Exhibit 10.19 ASSET PURCHASE AND SALE AGREEMENT, DATED DECEMBER 4, 1996
AMONG REGISTRANT, EE ACQUISITION, INC. XXXXXXX XXXX AND ELSINORE LP
ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement ("Agreement") is made and entered
into as of December 4, 1996 by and among XxXxxxx Aircraft Holdings, Inc., an
Ohio Corporation ("DAH"), EE Acquisition, Inc., a Delaware corporation and
wholly-owned subsidiary of DAH ("Buyer"), Xxxxxxx Xxxx, an individual ("Lyon"),
and Elsinore LP, a California Limited Partnership ("ELP") based on the following
facts:
ELP and Lyon (collectively referred to herein as the "Sellers") are the
owner of and desires to sell (i) the stock of Elsinore Aerospace Services, Inc.,
a California corporation ("EAS") and (ii) the Elsinore Engineering Services
division of ELP ("Elsinore Engineering"); Buyer desires to purchase the assets
of Elsinore Engineering (the "EE Assets") and the stock of EAS;
Based on the foregoing facts and circumstances, the parties hereby agree
as follows:
1. ASSETS TO BE PURCHASED AND SOLD.
1.1 THE EE ASSETS. On the Closing Date, ELP shall transfer to Buyer
all of the assets, properties, rights (contractual or otherwise) and business of
Elsinore Engineering (including but not limited to goodwill), whether such
assets and business is in the nature of real, personal, or mixed property and
whether such assets are tangible or intangible or known or unknown, provided,
however, that the business and assets of Elsinore Engineering located at Grand
Prairie, Texas, including, but not limited to, leasehold interests, facility,
furniture, fixtures and equipment (the "Grand Prairie Facility") are not being
transferred and the liabilities resulting from the Grand Prairie Facility are
not being assumed pursuant to this Agreement. Without limiting the generality of
the foregoing, the assets of Elsinore Engineering to be transferred include:
1.1.1 REAL PROPERTY LEASES. Any and all rights under leases
of real property and improvements, including that real property listed on
Schedule 1.1.1, (which leased property (including that listed on Schedule 1.1.1)
is referred to as "the Real Property Leases");
1.1.2 PERSONAL PROPERTY
(a) All machinery and equipment, including that listed
on Schedule 1.1.2(a), (which machinery and
equipment (including that listed on Schedule
1.1.2(a) is referred to as the "Machinery and
Equipment");
(b) All tooling (including that listed on Schedule
1.1.2(b)), (which tooling (including that
listed on Schedule 1.1.2(b)) is referred to as
the
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"Tooling");
(c) All parts and furniture ("Parts and Furniture");
(d) All rights under leases of equipment, vehicles or
other tangible personal property, including
that listed on Schedule 1.1.2(d), (all of
which (including that which is listed on
Schedule 1.1.2(d)) is referred to as the
"Leased Personal Property" or "Personal
Property Leases").
All of the Machinery and Equipment, Tooling and Parts and
Furniture are referred to collectively as "Personal Property."
1.1.3 VEHICLES. All automobiles and other motor vehicles,
including without limitation those listed on Schedule 1.1.3 (all of which
(including those listed on Schedule 1.1.3) are referred to as the "Vehicles").
1.1.4 APPROVALS. All licenses, permits, consents,
authorizations, approvals, certificates and franchises of any regulatory,
administrative or other government agency including those matters listed in
Schedule 1.1.4 (all of which items are referred to as "Approvals").
1.1.5 PROPRIETARY RIGHTS.
(a) Except as provided in Section 6.1.2, all patents,
inventions, STC's, trademarks, names, service
marks, trade names, copyrights, marks,
symbols, logos, franchises and permits and all
applications therefor, registrations thereof
and licenses, sublicenses or agreements in
respect thereof, which ELP owns and Elsinore
Engineering uses or has the right to use or
that ELP is a party to any filing,
registration with any federal, foregoing,
state local or regulatory authority, including
those listed on Schedule 1.1.5(a), (all of
which (including those described on Schedule
1.1.5(a)) are referred to as "Protectable
Proprietary Rights").
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(b) All trade secrets, processes, proprietary
knowledge, know-how, and other processes which
are not filed or registered but which
constitute the confidential proprietary
information of ELP and Elsinore Engineering
uses or has used or has the right to use,
including those described in Schedule
1.1.5(b), (all of which (including those
described on Schedule 1.1.5(b)) are referred
to as "Confidential Proprietary Rights").
1.1.6 CONTRACTS. All rights under contracts and
agreements and specifically including, but not limited to, purchase and sales
orders, quotations, executory commitments, instruments, guaranties,
indemnifications, arrangements or other understandings of Elsinore Engineering,
including without limitation those matters listed on Schedule 1.1.6, (all of
which matters (including those listed on Schedule 1.1.6) are referred to as
"Contracts").
1.1.7 RECEIVABLES. All accounts and notes receivable,
including those listed on Schedule 1.1.7, (all of which are referred to as
"Receivables").
1.1.8 DEPOSITS AND PREPAID EXPENSES. All of the deposits
and prepaid expenses of ELP which relate to or are used in the business of
Elsinore Engineering, including without limitation those deposits and prepaid
expenses listed on Schedule 1.1.8, (all of which deposits and prepaid expenses
(including those listed on Schedule 1.1.8) are referred to as "Deposits" and
"Prepaid Expenses").
1.1.9 TERMINATION CLAIMS. To the full extent legally possible
with respect to contracts for which Buyer assumes any liability pursuant to this
Agreement, all claims for termination for convenience or other claims against
prime contractors, government agencies, or others with respect to the
termination of contracts prior to the complete performance by Elsinore
Engineering of any such contract, including without limitation such claims as
are listed on Schedule 1.1.9, (all of such matters (including those listed on
Schedule 1.1.9) are referred to as "Termination Claims").
1.1.10 [Intentionally left blank.]
1.1.11 OTHER CLAIMS. To the full extent legally possible with
respect to contracts for which Buyer assumes any liability pursuant to this
Agreement, all claims, causes of action, demands and pending litigation in which
ELP on behalf of Elsinore Engineering is seeking the recovery of money or
equitable relief, including those matters listed on Schedule 1.1.11, (all of
such matters (including those listed on Schedule 1.1.11) are referred to as
"Other Claims").
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1.1.12 BOOKS AND RECORDS. All books of account, customer
lists, files, papers and records normally maintained by Elsinore Engineering and
a copy of all of the books of account and records of ELP which relate to
Elsinore Engineering.
1.1.13 TELEPHONE NUMBERS. All telephone, fax, email and other
numbers for communication with Elsinore Engineering, including without
limitation those numbers listed on Schedule 1.1.13.
1.1.14 All goodwill of ELP which in any way relates to
Elsinore Engineering or the business of Elsinore Engineering except as provided
in Section 6.1.2.
1.2 EAS. On the Closing Date, Lyon will transfer to Buyer 100% of all
of the classes of stock of EAS and all securities which may be converted into
the stock of EAS.
1.3 NON-ASSIGNMENT OF ASSETS. To the extent that any Asset
described in Section 1.1, may not be assigned or may only be assigned with the
consent of a third party, notwithstanding anything to the contrary in this
Agreement, neither this Agreement nor any action taken shall constitute an
assignment or an agreement to assign.
2. PURCHASE PRICE.
2.1 The purchase price shall be $2.25 million (the "Purchase Price"),
of which $1.0 million is payable in immediately available funds (cash) on the
Closing Date and the balance of $1.25 million together with interest at the rate
of 15% per annum on the unpaid portion of the Purchase Price or the maximum rate
allowed under applicable law, if less, in the form of a Promissory Note in the
form of Exhibit F attached hereto, subject to adjustment for working capital, as
provided in Section 2.2, will be payable on the earlier of (i) three business
days following the funding of an initial public offering of the common stock
of DAH (the "IPO") or (ii) February 15, 1997. If the Board of Directors of DAH
takes action to abandon the IPO on or before January 31, 1997 the balance of the
Purchase Price will be due and payable two weeks following such action by the
DAH Board of Directors, however, in no event shall the balance of the Purchase
Price be paid prior to the reduction, if any, for the Working Capital
Adjustment, contemplated by Section 2.2. Notwithstanding the foregoing sentence,
Seller acknowledges that pursuant to an agreement with a senior lender, DAH and
Buyer are prevented from making any payment pursuant to this Agreement or the
Note delivered pursuant hereto at any time during which DAH is in payment
default to such senior lender.
2.2 "Required Working Capital Percentage" shall be the average of
Elsinore Engineering's working capital (as determined pursuant to GAAP as
defined below) as a percentage of monthly sales measured at the end of each
month for the 12 calendar months ended September 30, 1996. This computation
shall be accomplished as soon as practical after the Closing Date.
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"Required Working Capital" is the dollar amount equal to the net
sales for the three month period ended September 30, 1996 divided by three,
multiplied by the Required Working Capital Percentage.
To the extent that working capital on the Closing Date is an
amount less than Required Working Capital, such amount shall be deducted from
the amount due Seller pursuant to the Promissory Note delivered pursuant to
Section 2.2.
2.3 DAH will cause Buyer to pay to Seller 15% of any fees earned for
purchases ("Purchasing Fees") made by Buyer or any direct or indirect affiliate
of DAH or Buyer between the Closing Date and December 31, 1997, from purchasing
by Elsinore Engineering for Daimler-Benz Aerospace Airbus GmbH ("Daimler-Benz")
in the passenger to freighter conversion of A300-B2, A300-B4 and A300-600
Aircraft. Within 30 days after the month in which each Purchasing Fee is
received, an accounting and payment shall be made to Seller.
2.4 DAH will cause Buyer to pay to Seller an amount equal to a
commission of 5% on any Kits purchased by Daimler-Benz from DAH or Buyer or
any direct or indirect affiliate of DAH or Buyer between the Closing Date and
December 31, 1999 for use in the passenger to freighter conversion of
A300-B2, A300-B4 and A300-600 Aircraft. Within 30 days after the month in
which each such payment in respect of Kit purchase price is received, an
accounting and payment shall be made to Seller.
3. REPRESENTATIONS AND WARRANTIES.
3.1 JOINTLY BY BUYER AND DAH. Buyer and DAH hereby jointly and
severally represent and warrant to Sellers that, except as set forth on Schedule
3.1, the representations and warranties of Buyer and DAH, and either of them,
contained in this Agreement, including those contained in this Section 3, are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date. Buyer and DAH hereby jointly and severally
represent and warrant to Sellers the following:
3.1.1 ORGANIZATION. Buyer and DAH are both Corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware and Ohio, respectively, and each have all requisite corporate power and
authority to own, lease and operate their respective properties and conduct
their respective businesses as now being conducted. Buyer and DAH are each duly
qualified, or will be duly qualified prior to the Closing Date, to do business
and in good standing in each jurisdiction listed on Schedule 3.1.1, are not
qualified to do business in any other jurisdiction and neither the nature of the
business conducted by either of them nor the property either of them owns,
leases or operates requires either of them to qualify to do business as a
foreign corporation in any other jurisdiction. Buyer and DAH have previously
delivered to Sellers complete and correct copies of Buyer's and DAH's articles
of incorporation and bylaws as in effect on the date hereof.
3.1.2 AUTHORIZATION. Buyer and DAH each have all requisite
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corporate power and authority to enter into this Agreement and the other
Transaction Documents to which either of them is a party, perform their
respective obligations hereunder and thereunder and consummate the transactions
contemplated hereby and thereby. All necessary corporate action has been taken
by Buyer and DAH with respect to the execution and delivery of this Agreement,
and the other Transaction Documents to which either of them is a party, and this
Agreement and the other Transaction Documents to which either of them is a
party, constitute valid and binding obligations of Buyer and DAH, enforceable
against Buyer and DAH, as the case may be, in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance and moratorium laws and other laws of general application affecting
the enforcement of creditors' rights generally.
3.1.3 BROKERS AND FINDERS. Except as disclosed in
Schedule 3.1.3, neither Buyer, DAH nor any of their officers, directors or
employees, has engaged any broker or finder or incurred any liability for any
brokerage fees, commissions, finders' fees or similar fees or expenses and no
broker or finder has acted directly or indirectly for Buyer or DAH in connection
with this Agreement or the transactions contemplated hereby.
3.2 JOINTLY BY SELLERS. Sellers hereby jointly and severally
represent and warrant to Buyer and DAH that, except as set forth on Schedule
3.2, the representations and warranties of Sellers, and either of them,
contained in this Agreement, including those contained in this Section 3.2, are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date. As used in this Section 3.2. To the "Senior
Management's Knowledge" means to the knowledge of Xxxxxxx Xxxx and Xxxxx
Xxxxxxxxx. Sellers hereby jointly and severally represent and warrant to Buyer
and DAH the following:
3.2.1 CORPORATE ORGANIZATION. EAS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. EAS is presently an "S Corporation" as such term is defined under
the Internal Revenue Code of 1986, as amended (the "Code"). ELP is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of California. Each of EAS and ELP has all requisite corporate
power and authority to own, lease and operate its respective properties and
conduct its respective business as now being conducted. Each of EAS and ELP is
duly qualified to do business and in good standing in the State of California.
Sellers have previously delivered to Buyer complete and correct copies of the
articles of incorporation and by-laws of EAS and the limited partnership
agreement of ELP, as in effect on the date hereof, and EAS and ELP are not in
default in the performance, observation or fulfillment of any provision of their
respective organizational documents.
3.2.2 CAPITALIZATION AND SECURITY HOLDERS. The
authorized capital stock of EAS consists solely of 1,000 shares of Common Stock,
no par value ("EAS Common Shares"); EAS has issued 1,000 EAS Common Shares, of
which 1,000 EAS Common Shares are outstanding, constituting all of the issued
and outstanding shares of capital stock of any class of EAS. 100% of the
outstanding EAS Common
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Shares are owned by Xxxxxxx Xxxx. All outstanding EAS Common Shares have been
validly issued and are fully paid and non-assessable and free of preemptive
rights; there are no outstanding subscriptions, options, warrants, puts, calls,
agreements, understandings, or other commitments or rights of any type relating
to the issuance, sale or transfer by EAS of any securities of EAS, nor are there
outstanding any securities which are convertible into or exchangeable for any
shares of capital stock of EAS; and EAS has no obligation of any kind to issue
any additional securities. All of the ownership interests in ELP are owned by
the persons listed in Schedule 3.2.2. All of such outstanding EAS Common Shares
and ownership interests in ELP are owned free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, equities and restrictions
whatsoever.
3.2.3 AUTHORIZATION OF SELLERS. EAS has full corporate
power and authority to enter into this Agreement, and the other Transaction
Documents to which it is a party, perform its obligations hereunder and
thereunder and consummate the transactions contemplated hereby and thereby. ELP,
and EAS as its general partner, has all requisite power, authority and legal
capacity and is competent to execute and deliver this agreement, and the other
Transaction Documents to which ELP is a party, perform its obligations hereunder
and thereunder and consummate the transactions contemplated hereby. All
necessary and appropriate corporate action has been taken by each Seller and EAS
with respect to the execution and delivery of this Agreement, and the other
Transaction Documents to which they are respectively a party. This Agreement
constitutes, and the other Transaction Documents to which each Seller and EAS
are parties when executed and delivered will constitute, valid and binding
obligations of each such party, enforceable against each such party in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and moratorium laws and other
laws of general application affecting the enforcement of creditors' rights
generally.
3.2.4 FINANCIAL STATEMENTS. Attached hereto as Schedule
3.2.4(a) are (i) the balance sheets of Elsinore Engineering (excluding the Grand
Prairie Facility) as at December 31, 1995 and as at September 30, 1996, and (ii)
the related statements of income for the year ended December 31, 1995 and the 9
months ended September 30, 1996 (all of such documents referred to collectively
as the "Financial Statements"). The Financial Statements dated as of September
30, 1996 either (a) reflect the equivalent of any adjustments made in the
Financial Statements dated as of December 31, 1995 or (b) have footnote
disclosure to reflect the absence of such adjustments and the dollar amount of
such adjustments had they been made. The Financial Statements (i) are true,
correct and complete, subject to the qualifications (if any) explicitly set
forth therein and in Schedule 3.2.4(b) (ii) have been prepared from and are in
accordance with the books and records of Elsinore Engineering, (iii) have been
prepared using an accrual basis method and average cost inventory cost flow
assumptions, (iv) are in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis for such periods subject to
the qualifications (if any) explicitly set forth therein and in Schedule
3.2.4(b), and (v) fairly present in all material respects the financial position
of Elsinore Engineering as of the dates stated and the results of operations of
Elsinore Engineering for the periods then ended in
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accordance with such practice subject to the qualifications (if any) explicitly
set forth therein and in Schedule 3.2.4(b); but EXCLUDING, in each case, the
Grand Prairie Facility. On the date of this Agreement and on the Closing Date,
neither EAS nor Elsinore Engineering has any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except in the case of the
contract between ELP and Daimler-Benz described at Section 5.2.9, as previously
disclosed to Buyer and DAH, and as reflected or provided for in the balance
sheets in the Financial Statements, subject to the qualifications (if any)
explicitly set forth therein and in Schedule 3.2.4(b) or, if not required by
GAAP to be so reflected, in Schedule 3.2.4(b). Since September 30, 1996, except
as described on Schedule 3.2.4, there has been no material adverse change in the
financial condition, operations, business or prospects taken as a whole of
Elsinore Engineering from that set forth in the Financial Statements dated as of
September 30, 1996.
3.2.5 COMPLIANCE WITH LAW.
(a) Each of Elsinore Engineering, EAS, and ELP (with
respect to the business of Elsinore
Engineering) is in compliance in all material
respects with all applicable laws, statutes,
orders, rules, regulations, policies or
guidelines promulgated, or judgments,
decisions or orders entered, by any federal,
state, local or foreign court or governmental
authority or instrumentality the violation of
which would be materially adverse to Elsinore
Engineering, EAS and ELP or any of their
respective businesses or properties.
(b) EAS and Elsinore Engineering are each in
compliance in all material respects with all
applicable federal, state and local laws,
ordinances, rules and regulations pertaining
to environmental matters, including solid
waste disposal, toxic substances, hazardous
substances, hazardous materials, hazardous
waste, toxic chemicals, pollutants,
contaminants and air or water pollution and to
the storage, use, handling, transportation,
discharge and disposal (including spills and
leaks) of gaseous, liquid, semi-solid or solid
materials. Neither EAS nor Elsinore
Engineering has, and to the Senior
Management's Knowledge, no third party has,
disposed or discharged any chemicals, oil or
solid wastes on any part of the Real Property
or any other any property owned, operated,
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leased or used by EAS or Elsinore Engineering
except in compliance in all material respects
with applicable laws. There are no underground
storage tanks located on any part of the Real
Property or any other property owned,
operated, leased or used by EAS or Elsinore
Engineering, except as disclosed on Schedule
3.2.5(b).
(c) Schedule 3.2.5(c) contains a complete and
accurate list of all material Permits. Each of
such Permits is currently valid and in full
force and effect and assignable to Buyer. Such
Permits constitute all material franchises,
licenses, permits, consents, authorization,
approvals, and certificates of any regulatory,
administrative or other agency or body
necessary for the conduct of the business of
Elsinore Engineering and the DAS held by EAS.
Neither EAS nor Elsinore Engineering are in
material violation of any of such Permits and
there is no pending or threatened proceeding
which could result in the revocation,
cancellation or inability of EAS, Elsinore
Engineering or any Seller to renew or transfer
any such Permit which is material to its
business.
(d) To Senior Management's Knowledge, except as
set forth in. Schedule 3.2.5(d), with respect
to the business of Elsinore Engineering,
neither ELP, EAS nor any Seller is under
investigation with respect to, or is currently
subject to a charge of or under notice of any
violation of, any applicable law.
3.2.6 PROPRIETARY RIGHTS. The sale by Sellers contemplated
hereby, ownership by Buyer of any of the Property and, to Senior Management's
Knowledge, the business of Elsinore Engineering as conducted prior to the
Closing Date, except as disclosed on Schedule 3.2.6, was not, is not and will
not infringe or be in contravention of any trade name, service xxxx, patent,
trademark, copyright or other proprietary right of any third party. Schedule
3.2.6 sets forth all of the Proprietary Rights and Registrations owned or used
by Elsinore Engineering. Other than those Proprietary Rights listed on Schedule
3.2.6, and other than Seller's proprietary rights as set forth in Section 6.1.2,
no patent, invention, trade secret, process, proprietary right, proprietary
knowledge, know-how, computer software, trademark, name, service xxxx, trade
name, copyright, xxxx, symbol, logos, franchise, permit, license, sublicense or
other such right
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is necessary for the operation of the business of Elsinore Engineering as the
same is currently conducted. None of the Proprietary Rights are registered with
any governmental or regulatory authority except as set forth on Schedule 3.2.6.
The amount of each of the royalties and license fees
presently paid by or on behalf of Elsinore Engineering in the ordinary course of
its business is listed in Schedule 3.2.6.
3.2.7 RESTRICTIVE DOCUMENTS OR LAWS. With the exception
of the matters listed on Schedule 3.2.7, with respect to the business of
Elsinore Engineering, neither of EAS or the Sellers is a party to or bound under
any (and, to Senior Management's Knowledge, there is no) pending, proposed or
threatened regulation, certificate, mortgage, lien, lease, agreement, contract,
instrument, law, vote, order, judgment or decree, or any similar restriction not
of general application which materially restricts or otherwise adversely
affects, or reasonably could be expected to materially restrict or otherwise
adversely to affect (a) the consummation of the transfers of the property to
Buyer and the other transactions contemplated in this Agreement or (b) in any
material respect: (i) the condition, financial or otherwise, of EAS or the
Property; or (ii) the continued operation by Buyer of the business of Elsinore
Engineering after the Closing Date on substantially the same basis as said
business was theretofore operated.
3.2.8 REAL PROPERTY. Except as set forth in Schedule 3.2.8,
neither EAS nor Elsinore Engineering owns, leases, or licenses any real property
interests. The property which constitutes Real Property interests includes all
such interests now owned or used by Elsinore Engineering and material to the
operation of its business as presently conducted (excluding the Grand Prairie
Facility). All such properties are held free and clear of all material
mortgages, pledges, liens, security interests and encumbrances, and material
restrictions of any nature whatsoever, except as listed on Schedule 3.2.8.
Except as set forth in Schedule 3.2.8, all real
property and each building and structure owned or used by Elsinore
Engineering (excluding the Grand Prairie Facility), and material to the
operation of its business as presently conducted, is suitable for the purpose
or purposes for which it is being used, and is in all material respects in
such condition and repair as to permit the continued operation of said
business. To Senior Management's Knowledge, none of such real property,
buildings or structures is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs. To Senior Management's Knowledge,
there are no material structural defects in the exterior walls or the
interior bearing walls, the foundation or the roof of any plant, building,
garage or other such structure owned, leased or used by Elsinore Engineering
and the electrical, plumbing and heating systems, and the air conditioning
system, if any, of any such plant, building, garage or structure are in
reasonable operating condition in light of their age and prior use. To Senior
Management's Knowledge, the utilities servicing the real property owned,
leased or used by Elsinore Engineering are adequate to permit the continued
operation of the business of Elsinore Engineering and to Senior Management's
Knowledge, there are no pending
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zoning, condemnation or eminent domain proceedings, building, utility or other
moratoria, or injunctions or court orders which would materially affect such
continued operation. Schedule 3.2.8 lists, and Sellers have furnished or made
available to Buyer copies of, all engineering, geologic and environmental
reports prepared by or for either Seller with respect to the real property
owned, leased or used by Elsinore Engineering.
3.2.9 PERSONAL PROPERTY. Schedule 3.2.9 contains complete
and accurate descriptions of, Elsinore Engineering's Machinery, Equipment,
Tooling and Vehicles. Except as set forth in Schedule 3.2.9, and except with
respect to personal property leased pursuant to the Personal Property Leases,
ELP has good, valid and marketable title to all of its property which is
personal property of every kind, nature and description, tangible or intangible,
and wherever located, including all property and assets which are personal
property shown or reflected on the September 30, 1996 Balance Sheet. Schedule
3.2.9 contains a complete and accurate description of all Personal Property
Leases to which Elsinore Engineering is party or which Elsinore Engineering,
uses in its business (in each case excluding the Grand Prairie Facility). The
Property which is personal property constitutes all material personal property
now used in and necessary for the conduct of the business of Elsinore
Engineering as presently conducted (excluding the Grand Prairie Facility), all
of which is held free and clear of all mortgages, pledges, liens, security
interests, encumbrances and material restrictions of any nature whatsoever,
except as listed on Schedule 3.2.9.
Except as listed on Schedule 3.2.9, no financing
statement under the Uniform Commercial Code or similar law naming ELP (with
respect to the Property), EAS or Elsinore Engineering as debtor has been
filed in any jurisdiction, and neither ELP, EAS nor Elsinore Engineering is a
party to or bound under any agreement or legal obligation authorizing any
party to file any such financing statement. Except as set forth on
Schedule 3.2.9, all Machinery and Equipment and other tangible personal
property owned or used by Elsinore Engineering and material to the operation
of the business as presently conducted (excluding the Grand Prairie Facility)
is suitable for the purpose or purposes for which it is being used, and is in
all material respects in such condition and repair as to permit the continued
operation of said business. None of the Machinery or Equipment is in need of
maintenance or repairs in any material respect except for ordinary, routine
maintenance and repairs necessary to permit the operation of said business.
3.2.10 ENVIRONMENTAL MATTERS. Except as set forth on
Schedule 3.2.10, the operations of Elsinore Engineering and EAS comply in all
material respects with all occupational health and safety acts and all
environmental laws and regulations of all federal, state and local governmental
or regulatory bodies having jurisdiction over Elsinore Engineering and EAS.
Without limiting the generality of the foregoing, and by way of example only,
except as set forth on Schedule 3.2.10:
(a) There has not been, and is not occurring, any
Release of any Hazardous Substance on any real
property owned, operated, leased or used by
Elsinore Engineering or EAS during Elsinore
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Engineering's or EAS' ownership, operation,
lease or use of such property except in
compliance in all material respects with
applicable laws. For purposes of this
Agreement, the terms "Release" and "Hazardous
Substance" shall have the same meanings as
those terms are given in the Comprehensive
Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601
ET SEQ. ("CERCLA"), except that for purposes
of this Agreement petroleum (including crude
oil or any fraction thereof) shall be deemed a
Hazardous Substance.
(b) Neither Elsinore Engineering nor EAS has ever
received notice that either has sent a
Hazardous Substance to a site which, pursuant
to CERCLA or any similar state law, (A) has
been placed, (or to Senior Management's
Knowledge, is proposed to be placed, or may in
the future be placed,) on the "National
Priorities List" of hazardous waste sites or
on any similar list of any federal, state or
local governmental agency, including the
Comprehensive Environmental Response,
Compensation and Liability System list for
potential hazardous waste sites, or (B) is
subject to a claim, an administrative order or
other request to take "removal" or "remedial"
action (as defined under CERCLA) or to pay for
any costs relating to such site.
(c) Neither Elsinore Engineering nor EAS has ever
been or is currently in material violation of
any provision of the Toxic Substances Control
Act or the regulations promulgated thereunder.
(d) Neither Elsinore Engineering nor EAS is involved
in any suit or has received notice of any
claim relating to personal injuries from
exposure to Hazardous Substances.
3.2.11 BROKERS, FINDERS. The transactions contemplated herein
were not submitted to Sellers by any broker or other person entitled to a
commission or finder's fee thereon, and were not with the consent of Sellers
submitted to DAH by any such broker or other person. Neither of Sellers nor any
of its officers, directors or employees has engaged any broker or finder or
incurred or taken any action which may
12
give rise to any liability against itself or the Property for any brokerage
fees, commissions, finders fees or similar fees or expenses and no broker or
finder has acted directly or indirectly for Sellers in connection with this
Agreement or the transactions contemplated hereby. No investment banking,
financial advisory or similar fees have been incurred or are or will be payable
by Sellers in connection with this Agreement or the transactions contemplated
hereby.
3.2.12 LEGAL PROCEEDINGS, ETC. Except as set forth on
Schedule 3.2.12, there is no claim, litigation, action, suit or proceeding,
administrative or judicial, filed, pending, or to Senior Management's Knowledge,
threatened against Elsinore Engineering, EAS or with respect to the business of
Elsinore Engineering, Sellers, or involving the Property, this Agreement or the
transactions contemplated hereby, at law or in equity, before any federal, state
or local court or regulatory agency, or other governmental authority, including
any unfair labor practice or grievance, proceedings or claim which matter
although disclosed on Schedule 3.2.12 would have a material adverse effect on
the business or assets of EAS or Elsinore Engineering. To Senior Management's
knowledge, there is no basis upon which such claim, litigation, action, suit or
proceeding would reasonably be brought or initiated. Except as set forth in
Schedule 3.2.12, with respect to the business of Elsinore Engineering, neither
EAS, ELP nor Elsinore Engineering is subject to any judgment, order or decree,
or, to Senior Management's Knowledge, any governmental restriction applicable to
EAS, ELP or Elsinore Engineering which has a reasonable probability of having a
Material Adverse Effect. As used herein, "Material Adverse Effect" means any
material adverse change in the business operations (as presently conducted or
proposed to be conducted), assets, properties or rights, prospects or condition
(financial or otherwise) of Elsinore Engineering (excluding the Grand Prairie
Facility), or any occurrence, circumstance, or combination thereof which
reasonably could be expected to result in any such material adverse change, or
which materially adversely affects the ability of Elsinore Engineering to
conduct business in any area, or of Buyer to continue the business of Elsinore
Engineering as presently conducted.
3.2.13 NO CONFLICT OR DEFAULT. Neither the execution and
delivery of this Agreement or any other Transaction Document, nor compliance
with the terms and provisions hereof or thereof, including the consummation of
the transactions contemplated hereby and thereby, will (a) violate in any
material respect any statute, regulation or ordinance of any governmental
authority, or (b) conflict with or result in the breach of any term, condition
or provision of the articles of incorporation or bylaws of EAS or the limited
partnership agreement of ELP, or (c) to Senior Management's Knowledge, conflict
with or result in the breach of any term, condition or provision of any
agreement, deed, contract, mortgage, indenture, writ, order, decree, legal
obligation or instrument, to which EAS, ELP or (with respect to the business of
Elsinore Engineering) any of the Sellers, is a party or by which any such party
or any part of the Property is or may be bound, or (d) constitute a material
default (or an event which with the lapse of time or the giving of notice, or
both, would constitute a material default) under any such agreement, deed,
contract, mortgage, indenture, writ, order, decree, legal obligation or
instrument thereunder, or (e) result in the creation or imposition of any
material lien, charge or encumbrance, or to Senior Management's Knowledge, any
other material
13
restriction of any nature whatsoever with respect to any part of the Property,
or (f) give to others any interest or rights, including rights of termination,
acceleration or cancellation in or with respect to any part of the Property or
the business of Elsinore Engineering which would have a Material Adverse Effect
thereon.
3.2.14 LABOR RELATIONS. Schedule 3.2.14 sets forth all
collective bargaining or other labor agreements to which Elsinore Engineering is
bound and which covers Elsinore Engineering employees. ELP has previously
delivered to Buyer true, correct and complete copies of each such agreement.
There is no labor strike, dispute, slowdown or stoppage, or petition for
certification actually pending or, to Senior Management's Knowledge, threatened
against or involving Elsinore Engineering, nor, to Senior Management's
Knowledge, any union organizing campaign pending or threatened. Schedule 3.2.14
sets forth all pending grievances and arbitration proceedings against Elsinore
Engineering arising out of or under a collective bargaining or other labor
agreement. No collective bargaining or other labor agreement is currently being
negotiated by ELP by or on behalf of Elsinore Engineering. With respect to the
business of Elsinore Engineering, neither Elsinore Engineering, EAS nor ELP has
experienced any work stoppage or other material labor difficulty over the past
three years. No agreement which is binding on Elsinore Engineering, EAS or EAP
restricts it from relocating or closing any or all of its operations.
3.2.15 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Schedule 3.2.15, neither
EAS nor Elsinore Engineering currently
sponsors, maintains or contributes, or has
within the past 3 years sponsored, maintained
or contributed, to any pension, retirement,
profit-sharing, deferred compensation, bonus,
stock option or other incentive plan, or any
other employee benefit program, arrangement,
agreement or understanding, or medical,
vision, dental or other health plan, or life
insurance or disability plan, or any other
employee benefit plan as defined in Section
3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"),
whether or not any such employee benefit plan
is otherwise exempt from the provisions of
ERISA, and whether or not formal or informal,
written or oral, and whether or not legally
binding. All such plans, funds or programs
sponsored, maintained or contributed to by
Elsinore Engineering currently or within the
past 3 years, whether or not listed on
Schedule 3.2.15, are hereinafter referred to
as the "Employee Benefit Plans").
14
(b) As of the Closing Date, no entity that may be
regarded as under common control with Elsinore
Engineering or EAS pursuant to Section 414 of
the Internal Revenue Code of 1986, as amended
(the "Code"), shall have incurred any
unsatisfied liability under Title IV of ERISA
or Section 4980 of the Code, nor shall any
such entity have become subject to a lien
pursuant to Section 412(n) of the Code.
(c) Full payment has been made of all amounts which
Elsinore Engineering or EAS is required, under
applicable law or under any Employee Benefit
Plan or any agreement relating to any Employee
Benefit Plan to which it is a party, to have
paid as contributions to or benefits under any
Employee Benefit Plan as of the last day of
the most recent fiscal year of such Employee
Benefit Plan ended prior to the date hereof.
Elsinore Engineering has made adequate
provision in its financial statements for
liabilities to meet current contributions or
benefit payments.
(d) Elsinore Engineering and EAS have each performed
all obligations required to be performed by it
under the Employee Benefit Plans. Neither
Elsinore Engineering nor EAS has engaged in
any transaction with respect to the Employee
Benefit Plans which would subject either of
them, Buyer or DAH to a tax, penalty or
liability for a prohibited transaction under
section 406, 407 or 502(i) of ERISA or Section
4975 of the Code, nor have either of EAS's or
Elsinore Engineering's directors, officers,
partners, employees or agents, to the extent
they or any of them are fiduciaries with
respect to such Employee Benefit Plans,
breached any of their responsibilities or
obligations imposed upon fiduciaries under
Title I of ERISA or which would result in any
claim being made under or by or on behalf of
any such Employee Benefit Plans by any party
with standing to make such claim. Neither
Elsinore Engineering nor EAS will have any
plan or commitment, whether formal or
informal, written or oral, and whether or not
legally binding, to modify or change any
Employee Benefit Plan in
15
any material manner prior to the Closing Date.
EAS, Elsinore Engineering and any
"administrator(s)" (as described in Section
3(16)(A) of ERISA) of the Employee Benefits
Plans have complied in all material respects
with the applicable requirements of ERISA, the
Code and all other statutes, orders, rules or
regulations, specifically including material
compliance with all reporting and disclosure
requirements of Part 1 of Title 1 of ERISA and
of the Code in a timely and accurate manner,
and no penalties have been or will be imposed,
nor is EAS, Elsinore Engineering or any
administrator liable for any penalties
imposed, under ERISA, the Code or otherwise
with respect to the Employee Benefit Plans or
any related trusts. Neither Elsinore
Engineering nor EAS is delinquent in the
payment of any federal, state or local taxes
with respect to the Employee Benefit Plans.
There is no pending litigation, arbitration,
or disputed claim, settlement adjudication or
proceeding with respect to the Employee
Benefit Plans, and none of EAS, Elsinore
Engineering or any administrator is aware of
any threatened litigation, arbitration or
disputed claim, adjudication proceeding, or
any governmental or other proceeding, or
investigation with respect to the Employee
Benefit Plans or with respect to any fiduciary
or administrator thereof (in their capacities
as such), or any party-in-interest thereto
(with respect to their relationship as such).
There is no "defined benefit plan" within the
meaning of Section 414(j) of the Code or
Section 3(35) of ERISA to which either
Elsinore Engineering or EAS has been a party
or has been required to make any contributions
at any time during the last ten years. There
is no "multiemployer plan" within the meaning
of Section 3(37) of ERISA to which either
Elsinore Engineering or EAS has been a party
or has been required to make any contributions
at any time during the last ten years.
(e) Seller has delivered or caused to be delivered
to Buyer and DAH prior to the Closing Date,
true, accurate and complete copies of (A) all
16
Employee Benefit Plans and any related trust
agreements, custodial agreements, investment
management agreements, insurance contracts or
policies, and administrative service
contracts, all as in effect, together with all
amendments thereto which will become effective
at a later date; (B) the latest Summary Plan
Description and any modifications thereto for
each Employee Benefit Plan requiring same
under ERISA; (C) the Summary Annual Report for
the current and prior fiscal years for each
Employee Benefit Plan requiring same under
ERISA; (D) each Form 5500 and/or Form 990
series filing (including required schedules
and financial statements) for the current and
the prior fiscal year for each Employee
Benefit Plan required to file such form; and
(E) the most recent actuarial evaluation,
analysis or other report issued with respect
to any Employee Benefit Plan. None of EAS,
Elsinore Engineering or any officer, partner,
employee, representative or agent of either of
them, has made any written or oral
representations or statements to any current
or former employees, dependents, participants
or beneficiaries or other persons which are
inconsistent in any material manner with the
provisions of these documents.
(f) With respect to any of Elsinore Engineering's,
or EAS's employee welfare plans (as defined in
Section 3(1) of ERISA and including those
Employee Benefits Plans which qualify as such)
which are "group health plans" under Section
4980B of the Code and Section 607(1) of ERISA
and related regulations (relating to the
benefit continuation rights imposed by the
Consolidated Omnibus Budget Reconciliation Act
of 1986 ("COBRA"), as amended to date), there
has been timely compliance in all material
respects with all requirements imposed
thereunder, as and when applicable to such
plans, so that Elsinore Engineering and EAS
have not (nor will incur any) loss,
assessment, penalty, loss of federal income
tax deduction or other sanction, arising on
account of or in respect of any failure to
comply with any COBRA benefit continuation
requirement, which
17
is capable of being assessed or asserted
directly or indirectly against such party, or
against Buyer or DAH or any of their
respective subsidiaries or other member of
Buyer's corporate control group, with respect
to any such plan.
(g) No Employee Benefit Plan maintained by EAS or
Elsinore Engineering which is a "welfare plan"
within the meaning of Section 3(1) of ERISA
provides benefits to employees after
termination of employment, except as required
by Section 4980B of the Code.
3.2.16 CONTRACTS AND COMMITMENTS. Schedule 3.2.16 is a list
of all of the Contracts to which Elsinore Engineering is a party and which
involve the payment by or to Elsinore Engineering in the aggregate of $50,000 or
more (per contract) during any year. Sellers have previously delivered to Buyer
correct and complete copies of each such Contract. The Real Property Leases, the
Personal Property Leases and the Contracts listed on Schedule 3.2.16, taken
together, constitute all of the contracts, agreements, contract rights, leases,
license agreements, franchise rights and agreements, policies, purchase and
sales orders, quotations and executory commitments, instruments, guaranties,
indemnifications, arrangements, obligations and understandings (written or
oral), involving the payment by or to Elsinore Engineering (excluding the Grand
Prairie Facility), in the aggregate of $50,000 or more (per contract) during any
year, necessary to the conduct of the business of Elsinore Engineering as
presently conducted (excluding the Grand Prairie Facility).
All of the Real Property Leases, the Personal Property
Leases and the Contracts are valid and binding, in full force and effect and
enforceable against Elsinore Engineering in accordance with their respective
provisions. Except as disclosed on Schedule 3.2.16, neither EAS nor Elsinore
Engineering has assigned, mortgaged, pledged, encumbered, or otherwise
hypothecated any of its right, title or interest under any Real Property Lease,
any Personal Property Lease, or any Contract. Neither EAS nor Elsinore
Engineering (nor, to Senior Management's Knowledge, any other party thereto) is
in material violation of, in default in respect of, nor has there occurred an
event or condition which, with the passage of time giving of notice (or both)
would constitute a material violation or default of, any Real Property Lease,
any Personal Property Lease, or any Contract; and, to Senior Management's
Knowledge, there are no facts or circumstances which would reasonably indicate
that Elsinore Engineering (or any other party) will be or may be in material
violation of or in default in respect of any Real Property Lease, any Personal
Property Lease, or any Contract, subsequent to the date hereof. No notice has
been received by EAS or Elsinore Engineering claiming any such default or
indicating the desire or intention of any other party thereto to amend, modify,
rescind or terminate the same to the extent that it would have a Material
Adverse Effect on the business or assets of Elsinore Engineering.
3.2.17 ACCOUNTS RECEIVABLE, ETC. All of the Receivables of
18
Elsinore Engineering are set forth on Schedule 3.2.17, together with the value
thereof. All such Receivables and Prepaid Expenses, together with any additional
Receivables and Prepaid Expenses arising between the date hereof and the Closing
Date (in each case net only of such allowances for doubtful accounts as
disclosed on the September 30, 1996 Balance Sheet), (a) are or will be valid and
subsisting, (b) represent or will represent sales actually made, (c) arose or
will arise in the ordinary and usual course of the business of Elsinore
Engineering, (d) except as set forth on Schedule 3.2.17, to the extent not
collected prior to the Closing Date, will be due and enforceable according to
their terms within 90 days after the date of the initial invoice therefor, and
(e) are not and (except as may be caused by Buyer) will not be subject to any
material counterclaim, set-off, defense, lien, charge or encumbrance of any
nature. There has not been any material adverse change in the collectibility of
the Receivables of Elsinore Engineering since September 30, 1996. Buyer will use
its best efforts (as defined in Section 6.1.4) to collect the Receivables.
3.2.18 INVENTORIES. [No Rep.]
3.2.19 BACKLOG. All unfilled orders as of September 30,
1996 to purchase goods and services of Elsinore Engineering are set forth in
Schedule 3.2.19 and all unfilled orders as of the Closing Date to purchase goods
and services of Elsinore Engineering shall be set forth in a disclosure document
provided by Seller to Buyer within thirty days of the Closing Date, and are firm
and binding commitments (subject to cancellation rights set forth therein) of
the respective purchasers (assuming that such purchaser has properly authorized
by all requisite corporate or, if not a corporation, by all other requisite
action and has properly executed and delivered such purchase order, which, to
Senior Management's Knowledge, is the case) to purchase the goods indicated.
3.2.20 BOOKS OF ACCOUNT: RECORDS. Except for the
qualifications (if any) explicitly set forth therein or in Schedule 3.2.20 the
general ledgers, books of account and other financial records of Elsinore
Engineering are complete and correct, have been maintained in accordance with
good business practices and the matters contained therein are appropriately and
accurately reflected in the Financial Statements.
3.2.21 MANAGERS, EMPLOYEES AND COMPENSATION. Schedule 3.2.21
sets forth the name of all managers and engineers of Elsinore Engineering, their
respective terms of office, the total salary, bonus payments, fringe benefits
and perquisites each received in each of the last 3 calendar years ended
December 31, 1995 (or, if briefer, during their tenure of employment with
Elsinore Engineering and any affiliate thereof), and changes to the foregoing
which have occurred since December 31, 1995, together with the professional
background of each manager and engineer for the last 5 years (as disclosed to
Elsinore Engineering by such employee and, to Senior Management's Knowledge,
correctly and completely); such Schedule also lists and described the current
base salary, bonus payments, fringe benefits and perquisites of any other
employee, agent or representative of Elsinore Engineering whose total current
salary, bonus or other compensation exceeds $50,000 annually during any of the
last
19
3 calendar years ended December 31, 1995, and changes to the foregoing since
December 31, 1995. There are no other material forms of compensation paid to any
such director, officer or employee of Elsinore Engineering. The provisions for
wages and salaries accrued on the September 30, 1996 Balance Sheet are adequate
for salaries and wages, including accrued vacation pay, for the period up
through the date thereof, and Elsinore Engineering has accrued on its books and
records all obligations to pay wages and salaries and other compensation to its
employees, including, but not limited to, vacation pay and sick pay, and all
commissions and other fees payable to agents, salesmen and representatives. ELP
and EAS has filed any and all payroll tax returns, and paid all payroll taxes
due for any and all Elsinore Engineering employees, due through the Closing
Date.
Except as set forth on Schedule 3.2.21, Elsinore
Engineering has not become obligated, directly or indirectly, to any
shareholder, director, officer or partner of ELP, EAS or any Seller or any
member of their families, except for current liability for employment
compensation. Except as set forth on Schedule 3.2.21, no shareholder,
director, officer, partner, agent or employee of ELP, EAS or any Seller holds
any position or office with or has any financial interest, direct or
indirect, in any supplier, customer or account of, or other outside business
which has transactions with Elsinore Engineering. Neither ELP, EAS nor
Elsinore Engineering, nor, to Senior Management's Knowledge, any third party,
has taken any action with respect to any shareholder, director, officer,
partner, employee or representative of ELP, EAS or Elsinore Engineering to
attempt to induce or which would influence any such person not to become
associated with Buyer from and after the Closing Date or from serving Buyer
in a capacity similar to the capacity presently held. Except to the extent as
may have been previously disclosed to DAH by Sellers in writing, no employee
of Elsinore Engineering, to Senior Management's knowledge, has a present
intention to leave the employ of Elsinore Engineering or has taken any action
directed towards leaving the employ of Elsinore Engineering. Except as set
forth on Schedule 3.2.21, to Senior Management's Knowledge, no former
employee of ELP, EAS is currently or intends to enter into competition with
the business of Elsinore Engineering.
3.2.22 CREDIT TERMS: PRODUCT WARRANTIES. Schedule 3.2.22
sets forth all of the standard terms and conditions of credit and discounts
given by Elsinore Engineering to its customers in the usual and ordinary course
of its business and a list of all transactions pending where there is a material
departure therefrom.
3.2.23 CONTRACTS WITH AFFILIATES. Any contract, commitment,
lease, permit or other instrument, agreement, understanding or obligation
(written or oral) between Elsinore Engineering and any affiliate of EAS or
any Seller is described on Schedule 3.2.23 hereto, and is the equivalent of
an "arms-length" transaction with a third party (except to the extent
otherwise described in Schedule 3.2.23).
3.2.24 GOVERNMENT CONTRACTS.
(a) For purposes of this Section 3.2.24, the term
"Government" means any agency, division,
20
subdivision, audit group, or procuring office
of the federal government, including the
employees or agents thereof; the term
"Government Contract" means any prime
contract, subcontract, basic ordering
agreement, letter contract, purchase order or
delivery order of any kind, including all
amendments, modifications and options
thereunder or relating thereto, between the
Elsinore Engineering and any of the
Government, any prime contractor of the
Government, any subcontractor of such a prime
contractor or any subcontractor of another
subcontractor, however far removed from the
prime contractor such subcontractor may be,
(A) currently in force; (B) which, within the
three years preceding the date of this
Agreement, expired or were terminated; or (C)
for which final payment was received within
the three years preceding the date of this
Agreement; and the term "Bid" means any
outstanding quotation, bid or proposal
submitted by Elsinore Engineering to the
Government, any proposed prime contractor of
the Government, or any proposed subcontractor.
(b) Elsinore Engineering is not a party to any
Government Contract and has not submitted any
Bids [which have not expired].
(c) Except as set forth in Schedule 3.2.24,
(A) no show cause notices, cure notices, or
terminations have been issued against the
Elsinore Engineering with respect to any
Government Contract; (B) no negative
determinations of responsibility have been
issued against the Elsinore Engineering with
respect to any Bid and (C) none of the
Government, any prime contractor nor any
subcontractor has notified the Elsinore
Engineering, either orally or in writing, that
it is in breach or violation of any provision
of any Government Contract, any certification
or representations with respect thereto or any
statutes and regulations applicable thereto.
(d) Elsinore Engineering is not undergoing and has
21
not undergone any audit, and has no knowledge
or reason to know of any basis for impending
audits in the future, arising under or
relating to any Government Contract except as
set forth in Schedule 3.2.24.
3.2.25 SOLVENCY. The total assets of ELP and each of the
Sellers exceed their respective total liabilities (excluding, in the case of
ELP, liabilities to or guaranteed by its affiliates); and ELP and each of the
Sellers generally are able to perform their respective financial obligations
as performance thereof becomes due.
3.2.26 ALLOCATIONS. Except as noted in the Financial
Statements, all payments in respect of administrative overhead or similar
allocative costs which Elsinore Engineering has made or is obligated to make
to ELP have been omitted from the Financial Statements.
3.2.27 COMPLETE DISCLOSURE. No representation or warranty
made by ELP or any of the Sellers in this Agreement, and no exhibit,
schedule, statement, certificate or other information furnished to Buyer by
or on behalf of ELP or any Seller pursuant to this Agreement or in connection
with the transactions contemplated hereby or thereby, contains or will
contain, any untrue statement of a material fact or omits or will omit to
state a material fact necessary in light of the circumstances to make the
statements contained herein and therein not misleading.
4. INDEMNIFICATION.
4.1 Lyon and ELP, with full recourse, jointly and severally,
hereby indemnify and hold harmless DAH and Buyer from any claims loss,
damages or expenses as a result of any breach of any representation made in
this Agreement by ELP or Lyon. The indemnification made in this Section 4
shall continue until (i) with respect to any Materially Misleading statement
or information (as defined below), the end of the applicable statute of
limitations from actual discovery or (ii) otherwise, the second anniversary
of the Closing Date. For the purposes of this Section 4, a statement,
representation, warranty or other information is "Materially Misleading" when
it contains any untrue statement of material fact or omits to state a
material fact necessary in light of the circumstances to make the statements
or other information contained therein not misleading.
4.2 Without limiting the generality of the foregoing, ELP and
Lyon, jointly and severally, agree to pay to DAH in immediately available
funds (cash) within 5 days of receipt of notice from DAH (i) an amount equal
to the difference between (a) the Accounts Receivable on the Closing Date
Balance Sheet (less the stated allowance for doubtful accounts and less the
amount of any billed Accounts Receivable for which payment arrangements which
Buyer has designated to such obligor as satisfactory to it have. been made)
and (b) such of the Accounts Receivable described in clause (a) have been
collected by Buyer (which Buyer agrees to use diligent efforts to collect)
between the Closing Date and the date 120 days following the Closing Date,
and (ii) in the event
22
of the cancellation of any item of backlog specified in Schedule 3.2.19 hereto,
an amount equal to 10% of the dollar amount of the goods and services canceled.
Buyer's obligations with respect to collection shall be deemed satisfied if it
continues the collection practices of Elsinore.
5. ASSUMPTION OF CERTAIN LIABILITIES: NO ASSUMPTION OF OTHER LIABILITIES.
5.1 On the Closing Date, Buyer will assume:
5.1.1 ACCOUNTS PAYABLE. All accounts payable for current
liabilities by Elsinore Engineering as of September 30, 1996 and as incurred
in the ordinary course of business from September 30, 1996 through the
Closing Date. A schedule of the Accounts Payable of Elsinore Engineering as
of September 30, 1996 is attached as Schedule 5.1.1;
5.1.2 ACCRUED OPERATING EXPENSES. All accrued operating
expenses which were incurred by Elsinore Engineering as of September 30, 1996
and as incurred in the ordinary course of business from September 30, 1996
through the Closing Date and which are reflected as a liability on the
balance sheets for Elsinore Engineering as of September 30, 1996 and as of
the Closing Date, respectively. Attached as Schedule 5.1.2 is a balance sheet
as at September 30, 1996;
5.1.3 LEASE(S). The leases specified on Schedule 1.1.1
and Schedule 1.1.2; prior to the Closing, ELP shall have obtained the written
consents of the lessors named on Schedule 1.1.1;
5.1.4 OPEN PURCHASE CONTRACTS. The obligation of ELP to
perform those purchase contracts and related purchase orders in existence on
the Closing Date which were incurred by ELP in the ordinary course of
business and.are disclosed in Schedule 1.1.6 at "List of Agreements" Part I;
provided, however, that only the obligations to deliver goods and services
(including warranties) are being assumed and Buyer does not assume any other
liability, risk or exposure of Elsinore Engineering or ELP; Buyer does not
assume the risk of any claim for any loss, damage, or exposure asserted by
any party to any contract for occurrences prior to the Closing Date.
5.1.5 CURRENT LIABILITIES FROM OPERATIONS IN THE ORDINARY
COURSE. Those obligations of Elsinore Engineering which have been incurred
from and after September 30, 1996, in the ordinary course of business and
which are expressly permitted by the affirmative covenants and not prohibited
by the negative covenants set forth in Section 6.2 of this Agreement;
5.1.6 WARRANTY AND RELATED OBLIGATIONS. To the extent
that work is requested and ELP grants prior written approval to Buyer to do
such work, and subject to the provisions of Section 6.2.12, the obligation to
provide warranty and related work in any agreement of Elsinore Engineering as
disclosed on Schedule 1.1.6 and which are hereby assumed, it being
acknowledged by Buyer that included in such work is the work relating to the
Crew Rest Program licensed from Qantas performed for Virgin
23
Atlantic, as to which Buyer hereby agrees to retain all data provided by Seller.
5.1.7 ROYALTIES AND LICENSE FEES. To the extent of
Royalties for Patents and License Fees specified in Schedule 5.1.7, the
Royalties and License Fees which appear on the Schedule.
5.1.8 VACATION, SICK LEAVE AND PENSION BENEFITS. To the
extent reserved for in the balance sheet as of September 30, 1996 and as
incurred in the ordinary course of business from September 30, 1996 through
the Closing Date, to pay for vacation time, sick leave and to provide pension
benefits as specified on Schedule 5.1.8.
5.1.9 DAIMLER-BENZ CONTRACT. Buyer will assume all
obligations, including those of performance, and liabilities under, and the
risk of profit or loss and the risk of completion of, that certain STC
Development Agreement by and between Elsinore LP and Daimler-Benz Aerospace
Airbus GmbH dated as of June 7, 1996 (the "Daimler-Benz Contract"), a copy of
which is attached hereto as Schedule 5.1.9.
5.1.10 STC's. All obligations in connection with the
ownership and maintenance of the STC's transferred pursuant to Section 1.1.5
hereof.
5.2. LIABILITIES NOT ASSUMED. With the exception of the
liabilities assumed pursuant to Section 5.1, Buyer shall not by the execution
or performance of this Agreement, or otherwise, assume or otherwise be
responsible for any liability or other obligation of Elsinore Engineering or
ELP of any kind, nature or description, whether such liability or obligation
is mature or not, liquidated or unliquidated, fixed or contingent, known or
unknown, whether arising out of occurrences prior to, at or after the date of
this Agreement, including without limitation, those rising from breach of
contract, breach of any warranty, infringement, fraud, violation of any law,
rule or regulation, or out of any charge, complaint, action, suit,
proceeding, hearing, investigation, claim or other demand. Without limiting
the foregoing, no liabilities related to the Grand Prairie Facility are being
assumed pursuant to this Agreement.
6. COVENANTS.
6.1 COVENANTS OF BUYER
6.1.1 PAYMENT AND PERFORMANCE OF ASSUMED LIABILITIES.
From and after the Closing Date, Buyer shall pay and perform the liabilities
assumed pursuant to Section 5.1 in the ordinary course of its business in
accordance with Buyer's standard business practices.
6.1.2 USE OF NAME. Seller owns the name "Elsinore" and
gives DAH the right to use the name Elsinore Aerospace Services, Inc.,
Elsinore LP, EAS and ELP only so long as reasonably necessary for EAS to
maintain its DAS with the FAA. At such time as the FAA agrees that a change
of name will have no adverse
24
effect on the DAS, DAH will cause EAS to change its name to a name which does
not include the name "Elsinore." DAH will diligently pursue such name change.
DAH agrees not to use the Elsinore logo and acknowledges the exclusive ownership
of such logo by Sellers. Sellers and their affiliates shall have the right to
continue to use the name "Elsinore Aerospace Services, Inc." in connection with
normal post closing matters arising after the consummation of the Agreement,
including but not limited to, settlement of disputes, documentation, etc.
Elsinore may use the name "Elsinore LP" for any purpose.
6.1.3 HOLD HARMLESS. DAH and Buyer agree to indemnify and
hold harmless Seller from any liabilities to third parties arising from the
operations or business of Elsinore Engineering on and after the consummation
of the transactions contemplated herein on the Closing Date, except to the
extent caused by the gross negligence or willful misfeasance of Seller.
6.1.4 DUTY TO COLLECT ACCOUNTS RECEIVABLE. Buyer and DAH
shall use their best efforts to collect accounts receivable outstanding at
the Closing Date. As used in this Section 6.1.4, "best efforts" shall be
deemed to have been used so long as Buyer continues the accounts receivable
collection practices used by Elsinore Engineering prior to the date of this
Agreement.
6.1.5 EMPLOYEES. From and after the Closing Date, Buyer
and DAH shall employ substantially all of the current employees of Elsinore
Engineering, subject to normal management prerogatives to review performance
and terminate employment as necessary or appropriate for the business. The
Buyer and DAH shall compensate such employees at substantially the same level
of compensation in effect for such employees and shall continue to recognize
each employee's seniority status as under current Elsinore Engineering
practice. Buyer and DAH will continue normal fringe benefits for such
employees subject to the integration of such fringe benefits with Buyer's and
DAH's current programs.
6.1.6 BUYER'S WORKING CAPITAL. DAH covenants that it will
(i) initially provide and (ii) continue to provide for a period of 5 years
from the Closing Date sufficient working capital for Buyer to (i) perform the
obligations assumed by Buyer pursuant to Section 5 of this Agreement and (ii)
for any business activities other than the performance of obligations assumed
pursuant to Section 5 of this Agreement. The forgoing are the only purposes
for which DAH shall have obligations to provide working capital to Buyer.
6.1.7 KITTING. On the Closing Date, Buyer and ELP will
enter into a Kitting Subcontract Agreement in the form of EXHIBIT A-1 to the
Agreement and a Warranty Subcontract Agreement in the form of EXHIBIT A-2 to
the Agreement.
6.2 COVENANTS OF ELP AND LYON.
6.2.1 COVENANT AGAINST HIRING. Each of ELP and Lyon
understand that it is essential to the successful operation of the business
to be acquired
25
hereunder that Buyer retain substantially unimpaired Elsinore Engineering's
operating organization. Each of ELP and Lyon agrees that neither he nor it
shall purposefully take any action which would induce any employee or
representative of ELP not to become or continue as an employee or
representative of Buyer. Without limiting the generality of the foregoing,
neither Elsinore Engineering nor Lyon shall, whether directly or indirectly
through any subsidiary or affiliate, for a three (3) year period from the
Closing Date solicit to employ (whether as an employee, officer, director,
agent, consultant or independent contractor), or enter into any partnership,
joint venture or other business association with, any person who was an
employee of ELP at any time from January 1, 1996, until the Closing Date as
listed on Schedule 6.2.1; provided, however that ELP and Lyon may solicit to
employ (whether as an employee, officer, director, agent, consultant or
independent contractor), or enter into any partnership, joint venture or
other business association with, Xxxxxxx X. Xxxxxxxx, Xxxxx Xxxxxx and X.X.
Xxxxx for any purpose not competitive with the business of Elsinore
Engineering or Xxxxxxxxxxx International, Inc. as they exist on the Closing
Date.
6.2.2 INJUNCTIVE RELIEF. Each of ELP and Lyon
acknowledges and agrees that Buyer's remedy at law for any breach of any of
ELP's or Lyon's obligations under Subsections 6.2.1 or 6.2.3 hereof would be
inadequate, and agrees and consents that temporary and permanent injunctive
relief may be granted in a proceeding which may be brought to enforce any
provision of Subsections 6.2.1 or 6.2.3 Seller recognizes that damages would
not be an adequate remedy. The rights and remedies conferred upon Buyer under
this Section 6.2.2, elsewhere in this Agreement, or by any instrument or law
shall be cumulative and may be exercised singularly or concurrently.
6.2.3 CONDUCT OF BUSINESS OF ELP PRIOR TO CLOSING DATE.
Each of ELP and Lyon agrees that on and after the date hereof and prior to
the Closing Date:
(a) The business and operations, activities and
practices of Elsinore Engineering shall be
conducted only in the ordinary course of
business and consistent with past practice;
(b) No change shall be made in the articles of
incorporation or bylaws of EAS, except as is
necessary to comply with Section 6.1.2 hereof;
(c) No change shall be made in the number of shares
of authorized or issued capital stock of EAS;
nor shall any option, warrant, call, right,
commitment or agreement of any character be
granted or made with respect to a general
partnership interest in ELP, except
immediately prior to the Closing, but after
the execution of this Agreement, ELP will
remove EAS as its
26
general partner and substitute Elsinore
Services Corporation as its general partner;
(d) Neither ELP nor Lyon shall, directly or
indirectly, solicit or encourage (including by
way of furnishing any non-public information
concerning the business, properties or assets
of Elsinore Engineering), or enter into any
negotiations or discussions concerning, any
Acquisition Proposal (as defined below). ELP
and Lyon will notify Buyer promptly by
telephone, and thereafter promptly confirm in
writing, if any such information is requested
from, or any Acquisition Proposal is received
by ELP or Lyon. As used in this Agreement,
"Acquisition Proposal" shall mean any proposal
received by ELP or Lyon prior to the Closing
Date for a merger or other business
combination involving Elsinore Engineering or
for the acquisition of, or the acquisition of
a substantial equity interest in, or any
material part of the assets of, Elsinore
Engineering other than the one contemplated by
this Agreement.
(e) Except as set forth in Schedule 6.2.3(e),
Elsinore Engineering will not, and ELP will
not cause or permit Elsinore Engineering to:
(i) incur, become subject to, or suffer, or
agree to incur, become subject to or
suffer, any obligation or liability
(absolute or contingent) except
current liabilities incurred, and
obligations under contracts entered
into, in the ordinary course of
business;
(ii) discharge or satisfy any lien or
encumbrance or pay any obligation or
liability (absolute or contingent)
other than liabilities payable in the
ordinary course of business;
(iii) mortgage, pledge or subject to lien,
charge or any other encumbrance, any
of the Property or agree so to do;
(iv) sell or transfer or agree to sell or
27
transfer any of its assets, or cancel
or agree to cancel any debt or claim,
except in each case in the ordinary
course of business;
(v) consent or agree to a waiver of any
right of substantial value;
(vi) enter into any transaction other than
in the ordinary course of its
business;
(vii) without the express written consent of
Buyer, increase the rate of
compensation payable or to become
payable by it to any Restricted
Employee over the rate being paid to
such Restricted Employee at September
30, 1996;
(viii) increase the rate of compensation
payable or to become payable by it
to any Non-Restricted Employee over
the rate being paid to such
Non-Restricted Employee at September
30, 1996, other than in the ordinary
course of business and in accordance
with Elsinore Engineering's past
practice;
(ix) except in the ordinary course of
business, terminate any contract,
agreement, license or other
instrument to which it is a party;
(x) through negotiation or otherwise, make
any commitment or incur any liability
or obligation to any labor
organization;
(xi) without the express written consent of
Buyer, make or agree to make any
accrual or arrangement for or payment
of bonuses or special compensation of
any kind to any Restricted Employee;
(xii) make or agree to make any accrual or
arrangement for or payment of bonuses
or special compensation of any kind
to any Non-Restricted Employee, other
than in the ordinary course of
business
28
and in accordance with Elsinore
Engineering's practice;
(xiii) without the express written consent of
Buyer, directly or indirectly pay or
make a commitment to pay any
severance or termination pay to any
Restricted Employee;
(xiv) directly or indirectly pay or make a
commitment to pay any severance or
termination pay to any Non-Restricted
Employee, other than in the ordinary
course of business and in accordance
with Elsinore Engineering's past
practice;
(xv) introduce any new method of management,
operation or accounting with respect
to its business or any of the assets,
properties or rights applicable
thereto;
(xvi) offer or extend more favorable prices,
discounts or allowances than were
offered or extended regularly on and
prior to September 30, 1996, other
than in the ordinary course of
business;
(xvii) make capital expenditures or
commitments therefor without the
express written consent of Buyer; and
(xviii) hire any employee earning a wage or salary
of more than $30,000 per year.
(f) ELP and Lyon will use their respective best
efforts to preserve Elsinore Engineering's
business organization intact, to keep
available to Elsinore Engineering the present
service of Elsinore Engineering's employees,
and to preserve for Elsinore Engineering the
goodwill of its suppliers, customers and
others with whom business relationship exist;
and
(g) Neither ELP nor Lyon will take, agree to take
or permit to be taken any action or do or
permit to be done anything in the conduct of
the
29
business of Elsinore Engineering, or
otherwise, which would be contrary to or in
breach of any of the terms or provisions of
this Agreement or which would cause any of the
representations or warranties of ELP or Lyon
contained herein to be or become untrue in any
material respect.
6.2.4 INSPECTION OF BOOKS AND RECORDS. From the date of
this Agreement until the Closing Date, ELP shall make or cause to be made
available to Buyer for examination the property and other materials such as
books of account, contract, agreements, commitments, records and its
documents directly relating to Elsinore Engineering and its business and
shall permit Buyer and its representatives, attorneys, accountants and agents
to have access to and to copy, at Buyer's expense, the same at all reasonable
times. In addition, ELP shall make, or cause to be made, available to Buyer
and its representatives, attorneys, accountants and agents the property and
all of the above described records for any environmental compliance audit,
any environmental site assessment (including soil, groundwater and/or other
testing) and any other physical inspection which Buyer may elect to conduct
at its own expense.
6.2.5 FURTHER ASSURANCES. On and after the Closing Date,
Elsinore Engineering and Lyon shall prepare, execute and deliver, at their
expense, such further instruments of conveyance, sale, assignment or
transfer, and shall take or cause to be taken such other or further action as
Buyer shall reasonably request at any time or from time to time in order to
perfect, confirm or evidence in Buyer title to all or any part of the
property or to consummate, in any other manner, the terms and conditions of
this Agreement.
6.2.6 PRESS RELEASES AND ANNOUNCEMENTS. Neither Elsinore
Engineering, Lyon, Buyer nor DAH shall issue any press release or
announcement relating to the subject matter of this Agreement without the
prior written approval of the other parties hereto; PROVIDED, HOWEVER that
Elsinore Engineering, Lyon, Buyer or DAH may make any public disclosure he or
it believes in good faith is required by law (in which case he or it will
advise the other parties hereto prior to making the disclosure). On the
Closing Date, ELP, the Buyer and DAH will issue public announcements and/or
press releases previously mutually agreed to by Seller, DAH and Buyer as to
form and content, announcing the transaction contemplated by this Agreement.
6.2.7 [Intentionally left blank.]
6.2.8 DELIVERY OF FINANCIAL STATEMENTS. No later than 30
days after the Closing Date, ELP and Lyon shall deliver to Buyer and DAH the
balance sheet of Elsinore Engineering as at the Closing Date and the related
statements of income, retained earnings and cash flows for the year to date
then ended (the "Closing Date Financial Statements") and which shall be true,
correct and complete, shall have been prepared from and are in accordance
with the books and records of Elsinore Engineering and ELP and, except as
disclosed in the Schedules to this Agreement or in the Financial Statements
or related notes by Seller, shall have been prepared in conformity with
30
generally accepted accounting principles applied on a consistent basis
for such periods using an accrual basis method, reflect sufficient reserves
for asserted and potential products liability claims, and fairly present the
financial condition of Elsinore Engineering as of the dates stated and the
results of operations of Elsinore Engineering for the periods then ended in
accordance with such practices. The Financial Statements (including all notes
accompanying such statements) shall not disclose any event or circumstance
materially adversely affecting Elsinore Engineering or its businesses. The
Closing Date Financial Statements shall upon delivery to Buyer become part of
the Financial Statements as defined herein for all purposes hereof.
6.2.9 TRADE SECRETS AND CONFIDENTIAL KNOW-HOW. Between
the date hereof and the Closing Date, ELP and Lyon and their representatives
shall, upon request by Buyer, reduce to writing all trade secret information
or other know-how of a business or technical nature which is now used in or
which is useful for the present or anticipated future business of Elsinore
Engineering, such writing to be confidential and afforded such protection and
confidential treatment as Buyer shall reasonably request.
6.2.10 SALES TAXES, UNEMPLOYMENT INSURANCE, ETC. Without
limiting any other term hereof, ELP shall pay all sales taxes and
unemployment insurance premiums to be paid in respect of Elsinore Engineering
and the Property through the Closing Date.
6.2.11 INDEMNITY REGARDING BULK SALES, ETC. Lyon and ELP
jointly and severally hereby agree to indemnify and hold harmless DAH and
Buyer from any claims, costs or losses incurred as a result of the failure of
ELP or Elsinore Engineering to comply with any and all requirements of sales
tax and bulk sales laws and regulations arising under California law in
connection with the transactions contemplated by this Agreement.
6.2.12 WARRANTY AND RELATED WORK AFTER CLOSING DATE. To
the extent that Elsinore Engineering has not adequately reserved on its
balance sheet as of the Closing Date for the following costs under this
Section 6.2.12, ELP shall reimburse Buyer for Buyer's actual direct cost of
material and labor incurred in respect of any warranty or related work
completed by Buyer pursuant to its liabilities assumed under Section 5. No
SG&A or overhead charge is to be applied.
6.2.13 HOLD HARMLESS. ELP and Lyon agree to indemnify and
hold harmless DAH and Buyer from any liabilities to third parties arising
from the operations or business of Elsinore Engineering at any time prior to
the consummation of the transactions contemplated herein on the Closing Date,
except to the extent caused by the actions, gross negligence or willful
misfeasance of DAH or Buyer.
7. CLOSING AND CONDITIONS PRECEDENT.
7.1 CLOSING DATE. The date upon which the transactions
contemplated hereby shall become effective December 5, 1996 (the "Closing
Date") upon which each of the conditions precedent set forth in Sections 7.2
and 7.3 shall have been satisfied
31
or waived pursuant to the respective terms thereof.
7.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF DAH AND BUYER. Each and
every obligation of DAH and Buyer to be performed on the Closing Date shall
be subject to the satisfaction on or before the Closing Date of each of the
following conditions (unless waived in writing by DAH and Buyer): ELP shall
have delivered to Buyer each of the following, in each case duly and properly
executed (if appropriate) and in form and substance reasonably satisfactory
to the Buyer:
7.2.1 DAH in its sole and absolute discretion shall be
satisfied that the transactions contemplated by this Agreement and the
changes in ownership of EAS and Elsinore Engineering will not result in the
termination or restriction of the Designated Alternation Station Certificate
("DAS") owned by EAS. The rights of DAH in this Section 7.2.1 shall terminate
on November 14, 1996 (the "Termination Date"); at any time on or prior to the
Termination Date, DAH may terminate its obligations to purchase as provided
in this Agreement by giving notice to Lyon and ELP in the event that DAH in
its sole and absolute discretion determines that as a result of this
Agreement or the transactions contemplated by it, or any provision of it,
including, without limitation, the transfer of the stock of EAS or the assets
of Elsinore Engineering, the FAA might terminate or restrict the DAS of EAS.
7.2.2 Good and sufficient assignments of each Real
Property Lease, conveying all of ELP's right, title and interest in and to
such Real Property Lease, free and clear of all mortgages, pledges, liens,
security interest, encumbrances, restrictions and claims of any nature
whatsoever, except those listed on Schedule 1.1.1.
7.2.3 Written consents of the lessors under each Real
Property Leases to the assignment of such Real Property Leases, with no
adverse condition attached.
7.2.4 A good and sufficient General Conveyance, Assignment
and Xxxx of Sale in the form of EXHIBIT G, conveying, selling, transferring
and assigning to Buyer title to all of the Personal Property free and clear
of all security interests, liens, charges, encumbrances or equities
whatsoever.
7.2.5 Motor Vehicle Certificates of Title to each of the
Vehicles, endorsed for transfer to Buyer.
7.2.6 The Closing Date may be extended by DAH in the event
that on or before the Closing Date any party to any contract of which consent
is required as a provision of such contract in which there is consideration
of $250,000, or parties to any group of contacts in which there is
consideration of $400,000 in the aggregate, have not consented to the
assignment to Buyer, provided, however, that in no event shall the Closing
Date be extended beyond November 30, 1996.
7.2.7 Copies of each of the Permits, together with
evidence satisfactory to Buyer that the same are in full force and effect,
and (to the extent
32
requested by Buyer) evidence that such permits are eligible for immediate
transfer to Buyer.
7.2.8 The books and records described in Section 3.2.20;
each of the Financial Statements described in Section 3.2.4; the Closing Date
Financial Statements to be delivered pursuant to Section 6.2.8, together with
evidence satisfactory to the Buyer of the payment by EAS of all amounts due
to the relevant taxing authorities pursuant thereto.
7.2.9 Evidence satisfactory to DAH and Buyer and their
counsel that the execution and delivery of this Agreement has been authorized
by ELP.
7.2.10 A favorable opinion of Irell & Xxxxxxx, counsel for
ELP and Lyon, addressed to Buyer and DAH and dated the Closing Date, in the
form of EXHIBIT B attached hereto.
7.2.11 The Articles of Incorporation of EAS, certified as
of a recent date by the Secretary of State of California.
7.2.12 The Bylaws of EAS, certified as true and complete by
the Corporate Secretary of ELP.
7.2.13 A certificate of the California Secretary of State,
each dated as of a date not earlier than ten days prior to the Closing Date,
as to the good standing of EAS and the payment of all corporate franchise
taxes), together with facsimile confirmation of such good standing on the
Closing Date.
7.2.14 An affidavit of the Chief Executive Officer or Chief
Financial Officer of ELP stating that ELP is not a foreign seller within the
meaning of the Internal Revenue Code of 1986, as amended.
7.2.15 Such other consents as Buyer deems necessary in
order to consummate the transactions contemplated herein.
7.2.16 Such other separate instruments of sale, assignment
or transfer that Buyer may reasonably deem necessary or appropriate in order
to perfect, confirm or evidence title to all or any part of the Property.
7.2.17 In its reasonable judgment, DAH shall be satisfied
with the completion of its due diligence and [shall have obtained the consent
of its senior lender and of its subordinated lender of the transaction
contemplated by this agreement].
7.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF ELP AND LYON. Each and
every obligation of ELP and Lyon to be performed on or before the Closing
Date shall be subject to the satisfaction on or before the Closing Date of
each of the following conditions (unless waived in writing by ELP and Lyon):
The Buyer shall have delivered to ELP each of the following, in each case
duly and properly executed (if appropriate)
33
and in form and substance reasonably satisfactory to ELP:
7.3.1 Payment of an amount equal to $1 million in
immediately available funds (cash) on the Closing Date.
7.3.2 Resolutions of the directors of Buyer and DAH
authorizing the execution and delivery of this Agreement by Buyer and DAH
respectively and the performance of their respective obligations hereunder,
certified by the Corporate Secretaries of Buyer and DAH, respectively.
7.3.3 An opinion of Spolin & Xxxxxxxxx, counsel for Buyer
and DAH, addressed to ELP and Lyon and dated the Closing Date, in the form of
EXHIBIT C attached hereto.
7.3.4 The Assumption Agreement with respect to the Assumed
Liabilities, in the form of EXHIBIT D attached hereto.
7.3.5 A termination of the guaranty of Air/Lyon
Associates, L.P. in favor of Daimler-Benz in the form of EXHIBIT E attached
hereto.
7.3.6 Execution of a promissory note (the "Note") by DAH
in favor of Seller in the form of EXHIBIT F attached hereto.
8. MISCELLANEOUS PROVISIONS.
8.1 NOTICE. All notices and other communications required or
permitted under this Agreement shall be in writing and shall be effective
upon receipt and shall be delivered by commercial courier providing proof of
delivery to such address as may be designated from time to time pursuant to
this Section 8.1 by the parties hereto and which addresses will initially be
as set forth below:
If to DAH
or Buyer: XxXxxxx Aircraft Holdings, Inc.
0000 Xxxxxxxxx Xxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
Attention: R. Xxxx XxXxxxx
Fax No. (000) 000-0000
with a copy to: XxXxxxx Aircraft Holdings, Inc.
000 Xxxxxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxx 00000
Fax No. (000) 000-0000
If such notice
asserts a breach
of this Agreement,
a copy to: Spolin & Xxxxxxxxx
34
000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx
Fax No. (000) 000-0000
If to Lyon: Xxxxxxx Xxxx
0000 Xxx Xxxxxx Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Fax No. (000) 000-0000
If to ELP: Elsinore LP
Xxxx Xxxxx/Orange County Airport
00000 Xxx Xxxxx Xxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
Fax No. (000) 000-0000
If such notice
asserts a breach
of this Agreement,
a copy to: Irell & Xxxxxxx
1800 Avenue of the Stars, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxx, Esq.
Fax No. (000) 000-0000
8.2 ARBITRATION OF DISPUTES. Except for actions seeking injunctive
relief, which may be brought before any court having jurisdiction, any claim
arising out of or relating to (i) this Agreement, including, but not limited
to, its validity, interpretation, enforceability or breach, or (ii) the
relationship between the parties (including its commencement and termination)
which are not settled by agreement between the parties, shall be settled by
arbitration conducted exclusively in Los Angeles, California before a retired
Judge of the Superior Court in an arbitration proceeding conducted in
accordance with the rules then in effect of the Judicial Arbitration and
Mediation Services ("JAMS"). The decision of the Arbitrator shall be final
and binding on the parties, and such decision shall be enforceable as a
judgment in any court of competent jurisdiction. The parties hereby consent
to the in personam jurisdiction of the courts of the State of California for
the purposes of confirming any such award and entering judgment thereon. In
any arbitration proceedings hereunder, (a) all testimony of witnesses shall
be taken under oath; (b) discovery will be allowed to the same extent as
available under the rules then applicable to civil actions under California
law; (c) upon conclusion of any arbitration, the arbitrator shall render
findings of fact and conclusions of law in a written opinion setting forth
the basis and reasons for any decision reached and deliver such documents
to-each party to this Agreement along with a signed copy of the award; and
35
(d) the rules of evidence as then applicable to civil actions under
California law shall be applied in the arbitration. Each party agrees that
the arbitration provisions of this Agreement are its exclusive damage remedy
and expressly waives any right to seek redress in another forum.
8.3 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, and the documents referred to herein and therein embody the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, and supersede all prior and contemporaneous agreements and
understandings, oral or written, relative to said subject matter.
8.4 BINDING EFFECT; ASSIGNMENT. This Agreement and the rights and
obligations arising hereunder shall inure to the benefit of and be binding
upon ELP, its successors and permitted assigns, Buyer and DAH, their
respective successors and permitted assigns, and Lyon, his heirs, legal
representative and permitted assigns. Neither this Agreement nor any of the
rights, interest or obligations hereunder shall be transferred or assigned
(by operation of law or otherwise) by any of the parties hereto without the
prior written consent of the other party or parties except that Buyer shall
have the right to assign, in whole or in part, its rights hereunder to one or
more affiliates of Buyer, which in each case shall be a wholly-owned
subsidiary of Buyer. Any transfer or assignment of any of the rights,
interests or obligations hereunder in violation of the terms hereof shall be
void and of no force or effect; it being acknowledged and agreed however,
that notwithstanding any such agreement, DAH and Buyer shall remain primarily
liable hereunder.
8.5 CAPTIONS. This Agreement and Section headings of this
Agreement are inserted for convenience only and shall not constitute a part
of this Agreement in construing or interpreting any provision hereof.
8.6 WAIVER; CONSENT. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance),
in whole or in part, except by a writing executed by the parties hereto, and
no waiver of any of the provisions or conditions of this Agreement or any of
the rights of a party hereto shall be effective or binding unless such waiver
shall be in writing and signed by the party claimed to have given or
consented thereto. Except to the extent that a party hereto may have
otherwise agreed in writing, no waiver by that party of any condition of this
Agreement or breach by the other party of any of its obligations or
representations hereunder or thereunder shall be deemed to be a waiver of any
other condition or subsequent or prior breach of the same or any other
obligation or representation by the other party, nor shall any forbearance by
the first party to seek a remedy for any noncompliance or breach by the other
party be deemed to be a waiver by the first party of its rights and remedies
with respect to such noncompliance or breach.
8.7 NO THIRD PARTY BENEFICIARIES. Subject to Section 7.3, nothing
herein, expressed or implied, is intended or shall be construed to confer
upon or give to any person, firm, corporation or legal entity, other than the
parties hereto, any rights, remedies or other benefits under or by reason of
this Agreement.
36
8.8 COUNTERPARTS. This Agreement may be executed
simultaneously in multiple counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
8.9 SEVERABILITY. With respect to any provision of this Agreement
finally determined to be unenforceable, ELP, Lyon, DAH and Buyer hereby agree
that such court or arbitrator(s) shall have jurisdiction to reform such
provision so that it is enforceable to the maximum extent permitted by law,
and the parties agree to abide by such court's or arbitrator(s)'
determination. In the event that any such provision [of this Agreement]
cannot be reformed, such provision shall be deemed to be severed from this
Agreement, but every other provision of this Agreement shall remain in full
force and effect.
8.10 GOVERNING LAW. This Agreement shall in all respects be
constructed in accordance with and governed by the laws of the State of
California.
8.11 EXPENSES. Whether or not the transactions are consummated,
none of the parties hereto shall have any obligation to pay any of the fees
and expenses of any other party incident to the negotiation, preparation and
execution of this Agreement or any related agreements, including the fees and
expenses of counsel, accountants, investment bankers and other experts.
XxXxxxx Aircraft Holdings, Inc.,
an Ohio corporation
/s/ X X XxxXxxxxx
---------------------------------------
By: X X XxxXxxxxx
Its President
EE Acquisition, Inc.,
a Delaware corporation
/s/ X X XxxXxxxxx
---------------------------------------
By: X X XxxXxxxxx
Its President
---------------------------------------
Xxxxxxx Xxxx, individually
Elsinore LP,
a California Limited Partnership
37
8.8 COUNTERPARTS. This Agreement may be executed
simultaneously in multiple counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument
8.9 SEVERABILITY. With respect to any provision of this Agreement
finally determined to be unenforceable, ELP, Lyon, DAH and Buyer hereby agree
that such court or arbitrator(s) shall have jurisdiction to reform such
provision so that it is enforceable to the maximum extent permitted by law.
and the parties agree to abide by such court's or arbitrator(s)'
determination. In the event that any such provision [of this Agreement]
cannot be reformed, Such provision shall be deemed to be severed from this
Agreement, but every other provision of this Agreement shall remain in full
force and effect.
8.10 GOVERNING LAW. This Agreement shall in all respects be
constructed in accordance with and governed by the taws of the State of
California.
8.11 EXPENSES. Whether or not the transactions are consummated,
none of the parties hereto shall have any obligation to pay any of the fees
and expenses of any ether party incident to the negotiation, preparation and
execution of this Agreement or any related agreements, including the fees and
expense of counsel, accountants, investment bankers and ether experts.
XxXxxxx Aircraft Holdings. Inc.,
an Ohio corporation
/s/ X X XxxXxxxxx
---------------------------------------
By: X X XxxXxxxxx
Its President
EE Acquisition, Inc.,
a Delaware corporation
/s/ X X XxxXxxxxx
---------------------------------------
By: X X XxxXxxxxx
Its President
/s/ Xxxxxxx Xxxx
---------------------------------------
Xxxxxxx Xxxx, individually
Elsinore LP,
a California Limited Partnership
37
By: ELSINORE AEROSPACE SERVICES, INC.
Its General Partner
/s/ Xxxxx X. Xxxxxxxxx
---------------------------------------
By: Xxxxx X. Xxxxxxxxx
President
38
SCHEDULE A TO
ASSET PURCHASE AND SALE AGREEMENT
DEFINITIONS
"Acquisition Proposal" .............................................. 6.2.3(d)
"Elsinore Engineering" .............................................. Preamble
"Agreement" ......................................................... Preamble
"ELP" ............................................................... Preamble
"EAS Common Shares" .................................................... 3.2.2
"Approvals" ............................................................ 1.1.4
"Bid" ................................................................. 3.2.24
"Buyer" ............................................................. Preamble
"CERCLA" .............................................................. 3.2.10
"COBRA" ............................................................... 3.2.15
"Commitment" .......................................................... 3.2.23
"Closing Date" ........................................................... 7.1
"Closing Date Financial Statements" .................................... 6.2.8
"Contracts" ............................................................ 1.1.6
"DAH" ............................................................... Preamble
"Deposits" ............................................................. 1.1.8
"Employee Benefit Plan" ............................................... 3.2.15
"ERISA" ............................................................... 3.2.15
"Financial Statements" ................................................. 3.2.4
"Government" .......................................................... 3.2.24
"Government Contract" ................................................. 3.2.24
"Hazardous substance" ................................................. 3.2.10
"Machinery and Equipment" .............................................. 1.1.2
"Material Adverse Effect" ............................................. 3.2.12
"Non-Restricted Employees" ................................................. ?
"Other Claims" ........................................................ 1.1.11
"Parts and Furniture" .................................................. 1.1.2
"Permits" .............................................................. 3.2.5
"Personal Property Leases" ............................................. 1.1.2
"Prepaid Expenses" ..................................................... 1.1.8
"Lyon" .............................................................. Preamble
"Proprietary Rights" ....................................................... ?
"Real Property" ............................................................ 2
"Purchase Price" ........................................................... 4
"Real Property Leases" ................................................. 1.1.1
"Receivables" .......................................................... 1.1.7
"Registrations" ............................................................ ?
"Release" ............................................................. 3.2.10
"Restricted Employee ....................................................... ?
"Termination Claims" ................................................... 1.1.9
39
"Tooling" .............................................................. 1.1.2
"Transferor" .......................................................... 3.2.24
"Vehicles" ............................................................. 1.1.3
40
