STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made as of the 10th
day of January, 2000, by and among Airport Systems International, Inc., a Kansas
corporation with its principal office at 11300 West 89th Street, Overland Park,
Kansas, 66214 (the "Buyer"), DCI, Inc., a Kansas corporation with its principal
office at 15301 W. 109th Street, Lenexa, Kansas 66219 (the "Company"), Chris I.
Hammond, Larry C. Klusman and William D. Cook (collectively referred to herein
as the "Sellers").
RECITALS
1. The Sellers own all of the issued and outstanding shares of the common
stock, $1.00 par value per share, of the Company (the "Company Shares").
2. The Buyer desires to purchase, and the Sellers desire to sell, the
Company Shares and certain intangible assets owned by them and relating to the
business of the Company for the consideration set forth below, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. PURCHASE AND SALE OF THE COMPANY SHARES AND INTANGIBLE ASSETS
1.1 PURCHASE OF THE COMPANY SHARES AND INTANGIBLE ASSETS FROM THE SELLERS.
Subject to and upon the terms and conditions of this Agreement, at the closing
of the transactions contemplated by this Agreement (the "Closing"):
(a) the Sellers shall sell, transfer, convey, assign and deliver to
the Buyer, and the Buyer shall purchase, acquire and accept from Sellers,
all of the Company Shares; and
(b) the Sellers shall sell, assign and deliver to Buyer and Buyer
shall purchase and accept from Sellers, all of Seller's right, title and
interest to all of the intangible assets necessary to conduct or used by
Sellers in connection with the operation of the Company's business
including, but not limited to, the ongoing business and customer
relationships possessed by Sellers, Sellers' industry knowledge and
Sellers' familiarity and relationships with suppliers (collectively
referred to herein as the "Intangible Assets").
1.2 PURCHASE PRICE FOR THE COMPANY SHARES AND INTANGIBLE ASSETS.
(a) The consideration to be paid for the Company Shares and the
Intangible Assets shall be the sum of Two Million Nine Hundred Thirty-Two
Thousand Dollars ($2,932,000), subject to adjustment after Closing pursuant
to Section 1.4(b) hereof (the "Purchase Price").
(i) At Closing, Buyer shall pay to the Sellers the portion of the
Purchase Price equal to $1,234,000 by wire transfer of immediately
available funds to accounts designated by the Sellers; and
(ii) At Closing, the Buyer shall issue to the Sellers shares of
Buyer's common stock ("ASII Common Stock"), $.01 par value per share. Buyer
shall deliver a certificate or certificates representing 150,000 shares of
ASII Common Stock, to be allocated among the Sellers as instructed by the
Sellers and imprinted with the Sellers' names.
(iii) At Closing, the Buyer shall deliver to Seller a four-year
promissory note in the amount of $1,248,000 (the "Note"). The Note shall be
secured by a second position on the assets of DCI which second position
shall be subordinated to any security interests granted at Closing or any
future security interest granted on such assets for cash committed to Buyer
on any future financings, and shall bear interest (payable quarterly) at
eight percent (8%) with principal payable semi-annually in eight (8) equal
payments of $156,000. The Note shall also be secured by a third position on
the assets currently owned by KHC of Lenexa L.L.C. (the "KHC Assets"),
which third position shall be subordinated as described above and shall be
subordinated to the security interests for industrial revenue bond
financing currently in place. In addition, the Note shall require payment
in full upon the occurrence of a change of control, as therein defined.
1.3 CLOSING. The Closing shall take place at the offices of Blackwell
Sanders Peper Martin LLP, 2300 Main Street, Suite 1100, Kansas City, Missouri
64108 at 10:00 a.m., local time, on February 4th, 2000, or at such other place,
time or date as may be mutually agreed upon in writing by the parties (such date
and time being referred to herein as the "Closing Date"). The transfer of the
Company Shares and the ASII Common Stock shall be deemed to occur at 10:00 a.m.,
central standard time, on the Closing Date.
1.4 ALLOCATION OF PURCHASE PRICE. The aggregate amount of the Purchase
Price shall be allocated among the Company Shares and the Intangible Assets in a
manner mutually acceptable to the parties and as set forth on SCHEDULE 1.4
attached hereto.
1.5 DELIVERY OF SHARES. At the Closing, Sellers shall deliver to the Buyer
certificates evidencing the Company Shares duly endorsed in blank or with stock
powers duly executed by the Sellers.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND EACH OF THE SELLERS
The Company and each of the Sellers hereby represents and warrants to the
Buyer as follows:
2.1 TITLE TO SHARES. The Sellers have good and marketable title to the
Company Shares which are to be transferred to the Buyer by the Sellers pursuant
hereto, free and clear of any and all covenants, conditions, restrictions,
voting trust arrangements, liens, charges, encumbrances, options and adverse
claims or rights whatsoever.
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2.2 AUTHORITY. The Sellers have the full right, power and authority to
enter into this Agreement and to transfer, convey and sell to the Buyer at the
Closing the Company Shares to be sold by the Sellers hereunder and, upon
consummation of the purchase contemplated hereby, the Buyer will acquire from
the Sellers good and marketable title to the Company Shares, free and clear of
all covenants, conditions, restrictions, voting trust arrangements, liens,
charges, encumbrances, options and adverse claims or rights whatsoever.
2.3 EXECUTION AND DELIVERY. The Sellers are not a party to, subject to or
bound by any agreement or any judgment, order, writ, prohibition, injunction or
decree of any court or other governmental body which would prevent the execution
or delivery of this Agreement by the Sellers or the transfer, conveyance and
sale of the Company Shares to be sold by the Sellers to the Buyer pursuant to
the terms hereof.
2.4 BROKERS. No broker or finder has acted for the Sellers in connection
with this Agreement or the transactions contemplated hereby, and no broker or
finder is entitled to any brokerage or finder's fee or other commissions in
respect of such transactions based upon agreements, arrangements or
understandings made by or on behalf of the Sellers.
2.5 CAPITALIZATION OF THE COMPANY. The Company's authorized capital stock
consists of 500 shares of common stock, $1.00 par value per share, of which 300
shares are issued and outstanding on the date hereof and held of record and
beneficially by the Sellers in the amounts allocated as set forth on SCHEDULE
2.5 attached hereto. All such issued and outstanding shares of common stock have
been and, on the Closing Date, will be duly and validly issued and are, or will
be on such date, fully paid and non-assessable. Except as set forth in SCHEDULE
2.5 attached hereto, there are not, and on the Closing Date there will not be,
outstanding (a) any options, warrants or other rights to purchase from the
Company any capital stock of the Company, (b) any securities convertible into or
exchangeable for shares of such stock; or (c) any other commitments of any kind
for the issuance of additional shares of capital stock or options, warrants or
other securities of the Company.
2.6 ORGANIZATION AND STATUS OF THE COMPANY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Kansas, and has all requisite power and authority (corporate or
otherwise) to execute and deliver this Agreement and the agreements contemplated
herein, and to consummate the transactions contemplated hereby and thereby. The
Company has all requisite corporate power to own its properties and carry on its
business as now being conducted and is duly qualified to do business in each
jurisdiction in which the nature of its business or properties make such
qualification necessary. The jurisdictions where the Company is so qualified are
set forth in SCHEDULE 2.6. Complete and correct copies of the Articles of
Incorporation and By-Laws, each as amended to the date hereof, for the Company
are set forth in SCHEDULE 2.6.
2.7 NO SUBSIDIARIES OR AFFILIATED ENTITIES. Except as set forth in SCHEDULE
2.7, the Company does not own an equity interest representing 50 percent or more
of the capital stock or other equity interest in any corporation, partnership,
joint venture or other entity.
2.8 AUTHORIZATION. The execution and delivery by the Company of this
Agreement and the agreements to be executed by the Sellers and/or the Company
hereunder and to be
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delivered by the Sellers and/or the Company at Closing, and the consummation by
the Company and Sellers of all transactions contemplated hereunder and
thereunder by the Company, have been duly authorized by all requisite corporate
action and necessary shareholder approval (none of which actions or approvals
has been modified or rescinded and all of which actions and approval are in full
force and effect.) This Agreement has been duly executed by the Company and the
Sellers. This Agreement and all other agreements and obligations entered into
and undertaken in connection with the transactions contemplated hereby to which
the Company or the Sellers is a party constitute the valid and legally binding
obligations of the Company and the Sellers, enforceable against them in
accordance with their respective terms. The execution, delivery and performance
by the Company and the Sellers of this Agreement and the agreements provided for
herein, and the consummation by the Company and the Sellers of the transactions
contemplated hereby and thereby, will not, with or without the giving of notice
or the passage of time or both, (a) violate the provisions of any law, rule or
regulation applicable to the Company or the Sellers; (b) violate the provisions
of the Articles of Incorporation or Bylaws of the Company; (c) violate any
judgment, decree, order or award of any court, governmental body or arbitrator;
or (d) conflict with or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any acceleration under, or
cause the creation of any lien, charge or encumbrance upon the properties or
assets of the Company or the Company Shares pursuant to any indenture, mortgage,
deed of trust or other instrument or agreement to which the Company or any of
the Sellers is a party or by which the Company or any of the Sellers or any of
their respective properties is or may be bound. SCHEDULE 2.8 attached hereto
sets forth a true, correct and complete list of all consents and approvals of
third parties that are required in connection with the consummation of the
transactions contemplated by this Agreement.
2.9 FINANCIAL STATEMENTS.
(a) The Sellers has previously delivered to the Buyer the unaudited
balance sheet of the Company as of December 31, 1998 and 1997 (the "Prior
Year Balance Sheets") and the related statements of income, shareholder's
equity, retained earnings and changes in financial condition of the Company
for the fiscal year then ended (collectively, the "Prior Year Financial
Statements"). The Sellers have also delivered to the Buyer, prior to the
Closing Date, the unaudited balance sheet of the Company as of September
30, 1999 (the "Current Balance Sheet") and the related statements of
income, shareholder's equity, retained earnings and changes in financial
condition of the Company for the three-month period then ended
(collectively, the "Current Financial Statements"). The Prior Year
Financial Statements and the Current Financial Statements (collectively,
the "Financial Statements") have been prepared in accordance with generally
accepted accounting principles, applied consistently, with past practices
and have been (or will be) certified by the Company's chief financial
officer. The date of the Prior Year Balance Sheets is hereinafter referred
to as the "Balance Sheet Date."
(b) To the best knowledge of the Sellers, the Financial Statements
fairly present, as of their respective dates, the financial condition,
retained earnings, assets and liabilities of the Company and the results of
operations of the Company's business for the periods indicated. With
respect to contracts and commitments for the sale of goods or the provision
of services by the Company, the Financial Statements contain and reflect
adequate reserves consistent with previous reserves taken for all
reasonably anticipated
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material losses and costs and expenses. The amounts shown as accrued for
current and deferred income and other taxes in the Financial Statements are
sufficient for the payment of all accrued and unpaid federal, state and
local taxes, interest, penalties, assessments or deficiencies applicable to
the Company, whether disputed or not, for the applicable period then ended
and periods prior thereto.
2.10 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent (a)
reflected and reserved against in the Current Balance Sheet, (b) set forth on
SCHEDULE 2.10 attached hereto, or (c) incurred in the ordinary course of
business after the date of the Current Balance Sheet and not material in amount,
either individually or in the aggregate, to the best knowledge of the Sellers,
the Company does not have any liability or obligation, secured or unsecured,
whether accrued, absolute, contingent, unasserted or otherwise, which is
material to the condition (financial or otherwise) of the assets, properties,
business or prospects of the Company taken as a whole. For purposes of this
Agreement, "material" means any amount in excess of $25,000.
2.11 LITIGATION. Except as set forth on SCHEDULE 2.11 attached hereto, (a)
there is no action, suit or proceeding to which the Company is a party (either
as a plaintiff or defendant) pending or, to the best knowledge of the Sellers,
threatened before any court or governmental agency, authority, body or
arbitrator and, to the best knowledge of the Sellers, there is no basis for any
such action, suit or proceeding; (b) neither the Company, nor, to the best
knowledge of the Sellers, any officer, director or employee of any of the
Company, has been permanently or temporarily enjoined by any order, judgment or
decree of any court or any governmental agency, authority or body from engaging
in or continuing any conduct or practice in connection with the business,
assets, or properties of the Company; and (c) there is not in existence on the
date hereof any order, judgment or decree of any court, tribunal or agency
related to the Company. Except as set forth on SCHEDULE 2.11 attached hereto,
there is no action, suit or proceeding to which one or more of the Sellers is a
party that may impact the contemplated transactions or the Company Shares.
2.12 INSURANCE. SCHEDULE 2.12 attached hereto sets forth a true, correct
and complete list of all fire, theft, casualty, general liability, workers'
compensation, business interruption, environmental impairment, product
liability, automobile and other insurance policies maintained by the Company and
of all life insurance policies maintained on the lives of any of their
employees, specifying the type of coverage, the amount of coverage, the premium,
the insurer and the expiration date of each such policy (collectively, the
"Insurance Policies") and all claims made under such Insurance Policies since
January 1, 1997. True, correct and complete copies of all Insurance Policies
have been previously delivered by the Sellers or the Company to the Buyer. The
Insurance Policies are in full force and effect and are in amounts of a nature
which are adequate and customary for the Company's business. All premiums due on
the Insurance Policies or renewals thereof have been paid and there is no
default under the Insurance Policies. Except as set forth on SCHEDULE 2.12, the
Company has not received any notice or other communication from any issuer of
the Insurance Policies since January 1, 1999 canceling or materially amending
any of the Insurance Policies, materially increasing any deductibles or retained
amounts thereunder, or materially increasing the annual or other premiums
payable thereunder, and, to the best knowledge of the Sellers, no such
cancellation, amendment or increase of deductibles, retainages or premiums is
threatened. Except as set forth on SCHEDULE 2.12, the Company does not have has
any outstanding claims or any dispute with any
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insurance carrier regarding claims, settlements or premiums, and the Company has
not failed to give any notice or present any claim under any Insurance Policy in
due and timely fashion. There are no outstanding requirements or recommendations
by any issuer of the Insurance Policies or by any Board of Fire Underwriters or
other similar body exercising similar functions or by any governmental authority
exercising similar functions which requires or recommends any changes in the
conduct of the business of, or any repairs or other work to be done on or with
respect to any of the properties or assets owned or leased by, the Company.
2.13 PERSONAL PROPERTY. SCHEDULE 2.13 attached hereto sets forth (i) a
true, correct and complete list of all items of tangible personal property owned
by the Company as of the date hereof having either a net book value per unit or
an estimated fair market value per unit in excess of $2,500; or not owned by the
Company but in the possession of or used in the business of the Company and
having rental payments therefor in excess of $250 per month or $3,000 per year
(collectively, the "Personal Property"); and (ii) a description of the owner of,
and any agreement relating to the use of, each item of Personal Property not
owned by the Company and the circumstances under which such Property is used.
Except as disclosed in SCHEDULE 2.13:
(a) The Company has good and marketable title to each item of Personal
Property free and clear of all liens, leases, encumbrances, claims under
bailment and storage agreements, equities, conditional sales contracts,
security interests, charges and restrictions, except for liens, if any, for
personal property taxes not due;
(b) No officer, director, employee nor any of the Sellers of the
Company nor any spouse, child or other relative or affiliate thereof, owns
directly or indirectly, in whole or in part, any of the Personal Property
described in SCHEDULE 2.13;
(c) Each item of Personal Property not owned by the Company is in such
condition that upon the return of such property to its owner in its present
condition at the end of the relevant lease term or as otherwise
contemplated by the applicable agreement between the Company and the owner
or lessor thereof, the obligations of the Company to such owner or lessor
will be discharged;
(d) The Personal Property is in good operating condition and repair,
normal wear and tear excepted, is currently used by the Company in the
ordinary course of its business, and normal maintenance has been
consistently performed with respect to the Personal Property; and
(e) The Company owns or otherwise has the right to use all of the
Personal Property now used by it in the operation of its business or the
use of which is necessary for the performance of any material contract,
letter of intent or proposal to which it is a party.
2.14 INTANGIBLE PROPERTY. SCHEDULE 2.14 attached hereto sets forth: (i) a
true, correct and complete list and, where appropriate, a description of, all
items of intangible property owned by, or used in the business of, the Company,
including, but not limited to, trade secrets, United States and foreign patents,
trade names, trademarks, trade name and trademark registrations, copyrights and
copyright registrations, and applications for any of the foregoing (the
"Intangible
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Property"); and (ii) a true, correct and complete list of all licenses or
similar agreements or arrangements to which the Company is a party, either as
licensee or licensor, with respect to the Intangible Property. Except as
otherwise disclosed in SCHEDULE 2.14:
(a) The Company is the sole and exclusive owner of all right, title
and interest in and to the Intangible Property and all designs, permits,
and instruction and procedures manuals, used on or in connection therewith,
free and clear of all liens, security interests, charges, encumbrances,
equities and other adverse claims;
(b) The Company has the right and authority to use the Intangible
Property in connection with the conduct of its business in the manner
presently conducted, and such use does not conflict with, infringe upon or
violate any rights of any other person, corporation or entity;
(c) Neither the Company nor the Sellers have received notice of, or
have any knowledge of any basis for, a pending or threatened claim,
interference action or other judicial or adversarial proceeding against the
Company that any of the Company's operations, activities, products,
services or publications infringes any patent, trademark, trade name,
copyright, trade secret or other property right of a third party, or that
it is illegally or otherwise using the trade secrets or property rights of
others;
(d) There are no outstanding, nor to the best knowledge of the
Sellers, any threatened disputes or other disagreements with respect to any
licenses or similar agreements or arrangements described in SCHEDULE 2.14
or with respect to infringement by a third party of any of the Intangible
Property;
(e) The Intangible Property owned or licensed by the Company is
sufficient to conduct the Company's business as presently conducted;
(f) The Company has taken all steps reasonably necessary to protect
its right, title and interest in and to the Intangible Property; and
(g) No officer, director, employee nor any of the Sellers of the
Company, nor any spouse, child or other relative or affiliate thereof, owns
directly or indirectly, in whole or in part, any of the Intangible
Property.
2.15 LEASES. SCHEDULE 2.15 attached hereto sets forth (a) a true, correct
and complete list as of the date hereof of all leases of real property,
identifying separately each ground lease, to which the Company is a party
(collectively, the "Leases"). The real property that is the subject of all such
Leases shall be referred to herein as the "Real Estate." True, correct and
complete copies of all Leases and all amendments, modifications and supplemental
agreements thereto, have previously been delivered by the Sellers or the Company
to the Buyer. The Leases are in full force and effect, are binding and
enforceable against each of the parties thereto in accordance with their
respective terms and, except as set forth on SCHEDULE 2.15, have not been
modified or amended since the date of delivery to the Buyer. No party to any
Lease has sent written notice to the other claiming that such party is in
default thereunder and that such default remains uncured. Except as set forth on
SCHEDULE 2.15, there has not occurred any event which would constitute a breach
of or default in the performance of any covenant, agreement or condition
contained in any
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Lease, nor has there occurred any event which with the passage of time or the
giving of notice or both would constitute such a breach or material default. The
Company is not obligated to pay any leasing or brokerage commission relating to
any Lease and, except as set forth on SCHEDULE 2.15, will not have any
obligation to pay any leasing or brokerage commission upon the renewal of any
Lease. Except as set forth on SCHEDULE 2.15, no construction, alteration or
other leasehold improvement work with respect to any of the Leases remains to be
paid for or to be performed by the Company. The Financial Statements contain
adequate reserves to provide for the restoration of the property subject to the
Leases at the end of the respective Lease terms, to the extent required by the
Leases.
2.16 INVENTORY. SCHEDULE 2.16 attached hereto sets forth a summary of the
inventory of the Company (the "Inventory"), with aggregate dollar amounts for
each category of Inventory, as of the date hereof. The Inventory consists of
items of a quality and quantity which are usable or saleable, without discount,
in the ordinary course of the business conducted by the Company, assuming sales
are at current levels. The value of all items of obsolete materials and of
materials of below standard quality have been written down to realizable market
value and the values at which such inventory is carried reflect the normal
Inventory valuation policy of the Company of stating Inventory at the lower of
cost or market value in accordance with generally accepted accounting
principles.
2.17 ACCOUNTS RECEIVABLE. SCHEDULE 2.17 attached hereto sets forth a true,
correct and complete list of the accounts and notes receivable of the Company
(the "Accounts Receivable"), including the aging thereof as of the date hereof.
All Accounts Receivable arose out of the sales of inventory or services in the
ordinary course of business and are collectible in the face value thereof within
90 days after the date of invoice, using normal collection procedures, net of
the reserve for doubtful accounts set forth thereon, which reserve is adequate
and was calculated in accordance with generally accepted accounting principles
consistently applied.
2.18 TAX MATTERS.
(a) Except as set forth on SCHEDULE 2.18 attached hereto:
(i) within the times and in the manner prescribed by law, the
Company has filed all federal, state and local tax returns and all tax
returns for foreign countries, provinces and other governing bodies
having jurisdiction to levy taxes upon them which are required to be
filed;
(ii) the Company has paid all taxes, interest, penalties,
assessments and deficiencies which have become due or which have been
claimed to be due, including without limitation income, franchise,
real estate, sales and withholding taxes and other employee benefits,
taxes and imports;
(iii) all tax returns filed by the Company for the taxable years
ending December 31, 1994 through December 31, 1998 constitute complete
and accurate representations of the tax liabilities of the Company for
such years and accurately set forth all items (to the extent required
to be included or reflected in such
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returns) relevant to their future tax liabilities, including the tax
bases of their properties and assets;
(iv) the Company has not waived or extended any applicable
statute of limitations relating to the assessment of federal, state,
local or foreign taxes;
(v) no examinations of the federal, state, local or foreign tax
returns of the Company is currently in progress nor, to the best
knowledge of the Sellers, threatened, and no deficiencies have been
asserted or assessed against the Company as a result of any audit by
the Internal Revenue Service or any state or local taxing authority
and no such deficiency has been proposed or threatened;
(vi) the Company has not filed a consent pursuant to Section
341(f) of the Internal Revenue Code of 1986, as amended (the "Code")
relating to collapsible corporations nor has the Company agreed to
have Section 341(f)(2) of the Code apply to any disposition of a
Section (f) asset (as such term is defined in Section 341(f)(4) of the
Code); and
(vii) since January 1, 1996, the Company has not participated in
or cooperated with an international boycott, within the meaning of
Section 999 of the Code, nor has the Company had operations which are
or may hereafter become reportable under Section 999 of the Code.
(b) SCHEDULE 2.18 attached hereto sets forth those taxable years for
which the tax returns of the Company have been reviewed or audited by
applicable federal, state, local and foreign taxing authorities and those
tax years for which said tax returns have received clearances or other
indications of approval from applicable federal, state, local and foreign
taxing authorities. No issue or issues have been raised in connection with
any prior or pending review or audit of said federal, state, local or
foreign tax returns which the Sellers reasonably believe may be expected to
be raised in the future by such taxing authorities in connection with the
audit or review of the tax returns of the Company.
2.19 BOOKS AND RECORDS. The general ledgers and books of account of the
Company and all federal, state and local income, franchise, property and other
tax returns filed by the Company are in all material respects complete and
correct and have been maintained in accordance with good business practice and
in accordance with all applicable procedures required by laws and regulations.
2.20 CONTRACTS AND COMMITMENTS.
(a) SCHEDULE 2.20 attached hereto contains a true, complete and
correct list and description of the following contracts and agreements,
whether written or oral (collectively, the "Contracts"):
(i) All loan agreements, indentures, mortgages and guaranties to
which the Company is a party or by which the Company or any of its
property is
9
bound including but not limited to, the Company's third party loans
with Bank of America;
(ii) All pledges, conditional sale or title retention agreements,
security agreements, equipment obligations, personal property leases
and lease purchase agreements to which the Company is a party or by
which the Company or any of its property is bound;
(iii) All contracts, agreements, commitments, purchase orders or
other understandings or arrangements to which the Company is a party
or by which the Company or any of its property is bound which (A)
involve aggregate payments or receipts by the Company of more than
$2,500 in the case of any single contract, agreement, commitment,
understanding or arrangement under which full performance (including
payment) has not been rendered by all parties thereto or (B) which may
materially adversely affect the condition (financial or otherwise) or
the properties, assets, business or prospects of the Company;
(iv) All collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, pension plans, retirement plans,
employee stock option or stock purchase plans and group life, health
and accident insurance and other employee benefit plans, agreements,
arrangements or commitments to which the Company is a party or by
which the Company or any of its property is bound;
(v) All agency, distributor, sales representative, franchise or
similar agreements to which the Company is a party or by which the
Company or any of its property is bound;
(vi) All contracts, agreements or other understandings or
arrangements between the Company and the Sellers (including, but not
limited to, any tax sharing arrangements) or their affiliates;
(vii) All leases, whether operating, capital or otherwise, under
which the Company is lessor or lessee;
(viii) All contracts, agreements and other documents or
information relating to past disposal of waste (whether or not
hazardous);
(ix) All contracts, agreements or other arrangements imposing a
non-competition or non-solicitation obligation on the Company or any
of its employees; and
(x) Any other material agreements or contracts entered into by
the Company.
(b) Except as set forth on SCHEDULE 2.20:
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(i) Each Contract is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms;
and the Company does not have any knowledge that any Contract is not a
valid and binding agreement of the other parties thereto;
(ii) The Company has fulfilled all material obligations required
pursuant to the Contracts to have been performed by the Company on its
part prior to the date hereof; and the Company has no reason to
believe that it will not be able to fulfill, when due, all of its
obligations under the Contracts which remain to be performed after the
date hereof;
(iii) The Company is not in breach of or default under any
Contract, and no event has occurred which with the passage of time or
giving of notice or both would constitute such a default, result in a
loss of rights or result in the creation of any lien, charge or
encumbrance, thereunder or pursuant thereto;
(iv) To the best knowledge of the Sellers, there is no existing
breach or default by any other party to any Contract, and no event has
occurred which with the passage of time or giving of notice or both
would constitute a default by such other party, result in a loss of
rights or result in the creation of any lien, charge or encumbrance
thereunder or pursuant thereto;
(v) There are not and, since January 1, 1998, have not been, any
claims of a non-routine nature relating to the Company by customers of
the Company;
(vi) The Company is not restricted by any Contract from carrying
on its business anywhere in the world;
(vii) The Company does not have any written or oral contracts to
sell products or perform services that are expected to be performed
at, or to result in, a loss;
(viii) The Company has not experienced any shortages of
components or other supplies (collectively "Supplies") or qualified
employees within the 12-month period preceding the date hereof, and
the Company has on hand, or has reason to believe it can timely
obtain, a sufficient quantity of Supplies and employees to satisfy all
outstanding orders heretofore received and all orders anticipated to
be received from the date hereof through the Closing Date; and (ix)
The Company has not experienced any shortages of raw materials ("Raw
Materials") within the 12-month period preceding the date hereof, and
the Company has on hand, or has reason to believe it can timely
obtain, a sufficient quantity of Raw Materials to satisfy all
outstanding orders heretofore received and all orders anticipated to
be received through the Closing Date.
(c) True, correct and complete copies of all Contracts have previously
been delivered by the Company or the Sellers to the Buyer.
11
2.21 COMPLIANCE WITH AGREEMENTS AND LAWS.
(a) The Company has all requisite licenses, permits and certificates,
including environmental, health and safety permits, from federal, state and
local authorities necessary to conduct its business and own and operate its
assets (collectively, the "Permits"). SCHEDULE 2.21 attached hereto sets
forth a true, correct and complete list of all such Permits, copies of
which have previously been delivered by the Company or the Sellers to the
Buyer. The Company has not received written notice that it is in violation
of any law, regulation or ordinance (including, without limitation, laws,
regulations or ordinances relating to building, zoning, environmental,
disposal of hazardous substances, land use or similar matters) relating to
its properties. To the best knowledge of the Sellers, the business of the
Company as conducted since January 1, 1998 has not violated, and on the
date hereof does not violate, in any material respect, any federal, state,
local or foreign laws, regulations or orders (including, but not limited
to, any of the foregoing relating to employment discrimination,
occupational safety, environmental protection, hazardous waste,
conservation, or corrupt practices, including the Foreign Corrupt Practices
Act), the enforcement of which would have a material adverse effect on the
results of operations, condition (financial or otherwise), assets,
properties, business or prospects of the Company. Except as set forth on
SCHEDULE 2.21, the Company has not had notice or communication from any
federal, state or local governmental or regulatory authority or otherwise
of any such violation or noncompliance.
2.22 ENVIRONMENTAL.
(a) For purposes of this Section:
(i) "Hazardous Materials" means any hazardous, infectious or
toxic substance, chemical, pollutant, contaminant, emission or waste
which is regulated by any local, state, federal or foreign authority.
Hazardous Materials include, without limitation, anything which is:
(i) defined as a "pollutant" pursuant to 33 U.S.C. Section 1362(6);
(ii) defined as a "hazardous waste" pursuant to 42 U.S.C. Section
6921; (iii) defined as a "regulated substance" pursuant to 42 U.S.C.
Section 6991; (iv) defined as a "hazardous substance" pursuant to 42
U.S.C. Section 9601(14); (v) defined as a "pollutant or contaminant"
pursuant to 42 U.S.C. Section 9601(33); (vi) petroleum; (vii)
asbestos; and (viii) polychlorinated biphenyl.
(ii) "Environmental Laws and Regulations" means all limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any Laws relating
to pollution, nuisance, health, safety or the environment including,
without limitation, (i) the Federal Clean Air Act, 42 U.S.C. Sections
7401 ET SEQ.; (ii) the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Sections 9601 ET SEQ.;
(iii) the Federal Emergency Planning and Community Right-to-Know Act,
42 U.S.C. Sections 1101 ET SEQ.; (iv) the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. Sections 136 ET SEQ.; (v) the
Federal Water Pollution Control Act, 33 U.S.C. Sections 1251 ET SEQ.;
(vi) the Solid
12
Waste Disposal Act, 42 U.S.C. Sections 6901 ET SEQ.; (vii) the Toxic
Substances Control Act, 15 U.S.C. Sections 2601 ET seq.; (viii) Laws
relating in whole or part to emissions, discharges, releases, or
threatened releases of any Hazardous Material; and (ix) Laws relating
in whole or part to the manufacture, processing, distribution, use,
coverage, disposal, transportation, storage or handling of any
Hazardous Material.
(b) To the best knowledge of Sellers, the operations and activities of
Sellers and the Company have complied, and until the Closing Date will
comply, in all respects, with all Environmental Laws and Regulations.
(c) To the best knowledge of Sellers, there is no civil, criminal,
administrative or other action, suit, demand, claim, hearing, notice of
violation, proceeding, investigation, notice or demand pending, received,
or threatened against the Sellers or the Company relating in any way to any
Environmental Laws and Regulations.
(d) Neither the Sellers nor the Company have received notice or
indication from any Governmental Authority or private or public entity
advising it that it is or may be responsible for any investigation or
response costs with respect to a release, threatened release or cleanup of
chemicals or materials produced by or resulting from any business,
commercial or industrial activities, operations or processes, including,
without limitation, any Hazardous Materials.
2.23 EMPLOYEE RELATIONS.
(a) To the best knowledge of Sellers, the Company is in compliance
with all federal, state and municipal laws respecting employment and
employment practices, terms and conditions of employment, and wages and
hours, and is not engaged in any unfair labor practice, and there are no
arrears in the payment of wages or social security taxes.
(b) To the best knowledge of Sellers, except as set forth on SCHEDULE
2.23 attached hereto:
(i) None of the employees of the Company is represented by any
labor union;
(ii) There is no unfair labor practice complaint against the
Company pending before the National Labor Relations Board or any state
or local agency;
(iii) There is no pending labor strike or other material labor
trouble affecting the Company (including, without limitation, any
organizational drive);
(iv) There is no material labor grievance pending against the
Company;
(v) There is no pending union representation effort respecting
the employees of the Company;
13
(vi) There are no pending arbitration proceedings arising out of
or under any collective bargaining agreement to which the Company is a
party, or to the best knowledge of the Sellers, any basis for which a
claim may be made under any collective bargaining agreement to which
the Company is a party; and
(vii) The Company does not have any continuing obligation for
health, life, medical insurance or other similar fringe benefits to
any former employee of the Company.
(c) The Company has provided to the Buyer a true, correct and complete
list of the current payroll of the Company, including the job descriptions
and salary or wage rates for each department manager, showing separately
for each such person the amounts paid or payable as salary and bonus
payments for the fiscal year ended December 31, 1998.
(d) For purposes of this Section 2.23, the term "employee" shall be
construed to include sales agents and other independent contractors who
spend a majority of their working time on the business of the Company.
2.24 EMPLOYEE BENEFIT PLANS.
(a) EMPLOYEE PLANS. SCHEDULE 2.24 attached hereto contains a true,
correct and complete list of all pension, benefit, profit sharing,
retirement, deferred compensation, welfare, insurance, disability, bonus,
vacation pay, severance pay and other similar plans, programs and
agreements, whether reduced to writing or not ("Employee Plans"), relating
to the employees of the Company, or maintained at any time since January
1, 1997 by the Company or by any member of any controlled group of
corporations, group of trades or businesses under common control, or
affiliated service group (as defined for purposes of Section 414(b), (c)
and (m), respectively, of the Code) (the "Company Employee Plans") of
which it is or has been a member which shall be referred to herein as a
"Member of the Controlled Group") and, except as set forth on SCHEDULE
2.24, the Company has no obligations, contingent or otherwise, past or
present, under applicable law or the terms of any Employee Plan. The
Company has not contributed to, and does not have any past or present
obligation to contribute to, any stock option or stock purchase plan or
other plan designed to hold the stock of the Company or any of its
affiliates. No employee of the Company participates in an Employee Plan
that is sponsored or maintained by an entity other than the Company and no
one other than Company employees and their beneficiaries or dependents
participate in an Employee Plan sponsored or maintained by the Company.
(b) PROHIBITED TRANSACTIONS. Neither the Company nor any of its
directors, officers, employees or agents, or any "party in interest" or
"disqualified person", as such terms are defined in Section 3 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
Section 4975 of the Code has, with respect to any Employee Plan, engaged in
or been a party to any nonexempt "prohibited transaction", as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, in connection
with which, directly or indirectly, the Buyer or any of its affiliates,
directors or employees or
14
any Employee Plan or any related funding medium could be subject to either
a penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code.
(c) COMPLIANCE. To the best knowledge of Sellers, with respect to all
Company Employee Plans, the Company is in compliance with the terms of the
plans and the requirements prescribed by any and all statutes, orders or
governmental rules or regulations currently in effect, including, but not
limited to, ERISA and the Code, applicable to such Company Employee Plans.
To the best knowledge of Sellers, the Company has in all respects performed
all obligations required to be performed by it under, and is not in
violation in any respect of, and there has been no default or violation by
any other party with respect to, any of the Company Employee Plans. Except
as set forth on SCHEDULE 2.24, none of the Company Employee Plans which are
subject to Title IV of ERISA has been or will be terminated in whole or in
part within the meaning of ERISA or the Code; no liability has been
incurred to, nor has any event or circumstance occurred, nor will any event
or circumstance occur prior to the Closing Date, which could result in such
a liability being asserted by, the Pension Benefit Guaranty Corporation
with respect to any Company Employee Plan (other than the payment of annual
premiums under Section 4007 of ERISA); nor has any Company Employee Plan
that is subject to Part 3 of Subtitle B of Title I of ERISA or Section 412
of the Code, or both, incurred any "accumulated funding deficiency" (as
defined in ERISA), whether or not waived; nor has the Company failed to pay
any amounts due and owing as required by the terms of any Company Employee
Plan; nor has there been any "reportable event" within the meaning of
Section 4043(b)(l)-(9) of ERISA, or any event described in Section 4063(a)
of ERISA, with respect to any Company Employee Plan, other than as
disclosed herein or on accompanying schedules.
(d) MULTI EMPLOYER PLANS. Except as set forth on SCHEDULE 2.24,
neither the Company nor any Member of the Controlled Group has ever been
obligated to contribute to any "multi employer plan", as such term is
defined in Section 3(37) of ERISA. Neither the Company nor any Member of
the Controlled Group has any "withdrawal liability", as computed under
Section 4211 of ERISA, with respect to any such plan and the Company and
each Member of the Controlled Group has made all contributions to any such
plan as are required through the Closing Date under the terms of any such
plans or applicable statutes, regulations, rulings and other applicable
law; and no event has occurred, or can occur prior to the Closing Date,
which could give rise to any other liability (other than a continuing
obligation to contribute to such plan(s) under the terms of any applicable
collective bargaining agreements) on the part of the Company or any Member
of the Controlled Group, the Buyer, or their affiliates, officers,
employees or directors with respect to such plan(s).
(e) COPIES OF COMPANY EMPLOYEE PLANS AND RELATED DOCUMENTS. The
Sellers or the Company have previously delivered to the Buyer true, correct
and complete copies of all Company Employee Plans which have been reduced
to writing and written descriptions of all Company Employee Plans which
have not been reduced to writing, and all agreements, including trust
agreements and insurance contracts, related to such Company Employee Plans,
and the Summary Plan Description and all modifications
15
thereto for each Company Employee Plan communicated to employees. With
respect to each Company Employee Plan that is a "defined benefit plan", as
such term is defined in Section 3(35) of ERISA (the "Defined Benefit
Plans"), true, correct and complete copies of (i) the annual actuarial
valuation reports for the last five years, (ii) the Form 5500 and Schedule
A or B thereto, or both, filed for the last five years and (iii) any
filings made with the Pension Benefit Guaranty Corporation, Internal
Revenue Service or Department of Labor, or any correspondence with or from
such agencies, regarding the termination of any such Defined Benefit Plan,
have been delivered to the Buyer.
(f) QUALIFICATIONS. Each Company Employee Plan and all amendments
thereto intended to qualify under Section 401(a) of the Code have been
determined by the Internal Revenue Service to so qualify, and the trusts
created thereunder have been determined to be exempt from tax under the
provisions of Section 501(a) of the Code, and copies of all determination
letters with respect to each such Company Employee Plan have been
previously delivered by the Sellers or the Company to the Buyer, and
nothing has since occurred, or will occur prior to the Closing Date, which
might cause the loss of such qualification or exemption, no such Company
Employee Plan has been operated in a manner which would cause it to be
disqualified in operation, and all such Company Employee Plans have been
administered in compliance with and consistent with all applicable
requirements of the Code and ERISA, including, without limitation, all
reporting and disclosure requirements.
(g) FUNDING STATUS.
(i) There is no Company Employee Plan that is a funded Defined
Benefit Plan.
(ii) With respect to each Company Employee Plan which is a
qualified profit-sharing or stock bonus plan, as defined in ERISA, all
employer contributions accrued for plan years ending prior to the
Closing Date under the Company Employee Plan terms and applicable law
have been made by the Company.
(iii) All premiums or other payments required by the terms of any
group or individual insurance policies and programs maintained by the
Company Employee Plan with respect to all periods up to and including
the Closing Date have been fully paid for the length of the
obligation.
(h) CLAIMS AND LITIGATION. There are no threatened or pending claims,
suits or other proceedings by present or former employees of the Company or
their affiliates, plan participants, beneficiaries or spouses of any of the
above, including claims against the assets of any trust, involving any
Company Employee Plan, or any rights or benefits thereunder, other than
ordinary and usual claims for benefits by participants or beneficiaries.
(i) NO IMPLIED RIGHTS. Nothing expressed or implied herein shall
confer upon any past or present employee of the Company, its
representatives, beneficiaries,
16
successors and assigns, nor upon any collective bargaining agent, any
rights or remedies of any nature, including, without limitation, any rights
to employment or continued employment with the Buyer, the Company, or any
successor or affiliate; nor shall the Buyer, the Company or their
affiliates be precluded or prevented from terminating or amending any
Company Employee Plan.
(j) TRANSFER. The Company shall take any actions as may be necessary
or appropriate in the reasonable opinion of the Buyer and the Buyer's
counsel under all applicable laws and the terms of the Company Employee
Plans to establish the Buyer, or an affiliate of the Buyer, as having all
rights and obligations with respect to the Company Employee Plans assumed
pursuant to this Agreement, including, without limitation, rights with
respect to all annuity or insurance contracts which form a part of any of
such Company Employee Plans, together with all other Company Employee Plan
assets. The Sellers shall obtain as of the Closing Date any and all
consents from trustees required to effect any transfer of any trust(s)
related to such assumed Company Employee Plans to such Trustee(s) as may be
appointed by the Buyer.
2.25 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as set forth on SCHEDULE 2.25 attached hereto, since the
Current Balance Sheet Date, the Company has not entered into any
transaction that is not in the usual and ordinary course of business, and,
without limiting the generality of the foregoing, the Company has not:
(i) incurred any material obligation or liability for borrowed
money;
(ii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability other than liabilities paid in the ordinary
course of business;
(iii) mortgaged, pledged or subjected to lien, charge or other
encumbrance any of their respective properties or assets;
(iv) sold or purchased, agreed to sell or purchase, assigned or
transferred any of its material, tangible assets or canceled any debts
or claims, except for inventory sold and raw materials purchased in
the ordinary course of business;
(v) made any material amendment to or termination of any Contract
or done any act or omitted to do any act which would cause the breach
of any Contract;
(vi) suffered any losses of personal or real property, whether
insured or uninsured, and whether or not in the control of the Company
in excess of $5,000 in the aggregate, or waived any rights of any
value;
(vii) authorized any declaration or payment of dividends by the
Company which is not wholly owned by the Company, or paid any such
17
dividends, or authorized any transfer of assets of any kind whatsoever
by the Company to the Sellers with respect to any shares of capital
stock;
(viii) authorized or issued recall notices for any of its
products or initiated any safety investigations;
(ix) received notice of any litigation, warranty claim or
liability claim;
(x) made any material change in the terms, status or funding
condition of any Employee Plan, as defined in Section 2.24 hereof;
(xi) made, or committed to make, any changes in the compensation
payable to any officer, director, employee or agent of the Company, or
any bonus payment or similar arrangements made to or with any of such
officers, directors, employees or agents;
(xii) incurred any capital expenditure in excess of $2,500 in any
instance or $10,000 in the aggregate except in relation to and in
connection with the completion of the work in process in the clean
room at the Lenexa facility;
(xiii) made any material alteration in the manner of keeping the
books, accounts or records of the Company or in the accounting
practices therein reflected;
(xiv) suffered any material adverse change in the results of
operations, condition (financial or otherwise), assets, liabilities
(whether absolute, accrued, contingent or otherwise), business or
prospects of the Company; or
(xv) made any payments or distributions to the Sellers, any
family member of the Sellers, or any entity controlled directly or
indirectly by any of the Sellers, including as a dividend, accrued
bonus, payment for outstanding shares or other rights in the Company,
or otherwise.
(b) Neither the Company nor the Sellers have knowledge of any existing
or threatened occurrence, event or development which, as far as can be
reasonably foreseen, could have a material adverse effect on the business,
properties, assets, condition (financial or otherwise) or prospects of the
Company.
2.26 CUSTOMERS. SCHEDULE 2.26 attached hereto sets forth a true, correct
and complete list of the names of each customer of the Company which accounted
for more than 10 percent of the revenues of the Company in the fiscal year ended
December 31, 1998 and for the nine months ended September 30, 1999. Except as
set forth on SCHEDULE 2.26, the Company has good customer relations and none of
the customers of the Company has notified the Company that it intends to
discontinue its relationship with the Company.
2.27 SUPPLIERS. SCHEDULE 2.27 attached hereto sets forth a true, correct
and complete list of (a) the names of each of the suppliers of the Company which
accounted for a dollar volume of purchases by the Company in excess of $25,000
for the fiscal year ended December
18
31, 1998, and (b) the present sole source suppliers of significant goods or
services, other than utilities, for any product with respect to which practical
alternative sources of supply are not available on comparable terms and
conditions, indicating the contractual arrangements for continued supply from
each such supplier. Except as set forth on SCHEDULE 2.27, (i) the Company has
good relations with all of its suppliers, (ii) the Company is not more than 30
days in arrears in any trade accounts payable or other payments owing to any
supplier, and (iii) no sole source supplier has indicated an inability or
unwillingness to supply significant goods or services for any product for the
next twelve months.
2.28 WARRANTY AND PRODUCT LIABILITY CLAIMS. SCHEDULE 2.28 attached hereto
contains a true, correct and complete list of all warranty and liability claims
made against the Company from January 1, 1997 through the date hereof and other
than in the ordinary course of business and not material in amount, the current
status of all such claims and the costs of all actions taken in satisfaction of
such claims. All information relative to such claims and those arising
thereafter shall be available to the Buyer from and after the date hereof. To
the best knowledge of Sellers, there exist no claims pending or threatened
against the Company for injury to person, property, its employees or any third
party suffered as a result of the sale of any product or the performance of any
service by the Company, including, but not limited to, claims arising out of the
defective or unsafe nature of its products or services. To the best knowledge of
Sellers, the Company has full and adequate insurance coverage for potential
liability claims against it. The Buyer acknowledges that the Company will have
an obligation to honor warranty and liability claims made against the Company
after the Closing.
2.29 PREPAYMENTS AND DEPOSITS. SCHEDULE 2.29 attached hereto sets forth all
prepayments and deposits in excess of $5,000 received by the Company as of the
date hereof from customers for products to be shipped or services to be
performed after the Closing Date.
2.30 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS AND SELLERS. Except as
set forth on SCHEDULE 2.30 attached hereto, the Company is not indebted,
directly or indirectly, to any person who is an officer, director or Seller of
the Company or any affiliate of any such person in any amount whatsoever other
than for salaries for services rendered, accrued bonuses or reimbursable
business expenses, all of which have been reflected on the Current Financial
Statements, and no such officer, director, Seller or affiliate is indebted to
the Company except for advances made to employees of the Company in the ordinary
course of business to meet reimbursable business expenses anticipated to be
incurred by such obligor.
2.31 BANKING FACILITIES. SCHEDULE 2.31 attached hereto sets forth a true,
correct and complete list of:
(a) each bank, savings and loan or similar financial institution in
which the Company has an account or safety deposit box and the numbers of
the accounts or safety deposit boxes maintained by the Company thereat; and
(b) the names of all persons authorized to draw on each such account
or to have access to any such safety deposit box facility, together with a
description of the authority (and conditions thereof, if any) of each such
person with respect thereto.
19
2.32 POWERS OF ATTORNEY AND SURETYSHIPS. Except as set forth on SCHEDULE
2.32 attached hereto, the Company does not have any general or special powers of
attorney outstanding (whether as grantor or grantee thereof) or has any
obligation or liability (whether actual, accrued, accruing, contingent or
otherwise) as guarantor, surety, consignor, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any person, corporation, partnership,
joint venture, association, organization or other entity, except as endorser or
maker of checks or letters of credit, respectively, endorsed or made in the
ordinary course of business.
2.33 CONFLICTS OF INTEREST. Except as set forth on SCHEDULE 2.33 attached
hereto, no officer, director or any of the Sellers of the Company nor, to the
best knowledge of the Sellers, any affiliate of any such person, now has or
within the last three years had, either directly or indirectly:
(a) an equity or debt interest in any corporation, partnership, joint
venture, association, organization or other person or entity which
furnishes or sells, or during such period furnished or sold, services or
products to the Company, or purchases or during such period purchased from
the Company any goods or services, or otherwise does or during such period
did business with the Company; or
(b) a beneficial interest in any contract, commitment or agreement to
which the Company is or was a party or under which any of them is or was
obligated or bound or to which any of their respective properties may be or
may have been subject.
2.34 REGULATORY APPROVALS. All consents, approvals, authorizations or other
requirements prescribed by any law, rule or regulation which must be obtained or
satisfied by the Company and which are necessary for the execution and delivery
by the Sellers and the Company of this Agreement or any documents to be executed
and delivered by the Sellers or the Company in connection herewith are set forth
on SCHEDULE 2.34 attached hereto and have been, or prior to the Closing Date
will be, obtained and satisfied.
2.35 OFFICERS AND DIRECTORS. SCHEDULE 2.35 attached hereto sets forth the
names of all of the officers and directors of the Company.
2.36 REAL ESTATE. SCHEDULE 2.36 attached hereto sets forth a legal
description of all real property owned by the Company or used in the conduct of
the Company's operations as of the Closing Date. All such owned properties are
free and clear of all Liens except for those Liens set forth in SCHEDULE 2.36
attached hereto. For the purposes of this paragraph, "Liens" shall mean any
lien, pledge, mortgage, security interest, lease, charge, option, right of first
refusal, easement, servitude, transfer restriction under any shareholder or
similar agreement, or any encumbrance.
2.37 DISCLOSURE. The information concerning the Company and the Sellers set
forth in this Agreement, the Exhibits and Schedules attached hereto and any
document, statement or certificate furnished or to be furnished to the Buyer
pursuant hereto, does not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated herein or
therein or necessary to make the statements and facts contained herein or
therein, in light of the circumstances in which they are made, not false and
misleading. The Sellers and the Company have disclosed to the Buyer all material
facts pertaining to the transactions
20
contemplated by this Agreement and the Exhibits hereto. Copies of all documents
heretofore or hereafter delivered or made available to the Buyer pursuant to
this Agreement were or will be complete and accurate copies of such documents.
2.38 YEAR 2000 ISSUES. Except as set forth on SCHEDULE 2.38, all aspects of
the Company have been verified by the Company and the Sellers to be, and are,
Year 2000 Compliant. As used in this Section, "Year 2000 Compliant" shall mean
that any and all communications equipment, computer hardware (including but not
limited to mainframe computers, personal computers, servers, telephone systems
and related equipment), computer software, programming languages, code,
electronic applications and systems (including but not limited to LANs, WANs,
inter/intranet systems and client/server systems), programs, files, databases,
chips, microprocessors and any and all electronic or mechanical functionalities
in any way used in connection with, relied upon or relating to a specified
subject matter (E.G., a business, product or service) accurately and completely
process (in the manner intended, including but not limited to calculating,
comparing and sequencing) on a timely basis any and all data which are in any
way dependent upon usage of calendar dates, including but not limited to dates
on or after January 1, 2000, or time.
2.39 OMRON. Prior to Closing, any and all obligations of the Company
pursuant to the terms and conditions of a certain License Agreement between
Omron Corporation and Seller dated September 11, 1995 shall be paid in full.
2.40 KTEC. Prior to Closing, any and all obligations of the Company
pursuant to the terms and conditions of a certain Applied Research Matching Fund
Agreement between the Company and Kansas Technology Enterprise Corporation
("KTEC") dated September 27, 1994 shall be paid in full.
2.41 ADVANCED DISPLAY SYSTEMS, INC. Pursuant to the terms and conditions of
a certain License Agreement between the Company and Advanced Display Systems,
Inc. dated January 1, 1999, Gross Revenues (as such term is defined in such
agreement) as of the current date are zero. There are no obligations or royalty
payments due in accordance with the terms and conditions of such agreement,
until year 2000 at which time a minimum royalty payment is due.
3. REPRESENTATIONS OF THE BUYER
The Buyer represents and warrants to the Sellers as follows:
3.1 ORGANIZATION AND AUTHORITY. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Kansas, and
has all requisite power and authority (corporate or otherwise) to own its
properties and to carry on its business as now being conducted. The Buyer has
full corporate power to execute and deliver this Agreement and the agreements
contemplated herein, and to consummate the transactions contemplated hereby and
thereby. Certified copies of the Article of Incorporation and the Bylaws of the
Buyer, as amended to date, are available to the Sellers, are complete and
correct, and no amendments have been made thereto or have been authorized since
the date thereof.
3.2 CAPITALIZATION OF THE BUYER. On the date hereof, the Buyer's authorized
capital stock consists of 5,000,000 shares of common stock, $.01 par value, of
which 2,230,500 shares
21
are issued and outstanding. All of the outstanding shares of capital stock of
the Buyer have been and on the Closing Date will be duly and validly issued and
are, or will be, fully paid and non-assessable.
3.3 AUTHORIZATION. The execution and delivery of this Agreement by the
Buyer, and the agreements to be executed by the Buyer hereunder and to be
delivered by the Buyer at Closing, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all requisite
corporate action and shareholder approval (none of which actions or approvals
has been modified or rescinded and all of which actions and approval are in full
force and effect. This Agreement and all such other agreements and written
obligations entered into and undertaken in connection with the transactions
contemplated hereby constitute the valid and legally binding obligations of the
Buyer, enforceable against the Buyer in accordance with their respective terms.
The execution, delivery and performance of this Agreement and the agreements
provided for herein, and the consummation by the Buyer of the transactions
contemplated hereby and thereby, will not, with or without the giving of notice
or the passage of time or both, (a) violate the provisions of any law, rule or
regulation applicable to the Buyer; (b) violate the provisions of the Buyer's
Articles of Incorporation or Bylaws; (c) violate any judgment, decree, order or
award of any court, governmental body or arbitrator; or (d) conflict with or
result in the breach or termination of any term or provision of, or constitute a
default under, or cause any acceleration under, or cause the creation of any
lien, charge or encumbrance upon the properties or assets of the Buyer pursuant
to, any indenture, mortgage, deed of trust or other agreement or instrument to
which the Buyer is a party or by which the Buyer is or may be bound. SCHEDULE
3.3 attached hereto sets forth a true, correct and complete list of all consent
and approvals of third parties that are required in connection with the
consummation by the Company of the transactions contemplated by this Agreement.
3.4 REGULATORY APPROVALS. All consents, approvals, authorizations and other
requirements prescribed by any law, rule or regulation which must be obtained or
satisfied by the Buyer and which are necessary for the consummation of the
transactions contemplated by this Agreement have been, or will be prior to the
Closing Date, obtained and satisfied.
3.5 DISCLOSURE. No representation or warranty by the Buyer in this
Agreement or in any Exhibit hereto, or in any list, statement, document or
information set forth in or attached to any Schedule delivered or to be
delivered pursuant hereto, contains or will contain any untrue statement of a
material fact.
4. ACCESS TO INFORMATION; PUBLIC ANNOUNCEMENTS
4.1 ACCESS TO MANAGEMENT, PROPERTIES AND RECORDS.
(a) From the date of this Agreement until the Closing Date, the
Sellers and the Company shall afford the officers, attorneys, accountants
and other authorized representatives of the Buyer free and full access upon
reasonable notice and during normal business hours to all management
personnel, offices, books and records of the Company so that the Buyer may
have full opportunity to make such investigation as it shall desire to make
of the management, and affairs of the Company, and the Buyer shall be
permitted to make abstracts from, or copies of, all such books and records.
The
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Sellers and the Company shall furnish to the Buyer such information as to
the Company as the Buyer shall reasonably request.
(b) If the Buyer, at its option and expense, elects within ten days
following the date hereof, to have a report or reports prepared by an
engineer or other professional selected by the Buyer, certifying that the
Real Estate (i) complies with all applicable federal, state and local
environmental and wetlands laws, rules and regulations and that there is
not now, and never has been, manufacture, storage, or disposal of hazardous
wastes at the Real Estate in violation of said laws, rules and regulations;
(ii) complies with all applicable building, health and fire codes, and
subdivision control laws, rules and regulations; and (iii) does not contain
any friable asbestos, the Sellers and the Company shall cooperate with such
engineer or professional to the extent necessary to prepare such reports,
including, without limitation, providing such engineer or professional
access to the Real Estate and necessary records, and arranging interviews
with employees of the Company.
(c) The Sellers and the Company shall authorize the release to the
Buyer of all files pertaining to the business or operations of the Company
held by any federal, state, county or local authorities, agencies or
instrumentalities. The Sellers' and the Company's authorization shall
specifically waive all previous claims of privilege or other restrictions,
and in any case where a release by a present or former employee of the
Company is necessary, the Sellers and the Company shall exercise their best
efforts to obtain such a release.
4.2 CONFIDENTIALITY.
(a) The existence and terms of the transaction contemplated hereby and
any information furnished by the Company, the Sellers or the Buyer to the
other party or parties in connection therewith ("Confidential Information")
shall be kept confidential by the receiving party and shall not be
disclosed to any third party except as set forth in subsection (b) below;
provided, however, that Confidential Information shall not include (i)
information known to the receiving party when received or (ii) information
that becomes generally available to the general public other than as a
result of a disclosure by the receiving party or parties or any of its or
their representatives in violation of this Agreement.
(b) Confidential Information may be disclosed (i) to the respective
directors, officers, employees, attorneys, accountants or financial
advisors of the receiving party or parties who need to know such
information for the purpose of consummating the transaction contemplated by
this Agreement (it being understood that such representatives of a
receiving party or parties shall be informed of the confidential nature of
such information and shall be directed to treat such information
confidentially and in accordance with this Agreement), (ii) with the
written consent of the disclosing party or parties, and (iii) as required
by law pursuant to the terms of a subpoena, order, civil investigative
demand, or similar process issued by a court of competent jurisdiction or
by any governmental or regulatory body or agency.
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(c) In the event that the transaction contemplated by this Agreement
is not consummated, each party agrees to return all physical manifestations
of the Confidential Information in its possession to the party or parties
furnishing such Confidential Information (including, to the extent
reasonably practicable, all copies, extracts, or other reproductions
thereof) and neither party or parties shall at any time thereafter,
directly or indirectly, disclose to third parties or use any Confidential
Information of the other party or parties.
4.3 PUBLIC ANNOUNCEMENTS. The parties agree that, prior to the Closing
Date, any and all general public pronouncements, other general public
communications, and internal communications to the Company's employees, in each
case concerning this Agreement and the purchase and sale of the Company Shares
by the Buyer, and the timing, manner and content of such disclosures, shall be
subject to the mutual agreement of the Company and the Buyer; provided, however,
that the Buyer, without prior consultation with the Sellers or the Company,
shall be entitled to file any and all public documents and make any and all
public disclosures as may be required of it under applicable securities laws.
5. PRE-CLOSING COVENANTS OF THE PARTIES
5.1 CONDUCT OF BUSINESS. From and after the date hereof and until the
Closing Date, except as otherwise contemplated by this Agreement, until the
Closing, the Sellers shall cause the Company to operate and carry on its
business only in the ordinary course consistent with past practices, and,
without limiting the generality of the foregoing, pending the Closing:
(a) PRESERVATION OF BUSINESS. The Sellers shall cause the Company to
use its best efforts to preserve the properties, assets and goodwill of its
business.
5.2 ABSENCE OF MATERIAL CHANGES. Without limiting the generality of the
covenants in Section 5.1, and without the prior written consent of the Buyer,
the Company shall not:
(a) take any action to amend its charter documents or bylaws;
(b) issue any stock, bonds or other corporate securities or grant any
option or issue any warrant to purchase or subscribe for any of such
securities or issue any securities convertible into such securities;
(c) incur any obligation or liability (absolute or contingent), except
current liabilities incurred and obligations under contracts entered into
in the ordinary course of business;
(d) declare or make any payment or distribution to the Sellers with
respect to its stock or purchase or redeem any shares of its capital stock;
(e) mortgage, pledge, or subject to any lien, charge or any other
encumbrance any of their respective assets or properties;
(f) sell, assign, or transfer any of its assets, except for (i)
inventory sold in the ordinary course of business, at a normal profit
margin, and for not less than replacement
24
cost and (ii) the LCD manufacturing facility located at 14812 W. 117th
Street, Olathe, Kansas 66062;
(g) cancel any debts or claims, except in the ordinary course of
business;
(h) merge or consolidate with or into any corporation or other entity;
(i) make, accrue or become liable for any bonus, profit sharing or
incentive payment, except for accruals under existing plans, if any, or
increase the rate of compensation payable or to become payable by it to any
of its officers, directors or employees, other than increases in the
ordinary course of business consistent with past practice;
(j) make any election or give any consent under the Code or the tax
statutes of any state or other jurisdiction or make any termination,
revocation or cancellation of any such election or any consent or
compromise or settle any claim for past or present tax due;
(k) waive any rights of material value;
(l) modify, amend, alter or terminate any of its executory contracts
of a material value or which are material in amount;
(m) take or permit any act or omission constituting a breach or
default under any contract, indenture or agreement by which it or its
properties are bound;
(n) fail to (i) preserve the possession and control of its assets and
business, (ii) keep in faithful service its present officers and key
employees, (iii) preserve the goodwill of its consumers, suppliers, agents,
brokers and others having business relations with it, and (iv) keep and
preserve its business existing on the date hereof until the Closing Date;
(o) fail to operate its business and maintain its books, accounts and
records in the customary manner and in the ordinary and regular course of
business and maintain in good repair its business premises, fixtures,
machinery, furniture and equipment;
(p) enter into any lease, contract, agreement or understanding;
(q) incur any capital expenditure in excess of $5,000 in any instance
or $20,000 in the aggregate except for those expenses related to and in
connection with the completion of the work in process in the clean room at
the Lenexa facility;
(r) engage any new management level employee;
(s) materially alter the terms, status or funding condition of any
Employee Plan;
(t) commit or agree to do any of the foregoing in the future; or
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(u) except as set forth on SCHEDULE 5.2 attached hereto, make any
payments or distributions to the Sellers, any family member of any of the
Sellers, or any entity controlled directly or indirectly by any of the
Sellers.
5.3 COMMUNICATIONS WITH CUSTOMERS, SUPPLIERS AND EMPLOYEES.
(a) Unless instructed otherwise by the Buyer in writing, the Company
will continue to accept customer orders and enter into agreements to
provide services in the ordinary course of business and consistent with
past practice for all products and services offered by the Company but
expected to be shipped or rendered, as the case may be, after the Closing
Date.
(b) The Company and the Buyer will cooperate in communications with
suppliers, customers and employees concerning the transfer of the Company
Shares to the Buyer on the Closing Date.
5.4 COMPLIANCE WITH LAWS. The Company will comply with all laws and
regulations applicable to it or to the conduct of its business and will perform
and comply with all contracts, commitments and obligations by which they are
bound.
5.5 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES. Neither the Sellers
nor the Company will take any actions that may result in any of the
representations or warranties set forth in Sections 2 hereof being untrue.
5.6 CONTINUING OBLIGATION TO INFORM. From time to time prior to the
Closing, the Sellers will deliver or cause to be delivered to the Buyer
supplemental information concerning events subsequent to the date hereof which
would render any statement, representation or warranty in this Agreement or any
information contained in any Schedule attached hereto inaccurate or incomplete
in any material respect at any time after the date hereof until the Closing
Date; PROVIDED, that none of such supplemental information shall constitute an
amendment of any statement, representation or warranty in this Agreement or any
Schedule, Exhibit or document furnished pursuant hereto.
5.7 EXCLUSIVE DEALING. Neither the Sellers nor the Company will, directly
or indirectly, through any officer, director, agent or otherwise, (a) solicit,
initiate or encourage submission of proposals or offers from any person relating
to an acquisition or purchase of all or a material portion of the assets of or
an equity interest in the Company or any merger, consolidation or business
combination with the Company, or (b) participate in any discussions or
negotiations regarding, or furnish to any other person, any non-public
information with respect to or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. The Sellers and the Company agree to
promptly notify the Buyer of any such proposal or offer, or any inquiry or
contact with respect thereto received by the Company or the Sellers.
5.8 REPORTS, TAXES. The Company will duly and timely file all reports or
returns required to be filed with federal, state, local and foreign authorities
and will promptly pay all federal, state, local and foreign taxes, assessments
and governmental charges levied or assessed
26
upon them or any of its properties (unless contesting such in good faith and
adequate provision has been made therefor).
5.9 NO SECURITIES TRADING. Sellers acknowledges that Buyer is a publicly
held company and that either (i) the improper dissemination of information
concerning this Agreement and the transactions contemplated herein, or (ii) the
trading in ASII Common Stock by any party to the Agreement or by any party
receiving information concerning the Agreement or the transactions contemplated
herein from any party to this Agreement prior to the proper public release or
announcement of the Agreement could result in a violation of the Securities
Exchange Commission's insider trading regulations. Sellers agree to refrain from
disseminating such information or engaging in such trading without the prior
written consent of Buyer.
5.10 ACKNOWLEDGMENT OF RELATED DOCUMENTS.
(a) The Sellers acknowledge and agree, in their individual capacity,
that they shall, simultaneously with the execution of this Agreement, cause
KHC of Lenexa, L.L.C. (a Kansas limited liability company wholly owned by
the Sellers) ("KHC"), to execute a certain Asset Purchase Agreement by and
between Company and KHC to be dated as of the Closing Date (the "Asset
Purchase Agreement");
(b) The parties acknowledge that the transactions contemplated by the
Asset Purchase Agreement are vital to this Agreement and to the continued
performance of the business activities and operations of Buyer; and
(c) ASII, pursuant to the transaction contemplated herein, shall
acquire 100% of the outstanding and issued shares of stock of the Company
and ASII shall cause the Company to promptly execute the Asset Purchase
Agreement immediately following the execution of this Agreement. The
parties anticipate closing the Asset Purchase Agreement on the Closing
Date.
6. BEST EFFORTS TO OBTAIN SATISFACTION OF CONDITIONS
6.1 BEST EFFORTS. The Sellers, the Company and the Buyer covenant and agree
to use their best efforts to obtain the satisfaction of the conditions to
Closing specified in this Agreement.
6.2 FURTHER ASSURANCES. The Buyer and the Sellers shall each cooperate with
each other, and execute and deliver, or cause to be executed and delivered, all
such other instruments, including instruments of conveyance, assignment and
transfer, and take all such other actions as another party may reasonably be
requested to take by the other party from time to time, consistent with the
terms of this Agreement in order to effectuate the provisions and purposes of
this Agreement.
7. CONDITIONS TO OBLIGATIONS OF THE BUYER
The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of the Buyer:
27
7.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND
THE COMPANY; COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The representations and
warranties of the Sellers shall be true on and as of the Closing Date as though
such representations and warranties were made on and as of such date (even
though they purport to have been given on a date prior to the Closing Date),
except for any changes permitted by the terms hereof or consented to in writing
by the Buyer. The Sellers and the Company shall have performed and complied with
all terms, conditions, covenants, obligations, agreements and restrictions
required by this Agreement to be performed or complied with by each of them
prior to or at the Closing Date.
7.2 PERFORMANCE BY THE SELLERS AND THE COMPANY. The Sellers shall have
tendered to the Buyer certificates transferring all of the Company Shares duly
endorsed or accompanied by duly executed stock powers (in blank) and with any
required transfer stamps affixed.
7.3 GOVERNMENTAL APPROVALS. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Sellers or the Company of the transactions contemplated
by this Agreement and the operation of the business of the Company by the Buyer
shall have consented to, authorized, permitted or approved such transactions.
7.4 CONSENT OF LENDERS, LESSORS AND OTHER THIRD PARTIES. The Sellers and
the Company shall have received all requisite consents and approvals of all
third parties whose consent or approval is required in order for the Sellers and
the Company to consummate the transactions contemplated by this Agreement,
including without limitation, those set forth on SCHEDULE 2.8 attached hereto.
7.5 BOARD OF DIRECTORS AND SHAREHOLDER APPROVAL. The Board of Directors and
the shareholders (if necessary) of the Buyer shall have duly authorized the
transactions contemplated by this Agreement.
7.6 ADVERSE PROCEEDINGS. No action or proceeding by or before any court,
administrative agency or other governmental body shall have been instituted or
threatened by any governmental body or person whatsoever which shall seek to
restrain, prohibit or invalidate the transactions contemplated by this Agreement
or which might affect the right of the Buyer to own the Company Shares or to own
or operate the business of the Company after the Closing.
7.7 OPINION OF COUNSEL. The Buyer shall have received an opinion of counsel
to the Sellers and the Company dated as of the Closing Date, in substantially
the form attached hereto as Exhibit A, and as to such other matters as may be
reasonably requested by the Buyer or its counsel.
7.8 UPDATE. The Company and the Sellers shall have provided the Buyer with
a true, correct and complete list and amount, as of the last business day
immediately preceding the Closing Date, of:
(a) the Personal Property;
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(b) the Real Property Leases;
(c) the Inventory;
(d) the Accounts Receivable, including an aging thereof;
(e) the Contracts;
(f) trade accounts payable and accrued liabilities;
(g) unfilled customer orders;
(h) all shipments made during the period from the date of this
Agreement to the Closing Date; and
(i) long-term and short-term debt.
None of the information with respect to the items referred to in clauses (a)
through (h) above shall be materially adverse from the information supplied by
the Sellers as of the date hereof and, with respect to clause (i) above, none of
such information shall reflect greater debt than is set forth in the Current
Balance Sheet. For purposes of this Section 7.8, the term "materially adverse"
shall mean any change, other than those specifically contemplated by or
permitted pursuant to the terms of this Agreement, having an economic value in
excess of $2,500.
7.9 DUE DILIGENCE. The Buyer shall have been satisfied, in its sole and
reasonable opinion, with the results of its investigation of the Company and the
Sellers. Buyer's due diligence shall in no way limit Sellers' representations,
warranties and agreements contained in this Agreement.
7.10 NONCOMPETITION AGREEMENT. Mr. Cook shall have executed and delivered
to Buyer a noncompetition agreement, substantially in the form attached hereto
as Exhibit B (the "Noncompetition Agreement").
7.11 EMPLOYMENT AGREEMENTS. Mr. Hammond and Mr. Klusman shall have executed
and delivered to Buyer employment agreements, substantially in the form attached
hereto as Exhibit C (the "Employment Agreements").
7.12 EMPLOYMENT AGREEMENT OF LARRY SHELTON. Mr. Shelton shall have executed
and delivered to Buyer an employment agreement, as agreed to by Mr. Shelton and
Buyer, and on no less favorable economic terms to Mr. Shelton than he currently
enjoys.
7.13 FINANCING. Buyer shall have obtained financing on satisfactory terms
and conditions to cover the obligations under Section 1.2.
7.14 REGISTRATION. At Closing, the Sellers shall have executed and
delivered a Registration Rights Agreement, substantially in the form attached
hereto as Exhibit D (the "Registration Agreement").
29
7.15 COMPANY AND SELLERS' APPROVAL. The Company expressly waives its rights
to purchase the stock of the Sellers and all other rights set forth in Section
26 of the Company's bylaws. Each of the Sellers hereby expressly consents to the
sale of the Company Shares by both of the other Sellers.
7.16 CLOSING DELIVERIES. The Buyer shall have received at or prior to the
Closing such documents, instruments or certificates as the Buyer may reasonably
request including, without limitation:
(a) the stock certificates representing the Company Shares duly
endorsed in accordance with Section 1.1 of this Agreement;
(b) such certificates of the Company's officers and of the Sellers and
such other documents evidencing satisfaction of the conditions specified in
this Section 7 as the Buyer shall reasonably request;
(c) certificates of the Secretary of State of the State of Kansas as
to the legal existence and good standing (including tax) of the Company in
Kansas;
(d) a cross receipt executed by the Buyer and the Sellers;
(e) such documents as are necessary to transfer to the Buyer control
over all banking accounts and safety deposit boxes of the Company;
(f) all blank stock certificates and the original stock transfer
records, the minute book and the seal of the Company, all other books,
records, surveys, data, documents, files and other information including
books of account related to the operation of the Company's business, or its
properties or assets and hard copies of any books or records or other
documents or information relating to the operation of the Company's
business or its properties or assets stored on any electronic media,
including computers;
(g) valid and binding resignations of all officers and directors of
the Company as of the Closing Date;
(h) duly executed Noncompetition Agreement;
(i) duly executed Employment Agreements from Mr. Hammond, Mr. Klusman
and Mr. Shelton; and
(j) duly executed Registration Agreement.
8. CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of the Sellers.
30
8.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE BUYER;
COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The representations and warranties of
the Buyer in this Agreement shall be true on and as of the Closing Date as
though such representations and warranties were made on and as of such date,
except for any changes consented to in writing by the Sellers. The Buyer shall
have performed and complied with all terms, conditions, covenants, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
8.2 CORPORATE PROCEEDINGS. All corporate and other proceedings required to
be taken on the part of the Buyer to authorize or carry out this Agreement shall
have been taken.
8.3 GOVERNMENTAL APPROVALS. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Buyer of the transactions contemplated by this Agreement
shall have consented to, authorized, permitted or approved such transactions.
8.4 ADVERSE PROCEEDINGS. No action or proceeding by or before any court or
other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might affect
the right of the Sellers to transfer the Company Shares.
8.5 CLOSING DELIVERIES. The Sellers shall have received at or prior to the
Closing such documents, instruments or certificates as the Sellers may
reasonably request including, without limitation:
(a) such certificates of the Buyer's officers and such other documents
evidencing satisfaction of the conditions specified in this Section 8 as
the Sellers shall reasonably request;
(b) payment of the Purchase Price, including a duly executed stock
certificate or certificates for the number of shares of ASII Common Stock
specified in Section 1.2 hereof;
(c) duly executed Noncompetition Agreements;
(d) duly executed Employment Agreements;
(e) duly executed Registration Agreement;
(f) a cross receipt executed by the Buyer and the Sellers; and
(g) a release from all lenders to the Company releasing the Sellers
from any and all personal liability they may have related to loans made to
the Company.
9. INDEMNIFICATION
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9.1 BY THE SELLERS AND THE COMPANY. If the Closing occurs, the Sellers and
the Company hereby indemnify and hold harmless the Buyer, from and against all
claims, damages, losses, liabilities, costs and expenses (including, without
limitation, settlement costs and any legal, accounting or other expenses for
investigating or defending any actions or threatened actions) (collectively, the
"Losses") in connection with each and all of the following:
(a) any material misrepresentation or breach of any representation or
warranty made by the Sellers and the Company in this Agreement;
(b) any material breach of any covenant, agreement or obligation of
the Sellers and the Company contained in this Agreement or any other
agreement, instrument or document contemplated by this Agreement;
(c) any misrepresentation contained in any statement, certificate or
schedule furnished by the Sellers and the Company pursuant to this
Agreement or in connection with the transactions contemplated by this
Agreement; and
(d) any claim relating to the Company's business or operation prior to
the Closing Date, other than any warranty or other claim relating to a
product manufactured or sold by the Company prior to the Closing Date.
9.2 BY THE BUYER. If the Closing occurs, the Buyer hereby indemnifies and
holds harmless the Sellers and the Company, from and against all claims,
damages, losses, liabilities, costs and expenses (including, without limitation,
settlement costs and any legal, accounting or other expenses for investigating
or defending any actions or threatened actions) (collectively, the "Losses") in
connection with each and all of the following:
(a) any misrepresentation or breach of any representation or warranty
made by the Buyer in this Agreement;
(b) any breach of any covenant, agreement or obligation of the Sellers
contained in this Agreement or any other agreement, instrument or document
contemplated by this Agreement;
(c) any misrepresentation contained in any statement, certificate or
schedule furnished by the Buyer pursuant to this Agreement or in connection
with the transactions contemplated by this Agreement; and
(d) any claim relating to (i) products manufactured or sold by the
Company after the Closing Date or (ii) the Company's business or operation
after the Closing Date.
9.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification under this Section 9, the Buyer, the Sellers or the Company, as
the case may be, seeking indemnification (the "Indemnified Party"), shall
promptly notify the other party (the "Indemnifying Party") the claim and, when
known, the facts constituting the basis for such claim. In the event of any such
claim for indemnification hereunder resulting from or in connection with any
claim or legal proceedings by a third party, the notice shall specify, if known,
the amount or an estimate of the amount of the liability arising therefrom. The
32
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent, which shall not be unreasonably withheld or delayed, of the
Indemnifying Party; provided, however, that if suit shall have been instituted
against the Indemnified Party and the Indemnifying Party shall not have taken
control of such suit after notification thereof as provided in Section 9.3 of
this Agreement, the Indemnified Party shall have the right to settle or
compromise such claim upon giving notice to the Indemnification Party as
provided in Section 9.3.
9.4 DEFENSE BY THE INDEMNIFYING PARTY. In connection with any claim which
may give rise to indemnity hereunder resulting from or arising out of any claim
or legal proceeding by a person other than the Indemnifying Party, at the sole
cost and expense of the Indemnifying Party, may, upon written notice to the
Indemnified Party, assume the defense of any such claim or legal proceeding if
the Indemnifying Party acknowledges to the Indemnified Party in writing the
obligation of the Indemnifying Party to indemnify the Indemnified Party with
respect to all elements of such claim. If the Indemnifying Party assume the
defense of any such claim or legal proceeding, the Indemnifying Party shall
select counsel reasonably acceptable to the Indemnified Party to conduct the
defense of such claims or legal proceedings and at the sole cost and expense of
the Indemnifying Party shall take all steps necessary in the defense or
settlement thereof. The Indemnified Party shall thereafter be entitled to
participate in and assume control of the defense of any such action if the
Indemnified Party has a reasonable basis for concluding that its interests would
be better served. The Indemnifying Party shall not consent to a settlement of,
or the entry of any judgment arising from, any such claim or legal proceeding,
without the prior written consent of the Indemnified Party (which consent shall
not be unreasonably withheld or delayed). The Indemnified Party shall be
entitled to participate in (but not control) the defense of any such action,
with its own counsel and at its own expense. If the Indemnifying Party do not
assume the defense of any such claim or litigation resulting therefrom within 30
days after the date such claim is made: (a) the Indemnified Party may defend
against such claim or litigation in such manner as it may deem appropriate,
including, but not limited to, settling such claim or litigation, after giving
notice of the same to the Indemnifying Party, on such terms as the Indemnified
Party may deem appropriate, and (b) the Indemnifying Party shall be entitled to
participate in (but not control) the defense of such action, with its counsel
and at its own expense. If the Indemnifying Party or the Indemnifying Party
thereafter seeks to question the manner in which the Indemnified Party defended
such third party claim or the amount or nature of any such settlement, the
Indemnifying Party shall have the burden to prove by a preponderance of the
evidence that the Indemnified Party did not defend or settle such third party
claim in a reasonably prudent manner.
9.5 PAYMENT OF INDEMNIFICATION OBLIGATION. All indemnification by the
Buyer, Sellers or the Company hereunder, as the case may be (to the extent not
satisfied in the manner specified in the preceding sentence), and any
indemnification by the Sellers, Buyer or the Company, as the case may be, if the
Closing does not occur, shall be effected by payment of cash or delivery of a
cashier's or certified check in the amount of the indemnification liability.
Buyer shall, in addition to other remedies then available to it, have the right
to offset the amount of such indemnification claim against payments due from
Buyer to Seller. Buyer shall only be entitled to receive payment for Losses for
which it is otherwise entitled to be compensated under this Section 9 to the
extent such Losses in the aggregate exceed $25,000 (the "Basket Amount"). If
such Losses in the aggregate exceed the Basket Amount, Buyer shall be entitled
to payment of all losses pursuant to this Section 9 that are in excess of the
Basket Amount.
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9.6 SURVIVAL OF REPRESENTATIONS. All representations and warranties made by
the Sellers and the Company in this Agreement, or in any instrument or document
furnished in connection with this Agreement or the transactions contemplated
hereby, excluding those listed below, shall survive the Closing and any
investigation at any time made by or on behalf of the Indemnified Party for a
period of eighteen months. The representations and warranties provided in
Section 2.18 shall survive the Closing and any investigation at any time made by
or on behalf of the Indemnified Party for a period of three (3) years. The
representations and warranties provided in Section 2.22 shall survive the
Closing and any investigation at any time made by or on behalf of the
Indemnified Party for a period of five (5) years.
10. TERMINATION OF AGREEMENT; OPTION TO PROCEED; DAMAGES
10.1 TERMINATION BY LAPSE OF TIME. This Agreement shall terminate at 5:00
p.m., local time, on January 31, 2000, if the transactions contemplated hereby
have not been consummated, unless such date is extended by the written consent
of the Company, the Buyer and the Sellers.
10.2 TERMINATION BY AGREEMENT OF THE PARTIES. This Agreement may be
terminated by the mutual written agreement of the parties hereto. In the event
of such termination by agreement, the Buyer shall have no further obligation or
liability to the Sellers under this Agreement, and the Sellers shall have no
further obligation or liability to the Buyer under this Agreement.
10.3 TERMINATION BY REASON OF BREACH. This Agreement may be terminated by
the Sellers if at any time prior to the Closing there shall occur a material
breach of any of the representations, warranties or covenants of the Buyer or
the failure by the Buyer to perform any condition or obligation hereunder, and
may be terminated by the Buyer, if at any time prior to the Closing there shall
occur a material breach of any of the representations, warranties or covenants
of the Sellers, the Company or the failure of the Sellers, or the Company to
perform any condition or obligation hereunder.
10.4 AVAILABILITY OF REMEDIES AT LAW. In the event this Agreement is
terminated by the Buyer or the Sellers, pursuant to the provisions of this
Section 10, the parties hereto shall have available to them all remedies
afforded to them by applicable law.
11. NOTICES
Any notices or other communications required or permitted hereunder shall
be sufficiently given if delivered personally or sent by federal express,
registered or certified mail, facsimile, postage prepaid, addressed as follows
or to such other address of which the parties may have given notice:
34
To the Buyer:
Airport Systems International, Inc.
11300 W. 89th Street
Overland Park, Kansas 66214
Facsimile No.: (913) 492-0870
Attention: Thomas C. Cargin
Vice President and Chief Financial Officer
With a copy to:
Blackwell Sanders Peper Martin LLP
Two Pershing Square, Suite 1000
2300 Main Street
P.O. Box 419777
Kansas City, Missouri 64141-6777
Facsimile No.: (816) 983-8080
Attention: Steven F. Carman
To the Sellers:
Mr. Chris Hammond
15301 W. 109th Street
Lenexa, Kansas 66219
Facsimile No.: (913) 982-5766
With a copy to:
Mr. James R. Hubbard
Norton, Hubbard, Ruzicka & Kramer L.C.
130 North Cherry
Olathe, Kansas 66051
Facsimile No.: (913) 782-2012
Unless otherwise specified herein, such notices or other communications shall be
deemed (a) received on the date delivered, if delivered personally, (b)
effective upon confirmation of transmission, if by facsimile, or (c) received
three business days after being sent, if sent by registered or certified mail.
35
12. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
Buyer, on the one hand, and the Sellers and the Company on the other hand, may
not assign their respective obligations hereunder without the prior written
consent of the other party; provided, however, that Buyer may assign this
Agreement and its rights and interests hereto to a financial lending institution
without the prior consent of the Sellers or the Company. Any assignment in
contravention of this provision shall be void. No assignment shall release the
Buyer, the Sellers, or the Company from any obligation or liability under this
Agreement.
13. ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto
with respect to the subject matter hereof and supersede all prior oral and
written and all contemporaneous oral negotiations, commitments and
understandings between such parties. The Buyer, by the consent of its Board
of Directors or officers authorized by such Board, and the Sellers may
amend or modify this Agreement, in such manner as may be agreed upon, by a
written instrument executed by the Buyer and such majority of the Sellers.
(b) If the provisions of any Schedule or Exhibit to this Agreement are
inconsistent with the provisions of this Agreement, the provisions of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to
be attached hereafter are hereby incorporated as integral parts of this
Agreement.
14. SEVERABILITY
Any provision of this Agreement which is invalid, illegal or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity, illegality or unenforceability, without affecting in any way
the remaining provisions hereof in such jurisdiction or rendering that or any
other provision of this Agreement invalid, illegal or unenforceable in any other
jurisdiction.
15. EXPENSES
Except as otherwise expressly provided herein, the Buyer, on the one hand,
and the Sellers on the other hand, will pay all fees and expenses (including,
without limitation, legal and accounting fees and expenses) incurred by them in
connection with the transactions contemplated hereby. In no event will any of
the fees or expenses incurred in connection with this transaction by the Sellers
including, without limitation, the fees and expenses of counsel to the Sellers,
be billed to or paid by the Company. The Sellers shall be responsible for
payment of all sales or transfer taxes arising out of the conveyance of the
Company Shares owned by the Sellers.
16. HEALTH INSURANCE
36
For a period of six years following the Closing Date, Buyer shall use
commercially reasonable efforts to make available to William D. Cook, at Mr.
Cook's expense, the family group medical insurance coverage generally available
from time to time to the employees of the Company.
17. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Kansas.
18. SECTION HEADINGS
The section headings are for the convenience of the parties and in no way
alter, modify, amend, limit, or restrict the contractual obligations of the
parties.
19. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall be one and the same
document.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
AIRPORT SYSTEMS INTERNATIONAL, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
DCI, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
37
SELLERS
________________________________
Chris I. Hammond
________________________________
William D. Cook
________________________________
Larry C. Klusman
38
STOCK PURCHASE AGREEMENT
BY AND AMONG
DCI, INC.,
CHRIS HAMMOND, WILLIAM COOK, LARRY KLUSMAN
AND
AIRPORT SYSTEMS INTERNATIONAL, INC.
TABLE OF CONTENTS
1. PURCHASE AND SALE OF THE COMPANY SHARES AND INTANGIBLE ASSETS.............1
1.1 PURCHASE OF THE COMPANY SHARES AND INTANGIBLE ASSETS FROM THE
SELLERS...................................................................1
1.2 PURCHASE PRICE FOR THE COMPANY SHARES AND INTANGIBLE ASSETS...........2
1.3 CLOSING...............................................................2
1.4 ALLOCATION OF PURCHASE PRICE..........................................2
1.5 DELIVERY OF SHARES....................................................2
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND EACH OF THE SELLERS.....3
2.1 TITLE TO SHARES.......................................................3
2.2 AUTHORITY.............................................................3
2.3 EXECUTION AND DELIVERY................................................3
2.4 BROKERS...............................................................3
2.5 CAPITALIZATION OF THE COMPANY.........................................3
2.6 ORGANIZATION AND STATUS OF THE COMPANY................................3
2.7 NO SUBSIDIARIES OR AFFILIATED ENTITIES................................4
2.8 AUTHORIZATION.........................................................4
2.9 FINANCIAL STATEMENTS..................................................4
2.10 ABSENCE OF UNDISCLOSED LIABILITIES...................................5
2.11 LITIGATION...........................................................5
2.12 INSURANCE............................................................5
2.13 PERSONAL PROPERTY....................................................6
2.14 INTANGIBLE PROPERTY..................................................7
2.15 LEASES...............................................................8
2.16 INVENTORY............................................................8
2.17 ACCOUNTS RECEIVABLE..................................................8
2.18 TAX MATTERS..........................................................9
2.19 BOOKS AND RECORDS...................................................10
2.20 CONTRACTS AND COMMITMENTS...........................................10
2.21 COMPLIANCE WITH AGREEMENTS AND LAWS.................................12
2.22 ENVIRONMENTAL.......................................................12
2.23 EMPLOYEE RELATIONS..................................................13
2.24 EMPLOYEE BENEFIT PLANS..............................................14
2.25 ABSENCE OF CERTAIN CHANGES OR EVENTS................................17
2.26 CUSTOMERS...........................................................19
2.27 SUPPLIERS...........................................................19
2.28 WARRANTY AND PRODUCT LIABILITY CLAIMS...............................19
2.29 PREPAYMENTS AND DEPOSITS............................................19
2.30 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS AND SELLERS............20
2.31 BANKING FACILITIES..................................................20
2.32 POWERS OF ATTORNEY AND SURETYSHIPS..................................20
2.33 CONFLICTS OF INTEREST...............................................20
2.34 REGULATORY APPROVALS................................................20
2.35 OFFICERS AND DIRECTORS..............................................21
2.36 REAL ESTATE.........................................................21
2.37 DISCLOSURE..........................................................21
2.38 YEAR 2000 ISSUES....................................................21
2.39 OMRON...............................................................21
2.40 KTEC................................................................21
2.41 ADVANCED DISPLAY SYSTEMS, INC.......................................22
3. REPRESENTATIONS OF THE BUYER.............................................22
3.1 ORGANIZATION AND AUTHORITY...........................................22
3.2 CAPITALIZATION OF THE BUYER..........................................22
3.3 AUTHORIZATION........................................................22
3.4 REGULATORY APPROVALS.................................................23
3.5 DISCLOSURE...........................................................23
4. ACCESS TO INFORMATION; PUBLIC ANNOUNCEMENTS..............................23
4.1 ACCESS TO MANAGEMENT, PROPERTIES AND RECORDS.........................23
4.2 CONFIDENTIALITY......................................................24
4.3 PUBLIC ANNOUNCEMENTS.................................................24
5. PRE-CLOSING COVENANTS OF THE PARTIES AND THE COMPANY.....................25
5.1 CONDUCT OF BUSINESS..................................................25
5.2 ABSENCE OF MATERIAL CHANGES..........................................25
5.3 COMMUNICATIONS WITH CUSTOMERS, SUPPLIERS AND EMPLOYEES...............26
5.4 COMPLIANCE WITH LAWS.................................................27
5.5 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES....................27
5.6 CONTINUING OBLIGATION TO INFORM......................................27
5.7 EXCLUSIVE DEALING....................................................27
5.8 REPORTS, TAXES.......................................................27
5.9 NO SECURITIES TRADING................................................27
5.10 ACKNOWLEDGMENT OF RELATED DOCUMENTS.................................28
6. BEST EFFORTS TO OBTAIN SATISFACTION OF CONDITIONS........................28
6.1 BEST EFFORTS.........................................................28
6.2 FURTHER ASSURANCES...................................................28
7. CONDITIONS TO OBLIGATIONS OF THE BUYER...................................28
7.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE SELLERS
AND THE COMPANY; COMPLIANCE WITH COVENANTS AND OBLIGATIONS...............28
7.2 PERFORMANCE BY THE SELLERS AND THE COMPANY...........................29
7.3 GOVERNMENTAL APPROVALS...............................................29
7.4 CONSENT OF LENDERS, LESSORS AND OTHER THIRD PARTIES..................29
7.5 BOARD OF DIRECTORS AND SHAREHOLDER APPROVAL..........................29
7.6 ADVERSE PROCEEDINGS..................................................29
7.7 OPINION OF COUNSEL...................................................29
7.8 UPDATE...............................................................29
7.9 DUE DILIGENCE........................................................30
7.10 NONCOMPETITION AGREEMENTS...........................................30
7.11 EMPLOYMENT AGREEMENTS...............................................30
7.12 EMPLOYMENT AGREEMENT OF LARRY SHELTON...............................30
7.13 FINANCING...........................................................30
7.14 Registration...........................................................30
7.15 COMPANY AND SELLERS' APPROVAL.......................................31
7.16 CLOSING DELIVERIES..................................................31
8. CONDITIONS TO OBLIGATIONS OF THE SELLERS.................................31
8.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE BUYER;
COMPLIANCE WITH COVENANTS AND OBLIGATIONS................................32
8.2 CORPORATE PROCEEDINGS................................................32
8.3 GOVERNMENTAL APPROVALS...............................................32
8.4 ADVERSE PROCEEDINGS..................................................32
8.5 CLOSING DELIVERIES...................................................32
9. INDEMNIFICATION..........................................................33
9.1 BY THE SELLERS AND THE COMPANY.......................................33
9.2 BY THE BUYER.........................................................33
9.3 CLAIMS FOR INDEMNIFICATION...........................................33
9.4 DEFENSE BY THE INDEMNIFYING PARTY....................................34
9.5 PAYMENT OF INDEMNIFICATION OBLIGATION................................34
9.6 SURVIVAL OF REPRESENTATIONS..........................................35
10. TERMINATION OF AGREEMENT; OPTION TO PROCEED; DAMAGES....................35
10.1 TERMINATION BY LAPSE OF TIME........................................35
10.2 TERMINATION BY AGREEMENT OF THE PARTIES.............................35
10.3 TERMINATION BY REASON OF BREACH.....................................35
10.4 AVAILABILITY OF REMEDIES AT LAW.....................................35
11. NOTICES.................................................................35
12. SUCCESSORS AND ASSIGNS..................................................37
13. ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS...............................37
14. SEVERABILITY............................................................37
15. EXPENSES................................................................37
16. HEALTH INSURANCE........................................................38
17. GOVERNING LAW...........................................................38
18. SECTION HEADINGS........................................................38
19. COUNTERPARTS............................................................38
Schedules to be provided by the Sellers and the Company:
Schedule 2.5 - Capitalization of the Company
Schedule 2.7 - Affiliated Entities
Schedule 2.10 - Undisclosed Liabilities
Schedule 2.11 - Litigation
Schedule 2.12 - Insurance
Schedule 2.13 - Personal Property
Schedule 2.14 - Intangible Property
Schedule 2.15 - Leases
Schedule 2.16 - Inventory
Schedule 2.17 - Accounts Receivable
Schedule 2.18 - Tax matters
Schedule 2.20 - Contracts
Schedule 2.23 - Employee Relations
Schedule 2.24 - Company Employee Plans
Schedule 2.25 - Certain Changes and Events
Schedule 2.26 - Customer List
Schedule 2.27 - Suppliers
Schedule 2.28 - Warranty and Product Liability Claims
Schedule 2.29 - Prepayments and Deposits
Schedule 2.30 - Affiliated Indebtedness
Schedule 2.31 - Banking Facilities
Schedule 2.32 - Powers of Attorney and Suretyships
Schedule 2.33 - Conflicts of Interest
Schedule 2.34 - Regulatory Approvals
Schedule to be provided by the Buyer:
Schedule 7.11 - Employment Agreements
Exhibits
A - Opinion of Sellers' Counsel
B - Noncompetition Agreement
C - Employment Agreements
D - Registration Rights Agreement
INDEX OF CERTAIN DEFINED TERMS
The terms set forth below shall have the meanings ascribed thereto in the
referenced sections:
Accounts Receivable Section 2.17
Affiliates Section 2.20
Balance Sheet Date Section 2.20
Closing Section 1.1
Closing Date Section 1.3
Code Section 2.18
Contracts Section 2.20
Current Balance Sheet Section 2.9
Current Financial Statements Section 2.9
Defined Benefit Plans Section 2.24
Company Employee Plans Section 2.24
ERISA Section 2.24
Financial Statements Section 2.9
Insurance Policies Section 2.12
Intangible Property Section 2.14
Inventory Section 2.16
Leases Section 2.15
1997 Balance Sheet Section 2.9
Personal Property Section 2.13
Purchase Price Section 1.2
Real Estate Section 2.36
Shares Section 1.1