AGREEMENT AND PLAN OF MERGER
among
STELLEX AEROSPACE HOLDINGS, INC.
a Delaware corporation,
SOZE CORP.,
a New York corporation,
and
MONITOR AEROSPACE CORPORATION
a New York corporation
April 28, 1998
TABLE OF CONTENTS
PAGE
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ARTICLE 1
MERGER; CLOSING; EFFECTIVE TIME; DEFINITIONS..............................1
1.1 The Merger..................................................1
1.2 Closing: Effective Time....................................1
1.3 Articles of Incorporation: Bylaws..........................2
1.4 Directors and Officers......................................2
1.5 Definitions.................................................2
ARTICLE 2
MERGER CONSIDERATION;
CONVERSION OF SHARES IN THE MERGER.......................................11
2.1 Terms of Merger............................................11
2.2 Payment for Company Common Stock...........................12
2.3 Determination and Payment of Merger Consideration..........13
2.4 Escrow Agreement and Pension Escrow Fund...................13
2.5 Closing Procedures.........................................14
2.6 Closing of Company Transfer Books..........................14
2.7 Transfer Taxes.............................................14
ARTICLE 3
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY................................................14
3.1 Organization; Powers.......................................14
3.2 Authorization of Transaction; Noncontravention.............15
3.3 Capitalization; Shares.....................................16
3.4 Financial Statements.......................................17
3.5 Litigation.................................................18
3.6 Tax Returns................................................18
3.7 No Defaults................................................20
3.8 Properties.................................................20
3.9 Governmental Approvals.....................................20
3.10 Intellectual Property......................................21
3.11 Compliance With Laws; Environmental Matters................23
3.12 ERISA......................................................24
3.13 Insurance..................................................25
3.14 Labor Matters..............................................26
3.15 Force Majeure..............................................26
3.16 Books and Records..........................................26
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3.17 Accounts Receivable; Inventory.............................26
3.18 Brokers' Compensation......................................27
3.19 Contracts..................................................27
3.20 Bank Accounts..............................................30
3.21 Suppliers..................................................30
3.22 Customers..................................................30
3.23 No Material Misstatements..................................30
3.24 Government Contracts.......................................31
3.25 Product Liability; Warranties..............................32
3.26 Absence of Undisclosed Liabilities.........................33
3.27 Absence of Undisclosed Changes.............................33
3.28 Affiliate Transactions.....................................33
3.29 Dividends..................................................33
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER..................................34
4.1 Organization, Standing and Power...........................34
4.2 Authority of Buyer; No Violation...........................34
4.3 Litigation.................................................35
4.4 Brokers or Finders.........................................35
4.5 Financing..................................................35
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS......................................35
5.1 Access to Information......................................35
5.2 Conduct of Business by the Company and its Subsidiaries....36
5.3 Regulatory Matters.........................................38
5.4 Audit/Updated Financial Information........................39
5.5 Further Assurances.........................................39
5.6 Releases...................................................39
5.7 Transaction Proposals......................................40
5.8 Notice of Certain Events...................................40
ARTICLE 6
CONDITIONS...............................................................41
6.1 Conditions Precedent to Obligations of Buyer and MergerSub.41
6.2 Conditions Precedent to Obligations of the Company.........44
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ARTICLE 7
TERMINATION..............................................................45
7.1 Termination................................................45
7.2 Effect of Termination or Failure to Consummate Merger......46
7.3 Termination Payment........................................46
7.4 Expenses...................................................46
ARTICLE 8
BUYER'S NOTE OFFSETS; SURVIVAL OF REPRESENTATIONS
AND WARRANTIES..........................................................47
8.1 Survival of Representations and Warranties.................47
8.2 Buyer's Note Payment Offsets; Exclusive Remedy.............47
8.3 Procedure for Payment Offsets for Third-Party Claims.......48
8.4 Buyer's Note Payment Offsets for Non-Third Party Claims....49
ARTICLE 9
GENERAL..................................................................50
9.1 Notices....................................................50
9.2 Extension; Waiver..........................................51
9.3 Choice of Law; Consent to Jurisdiction.....................51
9.4 Amendment; Entire Agreement................................51
9.5 Counterparts; Headings.....................................52
9.6 Expenses...................................................52
9.7 Publicity..................................................52
9.8 Severability...............................................53
9.9 No Third Party Beneficiaries; Assignment...................53
9.10 Confidentiality............................................53
Exhibits
A Amended and Restated Certificate of Incorporation of the Company
B Buyer's Note
C Escrow Agreement
D Letter of Transmittal
E-1 NonCompetition Agreement-Xxxxxxx
E-2 Monitor Asia Agreements
-Purchase and Sale Agreement
-Sales Representative Agreement
F Opinion of Company's Counsel
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G-1 Term Sheet-Xxxxxxx
G-2 Xxxxxxxx Consulting Agreement
H Opinion of Buyer's Counsel
I Release
Schedules
A Closing Liability Schedule
1.4 Officers of Surviving Corporation and Subsidiary
2.3 Shareholders; Amount Payable to each Shareholder
3.1 Directors and Officers of the Company and Subsidiary
3.2 Consents
3.3 Shareholders; Outstanding Debt
3.4 Projections
3.5 Litigation
3.6 Taxes
3.8 Real Property Owned or Leased
3.9 Government Approvals
3.10 Intellectual Property
3.11 Compliance with Laws; Environment
3.12 ERISA; Benefit Plans
3.13 Insurance
3.14 Employment Agreements
3.17 Inventory Locations
3.19A Major Contracts
3.19B Purchase and Sale Transactions
3.19C Exceptions
3.20 Bank Accounts
3.21 Suppliers
3.22 Customers
3.24 Government Contracts
3.25 Product Liability; Warranties
3.27 Material Adverse Changes
3.28 Affiliate Transactions
4.2 Consents of Buyer
5.2 Activities from 2/28/98 to Closing
6.2(h) Bonuses
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
April 28, 1998 by and among STELLEX AEROSPACE HOLDINGS, INC., a Delaware
corporation ("Buyer"), SOZE CORP., a New York corporation that is a wholly-owned
subsidiary of Buyer ("MergerSub"), and MONITOR AEROSPACE CORPORATION, a New York
corporation (the "Company").
Buyer and the Company desire to have MergerSub merge with and into the
Company (the "Merger"), as the result of which the Company will be the surviving
corporate entity, with the Merger to be upon the terms and subject to the
conditions set forth herein. The Shareholders and each of the Boards of
Directors of Buyer, MergerSub, and the Company have duly approved this
Agreement. Capitalized terms used herein shall have the meanings given to them
or referred to in Section 1.5 hereof.
In consideration of the premises and the mutual covenants, representations,
warranties, and agreements contained herein, Buyer, MergerSub and the Company
agree as follows:
ARTICLE 1
MERGER; CLOSING; EFFECTIVE TIME; DEFINITIONS
1.1 The Merger. At the Effective Time and in accordance with the terms and
conditions of this Agreement, the Company and MergerSub shall consummate the
Merger in which (i) MergerSub shall be merged with and into the Company and the
separate corporate existence of MergerSub shall thereupon cease, (ii) the
Company shall be the surviving corporation in the Merger and shall become a
wholly-owned subsidiary of Buyer, and (iii) the Company shall continue its
corporate existence under the laws of the State of New York with all its rights,
privileges, powers, franchises, assets, liabilities and obligations unaffected
by the Merger. The Merger shall have the effects set forth in Section 906 of the
Business Corporation Law of the State of New York ("BCL"). The Company after the
Merger is sometimes referred to herein as the "Surviving Corporation."
1.2 Closing: Effective Time. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.1 hereof, the Closing of the transactions contemplated by
the terms of this Agreement shall take place as soon as reasonably practicable
(and in any event within five (5) Business Days) after the date on which all of
the conditions set forth in Article 6 of this Agreement have been satisfied or
waived in writing, at the offices of Windels, Marx, Davies & Ives, 000 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx (such date, the "Closing Date"). At the Closing, the
Company and MergerSub shall execute a certificate of merger ("Certificate of
Merger") and cause the Certificate of Merger to be delivered for filing with the
Secretary of State of the State of New York in accordance with the BCL. The
Merger shall become effective in accordance with the BCL upon the filing of the
Certificate of Merger with the Secretary of State of New York, which Certificate
of Merger shall be filed on the Closing Date, or at such time thereafter as
Buyer and the Company may agree upon in writing in such Certificate of Merger
(the "Effective Time").
1.3 Articles of Incorporation: Bylaws. At the Effective Time (a) the
Certificate of Incorporation of the Company as in effect immediately prior to
the Effective Time shall be amended and restated as set forth in Exhibit A
hereto and as so amended and restated shall become the Amended and Restated
Certificate of Incorporation of the Surviving Corporation, and (b) the Bylaws of
MergerSub as in effect immediately prior to the Effective Time shall become the
Bylaws of the Surviving Corporation.
1.4 Directors and Officers. The directors of MergerSub immediately prior to
the Effective Time and the individuals identified on Schedule 1.4 hereto to be
officers of the Surviving Corporation, from and after the Effective Time shall
be the directors and officers, respectively, of the Surviving Corporation until
their successors have been duly elected or appointed in accordance with the
Bylaws of the Surviving Corporation (and Buyer, as the then sole shareholder of
the Surviving Corporation, and the Surviving Corporation shall take such action
as may be appropriate to elect or appoint such persons as directors and officers
of the Surviving Corporation and the Subsidiaries).
1.5 Definitions. In addition to capitalized terms otherwise defined herein,
as used in this Agreement the following capitalized terms shall have the
meanings provided in this Section 1.5:
"Affiliate" shall mean, with respect to any Person, at the time in
question, any shareholder, officer or director of such Person, any Affiliate of
any shareholder, officer or director of such Person, any other Person that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with such Person. For purposes of the
preceding definition, "control" (including the terms "controlling", "controlled
by" and "under common control with") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a Person, whether through ownership of voting securities, by contract or
otherwise.
"Xxxxxxx Employment Agreement" means the Employment Agreement between the
Company and R. Xxxxx Xxxxxxx effective December 1, 1995, as amended August 9,
1997 and March 25, 1998.
"Applicable Law" shall mean a statute, law, treaty, rule, code, ordinance,
regulation, permit license, certificate, Governmental Approval, order, judgment,
decree, injunction, writ, or other binding determination or like action of any
Governmental Authority, including all Environmental, Health or Safety
Requirements of Law, as in effect from time to time.
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"Asbestos Containing Material" shall mean any material containing more than
one percent (1%) asbestos by weight.
"BCL" means the New York State Business Corporation Law.
"Benefit Plan" shall mean a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which the Company
or any ERISA Affiliate is, or within the immediately preceding six (6) years
was, an "employer" as defined in Section 3(5) of ERISA.
"Best Efforts" means the reasonable best efforts that a prudent person
desirous of achieving a result would use in similar circumstances to insure that
such result is achieved as reasonably expeditiously as possible.
"BT Xxxx Xxxxx" shall have the meaning set forth in Section 3.18.
"Buyer" shall have the meaning set forth in the introductory paragraph
hereof.
"Buyer's Note" shall mean the Non-Negotiable Promissory Note, substantially
in the form of Exhibit B hereto, issued by the Surviving Corporation to the
Majority Noteholder as a representative of the Noteholders. The Buyer shall be
entitled to offset payments due or to become due under the Buyer's Note in
accordance with the provisions of Article VIII and those set forth in the
Buyer's Note.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. xx.xx. 9601 et seq., any amendments thereto, any
successor statutes, and any regulations or guidance promulgated thereunder.
"Certificate" means a stock certificate evidencing ownership of shares of
Common Stock immediately prior to the Effective Time.
"Claim" shall mean any claim or demand, by any Person, of whatsoever kind
or nature for any alleged Liabilities and Costs, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute,
permit, ordinance or regulation, common law or otherwise.
"Claim Notice" shall have the meaning set forth in Section 8.3(a).
"Closing" means the performance by the parties and satisfaction of all of
the conditions set forth in Article 6, which shall take place as provided in
Section 1.2.
"Closing Certificate" means the closing certificate referred to in Section
6.1(l).
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"Closing Date" shall have the meaning set forth in Section 1.2.
"Closing Liability Schedule" shall have the meaning set forth in Section
2.3(a).
"Common Stock" means the common stock, without par value, of the Company.
"Company" shall have the meaning set forth in the introductory paragraph
herein.
"Company Financial Statements" shall have the meaning set forth in Section
3.4.
"Company Value" means $95,000,000.
"Contaminant" shall mean any waste, pollutant, hazardous or toxic
substance, hazardous or toxic waste, petroleum or petroleum derived substance or
waste, any radioactive material, including but not limited to, any source,
special nuclear or byproduct material as defined at 42 U.S.C. Section 2011 et
seq., as amended or hereafter amended, asbestos in friable condition,
polychlorinated biphenyls, or any constituent of any such substance or waste,
and includes but is not limited to these terms as defined in federal, state,
local or foreign laws or regulations (including, without limitation, under any
Environmental, Health or Safety Requirements of Law.)
"Contracts" shall mean all contracts, agreements, guaranties, indentures,
bonds, options, leases, security agreements, easements, collective bargaining
agreements, licenses, contractual commitments or binding agreements of any
nature whatsoever, express or implied, written or unwritten, and all amendments
thereto, entered into or binding upon the Company or any of its Subsidiaries or
to which the property or assets of the Company or any of its Subsidiaries may be
subject.
"Current Assets" shall mean the Company's Current Assets determined in
accordance with GAAP.
"Current Liabilities" shall be the Company's Current Liabilities determined
in accordance with GAAP, but such amount shall exclude the current portion of
long-term debt.
"Defective Product Action" has the meaning set forth in Section 3.25(a).
"EAB" shall mean European American Bank.
"Environmental, Health or Safety Requirements of Law" shall mean any
Federal, state, local or foreign law, ordinance, rule, regulation, permit,
license, order, decree or other binding determination of any Governmental
Authority relating to, imposing liability or standards concerning, or otherwise
addressing the environment, human health and/or safety, including but not
limited to the Clean Air Act, the Clean Water Act, RCRA, CERCLA, any so-called
"Superfund" or "Superlien" law, the Toxic Substances Control Act and OSHA.
4
"Environmental Lien" shall mean a Lien in favor of any Governmental
Authority for any (i) liabilities under any Environmental, Health or Safety
Requirements of Law, or (ii) damages arising from, or costs incurred by such
Governmental Authority in response to, a Release or threatened Release of a
Contaminant into the environment.
"Environmental Reports" shall have the meaning set forth in Section 3.11.
"Equipment Purchase Leases" means the equipment purchase lease agreements
in effect on the Closing Date with lessors, including, without limitation,
Paramist Funding Corp., Jacom Computer Services Inc., GE Capital Fleet Services,
IBM Credit Corporation, Yale Industrial Trucks, ORIX Credit Alliance, Inc.,
Colonial Pacific Leasing, and Yale Financial Services.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the IRC) as the Company, (ii) partnership or other trade or business (whether or
not incorporated) under common control (within the meaning of Section 414(c) of
the IRC) with the Company, or (iii) member of the same affiliated service group
(within the meaning of Section 414(m) of the IRC) as the Company, any
corporation described in clause (i) above or any partnership or trade or
business described in clause (ii) above.
"Escrow Agent" means the Escrow Agent set forth in the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement described in Section 2.4 to
be entered into between the Buyer, the Company, the Majority Noteholder and the
Escrow Agent, substantially in the form of Exhibit C hereto.
"Excluded Share" means any share of Common Stock that immediately prior to
the Closing Date is held by MergerSub, a Subsidiary or by the Company in its
treasury.
"Existing Liens" means Permitted Liens and Liens under the Loan Agreements.
"Expiration Date" shall have the meaning set forth in Section 8.1.
"Fleet Bank Mortgage Loan Documents" means the Amended, Consolidated and
Restated Mortgage Note in the principal amount of $3,675,000, as amended, and
all instruments and agreements executed by the Company with, or in favor of,
Fleet Bank, N.A., including the mortgage modification and extension agreement
executed by the Company in favor of Fleet Bank, N.A.
"Force Majeure" shall mean an act of God, fire, flood, storm, strike or
labor difficulties, riot, insurrection, act of war (whether declared or
otherwise), act of Governmental Authority or
5
other extraordinary event, in each case beyond the control of and without the
fault or negligence of the party claiming Force Majeure.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"GE Capital Loan Documents" means the equipment financing agreements in the
original aggregate principal amount of $4,828,479.31, as amended, and all
instruments and agreements executed by the Company in connection therewith.
"Governmental Approval" shall mean any material authorization, certificate,
consent, approval, waiver, exception, variance, franchise, permission, permit,
exception, filing, publication, declaration, notice, license, right or other
form of required permission from, of or with any Governmental Authority, and
shall include, without limitation, each siting, environmental and operating
permit and license that is required for the ownership, use and operation of any
facility owned or leased by the Company or either of its Subsidiaries, or the
conduct by the Company or either of its Subsidiaries of their businesses.
"Governmental Authority" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Government Contract" means any prime government Contract, subcontract,
teaming agreement or arrangement, joint venture, basic ordering agreement,
letter contract, purchase order, delivery order, change order, or other
contractual commitment of any kind, or a bid which if accepted would result in
any of the foregoing, in each instance between the Company or any of its
Subsidiaries and (i) any Governmental Authority, (ii) any prime contractor of
any Governmental Authority, or (iii) any subcontractor with respect to any
contract described in clauses (i) or (ii) above.
"HSR Act" has the meaning set forth in Section 6.1(k).
"Intellectual Property" shall mean any patent, copyright, trademark, trade
name, service xxxx, logo, Internet domain name or industrial design, any
registrations thereof and pending applications therefor (to the extent
applicable), any other intellectual property right (including, without
limitation, any invention, know-how, trade secret, formula, algorithm, process,
confidential or proprietary report or information, customer list or membership
list, any computer program, software, source code, object code, database or data
right, and any system, user, programmer, maintenance, installation or other form
of documentation or other material related thereto), any license or other
contract relating to any of the foregoing, and any goodwill associated with any
business owning, holding or using any of the foregoing.
6
"IRC" shall mean the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder, and any successor
statutes or rules and regulations.
"IRS" means the Internal Revenue Service or any successor agency.
"Knowledge" or "to the best knowledge of" means to the actual knowledge of
(A) in the case of the Company, Xxxxxxx Xxxxxxx, Xxxxx Xxxxxxx, Xxxxxxxx
Xxxxxxxx, Xxxx Xxxxxx, Xxxxxxx Xxxxxxxx, Xxxxx Xxxxxxx, Xxxx Xxxxxx, Xxxx
Xxxxxx, Xxxxx Xxxxxx and Xxxxx Xxxxxxxx, and (B) in the case of the Buyer or
MergerSub, any officer or director of Buyer and MergerSub; but, in either case,
such terms shall not include imputed knowledge.
"Letter of Transmittal" shall have the meaning set forth in Section 2.2(b).
"Liabilities and Costs" shall mean all indebtedness, claims, liabilities,
obligations, responsibilities, losses, damages, personal injury, death, punitive
damages, economic damages, treble damages, intentional, willful or wanton
injury, damage or threat to the environment, natural resources or public health
or welfare, costs and expenses (including, without limitation, reasonable
attorney, expert, engineering and consulting fees and costs and any fees and
costs associated with any investigation, feasibility, or Remedial Action
studies), fines, penalties and monetary sanctions, and interest, whether
accrued, absolute or contingent, and whether or not of a kind required by GAAP
to be set forth on a financial statement or in notes thereto.
"Lien" shall mean any mortgage, pledge, deed of trust, assignment, lien,
charge, encumbrance, security interest of any kind, lease, conditional sales
contract, reversionary interest, right of first refusal, easement or other
adverse claim or right, or any agreement to grant or furnish any of the
foregoing.
"Loan Agreements" means collectively, the Fleet Bank Mortgage Loan
Agreements, the GE Capital Loan Agreements, the NYJDA Loan Agreements, the Stock
Redemption Notes, the Revolving Credit Agreements, and the Equipment Purchase
Leases.
"Losses" means all claims, demands, liabilities, obligations, losses,
fines, costs, proceedings, suits, actions, causes of action, judgments, awards,
deficiencies, assessments, damages (whether or not resulting from third party
claims, governmental actions or otherwise), including, without limitation,
out-of-pocket expenses and reasonable attorneys' and accountants' fees and
expenses.
"MAIC" means Monitor Aerospace International Corp., a New York Corporation,
which is a wholly owned subsidiary of the Company.
"Major Customers" has the meaning set forth in Section 3.22.
7
"Majority Noteholder" means one or more Noteholders owning a majority of
the percentage interest in the Buyer's Note as set forth on Schedule 2.3.
"Material Adverse Effect" means any condition, event, change, or occurrence
which is or would reasonably be expected to be materially adverse to either (i)
the business, operations, results of operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries on a consolidated
basis, (ii) the operation or use of any material facility of the Company or its
Subsidiaries, or (iii) the ability of the parties hereto to consummate the
transactions contemplated hereby.
"Material Contract" shall have the meaning given to such term in Section
3.19.
"Merger Consideration" shall mean the amount determined in accordance with
Section 2.3 hereof and payable by the Buyer to the Shareholders on the Closing
Date in accordance with Schedule 2.3 hereof.
"MergerSub" shall have the meaning set forth in the introductory paragraph
herein.
"MMC" means Monitor Marine Products, Inc., a New York Corporation which is
a wholly owned subsidiary of the Company.
"Monitor Asia Agreements" means the agreements set forth as Exhibit E-2
hereto including the (i) Purchase and Sale Agreement whereby certain assets,
agreements, licenses and liabilities of the Company will be transferred to a
company owned by Xx. Xxxxxxx simultaneously with the Closing, and (ii) Sales
Representative Agreement whereby a company owned by Xx. Xxxxxxx will act as a
representative of the Company for certain products and services.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by the Company or an ERISA Affiliate.
"Noteholders" means Xxxxxxx Xxxxxxx, Xxxxxxxx X. Xxxxxxxx and R. Xxxxx
Xxxxxxx, as their interests shall appear (as set forth on Schedule 2.3).
"NPL" is defined in Section 3.11(c)(ii).
"NYJDA Loan Agreement" means the $5,600,000 Third Mortgage Loan made by New
York Job Development Authority to the Company dated December 30, 1992.
"OSHA" shall mean the Occupational Safety and Health Act, 29 U.S.C. xx.xx.
651 et seq., any amendments thereto, and any successor statutes.
8
"Payment Event" shall have the meaning set forth in Section 7.3.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Escrow Fund" means the portion of the Merger Consideration placed
in escrow pursuant to the provisions of Section 2.4.
"Pension Plan" means the Monitor Aerospace Corporation Retirement Plan.
"Permitted Liens" shall mean:
(i) Liens for Taxes on Property not yet due and payable or which are
being diligently contested in good faith and by appropriate proceedings
diligently conducted, and for which the Company or such Subsidiary has set
aside full and adequate reserves on its books as required by GAAP;
(ii) Liens imposed by law, such as carrier's, warehousemen's and
mechanic's liens and other similar liens, which arise in the ordinary
course of business with respect to obligations not yet due or being
diligently contested in good faith by appropriate proceedings and for which
the Company or its Subsidiaries shall have set aside full and adequate
reserves on its books as required by GAAP;
(iii) Liens arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or other
social security benefits other than any Lien imposed by ERISA;
(iv) Liens incurred or deposits made in the ordinary course of
business to secure surety bonds provided that such Liens shall extend only
to cash collateral for such surety bonds; and
(v) Liens set forth on Schedule 3.8.
"Person" means any individual, corporation, association, limited liability
company, partnership, joint venture, trust, unincorporated organization,
Governmental Authority or other entity.
"Plan" shall have the meaning given in ERISA ss.3(3) (other than a
Multiemployer Plan) in respect of which the Company or any ERISA Affiliate is,
or within the immediately preceding six (6) years was, an "employer" as defined
in Section 3(5) of ERISA.
"Property" shall mean any real or personal property, plant, building,
facility, structure, underground storage tank, equipment or unit, or other asset
owned, leased or operated by the Company or a Subsidiary.
9
"Purchase and Sale Transaction" is defined in Section 3.19(B).
"RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C.
xx.xx. 6901 et seq., any amendments thereto or any successor statutes.
"Release" shall have the same meaning as set forth in 42 U.S.C. ss.
9601(22).
"Response Action" shall have the same meaning as set forth in 42 U.S.C. ss.
9601(25).
"Restricted Stock Bonus Plan" means the Company's Restricted Stock Bonus
Plan.
"Reportable Event" shall mean any reportable event as defined in Section
4043 of ERISA.
"Revolving Credit Agreements" means the Revolving Credit Agreement between
EAB, as Agent, and the Company dated as of March 31, 1997, as amended, and all
instruments and agreements executed by the Company or MAIC with, or in favor of,
EAB and the parties participating therein.
"Shareholder Side Agreement" means the Shareholder Side Agreement dated the
date hereof executed by each of the Shareholders in favor of the Buyer and
MergerSub.
"Shareholders" means the holders of record of capital stock of the Company
either as of the date hereof or prior to or as of the Closing Date, as
applicable.
"Shareholders Equity" shall mean the shareholders equity of the Company as
determined in accordance with GAAP.
"Stock Redemption Notes" mean two subordinated unsecured notes aggregating
$1,795,000 issued by the Company to Xx. Xxx Xxxxxx in connection with the
repurchase and retirement of 210 shares of Common Stock.
"Subsidiary" or "Subsidiaries" shall mean MAIC and/or MMC, as appropriate.
"Surviving Corporation" shall have the meaning given to such term in
Section 1.1.
"Taxes" shall mean any and all Federal, state, local or foreign taxes,
charges, fees, levies, other assessments in the nature of taxes, interest or
penalties, including (without limitation) those measured by or referred to as
income, gross receipts, excise, real or personal property, sales, withholding,
social security, occupation, use, service, service use, license, net worth,
payroll, franchise, ad valorem, profits, employment, severance, stamp, premium,
value added, windfall profits, customs duties or similar fees, transfer and
recordings taxes, fees and charges.
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"Tax Return" shall mean any return, declaration, claim for refund,
information return, report or statement in relation to Taxes, including any
schedule or attachment thereto or amendment thereof.
"Termination Event" shall mean (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the Company or any ERISA Affiliate from a
Benefit Plan during a plan year in which the Company or such ERISA Affiliate was
a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii) the
imposition of an obligation on the Company or any ERISA Affiliate under Section
4041 of ERISA to provide affected parties written notice of intent to terminate
a Benefit Plan in a distress termination described in Section 4041(c) of ERISA;
(iv) the institution by the PBGC of proceedings to terminate a Benefit Plan; (v)
any event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Benefit Plan; or (vi) the partial or complete withdrawal of the Company or any
ERISA Affiliate from a Multiemployer Plan.
"Threshold Amount" has the meaning set forth in Section 8.2(b).
"Transaction Proposal" has the meaning set forth in Section 5.7.
"Working Capital" shall mean the difference between the Company's Current
Assets and Current Liabilities.
ARTICLE 2
MERGER CONSIDERATION;
CONVERSION OF SHARES IN THE MERGER
2.1 Terms of Merger. Upon the Merger becoming effective:
(a) At the Closing Date and subject to the terms hereof, without any action
on the part of the holder, all outstanding shares of Common Stock (other than
any Excluded Share) that are issued and outstanding immediately prior to the
Effective Time shall become and be converted into the right to receive the
Merger Consideration. Certificates representing outstanding shares of Common
Stock shall, after the Effective Time, represent only the right to receive from
Buyer the portion of the Merger Consideration applicable to such shares, subject
to the terms hereof. Until presented and surrendered to Buyer in accordance with
the terms hereof, each Certificate which represented issued and outstanding
Common Stock shall be deemed for all purposes to evidence ownership of the
applicable portion of the Merger Consideration for such shares. Except for
interest payable on the funds represented by the Buyer's Note, no interest shall
accrue or be payable with respect to the Merger Consideration.
(b) Each Excluded Share shall be canceled and retired, and no securities
shall be issuable and no cash paid with respect thereto.
11
(c) Each share of common stock of MergerSub issued and outstanding at the
Effective Time shall, without any action on the part of the holder thereof,
become and be converted into one share of the common stock of the Surviving
Corporation. Outstanding certificates representing shares of common stock of
MergerSub shall be deemed to represent an identical number of shares of common
stock of the Surviving Corporation.
2.2 Payment for Company Common Stock.
(a) At the Closing, the Buyer and MergerSub shall deliver:
(i) to each holder of Common Stock of the Company, the portion of the
Merger Consideration specified on Schedule 2.3 hereof against the delivery
by each holder of a Certificate or Certificates representing such holder's
shares of Common Stock and an executed Letter of Transmittal;
(ii) to the Majority Noteholder, the Buyer's Note, substantially in the
form of Exhibit B; and
(iii) to the Escrow Agent, the Pension Escrow Fund.
(b) Promptly upon the signing of this Agreement, Buyer shall cause to be
mailed to each Shareholder a letter of transmittal and instructions for use in
effecting the surrender of the Certificates ("Letter of Transmittal") in the
form of Exhibit D hereto. If payment is to be made with respect to shares of
Common Stock to a Person other than the registered holder of the Certificate
surrendered, it shall be a condition of such payment that (i) the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer,
(ii) the Person requesting such payment shall pay any transfer or other Taxes
required by reason of the payment to a Person other than the registered holder
of the Certificate surrendered or establish to the reasonable satisfaction of
Buyer that such Tax has been paid or is not applicable and (iii) the Shareholder
and/or such Person shall otherwise comply with the provisions of the Letter of
Transmittal. If any Certificates are issued to a minor, such Certificates and
the Letter of Transmittal shall be executed by the trustee, custodian or other
person authorized to act on behalf of such minor and shall otherwise be in
conformity with the Uniform Gifts to Minors Act and other relevant legal
requirements.
(c) In the event any Certificate representing Common Stock shall have been
lost, stolen, or destroyed, Buyer shall deliver in exchange for such lost,
stolen, or destroyed Certificate, upon the making of an affidavit of that fact
by the holder thereof, such payment as may be required pursuant hereto;
provided, however, that the Surviving Corporation or Buyer may, in its
discretion and as a condition precedent to any such payment, require the owner
of such lost, stolen, or destroyed Certificate to deliver a bond in such sum as
it may reasonably direct as indemnity against any claim that may be made against
the Surviving Corporation,
12
Buyer, or any other party with respect to the Certificate alleged to have been
lost, stolen, or destroyed.
2.3 Determination and Payment of Merger Consideration.
(a) The Merger Consideration shall be determined by deducting from
$95,000,000 ("Company Value"), the liabilities and expenses of the Company in
the categories listed on the attached Schedule A ("Closing Liability Schedule")
calculated as of the Closing Date. The Closing Liability Schedule will be
prepared and certified by R. Xxxxx Xxxxxxx and the controller of the Company,
detailing all expenses and liabilities listed in the categories set forth
therein as of the Closing Date.
(b) The Merger Consideration shall be payable as follows:
(i) $5,180,000 will be payable in the form of the Buyer's Note;
(ii) The Pension Escrow Fund shall be delivered to the Escrow Agent to
be disbursed in accordance with the Escrow Agreement; and
(iii) The remainder of the Merger Consideration will be payable in
cash to the Shareholders, provided that the Buyer may rely on
Schedule 2.3 hereto with respect to the identity and number of
shares held by each Shareholder, and the amount and portion of
the Merger Consideration to be paid to each Shareholder, which
Schedule 2.3 shall be finalized and presented to Buyer no later
than three business days prior to the Closing Date.
2.4 Escrow Agreement and Pension Escrow Fund.
(a) A portion of the Merger Consideration ("Pension Escrow Fund") will be
placed in escrow for the purpose of paying all costs and liabilities incurred by
the Company in connection with termination of the Pension Plan, including legal,
accounting, actuarial and other expenses which would be incurred in connection
with the termination of the Pension Plan. The amount of the Pension Escrow Fund
shall be $4,000,000. Concurrently with the execution of this Agreement, the
Company shall have delivered to Buyer an actuarial report of Sedgwick Noble
Lowndes providing an estimate of termination liabilities as of May 31, 1998 for
the Pension Plan and the value of Pension Plan assets as of a recent date.
Between the date of this Agreement and the Closing Date (or the earlier
termination of this Agreement pursuant to Section 8.1), the Pension Plan assets
shall be invested in securities and other instruments reasonably acceptable to
the Buyer.
(b) The Pension Escrow Fund will be disbursed by the Escrow Agent in
accordance with the Escrow Agreement substantially in the form of Exhibit C
hereto. Subject to Section 2.4(c)
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below, after the Closing, the Buyer shall cause the Company to take all actions
reasonably necessary to effectuate the termination of the Pension Plan. In the
course of effectuating the termination of the Pension Plan, the Company shall
comply with all Applicable Law, including ERISA.
(c) After the Closing, at the election of the Buyer, if the cost to
terminate the Pension Plan exceeds or is expected to exceed the Pension Escrow
Fund, including any interest accrued thereon, the Buyer shall have the right to
withdraw the termination of the Plan and make a claim under the Escrow Agreement
for the full amount of the Pension Escrow Fund.
2.5 Closing Procedures. At the Closing, the Company will deliver to Buyer
the Closing Liability Schedule and the Closing Certificate.
2.6 Closing of Company Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of shares of
capital stock of the Company shall thereafter be made. If, after the Effective
Time, Certificates formerly representing shares of Common Stock are presented to
Buyer or the Surviving Corporation, as the case may be, they shall be canceled
and exchanged for the portion of the Merger Consideration into which such shares
are convertible under Section 2.1.
2.7 Transfer Taxes. The Surviving Corporation shall bear and pay any
applicable sales, transfer, stamp, documentary, and other similar Taxes (which
shall be reflected on the Closing Liability Schedule), other than any Taxes
based on income, and governmental fees that are due or payable as a result of
the transactions contemplated by this Agreement.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of Buyer and MergerSub as
follows:
3.1 Organization; Powers.
(a) Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the state of
New York and is duly qualified as a foreign corporation and in good standing
under the laws of each other jurisdiction in which such qualification is
required, except where failure to so qualify and/or be in good standing would
not have a Material Adverse Effect.
(b) Each of the Company and its Subsidiaries has the requisite corporate
power and authority and all necessary Government Approvals to own, lease and
operate its Properties and to carry on its business as it is presently being
conducted. The Company has heretofore made available to Buyer and MergerSub a
complete and correct copy of the Certificate
14
of Incorporation and the By-Laws, each as amended to date, of the Company and
each of its Subsidiaries. Such Certificates of Incorporation and By-Laws are in
full force and effect. Neither the Company nor any of its Subsidiaries is in
violation of any provision of its Certificate of Incorporation or By-Laws.
(c) Schedule 3.1 lists each director and officer (including the
title/position held) of the Company and each Subsidiary.
3.2 Authorization of Transaction; Noncontravention.
(a) The Company has all requisite corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby to be consummated by it. The
execution and delivery by the Company of this Agreement, the performance by the
Company of its obligations hereunder and the consummation by it of the
transactions contemplated hereby to be consummated by it have been duly and
validly authorized by all necessary corporate action on the part of the Company.
This Agreement has been duly executed and delivered by the Company and this
Agreement constitutes the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to the
effects of bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).
(b) Other than as set forth on Schedule 3.2, neither the execution and the
delivery by the Company of this Agreement, the performance by it of its
obligations hereunder, nor the consummation by it of the transactions
contemplated hereby to be consummated by it in accordance with the terms hereof
will (i) violate or conflict with any provision of the Certificate of
Incorporation or By-laws of the Company or any of its Subsidiaries, (ii) violate
or conflict with any law, rule, regulation or any court or administrative order,
judgment, decree, injunction or other binding action or requirement of any
Governmental Authority to or by which the Company or any of its Subsidiaries (or
any of their material Property) is a party or is bound, (iii) require the
approval of or a filing or registration with any Governmental Authority (other
than the filing of the Certificate of Merger and any filings under the HSR Act),
(iv) whether after notice or lapse of time or both, violate, breach or conflict
with any provision of, result in the loss of a material benefit under, give the
other parties thereto any rights or benefits not otherwise applicable under, or
permit the termination or acceleration of any Material Contract or Purchase and
Sale Transaction, (v) require any authorization, consent or approval of,
exemption or other action by, or notice to, any party to any Material Contract
or Purchase and Sale Transaction, or (vi) result in the creation or imposition
of any Lien upon any Property of the Company or any of its Subsidiaries.
15
3.3 Capitalization; Shares.
(a) The authorized capital stock of the Company consists of 5,700 shares of
capital stock, of which (i) 2,200 shares are Common Stock, without par value,
(ii) 2,000 shares are Class A Preferred Stock, par value $100 per share, and
(iii) 1,500 shares are Class B Preferred Stock, par value $100 per share.
1,038.0014 shares of Common Stock are outstanding and are validly issued, fully
paid, and nonassessable. As a result of the transactions contemplated by this
Agreement, an additional 63.1977 shares of Common Stock will be issued under the
Xxxxxxx Employment Agreement on or prior to the Closing Date, which shares, upon
issuance, will be validly issued, fully paid and nonassessable. No shares of
Preferred Stock are issued or outstanding.
(b) Except as set forth in Section 3.3(a) above, there are no shares of
capital stock or other equity or voting securities of the Company issued,
reserved for issuance or outstanding. There are no outstanding bonds,
debentures, notes or other indebtedness or other securities of the Company
having the right to vote (or convertible into, or exchangeable or exercisable
for, securities having the right to vote) on any matters on which stockholders
of the Company may vote. Except as set forth in Section 3.3(a) above, there are
no outstanding options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of its
Subsidiaries is a party or by which any of them is bound obligating the Company
or any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other securities of the
Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. There
are no outstanding contractual obligations, commitments, understandings or
arrangements of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire or make payment in respect of any shares of capital stock of
the Company or any of its Subsidiaries or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
such Subsidiary or any other entity. Except as set forth in Schedule 3.3, there
are no proxies with respect to the shares of capital stock of the Company or any
of its Subsidiaries and there are no agreements or understandings between or
among any Persons which affect or relate to the voting or giving of written
consents with respect to any security of the Company or any of its Subsidiaries.
Except as set forth in Schedule 3.3, there are no agreements or arrangements to
which the Company or any of its Subsidiaries is a party pursuant to which the
Company is or could be required to register shares of Common Stock or other
securities under the Securities Act of 1933, as amended. The Company has not
adopted a shareholders' rights plan. All outstanding shares of capital stock of
the Company are duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive or similar rights.
(c) Schedule 3.3 contains a true, accurate, and complete list of the names
of the Shareholders of record and the number and class of shares held of record
by each Shareholder as of the date hereof, and as at the Effective Time after
giving effect to the shares of Common
16
Stock to be issued pursuant to the issuance of stock under the Xxxxxxx
Employment Agreement. All issued and outstanding shares of capital stock of the
Company is owned of record by the Shareholders as set forth in Schedule 3.3.
Immediately prior to the Effective Time, the shares of Common Stock set forth on
Schedule 3.3 shall be owned by the Shareholders free and clear of any Liens,
encumbrances, security agreements, claims, equities, charges, restrictions,
voting agreements, proxies, options, rights of first refusal, calls, contractual
rights or other interests.
(d) The Company has no Subsidiaries other than MAIC and MMC, and does not
own or hold or have the right to acquire any equity interest in any Person,
directly or indirectly. All of the outstanding shares of capital stock of each
of the Subsidiaries have been validly issued and are fully paid and
non-assessable and not subject to preemptive or similar rights. The Company owns
all of the capital stock of MAIC and MMC, free and clear of all Liens, and there
are no outstanding options, warrants, or other rights in or with respect to the
unissued or treasury shares of capital stock of MAIC or MMC, or any other
securities convertible into capital stock of MAIC or MMC.
(e) Schedule 3.3 sets forth the outstanding indebtedness for borrowed money
of the Company and its Subsidiaries. Except as set forth on Schedule 3.3,
neither the Company nor any of the Subsidiaries is in conflict with or in
default or violation of (with or without the giving of notice or lapse of time
or both) of any of the material terms of such indebtedness nor has any event or
condition occurred which would give the holders of such indebtedness the right
to accelerate the maturity of or require repayment of such indebtedness prior to
its stated maturity, other than this Agreement.
3.4 Financial Statements. Copies of the audited consolidated balance sheets
of the Company and its Subsidiaries as of May 31, 1996 and 1997, and the related
consolidated statements of income and cash flow of the Company and its
Subsidiaries for the fiscal years ended May 31, 1995, 1996 and 1997 and the
notes thereto, accompanied by opinions of Xxxxx Xxxxxxxxxx & Co., LLP,
independent public accountants of the Company, and the unaudited consolidated
balance sheets of the Company and its Subsidiaries as of February 28, 1997 and
1998, and consolidated statements of income and cash flow of the Company and its
Subsidiaries for the nine months ended February 28, 1997 and 1998 (collectively,
the "Company Financial Statements"), duly certified by the controller and
President of the Company, have been furnished to the Buyer. The Company
Financial Statements (a) have been prepared in accordance with GAAP applied on a
consistent basis during the periods covered thereby, (b) fairly present the
consolidated financial condition of the Company as of such dates and the
consolidated results of the operations of the Company for the periods ended on
such dates , (c) contain and reflect all necessary adjustments and accruals for
a fair presentation to the Company's consolidated financial condition and the
consolidated results of its operations for the periods covered by the Company
Financial Statements, (d) contain and reflect adequate provisions for all
reasonably anticipated liabilities for all Taxes, with respect to the periods
then ended and all prior periods, (e) with respect to Contracts, Purchase and
Sale Transactions and commitments for the sale of goods or the provision of
services by the Company and its Subsidiaries, contain and reflect
17
adequate reserves for all anticipated losses, returns and allowances and costs
in excess of anticipated receipts, and (f) do not reflect items resulting
directly from the transactions contemplated by this Agreement other than
accounts payable which have been paid in the ordinary course of business. Since
the date of the unaudited financial statements there has been no change that
would represent a Material Adverse Effect other than changes resulting directly
from the transactions contemplated by this Agreement, including, without
limitation (i) the liabilities set forth on the Closing Liability Schedule, (ii)
the termination of the Pension Plan, and (iii) the compensation expense which
the Company will recognize upon (A) issuance of shares of Common Stock to Xx.
Xxxxxxx in accordance with the Xxxxxxx Employment Agreement, and (B)
cancellation of restrictions on Common Stock issued under the Restricted Stock
Bonus Plan. The projections attached hereto as Schedule 3.4 ("Projections") were
prepared in good faith by the Company based on reasonable assumptions, and to
the best knowledge of the Company, no event or condition relating to the
Company's ongoing business and operations, has occurred that would make the
Projections inaccurate or misleading in any material respect.
3.5 Litigation. There are no actions, suits, proceedings, orders, decrees
or judgments at law or in equity or by or before any Governmental Authority or
other agency now pending or, to the best knowledge of the Company, threatened
against or affecting the Company or its Subsidiaries or any Property or rights
of the Company or its Subsidiaries which, if adversely determined, could
reasonably be expected to, individually or in the aggregate, materially impair
the right of the Company or its Subsidiaries to carry on business substantially
as now being conducted or as presently contemplated or would result in a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries nor any
Property or asset of the Company or any of its Subsidiaries is subject to any
order, writ, judgment, injunction, decree, determination or award which has had,
or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Affect.
Schedule 3.5 sets forth an accurate and complete description of every
pending or, to the best knowledge of the Company, threatened legal action,
claim, suit, investigation, arbitration and legal, administrative or other
proceeding of any nature, domestic or foreign, criminal or civil, at law or in
equity, by or against or otherwise affecting the Company or any of its
Subsidiaries or their respective operations, Properties, financial condition or
prospects.
3.6 Tax Returns.
(a) The Company and its Subsidiaries have timely filed or caused to be
timely filed with the appropriate taxing jurisdictions, all Federal, state,
local and foreign Tax Returns required to be filed, have timely paid or caused
to be timely paid all Taxes as shown on such returns or on any assessment
received by them to the extent that such Taxes have become due, except (i) such
Taxes the amount, applicability or validity of which are being contested in good
faith by appropriate proceedings diligently conducted and with respect to which
the Company or its Subsidiaries shall have set aside on its books full and
adequate reserves with respect to such Taxes as are required by GAAP, or (ii)
for the Company's nonpayment of its estimated federal
18
income tax due February 15, 1998, in the amount of $1,000,000, as a result of
the anticipated reduction or elimination of the Company's federal income tax
liability for the tax period prior to the Closing as a result of the
transactions contemplated by this Agreement. The Company and its Subsidiaries
have established on the Company Financial Statements reserves which are adequate
for the payment of any Taxes not yet paid or due and payable, which reserves do
not reflect items resulting from the transactions contemplated by this Agreement
(including, without limitation, the compensation expense which the Company would
recognize upon (A) the issuance of shares of Common Stock at Closing to Xx.
Xxxxxxx in accordance with the Xxxxxxx Employment Agreement (although reserves
may have been adjusted for stock issued prior to Closing), and (B) cancellation
of restrictions on Common Stock issued under the Restricted Stock Bonus Plan).
(b) Except as disclosed in Schedule 3.6, no audits or other administrative
or court proceedings are pending or proposed with respect to the Company or any
of its Subsidiaries that relate to any Federal, state, local or foreign Taxes.
(c) No claim has been made by any taxing authority for material unpaid
Taxes against the Company or any of its Subsidiaries that has given rise to a
Lien against any assets of Property of the Company or any of its Subsidiaries.
(d) Except as set forth in Schedule 3.6, neither the Company nor any of its
Subsidiaries is a party to or bound by (nor will any of them become a party to
or bound by) any tax indemnity, tax sharing, or tax allocation agreement.
(e) Except as set forth in Schedule 3.6, neither the Company nor any of its
Subsidiaries has ever been a member of an affiliated group of corporations
within the meaning of Section 1504 of the IRC, other than the affiliated group
of which the Company is the common parent.
(f) Neither the Company nor any of its Subsidiaries has filed a consent
pursuant to the collapsible corporation provisions of Section 341(f) of the IRC
(or any corresponding provision of state or local law) or agreed to have Section
341(f)(2) of the IRC (or any corresponding provisions of state or local law)
apply to any disposition of any asset owned by the Company or any of its
Subsidiaries, as the case may be.
(g) Except as set forth in Schedule 3.6, neither the Company nor any of its
Subsidiaries has agreed to make nor is any required to make any adjustment under
Section 481(a) of the IRC by reason of a change in accounting method or
otherwise.
(h) Except as set forth in Schedule 3.6, no taxable period of the Company
or any Subsidiary of the Company that ended after May 31, 1992 has been subject
to an audit by a relevant taxing authority.
19
(i) There is no contract, agreement, plan, or arrangement covering any
employee or former employee of the Company or any of its Subsidiaries that,
individually or collectively, would give rise to a payment that would not be
deductible by reason of Section 280G of the Code.
3.7 No Defaults. Neither the Company nor any of its Subsidiaries is in
conflict with, or in default or violation of, any law, rule, regulation, order,
judgement, decree, injunction or requirement of any Governmental Authority
(including, without limitation, laws, rules and regulations relating to
government contracting) applicable to the Company or any of its Subsidiaries or
by which any Property or asset of the Company or any of its Subsidiaries is
bound or affected, except for any such conflicts, defaults or violations that
would not have, individually or in the aggregate, a Material Adverse Effect. All
exports and reexports made by or on behalf of the Company or any of its
Subsidiaries of commodities, software, or technology of United States origin
since January 1, 1993 have been in compliance in all material respects with all
United States laws and regulations governing exports.
3.8 Properties. As of the date hereof, each of the Company and its
Subsidiaries has good and marketable title to all of their Properties (other
than leased property), free and clear of all Liens of any nature whatsoever,
except Existing Liens. As of the Effective Time, each of the Company and its
Subsidiaries shall have good and marketable title to all of their Properties
(other than Leased Property), free and clear of all Liens of any nature
whatsoever, except Permitted Liens. Except as set forth on Schedule 3.8, each of
the Company and its Subsidiaries has the right to use all material leased
Property with valid and enforceable lease agreements expiring not earlier than
December 31, 1998. Schedule 3.8 contains a list of all real property owned or
leased by the Company or its Subsidiaries, including a summary of the principal
terms of each lease. Title to such real property owned by the Company and its
Subsidiaries is insurable by a nationally recognized title insurance company
subject only to Permitted Liens. Each material item of tangible personal
Property used by the Company or any of its Subsidiaries in connection with the
operation of their businesses is in operating condition and repair, is fit for
its intended purpose, and is usable in the ordinary course of business. During
the past twelve months, there has not been any significant interruption in the
operations of the Company or any of its Subsidiaries due to inadequate
maintenance of any item of tangible personal property.
3.9 Governmental Approvals. The Company and each Subsidiary has obtained
all Governmental Approvals which Governmental Approvals are necessary for it to
own, lease or operate its Properties and assets and to carry on its business as
presently conducted. All such Governmental Approvals are listed on Schedule 3.9.
All Governmental Approvals set forth in Schedule 3.9 have been duly obtained and
are in full force and effect unless otherwise indicated on Schedule 3.9. There
is no proceeding pending or, to the best knowledge of the Company, threatened
which seeks, or which may be expected, to rescind, terminate, modify, condition,
suspend or otherwise alter any Governmental Approval. Neither this Agreement nor
the transactions contemplated hereby will cause or result in the rescission,
termination, modification, suspension or alteration of any Governmental
Approval, nor will they require the consent or
20
approval of any Person with respect to any Governmental Approval (other than
filings required by the HSR Act).
3.10 Intellectual Property.
(a) Schedule 3.10 sets forth a true, correct and complete list of all
patents, copyrights, trademarks, trade names, service marks, logos and Internet
domain names, any registrations thereof and pending applications therefor which
are either owned by the Company or the Subsidiaries or licensed by or to the
Company or the Subsidiaries and indicates, with respect to each item of
Intellectual Property listed thereon, the owner thereof and, if applicable, the
name of the licensor and licensee thereof and the date(s) of any licenses or
other agreements or Contracts with respect thereto (which licenses, agreements
and other Contracts are valid and binding obligations of the parties thereto,
enforceable in accordance with their respective terms). The Company and each
Subsidiary owns or has the lawful right to use all Intellectual Property
necessary for the conduct of its business as now conducted, provided, that, with
respect to any patents or trademarks that are immaterial to the business of the
Company, such representation is being made only to the best knowledge of the
Company. The consummation of the transactions contemplated herein will not
adversely affect the nature or usefulness to the Company and its Subsidiaries of
any material item of Intellectual Property.
(b) Except as set forth in Schedule 3.10:
(i) The Company and each Subsidiary have full legal and beneficial
ownership (free and clear of any and all Liens) of, or a valid right to use
(free of any material restriction), all Intellectual Property necessary for
the conduct of its business, and neither the Company nor any Subsidiary has
received any notice or claim (whether written, oral or otherwise)
challenging the Company's or such Subsidiaries' ownership or rights in such
Intellectual Property or suggesting that any other Person (except, under
certain circumstances, the licensor thereof) has any claim of legal or
beneficial ownership with respect thereto or otherwise raising a dispute or
disagreement with respect to such Intellectual Property;
(ii) All Intellectual Property of the Company and the Subsidiaries is
legally valid and enforceable without any material qualification,
limitation or restriction on its use, and the Company and the Subsidiaries
have not, directly or indirectly through any of its Affiliates, received
any notice or claim (whether written, oral or otherwise) challenging the
validity or enforceability of any such Intellectual Property, including,
without limitation, the validity or enforceability of any license or other
Contract with respect to such Intellectual Property;
(iii) Neither the use of any of the Intellectual Property owned by the
Company or the Subsidiaries nor, to the best knowledge of the Company, any
other Intellectual Property used or licensed by the Company or the
Subsidiaries conflicts with, infringes
21
upon, violates or interferes with or constitutes an appropriation of any
right, title or interest held by any other Person, and there have been no
claims made with respect thereto; and
(iv) To the best knowledge of the Company, no other Person is
infringing on any part of the Intellectual Property listed on Schedule
3.10.
(v) Neither the Company nor any Subsidiary has done anything to
diminish or otherwise adversely affect the value or usefulness of any
material item of Intellectual Property, and neither the Company nor any
Subsidiary has or has caused anyone to copy or reproduce copyrighted
material that would materially diminish the value thereof or limit the
ability of the Company or a Subsidiary of the Company to enforce its rights
thereto.
(vi) No individual employee or third party contractor of, or
consultant to, the Company or its Subsidiaries who has worked on any
Intellectual Property necessary to the conduct of the Company's business
has any individual rights to such Intellectual Property which have not been
assigned to the Company or a Subsidiary. Neither the Company nor any of its
Subsidiaries has disclosed any confidential information in the possession
of the Company or any of its Subsidiaries under an obligation of
confidentiality to any third party, except pursuant to a valid and binding
agreement that prevents disclosure or misuse of such information, except
where such disclosure would not result in a Material Adverse Effect.
(c) The Company and the Subsidiaries have not conducted the Company's
business, and have not used or enforced (or failed to use or enforce) any
Intellectual Property, in a manner that would result in the abandonment,
cancellation or unenforceability of any item of the Intellectual Property listed
on Schedule 3.10, and the Company and the Subsidiaries have not taken or failed
to take any action that would result in the forfeiture or relinquishment of any
Intellectual Property used in the conduct of the Company's business as now
conducted.
(d) Protection and Maintenance of Intellectual Property. Except as set
forth in Schedule 3.10, (i) the Company has taken all reasonable steps to (A)
protect the Company's and Subsidiaries' rights to the Intellectual Property
listed on Schedule 3.10 and the secrecy, confidentiality and value of their
trade secrets, and (B) prevent the unauthorized use thereof by, or the
unauthorized disclosure thereof to, any other Person, in each case in accordance
with standard industry practice, and (ii) each of the Company and the
Subsidiaries shall use its Best Efforts to maintain, or cause to be maintained,
the Intellectual Property listed on Schedule 3.10 in full force and effect
through the Closing and, without limitation, has renewed or has made, and will
make within an applicable renewal period ending on or prior to the Closing,
application to renew all of such Intellectual Property subject to expiration on
or prior to the Closing. Except as set forth on Schedule 3.10, neither the
Company nor any Subsidiary, nor any of their respective Affiliates, has granted
to any other Person any rights or permissions to use any of the Intellectual
22
Property listed on Schedule 3.10. With respect to any part of the Intellectual
Property which was created by the Company, the Subsidiaries or any of their
agents or representatives (e.g., any copyrights, know-how, trade secrets, trade
rights or confidential or proprietary reports or information of the Company),
(A) to the best knowledge of the Company, no third party has any rights (whether
non-exclusive or otherwise) in such Intellectual Property, and, except pursuant
to reasonably prudent safeguards, no third party has received any confidential
information relating to such Intellectual Property, (B) the Company and the
Subsidiaries are not under any contractual or other obligation to disclose to
any third party any such Intellectual Property except pursuant to prudent and
reasonable safeguards, and (C) there are no known significant defects therein
and such Intellectual Property substantially conforms to all documentation and
materials produced by the Company and the Subsidiaries which described such
Intellectual Property.
3.11 Compliance With Laws; Environmental Matters. Each of the
representations and warranties set forth in this Section 3.11 is qualified in
its entirety by all disclosures contained in Schedule 3.11, including without
limitation, any environmental reports referred to therein, copies of which are
in the possession of the Buyer, and in any supporting documentation relating
thereto which has been so delivered to Buyer (the "Environmental Reports").
Except as disclosed on Schedule 3.11 and in the Environmental Reports:
(a) the operations of the Company and its Subsidiaries on a consolidated
basis comply in all material respects with all Applicable Laws, including all
applicable Environmental, Health or Safety Requirements of Law;
(b) neither the Company nor its Subsidiaries, or their Properties,
businesses or operations are subject to any investigation, judicial or
administrative proceeding, order, judgment, decree, settlement or other
agreement respecting (i) any Environmental, Health or Safety Requirements of
Law, (ii) any Response Action or (iii) any Claims or Liabilities and Costs
arising from the Release or threatened Release of a Contaminant;
(c) (i) for the past five years, neither the Company nor any
Subsidiary has filed any notice:
(A) under CERCLA, 42 U.S.C. ss. 9603(a), the Clean Water
Act, 33 U.S.C. ss. 1321(b)(5), or any other Environmental,
Health or Safety Requirements of Law reporting a Release or
threatened Release of a Contaminant;
(B) under CERCLA, 42 U.S.C. ss. 9603(c), or any state
equivalent indicating past or present treatment, storage or
disposal of a hazardous waste, as that term is defined under
40 C.F.R. Part 261 or any state equivalent; or
23
(C) reporting a material violation of any applicable
Environmental, Health or Safety Requirement of Law;
(ii) neither the Company's nor any Subsidiaries' present Property
is listed or, to the best knowledge of the Company, proposed for
listing on the National Priorities List pursuant to CERCLA ("NPL") or
on the Comprehensive Environmental Response Compensation Liability
Information System List or any similar state list of sites requiring
Response Action;
(d) there is not now, nor has there ever been on or in the Property of the
Company or either of its Subsidiaries during the past five years:
(i) any treatment, recycling, storage or disposal of any Contaminants
at levels requiring investigation or clean up under applicable
Environmental, Health or Safety Requirements of Law;
(ii) any underground or aboveground storage tank or surface
impoundment or underground injection well other than a well used as a
source of recirculating cooling water; or
(iii) any polychlorinated biphenyls (PCBs) used in hydraulic oils,
electrical transformers or other equipment;
(e) no Environmental Lien has attached to any property of the Company or
its Subsidiaries;
(f) all Asbestos Containing Material which is on or part of the Property
does not violate any applicable Environmental, Health or Safety Requirement of
Law; and
(g) none of the products that the Company or its Subsidiaries manufactures,
distributes or sells contains Asbestos Containing Material.
3.12 ERISA.
(a) Neither the Company nor any ERISA Affiliate maintains or contributes to
any Plan other than a Plan listed on Schedule 3.12 hereto, and no ERISA
Affiliate maintains or contributes to any Benefit Plan or Multiemployer Plan
other than a Plan listed on Schedule 3.12 hereto.
(b) Each Plan which is intended to be qualified under Section 401(a) of the
IRC has been determined by the IRS to be so qualified, and each trust related to
any such Plan has been determined to be exempt from federal income tax under
Section 501(a) of the IRC. Except as disclosed on Schedule 3.12, neither the
Company nor any ERISA Affiliate maintains
24
or contributes to any employee welfare benefit plan within the meaning of
Section 3(1) of ERISA which provides benefits to employees after termination of
employment other than as required by Section 601 of ERISA.
(c) Neither the Company nor any ERISA Affiliate has materially breached any
of the responsibilities, obligations or duties imposed on it by ERISA or
regulations promulgated thereunder with respect to any Plan. No Plan has
incurred any accumulated funding deficiency (as defined in Section 302(a)(2) of
ERISA and Section 412(a) of the IRC), whether waived or not waived. Neither the
Company nor any ERISA Affiliate nor any fiduciary of any Plan which is not a
Multiemployer Plan (i) has engaged in a nonexempt "prohibited transaction"
described in Section 406 of ERISA or Section 4975 of the IRC or (ii) has taken
or failed to take any action which would constitute or result in a Termination
Event. Neither the Company nor any ERISA Affiliate has incurred any liability to
the PBGC which remains outstanding other than the payment of premiums, and there
are no premium payments which have become due which are unpaid. Schedule B to
the most recent annual report filed with the IRS with respect to each Plan is
complete and accurate. Since the date of each such Schedule B, there has been no
adverse change in the funding status or financial condition of the Plan relating
to such Schedule B. Since its last valuation date, there have been no amendments
to such Plan that increase the present value of accrued benefits.
(d) Neither the Company nor any ERISA Affiliate has (i) failed to make a
required contribution or payment to a Multiemployer Plan or (ii) made a complete
or partial withdrawal under Sections 4203 or 4205 of ERISA from a Multiemployer
Plan, nor has the Company or any ERISA Affiliate suffered a 70% decline in its
Contribution base units within the meaning of ERISA Section 4205(h)(1)(j) in any
Plan Year beginning after 1979. Neither the Company nor any ERISA Affiliate has
failed to make a required installment or any other required payment under
Section 412 of the IRC on or before the due date for such installment or other
payment. Neither the Company nor any ERISA Affiliate is required to provide
security to a Plan under Section 401(a)(29) of the IRC due to a Plan amendment
that results in an increase in current liability for the plan year.
3.13 Insurance. Schedule 3.13 contains a true and complete list of all
insurance policies and binders to which the Company or any of its Subsidiaries
is a party or by which any of their material Properties or assets are covered,
specifying the insurer, the policy number or covering note number with respect
to binders and describing each pending claim thereunder of more than $100,000.
All of such insurance is in full force and effect. Except as set forth in
Schedule 3.13, none of such insurance policies or binders has been issued by
Affiliates of the Company or any of its Subsidiaries or cover any Persons other
than the Company and its Subsidiaries and their respective directors, officers,
employees, representatives or agents (in their capacities as such). The
insurance coverage maintained by the Company and its Subsidiaries is in such
amounts, types, and forms as are, in the opinion of management of the Company,
appropriate for the Company's and its Subsidiaries' business, operations,
properties, and assets. There are no outstanding unpaid claims under any
insurance policy or binder set forth in
25
Schedule 3.13, and neither the Company nor any of its Subsidiaries has received
a notice of cancellation or non-renewal of any such policy or binder. No such
policy or binder is terminable, modifiable, suspendable or cancelable by the
insurer by virtue of the consummation of the transactions contemplated by this
Agreement.
3.14 Labor Matters. Neither the Company nor its Subsidiaries is a party to
or is subject to any collective bargaining agreement, and there are no strikes
or other labor disputes against the Company or any Subsidiary pending or, to the
Company's Knowledge, threatened. The Company and each of its Subsidiaries have
complied in all material respects with all labor agreements and all Applicable
Laws relating to the employment of labor, including those related to wages,
hours, collective bargaining, occupational safety, and the payment of social
security and other payroll related Taxes, and neither the Company nor any of its
Subsidiaries has received any notice alleging a failure to comply in any
material respect with any such laws, rules, regulations decrees, orders,
judgments, injunctions and requirements. No material controversies, disputes or
proceedings are pending or, to the best knowledge of the Company, threatened
against the Company or any of its Subsidiaries with respect to their employees.
As of the date hereof, to the best knowledge of the Company, there are no
activities or proceedings of any labor union to organize non-unionized
employees. All payments due from the Company or its Subsidiaries or for which
any claim may be made against the Company or its Subsidiaries on account of
wages and employee health and welfare insurance and other benefits have been
paid or accrued as a liability on the books of the Company or its Subsidiaries,
except as disclosed on Schedule 3.14. Except as disclosed on Schedule 3.14,
there are no employment agreements covering the employees or directors of the
Company or its Subsidiaries.
3.15 Force Majeure. No event of Force Majeure has occurred and is
continuing.
3.16 Books and Records. The books and records of the Company and its
Subsidiaries accurately reflect in all material respects the business and
affairs of the Company and such Subsidiaries and are maintained in a manner
sufficient to permit the preparation of financial statements prepared in
accordance with GAAP.
3.17 Accounts Receivable; Inventory.
(a) All accounts receivable that are reflected on the Company Financial
Statements represent valid obligations arising from sales actually made or
services actually performed, subject to reserves on the Company Financial
Statements established in accordance with GAAP. Subject to such reserves, and
subject to any additional reserves required as of the Closing as a result of
events occurring subsequent to this Agreement, substantially all of the accounts
receivable either have been or will be collected in full, without any material
set off, in the ordinary course of the Company's and its Subsidiaries' business.
(b) Except as set forth on Schedule 3.17, all inventory of the Company and
its Subsidiaries reflected on the Company Financial Statements is owned by the
Company or one of
26
its Subsidiaries, is located on property owned or leased by the Company or one
of its Subsidiaries (each location of which is listed on Schedule 3.17) or is in
transit to one of such locations, and consists of a quality and quantity usable
and salable in the ordinary course of business. Obsolete items and items of
below-standard quality have been written off or written down to net realizable
value in the Company Financial Statements. All inventories not written off have
been priced at the lower of cost or market on a first in, first out basis. Other
than the Existing Liens, neither the Company nor any of its Subsidiaries has
given or agreed to give any Person an acknowledgment or confirmation of a Lien
or any other preferential right of such Person to any of the inventory or other
assets of the Company or any of its Subsidiaries, including, without limitation,
any bailee letter, warehousemen's letter or similar instrument.
3.18 Brokers' Compensation. Except for the Company's agreement with BT
Alex. Xxxxx & Co. ("BT Xxxx Xxxxx"), neither the Company nor any of its
Subsidiaries is a party to any agreement or has any obligation to any broker,
finder, or investment banker relating to the transactions contemplated hereby.
3.19 Contracts.
(A) Schedule 3.19A lists all of the following agreements, other than
Purchase and Sale Transactions, to which the Company or any Subsidiary is a
party (each such agreement being listed under a subheading to such schedule
corresponding to the lettered paragraphs below):
(a) any Contract permitting a person to borrow money or for the deferred
purchase price of property, any letter of credit, any pledge, any security
agreement, any lease, any guarantee, and any subordination agreement or other
similar or related type of Contract (including, without limitation, the Loan
Agreements) as to which the Company or any Subsidiary is a debtor, pledgor,
lessee, or obligor;
(b) any Contract dealing with advertising, distributorship, licensing,
consulting, dealership, representative, or agency relationships for an amount in
excess of $50,000 per annum and which can not be terminated by the Company in
accordance with its terms upon not more than thirty days' notice without penalty
or cost;
(c) any Contract pursuant to which any Person is or will become pursuant to
the terms thereof entitled to any benefit or right (including, without
limitation, a right to notice, termination or acceleration) upon a change in
control of the Company or the sale of capital stock of the Company or any of its
Subsidiaries or any of their Properties or assets, which Contract has a value or
potential liability to the Company in excess of $100,000 or is otherwise
material to the business of the Company;
(d) any Contract (A) for the sale of its assets outside of the ordinary
course of business, or (B) for the grant of any preferential right to purchase
any of its assets, Properties, or rights;
27
(e) any Contract having a value or potential liability to the Company in
excess of $100,000 which obligates the Company or any Subsidiary for a period in
excess of one year, to purchase, sell, or provide services, materials, supplies,
merchandise, facilities, or equipment and which is not terminable without
penalty by the Company or such Subsidiary on not more than 30 days' notice
without penalty or cost;
(f) any Contract for any one capital expenditure (or series of related
capital expenditures), the amount of which is in excess of $100,000;
(g) any Contract for the employment of any officer, consultant or employee,
including, without limitation, any employee manual or policy (whether oral or
written) or any Contract, program or policy (whether oral or written) providing
for severance or similar benefits, bonuses, profit-sharing payments,
post-retirement benefits or other compensation of any nature;
(h) any Contract still in effect with any present or former officer,
director, consultant or employee with respect to, or which grants any bonuses or
other rights on account of a change in control of the Company or any Subsidiary
or any sale of the capital stock of the Company or any of its Subsidiaries or
any of their Properties or assets;
(i) any lease, rental or occupancy agreement, license, installment or
conditional sale agreement, or other Contract affecting the ownership of,
leasing of, title to, use of, or any leasehold or other interest in, any
Property (except personal property leases and installment or conditional sale
agreements having a value per item or aggregate payments of less than $50,000
and with terms of less than one year);
(j) any joint venture, partnership, or other Contract (however named)
involving a sharing of profits, losses and costs of liabilities by the Company
or either Subsidiary with any other Person;
(k) any Contract containing covenants that purport to restrict the business
activity of the Company or either Subsidiary or limit their freedom to engage in
any line of business or compete with any Person or any Contract that restricts
any Subsidiary from paying dividends or making distributions to the Company or
transferring any Property or assets to the Company or any other Subsidiary or
which restricts the Company or its Subsidiaries from granting Liens on its
Properties or assets;
(l) any power of attorney granted by the Company or either Subsidiary that
is currently effective; and
(m) any other Contract not otherwise set forth on the Schedules hereto
which involves an amount or has a value in excess of $100,000 or which was not
entered into in the ordinary course of business consistent with past practices.
28
The documents identified in Schedule 3.19(A) are collectively referred to herein
as the "Material Contracts," and individually as a "Material Contract." Each
Material Contract is in full force and effect and is a valid and binding
obligation of the Company and its Subsidiaries which are a party thereto and, to
the best knowledge of the Company, the other parties thereto, and is enforceable
in accordance with its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or law). No event or
condition has occurred which (whether with or without notice or lapse of time or
both) would constitute a material default in any of the material terms of any
Material Contract by the Company or any of its Subsidiaries or, to the best
knowledge of the Company, by any third party thereto. Neither the Company nor
any of its Subsidiaries has Knowledge of any anticipated material breach of any
Material Contract.
(B) Schedule 3.19B lists all purchase orders, sales confirmations, purchase
contracts and supply contracts, including, without limitation, all Government
Contracts, entered into by the Company or any Subsidiary in the ordinary course
of business ("Purchase and Sale Transactions"). The Company has no Knowledge of
any breach or default under any Purchase and Sale Transaction which could
reasonably be expected to have a Material Adverse Effect, or, in any instance
where the Company has Knowledge of any fact that may constitute a default under
any of the provisions of a Purchase and Sale Transaction, neither the Company
nor the other party or parties to such Purchase or Sale Transaction has
indicated an intention to terminate such Purchase and Sale Transaction or to
hold the other party liable thereto for damages for breach. Neither the Company
nor any Subsidiary has received a notice of default from any party to a Purchase
and Sale Transaction.
(C) True and correct copies of all documents listed on Schedule 3.19A and B
have been, upon request, made available to Buyer at the Company prior to the
date hereof. Except as set forth in Schedule 3.19C, the Company has no Knowledge
of any intention by any party to any Material Contract or Purchase and Sale
Transaction to: (a) terminate such Material Contract or Purchase and Sale
Transaction or materially amend the terms thereof, (b) refuse to renew such
Material Contract or Purchase and Sale Transaction upon expiration thereof if
renewable, or (c) renew such Material Contract or Purchase and Sale Transaction
upon expiration thereof on terms and conditions which are materially more
onerous to the Company and the Subsidiaries which are a party thereto than those
currently set forth therein. Except as set forth on Schedule 3.19C, there are
not now, nor have there been in the twelve month period prior to the date
hereof, any disagreements or disputes of a serious nature which relate to the
validity or interpretation of or performance under any Material Contract or
Purchase and Sale Transaction. Neither the Company nor any of its Subsidiaries
is under any material liability or obligation with respect to the return of
inventory or products sold by the Company or any of its Subsidiaries which are
in the possession of distributors, wholesalers, retailers or customers.
29
3.20 Bank Accounts. Schedule 3.20 contains a true and complete list, as of
the date hereof, of all bank accounts, investment accounts and safe deposit
boxes existing in the name of the Company or any of its Subsidiaries, showing
the name of each bank or financial institution in which the Company or either
Subsidiary has such an account or safe deposit box, the names of all persons
authorized to draw thereon or to have access thereto and the account number of
each such account or safe deposit box.
3.21 Suppliers. The Company and its Subsidiaries have good business
relationships with suppliers which are material to the Company's business.
Except as set forth in Schedule 3.21, no supplier of materials or services to
the Company or either Subsidiary in an aggregate amount in excess of $250,000
per year has during the last 12 months decreased materially or, to the best
knowledge of the Company, threatened to decrease or limit materially, except
upon the Company's or any Subsidiary's request, its provision of such materials
or services. To the best knowledge of the Company, there has not occurred any
termination, cancellation, or limitation of, or any material modification or
change in, the business relationships of the Company or either of its
Subsidiaries with any supplier of materials or services which would reasonably
be expected to have a Material Adverse Effect. The consummation of the
transactions contemplated hereby will not, to the best knowledge of the Company,
adversely affect the relationships between the Company or any of its
Subsidiaries and any such supplier.
3.22 Customers. Schedule 3.22 sets forth a list of the largest customers of
the Company and its Subsidiaries on a consolidated basis in terms of sales
generated in the Company's fiscal years ended May 31, 1996 and 1997 and sales
expected during the fiscal year ending May 31, 1998 (the "Major Customers"). The
Company and its Subsidiaries have maintained good business relationships with
the Major Customers since May 31, 1996. Except as set forth in Schedule 3.22, no
Major Customer has decreased materially or, to the best knowledge of the
Company, threatened to decrease materially its purchases of the services or
products of the Company or any of its Subsidiaries. Except as set forth on
Schedule 3.22, since May 31, 1996, neither the Company nor any of its
Subsidiaries has Knowledge of any termination, cancellation, or limitation of,
or any material modification or change in, the business relationships of the
Company or any of its Subsidiaries with any of the Major Customers. The
consummation of the transactions contemplated hereby will not, to the best
knowledge of the Company, adversely affect the relationships between the Company
and its Subsidiaries and any Major Customer.
3.23 No Material Misstatements. No representation contained herein contains
any material misstatement of fact or omits to state any material fact necessary
to make the statements therein not materially misleading.
3.24 Government Contracts.
(a) With respect to each Government Contract to which Company or any
Subsidiary is a party, except as set forth on Schedule 3.24: (i) the Company or
the Subsidiary has fully
30
complied with all applicable requirements of statute, rule, regulation or order,
whether incorporated expressly, by reference or by operation of law; (ii) all
representations and certifications were current, accurate and complete when
made; (iii) to the best knowledge of the Company, no allegation has been made,
either orally or in writing, that the Company or any of its Subsidiaries is in
breach or violation of any statutory, contractual or regulatory requirement;
(iv) no termination for convenience, termination for default, cure notice or
show cause notice has been issued, (v) for the past twelve months, no material
cost incurred by the Company or any of its Subsidiaries pertaining to such
Government Contract has been formally questioned or challenged, is the subject
of any investigation (other than routine review by the Government not resulting
in formal action) or has been disallowed by any Governmental Authority, and (vi)
for the past twelve months, no money due to the Company or any of its
Subsidiaries pertaining to such Government Contract has been withheld or set off
nor has any claim been made to withhold or set off money and the Company and its
Subsidiaries are entitled to all progress payments received with respect
thereto.
(b) Neither the Company, any Subsidiary, nor any directors, officers,
consultants or employees of the Company or any Subsidiary is (or for the last
three years has been) (i) under administrative, civil or criminal investigation,
indictment or information, audit or internal investigation with respect to any
alleged irregularity, misstatement or omission regarding a Government Contract;
or (ii) suspended or debarred from doing business with the U.S. Government or
any state or local government or from participating in Government Contracts, or
declared nonresponsible or ineligible for government contracting. Neither the
Company nor any Subsidiary has conducted or initiated any internal investigation
or made a voluntary disclosure to any U.S. Government, state or local government
entity with respect to any alleged irregularity, misstatement or omission
arising under or relating to any Government Contract. The Company knows of no
circumstances that would warrant the institution of suspension or debarment
proceedings or the finding of nonresponsibility or ineligibility on the part of
the Company or any Subsidiary or any of their respective officers, directors,
consultants or employees in the future.
(c) Other than as set forth in Schedule 3.24, there exist (i) no financing
arrangements with respect to performance of any current Government Contract;
(ii) no outstanding claims against the Company or any of its Subsidiaries,
either by the U.S. Government or by any prime contractor, subcontractor, vendor
or other third party, arising under or relating to any Government Contract; and
(iii) no disputes between the Company or any of its Subsidiaries and the U.S.
Government or any prime contractor, subcontractor or vendor arising under or
relating to any Government Contract. Except as set forth in Schedule 3.24,
neither the Company nor any Subsidiary has any interest in any pending or
potential claim against the U.S. Government or any prime contractor,
subcontractor or vendor arising under or relating to any Government Contract.
Except as set forth on Schedule 3.24, neither the Company nor any Subsidiary has
been notified that any Government Contract is under audit by the U.S. Government
or any other Person that is a party to such Government Contract (other than
routine reviews by the U.S. Government not resulting in formal action).
31
(d) No payment has been made by the Company or its Subsidiaries (or, to the
extent that the same might result in any liability on the part of the Company or
its Subsidiaries, to the best knowledge of the Company, by any Person on behalf
of the Company or its Subsidiaries) in connection with any Government Contract
in violation of applicable procurement laws or regulations or in violation of,
or requiring disclosure pursuant to, the Foreign Corrupt Practices Act. The
Company's and each of the Subsidiaries' cost accounting and procurement systems
and the associated entries reflected in their respective financial statements
with respect to Government Contracts are in compliance in all material respects
with Applicable Law.
(e) All material test and inspection results provided by the Company or any
of its Subsidiaries to the U.S. Government pursuant to any Government Contract
or to any other Person pursuant to a Government Contract or as a part of the
delivery to the U.S. Government or to any other Person pursuant to a Government
Contract of any article designed, engineered or manufactured by the Company or
its Subsidiaries were complete and correct in all material respects as of the
date so provided. The Company and its Subsidiaries have provided all material
test and inspection results to the U.S. Government or to any other Person
pursuant to a Government Contract as required by Applicable Law and the terms of
the Government Contracts.
3.25 Product Liability; Warranties
(a) Except as disclosed in Schedule 3.25, (i) there is no claim now pending
or, to the best knowledge of the Company, threatened by or before any
Governmental Authority alleging any defect in any product manufactured, shipped,
sold or delivered by the Company or any Subsidiary or alleging, with respect
thereto, any failure of the Company or any of its Subsidiaries to warn or any
breach by the Company or any of its Subsidiaries of any express warranties or
representations; (ii) there has not within the last three years been any product
recall, post-sale warning, rebate offer, or similar action (collectively
"Defective Product Action") conducted with respect to any product manufactured,
shipped, sold or delivered by the Company or any of its Subsidiaries, or any
investigation by any Governmental Authority concerning any Defective Product
Action; and (iii) during the last three years, there have been no material
defects in, failures to warn, or breaches by the Company or any of its
Subsidiaries of express warranties or representations with respect to, any
product manufactured, shipped, sold or delivered by the Company or any of its
Subsidiaries.
(b) Except as described in Schedule 3.25, there are not pending nor, to the
best knowledge of the Company, threatened, any material claims under or pursuant
to any warranty, whether express or implied, on products or services sold prior
to the date of this Agreement by the Company or any Subsidiary.
3.26 Absence of Undisclosed Liabilities. As of February 28, 1998, none of
the Company nor any of its Subsidiaries has any Liabilities and Costs which were
required to be but were not reflected in the consolidated balance sheet of the
Company and its Subsidiaries included in the most recent Company Financial
Statements.
32
3.27 Absence of Undisclosed Changes. Since February 28, 1998, other than as
set forth on Schedule 3.27, and other than the transactions contemplated by this
Agreement, there has not been (a) any material adverse change in the business,
condition (financial or otherwise), results of operations or prospects of the
Company and its Subsidiaries, taken as a whole, (b) any damage, destruction or
loss (whether or not covered by insurance) with respect to any Property or asset
of the Company or any of its Subsidiaries having, individually or in the
aggregate, a Material Adverse Affect, or (c) any entry by the Company or any of
its Subsidiaries into any commitment or transaction material to the Company and
its Subsidiaries taken as a whole other than in the ordinary course of business.
In addition, since February 28, 1998, other than as set forth on Schedule 3.27,
and other than the transactions contemplated by this Agreement, (i) none of the
Company nor any of its Subsidiaries has incurred any Liabilities and Costs
except Liabilities and Costs incurred in the ordinary course of business
consistent with past practices, (ii) the Company and its Subsidiaries have
conducted their businesses only in the ordinary course of business consistent
with past practices and have not taken any of the actions proscribed by Section
5.2, (iii) there has not been (a) any change by the Company or any of its
Subsidiaries in their accounting methods, principles and practices, (b) any
reevaluation by the Company or any of its Subsidiaries of any assets (including,
without limitation, any write down of inventory or writeoff of accounts
receivable) other than as required by GAAP, (c) any declaration, setting aside
or payment of any dividend or distribution in respect of any capital stock of
the Company or any redemption, purchase or other acquisition of any of its
securities, or (d) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the rate of
compensation payable or to become payable to any officer or key employee of the
Company or any Subsidiary.
3.28 Affiliate Transactions. Except as set forth on Schedule 3.28, there
are no agreements (oral or written) between the Company or any of its
Subsidiaries, on the one hand, and any Affiliate thereof (other than Affiliates
that are the Company or one of its Subsidiaries), on the other hand.
3.29 Dividends. Since February 28, 1998, neither the Company nor any of its
Subsidiaries has (i) amended its Certificate of Incorporation to alter its
capital stock, (ii) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock (in cash or otherwise), or (iii)
purchased or redeemed any shares of its capital stock.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company that each of the following
statements is true and correct on the date hereof:
33
4.1 Organization, Standing and Power. Buyer is duly organized and existing
as a corporation under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease, and operate its properties and
assets and to carry on its business as presently conducted and to consummate the
transactions contemplated hereby. MergerSub is duly organized and existing as a
corporation under the laws of the State of New York and has all requisite
corporate power and authority to enter into this Agreement and consummate the
transactions contemplated hereby. MergerSub does not own, lease, or operate any
properties or assets and has not carried on any business activities since its
inception other than in connection with the transactions contemplated by this
Agreement. MergerSub is a wholly-owned subsidiary of Buyer.
4.2 Authority of Buyer; No Violation.
(a) Buyer and MergerSub each have all requisite corporate power and
authority to enter into this Agreement and to consummate the Merger and the
transactions contemplated hereby. The execution and delivery by Buyer and
MergerSub of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Buyer and MergerSub, and this Agreement has been
duly executed and delivered by Buyer and MergerSub and is a valid and binding
obligation of Buyer and MergerSub, enforceable in accordance with its terms,
except in so far as the enforceability thereof may be limited by (i) applicable
bankruptcy, insolvency, moratorium, reorganization and other similar laws
affecting creditors' rights generally, or (ii) general principles of equity
regardless of whether asserted in a proceeding in equity or at law.
(b) Neither the execution and delivery by Buyer or MergerSub of this
Agreement, the consummation of the transactions contemplated herein, nor
compliance by Buyer and MergerSub with any of the provisions hereof, will: (i)
conflict with or result in a breach of any provision of their respective
Articles or Certificate of Incorporation or Bylaws; (ii) as of the Closing Date,
constitute a breach of or result in a default, or give rise to any rights of
termination, cancellation, or acceleration under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, franchise, license, permit,
agreement, or other instrument or obligation to which Buyer or MergerSub is a
party, or by which Buyer or MergerSub or any of their respective properties or
assets is bound which would cause a material adverse effect on the business,
operations, condition or affairs of Buyer or MergerSub or the ability of Buyer
or MergerSub to consummate the transactions contemplated hereby; or (iii)
violate any order, writ, injunction, decree, statute, rule, or regulation
applicable to Buyer or MergerSub or any of their respective properties or
assets. No consent of, approval of, notice to, or filing with any Governmental
Authority having jurisdiction over any aspect of the business or assets of Buyer
or MergerSub, and no consent of, approval of, or notice to or filing with any
other Person, is required in connection with the execution and delivery by Buyer
and MergerSub of this Agreement or the consummation by Buyer and MergerSub of
the transactions contemplated hereby, except the filing (i) of the Certificate
of Merger contemplated by Section 1.2, (ii) pursuant to the HSR Act, to the
extent applicable, and (iii) as set forth on Schedule 4.2.
34
4.3 Litigation. There is no private or governmental suit, claim, action, or
proceeding pending or, to Buyer's Knowledge, threatened, against Buyer, its
subsidiaries or Affiliates or against any of their directors or officers that
would impair the ability of Buyer or MergerSub to perform its obligations
hereunder.
4.4 Brokers or Finders. Other than Mentmore Holdings Corporation (whose
fees will be paid by Surviving Corporation), Buyer has not incurred any
obligation or liability, contingent or otherwise, for brokerage or finder's
fees, agents' commissions, or any similar payment in connection with this
Agreement.
4.5 Financing. Buyer will use its Best Efforts to conclude the financing
arrangements reflected in the Commitment Letter of Societe Generale dated April
16, 1998 or other suitable financing arrangements.
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 Access to Information. Between the date of this Agreement and the
Closing Date, the Company and its Subsidiaries will afford to the officers,
employees, financial advisors, financing sources, consultants, accountants,
attorneys, and authorized representatives of Buyer reasonable access during
normal business hours to the premises, personnel, advisors, consultants,
attorneys, accountants, representatives, properties, contracts, commitments, and
books and records of the Company and its Subsidiaries. The Company shall furnish
Buyer as promptly as practicable with such documents or copies thereof, and
other information concerning the business and affairs of the Company and its
Subsidiaries, including without limitation, any financial and operating data or
other periodic financial information, as Buyer shall, from time to time,
reasonably request. All information and documents provided to Buyer and its
agents shall be kept confidential by Buyer pursuant to the provisions of Section
9.10. The Company further agrees to use its Best Efforts to cause its and its
Subsidiaries' accountants, personnel, advisors, consultants, attorneys, and such
other persons as the parties shall mutually agree upon to fully cooperate with
Buyer and its representatives in connection with the right of access granted
herein.
5.2 Conduct of Business by the Company and its Subsidiaries. Between the
date of this Agreement and the Closing Date, the Company and its Subsidiaries
will cause their businesses to be operated only in the ordinary course and
consistent with past practices. Each of the Company and its Subsidiaries will
use its Best Efforts to (i) preserve intact the present business organization,
(ii) maintain in effect all material licenses, permits, and approvals of
Governmental Authorities which are necessary for the conduct of its business,
(iii) keep available the services of the present management and workforce, and
(iv) maintain good business relationships with suppliers, customers and
distributors and others having business dealings with
35
it. Except as otherwise contemplated by or permitted by this Agreement, or as
otherwise consented to or approved by Buyer in writing, the Company and its
Subsidiaries shall not:
(a) amend their Certificates of Incorporation or Bylaws or issue, sell,
grant, pledge, purchase, redeem, or otherwise encumber, or agree or commit to
issue, sell, grant, pledge, purchase, redeem, or otherwise encumber any shares
of their or the Company's capital stock; or grant, issue, create, sell, pledge,
purchase, redeem or otherwise encumber or agree to grant, issue, sell, pledge,
purchase, redeem, or otherwise encumber any options, warrants or rights to
purchase shares of their or the Company's capital stock or securities of any
kind convertible into or exchangeable for shares of their or the Company's
capital stock; or declare, set aside, make or pay any dividend or other
distribution in respect of their or the Company's capital stock other than
issuances of stock which may be made pursuant to the Xxxxxxx Employment
Agreement;
(b) except as set forth in Schedule 5.2, increase the compensation or rate
of compensation payable or to become payable to any of its present or former
employees, directors, consultants or officers, nor make any increase in
compensation or rate of compensation or benefits payable or to become payable to
employees, directors, consultants or officers who are parties to separation,
severance, or employment agreements with the Company, nor enter into any
separation, severance, or "change in control" agreements with any of its present
or former employees, officers, consultants or directors, nor enter into any
written or oral employment agreement which by its terms cannot be terminated on
thirty (30) days' notice or less without penalty;
(c) except as contemplated by or permitted by this Agreement and except as
set forth in Schedule 5.2, set aside, or pay to any present or former officer,
director, consultant or employee any bonus, profit-sharing, severance,
retirement, insurance, death, fringe benefit, or other extraordinary
compensation, nor adopt, amend, fund or commit itself to fund any employee
benefit plan or account related to any Plan with or for the benefit of any of
its present or former employees, consultants, directors or officers;
(d) acquire any business entity or all or substantially all of the assets
of a business entity;
(e) except as set forth on Schedule 5.2, make any capital expenditures, the
aggregate amount of which are in excess of $100,000, other than (i) emergency
repairs, and (ii) those scheduled in the Company's and its Subsidiaries capital
expenditure budget for 1998, a copy of which has been provided to Buyer;
(f) create or incur any liabilities in excess of $100,000, other than
liabilities incurred in the ordinary course of business or as contemplated or
permitted by or in connection with this Agreement and the consummation of the
Merger;
36
(g) voluntarily create or incur any Lien, or fail to take action to
discharge any involuntary Lien, against or in respect of any Property, except
for Permitted Liens;
(h) terminate any Material Contract or Purchase and Sale Transaction, or
enter into, renew, extend, amend, or modify any Material Contract or Purchase
and Sale Transaction in any manner that is materially burdensome to the Company
and/or would negatively impact its business plan, except as set forth on
Schedule 5.2;
(i) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practices or in accordance with their
terms, of liabilities reflected or reserved against in, or discussed in, the
most recent Company Financial Statements or incurred since the date of such
financial statements in the ordinary course of business consistent with past
practices or liabilities set forth on the Closing Liability Schedule to the
extent deducted from the Company Value in calculating the Merger Consideration;
(j) institute, settle, or agree to settle any claim, action, or proceeding
involving an expenditure in excess of $100,000 before any court or other
Governmental Authority;
(k) (i) default in any material respect under any Material Contract, or
(ii) default in any material respect under any Purchase and Sale Transaction
which, individually or together with other agreements or understandings with
respect to which a default exists, could reasonably be expected to have a
Material Adverse Effect;
(l) fail to maintain such liability, casualty, property, loss, and other
insurance coverage upon its properties and with respect to the conduct of its
business, on such terms, in such amounts, and with such insurance carriers and
to such extent and covering such risks as are maintained on the date hereof;
(m) acquire or dispose of any material assets or rights;
(n) make any loan or advance to any Person, other than to the Company or to
any Subsidiary and other than routine advances to employees of the Company and
its Subsidiaries, or enter into any other transaction with any Affiliate (other
than any such transaction between the Company or one or more of its
Subsidiaries) or employees other than as set forth in Schedule 5.2;
(o) prior to the Closing Date, prepay any obligation of the Company or any
of its Subsidiaries for money borrowed, capital leases, purchase money
indebtedness, or Taxes due and owing, including, without limitation, obligations
under the Loan Agreements;
37
(p) fail to collect accounts receivable and pay accounts payable in the
ordinary course of business consistent with past practices;
(q) fail to maintain working capital components at such levels as are
consistent with past practice and appropriate in connection with the financing
of the Company's operations;
(r) fail to maintain and comply with all Government Approvals;
(s) make payments, directly or indirectly, to or for the benefit of Xxxxxxx
Xxxxxxx or his family members or their respective Affiliates in an amount in
excess of $250,000 per month between the date of this Agreement and the Closing
Date, whether such payments are for compensation, the reimbursement of expenses
or otherwise (provided that, in no event shall the aggregate payments exceed
$3.2 million in the Company's fiscal year ended May 31, 1998 or a pro rated
lesser amount should the Closing Date occur prior to May 31, 1998); or
(t) authorize any of, or commit or agree to take any of the foregoing
actions.
In addition to the foregoing, the Company and its Subsidiaries shall not take
any action that would, or that could reasonably be expected to, result in (i)
any of the representations and warranties of the Company set forth in this
Agreement becoming untrue in any material respect or (ii) any of the conditions
of the other parties to the consummation of the transactions contemplated by
this Agreement and set forth in Section 6 not being satisfied.
5.3 Regulatory Matters. The Company, Buyer and MergerSub will make, and the
Company will cause its Subsidiaries to make, all necessary governmental and
regulatory filings, as soon as practicable, in order to facilitate prompt
consummation of the transactions contemplated by this Agreement. In addition,
the Company and its Subsidiaries, Buyer and MergerSub will each use its Best
Efforts, and will cooperate fully with each other (i) to comply as promptly as
practicable with all governmental requirements applicable to the transactions
contemplated by this Agreement and (ii) to obtain as promptly as practicable all
necessary Governmental Approvals and consents of all third parties necessary for
the consummation of the transactions contemplated by this Agreement. Each of the
Company and its Subsidiaries, Buyer and MergerSub shall use its Best Efforts to
provide such information and communications to Governmental Authorities as such
Governmental Authorities may request.
5.4 Audit/Updated Financial Information. The Company shall permit the Buyer
and the Buyer's representatives to audit the Company's consolidated books and
records as of February 28, 1998 and for the nine-month period then ended, at the
cost and expense of Buyer. The Company shall, and shall cause its accountants,
agents and employees to, cooperate fully in connection with such audit and make
available to the Buyer such books and records as are reasonably necessary to
conduct such audit. Buyer will use its Best Efforts to complete such audit on or
prior to May 27, 1998. As soon as internally available and in any event within
25
38
days after the end of each calendar month, the Company shall deliver to Buyer
complete copies of any internal unaudited monthly statements of earnings and
balance sheets for the previous calendar month. The Company covenants that,
except for normal interim and year-end audit adjustments, such financial
statements shall be prepared in accordance with GAAP (except for changes
required by GAAP) consistently applied, and shall fairly present in all material
respects the consolidated financial condition and results of operations of the
Company as of the dates indicated and for the periods then ended.
5.5 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its Best Efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper, or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using its Best Efforts to defend any lawsuits or other legal
proceedings, whether judicial or administrative, whether brought derivatively or
on behalf of third parties (including any Governmental Authority), challenging
this Agreement or the consummation of the Merger. In addition, the Company shall
provide such information and assistance as Buyer shall reasonably request or
require in connection with the financing for the transactions contemplated by
this Agreement, including by making available officers and advisors of the
Company and its Subsidiaries from time to time to attend and make presentations
regarding the business and prospects of the Company and its Subsidiaries at
meetings of prospective lenders or purchasers of the Company's debt or equity
securities, provided, however, that all meals, transportation and lodging costs
and expenses incidental thereto shall be for the account of Buyer. Without
limiting the generality of the foregoing, the Company shall use its Best Efforts
to cause its accountants, attorneys, advisors, employees and other
representatives to cooperate with Buyer and MergerSub in order to consummate and
make effective the transactions contemplated by this Agreement, including,
without limitation, the financing of such transactions. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement and the Shareholders shall take all such necessary
action.
5.6 Releases. The Buyer shall deliver a release at the Closing (i)
releasing the Shareholders of any liability of, or to, the Company or the Buyer
arising prior to the Closing other than liabilities which may arise under such
Shareholder's Letter of Transmittal and Shareholder Side Agreement, and (ii)
releasing the directors and officers of the Company and each of its Subsidiaries
of any liability of, or to, the Company or the Buyer arising under this
Agreement, or any other liability (other than any such liabilities for gross
negligence or willful misconduct and for acts for which indemnity would not be
available under the Company's Certificate of Incorporation or By-laws) arising
prior to the Closing. After the Closing, the Buyer shall continue to hold
harmless and indemnify the former officers and directors of the Company from any
claim asserted by any third party with respect to acts or omissions arising out
of such individual's services as officers or directors of the Company or any
Subsidiary occurring prior to the Effective Time, to the fullest extent
currently permitted by the Certificate of Incorporation and By-laws of the
Company. Notwithstanding the foregoing, Buyer shall not be obligated to release
any current or former director or officer of the Company or any Subsidiary from
any liability, or indemnify any current or former officer or director of the
Company or any Subsidiary from any claims or Losses of or to any Shareholder or
any Person acting on behalf of
39
or as a successor in interest to any Shareholder, or relating to any action
brought by any Shareholder.
5.7 Transaction Proposals. From the date hereof until the Closing Date (or
the earlier termination of this Agreement), the Shareholders and the Company
shall not, and the Company shall not permit any of its Subsidiaries to, and
neither the Shareholders nor the Company shall authorize or permit any of their
respective officers, directors, consultants or employees, or any of their
respective investment bankers, attorneys, advisors, auditors, representatives or
agents to, directly or indirectly, (i) solicit, initiate or encourage the
submission of inquiries, proposals or offers from any Person or group relating
to any acquisition or purchase of assets of, or any equity interest in, the
Company or any of its Subsidiaries or any tender or exchange offer, merger,
consolidation, business combination, recapitalization, restructuring, spin-off,
liquidation, dissolution or similar transaction involving, directly or
indirectly, the Company or any of its Subsidiaries (each a "Transaction
Proposal"), (ii) participate in any discussions or negotiations regarding any
Transaction Proposal or furnish information about the Company to any Person
except to (x) lenders and other parties to agreements with the Company and its
Subsidiaries (for the specific purpose set forth in such agreements, which in no
event shall include a Transaction Proposal) and (y) Buyer or MergerSub or their
representatives, (iii) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
Person to make or enter into a Transaction Proposal, or (iv) accept, approve or
authorize, or enter into any agreement concerning any Transaction Proposal or
dispose of any equity interest in the Company or any of its Subsidiaries. The
Company and the Shareholders shall cause their agents, officers, directors,
representatives and Affiliates to abide by the terms of this Section 5.7. In the
event that the Company or any Shareholder receives or becomes aware of any
Transaction Proposal, it shall promptly notify Buyer in writing of such
communication and keep Buyer informed of any subsequent developments in
connection therewith.
5.8 Notice of Certain Events. Each party shall notify the other parties if:
(a) any notice or other communication is received from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement is received;
(c) any actions, suits, claims, investigations or proceedings are commenced
or, to the best knowledge of such party, threatened against, relating to or
involving or otherwise affecting any party hereto which could interfere with the
consummation of the transactions contemplated by this Agreement or could result
in a Material Adverse Effect; and
(d) the occurrence or non-occurrence of any event would cause either (i)
any representation or warranty of any party contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time, (ii) any condition set forth in this Agreement to be
unsatisfied at any time from the date hereof to the Effective Time,
40
or (iii) any material failure by any party to comply with or satisfy any
covenant, condition or agreement to be complied with hereunder; provided, that
the delivery of any notice pursuant to this Section 5.8 shall not limit or
otherwise affect the remedies available hereunder to Buyer or MergerSub.
ARTICLE 6
CONDITIONS
6.1 Conditions Precedent to Obligations of Buyer and MergerSub. The
obligations of Buyer and MergerSub to consummate the transactions provided for
by this Agreement are subject to the satisfaction at or prior to the Closing
Date of each of the following conditions, any one or more of which may be waived
(but only in writing) by Buyer:
(a) Representations and Warranties of the Company. (i) All of the Company's
representations and warranties contained in this Agreement, shall be true and
correct, in the case of any representation or warranty that is qualified as to
materiality or "Material Adverse Effect," in all respects, and in the case of
any representation or warranty that is not so qualified, in all material
respects, as of the date hereof and as of the Closing Date as though made on and
as of the Closing Date, except to the extent such representations and warranties
speak as of an earlier date; (ii) the Company and its Subsidiaries shall each
have performed and complied with all agreements and covenants required by this
Agreement to be performed by them on or prior to the Closing Date; and (iii)
with respect to (i) and (ii), at the Closing there shall be delivered to Buyer a
certificate signed by the President of the Company to the foregoing effect.
(b) Orders; Illegality. There shall not be in effect any statute, rule,
regulation, preliminary or permanent injunction or other order or decree of a
Governmental Authority which enjoins, prohibits, makes illegal or materially
restricts or otherwise prevents the consummation of the Merger or the
transactions contemplated hereby, and there shall not be pending any proceeding
in which any Person seeks such a remedy.
(c) Third Party Consents and Waivers. There shall have been obtained all
consents, approvals and waivers from parties to all Material Contracts and
Purchase and Sale Transactions that are required in connection with the Merger,
including those listed on Schedule 3.2.
(d) Governmental and Regulatory Consents. All filings required to be made
prior to the Closing Date with, and all consents, approvals, novations (if
required), permits and authorizations required to be made or obtained prior to
the Closing Date from any Governmental Authority in connection with the
execution and delivery of this Agreement and the consummation of the
transactions hereby by the Company, Buyer and MergerSub shall have been made or
obtained.
(e) Opinion of Counsel. Buyer shall have received the opinion of counsel to
the Company and its Subsidiaries dated as of the Closing Date, in the form of
Exhibit F attached hereto.
41
(f) Resignations. Buyer shall have received, in form reasonably
satisfactory to Buyer, the resignations, effective as of the Closing Date, of
all directors of the Company and the Subsidiaries and the resignations of all
officers thereof other than the officers identified on Schedule 1.4.
(g) Repayment of Existing Obligations. All amounts reflected on the Closing
Liability Schedule as deductions from the Company Value pursuant to Section 2.3,
including, without limitation, amounts outstanding under the Loan Agreements,
shall have been paid in full with funds provided by the Buyer simultaneously
with, and conditioned upon, the Closing. Buyer shall have received from each
bank, creditor or other Person a written commitment and/or certification, in
form and substance satisfactory to Buyer, to the effect that upon receipt of
payment in full of the amount listed on the Closing Liability Schedule, all
claims against the Company and its Subsidiaries, all guaranties with respect to
such claims, and all Liens and security interests in its favor encumbering any
of the Company's or its Subsidiaries' Properties or assets will be released and
extinguished. In this regard the Buyer shall also have received UCC termination
statements, reconveyances of deeds of trust, releases of mortgages and all other
documents sufficient or necessary to terminate all agreements and release all
claims thereunder, and release all such Liens and security interests, with
authority to file and/or record the same in the appropriate governmental offices
upon payment of the relevant amounts.
(h) Termination of Guaranty. At or prior to the Closing, the Company's
guaranty of a loan from KeyBank, N.A. to Xxxxxxx Xxxxxxx shall be
unconditionally released at no cost to the Company.
(i) Stock Certificates. Buyer shall have received Certificates representing
all issued and outstanding shares of capital stock of the Company and Letters of
Transmittal executed from each Shareholder.
(j) Financing Conditions. All conditions, other than conditions which are
not satisfied by or through the fault of the Buyer or MergerSub, to borrowing
set forth in the Commitment Letter of Societe Generale dated April 16, 1998
shall be satisfied as of the Closing Date.
(k) Xxxx-Xxxxx-Xxxxxx. The waiting period applicable to the transactions
contemplated by this Agreement under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), including any extensions thereof, shall have expired or been
terminated.
(l) Closing Certificate. At or prior to the Closing Date, Buyer shall have
received the Closing Certificate ("Closing Certificate") which shall contain the
certification from the President and controller of the Company that (i) the
Closing Liability Schedule is accurate and complete, and (ii) the Company's
Working Capital is at least $29,375,000, and the Company's Shareholders Equity
is at least $13,800,000 as of the Closing Date (without giving effect to the
costs, expenses and effects of the transactions contemplated by this Agreement,
including, without limitation, the issuance of stock to Xx. Xxxxxxx under the
Xxxxxxx Employment Agreement or the cancellation of restrictions on stock issued
under the Restricted
42
Stock Bonus Plan). The Closing Certificate shall contain such supporting
documentation as is reasonably necessary to demonstrate the accuracy of the
information contained therein, and the Buyer shall be reasonably satisfied that
the Closing Certificate and the information contained therein does not contain a
manifest error.
(m) Environmental Audits. The Buyer shall have received "Phase I"
environmental assessment reports of the environmental condition of the real
property owned or leased by the Company and its Subsidiaries which confirm the
correctness of the warranties, representations and covenants of the Company in
Section 3.11 hereof and which disclose no condition which could have a Material
Adverse Affect or could subject the Company to liability or remediation costs in
excess of $100,000.
(n) Non-competition/Monitor Asia. Xxxxxxx Xxxxxxx shall have entered into
(i) the Non-competition Agreement with Xx. Xxxxxxx substantially in the form of
Exhibit E-1, and (ii) the Monitor Asia Agreements substantially in the forms set
forth in Exhibit E-2, hereto.
(o) Employment of Management. The Company shall have entered into an (i)
amended employment agreement substantially on the terms described in Exhibit G-1
hereto with R. Xxxxx Xxxxxxx, and (ii) amended consulting agreement
substantially in the form set forth in Exhibit G-2 with Xxxxxxxx Xxxxxxxx.
(p) Escrow Agreement. The Company, the Majority Noteholder and the Escrow
Agent shall have executed the Escrow Agreement.
(q) Audit. Buyer shall have received the audited financial statements
described in Section 5.4 accompanied by an unqualified audit opinion, and the
audit shall present no reportable conditions and no indication of misfeasance,
malfeasance, misrepresentation, fraud or material irregularities, no material
weaknesses in accounting systems and controls and no material deviation from the
financial statements dated as of February 28, 1998 and for the nine-month period
then ended, which were certified and delivered by the Company to the Buyer prior
to the date hereof.
(r) CATIC Machines. The Company shall have entered into definitive
agreements with Catic International Leasing Co., Ltd. regarding the purchase,
sale, exchange or lease of four gantry profilers, in form and substance
satisfactory to the Buyer.
6.2 Conditions Precedent to Obligations of the Company. The obligations of
the Company to consummate the transactions provided for by this Agreement are
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any one or more of which may be waived by the Company (but
only in writing):
(a) Representations and Warranties of Buyer and MergerSub. All of Buyer's
and MergerSub's representations and warranties contained in this Agreement shall
be true and correct in all material respects as of the date hereof and as of the
Closing Date as though made on and as of the Closing Date, except to the extent
such representations and warranties speak as of an earlier date, (ii) Buyer and
MergerSub shall have performed and complied with all agreements
43
and covenants required by this Agreement to be performed by them on or prior to
the Closing Date; and (iii) with respect to (i) and (ii), at the Closing there
shall be delivered to the Company a certificate signed by an executive officer
or authorized representative of Buyer and MergerSub to the foregoing effect.
(b) Orders; Illegality. There shall not be in effect any statute, rule,
regulation, preliminary or permanent injunction or other order or decree of a
Governmental Authority which enjoins, prohibits, makes illegal or materially
restricts or otherwise prevents the consummation of the Merger or the
transactions contemplated hereby, and there shall not be pending any proceeding
in which any Person seeks such a remedy.
(c) Buyer's Note. The Noteholders shall have received the Buyer's Note
substantially in the form of Exhibit B hereto, duly executed by the Surviving
Corporation.
(d) Opinion of Counsel. The Company shall have received the opinion of
counsel to Buyer in the form attached as Exhibit H hereto.
(e) Loan Agreements/Expenses. At the Closing, MergerSub shall have
available sufficient funds to make the payments listed on the Closing Liability
Schedule if required to be paid at that time, and the guaranties of Xxxxxxx
Xxxxxxx under the Loan Agreements shall be unconditionally released at the
Closing without recourse against Xx. Xxxxxxx.
(f) Release. The Buyer shall deliver the release referred to in Section 5.6
in the form attached as Exhibit I hereto.
(g) Merger Consideration. At the Closing, Buyer and MergerSub shall have
available cash sufficient to pay the Merger Consideration, the Pension Escrow
Fund, and the liabilities listed on the Closing Liability Schedule if required
to be paid at that time. At the Closing, Buyer and MergerSub shall pay to each
Shareholder who has delivered to Buyer such Shareholder's Certificates and
Letter of Transmittal, the Shareholder's portion of the Merger Consideration and
shall deliver to the Escrow Agent, the Pension Escrow Fund.
(h) Employment Obligations. At the Closing, bonuses due through May 31,
1998 in the amounts and to the senior executives of the Company listed on
Schedule 6.2(h), shall be paid to each such executive in immediately available
funds by wire transfer to an account designated by such executive. To the extent
that the bonuses exceed $1,000,000, the excess shall be included on the Closing
Liability Schedule and deducted from the Company Value in calculating the Merger
Consideration. The amount of the bonuses due on account of operations of the
Company shall be calculated without giving effect to the transactions
contemplated by this Agreement.
(i) Non-competition/Monitor Asia. The Company shall have entered into (i)
the noncompetition agreement with Xx. Xxxxxxx substantially in the form of
Exhibit E-1, and (ii) the Monitor Asia Agreements substantially in the forms set
forth in Exhibit E-2, hereto.
44
(j) Employment of Management. The Company shall have entered into an (i)
amended employment agreement substantially on the terms described in Exhibit G-1
hereto with Xxxxx Xxxxxxx, and (ii) amended consulting agreement substantially
in the form set forth in Exhibit G-2 with Xxxxxxxx Xxxxxxxx.
(k) Xxxx-Xxxxx-Xxxxxx. The waiting period applicable to the transactions
contemplated by this Agreement under the HSR Act, including any extensions
thereof, shall have expired or been terminated.
(l) Escrow Agreement. The Buyer and the Escrow Agent shall have executed
the Escrow Agreement.
ARTICLE 7
TERMINATION
7.1 Termination. By notice given at or prior to the Closing, this Agreement
may be terminated and the transactions contemplated hereby may be abandoned:
(a) by either Buyer or the Company if a material breach of any provision of
this Agreement has been committed by the other party and such breach has not
been waived, provided that written notice of such breach has been given to the
breaching party and the breaching party has failed to cure such breach within 30
days of receipt of such notice;
(b) by Buyer or the Company, as the case may be, if any of the conditions
for the benefit of the terminating party in Article 6 have not been satisfied as
of the Closing Date or become impossible (other than through the failure of that
party to comply with its obligations under this Agreement) and that party has
not waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer and the Company; or
(d) by either Buyer or the Company if the Merger shall not have been
consummated (other than through the failure of the party seeking termination to
comply fully with its obligations under this Agreement) on or before May 30,
1998, or such later date as the parties may agree upon.
No termination of this Agreement under this Section 7.1 for any reason or in any
manner shall release, or be construed as releasing either party from its
obligations under Article VII or Section 9.10 hereof.
7.2 Effect of Termination or Failure to Consummate Merger. In the event of
the termination of this Agreement as provided in Section 7.1, (i) written notice
thereof shall forthwith be given to the other party or parties specifying the
provision hereof pursuant to which such termination is made, (ii) all documents
and materials forwarded by the Company to the Buyer shall be promptly returned
to the Company as required by Section 9.10, and (iii) this Agreement shall
become void and of no further force or effect, except that this Article VII and
45
Section 9.10 shall remain in full force and effect. Upon termination of this
Agreement under Section 7.1, there shall be no liability on the part of any
party hereto except in the event of a termination that constitutes a Payment
Event. In the event that the transactions contemplated by this Agreement do not
occur for any reason, the sole and exclusive remedy of the Buyer or MergerSub
with respect to such failure to close shall be as set forth in Section 7.3(a),
and the parties will have no other remedies against, and will have no liability
to, each other and each other parties' respective Affiliates, agents, officers,
directors, shareholders, partners or representatives except as set forth in
Section 9.10 and this Article VII.
7.3 Termination Payment.
(a) Within five business days after the occurrence of a Payment Event, the
Company shall pay to an account designated by Buyer, in immediately available
funds, a cancellation fee equal to $2,500,000.
(b) A "Payment Event" shall mean the termination of this Agreement or the
failure to consummate the Merger as a result of any of the following:
(i) the Buyer terminates this Agreement pursuant to Section 7.1(a), (b) or
(d) because of the voluntary, willful and intentional failure of the Company to
comply with any of the material provisions set forth in this Agreement, provided
that such failure is exclusively within the control of the Company or the
Company fails to meet the condition to Closing set forth in Section 6.1(i)
(unless such condition is waived by Buyer); or
(ii) all conditions to Closing set forth in Section 6.2 have been
satisfied, and the Company fails or refuses to close because the Company has
committed a voluntary, willful and intentional action, with respect to a matter
wholly within the control of the Company, which is intended to and does render
the Company unable to provide the closing certifications required by Section
6.1(a) or 6.1(l).
7.4 Expenses. Except as otherwise provided in Section 7.3, in the event the
transactions contemplated by this Agreement shall not be consummated, the
parties hereto shall bear their respective expenses incurred in connection with
the preparation, execution and performance of this Agreement and the
transactions contemplated hereby, including the fees and expenses of agents,
representatives, counsel, actuaries and accountants.
ARTICLE 8
BUYER'S NOTE OFFSETS; SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; MAJORITY NOTEHOLDER
8.1 Survival of Representations and Warranties. The representations,
warranties and covenants contained in this Agreement shall survive the Closing
Date and continue in effect for two years thereafter ("Expiration Date").
8.2 Buyer's Note Payment Offsets; Exclusive Remedy.
46
(a) The Buyer shall be entitled to offset payments of principal and
interest due under the Buyer's Note, in accordance with the procedures set forth
herein and in the Buyer's Note, if the Buyer or the Company or any of the
Subsidiaries has Losses as a result of, based upon or arising from:
(i) any inaccuracy in or breach of any of the representations and
warranties made by the Company in or pursuant to this Agreement;
(ii) any breach or nonperformance of any of the covenants or
agreements made by the Company in or pursuant to this Agreement;
(iii) any inaccuracy in the Closing Liability Schedule or the Closing
Certificate;
(iv) the invalidity, unenforceability of, or claims of material breach
or default arising under, any Material Contract or Purchase and Sale
Transaction;
(v) the amount by which the cost to terminate the Pension Plan
pursuant to Section 2.4 of the Merger Agreement exceeds the amount
recovered by Buyer under the Pension Escrow Fund (whether or not the
Pension Plan is terminated or Buyer elects not to terminate the Pension
Plan pursuant to Section 2.4(c));
(vi) any third party claim or demand against the Company or any of its
Subsidiaries regarding the conduct of the Company's or any Subsidiary's
business prior to Closing to the extent not actually covered by the
proceeds of insurance, ;
(vii) any claim the Buyer may have under any Letter of Transmittal or
the Shareholder Side Agreement;
(viii) any action, suit, proceeding or claim brought by, or on behalf
of, any Shareholder under or in respect of this Agreement, the Buyer's Note
or the Escrow Agreement, other than by Majority Noteholder in accordance
with such documents; and
(ix) any claims by a Governmental Authority for failure by the Company
to file reports with state and local officials pursuant to the Emergency
Planning and Community Right-to-Know Act, and any claims or costs of the
Company arising from any investigation or remediation required by the
appropriate Governmental Authority under any Environmental, Health or
Safety Requirement of Law, provided that the Company must make a good faith
effort to resolve each such claim or cost in the most cost-efficient manner
in accordance with prudent business practices.
(b) Notwithstanding anything in Section 8.2(a) to the contrary, no payment
offsets under the Buyer's Note may be made (i) with respect to any liabilities
listed on the Closing Liability Schedule to the extent such liabilities have
reduced the Company Value in the
47
calculation of the Merger Consideration, or (ii) unless the aggregate of all
Losses of the Buyer and/or the Company exceeds $100,000 (the "Threshold
Amount"), in which case the full amount of all Losses may be offset against the
Buyer's Note.
(c) If the Buyer shall be entitled to offset payments due or to become due
under the Buyer's Note at any time prior to the Expiration Date, the Buyer shall
make a claim for offset of payments under the Buyer's Note in accordance with
the procedures set forth in this Article VIII and in the Buyer's Note and
neither the Noteholders, any payee under the Buyer's Note, any Shareholder, nor
any of their respective Affiliates shall be personally liable to make payment of
thereof. No payment offsets under the Buyer's Note may be made at any time after
the Expiration Date, other than for claims for Losses made prior to, but not
settled prior to, the Expiration Date.
(d) After the Closing, the exclusive remedy of Buyer and MergerSub for any
claims made under this Agreement shall be to offset payments due under the
Buyer's Note as described herein, and the Buyer and MergerSub waive any and all
right to make further claims under this Agreement; provided, however, the Buyer
shall maintain any rights or remedies it may have under the respective Letters
of Transmittal, the Shareholder Side Agreement and the Escrow Agreement.
8.3 Procedure for Payment Offsets for Third-Party Claims
(a) If the Buyer determines that it is or may be entitled to payment
offsets under the Buyer's Note with respect to claims for Losses resulting from
the assertion of liability by third parties, it shall give notice ("Claim
Notice") to the Noteholders within 45 days of it becoming aware of any such
claim and the facts upon which any such claim for Losses will be based, and the
Claim Notice shall set forth such material information with respect thereto as
is then reasonably available to the Buyer. The rights of the Buyer in respect of
claims for Losses shall not be adversely affected by its failure to give notice
pursuant to the foregoing unless, and, if so, only to the extent that the
Noteholders incur an out-of-pocket expense or are materially prejudiced thereby.
After receipt of the Claim Notice, the Majority Noteholder shall be entitled, at
any time that he so elects, to participate in the defense thereof, at his own
expense. The Buyer shall not, without the written consent of the Majority
Noteholder (which shall not be unreasonably withheld or delayed), settle or
compromise any Loss or consent to entry of any judgment in respect thereof if
and to the extent that an offset under the Buyer's Note is claimed.
(b) The Majority Noteholder shall have the right to defend, compromise or
settle such claim for Losses if the Buyer or the Company, within 30 days of
receipt by the Majority Noteholder of the Claim Notice, fails to assume the
defense of such claim, at the cost and expense of Buyer and the Company.
(c) The parties shall cooperate in the defense of all third party claims.
In connection with the defense of any claim, each party shall make available to
the party controlling such defense any books, records or other documents within
its control and access to employees that are reasonably requested in the course
of such defense.
48
8.4 Buyer's Note Payment Offsets for Non-Third Party Claims. In the event
that the Buyer or the Company asserts the existence of a claim for Losses
(excluding claims resulting from the assertion of liability by third parties),
it shall give written notice to the Noteholders specifying the nature and amount
of the claim asserted. If the Majority Noteholder, within 30 days or such
greater time as may be necessary for the Majority Noteholder to investigate such
claim not to exceed 90 days, after receiving the notice from the Buyer or the
Company, shall not give written notice to the Buyer or the Company announcing
his intent to contest such assertion, such assertion shall be deemed accepted
and the amount of such claim shall be deemed a valid claim for Losses, the
amount of which will reduce the principal and interest due and to become due
under the Buyer's Note. During the time period set forth in the preceding
sentence, the Buyer or the Company shall cooperate fully with the Majority
Noteholder in respect of such claim for Losses. In the event that the Majority
Noteholder contests the assertion of a claim by giving such written notice to
the Buyer or the Company within said period, the parties shall, acting in good
faith, attempt to reach agreement with respect to such claim within ten days
after such notice. During the continuance of a pending claim for Losses,
payments in the amount of the contested Losses, due or to become due, shall be
withheld until a final resolution of such claim.
8.5 Majority Noteholder. The Majority Noteholder shall exercise all rights
and privileges of the Noteholders under the Buyer's Note and the Escrow
Agreement, and with respect to claims by Buyer under the Buyer's Note and Escrow
Agreement, and related matters, and in furtherance thereof (but without
limitation of the authority granted hereunder): (i) to investigate, employ
counsel to defend, resolve and settle any claim made by Buyer against the
Buyer's Note and Escrow Agreement, (ii) to give and receive notices pursuant
hereto and thereto, and (iii) to make and exercise all decisions, consents,
choices, elections, selections (including selection of counsel and other
consultants and advisors), settlements, requests, and exercise of discretion
that the Noteholders have the right to make or exercise with respect to matters
addressed herein or therein which shall be made or exercised only by the
Majority Noteholder on behalf of the Noteholders. Buyer and the Company shall
have the right to rely solely on the decisions made and actions taken by the
Majority Noteholder, and may rely on Schedule 2.3 exclusively in determining
whether or not it is dealing with the Majority Noteholder. If the Majority
Noteholder shall at any time transfer all or any part of his interest in the
Buyer's Note in accordance with the provisions of the Buyer's Note, whether or
not by operation of law, the Buyer shall be provided with such documentation
that it deems necessary to evidence such transfer, including, without
limitation, an opinion of counsel. In no event shall the Buyer or the Company be
responsible for the costs, expenses or liabilities of the Majority Noteholder.
ARTICLE 9
GENERAL
9.1 Notices. All notices and other communications hereunder shall be in
writing and may be delivered personally, sent by fax, sent by overnight courier,
or mailed by registered or certified mail, postage prepaid, return receipt
requested. Any such notice sent by fax shall be deemed given when transmitted
upon receipt of a confirmation thereof, any notice sent by overnight courier
shall be deemed given one business day after being delivered to the overnight
courier for next business day delivery, and any such notice sent by registered
or certified mail
49
shall be deemed given on the date such receipt is acknowledged or refused.
Notices should be sent as follows:
If to Buyer, addressed to:
Mentmore Holdings Corporation
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Fax No.: (000) 000-0000
with a copy to:
Winston & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
If to the Company, addressed to:
Monitor Aerospace Corporation
0000 Xxx Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxx, Chairman
Fax No. (000) 000-0000
with a copy to:
Windels, Marx, Davies & Ives
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx, Xx., Esq
Xxxxx X. Xxxxxx, Esq.
Fax No. (000) 000-0000
If to the Noteholders to:
Xxxxxxx Xxxxxxx, R. Xxxxx Xxxxxxx, Xxxxxxxx Xxxxxxxx
c/o Xxxxxx X. Xxxx, Xx., Esq.
Windels, Marx, Davies & Ives
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax No. (000) 000-0000
50
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
9.2 Extension; Waiver. At any time prior to the Closing, the parties hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid if set
forth in an instrument in writing signed on behalf of such party by a senior
officer of the waiving party, provided that after the Merger has been approved
by the Shareholders, the Board of Directors of the Company shall not have any
authority to change the form or amount of consideration to be paid in the Merger
without the approval of such changes by the Shareholders in accordance with
applicable legal requirements.
9.3 Choice of Law; Consent to Jurisdiction. This Agreement shall be
governed by, construed, interpreted, and the rights of the parties enforced in
accordance with the internal laws of the State of New York. Each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of any state
or Federal court located in the State of New York in the event any dispute
arises under this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction or venue by motion or other request for leave from such court, and
(c) agrees that it will not bring any action relating to this Agreement or any
of the transactions contemplated by this Agreement in any court other than a
state or Federal court sitting in the State of New York.
9.4 Amendment; Entire Agreement. This Agreement may not be amended except
by an instrument in writing signed by each of the parties hereto. This
Agreement, together with the exhibits and attachments hereto, and the schedules
hereto, constitutes the entire Agreement between the parties pertaining to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
understandings, negotiations, and discussions, whether oral or written, of the
parties.
9.5 Counterparts; Headings. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The headings of the
several Articles and Sections herein are inserted for convenience of reference
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
9.6 Expenses. Except as set forth in Sections 7.3 and 7.4, the expenses of
Buyer, the Company and each Shareholder shall be allocated as follows:
(a) Buyer shall bear all fees and expenses of its counsel and all other
costs and expenses incurred by it in the preparation of this Agreement and its
investigation of the Company including, without limitation, environmental
consultation, and shall, at the time of and conditioned upon the Closing of the
transactions contemplated by this Agreement and the
51
effectiveness of the Merger, provide funds to the Company to pay the fees and
expenses described in subparagraph (b) below;
(b) The Company shall pay all expenses of counsel to the Company and all
other costs and expenses incurred by the Company in connection with or arising
as a result of the transactions contemplated hereby, but only to the extent such
costs and expenses are set forth on the Closing Liability Schedule and have
reduced the Company Value in the calculation of the Merger Consideration as set
forth in Section 2.3(a); and
(c) Except to the extent such amounts have been set forth on the Closing
Liability Schedule and have reduced the Company Value in the calculation of the
Merger Consideration as set forth in Section 2.3(a), the Shareholders shall bear
all fees and expenses of counsel to the Company and the Shareholders, their
accountants, any brokers, finders, investment bankers, and any other Persons
specifically engaged to provide consulting, professional or other services to
the Company or the Shareholders in connection with the transactions contemplated
by this Agreement; all costs and expenses incurred by the Company and the
Shareholders or any such persons or firms in the preparation of this Agreement;
and the calling, noticing, and holding of a meeting of Shareholders to consider
and act upon the Merger or of attempting to obtain their written consents
thereto.
9.7 Publicity. No public announcement, press release, or communication
regarding the Merger shall be made without the prior written consent (which
consent shall not be unreasonably withheld) of the parties as to the content and
timing thereof except as required by Applicable Law (including, without
limitation, applicable securities laws). Any such general announcements or
communications by the Company or Buyer with third parties or representatives of
the press or news media shall be made only with the prior approval of the other
party hereto, which shall not be unreasonably withheld, except as otherwise
required by law or legal process. Subject to the preceding sentence, the Company
and the Buyer shall cooperate with each other in the development and
distribution of all news releases and other public announcements with respect to
the Merger.
9.8 Severability. If any term, provision, covenant, or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable, or against its regulatory policy, the remainder of
the terms, provisions, covenants, and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated so long as the economic or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by Applicable Law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
52
9.9 No Third Party Beneficiaries; Assignment. This Agreement is not
intended to confer upon any employee of the Company or its Subsidiaries, or any
other Person, other than the parties hereto and their respective successors and
permitted assigns, any legal or equitable rights or remedies, except that, with
respect to directors and officers of the Company and any Subsidiary, the
provisions of Sections 5.6 are intended for the benefit of, and enforceable by,
such Persons. Neither this Agreement nor any of the rights, interests, or
obligations of the parties may be assigned by any party hereto, whether by
operation of law or otherwise, without the prior written consent of the other
parties hereto and any such assignment that is not consented to shall be null
and void; provided, however, Buyer and MergerSub may assign their rights and
obligations under this Agreement to any of their respective Affiliates without
the consent of any other party hereto but such assignment shall not affect the
Buyer's and MergerSub's obligations hereunder which shall continue in full force
and effect. Subject to the foregoing, this Agreement shall be binding on and
inure to the benefit of and be enforceable by the parties and their respective
successors and permitted assigns.
9.10 Confidentiality. From the date hereof until the Closing Date:
(a) The Buyer acknowledges the confidential and proprietary nature of the
Confidential Information (as defined below), agrees not to disclose and to hold
and keep the same confidential as provided herein. As used herein, the term
"Confidential Information" means and includes any and all:
(i) trade secrets concerning the business and affairs of the Company
or the Subsidiaries, product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs, graphs, drawings,
samples, inventions and ideas, past, current, and planned research and
development, current and planned manufacturing or distribution methods and
processes, customer lists, current and anticipated customer requirements,
price lists, market studies, business plans, computer software and programs
(including object code and source code), computer software and database
technologies, systems, structures and architectures (and related processes,
formulae, composition, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information) and any
other information, however documented, that is a trade secret within the
meaning of applicable law; and
(ii) information concerning the business and affairs of the Company or
the Subsidiaries (which includes historical financial statements, financial
projections and budgets, historical and projected sales, capital spending
budgets and plans, the names and backgrounds of key personnel, personnel
training techniques and materials), however documented, that has been or
may hereafter be provided or shown to the Buyer or Buyer's representatives
(including financing sources of Buyer) by the Company or by the directors,
officers, employees, agents, consultants, advisors, legal counsel,
accountants, financial advisors or other representatives of the Company or
the Subsidiaries or is otherwise obtained from review of Company's or the
Subsidiaries' documents or property or discussions with Company's
representatives, irrespective of the form of the communication, and also
includes all notes, analyses, compilations, studies, summaries, and other
material prepared by the Buyer or the Buyer's representatives containing or
53
based, in whole or in part, on any information included in the foregoing.
Any trade secrets of the Company and its Subsidiaries will also be entitled
to all of the protections and benefits under Applicable Law.
(b) The Buyer agrees that the Confidential Information (a) will be kept
confidential by the Buyer and the Buyer's representatives and (b) without
limiting the foregoing, will not be disclosed by the Buyer or the Buyer's
representatives to any person except for the purpose of evaluating the
transactions contemplated by this Agreement, including the financing for such
transactions. It is understood that the Buyer may disclose Confidential
Information to only those of the Buyer's representatives (including, without
limitation, financing sources) who (i) require such material for the purpose of
evaluating the transaction contemplated by this Agreement, and (ii) are informed
by the Buyer of the confidential nature of the Confidential Information and the
obligations of this Agreement. Buyer shall be responsible to the Company for the
breach of this Section 9.10(b) by its representatives to whom it has furnished
Confidential Information.
(c) All of the foregoing obligations and restrictions do not apply to that
part of the Confidential Information that (a) was or becomes generally available
to the public other than as a result of a disclosure by the Buyer or the Buyer's
representatives in violation of this Section 9.10, (b) was available, or becomes
available, to the Buyer on a non-confidential basis prior to its disclosure to
the Buyer by the Company or a Company's representative, but only if the Buyer
has no Knowledge that the source of such information is bound by a
confidentiality agreement with the Company or is otherwise prohibited from
transmitting the information to the Buyer or the Buyer's representatives by a
contractual, legal, fiduciary, or other obligation, or (c) in the reasonable
opinion of Buyer, is required to be disclosed by Applicable Law.
(d) If the Buyer or any of the Buyer's representatives are requested or
become legally compelled (by oral questions, interrogatories, requests for
information or documents, subpoena, civil or criminal investigative demand, or
similar process) or are required by a regulatory body to make any disclosure
that is prohibited or otherwise constrained by this Agreement, the Buyer or such
representative, as the case may be, will provide the Company with prompt notice
of such request so that it may seek an appropriate order or other appropriate
remedy. Subject to the foregoing, the Buyer or such representative may furnish
that portion (and only that portion) of the Confidential Information that, in
the opinion of its counsel, the Buyer is legally compelled or is otherwise
legally required to disclose; provided, however, that the Buyer and the Buyer's
representatives must use reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded any Confidential Information so
disclosed.
(e) If this Agreement terminates for any reason or if the Merger is not
consummated, then (a) the Buyer (i) will promptly deliver to the Company all
documents or other materials furnished by the Company or any Company
representative to the Buyer or the Buyer's representatives constituting
Confidential Information, together with all copies and summaries thereof in the
possession or under the control of the Buyer or the Buyer's representatives, and
(ii) will destroy materials generated by the Buyer or the Buyer's
representatives that include or refer to any part of the Confidential
Information, without retaining a copy of any such material or (b) alternatively,
if the Company requests or gives its prior written
54
consent to the Buyer's request (which consent shall not be unreasonably
withheld), the Buyer will destroy all documents or other matters constituting
Confidential Information in the possession or under the control of the Buyer or
the Buyer's representatives. Any such destruction pursuant to the foregoing must
be confirmed by the Buyer in writing to the Company.
(f) Until the Closing Date, the Company and its Subsidiaries shall, and,
from and after the date hereof, the Shareholders (in whatever capacity) shall
treat as confidential all Confidential Information and all non-public
information concerning the Buyer or MergerSub and will not disclose any such
information to any Person except to the extent that (i) any disclosure of such
information may be required by Applicable Law, (ii) disclosure of Confidential
Information may be made by the Company prior to the Closing in the normal course
of business consistent with past practice provided that such disclosure would
not impair, in any material way, the business or operations of the Company or
any of the Subsidiaries, and (iii) with respect to non-public information
concerning Buyer, such information is available, or becomes available, to the
Company or its Subsidiaries on a non-confidential basis, but only if the source
of such information is not bound by a confidentiality agreement with the Buyer
or MergerSub or is not otherwise prohibited from transmitting the information by
a contractual, legal, fiduciary, or other obligation.
55
IN WITNESS WHEREOF, Buyer, MergerSub, and the Company have each caused this
Agreement to be executed by their respective officers as of the date first above
written.
STELLEX AEROSPACE HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Treasurer
SOZE CORP.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Treasurer
MONITOR AEROSPACE CORPORATION
By: /s/ R. Xxxxx Xxxxxxx
---------------------------------
Name: R. Xxxxx Xxxxxxx
Title: President
56
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
MONITOR AEROSPACE CORPORATION
a New York Corporation
Under Section 807 of the Business Corporation Law
THE UNDERSIGNED, President and Secretary of Monitor Aerospace
Corporation (the "Corporation") do hereby certify as follows:
1. The name of the Corporation is Monitor Aerospace Corporation. The
Corporation was formed under the name of Monitor Machinery Corp.
2. The Certificate of Incorporation of Monitor Machinery Corp. was
filed with the State of New York on May 26, 1948. The Corporation is the
surviving constituent corporation of a consolidation of Monitor Machinery
Corp., Monitor Properties Corp. and Boxart Machine Company, Inc., pursuant to a
certificate of consolidation filed with the Department of State of the State of
New York on May 31, 1963 pursuant to Section 86 of the Stock Corporation Law of
New York.
3. The Certificate of Incorporation is hereby amended to effect the
following amendments authorized by the Business Corporation Law:
a. Article SECOND of the Certificate of Incorporation is
hereby amended in its entirety to read as follows:
SECOND: The Corporation is formed for the following purposes:
To engage in any lawful act or activity for which
corporations may be organized under the Business Corporation Law,
provided that the Corporation is not formed to engage in any act or
activity requiring the consent or approval of any state official,
department, board, agency or other body without such consent or
approval first being obtained.
b. Article THIRD of the Certificate of Incorporation is
hereby amended in its entirety to read as follows:
THIRD: The total number of shares of stock which the
Corporation has authority to issue is 1,000 shares. All of such shares
are Common Stock without par value.
c. Article SIXTH of the Certificate of Incorporation is
hereby amended in its entirety to read as follows:
SIXTH: The Corporation shall indemnify any person to the
fullest extent permitted by the New York Business Corporation Law, as
amended from time to time, for all amounts (including, without
limitation, judgements, fines, settlement payments, expenses and
attorney's fees) incurred or paid in connection with any action, suit,
investigation or proceeding arising out of or relating to the
performance of services by such person for, or acting as a director,
officer, or employee of, the Corporation or any other person or
enterprise at the Corporation's request, and shall to the fullest
extent permitted by the New York Business Corporation Law, as amended
from time to time, advance all expenses incurred or paid by such
person in connection with, and until disposition of any action, suit,
investigation or proceeding arising out of or relating to the
performance of services by such person for, or acting as a director,
officer or employee of, the Corporation or any other person or
enterprise at the Corporation's request.
d. Article SEVENTH of the Certificate of Incorporation is
hereby amended in its entirety to read as follows:
SEVENTH: No director of the Corporation shall be personally
liable to the Corporation or its shareholders for damages for any
breach of duty in such capacity, provided that nothing contained in
this Article SEVENTH shall eliminate or limit the liability of any
director if a judgment or other final adjudication adverse to him or
her establishes that his or her acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law or that
he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled or that his or
her acts violated Section 719, or its successor, of the New York
Business Corporation Law.
e. A new Article EIGHTH is hereby added as follows:
EIGHTH: In furtherance and not in limitation or the powers
conferred by statute, the board of directors of the Corporation is
expressly authorized to adopt, amend or repeal the by-laws of the
Corporation.
f. A new Article NINTH is hereby added as follows:
NINTH: Elections of directors need not be by written ballot
unless the by-laws of the Corporation so provide.
2
g. A new Article TENTH is hereby added as follows:
TENTH: No holder of any of the shares of any class of the
Corporation shall be entitled as of right to subscribe for, purchase,
or otherwise acquire any shares of any class of the Corporation which
the Corporation proposes to issue or any rights or options which the
Corporation proposes to grant for the purchase of shares of any class
of the Corporation or for the purchase of any shares, bonds,
securities, or obligations of the Corporation which are convertible
into or exchangeable for, or which carry any rights, to subscribe for,
purchase, or otherwise acquire shares of any class of the Corporation;
and any and all of such shares, bonds, securities, or obligations of
the Corporation, whether now or hereafter authorized or created, may
be issued, or may be reissued or transferred if the same have been
reacquired and have treasury status, and any and all such rights and
options may be granted by the Board of Directors to such persons,
firms, corporations, and associations, and for such lawful
consideration, and on such terms, as the Board of Directors in its
discretion may determine, without first offering the same, or any
thereof, to any said holder. Without limiting the generality of the
foregoing stated denial of any and all preemptive rights, no holder of
shares of any class of the Corporation shall have any preemptive
rights in respect of the matters, proceedings, or transactions
specified in subparagraphs (1) to (6), inclusive, of paragraph (e) of
Section 622 of the Business Corporation Law.
h. A new Article ELEVENTH is hereby added as follows:
ELEVENTH: Corporation Service Company, 00 Xxxxx Xxxxxx, 0xx
Xxxxx, Xxxxxx, Xxx Xxxx, 00000-0000, is designated as agent of the
Corporation upon whom process against the Corporation may be served.
4. The Certificate of Incorporation of the Corporation as amended
heretofore is hereby restated as further amended to read in its entirety as
follows:
CERTIFICATE OF INCORPORATION
OF
MONITOR AEROSPACE CORPORATION
a New York Corporation
FIRST: The name of the corporation is Monitor Aerospace
Corporation.
3
SECOND: The Corporation is formed for the following purposes:
To engage in any lawful act or activity for which
corporations may be organized under the Business Corporation Law,
provided the Corporation is not formed to engage in any act or
activity requiring the consent or approval of any state official,
department, board, agency or other body without such consent or
approval first being obtained.
THIRD: The total number of shares of stock which the
Corporation has authority to issue is 1,000 shares. All of such
shares of Common Stock are without par value.
FOURTH: The office of the Corporation in the State of New York
is to be located in the Town of Babylon, Village of Amityville,
County of Suffolk.
FIFTH: The duration of the Corporation shall be perpetual.
SIXTH: The Corporation shall indemnify any person to the
fullest extent permitted by the New York Business Corporation Law, as
amended from time to time, for all amounts (including, without
limitation, judgements, fines, settlement payments, expenses and
attorney's fees) incurred or paid in connection with any action, suit,
investigation or proceeding arising out of or relating to the
performance of services by such person for, or acting as a director,
officer or employee of, the Corporation of any other person or
enterprise at the Corporation's request, and shall to the fullest
extent permitted by the New York Business Corporation Law, as amended
from time to time, advance all expenses incurred or paid by such
person in connection with, and until disposition of any action, suit,
investigation or proceeding arising out of or relating to the
performance of services by such person for, or acting as a director,
officer or employee of, the Corporation or any other person or
enterprise at the Corporation's request.
SEVENTH: No director of the Corporation shall be personally
liable to the Corporation or its shareholders for damages for any
breach of duty in such capacity, provided that nothing contained in
this Article SEVENTH shall eliminate or limit the liability of any
director if a judgment or other final adjudication adverse to him or
her establishes that his or her acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law or that
he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled or that his or
her acts violated Section 719, or its successor, of the New York
Business Corporation Law.
EIGHTH: In furtherance and not in limitation of the powers
conferred by statute, the board of directors of the Corporation is
expressly authorized to adopt, amend or repeal the by-laws of the
Corporation.
4
NINTH: Elections of directors need not be by written ballot
unless the by-laws of the Corporation so provide.
TENTH: No holder of any of the shares of any class of the
Corporation shall be entitled as of right to subscribe for, purchase,
or otherwise acquire any shares of any class of the Corporation which
the Corporation proposes to issue or any rights or options which the
Corporation proposes to grant for the purchase of shares of any class
of the Corporation or for the purchase of any shares, bonds,
securities, or obligations of the Corporation which are convertible
into or exchangeable for, or which carry any rights, to subscribe for,
purchase, or otherwise acquire shares of any class of the Corporation;
and any and all of such shares, bonds, securities, or obligations of
the Corporation, whether now or hereafter authorized or created, may
be issued, or may be reissued or transferred if the same have been
reacquired and have treasury status, and any and all such rights and
options may be granted by the Board of Directors to such persons,
firms, corporations, and associations, and for such lawful
consideration, and on such terms, as the Board of Directors in its
discretion may determine, without first offering the same, or any
thereof, to any said holder. Without limiting the generality of the
foregoing stated denial of any and all preemptive rights, no holder of
shares of any class of the Corporation shall have any preemptive
rights in respect of the matters, proceedings, or transactions
specified in subparagraphs (1) to (6), inclusive, of paragraph (e) of
Section 622 of the Business Corporation Law.
ELEVENTH: Corporation Service Company, 00 Xxxxx Xxxxxx, 0xx
Xxxxx, Xxxxxx, Xxx Xxxx, 00000-0000, is designated as agent of the
Corporation upon whom process against the Corporation may be served.
5. The amendment and restatement of the Certificate of Incorporation
is being done in connection with the merger of Soze Corp., a New York
corporation, with and into the Corporation in accordance with Section 902 of
the New York Business Corporation Law.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
statements made herein are true under the penalties of perjury, this day of ,
1998.
-----------------------------------
President
-----------------------------------
Secretary
[MAY BE REVISED PRIOR TO CLOSING]
5
EXHIBIT B
FORM OF
NON-NEGOTIABLE OFFSET
PROMISSORY NOTE
$5,180,000 ________, 1998
FOR VALUE RECEIVED, the undersigned, MONITOR AEROSPACE CORPORATION, a New
York Corporation ("Payor" or the "Company"), promises to pay to Xxxxxxx Xxxxxxx,
in his capacity as Majority Noteholder and representative for the Noteholders
named in the Merger Agreement referred to below (in such capacity the "Payee"),
at 1000 New Horizons Boulevard, Amityville, New York, or at such other place as
the Payee and the Payor shall agree upon, the principal sum of FIVE MILLION, ONE
HUNDRED EIGHTY THOUSAND DOLLARS ($5,180,000) (subject to offset as set forth
below), with interest from the date hereof on the outstanding principal amount
at the rate of 8% per annum. Interest hereon shall be payable quarterly on March
31, June 30, September 30 and December 31 of each year while this Note remains
outstanding. The entire principal hereof, plus accrued and unpaid interest
hereunder, shall be payable on the second anniversary of the date hereof (the
"Expiration Date"). Interest hereon shall be retroactively adjusted between the
parties when the principal amount hereof is adjusted so that any interest paid
hereunder is paid only upon the adjusted principal amount. Interest adjustments
will only be made by offset against future payments of principal and interest
hereunder.
All capitalized terms used herein but not otherwise defined shall have the
meanings ascribed to them in the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of April 28, 1998, among the Payor, Stellex Aerospace
Holdings, Inc. (the "Buyer") and Soze Corp.
The principal amount of this Note and any interest due and payable
hereunder but not otherwise paid by the Payor, shall be reduced in the event
that Payor or any of its subsidiaries or Buyer has Losses as a result of, based
upon or arising from:
(i) any inaccuracy in or breach of any of the representations and
warranties made by the Company in or pursuant to the Merger Agreement;
(ii) any breach or nonperformance of any of the covenants or
agreements made by the Company in or pursuant to the Merger Agreement;
(iii) any inaccuracy in the Closing Liability Schedule or the Closing
Certificate;
1
(iv) the invalidity, unenforceability of, or claims of material breach
or default arising under, any Material Contract or Purchase and Sale
Transaction;
(v) the amount by which the cost to terminate the Pension Plan
pursuant to Section 2.4 of the Merger Agreement exceeds the amount
recovered by the Buyer under the Pension Escrow Fund (whether or not the
Pension Plan is terminated or the Buyer elects not to terminate the Pension
Plan pursuant to Section 2.4(c) of the Merger Agreement);
(vi) any third party claim or demand against the Payor or any of its
Subsidiaries regarding the conduct of the Company's or any of its
Subsidiaries' business prior to the Closing to the extent not actually
covered by the proceeds of insurance;
(vii) any claim the Buyer or the Payor may have under any Letter of
Transmittal or the Shareholder Side Agreement; or
(viii) any action, suit, proceeding or claim brought by, or on behalf
of, any Shareholder under or in respect of this Note, the Merger Agreement
or the Escrow Agreement, other than by the Payee in accordance with such
documents; and
(ix) any claims by a Governmental Authority for failure by the Company
to file reports with state and local officials pursuant to the Emergency
Planning and Community Right-to-Know Act, and any claims or costs of the
Company arising from any investigation or remediation required by any
Governmental Authority under any Environmental, Health or Safety
Requirement of Law, provided that the Company must make a good faith effort
to resolve each such claim or cost in a cost-efficient manner in accordance
with prudent business practices.
Notwithstanding anything in the preceding paragraph to the contrary, no
payment offsets under this Note may be made (i) with respect to any liabilities
listed on the Closing Liability Schedule to the extent such liabilities reduced
the Company Value in the calculation of the Merger Consideration, or (ii) unless
the aggregate of all Losses of the Buyer and/or the Payor exceeds $100,000, in
which case the full amount of all Losses may be offset against this Note.
If either the Buyer or Payor shall be entitled to offset payments due or
become due under this Note at any time prior to the Expiration Date, it shall
make a claim for offsets of payments under this Note in accordance with the
procedures set forth herein and in Article VIII of the Merger Agreement, and
neither the Payee, any Noteholder, any Shareholder, nor any of their respective
Affiliates shall be personally liable to make payment thereof; provided,
however, that each Shareholder shall remain personally liable to the Buyer and
the Payor for any breach of such Shareholder's representations
2
or covenants set forth in its Letter of Transmittal or in the Shareholder Side
Agreement. No payment offsets under this Note may be made at any time after the
Expiration Date, other than for claims for Losses made prior to, but not settled
prior to, the Expiration Date.
If either the Buyer or Payor determines that it is or may be entitled to
payment offsets under this Note with respect to claims for Losses resulting from
the assertion of liability by third parties, it shall give notice ("Claim
Notice") to the Payee within 45 days of its becoming aware of any such claim and
the facts upon which any such claim for Losses will be based, and the Claim
Notice shall set forth such information with respect thereto as is then
reasonably available to the Buyer or the Payor. The rights of each of the Buyer
and Payor in respect of claims for Losses shall not be adversely affected by its
failure to give notice pursuant to the foregoing unless, and, if so, only to the
extent, that the Payee incurs an out-of-pocket expense or is otherwise
materially prejudiced thereby. After receipt of the Claim Notice, the Payee
shall be entitled, at any time that he so elects, to participate in the defense
thereof, at his own expense. The Buyer shall not, without the written consent of
the Payee (which consent shall not be unreasonably withheld or delayed), settle
or compromise any Loss or consent to entry of any judgment in respect thereof if
and to the extent that an offset by be claimed hereunder. The Payee shall have
the right to defend, compromise or settle any such claim for Losses if neither
the Buyer nor the Payor, within 30 days of receipt by the Payee of the Claim
Notice, assumes the defense of such claim, at the cost and expense of Buyer and
the Payor.
Each of the Payee and the Payor shall cooperate in the defense of all third
party claims. In connection with the defense of any claim, each of the Payee and
the Payor shall make available to the party controlling such defense any books,
records or other documents within its control and access to employees that are
reasonably requested in the course of such defense.
In the event that either the Buyer or the Payor asserts the existence of a
claim of Losses (excluding claims resulting from the assertion of liability by
third parties), it shall give written notice to the Payee specifying the nature
and amount of the claim asserted. If the Payee, within 30 days or such greater
time as may be necessary for the Payee to investigate such claim not to exceed
90 days after receiving the notice from the Buyer or the Payor, shall not give
written notice to the Buyer or the Payor announcing his intent to contest such
assertion, such assertion shall be deemed accepted and the amount of such claim
shall be deemed a valid claim for Losses, the amount of which will reduce the
principal and interest due and to become due under this Note. During the time
period set forth in the preceding sentence, the Buyer or the Payor shall
cooperate with the Payee in respect of such claim for Losses. In the event that
the Payee contests the assertion of a claim by giving such written notice to the
Buyer or the Payor within said period, the Payee and the Payor shall, acting in
good faith, attempt to reach agreement with respect to such claim within 10 days
after such notice. During the continuance of a pending claim for Losses,
payments due or becoming due under the Note shall be withheld until a final
resolution of such claim.
3
The undersigned may, at any time and from time to time, without penalty,
make prepayments which will be applied to the payment of principal under this
Note. In any case where the date of maturity of the principal of or interest on
this Note or the date fixed for payment or prepayment of this Note shall be, at
any place of payment, a Sunday, a legal holiday or a day on which banking
institutions are authorized or obligated by law or regulation to close, then
payment of principal or interest need not be made on such date at such place but
may be made on the next succeeding day that is not at such place of payment a
Sunday, a legal holiday or a day on which banking institutions are authorized or
obligated by law or regulation to close, with the same for and effect as if made
on the date of maturity or the date fixed for payment or prepayment.
Presentment, demand and protest, and notices of protest, dishonor, and
non-payment of this Note and all notices of every kind are hereby waived.
No single or partial exercise of any power hereunder shall preclude the
other or further exercise thereof or the exercise of any other power. No delay
or omission on the part of the Payee or the Payor in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note.
This Note may not be negotiated, assigned or transferred to any other
Person whatsoever without the consent of the undersigned.
THE OBLIGATIONS OF THE PAYOR UNDER THIS NOTE ARE TO THE PAYEE ONLY. NO
SHAREHOLDER, OR PERSON ACTING THROUGH OR ON BEHALF OF A SHAREHOLDER, OR ANY
OTHER PERSON (INCLUDING, WITHOUT LIMITATION, ANY NOTEHOLDER) SHALL HAVE THE
RIGHT TO ENFORCE ANY OF THE TERMS OR PROVISIONS OF THIS NOTE OR TO SEEK ANY
REMEDIES FOR AN ALLEGED BREACH HEREUNDER OR UNDER THE MERGER AGREEMENT. THE
PAYOR SHALL HAVE NO OBLIGATION TO DEAL WITH ANY INDIVIDUAL SHAREHOLDER OR
NOTEHOLDER REGARDING ANY ISSUE ARISING UNDER THIS NOTE OR THE MERGER AGREEMENT.
The Note shall be governed by and construed in accordance with the internal
laws of the State of New York.
MONITOR AEROSPACE CORPORATION,
a New York corporation
By:__________________________________
Xxxxxxx X. Xxxxxx
Chief Executive Officer
4
EXHIBIT C
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement"), dated as of _________, 1998 by
and among Stellex Aerospace Holdings, Inc. (the "Buyer"), Monitor Aerospace
Corporation (the "Company"), Xxxxxxx Xxxxxxx (in his capacity as Majority
Noteholder as provided in Section 8.5 of the Merger Agreement referred to below
"Majority Noteholder"), and _________ (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Buyer, the Buyer's wholly-owned subsidiary, Soze Corp.
("MergerSub"), and the Company have entered into an Agreement and Plan of Merger
dated as of April 28, 1998 (the "Merger Agreement") pursuant to which MergerSub
shall merge with and into the Company, the Company, as the surviving
corporation, will become the wholly-owned subsidiary of the Buyer, and the
shareholders of the Company will receive consideration for their shares of
common stock of the Company;
WHEREAS, the Merger Agreement provides that the Buyer shall deposit FOUR
MILLION DOLLARS ($4,000,000) into the Pension Escrow Fund (as defined in the
Merger Agreement) to be held in an escrow account with the Escrow Agent in
accordance with the terms of this Agreement;
WHEREAS, all terms used herein and not defined herein shall have the
meaning set forth in the Merger Agreement;
WHEREAS, pursuant to the terms of the Merger Agreement, the Majority
Noteholder will act on behalf of the Noteholders with respect to all rights,
privileges and obligations of the Noteholders under this Agreement;
WHEREAS, the Buyer and the Majority Noteholder desire the Escrow Agent to
hold and dispose of the funds in the Escrow Account, and the Escrow Agent is
willing to do so, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. Appointment of Escrow Agent. The Escrow Agent is hereby constituted and
appointed as escrow agent, and hereby accepts its appointment and agrees to act
as escrow agent pursuant to this Agreement.
2. Pension Escrow Fund. Pursuant to Section 2.4 of the Merger Agreement,
the Buyer has caused the delivery to the Escrow Agent of the sum of Four Million
Dollars ($4,000,000), in cash for deposit in an account identified as the
"Monitor Escrow Account" (the "Pension Escrow Account"). The Escrow Agent
acknowledges receipt of the sum referred to in the preceding sentence. The
Pension Escrow Fund will be held by the Escrow Agent until disbursed pursuant to
Section 4 or released pursuant to Section 5. Pursuant to Subsections 2.4(b) of
the Merger Agreement, the Buyer shall cause the Company to take all actions
reasonably necessary to effectuate the termination of the Pension Plan;
provided, however, that, in accordance with
Section 2.4(c) of the Merger Agreement, in the event the cost to terminate the
Pension Plan exceeds or is expected to exceed the Pension Escrow Fund, the Buyer
shall have the right to elect to withdraw the termination of the Pension Plan
and make a claim under Section 4(d) hereof for the full amount of the Pension
Escrow Fund.
3. Investment of Pension Escrow Fund. The Escrow Agent shall invest and
reinvest the Pension Escrow Fund in direct obligations of the United States of
America, obligations for which the full faith and credit of the United States of
America is pledged to provide for the payment of principal and interest,
commercial paper rated of the highest quality by Xxxxx'x Investors Service, Inc.
or Standard & Poor's Ratings Service, or, upon receipt of written investment
instructions from the Buyer and the Majority Noteholder, the Escrow Agent shall
invest the Pension Escrow Fund in other investments in accordance with such
instructions. The Pension Escrow Fund shall be invested at all times during the
term of this Agreement except when such investments are liquidated and cash is
held by the Escrow Agent pending immediate payment of any amount from the
Pension Escrow Fund as provided in this Agreement. The Escrow Agent shall not be
responsible or liable for any loss suffered in connection with any investment of
the Pension Escrow Fund made by it in accordance with this Section 3 or realized
as a result of the liquidation of any such investment, absent willful
misconduct, bad faith or gross neglect.
4. Disbursement From Escrow Account. The Escrow Agent shall continue to
hold the Pension Escrow Fund in its possession until authorized hereunder to
distribute the Pension Escrow Fund as follows:
(a) No transfer shall be made from the Pension Escrow Fund for the
purpose of paying benefits therefrom or otherwise, until the later of (i)
the date that a favorable determination letter upon plan termination is
received from the Internal Revenue Service and any actions required to be
taken as a condition of the favorable termination letter have been
satisfied, (ii) the date the Pension Benefit Guaranty Corporation has
indicated by notice to the Plan Administrator that distributions from
Pension Plan may proceed and (iii) the date all participants, beneficiaries
or alternate payees who can be located have either completed their election
forms or have been deemed to have made an election (the "Distribution
Date"). At the Distribution Date, or as soon as practicable thereafter, and
at the request of the Buyer, the Escrow Agent shall transfer into the
Pension Plan funds sufficient to satisfy all liabilities owed to
participants, beneficiaries or alternate payees under the Pension Plan. The
Buyer shall notify Majority Noteholder of the Distribution Date, and shall
provide Majority Noteholder with documentation evidencing the amount
required to satisfy all liabilities under the Pension Plan.
(b) The Buyer, may pursuant to a Claim Notice substantially in the
form attached to this Agreement as Exhibit A, request a withdrawal from the
Pension Escrow Fund for any and all costs associated with the termination
of the Company's Pension Plan, other than those liabilities described in
subsection (a) hereof, including, but not limited to, all legal,
accounting, actuarial and other expenses associated with such termination.
The Buyer must provide, along with the Claim Notice, detailed schedules of
any and all expense documentation to support the Claim Notice. The Claim
Notice with supporting documentation shall be delivered to the Escrow Agent
and the Majority Noteholder pursuant to Section 10. The Escrow Agent must
release the funds requested in the Claim Notice to the Buyer unless on or
by the third (3rd) business day after the Escrow Agent's receipt of such
Claim Notice, the Escrow Agent shall have received from the Majority
Noteholder, a Dispute Notice substantially in the form attached to this
Agreement as Exhibit B.
-2-
(c) Upon the later of (i) the date the last single sum distribution to
a participant, beneficiary or alternate payee is made or (ii) the date an
annuity contract is purchased for participants, beneficiaries or any
alternate payees who have not elected a single sum distribution upon plan
termination, the Majority Noteholder may, by delivering a Claim Notice to
the Escrow Agent, the Company and the Buyer, request a withdrawal from the
Pension Escrow Fund in an amount equal to the excess of the Escrow Pension
Fund over the actual cost to terminate the Pension Plan. The Majority
Noteholder must provide, along with the Claim Notice, detailed schedules of
any and all documentation to support the Claim Notice. The Escrow Agent
must release the funds requested in the Claim Notice to the Majority
Noteholder unless on or by the third (3rd) business day after the Escrow
Agent's receipt of such Claim Notice, the Escrow Agent shall have received
from the Buyer, a Dispute Notice.
(d) The Buyer may, by delivering a Claim Notice to the Escrow Agent
and the Majority Noteholder, request a withdrawal of the entire amount of
the Pension Escrow Fund if the cost of terminating the Pension Plan exceeds
or is expected to exceed the amount in the Escrow Pension Fund. The Buyer
must provide, along with the Claim Notice, detailed schedules of any and
all documentation to support the Claim Notice. The Escrow Agent must
release the funds requested in the Claim Notice to Buyer unless on or by
the third (3rd) business day after the Escrow Agent's receipt of such Claim
Notice, the Escrow Agent shall have received from the Majority Noteholder,
a Dispute Notice.
(e) If one party delivers a Claim Notice as described in this Section
4, and either (i) the other party, by written notice, accepts the claims
set forth in the Claim Notice, or (ii) the other party fails to deliver a
Dispute Notice within the time specified, then the amount of the claim in
the Claim Notice shall be delivered by the Escrow Agent as specified in the
Claim Notice.
(f) If a Dispute Notice is delivered, the Majority Noteholder and
Buyer shall attempt to resolve in good faith any disputes with respect to
the claims. Escrow Agent shall not distribute the amount of any claim in
dispute until its receipt of one of the following: (i) written instructions
from the Majority Noteholder and Buyer with instructions with regard to
payment or nonpayment of the claim, or (ii) the dispute has finally been
settled by order of a court of competent jurisdiction from which time for
appeal of such order has passed. If a court determines that any party
unreasonably disputed a valid claim, the court may award attorney fees to
the prevailing party.
5. Other Releases of Pension Escrow Fund.
(a) On the date that the Escrow Agent shall receive notice from the Buyer
that the Pension Plan has been terminated and all costs and liabilities
associated therewith paid, the Escrow Agent shall deliver to the Majority
Noteholder the balance of the Pension Escrow Fund (the "Release Date").
(b) Interest earned on the Pension Escrow Fund shall be used to pay the
fees of the Escrow Agent. In addition, interest on the Pension Escrow Fund shall
be part of the Pension Escrow Fund and may be used for payment of any claims
hereunder. Interest accrued and not paid to the Escrow Agent or any other party
hereto, pursuant to the provisions hereof shall be deemed to accrue to the
Company, and the Escrow Agent may release to the Company a portion of the
interest accrued to pay any tax liabilities associated therewith.
-3-
(c) If the Release Date shall fall on a day that is not a business day, any
required payment hereunder shall be made on the next business day.
6. Termination. This Agreement shall terminate upon delivery of the entire
amount of the Escrow Account (including interest thereon) in accordance
herewith.
7. Delivery of Pension Escrow Fund. The Majority Noteholder and the Buyer
will be entitled to delivery of the Pension Escrow Fund, or any portion thereof,
solely in accordance with the terms hereof. Except as may otherwise be lawfully
determined, no creditor of the Majority Noteholder, the Noteholders, the
Shareholders, the Company or the Buyer will have any rights in or to the Pension
Escrow Fund so long as it remains subject to the terms of this Agreement.
Interests in the Pension Escrow Account may not be transferred by any party
hereto.
8. Duties of the Escrow Agent; Fees. The Escrow Agent shall be reimbursed
for its fees described on Schedule A from interest earned on the Pension Escrow
Fund. Any reasonable attorneys' fees incurred by the Escrow Agent in connection
with a dispute between the Buyer and the Majority Noteholder shall be borne
equally by the parties. Acceptance by the Escrow Agent of its duties under this
Agreement is subject to the following terms and conditions, which the parties to
this Agreement hereby agree will govern and control the rights, duties and
immunities of the Escrow Agent:
(a) the duties and obligations of the Escrow Agent shall be determined
solely by the provisions of this Agreement and the Escrow Agent shall be
responsible only for the performance of such duties and obligations as are
specifically set forth in this Agreement;
(b) the Escrow Agent shall be fully protected in acting on and relying upon
any written advice, certificate, notice, direction, instruction, request,
or other paper or document which the Escrow Agent in good faith believes to
be genuine and to have been signed or presented by the proper party or
parties, and the Escrow Agent may assume that any person purporting to give
such advice, certificate, notice, direction, instruction, request or other
paper or document has been duly authorized to do so. The Escrow Agent
assumes no responsibility for the accuracy of the recitals thereof;
(c) the Escrow Agent shall not be liable for any mistake in fact or law or
otherwise, absent willful misconduct, bad faith or negligence;
(d) the Escrow Agent may seek the advice of legal counsel in the event of
any dispute or question as to the construction of any of the provisions of
this Agreement or its duties hereunder, and it shall incur no liability and
will be fully protected by the Buyer and the Majority Noteholder in respect
of any action taken, omitted or suffered by it in good faith in accordance
with the opinion of such counsel; and
(e) the Buyer and the Majority Noteholder agree to indemnify the Escrow
Agent from the performance or its duties and against any and all claims,
losses and liabilities arising out of or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), absent
willful misconduct, bad faith or negligence of the Escrow Agent.
9. Resignation of Escrow Agent. The Escrow Agent and any successor escrow
agent, as the case may be, may resign its duties and be discharged from all
further duties and obligations hereunder at any time upon giving 60 days' prior
written notice to the Buyer and the Majority Noteholder. The Buyer and the
Majority Noteholder shall thereupon jointly designate a successor
-4-
escrow agent hereunder within said 30-day period, to whom the Escrow Agent shall
deliver the Pension Escrow Fund. In the absence of such a joint designation of a
successor escrow agent, the Escrow Agent shall, without further liability or
responsibility, retain the Pension Escrow Fund as custodian thereof until
otherwise directed by the Buyer and the Majority Noteholder jointly.
10. Notices. Any notice or other communication required or permitted
hereunder shall be effective only if it is in writing and delivered personally
or sent by telecopy or mailed by registered or certified mail, return receipt
requested (air mail if to a point overseas from the point of mailing), postage
prepaid addressed as follows:
If to the Buyer:
Monitor Acquisition Corp.
c/o Mentmore Holdings Corporation
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Telecopier No.: (000) 000-0000
with a copy to:
Winston & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopier No.: (000) 000-0000
If to the Majority Noteholder:
Xxxxxxx Xxxxxxx
c/o Xxxxxx X. Xxxx, Xx.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
With copies to:
Windels, Marx, Davies & Ives
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx, Xx., Esq.
Xxxxx X. Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
If to Escrow Agent:
___________________________________
___________________________________
___________________________________
-5-
or to such other address as any such party may designate by notice given to the
other parties and shall be deemed to have been given as of the date received.
All notices given by telecopy shall be promptly confirmed by the mailing (by
first class mail) of a letter in receipt thereof.
13. Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
The parties to this Agreement agree that any legal suit, action or proceeding
arising out of or relating in any way to this Agreement, shall be instituted
exclusively in a court in New York, and each party waives any objection
whatsoever which it may now have or hereafter have to the laying of the venue of
any such suit, action or proceeding exclusively in a court in New York, and
irrevocably submit to the exclusive jurisdiction of a court in New York, in any
such suit, action or proceeding. In the event any legal suit, action or
proceeding of any kind is commenced in or brought in any court other than in a
court in New York, the parties agree to, and shall cause their respective
subsidiaries and affiliates to, transfer and/or remove any such legal suit,
action or proceeding to a court in New York, or to dismiss such legal suit,
action or proceeding immediately.
14. Assignment. No assignment, amendment or modification of the terms of
this Agreement shall be binding or effective unless expressed in writing and
signed by each party.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same instrument.
16. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
17. Captions. The titles of captions of sections contained in this
Agreement are inserted only as a matter of convenience and for reference and in
no way define, limit, extend or describe the scope of this Agreement or the
intent of any provision hereof.
-6-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
STELLEX AEROSPACE
HOLDINGS, INC.
By:________________________
Name:
Title:
MAJORITY NOTEHOLDER:
----------------------------
Name: Xxxxxxx Xxxxxxx
MONITOR AEROSPACE
CORPORATION
----------------------------
Name:
Title:
ESCROW AGENT:
By: __________________________
Name:
Title:
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SCHEDULE A
Escrow Fees $
-------------
EXHIBIT A
CLAIM NOTICE
[Escrow Agent Address]
---------------------
---------------------
---------------------
[Majority Noteholder/Buyer Address]
---------------------
---------------------
---------------------
Ladies and Gentlemen:
Reference is made to (i) the Agreement and Plan of Merger dated as of
___________, 1998 among Stellex Aerospace Holdings, Inc. ("Buyer "), Soze Corp.
and Monitor Aerospace Corporation (the "Company"), and (ii) the Escrow Agreement
dated as of _____________, 1998 ("Escrow Agreement") among the Buyer, the
Majority Noteholder named therein and the Escrow Agent.
This letter shall serve as the [Buyer's/Majority Noteholder's] notice to
the [Buyer/Majority Noteholder] that such party has a claim under the Escrow
Agreement with respect to costs associated with termination of the Company's
Pension Plan in the amount of $_______________________ (the "Claim Amount").
[Annex I hereto sets forth the supporting documentation of the Claim Amount.]
The undersigned hereby instructs the Escrow Agent to disburse from the
Escrow Account the Claim Amount by wire transfer to the account specified below.
[Insert Wire Instructions]
By: ____________________
Name:
Title:
EXHIBIT B
DISPUTE NOTICE
[Escrow Agent Address]
---------------------
---------------------
---------------------
[Buyer or Majority Noteholder's Address]
---------------------
---------------------
---------------------
Ladies and Gentlemen:
Reference is made to (i) the Agreement and Plan of Merger dated as of
___________, 1998 among Stellex Aerospace Holdings, Inc.. ("Buyer "), Soze Corp.
and Monitor Aerospace Corporation (the "Company"), and (ii) the Escrow Agreement
dated as of _____________, 1998 ("Escrow Agreement") among the Buyer, the
Majority Noteholder and the Escrow Agent.
This letter shall serve as the Dispute Notice of the [Buyer/Majority
Noteholder] as described in the Escrow Agreement. The undersigned hereby
instructs the Escrow Agent not to disburse from the Pension Escrow Fund
$__________________ to [Buyer/Majority Noteholder], but $____________ may be
distributed in accordance with the Claim Notice.
------------------------
EXHIBIT D
LETTER OF TRANSMITTAL
To accompany certificates for shares of Common Stock of
MONITOR AEROSPACE CORPORATION
surrendered for the applicable Merger Consideration
in connection with the merger of
Soze Corp., a wholly-owned subsidiary of
Stellex Aerospace Holdings, Inc., with and into Monitor Aerospace Corporation
This letter should be delivered with accompanying stock certificates as soon as
possible to:
Monitor Aerospace Corporation
0000 Xxx Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxx Xxxx 00000
PLEASE READ THE ATTACHED INSTRUCTIONS CAREFULLY.
Gentlemen:
Pursuant to the Agreement and Plan of Merger dated as of April 28, 1998
(the "Merger Agreement") among Stellex Aerospace Holdings, Inc. ("Buyer"), Soze
Corp. ("MergerSub"), and Monitor Aerospace Corporation (the "Company"), the
undersigned shareholder (the "Shareholder") herewith surrenders for cancellation
the following certificate(s), which represent all of the shares of Common Stock
of the Company ("Company Common Stock") owned (beneficially or of record) by the
Shareholder (the "Shares"):
====================================================================================================================
Common Stock
====================================================================================================================
Name and Address of Shareholder Cert. No. Number of Shares
====================================================================================================================
Unrestricted Restricted
Shares* Shares**
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
====================================================================================================================
Total (must equal total shares of record)
====================================================================================================================
(If the above space is inadequate, please attach a schedule.)
* Unrestricted Shares means Company Common Stock owned by persons other than
Xxxxxxx Xxxxxxx, Xxxxxxxx X. Xxxxxxxx and R. Xxxxx Xxxxxxx.
** Restricted Shares means Company Common Stock owned by Xxxxxxx Xxxxxxx,
Xxxxxxxx X. Xxxxxxxx and R. Xxxxx Xxxxxxx (collectively, the
"Noteholders").
1
Terms used herein, but not otherwise defined herein, shall have the
meanings subscribed thereto in the Merger Agreement.
Payment for Shares: You are hereby authorized and instructed to deliver, as
set forth below, the Shareholder's portion of the Merger Consideration set forth
on Schedule 2.3 of the Merger Agreement (which such Shareholder acknowledges is
accurate and complete and in accordance with any and all agreements with such
Shareholder and other Shareholders), less any withholding therefrom required by
Applicable Law, for all shares of Company Common Stock owned by the Shareholder
and formerly represented by the stock certificate(s) so surrendered and to take
all necessary actions to effect such delivery; provided that any shareholder
holding Restricted Shares acknowledges that a portion of the Merger
Consideration:
(i) will be paid in the form of a Buyer's Note in the aggregate amount
of $5,180,000 payable by the Company to the Majority Noteholder, and
that if the Buyer has claims under the Merger Agreement, the
Shareholder Side Agreement or under any Letter of Transmittal, the
Buyer may offset payments due under the Buyer's Note; and
(ii) will be placed in escrow pursuant to the Escrow Agreement between
Buyer, the Majority Noteholder and the Escrow Agent named therein (the
"Escrow Agreement") for the purpose of paying all costs and
liabilities associated with termination of the Pension Plan,
including, legal, accounting, actuarial, and other expenses which
would be incurred in connection with the termination of the Pension
Plan.
The portion of the Merger Consideration that is payable in cash to the
Shareholder pursuant to the Merger Agreement is hereinafter referred to as the
"Closing Date Merger Consideration." Each Shareholder intends to receive amounts
payable to him or her by wire transfer pursuant to the "Wire Transfer
Instructions" set forth on the last page hereof. If such instructions are not
provided, the Closing Date Merger Consideration shall be paid by Buyer by
issuing a cashier's check in the name of the Shareholder and mailing the same to
the address of the Shareholder indicated herein. The Shareholder understands
that if payment is to be made to a person other than the registered holder of
the certificate(s) surrendered herewith, it is a condition of such payment that
the certificate(s) be properly endorsed or otherwise in proper form for transfer
and that the Shareholder must pay any transfer or other Taxes required by reason
of the payment to such other person or establish to the reasonable satisfaction
of Buyer that such Taxes have been paid or are not applicable.
Ownership of Shares; Authorizations: The Shareholder represents and
warrants that the Shareholder: (i) is the record owner of the Shares, (ii) is
the beneficial owner of the Shares or has full authority and capacity to
transfer the Shares on behalf of the beneficial owners, and (iii) has good and
marketable title to the Shares, free and clear of any liens, encumbrances,
security agreements, claims, equities, charges, restrictions, voting agreements,
proxies, options, rights of first refusal, calls, contractual rights or other
interests or adverse claims. The Shareholder has all necessary power and
authority to execute and deliver this Letter of Transmittal, and to consummate
the transactions described herein, and the Letter of Transmittal is the legal,
valid and binding obligation of the Shareholder. If the Shareholder is a
Majority Noteholder, the Shareholder has all necessary power and authority to
execute and deliver the Escrow Agreement, and to consummate the transactions
described therein, and the Escrow Agreement is the legal, valid and binding
obligation of the Shareholder.
2
If the Shareholder is a legal entity, the execution and delivery of each of
this Letter of Transmittal and, if applicable, the Escrow Agreement: (a) has
been duly and validly authorized by such Shareholder's governing body; (b) does
not violate (A) any applicable law or court order or (B) the organizational
documents of such Shareholder; and (c) does not conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any agreement to which the Shareholder is a party or to which such
Shareholder's property is bound or result in the creation or imposition of any
lien of any nature upon any property of such Shareholder. If the Shareholder is
a trustee or otherwise acting in a fiduciary or representative capacity, the
Shareholder hereby represents and warrants that it is duly authorized to execute
and deliver this Letter of Transmittal.
Release: Effective as of the Closing, the Shareholder hereby irrevocably
waives and releases all known and unknown claims it may have, in such
Shareholder's capacity as a shareholder of the Company, against the Company,
Buyer, or MergerSub, or any present, future and former directors, officers,
agents, affiliates and employees of the Company, Buyer or MergerSub from any and
all actions, claims, causes of action or liabilities of any nature, in law or
equity, known or unknown, and whether or not heretofore asserted, which such
Shareholder ever had, now has or hereafter can, shall or may have against any of
the foregoing entities or persons for, upon or by reason of any matter, cause or
thing relating to the Shareholder's status as a shareholder of the Company,
provided that this release shall not be deemed to limit or release any party
from the provisions of the Merger Agreement, Buyer's Note or the Escrow
Agreement. The release set forth in the foregoing sentence shall be binding upon
all beneficiaries, heirs, executors, administrators, trustees in bankruptcy,
legatees, distributees, successors, assigns and legal representatives of the
Shareholder, and shall not be affected by, and shall survive the death,
incapacity, dissolution, bankruptcy, liquidation or reorganization of the
Shareholder. The Shareholder acknowledges that the release provided for in this
paragraph is a condition to Closing and is being given in partial consideration
for the Buyer's undertakings in the Merger Agreement.
THE SHAREHOLDER, UNLESS IT IS THE MAJORITY NOTEHOLDER ACTING IN ITS
CAPACITY AS SUCH, ACKNOWLEDGES AND AGREES THAT IT HAS NO RIGHT, TITLE OR OTHER
INTEREST IN THE BUYER'S NOTE OR THE PENSION ESCROW FUND. THE SHAREHOLDER, UNLESS
IT IS THE MAJORITY NOTEHOLDER ACTING IN ITS CAPACITY AS SUCH, WAIVES ANY AND ALL
RIGHTS TO BRING ANY CLAIMS OR CAUSES OF ACTION UNDER THE MERGER AGREEMENT, THE
BUYER'S NOTE OR THE ESCROW AGREEMENT.
IF THE SHAREHOLDER IS A NOTEHOLDER, SUCH NOTEHOLDER ACKNOWLEDGES AND AGREES
THAT THE MAJORITY NOTEHOLDER SHALL EXERCISE ALL RIGHTS AND PRIVILEGES OF THE
NOTEHOLDERS UNDER THE BUYER'S NOTE, THE ESCROW AGREEMENT AND THE MERGER
AGREEMENT, AND RELATED MATTERS, ALL IN ACCORDANCE WITH SECTION 8.5 OF THE MERGER
AGREEMENT.
EACH SHAREHOLDER ACKNOWLEDGES THAT THE BUYER AND THE COMPANY SHALL HAVE NO
OBLIGATION TO DEAL WITH ANY INDIVIDUAL SHAREHOLDER (OTHER THAN THE MAJORITY
NOTEHOLDER IN ITS CAPACITY AS SUCH) REGARDING ANY ISSUE ARISING UNDER THE
BUYER'S NOTE, THE ESCROW AGREEMENT OR THE MERGER AGREEMENT. GOVERNING LAW;
CONSENT TO JURISDICTION: THE SHAREHOLDER AGREES THAT THIS AGREEMENT SHALL BE
GOVERNED BY, CONSTRUED,
3
INTERPRETED, AND THE RIGHTS OF THE PARTIES ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK. THE SHAREHOLDER (A) CONSENTS TO SUBMIT
HIMSELF OR HERSELF TO THE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED IN THE STATE OF NEW YORK IN THE EVENT ANY DISPUTE ARISES UNDER THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, (B) AGREES THAT HE OR
SHE WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION OR VENUE BY
MOTION OR OTHER REQUEST FOR LEAVE FROM SUCH COURT, AND (C) AGREES THAT HE OR SHE
WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY IN ANY COURT OTHER THAN A STATE OR FEDERAL COURT SITTING IN
THE STATE OF NEW YORK.
Other Documents: The Shareholder hereby agrees to execute or provide any
additional documents, or take such additional action, as Buyer may deem
reasonably necessary to evidence or effect surrender of the Shares covered by
this Letter of Transmittal or to establish the right of the persons indicated in
this Letter of Transmittal to receive any payment indicated in this Letter of
Transmittal.
IMPORTANT TAX INFORMATION
Under federal income tax law, a shareholder who surrenders certificates
formerly evidencing shares of Company Common Stock for payment of the applicable
Merger Consideration is generally required by law to provide Buyer with his or
her correct taxpayer identification number on the Form W-9 accompanying this
Letter of Transmittal. If Buyer is not provided with the Shareholder's correct
taxpayer identification number, the Shareholder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, payments that are made to
such Shareholder may be subject to backup withholding. Backup withholding also
may be imposed if the Internal Revenue Service notifies Buyer that the taxpayer
identification number provided by the Shareholder is incorrect.
If backup withholding applies, Buyer is required to withhold 31% of any
payments made to the Shareholder. Backup withholding is not an additional tax.
Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained.
Purpose of Form W-9
To prevent backup withholding on payments that are made to a Shareholder,
the Shareholder must notify Buyer of the Shareholder's correct taxpayer
identification number by completing the Form W-9 certifying under penalties of
perjury that the taxpayer identification number provided on Form W-9 is correct
(or that the Shareholder has applied for or intends, in the near future, to
apply for a taxpayer identification number, and the Shareholder is not waiting
for such number).
What Number to Give
The taxpayer identification number that the Shareholder is required to give
is his or her social security number if the Shareholder is an individual, or the
employer identification number if the Shareholder is not an individual. If
someone is acting in a representative capacity for a Shareholder, the social
security number of the person being represented must also be provided. If
payment is to
4
be made to other than the registered holder, the payee indicated under "Special
Payment Instructions" or "Wire Transfer Instructions" must provide such payee's
taxpayer identification number and complete the Form W-9 accompanying this
Letter of Transmittal.
Form W-8/Foreign Persons
All persons who are not citizens of the United States or who are not
otherwise United States persons, as that term is defined in the Internal Revenue
Code of 1986, as amended, which term includes, among other things, a corporation
organized under the laws of any state, should complete Form W-8 in lieu of Form
W-9.
Employee Owners of Stock
Payments made to (i) employees and other persons who surrender shares of
stock issued under the Restricted Stock Bonus Plan or the Xxxxxxx Employment
Agreement or (ii) employees who otherwise own stock acquired as a consequence of
their employment with the Company, which stock is still subject to ownership
restrictions that cause the employee or other persons to then not be treated as
the unrestricted owner of the stock for tax purposes, are generally subject to
withholding of applicable Federal, state and local income and employment related
taxes. Any income taxes withheld shall be deemed to have been paid by such
shareholder, who may then claim a credit against such shareholder's personal tax
liability in an amount equal to such withheld taxes. Any affected shareholders
should consult with their tax advisors and the Company as to the impact of such
taxes.
INSTRUCTIONS FOR SURRENDERING CERTIFICATE(S)
(in connection with the merger of Soze Corp.,
a wholly-owned subsidiary of Stellex Aerospace Holdings, Inc.
with and into Monitor Aerospace Corporation)
In accordance with the terms of the Merger Agreement, upon surrender of
certificates representing the Shares, the Shareholder thereof is entitled to
receive his or her portion of the applicable Merger Consideration described in
the Merger Agreement for all shares of Company Common Stock surrendered by the
Shareholder, less amounts placed in escrow pursuant to the Escrow Agreement or
paid under the Buyer's Note. To receive such Merger Consideration, the
Shareholder must send this Letter of Transmittal, properly filled in, dated, and
signed, together with the certificate(s) evidencing the Shares, to the Company
at the address set forth above. It is expected that a representative of the
Buyer will be present at the closing of the transactions contemplated in the
Merger Agreement to receive Letters of Transmittal and certificates for shares
of Company Common Stock.
1. Signatures. This Letter of Transmittal must either: (a) be signed by the
registered holder(s) of the certificate(s) transmitted with this Letter to
Transmittal; or (b) signed by a transferee to whom such certificates have been
duly transferred by the registered holder (such transfer to be evidenced as
described in paragraph 2 below). THE SHAREHOLDER MUST HAVE HIS OR HER SIGNATURE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY HAVING AN OFFICE IN THE UNITED
STATES OR BY A MEMBER ORGANIZATION OF THE NEW YORK STOCK EXCHANGE OR THE
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., and such persons must complete
the Internal Revenue Service Form W-9, as described below. If any surrendered
certificates are held of record in joint tenancy,
5
both joint tenants must sign. If the surrendered certificates are held of record
in joint tenancy and one joint tenant is deceased, the surviving joint tenant
must send a death certificate of the deceased joint tenant along with this
Letter of Transmittal. If this Letter of Transmittal is executed by an attorney,
executor, administrator, trustee, or guardian, or by anyone acting in a
fiduciary or representative capacity, or by an officer of a corporation, the
person executing such letter of Transmittal must give his or her full title in
such capacity and evidence of authority satisfactory to Buyer. All signatures
must correspond with the name as written on the tendered Certificates or as
otherwise provided in this paragraph.
2. Payment to Other than the Registered Holder If any payment for shares of
Company Common Stock is to be made in a name other than the name of the
registered holder of the surrendered certificate, the certificate so surrendered
must be duly endorsed by the registered holder to the person to whom payment is
to be made, or the surrendered certificate must be accompanied by a duly
executed stock power, in each case with the signature guaranteed (as described
above in paragraph 1), evidencing proper assignment of the shares of Company
Common Stock represented by said certificate. Also, any person requesting
payment to anyone other than the registered holder of the shares of Company
Common Stock being surrendered must pay any transfer or other Taxes required by
reason of the payment to a person other than the registered holder or establish
to the satisfaction of Buyer that such Tax has been paid or is not payable.
3. Special Instructions/Wire Transfers. Please complete the applicable
special instruction boxes if either: (a) cashier's checks for the Closing Date
Merger Consideration are to be issued in a name other than the name of the
Shareholder; or (b) payments of the Closing Date Merger Consideration are to be
made by wire transfer (whether such payments are to be made for the account of
the Shareholder or that of a person other than the Shareholder).
4. Certificates in Different Names. If certificates are registered in
different names, it will be necessary to complete, sign, and submit as many
separate Letters of Transmittal as there are different registrations of
certificates surrendered.
5. Lost Certificates. If certificates have been lost, stolen, or destroyed,
that fact should be indicated on the face of this Letter of Transmittal, and the
Shareholder should contact R. Xxxxx Xxxxxxx at the Company for further
instructions.
6. Delivery of Certificates. All certificates should be delivered at one
time for surrender. A Letter of Transmittal and the stock certificate(s) must be
received by the Company and Buyer, in satisfactory form, in order to make an
effective surrender. Delivery of the certificate(s) and other documents will be
effected, and the risk of loss and title to the certificate(s) will pass, only
upon proper delivery of the certificate(s) to the Company. The method of
delivery of the Letter of Transmittal and the stock certificate(s) is at the
option and risk of the Shareholder, but if mail is used, registered mail with
proper insurance is suggested as a precaution against loss.
7. Comply with all Conditions. Failure to accurately complete this Letter
of Transmittal, to obtain guarantees of signatures, or to comply with the other
conditions and requirements of this Letter of Transmittal may affect the closing
of the Merger Agreement. Buyer may, entirely at its election, waive any of the
conditions or requirements specified herein. All determinations as to
whether the conditions and requirements of this Letter of Transmittal have been
complied with shall be made by Buyer and shall be final and binding.
6
8. Forms W-9. Please complete the Internal Revenue Service Form W-9 (or, in
the case of a non-United States person, a Form W-8) accompanying this Letter of
Transmittal. Failure to do so may result in withholding of a portion of the
payment to be made hereunder.
9. Additional Information. If you need an additional Letter of Transmittal
or require additional information or explanations, please call R. Xxxxx Xxxxxxx
at the Company at (516) 957- 2442.
10. Cancellation of Shares. Subject to and in accordance with the terms of
the Merger Agreement, all shares of Company Common Stock outstanding prior to
the Merger and held by the Shareholder will be canceled at the Effective Time.
11. Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of the Shareholder contained in this
Agreement shall survive the Closing Date indefinitely.
12. Representations Regarding Merger Agreement. The Shareholder
acknowledges that he, she or it has been provided with a fully executed copy of
the Merger Agreement (including schedules and exhibits) and approves the terms
and provisions thereof. The Shareholder confirms that it has approved, by
unanimous written consent, the form, terms and provisions of the Merger
Agreement pursuant to the Unanimous Written Consent of Shareholders of the
Company dated April 28, 1998.
7
--------------------------------------------------------------------------------
WIRE TRANSFER INSTRUCTIONS
To be completed if payments are to be made by wire transfer. Please make
payments by wire transfer to the following accounts and in the following amounts
in accordance with the following instructions:
--------- --------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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Guarantee of Signature(s)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(ALL SHAREHOLDERS' SIGNATURES APPEARING HEREON MUST BE GUARANTEED BY A
COMMERCIAL BANK OR TRUST COMPANY HAVING AN OFFICE IN THE UNITED STATES OR BY A
MEMBER ORGANIZATION OF THE NEW YORK STOCK EXCHANGE OR THE NATIONAL ASSOCIATION
OF SECURITIES DEALERS, INC.)
The undersigned hereby guarantees the signature(s) that appear on this
Letter of Transmittal and the stock certificate(s) formerly representing the
shares of Company Common Stock surrendered pursuant to this Letter of
Transmittal.
Authorized Signature: __________________________________________________________
Name of Firm: __________________________________________________________________
Dated: _________________________________________________________________________
*THE SHAREHOLDER MUST ALSO COMPLETE THE FORM W-9 ACCOMPANYING THIS LETTER
OF TRANSMITTAL. FAILURE TO COMPLETE SUCH FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS DUE.
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All Shareholders
SIGN HERE
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Signature(s) of Owner(s)
(Must be signed by registered holder(s) as name(s) appear on stock
certificate(s) or by person(s) authorized to become registered holder(s) by
certificates and documents transmitted herewith. If any certificate being
surrendered is held of record in joint tenancy, both joint tenants must sign. If
signature is by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation, or other acting in a fiduciary or representative
capacity, please set forth full title.
Shareholders should complete:
Dated: _________________________________________________________________________
Name(s): _______________________________________________________________________
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(Please Print)
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
(Including Zip Code)
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Area Code and Telephone Number (______) ________________________________________
CHECKS WILL BE MAILED TO THE ADDRESS
ABOVE UNLESS OTHERWISE INDICATED.
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8
EXHIBIT E-1
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "Agreement") is made as of the ___ day
of May, 1998 between Monitor Aerospace Corporation (the "Company"), a New York
corporation, whose address is at 0000 Xxx Xxxxxxxx Xxxxxxxxx, Xxxxxxxxxx, Xxx
Xxxx 00000 and Xxxxxxx Xxxxxxx ("Xxxxxxx").
WHEREAS, concurrently with the execution of this Agreement, Stellex
Aerospace Holdings, Inc. ("Buyer"), Soze Corp. ("MergerSub") and the Company
will enter into an Agreement and Plan of Merger, dated as of April __, 1998 (the
"Merger Agreement"), pursuant to which MergerSub will be merged into and with
the Company (the "Merger");
WHEREAS, concurrently with the execution of this Agreement, the Company and
Monitor Asia Corporation ("Monitor Asia"), an Affiliate of Xxxxxxx, will enter
into a Sales Representative Agreement, dated as of May __, 1998 (the "Monitor
Asia Sales Representative Agreement"), pursuant to which Monitor Asia will serve
as a non-exclusive representative of the Company for the promotion and sale of
certain products and services of the Company in certain territories as more
specifically provided for therein;
WHEREAS, concurrently with the execution of this Agreement, the Company,
Monitor Asia and Monitor Aerospace International Corporation ("MAIC"), a
subsidiary of the Company, will enter into an Asset Purchase Agreement, dated as
of May __, 1998 (the "Asset Purchase Agreement"), pursuant to which the Company
will sell and Monitor Asia will acquire certain assets and properties of MAIC as
set forth more specifically on Exhibit A thereto;
WHEREAS, pursuant to Section 6.1(n) of the Merger Agreement, a condition
precedent to the obligations of Buyer and MergerSub to consummate the Merger is
that Monitto shall have entered into a non-competition agreement with the
Company; and
WHEREAS, Xxxxxxx desires to induce Buyer and MergerSub to enter into the
Merger Agreement, the Asset Purchase Agreement and the Monitor Asia Sales
Representative Agreement and to consummate the Merger, from which transactions
Xxxxxxx will gain substantial economic benefits.
NOW THEREFORE, in consideration of the execution of the Merger Agreement,
the Asset Purchase Agreement and the Monitor Asia Sales Representative Agreement
and the consummation of the Merger, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and intending to be
legally sound hereby, Xxxxxxx and the Company hereby agree as follows:
1. Acknowledgments. The Company and Xxxxxxx acknowledge that:
a. The Company's business is highly competitive;
b. The essence of that portion of the Company's business in which Xxxxxxx
was involved consisted of trade secrets, business and product
information, financial information, and other confidential and
proprietary customer relationships (collectively, the "Trade
Secrets"), all of which are necessary to the conduct of the Company's
business and are protected and kept secret by the Company; and
x. Xxxxxxx acknowledges that the Company's rights in its Trade Secrets
and customers would be misappropriated should Xxxxxxx, personally, or
any company or business entity with which he is or becomes affiliated
at any time, disclose the Trade Secrets to others or engage in
solicitation of the Company's customers in a manner inconsistent with
this agreement, and that the Company would suffer substantial damage
as a result of such disclosure or solicitation.
2. Trade Secrets and Customer Lists.
Based upon what is set forth above:
x. Xxxxxxx agrees that neither he, personally, nor any company or
business entity with which he is or becomes affiliated, shall, for a
period of two (2) years after the date of execution of this Agreement,
solicit any customers of the Company for the account of any competing
business with which he is or shall in any way become employed or
affiliated.
x. Xxxxxxx agrees that neither he, personally, nor any company or
business entity with which he is or becomes affiliated, shall, for a
period of two (2) years after the execution of this Agreement, induce
or attempt to induce any employee or independent contractor of the
Company to terminate his employment or contractual agreement, whether
written or oral, with the Company.
x. Xxxxxxx agrees that following the date of execution of this Agreement
neither he, personally, nor any company or business entity with which
he is or becomes affiliated shall obtain, directly or indirectly, from
him and thereafter use, disseminate, or disclose, in whole or in part,
any of the Company's Trade Secrets to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever. As
used in this Agreement, the term "Trade Secrets" shall not include any
proprietary information and intellectual property set forth on Exhibit
A hereto, which the Company acknowledges to be proprietary information
and intellectual property belonging to Xxxxxxx as of the date of
execution of this Agreement. Except as set forth on Exhibit A hereto,
the presumption will be that all other proprietary
2
information and intellectual property of the Company represents
Company Trade Secrets.
3. Non-competition. Neither Xxxxxxx personally, nor any company or business
entity with which he is or becomes affiliated at any time, shall, for a
period of two (2) years after the date of execution of this Agreement,
directly or indirectly, own, manage, operate, or control, or be employed by
or participate in or be connected in any manner with the ownership,
management, operation, or control of any business or type of business
competitive with the Company's business. For the purposes of this
Agreement, the Company's business consists of the manufacture and assembly
of precision machined structural aircraft components and assemblies, the
sale and licensing of technology to aerospace manufacturers and the
providing of applied management consulting to aerospace manufacturers. In
addition, during such period, neither Xxxxxxx, personally, nor any company
or business entity with which he is or becomes affiliated at any time,
shall, directly or indirectly, hire, attempt to hire, solicit, or otherwise
attempt to employ in any capacity, whether as employee, independent
contractor, consultant, or otherwise, and whether temporary or permanent,
part-time or full time, any employee or agent of the Company or any
Affiliate of the Company.
4. Legal and Equitable Relief.
x. Xxxxxxx agrees that, upon the breach of any of the provisions of this
Agreement, the Company, in addition to all other remedies, shall be
entitled, as a matter of right, to injunctive relief in any court of
competent jurisdiction, and may, in addition, pursue any other
available remedy, at law or in equity, including the recovery of
damages.
b. If the scope, period of time, or area of restriction herein specified
is or would be adjudged unreasonable in any court proceeding, then the
period of time, scope, or area of restriction shall be reduced or
limited in the court's discretion so as to make said time period,
scope or area of restriction reasonable, such that it or they may be
enforced in such areas and during such periods of time and in such
manner as is adjudged to be reasonable by the court by the elimination
of any unreasonable aspects thereof.
x. Xxxxxxx stipulates that in any proceeding in which Xxxxxxx,
personally, or any company or business entity with which he is or
becomes affiliated at any time, is shown to be soliciting or receiving
business from the Company's customers in a manner contrary to the
provisions of this Agreement, such information shall be considered
prima facie evidence that the names and addresses of such customers
became known to Xxxxxxx as a result of the confidential relationship
between Company and Xxxxxxx. The burden shall be on Xxxxxxx to prove
otherwise.
5. Limitation on Restrictions. Notwithstanding the restrictions contained
herein, none of the following actions shall constitute a violation of the
terms of this Agreement: (a) the
3
assumption by Monitor Asia of the Sales Representative Agreement, dated as
of November 15, 1996, between the Company and Cincinnati-Milacron Marketing
Company, (b) Monitor Asia's acting as a non-exclusive representative of the
Company and others for the promotion and sale of certain products and
services of the Company and others in certain territories pursuant to or as
permitted by the Monitor Asia Sales Representative Agreement nor (C) the
assumption by Monitor Asia of (I) the Expatriate Employment Agreement,
dated June 30, 1997, between the Company and Kan Hong Seng, (ii) the letter
agreement, dated September 30, 1997, between the Company and Xxxx Xxxxx and
(iii) the ___________ agreement, dated _____________, between the Company
and Xxxxx Xx Da.
6. Successors and Assigns. The Company may assign its rights under this
Agreement and this Agreement shall inure to the benefit of the successors
and assigns of Company and, subject to the restrictions on transfer herein
set forth, be binding upon Monitto and his heirs, executors,
administrators, guardians, and successors whether individuals, companies,
Affiliates or other business entities. Xxxxxxx may not assign his rights or
obligations under this Agreement.
7. Waiver. The failure of the Company to insist upon strict adherence to any
term of this Agreement shall not be considered a waiver or deprive the
Company of the right to subsequently insist upon strict adherence to that
term or to insist at any time upon strict adherence to any other term of
this Agreement.
8. Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity of or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Choice of law; Consent to Jurisdiction. Each of the parties hereto agrees
that this Agreement shall be governed by, construed, interpreted, and the
rights of the parties enforced in accordance with the internal laws of the
State of New York. Each of the parties hereto (a) consents to submit
himself or herself to the personal jurisdiction of any State or Federal
court located in the State of New York in the event any dispute arises
under this Agreement, (b) agrees that he or she will not attempt to deny or
defeat such personal jurisdiction or venue by motion or other request for
leave from such court, and(C)agrees that he or she will not bring any
action relating to this Agreement in any court other than a state or
Federal court Sitting in the State of New York.
10. Headings. The headings in this Agreement are solely for convenience of
references and shall not affect its interpretation.
11. Entire Agreement. This Agreement constitutes the entire agreement between
the Company and Xxxxxxx and supersedes and cancels all prior oral or
written agreements between them, if any, with respect to the subject matter
hereof.
4
12. Amendments. This Agreement may not be amended, altered or changed, except
by a writing signed by the Company and Xxxxxxx.
13. Defined Terms. All capitalized terms used herein but not otherwise defined
shall have the meanings ascribed to them in the Merger Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
duplicate by a proper and duly authorized representative thereof, and Xxxxxxx
has signed this Agreement in duplicate, as of the day and year first above
written.
--------------------------------------
XXXXXXX XXXXXXX
Sworn before me this _________ day of
_________________, 1998.
-----------------------------------
Notary Public
MONITOR AEROSPACE CORPORATION
By:___________________________________
Name:
Title:
Sworn before me this ___________ day of
________________, 1998.
-----------------------------------
Notary Public
5
Exhibit E-2
ASSET PURCHASE AND SALE AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of the _____ day of
________, 1998, by Monitor Aerospace Corporation, a corporation duly organized
and existing under the laws of the State of New York and Monitor Aerospace
International Corporation, a corporation duly organized and existing under the
laws of the State of New York (collectively, the "Company") and Monitor Asia
Corporation ("Monitor Asia")(the "Purchaser"), a corporation duly organized and
existing under the laws of the State of Delaware.
WHEREAS, the Company desires to sell, and the Purchaser desires to
purchase, the assets and properties of the Company described on Exhibit A, and
to employ the persons listed on Exhibit A, in order to conduct a business
selling products, engineering and services to the aircraft and aerospace
industry throughout Asia; and
WHEREAS, it is the express intent of the parties that all assets
transferred hereunder are to be transferred for $1 plus assumption of certain
liabilities; and
WHEREAS, it is the express intent of the parties that all of the risks and
liabilities of the assets and businesses of the Company which are transferred
hereunder for events occurring after the date hereof shall be borne solely by
Purchaser; and
WHEREAS, it is the express intent of the parties that all of the risks and
liabilities of the assets and businesses of the Company which are not
transferred hereunder shall remain solely with the Company; and
WHEREAS, the Purchaser and its employees are knowledgeable about the
business and the assets which it is acquiring hereunder and the Purchaser is
willing to acquire such assets and business "as is" without any warranties or
representations by the Company as to their operating condition or otherwise;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE I.
SALE AND PURCHASE
Section 1.1. Sale of Assets by the Company. Subject to and upon the
terms, provisions and conditions contained in this Agreement as of the date
hereof, the Company hereby sells, assigns, and delivers to the Purchaser, and
the Purchaser
purchases, accepts and receives from the Company, all of the Company's right,
title and interest in and to all of the assets other than deposits related
thereto listed on Exhibit A (the "Assets"). Such deposits, which are referred to
in Items 1A, 1B and 1G and 2A of Exhibit A, shall be paid over to the Company on
the date of this Agreement.
Section 1.2. Excluded Assets. Notwithstanding any provision of this
Agreement to the contrary, there shall be excluded from the sale and purchase
contemplated by this Agreement all assets of the Company not specifically listed
in Exhibit A (the "Retained Assets").
Section 1.3. Liabilities Assumed by Purchaser. Purchaser hereby assumes and
agrees to pay all of the obligations and liabilities of the Company related to
the Assets, whether such obligations and liabilities arise out of events
occurring before or after the date hereof, including without limitation, all
risks of loss in connection with contracts scheduled on Exhibit A. All risks of
loss in connection with the Retained Assets shall remain with the Company.
Purchaser has delivered to the Company agreements (such agreements, together
with releases referred to in Section 4.2, the "Releases") of the third parties
to the contracts listed on Exhibit A, in form and substance satisfactory to the
Company, releasing the Company from all liability under such contracts.
Section 1.4. Purchase Price. In consideration of the sale, assignment and
delivery of the Assets to the Purchaser by the Company in accordance with the
provisions of this Agreement, the Purchaser shall pay to the Company the
purchase price (the "Purchase Price") in an amount equal to $1.00 by check in
good, available funds, receipt of which is acknowledged by the Company and the
assumption by the Purchaser of the obligations and liabilities of the Company
with respect to the Assets.
Section 1.5. Use of Name. Purchaser agrees to use the word "Monitor" only
in the countries of Indonesia, Malaysia, Thailand, Singapore, South Korea,
People's Republic of China and the Republic of China and only for so long as the
Sales Representative Agreement dated the date hereof between the Company and
Monitor Asia remains in effect. Purchaser agrees, within two months after
receipt of notice to do so, to cease using the word "Monitor" in its name if
requested to do so by the Company because such continued use would be
determintal or adverse to the business operations of the Company.
2
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents, warrants and covenants to the Purchaser
that:
Section 2.1. Due Authorization, Execution and Delivery. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. Such execution and
delivery by the Company has been duly authorized and this Agreement has been
duly executed and delivered and is enforceable in accordance with its terms,
subject only to bankruptcy, insolvency or other laws now or hereafter in effect
relating to creditors' rights.
Section 2.2. No Other Representations or Warranties. Other than as
expressly provided herein, the Company makes no other warranties or
representations regarding the Assets.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 3.1 Organization, Due Authorization, Execution and Delivery. The
Purchaser is a duly organized, validly existing corporation and in good standing
under the laws of the State of Delaware with all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Such execution and delivery by the Purchaser
has been duly authorized and this Agreement has been duly executed and is
enforceable in accordance with its terms, subject only to bankruptcy, insolvency
or other laws now or hereafter in effect relating to creditors' rights.
Section 3.2 Purchaser's Knowledge and Experience. Purchaser expressly
represents that it is highly knowledgeable and sophisticated in the businesses
to which the contracts being acquired as assets hereunder pertain and
acknowledges that the Company is transferring all assets, including the
contracts, "as is" and without any warranties or representations, except as
expressly stated herein, and Purchaser expressly waives all right to any
warranties or representations from the Company in connection with the purchase
and transfer of the Assets, except as expressly set forth herein.
Section 3.3 Valid and Binding Agreement. This Agreement and any further
instruments executed and delivered by the Purchaser hereunder, constitute and
will constitute the legal, valid and binding obligations of the Purchaser,
enforceable
3
against the Purchaser in accordance with their respective terms. To the
knowledge of the Purchaser, the Releases constitute the legal, valid and binding
obligations of the parties providing such releases, enforceable against such
parties in accordance with the respective terms.
Section 3.4 No Breach of Statute or Contract. Neither the execution and
delivery of this Agreement by the Purchaser, nor compliance with the terms and
provisions of this Agreement on the part of the Purchaser, will (a) violate any
statute or regulation of any governmental authority, domestic or foreign,
affecting the Purchaser; (b) require the issuance of any authorization, license,
consent or approval of any federal, state or foreign governmental agency; or (c)
conflict with or result in a breach of any of the terms, conditions or
provisions of any judgment, order, injunction, decree, note, indenture, loan
agreement or other agreement or instrument to which the Purchaser is a party, or
by which the Purchaser is bound, or constitute a default thereunder.
ARTICLE IV.
COVENANTS OF PURCHASER
Section 4.1. Performance of Obligations. The Purchaser will perform in a
timely manner all of the Company's obligations required under or in connection
with the Assets.
Section 4.2. Employees. Exhibit A lists those employees of the Company
whose employment with the Company will be terminated on the date of this
Agreement. It shall be a condition to the effectiveness of this Agreement that
the Purchaser shall deliver to the Company (a) a consent executed by each
employee of the Company listed on Exhibit A hereto to his termination of
employment by the Company and (b) a release executed by each employee listed on
Exhibit A hereto of all claims each such employee may have against the Company
under any employment agreement, consulting agreement, statute or otherwise, in
each case in form and substance satisfactory to the Company. The Purchaser shall
be responsible for any liability of the Company arising after the date hereof to
the former employees of the Company listed on Exhibit A.
ARTICLE V.
INDEMNIFICATION
Section 5.1 Indemnification. The Purchaser shall indemnify and hold the
Company and its affiliates harmless from and against any and all losses, costs,
obligations, liabilities,
4
settlement payments, awards, judgements, liens, penalties, damages, expenses and
charges (including, without limitation, reasonable fees and disbursements of
counsel and other professionals) incurred by the Company or its affiliates in
connection with or arising from:
a. Any indebtedness and obligation of or claim, contingent or otherwise,
relating to the Assets, whether incurred or arising prior to or after
the date hereof;
b. Any breach by Purchaser of any of its covenants or agreements
contained in this Agreement;
c. Any failure by Purchaser to perform any of its obligations under this
Agreement;
d. Any claim asserted by any party to a contract listed on Exhibit A; and
e. All actions, suits, proceedings, demands, assessments, judgments,
costs and expenses (including reasonable legal fees) incident to the
foregoing.
ARTICLE VI.
MISCELLANEOUS
Section 6.1 Confidentiality. Each party acknowledges the confidential
nature of the information covered by and relating to this Agreement and to the
Assets. Each party and each party's representatives will hold in strict
confidence all confidential data and information obtained with respect to this
Agreement, the Assets or the other party hereto, except to the extent disclosure
is required by applicable law.
Section 6.2 Construction. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
regard to conflicts of law principles.
Section 6.3. Entire Agreement. This Agreement, together with schedules and
exhibits attached hereto, contains the entire agreement between the parties with
respect to the subject matter hereof and supercedes all prior agreements or
understanding, oral or written, as to such subject matter.
Section 6.4. Further Assurances. Each of the parties agrees hereafter to
execute and deliver to the other any and all
5
further agreements, instruments, artifacts and other documents as may reasonably
be requested by the other party hereto in order more fully to consummate the
transactions contemplated hereby and to effect an orderly transition of the
Assets being acquired by the Purchaser hereunder.
Section 6.5. Notices. All notices or other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if served personally or by telecopier, on the date received if
sent by courtier, or otherwise addressed as follows:
(i) if to Purchaser, to:
Monitor Asia Corporation
Beijing Silver Tower
Xxxx 000
Xxxxxxx
Xxxxxxx Xxxxxxxx of China
with a copy to:
Xxxxxx X. Xxxx, Xx., Esq.
Windels, Marx, Davies & Ives
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(2) if to the Company, to:
Monitor Aerospace Corporation
0000 Xxx Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Attention: President
Fax No.: (000)000-0000
with a copy to:
Mentmore Holdings Corporation
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Fax No.: (000)000-0000
Section 6.6 Bulk Transfer Laws. Purchaser hereby waives compliance with the
provisions of applicable bulk transfer laws, if any, in connection with the sale
of the Assets to Purchaser.
Section 6.7 Survival. All representations and warranties (and indemnities
with respect thereto) contained in
6
this Agreement shall survive the execution and delivery of this Agreement. All
covenants and agreements (and indemnities with respect thereto) under this
Agreement shall survive the execution and delivery of this Agreement.
Section 6.8 Waivers and Amendments; Non-Contractual Remedies; Preservation
of Remedies. This Agreement may be amended, superceded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by authorized representatives of the parties hereto. No such written
instrument shall be effective unless it expressly recites that it is intended to
amend, supercede, cancel, renew or extend this Agreement or to waive compliance
with one or more of the terms hereof, as the case may be. Except as expressly
provided herein, no delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any such right, power or privilege, or any
single or partial exercise of any such right, power or privilege, preclude any
further exercise of any other such right, power or privilege
Section 6.9 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns.
Section 6.10 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts which together shall constitute one and the same
instrument.
Section 6.11 Severability. Should any provision of this Agreement be
determined to be invalid or at variance with any present or future requirements
of applicable laws then such provision alone shall become inoperative to the
extent necessary, and this Agreement may remain in full force and should be
construed so as to give effect to the intent and purpose of the parties to the
maximum extent possible.
7
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
and year first above written.
MONITOR AEROSPACE CORPORATION
By:
-----------------------------
Name:
--------------------------
Title:
-------------------------
MONITOR AEROSPACE INTERNATIONAL
CORPORATION
By:
-----------------------------
Name:
--------------------------
Title:
-------------------------
MONITOR ASIA CORPORATION
By:
-----------------------------
Name: Xxxxxxx Xxxxxxx
--------------------------
Title: President
-------------------------
8
EXHIBIT A
I. ASSETS (INCLUDING CONTRACTS AND LEASES) OF MONITOR AEROSPACE CORPORATION
AND MONITOR AEROSPACE INTERNATIONAL CORPORATION BEING SOLD HEREUNDER:
A. Lease of Premises at Xxxx #000, Xxxxxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxx
Xxxxxxxx of China,(other than prepaid rent in the amount of $18,000,
which will be paid by the Purchaser to the Company on the date of this
Agreement).
B. Telephone number,(less deposit of $4,000, which will be paid by the
Purchaser to the Company on the date of this Agreement ).
C. Office equipment and computer hardware and software located on leased
premises (having a total book value of less than $100,000).
D. Car.
E. Promotional materials on leased premises.
F. Cincinnati Milacron Sales Representative Agreement dated ____, between
_____________ and _____________ (including pro rata portion of advance
paid to Monitor for period subsequent to the date of this Agreement).
G. Beijing Cash Account to cover expenses incurred prior to Closing
(balance of account to be paid by the Purchaser to the Company on the
date of this Agreement).
II. PERSONS TO BE EMPLOYED BY PURCHASER:
A. Xxxx Xxxxx (Purchaser to reimburse the Company for $4,000 rent
prepayment on employee's apartment on the date of this Agreement).
X. Xxxxxxx Song (Kan Hong Seng).
C. Xxxxx Xx Da.
9
EXHIBIT E-2
SALES REPRESENTATIVE AGREEMENT
This is an Agreement effective as of the _____ day of May, 1998 between
Monitor Aerospace Corporation, a corporation organized under the laws of New
York, U.S.A. ("Monitor"), whose address is 0000 Xxx Xxxxxxxx Xxxxxxxxx,
Xxxxxxxxxx, Xxx Xxxx 00000 and Monitor Asia Corporation ("Monitor Asia"), a
corporation organized under the laws of Delaware (the "Representative"), whose
address is Xxxx 000, Xxxxxxx Xxxxxx Xxxxx, #0 Xxxxx Xxxx San Huan Road, Xxxx
Xxxx Xxxxxxxx, Xxxxxxx, 000000, Xxxxxxx Xxxxxxxx of China.
1. Appointment. Monitor appoints Representative and Representative accepts
such appointment as a non-exclusive representative of Monitor for the Products
or Services listed in the attached Exhibit A ("Products and Services") in the
Territory defined in Article 2 below.
2. Territory. The term "TERRITORY" shall mean the following geographical
area:
A. Entire world except North America with respect to sale of end xxxxx;
and
B. The countries of Indonesia, Malaysia, Thailand, Singapore, South
Korea, Peoples Republic of China and the Republic of China, with
respect to other Monitor Products and Services.
3. Term. The term of this Agreement shall be for one (1) year, commencing
on the ___ day of May, 1998. This Agreement shall automatically be extended for
successive one-year periods unless either party gives notice of termination to
the other party more than ninety (90) days prior to the beginning of an
extension period.
4. Representative's Obligations.
(a) Sales Promotion. Representative shall promote the sale of Products and
Services in the Territory. These efforts include advertising and canvassing
campaigns, and efforts to assist in obtaining necessary import licenses. In
general, Representative will be responsible for exhibition expenses.
(b) Orders and Inquiries. Representative shall transmit or cause to be
transmitted to Monitor without delay any order for or inquiry concerning
Products and Services from any prospective customer in the Territory.
(c) Assistance and Advice. Upon request, Representative shall provide
assistance and advice to customers in the Territory concerning the maintenance,
handling, application and use of Products and Services for a fee to be agreed
upon.
(d) Reports and Visits. Representative shall submit to Monitor upon request
detailed and complete written reports on its sales promotion activities. The
reports shall also include other relevant market information including, but not
limited to, customer demand, customer reaction and activities of competitors.
Representative shall as Monitor deems reasonably necessary, receive visits
throughout the Territory by employees or representatives of Monitor for the
purpose of consulting and cooperating with Representative in the promotion, sale
and service of Products and Services.
(e) Industrial Property Rights. Representative shall recognize and respect
the rights of Monitor and its affiliated companies in their trademarks, trade
names, copyright,
patents and other intellectual property, and Representative shall not use any
other trademarks in conjunction with the Products and Services without the prior
written consent of Monitor. Representative shall communicate to Monitor all
inventions or improvements made by Representative relating to the Products and
Services, and Representative shall grant to Monitor and its affiliated companies
a non-exclusive royalty-free license to all rights associated therewith,
including the right to sublicense such inventions or improvements to Monitor's
customers. Representative shall assist Monitor and its affiliated companies,
when requested, in obtaining and maintaining patent, trademark and other
intellectual property protection in Monitor's and its affiliated companies'
names which are used in conjunction with the Products and Services.
Representative shall supply to Monitor samples of any labels or advertising
material prepared by Representative and bearing the name "Monitor" and any other
trademarks or trade names of Monitor and its affiliated companies.
(f) Confidential Information. Except with the prior written consent of
Monitor, Representative shall not use or disclose to any person, business,
public body or other entity any confidential information concerning the business
or Products and Services of Monitor or its affiliates which it has acquired or
hereafter acquires in the course of or as an incident to its activities under
this Agreement or otherwise, and shall take precautions to prevent any such use
or disclosure by any of its employees, agents and representatives. This
obligation shall continue indefinitely, both prior to and after the termination
or expiration of this Agreement.
(g) Government Regulations. Representative shall not do any act or thing,
or cooperate in the doing of any act or thing, which will cause in any manner a
violation of United States export control laws or regulations, the export or
import control laws or regulations of any other applicable country as then in
force or amended or any other applicable law.
(h) Sub-Representatives. Representative shall not appoint any sub-
representative or agents for the sale of Products and Services without the prior
written consent of Monitor.
(i) Representations. Representative shall not make any representations as
to Products and Services other than that contained in the written Product and
Services information and data provided by Monitor. Representative shall be
totally responsible for any of its representations as to Products and Services
which are not authorized by Monitor and shall hold Monitor harmless for any
claims and expenses, including reasonable attorney's fees, resulting from such
unauthorized representations.
(j) Translation. Representative shall translate into local language all
commercial communications to the customer or prospective customer from Monitor,
such as proposals, conditions, etc. Representative shall translate into English
for Monitor all commercial communications to Monitor from the customer or the
Representative.
(k) Expenses. Representative shall bear and pay when due all expenses
incurred by it or its employees in the performance of obligations imposed by
this Agreement.
(l) Re-exportation. In the event Representative has knowledge that
prospective customers for Products and Services intend to re-export same to
another country, such sales shall be promoted by Representative only with the
full prior knowledge and written consent of Monitor and only in accordance with
applicable law.
-2-
(m) Exclusive Representation. Representative will not represent, sell,
offer to sell, or act on behalf of any competitor Products and Services sold by
Monitor (whether under an official agreement, or in an unofficial capacity, by
request of customer) except that Representative may sell end xxxxx manufactured
by others; provided that in connection with such sales, Representative does not
infringe any trademark, trade name or other intellectual property rights,
including the use of the name "Monitor", owned by Monitor or its affiliated
companies. In the event Representative offers a specific Product or Service
opportunity to Monitor, which Monitor does not wish to pursue, Representative
shall be free, subject to the other terms of this Agreement, to represent
another party with respect to such Product or Service, provided the overall
terms made available for such other party are no less favorable than the overall
terms made available by Monitor.
(n) Forecast. Representative shall develop a forecast for anticipated new
business on an annual basis. This forecast will be reviewed and concurred with
by management.
5. Monitor's Obligations. Monitor agrees as follows:
(a) Sales Opportunities. To identify for Representative prospective
customers known to it in the Territory.
(b) Promotional Assistance. To supply Representative with literature,
samples and such other information or materials as it believes will assist
Representative in promoting the sale and acceptance of Products and Services in
the Territory.
(c) Orders and Invoices. To transmit or cause to be transmitted to
Representative copies of proposed and executed contracts with customers for
Products and Services in the Territory and copies of invoices covering
deliveries pursuant to such contracts.
(d) Expenses. To bear and pay when due all expenses incurred by it or its
employees in the performance of its obligations under this Agreement.
6. Acceptance of Orders.
(a) Any quotation submitted by Monitor shall be valid only for the customer
to whom it is directed and the prices, terms and conditions of the quotation
shall not be altered, varied or changed except by Monitor in writing.
(b) Monitor may in its sole discretion either accept or reject any request
for quotation or any order for Products and Services from any prospective
customer in the Territory. Monitor shall have no obligation to supply Products
and Services until and unless an order has been accepted by Monitor in writing.
Monitor shall not incur any liability to Representative by reason of Monitor's
refusal to quote or accept any order.
(c) Monitor shall not be obligated to make any shipment of Products and
Services if such shipment would, at the time thereof, constitute a violation of
any provision of its country's law, regulations, or policy relating to trade
with the Territory, including, but not by way of limitation, the United States
Export Control Act of 1949 as amended or any regulation issued pursuant thereto.
-3-
7. Commissions.
(a) As compensation for services rendered pursuant to this Agreement for
sales of Products and Services directly due to Representative's efforts, Monitor
shall pay Representative a sales commission as agreed to by Monitor and
Representative for each contract on a specific basis.
(b) All commissions payable under this Article 7 shall be payable following
the month in which total payment from the customer is received by Monitor and
shall be paid or credited to Representative in the currency used by the customer
for such payment. All payments by Monitor to Representative shall be made by
check or bank transfer payable to Representative. No check or bank transfer
shall be sent to other than Representative's principal place of business unless
Representative makes a specific written request to the contrary, in which case a
record of such payment will be sent by Monitor to Representative's principal
place of business.
(c) In the event this agreement expires or is terminated by either party
unless otherwise expressly agreed to the contrary in the sales commission
agreement entered into with respect to a particular transaction, commissions
shall be paid to the extent payable prior to the effective date of such
expiration or termination.
8. Ethical Conduct. Representative is not entitled to any commission, fee
or discount if facts are known to Monitor which support a belief that
Representative is prepared to make or has made any unlawful or improper payment
in connection with the transaction on which a commission or fee is to be paid or
discount allowed, or that Representative is in violation of any law applicable
to Representative in its role as Representative hereunder.
9. Limitation of Liability. Each party agrees that under no circumstances
shall the other party or its affiliates be liable for any consequential,
indirect or incidental loss or damage, including lost profits, howsoever caused
or arising.
10. Products and Services List and Alterations. Monitor may from time to
time amend the list of Products and Services specified in the exhibit attached
by addition or deletion and may alter the specifications or design of any
Products and Services or parts. Representative shall not change or alter
Products and Services in any manner without Monitor's prior written consent.
11. Service Obligation. If the parties agree that Representative is to
perform service on the Products, they shall sign an addendum and attach it to
this Agreement along with an exhibit setting forth the fee for same.
12. Termination - Obligations Upon Termination.
(a) If either party hereto shall become insolvent or is in default of any
obligation under this Agreement (which default is not corrected within thirty
(30) days from written notice of such default) the other party may, at its
option, immediately terminate this Agreement. In the event that Xxxxxxx Xxxxxxx
ceases to hold a controlling ownership interest in Representative during the
term of this Agreement, Monitor shall have the right upon five (5) days written
notice to Representative to terminate this Agreement. Representative will notify
Monitor in writing upon the occurrence of any event resulting in Xxxxxxx Xxxxxxx
ceasing to hold a controlling ownership interest in Representative.
-4-
(b) Either party may also terminate this Agreement for any reason (with or
without cause) by giving the other party at least ninety (90) days prior written
notice.
(c) In no event shall any termination of this Agreement affect any rights
or obligations accrued or existing at the time of such termination or arising
out of such termination.
(d) Upon a termination of this Agreement for any reason, Representative
shall return to Monitor any unused promotional information or material supplied
by Monitor to Representative.
13. Force Majeure. Neither party shall be liable for any loss or damage of
any nature incurred as a result of any failures or delays in performance caused
by any strikes, lockouts, labor disputes, fires, acts of God or the public
enemy, riots, incendiaries, interference by civil or military authorities,
compliance with the laws, order or policies of any governmental authority,
delays in transit or delivery on the part of transportation companies or
communication facilities or sources of raw materials.
14. Relationship of Parties/Authority of Representative.
(a) The authority of Representative shall be to promote the sale and
acceptance of Products and Services in the Territory and to notify Monitor
whenever a customer desires a quotation for Products and Services
(b) Representative is and shall remain an independent contractor and in no
circumstances shall be deemed an employee of Monitor. Representative is not
authorized to and shall not accept any order on behalf of Monitor. It is
expressly agreed that this Agreement does not constitute a partnership
agreement.
(c) Representative is not authorized to and shall not undertake or assume
any obligation of any kind, express or implied, on behalf of Monitor.
15. Assignability. This Agreement shall not be assigned by either party
without the prior written consent of the other party, except that it may be
assigned without such consent to an affiliate or successor of Monitor or to a
person, firm, or corporation acquiring all or substantially all of the business
and assets of Monitor.
16. Authentic Text. The authentic text of this Agreement is in the English
language and shall be controlling in the event a question of interpretation or
construction should arise. The English language will also provide the text of
all day to day commercial communication between Monitor and Representative and,
when necessary, Representative will translate local language into English.
17. Notices. Any notice required or authorized to be given hereunder,
except for routine and typical shipment documentation, shall be served by
courier or certified letter return receipt requested or by telefax addressed to
Monitor or Representative (as the case may be) at the applicable address set
forth in the first paragraph of this Agreement. Any notice so given by telefax
shall be deemed to have been served on the day of sending the message,
otherwise, notice shall be deemed to have been given when received. Proof that
such notice was sent to the correct telefax numbers, shall be conclusive
evidence of service. Notices required by this Agreement shall be addressed to
any other address as may be specified by either party by written notice to the
other.
-5-
18. Licenses - Joint Ventures. This Agreement does not include or prohibit
any sales by Monitor in the Territory or any cooperation agreement, including
but not limited to license agreements and joint ventures, between Monitor and
other parties in the Territory, and purchase and/or shipments in connection with
such sales or agreements. Unless otherwise agreed, Representative shall not be
entitled to any compensation or commission hereunder in connection with such
sales or agreements.
19. Entire Agreement - Modifications - Waivers. This Agreement, including
the attached exhibits, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes and terminates all prior
agreements between the parties relating to the same subject matter. Any change,
addition to, or waiver of the terms and conditions of this Agreement shall be
binding upon the parties only if approved in writing by authorized
representatives of the parties. The failure of either party to require the
performance of any term or condition of this Agreement or the waiver by either
party of any breach of this Agreement shall not prevent a later enforcement of
such term or condition or be deemed a waiver of any later breach. If any
provision or paragraph of this Agreement shall be deemed legally invalid, the
other provisions and paragraphs shall remain in force and effect.
-6-
IN WITNESS WHEREOF, the parties have executed this Agreement.
MONITOR AEROSPACE CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
MONITOR ASIA CORPORATION
By:
-----------------------------
Name: Xxxxxxx Xxxxxxx
Title: President
EXHIBIT "A"
Schedule of Products and Services, Commissions and Support Assistance
I Monitor Products and Services
The following Products and Services currently offered by Monitor:
- Monitor Designed Cutting Tools
- Technologies, MRP Software and Know How
- Turn key projects
- Sub-contract manufacturing
Note: This agreement does not cover any other Products and Services of Monitor.
II Schedule of Sales Commissions
Commission will be subject to negotiation for each transaction.
Payment Terms. Payment of commissions are as stated in Sales Representative
Agreement, Article 7, Item (b). However, in the event the end user agrees to
make progress payments for the contracted amount, Monitor will make progress
payments on the commission to be paid. The amount of the commission paid upon
receipt of a progress payment will be based upon the percentage of the entire
order the progress payment represents.
Out of Territory Sales. Monitor recognizes that as Representative pursues
its Asian opportunities, it may identify a potential sale of Monitor Products
and Services outside of the Territory that Monitor is currently unaware of. In
such event, Monitor is willing to discuss a finder's fee in specific instances.
III Support Assistance
Monitor will pay Representative a monthly amount of $24,200 per month for
six months from the date of this Agreement to cover some of the expenses
incurred by Representative to support Monitor Products and Services in Asia.
Monitor will terminate the employment of Xxxxxxx Xxxx (Kan Hong Seng) and
pay him severance in the amount of $12,000 per month for six months, pursuant to
the terms of his employment contract.
-8-
EXHIBIT F
OPINION OF COMPANY'S COUNSEL
May __, 1998
Stellex Aerospace Holdings, Inc.
c/o Mentmore Holdings Corporation
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Ladies and Gentlemen:
We have acted as counsel to Monitor Aerospace Corporation, a New York
corporation (the "Company"), and its subsidiaries, Monitor Aerospace
International Corp. and Monitor Marine Products, Inc., both New York
corporations (together, the "Subsidiaries"), in connection with the Agreement
and Plan of Merger dated as of April 28, 1998 among Stellex Aerospace Holdings,
Inc., a Delaware Corporation (the "Buyer"), Soze Corp., a New York corporation,
and the Company (the "Merger Agreement"). In such capacity, we have been asked
to render the following opinion to you pursuant to Section 6.1(d) of the Merger
Agreement. Capitalized terms used herein and not defined herein shall have the
meaning ascribed to such terms in the Merger Agreement.
We have examined the Merger Agreement, the Escrow Agreement, the
Certificate of Incorporation and By-Laws of the Company and the Subsidiaries and
the Certificate of Merger. We have also examined and are familiar with the
Minutes of Meetings of the Board of Directors of the Company and other corporate
proceedings of the Company relating to the authorization of and the execution
and delivery by the Company of the Merger Agreement and the Escrow Agreement.
In addition to the foregoing, we have examined and relied upon such other
matters of law, documents, certificates of public officials and representations
of officers of the Company or the Subsidiaries as we have deemed relevant to the
rendering of our opinion including the representations and warranties of the
Company set forth in the Merger Agreement. In all of these examinations, we have
assumed: the accuracy of all factual information furnished to us; the
genuineness of all signatures on original and certified documents; the
conformity to original and certified documents of all copies submitted to us as
conformed or photostatic copies; the due authorization, execution and delivery
of the Merger Agreement by Buyer and MergerSub; and that the Merger Agreement is
the legal, valid and binding obligation of Buyer and MergerSub.
The opinions expressed herein are limited to the laws of the State of New
York and the federal laws of the United States of America.
Based upon and subject to the foregoing, we are of the opinion that:
Stellex Aerospace Holdings, Inc.
May __, 1998
Page 2
1. Each of the Company and its Subsidiaries (a) has been duly organized,
and is validly existing and in good standing under the laws of the State of New
York, (b) has all requisite corporate power and authority to own, operate and
lease its respective properties and to carry on its respective businesses as it
is now being conducted and (c) is duly qualified as a foreign corporation and in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, except we do not give any opinion as to the need for or
qualification of Monitor Aerospace International Corporation in the Peoples
Republic of China, or where the failure to be so qualified and in good standing
would not have a Material Adverse Effect and would not adversely affect the
ability of the Company to perform its obligations under the Merger Agreement and
the Escrow Agreement.
2. The Company has full legal and corporate power and authority to execute
and deliver the Merger Agreement and the Escrow Agreement, to perform its
obligations thereunder and to consummate the transactions contemplated thereby
to be consummated by it. The execution and delivery by the Company of the Merger
Agreement and the Escrow Agreement, the performance by the Company of its
obligations under each of the Merger Agreement and the Escrow Agreement and the
consummation by it of the transactions contemplated by the Merger Agreement have
been duly and validly authorized by all necessary corporate action on the part
of the Company. Each of the Merger Agreement and the Escrow Agreement has been
duly and validly executed and delivered by the Company and constitutes a legal,
valid and binding agreement of the Company enforceable in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, and general equitable principles (whether
considered in a proceeding in equity or at law).
3. The authorized capital stock of the Company consists of 5,700 shares of
capital stock, of which (i) 2,200 shares are Common Stock, without par value,
(ii) 2,000 shares are Class A Preferred Stock, par value $100 per share, and
(iii) 1,500 shares are Class B Preferred Stock, par value $100 per share.
1,038.0014 shares of Common Stock are outstanding and are validly issued, fully
paid and nonassessable and are held of record by the Shareholders as set forth
on Schedule 3.3 of the Merger Agreement. As a result of the transactions
contemplated by the Merger Agreement, an additional 63.1977 shares of Common
Stock will be issued under the Xxxxxxx Employment Agreement on or prior to the
Closing Date, which shares, upon issuance, will be validly issued, fully paid
and nonassessable. All outstanding shares of capital stock of the Company are,
and all shares which may be issued pursuant to the Xxxxxxx Employment Agreement
will be, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive or similar rights. No shares of Preferred Stock are issued
or outstanding.
Stellex Aerospace Holdings, Inc.
May __, 1998
Page 3
4. All of the outstanding shares of capital stock of each of the
Subsidiaries have been validly issued and are fully paid and nonassessable and
not subject to preemptive or similar rights. The Company owns all the capital
stock of each of the Subsidiaries free and clear of all Liens, and there are no
outstanding options, warrants or other rights in or with respect to the unissued
or treasury shares of capital stock of the Subsidiaries.
5. Except as set forth in paragraph 3 above, there are no shares of capital
stock or other equity or voting securities of the Company issued, reserved for
issuance or outstanding. To the best of our knowledge, there are no outstanding
bonds, debentures, notes or other indebtedness or other securities of the
Company having the right to vote (or convertible into, or exchangeable or
exercisable for, securities having the right to vote) on any matters on which
stockholders of the Company may vote. Except as set forth in paragraph 3, to the
best of our knowledge, there are no outstanding, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any of its Subsidiaries is a party or by which any if them
is bound obligating the Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other securities of the Company or any of its Subsidiaries or
obligating the Company or any of its Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. To the best of our knowledge, there are
no outstanding contractual obligations, commitments, understandings or
arrangements of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire or make payment in respect of any shares of capital stock of
the Company or any of its Subsidiaries or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
such Subsidiary or any other entity.
6. Except as disclosed in Schedule 3.2 of the Merger Agreement, neither the
execution and the delivery by the Company of the Merger Agreement or the Escrow
Agreement, the performance by it of its obligations under the Merger Agreement
or the Escrow Agreement, nor the consummation by it of the transactions
contemplated by the Merger Agreement to be consummated by it in accordance with
the terms of the Merger Agreement will (i) violate or conflict with any
provision of the Certificate of Incorporation or By-laws of the Company or any
of its Subsidiaries, (ii) violate or conflict with any law, rule, regulation or
any court or administrative order, judgment, decree, injunction or other binding
action or requirement of any Governmental Authority to or by which the Company
or any of its Subsidiaries (or any of their material Property) is a party or is
bound, (iii) require the approval of, or a filing or registration with, any
Governmental Authority (other than the filing of the Certificate of Merger and
any filing under the HSR Act), (iv) whether after notice or lapse of time or
both, violate, breach or conflict with any provision of, result in the loss of a
material benefit under,
Stellex Aerospace Holdings, Inc.
May __, 1998
Page 4
give the other parties thereto any rights or benefits not otherwise applicable
under or permit the termination or acceleration of those Material Contracts or
the Purchase and Sale Transactions listed on Annex 1 hereto, (v) require any
authorization, consent or approval of, exemption or other action by, or notice
to, any party to those Material Contracts or Purchase and Sale Transactions
listed on Annex 1 hereto, or (vi) result in the creation or imposition of any
Lien upon any Property of the Company or any of its Subsidiaries.
7. To the best of our knowledge, no legal or governmental proceedings are
pending or threatened to which the Company or any of its Subsidiaries is a
party, or to which any of their respective Properties or assets are subject,
which (a) are required to be disclosed in Schedule 3.5 of the Merger Agreement
and are not, (b) if decided against the Company or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect or (c) could impair or
otherwise threaten the consummation of the transactions contemplated by the
Merger Agreement.
8. Upon the filing of the Certificate of Merger with the Secretary of State
of the State of New York, the Merger will be effective under the BCL in
accordance with the terms of the Merger Agreement and the Certificate of Merger.
This opinion is being furnished to you solely in connection with the
consummation by the Company of the transactions contemplated by the Merger
Agreement. Without our specific prior written consent, this opinion may not be
utilized, quoted or relied upon by anyone other than you or your counsel for any
other purpose.
Very truly yours,
EXHIBIT G-1
R. Xxxxx Xxxxxxx
----------------
Employment Term Sheet
1. Title, role: no change
2. Base salary: $450,000
3. Duration of contract: December 31, 2002
4. Deferred compensation: no change - $60,000/yr (Subject to Mentmore
review of documents)
5. Benefits/prerequisites:
a. Golf club: no change
b. Car: no change
c. Medical, life insurance, LTD, 401(k): no change
d. Confidentiality, intellectual property, non-compete - may
need minor changes, subject to legal review
6. Vacation: no change
7. Termination: six months salary as severance for termination without
cause, may need changes, subject to legal review
8. Board seat at Monitor level
9. Bonus for calendar year 1998 and thereafter,
% Mgmt Plan
EBITDA Bonus Amount
------------ ------------
110% $150,000
125% 500,000 maximum
Prorated in between percentages, prorate for 1998
R. Xxxxx Xxxxxxx
Page 2
Mgmt Plan EBITDA
----------------
Calendar Year
-------------
1998-7 mo. -$11,314,000
1999 -Number to be agreed upon
2000 and thereafter -Annual management plan approved by
10. Discretionary bonus for all years
11. $750,000 investment: $500,000 in cash (assuming a minimum of $5.5
million in proceeds paid to R. Xxxxx Xxxxxxx) and $250,000 personal
full recourse note due at the time $5 million hold back note is
settled and cash distributed. A portion of the cash distributed will
pay off this note -- 8% interest rate -- interest paid annually.
Payments of interest on $5 million hold back note received by Xxxxx
Xxxxxxx to be paid towards interest on the $250,000 note. This note is
due in full in any case in two years or termination of employment. The
investment is in the same equity securities as purchased by the
shareholders of the acquiring corporation - $750,000 buys 2.83%.
12. If Xxxxx Xxxxxxx voluntarily terminates employment (including death or
disability) or is terminated without cause through December 31, 1999,
he can put shares to Company at the lesser of (i) cost plus interest
computed at 8% or (ii) equity percentage fully diluted x ((trailing 12
month EBITDA x 5) less funded debt)). Xxxxxxx must give not less than
six months notice of voluntary termination.
13. Company has call right on stock on Triggering Event at price
determined under 12 above through December 31, 1999, and thereafter by
appraisal (FMV of Company multiplied by percent equity interest, fully
diluted).
14. Triggering events: death, disability, any termination
15. Pull-along/Tag-along: management must sell common equity if majority
equity holder sells to non-affiliate; management may require its
common equity to be sold with a sale of all of a majority equity
holders stock to non-affiliate
R. Xxxxx Xxxxxxx
Page 3
16. Participation of 2.2% (55.5% x 4%) of the common equity based on the
achievement of annual SAR EBITDA Targets (as defined)
Vesting Schedule Based on Plan
Plan Year 110% 115%
--------- ---- ----
December 31, 1998 -0- -0-
December 31, 1999 20% 40%
December 31, 2000 10% 20%
December 31, 2001 10% 20%
December 31, 2002 10% 20%
Vesting on January 1, 2000 is based on meeting plan goals on an annual
basis (i.e. 110% of Plan 1998, 115% of Plan 1999, 30% vesting at January 1,
2000).
17. SAR EBITDA Targets
7 months $11,314,000
1999 May 31, plans
2000 extrapolated -
2001 numbers to be
2002 agreed on
18. "EBITDA" definition: sum of (a) GAAP net income, (b) depreciation and
amortization, (c) interest expense, (d) federal, state, local and
foreign taxes, and (e) Mentmore fees in excess of $1 million annually
less extraordinary items or non-recurring gains. EBITDA shall be after
full accrual for all incentive and bonus program amounts. The Board
may in its sole discretion consider other appropriate adjustments.
19. Company SAR call rights: right to call and redeem SARs on Triggering
Event.
20. Company SAR call price: independent appraisal process -- FMV of
Company multiplied by fully diluted percentage SAR common stock
equivalent.
21. Triggering events: death, disability, any termination
22. Accelerated vesting: IPO, sale of Company or substantially all of its
assets, change of control.
23. SAR owner put rights: right to put SAR to Company based on same
computation as call price above upon death or disability.
EXHIBIT G-2
CONSULTING AGREEMENT
--------------------
THIS AGREEMENT is made on June 1, 1998 among MONITOR AEROSPACE
CORPORATION, a corporation with offices at 0000 Xxx Xxxxxxxx Xxxxxxxxx,
Xxxxxxxxxx, Xxx Xxxx (the "Corporation") and XXXXXXXX X. XXXXXXXX, residing at
00 Xxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxx ("Xxxxxxxx") and LGG ASSOCIATES, LTD., a
New York Corporation with offices at 00 Xxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxx
("LGG"). In consideration of the mutual promises and agreements contained
herein, the parties agree as follows:
1. Consulting. The Corporation agrees to retain the consulting
services of LGG and LGG agrees to provide such services to the Corporation on
the terms and conditions of this Agreement.
2. Term of Agreement, Nature of Consulting Services and
Responsibilities. LGG will provide the services of Xxxxxxxx to the Corporation
and Xxxxxxxx shall serve the Corporation as a consultant for the period
commencing June 1, 1998 and ending on May 31, 2000. During that period,
Xxxxxxxx shall be available to provide such financial and other consulting
services (including assistance and advice in the negotiation of the
Corporation's annual financing package with its primary lender) as may be
reasonably requested by the corporation to assist its executive officers and
management personnel in the fiscal management and the operations of the
Corporation. Xxxxxxxx shall perform such services at such times and in such
manner as he may determine, in order to satisfactorily fulfill his obligations
under this agreement. Such services shall be performed during normal business
hours and such additional times as are necessary for travel and to respond to
the competitive needs of the business. In no event shall Xxxxxxxx be required
to devote more than an
average of ten days per month to the performance of such services. Of these ten
days per month, Xxxxxxxx agrees to devote up to an average of 5 days per month
to providing services to the Corporation's affiliates consistent with the
services described herein.
3. Compensation. During the term of this Agreement,
(a) The Corporation shall pay LGG monthly consulting payments of
Fifteen Thousand ($15,000) Dollars, such payments to be made on or about the
15th day of each month commencing June 1, 1998 and ending May 15, 2000, when
the final payment shall be made. Xxxxxxxx shall also be reimbursed for all
reasonable, documented out-of-pocket expenses incurred in his consulting work
for the Corporation.
(b) Beginning with Fiscal Year 1999, within ninety (90) days of the
close of each full fiscal year while this Agreement is in effect, the
Corporation shall pay LGG a lump sum payment of $50,000. For Fiscal Year 1998,
the Corporation shall pay LGG a lump sum payment of $29,162, representing a
pro-rata portion of the $50,000 lump sum payment provided for in the preceding
sentence (i.e., 7/12 of $50,000). In the event this Agreement is terminated
pursuant to Section 5 hereof, the Corporation shall pay LGG, within fifteen
(15) days of the effective date of termination, a pro rata portion of the lump
sum payments provided for in this Section based on the number of days this
Agreement was in effect during the fiscal year in which this Agreement was
terminated.
(c) As additional compensation, the Corporation will pay to Xxxxxxxx
one-half of the premiums (up to a maximum of $15,000 per year) necessary to
keep in force, during the term of this Agreement, life insurance policy number
31581184 on the life of Xxxxxxxx, issued by The Manufacturers Life Insurance
Company (Manulife), ownership of which has previously been assigned to
Xxxxxxxx. The Corporation's obligations hereunder will be limited to payment of
the
2
pro rata portion of the policy premiums which is attributable to the period
from June 1, 1998 to May 31, 2000. The Corporation, Xxxxxxxx and LGG understand
that an amount will be taxable to Xxxxxxxx or to LGG as a result of these
premium payments. Xxxxxxxx and LGG acknowledge their respective obligations to
pay any Federal, State or local income taxes assessed against either of them as
a result of the inclusion of this amount in gross income for income tax
purposes. The Corporation shall have no obligation with respect to the payment
of such income taxes or with respect to the payment of interest on policy
loans.
(d) Xxxxxxxx is presently included in the Corporation's group health
insurance plan (including the MERPS feature), group life and disability
insurance plans. To the extent that the Corporation continues its participation
under such plans, Xxxxxxxx shall continue to be covered thereby, (but not in
any cafeteria plan within the meaning of the Internal Revenue Code Section 125)
and the Corporation will make all premium payments and other contributions
which are required under such plans in order to continue Xxxxxxxx'x coverage.
4. Office Space. The Corporation shall make the two room office suite
adjacent to its reception area available to Xxxxxxxx for his exclusive use
during the term of this Agreement, rent-free. Xxxxxxxx shall also be entitled
to use such suite for other personal, business and professional activities, so
long as such activities do not violate the provisions of this paragraph 7 of
this Agreement.
5. Termination of Agreement. This Agreement shall terminate on May 31,
2000, unless sooner terminated by Xxxxxxxx'x death, by LGG or the Corporation
upon at least ninety (90) days' written notice of its intention to terminate,
or if Xxxxxxxx shall become physically or mentally disabled while this
Agreement is in effect so that he is unable to perform fully the duties
described
3
herein for a period of six consecutive months; provided, however that in no
event shall the termination of this Agreement by the Corporation be effective
prior to June 1, 1999. All monthly consulting payments not yet payable to LGG
shall immediately cease following either Xxxxxxxx'x resignation as a consultant
or the termination of this Agreement by LGG or the Corporation; provided,
however, that in the event this Agreement is terminated prior to June 1, 1999
as a result of the death or disability of Xxxxxxxx, LGG shall continue to be
entitled to consulting payments of Fifteen Thousand ($15,000) Dollars per month
for the twelve month period following Xxxxxxxx'x death or the commencement of
his disability.
6. Confidentiality. Both LGG and Xxxxxxxx shall maintain in strictest
confidence and shall neither use for its or his own benefit nor disclose to
third parties except as necessary and for the exclusive benefit of the business
of the Corporation any confidential propriety information of the Corporation of
either a business or technical nature. The obligation of this Section shall
survive the termination of this Agreement regardless of the reason for such
termination. It shall not, however, be deemed to prevent either LGG or Xxxxxxxx
from using its or his general experience and skills and information in the
public domain during or after termination of the consulting services required
under this Agreement.
7. Non-Competition. For as long as LGG is receiving consulting
payments pursuant to this Agreement, neither it nor Xxxxxxxx shall directly or
indirectly engage in, become employed by, invest in, or consult with any
business which competes or plans to compete with the Corporation in any aspect
of its business. Notwithstanding the foregoing, either LGG or Xxxxxxxx may
perform consulting services for any such business with the prior written
consent of the Corporation, which consent shall not be unreasonably withheld.
In addition, neither LGG nor Xxxxxxxx shall, during
4
such period, hire any person employed by the Corporation, solicit or advise any
person employed by the Corporation to seek or accept employment with any other
employer, or advise any other person about offering employment to any employee
of the Corporation.
8. Binding Effect and Assignment. This Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and LGG, Xxxxxxxx and their respective successors, assigns, heirs and personal
representatives. The rights and obligations of LGG and Xxxxxxxx hereunder shall
not be subject to voluntary or involuntary alienation, assignment or transfer.
In the event of any consolidation or merger of the Corporation into or with
another firm or corporation or the sale or other transfer of all or
substantially all of the assets of the Corporation to any person, firm or
corporation, or to more than one or a combination of such entities, the
acquiring person, firm or corporation shall assume, jointly and severally if
there is more than one acquiring entity, this Agreement and perform the
obligations of the Corporation, and the obligations of LGG and Xxxxxxxx
hereunder shall continue in favor of such acquiring person, firm or
corporation.
9. Independent Contractor - Taxes. Nothing herein shall be construed
as creating any partnership, joint venture, agency or employer-employee
relationship between the parties hereto. LGG, Xxxxxxxx and the Corporation
shall each be, and remain at all times, independent contractors. The
Corporation shall not be responsible for income tax withholding, social
security taxes, unemployment insurance and LGG and Xxxxxxxx shall be
responsible for determining the amounts of and making all such payments.
10. Entire Agreement. This Agreement contains the entire understanding
between and among the parties with respect to the subject matter hereof and
supersedes any prior understanding
5
and agreements. Any prior understandings or agreements between the parties with
respect to the subject matter hereof are hereby terminated as of the date
hereof.
11. Severability. Any provision of this Agreement which may be
determined to be unenforceable under the laws of the State of New York, or any
other applicable laws, shall be construed as severable from the other
provisions of this Agreement without in any way affecting the enforceability of
the remaining provisions.
12. Amendments. This Agreement may not be amended except by a writing
executed by the parties hereto.
13. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on
the date above written.
ATTEST: MONITOR AEROSPACE CORPORATION
--------------------------------- -------------------------------------
LGG ASSOCIATES LTD.
By:
-----------------------------------
--------------------------------------
XXXXXXXX X. XXXXXXXX
6
EXHIBIT H
OPINION OF BUYER'S COUNSEL
[Subject to Revision Prior to Closing]
, 1998
Monitor Aerospace Corporation
0000 Xxx Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
We have acted as counsel to Stellex Aerospace Holdings, Inc. ("Buyer") and
Soze Corp.("MergerSub")in connection with the Agreement and Plan of Merger dated
as of April 28, 1998 between Buyer, MergerSub and Monitor Aerospace Corporation
(the "Merger Agreement"). In such capacity, we have been asked to render the
following opinion to you pursuant to Section 6.2(d) of the Merger Agreement.
Capitalized terms used herein and not defined herein shall have the meaning
ascribed to such term in the Merger Agreement.
We have examined signed counterparts of the Merger Agreement and the
Certificate of Incorporation and By-Laws of the Buyer and MergerSub. We have
also examined and are familiar with the Minutes of Meetings of the Board of
Directors of Buyer and MergerSub or other corporate proceedings of Buyer and
MergerSub relating to the authorization of and the execution and delivery by
Buyer and MergerSub of the Merger Agreement.
In addition to the foregoing, we have examined and relied upon such other
matters of law, documents, certificates of public officials and representations
of officers of the Buyer or MergerSub as we have deemed relevant to the
rendering of our opinion including the representations and warranties of Buyer
and MergerSub set forth in the Merger Agreement. In all of these examinations,
we have assumed: the accuracy of all factual information furnished to us; the
genuineness of all signatures on original and certified documents; the
conformity
Monitor Aerospace Corporation
, 1998
Page
to original and certified documents of all copies submitted to us as conformed
or photostatic copies; the due authorization, execution and delivery of the
Merger Agreement by the Company; and that the Merger Agreement is the legal,
valid and binding obligation of the Company.
The opinions expressed herein are limited to the laws of the State of New
York, the General Corporation Law of the State of Delaware and the federal laws
of the United States of America.
Based upon and subject to the foregoing, we are of the opinion that:
1. Buyer and MergerSub are each corporations duly organized, validly
existing and in good standing under the laws of the their respective states of
incorporation and each has all requisite corporate power and authority to own,
operate and lease its respective properties and to carry on its respective
businesses as it is now being conducted.
2. Buyer and MergerSub each has full legal power and authority to execute
and deliver the Merger Agreement and to consummate the transactions contemplated
thereby. The execution and delivery of the Merger Agreement and the consummation
of the transactions contemplated thereby have been duly and validly authorized
by all necessary corporate action on the part of Buyer and MergerSub. The Merger
Agreement has been duly and validly executed and delivered by Buyer and
MergerSub and constitutes a legal, valid and binding agreement of Buyer and
MergerSub enforceable in accordance with its terms. The enforceability of
Buyer's and MergerSub's obligations under the Merger Agreement may be limited by
an implied covenant of good faith and fair dealing; by general equitable
principles (whether considered in a proceeding in equity or at law); by
bankruptcy, insolvency, fraudulent conveyance or transfer, reorganization,
moratorium or other similar laws now or hereafter in effect, relating to or
affecting creditors' rights or remedies generally; and by general principles of
interpretation and rules of construction of contracts.
3. The execution of the Merger Agreement does not require any Governmental
Approval except (i) the filing of the Certificate of Merger contemplated by
Section 1.2 of the Merger Agreement, and (ii) the filing made pursuant to the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976.
Monitor Aerospace Corporation
, 1998
Page
4. Neither the execution and delivery of the Merger Agreement nor the
consummation of the transactions contemplated thereby will: (i) violate the
Certificate of Incorporation or By-Laws of Buyer or MergerSub; (ii) to the best
of our knowledge, except as set forth in Section 4.2 to the Merger Agreement,
require any consent, approval or notice under or conflict with or result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any right of termination, cancellation or
acceleration) under any indenture, agreement for borrowed money, bond, note or
other similar instrument of Buyer or MergerSub listed on Exhibit I; or (iii) to
the best of our knowledge, violate or conflict with any law, rule or regulation
of the State of New York or any court or administrative order, judgment, decree
or injunction or other binding action or requirement of any New York
Governmental Authority to or which the Company or any of its Subsidiaries is
bound; provided that we express no opinion in the foregoing clauses (ii) and
(iii) with respect to matters that could not reasonably be expected to result in
a Material Adverse Effect.
5. Upon the filing of the Certificate of Merger with the Secretary of State
of the State of New York, the Merger will be effective under the BCL in
accordance with the terms of the Merger Agreement and the Certificate of Merger.
This opinion is being furnished to you solely in connection with the
consummation by Buyer and MergerSub of the transactions contemplated by the
Merger Agreement. Without our specific prior written consent, this opinion may
not be utilized, quoted or relied upon by anyone other than you or your counsel
for any other purpose.
Very truly yours,
EXHIBIT I
RELEASE
Stellex Aerospace Holdings, Inc. ("Buyer"), Soze Corp. ("MergerSub"), and
Monitor Aerospace Corporation (the "Company"), pursuant to the Agreement and
Plan of Merger, dated April ____, 1998, among the Company, MergerSub and Buyer
(the "Merger Agreement"), hereby (i) release and forever discharge, each of the
Shareholders (as defined in the Merger Agreement), and the heirs,
administrators, successors and assigns thereof, of any liability of, or to, the
Company or the Buyer arising prior to the date hereof other than liabilities
which may arise under a shareholder's Letter of Transmittal dated the date
hereof or the Side Shareholder Agreement executed by the Shareholder dated April
__, 1998, and (ii) release each person who currently serves as a director or
officer of the Company and each of its Subsidiaries of any liability of, or to,
the Company or the Buyer arising under the Merger Agreement, or any other
liability (other than any such liabilities for gross negligence or willful
misconduct and for acts for which indemnity would not be available under the
Company's Certificate of Incorporation or By-Laws) arising prior to the Closing.
After the Closing, the Buyer hereby agrees to hold harmless and indemnify the
former officers and directors of the Company from any claim asserted by any
third party with respect to acts or omissions arising out of such individual's
services as officers or directors of the Company or any Subsidiary occurring
prior to the date hereof, to the fullest extent currently permitted by the
Certificate of Incorporation and By-laws of the Company. Notwithstanding the
foregoing, Buyer shall not be obligated to release any current or former
director or officer of the Company or any Subsidiary from any liability, or
indemnify any current or former officer or director of the Company or any
Subsidiary from any claims or Losses of or to any Shareholder or any Person
acting on behalf of or as a successor in interest to any Shareholder, or
relating to any action brought by any Shareholder.
Dated: ___________________
Stellex Aerospace Holdings, Inc.
By: ____________________________
Name:
Title:
Soze Corp.
By: ____________________________
Name:
Title:
Monitor Aerospace Corporation
By: ____________________________
Name:
Title:
DISCLOSURE SCHEDULES
TO
AGREEMENT AND PLAN OF MERGER
AMONG
Stellex Aerospace Holdings, Inc., as Buyer
Soze Corp. as MergerSub
and
MONITOR AEROSPACE CORPORATION, as the Company
Dated as of April 28, 1998
THE DISCLOSURE SCHEDULES ATTACHED HERETO ARE SUBJECT TO THE
FOLLOWING TERMS AND CONDITIONS:
1. THE INTRODUCTORY LANGUAGE AND HEADINGS TO EACH OF THE PARTS TO THESE
DISCLOSURE SCHEDULES ARE INSERTED FOR CONVENIENCE ONLY AND SHALL NOT CREATE A
DIFFERENT STANDARD FOR DISCLOSURE THAN THE LANGUAGE SET FORTH IN THE AGREEMENT
AND PLAN OF MERGER.
2. THE INCLUSION OF ANY ITEM ON A SCHEDULE, WHICH SCHEDULE REQUIRES A LISTING OF
A "MATERIAL" ITEM OR AN ACTION "NOT IN THE ORDINARY COURSE OF BUSINESS" IS NOT
DEEMED TO BE AN ADMISSION OR REPRESENTATION THAT THE INCLUDED ITEM IS "MATERIAL"
OR IS "NOT IN THE ORDINARY COURSE OF BUSINESS."
3. ALL CAPITALIZED TERMS USED HEREIN AND NOT OTHERWISE DEFINED SHALL HAVE THE
MEANING GIVEN TO SUCH TERMS IN THE AGREEMENT AND PLAN OF MERGER.
SCHEDULE A
Monitor Aerospace Corporation
Closing Liability Schedule
Estimate/Final Numbers Inserted at Closing
Penalties/Cost Related to
Payment at Closing
(including LIBOR
Amount breakage costs)
----------------------- -----------------------
A.1 All outstanding short- and long-term
debt, mortgages, capital leases
and obligations secured by a Lien on
any assets of the Company or the
Subsidiaries (unless listed in A2)
Fleet Bank Mortgage Loan
GE Capital Loan 3,227,000 30,000
NYJDA Loan 2,243,617 67,309
Stock Redemption Notes (X. Xxxxxx) 4,891,667 -
Revolving Credit Agreement 1,247,963 -
13,000,000 -
----------------------- ----------------------
Sub-total $ 24,610,247 $ 97,309
======================= ======================
A.2 Equipment Purchase Leases (penalties
paid only if paid off at Closing)
Colonial Pacific Lease 8,290 *
Tektronics Lease 2,446
Paramist Funding Corporation (2/12/97) 171,758 n/a
Paramist Funding Corporation (3/3/97) 136,220 n/a
Paramist Funding Corporation (7/15/97) 241,372 n/a
Jacom Computer Services (Schedule 1) 14,441 *
Jacom Computer Services (Schedule 2) 33,546 *
Jacom Computer Services (Schedule 3) 40,104 *
Jacom Computer Services (Schedule 4) 24,930 *
Jacom Computer Services (Schedule 5) 246,867 16,608
Jacom Computer Services (Schedule 6) 673,306 21,175
Jacom Computer Services (Schedule 7) 118,901 4,664
IBM Credit Corporation 97,126 *
GE Capital Fleet Services 29,444 *
General Electric Capital Corp.
(Contour Lease) 853,279 34,131
Yale Financial Services 15,405 -
Orix Credit Alliance Inc. - -
Estimated Penalties on smaller leases (*) - 7,000
----------------------- ----------------------
Sub-total $ 2,707,435 $ 83,578
======================= ======================
Total A1 and A2 27,317,682 180,887
Credit for Equipment Purchased (199,500)
----------------------- ----------------------
Total A1 and A2 $ 27,118,182 180,887
----------------------- ----------------------
SCHEDULE A
Monitor Aerospace Corporation
Closing Liability Schedule
Estimate/Final Numbers Inserted at Closing
Penalties/Cost Related to
Payment at Closing
(including LIBOR
Amount breakage costs)
---------------------- ---------------- ------
B. Other Stock redemption obligations
(accrued, paid, payable) 0 0
---------------------- ---------------- ------
C. Any payments to current or former
shareholder, directors, officers or
employees pursuant to the following
(unless included as part of long
term debt):
Non-Qualified pension plans $ 3,000,000
Deferred Compensation 0
Post-termination benefits 0
Death Benefits 0
Medical Reimbursement Benefits 10,000 *2
to former employees
Salary continuation Benefits 0
Termination or change of control 0
D. Bonuses in excess of $1.0 million 145,000 *2
E. Medicare Tax or Premiums for Removal of 400,000 *2
Stock Restrictions under Restricted Stock
Bonus Plan and in connection with stock
issuance under Xxxxxxx Employment
Agreement
---------------------- ---------------- ------
F. All expenses incurred by the Company or
the Shareholders in conjunction with the
sale of the Company, including those
incurred in connection with the Merger
Agreement and the Merger, whenever paid
BT Xxxx Xxxxx fee
Attorney's fee
Accountant's fee
Consultant's fee
Consent and Waiver fees (if any) Transfer,
stamp, document taxes Pre-Closing Actuarial
fees Shareholder meeting
--------------------- ---------------- ------
Sub-total $ 2,500,000
(estimated)
G. Expenses for 6 months for Monitor Asia $ 217,200
transaction
Total B through G $ 2,500,000 $ 1,072,200
====================== ================ ======
Penalties/Cost Related to
Payment at Closing
(including LIBOR
Amount breakage costs)
----------------- ------------------
H. Freight and licensing costs $ 200,000
associated with final CATIC
arrangement (if applicable)*1
Total H $ 200,000 $ -
TOTAL REDUCTIONS (A through H) $ 29,818,18 $ 1,253,087
================= =================
Company Value $ 95,000,000
Total Reductions *2 (31,071,269)
$ 63,928,731
Pension Escrow Fund (4,000,000)
Merger Consideration *2 $ 59,928,731
*1 - If by closing, a resolution with CATIC is reached which does not
require the exporting of a gantry machine system to China, no deduction
will be made.
*2 - Estimate. Final numbers to be disclosed at closing.
Schedule 1.4 Officers of Surviving Corporation and Subsidiary
TO BE PROVIDED BY BUYER AT OR PRIOR TO CLOSING
2
Schedule 2.3 Shareholders
Amount Payable1/
Name Shares Issued and to each
Outstanding Shareholder
on Closing Date
Shares Percent
------ -------
Xxxxxxx Xxxxxxx 592.2165 53.7793%
Xxxxxxx Xxxxxxx, as 49.3534 4.4818%
Trustee for the benefit of
Xxxxxx Xxxxx
Xxxxxx Xxxxx 156.2093 14.1855%
Xxxx X. Xxxxxxx and 107.3000 9.7439%
Xxxxxxx Xxxxxxx, as
Trustees under the Will
of Xxxx X. Xxxxxxx
Xxxxxxxx X. Xxxxxxxx 70.0000 6.3567%
Xxxxxxx Xxxxx, as Custodian 4.0000 .3632%
for Xxxxxx Xxxxx
Xxxxxxx Xxxxx, as Custodian 4.0000 .3632%
for Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, as Custodian 4.0000 .3632%
for Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, as Custodian 4.0000 .3632%
for Xxxxxx Xxxxx
R. Xxxxx Xxxxxxx 110.1199 10.0000% $
---------- ----------
Total 1,101.1991 100.000% $
========== ==========
--------
(1) To Be Completed at Closing in accordance with the Agreement dated
April 28, 1998.
3
Schedule 2.3 Continued
$5,180,000 Note
Percentage Ownership
Note Holders of $5,180,000 Note
Xxxxxxx Xxxxxxx 76.6786 (Majority Noteholder)
R. Xxxxx Xxxxxxx 14.2580
Xxxxxxxx X. Xxxxxxxx 9.0634
4
Schedule 3.1 Directors and Officers of the Company and Subsidiaries
------------ ------------------------------------------------------
Monitor Aerospace Corporation
Xxxxxxx Xxxxxxx Chairman & Treasurer & Director
R. Xxxxx Xxxxxxx President & Director
Xxxxxxx Xxxxxx Vice President Marketing & Sales
Xxxx Xxxxxx Vice President of Technology & Assistant Secretary
Xxxxx X. Xxxxxxxxx Secretary & Director
Xxxxx Xxxxxxx Assistant Secretary
Xxxxxxxx X. Xxxxxxxx Director
Xxx Xxxxxx Director
Monitor Aerospace International Corp.
Xxxxxxx Xxxxxxx Chairman & President & Director
R. Xxxxx Xxxxxxx Executive Vice President & Director
Xxxxxx Xxxxxxx Vice President
Xxxxx Xxxxx Vice President
Xxxxxxx Xxxx Vice President
Xxxxx X. Xxxxxxxxx Treasurer & Secretary & Director
Xxxxx Xxxxxxx Assistant Secretary
Monitor Marine Products Inc.
Xxxxxxx Xxxxxxx Director & President
Xxxxx X. Xxxxxxxxx Director
R. Xxxxx Xxxxxxx Director & Secretary
5
Schedule 3.2 Consents upon Change of Control
------------ -------------------------------
The Loan Agreements listed on Schedule 3.19(a), which are incorporated
herein by reference, may require consent or notification prior to a
change of control of the Company, and the change of control may result
in a breach of such Loan Agreements.
The Buyer must comply with novation requirements under federal
acquisition regulations after the Closing in connection with the
Government Contracts (where the Company is the primary contractor)
listed on Schedule 3.19B.
Many of the Company's purchase orders with ShinMaywa (America) Ltd.
require consent prior to an assignment by operation of law. These
purchase orders are listed below:
P.O. # 1100-0082 dated 02/18/97
P.O. dated 03/05/96
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 12/15/95
X.X. # 0000-0000 dated 12/15/95
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 03/05/97
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 02/18/97
X.X. # 0000-0000 dated 02/18/97
Sales Representative Agreement dated January 15, 1998 between the
Company and Cincinnati Milacron Marketing Company (prohibits
assignments other than assignments by Milacron to a successor of
Milacron).
The General Terms Agreements, dated as of March 29, 1996 and March 20,
1998, between the Company and The Boeing Company states that upon a
sale of the Company, certain intellectual property rights of the
Company shall be transferred to Boeing.
The Software License Agreement with CGTech listed on Schedule 3.10,
Item 4, does not permit transfers by operation of law. Written consent
is needed to transfer the license.
6
Written consent is needed to transfer by operation of law the
Purchase/License Agreement with Electronic Data Systems Corporation
listed on Schedule 3.10, Item 6.
Computer Service Lease Agreements, dated as of March 29, 1996 ,
between the Company and Jacom Computer Services Inc., Lease Number
9609, and related schedules as follows: Schedule 1 dated April 15,
1996, Schedule 2 dated April 25, 1996, Schedule 3 dated June 14, 1996,
Schedule 4 dated October 17, 1996, Schedule 5 dated November 14, 1997,
Schedule 6 dated December 3, 1997 and Schedule 7 dated December 1,
1997 require that notice be given to Jacom prior to any assignment of
lease to a corporation acquiring all or substantially all of the
property of the Company.
The Employment Agreement dated December 8, 1997 between the Company
and Xxxx Xxxxxx, listed on Schedule 3.14, Item (i), provides that Xx.
Xxxxxx shall have the right to receive severance equal to one years
salary plus prorated portion of incentive compensation in the event of
a change of control, a reduction in his position and his voluntary
termination of employment with the Company. Prior to Closing, this
Agreement will be amended to provide that the rights set forth in the
preceding sentence shall, in respect of the change of control
resulting from the Merger, only survive for six months following the
Closing.
7
Schedule 3.3 Shareholders
Shares Issued and Shares Issued and Outstanding
Name Outstanding prior to Closing at the Effective Time
---- ---------------------------- ---------------------
Xxxxxxx Xxxxxxx 592.2165 592.2165
Xxxxxxx Xxxxxxx, as 49.3534 49.3534
Trustee for the benefit
of Xxxxxx Xxxxx
Xxxxxx Xxxxx 156.2093 156.2093
Xxxx X. Xxxxxxx and 107.3000 107.3000
Xxxxxxx Xxxxxxx as
Trustees under the Will
Of Xxxx X. Xxxxxxx
Xxxxxxxx X. Xxxxxxxx 70.0000 70.0000
Xxxxxxx Xxxxx, as Custodian 4.0000 4.0000
For Xxxxxx Xxxxx
Xxxxxxx Xxxxx, as Custodian 4.0000 4.0000
For Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, as Custodian 4.0000 4.0000
For Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, as Custodian 4.0000 4.0000
For Xxxxxx Xxxxx
R. Xxxxx Xxxxxxx 46.9222 110.1199
--------- ---------
Total 1038.0014 1101.1991
========= =========
Agreements with Shareholders
The Shareholders have entered into an agreement with respect to the allocation
of the Merger Consideration among themselves.
Agreements with respect to Common Stock
Xxxxxxx Xxxxxxx, Xxxxxxxx Xxxxxxxx and R. Xxxxx Xxxxxxx have entered into a
written agreement dated October 29, 1997 to sell their shares of Common Stock
collectively.
Agreements for Outstanding Debt: The contracts listed under Paragraph (a) of
Schedule 3.19A are incorporated herein by reference.
8
Schedule 3.4 Projections
Certified copy provided under separate cover.
9
Schedule 3.5 Litigation
None.
For informational purposes only: Management is aware of a U.S. Government
investigation concerning the possible unauthorized diversion by the People's
Republic of China of machine tools sold to a Chinese leasing company by a U.S.
aircraft OEM (a customer of the Company) in 1994 and of the Company's purported
connection to these matters. The Company has been cooperating with the
investigation, has done nothing unlawful and has been advised by the U.S.
Government that it is neither a subject nor a target of the investigation.
10
Schedule 3.6 Taxes
o The Company has been informed in writing that there is "No Change"
regarding tax payments for a New York State tax audit for the years ending
May 31, 1992 through May 31, 1994.
o The Company made the following accounting change for the fiscal year ended
May 31, 1993 and thereafter: Inventory valuation method was changed from
last-in-first- out to first-in-first-out.
11
Schedule 3.8 Real Property Owned and Leased
Real Estate Owned
0000 Xxx Xxxxxxxx Xxxxxxxxx, Xxxxxxxxxx, Xxx Xxxx (legal description attached as
Exhibit A).
Real Estate Leases
1. Warehouse and parking area at 00 X. Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxx
Xxxx pursuant to: Standard Form of Store Lease dated as of September
6, 1994 between Xxxxxxxx Xxxxxxxx Agency Realty and the Company with
the following principal terms:
-25,000 square feet
-$137,467.92 annual rent (5% annual increases)
-Term ends 11/30/99
-May terminate at end of lease year with six months notice
2. Garage at 00 Xxxx Xxxxxx, Xxxx Xxxxxxx, Xxx Xxxx pursuant to: Lease
dated November, 1993 between Chemlabs Pharmaceutical Co., Inc. and the
Company with the following principal terms:
-$26,250 annual rent, plus annual 5% or cost of
living increases, whichever is higher
-Term ends 11/14/99
3. Beijing Office Lease pursuant to: Lease between Richarm International
Limited and the Company with the following principal terms:
-Monthly rent $6,000
-To be transferred to Monitor Asia pursuant to the Asset Purchase
and Sale Agreement, which will be entered into by the Company and
Monitor Asia in connection with the Merger.
4. Residential property at 00 Xxxxxxxxxx Xxxxx, Xxxxx Xxxx, Xxx Xxxx
leased from Xxxxx Xxxxxxxx through April, 1998 with the following
principal terms:
-Monthly rent $2,000
5. Residential property at 00 Xxxxxxxxxx Xxxxx, Xxxxx Xxxx, Xxx Xxxx
leased from Xxx Xxxxxxx through August, 1998 with the following
principal terms:
-Monthly rent $2,000
Storage Lease
6. Storage Space Lease at Premise 006, Building 001, 2431 Chico Avenue,
S. El Monte, California, month to month verbal arrangement.
-Monthly rent $1,305
Permitted Liens
Easements and other minor encumbrances of record which do not materially affect
the value, use or marketability of any real property.
12
LEGAL DESCRIPTION
Exhibit A to Schedule 3.8
ALL THAT CERTAIN PLOT, PIECE, OR PARCEL OF LAND, SITUATE, LYING, AND BEING AT
NORTH AMITYVILLE, TOWN OF BABYLON, COUNTY OF SUFFOLK AND STATE OF NEW YORK MORE
PARTICULARLY BOUNDED AND DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE WESTERLY SIDE OF NEW HORIZONS BOULEVARD DISTANT
1781.22 FEET SOUTHWESTERLY FROM THE SOUTHWESTERLY END OF A CONNECTING LINE WHICH
CONNECTS THE NORTHWESTERLY SIDE OF NEW HORIZONS BOULEVARD WITH THE SOUTHERLY
SIDE OF WELLWOOD AVENUE, AS WIDENED;
RUNNING THENCE SOUTHERLY ALONG THE WESTERLY SIDE OF NEW HORIZONS BOULEVARD THE
FOLLOWING TWO COURSES AND DISTANCES:
1) ALONG THE ARC OF A CURVE BEARING TO THE LEFT HAVING A RADIUS OF 331.00 FEET A
DISTANCE OF 261.84 FEET;
2) SOUTH 11 DEGREES, 34 MINUTES, 49 SECONDS EAST 528.94 FEET;
RUNNING THENCE SOUTH 84 DEGREES, 57 MINUTES, 18 SECONDS WEST 833.88 FEET TO THE
EASTERLY LINE OF LAND NOW OR FORMERLY OF S. C. M. CORP.
RUNNING THENCE NORTH 21 DEGREES, 27 MINUTES, 52 SECONDS WEST 46.11 FEET TO THE
SOUTH EAST CORNER OF LAND NOW OR FORMERLY OF TOWN OF BABYLON;
RUNNING THENCE NORTHERLY ALONG SAID LAND THE FOLLOWING 2 COURSES AND DISTANCES:
1) NORTH 11 DEGREES, 34 MINUTES, 49 SECONDS WEST 722.85 FEET;
2) NORTH 00 DEGREES, 28 MINUTES, 12 SECONDS WEST 645.61 FEET TO THE SOUTHERLY
LINE OF LAND NOW OR FORMERLY A. AND J. SAVACA;
RUNNING THENCE NORTH 84 DEGREES, 18 MINUTES, 18 SECONDS EAST ALONG SAID LAND AND
LAND NOW OR FORMERLY OF X. XXXXX AND LAND NOW OR FORMERLY OF XXXXXX XXXXX 278.74
FEET;
RUNNING THENCE SOUTH 07 DEGREES, 08 MINUTES, 28 SECONDS WEST 150.00 FEET;
RUNNING THENCE NORTH 84 DEGREES, 18 MINUTES, 18 SECONDS EAST 481.37 FEET;
RUNNING THENCE SOUTH 11 DEGREES, 34 MINUTES, 49 SECONDS EAST 408.95 FEET;
RUNNING THENCE SOUTH 56 DEGREES, 15 MINUTES, 24 SECONDS EAST 145.46 FEET TO THE
WESTERLY SIDE OF NEW HORIZONS BOULEVARD, THE POINT OR PLACE OF BEGINNING.
FOR INFORMATION ONLY: DISTRICT 0100 SECTION 126.01 BLOCK 01.00 LOT 003.000.
( END )
Schedule 3.9 Government Approvals
Permits
Issuer: Suffolk County Department of Health Services
Type: Hazardous Materials Storage Permit
ID No.: 1-0087
Issuer: Suffolk County Department of Public Works
Type: Sewer Discharge Permit
ID No.: 000-000-0000
Issuer: New York Department of Environmental Conservation
Type: Particulate Emission Certificate
ID No.: 4720004749
Issuer: New York Department of Environmental Conservation
Type: Discharge of non-contact cooling water
ID No.:
Issuer:
Type: Occupancy Certificate
ID No.: 89121
Issuer:
Type: Fire Prevention Form 1
ID No.: 2937/12
13
Schedule 3.10 Intellectual Property
License Agreements (the Company or a Subsidiary is Licensee)
1. End User Product License Agreement with Progress Software Corporation (this
is an undated, unsigned license agreement applicable to anyone who opens
the software package)
2. Software License Agreement with Cimlinc Advanced Manufacturing technology
(this is an undated, unsigned license agreement applicable to anyone who
opens the software package)
3. Applications Support and Software Maintenance Contract dated February 1,
1997 with Numerical Control Computer Sciences (customer is not specified)
4. Software License Agreement with CGTech (this is an undated, unsigned
license agreement applicable to anyone who opens the software package)
5. Binary Code License and Software License Agreement with Sun Microsystems
Computer Company (this is an undated, unsigned license agreement applicable
to anyone who opens the software package)
6. Purchase/License Agreement with Electronic Data Systems Corporation signed
by the Company on December 19, 1996
7. End-User License Agreement for Microsoft Software (this is an undated,
unsigned license agreement applicable to anyone who opens the software
package)
8. WinDD End User License Agreement with Tektronix (this is an undated,
unsigned license agreement applicable to anyone who opens the software
package)
Transfer of Intellectual Property
The General Terms Agreements, dated as of March 29, 1996 and March 20,
1998, between the Company and The Boeing Company grants Boeing a license
to, and states that upon a transfer of the Company to any third party, all
intellectual property of the Company related to the development,
production, maintenance or repair of products covered by the Agreements, is
transferred to Boeing.
The Xxxx Long Term Agreements listed on Schedule 3.19B (LTA 47708-9301,
47708-9202 and 47708-9201) contain provisions that state that Xxxx has a
worldwide, royalty free, nonexclusive and irrevocable license to the
Company's proprietary information if (a) the Agreement or any purchase
order is terminated for default, or (b) the Company's refusal to provide
Xxxx or Xxxx'x customers any product under any agreement during or after
the life of the agreement.
The Textron Aerostructures purchase orders listed in the attachment to
Schedule 3.19B contain language granting Textron a non-exclusive,
noncancellable, royalty-free license under certain intellectual property
controlled by the Company which relate to or are required by Textron to
make complete use of the material being purchased.
14
Schedule 3.11 Environmental Compliance; Permits
Environmental Reports
Phase I Environmental Audit dated November 1991 prepared by EEA, Inc.
Phase I Environmental Audit dated October 1990 prepared by EEA, Inc.
Until April 27, 1998, Monitor had not filed reports with State and Local
officials pursuant to Sections 311 and 312 of the Emergency Planning and
Community Right-to-Know Act with respect to the storage at its manufacturing
facility of number 2 fuel oil and cutting oil. Monitor is currently filing Tier
Two reports with State and Local officials with respect to its storage of fuel
oil and cutting oil.
Monitor has three concrete lined drainage structures which have served as dry
well receptacles for surface water runoff from various sources including its
manufacturing operations. Sediments accumulated in these structures have been
tested and found to contain low levels of metal, solvent and petroleum
hydrocarbon contaminants. Monitor arranged for removal of the sediments by
Safety Kleen on April 24 and 25, 1998 and their disposal in accordance with
applicable regulations and is closing the structures in cooperation with the
Suffolk County Department of Health Services.
Above Ground Liquid Storage Tanks
See Attachment 3.11
15
Schedule 3.12 ERISA; Benefit Plans
3.10A Monitor Aerospace Corporation Savings and Profit Sharing Plan
3.12B Monitor Aerospace Corporation Employees' Pension Plan and Trust. This
plan was "frozen" in 1997 and will be terminated in accordance with
the Merger Agreement.
3.12C Salary Continuation Agreements - Four senior executives may
participate in plan providing for deferral of between $20,000 and
$60,000 of such executive's compensation and the purchase by the
Company of variable universal life insurance with such amount of
deferred compensation. Approved at September 1997 meeting, and
currently being set up. Annual cost is $100,000.
3.12D Executive Incentive Compensation Program - The senior executives
listed below can earn annual bonuses of up to 30% of base salary.
Two-thirds of the bonus is paid if the Company meets or exceeds profit
goals of its business plan and one-third is paid if executive meets
agreed upon individual goals.
Xxxxxxx Xxxxxxxx
Xxxx Xxxxxx
Xxxx Xxxxxx
Xxxxxxx Xxxxxx
Xxxx Xxxxxxx
Xxxx Xxxxxx
Xxxxx Xxxxxxxxxxxxx
Xxx Xxxxx (partial for 30% of last fiscal year) Xxxxxxx Xxxxx
(partial for 3/4 of last fiscal year)
3.12E Senior Officer Death Benefit - If Chairman, President or Executive
Vice President (currently vacant) should die while in office, widow or
surviving children (if under age 25) to receive two years salary
payable over a period of four to ten years. Adopted by the Board in
1975 and amended December 22, 1994.
3.12F Medical/Vacation and other Benefits
--Vytra POS (Point of Service) - Majority of employees enrolled. (See
Attachment 3.12F(i)).
--Vytra "Brooklyn" POS (Point of Service) - Plan covers employees
living in areas not served by Vytra network. (See Attachment
3.12F(ii)).
--Vytra "Executive" POS (Point of Service) - Plan covers six
executives. Monitor reimburses for medical expenses not covered by
VYTRA and pays copayments and deductibles. (See Attachment
3.12F(iii)).
--Medical/Dental Facility - Employees and dependents must use the
services of the on-site facility. (See Attachment 3.12F(iv)).
16
--Sick/Vacation Policy - Employees are paid for unused and accrued
vacation time at termination if employed at least one year. Neither
unused or accrued sick time is paid at termination of employment. (See
Attachment 3.12F(v)).
--Short/Long Term Disability (See Attachment 3.12F(vi)).
--Life Insurance (See Attachment 3.12F(vii)).
--Other Benefits (See Attachment 3.12F(viii)).
3.12G Monitor Aerospace Corporation Restricted Stock Bonus Plan Adopted
December 15, 1983, as modified and amended by Board resolution dated
January 6, 1997 and amended March 25, 1998.
3.12H [intentionally deleted]
3.12I Six former long term employees are receiving unfunded supplemental
payments totaling $17,000 per year from the Company. The payments
terminate at various times through the year 2004. The Company shall
terminate these obligations by the Closing, and the cost of
terminating these obligations will be included on the Closing
Liability Schedule. The Company has no obligation to make such
payments to other employees currently retired or retiring in the
future.
3.12J X. Xxxxxxxx has a contractual right to receive a payment of $23,400
per year for life and, upon such former employee's death, the
employee's spouse is entitled to receive $11,700 until her death,
pursuant to the Compensation and Settlement Agreement dated September
1990 between the Company and Xxxxxx X. Xxxxxxxx, as amended October 1,
1994 and October 1, 1997. The Company shall terminate this obligation
by the Closing, and the cost of terminating this obligation will be
included on the Closing Liability Schedule.
3.12K On December 26, 1973, the Company, by Board resolution, adopted a
medical reimbursement plan for officers, spouses and children
effective January 1, 1974 covering all expenses for medical care as
defined in Section 213(e) of the Internal Revenue Code. The medical
reimbursement plan was amended by Board resolution dated December 22,
1994 to include three former employees of the Company who were
consultants for the Company. The plan was further amended by Board
resolution dated October 3, 1996 to include directors of the Company,
their spouses and dependent children and corporate executives
designated by the Chairman or President and their spouses and
dependent children. The plan terminates for participants when the
participant or the participant's spouse turns 65 or the termination of
employment or any substantive consulting arrangement with the Company.
Costs relating to the medical reimbursement plan for former employees
will be included on the Closing Liability Schedule.
The benefits described in 3.12C, 3.12E, 3.12F, 3.12I, 3.12J and 3.12K may be
considered employee welfare benefit plans within the meaning of Section 3(1) of
ERISA.
17
Schedule 3.13 Insurance
See "Summary of Insurance" from X.X. Xxxx Agency, Inc. attached
hereto. The policies listed have been renewed and are in full force
and effect.
There may be ongoing xxxxxxx'x compensation claims which are unsettled
and not yet paid.
18
Schedule 3.14 Employment Contracts
The following employees have employment contracts:
(a) Employment Agreement between the Company and R. Xxxxx Xxxxxxx
effective December 1, 1995, as amended August 9, 1997 and March 25,
1998.
Salary Continuation Agreement, dated November 17, 1997, between the
Company and R. Xxxxx Xxxxxxx
(b) Letter Agreement between the Company and Xxxxxxx Xxxxxx executed on
May 15, 1997
(c) Letter Agreement between the Company and Xxxxx Xxxxxxxxxxxxx executed
on Xxxxx 00, 0000
(x) Letter Agreement between the Company and Xxxxxxx Xxxx executed on
January 15, 1997
(e) Letter Agreement between the Company and Xxxx Xxxxxx executed on
December 5, 1997
Salary Continuation Agreement, dated November 17, 1997, between the
Company and Xxxx Xxxxxx.
(f) Letter Agreement between the Company and Xxx Xxxxx executed on
December 9, 1997
(g) Letter Agreement between the Company and Xxxx Xxxxxx executed on April
21, 1997
Letter Agreement between the Company and Xxxx Xxxxxx executed on
December 8, 1997 stating that the Company will provide a housing
allowance of $10,000 per year for three years beginning December 1,
1997
Salary Continuation Agreement, dated November 17, 1997, between the
Company and Xxxx Xxxxxx.
(h) Letter Agreement between the Company and Xxxxx Xxxxx executed on
August 6, 1997
(i) Letter Agreement between the Company and Xxxx Xxxxxx executed on
December 8, 1997
(j) Expatriate Employment Agreement executed on June 30, 1997 between the
Company and Kan Hong Seng (Xxxxxxx Xxxx). This Agreement to be assumed
by Monitor Asia.
(k) Letter Agreement between the Company and Xxxx Xxxxxxx executed on
August 22, 1996
19
Salary Continuation Agreement, dated November 17, 1997, between the
Company and Xxxx Xxxxxxx.
(l) Letter Agreement between the Company and Xxxxxxx Xxxxxx executed on
February 22, 1996
(m) Letter Agreement between the Company and Xxxxxxx Xxxxxxxx executed on
December 5, 1997
In addition, (i) Xxxxxxxx Xxxxxxxx, a director of the Company, has a
consulting contract with the Company described in Schedule 3.19A(b), which is
incorporated herein by reference and which will be terminated at Closing, and
(ii) Xxxxx Xxxxxxxxx, director, has a verbal consulting arrangement with the
Company described in Schedule 3.19A(b), which is incorporated herein by
reference.
In addition, almost all new employees receive letters offering employment
and setting forth certain terms of employment, which do not constitute
employment agreements.
20
Schedule 3.17 Inventory Locations
On-Site Inventory Locations
Monitor Aerospace Corporation
0000 Xxx Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Monitor Aerospace Corporation
c/o Xxxxxxxx Xxxxxxxx Agency Realty
00 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxx Xxxx 00000
Monitor Aerospace Corporation
c/o Chemlabs Pharmaceutical Co., Inc.
00 Xxxx Xxxxxx
Xxxx Xxxxxxx, Xxx Xxxx 00000
Monitor Aerospace Corporation*
Xxxx 000, Beijing Silver Tower
#2 North Dong San Huan Road
Xxxx Xxxx District
Beijing 100027, PRC
Monitor Aerospace Corporation
c/o Coast Machinery Movers Inc.
Premise 006, Building 001
0000 Xxxxx Xxxxxx
Xxxxx Xx Xxxxx, Xxxxxxxxxx 00000-0000
See Attachment 3.17A for list of off-site inventory locations.
See Attachment 3.17B for description of consigned goods held by the
Company. All inventory of the Company and its Subsidiaries reflected on
the Company Financial Statements is owned by the Company or one of its
Subsidiaries and does not consist of consigned goods.
* On the Closing Date, there will be no inventory at this location.
21
Schedule 3.19A Contracts
(a) 1. Revolving Credit Agreement dated as of March 31, 1997 among Monitor
Aerospace Corporation, as Borrower, and European American Bank
("EAB"), as Agent, and EAB and Fleet Bank, N.A., as Banks, and any
notes or security agreements executed in connection therewith.
2. $3,675,000 Mortgage Modification among Fleet Bank, N.A., as Mortgagee,
and Monitor Aerospace Corporation, as Mortgagor, dated March 31, 1997,
and any notes or security agreements executed in connection therewith.
3. Promissory Note dated May 9, 1997 from Monitor Aerospace Corporation
to General Electric Capital Corporation. ($1.1 million loan financing
of two Cincinnati Milacron Gantry Machines), and any security
agreements executed in connection therewith. This Note and the Note
described in Item 4 below are partially secured by a $250,000 Letter
of Credit.
4. Promissory Note dated December 22, 1995 from Monitor Aerospace
Corporation to General Electric Capital Corporation ($3,728,479.31
million equipment refinancing), and any security agreements executed
in connection therewith.
5. $5,600,000 Third Mortgage Loan made by New York Job Development
Authority (JDA), as lender, to Monitor Aerospace Corporation, as
Borrower, dated December 30, 1992, and any notes or security
agreements executed in connection therewith.
6. Equipment Purchase Lease between Monitor Aerospace Corporation and
Colonial Pacific Leasing dated January 6, 1995 and any security
agreements executed in connection therewith.
7. Equipment Purchase Lease between Monitor Aerospace Corporation and
ORIX Credit Alliance, Inc. dated March 19, 1993 and any security
agreements executed in connection therewith.
8. Equipment Purchase Lease between Monitor Aerospace Corporation and
Yale Financial Services dated March 19, 1996 and any security
agreements executed in connection therewith.
9. "Master" Equipment Purchase Lease No. 9609 dated March 29, 1996
between Jacom Computer Services, Inc. and Monitor Aerospace
Corporation (Equipment Schedules #1 to #7) and any security agreements
executed in connection therewith.
10. Equipment Purchase Lease between Monitor Aerospace Corporation and
Paramist Funding Corp. dated February 12, 1997 and any security
agreements executed in connection therewith.
11. Equipment Purchase Lease between Monitor Aerospace Corporation and
Paramist Funding Corp. dated March 3, 1997 and any security agreements
executed in connection therewith.
22
12. Equipment Purchase Lease between Monitor Aerospace Corporation and
Paramist Funding Corp. dated July 15, 1997 and any security agreements
executed in connection therewith.
13. Equipment Purchase Lease between Monitor Aerospace Corporation and IBM
Credit Corporation dated May 6, 1997 and any security agreements
executed in connection therewith.
14. Equipment Purchase Lease between Monitor Aerospace Corporation and
Yale Financial Services dated May 15, 1997 and any security agreements
executed in connection therewith.
15. Equipment Purchase Lease between Monitor Aerospace Corporation and GE
Capital Fleet Services dated May 13, 1996 and any security agreements
executed in connection therewith.
16. Guaranty by Monitor Aerospace Corporation to Key Bank for $535,000
loan to Xxxxxxx Xxxxxxx for motor yacht "Monitor".
(b) Consulting Contracts:
(i) Consulting Agreement dated November 1, 1994 between the Company
and Xxxxxxxx X. Xxxxxxxx, as modified by Board resolution dated
September 28, 1995 and January 6, 1997.
(ii) Letter Agreement dated April 14 between the Company and Xxxxx
Xxxxx.
(iii) Letter Agreement dated September 30, 1997 between the Company
and Xxxx Xxxxx
(iv) Letter Agreement dated December 8, 1997 between the Company and
Xx. Xxxx Xxxxxxxxx
(v) Consultancy Agreement between the Company and Nor-Tec Asia, Inc.
dated April 23, 1993
(vi) Compensation and Settlement Agreement between the Company and X.
Xxxxxxxx dated September 1990 (no date on contract)
Amendment No. 1 to Compensation and Settlement Agreement dated
October 1, 1994
Amendment No. 2 to Compensation and Settlement Agreement dated
October 1, 1997
Consulting arrangements* without contracts between the Company
and:
(a) Xxxxx Xxxxxxxxx
(b) Xxxx Xxxxxx
(c) Xxxxx Xxxxx
23
(d) Xxxxxx Xxxxxxxxxx
(e) Xxxxxx Xxxxxxx
*The consulting arrangements are with former management employees
pursuant to verbal agreements. The number of consultants varies
from time to time. Total payments for the services of such
consultants are not expected to exceed $100,000 per individual
consultant in 1998, but the aggregate payments are expected to
exceed $100,000. The chart attached hereto as Attachment 3.19(i)
sets forth all material terms of the consulting arrangements
between the Company and each of the referenced individuals. Each
of the consulting arrangements is at will and terminable without
notice or penalty.
See software license agreements listed on Schedule 3.10 which are
incorporated herein by reference.
Sales Representative Agreement dated January 15, 1998 between the
Company and Cincinnati Milacron Marketing Company will be transferred
to Monitor Asia at closing.
Sales Representative Agreement between the Company and Xxxx Sales Inc.
dated November 27, 1996.
Representative Agreements between the Company and Western Engineering
Company dated March 21, 1996.
(c) The following benefits arise upon a change in control:
R. Xxxxx Xxxxxxx- Common Stock issuable pursuant to Xxxxxxx
Employment Agreement is issued giving Xx.
Xxxxxxx the share ownership reflected on
Schedule 3.3
BT Xxxx Xxxxx- Investment Banking Fee pursuant to Letter
Agreement dated October 27, 1997 between BT
Alex. Xxxxx Incorporated and the Company, as
modified by Letter Agreement dated October 27,
1997 from the Company to BT Alex. Xxxxx
Incorporated
Xxxxxxx Xxxxxxx- Restrictions on Common Stock granted pursuant to
Restricted Stock Bonus Plan, described on
Schedule 3.12G are released
Xxxxxxxx X. Xxxxxxxx- Restrictions on Common Stock granted pursuant to
Restricted Stock Bonus Plan described on
Schedule 3.12G are released
See Schedule 3.2 which lists agreements requiring consent or which grant
third parties certain rights upon a change of control, which Schedule
3.2 is incorporated herein by reference.
24
(d) Nonrecourse Promissory Note dated May 1, 1996 in the amount of $250,000
payable by Xxxx X. Xxxxx, Xxxxxx St. Xxxxxx and Xxxxxxx X. Xxxxxxxxx,
and Guaranty dated May 1, 1996 from DynaLantic Corp.
Purchase and Sale Agreement forming part of Monitor Asia Agreements and
attached to the Merger Agreement as Exhibit E-2.
Xxxx of Sale dated March 30, 1998 from the Company to Green Tree Vendor
Services for the transfer of Trane Coil Enclosure of Lease: 17159096,
pursuant to Lease Agreement executed in 1994 between TriCon Capital, a
unit of Greyhound Financial Corporation and the Company.
(e) New York Power Authority Application, dated May 4, 1992 with respect to
direct purchase of electric power by the Company.
(e) and (f) Contract between the Company and Cincinnati Milacron for lease
with option to buy "Sidewinder" machine (undated).
Computer Service Lease Agreement No. 9609, dated March 29, 1996 between
the Company and Jacom.
(g) & (h) See Schedule 3.14 for list of employment agreements which are
incorporated herein by reference. See Schedule 3.12 for list of employee
benefits, contracts and arrangements which are incorporated herein by
reference. See Schedule 3.19(c) for list of consulting agreements, which
are incorporated herein by reference.
(i) See Schedule 3.8 for list of real estate leases which is incorporated
herein by reference.
See Schedule 3.19A(a), Items 6 to 13, which are incorporated herein by
reference.
(j) Agreement between the Company and Cincinnati Milacron dated January 15,
1998 regarding marketing and related costs in Asia will be transferred
at Closing to Monitor Asia Corporation.
(k) The Loan Agreements listed on Schedule 3.19A(a) between the Company and
its lenders may limit the Company's business activities to the aerospace
business and may restrict Liens.
(l) A Power of Attorney granted by the Company to Xxxx X. Xxxxxx, CPA in
connection with New York State Tax audit.
A Power of Attorney granted pursuant to Revolving Credit Agreement with
EAB.
25
Schedule 3.19B
1. General Terms Agreement between The Boeing Company and the
Company dated March 20, 1998 (Number BCA-65336-0326).
2. Special Business Provisions between Boeing Commercial Airplane
Group, a division of The Boeing Company and the Company dated
March 20, 1998 (Number POP-65336-0360), and Amendment No. 1
dated March 20, 1998.
3. General Terms Agreement between The Boeing Company, acting by
and through its division The Boeing Commercial Airplane Group,
and the Company, No. BCA-65336-0056 dated as of March 29, 1996.
4. Special Business Provisions between The Boeing Company and the
Company dated March 29, 1996 (Number POP-65336-0059), and
Amendment No. 1 for interim pricing between January 1, 1997 and
June 30, 1998.
5. Long Term Agreement # LTA 47708-9301 dated May 15, 1993 between
the Company and Xxxx, Inc. for MD-11 Tail Pylon Components, and
Amendment No. 1 dated May 30, 1995.
6. Long Term Agreement # LTA 47708-9202 dated July 15, 1992 between
the Company and Xxxx, Inc. for RB211-535 (E-4) and V2500 Thrust
Reverser Tracks, and Amendment No. 1 dated May 30, 1995.
7. Long Term Agreement # LTA 47708-9201 dated March 15, 1992
between the Company and Xxxx, Inc. for Boeing Model 757 Aircraft
Engine Struts, and Amendment No. 1 dated May 30, 1995, and
Amendment No. 1 dated February 1995.
8. Negotiation Agreement dated December 22, 1995 between Northrop
Corporation, acting through its Military Aircraft Division and
the Company.
9. Purchase Agreement 0020229347 between the Company and Cincinnati
Milacron Marketing Co. dated December 23, 1996 for turnkey
manufacturing requirements, and Addendum dated February 17,
1997.
10. Memorandum of Understanding dated July 9, 1997 between the
Company and Mecachrome.
11. Contract Nos. 96-FE-0530, 96-FE-0531, 96-FE-0532, and
96-FE-0540, each dated October 2, 1996 between Monitor Aerospace
International Corporation and Xxx Xx Enterprise Co., Ltd.
12. Contract Number ATE/USA/95Z0016 dated August 15, 1995 between
the Company, China National Aero-Technology Import & Export
Corporation, and Xian Aircraft Industrial Company.
26
13. Contract Number ATE/USA/95Z0018 dated August 15, 1995 between
the Company, China National Aero-Technology Import & Export
Corporation, and Chengdu Aircraft Industrial Corp.
14. Contract Number ATE/USA/95Z0014 dated August 15, 1995 between
the Company, China National Aero-Technology Import & Export
Corporation, and Shanghai Aviation Industrial (Group)
Corporation, and Amendment No. 1 dated September 20, 1996.
A certified list of all other Purchase and Sale Transactions has been
provided under separate cover to Buyer.
Schedule 3.19C
Contract Compliance
The Company does not always meet the "on-time" requirements of Purchase
and Sale Transactions with customers, but this is common in the
industry, and the Company's on-time performance is considered above
average in the industry.
Contract Claim
The Company has certain claims for payment of additional costs with the
prime contractor for the U.S. Government's development of the F22
airplane. The Government had originally planned on making many F22
airplanes, but has had only one prototype built. The Company is
presently in the process of recouping these additional costs through
unit price adjustment to follow on production orders.
Stop Work Notice
The Company received by letter dated March 23, 1998 from Northrop
Grumman, a Stop Work Notice for F/A-18C/D FY'98 Purchase Orders (F18)
with indications that work may resume in September, 1998. The Company
was told verbally that the Stop Work Notice was issued to allow Boeing
St. Louis time to close a foreign military sale. Northrop Grumman, by
letter dated March 24, directed the Company to stop work on specific
portions of Purchase Orders, a copy of which is attached hereto as
Attachment 3.19.
27
Schedule 3.19(1)
Monitor Aerospace
Summary - Consultants Without Formal Agreements
As of March 16, 1998
Daily Monthly Other
Name Function Comp. Comp. Compensation Notes
Xxxxxx Xxxxxxx International $ 400 Living Allowance, Travel,
Auto, Bonus
Xxxxxx Xxxxxxxxxx Manufacturing $ 7,350 Vacation, Holidays, Auto Comp. based on
(3) days/week
Xxxxx Xxxxx Quality $ 400 Not currently
active
Johann Wislak Manufacturing $ 254 Currently @
(5) days/week
Xxxxx Xxxxxxxxx Pension/Profit Sharing $ 4,600 MERP Major Medical for Comp. based on (3)
Special Payroll spouse to age 65 (3/12/00), days/week
Corp. Secretary Minimum deposit life
insurance ($100k), Auto
Nor-Tec Inc. International - Asia $ 5,000 Expenses
Attachment 3.19
[NORTHROP GRUMMAN letterhead]
23 March 1998
To: Our Supplier Team
Subject: F/A-18 C/D Program
Accompanying this letter you will find a letter and Stop Work Order covering
Northrop Grumman Corporation F/A-18C/D FY '98 Purchase Orders. This has been
made necessary for delays in FY '98 aircraft procurement for which we are
competing. We anticipate that we will be in a position to resume work in
September, 1998.
We and Boeing, our customer, remain convinced that the future for the F/A-18C/D
is very promising. We, along with our Boeing customer, identify a future market
of several hundred aircraft. We intend to continue to aggressively pursue this
market. In order to keep the air vehicle price competitive, we solicit your
energetic support in helping us to avoid price increases arising from this
temporary interruption in program continuity. We are also asking for your help
in preserving the lead-time that we have achieved through the work performed to
date.
The F/A-18 program is a vital element of the defense of the United States and
its allies. The Northrop Grumman Corporation is proud of its long association
with the program and with you as a valued supplier.
I look forward to continuing our work together on the F/A-18C/D program.
Sincerely,
/s/ Xxxxx X. Xxxx
X.X. Xxxx
Program Manager
F/A-18A/B/C/D
Schedule 3.20 Bank Accounts
Schedule Attached
Safe Deposit Box
Location: Bank of New York, Wellwood Avenue, Amityville, New York
Box #: 417
Signatories: Xxxxx Xxxxxxxxx, R. Xxxxx Xxxxxxx, Xxxxxxx Xxxxxxx
28
Schedule 3.21 Suppliers
No exceptions.
29
Schedule 3.22 10 Largest Customers
See Attachment 3.22
30
Sales of Manufactured Product to Monitor Aerospace
Corporation's Largest Customers FY '96 Through FY '98 3rd Quarter
($ Rounded to Hundreds of Thousands)
FY '96 FY '97 FY '98 YTD Through Feb. 1998
------ ------ ----------------------------
Customer Sales(M) Customer Sales(M) Customer Sales(M)
-------- -------- -------- -------- -------- --------
Boeing Seattle 12.5 Boeing Seattle 23.2 Boeing Seattle 21.7
Xxxx (XX Xxxxxxxx) 7.9 Xxxx (XX Xxxxxxxx) 8.9 Xxxx (XX Xxxxxxxx) 12.8
Boeing Wichita 5.8 Boeing Wichita 7.3 Boeing Wichita 6.3
Boeing Canada (1) 3.1 Boeing St. Louis 5.2 Boeing St. Louis 4.1
Northrop Grumman 2.7 Northrop Grumman 2.7 Northrop Grumman 3.6
(Military) (Military) (Military)
Boeing St. Louis 2.7 Shinmaywa (3) 2.0 IAE (4) 2.2
Mitsui (2) 2.3 Hawker De Havilland 1.8 Hawker De Havilland (7) 1.5
Hawker De Havilland 1.9 Boeing Canada (1) 1.5 Xxxxx & Xxxxxxx 1.2
Northrop Grumman 1.3 IAE (4) 1.0 Saab (3) 0.7
(Melbourne)
Shinmaywa (3) 1.2 Xxxxx Xxxxxx (5) 0.7 Shinmaywa (3) 0.7
Saab 1.0 Lockheed Xxxxxx (6) 0.7 Northrop Grumman 0.5
(Commercial)
NOTES:
(1) One-time turnkey project to support MD11 at Boeing Canada
(2) Mitsui was Shinmaywa's trading agent in Japan and now Shinmaywa buys
directly
(3) Major sales is for a crash MD11 retrofit program which slows down in FY
98
(4) IAE was novated work previously done for Xxxx, work may again novate but
back to Xxxx
(5) Xxxxx Xxxxxx fluctuates with the F-22 program
(6) Lockheed Xxxxxx fluctuates with the space shuttle program
(7) Hawker sales will decrease in future as Monitor opted not to continue
contract at 30% decrease to current 747 work
(8) Saab work will decrease in future as Saab exits commercial business
Attachment 3.22
Schedule 3.24 Government Contracts
See Schedule 3.19C under heading "Contract Claim" which is incorporated herein
by reference.
31
Schedule 3.25 Product Liability/Warranty Claims Contracts
NONE
32
Schedule 3.27 Undisclosed Changes
Reference is made to Schedule 5.2 which is incorporated herein by
reference.
33
Schedule 3.28 Affiliate Transactions
Reference is made to the Monitor Asia Agreements attached as Exhibit E-2
to the Agreement and Plan of Merger, which are incorporated herein by
reference.
See Employment Agreements listed on Schedule 3.14 which are incorporated
herein by reference.
See Consulting Agreement with Xxxxxxxx Xxxxxxxx listed on Schedule
3.19(b), and Consulting Arrangement with Xxxxx Xxxxxxxxx listed on
Schedule 3.19(b) which are incorporated herein by reference.
The Company has made a loan to Xxxxxxx Xxxxxxx in the principal amount
of $51,212.32, which will be repaid at Closing.
Guaranty by Monitor Aerospace Corporation to Key Bank for $535,000 loan
to Xxxxxxx Xxxxxxx for motor yacht "Monitor". This Guaranty will be
released at Closing.
Certain shareholders are employees of the Company or a Subsidiary, and
receive benefits as such. Such benefits are described on Schedule 3.12
and are incorporated herein by reference.
Other arrangements with members of the Monitto family as previously
disclosed to Buyer will be terminated at or prior to Closing.
Stock Redemption Agreement dated February 1, 1996 between the Company
and Xxx Xxxxxx, and Promissory Notes in the amounts of $1,461,997.53 and
$332,562.08 executed in connection therewith. Such Amounts are included
on the Closing Liability Schedule.
34
Schedule 4.2 Requirements Relating to Buyer
Filings under Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended. Government Contracts may require novations or consents.
35
Schedule 5.2 Activities Prior to Closing
(c) Compensation/Payments to Employees
The Company will continue to accrue on its monthly Financial Statements
one-twelfth of the expected bonuses to be paid to employees at year end.
The Company will terminate the arrangements listed on Schedule 3.12I and
3.12J, and all costs associated with such termination will be on the
Closing Liability Schedule, and will reduce the Company Value in
calculating the Merger Consideration.
At Closing, bonuses in the amounts listed on Schedule 6.2(h) will be
paid to the persons listed thereon and any amounts in excess of
$1,000,000 will be reflected on the Closing Liability Schedule.
The Company will continue making payments under, or accruing amounts on
its financial statements, to the extent required under the Plans listed
on Schedule 3.12 and the employment agreements listed on Schedule 3.14
(e), (f) and (m) Capital Expenditure
The Company has purchased a used machine tool for $199,500 which is
currently being used in the normal course of business.
(h) Stop Work Notice
The Company received by letter dated March 23, 1998 from Northrop
Grumman, a Stop Work Notice for F/A-18C/D FY'98 Purchase Orders (F18)
with indications that work may resume in September, 1998. The Company
was told verbally that the Stop Work Notice was issued to allow Boeing
St. Louis time to close a foreign military sale. Northrop Grumman, by
letter dated March 24, directed the Company to stop work on specific
portions of Purchase Orders, a copy of which is attached hereto as
Attachment 3.19.
(c), (h) and (n) Restricted Stock Bonus Plan/Xxxxxxx Employment
Agreement
Amendment No. 1 to the Restricted Stock Bonus Plan was approved by the
Board at a meeting held March 25, 1998 and will be proposed at the
special meeting of shareholders to be held in connection with the
Merger.
Amendment No. 2 to the Xxxxxxx Employment Agreement was approved by the
Board at a meeting held March 25, 1998 and will be proposed at the
special meeting of shareholders to be held in connection with the
Merger.
36
(i) Payment of Obligations
The Company will terminate the arrangements listed on Schedule 3.12I and
3.12J and all costs associated with such termination will be on the
Closing Liability Schedule and will reduce the Company Value in
calculating the Merger Consideration.
At Closing, bonuses in the amounts listed on Schedule 6.2(h) will be
paid to the persons listed thereon and any amounts in excess of one
million dollars will be reflected on the Closing Liability Schedule.
Certain items listed on the Closing Liability Schedule will result in
the Company incurring liabilities not currently reflected on the
Financial Statements of the Company, but such liabilities will be a
deduction from the Company Value in the calculation of the Merger
Consideration.
Termination of the restrictions on shares issued to Xx. Xxxxxxx and Xx.
Xxxxxxxx pursuant to the Restricted Stock Bonus Plan and the Xxxxxxx
Employment Agreement will result in the Company recognizing compensation
expense, the effect of which has not been reflected on the Company's
Financial Statements.
(m) Sale/Transfer of Assets.
The Company will enter into the Monitor Asia Agreements at Closing in
the form attached as Exhibit E-2 to the Merger Agreement, which are
incorporated herein by reference .
Xxxx of Sale dated March 30, 1998 from the Company to Green Tree Vendor
Services for the transfer of Trane Coil Enclosure of Lease: 17159096,
pursuant to Lease Agreement executed in 1994 between TriCon Capital, a
unit of Greyhound Financial Corporation and the Company.
37
Schedule 6.2(h)
Company Bonuses Due Through
May 31, 1998 to be
Paid at the Closing
R. Xxxxx Xxxxxxx $ 550,000
Xxxxxxxx Xxxxxxxx $ 150,000
Senior Management $ 337,000
Special Recognition Awards $ 185,000
(Small awards to approximately
22 individuals contributors
consistent with prior years)
Total to be paid $1,222,000
