================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 17, 1995
------------------------------
BULOVA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 1-457 11-1719409
- --------------------------------------------------------------------------------
(State or Other jurisdiction (Commission (I.R.S. employer
of incorporation or organization) file number) identification no.)
One Bulova Avenue, Woodside, N.Y. 11377-7874
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (718) 204-3300
---------------------------
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
================================================================================
1
Item 2. Acquisition or Disposition of Assets.
-------------------------------------
On January 17, 1995 Registrant effected the disposition by merger (the
"Merger") of its wholly-owned subsidiary, Bulova Technologies, Inc. ("BTI")
pursuant to a Merger Agreement dated as of January 17, 1995 among Registrant,
BTI and BTI Acquisition Corporation (the "Buyer"). Registrant understands that
the Buyer is affiliated with National Defense Company and BT Capital
Corporation. Neither Registrant nor any of its affiliates, directors or
officers or any associates of any of the foregoing, had any material
relationship with the Buyer or any of its affiliates.
BTI is engaged primarily in the production, manufacture and sale of precision
mechanical, electronic and electro-mechanical timing devices, including fuzes
for ordnance applications for sale to the U.S. and foreign governments. BTI
also produces certain commercial products. BTI constituted Registrant's
industrial and defense products segment.
The consideration received by Registrant pursuant to the Merger consisted of
$20,810,000 paid in cash by the Buyer. In addition, Registrant assumed BTI's
liabilities with respect to post-retirement health care benefits for employees
of BTI who had retired prior to the consummation of the Merger. Immediately
prior to the Merger, Registrant contributed to the capital of BTI $11,582,000
principal amount of intercompany debt owed to Registrant. The terms of the
Merger, including the consideration, were determined through arms length
negotiation.
Registrant applied $18,000,000 of the consideration received by it to the
repayment of debt owed to its parent, Loews Corporation, and the balance of the
consideration was added to working capital.
Item 7. Financial Statements and Exhibits.
----------------------------------
(a) Not applicable.
(b) Pro forma financial information:
Unaudited pro forma consolidated condensed balance sheet of
Bulova Corporation as of September 30, 1994.
Unaudited pro forma consolidated condensed statement of operations of
Bulova Corporation for the nine months ended September 30, 1994.
Unaudited pro forma consolidated condensed statement of operations of
Bulova Corporation for the year ended December 31, 1993.
Unaudited notes to pro forma consolidated condensed financial
statements.
(c) Exhibits:
Exhibit 2. Merger Agreement entered into on January 17, 1995, by Bulova
Technologies, Inc., a New York corporation ("BTI"), BTI
Acquisition Corporation, a Delaware corporation, and Bulova
Corporation, a New York corporation.
2
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
On January 17, 1995, the Company, by merger, disposed of its wholly-owned
subsidiary Bulova Technologies, Inc. ("BTI") for $20,810,000 in cash. The
following unaudited pro forma consolidated condensed financial statements set
forth the effect that these transactions would have had on the financial
position of the Company at September 30, 1994 and on the results of operations
for the nine months ended September 30, 1994 and year ended December 31, 1993
had the transaction been consummated at the beginning of those respective
periods. These financial statements are presented for illustrative purposes
only and are not necessarily indicative of the financial position or the results
of operations which would actually have been reported had the transaction been
in effect during the periods reported or which may be reported in the future.
The accompanying pro forma consolidated condensed financial statements should be
read in conjunction with the historical financial statements and notes thereto
of Bulova Corporation's Quarterly Report on Form 10-Q for the nine months ended
September 30, 1994 and Annual Report on Form 10-K for the year ended December
31, 1993.
3
<TABLE>
Bulova Corporation and Subsidiaries
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1994
(Amounts in thousands)
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
--------------------------------------
<S> <C> <C> <C>
Assets:
Current assets:
Cash ............................... $ 4,447 $ 4,447
Receivables ........................ 52,069 $ (1,884) (2a) 50,185
Inventories ........................ 58,649 (18,238) (2b) 40,411
Other assets ....................... 10,664 (1,331) (2c) 9,333
-------- --------
Total current assets .............. 125,829 104,376
-------- --------
Property, plant and equipment-net .... 21,040 (8,097) (2b) 12,943
-------- --------
Other assets ......................... 17,506 (4) (2b) 17,502
-------- --------
Total assets ...................... $164,375 $134,821
======== ========
Liabilities and Shareholders' Equity:
Current liabilities .................. $ 25,864 (8,245) (2d) $ 17,619
-------- --------
Long-term debt, less current
installments ........................ 2,771 (2,371) (2b) 400
-------- --------
Other liabilities and credits:
Postretirement benefits payable .... 45,613 (2,277) (2b) 43,336
Other liabilities and credits ...... 8,184 8,184
-------- --------
Total other liabilities and credits 53,797 51,520
-------- --------
Debt to affiliate .................... 18,000 (18,000) (2e)
--------
Shareholders' equity ................. 63,943 1,339 (2f) 65,282
-------- --------
Total liabilities and shareholders'
equity ........................... $164,375 $134,821
======== ========
See accompanying unaudited notes to pro forma consolidated condensed financial
statements.
</TABLE>
4
<TABLE>
Bulova Corporation and Subsidiaries
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(Amounts in thousands, except per share data)
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
--------------------------------------
<S> <C> <C> <C>
Revenues:
Net sales ........................... $102,410 $(37,276)(3a) $65,134
Interest, royalties and other ....... 4,185 536 (3b) 4,721
-------- -------
Total revenues ................... 106,595 69,855
-------- -------
Expenses:
Cost of sales ....................... 73,353 (31,639)(3a) 41,714
Selling, general and administrative . 31,989 (3,820)(3c) 28,169
Interest ............................ 1,198 (980)(3d) 218
-------- -------
Total expenses ................... 106,540 70,101
-------- -------
Income (loss) from continuing
operations before income taxes ....... 55 (246)
Income tax (expense) benefit .......... (29) 105 (3e) 76
-------- -------
Income (loss) from continuing
operations............................ $ 26 $ (170)
======== =======
Income (loss) per share from continuing
operations ........................... $.01 $(.04)
======== =======
Weighted average number of shares
outstanding .......................... 4,599 4,599
======== =======
See accompanying unaudited notes to pro forma consolidated condensed financial
statements.
</TABLE>
5
<TABLE>
Bulova Corporation and Subsidiaries
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1993
(Amounts in thousands, except per share data)
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
--------------------------------------
<S> <C> <C> <C>
Revenues:
Net sales ........................... $146,315 $(52,421)(3a) $ 93,894
Interest, royalties and other ....... 7,409 7,409
-------- --------
Total revenues ................... 153,724 101,303
-------- --------
Expenses:
Cost of sales ....................... 105,638 (44,359)(3a) 61,279
Selling, general and administrative . 42,815 (5,120)(3c) 37,695
Interest ............................ 2,706 (2,013)(3d) 693
-------- --------
Total expenses ................... 151,159 99,667
-------- --------
Income from continuing operations
before income taxes .................. 2,565 1,636
Income tax (expense) benefit .......... (51) 325 (3e) 274
-------- --------
Income from continuing operations...... $ 2,514 $ 1,910
======== ========
Income per share from continuing
operations ........................... $.54 $.42
======== ========
Weighted average number of shares
outstanding .......................... 4,599 4,599
======== ========
See accompanying unaudited notes to pro forma consolidated condensed financial
statements.
</TABLE>
6
Bulova Corporation and Subsidiaries
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Note 1. Basis of Presentation:
The pro forma consolidated condensed financial statements are based on
historical financial statements for Bulova Corporation (the "Company"), as
adjusted for the sale of Bulova Technologies, Inc. ("BTI").
The pro forma consolidated condensed Balance Sheet assumes that the Company
sold BTI on September 30, 1994 and that the Company adjusted its historical
balance sheet as of that date. The pro forma consolidated condensed Statement of
Operations for the nine months ended September 30, 1994 and for the year ended
December 31, 1993 assumes that the Company sold BTI at the beginning of those
respective periods.
Note 2. Adjustments to the Balance Sheet:
Adjustments to the Unaudited Pro Forma Consolidated Condensed Balance Sheet
are as follows:
(a) To reflect the change in receivables as follows:
Net proceeds from sale of BTI ......................... $ 20,141,000
Payment of debt to affiliate .......................... (18,000,000)
------------
Advance to parent company ............................. 2,141,000
To eliminate the carrying value related to BTI ........ (4,025,000)
------------
$ (1,884,000)
============
(b) To eliminate the carrying value of BTI's assets and liabilities at
September 30, 1994.
(c) To reflect the change in other current assets as follows:
To eliminate the carrying value related to BTI ........ $ (610,000)
To adjust deferred taxes related to the gain on
disposition of BTI ................................... (721,000)
-----------
$(1,331,000)
===========
(d) To reflect the change in current liabilities as follows:
To eliminate the carrying value related to BTI ........ $(8,465,000)
To accrue costs related to sale ....................... 220,000
-----------
$(8,245,000)
===========
(e) To reflect the payment of debt to affiliate.
(f) To reflect the gain on disposition of BTI, net of tax.
7
Note 3. Adjustments to the Statements of Operations:
Adjustments to the Unaudited Pro Forma Consolidated Condensed Statements of
Operations are as follows:
(a) To eliminate the revenues and expenses related to the operations of BTI.
(b) To reflect interest earned on invested cash balances.
(c) To reflect the change in selling, general and administrative expenses as
follows:
Nine Months Year Ended
Ended September 30, December 31,
1994 1993
------------------- ------------
To eliminate the expenses related
to the operations of BTI ........ $(4,420,000) $(5,920,000)
To restore overhead charged to BTI 600,000 800,000
----------- -----------
$(3,820,000) $(5,120,000)
=========== ===========
(d) To reflect reduction of interest expense on debt to affiliate.
(e) To adjust tax provision for pro forma adjustments at the statutory rate.
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BULOVA CORPORATION
------------------
(Registrant)
Dated: January 31, 1995 By: Paul S. Sayegh
---------------------------
Paul S. Sayegh
Chief Operating Officer and
Principal Financial Officer
9
Exhibit 2
MERGER AGREEMENT
of
BULOVA TECHNOLOGIES, INC.
(a New York corporation)
into
BTI ACQUISITION CORPORATION
(a Delaware corporation)
DATED JANUARY 17, 1995
TABLE OF CONTENTS
EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
1. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Effective Time; Closing . . . . . . . . . . . . . . . . . . . . 2
1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . 3
1.4 Conversion of Securities . . . . . . . . . . . . . . . . . . . 3
1.5 Merger Consideration . . . . . . . . . . . . . . . . . . . . . 4
1.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 5
1.7 Documents to Be Delivered by Seller to Buyer at the Closing . . 5
1.8 Documents to be Delivered by Buyer to Seller at the Closing. . 6
2. Representations and Warranties of Seller and BTI. . . . . . . . . . 7
2.1 Title to the Shares. . . . . . . . . . . . . . . . . . . . . . 7
2.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Organization and Qualification . . . . . . . . . . . . . . . . 8
2.4 No Legal Bar; Conflicts . . . . . . . . . . . . . . . . . . . . 8
2.5 Acquisition History . . . . . . . . . . . . . . . . . . . . . . 9
2.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Capitalization of BTI . . . . . . . . . . . . . . . . . . . . . 10
2.8 Governmental Consents and Approvals . . . . . . . . . . . . . . 11
2.9 Governmental Authorizations and Regulations . . . . . . . . . . 11
2.10 Financial Statements; Absence of Undisclosed Liabilities . . . 12
2.11 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.12 Tangible Personal Property. . . . . . . . . . . . . . . . . . . 15
2.13 Certain Intangible Properties . . . . . . . . . . . . . . . . . 16
2.14 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.15 Inventory and Work in Process; Backlog . . . . . . . . . . . . 19
2.16 Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.17 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . 20
2.18 Government Contracts . . . . . . . . . . . . . . . . . . . . . 20
2.19 Payments and Boycotts . . . . . . . . . . . . . . . . . . . . . 22
2.20 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . 23
2.21 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.22 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 24
i
2.23 Employee Relations . . . . . . . . . . . . . . . . . . . . . . 27
2.24 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.25 Officers and Key Employees . . . . . . . . . . . . . . . . . . 31
2.26 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.27 Bank Accounts and Powers of Attorney . . . . . . . . . . . . . 31
2.28 Absence of Material Changes . . . . . . . . . . . . . . . . . . 32
2.29 Intercompany Transactions . . . . . . . . . . . . . . . . . . . 33
2.30 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 34
2.31 Minute Books/Records . . . . . . . . . . . . . . . . . . . . . 35
2.32 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.33 Delivery of Contracts . . . . . . . . . . . . . . . . . . . . . 36
2.34 Notices of Violations of Representations, Warranties and
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.35 Surviving Hamilton Document Representations, Warranties,
Covenants and Indemnities . . . . . . . . . . . . . . . . . . . 36
2.36 Other Representations . . . . . . . . . . . . . . . . . . . . . 36
3. Representations and Warranties of Buyer . . . . . . . . . . . . . . 37
3.1 Organization and Standing . . . . . . . . . . . . . . . . . . . 37
3.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.3 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.4 Hart-Scott-Rodino Notification . . . . . . . . . . . . . . . . 38
3.5 Access to Information . . . . . . . . . . . . . . . . . . . . . 39
3.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.7 Governmental Consents and Approvals . . . . . . . . . . . . . . 40
3.8 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . 40
3.9 No Other Representations . . . . . . . . . . . . . . . . . . . 40
4. Covenants of the Parties . . . . . . . . . . . . . . . . . . . . . . 40
4.1 Intercompany Liabilities . . . . . . . . . . . . . . . . . . . 40
4.2 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . 41
4.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 42
4.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.5 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.6 Retention and Access to Books and Records; Cooperation . . . . 44
4.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 46
4.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.9 Environmental Defects . . . . . . . . . . . . . . . . . . . . . 52
4.10 Use of Name . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ii
4.11 Product Indemnity . . . . . . . . . . . . . . . . . . . . . . . 60
4.12 Post Retirement Health Care Costs . . . . . . . . . . . . . . . 63
4.13 Additional Indemnities . . . . . . . . . . . . . . . . . . . . 64
4.14 Pension Plan Amendments . . . . . . . . . . . . . . . . . . . . 65
4.15 Bulova Watches . . . . . . . . . . . . . . . . . . . . . . . . 66
5. Covenant Regarding M762 Reimbursement . . . . . . . . . . . . . . . 66
6. M762 Contract Indemnification . . . . . . . . . . . . . . . . . . . 71
7. Guarantee of Collectability of Receivables . . . . . . . . . . . . . 72
8. Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . 73
9. Amendment and Waivers . . . . . . . . . . . . . . . . . . . . . . . 73
9.1 Amendments, Modifications, Etc . . . . . . . . . . . . . . . . 73
9.2 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10. Survival of Representations and Warranties . . . . . . . . . . . . . 74
11. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.1 By Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.2 By Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.3 Defense of Claims . . . . . . . . . . . . . . . . . . . . . . . 76
11.4 Prompt Payment . . . . . . . . . . . . . . . . . . . . . . . . 78
12. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
13. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
14. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
15. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
16. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 81
17. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
18. Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 81
iii
19. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
20. Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
iv
EXHIBITS
--------
No. SECTION TITLE
- --- ------- -----
1 1.4(c) Demand Note
2 1.7(2) Certificate of Seller certifying
as to certain corporate matters
3 1.7(4) and 5 Guaranty of Loews Corporation
4(a) and (b) 1.7(5) The written opinions of Warren
Neitzel, General Counsel of Bulova
Corporation and Gary Garson,
Deputy General Counsel of Loews
Corporation
5 1.8(2) Certificate of Buyer certifying as to
certain corporate matters
6 1.8(3) The written opinion of Craig
Schnee, General Counsel of National
Defense Company L.L.C.
7 4.5 Allocation of Merger Consideration
8 4.10 Trade Name Agreement
v
DEFINITIONS
Capitalized terms used herein shall have the meaning set forth below or as
elsewhere defined herein.
"AAA" means the American Arbitration Association.
"Affiliates" means, with respect to an entity, any entity that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with such entity.
"Affirmative Claim(s)" shall have the meaning set out in Section 4.11.
"Agreement" means this Merger Agreement dated January 11, 1995.
"Best Knowledge of Seller" means to the knowledge of Gary Garson of
Loews, Herb Hofmann, Warren Neitzel and Paul Sayegh of Seller and James
Waterwash, Michael Goeller, John Gwynn and Jacob Goodwin of BTI.
"BSIC" means Bulova Systems and Instruments Corporation before giving
effect to the acquisition of HTI.
"Business" means the business of designing, manufacturing, marketing and
supplying certain Fuzes and of manufacturing and supplying certain piece parts
for the medical industry.
"Charges" shall have the meaning set forth in Section 2.22.
vi
"Code" means the Internal Revenue Code of 1986, as amended, together with
the rules and regulations promulgated thereunder. References to sections of the
Code include any successor to such sections.
"Common Control Entity" shall have the meaning set forth in Section 2.24.
"Confidential Information" means information which is not publicly
available relating to or concerning the business, operations, properties,
condition (financial or otherwise), liabilities, employee relations, customers,
suppliers, distributors and franchise relations of BTI or of Buyer.
Confidential Information does not include information which (i) becomes
generally available to the public other than as a result of disclosure by
Seller, (ii) was available on a non-confidential basis prior to its disclosure
by Seller, or (iii) becomes available to Seller on a non-confidential basis from
a source other than BTI or its representatives, provided that such source is
not, to the Best Knowledge of Seller, bound by a confidentiality agreement with
BTI or its representatives.
"Defense Products" means products purchased by the Government for use by
the U.S. Department of Defense, the U.S. Army, the U.S. Navy, the U.S. Air Force
or the U.S. Marine Corps, or purchased or used by the military forces of a
foreign nation.
"Environmental Agency" means the U.S. Environmental Protection Agency or
any State or local governmental environmental agency having jurisdiction over
BTI.
vii
"Environmental Deductible" shall have the meaning set forth at Section
4.9(b).
"Environmental Indemnity" shall have the meaning set forth in Section
4.9(a).
"Environmental Laws" means the Resource Conservation and Recovery Act
(42 U.S.C. Section 6901, et seq.), the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 6901, et seq.) and the Toxic
Substance Control Act (15 U.S.C. Section 2601) and the laws, regulations, or
ordinances of the Commonwealth of Pennsylvania and local jurisdictions
applicable to BTI relating to the regulation of toxic or hazardous wastes or
substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Former BTI Property" means any real property leased as of the Closing Date
or at any time owned, leased or used by BTI or its Predecessors, but not
including the Former Hamilton Property or the Real Property.
"Former Hamilton Property" means any real property owned, leased or used
by Hamilton or its predecessors before June 23, 1989, including the Race Avenue
Property.
"Fuzes" means mechanical or electrical detonating fuze devices, including
safe and arming devices.
"GDC" means General Defense Corporation.
viii
"Government" means the United States of America acting by and through one
or more of its procurement agencies.
"Government Contract" means any contract awarded by the Government.
"Hamilton Document" means that Agreement styled a "Stock Purchase
Agreement," dated June 23, 1989 and executed by Bulova Systems and Instruments
Corporation, General Defense Corporation and Olin Corporation.
"Handling" means the production, use, generation, storage, treatment,
disposal, discharge, release or other handling or disposition of any kind.
"Intangible Properties" shall have the meaning set forth in Section 2.13.
"Loews M762 Guaranty" means that portion of the Loews Corporation
Guaranty (the form of which is attached hereto as Exhibit 3) guaranteeing the
performance by Seller of the M762 Obligation (as defined in the Loews
Corporation Guaranty) subject to an overall aggregate limit of $6,470,000.
"Loss" or "Losses" shall mean any and all liabilities, losses, damages,
claims, costs and expenses, interest, awards, judgements and penalties
(including, without limitation, reasonable attorneys' fees and expenses)
suffered or incurred, directly or indirectly.
"Material Adverse Effect" means a material adverse effect on the
operations, assets, condition (financial or otherwise) or Business as conducted
by BTI.
ix
"Material Adverse Change" means a material adverse change in the
operations, assets, condition (financial or otherwise) or Business as conducted
by BTI.
"Multiemployer Plan" shall have the meaning set forth in Section 2.24.
"Olin" means Olin Corporation.
"Pension Plan" shall have the meaning set forth in Section 2.24.
"Post Retirement Health Care Costs" means any and all costs or liabilities
relating to post retirement health care costs of employees of BTI or its
Predecessors arising under or relating to employee benefit plans adopted by BTI
or its Predecessors on or before the Closing Date.
"Predecessors" means companies as to which BTI is a successor including,
without limitation, Bulova Systems and Instruments Corporation and Hamilton
Technology, Inc., but not including predecessors to Hamilton Technology, Inc.
"Presence of Substances" means the existence of one or more Substances at a
level that exceeds an applicable threshold requiring Remediation by an
Environmental Agency under an Environmental Law in effect as of the Closing
Date.
"Product Claim(s)" shall have the meaning set forth in Section 4.11.
"Real Property" means the real property and improvements thereon located at
101 Queen Street, Lancaster, Pennsylvania and the real property and improvements
thereon located at 1000 Stoney Battery Road, Lancaster, Pennsylvania.
"Receivables" shall have the meaning set forth in Section 7(a).
x
"Remediation" means the delineation of the nature and extent of the
Presence of Substances, and removal or clean up of Substances in response to
the requirements of Environmental Laws in effect on the Closing Date which are
conducted in coordination with an applicable Environmental Agency.
"Schedule" means a schedule referenced in and attached to this Agreement.
"Substances" means asbestos, or any toxic or hazardous wastes or
substances as presently defined in any Environmental Laws.
"Waste Removal Claims" shall have the meaning set forth in Section 4.9(c).
"Welfare Plan" shall have the meaning set forth in Section 2.24.
xi
MERGER AGREEMENT
Merger Agreement entered into on January 17, 1995, by Bulova Technologies,
Inc., a New York corporation ("BTI"), BTI Acquisition Corporation, a Delaware
corporation ("Buyer"), and Bulova Corporation, a New York corporation (the
"Seller").
W I T N E S S E T H :
WHEREAS, the General Corporation Law of the State of Delaware (the
"DGCL") permits a merger of a New York corporation with and into a Delaware
corporation;
WHEREAS, the New York State Business Corporation Law (the "BCL")
permits a merger of a New York corporation with and into a Delaware corporation;
and
WHEREAS, BTI and Buyer and their respective stockholders and Boards of
Directors deem it advisable and to the advantage, welfare and best interests of
BTI and Buyer and their respective stockholders to merge BTI with and into
Buyer pursuant to the provisions of the DGCL and the BCL and upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement of the parties hereto, being thereunto duly entered into by Buyer and
1
approved by a resolution adopted by its stockholders and Board of Directors and
being thereunto duly entered into by BTI and approved by a resolution adopted by
its stockholders and Board of Directors, the Merger Agreement and the terms and
conditions thereof and the mode of carrying the same into effect, together with
any provisions required or permitted to be set forth therein, are hereby
determined and agreed upon as hereinafter in this Agreement set forth.
1. The Merger.
----------
1.1 The Merger. Upon the terms and subject to the conditions of this
----------
Agreement and in accordance with the DGCL and the BCL, on the Closing Date (as
hereinafter defined), BTI shall be merged with and into Buyer (the "Merger").
1.2 Effective Time; Closing. (a) The Merger shall become effective at
-----------------------
the time (the "Effective Time") of the filing of Certificates of Merger with
the Office of the Secretary of State of the State of Delaware and the Office of
the Secretary of State of the State of New York in such forms as are required
by, and executed in accordance with the relevant provisions of, the DGCL and the
BCL.
(b) The closing of the Merger (the "Closing") shall take place at 10:00
a.m. on January 17, 1995, at the offices of Eaton & Van Winkle, 600 Third
Avenue, New York, New York, unless another date or place is agreed to by the
parties. The date on which the Closing occurs is hereinafter referred to as
the "Closing Date".
2
1.3 Effects of the Merger. (a) At the Effective Time, the separate
---------------------
corporate existence of BTI shall cease, BTI shall be merged with and into Buyer,
and BTI and Buyer shall become a single company, which shall be the surviving
corporation (hereinafter sometimes referred to as the "Surviving Corporation"),
and the Surviving Corporation, without further action, shall be governed by the
laws of the State of Delaware and shall possess all the rights, privileges,
powers and franchises, public and private, of both BTI and Buyer and shall be
subject to all the debts, liabilities, obligations, restrictions, disabilities
and duties of both BTI and Buyer.
(b) The Certificate of Incorporation and By-laws of Buyer, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and By-laws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
(c) The directors and officers of Buyer in office immediately prior to
the Effective Time shall constitute the directors and officers of the Surviving
Corporation, all of whom shall hold their positions and offices until the
election and qualification of their respective successors or until their tenure
is otherwise terminated in accordance with the Certificate of Incorporation or
By-laws of the Surviving Corporation.
1.4 Conversion of Securities. (a) At the Effective Time, by virtue of
------------------------
the Merger and without any action on the part of any stockholder of Buyer, each
share of
3
capital stock of Buyer that is issued and outstanding immediately prior to the
Effective Time shall not be converted or exchanged in any manner, but each said
share shall continue to represent one issued share of the Surviving Corporation.
(b) At the Effective Time, all of the shares of common stock, no par
value (the "Shares") of BTI that are issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive the Merger
Consideration (as hereinafter defined), and the Shares, as such, shall be deemed
canceled and eliminated.
(c) At the Closing, in payment of the Merger Consideration, Buyer will
deliver to Seller its Demand Note, substantially in the form of Exhibit 1
attached hereto with the blanks appropriately filled in (the "Demand Note"), in
a principal amount equal to the Merger Consideration, payable to Seller against
receipt of evidence satisfactory to Buyer that certificates for the Shares have
been surrendered for cancellation pursuant to the Merger. As set forth in the
Closing Agreement Letter dated and executed as of the date hereof, immediately
following the Merger, Buyer will demand payment of, and the Buyer will pay, the
Demand Note.
1.5 Merger Consideration. The consideration (the "Merger
Consideration") to be paid to Seller in respect of the Merger shall be the
amount equal to the sum of (i) Twenty Million Dollars ($20,000,000) plus (ii)
Five Hundred Seventy-Five Thousand Dollars ($575,000), plus (iii) Two Hundred
Thirty-Five Thousand Dollars
4
($235,000), for a total of Twenty Million Eight Hundred Ten Thousand Dollars
($20,810,000).
1.6 Further Assurances. If at any time after the Effective Time the
------------------
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of BTI or
Buyer, or (b) otherwise to carry out the purposes of this Agreement, the
Surviving Corporation and its proper directors and officers or their designees
shall be authorized to execute and deliver, in the name and on behalf of each
such corporation, all such deeds, bills of sale, assignments and assurances and
do, in the name and on behalf of each such corporation, all such other acts and
things necessary, desirable or proper to vest, perfect or confirm, of record or
otherwise, its right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such corporations
and otherwise to carry out the purposes of this Agreement.
1.7 Documents to Be Delivered by Seller to Buyer at the Closing. At
-----------------------------------------------------------
the Closing, Seller shall deliver to Buyer:
(1) evidence satisfactory to Buyer that a stock certificate or
certificates for the Shares have been surrendered for cancellation
pursuant to the Merger;
5
(2) a certificate of Seller in the form of Exhibit 2 certifying as
to certain corporate matters, together with all of the attachments
referred to therein;
(3) such documentation as Buyer may reasonably request evidencing
the consummation of the transactions contemplated by Section 4.1;
(4) a Guaranty Agreement (the "Guaranty") in the form of Exhibit 3
hereto executed by Loews Corporation ("Loews") pursuant to Section 4.12
hereof up to a maximum of $8,185,000; and pursuant to Section 5 up to a
maximum of six million four hundred seventy five thousand dollars
($6,475,000);
(5) the written opinions in the forms attached hereto as Exhibits
4(a) and 4(b);
(6) the written resignations of certain of the directors and
officers of FSC, as designated by Buyer prior to the Closing;
(7) the Trade Name Agreement in the form of Exhibit 8; and
(8) such other documents as Buyer or its counsel may reasonably
request.
1.8 Documents to be Delivered by Buyer to Seller at the Closing. At
-----------------------------------------------------------
the Closing, Buyer will deliver to Seller:
(1) The Demand Note in payment of the Merger Consideration;
6
(2) a certificate of Buyer in the form of Exhibit 5 certifying as
to certain corporate matters, together with all of the attachments referred
to therein;
(3) the written opinion set out and attached hereto as Exhibit 6;
(4) the allocation in the form of Exhibit 7;
(5) the Trade Name Agreement in the form of Exhibit 8; and
(6) such other documents as Seller or its counsel may reasonably
request.
2. Representations and Warranties of Seller and BTI.
------------------------------------------------
Seller and BTI each hereby represents and warrants to Buyer as follows:
2.1 Title to the Shares. Seller has at the Closing, good, valid and inde-
-------------------
feasible title to the Shares, free and clear of all claims, security interests,
liens, encumbrances, options, restrictions and charges of any kind whatsoever,
other than those imposed by Buyer. There are no outstanding options, warrants or
rights to purchase or acquire any of the Shares or any of the capital stock
of BTI.
2.2 Authority. Each of BTI and Seller has the unrestricted power and the
---------
unqualified right to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by BTI and Seller
have been duly authorized by all requisite corporate action on the part of BTI
and Seller.
7
This Agreement constitutes a legal, valid and binding obligation of BTI and
Seller, enforceable against each in accordance with its terms.
2.3 Organization and Qualification. Each of Seller and BTI is a
------------------------------
corporation duly organized and validly existing, and in good standing under the
laws of its jurisdiction of incorporation, and BTI has all requisite corporate
power and authority to own its properties and to carry on its business as now
being conducted and is duly qualified and licensed to do business and is in good
standing in each jurisdiction where the nature of the property owned or business
conducted requires such qualification or licensing, except where the failure to
be so qualified or licensed will not have a Material Adverse Effect. Set forth
on Schedule 2.3 is a list of jurisdictions in which BTI is qualified to do
business. BTI is in compliance with all laws, regulations and requirements
applicable to its business which, if it were not in compliance therewith, would
have a Material Adverse Effect.
2.4 No Legal Bar; Conflicts. Neither the execution and delivery of this
-----------------------
Agreement, nor the consummation of the transactions contemplated hereby, (i)
violates or will violate any provision of the certificate of incorporation or
by-laws or other governing instrument of Seller or BTI, (ii) constitutes, or
will constitute, a material violation of any applicable law, or (iii) violates
or will violate, any order, judgement, writ, injunction, decree, determination
of law, statute, ordinance, rule or regulation applicable to either Seller or
BTI or either of their respective assets or
8
properties. Except as set forth on Schedule 2.4, neither the execution and
delivery of the Agreement, nor the consummation of the transactions contemplated
hereby (a) materially violates or will materially violate, or (b) materially
conflicts with or will materially conflict with, or (c) results in or will
result in any material breach of any of the terms of, or (d) constitutes or will
constitute a material default under, or (e) results in or will result in the
termination of or the creation or imposition of any material lien pursuant to,
or (f) gives to any other person any material interest or right, including
rights of acceleration, consent, termination or cancellation, in or with respect
to, the terms of any material contract, commitment, agreement, lease,
understanding or arrangement of any kind to which BTI is a party or by which BTI
or any of its assets are bound.
2.5 Acquisition History. On June 23, 1989, Bulova Systems and Instru-
-------------------
ments Corporation, a New York corporation ("BSIC") acquired (the "Hamilton
Acquisition") all of the issued and outstanding capital stock of Hamilton
Technology, Inc., a Delaware corporation ("HTI"), pursuant to a Stock Purchase
Agreement dated such date (the "Hamilton Agreement") among BSIC, General Defense
Corporation, a Pennsylvania corporation ("GDC") and Olin Corporation, a Virginia
corporation ("Olin"). On January 29, 1990, the corporate name of BSIC was
changed to Bulova Technologies, Inc. ("BTI"). HTI was merged with and into BTI
on or about January 1, 1991. Except as set forth on Schedule 2.5, BTI has not
used, since
9
January 30, 1990, any other corporate or trade name, nor registered to do
business under any other name.
2.6 Subsidiaries. BTI does not have any direct or indirect subsidiaries
------------
or own any capital stock or other securities, or have any equivalent interest
in, any corporation, partnership or other business entity except for Bulova
Technologies International Corporation ("FSC"), incorporated under the laws of
the U.S. Virgin Islands.
2.7 Capitalization of BTI. BTI has an authorized capital stock
---------------------
consisting solely of 100 shares of common stock, no par value, of which, as of
the date hereof, 100 shares are issued and outstanding. All of the issued and
outstanding Shares of BTI have been duly authorized and validly issued, are
fully paid and non-assessable, and are owned of record and beneficially by
Seller. None of such Shares were issued in violation of any preemptive or
other right. BTI is not a party to or bound by any contract, agreement or
arrangement to issue, sell or otherwise dispose of or redeem, purchase or
otherwise acquire any capital stock or any other security of BTI or any other
security exercisable or exchangeable for or convertible into any capital stock
or any other security of BTI, and, except for this Agreement, there is no
outstanding option, warrant or other right to subscribe for or purchase, or
contract, agreement or arrangement with respect to, any capital stock or any
other security of BTI or any other security exercisable or convertible into any
capital stock or any other security of
10
BTI. Seller owns all of the Shares, free and clear of all security interests,
liens, claims, charges, restrictions, equities and encumbrances of any kind.
2.8 Governmental Consents and Approvals. Seller and BTI each have
-----------------------------------
obtained all consents, authorizations and approvals under all statutes, laws,
ordinances, regulations, rules, judgments, decrees and orders of any court or
governmental agency, board, bureau, body, department or authority or of any
other person required to be obtained by Seller or BTI, in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby; provided, however, that neither Seller nor
BTI makes any representation or warranty in this Agreement regarding any
requirement for a novation of any contract with the Government to which BTI is a
party as of the Closing Date, in connection with the Merger.
2.9 Governmental Authorizations and Regulations. All material licenses,
-------------------------------------------
franchises, permits, approvals and other governmental authorizations held by BTI
or FSC are valid, and neither BTI nor FSC has received any written notice or, to
the Best Knowledge of Seller, oral notice, that any governmental authority
intends to cancel, terminate or not renew any such license, franchise, permit or
other governmental authorization which action would have a Material Adverse
Effect. BTI and FSC hold all licenses, franchises, permits, approvals and other
governmental authorizations the absence of any of which would have a Material
Adverse Effect.
11
Set forth on Schedule 2.9 is a list of all governmental licenses, franchises and
permits, held by BTI or FSC.
2.10 Financial Statements; Absence of Undisclosed Liabilities. (a)
--------------------------------------------------------
Seller has delivered to Buyer balance sheets of BTI and its consolidated
subsidiary FSC as at December 31, 1991, 1992 and 1993 and statements of
operations and deficit, and cash flows for each of the three years then ended,
audited by Deloitte & Touche. Seller has also delivered to Buyer an unaudited
balance sheet of BTI as at September 30, 1994 and a statement of profit and loss
and related notes for the period ended September 30, 1994 (collectively, the
"1994 Balance Sheet"). Except as otherwise noted therein, all of such financial
statements are in accordance with the books and records of BTI, have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with that of the preceding periods and fairly present the
financial position and the results of operations and cash flows of BTI, as at
the dates thereof and for the periods indicated.
(b) Except for (i) liabilities set forth on any Schedule or reflected or
reserved against on the 1994 Balance Sheet and (ii) liabilities incurred since
September 30, 1994 in the ordinary course of business consistent with past
practice which are not set forth in any Schedule and which in the aggregate have
not had a Material Adverse Effect, BTI has no material liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise
which are required to be disclosed on the 1994
12
Balance Sheet or in footnotes to the financial statements referred to above in
accordance with generally accepted accounting principles, and not so disclosed.
2.11 Real Property. (a) Schedule 2.11(a) sets forth a true and complete
-------------
list and a summary description of all the land and improvements thereon owned by
BTI, and a description of the use of each such parcel (the "Real Property").
Except as set forth on Schedule 2.11(a), (i) BTI has good title to each parcel
of Real Property, free and clear of any mortgage, liability, claim, security
interest, lien or encumbrance other than liens for current taxes not yet due and
payable and easements, restrictions and defects as do not have a Material
Adverse Effect and (ii) there are no encroachments or projections by any
property of others upon any part of the Real Property, nor does any part of the
Real Property encroach or project upon other properties, which encroachments or
projections would have a Material Adverse Effect.
(b) Except as set forth on Schedule 2.11(b), there are no pending or,
to the Best Knowledge of Seller, threatened condemnation or similar proceedings
or proceedings for the reduction of assessed valuation, against the Real
Property or any portion thereof, or relating to or arising out of the interest
of BTI in the Real Property or any portion thereof, in any court or before or by
any federal, state, county or municipal department, commission, board, bureau,
agency, or other
13
governmental instrumentality, and no portion of the Real Property is subject to
any special assessment.
(c) Schedule 2.11(c) identifies each lease under which BTI or FSC is the
lessee of any real property. The property described in all such leases is
presently used in the business currently conducted by BTI or FSC. BTI and/or FSC
has all right, title and interest of the lessee under the terms of all such
leases. No event has occurred which (with the passage of time or the giving of
notice) would impair any right of BTI or FSC to exercise and obtain the benefits
of any options contained in any such lease. All payments required to be made to
date by the lessee under each such lease have been made. Neither Seller, BTI nor
FSC has received any written notice or, to the Best Knowledge of Seller, oral
notice of default under any such lease, nor has any event occurred which (with
the passage of time or the giving of notice) would constitute such a default or
result in or permit the termination or acceleration of any such lease, by or in
the name of the Lessor.
(d) Except as set forth on Schedule 2.11(d), there are no subleases,
loan agreements, mortgages, trusts, or similar undertakings, agreements or
commitments entered into or granted by BTI with respect to the Real Property.
(e) To the Best Knowledge of Seller, no portion of the Real Property is
in violation of, or used or occupied in a manner in violation of, any building
code, zoning ordinance, or certificate of occupancy, which violation would have
a Material
14
Adverse Effect. Seller has delivered to Buyer a true and correct copy of the
certificate of occupancy for each parcel of Real Property. Except as set forth
on Schedule 2.11(e), no variances, exceptions or similar permits have been
obtained by or on behalf of BTI with respect to any of the Real Property.
2.12 Tangible Personal Property. (a) Schedule 2.12(a) sets forth a true
--------------------------
and complete listing by type of property and location, of all items of tangible
personal property (excluding inventory) having a value in excess of one hundred
thousand dollars ($100,000) which are owned by BTI or FSC. BTI or FSC has good
title to all of the personal property shown on Schedule 2.12(a) or purported to
be owned by it, free and clear of any mortgages, liabilities, claims, security
interests, liens or encumbrances except as set forth on Schedule 2.12(a). All
of such personal property shown on Schedule 2.12(a) has been maintained in
accordance with BTI's or FSC's, as the case may be, customary maintenance
practices. All inventory owned by BTI or FSC, or for which BTI or FSC has
received progress payments from the Government is, to the Best Knowledge of
Seller, located on either the Real Property, the leased real property identified
on Schedule 2.11(c), or as set forth on Schedule 2.12(a).
(b) Schedule 2.12(b) sets forth a true and complete listing of all items
of tangible personal property (excluding customer and Government furnished
material, equipment and property) which are not owned by BTI or FSC but which
are utilized
15
by BTI or FSC. With respect to each such item, such list contains a true and
correct description of the owner of such item and the lease, license or other
agreement pursuant to which BTI or FSC is entitled to the use or possession of
such item. Each lease, license or other agreement set forth on such listing is
valid, subsisting and in full force and effect in accordance with its terms, and
to the Best Knowledge of Seller, without objection by any governmental agency or
third party which could result in the termination, revocation or suspension
thereof. To the Best Knowledge of Seller, there is not existing any material
breach of or default under any such lease, license or other agreement (or any
state of facts which, with notice, lapse of time or the occurrence of any other
event, would constitute a breach or default), or any unauthorized or unlawful
use of the property covered thereby.
(c) Seller has advised Buyer that from time to time the Government has
furnished equipment, materials and property to BTI or it predecessors
("Government Property") which are or have been utilized by BTI or such
predecessor. Notwithstanding anything in this Agreement to the contrary, Buyer
acknowledges that Seller has made no representation or warranty regarding any
such Government Property.
2.13 Certain Intangible Properties. Schedule 2.13 contains a true and
-----------------------------
complete description of all licenses and permits relating to intellectual
property and all copyrights, patents, trademarks, service marks and trade names,
owned or used by, and applications for any of the foregoing made by BTI
(collectively, the "Intangible
16
Properties") and all contracts, agreements, licenses or other rights with
respect to each of the foregoing. The Intangible Properties listed or described
on Schedule 2.13 constitute all of the material licenses and permits relating to
intellectual property and all of the material copyrights, patents, trademarks,
service marks and trade names used or held for use in, the conduct of the
Business of BTI as presently conducted. All such rights are subsisting and in
full force and effect in accordance with their terms, without objection known to
Seller by any governmental agency or third party which might result in the
revocation or suspension thereof, or interference with or infringement on or by
the rights of any other person where, in any such case, any such failure would
have a Material Adverse Effect. To the Best Knowledge of Seller, neither
Seller nor BTI has received any notice with respect to, any alleged infringement
or unlawful use by BTI or by any third party of any such license, permit, patent
or any trademark, service mark, trade name, copyright or other intangible
property right owned or alleged to be owned by others, and the execution,
delivery and performance of this Agreement will not constitute any basis for the
revocation or suspension of any such license, permit or right or any application
therefor, which revocation or suspension would have a Material Adverse Effect.
2.14 Contracts. Except as set forth on Schedule 2.14, neither BTI nor
---------
FSC is a party to any written or oral:
17
(i) consulting contract or other contract for personal services
involving a payment of more than ten thousand dollars ($10,000) annually;
(ii) lease, as lessor, with respect to any property, real or personal,
involving a payment of more than ten thousand dollars ($10,000) annually;
(iii) agreement or instrument relating to any indebtedness;
(iv) contract of purchase by BTI or FSC of goods or services involving
in any one instance fifty thousand dollars ($50,000) or more;
(v) contract with any agent, dealer or distributor;
(vi) stand-by letter of credit, guarantee or performance bond;
(vii) contract or agreement restricting the ability of any person from
freely engaging in any business or competing anywhere in the world;
(viii) contract not made in the ordinary course of business; or
(ix) any other contract, involving a cost expenditure by BTI or FSC,
after the Closing Date, of fifty thousand dollars ($50,000) or more.
Each contract or other agreement listed on Schedule 2.14 is in full force
and effect and, to the Best Knowledge of Seller, is valid and enforceable by BTI
in
18
accordance with its terms assuming the due authorization, execution and
delivery thereof by each of the other parties thereto. Neither BTI nor, to the
Best Knowledge of Seller, any other party is in default in the observance or the
performance of any term or obligation to be performed by it under any contract
listed on Schedule 2.14. Seller has delivered to Buyer true and complete copies
of all contracts listed on Schedule 2.14 as in effect on the date hereof.
2.15 Inventory and Work in Process; Backlog. (a) All raw material,
--------------------------------------
inventory and work in process ("Inventory") of BTI reflected on the 1994 Balance
Sheet is owned and held by BTI, free and clear of liens, security interests or
other encumbrances, except to the extent that any of such inventory has been
disposed of in the ordinary course of business since September 30, 1994 and
except as may arise in favor of the U.S. Government with respect to progress
payments. Schedule 2.15(a) sets forth a true and complete list of the amounts
of progress payments received by BTI with respect to each of its outstanding
contracts as of December 31, 1994. Except as set forth on Schedule 2.15(a),
none of such Inventory has been manufactured other than against contracts in
effect on the Closing Date and awarded to BTI.
(b) Schedule 2.15(b) describes, by sales contract, each sales contract
and the backlog with respect to each such contract as of November 30, 1994.
2.16 Suppliers. Schedule 2.16 contains a list of BTI's twenty largest
---------
suppliers of goods (measured by dollar volume) during fiscal year 1994 through
19
November 30, 1994 showing, with respect to each, the name and address and dollar
volume (including the principal categories of products bought). Except as set
forth on Schedule 2.16, BTI is not required to provide or obtain any bonding or
other financial security arrangements in connection with any of the transactions
with any of BTI's suppliers in the ordinary course of its business. Except as
set forth on Schedule 2.16, neither Seller nor BTI has received any written
communication or, to the Best Knowledge of Seller, oral communication of any
intention of a supplier of BTI identified as one of BTI's twenty largest
suppliers on Schedule 2.16 to discontinue its relationship as a supplier of, or
materially reduce its sales to BTI.
2.17 Compliance with Law. Except as otherwise set forth on Schedule
-------------------
2.17, BTI and FSC are in compliance with all applicable statutes, rules,
regulations, ordinances, codes, orders, licenses, franchises, permits,
governmental authorizations and governmental concessions, as such apply to BTI,
FSC or their businesses, assets or operations, including, without limitation,
any applicable building, zoning, labor, environmental, export, occupational
safety, health or other law, ordinance or regulation, except for violations
which would not have a Material Adverse Effect.
2.18 Government Contracts. (a) Schedule 2.18 sets forth a true and
--------------------
complete list of (1) all Government Contracts to which BTI is a party and (2)
all contracts in which BTI acts as a subcontractor at any tier in the
performance of a Government Contract. Except as described on Schedule 2.18 (i)
assuming that all
20
required actions on the part of the Government have been properly taken, all
contracts of BTI with the Government have been legally awarded and are valid
and binding on the parties thereto; (ii) no payment has been made by BTI, BSIC
or to the Best Knowledge of Seller, any Predecessor or by any person acting on
their behalf, to any person relating to the award to BTI or any Predecessor of
any Government Contract in violation of applicable laws or regulations; (iii)
except as set forth on Schedule 2.18, to the Best Knowledge of Seller, no state
of facts exists which could give rise to a termination of any Government
Contract to which BTI is a party or any claim against BTI or any Predecessor
arising thereunder, including, but not limited to, any claim for price
adjustment under the Truth in Negotiations Act or other request for negotiated
reduction in the contract price, by any government agency or authority
concerning the award or performance of any Government Contract which, if
adversely determined, would have a Material Adverse Effect; (iv) BTI has not
been debarred or suspended from participation in the award of contracts with the
Government and no proceedings therefor are pending and there is no basis
therefor; (v) BTI's cost accounting and procurement systems are in compliance
with all applicable Government regulations in all material respects; (vi) to the
Best Knowledge of Seller, BTI is not the subject of any investigation by any
federal, state or local government relating to its Government Contracts that
could lead to criminal or civil penalties; and (vii) each written certification
provided by BTI in connection with any claim submitted
21
under or in connection with any Government contract, including any contract in
which BTI acts as a subcontractor at any tier, is true and accurate to the
extent required by the Federal Acquisition Regulations.
(b) Contract No. DAAA09-81-G-0026 Modification P0009 has been completed
and closed between the Government and BTI and neither BTI nor any Predecessor
is or may become liable to the Government in connection with such contract.
2.19 Payments and Boycotts. Neither Seller, BTI, nor FSC nor any of
---------------------
their respective officers, directors, employees or agents, has, directly or
indirectly, within three years prior to the date hereof, given or made or agreed
to give or make on behalf of BTI or FSC, any political contribution or any
commission, payment, gratuity, gift, or similar benefit, or received any rebate,
kickback, gratuity, gift or similar payment or benefit in violation of any
applicable law to or from any customer, supplier, governmental employee or other
person (foreign or domestic) who is or may be in a position to help or hinder
the businesses of BTI or FSC or assist BTI or FSC in connection with any actual
or proposed transaction (including, without limitation, where any such action
could subject BTI or FSC to liability under the Foreign Corrupt Practices Act of
1977, the Export Administration Act, the Internal Revenue Code of 1986, any
anti-boycott laws or other applicable laws). Seller has not, during such
period, filed any report with the Securities and Exchange Commission which
22
disclosed that Seller, BTI or FSC engaged in any of the foregoing practices in
connection with BTI or FSC or the business or operations of BTI or FSC. Neither
Seller, BTI nor FSC has participated, during such period, directly or
indirectly, in any boycotts in connection with BTI or FSC or the businesses or
operations of BTI or FSC (including, without limitation, any international
boycott as described in Section 999 of the Code).
2.20 [Intentionally Omitted]
2.21 Litigation. Except as listed on Schedule 2.21 there are no actions,
----------
suits or proceedings (excluding workers compensation claims and routine employee
grievances), nor has Seller, BTI or FSC received written notice or, to the Best
of Seller's Knowledge, oral notice of any claim, investigation or examination
pending against BTI or FSC or either of their business, properties, assets or
securities, nor, to the Best Knowledge of Seller, are any of the foregoing
threatened against BTI or its business, properties, assets or securities, at law
or in equity, before or by any federal, state or municipal court or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which, if adversely determined, either individually or in
the aggregate, would result in a monetary judgment against BTI or FSC of ten
thousand dollars ($10,000) or more or which would otherwise have a Material
Adverse Effect, or which questions the validity or
23
seeks to prevent the consummation of this Agreement or the transactions
contemplated hereby.
2.22 Tax Matters. (a) All federal, state, local and foreign tax
-----------
returns, reports and statements required to be filed by BTI and FSC (and each
Affiliate with which BTI files consolidated, combined or unitary returns) have
been properly and timely filed with the appropriate governmental agencies in all
jurisdictions in which such returns, reports and statements are required to be
filed, all such returns, reports and statements are correct and complete in all
material respects and all Charges (as hereinafter defined) and other impositions
shown thereon to be due and payable have been paid prior to the date on which
any fine, penalty, interest, late charge or loss may be added thereto for the
nonpayment thereof, unless any such amounts are being contested in good faith by
appropriate proceedings and an adequate reserve has been established on the 1994
Balance Sheet, or any such fine, penalty, interest, late charge or loss has been
paid. For purposes of this Agreement, "Charges" shall mean all federal, state,
county, city, municipal, local, foreign or other governmental taxes, levies,
assessments and charges, liens, claims or encumbrances upon or relating to (i)
BTI's or FSC's employees, payroll, income or gross receipts, (ii) BTI's or FSC's
ownership or use of any of its assets, or (iii) any other aspect of BTI's or
FSC's business, in each case including any and all interest and penalties.
24
(b) Each of BTI and FSC has paid when due and payable all Charges
required to be paid by it, except where contested in good faith, by appropriate
proceedings and where both adequate reserves therefor have been established on
the 1994 Balance Sheet in accordance with generally accepted accounting
principles and such nonpayment would not have a Material Adverse Effect. The
provisions for taxes due by BTI and FSC shown on the 1994 Balance Sheet are
sufficient for all unpaid Charges, whether or not disputed.
(c) Schedule 2.22(c) sets forth, for each of BTI and FSC, those taxable
years for which tax returns are currently being audited by the Internal Revenue
Service (the "IRS"). No issue has been raised or settled in any such
examination that, by application of similar principles, reasonably may be
expected to result in an assertion of a material deficiency for any other
taxable year not so examined that has not been accrued on the 1994 Balance Sheet
of BTI as at September 30, 1994 in accordance with generally accepted accounting
principles. Neither BTI nor FSC has settled, issued or has entered into a
closing agreement with respect to any tax year for which an audit or examination
has been concluded that, by application of similar principles, reasonably may be
expected to result in a material deficiency for any other taxable year not so
examined (or currently under examination) that has not been accrued on the
balance sheet of BTI in accordance with generally accepted accounting
principles. There is no issue known to BTI relating to any Charge (federal or
otherwise) that, if
25
determined adversely to BTI or FSC, would result in the assertion of any
material deficiency for any taxable year that has not been accrued on the
balance sheet of BTI as at September 30, 1994.
(d) Except as set forth on Schedule 2.22(d), neither BTI nor FSC has
executed or filed with the IRS or any other governmental authority any agreement
or other document extending, or having the effect of extending, the period for
assessment or collection of any Charge.
(e) Except as set forth on Schedule 2.22(e), neither BTI nor FSC has
filed a consent pursuant to Section 341(f) of the Internal Revenue Code of
1986, as amended (the "Code"), or agreed to have Section 341(f)(2) of Code
apply to any disposition of subsection (f) assets (as such term is defined in
Section 341(f)(4) of the Code). Neither BTI nor FSC has made any payment, is
obligated to make any payment, or is a party to any agreement that could, under
certain circumstances, obligate it to make any payment, that will not be
deductible under Section 280G of the Code. Each of BTI and FSC has disclosed on
its federal income tax returns all positions taken thereon that could give rise
to a substantial understatement of federal income tax within the meaning of
Section 6661 of the Code.
(f) Except as set forth on Schedule 2.22(f), none of the property owned
by BTI or FSC is property which such company is required to treat as being
owned by any other person pursuant to the provisions of Section 168(f)(8) of
the Internal
26
Revenue Code of 1954, as amended, and in effect immediately prior to the
enactment of the Tax Reform Act of 1986 or is "tax-exempt use property" within
the meaning of Section 168(h) of the Code.
(g) Except as set forth on Schedule 2.22(g) neither BTI nor FSC has
agreed to or has been requested to make any adjustment under Section 481(a) of
the Code by reason of a change in accounting method initiated by BTI or FSC and
neither BTI nor FSC has any knowledge that the IRS has proposed any such
adjustment or change in accounting methods.
(h) Except as set forth on Schedule 2.22(h), neither BTI nor FSC has any
obligation under any written tax sharing agreement.
2.23 Employee Relations. Schedule 2.23 sets forth a true and complete
------------------
list of all collective bargaining agreements, all written or, to the Best
Knowledge of Seller, oral employment contracts (other than BTI's standard terms
of employment and payroll practices), and all other binding arrangements
relating to the employment of any of the employees of BTI. Except as noted on
Schedule 2.23, BTI has performed in all material respects the obligations
required to be performed under all arrangements set forth on Schedule 2.23, and
no such arrangement will be terminated or reopened by reason of this Agreement
or the transactions contemplated hereby. BTI (i) is not a party to, involved in
or, to the Best Knowledge of Seller, threatened by, any labor dispute or unfair
labor practice charge, excluding routine employee
27
grievance claims, (ii) is not currently negotiating any collective bargaining
agreement and (iii) has not experienced any strikes, work stoppage, slow-down,
job action, lock-outs, or similar labor trouble during the last three years
(excluding routine employee grievance claims). Schedule 2.23 sets forth a true
and complete list as of the close of business on January 12, 1995 of (a) all
pending employee grievance claims and arbitrations, and charges of
discrimination in employment or in employment practices to which BTI is a party,
(b) a true and complete list of all employees terminated or laid off within the
90 day period immediately preceding the Closing Date and (c) a listing of all
increases in compensation of ten thousand dollars ($10,000) or more and all
payments of loans to employees, officers and directors of BTI and its
Affiliates, by individual, date and amount, paid by BTI in 1994 or which BTI in
1994 obligated itself to pay.
2.24 ERISA. (a) Schedule 2.24(a) contains a complete list of "Plans,"
-----
consisting of each
(i) "employee welfare benefit plan," as defined in Section 3(1) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), to which Seller, BTI or any of their respective subsidiaries
contributes or is required to contribute with respect to employees of
BTI, including each multiemployer welfare plan ("Welfare Plan"), and
sets forth the amount of any liability of Seller, BTI or such subsidiary
for payments to each such Welfare
28
Plan with respect to employees of BTI that are more than thirty (30) days
past due;
(ii) "multiemployer pension plan," as defined in Section 3(37) of
ERISA, to which Seller or BTI (or any entity which is a member of a
"controlled group of corporations" therewith or is under "common control"
therewith as defined in Section 414(b) or (c) of the Code ("Common
Control Entity")) has contributed or been obligated to contribute at any
time after January 1, 1991 with respect to employees of BTI
("Multiemployer Plan");
(iii) "employee pension benefit plan," as defined in Section
3(2) of ERISA (other than a Multiemployer Plan) to which Seller, BTI or
any Common Control Entity contributes or is required to contribute with
respect to employees of BTI ("Pension Plan"); and
(iv) deferred compensation plan, bonus plan, stock option plan,
employee stock purchase plan, severance or termination plan, and any
other employee benefit plan, agreement, arrangement or commitment binding
on BTI, maintained by Seller or any of its Affiliates or any Common
Control Entity with respect to employees of BTI, other than normal
payroll practices and policies concerning holidays, vacations, severance
and salary continuation during short absences for illness or other
reasons.
29
(b) Schedule 2.24(b) sets forth the contributions paid by BTI to each
Pension Plan for year 1994. Notwithstanding anything in this Agreement to the
contrary, Buyer acknowledges that Seller makes no representation or warranty,
directly or indirectly, with respect to the "funded" or "unfunded" status of, or
as to the sufficiency of the assets of, any Plan.
(c) Except as described in Schedule 2.24(c), no event has occurred or,
to the Best Knowledge of the Seller, is threatened or about to occur which
would constitute a reportable event within the meaning of Section 4043(b) of
ERISA, and no notice of termination has been filed by the plan administrator
pursuant to Section 4041 of ERISA or issued by the Pension Benefit Guaranty
Corporation pursuant to Section 4042 of ERISA with respect to any pension
benefit plan described in Schedule 2.24(c) subject to ERISA. No prohibited
transaction (as defined in Section 4975 of the Code) has occurred with respect
to any employee benefit plan maintained by either BTI or any Common Control
Entity for the benefit of employees of BTI.
(d) True and complete copies of each of the following documents have
been made available by Seller to Buyer: (i) each Welfare Plan, Multiemployer
Plan and Pension Plan, related trust agreement, annuity contract or other
funding instrument, (ii) each plan, agreement, arrangement and commitment
referred to in subsection (a)(iv), and a description, complete in all material
respects, of any such Plan which is not in writing, (iii) the most recent
determination letter issued by the Internal Revenue
30
Service with respect to each Pension Plan, (iv) the most recently filed Annual
Report on Form 5500 Series required to be filed with any governmental agency for
each Welfare Plan, Multiemployer Plan and Pension Plan and (v) the most recent
actuarial report prepared for each Pension Plan for which actuarial reports are
required to be prepared.
2.25 Officers and Key Employees. Schedule 2.25 contains a list of all
--------------------------
officers of BTI and all other employees of BTI whose current annual salary or
rate of compensation from BTI is seventy-five thousand dollars ($75,000) or
more.
2.26 Insurance. BTI and its properties are insured under policies issued
---------
to Loews under the Loews insurance program. To the Best Knowledge of Seller,
the policy holder and BTI have complied in all material respects with the
provisions of such policies, and such policies are in full force and effect.
BTI will be removed from such policies effective with the Closing Date for
occurrences thereafter.
2.27 Bank Accounts and Powers of Attorney. Schedule 2.27 contains a
------------------------------------
true and complete list of all banks or other financial institutions in which
BTI as of the Closing Date will have an account, line of credit, safe deposit
box or lockbox and the applicable account numbers, safe deposit or lockbox
numbers. Schedule 2.27 also identifies the names of all persons, if any,
holding a power of attorney from BTI or from Seller with respect to BTI, and
the names of all persons with access to any BTI account, line of credit, safe
deposit box or lockbox.
31
2.28 Absence of Material Changes. Since September 30, 1994, there has
---------------------------
not been:
(i) any Material Adverse Change, except as set forth on Schedule
2.28(i);
(ii) any, destruction, or damage (whether or not covered by
insurance) to any of the assets or properties of BTI which would have a
Material Adverse Effect;
(iii) any checks (other than payroll checks) issued by BTI or FSC
except as listed on Schedule 2.28(iii), which is true and correct in all
material respects;
(iv) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock of BTI; or any direct
or indirect redemption, purchase, issuance or other acquisition or
disposition by BTI of any such stock, or any grant of any option or
making of any commitment relating to any such stock;
(v) any material changes in BTI's accounting policies, procedures
or methodologies or any material failure to maintain BTI's records on a
basis consistent with past practice;
(vi) any grant of any severance or termination pay by BTI to any
officer or employee of BTI except in accordance with BTI's standard
practices,
32
any entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement)
with any officer, director or employee of BTI, any increase in
benefits payable by BTI under any existing severance or termination
pay policies or employment agreements;
(vii) except as set forth on Schedule 2.28(vii), any payment or
discharge of outstanding indebtedness other than the Intercompany
Debt;
(viii) any changes to the Intercompany Debt (as hereinafter
defined), except as listed on and described in Schedule 2.28(viii)
which is true and correct in all material respects;
(ix) except as set forth on Schedule 2.28(ix), any payment by
or charge to BTI for any fees due Seller or its Affiliates in
respect of Intercompany Obligations (defined in Section 4.1) at
rates greater than the rate charged during the first quarter of
1994;
(x) any amendment to BTI's Certificate of Incorporation or By-
Laws; or
(xi) any activity or transaction in which BTI has participated
other than activities or transactions conducted in the ordinary
course of business.
2.29 Intercompany Transactions. Schedule 2.29 lists all of the current
-------------------------
agreements, contracts, proposals, bids and arrangements between BTI and any of
33
Loews, Seller or their Affiliates. Except as set forth on Schedule 2.29, as of
the Closing Date, BTI will have no liability, whether accrued, contingent or
otherwise, to any of Loews, Seller or their Affiliates except for life, health,
employee benefit insurance programs with CNA insurance on the same terms as in
effect during the first quarter of 1994, and except for liabilities arising
under this Agreement.
2.30 Environmental Matters. With respect to the Former BTI Property and,
---------------------
to the Best Knowledge of Seller, with respect to the Real Property except as set
forth on Schedule 2.30, BTI (and any Predecessor) has no liability whatsoever,
contingent or determinable, which relates to Losses, including, without
limitation, environmental costs incurred in connection with, arising out of,
resulting from or incident to the (i) Handling of Substances at any time prior
to the Closing Date at any such property, including, without limitation, the
effects of such Handling of Substances on resources, persons or property within
or outside the boundaries of said property; (ii) the Presence as of the Closing
Date of Substances at, on or under any such property, regardless of how the
Substance or Substances came to rest on or under the property; or (iii) the
failure prior to the Closing Date of the property to be in compliance with any
Environmental Laws existing at or at any time prior to the Closing Date. Seller
makes no representation in this Agreement as to the presence of underground
storage tanks. Notwithstanding the foregoing, however, any liability of Seller
arising under
34
this Section 2.30 with respect to matters covered by Section 4.9 shall be
governed by the terms of Section 4.9.
2.31 Minute Books/Records. BTI's and FSC's minute books contain accurate
--------------------
records of all meetings and all written corporate actions in lieu of meetings of
their respective stockholders and boards of directors and committees thereof,
and complete and accurate copies of such minute books have been made available
by Seller to Buyer. BTI's and FSC's stock record books contain accurate
records of their respective issuance and transfer of all stock or other
securities, and such stock transfer books have been provided by Seller to Buyer.
2.32 Brokers. All negotiations on behalf of Seller and Loews relative to
-------
this Agreement and the transactions contemplated hereby have been carried on
directly by them without the intervention of any broker, finder, investment
banker or other third party. Neither Seller nor Loews has engaged or authorized
any broker, finder, investment banker or other third party to act on its behalf,
directly or indirectly, as a broker, finder, investment banker or in any other
like capacity in connection with this Agreement or the transactions contemplated
hereby, or has consented to or acquiesced in anyone's so acting, or knows of any
claim for compensation for so acting or of any basis for such a claim.
35
2.33 Delivery of Contracts. Seller has given or made available to Buyer
---------------------
true and correct copies of each of the contracts, agreements, instruments and
other documents listed in the Schedules attached hereto.
2.34 Notices of Violations of Representations, Warranties and Covenants.
------------------------------------------------------------------
Schedule 2.34 contains a list of the date and topic of any notification provided
by Seller, BTI or its Predecessors to Olin or GDC pursuant to Section 8.3 of the
Hamilton Document or otherwise in which Seller, BTI or its Predecessors notified
Olin or GDC of their potential liability to BTI or its Predecessors based upon
or arising out of any representation, warranty, covenant or agreement made under
the Hamilton Document or the breach thereof. To the Best Knowledge of Seller,
no material breach of any representations, warranties or covenants by Olin or
GDC under the Hamilton Document has occurred for which a notice pursuant to
Section 8.3 of the Hamilton Document or otherwise has not been provided.
2.35 Surviving Hamilton Document Representations, Warranties, Covenants
------------------------------------------------------------------
and Indemnities. Schedule 2.35 lists all representations, warranties, covenants
- ---------------
or indemnities provided by Olin or GDC to BTI or its Predecessors under the
Hamilton Document which by their terms have expired as of the Closing Date.
2.36 Other Representations. Seller makes no other representations or
---------------------
warranties to Buyer.
36
3. Representations and Warranties of Buyer.
---------------------------------------
Buyer hereby represents and warrants to Seller and BTI as follows:
3.1 Organization and Standing. Buyer is a corporation duly organized,
-------------------------
validly existing and in good standing under the laws of the State of Delaware,
with full power and authority to enter into this Agreement and to perform all of
its obligations hereunder.
3.2 Authority. Buyer has the unrestricted power and unqualified right to
---------
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Buyer and the
consummation of the transactions contemplated hereby have been duly authorized
by all requisite corporate action. This Agreement constitutes a valid and
binding obligation of Buyer, enforceable in accordance with its terms. Neither
the execution nor the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, nor the compliance with or fulfillment of the
terms and provisions hereof, will (i) conflict with or result in a breach or
violation of any of the terms, conditions or provisions of the Certificate of
Incorporation or By-laws of Buyer; (ii) conflict with or result in a breach or
violation of, or default or loss of a material benefit under, or permit the
acceleration of any obligation under any provision of any agreement, indenture,
mortgage, lien, lease or other instrument or restriction of any kind to which
Buyer is a party or by which it or any of its assets or properties is otherwise
bound; or (iii)
37
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Buyer or any of its assets or properties.
3.3 Brokers. All negotiations on behalf of Buyer relative to this
-------
Agreement and the transactions contemplated hereby have been carried on directly
by it without the intervention of any broker, finder, investment banker or any
other third party. Buyer has not engaged or authorized any broker, finder,
investment banker or any other third party to act on its behalf, directly or
indirectly, as a broker, finder, investment banker or in any other like capacity
in connection with this Agreement or the transactions contemplated hereby, or
has consented to or acquiesced in anyone's so acting, or knows of any claim for
compensation for so acting or of any basis of such a claim.
3.4 Hart-Scott-Rodino Notification. Neither Buyer, Seller or BTI, nor
------------------------------
any of their Affiliates is required to file a Notification and Report Form under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, by reason
of the truth and accuracy of the following statements: (1) no person (as that
term is defined in 16 C.F.R. 801.1(a)(1)) will have the right to fifty percent
(50%) or more of the profits of Buyer or the right, in the event of dissolution,
to fifty percent (50%) or more of the assets of Buyer; (2) Buyer does not have
a regularly prepared balance sheet; and (3) the total assets of Buyer, less cash
that will be used by Buyer in payment of the Merger Consideration, is less than
ten million dollars ($10,000,000).
38
3.5 Access to Information. Buyer acknowledges and agrees that it and
---------------------
its representatives have been given access to the offices, properties, records,
files and books of account of BTI for purposes of conducting an investigation of
the financial condition, status, liabilities, contracts, business operations,
properties, litigation and other matters relating to BTI and that Buyer and its
representatives have inspected, examined and investigated the same to their
satisfaction. Buyer acknowledges that Seller has given Buyer and its
representatives the opportunity to ask questions of Seller and BTI and their
respective officers, employees and agents regarding, and to obtain additional
information with respect to, the foregoing matters and that Buyer and such
representatives have received satisfactory responses to their inquiries and
requests.
3.6 Litigation. Except as listed and described on Schedule 3.6, there
----------
are no actions, suits or proceedings, nor has Buyer received notice of any
claim, investigation or examination, pending against Buyer or its businesses,
properties, assets or securities, at law or in equity, before or by any Federal,
State or municipal court or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if adversely
determined, would have a material adverse effect on the business, properties or
assets of Buyer or which questions the validity or seeks to prevent the
consummation of this Agreement or the
39
transactions contemplated hereby. Schedule 3.6 contains an accurate description
of each such pending action, suit, proceeding, claim or investigation or
examination.
3.7 Governmental Consents and Approvals. Buyer has obtained all
-----------------------------------
consents, authorizations and approvals under all statutes, laws, ordinances,
regulations, rules, judgments, decrees and orders of any court or governmental
agency, board, bureau, body, department or authority or of any other person
required to be obtained by Buyer in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
3.8 Compliance with Law. Except as set forth on Schedule 3.8, Buyer
-------------------
has not received any written citation or notification alleging any material
violation of any applicable statutes, rules, regulations, ordinances, codes,
orders, licenses, franchises, permits, authorizations and concessions with
respect to which all material corrective actions have not been taken, except in
any case where non-compliance would not have any material adverse effect on the
assets, condition (financial or other), or business of Buyer.
3.9 No Other Representations. Buyer makes no other representations or
------------------------
warranties to Seller.
4. Covenants of the Parties.
------------------------
4.1 Intercompany Liabilities. Immediately prior to the Closing Date,
------------------------
Seller will contribute $11,582,000 to the capital of BTI representing the full
amount of the
40
Intercompany Debt as of the Closing Date, which shall be in a principal amount
not less than eleven million five hundred eighty two thousand dollars
($11,582,000). In addition, on or prior to the Closing Date, Seller shall cause
BTI to pay all other Intercompany Obligations outstanding as of the Closing Date
as listed on Schedule 4.1. Accordingly, as of the Closing Date, BTI will have
no liability or obligation, whether accrued, contingent or otherwise, to Loews,
Seller or any of their Affiliates except as provided in Section 2.29.
The term "Intercompany Debt" shall mean the open account advance by
Seller to BTI as reflected on the books and records of BTI. The term
"Intercompany Obligations" shall mean all debts and liabilities of BTI to Seller
of whatsoever kind and amount, whether accrued, contingent or otherwise,
including interest at the rate of ten percent (10%) per annum on the
Intercompany Debt (accrued but unpaid since September 30, 1994) but excluding
the principal of the Intercompany Debt and excluding any debts and liabilities
as may arise under this Agreement.
4.2 Covenant Not to Compete. In connection with the Merger hereunder,
-----------------------
Seller covenants and agrees that until the third anniversary of the Closing
Date, neither it nor its subsidiaries will, directly or indirectly, re-enter the
business of manufacturing Fuzes or acquire control of a company deriving, for
either of its two most recent fiscal years, ten percent (10%) or more of its
income from the business of manufacturing Fuzes. If, in any judicial
proceeding, a court refuses to enforce
41
fully the covenant contained in the preceding sentence, then such covenant shall
be deemed modified for the purpose of such proceeding to the extent necessary to
permit the remainder thereof to be enforced. In the event of any violation of
the foregoing provisions of this Section 4.2, Buyer shall be entitled to
injunctive relief, in addition to any other rights or remedies it may have, it
being agreed that the damages which it would sustain upon any such violation are
impossible to ascertain in advance.
4.3 Confidentiality. (a) Seller covenants that, after the Closing, it
---------------
will not, prior to November 30, 1999, without the prior written consent of
Buyer, use itself or disclose to any third person Confidential Information,
except that Confidential Information with respect to BTI may be disclosed to
accountants, counsel and other representatives of Seller and Loews who need to
know such information for purposes of taxes, accounting, pending litigation and
other matters necessary in respect of Seller's ownership, prior to the Closing
Date, of BTI unless in the opinion of Seller's counsel disclosure is required to
be made under the Securities Act of 1933, the Securities Exchange Act of 1934,
as amended (the "1934 Act"), other applicable law or the regulations of the New
York Stock Exchange. In the event that Seller is requested or required by
subpoena, civil investigation demand, interrogatories, requests for information,
or other similar process to disclose any Confidential Information supplied to
Seller in the course of its ownership of BTI, Seller will provide Buyer with
prompt notice of such request or demand or other similar process
42
so that Buyer may promptly seek an appropriate protective order or, if such
request, demand or other similar process is not mandatory, waive Seller's
compliance with the provisions of this Section 4.3, as appropriate. If, in the
absence of a protective order or receipt of a waiver hereunder, Seller is
nonetheless, in the opinion of Seller's counsel, required or compelled to
disclose Confidential Information concerning BTI to any tribunal or governmental
body, Seller may nevertheless disclose such information to such tribunal or
government body without liability hereunder. For purposes of this Section 4.3,
Seller shall include Seller and Loews, and their Affiliates.
(b) No failure or delay by Buyer in exercising any right, power or
privilege under this Section 4.3 shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
hereof or the exercise of any other right, power or privilege hereunder.
(c) Buyer acknowledges receipt of a Confidentiality Agreement dated
February 22, 1994 executed by National Financial Corporation with respect to
information concerning BTI. Buyer agrees to be bound by the provisions of such
Confidentiality Agreement as if it were a party thereto.
4.4 Consents. Seller and Buyer shall each use reasonable efforts to
--------
obtain all consents, authorizations, approvals and agreements of, and to give
all notices and make all filings and registrations with, any third parties,
including the United States Department of Defense and other governmental
authorities, which are necessary to
43
permit BTI to conduct its business as presently conducted subsequent to the
consummation of the transactions contemplated hereby.
4.5 Tax Treatment. Seller and Buyer agree that it is their mutual
-------------
intention that the Merger shall be treated for federal income tax purposes as a
purchase and sale of the assets of BTI. The Merger Consideration shall be
allocated among the categories of assets of BTI for purposes of Section 1060 of
the Code as set forth on Exhibit 7 attached hereto. Seller and Buyer agree to
honor such Merger Consideration allocation for tax reporting purposes.
4.6 Retention and Access to Books and Records; Cooperation. (a) From
------------------------------------------------------
and after the Closing Date, Buyer shall retain or shall cause BTI to retain all
books, accounts, records and files of BTI in existence on the Closing Date in
the usual, regular and ordinary manner for a period of six years. Buyer shall,
subject to applicable law and to such reasonable limitations as may be necessary
to protect classified or proprietary information, at Seller's sole expense, and
on reasonable prior notice to Buyer, afford to Seller and its counsel,
accountants, consultants and other representatives full access during normal
business hours to examine and copy all such books, tax returns, contracts,
records and files of BTI as may be necessary in connection with Seller's
financial statements or tax returns, including, without limitation, preparation,
audit and examination of same, or with respect to any matters as to which Seller
or Loews retains responsibility under this Agreement, including,
44
without limitation, Section 5, and/or is required to indemnify Buyer hereunder,
or Buyer, except with respect to Section 5, at its option, may (subject to
applicable law and reasonable limitations to protect classified or proprietary
information) furnish to Seller, copies of all such documents and information
with respect to BTI as Seller may from time to time reasonably request following
the Closing Date. If Buyer chooses to furnish copies of documents, only Buyer's
out-of-pocket costs and the cost of the copies made shall be borne by Seller.
(b) For a period of six years following the Closing Date, if Buyer
shall desire to dispose of any books, records or files relating to BTI which
were in existence on the Closing Date and which are required to be retained
under Section 4.6(a), Buyer shall, prior to any such disposition, give written
notice thereof to Seller, and Seller shall have the right, at Seller's cost and
expense, for a period of twenty (20) days after receipt of such written notice,
to remove and retain all or any portion of such books, records and files.
(c) From and after the Closing Date, except as otherwise provided in
this Agreement, each of Seller and Buyer shall use reasonable efforts to
cooperate with all reasonable requests by the other party hereto regarding
production of or access to documents or files and making personnel available
for depositions, interviews or testimony in furtherance of or with respect to
any matters as to which it retains responsibility under this Agreement and/or
is required to indemnify the other party
45
hereunder, provided that the party making such request shall pay or promptly
reimburse the other party for all reasonable out-of-pocket expenses incurred by
such other party in connection with any such request.
(d) Within ninety (90) days after the Closing Date, Seller shall provide
Buyer with a list of all categories of books, accounts, records and files of BTI
in the possession of Seller or Loews. Buyer shall have thirty (30) days to
examine such list and notify Seller of such categories of books, accounts,
records and files which it wishes to have delivered to BTI. Within sixty (60)
days after receipt of such notice, Seller shall deliver to BTI, at no cost to
Buyer or BTI, the originals of all such books, accounts, records and files as
Buyer shall have requested.
4.7 Further Assurances. Upon the terms and subject to the conditions
------------------
herein provided, each of the parties hereto agrees to use its reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, to
consummate and make effective the transactions contemplated by this Agreement as
expeditiously as practicable. In case any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties to this Agreement shall take or cause to be taken
all such necessary actions, including, without limitation, the execution and
delivery of such further instruments and
46
documents as may be reasonably requested by any party for such purposes or
otherwise to complete or perfect the transactions contemplated hereby.
4.8 Taxes. Seller and its Affiliated Group (as defined in the Code)
-----
shall file, or cause to be filed, on a timely basis, all returns and reports
with respect to Charges which are required to be filed and which have not been
filed as of the Closing Date by BTI or its Affiliated Group for all periods
ending on, or prior to the Closing Date; provided, however, that Buyer shall
prepare and file, subject to Seller's approval, all such returns and reports
with respect to state and local income taxes for New York State, New York City
and the Commonwealth of Pennsylvania for the year 1994 and the short tax year
ending on the Closing Date. Seller shall pay all taxes due thereon to the
extent such taxes are in excess of the sum of the estimated state and local tax
payments made for 1994 and 1995 (exclusive of any prior year's overpayment
credited to estimated tax payments) plus $40,432, which is the maximum amount of
the aggregate reserve for state and local taxes provided in the 1994 Balance
Sheet.
Seller shall indemnify and hold harmless Buyer from any liability for any
other Charges (subject to appropriate gross-up in the case of inclusion of the
reimbursed amount in Buyer's income without a compensating deduction or basis
adjustment to land or on depreciation or amortizable assets for Buyer's payment
of such amount)
47
arising from BTI's inclusion in a consolidated return or attributable to BTI's
or any other member of its Affiliated Group's operations and business for
periods ending on, or prior to the Closing Date, including, but not limited to,
any liability arising from the merger (other than sales, use or transfer taxes
to the extent that any such taxes exceed those taxes which would have been
incurred had the acquisition of BTI been by way of a transaction described in
Section 338(h)(10) of the Code), deficiency assessments or from Seller or any
Affiliated Group restating or otherwise amending any return which relates to all
or any portion of a tax period ending on, or prior to the Closing Date, except
to the extent any such Charges have been prepaid or adequately provided for in
the 1994 Balance Sheet. Notwithstanding anything to the contrary contained
herein, with respect to all periods ending on or prior to the Closing Date, if
Buyer receives a tax refund occasioned by a timing adjustment attributable to
the same item or transaction which caused a tax deficiency to arise, then Seller
is not required to indemnify Buyer for that portion of such deficiency not in
excess of such refund.
Buyer shall file all returns and reports with respect to Charges which
are required to be filed for periods which include but do not end on the Closing
Date.
Such returns and reports, whether prepared by Buyer or Seller, shall be
prepared in a manner consistent with past practice of BTI and without a change
of any election of any accounting method and shall be submitted by Buyer to
Seller or Seller
48
to Buyer (together with schedules, statements and, to the extent requested,
supporting documentation) at least 45 days prior to the due date (including
extensions) of such return. The recipient shall have the right at its expense
to review all work papers and procedures used to prepare any return or report.
If within 10 business days after delivery of any return or report, the recipient
notifies the preparer in writing that it objects to any items in such return or
report, the dispute items shall be resolved (within a reasonable time, taking
into account the deadline for filing such return) by a nationally recognized
independent accounting firm chosen by, and mutually acceptable to, both Buyer
and Seller. Upon resolution of all such items, the relevant return or report
shall be adjusted to reflect such resolution and shall be binding upon the
parties without further adjustment. The costs, fees and expenses of such
accounting firm shall be borne equally by Buyer and Seller.
Seller shall remit promptly to Buyer any refund received, together with
applicable interest, from a state or local tax authority and attributable to a
tax payment made by BTI prior to the Closing Date, including, without
limitation, any real estate tax refund by virtue of any pending certiorari
proceeding. For purposes of the preceding sentence, all refunds and credits for
1993 and prior years are for the account of Buyer, and, except as provided
otherwise in this Section 4.8, may not be utilized to offset or reduce BTI's tax
liability for 1994 or later years, which is the obligation of Seller.
49
In the case of any Charges that are payable for a tax period that
includes (but does not end on) the Closing Date, Seller shall indemnify Buyer
for the portion of such Charges related to the portion of such tax period ending
on the Closing Date. The indemnified portion shall (x) in the case of any
Charges other than Charges based upon or related to income, be deemed to be the
actual amount allocable to the period before the Closing Date, or if not
determinable, then the amount of such Charges for the entire tax period shall be
multiplied by a fraction the numerator of which is the number of days in the tax
period ending on the Closing Date and the denominator of which is the number of
days in the entire tax period and (y) in the case of any Charges based upon or
related to income, be deemed equal to the amount which would be payable if the
relevant tax period ended on the Closing Date. All determinations necessary to
give effect to the foregoing allocations shall be made in a manner consistent
with prior practice of Seller and BTI.
Seller shall not be liable under this Section for any settlements
effected without the consent of Seller or resulting from any claim, suit,
action, litigation or proceeding in which Seller was not permitted an
opportunity to participate; provided Buyer may settle in a manner adverse to
--------
Seller any issue on a consolidated return of Buyer, provided that the settlement
is part of a settlement of all issues on such return and the issues affecting
Seller are not material in relation to all of the issues resolved. If Buyer
makes such a settlement, Buyer shall notify Seller and Buyer and Seller shall
50
negotiate in good faith to determine the appropriate indemnity, if any. If
Seller and Buyer are unable to reach an agreement within 20 days after receipt
by Seller of such notice, Buyer and Seller shall select a mutually acceptable
nationally recognized accounting firm (the "Referee"). The Referee shall
determine the appropriate amount of indemnity, if any, as soon as practicable,
taking into account the likelihood of success of any contest and the value of
the Loss. The Referee's determination shall be final and binding on both Buyer
and Seller. The cost of retaining the Referee shall be borne equally by the
parties.
Buyer and Seller agree to furnish or cause to be furnished to each other,
upon request, as promptly as practicable, such assistance relating to BTI as is
reasonably necessary for the filing of any return, the making of any permitted
election, for the preparation for any audit, and for the prosecution or defense
of any claim, suit or proceeding relating to any proposed adjustment. Buyer
and Seller agree to retain or cause to be retained all books and records
pertinent to BTI until the applicable period for assessment under applicable law
(giving effect to any and all extensions or waivers) has expired, and to abide
by or cause the abidance with all record retention agreements entered into
relating to United States federal income Taxes. Buyer or the Seller, as
applicable, agree to give each other reasonable notice prior to transferring,
discharging or destroying any such books and records relating to tax matters
and, if the other so requests, the discarding party shall allow the other to
take possession of
51
such books and records. Buyer and Seller shall cooperate with each other in
the conduct of any audit or other proceedings involving BTI for any tax purposes
and each shall execute and deliver such powers of attorney and other documents
as are necessary to carry out the intent of this subsection.
4.9 Environmental Defects. (a) In the event that, within eight months
---------------------
after the Closing, Buyer notifies Seller that it has discovered the Presence of
Substances (which for purposes of this Section 4.9 shall not include asbestos at
the North Queen Street real property, except as otherwise provided in Section
4.9(f)) at any of the Real Property, then Seller shall, subject to the
provisions of Section 4.9(b), indemnify and hold harmless Buyer and BTI (the
"Environmental Indemnity") against and in respect of any and all Loss which
Buyer or BTI may suffer or incur, directly or indirectly, as a result of the
Presence or Handling of such Substances at such Real Property on or prior to the
Closing Date, including, without limitation, the effects of such Handling of
Substances on persons (excluding employees and former employees of BTI and its
Predecessors, but including any Loss which Buyer or BTI may suffer or incur,
directly or indirectly, as a result of possible asbestos exposure to the
individuals identified on Schedule 4.9(a) to the extent such Loss arises other
than under Workers Compensation laws), natural resources or property within or
outside the boundaries of said Real Property. For purposes of this
Environmental Indemnity, to the extent Substances are found during the eight
month period after the Closing
52
Date at the locations identified in Schedule 4.9(b), Seller shall have the
burden of proof if it claims any such Substances were not present prior to the
Closing Date. Buyer shall provide Seller with as much notice as is practicable
with respect to any investigation or environmental survey it intends to conduct
relating to any Remediation. Seller may, at its option, participate in any such
investigation or environmental survey conducted by Buyer during such eight-month
period. Buyer shall have the absolute discretion to select a reputable,
experienced environmental engineering firm(s) to conduct testing for the
Presence of Substances. Costs incurred to determine the extent and location of
Substances shall be borne by Seller as provided in Section 4.9(b) below. With
respect to any investigation to determine the Presence of Substances, Buyer
shall give Seller at least thirty (30) days prior notice before any drilling is
to be conducted, or samples taken at the Real Property. Seller shall be
entitled to have its environmental consultant present during such drilling and
sampling. Duplicate samples shall be taken with one set provided to Seller's
consultant. Each party shall bear its own costs in connection with the
foregoing.
(b) As promptly as practicable after Buyer notifies Seller, pursuant to
Section 4.9(a) above, of the Presence of such Substances at any of the Real
Property, Buyer and Seller, acting jointly and reasonably, will select a
reputable environmental engineering firm to determine the extent and location
of Substances and the necessity of, and estimated cost of Remediation. In this
connection, Seller shall be entitled to
53
as much notice as is practicable with respect to any discussions or proceedings
Buyer intends to hold with any Environmental Agency and Seller may, at its
option, participate in any such discussions or proceedings. In the event that
the costs of Remediation, as so estimated, are (i) less than fifty percent (50%)
of the book value ("R.P. Book Value") as shown on the September 30, 1994 Balance
Sheet of that Real Property having such Substances, then Seller shall reimburse
Buyer for the actual cost of the Remediation of such Substances at such Real
Property but only to the extent such costs exceed twenty-five thousand dollars
($25,000) for all deficiencies disclosed pursuant to the environmental
investigation outlined in Schedule 4.9(b) or twenty-five thousand dollars
($25,000) pursuant to each subsequent environmental investigation (each such
twenty-five thousand dollar ($25,000) amount is herein called an "Environmental
Deductible"); provided, however, that in the case of Remediation resulting from
the Presence of Substances found other than as a result of the environmental
investigation outlined in Schedule 4.9(b), Seller shall reimburse Buyer for only
fifty percent (50%) of the first four hundred thousand dollars ($400,000) of
cost incurred in such Remediation after deducting any applicable Environmental
Deductible and, thereafter, one hundred percent (100%) of the additional cost
incurred in such Remediation; or (ii) greater than fifty percent (50%) of the
R.P. Book Value of the Real Property having such Substances, then Seller, at its
option, shall, within sixty (60) days of receipt of such estimate, notify Buyer
of its election
54
to either (A) reimburse Buyer for the actual cost of the Remediation of such
Substances at such Real Property as and to the extent described above, or (B)
repurchase such Real Property for an amount equal to its R.P. Book Value minus
(x) the applicable Environmental Deductible, and (y) $97,500. Remediation, as
referred to in this Section 4.9(b) shall be conducted diligently and timely and
on the most reasonably cost effective basis practicable, pursuant to the
Environmental Laws and consistent with Buyer's use of such property subject,
however, to Buyer's reasonable business needs, in response to Environmental
Laws. To the extent that Seller may be liable for any costs associated with the
removal or clean-up of Substances, the removal or clean-up of Substances shall
be accomplished through the joint efforts of Buyer and Seller with Buyer and
Seller jointly and reasonably selecting a reputable, experienced environmental
engineering firm to conduct the removal or clean-up and jointly and reasonably
approving any plan to be submitted to an Environmental Agency in which the
removal or clean-up of Substances is proposed. Buyer shall provide Seller with
as much notice as is practicable with respect to any discussions or proceedings
it intends to hold with an Environmental Agency, and Seller may, at its option,
participate in any such discussions or proceedings. In the event that Seller
offers to purchase any Real Property from Buyer pursuant to subsection
4.9(b)(ii)(B), then Buyer shall have sixty (60) days to notify Seller that it
will either (x) accept such offer or (y) reject the offer and demand that Seller
reimburse Buyer for the actual cost
55
of the Remediation of such Substances at such Real Property (but in no event
shall such reimbursement amount be greater than fifty percent (50%) of the R.P.
Book Value of such Real Property minus (x) the Environmental Deductible and (y)
$97,500, and upon payment thereof, Seller shall have no further obligation under
the Environmental Indemnity with respect to such Substances at such Real
Property. In the event that Seller repurchases any Real Property pursuant to the
foregoing, (1) Seller shall assume any and all liens and encumbrances thereon,
except for liens which may attach to such property after the Closing Date as a
result of any acts or omissions of Buyer after the Closing Date, and except for
any real property taxes, but not assessments, which may become due thereon after
the Closing Date, and (2) such property shall, if Buyer so requests, be leased
to Buyer pursuant to a "triple net" lease, having a five (5) year term
(terminable by Buyer at any time upon six (6) months' notice) and providing for
an annual rental equal to ten percent (10%) of the above-mentioned repurchase
price, payable monthly. Any Seller reimbursement made pursuant to this Section
4.9(b) shall be made within sixty (60) days of receipt of Buyer's invoices for
actual costs incurred reasonably which shall be submitted from time to time as
Remediation of Substances progresses.
(c) Seller shall indemnify and hold harmless Buyer against and in
respect of any and all Loss which Buyer may suffer or incur, directly or
indirectly, based upon or arising out of (i) the Presence of Substances at, or
the Handling (other than
56
Handling covered by clause (iii) below) of Substances at or from a Former BTI
Facility prior to the Closing Date, including, without limitation, the effects
of such Handling of Substances on persons (excluding employees and former
employees of BTI and its Predecessors, but including any Loss which Buyer may
suffer or incur, directly or indirectly, as a result of possible asbestos
exposure to the individuals identified on Schedule 4.9(a) to the extent such
Loss arises other than under Workers Compensation laws) natural resources or
property within or outside the boundaries of said Real Property, (ii) any of the
following matters as more fully described in Schedule 4.9(c) hereof: (the
Valley Stream Facility, the Aqua Tech Environmental Site and 25 Race Avenue);
and (iii) any claims or demands asserted against Buyer from and after the date
hereof regarding waste removal sites used by, or waste removal methods engaged
in or employed by (but not including the matters referred to in clause (ii)
above), BTI or its Predecessors and contractors to BTI or its Predecessors at
any tier acting on behalf of BTI or its Predecessors on or prior to the Closing
Date (but not for waste removal sites used by, or waste removal methods engaged
in or employed by Hamilton or its predecessors prior to June 23, 1989)
(collectively, "Waste Removal Claims"), provided that for such Waste Removal
Claims as to which Buyer notifies Seller (x) within four years after the Closing
Date, Seller's indemnity shall be for the full amount of such Loss and (y) more
than four
57
years after the Closing Date, Seller's indemnity shall be limited to fifty
percent (50%) of the aggregate amount of such Loss.
(d) With respect to (i) the presence of Substances at, or the Handling
of Substances at or from a Former Hamilton Property, including, without
limitation, the effects of such Handling of Substances on persons, natural
resources, property within or outside the boundaries of such Former Hamilton
Property, (ii) any waste removal sites used by, or waste removal methods engaged
in or employed by Hamilton or its predecessors prior to June 23, 1989, and (iii)
the Race Avenue Property, the East Petersburg Site, the HTI Cerclis Sites, the
HTI Off-Site Disposal Sites and the Maxey Flats Superfund Site (all as described
in the Hamilton Document), Seller shall execute such documents and use such
reasonable efforts (without incurring material out-of-pocket expenses) as may be
necessary or helpful to assist Buyer in obtaining the benefit of any
representation, warranty or covenant of GDC or Olin made to Bulova Systems and
Instruments Corporation (now BTI) under or in connection with the Hamilton
Document.
(e) Seller represents that BTI has been indemnified by Olin and GDC
under the Hamilton Document for any claim (the "Race Avenue Claim") relating to
the Presence or Handling of Substances at any time prior to June 23, 1989 at the
property known as 25 Race Avenue. Olin has asserted that BTI may be responsible
for a portion of such liability. In the event that it is determined that BTI
bears a portion of
58
such liability based upon actions of BTI subsequent to June 23, 1989 and prior
to the Closing Date, Seller will indemnify BTI for any Loss arising therefrom.
In order to effectively determine the extent, if any, of Seller's obligation to
indemnify BTI hereunder, Seller agrees that, in the event Olin or GDC fails to
indemnify BTI for any portion of the Race Avenue Claim, Seller will, in its name
or in the name of BTI, prosecute BTI's claim against Olin and/or GDC for
indemnity with counsel selected by Seller and reasonably acceptable to Buyer.
In this connection, Buyer shall cooperate with all reasonable requests of Seller
in connection with the prosecution of a claim against Olin and/or GDC,
including, without limitation, production or access to documents or files and
making personnel available for interviews or testimony. All attorney's fees and
expenses incurred by Seller in prosecuting the claim against Olin and/or GDC
shall be borne by Seller. Seller will not settle or compromise the Race Avenue
Claim without the prior written approval of Buyer, which approval will not be
withheld if such settlement or compromise would serve to hold Buyer harmless
from any Loss in connection with the Race Avenue Claim.
(f) Promptly following the Closing Date, Buyer and Seller, acting
jointly and reasonably, will select a reputable asbestos abatement firm to
determine whether the asbestos in the ceiling of the loading dock on the first
floor and in the penthouse at the North Queen Street Real Property is friable.
If any such asbestos is determined by such firm to be friable, Buyer and Seller
shall promptly, jointly and reasonably
59
agree upon a method to encapsulate such friable asbestos, the cost of which
encapsulation shall be borne by Seller.
4.10 Use of Name. (a) On the Closing Date, Seller, Buyer and BTI are
-----------
entering into a Trade Name Agreement under which Buyer may use the name "Bulova
Technologies, Inc." on the terms and conditions set forth therein.
(b) From and after the Closing Date Seller agrees that it shall not use
the name "Hamilton Technology, Inc."
4.11 Product Indemnity. (a) Subject to the provisions of subsection
-----------------
(b), below, Seller shall indemnify and hold harmless Buyer against and in
respect of any and all loss, liability, cost or expense (including reasonable
attorneys's fees) which Buyer may suffer or incur, directly or indirectly, based
on or arising out of the following ("Product Claims"): (i) any tort claim based
upon actions or omissions of BTI or its Predecessors (including, without
limitation, product liabilities, automobile and other liabilities for personal
injuries including claims of employees or former employees of BTI and its
Predecessors alleging death or injury due to workplace exposure, to the extent
not asserted under Workers Compensation laws, arising from or based upon an
injury, event or occurrence which occurred on or prior to the Closing Date; (ii)
any claims based upon actions or omissions of BTI or its Predecessors under or
relating to Government or commercial sales contracts (including, without
limitation, any claims relating to defective pricing, defective
60
products or warranty claims) arising out of BTI's or its Predecessors'
performance prior to the Closing Date with respect to products shipped by BTI
prior to the Closing Date; and (iii) any claims based upon actions or omissions
of BTI or its Predecessors under or relating to any failed or, as of the Closing
Date, completed lots, all of which are identified on Schedule 4.11 (a)(iii) (the
"Covered Lots"). Excluded from Product Claims are any claims relating to or
based upon Inventory on hand at the Closing Date, other than the Covered Lots.
(b) Seller's obligation to indemnify Buyer as provided above shall be
subject to the following:
(i) Seller shall have no obligation with respect to any claim which
is not asserted on or prior to the third anniversary of the Closing Date.
(ii) Seller shall have no obligation with respect to any Product
Claim with respect to which BTI has on the Closing Date, immediately
prior to the Merger, a valid indemnity from Olin or GDC under the
Hamilton Document, even if such indemnity would not fully indemnify Buyer
or BTI because the liability of Olin and GDC is limited in amount.
(iii) Seller's liability for all Product Claims arising under
Section 4.11(a)(iii) shall be limited to two hundred thousand dollars
($200,000).
(iv) Seller's liability for all Product Claims shall be limited in
the aggregate to eighty seven and one half percent (87 1/2%) of the first
three
61
million dollars ($3,000,000) of liability and one hundred percent (100%)
of such amount in excess of three million dollars ($3,000,000) up to ten
million dollars ($10,000,000). Seller shall have no liability for any
Product Claims in excess of ten million dollars ($10,000,000).
Accordingly, Seller's liability under this Section 4.11 shall not exceed
nine million six hundred twenty-five thousand dollars ($9,625,000).
(v) Notwithstanding the foregoing, Seller's maximum liability of
nine million six hundred twenty-five thousand dollars ($9,625,000) shall
be reduced by any amounts paid by Seller pursuant to the indemnity
provided in Section 11.1 hereof.
(c) Buyer shall assist Seller in defending Product Claims in such manner
as Seller may reasonably request, including, among other things, providing
Buyer's employees to assist in the defense, including giving of testimony, and
access to BTI's records. Seller will reimburse Buyer for its out-of-pocket
costs (e.g., travel) in connection therewith. In addition, Buyer shall perform
any remedial work or rework, if requested by Seller in a reasonably prompt
manner, at cost, which shall mean direct labor, materials and overhead (at a
rate of fifty percent (50%) of direct labor costs) in the amount incurred.
(d) Buyer shall assist Seller in asserting claims in connection with
Product Claims, which will be made in the name of Buyer for the benefit and
account of
62
Seller ("Affirmative Claims"), which may arise out of, or be related to a
Product Claim. If requested by Seller, Buyer shall assist Seller in asserting
Affirmative Claims by, among other things, providing BTI employees to assist in
claim preparation, including the giving of testimony and access to BTI's
records. In the event an Affirmative Claim includes solely post-closing costs
for which Seller was responsible under this Section 4.11, Seller shall reimburse
Buyer for its out-of-pocket costs as well as the salaries of Buyer's employees
who assist in asserting such Affirmative Claim. In the event an Affirmative
Claim includes costs for which Buyer seeks reimbursement for its own beneficial
account, Buyer and Seller shall each bear their own costs and out-of-pocket
costs shall be shared pro-rata.
4.12 Post Retirement Health Care Costs. (a) Seller hereby assumes
---------------------------------
liability for, and agrees to provide, all post retirement health care benefits
under any plan or arrangement ("Post Retirement Health Care Plan") adopted by
BTI or its Predecessors (other than Hamilton or its Predecessors) prior to the
Closing Date to any individual (and such individual's beneficiaries) who was,
prior to the Closing Date, entitled to benefits under any Post Retirement Health
Care Plan, but who was not an employee of BTI on the Closing Date ("Former
Employees"). In furtherance thereof, promptly following the Closing Date,
Seller shall provide notification to each Former Employee explaining that, as a
result of the Merger, Seller shall provide to the Former Employee such post
retirement health care benefits, and outlining for the Former
63
Employee the method by which the Former Employee should submit claims for post
retirement health care benefits to Seller.
(b) Seller hereby agrees to hold Buyer harmless from and against any
and all Loss with respect to the obligation to provide post retirement health
care benefits to Former Employees, as described in Section 4.12(a) above.
Seller shall cause Loews to guaranty (such guaranty to be limited to an
aggregate amount not to exceed $8,185,000) the performance by Seller of the
foregoing obligations.
(c) Set forth on Schedule 4.12(c) is a true and correct list of the
names of all Former Employees. Also set forth on Schedule 4.12(c) is a true
and correct list of all employees of BTI on the Closing Date who may be entitled
to benefits under any Post Retirement Health Care Plan on or after the Closing
Date. Attached hereto as Exhibit 4.12 is a true and accurate copy of a summary
of each Post Retirement Health Care Plan referred to in the immediately
preceding sentence.
4.13 Additional Indemnities. Seller shall indemnify and hold harmless
----------------------
Buyer and BTI against and in respect of any and all Loss which Buyer or BTI may
suffer or incur, directly or indirectly, based on or arising out of any Loss
arising out of or relating to (a) any claim by the Government in connection with
a gain resulting from the Pension Spinoff Claim, as defined in Schedule 2.21,
(b) the Vaccaro Claim, as defined in Schedule 2.21, and (c) check(s) issued on
or prior to the Closing Date by BTI against First National Bank of Chicago
account number 0956201 which fail to
64
clear within six (6) months after the Closing Date ("Lost Check"), provided
Buyer issues a check in replacement of the Lost Check. Seller shall forward
bank statements for the accounts on which all such Lost Checks were drawn for a
period of the lesser of (i) six (6) months following the Closing Date, and (ii)
the period which ends on the date when each check outstanding on the Closing
Date clears.
4.14 Pension Plan Amendments. Prior to the Closing Date BTI, by
-----------------------
resolution of its Board of Directors, duly adopted restated and amended plan
documents (the "Amended Plans") for the Retirement Plan for Salaried Employees
of Bulova Technologies, Inc. (the "Salaried Plan") and The Cooperative
Retirement Income Plan (Agreement between Bulova Technologies, Inc. and the
American Federation of Grain Millers, AFL-CIO, CLC Local 387) (the "Union
Plan"). Buyer acknowledges that BTI is required to file the Amended Plans with
the Internal Revenue Service to obtain a determination letter for each such plan
acknowledging that the respective Amended Plan complies with the provisions of
applicable law, including the Tax Reform Act of 1986. Buyer agrees to cause
BTI to cooperate with Seller and its consultants (Kwasha Lipton, with respect to
the Salaried Plan and CIGNA, with respect to the Union Plan) in executing,
filing and processing requests for the determination letters, and agrees to
cause BTI to make such changes in the Amended Plans as such consultants or the
Internal Revenue Service may require as a condition to granting such
determination letters.
65
4.15 Bulova Watches. BTI has on hand a supply of Bulova watches for
--------------
resale to its employees and customers which it has purchased from Seller. Buyer
agrees that it will not advertise, market or promote the sale of such Bulova
watches, or any Bulova watches subsequently purchased by Buyer from Seller, to
members of the general public.
5. Covenant Regarding M762 Reimbursement.
-------------------------------------
(a) Seller represents that BTI is a party to contract DAAA21-90-C0001
(the "M762 Contract") with the Government. Under the M762 Contract, Seller has
agreed to manufacture and sell to the Government an aggregate of approximately
525,804 M762/M767 fuzes at a specified Target Price (as such term is defined in
the M762 Contract). Through December 31, 1994, approximately 456,313 M762/M767
Fuzes have been accepted by the Government and approximately 69,491 M762/M767
Fuzes remain to be accepted.
(b) Seller also represents that Seller has incurred costs under the M762
Contract in excess of the Target Price ("Overrun Costs", as such term is defined
in the M762 Contract) with respect to M762/M767 fuzes manufactured in whole or
in part prior to December 31, 1994 in an aggregate amount of approximately
$7,717,000. Seller further represents that all books and records currently in
existence and required to pursue cost reimbursement under the M762 Contract are
within the possession and control of BTI.
66
(c) Under the M762 Contract, the Government has agreed to reimburse BTI
in an amount equal to eighty percent (80%) of the aggregate Overrun Costs which
are "Qualified Costs" (as such term is defined in the M762 Contract), as
determined by the Government. The maximum allowable reimbursement is the
product of eighty percent (80%) times the maximum Overrun Costs permissible
under the M762 Contract of eight million five hundred eighty eight thousand one
hundred fifty six dollars ($8,588,156), or six million eight hundred seventy
thousand five hundred twenty four dollars ($6,870,524).
(d) Within thirty (30) days after the Trigger Date (as such date is
defined in subsection (i) below) Seller will pay to Buyer (the "Reimbursement
Payment") an amount equal to fifty percent (50%) of the first $800,000 of
Reimbursement Shortfall (as hereinafter defined) and 100% of the Reimbursement
Shortfall in excess of $800,000; and fifty percent of the first $800,000 of
Reimbursement Shortfall shall be borne by Buyer notwithstanding anything to the
contrary in this Agreement. The Reimbursement Payment shall not exceed
$6,470,524, less 80% of any amount by which the Qualified Costs incurred by
Buyer subsequent to the Closing Date, when added to all Overrun Costs incurred
through the Closing Date, is less than $8,588,156.
67
(e) The term "Reimbursement Shortfall" as used herein means the amount,
if any, by which the Government Reimbursement (as hereinafter defined) is less
than an amount equal to eighty percent (80%) of the Overrun Costs.
(f) The term "Government Reimbursement" means the amount of the Overrun
Costs reimbursed by the Government from time to time.
(g) Seller's obligation to pay to Buyer any Reimbursement Payment under
this Section 5 shall be reduced by an amount equal to both (i) eighty percent
(80%) of the net amount received by Buyer, if any, from the Government as a
direct result of a written claim submitted by BTI prior to the Closing Date
under the M762 Contract, and (ii) one hundred percent of the net amount received
by Buyer, if any, from the Government as a direct result of any other written
claims proposed by Seller to Buyer within six (6) months after the Closing Date
including for any lot acceptance test incentive fee, or proposed by Buyer at any
time and, in either case, submitted and certified (within the meaning and
requirements of the Federal Acquisition Regulations), if necessary, by Buyer
under the M762 Contract, (collectively, the "M762 Claims"), in each case after
taking into account any monies that must be returned to the Government by Buyer
in connection with the M762 Contract as a direct result of the receipt of the
monies arising from such claim, (the aggregate amount of the M762 Claims which
is applied to reduce the Reimbursement Payments is referred to as the "Net Claim
Proceeds"). Buyer agrees that it shall file and
68
prosecute any M762 Claim reasonably proposed by Seller and reasonably acceptable
to Buyer until receipt of a Final Decision (as defined in the Federal
Acquisition Regulations) thereon by the Government. Once a Final Decision is
issued with respect to any M762 Claim, Seller may, at its option, require Buyer
to appeal such M762 Claim to any appropriate forum, including a federal court or
the Armed Services Board of Contract Appeals (the "ASBCA"). If Seller requires
Buyer to so appeal, Seller shall direct and control the appeal with counsel
chosen by Seller and at Seller's expense. Buyer shall cooperate reasonably with
Seller including, without limitation, production or access to documents and
files and making Buyer's personnel available. Seller shall reimburse Buyer
promptly for all of Buyer's out-of-pocket expenses as well as the salaries of
Buyer's employees who assist in such cooperation with Seller. Any monetary
award to Buyer from the Government resulting from the appeal of any M762 Claim
shall be allocated as follows: (a) first, to Seller to offset any Reimbursement
Payment made by Seller to Buyer until such Reimbursement Payment is recovered
fully; (b) second, to Seller to offset its legal fees and costs paid to Buyer
incurred in prosecuting such M762 Claim until such legal costs and fees are
recovered fully; and (c) finally, to Buyer.
(h) Buyer agrees that it shall maintain documentation to support
Qualified Costs incurred subsequent to the Closing Date and to prosecute a claim
(a "Reimbursement Claim") against the Government for recovery of all Qualified
Costs
69
until receipt of a Final Decision thereon by the Government. If any such Final
Decision denies recovery by Buyer of (1) Overrun Costs incurred on or prior to
the Closing Date or (2) Qualified Costs incurred after the Closing Date, Seller
may, at its option, require Buyer to appeal such Final Decision to any
appropriate forum, including a federal court or the ASBCA. If Seller requires
Buyer to so appeal, Seller shall direct and control the appeal with counsel
chosen by Seller and at Seller's expense. Buyer shall cooperate reasonably with
Seller, including, without limitation, production of or access to documents and
files and making Buyer's personnel available. Seller shall reimburse Buyer
promptly for all of Buyer's out-of-pocket expenses as well as the salaries of
Buyer's employees who assist in such cooperation with Seller. Any monetary
award to Buyer from the Government resulting from the appeal of such Final
Decision required by Seller shall be allocated (a) first, to Seller to offset
any Reimbursement Payment made by Seller to Buyer; (b) second, to Seller to
offset its legal fees and costs paid to Buyer incurred in prosecuting the
appeal; and (c) finally, to Buyer.
(i) The Reimbursement Payment, if any, shall be made within thirty (30)
days after the earlier of (the "Trigger Date") (a) the receipt of the last
final, non-appealable determination (whether because the time for appeal has
expired or any such appeal has been finally resolved) regarding the
Reimbursement Claim and all M762 Claims (provided, however, that if such
determination includes a monetary award to Buyer,
70
the Trigger Date shall be deemed to be the date upon which Buyer receives the
monies to be paid thereunder), and (b) July 31, 1998. If, on the Trigger Date,
Seller is required to make a Reimbursement Payment, Buyer shall, if requested by
Seller, upon receipt of such Reimbursement Payment assign or reassign to
Seller's designee, to the extent permitted by law and without recourse, all of
Buyer's right, title and interest to any Government Reimbursement and M762
Claims not yet paid to Buyer and, if requested by Seller, shall grant, in favor
of Seller, a security interest in such Government Reimbursement and M762 Claims.
The proceeds of any Government Reimbursement or M762 Claims, which are the
subject of the foregoing sentence shall be applied as provided in the last
sentence of Section 5(h) and (g), respectively
(j) Seller shall cause Loews to execute and deliver to Buyer the Loews
M762 Guaranty at Closing (such guaranty to be limited to an aggregate amount not
to exceed six million four hundred seventy five thousand five hundred twenty
four dollars ($6,470,524)), to guaranty the performance by Seller of the
foregoing obligation. Buyer shall give to Loews reasonable access to counsel
and employees as to the prosecution and status of the Reimbursement Claim and
the M762 Claims.
6. M762 Contract Indemnification.
-----------------------------
(a) Buyer agrees to hold harmless and indemnify Seller with respect to
any Loss incurred by Seller as a result of Seller's guarantee, if any, of the
performance to specification by BTI of the M762 Contract.
71
(b) Buyer shall have no obligation to hold harmless and indemnify Seller
under this Section 6 for any Loss arising under or resulting from any claim by
the Government resulting from (i) Covered Lots, (ii) lots which failed prior to
the Closing Date, and (iii) lots shipped prior to the Closing Date.
(c) Buyer's agreement to hold harmless and indemnify Seller under this
Section 6, shall not limit any representation, warranty, covenant or agreement
of Seller in this Agreement.
7. Guarantee of Collectability of Receivables.
------------------------------------------
(a) Schedule 7 sets forth a true and complete list of all accounts and
notes receivable, unliquidated billings and other customer receivables of BTI
as of December 31, 1994, other than any such amounts in respect of M762 Overrun
Costs (the "Receivables"). Seller guarantees that the Receivables set forth on
Schedule 7 will be paid to BTI in full as follows:
(1) Receivables, other than those generated by the cost type Government
Contracts set forth on Schedule 7(a)(1), shall be collectible in full
within six (6) months of date of invoice; provided, however, that with
respect to Receivables generated by commercial sales, any payment
received by a customer shall be credited to the oldest then-outstanding
invoice or invoice issued to such customer, unless such customer
disputes in writing its obligations to pay such specific invoice(s); and
72
(2) Receivables generated by cost type Government Contracts shall be
collectible in full in the ordinary course of business.
(b) If any part of the Receivables has not been paid in accordance with
Section 7(a) and such nonpayment does not result from any claim or offset
asserted against BTI or Buyer by the account debtor, then, Buyer or BTI shall
reassign to Seller all or any part of the unpaid part of the Receivables, free
and clear of any security interest, lien or other encumbrance arising on or
after the Closing, in which event Seller shall pay to Buyer in cash or by
certified check that amount equal to such reassigned part of the unpaid part of
the Receivables.
8. Intentionally Omitted.
9. Amendment and Waivers.
---------------------
9.1 Amendments, Modifications, Etc. This Agreement may be amended,
------------------------------
modified, superseded or supplemented only by an instrument in writing executed
and delivered on behalf of each of the parties hereto, which instrument when so
executed and delivered shall thereupon become a part of this Agreement and the
provisions thereof shall be given effect as if contained in this Agreement as of
the date hereof.
9.2 Waivers. The representations, warranties, covenants or conditions set
-------
forth in this Agreement may be waived only by a written instrument executed by
the party so waiving. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
party at a later
73
time to enforce the same. No waiver by any party of any condition, or breach of
any term, covenant, agreement, representation or warranty contained in this
Agreement, in any one or more instances, shall be deemed to be or construed as a
waiver of any other condition or of the breach of any other term, covenant,
agreement, representation or warranty contained in this Agreement.
10. Survival of Representations and Warranties.
------------------------------------------
Except as otherwise provided in this Agreement, all representations and
warranties of the parties hereto contained in this Agreement or made pursuant
hereto shall survive the Closing Date and remain in full force and effect for a
period of three years from the date hereof, regardless of any investigation made
by or on behalf of any of the parties hereto. Notwithstanding the foregoing,
the representations and warranties in Sections 2.1, 2.22 and 2.24 shall survive
the Closing Date without limitation and the representations and warranties in
Section 2.30 shall survive for a period of four years from the Closing Date.
11. Indemnification.
---------------
11.1 By Seller. Seller agrees to indemnify and hold Buyer and BTI harmless
---------
against and in respect of any and all Loss which Buyer or BTI may suffer or
incur, directly or indirectly, based upon or arising out of a breach of any
representation, warranty, covenant, indemnity or agreement of Seller set forth
herein. Notwithstanding the foregoing, (i) Seller shall not be liable under this
Section 11.1 for the breach
74
of any representation or warranty in Section 2 hereof, unless the aggregate
amount of liability hereunder exceeds one hundred thousand dollars ($100,000),
whereupon Buyer shall be entitled to indemnification hereunder for an aggregate
amount of such liability in excess of one hundred thousand dollars ($100,000);
(ii) in no event shall Seller be liable hereunder for an aggregate amount
(inclusive of any liability of Seller under Section 4.11) in excess of ten
million dollars ($10,000,000); and (iii) Seller shall have no obligation under
this Agreement with respect to any matter with respect to which an indemnity
against Olin or GDC under the Hamilton Document is in existence as of the
Closing Date immediately prior to the Merger, even if such indemnity would not
fully indemnify Buyer or BTI because the liability of Olin and GDC is limited in
amount. Losses relating to the matters covered by Sections 2.1, 2.22, 2.24,
4.12 and 7 hereof shall be recoverable without limitation.
11.2 By Buyer. Buyer agrees to indemnify and hold Seller harmless against
--------
and in respect of any and all Loss which Seller may suffer or incur, directly or
indirectly, based upon or arising out of any breach of any representation,
warranty, covenant, indemnity or agreement of Buyer set forth herein.
Notwithstanding the foregoing (i) Buyer shall not be liable under this Section
11.2 for the breach of any representation or warranty in Section 3 hereof,
unless the aggregate amount of liability hereunder exceeds one hundred thousand
dollars ($100,000) whereupon Seller shall be entitled to indemnification
hereunder for an aggregate amount of such liability
75
in excess of one hundred thousand dollars ($100,000); and (ii) that in no event
shall Buyer be liable hereunder for an aggregate amount in excess of ten million
dollars ($10,000,000).
11.3 Defense of Claims. If any action, suit, claim, proceeding, demand,
-----------------
assessment or enforcement action is filed against any party entitled to the
benefit of any indemnity under any provision of this Agreement, the indemnified
party shall give written notice thereof to the indemnifying party as promptly as
practicable (and in any event within fifteen (15) days after the service of the
citation or summons); provided, however, that the failure of any indemnified
party to give timely notice shall not affect the rights to indemnification
hereunder except to the extent that the indemnifying party demonstrates actual
damage or prejudice caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to such indemnified party that
such indemnifying party intends to assume the contest and defense of such
action, suit, claim, proceeding, demand, assessment or enforcement action, then
the indemnifying party shall be entitled, if it so elects, to take control of
the defense and investigation of such action, suit, claim, proceeding, demand,
assessment or enforcement action, and to employ and engage attorneys of its own
choice to handle and defend the same, at the indemnifying party's cost, risk and
expense (except as expressly provided otherwise in this Agreement); and the
indemnified party shall cooperate in all reasonable respects, at the
indemnifying
76
party's request and cost, risk and expense, with the indemnifying party and its
attorneys in the investigation, trial and defense of such action, suit, claim,
proceeding, demand, assessment or enforcement action, and any appeal arising
therefrom: provided, however, that the indemnified party may, at its own cost,
participate in (but not control) such investigation, trial and defense of such
action, suit, claim, proceeding, demand, assessment or enforcement action, and
any appeal arising therefrom; and provided further, that the indemnifying party
shall have an obligation to keep the indemnified party reasonably apprised of
the status of the action, suit, claim, proceeding, demand, assessment or
enforcement action, to furnish the indemnified party with all documents and
information that the indemnified party shall reasonably request in connection
therewith, and shall not settle any claim without the indemnified party's prior
written consent unless the claim can be settled solely by the payment of money
and the indemnifying party reaches a money settlement or compromise subject to
the indemnified party's consent, in which case the indemnified party shall
either consent to such settlement or accept payment of the settlement amount
from the indemnifying party, in which event, the indemnifying party shall have
no further indemnification obligation to the indemnified party with respect to
such claim, and provided that with respect to a claim which cannot be settled
solely by the payment of money, the indemnified party's consent shall not be
unreasonably withheld. The indemnified party shall be entitled to defend,
settle or
77
proceed in such other manner as it deems fit, in its sole discretion, in
connection with any action, suit, claim, proceeding, demand, assessment or
enforcement action as to which the indemnifying party, after notice and demand
by the indemnified party, has not assumed the contest and defense thereof in
accordance with the foregoing sentence; and no actions taken by the indemnified
party in connection therewith shall affect or limit the obligations of the
indemnifying party pursuant to this Section 11.3. Except as otherwise provided
herein, any claim for money damages asserted by a party hereto based upon
another party's breach of its representations, warranties or agreements set
forth herein shall be subject to the procedures and limitations contained in
this Section 11.3.
11.4 Prompt Payment. Any indemnity payable pursuant to this Agreement
--------------
shall be paid within the later of ten (10) days of the indemnified party's
request therefor or ten (10) days prior to the date on which the liability upon
which the indemnity is based is required to be satisfied by the indemnified
party.
12. Arbitration. Any claim arising under or relating to this Agreement where
-----------
the total amount in dispute by the party invoking this provision is not more
than $250,000, shall be resolved by arbitration under the commercial arbitration
rules of the American Arbitration Association ("AAA") then outstanding. Any
such
78
arbitration(s) shall be conducted in New York City. Expenses of such
arbitration required to be paid to the AAA shall be shared equally by the
parties.
13. Expenses.
--------
Each party hereto shall pay its own expenses incidental to the preparation
of this Agreement, the carrying out of the provisions hereof and the
consummation of the transactions contemplated hereby, whether or not such
transactions are consummated.
14. Notices.
-------
All notices or other communications required or permitted under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered personally or sent by registered or certified mail, postage prepaid,
addressed as follows:
If to Buyer: BTI Acquisition Corporation
621 N.W. 53rd Street, Suite 320
Boca Raton, FL 33487
Telefax: (407) 241-7797
Attention: Stephen L. Gurba
and Gary L. Shapiro
with a copy to: Craig Schnee
1831 North Belcher Road, Suite A1
Clearwater, Florida 34625
Telefax: (813) 725-1728
79
BT Capital Corporation
130 Liberty Street, 31st Floor
New York, NY 10006
Attention: Michael Batal III
Telefax: (212) 250-7651
If to Seller: Bulova Corporation
1 Bulova Avenue
Woodside, NY 11377-7874
Attention: Corporate Secretary
Telefax: (718) 204-3507
With a copy to: Loews Corporation
667 Madison Avenue
New York, New York
Attn: Corporate Secretary
Telefax: (212) 935-6801
Any party may change the address to which notices or other communications are to
be sent to it by giving written notice of such change in the manner provided
herein. Any notice sent via registered or certified mail shall be deemed given
as of the third business day after such notice is sent.
15. Assignment.
----------
This Agreement may not be assigned by any party hereto without the prior
written consent of the other parties, except that Buyer may assign this
Agreement, or any of its rights hereunder, to any successor to all or
substantially all of the liabilities and assets of Buyer; provided, however,
that no such assignment shall release Buyer from its obligations hereunder.
Subject to the foregoing, this Agreement shall bind
80
and inure to the benefit of the parties hereto, and their respective legal
representatives, successors and permitted assigns.
16. Entire Agreement.
----------------
This Agreement, together with the schedules and exhibits hereto and the
documents and instruments referred to herein, sets forth the entire agreement
and understanding of the parties hereto in respect of the transactions
contemplated hereby, and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof. Without limiting the
generality of the foregoing, each party hereby acknowledges and agrees that it
has not relied on any projections, forecasts or similar materials prepared or
provided by any other party in entering into this Agreement or the transactions
contemplated hereby.
17. Counterparts.
------------
This Agreement may be executed in any number of counterparts, each of which
shall be considered to be an original instrument.
18. Section Headings.
----------------
All section headings are inserted for convenience only and shall not
control or affect the meaning or construction of any provision of this
Agreement.
19. Applicable Law.
--------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without regard to its conflicts of laws
provisions.
81
20. Schedules.
---------
Each of the Schedules attached to this Agreement and referred to herein are
incorporated by reference herein and made a part hereof. Any disclosure
contained in any Schedule hereto shall be deemed contained in all other
Schedules hereto.
82
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
duly executed as of the date first above.
BULOVA TECHNOLOGIES, INC.
By: Herbert C. Hofmann
----------------------
Title: Chairman
-------------------
BULOVA CORPORATION
By: Herbert C. Hofmann
----------------------
Title: President
-------------------
BTI ACQUISITION CORPORATION
By: Stephen Gurba
----------------------
Title: President & CEO
-------------------
83
