EXHIBIT 2.2
ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement ("Agreement") is made and entered
into as of June 12 1998, by and among ▇▇▇▇▇▇▇ Aircraft Holdings, Inc., a
Delaware corporation ("DAH") and DAHX Acquisitions, Inc., a Delaware corporation
("Buyer") on the one hand, and ▇▇▇▇▇▇▇▇ Industries, Inc., a Delaware corporation
("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual, and ▇▇▇▇▇▇ Perl, an individual (▇▇.
▇▇▇▇▇▇▇▇ and Mr. Perl are collectively referred to herein as either the
"▇▇▇▇▇▇▇▇ Shareholders" or "Senior Management") on the other hand, based on the
following facts:
DAH desires to cause Buyer, a wholly owned subsidiary of DAH organized for
the purpose, to purchase, and ▇▇▇▇▇▇▇▇ wishes to sell, substantially all of the
assets of ▇▇▇▇▇▇▇▇ (with the specific exclusions set forth herein) on the terms
and conditions set forth herein; and
DAH desires to employ certain senior officers of ▇▇▇▇▇▇▇▇ specified herein
on the terms and conditions set forth in the form of Employment Agreement
attached as EXHIBIT A hereto (the "Employment Agreements" and, together with
this Agreement and all other agreements and instruments executed and delivered
by one or more parties hereto in connection herewith, the "Transaction
Documents").
Based on the foregoing facts and circumstances, the parties hereby agree as
follows:
1. ASSETS TO BE PURCHASED AND SOLD.
1.1 THE ▇▇▇▇▇▇▇▇ ASSETS. On the Closing Date, ▇▇▇▇▇▇▇▇ shall transfer
to Buyer all of the assets, properties, rights (contractual or otherwise)
and business of ▇▇▇▇▇▇▇▇ (including but not limited to the goodwill of
▇▇▇▇▇▇▇▇), whether such assets and business is in the nature of real,
personal, or mixed property and whether such assets are tangible or
intangible or known or unknown (collectively referred to herein as the
"Assets" or the "Property"). Without limiting the generality of the
foregoing, the assets to be transferred include:
1.1.1 REAL PROPERTY. Any and all real property (the "Owned Real
Property"), including that listed on Schedule 1.1.1;
1.1.2 REAL PROPERTY LEASES. Any and all rights under leases of real
property and improvements (the "Real Property Leases"), including that
listed on Schedule 1.1.2 (and all of the real property subject to the
Real Property Leases is referred to herein as the "Leased Real Property",
and together with the Owned Real Property, as the "Real Property");
1.1.3 PERSONAL PROPERTY.
(a) All machinery and equipment (the "Machinery and Equipment")
including that listed on Schedule 1.1.3;
(b) All tooling (the "Tooling"), including that listed on Schedule
1.1.3(b);
(c) All parts and furniture ("Parts and Furniture"); and
(d) All rights under leases of equipment, vehicles or other tangible
personal property (the "Personal Property Leases"), including that listed
on Schedule 1.1.3(d), (and all of the personal property subject to the
Personal Property Leases is referred to herein as the "Leased Personal
Property");
All of the Machinery and Equipment, Tooling, Parts and Furniture, and Leased
Personal Property are referred to collectively herein as "Personal
Property."
1.1.4 VEHICLES. All automobiles and other motor vehicles (the
"Vehicles"), including, without limitation, those listed on Schedule
1.1.4.
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1.1.5 APPROVALS. All licenses, permits, consents, authorizations,
approvals, certificates and franchises of any regulatory, administrative
or other government agency (all of which items are referred to as
"Approvals"), including those matters listed in Schedule 1.1.5.
1.1.6 PROPRIETARY RIGHTS.
(a) All patents, inventions, trademarks, names, service marks, trade
names, copyrights, marks, symbols, logos, franchises and permits, and all
applications therefor, registrations thereof and licenses, sublicenses or
agreements in respect thereof, which ▇▇▇▇▇▇▇▇ owns or uses or has used or
has the right to use or to which it is a party, and any filing or
registration thereof with any federal, state local or regulatory
authority (the "Protectable Proprietary Rights"), including those listed
on Schedule 1.1.6(a)).
(b) All trade secrets, processes, proprietary knowledge, know-how,
and other processes which are not filed or registered but which
constitute the confidential proprietary information of ▇▇▇▇▇▇▇▇ which
▇▇▇▇▇▇▇▇ uses or has used, or has the right to use (the "Confidential
Proprietary Rights").
1.1.7 CONTRACTS. All rights under contracts and agreements (other
than those described in other sections of this Section 1.1) and
specifically including, but not limited to purchase and sales orders,
quotations, executory commitments, instruments, guaranties,
indemnifications, arrangements or other understandings of ▇▇▇▇▇▇▇▇ (the
"Contracts"), including, without limitation, those matters listed on
Schedule 1.1.7.
1.1.8 RECEIVABLES. All accounts and notes receivable (the
"Receivables"), including those listed on Schedule 1.1.8.
1.1.9 DEPOSITS AND PREPAID EXPENSES. All of the deposits and
prepaid expenses of ▇▇▇▇▇▇▇▇ which relate to or are used in the business
of ▇▇▇▇▇▇▇▇, including without limitation those deposits and prepaid
expenses listed on Schedule 1.1.9 (all of which deposits and prepaid
expenses are referred to as "Deposits" and "Prepaid Expenses").
1.1.10 INVENTORY. All raw materials, supplies, component parts,
work-in-process and finished goods inventory and other inventory (the
"Inventory"), including that listed on Schedule 1.1.10;
1.1.11 TERMINATION CLAIMS. All claims for termination for
convenience or other claims against prime contractors, government
agencies, or others with respect to the termination of contracts prior to
the complete performance by ▇▇▇▇▇▇▇▇ of any such contract, including
without limitation such claims as are listed on Schedule 1.1.11, (all of
such matters, including those listed on Schedule 1.1.11, are referred to
as "Termination Claims").
1.1.12 CASH, ETC.. All cash (including in deposit accounts or
similarly liquid investments).
1.1.13 OTHER CLAIMS. All claims, causes of action, demands and
pending litigation in which ▇▇▇▇▇▇▇▇ is seeking the recovery of money or
equitable relief (the "Other Claims"), including those matters listed on
Schedule 1.1.13.
1.1.14 BOOKS AND RECORDS. All books of account, customer lists,
files, papers and records normally maintained by ▇▇▇▇▇▇▇▇ and a copy of
all of the books of account and records of ▇▇▇▇▇▇▇▇.
1.1.15 TELEPHONE NUMBERS. All telephone, fax, electronic mail and
other numbers for communication with ▇▇▇▇▇▇▇▇, including without
limitation those numbers listed on Schedule 1.1.15.
1.1.16 GOODWILL. All goodwill of ▇▇▇▇▇▇▇▇.
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1.2 NON-ASSIGNMENT OF ASSETS. To the extent that any Asset described
in Section 1.1 may not be assigned or may only be assigned with the consent
of a third party, then, notwithstanding anything to the contrary in this
Agreement, neither this Agreement nor any action taken shall constitute an
assignment or an agreement to assign such Asset; PROVIDED, HOWEVER, that in
such case ▇▇▇▇▇▇▇▇ will use its best efforts to obtain the consent of such
party to the assignment to Buyer. If such consent is not obtained, ▇▇▇▇▇▇▇▇
shall provide to Buyer the benefits of such Asset or a comparable asset in
its place as a condition to the obligations of DAH and Buyer hereunder.
2. PURCHASE PRICE. The price for the Assets (the "Purchase Price"), shall
be the amount determined pursuant to this Section 2 payable to ▇▇▇▇▇▇▇▇, or its
permitted assigns, as follows:
2.1 Subject to adjustment as provided in Section 2.2, $2,200,000 of
the Purchase Price shall be payable as follows: (i) $100,000 shall be paid
in immediately available funds upon the execution of this Purchase
Agreement; and (ii) $2,100,000 shall be paid in immediately available funds
on the first business day on or after June 29, 1998 after all conditions in
Section 6.2 have been satisfied or waived (which date is estimated to be
June 30, 1998), (the actual date is referred to as the "Closing Date").
2.2 The $2,100,000 amount payable on the Closing Date under Section
2.1 is subject to reduction as follows: (a) to the extent that the Assets
are encumbered by indebtedness or other liens (other than accounts payable
to trade creditors for goods and services incurred in the ordinary course of
▇▇▇▇▇▇▇▇' business and consistent with ▇▇▇▇▇▇▇▇' current practices for
payment of trade creditors), the payment shall be reduced by the aggregate
value of such indebtedness or liens; and (b) to the extent that
shareholders' equity in ▇▇▇▇▇▇▇▇ at the Closing Date is less than
shareholders' equity reported on the December 31, 1997 preliminary balance
sheet of ▇▇▇▇▇▇▇▇ previously delivered to DAH, the payment shall be reduced
in a corresponding amount.
2.3 On March 31 of each of the years 2000, 2001, 2002 and 2003, DAH
shall pay an additional $500,000, IF as of such date the Attributed EBITDA
(as defined below) for the year ended the prior December 31 is not less than
$650,000 (for 1999), $800,000 (for 2000), $1,000,000 (for 2001) and
$1,200,000 (for 2002). To the extent that the Attributed EBITDA for any such
year is less than the foregoing target amounts specified, but exceeds 90% of
such amount, ▇▇▇▇▇▇▇▇ shall be paid a PRO RATA portion of the amount so
specified for such year. No payment shall be made in respect of any such
year for which the Attributed EBITDA is equal to or less than 90% of the
foregoing target amounts. The payments contemplated by this Section 2.3 are
not contingent on the continued employment of the ▇▇▇▇▇▇▇▇ Shareholders by
Buyer.
As used herein the term "EBITDA" means 'Earnings 'Before Interest and
Tax ("EBIT"), adding back to EBIT, (i) Depreciation, and (ii) Amortization
(including without limitation all amortization of intangibles related to the
acquisition of the Assets and all financing costs of the acquisition of the
Assets). In determining EBITDA, no management fee or other charge shall be
imposed by DAH. As used herein "Attributed EBITDA" means for any calendar
year listed in Section 2.3, the EBITDA attributable to the Assets and
included in the consolidated income statement of DAH for such year, which
calculation shall be reviewed by the independent certified public accountant
which renders the opinion on the financial statement of DAH for such year.
The terms EBIT, Depreciation and Amortization are as defined in GAAP.
In the event DAH requires the operations of Buyer after the Closing to
undertake a project which, as a result of the lead time between R&D
expenditure and expected revenue, will have a material adverse impact on
EBITDA, the parties shall negotiate in good faith until they have reached an
agreement with respect to a credit, if any, to the calculation EBITDA for
the payments to be made pursuant to this Section 2.3.
DAH and the Buyer shall record the purchase of the Property as net
assets including goodwill.
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3. REPRESENTATIONS AND WARRANTIES.
3.1 JOINTLY BY BUYER AND DAH. Buyer and DAH hereby jointly and
severally represent and warrant to ▇▇▇▇▇▇▇▇ that the representations and
warranties of Buyer and DAH, and either of them, contained in this
Agreement, including those contained in this Section 3.1, are correct and
complete as of the date of this Agreement and will be correct and complete
as of the Closing Date. Buyer and DAH hereby jointly and severally represent
and warrant to ▇▇▇▇▇▇▇▇ the following:
3.1.1 ORGANIZATION. Buyer and DAH are both Corporations duly
organized, validly existing and in good standing under the laws of the
State of Delaware, and each have all requisite corporate power and
authority to own, lease and operate their respective properties and
conduct their respective businesses as now being conducted. Buyer and DAH
are each duly qualified, or will be duly qualified prior to the Closing
Date, to do business and in good standing in each jurisdiction listed on
Schedule 3.1.1, are not qualified to do business in any other
jurisdiction and neither the nature of the business conducted by either
of them, nor the property either of them owns, leases or operates,
requires either of them to qualify to do business as a foreign
corporation in any other jurisdiction. Buyer and DAH have previously
delivered to ▇▇▇▇▇▇▇▇ complete and correct copies of Buyer's and DAH's
articles of incorporation and bylaws as in effect on the date hereof.
3.1.2 AUTHORIZATION. Buyer and DAH each have all requisite
corporate power and authority to enter into this Agreement and each of
the Employment Agreements to which either is a party, perform their
respective obligations hereunder and thereunder and consummate the
transactions contemplated hereby and thereby. All necessary corporate
action has been taken by Buyer and DAH with respect to the execution and
delivery of this Agreement, and the Employment Agreements to which either
of them is a party, and this Agreement and such Employment Agreements to
which either of them is a party, constitute valid and binding obligations
of Buyer and DAH, enforceable against Buyer and DAH, as the case may be,
in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance and
moratorium laws and other laws of general application affecting the
enforcement of creditors' rights generally.
3.1.3 BROKERS AND FINDERS. Except as disclosed in Schedule 3.1.3,
neither Buyer, DAH nor any of their officers, directors, employees or
agents (the "Purchasing Parties"), has engaged any broker or finder or
incurred any liability for any brokerage fees, commissions, finders' fees
or similar fees or expenses and no broker or finder has acted directly or
indirectly for the Purchasing Parties in connection with this Agreement
or the transactions contemplated hereby. All of such fees, commissions or
other liabilities incurred by the Purchasing Parties in connection with
the transactions contemplated hereby shall be the sole responsibility of
DAH.
3.2 BY ▇▇▇▇▇▇▇▇ AND SENIOR MANAGEMENT. ▇▇▇▇▇▇▇▇ and Senior Management
hereby represent and warrant to Buyer and DAH that the representations and
warranties of ▇▇▇▇▇▇▇▇ and Senior Management contained in this Agreement,
including those contained in this Section 3.2, are correct and complete as
of the date of this Agreement and will be correct and complete as of the
Closing Date. As used in this Section 3.2, references to the "Senior
Management's Knowledge" means the knowledge of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
Perl. ▇▇▇▇▇▇▇▇ and Senior Management hereby represent and warrant to Buyer
and DAH the following:
3.2.1 ORGANIZATION. ▇▇▇▇▇▇▇▇ is a corporation duly organized
validly existing and in good standing under the laws of the State of
Delaware. ▇▇▇▇▇▇▇▇ has all requisite corporate power and authority to
own, lease and operate its respective properties and conduct its business
as now being conducted, and is duly qualified to do business and in good
standing in each jurisdiction listed on Schedule 3.2.1, is not qualified
to do business in any other jurisdiction, and neither the nature of the
business conducted by it nor the property it owns, leases or operates
requires it to
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qualify to do business as a foreign corporation in any other
jurisdiction. ▇▇▇▇▇▇▇▇ has previously delivered to Buyer complete and
correct copies of the articles of incorporation and by-laws of ▇▇▇▇▇▇▇▇,
as in effect on the date hereof, and ▇▇▇▇▇▇▇▇ is not in default in the
performance, observation or fulfillment of any provision of their
respective organizational documents.
3.2.2 CAPITALIZATION AND SECURITY HOLDERS. The authorized capital
stock of ▇▇▇▇▇▇▇▇ consists solely of 3000 shares of Common Stock, $0.01
par value ("Common Shares"); ▇▇▇▇▇▇▇▇ has issued 168 Common Shares, of
which 168 Common Shares are outstanding, constituting all of the issued
and outstanding shares of capital stock of any class of ▇▇▇▇▇▇▇▇. All
outstanding Common Shares have been validly issued and are fully paid and
non-assessable and free of preemptive rights. All of the ownership
interests in ▇▇▇▇▇▇▇▇ are owned by the persons listed in Schedule 3.2.2.
3.2.3 AUTHORIZATION OF ▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇▇ has full corporate power
and authority to enter into this Agreement and each of the other
Transaction Documents to which it is a party, perform its obligations
hereunder and thereunder and consummate the transactions contemplated
hereby and thereby. All necessary and appropriate corporate action has
been taken by ▇▇▇▇▇▇▇▇ with respect to the execution and delivery of this
Agreement, and the other Transaction Documents to which it is a party.
This Agreement constitutes, and the other Transaction Documents to which
▇▇▇▇▇▇▇▇ is party when executed and delivered will constitute, valid and
binding obligations of such party, enforceable against each such party in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and moratorium laws and
other laws of general application affecting the enforcement of creditors'
rights generally.
3.2.4 FINANCIAL STATEMENTS. Attached hereto as Schedule 3.2.4(a)
are (i) the balance sheets of ▇▇▇▇▇▇▇▇ as at December 31, 1995, 1996 and
1997 and as at March 31, 1998, and (ii) the related statements of income
for the years ended December 31, 1995, 1996 and 1997 and the three months
ended March 31, 1998 (all of such documents referred to collectively as
the "Financial Statements"). The Financial Statements dated as of March
31, 1998 either (a) reflect the equivalent of any adjustments made in the
Financial Statements dated as of December 31, 1997 or (b) have footnote
disclosure to reflect the absence of such adjustments and the dollar
amount of such adjustments had they been made. The Financial Statements
(i) are true, correct and complete, subject to the qualifications (if
any) explicitly set forth therein and in Schedule 3.2.4(b), (ii) have
been prepared from and are in accordance with the books and records of
▇▇▇▇▇▇▇▇, (iii) have been prepared using an accrual basis method and
average cost inventory cost flow assumptions, (iv) are in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent
basis for such periods subject to the qualifications (if any) explicitly
set forth therein and in Schedule 3.2.4(b), and (v) fairly present in all
material respects the financial position of ▇▇▇▇▇▇▇▇ as of the dates
stated and the results of operations of ▇▇▇▇▇▇▇▇ for the periods then
ended in accordance with such practices, subject to the qualifications
(if any) explicitly set forth therein and in Schedule 3.2.4(b). On the
date of this Agreement and on the Closing Date, ▇▇▇▇▇▇▇▇ has no material
contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as reflected or provided for in the
balance sheets in the Financial Statements, subject to the qualifications
(if any) explicitly set forth therein and in Schedule 3.2.4(b) or, if not
required by GAAP to be so reflected, in Schedule 3.2.4(b). Since December
31, 1997, except as described on Schedule 3.2.4, there has been no
material adverse change in the financial condition, operations, business
or prospects taken as a whole of ▇▇▇▇▇▇▇▇ from that set forth in the
Financial Statements dated as of December 31, 1997.
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3.2.5 COMPLIANCE WITH LAW.
(a) ▇▇▇▇▇▇▇▇ is in compliance in all material respects with all
applicable laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders entered, by any
federal, state, local or foreign court or governmental authority or
instrumentality, the violation of which would be materially adverse to
▇▇▇▇▇▇▇▇ or its businesses or properties.
(b) ▇▇▇▇▇▇▇▇ is compliance in all material respects with all federal,
state and local laws, ordinances, rules and regulations pertaining to
environmental matters, including solid waste disposal, toxic substances,
hazardous substances, hazardous materials, hazardous waste, toxic
chemicals, pollutants, contaminants and air or water pollution and to the
storage, use, handling, transportation, discharge and disposal (including
spills and leaks) of gaseous, liquid, semi-solid or solid materials.
Neither ▇▇▇▇▇▇▇▇ nor, to Senior Management's Knowledge, any third party
has disposed or discharged any chemicals, oil or solid wastes on any part
of the Real Property or on any other property owned, operated, leased or
used by ▇▇▇▇▇▇▇▇. There are no underground storage tanks located on any
part of the Real Property or any other property owned, operated, leased
or used by ▇▇▇▇▇▇▇▇, except as disclosed on Schedule 3.2.5(b).
(c) Schedule 3.2.5(c) contains a complete and accurate list of all
material Permits. Each of such Permits is currently valid and in full
force and effect and assignable to Buyer, and the closing of and the
transactions contemplated by this Agreement will not result in the
termination of any Permit. Such Permits listed on such schedule
constitute all material franchises, licenses, permits, consents,
authorizations, approvals, and certificates of any regulatory,
administrative or other agency or body necessary for the conduct of the
business of ▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇▇ is not in violation of any of such Permits
and there is no pending or threatened proceeding which could result in
the revocation, cancellation or inability of ▇▇▇▇▇▇▇▇ to renew or
transfer any such Permit which is material to its business. Without
limiting the foregoing, no consents, authorizations, approvals or similar
agreements or acquiescence is required from any issuer or regulator of
any Permit to any of the transactions contemplated hereby, except to the
extent listed on Schedule 3.2.5(c).
(d) To Senior Management's Knowledge, except as set forth in Schedule
3.2.5(d), ▇▇▇▇▇▇▇▇ is not under investigation with respect to, or is
currently subject to a charge of, or under notice of any violation of,
any applicable law.
3.2.6 PROPRIETARY RIGHTS. The sale by ▇▇▇▇▇▇▇▇ contemplated hereby,
ownership by Buyer of any of the Assets and, to Senior Management's
Knowledge, the business of ▇▇▇▇▇▇▇▇ as conducted prior to the Closing
Date, except as disclosed on Schedule 3.2.6, was not, is not and will not
infringe or be in contravention of any trade name, service ▇▇▇▇, patent,
trademark, copyright or other proprietary right of any third party.
Schedule 3.2.6 sets forth all of the Proprietary Rights and Registrations
owned or used by ▇▇▇▇▇▇▇▇. None of the Proprietary Rights are registered
with any governmental or regulatory authority except as set forth on
Schedule 3.2.6.
The amount of each of the royalties and license fees presently paid
by or on behalf of ▇▇▇▇▇▇▇▇ in the ordinary course of its business is
listed in Schedule 3.2.6.
3.2.7 RESTRICTIVE DOCUMENTS OR LAWS. With the exception of the
matters listed on Schedule 3.2.7, ▇▇▇▇▇▇▇▇ is not bound under any (and,
to Senior Management's Knowledge, there is no) pending, proposed or
threatened regulation, certificate, mortgage, lien, lease, agreement,
contract, instrument, law, vote, order, judgment or decree, or any
similar restriction not of general application which materially restricts
or otherwise adversely affects, or reasonably could be expected to
materially restrict or otherwise adversely to affect (a) the consummation
of the transfers of the Assets to Buyer and the other transactions
contemplated in this Agreement or (b) in any material respect: (i) the
condition, financial or otherwise, of ▇▇▇▇▇▇▇▇ or any material
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part of the Assets; or (ii) the continued operation by Buyer of the
business of ▇▇▇▇▇▇▇▇ after the
Closing Date on substantially the same basis as said business was
theretofore operated.
3.2.8 REAL PROPERTY. Schedule 3.2.8 contains complete and accurate
legal descriptions of each parcel of Real Property and a list of all Real
Property Leases identifying the Leased Real Property leased thereunder;
and ▇▇▇▇▇▇▇▇ owns, leases, uses or licenses no real property interests
other than as are listed on such schedule. The Real Property includes all
such interests now owned or used by ▇▇▇▇▇▇▇▇ and material to the
operation of its business as presently conducted. All such properties are
held free and clear of all mortgages, pledges, liens, security interests
and encumbrances, and material restrictions of any nature whatsoever,
except as listed on Schedule 3.2.8.
Except as set forth in Schedule 3.2.8, all real property and each
building and structure owned or used by ▇▇▇▇▇▇▇▇, and material to the
operation of its business as presently conducted, is suitable for the
purpose or purposes for which it is being used, and is in all material
respects in such condition and repair as to permit the continued
operation of said business. To Senior Management's Knowledge, none of
such real property, buildings or structures is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs. To Senior
Management's Knowledge, there are no material structural defects in the
exterior walls or the interior bearing walls, the foundation or the roof
of any plant, building, garage or other such structure owned, leased or
used by ▇▇▇▇▇▇▇▇ and the electrical, plumbing and heating systems, and
the air conditioning system, if any, of any such plant, building, garage
or structure are in reasonable operating condition in light of their age
and prior use. To Senior Management's Knowledge, the utilities servicing
the real property owned, leased or used by ▇▇▇▇▇▇▇▇ are adequate to
permit the continued operation of the business of ▇▇▇▇▇▇▇▇ and to Senior
Management's Knowledge, there are no pending zoning, condemnation or
eminent domain proceedings, building, utility or other moratoria, or
injunctions or court orders which would materially effect such continued
operation. Schedule 3.2.8 lists, and ▇▇▇▇▇▇▇▇ has furnished or made
available to Buyer copies of, all engineering, geologic and environmental
reports prepared by or for ▇▇▇▇▇▇▇▇ with respect to the real property
owned, leased or used by ▇▇▇▇▇▇▇▇.
3.2.9 PERSONAL PROPERTY. Schedule 3.2.9 contains complete and
accurate descriptions of, ▇▇▇▇▇▇▇▇' Machinery, Equipment, Tooling and
Vehicles. Except as set forth in Schedule 3.2.9, and except with respect
to personal property leased pursuant to the Personal Property Leases,
▇▇▇▇▇▇▇▇ has good, valid and marketable title to all of its property
which is personal property of every kind, nature and description,
tangible or intangible, and wherever located, including all property and
assets which are personal property shown or reflected on the March 31,
1998 Balance Sheet. Schedule 3.2.9 contains a complete and accurate
description of all Personal Property Leases to which ▇▇▇▇▇▇▇▇ is party or
which ▇▇▇▇▇▇▇▇ uses in its business. The Property which is personal
property constitutes all material personal property now used in and
necessary for the conduct of the business of ▇▇▇▇▇▇▇▇ as presently
conducted, all of which is held free and clear of all mortgages, pledges,
liens, security interests, encumbrances and material restrictions of any
nature whatsoever, except as listed on Schedule 3.2.9.
Except as listed on Schedule 3.2.9, no financing statement under the
Uniform Commercial Code or similar law naming ▇▇▇▇▇▇▇▇ as debtor has been
filed in any jurisdiction, and ▇▇▇▇▇▇▇▇ is not a party to or bound under
any agreement or legal obligation authorizing any party to file any such
financing statement. Except as set forth on Schedule 3.2.9, all Machinery
and Equipment and other tangible personal property owned or used by
▇▇▇▇▇▇▇▇ and material to the operation of the business as presently
conducted is suitable for the purpose or purposes for which it is being
used, and is in all material respects in such condition and repair as to
permit the continued operation of said business. None of the Machinery or
Equipment is in need of maintenance or
7
repairs in any material respect except for ordinary, routine maintenance
and repairs necessary to permit the operation of said business.
3.2.10 ENVIRONMENTAL MATTERS. Except as set forth on Schedule
3.2.10, the operations of ▇▇▇▇▇▇▇▇ meet the requirements of all
occupational health and safety acts and all environmental laws and
regulations of all federal, state and local governmental or regulatory
bodies having jurisdiction over ▇▇▇▇▇▇▇▇. Without limiting the generality
of the foregoing, and by way of example only, except as set forth on
Schedule 3.2.10:
(a) There has not been, and is not occurring, any Release of any
Hazardous Substance on any real property owned, operated, leased or used
by ▇▇▇▇▇▇▇▇. For purposes of this Agreement, the terms "Release" and
"Hazardous Substance" shall have the same meanings as those terms are
given in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 ET SEQ. ("CERCLA"), except
that for purposes of this Agreement petroleum (including crude oil or any
fraction thereof) shall be deemed a Hazardous Substance.
(b) ▇▇▇▇▇▇▇▇ has not ever sent a Hazardous Substance to a site which,
pursuant to CERCLA or any similar state law, (A) has been placed, (or to
Senior Management's Knowledge, is proposed to be placed, or may in the
future be placed,) on the "National Priorities List" of hazardous waste
sites or on any similar list of any federal, state or local governmental
agency, including the Comprehensive Environmental Response, Compensation
and Liability System list for potential hazardous waste sites, or (B) is
subject to a claim, an administrative order or other request to take
"removal" or "remedial" action (as defined under CERCLA) or to pay for
any costs relating to such site.
(c) ▇▇▇▇▇▇▇▇ has not ever been or is currently in violation of any
provision of the Toxic Substances Control Act or the regulations
promulgated thereunder.
(d) ▇▇▇▇▇▇▇▇ is not involved in any suit or has received notice of
any claim relating to personal injuries from exposure to Hazardous
Substances.
3.2.11 BROKERS, FINDERS. Except as disclosed on Schedule 3.2.11,
(a) the transactions contemplated herein were not submitted to ▇▇▇▇▇▇▇▇
nor any of its officers, directors, employees or Shareholders or their
respective agents (the "Selling Parties") by any broker or other person
entitled to a commission or finder's fee thereon, and were not with the
consent of the Selling Parties submitted to DAH by any such broker or
other person; (b) none of the Selling Parties has engaged any broker or
finder or incurred or taken any action which may give rise to any
liability against ▇▇▇▇▇▇▇▇ or the Property for any brokerage fees,
commissions, finders fees or similar fees or expenses, and no broker or
finder has acted directly or indirectly for the Selling Parties in
connection with this Agreement or the transactions contemplated hereby;
and (c) no investment banking, financial advisory or similar fees have
been incurred or are or will be payable by the Selling Parties in
connection with this Agreement or the transactions contemplated hereby.
All of such fees, commissions or other liabilities incurred by any of the
Selling Parties in connection with the transactions contemplated hereby
shall be the sole responsibility of the ▇▇▇▇▇▇▇▇ Shareholders; and none
of the Assets of ▇▇▇▇▇▇▇▇ have been or shall be applied to pay the same.
3.2.12 LEGAL PROCEEDINGS, ETC. Except as set forth on Schedule
3.2.12, there is no claim, litigation, action, suit or proceeding,
administrative or judicial, filed, pending, or to Senior Management's
Knowledge, threatened against ▇▇▇▇▇▇▇▇, or involving the Assets, this
Agreement or the transactions contemplated hereby, at law or in equity,
before any federal, state or local court or regulatory agency, or other
governmental authority, including any unfair labor practice or grievance,
proceedings or claim, which although disclosed on Schedule 3.1.12 would
have a material adverse effect on the business or assets of ▇▇▇▇▇▇▇▇. To
Senior Management's knowledge, there is no basis upon which such claim,
litigation, action, suit or proceeding would
8
reasonably be brought or initiated. Except as set forth in Schedule
3.2.12, ▇▇▇▇▇▇▇▇ is not subject to any judgment, order or decree, or, to
Senior Management's Knowledge, any governmental restriction applicable to
▇▇▇▇▇▇▇▇ which has a reasonable probability of having a Material Adverse
Effect. As used herein, "Material Adverse Effect" means any material
adverse change in the business operations (as presently conducted or
proposed to be conducted), assets, properties or rights, prospects or
condition (financial or otherwise) of ▇▇▇▇▇▇▇▇, or any occurrence,
circumstance, or combination thereof which reasonably could be expected
to result in any such material adverse change, or which materially
adversely affects the ability of ▇▇▇▇▇▇▇▇ to conduct business in any
area, or of Buyer to continue the business of ▇▇▇▇▇▇▇▇ as presently
conducted.
3.2.13 NO CONFLICT OR DEFAULT. Neither the execution and delivery
of this Agreement or any other Transaction Document, nor compliance with
the terms and provisions hereof or thereof, including the consummation of
the transactions contemplated hereby and thereby, will (a) violate in any
material respect any statute, regulation or ordinance of any governmental
authority, or (b) conflict with or result in the breach of any term,
condition or provision of the articles of incorporation or bylaws of
▇▇▇▇▇▇▇▇, or (c) to Senior Management's Knowledge, conflict with or
result in the breach of any term, condition or provision of any
agreement, deed, contract, mortgage, indenture, writ, order, decree,
legal obligation or instrument, to which ▇▇▇▇▇▇▇▇ is a party or by which
such party or any part of the Assets are or may be bound, or (d)
constitute a material default (or an event which with the lapse of time
or the giving of notice, or both, would constitute a material default)
under any such agreement, deed, contract, mortgage, indenture, writ,
order, decree, legal obligation or instrument thereunder, or (e) result
in the creation or imposition of any material lien, charge or
encumbrance, or to Senior Management's Knowledge, any other material
restriction of any nature whatsoever with respect to any part of the
Property, or (f) give to others any interest or rights, including rights
of termination, acceleration or cancellation in or with respect to any
part of the Property or the business of ▇▇▇▇▇▇▇▇ which would have a
Material Adverse Effect thereon.
3.2.14 LABOR RELATIONS. Schedule 3.2.14 sets forth all collective
bargaining or other labor agreements to which ▇▇▇▇▇▇▇▇ is bound and which
covers ▇▇▇▇▇▇▇▇ employees. ▇▇▇▇▇▇▇▇ has previously delivered to Buyer
true, correct and complete copies of each such agreement. There is no
labor strike, dispute, slowdown or stoppage, or petition for
certification actually pending or, to Senior Management's Knowledge,
threatened against or involving ▇▇▇▇▇▇▇▇, nor, to Senior Management's
Knowledge, any union organizing campaign pending or threatened. Schedule
3.2.14 sets forth all pending grievances and arbitration proceedings
against ▇▇▇▇▇▇▇▇ arising out of or under a collective bargaining or other
labor agreement. No collective bargaining or other labor agreement is
currently being negotiated by or on behalf of ▇▇▇▇▇▇▇▇. With respect to
the business of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ has not experienced any work stoppage
or other material labor difficulty over the past three years. Except for
the employment contract with ▇▇▇ Courtnery there is no obligation of
▇▇▇▇▇▇▇▇ to any employee or any person employed by Staff Leasing assigned
to ▇▇▇▇▇▇▇▇ except for an "at will" relationship. No agreement which is
binding on ▇▇▇▇▇▇▇▇ restricts it from relocating or closing any or all of
its operations.
3.2.15 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Schedule 3.2.15, ▇▇▇▇▇▇▇▇ does not
currently sponsor, maintain or contribute to, nor within the past 3 years
sponsored, maintained or contributed to, any pension, retirement,
profit-sharing, deferred compensation, bonus, stock option or other
incentive plan, or any other employee benefit program, arrangement,
agreement or understanding, or medical, vision, dental or other health
plan, or life insurance or disability plan, or any other employee benefit
plan as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether or not any such
employee benefit plan is otherwise exempt from the provisions of ERISA,
and whether or not formal or informal, written or oral, and whether or
9
not legally binding. All such plans are fully funded through the date of
this Agreement or amounts sufficient to fully fund contributions to such
plans through the Closing Date are reserved for in the March 31, 1998
Financial Statements. All such plans, funds or programs sponsored,
maintained or contributed to by ▇▇▇▇▇▇▇▇ currently or within the past 3
years, whether or not listed on Schedule 3.2.15, are hereinafter referred
to as the "Employee Benefit Plans"). For the purpose of this Section
3.2.15, the term "▇▇▇▇▇▇▇▇" shall include all "entities" of ▇▇▇▇▇▇▇▇,
whether or not incorporated, with which it would be treated as a single
employer for purposes of Sections 414(b), (c) or (m) of the Internal
Revenue Code (the "Code").
(b) As of the Closing Date, no entity that may be regarded as under
common control with ▇▇▇▇▇▇▇▇ pursuant to Section 414 of the Code shall
have incurred any unsatisfied liability under Title IV of ERISA or
Section 4980 of the Code, nor shall any such entity have become subject
to a lien pursuant to Section 412(n) of the Code.
(c) Full payment has been made of all amounts which ▇▇▇▇▇▇▇▇ is
required, under applicable law or under any Employee Benefit Plan or any
agreement relating to any Employee Benefit Plan to which it is a party,
to have paid as contributions to, or benefits under, any Employee Benefit
Plan as of the last day of the most recent fiscal year of such Employee
Benefit Plan ended prior to the date hereof. ▇▇▇▇▇▇▇▇ has made adequate
provision in its financial statements for liabilities to meet current
contributions or benefit payments.
(d) ▇▇▇▇▇▇▇▇ has performed all obligations required to be performed
by it under the Employee Benefit Plans. ▇▇▇▇▇▇▇▇ has not engaged in any
transaction with respect to the Employee Benefit Plans which would
subject it, Buyer or DAH to a tax, penalty or liability for a prohibited
transaction under section 406, 407 or 502(i) of ERISA or Section 4975 of
the Code, nor have any of ▇▇▇▇▇▇▇▇' directors, officers, partners,
employees or agents, to the extent they or any of them are fiduciaries
with respect to such Employee Benefit Plans, breached any of their
responsibilities or obligations imposed upon fiduciaries under Title I of
ERISA or which would result in any claim being made under or by or on
behalf of any such Employee Benefit Plans by any party with standing to
make such claim. ▇▇▇▇▇▇▇▇ will not have any plan or commitment, whether
formal or informal, written or oral, and whether or not legally binding,
to modify or change any Employee Benefit Plan in any material manner
prior to the Closing Date. ▇▇▇▇▇▇▇▇ and any "administrator(s)" (as
described in Section 3(16)(A) of ERISA) of the Employee Benefits Plans
have complied in all material respects with the applicable requirements
of ERISA, the Code and all other statutes, orders, rules or regulations,
specifically including material compliance with all reporting and
disclosure requirements of Part 1 of Title 1 of ERISA and of the Code in
a timely and accurate manner, and no penalties have been or will be
imposed, nor is ▇▇▇▇▇▇▇▇ or any administrator liable for any penalties
imposed, under ERISA, the Code or otherwise with respect to the Employee
Benefit Plans or any related trusts. ▇▇▇▇▇▇▇▇ is not delinquent in the
payment of any federal, state or local taxes with respect to the Employee
Benefit Plans. There is no pending litigation, arbitration, or disputed
claim, settlement adjudication or proceeding with respect to the Employee
Benefit Plans, and neither ▇▇▇▇▇▇▇▇ nor any administrator is aware of any
threatened litigation, arbitration or disputed claim, adjudication
proceeding, or any governmental or other proceeding, or investigation
with respect to the Employee Benefit Plans or with respect to any
fiduciary or administrator thereof (in their capacities as such), or any
party-in-interest thereto (with respect to their relationship as such).
There is no "defined benefit plan" within the meaning of Section 414(j)
of the Code or Section 3(35) of ERISA to which ▇▇▇▇▇▇▇▇ has been a party
or has been required to make any contributions at any time during the
last ten years. There is no "multiemployer plan" within the meaning of
Section 3(37) of ERISA to which ▇▇▇▇▇▇▇▇ has been a party or has been
required to make any contributions at any time during the last ten years.
10
(e) ▇▇▇▇▇▇▇▇ has delivered or caused to be delivered to Buyer and DAH
prior to the Closing, true, accurate and complete copies of (A) all
Employee Benefit Plans and any related trust agreements, custodial
agreements, investment management agreements, insurance contracts or
policies, and administrative service contracts, all as in effect,
together with all amendments thereto which will become effective at a
later date; (B) the latest Summary Plan Description and any modifications
thereto for each Employee Benefit Plan requiring same under ERISA; (C)
the Summary Annual Report for the current and prior fiscal years for each
Employee Benefit Plan requiring same under ERISA; (D) each Form 5500
and/or Form 990 series filing (including required schedules and financial
statements) for the current and prior fiscal years for each Employee
Benefit Plan required to file such form; and (E) the most recent
actuarial evaluation, analysis or other report issued with respect to any
Employee Benefit Plan. Neither ▇▇▇▇▇▇▇▇ nor any officer, partner,
employee, representative or agent of ▇▇▇▇▇▇▇▇ has made any written or
oral representations or statements to any current or former employees,
dependents, participants or beneficiaries or other persons which are
inconsistent in any material manner with the provisions of these
documents.
(f) With respect to any of ▇▇▇▇▇▇▇▇' employee welfare plans (as
defined in Section 3(1) of ERISA and including those Employee Benefits
Plans which qualify as such) which are "group health plans" under Section
4980B of the Code and Section 607(1) of ERISA and related regulations
(relating to the benefit continuation rights imposed by the Consolidated
Omnibus Budget Reconciliation Act of 1986 ("COBRA"), as amended to date),
there has been timely compliance in all material respects with all
requirements imposed thereunder, as and when applicable to such plans, so
that ▇▇▇▇▇▇▇▇ has not (nor will incur any) loss, assessment, penalty,
loss of federal income tax deduction or other sanction, arising on
account of or in respect of any failure to comply with any COBRA benefit
continuation requirement, which is capable of being assessed or asserted
directly or indirectly against such party, or against Buyer or DAH or any
of their respective subsidiaries or other member of Buyer's corporate
control group, with respect to any such plan. ▇▇▇▇▇▇▇▇ has no obligation
to provide medical benefits to any former employee, except as required by
COBRA.
(g) No Employee Benefit Plan maintained by ▇▇▇▇▇▇▇▇ which is a
"welfare plan" within the meaning of Section 3(1) of ERISA provides
benefits to employees after termination of employment, except as required
by Section 4980B of the Code.
3.2.16 CONTRACTS AND COMMITMENTS. Schedule 3.2.16 is a list of all
of the Contracts to which ▇▇▇▇▇▇▇▇ is a party and which involve the
payment by or to ▇▇▇▇▇▇▇▇ in the aggregate of $50,000 or more (per
contract) during any year. ▇▇▇▇▇▇▇▇ has previously delivered to Buyer
correct and complete copies of each such Contract. The Real Property
Leases, the Personal Property Leases and the Contracts listed on Schedule
3.2.16, taken together, constitute all of the contracts, agreements,
contract rights, leases, license agreements, franchise rights and
agreements, policies, purchase and sales orders, quotations and executory
commitments, instruments, guaranties, indemnifications, arrangements,
obligations and understandings (written or oral), involving the payment
by or to ▇▇▇▇▇▇▇▇, in the aggregate of $50,000 or more (per contract)
during any year, necessary to the conduct of the business of ▇▇▇▇▇▇▇▇ as
presently conducted.
All of the Real Property Leases, the Personal Property Leases and the
Contracts are valid and binding, in full force and effect and enforceable
against ▇▇▇▇▇▇▇▇ in accordance with their respective provisions. ▇▇▇▇▇▇▇▇
has not assigned, mortgaged, pledged, encumbered, or otherwise
hypothecated any of its right, title or interest under any Real Property
Lease, any Personal Property Lease, or any Contract. Neither ▇▇▇▇▇▇▇▇
nor, to Senior Management's Knowledge, any other party thereto is in
material violation of, in default in respect of, nor has there occurred
an event or condition which, with the passage of time of giving of notice
(or both) would constitute a material violation or default of, any Real
Property Lease, any Personal Property Lease, or any
11
Contract, and, to Senior Management's Knowledge, there are no facts or
circumstances which would reasonably indicate that ▇▇▇▇▇▇▇▇ (or any other
party) will be or may be in material violation of or in default in
respect of any Real Property Lease, any Personal Property Lease, or any
Contract, subsequent to the date hereof. Without limiting the foregoing,
no consents, authorizations, approvals or similar agreements or
acquiescence is required from any party under any Contract, Real Property
Lease or Personal Property Lease to any of the transactions contemplated
hereby, except to the extent listed on Schedule 3.2.16 hereof, and each
of such consents will be delivered to DAH on the Closing Date. No notice
has been received by ▇▇▇▇▇▇▇▇ claiming any such default or indicating the
desire or intention of any other party thereto to amend, modify, rescind
or terminate the same to the extent that it would have a Material Adverse
Effect on the business or assets of ▇▇▇▇▇▇▇▇.
3.2.17 ACCOUNTS RECEIVABLE, ETC.. All of the Receivables of
▇▇▇▇▇▇▇▇ are set forth on Schedule 3.2.17, together with the value
thereof. All such Receivables and Prepaid Expenses, together with any
additional Receivables and Prepaid Expenses arising between the date
hereof and the Closing Date (in each case net only of such allowances for
doubtful accounts as are disclosed on the March 31, 1998 Balance Sheet),
(a) are or will be valid and subsisting, (b) represent or will represent
sales actually made, (c) arose or will arise in the ordinary and usual
course of the business of ▇▇▇▇▇▇▇▇, (d) except as set forth on Schedule
3.2.17, to the extent not collected prior to the Closing Date, will be
due and enforceable according to their terms within 90 days after the
date of the initial invoice therefor, and (e) are not and (except as may
be caused by Buyer) will not be subject to any material counterclaim,
set-off, defense, lien, charge or encumbrance of any nature. There has
not been any material adverse change in the collectibility of the
Receivables of ▇▇▇▇▇▇▇▇ since March 31, 1998. Buyer will use diligent
efforts to collect the Receivables.
3.2.18 INVENTORIES. Schedule 3.2.18 completely and accurately lists
all raw materials, supplies, parts, work-in-process, and finished goods
inventory and other inventory owned by ▇▇▇▇▇▇▇▇ and the accurate cost of
such inventory as of March 31, 1998. Except as set forth in Schedule
3.2.18 and except for amounts which in the aggregate are not material,
all such inventories (i) consist of a quality and quantity usable and
saleable in the ordinary and usual course of business, except for items
of obsolete materials and materials of substandard quality, all of which
have been written off or written down on the books of ▇▇▇▇▇▇▇▇ to net
realizable value prior to March 31, 1998 and (ii) have been priced at the
lower of cost or market on a FIFO basis. The quantities of all material
portions of each type of inventory (whether raw materials, work-in-
process, or finished goods) are not excessive, but are reasonable and
warranted in the present circumstances of ▇▇▇▇▇▇▇▇; and all material
portions of work-in-process and finished goods inventory is free of any
material defect or other deficiency.
3.2.19 BACKLOG. All unfilled orders to purchase goods and services
of ▇▇▇▇▇▇▇▇ are set forth in Schedule 3.2.19 and are firm and binding
commitments (subject to cancellation rights set forth therein) of the
respective purchasers (assuming that each such purchaser has properly
authorized the same by all requisite acts and has properly executed and
delivered a purchase order, which assumption, to Senior Management's
Knowledge, is the case) to purchase the goods or services indicated.
3.2.20 BOOKS OF ACCOUNT: RECORDS. Except for the qualifications (if
any) explicitly set forth therein or in Schedule 3.2.20 the general
ledgers, books of account and other financial records of ▇▇▇▇▇▇▇▇ are
complete and correct, have been maintained in accordance with good
business practices, and the matters contained therein are appropriately
and accurately reflected in the Financial Statements.
12
3.2.21 MANAGERS, EMPLOYEES AND COMPENSATION. Schedule 3.2.21 sets
forth the name of all managers and engineers of ▇▇▇▇▇▇▇▇, their
respective terms of office, the total salary, bonus payments, fringe
benefits and perquisites each received in each of the calendar years
ending December 31, 1995, 1996 and 1997 (or, if briefer, during their
tenure of employment with ▇▇▇▇▇▇▇▇ and any affiliate thereof), and
changes to the foregoing which have occurred since December 31, 1997,
together with the professional background of each manager and engineer
for the last 5 years (as disclosed to ▇▇▇▇▇▇▇▇ by such employee and, to
Senior Management's Knowledge, correctly and completely); such Schedule
also lists and describes the current base salary, bonus payments, fringe
benefits and perquisites of any other employee, agent or representative
of ▇▇▇▇▇▇▇▇ whose total current salary, bonus or other compensation
exceeds $50,000 annually during any of the calendar years ending December
31, 1995, 1996 or 1997, and changes to the foregoing since December 31,
1997. There are no other material forms of compensation paid to any such
director, officer or employee of ▇▇▇▇▇▇▇▇. The provisions for wages and
salaries accrued on the March 31, 1998 Balance Sheet are adequate for
salaries and wages, including accrued vacation pay, for the period up
through the date thereof, and ▇▇▇▇▇▇▇▇ has accrued on its books and
records all obligations to pay wages and salaries and other compensation
to its employees, including, but not limited to, vacation pay and sick
pay, and all commissions and other fees payable to agents, salesmen and
representatives. ▇▇▇▇▇▇▇▇ has filed any and all payroll tax returns, and
paid all payroll taxes due for any and all employees due through the
Closing Date.
Except as set forth on Schedule 3.2.21, ▇▇▇▇▇▇▇▇ has not become
obligated, directly or indirectly, to any shareholder, director, officer
or partner of ▇▇▇▇▇▇▇▇ or any member of their families, except for
current liability for employment compensation. Except as set forth on
Schedule 3.2.21, no shareholder, director, officer, partner, agent or
employee of ▇▇▇▇▇▇▇▇ holds any position or office with or has any
financial interest, direct or indirect, in any supplier, customer or
account of, or other outside business which has transactions with
▇▇▇▇▇▇▇▇. Neither ▇▇▇▇▇▇▇▇ nor, to Senior Management's Knowledge, any
third party, has taken any action with respect to any shareholder,
director, officer, partner, employee or representative of ▇▇▇▇▇▇▇▇ to
attempt to induce or which would influence any such person not to become
associated with Buyer from and after the Closing Date or from serving
Buyer in a capacity similar to the capacity presently held. Except to the
extent as may have been previously disclosed to DAH by ▇▇▇▇▇▇▇▇ in
writing, no employee of ▇▇▇▇▇▇▇▇, to Senior Management's knowledge, has a
present intention to leave the employ of ▇▇▇▇▇▇▇▇ or has taken any action
directed towards leaving the employ of ▇▇▇▇▇▇▇▇. Except as set forth on
Schedule 3.2.21, to Senior Management's Knowledge, no former officer or
employee of ▇▇▇▇▇▇▇▇ is currently or intends to enter into competition
with the business of ▇▇▇▇▇▇▇▇.
3.2.22 CREDIT TERMS: PRODUCT WARRANTIES. Schedule 3.2.22(a) sets
forth all of the standard terms and conditions of credit and discounts
given by ▇▇▇▇▇▇▇▇ to its customers in the usual and ordinary course of
its business and a list of all transactions pending where there is a
material departure therefrom. There has been no material change in the
aggregate amount of losses and expenses incurred by reason of allowances,
customer dissatisfaction or liabilities arising under ▇▇▇▇▇▇▇▇'▇
warranties and guarantees during the three years ended December 31, 1997;
and there has been no material adverse change in that experience since
said date. Except as set forth on Schedule 3.2.22(b), (i) there have been
no recalls of ▇▇▇▇▇▇▇▇ product, (ii) to the knowledge of Senior
Management, there is no ▇▇▇▇▇▇▇▇ product which is either defective or
likely to experience a failure rate materially greater than the average
for ▇▇▇▇▇▇▇▇' products over the three year period ended December 31,
1997, and (iii) ▇▇▇▇▇▇▇▇ has conducted all qualification inspections and
quality conformance inspections required by the specifications for
products of ▇▇▇▇▇▇▇▇ included on qualified products lists in material
compliance with the requirements of such specifications, and all products
shipped have been in material conformance with such specifications.
13
3.2.23 CONTRACTS WITH AFFILIATES. Any contract, commitment, lease,
permit or other instrument, agreement, understanding or obligation
(written or oral) between ▇▇▇▇▇▇▇▇ and any affiliate of ▇▇▇▇▇▇▇▇ or any
officer thereof is described on Schedule 3.2.23 hereto, and is the
equivalent of an "arms-length" transaction with a third party (except to
the extent otherwise described in Schedule 3.2.23).
3.2.24 GOVERNMENT CONTRACTS.
(a) For purposes of this Section 3.2.24, (i) the term "Government"
means any agency, division, subdivision, audit group, or procuring office
of the federal government, including the employees or agents thereof;
(ii) the term "Government Contract" means any prime contract,
subcontract, basic ordering agreement, letter contract, purchase order or
delivery order of any kind, including all amendments, modifications and
options thereunder or relating thereto, between ▇▇▇▇▇▇▇▇ and any of the
Government, any prime contractor of the Government, any subcontractor of
such a prime contractor or any subcontractor of another subcontractor,
however far removed from the prime contractor such subcontractor may be,
(x) currently in force, or (y) which, within the three years preceding
the date of this Agreement, expired or were terminated, or (z) for which
final payment was received within the three years preceding the date of
this Agreement; and (iii) the term "Bid" means any outstanding quotation,
bid or proposal submitted by ▇▇▇▇▇▇▇▇ to the Government, any proposed
prime contractor of the Government, or any proposed subcontractor.
(b) ▇▇▇▇▇▇▇▇ is not a party to any Government Contract and has not
submitted any Bids which have not expired.
(c) Except as set forth in Schedule 3.2.24, (i) no show cause
notices, cure notices, or terminations have been issued against ▇▇▇▇▇▇▇▇
with respect to any Government Contract; (ii) no negative determinations
of responsibility have been issued against ▇▇▇▇▇▇▇▇ with respect to any
Bid and (iii) neither the Government, any prime contractor nor any
subcontractor has notified ▇▇▇▇▇▇▇▇, either orally or in writing, that it
is in breach or violation of any provision of any Government Contract,
any certification or representations with respect thereto, or any
statutes and regulations applicable thereto.
(d) ▇▇▇▇▇▇▇▇ is not undergoing and has not undergone any audit, and
has no knowledge or reason to know of any basis for impending audits in
the future, arising under or relating to any Government Contract except
as set forth in Schedule 3.2.24.
3.2.25 SOLVENCY. The total assets of ▇▇▇▇▇▇▇▇ exceed its total
liabilities; and ▇▇▇▇▇▇▇▇ generally is able to perform its financial
obligations as performance thereof becomes due.
3.2.26 INSURANCE. Schedule 3.2.26 is a true, correct and complete
list of all insurance policies and bonds in force in which ▇▇▇▇▇▇▇▇ is
named as an insured party, as respects the business of ▇▇▇▇▇▇▇▇, or for
which ▇▇▇▇▇▇▇▇ has been charged or has paid any premiums; all of which
are currently in full force and ▇▇▇▇▇▇▇▇ has not received any notice from
any such insurer with respect to the cancellation of any such insurance.
▇▇▇▇▇▇▇▇ has previously delivered correct and complete copies of all such
policies to DAH. ▇▇▇▇▇▇▇▇ will continue all of such insurance in full
force and effect up to and including the Closing Date. All premiums due
and payable on such policies have been paid. ▇▇▇▇▇▇▇▇ is not a co-insurer
under any term of any insurance policy.
3.2.27 BANK ACCOUNTS, DEPOSITORIES AND POWERS OF ATTORNEY. Schedule
3.2.27 is a true, correct and complete list of the names and locations of
all banks or other depositories in which ▇▇▇▇▇▇▇▇ maintains accounts or
safe deposit boxes, and the names of the persons authorized to draw
thereon, borrow therefrom or have access thereto. No person or entity
holds a power of attorney on behalf of ▇▇▇▇▇▇▇▇.
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3.2.28 UNDISCLOSED LIABILITIES. Except as disclosed on Schedule
3.2.28, ▇▇▇▇▇▇▇▇ has no liability or obligation of any nature
individually in the amount of $50,000 or in the aggregate in the amount
of $100,000 (whether liquidated, unliquidated, accrued, absolute, known
or unknown, contingent or otherwise and whether due or to become due)
except:
(a) those set forth or reflected in the March 31, 1998 Balance Sheet
which have not been paid or discharged since the date thereof;
(b) those arising under agreements or other commitments expressly
identified in any Schedule hereto; and
(c) current liabilities incurred in, or as a result of, the conduct
of its business in the ordinary and usual course consistent with past
practice since March 31, 1998, which are completely and accurately
reflected on its books and records and which are not inconsistent with
the other representations, warranties and agreements of ▇▇▇▇▇▇▇▇ set
forth in this Agreement.
3.2.29 TAXES. Except as set forth on Schedule 3.2.29, ▇▇▇▇▇▇▇▇ has
filed, when due, all federal, state, local and foreign tax returns and
tax reports. All amounts payable pursuant to such returns by ▇▇▇▇▇▇▇▇
through the Closing Date have been paid, or will be timely paid and are
adequately provided for in the March 31, 1998 Financial Statements. All
such returns and reports are true and correct and, except as disclosed on
Schedule 3.2.29, none of them have been amended. Schedule 3.2.29 sets
forth the dates and any results of any and all audits of any tax returns
of ▇▇▇▇▇▇▇▇ (whether pending or completed) performed by federal, state,
local or foreign taxing authorities; and no waivers of any statutes of
limitation have been made or requested in connection therewith. No
deficiency for any material amount of tax has been asserted or assessed
by any taxing authority against ▇▇▇▇▇▇▇▇. All estimated tax payments have
been made except as reserved for in the Balance Sheet included in the
March 31, 1998 Financial Statements, and there will not be any amount
owing by ▇▇▇▇▇▇▇▇ for taxes, penalties or interest.
3.2.30 ABSENCE OF CERTAIN CHANGES IN EVENTS. Except as set forth on
Schedule 3.2.30, since March 31, 1998, there has not been:
(a) Any Material Adverse Effect;
(b) Any transaction entered into or carried out by ▇▇▇▇▇▇▇▇ other
than in the ordinary and usual course of business;
(c) Any borrowing or agreement to borrow funds; any incurring of any
assumption, guarantee or other obligation or liability, contingent or
otherwise; or any assumption or performance of any loan or obligation of
any other entity, except (i) current liabilities incurred in the usual
and ordinary course of business or (ii) otherwise, those in an amount not
exceeding in the aggregate $50,000 at any one time outstanding;
(d) Any material change made by ▇▇▇▇▇▇▇▇ in the methods of doing
business, or other than such changes required by GAAP, any change in the
accounting principles or practices of ▇▇▇▇▇▇▇▇ with respect to any of the
Financial Statements or the method of application of such principles or
practices;
(e) Any mortgage, pledge, lien, security interest, hypothecation,
charge or other encumbrance imposed or agreed to be imposed on or with
respect to any of the Assets, Real Property or Personal Property);
(f) Any sale, lease or other disposition of or any agreement to sell,
lease or otherwise dispose of any of the Property or Assets of ▇▇▇▇▇▇▇▇,
other than sales of finished goods in the usual and ordinary course of
business and at ▇▇▇▇▇▇▇▇'▇ scheduled prices or the prices specified in
Contracts copies of which have previously been delivered to DAH;
15
(g) Any purchase of, or any agreement to purchase, capital assets for
an amount in excess of $50,000 for any one such purchase, or $100,000 for
all such purchases made by ▇▇▇▇▇▇▇▇; or any lease or any agreement to
lease, as lessee, any capital assets with payments over the term thereof
to be made by ▇▇▇▇▇▇▇▇ exceeding an aggregate of $50,000 for any one
lease or $100,000 in the aggregate;
(h) Any loan or advance made by ▇▇▇▇▇▇▇▇ to any individual, firm,
corporation or other entity except for advances not material in amount
made in the usual and ordinary course of business to employees; or
(i) Any other event or condition of any character which has had a
Material Adverse Effect or may reasonably be expected to result in a
Material Adverse Effect.
3.2.31 USE OF NAME. Without limiting the effect of Section 1.1.6(a)
hereof, ▇▇▇▇▇▇▇▇ owns the names "▇▇▇▇▇▇▇▇ Industries, Inc." and
"▇▇▇▇▇▇▇▇", and any related trademarks and trade names, free and clear
and, to Senior Management's Knowledge, without any restrictions or
limitations on their use, acknowledges that Buyer plans to operate the
Assets under the same or similar corporate names immediately after the
Closing Date, and unconditionally consents to such use for such duration
as DAH may at its sole option elect.
3.2.32 COMPLETE DISCLOSURE. No representation or warranty made by
▇▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇▇ Shareholders in this Agreement, and no exhibit,
schedule, statement, certificate or other information furnished to Buyer
by or on behalf of the ▇▇▇▇▇▇▇▇ Shareholders, ▇▇▇▇▇▇▇▇ or its officers
pursuant to this Agreement, or in connection with the transactions
contemplated hereby or thereby, contains or will contain, any untrue
statement of a material fact or omits or will omit to state a material
fact necessary in light of the circumstances to make the statements
contained herein and therein not misleading.
The Schedules to this Agreement identified in this Agreement as Schedules of
▇▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇▇ Shareholders have been prepared by and at the
exclusive direction of ▇▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇▇ Shareholders. The mechanical
assistance of DAH and Buyer in the physical preparation of the Schedules is not
and will not be asserted by either ▇▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇▇ Shareholders as
preparation of the ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Shareholders Schedules by DAH and/or
Buyer.
4. ASSUMPTION OF CERTAIN LIABILITIES; NO ASSUMPTION OF OTHER LIABILITIES.
4.1 On the Closing Date, Buyer will assume:
4.1.1 ACCOUNTS PAYABLE. All accounts payable for current purchases
by ▇▇▇▇▇▇▇▇ outstanding as of the Closing Date; PROVIDED, HOWEVER, that
Buyer shall not assume the obligation to pay any vendor to ▇▇▇▇▇▇▇▇ with
whom ▇▇▇▇▇▇▇▇ has a dispute as to the amount of the account payable. A
schedule of the accounts payable of ▇▇▇▇▇▇▇▇ as of March 31, 1998 is
attached as Schedule 4.1.1;
4.1.2 ACCRUED OPERATING EXPENSES. All accrued operating expenses
which were incurred by ▇▇▇▇▇▇▇▇ in the ordinary course of business and
which are reflected as a liability on the balance sheet for ▇▇▇▇▇▇▇▇ as
of the Closing Date. Attached as Schedule 4.1.2(a) is a balance sheet as
at March 31, 1998 and the general ledger for ▇▇▇▇▇▇▇▇ as of said date, a
copy of which is attached as Schedule 4.1.2(b).
4.1.3 OPERATING LEASE(S). The leases specified on Schedule 1.1.2;
together with the written consents of the lessors of such property to the
assignment of the leases to Buyer, each dated no less than 1 day prior to
the Closing Date.
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4.1.4 OPEN PURCHASE CONTRACTS. The obligation of ▇▇▇▇▇▇▇▇ as
purchaser to perform all purchase contracts in existence on the Closing
Date which were incurred by ▇▇▇▇▇▇▇▇ in the ordinary course of business.
4.1.5 CURRENT LIABILITIES FROM OPERATIONS IN THE ORDINARY
COURSE. Those obligations of ▇▇▇▇▇▇▇▇ which have been incurred from and
after March 31, 1998 in the ordinary course of business and which are
expressly permitted by the affirmative covenants and not prohibited by
the negative covenants set forth in Section 5.2 of this Agreement.
4.1.6 WARRANTY OBLIGATIONS. To the extent of $25,000 per year, the
obligation to provide warranty work provided to the customer in any sales
agreement of ▇▇▇▇▇▇▇▇.
4.1.7 ROYALTIES AND LICENSE FEES. To the extent of Royalties for
Patents and License Fees specified in Schedule 4.1.7, the Royalties and
License Fees which appear on said Schedule.
4.1.8 VACATION, SICK LEAVE AND PENSION BENEFITS. To the extent
reserved for in the balance sheet as of March 31, 1998, or to the extent
of assets transferred with respect to pension liabilities, to pay for
vacation time, sick leave and to provide pension benefits, in each case
to the extent specified on Schedule 4.1.8.
4.1.9 EMPLOYMENT CONTRACTS. Subject to modification to delete the
obligation in Section 2.4 thereof, Buyer shall assume the Employment
Agreement of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ dated January 1, 1998. Neither Buyer nor DAH
shall assume any other employment contract.
4.2 LIABILITIES NOT ASSUMED. With the exception of the liabilities
assumed pursuant to Section 4.1, Buyer shall not by the execution or
performance of this Agreement, or otherwise, assume or otherwise be
responsible for any liability or other obligation of ▇▇▇▇▇▇▇▇ or any
affiliate thereof of any kind, nature or description, whether such liability
or obligation is mature or not, liquidated or unliquidated, fixed or
contingent, known or unknown, whether arising out of occurrences prior to,
at or after the date of this Agreement, including without limitation, those
arising from the current employment and compensation arrangements of
▇▇▇▇▇▇▇▇ through Staff Leasing for the staff of ▇▇▇▇▇▇▇▇, breach of
contract, breach of any warranty, infringement, fraud, violation of any law,
rule or regulation, or out of any charge, complaint, action, suit,
proceeding, hearing, investigation, claim or other demand.
5. COVENANTS.
5.1 COVENANTS OF BUYER.
5.1.1 PAYMENT AND PERFORMANCE OF ASSUMED LIABILITIES. From and
after the Closing Date, Buyer shall pay and perform the liabilities
assumed pursuant to Section 4.1 in the ordinary course of its business in
accordance with Buyer's standard business practices.
5.1.2 HOLD HARMLESS. DAH and Buyer agree to indemnify and hold
harmless ▇▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇▇ Shareholders from any liabilities to
third parties arising from the operations or business of ▇▇▇▇▇▇▇▇ on and
after the consummation of the transactions contemplated herein on the
Closing Date, except to the extent caused by the actions, gross
negligence or willful misfeasance of ▇▇▇▇▇▇▇▇.
5.1.3 DUTY TO COLLECT ACCOUNTS RECEIVABLE . Buyer and DAH shall use
their best efforts to collect accounts receivable outstanding at the
Closing Date. As used in this Section 4.1.7, "best efforts" shall be
deemed to have been used so long as Buyer continues the accounts
receivable collection practices used by ▇▇▇▇▇▇▇▇ prior to the date of
this Agreement.
5.1.4 EMPLOYEES. From and after the Closing Date, Buyer and DAH
shall employ substantially all of the current employees of Staff Leasing
assigned to ▇▇▇▇▇▇▇▇, subject to normal management prerogatives to review
performance and terminate employment as necessary or
17
appropriate for the business. The Buyer and DAH shall compensate such
employees at substantially the same level of compensation in effect for
such employees. Buyer and DAH will continue normal fringe benefits for
such employees subject to the integration of such fringe benefits with
Buyer's and DAH's current programs.
5.2 COVENANTS OF ▇▇▇▇▇▇▇▇.
5.2.1 CONDUCT OF BUSINESS OF ▇▇▇▇▇▇▇▇ PRIOR TO CLOSING
DATE. ▇▇▇▇▇▇▇▇ agrees that on and after the date hereof and prior to the
Closing Date:
(a) The business and operations, activities and practices of ▇▇▇▇▇▇▇▇
shall be conducted only in the ordinary course of business and consistent
with past practice;
(b) No change shall be made in the articles of incorporation or
bylaws of ▇▇▇▇▇▇▇▇.
(c) No change shall be made in the number of shares of authorized or
issued capital stock of ▇▇▇▇▇▇▇▇; nor shall any option, warrant, call,
right, commitment or agreement of any character be granted or made by
▇▇▇▇▇▇▇▇ relating to its equity;
(d) ▇▇▇▇▇▇▇▇ shall not, directly or indirectly, solicit or encourage
(including by way of furnishing any non-public information concerning the
business, properties or assets of ▇▇▇▇▇▇▇▇), or enter into any
negotiations or discussions concerning, any Acquisition Proposal (as
defined below). ▇▇▇▇▇▇▇▇ shall notify Buyer promptly by telephone, and
thereafter promptly confirm in writing, if any such information is
requested from, or any Acquisition Proposal is received by ▇▇▇▇▇▇▇▇. As
used in this Agreement, "Acquisition Proposal" shall mean any proposal
received by ▇▇▇▇▇▇▇▇ or any officer or director thereof prior to the
Closing Date for a merger or other business combination involving
▇▇▇▇▇▇▇▇, or for the acquisition of, or the acquisition of a substantial
equity interest in, or any material part of the assets of ▇▇▇▇▇▇▇▇, other
than the one contemplated by this Agreement.
(e) Except as set forth in Schedule 5.2.1(e), ▇▇▇▇▇▇▇▇ will not:
(i) incur, become subject to, or suffer, or agree to incur,
become subject to or suffer, any obligation or liability
(absolute or contingent) except current liabilities incurred, and
obligations under contracts entered into, in the ordinary course
of business;
(ii) discharge or satisfy any lien or encumbrance or pay any
obligation or liability (absolute or contingent) other than
liabilities payable in the ordinary course of business;
(iii) mortgage, pledge or subject to lien, charge or any
other encumbrance, any of the Property or agree so to do;
(iv) sell or transfer or agree to sell or transfer any of
its assets, or cancel or agree to cancel any debt or claim,
except in each case in the ordinary course of business;
(v) consent or agree to a waiver of any right of substantial
value;
(vi) enter into any transaction other than in the ordinary
course of its business;
(vii) terminate any contract, agreement, license or other
instrument to which it is a party;
(viii) through negotiation or otherwise, make any commitment
or incur any liability or obligation to any labor organization;
(ix) without the express written consent of Buyer, make or
agree to make any accrual or arrangement for, or payment of
bonuses or special compensation of any kind, or any severance or
termination pay, to any employee;
18
(x) introduce any new method of management, operation or
accounting with respect to its business or any of the assets,
properties or rights applicable thereto;
(xi) offer or extend more favorable prices, discounts or
allowances than were offered or extended regularly on and prior
to March 31, 1998 other than in the ordinary course of business;
(xii) make capital expenditures or commitments therefor
without the express written consent of Buyer; or
(xiii) hire any new employee other than replacements for open
positions reflected in the March 31, 1998 Financial Statements.
(f) ▇▇▇▇▇▇▇▇ will use its best efforts to preserve ▇▇▇▇▇▇▇▇' business
organization intact, to keep available to ▇▇▇▇▇▇▇▇ the present service of
▇▇▇▇▇▇▇▇' employees, and to preserve for ▇▇▇▇▇▇▇▇ the good will of its
suppliers, customers and others with whom business relationship exist;
and
(g) ▇▇▇▇▇▇▇▇ will not take, agree to take or permit to be taken, any
action or do or permit to be done anything in the conduct of the business
of ▇▇▇▇▇▇▇▇, or otherwise, which would be contrary to or in breach of any
of the terms or provisions of this Agreement or which would cause any of
the representations or warranties of ▇▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇▇
Shareholders contained herein to be or become untrue in any material
respect.
5.2.2 INSPECTION OF BOOKS AND RECORDS. From the date of this
Agreement until the Closing Date, ▇▇▇▇▇▇▇▇ shall make or cause to be made
available to Buyer for examination, the Property and other materials such
as books of account, contracts, agreements, commitments, records and its
documents, and shall permit Buyer and its representatives, attorneys,
accountants and agents to have access to and to copy, at Buyer's expense,
the same at all reasonable times. In addition, ▇▇▇▇▇▇▇▇ shall make, or
cause to be made available to Buyer and its representatives, attorneys,
accountants and agents, the Property and all of the above described
records for any environmental compliance audit, any environmental site
assessment (including soil, groundwater and/or other testing) and any
other physical inspection which Buyer may elect to conduct at its own
expense.
5.2.3 FURTHER ASSURANCES. On and after the Closing Date, the
▇▇▇▇▇▇▇▇ Shareholders and Dettmers officers, directors and agents each
shall prepare, execute and deliver such further instruments of
conveyance, sale, assignment or transfer, and shall take or cause to be
taken such other or further action as Buyer shall reasonably request at
any time or from time to time in order to perfect, confirm or evidence in
Buyer title to all or any part of the Property or to consummate, in any
other manner, the terms and conditions of this Agreement.
5.2.4 PRESS RELEASES AND ANNOUNCEMENTS. Neither ▇▇▇▇▇▇▇▇ nor the
▇▇▇▇▇▇▇▇ Shareholders shall make any press release or announcement
regarding the transaction contemplated herein without the prior written
approval of Buyer or DAH, other than in conjunction with a press release
or announcement issued by Buyer or DAH, which Buyer or DAH shall be
permitted to make without the prior written approval of the other parties
hereto; PROVIDED, HOWEVER that ▇▇▇▇▇▇▇▇, the ▇▇▇▇▇▇▇▇ Shareholders, Buyer
or DAH may make any public disclosure he or it believes in good faith is
required by law (in which case he or it will advise the other parties
hereto prior to making the disclosure). On the Closing Date, Buyer and
DAH will issue public announcements and/or press releases announcing the
transaction contemplated by this Agreement.
5.2.5 BANKRUPTCY. ▇▇▇▇▇▇▇▇ agrees that on and after the date of
this Agreement (i) ▇▇▇▇▇▇▇▇ shall not commence any case, proceeding or
other action (A) under any existing or
19
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to any of them or seeking
to adjudicate any of them bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to any of them or
for all or any substantial part of any of their assets; (ii) ▇▇▇▇▇▇▇▇
shall not make a general assignment for the benefit of its creditors;
(iii) no case, proceeding or other action of a nature referred to in
clause (i) above shall be commenced by any person which (A) results in
the entry of an order for relief or any such adjudication or appointment
or (B) remains undismissed or discharged for a period of 60 days; (iv) no
case, proceeding or other action shall be commenced by any person seeking
issuance of a warrant of attachment, execution distraint or similar
process against all or any substantial part of the assets of ▇▇▇▇▇▇▇▇
which results in the entry of an order for any such relief; and (v)
▇▇▇▇▇▇▇▇ shall not take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), (iii), or (iv) above.
5.2.6 TRADE SECRETS AND CONFIDENTIAL KNOW-HOW. Between the date
hereof and the Closing Date, ▇▇▇▇▇▇▇▇ and its agents, officers and
employees shall, upon request by Buyer, reduce to writing all trade
secret information or other know-how of a business or technical nature
which is now used in or which is useful for the present or anticipated
future business of ▇▇▇▇▇▇▇▇, such writing to be confidential and afforded
such protection and confidential treatment as Buyer shall reasonably
request.
5.2.7 INDEMNITY REGARDING BULK SALES, ETC. The ▇▇▇▇▇▇▇▇
Shareholders hereby agree to indemnify and hold harmless DAH and Buyer
from any claims, costs or losses incurred as a result of the failure of
▇▇▇▇▇▇▇▇ to comply with any and all requirements of sales tax and bulk
sales laws and regulations arising under applicable state law in
connection with the transactions contemplated by this Agreement.
5.2.8 WARRANTY WORK AFTER CLOSING DATE. To the extent that such
costs exceed $25,000 per year for Buyer's costs incurred in respect of
any warranty work completed by Buyer pursuant to its liabilities assumed
under Section 4.1.6, the ▇▇▇▇▇▇▇▇ Shareholders, by a reduction of amounts
payable to ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇ Shareholders pursuant to the terms of
this Agreement, shall reimburse Buyer for Buyer's actual direct cost of
material and labor incurred in respect of any warranty work
5.2.9 HOLD HARMLESS. The ▇▇▇▇▇▇▇▇ Shareholders agree to indemnify
and hold harmless DAH and Buyer from any liabilities to third parties
arising from the operations or business of ▇▇▇▇▇▇▇▇ at any time prior to
the consummation of the transactions contemplated herein on the Closing
Date, except to the extent caused by the actions, gross negligence or
willful misfeasance of DAH or Buyer; provided, however, the indemnity
with respect to Warranty work set forth in Section 5.2.8 shall be limited
to amounts otherwise payable to ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇ Shareholders
pursuant to this Agreement.
5.2.10 USE OF NAME/DISSOLUTION OF SELLER. Immediately upon the
Closing, ▇▇▇▇▇▇▇▇ shall (a) change its name to a name which does not
include the name "▇▇▇▇▇▇▇▇", (b) not use any name, ▇▇▇▇, logo or design
included in the Assets, and (c) provide to DAH and Buyer such evidence of
the foregoing as either from time to time may reasonably request. In the
event that the ▇▇▇▇▇▇▇▇ Shareholders and ▇▇▇▇▇▇▇▇ decide to dissolve
▇▇▇▇▇▇▇▇ post transaction, then a certificate of dissolution shall be
delivered to Buyer and DAH upon ▇▇▇▇▇▇▇▇ receipt of same. A certified
copy of a certificate of dissolution shall constitute adequate evidence
for DAH and Buyer to make any further payments called for in this
Agreement directly to the ▇▇▇▇▇▇▇▇ Shareholders in such proportion as the
▇▇▇▇▇▇▇▇ Shareholders direct in writing.
20
6. CLOSING AND CONDITIONS PRECEDENT.
6.1 CLOSING DATE. The date upon which the transactions contemplated
hereby shall become effective (the "Closing Date") shall be the date, no
later than June 30, 1998, upon which each of the conditions precedent set
forth in Sections 6.2 and 6.3 shall have been satisfied or waived pursuant
to the respective terms thereof.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF DAH AND BUYER. Each and
every obligation of DAH and Buyer to be performed on the Closing Date shall
be subject to the satisfaction on or before the Closing Date of each of the
following conditions (unless waived in writing by DAH and Buyer):
6.2.1 ▇▇▇▇▇▇▇▇ shall have delivered to Buyer each of the
following, in each case duly and properly executed (if appropriate) and
in form and substance reasonably satisfactory to the Buyer:
(a Good and sufficient assignments of each Real Property Lease,
conveying all of ▇▇▇▇▇▇▇▇' right, title and interest in and to such Real
Property Lease, free and clear of all mortgages, pledges, liens, security
interests, encumbrances, restrictions and claims of any nature
whatsoever, except those listed as permitted exceptions on Schedule
6.2.1(a); together with recordable memoranda thereof if requested by
Buyer.
(b Written consents of the lessors under each Real Property Lease,
to the assignment of each such Real Property Lease, with no adverse
condition attached, and estoppel and non-disturbance agreements of such
lessors.
(c A good and sufficient General Conveyance, Assignment and ▇▇▇▇ of
Sale, conveying, selling, transferring and assigning to Buyer title to
all of the Property free and clear of all security interests, liens,
charges, encumbrances or equities whatsoever, except those listed as
permitted exceptions on Schedule 6.2.1(c); and Motor Vehicle Certificates
of Title to each of the Vehicles, endorsed for transfer to Buyer.
(d The persons listed on Schedule 6.2.1(d) shall have executed and
delivered Employment Agreements to DAH and Buyer in the form of EXHIBIT A
attached hereto.
(e Good and sufficient assignments of each of the Personal Property
Leases and each of the Contracts, in each case together with the written
consents of all parties necessary in order to transfer all of ▇▇▇▇▇▇▇▇'
rights thereunder to Buyer.
(f Copies of each of the Permits, together with evidence
satisfactory to Buyer that the same are in full force and effect, and (to
the extent requested by Buyer) evidence that such permits are eligible
for immediate transfer to Buyer.
(g The books and records described in Section 3.2.20; each of the
Financial Statements described in Section 3.2.4; [the Second Quarter
Financial Statements to be delivered pursuant to Section 4.2.10;] the tax
returns described in Section 3.2.29, together with evidence satisfactory
to the Buyer of the payment by ▇▇▇▇▇▇▇▇ of all amounts due to the
relevant taxing authorities pursuant thereto; and each policy of
insurance described in Section 3.2.26, together with evidence that such
policies are in force on the Closing Date.
(h Evidence satisfactory to DAH and Buyer and their counsel that the
execution and delivery of this Agreement has been authorized by ▇▇▇▇▇▇▇▇.
(i A favorable opinion of counsel for ▇▇▇▇▇▇▇▇, addressed to Buyer
and DAH and dated the Closing Date, as to the matters set forth in
Sections 3.2.1, 3.2.2 and 3.2.3 hereof and such other matters as Buyer or
DAH may reasonably request.
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(j The Articles of Incorporation of ▇▇▇▇▇▇▇▇, certified as of a
recent date by the Secretary of State of Delaware.
(k The Bylaws of ▇▇▇▇▇▇▇▇, certified as true and complete by the
Corporate Secretary of ▇▇▇▇▇▇▇▇.
(l Certificates of the Secretaries of State of Delaware and Florida,
each dated as of a date not earlier than ten days prior to the Closing
Date, as to the good standing of ▇▇▇▇▇▇▇▇ in such States (and, in
Delaware, the payment of all corporate franchise taxes), together with
facsimile confirmation of such good standing on the Closing Date.
(m An affidavit of the Chief Executive Officer or Chief Financial
Officer of ▇▇▇▇▇▇▇▇ stating that ▇▇▇▇▇▇▇▇ is not a foreign seller within
the meaning of the Internal Revenue Code of 1986, as amended, and such
other evidence of domestic ownership as may be required or reasonably
deemed advisable by Buyer in any state or local jurisdiction where the
Property is located.
(n Such other consents as Buyer deems necessary or desirable in
order to consummate the transactions contemplated herein.
(o Such other separate instruments of sale, assignment or transfer
that Buyer may reasonably deem necessary or appropriate in order to
perfect, confirm or evidence title to all or any part of the Property.
(p A general release in a form acceptable to Buyer and DAH from
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ regarding his prior ownership of ▇▇▇▇▇▇▇▇ shares.
(q Evidence of a written termination, in a form acceptable to DAH
and Buyer, of the Commercial Lease dated December 18, 1996 between ▇▇▇▇▇▇
Perl and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Industries Inc. with respect of the
Real Property leased at ▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇.
6.2.2 In its sole judgment and discretion, DAH shall be satisfied
with the compensation plan of ▇▇▇▇▇▇▇▇ for all employees and the
termination of (i) the provisions of the ▇▇▇▇▇▇▇▇ Employee Handbook and
(ii) the existing compensation program which provides incentives to all
employees.
6.2.3 In its sole judgment and discretion, (i) DAH shall be
satisfied with the completion of its due diligence review of the business
and operations of ▇▇▇▇▇▇▇▇, and (ii) DAH shall have obtained the consent
of its senior lender as to the transaction contemplated by this
Agreement.
6.2.4 DAH and Buyer shall have the right, but shall have no
obligation to close and make the final $2,100,000 payment, or any other
payment not already made, in the event that ▇▇▇▇▇▇▇▇ has not, prior to
the Closing Date, received a firm Purchase Order which sets forth
schedule, quantity and unit price from Raytheon E-Systems for ▇▇▇▇▇▇▇▇
products on Boeing Business Jets, as more fully described in Raytheon's
letter to ▇▇▇▇▇▇▇▇ dated May 29, 1998.
6.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF ▇▇▇▇▇▇▇▇. Each and every
obligation of ▇▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇▇ Shareholders to be performed on the
Closing Date shall be subject to the satisfaction on or before the Closing
Date of each of the following conditions (unless waived in writing by
▇▇▇▇▇▇▇▇): The Buyer shall have delivered to ▇▇▇▇▇▇▇▇ each of the following,
in each case duly and properly executed (if appropriate) and in form and
substance reasonably satisfactory to ▇▇▇▇▇▇▇▇:
6.3.1 Payment of the amounts required to be paid pursuant to
Section 2, in immediately available funds on the Closing Date.
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6.3.2 Resolutions of the directors of Buyer and DAH authorizing
the execution and delivery of this Agreement by Buyer and DAH
respectively, and the performance of their respective obligations
hereunder, certified by the Corporate Secretaries of Buyer and DAH,
respectively.
6.3.3 A favorable opinion of counsel for Buyer and DAH, addressed
to ▇▇▇▇▇▇▇▇ and dated the Closing Date, as to the matters set forth in
Sections 3.1.1 and 3.1.2 hereof.
6.3.4 The Assumption Agreement with respect to the Assumed
Liabilities, in the form of EXHIBIT B attached hereto.
6.3.5 Delivery by Buyer of an indemnity agreement which
indemnifies the ▇▇▇▇▇▇▇▇ Shareholders against any claims made by third
parties under their personal guarantees as set forth in the Commercial
Lease dated December 12, 1996 regarding the real property located at ▇▇▇▇
▇. ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ (the "3190 Lease"). The indemnity
provided to the ▇▇▇▇▇▇▇▇ Shareholders is only with respect of claims and
occurrences relating to the 3190 Lease that occur after the transactions
contemplated hereby are consummated, and is given in connection with
Buyer's assumption of the 3190 Lease.
7. MISCELLANEOUS PROVISIONS.
7.1 NOTICES. All notices and other communications required or
permitted under this Agreement shall be deemed to have been duly given and
made if made in writing, and (i) if served by personal delivery to the party
for whom intended (which shall include overnight delivery by Federal Express
or similar service), to the address provided for such party set forth below,
or such other address as may be designated by writing hereafter by such
party, or (ii) if sent by telecopy to the number set forth below, or such
other number as may be designated in writing hereafter by such party and
immediately confirmed by sending a copy of such notice by either method
described in clause (i) above:
If to Buyer/DAH: ▇▇▇▇▇▇▇ Aircraft Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Attn: R. ▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Spolin & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to ▇▇▇▇▇▇▇▇ or
▇▇▇▇▇▇▇▇
Shareholders: ▇▇▇▇▇▇ Perl
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Industries
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇)▇▇▇-▇▇▇▇
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7.2 ARBITRATION. Any dispute, claim or controversy arising out of or
relating to this Agreement or any breach thereof shall be decided by
arbitration conducted in Miami, Florida before a single arbitrator in an
arbitration proceeding otherwise conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and which
arbitration provides for reasonable discovery, including depositions,
interrogatories and production of documents. The decision of the arbitrator
shall be final and binding on the parties and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. The cost
of arbitration shall be shared equally between the parties.
7.3 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, and the documents referred to herein and therein, embody the entire
agreement and understanding of the parties hereto with respect to the
subject matter hereof, and supersede all prior and contemporaneous
agreements and understandings, oral or written, relative to said subject
matter.
7.4 BINDING EFFECT; ASSIGNMENT. This Agreement and the rights and
obligations arising hereunder shall inure to the benefit of and be binding
upon ▇▇▇▇▇▇▇▇, its successors and permitted assigns, Buyer and DAH, their
respective successors and permitted assigns. Neither this Agreement nor any
of the rights, interest or obligations hereunder shall be transferred or
assigned (by operation of law or otherwise) by any of the parties hereto
without the prior written consent of the other party or parties, except that
Buyer shall have the right to assign, in whole or in part, its rights
hereunder to one or more affiliates of Buyer, which in each case shall be a
wholly-owned subsidiary of Buyer. Any transfer or assignment of any of the
rights, interests or obligations hereunder in violation of the terms hereof
shall be void and of no force or effect.
7.5 CAPTIONS. The Section headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement in
construing or interpreting any provision hereof.
7.6 WAIVER; CONSENT. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance),
in whole or in part, except by a writing executed by the parties hereto, and
no waiver of any of the provisions or conditions of this Agreement or any of
the rights of a party hereto shall be effective or binding unless such
waiver shall be in writing and signed by the party claimed to have given or
consented thereto. Except to the extent that a party hereto may have
otherwise agreed in writing, no waiver by that party of any condition of
this Agreement or breach by the other party of any of its obligations or
representations hereunder or thereunder shall be deemed to be a waiver of
any other condition or subsequent or prior breach of the same or any other
obligation or representation by the other party, nor shall any forbearance
by the first party to seek a remedy for any noncompliance or breach by the
other party be deemed to be a waiver by the first party of its rights and
remedies with respect to such noncompliance or breach.
7.7 NO THIRD PARTY BENEFICIARIES. Subject to Section 7.4, nothing
herein, expressed or implied, is intended or shall be construed to confer
upon or give to any person, firm, corporation or legal entity, other than
the parties hereto, any rights, remedies or other benefits under or by
reason of this Agreement.
7.8 COUNTERPARTS. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
7.9 SEVERABILITY. With respect to any provision of this Agreement
finally determined to be unenforceable, ▇▇▇▇▇▇▇▇, the ▇▇▇▇▇▇▇▇ Shareholders,
DAH and Buyer hereby agree that such court or arbitrator(s) shall have
jurisdiction to reform such provision so that it is enforceable to the
maximum extent permitted by law, and the parties agree to abide by such
court's or arbitrator(s)' determination. In the event that any such
provision cannot be reformed, such provision shall be
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deemed to be severed from this Agreement, but every other provision of this
Agreement shall remain in full force and effect.
7.10 GOVERNING LAW. This Agreement shall in all respects be construed
in accordance with and governed by the laws of the State of Delaware, with
venue in Miami, Florida.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
▇▇▇▇▇▇▇▇ INDUSTRIES, INC., ▇▇▇▇▇▇▇ AIRCRAFT HOLDINGS, INC.
a Delaware corporation
By: By:
▇▇▇▇▇▇▇▇ SHAREHOLDERS DAHX ACQUISITIONS, INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By:
▇▇▇▇▇▇ PERL
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