EXHIBIT 10.18 ASSET PURCHASE AND SALE AGREEMENT AMONG ALLARD INDUSTRIES, INC.,
GERALD R. ALLARD, TRUSTEE OF THE GERALD R. ALLARD REVOCABLE TRUST OF 1994,
THE ALLARD CHILDREN'S TRUST F/B/O JOHN R. ALLARD, THE ALLARD CHILDREN'S TRUST
F/B/O MICHAEL E. ALLARD, YOUNES NAZARIAN, DAVID AND ANGELA NAZARIAN, TRUSTEES
OF NAZARIAN FAMILY TRUST, THE PRINCIPAL SHAREHOLDERS OF ALLARD, REGISTRANT
AND ADS ACQUISITION, INC.
ASSET PURCHASE AND SALE AGREEMENT
ASSETS OF ADS DIVISION OF ALLARD INDUSTRIES, INC.
BY ADS ACQUISITION, INC.,
A SUBSIDIARY OF DECRANE AIRCRAFT HOLDINGS, INC.
This Asset Purchase and Sale Agreement ("Agreement") is made and entered
into by and among Allard Industries, Inc. ("Allard"); Gerald R. Allard,
Trustee of The Gerald R. Allard Revocable Trust of 1994, The Allard
Children's Trust f/b/o John R. Allard, The Allard Children's Trust f/b/o
Michael E. Allard, Younes Nazarian, and David and Angela Nazarian, Trustees
of The Nazarian Family Trust, the principal shareholders of Allard
(collectively, the "Principal Shareholders"); DeCrane Aircraft Holdings, Inc.
("DAH") and ADS Acquisition, Inc. ("Buyer"), based on the following facts:
Allard is the owner of and desires to sell all of the assets of its
Aerospace Display Systems division (which division is referred to herein as
"ADS");
Buyer desires to purchase the assets of ADS;
Based on the foregoing facts and circumstances, the parties hereby agree
as follows (capitalized terms being used herein as defined where noted in
EXHIBIT A):
1. ASSETS TO BE PURCHASED AND SOLD.
1.1 THE ADS ASSETS. On the Closing Date, subject to any exclusions
provided for in Section 1.3, Allard shall transfer to Buyer all of the
assets, properties, rights (contractual or otherwise) and business of ADS
(including but not limited to the goodwill of ADS), in each case whether in
the nature of real, personal, or mixed property and whether tangible or
intangible and known or unknown (collectively, the "Property"). Without
limiting the generality of the foregoing, the assets to be transferred
include:
1.1.1 REAL PROPERTY. Any and all real property (the "Real
Property"), including that listed on Schedule 1.1.1;
1.1.2 REAL PROPERTY LEASES. Any and all rights under leases of
real property and improvements (the "Real Property Leases"), including the
ADS plant in Hatfield, Pennsylvania and the office in Phoenix, Arizona and
any others listed on Schedule 1.1.2;
1.1.3 PERSONAL PROPERTY.
(a) All machinery and equipment (the "Machinery and
Equipment"), including that listed on Schedule
1.1.3(a);
(b) All tooling (the "Tooling"), including that listed on
Schedule 1.1.3(b);
(c) All parts and furniture ("Parts and Furniture"),
including that listed on Schedule 1.1.3(c);
(d) All rights under leases of equipment vehicles or
other tangible personal property ("Personal Property
Leases");including that listed on Schedule: 1.3.3(d);
1.1.4 INVENTORY. All raw materials, supplies, component parts,
work-in-process and finished goods inventory and other inventory (the
"Inventory"), including that listed on Schedule 1.1.4;
1.1.5 VEHICLES. All automobiles and other motor vehicles (the
"Vehicles"), including those listed on Schedule 1.1.5;
1.1.6 PERMITS. All licenses, permits, consents,
authorizations, approvals, certificates and franchises of any regulatory,
administrative or other agency or body, or issued to or held by ADS
(collectively, the "Permits"), including those matters listed in Schedule 1.1.6;
1.1.7 PROPRIETARY RIGHTS.
(a) All patents, inventions, copyrights, computer
software, trademarks, names, service marks, trade
names, marks, symbols and logos;
(b) All trade secrets, processes, proprietary knowledge,
know-how, and other processes which are not filed
or registered but which constitute confidential
proprietary information;
(c) All franchises, licenses, sublicenses, permits or
agreements in respect of any of the foregoing; and
(d) All filings, registrations, or issuances of any of the
foregoing with or by any federal, state, local or
foreign regulatory, administrative or governmental
authority, and any applications for any of the
foregoing (collectively, "Registrations");
in each case which ADS owns, uses, has used or has the right to use or to
which ADS is a party (collectively, the "Proprietary Rights"), including
those described in Schedule 1.1.7;
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1.1.8 CONTRACTS. All rights under contracts and agreements
(not otherwise described in this Section 1.1) which have in whole been
specifically for the benefit or detriment of ADS (collectively, the
"Contracts"), including purchase and sales orders, quotations, executory
commitments, instruments, guaranties, indemnifications, arrangements or other
understandings, and including those matters listed on Schedule 1.1.8;
1.1.9 RECEIVABLES. All accounts and notes receivable (the
"Receivables"), including those listed on Schedule 1.1.9;
1.1.10 INVESTMENTS. All investments which relate to or are used
in the business of ADS (the "Investments"), including those investments
described on Schedule 1.1.10;
1.1.11 DEPOSITS AND PREPAID EXPENSES. All of the deposits and
prepaid expenses excluding prepaid insurance premiums of Allard which relate
to or are used in the business of ADS (respectively, the "Deposits" and the
"Prepaid Expenses"), including those deposits and prepaid expenses listed on
Schedule 1.1.11;
1.1.12 TERMINATION CLAIMS. All claims for termination for
convenience or other claims against prime contractors, government agencies,
or others with respect to the termination of a contract prior to the complete
performance by ADS of such contract (collectively, the "Termination Claims"),
including such claims as are listed on Schedule 1.1.12;
1.1.13 [Omitted]
1.1.14 OTHER CLAIMS. All claims, causes of action, demands and
pending litigation (not otherwise described in this Section 1.1) in which
ADS, or Allard on behalf of ADS, is seeking the recovery of money or
equitable relief (collectively, the "Claims"), including those matters listed
on Schedule 1.1.14;
1.1.15 BOOKS AND RECORDS. All books of account, customer lists,
files, papers and records normally maintained by ADS, together with a
complete and accurate copy of all of the books of account and records of
Allard which relate to ADS;
1.1.16 TELEPHONE NUMBERS. All telephone, fax, e-mail and other
numbers for communication with ADS, including those numbers listed on
Schedule 1.1.16; and
1.1.17 GOODWILL. All goodwill of Allard which directly relates
to ADS or the business of ADS.
1.2 NON-ASSIGNMENT OF ASSETS. To the extent that any asset
described in Section 1.1 may not be assigned to Buyer, or may only be
assigned to Buyer with the consent
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of a third party, then NOTWITHSTANDING anything to the contrary in this
Agreement, neither this Agreement nor any action taken shall constitute an
assignment or an agreement to assign; PROVIDED, HOWEVER, that in such case
Allard will use its best efforts to obtain the consent of such party to the
assignment to Buyer.
1.3 EXCLUDED ASSETS: Notwithstanding Section 1.1, the assets (if
any) listed on Schedule 1.3 shall be excluded from the "Property" for all
purposes.
2. ASSUMPTION OF CERTAIN LIABILITIES; NO ASSUMPTION OF OTHER LIABILITIES.
2.1 On the Closing Date, Buyer will assume:
2.1.1 ACCOUNTS PAYABLE. All accounts payable for current
purchases by ADS incurred in the ordinary course of its business which (i)
are set forth on the schedule of ADS accounts payable as of April 30, 1996
attached as Schedule 2.1.1, or (ii) if incurred after April 30, 1996, are (x)
completely and accurately reflected in all material respects on ADS's books
and records delivered to the Buyer on the Closing Date and (y) are of the
kind expressly permitted by the affirmative covenants, and not prohibited by
the negative covenants, set forth in Section 4 hereof; PROVIDED, HOWEVER,
that in any case Buyer shall not assume the obligation to pay any vendor to
ADS the amount of which obligation is disputed by ADS.
2.1.2 ACCRUED OPERATING EXPENSES. All accrued operating
expenses incurred by ADS in the ordinary course of business which (i) are
reflected as a liability as set forth on the balance sheet of ADS as at April
30, 1996 attached as Schedule 2.1.2(a) (the "April 30, 1996 Balance Sheet"),
or (ii) if incurred after April 30, 1996, are (x) completely and accurately
reflected in all material respects on ADS's books and records delivered to
the Buyer on the Closing Date and (y) are of the kind expressly permitted by
the affirmative covenants, and not prohibited by the negative covenants, set
forth in Section 4 hereof.
2.1.3 REAL PROPERTY LEASES: PERSONAL PROPERTY LEASES. The
obligations of ADS or Allard arising under the Real Property Leases listed on
Schedule 1.1.2 and the Personal Property Leases listed on Schedule 1.1.3.(d).
2.1.4 OPEN PURCHASE CONTRACTS. To the best of the knowledge of
Allard and the Principal Shareholders, the obligations of ADS or Allard, as
seller, to perform all purchase contracts in existence on the Closing Date
which (a) were entered into by ADS or Allard in the ordinary course of
business and (b) on average, provide for pricing materially consistent with
practices of ADS during calendar 1996 sufficient to result in Buyer selling
such goods and/or services at the gross margin reported for the current year
to date as of the Closing Date in the Financial Statements delivered pursuant
hereto.
2.1.5 WARRANTY OBLIGATIONS. The obligation of ADS to provide
warranty work under any purchase contract fulfilled by ADS, BUT ONLY to the
extent of (i) warranty work reflected as an accrued liability on the April
30, 1996 Balance Sheet, and (ii) warranty work for which Allard reimburses
the Buyer pursuant to Section 4.2.14.
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2.1.6 ROYALTIES AND LICENSE FEES. The royalties and license
fees owing by ADS, but ONLY TO the extent specified in Schedule 2.1.6.
2.1.7 VACATION AND SICK LEAVE. To pay for vacation time and
sick leave, BUT ONLY to the extent such liabilities are specified on
Schedule 2.1.7 AND are reserved for in the April 30, 1996 Balance Sheet.
2.2 LIABILITIES NOT ASSUMED. With the exception of the liabilities
assumed pursuant to Section 2.1, Buyer shall not by the execution or
performance of this Agreement, or otherwise, assume or otherwise be
responsible for any liability or other obligation of ADS or Allard of any
kind, nature or description, whether such liability or obligation is mature
or not, liquidated or unliquidated, fixed or contingent, known or unknown,
whether arising out of occurrences prior to, at or after the date of this
Agreement, including those rising from breach of contract, breach of any
warranty, infringement, fraud, violation of any law, rule or regulation, or
out of any charge, complaint, action, suit, proceeding, hearing,
investigation, claim or other demand. Without limiting the foregoing, Buyer
shall not assume any obligations of ADS or Allard arising in connection with
any Employee Benefit Plan.
3. REPRESENTATIONS AND WARRANTIES.
3.1 JOINTLY BY BUYER AND DAH. Buyer and DAH hereby jointly and
severally represent and warrant to Allard and Principal Shareholders that,
except as set forth on Schedule 3.1, the representations and warranties of
Buyer and DAH, and either of them, contained in this Agreement, including
those contained in this Section 3.1, are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date.
Buyer and DAH hereby jointly and severally represent and warrant to Allard
and Principal Shareholders the following:
3.1.1 ORGANIZATION. DAH is a Corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio,
and has all requisite corporate power and authority to own, lease and operate
its respective properties and conduct its respective businesses as now being
conducted. Buyer is a Corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to own, lease and operate its respective
properties and conduct its respective businesses as now being conducted.
Buyer and DAH are each duly qualified, or will be duly qualified prior to the
Closing Date, to do business and in good standing in each jurisdiction listed
on Schedule 3.1.1, are not qualified to do business in any other jurisdiction
and neither the nature of the business conducted by either of them nor the
property either of them owns, leases or operates requires either of them to
qualify to do business as a foreign corporation in any other jurisdiction.
Except as set forth on Schedule 3.1.1, Buyer and DAH have not received any
written notice or assertion within the last three years from any governmental
official of any jurisdiction to the effect that Buyer or DAH is required to
be qualified or otherwise authorized to do business therein, in which Buyer
or DAH, as the case may be, has not qualified or obtained such authorization.
Buyer and DAH have previously delivered to Allard complete and correct copies
of Buyer's and DAH's articles of incorporation and code of regulations as in
effect on the date hereof, and neither Buyer nor DAH is in default in the
performance, observation or fulfillment of any provision of their respective
articles of incorporation or codes of regulations.
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3.1.2 CAPITALIZATION AND SECURITY HOLDERS. The authorized
capital stock of Buyer consists solely of 750 shares of Common Stock,
without par value ("Buyer Common Shares"). Buyer has issued 100 Buyer Common
Shares, of which 100 Buyer Common Shares are outstanding, constituting all
of the issued and outstanding shares of capital stock of any class of Buyer.
All outstanding Buyer Common Shares have been Validly issued and are fully
paid and non-assessable and free of preemptive rights. There are no outstanding
subscriptions, options, warrants, puts, calls, agreements, understandings; or
other commitments or rights of any type relating to the issuance, sale or
transfer by Buyer of any securities of Buyer, nor are there outstanding any
securities which are convertible into or exchangeable for any shares of
capital stock of Buyer; and Buyer has no obligation of any kind to issue any
additional securities.
3.1.3 AUTHORIZATION. Buyer and DAH each have all requisite
corporate power and authority to enter into this Agreement and the other
Transaction Documents to which either of them is a party, perform their
respective obligations hereunder and thereunder and consummate the
transactions contemplated hereby and thereby. All necessary corporate action
has been taken by Buyer and DAH with respect to the execution and delivery of
this Agreement, and the other Transaction Documents to which either of them
is a party, and this Agreement and the other Transaction Documents to which
either of them is a party, constitute valid and binding obligations of Buyer
and DAH, enforceable against Buyer and DAH, as the case may be, in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance and moratorium laws and other laws of
general application affecting the enforcement of creditors' rights generally.
3.1.4 LITIGATION. There is no claim, litigation, action, suit,
proceeding, investigation or inquiry, administrative or judicial, pending or,
to the knowledge of Buyer or DAH, threatened against Buyer or DAH, at law or
in equity, before any federal, state or local court or regulatory agency, or
other governmental authority, which might have an adverse effect on their
ability to perform any of their obligations under this Agreement or upon the
consummation of the transactions contemplated by this Agreement.
3.1.5 BROKERS AND FINDERS. Except as disclosed in Schedule
3.1.5, neither Buyer, DAH nor any of their officers, directors or employees,
has engaged any broker or finder or incurred any liability for any brokerage
fees, commissions, finders' fees or similar fees or expenses and no broker or
finder has acted directly or indirectly for Buyer or DAH in connection with
this Agreement or the transactions contemplated hereby.
3.1.6 FINANCING. DAH has discussed the transaction contemplated
by this Agreement with its senior lender and its subordinated lender; subject
to each such lender's review of the definitive transaction documents
(including this Agreement), DAH has no basis to believe that its lenders will
not give their respective required consent to the transactions contemplated
by this Agreement.
3.2 JOINTLY BY ALLARD AND PRINCIPAL SHAREHOLDERS. Allard and,
subject to the limitations of Section 3.3, Principal Shareholders hereby
jointly and severally represent and
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warrant to Buyer and DAH that, except as set forth on Schedule 3.2, the
representations and warranties of Allard and Principal Shareholders, and
either of them, contained in this Agreement, including those contained in
this Section 3.2, are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date. As used in this
Section 3.2, (i) unless stated to the contrary; all representations and
warranties which are made to the "Knowledge of Allard" and the Principal
Shareholders relate only to ADS, its business, assets and liabilities; (ii)
all representations and warranties relate only to the time period from
December 1, 1992, to the date of this Agreement when ADS, its business,
assets and liabilities were owed by Allard and (iii) when reference is made
to ADS as if it were a legal entity, the representation is meant to be with
respect to the ADS division of Allard as if ADS were a separate legal entity.
As used in this Agreement, "to the Knowledge of Allard" shall mean the
knowledge of John R. Allard or Richard Murray after reasonable inquiry made
to Robert B. Martin and appropriate members of ADS management or staff.
Allard and, subject to the limitations of Section 3.3, Principal
Shareholders hereby jointly and severally represent and warrant to Buyer and
DAH the following:
3.2.1 CORPORATE ORGANIZATION. Allard is a corporation duly
organized, validly existing and in good standing under the laws of the State
of New Hampshire, and has all requisite corporate power and authority to own,
lease and operate its properties and conduct its business as now being
conducted. Allard is duly qualified to do business and in good standing in
each jurisdiction listed on Schedule 3.2.1, is not qualified to do business
in any other jurisdiction and neither the nature of the business conducted by
it nor the property it owns, leases or operates requires it to qualify to do
business as a foreign Corporation in any other jurisdiction. Except as set
forth on Schedule 3.2.1, Allard has not received any written notice or
assertion within the last three years from any governmental official of any
jurisdiction to the effect that Allard is required to be qualified or
otherwise authorized to do business therein, in which Allard has not
qualified or obtained such authorization. Allard has previously delivered to
Buyer complete and correct copies of Allard's articles of incorporation and
by-laws as in effect on the date hereof, and Allard is not in default in the
performance, observation or fulfillment of any provision of either of its
articles of incorporation or by-laws.
3.2.2 CAPITALIZATION AND SECURITY HOLDERS. The authorized
capital stock of Allard consists solely of Sixty (60) shares of Class A
Common Stock, no par value and Three Hundred (300) shares of Class B
Non-Voting Common Stock, no par value ("Allard Common Shares"); Allard has
issued Sixty (60) shares of Class A Common Stock and Allard has issued Two
Hundred Seventy (270) shares of Class B Non-Voting Common Stock; all
outstanding Allard Common Shares have been validly issued and are fully paid
and non-assessable and free of preemptive rights. Schedule 3.2.2 accurately
sets forth the names and addresses of, the number of Allard Common Shares
held at the date of this Agreement of record and/or beneficially by, and any
Allard Common Shares to be issued, sold or otherwise transferred at or prior
to the Closing Date to, each and every shareholder of Allard.
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3.2.3 AUTHORIZATION OF ALLARD AND PRINCIPAL SHAREHOLDERS.
Allard has full corporate power and authority to enter into this Agreement,
and the other Transaction Documents to which it is a party, perform its
obligations hereunder and thereunder and consummate the transactions
contemplated hereby and thereby. Each of the Principal Shareholders has all
requisite power, authority and legal capacity and is competent to execute and
deliver this agreement, and the other Transaction Documents to which he or
she is a party, perform his obligations hereunder and thereunder and
consummate the transactions contemplated hereby. All necessary and
appropriate corporate action has been taken by Allard with respect to the
execution and delivery of this Agreement, and the other Transaction Documents
to which it is a party. This Agreement constitutes, and the other Transaction
Documents to which Allard and Principal Shareholders are parties when
executed and delivered by Allard and Principal Shareholders will constitute,
valid and binding obligations of Allard and Principal Shareholders,
enforceable against Allard and Principal Shareholders in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance and moratorium laws and other laws of
general application affecting the enforcement of creditors' rights generally.
3.2.4 FINANCIAL STATEMENTS. Attached hereto as Schedule 3.2.4
are (i) the balance sheets of ADS as at December 31, 1995, 1994 and 1993 and
the April 30, 1996 Balance Sheet, (ii) the related statements of income,
retained earnings, and cash flows for the years ended December 31, 1995, 1994
and 1993 and the 4 months ended April 30, 1996 (all of such documents
referred to collectively as the "Financial Statements"). All of the year-end
Financial Statements reflect all year-end adjustments reflected in the
audited consolidated financial statements of Allard to the extent such
adjustments pertain to ADS. The Financial Statements dated as of April 30,
1996 either (a) reflect the equivalent of any adjustments made in the
December 31, 1995 Financial Statements or (b) have footnote disclosure to
reflect the absence of such adjustments and the dollar amount of such
adjustments had they been made. Each of the Financial Statements, and the
financial statements delivered pursuant to Section 6, (i) are true, correct
and complete in all material respects, (ii) have been prepared from and are
in accordance with the books and records of ADS, (iii) have been prepared
using an accrual basis method and LIFO inventory cost flow assumptions, (iv)
are in conformity with generally accepted accounting principles applied on a
consistent basis for such periods, and (v) fairly present the financial
position of ADS in all material respects as of the dates stated and the
results of operations and cash flows of ADS for the periods then ended in
accordance with such practices. On the date of this Agreement, ADS does not
have any material contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for
in the balance sheets in the Financial Statements or elsewhere in this
Agreement. Since April 30, 1996, there has been no material adverse change in
the financial condition, operations, business or prospects taken as a whole
of ADS from that set forth in the Financial Statements dated as of April 30,
1996 or elsewhere in this Agreement.
3.2.5 [Omitted]
3.2.6 ABSENCE OF CERTAIN CHANGES IN EVENTS. Except as set forth
on Schedule 3.2.6, since December 31, 1995, there has not been:
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(a) Any material adverse change in the business
operations (as now conducted or as presently
proposed to be conducted), assets, properties or
rights, prospects or condition (financial or
otherwise) of ADS or, any occurrence, circumstance,
or combination thereof which reasonably could be
expected to result in any such material adverse
change (a "Material Adverse Effect");
(b) Any material increase in amounts payable by ADS
to or for the benefit of, or committed to be paid by
ADS: (A) to or for the benefit of (x) any person
listed on Schedule 3.2.6(a) (each a "Restricted
Employee") or (y) in the aggregate, all shareholders,
directors, officers, partners, consultants, agents and
employees, in any capacity, of Allard who are not
listed on Schedule 3.2.6(b) (the "Non-Restricted
Employees") or (B) in any benefits granted under
any bonus, stock option, profit sharing, pension,
retirement, deferred compensation, insurance, or
other direct or indirect benefit plan, payment or
arrangement made to, for the benefit of, or with (x)
any Restricted Employee or (y) in the aggregate, all
Non-Restricted Employees;
(c) Any transaction entered into or carried out by ADS
other than in the ordinary and usual course of their
respective businesses;
(d) Any borrowing or agreement to borrow funds; any
incurring of any other obligation or liability,
contingent or otherwise except current liabilities
incurred in the usual and ordinary course of business
exceeding at any one time outstanding $10,000; or
any endorsement, assumption or guarantee of
payment or performance of any loan or obligation of
any other individual, firm, corporation or other
entity by Allard on behalf of ADS;
(e) Any material change made by ADS in the methods
of doing business or any change in the accounting
principles or practices of Allard with respect to the
Financial Statements or the method of application of
such principles or practices;
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(f) Any mortgage, pledge, lien, security interest,
hypothecation, charge or other encumbrance
imposed or agreed to be imposed on or with respect
to the Property;
(g) Any mortgage, pledge, lien, security interest,
hypothecation, charge or other encumbrance discharged
or satisfied, or any obligation or liability (absolute
or contingent) paid, other than current liabilities
shown on the April 30, 1996 Balance Sheet and current
liabilities incurred and obligations under contracts
entered into after such date in the usual and ordinary
course of business;
(h) Any sale, lease or other disposition of or any
agreement to sell, lease or otherwise dispose of any
of the properties or assets of ADS, other than sales
of finished goods in the usual and ordinary course
of business for ADS's scheduled prices;
(i) Any purchase of or any agreement to purchase
capital assets for an amount in excess of $50,000 for
any one such purchase or $100,000 for all such
purchases made by Allard on behalf of ADS or any
lease or any agreement to lease, as lessee, any
capital assets with payments over the term thereof to
be made by Allard for ADS exceeding an aggregate
of $30,000;
(j) Any loan or advance made by Allard on behalf of
ADS to any individual, firm, corporation or other
entity except for advances not material in amount
made in the usual and ordinary course of business to
employees;
(k) Any modification, waiver, change, amendment, release,
rescission or termination of, or accord and
satisfaction with respect to, any material term,
condition or provision of any contract, agreement,
license or other instrument to which ADS is a party,
other than any satisfaction by performance in
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accordance with the terms thereof in the usual and
ordinary course of business;
(l) Any labor disputes or disturbances materially adversely
affecting the business or financial condition of
ADS including the filing of any petition or charge of
unfair labor practices with the National Labor
Relations Board or efforts to effect a union
representation election, actual or threatened employee
strikes, work stoppages or slow downs;
(m) Any delay or postponement (beyond normal
practice) by Allard on behalf of ADS of the
payment of any accounts payable or other liabilities
of ADS; or
(n) To the best of the knowledge of Allard and each
Principal Shareholder, any other event or condition
of any character which has had a Material Adverse
Effect or may reasonably be expected to result in a
Material Adverse Effect.
3.2.7 UNDISCLOSED LIABILITIES. Except as disclosed on Schedule
3.2.7, ADS has no liability or obligation of any nature (whether liquidated,
unliquidated, accrued, absolute, known or unknown, contingent or otherwise
and whether due or to become due) except:
(a) those set forth or reflected in the April 30, 1996
Balance Sheet which have not been paid or discharged
since the date thereof;
(b) those arising under agreements or other commitments
expressly identified in any Schedule hereto; and
(c) current liabilities incurred in or as a result of
the conduct of its business in the ordinary and usual
course consistent with past practice since April 30,
1996, which are completely and accurately reflected
in all material respects on its books and records and
which are not inconsistent with the other
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representations, warranties and agreements of Allard
and Principal Shareholders, or either of them, set
forth in this Agreement or in the other Transaction
Documents (none of which relates to any breach of
contract, breach of warranty, tort, infringement,
fraud, or violation of law; or arose out of any
charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand).
3.2.8 TAXES. Except as set forth on Schedule 3.2.8, Allard has
filed all applicable Federal, State and local tax returns relating to the
business of ADS.
3.2.9 COMPLIANCE WITH LAW.
(a) Each of Allard and the Principal Shareholders is in
compliance in all material respects (with respect to
the business of ADS) with all applicable laws,
statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or
orders entered, by any federal, state, local or foreign
court or governmental authority or instrumentality
relating to ADS or any of its businesses or
properties.
(b) Allard is in compliance in all material respects with
all federal, state and local laws, ordinances, rules
and regulations pertaining to environmental matters,
including solid waste disposal, toxic substances,
hazardous substances, hazardous materials,
hazardous waste, toxic chemicals, pollutants,
contaminants and air or water pollution and to the
storage, use, handling, transportation, discharge and
disposal (including spills and leaks) of gaseous,
liquid, semi-solid or solid materials. Allard has not,
and to the best knowledge of Allard and Principal
Shareholders, no third party has, disposed or
discharged any chemicals, oil or solid wastes on any
part of the Real Property or any other any property
owned; operated, leased or used by ADS. To the
best of the knowledge of Allard and the Principal
Shareholders there are no underground storage
tanks located on any part of the Real Property or
any other property owned, operated, leased or used
by ADS.
(c) Schedule 1.1.6 contains a complete and accurate list
of the Permits. Each of the Permits is currently
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valid and in full force and effect and assignable to
Buyer. The Permits constitute all franchises,
licenses, permits, consents, authorization, approvals,
and certificates of any regulatory, administrative or
other agency or body necessary for the conduct of
the business of ADS. Neither ADS nor Allard is in
violation of any of the Permits and there is no
pending or to the best of the knowledge of Allard
and Principal Shareholders threatened proceeding
which could result in the revocation, cancellation or
inability of ADS or Allard to renew or transfer any
Permit.
(d) To the best of the knowledge of Allard and the
Principal Shareholders, except as set forth in
Schedule 3.2.9, neither Allard nor any Principal
Shareholder is under investigation (with respect to
the business of ADS) with respect to, or has been
charged with or given notice of any violation of,
any applicable law.
3.2.10 PROPRIETARY RIGHTS. Schedule 1.1.7 sets forth all of the
Proprietary Rights and Registrations in respect thereof. Other than those
Proprietary Rights listed on Schedule 1.1.7, to the best of the knowledge of
Allard and the Principal Shareholders, no patent, invention, trade secret,
process, proprietary right, proprietary knowledge, know-how, computer
software, trademark, name, service mark, trade name, copyright, mark, symbol,
logos, franchise, permit, license, sublicense or other such right is
necessary for the operation of the business of ADS as the same is currently
conducted. None of the Proprietary Rights are registered with any
governmental or regulatory authority except as set forth on Schedule 1.1.7.
The business of ADS as conducted prior to the Closing Date, the sale by
Allard, and ownership by Buyer of any of the Property, was not, is not and
will not infringe or be in contravention of any trade name, service mark,
patent, trademark, copyright or other proprietary right of any third party.
The amount of each of the royalties and license fees presently
paid by ADS in the ordinary course of its business is listed in Schedule
2.1.6.
13
Except as set forth on Schedule 3.2.10, ADS is the sole and
exclusive owner of all right, title and interest in and to all Proprietary
Rights free and clear of all liens, claims, charges, equities, rights of use,
encumbrances and restrictions whatsoever. Except as set forth in Schedule
3.2.10, none of the Proprietary Rights: (i) as been hypothecated, sold,
assigned or licensed by Allard or to the best knowledge of Allard and
Principal Shareholders, any other person, corporation, firm or other legal
entity; (ii) infringes upon or violates the rights of any person, firm,
corporation, or other legal entity; (iii) is subject to challenge, claims of
infringement, unfair competition or other claims; or (iv) to the best
knowledge of Allard and Principal Shareholders, is being infringed upon or
violated by any person, firm, corporation or other legal entity. Except as
set forth in Schedule 3.2.10: (w) Allard nor ADS has given any
indemnification against patent, trademark or copyright infringement as to any
equipment, materials' products, services or supplies which ADS produces,
uses, licenses or sells; (x) no product, process, method or operation
presently sold, engaged in or employed by ADS infringes upon any rights
owned by any other person' firm, corporation or other legal entity; (y) there
is not pending or threatened any claim or litigation against Allard or ADS
contesting the right of ADS to sell, engage in or employ any such product,
process, method, or operation; and (z) there is not, to the best knowledge
of ADS and Principal Shareholders, pending, proposed or threatened, any
patent, copyright, trade name, trademark, service mark, invention, device,
application or principle, or Registration therefor, which would materially
adversely affect the future operation by Buyer of ADS's business after the
Closing Date on substantially the same basis as said business was
theretofore operated.
3.2.11 RESTRICTIVE DOCUMENTS OR LAWS. With the exception of the
matters listed on Schedule 3.2.11, neither ADS, the Principal Shareholders
(with respect to the business of ADS), is a party to or bound under any and,
to the best knowledge of Allard and Principal Shareholders, there is no
pending, proposed or threatened regulation, certificate, mortgage, lien,
lease, agreement, contract, instrument, law, vote, order, judgment or decree,
or any similar restriction not of general application which materially
adversely affects, or reasonably could be expected materially adversely to
affect (i) the condition, financial or otherwise, of ADS or the Property;
(ii) the continued operation by Buyer of the business of ADS after the
Closing Date on substantially the same basis as said business was theretofore
operated; or (iii) the consummation of the transactions contemplated in this
Agreement.
3.2.12 INSURANCE. To the best of the knowledge of Allard and
the Principal Shareholders ADS is insured with respect to its property and
the conduct of its business in such amounts and against such risks as are
sufficient for compliance with law, and for compliance with the terms of each
of its contractual commitments (including under each of the Real Property
Leases, Personal Property Leases and Contracts). Schedule 3.2.12 is a true,
correct and complete list of all insurance policies and bonds in force in
which Allard or ADS is named as an insured party, in respect of the business
of ADS, or for which ADS has been charged or has paid any premiums. Except as
disclosed in Schedule 3.2.12, all such policies or bonds are currently in
full force and effect and neither Allard nor ADS has received any notice from
any such insurer with respect to the cancellation of any such insurance.
Allard will continue all of such insurance in full force and effect up to and
including the Closing Date. All premiums due and payable on such policies
have been paid. Neither Allard nor ADS is a co-insurer under any term of any
insurance policy.
14
3.2.13 BANK ACCOUNTS, DEPOSITORIES, POWERS OF ATTORNEY.
Schedule 3.2.13 is a true, correct and complete list of the names and
locations of all banks or other depositories in which ADS maintains accounts
or safe deposit boxes, and the names of the persons authorized to draw
thereon, borrow therefrom or have access thereto. No person or entity holds
a power of attorney on behalf of ADS.
3.2.14 REAL PROPERTY. Except as set forth in Schedule 1.1.1,
and except with respect to real property leased pursuant to the Real Property
Leases listed on Schedule 1.1.2, ADS has no real property. The Property which
is real property constitutes all of the real property now used in and
necessary for the conduct of the business of ADS as presently conducted.
Except as set forth in Schedule 3.2.14, to the best of the
knowledge of Allard and Principal Shareholders, all real property, buildings
and structures owned or used by ADS and material to the operation of its
business is suitable for the purpose or purposes for which it is being used,
and is in such condition and repair as to permit the continued operation of
said businesses. To the best of the knowledge of Allard and the Principal
Shareholders, none of such real property, buildings or structures is in need
of maintenance or repairs except for ordinary, routine maintenance and
repairs. To the best of Allard's knowledge and the knowledge of the Principal
Shareholders, there are no material structural defects in the exterior walls
or the interior bearing walls, the foundation or the roof of any plant,
building, garage or other such structure owned, leased or used by ADS and the
electrical, plumbing and heating systems, and the air conditioning system, if
any, of any such plant, building, garage or structure are in reasonable
operating condition in light of their age and prior use. To the best of the
knowledge of Allard and the Principal Shareholders the utilities servicing
the real property owned, leased or used by ADS are adequate to permit the
continued operation of the business of ADS and there are no pending or
threatened zoning, condemnation or eminent domain proceedings, building,
utility or other moratoria, or injunctions or court orders which would
materially effect such continued operation. Schedule 3.2.14 lists, and Allard
has furnished or made available to Buyer copies of, all engineering, geologic
and environmental reports prepared by or for either Allard or ADS with
respect to the Real Property and the real property leased pursuant to the
Real Property Leases.
3.2.15 PERSONAL PROPERTY. Schedules 1.1.3(a), 1.1.3(b), 1.1.4
and 1.1.5 contain complete and accurate descriptions of, respectively, the
Machinery and Equipment, the Tooling and the Inventory, and the Vehicles.
Except as set forth in Schedule 3.2.15, and except with respect to personal
property leased pursuant to the Personal Property Leases, ADS has good, valid
and marketable title to all of its assets and properties which are personal
property of every kind, nature and description, tangible or intangible
wherever located, including all property and assets which are personal
property shown or reflected on the April 30, 1996 Balance Sheet. Schedule
1.1.3 contains a complete and accurate description of all Personal Property
Leases to which ADS is party or which ADS uses in its business. To the best
of knowledge of Allard and Principal Shareholders, the Property which is
personal property constitutes all of the personal property now used in and
necessary for the conduct of the business of ADS as presently conducted. The
Property is held free and clear of all mortgages, pledges, liens, security
interests, encumbrances and restrictions of any nature whatsoever, except as
listed on Schedule 3.2.15.
15
No financing statement under the Uniform Commercial Code or similar
law naming Allard or ADS as debtor has been filed in any jurisdiction, and
neither Allard nor ADS is a party to or bound under any agreement or legal
obligation authorizing any party to file any such financing statement,
except as listed on Schedule 3.2.15. To the best knowledge of Allard and
Principal Shareholders, none of the Machinery or Equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repair.
3.2.16 ENVIRONMENTAL MATTERS. Except as set forth on Schedule
3.2.16, the operations of ADS meet the requirements of all occupational
health and safety acts and all environmental laws and regulations of all
federal, state and local governmental or regulatory bodies having
jurisdiction over ADS. Without limiting the generality of the foregoing, and
by way of example only, except as set forth on Schedule 3.2.16:
(a) There has not been, and is not occurring, any
Release of any Hazardous Substance on any real
property owned, operated, leased or used by ADS.
For purposes of this Agreement, the terms "Release"
and "Hazardous Substance" shall have the same
meanings as those terms are given in the
Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 ET SEQ. ("CERCLA"), except that for
purposes of this Agreement petroleum (including crude
oil or any fraction thereof) shall be deemed a Hazardous
Substance.
(b) ADS has never sent a Hazardous Substance to a site
which, pursuant to CERCLA or any similar state
law, (A) has been placed, or is proposed to be
placed, or, to the best knowledge of Allard or
Principal Shareholders, may in the future be placed,
on the "National Priorities List" of hazardous waste
sites or on any similar list of any federal, state or
local governmental agency, including the
Comprehensive Environmental Response,
Compensation and Liability System list for potential
hazardous waste sites, or (B) is subject to a claim,
an administrative order or other request to take
"removal" or "remedial" action (as defined under
CERCLA) or to pay for any costs relating to such
site.
(c) ADS has never been or is currently in violation of
any provision of the Toxic Substances Control Act
or the regulations promulgated thereunder.
16
(d) ADS is not involved in any suit or has received
notice of any claim relating to personal injuries from
exposure to Hazardous Substances.
3.2.17 BROKERS, FINDERS. The transactions contemplated herein
were not submitted to Allard by any broker or other person entitled to a
commission or finder's fee thereon, and were not with the consent of
Allard submitted to Buyer by any such broker or other person. Neither
Allard nor any of its officers, directors or employees has engaged any broker
or finder or incurred or taken any action which may give rise to any
liability against itself or the Property for any brokerage fees,
commissions, finders fees or similar fees or expenses and no broker or
finder has acted directly or indirectly for Allard in connection with this
Agreement or the transactions contemplated hereby. No investment banking,
financial advisory or similar fees have been incurred or are or will be
payable by Allard in connection with this Agreement or the transactions
contemplated hereby.
3.2.18 LEGAL PROCEEDINGS, ETC. Except as set forth on
Schedule 3.2.18, there is no claim, litigation, action, suit or proceeding,
administrative or judicial, filed, pending or threatened against Allard,
Principal Shareholders (with respect to the business of ADS), or ADS or
involving the Property, this Agreement or the transactions contemplated
hereby, at law or in equity, before any federal, state or local court or
regulatory agency, or other governmental authority, including any unfair
labor practice or grievance, proceedings or claim. To the best knowledge of
Allard and Principal Shareholders, there is no basis upon which such claim,
litigation, action, suit or proceeding could be brought or initiated. Except
as disclosed in Schedule 3.2.18, neither Allard, Principal Shareholders (with
respect to the business of ADS), nor ADS is subject to any judgment, order or
decree, or, to the best knowledge of Allard and Principal Shareholders, any
governmental restriction applicable to Allard, Principal Shareholders (with
respect to the business of ADS), or ADS which has a reasonable probability of
having a Material Adverse Effect, or which materially adversely affects the
ability of ADS to conduct business in any area, or of Buyer to continue the
business of ADS as presently conducted.
3.2.19 NO CONFLICT OR DEFAULT. Except as set forth on
Schedule 3.2.19, neither the execution and delivery of this Agreement or any
other Transaction Document, nor compliance with the terms and provisions
hereof or thereof, including the consummation of the transactions contemplated
hereby and thereby, will (a) violate in any material respect any statute,
regulation or ordinance of any governmental authority, or (b) conflict with or
result in the breach of any term, condition or provision of the articles of
incorporation or bylaws of Allard or of any agreement, deed, contract,
mortgage, indenture, writ, order, decree, legal obligation or instrument
(with respect to the business of ADS) to which Allard or any of the Principal
Shareholders, is a party or by which Allard or any of the Principal
Shareholders or any part of the Property is or may be bound, or (c)
constitute a material default (or an event which with the lapse of time or
the giving of notice, or both, would constitute a material default)
thereunder, or (d) result in the creation or imposition of any lien, charge
or encumbrance, or restriction of any nature whatsoever with respect to any
part of the Property, or (e) give to others any interest or rights, including
rights of termination, acceleration or cancellation in or with respect to any
part of the Property or the business of ADS.
17
3.2.20 LABOR RELATIONS. Schedule 3.2.20 sets forth all
collective bargaining or other labor agreements to which ADS or Allard is
bound and which covers ADS employees. Allard has previously delivered to
Buyer true, correct and complete copies of each such agreement. There is no
labor strike, dispute, slowdown or stoppage, or any union organizing
campaign, or petition for certification actually pending or, to the best
knowledge of Allard and Principal Shareholders, threatened against or
involving ADS. Schedule 3.2.20 sets forth all pending grievances and
arbitration proceedings against ADS arising out of or under a collective
bargaining or other labor agreement. No collective bargaining or other labor
agreement is currently being negotiated by Allard on behalf of ADS or by ADS.
Neither ADS nor Allard has experienced any work stoppage or other material
labor difficulty over the past three years. No agreement which is binding on
ADS restricts it from relocating or closing any or all of its operations.
3.2.21 EMPLOYEE BENEFIT PLANS.
(a) To the best of the knowledge of Allard and
Principal Shareholders except as set forth in
Schedule 3.2.21, neither Allard nor ADS, currently
sponsors, maintains or contributes, or has within the
past 3 years sponsored, maintained or contributed to,
to any pension, retirement, profit-sharing, deferred
compensation, bonus, stock option or other incentive
plan, or any other employee benefit program,
arrangement, agreement or understanding, or
medical, vision, dental or other health plan, or life
insurance or disability plan, or any other employee
benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), whether or not any such
employee benefit plan is otherwise exempt from the
provisions of ERISA, and whether or not formal or
informal, written or oral, and whether or not legally
binding. All such plans, funds or programs
sponsored, maintained or contributed to by ADS or
Allard currently or within the past 3 years, whether
or not listed on Schedule 3.2.21, are hereinafter
referred to as the "Employee Benefit Plans"). For
the purpose of this Section 3.2.21, the term "ADS"
shall include all "entities" of ADS and of Allard,
whether or not incorporated, with which it would be
treated as a single employer for purposes of
Sections 414(b), (c) or (m) of the Internal Revenue
Code (the "Code").
(b) Full payment has been made of all amounts which ADS or
Allard is required, under applicable law or under any
Employee Benefit Plan or any agreement
18
relating to any Employee Benefit Plan to which it is a
party, to have paid as contributions to or benefits
under any Employee Benefit Plan as of the last day of
the most recent fiscal year of such Employee Benefit
Plan ended prior to the date hereof. ADS has made
adequate provision in its financial statements for
liabilities to meet current contributions or benefit
payments.
(c) ADS and Allard have each performed all obligations
required to be performed by it under the Employee
Benefit Plans. Neither ADS nor Allard has engaged in
any transaction with respect to the Employee Benefit
Plans which would subject either of them, Buyer or DAH
to a tax, penalty or liability for a prohibited
transaction under section 406, 407 or 502(i) of ERISA or
Section 4975 of the Code, nor have either of Allard's or
ADS' directors, officers, partners, employees or agents,
to the extent they or any of them are fiduciaries with
respect to such Employee Benefit Plans, breached any of
their responsibilities or obligations imposed upon
fiduciaries under Title I of ERISA or which would result
in any claim being made under or by or on behalf of any
such Employee Benefit Plans by any party with standing
to make such claim. Neither ADS nor Allard will have any
plan or commitment, whether formal or informal, written
or oral, and whether or not legally binding, to modify
or change any Employee Benefit Plan in any material
manner prior to the Closing Date. Allard, to the best of
the knowledge of Allard and Principal Shareholders, ADS
to the best of the knowledge of Allard and Principal
Shareholders and any "administrator(s)" (as described in
Section 3(16)(A) of ERISA) of the Employee Benefits
Plans have complied in all material respects with the
applicable requirements of ERISA, the Code and all other
statutes, orders, rules or regulations, specifically
including material compliance with all reporting and
disclosure requirements of Part 1 of Title 1 of ERISA
and of the Code in a timely and accurate manner, and
no penalties have been or will be imposed, nor is
Allard, ADS or any administrator liable for any
penalties imposed, under ERISA, the Code or otherwise
with respect to the Employee Benefit Plans or any
related trusts. Neither ADS nor Allard
19
is delinquent in the payment of any federal, state or
local taxes with respect to the Employee Benefit Plans.
There is no pending litigation, arbitration, or disputed
claim, settlement adjudication or proceeding with
respect to the Employee Benefit Plans, and none of
Allard, to the best of the knowledge of Allard and
Principal Shareholders, ADS to the best of the knowledge
of Allard and Principal Shareholders or any
administrator is aware of any threatened litigation,
arbitration or disputed claim, adjudication proceeding,
or any governmental or other proceeding, or
investigation with respect to the Employee Benefit Plans
or with respect to any fiduciary or administrator
thereof (in their capacities as such), or any
party-in-interest thereto (with respect to their
relationship as such). There is no "defined benefit
plan" within the meaning of Section 414(j) of the Code
or Section 3(35) of ERISA to which either ADS or Allard
has been a party or has been required to make any
contributions at any time during the last ten years.
There is no "multiemployer plan" within the meaning of
Section 3(37) of ERISA to which either ADS or Allard has
been a party or has been required to make any
contributions at any time during the last ten years.
(d) Allard has delivered or caused to be delivered to
Buyer and DAH prior to the Closing, true, accurate and
complete copies of (A) all Employee Benefit Plans and
any related trust agreements, custodial agreements,
investment management agreements, insurance contracts or
policies, and administrative service contracts, all as
in effect, together with all amendments thereto which
will become effective at a later date; (B) the latest
Summary Plan Description and any modifications thereto
for each Employee Benefit Plan requiring same under
ERISA; (C) the Summary Annual Report for the current and
prior fiscal years for each Employee Benefit Plan
requiring same under ERISA; (D) each Form 5500 and/or
Form 990 series filing (including required schedules and
financial statements) for the current and prior fiscal
years for each Employee Benefit Plan required to file
such form; and (E) the most recent actuarial evaluation,
analysis or other report issued with respect to any
Employee Benefit Plan. None of Allard, ADS or any
officer, partner,
20
employee representative or agent of either of them, has
made any written or oral representations or statements
to any current or former employees, dependents,
participants or beneficiaries or other persons which
are inconsistent in any material manner with the
provisions of these documents.
(e) With respect to any of ADS's employee welfare plans (as
defined in Section 3(1) of ERISA and including those
Employee Benefits Plans which qualify as such) which
are "group health plans" under Section 498OB of the Code
and Section 607(1) of ERISA and related regulations
(relating to the benefit continuation rights imposed by
the Consolidated Omnibus Budget Reconciliation Act of
1986 ("COBRA"), as amended to date), since such time as
Allard has owned ADS, there has been timely compliance
in all material respects with all requirements imposed
thereunder, as and when applicable to such plans, so
that Allard has not (or will not incur any) loss,
assessment, penalty, loss of federal income tax
deduction or other sanction, arising on account of or
in respect of any failure to comply with any COBRA
benefit continuation requirement, which is capable of
being assessed or asserted directly or indirectly
against Allard or ADS, or against Buyer or DAH or any
of their respective subsidiaries or other member of
Buyer's corporate control group, with respect to any
such plan.
(f) No Employee Benefit Plan maintained by Allard or ADS
which is a "welfare plan" within the meaning of
Section 3(1) of ERISA provides benefits to employees
after termination of employment, except as required by
Section 4980B of the Code.
3.2.22 CONTRACTS AND COMMITMENTS. Schedule 3.2.22 is a list of
all of the Contracts to which ADS is a party and which involve the payment by
or to ADS in the aggregate of $50,000 or more during any year, and Allard has
previously delivered to Buyer correct and complete copies of each such
Contract. The Real Property Leases, the Personal Property Leases and the
Contracts listed on Schedule 3.2.22, taken together, constitute all of the
contracts, agreements, contract rights, leases, license agreements, franchise
rights and agreements, policies, purchase and sales orders, quotations and
executory commitments, instruments, guaranties, indemnifications,
arrangements, obligations and understandings (written or oral),
21
involving the payment by or to ADS, in the aggregate of $50,000 or more
during any year, necessary to the conduct of the business of ADS as conducted
by ADS.
All of the Real Property Leases, the Personal Property Leases and
the Contracts are valid and binding, in full force and effect and enforceable
against ADS in accordance with their respective provisions. Neither Allard
nor ADS has assigned, mortgage pledged, encumbered, or otherwise
hypothecated any of its right, title or interest under any Real Property
Lease, any Personal Property Lease, or any Contract. Neither Allard nor ADS
(nor, to the best knowledge of Allard and Principal Shareholders, any other
party thereto) is in violation of, in default in respect of, nor has there
occurred an event or condition which, with the passage of time of giving of
notice (or both) would constitute a violation or default of, any Real
Property Lease, any Personal Property Lease, or any Contract; and, to the
best knowledge of Allard and Principal Shareholders, there are no facts or
circumstances which would reasonably indicate that ADS (or any other party)
will be or may be in violation of or in default in respect of any Real
Property Lease, any Personal Property Lease, or any Contract, subsequent to
the date hereof. No notice has been received by Allard or ADS claiming any
such default by ADS or indicating the desire or intention of any other party
thereto to amend, modify, rescind or terminate the same.
3.2.23 ACCOUNTS RECEIVABLE, ETC.. All of the Receivables of ADS are
set forth on Schedule 1.1.9, together with the value thereof. All of the
Investments are set forth on Schedule 1.1.10, together with the value
thereof. All of the Deposits and prepaid expenses of ADS are set forth on
Schedule 1.1.11, together with the value thereof. All such Receivables,
Investments, Deposits and Prepaid Expenses, together with any additional
Receivables, Investments, Deposits and Prepaid Expenses arising between the
date hereof and the Closing Date (in each case net only of such allowance for
doubtful accounts as is included on the April 30, 1996 Balance Sheet), (a)
are or will be valid and subsisting, (b) represent or will represent sales
actually made, (c) arose or will arise in the ordinary and usual course of
the business of ADS, (d) to the extent not collected prior to the Closing
Date, will be collectible according to their terms within 90 days after the
date of the initial invoice therefor subject to the allowance for doubtful
accounts included on the April 30, 1996 Balance Sheet and (e) are not and
will not be subject to any counterclaim, set-off or defense nor any lien,
charge or encumbrance of any nature. There has not been any material adverse
change in the collectibility of the Receivables of ADS since April 30, 1996.
3.2.24 INVENTORIES. As of July 22, 1996, Schedule 1.1.4
completely and accurately lists all of the raw materials owned by ADS, and
the value thereof. Except as set forth in Schedule 3.2.24, in all material
respects, all of the raw materials of ADS consists of a quality and quantity
usable and saleable in the ordinary and usual course of business, except for
items of obsolete materials and materials of substandard quality, all of
which have been written off, written down or reserved for on the books of ADS
to net realizable prior to April 30, 1996. All Inventory not written off has
been priced at the lower of cost or market on a LIFO basis. The quantities of
each type of Inventory (whether raw materials, work-in-process, or finished
goods) are not excessive in all material aspects, consistent with past
business practice, but are
22
reasonable and warranted in the present circumstances of ADS. All
work-in-process and finished goods Inventory is free of any defect or other
deficiency or, to the extent there is a defect or other deficiency, there is
a valid claim by ADS against the manufacturer or supplier thereof for an
amount adequate to fully compensate ADS therefor.
3.2.25 BACKLOG. All unfilled orders to purchase goods of ADS
are set forth in Schedule 3.2.25 and are firm and binding commitments
(subject to cancellation rights set forth therein) of the respective
purchasers (assuming that such purchaser has properly authorized by all
requisite corporate or, if not a corporation, by all other requisite action
and has properly executed and delivered such purchase order, which, to the
best knowledge of Allard and the Principal Shareholders, is the case) to
purchase the goods indicated.
3.2.26 BOOKS OF ACCOUNT: RECORDS. Except as disclosed in
Schedule 3.2.26, the general ledgers, books of account and other financial
records of ADS are complete and correct, have been maintained in accordance
with good business practices and the matters contained therein are
appropriately and accurately reflected in the Financial Statements.
3.2.27 MANAGERS, EMPLOYEES AND COMPENSATION. Schedule 3.2.27
sets forth the name of all managers of ADS, their respective terms of office,
the total salary, bonus payments, fringe benefits and perquisites each
received in each of the last 3 fiscal years ended December 31, 1995, and
changes to the foregoing which have occurred since December 31, 1995; such
Schedule also lists and described the current base salary, bonus payments,
fringe benefits and perquisites of any other employee, agent or
representative of ADS whose total current salary, bonus or other compensation
exceeds $50,000 annually during any of the last 3 fiscal years ended
December 31, 1995, and changes to the foregoing since December 31, 1995.
There are no other material forms of compensation paid to any such manager or
employee of ADS. The provisions for wages and salaries accrued on the
April 30, 1996 Balance Sheet are adequate for salaries and wages, including
accrued vacation pay, for the period up through the date thereof, and ADS has
accrued on its books and records all obligations for wages and salaries and
other compensation to its employees, including, but not limited to, vacation pay
and sick pay, and all commissions and other fees payable to agents, salesmen
and representatives. Allard has filed any and all payroll tax returns, and
paid all payroll taxes due for any and all ADS employees, due through the
Closing Date.
Except as set forth on Schedules 3.2.27 and 3.2.29, ADS has not
become obligated, directly or indirectly, to any shareholder, director,
officer or partner of Allard or any member of their families, except for
current liability for employment compensation. Except as set forth on
Schedule 3.2.27, no shareholder, director, officer, partner, agent or
employee of Allard holds any position or office with or has any financial
interest, direct or indirect, in any supplier, customer or account of, or
other outside business which has transactions with ADS. Neither Allard, nor
ADS, nor, to the best knowledge of Allard and Principal Shareholders, any
third party, has taken any action with respect to any shareholder, director,
officer, partner, employee or representative of Allard to attempt to induce
or which would influence any such person not to become associated with Buyer
from and after the Closing Date or from serving Buyer in a capacity similar
to the capacity presently held. No employee of ADS, to the best
23
knowledge of Allard and Principal Shareholders, has a present intention to
leave the employ of ADS or has taken any action directed towards leaving the
employ of ADS. Except as set forth on Schedule 3.2.27, to the best knowledge
of Allard and Principal Shareholders, no former employee of Allard is
currently or intends to enter into competition with the business of ADS.
3.2.28 CREDIT TERMS: PRODUCT WARRANTIES. SCHEDULE 3.2.28 sets
forth all the terms and conditions of credit and discounts given by ADS to
its customers in the usual and ordinary course of its business and a list of
all transactions pending where there is a material departure therefrom. Also
set forth on such Schedule are the terms and conditions of all product or
service warranties and guarantees given by ADS. The aggregate amount of
losses and expenses incurred by reason of allowances, customer
dissatisfaction or liabilities arising under such warranties and guarantees
were not materially significant during the period beginning on December 1,
1992 and ending on December 31, 1995 and there has been no materially adverse
change in that experience since December 31, 1995. Except as set forth on
such Schedule, ADS has conducted all qualification inspections and quality
conformance inspections required by the specifications for products of ADS
included on qualified products lists in accordance with the requirements of
such specifications, and all products shipped have been in conformance with
such specifications.
3.2.29 CONTRACTS WITH AFFILIATES. Any contract, commitment,
lease, permit or other instrument, agreement, understanding or obligation
(written or oral) between ADS and any affiliate of Allard (including Allard
and any Principal Shareholder) is the equivalent of an "arms-length"
transaction with a third party, and is described on Schedule 3.2.29 hereto.
3.2.30 GOVERNMENT CONTRACTS.
(a) For purposes of this Section 3.2.30, the term
"Government" means any agency, division, subdivision,
audit group, or procuring office of the federal
government, including the employees or agents thereof;
the term "Transferor" means ADS and its subsidiaries,
divisions, affiliates, joint venturers, agents,
employees, officers and directors; the term "Government
Contract" means any prime contract, subcontract, basic
ordering agreement, letter contract, purchase order or
delivery order of any kind, including all amendments,
modifications
24
and options thereunder or relating thereto, between the
Transferor and any of the Government, any prime
contractor of the Government, any subcontractor of such
a prime contractor or any subcontractor of another
subcontractor, however far removed from the prime
contractor such subcontractor may be, (A) currently in
force; (B) which, within the three years preceding the
date of this Agreement, expired or were terminated; or
(C) for which final payment was received within the
three years preceding the date of this Agreement; and
the term "Bid" means any outstanding quotation, bid or
proposal submitted by Transferor to the Government, any
proposed prime contractor of the Government, or any
proposed subcontractor.
(b) Schedule 3.2.30 contains a true and complete list of
all Bids which involve or can be expected to involve
aggregate consideration in excess of $100,000.
(c) Except as set forth in Schedule 3.2.30, with respect
to any Government Contract or Bid, to the best of
the knowledge of Allard and Principal Shareholders,
the Transferor has complied with and expects to
comply with all material terms thereof, all
certifications and representations of Transferor with
respect thereto, and all statutes and regulations
applicable thereto.
(d) Except as set forth in Schedule 3.2.30, (A) no show
cause notices, cure notices, or terminations have
been issued against the Transferor with respect to
any Government Contract; (B) no negative
determinations of responsibility have been issued
against the Transferor with respect to any Bid and
(C) none of the Government, any prime contractor
nor any subcontractor has notified the Transferor,
either orally or in writing, that it is in breach or
violation of any provision of any Government
Contract, any certification or representations with
respect thereto or any statutes and regulations
applicable thereto.
(e) The Transferor possesses all necessary security
clearances and permits for the execution of its
25
obligations under any Government Contracts and Bids. The
Transferor has never been denied a security clearance.
(f) The Transferor is not undergoing and has not undergone
any audit, and has no knowledge or reason to know of any
basis for impending audits in the future, arising under
or relating to any Government Contract except as set
forth in Schedule 3.2.30.
(g) The Transferor has entered into no financing
arrangements with respect to the performance of any
current Government Contract except as set forth in
Schedule 3.2.30.
3.2.31 SOLVENCY. The total assets of Allard and each of the
Principal Shareholders exceed their respective total liabilities; and Allard
and each of the Principal Shareholders are able to perform their respective
financial obligations as performance thereof becomes due.
3.2.32 ALLOCATIONS. Those costs which, during the period January 1,
1993 through April 30, 1996, have been allocated by Allard to ADS, as set
forth in Schedule 3.2.32, equal or exceed the true cost to Allard, and all
such identifiable costs have been allocated to ADS. Schedule 3.2.32 sets
forth such allocations for each year 1993, 1994 and 1995, and for the 4
months ended April 30, 1996 as disclosed on the April 30, 1996 Balance Sheet.
3.2.33 COMPLETE DISCLOSURE. No representation or warranty made
by Allard or any of the Principal Shareholders in this Agreement, and no
exhibit, schedule, statement, certificate or other writing furnished to Buyer
by or on behalf of Allard or any Principal Shareholders pursuant to this
Agreement or in connection with the transactions contemplated hereby or
thereby, contains or will contain, any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein and therein not misleading.
3.2.34 REPETITIVE DISCLOSURE. To the extent that the Buyer or
DAH or Allard have made any disclosure on any schedule to this Agreement,
such disclosure shall be considered to be made for purposes of this Agreement
notwithstanding that such disclosure is not made on all applicable schedules.
3.2.35 CLAIMS. Allard shall not be liable to make any payment to
the Buyer or DAH for any damage, loss. liability, cost, penalty, fine,
assessment or expense resulting or arising from or incurred in connection
with any misrepresentation, breach of warranty or nonfulfillment or
nonperformance of any agreement, term or condition on the part of Allard or
any misrepresentation in or omission from any schedule, certificate or other
instrument
26
furnished to the Buyer or DAH under this Agreement until their aggregate
liability under Section 3.2 exceeds $100,000.
3.3 INDEMNIFICATION BY PRINCIPAL SHAREHOLDERS. To the extent
specified in this Section 3.3, the Principal Shareholders hereby indemnifies
DAH and Buyer for breach of any warranty or representation of Allard or the
principal Shareholders in this Agreement. Such indemnity shall be limited and
shall occur as follows:
3.3.1 In the event DAH or Buyer has any claim for
breach of warranty or representation of Allard or the Principal Shareholder,
DAH or Buyer shall give notice to Allard and the Principal Shareholders of
such breach and the specifics thereof prior to the commencement of any
proceeding pursuant to Section 7.3;
3.3.2 Not less than 10 days following the notice
described in Section 3.3.1, DAH or Buyer may commence an arbitration against
Allard pursuant to Section 7.3;
3.3.3 Subject to the obligations of the Principal
Shareholders pursuant to this Section 3.3, no Principal Shareholder need be a
party to or otherwise participate in the Arbitration.
3.3.4 In the event that any award is made against
Allard in the Arbitration conducted pursuant to Section 7.3, and the amount
of such Award is not paid to DAH or Buyer in immediately available funds
within 30 days of the Award, each of the Principal Shareholders shall pay to
DAH or Buyer as the case may be a portion of the Award, to the extent of and
amount equal to the sum of (i) such amount as is received by such Principal
Shareholder pursuant to the Covenant Not to Compete and (ii) the aggregate
amount of distributions received by such Principal Shareholder after the
Closing Date in respect of their Allard Common Shares, other than
distributions directly related to the payment of federal or state taxes
arising out of the transaction contemplated by this Agreement, provided,
however, each Principal Shareholder shall only be liable to DAH or Buyer
based on his percentage of distributions and payments received under the
Covenant Not to Compete compared to total distributions and payments received
under the Covenant Not to Compete by all Principal Shareholders. Each
Principal Shareholder acknowledges and agrees that he shall be bound by the
Award in the Arbitration as if he had been named a party to the Arbitration
and will not contest his obligation as a result of not being a party to the
Arbitration.
3.3.5 Should any Principal Shareholder not make
payment of the amount so determined pursuant to Section 3.3.4 within 90 days
after the entry of the Award, the arbitrator may enter an Award against such
Principal Shareholder in such amount.
3.4 CLAIMS BASED ON REPRESENTATIONS AND WARRANTIES.
The recourse by DAH and Buyer against Allard and the Principal Shareholders
or by Allard and the Principal Shareholders against DAH and the Buyer for any
breach of the representations and warranties set forth in Sections 3.1 and
3.2 shall be limited to prior to May 31, 1998, except for matters as to which
notification has been given prior to May 31, 1998.
27
4. COVENANTS.
4.1 COVENANTS OF BUYER.
4.1.1 PAYMENT AND PERFORMANCE OF ASSUMED LIABILITIES.
From and after the closing Date, buyer shall pay and perform the liabilities
issued pursuant to Section 2.1 in the ordinary course of its business in
accordance with Buyer's standard business practices.
4.1.2 PAYMENT FOR COVENANT NOT TO COMPETE. Subject to
the satisfaction of each of the conditions precedent set forth in Section 4.2,
DAH shall pay to Principal Shareholders its consideration for the covenants
not to compete delivered to Buyer and DAH pursuant hereto by payment of 36
equal installments of $55,555.55, on the first business day of each calendar
month for the 36 months following the Closing Date.
4.1.3 USE OF NAME. After the Closing Date, Buyer and
ADS shall not use the name "Allard" in connection with the business of ADS.
4.1.4 COVENANT AGAINST DISCLOSURE. Each of DAH and
Buyer agree not to (a) disclose to any person, association, firm, corporation
or other entity (other than Allard or those designated in writing by Allard)
in any manner, directly or indirectly, any information or data relevant to
the business of Allard (other than ADS), or whether of a technical or
commercial nature, or (b) by use, or permit or assist, by acquiescence or
otherwise, any person, association, firm corporation or other entity (other
than Allard or those designated in writing by Allard) to use, in any manner,
directly or indirectly, any such information or data, excepting only use of
such data or information as is at the time generally known to the public
other than by any breach of any provision of this Section 4.1.4.
4.1.5 COVENANT AGAINST HIRING. [deleted]
4.1.6 HOLD HARMLESS. DAH and Buyer agree to indemnify
and hold harmless Allard from any liabilities to third parties arising from the
operations or business of ADS on and after the consummation of the transactions
contemplated herein on the Closing Date, except to the extent caused by the
actions, gross negligence or willful misfeasance of Allard.
4.1.7 DUTY TO COLLECT ACCOUNTS RECEIVABLES. Buyer and
DAH shall use their best efforts to collect accounts receivables outstanding at
the Closing Date; As used in this Section 4.1.7, "best efforts" shall be deemed
to have been used so long as Buyer continues the accounts receivable collection
practices used by ADS prior to the date of this Agreement.
4.1.8 EMPLOYEES. From and after the Closing Date, Buyer
and DAH shall employ substantially all of the current employees of the ADS
division, subject to normal management prerogatives to review performance and
terminate employment as necessary or appropriate for the business. The Buyer and
DAH shall compensate such employees at substantially the same level of
compensation in effect for such employees. Buyer and DAH will
28
continue normal fringe benefits for such employees subject to the integration
of such fringe benefits with Buyer's and DAH's current programs.
4.2 COVENANTS OF ALLARD AND THE PRINCIPAL SHAREHOLDERS.
4.2.1 CHANGE OF NAME: USE OF NAME. ALLARD shall grant
any consents and take any other and further action, all at its own expense,
requested by Buyer to enable Buyer to use, reserve or register the names
"ADS" and "Aerospace Display Systems", and any other trademark or trade style
or name presently used by ADS, for the exclusive use of Buyer. After the
Closing Date, Allard shall discontinue use of the names "ADS" and "Aerospace
Display Systems".
4.2.2 COVENANT AGAINST DISCLOSURE. Each of Allard and
each Principal Shareholder agree not to (a) disclose to any person,
association, firm, corporation or other entity (other than Buyer or those
designated in writing by Buyer) in any manner, directly or indirectly, any
information or data relevant to the business of ADS, or whether of a
technical or commercial nature, or (b) by use, or permit or assist, by
acquiescence or otherwise, any person, association, firm corporation or other
entity (other than Buyer or those designated in writing by Buyer) to use, in
any manner, directly or indirectly, any such information or data,' excepting
only use of such data or information as is at the time generally known to the
public other than by any breach of any provision of this Section 4.2.2.
4.2.3 COVENANT AGAINST HIRING. Each of Allard and the
Principal Shareholders understand that it is essential to the successful
operation of the business to be acquired hereunder that Buyer retain
substantially unimpaired ADS's operating organization. Each of Allard and the
Principal Shareholders agrees that neither he nor it shall purposefully take
any action which would induce any employee or representative of Allard not to
become or continue as an employee or representative of Buyer. Without
limiting the generality of the foregoing, neither ADS nor any of the
Principal Shareholders shall, whether directly or indirectly through any
subsidiary or affiliate, for a three (3) year period from the Closing Date
solicit to employ (whether as an employee, officer, director, agent,
consultant or independent contractor), or enter into any partnership, joint
venture or other business association with, any person who was at any time
during the 12 months preceding the Closing Date an employee, partner,
representative, or manager of ADS. Provided, however, if the Buyer and Robert G.
Martin sign a three (3) year employment agreement and thereafter Buyer
terminates Robert G. Martin other than "for cause" and does not compensate
him for the three (3) year period from the Closing, then Allard and the
Principal Shareholders shall have the right, after such termination, to
employ Robert G. Martin.
4.2.4 INJUNCTIVE RELIEF. Each of Allard and the
Principal Shareholders acknowledges and agrees that Buyer's remedy at law for
any breach of any of Allard's or such Principal Shareholders obligations
under Subsections 4.2.2 or 4.2.3 hereof would be inadequate, and agrees and
consents that temporary and permanent injunctive relief may be granted in a
proceeding which any be brought to enforce any provision of Subsections 4.2.2
or 4.2.3 without the necessity of proof of actual damage. The rights and
remedies conferred upon
29
Buyer under this Section 4.2.4, elsewhere in this Agreement, or by any
instrument or law shall be cumulative and may be exercised singularly or
concurrently.
4.2.5 CONDUCT OF BUSINESS OF ALLARD PRIOR TO CLOSING DATE.
Each of Allard and the Principal Shareholders agrees that on and after the
date hereof and prior to the Closing Date:
(a) The business and operations, activities and
practices of ADS shall be conducted only in the
ordinary course of business and consistent with
past practice;
(b) No change shall be made in the articles of
incorporation or bylaws of Allard, except as is
necessary to comply with Section 4.2.1 hereof;
(c) No change shall be made in the number of shares of
authorized or issued capital stock of Allard; nor
shall any option, warrant, call, right, commitment
or agreement of any character be granted or made by
Allard relating to its equity;
(d) [deleted]
(e) Neither Allard nor any Principal Shareholder shall,
directly or indirectly, solicit or encourage
(including by way of furnishing any non-public
information concerning the business, properties or
assets of ADS), or enter into any negotiations or
discussions concerning, any Acquisition Proposal (as
defined below). Allard and any Principal Shareholder
will notify Buyer promptly by telephone, and
thereafter promptly confirm in writing, if any such
information is requested from, or any Acquisition
Proposal is received by Allard or such Principal
Shareholder. As used in this Agreement, "Acquisition
Proposal" shall mean any proposal received by Allard
or any Principal Shareholder prior to the Closing Date
for a merger or other business combination involving
ADS or for the acquisition of, or the acquisition of a
substantial equity interest in, or any material part
of the assets of, ADS other than the one contemplated
by this Agreement.
(f) Except as set forth in Schedule 4.2.5(f), ADS will
not, and Allard will not cause or permit ADS to:
30
(i) incur, become subject to, or suffer, or agree
to incur, become subject to or suffer, any
obligation or liability (absolute or
contingent) except current liabilities incurred,
and obligations under contracts entered into,
in the ordinary course of business;
(ii) discharge or satisfy any lien or encumbrance
or pay any obligation or liability (absolute or
contingent) other than liabilities payable in
the ordinary course of business;
(iii) mortgage, pledge or subject to lien, charge
or any other encumbrance, any of the Property
or agree so to do;
(iv) sell or transfer or agree to sell or transfer
any of its assets, or cancel or agree to cancel
any debt or claim, except in each case in the
ordinary course of business;
(v) consent or agree to a waiver of any right of
substantial value;
(vi) enter into any transaction other than in the
ordinary course of its business;
(vii) without the express written consent of Buyer,
increase the rate of compensation payable or
to become payable by it to any Restricted
Employee over the rate being paid to such
Restricted Employee at April 30, 1996;
(viii) increase the rate of compensation payable or
to become payable by it to any Non-
Restricted Employee over the rate being paid
to such Non-Restricted Employee at April 30,
1996, other than in the ordinary course of
business and in accordance with ADS's past
practice;
(ix) terminate any contract, agreement, license or
other instrument to which it is a party;
31
(x) through negotiation or otherwise, make any
commitment or incur any liability or
obligation to any labor organization;
(xi) without the express written consent of Buyer,
make or agree to make any accrual or
arrangement for or payment of bonuses or
special compensation of any kind to any
Restricted Employee;
(xii) make or agree to make any accrual or
arrangement for or payment of bonuses or
special compensation of any kind to any
Non-Restricted Employee, other than in the
ordinary course of business and in
accordance with ADS's practice;
(xiii) without the express written consent of Buyer,
directly or indirectly pay or make a commitment
to pay any severance or termination pay to any
Restricted Employee;
(xiv) directly or indirectly pay or make a commitment
to pay any severance or termination pay to any
Non-Restricted Employee, other than in the ordinary
course of business and in accordance with ADS's
past practice;
(xv) introduce any new method of management, operation
or accounting with respect to its business or any
of the assets, properties or rights applicable
thereto;
(xvi) offer or extend more favorable prices, discounts
or allowances than were offered or extended
regularly on and prior to April 30, 1996, other
than in the ordinary course of business;
(xvii) [Omitted]
(xviii) hire any employee earning a wage or salary
of more than $50,000 per year.
32
(g) Allard and each of the Principal Shareholders will
use their respective best efforts to preserve ADS's
business organization intact, to keep available to
ADS the present service of ADS's employees, and
to preserve for ADS the good will of its suppliers,
customers and others with whom business
relationship exist; and
(h) Neither Allard nor any of the Principal
Shareholders will take, agree to take or permit to
be taken any action or do or permit to be done
anything in the conduct of the business of ADS, or
otherwise, which would be contrary to or in breach
of any of the terms or provisions of this Agreement
or which would cause any of the representations or
warranties of Allard or the Principal Shareholders
contained herein to be or become untrue in any
material respect.
4.2.6 INSPECTION OF BOOKS AND RECORDS. From the date of this
Agreement until the Closing Date, Allard shall make or cause to be made
available to Buyer for examination the Property and other materials such as
books of account, contract, agreements, commitments, records and its
documents directly relating to ADS and its business and shall permit Buyer
and its representatives, attorneys, accountants and agents to have access to
and to copy, at Buyer's expense, the same at all reasonable times. In
addition, Allard shall make, or cause to be made, available to Buyer and its
representatives, attorneys, accountants and agents the Property and all of
the above described records for any environmental compliance audit, any
environmental site assessment (including soil, groundwater and/or other
testing) and any other physical inspection which Buyer may elect to conduct
at its own expense.
4.2.7 FURTHER ASSURANCES. On and after the Closing Date, ADS
and the Principal Shareholders shall prepare, execute and deliver, at their
expense, such further instruments of conveyance, sale, assignment or
transfer, and shall take or cause to be taken such other or further action as
Buyer shall reasonably request at any time or from time to time in order to
perfect, confirm or evidence in Buyer title to all or any part of the
Property or to consummate, in any other manner, the terms and conditions of
this Agreement.
4.2.8 PRESS RELEASES AND ANNOUNCEMENTS. Neither ADS, any
Principal Shareholder, Buyer nor DAH shall issue any press release or
announcement relating to the subject matter of this Agreement without the
prior written approval of the other parties hereto; PROVIDED, HOWEVER that
ADS, any Principal Shareholder, Buyer or DAH may make any public disclosure
he or it believes in good faith is required by law (in which case he or it
will advise the other parties hereto prior to making the disclosure). On the
Closing Date, Allard, the Buyer
33
and DAH will issue mutual public announcements and/or press releases announcing
the transaction contemplated by this Agreement.
4.2.9 BANKRUPTCY. Allard agreed on and after the date of this
Agreement (i) neither Allard nor any Principal Shareholder shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to any of them or seeking to adjudicate any of them
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with
respect to any of them or for all of any substantial part of any of their
assets; (ii) neither ADS nor any Principal Shareholder shall make a general
assignment for the benefit of its creditors; (iii) no case, proceeding or
other action of a nature referred to in clause (i) above shall be commenced
by any person which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed or discharged
for a period of 60 days; (iv) no case, proceeding or other action shall be
commenced by any person seeking issuance of a warrant of attachment,
execution distraint or similar process against all or any substantial part
of the assets of Allard or any Principal Shareholder which results in the
entry of an order for any such relief; and (v) neither ADS nor any Principal
Shareholder shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), (iii), or (iv) above.
4.2.10 DELIVERY OF FINANCIAL STATEMENTS. No later than July
31, 1996, Allard and the Principal Shareholders shall deliver to Buyer and
DAH the balance sheet of ADS as at June 30, 1996 and the related statements
of income, retained earnings and cash flows for the year to date then ended
(the "Second Quarter Financial Statements") and which shall be true, correct
and complete, shall have been prepared from and are in accordance with the
books and records of ADS and Allard and shall have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis for such periods using an accrual basis method, reflect
sufficient reserves for asserted and potential products liability claims, and
fairly present the financial condition of ADS as of the dates stated and the
results of operations of ADS for the periods then ended in accordance with
such practices. The Second Quarter Financial Statements shall upon delivery
to Buyer become part of the Financial Statements as defined herein for all
purposes hereof.
4.2.11 TRADE SECRETS AND CONFIDENTIAL KNOW-HOW. Between the
date hereof and the Closing Date, Allard and the Principal Shareholders and
their representatives shall, upon request by Buyer, reduce to writing all
trade secret information or other know-how of a business or technical nature
which is now used in or which is useful for the present or anticipated future
business of ADS, such writing to be confidential and afforded such protection
and confidential treatment as Buyer shall reasonably request.
4.2.12 SALES TAXES, UNEMPLOYMENT INSURANCE, ETC. Without
limiting any other term hereof, Allard shall pay all sales taxes and
unemployment insurance premiums to be paid in respect of ADS and the Property
through the Closing Date.
34
4.2.13 INDEMNITY REGARDING BULK SALES, ETC. Allard hereby
agrees to indemnify and hold harmless DAH and Buyer from any claims, costs
or losses incurred as a result of the failure of Allard or ADS to comply
with any and all requirements of sales tax and bulk sales laws and
regulations arising under Pennsylvania, Arizona, New Hampshire and any
other jurisdiction in connection with the transactions contemplated herein,
including all pre-closing notice, payment and receipt requirements of
Pennsylvania Reg. 32 and Arizona Reg. Sec. 42-119, in connection with the
transactions contemplated by this Agreement.
4.2.14 WARRANTY WORK AFTER CLOSING DATE. Allard shall
reimburse Buyer for Buyer's actual direct cost of material and labor incurred
in respect of any warranty work completed by Buyer pursuant to its
liabilities assumed under Section 2.1.5. No other costs, such as SG&A,
overhead, or other charges, are to be reimbursed by Allard.
4.2.15 USE OF NAME. After the Closing Date, Buyer and ADS
shall not use the name "Allard" in connection with the business of ADS.
4.2.16 HOLD HARMLESS. Allard and Principal Shareholders agree
to indemnify and hold harmless DAH and Buyer from any liabilities to third
parties arising from the operations or business of ADS at any time prior to
the consummation of the transactions contemplated herein on the Closing Date,
except to the extent caused by the actions, gross negligence or willful
misfeasance of DAH or Buyer.
5. CLOSING AND CONDITIONS PRECEDENT.
5.1 CLOSING DATE. The date upon which the transactions contemplated
hereby shall become effective (the "Closing Date") shall be the date, no
later than September 23, 1996, upon which each of the conditions precedent
set forth in Sections 5.2 and 5.3 shall have been satisfied or waived
pursuant to the respective terms thereof.
5.1.1 CONDITIONS. On or before September 11, 1996, DAH by
giving notice to Allard, DAH may extend the Closing Date pursuant to this
Agreement to and including October 16, 1996. In the event that such notice is
given by DAH, the Purchase Price shall be increased by the sum of $100,000.00
which amount shall be payable to Allard at the Closing in immediately
available funds.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF DAH AND BUYER. Each and
every obligation of DAH and Buyer to be performed on the Closing Date shall
be subject to the satisfaction on or before the Closing Date of each of the
following conditions (unless waived in writing by DAH and Buyer): Allard
shall have delivered to Buyer each of the following, in each case duly and
properly executed (if appropriate) and in form and substance reasonably
satisfactory to the Buyer:
35
5.2.1 Good and sufficient assignments of each Real Property
Lease, conveying all of Allard's right, title and interest in and to such
Real Property Lease, free and clear of all mortgages, pledges, liens,
security interest, encumbrances, restrictions and claims of any nature
whatsoever, except those listed on Schedule 3.2.14; together with recordable
memoranda thereof if requested by Buyer.
5.2.2 Written consents of the lessors under each Real Property
Leases to the assignment of such Real Property Leases, with no adverse
condition attached, and estoppel and non-disturbance agreements of such
lessors.
5.2.3 A good and sufficient General Conveyance, Assignment and
Bill of Sale, conveying, selling, transferring and assigning to Buyer title
to all of the Property free and clear of all security interests, liens,
charges, encumbrances or equities whatsoever, except those listed on
Schedule 3.2.15.
5.2.4 Motor Vehicle Certificates of Title to each of the
Vehicles, endorsed for transfer to Buyer.
5.2.5 Good and sufficient assignments of each of the Personal
Property Leases and each of the Contracts in each case together with the
written consents of all parties necessary in order to transfer all of
Allard's rights thereunder to Buyer.
5.2.6 Copies of each of the Permits, together with evidence
satisfactory to Buyer that the same are in full force and effect, and (to the
extent requested by Buyer) evidence that such permits are eligible for
immediate transfer to Buyer.
5.2.7 The books and records described in Section 1.1.15; each
of the Financial Statements described in Section 3.2.4; the Second Quarter
Financial Statements to be delivered pursuant to Section 4.2.10; and each
policy of insurance described in Section 3.2.12, together with evidence that
such policies are in force on the Closing Date.
5.2.8 A covenant not to compete with a duration of four
years, executed by Allard and each of the Principal Shareholders, in the form
of EXHIBIT B attached hereto.
5.2.9 Robert Martin shall become an employee of Buyer or DAH.
5.2.10 Evidence of the release by BF Goodrich of Allard and
ADS with respect to all liabilities relating to ADS.
5.2.11 Omitted
5.2.12 Resolutions of the directors and shareholders of Allard
authorizing the execution and delivery of this Agreement by Allard and the
performance of its obligations hereunder, certified by the Corporate
Secretary of Allard.
36
5.2.13 Allard shall have delivered to Buyer, in form suitable
for filing, such certificates, consents and other documents as are necessary
or desirable to effect the transfer of the registration of any name conveyed
to Buyer pursuant to this Agreement, in New Hampshire, Pennsylvania, Arizona
and in each other state where ADS is qualified to do business or has
registered any such name under a "trade name" or "fictitious name" statute or
similar law or has taken any other action-in order to obtain or protect
rights in such name.
5.2.14 A favorable opinion of counsel for Allard and the
Principal Shareholders, addressed to Buyer and DAH and dated the Closing
Date, in the form of EXHIBIT C attached hereto.
5.2.15 The Articles of Incorporation of Allard, certified as
of a recent date by the Secretary of State of New Hampshire.
5.2.16 The Bylaws of Allard, certified as true and complete by
the Corporate Secretary of Allard.
5.2.17 A certificate of the New Hampshire, Pennsylvania and
Arizona Secretaries of State, each dated as of a date not earlier than ten
days prior to the Closing Date, as to the good standing of Allard in such
States (and, in New Hampshire, the payment of all corporate franchise taxes),
together with facsimile confirmation of such good standing on the Closing
Date.
5.2.18 An affidavit of the Chief Executive Officer or Chief
Financial Officer of Allard stating that Allard is not a foreign seller
within the meaning of the Internal Revenue Code of 1986, as amended.
5.2.19 Such other consents as Buyer deems necessary or
desirable in order to consummate the transactions contemplated herein.
5.2.20 Such other separate instruments of sale, assignment or
transfer that Buyer may reasonably deem necessary or appropriate in order to
perfect, confirm or evidence title to all or any part of the Property.
5.2.21 On or before 5:30 P.M. Pacific Daylight Time of the 7th
calendar day following the receipt by DAH of the following: Equipment,
Tooling, Inventory, Backlog and the Financial Statements, DAH shall conclude
its due diligence.
5.2.22 On or before 5:30 P.M. Pacific Daylight Time of the
twenty-first (21st) calendar day after DAH receives the items listed in
Section 5.2.21, DAH shall use its best efforts to obtain the consent of its
senior and subordinated lenders to the transaction contemplated by this
Agreement.
5.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF ALLARD AND THE PRINCIPAL
SHAREHOLDERS. Each and every obligation of Allard and the Principal Shareholders
to be performed on or before the Closing Date shall be subject to the
satisfaction on or before the Closing Date of each of the following conditions
(unless waived in writing by Allard and the
37
Principal Shareholders): The Buyer shall have delivered to Allard each of the
following, in each case duly and properly executed (if appropriate) and in form
and substance reasonably satisfactory to Allard:
5.3.1 Payment of an amount equal to $11,000,000, plus or
minus any Working Capital Adjustment calculated pursuant to Section 6, in
immediately available funds on the Closing Date.
5.3.2 Resolutions of the directors of Buyer and DAH
authorizing the execution and delivery of this Agreement by Buyer and DAH
respectively and the performance of their respective obligations hereunder,
certified by the Corporate Secretaries of Buyer and DAH, respectively.
5.3.3 An opinion of counsel for Buyer and DAH, addressed to
Allard and the Principal Shareholders and dated the Closing Date, in the form
of EXHIBIT D attached hereto.
5.3.4 The Assumption Agreement with respect to the Assumed
Liabilities, in the form of EXHIBIT E attached hereto.
5.3.5 On or before 5:30 P.M. Pacific Daylight Time of the
twenty-first (21st) day after DAH has received the material set forth in
Section 5.2.21, DAH shall use its best efforts to obtain the consent of its
senior and subordinated lenders to the transaction contemplated by this
Agreement.
5.3.6 A covenant not to compete with a duration of four years,
executed by DAH and each of the Principal Shareholders, in the form of
EXHIBIT B attached hereto.
5.4 ALLOCATION. For purposes of income tax reporting, the parties
hereto agree that the fixed amounts to be paid by Buyer hereunder shall be
allocated as follows: (a) $4,700,000 in respect of tangible assets; (b)
$6,300,000 in respect of the goodwill of ADS; and (c) $2,000,000 in respect
of the covenants not to complete delivered to Buyer and DAH pursuant hereto.
6. WORKING CAPITAL ADJUSTMENT. In the event that the amount by which, as
of the Closing Date, (a) the aggregate value of the Receivables and the
Inventory exceeds the then current liabilities of ADS of a nature set forth
on Schedule 6 is less than (b) the amount by which, as of April 30, 1996, the
aggregate value of the Receivables and the Inventory exceeded the current
liabilities of ADS (each as set forth in the Financial Statements dated as of
April 30, 1996), the cash payment to be made pursuant to Section 5.3.1 shall
be adjusted to reflect such reduction, by a partial refund by Allard of the
purchase price paid pursuant hereto, made to DAH in immediately available
funds within ten business days of the Closing Date, calculated on the basis
of financial statements as of the Closing Date to be delivered concurrently
with such payment. Similarly, in the event that the amount by which, as of
the Closing Date, (a) the aggregate value of the Receivables and the
Inventory of a nature set forth on Schedule 6 exceeds the then current
liabilities of ADS is greater than (b) the amount by which, as of April 30,
1996,
38
the aggregate value of the Receivables and the Inventory exceeded the current
liabilities of ADS (each as set forth in the Financial Statements dated as of
April 30, 1996), the cash payment to be made pursuant to Section 5.3.1 shall be
increased to reflect such excess. Such adjustment shall be made by a payment to
Allard by DAH in immediately available funds within five (5) business days of
DAH's receipt of financial statements as of the Closing Date to be delivered by
Allard to DAH. Price Waterhouse & Co. shall make a determination as to the
amount of the Working Capital Adjustment pursuant to this Section 6; in the
event that Allard does not agree with the determination so made and the
difference between the Price Waterhouse & Co. calculation and the amount
determined by Allard is less than $30,000, the working capital adjustment shall
be made by dividing the disputed amount equally between Buyer and Allard; in the
event that the dispute is $30,000 or more, the dispute shall be resolved by
Arbitration in accordance with the provisions of Section 7.3 and the non
prevailing party in the Arbitration shall pay the entire cost of the
Arbitration.
7. MISCELLANEOUS PROVISIONS.
7.1 NOTICE. All notices and other communications required or
permitted under this Agreement shall be deemed to have been duly given and
made, if in writing, and (i) if served by personal delivery to the party for
whom intended (which shall include overnight delivery by Federal Express or
similar service), (ii) or 3 business days after being deposited, postage
prepaid, certified or registered mail, return receipt requested, in the
United States mail bearing the address shown in this Agreement for, or such
other address as may be designated by writing hereafter by, such party, or
(iii) if sent by telecopy to the number showing in this Agreement for, or
such other number as may be designated in writing hereafter by, such party
and immediately confirmed by sending a copy of such notice by either method
described in clause (i) or (ii) above.
7.2 POST-CLOSING ACCESS. For the shorter of (1) the period DAH owns
Buyer or (ii) a period of seven (7) years commencing on the Closing Date, or for
such longer period as may be required by applicable law, the Buyer and DAH shall
retain all books, records and other data relating to the business of ADS prior
to the Closing Date. The Buyer and DAH shall grant access to such books, records
and other data to Allard and the Principal Shareholders and their
representatives during regular business hours upon reasonable prior notice to
the extent that such access is required by Allard and the Principal Shareholders
in connection with tax, regulatory or contractual matters, or otherwise in order
to permit Allard and the Principal Shareholders to comply with applicable law,
or in order to defend against any claim brought against Allard or the Principal
Shareholders. Provided, however, in the event DAH sells Buyer, DAH shall reserve
the right on behalf of Allard.
7.3 ARBITRATION. Any dispute, claim or controversy arising out of or
relating to this Agreement or breach thereof shall be decided by Arbitration
conducted in Philadelphia, Pa. before a single arbitrator in an arbitration
proceeding otherwise conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association and which arbitration provides for
reasonable discovery, including depositions, interrogatories and production of
documents. The decision of the arbitrator shall be final and binding on the
parties and such decision shall be enforceable as a judgment in any court of
competent jurisdiction. The cost of arbitration shall be shared equally between
the parties.
39
7.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, and the documents referred to herein and therein embody the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, and supersede all prior and contemporaneous agreements and
understandings, oral or written, relative to said subject matter.
7.5 BINDING EFFECT; ASSIGNMENT. This Agreement and the rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
Allard, its successors and permitted assigns, Buyer and DAH, their respective
successors and permitted assigns, and the Principal Shareholders, their heirs,
legal representative and permitted assigns. Neither this Agreement nor any of
the rights, interest or obligations hereunder shall be transferred or assigned
(by operation of law or otherwise) by any of the parties hereto without the
prior written consent of the other party or parties except that Buyer shall have
the right to assign, in whole or in part, its rights hereunder to one or more
affiliates of Buyer, which in each case shall be a wholly-owned subsidiary of
Buyer. Any transfer or assignment of any of the rights, interests or obligations
hereunder in violation of the term hereof shall be void and of no force or
effect.
7.6 CAPTIONS. This Agreement and Section headings of this Agreement
are inserted for convenience only and shall not constitute a part of this
Agreement in construing or interpreting any provision hereof.
7.7 WAIVER: CONSENT. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto, and no
waiver of any of the provisions or conditions of this Agreement or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto. Except to the extent that a party hereto may have otherwise agreed in
writing, no waiver by that party of any condition of this Agreement or breach by
the other party of any of its obligations or representations hereunder or
thereunder shall be deemed to be a waiver of any other condition or subsequent
or prior breach of the same or any other obligation or representation by the
other party, nor shall any forbearance by the first party to seek a remedy for
any noncompliance or breach by the other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.
7.8 NO THIRD PARTY BENEFICIARIES. Subject to Section 7.3, nothing
herein, expressed or implied, is intended or shall be construed to confer upon
or give to any person, firm, corporation or legal entity, other than the parties
hereto, any rights, remedies or other benefits under or by reason of this
Agreement.
7.9 COUNTERPARTS. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
7.10 FACSIMILE SIGNATURES. This Agreement may be executed by facsimile
signatures. Such signatures shall be forwarded to the other parties by overnight
mail.
7.11 SEVERABILITY. With respect to any provision of this Agreement
finally determined by a court of competent jurisdiction to be unenforceable,
Allard, Principal
40
Shareholders, DAH and Buyer hereby agree that such court or arbitrator(s) shall
have jurisdiction to reform such provision so that it is enforceable to the
maximum extent permitted by law, and the parties agree to abide by such court's
or arbitrator(s)' determination. In the event that any such provision of this
Agreement cannot be reformed, such provision shall be deemed to be severed from
this Agreement, but every other provision of this Agreement shall remain in full
force and effect.
7.12 GOVERNING LAW. This Agreement shall in all respects be
constructed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
DeCRANE AIRCRAFT HOLDINGS, INC.
By:
----------------------------
ADS ACQUISITION, INC.
By:
----------------------------
ALLARD INDUSTRIES, INC.
By:
----------------------------
THE GERALD R. ALLARD REVOCABLE
TRUST OF 1994
By:
----------------------------
Gerald R. Allard, Trustee
THE ALLARD CHILDREN'S TRUST
f/b/o JOHN R. ALLARD
By:
----------------------------
41
severed from this Agreement, but every other provision of this Agreement
shall remain in full force and effect.
7.12 GOVERNING LAW. This Agreement shall in all respects be
constructed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
DeCRANE AIRCRAFT HOLDINGS, INC.
By: /s/ R. Jack DeCrane
----------------------------
ADS ACQUISITION, INC.
By: /s/ R. Jack DeCrane
----------------------------
ALLARD INDUSTRIES, INC.
By:
----------------------------
THE GERALD R. ALLARD REVOCABLE
TRUST OF 1994
By:
----------------------------
Gerald R. Allard, Trustee
THE ALLARD CHILDREN'S TRUST
f/b/o JOHN R. ALLARD
By:
----------------------------
41
Shareholders, DAH and Buyer hereby agree that such court or arbitrator(s) shall
have jurisdiction to reform such provision so that it is enforceable to the
maximum extent permitted by law, and the parties agree to abide by such court's
or arbitrator(s)' determination. In the event that any such provision of this
Agreement cannot be reformed, such provision shall be deemed to be severed from
this Agreement, but every other provision of this Agreement shall remain in full
force and effect.
7.12 GOVERNING LAW. This Agreement shall in all respects be
constructed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
DeCRANE AIRCRAFT HOLDINGS, INC.
By:
----------------------------
ADS ACQUISITION, INC.
By:
----------------------------
ALLARD INDUSTRIES, INC.
By: /s/ John R. Allard, CEO
----------------------------
THE GERALD R. ALLARD REVOCABLE
TRUST OF 1994
By:
----------------------------
Gerald R. Allard, Trustee
THE ALLARD CHILDREN'S TRUST
f/b/o JOHN R. ALLARD
By: /s/ John R. Allard, Trustee
----------------------------
41
Shareholders, DAH and Buyer hereby agree that such court or arbitrator(s) shall
have jurisdiction to reform such provision so that it is enforceable to the
maximum extent permitted by law, and the parties agree to abide by such court's
or arbitrator(s)' determination. In the event that any such provision of this
Agreement cannot be reformed, such provision shall be deemed to be severed from
this Agreement, but every other provision of this Agreement shall remain in full
force and effect.
7.12 GOVERNING LAW. This Agreement shall in all respects be
constructed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
DeCRANE AIRCRAFT HOLDINGS, INC.
By:
----------------------------
ADS ACQUISITION, INC.
By:
----------------------------
ALLARD INDUSTRIES, INC.
By:
----------------------------
THE GERALD R. ALLARD REVOCABLE
TRUST OF 1994
By: /s/ Gerald R. Allard, Trustee
----------------------------
Gerald R. Allard, Trustee
THE ALLARD CHILDREN'S TRUST
f/b/o JOHN R. ALLARD
By:
----------------------------
41
THE ALLARD CHILDREN'S TRUST
f/b/o MICHAEL E. ALLARD
By: /s/ Michael E. Allard
----------------------------
THE NAZARIAN FAMILY TRUST
By:
----------------------------
David Nazarian, Trustee
By:
----------------------------
Angela Nazarian, Trustee
-------------------------------
Younes Nazarian
42
THE ALLARD CHILDREN'S TRUST
f/b/o MICHAEL E. ALLARD
By:
----------------------------
THE NAZARIAN FAMILY TRUST
By: /s/ David Nazarian
----------------------------
David Nazarian, Trustee
By: /s/ Angela Nazarian
----------------------------
Angela Nazarian, Trustee
/s/ Younes Nazarian
-------------------------------
Younes Nazarian
42