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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): November 9, 1999
DUCOMMUN INCORPORATED
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(Exact name of registrant as specified in its charter)
Delaware 1-8174 95-0693330
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(State of Incorporation) (Commission File No.) (IRS Identification No.)
111 West Ocean Boulevard, Suite 900, Long Beach, California 90802
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(Address of principal executive offices) (Zip Code)
(562) 624-0800
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On November 9, 1999 (the "Closing Date"), Ducommun Acquisition
Corporation, a wholly-owned subsidiary (the "Subsidiary") of Ducommun
Incorporated ("Ducommun"), acquired substantially all of the assets and assumed
certain liabilities of Parsons Precision Products, Inc. ("Parsons"), pursuant to
an asset Purchase and Sale Agreement dated as of November 8, 1999 (the
"Agreement") among Ducommun, the Subsidiary, Jordan Industries, Inc. and
Parsons. Parsons is a leading manufacturer of titanium hot-formed products for
the aerospace industry. The assets acquired by the Subsidiary include Parsons'
fixed assets, accounts receivable, inventory, rights under agreements, and
certain other assets of Parsons. Ducommun does not intend to move the business.
The assets of Parsons are intended to be used in substantially the same manner
as such assets were used prior to the acquisition. The liabilities assumed by
the Subsidiary include Parsons' trade payables, certain accrued liabilities and
obligations under certain agreements of Parsons.
The purchase price was determined primarily by reference to the tangible
net worth of Parsons as of the Closing Date and the future earnings potential of
the business of Parsons. The purchase price for Parsons was approximately
$22,000,000, subject to adjustment based upon Parsons' tangible net worth as of
the Closing Date determined in accordance with generally accepted accounting
principles. The purchase price was paid in cash at the closing. The source of
funds for the acquisition of Parsons was Ducommun's working capital and
borrowings under Ducommun's credit agreement with Bank of America.
The foregoing is a general description of the acquisition and is
qualified in its entirety by reference to the Agreement, a copy of which is
attached hereto as Exhibit 2.1.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
2.1 Asset Purchase and Sale Agreement dated as of November 8,
1999 among Ducommun Incorporated, Ducommun Acquisition
Corporation, Jordan Industries, Inc., and Parsons Precision
Products, Inc.
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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 here-unto duly authorized.
DUCOMMUN INCORPORATED
Registrant
By: /s/ James S. Heiser
------------------------------
James S. Heiser
Vice President and Chief
Financial Officer
(Duly Authorized Officer
of the Registrant)
Date: November 23, 1999
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
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2.1 Asset Purchase and Sale Agreement dated as of November 8, 1999
among Ducommun Incorporated, Ducommun Acquisition Corporation,
Jordan Industries, Inc., and Parsons Precision Products, Inc.
</TABLE>
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EXHIBIT 2.1
ASSET PURCHASE AND SALE AGREEMENT
AMONG
DUCOMMUN INCORPORATED,
DUCOMMUN ACQUISITION CORPORATION
JORDAN INDUSTRIES, INC.,
AND
PARSONS PRECISION PRODUCTS, INC.
NOVEMBER 8, 1999
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TABLE OF CONTENTS
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ARTICLE I. CERTAIN DEFINITIONS...................................................1
ARTICLE II. PURCHASE AND SALE OF ASSETS..........................................6
SECTION 2.2. ASSETS TO BE TRANSFERRED...................................6
SECTION 2.3. OBTAINING CONSENTS.........................................7
SECTION 2.4. OBTAINING PERMITS AND LICENSES.............................7
SECTION 2.5. ASSUMED LIABILITIES AND OBLIGATIONS........................8
SECTION 2.6. NO OTHER LIABILITIES OR OBLIGATIONS ASSUMED................8
ARTICLE III. THE CLOSING.........................................................9
SECTION 3.1. PAYMENT TO PURCHASE PRICE..................................9
SECTION 3.2. ADJUSTMENT TO PURCHASE PRICE...............................9
SECTION 3.3. TIME AND PLACE............................................11
SECTION 3.4. PAYMENT OF TAXES AND OTHER CHARGES........................11
SECTION 3.5. THE SELLER'S DELIVERIES AT CLOSING........................11
SECTION 3.6. THE BUYER'S DELIVERIES AT CLOSING.........................12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND JORDAN.............13
SECTION 4.1. ORGANIZATION AND GOOD STANDING............................13
SECTION 4.2. AUTHORIZATION.............................................13
SECTION 4.3. SUBSIDIARIES..............................................13
SECTION 4.4. FINANCIAL STATEMENTS......................................13
SECTION 4.5. LICENSES AND PERMITS......................................14
SECTION 4.6. OWNERSHIP AND CONDITION OF ACQUIRED ASSETS................14
SECTION 4.7. ACCOUNTS RECEIVABLE.......................................15
SECTION 4.8. INVENTORY.................................................15
SECTION 4.9. BACKLOG...................................................15
SECTION 4.10. ABSENCE OF UNDISCLOSED LIABILITIES.......................15
SECTION 4.11. ABSENCE OF CERTAIN CHANGES...............................16
SECTION 4.12. PROGRESS PAYMENTS........................................16
SECTION 4.13. REAL PROPERTY............................................17
SECTION 4.14. LETTERS OF CREDIT, BONDS, ETC............................17
SECTION 4.15. CONSENTS AND APPROVALS...................................17
SECTION 4.16. ACCOUNTING PRINCIPLES, POLICIES AND PROCEDURES...........18
SECTION 4.17. ENVIRONMENTAL MATTERS....................................18
SECTION 4.18. INTANGIBLE PERSONAL PROPERTY.............................19
SECTION 4.19. LABOR AND EMPLOYMENT-RELATED AGREEMENTS..................19
SECTION 4.20. EMPLOYEE BENEFIT PLANS; ERISA............................20
SECTION 4.21. MATERIAL CONTRACTS AND RELATIONSHIPS.....................22
SECTION 4.22. ABSENCE OF CERTAIN BUSINESS PRACTICES....................23
SECTION 4.23. TRANSACTIONS WITH RELATED PARTIES........................23
SECTION 4.24. COMPLIANCE WITH LAWS.....................................24
SECTION 4.25. LITIGATION...............................................24
SECTION 4.26. TAXES....................................................24
SECTION 4.27. INSURANCE................................................25
SECTION 4.28. NO POWERS OF ATTORNEY OR SURETYSHIPS.....................25
</TABLE>
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TABLE OF CONTENTS (Continued)
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SECTION 4.29. BROKERAGE FEES...........................................25
SECTION 4.30. PRODUCT WARRANTY AND LIABILITY...........................25
SECTION 4.31. BANKING FACILITIES.......................................26
SECTION 4.32. YEAR 2000 ISSUES.........................................26
SECTION 4.33. STANDARDS AND CERTIFICATIONS.............................26
SECTION 4.34. DISCLOSURE...............................................27
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF DUCOMMUN...........................27
SECTION 5.1. ORGANIZATION AND CORPORATE AUTHORITY......................27
SECTION 5.2. CONSENTS AND APPROVALS....................................27
SECTION 5.3. BROKERAGE FEES............................................28
SECTION 5.4. SUFFICIENT FUNDS..........................................28
ARTICLE VI. COVENANTS OF THE PARTIES............................................28
SECTION 6.1. CONDUCT OF BUSINESS.......................................28
SECTION 6.2. FURTHER ASSURANCES........................................29
SECTION 6.3. EMPLOYEES; BENEFIT PLANS; MULTIEMPLOYER PLANS.............29
SECTION 6.4. NOTICE OF SALE............................................31
SECTION 6.5. UNDERTAKINGS..............................................31
SECTION 6.6. BOOKS AND RECORDS.........................................31
SECTION 6.7. NO SOLICITATION...........................................31
SECTION 6.8. AMENDMENT TO THE SELLER'S ARTICLES OF INCORPORATION.......31
SECTION 6.9. FINANCIAL STATEMENTS......................................32
SECTION 6.10. HART-SCOTT-RODINO FILING.................................32
SECTION 6.11. REAL PROPERTY............................................32
SECTION 6.12. TAX......................................................32
ARTICLE VII. CONDITIONS TO CLOSING..............................................33
SECTION 7.1. CONDITIONS TO THE OBLIGATIONS OF THE BUYER TO EFFECT
THE TRANSACTIONS CONTEMPLATED HEREBY......................33
SECTION 7.2. CONDITIONS TO THE OBLIGATIONS OF THE SELLER TO
EFFECT THE TRANSACTIONS CONTEMPLATED HEREBY...............34
SECTION 7.3. CONDITIONS TO THE OBLIGATIONS OF THE SELLER TO EACH
PART TO EFFECT THE TRANSACTIONS CONTEMPLATED HEREBY.......34
ARTICLE VIII. CERTAIN AGREEMENTS AND UNDERSTANDINGS.............................34
SECTION 8.1. AGREEMENT NOT TO COMPETE..................................34
SECTION 8.2. RISK OF LOSS..............................................35
ARTICLE IX. INDEMNIFICATION.....................................................35
SECTION 9.1. INDEMNIFICATION BY THE SELLER AND JORDAN..................35
SECTION 9.2. INDEMNIFICATION BY THE BUYER..............................36
SECTION 9.3. INDEMNIFICATION BY THE SELLER FOR TAX LIABILITIES.........37
SECTION 9.4. INDEMNIFICATION FOR PRODUCT LIABILITY AND TORT CLAIMS.....37
SECTION 9.5. CLAIMS FOR INDEMNIFICATION................................37
SECTION 9.6. DEFENSED CLAIMS...........................................38
SECTION 9.7. INTEREST..................................................38
SECTION 9.8. MANNER OF INDEMNIFICATION.................................39
SECTION 9.9. LIMITATIONS ON INDEMNIFICATION............................39
ARTICLE X. TERMINATION..........................................................40
SECTION 10.1. TERMINATION..............................................40
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TABLE OF CONTENTS (Continued)
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ARTICLE XI. MISCELLANEOUS.......................................................40
SECTION 11.1. NOTICES..................................................40
SECTION 11.2. ASSIGNABILITY AND PARTIES IN INTEREST....................41
SECTION 11.3. GOVERNING LAW............................................41
SECTION 11.4. COUNTERPARTS.............................................41
SECTION 11.5. COMPLETE AGREEMENT.......................................41
SECTION 11.6. MODIFICATIONS, AMENDMENTS AND WAIVERS....................42
SECTION 11.7. DUE DILIGENCE INVESTIGATION; KNOWLEDGE...................42
SECTION 11.8. EXPENSES.................................................42
SECTION 11.9. LIMIT ON INTEREST........................................42
SECTION 11.10. ATTORNEYS' FEES AND COSTS...............................42
SECTION 11.11. FURTHER ASSURANCES......................................42
SECTION 11.12. CONTRACT INTERPRETATION; CONSTRUCTION OF AGREEMENT......42
SECTION 11.13. ARBITRATION.............................................43
</TABLE>
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INDEX OF SCHEDULES
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Schedule Description
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2.2(a)................................... Real Property
2.2(b)................................... Equipment
2.2(c)................................... Inventory
2.2(d)................................... Contracts
2.2(e)................................... Accounts Receivable
4.6(a)................................... Liens
4.9...................................... Backlog
4.11..................................... Certain Changes
4.12..................................... Progress Payments
4.13..................................... Real Property
4.14..................................... Letters of Credit, Bonds, Etc.
4.16..................................... Accounting Principles, Policies and Procedures
4.17..................................... Environmental Matters
4.18..................................... Intangible Personal Property
4.19..................................... Employment-Related Agreements
4.20..................................... Employee Benefit Plans
4.21..................................... Material Contracts
4.23..................................... Related Party Transactions
4.24..................................... Compliance With Laws
4.25..................................... Litigation
4.26..................................... Taxes
4.27..................................... Insurance
4.28..................................... Powers of Attorney
4.31..................................... Banking Facilities
4.32..................................... Year 2000
8.1...................................... Business as Currently Conducted
3.1(d)................................... Purchase Price Allocation (Form 8594)
3.5(g)................................... Seller's Counsel Opinion
3.5(i)................................... Standard Employment Letter, Employment Application
and Arbitration Agreement
</TABLE>
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ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is made and
entered into as of November 8, 1999 by and among Ducommun Incorporated, a
Delaware corporation ("DUCOMMUN") and Ducommun Acquisition Corporation, a
Delaware corporation and a wholly owned subsidiary of Ducommun ("BUYER") on the
one hand, and Jordan Industries, Inc., an Illinois corporation ("JORDAN"), and
Parsons Precision Products, Inc., a Kansas corporation and a majority owned
indirect subsidiary of Jordan ("SELLER"), on the other.
R E C I T A L S
A. Jordan indirectly owns eighty-five percent (85%) of the shares of
outstanding common stock of the Seller, and one hundred percent (100%) of the
shares of outstanding preferred stock of the Seller.
B. The Seller owns and operates a manufacturing and sales business
specializing in the hot forming, fabrication, welding, CNC machining and
assembly of titanium, inconel, stainless steel, and tool steels for the
manufacture of aviation parts and equipment, such business located at 3333 Main
Street, P.O. Box 320, Parsons, Kansas 67357.
C. The Seller desires to sell, assign, transfer and convey to the Buyer
and Buyer desires to purchase, acquire and accept from the Seller the assets,
properties and rights described herein and to assume from the Seller the
liabilities described herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the provisions
set forth below, and subject to the terms and conditions set forth herein, the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
indicated below:
"ACCOUNTS RECEIVABLE" shall have the meaning set forth in Section 4.7
"ACQUIRED ASSETS" shall have the meaning set forth in Section 2.2.
"AFFILIATE" shall mean, in respect of any specified Person, any other
Person that, directly or indirectly, controls, is controlled by, or is under
common control with, such specified Person or if such specified Person bears a
familial relationship with such other Person.
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"AFFILIATED PARTIES" shall have the meaning set forth in Section 9.1.
"AGREEMENT" shall have the meaning set forth in the Preamble.
"ASSUMED LIABILITIES" shall have the meaning set forth in Section 2.5.
"AUDITED FINANCIALS" shall have the meaning set forth in Section 6.9.
"BALANCE SHEET DATE" shall have the meaning set forth in Section
4.4(a).
"BOOKS AND RECORDS" shall have the meaning set forth in Section 2.2(j).
"BUSINESS" shall mean the business and operations of the Seller as
previously conducted and as conducted through the Closing Date.
"BUYER" shall have the meaning set forth in the Recitals.
"CERCLA" shall have the meaning set forth within the definition of
"Environmental Protection Laws."
"CLOSING" shall have the meaning set forth in Section 3.3.
"CLOSING BALANCE SHEET" shall have the meaning set forth in Section
3.2(a)(i).
"CLOSING DATE" shall have the meaning set forth in Section 3.3.
"COBRA" shall have the meaning set forth in Section 6.3(d).
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPUTER SYSTEMS" shall have the meaning set forth in Section 4.32.
"CONTINUING EMPLOYEES" shall have the meaning set forth in Section
6.3(a).
"CONTRACTS" shall have the meaning set forth in Section 2.2(d).
"CURRENT LIABILITIES" shall have the meaning set forth in Section 2.5.
"DEBT" shall have the meaning set forth in Section 2.6.
"DUCOMMUN" shall have the meaning set forth in the Preamble.
"EMPLOYEE BENEFIT PLANS" shall have the meaning set forth in Section
4.20.
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"EMPLOYMENT-RELATED AGREEMENTS" shall mean (i) any employment,
consulting, collective bargaining or similar agreement, whether written or oral,
to which the Seller is a party or by which it is bound, (ii) any plan, agreement
or arrangement sponsored by or contributed to by the Seller, including, without
limitation, any life and health insurance, hospitalization, savings, bonus,
deferred compensation, incentive compensation, profit sharing, stock purchase,
stock option, holiday, vacation, personal leave, severance pay, sick pay, sick
leave, disability, educational assistance, employee discount, tuition refund,
service award, company car, scholarship, relocation, fringe benefit, severance
contracts, supplemental, pension arrangements, and other policies, practices or
commitments, whether written or unwritten, providing employee or executive
compensation or benefits to employees of the Seller, (iii) any employee welfare
benefit plan or employee pension benefit plan as defined in Section 3 of ERISA,
and (iv) any arrangement or understanding for the payment of post-retirement
benefits.
"ENVIRONMENTAL PROTECTION LAWS" shall mean all federal, state, local
and foreign laws, statutes, regulations having the force and effect of law,
permits, court decrees, judgments, injunctions and written orders concerning (i)
public health and safety relating to exposure of humans to toxic or hazardous
substances or (ii) pollution or protection of the environment or natural
resources, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. Section 9601 et
seq.); the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et
seq.); the Resource Conservation and Recovery Act ("RCRA") (42 U.S.C. Section
6901 et seq.); the Clean Water Act (33 U.S.C. Section 1251 et seq.); the Safe
Drinking Water Act (14 U.S.C. Section 1401 et seq.); the Toxic Substances
Control Act (15 U.S.C. Section 2601 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.); the Clean Air Act
(42 U.S.C. Section 7401 et seq.); the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. Sections 11001-11005, 11021-11023, and
11041-11050); and all comparable Kansas state laws; in each case including the
regulations promulgated thereunder and as supplemented or amended from time to
time.
"EPA" shall mean the United States Environmental Protection Agency, or
any successor United States governmental agency.
"EQUIPMENT" shall have the meaning set forth in Section 2.2(b).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time.
"EXCHANGE ACT" shall have the meaning set forth in Section 5.2.
"FAR" shall mean the Federal Acquisition Regulations.
"FINANCIALS" shall have the meaning set forth in Section 4.4(a).
"GAAP" shall mean generally accepted accounting principles as in effect
at the time in question.
"GRANT DEED" shall have the meaning set forth in Section 3.5(a).
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"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 9.5.
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 9.5.
"INDEPENDENT ACCOUNTING FIRM" shall have the meaning set forth in
Section 3.2(a)(ii).
"INTANGIBLE PERSONAL PROPERTY" shall have the meaning set forth in
Section 2.2(h).
"INVENTORY" shall have the meaning set forth in Section 2.2(c).
"IRS" shall mean the Internal Revenue Service, or any successor agency
thereto.
"JORDAN" shall have the meaning set forth in the Preamble.
"LICENSES" shall have the meaning set forth in Section 2.2(h).
"LIENS" shall have the meaning set forth in Section 4.6(a).
"MATERIAL CONTRACTS" shall have the meaning set forth in Section
4.21(a).
"MIDWEST TOOLS PAYABLES" shall have the meaning set forth in Section
2.6.
"MOST RECENT BALANCE SHEET" shall have the meaning set forth in Section
4.4(a).
"PCB" shall mean polychlorinated biphenyls.
"PERMITTED ENCUMBRANCES" shall have the meaning set forth in Section
4.6(a).
"PERSON" shall mean any natural person or any corporation, partnership,
joint venture or other entity.
"PRIME RATE" shall mean the reference rate as reported by Bank of
America NT&SA.
"PRODUCT LIABILITY CLAIM" shall have the meaning set forth in Section
9.4.
"PURCHASE PRICE" shall have the meaning set forth in Section 3.1(a).
"PURCHASE PRICE DECREASE" shall have the meaning set forth in Section
3.2(b).
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"PURCHASE PRICE INCREASE" shall have the meaning set forth in Section
3.2(c).
"RCRA" shall have the meaning set forth within the definition of
"Environmental Protection Laws."
"REAL PROPERTY" shall have the meaning set forth in Section 2.2(a).
"REGULATED SUBSTANCE" shall mean any chemical or substance subject to
or regulated under any Environmental Protection Law including, without
limitation, any "POLLUTANT OR CONTAMINANT" or "HAZARDOUS SUBSTANCE" as those
terms are defined in CERCLA, any "hazardous waste" as that term is defined in
RCRA, and any other hazardous or toxic wastes, substances, or materials,
petroleum (including crude oil and refined and unrefined fractions thereof),
PCBs, infectious waste, special waste, pesticides, fungicides, solvents,
herbicides, flammables, explosives, asbestos and asbestos-containing material,
and radioactive materials, whether injurious by themselves or in combination
with other materials.
"RELATED PARTIES" shall have the meaning set forth in Section 4.21(v).
"SELF-FUNDED PLANS" shall have the meaning set forth in Section 6.3(d).
"SELLER" shall have the meaning set forth in the Preamble.
"TANGIBLE BOOK VALUE" shall mean, as of a given date, the aggregate
carrying value of the tangible Acquired Assets (excluding goodwill and other
intangibles) as of such date, minus the Current Liabilities as of such date, in
each case determined in accordance with GAAP applied consistently with prior
periods.
"TAX" or "TAXES" shall mean any and all taxes imposed or required to be
collected by any federal, state or local taxing authority in the United States,
or by any foreign taxing authority under any statute or regulation, including,
without limitation, all income, gross receipts, sales, use, personal property,
use and occupancy, business occupation, mercantile, ad valorem, transfer,
license, withholding, payroll, employment, excise, real estate, environmental,
capital stock, franchise, alternative or add-on minimum, estimated or other tax
of any kind whatsoever, including any interest, penalties and other additions
thereto.
"TAX RETURN" shall mean any return, declaration, report, statement,
information statement and other document required to be filed with respect to
Taxes.
"TRANSACTIONS" shall mean, in respect of any party, all transactions
contemplated by this Agreement that involve, relate to or affect such party.
"VEBA" shall have the meaning set forth in Section 6.3(d).
"WARN ACT" shall mean the Worker Adjustment and Retraining Notification
Act, as amended.
"YEAR 2000 COMPLIANT" shall have the meaning set forth in Section 4.32.
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ARTICLE II
PURCHASE AND SALE OF ASSETS
SECTION 2.1 [RESERVED]
SECTION 2.2 ASSETS TO BE TRANSFERRED. Subject to the terms and
conditions of this Agreement, at the Closing, the Seller shall sell, assign,
transfer, convey and deliver to the Buyer, and the Buyer shall purchase, acquire
and accept from the Seller, all of the Seller's right, title and interest in and
to all of the properties and assets, exclusive of cash, owned by the Seller or
used by the Seller in connection with the Business, with such changes, deletions
or additions thereto as may occur from the date hereof to the Closing in the
ordinary course of business and consistent with the terms and conditions of this
Agreement (collectively, the "ACQUIRED ASSETS"), including, but not limited to
the following:
(a) all Real Property owned, leased or otherwise utilized in connection
with the Business by Seller ("REAL PROPERTY), including, but not limited to, the
Real Property listed on Schedule 2.2(a);
(b) all fixtures, furnishings, furniture, office supplies, tools, motor
vehicles, trailers, machinery, equipment and other fixed assets owned or leased
by the Seller, located upon or affixed to any of the Real Property or used in
the operation of the Business (collectively, the "EQUIPMENT"), including, but
not limited to, the Equipment listed on Schedule 2.2(b);
(c) all inventories, including but not limited to, finished goods,
work-in-progress, parts, supplies and raw materials (the "INVENTORY"), and
including, but not limited to, the Inventory listed on Schedule 2.2(c);
(d) those certain contracts, purchase orders, agreements, leases,
arrangements and/or commitments that relate to the Business and including those
listed in paragraphs 1 through 6 on Schedule 4.21(a) (the "CONTRACTS"), but
excluding any Contracts with Midwest Tool or any Related Parties;
(e) all accounts receivable and other rights to payment of money and
all rights in any returned, reclaimed and repossessed goods, together with all
rights, claims, titles, securities, security interests, liens and guaranties
evidencing, securing, guaranteeing payment of, relating to or otherwise with
respect to such accounts receivable and rights, including any rights to stoppage
in transit, replevin, reclamation and resale, including, but not limited to, the
Accounts Receivable listed on Schedule 2.2(e) to the extent not collected prior
to the Closing;
(f) all right, title and interest of the Seller in, to and under all
unfilled purchase orders accepted by Seller as of the Closing Date, together
with all of the Seller's rights, if any, under purchase orders not yet accepted
by the Seller as of the Closing Date;
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(g) except as provided in Schedule 2.2(g), all chattel paper, drafts,
surety bonds, insurance policies, insurance proceeds, insurance refunds,
insurance dividends, and all rights to insurance proceeds, refunds and
dividends, under any insurance policies existing on or prior to the Closing
Date;
(h) all of the Seller's intangible assets, including without limitation
processes, designs, inventions, trade secrets, computer programs, formulae,
customer lists, contractors' and manufacturers' warranties, licenses and permits
(to the extent the same can be assigned) respecting any and all Real Property
and personal property to be acquired hereunder, all trademarks, trade names,
logos and service marks (whether or not registered), copyrights (including
common law rights) and patents owned by the Seller, and any pending
applications, registrations, extensions and renewals for any of the foregoing,
all additions to any of the foregoing acquired from the date hereof through the
Closing Date and all licenses or similar agreements or arrangements ("LICENSES")
with respect to the foregoing to which the Seller is a party either as a
licensee or licensor (collectively "INTANGIBLE PERSONAL PROPERTY");
(i) except as provided in Schedule 2.2(i), all deposits and prepaid
expenses;
(j) all business and financial records, computer hardware and software,
promotional and advertising lists, telephone, telecopy and fax numbers, files,
books, engineering manuals and documents relating to the Acquired Assets or the
Business (the "BOOKS AND RECORDS");
(k) all cash in Seller's bank accounts as at Closing; and
(l) all goodwill and going concern value attributable to the Business.
SECTION 2.3 OBTAINING CONSENTS. The Seller shall not sell, assign,
transfer or convey to the Buyer any of its rights and obligations in and to any
of the Acquired Assets without first obtaining all approvals, consents or
waivers necessary to effect such sale, assignment, transfer or conveyance,
unless such requirement is waived in a writing executed by Buyer. The Seller
shall use its commercially reasonable best efforts to obtain all necessary
approvals, consents or waivers necessary to sell, assign, transfer or convey the
Acquired Assets to the Buyer prior to the Closing; provided, that in obtaining
such consents, the Seller shall not, without the Buyer's prior written consent,
agree or enter into any material modification or amendment to any contract,
lease or other agreement relating to any of the Acquired Assets.
SECTION 2.4 OBTAINING PERMITS AND LICENSES. The Buyer shall be
responsible for obtaining all permits and licenses required by any governmental
agency with respect to the Business or the Acquired Assets after the Closing.
The Seller will cooperate reasonably with the Buyer in obtaining or transferring
such permits and licenses.
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SECTION 2.5 ASSUMED LIABILITIES AND OBLIGATIONS. At the Closing, the
Buyer shall assume and shall thereafter pay, discharge and perform in the
ordinary course and without enlarging the rights of any third party, and
Ducommun hereby agrees with Seller that Ducommun will cause the Buyer to assume
and pay, discharge and perform in the ordinary course (i) the trade payables and
accrued expenses of Seller in each case as incurred in the ordinary course
consistent with past practice and as shown on the Closing Balance Sheet, minus
the amount of the Midwest Tool Payables (the "CURRENT LIABILITIES") and (ii) the
obligations of the Seller existing on and arising after the Closing Date under
each of the Contracts listed in paragraphs 1 through 6 on Schedule 2.5 (other
than any obligations or liabilities arising from or relating to any breach of
contract, tort or violation of law prior to the Closing Date) (collectively with
the Current Liabilities, the "ASSUMED LIABILITIES").
SECTION 2.6 NO OTHER LIABILITIES OR OBLIGATIONS ASSUMED. The Buyer does
not assume and shall not be liable for any liabilities, indebtedness or
obligations of the Seller or the Business other than the Assumed Liabilities.
Notwithstanding any other provisions of this Agreement, the Buyer shall not
assume, and the Assumed Liabilities shall not include, (i) any liability or
obligation of the Seller or Jordan in connection with this Agreement or the
Transactions, including, without limitation, attorneys', accountants',
investment bankers' and consultants fees and expenses pertaining to the
performance by the Seller or Jordan of its or their obligations hereunder, (ii)
except as provided in Section 3.2(e) hereof, any liability or obligation of the
Seller or Jordan for Taxes, whether relating to periods before or after the date
of this Agreement, or whether incurred by the Seller or Jordan in connection
with this Agreement, the Transactions or the Business, (iii) any liability or
obligation of the Seller under any guarantee or any agreement to provide
indemnification to any other Person, (iv) any liability or obligation of the
Seller arising from or relating to any Employment-Related Agreement except for
vacation, holiday and sick pay to the extent accrued on the Closing Balance
Sheet, (v) any liability or obligation to any shareholder or former shareholder
of the Seller; (vi) indebtedness, capital leases, and all other obligations and
liabilities of the Seller to any bank or other lender ("DEBT") except (subject
to Seller obtaining consent prior to Closing) for the obligations under the Loan
Agreement and Promissory Note, dated March 3, 1997 between the Kansas Department
of Commerce and Housing, Business Development Division and the Seller, or (vii)
all obligations and liabilities of the Seller or the Business to Midwest Tool
Supply Company, Inc. (the "MIDWEST TOOL Payables"). The assumption of the
Assumed Liabilities by the Buyer hereunder and the agreement by Ducommun to
cause the Buyer to assume and pay the Assumed Liabilities shall not in any
respect enlarge any rights of third parties under contracts or arrangements with
the Buyer or the Seller and nothing herein shall prevent any party from
contesting in good faith any of the Assumed Liabilities with any third party.
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ARTICLE III
THE CLOSING
SECTION 3.1 PAYMENT OF PURCHASE PRICE.
(a) In full consideration of the sale, transfer, assignment, conveyance
and delivery of the Acquired Assets and the assumption of the Assumed
Liabilities, and subject to the terms and conditions of this Agreement, the
Buyer shall pay to the Seller at the Closing a purchase price of Twenty-Two
Million Dollars ($22,000,000) (the "PURCHASE PRICE"), subject to such additions
or subtractions as provided in Sections 3.1(b) and 3.2.
(b) The Purchase Price payable at Closing shall be reduced by the
amount of any Debt or any other debt or capital leases if assumed by Buyer at
Closing (not including Current Liabilities).
(c) In full payment of the Purchase Price, at the Closing the Buyer
shall pay the Purchase Price (as adjusted pursuant to Section 3.1(b)) to the
Seller by bank wire transfer to an account or accounts as designated by the
Seller at least three (3) business days prior to Closing.
(d) For federal income tax purposes, the parties agree that the
Purchase Price is to be allocated to the Acquired Assets based on the Closing
Balance Sheet (including any residual allocation to purchase I.R.C. Section 197
intangible assets) and as set forth on the Form 8594, attached hereto as Exhibit
3.1(d). The parties agree to adjust such allocation and said form, if necessary,
to reflect any changes to the Closing Balance Sheet pursuant to Section 3.2(a)
and to file said form thereafter when due. The parties agree to report the
transactions contemplated by this Agreement consistently with such allocation
(subject to any required adjustments) and to take no position in any
examination, claim for refund, or any contest (administrative or judicial) of
any adjustment to any return that is inconsistent with such allocation (subject
to any required adjustments).
SECTION 3.2 ADJUSTMENT TO PURCHASE PRICE.
(a) Closing Balance Sheet.
(i) At least three (3) business days prior to the Closing, the
Seller shall prepare and deliver to the Buyer an estimated balance sheet of
the Seller as of the Closing Date (the "CLOSING BALANCE SHEET"). The
Closing Balance Sheet shall be prepared in accordance with GAAP applied
consistently with the accounting principles, policies and procedures
utilized in the preparation of the audited Financial Statements of the
Seller for the year ending December 31, 1998 and shall not include (A) cash
(except to the extent provided in Section 2.2(k)), (B) Debt and any
liability other than the Assumed Liabilities except that the Loan Agreement
and Promissory Note, dated March 3, 1997 between the Kansas Department of
Commerce & Housing, Business Development Division and Seller, shall be
accrued as a liability in the amount of (subject to Seller obtaining
consent prior to Closing) $30,000 on the Closing Balance Sheet, and (C) any
amount in respect of goodwill, research, development, consulting, software
development or other intangibles. Following completion of the Closing
Balance Sheet, the Buyer shall have the right to review the Closing Balance
Sheet and the underlying financial records and work papers pertaining
thereto. The Closing Balance Sheet shall be final and binding for purposes
of determining total
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Tangible Book Value of the Seller as of the Closing Date, unless the Buyer
shall provide written notice to the Seller of any disagreement with any
values or amounts set forth in the Closing Balance Sheet within 60 days
after the Closing Date. Such notice shall specify, in reasonable detail,
the nature and extent of such disagreement.
(ii) If the Seller and the Buyer are unable to resolve any such
disagreement with respect to the Closing Balance Sheet within 30 days after
receipt by the Seller of the notice referred to in Section 3.2(a)(i), the
disagreement shall be submitted for final determination to a "Big Five"
accounting firm mutually acceptable to the Seller and the Buyer (the
"INDEPENDENT ACCOUNTING FIRM"). The Independent Accounting Firm shall
follow such procedures as it deems appropriate for obtaining the necessary
information in considering the positions of the Seller and the Buyer but
shall not conduct an independent audit. The Independent Accounting Firm
shall render its determination on the matter within 90 days of its
submission by the Seller and the Buyer, and such determination shall be
final, conclusive and binding upon the Buyer and the Seller.
(iii) The fees and expenses of the Independent Accounting Firm
shall be paid equally by the Buyer on the one hand and Seller on the other
hand.
(b) The Purchase Price shall be decreased (the "PURCHASE PRICE
DECREASE") by the sum of (i) the amount, if any, by which Tangible Book Value as
of the Closing Date is less than $6,844,000 and (ii) the amount of any Debt
appearing on the Closing Balance Sheet which is assumed by the Buyer,, other
than such as are included as Assumed Liabilities.
(c) The Purchase Price shall be increased (the "PURCHASE PRICE
INCREASE") by the amount, if any, equal to the lesser of: (i) the amount by
which Tangible Book Value as of the Closing Date is more than $6,844,000 or (ii)
$250,000.
(d) Promptly following the date upon which an adjustment to Tangible
Book Value is mutually agreed upon by the Seller and the Buyer or determined
pursuant to Section 3.2(a), but not later than ten (10) business days after such
date, the Buyer shall pay to the Seller the Purchase Price Increase or the
Seller shall pay to the Buyer the Purchase Price Decrease, as applicable.
(e) On the Closing Balance Sheet, the following items of income and
expense shall be prorated between the Seller and the Buyer as of 11:59 p.m. on
the day immediately preceding the Closing Date in accordance with GAAP, unless
otherwise specifically stated in this Agreement:
(i) General and special real and personal property Taxes and
assessments imposed on the real and personal property being purchased by
the Buyer or imposed on real or personal property under any Leases assigned
to the Buyer which are either not yet payable at the Closing Date or which
have been
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prepaid at the Closing Date, and special district levies which are Liens
but not due or which have been prepaid at the Closing Date; and
(ii) Any power charges, utility charges, telephone charges or other
communication charges either due or prepaid at the Closing Date.
SECTION 3.3 TIME AND PLACE. The closing with respect to the
Transactions (the "Closing") shall take place at such location as may be agreed
by the parties at 10:00 a.m. local time on November 8, 1999 or such other time
and date as may be agreed by the parties (the "CLOSING DATE"), but in no event
later than November 30, 1999.
SECTION 3.4 PAYMENT OF TAXES AND OTHER CHARGES. At the Closing, the
Seller shall pay, and from the Closing Date shall be responsible for, all real
property transfer, sales, value added, use, documentary stamp, recording charges
and other Taxes imposed by any governmental entity in connection with the
transfer of the Acquired Assets. Each of the Buyer, Jordan and the Seller shall
prepare and file, and shall fully cooperate with the other parties with respect
to such preparation and filing of, any returns and other filings relating to any
such Taxes, fees, charges, or transfers, as may be required.
SECTION 3.5 THE SELLER'S DELIVERIES AT CLOSING. At the Closing, the
Seller will deliver, or cause to be delivered, to the Buyer the following:
(a) a grant deed with respect to all Real Property (the "GRANT DEED")
in proper form for recording;
(b) an ALTA title insurance policy with respect to the Real Property in
the amount of $3,000,000 in form satisfactory to Buyer;
(c) duly executed assignments of all Contracts in form satisfactory to
the Buyer;
(d) duly executed consents to assignment of Contracts from the
customers listed on Schedule 4.15;
(e) a duly executed bill of sale with respect to the Equipment,
Inventory, Books and Records and the other Acquired Assets in form satisfactory
to the Buyer;
(f) a notice to each of the parties under the Contracts required
pursuant to Section 6.4;
(g) an opinion of Sonnenschein Nath & Rosenthal, counsel to the Seller,
as to the matters set forth in Exhibit 3.5(g) hereto, in form and substance
satisfactory to the Buyer and its counsel;
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(h) original certificates of title with respect to the Equipment,
including without limitation, any motor vehicles, duly endorsed by the Seller to
the Buyer;
(i) Buyer's standard form of employment letter, employment application
and arbitration agreement, in the form of Exhibit 3.5(i), executed by all
employees of Seller;
(j) a certificate dated the Closing Date and executed by the President
and Secretary of Seller and Jordan representing and warranting to Buyer and
Ducommun that each of the representations and warranties and each of the
covenants made by Seller and/or Jordan and contained in this Agreement were
accurate and complete in all respects as of the date of this Agreement and are
accurate and complete in all respects as of the Closing Date as if made on the
Closing Date; and
(k) all other documents, instruments and writings reasonably requested
by the Buyer to be delivered by the Seller at or prior to the Closing.
SECTION 3.6 THE BUYER'S DELIVERIES AT CLOSING. At the Closing, the
Buyer and Ducommun will deliver, or cause to be delivered, to the Seller the
following:
(a) the Purchase Price;
(b) a duly executed assumption agreement of all Contracts assigned to
the Buyer that require the Buyer's assumption of the obligations thereunder in
form satisfactory to the Seller;
(c) an assumption and assignment agreement in connection with all other
Assumed Liabilities to be assumed by the Buyer pursuant to Section 2.6 hereof in
form satisfactory to the Seller;
(d) a certificate dated the Closing Date and executed by the President
and Secretary of Buyer and Ducommun representing and warranting to Seller that
each of the representations and warranties and each of the covenants made by
Buyer and/or Ducommun and contained in this Agreement were accurate and complete
in all respects as of the date of this Agreement and are accurate and complete
in all respects as of the Closing Date as if made on the Closing Date; and
(e) all other documents, instruments and writings reasonably requested
by the Seller to be delivered by the Buyer at or prior to the Closing.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE SELLER AND JORDAN
The Seller and Jordan hereby jointly and severally represent and
warrant to each of Ducommun and the Buyer that:
SECTION 4.1 ORGANIZATION AND GOOD STANDING. The Seller and Jordan are
each corporations duly organized, validly existing and in good standing under
the laws of their respective states of incorporation, and the Seller and Jordan
are each duly qualified or authorized to do business in each jurisdiction in
which such qualification or authorization is required, unless failure to be so
qualified would not have a material adverse affect on the Business.
SECTION 4.2 AUTHORIZATION. Each of the Seller and Jordan have full
power and authority to enter into this Agreement and to perform its or their
obligations under this Agreement and to consummate the Transactions. This
Agreement and all other agreements or instruments herein contemplated to be
executed by the Seller, or to the extent it is a party thereto, Jordan, are the
valid and binding agreements of the Seller and Jordan, enforceable against each
of them in accordance with their respective terms. Jordan owns indirectly
Eighty-Five Percent (85%) of the outstanding common stock of Seller and One
Hundred Percent (100%) of the outstanding preferred stock of Seller.
SECTION 4.3 SUBSIDIARIES. The Seller does not have any subsidiaries or
any other equity interest in any corporation, partnership or similar entity.
SECTION 4.4 FINANCIAL STATEMENTS.
(a) Seller has delivered to Buyer the following financial statements of
the Seller (collectively, the "FINANCIALS"): (a) audited balance sheets and
statements of operations, changes in stockholders' equity and cash flows, and
notes thereto as of and for the fiscal year ended December 31, 1998, (b)
unaudited balance sheets and statements of operations, changes in stockholders'
equity and cash flows, and notes thereto as of and for the fiscal year ended for
the years ended December 31, 1997 and December 31, 1996 and (c) the unaudited
balance sheet (the "MOST RECENT BALANCE SHEET") and statements of operations,
changes in stockholders' equity and cash flows for the nine months ended
September 30, 1999 (the "BALANCE SHEET DATE"). The Financials have been prepared
in accordance with GAAP consistently applied with prior periods, are complete
and correct and fairly present the financial condition and results of operations
of the Seller as of the dates and for the periods indicated thereon, and contain
and reflect adequate reserves for all liabilities and obligations of any nature,
whether absolute, contingent or otherwise consistent with past practices, except
for reserves not required to be maintained under GAAP and subject in the case of
unaudited financials covering interim periods to year end audit adjustments, the
net effect of which shall not be material in nature or amount. The books of
account of the Seller as they relate to the Financials have been maintained in
all material respects in accordance with sound business practices, and there
have been no material transactions involving the Seller that properly should
have been set forth therein in accordance with GAAP that have not been
accurately so set forth.
(b) The Financials have been prepared from, and are consistent with,
the accounting books and records of Seller. There are no material transactions,
agreements or accounts that have not been properly reflected in the Financials
and recorded in the accounting books and records of Seller underlying the
Financials. All transactions with Related Parties, including, but not limited
to, sales, purchases, loans,
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transfers, leasing arrangements, guarantees and amounts receivable from or
payable to Related Parties, have been properly reflected in the Financials and
recorded in the accounting books and records of Seller. For purposes of the
Financials, revenue, including sales under fixed price contracts, has been
recognized upon shipment of products, and not on the percentage completion
method or any other method. The Financials reflect all costs and expenses
incurred in connection with the Business of the Company throughout the
respective periods covered. The Financials contain and reflect the establishment
and inclusion in the balance sheets, and in cost of goods sold or operating
expense, for the respective periods covered of all appropriate accruals and
reserves affecting the carrying value of the assets and liabilities of the
Company. Liabilities for amounts unpaid to suppliers are recorded for all items
included in inventories at each of the respective balance sheet dates of the
Financials, and all quantities billed to customers at those dates are excluded
from the inventory balances. Adequate provision has been made in the Financials
for all anticipated losses on contracts, including contracts on which work has
not started. Except for the liabilities reflected in the Financials or as
otherwise specifically disclosed in Schedules to this Agreement, there are no
other liabilities, obligations or gain or loss contingencies that would be
required by GAAP to be accrued or disclosed in notes to the Financials. The
Financials do not contain any items of extraordinary or nonrecurring income or
any other income not earned in the ordinary course of business.
SECTION 4.5 LICENSES AND PERMITS. The Seller is duly licensed, with all
requisite permits and qualifications, as required by applicable law for the
purpose of conducting its business or owning its properties. The Seller is in
material compliance with all such licenses, permits and qualifications.
SECTION 4.6 OWNERSHIP AND CONDITION OF ACQUIRED ASSETS .
(a) The Seller is the lawful owner of or has the right to use and
transfer to the Buyer each of the Acquired Assets and has good title to the
Acquired Assets, free and clear of all liens, mortgages, pledges, security
interests, restrictions, prior assignments, licenses, easements, encumbrances
and claims of any kind or nature whatsoever, direct or indirect, accrued,
absolute, contingent or otherwise (collectively "LIENS") except (i) for any of
the foregoing disclosed in Schedule 4.6(a) attached hereto, and (ii) easements,
covenants, rights of way and other similar restrictions of record ("PERMITTED
Encumbrances"). The delivery to the Buyer of the instruments of transfer of
ownership contemplated by this Agreement will vest good title to the Acquired
Assets in the Buyer, free and clear of all Liens except for the Permitted
Encumbrances. The Acquired Assets to be acquired at the Closing constitute all
of the real, personal, and mixed assets, both tangible and intangible, that are
presently used, held for use or otherwise relate to the Business.
(b) To the Seller's and Jordan's knowledge and except as set forth on
Schedule 4.6(b), all of the Acquired Assets are in good operating condition and
sufficient to carry on the Business in the normal course as it is presently
conducted and are free from material defects, whether patent or latent, subject
to normal wear and tear. The Computer Systems are, and with ordinary maintenance
will continue to be after Closing, adequate and sufficient in all respects,
without upgrade or new implementations, to conduct the Business in the normal
course as it is presently conducted.
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SECTION 4.7 ACCOUNTS RECEIVABLE. All accounts receivable of Seller that
are reflected on the Most Recent Balance Sheet or on the accounting records of
Seller as of the Closing Date (collectively, the "ACCOUNTS RECEIVABLE")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. Each of the
Accounts Receivable either has been or will be collected in full, without any
set-off. Except as set forth on Schedule 4.7, there is no contest, claim, or
right of set-off, under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable.
SECTION 4.8 INVENTORY. All inventory of Seller that is reflected on the
Most Recent Balance Sheet or on the accounting records of Seller as of the
Closing Date is based on a physical count and is stated at the lower of cost or
market, cost being determined on the actual cost basis. All obsolete, excess and
unusable inventory is written off at the earlier of (i) the completion of the
contract or purchase order for which such inventory was purchased or built, or
(ii) when identified as such during the monthly review process of the Seller. No
reserves are maintained for obsolescence or shrinkage of inventory. The
Inventory consists of finished goods, raw materials and work in process
inventory purchased or built by Seller only in support of firm customer backlog.
SECTION 4.9 BACKLOG. On the Balance Sheet Date, the firm customer
backlog of the Seller was $16,638,063. Schedule 4.9 sets forth a complete and
correct listing of the amount of firm customer backlog by customer, and calendar
year of scheduled delivery. As used in this Agreement, "FIRM CUSTOMER BACKLOG"
means purchase orders or contracts from customers with fixed prices, fixed
quantities and fixed delivery dates. Except as set forth on Schedule 4.9, since
the Balance Sheet Date, the Seller has not received any written notification
from any customer that any of such firm customer backlog may be canceled,
rescheduled beyond two months or revised by an amount in excess of $25,000.
SECTION 4.10 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 4.10, there are no liabilities of the Seller, whether absolute,
accrued, contingent or otherwise, and whether due or to become due, not
reflected on or reserved for in the Most Recent Balance Sheet or the Closing
Balance Sheet, as applicable, except for executory obligations under Material
Contracts (as defined below) and immaterial contracts for the purchase of
supplies or the sale of products incurred in the ordinary course of business.
There are no commitments, contracts or undertakings covering the purchases of
items of Inventory in excess of the Seller's normal operating requirements or
covering the purchases of items of Equipment in excess of the current or
anticipated requirements of the Seller.
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SECTION 4.11 ABSENCE OF CERTAIN CHANGES. Except as disclosed on
Schedule 4.11, since December 31, 1998, there has not occurred:
(a) Any adverse change in the assets, liabilities (whether absolute,
accrued, contingent or otherwise), financial condition, results of operations or
business of the Seller not reflected in the Financials and that has resulted in
or to the Seller's knowledge, may result in a loss to the Seller of more than
$15,000;
(b) Except for changes in delivery schedules and scope of work in the
ordinary course of business consistent with past practices, any amendment or
modification of any Material Contract (as defined below), or any termination of
any agreement that would have been a Material Contract were such agreement in
existence on the date hereof;
(c) Except in the ordinary course of business consistent with past
practices, any increase in the compensation (including, without limitation, the
rate of commissions) payable to, or any payment of a cash bonus to, any officer,
director or employee of, or consultant to, the Seller;
(d) Any transaction by the Seller, whether or not covered by the
foregoing, not in the ordinary course of business;
(e) Any alteration in the manner of keeping the books, accounts or
records of the Seller, or in the accounting policies, practices or procedures
therein reflected;
(f) Any declaration or payment of any dividends or distributions by the
Seller, any acquisition or redemption by the Seller of any of its equity
securities or any loan by the Seller to any of its security holders;
(g) Any loss or, to Seller's knowledge, threatened loss of a customer
to whom sales in the previous 12 months exceeded $100,000;
(h) Any damage or destruction to, or loss of, any assets or property
owned, leased or used by the Seller (whether or not covered by insurance) in
excess of $25,000; or
(i) Any agreement to do any of the things described in the preceding
subsections (a) - (h) of this Section 4.11.
SECTION 4.12. PROGRESS PAYMENTS. The Company has not received any
progress payments, milestone payments, advance payments, deposits or other
similar payments from customers (collectively, "Progress Payments") with respect
to the agreements in effect as of the date hereof and the Closing Balance Sheet
will not reflect any Progress Payments.. All Progress Payment requests submitted
by the Company have been in material compliance with the contractual terms and
with applicable U.S. Government laws and regulations, including but not limited
to, the FAR and related cost accounting standards.
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SECTION 4.13 REAL PROPERTY.
(a) Schedule 4.13 sets forth a complete description of all of the real
property (including material fixtures) which Seller owns, leases or subleases,
has agreed (or has an option) to purchase, sell or lease on or after the date
hereof, or may be obligated to purchase, sell or lease, and liens, security
interests, claims, charges or other encumbrances thereon, and any title
insurance or guaranty policies with respect thereto. The real property set forth
in Schedule 2.2(a) constitutes all real property used in the conduct of the
Business.
(b) Except as set forth on Schedule 4.13, Seller has good and
marketable title to, and owns free and clear of any lines, security interest,
claims, charges or other encumbrances, all of the Real Property. Seller is not
in violation of any applicable laws relating to such properties including,
without limitation, laws related to zoning, city planning or similar matters.
(c) Seller has valid and binding leases and subleases with respect to
all real property listed as leased or subleased by it on Schedule 2.2(a). There
are no developments affecting any of such properties pending or, to Seller's
knowledge, threatened which might curtail in any material respect the present or
future use of such property for the purpose for which it is used. Seller has
not, nor, to Seller's knowledge, has any other party to such lease or sublease
breached any material provision of or otherwise defaulted under, the terms of
any such lease or sublease. Seller has furnished to Buyer an accurate and
complete copy of each such lease or sublease as presently in effect.
SECTION 4.14 LETTERS OF CREDIT, BONDS, ETC. (a) The Seller is not the
beneficiary of any letters of credit, performance or other bonds, or any other
financial instruments guaranteeing the payment or performance of any third party
under any Contract, and (b) The Seller is not required to provide any letter of
credit, performance or other bond, or any other financial instrument for the
purpose of guaranteeing the Seller's payment or performance under any Contract.
SECTION 4.15 CONSENTS AND APPROVALS. Except as provided in Schedule
4.15, neither the execution and delivery of this Agreement by the Seller or
Jordan nor the consummation of the Transactions by the Seller and Jordan will
violate, result in a breach of any of the terms or provisions of, constitute a
default (or any event that, with the giving of notice or the passage of time or
both, would constitute a default) under, result in the acceleration of any
indebtedness under or performance required by, result in any right of
termination of, increase any amounts payable under, decrease any amounts
receivable under, change any other rights pursuant to, or conflict with, the
Seller's charter documents or bylaws, or any agreement, indenture or other
instrument to which the Seller or Jordan is a party or by which any of the
Seller's, or Jordan's properties are bound, or any judgment, decree, order or
award of any court, governmental body or arbitrator applicable to the Seller or
Jordan. All consents, approvals and authorizations of, and declarations, filings
and registrations with, and payments of all taxes, fees, fines, and penalties
to, any governmental or regulatory authority or any other person (either
governmental or private) required in connection with the execution and delivery
by the Seller or Jordan of this Agreement or the consummation of the
Transactions by the Seller and Jordan including, without limitation, the WARN
Act, subject to Buyer and Ducommun not taking any action to trigger application
of the WARN Act, have been obtained, made and satisfied.
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SECTION 4.16 ACCOUNTING PRINCIPLES, POLICIES AND PROCEDURES. Except as
set forth on Schedule 4.16, since December 31, 1995, the Seller has not made any
change to its accounting principles, policies or procedures. Schedule 4.16 sets
forth a complete and correct description of each such change in accounting
principles, policies and procedures, including, but not limited to, the date of
such change, the reason for such change, a description of such change and the
effect of such change on the financial results of the Seller as reflected in the
Financials.
SECTION 4.17 ENVIRONMENTAL MATTERS. Except as set forth in Schedule
4.17:
(a) The Seller is, and at all times has been, in all material respects
in full compliance with all applicable Environmental Protection Laws;
(b) The Seller has obtained, and is in compliance with, all permits,
licenses and other authorizations under applicable Environmental Protection Laws
which are required in connection with its business and operations, all of which
are in full force and effect;
(c) No portion of the Real Property or, to the knowledge of Seller, any
other property previously owned, leased, occupied or operated by the Seller (i)
contains, or has been used in any manner at any previous time for the treatment,
storage or disposal of any Regulated Substance except for temporary storage of
Regulated Substances or use in compliance with Environmental Protection Laws;
(ii) contains underground tanks of any type, or any materials containing PCBs or
any asbestos; or (iii) contains any surface or sub-surface conditions, that
constitute, or that through the physical effects of the passage of time may
constitute, a public or private nuisance;
(d) There has been no contamination, whether of soil, groundwater or
otherwise, on, in, under or about the Real Property or, to the knowledge of
Seller, any other property previously owned, leased, occupied or operated by the
Seller;
(e) There has been no spill, discharge, disposal, leak, emission,
injection, escape, dumping or release of any Regulated Substance on, in, under
or about the Real Property, or, to the knowledge of Seller, any other property
previously owned, leased, occupied or operated by the Seller;
(f) No portion of the Real Property or any other property previously
owned, leased, occupied or operated by the Seller has been designated, listed,
or identified in any manner by the EPA, or any other federal, state, local or
other governmental agency or instrumentality, or under and pursuant to any
Environmental Protection Law as a hazardous waste or hazardous substance
disposal or removal site, Superfund or clean-up site, or candidate for clean-up,
investigation, removal or closure pursuant to any Environmental Protection Law;
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(g) The Seller has not received at any time during the two years prior
to the Closing Date any summons, citation, notice, directive, letter or other
written or electronic communication from the EPA or any other federal, state,
local or other governmental agency or instrumentality, authorized pursuant to an
Environmental Protection Law; and
(h) The Seller has not received at any time any summons, citation,
notice, directive, letter or other written or electronic communication of any
potential claim or liability under any Environmental Protection Law, including,
without limitation, any notification as a potentially responsible party with
respect to any Superfund or other clean-up site.
SECTION 4.18 INTANGIBLE PERSONAL PROPERTY.
(a) Schedule 4.18 sets forth a complete and correct list of each
Intangible Personal Property of the Seller.
(b) Except as set forth on Schedule 4.18:
(i) There have been no actions or other judicial or adversary
proceedings involving the Seller concerning any item of Intangible Personal
Property, no claim or other demand has been made to the Seller or Jordan by
any Person relating to any item of Intangible Personal Property and, to the
knowledge of the Seller, no such action, proceeding or claim is threatened;
(ii) The Seller has the right and authority to use each item of
Intangible Personal Property in connection with the conduct of its
businesses in the manner presently conducted and to convey such right and
authority, and, to Seller's knowledge, such use does not conflict with,
infringe upon or violate any patent, copyright, trademark or registration
of any other person or entity; and
(iii) There are no outstanding or, to the knowledge of the Seller,
threatened disputes or disagreements with respect to any License.
(c) To Seller's knowledge, the conduct by the Seller of its business,
and the manufacture and sale by the Seller of its products, does not conflict
with, infringe upon or violate any patent, copyright, trademark or registration
of any other person or entity.
SECTION 4.19 LABOR AND EMPLOYMENT-RELATED AGREEMENTS.
(a) Schedule 4.19 sets forth a complete and correct list of the
following:
(i) Each Employment-Related Agreement; and
(ii) The name of each employee or agent of or consultant to the
Seller to whom the Seller paid $50,000 or more during the fiscal year ended
December 31, 1998 or whose current monthly compensation is at an annual
rate of $50,000 or more.
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As used in this Section 4.19, the word "agreement" includes both oral
and written contracts, understandings, arrangements and other agreements.
(b) To Seller's knowledge, the Seller has complied in all material
respects with, and there are no outstanding complaints under, all applicable
laws, rules and regulations relating to the employment of labor, including,
without limitation, those related to wages, hours, collective bargaining and the
payment and withholding of Taxes.
(c) The Seller is not a party to or bound by any collective bargaining
agreement. To the knowledge of Seller, no organizational effort is presently
being made or is threatened with respect to employees of the Seller. No such
organizational effort has been made within the three-year period prior to the
date hereof.
(d) No unfair labor practice complaint is pending against the Seller
before the National Labor Relations Board or any federal, state or local agency,
and no labor strike, grievance or other labor trouble affecting the Seller is
pending or, to the knowledge of the Seller, is threatened.
(e) No sex discrimination, racial discrimination, age discrimination or
other employment-related allegation, claim, suit or proceeding has been made in
writing, and to the knowledge of the Seller, no reasonable basis exists for any
present or former employee of the Seller to bring any such allegation, claim,
suit or proceeding.
(f) All reasonably anticipated obligations of the Seller, whether
arising by operation of law, contract, past custom or otherwise, for
unemployment compensation benefits, advances, salaries, bonuses, vacation and
holiday pay, sick leave and other forms of compensation payable to the employees
or agents of the Seller in respect of the services rendered by any of them on or
prior to the date hereof have been paid or adequate accruals therefor have been
made in the books and records of the Seller and in the Closing Balance Sheet to
the extent required to be recorded under GAAP.
(g) To the knowledge of the Seller, none of the top 15 most highly
compensated employees of the Seller plans to terminate employment with the Buyer
during the next 12 months.
(h) The Seller has provided the Buyer with true and correct copies of
all Employment-Related Agreements.
SECTION 4.20 EMPLOYEE BENEFIT PLANS; ERISA. The only "employee welfare
benefit plans" or "employee pension benefit plans" as defined by Section 3 of
ERISA that are maintained by the Seller with respect to any of the employees of
the Business are those disclosed in Schedule 4.20 attached hereto (which are
collectively referred to as the "EMPLOYEE BENEFIT PLANS"). To Seller's
knowledge, each of the Employee Benefit Plans intended to be qualified under
Section 401 of the Code is and always has been so qualified, and each trust
established in connection with any Employee
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Benefit Plan is intended to be exempt from federal income taxation under Section
501 of the Code is and always has been so exempt, and either has received a
favorable determination letter with respect to such qualified status from the
IRS or has filed a request for such determination letter with the IRS within the
remedial amendment period. To the Seller's knowledge, nothing has occurred since
the issuance of such letters which could result in a loss of any plan's
qualified status.
(a) Except as set forth in Schedule 4.20 attached hereto, to the
knowledge of Seller:
(i) None of the Employee Benefit Plans promises or provides retiree
medical or other retiree welfare benefits to any person;
(ii) there has been no "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, with respect
to any Employee Benefit Plan;
(iii) each Employee Benefit Plan has been administered in
accordance with its terms and in compliance with the requirements
prescribed by any and all statutes, rules and regulations (including ERISA
and the Code), and the Seller has performed all obligations required to be
performed by it under, is not in any respect in default under or violation
of, and has no knowledge of any default or violation by any other party to,
any of the Employee Benefit Plans;
(iv) neither the Seller is subject to any liability or penalty
under Sections 4976 through 4980 of the Code or Title I of ERISA with
respect to any of the Employee Benefit Plans;
(v) with respect to each Employee Benefit Plan, no "reportable
event" within the meaning of Section 4043 of ERISA (excluding any such
event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 of ERISA has occurred; and
(vi) the Seller does not currently maintain any Employee Benefit
Plan subject to Title IV of ERISA or Section 412 of the Code.
(b) No suit, administrative proceeding, action or other litigation has
been brought, or to the best knowledge of the Seller is threatened, against or
with respect to any such Employee Benefit Plan, including any audit or inquiry
by the IRS or United States Department of Labor. The Seller is neither a party
to, nor has made any contribution to or otherwise incurred any obligation under,
any "multiemployer plan" as defined in Section 3(37) of ERISA.
(c) With respect to each Employee Benefit Plan, to Seller's knowledge,
the Seller has complied with (i) the applicable health care continuation and
notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and the regulations thereunder and (ii) the applicable requirements of
the Family and Medical Leave Act of 1993 and the regulations thereunder.
(d) The consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee or other service provider of
the Seller to severance benefits or any other payment, or (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due any such
employee or service provider.
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(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Seller relating to, or change in
participation or coverage under, any Employee Benefit Plan which would
materially increase the expense of maintaining such Plan above the level of
expense incurred with respect to that Plan for the most recent fiscal year
included in the Seller's financial statements.
SECTION 4.21 MATERIAL CONTRACTS AND RELATIONSHIPS.
(a) Schedule 4.21(a) sets forth a complete and correct list of the
following:
(i) All existing agreements (or groups of agreements with one or
more related entities) between the Seller and any customer or supplier in
excess of $15,000 and all agreements and blanket purchase orders extending
beyond 12 months;
(ii) All agreements that relate to the borrowing or lending by the
Seller of any money or that create or continue any material claim or Lien
against, or right of any third party with respect to, any material asset of
the Seller;
(iii) All agreements by which the Seller leases any real property,
has the right to lease any real property or leases capital equipment and
all other leases involving the Seller as lessee or lessor;
(iv) All agreements to which the Seller is a party not in the
ordinary course of business;
(v) All agreements to which the Seller, on the one hand, and
Jordan, any other owner of the equity of the Seller, or any of their
Affiliates (Jordan, any other owner of the equity of the Seller, and their
Affiliates being collectively referred to herein as "RELATED PARTIES"), on
the other hand, are parties or by which they are bound;
(vi) All contracts or commitments relating to commission
arrangements with others;
(vii) All Licenses, whether as licensor or licensee;
(viii) All agreements between the Seller and its sales
representatives, distributors and dealers;
(ix) All agreements between the Seller and its customers relating
to volume rebates or price reductions;
(x) All other agreements to which the Seller is a party or by which
it is bound and that involve $15,000 or more or that extend for a period of
one year or more; and
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(xi) All other agreements to which the Seller is a party or by
which it is bound and that are material to the assets, liabilities (whether
absolute, accrued, contingent or otherwise), condition (financial or
otherwise), results of operations, business or prospects of the Seller.
As used in this Section 4.21, the word "agreement" includes both written and
oral contracts, leases, understandings, arrangements and all other agreements.
The term "MATERIAL CONTRACTS" means the agreements of the Seller required to be
disclosed on Schedule 4.21(a), including agreements specifically identified in
other Schedules.
(b) All of the Material Contracts are in full force and effect, are
valid and binding and are enforceable in accordance with their terms against the
Seller and, to the Seller's knowledge, against the other party except for
bankruptcy and similar laws affecting the enforcement of creditors' rights
generally. There are no liabilities of Seller to any Material Contract arising
from any breach or default of any provision thereof by Seller and no event has
occurred that, with the passage of time or the giving of notice or both, would
constitute a breach or default by Seller, and, to the knowledge of Seller, there
are no liabilities of any third party to any Material Contract arising from any
breach or default of any provision thereof by such third party, and no event has
occurred that, with the passage of time or the giving of notice or both, would
constitute a breach or default by such third party..
(c) Seller has fulfilled all material obligations required pursuant to
each Material Contract to have been materially performed by the Seller prior to
the date hereof, and the Seller has no reason to believe that the Seller will
not be able to fulfill, when due, all of its obligations under the Material
Contracts that remain to be performed after the date hereof.
(d) The Seller has not received written or electronic notice from any
customer, supplier or agent of Seller indicating such customer, supplier or
agent's intention to terminate or impair its business relationship with Seller.
To the knowledge of Seller, the Seller has maintained and continues to maintain
good relations with its customers, suppliers and agents, and Seller does not
have knowledge of any event that would precipitate the impairment or termination
of, or the failure to renew, or entitle any customer, supplier or agent to
terminate, its business relationship with Seller.
SECTION 4.22 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Seller
nor any employee, agent or other person acting on the Seller's behalf, has,
directly or indirectly, given or agreed to give any gift or similar benefit to
any customer, supplier, competitor or governmental employee or official
(domestic or foreign) that would subject the Seller to any damage or penalty in
any civil, criminal or governmental litigation or proceeding.
SECTION 4.23 TRANSACTIONS WITH RELATED PARTIES. Except as set forth on
Schedule 4.23, since January 1, 1997, (i) there have been no transactions by the
Seller with any Related Party and (ii) there are no written agreements now in
effect between the Seller and any Related Party. In addition, except as set
forth on Schedule 4.23, none of
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the transactions with any Related Party that have occurred has provided to the
Seller assets, income, financing or business on a basis significantly more or
less favorable than that available from unaffiliated persons. Schedule 4.23 also
(i) states the amounts due from the Seller to any Related Party and the amounts
due from any Related Party to the Seller, (ii) describes the transactions out of
which such amounts due arose and (iii) describes any interest of the Seller or
any Related Party in any supplier or customer of, or any other entity that has
had business dealings with, the Seller. After the Closing, there will be no
obligations or other liabilities between the Buyer, on the one hand, and the
Seller or any Related Party, on the other hand, other than pursuant to this
Agreement.
SECTION 4.24 COMPLIANCE WITH LAWS. Since January 1, 1997, the
operation, conduct and ownership of the property or business of the Seller are
being, and at all times have been, conducted, in all material respects, in full
compliance with all applicable federal, state, local and other (domestic and
foreign) laws, rules, regulations and ordinances and all judgments and orders of
any court, arbitrator or governmental authority applicable to it.
SECTION 4.25 LITIGATION. Except as set forth on Schedule 4.25, there
is, and since January 1, 1997 there has been, no legal, administrative,
arbitration or other proceeding, or any governmental investigation, pending or,
to the knowledge of the Seller, threatened against or otherwise affecting the
Seller, any of its assets or the Business, and the Seller is not aware of any
fact that might reasonably be expected to form the basis for any such proceeding
or investigation.
SECTION 4.26 TAXES.
Except as set forth on Schedule 4.26:
(a) The Seller has timely filed all material Tax Returns required to
have been filed by it for all taxable periods ending on or prior to the date
hereof, and has paid or accrued all material Taxes due to any taxing authority
with respect to all taxable periods ending on or prior to the date hereof. The
accrual for Taxes on the Most Recent Balance Sheet and the Closing Balance Sheet
is sufficient for the payment of all material Taxes that were or are payable by
the Seller. The Tax returns and reports filed are true and correct in all
material respects.;
(b) All amounts that are required to be collected or withheld by the
Seller have been duly collected or withheld; all such amounts that are required
to be remitted to any taxing authority have been duly remitted;
(c) There are no Liens for Taxes due and payable upon any of the
Acquired Assets;
(d) None of the Assumed Liabilities is an obligation to make any
payment that will be not deductible under Section 280G of the Code;
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(e) Since January 1, 1993, the Seller does not have and has not had a
permanent establishment in any foreign country, as defined in any applicable Tax
treaty or convention between the United States and such foreign country, and the
Seller has not engaged in a trade or business within any foreign country; and
(f) The Seller is not a "foreign person" within the meaning of Section
1445 of the Code.
SECTION 4.27 INSURANCE. Schedule 4.27 sets forth a complete and correct
list of all insurance policies and of all claims made by the Seller on any
liability or other insurance policies during the past five years (other than
workers' compensation claims). Schedule 4.27(a) is a complete and correct list
of all insurance currently in place and accurately sets forth the coverages,
deductible amounts, carriers and expiration dates thereof. Schedule 4.27(b) is a
complete and correct list of all insurance with respect to which the policy
period has expired, but for which certain of the coverage years are still
subject to audit or retrospective adjustment by the carrier, and accurately sets
forth such coverage years and the coverages, deductible amounts, carriers and
expiration dates thereof. Except as set forth on Schedule 4.27(c), no notice or
other communication has been received by the Seller from any insurance company
within the three years preceding the date hereof canceling or materially
amending or materially increasing the annual or other premiums payable under any
of its insurance policies, and, to the knowledge of the Seller, no such
cancellation, amendment or increase of premiums is threatened.
SECTION 4.28 NO POWERS OF ATTORNEY OR SURETYSHIPS. Except as set forth
on Schedule 4.28, (i) the Seller has not granted any general or special powers
of attorney and (ii) the Seller does not have any obligation or liability
(whether actual, contingent or otherwise) as guarantor, surety, co-signer,
endorser, co-maker, indemnitor, obligor on an asset or income maintenance
agreement or otherwise in respect of the obligation of any person, corporation,
partnership, joint venture, association, organization or other entity.
SECTION 4.29 BROKERAGE FEES. No Person is entitled to any brokerage or
finder's fee or other commission from the Seller in respect of this Agreement or
the Transactions other than Goldsmith, Agio, Helms and Company ("GAHC"). No fees
and expenses owed to GAHC shall be accrued on the Closing Balance Sheet or paid
by Ducommun or the Buyer.
SECTION 4.30 PRODUCT WARRANTY AND LIABILITY. Each product designed,
manufactured, sold or leased by the Seller and all services performed by the
Seller have been in conformity with all applicable contractual commitments and
all express and implied warranties, and the Seller has no liability and, to
Seller's knowledge, there is no basis for any present or future action, suit or
proceeding giving rise to any liability, of replacement or repair thereof or
other damages in connection therewith, subject only to the reserve for product
warranty claims set forth on the Most Recent Balance Sheet and the Closing
Balance Sheet. The Seller does not have any liability, and, to Seller's
knowledge, there is no reasonable basis for any present or future action, suit
or proceeding giving rise to any liability, arising out of any injury to persons
or property as a result of any products designed, manufactured, sold or leased
by the Seller or any services performed by the Seller. The Seller has not
received any written notice that an action, suit or proceeding has been, or in
the future may be, made alleging that products or services of the Seller are or
were defective in any way.
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SECTION 4.31 BANKING FACILITIES. Schedule 4.31 sets forth a complete
and correct list of:
(a) The name and address of each bank, savings and loan, brokerage firm
or similar financial institution in which the Seller has an account or safety
deposit box and the numbers of such accounts or safety deposit boxes maintained
thereat; and
(b) The names of all persons authorized to draw on each such account or
to have access to any such safety deposit box, together with a description of
the authority (and conditions thereto, if any) of each person with respect
thereto.
SECTION 4.32 YEAR 2000 ISSUES.
Except as disclosed in Schedule 4.33, all date-related output,
calculations or results before, during or after the calendar year 2000 that are
produced or used by any hardware, software, firmware or facilities systems
("COMPUTER SYSTEMS") owned or used by the Seller are Year 2000 Compliant. For
purposes of this section, "YEAR 2000 COMPLIANT" means:
(a) all dates receivable by the Computer Systems, as well as
calculations, output and results will (i) include a consistent-length century
indicator of at least two base ten digits, and (ii) have date elements in
interfaces and data storage that will permit specifying the century to eliminate
date ambiguity;
(b) when any date data is represented without a century, either in an
interface or in data storage, the correct century will be unambiguous for all
manipulations involving that data;
(c) data calculations involving either a single century or multiple
centuries will neither (i) cause an abnormal ending or operation nor (ii)
generate incorrect results or results inconsistent with output or results from
any other century;
(d) when sorting by date, all records will be sorted in accurate
chronological sequence; and when the date is used as a key, records will be read
and written in accurate chronological sequence; and
(e) leap years will be determined by the following standard: (i) if
dividing the year by 4 yields an integer, it is a leap year, except for years
ending in 00, but (ii) a year ending in 00 is a leap year if dividing it by 400
yields an integer.
SECTION 4.33 STANDARDS AND CERTIFICATIONS. The products designed,
manufactured, sold and leased by the Seller, and the manufacturing processes of
the Seller, meet and have received, all necessary customer approvals and
certifications of all standards established by relevant standard-setting
organizations and all certifications from relevant safety and standards testing
and certifying organizations.
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SECTION 4.34 DISCLOSURE. The written information provided by the Seller
or Jordan in connection with this Agreement, including, without limitation, the
exhibits and schedules hereto, does not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated herein or therein or necessary to make the statements and facts contained
herein or therein, in light of the circumstances under which they are made, not
materially false or misleading. Copies of all documents heretofore or hereafter
delivered or made available by the Seller or Jordan to Ducommun or the Buyer
pursuant hereto were or will be complete and accurate records of such documents.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DUCOMMUN
Ducommun hereby represents and warrants to the Seller and Jordan that:
SECTION 5.1 ORGANIZATION AND CORPORATE AUTHORITY. Ducommun and Buyer
are corporations duly organized, validly existing and in good standing under the
laws of their respective state of incorporation. Ducommun and Buyer have all
requisite corporate power and authority to enter into this Agreement and to
consummate the Transactions. Other than the consent and approval of Ducommun's
Board of Directors, which will be obtained prior to the Closing, all necessary
action, corporate or otherwise, required to have been taken by or on behalf of
Ducommun or Buyer by applicable law, its charter documents or otherwise to
authorize (i) the approval, execution and delivery on behalf of the Buyer of
this Agreement and (ii) the performance by the Buyer of its obligations under
this Agreement and the consummation of the Transactions has been taken. Subject
to the foregoing, this Agreement and all agreements and instruments herein
contemplated to be executed by Ducommun and the Buyer are valid and binding
agreements of Ducommun and the Buyer, enforceable against each of them in
accordance with their respective terms.
SECTION 5.2 CONSENTS AND APPROVALS. Other than the approval and consent
of Ducommun's Board of Directors which will be obtained prior to the Closing,
neither the execution and delivery of this Agreement nor the consummation of the
Transactions will violate, result in a breach of any of the terms or provisions
of, constitute a default (or any event that, with the giving of notice or the
passage of time or both, would constitute a default) under, result in the
acceleration of any indebtedness under or performance required by any agreement,
indenture or other instrument to which Ducommun or the Buyer is a party or by
which any of its property is bound, its charter documents, or any judgment,
decree, order or award of any court, governmental body or arbitrator applicable
to Ducommun or the Buyer. Subject to the foregoing, all consents, approvals and
authorizations of, and declarations, filings and registrations with, any
governmental or regulatory authority or any other Person (either governmental or
private) required in connection with the execution and delivery by Ducommun or
the Buyer of this Agreement or the consummation of the Transactions have been
obtained, made and satisfied, except for any filings required to be made after
the date hereof pursuant to the Securities Exchange Act of 1934, as amended, the
regulations promulgated thereunder (the "EXCHANGE ACT") or the rules and
regulations of any stock exchange on which Ducommun's securities are listed.
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SECTION 5.3 BROKERAGE FEES. No Person is entitled to any brokerage or
finder's fee or other commission from Ducommun or the Buyer in respect of this
Agreement or the Transactions.
SECTION 5.4 SUFFICIENT FUNDS. Ducommun has or will have, and will cause
Buyer at Closing to have, funds sufficient to satisfy the sum due at Closing,
such funds to be provided from Ducommun's cash on hand or its revolving credit
facility with Bank of America NT & SA.
ARTICLE VI
COVENANTS OF THE PARTIES
SECTION 6.1 CONDUCT OF BUSINESS. Except as Ducommun may otherwise
consent in writing, from the date hereof through the Closing Date, the Seller
shall and Jordan shall cause Seller to:
(a) use its commercially reasonable best efforts to pay, on or prior to
the Closing, all debt and other liabilities of the Seller, except accounts
payable and accrued expenses incurred in the ordinary course of business
included among the Assumed Liabilities and to be reflected on the Closing
Balance Sheet to the extent necessary to consummate the Transactions;
(b) operate the Business only in the usual, regular and ordinary course
and in accordance with past practice and, to the extent consistent with such
operation, use its good faith efforts to: (i) preserve the Business' present
business organization intact; (ii) keep available the services of the employees
of the Seller; (iii) preserve all material business relationships with
customers, suppliers, and others having business dealings with the Seller; (iv)
keep all of the Acquired Assets in good working order and repair, ordinary wear
and tear excepted; and (v) maintain in full force and effect all of the existing
casualty, liability, and other insurance of the Business through the Closing
Date in amounts not less than those in effect on the date hereof;
(c) maintain the Books and Records and accounts of the Business in the
usual, regular and ordinary manner and on a basis consistent with past
practices; and
(d) give to Ducommun, the Buyer and their counsel, accountants and
other representatives, upon reasonable notice, and with a representative of the
Seller present, reasonable access during normal business hours to all of the
Acquired Assets and the personnel, books, tax returns, contracts, commitments
and other records of the Seller related thereto, including in the areas of
detailed financial testing, human resources, taxes and environmental, and
furnish to Ducommun, the Buyer and such representatives all such additional
documents, financial information and information with respect to the Business,
the Acquired Assets and the Assumed Liabilities as Ducommun or the Buyer may
reasonably request.
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In addition to the foregoing, the Seller shall not, without the prior
written consent of Ducommun, (i) materially amend, modify or terminate any
Material Contract, lease or agreement of the Seller or relating to the Business
or the Acquired Assets, (iii) make any increase in, or any commitment to
increase, the compensation or benefits payable to any employee of the Seller,
(iii) enter any lease, or make any commitment to enter any lease or to purchase
any Equipment.
SECTION 6.2 FURTHER ASSURANCES. At the Closing, the Seller, at the
request of the Buyer or Ducommun, or the Buyer, at the request of the Seller,
shall promptly execute and deliver all such further assignments, bills of sale,
endorsements, and other documents, in form and substance reasonably satisfactory
to the other party and its counsel, as such party may reasonably request in
order to (a) vest in the Buyer title to and possession of the Acquired Assets,
(b) perfect and record, if necessary, the sale, assignment, conveyance,
transfer, and delivery to the Buyer of the Acquired Assets and (c) otherwise
carry out or evidence the terms of this Agreement. At or after the Closing, the
Seller shall promptly deliver to the Buyer and the Buyer shall promptly deliver
to the Seller the original of any mail or other communication received by it
after the Closing Date pertaining to or belonging to the other and any moneys,
checks or other instruments of payment to which the other is entitled.
SECTION 6.3 EMPLOYEES; BENEFIT PLANS; MULTIEMPLOYER PLANS.
(a) As of the date of this Agreement, Ducommun presently intends to
operate the Business at the Real Property and to offer employment to all
employees employed by the Seller immediately prior to the Closing Date (the
"CONTINUING EMPLOYEES") at a comparable rate of pay or salary existing
immediately prior to the Closing Date. Notwithstanding the foregoing, nothing in
this Agreement shall limit in any way the right of the Buyer or Ducommun to move
any such operations or change such rate of pay or salary, or to terminate the
employment of such Continuing Employees after the Closing Date.
(b) Subject to Section 6.3(d), below, the Seller shall be responsible
for all obligations and liabilities of the Seller with respect to the Continuing
Employees and former employees of the Seller prior to the Closing Date,
including all such obligations of the Seller for salaries, vacation and holiday
pay, severance payments, bonuses, retirement benefits, welfare benefits and
other forms of compensation, benefits or other payments or liabilities of the
Seller arising under Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985; provided, however, that the Buyer agrees to assume and continue
without interruption or reduction all vacation time and holiday pay and sick pay
to the extent accrued on the Closing Balance Sheet. No assets or liabilities of
any Employment-Related Agreement of the Seller shall be transferred to any
employee benefit plan established or maintained by the Buyer, and the Buyer does
not agree to adopt or assume any obligations under such Employment-Related
Agreements or to contribute to such Employment-Related Agreements or to adopt or
provide benefits similar to such Employment-Related Agreements.
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(c) Payroll withholding and tax reporting with respect to Continuing
Employees will be terminated as of the Closing Date and the Seller will pay over
to federal, state and local governments, in accordance with applicable law, all
amounts withheld on or before the Closing Date. The Seller also agrees to issue,
at Seller's expense, by the date prescribed by IRS Regulations, Forms W-2 for
wages paid through the Closing Date. Except as set forth in Section 6.3(a), the
Buyer shall be responsible for all payroll responsibilities resulting from
operations of the Buyer after the Closing Date.
(d) The Seller shall assign, and the Buyer shall assume, the Seller's
self-funded medical, dental and short-term disability plans (collectively the
"Self-Funded Plans"), the Employees' Beneficiary Association Trust of Parsons
Precision Products, Inc. ("VEBA") related thereto, and the Seller's Blue Cross
Blue Shield of Kansas Comprehensive Major Medical contract. The Buyer and the
Seller shall take all such actions as may be necessary or appropriate to
effectuate same. The Seller shall be responsible for any and all claims incurred
with respect to the Self-Funded plans prior to the Closing Date including claims
which are incurred but not reported prior to the Closing Date. The Buyer shall
assume and be responsible for group health plan continuation coverage pursuant
to Section 4980B of the Code ("COBRA") with respect to the Self-Funded Plans for
any existing COBRA beneficiary who incurred a qualifying event (as described in
Section 4980B(3) of the Code) and elected COBRA coverage pursuant to Section
4980B(5) on or before the Closing Date and any covered employee, or associated
qualified beneficiary, whose last employment was in connection with the
purchased assets and who was a participant in the Self-Funded Plans on or before
the Closing Date, who incurs a qualifying event and who elects COBRA coverage
pursuant to Section 4980B(5) of the Code. The Closing Balance Sheet shall
include as an accrual $174,000, which is a reasonable estimate of the amount of
the Seller's liabilities, costs and expenses, whether invoiced before or after
the Closing (collectively, the "Tail Liabilities"), arising from (i) claims
incurred, whether or not reported on or before the Closing Date, and (ii) any
person eligible for benefits under the Short-Term Disability Plan on or before
the Closing Date. Within six (6) months after the Closing, the Buyer shall
provide the Seller with an accounting of the Tail Liabilities and (i) if the
Tail Liabilities exceed the amount accrued therefor on the Closing Balance
Sheet, the Seller and Jordan shall promptly pay to the Buyer such excess amount,
and (ii) if the Tail Liabilities are less than the amount accrued therefor on
the Closing Balance Sheet, the Buyer shall promptly pay to the Seller and Jordan
such excess amount. Buyer agrees to pay to Seller or to give Seller a credit in
the amount of any reimbursement received by Buyer under the Blue Cross Blue
Shield of Kansas Comprehensive Major Medical Contract to the extent such
reimbursement is related to claims incurred, whether or not reported, on or
before the Closing Date, and to the extent such reimbursements have not
otherwise been accounted for in determining the $174,000 accrual for Tail
Liabilities.
(e) With respect to the Jordan Industries, Inc. 401(k) Savings Plan,
there shall be no trustee to trustee transfer pursuant to Section 414(l) of the
Code with respect to the transactions described herein. The Seller shall treat
the transactions described herein as a disposition of assets pursuant to Section
401(k)(10) of the Code and shall make distributions to plan participants in
accordance with same.
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(f) The Seller shall terminate or cause to be terminated the Parsons
Precision Products, Inc. Section 125 Plan prior to the Closing Date, or promptly
thereafter, without in any case any liability to Buyer or Ducommun. .
SECTION 6.4 NOTICE OF SALE. In the event any Contract does not require
the consent of the other party for the performance of any of the transactions
covered thereby, the Seller and the Buyer will cooperate with each other in
giving prompt notice to the other party to any such Contract to the effect that
the Contract has been assigned to the Buyer.
SECTION 6.5 UNDERTAKINGS. The Seller and the Buyer each agree to use
their good faith efforts to facilitate the consummation of the transactions
contemplated by this Agreement so as to permit such transactions to take place
on the Closing Date. The Buyer and the Seller, will cooperate with one another
in connection with their efforts to satisfy the closing conditions set forth in
Article VII hereof.
SECTION 6.6 BOOKS AND RECORDS. For a period of five years from the
Closing Date, the parties agree to allow the other party's representatives,
attorneys, and accountants, at the such other party's own expense, access to the
books and records of the Business upon reasonable request and during normal
business hours for the purpose of examination and copying to the extent
reasonably required in connection with any tax procedure, any obligation or duty
hereunder, or compliance with any other legal duty or obligation.
SECTION 6.7 NO SOLICITATION. Prior to Closing or termination of this
Agreement pursuant to Section 10.1 of this Agreement, neither the Seller, Jordan
nor any of the Seller's other officers, directors, shareholders, employees,
representatives or agents will initiate, solicit or encourage, directly or
indirectly any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to the shareholders of the Seller)
with respect to the acquisition of the Business, the stock of Seller or
substantially all of the Acquired Assets, or a merger of or consolidation with
or into Seller.
SECTION 6.8 AMENDMENT TO THE SELLER'S ARTICLES OF INCORPORATION. No
later than the business day following the Closing Date, the Seller shall file,
with the Kansas Secretary of State, an amendment to its Articles of
Incorporation to change the name of the Seller from Parsons Precision Products,
Inc. to another name in order to permit the Buyer to amend its Articles of
Incorporation to change the name of the Buyer to "Parsons Precision Products",
any derivation thereof, or such other name as the Buyer may choose. Each of the
Seller and Jordan further agrees to cooperate with the Buyer and to take such
actions as the Buyer may reasonably request, to permit the Buyer to use the name
"Parson Precision Products" or any derivation thereof, including without
limitation, assignment to the Buyer of the trademark "Parson Precision
Products".
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SECTION 6.9 FINANCIAL STATEMENTS. As promptly as practical following
the date hereof, but in no event later than November 5, 1999, Seller shall cause
its independent outside accountants, Ernst & Young, to deliver to Ducommun
audited financial statements of Seller for the year ended December 31, 1998,
including an unqualified opinion with respect thereto and such other financial
statements as Ducommun may reasonably request (collectively, the "AUDITED
FINANCIALS"), all in accordance with GAAP and with the rules, regulations and
interpretations of the Securities and Exchange Commission such that Ducommun may
properly include such Audited financials in its filings pursuant to the
Securities Exchange Act of 1934.
SECTION 6.10 HART-SCOTT-RODINO FILING. The parties shall, within one
business day following the execution of this Agreement, file Notification and
Report forms under the HSR Act with the Federal Trade Commission and the
Antitrust Division of the Department of Justice with respect to the transactions
contemplated herein, shall file requests for early termination and shall use
reasonable efforts to respond as promptly as practicable to all inquiries
received from the Federal Trade Commission or the Antitrust Division for
additional information or documentation. Each party shall furnish the other with
copies of all documents so filed by it. Ducommun and Jordan agree to share
equally the applicable filing fee.
SECTION 6.11 REAL PROPERTY. As promptly as practical following the date
hereof, but in no event later than November 5, 1999, Seller shall cause to be
delivered to Ducommun a copy of the grant deed and the preliminary report of the
ALTA title insurance policy relating to the Real Property.
SECTION 6.12 TAX.
(a) Tax Cooperation. After the Closing, the parties shall, and shall
cause their respective Affiliates to, cooperate with each other as reasonably
requested in the preparation of all tax returns and shall provide, or cause to
be provided, to such other party any records and other information reasonably
requested by such party in connection therewith as well as access to, and the
cooperation of, the auditors of such other party and its Affiliates. After the
Closing, the parties shall, and shall cause their respective Affiliates to,
cooperate with the other party in connection with any tax investigation, tax
audit or other tax proceeding relating to the Business or the Acquired Assets.
Without limiting the generality of the foregoing, the parties will retain, until
the expiration of the applicable statutes of limitation (including any
extensions thereof) copies of all Tax Returns, supporting work schedules and
other records relating to Tax periods or portions thereof ending on or prior to
the Closing Date. Any information obtained pursuant to this Section 6.12(a)
relating to Taxes shall be kept confidential by the other party.
(b) Clearance Certificates. On or prior to the Closing Date, Seller
will provide Buyer, at Buyer's request, with all clearance certificates or
similar documents that may be required by any state, local or other taxing
authority in order to relieve Buyer of any obligation to withhold or escrow any
portion of the Purchase Price.
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ARTICLE VII
CONDITIONS TO CLOSING
7.1 CONDITIONS TO THE OBLIGATIONS OF DUCOMMUN AND THE BUYER TO EFFECT
THE TRANSACTIONS CONTEMPLATED HEREBY. The obligations of Ducommun and the Buyer
to effect the transactions contemplated by this Agreement are subject to the
satisfaction, on or before the Closing Date, of each of the following
conditions, unless waived in writing by Ducommun or the Buyer:
(a) the representations and warranties of each of the Seller and Jordan
contained in this Agreement shall be true and correct on the Closing Date with
the same effect as if they were made on and as of the Closing Date, except that
any such representation and warranty made as of a specified date (other than the
date of this Agreement) shall have been true on and as of such date; provided,
however, that Seller and Jordan may deliver amended and revised Schedules (the
"Revised Schedules") no less than three business days prior to the Closing Date,
in which case, after review of such Revised Schedules, the Buyer may determine
in its sole discretion whether to consummate the transactions contemplated
hereby or to terminate this Agreement and, provided, further, that if Buyer,
after reviewing such Revised Schedules, shall have determined to consummate the
transactions contemplated hereby, the Revised Schedules shall be deemed
substitutes for all purposes in place of the Schedules delivered as of the date
hereof;
(b) each of the Seller and Jordan shall have performed in all material
respects all obligations and agreements and complied with all covenants
contained in this Agreement or in any document delivered in connection herewith
required to be performed and complied with by it or him on or before the Closing
Date;
(c) the Buyer and Ducommun shall have received a certificate from each
of the Seller and Jordan executed by a duly authorized officer of the Seller and
Jordan, as applicable, dated the Closing Date, certifying that the conditions
specified in Sections 7.1(a) and (b) have been satisfied;
(d) all necessary consents to the assignment of all Leases and
Contracts requiring the consent of the other party thereto shall have been
obtained pursuant to written instruments satisfactory to the Buyer, unless
otherwise waived by Buyer;
(e) Ducommun shall be satisfied in its sole discretion with the result
of its due diligence investigation of Seller and the Business;
(f) the Board of Directors of Ducommun shall have authorized and
approved the execution of this Agreement; and
(g) Ducommun shall be satisfied in its sole discretion with the
contents of the ALTA title insurance policy relating to the Real Property.
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7.2. CONDITIONS TO THE OBLIGATIONS OF THE SELLER TO EFFECT THE
TRANSACTIONS CONTEMPLATED HEREBY. The obligations of the Seller to consummate
the transactions contemplated by this Agreement are subject to the satisfaction,
on or before the Closing Date, of each of the following conditions, unless
waived in writing by the Seller:
(a) the representations and warranties of Ducommun contained in this
Agreement shall be true and correct on the Closing Date with the same effect as
if they were made on and as of the Closing Date, except that any such
representation and warranty made as of a specified date (other than the date of
this Agreement) shall have been true on and as of such date;
(b) Ducommun and the Buyer shall have performed in all material
respects all obligations and agreements and complied with all covenants
contained in this Agreement or in any document delivered in connection herewith,
required to be performed and complied with by them on or before the Closing
Date; and
(c) the Seller shall have received a certificate executed by a duly
authorized officer of each of Ducommun and the Buyer, dated the Closing Date,
certifying that the conditions specified in Sections 7.2(a) and (b) have been
satisfied.
7.3. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE
TRANSACTIONS CONTEMPLATED HEREBY. No statute, rule or regulation shall have been
enacted or promulgated and no permanent injunction or preliminary injunction or
other order shall have been entered, and not vacated, by a court or
administrative agency of competent jurisdiction in any proceeding or action,
which enjoins, restrains, makes illegal or prohibits consummation of the
transactions contemplated hereby, and the parties shall have received
notification either from the U.S. Department of Justice or the Federal Trade
Commission to the effect that the applicable waiting period under the HSR Act
shall have expired or been terminated without further action by either agency.
ARTICLE VIII
CERTAIN AGREEMENTS AND UNDERSTANDINGS
SECTION 8.1 AGREEMENT NOT TO COMPETE.
(a) As additional consideration for the payments made or to be made by
the Buyer under Sections 3.1 and 3.2, from the Closing Date to and including the
third anniversary of the Closing Date, the Seller and Jordan hereby agree that
neither the Seller nor Jordan shall, for any reason, directly, engage or have a
financial interest in any business that competes with the Business as presently
conducted (as described on Schedule 8.1), nor shall, directly, have any
financial interest in, own, manage, operate, control, be a stockholder (other
than as a stockholder of less than five percent (5%) of the issued and
outstanding stock of a publicly-held corporation), any business that shall
compete with the Businesses as presently conducted (as described on Schedule
8.1) in any county or any other political subdivision of any state of the United
States of America
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or of any other country in the world where the Seller conducted any business at
any time during the two (2) year period preceding the date hereof. All of the
parties agree that the duration and area for which the covenant not to compete
set forth in this Section 8.1 is to be effective are reasonable. In the event
that any court determines that the time period or the geographical areas
provided for in this Section 8.1, or both of them, are unreasonable and that
such covenant is to that extent unenforceable, such covenant shall remain in
full force and effect for the greatest time period and in the greatest
geographical area that would not render it unenforceable. The parties intend
that this covenant shall be deemed to be a series of separate covenants, one for
each and every county of each and every state of the United States of America
and for any other country in the world where this covenant is intended to be
effective.
(b) The parties agree that damages would be an inadequate remedy for
the Buyer in the event of a breach or threatened breach of this Agreement and
thus, in any such event, the Buyer may, either with or without pursuing any
potential damage remedies, immediately obtain and enforce an injunction
prohibiting the Seller and/or Jordan from violating this Agreement.
SECTION 8.2 RISK OF LOSS. The risk of loss or damage by fire or other
casualty or cause to the Acquired Assets until the Closing shall be upon the
Seller. In the event of loss or damage prior to the Closing in excess of
$15,000, the Seller shall promptly notify Ducommun and the Buyer in writing of
such event describing with such particularity as is possible the extent of such
loss or damage and the extent to which such loss or damage may be covered by any
insurance policy of the Seller. Within ten (10) days after receipt of written
notice from the Seller of such loss or damage, Ducommun or the Buyer shall, at
their option, either (a) have the Seller assign to the Buyer at the Closing all
insurance proceeds to which the Seller would be entitled as a result of such
loss or damage or (b) terminate this Agreement; provided that Ducommun or the
Buyer shall have no right of termination pursuant to this Section 8.2 if the
Seller promptly replaces the lost or damaged asset with a substantially similar
asset or repairs the damaged asset substantially to its previous condition.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 INDEMNIFICATION BY THE SELLER AND JORDAN. Each of the
Seller and Jordan shall, jointly and severally, indemnify and hold harmless the
Buyer and Ducommun and each of their Affiliates, directors, officers, employees,
attorneys, agents and representatives (collectively, the "AFFILIATED PARTIES")
in respect of any and all claims, losses, damages, liabilities, declines in
value, penalties, interest, costs and expenses (including, without limitation,
settlement costs and any attorneys', accountants', investment bankers' and
consultants' fees and other expenses) reasonably incurred by the Buyer or
Ducommun or their respective Affiliated Parties, in connection with or related
to each and all of the following:
(a) any breach of any representation or warranty made by the Seller or
the Jordan in this Agreement or pursuant hereto;
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(b) any misrepresentation contained in any written statement or
certificate furnished by the Seller or the Jordan pursuant to this Agreement or
in connection with the Transactions;
(c) any breach of any covenant, agreement or obligation of the Seller
or the Jordan contained in this Agreement or any other instrument contemplated
by this Agreement;
(d)(i) Any violation by the Seller of any Environmental Protection Laws
(as amended or supplemented from time to time up to the Closing Date) on or
prior to the Closing Date, (ii) any liabilities arising under Environmental
Protection Laws (as amended or supplemented from time to time up to the Closing
Date) as a result of the conduct of the Business on or prior to the Closing
Date, (iii) any contamination of soil, groundwater or other environmental media
by or with any Regulated Substance on, in or under the Real Property or, as a
result of the operation of the Seller's business, about the Real Property
existing on or prior to the Closing Date; and (iv) any matters described in
Section 4.17 or Schedule 4.17, whether or not the Seller had knowledge of such
matters;
(e) any claims, liabilities or obligations (whether absolute, accrued,
contingent or otherwise and whether a contractual, Tax or any other type of
liability or obligation or claim) of Jordan or Seller, whether or not with
respect to the operation of the Business by the Seller on or prior to the
Closing Date, not specifically assumed by the Buyer pursuant to this Agreement;
(f) the failure of the Seller to qualify for an exemption from, and
obtain, the protections afforded by compliance with the notification
requirements of, the bulk sales laws in force in the jurisdictions in which such
laws may be applicable to either the Seller or the Transactions; and
(g) any liability to or asserted by any employee or former employee of
the Seller or beneficiary of any of them arising under the provisions of (i) the
Consolidated Omnibus Budget Reconsolidation Act of 1985, as amended, with
respect to any qualifying event (as defined in Section 4980B of the Code)
occurring through the Closing Date or (ii) any Employment-Related Agreement.
SECTION 9.2 INDEMNIFICATION BY THE BUYER. Each of the Buyer and
Ducommun shall indemnify and hold harmless each of the Seller and Jordan in
respect of any and all claims, losses, damages, liabilities, declines in value,
penalties, interest, costs and expenses (including, without limitation, any
attorneys', accountants', investment bankers' and consultants' fees and other
expenses) reasonably incurred by the Seller or Jordan, in connection with or
related to each and all of the following:
(a) any breach of any representation or warranty made by Ducommun in
this Agreement or pursuant hereto; or
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(b) any misrepresentation contained in any written statement or
certificate furnished by the Buyer or Ducommun pursuant to this Agreement or in
connection with the Transactions;
(c) any breach of any covenant, agreement or obligation of the Buyer or
Ducommun contained in this Agreement or any other instrument contemplated by
this Agreement; or
(d) any of the Assumed Liabilities.
SECTION 9.3 INDEMNIFICATION BY THE SELLER FOR TAX LIABILITIES. In
addition to, and not by way of limitation on, the indemnities set forth in
Sections 9.1 and 9.4, the Seller and Jordan shall jointly and severally
indemnify and hold harmless on an after-tax basis the Buyer and Ducommun against
all Taxes of the Seller for all taxable periods (or parts thereof) ending on or
before the Closing Date, or otherwise attributable to the operations,
transactions, assets, or income of the Seller or its predecessors prior to the
Closing Date, and any Taxes described in Section 3.4, together with any expenses
(including, without limitation, settlement costs and any attorneys',
accountants' and consultants' fees and other expenses) incurred in connection
with the contesting, collection or assessment of such Taxes. The Seller's and
Jordan's obligations to indemnify the Buyer and Ducommun pursuant to this
Section 9.3 shall continue until 90 days after all applicable statutes of
limitations have expired.
SECTION 9.4 INDEMNIFICATION FOR PRODUCT LIABILITY AND TORT CLAIMS. In
addition to, and not by way of limitation on, the indemnities set forth in
Sections 9.1 and 9.3, the Seller and Jordan shall jointly and severally
indemnify and hold harmless the Buyer and Ducommun and each of their Affiliated
Parties in respect of any and all claims, losses, damages, liabilities, declines
in value, penalties, interest, costs and expenses (including, without
limitation, settlement costs and any attorneys', accountants' and consultants'
fees and other expenses) reasonably incurred by the Buyer or Ducommun or their
respective Affiliated Parties in connection with, or resulting from, any Product
Liability Claim. As used herein, any "PRODUCT LIABILITY CLAIM" shall mean any
accident, incident or occurrence caused (in whole or in part) or contributed to,
or alleged to have been caused (in whole or in part) or contributed to, by any
products designed, manufactured, sold or leased by the Seller or any services
performed by the Seller prior to the Closing Date. The Seller's and Jordans'
obligations to indemnify the Buyer and Ducommun pursuant to this Section 9.4
shall continue until 90 days after all applicable statutes of limitations have
expired.
SECTION 9.5 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise
for indemnification hereunder, the party entitled to indemnification (the
"INDEMNIFIED PARTY") shall promptly notify the party obligated to provide
indemnification (the "INDEMNIFYING PARTY") of the claim and, when known, the
facts constituting the basis for such claim; provided, however, that the failure
to so notify the indemnifying party shall not relieve the indemnifying party of
its obligation hereunder to the extent such failure does not materially
prejudiced the indemnifying party. In the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice to the indemnifying party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom.
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SECTION 9.6 DEFENSED CLAIMS. In connection with any claim
giving rise to indemnity hereunder resulting from or arising out of any claim or
legal proceeding by a person who is not a party to this Agreement, the
indemnifying party at its sole cost and expense and with counsel reasonably
satisfactory to the indemnified party may, upon written notice to the
indemnified party, assume the defense of any such claim or legal proceeding if
(a) the indemnifying party acknowledges to the indemnified party in writing,
within fifteen (15) days after receipt of notice from the indemnified party, its
obligations to indemnify the indemnified party with respect to all elements of
such claim, (b) the indemnifying party provides the indemnified party with
evidence reasonably acceptable to the indemnified party that the indemnifying
party will have the financial resources to defend against such third-party claim
and fulfill its indemnification obligations hereunder, (c) the third-party claim
involves only money damages and does not seek an injunction or other equitable
relief, and (d) settlement or an adverse judgment of the third-party claim is
not, in the good faith judgment of the indemnified party, likely to establish a
pattern or practice adverse to the continuing business interests of the
indemnified party. The indemnified party shall be entitled to participate in
(but not control) the defense of any such action, with its counsel and at its
own expense; provided, however, that if there are one or more legal defenses
available to the indemnified party that conflict with those available to the
indemnifying party, or if the indemnifying party fails to take reasonable steps
necessary to defend diligently the claim after receiving notice from the
indemnified party that it believes the indemnifying party has failed to do so,
the indemnified party may assume the defense of such claim; provided, further,
that the indemnified party may not settle such claim without the prior written
consent of the indemnifying party, which consent may not be unreasonably
withheld. If the indemnified party assumes the defense of the claim, the
indemnifying party shall reimburse the indemnified party for the reasonable fees
and expenses of counsel retained by the indemnified party and the indemnifying
party shall be entitled to participate in (but not control) the defense of such
claim, with its counsel and at its own expense. If the indemnifying party
thereafter seeks to question the manner in which the indemnified party defended
such third party claim or the amount or nature of any such settlement, the
indemnifying party shall have the burden to prove by a preponderance of the
evidence that the indemnified party did not defend or settle such third party
claim in a reasonably prudent manner. The parties agree to render, without
compensation, to each other such assistance as they may reasonably require of
each other in order to insure the proper and adequate defense of any action,
suit or proceeding, whether or not subject to indemnification hereunder.
SECTION 9.7 INTEREST. Any amount of money owed by an indemnifying party
to an indemnified party hereunder shall be paid with interest, at an annual rate
equal to the Prime Rate then in effect, from the date that the loss or damage
was sustained or cash disbursement made by the indemnified party until such
amount is paid by the indemnifying party.
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SECTION 9.8 MANNER OF INDEMNIFICATION. All indemnification payments
hereunder shall be effected by payment of cash or delivery of a certified or
official bank check in the amount of the indemnification liability.
SECTION 9.9 LIMITATIONS ON INDEMNIFICATION.
(a) No claim, demand, suit or cause of action shall be brought against
an indemnifying party by an indemnified party under Sections 9.1(a) and (b) or
Section 9.2(a) and (b) unless and until the aggregate amount of claims by such
indemnified party exceeds $220,000 (the "Threshold"), in which case the
indemnified party shall be entitled to indemnification from the indemnifying
party for the full amount of claims, including any amounts which constituted the
Threshold; provided, however, that the Threshold shall not apply to
indemnification arising from, or related to Section 4.26 (Taxes), Section 4.30
(Product Liability and Tort Claims), Section 4.17 (Environmental Issues),
.Sections 9.1 (c)-(g), Section 9.3 and Section 9.4 .
(b) The obligations of Seller and Jordan to indemnify Ducommun and
Buyer and each of their Affiliated Parties pursuant to Sections 9.1 (a) and (b)
hereof shall survive (i) for twenty-four months from the date of Closing, except
as otherwise specifically described herein, (ii) until 90 days following
expiration of the applicable statute of limitations with respect to breaches of
the representations and warranties contained in Section 4.6 (Ownership), Section
4.26 (Taxes) , and Section 4.30 (Product Liability) or pursuant to Sections
9.1(c), (e)-(g), or Section 9.3, or Section 9.4, and (iii) seven years from the
date of Closing with respect to breaches of the representations and warranties
contained in Section 4.17(Environmental Matters) or as a result of Section
9.1(d).
(c) The obligations of Buyer and Ducommun to indemnify Seller and
Jordan (i) pursuant to Sections 9.2(a) and (b) hereof shall survive for
twenty-four months from the date of Closing and (ii) pursuant to Sections
9.2(c)-(d) hereof shall survive until 90 days following expiration of the
applicable statue of limitations.
(d) Notwithstanding the provisions of Sections 9.3, 9.4 or 9.9(a), (b)
or (c) an indemnifying party's obligations shall continue (i) as to any matter
as to which a claim is submitted in writing to the indemnifying party prior to
such specified anniversary dates and identified as a claim for indemnification
pursuant to this Agreement and (ii) as to any matter that is based upon fraud by
the indemnifying party, until such time as such claims and matters are resolved.
(e) In no event shall the liability of any party for indemnification
pursuant to this Article 9 exceed the Purchase Price.
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ARTICLE X
TERMINATION
SECTION 10.1 TERMINATION. This Agreement and the Transactions
contemplated herein may be terminated at any time prior to the Closing by the
Seller and Jordan, on the one hand, or Ducommun or the Buyer, on the other, as
the case may be, providing written notice or termination to the other party:
(a) by mutual agreement between the Seller, on the one hand, and
Ducommun, on the other hand;
(b) by Ducommun or the Buyer, if any one or more of the conditions set
forth in Sections 7.1 or 7.3 hereof are not satisfied on or as of the Closing
Date;
(c) by the Seller or Jordan, if any one or more of the conditions set
forth in Sections 7.2 or 7.3 hereof are not satisfied on or as of the Closing
Date;
(d) by Ducommun or the Buyer, if either the Seller or Jordan is in
material breach of any material agreement or covenant contained in this
Agreement;
(e) by the Seller, if Ducommun or the Buyer is in material breach of
any material agreement or covenant contained in this Agreement; or
(f) by either party if the Closing shall not have occurred on or prior
to November 30, 1999;
provided, that the party seeking to terminate this Agreement under this
Section 10.1 not be in default under this Agreement. Upon termination of this
Agreement, this Agreement shall be deemed null, void, and of no further force
and effect and the Buyer and Ducommun will promptly return all confidential
documents and other written information (and all copies thereof) relating to
Seller or Jordan and received from the Seller or Jordan. For purposes hereof,
"confidential" shall mean any documents or information which is not generally
known to the public or within the Seller's industry.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed given upon
actual receipt if delivered personally or by facsimile transmission (with
subsequent letter confirmation by mail) or three days after being mailed by
certified or registered mail, postage prepaid, return receipt requested, to the
parties, their successors in interest or their assignees at the following
addresses, or at such other addresses as the parties may designate by written
notice in the manner aforesaid:
If to the Buyer or Ducommun: c/o Ducommun Incorporated
111 West Ocean Blvd.
Suite 900
Long Beach, California 90801
Facsimile No.: (562) 624-0789
Attention: Chief Financial Officer
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With a concurrent copy to: Gibson, Dunn & Crutcher, LLP
Jamboree Center
4 Park Plaza
Irvine, California 92614
Facsimile No.: (949) 451-4220
Attention: Leonard J. McGill, Esq.
If to the Seller or Jordan: Jordan Industries, Inc.
ArborLake Centre
1751 Lake-Cook Road
Suite 550
Deerfield, Illinois 60015
Facsimile No.: (847) 945-5591
Attention: Thomas H. Quinn
With a concurrent copy to: Sonnenschein, Nath & Rosenthal
4520 Main Street
Suite 1100
Kansas City, Missouri 6411
Facsimile No.: (816) 531-7545
Attention: Steven L. Rist, Esq.
SECTION 11.2 ASSIGNABILITY AND PARTIES IN INTEREST. This Agreement
shall not be assignable by any of the parties, except that Ducommun and the
Buyer may assign to Bank of America NT&SA the representations, warranties and
indemnities made by the Seller or Jordan hereunder. This Agreement shall inure
to the benefit of and be binding upon the parties and their respective permitted
successors and assigns.
SECTION 11.3 GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal law, and not the law
pertaining to conflicts or choice of law, of the State of California.
SECTION 11.4 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
SECTION 11.5 COMPLETE AGREEMENT. This Agreement, the Exhibits and
Schedules and the documents delivered or to be delivered pursuant to this
Agreement contain or will contain the entire agreement among the parties with
respect to the Transactions and shall supersede all previous oral and written
and all contemporaneous oral negotiations, commitments and understandings,
including the terms of any consents that may be executed in connection herewith.
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SECTION 11.6 MODIFICATIONS, AMENDMENTS AND WAIVERS. This Agreement may
be modified, amended or otherwise supplemented only by a writing signed by all
of the parties. No waiver of any right or power hereunder shall be deemed
effective unless and until a writing waiving such right or power is executed by
the party waiving such right or power.
SECTION 11.7 DUE DILIGENCE INVESTIGATION; KNOWLEDGE. All
representations and warranties contained herein that are made to the knowledge
of a party shall require that such party make reasonable investigation and
inquiry with respect thereto to ascertain the correctness and validity thereof.
Without limiting the foregoing sentence, when any fact is stated to be to the
"knowledge of the Seller," such reference shall mean that one or more of the
officers of Jordan, or one or more of the following officers or employees of the
Seller know or should have known of the existence or non-existence of such fact
based upon a reasonable investigation and inquiry of the employees, accountants
and attorneys of the Seller: Phil Stevens, Mike Coltrane, John Kelley, Ed
Bergfield, Ed Sims, Teressa Steeby and Brian Williams. The representations,
warranties and covenants of the Seller and Jordan shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any of the Buyer, Ducommun or their respective representatives.
SECTION 11.8 EXPENSES. Except as otherwise expressly provided elsewhere
in this Agreement, each party shall pay all fees and expenses incurred by it in
connection with the transactions contemplated by this Agreement.
SECTION 11.9 LIMIT ON INTEREST. Notwithstanding anything in this
Agreement to the contrary, no party shall be obligated to pay interest at a rate
higher than the maximum rate permitted by applicable law. In the event that an
interest rate provided in this Agreement exceeds the maximum rate permitted by
applicable law, such interest rate shall be deemed to be reduced to such maximum
permissible rate.
SECTION 11.10 ATTORNEYS' FEES AND COSTS. Should any party institute any
action or proceeding in any court or arbitration proceeding to enforce any
provision of this Agreement, the prevailing party shall be entitled to receive
from the losing party reasonable attorneys' fees and costs incurred in such
action or proceeding, whether or not such action or proceeding is prosecuted to
judgment.
SECTION 11.11 FURTHER ASSURANCES. Each party shall execute and deliver
such further instruments and take such further actions as any other party may
reasonably request in order to carry out the intent of this Agreement and to
consummate the Transactions.
SECTION 11.12 CONTRACT INTERPRETATION; CONSTRUCTION OF AGREEMENT.
(a) The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Article, section, exhibit, schedule, preamble, recital and party
references are to this Agreement unless otherwise stated.
(b) No party, nor its respective counsel, shall be deemed the drafter
of this Agreement for purposes of construing the provisions of this Agreement,
and all language in all parts of this Agreement shall be construed in accordance
with its fair meaning, and not strictly for or against any party.
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SECTION 11.13 ARBITRATION.
(a) Except as otherwise provided in Sections 3.2 or 3.3, any
controversy, dispute or claim arising under this Agreement shall be settled by
arbitration conducted in Los Angeles, California in accordance with the then
existing Commercial Arbitration Rules of the American Arbitration Association,
and judgment upon any award rendered by the arbitrator may be entered by any
federal or state court having jurisdiction thereof. The decision of the
arbitrator shall be final and binding upon the parties. The arbitrator shall be
authorized to award any relief, whether legal or equitable, to the party so
entitled to such relief.
(b) In respect of any action, suit or other proceeding relating to the
enforcement of the award rendered by the arbitrator pursuant to this Section
11.13, each party hereby irrevocably submits to the non-exclusive jurisdiction
of any state or federal court located in the County of Los Angeles, State of
California. EACH PARTY HEREBY WAIVES ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS, TO ASSERT THAT IT IS NOT SUBJECT TO THE
JURISDICTION OF THE AFORESAID COURTS, OR TO OBJECT TO VENUE TO THE EXTENT THAT
ANY ACTION, SUIT OR OTHER PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
11.13.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
DUCOMMUN
DUCOMMUN INCORPORATED, a Delaware
corporation
By:
--------------------------------
Name: James S. Heiser
Title: Secretary
BUYER
DUCOMMUN ACQUISITION CORPORATION,
a Delaware corporation
By:
--------------------------------
Name: James S. Heiser
Title: Vice President/Secretary
JORDAN
JORDAN INDUSTRIES, INC., an Illinois
corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
SELLER
PARSONS PRECISION PRODUCTS, INC.,
a Kansas corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
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