EXHIBIT 2.1
MERGER AGREEMENT
This MERGER AGREEMENT (this "Agreement") is entered into as of
September 30, 1997 by and among AVIATION SALES COMPANY, a Delaware corporation
("AVS"); and AVS/ASI MERGER CORP., an Arkansas corporation and wholly-owned
direct subsidiary of AVS (the "AVS Merger Sub,"and together with AVS, the "AVS
Companies"); AEROCELL STRUCTURES, INC., an Arkansas corporation (the "Company");
and the shareholders of the Company listed on the signature pages hereto, who
constitute all of the shareholders of the Company (collectively, the
Shareholders"). Certain other capitalized terms used herein are defined in
Article XI and throughout this Agreement.
RECITALS
The Boards of Directors of AVS and the Company have determined that it
is in the best interests of their respective shareholders for AVS to acquire the
Company upon the terms and subject to the conditions set forth in this
Agreement. In order to effectuate the transaction, AVS has organized the AVS
Merger Sub as a wholly-owned direct subsidiary of AVS, and the parties have
agreed, subject to the terms and conditions set forth in this Agreement, to
merge the AVS Merger Sub with and into the Company so that the Company continue
as the surviving corporation. As a result of the Merger, the Company will become
a wholly-owned subsidiary of AVS, and each of the Shareholders will be issued
certain shares of common stock of AVS.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement
and in accordance with the Arkansas Business Corporation Act (the "Corporation
Code"), at the Effective Time (as defined below), the AVS Merger Sub will be
merged with and into the Company (the "Merger") pursuant to the Plan of Merger
annexed hereto as EXHIBIT A (the "Plan of Merger"). The terms and conditions of
the Plan of Merger are incorporated herein by reference as if fully set forth
herein. As a result of the Merger, the separate corporate existence of the AVS
Merger Sub shall cease and the Company shall continue as the surviving
corporation ("Surviving Corporation") and a wholly-owned direct subsidiary of
AVS.
1.2 THE CLOSING. Subject to the terms and conditions of this Agreement,
the consummation of the Merger (the "Closing") shall take place not later than
September 30, 1997, subject to satisfaction or waiver of the conditions set
forth in Articles VI and VII, at the offices of
the Company's counsel, Friday, Xxxxxxxx & Xxxxx, 000 X. Xxxxxxx, Xxxxx 0000,
Xxxxxx Xxxx, Xxxxxxxx 00000, or such other time and place as the parties may
otherwise agree.
1.3 COMPLETION OF PLAN OF MERGER. Prior to the Closing, the parties
shall fill in and complete the blank spaces in Article III of the Plan of Merger
with the respective number of shares of the voting common stock, $0.001 par
value per share, of AVS ("AVS Common Stock") that will be issued in the Merger
in exchange for each share of the issued and outstanding common stock of the
Company, as follows:
(a) 620,970 unregistered shares of AVS Common Stock, in the
aggregate (the "Merger Consideration"), will be issued in the Merger in exchange
for all of the issued and outstanding shares of common stock of the Company; and
(b) Each share of common stock of the AVS Merger Sub issued
and outstanding at the Effective Time shall be converted into one share of
common stock of the Surviving Corporation.
1.4 FILING OF ARTICLES OF MERGER. At the time of the Closing, the
parties shall cause the Merger to be consummated by filing duly executed
Articles of Merger (with the completed Plan of Merger annexed thereto) with the
Secretary of State of the State of Arkansas, in such form as AVS reasonably
determines is required by, and is in accordance with, the relevant provisions of
the Corporation Code (the date and time of such filing is referred to herein as
the "Effective Date" or "Effective Time").
1.5 ISSUANCE OF AVS SHARES; DELIVERY OF CERTIFICATES. At the Effective
Time, each of the Shareholders shall deliver the certificates representing all
issued and outstanding shares of common stock of the Company to AVS for
cancellation, and AVS shall issue to each Shareholder the shares of AVS Common
Stock issuable pursuant to Section 1.3, registered in the name of such
Shareholder based on the number of shares of common stock of the Company owned
by such Shareholder on the Effective Date as set forth on SCHEDULE 3.5 and AVS
shall deliver to each such Shareholder one or more certificates evidencing such
shares of AVS Common Stock. The shares of AVS Common Stock issuable by AVS in
the Merger are sometimes referred to herein as the "AVS Shares."
1.6 ACCOUNTING AND TAX TREATMENT. The parties hereto acknowledge and
agree that the transactions contemplated hereby are intended to be treated as a
pooling of interest business combination by AVS for accounting purposes and as a
tax-free reorganization under Section 368 of the Code.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE AVS COMPANIES
As a material inducement to each of the Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereby, each of the
AVS Companies makes the following representations and warranties to the
Shareholders:
2.1 CORPORATE STATUS. AVS is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. AVS is
duly qualified and in good standing as a foreign corporation in all
jurisdictions where such qualification is required under applicable law, except
where the failure to be so qualified would not have a Material Adverse Effect on
AVS. The AVS Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Arkansas and the AVS Merger Sub is
a wholly owned direct subsidiary of AVS.
2.2 CORPORATE POWER AND AUTHORITY. Each of the AVS Companies has the
corporate power and authority to execute and deliver this Agreement, to perform
its respective obligations hereunder and to consummate the transactions
contemplated hereby. Each of the AVS Companies has taken all action necessary to
authorize their execution and delivery of this Agreement, the performance of
their respective obligations hereunder and the consummation of the transactions
contemplated hereby.
2.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by each of the AVS Companies and constitutes a legal, valid and binding
obligation of each of the AVS Companies, enforceable against each of the AVS
Companies in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
2.4 NO VIOLATION. The execution and delivery of this Agreement by AVS
Companies, the performance by them of their obligations hereunder and the
consummation by them of the transactions contemplated by this Agreement will not
(i) contravene any provision of the articles of incorporation or bylaws of the
AVS Companies, (ii) to the knowledge of the AVS Companies, violate or conflict
with (in a manner that would have a Material Adverse Effect on the AVS
Companies) any law, statute, ordinance, rule, regulation, decree, writ,
injunction, judgment or order of any (Governmental Authority or of any
arbitration award which is either applicable to, binding upon or enforceable
against the AVS Companies, (iii) conflict with, result in any breach of, or
constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) in any material respect under,
or give rise to a right to terminate, amend, modify, abandon or accelerate, any
Contract which is applicable to, binding upon or enforceable against either of
the AVS Companies, where such breach or default would have a Material Adverse
Effect on the AVS Companies, (iv) result in or require the creation or
imposition of any Lien upon or with respect to any of the property or assets of
the AVS Companies (excluding Liens arising as a result of actions of the
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Shareholders), or (v) to the knowledge of the AVS Companies, require the
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, any court or tribunal or any other Person,
except any SEC and other filings required to be made by AVS.
2.5 AVS COMMON STOCK. Upon consummation of the Merger and the issuance
and delivery of certificates representing the AVS Shares to the Shareholders,
the AVS Shares will be validly issued, fully paid and non-assessable shares of
AVS Common Stock.
2.6 REPORTS AND FINANCIAL STATEMENTS. Since July 1996, except where
failure to have done so did and would not have a Material Adverse Effect on AVS,
AVS has filed all reports, registrations and statements, together with any
required amendments thereto, that it was required to file with the SEC,
including, but not limited to Forms 10-K, Forms 10-Q, Forms 8-K and proxy
statements (collectively, the "AVS Reports"). AVS has previously furnished to
the Company and made available to the Shareholders copies of all AVS Reports
filed with the SEC since January 1, 1997, and with respect to AVS Reports filed
after the date of this Agreement until the Effective Date, will promptly furnish
to the Company and make available to the Shareholders, copies of each of the AVS
Reports filed with the SEC during such period. As of their respective dates (but
taking into account any amendments filed prior to the date of this Agreement),
the AVS Reports complied, or, with respect to AVS Reports filed after the date
of this Agreement, will comply, in all material respects with all the rules and
regulations promulgated by the SEC and did not contain, or, with respect to AVS
Reports filed after the date of this Agreement, will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in AVS
Reports filed by AVS with the SEC prior to the date of this Agreement, since
December 31, 1996 to the date of this Agreement, there has not been any change
in the financial condition, results of operations or business of AVS that would
have a Material Adverse Effect on the financial condition of AVS.
2.8 LITIGATION. Except as set forth in the AVS Reports, there is no
action, suit, or other legal or administrative proceeding or governmental
investigation pending, or to the knowledge of AVS threatened, anticipated or
contemplated against, by or affecting AVS, or any of its properties or assets,
or which questions the validity or enforceability of this Agreement or the
transactions contemplated hereby, and to the knowledge of AVS there is no basis
for any of the foregoing where an adverse result would have a Material Adverse
Effect on the same. There are no outstanding orders, decrees or stipulations
issued by any Governmental Authority in any proceeding to which AVS is or was a
party which have not been complied with in full or which continue to impose any
material obligations on AVS.
2.9 COMPLIANCE WITH LAWS. To the knowledge of AVS, AVS is and has been
in compliance in all material respects with all laws, regulations and orders
applicable to it, its business and operations (as conducted by it now and in the
past), and any other properties and assets (in each case owned or used by it now
or in the past). AVS has not been cited, fined or otherwise notified of
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any asserted past or present failure to comply with any laws, regulations or
orders and no proceeding with respect to any such violation is pending or to the
knowledge of AVS threatened.
2.10 INVESTMENT INTENT. AVS is acquiring the shares of the Company
Common Stock for its own account, for investment purposes only and not with the
intent or view to the resale, fractionalization or further distribution thereof.
2.11 ACCESS TO INFORMATION. AVS acknowledges that it has been provided
with access to the assets, properties and facilities of the Company and all
financial and other information concerning the shares of the Company Common
Stock, the Company and the transaction contemplated by this Agreement which it
deemed necessary in order to make an informed investment decision. AVS has had a
reasonable opportunity to ask questions of, and receive answers from, the
Shareholders, the Company and its officers, agents and advisors in connection
with matters relating to the shares of the Company Common Stock, the Company and
the transaction contemplated hereby.
2.12 POST CLOSING MATTERS. AVS has no present plan or intention (i) to
reacquire any of the AVS Shares issued as the Merger Consideration, (ii) to
sell, transfer or dispose of any of the shares of the Company Common Stock, as
defined below, except for transfers of such shares to a corporation controlled
by AVS within the meaning of IRC Section 368(a)(2)(C), or (iii) to allow the
Company to sell, transfer or otherwise dispose of any of the assets of the
Company, except for dispositions made in the ordinary course of business, or
transfers of assets to a corporation controlled by AVS within the meaning of IRC
Section 368(a)(2)(C). Following the Closing, AVS (and/or the Company) will
continue the historic business assets of the Company in a business as
contemplated by Treas. Reg. Section 1.368-l(d).
2.13 NO COMMISSIONS. None of the AVS Companies has incurred any
obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTS OF THE SHAREHOLDERS
As a material inducement to each of the AVS Companies to enter into
this Agreement and to consummate the transactions contemplated hereby, each of
the Shareholders makes the following representations and warranties to AVS:
3.1 CORPORATE STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has the requisite power and authority to own or lease its
properties and to carry on its business as now being conducted. The Company is
not legally qualified to transact business as a foreign corporation in any
jurisdiction, and the nature of its properties and the conduct of its business
does not require such qualification where the failure to be so qualified would
have a Material Adverse Effect on the Company. To the extent
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applicable, the Company has fully complied with all of the requirements of any
statute governing the use and registration of fictitious names, and has the
legal right to use the names under which it operates its business in Arkansas.
There is no pending or threatened proceeding for the dissolution, liquidation,
insolvency or rehabilitation of the Company.
3.2 POWER AND AUTHORITY. The Company has the corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The Company
has taken all action necessary to authorize the execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby. Each Shareholder represents that he is an
individual residing in the State of Arkansas or Indiana, and has the requisite
competence and authority to execute and deliver this Agreement, to perform his
respective obligations hereunder and to consummate the transactions contemplated
hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by the Company and the Shareholders, and constitutes the legal, valid and
binding obligation of each of them, enforceable against them in accordance with
its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
3.4 CAPITALIZATION. As of the date hereof, the Company has (a) 2,000
shares of common stock, no par value, of the Company ("Company Common Stock")
authorized and no other shares of any class of capital stock, (b) 120 shares of
Company Common Stock issued and outstanding, and (c) no shares of Company Common
Stock held in treasury. All of the issued and outstanding shares of capital
stock of the Company (i) have been duly authorized and validly issued and are
fully paid and non-assessable, (ii) were issued in compliance with all
applicable state and federal securities laws, and (iii) were not issued in
violation of any preemptive rights or rights of first refusal. Except as set
forth on SCHEDULE 3.4, no preemptive rights or rights of first refusal exist
with respect to the shares of capital stock of the Company and no such rights
arise by virtue of or in connection with the transactions contemplated hereby.
There are no outstanding or authorized rights, options, warrants, convertible
securities, subscription rights, conversion rights, exchange rights or other
agreements or commitments of any kind that could require the Company to issue or
sell any shares of its capital stock (or securities convertible into or
exchangeable for shares of its capital stock). There are no outstanding stock
appreciation, phantom stock, profit participation or other similar rights with
respect to the Company. Except as set forth on SCHEDULE 3.4, there are no
proxies, voting rights or other agreements or understandings with respect to the
voting transfer of the capital stock of the Company. The Company is not
obligated to redeem or otherwise acquire any of its outstanding shares of
capital stock.
3.5 SHAREHOLDERS OF THE COMPANY. SCHEDULE 3.5 sets forth, with respect
to the Company, the name, address and federal taxpayer identification number of,
and the number of outstanding shares of each class of its capital stock owned of
record and/or beneficially by, each
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shareholder of the Company as of the close of business on the date of this
Agreement. As of the date hereof, the Shareholders constitute all of the holders
of all issued and outstanding shares of capital stock of the Company, and each
of the Shareholders owns such shares free and clear of all Liens, restrictions
and claims of any kind.
3.6 NO VIOLATION. The execution and delivery of this Agreement by the
Company and the Shareholders, the performance by them of their respective
obligations hereunder and the consummation by them of the transactions
contemplated by this Agreement will not (i) contravene any provision of the
articles of incorporation or bylaws of the Company, (ii) to the knowledge of the
Shareholders, violate or conflict with (in a manner that would have a Material
Adverse Effect on the Company) any law, statute, ordinance, rule, regulation,
decree, writ, injunction, judgment or order of any Governmental Authority or of
any arbitration award which is either applicable to, binding upon or enforceable
against the Company or any of the Shareholders, (iii) conflict with, result in
any breach of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default) in any
material respect under, or give rise to a right to terminate, amend, modify,
abandon or accelerate, any Contract which is applicable to, binding upon or
enforceable against the Company or any of the Shareholders, where such breach or
default would have a Material Adverse Effect on the Company, (iv) result in or
require the creation or imposition of any Lien upon or with respect to any of
the property or assets of the Company (excluding Liens arising as a result of
actions of AVS), or (v) to the knowledge of the Shareholders, require the
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, any court or tribunal or any other Person,
except any SEC and other filings required to be made by AVS.
3.7 RECORDS OF THE COMPANY. The copies of the articles of incorporation
and bylaws of the Company which were provided to AVS are true, accurate and
complete and reflect all amendments made through the date of this Agreement. The
minute books for the Company made available to AVS for review were correct and
complete in all material respects as of the date of such review, no further
entries have been made through the date of this Agreement, such minute books
contain the true signatures of the persons purporting to have signed them, and
such minute books contain an accurate record of all material corporate actions
of the shareholders and directors (and any committees thereof) of the Company
(consistent with companies of like size and character) taken by written consent
or at a meeting since incorporation. All material corporate actions taken by the
Company have been duly authorized or ratified. Except as reflected in Section
3.9, all accounts, books, ledgers and official and other records of the Company
have been fully, properly and accurately kept and completed in all material
respects, and there are no material inaccuracies or discrepancies of any kind
contained therein. The stock ledgers of the Company, as previously made
available to AVS, contain accurate and complete records of all issuances,
transfers and cancellations of shares of the capital stock of the Company.
3.8 SUBSIDIARIES. The Company does not own, directly or indirectly, any
outstanding voting securities of or other interests in, or controls, any other
corporation, partnership, joint venture or other business entity.
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3.9 FINANCIAL STATEMENTS. The Shareholders have delivered to AVS the
financial statements of the Company, including the notes thereto, for (i) the
year ended April 30, 1997, audited by XxXxxxxx & Gardial ("XxXxxxxx"), and (ii)
the month ended August 31, 1997, internally prepared by the Company, copies of
which are attached to SCHEDULE 3.9 hereto (the "Financial Statements"). The
balance sheet of the Company dated as of August 31, 1997, included in the
Financial Statements is referred to herein as the "Current Balance Sheet."To the
knowledge of the Shareholders, except as set forth on SCHEDULE 3.9: (a) the
Financial Statements fairly present in all material respects the financial
position of the Company at each of the balance sheet dates and the results of
operations for the periods covered thereby, and have been prepared in accordance
with GAAP consistently applied throughout the periods indicated except, in the
case of interim financial statements, for normal year-end audit adjustments and
the absence of footnotes; (b) the books and records of the Company fully and
fairly reflect in all material respects all of its transactions, properties,
assets and liabilities; (c) there are no extraordinary or material non-recurring
items of income or expense (subject to fluctuations in the ordinary course of
business) during the periods covered by the Financial Statements and the balance
sheets included in the Financial Statements do not reflect any write-up or
revaluation increasing the book value of any assets, except as specifically
disclosed in the notes thereto; and (d) the Financial Statements reflect all
adjustments necessary for a fair presentation of the financial information
contained therein.
3.10 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Except as set forth
on SCHEDULE 3.10, since the date of the Current Balance Sheet, the Company has
not (i) issued any capital stock or other securities; (ii) made any distribution
of or with respect to its capital stock or other securities or purchased or
redeemed any of its securities; (iii) paid any bonus to or increased the rate of
compensation of any of its officers or salaried employees or amended in any
material respect any other terms of employment of such persons; (iv) sold,
leased or transferred any of its properties or assets other than in the ordinary
course of business consistent with past practice; (v) made or obligated itself
to make capital expenditures out of the ordinary course of business consistent
with past practice; (vi) made any payment in respect of its liabilities other
than in the ordinary course of business consistent with past practice; (vii)
incurred any obligations or liabilities (including any indebtedness) or entered
into any transaction or series of transactions involving in excess of $10,000 in
the aggregate out of the ordinary course of business, except for this Agreement
and the transactions contemplated hereby; (viii) suffered any theft, damage,
destruction or casualty loss, not covered by insurance and for which a timely
claim was filed, in excess of $10,000 in the aggregate; (ix) suffered any
extraordinary losses in any material respect (whether or not covered by
insurance); (x) waived, canceled, compromised or released any rights having a
value in excess of $10,000 in the aggregate; (xi) made or adopted any material
change in its accounting practice or policies; (xii) made any material
adjustment to its books and records other than in respect of the conduct of its
business activities in the ordinary course consistent with past practice; (xiii)
entered into any transaction with any Affiliate other than intercompany
transactions in the ordinary course of business consistent with past practice;
(xiv) entered into any written employment agreement or other employment
agreements not in the ordinary course of business; (xv) terminated, amended or
modified in any material respect any agreement involving an amount in excess of
$10,000; (xvi) imposed any security interest or other Lien on any of its assets
other than in the ordinary course of business consistent with past practice;
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(xvii) delayed beyond any customary grace period paying any accounts payable
which are due and payable except to the extent being contested in good faith;
(xviii) made or pledged any charitable contribution in excess of $5,000; (xix)
entered into any other transaction or, to the knowledge of the Shareholders,
been subject to any event which has or may have a Material Adverse Effect on the
Company; or (xx) agreed to do or authorized any of the foregoing.
3.11 LIABILITIES OF THE COMPANY. Except as set forth on SCHEDULE 3.11,
the Company does not have any liabilities or obligations, whether accrued,
absolute, contingent or otherwise, except (a) to the extent reflected or taken
into account in the Current Balance Sheet and not heretofore paid or discharged,
(b) liabilities incurred in the ordinary course of business consistent with past
practice since the date of the Current Balance Sheet [none of which relates to
breach of contract, breach of warranty (other than warranty claims incurred from
time to time in the ordinary course of business), tort, infringement or
violation of law, or which arose out of any action, suit, claim, governmental
investigation or arbitration proceeding], (c) normal accruals,
reclassifications, and audit adjustments which would be reflected on an audited
financial statement and which would not be material in the aggregate, and (d)
liabilities incurred in the ordinary course of business prior to the date of the
Current Balance Sheet which, in accordance with GAAP consistently applied, were
not recorded thereon. With respect to matters referred to in items (c) and (d)
above, the foregoing representation is made only to the knowledge of the
Shareholders, and with respect to warranty claims, the Shareholders represent
that they have no knowledge of any material warranty claims against the Company
(other than warranty claims in the ordinary course of business), and the parties
agree that the Shareholders shall not have liability for any warranty claims
except to the extent of a breach of the representation in this sentence. With
respect to the matters referred to in the brackets [ ] in item (b) above
relating to tort, infringement or violations of law or actions, suits, claims of
governmental investigations, the representations contained therein shall be
qualified to the knowledge of the Shareholders to the extent the particular
matter is covered by a specific representation relating thereto contained herein
that is so qualified by the knowledge of the Shareholders.
3.12 LITIGATION. Except as set forth on SCHEDULE 3.12, there is no
action, suit, or other legal or administrative proceeding or governmental
investigation pending, or to the knowledge of the Shareholders threatened,
anticipated or contemplated against, by or affecting the Company, or any of its
properties or assets, or the Shareholders, or which questions the validity or
enforceability of this Agreement or the transactions contemplated hereby, and to
the knowledge of the Shareholders, there is no basis for any of the foregoing
where an adverse result would have a Material Adverse Effect on the same. There
are no outstanding orders, decrees or stipulations issued by any Governmental
Authority in any proceeding to which the Company is or was a party which have
not been complied with in full or which continue to impose any material
obligations on the Company.
3.13 ENVIRONMENTAL MATTERS. To the knowledge of the Shareholders:
(a) Company (as defined in clause (g) below) is and has at all
times been in full compliance in all material respects with all Environmental
Laws (as defined in clause (g) below) governing its business, operations,
properties and assets, including, without limitation: (i) all
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requirements relating to the Discharge (as defined in clause (g) below) and
Handling (as defined in clause (g) below) of Hazardous Substances (as defined in
clause (g) below); (ii) all requirements relating to notice, record keeping and
reporting; (iii) all requirements relating to obtaining and maintaining Licenses
(as defined in clause (g) below) for the ownership of its properties and assets
and the operation of its business as presently conducted, including Licenses
relating to the Handling and Discharge of Hazardous Substances; and (iv) all
applicable writs, orders, judgements, injunctions, governmental communications,
decrees, informational requests or demands issued pursuant to, or arising under,
any Environmental Laws.
(b) There are no (and there is no basis for any)
non-compliance orders, warning letters, notices of violation (collectively
"Notices"), claims, suits, actions, judgments, penalties, fines, or
administrative or judicial investigations or proceedings (collectively
"Proceedings") pending or threatened against or involving the Company, or its
business, operations, properties or assets which would have a Material Adverse
Effect on the same, issued by any Governmental Authority or third party with
respect to any Environmental Laws or Licenses issued to the Company thereunder
in connection with, related to or arising out of the ownership by the Company of
its properties or assets or the operation of its business, which have not been
resolved to the satisfaction of the issuing Governmental Authority or third
party in a manner that would not impose any material obligation, burden or
continuing material liability on AVS or the Company in the event that the
transactions contemplated by this Agreement are consummated, or which could have
a Material Adverse Effect on the Company, including, without limitation: (i)
Notices or Proceedings related to the Company being a potentially responsible
party for a federal or state environmental cleanup site or for corrective action
under any applicable Environmental Laws; (ii) Notices or Proceedings relating to
the Company being responsible to undertake any response or remedial actions or
clean-up actions of any kind; or (iii) Notices or Proceedings related to the
Company being liable under any Environmental Laws for personal injury, property
damage, natural resource damage, or clean up obligations.
(c) The Company has not Handled or Discharged, nor has it
allowed or arranged for any third party to Handle or Discharge, Hazardous
Substances to, at or upon: (i) any location other than a site lawfully permitted
to receive such Hazardous Substances; (ii) any real property currently or
previously owned or leased by the Company (other than in the ordinary course of
business in full compliance with applicable Environmental Laws); or (iii) any
site which, pursuant to any Environmental Laws, (x) has been placed on the
National Priorities List or its state equivalent, or (y) the Environmental
Protection Agency or the relevant state agency or other Governmental Authority
has notified the Company that such Governmental Authority has proposed or is
proposing to place on the National Priorities List or its state equivalent.
There has not occurred, nor is there presently occurring, a Discharge, or
threatened Discharge, of any Hazardous Substance on, into or beneath the surface
of, or adjacent to, any real property currently or previously owned or leased by
the Company in an amount requiring a notice or report to be made to a
Governmental Authority or in violation of any applicable Environmental Laws.
(d) SCHEDULE 3.13 identifies the operations and activities,
and locations thereof, which have been conducted or are being conducted by the
Company on any real property currently
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or previously owned or leased by the Company which have involved the Handling or
Discharge of Hazardous Substances.
(e) Except as set forth on SCHEDULE 3.13, the Company does not
use, nor has it used, any Aboveground Storage Tanks (as defined in clause (g)
below) or Underground Storage Tanks (as defined in clause (g) below), and there
are not now nor have there ever been any Underground Storage Tanks beneath any
real property currently or previously owned or leased by the Company that are
required to be registered under applicable Environmental Laws.
(f) SCHEDULE 3.13 identifies (i) all environmental audits,
assessments or occupational health studies undertaken by the Company or its
agents or, to the knowledge of the Company and the Shareholders, undertaken by
any Governmental Authority, or any third party, relating to or affecting the
Company or any real property currently or previously owned or leased by the
Company; (ii) the results of any ground, water, soil, air or asbestos monitoring
undertaken by the Company or its agents or, to the knowledge of the Company and
the Shareholders, undertaken by any Governmental Authority or any third party,
relating to or affecting the Company or any real property currently or
previously owned or leased by the Company which indicate the presence of
Hazardous Substances at levels requiring a notice or report to be made to a
Governmental Authority or in violation of any applicable Environmental Laws;
(iii) all material written communications between the Company and any
Governmental Authority arising under or related to Environmental Laws; and (iv)
all outstanding citations issued under OSHA, or similar state or local statutes,
laws, ordinances, codes, rules, regulations, orders, rulings, or decrees,
relating to or affecting either the Company or any real property currently or
previously owned or leased by the Company.
(g) For purposes of this Section 3.13, the following terms
shall have the meanings ascribed to them below:
"Aboveground Storage Tank" shall have the meaning ascribed to
such term in Section 6901 ET SEQ., as amended, of RCRA, or any applicable state
or local statute, law, ordinance, code, rule, regulation, order ruling, or
decree governing Aboveground Storage Tanks.
"Company" means the Company and any Affiliates.
"Discharge" means any manner of spilling, leaking, dumping,
discharging, releasing or emitting, as any of such terms may further be defined
in any Environmental Law, into any medium including, without limitation, ground
water, surface water, soil or air.
"Environmental Laws" means all federal, state, regional or
local statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings, and changes or ordinances or judicial or administrative
interpretations thereof, or similar laws of foreign jurisdictions where the
Company conducts business, whether currently in existence or hereafter enacted
or promulgated, any of which govern (or purport to govern) or relate to
pollution, protection of the environment, public health and safety, air
emissions, water discharges, hazardous or toxic substances, solid or hazardous
waste or
11
occupational health and safety, as any of these terms are or may be defined in
such statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings and changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation: the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C. Section 9601,
ET SEQ. (collectively "CERCLA"); the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and subsequent Hazardous and
Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 ET SEQ. (collectively
"RCRA"); the Hazardous Materials Transportation Act, as amended, 49 U.S.C.
Section 1801, ET SEQ.; the Clean Water Act, as emended, 33 U.S.C. Section 1311,
ET SEQ.; the Clean Air Act, as amended (42 U.S.C. Section 7401-7642); the Toxic
Substances Control Act, as amended, 15 U.S.C. Section 2601 ET SEQ.; the Federal
Insecticide, Fungicide, and Rodenticide Act as amended, 7 U.S.C. Section
136-136y ("FIFRA"); the Emergency Planning and Community Right-to-Know Act of
1986 as amended, 42 U.S.C. Section 11001, ET SEQ. (Title III of XXXX) ("EPCRA");
and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
Section 651, ET SEQ. ("OSHA").
"Handle" means any manner of generating, accumulating,
storing, treating, disposing of, transporting, transferring, labeling, handling,
manufacturing or using, as any of such terms may further be defined in any
Environmental Law, of any Hazardous Substances or Waste.
"Hazardous Substances" shall be construed broadly to include
any toxic or hazardous substance, material, or waste, and any other contaminant,
pollutant or constituent thereof, whether liquid, solid, semi-solid, sludge
and/or gaseous, including without limitation, chemicals, compounds, by-products,
pesticides, asbestos containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires investigation or
remediation under any Environmental Laws or which are or become regulated,
listed or controlled by, under or pursuant to any Environmental Laws, including,
without limitation, RCRA, CERCLA, the Hazardous Materials Transportation Act,
the Toxic Substances Control Act, the Clean Air Act, the Clean Water Act, FIFRA,
EPCRA and OSHA, or any similar state statute, or any future amendments to, or
regulations implementing such statutes, laws, ordinances, codes, rules,
regulations, orders, rulings, or decrees, or which has been or shall be
determined or interpreted at any time by any Governmental Authority to be a
hazardous or toxic substance regulated under any other statute, law, regulation,
code, rule, order, or decree.
"Licenses" means all licenses, certificates, permits,
approvals and registrations.
"Underground Storage Tank" shall have the meaning ascribed to
such term in Section 6901 ET SEQ., as amended, of RCRA, or any applicable state
or local statute, law, ordinance, code, rule, regulation, order ruling, or
decree governing Underground Storage Tanks.
3.14 REAL ESTATE.
(a) SCHEDULE 3.14(a) sets forth a list of each parcel of real
property owned by the Company on the date hereof (the "Owned Properties"), which
Schedule sets forth with respect to
12
each such parcel (A) the legal description, including street address, of such
parcel, (B) a brief description (including size and function) of the principal
improvements and buildings on such parcel, and (C) the title insurance policy
relating to such parcel, all of which policies have previously been delivered or
made available to AVS by the Company. With respect to each such parcel of Owned
Property:
(i) The Company has good and marketable title to each
parcel of Owned Property, free and clear of any Lien other
than (x) liens for real estate taxes not yet due and payable
and delinquent; (y) recorded easements, covenants, and other
restrictions which do not impair in any material respect the
current use, occupancy or value of the property subject
thereto, and (z) encumbrances and restrictions described in
the title insurance policies listed on SCHEDULE 3.14(a);
(ii) There are no pending or to the knowledge of the
Shareholders threatened condemnation proceedings, suits or
administrative actions relating to the Owned Properties or
other matters affecting adversely the current use, occupancy
or value thereof (except as reflected on the title insurance
policies included in SCHEDULE 3.14(a));
(iii) The legal descriptions for the parcels of Owned
Property contained in the deeds thereof describe such parcels
fully and adequately; the buildings and improvements are
located within the boundary lines of the described parcels of
land, are not in violation in any material respect of
applicable setback requirements, local comprehensive plan
provisions, zoning laws and ordinances (and none of the
properties or buildings or improvements thereon are subject to
"permitted non-conforming use" or "permitted non-conforming
structure" classifications), building code requirements,
permits, licenses or other forms of approval by any
Governmental Authority, and do not encroach on any easement
which may burden the land; the land does not serve any
adjoining property for any purpose inconsistent with the use
of the land; and the Owned Properties are not located within
any flood plain (such that a mortgagee would require a
mortgagor to obtain flood insurance) or subject to any similar
type restriction for which any permits or licenses necessary
to the use thereof have not been obtained;
(iv) To the knowledge of the Shareholders, all
facilities have received all material approvals of
Governmental Authorities (including licenses and permits)
required in connection with the ownership or operation thereof
and have been operated and maintained in all material respects
in accordance with applicable laws, ordinances, rules and
regulations;
(v) There are no Contracts granting to any party or
parties the right of use or occupancy of any portion of the
parcels of Owned Property;
13
(vi) There are no outstanding options or rights of
first refusal to purchase the parcels of Owned Property, or
any portion thereof or interest therein;
(vii) There are no parties (other than the Company)
in possession of the parcels of Owned Property;
(viii) All facilities located on the parcels of Owned
Property are supplied with utilities and other services
reasonably necessary for the operation of such facilities, in
their current manner, including gas, electricity, water,
telephone, sanitary sewer and storm sewer, all of which
services are adequate in accordance with all applicable laws,
ordinances, rules and regulations, and are provided via public
roads or via permanent, irrevocable, appurtenant easements
benefitting the parcels of Owned Property;
(ix) Each parcel of Owned Property abuts on and has
direct vehicular access to a public road, or has access to a
public road via a permanent, irrevocable, appurtenant easement
benefitting the parcel of Owned Property; access to the
property is provided by paved public right-of-way with
adequate curb cuts available; and there is no pending or
threatened termination of the foregoing access rights;
(x) All improvements and buildings on the Owned
Property are in reasonably good repair and are safe for
occupancy and use, free from termites or other wood-destroying
organisms; the roofs thereof are watertight; and the
structural components and systems (including plumbing,
electrical, air conditioning/heating, and sprinklers) are in
good working order and adequate for the use of such Owned
Property in the manner in which presently used in each case
above, normal wear and tear excepted;
(xi) There are no material service contracts,
management agreements or similar agreements which affect the
parcels of Owned Property; and
(xii) The Company has not received notice of (a) any
condemnation proceeding with respect to any portion of any
parcel of Owned Property or any access thereto; and no such
proceeding is contemplated by any Governmental Authority; or
(b) any special assessment which may affect any parcel of
Owned Property, and no such special assessment is contemplated
by any Governmental Authority (other than any applicable
special assessment included the current property tax xxxx).
(b) SCHEDULE 3.14(b) sets forth a list of all leases, licenses
or similar agreements ("Leases") to which the Company is a party (copies of
which have previously been furnished to AVS), in each case setting forth (A) the
lessor and lessee thereof and the date and term of each of the Leases, (B) the
legal description, including street address, of each property covered thereby,
and (C) a brief description (including size and function) of the principal
improvements and buildings
14
thereon (the "Leased Premises"), all of which are within the property set-back
and building lines of the respective property. The Leases are in full force and
effect and have not been amended, and no party thereto is in default or breach
under any such Lease in any material respect. No event has occurred which, with
the passage of time or the giving of notice or both, would cause a material
breach of or default under any of such Leases. There is no material breach or
anticipated material breach by any other party to such Leases. With respect to
each such Leased Premises:
(i) The Company has valid leasehold interests in the
Leased Premises, free and clear of any Liens, covenants and
easements or title defects of any nature whatsoever, other
than customary utility easements that do not have a Material
Adverse Effect on the use of such property;
(ii) The portions of the buildings located on the
Leased Premises that are used in the business of the Company
are each in good repair and condition in all material
respects, normal wear and tear excepted, and are in the
aggregate sufficient to satisfy the Company's current and
reasonably anticipated normal business activities as conducted
thereat;
(iii) Each of the Leased Premises (a) has direct
access to public roads or access to public roads by means of a
perpetual access easement, such access being sufficient to
satisfy the current and reasonably anticipated normal
transportation requirements of the Company's business as
presently conducted at such parcel; and (b) is served by all
utilities in such quantity and quality as are sufficient to
satisfy the current normal business activities as conducted at
such parcel; and
(iv) The Company has not received notice of (a) any
condemnation proceeding with respect to any portion of the
Leased Premises or any access thereto, and to the knowledge of
the Shareholders, no such proceeding is contemplated by any
Governmental Authority; or (b) any special assessment which
may affect any of the Leased Premises, and to the knowledge of
the Shareholder, no such special assessment is contemplated by
any Governmental Authority (other than any applicable special
assessment included the current property tax xxxx).
3.15 GOOD TITLE TO AND CONDITION OF ASSETS.
(a) Except as set forth on SCHEDULE 3.15, the Company has good
and marketable title to all of its Assets (as hereinafter defined), free and
clear of any Liens or restrictions on use. For purposes of this Agreement, the
term "Assets" means all of the properties and assets of the Company, other than
the Owned Properties and the Leased Premises, whether personal or mixed,
tangible or intangible, wherever located.
(b) The Fixed Assets (as hereinafter defined) currently in use
or necessary for the business and operations of the Company are in reasonably
good operating condition, normal wear and
15
tear excepted, and have been maintained substantially in accordance with all
applicable manufacturer's specifications and warranties. For purposes of this
Agreement, the term "Fixed Assets" means all vehicles, machinery, equipment,
tools, supplies, leasehold improvements, furniture and fixtures used by or
located on the premises of the Company or set forth on the Current Balance Sheet
or acquired by the Company since the date of the Current Balance Sheet. SCHEDULE
3.15 lists the Fixed Assets.
3.16 COMPLIANCE WITH LAWS.
(a) To the knowledge of the Shareholders, the Company is and
has been in compliance with all laws, regulations and orders applicable to it,
its business and operations (as conducted by it now and in the past), the
Assets, the Owned Properties and the Leased Premises and any other properties
and assets (in each case owned or used by it now or in the past except where the
failure to be in such compliance would not have a Material Adverse Effect on the
same). The Company has not been cited, fined or otherwise notified of any
asserted past or present failure to comply in any material respect with any
laws, regulations or orders and no proceeding with respect to any such violation
is pending or to the knowledge of the Shareholders threatened.
(b) Neither the Company, nor any of its employees or agents,
has made any payment of funds in connection with the business of the Company
which is prohibited by law, and no funds have been set aside to be used in
connection with the business of the Company for any payment prohibited by law.
(c) To the knowledge of the Shareholders, the Company is and
at all times has been in compliance in all material respects with the terms and
provisions of the Immigration Reform and Control Act of 1986, as amended (the
"Immigration Act"). With respect to each Employee (as defined in 8 C.F.R.
274a.1(f)) of the Company for whom compliance with the Immigration Act is
required, the Company has on file a true, accurate and complete copy of (i) each
Employee's Form I-9 (Employment Eligibility Verification Form) and (ii) all
other records, documents or other papers prepared, procured and/or retained by
the Company pursuant to the Immigration Act. The Company has not been cited,
fined, served with a Notice of Intent to Fine or with a Cease and Desist Order,
nor has any action or administrative proceeding been initiated or threatened
against the Company, by the Immigration and Naturalization Service by reason of
any actual or alleged failure to comply with the Immigration Act except where
the failure to be in such compliance would not have a Material Adverse Effect on
the Company.
(d) The Company is not subject to any Contract, decree or
injunction in which the Company is a party which restricts the continued
operation of any business of the Company or the expansion thereof to other
geographical areas, customers and suppliers or lines of business.
3.17 LABOR AND EMPLOYMENT MATTERS. SCHEDULE 3.17 sets forth the name,
address, social security number and current rate of compensation of the
employees of the Company. The Company is not a party to or bound by any
collective bargaining agreement or any other agreement with a labor union, and
there has been no effort by any labor union during the 24 months prior to the
date hereof
16
to organize any employees of the Company into one or more collective bargaining
units. There is no pending or to the knowledge of the Shareholders threatened
labor dispute, strike or work stoppage which affects or which may affect the
business of the Company or which may interfere with its continued operations.
Neither the Company nor any agent, representative or employee thereof has within
the last 24 months committed any unfair labor practice as defined in the
National Labor Relations Act, as amended, and there is no pending or to the
knowledge of the Shareholders threatened charge or complaint against the Company
by or with the National Labor Relations Board or any representative thereof.
There has been no strike, walkout or work stoppage or threat of union activity
involving any of the employees of the Company during the 24 months prior to the
date hereof. None of the Shareholders is aware that any executive or key
employee or group of employees has any plans to terminate his, her or their
employment with the Company as a result of the Merger or otherwise. To the
knowledge of the Shareholders, the Company has complied with applicable laws,
rules and regulations relating to employment, civil rights and equal employment
opportunities, including but not limited to, the Civil Rights Act of 1964, the
Fair Labor Standards Act, and the Americans with Disabilities Act, as amended.
3.18 EMPLOYEE BENEFIT PLANS.
(a) EMPLOYEE BENEFIT PLANS. SCHEDULE 3.18 contains a list
setting forth each employee benefit plan or arrangement of the Company,
including but not limited to, employee pension benefit plans, as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), multi-employer plans, as defined in Section 3(37) of ERISA, employee
welfare benefit plans, as defined in Section 3(1) of ERISA, deferred
compensation plans, stock option plans, bonus plans, stock purchase plans,
hospitalization, disability and other insurance plans, severance or termination
pay plans and policies, whether or not described in Section 3(3) of ERISA, in
which employees, their spouses or dependents, of the Company participate
("Employee Benefit Plans") (true and accurate copies of which, together with the
most recent annual reports on Form 5500 and summary plan descriptions with
respect thereto, were furnished to AVS).
(b) COMPLIANCE WITH LAW. To the knowledge of the Shareholders,
with respect to each Employee Benefit Plan (i) each has been administered in all
material respects in compliance with its terms and with all applicable laws,
including, but not limited to, ERISA and the Internal Revenue Code of 1986, as
amended (the "Code"); (ii) no actions, suits, claims or disputes are pending, or
threatened (other than routine claims for benefits under the terms of any such
plans); (iii) no audits, inquiries, reviews, proceedings, claims, or demands are
pending with any governmental or regulatory agency; (iv) there are no facts
which could give rise to any material liability in the event of any such
investigation, claim, action, suit, audit, review, or other proceeding; (v) all
material reports, returns, and similar documents required to be filed with any
governmental agency or distributed to any plan participant have been duly or
timely filed or distributed; and (vi) no "prohibited transaction" has occurred
within the meaning of the applicable provisions of ERISA or the Code.
(C) QUALIFIED PLANS. With respect to each Employee Benefit
Plan intended to qualify under Code Section 401(a) or 403(a) (i) the Internal
Revenue Service has issued a favorable
17
determination letter, true and correct copies of which have been furnished to
AVS, that such plans are qualified and exempt from federal income taxes; (ii) no
such determination letter has been revoked nor has revocation been threatened,
nor has any amendment or other action or omission occurred with respect to any
such plan since the date of its most recent determination letter or application
therefor in any respect which would adversely affect its qualification or
materially increase its costs; (iii) no such plan has been amended in a manner
that would require security to be provided in accordance with Section 401(a)(29)
of the Code; (iv) no reportable event (within the meaning of Section 4043 of
ERISA) has occurred, other than one for which the 30-day notice requirement has
been waived; (v) as of the Closing Date, the present value of all liabilities
that would be "benefit liabilities" under Section 4001(a)(16) of ERISA if
benefits described in Code Section 411(d)(6)(B) were included will not exceed
the then current fair market value of the assets of such plan (determined using
the actuarial assumptions used for the most recent actuarial valuation for such
plan); (vi) all contributions to, and payments from and with respect to such
plans, which may have been required to be made in accordance with such plans
and, when applicable, Section 302 of ERISA or Section 412 of the Code, have been
timely made; and (vii) all such contributions to the plans, and all payments
under the plans (except those to be made from a trust qualified under Section
401(a) of the Code) and all payments with respect to the plans (including,
without limitation, PBGC (as defined below) and insurance premiums) for any
period ending before the Closing Date that are not yet, but will be, required to
be made are properly accrued and reflected on the Current Balance Sheet (other
than routine claims for benefits under the terms of such plans).
(d) MULTIEMPLOYER PLANS. With respect to any multiemployer
plan, as described in Section 4001(a)(3) of ERISA ("MPPA Plan") (i) all
contributions required to be made with respect to employees of the Company have
been timely paid; (ii) the Company has not incurred or is not expected to incur,
directly or indirectly, any withdrawal liability under ERISA with respect to any
such plan (whether by reason of the transactions contemplated by the Agreement
or otherwise); (iii) SCHEDULE 3.18 sets forth (A) the withdrawal liability under
ERISA to each MPPA Plan, (B) the date as of which such amount was calculated,
and (C) the method for determining the withdrawal liability; and (iv) no such
plan is (or is expected to be) insolvent or in reorganization and no accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, exists or is expected to exist with respect to any
such plan.
(e) WELFARE PLANS. (i) The Company is not obligated under any
employee welfare benefit plan as described in Section 3(1) of ERISA ("Welfare
Plan") to provide medical or death benefits (other than routine claims for
benefits under the terms of its health insurance plan) with respect to any
employee or former employee of the Company or its predecessors after termination
of employment except as required by COBRA; (ii) the Company has complied with
the notice and continuation coverage requirements of Section 4980B of the Code
and the regulations thereunder with respect to each Welfare Plan that is, or was
during any taxable year for which the statute of limitations on the assessment
of federal income taxes remains, open, by consent or otherwise, a group health
plan within the meaning of Section 5000(b)(1) of the Code; and (iii) there are
no reserves, assets, surplus or prepaid premiums under any Welfare Plan which is
an Employee Benefit Plan. The consummation of the transactions contemplated by
this Agreement will not entitle any individual to
18
severance pay, and, will not accelerate the time of payment or vesting, or
increase the amount of compensation, due to any individual.
(f) CONTROLLED GROUP LIABILITY. Neither the Company nor any
entity that would be-aggregated with it under Code Section 414(b), (c), (m) or
(o): (i) has ever terminated or withdrawn from any employee benefit plan under
circumstances resulting (or expected to result) in liability to the Pension
Benefit Guaranty Corporation ("PBGC"), the fund by which the employee benefit
plan is funded, or any employee or beneficiary for whose benefit the plan is or
was maintained (other than routine claims for benefits); (ii) has any assets
subject to (or expected to be subject to) a lien for unpaid contributions to any
employee benefit plan; (iii) has failed to pay premiums to the PBGC when due;
(iv) is subject to (or expected to be subject to) an excise tax under Code
Section 4971; (v) has engaged in any transaction which would give rise to
liability under Section 4069 or Section 4212(c) of ERISA; or (vi) has violated
Code Section 4980B or Section 601 through 608 of ERISA.
(g) OTHER LIABILITIES. (i) None of the Employee Benefit Plans
obligates the Company to pay separation, severance, termination or similar
benefits solely as a result of any transaction contemplated by this Agreement or
solely as a result of a "change of control" (as such term is defined in Section
280G of the Code); (ii) all required or discretionary (in accordance with
historical practices) payments, premiums, contributions, reimbursements, or
accruals for all periods ending prior to or as of the Closing Date shall have
been made or properly accrued on the Current Balance Sheet or will be properly
accrued on the books and records of the Company as of the Closing Date; and
(iii) none of the Employee Benefit Plans has any unfunded liabilities which are
not reflected on the Current Balance Sheet or the books and records of the
Company other than for routine claims under the terms of such plans.
3.19 TAX MATTERS. Except as set forth in SCHEDULE 3.19, all Tax Returns
required to be filed prior to the date hereof with respect to the Company or any
of its income, properties, franchises or operations have been timely filed, each
such Tax Return has been prepared in compliance in all material respects with
all applicable laws and regulations, and all such Tax Returns are true and
accurate in all respects. Except as set forth on SCHEDULE 3.19, all Taxes due
and payable by or with respect to the Company have been paid and are accrued on
the Current Balance Sheet or will be accrued on its books and records as of the
Closing subject to customary year end adjustments and accruals for current year
Taxes. Except as set forth in SCHEDULE 3.19 hereto: (i) with respect to each
taxable period of the Company, either such taxable period has been audited by
the relevant taxing authority or the time for assessing or collecting Taxes with
respect to each such taxable period has closed and such taxable period is not
subject to review by any relevant taxing authority; (ii) no deficiency or
proposed adjustment which has not been settled or otherwise resolved for any
amount of Taxes has been asserted or assessed by any taxing authority against
the Company; (iii) the Company has not consented to extend the time in which any
Taxes may be assessed or collected by any taxing authority; (iv) the Company has
not requested or been granted an extension of the time for filing any Tax Return
to a date later than the Closing Date; (v) there is no action, suit, taxing
authority proceeding, or audit or claim for refund now in progress, pending or
threatened against or
19
with respect to the Company regarding Taxes; (vi) the Company has not made an
election or filed a consent under Section 341(f) of the Code (or any
corresponding provision of state, local or foreign law) on or prior to the
Closing Date; (vii) there are no Liens for Taxes (other than for current Taxes
not yet due and payable and delinquent) upon the assets of the Company; (viii)
the Company will not be required (A) as Result of a change in method of
accounting for a taxable period ending on or prior to the Closing Date, to
include any adjustment under Section 481(c) of the Code (or any corresponding
provision of state, local or foreign law) in taxable income for any taxable
period (or portion thereof) beginning after the Closing Date or (B) as a result
of any "closing agreement,"as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign law), to include any item of
income or exclude any item of deduction from any taxable period (or portion
thereof) beginning after the Closing Date; (ix) the Company has not been a
member of an affiliated group (as defined in Section 1504 of the Code) or filed
or been included in a combined, consolidated or unitary income Tax Return; (x)
the Company is not a party to or bound by any tax allocation or tax sharing
agreement or has any current or potential contractual obligation to indemnify
any other Person with respect to Taxes; (xi) there are no material additional
Taxes owed by the Company for any period for which Tax Returns have been filed
in excess of the amounts shown as due and payable thereon; (xii) the Company has
not made any payments, and will not become obligated (under any contract entered
into on or before the Closing Date) to make any payments, that will be
non-deductible under Section 280G of the Code (or any corresponding provision of
state, local or foreign law); (xiii) none of the Shareholders is a "foreign
person" within the meaning of Section 1445 of the Code; (xiv) no claim has ever
been made by a taxing authority in a jurisdiction where the Company does not
file Tax Returns that the Company is or may be subject to Taxes assessed by such
jurisdiction; (xv) the Company does not have any permanent establishment in any
foreign country, as defined in the relevant tax treaty between the United States
of America and such foreign country; (xvi) true, correct and complete copies of
all income and sales Tax Returns filed by or with respect to the Company for the
past three years have been furnished or made available to AVS; (xvii) the
Company will not be subject to any Taxes for the period ending at the Closing
Date for any period for which a Tax Return has not been filed imposed pursuant
to Section 1374 or Section 1375 of the Code (or any corresponding provision of
state, local or foreign law); and (xviii) no Arkansas sales or use tax, Arkansas
non-recurring intangibles tax, Arkansas documentary stamp tax or other Arkansas
excise tax (or comparable tax imposed by the State of Arkansas) will be payable
by AVS merely by virtue of the transactions contemplated in this Agreement.
3.20 INSURANCE. SCHEDULE 3.20 contains (i) a complete and correct list
of all insurance policies and all amendments and riders thereto maintained by
the Company (copies of which have been provided to AVS) (the "Insurance
Policies") and (ii) a detailed description of each pending claim under any of
the Insurance Policies for an amount in excess of $10,000 that relates to loss
or damage to the properties, assets or businesses of the Company. Such Insurance
Policies are in full force and effect, and all premiums due thereon have been
paid or accrued on the Current Balance Sheet. As of the Closing Date, each of
the Insurance Policies will be in full force and effect. None of the Insurance
Policies will lapse or terminate as a result of the transactions contemplated by
this Agreement. To the knowledge of the Shareholders, the Company has complied
in all material respects with the provisions
20
of such Insurance Policies. The Company has not failed to give, in a timely
manner, any notice required under any of the Insurance Policies to preserve its
rights thereunder.
3.21 RECEIVABLES. All of the Receivables (as hereinafter defined) are
valid and legally binding, represent bona fide transactions and arose in the
ordinary course of business of the Company. All of the Receivables are good and
collectible receivables, and will be collected in full in accordance with the
terms of such receivables (and in any event within six months following the
Closing), without setoff or counterclaims, subject to the allowance for doubtful
accounts, if any, set forth on the Current Balance Sheet as reasonably adjusted
since the date of the Current Balance Sheet in the ordinary course of business
consistent with past practice. For purposes of this Agreement, the term
"Receivables" means all receivables of the Company, including all trade account
receivables arising from the provision of services, sale of inventory, notes
receivable, and insurance proceeds receivable.
3.22 LICENSES AND PERMITS. To the knowledge of the Shareholders, except
as set forth on SCHEDULE 3.22, the Company possesses all material licenses and
required governmental or official approvals, permits or authorizations
(collectively, the "Permits") for its businesses and operations, including with
respect to the operation of each of the Owned Properties and Leased Premises,
and SCHEDULE 3.22 contains a true and complete list of all such Permits. All
such Permits are valid and in full force and effect, and to the knowledge of the
Shareholders, the Company is in compliance in all material respects with the
respective requirements thereof and no proceeding is pending or threatened to
revoke or amend any of them. Subject to obtaining any required governmental
consents, none of such Permits is or will be impaired or in any way affected in
any material respect by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. The Company has
appropriate FAA permits for the work performed by the Company.
3.23 ADEQUACY OF THE ASSETS; RELATIONSHIPS WITH CUSTOMERS AND
SUPPLIERS; AFFILIATED TRANSACTIONS. The Assets, Owned Properties and Leased
Premises constitute, in the aggregate, all of the assets and properties
necessary for the conduct of the business of the Company in the manner in which
and to the extent to which such business is currently being conducted. No
current supplier to the Company of items essential to the conduct of its
business has threatened to terminate its business relationship with it for any
reason. Except as set forth on SCHEDULE 3.23, the Company does not have any
direct or indirect interest in any customer, supplier or competitor of the
Company, or in any person from whom or to whom the Company leases real or
personal property. Except as set forth on SCHEDULE 3.23, no officer, director or
shareholder of the Company, nor any person related by blood or marriage to any
such person, nor any entity in which any such person owns any beneficial
interest, is a party to any Contract or transaction with the Company or has any
interest in any property used by the Company.
3.24 INTELLECTUAL PROPERTY. To the knowledge of the Shareholders, the
Company has full legal right, title and interest in and to all trademarks,
service marks, trade names, copyrights, know-how, patents, trade secrets,
proprietary computer software, data bases and compilations, licenses (including
licenses for the use of computer software programs and technical
specifications), and other intellectual property used in the conduct of its
business (the "Intellectual Property"). To
21
the knowledge of the Shareholders, the business of the Company as presently
conducted, and the unrestricted conduct and the unrestricted use and
exploitation of the Intellectual Property, does not infringe or misappropriate
any rights held or asserted by any Person, and no Person is infringing on the
Intellectual Property. Except as set forth on SCHEDULE 3.24, no payments are
required for the continued use of the Intellectual Property. To the knowledge of
the Shareholders, none of the Intellectual Property has ever been declared
invalid or unenforceable, or is the subject of any pending or threatened action
for opposition, cancellation, declaration, infringement, or invalidity,
unenforceability or misappropriation or like claim, action or proceeding.
3.25 CONTRACTS. SCHEDULE 3.25(a) sets forth a list of each Contract to
which the Company is a party or by which it or its properties and assets are
bound and which is material to its business, assets, properties or prospects
(the "Designated Contracts"), true and correct copies of which have been
provided to AVS. The copy of each Designated Contract furnished to AVS is a true
and complete copy of the document it purports to represent and reflects all
amendments thereto made through the date of this Agreement. Except as set forth
on SCHEDULE 3.25(b): (i) the Company has not violated any of the terms or
conditions of any Designated Contract [where such violation would have a
Material Adverse Effect], or any term or condition which would permit
termination or material modification of any Designated Contract, and all of the
covenants to be performed by any other party thereto have been performed in all
material respects and there are no claims for breach or indemnification or
notice of default or termination under any Designated Contract, and (ii) no
event has occurred which constitutes, or after notice or the passage of time, or
both, would constitute, a material default by the Company under any Designated
Contract, and no such event has occurred which constitutes or would constitute a
material default by any other party. Except as set forth on SCHEDULE 3.25(c),
the Company is not subject to any material liability or payment resulting from
renegotiation of amounts paid it under any Designated Contract. As used in this
Section, Designated Contracts shall include, without limitation, (a) loan
agreements, indentures, mortgages, pledges, hypothecations, deeds of trust,
conditional sale or title retention agreements, security agreements, equipment
financing obligations or guaranties, or other sources of contingent liability in
respect of any indebtedness or obligations to any other Person, or letters of
intent or commitment letters with respect to same; (b) contracts obligating the
Company to provide products or services for a period of one year or more,
excluding standard maintenance contracts entered into in the ordinary course of
business without material modification from the preprinted forms used by the
Company in the ordinary course of its business; (c) leases of real property, and
leases of personal property not cancelable without penalty on notice of sixty
(60) days or less or calling for payment of an annual gross rental exceeding
$10,000; (d) distribution, sales agency or franchise or similar agreements, or
agreements providing for an independent contractor's services, or letters of
intent with respect to same; (e) employment agreements, management service
agreements, consulting agreements, confidentiality agreements, non-competition
agreements, any other agreements relating to any employee, officer or director
of the Company, and all employee handbooks, policy statements and similar plans;
(f) licenses, assignments or transfers of trademarks, trade names, service
marks, patents, copyrights, trade secrets or know how, or other agreements
regarding proprietary rights or intellectual property; (g) any Contract relating
to pending capital expenditures by the Company; and (h) other material Contracts
or understandings, irrespective of subject matter and whether or not in
22
writing, not entered into in the ordinary course of business by the Company and
not otherwise disclosed on the Schedules.
3.26 ACCURACY OF INFORMATION FURNISHED BY THE SHAREHOLDERS. To the
knowledge of the Shareholders, no representation, statement or information made
or furnished by the Shareholders to AVS or any of AVS' representatives contained
in this Agreement and the various Schedules attached hereto contains any untrue
statement of a material fact or omits any material fact necessary to make the
information contained herein not misleading. The Shareholders have provided AVS
with true, accurate and complete copies of all documents listed or described in
the various Schedules attached hereto. Notwithstanding the foregoing, the
representation contained in this Section 3.26 does not supersede or modify the
specific representations contained in other sections herein.
3.27 INVESTMENT INTENT; ACCREDITED INVESTOR STATUS: SECURITIES
DOCUMENTS. Each of the Shareholders is acquiring the AVS Shares hereunder for
his own account for investment and not with a view to, or for the sale in
connection with, any distribution of any of the AVS Shares, except in compliance
with applicable state and federal securities laws. Each of the Shareholders has
had the opportunity to discuss the transactions contemplated hereby with AVS and
has had the opportunity to obtain such information pertaining to the AVS
Companies as has been requested, including but not limited to filings made by
AVS with the SEC under the Exchange Act, including the most recent filing by AVS
on Form 10-K, and any filings on Schedule 14A and Forms 10-Q or 8-K since the
end of AVS' last fiscal year end. Each of the Shareholders is an accredited
investor" within the meaning of Regulation D promulgated under the Securities
Act, and has such knowledge and experience in business or financial matters that
he is capable of evaluating the merits and risks of an investment in the AVS
Shares.
3.28 BANK ACCOUNTS; BUSINESS LOCATIONS. Schedule 3.28 sets forth all
accounts of the Company with any bank, broker or other depository institution,
and the names of all persons authorized to withdraw funds from each such
account. As of the date hereof, the Company has no office or place of business
other than as identified on SCHEDULES 3.14(A) AND 3.14(B) and the Company's
principal places of business and chief executive offices are indicated on
SCHEDULE 3.14(A) OR 3.14(B), and, except for equipment leased to customers in
the ordinary course of business, all locations where the equipment, inventory,
chattel paper and books and records of the Company is located as of the date
hereof are fully identified on SCHEDULES 3.14(A) AND 3.14(B).
3.29 NAMES; PRIOR ACQUISITIONS. All names under which the Company does
business as of the date hereof are specified on Schedule 3.29. Except as set
forth on SCHEDULE 3.29, the Company has not changed its name or used any assumed
or fictitious name, or been the surviving entity in a merger, acquired any
business or changed its principal place of business or chief executive office,
within the past three years.
3.30 NO COMMISSIONS. Neither the Company nor any of the Shareholders
has incurred any obligation for any finder's or brokers or agent's fees or
commissions or similar compensation in connection with the transactions
contemplated hereby.
23
3.31 CERTAIN ACCOUNTING MATTERS. To the knowledge of the Shareholders,
neither the Company nor any of the Shareholders, nor any of their Affiliates
have taken or agreed to take any action that (excluding any action taken or
agreed to be taken as contemplated by this Agreement or by AVS or any of its
Affiliates or with the consent of AVS) would prevent AVS from accounting for the
transactions contemplated hereby as a pooling of interest business combination.
3.32 BUSINESS OF THE COMPANY. The business of the Company consists of
the repair and overhaul of aircraft parts and the Company is not engaged in the
business of manufacturing. The Person within which the Company is included has
annual net sales of less than $100,000,000 and has total assets of less than
$10,000,000. As a result of the transactions contemplated by this Agreement, no
Shareholder will hold shares of AVS Common Stock valued at more than
$15,000,000.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Except for
the transactions contemplated by this Agreement, the Company covenants and
agrees that, between the date of this Agreement and the Effective Time, the
business of the Company shall be conducted only in, and the Company shall not
take any action except in, the ordinary course of business, consistent in all
material respects with past practice. The Company shall use its commercially
reasonable best efforts to preserve intact its business organizations, to keep
available the services of their current officers, employees and consultants, and
to preserve their present relationships with customers, suppliers and other
persons with which they have significant business relations. By way of
amplification and not limitation, except as set forth on SCHEDULE 4.1, the
Company shall not, between the date of this Agreement and the Effective Time,
directly or indirectly, do or propose or agree to do any of the following
without the prior written consent of AVS:
(a) amend or otherwise change its articles of incorporation or
bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, encumber, or, authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares
of its capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of such capital
stock, or any other ownership interest, of it or (ii) any of its assets,
tangible or intangible, except in the ordinary course of business consistent in
all material respects with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
24
(e) (i) acquire (including, without limitation, for cash or
shares of stock, by merger, consolidation, or acquisition of stock or assets)
any interest in any corporation, partnership or other business organization or
division thereof or any assets, or make any investment either by purchase of
stock or securities, contributions of capital or property transfer, or, except
in the ordinary course of business, consistent with past practice, purchase any
property or assets of any other Person, (ii) incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse or otherwise
as an accommodation become responsible for, the obligations of any Person,
except endorsement of checks payable to the Company in the ordinary course of
business, or make any loans or advances, or (iii) enter into any Contract other
than in the ordinary course of business, consistent with past practice;
(f) increase the compensation payable or to become payable to
its officers or employees, or, except as presently bound to do, grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any of its directors, officers or other employees, or establish,
adopt, enter into or amend or take any action to accelerate any rights or
benefits which any collective bargaining, bonus, profit sharing, trust,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors, officers or
employees;
(g) take any action other than in the ordinary course of
business and in a manner consistent in all material respects with past practice
with respect to accounting policies or procedures;
(h) pay, discharge or satisfy any existing claims, liabilities
or obligations (absolute, accrued, asserted or unassorted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent in all material respects with past practice of
due and payable liabilities reflected or reserved against in its financial
statements, as appropriate, or liabilities incurred after the date hereof in the
ordinary course of business and consistent in all material respects with past
practice;
(i) increase or decrease in any material respect prices
charged to its customers, except for previously announced price changes, or take
any other action which might reasonably result in any material increase in the
loss of customers through non-renewal or termination of service contracts or
other causes; or
(j) agree, in writing or otherwise, to take or authorize any
of the foregoing actions or any action which would make any representation or
warranty in Article III untrue or incorrect.
25
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 FURTHER ASSURANCES. Each party shall execute and deliver such
additional customary instruments and other documents and shall take such further
actions as may be reasonably necessary or appropriate to effectuate, carry out
and comply with all of the terms of this Agreement and the transactions
contemplated hereby.
5.2 COMPLIANCE WITH COVENANTS. The Shareholders shall cause the Company
to comply with all of the respective covenants of the Company under this
Agreement.
5.3 COOPERATION. Each of the parties agrees to cooperate with the other
in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
law, rule or regulation or the rules of the New York Stock Exchange ("NYSE") (or
any exchange on which the AVS Common Stock may be listed) in connection with the
transactions contemplated by this Agreement and to use their respective
commercially reasonably best efforts to agree jointly on a method to overcome
any objections by any Governmental Authority to any such transactions.
5.4 OTHER ACTIONS. Each of the parties hereto shall use its
commercially reasonable best efforts to take, or cause to be taken, all
appropriate actions, and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated herein, including,
without limitation, using its commer cially reasonable best efforts to obtain
all licenses, permits, consents, approvals, authorizations, qualifications and
orders of any Governmental Authority and parties to Contracts with the Company
as are necessary for the consummation of the transactions contemplated hereby.
Each of parties shall make on a prompt and timely basis all governmental or
regulatory notifications and filings required to be made by it for the
consummation of the transactions contemplated hereby. The parties also agree to
use commercially reasonable best efforts to defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby and to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby.
5.5 ACCESS TO INFORMATION. From the date hereof to the Closing Date,
the Company shall (and shall cause its directors, officers, employees, auditors,
counsel and agents) to afford AVS and AVS' officers, employees, auditors,
counsel and agents reasonable access at all reasonable times to its properties,
offices, and other facilities, to its officers and employees and to all books
and records, and shall furnish such persons with all financial, operating and
other data and information as may be requested. No information provided to or
obtained by AVS shall affect any representation or warranty in this Agreement.
AVS represents to the Shareholders that it is not aware of any material breach
of a representation or warranty hereunder by the Shareholders.
26
5.6 NOTIFICATION OF CERTAIN MATTERS. The Shareholders shall give prompt
notice to AVS of the occurrence or non-occurrence of any event which would
likely cause any representation or warranty contained herein to be untrue or
inaccurate, or any covenant, condition, or agreement contained herein not to be
complied with or satisfied.
5.7 TAX TREATMENT. AVS, the Company and the Shareholders will use their
respective best efforts to cause the Merger to qualify as a reorganization under
the provisions of Section 368(a) of the Code and do not presently intend to take
any action after the Merger is effected to cause the Merger to lose its tax-free
status. All parties hereto agree to comply with the reporting requirements of
Treasury Regulation 1.368-3.
5.8 CONFIDENTIALITY; PUBLICITY. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no party hereto or their
respective Affiliates, employees, agents and representatives shall disclose to
any third party this Agreement or the subject matter or terms hereof without the
prior consent of the other parties hereto. No press release or other public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued by any party hereto without the prior approval of the other
parties, except that AVS may make such public disclosure which it believes in
good faith to be required by law or by the terms of any listing agreement with
or requirements of a securities exchange (in which case AVS will consult with an
officer of the Company prior to making such disclosure).
5.9 NO OTHER DISCUSSIONS. Until this Agreement is terminated in
accordance with its provisions, the Company, the Shareholders, and their
respective Affiliates, employees, agents and representatives will not (i)
initiate, encourage the initiation by others of discussions or negotiations with
third parties or respond to solicitations by third persons relating to any
merger, sale or other disposition of any substantial part of the assets,
business or properties of the Company (whether by merger, consolidation, sale of
stock or otherwise) or (ii) enter into any agreement or commitment (whether or
not binding) with respect to any of the foregoing transactions. Until this
Agreement is terminated in accordance with its provisions, the Shareholders will
immediately notify AVS if any third party attempts to initiate any solicitation,
discussion or negotiation with respect to any of the foregoing transactions.
5.10 DUE DILIGENCE REVIEW AND ENVIRONMENTAL ASSESSMENT. AVS shall be
entitled to have conducted prior to Closing a due diligence review of the
assets, properties, books and records of the Company and an environmental
assessment of the Owned Properties and Leased Premises (hereinafter referred to
as "Environmental Assessment"). The Environmental Assessment may include, but
not be limited to, a physical examination of the Owned Property or Leased
Premises, and any structures, facilities, or equipment located thereon, soil
samples, ground and surface water samples, storage tank testing, review of
pertinent records, documents, and Licenses of the Company. The Shareholders
shall provide AVS or its designated agents or consultants with the access to
such property which AVS, its agents or consultants require to conduct the
Environmental Assessment. If the Environmental Assessment identifies
environmental conditions which require remediation or further evaluation under
the Environmental Laws or if the results of the Environmental Assessment
27
or due diligence review are otherwise not satisfactory to AVS in its sole
discretion, then AVS may, prior to the Effective Date, elect to terminate this
Agreement and not to close the transactions contemplated by this Agreement as
its sole and exclusive remedy. AVS' failure or decision not to conduct any such
Environmental Assessment shall not affect any representation or warranty of the
Shareholders under this Agreement.
5.11 TRADING IN AVS COMMON STOCK. Except as otherwise expressly
consented to by AVS, from the date of this Agreement until the Closing Date,
neither the Company nor the Shareholders (nor any Affiliates thereof) will
directly or indirectly purchase or sell (including short sales) any shares of
AVS Common Stock in any transactions effected on the NYSE or otherwise, or sell,
transfer, pledge, dispose of or otherwise part with any interest in or with
respect to or in any other manner reduce their investment risk with respect to
any shares of AVS Common Stock to be received pursuant to this Agreement.
5.12 ACCOUNTING TREATMENT. The Shareholders acknowledge that it is AVS'
intention that the transactions contemplated by this Agreement be accounted for
as a pooling of interests business combination and that each of the Shareholders
may be deemed to be an "affiliate" of the Company within the meaning of Rule 145
promulgated under the Securities Act. Accordingly, each of the Shareholders
covenants and agrees that he will not without AVS' consent (i) take any action
after the date hereof to cause the transactions contemplated hereby not to be
accountable under the pooling of interests method of accounting, or (ii) sell,
transfer, pledge, dispose of or otherwise part with any interest in or with
respect to, or in any other manner reduce his investment risk with respect to,
(A) any shares of capital stock of the Company at any time prior to the Closing
Date, and (B) any shares of AVS Common Stock received by such Shareholder in
connection with the Merger or otherwise until such time as AVS publishes
financial results covering at least 30 days of combined operations of AVS and
the Company. AVS agrees that it will publish such financial results as soon as
reasonably practical and will promptly give the Shareholders written notice when
such financial results have been published. AVS agrees to use good faith efforts
to publish such financial results by December 15, 1997.
5.13 CERTAIN TAX MATTERS. The parties agree that after the Effective
Time, AVS shall prepare, or cause to be prepared, and file, or cause to be
filed, in accordance with applicable laws and regulations, all Tax Returns
(including any necessary amendments to previously filed Tax Returns) for the
Company for any period ending on or before the Effective Time. AVS shall provide
such Tax Returns to the Shareholders for review at least thirty (30) days prior
to their due date (including extensions where applicable). After the Effective
Time, the Shareholders shall provide AVS with such information and records and
access to such of its former officers, directors and agents as may be reasonably
requested by AVS in connection with the preparation of any tax return or any
audit or other proceeding relating to the Company.
5.14 SHAREHOLDER VOTE. Each of the Shareholders, in executing this
Agreement, consents as a shareholder of the Company to the Merger and the
transactions contemplated hereby, and waives notice of any meeting in connection
therewith, and hereby releases and waives all rights with respect
28
to the transactions contemplated hereby under the articles of incorporation of
the Company and any agreements among the Shareholders and the Company relating
to the sale, purchase or voting of any capital stock of the Company. At Closing,
the Shareholders agree that any and all agreements relating to the sale,
purchase or voting of capital stock of the Company, including any agreements
among the Shareholders and the Company described on Schedule 3.4, shall be
terminated.
5.15 COMPANY COMMON STOCK; STOCK POWERS; RELEASES. At the Closing, each
of the Shareholders agrees to deliver to AVS: (i) all certificates evidencing
shares of capital stock of the Company held by them, duly endorsed for transfer
to AVS; and (ii) a release in the form described in Section 6.11.
5.16 PAYOFF AMOUNTS. Prior to Closing, the Company shall request and
deliver to AVS payoff and estoppel letters from such holders of the Company's
outstanding Indebtedness as designated by AVS, which letters shall contain
payoff amounts, per diem interest, wire transfer instructions and an agreement
to deliver, upon payment in full, WCC-3 termination statements, satisfactions of
mortgage and any original promissory notes or other evidences of indebtedness
marked canceled. AVS shall pay at the Closing the Company's existing bank debts
reflected in the Financial Statements.
5.17 ADDITIONAL FINANCIAL STATEMENTS. Following the Effective Time, the
Shareholders shall reasonably assist and cooperate with AVS in the preparation
of financial statements for the Company for the interim period ending September
30, 1997.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE AVS COMPANIES
The obligations of the AVS Companies to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions, any or all of which may be waived in whole or in part by the AVS
Companies:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Shareholders contained in
this Agreement shall be true and correct in all material respects at and as of
the Effective Time with the same force and effect as though made at and as of
that time except (i) for changes specifically permitted by or disclosed on any
schedule to this Agreement, and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true and correct
in all material respects as of such date. The Company and the Shareholders shall
have performed and complied with all of their respective obligations required by
this Agreement to be performed or complied with at or prior to the Effective
Time. The Company and the Shareholders shall have delivered to the AVS Companies
a certificate, dated as of the Effective Date, duly signed (in the case of the
Company, by its President), certifying that such representations and warranties
are true and correct and that all such obligations have been complied with and
performed.
29
6.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Between the
date hereof and the Effective Time, (i) there shall have been no Material
Adverse Change to the Company, (ii) there shall have been no adverse federal,
state or local legislative or regulatory change affecting in any material
respect the services, products or business of any of the Company, and (iii) none
of the properties and assets of the Company shall have been damaged by fire,
flood, casualty, act of God or the public enemy or other cause (regardless of
insurance coverage for such damage) which damages may have a Material Adverse
Effect thereon, and there shall have been delivered to the AVS Companies a
certificate to that effect, dated the Effective Date and signed by or on behalf
of the Company and the Shareholders.
6.3 CORPORATE CERTIFICATE. The Shareholders shall have delivered to the
AVS Companies (i) copies of the articles of incorporation and bylaws of the
Company as in effect immediately prior to the Effective Time, (ii) copies of
resolutions adopted by the Board of Directors and Shareholders of the Company
authorizing the transactions contemplated by this Agreement, and (iii) a
certificate of good standing of the Company issued by the Secretary of State of
the State of Arkansas as of a date not more than ten days prior to the Effective
Date, certified in the case of subsections (i) and (ii) of this Section as of
the Effective Date by the Secretary of the Company as being true, correct and
complete.
6.4 OPINION OF COUNSEL. The AVS Companies shall have received an
opinion dated as of the Effective Date from counsel for the Company and the
Shareholders, in form attached hereto, to the effect that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arkansas and has
the corporate power to carry on the business now conducted by it and to own or
lease the properties now owned or leased by it;
(b) The Company has obtained all necessary authorizations and
consents of its Boards of Directors and the Shareholders to effect the Merger;
(c) Based solely upon such counsel's review of the Company's
corporate record book and a certificate from the Company's Secretary and the
Shareholders, all issued and outstanding shares of capital stock of the Company
is owned as set forth on SCHEDULE 3.5 hereto;
(d) Such counsel does not know of any litigation, proceeding
or investigation then pending or threatened which could reasonably be expected
to result in any Material Adverse Effect on the Company, or which questions the
validity of this Agreement; and
(e) This Agreement is a valid and binding obligation of the
Company and the Shareholders, and enforceable against each of them in accordance
with their terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or general equitable principles.
30
6.5 CONSENTS. The Company shall have received consents to the
transactions contemplated hereby and waivers of rights to terminate or modify
any material rights or obligations of the Company from any Person from whom such
consent or waiver is required under any Contract or instrument on or prior to
the Effective Date, or who, as a result of the transactions contemplated hereby,
would have such rights to terminate or modify such Contracts or instruments,
either by the terms thereof or as a matter of law.
6.6 SECURITIES LAWS. AVS shall have received all necessary consents and
otherwise complied with any state or federal securities laws applicable to the
issuance of the AVS Shares, in connection with the transactions contemplated
hereby.
6.7 CAPITAL STOCK OF THE COMPANY. At the Closing, each of the
Shareholders shall have delivered to AVS all certificates evidencing the shares
of capital stock of the Company held by them.
6.8 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the Merger or any other transaction contemplated hereby, and which, in the
reasonable judgment of AVS, makes it inadvisable to proceed with the Merger and
other transactions contemplated hereby.
6.9 BOARD APPROVAL. The Board of Directors of AVS shall have authorized
and approved this Agreement, the Merger and transactions contemplated hereby.
6.10 DUE DILIGENCE REVIEW. AVS shall be satisfied with the results of
its due diligence review and Environmental Assessment pursuant to Section 5.10.
6.11 RELEASES. Each of the Shareholders shall deliver to AVS a release
(collectively, the "Releases") in such form as is reasonably satisfactory to AVS
releasing all claims of any nature against the Company, if any, and any claims
arising out of the Merger and the transactions contemplated by this Agreement,
provided that such Release shall not cover (i) any rights of the Shareholders
against AVS under this Agreement; (ii) any employment benefits (including
benefits under the Company's employee benefit plans) accrued in the ordinary
course of business consistent with past practice or related rights under law
(such as ERISA); or (iii) rights under the Employment Agreements referenced
below.
6.12 EMPLOYMENT AGREEMENT. On or prior to Closing, Xxxxx X. Xxxxxxx, XX
and Xxxxxxx X. Xxxxxx shall execute and deliver to AVS employment agreements in
a mutually acceptable form.
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ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY AND THE SHAREHOLDERS
The obligations of the Company and the Shareholders to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions, any or all of which may be waived in whole or in part
by the Company and the Shareholders:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the AVS Companies contained
in this Agreement shall be true and correct in all material respects at and as
of the Effective Time with the same force and effect as though made at and as of
that time except (i) for changes specifically permitted by or disclosed pursuant
to this Agreement, and (ii) that those representations and warranties which
address matters only as of a particular date shall remain true and correct as of
such date. Each of the AVS Companies shall have performed and complied with all
of its obligations required by this Agreement to be performed or complied with
at or prior to the Effective Time. Each of the AVS Companies shall have
delivered to the Company and the Shareholders a certificate, dated as of the
Effective Date, and signed by an executive officer, certifying that such
representations and warranties are true and correct in all material respects and
that all such obligations have been complied with and performed.
7.2 AVS SHARES. At the Closing, AVS shall have issued all of the AVS
Shares and shall have delivered to the Shareholders certificates representing
the AVS Shares issued to them hereunder.
7.3 NO ORDER OR INJUNCTION. No court of competent jurisdiction or other
governmental body shall have issued or entered any order or injunction
restraining or prohibiting the transactions contemplated hereby, which remains
in effect at the time of Closing and no litigation, claim or proceeding shall be
pending or threatened which seeks to restrain, prohibit or invalidate the
Merger.
7.4 CONSENTS. The Company shall have received consents to the
transactions contemplated hereby and waivers of rights to terminate or modify
any material rights or obligations of the Company from any Person from whom such
consent or waiver is required under any Contract or instrument on or prior to
the Effective Date, or who, as a result of the transactions contemplated hereby,
would have such rights to terminate or modify such Contracts or instruments,
either by the terms thereof or as a matter of law.
7.5 TAX OPINION. The Shareholders shall have received an opinion from
Friday, Xxxxxxxx & Xxxxx (in customary form and subject to customary
qualifications and assumptions) that the transaction contemplated hereby
qualifies for federal income tax purposes as a reorganization pursuant to IRC
368(a)(1)(A) and (a)(2)(E) and that the Shareholders will not recognize taxable
gain for federal income tax purposes with respect to the exchange of the shares
of the Company's common stock solely for AVS voting Common Stock in connection
with the Merger contemplated hereby.
32
7.6 OPINION OF COUNSEL. The Company and the Shareholders shall have
received an opinion dated as of the Effective Date from counsel for AVS, in form
and substance acceptable to the Company to the effect that:
(a) AVS is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware;
(b) AVS has obtained all necessary authorizations and consents
of its Board of Directors to effect the transactions contemplated hereby and the
consent of its shareholders is not required;
(c) the AVS Shares, when issued in connection with the
transactions contemplated hereby, will be duly authorized, validly issued, fully
paid and nonassessable; and
(d) this Agreement is a valid and binding obligation of AVS,
enforceable against it in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or general equitable
principles.
ARTICLE VIII
REGISTRATION RIGHTS
The Shareholders shall have the following registration rights with
respect to the AVS Shares issued to them hereunder:
8.1 REGISTRATION RIGHTS FOR AVS SHARES; FILING OF REGISTRATION
STATEMENT. AVS will utilize reasonable efforts to cause, within 90 days
following the Effective Time, a registration statement to be filed under the
Securities Act or an existing registration statement to be amended for the
purpose of registering the AVS Shares for resale by a Holder thereof (the
"Registration Statement"). For purposes of this Article, a person is deemed to
be a "Holder" of AVS Shares whenever such person is the record owner of AVS
Shares. AVS will use reasonable efforts to have the Registration Statement
become effective and cause the AVS Shares to be registered under the Securities
Act, and registered, qualified or exempted under the state securities laws of
such jurisdictions as any Holder reasonably requests, and will file an
application to list such shares on the NYSE, as soon as is reasonably
practicable.
8.2 EXPENSES OF REGISTRATION. AVS shall pay all expenses incurred by
AVS in connection with the registration, qualification and/or exemption of the
AVS Shares, including any SEC and state securities law registration and filing
fees, printing expenses, fees and disbursements of AVS's counsel and
accountants, transfer agents' and registrars' fees, fees and disbursements of
experts used by AVS in connection with such registration, qualification and/or
exemption, and expenses incidental to any amendment or supplement to the
Registration Statement or prospectuses contained therein. AVS shall
33
not, however, be liable for any sales, broker's or underwriting commissions or
other selling expenses incurred upon sale by any Holder of any of the AVS
Shares.
8.3 FURNISHING OF DOCUMENTS. AVS shall furnish to the Holders such
reasonable number of copies of the Registration Statement, such prospectuses as
are contained in the Registration Statement and such other documents as the
Holders may reasonably request in order to facilitate the offering of the AVS
Shares.
8.4 AMENDMENTS AND SUPPLEMENTS. AVS shall prepare and promptly file
with the SEC and promptly notify the Holders of the filing of such amendments or
supplements to the Registration Statement or prospectuses contained therein as
may be necessary to correct any statements or omissions if, at the time when a
prospectus relating to the AVS Shares is required to be delivered under the
Securities Act, any event shall have occurred as a result of which any such
prospectus or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. AVS shall also advise the Holders promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the SEC suspending the effectiveness of the Registration Statement or
the initiation or threatening of any proceeding for that purpose and promptly
use its reasonable best efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued. If, after a
Registration Statement becomes effective, AVS advises the Holders that AVS
considers it appropriate that the Registration Statement be amended, the Holders
shall suspend any further sales of the AVS Shares until AVS advises the Holders
that the Registration Statement has been amended, in which case AVS shall cause
such amendment to be filed as soon as reasonably practical.
8.5 DURATION. AVS shall maintain the effectiveness of the Registration
Statement until such time as AVS reasonably determines, based on an opinion of
counsel, that the Holders will be eligible to sell all of the Shares then owned
by the Holders without the need for continued registration of the shares, in the
three month period immediately following the termination of the effectiveness of
the Registration Statement. AVS's obligations contained in this Article VIII
shall terminate on the first anniversary of the Effective Date.
8.6 FURTHER INFORMATION. If AVS Shares owned by a Holder are included
in any registration, such Holder shall furnish AVS such information regarding
itself as AVS may reasonably request and as shall be required in connection with
any registration, qualification or compliance referred to in this Agreement.
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ARTICLE IX
INDEMNIFICATION
9.1 Agreement to Indemnify.
(a) INDEMNITY BY THE SHAREHOLDERS. Subject to the limitations
set forth herein, each of the Shareholders agrees to indemnify and hold AVS
harmless from and against the aggregate of all expenses, losses, costs,
deficiencies, liabilities and damages (including, without limitation, related
reasonable counsel and paralegal fees and expenses) incurred or suffered by AVS
arising out of or resulting from (i) any breach of a representation or warranty
made by the Shareholders in this Agreement, (ii) any breach of the covenants or
agreements made by the Company or any Shareholder in this Agreement, or (iii)
any inaccuracy in any certificate delivered by the Company or any shareholder
pursuant to this Agreement (collectively, "AVS Indemnifiable Damages"). Without
limiting the generality of the foregoing, with respect to the measurement of AVS
Indemnifiable Damages, subject to the provisions set forth herein, AVS shall
have the right to be put in the same after tax consolidated financial position
as it would have been in had each of the representations and warranties of the
Shareholders hereunder been true and correct and had the covenants and
agreements of the Company and the Shareholders hereunder been performed in full.
Notwithstanding anything to the contrary contained herein, (i) AVS shall not be
entitled to any AVS Indemnifiable Damages unless the aggregate of all such AVS
Indemnifiable Damages exceeds $180,000 (the "Indemnification Threshold"), in
which case AVS shall be entitled to the amount of such AVS Indemnifiable Damages
to the extent exceeding the Indemnification Threshold, subject to the
limitations set forth herein, and (ii) the maximum liability of each Shareholder
for AVS Indemnifiable Damages with respect to any such breach of representation,
warranty, covenant or agreement of the Shareholders hereunder shall be limited
to $1,000,000 (the "Shareholder Ceiling"); provided, however, neither the
Indemnification Threshold nor the Shareholder Ceiling shall apply in the case of
fraud or an intentional misrepresentation or intentional breach of warranty,
covenant or agreement.
(b) INDEMNIFICATION BY AVS. Subject to the limitations set
forth herein, AVS agrees to indemnify and hold the Shareholders harmless from
and against the aggregate of all expenses, losses, costs, deficiencies,
liabilities and damages (including, without limitation, related reasonable
counsel and paralegal fees and expenses) incurred or suffered by the
Shareholders arising out of or resulting from (i) any breach of a representation
or warranty made by AVS in this Agreement, (ii) any breach of the covenants or
agreements made by AVS in this Agreement, or (iii) any inaccuracy in any
certificate delivered by AVS pursuant to this Agreement (collectively,
"Shareholder Indemnifiable Damages"). Without limiting the generality of the
foregoing, subject to the provisions set forth herein, with respect to the
measurement of Shareholder Indemnifiable Damages, the Shareholders shall have
the right to be put in the same after tax consolidated financial position as
they would have been in had each of the representations and warranties of AVS
hereunder been true and correct and had the covenants and agreements of AVS
hereunder been performed in full. Notwithstanding anything to the contrary
contained herein, (i) the Shareholders shall not be entitled to any Shareholder
Indemnifiable Damages unless the aggregate of all such Shareholder
35
Indemnifiable Damages exceeds $180,000 (the "Indemnification Threshold"), in
which case the Shareholders shall be entitled to the amount of such Shareholder
Indemnifiable Damages to the extent exceeding the Indemnification Threshold,
subject to the limitations set forth herein, and (ii) the maximum aggregate
liability of AVS for Shareholder Indemnifiable Damages with respect to any such
breach of representation, warranty, covenant or agreement of AVS hereunder shall
be limited to $1,000,000 per Shareholder and $6,000,000 in the aggregate (the
"AVS Ceiling"); provided, however, neither the Indemnification Threshold nor the
AVS Ceiling shall apply in the case of fraud or an intentional misrepresentation
or intentional breach of warranty, covenant or agreement.
(c) RECOVERY BY INDEMNIFIED PARTY. The amount of any
Indemnifiable Damages hereunder shall be reduced by the amount, if any, of the
recovery actually received by the indemnified party with respect to such
Indemnifiable Damages (net of any out-of-pocket collection costs) under
applicable insurance policies or from persons or entities not parties to this
Agreement (not including any successor in interest or assign of any party
hereto).
(d) MINIMUM INSURANCE COVERAGE. In the event (a) AVS and the
Company fail to maintain following the Closing, "Minimum Insurance Coverage", as
hereinafter defined, and (b) AVS or the Company incur any AVS Indemnifiable
Damages subject to indemnification by the Shareholders hereunder which would
have been covered in whole or in part by insurance had AVS maintained such
Minimum Insurance Coverage, then the amount of such AVS Indemnifiable Damages
shall be reduced to the extent such AVS Indemnifiable Damages would have been so
compensated by insurance had the Minimum Insurance Coverage been maintained. For
purposes of this provision, the term "Minimum Insurance Coverage" shall mean
commercial liability, products liability, workers compensation and other
applicable insurance (and related umbrella coverage) on a claims made basis with
respect to the Company in amounts, with deductibles, and covering risks not
materially less than the coverage amounts and risks, or materially in excess of
the deductibles, presently maintained by the Company.
(e) TAXES. The amount of any Indemnifiable Damages shall be
fairly and equitably reduced by the amount of the actual reduction in income tax
liability actually received by the indemnified party after giving effect to the
incurrence by the indemnified party of the liability giving rise to the claim
for indemnification, the payment by the indemnified party of such claim, and the
receipt by the indemnified party of any indemnity payment with respect to such
claim, provided the indemnifying party shall reimburse the indemnified party
with respect to the reasonable accounting fees and out-of-pocket costs incurred
by the indemnified party in calculating such reduction.
9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Shareholders or AVS in this Agreement
or pursuant hereto shall survive for a period of one year after the Effective
Time (except that the representations and warranties in Sections 2.10 and 2.12
shall survive until the expiration of the applicable statute of limitations with
respect to a breach thereof). No claim for the recovery of Indemnifiable Damages
arising out of a breach of any representation or warranty may be asserted by AVS
against the Shareholders or by the Shareholders against AVS after such
representations and warranties shall thus expire; PROVIDED,
36
HOWEVER, that claims for Indemnifiable Damages first asserted within the
applicable period shall not thereafter be barred. Notwithstanding any knowledge
of facts determined or determinable by any party by investigation, each party
shall have the right to fully rely on the representations, warranties, covenants
and agreements of the other parties contained in this Agreement or in any
certificate delivered at the Closing pursuant to this Agreement. Each
representation, warranty, covenant and agreement of the parties contained in
this Agreement is independent of each other representation, warranty, covenant
and agreement.
9.3 NOTICE AND DEFENSE. The obligation of the Shareholders and AVS with
respect to their respective indemnities hereunder resulting from any claim or
other assertion of liability by third parties (hereinafter collectively, "Third
Party Claim(s)"), shall be subject to the following terms and conditions:
(i) The party seeking indemnification hereunder (the
"Indemnified Party") shall give written notice of any such
Third Party Claim to the party from whom indemnification is
sought hereunder (the "Indemnifying Party") within a
reasonable time after the Indemnified Party receives notice
thereof; provided, however, the failure to give notice timely
shall not affect the Indemnifying Party's obligation hereunder
except to the extent that such failure prejudices the
Indemnifying Party or its ability to defend or reduce the Loss
relating to such Third Party Claim.
(ii) The Indemnifying Party shall have the right to
undertake, with counsel or other representatives of its own
choosing and reasonably acceptable to the Indemnified Party,
the defense or settlement of any such Third Party Claim.
(iii) In the event that the Indemnifying Party shall
have the right to undertake the defense of any Third Party
Claim, but shall fail to notify the Indemnified Party within
ten (10) days of receipt of the notice that it has elected to
undertake such defense or settlement, or if at any time the
Indemnifying Party shall otherwise fail to diligently defend
or pursue settlement of such claim, then the Indemnified Party
shall have the right to undertake the defense, compromise or
settlement of such claim, with counsel reasonably acceptable
to the Indemnifying Party.
(iv) Neither party shall settle any Third Party Claim
without the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed. In the
event in connection with any civil claim (not involving any
criminal responsibility or civil theft) the Indemnifying Party
submits to the Indemnified Party a bona fide settlement offer
from the third party claimant of any Third Party Claim (which
settlement offer shall include as an unconditional term
thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect
of such claim) and the Indemnified Party refuses to consent to
such settlement, then thereafter the Indemnifying Party's
liability to the Indemnified Party for indemnification
hereunder with respect to such Third Party Claim shall not
exceed
37
the settlement amount included in said bona fide settlement
offer, and the Indemnified Party shall either assume the
defense of such Third Party Claim or pay the Indemnifying
Party's attorneys fees and other out of pocket costs incurred
thereafter in continuing the defense of such claim.
(v) Regardless of which party is conducting the
defense of any such Third Party Claim, the other party, with
counsel or other representatives of its own choosing and at
its sole cost and expense, shall have the right to consult
with the party conducting the defense of such claim and its
counsel or other representatives concerning such claim and the
Indemnifying Party and the Indemnified Party and their
respective counsel or other representatives shall cooperate
with respect to such claim, and the party conducting the
defense of any such claim and its counsel shall in any case
keep the other party and its counsel (if any) fully informed
as to the status of any claim and any matters relating
thereto. Each party shall provide to the other party such
records, books, documents and other materials as shall
reasonably be necessary for such party to conduct or evaluate
the defense of any Third Party Claim and will generally
cooperate with respect to any matters relating thereto.
(vi) Notwithstanding the foregoing, the Indemnified
Party shall have the right to pursue any appeal from the trial
court at the cost of the Indemnifying Party with counsel
chosen by the Indemnified Party and reasonably acceptable to
the Indemnifying Party.
9.4 ADJUSTMENT MERGER CONSIDERATION. All payments for Indemnifiable
Damages made pursuant to this Article shall be treated as adjustments to the
consideration granted in the Merger under Section 1.3 hereof.
9.5 NO BAR; WAIVER. AVS may take any action or exercise any remedy
available to it by appropriate legal proceedings to collect the Indemnifiable
Damages, subject to the limitations set forth herein. The Shareholders hereby
waive any rights to contribution or any similar rights they may have against the
Company as of a result of their agreement to indemnify AVS under this Article
IX.
ARTICLE X
SECURITIES LAW MATTERS
The parties agree as follows with respect to the sale or other
disposition after the Effective Time of the AVS Shares:
10.1 DISPOSITION OF SHARES. The Shareholders represent and warrant that
the shares of AVS Common Stock being acquired by them hereunder are being
acquired and will be acquired for their own respective accounts and will not be
sold or otherwise disposed of, except pursuant to (a) an exemption from the
registration requirements under the Securities Act, which does not require the
38
filing by AVS with the SEC of any registration statement, offering circular or
other document, in which case, the Shareholders shall first supply to AVS an
opinion of counsel (which counsel and opinions shall be satisfactory to AVS)
that such exception is available, or (b)an effective registration statement
filed by AVS with the SEC under the Securities Act.
10.2 LEGEND. The certificates representing the AVS Shares shall bear
the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER
THE SECURI TIES ACT OF 1933, AS AMENDED, AND IN COMPLIANCE
WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT
THERETO, OR IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE, AND ALSO MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT
COMPLIANCE WITH THE SECURITIES AND EXCHANGE COMMISSION'S
ACCOUNTING SERIES RELEASES 130 AND 135.
AVS may, unless a registration statement is in effect covering such shares or it
has received an opinion of counsel reasonably acceptable to it that registration
is not required due to an exemption therefrom, place stop transfer orders with
its transfer agents with respect to such certificates in accordance with federal
securities laws.
ARTICLE XI
DEFINITIONS
11.1 DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the Exchange Act, as
in effect on the date hereof.
"Contract" means any agreement, contract, lease, note,
mortgage, indenture, loan agreement, franchise agreement, covenant,
employment agreement, license, instrument, purchase and sales order,
commitment, undertaking, obligation, whether written or oral, express
or implied.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
39
"GAAP" means generally accepted accounting principles in
effect in the United States of America from time to time.
"Governmental Authority" means any nation or government, any
state, regional, local or other political subdivision thereof, and any
entity or official exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
As used herein, terms such as "to the knowledge," and similar
phrases shall be limited to matters within such Person's actual
knowledge, and notwithstanding anything herein to the contrary, no
Person shall be deemed to be in breach of any representation or
warranty so qualified except to the extent of such breach with respect
to matters actually known by such Person and not disclosed or
accurately disclosed herein or in the Schedules hereto.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, but not limited to,
any conditional sale or other title retention agreement, any lease in
the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code or comparable law
or any jurisdiction in connection with such mortgage, pledge, security
interest, encumbrance, lien or charge).
For purposes of quantifying the term "material" as used in
this Agreement with respect to the representations and warranties of
the Shareholders, the parties agree that the amount of $7,500 shall be
used for purposes of materiality with respect to individual items and
$75,000 shall be used when considering the Company or individual items
in the aggregate.
"Material Adverse Change (or Effect)" means a change (or
effect), in the condition (financial or otherwise), properties, assets,
liabilities, rights, obligations, operations, business or prospects
which change (or effect) individually or in the aggregate, is
materially adverse.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, estate, trust, unincorporated
association, joint venture, Governmental Authority or other entity, of
whatever nature.
"Register", "registered" and "registration" refer to a
registration of the offering and sale of securities effected by
preparing and filing a registration statement in compliance with the
Securities Act and the declaration or ordering of the effectiveness of
such registration statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Tax Return" means any tax return, filing or information
statement required to be filed in connection with or with respect to
any Taxes; and
40
"Taxes" means all taxes, fees or other assessments, including,
but not limited to, income, excise, property, sales, franchise,
intangible, withholding, social security and unemployment taxes imposed
by any federal, state, local or foreign governmental agency, and any
interest or penalties related thereto.
11.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection with
this Agreement and the transactions contemplated hereby shall be determined in
accordance with GAAP applied on a basis consistent with prior periods, where
applicable.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
ARTICLE XII
TERMINATION
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual written consent of AVS and a majority of the
Shareholders at any time prior to the Closing; or
(b) by AVS by written notice in the event of a material breach
by the Company or any of the Shareholders of any provision of this Agreement; or
(c) by the Company or a majority of the Shareholders by
written notice in the event of a material breach by AVS of any provision of this
Agreement; or
(d) by either AVS, the Company or a majority of the
Shareholders if the Closing shall not have occurred by October 30, 1997.
12.2 EFFECT OF TERMINATION. Except for the provisions of Article IX
hereof, which shall survive any termination of this Agreement, in the event of
termination of this Agreement pursuant to Section 12.1, this Agreement shall
forthwith become void and of no further force and effect and the
41
parties shall be released from any and all obligations hereunder; provided,
however, that nothing herein shall relieve any party from liability for the
willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement. The provisions of any Confidentiality
Agreement executed by AVS for the benefit of the Company shall survive any
termination of this Agreement.
ARTICLE XIII
GENERAL PROVISIONS
13.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall designate
in writing to the other party):
(a) IF TO ANY OF THE AVS COMPANIES TO:
Aviation Sales Company
0000 X.X. 00xx Xxxxxx
Xxxxx, XX 00000
Attn: Xxxx X. Xxxxx, Chairman of the Board, President
and Chief Executive Officer
Telecopy: (000) 000-0000
WITH A COPY TO:
Akerman, Senterfitt & Xxxxxx, P.A.
Xxx Xxxxxxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
(b) IF TO THE COMPANY AND/OR THE SHAREHOLDERS TO:
Xxxxx X. Xxxxxxx, XX
000 Xxxxxxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxx 00000;
Xxxxxxx X. Xxxxxx
000 Xxxxxxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxx 00000;
42
Xxxxxx X. Xxxxxx
Chem-Fab Corporation
0000 Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxx 00000;
Xxxxx X. Xxxxxx
Chem-Fab Corporation
0000 Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxx 00000;
Xxxxxx X. Xxxxxx
Chem-Fab Corporation
0000 Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxx 00000; and
Xxxxxxx X. Xxxxx
00000 Xxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
WITH A COPY TO:
Friday, Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxx, III, Esq.
Telecopy: (000) 000-0000; and
Carnahan, Evans, Xxxxxxxx & Xxxxx, P.C.
Four Corporate Centre, Suite 410
1949 E. Sunshine
X.X. Xxx 00000 X.X.X.
Xxxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxx X. Xxxxxxxx III
Telecopy: (000) 000-0000
Notice shall be deemed given on the date sent if sent by facsimile
transmission and on the date delivered (or the date of refusal of delivery) if
sent by overnight delivery or by certified or registered mail.
13.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules attached hereto) and other documents delivered at the Closing pursuant
hereto, contains the entire understanding of the parties in respect of its
subject matter and supersedes all prior agreements and understandings (oral or
written) between or among the parties with respect to such subject matter.
43
The Exhibits and Schedules constitute a part hereof as though set forth in full
above. Except for the certificates to be delivered at the Closing as provided in
Articles VI and VII, there are no representations, warranties, covenants or
agreements between the parties in connection with the transaction contemplated
hereby other than those expressly set forth herein and in the Exhibits and
Schedules hereto.
13.3 EXPENSES. Except as otherwise provided herein, the parties shall
pay their own fees and expenses, including their own counsel fees, incurred in
connection with this Agreement or any transaction contemplated hereby. The
Shareholders shall pay all legal, accounting, tax consulting, financial
advisory, and other similar fees and expenses, incurred by the Company in
connection with the transactions contemplated by this Agreement, provided, the
Company shall pay the legal fees of Friday Xxxxxxxx and Xxxxx and Carnahan,
Evans, Xxxxxxxx & Xxxxx, P.C. subject to a maximum of $41,000 in the aggregate.
13.4 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented or waived, except by written instrument executed by all parties. No
failure to exercise, and no delay in exercising, any right, power or privilege
under this Agreement shall operate as a waiver, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude the exercise of any
other right, power or privilege. No waiver of any breach of any provision shall
be deemed to be a waiver of any preceding or succeeding breach of the same or
any other provision, nor shall any waiver be implied from any course of dealing
between the parties. No extension of time for performance of any obligations or
other acts hereunder or under any other agreement shall be deemed to be an
extension of the time for performance of any other obligations or any other
acts. The rights and remedies of the parties under this Agreement are in
addition to all other rights and remedies, at law or equity, that they may have
against each other, subject to the provisions of Article IX.
13.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by the Company, or any Shareholders without the
prior written consent of AVS. Except for transfers and assignments to any
Affiliate after the Effective Time, the rights and obligations of this Agreement
may not be assigned by AVS without the prior written consent of the
Shareholders.
13.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
13.7 INTERPRETATION. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Whenever the words "include,""includes" or "including" are used in
this Agreement, they shall be
44
deemed to be followed by the words "without limitation." Time shall be of the
essence in this Agreement.
13.8 GOVERNING LAW; SEVERABILITY. This Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of
Florida applicable to contracts executed and to be wholly performed within such
State. If any word, phrase, sentence, clause, section, subsection or provision
of this Agreement as applied to any party or to any circumstance is adjudged by
a court to be invalid or unenforceable, the same will in no way affect any other
circumstance or the validity or enforceability of any other word, phrase,
sentence, clause, section, subsection or provision of this Agreement. If any
provision of this Agreement, or any part thereof, is held to be unenforceable
because of the duration of such provision or the area covered thereby or
otherwise, the parties agree that the court making such determination shall have
the power to reduce the duration and/or area of such provision, and/or to delete
specific words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.
13.9 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly represents
and warrants to all other parties hereto that (a) before executing this
Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
[Signatures on following pages]
45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
AVIATION SALES COMPANY, a Delaware
corporation
By:_________________________________
Name:____________________________
Title:___________________________
AVS/ASI MERGER CORP., an Arkansas
corporation
By:_________________________________
Name:____________________________
Title:___________________________
AEROCELL STRUCTURES, INC., an Arkansas
corporation
By:_________________________________
Name:____________________________
Title:___________________________
____________________________________
XXXXXX X. XXXXXX, individually
____________________________________
XXXXX X. XXXXXX, individually
____________________________________
XXXXX X. XXXXXXX, XX, individually
46
___________________________________
XXXXXXX X. XXXXXX, individually
___________________________________
XXXXXXX X. XXXXX, Individually
___________________________________
XXXXXX X. XXXXXX, individually
47
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Plan of Merger
Schedule 3.4 Capitalization
Schedule 3.5 Shareholders
Schedule 3.9 Financial Statements
Schedule 3.10 Changes Since the Current Balance Sheet
Schedule 3.11 Liabilities
Schedule 3.12 Litigation
Schedule 3.13 Environmental Matters
Schedule 3.14(a) Owned Properties
Schedule 3.14(b) Leased Premises
Schedule 3.15 Fixed Assets
Schedule 3.17 Employees
Schedule 3.18 Employee Benefit Plans
Schedule 3.19 Tax Matters
Schedule 3.20 Insurance Matters
Schedule 3.22 Permits
Schedule 3.23 Affiliated Transactions
Schedule 3.24 Intellectual Property
Schedule 3.25(a) Designated Contracts
Schedule 3.25(b) Designated Contract Matters
Schedule 3.25(c) Rebates
Schedule 3.28 Bank Accounts
Schedule 3.29 Names
Schedule 4.1 Permitted Transactions Pending Closing
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