EXHIBIT 10.2
_______________________________________________
ASSET PURCHASE AGREEMENT
by and among
Banner Aerospace, Inc.,
the Sellers listed on Annex A,
AlliedSignal Inc.
and
AS BAR LLC
dated as of December 8, 1997
_______________________________________________
TABLE OF CONTENTS
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ARTICLE I
The Transaction
1.1 Purchase and Transfer............................................... 1
1.2 Acquisition of Assets............................................... 2
1.3 Assumption of Assumed Liabilities................................... 5
1.4 Initial Purchase Price.............................................. 9
1.5 Escrow of Shares.................................................... 9
1.6 Purchase Price Adjustment........................................... 10
1.7 Accounts Receivable................................................. 13
1.8 Closing............................................................. 14
1.9 Deliveries and Proceedings at the Closing........................... 15
1.10 Stock Legend........................................................ 17
1.11 Prorations.......................................................... 17
ARTICLE II
Representations And Warranties Of Parent And Sellers
2.1 Qualification....................................................... 18
2.2 Ownership of the Companies.......................................... 18
2.3 Authorization and Enforceability.................................... 19
2.4 No Violation of Laws or Agreements.................................. 19
2.5 Consents............................................................ 20
2.6 Financial Statements................................................ 20
2.7 No Changes.......................................................... 21
2.8 Contracts........................................................... 22
2.9 Permits and Compliance With Laws Generally.......................... 23
2.10 Environmental Matters............................................... 24
2.11 Transactions with Affiliates........................................ 25
2.12 Title............................................................... 25
2.13 Acquired Real Property.............................................. 26
2.14 Taxes............................................................... 27
2.15 Intellectual Property and Technology................................ 28
2.16 Brokerage........................................................... 29
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2.17 Product Warranties and Guarantees................................... 29
2.18 Products Liability.................................................. 30
2.19 Labor Matters....................................................... 30
2.20 Employee Benefits................................................... 30
2.21 No Pending Litigation or Proceedings................................ 33
2.22 Insurance........................................................... 33
2.23 Customers; Suppliers................................................ 33
2.24 Condition of Assets................................................. 34
2.25 All Assets.......................................................... 34
2.26 Undisclosed Liabilities............................................. 34
2.27 Securities Matters.................................................. 34
2.28 SEC Filings......................................................... 35
2.29 Bank Accounts....................................................... 35
2.30 Business Conduct.................................................... 35
ARTICLE III
Representations And Warranties Of AlliedSignal and Buyer
3.1 Organization and Good Standing...................................... 35
3.2 Authorization and Enforceability.................................... 36
3.3 No Violation of Laws or Agreements.................................. 36
3.4 Consents............................................................ 36
3.5 AlliedSignal Common Stock........................................... 36
3.6 SEC Filings......................................................... 37
3.7 Financial Statements................................................ 37
3.8 Brokerage........................................................... 37
ARTICLE IV
Additional Covenants
4.1 Conduct of Business................................................. 37
4.2 Mutual Covenants.................................................... 40
4.3 Filings and Authorizations.......................................... 40
4.4 Public Announcement................................................. 41
4.5 Investigation....................................................... 41
4.6 Taxes............................................................... 42
4.7 Certain Deliveries.................................................. 44
4.8 Consents............................................................ 44
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4.9 Releases............................................................ 44
4.10 Real Property....................................................... 44
4.11 Environmental....................................................... 45
4.12 Ancillary Agreements................................................ 45
4.13 Reasonable Best Efforts............................................. 45
4.14 Negotiations........................................................ 45
4.15 U.S. Government Contracts........................................... 46
4.16 NYSE Listing........................................................ 47
4.17 Continued Existence................................................. 47
4.18 Company Debt........................................................ 47
4.19 Side Letters........................................................ 47
4.20 Product Liability Insurance......................................... 47
4.21 Harco Northern Ireland, Ltd......................................... 48
ARTICLE V
Conditions Precedent
5.1 Conditions Precedent to Obligations of Allied Signal and Buyer...... 48
5.2 Conditions Precedent to Obligations of Parent and Sellers........... 50
ARTICLE VI
Certain Additional Covenants
6.1 Expenses............................................................ 51
6.2 Maintenance of Books and Records.................................... 52
6.3 Financial Statements................................................ 52
6.4 Non-Competition/Non-Solicitation.................................... 52
6.5 Confidential Information............................................ 54
ARTICLE VII
Survival; Indemnification
7.1 Survival............................................................ 54
7.2 Indemnification by Parent, Sellers and Xxxxxxx Sellers.............. 55
7.3 Indemnification by AlliedSignal and Buyer........................... 56
7.4 Notification of Claims.............................................. 57
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ARTICLE VIII
Employees And Employee Benefits
8.1 Scope of Article.................................................... 59
8.2 U.S. Employees...................................................... 59
8.3 Foreign Employees................................................... 61
ARTICLE IX
Termination; Miscellaneous
9.1 Termination......................................................... 62
9.2 Further Assurances.................................................. 63
9.3 Entire Agreement; Amendments; Waivers............................... 63
9.4 Benefit; Assignment................................................. 63
9.5 No Presumption...................................................... 63
9.6 Notices............................................................. 64
9.7 Terms Generally..................................................... 64
9.8 Counterparts; Headings.............................................. 65
9.9 Severability........................................................ 65
9.10 No Reliance......................................................... 65
9.11 Governing Law....................................................... 65
9.12 Submission to Jurisdiction; Waivers................................. 65
9.13 Bulk Transfer....................................................... 65
9.14 Use of Names........................................................ 66
9.15 Xxxxxxx Price Allocation............................................ 66
9.16 Relationship with Xxxxxxx Agreement................................. 66
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of December 8, 1997, by and among
Banner Aerospace, Inc., a Delaware corporation ("Parent"), the seven companies
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listed on Annex A hereto (individually, a "Seller" and, collectively,
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"Sellers"), AlliedSignal Inc., a Delaware corporation ("AlliedSignal") and AS
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BAR LLC, a Delaware limited liability company ("Buyer"). Sellers and the
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Subsidiaries of Sellers listed on Annex B hereto (the "Seller Subsidiaries") are
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referred to herein collectively as the "Companies".
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The Companies are engaged in, among other things, the businesses of
supplying to the aerospace industry (i) aircraft hardware (including bearings,
nuts, bolts, screws, rivets and other types of fasteners), (ii) chemical
products (including adhesives, sealants, lubricants, cleaners and paint) and
(iii) related support services (including Inventory management services). The
term "Business", as used herein, shall mean the compilation of all the
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businesses of all of the Companies, except that when this Agreement refers to a
single Company and the Business, it refers to that portion of the Business which
is conducted by that particular Company.
Buyer desires to purchase, and AlliedSignal desires to cause the
purchase of, substantially all of the Assets of Sellers (including all of the
Subsidiary Shares (as hereinafter defined)), and Sellers desire to transfer, and
Parent desires to cause the transfer of, such Assets to Buyer, all on the terms
and subject to the conditions set forth in this Agreement.
Capitalized terms used herein without definition shall have the
meanings assigned to them in Annex C hereto, which is hereby incorporated into
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this Agreement as if set forth in full herein.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE TRANSACTION
1.1 Purchase and Transfer. Upon the terms and subject to the
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conditions set forth in this Agreement, at the Closing, (i) Sellers shall, and
Parent shall cause Sellers to, transfer, convey, assign and deliver to Buyer,
and Buyer shall purchase, acquire and accept from the Sellers, all of Sellers'
right, title and interest in and to the Purchased Assets, and (ii) Buyer shall
pay to Sellers the Initial Purchase Price and shall assume, and agree to
thereafter pay, perform and discharge when due, the Assumed Liabilities.
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1.2 Acquisition of Assets.
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(a) Subject to Section 1.2(b), "Purchased Assets" means all of the
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Assets of Sellers owned, used or held for use in connection with, or that are
otherwise related to or required for the conduct of, the Business including,
without limitation, all of the Assets set forth below:
(i) all Subsidiary Shares;
(ii) all Owned Real Property;
(iii) all Equipment;
(iv) all Inventory;
(v) all Accounts Receivable;
(vi) all credits, prepaid expenses, deferred charges, advance
payments, security deposits and deposits owned, used or held for use by any
Company with respect to the Business ("Prepaid Expenses") to the extent
that such items will accrue to the benefit of Buyer immediately following
the Closing;
(vii) all Intellectual Property;
(viii) all Technology;
(ix) all Contracts;
(x) all Permits;
(xi) all books, records, ledgers, files, documents (including
originally executed copies of written Contracts, customer and supplier
lists (past, present or future), correspondence, memoranda, forms, lists,
plats, architectural plans, drawings and specifications, copies of
documents evidencing Intellectual Property or Technology, new product
development materials, creative materials, advertising and promotional
materials, studies, reports, sales and purchase correspondence, books of
account and records relating to the employees of the Business, photographs,
records of plant operations and materials used, quality control records and
procedures, equipment maintenance records, manuals and warranty
information, research and development files, data and laboratory books,
inspection processes, in each case, whether in hard copy or magnetic
format, in each instance, to the extent used or held for use with respect
to the Business or the employees of the Business;
(xii) all rights or choses in action arising out of occurrences
before or after the Closing Date and related to any portion of the
Business, including third party warranties and guarantees and all related
claims, credits, rights of recovery and set-off and other similar
contractual rights, as to third parties held by or in favor of Sellers and
arising out of, resulting from or relating to the Business or the Acquired
Assets, other
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than as a result of the allegations of Xxxxx Xxxxxxxxx of wrongful
termination by Burbank Aircraft Supply, Inc. (collectively, "Third
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Party Rights");
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(xiii) all rights to insurance and condemnation proceeds
relating to the damage, destruction, taking or other impairment of the
Acquired Assets which damage, destruction, taking or other impairment
occurs on or prior to the Closing Date, except to the extent Buyer receives
a credit against the Initial Purchase Price pursuant to Section
1.2(d)(i)(y) or 1.2(d)(ii)(y);
(xiv) all Assets (other than Subsidiary Assets) that (A) are
reflected on the Balance Sheet (other than Assets reflected on the Balance
Sheet that are disposed of prior to the Closing Date in accordance with
this Agreement) or (B) have been or are acquired by the Companies after the
date of the Balance Sheet and would be reflected on a balance sheet for the
Business prepared on a basis consistent with that on which the Balance
Sheet was prepared (other than any such Assets that are disposed of prior
to the Closing Date in accordance with this Agreement); and
(xv) the Business and the goodwill thereof.
(b) Notwithstanding anything to the contrary contained herein,
Purchased Assets shall not include any Excluded Assets. "Excluded Assets"
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means:
(i) cash and cash equivalents on hand or in bank accounts;
(ii) all accounts owing between and among each Company and its
Affiliates, other than trade receivables;
(iii) except as otherwise set forth herein, Assets attributable
or related to any Plan;
(iv) all rights of Parent and each Seller under this
Agreement;
(v) all stock and minute books and similar records of the
Sellers;
(vi) all Third Party Rights arising out of Non-Assumed
Liabilities or Excluded Assets;
(vii) all shares of capital stock of (or other ownership
interests in) Burbank Aircraft International, Inc., Banner Aero (Australia)
Pty, Ltd. and TriFast S.a.r.l;
(viii) all Prepaid Expenses to the extent that such items will
not accrue to the benefit of Buyer immediately following the Closing;
(ix) all Plans of Sellers (including, without limitation, the
deferred compensation agreement with Xxxxxxx Xxxxx (the "Lovin Agreement"),
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the two non-competition agreements with Xxx Xxxxxxx (the "Xxxxxxx
Agreements") and those referenced on Schedule 2.20(a)(iii));
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(x) all Contracts referenced on Schedule 2.8(a)(i) other than
(i) the purchase orders described thereon and (ii) distributorship
agreements with Xxxxxxxxx Fasteners that are terminable by the Companies on
not more than 60 days notice without any penalty;
(xi) all Contracts pursuant to which any business included in
the Business or any Company was purchased; and
(xii) all rights of any Seller under the Second Amended and
Restated Credit Agreement, dated as of December 12, 1996, among Parent,
Burbank Aircraft Supply, Inc. and other Subsidiaries of Parent, Citicorp
USA, Inc. (as Administrative Agent and Arranger), NationsBank, N.A. (as Co-
Arranger) and the Institutions as Lenders and Issuing Banks thereunder.
(c) Nonassignable Rights. Anything in this Agreement to the contrary
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notwithstanding, but subject to AS's and Buyer's rights under Section 7.2, this
Agreement shall not constitute an agreement to assign any of the Contracts,
Intellectual Property, Technology or Permits or any claim or right or any
benefit arising thereunder or resulting therefrom if an attempted assignment
thereof, without the consent of a third Person thereto, would constitute a
breach or other contravention thereof or in any way adversely affect the rights
of Buyer thereunder. (Any Asset that, but for this Section 1.2(c) would be sold
and assigned at the Closing shall remain a "Purchased Asset" for purposes of
this Agreement.) Parent and Sellers will use all reasonable best efforts to
obtain the consent of the other parties to any such Contract or Permit for the
assignment thereof to Buyer and Buyer shall reasonably cooperate with such
efforts. If such consent is not obtained prior to the Closing, or if an
attempted assignment thereof would be ineffective or would adversely affect the
rights of Parent and Sellers thereunder so that Buyer would not in fact receive
all such rights, subject to Section 5.1(d), the Closing shall nevertheless take
place and, thereafter, Parent, Sellers and Buyer will cooperate in a mutually
agreeable arrangement under which Buyer would obtain the benefits and assume the
obligations thereunder (but only to the extent such obligations would have
constituted Assumed Liabilities if such assignment occurred on the Closing Date)
from and after the Closing Date in accordance with this Agreement, including
subcontracting, sublicensing or subleasing to Buyer, or under which Parent and
each Seller would enforce for the benefit of Buyer, with Buyer assuming each
Seller's obligations to the same extent as if it would have constituted an
Assumed Liability and any and all rights of Parent or any Seller against a third
Person thereto. Parent and each Seller will pay promptly to Buyer when received
all monies received by Parent or any Seller after the Closing Date under any of
the Contracts or any claim or right or any benefit arising thereunder to the
extent that Buyer would be entitled thereto pursuant hereto. The provisions of
this Section 1.2 shall in no way limit the Closing condition set forth in
Section 5.1(d).
(d) Damage; Condemnation.
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(i) If, prior to the Closing, any Acquired Real Property is
damaged by fire, vandalism, acts of God, or other casualty or cause (and
such damage is not repaired by the Closing), Buyer shall have the option of
(x) accepting such property as it is
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together with the insurance proceeds, if any, and the right to receive the
same, in which case no adjustment shall be made in respect of the decreased
value of such Asset pursuant to Section 1.4(b), or (y) excluding such
Acquired Real Property from the Acquired Assets and receiving a credit
against the Initial Purchase Price equal to the fair market value thereof,
in which case no adjustment shall be made in respect of the decreased value
of such Asset pursuant to Section 1.4(b) other than such credit against the
Initial Purchase Price. If Buyer elects option (x) above, Parent hereby
agrees to cooperate with Buyer in any loss adjustment negotiations, legal
actions and agreements with the insurance company, and to assign (pursuant
to a writing in form satisfactory to Buyer,) to Buyer at Closing its rights
to such insurance proceeds (and pay over to Buyer any such proceeds already
received), and Parent will not settle any insurance claims or legal actions
relating thereto without Buyer's prior written consent.
(ii) If, prior to the Closing, all or any portion of any
Acquired Real Property is taken by eminent domain, Buyer shall have the
option of (x) proceeding with the Closing and accepting the property as
affected by such taking, together with all compensation and damages
awarded, if any, and the right to receive the same, in which case, no
adjustment shall be made in respect of the decreased value of such Asset
pursuant to Section 1.4(b), or (y) excluding such Acquired Real Property
from the Acquired Assets and receiving credit against the Initial Purchase
Price equal to the fair market value thereof, in which case no adjustment
shall be made in respect of the decreased value of such Asset pursuant to
Section 1.4(b) other than such credit against the Initial Purchase Price.
If Buyer elects option (x) above, Parent hereby agrees to assign to Buyer
at Closing its rights to such compensation and damages (and pay over to
Buyer any such compensation and damages already received), and will not
settle any proceedings relating to such taking without Buyer's prior
written consent.
(iii) Parent shall promptly notify AlliedSignal of any material
casualty or any actual or threatened condemnation affecting all or any
portion of any Acquired Real Property. Any such notice relating to
casualty shall be accompanied by Parent's selection of an architect or
engineer to determine the cost of repair and/or replacement.
(iv) Nothing in this Section 1.2(d) limits the condition to
Closing set forth in Section 5.1(a).
1.3 Assumption of Assumed Liabilities.
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(a) "Assumed Liabilities" shall mean (i) all Liabilities of the
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Business (including bank overdrafts, if any) to the extent included on the
Closing Date Balance Sheet, (ii) Liabilities under the Contracts, Permits,
Intellectual Property or Technology to the extent (but not only to the extent)
arising from, and accruing with respect to, the operation of the Business after
the Closing, and (iii) Liabilities relating to the employees of the Business
expressly assumed pursuant to Article VIII.
(b) Notwithstanding anything to the contrary contained herein, neither
Buyer nor AlliedSignal shall assume or be bound by, or be obligated or
responsible for, any Non-
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Assumed Liabilities. "Non-Assumed Liabilities" shall mean (x) all Liabilities of
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Sellers relating to the Purchased Assets or the Business and any claims in
respect thereof, other than the Assumed Liabilities, and (y) any Liabilities or
claims which may be asserted against or imposed upon Buyer by reason of its
being a successor or transferee of Sellers or as an acquiror of the Purchased
Assets or the Business or otherwise as a matter of law. Without limitation of
the foregoing, all of the following shall be Non-Assumed Liabilities for the
purposes of this Agreement:
(i) any product Liability, or Liability relating to any toxic
tort or similar claim for injury to person or property, regardless of when
made or asserted that arises out of or is based upon any express or implied
representation, warranty, agreement or guarantee made by any Company or any
of its Affiliates, or alleged to have been made by any of such Persons, or
that it is imposed or asserted to be imposed by operation of law, in
connection with any service performed or product manufactured, distributed
or sold by or on behalf of any Company or any of its Affiliates (in the
case of the Seller Subsidiaries prior to the Closing) or which arises out
of any condition existing as of the Closing, including any claim relating
to any product delivered, manufactured or distributed by any Company or any
of its Affiliates (in the case of the Seller Subsidiaries prior to the
Closing) and any claim seeking recovery for consequential damages, lost
revenue or income;
(ii) except for Assumed Tax Liabilities, any Liability of
Parent or any Company (including under any Contract) for Taxes, including
without limitation, any (1) Tax payable (A) with respect to the Business,
Assets or operations of Parent or Sellers, (B) by any member of any
consolidated, affiliated or unitary group of which Parent or any Company is
a member, or (C) by any other person for whose Tax Parent or any Company
may be liable under Contract or otherwise, and (2) Tax incident to or
arising as a consequence of the negotiation or consummation by Parent or
any Seller or any member of any affiliate group of which Parent or Sellers
is a member of this Agreement and the transactions contemplated hereby;
(iii) except as expressly provided in clause (iii) of the
definition of Assumed Liabilities, any Liability with respect to
compensation or employee benefits of any nature owed to any employees,
agents or independent contractors of any Company or any of its Affiliates,
whether or not employed by Buyer after the Closing, or any of their
beneficiaries, heirs or assigns, that arises out of or relates to events or
conditions to the extent occurring before the Closing, including, but not
limited to, Liabilities for supplemental unemployment benefits, vacation
pay, sick pay, severance benefits, Liabilities under any Plan whether
arising prior to, on or after the Closing Date, Liabilities to provide any
retiree benefits to former hourly and/or salaried employees of the Business
or any retiree benefits to be provided to current hourly and/or salaried
employees of the Business, and any other benefits, withholding tax
Liabilities, workers compensation or unemployment compensation premiums,
hospitalization or medical claims, occupational injury, disease or
disability claims or claims for discrimination,
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unfair labor practices, violations of the collective bargaining agreements
or wrongful discharge;
(iv) Liabilities relating to the operation of the Business
prior to the Closing arising by operation of law under any common law or
statutory doctrine (including successor Liability or de facto merger);
(v) any Liability with respect to or arising out of any
Contract (A) that is not capable of being assigned to Buyer at the Closing
(except to the extent provided in Section 1.2(c)) (B) to the extent arising
out of any breach or default thereof by Parent or any Company on or prior
to the Closing Date (including any event occurring on or prior to the
Closing Date that, with the passing of time or the giving of notice, or
both, would become a breach or default) under any Contract, or (C) required
by the terms thereof to be discharged on or prior to the Closing Date;
(vi) any Liability of Parent or any of the Companies or any of
their predecessors (including under any Contract) with respect to any
claim, action, suit or proceeding made or threatened (whether prior to, at
or after the Closing Date) which asserts Losses arising from (x) the
presence, at any time prior to the Closing Date, of asbestos at the
Acquired Real Property, any other real property owned or leased at any time
by Parent, Sellers or any of their past, present or future Subsidiaries or
any other third-party location or (y) the presence of asbestos in any
product at any time prior to the Closing Date manufactured, used, sold or
serviced by Parent, Sellers or any of their past, present or future
Subsidiaries, or which otherwise asserts any asbestos-related personal
injury or property damage.
(vii) any Liability to the extent the existence of such
Liability constitutes a breach of any representation or warranty of Parent
or any Seller contained in or made pursuant to this Agreement;
(viii) any Environmental Liability, including, without
limitation, any Environmental Claim that relates to or arises in connection
with the Business, the Acquired Assets, or any other Assets (including, but
not limited to facilities used for the off-site disposal of waste) formerly
owned, leased, operated or used by any of the Companies or any
predecessors-in-interest to any of the Companies, if the Environmental
Claim is based on any act or omission of the Business or any of the
Companies on or prior to the Closing Date;
(ix) any Liability in respect of the Excluded Assets;
(x) any Debt or other amounts (except to the extent reflected
on the Closing Date Balance Sheet) owing by the Companies to Parent or any
of Parent's Affiliates (other than the Companies) including, without
limitation, any negative balances in intercompany accounts, but excluding
any trade payables incurred in the ordinary course of business consistent
with past practice;
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(xi) any Liability that arises out of or relates to the
employment or termination of employment of any employees, agents or
independent contractors by Parent, Sellers or any of their Affiliates,
except any such Liability caused by Buyer's failure to perform its
obligations under Article VIII;
(xii) any Liability to past, present or future stockholders of
Parent or Sellers;
(xiii) any Liability arising out of the Lovin Agreement or the
Xxxxxxx Agreements;
(xiv) any Liability that arises out of or relates to any claim,
action, suit, proceeding or investigation, whether civil or criminal,
pending or threatened as of the Closing Date, relating to the conduct or
activities of the Business, or the ownership, use or possession of the
Acquired Assets, on or prior to the Closing Date;
(xv) any Liability relating to any broker's or finder's fee or
commission incurred by Parent, any of the Companies or any of their
Affiliates as a result of the transactions contemplated hereunder;
(xvi) any Liability arising under, resulting from or relating
to the matters referred to on Schedule 2.20(a)(iii), including, without
limitation, the Plans described thereon;
(xvii) any Liability arising under, resulting from, or relating
to matters set forth on Schedule 2.8(a)(i) (other than with respect to the
purchase orders described thereon and distributorship agreements with
Xxxxxxxxx Fasteners that are terminable by the Companies on not more than
60 days notice without any penalty) including, without limitation, the
agreement with Shared Technologies Xxxxxxxxx, Inc. and the tax sharing
agreement described thereon, except to the extent reflected on the Closing
Date Balance Sheet; and
(xviii) except for the Assumed Liabilities, any Liability
arising out of or relating to the conduct or activities of the Business
(including any predecessor operations) or the ownership, use or possession
of the Acquired Assets on or prior to the Closing Date, any Liabilities or
claims arising out of or relating to events, circumstances or conditions
occurring on or before the Closing Date, and any Liability associated with
any other business of Parent, Sellers and their Affiliates.
Parent and each Seller hereby irrevocably waives and releases, and has caused
the Parent Subsidiaries to waive and release, AlliedSignal and Buyer from all
Non-Assumed Liabilities, including any Liabilities created or which arise by
statute or common law.
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1.4 Initial Purchase Price.
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(a) No later than the third Business Day prior to the Closing Date,
Parent shall deliver to AlliedSignal a written notice setting forth Parent's
good faith estimate of the Closing Date Net Worth (without giving effect to the
proviso in the second sentence of Section 1.6(a)) (the "Estimated Closing Date
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Net Worth") and the basis for the calculation thereof.
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(b) The initial purchase price for the Purchased Assets to be paid at
the Closing (the "Initial Purchase Price") shall consist of a number of shares
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of AlliedSignal Common Stock (the "Closing Date Shares") equal to (1) the number
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(rounded to the nearest whole share) (the "Estimated Share Number") obtained by
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dividing (A) an amount equal to Three Hundred Twenty-Two Million Dollars
($322,000,000) plus (x) the Adjustment Amount if Estimated Closing Date Net
Worth exceeds Target Net Worth and minus (y) the Adjustment Amount if Estimated
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Closing Date Net Worth is less than Target Net Worth, by (B) the Average Trading
Price as of the Closing Date, minus (2) the sum of the Purchase Price Escrow
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Shares and the Indemnification Escrow Shares, to be delivered by Buyer to
Sellers in the proportions set forth on Annex 1.6(f) hereto.
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1.5 Escrow of Shares.
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(a) At the Closing, Buyer shall deliver to the Escrow Agent (i) the
Purchase Price Escrow Shares, to be held in an escrow account pursuant to the
terms of the Escrow Agreement until released from escrow pursuant to the terms
of Section 1.6(f), and (ii) the Indemnification Escrow Shares, to be held in an
escrow account pursuant to the terms of the Escrow Agreement until released as
set forth in Section 1.5(b) or (d).
(b) At any time on or after the Closing Date, Parent shall have the
right, upon not less than 10 Business Days' written notice to Buyer and the
Escrow Agent, to deliver Escrow Cash to the Escrow Agent to be held pursuant to
the terms of the Escrow Agreement in lieu of the Indemnification Escrow Shares.
Upon delivery by Parent of Escrow Cash to the Escrow Agent, the Escrow Agent
shall release to Parent the number of Indemnification Escrow Shares (rounded to
the nearest whole share) obtained by dividing (i) the face amount of the Escrow
Cash by (ii) the Average Trading Price as of the date the shares are released.
Any notice delivered pursuant to this Section 1.5(b) shall set forth either the
face amount of the Escrow Cash to be delivered by Parent or the number of
Indemnification Escrow Shares to be released by the Escrow Agent.
(c) If, on or prior to the first anniversary of the Closing Date (the
"Escrow Release Date"), a Buyer Indemnified Party has given notice of a claim
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for indemnification for Losses in accordance with Section 7.4 (all such claims,
the "Buyer Escrow Claims"), Buyer shall give written notice thereof to Parent on
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or prior to such date setting forth Buyer's good faith estimate of the aggregate
amount of such Losses in reasonable detail for which Buyer has not been
reimbursed (the "Buyer Escrow Claim Loss Estimate"); provided, however, Buyer's
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failure to deliver a notice pursuant to this Section 1.5(c) shall not relieve
any party from any liability that it may have to such Buyer Indemnified Party in
respect of any matter under Section 7.2(a);
10
(d) The Indemnification Escrow Shares shall be released from escrow
as follows:
(i) On the Escrow Release Date a number of shares of
AlliedSignal Common Stock (rounded to the nearest whole share) equal to (1)
the number of Indemnification Escrow Shares minus (2) a number (which shall
-----
not be less than zero) equal to the quotient of (A) an amount equal to
(x) the Buyer Escrow Claim Loss Estimate for which AlliedSignal or Buyer
has not been reimbursed minus (y) the amount of the Basket (to the extent
-----
not previously applied), divided by (B) the Average Trading Price as of
----------
the Escrow Release Date, shall be released from escrow and
delivered to Parent;
(ii) Upon resolution of a Buyer Escrow Claim following the
Escrow Release Date, to the extent it is determined pursuant to Article VII
that such Losses are payable by Parent or Sellers to a Buyer Indemnified
Party with respect to such claim, a number of shares of AlliedSignal Common
Stock (rounded to the nearest whole share) equal to the lesser of (1) the
quotient of (x) the amount of Losses for which Parent and Sellers must
indemnify Buyer Indemnified Parties in respect of such claim, divided by
----------
(y) the Average Trading Price as of the date of the release of such shares,
and (2) the number of Indemnification Escrow Shares that remain in escrow,
shall be released to Buyer; and
(iii) Upon resolution of all Buyer Escrow Claims and release to
Buyer of all Indemnification Escrow Shares to which it is entitled pursuant
to clause (ii) above, all remaining Indemnification Escrow Shares shall be
released to Parent.
(e) Notwithstanding anything to the contrary contained herein, any
party entitled to have Indemnification Escrow Shares released and delivered to
it in accordance with Section 1.5(d) may elect, by written notice to the Escrow
Agent not less than two Business Days prior to the release, to receive the value
(or any portion thereof) of the Indemnification Escrow Shares to which the party
is entitled (based on the Average Trading Price as of the date the collateral is
to be released) in Escrow Cash to the extent Escrow Cash is being held as
collateral pursuant to the Escrow Agreement.
1.6 Purchase Price Adjustment.
-------------------------
(a) Within sixty (60) days after the Closing Date, Buyer shall
prepare and deliver to Parent a proposed Closing Date Balance Sheet conforming
to the requirements set forth in this Section 1.6 (the "Proposed Closing Date
-------------------------
Balance Sheet"). The Proposed Closing Date Balance Sheet shall be a pro forma
-------------
unaudited consolidated balance sheet of the Combined Business as of
the Closing Date reflecting only Acquired Assets, Assumed Liabilities, Xxxxxxx
Purchased Assets and Xxxxxxx Assumed Liabilities, prepared in accordance with
GAAP on a basis consistent with the Balance Sheet (including, without
limitation, accounting for Inventory in accordance with the procedures and
criteria set forth on Schedule 1.6(a)) and presenting fairly the
--------
financial condition of the Combined Business as of the Closing Date; provided,
--------
however, that the Proposed Closing Date Balancee Sheet shall not include (i) as
-------
an asset any future tax benefits
11
that relate to the allowance for doubtful accounts or (ii) as a Liability any
allowance for doubtful accounts (which is $2,263,000 on Schedule 2.6). During
the period following the Closing Date and prior to the delivery of the Closing
Date Balance Sheet, Parent shall make available to Buyer the appropriate
personnel and the books and records of the Companies to assist in the
preparation of the Closing Date Balance Sheet. The Proposed Closing Date Balance
Sheet shall include appropriate adjustments as if it were prepared for a fiscal
year-end and will set forth and designate the net worth, on a combined basis, of
the Combined Business as of the Closing Date ("Closing Date Net Worth").
----------------------
(b) In connection with the preparation of the Proposed Closing Date
Balance Sheet, Sellers, the Xxxxxxx Sellers, Parent and Buyer shall, at Buyer's
option upon notice to Parent as provided in Schedule 1.6(b), cooperate with each
other in the taking of a physical count of the Inventory in accordance with the
procedures set forth in Schedule 1.6(b). Parent and Sellers shall be entitled
to have a representative present to observe the taking of the physical count of
the inventory described in this Section 1.6(b).
(c) Following the Closing, Buyer shall provide to Parent and Sellers,
and their respective employees, agents and advisers, upon not less than two
business days prior written request, reasonable access during regular business
hours to the financial books and records, personnel and facilities relating to
the Combined Business necessary for the review and analysis of the Proposed
Closing Date Balance Sheet. If Parent fails to give written notice of its
disagreement with any item on such Proposed Closing Date Balance Sheet within
sixty (60) days after receipt of such Proposed Closing Date Balance Sheet (the
"Review Period"), such Proposed Closing Date Balance Sheet shall be deemed
--------------
accepted and shall become the Closing Date Balance Sheet and be final and
binding upon the parties hereto. If, before the expiration of the Review
Period, Parent provides Buyer with a written notice setting forth in reasonable
detail its disagreement with one or more items on the Proposed Closing Date
Balance Sheet (a "Dispute Notice"), Buyer and Parent shall negotiate in good
--------------
faith to resolve all matters set forth in the Dispute Notice ("Disputes") during
--------
the sixty (60) day period following receipt of the Dispute Notice by Parent (the
"Resolution Period"). Items on the Proposed Closing Date Balance Sheet shall be
-----------------
deemed final to the extent they are not referenced in the Dispute Notice. To
the extent Disputes are resolved to the mutual satisfaction of Buyer and Parent
during the Resolution Period, such resolutions shall be reflected on the
Proposed Closing Date Balance Sheet and deemed final, and if all Disputes are so
resolved, the Proposed Closing Date Balance Sheet, as modified to reflect the
resolution of such Disputes shall be deemed final and become the Closing Date
Balance Sheet.
(d) If all Disputes cannot be resolved within the Resolution Period,
then within fifteen (15) days of the end of the Resolution Period, Parent and
Buyer (i) shall set forth in writing their respective positions on the Disputes
still at issue and (ii) shall submit the unresolved Disputes to a Big Six
accounting firm (other than the principal outside accountants for either Parent
or Buyer or any of their Affiliates) mutually acceptable to Parent and Buyer
(the "Firm").
----
(e) The Firm shall make a determination with respect to the Disputes
so submitted as well as such modifications, if any, to be made to the Proposed
Closing Date
12
Balance Sheet in accordance with such determination within thirty (30) days
after the engagement of the Firm and the Proposed Closing Date Balance Sheet as
so modified shall be deemed final and shall become the Closing Date Balance
Sheet; provided, however, that in no event shall the Firm determine, with
-------- -------
respect to any Dispute submitted to it, an amount that is outside of the range
of the amounts submitted by Parent and Buyer nor shall it address or consider
any issue other than the issues involved in the Disputes. Such determinations by
the Firm shall be conclusive and binding upon, and shall not be appealable by
the parties hereto. The fees and expenses of the Firm shall be shared equally by
Parent and Buyer.
(f) Promptly, and in any event within five Business Days, after the
Closing Date Balance Sheet becomes final and binding on the parties hereto:
(i) If Closing Date Net Worth is equal to the Estimated
Closing Date Net Worth, Buyer shall take all steps reasonably practical
(including, without limitation, giving notice to the Escrow Agent), to
cause the release and delivery to Sellers, in the proportions set forth on
Annex A to the Escrow Agreement, of all the Purchase Price Escrow Shares.
(ii) If Closing Date Net Worth is more than Estimated Closing
Date Net Worth, (A) Buyer shall take all steps reasonably practical
(including, without limitation, giving notice to the Escrow Agent), to
cause the release and delivery to Sellers, in the proportions set forth on
Annex A to the Escrow Agreement, of all the Purchase Price Escrow Shares
and (B) AlliedSignal shall issue and Buyer shall deliver to Sellers, in
the proportions set forth on Annex A to the Escrow Agreement, an additional
number of shares of AlliedSignal Common Stock having a value (based on the
Average Trading Price as of the Closing Date) (rounded to the nearest whole
share) equal to the excess of Closing Date Net Worth over Estimated Closing
Date Net Worth.
(iii) If Estimated Closing Date Net Worth is more than Closing
Date Net Worth, (A) a number of Purchase Price Escrow Shares having a value
(based on the Average Trading Price) (rounded to the nearest whole share)
equal to the excess of Estimated Closing Date Net Worth over Closing Date
Net Worth (the "Shortfall Amount") shall be released from escrow and
----------------
returned to AlliedSignal, and Buyer shall take all steps reasonably
practical (including, without limitation, giving notice to the Escrow
Agent), to cause the release and delivery to the Sellers, in the
proportions set forth on Annex A to the Escrow Agreement, of the balance,
if any, of the Purchase Price Escrow Shares and (B) if the value (based on
the Average Trading Price as of the Closing Date) of all of the Purchase
Price Escrow Shares is less than the Shortfall Amount, (x) all of the
Purchase Price Escrow Shares shall be released from escrow and returned to
AlliedSignal and (y) Parent shall indemnify AlliedSignal for, and shall
promptly pay to AlliedSignal in cash, an amount equal to the excess of the
Shortfall Amount over the value (based on the Average Trading Price as of
the Closing Date) of the Purchase Price Escrow Shares. Such payment shall
be made by wire transfer of immediately available funds to a bank account
designated by AlliedSignal to Parent within five Business Days
13
after the Closing Date Balance Sheet has become final and binding upon the
parties hereto.
1.7 Accounts Receivable.
-------------------
(a) After the Closing, Buyer shall have full right and authority to
collect for its own account all Accounts Receivable reflected on in the Closing
Date Balance Sheet without any allowance for doubtful accounts ("Closing
-------
Accounts Receivable"). Each Seller and each Xxxxxxx Seller shall immediately
-------------------
pay to Buyer any amount received by such Seller after the Closing attributable
to payment of any Closing Accounts Receivable, except with respect to Assigned
Receivables after assignment thereof to Parent as provided below. In the event
that as of the date that is 180 days after the Closing Date (the "Adjustment
----------
Date") Buyer shall not have been paid in full in respect of Closing Accounts
----
Receivable an amount equal to the Closing Accounts Receivable, Buyer shall give
Parent written notice (the "Receivables Notice") specifying the sum of (i) the
------------------
aggregate amount of Closing Accounts Receivable collected by Buyer during the
period from the Closing Date through the Adjustment Date and (ii) the aggregate
amount of Inventory (valued at original cost) that (x) is the subject of a
Closing Accounts Receivable, (y) has been returned to Buyer during the period
from the Closing Date through the Adjustment Date and (z) is not Defective
Inventory (the "Collected Amount"). If the face amount of the Closing Accounts
----------------
Receivable exceeds the Collected Amount, (i) such excess (the "Receivables
Deficiency"), plus interest accrued on the amount thereof from and including the
Closing Date to but excluding the date of payment at a rate per annum equal to
the Prime Rate in effect from time to time, shall be paid by Parent to Buyer
within five Business Days after the date that the Receivables Notice is given in
immediately available funds and (ii) upon receipt of such payment, Buyer shall
assign to Parent any Closing Accounts Receivable that were not collected during
the period from the Closing Date through the Adjustment Date (the
"Assigned Receivables"). Upon an assignment to Parent of Assigned Receivables
--------- -----------
pursuant to this Section, Buyer shall have no further responsibility with
respect to any such Assigned Receivables and shall not be entitled to receive
any portion of any amounts collected by Parent with respect thereto, and Parent
shall be entitled to undertake any and all collection efforts with respect to
any such Assigned Receivables. Buyer shall promptly pay to Seller any amount
received by Buyer after the Adjustment Date attributable to payment of any
Assigned Receivables. In calculating the amount, if any, which Parent must pay
to Buyer pursuant to this Section 1.7, payments received by Buyer on account of
receivables from a particular customer shall be credited first to the oldest
account receivable of that customer until all accounts receivable with respect
to that customer are paid in full; provided, however, that no such payment shall
-------- -------
be so credited to any pre-Closing account receivable with respect to a Disputed
Account Receivable of such customer (as defined below) unless such customer
shall have specifically advised Buyer to credit such payment to such Closing
Account Receivable. For purposes of this Agreement, "Disputed Account
----------------
Receivable" means any Closing Account Receivable owed:
----------
(i) by a customer who is bankrupt;
(ii) by a customer who has asserted in writing a bona fide
claim that the products or services sold and which are the subject matter
of the Closing Account
14
Receivable were defective or that the cost of the products or services
received from Seller were less than the amount invoiced;
(iii) by a customer who, in the reasonable opinion of Buyer,
has a bona fide claim that an error has been made on the invoice to such
customer; or
(iv) by a customer who has asserted that the invoice and
shipping documentation did not comply with the customer's requirement
In connection with such acquisition of Closing Accounts Receivable by
Parent, Buyer agrees to execute assignments, in form and substance reasonably
satisfactory to Buyer, as are reasonably requested by Parent in order to
effectively transfer to Parent such Closing Accounts Receivable.
(b) From and after the Closing, Buyer shall use reasonable efforts to
collect all of the Closing Accounts Receivable at their full face value and
shall be prompt, and shall exercise reasonable diligence, in such efforts, but
in no event shall Buyer be required to resort to litigation to try to collect
any such Closing Accounts Receivable. Parent and each Seller shall provide
reasonable assistance to Buyer with respect to the collection of the Closing
Accounts Receivable. Buyer shall provide to Parent and each Seller reasonable
access during regular business hours to all books and records relating to the
Closing Accounts Receivable and any payments made with respect thereto. Prior
to the Adjustment Date, neither Parent nor any Seller shall contact directly or
indirectly any customer from which a Closing Accounts Receivable is due with
respect to any matters contemplated by this Agreement, including any outstanding
Closing Account Receivable, without Buyer's prior consent in each case.
(c) Commencing 60 days after the Closing Date, and continuing not
less frequently than monthly during the 120 days thereafter, Buyer shall deliver
written reports to Parent setting forth in reasonable detail the status of the
collection of the Closing Accounts Receivable, on a customer by customer basis,
the collection efforts made by Buyer relating thereto and the status of the
payment of any other receivables from such customers to Buyer. Buyer shall in
all respects, including its collection efforts, treat the Closing Accounts
Receivable in the same manner as it treats its other accounts receivable.
1.8 Closing.
-------
(a) Closing Date. The closing of the transactions contemplated under
------------
this Agreement (the "Closing") shall take place at 10:00 a.m. Eastern Time at
-------
the offices of Xxxxxx Xxxxxxx & Xxxx LLP, One Battery Park Plaza, New York, New
York, on the fifth Business Day after all conditions to the obligations of the
parties under Article V and under Article V of the Xxxxxxx Agreement shall have
been satisfied or waived (other than those requiring a delivery of a certificate
or other document, or the taking of other action, at the Closing and the
conditions set forth in Sections 5.1(j) and 5.2(g) and in Sections 5.1(g) and
5.2(g) of the Xxxxxxx Agreement), or at such other place and on such other date
as the parties may mutually agree in writing (such date on which the Closing
occurs hereinafter is referred to as the "Closing Date"). Each of the parties
------------
acknowledges that, with respect to the Closing Date, time is of the essence.
15
(b) Effectiveness. The consummation of the transactions contemplated
-------------
by this Agreement and the Closing shall be deemed to take place at 11:59 p.m.,
Eastern Time, on the Closing Date and no transaction shall be deemed to have
been completed and no document or certificate shall be deemed to have been
delivered until all transactions are completed and all documents are delivered.
1.9 Deliveries and Proceedings at the Closing. Subject to the
-----------------------------------------
terms and conditions of this Agreement, at the Closing:
(a) Deliveries to AlliedSignal and Buyer. Parent and Sellers shall
------------------------------------
deliver to AlliedSignal and Buyer:
(i) bills of sale and instruments of assignment, in forms
reasonably satisfactory to Buyer, to evidence the transfer to Buyer of the
Purchased Assets (other than the Owned Real Property) in accordance
herewith, duly executed by Sellers;
(ii) certificates (or other appropriate evidence of transfer)
representing all of the Subsidiary Shares accompanied, except with respect
to the certificates representing shares of Banner Aircraft International,
GmbH and Harco Northern Ireland, Ltd., by stock powers duly executed in
blank with all necessary stock transfer and other documentary stamps
attached;
(iii) any consents to transfer of all transferable or
assignable Contracts and Permits obtained by Parent and the Companies as of
Closing and all consents referred to in Section 5.1(d);
(iv) title certificates to any motor vehicles included in the
Purchased Assets, duly executed by each Seller with any interest therein
(together with any other transfer forms necessary to transfer title to such
vehicles);
(v) one or more deeds of conveyance to Buyer of the Owned
Real Property, in forms customarily delivered for similar Real Property
conveyances and reasonably satisfactory to Buyer, sufficient to transfer to
Buyer good and marketable, and insurable, fee simple title to the Owned
Real Property included in the Purchased Assets in accordance herewith, duly
executed and acknowledged by each Seller with any interest therein and in
recordable form;
(vi) one or more title insurance policies, in form, substance
and amount, and issued by title insurance companies reasonably acceptable
to Buyer, and containing such endorsements and affirmative coverage as
Buyer shall reasonably request (including, with respect to Owned Real
Property that is a Purchased Asset, nonimputation endorsements), insuring
Buyer's fee simple title to the Owned Real Property subject only to the
Permitted Liens, the cost of which shall be paid 50% by Parent and Sellers
and 50% by AlliedSignal and Buyer;
16
(vii) U.C.C. termination statements in recordable form and
other appropriate releases, in form and substance reasonably satisfactory
to Buyer, with respect to all recorded Liens in the Purchased Assets;
(viii) the Foreign Investment in Real Property Tax Act
Certification and Affidavit for each parcel of Owned Real Property, in form
reasonably satisfactory to Buyer, duly executed by each Seller transferring
Owned Real Property (the "FIRPTA Affidavit");
----------------
(ix) the certificates and other documents required to be
delivered by Parent and Sellers pursuant to Section 5.1 hereof and
certified resolutions evidencing the authority of Parent and Sellers as set
forth in Section 2.3 hereof;
(x) the Release contemplated by Section 4.9;
(xi) an opinion of Potter Xxxxxxxx & Xxxxxxx, Delaware
counsel, substantially in the form of Exhibit 1.9(a)(xi), to the effect
------------------
that no approval of the holders of Parent Common Stock is
required in connection with the execution, delivery and performance of this
Agreement by Parent and Sellers;
(xii) the Escrow Agreement, duly executed by Parent;
(xiii) the letters of Xxxxxxx Xxxxxxx and Xxxxxxxxx, dated as of
the Closing Date, substantially in the form of Exhibit 1.9(a)(xiii)(A-C)
-------------------------
(the "Side Letters"); and
------------
(xiv) all such other documents and instruments as shall, in the
reasonable opinion of Buyer or its title insurance company (including
affidavits and indemnities in connection with nonimputation endorsements),
be necessary in connection with the transfer to Buyer of the Purchased
Assets in accordance herewith and, where necessary or desirable, in
recordable form.
(b) Deliveries to Parent and Sellers. AlliedSignal and Buyer will
--------------------------------
deliver to Parent and Sellers, as applicable:
(i) the Closing Date Shares, issued by AlliedSignal and
delivered by Buyer to Sellers in the proportions set forth in Annex 1.6(f)
hereto;
(ii) an assumption agreement, in form reasonably satisfactory
to Parent, to evidence the assumption by Buyer of the Assumed Liabilities
in accordance with Section 1.3, duly executed by Buyer;
(iii) the certificates and other documents required to be
delivered by AlliedSignal and Buyer pursuant to Section 5.2 hereof and
certified resolutions evidencing the authority of AlliedSignal and Buyer as
set forth in Section 3.2 hereof;
(iv) the Escrow Agreement duly executed by Buyer;
17
(v) all such other documents and instruments of assumption as
shall, in the reasonable opinion of Parent, be necessary for Buyer to
assume the Assumed Liabilities in accordance herewith; and
(vi) the Registration Rights Agreement, in the form attached
as Exhibit 1.9(b)(vi), duly executed by AlliedSignal.
------- ----------
(c) Escrow Agreement. Parent and Buyer shall use their reasonable
----------------
best efforts to cause the Escrow Agent to execute and deliver an escrow
agreement substantially in the form of Exhibit 1.9(c) at the Closing (the
--------------
"Escrow Agreement").
-----------------
1.10 Stock Legend.
------------
(a) Each certificate representing the shares of AlliedSignal Common
Stock issued to Sellers at the Closing shall be endorsed with a legend in
substantially the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT OR THE CORPORATION RECEIVES AN OPINION
OF COUNSEL FOR THE HOLDERS OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE CORPORATION STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENT OF SUCH ACT.
1.11 Prorations. The parties hereto agree that the following
----------
expenses shall be calculated and pro rated as of the Closing Date, with Parent
and Sellers jointly responsible for such expenses for the period up to the
Closing Date (it being understood that any such expense not paid prior to the
Closing shall be reflected as a liability on the Closing Date Balance Sheet),
and Buyer to be responsible for the period on and after the Closing Date:
(a) personal property, real property and payroll taxes (on
the basis on which the same were assessed and paid), in each case to the
extent relating to the Combined Business and except as otherwise provided
in Section 4.6(i);
(b) electric, fuel, gas, telephone, sewer and utility
charges, in each case to the extent relating to the Combined Business;
18
(c) rentals and other charges under Combined Contracts to be
assumed by Buyer pursuant hereto; and
(d) charges under maintenance and service contracts and other
Combined Contracts, and fees under Permits to be transferred to Buyer as
part of the Purchased Assets or the Xxxxxxx Purchased Assets.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLERS
Parent and each Seller hereby jointly and severally represent and
warrant to AlliedSignal and Buyer as follows:
2.1 Qualification. Parent is a corporation duly organized, validly
-------------
existing and in good standing under the laws of the State of Delaware. Each
Company is a legal entity of the type described on Annex A or Annex B, as the
case may be, duly organized, validly existing and in good standing under the
laws of the jurisdiction set forth next to such Company's name on such Annex,
and has all requisite corporate power and authority to own and lease its Assets
and to conduct its Business as presently being conducted. Each Company is
qualified to do business and is in good standing as a foreign corporation in all
jurisdictions wherein the nature of its Business or such Company's ownership or
use of its Assets make such qualification necessary, except such failures to be
qualified or to be in good standing, if any, which when taken together with all
such other failures of such Company would not have a Material Adverse Effect on
such Company. None of the Companies is currently insolvent, has suspended
payments, is subject to any judicial receivership or liquidation proceedings or
is in bankruptcy, nor has any such similar proceedings been commenced with
respect to any of them.
2.2 Ownership of the Companies.
--------------------------
(a) Except as set forth on Schedule 2.2, all of the outstanding
------------
shares of capital stock of (or other ownership interests in) each of the Sellers
are owned of record and beneficially solely by Parent free and clear of any
Liens. The ownership of the Subsidiary Shares is described on Schedule 2.2. All
of the Subsidiary Shares are (i) duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights and were issued in compliance with
all applicable Laws and (ii) except for nominal or qualifying shares identified
on Schedule 2.2, owned of record and beneficially solely by one or more Sellers
and/or other Seller Subsidiaries, free and clear of any Liens. There are no
options, warrants, calls, rights or agreements to which Parent or any of the
Companies is a party obligating any of them to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock of (or other
ownership interests in) any of the Companies or obligating Parent or any of the
Companies to grant, extend or enter into any such option, warrant, call, right
or agreement. There are no agreements, voting trusts or proxies with respect to
the voting of the Subsidiary Shares. The transfer of the nominal or qualifying
shares of the Seller Subsidiaries not owned by any of the Companies to Persons
designated by Buyer (i) shall be accomplished at or prior to the Closing and
(ii) shall not require
19
any payment by AlliedSignal or Buyer to any Person or result in the creation of
any Liability of AlliedSignal or Buyer to any Person.
(b) Except for the Subsidiary Shares and except as set forth on
Schedule 2.2, none of the Companies owns any shares of capital stock of (or
other ownership interests in) any other Person, including any joint venture.
2.3 Authorization and Enforceability. With respect to each of
--------------------------------
Parent and the Sellers: (a) such entity has full corporate power and authority
to execute, deliver and perform this Agreement and all other agreements,
instruments and documents to be executed in connection herewith (such other
agreements and instruments being hereinafter referred to collectively as the
"Transaction Documents") to which such entity is a party, (b) the execution,
----------------------
delivery and performance by such entity of this Agreement and the Transaction
Documents to which such entity is a party have been duly authorized by all
necessary corporate action on the part of such entity and no approval by the
holders of any security issued by Parent is required in connection therewith,
(c) this Agreement has been duly executed and delivered by such entity, and, as
of the Closing Date, the other Transaction Documents to which any such entity is
a party will be duly executed and delivered by such entity, (d) this Agreement
is a legal, valid and binding obligation of such entity, enforceable against
such entity in accordance with its terms, and (e) as of the Closing Date, each
of the other Transaction Documents to which such entity is a party will
constitute the legal, valid and binding obligations of such entity, enforceable
against such entity in accordance with its terms.
2.4 No Violation of Laws or Agreements. The execution, delivery,
----------------------------------
and performance by Parent and each Seller of this Agreement and the Transaction
Documents to which such entities (as applicable) are parties do not, and the
consummation by Parent and each Seller (as applicable) of the transactions
contemplated hereby and thereby, will not, (a) contravene any provision of the
charter, bylaws or any other organizational documents of Parent or any Company,
or (b) except as set forth on Schedule 2.4 and subject, in the case of clause
------------
(i) below, to such exceptions as would not in the aggregate have a Material
Adverse Effect, violate, conflict with, result in a 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) under, or result in or permit the
termination, modification, acceleration, or cancellation of, or result in the
creation or imposition of any Lien of any nature whatsoever upon any of the
Acquired Assets or give to others any interests or rights therein under, (i) any
personal property lease with payments in excess of $50,000 per year, lease of
Real Property, indenture, mortgage, loan or credit agreement, license,
instrument, contract, plan, permit or other agreement or commitment, oral or
written, to which Parent or any Company is a party, other than such agreements
or commitments involving any customer or supplier of the Business (including any
supplier of Intellectual Property), or by which the Business or any of the
Acquired Assets may be bound or affected (including without limitation any
agreement or instrument pertaining to Debt), or (ii) any judgment, injunction,
writ, award, decree, restriction, ruling, or order of any arbitrator or
Governmental Entity or any applicable Law to which Parent, any Company or the
Acquired Assets is subject.
20
2.5 Consents. Except (i) as set forth on Schedule 2.5 or (ii) for
-------- ------------
agreements or commitments involving any customer or supplier of the Business
(including any supplier of Intellectual Property), no consent, approval or
authorization of, or registration or filing with, any Person (governmental or
private) is required in connection with the execution, delivery and performance
by Parent or any Seller of this Agreement, the other Transaction Documents to
which Parent or any Seller is a party, or the consummation by Parent and each
Seller (as applicable) of the transactions contemplated hereby or thereby,
including without limitation in connection with the assignment of the Contracts
and Permits contemplated hereby, except as required by the HSR Act and except
for any required, consent, approval or authorization of, or registration or
filing with, any foreign governmental authority.
2.6 Financial Statements.
--------------------
(a) Schedule 2.6(a) sets forth (i) an unaudited combined pro forma
------------
balance sheet of the Combined Business as of September 30, 1997 (the "Balance
-------
Sheet") and related unaudited combined pro forma statement of income of the
-----
Combined Business for the six months ended September 30, 1997 (together with the
Balance Sheet, the "Financial Statements"). The Excluded Assets, the Xxxxxxx
--------------------
Excluded Assets, the Non-Assumed Liabilities, and the Xxxxxxx Non-Assumed
Liabilities are excluded from the Balance Sheet. The Financial Statements are
in accordance with the books and records of the Companies and the Xxxxxxx
Sellers and except for the Excluded Assets, the Xxxxxxx Excluded Assets, the
Non-Assumed Liabilities, the Xxxxxxx Non-Assumed Liabilities, and as set forth
in Schedule 2.6(a), fairly present the financial position and results of
operations of the Combined Business on a stand-alone basis as of the date and
for the period indicated, in conformity with GAAP throughout the period
specified and in accordance with the procedures and criteria set forth on
Schedule 1.6(a), except as expressly set forth therein and except that the
---------------
Financial Statements may omit notes and are subject to normal year-end
adjustments which are not, in the aggregate, material. Except as described on
Schedule 2.6(a), all fees, charges, costs and expenses associated with the
ownership, leasing, operation, maintenance and management of the Combined
Business and the Assets owned, used or held for use by the Combined Business
have been fully and properly reflected and charged on the Financial Statements
in accordance with GAAP (to the extent such items are required to be so
reflected and charged in accordance with GAAP). All Acquired Assets, Assumed
Liabilities, Xxxxxxx Purchased Assets and Xxxxxxx Assumed Liabilities are
disclosed on or reflected in the Balance Sheet except (i) as disclosed on
Schedule 2.6(a), and (ii) as disposed of or transferred between September 30,
1997 and the Closing Date in the ordinary course of business consistent with
past practice and in accordance with this Agreement.
(b) The future tax benefits set forth in the Balance Sheet as of the
date hereof ("Preliminary Future Tax Benefits") represent future tax benefits as
of March 31, 1997. No later than 30 days after the date hereof, Parent shall
deliver written notice to AlliedSignal of the amount of future tax benefits as
of September 30, 1997 ("Final Future Tax Benefits"), and the Balance Sheet shall
be adjusted accordingly.
21
2.7 No Changes. Since September 30, 1997, the Companies have
----------
conducted the Business only in the ordinary course of business consistent with
past practice and, except as set forth on Schedule 2.7, there has not been:
------------
(a) any Material Adverse Effect;
(b) any change in the salaries or other compensation payable
or to become payable to, or any advance (excluding advances for ordinary
business expenses) or loan to, any employee of the Business, or material
change or material addition to, or material modification of, other benefits
(including any bonus, profit-sharing, pension or other plan in which any of
the employees of the Business participate) to which any of the employees of
the Business may be entitled, other than in the ordinary course of the
Business consistent with past practice;
(c) any material change or modification in any manner of the
Companies' existing Inventory management and collection and payment
policies, procedures and practices with respect to Inventory and accounts
receivable and accounts payable, respectively, of the Business,
acceleration of payment of payables or failure to pay or delay in payment
of payables and any change in the Companies' existing policies, procedures
and practices, with respect to the provision of discounts, rebates or
allowances insofar as they relate to the Business;
(d) any cancellation or waiver by any Company of any right
material to the Business or any cancellation or waiver of any material
Debts of or claims of the Business against Parent or any other Affiliate of
any Company or any disposition of or failure to keep in effect any rights
in, to or for the use of any Permit material to the Business;
(e) any damage, destruction or loss, or eminent domain or
other condemnation proceeding affecting the distribution center located in
Salt Lake City, Utah, or the Business which individually or in the
aggregate has had a Material Adverse Effect, whether or not covered by
insurance;
(f) any change by any Company in its method of accounting or
keeping its books of account or accounting practices with respect to the
Business except as required by GAAP;
(g) any acquisition, sale, transfer or other disposition of
any material Assets of the Business other than the disposition of (i)
Inventory in the ordinary course of the Business consistent with past
practice or (ii) Assets not used or useful in the Business;
(h) any commencement or termination of any line of business;
(i) any action that would be prohibited to be taken after the
date of this Agreement under Section 4.1(c); or
22
(j) any agreement in writing or otherwise to take any of the
foregoing actions.
2.8 Contracts.
---------
(a) As of the date of this Agreement, Schedule 2.8(a) contains a
---------------
true, correct and complete list of (i) all Contracts (other than any guarantee
of any Seller that does not directly or indirectly support or benefit the
Business) to which Parent or any of its Affiliates (other than the Companies) is
a party or which benefit Parent or any of its Affiliates (other than the
Companies); (ii) all Contracts under which any Company is a licensee or licensor
of Intellectual Property or Technology which are material to the Business; (iii)
all Contracts under which any Company is a lessee or lessor of (or has an
obligation to lease) Real Property; (iv) all Contracts providing for the
formation or operation of a partnership or other joint venture; (v) all material
Contracts which afford customers any right to return Inventories at the option
of the customer; (vi) all Government Contracts with a backlog in excess of
$100,000; (vii) all Contracts requiring forward stocking locations; and (viii)
except for agreements or commitments involving any customer or supplier of the
Business (including any supplier of Intellectual Property), all other Contracts
(other than with respect to which the Business' total annual Liability or
expense is less than $1,000,000 per such non-listed Contract). Parent and
Sellers have made available to AlliedSignal a correct and complete copy of each
written agreement.
(b) Except as set forth on Part A of Schedule 2.8(b), with respect to
---------------
each Contract described in Schedule 2.8(a), neither any Company nor, to the best
of Parent's and each Seller's knowledge, any other party thereto, is in material
breach or default and no event has occurred which with notice or lapse of time
would constitute a material breach or default, or permit termination,
modification, or acceleration, under such Contract. Except as set forth on Part
B of Schedule 2.8(b), there are no disputes pending or, to the best of Parent's
and each Seller's knowledge, threatened, under or in respect of any of the
Contracts described in Schedule 2.8(a) and no counterparty to any such Contract
has given notice to any Company or Affiliate thereof with respect to any
material breach or default hereunder. Each of the Contracts described in
Schedule 2.8(a) is in full force and effect and constitutes the legal and
binding obligation of, and is legally enforceable against, such Company as the
Contracts relate, and, to the best of Parent's and each Seller's knowledge, any
other party thereto, in accordance with its terms.
(c) Except as identified with an asterisk on Schedule 2.8(a), each of
---------------
the Contracts listed thereon is fully assignable to Buyer (or, in the case of
Contracts of the Seller Subsidiaries, will remain in full force and effect upon
the sale of the Subsidiary Shares to Buyer) without the consent, approval or
waiver of any other Person. None of such Contracts contains any provision
which, after the Closing, will restrict Buyer or any of the Seller Subsidiaries
from conducting any portion of the Business in any jurisdiction, except such
Contracts which may be terminated by Buyer or the applicable Seller Subsidiary
without penalty or Liability on no more than 30 days' notice. With respect to
those Contracts that were assigned, novated or subleased to any Company by a
third party, all necessary consents to such assignments, novations or subleases
have been obtained.
23
(d) Subject to such exceptions as would not in the aggregate have a
Material Adverse Effect, with respect to each and every Government Contract that
has a backlog in excess of $100,000 or binding or non-binding bid for such a
Government Contract ("Bid") to which any Company is a party: (i) such Company
has fully complied with all material terms and conditions of such Government
Contract or Bid, including all clauses, provisions and requirements incorporated
expressly, by reference or by operation of law therein; (ii) such Company has
fully complied with all requirements of Law applicable to such Government
Contract or Bid and no Government Contract is subject to any adjustment in price
as a result of a claim by the U.S. Government or U.S. Government prime
contractor or subcontractor on the basis of (w) defective pricing pursuant to
FAR 52.215-22, FAR 52.215-23, FAR 52.215-24, FAR 52.215-25, (x) CAS violations
pursuant to FAR 52.230-2, (y) any submission for progress payments of invoices
or (z) any claims arising out of or related to the Government Contracts
occurring on or before the Closing Date; (iii) all representations and
certifications executed, acknowledged or set forth in or pertaining to such
Government Contract or bid for a Government Contract were current, accurate and
complete as of their effective date, and such Company has fully complied with
all such representations and certifications; (iv) neither the U.S. Government
nor any prime contractor, subcontractor or other Person has notified such
Company, either orally or in writing, that such Company has breached or violated
any Law, certification, representation, clause, provision or requirement, (v) no
termination for convenience, termination for default, cure notice or show cause
notice has been issued; (vi) no cost incurred by such Company has been
questioned or disallowed; and (vii) no money due to such Company has been (or
has attempted to be) withheld or set off.
2.9 Permits and Compliance With Laws Generally.
------------------------------------------
(a) Subject to such exceptions as would not in the aggregate have a
Material Adverse Effect, (i) except as set forth on Part A of Schedule 2.9(a),
---------------
the Companies possess and are in compliance with all Permits required to operate
the Business as presently operated and to own, lease or otherwise hold the
Acquired Assets under all applicable Laws and (ii) except as set forth on Part B
of Schedule 2.9(a), to the best of Parent's and each Seller's knowledge, the
Business is conducted by the Companies in compliance with, and the use,
construction and operation of all Real Property constituting any part of the
Acquired Assets conforms to, all applicable Laws (including the Occupational
Safety and Health Act and the rules and regulations thereunder ("OSHA") and
----
other similar Laws, and zoning, building and other similar Laws) and all
restrictions and conditions affecting title. All material Permits of the
Companies are in full force and effect. There are no proceedings pending or, to
the best of Parent's and each Seller's knowledge, threatened that seek the
revocation, cancellation, suspension or any adverse modification of any material
Permits presently possessed by the Companies. Parent and Sellers are aware of
no facts, conditions or circumstances reasonably likely to result in the
revocation, cancellation, suspension, or adverse modification of any material
Permit. Except as set forth on Part C of Schedule 2.9(a), all material Permits
of the Companies are assignable to and at the Closing will be assigned to Buyer
(or, in the case of Permits of the Seller Subsidiaries, will continue to be
possessed by the Seller Subsidiaries upon the sale of the Subsidiary Shares to
Buyer) and no approvals or consents are required for such assignment (or
continued possession)
24
and the sale of the Business or Acquired Assets hereunder will not result in a
default under or termination of any such material Permit.
(b) Except as set forth on Schedule 2.9(b), no outstanding notice,
---------------
citation, summons or order has been issued, no outstanding complaint has been
filed, no outstanding penalty has been assessed and no investigation or review
is pending or, to the best of Parent's and each Seller's knowledge, threatened,
by any Governmental Entity or other Person with respect to any alleged (i)
violation by any Company relating to the Business or the Acquired Assets of any
Law or (ii) failure by any Company to have any Permit required in connection
with the conduct of the Business or otherwise applicable to the Business
(including the Acquired Assets) except in such cases as would not in the
aggregate have a Material Adverse Effect.
2.10 Environmental Matters. As of the Closing Date, except as set
---------------------
forth on Schedule 2.10,
-------------
(a) There are no reports in Parent's, the Companies' or any of their
respective Affiliates' possession or control of environmental site assessments
or audits of the Business, the Acquired Assets or any other Assets (including
but not limited to facilities used for the off-site disposal of waste) formerly
owned, leased, operated or used by the Companies, or any predecessor-in-interest
to the Companies.
(b) The Companies possess and are in compliance with all
Environmental Permits required to operate the Business as presently operated and
to own, lease or otherwise hold the Acquired Assets under all Environmental
Laws. The operations of the Business and Acquired Assets (including the use,
construction and operation of all Real Property constituting any part of the
Acquired Assets) are in compliance with all Environmental Laws and are conducted
in a manner that does not pose a risk to the safety or health of workers or
other individuals or to the environment. All Environmental Permits of the
Companies relating to the operation of the Business are in full force and
effect. There are no proceedings pending or, to the best of Parent's and each
Seller's knowledge, threatened that seek the revocation, cancellation,
suspension or any adverse modification of any such Environmental Permits
presently possessed by the Companies. Parent and Sellers are aware of no facts,
conditions or circumstances reasonably likely to result in the revocation,
cancellation, suspension or adverse modification of any Environmental Permits.
(c) There are no environmental conditions with respect to the
Business, Acquired Assets or any other Assets (including but not limited to
facilities used for the off-site disposal of waste) formerly owned, leased,
operated or used by any of the Companies, or any predecessor-in-interest to any
of the Companies that (i) pose a risk to human health or the environment, or
(ii) are otherwise required to be remediated under applicable Environmental Laws
due to evidence of soil or groundwater contamination on, under or migrating onto
or from the Business, Acquired Assets or any such other Assets.
(d) There are no Environmental Claims currently pending nor has
Parent, any of the Companies or any of their respective Affiliates received any
notice of an Environmental Claim with respect to the Business, the Acquired
Assets, or any other Assets (including, but not
25
limited to, facilities used for the off-site disposal of waste) formerly owned,
leased, operated or used by the Companies or any predecessors-in-interest to the
Companies that a Hazardous Material has been (i) disposed, released, or
discharged or (ii) produced, stored, handled, used or emitted onto, under, or
from the Business, Acquired Assets or any such other Assets.
(e) Neither the Business nor the Acquired Assets are subject to the
requirements of any Laws that condition, restrict, prohibit or require
notification or disclosure upon the transfer, sale, lease or closure of certain
property for environmental reasons.
(f) No outstanding notice, citation, summons or order has been
issued, no outstanding complaint has been filed, no outstanding penalty has been
assessed and no investigation or review is pending or, to the best of Parent's
and each Seller's knowledge, threatened, by any Governmental Entity or other
Person with respect to any alleged (i) violation by any Company or any of its
Affiliates relating to the Business or the Acquired Assets of any Environmental
Law or (ii) failure by any Company or any of its Affiliates to have any
Environmental Permit required in connection with the conduct of the Business or
otherwise applicable to the Business (including the Acquired Assets).
2.11 Transactions with Affiliates.
----------------------------
(a) Set forth on Schedule 2.11(a) is a true, correct and complete
----------------
list and description of (a) all services and other support provided to the
Business by Parent and its Affiliates (other than the Companies) since April 1,
1996, (b) all other overhead charges allocated to the Companies since April 1,
1996, and (c) all other transactions between one or more Companies, on the one
hand, and Parent or any of its Affiliates (other than the Companies), on the
other hand, since April 1, 1996 (other than payment of compensation or other
benefits to employees).
(b) To the best of Parent's and each Seller's knowledge, except as
set forth on Schedule 2.11(b), (i) as of the Closing, no employee, officer or
----------------
director (or any member of his or her immediate family) of Parent or of any
Company or any of their Affiliates will be indebted to any Company, nor is any
Company indebted (or committed to make loans or extend or guarantee credit) to
any of such individuals, (ii) no such individual, except Xxxx Xxxxxxx and
Xxxxxxx Xxxxxxx and any such individual whose position is with Xxxxxxxxx or any
of its Affiliates (other than Parent or any of the Companies) has any direct or
indirect ownership interest in any Person with which any Company has a business
relationship, or any Person that competes with any Company and (iii) no member
of the immediate family of any officer or director of any Company is an
interested party with respect to any Contract.
2.12 Title. The Sellers have, and at the Closing will transfer to
-----
the Buyer, good and marketable title to all personal property owned by them
respectively, good and marketable title to all Owned Real Property, valid and
enforceable leasehold interests in Leased Real Property and personal property
leased by them, and good and valid title to or rights to use, all intangible
properties and rights used by them, in each case free and clear of all Liens,
except Permitted Liens. The Seller Subsidiaries have good and marketable title
to all Subsidiary Assets free and clear of all Liens, except Permitted Liens.
26
2.13 Acquired Real Property.
-----------------------
(a) Part A of Schedule 2.13(a) sets forth a true, correct and
----------------
complete list and legal descriptions of all Real Property owned (beneficially or
of record) by any of the Companies in the conduct of the Business, and Part B of
Schedule 2.13(a) sets forth a true, correct and complete list of all Real
Property leased by any of the Companies in the conduct of the Business, and in
each case identifies the street address thereof.
(b) Except in such cases as would not in the aggregate have a
Material Adverse Effect, all structures and other improvements on such
properties are within the lot lines and do not encroach on the properties of any
other Person (and improvements on adjacent Real Property do not encroach on any
of the Real Property constituting any part of the Acquired Assets), and the use,
construction and operation of all Real Property constituting any part of the
Acquired Assets or otherwise owned or leased by the Companies in the conduct of
the Business conform to all applicable building, zoning, safety, environmental
and other Laws, permits, licenses and certificates and all restrictions and
conditions affecting title.
(c) Other than as set forth on of Schedule 2.13(c), there are no
----------------
leases, subleases, options or other agreements, written or oral, granting to any
Person (other than the Companies) the right to purchase, use or occupy the
Acquired Real Property or any portion thereof. None of Parent, the Companies
and any of their respective Affiliates has received any written or oral notice
or order by any Governmental Entity, any insurance company which has issued a
policy with respect to any of such properties or any board of fire underwriters
or other body exercising similar functions which (i) relates to violations of
building, safety, fire or other ordinances or regulations, (ii) claims any
defect or deficiency with respect to any of such properties or (iii) requests
the performance of any repairs, alterations or other work to or in any of such
properties or in the streets bounding the same, except such as would not
individually or in the aggregate have a Material Adverse Effect. Parent and
Sellers have made available to Buyer true, correct and complete copies of all
leases and financing documents affecting all or any portion of the Acquired Real
Property.
(d) None of Parent, the Companies and any of their respective
Affiliates has received any written or oral notice for assessments for public
improvements against the Acquired Real Property which remains unpaid, and, to
the best of Parent's and each Seller's knowledge, no such assessment has been
proposed. Except as set forth on Schedule 2.13(d), there is no pending
----------------
condemnation, expropriation, eminent domain or similar proceeding affecting all
or any portion of any of the Acquired Real Property and, to the best of Parent's
and each Seller's knowledge, no such proceeding is threatened.
(e) Except as set forth on Schedule 2.13(e), no Person other than the
----------------
Companies is in possession of (or has any right, absolute or contingent, to
possess which is superior to any Company's right to possess) all or any portion
of the Acquired Real Property.
(f) Except as set forth on Schedule 2.13(f), all Acquired Real
----------------
Property has direct and unrestricted access over currently utilized facilities
and land to such public roads, owned roads and driveways presently in use, and
such utilities and other services, as are
27
necessary for the uses thereof and the conduct of the Business, and neither any
Company nor any other Person has applied for any change in the zoning or land
use classification of any such Real Property.
(g) Except as set forth on Part A of Schedule 2.13(g), the Acquired
----------------
Real Property has adequate arrangements for supplies of water, electricity, gas
and/or oil for all operations at the 1996 or current operating levels, whichever
is greater. Except as set forth on Part B of Schedule 2.13(g), there are no
actions or proceedings pending or, to the best of Parent's and each Seller's
knowledge, threatened that would adversely affect the supply of water,
electricity, gas and/or oil to the Acquired Real Property except for those which
individually and in the aggregate would not have a Material Adverse Effect.
2.14 Taxes.
-----
(a) Parent and each Company has (i) timely filed all returns and
reports for Taxes, including information returns, that are required to have been
filed in connection with, relating to, or arising out of the Business or the
Acquired Assets, (ii) paid to the appropriate Tax Authority all Taxes that are
shown to have come due pursuant to such returns or reports and (iii) paid to the
appropriate Tax Authority all other Taxes not required to be reported on returns
in connection with, relating to, or arising out of, or imposed on the property
of the Business for which a notice of assessment or demand for payment has been
received or which have otherwise become due except for Taxes being properly
contested in good faith.
(b) All such returns or reports were complete and accurate in all
material respects at the time of filing and such returns which have not been
audited do not contain a disclosure statement under Code Section 6662 (or any
predecessor provision or comparable provision of any Law).
(c) There are no unpaid Taxes with respect to any period ending on or
before the Closing Date which are or could give rise to a lien on the Acquired
Assets or the Business, except for current Taxes not yet due and payable.
(d) Except as set forth on Schedule 2.14(d), (i) there are no pending
----------------
audits or, to the best of Parent's and each Seller's knowledge, threatened
audits or assessments relating to Taxes with respect to the Business or the
Acquired Assets and (ii) there is no unassessed Tax deficiency proposed or to
the best of Parent and each Seller's knowledge threatened against Parent or any
Company relating to or affecting the Acquired Assets or the Business, nor is any
action or proceeding pending, or to the best of Parent's and each Seller's
knowledge, threatened by any Governmental Entity for assessment, reassessment or
collection of Taxes.
(e) Except as set forth on Schedule 2.14(e), none of the Acquired
----------------
Assets (i) is property that is required to be treated as owned by another Person
pursuant to the "safe harbor lease" provisions of former Section 168(f)(8) of
the Code, (ii) is "tax-exempt use property" within the meaning of Code Section
168(h) or (iii) directly or indirectly secures any Debt the interest on which is
tax-exempt under Code Section 103(a).
28
(f) Except as set forth on Schedule 2.14(f), no Company has agreed to
----------------
make, or is required to make, any adjustment under Code Section 263A or 481(a)
or any comparable provision of state or foreign Tax Laws by reason of a change
in accounting method or otherwise and no Company has changed a method of
accounting or Inventory method, made or changed a tax election, or otherwise
taken any action which is not in accordance with past practice that could
accelerate a tax deduction from a period after the Closing Date to a period
before the Closing Date or defer income from a period before the Closing Date to
a period after the Closing Date.
(g) Except as set forth on Schedule 2.14(g), no Company is a party to
----------------
any agreement, contract, arrangement or plan that has resulted or would or could
result, separately or in the aggregate, in connection with this Agreement or any
change of control of the Company, in the payment of any "excess parachute
payment" within the meaning of Code Section 280G.
(h) The aggregate adjusted tax basis in the Inventory, the accounts
receivable and the property, plant and equipment that constitute the Purchased
Assets for federal Tax purposes as of March 31, 1997, was at least $150,000,000,
$29,000,000 and $8,000,000, respectively.
(i) The amount of the reserves for value-added Taxes, real property
Taxes, property Taxes and payroll Taxes reflected on the Closing Date Balance
Sheet will be adequate to pay all Assumed Tax Liabilities.
2.15 Intellectual Property and Technology.
------------------------------------
(a) Schedule 2.15(a) contains a true, correct and complete list of
----------------
all patents, trademarks, trade names, service marks and applications for the
foregoing owned, used or held for use by any Company with respect to the
Business, except for matters listed on Schedule 2.15(b).
----------------
(b) Schedule 2.15(b) contains a true, correct and complete list of
----------------
all Intellectual Property which has been registered in, filed in or issued by
the PTO, the United States Copyright Office, any state trademark offices and the
patent, trademark, copyright and other corresponding offices of foreign
jurisdictions. All such registrations have been duly filed, registered and
issued and are in full force and effect.
(c) Except as set forth on Schedule 2.15(c), Section 8 and 15
----------------
declarations and applications for renewal with respect to all U.S. registered
trademarks and service marks listed in Schedule 2.15(b) were timely filed in and
accepted by the PTO. No trademarks or service marks listed in Schedule 2.15(b)
have been abandoned.
(d) Schedule 2.15(d) sets forth all licenses or other agreements from
----------------
or with third Persons under which any Company uses or exercises any rights with
respect to any of the Intellectual Property or Technology, other than such
licenses and other agreements that involve payments of no more than $25,000 per
year ("Small Licenses"). At the Closing, Sellers will
--------------
29
transfer to Buyer all Intellectual Property and Technology without payment of
royalties, free and clear of any Liens.
(e) Except (i) as set forth on Schedule 2.15(e) or (ii) with respect
----------------
to Small Licenses, the Companies (as applicable) are the sole and exclusive
owners of the Intellectual Property and Technology, free and clear of any Liens.
(f) Except as set forth on Schedule 2.15(f), no Company has received
----------------
(and Parent and Sellers have no knowledge of) any written notice from any other
Person pertaining to or challenging the right of any Company (or any other
Person) to use any of the Intellectual Property or any Technology, and there is
no interference, opposition, cancellation, reexamination or other contest
proceeding, administrative or judicial, pending or threatened with respect to
any Intellectual Property or Technology.
(g) Except as set forth on Schedule 2.15(g), no licenses have been
----------------
granted by any Company and no Company has any obligation to grant licenses with
respect to any Intellectual Property or Technology. No written claims have been
made by any Company of any violation or infringement by others of rights with
respect to any Intellectual Property or Technology, and neither Parent nor
Sellers know of any basis for the making of any such claim. Except in such
cases as would not in the aggregate have a Material Adverse Effect, the use by
each Company of the Intellectual Property and Technology (past and present) has
not violated or infringed any rights of other Persons, or constituted a breach
of any Contract (or other agreement or commitment).
(h) The Intellectual Property and Technology includes all such rights
necessary to conduct the Business as now conducted and, except (i) as set forth
on Schedule 2.15(d) or (ii) with respect to Small Licenses, such rights will not
----------------
be adversely affected by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
(i) There are no licenses or service, maintenance or other agreements
or obligations of any nature whatsoever regarding the Intellectual Property or
Technology between or among any such Company, on the one hand, and any
Affiliate(s) of such Company, on the other hand. All statements and
representations made by each Company or any of its Affiliates in any pending
patent, copyright and trademark applications with respect to the Intellectual
Property were true in all material respects as of the time they were made.
2.16 Brokerage. Neither Parent nor any Company nor any of their
---------
respective Affiliates has made any agreement or taken any other action which
might cause AlliedSignal or Buyer to become liable for a broker's or finder's
fee or commission as a result of the transactions contemplated hereunder.
2.17 Product Warranties and Guarantees. Parent and each Company
---------------------------------
has provided Buyer with true and correct copies of all written product and
service warranties and guarantees in connection with Contracts listed on
Schedule 2.8(a).
30
2.18 Products Liability. There are no Liabilities of any Company,
------------------
fixed or contingent, asserted or, to the best of Parent's and each Seller's
knowledge, unasserted, (a) with respect to any product Liability or any similar
claim that relates to any product sold by any of the Companies to others prior
to the Closing, or (b) with respect to any claim for the breach of any express
or implied product warranty or any other similar claim with respect to any
product sold by any of the Companies to others prior to the Closing, other than
standard warranty obligations (to replace, repair or refund) made by any Company
in the ordinary course of the conduct of the Business to buyers of the
respective products, and except in the case of the preceding clauses (a) and (b)
where such Liabilities would not exceed $500,000 in the aggregate for the
Combined Business.
2.19 Labor Matters.
-------------
(a) To the best of Parent's and each Seller's knowledge, there have
been no union organizing efforts with respect to any Company conducted within
the last three years and there are none now being conducted with respect to any
Company. The Companies have not at any time during the three years prior to the
date of this Agreement had, nor, to the best of Parent's and each Seller's
knowledge, is there now threatened, a strike, work stoppage, work slowdown or
other material labor dispute with respect to or affecting the Business. Except
as set forth on Schedule 2.19, (i) no employee of any Company is represented by
-------------
any union or other labor organization; (ii) there is no charge or complaint,
including any unfair labor practice charge or any claim of discrimination, which
is pending with any Governmental Entity or, to the best of Parent's and each
Seller's knowledge, threatened against any Company relating to any of its
employees; and (iii) there is no commitment or agreement to increase wages or
modify the terms and conditions of employment of employees of any Company other
than ordinary course of the Business consistent with past practice. Parent and
Sellers have provided Buyer with copies of any collective bargaining agreement
or other agreement with any union or other labor organization representing
employees of any Company.
(b) Within six months prior to the date hereof, (i) no Company has
effectuated (x) a "plant closing" (as defined in the WARN Act) affecting any
site of employment or one or more facilities or operating units within any site
of employment or facility of the Business or (y) a "mass layoff" (as defined in
the WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the Business, (ii)
no Company has been affected by any transaction or engaged in layoffs or
employment terminations with respect to the Business sufficient in number to
trigger application of any similar foreign, state or local law, and (iii) none
of the Companies' employees has suffered an "employment loss" (as defined in the
WARN Act).
2.20 Employee Benefits.
-----------------
(a) Set forth on Schedule 2.20(a) is a true, correct and complete
----------------
list of the following:
(i) Separately by location, the names, job titles and current
salary or wage rates of all employees of each Company and their hourly or
yearly salary, together
31
with a summary of all bonus, incentive compensation or other additional
compensation or similar benefits paid to such persons for the 1997 fiscal
year and estimated for the 1998 fiscal year;
(ii) Separately by location, the names, job titles and current
salary or wage rates of all independent contractors, including any
consultants, and leased employees who perform services for a Company; and
(iii) All of (x) the employee benefit plans, arrangements or
policies (whether or not written, whether U.S. or foreign, and whether or
not subject to ERISA), including, without limitation, any stock option,
stock purchase, stock award, retirement, pension, deferred compensation,
profit sharing, savings, incentive, bonus, health, dental, hearing, vision,
drug, life insurance, cafeteria, flexible spending, dependent care, fringe
benefit, vacation pay, holiday pay, disability, sick pay, workers
compensation, unemployment, severance pay, employee loan, educational
assistance plan, policy or arrangement, and (y) any employment,
indemnification, consulting or severance agreement, under which any
employee or former employee of a Company has any present or future right to
benefits or under which a Company has any present or future Liability
(collectively, the "Plans"). Schedule 2.20(a) indicates which Plans are
----- ----------------
maintained for employees employed in the United States (collectively, "U.S.
----
Plans"); which Plans are maintained for employees employed outside of the
-----
United States (collectively, "Foreign Plans"); and which Plans cover only
-------------
employees of one or more Seller Subsidiaries (collectively, "Free-Standing
-------------
Plans").
-----
(b) Parent or Sellers have made available to Buyer a complete and
correct copy of each Plan document or a written description of any unwritten
plan; the most recent summary plan description or similar booklet for any Plan;
any employee handbook applicable to employees of a Company; and with respect to
any Free-Standing Plan, any related trust agreement or insurance contract, the
most recent actuarial valuation report, and the most recent financial
statements.
(c) Except (i) as set forth on Schedule 2.20(c) or (ii) in such cases
----------------
as would not in the aggregate have a Material Adverse Effect:
(i) Neither Parent nor any Company nor any of their
Affiliates has communicated to present or former employees of a Company, or
formally adopted or authorized, any additional Plan or any change in or
termination of any existing Plan.
(ii) Each Plan has been operated and administered in
accordance with its terms, the terms of any applicable collective
bargaining agreement, and all applicable Laws.
(iii) Each U.S. Plan which is a "group health plan" subject to
the continuation coverage requirements of Section 4980B of the Code and
Part 6 of Title I of ERISA ("COBRA") which is maintained by a Company or
-----
any of its Affiliates has been operated and administered, in all material
respects, in accordance with such requirements.
32
(d) Schedule 2.20(d) identifies each U.S. Plan which provides health,
----------------
life insurance or other welfare benefits to retired or other terminated
employees of a Company other than continuation coverage required by COBRA and
the Companies have the ability to amend or terminate any such Plan.
(e) Except in such cases as would not in the aggregate have a
Material Adverse Effect, with respect to any Plan, no actions, suits, claims or
proceedings (other than routine claims for benefits) are pending or, to the best
of Parent's and each Seller's knowledge, threatened, and no facts or
circumstances exist which could be reasonably expected to give rise to any such
actions, suits, claims or proceedings.
(f) Except in such cases as would not in the aggregate have a
Material Adverse Effect, no Plan is currently under governmental investigation
or audit, and to the best of Parent's and each Seller's knowledge, no such
investigation or audit is contemplated or under consideration.
(g) Except (i) for benefits payable under the terms of any Free-
Standing Plan or (ii) in such cases as would not in the aggregate have a
Material Adverse Effect, no event has occurred and no condition exists that
could be reasonably expected to subject AlliedSignal, Buyer or any Seller
Subsidiary, directly or indirectly, to any tax, fine, penalty or other Liability
arising under, or with respect to, any employee benefit plan currently or
previously maintained by any Company or any Person that is or was a member of a
controlled group with, under common control with, or otherwise required to be
aggregated with, any Company under Section 414(b), (c), (m) or (o) of the Code.
(h) No lien has arisen or is expected to arise under the Code or
ERISA on the Purchased Assets.
(i) No U.S. Plan is a "multiemployer plan" within the meaning of
Section 3(37)(A) of ERISA, and no Company has any outstanding Liability with
respect to any such plan (contingent or otherwise).
(j) Except (i) as set forth on Schedule 2.20(j) or (ii) in such cases
----------------
as would not in the aggregate have a Material Adverse Effect, neither the
execution of this Agreement nor the consummation of the transactions
contemplated by this Agreement, will (x) increase the amounts of benefits
otherwise payable under any Plan, (y) result in the acceleration of the time of
payment, exercisability, funding or vesting of any such benefits, or (z) result
in any payment (whether severance pay or otherwise) becoming due to, or with
respect to, any employee or director of a Company.
(k) Except in such cases as would not in the aggregate have a
Material Adverse Effect, with respect to each Foreign Plan:
(i) All contributions and premium payments required to have
been made under or with respect to each Foreign Plan have been timely paid;
and
33
(ii) Each Foreign Plan is either fully funded (or fully insured)
based upon generally accepted local actuarial and accounting practice and
procedure.
(l) No employee benefits are provided to any employee of a Company
who is employed outside of the United States except to the extent required by
law.
(m) Each Foreign Plan has been operated, in all material respects, in
compliance with all applicable Laws with such exceptions as would not
individually or in the aggregate result in a Material Adverse Effect.
(n) Each Foreign Plan is a Free-Standing Plan.
2.21 No Pending Litigation or Proceedings. Except as set forth on
------------------------------------
Part A of Schedule 2.21, there are no actions, suits, investigations or
-------------
proceedings pending against or affecting, or, to the best of Parent's and each
Seller's knowledge, threatened against, Parent, any Company, the Business or any
of the Acquired Assets before any arbitrator or Governmental Entity (including
the United States Environmental Protection Agency, the United States Equal
Employment Opportunity Commission or any similar Governmental Entity) that would
materially and adversely affect their ability to perform their obligations under
this Agreement. Except as set forth on Part B of Schedule 2.21, there are no
outstanding judgments, decrees, writs, injunctions or orders of any arbitrator
or Governmental Entity against Parent or any Company which relate to or arise
out of the conduct of the Business or the ownership, condition or operation of
the Business or the Acquired Assets except in such cases as would not in the
aggregate have a Material Adverse Effect.
2.22 Insurance. Schedule 2.22 lists each Company's policies and
--------- -------------
contracts in effect as of the date hereof for insurance covering the Acquired
Assets or Assumed Liabilities and the operation of the facilities constituting
the Business owned or held by the Companies, together with the risks insured
against, coverage limits and deductible amounts. Sellers have made available to
Buyer complete and correct copies of all such policies together with all riders
and amendments thereto. Such policies are in full force and effect and all
premiums due thereon have been paid. Each of the Companies has complied in all
material respects with the terms and conditions of such policies. The Companies
have made available to Buyer all books and records relating to workers
compensation claims and all claims made by the Companies under any policy of
insurance during the five years prior to the date hereof with respect to the
Business other than employee claims under health or medical insurance policies
or coverage.
2.23 Customers; Suppliers. As of the date of this Agreement, Part
--------------------
A of Schedule 2.23 contains a true, correct and complete list of (i) all
-------------
Contracts to which any Major Customer is a party and (ii) all Major Suppliers,
together with an estimate of all purchases from each Major Supplier for the last
12 months. Except as identified with an asterisk on Part A of Schedule 2.23,
each of the Contracts listed thereon is fully assignable to Buyer (or, in the
case of Contracts of the Seller Subsidiaries, will remain in full force and
effect upon the sale of the Subsidiary Shares to Buyer) without the consent,
approval or waiver of any other Person. Except as set forth on Part B of
Schedule 2.23, as of the date of this Agreement, neither Parent nor any Company
has received written notice within the preceding 12 months of any development
34
(a) which could reasonably be expected to result in a Material Adverse Effect or
(b) which indicates that a Major Customer will not purchase products of the
Combined Business from Buyer during the 1998 fiscal year in amounts
substantially equivalent (on a pro rata basis) to such purchases from such
Company in the 1997 fiscal year. Except as set forth on Part C of Schedule 2.23,
as of the date hereof, no supplier of the Business (including any supplier of
Intellectual Property) has threatened to refuse to sell its products or services
to the Business except in such cases as would not in the aggregate have a
Material Adverse Effect.
2.24 Condition of Assets. Except as set forth on Schedule 2.24,
------------------- -------------
the buildings, machinery, equipment, tools, furniture, improvements, sewers,
pipes, transportation equipment and other fixed tangible Assets of the Business
(a) included in the Acquired Assets or (b) subject to any Contract included in
the Acquired Assets are in sufficiently good operating condition and repair to
conduct the Business as presently conducted, reasonable wear and tear excepted.
2.25 All Assets. Except as set forth on Schedule 2.25 and for the
---------- -------------
Excluded Assets, the Acquired Assets (including any Assets, properties and
rights subject to any Contract included in the Acquired Assets) constitute all
the assets, properties and rights owned, used, or held for use in connection
with, or that are otherwise related to or required for the conduct of, the
Business as currently conducted by the Companies on the date of this Agreement.
Except as set forth on Schedule 2.25, none of the Acquired Assets are owned, in
whole or in part, by any Person other than the Companies.
2.26 Undisclosed Liabilities. None of the Seller Subsidiaries has
-----------------------
any Liability of any nature, mixed, contingent or otherwise, liquidated or
unliquidated and whether due or to become due, except for Non-Assumed
Liabilities and except for (i) Liabilities reflected on the Balance Sheet, other
than those discharged since September 30, 1997, (ii) Liabilities under
Contracts, (iii) Liabilities disclosed on Schedule 2.26 and (iv) Liabilities
-------------
incurred in the ordinary course of business since the date of the Balance Sheet,
none of which would constitute a violation of any covenant herein or give rise
to the failure of any condition herein. None of the Seller Subsidiaries has any
Liability of any nature, mixed, contingent or otherwise, liquidated or
unliquidated and whether due or to become due, which does not relate to the
Business.
2.27 Securities Matters. Except as set forth on Schedule 2.27,
------------------ -------------
Sellers are acquiring the AlliedSignal Common Stock for their own account and
without a present view to any distribution thereof or any present intention of
distributing or selling the AlliedSignal Common Stock in violation of the
federal securities laws. Each Seller is an "accredited investor" as such term is
defined in Regulation D promulgated under the Securities Act. In evaluating the
suitability of an investment in the AlliedSignal Common Stock, each Seller has
relied solely upon the representations, warranties, covenants and agreements
made by AlliedSignal herein and has not relied upon any other representations or
other information (whether oral or written and including any estimates,
projections or supplemental data) made or supplied by or on behalf of
AlliedSignal or any Affiliate, employee, agent or other representative of
AlliedSignal. Each Seller understands and agrees that it may not sell or dispose
of any of the AlliedSignal Common Stock other than pursuant to a registered
offering or in a transaction exempt from the registration requirements of the
Securities Act.
35
2.28 SEC Filings. Parent has heretofore delivered to Buyer and
-----------
Buyer acknowledges receipt of the following documents (the "Parent Reports"):
--------------
(a) Parent's Annual Report on Form 10-K for the fiscal year ended Xxxxx 00,
0000, (x) Parent's Quarterly Reports on Form 10-Q for the fiscal quarters ended
June 30, and September 30, 1997, (c) Parent's proxy statement relating to its
1997 Annual Meeting of Stockholders, (d) Parent's Annual Report to Stockholders
for 1997, and (e) any other report filed during 1997, and prior to the date of
this Agreement, with the Securities and Exchange Commission under the Securities
Act or the Exchange Act. Each Parent Report, as of its filing date, insofar as
it relates to the Business, did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of circumstances under which they were made, not
misleading.
2.29 Bank Accounts. Schedule 2.29 contains a true, correct and
------------- -------------
complete list of all bank accounts used or held for use by the Seller
Subsidiaries and the authorized signatures associated therewith.
2.30 Business Conduct. Except as discussed between Parent and
----------------
Buyer on December 7, 1997, to the best of Parent's and each Seller's knowledge,
during the past three years neither any Company, nor any director, officer,
employee or third party acting on behalf thereof, has, in violation of any Law:
(i) made any bribes, kickbacks or other payments, directly or indirectly, to any
Person or any representative thereof, to obtain favorable treatment in securing
business or otherwise to obtain special concessions for any Company; (ii) made
any bribes, kickbacks or other payments, directly or indirectly, to or for the
benefit of any Governmental Entity or any official, employee or agent thereof,
for the purpose of affecting his or her action or the action of the Governmental
Entity that he or she represents to obtain favorable treatment in securing
business or to obtain special concessions for the Company or any Subsidiary;
(iii) made any unlawful political contributions on behalf of any Company; or
(iv) otherwise used corporate funds of any Company for any illegal purpose,
including without limitation, any violation of the Foreign Corrupt Practices
Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ALLIEDSIGNAL AND BUYER
AlliedSignal and Buyer hereby jointly and severally represent and
warrant to Parent and Sellers as follows:
3.1 Organization and Good Standing. (a) AlliedSignal is a
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.
(b) Buyer is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware.
AlliedSignal is the sole member of Buyer. AlliedSignal owns all of the
outstanding equity and profit interests in Buyer, free and clear of all Liens.
Buyer is disregarded as an entity separate from AlliedSignal for federal tax
purposes.
36
3.2 Authorization and Enforceability. With respect to each of
--------------------------------
AlliedSignal and Buyer: (a) such entity has full power and authority to
execute, deliver and perform this Agreement and Transaction Documents to which
such entity is a party, (b) the execution, delivery and performance by such
entity of this Agreement and the Transaction Documents to which such entity is a
party have been duly authorized by all necessary action on the part of such
entity, (c) this Agreement has been duly executed and delivered by such entity,
and, as of the Closing Date, the other Transaction Documents to which either
entity is a party will be duly executed and delivered by such entity, (d) this
Agreement is a legal, valid and binding obligation of such entity, enforceable
against such entity in accordance with its terms, and (e) as of the Closing
Date, each of the other Transaction Documents to which such entity is a party
will constitute the legal, valid and binding obligations of such entity,
enforceable against such entity in accordance with its terms.
3.3 No Violation of Laws or Agreements. The execution, delivery,
----------------------------------
and performance by AlliedSignal and Buyer of this Agreement and the Transaction
Documents to which such entities (as applicable) are parties do not, and the
consummation by AlliedSignal and Buyer (as applicable) of the transactions
contemplated hereby and thereby, will not, (a) contravene any provision of the
Certificate of Incorporation or Bylaws of AlliedSignal nor the Certificate of
Formation or Limited Liability Company Agreement of Buyer, or (b) violate,
conflict with, result in a 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) under, or result in or permit the termination, modification,
acceleration, or cancellation of, (i) any indenture, mortgage, loan or credit
agreement, license, instrument, lease, contract, plan, permit or other agreement
or commitment, oral or written, to which either AlliedSignal or Buyer is a
party, or by which any of either entity's Assets may be bound or affected, or
(ii) any judgment, injunction, writ, award, decree, restriction, ruling, or
order of any arbitrator or Governmental Entity or any applicable Law to which
AlliedSignal or Buyer is subject.
3.4 Consents. No consent, approval or authorization of, or
--------
registration or filing with, any Person (governmental or private) is required in
connection with the execution, delivery and performance by AlliedSignal or Buyer
of this Agreement, the other Transaction Documents to which AlliedSignal or
Buyer is a party, or the consummation by AlliedSignal or Buyer of the
transactions contemplated hereby or thereby except (a) as required by the HSR
Act, (b) as required by the NYSE to list AlliedSignal Common Stock and (c) any
required consent, approval of, or authorization of, or registration or filing
with, any foreign governmental authority.
3.5 AlliedSignal Common Stock. As of the date hereof,
-------------------------
1,000,000,000 shares of AlliedSignal Common Stock are authorized for issuance.
As of November 30, 1997, 562,554,971 shares of AlliedSignal Common Stock were
issued and outstanding and 153,902,513 shares of AlliedSignal Common Stock were
held in the treasury of AlliedSignal or owned by any Subsidiary of AlliedSignal.
AlliedSignal has a sufficient number of unreserved shares of AlliedSignal Common
Stock to perform the transactions contemplated hereby. All shares of
AlliedSignal Common Stock to be issued at the Closing, when so issued, will be
duly authorized, validly issued, fully paid and non-assessable, free of
preemptive rights and all Liens
37
and will be issued in compliance with all applicable Laws. Parent acknowledges
that AlliedSignal has disclosed to Parent that AlliedSignal will be making open
market and/or block purchases of AlliedSignal Common Stock during the period
between the date hereof and the Closing Date. All such purchases shall comply
with Rule 10b-18 under Exchange Act.
3.6 SEC Filings. AlliedSignal has heretofore delivered to Parent,
-----------
and Parent acknowledges receipt of, the following documents (the "AlliedSignal
------------
Reports"): (a) AS's Annual Report on Form 10-K for the fiscal year ended
-------
December 31, 1996, (b) AS's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997, (c) AS's
proxy statement relating to its 1997 Annual Meeting of Stockholders, (d) AS's
Annual Report to Stockholders for 1996, and (e) any other report filed during
1997, and prior to the date of this Agreement, with the Securities and Exchange
Commission under the Securities Act or the Exchange Act. As of their respective
dates, each of the AlliedSignal Reports complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and none contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Since January 1, 1996, AlliedSignal has timely filed all reports,
registration statements and made all filings required to be filed with the SEC
under the rules and regulations of the SEC.
3.7 Financial Statements. The audited consolidated financial
--------------------
statements and unaudited consolidated interim financial statements of
AlliedSignal and its consolidated Subsidiaries included in or incorporated by
reference into the AlliedSignal Reports (including any related notes and
schedules) have been prepared in accordance with GAAP (except as may be
indicated in the notes thereto or as permitted by the Securities Act or the
Exchange Act in the case of unaudited financial statements included in or
incorporated by reference into the AlliedSignal Reports) and fairly present the
consolidated financial position of AlliedSignal and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations for the periods then ended, subject, in the case of the unaudited
consolidated interim financial statements, to normal year-end adjustments and
any other adjustments described therein.
3.8 Brokerage. Neither AlliedSignal, Buyer nor any of their
---------
respective Affiliates has made any agreement or taken any other action which
might cause Parent or any Seller to become liable for a broker's or finder's fee
or commission as a result of the transactions contemplated hereunder.
ARTICLE IV
ADDITIONAL COVENANTS
4.1 Conduct of Business. Except (i) as otherwise specifically
-------------------
permitted by this Agreement or (ii) with the prior written consent of Buyer,
from and after the date of this Agreement and until the Closing Date, Parent and
Sellers agree that:
38
(a) Sellers shall, and Parent and Sellers shall cause the
Seller Subsidiaries to:
(i) conduct the Business as presently conducted and only
in the ordinary course of business consistent with past practice; and
(ii) use their reasonable best efforts to preserve the
business organization of the Business substantially intact, to keep
available to Buyer the services of their respective employees, and to
preserve for Buyer the goodwill of the suppliers, distributors,
customers and others having business relationships with the Business.
(b) Parent and Sellers shall promptly inform AlliedSignal in
writing of any specific event or circumstance (including, without
limitation, any consecutive two week period in which any Major Customer
fails to place orders with the Company or Companies with which it transacts
business) of which any of them (or any Seller Subsidiary) is aware, or of
which any of them (or any Seller Subsidiary) receives written or oral
notice, that (i) has or is likely to have, individually or in the
aggregate, taken together with other events or circumstances, a Material
Adverse Effect, (ii) indicates that any Major Customer is terminating or
intends to terminate any Contract (excluding termination upon expiration of
the term of any Contract so long as such customer continues to purchase
goods from the Combined Business) and/or indicates that any such customer
intends to reduce its purchases from any Company or (iii) indicates that
any Major Supplier is terminating or intends to terminate any Contract
(excluding termination upon expiration of the term of any Contract so long
as such supplier continues to sell goods to the Combined Business) and/or
indicates that any such Major Supplier intends to reduce its sales to any
Company, provided that any such oral notice reportable under this Section
4.1(b) shall be directed to a responsible management Person at Parent or
any Company; and
(c) Sellers shall not, and Parent and Sellers shall cause the
Seller Subsidiaries not to:
(i) change or modify in any material respect existing
Inventory management or credit and collection policies, procedures and
practices with respect to accounts receivable in any case relating to
the Business;
(ii) enter into any Contracts, waive any rights or enter
into any other transactions which individually or in the aggregate
would have a Material Adverse Effect;
(iii) mortgage, pledge or subject to any Lien (other
than Permitted Liens) any of the Acquired Assets;
(iv) change any compensation or benefits or grant any
material new compensation or benefits payable to or in respect of any
employee of the
39
Business (except, for regularly scheduled merit increases in the
ordinary course of business consistent with past practice);
(v) sell, lease or otherwise transfer any Assets, except
Inventory in the ordinary course of the Business, necessary, or
otherwise material to the conduct of, the Business which would
constitute Acquired Assets;
(vi) change any Company's method of accounting or keeping
its books of account or accounting practices with respect to the
Business, except as required by GAAP;
(vii) take or omit to take any action which if taken or
omitted prior to the date hereof would constitute or result in a
breach of any representations or warranties of Parent or Sellers set
forth herein;
(viii) enter into any Contract (except sales contracts
with customers in the ordinary course of the Business and except for
such Contracts which may be terminated by Buyer or the applicable
Seller Subsidiary without penalty or Liability on no more than 30
days' notice) that would create a Liability for the Business in excess
of $200,000 per year without obtaining AS's prior written consent,
such consent not to be unreasonably withheld;
(ix) create, incur or assume any Debt not currently
outstanding, other than current Liabilities incurred in the ordinary
course of business;
(x) amend their charters, bylaws or other organizational
documents;
(xi) authorize, issue, sell or otherwise dispose of any
capital stock of any Company or amend the terms thereof;
(xii) split, combine or reclassify any shares of capital
stock of any of the Seller Subsidiaries, declare, set aside or pay any
dividend or other distribution (whether in cash, stock or property or
any combination thereof) in respect of the capital stock of any of the
Companies, or redeem or otherwise acquire any of the capital stock of
any of the Companies;
(xiii) make any loans, advances or capital contributions
to, or investments in, any Person;
(xiv) acquire, sell, lease or dispose of any Assets
used or held for use in the Business, other than (x) sales of
Inventory in the ordinary and usual course of business consistent with
past practice or (y) purchases of goods for use in the Business in the
ordinary and usual course of business consistent with past practice;
40
(xv) with respect to the Business, pay, discharge or
satisfy any claims, Liabilities (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business of
Liabilities reflected or reserved against in, or contemplated by, the
Balance Sheet or incurred in the ordinary course of business
consistent with past practice;
(xvi) disclose to any third party or enter into any
Technology license or agreement to disclose to any third party any
Intellectual Property, except in the ordinary and usual course of
business and pursuant to written confidentiality agreements;
(xvii) enter into any labor agreement;
(xviii) sell or dispose of any significant amount of old
or obsolete Inventory; or
(xix) make capital expenditures in excess of $50,000
individually or $250,000 in the aggregate for the Combined Business;
(xx) agree in writing or otherwise to take any of the
foregoing actions.
4.2 Mutual Covenants. The parties hereto mutually covenant from
----------------
the date of this Agreement to the Closing Date (and subject to the other terms
of this Agreement):
(a) to cooperate with each other in determining whether
filings are required to be made or consents required to be obtained in any
jurisdiction in connection with the consummation of the transactions
contemplated by this Agreement and in making or causing to be made any such
filings promptly and in seeking to obtain timely any such consents (each
party hereto shall furnish to the other and to the other's counsel all such
information as may be reasonably required in order to effectuate the
foregoing action); and
(b) to advise the other parties promptly if such party
determines that any condition precedent to its obligations hereunder will
not be satisfied in a timely manner.
4.3 Filings and Authorizations. The parties hereto will, as
--------------------------
promptly as practicable, and in the case of filings under the HSR Act no later
than five Business Days after the date of this Agreement, make or cause to be
made all such filings and submissions under Laws applicable to them or their
Affiliates as may be required to consummate the terms of this Agreement,
including all notifications and information to be filed or supplied pursuant to
the HSR Act. The parties hereto shall also provide as promptly as possible full
responses to any requests for additional information made of them under the HSR
Act. Any such filings, including any supplemental information and requests for
additional information under the HSR
41
Act, will be in substantial compliance with the requirements of the applicable
Law. Each of AlliedSignal and Buyer, on the one hand, and Parent and Sellers, on
the other hand, shall furnish to the other such necessary information and
reasonable assistance as the other may request in connection with its
preparation of any filing or submission which is necessary under the HSR Act.
Parent, Sellers, AlliedSignal and Buyer shall keep each other apprised of the
status of any communications with, and inquiries or requests for additional
information from, any Governmental Entity, including the FTC and the Antitrust
Division, and shall comply promptly with any such inquiry or request. Each of
Parent and AlliedSignal shall use its reasonable efforts to obtain any clearance
required under the HSR Act for the purchase and sale of the Purchased Assets in
accordance with the terms and conditions hereof. Nothing contained in this
Agreement, including under this Section 4.3 and Sections 4.8 and 4.13, will
require or obligate (a) Parent, the Companies, AlliedSignal, Buyer or their
respective Affiliates to initiate, pursue or defend any litigation to which any
Governmental Entity (including the Antitrust Division and the FTC) is a party or
(b) AlliedSignal, Buyer or their respective Affiliates (i) to agree or otherwise
become subject to any limitations on (x) the right of AlliedSignal, Buyer or
their respective Affiliates effectively to control or operate the Business, (y)
the right of AlliedSignal, Buyer or their respective Affiliates to acquire or
hold the Business, or (z) the right of AlliedSignal or Buyer to exercise full
rights of ownership of the Business or all or any portion of the Acquired
Assets, or (ii) to agree or otherwise be required to sell or otherwise dispose
of, hold separate (through the establishment of a trust or otherwise), or divest
itself of all or any portion of the business, Assets or operations of
AlliedSignal, Buyer, any Affiliate of AlliedSignal or Buyer or the Business. The
parties agree that no representation, warranty or covenant of Parent, Sellers,
AlliedSignal or Buyer contained in this Agreement shall be breached or deemed
breached as a result of the failure by any party hereto or any of its Affiliates
to take any of the actions specified in the preceding sentence.
4.4 Public Announcement. No party hereto shall make or issue, or
-------------------
cause to be made or issued, any public announcement or written statement
concerning this Agreement or the transactions contemplated hereby without the
prior written consent of the other party hereto (which will not be unreasonably
withheld or delayed), unless counsel to such party advises that such
announcement or statement is required by law or the rules of any securities
exchange on which securities of any Affiliate of Parent are traded (in which
case the parties hereto shall make reasonable efforts to consult with each other
prior to such required announcement).
4.5 Investigation. Sellers shall, and Parent and Sellers shall
-------------
cause the Seller Subsidiaries to, give AlliedSignal and its representatives
(including AS's accountants, consultants, counsel and employees), upon
reasonable notice and during normal business hours, reasonable access to the
properties (including any Equipment and any Acquired Real Property), Contracts,
employees, books, records and affairs of the Companies to the extent relating to
the Business and the Acquired Assets (provided that such access does not
unreasonably disrupt the conduct of the Business), and shall cause their
respective officers, employees, agents and representatives to furnish to
AlliedSignal all documents, records and information (and copies thereof), to the
extent relating to the Business and the Acquired Assets, as AlliedSignal may
reasonably request. Parent and Sellers may reasonably limit the number of
representatives of AlliedSignal provided access hereby. No investigation or
receipt of information by AlliedSignal
42
pursuant to, or in connection with, this Agreement, shall diminish or obviate
any of the representations, warranties, covenants or agreements of Parent or
Sellers under this Agreement or the conditions to the obligations of Buyer under
this Agreement. All information provided to AlliedSignal or Buyer under this
Agreement shall be held subject to the terms and conditions of the
Confidentiality Agreement.
4.6 Taxes.
-----
(a) Parent and each Seller shall jointly and severally be responsible
for and shall pay any and all Taxes arising or resulting from the conduct of the
Business or the ownership of the Acquired Assets on or prior to the Closing
Date, which Liability shall be a Non-Assumed Liability (including, without
limitation, the sale of the Business and the Purchased Assets on the Closing
Date pursuant to this Agreement).
(b) Buyer shall be responsible for and shall pay any and all Taxes
arising or resulting from the conduct of the Business or the ownership of the
Acquired Assets after the Closing Date (excluding without limitation, the sale
of the Business and the Purchased Assets or the Closing Date pursuant to this
Agreement), which Liability shall be an Assumed Liability.
(c) Each Seller hereby acknowledges that for FICA and FUTA purposes,
Buyer qualifies as a successor employer with respect to the retained employees.
In connection with the foregoing, the parties agree to follow the "Alternative
Procedures" set forth in Section 5 of the Revenue Procedure 96-60, 1996-
2C.B.399. Each affected Seller and Buyer understands that Buyer shall assume
the affected Seller's entire obligation to furnish a Form W-2, Wage and Tax
Statement to the employees of the Business for calendar year ending December 31,
1998.
(d) In addition to all personnel files and records relating to
employees of the Business that each Seller shall deliver to the Buyer when their
employment commences with Buyer as otherwise required by this Agreement, each
Seller shall timely provide Buyer with any and all other information it needs to
properly comply with the requirements of the final sentence of Section 4.6(c).
(e) Each Seller acknowledges that for state unemployment Tax
purposes, each Seller will permit Buyer to apply for a transfer of such Seller's
rating account with respect to its Business. Each Seller shall deliver to Buyer
within a reasonable time after request therefor, with respect to its Business,
copies of such Seller's (i) Form 940, Employer's Annual Federal Unemployment Tax
Returns for 1995 and 1996, (ii) state unemployment tax rate notices for 1995 and
1996, and (iii) benefit change statements that itemize claims charged against
the state account of such Seller in each state in which the Business is operated
for the four most recent calendar quarters.
(f) Parent, Sellers and Buyer shall (i) each provide the other with
such assistance as may reasonably be requested by any of them in connection with
the preparation of any Tax return, any audit or other examination by any Taxing
Authority or any judicial or administrative proceeding with respect to Taxes,
(ii) each retain and provide to the other any records or other information which
may be relevant to such return, audit examination or
43
proceeding, and (iii) each provide to the other any final determination of any
such audit or examination, proceeding or determination that affects any amount
required to be shown on any Tax return of the other for any period (which shall
be maintained confidentially). Without limiting the generality of the foregoing,
Buyer, Sellers and Parent shall retain, until the applicable statutes of
limitations (including all extensions) have expired, copies of all Tax returns,
supporting workpapers, and other books and records or information which may be
relevant to such returns for all Tax periods or portions thereof ending before
or including the Closing Date, and shall not destroy or dispose of such records
or information without first providing the other party with a reasonable
opportunity to review and copy the same.
(g) AlliedSignal, Buyer, Parent and Sellers intend that Buyer's
acquisition of the Business and Purchased Assets from each Seller pursuant to
this Agreement shall qualify as and constitute a reorganization under Code
Section 368 (a)(1)(C) and each of the parties agrees to treat such acquisitions
in such manner for all tax purposes, including, without limitation, for all
purposes on any federal or state income or franchise tax return filed by any
party after the Closing Date.
(h) Neither Parent nor any Company shall make a new or change any
existing Tax election, change a method of accounting or Inventory method, file
any amended Tax return, enter into any closing agreement, settle any Tax claim
or assessment, or take or omit to take any other action not consistent with past
practice, if any such action or omission would have the effect of increasing the
Tax Liability of AlliedSignal or Buyer with respect to the Business and Acquired
Assets for any period after the Closing Date.
(i) AlliedSignal and Buyer, on the one hand, and Parent and Sellers,
on the other hand, shall equally bear all Transfer Taxes. Parent, Sellers and
Buyer shall cooperate in timely making and filing all Tax Returns as may be
required to comply with the provisions of any Transfer Tax laws. To the extent
legally able to do so, Buyer shall deliver to Parent and Sellers exemption
certificates satisfactory in form and substance to Parent and Sellers with
respect to Transfer Taxes if such delivery would reduce the amount of Transfer
Taxes that would otherwise be imposed.
(j) AlliedSignal, Buyer, Parent and each Seller acknowledge that no
affirmative election under Code Section 338 can be made with respect to any
Subsidiary Shares.
(k) No later than 10 days prior to the due date for filing, Buyer
shall provide to Parent copies of Tax Returns for taxable periods that include
but do not end on the Closing Date to be filed by any Seller Subsidiary and
shall provide Parent the opportunity to comment on such Tax Returns.
(l) Buyer shall cause Harco Aerospace Fasteners Ltd. and Burbank
Aircraft International, GmbH not to make any distribution of property during the
period beginning on the Closing Date and ending March 31, 1998 that would result
in a diminution of the earnings and profits of such entity for Federal income
tax purposes.
44
4.7 Certain Deliveries.
------------------
(a) Within thirty (30) days after the end of each month ending after
the date of this Agreement and prior to the Closing Date, Parent and Sellers
shall prepare and furnish to or cause to be furnished to AlliedSignal a copy of
the monthly financial reports for the Combined Business after September 30, 1997
(including unaudited balance sheet and income statements) for each such month
and the fiscal year to the end of such month). All of the foregoing financial
statements shall comply with the requirements concerning unaudited financial
statements set forth in Section 2.6. In addition, Parent and Sellers shall
furnish AlliedSignal, upon request, with copies of regular management reports,
if any, concerning the operation of the Business within ten (10) days after such
reports are prepared.
(b) Each Seller shall, and Parent and Sellers shall cause the Seller
Subsidiaries to, provide AlliedSignal, within five days of the execution or the
date of receipt thereof, a copy of each Contract entered into by any Company
after the date hereof and prior to the Closing Date which, if entered into prior
to the date hereof would have been required to be disclosed on Part A of
Schedule 2.8(a).
(c) Within five days after the date of filing thereof, AlliedSignal
or Parent, as the case may be, shall furnish to the other a copy of each report
filed by AlliedSignal or Parent, as the case may be, after the date of this
Agreement and prior to the Closing Date under the Securities Act or the Exchange
Act.
4.8 Consents. Prior to the Closing, Parent and Sellers shall give
--------
any notices and obtain all waivers, licenses, agreements, permits, consents,
approvals or authorizations of any Governmental Authority that are required to
be obtained by any Company pursuant to any Contract or Permit or otherwise in
order to consummate the transactions contemplated hereunder, and all of such
shall be in a written form agreeable to AlliedSignal and in full force and
effect and without conditions or limitations that restrict the ability of the
parties hereto to carry out the transactions contemplated hereby. Concurrently
with or immediately prior to the Closing, Parent and Sellers shall cause the
Seller Subsidiaries to be released from any guarantees made by any Seller
Subsidiary of any indebtedness or other Liabilities of Parents, Sellers or any
of their Affiliates.
4.9 Releases. At the Closing, all intercompany Debt (other than
--------
receivables and payables arising from ordinary course commercial transactions)
between the Companies, on the one hand, and the Parent and its Subsidiaries
other than the Companies, on the other hand, shall be canceled and all such
amounts shall be deemed to be capital contributions to the entity owing such
Debt. Parent, Sellers and their Affiliates shall release any and all claims,
causes of action, demands of any kind, Liabilities, Debts, damages, suits, or
offsets, whether known or unknown, suspected or unsuspected, that any of them
have or may have against any Seller Subsidiary (other than receivables and
payables arising from ordinary course commercial transactions).
4.10 Real Property. Within thirty (30) days after the date hereof,
-------------
Parent and Sellers shall deliver or cause to be delivered to Buyer current, as-
built ALTA surveys of the
45
Owned Real Property (the cost of which shall be borne 50% by Parent and 50% by
Buyer); such surveys to be dated within thirty (30) days of the date hereof and
to be reasonably acceptable to Buyer. Such surveys shall be performed by
licensed surveyors designated by Buyer and shall be certified to Buyer, Buyer's
title insurance companies and others as Buyer shall request. The surveys shall
be in form sufficient to cause Buyer's title insurance companies to insure such
surveys, and shall be an ALTA/ACSM Land Title Survey, prepared in accordance
with the "Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys
as adopted by American Land Title Association and American Congress on Surveying
& Mapping", and shall meet the currently effective Accuracy Standards for an
Urban Survey adopted by said organizations and shall include such optional
survey responsibilities and specifications as Buyer reasonably shall select.
4.11 Environmental. At or prior to Closing, Parent and Sellers
-------------
shall deliver or cause to be delivered all such necessary applications,
approvals or consents required to transfer (or, in the case of the Seller
Subsidiaries, required to permit the Seller Subsidiaries to continue to hold)
all Permits required for the continued operation of the Business and the
Acquired Assets after the Closing Date in compliance with Environmental Laws.
Within thirty (30) days after execution of this Agreement, Sellers shall
identify to Buyer any of the Acquired Assets that are subject to the
requirements of any Laws that condition, restrict, prohibit or require
notification or disclosure for environmental reasons upon the transfer, sale,
lease or closure of certain property; and Sellers shall deliver on or prior to
the Closing Date, all necessary applications, approvals, or consents required by
such Laws.
4.12 Ancillary Agreements. At or prior to the Closing, the
--------------------
applicable parties shall enter into each of the Ancillary Agreements.
4.13 Reasonable Best Efforts. Without limiting the specific
-----------------------
obligations of any party hereto under any covenant or agreement hereunder, each
party hereto shall use reasonable best efforts to take all action and do all
things necessary in order to promptly consummate the transactions contemplated
hereby, including, without limitation, satisfaction, but not waiver, of the
Closing conditions set forth in Article V.
4.14 Negotiations. From the date hereof until the termination of
------------
this Agreement in accordance with its terms, Parent and Sellers, on behalf of
themselves and their Affiliates, agree that Parent, Sellers and their Affiliates
will deal exclusively and in good faith with AlliedSignal and Buyer with respect
to any transaction involving the sale, transfer or other disposition of the
Acquired Assets or the Business; and neither Parent, Sellers, their Affiliates
nor any of their officers, directors, employees, lenders, investment banking
firms, advisors or other agents, or any Person acting on their behalf, will
solicit any inquiries or proposals by, or engage in any discussions or
negotiations with, or furnish any nonpublic information to or enter into any
agreement with, any Person other than AlliedSignal or Buyer concerning the sale
or other disposition of the Acquired Assets or the Business or the merger,
consolidation, sale of securities or other transaction involving Parent or any
of the Companies, if such merger, consolidation, sale or other transaction would
be inconsistent, in any respect, with the transactions contemplated by this
Agreement, and will promptly notify AlliedSignal of the
46
substance of any inquiry or proposal concerning any such transaction that may be
received by Parent, Sellers or their Affiliates; provided, however, that
-------- -------
notwithstanding any other provision hereof, Parent may (i) engage in
discussions or negotiations with a third party who (without any solicitation,
initiation, encouragement, discussion or negotiation, directly or indirectly, by
or with Parent or Sellers after the date hereof) seeks to initiate such
discussions or negotiations and may furnish such third party information
concerning the Combined Business, the Acquired Assets and the Xxxxxxx Purchased
Assets if, and only to the extent that, (A)(x) the third party has first made an
Acquisition Proposal that is financially superior to the transactions
contemplated by this Agreement and has demonstrated that the funds necessary for
the Acquisition Proposal are reasonably likely to be available (as determined in
good faith in each case by Parent's Board of Directors after consultation with
its financial advisors) and (y) Parent's Board of Directors shall conclude in
good faith, after considering applicable provisions of state law, on the basis
of advice of outside counsel, that such action is necessary for the Board of
Directors to act in a manner consistent with its fiduciary duties under
applicable law and (B) prior to furnishing such information to or entering into
discussions or negotiations with such Person, Parent (x) provides prompt notice
to AlliedSignal to the effect that it is furnishing information to or entering
into discussions or negotiations with such Person and (y) receives from such
Person an executed confidentiality agreement in reasonably customary form and
(ii) provided Parent terminates this Agreement pursuant to Section 9.1(a)(iv),
accept an Acquisition Proposal from a third party. Parent shall notify
AlliedSignal in writing of any such inquiries, offers or proposals (including,
without limitation, the terms and conditions of any such proposal and the
identity of the Person making it), within 24 hours of the receipt thereof, shall
keep AlliedSignal informed of the status and details of any such inquiry, offer
or proposal, and shall give AlliedSignal five days' advance notice of any
agreement to be entered into with, or any information to be supplied to, any
Person making such inquiry, offer or proposal. As used herein, "Acquisition
-----------
Proposal" shall mean a proposal or offer (other than by AlliedSignal) for a
---------
purchase of Assets, merger or other business combination involving Sellers and
the Xxxxxxx Sellers, or any proposal to acquire in any manner a substantial
equity interest in, or all or substantially all of the Assets of, Sellers and
the Xxxxxxx Sellers or otherwise relating to the Combined Business.
4.15 U.S. Government Contracts. As soon as practicable following
-------------------------
the date of this Agreement and only after Buyer's written request, with respect
to each Government Contract, AlliedSignal and Buyer shall assist Parent and
Sellers to either obtain written confirmation reasonably satisfactory in form
and substance to Buyer that novation of such Government Contract is not
required, or, if not received prior to the Closing Date, submit to the cognizant
responsible contracting officer, as soon as practicable after the Closing Date
(i) a written request that the U.S. Government enter into a novation agreement
contemplated by FAR 42.1204 (a "Novation Agreement") with Buyer with respect to
------------------
each Government Contract and (ii) a Novation Agreement executed by the Company
or any Subsidiary party thereto for each Government Contract. Parent, Sellers,
AlliedSignal and Buyer shall coordinate their efforts to facilitate the actions
required by this Section 4.15 and Parent agrees to take all necessary action to
assist Sellers prior to and after the Closing in connection therewith, including
without limitation, upon Buyer's written request, obtaining such consents after
the Closing, informing the appropriate governmental personnel of the pending
transaction and of the planned novation.
47
4.16 NYSE Listing. AlliedSignal shall take all reasonable action
------------
required to obtain from the NYSE, prior to the Closing Date to have duly
approved for listing, subject to official notice of issuance, the shares of
AlliedSignal Common Stock to be issued hereunder at the Closing.
4.17 Continued Existence. Unless Parent makes other provisions for
-------------------
its obligations under Article VII that are reasonably satisfactory to
AlliedSignal, (A) for a period of three years after the Closing Date, Parent
shall (i) maintain its corporate existence, (ii) not authorize or take any other
action to implement a dissolution of Parent, and (iii) maintain a minimum net
worth of Fifty Million Dollars ($50,000,000) and (B) following such three year
period, for so long as any claim by a Buyer Indemnified Party for
indemnification pursuant to Article VII remains unresolved, Parent shall (i)
maintain its corporate existence, (ii) not authorize or take any other action to
implement a dissolution of Parent, and (iii) maintain a minimum net worth equal
to the lesser of (x) Fifty Million Dollars ($50,000,000) or (y) the amount of
such unresolved claims then outstanding; provided, however, that nothing in this
-------- -------
Section 4.17 shall (i) prevent Parent from engaging in a merger, sale of
substantially all its assets or other business combination after the Closing
Date if (x) prior to the consummation of such transaction, the successor in
interest to Parent (or the purchaser of such assets, as the case may be) in such
transaction agrees in writing (for the benefit of the Buyer Indemnified Parties)
to assume and become fully responsible for, pursuant to an agreement reasonably
satisfactory in form and substance to AlliedSignal, all of Parent's obligations
under this Agreement (including, without limitation, Parent's obligations under
Article VII) and (y) immediately after consummation of such transaction, such
successor in interest (or purchaser, as the case may be) has a net worth of not
less than the net worth then required to be maintained by Parent pursuant to
this Section 4.17 or (ii) limit the rights of the parties under Section 4.14.
4.18 Company Debt. Prior to the Closing, Parent shall (i) cause
------------
the Debt which is secured by a mortgage on the distribution center located in
Salt Lake City, Utah, to be repaid, (ii) cause all remaining payments on all
capitalized leases of the Companies to be paid and (iii) use its reasonable best
efforts to cause all cash accounts of the Companies to be reduced to zero with
no negative or positive balances. Buyer acknowledges that the funding of
negative balances will increase Closing Date Net Worth.
4.19 Side Letters. At or prior to the Closing, Parent shall
------------
deliver or cause to be delivered, to AlliedSignal, the Side Letters.
4.20 Product Liability Insurance. At Parent's request,
---------------------------
AlliedSignal shall use reasonable commercial efforts to procure, to the extent
available, at Parent's expense, product liability insurance covering products
manufactured or distributed by the Companies prior to the Closing Date. Upon
receipt of any premium notice relating to such insurance, AlliedSignal shall
notify Parent and Parent shall promptly pay to AlliedSignal the amount of the
premium due. Parent acknowledges and agrees that AlliedSignal is free to ascribe
any adverse claim experience, to the extent reasonably identifiable to products
manufactured or distributed by the Companies prior to the Closing Date, to such
policy, so that (to such extent) such adverse claim experience does not
adversely affect other product liability premiums being paid by AlliedSignal.
48
4.21 Harco Northern Ireland, Ltd. At or prior to the Closing,
---------------------------
Parent will cause Xxxx Xxxxxxx to convey to Buyer or Buyer's designee the share
of capital stock of (or other equity interest in) Harco Northern Ireland, Ltd.
owned by him, free and clear of all Liens.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions Precedent to Obligations of AlliedSignal and Buyer.
-------------------------------------------------------------
The obligations of Buyer to purchase (and of AlliedSignal to cause Buyer to
purchase) the Purchased Assets and assume (and of AlliedSignal to cause Buyer to
assume) the Assumed Liabilities and to consummate the other transactions
contemplated hereby are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions (any one or more of which may be
waived in writing in whole or in part by Buyer in its sole discretion):
(a) Representations, Warranties and Covenants. Each of the
-----------------------------------------
representations and warranties of Parent and Sellers contained in this Agreement
or in any Transaction Document delivered in connection herewith shall be true
and correct in all material respects on and as of the date of this Agreement and
at and as of the Closing with the same effect as though such representations and
warranties had been made at and as of the Closing, except for representations
and warranties that speak as of a specific date or time other than the Closing
(which need only be true and correct in all material respects as of such date or
time); provided, however, that if any such representation or warranty is already
-------- -------
qualified by materiality, for purposes of determining whether this condition has
been satisfied, such representation or warranty as so qualified shall be true
and correct in all respects. Parent and Sellers shall have performed and
complied in all material respects with each covenant and agreement required by
this Agreement to be performed or complied with by them at or prior to the
Closing. Parent and each Seller shall furnish AlliedSignal and Buyer with a
certificate of such company dated the Closing Date and signed by a senior
executive officer of Parent or such Seller, as the case may be, to the effect
that the conditions set forth in this Section 5.1(a) have been satisfied.
(b) HSR Act. The applicable waiting period under the HSR Act
-------
(including any extensions thereof) with respect to the transactions contemplated
hereby shall have expired or been terminated.
(c) Stock Exchange Listing. The NYSE shall have duly approved for
----------------------
listing, subject to official notice of issuance, the shares of AlliedSignal
Common Stock to be issued hereunder at the Closing.
(d) Required Consents. Parent and the Companies shall have obtained
-----------------
all statutory and regulatory consents and approvals which are required under any
applicable Laws in order to consummate the transactions contemplated hereby and
to permit Buyer to conduct the Business as conducted as of the date of this
Agreement and all other necessary consents and approvals of third parties (other
than any customer or supplier of the Business) to the transactions contemplated
hereby, other than those the failure of which to obtain, individually and in the
aggregate, would not have a Material Adverse Effect.
49
(e) Customer/Supplier Concurrence. During the period from November 1,
-----------------------------
1997 through the date immediately preceding the Closing Date, Parent, Sellers,
Xxxxxxx Sellers, AlliedSignal and/or Buyer shall not have received written
notice from (i) customers indicating that such customers are terminating or
intend to terminate Combined Contracts (excluding termination upon expiration of
the term of any Combined Contract so long as such customer continues to purchase
goods from the Combined Business) and/or indicating that any such customer
intends to reduce its purchases from any Company or any Xxxxxxx Seller, which
terminations and/or reductions in the aggregate would reasonably be expected to
result in the revenues of the Combined Business for the 12 months immediately
following the Closing Date being $40 million or more less than the revenues of
the Combined Business for the 12 months immediately preceding the Closing Date
or (ii) suppliers (including suppliers of Intellectual Property) indicating that
such suppliers are terminating or intend to terminate Combined Contracts
(excluding termination upon expiration of the term of any Combined Contract so
long as such supplier continues to provide goods or Intellectual Property to the
Combined Business) and/or indicating that any such supplier intends to reduce
its sales to any Company or any Xxxxxxx Seller, which terminations and/or
reductions in the aggregate would reasonably be expected to result in supplier
sales to the Combined Business for the 12 months immediately following the
Closing Date being $10 million or more less than supplier sales to the Combined
Business for the 12 months immediately preceding the Closing Date.
(f) Injunction; Litigation; Legislation. (i) Parent, the Companies,
-----------------------------------
AlliedSignal and Buyer shall not be subject to any order or injunction by any
Governmental Entity restraining or prohibiting the consummation of the
transactions contemplated hereby, (ii) no action or proceeding shall have been
instituted before any Governmental Entity to restrain or prohibit, or to obtain
substantial damages in respect of, the consummation of the transactions
contemplated hereby, (iii) none of the parties hereto or any Seller Subsidiary
shall have received written notice from any Governmental Entity of (x) its
intention to institute any action or proceeding to restrain, enjoin or nullify
this Agreement or the transactions contemplated hereby, or to commence any
investigation (other than a routine letter of inquiry, including a routine civil
investigative demand) into the consummation of the transactions contemplated
hereby or (y) the actual commencement of such investigation, (iv) there shall
not be any pending or threatened litigation, suit, action or proceeding by any
party which would reasonably be expected to limit or materially adversely affect
Buyer's ownership of the Acquired Assets or the Buyer under the Xxxxxxx
Agreement's ownership of and the Xxxxxxx Purchased Assets, and (v) no Law shall
have been promulgated or enacted by any Governmental Entity, which would prevent
or make illegal the consummation of the transactions contemplated hereby.
(g) Transition Services Agreement. Parent, Sellers and Buyer shall
-----------------------------
have entered into a mutually satisfactory transition services agreement provided
that charges for services rendered shall be customary and reasonable.
(h) Side Letters. Xxxxxxxxx and Xxxxxxx Xxxxxxx, as appropriate,
------------
shall have executed and delivered to AlliedSignal the three Side Letters
substantially in the form of Exhibits 1.9(xiii)(A-C).
-----------------------
50
(i) Documents. Parent and the Companies shall have delivered to Buyer
---------
at the Closing such other documents and instruments as shall be reasonably
necessary to transfer to Buyer the Purchased Assets as contemplated by this
Agreement. Parent and Sellers shall have delivered all the certificates,
instruments, contracts and other documents specified to be delivered by each of
them hereunder.
(j) Xxxxxxx Closing. (i) All conditions to the Closing (as defined in
---------------
the Xxxxxxx Agreement) shall have been satisfied or waived and (ii) the Closing
(as defined in the Xxxxxxx Agreement) shall be consummated simultaneously with
the consummation of the Closing hereunder.
(k) Harco Northern Ireland, Ltd. Xxxx Xxxxxxx shall have conveyed to
---------------------------
Buyer or Buyer's designees the share of capital stock of (or other equity
interest in) Harco Northern Ireland, Ltd. owned by him, free and clear of all
Liens.
(l) Escrow Agreement. Parent and the Escrow Agent shall have executed
----------------
and delivered to AlliedSignal the Escrow Agreement.
5.2 Conditions Precedent to Obligations of Parent and Sellers. The
---------------------------------------------------------
obligations of Sellers to sell, and Parent to cause to be sold, the Purchased
Assets and to consummate the other transactions contemplated hereby are subject
to the satisfaction, on or prior to the Closing Date, of each of the following
conditions (any one or more of which may be waived in writing in whole or in
part by Parent (acting on its own behalf and on behalf of Sellers) in its sole
discretion):
(a) Representations, Warranties and Covenants. Each of the
-----------------------------------------
representations and warranties of AlliedSignal and Buyer contained in this
Agreement and in any Transaction Document delivered in connection herewith shall
be true and correct in all material respects on and as of the date of this
Agreement and at and as of the Closing with the same effect as though such
representations and warranties had been made at and as of the Closing, except
for representations and warranties that speak as of a specific date or time
other than the Closing (which need only be true and correct in all material
respects as of such date or time); provided, however, that if any such
-------- -------
representation or warranty is already qualified by materiality, for purposes of
determining whether this condition has been satisfied, such representation or
warranty as so qualified shall be true and correct in all respects.
AlliedSignal and Buyer shall have performed or complied in all material respects
with each covenant and agreement required by this Agreement to be performed or
complied with by it at or prior to the Closing. AlliedSignal or Buyer, as the
case may be, shall furnish Sellers with a certificate of such company dated the
Closing Date and signed by a senior executive officer of Buyer to the effect
that the conditions set forth in this Section 5.2(a) have been satisfied.
(b) HSR Act. The applicable waiting period under the HSR Act
-------
(including any extensions thereof) with respect to the transactions contemplated
hereby shall have expired or been terminated.
51
(c) Stock Exchange Listing. The NYSE shall have duly approved for
----------------------
listing, subject to official notice of issuance, the shares of AlliedSignal
Common Stock to be issued hereunder at the Closing.
(d) Injunction; Litigation; Legislation. (i) Parent, the Companies,
-----------------------------------
AlliedSignal and Buyer shall not be subject to any order or injunction by any
Governmental Entity restraining or prohibiting the consummation of the
transactions contemplated hereby, (ii) no action or proceeding shall have been
instituted before any Governmental Entity to restrain or prohibit, or to obtain
substantial damages in respect of, the consummation of the transactions
contemplated hereby, (iii) none of the parties hereto or any Seller Subsidiary
shall have received written notice from any Governmental Entity of (x) its
intention to institute any action or proceeding to restrain, enjoin or nullify
this Agreement or the transactions contemplated hereby, or to commence any
investigation (other than a routine letter of inquiry, including a routine civil
investigative demand) into the consummation of the transactions contemplated
hereby or (y) the actual commencement of such investigation and (iv) no Law
shall have been promulgated or enacted by any Governmental Entity, which would
prevent or make illegal the consummation of the transactions contemplated
hereby.
(e) Registration Rights Agreement. AlliedSignal shall have executed
-----------------------------
and delivered to Parent a registration rights agreement substantially in the
form of Exhibit 1.9(b)(vi) with such changes as may reasonably be requested by
------------------
Citicorp USA, Inc. provided that such changes shall not provide for (i) more
than a single demand registration right, (ii) a period of longer than 180 days
during which the Registration Statement must be kept in effect or (iii) the
payment of expenses by a party other than Citicorp USA, Inc. or Parent.
(f) Documents. AlliedSignal and Buyer shall have delivered to Sellers
---------
at the Closing such other documents and instruments as shall be reasonably
necessary for the assumption by Buyer of the Assumed Liabilities as contemplated
by this Agreement. AlliedSignal and Buyer shall have delivered all the
certificates, instruments, contracts and other documents specified to be
delivered by it hereunder.
(g) Xxxxxxx Closing. (i) All conditions to the Closing (as defined in
---------------
the Xxxxxxx Agreement) shall have been satisfied or waived and (ii) the Closing
(as defined in the Xxxxxxx Agreement) shall be consummated simultaneously with
the consummation of the Closing hereunder.
(h) Escrow Agreement. AlliedSignal and the Escrow Agent shall have
----------------
executed and delivered to Parent the Escrow Agreement.
ARTICLE VI
CERTAIN ADDITIONAL COVENANTS
6.1 Expenses. Except as otherwise expressly provided in this
--------
Agreement, each of the parties hereto shall each bear its respective accounting,
legal and other expenses incurred in connection with the transactions
contemplated by this Agreement.
52
6.2 Maintenance of Books and Records. Parent, Sellers and Buyer
--------------------------------
shall cooperate fully with each other after the Closing so that (subject to any
limitations that are reasonably required to preserve any applicable attorney-
client privilege) each party hereto has access to the business records,
contracts and other information existing at the Closing Date and relating in any
manner to the Acquired Assets, the Assumed Liabilities or the conduct of the
Business (whether in the possession of Parent, Sellers or Buyer). No files,
books or records existing at the Closing Date and relating in any manner to the
Acquired Assets or the conduct of the Business prior to the Closing Date shall
be destroyed by any party hereto for a period of six years after the Closing
Date without giving the other party at least 30 days' prior written notice,
during which time such other party shall have the right (subject to the
provisions hereof) to examine and to remove any such files, books and records
prior to their destruction. The access to files, books and records contemplated
by this Section 6.2 shall be during normal business hours and upon not less than
two business days' prior written request, shall be subject to such reasonable
limitations as the party having custody or control thereof may impose to
preserve the confidentiality of information contained therein, and shall not
extend to material subject to a claim of privilege unless expressly waived by
the party entitled to claim the same.
6.3 Financial Statements. Upon the request of AlliedSignal, Parent
--------------------
and Sellers shall, as promptly as practicable (but in no event later than 30
days after such request), provide AlliedSignal with such financial statements
relating to the Combined Business as may be required under Rule 3-05, Article 11
of Regulation S-X or other rule or regulation promulgated under the Securities
Act or the Exchange Act in connection with the preparation and filing of any
registration statement or periodic report of AlliedSignal pursuant to such laws,
including unqualified opinions thereon of independent public accountants and
consents therefor as required by such laws and the rules and regulations
thereunder.
6.4 Non-Competition/Non-Solicitation.
--------------------------------
(a) Parent and each Seller covenants and agrees that, if the Closing
is consummated, for a period of three years after the Closing Date, it will not,
and will cause Parent Subsidiaries not to, engage in the business of supplying
to the aerospace industry aircraft hardware, chemicals or related support
services (or any portion thereof) anywhere in the world (the "Competitive
Activities"), except for (i) the sale of any Inventory of such hardware or
chemicals owned by such Person or consigned to such Person as of the date
hereof, the value of which Inventory is estimated to be approximately $5,000,000
or (ii) the sale of any Inventory of such hardware or chemicals hereafter
acquired by such Person as part of a bulk purchase or hereafter consigned to
such person as part of a bulk consignment, but only after such Person has
offered to sell such hardware or chemicals to Buyer at commercially reasonable
prices for such quantities as would be charged to distributors of such products;
provided, however, that nothing herein shall be construed to prevent Parent,
-------- -------
Sellers and/or any of their respective Affiliates from owning, in the aggregate,
up to 10% of the stock or equity interest in any Person that engages in such
business or any portion thereof. It is the desire and intent of the parties
hereto that the provisions of this Section 6.4 shall be enforced to the fullest
extent permitted under the laws and public policies of each jurisdiction in
which enforcement is sought. If any court determines that any provision of this
Section 6.4 is unenforceable, such court shall have the power to reduce the
53
duration or scope of such provision, as the case may be, or terminate such
provision and, in reduced form, such provision shall be enforceable; it is the
intention of the parties that the foregoing restrictions shall not be
terminated, unless so terminated by a court, but shall be deemed amended to the
extent required to render them valid and enforceable, such amendment to only
apply with respect to the operation of this Section 6.4 in the jurisdiction of
the court that has made the adjudication. Notwithstanding the foregoing,
nothing in this Section 6.4(a) shall prohibit Parent, any Seller or any of their
respective Affiliates from acquiring any Person or business that engages in
Competitive Activities provided that (x) such activities do not constitute the
principal activities of the Person or business to be acquired (based on the
sales of such business during the preceding four (4) full calendar quarters) and
(y) if Competitive Activities constitute in excess of fifteen percent (15%) of
the revenues of the Person or business acquired, Sellers use their reasonable
efforts to divest that portion of such Person or business that engages in
Competitive Activities within twelve (12) months after the acquisition thereof.
(b) Each of Parent and each Seller covenants and agrees that, if the
Closing is consummated, for a period of one year after the Closing Date, it will
not, and will cause Parent Subsidiaries not to, directly or indirectly, solicit
for employment, either as an employee or a consultant, any employee or
independent contractor of AlliedSignal, Buyer or any of their respective
Affiliates who is engaged in the Business and was an employee or independent
contractor of any Company engaged in the Business as of the Closing Date to
become an employee or consultant or otherwise provide services to Parent, such
Seller or any Parent Subsidiary, except for persons whose employment is
solicited or procured through general media advertisements.
(c) The parties acknowledge and agree that the restrictions contained
in Sections 6.4(a) and 6.4(b) are a reasonable and necessary protection of the
immediate interests of AlliedSignal and Buyer, and any violation of these
restrictions would cause substantial injury to AlliedSignal or Buyer, as the
case may be and that AlliedSignal and Buyer would not have entered into this
Agreement without receiving the additional consideration offered by Parent and
each Seller in binding itself to these restrictions. In the event of a breach
or a threatened breach by Parent, any Seller or any Parent Subsidiary of these
restrictions, AlliedSignal and Buyer shall be entitled to apply to any court of
competent jurisdiction for an injunction restraining such Person from such
breach or threatened breach (without the necessity of proving the inadequacy of
money damages as a remedy); provided, however, that the right to apply for
-------- -------
injunctive relief shall not be construed as prohibiting AlliedSignal or Buyer,
as the case may be, from pursuing any other available remedies for such breach
or threatened breach.
(d) Each of AlliedSignal and Buyer covenant and agree that, if the
Closing is consummated, for a period of one year after the Closing Date, and if
not consummated for a period of one year from the date of termination of this
Agreement, it will not, and will cause its Affiliates not to, directly or
indirectly, solicit for employment, either as an employee or a consultant, any
employee or independent contractor of Parent or any Parent Subsidiary (other
than any employee or independent contractor of any of the Companies) to become
an employee or consultant or otherwise provide services to AlliedSignal, Buyer
or any of their respective
54
Affiliates, except for persons whose employment is solicited or procured through
general media advertisements.
(e) The parties acknowledge and agree that the restrictions contained
in Section 6.4(d) are a reasonable and necessary protection of the immediate
interests of Parent and Sellers, and any violation of these restrictions would
cause substantial injury to Parent or Sellers, as the case may be, and that
Parent and Sellers would not have entered into this Agreement without receiving
the additional consideration offered by AlliedSignal and Buyer in binding itself
to these restrictions. In the event of a breach or a threatened breach by
AlliedSignal, Buyer or any of their respective Affiliates of these restrictions,
Parent and any such Seller shall be entitled to apply to any court of competent
jurisdiction for an injunction restraining such Person from such breach or
threatened breach (without the necessity of proving inadequacy of money damages
as a remedy); provided, however, that the right to apply for injunctive relief
-------- -------
shall not be construed as prohibiting Parent or such Seller from pursuing any
other available remedies for such breach or threatened breach.
6.5 Confidential Information. Parent and Sellers shall, and shall
------------------------
cause Parent Subsidiaries to, maintain the confidentiality of, and shall not
use, and shall cause Parent Subsidiaries not to use, for the benefit of itself
or others, any confidential information concerning the Business or the Acquired
Assets, including any information with respect to the Intellectual Property or
Technology (the "Confidential Information"); provided, however, that this
------------------------ -------- -------
Section 6.5 shall not restrict (a) any disclosure by any such Person of any
Confidential Information required by applicable Law, securities exchange or any
court of competent jurisdiction; provided, that AlliedSignal and Buyer are given
--------
notice and an adequate opportunity to contest such disclosure, (b) any
disclosure on a confidential basis to any such Person's attorneys, accountants,
lenders and investment bankers and (c) any disclosure of information (i) which
is available publicly as of the date of this Agreement, (ii) which, after the
date of this Agreement, becomes available publicly through no fault of the
disclosing party or any of its Affiliates or (iii) which is received by such
Person from a third party not, to the best of such Person's knowledge, subject
to any obligation of confidentiality with respect thereto.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 Survival. All representations, warranties, covenants and
--------
agreements contained in this Agreement or the Transaction Documents shall
survive (and not be affected in any respect by) the Closing, any investigation
conducted by any party hereto and any information which any party may receive.
Notwithstanding the foregoing, the representations and warranties contained in
or made pursuant to this Agreement and the related indemnity obligations set
forth in Sections 7.2(a)(i) and 7.3(a)(i) shall terminate on, and no claim or
action with respect thereto may be brought after, the date three years after the
Closing Date, except that (a) the representations and warranties contained in
Sections 2.3 and 2.12 and the related indemnity obligations
55
contained in Section 7.2 shall survive indefinitely and (b) the representations
and warranties contained in Sections 2.10, 2.14 and 2.20 and the related
indemnity obligations contained in Section 7.2 shall survive until 30 days after
the expiration of the applicable statute of limitations (or extensions or
waivers thereof). The representations and warranties which terminate on the date
three years after the Closing Date and the representations and warranties
referred to in the foregoing clause (b), and the Liability of any party hereto
with respect thereto pursuant to this Article VII, shall not terminate with
respect to any claim, whether or not fixed as to Liability or liquidated as to
amount, with respect to which the Indemnifying Party has been given written
notice prior to the date three years after the Closing Date or such 30th day
after the expiration of the applicable statute of limitations (or extensions or
waivers thereof), as the case may be.
7.2 Indemnification by Parent, Sellers and Xxxxxxx Sellers.
------------------------------------------------------
(a) Subject to Section 7.1 Parent, Sellers and Xxxxxxx Sellers shall
jointly and severally indemnify and hold AlliedSignal, Buyer, Buyer as defined
in the Xxxxxxx Agreement, and their respective employees, officers, directors,
agents and Affiliates (collectively, the "Buyer Indemnified Parties") harmless
-------------------------
from and against, and agree promptly to defend any Buyer Indemnified Party from
and reimburse any Buyer Indemnified Party for, any and all Losses which any
Buyer Indemnified Party may at any time suffer or incur, or become subject to,
as a result of or in connection with:
(i) any breach or inaccuracy as of the date of this Agreement,
the date of the Xxxxxxx Agreement or the Closing Date of any of the
representations and warranties made (w) by Parent or Sellers in or pursuant
to this Agreement, (x) in any Transaction Document delivered by Parent or
any Seller at the Closing in accordance herewith, (y) made by Parent or the
Xxxxxxx Sellers in or pursuant to the Xxxxxxx Agreement or (z) in any
Transaction Document delivered by Parent or any Xxxxxxx Seller at the
Closing under the Xxxxxxx Agreement in accordance with the Xxxxxxx
Agreement (it being understood and agreed that, notwithstanding anything to
the contrary contained in this Agreement or the Xxxxxxx Agreement, to
determine if there had been an inaccuracy or breach of a representation or
warranty of Parent, any Seller or any Xxxxxxx Seller and the Losses arising
from such inaccuracy or breach, such representation and warranty shall be
read as if it were not qualified by materiality, including, without
limitation, qualifications indicating accuracy in all material respects, or
accuracy except to the extent the inaccuracy would not have a Material
Adverse Effect);
(ii) any failure by Parent, any Seller or any Xxxxxxx Seller to
carry out, perform, satisfy and discharge any of their respective
covenants, agreements, undertakings or Liabilities under (w) this
Agreement, (x) any of the Transaction Documents delivered by Parent or any
Seller pursuant to this Agreement, (y) the Xxxxxxx Agreement or (z) any of
the Transaction Documents delivered by Parent or any Xxxxxxx Seller
pursuant to the Xxxxxxx Agreement;
(iii) the Non-Assumed Liabilities and the Xxxxxxx Non-Assumed
Liabilities; and
56
(iv) the ownership, use and possession of the Excluded Assets or
the Xxxxxxx Excluded Assets prior to, on or after the Closing Date.
(b) Notwithstanding any other provision herein to the contrary, (i)
neither Parent, Sellers nor the Xxxxxxx Sellers shall be required to indemnify
and hold harmless any Buyer Indemnified Party pursuant to Section 7.2(a)(i)
unless the applicable Buyer Indemnified Party has asserted a claim with respect
to such matters within the applicable survival period set forth in Section 7.1
hereof, (ii) neither Parent, Sellers nor the Xxxxxxx Sellers shall have any
Liability pursuant to Section 7.2(a)(i) until the cumulative aggregate amount of
all Losses which are otherwise recoverable thereunder by Buyer Indemnified
Parties exceed an amount equal to Six Million Nine Hundred Thousand Dollars
($6,900,000) (the "Basket"), and then only for the amount by which such Losses
------
exceed the Basket, (iii) the cumulative indemnification obligation of Parent,
Sellers and the Xxxxxxx Sellers under Section 7.2(a)(i), except as it applies to
a breach of the representations and warranties contained in Section 2.3, shall
in no event exceed 50% of the Cash Equivalent Purchase Price, (iv) the
cumulative indemnification obligation of Parent and Sellers under Section
7.2(a)(i) with respect to a breach of the representations and warranties
contained in Section 2.3 shall in no event exceed the Cash Equivalent Purchase
Price, (v) the amount of any Loss for which indemnification is provided under
this Section 7.2 shall be net of any amount actually recovered by AlliedSignal
or Buyer under insurance policies with respect to such Losses, and (vi) neither
Parent, Sellers, nor the Xxxxxxx Sellers shall have any Liability for
consequential damages, except that the provisions of this clause (vi) shall not
------
apply to the breach of the representations and warranties contained in Section
2.3 or the breach of any covenant contained in Section 4.19. Notwithstanding
anything in this Agreement to the contrary, neither Parent, Sellers, nor the
Xxxxxxx Sellers shall have any obligation to indemnify any Buyer Indemnified
Party for any Special Claims (as defined in Section 7.4(b)) that are less than
$20,000 per claim (a "Small Claim") and Losses in respect of Small Claims shall
be disregarded for purposes of determining whether Losses pursuant to Sections
7.2(a)(i) and 7.2(a)(iv) exceed the Basket.
7.3 Indemnification by AlliedSignal and Buyer.
-----------------------------------------
(a) Subject to Section 7.1 AlliedSignal and Buyer shall jointly and
severally indemnify and hold Parent, Sellers, the Xxxxxxx Sellers and their
respective employees, officers, directors, agents and Affiliates (collectively,
the "Seller Indemnified Parties") harmless from and against, and agree promptly
--------------------------
to defend any Seller Indemnified Party from and reimburse any Seller Indemnified
Party for, any and all Losses which any Seller Indemnified Party may at any time
suffer or incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy as of the date of this Agreement, or
the Xxxxxxx Agreement or the Closing Date of any of the representations and
warranties made (w) by AlliedSignal or Buyer in or pursuant to this
Agreement, (x) in any Transaction Document delivered by AlliedSignal or
Buyer at the Closing in accordance herewith, (y) made by AlliedSignal or
the Buyer under the Xxxxxxx Agreement in or pursuant to the Xxxxxxx
Agreement or (z) in any Transaction Document delivered by AlliedSignal or
the Buyer under the Xxxxxxx Agreement at the Closing under the
57
Xxxxxxx Agreement in accordance with the Xxxxxxx Agreement (it being
understood and agreed that, notwithstanding anything to the contrary
contained in this Agreement or the Xxxxxxx Agreement, to determine if there
had been an inaccuracy or breach of a representation or warranty of
AlliedSignal, Buyer or the Buyer under the Xxxxxxx Agreement and the Losses
arising from such inaccuracy or breach, such representation and warranty
shall be read as if it were not qualified by materiality, including,
without limitation, qualifications indicating accuracy in all material
respects, or accuracy except to the extent the inaccuracy will not have a
material adverse effect on the ability of AlliedSignal or Buyer to perform
its obligations under this Agreement and the other Transaction Documents to
which it is a party);
(ii) any failure by AlliedSignal, Buyer or the Buyer under the
Xxxxxxx Agreement to carry out, perform, satisfy and discharge any of their
respective covenants, agreements, undertakings, Liabilities under (w) this
Agreement, (x) any of the Transaction Documents delivered by AlliedSignal
or Buyer, as the case may be, pursuant to this Agreement, (y) the Xxxxxxx
Agreement or (z) any of the Transaction Documents delivered by AlliedSignal
or the Buyer under the Xxxxxxx Agreement, as the case may be, pursuant to
the Xxxxxxx Agreement;
(iii) the Assumed Liabilities and the Xxxxxxx Assumed
Liabilities; and
(iv) the operation of the Combined Business after the Closing.
(b) Notwithstanding any other provision herein to the contrary, (i)
neither AlliedSignal nor Buyer shall be required to indemnify and hold harmless
any Seller Indemnified Party pursuant to Section 7.3(a)(i) unless the applicable
Seller Indemnified Party has asserted a claim with respect to such matters
within the applicable survival period set forth in Section 7.1 hereof, (ii) the
cumulative indemnification obligation of AlliedSignal and Buyer under Section
7.3(a)(i) shall in no event exceed 50% of the Cash Equivalent Purchase Price,
and (iii) neither AlliedSignal nor Buyer shall have any Liability for
consequential damages.
7.4 Notification of Claims.
----------------------
(a) If any Buyer Indemnified Party, on the one hand, or Seller
Indemnified Party, on the other hand (an "Indemnified Party"), has a claim or
-----------------
potential claim or receives notice of any claim, potential claim or the
commencement of any action or proceeding which could give rise to an obligation
on the part of Parent or Sellers, on the one hand, or AlliedSignal or Buyer, on
the other hand, to provide indemnification (the "Indemnifying Party") pursuant
------------------
to Section 7.2 or 7.3, respectively, the Indemnified Party shall promptly give
the Indemnifying Party notice setting forth in reasonable detail the facts
giving rise to the claim to the extent known (an "Indemnification Claim");
---------------------
provided, however, that the failure to give such prompt notice shall
-------- -------
not prevent any Indemnified Party from being indemnified hereunder for any
Losses, except to the extent that the failure to so promptly notify the
Indemnifying Party actually damages the Indemnifying Party or except to the
extent such notice is not received during the applicable survival period set
forth in Section 7.1.
58
(b) In the event of a claim, a potential claim or the commencement of
any action or proceeding by a third party which could give rise to an obligation
to provide indemnification pursuant to Section 7.2 or 7.3, the Indemnified Party
shall give the Indemnifying Party prompt written notice thereof setting forth in
reasonable detail the facts giving rise to the claim to the extent known (the
"Third Party Indemnification Claim"); provided, however, that the failure of the
---------------------------------- -------- -------
Indemnified Party to so promptly notify the Indemnifying Party shall not prevent
any Indemnified Party from being indemnified for any Losses, except to the
extent that the failure to so promptly notify actually damages the Indemnifying
Party or except to the extent such notice is not received during the applicable
survival period set forth in Section 7.1. If the Indemnifying Party confirms in
writing (the "Confirmation of Indemnification") to the Indemnified Party within
-------------------------------
fifteen (15) days after receipt of the Third Party Indemnification Claim the
Indemnifying Party's responsibility to indemnify and hold harmless the
Indemnified Party therefor in accordance herewith and within such fifteen (15)
day period demonstrates to the Indemnified Party's reasonable satisfaction that
as of such time (i) in the event the Indemnifying Party is Parent and Sellers,
Parent is in compliance with the covenants set forth in Section 4.17 and the
face value of the Third Party Indemnification Claim, when aggregated with the
face value of all other outstanding claims of Buyer Indemnified Parties, does
not exceed the net worth of Parent, or (ii) in the event the Indemnifying Party
is AlliedSignal and Buyer, AlliedSignal and Buyer have sufficient financial
resources in order to indemnify for the full amount of any potential Liability
in connection with such claim, the Indemnifying Party may elect to compromise or
defend, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, which counsel shall be reasonably satisfactory to the
Indemnified Party, any such matter involving the asserted Liability of the
Indemnified Party. If the Indemnifying Party elects to compromise or defend any
such asserted Liability, it shall within fifteen (15) days (or sooner, if the
nature of the asserted Liability so requires) notify the Indemnified Party of
its intent to do so, and the Indemnified Party shall cooperate, at the expense
of the Indemnifying Party, in the compromise of, or defense against, any such
asserted Liability; provided that (i) the Indemnified Party may, if it so
-------------
desires, employ counsel at its own expense to assist in the handling of any such
third party claim, (ii) the Indemnifying Party shall keep the Indemnified Party
advised of all material events with respect to any such third party claim, (iii)
the Indemnifying Party shall obtain the prior written approval of the
Indemnified Party (which approval may not be unreasonably withheld) before
ceasing to defend against such third party claim or entering into any
settlement, adjustment or compromise of such third party claim involving
injunctive or similar equitable relief being asserted against any Indemnified
Party or any Affiliate thereof and (iv) no Indemnifying Party shall, without the
prior written consent of each Indemnified Party, settle or compromise or consent
to the entry of any judgment in any pending or threatened demand, claim, action
or cause of action, suit or proceeding in respect of which indemnification may
be sought hereunder (whether or not any such Indemnified Party is a party to
such demand, claim, action or cause of action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of all such
Indemnified Parties from all Liability arising out of such claim, action, suit
or proceeding. With respect to claims for indemnification arising out of or
relating to trade disputes, warranty claims, ordinary course returns and
allowances disputes and similar contractual disputes (including late deliveries
or delivery of non-conforming goods) ("Special Claims"), (i) if the Special
Claim or Claims related to a single third party aggregates less than $1,000,000
on the face of such Special Claim
59
or Claims, AlliedSignal and Buyer shall control the defense and settlement of
such claims with such third party, and (ii) if the Special Claim or Claims
related to a single third party aggregates more than $1,000,000 on the face of
such Special Claim or Claims, Parent and Sellers shall control the defense of
such claims, provided that Parent shall have delivered a Confirmation of
Indemnification and demonstrated that Parent has sufficient financial resources
in accordance with clause (i) of the second sentence of this Section 7.4(b).
Notwithstanding anything contained herein to the contrary, the Indemnifying
Party shall not be entitled to have sole control over the defense, settlement,
adjustment or compromise of any third party non-monetary claim that seeks an
order, injunction or other equitable relief against any Indemnified Party or any
Affiliate thereof, which, if successful, could materially interfere with the
business, Assets, Liabilities, financial condition or results of operations of
the Indemnified Party or any of its Affiliates. If the Indemnifying Party elects
not to compromise or defend against the asserted Liability, or fails to notify
the Indemnified Party of its election as herein provided, the Indemnified Party
may, at the Indemnifying Party's expense, pay, compromise or defend against such
asserted Liability.
ARTICLE VIII
EMPLOYEES AND EMPLOYEE BENEFITS
8.1 Scope of Article. This Article VIII contains the covenants and
----------------
agreements of the parties with respect to (a) the status of employment of the
employees of Sellers and the Seller Subsidiaries employed in the Business
("Employees") upon the sale of the Business to Buyer, and (b) the employee
-----------
benefits and employee benefit plans provided or covering such Employees and
former employees of Sellers and the Seller Subsidiaries who terminated
employment with the Sellers or the Seller Subsidiaries while employed in the
Business or who retired from the Business ("Former Employees"). Nothing herein
----------------
expressed or implied confers upon any Employee or Former Employee of Sellers or
the Seller Subsidiaries any rights or remedies of any nature or kind whatsoever.
8.2 U.S. Employees. This Section 8.2 applies only to Employees and
--------------
Former Employees employed or previously employed by Sellers in the United
States.
(a) Employment. Buyer shall offer employment effective as of the
----------
Closing Date to each Employee of a Seller who is employed in the United States
(a "U.S. Employee") and is actively at work immediately prior to the Closing
-------------
Date or is not actively at work immediately prior to the Closing Date due solely
to vacation, holiday or jury duty. Such initial offer of employment shall be
for a position and for base salary or wages which are comparable to that which
Employee had with Sellers immediately prior to the Closing and shall include
employee benefits which are comparable in the aggregate to that which such
Employees had with Sellers immediately prior to the Closing; provided, however,
that no such employment shall be offered to Xxxxxx X. Xxxxx, Xxxxx Xxxxxxxx
and Xxxxx Xxxxxxxxx. Buyer shall offer employment to each other U.S.
Employee who is not actively at work immediately prior to the Closing
Date (including, but not limited to, any such employee who is not actively at
work due to medical leave, sick leave, short-term disability, long-term
disability, layoff or leave of absence) (an "Inactive Employee") who is willing
-----------------
and able to return to work within 90 days after the Closing
60
Date or such later date as may be required by law, with such employment with
Buyer to commence on the date the Inactive Employee first commences active
employment with Buyer. Sellers shall be responsible for any obligation to
provide employee benefits to an Inactive Employee prior to such employee's date
of hire by Buyer. U.S. Employees who accept Buyer's offer of employment and
become employees of Buyer shall be referred to herein as "U.S. Transferred
----------------
Employees." Notwithstanding the foregoing, nothing herein shall be construed to
---------
limit Buyer's ability to thereafter terminate the employment of any Employee or
to amend or terminate any employee benefit plan or to otherwise change the terms
and conditions of employment of any Employee.
(b) Past Service Credit. Buyer shall credit the service of all U.S.
-------------------
Transferred Employees with Sellers and their Affiliates prior to the Closing
Date for purposes of eligibility and vesting under all employee benefit plans
provided by Buyer for U.S. Transferred Employees (but not for purposes of
benefit accrual). Buyer shall also: (i) cause to be waived any pre-existing
condition limitation under any Buyer medical plans applicable to U.S.
Transferred Employees or their dependents (except to the extent that any such
pre-existing condition limitation would not have been waived under Sellers'
medical plans), and (ii) recognize (or cause to be recognized) the dollar amount
of all covered expenses incurred by U.S. Transferred Employees and their
dependents under Sellers' applicable medical plans during the calendar year in
which the Closing Date occurs for purposes of satisfying such calendar year's
deductibles and co-payment limitations under any applicable Buyer medical plans;
provided, that the U.S. Transferred Employee enrolls in the applicable Buyer
--------
medical plan at such time and in such manner as is reasonably specified by
Buyer.
(c) Severance; WARN Act. Sellers shall pay and be solely liable for,
-------------------
and shall indemnify and hold AlliedSignal and Buyer harmless against, any
obligation, cost or expense for (i) severance pay, termination indemnity pay,
salary continuation, special bonuses or like compensation under Sellers' plans,
policies or arrangements and (ii) liability under the WARN Act, or any similar
state or local law, arising from, relating to or claimed by reason of the
Closing or the transactions contemplated by this Agreement or which result from
or relate to actions taken by Sellers on or before the Closing Date.
(d) Vacation. Buyer shall adopt and assume Sellers' liability for
--------
accrued, unused vacation entitlement of U.S. Transferred Employees as of the
Closing to the extent listed on the Balance Sheet.
(e) Workers Compensation. Sellers shall be responsible for all
--------------------
workers compensation claims filed by or on behalf of a U.S. Transferred Employee
to the extent attributable to events, occurrences or exposures prior to the
Closing. Buyer shall be responsible for all workers compensation claims filed
by or on behalf of a U.S. Transferred Employee to the extent attributable to
events, occurrences or exposures following the Closing.
(f) Employment and Plan Liabilities. It is understood and agreed that
-------------------------------
neither AlliedSignal nor Buyer is assuming any obligations or liabilities
arising under any Plan (except to the extent provided in Sections 8.2(d) above
and 8.2(g) below) or as a result of any
61
Employee's or Former Employee's employment with, or termination of employment,
from Sellers, and Sellers shall remain responsible for any such obligations and
liabilities.
(g) Employment Agreements. Buyer shall reimburse Sellers for any
---------------------
Liabilities incurred after the Closing Date under the employee agreements listed
under "Employee Agreement" on Schedule 2.20(a), other than the agreement
relating to the employment of Xxxxxx X. Xxxxx.
(h) Post-Closing Liability. AlliedSignal and Buyer shall pay and be
----------------------
solely liable for, and shall indemnify and hold Parent and Sellers harmless
against, any obligation, cost or expense for severance pay, termination pay,
salary continuation, special bonuses or like compensation under any Buyer plan,
policy or arrangement which result from, or relate to, actions taken by
AlliedSignal or Buyer or any Affiliate thereof after the Closing Date.
(i) Cooperation. The parties agree to furnish each other with such
-----------
information concerning employees and employee benefit plans, and to take all
such other action, as is necessary or appropriate to effect the transactions
contemplated by this Article VIII.
8.3 Foreign Employees. This Section 8.3 applies only to Employees
-----------------
and Former Employees employed or previously employed by Sellers or the Seller
Subsidiaries outside of the United States.
(a) Employment. Buyer shall continue the employment without changes
----------
in terms immediately after the Closing of each Employee of a Seller Subsidiary
who is employed outside of the United States (a "Foreign Employee"). Nothing
herein shall be construed to limit Buyer's ability to terminate the employment
of any Foreign Employee or to amend or terminate any employee benefit plan
applicable to Foreign Employees or to otherwise change the terms and conditions
of employment.
(b) Severance. Sellers shall pay and be solely liable for, and shall
---------
indemnify and hold AlliedSignal and Buyer harmless against, any obligation, cost
or expense for severance pay, termination indemnity pay, salary continuation,
special bonuses or like compensation under (i) any Seller or Seller Subsidiary
plan, policy or arrangement or (ii) any applicable Laws, which result from or
relate to actions taken by any Seller or Seller Subsidiary on or before the
Closing Date (other than the consummation of the Closing, which shall be the
responsibility of Buyer and Allied Signal).
(c) Cooperation. The parties agree to furnish each other with such
-----------
information concerning employees and employee benefit plans, and to take all
such other action, as is necessary or appropriate to effect the transactions
contemplated by this Article VIII.
62
ARTICLE IX
TERMINATION; MISCELLANEOUS
9.1 Termination.
-----------
(a) This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing Date, as follows:
(i) by the mutual written agreement of Buyer and Parent;
(ii) by Buyer or Parent if the Closing has not occurred on or
before September 30, 1998; provided, however, that the right to terminate
-------- -------
this Agreement pursuant to this Section 9.1(a)(ii) shall be suspended as to
any party whose failure to fulfill any material obligation under this
Agreement shall have been the cause of, or shall have resulted in, the
failure of the Closing to occur prior to such date until the fifth Business
Day after such failure has been cured;
(iii) by Buyer or Parent in the event of the issuance by any
Governmental Entity of a final, nonappealable order or injunction
restraining or prohibiting the consummation of the transactions
contemplated hereby; or
(iv) by Parent, upon five days' prior notice to AlliedSignal, if,
as a result of an Acquisition Proposal received by Parent from a person
other than a party to this Agreement or any of its Affiliates, the Board of
Directors of Parent determines in good faith that their fiduciary
obligations under applicable law require that such Acquisition Proposal be
accepted; provided, however, that (x) the Board of Directors of Parent
-------- -------
shall have concluded in good faith, after considering applicable provisions
of state law and after giving effect to all concessions which may be
offered by AlliedSignal pursuant to clause (y) below, on the basis of
advice of outside counsel, that such action is necessary for the Board of
Directors to act in a manner consistent with its fiduciary duties under
applicable law and (y) prior to any such termination, Parent shall, and
shall cause its respective financial and legal advisors to, negotiate with
AlliedSignal to make such adjustments in the terms and conditions of this
Agreement as would enable AlliedSignal to proceed with the transactions
contemplated hereby; provided further, however, that no termination shall
---------------- -------
be effective pursuant to this clause (iv) unless concurrently with such
termination a termination fee of Thirty-Four Million Five Hundred Thousand
Dollars ($34,500,000) is paid in cash by Parent to AlliedSignal.
(b) Except for the obligations contained in Section 6.1, the last
sentence of Section 4.5 and this Article IX (other than Sections 9.2, 9.13 and
9.14) and the representations and warranties contained in Sections 2.16 and 3.8
(and the related indemnity obligations under Sections 7.2(a)(i) and 7.3(a)(i),
respectively), all of which shall survive any termination of this Agreement,
upon the termination of this Agreement pursuant to Section 9.1(a), this
Agreement shall forthwith become null and void, and no party hereto or any of
its officers, directors, employees, agents, consultants, stockholders or
principals shall have any rights or Liabilities
63
hereunder or with respect hereto, including without limitation for any breach of
warranty or representation; provided, however, that nothing contained herein
-------- -------
shall relieve any party hereto from Liability for any willful failure to comply
with any covenant or agreement contained herein.
9.2 Further Assurances. From time to time after the Closing,
------------------
AlliedSignal, Buyer, Parent and Sellers shall execute and deliver or cause to be
executed and delivered such further documents, certificates, instruments of
conveyance, assignment and transfer and take such further action as
AlliedSignal, Buyer, Parent or Sellers may reasonably request in order to more
effectively to sell, assign, convey, transfer, reduce to possession and record
title to any of the Purchased Assets to Buyer or to better enable Buyer to
complete, perform and discharge any of the Assumed Liabilities. AlliedSignal,
Buyer, Parent and Sellers agree to cooperate with each other in all reasonable
respects to assure to Buyer the continued title to and possession of the
Purchased Assets in the condition and manner contemplated by this Agreement.
Each party hereto shall cooperate and deliver such instruments and take such
action as may be reasonably requested by any other party hereto in order to
carry out the provisions and purposes of this Agreement and the transactions
contemplated hereby. AlliedSignal, Buyer, Parent and Sellers shall cooperate
and shall cause their respective Affiliates, officers, employees, agents and
representatives to cooperate to ensure the orderly transition of the Business
from Sellers to Buyer and to minimize the disruption to the Business resulting
from the transactions contemplated hereby.
9.3 Entire Agreement; Amendments; Waivers. This Agreement, the
-------------------------------------
Confidentiality Agreement, and the documents referred to herein and to be
delivered pursuant hereto constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof, and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions of the
parties, whether oral or written. No amendment, supplement, modification,
waiver or termination of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision or breach of this Agreement, whether or not similar, unless otherwise
expressly provided.
9.4 Benefit; Assignment. This Agreement shall be binding upon and
-------------------
inure to the benefit of, and shall be enforceable by, the parties hereto and
their respective successors and permitted assigns. This Agreement shall not be
assigned by any party hereto without the prior written consent of the other
party hereto; provided, however, that AlliedSignal or Buyer may assign any or
-------- -------
all of their respective rights hereunder to one or more Affiliates of
AlliedSignal or Buyer, as the case may be, without the consent of Parent or
Sellers provided that AlliedSignal or Buyer, as the case may be, shall continue
to be obligated to perform all of its obligations hereunder.
9.5 No Presumption. AlliedSignal, Buyer, Parent and Sellers have
--------------
participated jointly in the negotiation and drafting of this Agreement. In the
event any ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by AlliedSignal, Buyer,
Parent and Sellers, and no presumption or burden of proof shall
64
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
9.6 Notices. Notices and other communications provided for herein
---------
shall be in writing and shall be deemed given only if delivered to the party
personally or sent to the party by telecopy, by registered or certified mail
(return receipt requested) with postage and registration or certification fees
thereon prepaid, or by any nationally recognized overnight courier, addressed to
the party at its address set forth below:
If to Parent or Sellers: Banner Aerospace
X.X. Xxx 00000
Xxxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Telecopy No.: 000-000-0000
with copy to: Xxxxxx X. Xxxxxx
00000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
If to AlliedSignal or Buyer: AlliedSignal Inc.
X.X. Xxx 0000
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000-0000
Attention: General Counsel
Telecopy No.: 000-000-0000
or to such other address as a party may from time to time designate in writing
in accordance with this section. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.
9.7 Terms Generally.
---------------
(a)(i) Words in the singular shall be held to include the plural and
vice versa and words of one gender shall be held to include the other genders as
the context requires, (ii) the terms "hereof," "herein," and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole (including all of the Annexes, Schedules and Exhibits
hereto) and not to any particular provision of this Agreement, and Article,
Section, paragraph, Exhibit and Schedule references are to the Articles,
Sections, paragraphs, Exhibits and Schedules to this Agreement unless otherwise
specified, (iii) the word "including" and words of similar import when used in
this Agreement shall mean "including, without limitation," unless otherwise
specified, (iv) the word "or" shall not be exclusive, and (v) provisions shall
apply, when appropriate, to successive events and transactions.
65
(b) Each reference in this Agreement (or in any other document or
instrument furnished to AlliedSignal or Buyer by Parent or any Seller pursuant
to this Agreement) to "the best of Parent's and each Seller's knowledge", or
words of similar import referring to Parent and Sellers (including Parent and
Sellers not being aware of a particular event or other matter), means the actual
knowledge, after due inquiry, of each executive officer of Parent and each of
the Companies.
9.8 Counterparts; Headings. This Agreement may be executed in
----------------------
several counterparts, each of which shall be deemed an original, but such
counterparts shall together constitute but one and the same Agreement. The
Article and Section headings in this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof.
9.9 Severability. If any provision, clause or part of this
------------
Agreement or the application thereof under certain circumstances is held invalid
or unenforceable, the remainder of this Agreement, or the application of such
provision, clause or part under other circumstances, shall not be affected
thereby.
9.10 No Reliance. Except for any assignees permitted by Section
-----------
9.4 of this Agreement and the indemnified persons pursuant to Sections 7.2 and
7.3: (i) no third party is entitled to rely on any of the representations,
warranties or agreements of the parties hereto contained in this Agreement; and
(ii) the parties hereto assume no Liability to any third party because of any
reliance on the representations, warranties or agreements of such parties
contained in this Agreement.
9.11 Governing Law. This Agreement shall be construed and
-------------
interpreted according to the laws of the State of New York, without regard to
the conflict of law principles thereof.
9.12 Submission to Jurisdiction; Waivers. The parties hereto
-----------------------------------
hereby irrevocably and unconditionally agree that:
(a) All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined in a New York state or federal court
sitting in the City of New York, and the parties hereto hereby irrevocably
submit to the exclusive jurisdiction of such courts in any such action or
proceedings and irrevocably waive the defense of an inconvenient forum to the
maintenance of any such action or proceeding.
(b) Service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such party at its
address as provided in Section 9.6.
9.13 Bulk Transfer. The parties hereto hereby waive compliance
-------------
with the provisions of any applicable bulk sales law of any jurisdiction in
connection with the transactions contemplated hereby and no representation,
warranty or covenant contained in this Agreement shall be deemed to have been
breached as a result of such non-compliance. Parent and Sellers hereby agree,
jointly and severally, to indemnify, defend and hold AlliedSignal and Buyer
66
harmless from and against any and all Losses arising out of or relating to
claims which may be asserted by third Persons, including Governmental Entities,
against the Acquired Assets or any Buyer Indemnified Parties as a result of non-
compliance with any applicable bulk sales law. Nothing in this Agreement shall
be construed as an admission by any party as to the applicability of any bulk
sales laws.
9.14 Use of Names. During the first 180 days after the Closing
------------
Date, Buyer shall have the right to use all of the logos, trademarks and trade
identification of Parent as are located at the Acquired Real Property or on the
Acquired Assets (collectively, the "Trademarks"). Buyer's use of the Trademarks
----------
shall be in accordance with such reasonable quality control standards as shall
be promulgated by Parent and provided to Buyer. If Parent shall notify Buyer in
writing of Buyer's material failure to comply with such reasonable quality
control standards and Buyer continues to not comply with such reasonable quality
control standards for more than 20 days after receipt of such notice, Parent
shall have the right to terminate Buyer's right under this Section 9.14 to use
the Trademarks.
9.15 Xxxxxxx Price Allocation. In connection with the purchase
------------------------
price adjustment contemplated by Section 1.6, Parent and AlliedSignal shall
agree on an appropriate allocation of the Adjustment Amount to the Initial
Purchase Price under the Xxxxxxx Agreement (expressed as a positive or negative
number) and the Initial Purchase Prices under this Agreement and the Xxxxxxx
Agreement shall be adjusted accordingly. Similarly, Parent and AlliedSignal
shall agree on an appropriate allocation of any post-Closing adjustments of the
purchase price required under Section 1.6(f).
9.16 Relationship with Xxxxxxx Agreement. The parties acknowledge
-----------------------------------
and agree that it is the intent of the parties that, notwithstanding any other
provision of this Agreement or the Xxxxxxx Agreement, the representations,
warranties and covenants contained in this Agreement and in the Xxxxxxx
Agreement that (i) have substantially the same language (without regard to the
identity of the parties making such representation or warranty or about whom
such representation or warranty is made) and (ii) contain either the language
"in the aggregate" or a similar combining concept or a reference to a Material
Adverse Effect (a "Collective Representation" or a "Collective Covenant", as the
case may be) shall be deemed to be a single representation and warranty or a
single covenant, as the case may be, for purposes of determining whether such
representation and warranty has been breached or such covenant has been complied
with and all relevant facts relating to such Collective Representation or
Collective Covenant in both agreements shall be considered. As examples, if
there should be an issue regarding whether a Collective Representation contained
in this Agreement has been breached, the parties would consider inaccuracies in
such Collective Representation as well as inaccuracies in the corresponding
Collective Representation in the Xxxxxxx Agreement in determining whether a
breach of such Collective Representation had occurred and in determining the
materiality of any breach of a Collective Representation relating to the
Business, reference shall be made to the Combined Business.
67
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
BANNER AEROSPACE, INC. ALLIEDSIGNAL INC.
By: /s/ Xxxxxx X. Xxxxxxxxx By: /s/ Xxx Xxxxxxx
------------------------------ ------------------------------
Name: Xxxxxx X. Xxxxxxxxx Name: Xxx Xxxxxxx
Title: Senior Vice President Title: Senior Vice President
XXXXX INDUSTRIES, INC. AS BAR LLC
By: /s/ Xxxxxx X. Xxxxxxxxx By: ALLIED SIGNAL INC.
------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President
AEROSPACE BEARING SUPPORT, INC. By: /s/ Xxx Xxxxxxx
------------------------------
Name: Xxx Xxxxxxx
Title: Senior Vice President
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President
AIRCRAFT BEARING SUPPORT, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President
68
BANNER DISTRIBUTION, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President
BURBANK AIRCRAFT SUPPLY, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President
HARCO, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President
PACAERO
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President
ANNEX A
SELLERS
Name of Entity Jurisdiction of Organization
-------------- ----------------------------
Xxxxx Industries, Inc. Connecticut
Aerospace Bearing Support, Inc. California
Aircraft Bearing Corporation California
Banner Distribution, Inc. Delaware
Burbank Aircraft Supply, Inc. Delaware
Harco, Inc. Delaware
PacAero California
ANNEX B
SELLER SUBSIDIARIES
Name of Entity Jurisdiction of Organization
-------------- ----------------------------
Burbank Aircraft International, GmbH Germany
Harco Aerospace Fasteners, Ltd. Canada
Harco Northern Ireland, Ltd. United Kingdom
ANNEX C
DEFINITIONS
The following terms shall have the respective meanings ascribed to
them in this Annex C. References to Sections constitute references to Sections
of the Agreement.
"Accounts Receivable" means all billed and unbilled accounts receivable and
-------------------
all trade notes receivable relating to the Combined Business whether recorded or
unrecorded, including, without limitation, all trade receivable from other
divisions or Affiliates of Parent and the Companies.
"Acquired Assets" means the Purchased Assets and the Subsidiary Assets.
---------------
"Acquired Real Property" means, collectively, the Leased Real Property and
----------------------
Owned Real Property.
"Acquisition Proposal" has the meaning set forth in Section 4.14.
--------------------
"Adjustment Amount" means an amount equal to the difference between
-----------------
Estimated Closing Date Net Worth and Target Net Worth expressed as a positive
number, as adjusted pursuant to Section 9.15.
"Adjustment Date" has the meaning set forth in Section 1.7(a).
---------------
"Affiliate" of any Person means any Person directly or indirectly
---------
controlling, controlled by or under common control with such Person.
"Agreement" means the Asset Purchase Agreement, dated as of December ___,
---------
1997, by and among Parent, Sellers, AlliedSignal and Buyer, together with the
Annexes, Schedules and Exhibits attached thereto, as the same may be amended
from time to time in accordance with the terms thereof.
"AlliedSignal" had the meaning set forth in the Preamble of the Agreement.
------------
"AlliedSignal Common Stock" means the common stock, par value $1 per share,
-------------------------
of AlliedSignal.
"AlliedSignal Reports" has the meaning set forth in Section 3.6.
--------------------
"Ancillary Agreements" means the agreements to be delivered pursuant to
--------------------
Sections 5.1 and 5.2.
"Antitrust Division" means the Antitrust Division of the United States
------------------
Department of Justice.
2
"Assets" means businesses, properties, assets, goodwill, rights, interests
------
and privileges of every kind, nature or description, wherever located, whether
real, personal or mixed, tangible or intangible, and without regard to whether
they have value for accounting purposes or are carried on or reflected in
relevant books and records or financial statements.
"Assigned Receivables" has the meaning set forth in Section 1.7(a).
--------------------
"Assumed Liabilities" has the meaning set forth in Section 1.3(a).
-------------------
"Assumed Tax Liabilities" means Tax liabilities for value-added Taxes, real
-----------------------
property Taxes, personal and intangible property Taxes and payroll Taxes, in
each case only to the extent included on the Closing Balance Sheet.
"Average Trading Price" means, as of a specified date, the average of the
---------------------
daily high and low closing prices of AlliedSignal Common Stock as reported on
the NYSE Composite Tape on each of the twenty (20) consecutive trading days
immediately preceding (and not including) such date.
"Balance Sheet" has the meaning set forth in Section 2.6.
-------------
"Basket" has the meaning set forth in Section 7.2(b).
------
"Bid" has the meaning set forth in Section 2.8(d).
---
"Business" has the meaning set forth in the Recitals of the Agreement.
--------
"Business Day" or "business day" means any day other than a Saturday,
------------ ------------
Sunday, or a day on which banking institutions in the City of New York are
authorized or obligated by law or executive order to close.
"Buyer" has the meaning set forth in the Preamble of the Agreement.
-----
"Buyer Escrow Claims" has the meaning set forth in Section 1.5(c).
-------------------
"Buyer Escrow Claim Loss Estimate" has the meaning set forth in Section
--------------------------------
1.5(c).
"Buyer Indemnified Parties" has the meaning set forth in Section 7.2(a).
-------------------------
"Cash Equivalent Purchase Price" means an amount equal to Three Hundred
------------------------------
Forty-Four Million Seven Hundred Seventy-Four Thousand Dollars ($344,774,000)
plus (x) the excess, if any, of the Closing Date Net Worth over the Target Net
----
Worth and minus (y) the excess, if any, of the Target Net Worth over the Closing
-----
Date Net Worth.
"Closing" has the meaning set forth in Section 1.8(a).
-------
"Closing Accounts Receivable" has the meaning set forth in Section 1.7(a).
---------------------------
3
"Closing Date" has the meaning set forth in Section 1.8(a).
------------
"Closing Date Balance Sheet" shall mean the Proposed Closing Date Balance
--------------------------
Sheet as accepted or deemed final pursuant to Section 1.6(d) or (f), as the case
may be.
"Closing Date Net Worth" has the meaning set forth in Section 1.6(a).
----------------------
"Closing Date Shares" has the meaning set forth in Section 1.4(b).
-------------------
"COBRA" has the meaning set forth in Section 2.20(c)(iii).
-----
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Collected Amount" has the meaning set forth in Section 1.7(a).
----------------
"Combined Business" means collectively the Business and the Business as
-----------------
defined in the Xxxxxxx Agreement.
"Combined Contracts" means, collectively, all Contracts and all Contracts
------------------
as defined in the Xxxxxxx Agreement.
"Companies" has the meaning set forth in the Preamble of the Agreement, and
---------
"Company" means any one of the Companies.
-------
"Competitive Activities" has the meaning set forth in Section 6.4(a).
----------------------
"Confidentiality Agreement" means that certain confidentiality agreement
-------------------------
dated June 27, 1997 between AlliedSignal and Parent.
"Confidential Information" has the meaning set forth in Section 6.5.
------------------------
"Confirmation of Indemnification" has the meaning set forth in Section
-------------------------------
7.4(b).
"Contracts" means (a) all written and oral contracts, licenses,
---------
commitments, agreements and instruments, including all customer contracts,
operating contracts and distribution contracts relating to the Business, (b) all
sales and purchase orders and supply agreements and other agreements relating to
the Business, (c) all leases of Equipment and Real Property relating to the
Business and (d) all other contracts, licenses, agreements and instruments
relating to the Business; provided, however, that the term "Contract" shall not
include any collective bargaining agreement or any employment agreement or other
Plan.
"Debt" means, with respect to any Person, the following Liabilities,
----
whether incurred by such Person, directly or indirectly, without duplication:
(i) its Liabilities for borrowed money;
4
(ii) its Liabilities for the deferred purchase price of property
acquired by it (excluding accounts payable arising in the ordinary course
of business but including, without limitation, all liabilities created or
arising under any conditional sale or other title retention agreement with
respect to any such property);
(iii) the amount of the obligation of such Person as the lessee under
any Capital Lease that would, in accordance with GAAP, appear as a
Liability on a balance sheet of such Person ("Capital Lease" meaning, at
any time, a lease with respect to which such Person, as lessee, is required
concurrently to recognize the acquisition of an asset and the incurrence of
a Liability in accordance with GAAP);
(iv) amounts secured by any Lien with respect to any property owned by
such Person (whether or not it has assumed or otherwise become liable for
such amounts);
(v) all of its Liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account
by banks and other financial institutions (whether or not representing
obligations for borrowed money);
(vi) any Guarantee of such Person with respect to Liabilities of any
Person of the character described in any of the clauses described in (i)
through (vi) above ("Guarantee" meaning, with respect to any Person, any
obligation (except the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection) of such Person
guaranteeing or in effect guaranteeing any indebtedness, dividend or other
Debt or obligation of any other Person in any manner, whether directly or
indirectly, including (without limitation) obligations incurred through an
agreement, contingent or otherwise, by such Person);
(vii) all Liabilities of any Subsidiary of such Person of the
character described in clauses (i) through (vii) above; and
(viii) all Liabilities of the character described in clauses (i)
through (vii) above with respect to which, and to the extent that, such
Person remains legally liable, notwithstanding that such Liability or
obligation is deemed extinguished under GAAP.
"Defective Inventory" means the aggregate of all (i) excess Inventory, (ii)
-------------------
obsolete or substandard Inventory, and (iii) Inventory that is not Traceable
Inventory, in each case determined in accordance with the procedures and
criteria set forth on Schedule 1.6(a).
"Disputed Account Receivable" has the meaning set forth in Section 1.7(a).
---------------------------
"Dispute Notice" has the meaning set forth in Section 1.6(c).
--------------
5
"Disputes" has the meaning set forth in Section 1.6(c).
--------
"Employees" has the meaning set forth in Section 8.1.
---------
"Environmental Claim" shall mean any third party or governmental written
-------------------
claim, notice, request for information, demand, investigation, lawsuit,
proceeding, judgment, award, penalty, order or other action that could expose
Parent, the Companies, AlliedSignal or Buyer to Losses under any Environmental
Law or to Losses for personal injuries (including death) or property damage
relating to or arising from the presence of, or exposure to, Hazardous
Materials.
"Environmental Law" means all applicable Laws relating to the protection of
-----------------
the environment (including, but not limited to, natural resources) and human
health and safety, including, without limitation (a) all requirements pertaining
to reporting, licensing, permitting, investigation and remediation of emissions,
discharges, releases or threatened releases of Hazardous Materials or other
environmental conditions into the air, surface water, groundwater or land or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, and (b) all requirements
pertaining to the protection of the health and safety of employees and other
workers, and the protection of or compensation to individuals from or related to
exposures to Hazardous Materials.
"Environmental Liability" means any Liability (existing at, or arising
-----------------------
after, the Closing) under Environmental Law, or any remedial action (at or after
the Closing), in connection with the Acquired Assets or the Business to the
extent arising from any condition (including any Hazardous Materials condition)
existing, or any act or omission the Companies or any of their predecessors or
any of their past, present or future Subsidiaries, at or prior to the Closing
Date, including claims, demands, assessments, judgments, orders, causes of
action (including toxic tort suits), notices of actual or alleged violations or
Liability (including such notices regarding the disposal or release of Hazardous
Materials on the Acquired Real Property or elsewhere), proceedings and any
associated Losses.
"Environmental Permit" means any Permit issued under any Environmental Law
--------------------
or issued by any Governmental Entity responsible for environmental matters.
"Equipment" means all tangible assets and properties, except Real Property,
---------
owned, used or held for use by any Company, including cars, trucks and other
transportation equipment, machinery and equipment, tools, spare parts,
furniture, office equipment, furnishings and fixtures and machinery and
equipment under order or construction.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Escrow Agent" means the escrow agent under the Escrow Agreement.
------------
"Escrow Agreement" has the meaning set forth in Section 1.9(c).
----------------
"Escrow Cash" means any of the following: (i) any investment in Government
-----------
Obligations; (ii) investments in time deposit accounts, certificates of deposit
and money market
6
deposits maturing within 180 days of the date of acquisition issued by a bank or
trust issuer which is organized under the laws of the United States of America,
any state thereof or any foreign country recognized by the United States, and
which bank or trust issuer has capital, surplus and undivided profits
aggregating in excess of $50,000,000 (or the foreign currency equivalent
thereof) and has outstanding debt which is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act) or any money
market fund sponsored by a registered broker dealer or mutual fund distributor;
(iii) repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (ii) above; and (iv) investments in
securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by Standard & Poor's Ratings Group or "A" by Xxxxx'x
Investors Service, Inc.
"Escrow Release Date" has the meaning set forth in Section 1.5(c).
-------------------
"Estimated Closing Date Net Worth" has the meaning set forth in Section
--------------------------------
1.4(a).
"Estimated Share Number" has the meaning set forth in Section 1.4(b).
----------------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Excluded Assets" has the meaning set forth in Section 1.2(b).
---------------
"FAA" means the Federal Aviation Administration.
---
"Fairchild" means The Xxxxxxxxx Corporation, a Delaware corporation.
---------
"Final Future Tax Benefits" has the meaning set forth in Section 2.6(b).
-------------------------
"Financial Statements" has the meaning set forth in Section 2.6.
--------------------
"Firm" has the meaning set forth in Section 1.6(d).
----
"FIRPTA Affidavit" has the meaning set forth in Section 1.9(a)(viii).
----------------
"Foreign Employees" has the meaning set forth in Section 8.3(a).
-----------------
"Foreign Plan" has the meaning set forth in Section 2.20(a)(iii).
------------
"Former Employees" has the meaning set forth in Section 8.1.
----------------
"Free-Standing Plan" has the meaning set forth in Section 2.20(a)(iii).
------------------
"FTC" means the United States Federal Trade Commission.
---
7
"GAAP" means United States generally accepted accounting principles,
----
consistently applied.
"Government Contract" shall mean any written prime contract, subcontract,
-------------------
grant or cooperative agreement with (i) the US Government, (ii) any prime
contractor of the US Government or (iii) any subcontractor with respect to any
contract described in clauses (i) or (ii) above.
"Governmental Entity" means (a) any multinational, federal, provincial,
-------------------
state, municipal, local or other governmental or public department, court,
commission, board, bureau, agency, legislative or quasi-legislative body or
instrumentality, domestic or foreign; (b) any subdivision, agent, commission,
board, or department, authority, or similar body or instrumentality of any of
the foregoing; or (c) any quasi-governmental or private body exercising any
regulatory, expropriation or taxing governmental authority under or for the
account of any of the foregoing.
"Government Obligations" means direct obligations (or certificates
----------------------
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged.
"Hazardous Material" means any substance, material or waste (a) the
------------------
presence of which requires investigation or remediation under any Environmental
Law, (b) which is regulated by an applicable Governmental Entity, which
substance, material or waste includes, without limitation, petroleum and its by-
products, friable asbestos, and any material or substance which is defined as a
"hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or "toxic substance" under any provision of Environmental Law, (c)
which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous, or (d) the presence of which
causes or threatens to cause a nuisance or trespass to any property or poses or
threatens to pose a hazard to the health or safety of individuals on or about
any such property.
"Xxxxxxx" means XX Xxxxxxx Aerospace, Inc., a Missouri corporation.
-------
"Xxxxxxx Agreement" means the Asset Purchase Agreement, dated as of the
-----------------
date of this Agreement, by and among Parent, Xxxxxxx, Banner Aerospace Services,
Inc., AlliedSignal and AS BAR PBH LLC, as the same may be amended form time to
time in accordance with the terms thereof.
"Xxxxxxx Assumed Liabilities" means Assumed Liabilities as defined in the
---------------------------
Xxxxxxx Agreement.
"Xxxxxxx Excluded Assets" means the Excluded Assets as defined in the
-----------------------
Xxxxxxx Agreement.
"Xxxxxxx Non-Assumed Liabilities" means the Non-Assumed Liabilities as
-------------------------------
defined in the Xxxxxxx Agreement.
8
"Xxxxxxx Purchased Assets" means the Purchased Assets as defined in the
------------------------
Xxxxxxx Agreement.
"Xxxxxxx Sellers" means the Sellers under the Xxxxxxx Agreement.
---------------
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
-------
as amended.
"Inactive Employee" has the meaning set forth in Section 8.2(a).
-----------------
"Indemnification Claim" has the meaning set forth in Section 7.4(a).
---------------------
"Indemnification Escrow Shares" means (i) as of the Closing Date, a number
-----------------------------
of shares of AlliedSignal Common Stock equal to five percent (5%) of the
Estimated Share Number and (ii) thereafter, the initial number of
Indemnification Escrow Shares less any Indemnification Escrow Shares from time
to time released from escrow pursuant to Section 1.5(b) or (d).
"Indemnified Party" has the meaning set forth in Section 7.4(a).
-----------------
"Indemnifying Party" has the meaning set forth in Section 7.4(a).
------------------
"Initial Purchase Price" has the meaning set forth in Section 1.4(b).
----------------------
"Intellectual Property" means all foreign and domestic patents (including
---------------------
all reissues, divisions, continuations and extensions thereof), patent rights,
service marks, trademarks and tradenames, trade dress, all product names, all
assumed or fictitious names and the logos associated therewith, copyrights,
applications for the foregoing, licenses and other contractual rights with
respect to the foregoing and other such property and intangible rights owned,
used or held for use by any Company, including financial and marketing business
data, pricing and cost information, business and marketing plans and customer
and suppliers lists, together with the goodwill of the Business in connection
with which such trademarks, tradenames, product names and service marks are
used.
"Inventory" means all inventory of the Combined Business, including
---------
finished goods, work-in-progress, raw materials, operating chemical and
catalysts, parts, accessories, packaging, manufacturing, administrative and
other supplies on hand, goods held for sale or lease or to be furnished under
Assumed Contracts, and other inventory owned, used or held for use by any
Company.
"IRS" means the United States Internal Revenue Service.
---
"Laws" means all laws, constitutions, statutes, codes, ordinances, decrees,
----
rules, regulations, municipal by-laws, judicial or arbitral or administrative or
ministerial or departmental or regulatory judgments, orders, decisions, rulings
or awards, consent orders, consent decrees, policies, voluntary restraints,
guidelines, or any provisions or interpretations of the foregoing, including
general principles of common and civil law and equity, binding on or affecting
the Person referred to in the context in which such word is used.
9
"Leased Real Property" means all leased Real Property relating to the
--------------------
Business including, without limitation, all Real Property listed on Part B of
Schedule 2.13(a).
"Liabilities" means, as to any Person, all debts, liabilities, obligations
-----------
and responsibilities of any kind or nature whatsoever of such Person, whether
direct or indirect, fixed or contingent, known or unknown, accrued, vested or
otherwise, whether in contract, tort, strict Liability or otherwise, and whether
or not actually reflected, or required by GAAP to be reflected, in such Person's
balance sheets or other books and records.
"Lien" means any lien, charge, claim, pledge, security interest,
----
conditional sale agreement or other title retention agreement, lease, mortgage,
security agreement, right of first refusal, option, restriction, tenancy,
license, covenant, right of way, easement or other encumbrance (including the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or statute or law of any jurisdiction).
"Losses" means any losses, costs, expenses, damages including compensatory,
------
exemplary, or punitive damages, Taxes, penalties, fines, charges, demands,
Liabilities and claims of any kind (including interest, penalties and reasonable
attorneys' and consultants' fees, expenses and disbursements), except that
Losses shall not include attorneys' fees of AlliedSignal or Buyer if Parent has
delivered a Confirmation of Indemnification in respect of a Third Party
arbitration claim and offered to assume the defense thereof which offer was not
accepted because the amount of such indemnification claim exceeded Parent's net
worth and Parent was in compliance with (S) 4.17 of the Agreement.
"Major Customer" means any customer of the Combined Business that accounted
--------------
for $500,000 or more in revenues of the Combined Business in the 1997 fiscal
year or could reasonably be expected to account for more than $500,000 or more
in revenues of the Combined Business in the 1998 fiscal year.
"Major Supplier" means any supplier of the Combined Business (including any
--------------
supplier of Intellectual Property) that accounted for $1,000,000 or more in
sales to the Combined Business in the 1997 fiscal year or could reasonably be
expected to account for more than $1,000,000 or more in sales to the Combined
Business in the 1998 fiscal year.
"Material Adverse Effect" means (i) a material adverse effect upon, or
-----------------------
material adverse change in, the operations, Assets, Liabilities, condition
(financial or otherwise), or results of operations of the Combined Business,
taken as a whole (ii) any event, condition, circumstance or change that is
reasonably likely to have a Material Adverse Effect referred to in preceding
clause (i), or (iii) a significant risk that Buyer and the Buyer under the
Xxxxxxx Agreement, in any material respect, will not be able after the Closing
to operate the Combined Business substantially as operated by, or to own,
possess and use the Acquired Assets and the Xxxxxxx Purchased Assets
substantially as owned, possessed and used by, the Companies and the Xxxxxxx
Sellers, taken as a whole, as of the date hereof; provided, however, that the
-------- -------
loss of business from customers and suppliers of the Combined Business
(including through termination of contracts or reduction of purchases) shall not
be deemed a Material Adverse Effect unless the condition in Section 5.1(e) of
the Agreement has not been satisfied.
10
"Non-Assumed Liabilities" has the meaning set forth in Section 1.3(b).
-----------------------
"Novation Agreement" has the meaning set forth in Section 4.15.
------------------
"NYSE" means the New York Stock Exchange, Inc.
----
"OSHA" has the meaning set forth in Section 2.9(a) hereof.
----
"Owned Real Property" means all Real Property owned by Sellers or any
-------------------
Seller Subsidiary, including, without limitation, all Real Property listed on
Part A of Schedule 2.13(a).
"Parent" has the meaning set forth in the Preamble of the Agreement.
------
"Parent Common Stock" means the common stock, par value $1 per share, of
-------------------
Parent.
"Parent Subsidiaries" means the direct or indirect Subsidiaries of Parent
-------------------
or any other corporation or entity in which Parent owns a majority of the
capital stock or other equity interest.
"Parent Reports" has the meaning set forth in Section 2.28.
--------------
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"Permits" means all franchises, approvals, permits, authorizations,
-------
licenses, orders, registrations, certificates, variances, exemptions and other
similar permits or rights obtained from any Governmental Entity relating to the
conduct of the Business or the Acquired Real Properties and all pending
applications therefor.
"Permitted Liens" means (a) Liens securing Taxes, assessments, governmental
---------------
charges or levies, all of which are not yet due and payable, (b) Liens (other
than any Lien imposed by ERISA) incurred or deposits made in the ordinary course
of the Business and on a basis consistent with past practice in connection with
worker's compensation, unemployment insurance or other types of social security,
(c) mechanics, materialman's, carrier's, warehousemen's, landlords and other
similar Liens under state or common law or (d) such other Liens which,
individually and in the aggregate, do not and would not detract from the value
of or impair the use of any Acquired Asset; it being understood that to the
extent a Permitted Lien relates to or arises from a Non-Assumed Liability, the
applicable Company shall still be liable for such Non-Assumed Liability to the
extent set forth herein.
"Person" means an individual, a corporation, a partnership, a limited
------
Liability company, an association, a firm, a Governmental Entity, a trust or
other entity or organization.
"Plans" has the meaning set forth in Section 2.20(a)(iii).
-----
"Preliminary Future Tax Benefits" has the meaning set forth in Section
-------------------------------
2.6(b).
"Prime Rate" means the rate of interest publicly announced by Citicorp USA,
----------
Inc. in New York, New York from time to time as its base rate.
"Proposed Closing Date Balance Sheet" has the meaning set forth in Section
-----------------------------------
1.6(a)
"PTO" means the United States Patent and Trademark Office.
---
"Purchase Price Escrow Shares" means a number of shares of AlliedSignal
----------------------------
Common Stock equal to one percent (1%) of the Estimated Share Number.
"Purchased Assets" has the meaning set forth in Section 1.2(a).
----------------
"Real Property" means all real property, together with all fixtures,
-------------
fittings, buildings, structures and other improvements erected thereon, and
easements, rights of way, water lines, rights of use, licenses, hereditaments,
tenements, privileges and other appurtenances thereto (such as appurtenant
rights in and to public streets).
"Receivables Deficiency" has the meaning set forth in Section 1.7(a).
----------------------
"Receivables Excess" has the meaning set forth in Section 1.7(a).
------------------
"Receivables Notice" has the meaning set forth in Section 1.7(a).
------------------
"Receivables Reserve" has the meaning set forth in Section 1.7(a).
-------------------
"Registration Rights Agreement" means an agreement substantially in the
-----------------------------
form of Exhibit 1.9(b)(vi).
"Resolution Period" has the meaning set forth in Section 1.6(c).
-----------------
"Review Period" has the meaning set forth in Section 1.6(c).
-------------
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Seller" and "Sellers" have the respective meanings set forth in the
------ -------
Preamble of the Agreement.
"Seller Indemnified Parties" has the meaning set forth in Section 7.3(a).
--------------------------
"Seller Subsidiaries" has the meaning set forth in the Preamble of the
-------------------
Agreement, and "Seller Subsidiary" means any one of the Seller Subsidiaries.
-----------------
"Shortfall Amount" has the meaning set forth in Section 1.6(f)(iii).
----------------
"Side Letters" has the meaning set forth in Section 1.9(a)(xiii).
------------
"Small Claim" has the meaning set forth in Section 7.2(b).
-----------
"Small Licenses" has the meaning set forth in Section 2.15(d).
--------------
12
"Special Claim" has the meaning set forth in Section 7.4(b).
-------------
"Subsidiary" of any Person means any corporation, partnership, joint
----------
venture, limited liability company, trust or other entity with respect to which
such Person directly or indirectly owns or controls more than 50% of (i) the
issued and outstanding capital stock having ordinary voting power to elect a
majority of the board of directors or other governing body of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (ii) the interest in the capital or profits of such partnership,
joint venture or limited liability company or (iii) the beneficial interest in
such trust.
"Subsidiary Assets" means all Assets of the Seller Subsidiaries.
-----------------
"Subsidiary Shares" means all of the outstanding shares of capital stock of
-----------------
(or other ownership interests in) the Seller Subsidiaries.
"Target Net Worth" means Two Hundred Twenty Million Twenty Five Thousand
----------------
Dollars ($220,025,000) plus the amount, if any, by which Final Future Tax
Benefits exceeds Preliminary Future Tax Benefits, but in any event not less than
$220,025,000.
"Tax" means any tax imposed under Subtitle A of the Code and any net
---
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, value added, transfer, franchise, profits, license, lease,
service, service use, withholding on amounts paid to or by any Company, payroll,
employment, excise, severance, stamp, capital stock, occupation, property,
environmental or windfall profits tax, premium, custom duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any Governmental Entity responsible for the imposition of any such
tax (domestic or foreign) (a "Tax Authority").
-------------
"Tax Authority" has the meaning set forth in the definition of "Tax".
------------- ---
"Technology" means all formulae, processes, procedures, designs, ideas,
----------
research records, inventions (whether or not patentable), records of inventions,
test information, technical information, engineering data, marketing know-how,
proprietary information, manufacturing information, know-how, and trade secrets
(and all related manuals, books, files, journals, models, instructions,
patterns, drawings, blueprints, plans, designs specifications, equipment lists,
parts lists, descriptions, data, art work, software, computer programs and
source code data related thereto including all current and historical data
bases) owned, used or held for use by any Company ( it being understood that, to
the extent any such technology is licensed to a Company, "Technology" shall mean
any and all rights of such Company under such license).
"Third Party Indemnification Claim" has the meaning set forth in Section
---------------------------------
7.4(b).
"Third Party Rights" has the meaning set forth in Section 1.2(a)(xiii).
------------------
13
"Traceable Inventory" means Inventory held pursuant to good and valid parts
-------------------
manufacturer approvals issued by the FAA, supplemental type certificates issued
by the FAA or other certificates required by applicable Laws including, without
limitation, those promulgated by the FAA.
"Trademarks" has the meaning set forth in Section 9.14.
----------
"Transaction Documents" has the meaning set forth in Section 2.3.
---------------------
"Transfer Taxes" means all state, local and foreign sales, use, transfer,
--------------
real property transfer, documentary stamp, recording and other similar taxes
arising from and with respect to the sale and purchase of the Purchased Assets.
"U.S. Employee" has the meaning set forth in Section 8.2(a).
-------------
"US Government" shall mean the United States Government and any agencies,
-------------
instrumentalities and departments thereof.
"U.S. Plans" has the meaning set forth in Section 2.20(a)(iii).
----------
"U.S. Transferred Employees" has the meaning set forth in Section 8.2(a).
--------------------------
"WARN Act" means the Worker Adjustment and Retraining Notification Act, as
--------
codified at 29 U.S.C. (S)(S) 2101 - 2109, as amended.
EXHIBIT 1.9(xiii)(A)
--------------------
[Closing Date]
AlliedSignal Inc.
AS BAR LLC
AS XXX Xxxxxxx LLC
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX
I refer to the Asset Purchase Agreement (the "Purchase Agreement") by and among
AlliedSignal Inc. ("AlliedSignal"), AS BAR LLC ("Buyer"), Banner Aerospace, Inc.
and the Sellers listed on Annex A thereto ("Sellers"), relating to the
acquisition of all the assets of Sellers and the Business (as defined therein),
and to the Xxxxxxx Agreement (as defined therein).
This will confirm that, as of December 1, 1997 and at all times through and
including the date hereof, I personally have not had and do not have any plan or
intention of entering into the business of distributing aerospace hardware parts
and will not do so through any entity which I control, other than The Xxxxxxxxx
Corporation and its subsidiaries and affiliates (other than Banner Aerospace,
Inc. and its subsidiaries), during the thirty month period from today's date.
I understand that you are relying upon the assurances provided in this letter as
a material inducement to your consummating the transactions contemplated by the
Purchase Agreement.
Sincerely,
Xxxxxxx X. Xxxxxxx
EXHIBIT 1.9(xiii)(B)
--------------------
[Closing Date]
AlliedSignal Inc.
AS BAR LLC
AS XXX Xxxxxxx LLC
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX
The undersigned, on behalf of The Xxxxxxxxx Corporation ("Xxxxxxxxx") confirms
as follows:
We refer to the Asset Purchase Agreement (the "Purchase Agreement") by and among
AlliedSignal Inc. ("AlliedSignal"), AS BAR LLC ("Buyer"), Banner Aerospace, Inc.
and the Sellers listed on Annex A thereto ("Sellers"), relating to the
acquisition of all the assets of Sellers and the Business (as defined therein)
and to the Xxxxxxx Agreement (as defined therein).
This will confirm that, as of December 1, 1997 and at all times through and
including the date hereof, neither Xxxxxxxxx nor any subsidiary or controlled
entity of Xxxxxxxxx has had or has any plan or intention to acquire all or any
substantial part of the stock, assets or business of Tri-Star Aerospace, Inc.,
M & M Aerospace Hardware, Inc. or WESCO Aircraft Hardware Corporation.
We understand that you are relying upon the assurances provided in this letter
as a material inducement to your consummating the transactions contemplated by
the Purchase Agreement.
THE XXXXXXXXX CORPORATION
By_________________________
EXHIBIT 1.9(xiii)(C)
--------------------
THE XXXXXXXXX CORPORATION
[Closing Date]
AlliedSignal Inc.
AS BAR LLC
AS XXX Xxxxxxx LLC
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX
We refer to the Asset Purchase Agreement (the "Purchase Agreement") by and among
AlliedSignal Inc. ("AlliedSignal"), AS BAR LLC ("Buyer"), Banner Aerospace, Inc.
("Banner") and the Sellers listed on Annex A thereto ("Sellers"), relating to
the acquisition of all the assets of Sellers and the Business (as such terms are
defined therein) and to the Xxxxxxx Agreement (as defined therein).
In consideration of the benefits to be derived by The Xxxxxxxxx Corporation
("Xxxxxxxxx") from the transactions contemplated by the Purchase Agreement, this
will confirm the agreement of Xxxxxxxxx that, during the period Banner is
required to maintain its corporate existence pursuant to Section 4.17 of the
Purchase Agreement, Xxxxxxxxx shall take no action to authorize or implement
(including, without limitation, voting for) any dissolution of Banner or other
termination of Banner's corporate existence; provided, however, that (i)
-------- --------
Xxxxxxxxx may take action to dissolve Banner or otherwise terminate its
existence if, prior to the consummation of such transaction, Xxxxxxxxx agrees in
writing (for the benefit of the Buyer Indemnified Parties as defined in the
Purchase Agreement) to assume and become fully responsible for, pursuant to an
agreement reasonably satisfactory in form and substance to AlliedSignal, all
obligations of Banner under Article VII of the Purchase Agreement and (ii)
Xxxxxxxxx may vote in favor of, or otherwise take action to implement a merger
or other business combination of Banner or a sale of substantially all its
assets if (x) upon the consummation of such transaction, the successor in
interest to Banner (or the purchaser of such assets, as the case may be) in such
transaction assumes in writing (for the benefit of the Buyer Indemnified Parties
as defined in the Purchase Agreement) and becomes fully responsible for,
pursuant to an agreement reasonably satisfactory in form and substance to
AlliedSignal, all of Banner's obligations under the Agreement (including,
without limitation, Banner's obligations under Article VII) and (y) immediately
after consummation of such transaction, such successor in interest (or
purchaser, as the case may be) has a net worth of not less than the net worth
then required to be maintained by Banner pursuant to Section 4.17 of the
Purchase Agreement.
2
We understand that you are relying upon the obligations set forth in this letter
as a material inducement to your consummating the transactions contemplated by
the Purchase Agreement.
THE XXXXXXXXX CORPORATION
By_________________________
