Exhibit 10.12
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
FIGGIE INTERNATIONAL INC.
AND
COMMUNICATIONS INSTRUMENTS, INC.
RELATING TO THE ACQUISITION OF
SUBSTANTIALLY ALL THE ASSETS OF
HARTMAN ELECTRICAL MANUFACTURING
DATED AS OF JUNE 27, 1996
TABLE OF CONTENTS
SECTION HEADING PAGE NO.
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ARTICLE I - PURCHASE AND SALE............................................. 1
1.1 Sale and Purchase of Assets....................................... 1
1.2 Purchase Price.................................................... 3
1.3 Allocation of Purchase Price...................................... 3
1.4 Assumption of Liabilities......................................... 4
ARTICLE II - CLOSING, ITEMS TO BE DELIVERED, FURTHER
ASSURANCES AND THIRD PARTY CONSENTS.................................... 5
2.1 Closing........................................................... 5
2.2 Items to be Delivered at Closing.................................. 5
2.3 Further Assurances............................................... 10
2.4 Third Party Consents............................................. 10
2.5 Accounting Systems............................................... 11
ARTICLE III - REPRESENTATIONS AND WARRANTIES............................. 11
3.1 Representations and Warranties of Seller......................... 11
3.1.1 Corporate Existence.................................... 11
3.1.2 Corporate Power; Enforceable Obligations............... 12
3.1.3 No Violation........................................... 12
3.1.4 No Consent Required.................................... 12
3.1.5 Balance Sheet.......................................... 12
3.1.6 Title to Assets........................................ 13
3.1.7 Absence of Changes..................................... 13
3.1.8 Leases................................................. 13
3.1.9 Litigation............................................. 13
3.1.10 Licenses and Permits................................... 14
3.1.11 Material Agreements.................................... 14
3.1.12 Compliance with Laws; Etc.............................. 15
3.1.13 Employee Benefit Plans................................. 16
3.1.14 Brokerage.............................................. 16
3.1.15 Government Contracts................................... 16
3.1.16 Inventory.............................................. 17
3.1.17 Accounts Receivable.................................... 17
3.1.18 Ordinary Course........................................ 17
3.2 Representations and Warranties of Buyer.......................... 17
3.2.1 Corporate Existence.................................... 17
3.2.2 Corporate Power; Enforceable Obligations............... 17
3.2.3 No Violation........................................... 18
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3.2.4 No Consent Required..................................... 18
3.2.5 Brokerage............................................... 18
3.2.6 No Knowledge of Breach.................................. 18
3.2.7 No Involvement in Business.............................. 19
3.3 No Other Warranties.............................................. 19
3.4 Survival of Representations and Warranties....................... 19
ARTICLE IV - COVENANTS PENDING CLOSING................................... 19
4.1 Agreements of Seller............................................. 19
4.1.1 Business in the Ordinary Course........................... 19
4.1.2 Preservation of Assets.................................... 20
4.1.3 Employees and Business Relations.......................... 20
4.1.4 Consents and Approvals.................................... 20
4.1.5 No Negotiations........................................... 20
4.1.6 Access.................................................... 20
4.1.7 Best Efforts.............................................. 21
4.1.8 Environmental Matters..................................... 21
4.2 Agreements of Buyer.............................................. 22
4.2.1 Articles of Incorporation and By-laws..................... 22
4.2.2 Consents and Approvals.................................... 22
4.2.3 Best Efforts.............................................. 22
ARTICLE V - OTHER AGREEMENTS............................................. 22
5.1 Confidentiality.................................................. 22
5.2 Financing........................................................ 22
5.3 Investigation and Evaluation..................................... 23
5.4 Forecasts; Projections; Etc...................................... 23
5.5 Employment of Employees.......................................... 24
5.6 Publicity........................................................ 24
5.7 Access........................................................... 24
5.8 Product Recall; Jetstream Warranty Work.......................... 25
5.9 No Union Agreements.............................................. 26
5.10 Cooperation..................................................... 27
5.11 Equipment Lease................................................. 29
ARTICLE VI - CONDITIONS PRECEDENT TO THE CLOSING......................... 29
6.1 Conditions Precedent of Buyer.................................... 29
6.1.1 Representations and Warranties True on Closing Date....... 29
6.1.2 Performance by Seller..................................... 30
6.1.3 Injunction................................................ 30
6.2 Conditions Precedent of Seller................................... 31
6.2.1 Representations and Warranties True on Closing Date....... 31
6.2.2 Performance by Buyer...................................... 31
................................................................ 31
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6.2.3 Injunction................................................ 31
ARTICLE VII - INDEMNIFICATION............................................. 32
7.1 Indemnification.................................................. 32
7.2 Third Party Claims............................................... 34
7.3 Exclusivity...................................................... 35
ARTICLE VIII - MISCELLANEOUS............................................. 35
8.1 Termination...................................................... 35
8.2 Effect of Termination............................................ 35
8.3 Sales, Transfer and Documentary Taxes; Etc....................... 37
8.4 Expenses......................................................... 37
8.5 Bulk Sales Laws.................................................. 37
8.6 Contents of Agreement; Amendment................................. 37
8.7 No Assignment.................................................... 37
8.8 Waiver........................................................... 38
8.9 Notices.......................................................... 38
8.10 Ohio Law to Govern.............................................. 39
8.11 No Benefit to Others............................................ 39
8.12 Headings........................................................ 40
8.13 Schedules and Exhibits.......................................... 40
8.14 Severability.................................................... 40
8.15 Counterparts.................................................... 40
8.16 Dispute Resolution.............................................. 40
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ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 27th day of June, 1996, by and between Figgie International Inc.,
a Delaware corporation ("Seller"), and Communications Instruments, Inc., a North
Carolina corporation ("Buyer").
Seller is in the business of manufacturing high current
electromechanical relays for applications in military and commercial aerospace
markets (the "Business") through its Hartman Electrical Manufacturing division
(the "Division"). Seller desires to sell and Buyer desires to purchase
substantially all of the assets used solely in the conduct of the Business
pursuant to the terms and conditions of this Agreement for the purchase price
provided herein.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I - PURCHASE AND SALE
1.1 Sale and Purchase of Assets. At the Closing described in Section
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2.1, Seller will grant, sell, assign and transfer to Buyer, and Buyer will
purchase and accept from Seller, upon and subject to the terms and conditions of
this Agreement:
(a) all of Seller's right, title and interest in and to all of the
personal assets, properties and rights of Seller used solely in the conduct of
the Business of every kind and description, tangible and intangible, wherever
situated, including without limitation:
(i) all accounts receivable, prepaid expenses, machinery,
equipment, inventory, work-in-process, office furniture, computer software
and hardware, tools, dies,
maintenance and other supplies, stationery, catalogs, product literature
and books and records of Seller used solely in the conduct of the Business,
(ii) those personal assets and properties reflected on the May
Balance Sheet (as defined in Section 3.1.5), with only such changes therein
as shall have occurred since May 31, 1996 in the regular and ordinary
course of the Business consistent with past practice,
(iii) all patents, trademarks and other proprietary rights of
Seller used solely in the conduct of the Business and the goodwill
associated therewith,
(iv) all rights of Seller to the Hartman Electrical
Manufacturing name and derivatives thereof, and
(v) all rights of Seller under all agreements, contracts,
purchase orders, commitments, leases (including without limitation
operating leases with respect to various items of machinery, equipment and
tooling), designs, plans, drawings, bids, quotations, proposals, licenses,
permits, authorizations, instruments and other documents relating solely to
the conduct of the Business, and
(b) the Business as a going concern and its goodwill.
The assets, properties, rights and Business being sold hereunder are herein
sometimes collectively called the "Assets." Notwithstanding the foregoing, the
Assets do not include (w) the corporate seal, certificate of incorporation,
minute books, stock books, tax returns or other records having to do with the
corporate organization of Seller, (x) the rights which accrue or will accrue to
Seller under this Agreement, (y) any assets, properties or rights that do not
solely relate to the
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conduct of the Business or (z) the assets, properties or rights listed on
Exhibit A (the foregoing collectively, the "Excluded Assets").
1.2 Purchase Price. The purchase price to be paid at the Closing by
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Buyer to Seller for the Assets shall be $12,000,000 (the "Purchase Price"),
payable in cash as follows:
(a) The $50,000 deposit paid by Buyer to Seller on May 24, 1996 (the
"Deposit") shall be applied by Seller to the Purchase Price,
(b) $11,435,000 shall be delivered to Wilmington Trust, Wilmington,
Delaware by wire transfer of immediately available funds for credit to Seller's
account, Account No. 23177-5, at such bank, and
(c) $515,000 shall be delivered by wire transfer of immediately
available funds to the escrow agent (the "Escrow Agent") designated in an
environmental remediation and escrow agreement to be entered into at the Closing
in substantially the form of Exhibit B (the "Escrow Agreement") among Seller,
Buyer and the Escrow Agent, and shall be held and disbursed by the Escrow Agent
in accordance with the Escrow Agreement.
1.3 Allocation of Purchase Price. After the Closing the parties
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shall allocate the Purchase Price and the Assumed Liabilities (as defined in
Section 1.4(a)) among the Assets to be acquired hereunder. Neither Buyer nor
Seller shall take a position on any income tax return, before any governmental
agency charged with the collection of any income tax or in any judicial
proceeding that is in any way inconsistent with such allocation. If Buyer and
Seller cannot agree on a mutually acceptable allocation of the Purchase Price
and the Assumed Liabilities among the Assets, Buyer and Seller shall each
determine such allocation in the manner it considers appropriate. Buyer and
Seller each agree to prepare and file Internal Revenue Service Form 8594
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in a timely fashion in accordance with the rules under section 1060 of the
Internal Revenue Code of 1986, as amended.
1.4 Assumption of Liabilities.
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(a) At the Closing, Buyer shall assume and agree to pay, discharge
or perform, as appropriate, the following liabilities and obligations of Seller
in respect of the Business:
(i) all liabilities and obligations of Seller of the type
reflected on the May Balance Sheet (as defined in Section 3.1.5),
(ii) all liabilities and obligations of Seller of a commercial
nature arising in the ordinary course of its business between May 31, 1996
and the Closing Date (as defined in Section 2.1),
(iii) the agreements, contracts, customer purchase orders,
commitments, leases, designs, plans, drawings, bids, quotations, proposals,
licenses, permits, authorizations, instruments and other documents included
in the Assets,
(iv) warranty and service claims (including without limitation
product recalls), and
(v) those liabilities set forth in Section 5.5.
The liabilities and obligations to be assumed by Buyer at the Closing are herein
sometimes collectively called the "Assumed Liabilities." Notwithstanding the
foregoing, the Assumed Liabilities do not include any liabilities or obligations
in respect of (s) part numbers A2104 and A2105 (and all revisions thereto prior
to Closing) sold by the Division to Allied Signal ("Allied Signal") for delivery
to Jetstream Aircraft Limited ("Jetstream"), (t) Seller other than those
referred to in clauses (i)-(vi) above, (u) the Excluded Assets, (v) any
intercompany liabilities and
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obligations for taxes or professional fees, (w) any product liability claims
pending or which may be filed after the Closing Date relating to any product
manufactured and shipped before the Closing Date, (x) any claim by any employee
of the Division whose employment was or is terminated prior to the Closing Date,
(y) any claim by any employee of the Division on the Closing Date except for
claims which relate to liabilities assumed pursuant to Sections 1.4(a)(i),
1.4(a)(ii) and 5.5, or (z) any of the items listed on Exhibit C (the foregoing
collectively, the "Excluded Liabilities").
(b) After the Closing, Seller will remain responsible for, and shall
indemnify Buyer for, the Excluded Liabilities. Except as specifically provided
in Section 1.4(a), Buyer shall not assume or be responsible for any liabilities
or obligations of Seller of any nature whatsoever.
ARTICLE II - CLOSING, ITEMS TO BE DELIVERED,
FURTHER ASSURANCES AND THIRD PARTY CONSENTS
2.1 Closing. Subject to the termination rights set forth in Section
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8.1, the closing (the "Closing") of the sale and purchase of the Assets shall
take place at the offices of Benesch Friedlander Coplan & Aronoff, 2300 BP
America Building, 200 Public Square, Cleveland, Ohio 44114-2378 commencing at
10:00 A.M., local time, on July 3, 1996, or at such other date, time or place as
may be agreed upon in writing by the parties hereto. The date of the Closing is
sometimes herein referred to as the "Closing Date."
2.2 Items to be Delivered at Closing. At the Closing:
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(a) Seller shall deliver to Buyer the following:
(i) a duly executed Bill of Sale and Assignment in
substantially the form of Exhibit D,
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(ii) a duly executed Lease Agreement in substantially the form
of Exhibit E (the "Lease") regarding the Division's Mansfield, Ohio
facility (the "Mansfield Facility"),
(iii) a duly executed Escrow Agreement,
(iv) a certificate of the President or a Vice President of
Seller, dated the Closing Date, certifying that (A) the representations and
warranties of Seller contained in this Agreement or in any certificate or
document delivered by Seller to Buyer pursuant to the provisions hereof are
in all material respects true with the same effect as though such
representations and warranties were made as of such date except for changes
contemplated or permitted by this Agreement and (B) Seller has performed
and complied in all material respects with all agreements and conditions
required by this Agreement to be performed or complied with by Seller prior
to or at the Closing,
(v) an opinion dated the Closing Date of Seller's General
Counsel to the effect that:
(A) Seller has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby to be performed by it, including without
limitation to transfer title to the Assets to Buyer,
(B) this Agreement has been duly authorized, executed and
delivered by Seller and is the legal, valid and binding obligation of
Seller, except as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws
affecting the enforcement of creditors' rights in general,
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and except that the enforceability of the Agreement is subject to
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and
(C) all consents, approvals and authorizations of regulatory
authorities and governmental agencies required in connection with the
execution and delivery by Seller of this Agreement and the
consummation by Seller of the transactions contemplated hereby to be
performed by it have been obtained.
In rendering such opinion, such General Counsel may rely (1) as to
factual matters upon certificates and other documents furnished by
Seller, by officers or directors of Seller or by governmental
officials and (2) upon such other documents and information as such
counsel may deem appropriate and reasonable as a basis for such
opinion. Such opinion may also be limited to the laws of the state of
Ohio, the federal laws of the United States and the General
Corporation Law of the state of Delaware,
(vi) a copy of Seller's certificate of incorporation and all
amendments thereto, certified to be complete and correct on the Closing
Date by the Secretary or an Assistant Secretary of Seller,
(vii) an incumbency certificate for Seller dated the Closing
Date, including specimen signatures,
(viii) a copy of the resolution adopted by Seller's board of
directors relating to the transactions contemplated by this Agreement,
certified on the Closing Date to be complete and correct by the Secretary
or an Assistant Secretary of Seller, and
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(ix) an unaudited balance sheet of the Division dated as of
June 30, 1996 (the "June Balance Sheet").
(b) Buyer will deliver to Seller the following:
(i) $11,950,000 cash by wire transfers of immediately
available funds as provided in Sections 1.2(b) and 1.2(c),
(ii) a duly executed Assumption Agreement in substantially the
form of Exhibit F,
(iii) a duly executed Lease,
(iv) a duly executed Escrow Agreement,
(v) a certificate of the President or a Vice President of
Buyer, dated the Closing Date, certifying that (A) the representations and
warranties of Buyer contained in this Agreement or in any certificate or
document delivered by Buyer to Seller pursuant to the provisions hereof are
in all material respects true with the same effect as though such
representations and warranties were made as of such date except for changes
contemplated or permitted by this Agreement and (B) Buyer has performed and
complied in all material respects with all agreements and conditions
required by this Agreement to be performed or complied with by Buyer prior
to or at the Closing,
(vi) an opinion dated the Closing Date of one or more counsel
to Buyer, to the effect that:
(A) Buyer has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby to be performed by it,
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(B) this Agreement has been duly authorized, executed and
delivered by Buyer and is the legal, valid and binding obligation of
Buyer, except as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws
affecting the enforcement of creditors' rights in general, and except
that the enforceability of the Agreement is subject to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), and
(C) All consents, approvals and authorizations of regulatory
authorities and governmental agencies required in connection with the
execution and delivery by Buyer of this Agreement and the consummation
by Buyer of the transactions contemplated hereby to be performed by it
have been obtained.
In rendering such opinion, such special counsel may rely (1) as to
factual matters upon certificates and other documents furnished by
Buyer, by officers or directors of Buyer or by governmental officials
and (2) upon such other documents and information as such counsel may
deem appropriate and reasonable as a basis for such opinion. Such
opinion may also be limited to the laws of the states of Ohio and
North Carolina, the federal laws of the United States and the General
Corporation Law of the state of Delaware,
(vii) a copy of Buyer's articles of incorporation and all
amendments thereto, certified to be complete and correct on the Closing
Date by the Secretary or an Assistant Secretary of Buyer,
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(viii) an incumbency certificate for Buyer dated the Closing
Date, including specimen signatures,
(ix) a copy of all resolutions adopted by Buyer's board of
directors relating to the transactions contemplated by this Agreement,
certified on the Closing Date to be complete and correct by the Secretary
or an Assistant Secretary of Buyer and
(x) an Ohio sales tax resale certificate.
2.3 Further Assurances. Seller from time to time after the Closing,
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at Buyer's request and expense, will execute, acknowledge and deliver to Buyer
such other instruments of conveyance and transfer and will take such other
actions and execute and deliver such other documents, certifications and further
assurances as Buyer may reasonably request in order to vest more effectively in
Buyer, or to put Buyer more fully in possession of, any of the Assets, or to
better enable Buyer to pay, perform or discharge any of the Assumed Liabilities.
2.4 Third Party Consents. To the extent that Seller's rights under
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any agreement, contract, purchase order, commitment, lease, plan, drawing, bid,
quotation, proposal, license, permit, authorization, instrument or other similar
Asset to be assigned to Buyer hereunder may not be assigned without the consent
of another person which has not been obtained, neither this Agreement, the Bill
of Sale, nor any other instrument or document delivered by Seller at the Closing
shall constitute an agreement to assign the same if an attempted assignment
would constitute a breach thereof or be unlawful. If any such consent shall not
be obtained or if any attempted assignment would be ineffective or would impair
Buyer's rights under the instrument in question so that Buyer would not in
effect acquire the benefit of all such rights, Seller, to the maximum extent
permitted by law and the instrument, shall act as Buyer's agent in order to
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obtain for it the benefits thereunder and shall cooperate, to the maximum extent
permitted by law and the instrument, with Buyer in any other reasonable
arrangement designed to provide such benefits to Buyer, in each case at Buyer's
expense.
2.5 Accounting Systems. Buyer and Seller agree that, effective as of the
------------------
Closing, the accounting systems of the Division shall be transferred from Seller
to Buyer as of 12:00 midnight, June 30, 1996.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller. For purposes of this
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Section 3.1 and, to the extent applicable, any other portion of this Agreement,
"knowledge of Seller" or "best knowledge of Seller" and each phrase having
equivalent meaning (e.g., "known to Seller") shall be conclusively deemed to be
only the conscious awareness of facts or other information of Steven L.
Siemborski, James R. Mikesell or Joseph R. Murach after having made reasonable
inquiry of senior management of the Division, but without such persons being
obligated or deemed obligated to conduct or to have conducted any special
investigation or other inquiry into the affairs or business of Seller. Seller
shall not be deemed to have knowledge, actual, constructive or otherwise, of any
fact, circumstance or occurrence known (or deemed to be known) to any person
other than as set forth in the preceding sentence. Seller hereby represents and
warrants to Buyer as follows:
3.1.1 Corporate Existence. Seller is a corporation duly organized,
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validly existing and, except as set forth in Schedule 3.1.1, in good standing
under the laws of the state of Delaware. Seller is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
where the character of the properties owned or leased by it or the nature of
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the business transacted by it requires it to be so qualified, except where the
failure to be so qualified or in good standing would not have a material and
adverse effect on the Assets or the Business.
3.1.2 Corporate Power; Enforceable Obligations. Seller has all
----------------------------------------
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby to be performed by it.
This Agreement has been duly authorized, executed and delivered by Seller and is
the legal, valid and binding obligation of Seller, except as may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other laws affecting the enforcement of creditors' rights in general, and except
that the enforceability of the Agreement is subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
3.1.3 No Violation. The execution, delivery and performance of this
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Agreement by Seller do not violate (a) any law, rule or regulation to which
Seller is subject, (b) any judgment, order or injunction binding upon Seller or
(c) the certificate of incorporation or by-laws of Seller or any securities
issued by Seller.
3.1.4 No Consent Required. Except as set forth in Schedule 3.1.4, no
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consent, approval or authorization of any regulatory authority or governmental
agency is required in connection with the execution and delivery by Seller of
this Agreement or the consummation by Seller of the transactions contemplated
hereby to be performed by it.
3.1.5 Balance Sheet. Seller has delivered to Buyer and Schedule
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3.1.5 contains an unaudited balance sheet of the Division as of May 31, 1996
(the "May Balance Sheet"). Except as may otherwise be indicated therein or in
Schedule 3.1.5, the May Balance Sheet has
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been derived from the books and records of the Division and fairly presents in
all material respects the assets and liabilities of the Division as of the date
thereof in accordance with the accounting practices used by the Division.
3.1.6 Title to Assets. Seller has good, valid and marketable title
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to all of the Assets, free and clear of liens, pledges, security interests and
other encumbrances of every kind, except for (a) those items set forth in
Schedule 3.1.6, (b) liens for taxes and assessments not yet delinquent, (c)
liens for taxes, assessments and other charges, if any, the validity of which
Seller is contesting in good faith by appropriate action (all of which are
listed on Schedule 3.1.6), (d) liens of employees and laborers for current wages
not yet due and (e) restrictions not materially affecting the present use of the
Assets. Seller has previously delivered to Buyer a list of substantially all of
the fixed assets of the Division as of the date thereof.
3.1.7 Absence of Changes. Except as set forth in Schedule 3.1.7,
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since May 31, 1996, there has not been, occurred or arisen any material and
adverse change in the Assets or the Business.
3.1.8 Leases. Each lease of personal property included in the Assets
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to which Seller is a party as lessee is identified in Schedule 3.1.8 and is in
full force and effect; and true and correct copies of all such leases have been
provided to or made available to Buyer. In the case of each such lease, there
is no existing material default or material event of default by Seller as
lessee, nor does there exist any event or condition which, with notice or lapse
of time or both, would constitute a material default or material event of
default by Seller as lessee.
3.1.9 Litigation. Except as set forth in Schedule 3.1.9, there is no
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litigation, arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental,
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regulatory or administrative official, body or authority pending, or to the
knowledge of Seller threatened, which would have a material and adverse effect
on the Assets or the Business.
3.1.10 Licenses and Permits. Seller has all material licenses,
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permits and other governmental authorizations and approvals required for the
operation of the Business and the use of the Assets as currently operated and
used, except where the failure to have such licenses and permits would not have
a material and adverse effect on the Assets or the Business.
3.1.11 Material Agreements. Schedules 3.1.8 and 3.1.11 contain a
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complete and correct list, as of the date of this Agreement, of all written
agreements included in the Assets of the following types:
(a) employment contracts involving annual compensation in excess of
$100,000 with respect to any employee,
(b) collective bargaining agreements,
(c) loan agreements, notes, mortgages, indentures, security
agreements and other agreements and instruments relating to the borrowing of
money by the Division,
(d) material franchise or license agreements between the Division and
any person, other than agency, sales representative and distributorship
agreements and usage licenses granted in connection with the sale of the
Division's products or the conduct of the Business entered into in the ordinary
course of business,
(e) partnership or joint venture agreements of any kind,
(f) purchase orders and other agreements to supply products of the
Division involving in any one case in excess of $100,000, and
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(g) other agreements requiring payments by the Division in excess of
$100,000 during the remainder of any of their terms.
To the best knowledge of Seller, all of the agreements referred to in Schedule
3.1.11 are legally binding and in full force and effect; and true and correct
copies of all such agreements have been provided to or made available to Buyer.
In the case of each such agreement, except as set forth in Schedule 3.1.11 (i)
there is no existing material default or material event of default by Seller nor
(ii) does there exist any event or condition which, with notice or lapse of time
or both, would constitute a material default or material event of default by
Seller. Except as set forth in Schedule 3.1.8 or Schedule 3.1.11 hereto, no
consent of any party to the consummation of the transactions contemplated by
this Agreement is required under any of the agreements listed on such Schedules,
except for such consents the failure of which to obtain would not have a
material adverse effect on the Assets or the Business.
3.1.12 Compliance with Laws; Etc. Except as set forth in Schedule
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3.1.12, Seller in the conduct of the Business is not in violation of, and has
not received any written notice claiming that it is in violation of, (a) any
term of its certificate of incorporation or by-laws, (b) to the best knowledge
of Seller, any material agreement, contract, purchase order, commitment, lease,
plan, drawing, bid, quotation, proposal, license, permit, authorization,
instrument or other agreement included in the Assets, where in any of such cases
violation thereof would have a material and adverse effect on the Assets or the
Business, or (c) any judgment, order, ruling, law or governmental regulations
applicable to the Business or any of the Assets, where in any of such cases
violation thereof would have a material and adverse effect on the Assets or the
Business.
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3.1.13 Employee Benefit Plans. Except as listed on Schedule 3.1.13,
----------------------
Seller in the conduct of the Business does not sponsor, maintain or support, nor
is it otherwise a party to or have any liability under, any plan, fund, policy,
program, contract, arrangement, understanding or commitment, whether qualified
or not qualified for federal income tax purposes, whether formal or informal,
whether for the benefit of a single individual or more than one individual,
which is in the nature of (a) an "employee pension plan" (as defined in section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), (b) an "employee welfare benefit plan" (as defined in section 3(1)
of ERISA) or (c) an incentive, current or deferred compensation, or other
benefit or compensation arrangement for employees, former employees, their
dependents or their beneficiaries (each such plan and arrangement, a "Benefit
Plan").
3.1.14 Brokerage. No broker or finder has acted directly or
---------
indirectly for Seller 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 commission in respect thereof based in any way on
agreements, arrangements or understandings made by or, to the knowledge of
Seller, on behalf of Seller, except for Carleton, McCreary, Holmes & Co. whose
fees for services in connection with this transaction will be paid by Seller.
3.1.15 Government Contracts. Seller is not in material default under
--------------------
any government contract or subcontract to which Seller is a party. To the best
of Seller's knowledge, all of Seller's government contracts and subcontracts are
valid and enforceable and there are no outstanding claims by the government or
any prime contractors against Seller under such contracts. To the best of
Seller's knowledge, there are no facts or conditions under Seller's
-16-
control that would prevent these contracts and subcontracts from being novated
or assigned to Buyer, as appropriate.
3.1.16 Inventory. All inventory of Seller reflected on the May
---------
Balance Sheet, and all inventory of Seller acquired since the date thereof, was
acquired and has been maintained in accordance with the regular business
practices of Seller, and with the exception of certain items contained within
the inventory that may not be useable or saleable in the future conduct of the
Business, consists of items useable or saleable in the ordinary course of
business of Seller consistent with past practice. The quantities reflected in
the perpetual inventory of the Division are substantially correct in all
material respects, and the standard costs set forth therein for such items
generally reflect historical material costs thereof and are generally based on
current labor and overhead rates of the Division.
3.1.17 Accounts Receivable. All accounts receivable reflected on the
-------------------
May Balance Sheet, and all accounts receivable arising subsequent to May 31,
1996 have arisen in the ordinary course of business consistent with past
practice.
3.1.18 Ordinary Course. Since May 31, 1996, the Business has been
---------------
conducted in the ordinary course consistent with past practice.
3.2 Representations and Warranties of Buyer. Buyer hereby represents
---------------------------------------
and warrants to Seller as follows:
3.2.1 Corporate Existence. Buyer is a corporation duly organized,
-------------------
validly existing and in good standing under the laws of the state of North
Carolina.
3.2.2 Corporate Power; Enforceable Obligations. Buyer has all
----------------------------------------
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions
-17-
contemplated hereby to be performed by it. This Agreement has been duly
authorized, executed and delivered by Buyer and is the legal, valid and binding
obligation of Buyer, except as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws affecting the
enforcement of creditors' rights in general, and except that the enforceability
of the Agreement is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.2.3 No Violation. The execution, delivery and performance of this
------------
Agreement by Buyer do not violate (a) any law, rule or regulation to which Buyer
is subject, (b) any judgment, order or injunction binding upon Buyer or (c) the
articles of incorporation or by-laws of Buyer or any securities issued by Buyer.
3.2.4 No Consent Required. Except as set forth in Schedule 3.2.4, no
-------------------
consent, approval or authorization of any regulatory authority or governmental
agency is required in connection with the execution and delivery by Buyer of
this Agreement or the consummation by Buyer of the transactions contemplated
hereby to be performed by it.
3.2.5 Brokerage. Except for Naylor Capital Corporation, the fees of
---------
which are the sole responsibility of Buyer, no broker or finder has acted
directly or indirectly for Buyer 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 commission in respect thereof based in any
way on agreements, arrangements or understandings made by or, to the knowledge
of Buyer, on behalf of the Buyer.
3.2.6 No Knowledge of Breach. Except as disclosed on Schedule 3.2.6,
----------------------
neither Buyer nor its counsel, accountants or other representatives are aware of
any misrepresentation or
-18-
breach of warranty, or any basis therefor, by Seller in connection with the
transactions contemplated by this Agreement.
3.2.7 No Involvement in Business. Prior to the Closing, Buyer has
--------------------------
not and will not exercise any control or have any right, responsibility or
involvement with the operation of Seller's Mansfield operations, its employees
or the direction of its employees.
3.3 No Other Warranties. EXCEPT AS OTHERWISE PROVIDED IN SECTIONS
-------------------
3.1 AND 3.2, THERE ARE NO EXPRESS OR IMPLIED WARRANTIES THAT APPLY TO BUYER,
SELLER, THE DIVISION, THE BUSINESS, THE ASSETS, THE ASSUMED LIABILITIES OR THE
CONSUMMATION BY BUYER OR SELLER OF THE TRANSACTIONS CONTEMPLATED HEREBY. SELLER
SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY AND ANY IMPLIED
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
3.4 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made by each party in this Article III or in any
certificate delivered at the Closing shall survive the Closing for a period of
one year only, after which no claim may be made based upon any such
representation or warranty.
ARTICLE IV - COVENANTS PENDING CLOSING
4.1 Agreements of Seller. Seller covenants and agrees that, pending
--------------------
the Closing:
4.1.1 Business in the Ordinary Course. The Business shall be
-------------------------------
conducted in the ordinary course consistent with past practice, and Seller in
the conduct of the Business shall not (a) enter into any material new contracts
or incur any material new obligations (including without limitation any
collective bargaining agreements, employment contracts or employee benefit
plans),
-19-
(b) materially increase the salary of any employee of the Division, or (c) sell
or otherwise dispose of a material portion of the assets of the Division outside
the ordinary course of business.
4.1.2 Preservation of Assets. Seller shall not, without the prior
----------------------
written consent of Buyer, mortgage, pledge or subject to any new lien, security
interest or other encumbrance securing a monetary obligation, any of the Assets.
4.1.3 Employees and Business Relations. Seller will use its
--------------------------------
reasonable best efforts to keep available the services of the present employees
and agents of the Division and to maintain its relations and good will with
suppliers, customers, distributors and any others having business relations with
the Business.
4.1.4 Consents and Approvals. Seller shall use its reasonable best
----------------------
efforts to obtain or make, at the earliest practicable date and in any event
before the Closing, all consents or filings necessary to the consummation by
Seller of the transactions contemplated hereby or which are reasonably requested
by Buyer.
4.1.5 No Negotiations. Seller shall not, directly or indirectly, in
---------------
any way contact, initiate, enter into or conduct any discussions or
negotiations, or enter into any agreements, whether written or oral, with any
person with respect to the sale of all or part of the Division, the Business or
the Assets, except for transactions in the ordinary course of the Business.
4.1.6 Access. Prior to the Closing, Seller will give to Buyer's
------
officers, employees, counsel, accountants and other representatives, during
normal business hours and after reasonable notice to Seller, free and full
access to and the right to inspect all of the premises, properties, assets,
records, contracts, business plans and other documents relating solely to the
Business for the purpose of making such investigation of the Business as Buyer
reasonably shall
-20-
desire to make, provided that such investigation shall not unreasonably
interfere with the operations of the Business, and Seller will cause its
accountants to provide to Buyer's officers, employees, counsel, accountants and
other representatives, during normal business hours and after reasonable notice
to Buyer, access to each such accountant's workpapers relating solely to the
Business for the purpose of making an investigation as Buyer reasonably shall
desire to make, provided that such access shall not unreasonably interfere with
the operations of such accountant's business.
4.1.7 Best Efforts. Seller shall use its reasonable best efforts to
------------
fulfill the conditions set forth in Section 6.1 and to cause the representations
and warranties set forth in Section 3.1 to remain true and correct in all
material respects.
4.1.8 Environmental Matters. Seller shall use its reasonable best
---------------------
efforts: (a) to have Tighe & Bond complete the Phase II environmental assessment
of the Mansfield Facility specified (under the caption Site Environmental
------------------
Status) in that firm's April 30, 1996 letter to Seller, and (b) with the
- ------
assistance of Tighe & Bond, to bring the ongoing operations of the Business into
material compliance with applicable federal, state and local environmental laws,
rules and regulations. The fees and expenses of Tighe & Bond prior to the
Closing shall paid as follows:
Up to $50,000 Seller pays 100%
From $50,000 to $75,000 Buyer pays 100%
In excess of $75,000 Seller & Buyer each pay 50%
Arrangements regarding responsibility for the cost of the foregoing remediation
and compliance activities after the Closing are set forth in the Lease and the
Escrow Agreement.
-21-
4.2 Agreements of Buyer. Buyer covenants and agrees that, pending
-------------------
the Closing:
4.2.1 Articles of Incorporation and By-laws. No change shall be made
-------------------------------------
in the articles of incorporation or the by-laws of Buyer.
4.2.2 Consents and Approvals. Buyer shall use its reasonable best
----------------------
efforts to obtain or make, at the earliest practicable date and in any event
before the Closing, all consents or filings necessary to the consummation by
Buyer of the transactions contemplated hereby or which are reasonably requested
by Seller.
4.2.3 Best Efforts. Buyer shall use its reasonable best efforts to
------------
fulfill the conditions set forth in Section 6.2 and to cause the representations
and warranties set forth in Section 3.2 to remain true and correct in all
material respects.
ARTICLE V - OTHER AGREEMENTS
5.1 Confidentiality. Each of Buyer and Seller shall, and shall cause
---------------
its officers, counsel, agents and other representatives to, hold in strict
confidence, and not use or disclose to any other person without the prior
written consent of the other party hereto, all information obtained from such
other party in connection with the transactions contemplated by this Agreement,
except such information may be disclosed (a) where necessary to any regulatory
authorities or governmental agencies, (b) if required by court order or decree
or applicable law, (c) if it is publicly available as the result of a previous
authorized disclosure, (d) to a purchaser or prospective purchaser of Seller or
(e) if it is otherwise contemplated hereby.
5.2 Financing. Buyer (a) shall keep Seller apprised of the status of
---------
Buyer's financing with Bank of America for the transactions contemplated by this
Agreement, (b) at Seller's reasonable request, shall provide Seller with access
to all appropriate representatives of
-22-
Bank of America for purposes of allowing Seller to evaluate the status of such
financing, and (c) shall use its reasonable best efforts to obtain such
financing.
5.3 Investigation and Evaluation. Buyer acknowledges that (a) Buyer
----------------------------
is experienced in the operation of the type of business conducted by the
Division, (b) Buyer and its directors, officers, attorneys, accountants and
advisors have been given the opportunity to examine to the full extent deemed
necessary and desirable by Buyer all books, records and other information with
respect to the Division, the Business, the Assets and the Assumed Liabilities,
(c) Buyer has taken full responsibility for determining the scope of its
investigations of the Division, the Business, the Assets and the Assumed
Liabilities, and for the manner in which such investigations have been
conducted, and has examined the Division, the Business, the Assets and the
Assumed Liabilities to Buyer's full satisfaction, (d) Buyer is fully capable of
evaluating the adequacy and accuracy of the information and material obtained by
Buyer in the course of such investigations and (e) Buyer has not relied on
Seller with respect to any matter in connection with Buyer's evaluation of the
Division, the Business, the Assets and the Assumed Liabilities, other than the
representations and warranties of Seller specifically set forth in Section 3.1.
5.4 Forecasts; Projections; Etc. Buyer acknowledges that (a) Buyer
---------------------------
has taken full responsibility for evaluating the adequacy, completeness and
accuracy of various forecasts, projections, opinions and similar material
heretofore furnished by Seller or its representatives to Buyer in connection
with Buyer's investigations of the Division, the Business, the Assets and the
Assumed Liabilities and (b) there are uncertainties inherent in attempting to
make projections and forecasts and render opinions, Buyer is familiar with such
uncertainties, and Buyer is not relying on any projections, forecasts or
opinions furnished to it by Seller or any of its representatives.
-23-
5.5 Employment of Employees. The parties understand that Buyer has
-----------------------
not agreed in this Agreement to hire any employees presently employed by the
Division ("Division Employees"), that Buyer may determine which of Seller's
employees it wants to hire following the transfer of the Assets, and that
following the transfer of Assets Buyer will establish the initial wages, hours,
terms and conditions of employment for Buyer's employees both within and outside
the bargaining unit presently represented by the Union (as hereinafter defined).
Buyer shall pay each Division Employee, in accordance with the customary
practices and procedures of the Division, all commissions, bonuses and vacation
pay earned by such Division Employee, but unpaid, through the Closing Date.
Buyer, and not Seller, shall be fully responsible for, and Buyer shall indemnify
Seller for, all severance matters and for all matters that may arise under the
Federal Worker Adjustment and Retraining Notification Act relating to the
Division Employees.
5.6 Publicity. Neither Buyer nor Seller shall issue any press
---------
release or otherwise make any public statement (except for releases and public
statements required or advisable under federal securities laws) with respect to
the transactions contemplated hereby without first consulting with and obtaining
the approval of Buyer, in the case of Seller, or without first consulting with
and obtaining the approval of Seller, in the case of Buyer.
5.7 Access. After the Closing, Seller shall have access at all
------
reasonable times to those files and records which are part of the Assets and
shall have the right to make copies thereof at its expense. Buyer agrees to
maintain such files and records in accordance with appropriate record retention
procedures, but such obligation shall expire seven years after the Closing.
-24-
5.8 Product Recall; Jetstream Warranty Work.
---------------------------------------
(a) A "Product Recall" is for the purposes of this Agreement an
action initiated post Closing by Buyer on behalf of Seller which is intended to
retrieve from a customer or customers specific products or lots of products
manufactured and shipped by Seller prior to the Closing Date (collectively,
"Products"), for which Buyer (i) has obtained knowledge that any such Product
contains one or more defects, (ii) has determined in good faith that such
defect(s) cause the Products to (A) pose a material health and safety risk to
the customer or customers to whom such Products were sold and shipped by Seller
based on the intended use of such Products by said customer or customers or (B)
materially fail to perform the function or functions for which such Products
were designed, and (iii) has determined in good faith that there is no practical
way to effectively remedy any such defect(s) in the Products other than through
a retrieval by Buyer of the Products for repair or replacement, as necessary, to
properly remedy the defect(s) in question.
(b) Buyer shall notify Seller in advance of any proposed Product
Recall (a "Product Recall Notification"). The Product Recall Notification shall
set forth in reasonable detail (i) the identity of the Product to be recalled,
(ii) the nature of the defect(s) in question including an explanation as to why
such defect(s) give rise to the need for a Product Recall and the proposed
remedy to such defect(s), (iii) the reason Buyer believes such defect(s) cannot
be remedied through any means other than through a Product Recall, and (iv) the
identity of the customers subject to the Product Recall. Buyer shall be deemed
authorized to proceed with the Product Recall 14 days following the date that
Buyer has delivered to Seller the Product Recall Notification, provided Seller
has not notified Buyer within such 14 day period of Seller's intention to
independently investigate the Product Recall (a "Seller's Recall Objection").
Should
-25-
Buyer receive a Seller's Recall Objection, Buyer shall not proceed with the
Product Recall until Seller has satisfied itself that a Product Recall is
required and delivers written authorization to Buyer that Buyer may proceed with
the Product Recall as described in the Product Recall Notification. In no case
shall Seller unreasonably withhold authorization for a Product Recall.
(c) After the Closing, Seller shall reimburse Buyer for the repair or
replacement of the Products subject to a Product Recall at Buyer's (i) 115% of
actual cost for products and parts, (ii) prevailing labor rates and (iii) direct
and indirect overhead at 300% of direct labor costs. Seller shall make such
reimbursement payments within 30 days after receipt of invoices therefor.
(d) After the Closing, Buyer shall perform all warranty and service
work requested by Seller with respect to Products sold directly or indirectly by
the Division to Jetstream prior to the Closing Date, and Seller shall reimburse
Buyer for the repair or replacement of the Products and Buyer's (i) 115% of
actual cost for products and parts, (ii) prevailing labor rates and (iii) direct
and indirect overhead at 300% of direct labor costs. Buyer shall invoice Allied
Signal for such warranty and service work. If Allied Signal does not pay Buyer
for the work subject to the invoice, Seller shall reimburse Buyer for such work
within 30 days after receipt of notice from Buyer that Allied Signal has failed
to make payment for such work.
5.9 No Union Agreements. Prior to and after the Closing, Seller
-------------------
agrees not to conduct or enter into any discussions, negotiations or agreements
(whether written or oral) with the International Union of Electronics,
Electrical, Salaried, Machine and Furniture Workers, AFL-CIO and its Amalgamated
Local 708 (the "Union") (a) that would have a material adverse effect
-26-
on Buyer or (b) with respect to a modification of the terms of the Division's
collective bargaining agreement with the Union, that adversely affects Buyer's
obligations or rights with respect to the Union and its members. Prior to and
after the Closing, Seller agrees to keep Buyer apprised of all material
developments between Seller and the Union, where such developments indicate that
Seller will enter into any agreement with the Union.
5.10 Cooperation.
-----------
(a) After the Closing, Seller and Buyer shall fully cooperate with
each other in the defense or prosecution of any litigation or other proceeding
against or by the other party relating to or arising out of, in whole or in
part, the Business prior to, on or after the Closing (other than litigation and
other proceedings arising out of this Agreement or the transactions contemplated
hereby). The party requesting such cooperation shall pay the reasonable out-of-
pocket expenses incurred in providing such cooperation (including without
limitation attorneys' fees and expenses) by the other party and its officers,
directors, employees and agents, but shall not be responsible for reimbursing
such persons for time spent in connection with such cooperation.
(b) After the Closing, Buyer and Seller shall each (i) provide the
other with such assistance as may reasonably be requested by the other in
connection with the preparation of any tax return, audit or other examination by
any taxing authority or judicial or administrative proceedings or determination
relating to liability for taxes, (ii) retain and provide the other with any
records or other information which may be relevant to such tax return, audit or
examination, proceeding or determination, and (iii) provide the other with any
final determination of any such audit or examination, proceeding or
determination that affects any amount required to be shown
-27-
on any tax return of the other for any period. Without limiting the generality
of the foregoing, (A) with respect to any portion of a taxable period in 1996
prior to the Closing Date, for which a tax return is required to be filed after
the Closing Date and is required to include taxable income or other financial
information of the Business, Buyer shall prepare on a basis consistent with
Seller's past practices, under Seller's direction, all tax information materials
of the Business and furnish the same (including without limitation schedules and
work papers) to Seller no later than January 1, 1997 or at least 90 days prior
to the due date for the filing thereof, whichever occurs earlier; and (B) Seller
and Buyer shall retain, until the applicable statutes of limitations (including
without limitation any extensions) have expired, copies of all tax returns,
supporting work schedules and other records or information which may be relevant
to such returns for all tax periods or portions thereof ending before or
including the Closing Date and shall not destroy or otherwise dispose of any
such records without first providing Buyer (in the case of Seller) or Seller (in
the case of Buyer) with a reasonable opportunity to review and copy the same.
(c) Upon receipt by Buyer of notice, whether written or otherwise, of
any pending or threatened tax audits of or assessments against Buyer for taxes
allocable to Seller, or upon receipt by Buyer or Seller of a written notice of
any pending or threatened tax audits of or assessments against Seller for taxes
allocable to Seller or Buyer, Buyer (or Seller, as the case may be) shall notify
the other party reasonably promptly (and in any event within 15 business days of
the receipt of any notice).
(d) Buyer shall be responsible for filing tax returns in respect of
sales and use taxes of the Business for periods ending on or after the Closing
Date and for any periods ending
-28-
prior to the Closing Date for which the deadline (including without limitation
extensions) for filing such tax returns occurs after the Closing Date.
5.11 Equipment Lease. At the Closing, Seller shall lease to Buyer
---------------
and Buyer shall let from Seller the equipment located at the Division and
described on the attached Exhibit G ("Leased Equipment") on terms and conditions
and utilizing the form of Master Lease Agreement attached as Exhibit H (the
"Equipment Lease"). Buyer acknowledges that Seller intends to assign its
interest in the Equipment Lease to a third party financial institution. Buyer
shall reasonably assist Seller in such assignment, including, without
limitation, promptly providing to Seller and such prospective assignees
reasonable access to the Division premises for the purpose of inspecting the
Leased Equipment, copies of Buyer's latest annual report and audited financial
statements, unaudited financial statements, and all other information concerning
Buyer or Buyer's business as is reasonably requested by Seller or such third
parties for the purpose of underwriting the Equipment Lease or otherwise
required in connection with completing the assignment of the Equipment Lease.
ARTICLE VI - CONDITIONS PRECEDENT TO THE CLOSING
6.1 Conditions Precedent of Buyer. The obligation of Buyer to
-----------------------------
consummate the transactions contemplated by this Agreement is subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:
6.1.1 Representations and Warranties True on Closing Date. The
---------------------------------------------------
representations and warranties of Seller contained in this Agreement or in any
certificate or document delivered by Seller to Buyer pursuant to the provisions
hereof shall be in all material respects true on the
-29-
Closing Date with the same effect as though such representations and warranties
were made as of such date except for changes contemplated or permitted by this
Agreement.
6.1.2 Performance by Seller. Seller shall have performed and
---------------------
complied in all material respects with all agreements and conditions required by
this Agreement to be performed or complied with prior to or at the Closing.
6.1.3 Injunction. No injunction, writ, temporary restraining order
----------
or other order shall be in effect which restrains or prohibits the transactions
contemplated by this Agreement.
6.1.4 Jetstream Products. Seller shall have manufactured and shipped
------------------
all products of the Division subject to purchase orders with Allied Signal for
delivery to Jetstream, and neither Seller nor Buyer shall have any further
obligation to manufacture or ship part number A2104 or A2105 (and all revisions
thereto prior to Closing) to Allied Signal for delivery to Jetstream.
Notwithstanding the foregoing, should any purchase orders with Allied Signal for
delivery of product to Jetstream remain uncompleted as of the Closing Date,
Buyer and Seller will agree to an appropriate arrangement to exclude the assets
utilized by the Division in connection with the completion of such purchase
order(s) from the Assets being conveyed to Buyer at Closing, and such
arrangement will further provide that all such excluded assets will be conveyed
to Buyer at a later date when all of the open Allied Signal purchase orders have
been fully completed. Buyer may in its sole discretion determine to accept
purchase orders for part numbers A2104 and A2105 (and all revisions thereto
prior to Closing) following the Closing Date. Should Buyer accept post Closing
purchase orders for part numbers A2104 and/or A2105 (and all revisions thereto
prior to Closing), the parties acknowledge that all matters relating to these
items will be the sole responsibility of Buyer.
-30-
6.1.5 June Balance Sheet Approval. Buyer shall be satisfied that
---------------------------
there exists no material difference in the categorization of liabilities
appearing on the June Balance Sheet versus the categorization of liabilities
appearing on the May Balance Sheet.
6.2 Conditions Precedent of Seller. The obligation of Seller to
------------------------------
consummate the transactions contemplated by this Agreement is subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:
6.2.1 Representations and Warranties True on Closing Date. The
---------------------------------------------------
representations and warranties of Buyer contained in this Agreement or in any
certificate or document delivered by Buyer to Seller pursuant to the provisions
hereof shall be in all material respects true on the Closing Date with the same
effect as though such representations and warranties were made as of such date
except for changes contemplated or permitted by this Agreement.
6.2.2 Performance by Buyer. Buyer shall have performed and complied
--------------------
in all material respects with all agreements and conditions required by this
Agreement to be performed or complied with prior to or at the Closing.
6.2.3 Injunction. No injunction, writ, temporary restraining order
----------
or other order shall be in effect which restrains or prohibits the transactions
contemplated by this Agreement.
6.2.4 Jetstream Products. Seller shall have manufactured and shipped
------------------
all products of the Division subject to purchase orders with Allied Signal for
delivery to Jetstream, and neither Seller nor Buyer shall have any further
obligation to manufacture or ship part number A2104 or A2105 to Allied Signal
for delivery to Jetstream. Notwithstanding the foregoing, should any purchase
orders with Allied Signal for delivery of product to Jetstream remain
uncompleted as of the Closing Date, Buyer and Seller will agree to an
appropriate arrangement to exclude the
-31-
assets utilized by the Division in connection with the completion of such
purchase order(s) from the Assets being conveyed to Buyer at Closing, and such
arrangement will further provide that all such excluded assets will be conveyed
to Buyer at a later date when all of the open Allied Signal purchase orders have
been fully completed. Buyer may in its sole discretion determine to accept
purchase orders for part numbers A2104 and A2105 following the Closing Date.
Should Buyer accept post Closing purchase orders for part numbers A2104 and/or
A2105, the parties acknowledge that all matters relating to these items will be
the sole responsibility of Buyer.
6.2.5 Schedule 3.2.6 Approval. Seller shall be satisfied with the
-----------------------
content of Schedule 3.2.6. Should Seller elect to consummate the sale of the
Assets to Buyer as provided for in this Agreement, Seller shall indemnify Buyer
for those items set forth on Schedule 3.2.6.
ARTICLE VII - INDEMNIFICATION
7.1 Indemnification.
---------------
(a) Subject to the limitations set forth in Sections 7.1(b) and
7.1(c), Buyer and Seller agree that from and after the Closing, each shall
indemnify and hold harmless the other (the "Indemnified Party") against any
loss, liability or expense (including reasonable attorneys' fees and expenses)
caused by or resulting from (i) the failure by the party against whom
indemnification is sought (the "Indemnifying Party") to perform any covenant or
agreement which it is obligated to perform pursuant to this Agreement or (ii)
any misrepresentation or breach of warranty made by the Indemnifying Party in
this Agreement or in any certificate rendered by it pursuant hereto.
-32-
(b) No Indemnified Party shall make any claim against an Indemnifying
Party for indemnification under this Article VII with respect to a
misrepresentation or breach of warranty unless and until the aggregate amount of
all such claims against such Indemnifying Party exceeds $350,000 (the "Threshold
Amount") whereupon the Indemnified Party may claim indemnification for the
amount of such claims, or portion thereof, in excess of such Threshold Amount;
provided, however, that neither party may recover in the aggregate an amount
greater than $3,000,000 from the other pursuant to this Article VII. In
determining the amount of claims against an Indemnifying Party hereunder, the
amount of any tax benefit (federal, state or local) or insurance proceeds to be
realized or received by the Indemnified Party by reason of such claims shall be
deducted from the amount to be paid by the Indemnifying Party. Seller shall not
be liable under this Article VII for any loss, liability or expense (and no such
loss, liability or expense shall be counted against the Threshold Amount) if it
relates to any breach of the representation and warranty of Buyer set forth in
Section 3.2.6. The Indemnified Party shall promptly notify the Indemnifying
Party of any claim hereunder (including without limitation items that would be
claims if they were not below the Threshold Amount) and shall provide to the
Indemnifying Party as soon as practicable thereafter all information and
documentation necessary to support and verify the claim asserted (or which would
be asserted in not below the Threshold Amount), and the Indemnifying Party shall
be given access to all books and records in the possession or control of the
Indemnified Party which the Indemnifying Party reasonably determines to be
related to such claim.
-33-
(c) The indemnification provided for in this Article VII, to the
extent it relates to any matter other than compliance with a covenant or
agreement to be performed after the Closing, shall be limited to claims asserted
within one year after the Closing Date.
7.2 Third Party Claims. If any legal proceedings are instituted or
------------------
any claim or demand is asserted by any person in respect of which Buyer or
Seller may seek indemnification from the other pursuant to the provisions of
Section 7.1, the Indemnified Party shall promptly cause written notice of the
assertion of any such claim or demand to be made to the Indemnifying Party. The
Indemnifying Party shall have the right at any time, at its option and expense,
to defend against, negotiate or settle any such claim, and in such case the
Indemnifying Party shall not be liable for the fees and expenses of counsel
employed by the Indemnified Party. Buyer and Seller shall cooperate fully with
each other in connection with the defense, negotiation and settlement of any
such legal proceeding, claim or demand. If at any time any such claim or demand
seeks material prospective relief which would have a materially adverse effect
on the Business, the Indemnified Party shall have the right to control or assume
(as the case may be) the defense of any such claim or demand; if the Indemnified
Party should elect to exercise such right, the Indemnifying Party shall have the
right to participate in, but not control, the defense of such claim or demand at
the sole cost and expense of the Indemnifying Party, and the Indemnified Party
may not agree to any settlement without the prior consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. The Indemnifying Party
shall be subrogated to all rights and remedies of the Indemnified Party.
-34-
7.3 Exclusivity. This Article VII sets forth the only responsibility
-----------
of each party to indemnify or otherwise protect the other party against any
loss, liability or expense arising out of or related to the transactions
contemplated by this Agreement.
ARTICLE VIII - MISCELLANEOUS
8.1 Termination. This Agreement may be terminated by written notice
-----------
of termination only as follows:
(a) by mutual consent of Buyer and Seller,
(b) by either Buyer or Seller if the Closing has not occurred on or
before July 15, 1996, unless the reason that the Closing has not occurred shall
be the failure of the party seeking to terminate this Agreement to fulfill its
obligations hereunder, or
(c) by either Buyer or Seller if there has been a material
misrepresentation or material breach on the part of the other party in the
representations, warranties, covenants or agreements contained herein which is
not cured within ten business days after such other party has been notified of
the nature of such breach and the intent to terminate this Agreement pursuant to
this Section 8.1(c).
8.2 Effect of Termination.
---------------------
(a) Except as provided in Section 8.2(b), in the event of the
termination hereof as expressly permitted under Section 8.1, this Agreement
shall forthwith become void and have no effect (except for Sections 5.1 and 8.4)
and there shall be no liability in respect of this Agreement on the part of any
of Buyer or Seller or their respective officers, directors, or shareholders
except as provided in Sections 5.1 and 8.4. Notwithstanding the foregoing, if
such termination is due to the knowing material non-fulfillment of any covenant
or agreement herein
-35-
by either party hereto or the knowing material misrepresentation or knowing
material breach of warranty on the part of either such party, such party shall
be fully liable to the other party hereto for all costs and expenses (including
reasonable attorneys' fees and expenses) actually incurred in good faith by such
other party in connection with this Agreement and the transactions contemplated
hereby and for all damages sustained or incurred by such other party as a result
thereof. In the event of termination hereunder without Closing, each party
hereto shall return promptly to the other party hereto or destroy (and certify
such destruction to the other party in writing) all documents, work papers and
other material of the other party furnished or made available to such party or
its representatives or agents, and all copies thereof, and agrees that no
information received by it or its representatives or agents shall be revealed by
it or its representatives or agents to any third party or used for the advantage
of such party or any other person, except such information may be disclosed (a)
where necessary to any regulatory authorities or governmental agencies, (b) if
required by court order or decree or applicable law or (c) if it is publicly
available as a result of a previous authorized disclosure. Furthermore, in the
event of termination hereunder without Closing, Buyer covenants and agrees that,
for a period of two years following the date of such termination, it will not
offer employment to any employee of the Division.
(b) Notwithstanding the foregoing, (i) if Buyer terminates this
Agreement under Section 8.1(c) as a result of Seller's material
misrepresentation or breach of warranty, Seller shall promptly return the
Deposit to Buyer and (ii) if the Agreement is terminated for any other reason
Seller shall be entitled to retain the Deposit.
-36-
8.3 Sales, Transfer and Documentary Taxes; Etc. Seller shall pay all
-------------------------------------------
sales, transfer and documentary taxes, if any, due as a result of the transfer
of the Assets to Buyer and Buyer shall pay all affidavit, filing and
acknowledgment fees and other fees directly relating to the transfer of the
Assets.
8.4 Expenses. The parties hereto shall pay their own expenses
--------
incidental to the preparation of this Agreement, the carrying out of the
provisions of this Agreement and the consummation of the transactions
contemplated hereby.
8.5 Bulk Sales Laws. Buyer hereby waives compliance with the bulk
---------------
sales law and any other similar laws in any applicable jurisdiction in respect
of the transactions contemplated by this Agreement, and Seller shall indemnify
Buyer for any damages suffered by reason of such non compliance.
8.6 Contents of Agreement; Amendment. This Agreement sets forth the
--------------------------------
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. It shall not be amended or modified except by written
instrument duly executed by each of the parties hereto. Any and all previous
agreements and understandings between the parties regarding the subject matter
hereof, whether written or oral (and including without limitation the Letter of
Intent dated May 10, 1996 between Seller and Buyer), are superseded by this
Agreement.
8.7 No Assignment. This Agreement may not be assigned by either
-------------
party hereto without the prior written consent of the other party, provided that
Seller may assign this Agreement to any successor or successor-in-business
without such consent (whether by operation of law or otherwise) in any
transaction involving the sale or transfer of control of Seller or substantially
all of its business (whether by merger, tender, sale of assets or otherwise),
and
-37-
provided further that Buyer may assign this Agreement to any wholly owned
subsidiary of Buyer without such consent; however, Buyer shall remain fully
responsible under this Agreement notwithstanding any such assignment.
8.8 Waiver. No waiver by either party hereto, whether express or
------
implied, of any right under any provision of this Agreement shall constitute a
waiver of such party's rights under any other provision of this Agreement, nor
shall any such waiver constitute a waiver of such party's right at any other
time or unless it is made in writing and signed by the party waiving the
condition. No failure by either party hereto to take any action with respect to
any breach of this Agreement or default by the other party shall constitute a
waiver of such party's right to enforce any provision of this Agreement against
such other party or to take action with respect to such breach or default or of
any subsequent breach or default by such other party.
8.9 Notices. Any notice, request, demand, waiver, consent, approval
-------
or other communication which is required or permitted hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
telefaxed with receipt acknowledged (and with a confirmation copy also sent by
registered or certified mail return receipt requested), delivered by a
recognized commercial courier service with receipt acknowledged, or mailed by
registered or certified mail return receipt requested, as follows:
If to Buyer, to:
Communications Instruments, Inc.
P.O. Box 520
Highway 74 East
Fairview, NC 28730
Attention: Ramzi Dabbagh
Chairman and Chief Executive Officer
Telefax No.: 704-628-1439
-38-
with a required copy to:
Simpson, Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Richard Chadbourn Weisberg, Esq.
Telefax No.: 212-455-2502
If to Seller, to:
Figgie International Inc.
4420 Sherwin Road
Willoughby, OH 44094
Attention: General Counsel
Telefax No.: 216-953-2859
with a required copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
Attention: Timothy Maxwell, Esq.
Telefax No.: 215-963-5299
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as of
the date so delivered, telefaxed or mailed.
8.10 Ohio Law to Govern. This Agreement shall be governed by and
------------------
interpreted and enforced in accordance with the laws of the state of Ohio,
including without limitation all matters of construction, validity and
performance.
8.11 No Benefit to Others. The representations, warranties,
--------------------
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto and their
-39-
permitted successors and assigns, and they shall not be construed as conferring
any rights on any other persons.
8.12 Headings. All section headings contained in this Agreement are
--------
for convenience of reference only, do not form a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
8.13 Schedules and Exhibits. All Schedules and Exhibits referred to
----------------------
herein are intended to be and hereby are specifically made a part of this
Agreement.
8.14 Severability. If any provision of this Agreement or the
------------
application thereof to any person or circumstance is held invalid or
unenforceable in any jurisdiction, the remainder of this Agreement, and the
application of such provision to such person or circumstance in any other
jurisdiction or to other persons or circumstances in any jurisdiction, shall not
be affected thereby, and to this end the provisions of this Agreement shall be
severable.
8.15 Counterparts. This Agreement may be executed in any number of
------------
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
8.16 Dispute Resolution. Claims, disputes or other matters in
------------------
question between the parties to this Agreement arising out of or relating to
this Agreement or breach thereof shall be subject to and decided by arbitration
in accordance with the rules of the American Arbitration
-40-
Association currently in effect, unless the parties mutually agree otherwise,
and in accordance with the following:
(a) Demand for arbitration shall be filed in writing with the other
party to this Agreement and with the American Arbitration Association. A demand
for arbitration shall be made within a reasonable time after the claim, dispute
or other matter in question has arisen. In no event shall the demand for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statutes of limitations.
(b) Any arbitration arising out of or relating to this Agreement
shall include, by consolidation, joinder or joint filing, any additional persons
or entities not parties to this Agreement to the extent reasonably necessary to
the final resolution of the matter in controversy.
(c) All arbitration proceedings shall be heard and decided by three
(3) arbitrators, one selected by each party and the third selected by the first
two arbitrators who shall be experienced in matters similar to the subject of
the arbitration. Each party shall be responsible for payment of its own
arbitrator's fees and each party shall pay one-half (1/2) of the fee for the
third arbitrator.
(d) Each party shall be responsible for its own costs and expenses
incurred in connection with the arbitration including, without limitation,
attorney's fees.
(e) Unless the parties otherwise agree, pre-hearing discovery shall
be limited to production of documents and other things, as contemplated by Rule
34(a) of the Federal Rules of Civil Procedure.
-41-
(f) In arbitration proceedings, the award of the arbitrators shall
not be limited to a single dollar amount, but (i) shall indicate the
arbitrators' decision with respect to the various claims, disputes or other
matters in question presented by each party and (ii) shall contain a brief
statement of the reasons supporting the arbitrators' decision.
(g) The award rendered by the arbitrator or arbitrators shall be
final and binding upon all parties, judgment may be entered upon it in
accordance with applicable law in any court having jurisdiction thereof.
(h) The location for arbitration and any and all claims,
controversies or disputes arising out of or relating to this Agreement or any
breach thereof shall be Cleveland, Ohio.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
FIGGIE INTERNATIONAL INC.
By:____________________________________
As its:__________________________
COMMUNICATIONS INSTRUMENTS, INC.
By:____________________________________
As its:__________________________
-42-
EXHIBIT A
EXCLUDED ASSETS
---------------
1. Cash, checks and equivalents
2. Prepaid insurance
3. All real property interests, and the improvements and fixtures
thereon and thereto, relating to the Mansfield Facility
4. Assets financed under two capital leases with IBM Credit
Corporation (supplement #s 174947 and C00232814)
5. Labor Agreement, entered into March 10, 1995, between the
Division and the International Union of Electronics, Electrical,
Salaried, Machine and Furniture Workers (AFL-CIO), and its
Amalgamated Local 708
6. Equipment assets (which are not recorded as assets
of the Division) at Interstate Electronics Corporation of
approximately $100,100 that relate to the manufacture of the
Boeing 777 Electrical Load Management System and are listed as
Attachment C to Appendix E to the ELMS Purchase Order dated May
9, 1996
EXHIBIT B
ENVIRONMENTAL REMEDIATION AND ESCROW AGREEMENT
----------------------------------------------
EXHIBIT C
EXCLUDED LIABILITIES
--------------------
1. Capital Leases with IBM Credit Corporation (supplement Nos. 174947 and
C00232814)
2. Any Benefit Plans, except for claims which relate to liabilities
assumed pursuant to Sections 1.4(a)(i), 1.4(a)(ii) and 5.5
3. Sections 601-608 of ERISA (COBRA)
EXHIBIT D
BILL OF SALE AND ASSIGNMENT
---------------------------
Bill of Sale and Assignment, dated ________, 1996, from Figgie
International Inc., a Delaware corporation ("Seller"), to Communications
Instruments, Inc., a North Carolina corporation ("Buyer").
W I T N E S S E T H:
-------------------
WHEREAS, by an Asset Purchase Agreement dated as of June 27, 1996 (the
"Agreement") between Seller and Buyer, Seller has agreed to sell to Buyer the
assets, properties, rights and business described and referred to in Section 1.2
of the Agreement (collectively, the "Assets"); and
WHEREAS, Seller is currently executing and delivering this Bill of
Sale and Assignment to Buyer for the purpose of selling and assigning to Buyer
all of Seller's right, title and interest in and to the Assets;
NOW, THEREFORE, in consideration of the purchase price provided in the
Agreement and other good and valuable consideration, and intending to be legally
bound, Seller hereby grants, sells, assigns and transfers to Buyer, its
successors and assigns all of Seller's right, title and interest in and to all
of the Assets,
TO HAVE AND TO HOLD the same, including the appurtenances thereof,
unto Buyer, its successors and assigns forever, to its and their own proper use
and behalf; and Seller hereby warrants title to such Assets unto Buyer, its
successors and assigns to the full extent warranted in the Agreement.
1. Nothing in this instrument, express or implied, is intended or
shall be construed to confer upon or give to any person, firm or corporation
other than Buyer, its successors and assigns any remedy or claim under or by
reason of this instrument or any term, covenant, condition, promise or agreement
hereof, and all of the terms, covenants, conditions, promises and agreements
contained in this instrument shall be for the sole and exclusive benefit of
Buyer, its successors and assigns.
2. Neither the making nor the acceptance of this instrument shall
enlarge, restrict or otherwise modify the terms of the Agreement or constitute a
waiver or release by Seller or Buyer of any liabilities, duties or obligations
imposed upon them by the terms of the Agreement, including without limitation
the representations, warranties, covenants, agreements and other provisions of
the Agreement.
3. This instrument is being executed by Seller and shall be binding
upon Seller, its successors and assigns for the uses and purposes set forth and
referred to above, and shall be effective the date hereof.
4. This instrument shall be governed by and enforced in accordance
with the laws of the state of Ohio.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale and Assignment
to be duly executed on the date first above written.
FIGGIE INTERNATIONAL INC.
By:________________________________
As its:______________________
RECEIPT OF THE FOREGOING BILL OF SALE AND ASSIGNMENT
ACKNOWLEDGED ON ________, 1996
COMMUNICATIONS INSTRUMENTS, INC.
By:________________________________
As its:______________________
D-2
EXHIBIT E
LEASE AGREEMENT
---------------
EXHIBIT F
ASSUMPTION AGREEMENT
--------------------
Assumption Agreement, dated ________, 1996, from Communications
Instruments, Inc., a North Carolina corporation ("Buyer"), to Figgie
International Inc., a Delaware corporation ("Seller").
W I T N E S S E T H:
-------------------
WHEREAS, by an Asset Purchase Agreement dated as of June 27, 1996 (the
"Agreement") between Seller and Buyer, Seller has agreed to sell to Buyer the
assets, properties, rights and business described and referred to in Section 1.2
of the Agreement (collectively, the "Assets"); and
WHEREAS, Buyer has agreed in Section 1.4 of the Agreement that at the
closing for the purchase and sale of the Assets it would assume and agree to
pay, discharge or perform, as appropriate, certain liabilities and obligations
of Seller (the "Assumed Liabilities"); and
WHEREAS, Buyer wishes to provide by this instrument for such
assumption of the Assumed Liabilities;
NOW, THEREFORE, in consideration of the terms and conditions of the
Agreement and other good and valuable consideration, and intending to be legally
bound, Buyer hereby assumes and agrees to pay, discharge or perform, as
appropriate, the Assumed Liabilities only to the extent and as provided in
Section 1.4 of the Agreement.
1. Nothing in this instrument, express or implied, is intended or
shall be construed to confer upon or give to any person, firm or corporation
other than Seller, its successors and assigns any remedy or claim under or by
reason of this instrument or any term, covenant, condition, promise or agreement
hereof, and all of the terms, covenants, conditions, promises and agreements
contained in this instrument shall be for the sole and exclusive benefit of
Seller, its successors and assigns.
2. Neither the making nor the acceptance of this instrument shall
enlarge, restrict or otherwise modify the terms of the Agreement or constitute a
waiver or release by Seller or Buyer of any liabilities, duties or obligations
imposed upon them by the terms of the Agreement, including without limitation
the representations, warranties, covenants, agreements and other provisions of
the Agreement.
3. This instrument is being executed by Buyer and shall be binding
upon Buyer, its successors and assigns for the uses and purposes set forth and
referred to above, and shall be effective the date hereof.
4. This instrument shall be governed by and enforced in accordance
with the laws of the state of Ohio.
IN WITNESS WHEREOF, Buyer has caused this Assumption Agreement to be
duly executed on the date first above written.
COMMUNICATIONS INSTRUMENTS, INC.
By:__________________________________
As its:________________________
RECEIPT OF THE FOREGOING ASSUMPTION AGREEMENT
ACKNOWLEDGED ON ________, 1996
FIGGIE INTERNATIONAL INC.
By:__________________________________
As its:________________________
F-2
EXHIBIT G
EQUIPMENT TO BE LEASED FROM SELLER AT THE CLOSING
-------------------------------------------------
EXHIBIT H
MASTER LEASE AGREEMENT
----------------------
ASSET PURCHASE AGREEMENT
between FIGGIE INTERNATIONAL INC.
and COMMUNICATIONS INSTRUMENTS, INC.
Dated as of June 27, 1996