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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-6179
CORDANT TECHNOLOGIES INC.
Incorporated in the State of Delaware IRS Employer Identification
No. 36-2678716
Principal Executive Offices
15 W. South Temple, Salt Lake City, UT 84101
Telephone Number: (801) 933-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange
Common Stock, par value On Which Registered
$1.00 per share New York Stock Exchange
Common Stock Purchase Rights Chicago Stock Exchange
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. X
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period than the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
Aggregate market value of Registrant's voting stock held by
non-affiliates, based upon the closing price of said stock on the New York
Stock Exchange-Composite Transaction Listing on August 31, 1998, ($35.625
per share): $1,302,296,741
Number of shares of Common Stock outstanding as of August 31, 1998: 36,555,698
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Proxy Statement, Exhibit B for the fiscal year ended June
30, 1998: Parts I, II, and IV.
2. Portions of definitive Proxy Statement dated September 11, 1998: Parts
III and IV.
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PART I
ITEM 1. BUSINESS
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Cordant Technologies Inc. (the "Company") operates in three business
groups. Thiokol Propulsion is a leading producer of high technology solid
rocket motors for space, defense and commercial launch applications. Huck
International, Inc. ("Huck"), a wholly owned subsidiary of the Company, is
a major supplier of precision fastening systems for aerospace and
industrial markets worldwide and custom injection molded plastic products.
The Company's 62 percent owned subsidiary, Howmet International Inc.
("Howmet"), is a leading manufacturer of investment cast turbine engine
components for jet aircraft and industrial gas turbine power generation
markets, as well as a leading producer of aluminum investment castings for
commercial aerospace and defense electronics industries.
Originally formed in 1930, the Company operated in various forms
including a division of Morton Thiokol, Inc. In 1989, the specialty
chemicals, salt and automotive restraint business was spun off into a newly
formed company, Morton International, Inc. The Company's aerospace and
defense business continued to operate as Thiokol Corporation. Through a
series of acquisitions, the fastening systems segment was developed and is
operated by Huck. In December 1995, the Company and the Carlyle Group, a
private merchant investment firm ("Carlyle"), formed a jointly owned
company in which this Company owned 49 percent and Carlyle 51 percent, to
acquire Howmet International Inc.
In December 1997, The Company purchased an additional 13 percent of
Howmet from Carlyle for approximately $184 million, increasing the
Company's ownership from 49 percent to 62 percent. The Company began
consolidating Howmet's operating results as of December 2, 1997. In
connection with the sale to the Company, Carlyle also sold 15.35 percent of
Howmet to the public through an initial public offering, resulting in a
reduction of Carlyle's ownership from 51 percent to 22.65 percent. The
Company has the right, during a two-year period commencing in December
1999, to acquire all of Carlyle's remaining shares of Howmet common stock
and a right of first refusal to acquire any shares Carlyle proposes to
sell, in each case at market price. Carlyle has also agreed with the
Company that it will not dispose of any of its shares of Howmet common
stock until the earlier of December 1999 or the occurrence of a change of
control of the Company. The Company and its affiliates agreed with Carlyle
not to acquire shares of Howmet common stock from the public if less than
14 percent of the Howmet common stock would be held by the public following
such acquisition, unless such acquisition was made in connection with a
tender offer for all the shares or an acquisition in which all the publicly
held shares were treated equally.
In May 1998, the Company's name was changed from Thiokol Corporation
to Cordant Technologies Inc., and the relocation of the Company's corporate
office to Salt Lake City was completed in July.
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In June 1998, the Company completed the acquisition of Jacobson
Manufacturing, a manufacturer of custom designed metal parts and fasteners
and custom injection molded plastic products used in automotive,
construction, consumer products and heavy equipment applications.
Jacobson's operations were merged into Huck International, Inc.
The Company has changed its fiscal year-end from June 30 to December
31, effective for the quarter ended September 30, 1998.
Business Segments
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The Company operates in three business segments: (i) Thiokol
Propulsion; (ii) Fastening Systems; and (iii) Investment Castings. This
business segmentation reflects: (i) the Company consolidated its Space,
Defense and Launch Vehicle divisions and Science and Engineering unit into
one business segment, Thiokol Propulsion, (ii) the increase in ownership
and accounting consolidation of Howmet; and (iii) continuing growth in the
fastener business including the Jacobson Manufacturing acquisition.
Thiokol Propulsion. The propulsion segment consists of solid rocket
propulsion systems and related products, research and development and
launch support services for the National Aeronautics and Space
Administration ("NASA"), Department of Defense and commercial space
applications. Such systems include the Reusable Solid Rocket Motor ("RSRM")
used for NASA's Space Shuttle. Deliveries under the current Buy III Space
Shuttle contract awarded to the Company in 1991 are expected to be
completed by 1999. Remaining contract activities are expected to be
completed during fiscal year 2001. The Buy III contract is a "cost plus
award fee" contract with an award fee based on the degree of the Company's
success, as rated by NASA, of meeting contract standards relating to
program safety, management, reliability, quality assurance, delivery, and
hardware flight performance on the contract. The Company also receives a
cost-incentive fee for meeting certain predetermined cost-reduction
targets. The Company is currently negotiating the follow-on Buy IV contract
with expected production of thirty-five flight sets through 2004. The
delivery rate and the Company's contract accrual rate for financial
statement purposes are subject to continuing NASA funding, NASA's Shuttle
flight scheduling (currently averaging seven flights per year), and program
performance. The NASA contracts are subject to termination for convenience
by the federal government with the Company retaining such rights of
recovery for costs and expenses provided by the government procurement laws
and regulations, and contract terms and conditions. NASA is in the process
of reorganizing the Shuttle program under one prime contractor, United
Space Alliance, to manage many of the program functions now managed by
NASA. Such restructuring will occur over a transition period of several
years. The Company's position as a contractor to NASA is expected over time
to shift to the role of a subcontractor to United Space Alliance, although
there can be no assurance that such shift will occur. Currently, the
Company is the only qualified manufacturer of the RSRM. The Company
believes the time and cost to qualify a second source of supply would be
prohibitive in light of the
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shuttle flight schedule and declining government expenditures for the Space
program. The Company retains certain Shuttle RSRM solid rocket motor launch
oversight activities at the Kennedy Space Center.
For defense and commercial space applications, the Company's family of
CASTOR solid rocket motors is used in the first and second stages of a
number of expendable launch vehicles. The CASTOR 120 motor, designed as a
low-cost motor for the small launch vehicle market, has been selected as
the propulsion system for the Lockheed Athena Launch Vehicle and the
Orbital Science Taurus launch vehicle. The CASTOR IV motors are used by
Lockheed/Martin Aeronautics as strap-on boosters for the Atlas IIAS
programs and has been selected to support the Department of Defense Target
Critical Measurement Program. The Company is supplying motors for systems
and satellite positioning for commercial space and defense applications.
The Company is supplying motors for a variety of international launch
programs such as the Spanish government's Capricornio launch vehicle and
the Japanese HII-A launch vehicles.
Thiokol Propulsion participates as a subcontractor in various defense
programs providing propulsion systems and related technology for the
Theater Missile Defense Program and propulsion and ordnance for the Trident
Submarine Missile Program through a joint venture with Alliant
Technologies, Inc.
As the lead propulsion contractor on the Air Force Intercontinental
Ballistic Missile (ICBM) Prime Integration Contract with TRW, the Company,
in a joint venture with the Chemical Systems Division of United
Technologies, will provide the propulsion refurbishment for the Minuteman
solid rocket motors. Production on the 15-year program, with an estimated
value of $1 billion, is expected to begin in the year 2000. The level of
program activity is dependent on the level of government funding and is
subject to cancellation or modification. The outcome, if any, of
international treaties such as the START treaty negotiations can impact the
number of motors subject to refurbishment.
Thiokol Propulsion also manufactures infrared and illuminating flares;
provides solid rocket motor propellant reclamation services; and provides
aging and surveillance technologies. Commercial applications are being
developed for composite resin prepreg materials, airbag inflator gas
generants and igniters and composite resin-based conformable storage tanks.
Federal export laws, controls and regulations impact or otherwise
restrict the export of the Company's propulsion products and technical
data. All U.S. Government contracts and subcontracts are subject to
termination for the convenience of the government and may also be impacted
by changing levels of government funding, schedule changes and other
changes within the government's authority.
Fastening Systems. The fastening systems products consist of specialty
fasteners, installation tooling and custom injection molded plastic
products which are
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sold to customers directly by the Company and through a distribution
network in both domestic and foreign markets. Fasteners made from a variety
of materials including high strength metals and metal alloys are threaded
and non-threaded consisting of lock bolts, blind bolts, lock nuts, blind
rivets, cap screws and various other metal products sold under various
trade names and trademarks for aerospace, industrial, automotive and
construction industry applications. Injected molded products consist of
custom components and end products. Fastener installation tooling is also
manufactured and marketed to provide customers complete fastener
installation systems. The aerospace market consists of both commercial and
military aerospace manufacturing companies, domestic and foreign. Customer
product qualification required by domestic and foreign regulatory agencies
such as the Federal Aviation Administration as to plant and product quality
and lot traceability is important for the aerospace market acceptance of
the Company's fasteners. The Company's fasteners have been qualified by
major domestic and foreign aerospace companies in order for such customers
to use such fasteners in original equipment and aftermarket aircraft
products. Principal domestic and foreign industrial markets include
automotive, truck, trailer, railcar, and mining applications. The
construction industry utilizes the Company's fastening systems for certain
structural applications such as bridges and building columns. Plastic
injected molded products are used in the computer, telecommunications and
medical industries.
Investment Castings. The Company, through its 62 percent ownership in
Howmet, is a manufacturer of investment castings for aircraft turbine
engines and industrial gas turbine engines. The Howmet Cercast Group is a
producer of high quality aluminum investment castings used in the defense
electronics and commercial aerospace industries.
Howmet's aerospace castings consist of super alloy and titanium
castings for aircraft turbine engines and structural airframe and engine
applications. Products include individual airfoils consisting of blades
(rotating foils) or vanes (non-rotating foils), as well as integral
castings such as turbine rotors and nozzle rings for smaller engines
involving an entire set of blades and related components cast together.
Structural components include support components of engines, such as engine
castings, frames, and bearing housings, and other airframe components.
Howmet's aerospace castings are manufactured for commercial and military
applications and sold to original equipment aircraft manufacturers and
aftermarket customers.
Industrial gas turbine engine products consist of airfoils (including
moving blades and stationary vanes) for gas turbines used for power
generation primarily by the electric utility industry and mechanical drive
applications for industrial and pipeline operations, oil and gas processing
and offshore drilling.
Howmet's Cercast subsidiaries produce aluminum investment castings for
the commercial aerospace and defense markets. Applications include
electronic packaging, electro-optical system housings, engine parts, pumps
and compressors.
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Howmet also provides other products and services to third parties
including machining of components, component coating, specialty alloys and
casting equipment and tooling. Howmet also participates in an 81 percent
owned joint venture in Japan with Komatsu Ltd. manufacturing investment
cast components for industrial gas turbine and aerospace customers
primarily in Japan and a 51 percent owned joint venture with Pratt &
Whitney Division of United Technologies Corp. manufacturing spray-formed
metal components for aircraft turbine engines.
Competition
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Thiokol Propulsion. The Company is the sole source supplier of RSRM
solid rocket motors, the only domestic human-rated solid rocket propulsion.
The Shuttle Buy III and Buy IV contracts are placed directly by NASA. The
Company, as the only qualified supplier for the RSRM, does not compete with
other manufacturers.
Liquid propulsion systems that may be competitive with the RSRM are
under study, but are not yet developed. The Company, Alliant Technologies,
Inc., and the CSD Division of United Technologies, Corp. are the major
suppliers of heavy-lift solid propulsion launch vehicles for space and
strategic applications and are competitive with each other with regard to
medium, light, and strap-on launch vehicles for commercial space
applications. Both foreign governments and foreign private enterprises have
solid rocket propulsion systems competitive with propulsion systems
manufactured by the Company. Liquid propulsion systems and excess strategic
ballistic missile inventory may be competitive with the Company's
propulsion systems, especially in the commercial launch market. For Thiokol
Propulsion products other than the RSRM solid rocket motors sold to the
federal government or federal government prime contractors, the primary
method of competition is through the Company responding to a request for
proposal or complying with other government procurement procedures under
federal acquisition regulations in competition with others. Commercial
launch vehicle products are sold primarily through responding to the terms
and conditions of a request for proposal or negotiated contracts in
competition with others. Principal competitive factors are cost, technical
performance, quality, reliability, depth and capability of personnel and
adequacy of facilities. Except for the sole-sourced RSRM solid rocket motor
and other strategic military launch motors, the Company's propulsion
products are sold primarily on the basis of technical performance,
reliability and price. Although this market has begun to stabilize,
reductions in Department of Defense expenditures, the decline in the
availability of new programs, and lower quantities being procured for
strategic and tactical solid rocket motor programs has increased the
competitive pressure for these products. The Company's competitive strength
is also affected by the technical performance, quality, and reliability of
its solid propulsion products for space launch applications. The Company's
propulsion systems, services and related products are competitive with
Alliant Technologies, Inc., CSD, Aerojet Division of Gencorp Inc., the ARC
Division of Sequa Corporation and various liquid propulsion systems
produced both domestically and internationally .
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Fastening Systems. Fastening systems are manufactured by a number
of competitors with no one manufacturer having a major position in the
aerospace or industrial fastener markets. Alternative fastening methods
compete with the Company's threaded and non-threaded fastener systems.
Competition for orders from aerospace original equipment manufacturers is
often dependent on customer qualification of the Company's fasteners as
required by government regulations. The Company's fastening system products
compete not only on price, but also product quality and the Company's
ability to provide customer service and delivery. Fastening systems
applications and tooling help differentiate the Company's fastening systems
products from those of its competitors. Aerospace fastener competition is
primarily through responding to requests for quotations made by major
aerospace contractors and distributors and purchase orders. Industrial
fastener competition including automotive, railcar and construction is
primarily through requests for proposals, purchase order quotations and
negotiated contracts in competition with others. The Company's fastening
systems compete on price, quality, delivery, and ability to provide
customer fastening installation solutions through specific-purpose tooling
and fasteners. The Company maintains a proprietary patented position for
certain of its fastener designs for which certain limited licenses have
been granted to competitors. The Company also manufactures certain
fasteners under licenses from competitors. The Company's custom plastic
injection molding competes on price, quality and delivery with many custom
injection molding competitors.
Investment Castings. Howmet believes it has a major market share in
the overall turbine engine airfoil investment casting market. Precision
Castparts Corp. ("PCC") is Howmet's primary competitor. Management believes
that Howmet and PCC and other smaller participants compete primarily on
technological sophistication, quality, price, service and delivery time for
orders from large, well-capitalized customers with significant market
power. Certain of Howmet's customers, principally in Europe, have their own
investment casting foundries, which produce parts similar to those
manufactured by Howmet. Howmet knows of no plans by its major North
American customers to establish such captive facilities, nor any
significant expansion plans by those customers that have such foundries
now, although there can be no assurance that such developments will not
occur in the future.
Howmet's aluminum casting operations compete with a large number of
smaller competitors, also on the basis of price, quality and service.
Research and Development
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Company-sponsored research and development (R&D) activities relate
to new products and services, improvement of existing products and services
and new and improved production processes. The Company's R&D cost was $24.4
million, $12.5 million, and $13.3 million and represented 1.4 percent, 1.4
percent and 1.5 percent of revenues for fiscal years 1998, 1997, and 1996,
respectively; the amount spent during the same periods for
customer-sponsored R&D (primarily U.S. government-funded) was
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$70.5 million, $75.7 million, and $56.6 million, respectively.
Environmental Matters
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Compliance with federal, state, and local environmental requirements
with respect to the Company's facilities, including formerly owned and
operated facilities, while having the potential to be a significant cost
and liability, are not at this time expected to have a material adverse
effect on the Company's financial condition or upon the competitive
position of the Company or its subsidiaries. Capital expenditures and
amounts expensed relating to environmental matters were $1.8 million and
$8.1 million, respectively, for fiscal year 1998 and are estimated to be
$3.5 million and $11.0 million for fiscal year ending June 30, 1999.
Estimated fiscal 2000 environmental capital expenditures and amounts
expensed are $2.2 million and $10.4 million, respectively, although there
can be no assurances that actual amounts will not vary materially from such
estimates. Capital expenditures and expenses for environmental matters
reflect the consolidation of Howmet since December 2, 1997. The Company
maintains ongoing programs for environmental site evaluations, continues
its cooperation with federal and state agencies in site investigations, and
engages in environmental remediation activities at its sites and sites of
third parties where appropriate.
The Company continues to be involved with two Environmental Protection
Agency ("EPA") superfund sites designated under the Comprehensive
Environmental Response, Compensation and Liability Act in Morris County,
New Jersey. These sites were operated about thirty years ago by the Company
for government contract work. The Company has negotiated a consent decree
with the EPA concerning the Rockaway Borough Well Field Site. At this site,
the Company's estimated cost for response costs, site remediation, and
future operation and maintenance costs is $4.8 million, of which
approximately $1.4 million is estimated to be spent during 1999. In 1996,
the Company negotiated a consent decree with the State of New Jersey for
the Rockaway Township Well Field Site. At this site, the Company's
estimated cost for response costs, site remediation, and future operations
and maintenance costs is $4.6 million, of which approximately $1.2 million
is estimated to be spent during fiscal year 1999. Jacobson Manufacturing
Company, acquired by Huck in June of 1998, is involved in a superfund site
at Tempe, Arizona. Pursuant to the terms of a five-year environmental
indemnity contained in the Stock Purchase Agreement between Huck and
Seller, Huck is responsible for the first $2 million in environmental
liabilities, the Seller is responsible for environmental liabilities from
$2 to $6 million; Huck and Seller share the expense of environmental
liabilities 50-50 in excess of $6 million but less than $10 million.
Howmet has received test results indicating levels of polychlorinated
biphenyls ("PCBs") at its Dover, New Jersey facility which will require
remediation. These levels have been reported to the New Jersey Department
of Environmental Protection ("NJDEP"). Howmet is preparing a work plan to
define the risk and to test possible clean-up options. The statement of
work must be approved by the NJDEP pursuant to
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an administrative consent order entered into between the Company and the
NJDEP on May 20, 1991, regarding clean-up of the site. Various remedies are
possible and could involve expenditures ranging from $2 million to $22
million or more. Howmet has recorded a $2 million long-term liability as of
June 30, 1998 for this matter. Given the uncertainties, it is possible that
the estimated range of this cost and the amount accrued will change within
the next year. The indemnification discussed below applies to the costs
associated with this matter.
In addition to the above, liabilities arising for clean-up costs
associated with hazardous types of materials in several waste disposal
facilities exist. In particular, Howmet has been or may be named a
potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act or similar state laws at eight
on-site and off-site locations. At June 30, 1998, $4.1 million of accrued
environmental liabilities are included in the consolidated balance sheet
for such matters.
In connection with the Howmet Acquisition by the Company and Carlyle,
Pechiney, S.A. is required by the terms of the acquisition agreement to
indemnify Howmet for environmental liabilities and obligations relating to
Howmet Corporation stemming from events occurring or conditions existing
prior to the December 13, 1995 acquisition date to the extent that such
liabilities exceed a cumulative $6 million. This indemnification applies to
all of the Howmet related environmental matters prior to the acquisition
date.
In addition, unrelated to Howmet Corporation's operations, Howmet `s
subsidiary, Howmet Holdings Corporation, and Pechiney, S.A., are jointly
and severally liable for environmental contamination and related costs
associated with certain discontinued mining operations owned and/or
operated by a predecessor-in-interest until the early 1960s. These
liabilities include approximately $21.3 million in remediation and natural
resource damage liabilities at the Blackbird Mine Site in Idaho and at
least $10 million in investigation and remediation costs at the Holden Mine
Site in Washington. Pechiney, S.A. has agreed to indemnify Howmet for such
environmental liabilities. Howmet has recorded a liability and an asset for
an equal amount related to these matters which are reflected in the
Company's consolidated balance sheet. In the event that Pechiney, S.A. does
not honor its indemnification obligations, Howmet would likely be
responsible for such matters and the cost of addressing those matters could
be material.
The Company estimates that the eventual cost for site remediation
matters known at this time, including the consolidation of those of Howmet,
before any recoveries from insurance and third party contributions by other
responsible parties including the federal government, will be approximately
$55.9 million. The Company has established a receivable in the amount of
$33.6 million for expected reimbursement or recovery for environmental
claims, costs and expenses from third parties, including the federal
government. As the result of the settlement of outstanding environmental
liabilities with insurance carriers, the Company has received $9.5 million,
of which $6.8
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million was used to settle reimbursement of claims with the federal
government. The Company's policy and accounting for environmental matters
is set forth in Note 1 and Note 17 of the Notes to the Company's
consolidated financial statements. The Company believes that after
recoveries from third parties and the federal government, any net liability
for which it may ultimately be responsible in excess of amounts currently
accrued, would not be material to the Company's financial condition and
results of operations.
The Company has negotiated an agreement with the federal government to
recover certain environmental costs and expenses incurred in connection
with the performance of government contracts in the forward pricing on
certain of the Company's government contracts.
Employees
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The approximate number of employees of the Company including the
consolidation of Howmet and the Jacobson Manufacturing acquisition on June
30, 1998, was approximately 17,400 compared to 5,300 on June 30, 1997.
Thiokol Propulsion employment at June 30, 1998 was approximately 3,900
compared to approximately 3,500 at June 30, 1997. Investment Castings
employment was approximately 11,000 at June 30, 1998. Fastening Systems
employment was approximately 2,400 on June 30, 1998 compared to
approximately 1,500 on June 30, 1997. Thiokol Propulsion employment levels
reflect the stabilization of the business base as the result of
consolidation of its operations. Fastening Systems' employment levels
reflect increased production volumes and the addition of Jacobson
Manufacturing.
Raw Materials
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Although most of the raw materials used by the Company are readily
available, certain key raw material suppliers for Thiokol Propulsion (such
as suppliers of propellant raw materials and nozzle and case component
materials) must be approved by the federal government. With a limited
number of such approved suppliers, delivery of these materials could be
disrupted at the supplier level at any time and have a material adverse
impact on production and delivery schedules until government approval of
alternative suppliers is obtained. Raw materials used by the Company's
Investment Castings and Fastening Systems segments include a number of
materials and minerals, including titanium, hafnium, aluminum, nickel,
cobalt, molybdenum and chromium among others. Commercial deposits of
certain metals, such as cobalt, nickel, titanium and molybdenum, which are
required for the alloys used in precision castings and aircraft fasteners,
are found in only a few parts of the world, and for certain materials only
single sources are readily available. These materials and metals are
subject to price fluctuations, and price and supply may be influenced by
private or government cartels, unstable governments in countries exporting
materials and production interruptions.
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Seasonality
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The business of the Company is not subject to seasonal fluctuations.
Patents and Trademarks
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The Company has approximately 500 patents and patent applications, of
which 320 relate to the Thiokol Propulsion business segment, 80 relate to
the Investment Castings business segment, and 100 relate to the Fastening
Systems segment. As a government contractor, the Company conducts
independent research and development ("IR&D") to enable it to maintain its
competitive position. Research and development work is also performed under
contracts with the Department of Defense, NASA, and other government
agencies.
Approximately ninety percent of the Company's patents in the Thiokol
Propulsion business segment were developed under Company-funded IR&D
related budgets. The Company has full ownership interest in its patents
developed under these budgets and lesser rights in the patents it developed
under Contract R&D programs.
The Thiokol Propulsion business segment patents coverage includes
propulsion system design, case, nozzle, and propellants. Patents also cover
gas generators, ordnance, flare-related products, and the Company's fiber
resin technology. Patents cover non-sodium azide gas generant technology
used by Autoliv ASP Inc. pursuant to agreements with the Company. Under
contracts with the federal government, licenses have been granted to the
government for limited use of certain patented technology.
Investment Castings segment patents cover both materials and processes
for casting of high temperature components for aerospace and industrial gas
turbine applications. Included are advanced casting technologies for
superalloys, intermetallics and composites as well as high temperature
alloys, furnace designs, ceramic materials, and coatings.
Fastening Systems segment patent coverage includes major aerospace
fastening systems including a lightweight grooved proportional lock bolt
and the "Unimatic" blind bolt rivet. Major industrial fastening systems
covered by patents include "Huck-Fit" lock bolts, "Magna-Lok" blind rivets,
"Ultra-Twist" blindbolt for box beam construction applications and
"Magna-Grip" lock bolts with patent lives remaining of more than five
years. Certain of the Company's fastener products are manufactured under
licenses from competitors.
Although the Company believes that its present competitive position is
enhanced by its patents and its technical expertise, know-how and
proprietary information, no individual patent or group of patents is
material to the conduct of the business of the Company.
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Trademarks are important for product identification in the fastening
systems and Investment Castings segments of the business, but are not
significant to the Company's Propulsion business.
Customers
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The customers of Thiokol Propulsion are primarily the federal
government and its prime contractors and subcontractors. Commercial
propulsion customers, primarily in the light and medium launch vehicle
market, are being developed, but are not yet material to the Company's
customer base. Federal government contracts and subcontracts entered into
by the Company are by their terms subject to termination by the government
or the prime contractor either for convenience or default. Such contracts
are also subject to funding appropriations by Congress. Since the federal
government provided, directly and indirectly, approximately 37 percent of
the Company's revenues in fiscal year 1998, the termination or
discontinuance of funding of a substantial portion of such business would
have a material adverse effect on the Company's operations. No single
non-government customer is material to the overall business conducted by
the Company.
Fastening Systems customers consist of industrial and aerospace
original equipment manufacturers and distributors, domestic and foreign.
Foreign customers and a foreign sales base are still developing, but are
not yet material to the Company's customer and sales base. The Boeing
Company, Wesco, Freightliner, TriStar and Ford Motor Company are major
fastening systems customers.
Investment Casting's top ten customers represented approximately 27
percent of the Company's net sales in fiscal year 1998. Investment
Casting's principal customers are The General Electric Company through its
aircraft engine and power systems groups and United Technologies
Corporation's Pratt & Whitney aircraft operations represent approximately
14 percent of the Company's sales. No other Investment Castings customer
represents more than three percent of the Company's sales in fiscal 1998.
Orders for components are primarily awarded through a competitive
bidding process. Contractual relationships with the Company's principal
customers vary. Approximately half of its casting business is derived from
multi-year contracts, typically three years in length. Under these
contracts, Howmet's customers agree to order from Howmet, and Howmet agrees
to supply, specified percentages of specified parts at specified pricing
over the life of the contracts. The customers are not required to order
fixed numbers of parts, although pricing may be subject to certain
threshold quantities. Some of these contracts include provisions requiring
specified price reductions over the term of the contract, based on lower
production costs as programs mature, shared benefits from other cost
reductions resulting from joint production decisions, and negotiated
reductions. Most major contracts provided Howmet with protection against
substantial changes in prices for elemental metal raw materials. Howmet
typically
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renegotiates these contracts during the last year of the contract period
and, during the process, customers frequently solicit bids from the
Company's competitors.
Backlog Orders
- --------------
The Company's backlog of orders on June 30, 1998, and June 30, 1997,
was approximately $1.6 billion and $1.1 billion, respectively. Thiokol
Propulsion's backlog as of June 30, 1998 was $595 million. The Company
expects its December 31, 1998 backlog to increase substantially as the
Company anticipates completion of the RSRM Buy IV contract negotiation
within the next six months. The NASA Space Shuttle solid rocket motor
booster and related contracts comprise approximately 16 percent of the
backlog. It is expected that approximately 46 percent of the orders in
backlog on June 30, 1998, will be completed by June 30, 1999. The majority
of the remainder thereafter are expected to be completed through fiscal
year 2001. The backlog represents the value of contracts for which goods
and services are to be provided and includes approximately $525 million in
government contracts, of which $380 million have been funded by the
government. Although contracts can be changed or canceled, the backlog is
believed to consist of firm contracts. The Company does not believe that a
material change or cancellation of a single contract (other than the RSRM)
would be materially significant to its business. The contract backlog
consists of a combination of cost-plus award fee, cost-plus fixed fee,
cost-plus incentive fee, fixed price incentive fee, and firm fixed price
contracts. The Investment Castings backlog of orders as of June 30, 1998
was $850 million. The Company's Fastening Systems backlog was approximately
$152 million on June 30, 1998. Because of the short lead and delivery times
often involved, and because deferrals and cancellations often effect the
Company's Investment Castings and Fastening Systems orders, backlog may not
be a significant indicator of the Company's future performance.
ITEM 2. PROPERTIES
- ------------------
The Company operates manufacturing, research, and development
facilities at 47 locations, and has administrative and sales offices,
warehouses, and service centers worldwide. The Company considers its
manufacturing facilities, warehouses, and other properties to be in
generally good operating condition and suitable for their intended
purposes. Facilities are considered adequate and sufficient to meet the
operating requirements of the Thiokol Propulsion and Fastening Systems
business units. Investment Castings has planned capacity expansion for aero
and industrial gas turbine and airfoil production. Expansion and relocation
of the Cercast Group's Montreal, Canada aluminum castings operations is
under construction. Thermatech Coating and the United Kingdom foundry
facilities have been expanded. Completed and planned facility expansion is
considered sufficient and adequate to meet Investment Castings operating
needs. All Company-owned property is held in fee with no encumbrances.
Company leased property obligations are set forth in Note 18 of the
Company's consolidated financial statements. During fiscal year 1998, the
Company relocated its Corporate office to Salt Lake City, Utah.
-12-
<PAGE>
During fiscal year 1998, additions to property, plant, and equipment
totaled $72.8 million.
The following table sets forth the Company's manufacturing locations
and the approximate square footage.
Buildings (000's Square Feet)
-----------------------------
Manufacturing Location Company
by Segment Owned Leased Total
---------- ----- ------ -----
THIOKOL PROPULSION
Northern Utah(1) 2,641 722 3,363
Elkton, Maryland 378 378
Ogden, Utah 105 105
FASTENING SYSTEMS
Domestic
Altoona, Pennsylvania 150 150
Branford, Connecticut, 2 facilities 74 74
Carson, California 153 153
Kenilworth, New Jersey 79 79
Kingston, New York(2) 142 142
Lakewood, California 115 115
Medina, Ohio 271 271
New Braunfels, Texas 116 116
Sanford, North Carolina 50 50
Tempe, Arizona 45 45
Tucson, Arizona 67 67
Waco, Texas 371 371
-13-
<PAGE>
International
Us, France 61 61
United Kingdom 50 50
INVESTMENT CASTINGS
Domestic
Bethlehem, Pennsylvania 47 47
Branford, Connecticut 138 138
City of Industry, California 50 50
Cleveland, Ohio 100 100
Dover, New Jersey, 2 facilities 357 357
Hampton, Virginia, 2 facilities 296 6 302
Hillsboro, Texas 68 68
LaPorte, Indiana 186 186
Morristown, Tennessee 111 111
Whitehall, Michigan, 7 facilities 711 711
Wichita Falls, Texas 227 227
Winsted, Connecticut 81 81
International
Dives, France (capital lease) 256 256
Evron, France 86 86
Exeter, U.K., 2 facilities 253 67 320
Gennevilliers, France 47 47
Georgetown, Ontario, Canada 37 37
Le Creusot, France 156 156
Montreal, Quebec, Canada 11 100 111
Terai, Japan, 3 facilities3 53 53
(1)The Company occupies an additional 6,000 sq. ft. of government owned
property.
(2)Land is leased.
(3)Factory owned by Howmet's joint venture, Komatsu-Howmet Ltd.
ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------
Litigation and Regulation
- -------------------------
During fiscal year 1998, previously disclosed material litigation
against the Company was settled or resolved favorably for the Company.
-14-
<PAGE>
The Company is involved in a number of other pending legal and
administrative proceedings which are not expected individually or in the
aggregate to have a material adverse effect upon the Company's financial
condition.
Depending on the amount and the timing of an unfavorable resolution of
these matters, it is possible that the Company's future results of
operations or cash flows could be materially affected in a particular
period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
No matter was submitted to a vote of the Company's stockholders during
the fourth quarter of fiscal year 1998.
EXECUTIVE OFFICERS OF THE REGISTRANT (as required by Instruction 3. to Item
401(b) of Regulation S-K)
Generally, Executive Officers are elected by the Board of Directors at
its first meeting following the Annual Meeting of Stockholders. The
officers generally serve until the next such meeting, or until their
successors are elected and qualified. The next Annual Meeting of
Stockholders will be held on October 22, 1998.
The Executive Officers of the Company on June 30, 1998, were:
Positions Held During Past Five
Name and Age Years and Terms of Office
- ------------ -------------------------
James R. Wilson (57)...................Chairman of the Board, President and
Chief Executive Officer since October
1995; President and Chief Executive
Officer (October 1993-95); director
since October 1993.
Richard L. Corbin (52).................Senior Vice President and Chief
Financial Officer since May 1994; Chief
Financial Officer and Vice President,
Administration Space Systems Division of
General Dynamics Corporation (1976-94).
James E. McNulty (54...................Executive Vice President Human Resources
and Administration since 1992.
-15-
<PAGE>
Robert L. Crippen (60).................Vice President and President of Thiokol
Propulsion since December 1996, Vice
President of Training Simulator Systems,
Lockheed Martin, (April 1995-October
1996); Director of John F. Kennedy Space
Center, (1992-January 1995).
Bruce M. Zorich (44................... Vice President and President of Huck
International, Inc. since April 1996;
Vice President, Worldwide Automotive
Operations, (1993-1996); Vice President
& General Manager, OEM Products, Senior
Flexonics (1989-1993).
Joseph A. Lombardo (65)................Vice President Space Operations since
April 1992.
Winston N. Brundige (53)...............Vice President and General Manager,
Defense and Launch Vehicles Division
since July 1994; Vice President and
Division Manager Elkton Division
(1991-June 1994); Director of Production
(1990-91).
Daniel S. Hapke, Jr. (52)..............Senior Vice President and General
Counsel since October 1997; Vice
President and General Counsel since
February 1997; Various positions at
General Dynamics Corporation (1984-1997)
including Vice President and General
Counsel of its Electric Boat subsidiary
(1994 to 1997).
Michael R. Ayers (47.................. Vice President and Controller since
January 1996; Vice President Strategic
Development (1994-1996); Director
Finance & Administration Space
Operations (1986-1994).
Nicholas J. Iuanow (38.................Vice President and Treasurer since
October 1997, Treasurer (1994-October
1997); Assistant Treasurer 1989-1993).
Edwin M. North (53).................. Vice President and Corporate Secretary
since October 1997;Secretary since 1990.
-16-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------- ---------------------------------------------------------------------
Information concerning the market for the Company's common equity and
related security holder matters is included in the section "Quarterly
Financial Highlights" on page F-29, "Dividends and Recent Market Prices" on
page F-45 of the Exhibit B, Financial Information, to the Company's Notice
of Annual Meeting and Proxy Statement for fiscal year 1998, and is
incorporated herein by reference in Exhibit Number 13. As of August 31,
1998, there were 5,149 stockholders of record.
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
Selected financial data for the five fiscal years ended June 30, 1998
is included on page F-46 of Exhibit B, Financial Information, to the
Company's Notice of Annual Meeting and Proxy Statement for fiscal year 1998
and is incorporated herein by reference in Exhibit Number 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------ -------------------------
Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three fiscal years ended June 30, 1998, is
included on pages F-30 through F-45 of Exhibit B, Financial Information, to
the Company's Notice of Annual Meeting and Proxy Statement for fiscal year
1998 and is incorporated herein by reference in Exhibit Number 13.
The Company sets forth below "Cautionary Statements" for the purpose
of the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. Many of the factors described below are discussed in both
current and prior Company Securities and Exchange Commission filings and to
the extent not otherwise discussed in forward-looking statements should be
considered in assessing the various risks associated with the Company's
conduct of its business and financial condition. Risks which may impact the
accuracy of the Company's forward-looking statements include, but are not
necessarily limited to, the following:
(i) The Company's RSRM contract for NASA's space shuttle program is
subject to substantial performance and financial risks. Without
cause, the contract may be terminated for the convenience of the
U.S. Government ("government"). Deliveries under the contract may
be delayed or extended at the election of the government. Future
space shuttle launches are highly dependent upon the
international space station. Delays in space station components
may delay launches and affect the RSRM production rates. Congress
may change the
-17-
<PAGE>
funding available to the contract. Actions by the government or
the Company may make the amount of the contract fee already
booked inappropriate, thus causing a retroactive award fee
adjustment including possible reimbursement to the government of
fees the government has paid to the Company. The current "Buy
III" contract is expected to continue until fiscal year 2001.
Deliveries are expected to be completed by 1999. The Company is
negotiating the Buy IV contract with expected production of
thirty-five flight sets through 2004. The terms of the Company's
Buy IV award fee have not been finalized, but are expected to be
similar to the structure of the Buy III award fee. The
profitability and cash flow of the Buy IV contract, however, may
not be at current levels. NASA's privatization of the Space
Shuttle Program through United Space Alliance could adversely
impact the Company's RSRM contract in the out-years. NASA has
also shown initial interest in developing a Liquid Fly Back
Booster (LFBB) as an alternative propulsion source or as a
replacement for the Company's RSRM motors.
(ii) The Company's maintenance of non-RSRM space and defense contracts
including the Minuteman regrain and commercial launch vehicle
programs (collectively "programs") and the availability and award
of future programs with the government and prime contractors are
subject to the risk of termination or renegotiation by the
government or failure of such programs to be funded. The level of
Minuteman production may be impacted by international treaty
negotiations limiting the deployment of ICBM's. The Company's
ability to successfully compete for and win new programs or
retain current programs is also dependent on the availability of
program funding; competition by others with the Company for such
programs on price, quality, technology, facilities, delivery, and
product performance; changes in Congressional funding objectives;
and federal agency demand and program management, including but
not limited to, program termination, consolidation, or
privatization. Other risks include the Company's ability to
successfully manage current programs, obtaining or retaining new
and existing programs, and the profitability of such programs
with satisfactory return on investment on lower prices, costs,
and unit volumes in a shrinking and competitive government
procurement environment. Competitive propulsion systems and
technologies, as well as ballistic missile surplus propulsion
inventory (both domestic and foreign), can adversely impact the
success of the Company's commercial launch programs and ability
to compete successfully for government strategic and tactical
propulsion programs.
(iii) The products and services sold by the Company to domestic and
international commercial aerospace markets are subject to the
risks of the cyclical nature of the aircraft market and the phase
of such cycle at any point in time. Delay or changes in aircraft
and component orders and build schedules may impact the future
demand for Company products, delivery, and profitability. The
Company's major aerospace customers are large and may exercise
their market power among a number of vendors, including the
Company, competing for their
-18-
<PAGE>
business by exerting pricing pressure, delivery, inventory, and
unit volume requirements. Risks to the Company include
management's ability to maintain both product and manufacturing
qualifications, meet the needs of its major customers and
regulatory agencies and maintain or improve margins and return on
investment in light of competitive pricing pressures, unit demand
and product qualification, and product substitutions by major
customers. The Company's potential inability to maintain product
pricing, as well as availability, delivery, and service are
important risk factors.
(iv) The products and services sold by the Company for domestic and
international, and industrial commercial markets, primarily
through the Fastening Systems business segment and the Investment
Castings segment represented by the Company's 62 percent equity
investment in Howmet, are subject to the risks of the level of
general economic activity and industry capacity in mature
industrial markets, product applications, and technology
associated primarily with aircraft, automotive, transportation,
power generation, construction, and other industrial
applications. The Fastening Systems segment is subject to the
cyclical and economic nature of the automotive industry and the
market power of large automotive original equipment manufacturers
as to competition among vendors for pricing, delivery, inventory
and unit volumes. The Company's business can also be affected by
factors such as management's ability to successfully expand new
and existing product lines, including the successful integration
of the Jacobson Manufacturing operations, to improve margins and
returns on investment by successfully implementing asset
management, pricing and cost reduction strategies. The Company's
ability to maintain competitive products, pricing, availability,
delivery, and service are important factors in maintaining
customer relationships and effectively competing with other
manufacturers.
(v) Additional future increases in ownership percentage of Howmet
will, in part, be dependent on the favorable operational and
financial performance, favorable economic conditions, price of
Howmet common stock, and the availability of financing at
reasonable costs and on reasonable terms from the capital markets
at the time the Company exercises its option to acquire the
balance of the equity ownership of Howmet from Carlyle.
Significant intangible values comprise Howmet asset values, which
may not be realized by stockholders including the Company if
Howmet were sold or liquidated. Howmet remains liable as the
original issuer of the Purchase Notes, as defined in the Notes to
the Company's financial statements, due to be paid in January of
1999, held in a Restricted Trust secured by Pechiney
International, a French Company secured by $772 million in
letters of credit issued by Banque Nationale de Paris, a French
bank with a Standard & Poor's rating of A+ secured by
substantially identical "back-up" letters of credit issued by
Caisse des Depots et Consignations, a French bank with a Standard
& Poor's AAA credit rating. In the event that Pechiney fails to
meet its obligations under the Restricted Trust and both banks
fail to meet their obligations under their respective letters of
credit, such events,
-19-
<PAGE>
which management believes are remote, would have a material
effect on Howmet's financial condition and value of the Company's
62 percent equity ownership of Howmet.
(vi) Supplier and customer product qualifications are important to the
Company as a purchaser and as a supplier. As a supplier, loss or
failure to maintain product or manufacturing qualifications from
major customers including the government and major commercial
aerospace and aircraft manufacturers and automotive original
equipment manufacturers may result in loss of markets and
business for the Company. Qualified vendors, component parts, and
raw materials qualifications are important to the Company in the
manufacture of its products including major propulsion systems
such as the RSRM. Vendor, component parts and raw materials may
be limited, and the loss of a major vendor as a supplier, has the
potential to cause a major and material delay in production or
program performance.
(vii) Raw materials used by the Company's Investment Castings and
Fastening Systems segments include a number of metals and
minerals, including titanium, hafnium, aluminum, nickel, cobalt,
molybdenum and chromium, among others. Prices of these materials
can be volatile, and the Company engages in forward purchases of
some of these materials under certain market conditions, and
passes certain price fluctuations through to customers pursuant
to its long-term agreements. The Company ordinarily does not
otherwise attempt to hedge the price risk of its raw materials.
For some of the supplies and raw materials it purchases,
including certain metals, the Company has no fixed price
contracts or arrangements. Commercial deposits of certain metals,
such as cobalt, nickel, titanium, and molybdenum, that are
required for the alloys used in precision castings and aircraft,
are found in only a few parts of the world, and for certain
materials only single sources are readily available. The
availability and prices of these metals and other materials may
be influenced by private or governmental cartels, changes in
world politics, unstable governments in exporting nations,
production interruptions, inflation and other factors. Although
the Company has not experienced significant shortages of its
supplies and raw materials, there can be no assurance that such
shortages will not occur in the future. Any such shortages or
prices fluctuations could have a material adverse effect on the
Company.
(viii) The Company maintains a policy of hedging foreign currency
transactions and economic exposures for foreign currency
denominated obligations. The Company does not hedge against net
asset values for its foreign investments attributed to its
foreign subsidiaries valued in local currencies. To the extent
the Company's foreign revenue base grows and net asset base
expands, as the result of the Company's increased foreign
business activity, the Company's exposure to adverse foreign
currency rate movement increases. The Company's foreign currency
risk exposure is also subject to the stability of the foreign
-20-
<PAGE>
currency of the country where the Company maintains foreign
operations or does business. The Company seeks to minimize the
impact of adverse foreign currency rate movements through its
hedging policy. The success of the hedging policy in preventing
an adverse financial result on operations in any accounting
period cannot be assured.
(ix) The Company has a decentralized Information Systems (I.S.)
function, in which each of its three major business segments
operate autonomously with its own I.S. organization. The Thiokol
Propulsion I.S. organization is moving toward completing a
scheduled three-year Year 2000 date readiness project that
addresses all major production applications supported by the
propulsion systems segment. The project's objective is to
identify all date-related program logic, to correct, replace or
eliminate all date processing problems, and to test and implement
into production the corrected application software. The project
is on schedule with over 80 percent of the planned work
completed. The project is expected to be completed by December
31, 1998, with system-wide testing activity occurring after that
date. The estimated cost for the project is $7.5 million, which
is being expensed as incurred over the three-year life of the
project. The Thiokol Propulsion I.S. organization has requested
its vendors of application or operating system software products
to provide a status and commitment regarding the readiness of
their respective products for the Year 2000. Most responses
indicate that vendors have solutions either in place or have
scheduled future versions to correct this problem.
Huck (fastening systems) uses primarily standard commercial,
vendor-supported application software products. These systems can
be made Year 2000 compliant by upgrading to current versions of
the vendors' software products. Huck recently purchased a new
Enterprise Resource Planning (ERP) software product that is Year
2000 and Euro compliant and will be implemented at all Huck sites
over the next three years. During the next twelve months,
approximately one-half of Huck's facilities will be converted to
the new software, thereby avoiding the need to upgrade the old
systems at those sites to achieve Year 2000 readiness. All
remaining sites, meanwhile, will be made compliant by upgrading
to current versions of the existing software products as
described above. This dual approach will address all Year 2000
readiness requirements by June 30, 1999. Those costs associated
with software purchases and with Year 2000 readiness are
estimated at $8.6 million.
Howmet (investment castings) I.S. is actively working its Year
2000 readiness issues. All date logic concerns on its central
mainframe applications and distributed server applications have
been identified and remedial action to correct or replace the
problematic code is currently under way. Howmet is currently
reviewing its various remote plant facilities to identify and
begin implementing any needed changes to both local business
applications and shop floor control systems. All corrective
action projects are expected to be completed by June 30, 1999. To
date, no material risk of non-compliance has been identified.
Howmet
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<PAGE>
has also initiated formal communications with all of its
significant suppliers, including raw materials, services, and
computer hardware/software suppliers, and large customers to
determine the extent to which Howmet's manufacturing processes
and interface systems are vulnerable to those third parties'
failure to resolve their own Year 2000 issues. Early responses
have indicated no significant problems.
Additionally, Howmet is installing several commercial application
software products, at both its central facility and at certain
plant sites, to further address their Year 2000 readiness.
Howmet's total estimated Year 2000 cost is $14.6 million, spread
over the three-year life of the project.
During 1999, all three business segments will focus on further
evaluation of customer and supplier readiness, embedded processor
systems, risk assessment, worst case scenarios and contingency
planning. There can be no guarantee that the systems of other
companies on which the Company's systems rely will be timely
converted and would not have an adverse effect on the Company's
systems.
(x) The Company is assessing the impact of the Euro conversion on its
business operations and is currently implementing a strategy
which will allow it to operate in a Euro environment during the
transition period, January 1, 1999 - December 31, 2001, and after
full Euro conversion, post July 1, 2002. The Company does not
anticipate any material impact from the Euro conversion on its
computer software plans. Computer software changes necessary to
comply with the Year 2000 issue are generally compliant with the
Euro conversion issue. Enterprise Resource Planning (ERP)
software being implemented at Huck and Howmet as a part of Year
2000 readiness will be Euro compliant. No additional costs
related to Euro compliance are expected for the ERP software.
Some expense is anticipated for minor system modifications, but
is not expected to be material. The Company's payroll system has
not yet been examined and will require modifications to be Euro
compliant. The costs of payroll systems modifications are also
undetermined. The Company expects no Euro conversion impact to
its Thiokol Propulsion business segment. The Company does not
expect any material impact to its contracting policies or
competitive position on its three business segments as a result
of the Euro conversion. The Company is reviewing the impact of
the Euro conversion on its foreign exchange exposure position.
The Company does not expect any significant changes to its
current hedging policy and does not expect any significant
increases in its foreign exchange exposure. Until the Company
completes its assessment of the Euro conversion impact, there can
be no assurance that the Euro impact will not have a material
impact on the overall business operations of the Company.
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<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
- ------------------------------------------------------------------
Information concerning the quantitative and qualitative disclosure
about market risk are included on pages F-25 and F-40 through F-41 of
Exhibit B, Financial Information, of the Company's Notice of Annual Meeting
and Proxy Statement for fiscal year-ended 1998 and is incorporated by
reference herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
The consolidated balance sheets of the Company as of June 30, 1998 and
1997, and the consolidated statements of income, cash flows, and
stockholders' equity for each of the three years in the period ended June
30, 1998, and notes to consolidated financial statements, are included on
pages F-4 through F-29 of Exhibit B, Financial Information, to the
Company's Notice of Annual Meting and Proxy Statement for fiscal year 1998
and are incorporated herein by reference in Exhibit Number 13.
Quarterly financial highlights are included on page F-29 to Exhibit B,
Financial Information, to the Company's Notice of Annual Meting and Proxy
Statement for the fiscal year ended 1998, and are incorporated herein by
reference in Exhibit Number 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- ------ --------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
Information concerning the Company's directors and nominees for
director is included on pages 2 through 4 of the Company's definitive Proxy
Statement dated September 11, 1998, and is incorporated herein by
reference. Information concerning disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is set forth on page 8 of the Company's
definitive Proxy Statement dated September 11, 1998, and is incorporated
herein by reference.
Information concerning the Company's Executive Officers is included on
pages 15 through 16 of Part I hereof.
-23-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
- -------------------------------
Information concerning executive compensation for fiscal year 1998 is
included on pages 8 through 12 of the Company's definitive Proxy Statement
dated September 11, 1998, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------
Information concerning beneficial ownership of the Company's common
stock is included on pages 6 and 7 of the Company's definitive Proxy
Statement dated September 11, 1998, and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- ------------------ ------------------------------------------------------
(a) DOCUMENTS FILED AS PART OF THIS REPORT
- --- --------------------------------------
1. Financial Statements
-----------------------
The following consolidated financial statements are included on pages
F-2 through F-29 of the Exhibit B, Financial Information, to the Company's
Notice of Annual Meeting and Proxy Statement for the fiscal year ended
1998, and are incorporated herein by reference in Exhibit Number 13:
Management's Report on Financial Statements.
Report of Ernst & Young LLP, Independent Auditors.
Consolidated Statements of Income -- Years ended June 30, 1998, 1997
and 1996.
Consolidated Balance Sheets -- June 30, 1998 and June 30, 1997.
-24-
<PAGE>
Consolidated Statements of Cash Flows -- Years ended June 30, 1998,
1997 and 1996.
Consolidated Statements of Stockholders' Equity -- Years ended June
30, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
--------------------------------
All schedules for which provision is made under the applicable
accounting regulation of the Securities and Exchange Commission are omitted
as they are either not required under the related instructions or are
otherwise inapplicable.
3. Index to Exhibits
--------------------
Exhibit
Number Description
------ -----------
(3) Certificate of Incorporation and By-Laws.
3.01 Restated Certificate of Incorporation of the Company,
effective July 3, 1989: Incorporated by reference as
Exhibit 3 to Form 10-K for fiscal year ended June 30,
1989.
3.02 Amended By-Laws of the Company: Incorporated by
reference to Annex IV to Proxy Statement/Prospectus
dated May 22, 1989, for Special Stockholders meeting
held June 23, 1989.
3.03 Amended By-Laws of the Company dated June 19, 1997
increasing Board of Directors: Incorporated by
reference as Exhibit 3 to Form 10-K for fiscal year
ended June 30, 1997.
3.04 Amended Certificate of Incorporation effective May 5,
1998: incorporated by reference as Exhibit 3(i) to Form
10-Q for the quarterly period ended March 31, 1998.
3.05 Amended and Restated By-Laws effective April 22, 1998:
Incorporated by reference as Exhibit 3(ii) to Form 10-Q
for the quarterly period ended March 31, 1998.
-25-
<PAGE>
(4) Instruments defining the rights of security holders including
indentures.
4.01 Rights Agreement between Thiokol Corporation and First
Chicago Trust Company of New York: Incorporated by
reference to Exhibit 4 to Form 8-A dated May 28, 1997.
4.02 See Exhibits 3.01, 3.02, 3.03, 3.04 and 3.05 above.
(10) Material contracts.
10.01 (1)1989 Stock Awards Plan: Incorporated by reference to
Annex VI to Proxy Statement/Prospectus dated May 22,
1989, for special Stockholders Meeting held June 23,
1989.
10.02 (1)1989 Stock Awards Plan as amended by stockholder
approval October 15, 1993: Incorporated by reference to
the definitive Proxy Statement dated September 11,
1992.
10.03 (1)Survivor Income Benefits Plan, amended through March
24, 1983: Incorporated by reference as Exhibit 10 to
Form 10-K for fiscal year ended June 30, 1989.
10.04 (1)Arrangements whereby the Company compensates its
independent auditors for tax services to certain key
executives for which there is no written document:
Incorporated by reference as Exhibit 10 to Form 10-K
for fiscal year ended June 30, 1989.
10.05 (1)Form of Employment Agreement between the Company and
certain of its executive officers including the Chief
Executive Officer and the other four highest paid
executive officers: Incorporated by reference as
Exhibit 10 to Form 10-K for fiscal year ended June 30,
1989.
10.06 Amended Form of Employment Agreement between certain of
its executive officers including the five most highly
compensated: Incorporated by reference as Exhibit 10 to
Form 10-K for fiscal year ended June 30, 1990.
10.07 Credit Agreement dated September 30, 1993 among Thiokol
Corporation and The First National Bank of Chicago,
Bank of America National Trust and Savings Association,
NBD Bank, N.A., and The Northern Trust Company:
Incorporated by reference as Exhibit 10 to Form 10-K
for fiscal year ended June 30, 1994.
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<PAGE>
10.08 (1)Thiokol Corporation Pension Plan (Second Restatement
Effective January 1, 1989): Incorporated by reference
as Exhibit 10 to Form 10-K for fiscal year ended June
30, 1994.
10.09 Huck International, Inc. Personal Retirement Account
Plan (Second Restatement Effective as of January 1,
1992): Incorporated by reference as Exhibit 10 to Form
10-K for fiscal year ended June 30, 1995.
10.10 Huck International, Inc. Supplemental Executive
Retirement Plan (Effective January 1, 1992):
Incorporated by reference as Exhibit 10 to Form 10-K
for fiscal year ended June 30, 1995.
10.11 Stock Purchase Agreement by and among Thiokol Holding
Company, Carlyle-Blade Acquisition Partners L.P., and
Blade Acquisition Corp. dated as of December 13, 1995:
Incorporated by reference as Exhibit 10 to Form 10-Q
for the quarterly period ended December 31, 1995.
10.12 Shareholders' Agreement by and among Thiokol Holding
Company, Carlyle-Blade Acquisition Partners, L.P., and
Blade Acquisition Corp. dated as of December 13, 1995:
Incorporated by reference as Exhibit 10 to Form 10-Q
for the quarterly period ended December 31, 1995.
10.13 Registration Rights Agreement by and between Blade
Acquisition Corp., Thiokol Holding Company and
Carlyle-Blade Acquisition Partners, L.P. dated as of
December 13, 1995: Incorporated by reference as Exhibit
10 to Form 10-Q for the quarterly period ended December
31, 1995.
10.14 Holding Management Agreement by and between Howmet
Corporation and Thiokol Holding Company dated as of
December 13, 1995: Incorporated by reference as Exhibit
10 to Form 10-Q for the quarterly period ended December
31, 1995.
10.15 Thiokol Transaction Fee Agreement by and between Howmet
Holdings Acquisition Corp. and Thiokol Corporation
dated as of December 13, 1995: Incorporated by
reference as Exhibit 10 to Form 10-Q for the quarterly
period ended December 31, 1995.
10.16 Amended Certificate of Designations, Preferences and
Relative, Participating, Optional, and Other Special
Rights of Preferred Stock and Qualifications,
Limitations, and Restrictions thereof of 9.0% Series A
Senior Cumulative Preferred Stock of
-27-
<PAGE>
Blade Acquisition Corp.: Incorporated by reference as
Exhibit 10 to Form 10-Q for the quarterly period ended
December 31, 1995.
10.17 Standstill Agreement by and among Thiokol Holding
Company, Thiokol Corporation, Carlyle-Blade Acquisition
Partners, L.P. et al. dated as of December 13, 1995:
Incorporated by reference as Exhibit 10 to Form 10-Q
for the quarterly period ended December 31, 1995.
10.18 Collateral Custodial Agreement by and among
Carlyle-Blade Acquisition Partners L.P., Thiokol
Holding Company, and the First National Bank of
Chicago: Incorporated by reference as Exhibit 10 to
Form 10-Q for the quarterly period ended December 31,
1995.
10.19 Credit Agreement dated as of May 23, 1996, among
Thiokol Corporation and The First National Bank of
Chicago. Incorporated by reference as Exhibit 10 to
Form 10-K for fiscal year ended June 30, 1996.
10.20 Thiokol Corporation 1996 Stock Awards Plan:
Incorporated by reference as Exhibit A to Proxy
Statement dated September 20, 1996.
10.21 (1)Thiokol Corporation Supplemental Executive
Retirement Plan amended and restated effective June 16,
1997.
10.22 (1)Thiokol Corporation Executive Bonus Plan as amended
and restated effective June 16, 1997.
10.23 (1)Thiokol Corporation Key Executive Bonus Plan as
amended and restated effective June 16, 1997.
10.24 (1)Thiokol Corporation Key Executive Long-Term
Incentive Plan as amended and restated effective June
16, 1997.
10.25 (1)Huck International, Inc. Excess Benefit Plan for
Selected Employees amended and restated effective June
16, 1997.
10.26 (1)Thiokol Corporation Grant Agreement Incentive Stock
Option amended and restated June 16, 1997.
10.27 (1)Thiokol Corporation Grant Agreement Non-qualified
Stock Option amended and restated June 16, 1997.
-28-
<PAGE>
10.28 (1)Cordant Technologies Inc. Directors Restricted Stock
Agreement dated July 1, 1998.
10.29 Thiokol Corporation $150,000,000 6-5/8% Senior Notes
Due 2008: Incorporated by reference to prospectus
Supplement to prospectus dated February 26, 1998.
10.30 Stock Purchase Agreement among Huck Industrial, Inc.,
Harvey Jacobson as Trustee to the Harvey Jacobson
Revocable Trust No. 2, dated as of March 13, 1998.
(11) Statement re computation of per share earnings.
Statement re computation of per share earnings of the Company and
subsidiaries for the three years ended June 30, 1998, 1997, and
1996 are included on page F-19 of Exhibit B, Financial
Information, to the Company's Notice of Annual Meeting and Proxy
Statement for fiscal year 1998 and are incorporated by reference
in Exhibit No. 13.
(13) Annual Report to security holders.
Applicable sections of the Annual Report to Stockholders of the
Company for fiscal year 1998 are contained in Exhibit B,
Financial Information, pages F-1 through F-46 of the Notice of
Annual Meeting and Proxy Statement incorporated by reference.
(21) Subsidiaries of the registrant.
Subsidiaries of the Company.
(23) Consents.
Consent of Ernst & Young LLP, independent auditors.
(27) Financial Data Schedule.
(b) REPORTS ON FORM 8-K
- --- -------------------
Form 8-K filed June 16, 1998. Item 5 - Other Events - News release
reporting completion of the acquisition of Jacobson Manufacturing.
-29-
<PAGE>
Form 8-K filed May 5, 1998. Item 5 - Other Events - News release
reporting change of corporate name from Thiokol Corporation to Cordant
Technologies Inc.
- ------------
(1)Management contract or compensatory plan or arrangement has been filed as
an Exhibit to this Form 10-K pursuant to Item 14c.
-30-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, as of
the 24th day of September 1998.
CORDANT TECHNOLOGIES INC.
(Registrant)
By /s/ Richard L. Corbin
Richard L. Corbin
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities indicated, as of the 24th day of September
1998.
SIGNATURE TITLE
--------- -----
/s/ James R. Wilson Chairman of the Board, President, Chief Executive
James R. Wilson Officer and Director
(Principal Executive Officer)
/s/ Richard L. Corbin Senior Vice President and Chief Financial Officer
Richard L. Corbin (Principal Financial Officer)
/s/ Michael R. Ayers Vice President and Controller
Michael R. Ayers (Principal Accounting Officer)
-31-
<PAGE>
/s/ Neil A. Armstrong Director
Neil A. Armstrong
/s/ Michael P.C. Carns Director
Michael P.C. Carns
/s/ Edsel D. Dunford Director
Edsel D. Dunford
/s/ U. Edwin Garrison Director
U. Edwin Garrison
_______________________ Director
Steven G. Lamb
_______________________ Director
David J. Lesar
/s/ Charles S. Locke Director
Charles S. Locke
/s/ D.Larry Moore Director
D.Larry Moore
/s/ William O.Studeman Director
William O.Studeman
/s/ Donald C. Trauscht Director
Donald C. Trauscht
-32-
<PAGE>
EXHIBIT (21)
SUBSIDIARIES OF CORDANT TECHNOLOGIES INC.
The following is a list of operating subsidiary corporations of the
Company as of June 30, 1998. Certain subsidiaries not considered
significant have been omitted.
State or Other
Jurisdiction
Subsidiary of Incorporation
- ---------- ----------------
Huck International, Inc.... .......................................Delaware
Huck S.A.............................................................France
Huck International Ltd.......................................United Kingdom
Thiokol Holding Company............................................Delaware
Howmet International Inc...........................................Delaware
Howmet Corporation.................................................Delaware
Howmet Holdings Corporation........................................Delaware
Howmet Cercast (Canada), Inc.........................................Canada
Howmet Cercast (U.S.A.), Inc.......................................Delaware
Howmet Ltd...................................................United Kingdom
Howmet Refurbishment Inc...........................................Delaware
Howmet S.A...........................................................France
Howmet Tempcraft, Inc..................................................Ohio
-33-
<PAGE>
EXHIBIT (23)
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Cordant Technologies Inc. of our report dated July 31, 1998,
included in Exhibit B, to the Cordant Technologies Inc. Notice of Annual
Meeting and Proxy Statement.
We also consent to the incorporation by reference in the Registration
Statements Form S-3 No. 333-1753, and Form S-8, Nos. 33-18630, 33-2921,
33-10316, 2-76672, 2-90885, 33-38322, and 33-22965 pertaining to certain
Retirement Savings and Investment Plans and Stock Option Plans of Cordant
Technologies Inc. of our report dated July 31, 1998, with respect to the
consolidated financial statements of Cordant Technologies Inc. incorporated
by reference in the Annual Report (Form 10-K) of Cordant Technologies Inc.
for the year ended June 30, 1998.
/s/ ERNST & YOUNG LLP
Salt Lake City, Utah
September 24, 1998
-34-
8/19/98
CORDANT TECHNOLOGIES INC.
DIRECTOR
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT, dated July 1, 1998 is
made by and between Cordant Technologies Inc., a Delaware corporation (the
"Company"), and ________________________, a Director of the Company (the
"Grantee"):
WHEREAS, it is determined to be in the best interests of the Company
and its Stockholders to offer grants of Restricted Stock as compensation to
directors serving on the Board of Directors of the Company in order to
recruit and retain qualified individuals to serve as Directors of the
Company;
WHEREAS, it is in the best interest of the Company and its
Stockholders that the Grantee, who is not an officer or employee of the
Company, an opportunity to acquire shares of Common Stock of the Company as
part of the annual retainer compensation paid to Directors for serving on
the Board of Directors; and
WHEREAS, the terms and conditions of the Company's 1996 Stock Awards
Plan, as amended and restated (the terms and conditions of which are hereby
incorporated by reference and made a part of this Agreement) permits the
grants of Restricted Stock;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS
Whenever the following terms are used below in this Agreement, they
shall have the meaning specified below unless the context clearly indicates
to the contrary. All capitalized terms used herein without definition shall
have the meanings ascribed to such terms in the Plan.
1.1. Board. "Board" means the Board of Directors of the Company.
<PAGE>
1.2. Committee. "Committee" means a committee of two or more directors
of the Company who are "outside directors" as such term is used in Section
162(m) of the Code and Non-Employee Directors for purposes of Rule 16b-3.
1.3. Common Stock. "Common Stock" means the common stock, $1.00 par
value, of the Company or such other securities as may be substituted
therefore pursuant to the Plan.
1.4. Exchange Act. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.5. Fair Market Value. "Fair Market Value" shall have the meaning set
forth in the Plan.
1.6. Plan. "Plan" means the 1996 Stock Awards Plan of Cordant
Technologies Inc. as amended ---- and restated.
1.7. Restrictions. "Restrictions" means the reacquisition and
transferability restrictions imposed upon Restricted Stock under this
Agreement.
1.8. Restricted Stock. "Restricted Stock" means Common Stock issued
under this Agreement and subject to the Restrictions imposed hereunder.
1.9. Rule 16b-3. "Rule 16b-3" means such rule adopted under the
Exchange Act, as such Rule may be amended from time to time, or any
successor rule.
2.0. Securities Act. "Securities Act" means the Securities Act of
1933, as amended.
ARTICLE II.
ISSUANCE OF RESTRICTED STOCK
In consideration for the services rendered to the Company as a
Director and for other good and valuable consideration, on the date hereof
the Company issues to the Grantee 428 shares of Restricted Stock upon the
terms and conditions set forth in this Agreement.
ARTICLE III.
RESTRICTIONS, VESTING AND REMOVAL OF RESTRICTIONS
3.1. Restrictions. No shares of Restricted Stock granted pursuant to
this Agreement may be sold, traded, assigned, transferred or otherwise
encumbered until such shares shall become vested and non-forfeitable and
the restrictions thereon are removed.
2
<PAGE>
3.2. Vesting And Removal Of Restrictions. No shares of Restricted
Stock granted pursuant to this Agreement shall vest and become
non-forfeitable and the restrictions thereon are removed ("Vested Stock")
until such date as the director's services as a member of the Company's
Board of Directors terminates, which shall be the date at which the
earliest of the following events occurs:
(a) the director's death or permanent disability,
(b) mandatory retirement, pursuant to Company director's
retirement policy, effective at the end of the term of
service during which the director has attained retirement
age pursuant to the terms of such directors' retirement
policy,
(c) resignation or failure to stand for re-election, prior to
such mandatory retirement provided that such action must
have the consent of at least 80% of all directors then on
the Board, with the affected director abstaining, or
(d) the occurrence of a merger, consolidation, acquisition,
liquidation or dissolution as described in Section 3.4 of
this Agreement.
In the event the Grantee terminates his or her services other than by an
event set forth in (a) through (d) above, such Restricted Stock shall be
forfeited.
3.3. Legend. Certificates representing shares of Restricted Stock
issued pursuant to this Agreement shall, until all restrictions lapse and
new certificates are issued pursuant to Section 3.4, bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN VESTING REQUIREMENTS AND MAY BE SUBJECT TO FORFEITURE OR
REACQUISITION BY CORDANT TECHNOLOGIES INC. (THE "COMPANY") UNDER
THE TERMS OF A RESTRICTED STOCK AGREEMENT BY AND BETWEEN THE
COMPANY AND THE HOLDER OF THE SECURITIES. PRIOR TO VESTING OF
OWNERSHIP IN THE SECURITIES, THEY MAY NOT BE, DIRECTLY OR
INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES.
COPIES OF THE ABOVE REFERENCED AGREEMENT ARE ON FILE AT THE
OFFICES OF THE COMPANY."
The Company shall retain custody of all shares of Restricted Stock or may
hold such shares by book entry registration until such restrictions are
removed. Grantee will execute stock powers to permit the transfer of such
shares by the Company free of such Restrictions, including in an event of
forfeiture as the case may be.
3.4. Lapse of Restrictions. Upon the vesting of the Restricted Stock
as provided in Section 3.1 and subject to Section 4.3, the Company shall
cause new certificates to be issued with respect to such Vested Stock and
delivered to the Grantee
3
<PAGE>
or his or her legal representative, free from the legend provided for in
Section 3.3 and any of the other Restrictions. Such Vested Stock shall
cease to be considered Restricted Stock subject to the terms and conditions
of this Agreement. Notwithstanding the foregoing, no such new certificate
shall be delivered to the Grantee or his or her legal representative unless
and until the Grantee or his legal representative shall have paid to the
Company in cash or by check the full amount of any federal, state and local
withholding or other employment taxes applicable to the taxable income of
the Grantee resulting from the lapse of the Restrictions.
3.5. Merger, Consolidation, Acquisition, Liquidation or Dissolution.
Upon the (w) dissolution or liquidation of the Company, (x) merger or
consolidation in which the Company or a subsidiary of the Company is not
the surviving corporation, (y) the sale of more than 50% of the Company's
capital stock or (z) the sale of all or substantially all of the Company's
assets, the Committee may then provide by resolution adopted prior to such
event that, at some time prior to the effective date of such event, all
Restricted Stock shall fully vest and all Restrictions with respect to such
Restricted Stock shall immediately expire.
3.6. Restrictions On New Stock. In the event that the Company's
outstanding Common Stock is changed into or exchanged for a different
number or kind of stock, shares or other securities of the Company or of
another entity pursuant to a merger or consolidation of the Company, the
sale of more than 50% of the Company's capital stock, the sale of all or
substantially all of the Company's assets or other similar transaction, or
a stock split, stock dividend, reorganization, recapitalization or other
similar event, such new, additional or different stock, shares or other
securities which are held or received by the Grantee in his or her capacity
as a holder of Restricted Stock shall be considered to be Restricted Stock
and shall be subject to all of the Restrictions, unless the Committee
provides, pursuant to Section 3.5, for the accelerated vesting and
expiration of the Restrictions on the Restricted Stock underlying the
distribution of the new, additional or different securities.
ARTICLE IV.
MISCELLANEOUS
4.1. Administration. The Committee shall have the power to interpret
this Agreement and all other documents relating to the shares of Restricted
Stock and to adopt such rules for the administration, interpretation and
application of the Plan with respect to this Agreement as are consistent
therewith and to interpret, amend or revoke any such rules. All actions
taken and all interpretations and determinations made by the Committee in
good faith shall be final and binding upon the Grantee, the Company and all
other interested persons. No member of the Committee shall be personally
liable for any action, determination or interpretation made in good faith
with respect to the Plan or Restricted Stock and all members of the
Committee shall be fully protected by the Company in respect to any such
action, determination or interpretation.
4
<PAGE>
4.2. Restricted Stock Not Transferable. No shares of Restricted Stock
or any interest or right therein or part thereof shall be liable for the
debts, contracts or engagements of the Grantee or his or her successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether
such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof
shall be null and void and of no effect; provided, however, that this
Section 4.2 shall not prevent transfers by will or by applicable laws of
descent and distribution or pursuant to a qualified domestic relations
order.
4.3. Conditions to Issuance of Stock Certificates. The Company shall
not be required to issue or deliver any certificate or certificates for
shares of Restricted Stock pursuant to this Agreement prior to fulfillment
of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which the Common Stock is then listed;
(b) The completion of any registration or otherqualification of such
shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body which the Committee shall, in its absolute discretion, deem
necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time as the Committee may
establish from time to time for reasons of administrative convenience; and
(e) Subject to the provisions of Section 4.8, the receipt by the
Company of full payment for such shares, including payment of any
applicable withholding or other taxes and/or the lapse or removal of any of
the Restrictions.
4.4. Notices. Any notice to be given under the terms of this Agreement
to the Company shall be addressed to the Company in care of its Secretary,
and any notice to be given to the Grantee shall be addressed to him or her
at the address given beneath his or her signature hereto. By a notice given
pursuant to this Section 4.4, either party may hereafter designate a
different address for notices to be given to it, him or her. Any notice
which is required to be given to the Grantee shall, if the Grantee is then
deceased, be given to the Grantee's personal representative if such
representative has previously informed the Secretary of the Company of his
or her status and address by written notice under this Section 4.4. Any
notice shall have been deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, deposited (with postage
prepaid) in a post office or branch post office regularly maintained by the
United States Postal Service.
5
<PAGE>
4.5. Rights as Stockholder. The Grantee shall have all the rights of a
stockholder with respect to the Restricted Stock granted hereby, subject to
the restrictions provided for herein, and in the Plan, including the right
to vote the shares of Restricted Stock and to receive all dividends or
other distributions paid or made with respect to the Restricted Stock.
4.6. Conformity to Securities Laws. This Agreement is intended to
conform to the extent necessary with all provisions of the Securities Act
and the Exchange Act and any and all regulations and rules promulgated by
the Securities and Exchange Commission thereunder, including without
limitation, Rule 16b-3. Notwithstanding anything herein to the contrary,
this Agreement shall be administered, and the Restricted Stock shall be
issued, only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, this Agreement and
the Restricted Stock issued hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
4.7. Amendment. This Agreement may be amended only by a writing
executed by the parties hereto which specifically states that it is
amending this Agreement.
4.8. Tax Withholding. The Company's obligation (i) to issue or deliver
to the Grantee any certificate or certificates for unrestricted Common
Stock or (ii) to pay to the Grantee any distributions with respect to the
Restricted Stock, is expressly conditioned upon receipt from the Grantee,
on or prior to the date the same is required to be withheld, of:
(a) Full payment (in cash or by check) of any amount that must be
withheld by the Company for federal, state and/or local tax purposes; or
(b) Subject to the Committee's consent, full payment by delivery to
the Company of unrestricted and unencumbered Common Stock previously owned
by the Grantee duly endorsed for transfer to the Company by the Grantee,
with an aggregate Fair Market Value (determined, as applicable, as of the
date of the lapse of the restrictions or vesting, or as of the date of the
distribution) equal to the amount that must be withheld by the Company for
federal, state and/or local tax purposes; or
(c) With respect to the withholding obligation for Restricted Stock
that becomes unrestricted as of a certain date (the "Vesting Date"),
subject to the Committee's consent, full payment by retention by the
Company of a portion of such Restricted Stock which become unrestricted or
vested with an aggregate Fair Market Value (determined as of the Vesting
Date) equal to the amount that must be withheld by the Company for federal,
state and/or local tax purposes; or
(d) Subject to the Committee's consent, any combination of payments
provided for in the foregoing subsections (a), (b) or (c).
4.9. Governing Law. The laws of the State of Delaware shall govern the
interpretation, validity, administration, enforcement and performance of
the terms of
6
<PAGE>
this Agreement regardless of the law that might be applied under principles
of conflicts of laws.
ARTICLE V.
STOCKHOLDER APPROVAL
Amendments to the Plan under which the Restricted Stock Awards are
granted pursuant to this Agreement will be submitted to stockholders for
approval on or before July 1, 1999 (within twelve months after July 1,
1998, the Restricted Stock grant date). Such Restricted Stock shall not
vest prior to the time the Plan amendments are approved by stockholders and
further provided if such approval has not been obtained by stockholders at
the end of such twelve month period all Restricted Stock granted pursuant
to this Agreement shall be canceled and become null and void.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
CORDANT TECHNOLOGIES INC.
By:________________________________
Name: Edwin M. North
Title: Vice President & Secretary
GRANTEE
By:_________________________________
Date:________________________________
7
EXECUTION COPY
- ------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
among
HUCK INTERNATIONAL, INC.,
as Purchaser,
HARVEY JACOBSON,
as Trustee of the Harvey
Jacobson Revocable Trust No.2
u/a/d March 1, 1998,
as Seller,
HARVEY JACOBSON,
and
CORDANT TECHNOLOGIES INC.
----------------------------
Dated as of May 13, 1998
----------------------------
------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
I. DEFINED TERMS Page
1.01. Defined Terms.........................................1
1.02. Other Definitions.....................................5
1.03. Accounting Terms......................................6
1.04. Other Rules of Construction...........................6
II. PURCHASE AND SALE
2.01. Purchase and Sale.....................................6
2.02. Closing Date Payment Amount...........................6
2.03. The Closing...........................................6
2.04. Purchase Price Adjustments............................7
2.05. Further Assurances....................................8
2.06. Cordant Actions.......................................8
III. REPRESENTATIONS AND WARRANTIES OF SELLER
AND JACOBSON
3.01. Authority.............................................8
3.02. Ownership of the Shares...............................9
3.03. Organization and Qualification of the Company.........9
3.04. Capital Stock of the Company..........................10
3.05. Other Equity Interests................................10
3.06. Historical Financial Statements;
No Undisclosed Liabilities........................... 10
3.07. Absence of Material Adverse Changes.................. 10
3.08. Real Property and Improvements....................... 11
3.09. Personal Property.................................... 12
3.10. Intellectual Property Rights......................... 12
3.11. Litigation........................................... 12
3.12. Contracts............................................ 12
3.13. Benefit Plans.........................................13
3.14. Taxes.................................................15
3.15. Environmental Matters.................................15
3.16. Transactions with Affiliates..........................16
3.17. Insurance.............................................16
3.18. Accuracy..............................................16
<PAGE>
IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER
AND CORDANT
4.01. Organization..........................................16
4.02. Authority.............................................16
4.03. Available Funds.......................................17
4.04. No Legal Proceedings..................................17
4.05. Securities Act of 1933................................17
V. FURTHER COVENANTS AND AGREEMENTS
5.01. Conduct of Business...................................18
5.02. Access; Information; Confidentiality..................19
5.03. Consents and Conditions to Closing....................19
5.04. Notification of Certain Matters.......................19
5.05. Insurance.............................................20
5.06. Jacobson Name.........................................20
5.07. Prohibition of Solicitation...........................20
5.08. Pay-Off of Debt.......................................20
5.09. Related Party Obligations.............................20
5.10. Resignation of Officers and Directors.................21
VI. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
6.01. Opinion of Counsel....................................21
6.02. Performance by Seller.................................21
6.03. Representations and Warranties........................21
6.04. No Injunctions........................................21
6.05. Seller's Certificate..................................21
6.06. Secretary's Certificate...............................22
6.07. Consents..............................................22
6.08. Ancillary Agreements..................................22
6.09. Transfer of All Capital Stock.........................22
VII. CONDITIONS PRECEDENT TO OBLIGATIONS OF JACOBSON
AND SELLER
7.01. Opinion of Counsel....................................22
7.02. Performance by Purchaser..............................22
7.03. Representations and Warranties........................22
7.04. No Injunctions........................................23
7.05. Officer's Certificate.................................23
7.06. Purchaser's Secretary's Certificate...................23
7.07. Cordant's Secretary's Certificate.....................23
<PAGE>
7.08. Consents..............................................23
7.09. Non-Competition Agreement.............................23
VIII. SURVIVAL AND INDEMNIFICATION
8.01. Survival of Representations, Etc.; Exclusive Remedies.23
8.02. Indemnification by Seller and Jacobson................24
8.03. Indemnification by Purchaser and Cordant..............25
8.04. Notice; Cooperation; Defense; Etc.....................26
8.05. Time Limitations; Recoverable Damages.................26
IX. TAXES
9.01. Taxes.................................................27
9.02. Transfer Taxes........................................31
9.03. Treatment of Indemnity and Other Payments.............31
9.04. Survival and Indemnification..........................31
X. MISCELLANEOUS
10.01. Brokers..............................................32
10.02. Expenses.............................................32
10.03. Preservation of Records..............................32
10.04. Amendments and Waivers...............................33
10.05 Transferability......................................33
10.06. Termination..........................................33
10.07. Notices..............................................33
10.08. Governing Law; Choice of Forum.......................34
10.09. Partial Invalidity...................................35
10.10. Section Headings.....................................35
10.11. Disclosure...........................................35
10.12 Counterparts.........................................35
10.13 Entire Agreement.....................................35
10.14 Publicity............................................35
10.15 Parties in Interest..................................35
10.16. Knowledge............................................36
10.17 Specific Performance.................................36
10.18 Cordant Guarantee....................................36
10.19 Jacobson Guarantee...................................36
<PAGE>
Exhibits
- --------
6.01. Opinion of Counsel for Seller
6.08. Form of Jacobson Non-Competition Agreement
7.01. Opinion of Counsel for Purchaser
9.01(h). Jacobson Purchase Price Allocation
9.01(j). Form of Tax Payment Agreement
Schedules
- ---------
3.01. Authority
3.05. Other Equity Interests
3.06. Historical Financial Statements
3.07. Absence of Material Adverse Changes
3.08. Real Property and Improvements
3.09. Personal Property
3.10. Intellectual Property Rights
3.11. Litigation
3.12. Contracts
3.13. Benefit Plans
3.14. Taxes
3.15. Environmental Matters
3.16. Transaction with Affiliates
3.17. Insurance
4.02. Authority (Purchaser)
5.01. Conduct of Business
5.04. Notification of Certain Matters
<PAGE>
STOCK PURCHASE AGREEMENT dated as of May 13, 1998,
among HUCK INTERNATIONAL, INC., a Delaware corporation
(the "Purchaser"), HARVEY JACOBSON, as Trustee of the
Harvey Jacobson Revocable Trust No. 2 u/a/d March 1,
1998 (the "Seller"), HARVEY JACOBSON, an individual
("Jacobson"), and CORDANT TECHNOLOGIES INC., a Delaware
corporation ("Cordant").
WHEREAS Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, all the issued and outstanding shares of capital
stock of Jacobson Mfg. Co. Inc., a New Jersey corporation (the "Company"),
upon the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
Defined Terms
-------------
1.01. Defined Terms. The following terms, not defined elsewhere in
this Agreement, shall have the following meanings:
"Affiliate" shall mean, as to the party specified, any Person
which directly or indirectly through stock ownership or through any
other arrangement either controls, is controlled by or is under common
control with, such party. The term "control" shall mean the power to
direct the affairs of such Person by reason of ownership of voting
stock or other equity interests, by contract or otherwise.
"Applicable Accounting Principles" shall mean United States
Generally Accepted Accounting Principles, consistently applied.
"Approved Remediation Program" shall mean any program for the
remediation or containment of any spill or release of Hazardous
Materials at any Real Property or Former Facility that is (i) proposed
or adopted by Seller or its Affiliates (or, at Seller's option, by the
Company or its Affiliates) and (ii) approved by any Environmental
Authority having jurisdiction over the Real Property or Former
Facility in question.
"Business Day" shall mean any day other than a Saturday, Sunday
or other day on which banks are authorized to be closed in New York
City.
<PAGE>
2
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Contracts" shall mean the leases, rental agreements, insurance
policies, sales orders, collective bargaining agreements, union
contracts, licenses, agreements, permits, purchase orders, commitments
and any and all other contracts or binding arrangements (including,
capital commitments), whether written or oral, express or implied, of
the Company.
"Dollars" and "$" shall mean, unless otherwise specified, United
States Dollars.
"Encumbrances" shall mean, to the extent applicable, all claims,
liens (including liens for Taxes), mortgages, security interests,
leases, options, rights of first refusal or first offer, easements or
other similar encumbrances.
"Environmental Affiliates" of the Company shall mean,
collectively, (a) any former subsidiaries of the Company, (b) all
partnerships, joint ventures and other entities or organizations in
which the Company was at any time a partner, joint venturer, member or
participant, (c) all predecessors or former corporations,
partnerships, joint ventures, organizations, businesses or other
entities whether in existence as of the date hereof or at any time
prior to the date hereof, the assets and obligations of which have
been acquired or assumed by the Company and to which the Company has
succeeded.
"Environmental Authority" shall mean any Federal, state or local
governmental authority charged with the enforcement of Environmental
Laws.
"Environmental Laws" shall mean all applicable Federal, state,
local and foreign laws, statutes, ordinances, codes, rules, standards
and regulations, and any applicable judicial or administrative
interpretation thereof, including any common law, applicable judicial
or administrative order, consent decree or judgment, imposing
liability or standards of conduct for the protection, preservation or
restoration of the environment (including ambient air, surface water,
groundwater, drinking water, wetlands, land surface or subsurface
strata, animal life and vegetation) and human health and safety.
Environmental Laws include the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. ss 9601 et seq.)
("CERCLA"); the Hazardous Materials Transportation Authorization Act
of 1994 (49 U.S.C. ss 5101 et seq.); the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. ss 136 et seq.); the Solid
Waste Disposal Act (42 U.S.C. ss 6901 et seq.); the Toxic Substance
Control Act (15 U.S.C. ss 2601 et seq.); the Clean Air Act (42 U.S.C.
ss 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C.
ss 1251 et seq.); the Safe Drinking Water Act (42 U.S.C. ss 300(f)
et seq.) and all analogous state, local and foreign counterpart or
equivalent statutes and any transfer of ownership notification or
approval statutes relating to environmental matters, each as amended
and in effect on the date hereof, and any and all regulations
promulgated thereunder.
<PAGE>
3
"Environmental Losses" shall mean amounts (net of insurance,
contributions from other potentially responsible parties and any
applicable reserves or escrows) paid to third parties (including
consultants and counsel and including fines and penalties payable to
governmental authorities, if applicable) after the Closing Date that
are incurred: (i) in the defense of, or in settlement or pursuant to a
judgment in respect of, any regulatory action brought by any
Environmental Authority, or any lawsuit brought by a third party,
relating to the off-site disposal or release of Hazardous Materials by
the Company prior to the Closing Date giving rise to liability under
applicable Environmental Laws (but only if and to the extent the
Company would have had this liability, if then properly asserted, on
or prior to the Closing Date) or (ii) in remediation of any Real
Property or Former Facility following the independent initiation of an
investigation by an Environmental Authority of such Real Property or
Former Facility, but only insofar as such amounts are spent to meet
the minimum requirements under applicable Environmental Laws or any
Approved Remediation Program in respect of the clean-up or remediation
of any Hazardous Materials spilled or released at such site prior to
the Closing Date (and only if and to the extent the Company would have
had this liability, if then properly asserted, on or prior to the
Closing Date); PROVIDED, HOWEVER, that "Environmental Losses" shall
not include expenses attributable directly or indirectly to (a) any
environmental conditions that are aggravated after the Closing Date
(by the Company or Purchaser), to the extent so aggravated, (b) any
change or proposed change in the Company's business or in or to any
Real Property or Former Facility (or the use thereof) after the
Closing Date or (c) the operations (including safety requirements) of
the Company after the Closing Date (or any permits relating thereto).
"Environmental Permits" shall mean all material permits, licenses
and authorizations of all governmental authorities needed by the
Company for the conduct of its operations as currently conducted under
all applicable Environmental Laws.
"Former Facilities" shall mean all real property and related
facilities owned, leased or operated by the Company or its
Environmental Affiliates at any time prior to the date hereof, and all
buildings, structures, improvements and fixtures located thereon,
whether owned, leased or otherwise held or used by the Company or any
Environmental Affiliate, but excluding any Real Property or
Improvement.
"Hazardous Material" shall mean any substance (liquid, gas or
solid), material or waste which is regulated by or forms the basis of
liability under any Environmental Laws, including any material or
substance which is (a) defined as a "solid waste," "hazardous waste,"
"hazardous material," "hazardous substance," "extremely hazardous
waste," "restricted hazardous waste," "pollutant," "contaminant,"
"hazardous constituent," "special waste," "toxic substance" or other
similar term or phrase under any Environmental Law, (b)
polychlorinated biphenyls (PCB's) or (c) any radioactive substance.
"Historical Financial Statements" shall mean the Company's
audited financial statements (balance sheets, statements of income and
statements of cash flows) for the
<PAGE>
4
fiscal years ending December 31, 1996 and December 31, 1997, and the
Company's unaudited balance sheet as of March 31, 1998 and unaudited
statement of income for the fiscal quarter ended March 31, 1998,
copies of which are included in Schedule 3.06(a).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Income Taxes" shall mean all Taxes on or measured by net income,
gross profits or net profits, together with any interest and any
penalties, additions to tax or additional amounts imposed by any
taxing authority, domestic or foreign.
"Jacobson Non-Competition Agreement" shall mean a Non-Competition
Agreement between Jacobson and the Purchaser dated the Closing Date in
the form of Exhibit 6.08.
"Intellectual Property Rights" shall mean Patents, Trademarks,
Trade Names, copyrights, and confidential and proprietary shop
drawings, industrial designs, inventions, trade secrets, and customer
and supplier lists.
"Multiemployer Plan" shall mean any "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA (i) which the Company
maintains, administers, contributes to or is required to contribute to
or under which the Company may incur any liability and (ii) which
covers any employee or former employee of the Company.
"Multiemployer Welfare Plan" shall mean any "employee welfare
plan" which covers employees of more than one employer and to which
the Company contributes or is obligated to contribute.
"Patents" shall mean patents (including all reissues, divisions,
continuations, continuations in part and extensions thereof), patent
applications and patent disclosures docketed.
"Permitted Encumbrances" shall mean, to the extent applicable,
Encumbrances which (a) are liens for Taxes not yet due and payable,
(b) do not, individually or in the aggregate, materially detract from
the value of the assets to which they attach, (c) are mechanics',
carriers', materialmen's, landlords', workers' or other similar liens
incurred in the ordinary course of business or (d) relate to molds,
equipment or similar assets owned by customers or third parties that
are used by the Company in its operations.
"Person" shall mean any natural person, corporation, limited
liability company, unincorporated association, trust, partnership,
joint venture or other entity.
"Taxes" shall mean all taxes on, or measured by or referred to
as, income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property or windfall profits
<PAGE>
5
taxes, customs, duties or similar assessments or charges, together
with any interest and any penalties, additions to tax or additional
similar amounts imposed by any taxing authority, domestic or foreign,
with respect thereto.
"Tax Returns" shall mean all returns, reports and statements
relating to Taxes that are required to be filed with any appropriate
domestic or foreign taxing authority.
"Trade Names" shall mean trade names embodying goodwill of the
Company, whether or not registration has been obtained or an
application for registration is pending.
"Trademarks" shall mean trademarks, service marks, brand names,
brand marks, trade dress, logos and all other names and slogans
associated with products of the Company, and all registrations thereof
and pending applications therefor.
"Trust Agreement" shall mean the Declaration of Trust, entitled
"Harvey Jacobson Revocable Trust No. 2 dated March 1, 1998", made and
entered into by Jacobson.
1.02. Other Definitions. The following terms are defined in the
sections indicated:
Term Section
"Adjusted Purchase Price 2.04
"Arbitrator" 2.04
"Balance Sheet" 2.04
"Benefit Plans" 3.13
"Claims" 8.04
"Closing" 2.03
"Closing Date" 2.03
"Closing Date Payment Amount: 2.02
"Closing Working Capital" 2.04
"COBRA" 3.13
"Current Assets" 2.04
"Current Liabilities" 2.04
"ERISA" 3.13
"Improvements" 3.08
"Losses" 8.02
"Material Adverse Effect" 3.03
"Notice of Disagreement" 2.04
"Order" 3.11
"Purchase Price" 2.02
"Real Property" 3.08
"Shares" 2.01
"Statement" 2.04
<PAGE>
6
"WC Amount" 2.04
"Working Capital" 2.04
1.03. Accounting Terms. Any accounting terms used in this
Agreement shall, unless otherwise specifically provided, have the
meanings given them in accordance with, and all financial computations
hereunder shall, unless otherwise specifically provided, be computed
in accordance with, the Applicable Accounting Principles.
1.04. Other Rules of Construction. References in this Agreement
to sections, schedules and exhibits are to sections of, and schedules
and exhibits to, this Agreement unless otherwise indicated. Unless
otherwise specifically provided, all references to laws, rules
regulations, agreements, Contracts, instruments, policies,
interpretations, accounting standards, stock exchange rules or other
governmental, judicial or quasi-governmental standards or
determinations, or the standards or determinations of any applicable
self-regulatory organizations, shall be deemed to be references to the
same as currently in effect on the date hereof. Words in the singular
include the plural and in the plural include the singular. The word
"or" is not exclusive. The words "including", "includes", "included"
and "include", when used, are deemed to be followed by the words
"without limitation".
ARTICLE II
Purchase and Sale
-----------------
2.01. Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, Seller agrees to sell, assign,
transfer, convey and deliver all the issued and outstanding capital
stock of the Company (the "Shares") to Purchaser, and Purchaser agrees
to purchase and accept the Shares from Seller, on the Closing Date.
2.02. Closing Date Payment Amount. In consideration of the sale
and transfer to Purchaser of the Shares on the Closing Date, Purchaser
shall deliver to Seller on the Closing Date, by wire transfer of
immediately available funds, the following (the "Closing Date Payment
Amount"): (i) $269,000,000 (the "Purchase Price") plus or minus, as
the case may be, (ii) an estimate, prepared by Seller and communicated
to Purchaser at least five Business Days prior to the Closing Date, of
any adjustments to the Purchase Price pursuant to Section 2.04.
2.03. The Closing. Upon the terms and subject to the conditions
set forth in this Agreement, the acquisition by Purchaser of the
Shares (herein called the "Closing") shall take place at 10:00 a.m. at
the offices of Roberts, Sheridan & Kotel, 12 East 49th Street, 30th
Floor, New York, New York, on the later to occur of May 31, 1998 and
the second Business Day following the date on which the conditions set
forth in Articles VI and VII shall have been satisfied or waived, or
such other time, date and place as the parties shall agree upon (the
date of the Closing being herein referred to as the "Closing Date").
<PAGE>
7
2.04. Purchase Price Adjustments. (a) Within 60 days after the
Closing Date, Seller shall prepare and deliver to Purchaser a
statement (the "Statement"), setting forth Working Capital (as defined
below) as of the close of business on the Closing Date ("Closing
Working Capital"). Purchaser shall cause the Company and its employees
to assist Seller and its representatives in the preparation of the
Statement and shall provide Seller and its representatives access at
all reasonable times to the personnel, properties, books and records
of the Company for such purpose. Purchaser and its representatives may
participate in the preparation of the Statement; provided, however,
that Purchaser acknowledges that Seller shall have the primary
responsibility and authority for preparing the Statement. At
Purchaser's option and expense, a physical inventory shall be
conducted by the Company on or before the Closing Date for the purpose
of preparing the Statement, and each of Seller and Purchaser and their
respective representatives shall have the right to observe the taking
of such physical inventory. Any expense incurred by the Company in
connection with the taking of such a physical inventory shall be for
the account of Purchaser and shall not be reflected in determining
Closing Working Capital. During the 30-day period following
Purchaser's receipt of the Statement, Purchaser and its independent
auditors will be permitted to review Seller's methodology and working
papers relating to the Statement. The Statement shall become final and
binding upon the parties on the thirtieth day following receipt
thereof by Purchaser unless Purchaser gives written notice of any
disagreement ("Notice of Disagreement") to Seller prior to such date.
The Notice of Disagreement (if any) shall specify in reasonable and
sufficient detail the nature of any disagreement so asserted and shall
be accompanied by a certificate of Purchaser's independent auditors
that they concur with each of the positions taken by Purchaser in the
Notice of Disagreement. If a Notice of Disagreement is received by
Seller in a timely manner, then the Statement (as revised in
accordance with clause (x) or (y) below) shall become final and
binding upon the parties on the earlier of (x) the date the parties
hereto resolve in writing any differences they have with respect to
any matter specified in the Notice of Disagreement or (y) the date any
disputed matters are finally resolved in writing by the Arbitrator (as
defined below). During the 30-day period following the delivery of a
Notice of Disagreement, Seller and Purchaser shall seek in good faith
to resolve in writing any differences which they may have with respect
to any matter specified in the Notice of Disagreement. If, at the end
of such 30-day period, Seller and Purchaser have not reached agreement
on such matters, the matters which remain in dispute shall be
submitted to an arbitrator (the "Arbitrator") for review and
resolution. The Arbitrator shall be Deloitte & Touche LLP, or if such
firm is unable or unwilling to act, such other nationally recognized
independent public accounting firm as shall be agreed upon by the
parties hereto in writing. The Arbitrator shall render a decision
resolving the matters in dispute within 30 days following their
submission to the Arbitrator. The fees of the Arbitrator, if
disagreements are submitted to the Arbitrator pursuant to this Section
2.04, shall be borne 50% by Purchaser and 50% by Seller.
(b) The purchase price for the Shares shall consist of the
Purchase Price plus the amount by which Closing Working Capital
exceeds $21,086,000 (the "WC Amount") or minus the amount by which
Closing Working Capital is less than the WC Amount (the Purchase Price
as so increased or decreased shall hereinafter be referred to as the
"Adjusted Purchase Price"). If the Closing Date Payment Amount is less
than the Adjusted Purchase Price, Purchaser shall, and if the Closing
Date Payment Amount is more than the Adjusted Purchase Price, Seller
<PAGE>
8
shall, within 10 Business Days after the Statement becomes final and
binding on the parties, make payment by wire transfer in immediately
available funds of the amount of such difference, together with
interest thereon at a rate equal to the rate of interest from time to
time announced publicly by Citibank, N.A. as its base rate, calculated
on the basis of the actual number of days elapsed over 365, from the
Closing Date to the date of payment.
(c) The term "Working Capital" shall mean Current Assets minus
Current Liabilities. The terms "Current Assets" and "Current
Liabilities" shall mean current assets and current liabilities of the
Company calculated on the same basis as reflected as line items on the
Company's audited balance sheet (the "Balance Sheet") as of December
31, 1997 (included in the Historical Financial Statements). The
parties hereto acknowledge and agree that the computation of Closing
Working Capital will be done in a manner consistent with the methods
used in the preparation of the Balance Sheet and that if disagreements
should arise with respect to individual items of inclusion and/or
exclusion, the governing principle will be that the adjustment
contemplated by this Section 2.04 is intended to analyze the economic
effects of a change in Working Capital from the date of the Balance
Sheet to the Closing Date, and that such change can only be
appropriately measured when the WC Amount and the Closing Working
Capital are computed on the same basis (even if consistent treatment
as such is not the best treatment or an appropriate treatment, in
whole or in part, under the Applicable Accounting Principles).
2.05. Further Assurances. From and after the Closing, upon
written request from and at the expense of Purchaser, Seller shall
execute, acknowledge and deliver all such further acts, assurances,
deeds, assignments, transfers, conveyances and other instruments and
papers as may be reasonably required to sell, assign, transfer, convey
and deliver the Shares to Purchaser.
2.06. Cordant Actions. Cordant agrees to provide Purchaser on the
Closing Date with immediately available funds in the amount required
for Purchaser to perform its obligations under Article II.
ARTICLE III
Representations and Warranties of Seller and Jacobson
-----------------------------------------------------
Each of Seller and Jacobson represents and warrants to Purchaser
as follows:
3.01. Authority. Seller has the requisite power and authority
under the Trust Agreement to execute and deliver this Agreement and
the other agreements and instruments to be executed and delivered by
Seller pursuant hereto and to consummate the transactions contemplated
hereby and thereby. This Agreement has been duly executed and
delivered by Seller and constitutes, and such other agreements and
instruments when duly executed and delivered by Seller will
constitute, legal, valid and binding obligations of Seller enforceable
against Seller in accordance with their respective terms. Jacobson has
the requisite legal capacity to execute this Agreement and the other
agreements and instruments to be executed and delivered
<PAGE>
9
by Jacobson pursuant hereto and to consummate the transactions
contemplated hereby and thereby. This Agreement has been duly executed
and delivered by Jacobson and constitutes, and such other agreements
and instruments when duly executed and delivered by Jacobson will
constitute, legal, valid and binding obligations of Jacobson
enforceable against Jacobson in accordance with their respective
terms. Jacobson hereby explicitly ratifies, adopts and acknowledges,
as the sole beneficiary of Seller, the execution, delivery and
performance of this Agreement by Seller. Except as set forth in
Schedule 3.01, the execution and delivery by Seller and Jacobson of
this Agreement and the execution and delivery by Seller and Jacobson
of such other agreements and instruments and the consummation by
Seller and Jacobson of the transactions contemplated hereby and
thereby will not violate any law, or conflict with, or result in any
breach of, constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or result in the
creation of an Encumbrance on any of the properties or assets of
Seller pursuant to, the Trust Agreement, the corporate charter or
by-laws of the Company or any material indenture, mortgage, lease,
agreement or other instrument to which Seller or the Company is a
party or by which Seller or the Company, or their respective
properties or assets, are bound. No material approval, authorization,
consent or other order or action of or filing with any Person or
court, administrative agency or other governmental body in the United
States of America is required for the execution and delivery by Seller
or Jacobson of this Agreement or such other agreements and instruments
or the consummation by Seller or Jacobson of the transactions
contemplated hereby or thereby, except for the filing of a premerger
notification report by Seller and the Company under the HSR Act and
filings by the Company under the New Jersey Industrial Site
Responsibility Act, and except as set forth in Schedule 3.01.
3.02. Ownership of the Shares. Seller has good and valid title to
the Shares, free and clear of any Encumbrances or restrictions
whatsoever. The Shares are not subject to any voting trust agreement
or other Contract, agreement, arrangement, commitment or
understanding, including any such agreement, arrangement, commitment
or understanding restricting or otherwise relating to the voting,
dividend rights or disposition of the Shares, other than this
Agreement.
3.03. Organization and Qualification of the Company. The Company
is a corporation duly organized, validly existing and in good standing
under the laws of the State of New Jersey. The Company has full power
and authority and possesses all governmental franchises, licenses,
permits, authorizations and approvals necessary to enable it to use
its corporate name and to own, lease or otherwise hold its properties
and assets and to carry on its business as presently conducted other
than such franchises, licenses, permits, authorizations and approvals
the lack of which, individually or in the aggregate, would not have a
material adverse effect on the business, assets, financial condition
or results of operations of the Company (a "Material Adverse Effect").
The Company is in good standing to do business in each jurisdiction in
which the nature of its business or the ownership, leasing or holding
of its properties makes such qualification necessary, except such
jurisdictions where the failure to so qualify would not have a
material adverse effect on the business, assets, financial condition
or results of operations of the Company. Seller has made available to
Purchaser true and complete copies of the Certificate of
Incorporation, as amended to date, and the By-laws, as in effect on
the date hereof, of the Company.
<PAGE>
10
3.04. Capital Stock of the Company. The authorized capital stock
of the Company consists of 2,500 shares of Common Stock having no par
value, of which 225 shares, constituting the Shares, are duly
authorized, validly issued and outstanding, fully paid and
non-assessable. Seller is the sole registered holder of the Shares and
Jacobson, as its sole beneficiary, is the sole beneficial owner of the
Shares. No claim has been made or threatened to Seller or Jacobson
asserting that any Person other than Seller (or Jacobson, as its
beneficiary) is the holder or beneficial owner of, or has the right to
acquire beneficial ownership of, any stock of, or any other voting,
equity or ownership interest in the Company. The Shares have not been
issued in violation of, and are not subject to, any preemptive or
subscription rights. Except for the Shares, there are no shares of
capital stock or other equity securities of the Company outstanding.
There are no outstanding warrants, agreements, convertible or
exchangeable securities or other commitments (other than this
Agreement) pursuant to which Seller, the Company or any Person is or
may become obligated to issue, sell, transfer, purchase, return or
redeem any securities of the Company, and there are not any equity
securities of the Company reserved for issuance for any purpose.
3.05. Other Equity Interests. Except as set forth on Schedule
3.05, the Company does not directly or indirectly own any capital
stock of or other equity interest in any Person.
3.06. Historical Financial Statements; No Undisclosed
Liabilities. (a) The Historical Financial Statements, true and
complete copies of which are included in Schedule 3.06, were prepared
in all material respects in accordance with the Applicable Accounting
Principles (except that the unaudited balance sheet as of March 31,
1998 and the unaudited statement of income for the first quarter ended
March 31, 1998 do not include notes and are subject to year-end audit
adjustment) and constitute fair and reasonable presentations of the
financial position and results of operations of the Company, in all
material respects, as of the dates and for the periods set forth
therein. The Company does not have any known contingent or undisclosed
obligations or liabilities which would be required in accordance with
the Applicable Accounting Principles to be reflected in a currently
prepared balance sheet, other than obligations or liabilities (i) that
are reflected or disclosed in the Historical Financial Statements,
(ii) that are disclosed in this Agreement or the Schedules hereto,
(iii) that were incurred after December 31, 1997, in the ordinary
course of business, or (iv) that are not material to the financial
condition of the Company.
(b) The pro forma income statement attached as Schedule
3.06(b)(i) was prepared from the Company's financial records on a
basis consistent with the preparation of the statement of income for
the quarter ended March 31, 1998 that is included in the Historical
Financial Statements, except as modified in accordance with the pro
forma adjustments made thereto that are referenced in Schedule
3.06(b)(ii). The financial information included in Schedule 3.06(b)(i)
(subject to the pro forma adjustments) and in Schedule 3.06(b)(ii) is
accurate in all material respects on a pro forma basis.
3.07 Absence of Material Adverse Changes. Except as disclosed in
Schedule 3.07, and excluding any macroeconomic changes or conditions
in national or local economies affecting the business of the Company
or its customers or suppliers generally, there
<PAGE>
11
have been no changes since December 31, 1997, through the date of this
Agreement which in the aggregate have had or are reasonably likely to
have a Material Adverse Effect. Except as disclosed in Schedule 3.07,
since December 31, 1997, the Company has not:
(i) redeemed or otherwise acquired any shares of its capital
stock or issued any capital stock or any option, warrant or right
relating thereto;
(ii) granted to any officer or plant manager any increase in
compensation, or granted any material increase in compensation to
the Company's other employees generally, except as required under
existing agreements or in the ordinary course of business
consistent with past practice;
(iii) incurred any liabilities, obligations or indebtedness
for borrowed money or guaranteed any such liabilities,
obligations or indebtedness, other than in the ordinary course of
business consistent with past practice;
(iv) cancelled any material indebtedness owed to the
Company, other than in the ordinary course of business consistent
with past practice;
(v) made any material change in any method of accounting or
accounting practice or policy;
(vi) acquired by merging or consolidating with, or by
purchasing stock or a substantial portion of the assets of, or by
any other manner, any material operating business, corporation,
partnership, association or other business organization (or
division thereof);
(vii) sold, leased or otherwise disposed of or imposed any
Encumbrance on any of its assets which are material, individually
or in the aggregate, to the Company, except in the ordinary
course of business consistent with past practice;
(viii) entered into any material lease or license of real or
personal property; or
(ix) modified, amended or terminated any lease of, or other
material agreement pertaining to, real property (except
modifications or amendments associated with renewals of leases in
the ordinary course of business).
3.08. Real Property and Improvements. Schedule 3.08 contains a
list of all real property and interests in real property owned or
leased by the Company (the "Real Property"). Except as set forth in
Schedule 3.08, the Company has good and valid title in fee simple to
the Real Property set forth in Schedule 3.08 as being owned by it, in
each case free and clear of all Encumbrances, other than Permitted
Encumbrances and any Encumbrances described in or incorporated by
reference into Schedule 3.08. The uses for which the buildings,
facilities, and other improvements located on the Real Property (the
"Improvements") are zoned do not materially restrict, or in any manner
materially impair, the use of the Improvements for purposes
<PAGE>
12
of the businesses of the Company as conducted on the date of this
Agreement. The Company is the lessee of each of the leasehold estates
set forth in Schedule 3.08 as being leased by it, and except as set
forth in Schedule 3.08, is in possession of each of the premises
purported to be so leased. Each such lease pursuant to which such
leasehold estate is granted is valid and without any material default
thereunder by the Company, or, to the knowledge of Seller, the
landlord. Except as set forth in Schedule 3.08, there is no pending
or, to the knowledge of Seller, threatened, condemnation, eminent
domain or similar proceeding with respect to the Real Property or the
Improvements. There are no capitalized leases of real or personal
property.
3.09. Personal Property. Except as disclosed in Schedule 3.09 and
except for assets disposed of in the ordinary course of business since
December 31, 1997, the Company has good and valid title to the
machinery, equipment and other tangible personal property reflected in
the Balance Sheet as being owned by it, free and clear of all
Encumbrances, other than Permitted Encumbrances; and the Company is
the lessee of all the leasehold estates pertaining to the machinery,
equipment and other tangible personal property purported to be granted
by the capitalized leases reflected in the Balance Sheet (if any).
Each capitalized lease pursuant to which such leasehold estate is
granted is valid and without any material default thereunder by the
Company, or, to the knowledge of Seller, the lessor.
3.10. Intellectual Property Rights. Schedule 3.10 lists all the
Patents, Trademarks and Trade Names owned or licensed by the Company
which are used in and are material to the Company's businesses. Except
as otherwise disclosed in Schedule 3.10, the Company validly owns,
beneficially and of record, all the Patents, Trademarks and Trade
Names listed in Schedule 3.10, free and clear of all Encumbrances
other than Permitted Encumbrances. Except as disclosed in Schedule
3.10, no action, claim, suit or proceeding has been brought against
the Company or, to the knowledge of Seller, has been threatened
against the Company with respect to any material Intellectual Property
Rights used in the Company's businesses that challenge the Company's
right to use such Intellectual Property Rights in the manner the
Company currently uses such rights.
3.11. Litigation. Except as disclosed in Schedule 3.11, there is
no action, suit or proceeding involving more than $500,000 and there
are no related actions, suits or proceedings each involving less than
$500,000 but involving more than $2,500,000 in the aggregate, pending
or, to the knowledge of Seller, threatened against the Company in any
court, or before any Federal, state, local or other governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind. The Company
is not subject to any judgment, order, writ, injunction or decree of
any court or any Federal, state, local or other governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or any arbitrator (collectively, an "Order"),
that materially affects the operation of the Company's businesses.
3.12. Contracts. Except for the Contracts listed in Schedule
3.12, the Company is not a party to any (i) contract or agreement for
the employment of any officer or employee or with any labor union or
association; (ii) bonus, pension, profit-sharing, retirement, deferred
compensation, incentive or supplementary compensation, percentage
compensation, termination
<PAGE>
13
or severance pay, stock purchase, stock option, hospitalization,
insurance or other plan providing employee benefits; (iii) material
contract or agreement in which any Person who is an officer, director
or stockholder or of the Company has a significant economic interest;
(iv) contract or agreement relating to the borrowing or lending of
money or the guarantee of any obligations for borrowed money in excess
of $100,000, excluding endorsements made for purposes of collection in
the ordinary course of business; (v) material license or royalty
agreement; (vi) material distributor, dealer, sales agency or
advertising contract; (vii) material contract or agreement with any
government or agency or instrumentality thereof; (viii) contract or
agreement granting to any Person a preferential right to purchase any
of its material assets, properties or rights or containing a covenant
or other agreement not to compete; (ix) contract or agreement with
respect to the transportation, removal or storage of any material
amount of effluent, wastes, pollutants or other hazardous substances
or materials; (x) any other material contract or agreement not made in
the ordinary course of business. Except as disclosed in Schedule 3.12,
each of the Contracts listed in Schedule 3.12 is valid and in full
force and effect and, to the knowledge of Seller, the Company and each
other party to any such Contract has performed all material
obligations required to be performed by it thereunder, and, to
Seller's knowledge, no other party to any such Contract has taken the
position that such Contract is not enforceable against any such other
parties by the Company.
3.13. Benefit Plans. (a) Schedule 3.13 contains a list and brief
description of all material "employee pension benefit plans" (as
defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA), and any other material employee
fringe benefit plans maintained, or contributed to, by the Company
(all the foregoing being herein called "Benefit Plans"). The Company
has made available to Purchaser true, complete and correct copies of
(1) each Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (2) the most recent annual report on Form 5500
filed with the Internal Revenue Service with respect to any Benefit
Plan (if any such report was required), (3) each trust agreement or
other funding arrangement relating to any Benefit Plan (if applicable)
and (4) copies of the acturial valuations and other reports set forth
on Schedule 3.13.
(b) Each Benefit Plan has been administered in all material
respects in accordance with its terms. All the Benefit Plans, and the
Company with respect thereto, are in compliance in all material
respects with the applicable provisions of ERISA and the Code. Except
as disclosed in Schedule 3.13, there are no investigations by any
governmental agency, termination proceedings or other claims (except
claims for benefits payable in the normal operation of the Benefit
Plans), suits or proceedings against or involving any Benefit Plan
that would result in material liability against the Company.
(c) Except as disclosed in Schedule 3.13, all the Benefit Plans,
as adopted or as they may have been amended, as, when and to the
extent required, comply with the applicable provisions of the Tax
Equity and Fiscal Responsibility Act of 1982, the Deficit Reduction
Act of 1984, the Retirement Equity Act of 1984 and the Tax Reform Act
of 1986. Except as disclosed in Schedule 3.13, the Benefit Plans that
are pension benefit plans have received determination letters from the
Internal Revenue Service to the effect that such Benefit Plans are
qualified and
<PAGE>
14
exempt from Federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, and no such determination letter has been
revoked nor, to the knowledge of Seller, has revocation been
threatened, nor has any such Benefit Plan been amended since the date
of its most recent determination letter or application therefor in any
respect that would adversely affect its qualification.
(d) No "prohibited transaction" (as defined in Section 4975 of
the Code or Section 406 of ERISA) has occurred which involves the
assets of any Benefit Plan and which could subject any employees of
the Company, a trustee, administrator or other fiduciary of any trusts
created under any Benefit Plan to the tax or penalty on prohibited
transactions imposed by Section 4975 of the Code or the sanctions
imposed under Title I of ERISA. Except as disclosed in Schedule 3.13,
none of the Benefit Plans has been terminated nor have there been any
"reportable events" (as defined in Section 4043 of ERISA and the
regulations thereunder) with respect thereto.
(e) Each Benefit Plan subject to Title IV of ERISA has paid all
premiums when due to the Pension Benefit Guaranty Corporation. No
Benefit Plan has applied for or received a waiver of the minimum
funding standards imposed by Section 412 of the Code, and no Benefit
Plan has an "accumulated funding deficiency" within the meaning of
Section 412(a) of the Code as of the most recent plan year. The
Company has made available to Purchaser the most recent actuarial
report or valuation with respect to each Benefit Plan that is a
"defined benefit plan" (as defined in Section 3(35) of ERISA). The
information supplied to the actuary for use in preparing those reports
or valuations was complete and accurate in all material respects and
Seller has no reason to believe that the conclusions expressed in
those reports or valuations are incorrect in any material respect.
(f) Except to the extent required under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"), the Company
does not maintain, contribute to, or have any liability or obligation
to contribute to any funded or unfunded medical, health or life
insurance plan or similar arrangement for present or future retirees
or present or future terminated employees.
(g) All contributions required to be made by the Company to each
Multiemployer Plan and Multiemployer Welfare Plan have been made when
due.
(h) The Company is not a member of a controlled group of
corporations, within the meaning of Section 414(b) of the Code, is not
a member of a group of trades or businesses under common control,
within the meaning of Section 414(c) of the Code, and is not a member
of an affiliated service group, within the meaning of Section 414(m)
and (o) of the Code.
(i) The execution of this Agreement and the consummation of the
transaction contemplated hereby do not result in the acceleration or
early vesting of any payments or benefits under any Benefit Plan or in
the payment of any "excess parachute payments" within the meaning of
Section 280G of the Code.
<PAGE>
15
3.14. Taxes. The Company has timely filed or caused to be filed
with the appropriate taxing authorities all Tax Returns required to be
filed by the Company through the date hereof and will timely file all
Tax Returns required to be filed on or prior to the Closing Date, in
each case, subject to applicable extensions. Except as disclosed in
Schedule 3.14, no outstanding or unresolved deficiency for any Tax or
claim for additional Taxes by any taxing authority has been proposed,
asserted or assessed in writing against the Company and no audit,
action, suit or claim is currently pending against the Company in
respect of any Tax or assessment. Except as disclosed on Schedule
3.14, there are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any material Tax Returns
required to be filed by or with respect to the Company, and the
Company has not requested any extension of time within which to file
any Tax Return (with respect to Tax Returns that have not yet been
filed). Except as disclosed on Schedule 3.14, the Company is not a
party to any agreement or arrangement (written or oral) providing for
the allocation or sharing of Taxes or Tax benefits. For Federal Income
Tax purposes the Company is an "S Corporation" as defined in Section
1361(a) of the Code and has been an S Corporation for each taxable
year since December 31, 1987. In addition, the Company has taken all
required steps to be taxed as an S Corporation under applicable state
income Tax law in Ohio, Pennsylvania, Arizona and North Carolina.
3.15. Environmental Matters. Except as set forth in Schedule
3.15, to Seller's knowledge: (i) the Company is in compliance in all
material respects with all Environmental Laws applicable to it and its
properties, (ii) the Company has obtained and is in compliance in all
material respects with all Environmental Permits, and the sale of the
Shares hereunder will not cause a termination of any such
Environmental Permits, (iii) the Company does not generate, use,
store, transport or dispose of any Hazardous Materials in the course
of conducting its business operations in compliance in all material
respects with all applicable Environmental Laws, (iv) neither the
Company nor its Environmental Affiliates has caused, had or suffered
any material spills, releases or threatened releases of Hazardous
Materials at any of its Real Properties or Former Facilities or which
affect any adjacent parcels of land, (v) all garbage, wastes, refuse,
byproducts, Hazardous Materials and other potential contaminants
produced by the Company in the course of conducting its business
operations are and have been disposed of by properly licensed waste
removal companies, or other third parties or governmental authorities,
in compliance in all material respects with all requirements
applicable to the Company under Environmental Laws regulating such
activities, (vi) none of the Real Properties or Former Facilities
(including the soil, subsoil and groundwater at or under such sites)
contains any Hazardous Materials in amounts exceeding prescribed
levels under any Environmental Laws which could require the Company or
any Environmental Affiliate to incur any material clean-up or
remediation expenses or liabilities not covered by insurance or other
third party indemnities, (vii) there are no unregistered underground
storage tanks located under any of the Real Properties or Former
Facilities that are required to be registered under any applicable
Environmental Laws, (viii) no notice has been received by the Company
identifying the Company or any Environmental Affiliate as a
"potentially responsible party", or requesting information under
CERCLA or any similar state statutes, with respect to any current
investigation, suit, proceeding or other regulatory activity of any
applicable Federal or state environmental agency (whether
<PAGE>
16
with respect to the Company, any Environmental Affiliate, the Real
Properties, the Former Facilities or otherwise), (ix) there are no
pending or threatened investigations, suits, administrative actions,
demands, claims, hearings or proceedings against the Company or any
Environmental Affiliate alleging the violation of any Environmental
Laws, (x) there are no consent decrees, orders, judgments or
agreements with any Federal or state environmental agencies in effect
that materially restrict the Company's operations, or the use of the
Real Properties in connection with the Company's operations, as
currently conducted and (xi) none of the Real Properties or Former
Facilities is listed or proposed for listing on the National
Priorities List or is listed on the Comprehensive Environmental
Response, Compensation, Liability Information System List promulgated
pursuant to CERCLA, except in each case for violations of or
exceptions to the foregoing which would not in the aggregate have or
cause a Material Adverse Effect.
3.16. Transactions with Affiliates. Since December 31, 1996,
except as disclosed in Schedule 3.16, the Company has not purchased,
acquired, leased or licensed any property or services from, or sold,
transferred, leased or licensed any property or services to, any
Affiliate, or any officer or director of the Company, other than on an
arm's length basis in the ordinary course of business except where the
amount involved (for individual matters or related matters) is less
than $60,000.
3.17. Insurance. Schedule 3.17 contains a list and description of
all material policies of property, fire, liability, workers'
compensation and all other types of insurance maintained by the
Company. As of the date hereof, all such policies are in full force
and effect and all premiums due thereon have been paid.
3.18. Accuracy. To Seller's knowledge, the required disclosures
made in this Agreement and the schedules attached hereto are complete
and accurate in all material respects, and the scheduled disclosures
do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements or facts
contained therein not misleading.
ARTICLE IV
Representations and Warranties of Purchaser and Cordant
-------------------------------------------------------
Each of Purchaser and Cordant represents and warrants to Seller
as follows:
4.01. Organization. Each of Purchaser and Cordant is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization.
4.02. Authority. Each of Purchaser and Cordant has the full
corporate power and authority to execute and deliver this Agreement
and the other agreements and instruments to be executed and delivered
by Purchaser or Cordant pursuant hereto and to consummate the
<PAGE>
17
transactions contemplated hereby and thereby. All corporate acts and
other proceedings required to be taken by or on the part of Purchaser
or Cordant to authorize such execution, delivery and consummation have
been duly and properly taken. This Agreement has been duly executed
and delivered by Purchaser and Cordant and constitutes, and such other
agreements and instruments when duly executed and delivered by
Purchaser or Cordant will constitute, legal, valid and binding
obligations of Purchaser and Cordant enforceable against Purchaser and
Cordant in accordance with their respective terms. The execution and
delivery by Purchaser and Cordant of this Agreement and the execution
and delivery by Purchaser or Cordant of such other agreements and
instruments and the consummation by Purchaser or Cordant of the
transactions contemplated hereby and thereby will not violate any law,
or conflict with, result in any breach of, constitute a default (or an
event which with notice or lapse of time or both would become a
default) under, or result in the creation of an Encumbrance on any of
the properties or assets of Purchaser or Cordant pursuant to, the
corporate charter or by-laws of Purchaser or Cordant or any indenture,
mortgage, lease, agreement or other instrument to which Purchaser or
Cordant is a party or by which their respective properties or assets
are bound. No material approval, authorization, consent or other order
or action of or filing with any Person or court, administrative agency
or other governmental body in the United States of America is required
for the execution and delivery by Purchaser or Cordant of this
Agreement and the execution and delivery by Purchaser or Cordant of
such other agreements and instruments or the consummation by Purchaser
and Cordant of the transactions contemplated hereby or thereby, except
for the filing of a premerger notification report by Purchaser and
Cordant under the HSR Act and except as set forth in Schedule 4.02.
4.03. Available Funds. Purchaser has available to it, without
requiring the prior consent, approval or other discretionary action of
any third party, cash to pay the full amount of the Purchase Price.
4.04. No Legal Proceedings. There is no action, suit, order,
judgment or proceeding pending or, to the knowledge of Purchaser or
Cordant, threatened against or affecting Purchaser or Cordant that,
individually or when aggregated with one or more other actions, suits,
orders, judgments or proceedings, has or might reasonably be expected
to have a material adverse effect on Purchaser's or Cordant's ability
to perform any of its obligations hereunder or under any of the other
agreements and instruments to be executed and delivered by Purchaser
or Cordant in connection herewith.
4.05. Securities Act of 1933. The Shares purchased by Purchaser
pursuant to this Agreement are being acquired for investment only and
not with a view to any public distribution thereof, and Purchaser will
not offer to sell or otherwise dispose of the Shares so acquired by it
in violation of the registration requirements of the Securities Act of
1933.
<PAGE>
18
ARTICLE V
Further Covenants and Agreements
--------------------------------
5.01. Conduct of Business. Except as otherwise expressly provided
herein, from and after the date of this Agreement and until the
Closing, Seller and Jacobson will cause the Company to operate its
business only in the ordinary course consistent with past practice in
all material respects and will promptly notify Purchaser of any
material adverse change in the business, assets, financial condition
or results of operations of the Company. From the date hereof to the
Closing, none of Jacobson, Seller nor the Company will take any action
or engage in any transaction which would render the representations
and warranties in Article III inaccurate in any material respect as of
the Closing Date. In addition, except as set forth on Schedule 5.01 or
otherwise expressly permitted by the terms of this Agreement, each of
Jacobson and Seller will cause the Company not to do any of the
following without the prior written consent of Purchaser (such consent
not to be unreasonably withheld):
(i) amend its Certificate of Incorporation or By-laws;
(ii) redeem or otherwise acquire any shares of its capital
stock or issue any capital stock or any option, warrant or right
relating thereto;
(iii) grant to any officer or plant manager any increase in
compensation or any severance or change of control benefits, or
grant any material increase in compensation to the Company's
other employees generally, except as may be required under
existing agreements or in the ordinary course of business
consistent with past practice;
(iv) incur any liabilities, obligations or indebtedness for
borrowed money or guarantee any such liabilities, obligations or
indebtedness, other than in the ordinary course of business
consistent with past practice;
(v) cancel any material indebtedness owed to the Company,
other than in the ordinary course of business consistent with
past practice;
(vi) make any material change in any method of accounting or
accounting practice or policy;
(vii) acquire or agree to acquire by merging or
consolidating with, or by purchasing stock or a substantial
portion of the assets of, or by any other manner, any material
operating business, corporation, partnership, association or
other business organization (or division thereof);
(viii) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets which are
material, individually or in the aggregate, to the Company,
except in the ordinary course of business consistent with past
practice;
(ix) enter into any lease of real property;
<PAGE>
19
(x) modify, amend or terminate any lease of, or other
material agreement pertaining to, real property (except
modifications or amendments associated with renewals of leases in
the ordinary course of business);
(xi) make capital expenditures or purchases of machinery and
equipment in excess of $1,000,000 in the aggregate;
(xii) enter into or modify any collective bargaining
agreements; or
(xiii) agree, whether in writing or otherwise, to do any of
the foregoing.
5.02. Access; Information; Confidentiality. From the date hereof
to and including the Closing Date, Jacobson, Seller and the Company
shall afford to the officers, employees, attorneys, accountants and
other authorized representatives of Purchaser reasonable access,
during normal business hours and with reasonable notice, to the
offices, plants, properties, books and records of the Company in order
that Purchaser may have the full opportunity to make such legal,
financial, accounting and other reviews or investigations of the
Company as Purchaser shall desire to make. Purchaser covenants and
agrees, and shall cause each of its officers, employees, attorneys,
accountants and other authorized representatives, to treat all
information obtained or developed by them concerning the Company in
accordance with the Confidentiality Agreement dated as of February 24,
1998 between Cordant and the Company. Purchaser also covenants and
agrees to comply with all other confidentiality undertakings
heretofore agreed to between Purchaser and Seller, its Affiliates or
their representatives relating to the Company or the transactions
contemplated by this Agreement.
5.03. Consents and Conditions to Closing. From the date hereof to
and including the Closing Date, each of the parties hereto agrees (i)
to take all reasonable actions necessary to obtain (and to cooperate
with each other in obtaining) all consents, authorizations, orders,
exemptions and approvals of any third parties, including governmental
bodies, required to be obtained by it in connection with any of the
transactions contemplated hereby; provided that no party shall be
required to make any material payments or dispose of any material
assets in order to obtain any such consents, authorizations, orders,
exemptions or approvals, (ii) to take all reasonable actions necessary
to comply promptly with all legal requirements which may be imposed on
or applicable to it with respect to the Closing (including furnishing
all information required under the HSR Act) and (iii) to promptly
cooperate with and furnish information to each other in connection
with any such legal requirements. Seller and Purchaser each promptly
(but in no event later than three Business Days) after the execution
and delivery of this Agreement, shall file their completed premerger
notification report under the HSR Act.
5.04. Notification of Certain Matters. Seller shall give prompt
written notice to Purchaser, and Purchaser shall give prompt written
notice to Seller, as the case may be, of (i) the occurrence, or
failure to occur, of any event that would be likely to cause any
representation or warranty by such notifying party contained in this
Agreement to be untrue or inaccurate in any material respect at any
time between or including the date of this Agreement and the Closing
<PAGE>
20
Date, (ii) any knowledge of or discovery by the notifying party of the
inaccuracy of any representation or warranty in any material respect
by the non-notifying party contained in this Agreement and (iii) any
failure of the non-notifying party to comply with or satisfy, in any
material respect, any covenant condition or agreement to be complied
with or satisfied by it under this Agreement. For purposes of this
Section 5.04, Purchaser's and Cordant's knowledge or discovery shall
mean the knowledge or discovery by any of the individuals listed on
Schedule 5.04.
5.05. Insurance. Seller agrees to keep, or cause the Company to
keep, all insurance policies set forth in Schedule 3.17, or
replacements thereof, in full force and effect through the close of
business on the Closing Date. Purchaser agrees to keep, or to cause
the Company to keep, the same or substantially similar insurance
policies with regard to environmental risks, in full force and effect
after the Closing Date until the later of the fifth anniversary hereof
and the resolution of all indemnification claims under Section
8.02(b).
5.06. Jacobson Name. Promptly following the Closing Date,
Purchaser shall cause the Company to change its corporate name in its
certificate of incorporation and eliminate all uses of the name
"Jacobson" or its derivatives in all signage, correspondence, new
Contracts, corporate names or registrations, assumed names,
trademarks, tradenames, service marks or logos, in each case within 5
years after the Closing Date.
5.07. Prohibition of Solicitation. From the date hereof through
the Closing or the earlier termination of this Agreement, each of
Jacobson and Seller shall not, and shall cause the Company and each of
their respective directors, officers, shareholders, affiliates,
agents, advisers and other representatives (including investment
bankers) not to, directly or indirectly, enter into, solicit or
initiate any discussions or negotiations with, or encourage or respond
to any inquiries or proposals by, or participate in any negotiations
with, or provide any information to, or otherwise cooperate in any
other way with, any Person, other than Purchaser and its directors,
officers, shareholders, affiliates, agents, advisers and other
representatives, concerning any sale of all or a portion of the
Company's assets, any shares of capital stock of the Company, or any
merger, consolidation, liquidation, dissolution or similar transaction
involving the Company (each such transaction being referred to herein
as a "Proposed Acquisition Transaction"). Jacobson and Seller will
immediately notify Purchaser if any discussions or negotiations are
sought to be initiated, any inquiry or proposal is made, or any
information is requested with respect to any Proposed Acquisition
Transaction and notify Purchaser of the terms of any proposal which it
may receive after the date hereof in respect of any such Proposed
Acquisition Transaction, including without limitation the identity of
the prospective purchaser or soliciting party.
5.08. Pay-Off of Debt. Jacobson and Seller shall take all action
necessary to ensure that, as of the Closing Date, the Company shall
not have any indebtedness for borrowed money, guarantees or agreements
to guarantee any indebtedness for borrowed money.
5.09. Related Party Obligations. Jacobson and Seller shall take
all action necessary to ensure that, as of the Closing Date, the
Company shall not have any obligations or
<PAGE>
21
any liabilities, directly or indirectly, to directors or other
Affiliates. On or prior to the Closing Date, each of Jacobson and
Seller shall have repaid all obligations owed by them (if any) to the
Company in full.
5.10. Resignation of Officers and Directors. On or prior to the
Closing, Jacobson and Seller shall cause the Company to deliver to
Purchaser evidence satisfactory to Purchaser of the resignation of all
officers and directors of the Company (other than those individuals
designated by Purchaser).
ARTICLE VI
Conditions Precedent to Obligations of Purchaser and Cordant
------------------------------------------------------------
All obligations of Purchaser and Cordant to effect the Closing
hereunder are, subject to the satisfaction, at the Closing, of each of the
following conditions, any of which may be waived by Purchaser and Cordant:
6.01. Opinion of Counsel. Purchaser shall have received the
favorable opinions of Roberts, Sheridan & Kotel, a Professional
Corporation, special New York counsel for Seller and Jacobson and
Cavitch, Familo, Durkin & Frutkin Co., L.P.A., special Ohio counsel
for Seller, addressed to Purchaser and dated the Closing Date,
substantially in the forms of Exhibit 6.01.
6.02. Performance by Seller. All the terms, covenants, agreements
and conditions of this Agreement to be complied with and performed by
Seller on or before the Closing shall have been complied with and
performed in all material respects.
6.03. Representations and Warranties. The representations and
warranties made by Seller in this Agreement shall have been true and
correct in all material respects at the date hereof and as of the
Closing with the same force and effect as though all such
representations and warranties had been made as of the Closing;
provided that each of the representations and warranties which already
are qualified by materiality must have been true and correct in all
respects as of the Closing.
6.04. No Injunctions. There shall not be in effect any injunction
or restraining order issued by a court of competent jurisdiction
against the consummation of the transactions contemplated by this
Agreement; and the waiting period under the HSR Act applicable to the
consummation of the transactions contemplated by this Agreement,
including any extensions of such waiting period, shall have expired or
been terminated.
6.05. Seller's Certificate. Purchaser shall have received from
Seller, in form and substance reasonably satisfactory to Purchaser and
its counsel, a certificate of Seller, dated the Closing Date, of
Seller, confirming the satisfaction of the conditions set forth in
Sections 6.02 and 6.03.
<PAGE>
22
6.06. Secretary's Certificate. Purchaser shall have received from
the Company, in form and substance reasonably satisfactory to
Purchaser and its counsel, a certificate, dated the Closing Date, of
the Secretary or an Assistant Secretary of the Company, certifying the
Certificate of Incorporation and Bylaws of the Company.
6.07. Consents. All material licenses, consents or permits from
any governmental authority or other persons, including pursuant to the
New Jersey Industrial Site Remediation Act, that are necessary for the
consummation of the transactions contemplated hereby shall have been
obtained.
6.08. Ancillary Agreements. Jacobson shall have executed and
delivered the Jacobson Non-Competition Agreement.
6.09. Transfer of All Capital Stock. The transfer of the Shares
to Purchaser hereunder shall constitute the transfer of 100% of the
capital stock of the Company to Purchaser; provided that if Purchaser
waives the condition set forth in this Section 6.09, Purchaser shall
not be entitled to seek indemnification for a failure of this
condition to the extent that Purchaser knows of such failure.
ARTICLE VII
Conditions Precedent to Obligations of Jacobson and Seller
----------------------------------------------------------
All obligations of Jacobson and Seller to effect the Closing
hereunder are, subject to the satisfaction, at the Closing of each of the
following conditions, any of which may be waived by Jacobson and Seller:
7.01. Opinion of Counsel. Seller shall have received the
favorable opinions of Daniel Hapke, Esq., general counsel for Cordant,
and Latham & Watkins, counsel for Purchaser, addressed to Seller and
Jacobson dated the Closing Date, substantially in the forms of Exhibit
7.01.
7.02. Performance by Purchaser. All the terms, covenants,
agreements and conditions of this Agreement to be complied with and
performed by Purchaser on or before the Closing shall have been
complied with and performed in all material respects.
7.03. Representations and Warranties. The representations and
warranties made by Purchaser in this Agreement shall have been true
and correct in all material respects at the date hereof and as of the
Closing with the same force and effect as though all such
representations and warranties had been made as of the Closing;
provided that each of the representations and warranties which already
are qualified by materiality must have been true and correct in all
respects as of the Closing.
<PAGE>
23
7.04. No Injunctions. There shall not be in effect any injunction
or restraining order issued by a court of competent jurisdiction
against the consummation of the sale and purchase of the Shares
pursuant to this Agreement; and the waiting period under the HSR Act
applicable to the consummation of the transactions contemplated by
this Agreement, including any extensions of such waiting period, shall
have expired or been terminated.
7.05. Officer's Certificate. Seller shall have received from
Purchaser, in form and substance reasonably satisfactory to Seller and
its counsel, a certificate, dated the Closing Date, of the President
or any Vice President of Purchaser, certifying as to the satisfaction
of the conditions set forth in Sections 7.02 and 7.03.
7.06. Purchaser's Secretary's Certificate. Seller shall have
received from Purchaser, in form and substance reasonably satisfactory
to Seller and its counsel, a certificate, dated the Closing Date, of
the Secretary or an Assistant Secretary of Purchaser, (i) certifying
all documents evidencing the corporate actions of Purchaser
authorizing the transactions contemplated hereby and the execution,
delivery and performance by Purchaser of this Agreement and the
documents contemplated hereby, (ii) certifying the Certificate of
Incorporation and Bylaws of Purchaser and (iii) containing an
incumbency certificate regarding the officers authorized to sign this
Agreement and the other documents contemplated hereby.
7.07. Cordant's Secretary's Certificate. Seller shall have
received from Cordant, in form and substance reasonably satisfactory
to Seller and its counsel, a certificate, dated the Closing Date, of
the Secretary or an Assistant Secretary of Cordant, (i) certifying all
documents evidencing the corporate actions of Cordant authorizing the
transactions contemplated hereby and the execution, delivery and
performance by Cordant of this Agreement and the documents
contemplated hereby, (ii) certifying the Certificate of Incorporation
and Bylaws of Cordant and (iii) containing an incumbency certificate
regarding the officers authorized to sign the Cordant Performance
Guarantee and any other document contemplated hereby.
7.08. Consents. All material licenses, consents or permits from
any governmental authority or other persons, including pursuant to the
New Jersey Industrial Site Remediation Act, that are necessary for the
consummation of the transactions contemplated hereby shall have been
obtained.
7.09. Non-Competition Agreement. Purchaser shall have executed
and delivered the Jacobson Non-Competition Agreement, and shall have
made the payment to Jacobson required thereunder.
ARTICLE VIII
Survival and Indemnification
----------------------------
8.01. Survival of Representations, Etc.; Exclusive Remedies. The
representations, warranties, covenants and agreements contained in
this Agreement, and in any
<PAGE>
24
agreements, certificates or other instruments delivered pursuant to
this Agreement, shall survive the Closing and shall remain in full
force and effect, but subject to all limitations and other provisions
contained in this Agreement (including Section 8.05). The
representations and warranties contained in this Agreement are
exclusive and the parties hereto confirm that they have not relied
upon any other representation or warranty as an inducement to enter
into this Agreement and the transactions contemplated hereby (even
though information not represented and warranted to may have been, or
may hereafter be, given to or obtained or developed by one or both of
the parties hereto pertaining to the Company, the transactions
contemplated hereby or otherwise). Subject to the next sentence
hereof, the remedies contained in this Article VIII shall be the sole
recourse of the parties hereto and their respective Affiliates for all
losses, liabilities, claims, damages or expenses related to or
arising, directly or indirectly, out of this Agreement, the
transactions contemplated hereby or otherwise arising at law, under
any statute or in equity, and each party hereto has waived any and all
rights, claims, causes of action and other remedies it or its
Affiliates may have against the other relating to the subject matter
of this Agreement other than the remedies expressly provided in this
Article VIII. No party hereto shall be deemed to have waived any
rights, claims, causes of action or remedies if and to the extent such
rights, claims, causes of action or remedies may not be waived under
applicable law or fraud is proven on the part of a party by another
party hereto. The right to indemnification or other remedy based on
such representations, warranties, covenants, and agreements will not
be affected by any investigation conducted with respect to, or any
knowledge acquired (or capable of being acquired) at any time, whether
before or after the execution and delivery of this Agreement or the
Closing, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant or agreement. The
waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
agreement, will not affect the right to indemnification or other
remedy based on such representations, warranties, covenants and
agreements.
8.02. Indemnification by Seller and Jacobson. (a) Subject to the other
provisions of this Article VIII, Seller and Jacobson, jointly and
severally, hereby agree to indemnify and hold Purchaser and its
Affiliates, officers, directors, employees, agents and representatives
harmless from and against any and all claims, demands, orders,
allegations, actions, damages, liabilities, including liabilities
arising under principles of strict or joint and several liability,
liens, losses or other obligations whatsoever, together with costs and
expenses, including fees and disbursements of counsel and expenses of
investigation (collectively, "Losses"), arising out of, based upon or
caused by (i) the inaccuracy of any representation or the breach of
any warranty of Seller or Jacobson contained in this Agreement or in
any agreement, certificate or other instrument delivered by Seller or
Jacobson pursuant to this Agreement or (ii) any breach or
nonperformance by Seller or Jacobson of any of its covenants or
agreements contained in this Agreement or in any agreement,
certificate or other instrument delivered by Seller or Jacobson
pursuant to this Agreement; PROVIDED, HOWEVER, that Purchaser and its
Affiliates and their respective, officers, directors, employees,
agents and representatives shall be entitled to indemnification under
Section 8.02(a)(i) or Section 8.02(a)(ii) due to a breach of Section
5.01 only if and to the extent the aggregate amount of all Losses
indemnified against under Section 8.02(a)(i) or Section 8.02(a)(ii)
due to a breach of Section 5.01 shall exceed $1,000,000, and in no
event shall such indemnification exceed in the aggregate $10,000,000;
<PAGE>
25
provided that the limitation set forth in this Section 8.02(a) shall
not apply to a breach of Seller's obligation to transfer 100% of the
capital stock of the Company to Purchaser at the Closing; PROVIDED
FURTHER, HOWEVER, that any indemnification relating to Taxes or
Section 3.14 shall be governed solely by Article IX and any
indemnification relating to Environmental Laws, Hazardous Materials or
Section 3.15 shall be governed solely by Section 8.02(b), and
accordingly no claims may be made in respect of such matters or the
representations and warranties set forth in such Sections under this
Section 8.02(a).
(b) Special Environmental Indemnification. Subject to the other
provisions of this Article VIII, Seller and Jacobson hereby agree to
indemnify and hold Purchaser and its Affiliates, officers, directors,
employees, agents and representatives harmless from and against any
Environmental Losses only on the terms and subject to conditions as
follows: (i) for aggregate Environmental Losses up to $2,000,000,
there shall be no indemnification obligation of Seller and Jacobson
under this Article VIII; (ii) for aggregate Environmental Losses
incurred prior to the fifth anniversary of the Closing Date in excess
of $2,000,000 but less than $6,000,000, there shall be full
indemnification by Seller and Jacobson for such excess amounts
pursuant to this Article VIII; (iii) for aggregate Environmental
Losses incurred prior to the fifth anniversary of the Closing Date in
excess of $6,000,000 but less than $10,000,000, there shall be
indemnification for such excess amounts by Seller and Jacobson under
this Article VIII limited to 50% of such Environmental Losses in
excess of $6,000,000 and (iv) for aggregate Environmental Losses in
excess of $10,000,000, or any Environmental Losses incurred after the
fifth anniversary of the Closing Date, there shall be no
indemnification obligation of Seller and Jacobson under this Article
VIII or otherwise. The obligations set forth in this Section 8.02(b)
shall be limited to amounts paid to third parties or reimbursement to
the Company for such amounts, in each case as specifically described
in the definition of Environmental Losses; PROVIDED, HOWEVER, that
with respect to products or services delivered or performed prior to
the fifth anniversary of the Closing Date, the obligations set forth
in this 8.02(b) shall be available even after the fifth anniversary of
the Closing Date so long as the expenses for such products or services
are paid in the ordinary course thereafter within the customary
billing cycles of the applicable third party.
8.03. Indemnification by Purchaser and Cordant. Subject to the
other provisions of this Article VIII, Purchaser and Cordant each
hereby jointly and severally agree to indemnify and hold Jacobson,
Seller, their Affiliates and their respective officers, directors,
employees, agents and representatives harmless, from and against any
and all Losses arising out of, based upon or caused by (i) the
inaccuracy of any representation or the breach of any warranty of
Purchaser or Cordant contained in this Agreement or in any agreement,
certificate or other instrument delivered by Purchaser pursuant to
this Agreement, (ii) any breach or nonperformance by Purchaser or
Cordant of any of their respective covenants or agreements contained
in this Agreement or in any agreement, certificate or other instrument
delivered by Purchaser or Cordant pursuant to this Agreement, (iii)
Purchaser's ownership of the Company or the operations of the Company
after the Closing Date or (iv) any failure by the Company after the
Closing Date to perform and discharge all its obligations under any
Contracts or other undertakings that were in effect and known to
Purchaser prior to the Closing Date. In the event any claims are
asserted against any current or former shareholders (direct or
indirect), officers, directors or employees of
<PAGE>
26
the Company in respect of Environmental Losses, Purchaser and the
Company shall indemnify and hold harmless such shareholders, officers,
directors and employees, subject to the provisions of Section 8.02(b)
that may render Seller (rather than Purchaser and the Company) liable
for some or all of such Environmental Losses.
8.04. Notice; Cooperation; Defense; Etc. The indemnified party
agrees to give the indemnifying party prompt written notice of any
action, claim, demand, discovery of fact, proceeding or suit
(collectively, "Claims") for which such indemnified party intends to
assert a right to indemnification under this Agreement; PROVIDED,
HOWEVER, that failure to give such notification after such notice is
required shall not adversely affect the indemnified party's
entitlement to indemnification hereunder except to the extent that the
indemnifying party shall have been actually prejudiced as a result of
such failure. The indemnified party shall take all reasonable or
necessary steps to resolve, defend or cooperate in the defense of such
Claims, including retaining and providing to the indemnifying party
all documents, records and other information that may be relevant to
such Claims and making employees available to the extent reasonably
requested to fully cooperate in the resolution or defense of such
Claims and provide any additional information (including explanations
and interpretations of any other materials or information provided)
that they are able to provide with respect thereto. The indemnifying
party shall have the right to participate jointly with the indemnified
party in the indemnified party's defense, settlement or other
disposition of any Claim and, with respect to any Claim that is not
likely to result in the indemnified party's becoming subject solely to
injunctive or other similar relief, the indemnifying party shall have
the sole right (but not the obligation) to defend, settle or otherwise
dispose of such Claim on such terms as the indemnifying party, in its
sole discretion, shall deem appropriate. The indemnifying party shall
obtain the written consent of the indemnified party, which shall not
be unreasonably withheld or delayed, prior to ceasing to defend any
Claim if it has theretofore elected to exercise its sole right to
defend, settle or otherwise dispose of such Claim.
8.05. Time Limitations; Recoverable Damages. Except as may
elsewhere be specifically provided, representations, warranties,
covenants and obligations in this Agreement and any other certificate
or document delivered pursuant to this Agreement will survive the
Closing; PROVIDED, HOWEVER, that notwithstanding anything to the
contrary contained herein, the obligation of Seller or Jacobson to
indemnify or otherwise hold harmless Purchaser, or its Affiliates or
any of their respective officers, directors, employees, agents or
representatives (i) for any Losses arising out of, based upon or
caused by the inaccuracy of any representation or the breach of any
warranty which survives the Closing shall, except as otherwise
provided in the next sentence, terminate at 11:59 p.m., New York City
time, on the first anniversary of the Closing Date, (ii) for any
Environmental Losses pursuant to Section 8.02(b) shall, except as
otherwise provided in the next sentence, terminate at 11:59 p.m., New
York City time, on the fifth anniversary of the Closing Date, (iii)
for any Losses relating to Taxes or Section 3.14 shall survive as set
forth in Article IX and (iv) for any Losses resulting from the breach
of Seller's obligations to transfer 100% of the capital stock of the
Company to Purchaser shall survive until the expiration of the
applicable statute of limitations. Claims (with all relevant and
necessary information and particulars to support such Claims) properly
made in accordance with the provisions of this Article VIII on or
prior to the expiration of the applicable survival period
<PAGE>
27
specified above may continue to be asserted and shall be indemnified
against by Seller (subject to any other applicable limitations
herein), but such Claims may not be supplemented, expanded, amended or
modified after the expiration of such time period in a manner that
fundamentally changes the Claim without the prior written consent of
Seller. Any amounts required to be paid as damages or indemnification
by Seller or Jacobson hereunder shall be limited to the actual,
reasonable, direct and reasonably foreseeable damages sustained by the
indemnified party with respect to the Claim in question, net of
available insurance (which the Company and the indemnified party shall
use their best efforts to pursue at the Company's expense) except
that, in the event that the Losses would have been within the scope of
coverage provided in an insurance policy that the Company had in
effect at the Closing Date ("Applicable Insurance Coverage") and, at
the time the Company suffers the Losses, Purchaser or the Company
carries Applicable Insurance Coverage (or comparable insurance) with a
higher deductible than that carried by the Company for such Applicable
Insurance Coverage on the Closing Date, or if Purchaser and the
Company have no Applicable Insurance Coverage (or comparable
insurance), then the amount of indemnification hereunder shall be
reduced by (a) an amount equal to the excess, if any, of (i) the
amount of the higher deductible or the amount of the indemnification
claim, whichever is less, over (ii) the amount of the Closing Date
deductible or (b) if Purchaser and the Company have no Applicable
Insurance Coverage (or comparable insurance), the amount of the
indemnification claim in excess of the Closing Date deductible,
respectively. In no event shall any damages or indemnification be
claimed, assessed or required to be paid by Seller or Jacobson in
respect of any actual or alleged lost profits, lost opportunities or
other consequential or speculative damages sustained by Purchaser, its
Affiliates or their respective officers, directors, employees, agents
or representatives. Subject to the foregoing, the term "Losses" is not
limited to matters asserted by third parties if the indemnified party
can otherwise prove and calculate its damages in the absence of a
third party claim, and accordingly payments by an indemnitee shall not
be (except in the case of claims under Section 8.02 (b)) a condition
precedent to recovery if damages can be otherwise proven.
ARTICLE IX
Taxes
-----
9.01. Taxes. (a) Allocation of Responsibility. From and after the
Closing Date, Seller shall pay (or indemnify Purchaser with respect
to) (without duplication of amounts otherwise payable) any Taxes
(excluding any penalties arising from any act or omission by Purchaser
or, after the Closing, the Company) payable by the Company, including
any Taxes, other than Taxes that are subject to Section 9.02, that may
arise by reason of an election under Section 338(h)(10) of the Code
(or any similar provision under any state or local law, or in the case
of New Jersey in respect of a deemed Section 338 election) (i) for all
taxable periods ending on or prior to the Closing Date, and (ii) for
all taxable periods beginning on or prior to the Closing Date and
ending after the Closing Date, for that portion of any such taxable
period up to and including the Closing Date, determined in the manner
provided in Section 9.01(m) and (iii) payable as a result of any
breach of any representation or warranty in Section 3.14 or any
covenant made by Seller in this Article IX. Notwithstanding anything
to the contrary in this
<PAGE>
28
Agreement, no payment will be made hereunder by Seller with respect to
Taxes which have been paid by Seller or the Company on or prior to the
Closing Date. After the Closing Date, the Company and Purchaser shall
be responsible for all Taxes of the Company which are not expressly
described as being the responsibility of Seller in the first sentence
of this Section 9.01(a). Any Taxes payable by Seller pursuant to this
Section 9.01(a) shall be paid within thirty days following Purchaser's
request therefor or, if Seller contests the assessment of such Taxes,
Seller shall wire transfer funds to Purchaser for value no later than
3 days before such payments are due (after giving effect to available
extensions or suspension periods arising from the initiation of the
contest). In the event Purchaser has withheld a portion of the
Purchase Price to pay such Tax obligations in accordance with Section
9.01(k), Purchaser shall give Seller credit for such withholding when
making any claim for reimbursement. The withheld amounts shall be
placed in a tax payment account pursuant to a Tax Payment Agreement in
accordance with Section 9.01(k) and shall be disbursed in accordance
with the terms of such Tax Payment Agreement.
(b) Returns. Seller (and after the Closing Date, Purchaser) shall
cause the Company to prepare and file all required Federal, state,
local and foreign Tax Returns for the Company for all taxable periods
ending on or prior to the Closing Date and pay all Taxes required to
be paid for periods covered by such Tax Returns. Purchaser shall cause
the Company to prepare and file all other Tax Returns required of the
Company (including all required information reporting returns), shall
cause to be paid all Taxes with respect to, and shall cause to be
reported on such Tax Returns any transactions by or relating to, the
Company occurring after the Closing Date. Any such Tax Returns shall,
insofar as they relate to the Company, be on a basis consistent with
the last such Tax Returns that have been filed in respect to the
Company (subject to the provisions of Section 9.01(f)).
Notwithstanding the foregoing, Seller and Jacobson shall have the
right to prepare and file, or cause to be prepared and filed, all U.S.
federal, state and local income Tax Returns of the Company for all
periods ending on or prior to, or that include, the Closing Date and
no such income Tax Returns shall be subsequently amended or refiled
without the prior written consent of Seller or Jacobson. In addition,
Purchaser and the Company shall not refile or amend any Tax Return in
any manner which would result in additional liability to Seller or
Jacobson under this Agreement or otherwise, without Seller's or
Jacobson's prior written consent.
(c) Subsequent Adjustments. Seller shall be entitled to retain,
or receive immediate payment from the Company of any Tax refunds
(including refunds arising by reason of amended Tax Returns filed
after the Closing Date) or credit of Federal, state, local or foreign
Taxes (plus any interest thereon received with respect thereto from
the applicable taxing authority) relating to the Company, that were
paid with respect to a period ending on or prior to the Closing Date
(whether or not constituting the close of a taxable year) (or a pro
rata portion thereof for periods that include but do not end on the
Closing Date). The Company shall be entitled to the benefit of any
refunds or credit of Federal, state, local or foreign Taxes (plus any
interest thereon received with respect thereto from the applicable
taxing authority) relating to it that were paid with respect to a
period after the Closing Date (or a pro rata portion thereof for
periods that include but do not end on the Closing Date). Purchaser
and Seller agree to cooperate, and Purchaser agrees to cause the
Company to cooperate with Seller, with respect to
<PAGE>
29
claiming any refund referred to in this Section 9.01(c), including
providing Seller or Purchaser, as the case may be, with information
that could constitute a reasonable basis for claiming such a refund
when requested to do so, providing all relevant information available
to Seller or Purchaser (through the Company or otherwise), as the case
may be, with respect to any such claim, filing and diligently pursuing
such claim (including by litigation, if appropriate), paying over to
Seller or the Company, as the case may be, and in accordance with this
provision, any amount received by Purchaser, the Company or Seller, as
the case may be, with respect to such claim, and consulting with the
other party prior to agreeing to any disposition of such claim. The
party that is to enjoy the economic benefit of a refund under this
Section 9.01(c) shall bear the expenses of the other party reasonably
incurred in seeking such refund.
(d) Cooperation. Purchaser and Seller mutually agree to cooperate
fully with each other with respect to the preparation of all Tax
Returns, the filing and prosecution of any Tax claims, the furnishing
of any document, record or other relevant information relating to any
Tax liability or refund and all other Tax matters, and to keep each
other advised as to any issue relating to Taxes which would have any
bearing on the other party's responsibilities pursuant to this Section
9.01.
(e) Election. Purchaser and Seller agree to make a joint election
under Section 338(h)(10) of the Code in accordance with Treas. Reg. ss
1.338(h)(10)-1(d) on Internal Revenue Service Form 8023 and to make a
joint election under any corresponding state, local or foreign tax law
(the "Election") with respect to the purchase and sale of the stock of
the Company within 60 days after the Closing Date. Purchaser and
Seller agree that, except as set forth in Section 9.02, Seller shall
have sole liability for all Taxes that arise from the actual sale of
the shares of the Company or the deemed sale of the assets of the
Company occurring as a result of the Election, including, but not
limited to Taxes payable by the Company to any federal, state, local
or foreign jurisdiction as a result of the Election. In addition,
Purchaser and Seller agree to provide the other with all necessary
information to permit the Election to be made. In connection with the
Election, Purchaser and Seller shall mutually determine (i) the amount
of the modified aggregated deemed sales price ("MADSP") of the shares
of the Company (within the meaning of Treas. Reg. Section
1.338(h)(10)-1(f)) and (ii) based on the fair market value of the
assets of the Company, as determined under Section 9.01(i), the proper
allocation of the MADSP among the assets of the Company in accordance
with Treas. Reg. Section 1.338(h)(10)-1(f). The allocations referred
to in the preceding sentence are referred to herein as the
"Allocations." Purchaser and Seller will calculate the gain or loss,
if any, in a manner consistent with the Allocations, and Purchaser and
Seller will not take any position inconsistent with the Allocations in
any Tax Return (subject to appropriate adjustments pursuant to Treas.
Reg. ss 1.338(h)(10)-1(f)(4)).
(f) Conduct of Business. On and after the Closing Date, as to
matters which could affect the Company's Tax Returns with respect to
the Closing Date or the periods prior thereto, Purchaser shall cause
the Company to file Tax Returns of the Company for taxable periods
ending after the Closing Date in a manner that is consistent with past
practices, unless the Purchaser reasonably determines that it is
required by law to do otherwise. In the event that Purchaser makes
such a determination, Purchaser shall consult with Seller or Jacobson
prior to
<PAGE>
30
filing any additional Tax Returns with regard to any changes from past
practices and Seller and Jacobson shall have the opportunity to
demonstrate that such change is not required by law.
(g) Post-Closing Access. In connection with any matter relating
to any period prior to, or any period ending on, the Closing Date, (i)
each party shall (and Purchaser shall cause the Company to), upon the
request and at the expense of the other, permit the other party and
its representatives full access at all reasonable times to the books
and records, including Tax Returns, of the Company which are in the
possession of the party to whom the request is made, and (ii) each
party shall execute (and Purchaser shall cause the Company to execute)
such documents as the other party may reasonably request to enable the
other party to file any required reports or Tax Returns (including
amended Tax Returns) relating to the Company. Neither party shall
dispose (or allow the disposal) of such books and records (i) at any
time without the other party's consent, in the case of books and
records pertaining to acquisition of equipment prior to the Closing,
and (ii) with respect to all other such books and records, during the
six-year period beginning with the Closing Date without the other
party's consent. For the three-year period directly following the
expiration of such six-year period, either party may dispose (or allow
the disposal) of such other books and records at any time upon giving
60 days prior written notice to the other party, unless the other
party agrees to take possession of such books and records within 60
days at no expense to the other party seeking to dispose of such other
books and records. Thereafter, either party may dispose of such other
books and records without notice to the other.
(h) Fair Market Values. Purchaser and Seller have in good faith
agreed on the fair market values (as of the end of the Closing Date)
of the assets of the Company, which fair market values are set forth
on Exhibit 9.01(h). No party shall file any Tax Return (including
amendments) or report inconsistent with such determination.
(i) Clearance Certificates. Seller shall use commercially
reasonable efforts to provide Purchaser with a clearance certificate
or similar document requested by Purchaser, on or before the Closing
Date, which may be required by any State taxing authority in order to
relieve Purchaser of any obligation to withhold any portion of the
Purchase Price.
(j) Withholding For Taxes. Purchaser shall withhold from the
Purchase Price payable at Closing any amounts it is required to
withhold under state law and for which a clearance certificate has not
been obtained on or prior to the Closing Date, as well as any amounts
payable by the Company to any state or local jurisdiction as a result
of the Election, and Purchaser shall deposit such amount in a tax
payment account governed by the Tax Payment Agreement to be entered
into substantially in the form attached hereto as Exhibit 9.01(j).
(k) Waiver of Inadvertent Termination. Seller agrees to cooperate
fully and take any steps necessary to obtain a waiver of any
inadvertent termination of the election under Code Section 1362(f) or
similar state election by the Company, if it is determined after the
Closing that such election(s) was not valid or was terminated prior to
Closing.
(l) Successors. For purposes of this Article IX, all references
to the Purchaser, the Seller, the Shareholder and the Company include
successors.
<PAGE>
31
(m) Allocation of Taxes. For purposes of Section 3.14 and this
Article IX, in the case of Taxes that are payable with respect to a
taxable period that begins before the Closing Date and ends after the
Closing Date, the portion of such Taxes payable for the period ending
on the Closing Date shall be (a) in the case of any Tax other than a
Tax based upon or measured by income, the amount of such Tax for the
entire period multiplied by a fraction, the numerator of which is the
number of days in the period ending on the Closing Date and the
denominator of which is the number of days in the entire period and
(b) in the case of any Tax based upon or measured by income, the
amount which would be payable if the taxable year ended as of the end
of the Closing Date.
9.02. Transfer Taxes. Purchaser shall be responsible for all
transfer and similar Taxes assessed or payable in connection with the
Transfer of the Shares (or deemed transfer of assets by reason of an
actual or deemed election under Section 338 or Section 338(h)(10) of
the Code) pursuant to this Agreement.
9.03 Treatment of Indemnity and Other Payments. All indemnity and
other payments made under this Agreement shall be considered to be
adjustments to the Purchase Price.
9.04 Survival and Indemnification. The covenants and agreements
of the parties contained in this Article IX and the representations
and warranties contained in Section 3.14 shall survive the Closing and
shall remain in full force and effect until ninety (90) days following
the expiration of the applicable statutes of limitations with respect
to any Taxes that would be indemnifiable under this Article IX. The
procedures set forth in Section 8.04 shall apply to any claims made by
the parties to this Agreement pursuant to this Article IX. Seller
shall indemnify and hold harmless Purchaser and the Company against
any and all Losses as a result of, or arising out of, any breach of
representation or warranty in Section 3.14 or any covenant made by
Seller in this Article IX, provided, however, that, subject to the
next sentence hereof, Purchaser shall be entitled to indemnification
under this Article IX only if and to the extent that the aggregate
amount of claims made under this Article IX exceeds $500,000 and in no
event shall the indemnification obligation of Seller under this
Article IX exceed $10,000,000 in the aggregate. Seller and Purchaser
agree that the deductible and limitation on liability set forth in the
immediately preceding sentence do not apply to claims relating to the
Election. Purchaser shall indemnify and hold harmless Seller against
any and all Losses as a result of or arising out of any breach of any
covenant (without limiting the ability to enforce such covenant
directly) made by Purchaser in this Article IX and shall reimburse
Seller upon demand (or credit Seller against amounts otherwise then
payable by Seller pursuant to this Agreement, if any) for any
overpayments that may have been made (including overpayments of
estimated amounts, payments made by Seller, the Company or Jacobson
directly as a result of a direct claim by or obligation to a Tax
authority that should have been subject to the above deductible or
limitation on liability, amendments to Tax Returns or other similar
circumstances). Notwithstanding anything to the contrary in this
Agreement, to the extent that the provisions contained in this Article
IX conflict with any provision of Article VIII hereof, the provisions
contained in Article IX shall control. The remedies contained in this
Article IX shall be the sole recourse of the
<PAGE>
32
parties hereto and their respective Affiliates for all losses,
liabilities, claims, damages or expenses related to or arising,
directly or indirectly, out of or relating to Taxes, Section 3.14 and
this Article IX, the transactions contemplated hereby or otherwise
arising at law, under any statute or in equity, and each party hereto
has waived any and all rights, claims, causes of action and other
remedies it or its Affiliates may have against the other relating to
the subject matter of the foregoing other than the remedies expressly
provided in this Article IX.
ARTICLE X
Miscellaneous
-------------
10.01. Brokers. Seller represents and warrants to Purchaser, and
Purchaser represents and warrants to Seller, that neither it nor any
party acting on its behalf has incurred any liability, either express
or implied, to any "broker", "finder", financial adviser or similar
Person in respect of any of the transactions contemplated hereby, with
the exception of Chase Securities Inc. with respect to Seller (and who
shall be paid by the Company at or prior to Closing) and except for
Morgan Stanley & Co. Incorporated with respect to Purchaser (and who
shall be paid by Purchaser). Purchaser agrees to indemnify Seller
against, and hold it harmless from, and Seller agrees to indemnify
Purchaser against, and hold it harmless from, any liability, cost or
expense (including, but not limited to, fees and disbursements of
counsel) resulting from any agreement, arrangement or understanding
made by such party with any third party for brokerage, finders' or
financial advisory fees or other commissions in connection with this
Agreement or the transactions contemplated hereby. The provisions of
this Section shall survive any termination of this Agreement.
10.02. Expenses. Except as otherwise specifically provided in
this Agreement, each party will pay its own expenses incident to this
Agreement and the transactions contemplated hereby, including legal
and accounting fees and disbursements. The fees and expenses of
Roberts, Sheridan & Kotel, a Professional Corporation, counsel to
Seller, shall be paid by the Company at or prior to Closing. Any
sales, transfer, stamp or other Taxes or fees applicable to the
conveyance and transfer to Purchaser of the Shares (but excluding any
Income Taxes arising as a result of the transactions contemplated by
this Agreement), shall be borne and paid by Purchaser. The provisions
of this Section shall survive any termination of this Agreement.
10.03. Preservation of Records. Purchaser covenants and agrees to
cause the Company to preserve and maintain all records relating to
safety and environmental matters (including environmental audits and
assessments, waste disposal manifests, safety inspection reports,
correspondence and notices from third parties and governmental
agencies, etc.) and product liability matters (including product
history files, purchase orders, drawings and designs, patent
infringement indemnification agreements, product instruction and
labeling materials, etc.) until such time as all statutory limitations
periods have run with respect to such matters and no claims can be
asserted against Seller, the Company or the Company's officers,
directors, employees, agents or representatives with respect thereto.
During the period such records are so
<PAGE>
33
required to be preserved and kept, Seller and its Affiliates,
beneficiaries, representatives and successors shall, on reasonable
prior notice, have reasonable access thereto during normal business
hours to examine, inspect and copy the same; provided, however, that
Seller shall be obligated to maintain the confidentiality of any
information provided under this section on the same basis as Purchaser
is obligated to maintain confidentiality of information under Section
5.02 (i.e., as if Seller rather than Purchaser was party to the
February 24, 1998 confidentiality agreement).
10.04. Amendments and Waivers. The parties hereto may, by written
agreement signed by the parties, modify any of the covenants or
agreements or extend the time for the performance of any of the
obligations contained in this Agreement or in any document delivered
pursuant to this Agreement. Any party hereto may waive, by written
instrument signed by such party, any inaccuracies in the
representations and warranties of another party or compliance by
another party with any of its obligations contained in this Agreement
or in any document delivered pursuant to this Agreement. This
Agreement may be amended only by written instrument signed by the
parties hereto.
10.05. Transferability. The respective rights and obligations of
each party hereto shall not be assignable by either such party without
the written consent of the other party hereto (and any purported
assignment without such written consent shall be void and of no
effect). This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors, permitted
assignees and personal representatives, estates and heirs.
10.06. Termination. Purchaser or Seller may terminate this
Agreement if the Closing has not occurred on or prior to December 31,
1998; PROVIDED, HOWEVER, that any party that has failed to perform any
covenant hereunder, which failure has resulted in the failure of a
condition in Articles VI or VII, shall not be entitled to terminate
this Agreement except with the prior written consent of the other
party hereto. In the event of the termination of this Agreement, none
of the parties shall have any obligation or liability of any nature
whatsoever to the other party hereto, and all expenses incurred by any
party hereto shall be for its own account, except for the obligations
of Purchaser in Section 5.02 which shall survive the termination and
except as may otherwise be specifically provided in this Agreement;
PROVIDED, HOWEVER, that notwithstanding any termination of this
Agreement, no party hereto shall be deemed to have waived any rights
it may have arising from the breach of this Agreement or any provision
contained herein by the other party hereto and such rights shall
specifically survive any such termination of this Agreement.
10.07. Notices. Any notice, request or other document to be given
hereunder to a party hereto shall be effective when received and shall
be given in writing and delivered in person or sent by hand delivery
or overnight courier, as follows:
If to Purchaser, addressed to it at:
Cordant Technologies Inc.
2475 Washington Boulevard
<PAGE>
34
Ogden, Utah 84401-2398
Attention of Daniel Hapke, Jr.
with a copy to:
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, CA 94111-2562
Attention of Scott R. Haber, Esq.;
If to Seller, addressed to it at:
Jacobson Mfg. Co. Inc.
1404 IH-35 East
New Braunfels, Texas 78130
Attention: Mr. Harvey Jacobson;
with a copy to:
Jacobson Mfg. Co. Inc.
530 North Michigan Avenue
Kenilworth, NJ 07033
Attention: Mr. Charles Sundstrom;
and with a further copy to:
Roberts, Sheridan & Kotel,
a Professional Corporation
12 East 49th Street
New York, NY 10017
Attention: Todd Roberts, Esq.
Any party hereto may change its address for receiving notices,
requests and other documents by giving written notice of such change
to the other parties hereto.
10.08. Governing Law; Choice of Forum. This Agreement shall be
governed by and construed in accordance with the laws of the State of
New York (without regard to conflict of laws doctrines). The parties
agree that the exclusive place of jurisdiction for any action, suit or
proceeding relating to this Agreement shall be in the courts of the
United States of America sitting in the Borough of Manhattan in the
City of New York or, if such courts shall not have jurisdiction over
the subject matter thereof, in the courts of the State of New York
sitting therein, and each such party hereby irrevocably and
unconditionally agrees to submit to the jurisdiction of such courts
for purposes of any such action, suit or proceeding. Each party
irrevocably waives any objection it may have to the venue of any
action, suit or proceeding brought in such courts or to the
convenience of the forum. Final judgment in any such action, suit or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment, a certified or true
<PAGE>
35
copy of which shall be conclusive evidence of the fact and the amount
of any indebtedness or liability of any party therein described.
10.09. Partial Invalidity. In the event that any provision of
this Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
10.10. Section Headings. The section headings and table of
contents contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this
Agreement.
10.11. Disclosure. The information set forth in the Schedules to
this Agreement is qualified in its entirety by reference to the
specific provisions of this Agreement and is not intended to
constitute and shall not be construed as constituting, representations
or warranties of the party to which such Schedules relate except as
and to the extent provided in this Agreement. Inclusion of information
in the Schedules shall not be construed as an admission that such
information is material for purposes of the specific provisions of
this Agreement to which such information relates. Information included
in the Schedules that is not required to be so included under the
specific provisions of this Agreement shall be deemed to be included
for information purposes only and information of a similar nature need
not be included elsewhere (in the Schedules or otherwise), at the
discretion of the party providing such information. Any information
disclosed by a party in any Schedule shall be deemed to be disclosed
in all the Schedules of such party and for all purposes under this
Agreement to the extent the specific provisions of this Agreement
require such disclosure.
10.12. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same
instrument.
10.13. Entire Agreement. Except in the case of any
confidentiality agreements or undertaking referenced in Section 5.02,
this Agreement, together with the schedules and exhibits and the
agreements, certificates and instruments delivered pursuant hereto,
contain the entire agreement among the parties hereto, and supersede
all prior agreements and undertakings (written and oral) between the
parties hereto, relating to the subject matter hereof.
10.14. Publicity. No party shall issue any press release or make
any other public announcement with respect to this Agreement or the
transactions contemplated hereby without obtaining the prior written
approval of the other parties (which will not be unreasonably withheld
or delayed), except as may be required by law or the regulations of
any securities exchange.
10.15. Parties in Interest. Nothing in this Agreement, express or
implied, is intended to confer on any Person other than the parties
and their respective successors and permitted assigns any rights or
remedies under or by virtue of this Agreement, and no Person shall
assert any rights as a third party beneficiary hereunder.
<PAGE>
36
10.16. Knowledge. Any reference to Seller's knowledge or the
knowledge of Seller shall mean the knowledge, after reasonable
investigation and inquiry, of Harvey Jacobson, Paul Parker and/or
Charles Sundstrom.
10.17. Specific Performance. The Company and Seller agree that
Purchaser will be irreparably injured if this Agreement is not
specifically enforced. Therefore, notwithstanding anything to the
contrary in this Agreement, Purchaser shall have the right to enforce
specifically the performance by Jacobson or Seller under this
Agreement, and Jacobson and Seller agree to waive the defense in any
such suit that Purchaser has an adequate remedy at law and to
interpose no opposition, legal or otherwise, as to the propriety of
specific performance as a remedy. The specific performance remedy
described in this Section 10.17 shall be in addition to, and not in
lieu of, any other remedies at law or in equity that Purchaser may
elect to pursue.
10.18. Cordant Guarantee. Cordant hereby fully guarantees to
Seller and Jacobson the full and timely performance of Purchaser's
obligations under this Agreement on the terms and subject to the
conditions set forth herein.
10.19. Jacobson Guarantee. Jacobson hereby fully guarantees to
Purchaser and Cordant the full and timely performance of Seller's
obligations under this Agreement on the terms and subject to the
conditions set forth herein.
<PAGE>
37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
HUCK INTERNATIONAL, INC.
By: /s/ D. S. Hapke, Jr.
Name: Daniel S. Hapke, Jr.
Title:Authorized Signature
HARVEY JACOBSON, as trustee of the Harvey Jacobson
Revocable Trust No.2, u/a/d March 1, 1998,
By: /s/ H. Jacobson
Name: Harvey Jacobson
Title: Trustee
/s/ H. Jacobson
HARVEY JACOBSON
CORDANT TECHNOLOGIES INC.
By: /s/ D. S. Hapke, Jr.
Name: Daniel S. Hapke, Jr.
Title: General Counsel
Agreed and acknowledged as to
Sections 5.01, 5.02 and 5.03 only:
JACOBSON MFG. CO. INC.
By: /s/ H. Jacobson
Name: Harvey Jacobson
Title: Chairman
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CORDANT
TECHNOLOGIES INC. AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE
30, 1996, 1997, AND 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS. Data reflects two-for-one stock split paid as a Stock
Dividend, March 1998. Restated Financial Data Schedules for FAS 128.
</LEGEND>
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1997 JUN-30-1998
<PERIOD-START> JUL-01-1995 JUL-01-1996 JUL-01-1997
<PERIOD-END> JUN-30-1996 JUN-30-1997 JUN-30-1998
<CASH> 15 51 17
<SECURITIES> 0 0 0
<RECEIVABLES> 164 148 283
<ALLOWANCES> 1 2 7
<INVENTORY> 91 85 261
<CURRENT-ASSETS> 301 312 1334
<PP&E> 594 595 1037
<DEPRECIATION> 308 312 400
<TOTAL-ASSETS> 818 854 2778
<CURRENT-LIABILITIES> 182 139 1175
<BONDS> 2 2 463
0 0 0
0 0 0
<COMMON> 21 21 41
<OTHER-SE> 427 501 569
<TOTAL-LIABILITY-AND-EQUITY> 818 854 2778
<SALES> 889 890 1779
<TOTAL-REVENUES> 924 932 1805
<CGS> 739 724 1369
<TOTAL-COSTS> 761 746 1403
<OTHER-EXPENSES> 66 69 160
<LOSS-PROVISION> 0 1 0
<INTEREST-EXPENSE> 4 2 16
<INCOME-PRETAX> 92 115 223
<INCOME-TAX> 34 33 76
<INCOME-CONTINUING> 58 82 147
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 7
<CHANGES> 0 0 0
<NET-INCOME> 58 82 119
<EPS-PRIMARY> 1.60 2.26 3.45
<EPS-DILUTED> 1.57 2.21 3.34
</TABLE>
