Exhibit 2
▇▇▇▇▇▇▇ INTERNATIONAL, INC.
STOCK PURCHASE AGREEMENT
JUNE 9, 1998
AMONG
HEICO AEROSPACE HOLDINGS CORP.
▇▇▇▇▇▇▇ INTERNATIONAL, INC.,
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
AND
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
TABLE OF CONTENTS
PAGE
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ARTICLE I. Definitions...............................................1
ARTICLE II. Purchase of Shares; Consideration.........................1
2.1 Shares to be Purchased....................................1
2.2 Consideration.............................................1
2.3 ss.338(h)(10) Election....................................1
2.4 Purchase Price Adjustment.................................2
2.5 Closing Date Balance Sheet................................2
2.6 Disputes..................................................3
ARTICLE III. Representations and Warranties of the Buyer...............3
3.1 Organization..............................................3
3.2 Authorization; Enforceability.............................3
3.3 No Violation or Conflict..................................4
3.4 Brokers...................................................4
3.5 Consents and Approvals....................................4
3.6 Purchase Price Proceeds...................................4
ARTICLE IV. Representations and Warranties of the Company
and the Sellers...........................................4
4.1 Ownership of Shares.......................................4
4.2 Power and Authority.......................................4
4.3 Organization of the Company...............................5
4.4 Authorization; Enforceability.............................5
4.5 No Violation or Conflict..................................5
4.6 Consents and Approvals....................................5
4.7 Brokers...................................................5
4.8 Capitalization............................................5
4.9 Financial Statements......................................6
4.10 Absence of Undisclosed Liabilities........................6
4.11 Subsidiaries and Investments..............................6
4.12 Inventories...............................................6
4.13 Accounts and Notes Receivable.............................6
4.14 Conduct of Business.......................................6
4.15 Compliance with Laws......................................8
4.16 Litigation................................................8
4.17 Title to and Condition of Personal Property...............8
4.18 Real Property.............................................9
4.19 Intangible Property.......................................9
4.20 Governmental Authorizations..............................10
4.21 Other Person Authorizations..............................10
4.22 Insurance................................................10
4.23 Major Customers and Suppliers; Supplies..................10
4.24 Personnel................................................11
4.25 Labor Relations..........................................11
4.26 Employment Agreements and Employee Benefit Plans.........11
4.27 Tax Matters..............................................12
4.28 Material Agreements......................................13
4.29 Related Parties..........................................15
4.30 Absence of Certain Business Practices....................15
4.31 Products and Services....................................15
4.32 Environmental Matters....................................16
4.33 List of Accounts.........................................16
4.34 Certain Claims...........................................16
4.35 Disclosure...............................................16
ARTICLE V. Certain Agreements.......................................17
5.1 Preserve Accuracy of Representations and Warranties......17
5.2 Consents of Third Parties; Governmental Approvals........17
5.3 Operations Prior to the Closing Date.....................17
5.4 Acquisition Proposals....................................19
5.5 Access...................................................19
5.6 Investigation............................................20
5.7 Notification.............................................20
5.8 Reasonable Efforts.......................................20
ARTICLE VI. Additional Agreements....................................21
6.1 Certain Tax Returns and Indemnity........................21
6.2 Survival.................................................21
6.3 Indemnification..........................................21
6.4 Noncompetition; Standstill...............................24
6.5 Confidentiality..........................................25
6.6 Continuing Obligations...................................26
6.7 ▇▇▇▇▇▇▇ Consulting and Schwinne Employment Agreements....26
6.8 Publicity................................................27
6.9 Product Liability Insurance..............................27
6.10 ENVIRONMENTAL LIABILITY INSURANCE........................27
(ii)
ARTICLE VII. Closing; Conditions Precedent; Termination...............27
7.1 Closing..................................................27
7.2 Conditions Precedent to the Obligations of the Buyer.....29
7.3 Conditions Precedent to the Obligations of the Company
and the Sellers..........................................31
7.4 Termination..............................................32
7.5 Notice of Termination....................................32
7.6 Effect of Termination....................................32
ARTICLE VIII. Miscellaneous............................................33
8.1 Notices..................................................33
8.2 Entire Agreement.........................................34
8.3 Assignment...............................................34
8.4 Waiver and Amendment.....................................34
8.5 No Third Party Beneficiary...............................34
8.6 Severability.............................................34
8.7 Expenses.................................................35
8.8 Headings.................................................35
8.9 Counterparts.............................................35
8.10 Litigation; Prevailing Party.............................35
8.11 Injunctive Relief........................................35
8.12 Governing Law and Venue..................................35
8.13 Risk of Loss.............................................36
8.14 Further Assurances.......................................36
8.15 Remedies Cumulative......................................36
8.16 Participation of Parties; Construction...................36
8.17 Time of Essence..........................................36
(iii)
EXHIBITS
▇. ▇▇▇▇▇▇▇ Consulting Agreement
▇. ▇▇▇▇▇▇▇▇ Employment Agreement
C. Opinion of Counsel to the Company and the Sellers
D. Opinion of Counsel to the Buyer
E. Division of Purchase Price Consideration
F. Real Property Purchase Agreement
G. Escrow Agreement
(iv)
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of June __, 1998,
among HEICO Aerospace Holdings Corp., a Florida corporation ("BUYER"), ▇▇▇▇▇▇▇
International, Inc., a Georgia corporation (the "COMPANY"), ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇")
(▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ are sometimes referred to in this Agreement
individually as a "SELLER" and collectively as the "SELLERS").
PRELIMINARY STATEMENTS
A. The Sellers collectively own all of the issued and outstanding
capital stock (the "SHARES") of the Company.
B. The Buyer desires to acquire from the Sellers, and the Sellers
desire to sell to the Buyer all of the Shares of the Company on the terms and
subject to the conditions set forth in this Agreement.
AGREEMENT
In consideration of the preliminary statements and the respective
covenants, representations and warranties contained in this Agreement, the
parties agree as set forth below.
ARTICLE I.
DEFINITIONS
Each term which is defined on SCHEDULE 1 to this Agreement shall have
the meaning ascribed thereto on SCHEDULE 1.
ARTICLE II.
PURCHASE OF SHARES; CONSIDERATION
2.1 SHARES TO BE PURCHASED. On the terms and subject to the conditions
set forth herein, on the Closing Date, the Sellers shall sell, transfer, assign,
convey and deliver to the Buyer, all of Sellers' right, title and interest in
and to all of the Shares.
2.2 CONSIDERATION. Subject to adjustment as provided in SECTIONS 2.4
and 6.3 hereof, the aggregate purchase price for all of the Shares shall be
Forty One Million Dollars ($41,000,000) (the "PURCHASE PRICE"). Such Purchase
Price consideration shall be payable in cash and shall be divided among each
Seller in the manner set forth on EXHIBIT "E" hereto.
2.3 SS.338(H)(10) ELECTION.
(a) The Sellers will join with the Buyer in making an election
under ss.338(h)(10) of the Code and Treasury Regulations ss.1.338(h)(10)-1(d)
and any corresponding elections under any applicable state and local Laws
(collectively, a "SS.388(H)(10) ELECTION") with respect to the purchase and sale
of the Shares from the Sellers hereunder. Subject in all respect to SECTION
2.3(B) hereof, the Sellers will pay any Tax attributable to the making of the
ss.338(h)(10) Election and the Sellers, jointly and
severally, will indemnify the Buyer and the Company from and against any Losses
arising out of any failure to pay such Tax.
(b) Notwithstanding anything herein to the contrary, the Buyer and
the Sellers have agreed to elect to treat the sale of shares contemplated hereby
as a sale of assets under IRC SECTION 338(H)(10). Buyer shall indemnify the
Sellers for the tax liabilities attributable to the income tax rate differential
between the applicable long-term capital gains rate of 20% and the maximum
individual ordinary income tax rate of 39.6% arising from the reclassification
of capital gains to ordinary income as a result of this election. This provision
shall survive the Closing.
(c) The Sellers will be responsible for preparing and filing all
Federal and State income Tax Returns of the Company relating to pre-Closing Tax
periods. The Buyer will be responsible for preparing and filing all Federal and
State income Tax Returns of the Company relating to periods other than
pre-Closing Tax periods. After the Closing has occurred, the Buyer will cause
the Company to provide, or cause to be provided, to the Sellers, without charge,
any information that may reasonably be requested by the Sellers in connection
with the preparation of any Tax Returns relating to pre-Closing Tax periods. The
Sellers will allow the Buyer an opportunity to review and comment on such Tax
Returns (including any amended Returns). The Sellers will take no positions on
the Tax Returns of the Company that relate to pre-Closing Tax periods that would
adversely affect the Company after the Closing Date. The income of the Company
will be apportioned to the period up to the close of business as of the Closing
Date (or within three business days of the Closing Date) and the period from and
after the Closing Date in accordance with the provisions of ss.1362(e)(6)(i) of
the Code by closing the books of the Company as of the Closing Date.
(d) SCHEDULE 2.3 hereto sets forth an allocation of the "Modified
Adjusted Deemed Sales Price", as defined in Treasury Regulations
ss.1.338(h)(10)-(f), among the assets of the Company (the "ALLOCATION
SCHEDULE"). On the Closing Date, the Sellers and the Buyer shall exchange
completed and executed copies of IRS Form 8023-A (or other applicable form),
required schedules thereto, and any similar forms required by any state or local
Tax Authority. If any changes are required to these forms as a result of
information which is first available after the Closing Date, the Sellers and the
Buyer will in good faith use commercially reasonable efforts to promptly agree
on such changes. The Sellers and the Buyer each agree to file all Tax Returns in
accordance with the Allocation Schedule.
2.4 PURCHASE PRICE ADJUSTMENT. The Purchase Price shall be reduced or
increased (the "PURCHASE PRICE ADJUSTMENT") by either adding (x) the excess, if
any, of the dollar amount of the Company's net shareholders' equity, computed in
accordance with generally accepted accounting principles consistently applied
with the Company's prior practices ("GAAP") but without giving effect to any
purchase accounting adjustments attributable to the sale of Shares contemplated
hereby (the "CLOSING DATE NET WORTH") as of the Closing Date OVER $3,446,000, OR
subtracting (y) the excess, if any, of $3,446,000 OVER the dollar amount of the
Closing Date Net Worth, as applicable.
2.5 CLOSING DATE BALANCE SHEET. As soon as practical (and in no event
later than four months after the Closing Date), Buyer shall cause to be prepared
and delivered to the Sellers (i) a balance sheet for the Company dated as of the
Closing Date (the "CLOSING DATE BALANCE SHEET"), and (ii) a calculation of the
Purchase Price Adjustment.
2.6 DISPUTES. The following clauses (i) and (ii) set forth the
procedures for resolving disputes among the parties with respect to the
determination of the Purchase Price Adjustment:
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(i) Within thirty (30) days after delivery to the Sellers of
Buyer's calculation of the Purchase Price Adjustment pursuant to this Article
II, the Sellers may deliver to Buyer a written report (a "SELLERS' REPORT")
prepared by the Sellers' accountants (the "SELLERS' ACCOUNTANTS") advising Buyer
either that the Sellers' Accountants (A) agree with the Buyer's calculations of
the Purchase Price Adjustment, or (B) deem that one or more adjustments are
required. The costs and expenses of the services of the Sellers' Accountants
shall be borne by the Sellers. If Buyer's accountants ("BUYER'S ACCOUNTANTS")
shall concur with the adjustments proposed by the Sellers' Accountants, or if
Buyer shall not object thereto in writing delivered to the Sellers within thirty
(30) days after Buyer's receipt of the Sellers' Report, the calculations of the
Purchase Price Adjustment set forth in such Sellers' Report shall become final
and shall not be subject to further review, challenge or adjustment absent
fraud. If the Sellers do not submit a Sellers' Report within the 30-day period
provided herein, then the Purchase Price Adjustment as calculated by Buyer shall
become final and shall not be subject to further review, challenge or adjustment
absent fraud.
(ii) In the event that the Sellers submit a Sellers' Report and
Buyer's Accountants and the Sellers' Accountants are unable to resolve the
disagreements set forth in such report within (30) days after the date of the
Sellers' Report, then such disagreements shall be referred to a recognized firm
of independent certified public accountants selected by mutual agreement of the
Sellers' Accountants and Buyer's Accountants (the "SETTLEMENT ACCOUNTANTS"), and
the determination of the Settlement Accountants shall be final and shall not be
subject to further review, challenge or adjustment absent fraud. The Settlement
Accountants shall use their best efforts to reach a determination not more than
forty-five (45) days after such referral. The costs and expenses of the services
of the Settlement Accountants shall be shared equally between Sellers and Buyer.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE BUYER
In order to induce the Company and the Sellers to enter into this
Agreement and to consummate the transactions contemplated hereby, as of the date
hereof and as of the Closing Date, the Buyer makes the representations and
warranties set forth below to the Company and the Sellers.
3.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. Buyer has
all requisite right, power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby.
3.2 AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance of this Agreement by the Buyer and the consummation by the Buyer of
the transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Buyer. This Agreement and all other
documents to be executed by the Buyer pursuant to this Agreement have been and
will be duly authorized, executed and delivered by them, as applicable, and
constitute, and upon execution will constitute, the legal, valid and binding
obligations of the Buyer, as applicable, enforceable against Buyer in accordance
with their respective terms, except to the extent that their enforcement is
limited by bankruptcy, insolvency, reorganization or other laws relating to or
affecting the enforcement of creditors' rights generally and by general
principles of equity.
3
3.3 NO VIOLATION OR CONFLICT. Except as set forth on SCHEDULE 3.3, the
execution, delivery and performance of this Agreement by the Buyer and the
consummation by the Buyer of the transactions contemplated hereby: (a) do not
and will not violate or conflict with any provision of law or regulation, or any
writ, order, judgment or decree of any court or governmental or regulatory
authority, or any provision of the Buyer's Articles of Incorporation or Bylaws;
and (b) do not and will not, with or without the passage of time or the giving
of notice, result in the breach of, or constitute a default, cause the
acceleration of performance, or require any consent under, or result in the
creation of any lien, charge or encumbrance upon any property or assets of the
Buyer pursuant to any material instrument or agreement to which the Buyer is a
party or by which the Buyer or any of their respective properties may be bound
or affected.
3.4 BROKERS. The Buyer has not employed any financial advisor, broker
or finder and has not incurred and will not incur any broker's, finder's,
investment banking or similar fees, commissions or expenses, in connection with
the transactions contemplated by this Agreement.
3.5 CONSENTS AND APPROVALS. Except for appropriate filings under the
Exchange Act and under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act, as
amended (the "HSR ACT"), no consent, approval, waiver or authorization of, or
registration, qualification or filing with or notice to any federal, state or
local governmental or regulatory authority is required to be made by the Buyer
in connection with the execution, delivery or performance of this Agreement by
the Buyer or the consummation by them of the transactions contemplated hereby.
3.6 PURCHASE PRICE PROCEEDS. Buyer has either (i) sufficient liquid
funds or (ii) a written proposal from a financial institution to provide such
funds, to enable Buyer to close on the acquisition of Sellers' shares.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS
In order to induce the Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, as of the date hereof and as of
the Closing Date, the Company and each of the Sellers, jointly and severally,
make the representations and warranties set forth below to the Buyer.
4.1 OWNERSHIP OF SHARES. Each Seller is the record and beneficial owner
of the Shares as set forth on SCHEDULE 4.1, free and clear of any and all
Encumbrances.
4.2 POWER AND AUTHORITY. The Sellers have all requisite right, power
and authority to enter into this Agreement and each Ancillary Document to be
entered into by them pursuant hereto and to sell, transfer and deliver the
Shares owned by them to the Buyer and perform their obligations hereunder and
thereunder.
4.3 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia. Neither the ownership nor the leasing of the Company's properties nor
the conduct of its businesses requires the Company to qualify to transact
business as a foreign corporation in any jurisdiction. The Company has all
requisite right, power and authority to (a) own or lease and operate its
properties and assets, (b) conduct its business as presently conducted, and (c)
engage in and consummate the transactions contemplated hereby.
4
4.4 AUTHORIZATION; ENFORCEABILITY. This Agreement and all other
documents to be executed and delivered by the Company or any of the Sellers
pursuant to this Agreement have been and will be duly authorized, executed and
delivered by them, as applicable, and constitute, and upon execution will
constitute, the legal, valid and binding obligations of the Company and each of
the Sellers, as applicable, enforceable against them, as applicable, in
accordance with their respective terms, except to the extent that their
enforcement is limited by bankruptcy, insolvency, reorganization or other laws
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity.
4.5 NO VIOLATION OR CONFLICT. The execution, delivery and performance
of this Agreement by the Company and the Sellers and the consummation by the
Company and the Sellers of the transactions contemplated hereby: (a) do not and
will not violate or conflict with any provision of law or regulation, or any
writ, order, judgment or decree of any court or governmental or regulatory
authority, or any provision of the Company's Articles or Certificate of
Incorporation or Bylaws, or other organizational documents or any license,
franchise or permit to which any Seller or the Company is a party or by which
any of them is bound; and (b) do not and will not, with or without the passage
of time or the giving of notice, result in the breach of, or constitute a
default, cause the acceleration of performance or require any consent under, or
result in the creation of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to any instrument or agreement to which any of
the Sellers or the Company is a party or by which any of the Sellers or the
Company or their respective properties or assets may be bound or affected, other
than instruments or agreements as to which consent shall have been obtained at
or prior to the Closing, each of which instruments or agreements is listed on
SCHEDULE 4.5 hereto.
4.6 CONSENTS AND APPROVALS. No consent, approval, waiver or
authorization of, or registration, qualification or filing with or notice to any
federal, state or local governmental or regulatory authority, or any other
Person, is required to be made by any of the Sellers or the Company in
connection with the execution, delivery or performance of this Agreement by the
Company or by the Sellers or the consummation by the Company or the Sellers of
the transactions contemplated hereby, except for the consents of governmental
authorities to the assignment of the Material Agreements set forth on SCHEDULE
4.28, all of which will be received prior to the Closing.
4.7 BROKERS. None of the Sellers nor the Company has employed any
financial advisor, broker or finder, and none of them has incurred or will incur
any broker's, finder's, investment banking or similar fees, commissions or
expenses in connection with the transactions contemplated by this Agreement.
4.8 CAPITALIZATION. The Sellers together own 100% of the issued and
outstanding capital stock and securities of the Company.
4.9 FINANCIAL STATEMENTS. The Sellers have delivered to Buyer true and
complete copies of audited balance sheet and related statements of income, cash
flows and changes in stockholder equity (collectively "FINANCIAL Statements")
with respect to the Company and its business as of and for the year ended
December 31, 1997 and unaudited Financial Statements as of and for the four
months ended April 30, 1998, and said Financial Statements are attached hereto
as SCHEDULE 4.9. All of such Financial Statements present fairly the financial
condition and results of operations of the Company for the dates or periods
indicated thereon. Except for the omission of certain notes and the absence of
year-end adjustments (consisting only of normal recurring adjustments) in the
unaudited interim Financial Statements, all of such Financial Statements have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods indicated.
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4.10 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
SCHEDULE 4.10 hereto and except as and to the extent reflected in the unaudited
interim Financial Statements, the Company has no liabilities, commitments or
obligations of any nature whatsoever, whether accrued, contingent or otherwise
and whether due or to become due (other than liabilities, commitments or
obligations incurred since April 30, 1998 in the ordinary course of business
consistent with past practices to Persons other than the Sellers or Affiliates
of the Company or the Sellers, none of which are material) or any unrealized or
anticipated losses from any commitments of the Company, and there is no basis
for assertion against the Company of any such liability, commitment, obligation
or loss.
4.11 SUBSIDIARIES AND INVESTMENTS. The Company has no Investments. The
Company has no Subsidiaries.
4.12 INVENTORIES. The Inventories of the Company shown on the balance
sheets included in the Financial Statements and the unaudited interim Financial
Statements and the Inventories of the Company as of the Closing Date, are stated
and will be stated at not more than the lower of cost or market. The Company has
and will continue to have adequate quantities and types of inventory to enable
it to conduct its businesses consistent with past practices and anticipated
operations.
4.13 ACCOUNTS AND NOTES RECEIVABLE. The Company has delivered to Buyer
a true and complete aged list of unpaid accounts and notes receivable owing to
the Company as of April 30, 1998. All of such accounts and notes receivable
constitute only bona fide, valid and binding claims arising in the ordinary
course of the Company's business, subject to no valid defenses, counterclaims or
setoffs, and are current and collectible in accordance with their terms.
4.14 CONDUCT OF BUSINESS. Except as disclosed on SCHEDULE 4.14 hereto,
since December 31, 1997, the Company has conducted its businesses only in the
ordinary and usual course consistent with past practices and there has not
occurred any material adverse change in its condition (financial or otherwise),
results of operations, properties, assets, liabilities, business or prospects.
Without limiting the generality of the foregoing, except as disclosed on
SCHEDULE 4.14, since December 31, 1997, the Company has not:
(a) declared or paid any dividends or other distribution (whether
in cash, stock or other property) with respect to its capital stock, or
otherwise transferred or agreed to transfer any assets to any of its
shareholders or Affiliates, except for cash distributions or compensation
bonuses paid to its shareholders (as long as such distributions do not reduce
the Closing Date Net Worth below $3,446,000).
(b) suffered any damage, destruction or loss, whether or not
covered by insurance, which has had or could have an adverse effect on any of
its properties, assets, business or prospects;
(c) voluntarily or involuntarily sold, transferred, surrendered,
abandoned or disposed of any of its assets or property rights (tangible or
intangible), other than inventory and minor amounts of personal property, in the
ordinary course of business consistent with past practices at a price equal to
the greater of fair market value or book value;
(d) disclosed any proprietary or confidential information to any
third party;
(e) granted or made any mortgage or pledge or subjected itself or
any of its properties or assets to any Encumbrance, except Permitted
Encumbrances;
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(f) created, incurred or assumed any liability or indebtedness,
for borrowed money or entered into any capitalized lease obligations;
(g) made or committed to make any capital expenditures;
(h) applied any of its assets to the direct or indirect payment,
discharge, satisfaction or reduction of any amount payable directly or
indirectly to or for the benefit of any Seller or any Affiliate thereof or to
the prepayment of any such amounts, or otherwise entered into or modified any
arrangement with any Affiliate of the Company or any Seller;
(i) written off the value of any inventory or any accounts
receivable or increased the reserves for obsolete, damaged, spoiled or otherwise
not usable inventory or doubtful or uncollectible receivables;
(j) granted any increase in the compensation payable or to become
payable to directors, officers or employees (including, without limitation, any
such increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment or otherwise), other than merit increases to officers and employees
(other than the Sellers and their Affiliates) in the ordinary course of business
and consistent with past practices;
(k) altered the manner of keeping its books, accounts or records,
or changed in any manner the accounting practices therein reflected;
(l) accelerated or delayed collection of notes or accounts
receivable in advance of or beyond their regular dates or the dates when the
same could have been collected in the ordinary course of business consistent
with past practices;
(m) allowed its levels of inventory to vary in any material
respect from the levels customarily maintained;
(n) experienced any other event or condition of any character
which has had or could have, individually or in the aggregate, a material
adverse effect on the condition (financial or otherwise), results of operations,
assets, liabilities, properties, business or prospects of the Company, or on
employee, customer or supplier relations;
(o) engaged in or agreed to engage in any of the transactions or
occurrences which would be prohibited prior to the Closing under SECTION 5.3(B);
or
(p) agreed, whether in writing or otherwise, to do any of the
foregoing.
4.15 COMPLIANCE WITH LAWS. The Company has conducted its business in
compliance with all federal, state, local and foreign laws, ordinances,
regulations, judgments, rulings, orders and other requirements applicable to it,
including without limitation those relating to (a) the development, testing,
manufacture, packaging, distribution and marketing of products, (b) employment,
safety and health, and (c) environmental protection, building, zoning and land
use. No governmental authority has asserted that the Company is not in
compliance with any such laws, ordinances, regulations, judgments, rulings,
orders and other requirements. The Company is not subject to any order, judgment
or decree of any court or governmental authority. The Buyer has been furnished
with true and correct copies of all reports of inspections of the Company's
businesses and properties through the date hereof under all applicable federal,
state, foreign and local laws and regulations. Except as set forth on SCHEDULE
4.15, there has
7
been no inspection of the Company's businesses and properties conducted by
insurance companies, consultants, or any other Persons. All deficiencies noted
in any such reports have been corrected. The representations made in this
Section 4.15 are made solely to the knowledge of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Sellers' Knowledge").
4.16 LITIGATION. Except as set forth on SCHEDULE 4.16, to the Sellers'
Knowledge, there are no actions, suits, investigations, claims or proceedings
pending or threatened within the past three years prior to Closing before any
court, governmental or regulatory authority or arbitrator: (a) affecting the
Company (as plaintiff or defendant) which: (i) could, individually or in the
aggregate, have an adverse effect on the condition (financial or otherwise),
results of operations, properties, assets, liabilities, business or prospects of
the Company; or (ii) without limiting the generality of the foregoing (A)
threatens to revoke, vary, modify or terminate any of the Governmental
Authorizations or to declare any of them invalid in any respect; (B) involves
any of the Intangible Property; (C) involves any claim against the Company under
any warranty, whether express or implied, on products repaired, overhauls or
services sold by the Company; (D) involves any claim against the Company for
injury to persons, animals or property suffered as a result of the sale,
manufacture or distribution of any product or performance of any repairs,
overhauls or services by the Company including, but not limited to, claims
arising out of the defective or unsafe nature of its products or services; or
(E) involves a claim for specific performance, injunctive relief or other
equitable remedies; or (b) which questions the legality or propriety of the
transactions contemplated by this Agreement; and there exist no facts or
circumstances to the Sellers' Knowledge creating a reasonable basis for the
institution of any such action, suit, investigation, claim or proceeding
described in clauses (a) or (b) above. No action, suit, investigation, claim or
proceeding of the kind described in clauses (a) and (b) above have been pending,
settled or adjudicated during the three years preceding the date of this
Agreement, except as set forth on SCHEDULE 4.16.
4.17 TITLE TO AND CONDITION OF PERSONAL PROPERTY. The Company has, and
will have at Closing, good, valid and marketable title to all of the Purchased
Assets, including, without limitation, each item of equipment and other personal
property, tangible and intangible, included as an asset in the unaudited interim
Financial Statements dated April 30, 1998 (other than inventory disposed of in
the ordinary course of business consistent with past practices since April 30,
1998 to Persons other than the Sellers or Affiliates of the Company or any of or
the Sellers) and to each item of equipment and other personal property, tangible
and intangible, acquired since April 30, 1998, free and clear of any
Encumbrances whatsoever except for Permitted Encumbrances. SCHEDULE 4.17
contains a detailed list as of April 30, 1998 of all machinery, equipment,
vehicles, furniture and other personal property owned by the Company and used by
the Company in the operation of its business, having an original cost of $2,000
or more, except as set forth on Schedule 4.17. All tangible personal property
owned by the Company or used by the Company in the operation of its business is
in good operating condition and in a good state of maintenance and repair,
ordinary wear and tear excepted, and is adequate for the business conducted by
the Company. Except for the licenses to use certain Rights specifically
identified on SCHEDULE 4.19, there are no properties or assets, tangible or
intangible, owned by any Person other than the Company which are used in
connection with the business of the Company. The Sellers make no warranty as to
assets that are owned by the Company but have been fully depreciated to the
extent of depreciable value or that have been written off UNLESS such assets are
utilized in the operation of the business. The Sellers' liability for any
misrepresentations as to operating condition of machinery, equipment, vehicles
and other tangible personal property is limited to its fair market value.
8
4.18 REAL PROPERTY. The Company does not own any real property. The
real property currently used by the Company in the conduct of its business (the
"REAL PROPERTY") is subject to a lease which will be cancelled, without penalty
to the Company, effective with the Closing.
4.19 INTANGIBLE PROPERTY. Set forth on SCHEDULE 4.19 is a list and
description of all foreign and domestic patents, patent rights, trademarks,
service marks, trade names, brands and copyrights (whether or not registered
and, if applicable, including pending applications for registration) owned,
used, licensed or controlled by the Company and all goodwill associated
therewith (collectively, the "RIGHTS"). Except as set forth on SCHEDULE 4.19, to
the Sellers' Knowledge: (a) the Company is the sole and exclusive owner of all
right, title and interest in and to all of the Rights and in and to each
invention, formula, software, trade secret, technology, product, composition,
formula, know-how, method or process used by the Company (together with the
Rights, hereinafter collectively referred to as "INTANGIBLE PROPERTY"), and has
the exclusive right to use and license the same, free and clear of any claim or
conflict with the rights of others; (b) no royalties, honorariums or fees are
payable by the Company to any Person by reason of the ownership or use of any of
the Intangible Property; (c) there have been no claims made within the past
three years against the Company asserting the invalidity, abuse, misuse, or
unenforceability of any of the Intangible Property, and no grounds for any such
claims exist; (d) the Company has not made any claim of any violation or
infringement by others of its rights in the Intangible Property, and no grounds
for any such claims exist; (e) the Company has not received any notice within
the past three years that it is in conflict with or infringing upon the asserted
rights of others in connection with the Intangible Property and neither the use
of the Intangible Property nor the operation of its businesses is infringing or
has infringed upon any rights of others; (f) the Intangible Property is
sufficient and includes all rights necessary for the Company to lawfully conduct
its businesses as presently being conducted; (g) no interest in any of the
Company's rights to any Intangible Property has been assigned, transferred,
licensed or sublicensed by the Company to any Person other than the Buyer
pursuant to this Agreement; (h) to the extent that any item constituting part of
the Intangible Property has been registered with, filed in or issued by, as the
case may be, any government or other regulatory authority, such registrations,
filings or issuances are listed on SCHEDULE 4.19 and were duly made and remain
in full force and effect; and (i) no act or failure to act by the Company or any
of its directors, officers, employees, attorneys or agents during the
prosecution or registration of, or any other proceeding relating to, any of the
Intangible Property or of any other fact which could render invalid or
unenforceable, or negate the right to issuance of any of the Intangible
Property. To the extent any of the Intangible Property constitutes proprietary
or confidential information, the Company has adequately safeguarded such
information from disclosure. Except as otherwise indicated on SCHEDULE 4.19, all
of the Intangible Property is assignable to the Buyer without alteration or
impairment.
4.20 GOVERNMENTAL AUTHORIZATIONS. Set forth on SCHEDULE 4.20 is a list
of all authorizations, consents, approvals, franchises, licenses and permits
required under applicable law or regulation for the operation of the business of
the Company as presently operated (the "GOVERNMENTAL AUTHORIZATIONS"). All the
Governmental Authorizations have been duly issued or obtained and are in full
force and effect, and the Company is in compliance with the terms of all the
Governmental Authorizations. Neither the Company nor any of the Sellers have any
knowledge of any facts which could be expected to cause them to believe that the
Governmental Authorizations will not be renewed by the appropriate governmental
authorities in the ordinary course. Each of the Governmental Authorizations may
be assigned and transferred to the Buyer in accordance with this Agreement and
will continue in full force and effect thereafter, in each case without (i) the
occurrence of any breach, default or forfeiture of rights thereunder, or (ii)
the consent, approval, or act of, or the making of any filings with, any Person.
9
4.21 OTHER PERSON AUTHORIZATIONS. Set forth on SCHEDULE 4.21 is a list
of all authorizations, consents, approvals, franchises, licenses and permits
required by any Person for the operation of the business of the Company as
presently operated (the "OTHER PERSON AUTHORIZATIONS"). All of the Other Person
Authorizations have been duly issued or obtained and are in full force and
effect, and the Company is in compliance with the terms of all the Other Person
Authorizations. Neither the Company nor any of the Sellers have any knowledge of
any facts which could be expected to cause them to believe that the Other Person
Authorizations will not be renewed by the appropriate Person in the ordinary
course. Each of the Other Person Authorizations may be assigned and transferred
to the Buyer in accordance with this Agreement and will continue in full force
and effect thereafter, in each case without (i) the occurrence of any breach,
default or forfeiture of rights thereunder, or (ii) the consent, approval, or
act of, or the making of any filings with, any Person.
4.22 INSURANCE. Set forth on SCHEDULE 4.22 is a list of all insurance
policies providing insurance coverage of any nature to the Company. The Company
has previously delivered to the Buyer a true and complete copy of all of such
insurance policies as amended. Such policies are sufficient for compliance by
the Company with all requirements of law and all Material Agreements. All of
such policies are in full force and effect and are valid and enforceable in
accordance with their terms, and the Company has complied with all material
terms and conditions of such policies, including the payment of premium
payments. None of the insurance carriers has indicated to the Company an
intention to cancel any such policy. The Company has no claim pending or
anticipated against any of the insurance carriers under any of such policies and
there has been no actual or alleged occurrence of any kind which may give rise
to any such claim.
4.23 MAJOR CUSTOMERS AND SUPPLIERS; SUPPLIES. Set forth on SCHEDULE
4.23 is a list of all customers of the Company and all suppliers of goods or
services to the Company during the fiscal years ended December 31, 1996 and
December 31, 1997 and the four-month period ending April 30, 1998, and with
respect to each, the name and address, dollar volume involved and nature of the
relationship (including the principal categories of products purchased or sold).
Except as indicated on SCHEDULE 4.23, all supplies and services necessary for
the conduct of the Company's businesses as presently conducted and as proposed
to be conducted may be readily obtained from alternate sources on comparable
terms and conditions as those presently available to the Company. No facts,
circumstances or conditions exist which create a reasonable basis for believing
that the Company or the Buyer after the Closing Date would be unable to continue
to procure and provide the supplies and services necessary to conduct its
business on substantially the same terms and conditions as such supplies and
services are currently procured and provided. To the Sellers' Knowledge, no
significant customer or supplier of the Company has advised the Company within
the past three years that it has terminated its relationship with the Company or
advised the Company or any of the Sellers of its intention to terminate its
relationship with the Company, decreased its purchases from or sales to the
Company, or changed the terms upon which it purchases from or sells to the
Company. The Company makes no warranty as to whether any particular customer
will continue to purchase products from the Company following the Closing at
existing sales volumes.
4.24 PERSONNEL. SCHEDULE 4.24 contains the names, job descriptions and
annual salary rates (and the most recent date of any increase in salary rates)
and other compensation of all employees, officers, directors and consultants of
the Company (including compensation paid or payable by the Company under any
Plans), and a list of all employee policies (written or otherwise), employee
bonus or profit sharing plans, employee manuals or other written statements of
rules or policies concerning employment, including working conditions, paid time
off, vacation and sick leave, a complete copy of each of which (or a
description, if unwritten) has been delivered to the Buyer. Neither the Buyer
nor any
10
of its Affiliates shall have any liability or obligations under or with respect
to the Workers Adjustment Retraining Notification Act in connection with any of
the transactions contemplated in connection herewith.
4.25 LABOR RELATIONS. None of the employees of the Company is a member
of any labor union, and the Company is not a party to, otherwise bound by or, to
the Sellers' Knowledge, threatened, with any labor or collective bargaining
agreement. None of the employees of the Company is known to be engaged in
organizing any labor union or other employee group that is seeking recognition
as a bargaining unit. Without limiting the generality of SECTION 4.25, (i) no
unfair labor practice complaints are pending or, to the Sellers' Knowledge,
threatened within the past three years against the Company, and (ii) no Person
has made or threatened within the past three years to make any claim, and to the
Sellers' Knowledge, no Person has made any claim and there is no basis for any
claim, against the Company under any statute, regulation or ordinance relating
to employees or employment practices, including without limitation those
relating to age, sex and racial discrimination, conditions of employment, and
wages and hours.
4.26 EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT PLANS.
(a) EMPLOYMENT AGREEMENTS. Except as set forth on SCHEDULE 4.26A,
there are no employment, consulting, severance or indemnification arrangements,
agreements, or understandings between the Company and any officer, director,
consultant or employee, except for oral agreements terminable at will
("EMPLOYMENT AGREEMENTS"). The Company has previously delivered to the Buyer
true and complete copies of all of the Employment Agreements. No such Employment
Agreement (i) will require any payment by the Buyer or any of its Affiliates or,
except as disclosed on SCHEDULE 4.26A, the Company, to any director, officer or
employee of the Company, or any other party, by reason of the transactions
contemplated by this Agreement, or (ii) provides for the acceleration or change
in the award, grant, vesting or determination of options, warrants, rights,
severance payments, or other contingent obligations of any nature whatsoever of
the Company in favor of any such parties. Except as set forth on SCHEDULE 4.26A,
the terms of employment or engagement of all directors, officers, employees,
agents, consultants and professional advisers of the Company are such that their
employment or engagement may be terminated upon not more than two weeks notice
given at any time without liability for payment of compensation or damages and
the Company has not entered into any agreement or arrangement for the management
of its business or any part thereof other than with its directors or employees.
Except as set forth on Schedule 4.26, the Company has no unaccrued liability for
any arrears of wages, bonuses or other employee benefits (including, without
limitation, termination or severance pay, sick pay, personal days and holiday
pay) for any of their employees.
(b) EMPLOYEE BENEFIT PLANS.
(i) The only employee benefit plan (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), stock purchase plan, stock option plan, fringe
benefit plan, bonus plan or any other deferred compensation agreement
or plan or funding arrangement or commitment, policy or practice
(including a simplified employee pension plan) sponsored, maintained or
to which contributions are made by the Company (a "PLAN") are described
on SCHEDULE 4.26B. The Company has no "MULTIEMPLOYER PLAN," as such
term is defined in ERISA. With respect to each Plan, the Company has
delivered or made available to the Buyer current, accurate and complete
copies of such Plan (including all other instruments relating thereto).
11
(ii) With respect to each Plan, (A) there are no actions,
suits, proceedings, investigations or claims pending, or to the
knowledge of the Company or the Sellers, threatened, and neither the
Company nor the Sellers have any knowledge of any facts which could
give rise to any such actions, suits, proceedings, investigations or
claims; (B) neither the Company nor any employee or director thereof or
any fiduciary of any Plan has, with respect to any such Plan, engaged
in a prohibited transaction, as such term is defined in ERISA Section
406, which would subject the Company to any penalties or other
liabilities resulting from prohibited transactions under ERISA Sections
409 or 502(i); (C) no event has occurred and no condition exists that
would subject the Company to any penalty under ERISA Sections 502(c) or
502(l); (D) the Plan and the Company have complied with all applicable
requirements of ERISA; and (E) all insurance premiums related to the
Plan required to be paid as of the Closing Date have been or will be
paid at or prior to the Closing Date.
(iii) With respect to any Plan which is an employee welfare
benefit plan (within the meaning of ERISA Section 3(1)), the Plan does
not prohibit the amendment or termination of the Plan, except that such
amendment or termination may be subject to the terms of any applicable
collective bargaining agreement.
(iv) No Plan has been: (A) terminated; (B) amended in any
manner which would directly or indirectly increase the benefits
accrued, or which may be accrued, by any participant thereunder; or (C)
amended in any manner which would increase the cost to the Company or
the Buyer of maintaining such Plan.
4.27 TAX MATTERS.
(a) All federal, state, local and foreign Tax Returns and reports
required to be filed with respect to the Company or its businesses or assets,
including, without limitation, any consolidated federal income Tax returns filed
on behalf of the affiliated group (as defined in Section 1504(a) of the Code) of
which the Company is a member, and any combined income Tax return filed on
behalf of a group of corporations of which the Company is a member, have been
duly and timely filed as required, are true, correct and complete as filed, and
reflect accurately all liability for Taxes for the periods to which such returns
and documents relate, and all amounts showing as owing thereon have been paid.
All Taxes upon the Company or upon its properties, assets, income or franchises
which are due and payable, and all assessments and taxes upon any group of
corporations of which the Company is a member or upon such group's properties,
assets or income, through the Closing Date have been paid, except as reflected
by accruals on the Closing Date Balance Sheet.
(b) All Taxes collectible or payable by the Company or relating to
or chargeable against any of its assets, revenues or income through December 31,
1997 were fully collected and paid by such date and all similar items
collectible or payable through the Closing Date will have been fully collected
and paid by that date. No taxation authority has audited the records of the
Company or given notice of its intention to audit the records of the Company. No
claims or deficiencies have been asserted against the Company with respect to
any Taxes which have not been paid or otherwise satisfied and there exists no
reasonable basis for the making of any such claims. The Company has not waived
any restrictions on assessment or collection of Taxes or consented to the
extension of any statute of limitations relating to taxation.
12
4.28 MATERIAL AGREEMENTS.
(a) SCHEDULE 4.28 sets forth a brief description of all material
written and oral contracts or agreements to which the Company is a party or by
which the Company or any of its assets or properties is bound or affected,
including without limitation any:
(i) contract resulting in a commitment for expenditure or
other obligation, or which provides for the receipt or potential
receipt, involving in excess of $15,000 in any instance, or series of
related contracts that in the aggregate give rise to rights or
obligations exceeding such amount;
(ii) indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing or lending
of money or encumbrance of assets;
(iii) agreement which restricts the Company from engaging in
any line of business or from competing with any other Person;
(iv) agreement or arrangement for the sale or lease of any
of the assets, property or rights of the Company outside the ordinary
course of business or requiring the consent of any party to the
transfer and assignment of any assets, property and rights;
(v) agreement relating to any Intangible Property,
including confidentiality or secrecy agreements;
(vi) agreement relating to the development, manufacture,
distribution or sale of any products or products under development by
the Company;
(vii) warranties made with respect to products manufactured,
packaged, distributed or sold by the Company;
(viii) contract for the purchase or lease by the Company of
goods, equipment, supplies or capital assets or the performance by
others of services which the Company reasonably anticipates will
involve the payment by the Company of more than $10,000 after the date
hereof or which extends beyond the Closing Date or contract for the
purchase by the Company of raw materials which the Company reasonably
anticipates will involve the payment by the Company of more than
$100,000 after the date hereof or which extends beyond the Closing
Date;
(ix) contract for the sale of products of the Company which
the Company reasonably anticipates will involve the payment of more
than $250,000 after the date hereof or which extends beyond the Closing
Date;
(x) consignment, distributor, dealer, manufacturers
representative or sales agency contract which the Company reasonably
anticipates will involve the payment of more than $10,000 after the
date hereof or which extends beyond the Closing Date or advertising
representative, advertising or public relations contract which the
Company reasonably anticipates will involve the payment of more than
$25,000 after the date hereof or which extends beyond the Closing Date;
13
(xi) contract not made in the ordinary course of business
consistent with past practices;
(xii) agreement, contract or arrangement with any Affiliates
of the Company or
either Seller; or
(xiii) any other contract, agreement, instrument, arrangement
or commitment that is material to the condition (financial or
otherwise), results of operations, assets, properties, liabilities,
business or prospects of the Company (collectively, and together with
the Employment Agreements, Plans and all other agreements required to
be disclosed on any Schedule to this Agreement, the "MATERIAL
AGREEMENTS"). The Company has previously furnished to the Buyer true,
complete and correct copies of all written agreements, as amended,
required to be listed on SCHEDULE 4.28.
(b) None of the Material Agreements was entered into outside the
ordinary course of business of the Company, contains any provisions that could
reasonably be expected to impair or adversely affect in any material way the
operations of the Company, or could reasonably be expected to be performed at a
material loss.
(c) The Material Agreements are each in full force and effect and
are the valid and legally binding obligations of the Company and, to the Company
and the Sellers' knowledge, the other parties thereto, enforceable in accordance
with their respective terms, subject only to bankruptcy, insolvency or similar
laws affecting the rights of creditors generally and to general equitable
principles. Neither the Company nor any of the Sellers have received notice of
default by the Company under any of the Material Agreements, and the Company is
not in default under any of the Material Agreements and no event has occurred
which, with the passage of time or the giving of notice or both, would
constitute a default by the Company thereunder. To the Company and the Sellers'
knowledge, none of the other parties to the Material Agreements is in default
thereunder, nor has an event occurred which, with the passage of time or the
giving of notice or both, would constitute a default by such other party
thereunder. Neither the Company nor any of the Sellers have received notice of
the pending or threatened cancellation, revocation or termination of any of the
Material Agreements, nor are any of them aware of any facts or circumstances
which could reasonably be expected to lead to any such cancellation, revocation
or termination.
(d) Except as otherwise indicated on SCHEDULE 4.28, each of the
Material Agreements may survive the transfer to the Buyer pursuant to this
Agreement and will continue in full force and effect under the current terms
thereof, in each case without breaching the terms thereof or resulting in the
forfeiture or impairment of any right thereunder and without the consent,
approval or act of, or the making of any filing with any Person.
4.29 RELATED PARTIES. Except as disclosed on SCHEDULE 4.29, none of the
Sellers nor any current director, officer or employee of the Company
(individually a "RELATED PARTY" and collectively the "RELATED PARTIES") or any
Affiliate of any of the Sellers or any Related Party: (a) owns, directly or
indirectly, any interest in any Person which is a competitor, potential
competitor, supplier or customer of the Company; (b) owns, directly or
indirectly, in whole or in part, any property, asset or right, real, personal or
mixed, tangible or intangible (including, but not limited to, any of the
Intangible Property) which is utilized by or in connection with the business of
the Company; (c) is a customer or supplier of the Company; or (d) directly or
indirectly has an interest in or is a party to any contract, agreement, lease,
arrangement or understanding, whether or not in writing, pertaining or relating
to the Company,
14
except for employment, consulting or other personal service agreements which
are listed on SCHEDULE 4.26A hereto.
4.30 ABSENCE OF CERTAIN BUSINESS PRACTICES. None of the Sellers, any
Related Party, any Affiliate of the Sellers or of any Related Party, any agent
of the Company, or any other Person acting on behalf of or associated with the
Company, acting alone or together, has: (a) received, directly or indirectly,
any rebates, payments, commissions, promotional allowances or any other economic
benefits, regardless of their nature or type, from any customer, supplier,
employee or agent of any customer or supplier, official or employee of any
government (domestic or foreign) or other Person; or (b) directly or indirectly,
given or agreed to give any money, gift or similar benefit to any customer,
supplier, employee or agent of any customer or supplier, official or employee of
any government (domestic or foreign), or any political party or candidate for
office (domestic or foreign) or other Person who was, is or may be in a position
to help or hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction) which (i) may subject the
Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, may have had an adverse
effect on the assets, business, operations or prospects of the Company or (iii)
if not continued in the future, may adversely affect the assets, business,
operations or prospects of the Company.
4.31 PRODUCTS AND SERVICES.
(a) SCHEDULE 4.31A lists each product repair process or service
under development, developed, manufactured, licensed, distributed or sold by the
Company and any other products in which the Company has any proprietary rights
or beneficial interest (the "PRODUCTS"). Each Product manufactured, repaired or
serviced by the Company has been manufactured, repaired or serviced in
accordance with (i) the specifications under which the Product is normally and
has normally been manufactured, and (ii) without limiting the generality of
SECTION 4.15, the provisions of all applicable laws, policies, guidelines and
any other governmental requirements.
(b) SCHEDULE 4.31B sets forth (i) a list of all Products which at
any time have been recalled, withdrawn or suspended by the Company, whether
voluntarily or otherwise, including the date recalled, withdrawn or suspended
and a brief description of the reasons therefor, and (ii) without limiting the
generality of SECTION 4.16, a brief description of all completed or pending
proceedings seeking the recall, withdrawal, suspension or seizure of any
Product, and (iii) a list of all regulatory letters received by the Company or
any of its agents relating to the Company or any of the Products or the
Company's establishments.
(c) Except as set forth on SCHEDULE 4.31C, there exist no set of
facts which could furnish a basis for the recall, withdrawal or suspension of
any product registration, product license, repair or overhaul license,
manufacturing license, wholesale dealers license, export license or other
license, approval or consent of any governmental or regulatory authority with
respect to the Company or any of the Products.
(d) The Company has previously delivered to the Buyer true and
complete copies of all correspondence received or sent by or on behalf of the
Company from or to any federal or state governmental or regulatory authority.
4.32 ENVIRONMENTAL MATTERS. No property owned, leased, used or occupied
by the Company currently or in the past has been used by the Company or any
other Person to manufacture, treat, store, or dispose of any hazardous substance
or any other regulated material, and such property is free of all such
15
substances and materials. Without limiting the generality of SECTION 4.15, the
Sellers and the Company, and any other Person for whose conduct either it or
they are or may be responsible, are in compliance with all laws, regulations and
other federal, state or local governmental requirements, and all applicable
judgments, orders, writs, notices, decrees, permits, licenses, approvals,
consents or injunctions relating to the generation, management, handling,
transportation, treatment, disposal, storage, delivery, discharge, release or
emission of any waste, pollutant or toxic, hazardous or other regulated
substance (including, without limitation, asbestos, radioactive material and
pesticides and the keeping and posting of all Material Safety Data Sheets and
waste manifests) or to any other actions, omissions or conditions affecting the
environment (the "ENVIRONMENTAL LAWS"). Without limiting the generality of
SECTION 4.16, neither the Company nor any other Person for whose conduct it may
be responsible has received any complaint, notice, order, or citation of any
actual or alleged noncompliance with any Environmental Law, and there is no
proceeding, suit or investigation pending or, to the Company's and the Sellers'
knowledge, threatened against the Company or any such Person with respect to any
violation or alleged violation of the Environmental Laws, and there is no
reasonable basis for the institution of any such proceeding, suit or
investigation.
4.33 LIST OF ACCOUNTS. Set forth on SCHEDULE 4.33 is: (a) the name and
address of each bank or other institution in which the Company maintains an
account (cash, securities or other) or safe deposit box; (b) the name and phone
number of the Company's contact person at such bank or institution; (c) the
account number of the relevant account and a description of the type of account;
and (d) the persons authorized to transact business in such accounts.
4.34 CERTAIN CLAIMS. There are no claims existing or, to the best of
the Company's and the Sellers' knowledge, threatened under or pursuant to any
warranty, whether express or implied, on products or services sold by the
Company. There are no claims existing and there is no basis for any claim
against the Company for injury to persons, animals or property as a result of
the sale, distribution or manufacture of any product or performance of any
service by the Company including, but not limited to claims arising out of the
defective or unsafe nature of its products or services.
4.35 DISCLOSURE. No representation or warranty of the Company or the
Sellers contained in this Agreement, and no statement, notice, certificate or
other document furnished by or on behalf of the Sellers or the Company to the
Buyer or their agents pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading or omits or will omit to state a
material fact necessary in order to provide a prospective purchaser of the
Purchase Assets with full and proper information as to the business, assets,
prospects, financial condition or results of operations of the Company.
ARTICLE V.
CERTAIN AGREEMENTS
5.1 PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the
parties hereto shall refrain from taking any action which would render any
representation or warranty contained in this Agreement inaccurate as of the
Closing Date.
16
5.2 CONSENTS OF THIRD PARTIES; GOVERNMENTAL APPROVALS.
(a) The Company, the Buyer and the Sellers will act diligently and
reasonably to secure, before the Closing Date, the consent, approval or waiver,
in form and substance reasonably satisfactory to the Buyer, from any party to
any Material Agreement required to be obtained to satisfy the conditions set
forth in SECTION 7.2(D); PROVIDED that the Company shall not make any agreement
or understanding affecting the Company as a condition for obtaining any such
consent or waivers except with the prior written consent of the Buyer (which
consent shall not be unreasonably withheld).
(b) During the period prior to the Closing Date, the parties shall
act diligently and reasonably, and shall cooperate with each other, to secure
any consents and approvals of any Person required to be obtained by them in
order to permit the consummation of the transactions contemplated by this
Agreement, or to otherwise satisfy the conditions set forth in SECTION 7.2(H);
PROVIDED that the Company shall not make any agreement or understanding
affecting the Company as a condition for obtaining any such consents or
approvals except with the prior written consent of the Buyer (which consent
shall not be unreasonably withheld). Buyer shall pay any required fee under the
HSR Act.
5.3 OPERATIONS PRIOR TO THE CLOSING DATE.
(a) Until the Closing, the Company shall operate and carry on its
business only in the ordinary course and substantially as presently operated.
Consistent with the foregoing, the Company shall (i) keep and maintain the
Company's assets in good operating condition and repair, (ii) use its reasonable
efforts consistent with good business practice to preserve the goodwill of the
suppliers, contractors, licensors, employees, customers, distributors and others
having business relations with it and (iii) continuously maintain insurance
coverage substantially equivalent to that presently maintained by the Company.
The Sellers shall use all reasonable efforts, consistent with past practices, to
promote the Company's business and to maintain the reputation associated with
the Company's business, and shall not take or omit to take any action which
causes, or which is likely to cause, any deterioration of the Company's present
business or relationships with suppliers or customers.
(b) Notwithstanding SECTION 5.3(A), except as expressly
contemplated by this Agreement, or except with the express written approval of
the Buyer the Company shall not:
(i) enter into or modify any contract, agreement, undertaking
or commitment which would have been required to be set forth on
SCHEDULE 4.28, if in effect on the date hereof or enter into any
contract which cannot be assigned to the Buyer or a permitted assignee
of the Buyer under SECTION 8.3;
(ii) sell, lease (as lessor), transfer or otherwise dispose of
(including any transfers to any Seller or any of its or their
Affiliates), or mortgage or pledge, or impose or suffer to be imposed
any Encumbrance (except Permitted Encumbrances) on, any of the
Company's Assets, other than inventory and minor amounts of personal
property sold or otherwise disposed of in the ordinary course of
business consistent with past practices;
(iii) accelerate or delay collection of any notes or accounts
receivable in advance of or beyond their regular due dates or the dates
when the same would have been collected in the ordinary course of
business, consistent with past practices;
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(iv) delay or accelerate payment of any account payable or
other liability beyond or in advance of its due date or the date when
such liability would have been paid in the ordinary course of business
consistent with past practices;
(v) make, or agree to make, any distribution of assets
(other than cash and/or life insurance to the extent permitted by the
proviso to this SECTION 5.3) to any Seller or any of its or their
Affiliates;
(vi) make any change in the compensation of its employees,
other than changes made in accordance with normal compensation
practices and consistent with past compensation practices;
(vii) allow its levels of inventory to vary in any material
respect from the levels customarily maintained;
(viii) permit to lapse any of its rights to the Intangible
Property listed on SCHEDULE 4.19;
(ix) issue, sell or authorize for issuance or sale any
securities or enter into any commitment with respect to the foregoing;
(x) redeem, purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock or any option, warrant or
other right to purchase or acquire any such shares;
(xi) declare or pay any dividend or other distribution
(whether in cash, stock or other property) with respect to its capital
stock;
(xii) create, incur or assume any liability or indebtedness
for borrowed money, except in the ordinary course of business
consistent with past practices but in no event in an aggregate amount
exceeding $20,000, except with respect to the Company's plans and
commitments for the plant expansion in the amount not to exceed $1.3
million dollars.
(xiii) make or commit to make any capital expenditures in
excess of $20,000 in the aggregate;
(xiv) cancel or waive any material debts, claims or rights or
write off the value of any inventory or accounts receivable or increase
the reserve for uncollectible receivables or obsolete, damaged or
otherwise unsalable inventory, except as required by generally accepted
accounting principles or by law;
(xv) make any loans, advances or capital contributions to any
Person, except routine advances to employees in the ordinary course of
their business in non-material amounts or enter into any termination or
severance arrangement with any employee or consultant;
(xvi) take any action which could reasonably be expected to
have a material adverse affect on the business, assets, operations or
prospects of the Company or the Purchased Assets;
(xvii) apply any of its assets to the direct or indirect
payment, prepayment, discharge, satisfaction or reduction of any amount
payable, directly or indirectly, to or for the
18
benefit of any Affiliate of any Seller or the Company (except for
salary and benefits as currently in effect and except in accordance
with existing agreements and arrangements which have been disclosed to
the other parties hereto in writing);
(xviii) guaranty any obligation of any Person or enter into or
modify any arrangement with any Affiliate of any Seller or the Company;
(xix) agree, whether in writing or otherwise, to do any of
the foregoing;
(xx) take any action that could cause the representations
and warranties of the Company or the Sellers set forth herein not to be
true and correct at and as of the Closing Date as if made at as of each
such time;
PROVIDED, HOWEVER, that nothing herein shall prohibit the Company from (i)
distributing its earnings (in the form of available cash and/or life insurance
policies) or treating any such distributions as salary or bonus payments if and
to the extent that such distributions could not reasonably be expected to result
in a reduction of the Closing Date Net Worth below $3,446,000 pursuant to
SECTION 2.4 hereof, or (ii) continuing with the Company plans for the plant
expansion.
5.4 ACQUISITION PROPOSALS. Except for the transactions contemplated by
this Agreement, unless and until this Agreement shall have been terminated,
neither the Sellers nor the Company shall, directly or indirectly (i) solicit,
encourage, initiate or participate in any negotiations or discussions with
respect to any offer or proposal to acquire all or substantially all of the
business and properties of the Company, whether by merger, purchase of assets or
otherwise, or (ii) except as required by law, disclose any information not
customarily disclosed to any Person concerning the business and properties of
the Company, afford to any Person (other than the Buyer and their designees)
access to the properties, books or records of the Company or otherwise assist or
encourage any Person, in connection with any of the foregoing. Without limiting
the generality of the foregoing obligations of the Company and the Sellers, in
the event the Company or any Seller shall receive any offer or proposal of the
type referred to in clause (i) above, the Company shall promptly provide the
Buyer with a reasonably detailed description of the terms and conditions
thereof.
5.5 ACCESS. The Company shall: (i) afford to the other parties hereto
and their agents and representatives reasonable access to the properties, books,
records and other information of the Company, PROVIDED that such access shall be
granted upon reasonable notice and at reasonable times during normal business
hours in such a manner as not to unreasonably interfere with normal business
operations; (ii) use its reasonable efforts to cause its personnel to assist the
other parties hereto in their investigation of the Company; and (iii) furnish
promptly to the other parties all information and documents concerning the
business, assets, liabilities, properties and personnel of the Company as may be
reasonably requested from time to time. In addition, from the date of this
Agreement until the Closing Date, the Company shall cause one or more of its
officers to confer on a regular basis with officers of the Buyer and to report
on the general status of its ongoing operations.
5.6 INVESTIGATION. The representations, warranties and covenants set
forth in this Agreement shall not be affected or diminished in any way by any
investigation (or failure to investigate) at any time by or on behalf of the
party for whose benefit such representations, warranties and covenants were
made. All statements contained herein or in any schedule, certificate, exhibit,
list or other document delivered pursuant hereto shall be deemed to be
representations and warranties for purposes of this Agreement. To the extent
that ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇ ("BUYER'S
19
REPRESENTATIVES") have Knowledge and a reasonable person would have made a
determination that the Sellers' (i) have made a material misrepresentation or
(ii) are in material (a) violation of a covenant or (b) violation of a warranty
prior to Closing ("Sellers' Breach"), Buyer's Representatives shall disclose in
writing such Seller's Breach to the Buyer's board of directors and the Sellers
prior to Closing.
5.7 NOTIFICATION. Each party to this Agreement shall promptly notify
the other parties in writing of the occurrence, or threatened occurrence, of (i)
any event that, with the lapse of time or notice or both, would constitute a
breach of this Agreement by such party; (ii) any event that would cause any
representation or warranty made by such party in this Agreement to be false or
misleading in any respect; and (iii) any event which would have been required to
be disclosed herein had such event occurred on or prior to the date of this
Agreement. Each party shall promptly notify the other of any action, suit or
proceeding that is instituted or threatened against such party to restrain,
prohibit or otherwise challenge the legality of any transaction contemplated by
this Agreement. The Company and the Sellers shall promptly notify the Buyer of
any lawsuit, claim, proceeding or investigation that may be threatened, brought,
asserted or commenced against the Company or which should have been listed in
any Schedule hereto if such lawsuit, claim, proceeding or investigation had
arisen prior to the date hereof. The updating of any schedule pursuant to this
SECTION 5.7 shall not be deemed to release any party for the breach of any
representation, warranty or covenant hereunder or of any other liability arising
hereunder.
5.8 REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties shall use its diligent and reasonable efforts in
good faith to take or cause to be taken as promptly as practicable all
reasonable actions that are within its control to cause to be fulfilled: (i)
those conditions precedent to its obligations to consummate the transactions
contemplated hereby; and (ii) those actions upon which the conditions precedent
to the other party's obligations to consummate this Agreement are dependent.
ARTICLE VI.
ADDITIONAL AGREEMENTS
6.1 CERTAIN TAX RETURNS AND INDEMNITY.
(a) The Buyer shall be liable for and shall pay all Taxes
applicable to the Company and/or the Shares for all taxable periods beginning
after the Closing Date, regardless of when assessed, and including any interest
or penalties thereon.
(b) The Sellers shall be liable for and pay all income Taxes
applicable to the Company and/or the Shares for all taxable periods ending on or
before the Closing Date, regardless of when assessed, and including any interest
or penalties thereon, and shall indemnify and hold harmless Buyer, the Company
and all of their respective Affiliates with respect thereto.
6.2 SURVIVAL.
(a) The representations and warranties of the parties hereto
contained in this Agreement or in any exhibit or schedule to this Agreement
shall survive the Closing Date, except (i) as expressly provided in SECTION
6.2(B) hereof, and (ii) to the extent Buyer's Representatives have made a
determination of a Sellers' Breach (which breach shall be evidenced by a written
notice to the Buyer's board of directors and the Sellers by Buyer's
Representatives) and elect to close, in which case Buyer's
20
sole recourse against Sellers as to such Sellers' Breach shall be to terminate
this Agreement and Buyer shall have no liability claim against the Sellers or
the Company as to such Sellers' Breach.
(b) The Sellers shall have no liability under SECTION 6.3(A) hereof
unless the indemnifying party receives notice in writing from Buyer of Buyer's
claim thereunder on or before the 18th month anniversary of the Closing Date,
PROVIDED, HOWEVER, that such time limitation shall not be applicable with
respect to claims for (i) any claims with respect to Federal or state income
Taxes under SECTION 6.3(A)(IV) hereof, and/or (ii) any claim with respect to a
breach of any or all of SECTIONS 4.1, 4.2 or 4.4 hereof.
6.3 INDEMNIFICATION.
(a) BY THE SELLERS. Subject to the limitations set forth in
SECTIONS 6.2 AND 6.3(D) hereof, and provided that the Closing has occurred,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and Schwinne agree, jointly and severally, to indemnify and
hold harmless the Buyer and its respective directors, officers, employees and
agents from, against and in respect of, the full amount of any and all
liabilities, damages, claims, deficiencies, fines, assessments, losses, taxes,
penalties, interest, costs and expenses, including, without limitation,
reasonable fees and disbursements of counsel (collectively, the "LOSSES"),
arising from, relating to, caused from (whether in whole or in part), in
connection with, or incident to:
(i) any breach, inaccuracy or violation of the Sellers'
representations in SECTION 4.10 hereof (an "UNDISCLOSED LIABILITY
BREACH");
(ii) any breach, inaccuracy or violation of any of the other
representations, warranties, covenants or agreements of the Company or
any of the Sellers contained in this Agreement, in any schedule or
exhibit to this Agreement or in any document or certificate delivered
by any of them at or prior to the Closing;
(iii) any and all loss or liability, including the costs and
expenses of prosecution or defense incurred by the Buyer as a
consequence of or relating to any claims and/or litigation relating to
any matters before the Closing (A) against the Company, (B) relating to
the Company, or (C) relating to the Shares;
(iv) any and all Taxes, due or claimed to be due (including,
without limitation, Taxes on properties, income, franchises, licenses,
sales, services and payrolls) by any federal, state, local and foreign
authority applicable to the Company and/or the Shares in respect of or
attributable to any and all periods ending on or before the Closing
Date; and
(v) any and all actions, suits, proceedings, demands,
assessments or judgments, costs and expenses incidental to any of the
foregoing.
(b) BY THE BUYER. Subject to the limitations set forth in SECTION
6.4(D) hereof, and provided that the Closing has occurred, the Buyer agrees to
indemnify and hold harmless the Company (and its directors, officers, employees
and agents) and the Sellers from, against and in respect of, the full amount of
any and all Losses arising from, in connection with, or incident to:
(i) any breach, inaccuracy or violation of any of the
representations, warranties, covenants or agreements of the Buyer
contained in this Agreement, in any schedule or exhibit to this
Agreement or in any document or certificate delivered by the Buyer at
or prior to the Closing;
21
(ii) any and all actions, suits, proceedings, demands,
assessments or judgments, costs and expenses incidental to any of the
foregoing.
(c) INDEMNITY PROCEDURE. A party or parties responsible for
indemnifying another party against any matter pursuant to this Agreement is
referred to herein as the "INDEMNIFYING PARTY," and a party or parties entitled
to indemnity is referred to as the "INDEMNIFIED PARTY."
(i) An Indemnified Party under this Agreement shall, with
respect to claims asserted against such party by any third party, give
written notice to each Indemnifying Party of any liability which might
give rise to a claim for indemnity under this Agreement within 30
business days of the receipt of any written claim from any such third
party, and with respect to other matters for which the Indemnified
Party may seek indemnification, give prompt written notice to each
Indemnifying Party of any liability which might give rise to a claim
for indemnity; PROVIDED, HOWEVER, that any failure to give such notice
will not waive any rights of the Indemnified Party except to the extent
the rights of the Indemnifying Party are materially prejudiced or the
ability of the Indemnifying Party to cure a claim or mitigate damages
is materially prejudiced.
(ii) As to any claim, action, suit or proceeding by a third
party, the Indemnifying Party shall be entitled, together with the
Indemnified Party, to participate in the defense, compromise or
settlement of any such matter through the Indemnifying Party's own
attorneys and at its own expense. With regard to claims of third
parties for which indemnification is payable hereunder, such
indemnification expense shall be paid by the Indemnifying Party subject
to the limitations in Sections 6.3(c)(iv) and 6.3(d); (i) the
Indemnified Party shall provide such cooperation and such access to its
books, records and properties as the Indemnifying Party shall
reasonably request with respect to such matter; (ii) the parties hereto
agree to cooperate with each other in order to ensure the proper and
adequate defense thereof; and (iii) it being understood that the
Indemnified Party shall control any such defense, all at the
Indemnifying Party's expense to the extent of such limitations..
(iii) An Indemnifying Party shall not make any settlement of
any claims without the written consent of the Indemnified Party, which
consent shall not be unreasonably withheld. Without limiting the
generality of the foregoing, it shall not be deemed unreasonable to
withhold consent to a settlement involving injunctive or other
equitable relief against the Indemnified Party or its assets, employees
or business.
(iv) With regard to claims of third parties for which
indemnification is payable hereunder, such indemnification shall be
paid by the Indemnifying Party upon the earliest to occur of: (i) the
entry of a judgment against the Indemnified Party and the expiration of
any applicable appeal period, or if earlier, five days prior to the
date that the judgment creditor has the right to execute the judgment
or if earlier the date that the Indemnified Party must post any bond
with respect to any judgment or other judicial ruling; (ii) the entry
of an unappealable judgment or final appellate decision against the
Indemnified Party; (iii) a settlement of the claim; or (iv) with
respect to indemnities for Tax liabilities, upon the issuance of any
resolution by a taxation authority to the extent the Buyer is subject
to an attachment, a lien, or the taxing authority can pursue collection
without adjudication. With regard to other claims for which
indemnification is payable hereunder, such indemnification shall be
paid promptly by the Indemnifying Party upon demand by the Indemnified
Party.
22
(v) Any indemnification payment pursuant to SECTION 6.3(A)
hereof shall constitute a reduction in the Purchase Price hereunder.
(d) LIMITATIONS.
(i) The Sellers shall be obligated to indemnify under SECTION
6.3(A)(I) with respect to Undisclosed Liability Breaches only if and to
the extent the aggregate of all of the Sellers' liability with respect
thereto exceeds $100,000. In addition, in no event shall the aggregate
indemnity liability of the Sellers with respect to Undisclosed
Liability Breaches together with breaches under subparagraph (iii) of
this SECTION 6.3(D) exceed $5,000,000.
(ii) There shall not be any limit on the Sellers' indemnity
liability with respect to (x) Sellers' liability under SECTION 6.1(B)
hereof, and/or (y) Losses attributable to fraud and/or intentional
misconduct by Sellers, the Company and/or the Company's Affiliates
prior to the Closing Date. For purposes of this Subsection 6.3(d)(ii),
fraud and intentional misconduct shall not include negligent
misrepresentations or omissions to state a fact or misstatements made
or omissions made by Sellers or the Company acting in good faith.
(iii) The Sellers shall be obligated to indemnify under clauses
(ii) through (v) of SECTION 6.3(A) hereof only if and to the extent the
aggregate of all of Sellers' liability with respect thereto exceeds
$1,000,000. In addition, in no event shall the aggregate liability of
Sellers thereunder together with breaches under SECTION 6.3(D)(I)
exceed $5,000,000. The limitations in this SECTION 6.3(D)(III) shall
not apply to any breach of any of the covenants of Sellers hereunder
under Sections 5.1, 5.3, 5.4, 5.5, 5.7, 6.4, 6.5, 6.6 and 6.7
("COVENANT BREACHES"), Federal or state income Tax liability of Sellers
hereunder, to any Undisclosed Liability Breaches ($100,000 threshold
limitation of Section 6.3(d)(i)) or to any breaches of SECTIONS 4.1,
4.2 or 4.4 hereof (collectively "TITLE/AUTHORITY BREACHES") or to
Sections 6.3(d)(iv) and 6.3(d)(v) regardless of whether such Covenant
Breaches, income Tax liability, Undisclosed Liability Breaches and/or
Title/Authority Breaches would also be subject to indemnification under
clauses (ii) through (v) of SECTION 6.3(A) hereof.
(iv) Sellers' liability for any claims by third parties (or
related legal fees) against the Company or Buyer relating to Product
Liability Claims shall be limited to the proceeds of the Company's
Product Liability Insurance which names the Sellers as additional
insured, provided that the Product Liability Insurance is enforceable
in all respects and such policy provides liability protection to the
Company or the Buyer against said Product Liability Claims up to and
including an aggregate of five million dollars ($5,000,000). Product
liability Claims covered by Product Liability Insurance are not subject
to the ▇▇▇▇▇▇▇ and the limitations of SECTIONS 6.3(D)(I) AND (III).
Sellers agree that if the Product Liability Insurance policy is not
enforceable, Sellers shall be liable for any Product Liability Claims
subject to the limitations of Section 6.3(d)(i) and for a term not to
exceed eighteen months from the date of Closing.
(v) Sellers' liability for any claims by third parties (or
related legal fees) against the Company or Buyer relating to
Environmental Liability Claims shall be limited to the proceeds of the
Company's Environmental Liability Insurance which names Sellers as
additional insured, provided that the Environmental Liability Insurance
is enforceable in all respects and such policy provides liability
protection to the Company or the Buyer against said Environmental
Liability Claims up to and including an aggregate of ten million
dollars. Environmental Liability
23
Claims covered by Environmental Liability Insurance are not subject to
the ▇▇▇▇▇▇▇ and the limitations of SECTIONS 6.3(D)(I) AND (III).
Sellers agree that if the Environmental Liability Insurance policy is
not enforceable, Sellers shall be liable for any Environmental
Liability Claims subject to the limitations of Section 6.3(d)(i) and
for a term not to exceed eighteen months from the date of Closing.
Sellers shall have no liability to pay Buyer's or the Company's counsel, or to
reimburse Buyer for same, or pay for any misrepresentation or warranty violation
until the third party claim is adjudicated and a liability is imposed upon the
Company or the Buyer and the applicable ▇▇▇▇▇▇▇ amounts set forth in SECTIONS
6.3(D)(I)-(III) are exceeded, except as otherwise set forth in Section
6.3(d)(ii).
(e) INDEMNIFICATION PAYMENTS NET OF TAXES. All sums payable by an
Indemnifying Party as indemnification under this SECTION 6.4 shall be paid free
and clear of all deductions or withholdings (including any taxes or governmental
charges of any nature) unless the deduction or withholding is required by law,
in which event or in the event the Indemnified Party shall incur any liability
for tax chargeable or assessable in respect of any such payment, the
Indemnifying Party shall pay such additional amounts as shall be required to
cause the net amount received by the Indemnified Party to equal the full amount
which would otherwise have been received by it had no such deduction or
withholding been made or no such liability for taxes been incurred, except to
the extent the reimbursement constitutes taxable revenue.
6.4 NONCOMPETITION; STANDSTILL.
(a) Each of the Sellers severally represent and the Company
acknowledges that in furtherance of the sale of the Shares to the Buyer and in
order to assure the Buyer that the Buyer will retain the value and goodwill of
the Shares and the business so sold, each of the Company and the Sellers agree
not to utilize their special knowledge of the business of the Company and their
relationships with customers, suppliers and others to compete with the Buyer in
any business which is the same as the business as conducted by the Company or
the Buyer, including, without limitation, the design, manufacture and/or sale of
FAA/PMA (including any successor term which may be used to describe such term)
parts (the "PROHIBITED BUSINESS"). For a period of seven years beginning on the
Closing Date, neither the Company, nor any Seller shall, directly or indirectly,
assist in the creation or development of, engage or have an interest, anywhere
in the United States of America or any other geographic area where the Company
does business or in which its Products are marketed, alone or in association
with others, as principal, officer, agent, employee, director, partner or
stockholder (except as an employee or consultant of the Buyer or any of their
Affiliates), or through the investment of capital, lending of money or property,
rendering of services or advice or otherwise, in any business competitive with
or similar to the Prohibited Business. During the same period, neither the
Company nor any Seller shall, nor shall they permit any of their employees,
agents or others under any of their control to, directly or indirectly, on
behalf of the Company or any Seller or any other Person, (i) call upon, accept
business from, or solicit the business of any Person who is, or who had been at
any time during the preceding two years, a customer of the Company or otherwise
divert or attempt to divert any business from the Buyer; or (ii) recruit or
otherwise solicit or induce any person who was an employee of, or otherwise
engaged by, the Buyer or the Company at any time between January 1, 1997 and the
Closing Date to terminate his or her employment or other relationship with the
Company or the Buyer, or hire any person who has left the employ of the Company
or the Buyer during the preceding two years. Neither the Company nor any Seller
shall at any time, directly or indirectly, use or purport to authorize any
Person to use any name, ▇▇▇▇, logo, trade dress or other identifying words or
images which are the same as or similar to those used currently or in the past
by the Company in connection with any product or service, whether or not
24
such use would be in a business competitive with that of the Buyer. The
ownership or control of up to five percent of the outstanding voting securities
or securities of any class of a company with a class of securities registered
under the Exchange Act shall not be deemed to be a violation of the provisions
of this SECTION 6.4(A). This provision shall be subject to defenses available to
▇▇▇▇▇▇▇ or Schwinne under the ▇▇▇▇▇▇▇ Consulting Agreement or the Schwinne
Employment Agreement attached as Exhibits A and B hereto.
(b) Each of the Sellers and the Company hereby agrees that for a
period ending on the date which is ten years from the Closing neither any Seller
nor the Company nor any Affiliate, successor or assign of any of them
(regardless of whether such Person is an Affiliate on the date hereof) will (a)
acquire, offer to acquire, or agree to acquire, directly or indirectly, by
purchase or otherwise, control of Buyer, (b) make, or in any way participate,
directly or indirectly, as advisor or otherwise, in any "solicitation" of
"proxies" or consents to vote (as such terms are used in the proxy rules of the
Commission), or seek to advise or influence any Person with respect to the
voting of any voting securities of Buyer, in opposition to any proposed actions
of the Board of Directors of Buyer or in opposition to any nominees for
Directors of Buyer which nominees have been nominated by Buyer, its management
or its Board of Directors, (c) seek or assist any other party in seeking
representation on the Board of Directors of Buyer through the election to the
Board of Directors of individuals(s) not nominated and supported by Buyer, its
management and Board of Directors, (d) pursue or publicly announce an interest
in pursuing an acquisition of control of Buyer or an alteration of the
composition of Buyer's Board of Directors or (e) advise or otherwise act, alone
or in concert with others, directly or indirectly, to seek to control or
influence the management, Board of Directors or policies of Buyer.
6.5 CONFIDENTIALITY. The Company and the Sellers acknowledge that the
Intangible Property and all other confidential or proprietary information with
respect to the business and operations of the Company are valuable, special and
unique assets included within the Purchased Assets. The Company and the Sellers
shall not, and shall cause their respective Affiliates to not, at any time,
disclose, directly or indirectly, to any Person, or use or authorize or purport
to authorize any Person to use any confidential or proprietary information with
respect to the Company or the Buyer, whether or not for the Company's or any
Seller's own benefit, without the prior written consent of the Buyer, including
without limitation, information as to the financial condition, results of
operations, customers, suppliers, products, products under development,
inventions, sources, leads or methods of obtaining new products or business,
Intangible Property, pricing methods or formulas, cost of supplies, marketing
strategies or any other information relating to the Company or the Buyer which
could reasonably be regarded as confidential, but not including information
which is or shall become generally available to the public other than as a
result of disclosure by the Company or a Seller or any of their agents,
Affiliates or representatives or a person to whom any of them has provided such
information.
6.6 CONTINUING OBLIGATIONS. The restrictions set forth in SECTIONS 6.4,
and 6.5 are considered by the parties to be reasonable for the purposes of
protecting the value of the business and goodwill of the Company and the Buyer.
The parties hereto acknowledge that the Buyer would be irreparably harmed and
that monetary damages would not provide an adequate remedy to the Buyer in the
event the covenants contained in SECTIONS 6.4, and 6.5 were not complied with in
accordance with their terms. Accordingly, the Company and the Sellers agree that
any breach or threatened breach by any of them of any provision of SECTIONS 6.4
AND 6.5 shall entitle the Buyer to injunctive and other equitable relief without
the posting of any bond or security to secure the enforcement of these
provisions, in addition to any other remedies which may be available to the
Buyer, and that the Buyer shall be entitled to receive from the Company and the
Sellers reimbursement for all attorneys' fees and expenses incurred by the Buyer
in enforcing these provisions. In addition to its other rights and remedies, the
Buyer shall
25
have the right to require the Company and any Seller who breaches any of the
covenants contained in SECTIONS 6.4 AND 6.5 to account for and pay over to the
Buyer, as the case may be, all compensation, profits, money, accruals and other
benefits derived or received, directly or indirectly, by the Company or such
Seller from the action constituting such breach. If the Company or any Seller
breaches the covenant set forth in SECTION 6.4(A), the running of the noncompete
period described therein shall be tolled with respect to the Company or such
Seller for so long as such breach continues. It is the desire and intent of the
parties that the provisions of SECTIONS 6.4 AND 6.5 be enforced to the fullest
extent permissible under the laws and public policies of each jurisdiction in
which enforcement is sought. If any provisions of SECTIONS 6.4, and 6.5 relating
to the time period, scope of activities or geographic area of restrictions are
declared by a court of competent jurisdiction to exceed the maximum permissible
time period, scope of activities or geographic area, the maximum time period,
scope of activities or geographic area, as the case may be, shall be reduced to
the maximum which such court deems enforceable. If any provisions of SECTIONS
6.4, and 6.5 other than those described in the preceding sentence are
adjudicated to be invalid or unenforceable, the invalid or unenforceable
provisions shall be deemed amended (with respect only to the jurisdiction in
which such adjudication is made) in such manner as to render them enforceable
and to effectuate as nearly as possible the original intentions and agreement of
the parties.
6.7 ▇▇▇▇▇▇▇ CONSULTING AND SCHWINNE EMPLOYMENT AGREEMENTS. At the
Closing, (i) the Company and ▇▇▇▇▇▇▇ shall enter into the Consulting and
Non-Competition Agreement attached hereto as EXHIBIT A (the "▇▇▇▇▇▇▇ CONSULTING
AGREEMENT"), and (ii) the Company and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall enter into the
Employment and Non-Competition Agreement attached hereto as EXHIBIT B (the
"SCHWINNE EMPLOYMENT AGREEMENT").
6.8 PUBLICITY. The parties agree to reasonably cooperate in issuing any
press release or other public announcement or making any governmental filing
concerning this Agreement or the transactions contemplated hereby. Nothing
contained herein shall prevent any party from at any time furnishing any
information to any governmental authority which it is by law or otherwise so
obligated to disclose or from making any disclosure which its counsel deems
necessary or advisable in order to fulfill such party's disclosure obligations
under applicable law. Nothing contained herein shall prevent Buyer or Buyer's
parent company, HEICO Corporation ("HEICO"), from at any time furnishing any
information to the AMEX or to the public which it is required to disclose under
the applicable rules of the AMEX or applicable securities laws.
6.9 PRODUCT LIABILITY INSURANCE. Sellers shall obtain a product
liability insurance policy ("Product Liability Insurance") which shall provide
product liability protection to the Company or the Buyer against product
liability claims by third parties (including related legal fees) including
claims relating to defectively designed, manufactured or assembled Products
("Product Liability Claims") and which names the Sellers as additional insured.
Sellers represent that the Product Liability Insurance is enforceable in all
respects against Product Liability Claims and such policy will provide liability
protection to the Company or the Buyer up to and including an aggregate of five
million dollars (the "Policy Amount"). Sellers agree that if the Product
Liability Insurance policy is not enforceable against any and all Product
Liability Claims, Sellers shall be liable for any such Product Liability Claims
subject to the limitations of Section 6.3(d)(i) and for a term not to exceed
eighteen months from the date of Closing. This Section 6.9 shall not be used to
interpret or expand Sellers' liability hereunder or be used to expand the
representations and warranties of Article IV herein; this Section 6.9 is subject
to the limitations of Section 6.3(d)(iv).
6.10 ENVIRONMENTAL LIABILITY INSURANCE. Sellers shall obtain an
environmental liability insurance policy ("Environmental Liability Insurance")
which shall provide environmental liability
26
protection to the Company or the Buyer against environmental liability claims by
third parties (including related legal fees) including claims relating to
environmental contamination or hazardous waste of the Company's property
("Environmental Liability Claims") and which names the Sellers as additional
insured. Sellers represent that the Environmental Liability Insurance is
enforceable in all respects against Environmental Liability Claims and such
policy will provide liability protection to the Company or the Buyer up to and
including an aggregate of ten million dollars ("the Environmental Policy
Amount"). Buyer shall pay the cost of such insurance in excess of a $5 million
dollar policy. Sellers agree that if the Environmental Liability Insurance
policy is not enforceable against any and all Environmental Liability Claims,
Sellers shall be liable for any such Environmental Liability Claims subject to
the limitations of Section 6.3(d)(i) and for a term not to exceed eighteen
months from the date of Closing. This Section 6.10 shall not be used to
interpret or expand Sellers' liability hereunder or be used to expand the
representations and warranties of Article IV herein; this Section 6.10 is
subject to the limitations of Section 6.3(d)(v).
ARTICLE VII.
CLOSING; CONDITIONS PRECEDENT; TERMINATION
7.1 CLOSING. Subject to the satisfaction or waiver of the conditions
set forth in SECTIONS 7.2 and 7.3 hereof, the consummation of the sale and
purchase and the transfers and deliveries to be made pursuant to this Agreement
(the "CLOSING") shall take place at 10:00 a.m. local time (but shall be deemed
to have occurred at 12:01 a.m. local time) at the offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇ on July 31, 1998 (the "CLOSING DATE"), or at such other place,
time or date as may be agreed to by the parties. All proceedings to be taken and
all documents to be executed at the Closing shall be deemed to have been taken,
delivered and executed simultaneously, and no proceeding shall be deemed taken
nor documents deemed executed or delivered until all have been taken, delivered
and executed.
(a) At the Closing, the Company and the Sellers shall deliver to
the Buyer:
(i) A Copy of the Articles or Certificate of Incorporation of
the Company certified as of a recent date by the Secretary of State of
Georgia and a copy of the by-laws of the Company certified on the
Closing Date by the secretary or an assistant secretary of the Company;
(ii) Certificate of existence of the Company issued as of a
recent date by the Secretary of State of Georgia;
(iii) Incumbency certificates, duly executed and dated the
Closing Date, with respect to the officers of the Company executing
this Agreement;
(iv) Copies of the resolutions of the Board of Directors of
the Company authorizing the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, certified by the
secretary or an assistant secretary of the Company as of the Closing
Date;
(v) Opinion of counsel to the Company and the Sellers, duly
executed by them substantially in the form of EXHIBIT C;
27
(vi) Duly executed certificates of title (or like documents)
with respect to any vehicles or other equipment included in the
Purchased Assets for which a certificate of title is required in order
to transfer title;
(vii) All consents, waivers or approvals obtained by the
Company with respect to the Purchased Assets or the consummation of the
transactions contemplated by this Agreement; and in particular, the
Company shall have obtained each of the consents to the assignment or
transfer of Material Agreements contemplated by SECTIONS 4.28 and
5.2(A) hereof;
(viii) The certificate contemplated by SECTION 7.2(F), duly
executed by the Sellers and duly authorized officers of the Company;
(ix) A comfort letter, dated not more than two days prior to
the Closing Date, from the Company's independent public accountants, in
form and substance acceptable to Buyer and HEICO, and substantially in
accordance with the form of comfort letter included on SCHEDULE 7.1.
(x) If required, audited Company Financial Statements as of
and for two years ended December 31, 1996 and 1997, together with the
consent of the Company's accountants, necessary for the Company's
proper filing of a Current Report on Form 8-K with respect to the
purchase of Shares contemplated hereby, and
(xi) Such other bills of sale, assignments and other
instruments of transfer or conveyance as the Buyer may reasonably
request or as may be otherwise necessary to evidence and effect the
sale, assignment, transfer, conveyance and delivery of the Purchased
Assets to the Buyer.
In addition to the above deliveries, the Company and the Sellers shall take all
steps and actions as the Buyer may reasonably request or as may otherwise be
necessary to put the Buyer in actual possession or control of the Shares.
(b) At the Closing, the Buyer shall deliver to the Company and/or
the Sellers:
(i) A wire transfer or cashier's check for the amount of the
Purchase Price LESS $5,000,000, and deliver to the Escrow Agent the sum
of Five Million Dollars ($5,000,000) (the "Indemnity Escrow Deposit")
in immediately available funds, which amount shall be held by the
Escrow Agent pursuant to the terms and conditions of the Indemnity
Escrow Agreement attached hereto as EXHIBIT G (the "Indemnity Escrow
Agreement") and Section 7.2(n);
(ii) Copies of the Articles of Incorporation of the Buyer
certified as of a recent date by the Secretary of State of the State of
Florida and copies of the by-laws of the Buyer, certified on the
Closing Date by the secretary or an assistant secretary of the Buyer;
(iii) Certificates of good standing of the Buyer issued as of a
recent date by the Secretary of State of the State of Florida;
(iv) Incumbency certificates, duly executed and dated the
Closing Date, with respect to the officers of the Buyer executing this
Agreement;
28
(v) Copies of the resolutions of Boards of Directors of the
Buyer authorizing the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, certified by the
secretary or an assistant secretary of the Buyer, as of the Closing
Date;
(vi) Opinion of counsel to the Buyer, duly executed by
▇▇▇▇▇▇▇▇▇ Traurig, P.A., substantially in the form of EXHIBIT D;
(vii) The certificate contemplated in SECTION 7.3(C), duly
executed by the duly authorized officers of the Buyer; and
(viii) The ▇▇▇▇▇▇▇ Consulting Agreement and the Schwinne
Employment Agreement all executed by the Buyer, as applicable.
7.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER. The
obligations of the Buyer to consummate the transactions contemplated by this
Agreement are subject to the satisfaction at or prior to the Closing of the
following conditions.
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Company and the Sellers contained in this Agreement and in any
certificate or other document delivered pursuant to this Agreement shall be true
and correct in all material respects (except for representations and warranties
which are by their terms qualified by materiality, which shall be true and
correct in all respects) as of the Closing Date with the same force and effect
as though made on and as of such date.
(b) COVENANTS PERFORMED. All of the terms, covenants and conditions
of this Agreement to be performed or complied with by the Company or the Sellers
on or prior to the Closing Date shall have been duly performed or complied with
in all respects.
(c) NO MATERIAL ADVERSE CHANGE. There shall not have occurred any
event or condition of any character which has adversely affected or may
adversely affect in any material respect the Buyer's ability to operate the
business of the Company as such business is currently being operated, and no
event or condition shall have occurred which has adversely affected or may
adversely affect in any material respect the Purchased Assets or the condition
(financial or otherwise) of the Company or the Company's assets, liabilities,
earnings, book value, business, operations or prospects.
(d) CONSENTS. The Company shall have obtained all authorizations
consents and approvals of Persons reasonably necessary or desirable to
consummate the transactions contemplated by this Agreement, each of which shall
have been obtained without the imposition of any adverse terms or condition.
(e) DUE DILIGENCE. The Buyer's due diligence review with respect to
the Company shall be satisfactory to the Buyer in its sole discretion.
(f) COMPANY'S AND SELLERS' CERTIFICATE. The Company and the Sellers
shall have delivered to the Buyer a certificate executed by the President of the
Company and each Seller, dated the Closing Date, certifying in such detail as
the Buyer may reasonably request, that the conditions specified in SECTIONS
7.2(A), (B) and (C) above have been fulfilled and as to such other matters as
the Buyer may reasonably request.
(g) GOVERNMENTAL CONSENTS. All consents and approvals required by
governmental authorities for the consummation of the transactions contemplated
by this Agreement shall have been
29
obtained. All of such consents and approvals shall have been obtained without
the imposition of any conditions which would adversely affect the Buyer or the
Company.
(h) NO LITIGATION. No litigation, arbitration or other proceeding
shall be pending or, to the knowledge of the parties, threatened by or before
any court, arbitration panel or governmental authority; no law or regulation
shall have been enacted after the date of this Agreement; and no judicial or
administrative decision shall have been rendered; in each case, which enjoins,
prohibits or materially restricts, or seeks to enjoin, prohibit or materially
restrict, the consummation of the transactions contemplated by this Agreement.
(i) ENVIRONMENTAL AUDIT. The results of the environmental audit
performed on behalf of the Buyer shall be satisfactory to the Buyer in all
respects.
(j) DELIVERIES. Each of the items specified in SECTION 7.1(A) shall
have been executed and/or delivered, as applicable, to the Buyer.
(k) APPROVALS. Approval of the Board of Directors of HEICO
Aerospace Holdings Corp..
(l) REAL PROPERTY PURCHASE AGREEMENT. ▇▇▇▇▇▇▇ and Buyer shall have
consummated the sale of real property contemplated by that certain Real Property
Purchase Agreement, dated as of the date hereof, a copy of which is attached
hereto as EXHIBIT "F" (the "REAL PROPERTY PURCHASE AGREEMENT").
(m) CONSTRUCTION CONTRACT. A copy of the plans and contract shall
be provided to the Buyer and is subject to Buyer's approval.
(n) INDEMNITY ESCROW AGREEMENT. The Buyer, the Company and the
Sellers shall have entered into an Indemnity Escrow Agreement in the form of
EXHIBIT G hereto; pursuant to which Buyer shall escrow as of the Closing Date,
Five Million Dollars ($5,000,000) (the "Escrowed Funds"). The Escrowed Funds
shall be held in escrow during the period beginning on the Closing Date and
continue for a period of eighteen months from the Closing Date. The Escrow Funds
shall be used to satisfy any indemnification payments pursuant to Section 6.3(a)
which shall constitute a reduction in the Purchase Price. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall
have the authority to (i) manage the Escrow Funds and (ii) withdraw any earnings
on such funds as long as such withdrawal does not result in a reduction in the
Escrow Funds. Sellers shall maintain the Escrow Funds balance of $5,000,000 at
all times until the expiration of the Escrow Agreement, except for appropriate
reductions resulting from indemnification payments pursuant to Section 6.3.
(o) PRODUCT LIABILITY INSURANCE. Sellers shall deliver to Buyer a
Product Liability Insurance policy in compliance with the provisions set forth
in Section 6.9.
(p) ENVIRONMENTAL LIABILITY INSURANCE. Sellers shall deliver to
Buyer an Environmental Liability Insurance policy in compliance with the
provisions set forth in Section 6.10.
7.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
SELLERS. The obligations of each of the Company and the Sellers to consummate
the transactions contemplated by this Agreement are subject to the satisfaction
at or prior to the Closing of the following conditions.
30
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Buyer contained in this Agreement or in any certificate or
other document delivered pursuant to this Agreement shall be true and correct in
all material respects (except for representations and warranties which are by
their terms qualified by materiality, which shall be true and correct in all
respects) as of the Closing Date with the same force and effect as though made
on and as of such date.
(b) COVENANTS PERFORMED. The terms, covenants and conditions of
this Agreement to be performed or complied with by the Buyer on or prior to the
Closing Date shall have been duly performed or complied with in all respects.
(c) THE BUYER'S CERTIFICATE. The Buyer shall have delivered to the
Company a certificate executed by their President, dated the Closing Date,
certifying in such detail as the Company may reasonably request, that the
conditions specified in SECTIONS 7.3(A) and (B) above have been fulfilled.
(d) NO LITIGATION. No litigation, arbitration or other proceeding
shall be pending or, to the knowledge of the parties, threatened by or before
any court, arbitration panel or governmental authority; no law or regulation
shall have been enacted after the date of this Agreement; and no judicial or
administrative decision shall have been rendered; in each case, which enjoins,
prohibits or materially restricts, or seeks to enjoin, prohibit or materially
restrict, the consummation of the transactions contemplated by this Agreement.
(e) DELIVERIES. Each of the items specified in SECTION 7.1(B) shall
have been executed and/or delivered, as applicable, to the Company and/or the
Sellers.
(f) REAL PROPERTY PURCHASE AGREEMENT. The transactions contemplated
by the Real Property Purchase Contract shall have been consummated.
(g) CONSULTING AND EMPLOYMENT AGREEMENTS. The ▇▇▇▇▇▇▇ Consulting
Agreement and Schwinne Employment Agreement shall have been executed by Buyer
and the Company and delivered to ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, as applicable.
(h) PRODUCT LIABILITY INSURANCE. Sellers shall deliver to Buyer a
Product Liability Insurance policy in compliance with the provisions set forth
in Section 6.9
(i) ENVIRONMENTAL LIABILITY INSURANCE. Sellers shall deliver to
Buyer an Environmental Liability Insurance policy in compliance with the
provisions set forth in Section 6.10.
7.4 TERMINATION. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated at any time prior to the
Closing Date:
(a) by the mutual consent of the Board of Directors of the Buyer
and the Board of Directors of the Company;
(b) by the Buyer, or the Sellers if the Closing shall not have
occurred on or before August 31, 1998 (or such later date as may be mutually
agreed to in writing by the Buyer and the Sellers), PROVIDED that the failure of
the Closing to occur by such date is not the result of the failure of the party
(or any of its Affiliates) seeking to terminate this Agreement to perform or
fulfill its obligations hereunder (time is of the essence);
31
(c) by the Buyer in the event of any material breach by the Company
or any Seller of any of their respective agreements, representations or
warranties contained herein and the failure of the Company to cure such breach
within 14 days after receipt of notice from the Buyer requesting such breach to
be cured;
(d) by the Company in the event of any material breach by the Buyer
of any of the Buyer's agreements, representations or warranties contained herein
and the failure of the Buyer to cure such breach within 14 days after receipt of
notice from the Company requesting such breach to be cured; or
(e) by the Buyer or the Company if any court of competent
jurisdiction in the United States or any other United States governmental
authority or regulatory body shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated hereby.
7.5 NOTICE OF TERMINATION. Any party desiring to terminate this
Agreement pursuant to SECTION 7.4 shall give notice of such termination to the
other parties to this Agreement.
7.6 EFFECT OF TERMINATION. In the event that this Agreement shall be
terminated pursuant to SECTION 7.4, all further obligations of the parties under
this Agreement shall be terminated without further liability of any party to the
other, PROVIDED that nothing herein shall relieve any party from liability for
its breach or violation of this Agreement. Without limiting the generality of
any other provision herein, the terms of SECTIONS 8.10 through 8.12 and 8.16
hereof shall survive any such termination.
ARTICLE VIII.
MISCELLANEOUS
8.1 NOTICES. Any notice, request, demand or other communication
required or permitted under this Agreement shall be in writing and shall be
delivered personally or sent by prepaid overnight courier for next business day
delivery to the parties at the addresses set forth below their names below (or
at such other addresses as shall be specified by the parties by like notice).
IF TO THE COMPANY OR ANY SELLER: c/o McClain International Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
WITH A COPY TO: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. Esq.
Pyke & Associates P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
And ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇.
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ 400 Tower
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
32
IF TO THE BUYER OR HEICO: HEICO Aerospace Holdings Corp.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
33
WITH A COPY TO: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ &
Quentel, P.A.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Such notices, demands, claims and other communications shall be deemed given
when actually received or in the case of delivery by overnight service with
guaranteed next business day delivery, the next business day or the day
designated for delivery.
8.2 ENTIRE AGREEMENT. This Agreement and the exhibits and schedules to
this Agreement contain every obligation and understanding among the parties
relating to the subject matter hereof and merge all prior discussions,
negotiations and agreements, if any, among them, and none of the parties shall
be bound by any representations, warranties, covenants, or other understandings,
other than as expressly provided or referred to herein. The Sellers reserve the
right to supplement or substitute any of the Schedules hereto up to seven
business days prior to the Closing Date, without being in breach hereof, except
if Buyer notifies the Sellers of a Sellers' Breach subsequent to such time, in
which case such breach may be added to the Schedules.
8.3 ASSIGNMENT. This Agreement may not be assigned by any party without
the written consent of each other party. Subject to the preceding sentence, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, heirs, personal representatives, legal
representatives, and permitted assigns.
8.4 WAIVER AND AMENDMENT. Any representation, warranty, covenant, term
or condition of this Agreement which may legally be waived, may be waived, or
the time of performance thereof extended, at any time by the party hereto
entitled to the benefit thereof, and any term, condition or covenant hereof may
be amended by the parties hereto at any time. Any such waiver, extension or
amendment shall be evidenced by an instrument in writing executed on behalf of
the appropriate party by a person who has been authorized by such party to
execute waivers, extensions or amendments on its behalf. No waiver by any party
hereto, whether express or implied, of its rights under any provision of this
Agreement shall constitute a waiver of such party's rights under such provisions
at any other time or a waiver of such party's rights under any other provision
of this Agreement. No failure by any party hereto to take any action against any
breach of this Agreement or default by another party shall constitute a waiver
of the former party's right to enforce any provision of this Agreement or to
take action against such breach or default or any subsequent breach or default
by such other party.
8.5 NO THIRD PARTY BENEFICIARY. Except with respect to the officers,
directors, employees and agents expressly referenced in SECTION 6.5, nothing
expressed or implied in this Agreement is intended, or shall be construed, to
confer upon or give any Person other than the parties hereto and their
respective heirs, personal representatives, legal representatives, successors
and permitted assigns, any rights or remedies under or by reason of this
Agreement.
8.6 SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement shall be declared invalid, void or unenforceable,
the remainder of the provisions of this Agreement shall remain in full force and
effect, and such invalid, void or unenforceable provision shall be interpreted
as closely as possible to the manner in which it was written.
34
8.7 EXPENSES. Each party agrees to pay, without right of reimbursement
from any other party, the costs incurred by it incident to the performance of
its obligations under this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, costs incident to the
preparation of this Agreement, and the fees and disbursements of counsel,
accountants and consultants employed by such party in connection herewith.
8.8 HEADINGS. Article titles and headings to sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement. The schedules and
exhibits referred to herein shall be construed with and as an integral part of
this Agreement to the same extent as if they were set forth verbatim herein. The
specification of any dollar amount in the representations or warranties
contained in this Agreement or the inclusion of any specific item in any
schedule hereto is not intended to imply that such amounts, or higher or lower
amounts, or the items so included or other items, are or are not material, and
neither party shall use the fact of the setting of such amounts or the inclusion
of any such item in any dispute or controversy between the parties as to whether
any obligation, item or matter not described herein or included in a Schedule is
or is not material for purposes of this Agreement.
8.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Any facsimile copy of a
manually executed original shall be deemed a manually executed original.
8.10 LITIGATION; PREVAILING PARTY. In the event of any litigation with
regard to this Agreement, the prevailing party shall be entitled to receive from
the non-prevailing party and the non-prevailing party shall pay upon demand all
reasonable attorneys fees and legal expenses for the prevailing party.
8.11 INJUNCTIVE RELIEF. It is possible that remedies at law may be
inadequate and, therefore, the parties hereto shall be entitled to equitable
relief including, without limitation, injunctive relief, specific performance or
other equitable remedies in addition to all other remedies provided hereunder or
available to the parties hereto at law or in equity.
8.12 GOVERNING LAW AND VENUE. This Agreement shall be construed and
enforced in accordance with the laws of the State of Florida except for the
provisions of Sections 6.4, 6.5, 6.6 and 6.7 which shall be governed by the laws
of the State of Florida and venue shall be Dade County, Florida, without
reference to the choice of law principles thereof. Except with respect to claims
related to breaches of Sections 6.4, 6.5, 6.6 and 6.7, this Agreement shall be
subject to the exclusive jurisdiction of the courts of the State of Georgia
located in ▇▇▇▇▇▇ County, Georgia or the United States District Court for the
Northern District of Georgia. The parties to this Agreement irrevocably and
expressly agree to submit to the jurisdiction of the courts of the State of
Georgia (Florida in the case of Sections 6.4, 6.5, 6.6 and 6.7) for the purpose
of resolving any disputes among the parties relating to this Agreement or the
transactions contemplated hereby. The parties irrevocably waive, to the fullest
extent permitted by law, any objection which they may now or hereafter have to
the laying of venue of any suit, action or proceeding arising out of or relating
to this Agreement, or any judgment entered by any court in respect hereof
brought in ▇▇▇▇▇▇ County, Georgia, and further irrevocably waive any claim that
any suit, action or proceeding brought in ▇▇▇▇▇▇ County, Georgia has been
brought in an inconvenient forum.
8.13 RISK OF LOSS. Prior to the Closing, the risk of loss or damage to,
or destruction of any or all of the Company's property and assets, including,
without limitation, the Purchased Assets, shall remain with the Company.
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8.14 FURTHER ASSURANCES. On the Closing Date, the Company shall (i)
deliver to the Buyer such other bills of sale, deeds, endorsements, assignments
and other good and sufficient instruments of conveyance and transfer, in form
reasonably satisfactory to the Buyer and its counsel, as the Buyer may
reasonably request or as may be otherwise reasonably necessary to vest in the
Buyer all the right, title and interest of the Company in, to or under any or
all of the Purchased Assets, and (ii) take all steps as may be reasonably
necessary to put the Buyer in actual possession and control of all the Purchased
Assets. From time to time following the Closing, the Company and the Sellers
shall execute and deliver, or cause to be executed and delivered, to the Buyer
such other instruments of conveyance and transfer as the Buyer may reasonably
request or as may be otherwise necessary to more effectively convey and transfer
to, and vest in, the Buyer and to put the Buyer in possession of, any part of
the Purchased Assets, and, in the case of licenses, certificates, approvals,
authorizations, agreements, contracts, leases, easements and other commitments
included in the Purchased Assets which cannot be transferred or assigned
effectively without the consent of third parties which consent has not been
obtained prior to the Closing, to cooperate with the Buyer at its request in
endeavoring to obtain such consent promptly.
8.15 REMEDIES CUMULATIVE. No remedy made available by any of the
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity.
8.16 PARTICIPATION OF PARTIES; CONSTRUCTION. The parties hereto
acknowledge that this Agreement and all matters contemplated herein, have been
negotiated among all parties hereto and their respective legal counsel and that
all such parties have participated in the drafting and preparation of this
Agreement from the commencement of negotiations at all times through the
execution hereof. This Agreement shall be construed and interpreted without
regard to any presumption or other rule or interpretation against the party who
may have had primary responsibility for drafting this Agreement.
8.17 TIME OF ESSENCE. Time shall be of the essence for each and every
provision of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have each executed and delivered
this Agreement as of the day and year first above written.
HEICO AEROSPACE HOLDINGS CORP., A FLORIDA CORPORATION
By:__________________________________________________
Name: _______________________________________________
Title:_______________________________________________
▇▇▇▇▇▇▇ INTERNATIONAL, INC. A GEORGIA CORPORATION
By:__________________________________________________
Name: _______________________________________________
Title:_______________________________________________
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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SCHEDULE 1
DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following
terms when used in this Agreement shall have the meanings indicated below:
"AGREEMENT" means this Asset Purchase Agreement together with all
exhibits and schedules referred to herein.
"ALLOCATION SCHEDULE" has the meaning specified in SECTION 2.3(D).
"BUYER'S ACCOUNTANTS" has the meaning specified in SECTION 2.6.
"BUYER'S REPRESENTATIVES" has the meaning specified in SECTION 5.6.
"CLOSING" has the meaning specified in SECTION 7.1.
"CLOSING DATE" has the meaning specified in SECTION 7.1.
"CLOSING DATE BALANCE SHEET" has the meaning specified in SECTION 2.5.
"CLOSING DATE NET WORTH" has the meaning specified in SECTION 2.4.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COVENANT BREACHES" has the meaning specified in SECTION 6.3(D)(III).
"EMPLOYMENT AGREEMENTS" has the meaning specified in SECTION 4.26(A).
"ENCUMBRANCE" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, covenant or other encumbrance or restriction of any kind.
"ENVIRONMENTAL LAWS" has the meaning specified in SECTION 4.32.
"ENVIRONMENTAL LIABILITY CLAIMS" has the meaning specified in Section
6.10.
"ENVIRONMENTAL LIABILITY INSURANCE" has the meaning specified in
Sections 6.10.
"ENVIRONMENTAL POLICY AMOUNT" has the meaning specified in Sections
6.10.
"ERISA" has the meaning specified in SECTION 4.26(B).
"FINANCIAL STATEMENTS" has the meaning specified in SECTION 4.9.
"GAAP" shall have the meaning specified in SECTION 2.4.
"GOVERNMENTAL AUTHORIZATIONS" has the meaning specified in SECTION
4.20.
"HEICO" has the meaning specified in SECTION 6.8.
▇▇
"▇▇▇ ▇▇▇" has the meaning specified in SECTION 3.5.
"INDEMNIFIED PARTY" has the meaning specified in SECTION 6.3(C).
"INDEMNIFYING PARTY" has the meaning specified in SECTION 6.3(C).
"INTANGIBLE PROPERTY" has the meaning specified in SECTION 4.19.
"INVESTMENT" means, with respect to any Person, any advances, loans or
extensions of credit to any other Person, any purchases or commitments to
purchase any stock, bonds, notes, debentures or other securities of any other
Person, and any other investment in any other Person, including partnerships,
joint ventures or other similar arrangement with any Person.
"KNOWLEDGE" or "KNOWN" means, with respect to any representation or
warranty or other statement in this Agreement qualified by the knowledge of any
party, that such party has made a due and diligent investigation as to the
matters that are the subject of such representation, warranty or other
statement. Where reference is made to the knowledge of the Sellers or the
Company, such reference shall be deemed to include the directors, officers and
managerial employees of the Company, all of whom shall be deemed to have
conducted the investigation required by this definition.
"LOSSES" has the meaning specified in SECTION 6.3(A).
"MATERIAL AGREEMENTS" has the meaning specified in SECTION 4.28.
"▇▇▇▇▇▇▇ CONSULTING AGREEMENT" has the meaning specified in SECTION
6.7.
"MULTIEMPLOYER PLAN" has the meaning specified in SECTION 4.23(B).
"NON-COMPETE BREACHES" has the meaning specified in SECTION 8.12.
"OTHER PERSON AUTHORIZATIONS" has the meaning specified in SECTION
4.21.
"PERMITTED ENCUMBRANCES" means liens for taxes which are not yet due
and payable.
"PERSON" means any natural person, corporation, unincorporated
organization, partnership, association, joint stock company, joint venture,
trust or government, or any agency or political subdivision of any government,
or any other entity.
"PLAN" has the meaning specified in SECTION 4.26(B).
"POLICY AMOUNT" has the meaning specified in SECTION 6.9.
"PRODUCTS" has the meaning specified in SECTION 4.31(A).
"PRODUCT LIABILITY CLAIMS" has the meaning specified in SECTION 6.9.
"PRODUCT LIABILITY INSURANCE" has the meaning specified in SECTION 6.9.
"PROHIBITED BUSINESS" has the meaning specified in SECTION 6.4(A).
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"PURCHASE PRICE" has the meaning specified in SECTION 2.2.
"PURCHASE PRICE ADJUSTMENT" has the meaning as specified in SECTION
2.4.
"REAL PROPERTY" has the meaning specified in SECTION 4.18.
"REAL PROPERTY PURCHASE AGREEMENT" has the meaning specified in SECTION
7.2(L).
"RELATED PARTY" has the meaning specified in SECTION 4.29.
"RIGHTS" has the meaning specified in SECTION 4.19.
"SS.388(H)(10) ELECTION" has the meaning specified in SECTION 2.3(A).
"SELLERS' ACCOUNTANTS" has the meaning specified in SECTION 2.6(I).
"SELLERS' BREACH" has the meaning specified in SECTION 5.6.
"SELLERS' KNOWLEDGE" has the meaning specified in SECTION 4.15.
"SELLERS' REPORT" has the meaning specified in SECTION 2.6(I).
"SETTLEMENT ACCOUNTANTS" has the meaning specified in SECTION 2.6(II).
"SCHWINNE EMPLOYMENT AGREEMENT" has the meaning specified in SECTION
6.7.
"SHARES" has the meaning specified on page one, item A.
"SUBSIDIARY" of any Person means any Person, whether or not
capitalized, in which such Person owns, directly or indirectly, an equity
interest of 50% or more, or any Person which may be controlled, directly or
indirectly, by such Person, whether through the ownership of voting securities,
by contract, or otherwise.
"TAX" means any federal, state, local or foreign income, gross
receipts, property, sales, use, transfer, gains, license, excise, employment,
payroll, withholding or minimum tax, or any other tax custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
foreign, federal, state, local or other governmental authority or regulatory
body.
"TAX RETURN" means any return, report or similar statement required to
be filed with respect to any Taxes (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.
"TITLE/AUTHORITY BREACHES" has the meaning specified in SECTION
6.3(D)(III).
"UNDISCLOSED LIABILITY BREACHES" has the meaning specified in SECTION
6.3(A)(I).
40