EXHIBIT 4.9
MEMBERSHIP INTEREST PURCHASE AGREEMENT
MEMBERSHIP INTEREST PURCHASE AGREEMENT (the "Agreement ") dated the 24th
day of May, 2005 between Limco-Airepair, Inc., an Oklahoma corporation
(hereinafter referred to as the "Purchaser"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇ (collectively referred to as "Members")
and Piedmont Aviation Component Services, L.L.C., a North Carolina limited
liability company (hereinafter referred to as "Company", and collectively with
the Members referred to as "Seller").
RECITALS
A. Members are the owners of all outstanding ownership units evidencing
their membership interest in the Company as have been issued by the Company as
follows:
Units Owned Percentage
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 9,900 33%
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 9,900 33%
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 9,900 33%
▇▇▇ ▇▇▇▇▇▇ 300 01%
----- ---
TOTAL ISSUED AND
OUTSTANDING UNITS 30,000 100%
which units of membership interests are fully paid and non assessable by the
Company.
B. The Company conducts business as an authorized and fully licensed
and/or authorized or recommended aviation Repair Station or authority for, among
others, Honeywell Aerospace, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Propeller, in the overhaul,
repair, maintenance, service and supply of, among other products, Propellers,
Landing Gear and APU/LRU units, and products made in its machine shop with metal
finishing capability, as well as supplying parts through brokerage some of which
products and activities are limited in scope by the United States Department of
Transportation, Federal Aviation Administration Air Agency Certificate Nos.
QKPR504X (issued August 10, 2004) and QWPR503X (issued September 21, 2004), all
of which licenses, certificates and authorities are fully and properly issued
and are not now suspended, revoked, or in default or under suspension or
revocation proceedings or notifications. (hereinafter referred to as the
"Company's Business")
C. The Purchaser desires to purchase all units of membership interest
from the Members free and clear of any and all liens, judgments, orders, decrees
or encumbrances of any kind in order to have 100% ownership of the Company and
thus acquire all of the Company's business free an clear of all liens debts,
obligations of whatever kind or character except for those obligations
specifically assumed by the Purchaser as are hereinafter described in this
Agreement (e.g., obligations identified in the audited financial statement of
December 31, 2004 and acquired in the normal course of business since that date
to date of Closing as is specifically described hereinafter).
MEMBERSHIP INTEREST AGREEMENT
Page 2
D. Upon execution of this Agreement by the parties hereto, the
foregoing recitals A, B, and C shall be deemed to be true and correct and to
form a material part of the inducement for Purchaser to enter this Agreement.
NOW, THEREFORE, in consideration of the covenants, agreements,
representations, and warranties contained in this Agreement, the parties hereto
hereby agree as follows:
ARTICLE I.
PURCHASE AND SALE OF MEMBERSHIP INTERESTS;
COMPANY'S BUSINESS; PURCHASE PRICE; CLOSING
1.1 Purchase and Sale of Membership Interests. Subject to the terms and
conditions of this Agreement, on the Closing Date (as defined herein) the
Members shall sell, transfer, convey, assign, and deliver to the Purchaser, and
the Purchaser shall purchase, acquire, and accept from the Members, all of the
Member's right, title, and interest in and to the membership interest (also
referred to as "ownership units") of the Company (and any evidence of such
ownership such as certificates), the purpose being to vest in the Purchaser
title to all of the ownership units, right and interest in the Company; the
Purchaser thereby becoming the sole member and owner of the Company, and as such
indirectly acquiring all of the assets owned and controlled by the Company,
inclusive of any and all intellectual property, trade names, patents,
copyrights, proprietary information, trade secrets, rolling stock, equipment,
inventory, goods, materials of every kind as are used, employed and stored for
the purpose of operating the Company's Business.
1.2 Excluded Assets. No assets owned by the Company are excluded from
this sale.
1.3 Assumption of Liabilities or Obligations. Notwithstanding anything
to the contrary in this Agreement, the Company shall retain and remain obligated
for and the Purchaser, as the sole member and owner of the Company, shall assume
all liabilities or obligations of the Company accruing, accrued and as are
disclosed in the Audited Financials dated December 31, 2004, as well as those
debts and obligations entered into or incurred in the normal course of operating
the business of the Company from and after December 31, 2004 until Closing, and
as are fully set forth on the monthly Financial Statements of the Company since
December 31, 2004 (which have been provided to the Purchaser prior to Closing),
or as are recorded in Company's normal business records, (e.g., accounts
payable, payroll ledger and the like records has have been supplied to the
Purchaser prior to Closing) and/or the Disclosure Schedule 1.3 Assumed Debts and
Obligations, which is attached and made a part hereof. No other liabilities of
the Company are assumed and shall be deemed to be undisclosed liabilities and
subject to the indemnity provisions of Article IX of this Agreement in the event
of subsequent claims for payment lodged against the Purchaser.
(a) At Closing, Purchaser shall pay and satisfy in full all
financial obligations of the Company under that Promissory Note executed by the
Company and payable to Blue Ridge Investors, II Limited Partnership, dated
November 18, 2002, in the original amount of $2,000,000.00, as the same may have
been modified or amended from time to time.
MEMBERSHIP INTEREST AGREEMENT
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(b) At Closing, Purchaser shall pay in full and satisfy all
obligations of the Company under that Credit and Security Agreement executed by
the Company, as Borrower, and Whitehall Business Credit Corporation, as Lender,
on November 15, 2002, and the documents and instruments pursuant thereto,
including that Revolving Credit Note in the original principal amount of
$7,500,000.00; that Term Loan Note in the original principal amount of
$675,000.00; and that Capital Expenditures Loan Note in the original principal
amount of $500,000.00, as the foregoing may have been modified or amended from
time to time. At Closing, the aggregate amount of the obligations under the
above-described Whitehall loan shall not exceed $7,500,000.00.
1.4 Purchase Price. The aggregate consideration for the Purchase of the
Membership Interests and Company's Business transferred to Purchaser
("Transferred Membership Interest") shall be $5,500,000 payable in cash or
certified funds at Closing.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Except as otherwise set forth in the schedules attached to this
Agreement by reference to specific sections of this Agreement (hereinafter
collectively referred to as the "Disclosure Schedule"), the Seller represents
and warrants to the Purchaser as set forth below:
2.1 Organization and Good Standing. The Company is a limited liability
company duly organized, validly existing, and in good standing under the laws of
the State of North Carolina, and (a) is duly qualified to transact business as a
limited liability company and is in good standing in every other jurisdiction
within the United States in which the conduct of its business requires it to be
so qualified, (b) to the extent it has its EASA Repair Certificate, the Company
is duly qualified to transact business as a limited liability company and is in
good standing in every European jurisdiction in which the conduct of its
business requires it to be so qualified, and (c) to Seller's knowledge, is duly
qualified to transact business as a limited liability company and is in good
standing in every other jurisdiction outside of the United States and Europe in
which the conduct of its business requires it to be so qualified. Copies of the
Articles and/or Certificate of Organization or Formation and the Operating
Agreement of the Company and all amendments thereto as presently in effect, as
well as any minutes of Members' or managers' meetings, and requisite notices and
or waivers of notice fully endorsed have been delivered to the Purchaser and are
complete and correct as of the date hereof.
2.2 Authorization. Subject to receiving the approval of the Company's
managers, the Seller has full power and authority to enter into this Agreement,
both individually, and as authorized by the Members and managers of the Company
and as is allowable under the Company's Operating Agreement), inclusive of all
exhibits and schedules hereto, and all agreements contemplated herein (this
Agreement and all such exhibits, schedules, and other agreements being
collectively referred to herein as the "Acquisition Documents"), to perform its
obligations hereunder and there under, to assign, transfer, sale and convey the
units of Membership Interest purchased hereunder, and to carry out the
transactions
MEMBERSHIP INTEREST AGREEMENT
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contemplated hereby and thereby. The Managers of the Company have taken, or will
take before the Closing Date, all actions required by law, its Operating
Agreement or otherwise to authorize (i) the execution and delivery of this
Agreement and the other Acquisition Documents, and (ii) the performance of its
obligations hereunder and there under. This Agreement has been duly executed and
delivered by the Seller and upon the execution and delivery of the remaining
Acquisition Documents by a duly authorized Members and managers of the Company,
the remaining Acquisition Documents will have been duly executed and delivered
by the Seller, and this Agreement is and such other Acquisition Documents will
be, upon due execution and delivery thereof, the legal, valid, and binding
obligations of the Seller enforceable according to their terms
2.3 Title to Ownership Units Transferred. Except as set forth below in
this Section 2.3, the Members own and have good and marketable title to all
ownership units evidencing their Transferred Membership Interest, free and clear
of all Liens. Seller hereby specifically discloses to Buyer (a) that Blue Ridge
Investors, II Limited Partnership holds a warrant to acquire additional
membership units in the Company, (ii) that there are restrictions on the
transfer of the Membership Interest contained in the Company's Operating
Agreement, and (iii) that there are rights of first refusal and restrictions on
the transfer of the Membership Interest contained in that Loan and Purchase
Agreement between the Company and Blue Ridge Investors, II Limited Partnership,
dated November 18, 2002, and an option in favor of Member ▇▇▇ ▇▇▇▇▇▇ to obtain
up to five percent (5%) of all outstanding Membership Interest. As specified in
Section 6.4, it is a condition precedent to Closing this Agreement that (i) the
warrant and any other rights or interests in the Company held by Blue Ridge
Investments II, Limited Partnership shall be terminated and released and (ii)
▇▇▇ ▇▇▇▇▇▇ terminate and release any and all option rights he may have to
acquire additional units of ownership or future Membership Interests.
2.4 Title to Properties; Absence of Liens and Encumbrances. The Company
has good and marketable title to or a valid leasehold interest in all of its
properties and assets, tangible and intangible, free and clear of all liens,
mortgagees and encumbrances except for (i) those set forth in the Disclosure
Schedule 2.4, List of Liens, Mortgages and other Encumbrances attached, (ii)
liens for current taxes not yet due and payable, and (iii) such other minor
imperfections of title and encumbrances, if any, that do not, in the aggregate,
have a material adverse effect on the Company's Business, assets, or financial
condition of the Company (collectively hereinafter referred to as the "Permitted
Liens"). To Seller's knowledge, there is no material asset used or required by
the Company in the conduct of Company's Business, which is not owned by the
Company or licensed or leased to it pursuant to one of the licenses or leases
listed in Disclosure Schedule 2.6, List of Leases and Licenses.
2.5 Owned Real Property. The Company and Sellers own no right, title or
interest in or to any real property (other than leasehold interests) nor do they
have any options to purchase any real property used by the Company in
conjunction with operation and conduct of Company's Business.
2.6 Leases. Disclosure Schedule 2.6, List of Leases and Licenses
attached hereto contains a complete list of (i) each lease pursuant to which the
Company leases, as lessee, any real property interest and (ii) each lease
pursuant to which the Seller leases, as lessee, any
MEMBERSHIP INTEREST AGREEMENT
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type of property (real or personal) in which the Purchaser's inability to
acquire the Seller's rights there under would have a material adverse effect
upon the business assets or financial condition of the Company and in which the
rental payments pursuant to such lease exceed $ 10,000 per annum. Each such
lease is valid and binding and is in full force and effect, subject only to
exceptions based on bankruptcy, insolvency, or similar laws of general
application, and there are no existing defaults by any party to any such lease,
or any condition, event, or act known to the Seller which, with notice or lapse
of time or both, would constitute such a default. Without limiting the
foregoing, the Seller is not in default under any of such leases, and the Seller
has not received any notice from any person asserting a default by the Seller
under any such lease.
2.7 No Violation. Except as set forth on Disclosure Schedule 2.7, none
of (i) the execution and delivery of this Agreement or any of the other
Acquisition Documents by the Seller, (ii) the performance by the Seller of its
obligations hereunder or there under, (iii) the consummation of the transactions
contemplated hereby or thereby after the Closing, will (A) violate any provision
of the Certificate of Organization or Formation Articles of the Company, or the
Operating Agreement under which the Company operates; (B) violate, or be in
conflict with, or constitute a default under or breach of, or permit the
termination of, or cause the acceleration of the maturity of, any indenture,
mortgage, contract, commitment, debt, or obligation of the Seller, which
violation, conflict, default, breach, termination, or acceleration, either
individually or in the aggregate with all other such violations, conflicts,
defaults, breaches, terminations, and accelerations, would have a material
adverse effect on the operations, business, assets, or financial condition of
the Company or the Transferred Member Interests; (C) except for the consent of
Managers, require the consent of any other party to or result in the creation or
imposition of any Lien upon any property or assets of the Company or the
Transferred Membership Interest under any indenture, mortgage contract,
commitment, debt or obligation of or to which the Seller is a party or by which
the Seller is bound; (D) violate any statute, law, judgment, decree, order,
regulation, or rule of any court or governmental authority to which the Seller
or the Transferred Membership Interests are subject; or (E) result in the loss
of any material license, privilege, or certificate benefiting the Company.
Purchaser acknowledges and agrees that the items listed on Disclosure Schedule
2.7 are agreements and instruments to which the Company is a party (or permits
and licenses held by the Company), which may be violated upon transfer of the
Transferred Membership Interest by the Members to Purchaser, and for which
Purchaser may need to obtain consent, approval, or authorization. As specified
in Section 5.4, it is a condition of this Agreement, it is a condition precedent
to Closing that Purchaser obtain such consents, approvals, or authorizations.
2.8 Consents and Approvals of Governmental Authorities. Except as set
forth on Disclosure Schedule 2.8, no consent, approval, or authorization of, or
declaration, filing, or registration with, any governmental or regulatory
authority is required to be made or obtained by the Seller in connection with
the execution, delivery, and performance of this Agreement or any of the other
Acquisition Documents by the Seller. Purchaser acknowledges and agrees that the
items listed on Disclosure Schedule 2.8 are permits and licenses held by the
Company, for which Purchaser may need to obtain governmental consent, approval,
or authorization. As specified in Section 5.4, it is a condition of this
Agreement, it is a condition precedent to Closing that Purchaser obtain such
consents, approvals, or authorizations.
MEMBERSHIP INTEREST AGREEMENT
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2.9 Financial Statements.
(a) Delivery. The Seller has delivered to the Purchaser true
and complete copies of the Company's audited financial statements including
balance sheets, statements of operations and retained earnings, and statements
of changes in financial position, as of and for the years ended December 31,
2004 (the "Audited Financials") as well as its un-audited financial statements,
including balance sheets, statements of operations and retained earnings, and
statements of changes in financial position, as of and for the months and/or
quarters from and after December 31, 2004 until the month preceding the month
Closing occurs, and thereafter internally generated financial statements up to
the date of Closing (such un-audited financial statements (income and expense
statement, as well as the balance sheet) of the Company and any notes thereto
being hereinafter referred to as the Company's "Financial Statements."
(b) Accuracy. The Audited Financials, Financial Statements are
materially true and correct and fairly present the financial condition of the
Company as of the respective dates thereof and the results of operations of the
Company for the periods then ended in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved.
2.10 Absence of Certain Changes. Since the most recent period of time
for which the Financial Statements apply and until the date of Closing, the
Company has not:
(a) Suffered any material adverse change in its working
capital, condition (financial or otherwise), assets, liabilities, reserves,
business operations, or prospects;
(b) Suffered any damage, destruction, or loss, whether covered
by insurance or not, materially adversely affecting its business operations, or
prospects, assets, or condition, financial or otherwise;
(c) Permitted or allowed any of its property or assets (real,
personal, or mixed, tangible or intangible) to be subjected to any mortgage,
pledge, security interest, conditional sale, or other title retention agreement,
encumbrance, lien, easement, claim, right of way, warrant, option, or charge of
any kind (individually and collectively hereinafter referred to as a "Lien"),
except Permitted Liens;
(d) Created or incurred any liability (fixed, absolute,
accrued, contingent, or otherwise) except for unsecured current liabilities
incurred for other than money borrowed, and liabilities under contracts entered
into in the ordinary course of business and for amounts and for terms consistent
with past practice;
(e) Canceled or compromised any debts, or waived or permitted
to lapse, any material claims or rights, or sold, transferred, or otherwise
disposed of any of its properties or assets (real, personal, or mixed, tangible
or intangible), except in the ordinary course of business and consistent with
past practice;
(f) Transferred or granted any concessions, leases, licenses,
or agreements with respect to or disposed of or permitted to lapse any rights to
the use of any patent,
MEMBERSHIP INTEREST AGREEMENT
Page 7
registered trademark, servicemark, trade name, or copyright material to the
business of the Company (all of which are listed on Schedule 2.11), or disposed
of or disclosed to any person any material, trade secret, formula, process, or
know-how not theretofore a matter of public knowledge;
(g) Entered into any material commitment or transaction not in
the ordinary course of business and consistent with past practice or made any
capital expenditures or commitments for any additions to property, plant, or
equipment that in the aggregate exceed $5,000;
(h) Paid, loaned, or advanced any amount to, or sold,
purchased, transferred, or leased any properties or assets (real, personal, or
mixed, tangible or intangible) to or from, or entered into any agreement or
arrangement with, any of its Company Members, managers, or employees, or any
family member of any of its members, managers or employees, or any partnership,
company, corporation or other entity controlled by, controlling, or under common
control with it, or any partner, officer, director or employee of any such
corporation or other entity, or any such individual's family members;
(i) Purchased, redeemed, issued, sold, or otherwise acquired
or disposed of, directly or indirectly, any membership interests, options,
warrants, bonds, notes, or other securities, or rights to purchase or convert
into any securities of the Company;
(j) Declared or paid, or set aside funds in anticipation of,
any dividends or other distributions of Company funds for any Member or Manager
of the Company;
(k) Made any acquisition or disposition of assets except in
the ordinary course of business, consistent with past practice;
(l) Introduced any material change with respect to the
operation of its business, including, without limitation, its method of
accounting;
(m) Except for sales of inventories in the ordinary course of
business, sold or otherwise disposed of, or entered into or agreed to enter into
any agreement or other arrangement to sell or otherwise dispose of, any of its
assets, properties, or rights or any agreement or other arrangement which
requires the consent of any party to the transfer and assignment of any such
assets, properties, or rights;
(n) Paid or agreed to pay any bonus or extraordinary payment
to any employee or Member (including payment by the Company of attorney fees
related to this transaction) or changed or agreed to change in any material
respect the compensation of any employee; or
(o) Agreed, whether in writing or otherwise, to take any
action described in this Section.
2.11 Patents, Trademarks, Trade Names. Except as set forth on
Disclosure Schedule 2.11, the Seller owns, is licensed, or otherwise has the
full right to use all patents, trademarks, servicemarks, trade names, and
copyrights used in the business of the Company as currently
MEMBERSHIP INTEREST AGREEMENT
Page 8
conducted. Disclosure Schedule 2.11, Intellectual Materials Owned or Controlled
by Company, attached hereto contains a complete and accurate list of (i) all
patents, trademarks, servicemarks, trade names, copyrights, technology,
know-how, recipes, and processes used or proposed to be used by the Seller in
operation of the Company's Business, all applications therefore, and all
licenses and other agreements relating thereto, and (ii) all agreements relating
to technology, know-how, recipes, or processes that the Seller is licensed or
authorized to use by others or licenses or authorizes others to use. Except as
set forth in any of such licenses or agreements, the Seller has the sole and
exclusive right to use its patents, trademarks, servicemarks, trade names,
copyrights, technology, know-how, recipes, and processes identified in
Disclosure Schedule 2.11 hereto, and no consent of any third party is required
for the use thereof by the Company upon completion of the transfer of the
Transferred Membership Interest to Purchaser. No claims have been asserted by
any person to the use of any such patents, trademarks, servicemarks, trade
names, copyrights, technology, know-how, recipes, or processes, or challenging
or questioning the validity or effectiveness of any such license or agreement,
and the Seller knows of no valid basis for any such claims. The Seller has not
received any notice or is aware of any facts or alleged facts indicating that
the use of such patents, trademarks, servicemarks, trade names, copyrights,
technology, know-how, recipes, or processes by the Company infringes on the
rights of any other person. No additional proprietary rights other than those
listed on Disclosure Schedule 2.11 hereto are necessary or material to the
conduct the Company's Business.
2.12 Litigation. Disclosure Schedule 2.12, Litigation and Potential
Claims, which is attached hereto sets forth all actions, claims, proceedings,
and investigations ("Actions"), including without limitation Actions for
personal injuries, products liability, or breach of warranty arising from
products sold by the Company, pending or to Seller's knowledge threatened
against the Company, any properties or rights of the Company (including, without
limitation, the patents, trademarks, servicemarks, trade names, copyrights,
technology, know-how, recipes, or processes listed in Disclosure Schedule 2.11
hereto), or the transactions contemplated by this Agreement or any other
Acquisition Document before any court, arbitrator, or administrative or
governmental body. To the best knowledge of the Seller, no state of facts exists
or has existed that would constitute grounds for the institution of any Action
against the Company or against any properties or rights of the Company or the
transactions contemplated by this Agreement or any other Acquisition Document.
The Seller is not subject to any judgment, order, or decree entered in any
lawsuit or proceeding that has materially adversely affected, or that can
reasonably be expected to materially adversely affect, the transactions
contemplated by this Agreement, the Seller, or the Transferred Membership
Interest in the Company, including, without limitation, the Company's Business
practices and its ability to acquire any property or conduct business in any
way.
2.13 Tax Returns and Payments. All of the tax returns and reports of
the Company or respecting the operations of the Company required by law to be
filed on or before the date hereof have been duly and timely filed or extended
and all taxes shown as due thereon have been either paid or are accrued in
liquid form and saved for future payment thereof. There are in effect no waivers
of any applicable statute of limitations related to such returns. No liability
for any tax will be imposed upon the Transferred Membership Interest in the
Company or the Company's Business or its assets with respect to any period
before the Closing Date for which there is not an adequate reserve reflected in
the balance sheet and
MEMBERSHIP INTEREST AGREEMENT
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held in cash form. The provisions of this Section 2.13 shall include, without
limiting the generality of this Section, all reports, returns, and payments due
under all federal, state, or local laws or regulations relating to income,
sales, use and withholding taxes, withholding obligations, unemployment
insurance, Social Security, workers' compensation, and other obligations of the
same or of a similar nature. The Seller is not subject to any open audit in
respect of its taxes, no deficiency assessment or proposed adjustment for taxes
is pending, and the Seller has no knowledge of any liability, whether or not
proposed, for any tax with respect to any period through the date hereof to be
imposed upon any of its properties or assets for which there is not an adequate
reserve (in cash) reflected in its respective Audited Financials and Financial
Statements.
2.14 Banks. Disclosure Schedule 2.14, Bank Accounts, which is attached
lists all the names and locations of all banks, trust companies, savings and
loan associations, and other financial institutions at which the Company
maintains accounts or lock boxes and the corresponding account numbers, if any,
relating to the Company and the names of all persons authorized to draw on such
accounts or who have access to such boxes.
2.15 Insurance. Disclosure Schedule 2.15, Insurance Policies, which is
attached contains (i) a complete and accurate description of the Company's
self-insurance practices and items covered by such self-insurance, if any and
(ii) a complete list of all material policies of fire, liability, workers'
compensation, products liability and other forms of insurance owned or held by
or for the benefit of the Company (collectively, the "Insurance Policies"). The
Seller has delivered to the Purchaser true and complete copies of the Insurance
Policies, along with copies of all past Insurance Policies reasonably available
after due and diligent search. To Seller's knowledge the Company's tangible real
and personal property and assets, whether owned or leased, are insured by
reputable insurance companies licensed to do business in the state in which such
property is located in such amounts customarily carried by comparable
businesses, and as is required by any agreements with licensors and/or customers
except to the extent that any failures to insure would not, in the event of a
loss, have a material adverse effect upon the Company's Business. All such
Insurance Policies are and will remain in full force and effect through the
Closing Date and, to the best knowledge of the Seller; there is no notice of or
basis for any modification, suspension, termination, or cancellation of any
Insurance Policy.
2.16 Contracts and Commitments.
(a) Disclosure Schedule 2.16, Contract Commitments, which is
attached hereto, contains a complete list of each contract and commitment of the
Seller that is material to the operations, assets, and business or financial
condition of the Company or that by its terms can reasonably be expected to
require future payment by or to the Company of $10,000 or more, including but
not limited to the following:
(i) All employment contracts and commitments between
the Company and its employees, other than those terminable by the Company at
will and without payment or penalty;
(ii) All collective bargaining agreements and union
contracts to which the Company is a party;
MEMBERSHIP INTEREST AGREEMENT
Page 10
(iii) All contracts or commitments, written or oral,
with distributors, brokers, manufacturer's representatives, sales
representatives, service or warranty representatives, customers, and other
persons, firms, or corporations engaged in the sale or distribution of the
Company's products or services;
(iv) All purchase orders issued by the Company in
excess of $20,000, all sales orders received by the Seller in excess of $25,000
and all purchase or sales orders that call for delivery or performance on a date
more than one year from the date of this Agreement;
(v) All contracts and arrangements between the
Company or any person or entity that controls, is controlled by, or is under
common control with, the Seller or any family member of any such person (such
entity or person, being hereinafter referred to as an "Affiliate");
(vi) All contracts and arrangements, written or oral,
under which the Company is either a ▇▇▇▇▇▇ or bailee including without
limitation contracts for the bailment of Aircraft;
(vii) All agreements pursuant to which the Company
acquired its Trade Name or a substantial portion of its assets; and
(viii) All other contracts and commitments of the
Company (excluding leases for the purpose of this Section 2.16(a)) and
instruments reflecting obligations for borrowed money or for other indebtedness
or guarantees thereof.
(b) At the Purchaser's request, the Seller shall deliver or
cause to be delivered to the Purchaser full and complete copies of the documents
identified above and all such other agreements and instruments as the Purchaser
may reasonably request.
(c) The Seller is not a party to any written agreement that
would restrict it from carrying on any line of business anywhere in the world.
(d) Each of the contracts listed on Disclosure Schedule 2.16
is valid and binding, and each of the contracts binding on the Company (whether
or not listed on Disclosure Schedule 2.16) has been entered into in the ordinary
course of business. To Seller's knowledge, neither the Company nor any other
party hereto is in default under or in breach or violation of, and neither the
Company nor any other party hereto has received notice of any asserted claim of
default by any other party under, or a breach or violation of, any of the
contracts, agreements, and commitments described in this Section 2.16, including
without limitation, any licensing or usage agreements with respect to the
technology that the Company now uses or currently intends and plans to use.
2.17 Distributors and Customers. To the Seller's best knowledge, it
enjoys good working relationships under all of its distributor, sales
representative, and similar agreements necessary to the normal operation of
Company's Business. Except as set forth on Disclosure Schedule 2.17, the Seller
has no knowledge or basis for knowledge that any customer or group of related
customers (i.e., any customers who are directly or indirectly
MEMBERSHIP INTEREST AGREEMENT
Page 11
through one or more intermediaries under common control), who, for the fiscal
year ended 2004 and during each of the two preceding fiscal years accounted for
more than 10% in aggregate volume of gross sales of the Company, has terminated
or expects to terminate a material portion of its normal business with the
Company.
2.18 Fringe Benefit Plans.
(a) List of Plans. Disclosure Schedule 2.18, Benefit Plans,
which is attached, contains a true and complete list and summary description of,
and the Company has delivered to the Purchaser true and complete copies of, each
pension, retirement, profit-sharing, stock purchase, stock option, vacation,
deferred compensation, bonus or other incentive plan, or 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 plans, including, without limitation, any "employee benefit
plan" as defined in section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"'), whether formal or informal, written or oral, to
which the Seller contributes, or is a party, or is bound, or under which it may
have liability, and under which employees or former employees of the Company (or
their beneficiaries) are eligible to participate or derive a benefit. Each
employee benefit plan which is a "group health plan" as such term is defined in
section 162(i)(2) of the Internal Revenue Code of 1986, as amended (the "Code"),
satisfies the applicable requirements of section 4980B of the Code. Except as
described on Disclosure Schedule 2.18, the Company does not have the intention
or commitment, whether legally binding or not, to create any additional plan,
practice, or agreement, or to modify or change any existing plan, practice, or
agreement that would affect any employee or terminated employee of the Seller,
and benefits under all employee benefit plans are as represented and have not
been and will not be increased after the date on which documents have been
provided.
(b) Representations with Respect to Plans. Except as disclosed
on Disclosure Schedule 2.18, the Company does not sponsor, maintain, or
contribute to any employee benefit plans within the meaning of section 3(3) of
ERISA, which are subject to Title I of ERISA (the "ERISA Plans"). Each pension
plan within the meaning of section 3(2) of ERISA ("Pension Plan") is identified
on Disclosure Schedule 2.18. The following representations are made with regard
to the ERISA Plans or the Pension Plans, if any and so limited:
(i) The Company does not contribute to, or have an
obligation to contribute to, or has at any time contributed to or had an
obligation to contribute to, sponsor, or maintain, or at any time has sponsored
or maintained, a multiemployer plan within the meaning of section 3(37) of ERISA
and the Company has not incurred any withdrawal liability, or suffered a
"complete withdrawal" or a "partial withdrawal" with respect to a multiemployer
plan;
(ii) The Pension Plans are qualified plans, have
remained qualified under the Code since inception and have been determined by
the Internal Revenue Service ("IRS") to be so qualified, and the IRS has taken
no action to revoke such determination or qualification;
MEMBERSHIP INTEREST AGREEMENT
Page 12
(iii) The Company has, in all material respects,
performed all obligations, whether arising by operation of law, contract, or
past custom, required to be performed under or in connection with the ERISA
Plans, and the Company does not have any knowledge of any default or violation
by any other party with respect to the ERISA Plans;
(iv) To Seller's knowledge, the Company has complied
in all material respects with ERISA, and, where applicable, the Code, regarding
the ERISA Plans;
(v) All reports and disclosures relating to the ERISA
Plans required to be filed with or furnished to governmental agencies, plan
participants, or plan beneficiaries have been or will be filed or furnished in
accordance with applicable law in a timely manner;
(vi) There are no Actions pending (other than routine
claims for benefits) or, to the knowledge of the Seller threatened, against any
ERISA Plan or against the assets funding any ERISA Plan;
(vii) Full payment has been or will be made, in
accordance with section 404(a)(6) of the Code, of all amounts which the Company
is required to pay under the terms of the Pension Plans as contributions to the
Pension Plans as of the last day of the most recent plan year of the Pension
Plans ended before the date of this Agreement, and neither the Pension Plans nor
the trusts established there under have incurred any "accumulated funding
deficiency" (as defined in section 302 of ERISA and section 412 of the Code),
whether or not waived, as of the last day of the most recent plan year of the
Pension Plans ended before the date of this Agreement;
(viii)The Company maintains adequate accruals on its
books to reflect accrued contributions to each of the Pension Plans for the
current plan year and to reflect accrued medical and dental claims incurred, but
not yet paid, under the terms of any ERISA Plan which is a welfare plan within
the meaning of section 3(1) of ERISA (a "Welfare Plan");
(ix) No transaction has occurred with respect to the
Pension Plans or the assets thereof which could result in the imposition on the
Seller or the administrators or trustees under the Pension Plans, either
directly or indirectly, of taxes or penalties imposed under section 4975 of the
Code or section 502(i) of ERISA;
(x) With respect to the Pension Plans, regardless of
whether such plans are subject to Title IV of ERISA, no termination or
reportable event, as defined in section 4043(b) of ERISA has occurred or is
anticipated to occur;
(xi) As of the most recently dated plan statement
received by the Company, the fair market value of assets of each Pension Plan
which is a "defined benefit plan" as defined in section 3(35) of ERISA ("Defined
Benefit Plan") equals or exceeds the aggregate present value of the accrued
benefits there under of all participants, computed on a "plan termination
basis," based upon actuarial assumptions which are reasonable in the aggregate;
MEMBERSHIP INTEREST AGREEMENT
Page 13
(xii) Other than applications for determination, no
action is pending with respect to the Pension Plans before the IRS, the
Department of Labor, the Pension Benefit Guaranty Corporation ("PBGC") or before
any state or local governmental agency;
(xiii) No act or omission constituting a breach of
fiduciary duties has occurred with respect to the ERISA Plans or the assets
thereof, which could subject the Seller or the Purchaser, either directly or
indirectly, to any liability;
(xiv) No liability under Title IV of ERISA has been
incurred by the Company which has been satisfied in full and the Company does
not know of any facts or circumstances which might give rise to any liability of
the Company under Title IV of ERISA which could reasonably be anticipated to
result in any claims being made against the Purchaser or the Seller by the PBGC;
(xv) The PBGC has not instituted any proceedings to
terminate any of the Pension Plans; and
(xvi) Each Welfare Plan is intended to meet currently
applicable requirements for tax-favored treatment under Subchapter B of Chapter
1 of the Code, is in compliance with such requirements, and if applicable, with
the requirements of sections 419 and 419A of the Code, and there is no
disqualified benefit (as such term is defined in section 4976(a) of the Code)
which would subject the Seller or the Purchaser to a tax under section 4976.
(c) Plan Documents. The Seller has delivered to the Purchaser
and its counsel true and complete copies, if any, of (i) all documents governing
the ERISA Plans, including all amendments thereto which will become effective at
a later date, (ii) all agreements and arrangements listed on Disclosure Schedule
2.18, (iii) the latest IRS determination letter obtained with respect to each of
the Pension Plans, (iv) Form 5500 for the most recent completed plan year for
each of the ERISA Plans, together with all schedules forming a part thereof, (v)
the most recent actuarial valuation for any Defined Benefit Plan, (vi) any form,
other than Form 5500, required to be filed for the most recently completed plan
year for any Defined Benefit Plan with any governmental agency, (vii) all
summary plan descriptions relating to the ERISA Plans, (viii) the annuity
contracts funding obligations of any Defined Benefit Plan, and (ix) all
employment manuals.
2.19 Labor Relations. No employee of the Company is represented by a
labor union or under a collective bargaining agreement, except as set forth on
Disclosure Schedule 2.19, Collective Bargaining Agreements, if any, and the
particular collective bargaining agreement or agreements have been delivered to
the Purchaser. No petition has been filed or proceedings instituted by any
employee or group of employees with any labor relations board seeking
recognition of a bargaining representative. There are no matters pending before
the National Labor Relations Board or any similar state or local labor agency,
and the Company is neither engaged in nor subject to any penalties or
enforcement action in respect of any unfair labor practices, and the Seller
believes that it enjoys good labor relations. There are no controversies or
disputes pending between the Company and any of its employees, except for such
controversies and disputes as do not and will not, individually or in the
aggregate, have a material adverse effect on its business, operations, assets,
prospects, or condition, financial or otherwise.
MEMBERSHIP INTEREST AGREEMENT
Page 14
2.20 Environmental Matters.
(a) For purposes of this Section 2.20, the property of the
Seller shall mean such property whether now or in the past owned or leased by
it. Additionally, for purposes of this Section 2.20, "Hazardous Substance" means
(i) a hazardous substance as defined in 42 U.S.C. ss.9601(14), as amended from
time to time, and all rules, regulations, and orders promulgated there under as
in effect from time to time, (ii) "hazardous waste" as defined in 42 U.S.C.
ss.6903(5), as amended from time to time, and all rules, regulations, and orders
promulgated there under as in effect from time to time, (iii) if not included in
(i) or (ii) above, "hazardous waste constituents" as defined in 40 C.F.R.
ss.260.10, specifically including Appendix VII and VIII of Subpart D of 40
C.F.R. ss.261, as amended from time to time, and all rules, regulations, and
orders promulgated there under as in effect from time to time, and (iv)
"source," "special nuclear," or "by-product material" as defined in 42 U.S.C.
ss.3011, et seq., as amended from time to time, and all rules, regulations, and
orders promulgated there under as in effect from time to time. Further,
"Requirements of Law" shall mean all applicable federal, state, local, or
foreign laws, statutes, ordinances, rules, regulations, or court or
administrative orders or processes, or arbitrator's orders or processes.
(b) Except as set forth on Disclosure Schedule 2.20 Hazardous
Substances, or as set forth in any and all reports, studies, plans, governmental
interventions, indemnity agreements, insurance policies or other documents
concerning the Hazardous condition of the property or Company's Business set
forth thereon or otherwise delivered to Purchaser, to Seller's knowledge, the
Seller is and has been in compliance with all Requirements of Law relating to
Hazardous Substances and applicable to any of its properties. Without limiting
the foregoing, (i) neither the operations of the Company nor the development,
manufacture, or sale of the processes, technology, results, or products of the
Company violate or have violated any Requirements of Law relating to air, soil,
water, or noise pollution, or the production, storage, processing, utilization,
labeling, transportation, disposal, emission, or other disposition of Hazardous
Substances, and (ii) to Seller's knowledge, the Company, or any current or
former owner, occupant or operator of any property at any time owned, leased, or
operated by the Seller for the Company's Business, or any portion thereof, has
never utilized any such property or any portion thereof in violation of any
environmental Requirements of Law, except those hazards specified in Disclosure
Schedule 2.20 Hazardous Substances, which is attached hereto, or as set forth in
any and all reports, studies, plans, governmental interventions, indemnity
agreements, insurance policies or other documents concerning the Hazardous
condition of the property or Company's Business set forth thereon or otherwise
delivered to Purchaser.
(c) Except as set forth on Disclosure Schedule 2.20 Hazardous
Substances, or as set forth in any and all reports, studies, plans, governmental
interventions, indemnity agreements, insurance policies or other documents
concerning the Hazardous condition of the property or Company's Business set
forth thereon or otherwise delivered to Purchaser, to Seller's knowledge, no
discharge, release, spillage, uncontrolled loss, seepage, or filtration of any
Hazardous Substance or any fuel, gasoline, or other petroleum product or
by-product has occurred at, upon, or under any property at any time owned,
leased, or operated by the Seller in an amount that violates any Requirements of
Law.
MEMBERSHIP INTEREST AGREEMENT
Page 15
(d) Except as set forth on Disclosure Schedule 2.20 Hazardous
Substances, or as set forth in any and all reports, studies, plans, governmental
interventions, indemnity agreements, insurance policies or other documents
concerning the Hazardous condition of the property or Company's Business set
forth thereon or otherwise delivered to Purchaser, the Company does not utilize,
store, dispose of, treat, generate, process, transport, release, or own any
Hazardous Substance, nor has the Company ever done so.
(e) The Seller has in a timely manner obtained all Licenses
and filed all reports required to be filed under or pursuant to any applicable
environmental Requirements of Law.
(f) Except as set forth on Disclosure Schedule 2.20 Hazardous
Substances, or as set forth in any and all reports, studies, plans, governmental
interventions, indemnity agreements, insurance policies or other documents
concerning the Hazardous condition of the property or Company's Business set
forth thereon or otherwise delivered to Purchaser, to Seller's knowledge, no
property at any time owned, leased, or operated by the Company now contains, or,
to the knowledge of the Seller, in the past has contained, any underground or
aboveground tanks for the storage of any Hazardous Substance or fuel oil,
gasoline, or any other petroleum product or by-product.
(g) Except as set forth on Disclosure Schedule 2.20 Hazardous
Substances, or as set forth in any and all reports, studies, plans, governmental
interventions, indemnity agreements, insurance policies or other documents
concerning the Hazardous condition of the property or Company's Business set
forth thereon or otherwise delivered to Purchaser, the Seller has not received
any notice of writs, injunctions, decrees, orders, or judgments outstanding, or
suits, claims, actions, proceedings, or investigations instituted or threatened
under any environmental Requirements of Law applicable to any of the properties
at any time owned, leased, or operated by the Company, including but not limited
to any notice from any governmental authority or private or public entity
advising the Seller that it is or is potentially responsible for response costs
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), as amended, with respect to a release or threatened release of
Hazardous Substances.
(h) Except as set forth on Disclosure Schedule 2.20 Hazardous
Substances, or as set forth in any and all reports, studies, plans, governmental
interventions, indemnity agreements, insurance policies or other documents
concerning the Hazardous condition of the property or Company's Business set
forth thereon or otherwise delivered to Purchaser, the Seller has not received
notice of any violation of any environmental, zoning, worker safety, or land use
Requirements of Law relating to the operation of the Company or to any of the
processes used or followed, results obtained, or products developed, made, or
sold by the Seller including, without limitation, under CERCLA, the Toxic
Substances Control Act of 1976, as amended, the Resource Conservation and
Recovery Act of 1976, as amended, the Clean Air Act, as amended, the Federal
Water Pollution Control Act, as amended, or the Occupational Safety and Health
Act of 1970, as amended.
2.21 Compliance with Laws. The Seller has not been charged with any
violation of, or, to the best of its knowledge, Seller is not in violation of,
and is not under any investigation with respect to any charge concerning any
violation of any Requirements of Law, in which
MEMBERSHIP INTEREST AGREEMENT
Page 16
such violation either singly or in the aggregate with other violations would
have a material adverse effect upon the operations, assets, business or
financial condition of the Company. The Company is not in default with respect
to any order, writ, injunction, or decree of any court, agency, or
instrumentality. Without limiting the generality of the foregoing, to Seller's
knowledge, the Company is in compliance with all Requirements of Law promulgated
by the Occupational Safety and Health Administration.
2.22 Licenses, Permits, and Authorizations. The Seller has all
approvals, authorizations, consents, licenses, franchises, orders, and other
permits (collectively, "Licenses") of (i) any governmental or regulatory agency,
whether federal, state, local or foreign, and (ii) all trade or industry
associations, required to permit it to carry on its business as presently
conducted, all of which are in full force and effect. Disclosure Schedule 2.22
Operational Licenses hereto sets forth all such Licenses required for the
operation of the business of the Company to the extent not previously include in
Disclosure Schedule 2.6.
2.23 Inventory. Except as set forth on Disclosure Schedule 2.23, the
inventories of the Company reflected on the Balance Sheets of its "Audited
Financials" and "Financial Statements" (both terms collectively referred to as
"Company Financials"); taken as a whole are substantially in good and
merchantable condition and are suitable and usable or saleable in the ordinary
course of business for the purposes intended, net of the reserves stated on the
Company Financials. The value of the inventory set forth on the Company
Financials (net of such reserves) was established in accordance with GAAP and
with the Company's inventory valuation and write-down policies so that the net
value thereof stated on such Company Financials shall have been determined. The
Company has reasonable inventories to conduct its business consistent with past
practices. There has been no material adverse change since December 31, 2004 in
the amount or condition of the inventories or the reserves with respect thereto.
2.24 Accounts Receivable. All accounts receivable of the Company
represent bona fide and valid claims arising in connection with sales of
products by the Company and, except to the extent of the reserves stated on the
Company Financials, to Seller's knowledge, the Company's accounts receivable are
collectible and are not subject to any counterclaim or setoff, except as set
forth on Disclosure Schedule 2.24. There has been no material adverse change at
the time of Closing in the amount, validity, or collectibility of the accounts
receivable of the Company from that stated on the Company's Financials.
2.25 Property of Others. Except as set forth on Schedule 2.25, no
shortage exists in (i) any inventory of raw material, work in progress, or
finished goods owned by customers or suppliers of the Company and stored upon
its premises or otherwise, or (ii) any other item of personal property owned by
another for which the Company is accountable to another. Without limiting the
foregoing, except as set forth on Schedule 2.25 all items of personal property
for which the Company is accountable under any bailment agreement, consignment
contract, loan program, or otherwise are fully accounted for with no shortages
or missing or lost items, are in workable, usable, and saleable condition, and
have suffered no damage or deterioration, ordinary wear and tear excepted.
2.26 Disclosure of Confidential Information. The Seller has fully
disclosed, or will disclose to the Purchaser, on or before the Closing Date, all
processes, inventions, recipes, methods,
MEMBERSHIP INTEREST AGREEMENT
Page 17
formulas, plans, drawings, customer lists, secret information, recipes, and
know-how (whether secret or not) known to it or in its possession and usable by
the Company in connection with its business as now conducted or proposed to be
conducted.
2.27 Condition of Tangible Assets. Except as set forth on Schedule
2.27, to Seller's knowledge, all of the facilities of the Company and its
equipment and other tangible assets, are in good condition and repair (ordinary
wear and tear excepted) and workable, usable, and adequate for the uses to which
they have been put by the Company in the ordinary course of business, and none
of such facilities and none of such equipment or other tangible assets
(exclusive of obsolete items no longer used in the Company's business) is in
need of other than routine maintenance or repair. The Company has not received
any notice of any violations of any Requirements of Law with respect to the
Company's properties or operations that have not been cured.
2.28 Product and Service Warranties. Disclosure Schedule 2.28,
Warranties, which is attached hereto, contains a true and complete description
of all warranties and terms and conditions of sale to third parties which are
not included in the Customer maintenance and service Agreement disclosed in
Disclosure Schedule 2.16 with respect to all products overhauled, manufactured,
assembled, repaired or sold by the Company that have been in effect at any time
over the last five years, except for warranties imposed by law.
2.29 Absence of Undisclosed Liabilities. The Company does not have any
material debt, liability, or obligation of any nature, whether known or unknown,
or fixed, absolute, accrued, contingent, or otherwise, except those which (i)
are accrued or reserved against it in the Company's Financials, (ii) have been
disclosed in this Agreement or in any of the Disclosure Schedules hereto, or
(iii) have been incurred since May 24,, 2005 in the ordinary course of business
in amounts and for terms consistent, individually and in the aggregate, with the
Company's past practice.
2.30 Disclosure. No representation or warranty by the Seller in this
Agreement or any of the other Acquisition Documents (including, without
limitation, the Disclosure Schedule), contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make the statements herein or therein not misleading. There is no
fact known to the Seller that materially adversely affects, or that, as of the
date of Closing, might in the future materially adversely affect, the
operations, business, assets, properties, or condition, financial or otherwise,
of the Seller that has not been set forth in this Agreement or the Disclosure
Schedule.
2.31 Brokerage. No broker or finder has acted directly or indirectly
for the Seller or any of their Affiliates in connection with this Agreement or
the transactions contemplated hereby, and no broker or finder is entitled to any
brokerage or finder's fee or other commission in respect thereof based in any
way on the actions or statements of, or agreements, arrangements, or
understandings made with the Seller or any of its Affiliates.
2.32. With respect to any representation or warranty made by Seller
herein, the phrases "to Seller's best knowledge" or "to Seller's knowledge" (or
similar phrases which limit a representation or warranty to matters within the
knowledge or belief of Seller) shall mean that no facts or circumstances are
known by or have come to the attention of the
MEMBERSHIP INTEREST AGREEMENT
Page 18
Members of the Company, which would give any such Members knowledge of the
inaccuracy of the substantive facts and circumstances set forth in such
representation or warranty, but shall not mean that Seller, the Company or the
Members have undertaken investigations or verifications with respect to such
matters.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller as set forth below:
3.1 Corporate Organization, etc. The Purchaser is on the date hereof,
and will be on the Closing Date, a corporation duly organized, validly existing
and in good standing under the laws of the State of Oklahoma.
3.2 Authorization, etc. The Purchaser has full corporate power and
authority to enter into this Agreement and the other Acquisition Documents to
which it is or will be a party, to perform its obligations hereunder and there
under, and to carry out the transactions contemplated hereby and thereby. The
Boards of Directors of the Purchaser and its Parent corporation, TAT
Technologies, Ltd. have taken, or will take before the Closing Date, all actions
required by law, its Certificate of Incorporation, its By-Laws or otherwise to
authorize (i) the execution and delivery of this Agreement and the other
Acquisition Documents and (ii) the performance of its obligations hereunder and
there under. This Agreement has been duly executed and delivered by the
Purchaser and, upon the execution and delivery of the remaining Acquisition
Documents by a duly authorized officer of the Purchaser, the remaining
Acquisition Documents will have been duly executed and delivered by the
Purchaser, and this Agreement is, and such other Acquisition Documents will be,
upon due execution and delivery thereof, the legal, valid, and binding
obligations of the Purchaser, enforceable according to their terms.
3.3 No Violation. None of (i) the execution and delivery of this
Agreement or any other Acquisition Document by the Purchaser, (ii) the
performance by the Purchaser of its obligations hereunder or there under, or
(iii) the consummation of the transactions contemplated hereby or thereby will
(A) violate any provision of the Certificate of Incorporation or By-Laws of the
Purchaser, (B) violate, or be in conflict with, or permit the termination of, or
constitute a default under or breach of, or cause the acceleration of the
maturity of, any contract, debt, or other obligation of the Purchaser, which
violation, conflict, default, breach, termination or acceleration, either
individually or in the aggregate with all other such violations, conflicts,
defaults, breaches, terminations and accelerations, would have a material
adverse effect on the business, assets or financial condition of the Purchaser,
(C) except as set forth in Disclosure Schedule 3.3, if any hereof, require the
consent of any other party to, or result in the creation or imposition of any
Lien upon any property or assets of the Purchaser under any agreement or
commitment to which the Purchaser is a party or by which the Purchaser is bound,
or (D) to the best knowledge and belief of the Purchaser, violate any statute or
law or any judgment, decree, order, regulation, or rule of any court or
governmental authority to which the Purchaser is subject.
3.4 Litigation. There is no action pending or, to the best knowledge
and belief of the Purchaser, threatened against the Purchaser, or any properties
or rights of the Purchaser,
MEMBERSHIP INTEREST AGREEMENT
Page 19
that questions or challenges the validity of this Agreement or any of the other
Acquisition Documents, nor any action taken or to be taken by the Purchaser
pursuant hereto or thereto or in connection with the transactions contemplated
hereby or thereby and the Purchaser does not know of any such action,
proceeding, or investigation that may be asserted.
3.5 Disclosure. No representation or warranty by the Purchaser in this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary to make the statements
herein not misleading.
3.6 Brokerage. No broker or finder has acted directly or indirectly for
the Purchaser or its Affiliates in connection with this Agreement or the
transactions contemplated hereby, and no broker or finder is entitled to any
brokerage or finder's fee or other commission in respect thereof based in any
way on the actions or statements of, or the agreements, arrangements, or
understandings made with the Purchaser or its Affiliates.
ARTICLE IV
OBLIGATIONS OF THE PARTIES
The Seller hereby covenants and agrees with the Purchaser and the Purchaser
hereby covenants and agrees with the Seller that:
4.1 Reasonable Access. The Seller shall or shall cause its Members and
managers, accountants, counsel, and other authorized representatives and
affiliated parties to afford the Purchaser and its counsel, accountants, and
other authorized representatives reasonable access during normal business hours
to its plants, properties, books and records that the Purchaser and its advisors
may have the opportunity to make such reasonable investigations as they shall
desire to make of the affairs of the Seller; provided, however, except for
managers, representatives and employees designated by the managers, the
Purchaser shall not contact employees of the Company to discuss the transactions
contemplated by this Agreement. The Company shall furnish to the Purchaser any
additional financial and operating data and other information as the Purchaser
and its counsel, accountants, and other authorized representatives shall from
time to time reasonably request.
4.2 Conduct Before Closing Date. Before the Closing Date, except as
otherwise contemplated by this Agreement or as permitted by the prior written
consent of the Purchaser, but without making any commitment on the Purchaser's
behalf, the Company shall:
(a) Conduct its business and operations only in the ordinary
course, including, without limitation, maintaining inventories , taken as a
whole, at levels consistent with past practice;
(b) Maintain all of its properties and assets in good
condition, working order, and repair (except for ordinary wear and tear);
(c) Perform its obligations under all agreements binding upon
it and maintain all of its Licenses in good standing;
MEMBERSHIP INTEREST AGREEMENT
Page 20
(d) Continue in effect the Insurance Policies (or similar
coverage) referred to in Section 2.14 hereof;
(e) Keep available the services of its current managers and
employees;
(f) Maintain and preserve the good will of the suppliers,
customers, and others having business relations with it;
(g) Before the Closing Date, consult with the Purchaser from
time to time with respect to any actual or proposed material conduct of its
business;
(h) Continue all capital expenditure programs in progress
before the Closing Date; and
(i) Obtain the approval of Purchaser prior to making any
extraordinary (not in the ordinary course of business) expenditure in excess of
$2,500.00.
4.3 Prohibited Transactions Before Closing Date. Before the Closing
Date, except as otherwise contemplated by this Agreement or permitted by the
prior written consent of the Purchaser, the Company shall not:
(a) Become a party to any agreement, which, if it had existed
on the date hereof, would have come within the scope of the Disclosure Schedule
pursuant to Section 2.16 hereof;
(b) Do any of the things listed in Section 2.10 hereof;
(c) Enter into any compromise or settlement of any litigation,
proceeding or governmental investigation relating to its properties or Company's
Business; or
(d) Directly or indirectly, in any way, contact, initiate,
enter into, or conduct any discussions or negotiations, or enter into any
agreements, whether written or oral, with any person or entity with respect to
the sale of any of the Company's assets or units evidencing Membership Interests
or a merger or consolidation of the Company with any other entity.
4.4 Further Assurances. Before and after the Closing, each party hereto
shall execute and deliver such instruments and take such other actions as any
other party may reasonably request for the purpose of carrying out the intent of
this Agreement and the other Acquisition Documents. Each party hereto shall use
its best efforts to cause the transactions contemplated by this Agreement and
the other Acquisition Documents to be consummated, and, without limiting the
generality of the foregoing, to obtain all consents and authorizations of
government agencies and third parties and to make all filings with and give all
notices to government agencies and third parties that may be necessary or
reasonably required to effect the transactions contemplated by this Agreement
and the other Acquisition Documents. The Seller shall give prompt notice to the
Purchaser, after receipt thereof by the Seller, of (i) any notice of, or other
communication relating to, any default or event that, with notice or lapse of
time or both, would become a default under any
MEMBERSHIP INTEREST AGREEMENT
Page 21
indenture, instrument, or agreement material to the Company, to which the
Company is a party or by which the Company is bound, and (ii) any notice or
other communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement and the other Acquisition Documents. Each corporate party shall
deliver to the other at Closing, appropriate evidence of the approval of its
respective Managers or Board of Directors and stockholders or Members (if
required by law) of this Agreement, the other Acquisition Documents and the
transactions contemplated hereby and thereby.
4.5 Confidentiality. Before and after the Closing, each party to this
Agreement shall, cause its managers, officers, accountants, counsel, and other
authorized representatives and affiliated parties, to hold in strict confidence
and not use or disclose to any other party without the prior written consent of
the other party, all information obtained from the other parties in connection
with the transactions contemplated hereby, except such information may be used
or disclosed: (i) as may be necessarily published by Purchaser to any public
market, business reporting service, or stock exchange or as may be required by
governmental stock exchange regulations or rules, or as required under
agreements with customers, vendors, lenders or other third parties, (ii) if
required by court order or decree or applicable law, (iii) if it is publicly
available other than as a result of a breach of this Agreement, (iv) if it is
otherwise contemplated herein.
ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligation of the Purchaser under this Agreement to consummate the
Closing on the Closing Date shall be subject to the satisfaction, on or before
the Closing Date, of each of the following conditions:
5.1 Representations and Warranties True. The representations and
warranties of the Seller contained herein, in the other Acquisition Documents
(including, without limitation, all schedules and exhibits hereto and thereto)
and in all certificates and documents delivered by the Seller shall be true and
accurate as of the Closing Date, except for changes permitted or contemplated by
this Agreement.
5.2 No Material Changes.
(a) No portion of the assets material to the operation of the
business of the Company shall, after December 31, 2004 until the Closing Date,
be damaged, destroyed, or taken by condemnation, whether or not covered by any
Insurance Policy;
(b) After December 31, 2004 and until the Closing Date, the
Company shall not have suffered or become bound by changes of any kind or nature
that either individually or in the aggregate have a material adverse effect on
its ability to continue its business operations; and,
(c) No material adverse change in the business, assets, or
financial condition of the Company shall have occurred after December 31, 2004
and be continuing.
MEMBERSHIP INTEREST AGREEMENT
Page 22
5.3 Performance. The Seller shall have performed and complied in all
material respect with all agreements, obligations, and conditions required by
this Agreement or the other Acquisition Documents to be performed or complied
with by them on or before the Closing Date.
5.4 Consents. All filings with and consents from government agencies
and third parties required to consummate the transactions contemplated hereby
and by the other Acquisition Documents shall have been made or obtained
(including without limitation the consents of the lessors under the leases
referred to in Section 2.6 hereof and the consents and approvals specified in
Section 2.7 and Section 2.8), except to the extent that making any such filing
or obtaining any such consent has been waived in writing by the Purchaser or the
failure to obtain any such consent or make any such filing would not have a
material adverse effect on the assets, properties, operations, business, or
condition, financial or otherwise, of the Company.
5.5 Closing Documents. The Seller shall have delivered, or caused to be
delivered to the Purchaser, the documents and instruments described below:
(a) The opinion of counsel for the Seller, in form and
substance reasonably satisfactory to the Purchaser and its counsel and
containing such assumptions and limitations as are customary or reasonable for
opinion letters normally provided in similar transactions, covering at least the
following:
(i) The Company is a North Carolina Limited Liability
Company validly existing and in good standing under the laws of its state in
which it was chartered;
(ii) The execution, delivery, and performance of this
Agreement, the other Acquisition Documents to which the Seller is a party, and
the other instruments or documents required to be executed by the Seller in
connection herewith and therewith have been authorized by all necessary Company
and other actions of the Seller and have been duly executed and delivered by the
Seller and constitute legal, valid, and binding obligations of such parties
enforceable in accordance with their terms to the extent the Purchaser should be
able to realize the practical benefits thereof, except as such enforceability
may be limited by bankruptcy, reorganization, insolvency, moratorium, or similar
laws affecting the enforcement of creditor's rights and except as the
availability of suitable remedies may be subject to judicial discretion;
(iii) The consummation of the transactions
contemplated by this Agreement, the other Acquisition Documents to which the
Seller is a party, and all other instruments or documents required to be
executed by the Seller in connection herewith and therewith will not violate or
result in a breach of or constitute a default under the Articles of Organization
or Operating Agreement or other organizational agreements of the Company;
(iv) Except for such actions and proceedings as are
disclosed to the Purchaser in writing, Seller's counsel does not know of any
limitation, governmental investigation, actions, or suits, pending or
threatened, against or relating to the transactions contemplated by this
Agreement or any other Acquisition Document to which Seller is a party; and
MEMBERSHIP INTEREST AGREEMENT
Page 23
(v) On best information and belief, the transaction
contemplated herein will not violate any securities ("blue sky laws") of the
state of North Carolina.
(b) Certified copies of the resolutions adopted by the Members
and Managers of the Company, or by appropriate committees thereof, authorizing
this Agreement and the other Acquisition Documents and the transactions
contemplated hereby and thereby.
(c) Certificates of the Secretary of State of each of the
states in which the Company is qualified to transact business as a foreign
corporation, dated no earlier than May 1, 2005, respecting the good standing of
the Company in each such jurisdiction the Company is domesticated or qualified
by certificate to conduct business.
(d) Operating Agreement of the Company certified as of the
Closing Date by a manager of the Company.
(e) Any and all licenses or renewals, and consents as may be
necessary to effect the continuation of the Company's Business by the Purchaser
following the Closing of this Agreement.
(f) Such other documents, instruments, or certificates as
shall be reasonably requested by the Purchaser or its counsel (inclusive of
executed conveyances of certificates or units of ownership and or cancelled
certificates and other assignments, waivers and necessary releases of liens,
mortgages and financial statements and security or UCC filings).
5.6 Environmental Report. If the Purchaser shall choose at its expense
to retain an environmental consulting firm to render an environmental audit
report respecting the Company and such firm renders a report that details
violations of federal, state, or local environmental Requirements of Law, the
Seller shall have cured or shall have caused the cure of such violations or the
Purchaser shall have waived such compliance with this Section 5.6; provided,
however, that the Seller shall not be obligated to cure any such violation.
5.7 Certificates of the Seller. The Seller shall have furnished such
certificates of its managers and others as may reasonably be required by the
Purchaser to evidence compliance with the conditions set forth in this Article
5.
5.8 Seller's auditors and Purchaser's auditors shall have agreed upon
both the method of compilation and accuracy of the financial statements for the
Company from January 1, 2005 through the date of Closing.
5.9 Seller and Purchaser shall have agreed upon a baseline
environmental audit as provided in Section 9.3 (e).
MEMBERSHIP INTEREST AGREEMENT
Page 24
ARTICLE VI
CONDITIONS TO SELLER'S OBLIGATIONS
The obligation of the Seller under this Agreement to consummate the
Closing on the Closing Date shall be subject to the satisfaction, on or before
the Closing Date, of each of the following conditions.
6.1 Representations and Warranties True. The representations and
warranties of the Purchaser contained herein, in the other Acquisition Documents
(including, without limitation, all schedules and exhibits hereto and thereto),
and in all certificates and documents delivered by the Purchaser, shall be true
and accurate as of the Closing Date, except for changes permitted or
contemplated by this Agreement.
6.2 Performance. The Purchaser shall have performed and complied in all
material respects with all agreements, obligations, and conditions required by
this Agreement to be performed or complied with by it on or before the Closing
Date.
6.3 Closing Documents. The Purchaser shall have delivered or caused
to be delivered to the Seller the documents and instruments described below:
..
(a) The cash payment as provided in Article I Section 4 (1.4,
above), and payment and satisfaction in full of the Blue Ridge II Limited
Partnership loan as provided in Section 1.3 (a) above, and satisfaction of the
Whitehall loan as provided in Section 1.3(b) above.
(b) A certified copy of the resolutions adopted by the Boards
of Directors of the Purchaser and its parent corporation, TAT Technologies, Ltd.
authorizing this Agreement and the other Acquisition Documents and the
transactions contemplated hereby and thereby.
(c) The opinion of counsel for the Purchaser, in form and
substance reasonably satisfactory to the Seller and its counsel and containing
such assumptions and limitations as are customary or reasonable for opinion
letters normally provided in similar transactions, covering at least the
following:
(i) The Purchaser is a corporation validly existing
and in good standing under the laws of the State of Oklahoma;
(ii) The execution, delivery, and performance of the
Agreement, the other Acquisition Documents to which it is a party and the other
instruments or documents required to be executed by the Purchaser in connection
herewith and therewith, have been authorized by all necessary corporate and
other actions of the Purchaser and have been duly executed and delivered by the
Purchaser and constitute the legal, valid, and binding obligations of such
parties enforceable in accordance with their terms to the extent the Seller
should be able to realize the practical benefits thereof, except as such
enforceability may be limited by bankruptcy, reorganization, insolvency,
moratorium, or similar laws affecting the enforcement of creditors' rights and
except as the availability of suitable remedies may be subject to judicial
discretion;
MEMBERSHIP INTEREST AGREEMENT
Page 25
(iii) The consummation of the transactions
contemplated by this Agreement, the other Acquisition Documents to which the
Purchaser is a party, and all other instruments or documents required to be
executed by the Purchaser in connection herewith and therewith will not violate
or result in a breach of or constitute a default under the Articles of
Incorporation, By-Laws or other organizational agreements of the Purchaser; and
(d) Such other documents, instruments, or certificates as
shall be reasonably requested by the Seller or its counsel.
6.4 Seller shall have reached an agreement with Blue Ridge Investments
II, Limited Partnership and its parent and affiliated companies, and at or prior
to Closing shall have consummated the same, whereby the warrant and other rights
and interest of Blue Ridge Investments II, Limited Partnership in the Company
shall be released and terminated, and ▇▇▇ ▇▇▇▇▇▇ shall have terminated and
released any and all options as are in his favor to acquire additional units of
ownership or future Membership Interests in the Company.
6.5 Seller and Buyer shall have agreed upon a baseline environmental
audit as provided in Section 9.3 (e).
ARTICLE VII
CLOSING; CLOSING DATE
7.1 Closing. The closing (the "Closing") will be held in on July 6,
2005 at 9:00 a.m., at the offices of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, ▇▇▇▇▇▇▇-Salem,
N.C, or at such other time and place as the parties hereto may mutually agree
upon in writing (the "Closing Date"), at which Closing the documents and
instruments referred to in Articles V and VI hereof will be delivered by the
parties. Notwithstanding Closing Date shall occur later, the effective date of
this agreement shall be July 1, 2005.
ARTICLE VIII
CERTAIN POST-CLOSING COVENANTS
8.1 Access. After the Closing Date, the Purchaser shall, at the
Seller's expense, permit the Seller, from time to time, to inspect and copy such
books of account and other records of the Seller and to utilize the services of
the Purchaser's or the Seller's employees, all as may be necessary or convenient
to enable the Seller to prepare and file tax returns. Until the seventh
anniversary of the Closing Date, the Purchaser shall not, without the prior
written consent of the Seller or its successors in interest, destroy or dispose
of any such records. Notwithstanding any of the foregoing, no covenant contained
in this Section 8.1 on the part of the Purchaser is intended to, and nothing
herein shall be construed to, benefit or confer any rights upon any person,
firm, or corporation other than the Seller.
8.2 Non-Competition Requirements.
(a) The Purchaser and the Seller agree that the Purchase Price
was fixed on the basis that the transfer of the Transferred Membership Interest
to the Purchaser would provide the Purchaser with the full benefit and good will
of the Company as it existed on the
MEMBERSHIP INTEREST AGREEMENT
Page 26
Closing Date. The Seller acknowledges that it is proper for the Purchaser to
have assurance that the value of the Transferred Membership Interest will not be
diminished by acts of the Seller after the Closing Date.
(b) Excluding Member ▇▇▇ ▇▇▇▇▇▇ because of his minor ownership
interest., the covenant of the other Members of the Company not to compete with
the Company following the transfer of their Transferred Membership Interests to
the Purchaser at Closing, is a material inducement for the Purchaser to purchase
the Company. Purchaser has committed additional consideration by this Agreement
to pay (the "Non-Competition Payments") the Members, excluding ▇▇▇ ▇▇▇▇▇▇, in
consideration of the full and faithful performance of the covenant not to
compete as is set forth in this Article, collectively the sum of $600,000
payable in 36 future monthly installments of $16,666.65 each (the final
installment being $16,666.90) disbursed to Members monthly as and for their
respective Covenants Not To Compete as set forth in this Article 8 Section 2
(8.2), the first installment commencing on like date as the date of Closing for
each successive month following the date of Closing, for a total of 36 months,
payable to Members as follows:
Member Name % Amount Mo. Amount 36th 3 Year Total
----------- --- Installment Installment ------------
----------- -----------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 33 1/3% $5,555.55 $5,555.75 $200,000.00
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 33 1/3% $5,555.55 $5,555.75 $200,000.00
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 33 1/3% $5,555.55 $5,555.75 $200,000.00
TOTAL 100% $16,666.65 $16,667.25 $600.000.00
(c) In consideration of the foregoing, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ covenant and agree that, commencing on the
Closing Date and ending on like anniversary date of the month 36 months
following the Closing Date ("3 Year Anniversary of Closing Date"), they will not
(i) directly or indirectly compete with, or own, manage, operate, or control or
participate in the ownership, management, operation or control of, or provide
consulting services to, any business, firm, corporation, partnership, person,
proprietorship or other entity which is engaged in the Company's Business of
APU, propeller or landing gear maintenance, repair and overhaul or parts sales
(the "Restricted Business"), (ii) directly or indirectly solicit employment by
any person, partnership, corporation or other entity of any of the employees,
consultants, agents, or independent contractors of the Company (for this purpose
the terms "employees," "consultants," "agents," and "independent contractors"
shall include any persons having such status with regard to the Company at any
time during the six (6) months preceding any solicitation in question), or (iii)
solicit, interfere with, or endeavor to entice away from the Company, on behalf
of any person, partnership, corporation, or other entity, any customer of the
Restricted Business of the Company. The foregoing provisions shall not apply to
investments in shares of stock of a corporation traded on a national securities
exchange or on the national over-the-counter market, which shall have an
aggregate market value, at the time of acquisition, of less than $100,000 and
constitute less than two per cent of the outstanding shares of such stock of
such corporation. For purposes of this 8.2(c), parts sales shall be defined as
the following: (i) new and repaired or overhauled parts, including cores, for
APUs, landing gear and propellers; (ii) parts and logistic support for airline
heavy maintenance checks; (iii) consumables to both the airline and military
segments; and (iv) the
MEMBERSHIP INTEREST AGREEMENT
Page 27
following rotable components to both airlines and corporate aviation segments:
(a) Honeywell air cycle machines, and (b) ▇▇▇▇▇▇ actuators.
Anything to the contrary set forth in Section 8.2 notwithstanding, it
is understood and agreed that a Member may, without breaching or violating the
provisions and covenants contained in this Section 8.2, be employed by or may
participate in the ownership, management, operation or control of, or provide
consulting services to, any division, subsidiary or affiliated business not
engaged in the Restricted Business. Provided, however, ▇▇▇▇▇▇▇ may seek written
approval from Purchaser following Closing to accept employment, consulting
assignments or other work from companies, entities or individuals which may be
considered as indirect competitors because, for example, such employers have
divisions which compete directly with Company, and Purchaser may at its
discretion provide written consent for such engagement or employment, which such
consent shall not be unreasonably withheld. Purchaser shall provide its response
to ▇▇▇▇▇▇▇'▇ request in writing within 30 days of receipt of that request or
Purchaser shall be deemed to approve. the request.
(d) If any of the Members commits a breach, or threatens to
commit a breach, of any of the provisions of this Section 8.2, the Purchaser
shall have the right and remedy, in addition to any others, to have the
provisions of this Section 8.2 specifically enforced by any court having equity
jurisdiction, together with an accounting therefore, it being acknowledged and
understood by the Seller that any such breach or threatened breach will cause
irreparable injury to the Purchaser and that money damages will not provide an
adequate remedy therefore. In addition to any remedy Purchaser may have against
the Members breaching this covenant not to compete, the Purchaser shall have the
right to suspend payments pendent lite, and set off or off set future payments
to breaching Member or Members against any judgment, order or decree of a court
of competent jurisdiction awarding damages to Purchaser. Anything to the
contrary set forth in the Section 8.2 notwithstanding, it is understood and
agreed that upon a breach or threatened breach of the covenants set forth this
Section 8.2, Purchaser's remedies shall be only against Member or Members
committing or threatening to commit such breach, and Purchaser shall have no
claim against and no right to suspend payments to the other non-breaching Member
or Members.
(e) Members agree the territorial limitation under which the
covenant not to compete will apply shall be worldwide and that Members do not
consider such broad territorial limits to be unreasonable, but in the event any
court of competent jurisdiction shall determine the territorial limits of this
covenant to be unreasonable, then in that event, the geographical territorial
limits shall be fixed by the court to the maximum geographical territory allowed
by the law.
8.3 Consulting Services Requirements. During the first three (3) months
following the Closing Date and at Purchaser's request, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ each agree to provide up to a maximum of 10 hours
per month in consulting services at no additional cost to Purchaser. The date,
time and location for the provision of such consulting services shall be
mutually agreed upon by Purchaser and the Member to perform such consulting
services.
MEMBERSHIP INTEREST AGREEMENT
Page 28
Should Purchaser request consulting services in excess of the 10 hour
monthly maximum, neither ▇▇▇▇▇▇▇, nor ▇▇▇▇▇▇ nor ▇▇▇▇▇▇▇▇ shall have any
obligation to provide such excess services. However, if ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ or
▇▇▇▇▇▇▇▇ agree to provide any consulting services in excess of the 10 hour
monthly maximum during the three (3) month period of time following Closing,
then in that event, they will be paid, for actual hours worked at the same rate
of pay received by them from the Company prior to
Closing, and payable to them at times they were paid prior to Closing. After
conclusion of the third month following the Closing Date, Purchaser and Members
may continue the consulting services under terms as may be thereafter agreed by
them in writing; however, neither Purchaser nor the Members shall have any
obligation to continue such consulting services.
ARTICLE IX
INDEMNIFICATION
9.1 Survival. Notwithstanding (i) the making of this Agreement, (ii)
any examination made by or on behalf of the parties hereto, and (iii) the
Closing hereunder, (A) the representations and warranties of the parties
contained herein or in any certificate or other document delivered pursuant
hereto or in connection herewith shall survive until the 3 Year Anniversary of
Closing Date, except for the representations and warranties made in Section 2.13
hereof (Tax Returns and Payments), which shall survive until expiration of the
applicable statute of limitations for the underlying cause of action; and (B)
the covenants and agreements required to be performed after the Closing pursuant
to any provision of this Agreement, including this Article 9, shall survive
until fully performed or fulfilled. No action for indemnification pursuant to
Sections 9.3 or 9.4 may be brought after the applicable expiration date,
provided, however, that if before such date one party hereto has notified in
writing the other party hereto of a claim for indemnity hereunder (whether or
not formal legal action shall have been commenced based upon such claim), such
claim shall continue to be subject to indemnification in accordance herewith.
9.2 Limitations on Member's Indemnity:
(a) Purchaser shall not be entitled to any indemnification, whether in
the form of payment or offset against the Non-Competition Payments, for any
Damages, unless and until the aggregate amount of all Damages suffered or
incurred by Purchaser exceeds $100,000.00, in which event such Damages of
Purchaser may be claimed only to the extent that such Damages exceed
$100,000.00. Provided however, this $100,000.00 minimum shall not apply to
Damages based on income taxes of the Company pursuant to Section 9.3(d) or
Damages based upon Requirements of Law related to Hazardous Substances or any
release, spill or discharge by the Company of any Hazardous Substances onto any
property owned, leased or operated by the Company pursuant to Requirements of
Law related to Hazardous Substances or any release, spill or discharge by the
Company of any Hazardous Substances onto any property owned, leased or operated
by the Company pursuant to Section 9.3(e). below.
(b) Except only as provided in 9.2(c) below, none of the Members shall
have any liability to Purchaser or its successors or assigns (for
indemnification, Damages or otherwise) in excess of the unpaid amounts of the
Non-Competition Payments pursuant to Section 8.2, and Purchaser's sole recourse
for Damages under Section 9.3 or otherwise under this
MEMBERSHIP INTEREST AGREEMENT
Page 29
Agreement, shall be as an offset against the Non-Competition Payments coming due
under Section 8.2 above.
(c) Provided, however, the Damages limitation set forth in 9.2(b) above
shall not apply to Damages incurred by Purchaser for undisclosed liabilities on
account of Seller's actual fraud, intentional deceit or intentional
misrepresentation (for example, undisclosed liabilities of which the Members had
actual knowledge and intentionally failed to disclose the same or actively and
intentionally concealed the same).
(d) The amount of any Damages of Purchaser under Section 9.3 shall be
reduced by the amount, if any, received by Purchaser from any third person,
including, without limitation, any insurance company or other insurance provider
(such amount being referred to herein as a "Third Party Reimbursement"), in
respect of the Damages suffered thereby. If, after receipt by Purchaser of any
indemnification payment or off-set against the Non-Competition Payments,
Purchaser receives a Third Party Reimbursement in respect of the same Damages
for which indemnification was made and such Third Party Reimbursement was not
taken into account in assessing the amount of indemnification, then Purchaser
shall turn over all of such Third Party Reimbursement to the Members (other than
▇▇▇ ▇▇▇▇▇▇) up to the amount of the indemnification paid pursuant hereto.
(e) Anything to the contrary contained in this Agreement
notwithstanding, the Members shall have no obligation to or liability to
indemnify Purchaser for any Damages for undisclosed liabilities or for breach of
any representation or warranty where the basis of such liabilities or breach
were discovered by or known to Purchaser prior to Closing (the burden of proof
being on the Members that the basis of such liabilities were known to or
discovered by Purchaser prior to Closing). Further, anything to the contrary
contained in this Agreement notwithstanding, the Members shall have no
obligation to or liability to indemnify Purchaser for any Damages for
undisclosed liabilities or for breach of any representation or warranty where
the basis of such liabilities or breach were disclosed to Purchaser in writing
(including paper, photocopies, facsimiles, e-mails, electronic, magnetic or
digital data contained on a computer readable disk,prior to Closing.
(f) Anything to the contrary contained in this Agreement
notwithstanding, and except for Seller's post closing covenants set forth in
Section 8.2 above, Purchaser's sole remedy for any breach or default under this
Agreement (including any breach of representation or warranty), shall be a claim
for indemnification pursuant to Section 9.3 below, as limited by the limitations
set forth in Section 9.2.
(g) At least one printed hard copy of all items contained in Disclosure
Schedules shall be maintained by the Company following Closing and for a period
of five years following Closing. All other copies of this Agreement provided to
Seller and Purchaser shall provide copies of all Disclosure Schedules on
magnetic or ditigal data contained on computer readable disk.
9.3 Indemnification by the Seller. Subject to the conditions of Article
IX, Section 9 (9.2, above), the Members, except for ▇▇▇ ▇▇▇▇▇▇, shall indemnify
and hold the Purchaser and its successors and assigns harmless in respect of any
and all claims, losses, damages, liabilities, and expenses (including, without
limitation, settlement costs and legal, accounting, and other
MEMBERSHIP INTEREST AGREEMENT
Page 30
expenses in connection therewith) (collectively, the "Damages") incurred by the
Purchaser and its successors and assigns in connection with each and all of the
following.
(a) Any claim by any person or other entity for any broker's
or finder's fee or similar fee charged for commission that arises from any
action, statement, or commitment made by the Seller or its agents or Affiliates.
(b) Any breach or other failure to perform any covenant,
agreement, or obligation of the Seller contained in this Agreement, any other
Acquisition Document or any other instrument, including all certificates,
contemplated hereby or thereby.
(c) Any breach of any representation or warranty by the Seller
contained in this Agreement, any other Acquisition Document or any other
instrument, including all certificates, contemplated hereby or thereby.
(d) The Company's failure to pay any income taxes it is
required to pay prior to Closing.
(e) To the extent not otherwise indemnified under that certain
Indemnity Agreement in favor of Company and Members by Piedmont Aviation
Services, Inc. and Piedmont Hawthorne Aviation, Inc. dated November 18, 2002,
which is attached hereto marked Exhibit "A" and made a part hereof ('Hawthorne
Indemnity"), Members (excluding ▇▇▇ ▇▇▇▇▇▇), shall additionally indemnity
Purchaser and Company in the same manner and upon the same terms of the
Hawthorne Indemnity, (which for purposes of this indemnity, the Members
excluding ▇▇▇ ▇▇▇▇▇▇ being identified as "Indemnitor" and the Company and
Purchaser as well as their members, managers, officers, directors, shareholders,
employees, representative and attorneys being identified as Indemnitees as those
terms are defined in the Hawthorne Indemnity.) for Any Damages arising between
the dates of November 18, 2002 and the Closing Date which are caused by the
Company's failure to comply with any Requirements of Law related to Hazardous
Substances or any release, spill or discharge by the Company of any Hazardous
Substances onto any property owned, leased or operated by the Company
(including, without limitation, costs of response, removal, remediation,
investigation, corrective action, property damage, personal injury, economic
loss, damage to natural resources, health assessments and health studies,
settlement, interest accruing on recoverable amounts, penalties, and attorneys'
fees) accruing to the Purchaser or the Company, including (i) remedial work,
monitoring, removal or other costs and expenses associated with environmental
matters with respect to any Hazardous Substances required by any environmental
Requirements of Law, (ii) injury, disease, or death of any person (including any
employee, former employee, agent, or representative of any subcontractor of the
Company) arising out of any environmental matters, or (iii) any damage to any
property. (hereinafter all of the above damages referenced as "Remediation
Damages') The standard in determination of contamination levels applicable
during the Members operation of the Company upon which claims for contamination
may be made by the Indemnitees shall be the difference in contaminate levels
disclosed: (i) by the Environmental Site Aassessment results determining maximum
soil contaminant concentrations listed on Exhibits A and B of the Hawthorne
Indemnity and results determining maximum soil contaminant concentrations listed
in the Environmental Site Assessments determining maximum soil contaminant
concentrations prepared for the Purchaser prior to Closing which is attached
MEMBERSHIP INTEREST AGREEMENT
Page 31
hereto as Exhibit "B" and made a part hereof.. Members liability for claims made
under this Section shall not exceed the Remediation Damages as are ordered by
any governmental; authority having competent jurisdiction over environmental
matters.
9.4 Indemnification by the Purchaser. The Purchaser and its successors
and assigns shall indemnify, defend and hold harmless the Seller, each of the
Members, and their respective successors and assigns in respect of any and all
Damages incurred by Seller, each of the Members, and their respective successors
and assigns in connection with each and all of the following.
(a) The claim by any person for any broker's or finder's fee
or similar fee charged for commission that arises from any actions, statements,
or commitments made by the Purchaser or its agents or Affiliates.
(b) The breach or other failure to perform any covenant,
agreement, or obligation of the Purchaser contained in this Agreement or any
other Acquisition Document or any other instrument, including all certificates
contemplated hereby or thereby, including failure to pay or hold any Member
harmless from assumed liabilities and obligations as are identified in Article I
section 3 (e.g., 1.3), above.
(c) Any breach of any representation or warranty by the
Purchaser contained in this Agreement or any other Acquisition Document or any
other instrument, including all certificates, contemplated hereby or thereby,
including failure to pay or hold any Member harmless from assumed liabilities
and obligations as are identified in Article I section 3 (e.g., 1.3), above.
9.5 Notice and Defense of Claim. Whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"Indemnified Party") shall provide written notice to the other party (the
"Indemnifying Party") within 60 (sixty) days of becoming aware of the right to
indemnification and, as expeditiously as possible thereafter, the facts
constituting the basis for such claim. In connection with any claim giving rise
to indemnity hereunder, resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Indemnifying
Party, at its sole cost and expense and upon written notice to the Indemnified
Party, may assume the defense of any such claim or legal proceeding with counsel
reasonably satisfactory to the Indemnified Party. The Indemnified Party shall be
entitled to participate in the defense of any such action, with its counsel and
at its own expense. If the Indemnifying Party does not assume the defense of any
such claim or litigation resulting there from, the Indemnified Party may, but
shall not be obligated to, defend against such claim or litigation in such
manner as it may deem appropriate including, but not limited to, settling such
claim or litigation, after giving notice of it to the Indemnifying Party, on
such terms as the Indemnified Party may deem appropriate and no action taken by
the Indemnified Party in accordance with such defense and settlement shall
relieve the Indemnifying Party of its indemnification obligations herein
provided with respect to any Damages resulting there from.
MEMBERSHIP INTEREST AGREEMENT
Page 32
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time before the
Closing Date:
(a) By mutual consent of the Purchaser and the Seller;
(b) By either the Purchaser or the Seller if the Closing has
not occurred on or before the Closing Date as may be extended for reasonable
cause, provided that this provision shall not be available to the party who
fails or refuses to consummate the transactions contemplated herein or to take
any other action referred to herein as necessary to consummate the transactions
contemplated hereby in breach of such party's obligations contained herein; and
(c) By either the Purchaser or the Seller if there has been a
material breach on the part of the other party in any material representation,
warranty or covenant set forth in this Agreement that is not cured within ten
(10) business days after such other party has been notified of the intent to
terminate this Agreement pursuant to this clause 10.1 (c).
(d) By Purchaser in the event of its inability to meet any of
the four (4) contingencies set forth in paragraph 3 of the Letter of Intent from
Purchaser to Seller dated March 29, 2005 (the "Contingencies"), these
Contingencies, and only the Contingencies, being specifically incorporated
herein by reference and made a part hereof as though fully set out in this
Agreement
10.2 Effect of Termination. In the event of termination of this
Agreement as expressly permitted under Section 10.1 hereof, this Agreement shall
forthwith become void and of no force and effect, and there shall be no
liability on the part of either the Seller, the Purchaser, or their respective
managers, officers, directors, representatives or agents, provided however, if
such termination occurs pursuant to Section 10.1(c) and resulted from the
material misrepresentation or material breach by a party of the covenants of
such party contained in this Agreement, (and the breach remains uncured for more
than the 10 day period of time) such breaching party shall be fully liable as a
result of the material misrepresentation or breach. In the event of termination
hereunder before the Closing, each party shall return promptly to the other
Party all documents, work papers, and other material of the other party
furnished or made available to such party or its representatives or agents and
all copies thereof.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Amendment and Modification; Waiver of Compliance. Subject to the
applicable law, this Agreement may be amended, modified, and supplemented only
by written agreement signed by the Purchaser and the Seller. Any failure by any
party to this Agreement to comply with any obligation, covenant, agreement, or
condition contained herein may be expressly waived in writing by the other
parties hereto, but such waiver or failure to insist upon strict compliance
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any
MEMBERSHIP INTEREST AGREEMENT
Page 33
party hereto, such consent shall be given in a manner consistent with the
requirements for a waiver of compliance as set forth in this Section.
11.2 Fees and Expenses. Except as otherwise provided herein, each of
the parties hereto will pay its own fees and expenses (including attorneys' and
accountants' fees, legal costs, and expenses) incurred in connection with this
Agreement, the other Acquisition Documents and the consummation of the
transactions contemplated hereby and thereby.
11.3 Notices. All notices, requests, demands, and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered by hand, overnight courier, or mailed certified or
registered mail with postage prepaid as follows.
(a) If to the Purchaser, to:
Limco-Airepair, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
With a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Lawyers, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇
(b) If to the Seller, to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With Copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇ PLLC
▇▇▇ ▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
MEMBERSHIP INTEREST AGREEMENT
Page 34
11.4 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
11.5 Governing Law. This Agreement and the legal relations between the
parties hereto shall be governed by, and construed in accordance with, the laws
of the State of Delaware, without reference to the conflict of laws principles
thereof; provided however, Section 8.2 concerning Non-Competition shall be
governed by, and construed in accordance with either the laws of the State of
North Carolina or the laws of the State of Oklahoma, whichever best allows for
enforcement of the covenant not to compete in accordance with the terms of
section 8.2.
11.6 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Faxed signatures
shall have the same effect as an original signature.
11.7 Headings. The headings contained in this Agreement are inserted
for convenience only and shall not constitute a part hereof.
11.8 Attorney fees in Litigation. The prevailing party in any litigated
claim between the parties hereto (including those brought in Arbitration under
Section 11.11, below) shall be entitled to recover all costs and attorney fees
they have expended as may deemed reasonable by the court of competent
jurisdiction in which the controversy or action is pending.
11.9 Entire Agreement. This Agreement, including the Disclosure
Schedules, the exhibits hereto and other documents referred to herein which form
a part hereof, embody the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein and supersede all prior
agreements and understandings between the parties with respect to such subject
matter, including, by way of illustration and not by limitation, the Letter of
Intent dated March 29, 2005 (except the terms therein contained concerning
Purchaser contingencies, which have been incorporated herein by reference).
There are no restrictions, promises, warranties, covenants, or undertakings
other than those expressly set forth or referred to herein.
11.10 Definitional Provisions. All terms defined in this Agreement
shall have such defined meanings when used in any exhibit, schedule, or any
certificate or other document made or delivered pursuant hereto or thereto,
unless otherwise defined therein.
11.11 Arbitration. Any and all controversies and claims arising out of
or relating to this Agreement or any of the Acquisition Documents, or breach
thereof, shall be settled by binding private arbitration. The place of
arbitration shall be Greensboro, North Carolina. There shall be three
arbitrators, who shall be licensed attorneys, chosen as follows: (a) one
arbitrator shall be chosen by Purchaser, and (b) one arbitrator shall be chosen
by the Members, and (c) the two arbitrators thus named will then be directed to
name a third arbitrator. The decisions and determinations by any two of the
three arbitrators shall be binding on all parties to the arbitration The
arbitration shall be administered in accordance
MEMBERSHIP INTEREST AGREEMENT
Page 35
with the American Arbitration Association's Commercial Arbitration Rules, except
that (i) there shall be no discovery depositions, unless any witness will not
personally appear and testify at the arbitration; and (ii) each party agrees to
provide any relevant documents requested by the other party, except to the
extent such documents are not discoverable under applicable law. Any dispute
concerning discovery depositions or the provision of documents shall be decided
by the arbitrators. Any award shall be a conclusive determination of the matter,
shall be binding upon the parties thereto and shall not be contested by any of
them. Judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The parties shall share equally the cost of
the arbitrator's fees and expenses and any administrative expenses as they
arise. As part of such award, the prevailing party (as determined by the
arbitrator) shall be awarded the arbitrator's fees and expenses and any
administrative expenses previously paid by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above stated.
"Purchaser"
LIMCO-AIREPAIR, INC.
---------------------------------
by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
"Seller"
PIEDMONT AVIATION COMPONENT
SERVICE, L.L.C.
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by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Authorized Manager
"Member and Managers"
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Member and Manger
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Member and Manager
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Member and Manager
----------------------------------
▇▇▇ ▇▇▇▇▇▇, Member and Manager