SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13D - 1(A) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13-D-2(A)
(AMENDMENT NO. ________)*
AVIATION SALES COMPANY
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(Name of Issuer)
COMMON STOCK, $.001 PAR VALUE
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(Title of Class of Securities)
053672101
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(CUSIP Number)
PHILIP B. SCHWARTZ, ESQ.
AKERMAN, SENTERFITT & EIDSON, P.A.
ONE S.E. THIRD AVE., MIAMI, FL 33131
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
JULY 31, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
statement because of Rule 13d-1(b)(3) or (4), check the following box: [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, SEE the
Notes).
<PAGE>
SCHEDULE 13D
CUSIP PAGE 2 OF 10 PAGES
NO. 053672101
NAME OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NOs. OF ABOVE PERSONS
CAMBRIDGE CAPITAL FUND, L.P. (13-3468962)
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OF PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
675,995 SHARES OF COMMON STOCK
NUMBER OF --------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0
OWNED BY --------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 675,995 SHARES OF COMMON STOCK
PERSON --------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
675,995 SHARES OF COMMON STOCK
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.6%
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14 TYPE OF REPORTING PERSON*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP PAGE 3 OF 10 PAGES
NO. 053672101
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOs. OF ABOVE PERSONS
GEORGE F. BAKER, III
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OF PLACE OF ORGANIZATION
USA
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7 SOLE VOTING POWER
72,002 (COMPRISES OPTIONS TO PURCHASE 72,002
SHARES OF COMMON STOCK)
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8 SHARED VOTING POWER
973,774 (INCLUDES 675,995 SHARES OF COMMON
STOCK HELD BY CAMBRIDGE CAPITAL FUND,
NUMBER OF L.P., AND 297,779 SHARES OF COMMON
SHARES STOCK HELD BY BAKER NYE, L.P.)
BENEFCIALLY --------------------------------------------------------------
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH 72,002 (COMPRISES OPTIONS TO PURCHASE 72,002
REPORTING SHARES OF COMMON STOCK)
PERSON --------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
973,774 (INCLUDES 675,995 SHARES OF COMMON
STOCK HELD BY CAMBRIDGE CAPITAL
FUND, L.P., AND 297,779 SHARES OF
COMMON STOCK HELD BY BAKER NYE,
L.P.)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,045,776 (INCLUDES OPTIONS TO PURCHASE 72,002 SHARES OF COMMON
STOCK, 675,995 SHARES OF COMMON STOCK HELD BY CAMBRIDGE
CAPITAL FUND, L.P., AND 297,779 SHARES OF COMMON STOCK
HELD BY BAKER NYE, L.P.)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.7%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP PAGE 4 OF 10 PAGES
NO. 053672101
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOs. OF ABOVE PERSONS
RICHARD B. NYE
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OF PLACE OF ORGANIZATION
U.S.A.
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7 SOLE VOTING POWER
0
--------------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF 973,774 (INCLUDES 675,995 SHARES OF COMMON
SHARES STOCK HELD BY CAMBRIDGE CAPITAL FUND,
BENEFICIALLY L.P. AND 297,779 SHARES OF COMMON
OWNED BY STOCK HELD BY BAKER NYE, L.P.)
EACH --------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH --------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
973,774 (INCLUDES 675,995 SHARES OF COMMON
STOCK HELD BY CAMBRIDGE CAPITAL FUND,
L.P. AND 297,779 SHARES OF COMMON
STOCK HELD BY BAKER NYE, L.P.)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
973,774 (INCLUDES 675,995 SHARES OF COMMON STOCK HELD BY
CAMBRIDGE CAPITAL FUND, L.P. AND 297,779 SHARES OF
COMMON STOCK HELD BY BAKER NYE, L.P.)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.1%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP PAGE 5 OF 10 PAGES
NO. 053672101
ITEM 1. SECURITY AND ISSUER
This statement on Schedule 13D relates to the shares of Common
Stock, $.001 par value per share (the "Shares") of Aviation
Sales Company (the "Registrant" or "Company"). The principal
executive offices of the Registrant are located at 6905 N.W.
25th Street, Miami, FL 33122.
ITEM 2. IDENTITY AND BACKGROUND
(a) This statement on Schedule 13D is being filed on
behalf of (i) Cambridge Capital Fund, L.P.
("Cambridge"), (ii) George F. Baker, III ("Baker"),
and (iii) Richard B. Nye ("Nye").
(b) (i) Cambridge is a Delaware limited partnership
with its principal place of business at 767
Fifth Avenue, Suite 2800, New York, NY 10153.
(ii) The principal business address of both Baker
and Nye is 767 Fifth Avenue, Suite 2800, New
York, NY 10153.
(c) Cambridge is an investment limited partnership. Each
of Baker and Nye is a managing general partner of
Cambridge. In addition to the managing general
partners, the general partners of Cambridge and their
principal occupations are set forth on Schedule A
attached hereto and incorporated herein by reference.
(d) During the last five years, neither Cambridge nor any
of its general partners has been convicted in a
criminal proceeding (excluding traffic violations or
similar misdemeanors).
(e) During the last five years, neither Cambridge, nor
any of its general partners has been a party to a
civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or
final order enjoining future violations of or
prohibiting or mandating laws or finding any
violation with respect to such laws.
<PAGE>
CUSIP PAGE 6 OF 10 PAGES
NO. 053672101
(f) Cambridge is a Delaware limited partnership. Each of its
general partners are U.S. citizens.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Cambridge originally acquired for investment purposes shares of
common stock of Whitehall Corporation, a Delaware corporation
("Whitehall"), on margin and using its working capital. Pursuant to
the Merger Agreement (as defined below), shares of Whitehall common
stock were converted into shares of the Common Stock of the
Registrant. No part of the purchase price of the shares of Whitehall
common stock (or the Registrant's Common Stock upon conversion) was
represented by funds or other consideration otherwise borrowed or
obtained for the specific purpose of acquiring, holding, trading or
voting the shares of such stock. Should Cambridge make additional
purchases of the Registrant's Common Stock, it reserves the right to
purchase such additional shares on margin or with funds or other
consideration borrowed or otherwise obtained for the purpose of
acquiring, holding, trading or voting such shares. In addition,
Cambridge may margin or otherwise use the shares of the Registrant's
Common Stock presently owned by it as collateral for the purposes of
obtaining loans. In addition, pursuant to the Merger Agreement,
Baker, who held options to purchase shares of common stock of
Whitehall, had such options converted into options to purchase shares
of the Common Stock of the Registrant.
ITEM 4. PURPOSE OF TRANSACTION
On July 31, 1998 (the "Effective Time"), the Registrant consummated a
merger (the "Merger") pursuant to an Agreement and Plan of Merger
(the "Merger Agreement") among the Registrant, WHC Acquisition Corp.,
a Delaware corporation and a wholly-owned subsidiary of the
Registrant ("Sub") and Whitehall in a transaction, pursuant to which
each outstanding share of common stock of Whitehall was converted
into .5143 shares of the Registrant's Common Stock. In addition, at
the Effective Time, outstanding options to purchase shares of
Whitehall common stock were converted into a right to purchase that
number of shares of the Registrant's Common Stock as the holder would
have been entitled to receive had such holder exercised such options
prior to the Effective Time and participated in the Merger.
Accordingly, the shares of Registrant's Common Stock acquired by
Cambridge were a result of such share-for-share exchange. In
addition, the options to purchase shares of the Common Stock of the
Registrant acquired
<PAGE>
CUSIP PAGE 7 OF 10 PAGES
NO. 053672101
by Baker were also a result of such exchange. Pursuant to the Merger,
Baker and Jeffrey N. Greenblatt ("Greenblatt"), a general partner of
Cambridge, were both appointed as directors of the Registrant.
Depending upon then general economic and business conditions, the
financial condition and results of operations of the Registrant, and
the financial requirements of Cambridge, Baker and Nye, respectively,
each of such party may seek to acquire additional securities of the
Registrant, may seek to dispose of all or a portion of its respective
investments in the Registrant, or may continue to hold said shares
for its own account. Neither Cambridge, nor Baker nor Nye has any
current plans or proposals that may have or which may relate to or
would result in (a) the acquisition by any person of additional
securities of the Registrant, or the disposition of securities of the
Registrant; (b) an extraordinary corporate transaction, such as a
merger, reorganization or liquidation, involving the Registrant or
any of its subsidiaries; (c) a sale or transfer of a material amount
of assets of the Registrant or any of its subsidiaries; (d) any
change in the present Board of Directors or management of the
Registrant, including any plans or proposals to change the number or
term of directors or to fill any existing vacancies on the Board of
Directors; (e) any material change in the present capitalization or
dividend policy of the Registrant; (f) any other material change in
the Registrant's business or corporate structure; (g) any changes in
the Registrant's charter, bylaws or instruments corresponding thereto
or other actions which may impede the acquisition of control of the
Registrant by any person; (h) causing a class of securities of the
Registrant to be delisted from a national securities exchange or
cease to be authorized to be quoted in an inter-dealer quotation
system of a registered national securities association; (i) causing a
class of equity securities of the Registrant to become eligible for
termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934; or (j) any actions similar to any of
those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) Cambridge may be deemed to directly beneficially own 675,995
shares of the Registrant's Common Stock or approximately 5.6%
of the total issued and outstanding shares of the
Registrant's Common Stock (based on 11,989,164 shares of the
Registrant's Common Stock issued and outstanding at the close
of business on August 12, 1998, as reported by the
Registrant's transfer agent). All such shares
<PAGE>
CUSIP PAGE 8 OF 10 PAGES
NO. 053672101
are owned of record by Cambridge which has the sole voting
and dispositive power as to such shares.
(b) In addition to each being managing general partners of
Cambridge, Baker and Nye are also each managing general
partners of Baker Nye, L.P. ("Baker Nye"). Baker Nye may be
deemed to directly beneficially own 297,779 shares of the
Registrant's common stock or approximately 2.5% of the total
issued and outstanding shares of the Registrant's Common
Stock (based on 11,989,164 shares of the Registrant's Common
Stock issued and outstanding at the close of business on
August 12, 1998, as reported by the Registrant's transfer
agent). All such shares are owned of record by Baker Nye,
which has the sole voting and dispositive power as to such
shares.
Pursuant to the limited partnership agreements of both
Cambridge and Baker Nye, each partnership is managed by the
managing general partners, and no general partner other than
the managing general partners of each partnership, has the
power to vote or to direct the vote or to dispose or direct
the disposition of the Common Stock of the Registrant owned
by each such partnership. Accordingly, Baker and Nye, as the
managing general partners of both Cambridge and Baker Nye,
may be deemed to have the shared power to direct the vote or
the disposition of the shares of Common Stock of the
Registrant held by both Cambridge and Baker Nye, and
accordingly, may be deemed, for purposes of determining
beneficial ownership pursuant to Rule 13d-3 of the Act, to
each be indirect beneficial owners of the 675,995 shares of
Common Stock of the Registrant held by Cambridge and the
297,779 shares of the Common Stock of the Registrant held by
Baker Nye (or, in the aggregate, 7.8% of the total issued and
outstanding shares of the Registrant's Common Stock). Each of
Baker and Nye hereby disclaim beneficial ownership of such
shares held by Cambridge and Baker Nye, for any other
purpose. In addition, Baker is deemed to own directly,
options to purchase an additional 72,002 shares of the
Registrant's Common Stock over which he has sole voting and
dispositive power or an additional .60% of the total issued
and outstanding shares of the Registrant's Common Stock
(based on 11,989,164 shares of the Registrant's Common Stock
issued and outstanding at the close of business on August 12,
1998, as reported
<PAGE>
CUSIP PAGE 9 OF 10 PAGES
NO. 053672101
by the Registrant's transfer agent).
No other person, other than as set forth herein, is known to
have the right to receive or the power to direct receipt of
dividends from, or the proceeds from the sale of, the
aforementioned shares held by Cambridge, Baker Nye, Baker and
Nye, respectively.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Cambridge and Baker have certain registration rights with respect to
the Registrant's Common Stock owned by each such party. There are no
other contracts, arrangements or relationships between Cambridge or
Baker or Nye on the one hand and Registrant on the other hand, other
than as set forth in the Merger Agreement.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit A - Joint Filing Agreement
Exhibit B - Merger Agreement.
<PAGE>
CUSIP PAGE 10 OF 10 PAGES
NO. 053672101
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: August 31, 1998
Cambridge Capital Fund, L.P.
By: /s/ GEORGE F. BAKER, III
--------------------------------------
George F. Baker, III, Managing General Partner
--------------------------------------
Name/Title
/s/ GEORGE F. BAKER, III
--------------------------------------
George F. Baker, III
/s/ RICHARD B. NYE
--------------------------------------
Richard B. Nye
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS OF
NAME OCCUPATION ORGANIZATION ADDRESS
- ---- ---------- ------------ -------
<S> <C> <C> <C>
George F. Baker, III Investment Professional(1) Investments 767 Fifth Ave.
Suite 2800
NY, NY 10153
Richard B. Nye Investment Professional(2) Investments 767 Fifth Ave.
Suite 2800
NY, NY 10153
Jeffrey N. Greenblatt Investment Professional(3) Investments 767 Fifth Ave.
Suite 2800
NY, NY 10153
</TABLE>
(1) Managing general partner of both Cambridge Capital Fund, L.P. and Baker Nye,
L.P.
(2) Managing general partner of both Cambridge Capital Fund, L.P. and Baker Nye,
L.P.
(3) General partner of both Cambridge Capital Fund, L.P. and Baker Nye, L.P.
<PAGE>
EXHIBIT A
JOINT FILING AGREEMENT
(Pursuant to Rule 13d-1(f))
The undersigned hereby agree this 31 day of August 1998 that the statement
on Schedule 13D to which this agreement is attached is, and any amendment
thereto will be, filed with the U.S. Securities and Exchange Commission on
behalf of each of the undersigned. This agreement may be executed in any number
of counterparts, each of which shall be deemed an original but all together
shall constitute one and the same agreement.
Cambridge Capital Fund, L.P.
By: /s/ GEORGE F. BAKER, III
--------------------------------------
George F. Baker, III, Managing General Partner
--------------------------------------
Name/Title
/s/ GEORGE F. BAKER, III
--------------------------------------
George F. Baker, III
/s/ RICHARD B. NYE
--------------------------------------
Richard B. Nye
<PAGE>
EXHIBIT B
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is dated as of March 26, 1998 (the
"Agreement") by and among Aviation Sales Company, a Delaware corporation
("AVS"), WHC Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of AVS ("AVS Sub"), and Whitehall Corporation, a Delaware
corporation (the "Company").
WHEREAS, the Board of Directors of each of AVS and the Company have
determined that a business combination between AVS and the Company merging
their respective businesses is in the best interests of their respective
companies and stockholders and accordingly have agreed to effect the merger
provided for herein upon the terms and subject to the conditions set forth
herein; and
WHEREAS, it is the intention of the parties to this Agreement that (a) for
federal income tax purposes, the merger provided for herein shall qualify as a
"reorganization" within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"); and (b) for accounting purposes, the merger
provided for herein shall qualify as a "pooling of interests"; and
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.3 of this Agreement),
AVS Sub shall be merged with and into the Company in accordance with the laws
of the State of Delaware and the terms of this Agreement (the "Merger"),
whereupon the separate corporate existence of AVS Sub shall cease, and the
Company shall be the surviving corporation of the Merger (the Company, as the
surviving corporation after the Merger is sometimes referred to herein as the
"Surviving Corporation").
1.2 CLOSING. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place (a) at the offices of
Akerman, Senterfitt & Eidson, P.A., SunTrust International Center, One S.E.
Third Avenue, Suite 2800, Miami, Florida 33131 on the date of the last of the
conditions set forth in Article VI of this Agreement (other than (i) those that
are waived by the party or parties for whose benefit such conditions exist, and
(ii) any such conditions which, by their terms, are not capable of being
satisfied until the Closing Date) are satisfied; or (b) at such other place,
time, and/or date as the parties hereto may otherwise agree. The date upon
which the Closing shall occur is referred to herein as the "Closing Date."
1.3 EFFECTIVE TIME. If all the conditions to the Merger set forth in
Article VI of this Agreement have been fulfilled or waived and this Agreement
shall not have been terminated as provided in Article VII hereof, the parties
hereto shall cause a certificate of merger (the "Certificate of Merger") to be
properly executed and filed in accordance with the laws of the State of
Delaware and the terms of this Agreement on the Closing Date. The Merger shall
become effective at such time as the Certificate of Merger is duly filed with
the Secretary of State of Delaware or at such later time as is specified by the
parties hereto as the Effective Time in the Certificate of Merger (the
"Effective Time"). The Merger shall have the effects set forth in Sections 259,
260 and 261 of the General Corporation Law of the State of Delaware (the
"DGCL"). Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, the Surviving Corporation shall possess all the rights,
privileges, powers and franchises and be subject to all of the restrictions,
disabilities and duties of the Company and AVS Sub.
B-1
<PAGE>
1.4 CONVERSION OF SHARES.
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of AVS, AVS Sub, the Company or the holders of the following
securities:
(i) each share of Common Stock, par value $0.01 per share, of AVS Sub
outstanding immediately prior to the Effective Time, shall be converted
into one share of Common Stock, par value $0.01 per share, of the Surviving
Corporation; and
(ii) subject to Section 1.6(f), each share of Common Stock, $0.10 par
value per share, of the Company (the "Company Common Stock") outstanding
immediately prior to the Effective Time (except as otherwise provided in
Section 1.4(c) hereof), shall be converted into the right to receive 0.5143
of a validly issued, fully paid and nonassessable share of Common Stock,
$.001 par value per share, of AVS ("AVS Common Stock") (the "Exchange
Ratio").
(b) Immediately following the Effective Time, all shares of Company
Common Stock shall cease to be outstanding and shall be canceled and retired
and shall cease to exist, and each holder of shares of Company Common Stock
shall thereafter cease to have any rights with respect to such shares of
Company Common Stock, except for the right to receive, without interest, the
consideration set forth in this Section 1.4 (and any dividends or other
distributions payable with respect thereto pursuant to Section 1.6(d)) and cash
in lieu of fractional shares of AVS Common Stock in accordance with Section 1.6
of this Agreement upon the surrender of a certificate representing such shares
of Company Common Stock in accordance with the provisions of this Article I.
(c) Each share of Company Common Stock held by the Company as treasury
stock or owned by AVS or any Subsidiary (as defined in Section 1.4(d) of this
Agreement) of AVS immediately prior to the Effective Time shall be canceled,
and no payment shall be made with respect thereto.
(d) For purposes of this Agreement, (i) the term "Average Closing Price"
shall mean the average of the per share last daily closing price of AVS Common
Stock as quoted on the New York Stock Exchange ("NYSE") (and as reported by The
Wall Street Journal or, if not reported thereby, by another authoritative
source) during the ten (10) consecutive trading days ending on and including
the last full trading day immediately preceding the Closing Date; (ii) the word
"Subsidiary" when used with respect to any Person means any corporation or
other organization, whether incorporated or unincorporated, of which (A) at
least fifty percent (50%) of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries; or (B) such Person or any other Subsidiary
of such Person is a general partner (excluding partnerships the general
partnership interests of which held by such Person or any Subsidiary of such
Person do not have a majority of the voting interests in such partnership), it
being understood that representations and warranties of a Person concerning any
former Subsidiary of such Person shall be deemed to relate only to the periods
during which such former Subsidiary was a Subsidiary of such Person; and (iii)
the word "Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof, or any affiliate (as that term is defined in the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act")) of any of the foregoing.
1.5 STOCK OPTIONS. All options to acquire Company Common Stock
(individually, a "Company Option" and collectively, the "Company Options")
outstanding at the Effective Time under the Company's 1992 Incentive Stock
Option Plan, the Company's 1992 Non-Employee Directors Stock Option Plan or
otherwise (the "Company Stock Option Plans") shall remain outstanding following
the Effective Time. At the Effective Time, such Company Options, by virtue of
the Merger and without any further action on the part of the Company or the
holder of such Company Options, shall be assumed by AVS in such manner that AVS
(a) is a corporation (or a parent or a subsidiary corporation of such
B-2
<PAGE>
corporation) "assuming a stock option in a transaction to which Section 424(a)
applied" within the meaning of Section 424 of the Code; or (b) to the extent
that Section 424 of the Code does not apply to any such Company Options, would
be such a corporation (or a parent or a subsidiary corporation of such
corporation) were Section 424 applicable to such option. Each Company Option
assumed by AVS shall be exercisable upon the same terms and conditions as under
the applicable Company Stock Option Plan and the applicable option agreement
issued thereunder, except that (x) the unexercised portion of each such Company
Option shall be exercisable for that whole number of shares of AVS Common Stock
(rounded down to the nearest whole share) equal to the number of shares of
Company Common Stock subject to the unexercised portion of such Company Option
multiplied by the Exchange Ratio; and (y) the option exercise price per share
of AVS Common Stock shall be an amount equal to the option exercise price per
share of Company Common Stock subject to such Company Option in effect at the
Effective Time divided by the Exchange Ratio (the option price per share, as so
determined, being rounded up to the nearest full cent). No payment shall be
made for fractional interests. The term, exercisability, vesting schedule,
status as an "incentive stock option" under Section 422 of the Code, if
applicable, and all of the other terms of the Company Options shall otherwise
remain unchanged unless modified by or as a result of the transaction
contemplated by this Agreement (including, without limitation, to the extent
that all outstanding Company Options shall become vested and exercisable at the
Effective Time). As soon as practicable after the Effective Time, AVS shall
deliver to the holders of Company Options appropriate notices setting forth
such holders' rights pursuant to such Company Options, as amended by this
Section 1.5 as well as notice of AVS's assumption of the Company's obligations
with respect thereto (which occurs by virtue of this Agreement). AVS shall take
all corporate actions necessary to reserve for issuance such number of shares
of AVS Common Stock as will be necessary to satisfy exercises in full of all
Company Options after the Effective Time.
1.6 EXCHANGE OF CERTIFICATES REPRESENTING COMPANY COMMON STOCK.
(a) Continental Stock Transfer & Trust Company (or such other exchange
agent selected by AVS and reasonably acceptable to the Company) shall act as
exchange agent (the "Exchange Agent") in the Merger.
(b) As of the Effective Time and in any event, no later than five (5)
business days after the Effective Time, AVS shall deposit or cause to be
deposited with the Exchange Agent for exchange in accordance with this Article
I, certificates representing the shares of AVS Common Stock issuable pursuant
to Section 1.4 in exchange for certificates formerly representing shares of
Company Common Stock outstanding immediately prior to the Effective Time and a
sufficient amount of cash to satisfy the cash payments to be made by AVS to
certain holders of Company Common Stock pursuant to Section 1.6(f) hereof.
(c) Promptly after the Effective Time, AVS shall cause the Exchange Agent
to mail to each holder of a certificate or certificates which immediately prior
to the Effective Time represented outstanding shares of Company Common Stock
("Certificates") whose shares were converted into the right to receive AVS
Common Stock Common Stock pursuant to Section 1.4 (i) a notice of effectiveness
of the Merger, (ii) a letter of transmittal which shall specify that delivery
shall be effected, and risk of loss and title to such Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent; and (iii)
instructions for use in effecting the surrender of such Certificates in
exchange for the consideration to be received by such holder pursuant to
Sections 1.4 and 1.6 hereof. Upon surrender of a Certificate for cancellation
to the Exchange Agent, together with such letter of transmittal, duly executed
and completed in accordance with the instructions thereto, AVS shall cause to
be delivered to the person in whose name such Certificate shall have been
issued, or to such person as such person shall direct in writing in the letter
of transmittal, (A) a certificate representing that number of whole shares of
AVS Common Stock into which the shares previously represented by the surrender
of Certificates shall have been converted into the right to receive at the
Effective Time pursuant to Section 1.4; and (B) a check representing the amount
of cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, which such holder has the right to receive in respect of
the Certificate surrendered pursuant to the provisions of this Section 1.6, in
each case, after giving effect to any
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required withholding tax, and the shares represented by the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash in lieu of fractional shares and unpaid dividends and distributions,
if any, payable to holders of shares of Company Common Stock who receive shares
of AVS Common Stock pursuant to Section 1.4 hereof. In the event of a transfer
of ownership of Company Common Stock which is not registered in the transfer
records of the Company, the consideration to be paid to such holder of Company
Common Stock pursuant to Sections 1.4 and 1.6 hereof may be issued to such a
transferee if the Certificate representing such Company Common Stock is
presented to AVS, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have
been paid or, alternatively, payments of such transfer tax to the Exchange
Agent. Until so surrendered, each Certificate that, at the Effective Time,
represented shares of Company Common Stock will be deemed from and after the
Effective Time, for all corporate purposes (except to the extent provided in
Section 1.6(d) below), to evidence the consideration to be received by the
holders of Company Common Stock pursuant to Sections 1.4 and 1.6 hereof.
(d) Notwithstanding anything to the contrary contained herein, no
dividends or other distributions declared after the Effective Time on AVS
Common Stock shall be paid with respect to any shares of Company Common Stock
entitled to be converted into shares of AVS Common Stock represented by a
Certificate until such Certificate is surrendered for exchange as provided
herein. Subject to the effect of applicable laws, following surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing whole shares of AVS Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
payable with respect to such whole shares of AVS Common Stock and not paid,
less the amount of any withholding taxes which may be required thereon; and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of AVS Common Stock, less the amount of any withholding taxes
which may be required thereon.
(e) After the Effective Time, there shall be no transfers on the stock
transfer books of the Company of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to AVS or the Surviving Corporation, they
shall be canceled and exchanged for the consideration set forth in this Article
I deliverable in respect thereof pursuant to this Agreement in accordance with
the procedures set forth in this Section 1.6. Certificates surrendered for
exchange by any person constituting an "affiliate" of the Company for purposes
of Rule 145(c) under the Securities Act of 1933, as amended (the "Securities
Act") shall not be exchanged until AVS has received an Affiliate Letter (as
defined herein) from such person as provided in Section 5.9.
(f) No fractional shares of AVS Common Stock shall be issued upon
surrender for exchange of Certificates for Company Common Stock. In lieu of the
issuance of any fractional share of AVS Common Stock pursuant to Section 1.4,
cash adjustments will be paid to holders in respect of any fractional share of
AVS Common Stock that would otherwise be issuable, and the amount of such cash
adjustment shall be equal to such fractional proportion of the Average Closing
Price of a share of AVS Common Stock.
(g) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, AVS will issue in
exchange for such lost, stolen or destroyed Certificate, the consideration to
be received by the holder of such Certificate pursuant to Sections 1.4 and 1.6
hereof.
(h) Any portion of the property delivered to the Exchange Agent in
accordance with this Section 1.6(b) that remains unclaimed two years after the
Effective Time shall be delivered to AVS.
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Any holder of a Certificate who has not theretofore surrendered such
Certificate for exchange pursuant to this Section 1.6 shall thereafter look
only to AVS for payment of the consideration deliverable in respect of such
Certificate determined pursuant to this Agreement, without any interest
thereon. Payment or delivery of any shares of AVS Common Stock, any cash in
lieu of fractional shares of AVS Common Stock and any dividends, or
distributions with respect to AVS Common Stock shall be subject to applicable
abandoned property, escheat and similar laws and none of AVS, AVS Sub, the
Company, the Surviving Corporation or any other person shall be liable to any
former holder of shares of Company Common Stock for any amount properly
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar laws.
1.7 ADJUSTMENT OF EXCHANGE RATIO. In the event that, subsequent to the
date of this Agreement but prior to the Effective Time, the AVS Common Stock is
recapitalized or reclassified or AVS shall effect any stock split, reverse
stock split, stock dividend of AVS Common Stock, then the Exchange Ratio and
the Average Closing Price shall be appropriately and equitably adjusted to the
kind and amount of shares of stock and other securities and property which the
holders of such shares of AVS Common Stock would have been entitled to receive
had such shares been issued and outstanding as of the record date for
determining stockholders entitled to participate in such corporate event.
1.8 TAX CONSEQUENCES AND ACCOUNTING TREATMENT. It is intended by the
parties hereto that the Merger shall constitute a reorganization within the
meaning of Section 368 of the Code and that the transaction be accounted for as
a pooling of interests.
1.9 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and AVS Sub, the officers and directors of the
Company and AVS Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
ARTICLE II
CERTAIN MATTERS RELATING TO THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION. The
certificate of incorporation of AVS Sub in effect at the Effective Time shall
be the certificate of incorporation of the Surviving Corporation until amended
in accordance with its terms and pursuant to applicable law; provided however,
that Article I of the Certificate of Incorporation of the Surviving Corporation
shall be amended to read as follows: "The name of the corporation is Whitehall
Corporation."
2.2 BY-LAWS OF THE SURVIVING CORPORATION. The By-Laws of AVS Sub in effect
at the Effective Time shall be the By-Laws of the Surviving Corporation until
amended in accordance with the terms of such By-Laws and pursuant to applicable
law and the Certificate of Incorporation of the Surviving Corporation.
2.3 OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION. The officers and
directors of AVS Sub immediately prior to the Effective Time shall be the
officers and directors of the Surviving Corporation immediately after the
Effective Time, and shall hold office until their successors are duly appointed
or elected in accordance with applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AVS AND AVS SUB
AVS and AVS Sub represent and warrant to the Company that the statements
contained in this Article III are true and correct, except as set forth in the
disclosure statement delivered by AVS and
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AVS Sub to the Company concurrently herewith and identified as the "AVS
Disclosure Statement."All exceptions noted in the AVS Disclosure Statement
shall be numbered to correspond to the applicable sections to which such
exception refers; provided, however that for purposes of this Agreement and the
AVS Disclosure Statement any disclosure set forth on any particular schedule
shall be deemed disclosed in reference to all applicable schedules.
3.1 EXISTENCE, GOOD STANDING, CORPORATE AUTHORITY. Each of AVS, AVS Sub
and each of the Subsidiaries of AVS other than AVS Sub (each such Subsidiary
singularly "AVS Subsidiary" or collectively "AVS Subsidiaries") (i) is a
corporation duly incorporated, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation; (ii) has all requisite
power and authority to own or lease, and operate its properties and assets, and
to carry on its business as now conducted and as currently proposed to be
conducted, except where the failure to have such power and authority would not
have an AVS Material Adverse Effect (as defined herein) and to consummate the
transactions contemplated hereby; (iii) is duly qualified or licensed to do
business and is in good standing in all jurisdictions in which it owns or
leases property or in which the conduct of its business requires it to so
qualify or be licensed, except where the failure to so qualify, individually or
in the aggregate, would not have an AVS Material Adverse Effect; and (iv) has
obtained all licenses, permits, franchises and other governmental
authorizations necessary to the ownership or operation of its properties or the
conduct of its business, except where the failure to have obtained such
licenses, permits, franchises or authorizations would not have an AVS Material
Adverse Effect. The copies of AVS's and AVS Sub's Articles or Certificate of
Incorporation and By-Laws as in effect on the date hereof have been previously
delivered to the Company or have been made available for the Company's review
and are true and correct. For purposes of this Agreement, a "Material Adverse
Effect" when used with respect to any entity means (a) a material adverse
effect on the business, results of operations, financial condition or prospects
of such entity and its subsidiaries, taken as a whole, or (b) a material
impairment in the ability of such entity or its subsidiaries to perform any of
their obligations under this Agreement or to consummate the Merger.
3.2 AUTHORIZATION OF AGREEMENT AND OTHER DOCUMENTS. The execution and
delivery of this Agreement and the other documents executed or to be executed
in connection herewith to which AVS or AVS Sub is a party (collectively, the
"AVS Ancillary Documents"), have been duly authorized by the Board of Directors
of AVS and AVS Sub and no other proceedings on the part of AVS or AVS Sub are
necessary to authorize the execution, delivery or performance of this Agreement
or any AVS Ancillary Document, except the approval of the Merger by the
stockholders of AVS. This Agreement is, and, as of the Closing Date, each of
the AVS Ancillary Documents will be, a valid and binding obligation of AVS
and/or AVS Sub, as the case may be, enforceable against AVS and/or AVS Sub, as
the case may be, in accordance with its terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency; reorganization,
moratorium, fraudulent conveyance or other similar laws affecting enforcement
of creditors' rights generally, and by general principles of equity (regardless
of whether enforcement is considered in a proceeding at law or in equity) and
subject to receipt of approval of the Merger by the AVS stockholders.
3.3 NO VIOLATION. Neither the execution and delivery by AVS and AVS Sub of
this Agreement or the AVS Ancillary Agreements, nor the consummation by AVS and
AVS Sub of the transactions contemplated hereby and thereby in accordance with
their respective terms, will (a) assuming approval of the Merger by the
stockholders of AVS, conflict with or result in a breach of any provisions of
the Articles or Certificate of Incorporation or By-Laws of AVS or AVS Sub; (b)
result in a breach or violation of, a default under, or the triggering of any
payment or other material obligations pursuant to, or accelerate vesting under,
any of the AVS stock option plans, or any grant or award made under any of the
foregoing; (c) subject to obtaining the consents set forth in the AVS
Disclosure Statement, violate, conflict with, result in a breach of any
provision of, constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, result in the termination, or
in a right of termination or cancellation of, accelerate the performance
required by, result in the triggering of any payment or other material
obligations pursuant to, result in the creation of any lien, security interest,
charge or encumbrance upon any of the material properties of AVS, AVS Sub or
any of the AVS
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Subsidiaries, other than as disclosed in the AVS Disclosure Statement, under,
or result in being declared void, voidable, or without further binding effect,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust or any material license, franchise, permit, lease,
contract, agreement or other instrument, commitment or obligation to which AVS,
AVS Sub or any of the AVS Subsidiaries is a party, or by which AVS, AVS Sub or
any of the AVS Subsidiaries or any of their respective properties is bound or
affected, except for any of the foregoing matters which would not have an AVS
Material Adverse Effect; (d) assuming the Merger is so approved by stockholders
of AVS and assuming all required consents and approvals are obtained and all
applicable filings are made, contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgement, injunction, order
or decree binding upon or applicable to AVS or AVS Sub, except for any of the
foregoing matters which would not have an AVS Material Adverse Effect; or (e)
other than the filings provided for in Sections 1.3 and 5.7, filings required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"),
the Exchange Act, the Securities Act, or applicable state securities and "Blue
Sky" laws or filings in connection with the maintenance of qualification to do
business in other jurisdictions (collectively, the "Regulatory Filings"),
require any material consent, approval or authorization of, or declaration of,
or filing or registration with, any domestic governmental or regulatory
authority, the failure to obtain or make which would have an AVS Material
Adverse Effect.
3.4 SEC DOCUMENTS. AVS has delivered or made available to the Company each
registration statement, report, proxy statement or information statement (as
defined in Regulation 14C under the Exchange Act) prepared by it since July 1,
1996, which reports constitute all of the documents (other than preliminary
material) required to be filed by AVS with the Securities and Exchange
Commission ("SEC") since such date, each in the form (including exhibits and
any amendments thereto) filed with the SEC (collectively, the "AVS Reports").
As of their respective dates, each of the AVS Reports complied and, in the case
of filings after the date hereof, will comply as to form in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations thereunder. None of the
AVS Reports contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading. AVS has filed with the SEC all reports required to
be filed under Sections 13, 14 and 15(d) of the Exchange Act since July 1,
1996. Each of the consolidated balance sheets of AVS included in or
incorporated by reference into the AVS Reports (including the related notes and
schedules) fairly present in all material respects the consolidated financial
position of AVS and the AVS Subsidiaries as of its date (subject, in the case
of unaudited statements, to normal year-end audit adjustments which would not
be material in amount or effect), and each of the consolidated statements of
income, retained earnings and cash flows of AVS included in or incorporated by
reference into the AVS Reports (including any related notes and schedules)
fairly present in all material respects the results of operations, retained
earnings or cash flows, as the case may be, of AVS and the AVS Subsidiaries for
the periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments which would not be material in amount or
effect). Except as and to the extent reflected or reserved against in the
financial statements included in the AVS's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997 (the "AVS Form 10-Q") or as disclosed
herein or in the AVS Disclosure Statement, neither AVS nor any of the AVS
Subsidiaries had as of such date any liability or obligation of any kind,
whether accrued, absolute, contingent, unliquidated or other and whether due or
to become due (including any liability for breach of contract, breach of
warranty, torts, infringements, claims or lawsuits), which was material to the
business, assets, results of operations or financial conditions of AVS and the
AVS Subsidiaries taken as a whole. Except as set forth in the AVS Disclosure
Statement, since September 30, 1997, neither AVS nor any of the AVS
Subsidiaries has incurred any liability or obligation of any kind which, in any
case or in the aggregate, is material to the business, assets, results of
operations or financial condition of AVS and the AVS Subsidiaries taken as a
whole, except in the ordinary course of business. There are no extraordinary or
material non-recurring items of income or expense during the periods covered by
such financial statements and the consolidated balance sheets of the AVS
included or incorporated therein do not reflect any write-up or
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revaluation increasing the book value of any assets, except as specifically
disclosed in the notes thereto. The financial statements of AVS, including the
notes thereto, included in or incorporated by reference into the AVS Reports
comply as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, and have been prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP") (except as may be indicated in the notes thereto). Since January 1,
1993, there has been no change in AVS's accounting methods or principles that
would be required to be disclosed in AVS financial statements in accordance
with GAAP, except as described in the notes to such AVS financial statements.
3.5 NO UNDISCLOSED LIABILITIES. There are no liabilities or obligations of
any nature (whether accrued, absolute or contingent) of AVS or the AVS
Subsidiaries other than (i) liabilities disclosed or provided for in the most
recent financial statements contained in the AVS Reports; (ii) liabilities
which, individually or in the aggregate, are not material to AVS or the AVS
Subsidiaries; (iii) liabilities under this Agreement (or contemplated hereby)
or disclosed in the AVS Disclosure Statement and (iv) liabilities incurred
since September 30, 1997 in the ordinary course of business and consistent with
past practices.
3.6 NO BROKERS. AVS has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of the
Company or AVS, AVS Sub or their respective Subsidiaries to pay any finder's
fee, brokerage or agent's commissions or other like payments in connection with
the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby; provided, however that AVS has retained SBC
Warburg Dillon Read, Inc. ("SBCWDR") to render an opinion with respect to the
fairness of the Merger transaction from the standpoint of AVS's stockholders
and has agreed to pay a fee to them for providing such services.
3.7 OPINION OF FINANCIAL ADVISOR. AVS has received the opinion of SBCWDR,
to the effect that, as of the date of such opinion, the consideration to be
paid by AVS pursuant to the Merger is fair to AVS and its stockholders from a
financial point of view.
3.8 AVS COMMON STOCK. Subject to obtaining the approval of the
stockholders of AVS, the issuance and delivery by AVS of shares of AVS Common
Stock in connection with the Merger and this Agreement have been duly and
validly authorized by all necessary corporate action on the part of AVS. The
shares of AVS Common Stock to be issued in connection with the Merger and this
Agreement, when issued in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable and free of preemptive rights.
3.9 CAPITALIZATION
(a) The total authorized capital stock of AVS consists of (i) 30,000,000
shares of AVS Common Stock, 9,586,871 shares of which are issued and
outstanding as of March 23, 1998, and (ii) 1,000,000 shares of Preferred Stock,
none of which are issued and outstanding as of the date of this Agreement. The
authorized capital stock of AVS Sub consists of 1,000 shares of Common Stock,
$0.01 par value per share, 100 shares of which, as of the date hereof, are
issued and outstanding and are held by AVS.
(b) Except as set forth in the AVS Disclosure Statement, there are
currently no outstanding, and as of the Closing; there will be no outstanding
(i) securities convertible into or exchangeable for any capital stock of AVS or
any of the AVS Subsidiaries, (ii) options, warrants or other rights to purchase
or subscribe to capital stock of AVS or any of the AVS Subsidiaries or
securities convertible into or exchangeable for capital stock of AVS or any of
the AVS Subsidiaries, or (iii) contracts, commitments, agreements,
understandings, arrangements, calls or claims of any kind relating to the
issuance of any capital stock of AVS or any of the AVS Subsidiaries.
3.10 MATERIAL ADVERSE CHANGE. Since September 30, 1997 to the date of this
Agreement, AVS, AVS Sub and the AVS Subsidiaries, taken as a whole, have not
suffered any change in their businesses, operations, assets, liabilities,
financial condition or prospects which would reasonably have an AVS
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Material Adverse Effect; provided, that an AVS Material Adverse Effect will not
be deemed to have occurred solely as a result of fluctuations in the trading
price of the AVS Common Stock.
3.11 DISCLOSURE DOCUMENTS. None of the information supplied or to be
supplied by AVS or any of its affiliates, directors, officers, employees,
agents or representatives, in writing specifically for inclusion or
incorporation by reference in, and which is included or incorporated by
reference in, (i) the Form S-4 (as defined in Section 5.7 of this Agreement) or
any amendment or supplement thereto, (ii) the proxy statement to be mailed to
Company's stockholders (the "Company Proxy Statement") in connection with the
meeting of Company's stockholders called to consider and vote upon the approval
of the Merger (the "Company Stockholder Meeting") or any amendment or
supplement thereto, or (iii) any other documents filed or to be filed by
Company with the Commission or any other Governmental Authority in connection
with the transactions contemplated hereby, will, at the respective times such
documents are filed, and, in the case of the Form S-4 or any amendment or
supplement thereto, at the date of Company Stockholder Meeting, and, in the
case of the Company Proxy Statement or any amendment or supplement to either
thereof, at the time of mailing to Company stockholders or at the time of the
Company Stockholders Meeting, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the Company
Stockholder Meeting. The Form S-4 will comply as to form in all material
respects with the applicable provisions of the Securities Act and the rules and
regulations under such Act (except that no representation is made as to the
form of the Company Proxy Statement to be included as the prospectus therein).
3.12 TAX REORGANIZATION; ACCOUNTING MATTERS. Neither AVS nor any of its
Subsidiaries has taken or failed to take any action which would prevent the
Merger from (a) constituting a reorganization within the meaning of section
368(a) of the Code; or (b) being treated as a "pooling or interests" in
accordance with Accounting Principles Board Opinion No. 16, the interpretative
releases issued pursuant thereto and the pronouncements of the SEC.
3.13 COMPLIANCE WITH LAWS.
(a) AVS, AVS Sub and each of the AVS Subsidiaries hold all permits,
licenses, variances, exemptions, orders, approvals, authorizations,
certificates, filings, franchises, notices and rights of all Governmental
Authorities necessary for each of them to own, lease or operate its properties
and assets and for the lawful conduct of its business (the "Permits"), except
where the failure to hold such Permits would not have an AVS Material Adverse
Effect. None of such Permits is or will be materially impaired by the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(b) AVS, AVS Sub and each of the AVS Subsidiaries are in compliance with
the terms of its Permits in all material respects.
(c) AVS, AVS Sub and each of the AVS Subsidiaries are in compliance with
all statutes, laws, ordinances orders, rules, or regulations of any
Governmental Authority (including, but not limited to, those related to
occupational health and safety, or employment and employment practices) that
are applicable to AVS, AVS Sub or any of the AVS Subsidiaries or affect or
relate to this Agreement or the transactions contemplated hereby, except for
any noncompliance that would not have an AVS Material Adverse Effect.
(d) As of the date of this Agreement, and as of the Closing, no
investigation, review, inquiry or proceeding by any Governmental Authority with
respect to AVS, AVS Sub or any of the AVS Subsidiaries is to the knowledge of
the AVS, pending or threatened which, if determined unfavorably, would have an
AVS Material Adverse Effect.
(e) Neither AVS nor AVS Sub nor any of the AVS Subsidiaries are subject
to any agreement, contract, judgment, order or decree with any Governmental
Authority arising out of any current or previously existing violations of any
laws, ordinances or regulations applicable to AVS, AVS Sub or any of the AVS
Subsidiaries.
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(f) For the purposes of this Agreement, "Governmental Authority" shall
mean any nation, or government, any state, regional, local or other political
subdivision thereof, and any entity or official exercising executive,
legislative, judicial, regulatory, or administrative functions or pertaining to
government.
3.14 LITIGATION. Except as set forth in the AVS Reports filed with the SEC
prior to the date hereof or as set forth in the AVS Disclosure Statement, (i)
there is no litigation or proceeding including, without limitation, any
arbitration proceeding, in law or in equity, and there are no proceedings or
governmental investigations before any commission or other administrative
authority, pending or, to AVS's knowledge, threatened against AVS, AVS Sub or
any of the AVS Subsidiaries which, if adversely determined, is reasonably
likely to have, either individually or in the aggregate, an AVS Material
Adverse Effect; (ii) there is no judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency, instrumentality or
arbitrator applicable to AVS, the AVS Sub or any of the AVS Subsidiaries
having, or which is reasonably likely to have, either individually or in the
aggregate, an AVS Material Adverse Effect; and (iii) to the knowledge of AVS,
there is no action, suit, proceeding or investigation pending or threatened
against AVS, the AVS Sub or any of the AVS Subsidiaries which seeks to
restrain, enjoin or delay the consummation of the Merger or any of the other
transactions contemplated hereby or which seeks damages in connection
therewith, and no injunction of any type referred to in Section 6.1(c) has been
entered or issued.
3.15 TAXES.
(a) As used in this Agreement, (i) the term "Taxes" means all federal,
state, local, foreign and other net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments or charges of any kind whatever of a nature similar to
taxes, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, and the term "Tax" means any one of
the foregoing Taxes; and (ii) the term "Returns" means all returns,
declarations, reports, statements and other documents required to be filed in
respect of Taxes, and the term "Return" means any one of the foregoing Returns.
(b) There have been properly completed and filed on a timely basis and in
correct form all material Returns required to be filed by AVS or any of the AVS
Subsidiaries. As of the time of filing, the foregoing Returns were correct and
complete in all material respects. Except as set forth in the AVS Disclosure
Statement, an extension of time within which to file any Return which has not
been filed has not been requested or granted.
(c) With respect to all amounts in respect of Taxes imposed upon AVS or
any of the AVS Subsidiaries, or for which AVS or any of the AVS Subsidiaries is
or could be liable, whether to taxing authorities (as, for example, under law)
or to other persons or entities (as, for example, under tax allocation
agreements), with respect to all taxable periods or portions of periods ending
on or before September 30, 1997, (i) all applicable tax laws and agreements
have been complied with in all material respects, and (ii) all amounts required
to be paid by AVS or the AVS Subsidiaries, to taxing authorities or others, on
or before the date hereof have been paid or adequately reserved for on the
financial statements contained in the AVS Reports, and any Taxes accrued but
not due and payable as of September 30, 1997 have been accrued or otherwise
reserved for in financial statements contained in the most recent AVS Report.
No Taxes have been (or will prior to the Closing Date be) recorded by AVS or
any of the AVS Subsidiaries other than in the ordinary course of business.
There are no Liens filed against any asset of the Company or any of its
Subsidiaries resulting from the failure to pay any Tax when due.
(d) No material issues have been raised (and are currently pending) by
any taxing authority in connection with any of the Returns. No waivers of
statutes of limitation with respect to the Returns have been given by AVS or
any of the AVS Subsidiaries (or with respect to any Return which a taxing
authority has asserted should have been filed by AVS or any of the AVS
Subsidiaries) which waivers are
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still in effect. The AVS Disclosure Statement sets forth for the past seven
years, the years for which examinations or audits of Florida state sales tax
and federal income tax returns have been completed, those years for which
examinations are presently being conducted, and those years for which such
returns will be required but are not yet due to be filed and have not yet been
filed. All deficiencies asserted or assessments made as a result of any
examinations have been fully paid, or are fully reflected as a liability in the
financial statements contained in the AVS Report, or are being contested and an
adequate reserve therefor has been established and is fully reflected as a
liability in the financial statements contained in the most recent AVS Report.
(e) The unpaid Taxes of AVS or any of the AVS Subsidiaries do not
materially exceed the reserve for tax liability (excluding any reserve for
deferred Taxes established to reflect timing differences between book and tax
income) set forth or included in the financial statements included in the most
recent AVS Report, as adjusted for the passage of time through the Closing.
(f) Neither AVS nor any of the AVS Subsidiaries is or at any time has
been a party to or bound by (nor will AVS or any of the AVS Subsidiaries become
a party to or bound by) any tax indemnity, tax sharing or tax allocation
agreement.
(g) All material elections with respect to Taxes affecting AVS or any of
the AVS Subsidiaries that are currently effective as of the date hereof that
are not reflected in the AVS's Returns are set forth in the AVS Disclosure
Statement.
(h) There are no challenges on appeals pending regarding the amount of
Taxes on, or the addressed valuation of, the real estate owned or leased by AVS
or any of the AVS Subsidiaries, and no special arrangements or agreements exist
with any governmental authority with respect thereto (the representations and
warranties contained in this Section 3.15(i) shall not be deemed to be breached
by any prospective general increase in real estate taxes.)
(i) There is no assessment for Taxes (in addition to the normal, annual
general real estate tax assessment) pending against AVS or any of the AVS
Subsidiaries, or to AVS's knowledge, threatened with respect to any portion of
the real estate owned by AVS or any of the AVS Subsidiaries, or to the extent
AVS or any of the AVS Subsidiaries is liable for payment of the real estate
leased by them.
3.16 AFFILIATED TRANSACTIONS. Except as disclosed in any AVS Report filed
with the SEC prior to the date of this Agreement or as set forth in the AVS
Disclosure Statement, since September 30, 1997, neither AVS nor any of the AVS
Subsidiaries has been a party to any transactions (other than employee
compensation and other ordinary incidents of employment) with an "AVS Related
Party," For purposes of this Agreement, the term "AVS Related Party" shall
mean: any present officer or director, 10% stockholder (including any officers
or directors thereof) or present affiliate of AVS or any of the AVS
Subsidiaries, any present or former known spouse of any of the aforementioned
persons or any trust or other similar entity for the benefit of any of the
foregoing persons.
3.17 AVS SUB-CONDUCT OF BUSINESS. Since its incorporation AVS Sub has not
conducted any business.
3.18 INAPPROPRIATE PAYMENTS. Neither AVS nor any of the AVS Subsidiaries
nor, to AVS' knowledge, any of their respective officers, directors, principal
stockholders, employees, agents or representatives has made, directly or
indirectly, with respect to AVS, the AVS Subsidiaries or their respective
business activities, any bribes or kickbacks, illegal political contributions,
payments from corporate funds not recorded on the books and records of AVS or
the AVS Subsidiaries, payments from corporate funds to governmental officials,
in their individual capacities, for the purpose of affecting their action or
the action of the government they represent, to obtain favorable treatment in
securing business or licenses or to obtain special concessions, or illegal
payments from corporate funds to obtain or retain business.
3.19 ABSENCE OF INDEMNIFIABLE CLAIMS, ETC. There are no pending claims
and, to the knowledge of AVS, no facts that would reasonably entitle any
director, officer or employee of AVS or the AVS
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Subsidiaries to indemnification by AVS or the AVS Subsidiaries under applicable
law, the Certificate of Incorporation or By-laws of AVS or the AVS Subsidiaries
or any insurance policy maintained by AVS or the AVS Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to AVS and AVS Sub that the statements
contained in this Article IV are true and correct, except as set forth in the
disclosure statement delivered by the Company to AVS and AVS Sub concurrently
herewith and identified as the "Disclosure Statement." All exceptions noted in
the Disclosure Statement shall be numbered to correspond to the applicable
sections to which such exception refers; provided, however that for purposes of
this Agreement and the Disclosure Statement any disclosure set forth on any
particular schedule shall be deemed disclosed in reference to all applicable
schedules.
4.1 ORGANIZATION, STANDING AND QUALIFICATION. The Company and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation; (ii)
has all requisite power and authority to own or lease, and operate their
respective properties and assets, and to carry on their respective businesses
as now conducted and as currently proposed to be conducted except where the
failure to have such power and authority would not have a Company Material
Adverse Effect and to consummate the transactions contemplated hereby; (iii) is
duly qualified or licensed to do business and is in good standing in all
jurisdictions in which they own or lease property or in which the conduct of
their respective businesses requires them to so qualify or be licensed except
where the failure to so qualify, individually or in the aggregate, would not
have a Company Material Adverse Effect; and (iv) has obtained all licenses,
permits, franchises and other governmental authorizations necessary to the
ownership or operation of their respective properties or the conduct of their
respective businesses except where the failure to have obtained such licenses,
permits, franchises or authorizations would not have a Company Material Adverse
Effect.
4.2 CAPITALIZATION.
(a) The total authorized capital stock of the Company consists of (i)
20,000,000 shares of common stock, par value $0.10 per share, 5,530,000 shares
of which are issued and outstanding as of the date of this Agreement and
2,161,312 shares of which are held by the Company in its treasury; and (ii)
500,000 shares of preferred stock, par value $5.00 per share, none of which are
issued and outstanding as of the date of this Agreement. There are no shares of
capital stock of the Company of any other class authorized, issued or
outstanding.
(b) Each share outstanding of Company Common Stock is duly authorized and
validly issued, fully paid and nonassessable and free of preemptive and similar
rights.
(c) There are currently no outstanding, and, except as permitted pursuant
to Section 5.2 or the exercise or cancellation of outstanding options in
accordance with their terms, as of the Closing, there will be no outstanding
(i) securities convertible into or exchangeable for any capital stock of the
Company or any of its Subsidiaries, (ii) options, warrants or other rights to
purchase or subscribe to capital stock of the Company or any of its
Subsidiaries or securities convertible into or exchangeable for capital stock
of the Company or any of its Subsidiaries, or (iii) contracts, commitments,
agreements, understandings, arrangements, calls or claims of any kind to which
the Company or any of its Subsidiaries is a party or is bound relating to the
issuance of any capital stock of the Company or any of its Subsidiaries. The
Disclosure Statement identifies, as of the date hereof, the option holder, the
number of shares subject to each option, the exercise price, the vesting
schedule and the expiration date of each outstanding option to purchase capital
stock of the Company or any of its Subsidiaries.
4.3 SUBSIDIARIES. The Company owns directly or indirectly each of the
outstanding shares of capital stock of (or other ownership interests having by
their terms ordinary voting power to elect a
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majority of directors or others performing similar functions with respect to)
each of the Company's Subsidiaries indicated in the Disclosure Statement as
being owned by the Company. Each of the outstanding shares of capital stock
owned by the Company of each of the Company's Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable, and is owned, directly or
indirectly, by the Company free and clear of all liens, pledges, security
interests, claims or other encumbrances other than liens imposed by local law
which are not material. The following information for each Subsidiary of the
Company is listed in the Disclosure Schedule, if applicable: (a) its name and
jurisdiction of incorporation or organization, and (b) the location of its
principal executive office.
4.4 OWNERSHIP INTERESTS. Except for the interests in the Company's
Subsidiaries, neither the Company nor any of its Subsidiaries owns any direct
or indirect interest in any corporation, joint venture, limited liability
company, partnership, association or other entity. Since September 30, 1997,
the Company has not (i) disposed of the capital stock (other than Company
Common Stock) or all or substantially all of the assets of any ongoing
business, or (ii) purchased the business and/or all or substantially all of the
assets of another person, firm or corporation (whether by purchase of stock,
assets, merger or otherwise).
4.5 CONSTITUENT DOCUMENTS. True and complete copies of the Certificate of
Incorporation and all amendments thereto, the By-Laws as amended and currently
in force, all stock records, and all corporate minute books and records of the
Company and each of its Subsidiaries have been furnished or made available by
the Company to AVS for inspection to the extent requested by AVS. Since January
1, 1990, the corporate minute books and records of the Company and its
Subsidiaries contain true and complete copies, in all material respects, of all
resolutions adopted by the stockholders or the Board of Directors of the
Company and its Subsidiaries and any other action formally taken by them
respectively as such. The Company has provided to AVS a copy of its stock
ledger as of a recent practicable date certified by the Company's transfer
agent.
4.6 AUTHORIZATION OF AGREEMENT AND OTHER DOCUMENTS. The execution and
delivery of this Agreement and the other documents executed or to be executed
in connection herewith to which the Company is a party (collectively, the
"Ancillary Documents"), have been duly authorized by the Board of Directors of
the Company, and no other proceedings on the part of the Company are necessary
to authorize the execution, delivery or performance of this Agreement or any
Ancillary Document, except the approval of the Merger by the stockholders of
the Company. This Agreement is, and, as of the Closing Date, each of the
Ancillary Documents will be, a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting enforcement of creditors' rights generally, and by general principles
of equity (regardless of whether enforcement is considered in a proceeding at
law or in equity) and subject to the receipt of stockholder approval of the
Merger.
4.7 NO VIOLATION. Neither the execution and delivery of this Agreement nor
the Ancillary Documents by the Company nor the consummation by the Company of
the transactions contemplated hereby and thereby in accordance with their
respective terms, will (a) assuming approval of the Merger by the Company's
stockholders, conflict with or result in a breach of any provisions of the
Certificate of Incorporation or By-Laws of the Company or any of its
Subsidiaries; (b) result in a breach or violation of, a default under, or the
triggering of any payment or other material obligations pursuant to, or except
as otherwise provided in any of the individual option agreements under the
Company Stock Option Plans, accelerate vesting under, any of the Company Stock
Option Plans, or any grant or award made under any of the foregoing; (c)
violate, conflict with, result in a breach of any provision of, constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination, or in a right of
termination or cancellation of, accelerate the performance required by, result
in the triggering of any payment or other material obligations pursuant to,
result in the creation of any lien, security interest, charge or encumbrance
upon any of the material properties of the Company or any of its Subsidiaries
under, or result in being declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed
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of trust or any material license, franchise, permit, lease, contract, agreement
or other instrument, commitment or obligation to which the Company or any of
its Subsidiaries is a party, or by which the Company or any of its Subsidiaries
or any of their respective properties is bound or affected, except for any of
the foregoing matters which would not have a Company Material Adverse Effect;
(d) assuming the Merger is so approved by the Company's stockholders, and
assuming all required consents and approvals are obtained and all applicable
filings are made, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to the Company or any of its Subsidiaries, except for any of
the foregoing matters which would not have a Company Material Adverse Effect;
or (e) other than the Regulatory Filings, require any material consent,
approval or authorization of, or declaration of, or filing or registration
with, any domestic governmental or regulatory authority, the failure to obtain
or make which would have a Company Material Adverse Effect.
4.8 COMPLIANCE WITH LAWS.
(a) The Company and each of its Subsidiaries hold all permits, licenses,
variances, exemptions, orders, approvals, authorizations, certificates,
filings, franchises, notices and rights of all Governmental Authorities
necessary for each of them to own, lease or operate its properties and assets
and for the lawful conduct of its business (the "Permits"), except where the
failure to hold such Permits would not have a Company Material Adverse Effect.
None of such Permits is or will be materially impaired by the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
(b) The Company and its Subsidiaries are in compliance with the terms of
its Permits in all material respects.
(c) The Company and its Subsidiaries are in compliance with all statutes,
laws, ordinances orders, rules, or regulations of any Governmental Authority
(including, but not limited to, those related to occupational health and
safety, or employment and employment practices) that are applicable to the
Company or any of its Subsidiaries or affect or relate to this Agreement or the
transactions contemplated hereby, except for any noncompliance that would not
have a Company Material Adverse Effect.
(d) As of the date of this Agreement, and as of the Closing, no
investigation, review, inquiry or proceeding by any Governmental Authority with
respect to the Company or any of its Subsidiaries is to the knowledge of the
Company, pending or threatened which, if determined unfavorably, would have a
Company Material Adverse Effect.
(e) Neither the Company nor any of its Subsidiaries are subject to any
agreement, contract, judgment, order or decree with any Governmental Authority
arising out of any current or previously existing violations of any laws,
ordinances or regulations applicable to the Company or any of its Subsidiaries.
4.9 BOOKS AND RECORDS. The Company's and its Subsidiaries' books, accounts
and records are, and have been, in all material respects, maintained in the
Company's and its Subsidiaries usual, regular and ordinary manner, in
accordance with GAAP, and all material transactions to which the Company or any
of its Subsidiaries is or has been a party are properly reflected therein.
4.10 SEC DOCUMENTS. The Company has delivered or made available to AVS
each registration statement, report, proxy statement or information statement
(as defined in Regulation 14C under the Exchange Act) prepared by it, which
reports constitute all of the documents (other than preliminary material)
required to be filed by the Company with the SEC since January 1, 1993, each in
the form (including exhibits and any amendments thereto) filed with the SEC
(collectively, the "Company Reports"). As of their respective dates, each of
the Company Reports complied and, in the case of filings after the date hereof,
will comply as to form in all material respects with the applicable
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requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations thereunder. None of the Company Reports contain any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
The Company has filed with the SEC all reports required to be filed under
Section 13, 14 and 15(d) of the Exchange Act since January 1, 1993. Each of the
consolidated balance sheets of the Company included in or incorporated by
reference into the Company Reports (including the related notes and schedules)
fairly present in all material respects the consolidated financial position of
the Company and its Subsidiaries as of its date (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect, and each of the consolidated statements of
income, retained earnings and cash flows of the Company included in or
incorporated by reference into the Company Reports (including any related notes
and schedules) fairly present in all material respects the results of
operations, retained earnings or cash flows, as the case may be, of the Company
and its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect). There are no extraordinary or material
non-recurring items of income or expense during the periods covered by such
financial statements and the consolidated balance sheets of the Company
included or incorporated therein do not reflect any write-up or revaluation
increasing the book value of any assets, except as specifically disclosed in
the notes thereto. Except as and to the extent reflected or reserved against in
the financial statements included in the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997 (the "Company Form 10-Q") or as
disclosed therein, neither the Company nor any Company Subsidiary had as of
such date any liability or obligation of any kind, whether accrued, absolute,
contingent, unliquidated or other and whether due or to become due (including
any liability for breach of contract, breach of warranty, torts, infringements,
claims or lawsuits), which was material to the business, assets, results of
operations or financial condition of the Company and its Subsidiaries taken as
a whole. Since September 30, 1997, neither the Company nor any Company
Subsidiary has incurred any liability or obligation of any kind which, in any
case or in the aggregate, is material to the business, assets, results of
operations or financial condition of the Company and its Subsidiaries taken as
a whole, except in the ordinary course of business. The financial statements of
the Company, including the notes thereto, included in or incorporated by
reference into the Company Reports comply as to form in all material respects
with the published rules and regulations of the SEC with respect thereto, and
have been prepared in accordance with GAAP. Since January 1, 1993, there has
been no material change in the Company's accounting methods or principles that
would be required to be disclosed in the Company's financial statements in
accordance with GAAP, except as described in the notes to such Company
financial statements.
4.11 ADEQUACY OF PROPERTIES; INTANGIBLE PROPERTY.
(a) The properties and assets owned or leased by the Company and its
Subsidiaries (including, without limitation, the Real Property and Leased
Premises) are suitable and adequate for the conduct of their respective
businesses and operations and, except as otherwise disclosed in the Company
Reports filed with the Commission prior to the date hereof, the Company and its
Subsidiaries have good and marketable title to or valid leasehold or other
contractual interests in such properties and assets, free and clear of all
Liens other than Permitted Encumbrances.
(b) All trade receivables and notes receivables which are reflected in
the financial statements contained in the Company Reports or which arose
subsequent to September 30, 1997, whether billed or unbilled, arose out of bona
fide, arms-length transactions for the sale of goods or performance of
services, and to the Company's knowledge, all such trade receivables and notes
receivable are good and collectible (or have been collected) in the ordinary
course of business using normal collection practices at the aggregate recorded
amounts thereof, less the amount of applicable reserves for doubtful accounts
and for allowances and discounts, which reserves are adequate in accordance
with GAAP.
(c) All inventory of the Company or any of its Subsidiaries which is held
for sale or resale, materials and supplies (collectively, "Inventory"),
consists of items of a quantity and quality historically
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useable and/or saleable in the normal course of business. Since September 30,
1997, there has not been a material change in the level of the Inventory. All
Inventory is, and located at the Real Estate (as defined herein) or at the
Leased Premises (as defined herein).
(d) Attached to the Disclosure Statement is a list and description of
each item of real or tangible personal property owned by the Company or any of
its Subsidiaries which has a net book value in excess of $10,000. The
Disclosure Statement lists all properties and assets used by the Company or any
of its Subsidiaries in connection with the operation of their respective
businesses which are held under any lease or under any conditional sale or
other title retention agreement to the extent the Company or its Subsidiaries'
remaining obligations under any such lease or agreement exceed $5,000 and such
remaining obligations extend for one year or more from the date hereof.
(e) The Company and its Subsidiaries own or have adequate rights to use
all patents, trademarks, trade names, service marks, brands, logos, copyrights,
trade secrets, customer lists and other proprietary intellectual property
rights (including, without limitation, all computer software, unpatented
formulations, manufacturing methods, technical agreements and technical
specifications and know-how) required for, used in or incident to the
businesses of the Company and its Subsidiaries as now conducted or proposed to
be conducted. Except as otherwise described in the Company Reports, neither the
Company nor any of its Subsidiaries has received notice, and has reason to
know, of any claim or threatened infringement of the rights of others with
respect to any patents, trademarks, service marks, trade names, brands, logos,
copyrights or licenses used or owned by the Company, the loss of which could
have a Company Material Adverse Effect. The Company has no knowledge that
either it or any of its Subsidiaries is infringing upon or otherwise violating,
or has in the past infringed upon or otherwise violated, the rights of any
third party with respect to any patent, trademark, trade name, service mark or
copyright. To the knowledge of the Company, no current or former employee of
the Company of any of its Subsidiaries is or was a party to any confidentiality
agreement and/or agreement not to compete which restricts or forbids or
restricted or forbade at any time during such employee's employment by the
Company or any of its Subsidiaries, such employee's performance of the
Company's or any of its Subsidiaries' business, as the case may be, or any
activity that such employee was hired to perform. Neither the Company nor any
of its Subsidiaries is now using, and has not in the past used without
appropriate authorization, any confidential information or trade secrets of any
third party. Neither the Company nor any of its Subsidiaries has ever received
any notice alleging such conduct.
(f) For purposes of this Agreement, (i) the term "Lien" shall mean any
security interest, mortgage, pledge, hypothecation, charge, claim, option,
right to acquire, adverse interest, assignment, deposit arrangement,
encumbrance, restriction, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including any conditional sale or other title retention agreement,
any financing lease involving substantially the same economic effect as any of
the foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction), and (ii) the term
"Permitted Encumbrances" shall mean the following Liens with respect to the
properties and assets of the Company of any of its Subsidiaries: (A) Liens for
taxes, assessments or other governmental charges or levies not at the time
delinquent or thereafter payable without penalty or being contested in good
faith by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on the Company's books; (B) Liens of
carriers, warehousemen, mechanics, materialmen and landlords incurred in the
ordinary course of business for sums not overdue or being contested in good
faith by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on the Company's books; (C) Liens incurred
in the ordinary course of business in connection with workmen's compensation,
unemployment insurance or other forms of governmental insurance or benefits, or
to secure performance of tenders, statutory obligations, leases and contracts
(other than for borrowed money) entered into in the ordinary course of business
or to secure obligations on surety or appeal bonds; and (D) purchase money
security interests or Liens on property acquired or held by the Company in the
ordinary course of business to secure the purchase price of such property or to
secure indebtedness incurred solely for the purpose of financing the
acquisition of such property, provided that
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the security interests permitted under the clause (D) shall not exceed $250,000
at any time outstanding and shall be listed on the Company Disclosure
Statement.
4.12 REAL ESTATE.
(a) Neither the Company nor any of its Subsidiaries owns any real estate,
or has the option to acquire any real estate, other than the premises
identified in the Disclosure Statement (the "Real Estate"). The Disclosure
Statement accurately sets forth the street addresses of the Real Estate. The
Real Estate is not subject to any leases or tenancies. None of the improvements
comprising the Real Estate or the businesses conducted or proposed to be
conducted by the Company or its Subsidiaries thereon, are, to the Company's
knowledge, in violation of any material use or occupancy restriction,
limitation, condition or covenant of record or any zoning or building law,
code, ordinance or public utility easement or any other applicable law. To the
Company's knowledge, no material expenditures are required to be made for the
repair or maintenance of any improvements on the Real Estate or for the Real
Estate to be used for its intended purpose.
(b) Neither the Company nor any of its Subsidiaries leases or licenses
any real estate other than the premises identified in the Disclosure Statement
as being so leased or licensed (the "Leased Premises"). The Leased Premises are
leased to the Company or its Subsidiaries, pursuant to written leases, true,
correct and complete copies, including all amendments thereto, of which have
been provided to AVS or its counsel. None of the improvements comprising the
Leased Premises, or the businesses conducted by the Company or its Subsidiaries
thereon, are, to the Company's knowledge, in violation of any building line or
use or occupancy restriction, limitation, condition or covenant of record or
any zoning or building law, code or ordinance, public utility or other
easements or other applicable law, except for violations which do not have a
Company Material Adverse Effect or materially interfere with the conduct of the
business of the Company or its Subsidiaries. No material expenditures are
required to be made for the repair or maintenance of any improvements on the
Leased Premises which exceed, in the aggregate $2,000,000 per year other than
routine repairs and maintenance in the ordinary course of business. The Company
or its Subsidiaries have valid leasehold interests in the Leased Premises,
which leasehold interests are free and clear of all Liens other than Permitted
Encumbrances. Neither the Company nor its Subsidiaries are in default under any
material agreement relating to the Leased Premises nor, to the knowledge of the
Company, is any other party thereto in default thereunder. All options in favor
of the Company or its Subsidiaries to purchase any of the Leased Premises, if
any, are in full force and effect.
(c) There are no condemnation proceedings pending against the Company or,
to the Company's knowledge, threatened with respect to any portion of the Real
Estate or the Leased Premises.
(d) To the Company's knowledge, the buildings and other facilities
located on the Real Estate and the Leased Premises are free of any material
latent structural or engineering defects or any material patent structural or
engineering defects.
4.13 CONTRACTS.
(a) Neither the Company nor any of its Subsidiaries is a party to or
bound by, and neither they nor their properties are subject to, any contracts,
agreements or arrangements required to be disclosed in a Form 10-K, Form 10-Q
or Form 8-K under the Exchange Act which is not filed as an exhibit to one or
more of the Company Reports filed and made publicly available prior to the date
of this Agreement.
(b) Neither the Company nor any of its Subsidiaries is a party to, or
bound by, any undischarged written or oral: (i) agreement or arrangement to
which the Company or its Subsidiaries is a party or by which the Company or its
Subsidiaries or any of their respective assets is bound which would be required
to be filed as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997; (ii) agreement or arrangement obligating the
Company or its Subsidiaries to pay or receive, or pursuant to which the Company
or its Subsidiaries has previously paid or received, an
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amount in excess of $50,000 (excluding purchase and sale orders entered into by
the Company or its Subsidiaries in the ordinary course of business consistent
with past practices); (iii) employment or consulting agreement or arrangement
involving an amount in excess of $25,000; (iv) plan or contract or arrangement
providing for bonuses, severance, options, deferred compensation, retirement
payments, profit sharing, medical and dental benefits or the like covering
employees of the Company, other than Plans, Welfare Plans and Employee Benefit
Plans (in each case as defined herein) described in the Disclosure Statement;
(v) agreement restricting in any manner the Company's right to compete with any
other person or entity, the Company's right to sell to or purchase from any
other person or entity, the right of any other party to compete with the
Company, or the ability of such person or entity to employ any of the Company's
employees; (vi) secrecy or confidentiality agreements (except for secrecy and
confidentiality agreements which (A) are terminable at will at any time by the
Company, (B) do not provide for any payment of consideration and (C) do not
contain any "standstill" provision or similar restriction on the Company's
ability to negotiate an acquisition of another entity); (vii) any
distributorship, non-employee commission or marketing agent, representative or
franchise agreement providing for the marketing and/or sale of the products or
services of the Company or any of its Subsidiaries; (viii) agreement between
the Company and any of its affiliates or other Related Parties (as herein
defined) (excluding any such agreement disclosed in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 and its Quarterly Reports on
Form 10-Q for the first three quarters of 1997); (ix) guaranty, performance,
bid or completion bond, or surety or indemnification agreement (excluding (A)
any such item between the Company and its Subsidiaries and (B) any
indemnification agreement entered into in the Company's and/or its
Subsidiaries' ordinary course of business with a customer of the Company (such
ordinary course of business policy is set forth in all material respects in the
general performance agreements attached to the Disclosure Statement); (x)
requirements contract; (xi) loan or credit agreement, pledge agreement, note,
security agreement, mortgage, debenture, indenture, factoring agreement or
letter of credit relating to borrowed money; (xii) agreements with respect to
compliance with Environmental Laws (as defined herein); (xiii) any agreement
relating to the ownership or control of any interest in a partnership,
corporation, limited liability company, joint venture or other entity or
similar arrangement other than as otherwise disclosed herein; (xiv) any
contract or agreement containing change of control provisions; or (xvi) any
other material agreement not entered into in the ordinary course of business.
Neither the Company nor any of its Subsidiaries are currently negotiating (and
have not entered into preliminary discussions with respect to) any transaction
involving an aggregate payment by the Company or its Subsidiaries and/or
receipts to the Company or its Subsidiaries in excess of $50,000 excluding
purchase and sale orders entered into by the Company or its Subsidiaries in the
ordinary course of business consistent with past practices.
(c) All agreements, leases, subleases and other instruments referred to
in this Section 4.13, are, pursuant to their terms, in full force and binding
upon the Company or its Subsidiaries, and, to the knowledge of the Company, the
other parties thereto, except in each case to the extent such failure would not
cause a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is and, to the Company's knowledge, none of the other parties
thereto are in default of a material provision under any such agreement, lease,
sublease or other instrument. Neither the Company nor any of its Subsidiaries
has been notified that the Company is in default under any such lease
agreement, sublease or other instrument and to the Company's knowledge no event
has occurred and it is not aware of the existence of a condition which, with
the lapse of time, the giving of notice, or both, or the happening of any
further event or condition, would become a default of a material provision
under any such agreement, lease, sublease or other instrument by the Company or
its Subsidiaries, or, to the knowledge of the Company, the other contracting
party. Neither the Company nor any of its Subsidiaries has released or waived
any material right under any such agreement, lease, sublease or other
instrument other than in the ordinary course of business consistent with past
practices.
(d) Other than the Company Stock Option Plans, immediately after the
Closing, except as contemplated by this Agreement, neither the Company nor any
of its Subsidiaries will be bound by the terms of any stock option agreement,
registration rights agreement, stockholders agreement,
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management agreement, consulting agreement or any other agreement relating to
the equity or management of the Company or its Subsidiaries.
4.14 INSURANCE. The Company has delivered to AVS prior to the date of this
Agreement copies of all insurance policies which are owned by the Company or
its Subsidiaries or which name the Company or any of its Subsidiaries as an
insured (or loss payee), including without limitation those which pertain to
the Company's or its Subsidiaries' assets, employees or operations. All such
insurance policies are in full force and effect, are valid and enforceable, all
premiums due thereunder have been paid and cover against the risks of the
nature normally insured against by entities in the same or similar lines of
business in coverage amounts typically and reasonable carried by such entities.
Neither the Company nor any of its Subsidiaries have received notice of
cancellation of any such insurance policies.
4.15 LITIGATION. Except as set forth in the Company Reports filed with the
SEC prior to the date hereof, (i) there is no litigation or proceeding,
including, without limitation, any arbitration proceeding, in law or in equity,
and there are no proceedings or governmental investigations before any
commission or other administrative authority, pending or, to the Company's
knowledge, threatened against the Company or any of its Subsidiaries, which, if
adversely determined, is reasonably likely to have, either individually or in
the aggregate, a Company Material Adverse Effect; (ii) there is no judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator applicable to the Company or
any Company Subsidiaries having, or is reasonably likely to have, either
individually or in the aggregate, a Company Material Adverse Effect; and (iii)
to the knowledge of the Company, there is no action, suit, proceeding or
investigation pending or threatened against the Company, which seeks to
restrain, enjoin or delay the consummation of the Merger or any of the other
transactions contemplated hereby or which seeks damages in connection
therewith, and no injunction of any type referred to in Section 6.1(c) has been
entered or issued.
4.16 WARRANTIES. Neither the Company nor any of its Subsidiaries has made
any oral or written warranties with respect to the quality or absence of
defects of its products or services which they have sold or performed which are
in force as of the date hereof. There are no material claims pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries with respect to the quality of or absence of defects in such
products or services nor are there any facts known to the Company relating to
the quality of or absence of defects in such products or services which, if
known by a potential claimant or governmental authority, would reasonably give
rise to a material claim or proceeding. The Company's warranty policy is
generally described in the Disclosure Statement. The Company has no knowledge
of or reason to believe that the percentage of warranty claims for products
sold or services rendered by the Company and its Subsidiaries prior to the
Closing Date will exceed historical levels.
4.17 PRODUCTS LIABILITY. Neither the Company nor any of its Subsidiaries
have received any written notice relating to, nor does the Company have
knowledge of any facts or circumstances which could give rise to, any claim
involving any product manufactured, serviced, produced, distributed or sold by
or on behalf of the Company or its Subsidiaries resulting from an alleged
defect in design, manufacture, materials or workmanship, or any alleged failure
to warn, or from any breach of implied warranties or representations, other
than notices or claims that have been settled or resolved by the Company or its
Subsidiaries prior to the date of this Agreement.
4.18 TAXES.
(a) There have been properly completed and filed on a timely basis and in
correct form all material Returns required to be filed by the Company or any of
its Subsidiaries. As of the time of filing, the foregoing Returns were correct
and complete in all material respects. An extension of time within which to
file any Return which has not been filed has not been requested or granted.
(b) With respect to all amounts in respect of Taxes imposed upon the
Company or any of its Subsidiaries, or for which the Company or any of its
Subsidiaries is or could be liable, whether to taxing
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authorities (as, for example, under law) or to other persons or entities (as,
for example, under tax allocation agreements), with respect to all taxable
periods or portions of periods ending on or before September 30, 1997, (i) all
applicable tax laws and agreements have been complied with in all material
respects, and (ii) all amounts required to be paid by the Company or its
Subsidiaries, to taxing authorities or others, on or before the date hereof
have been paid or adequately reserved for on the financial statements contained
in the Company Reports, and any Taxes accrued but not due and payable as of
September 30, 1997 have been accrued or otherwise reserved for in financial
statements contained in the most recent Company Report. No Taxes have been (or
will prior to the Closing Date be) recorded by the Company or any of its
Subsidiaries other than in the ordinary course of business. There are no Liens
filed against any asset of the Company or any of its Subsidiaries resulting
from the failure to pay any Tax when due.
(c) No material issues have been raised (and are currently pending) by
any taxing authority in connection with any of the Returns. No waivers of
statutes of limitation with respect to the Returns have been given by the
Company or any of its Subsidiaries (or with respect to any Return which a
taxing authority has asserted should have been filed by the Company or any of
its Subsidiaries) which waivers are still in effect. The Disclosure Statement
sets forth, for the past seven years, the years for which examinations or
audits of Florida state sales tax and federal income tax returns have been
completed, those years for which examinations or audits are presently being
conducted, and those years for which such returns will be required but are not
yet due to be filed and have not yet been filed. All deficiencies asserted or
assessments made as a result of any examinations have been fully paid, or are
fully reflected as a liability in the financial statements contained in the
Company Report, or are being contested and an adequate reserve therefor has
been established and is fully reflected as a liability in the financial
statements contained in the most recent Company Report.
(d) The unpaid Taxes of the Company or any of its Subsidiaries do not
materially exceed the reserve for tax liability (excluding any reserve for
deferred Taxes established to reflect timing differences between book and tax
income) set forth or included in the financial statements included in the most
recent Company Report, as adjusted for the passage of time through the Closing.
(e) Neither the Company nor any of its Subsidiaries is or at any time has
been a party to or bound by (nor will the Company or any of its Subsidiaries
become a party to or bound by) any tax indemnity, tax sharing or tax allocation
agreement.
(f) All material elections with respect to Taxes affecting the Company or
any of its Subsidiaries that are currently effective as of the date hereof that
are not reflected in the Company's Returns are set forth in the Disclosure
Statement.
(g) There are no challenges on appeals pending regarding the amount of
Taxes on, or the addressed valuation of, the Real Estate or the Leased
Premises, and no special arrangements or agreements exist with any governmental
authority with respect thereto (the representations and warranties contained in
this Section 4.18(h) shall not be deemed to be breached by any prospective
general increase in real estate taxes.)
(h) There is no assessment for Taxes (in addition to the normal, annual
general real estate tax assessment) pending against the Company, or to the
Company's knowledge, threatened with respect to any portion of the Real Estate
or, to the extent the Company or its Subsidiaries is liable for payment of the
Leased Premises.
4.19 ERISA.
(a) The Disclosure Statement contains a list and brief description of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "Pension Plans"), "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA and referred to herein as a "Welfare Plan")
and all other
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Benefit Plans (defined herein as any Pension Plan, Welfare Plan and any other
plan, fund, program, arrangement or agreement to provide employees, directors,
independent contractors, officers or agents of any Commonly Controlled Entity
(as defined herein) with medical, health, life, bonus, stock (option, ownership
or purchase), deferred compensation, severance, salary continuation, vacation,
sick leave, fringe, incentive insurance or other benefits) maintained, or
contributed to, or required to be contributed to, by the Company or any of its
Subsidiaries or any other Person that, together with the Company at any time
during the last six years, is or was treated as a single employer under Section
414(b), (c), (m) or (o) of the Code (the Company and each such other Person, a
"Commonly Controlled Entity") for the benefit of any current or former
employees, officers or directors of the Company, any of its Subsidiaries or any
Commonly Controlled Entity. The Company has delivered or made available to AVS
true, complete and correct copies of (i) each Benefit Plan (or, in the case of
any unwritten Benefit Plans, descriptions thereof), (ii) the most recent annual
report on Form 5500 filed with the Internal Revenue Service with respect to
each Benefit Plan (if any such report was required), (iii) the most recent
summary plan description for each Benefit Plan for which such summary plan
description is required, (iv) each trust agreement and group annuity contract
relating to any Benefit Plan; and (v) a list of all assets and liabilities of,
allocated to or accounted for separately with respect to every Benefit Plan
(including insurance contracts associated with every Benefit Plan regardless of
whether any current cash value exists). Each Benefit Plan has been established,
funded, maintained and administered in all material respects in accordance with
its terms and is in compliance with the applicable provisions of ERISA, the
Code, all other applicable laws and all applicable collective bargaining
agreements except where the failure to comply would not be reasonably expected
to result in a Company Material Adverse Effect.
(b) All Pension Plans have been the subject of favorable and up-to-date
(through any applicable remedial amendment period) determination letters from
the Internal Revenue Service, or a timely application therefor has been filed,
to the effect that such Pension Plans are qualified and exempt from federal
income taxes under Section 401(a) and 501(a), respectively, of the Code, and no
such determination letter has been revoked nor has any such Pension Plan been
amended since the date of its most recent determination letter or application
therefor in any respect that would adversely affect its qualification or
materially increase its costs.
(c) Neither the Company, nor any of its Subsidiaries, nor any Commonly
Controlled Entity has adopted or been obligated to contribute to any "defined
benefit pension plan" as defined in Section 3(35) of ERISA subject to Title IV
of ERISA in the five years preceding the date hereof.
(d) Neither the Company, nor any of its Subsidiaries, nor any Commonly
Controlled Entity has been required at any time within the five calendar years
preceding the date hereof or is required currently to contribute to any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA ) or has
withdrawn from any multiemployer plan where such withdrawal has either: (i)
resulted or would result in any "withdrawal liability" (within the meaning of
Section 4201 of ERISA) that has not been fully paid; or (ii) engaged in a
transaction that might have resulted in withdrawal liability but for the
application of Section 4204 of ERISA.
(e) With respect to any Welfare Plan, (i) no such Welfare Plan is funded
through a "welfare benefits fund", as such term is defined in Section 419(e) of
the Code, (ii) no such Welfare Plan is self-insured, and (iii) each such
Welfare Plan that is a "group health plan", as such term is defined in Section
5000(b)(1) of the Code, complies with the applicable requirements of Section
4980B(f) of the Code.
(f) Neither the Company, nor any of its Subsidiaries, nor any Commonly
Controlled Entity nor any Person acting on behalf of the Company, its
Subsidiaries or any Commonly Controlled Entity has, in contemplation of any
corporate transaction involving AVS, issued any written communication to, or
otherwise made or entered into any legally binding commitment with, any
employees of the Company, any of its Subsidiaries or of any Commonly Controlled
Entity to the effect that, following the date hereof, (i) any benefits or
compensation provided to such employees under existing Benefit Plans or
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under any other plan or arrangement will be enhanced, (ii) any new plans or
arrangements providing benefits or compensation will be adopted, (iii) any
Benefit Plans will be continued for any period of time or cannot be amended or
terminated at any time or for any reason, or (iv) any plans or arrangements
provided by AVS will be made available to such employees.
(g) Neither the Company, nor any of its Subsidiaries, nor any Commonly
Controlled Entity has ever promised or been obligated to provide former
employees with coverage or benefits under Benefit Plans, other than as required
by Section 4980B of the Code.
(h) All contributions or premiums owed by the Company any of its
Subsidiaries and Commonly Controlled Entities with respect to Benefit Plans
under law, contract or otherwise have been made in full and on a timely basis
and the Company, its Subsidiaries and Commonly Controlled Entities are not
obligated to contribute with respect to any Benefit Plan that involves a
retroactive contribution, assessment or funding waiver arrangement. All
administrative costs attributable to Benefit Plans have been paid when due.
(i) To the Company's knowledge, no Pension Plan or Welfare Plan or any
"fiduciary" or "party-in-interest" (as such terms are respectively defined by
Sections 3(21) and 3(14) of ERISA) thereto has engaged in a transaction
prohibited by Section 406 of ERISA or 4975 of the Code for which a valid
exception is not available.
(j) There are no pending or, to the Company's knowledge, threatened
likely claims, lawsuits, arbitrations or audits asserted or instituted against
any Benefit Plan, any fiduciary (as defined by Section 3(21) of ERISA thereto,
the Company, any of its Subsidiaries, any Commonly Controlled Entity or any
employee or administrator thereof in connection with the existence, operation
or administration of a Benefit Plan, other than routine claims for benefits.
(k) Nothing in this Agreement or the transaction contemplated hereunder
will: (i) cause the termination or repricing of any insurance contract to which
the Company, any of its Subsidiaries or a Commonly Controlled Entity or Benefit
Plan is a party to the purposes of providing employee benefits; (ii) trigger a
right of any employee of the Company, any of its Subsidiaries, or any Commonly
Controlled Entity to severance, deferred compensation or retirement benefits;
or (iii) cause any early withdrawal or premature termination penalty with
respect to any asset held in connection with any Benefit Plan.
(l) Neither the Company, nor any of its Subsidiaries, nor any Commonly
Controlled Entity maintains any unfunded plan of deferred compensation.
4.20 LABOR MATTERS. Except for events that occur after the date hereof
which are disclosed in writing by the Company to AVS, (a) there is no labor
strike, dispute, slowdown, work stoppage or lockout pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries and during the past three years, there has not been any such
action; (b) to the knowledge of the Company there are no union claims to
represent the employees of the Company or any of its Subsidiaries, (c) neither
the Company nor any of its Subsidiaries is a party to or bound by any
collective bargaining or similar agreement with any labor organization, or work
rules or practices agreed to with any labor organization or employee
association applicable to employees of the Company or any of its Subsidiaries;
(d) none of the employees of the Company or any of its Subsidiaries are
represented by any labor organization and the Company does not have any
knowledge of any current union organizing activities among the employees of the
Company or any of its Subsidiaries, nor to the knowledge of the Company does
any question concerning representation exist with respect to such employees;
(e) neither the Company nor any of its Subsidiaries is delinquent in payments
to any of its employees for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed by them to the date of this
Agreement or amounts required to be reimbursed to such employees; (f) upon
termination of the employment of any of the employees of the Company or any of
its Subsidiaries after the Closing, neither the Company nor any of its
Subsidiaries will be liable to any of its employees for
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severance pay, except as otherwise required by federal law; (g) the employment
of each of the Company's or its Subsidiaries' employees is terminable at will
without cost to the Company or any of its Subsidiaries except for payments
disclosed on the Disclosure Statement or required under the Plans, Welfare
Plans and Employee Benefit Plans and payment of accrued salaries or wages and
vacation pay; (h) the Disclosure Statement contains a true and complete list of
all employees who are employed by the Company or any of its Subsidiaries as of
December 31, 1997, and said list correctly reflects their salaries, wages and
other compensation (other than benefits under the Plans, Welfare Plans and
Employee Benefit Plans).
4.21 ENVIRONMENTAL MATTERS.
(a) The Company has obtained all licenses, permits and other
authorizations under Environmental Laws required for the conduct and operation
of its business and is in compliance with the terms and conditions contained
therein and is in compliance with other provisions of applicable Environmental
Laws, except where the failure to obtain such licenses, permits and other
authorizations or the non-compliance with the terms and conditions contained
therein or the non-compliance with other provisions of applicable Environmental
Laws would not singly or in the aggregate create a Company Material Adverse
Effect.
(b) To the knowledge of the Company, there is no condition on any
property currently or formerly owned or leased by the Company that would create
liability for the Company under Environmental Laws, except for liability that
would not singly or in the aggregate create a Company Material Adverse Effect.
(c) To the knowledge of the Company, there is no condition or any other
property owned by any third party that would create liability for the Company
under Environmental Laws, except for liability that would not singly or in the
aggregate create a Company Material Adverse Effect.
(d) There are no (and to the Company's knowledge there is no basis for
any) non-compliance orders or notices of violation (collectively "Notices"),
claims, suits, actions, judgments, penalties, fines, or administrative or
judicial investigations or proceedings (collectively "Proceedings") pending or,
to the knowledge of the Company, threatened against or involving the Company,
or its business, operations, properties or assets, issued by any Governmental
Authority with respect to any Environmental Laws or Licenses issued to the
Company thereunder in connection with, related to or arising out of the
ownership by the Company of its properties or assets or the operation of its
business, which have not been resolved in a manner that would not impose any
material obligation, burden or continuing material liability on AVS or the
Company in the event that the transactions contemplated by this Agreement are
consummated, or which could have a Material Adverse Effect on the Company.
(e) The Company does not use, nor has it used, any Aboveground Storage
Tanks (as defined in clause (g) below) or Underground Storage Tanks (as defined
in clause (g) below), and there are not now any Underground Storage Tanks
beneath any real property currently or previously owned or leased by the
Company that are required to be registered under applicable Environmental Laws.
(f) The Disclosure Statement identifies (i) all environmental audits,
assessments or occupational health studies undertaken by the Company or its
agents or undertaken by any Governmental Authority and known to the Company,
relating to the Company or any real property currently or previously owned or
leased by the Company; (ii) the results of any ground, water or soil monitoring
undertaken by the Company or undertaken by any Governmental Authority and known
to the Company relating to the Company or any real property currently or
previously owned or leased by the Company; and (iii) all material written
communications between the Company and any Governmental Authority arising under
or related to Environmental Laws.
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(g) For purposes of this Section 4.21, the following terms shall have the
meanings ascribed to them below:
"Aboveground Storage Tank" shall have the meaning ascribed to such term
in Section 6901 ET SEQ., as amended, of RCRA, or any applicable state or local
statute, law, ordinance, code, rule, regulation, order ruling, or decree
governing Aboveground Storage Tanks.
"Company" means the Company and its Subsidiaries.
"Environmental Laws" means all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions, decrees,
rulings, and changes or ordinances or judicial or administrative
interpretations thereof, or similar laws of foreign jurisdictions where the
Company conducts business, whether currently in existence or hereafter enacted
or promulgated, any of which govern (or purport to govern) or relate to
pollution, protection of the environment, public health and safety, air
emissions, water discharges, hazardous or toxic substances, solid or hazardous
waste or occupational health and safety, as any of these terms are or may be
defined in such statutes, laws, rules, regulations, codes, orders, plans,
injunctions, decrees, rulings and changes or ordinances, or judicial or
administrative interpretations thereof, including, without limitation: the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended by the Superfund Amendment and Reauthorization Act of 1986, 42
U.S.C. /section/9601, ET SEQ. (collectively "CERCLA"); the Solid Waste Disposal
Act, as amended by the Resource Conservation and Recovery Act of 1976 and
subsequent Hazardous and Solid Waste Amendments of 1984, 42 U.S.C.
/section/6901 ET SEQ. (collectively "RCRA"); the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. /section/1801, ET SEQ.; the Clean
Water Act, as emended, 33 U.S.C. /section/1311, ET SEQ.; the Clean Air Act, as
amended (42 U.S.C. /section/7401-7642); the Toxic Substances Control Act, as
amended, 15 U.S.C. /section/2601 ET SEQ.; the Federal Insecticide, Fungicide,
and Rodenticide Act as amended, 7 U.S.C. /section/136-136y ("FIFRA"); the
Emergency Planning and Community Right-to-Know Act of 1986 as amended, 42
U.S.C. /section/11001, ET SEQ. (Title III of SARA) ("EPCRA"); the Occupational
Safety and Health Act of 1970, as amended, 29 U.S.C. /section/651, ET SEQ.
("OSHA"); Chapters 376 and 403, Florida statutes; and Florida common law.
"Underground Storage Tank" shall have the meaning ascribed to such term
in Section 6901 ET SEQ., as amended, of RCRA, or any applicable state or local
statute, law, ordinance, code, rule, regulation, order ruling, or decree
governing Underground Storage Tanks.
4.22 INTERIM CONDUCT OF BUSINESS. Except as otherwise contemplated by this
Agreement, since September 30, 1997, neither the Company nor any of its
Subsidiaries has:
(a) sold, assigned, leased, exchanged, transferred or otherwise disposed
of any material portion of its assets or property, except for sales of
Inventory and cash applied in the payment of the Company's or its Subsidiaries'
liabilities in the usual and ordinary course of business in accordance with the
Company's or its Subsidiaries' past practices;
(b) written off any asset outside the ordinary course of business which
has a net book value which exceeds $25,000 in the aggregate in value, or
written off any amounts in the ordinary course of business in excess of
reserves which have been established for such purpose, which reserves are
adequate in accordance with GAAP applied on a consistent basis;
(c) suffered any casualty, damage, destruction or loss, or interruption
in use, of any material asset, property or portion of Inventory (whether or not
covered by insurance), on account of fire, flood, riot, strike or other hazard
or Act of God;
(d) waived any material right arising out of any material agreement other
than in the ordinary course of business;
(e) made (or committed to make) capital expenditures in an amount which
exceeds $10,000 for any item or $25,000 in the aggregate;
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(f) made any change in accounting methods or principles which are
required to be disclosed in the Company's financial statements in accordance
with GAAP;
(g) borrowed any money or issued any bonds, debentures, notes or other
corporate securities (other than equity securities), including without
limitation, those evidencing borrowed money except under existing credit
agreements;
(h) entered into any transaction with, or made any payment to, or
incurred any liability to, any Related Party (as defined herein)(except for
payment of salary and other customary expense reimbursements made in the
ordinary course of business to Related Parties who are employees of the Company
or its Subsidiaries);
(i) increased the compensation payable to any employee, except for normal
pay increases in the ordinary course of business consistent with past
practices;
(j) made any payments or distributions to its employees, officers or
directors except such amounts as constitute currently effective compensation
for services rendered, or reimbursement for reasonable ordinary and necessary
out-of-pocket business expenses;
(k) paid or incurred any management or consulting fees, or engaged any
consultants, except in the ordinary course of business;
(l) hired any employee who has an annual salary in excess of $75,000;
(m) terminated any employee having an annual salary or wages in excess of
$50,000;
(n) adopted any new Plan, Welfare Plan or Employee Benefit Plan;
(o) issued or sold any securities of any class, except for the exercise
of options to purchase Company Common Stock under the Company Option Plans;
(p) paid, declared or set aside any dividend or other distribution on its
securities of any class, or purchased, exchanged or redeemed any of its
securities of any class; or
(q) without limitation by the enumeration of any of the foregoing,
entered into any material transaction other than in the usual and ordinary
course of business in accordance with past practices.
Notwithstanding the foregoing, the Company shall not be deemed to have breached
the terms of this Section 4.22 by entering into this Agreement or by
consummating the transactions contemplated hereby.
4.23 AFFILIATED TRANSACTIONS. Except as disclosed in any Company Report
filed with the SEC prior to the date of this Agreement, since September 30,
1997, neither the Company nor any of its Subsidiaries has been a party to any
transactions (other than employee compensation and other ordinary incidents of
employment) with a "Related Party," For purposes of this Agreement, the term
"Related Party" shall mean: any present officer or director, 10% stockholder
(including any officers or directors thereof) or present affiliate of the
Company or any of its Subsidiaries, any present or former known spouse of any
of the aforementioned persons or any trust or other similar entity for the
benefit of any of the foregoing persons. Prior to the Closing, all amounts due
and owing to or from the Company or its Subsidiaries by or to any of the
Related Parties (excluding employee compensation and other incidents of
employment) shall be paid in full.
4.24 MATERIAL ADVERSE CHANGE. Since September 30, 1997 to the date of this
Agreement, there has not been any material adverse change in the business,
operations, assets, liabilities, financial condition or prospects of the
Company or its Subsidiaries, taken as a whole.
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4.25 REPRESENTATIONS REGARDING THE AVAERO NOISE REDUCTION JOINT VENTURE.
(a) AvAero Noise Reduction Joint Venture (the "Joint Venture") is a
general partnership duly organized and validly existing under the laws of the
State of Delaware having the requisite power and authority to own or lease its
properties and to carry on its business as now being conducted. The Joint
Venture is qualified to transact business in all jurisdictions in which it owns
or leases real property or in which the conduct of its business requires it to
be qualified, except where the failure to be so qualified would not have a
Joint Venture Material Adverse Effect.
(b) The Joint Venture Agreement made and entered into as of January 5,
1994 by and among Aero Hushkit Corporation, a Delaware corporation ("AHC"), WDW
Aviation Management, Inc., a Delaware corporation and Avro Corp, a California
corporation (the "Joint Venture Agreement"), has been duly executed and
delivered and constitutes the legal, valid and binding obligation of AHC and,
to the knowledge of the Company, each of the other parties thereto, enforceable
against AHC and, to the knowledge of the Company, each of the other parties
thereto in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
(c) The record owners of all the outstanding partnership interests of the
Joint Venture are set forth in the Joint Venture Agreement and the partnership
interest of AHC in the Joint Venture is free of all Liens, other than Permitted
Encumbrances.
(d) To the Company's knowledge the execution and delivery of this
Agreement by the Company, the performance by it of its obligations hereunder
and the consummation by it of the transactions contemplated by this Agreement
will not (i) contravene any provision of the Joint Venture Agreement or other
organizational documents of the Joint Venture, (ii) violate or conflict with
any law, statute, ordinance, rule, regulation, decree, writ, injunction,
judgment or order of any Governmental Authority or of any arbitration award
which is either applicable to, binding upon or enforceable against the Joint
Venture, (iii) conflict with, result in any breach of, or constitute a default
(or an event which would, with the passage of time or the giving of notice or
both, constitute a default) under, or give rise to a right to terminate, amend,
modify, abandon or accelerate, any material contract which is applicable to,
binding upon or enforceable against the Joint Venture, (iv) result in or
require the creation or imposition of any Lien upon or with respect to any of
the property, assets or the issued and outstanding interests of the Joint
Venture, or give rise to a right to buy the partnership interest of AHC in the
Joint Venture, or (v) require the consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority, any court or
tribunal or any other Person in connection with the Joint Venture.
(e) A copy of each of the Joint Venture Agreement, the Manufacturing
Agreement, the Credit Agreement, the Loan Assumption Option Agreement and the
Contribution Agreement has been previously provided by the Company to AVS and
each is true, accurate and complete and reflects all amendments made through
the date of this Agreement.
(f) The Company has delivered to AVS the financial statements of the
Joint Venture, consisting of balance sheets and related statements of income
and cash flows and notes thereto described as follows: (i) for the years ended
December 31, 1996 and 1997 (the "Annual Statements"); and (ii) interim
unaudited financial statements of the Joint Venture for the two months ended
February 28, 1998 (the "Interim Statements"). The Interim Statements together
with the Annual Statements are collectively referred to as the "Financial
Statements." A copy of each of the Financial Statements are attached to the
Disclosure Statement. The Financial Statements fairly present in all material
respects the financial position of the Joint Venture at each of the balance
sheet dates and the results of operations of the Joint Venture for the periods
covered thereby. The Annual Statements have been prepared in accordance with
GAAP consistently applied throughout the periods indicated, except as otherwise
indicated therein or in the notes thereto. The Interim Statements have been
prepared in
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accordance with GAAP except for normal year-end audit adjustments, the absence
of footnotes and as set forth on the Disclosure Statement.
(g) To the Company's knowledge, and other than in the ordinary course of
business consistent with past practice, since the date of the Interim
Statements, the Joint Venture has not: (i) sold, leased or transferred any of
its properties or assets; (ii) made or obligated itself to make capital
expenditures; (iii) made any payment in respect of its liabilities; (iv)
incurred any obligations or liabilities (including any indebtedness) or entered
into any transaction or series of transactions involving in excess of $50,000
in the aggregate; (v) suffered any theft, damage, destruction or casualty loss,
not covered by insurance and for which a timely claim was filed, in excess of
$50,000 in the aggregate; (vi) suffered any extraordinary losses (whether or
not covered by insurance); (vii) waived, canceled, compromised or released any
rights under any material contract or agreement to which the Joint Venture is a
party having a value in excess of $50,000 in the aggregate; (viii) entered into
any transaction with any affiliate of the Joint Venture; (ix) entered into,
terminated, amended or modified any material contract; (x) imposed any security
interest or other Lien on any of its assets, other than Permitted Encumbrances;
or (xi) delayed paying any accounts payable which are due and payable except to
the extent being contested in good faith;. Except as set forth on the
Disclosure Statement, to the Company's knowledge, since the date of the Interim
Statements, the Joint Venture has not made or adopted any changes in its
accounting practices or policies.
(h) To the Company's knowledge, the Joint Venture does not have any
material liabilities or obligations, whether accrued, absolute, contingent or
otherwise, except (i) to the extent reflected or taken into account in its
Financial Statements and not heretofore paid or discharged, (ii) liabilities
incurred in the ordinary course of business consistent with past practice since
the date of its Interim Statements (none of which relates to breach of
contract, breach of warranty, tort, infringement or violation of law, or which
arose out of any action, suit, claim, governmental investigation or arbitration
proceeding), (iii) normal accruals, reclassifications, and audit adjustments
which would be reflected on an audited financial statement and (iv) liabilities
incurred in the ordinary course of business.
(i) To the Company's knowledge, there is no action, suit or other legal
or administrative proceeding or governmental investigation pending, or to the
best knowledge of the Company, threatened, by or against the Joint Venture or
affecting the Joint Venture or any of its properties or assets which, if
adversely determined, is reasonably likely to have a Joint Venture Material
Adverse Effect or which questions the validity or enforceability of the Joint
Venture Agreement. To the Company's knowledge, there are no outstanding orders
or decrees issued by any Governmental Authority in any proceeding to which the
Joint Venture is or was a party which have not been complied with in full.
4.26 INAPPROPRIATE PAYMENTS. Neither the Company, its Subsidiaries nor, to
the Company's knowledge, any of their respective officers, directors, principal
stockholders, employees, agents or representatives has made, directly or
indirectly, with respect to the Company, its Subsidiaries or their respective
business activities, any bribes or kickbacks, illegal political contributions,
payments from corporate funds not recorded on the books and records of the
Company or its Subsidiaries, payments from corporate funds to governmental
officials, in their individual capacities, for the purpose of affecting their
action or the action of the government they represent, to obtain favorable
treatment in securing business or licenses or to obtain special concessions, or
illegal payments from corporate funds to obtain or retain business.
4.27 ABSENCE OF INDEMNIFIABLE CLAIMS, ETC. There are no pending claims
and, to the knowledge of the Company, no facts that would reasonably entitle
any director, officer or employee of the Company or its Subsidiaries to
indemnification by the Company or its Subsidiaries under applicable law, the
Certificate of Incorporation or By-laws of the Company or its Subsidiaries or
any insurance policy maintained by the Company or its Subsidiaries.
4.28 NO UNDISCLOSED LIABILITIES. There are no liabilities or obligations
of any nature (whether accrued, absolute or contingent) of the Company or its
Subsidiaries other than (i) liabilities disclosed or
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provided for in the most recent financial statements contained in the Company
Reports; (ii) liabilities which, individually or in the aggregate, are not
material to the Company or its Subsidiaries; (iii) liabilities under this
Agreement (or contemplated hereby) or disclosed in the Disclosure Statement and
(iv) liabilities incurred since September 30, 1997 in the ordinary course of
business and consistent with past practices.
4.29 NO BROKERS. Neither the Company nor any of its Subsidiaries has
entered into any contract, arrangement or understanding with any person or firm
which may result in the obligation of the Company or AVS, AVS Sub or their
respective Subsidiaries to pay any finder's fee, brokerage or agent's
commissions or other like payments in connection with negotiations leading to
this Agreement or the consummation of the transactions contemplated hereby
provided, however, that the Company has retained Ladenburg, Thalmann & Co.,
Inc. ("Ladenburg") to render an opinion with respect to the fairness of the
consideration to be received by the Company's stockholders in the Merger and
has agreed to pay a fee to Ladenburg.
4.30 TAX REORGANIZATION AND POOLING OF INTEREST ACCOUNTING TREATMENT.
Neither the Company nor any of its Subsidiaries has taken or failed to take any
action which would prevent the Merger from (a) constituting a reorganization
within the meaning of section 368(a) of the Code or (b) being treated as a
"pooling or interests" in accordance with Accounting Principles Board Opinion
No. 16, the interpretative releases issued pursuant thereto, and the
pronouncements of the SEC.
4.31 OPINION OF FINANCIAL ADVISOR. The Company has been orally advised by
Ladenburg to the effect that, as of the date hereof, the consideration to be
received by the stockholders of the Company pursuant to the Merger is fair to
such stockholders from a financial point of view.
4.32 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company or any of its affiliates, directors, officers,
employees, agents or representatives in writing specifically for inclusion or
incorporation by reference in, and which is included or incorporated by
reference in, (i) the Form S-4 or any amendment or supplement thereto; (ii) the
Company Proxy Statement, (iii) the proxy statement to be mailed to AVS'
stockholders (the "AVS Proxy Statement") in connection with the meeting of AVS'
stockholders called to consider and vote upon the approval of the Merger (the
"AVS Stockholder Meeting") or (iv) any other documents filed or to be filed
with the SEC or any other Governmental Authority in connection with the
transactions contemplated hereby, will, at the respective times such documents
are filed, and in the case of the Form S-4 or any amendment or supplement
thereto, when the same becomes effective, at the time of the Company
Stockholder Meeting and at the Effective Time, and, in the case of the Company
Proxy Statement or any amendment or supplement to either thereof, at the time
of mailing of the Company Proxy Statement to Company's stockholders or at the
time of the Company Stockholders Meeting or any other meeting of the Company's
stockholders to be held in connection with the Merger, and, in the case of the
AVS Proxy Statement or any amendment or supplement thereto, at the time of the
AVS Stockholder Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading or necessary to correct any statement in any earlier
communication. The Form S-4 (to the extent that the Company Proxy Statement
constitutes the prospectus thereunder) and the Company Proxy Statement will
comply as to form in all material respects with the applicable provisions of
the Securities Act, the Exchange Act and the respective rules and regulations
under any such Act.
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ARTICLE V
COVENANTS
5.1 ALTERNATIVE PROPOSALS.
(a) Prior to the Effective Time, the Company agrees that neither it nor
any of its Subsidiaries shall, and it shall direct and cause its officers,
directors, employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or any
of the Subsidiaries) not to, (i) initiate or solicit, directly or indirectly,
any inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to the stockholders of
the Company) with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities of, the Company or its Subsidiaries (any such
proposal or offer being hereinafter referred to as an "Alternative Proposal"),
(ii) engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Alternative Proposal, or otherwise facilitate any effort or attempt to make or
implement an Alternative Proposal, or (iii) subject to subsection (b) of this
Section 5.1, enter into any agreement or understanding with any Person other
than AVS with the intent to effect any Alternative Proposal; provided that
nothing contained in this Section 5.1 shall prohibit the Company or the Board
of Directors of the Company (the "Company Board"), to the extent required by
their fiduciary duties under applicable law, from providing information to, or
participating in discussions with, any party that makes an unsolicited inquiry
with respect to the Company if the Company Board reasonably believes such party
may propose an Alternative Proposal on terms that are superior, from a
financial point of view, to the terms of the Merger for the stockholders of the
Company. The Company will immediately give written notice to AVS of its receipt
of any Alternative Proposal or inquiry with respect to making an Alternative
Proposal. Nothing contained herein shall be construed to prohibit the Company
or the Company Board from making any disclosure to its stockholders which, in
the judgment of the Company Board as advised by counsel, may be required by
applicable law in connection with any such proposal or offer.
(b) Except as set forth in this Section 5.1, the Company Board shall not
approve or recommend, or cause the Company to enter into any agreement with
respect to, any Alternative Proposal. Notwithstanding the foregoing, if the
Company Board, after consultation with and based upon the advice of independent
legal counsel, determines in good faith that it is necessary to do so in order
to comply with its fiduciary duties to stockholders under applicable law, the
Company Board may approve or recommend a Superior Proposal (as defined below)
or cause the Company to enter into an agreement with respect to, a Superior
Proposal, but in each case only after providing prompt written notice to AVS
advising that the Company Board has determined to approve or recommend, or
authorize the Company to enter into an agreement with respect to, a Superior
Proposal. For purposes of this Agreement, a "Superior Proposal" means an
Alternative Proposal on terms which the Company Board determines in its good
faith judgment to be more favorable to the Company's stockholders than the
Merger.
5.2 INTERIM OPERATIONS.
(a) During the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the Effective Time,
except as set forth in the Disclosure Statement, unless AVS has consented in
writing thereto (which consent shall not be unreasonably withheld), the Company
shall, and shall cause each of its Subsidiaries to:
(i) conduct their respective operations according to their usual, regular
and ordinary course in substantially the same manner as heretofore
conducted;
(ii) to the extent consistent with their respective businesses, use
commercially reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the
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services of their respective officers and employees and maintain
satisfactory relationships with those persons having business relationships
with them;
(iii) not amend their respective Certificates of Incorporation or By-Laws
or comparable governing instruments;
(iv) promptly notify AVS of any Company Material Adverse Effect, any
material litigation or material governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated),
or the material breach of any representation or warranty contained herein;
(v) promptly deliver to AVS true and correct copies of any report,
statement or schedule filed with the SEC subsequent to the date of this
Agreement;
(vi) not (A) except pursuant to the exercise of options, warrants,
conversion rights and other contractual rights existing on the date hereof
and disclosed pursuant to this Agreement, issue any shares of its capital
stock, effect any stock split or otherwise change its capitalization as it
existed on the date hereof; (B) grant, confer or award any option, warrant,
conversion right or other right not existing on the date hereof to acquire
any shares of its capital stock; (C) increase any compensation or enter
into or amend any employment agreement with any of its present or future
officers, directors or employees, except for normal increases consistent
with past practice; (D) grant any severance or termination package to any
employee or consultant, except to the extent consistent with past
practices; (E) hire any new employee who shall have, or terminate the
employment of any employee who has, an annual salary in excess of $50,000;
or (F) adopt any new employee benefit plan (including any stock option,
stock benefit or stock purchase plan) or amend any existing employee
benefit plan in any material respect, except for changes which are less
favorable to participants in such plans;
(vii) not (A) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock or
other ownership interests; or (B) directly or indirectly, redeem, purchase
or otherwise acquire any shares of its capital stock, or make any
commitment for any such action;
(viii) not enter into any agreement or transaction, or agree to enter
into any agreement or transaction, outside the ordinary course of business,
including, without limitation, any transaction involving a merger,
consolidation, joint venture, license agreement partial or complete
liquidation or dissolution, reorganization, recapitalization, restructuring
or a purchase, sale, lease or other disposition of a material portion of
assets or capital stock;
(ix) not incur any indebtedness for borrowed money (other than borrowings
under the Company's existing credit agreement) or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of others;
(x) not make any loans, advances or capital contributions to, or
investments in, any other Person in excess of $10,000;
(xi) Except as described in the Disclosure Statement, not make or commit
to make any capital expenditures in excess of $25,000 individually or
$50,000 in the aggregate;
(xii) not apply any of its assets to the direct or indirect payment,
discharge, satisfaction or reduction of any amount payable directly or
indirectly to or for the benefit of any affiliate or Related Party or enter
into any transaction with any affiliate or Related Party (except for
payment of salary and other customary expense reimbursements made in the
ordinary course of business to Related Parties who are employees, directors
or consultants of the Company or its Subsidiaries);
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<PAGE>
(xiii) not voluntarily elect to alter the manner of keeping its books,
accounts or records, or change in any manner the accounting practices
therein reflected, except for changes in accounting laws which effect all
companies in the business of the Company generally and those indicated by
good accounting practices;
(xiv) not grant or make any mortgage or pledge or subject itself or any
of its material properties or assets to any lien, charge or encumbrance of
any kind, except Permitted Encumbrances, and liens granted to incur the
indebtedness contemplated by Section 5.2(a)(ix) hereof; and
(xv) maintain insurance on its tangible assets and its businesses in such
amounts and against such risks and losses as are currently in effect.
(b) During the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the Effective Time,
except as set forth in the Disclosure Statement, unless the Company has
consented in writing thereto (which consent shall not be unreasonably
withheld), AVS shall, and shall cause each of its Subsidiaries to:
(i) conduct their respective operations according to their usual, regular
and ordinary course in substantially the same manner as heretofore
conducted;
(ii) promptly deliver to the Company true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(iii) promptly notify the Company of any AVS Material Adverse Effect, any
material litigation or material governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated),
or the material breach of any representation or warranty contained herein;
(iv) promptly notify the Company of its entering into any agreement with
respect to any material transaction involving a merger, consolidation,
joint venture, partial or complete liquidation or dissolution,
reorganization or recapitalization, restructuring or a purchase, sale,
lease or other disposition of a material portion of assets or capital
stock;
(v) not take any action that would result in a failure to maintain the
trading of AVS Common Stock on the NYSE; and
(vi) with respect to AVS only (and not its Subsidiaries), not (A)
declare, set aside or pay any dividend or make any other distribution or
payment with respect to any shares of its capital stock or other ownership
interests; or (B) directly or indirectly, redeem, purchase or otherwise
acquire any shares of its capital stock, or make any commitment for any
such action.
5.3 MEETINGS OF STOCKHOLDERS. Each of AVS and the Company will take all
action necessary in accordance with applicable law and its Certificate of
Incorporation and Bylaws to convene the AVS Stockholder Meeting and the Company
Stockholder Meetings as promptly as practicable to consider and vote upon the
approval of the Merger, this Agreement and the transactions contemplated
hereby. The Boards of Directors of AVS and the Company Board (subject in the
case of the Company Board to Section 5.1(b)) shall recommend such approval and
each of AVS and the Company shall take all lawful action to solicit such
approval, including, without limitation, timely mailing the AVS Proxy Statement
and the Company Proxy Statement.
5.4 FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, the Company and AVS shall: (a) promptly make their respective filings
and thereafter make any other required submissions under the HSR Act with
respect to the Merger; (b) use all reasonable efforts to cooperate with one
another in (i) determining which filings are required to be made prior to the
Effective Time
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with, and which consents, approvals, permits or authorizations are required to
be obtained prior to the Effective Time from, governmental or regulatory
authorities of the United States, the several states and foreign jurisdictions
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby; and (ii) timely making
all such filings and timely seeking all such consents, approvals, permits or
authorizations; (c) use commercially reasonable efforts to obtain all consents
under or with respect to, any Permit, contract, lease, agreement, purchase
order, sales order or other instrument, where the consummation of the
transactions contemplated hereby would be prohibited or constitute an event of
default, or grounds for acceleration or termination, in the absence of such
consent; and (d) take, or cause to be taken, all other commercially reasonable
actions as are reasonably necessary, proper or appropriate to consummate and
make effective the transactions contemplated by this Agreement.
5.5 INSPECTION OF RECORDS. From the date hereof to the Effective Time, the
Company shall (a) allow all designated officers, attorneys, accountants and
other representatives of AVS reasonable access at all reasonable times to the
offices, records and files, correspondence, audits and properties, as well as
to all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs of the Company
and its Subsidiaries; (b) furnish to AVS, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information as such persons may reasonably request; and (c) instruct
the employees, counsel and financial advisors of the Company and its
Subsidiaries to cooperate with AVS and its investigation of the business of the
Company and its Subsidiaries. From the date hereof to the Effective Time, AVS
shall (a) furnish to the Company, its counsel, financial advisors, auditors and
other authorized representatives such financial and operating data and other
information as such persons may reasonably request, and (b) instruct the
officers, counsel and financial advisors of AVS to cooperate with the Company
in its investigation of the business of AVS and its Subsidiaries. All
information disclosed by the Company to AVS and its representatives or by AVS
to the Company and its representatives shall be subject to the terms of those
certain Confidentiality Agreements (the "Confidentiality Agreement") dated as
of January 5, 1998 between AVS and the Company.
5.6 PUBLICITY. Neither party hereto shall make any press release or public
announcement with respect to this Agreement, the Merger or the transactions
contemplated hereby without the prior written consent of the other party hereto
(which consent shall not be unreasonably withheld); provided, however, that
each party hereto may make any disclosure or announcement which such party, in
the opinion of its legal counsel, is obligated to make pursuant to applicable
law or regulation of the New York Stock Exchange, in which case, the party
desiring to make the disclosure shall consult with the other party hereto prior
to making such disclosure or announcement.
5.7 REGISTRATION STATEMENT; PROXY STATEMENT.
(a) AVS and the Company shall cooperate and promptly prepare and file
with the SEC as soon as practicable (i) the Company Proxy Statement, (ii) the
AVS Proxy Statement and (iii) a Registration Statement on Form S-4 (the "Form
S-4") under the Securities Act, with respect to the AVS Common Stock issuable
in the Merger, a portion of which Registration Statement shall also serve as
the Company Proxy Statement. The respective parties will cause the Company
Proxy Statement, the AVS Proxy Statement and the Form S-4 to comply as to form
in all material respects with the applicable provisions of the Securities Act,
the Exchange Act and the rules and regulations promulgated thereunder. AVS
shall use all reasonable efforts, and the Company will cooperate with AVS, to
cause the Form S-4 to be declared effective by the SEC as promptly as
practicable and to continue to be effective as of the Effective Time. AVS shall
use its best efforts to obtain, prior to the effective date of the Form S-4,
all necessary state securities law or "Blue Sky" permits or approvals required
to carry out the transactions contemplated by this Agreement and will pay all
expenses incident thereto. No amendment or supplement to the Company Proxy
Statement, the AVS Proxy Statement or the Form S-4 will be made by AVS or the
Company without the approval of the other party, which approval shall not be
unreasonably withheld. AVS will advise the Company, promptly after it receives
notice thereof, of the
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time when the Form S-4 has become effective, the issuance of any stop order, or
the suspension of the qualification of the AVS Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction.
(b) Each of the parties shall notify the other party promptly after
receipt by such first party of any comments of the SEC on, or of any request by
the SEC for amendments or supplements to, the Company Proxy Statement, the AVS
Proxy Statement or the Form S-4. Each of the parties shall supply the other
party with copies of all correspondence between such party or any of its
representatives and the SEC with respect to any of the foregoing filings. If at
any time prior to the AVS Stockholder Meeting any event shall occur relating to
the Company or any of its Subsidiaries or any of their respective officers,
directors or affiliates which should be described in an amendment to the AVS
Proxy Statement, the Company shall inform AVS promptly after becoming aware of
such event. If at any time prior to the Effective Time, any event shall occur
relating to the Company or any of its Subsidiaries or any of their respective
officers, directors or affiliates which should be described in an amendment or
supplement to the Company Proxy Statement or the Form S-4, the Company shall
inform AVS promptly after becoming aware of such event. If at any time prior to
the Company Stockholder Meeting, any event shall occur relating to AVS or any
of its Subsidiaries or any of their respective officers, directors or
affiliates which should be described in an amendment or supplement to the
Company Proxy Statement, AVS shall inform the Company promptly after becoming
aware of such event. Whenever the Company or AVS learn of the occurrence of any
event which should be described in an amendment of, or supplement to, the AVS
Proxy Statement, the Company Proxy Statement or the Form S-4, the parties shall
cooperate to promptly cause such amendment or supplement to be prepared, filed
with and cleared by the SEC and, if required by applicable law, disseminated to
the persons and in the manner required.
5.8 FURTHER ACTION. Subject to the terms and conditions of this Agreement
and applicable law, each of the parties hereto shall use its reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things reasonably necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement as soon as reasonably
practicable, including such actions or things as any other party hereto may
reasonably request in order to cause any of the conditions to such other
party's obligation to consummate such transactions specified in Article VI to
be fully satisfied. Without limiting the generality of the foregoing, the
parties shall (and shall cause their respective Subsidiaries, and use their
reasonable efforts to cause their respective affiliates, directors, officers,
employees, agents, attorneys, accountants and representatives, to) consult and
fully cooperate with and provide reasonable assistance to each other in (i) the
preparation and filing with the SEC of the Form S-4, the Company Proxy
Statement, the AVS Proxy Statement, and any necessary amendments or supplements
to any thereof; (ii) seeking to have each such proxy statement cleared, and the
Form S-4 declared effective, by the SEC as soon as reasonably practicable after
filing; (iii) taking such actions as may be required under applicable state
securities or blue sky laws in connection with the issuance of the AVS Common
Stock pursuant to the Merger, (iv) obtaining all necessary consents, approvals,
waivers, licenses, permits, authorizations, registrations, qualifications, or
other permission or action by, and giving all necessary notices to and making
all necessary filings with and applications and submissions to, any
Governmental Authority or other person or entity; (v) lifting any permanent or
preliminary injunction or restraining order or other similar order issued or
entered by any court or governmental entity of any type referred to in Section
6.1(c); (vi) obtaining the tax opinions referred to in Sections 6.2(f) and
6.3(h); (vii) providing all such information about such party, its Subsidiaries
and its officers, directors and affiliates and making all applications and
filings as may be necessary or reasonably requested in connection with any of
the foregoing; and (viii) in general, consummating and making effective the
transactions contemplated hereby.
5.9 AFFILIATE LETTERS. At least 10 days prior to the Closing Date, the
Company shall deliver to AVS a list of names and addresses of those persons who
were or will be, in the Company's reasonable judgment, at the record date for
its stockholders' meeting to approve the Merger, "affiliates" (each such
person, an "Affiliate") of the Company within the meaning of Rule 145 of the
rules and regulations promulgated under the Securities Act. The Company shall
deliver or cause to be delivered to AVS,
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prior to the Closing Date, from each of the Affiliates of the Company
identified in the foregoing list, an Affiliate Letter in substantially the form
attached hereto as Exhibit A. AVS shall be entitled to place legends as
specified in such Affiliate Letters on the certificates evidencing any AVS
Common Stock to be received by such Affiliates pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for the AVS Common Stock, consistent with the terms of such Affiliate
Letters.
5.10 EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, except
(a) as otherwise expressly provided for herein; and (b) the expenses incurred
in connection with printing and mailing the Form S-4 and the Company Proxy
Statement shall be shared equally by the Company and AVS. The costs of printing
and mailing the AVS Proxy Statement and the HSR Act filing fees in connection
with the Merger shall be borne by AVS.
5.11 TAX TREATMENT OF MERGER AND POOLING OF INTEREST ACCOUNTING TREATMENT.
From and after the date hereof and until the Effective Time, neither AVS nor
the Company nor any of their respective Subsidiaries or other affiliates shall
(a) knowingly take any action, or knowingly fail to take any action, that would
jeopardize qualification of the Merger as (i) a reorganization within the
meaning of Section 368(a) of the Code; or (ii) a "pooling of interests" for
accounting purposes; or (b) enter into any contract, agreement, commitment or
arrangement with respect to the foregoing. After the Effective Time, AVS shall
not take or fail to take (and shall cause the Surviving Corporation not to take
or fail to take) any action that is reasonably likely to jeopardize
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
5.12 EMPLOYEE BENEFIT PLANS. AVS covenants and agrees that it will
continue the Company's existing benefit plans and arrangements for a period of
up to three (3) months following the Effective Date. Thereafter, to the extent
the existing benefit plans and arrangements provided by the Company to its
employees are terminated, such employees who remain employees of the Surviving
Corporation or AVS or any of its Subsidiaries shall be entitled to participate
in all benefit plans and arrangements that are available and subsequently
become available to AVS's employees on the same basis as AVS's employees in
similar positions are eligible to participate. For purposes of satisfying the
terms and conditions of such plans, AVS shall give full credit for eligibility,
vesting or benefit accrual for each participant's period of service with the
Company prior to the Effective Time. To the extent AVS's benefit plans provide
medical or dental welfare benefits after the Closing Date, AVS shall cause all
pre-existing condition exclusions and actively at work requirements to be
waived and AVS shall provide that any expenses incurred on or before the
Closing Date shall be taken into account under AVS's benefit plans for purposes
of satisfying the applicable deductible, coinsurance and maximum out-of-pocket
provisions for such employees and their covered dependents.
5.13 COMPANY OPTIONS. Immediately after the Effective Time, but in any
event, no later than 5 days after the Closing Date, AVS shall register the
shares of AVS Common Stock issuable upon exercise of such Company Options with
the SEC on Form S-8, to the extent that such Company Options may be registered
on such form.
5.14 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) Until six years from the Effective Time, unless otherwise required by
Law, the certificate of incorporation and by-laws of the Surviving Corporation
shall contain provisions no less favorable with respect to the elimination of
liability of directors and the indemnification of (and advancement of expenses
to) directors, officers, employees and agents that are set forth in the
certificate of incorporation and by-laws of the Company, as in effect on the
date hereof.
(b) From and after the Effective Time, AVS and the Surviving Corporation
shall, jointly and severally, indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date of this Agreement or who
becomes prior to the Effective Time, an officer, director, employee
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or agent of the Company or any of its Subsidiaries (collectively, the
"Indemnified Parties") against all losses, reasonable expenses (including
reasonable attorneys' fees), claims, damages, liabilities or amounts that are
paid in settlement of, or otherwise in connection with, any threatened or
actual claim, action, suit, proceeding or investigation (a "Claim"), based in
whole or in part on or arising in whole or in part out of the fact that the
Indemnified Party (or the person controlled by the Indemnified Party) is or was
a director, officer, employee or agent of the Company or any of its
Subsidiaries and pertaining to any matter existing or arising out of actions or
omissions occurring at or prior to the Effective Time including, without
limitation, any Claim arising out of this Agreement or any of the transactions
contemplated hereby), whether asserted or claimed prior to, at or after the
Effective Time, in each case to the fullest extent permitted under Delaware
law, and shall pay any expenses, as incurred, in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
fullest extent permitted under Delaware law. Without limiting the foregoing, in
the event any such Claim is brought against any of the Indemnified Parties, (i)
such Indemnified Parties may retain counsel (including local counsel)
satisfactory to them and which shall be reasonably satisfactory to AVS and the
Surviving Corporation and AVS and the Surviving Corporation shall pay, jointly
and severally, all reasonable fees and expenses of such counsel for such
Indemnified Parties; and (ii) AVS and the Surviving Corporation shall use all
reasonable efforts to assist in the defense of any such Claim, provided that
AVS and the Surviving Corporation shall not be liable for any settlement
effected without their written consent, which consent, however, shall not be
unreasonably withheld. Notwithstanding the foregoing, nothing contained in this
Section 5.14 shall be deemed to grant any right to any Indemnified Party which
is not permitted to be granted to an officer, director, employee or agent of
the Company under Delaware law, assuming for such purposes that the Company's
certificate of incorporation and by-laws provide for the maximum
indemnification permitted by law.
5.15 PUBLICATION OF POST-MERGER RESULTS. AVS shall use its reasonable best
efforts to cause financial results covering at least thirty days of post-Merger
combined operations to be published in its first report of quarterly financial
statements as soon as practicable after such information is required to be
filed with the SEC.
5.16 VOTING AGREEMENT--COMPANY. On the date hereof, each of Cambridge
Capital Fund, L.P. and Baker Nye, L.P., acting solely in their capacity as
stockholders of the Company, shall enter into a voting agreement in the form
attached hereto as Exhibit B.
5.17 VOTING AGREEMENT--AVS. On the date hereof, each of AVAC Corporation,
RCP Management LP, Robert Alpert, Dale S. Baker and Harold M. Woody, acting
solely in their capacity as stockholders of AVS, shall enter into a voting
agreement in the form attached hereto as Exhibit C.
5.18 CONFIDENTIALITY. Each party shall, and shall use its reasonable
efforts to cause its officers, employees and authorized representatives to, (i)
hold in confidence all confidential information obtained by it or them from any
other party or any of such other party's officers, employees or authorized
representatives pursuant to this Agreement (unless such information is or
becomes publicly available or readily ascertainable from public or published
information or trade sources through no wrongful act of such first party) and
(ii) use all such data and information solely for the purpose of consummating
the transactions contemplated hereby, except, in either case, as may be
otherwise required by law or legal process or as may be necessary or
appropriate in connection with the enforcement of, or any litigation
concerning, this Agreement. In the event this Agreement is terminated, each
party shall promptly return, if so requested by any other party, all nonpublic
documents obtained from such other party in connection with the transactions
contemplated hereby and any copies thereof which may have been made by such
first party and shall use its reasonable efforts to cause its officers,
employees and authorized representatives to whom such documents were furnished
promptly to return such documents and any copies thereof any of them may have
made.
5.19 DEFENSE OF LITIGATION. Each of the parties agrees to vigorously
defend against all actions, suits or proceedings in which such party is named
as a defendant which seek to enjoin, restrain or prohibit the transactions
contemplated hereby or seek damages with respect to such transactions. No
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party shall settle any such action, suit or proceeding or fail to perfect on a
timely basis any right to appeal any judgment rendered or order entered against
such party therein without the consent of the other party (which consent shall
not be withheld unreasonably). Each of the parties further agrees to use its
reasonable efforts to cause each of its affiliates, directors and officers to
vigorously defend any action, suit or proceeding in which such affiliate,
director or officer is named as a defendant and which seeks any such relief to
comply with this Section to the same extent as if such person were a party
hereto.
5.20 ACTIONS BY AVS SUB. In its capacity as sole stockholder of AVS Sub,
AVS shall cause AVS Sub to approve and adopt the Merger and to take all
corporate action necessary on its part to consummate the Merger and the
transactions contemplated hereby.
5.21 TAKEOVER STATUTES. If any "fair price", "moratorium", "control share
acquisition" or other form of anti-takeover statute or regulation shall become
applicable to the transactions contemplated hereby, each of the Company, AVS
and AVS Sub and their respective members of their Boards of Directors shall
grant such approvals to take such actions as are necessary to that the
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated herein and otherwise act to eliminate or
minimize the effects of such statute or regulation on the transactions
contemplated herein.
5.22 NYSE LISTING. AVS agrees to use its reasonable efforts to cause the
AVS Common Stock to be issued to the stockholders of the Company to have been
authorized for trading on the NYSE, subject only to official notice of listing.
5.23 TERMINATION OF CONFIDENTIALITY AND SECRECY AGREEMENTS. The Company
shall terminate all confidentiality agreements and secrecy agreements to which
it and any of it Subsidiaries are a party relating to the exchange of
information for purposes of evaluating potential acquisitions of any entity.
5.24 BOARD OF DIRECTORS. Effective immediately after the Effective Time,
(a) the number of members of the Board of Directors of AVS will be increased to
eight (8) and (b) George F. Baker shall be appointed as a member of the Board
of Directors of AVS to serve for a term expiring at the annual meeting of the
stockholders of AVS to be held in 2001 and Jeffrey N. Greenblatt shall be
appointed as a member of the Board of Directors of AVS to serve for a term
expiring at the annual meeting of stockholders of AVS to be held in 2000.
ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of each of the following
conditions (unless waived by each of the parties hereto in accordance with the
provisions of Section 7.6 hereof):
(a) This Agreement and the Merger and other transactions contemplated
hereby shall have been approved and adopted by the requisite vote of the
stockholders of AVS and the Company.
(b) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.
(c) No preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the Merger or
materially changes the terms or conditions of this Agreement shall have been
issued and remain in effect. In the event any such order or injunction shall
have been issued, each party agrees to use its reasonable efforts to have any
such injunction lifted.
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(d) The Form S-4 shall have become effective under the Securities Act and
shall be effective at the Effective Time, and no stop order suspending the
effectiveness of the Form S-4 shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing, and all necessary approvals under
state securities laws relating to the issuance or trading of the AVS Common
Stock to be issued to the stockholders of the Company in connection with the
Merger shall have been received.
(e) The parties shall have obtained all material consents,
authorizations, orders and approvals of (or filings or registrations with) any
governmental commission, board or other regulatory body required in connection
with the execution, delivery and performance of this Agreement shall have been
obtained or made, except for filings in connection with the Merger and any
other documents required to be filed after the Effective Time and except where
the failure to obtain such consent or approval is not reasonably likely to have
a Surviving Corporation Material Adverse Effect or is not reasonably likely to
prevent or materially burden or materially impair the ability of the parties to
consummate the transactions contemplated by this Agreement.
(f) The AVS Common Stock to be issued to the stockholders of the Company
in connection with the Merger shall have been authorized for trading on the
NYSE, subject only to official notice of issuance.
(g) AVS shall have received a letter from Arthur Andersen (as auditors
for AVS), dated the Closing Date and addressed to AVS, stating substantially to
the effect that, based on such firm's review of this Agreement and the other
procedures set forth in such letter, such firm concurs that the Merger will
qualify as a pooling of interest transaction under Opinion 16 of the Accounting
Principles Board.
(h) The Company shall have received a letter from Arthur Andersen (as
auditors for the Company), dated the Closing Date and addressed to the Company,
stating substantially to the effect that, based on such firm's review of this
Agreement and the other procedures set forth in such letter, such firm concurs
that the Company is qualified to participate in a pooling of interest
transaction under Opinion 16 of the Accounting Principles Board.
6.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date each of the following conditions
(unless waived by the Company in accordance with the provisions of Section 7.6
hereof):
(a) Each of AVS and AVS Sub shall have performed, in all material
respects, all of its agreements contained herein that are required to be
performed by AVS on or prior to the Closing Date, and the Company shall have
received a certificate of the Chairman or President of AVS, dated the Closing
Date, certifying to such effect.
(b) The representations and warranties of AVS and AVS Sub contained in
this Agreement and in any document delivered in connection herewith shall be
true and correct in all material respects as of the Closing (except to the
extent such representations and warranties speak of a specified earlier date
and except as specifically contemplated by this Agreement), and the Company
shall have received a certificate of the President of AVS, dated the Closing
Date, certifying to such effect.
(c) The Company shall have received from AVS certified copies of the
resolutions of AVS's and AVS Sub's Boards of Directors and stockholders
approving and adopting this Agreement, the AVS Ancillary Documents and the
transactions contemplated hereby and thereby.
(d) From the date of this Agreement through the Effective Time, there
shall not have occurred any event that has had a material adverse effect on the
financial condition, business, operations or prospects of AVS and its
Subsidiaries, taken as a whole; provided, that such an event will not be deemed
to have occurred solely as a result of fluctuations in the trading price of the
AVS Common
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Stock or solely as a result of changes in the aviation industry which generally
impact on all companies in AVS's business (other than specifically on AVS).
(e) The fairness opinion of Ladenburg, to the effect that the Merger or
the Exchange Ratio, as the case maybe, is fair to the stockholders of the
Company from a financial point of view, as described in Section 4.31, has not
be withdrawn; provided, however, that such withdrawal shall only permit the
Company not to fulfill its obligations to effect the Merger if the withdrawal
of such opinion is a result of a material adverse change in the financial
condition, business, operations or prospects of AVS and its Subsidiaries, taken
as a whole.
(f) The Company shall have received, prior to the earlier of the date the
Company Proxy Statement is first mailed to the Company's stockholders and the
effective date of the S-4, the opinion of Baker & Botts L.L.P., counsel to the
Company, dated the Closing Date, to the effect that the Merger will be treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code, and that the Company and AVS will each be a party
to that reorganization within the meaning of Section 368(b) of the Code. In
rendering such opinion, counsel shall be entitled to rely upon, among other
things, reasonable assumptions as well as representations and covenants of AVS,
AVS Sub and the Company.
(g) The Company shall have received the opinion of Akerman, Senterfitt &
Eidson, P.A. to such matters as the Company or its counsel shall reasonably
request.
(h) AVS shall have entered into a Registration Rights Agreement with
Cambridge Capital Fund, L.P., Baker Nye, L.P. and the persons serving as
directors and executive officers of the Company immediately prior to the
Effective Time in substantially the form set forth as Exhibit D.
(i) AVS and AVS Sub shall have executed and delivered such other
documents and taken such other actions as the Company shall reasonably request.
6.3 CONDITIONS TO OBLIGATION OF AVS AND AVS SUB TO EFFECT THE MERGER. The
obligations of AVS and AVS Sub to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date each of the following conditions
(unless waived by AVS in accordance with the provisions of Section 7.6 hereof):
(a) The Company shall have performed, in all material respects, all of
its agreements contained herein that are required to be performed by the
Company on or prior to the Closing Date, and AVS shall have received a
certificate of the Chairman or President of the Company, dated the Closing
Date, certifying to such effect.
(b) The representations and warranties of the Company contained in this
Agreement and in any document delivered in connection herewith shall be true
and correct in all material respects as of the Closing (except to the extent
such representations and warranties speak as of a specified earlier date and
except as specifically contemplated by this Agreement), and AVS shall have
received a certificate of the Chairman or President of the Company, dated the
Closing Date, certifying to such effect.
(c) AVS shall have received from the Company certified copies of the
resolutions of the Company's Board of Directors and stockholders approving and
adopting this Agreement, the Ancillary Documents and the transactions
contemplated hereby and thereby.
(d) AVS shall have received the opinion of Baker & Botts, L.L.P. to such
matters as AVS or AVS's counsel shall reasonably request.
(e) The fairness opinion of SBCWDR, to the effect that the Merger of the
Exchange Ratio, as the case maybe, is fair to AVS's stockholders as described
in Section 3.7, has not been withdrawn; provided, however, that such withdrawal
shall only permit AVS not to fulfill its obligations to effect the
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Merger if the withdrawal of such opinion is a result of a material adverse
change in the financial condition, business, operations or prospects of the
Company and its Subsidiaries, taken as a whole.
(f) From the date of this Agreement through the Effective Time, there
shall not have occurred any event that has had a material adverse effect on the
financial condition, business, operations or prospects of the Company and its
Subsidiaries, taken as a whole, provided, that such an event will not be deemed
to have occurred solely as a result of fluctuations in the trading price of the
Company Common Stock or solely as a result of changes in the aviation industry
which generally impact on all companies in the Company's business (other than
specifically on the Company).
(g) The Company shall have received all necessary consents with respect
to any contract, lease, purchase order, sales order, license agreement, Permit,
Environmental Permit and license which are required as a result of a change of
control of the Company except in those instances where failure to receive any
such consent would not have a Company Material Adverse Effect.
(h) AVS shall have received, prior to the earlier of the date the Company
Proxy Statement is first mailed to the Company's stockholders and the effective
date of the S-4, the opinion of Akerman, Senterfitt & Eidson, P.A., counsel to
AVS, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
and that the Company and AVS will each be a party to that reorganization within
the meaning of Section 368(b) of the Code. In rendering such opinion, counsel
shall be entitled to rely upon, among other things, reasonable assumptions as
well as representations and covenants of AVS, AVS Sub and the Company.
(i) The Company shall have executed and delivered such other documents
and taken such other actions as AVS shall reasonably request.
ARTICLE VII
TERMINATION
7.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the stockholders of AVS and the
Company, by the mutual written consent of AVS and the Company.
7.2 TERMINATION BY EITHER AVS OR THE COMPANY. This Agreement may be
terminated and the Merger may be abandoned by action of either the Company
Board or Board of Directors of AVS if (a) the Merger shall not have been
consummated by September 30, 1998; provided, however, that the right to
terminate this Agreement under this Section 7.2(a) will not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Merger to occur on or before such
date; (b) the approval of the stockholders of AVS and the Company required by
Section 6.1(a) shall not have been obtained at meetings duly convened therefor
or at any adjournment thereof; provided, however, that neither party shall have
the right to terminate this Agreement under this Section 7.2(b) if the other
party has caused (directly or indirectly) or aided in the failure to obtain
such approval; provided, however, that the Company shall not be deemed to have
caused or aided in the failure to obtain such approval if the Company Board
withdraws its recommendation to the Company's stockholders in accordance with
Section 5.3 by accepting or recommending a Superior Proposal; or (c) a court of
competent jurisdiction or a governmental, regulatory or administrative agency
or commission shall have issued an order, decree or ruling or taken any other
action either (i) permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement; or (ii) compelling AVS, AVS
Sub or the Surviving Corporation to dispose of or hold separate all or a
material portion of the respective businesses or assets of AVS and the Company,
or sell or license any material product of AVS or the Company, and such order,
decree, ruling or other action shall have become final and non-appealable.
7.3 TERMINATION BY THE COMPANY. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after the adoption and approval
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by the stockholders of the Company or AVS, by action of the Company Board, if
(a) there has been a breach by AVS or AVS Sub of any representation or warranty
contained in this Agreement which would have an AVS Material Adverse Effect; or
(b) there has been a material breach of any of the material covenants or
agreements set forth in this Agreement on the part of AVS, which breach is not
curable or, if curable, is not cured within 30 days after written notice of
such breach is given by the Company to AVS.
7.4 TERMINATION BY AVS. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after the
approval by the stockholders of the Company or AVS, by action of the Board of
Directors of AVS, if (a) the Company Board shall have recommended a Superior
Proposal to the stockholders of the Company; (b) there has been a breach by the
Company of any representation or warranty contained in this Agreement which
would have a Company Material Adverse Effect; or (c) there has been a material
breach of any of the material covenants or agreements set forth in this
Agreement on the part of the Company, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by AVS to the Company.
7.5 EFFECT OF TERMINATION AND ABANDONMENT.
(a) In the event that this Agreement is terminated by AVS pursuant to
Section 7.4(a) and the Company enters into an agreement or an understanding
with respect to a Superior Proposal within one year of the date of such
termination, then the Company shall immediately pay AVS a fee in an amount
equal to $7,500,000. Additionally, if the Company terminates this Agreement
pursuant to Section 7.3 or if AVS terminates this Agreement pursuant to Section
7.4(b) or 7.4(c), the breaching party shall reimburse the non-breaching party
for all actual out-of-pocket costs and expenses incurred by the non-breaching
party in connection with this Agreement and the consummation and negotiation of
the transactions contemplated hereby, including, without limitation, legal,
professional and service fees and expenses, including fees relating to the
delivery of the fairness opinion provided, however, that the aggregate
reimbursement amount of all such costs and expenses shall not exceed $500,000.
All such amounts which may become due shall be payable pursuant to this Section
7.5 shall be paid by wire transfer of same day funds on the date on which the
Agreement is terminated or, if termination occurs under Section 7.4(a), upon
the date on which the Company enters into an agreement with respect to a
Superior Proposal. The parties acknowledge that the agreements contained in
this Section 7.5(a) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, the other party would not
enter into this Agreement. Accordingly, if either party fails to promptly pay
the amounts due pursuant to this Section 7.5(a), and, in order to obtain such
payment, the other party commences a suit which results in a final,
non-appealable judgment against the other party for the amounts set forth in
this Section 7.5(a), the breaching party shall pay to the non-breaching party
its costs and expenses (including attorneys' fees) incurred in connection with
such suit, together with interest on the amount of the fee at the rate of 12%
per annum.
(b) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article 7, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
7.5 and the provisions of Sections 5.10 and 5.18, which obligations shall
survive the termination of this Agreement.
7.6 EXTENSION; WAIVER. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto; (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto; and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of such
party.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of the
representations, warranties, covenants and agreements contained in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for (i) the agreements contained in Sections
1.4, 1.5, 1.6, 1.7, 1.9, 5.10, 5.11, 5.12, 5.13, 5.14, 5.15, 5.22 and 5.24 and
Articles II and VIII and the agreements delivered pursuant to this Agreement
shall survive the Merger.
8.2 NOTICES. All notices required or permitted to be given hereunder shall
be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by mail
shall be deemed given three (3) business days after being deposited in the
United States mail, postage prepaid, registered or certified mail. Notices
delivered by hand by facsimile, or by nationally recognized private carrier
shall be deemed given on the day following receipt; provided, however, that a
notice delivered by facsimile shall only be effective if such notice is also
delivered by hand, or deposited in the United States mail, postage prepaid,
registered or certified mail, on or before two (2) business days after its
delivery by facsimile. All notices shall be addressed as follows:
If to AVS or AVS Sub: If to the Company:
Aviation Sales Company. Whitehall Corporation
6905 NW 25th Street 2659 Nova Drive
Miami, Florida 33122 Dallas, Texas 75229
Fax: (305) 599-6775 Fax: (972) 247-2024
Attn:Dale S. Baker, Attn:George F. Baker
Chairman, President & CEO Chairman & CEO
With copies to: With copies to:
Akerman, Senterfitt & Eidson P.A. Baker & Botts, L.L.P.
One S.E. 3rd Avenue 599 Lexington Avenue
Miami, Florida 33131 New York, New York
Fax: (305) 374-5095 Fax: (212) 705-5125
Attn: Philip B. Schwartz, Esq. Attn: Lee D. Charles, Esq.
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
8.3 ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective permitted successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Sections 1.4, 1.5, 1.6, 1.7, 2.3, 2.4 and 5.14, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the
parties hereto or their respective heirs, successors, executors, administrators
and assigns any rights, remedies, obligations or liabilities under or by reason
of this Agreement.
8.4 ENTIRE AGREEMENT. This Agreement, the Exhibits, the Disclosure
Statement, the AVS Disclosure Statement, the Ancillary Documents, the AVS
Ancillary Agreements, and any other documents delivered by the parties in
connection herewith constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
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8.5 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of each of the Company and AVS, but after any such stockholder
approval, no amendment shall be made which by law requires the further approval
of stockholders without obtaining such further approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules
of conflict of laws.
8.7 COUNTERPARTS. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
8.8 HEADINGS. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever.
8.9 INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
8.10 WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties,
covenants or agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be construed
as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
8.11 INCORPORATION OF EXHIBITS. The Disclosure Statement, the AVS
Disclosure Statement and all Exhibits attached hereto and referred to herein
are hereby incorporated herein and made a part hereof for all purposes as if
fully set forth herein.
8.12 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
8.13 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
AVIATION SALES COMPANY
By: ____________________________________
Title: _________________________________
WHC ACQUISITION CORP.
By: ____________________________________
Title: _________________________________
WHITEHALL CORPORATION
By: ____________________________________
Title: _________________________________
[Signature Page of Agreement and Plan of Merger]
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