SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File No. 0-13829
March 31, 1998
PRECISION STANDARD, INC.
(Exact Name of Registrant as Specified in its Charter)
Colorado 84-0985295
(State of Incorporation) (I.R.S. Employer Identification No.)
12000 East 47th Avenue
Suite 400
Denver, Colorado 80239
(Address of Principal Executive Offices)
(303) 371-6525
(Registrant's telephone number, including area code)
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 that 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 [ ]
The number of shares outstanding of each of the issuer's classes of
common shares, as of the close of the period covered by this
report:
Class of Securities Outstanding Securities
$.0001 Par Value 3,775,401 shares
Common Shares Outstanding at May 6, 1998
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRECISION STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1998 1997
(Unaudited)
Current assets:
Cash and cash equivalents $ 101,706 $ 369,334
Accounts receivable, net 12,810,862 10,138,430
Inventories 14,595,072 17,047,983
Prepaid expenses and other 890,110 1,045,564
Total current assets 28,397,750 28,601,311
Property, plant and equipment,
at cost:
Leasehold improvements 10,762,667 10,826,369
Machinery and equipment 18,278,889 19,298,310
29,041,556 30,124,679
Less accumulated depreciation (17,631,251) (17,991,714)
Net property, plant
and equipment 11,410,305 12,132,965
Other non-current assets:
Prepaid pension costs 4,027,078 4,106,609
Intangible assets, net of
accumulated amortization 736,606 741,241
Related party receivable 269,824 269,824
Deposits and other 479,861 480,593
5,513,369 5,598,267
Total other assets $45,321,424 $46,332,543
The accompanying notes are an integral part of
these consolidated financial statements.
PRECISION STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1998 1997
(Unaudited)
Current liabilities:
Current portion of debt $21,748,463 $24,784,318
Accounts payable and accrued
expenses 29,215,460 31,728,406
Total current liabilities 50,963,923 56,512,724
Workers' compensation reserve 3,631,734 3,631,734
Deferred income tax liability 2,525,231 2,525,231
Total liabilities 57,120,888 62,669,689
Stockholders' equity:
Common stock, $.0001 par value,
300,000,000 shares authorized,
3,692,993 and 3,614,872 shares
issued and outstanding at
March 31, 1998 and December 31,
1997, respectively 369 361
Additional paid-in capital 4,764,216 4,764,224
Accumulated deficit (16,325,047) (20,862,729)
Foreign Currency Translation
adjustments (239,002) (239,002)
Total stockholder's deficit (11,799,464) (16,337,146)
Total liabilities and
stockholders' deficit $45,321,424 $46,332,543
The accompanying notes are an integral part of
these consolidated financial statements.
PRECISION STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Three
Months Ended Months Ended
March 31, March 31,
1998 1997
(Unaudited) (Unaudited)
Net sales $34,453,916 $ 35,017,730
Cost of sales 27,813,422 31,801,908
Gross profit 6,640,494 3,215,822
Selling, general and
administrative expenses (4,523,556) (5,035,790)
Research and development expense (124,985) (245,444)
Income (loss) from operations 1,991,953 (2,065,412)
Other (income)expense:
Interest expense 667,472 325,394
Other, net (3,238,201) (70,576)
Income (loss) before income
taxes 4,562,682 (2,461,382)
Provision for income taxes 25,000 66,000
Net income (loss) $ 4,537,682 $ (2,527,382)
Net income (loss) per common share:
Basic $1.24 $(.79)
Diluted $1.16 $(.79)
The accompanying notes are an integral part of
these consolidated financial statements.
PRECISION STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Three
Months Ended Months Ended
March 31, March 31,
1998 1997
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income (loss) $ 4,537,682 $(2,527,382)
Adjustments to reconcile
net income (loss) to net cash
provided from operating
activities:
Depreciation and amortization 543,212 622,297
Pension cost in excess of
funding 0 362,500
Gain on sale of division (3,345,940) 0
Changes in assets and liabilities:
Accounts receivable (3,439,618) (182,986)
Inventories 824,512 (1,170,045)
Prepaid expenses and
other assets 67,008 (207,734)
Prepaid pension costs 79,531 0
U.S. Government request for
equitable adjustment, net 0 (238,743)
Deposits and other 732 1,251,019
Accounts payable and
accrued expenses (1,498,892) 1,696,308
Accrued warranty expense 0 (177,025)
Self-insured workers'
compensation reserve 0 41,500
Total adjustments (6,769,455) 1,997,091
Net cash provided by (used in)
operating activities (2,231,773) (530,291)
Cash flows from investing activities:
Proceeds from sale of
division 5,000,000
Capital expenditures 0 (77,320)
Net cash provided by (used in)
investing activities $ 5,000,000 $ (77,320)
The accompanying notes are an integral part of
these consolidated financial statements.
PRECISION STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Three Three
Months Ended Months Ended
March 31, March 31,
1998 1997
(Unaudited) (Unaudited)
Cash flows from financing activities:
Proceeds from issuance of
common stock $ 0 $ 1,030
Net repayments under short-term
obligations (3,035,855) 0
Principal payments under
long-term obligations 0 (206,939)
Net cash used in
financing activities (3,035,855) (205,909)
Net increase (decrease) in cash
and cash equivalents (267,628) (813,520)
Cash and cash equivalents
beginning of period 369,334 1,183,200
Cash and cash equivalents
end of period $ 101,706 $ 369,680
Supplemental disclosure of cash
flow information:
Cash paid during the period for:
Interest $ 769,398 $ 387,327
Income taxes 0 107,000
The accompanying notes are an integral part of
these consolidated financial statements.
PRECISION STANDARD, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated interim financial statements included in this
report have been prepared by the Company without audit. In
the opinion of management, all adjustments necessary for a
fair presentation are reflected in the interim financial
statements. Such adjustments are of a normal and recurring
nature. The results of operations for the period ended March
31, 1998 are not necessarily indicative of the operating
results for the full year. The interim financial statements
should be read in conjunction with the audited financial
statements and notes thereto included in the Company's 1997
Form 10-K.
The Company's consolidated financial statement for the year
ending December 31, 1997 as reflected in the Balance Sheet has
been adjusted to deconsolidate the financial results of Pemco
World Air Services A/S, the Company's Danish subsidiary. In
November 1997, the Danish subsidiary was closed and placed in
involuntary bankruptcy. However, the 1997 interim quarterly
statement of operations for the first quarter has not been
adjusted and includes the financial results of the Danish
subsidiary for such period. (See Note 8)
2. SIGNIFICANT ACCOUNTING POLICIES
Translation of Non-U.S. Currency Amounts - Assets and
liabilities of non-U.S. subsidiaries that operate in a local
currency environment are translated to U.S. dollars at the
exchange rate for the end of the accounting period. Income
and expenses are translated at average rates of exchange.
Translation adjustments are accumulated in a separate
component of stockholders' equity.
3. INVENTORIES
Inventories consist of the following:
March 31, December 31,
1998 1997
(Unaudited)
Work in-process $21,175,548 $25,385,996
Finished goods 2,938,107 3,125,830
Raw materials and supplies 5,859,237 5,987,419
Total $29,972,892 $34,499,245
Less progress payments
and customer deposits (15,377,820) (17,451,262)
$14,595,072 $17,047,983
4. EARNINGS PER COMMON SHARE
Net Income (Loss) per Common Share - In February 1997, the
Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 128, EARNINGS
PER SHARE. SFAS No. 128 revises the methodology to be used in
computing earnings per share ("EPS") such that the
computations required for primary and fully diluted EPS are to
be replaced with "basic" and "diluted" EPS. Basic EPS is
computed by dividing net income by the weighted average number
of shares outstanding during the period. Diluted EPS is
computed in the same manner as fully diluted EPS, except that,
among other changes, the average share price for the period is
used in all cases when applying the treasury stock method to
potentially dilutive securities. All share and per share
information included in these financial statements have been
restated to give effect to the adoption of SFAS No. 128.
The following table represents the net income (loss) per share
calculations for the three months ended March 31, 1998 and
1997:
For the three months ended March 31:
1998
Net income $ 4,537,682
Weighted Average Shares 3,666,054
Basic Net Income Per Share 1.24
Dilutive Securities:
Options 1,863
Warrants 243,459
Diluted Weighted Average shares 3,911,376
Diluted Net Income Per Share 1.16
1997
Net Loss (2,527,382)
Weighted Average Shares 3,187,328
Basic Net Loss Per Share (.79)
Dilutive securities:
*Options -
*Warrants -
Diluted Weighted Average Shares 3,187,328
Diluted Net Loss Per Share (.79)
*Potentially dilutive securities outstanding for 1997 were
excluded from EPS because they were antidilutive. Potentially
dilutive securities at March 31, 1997, were 1,053,938 warrants
and 157,015 options.
5. NOTES PAYABLE
March 31, December,31,
1998 1997
(Unaudited)
Revolving credit facility $14,233,511 $16,427,130
Senior Subordinated Loan
interest at 14.5% 6,200,000 6,700,000
Note due to individual repaid
in 1st quarter, 1998 1,202 277,202
Other obligations: interest
from 8 to 18%, collateralized
security interests in certain
equipment 1,313,750 1,379,986
Total debt $21,748,463 $24,784,318
On August 8, 1997, the Company entered into a three-year
revolving credit facility with a new lender. The amount of
funds available to borrow under the new $20 million revolving
credit facility is tied to percentages of accounts receivables
and inventory and, as a result of certain subordination
provisions, may not exceed $17 million. Therefore, available
funds will fluctuate on a daily basis. Interest on the new
revolving credit facility accrues at prime rate plus 1.5% with
provisions for both reductions in the interest rate based on
specific operating performance targets and increases related
to certain events of default. Interest is accrued and charged
to the loan balance on a monthly basis.
All scheduled principal amortization for the Senior
Subordinated loan has been deferred for the three-year term of
the new revolving credit facility. The Senior Subordinated
loan will be repaid over five installments commencing on
August 31, 2000, due each subsequent quarter through June 30,
2001.
The above loans are collateralized by substantially all of the
assets of the Company and have various covenants which limit
or prohibit the Company from incurring additional
indebtedness, disposing of assets, merging with other
entities, declaring dividends, or making capital expenditures
in excess of certain amounts in any fiscal year.
Additionally, the Company is required to maintain various
financial ratios and minimum net worth amounts. As a result
of its losses from operations, the Company was in violation of
substantially all of such covenants. Although the Company's
primary lender has waived the financial debt covenant
violations through March 31, 1998, there is no assurance that
the Company will not be in violation of its debt covenants in
the future, that the Company will have sufficient availability
under its revolving credit facility to fund operations until
implementation of its restructuring strategies or that the
bank will continue to fund under the current arrangements if
the Company remains in violation of its covenants subsequent
to March 31, 1998.
The Company's cash resources continued to be strained in 1998
primarily due to delays and reductions in progress payments
for amounts billed to the U.S. Government, increased workloads
under government contracts, and costs associated with the
strikes at the Birmingham and Dothan facilities.
6. CONTINGENCIES
United States Government Contracts - The Company, as a U.S.
Government contractor, is subject to audits, reviews, and
investigations by the government related to its negotiation
and performance of government contracts and its accounting for
such contracts. Failure to comply with applicable U.S.
Government standards by a contractor may result in suspension
from eligibility for award of any new government contract and
a guilty plea or conviction may result in debarment from
eligibility for awards. The government may, in certain cases,
also terminate existing contracts, recover damages, and impose
other sanctions and penalties. The Company believes, based on
all available information, that the outcome of the U.S.
Government's audits, reviews, and investigations will not have
a materially adverse effect on the Company's consolidated
results of operations, financial position, or cash flows.
On March 20, 1998, the U.S. Government released a request for
proposal (RFP) seeking proposals for all work related to its
KC-135 aircraft. The Company's Pemco Aeroplex subsidiary
currently performs the airframe maintenance portion of the KC-
135 workload, which is included in the RFP. Pemco intends to
pursue this workload through teaming or subcontracting
agreements.
Litigation - A purported class action was brought against the
Company and its Pemco Aeroplex subsidiary on behalf of those
persons hired as replacement workers during the strike by
Pemco's United Auto Worker ("UAW") union employees and who
were terminated upon settlement of such strike. The complaint
alleges fraud, breach of contract, and civil conspiracy and
seeks both compensatory and punitive damages. The Company
believes the plaintiffs' claims have no factual basis and will
vigorously defend the case.
The Company's Pemco Aeroplex subsidiary, successor to Hayes
International, is a defendant in several suits seeking damages
and indemnity for claims arising from an Airworthiness
Directive issued by the FAA. That Directive restricts the
cargo capacity of Boeing 747 aircraft converted pursuant to an
STC for such conversions. Hayes International had performed
engineering for the development of the STC. Certain of the
suits also allege fraud, misrepresentation and violations of
the Racketeer Influenced and Corrupt Organization Act.
On November 3, 1997, a Jefferson County, Alabama jury returned
a verdict against the Company's Pemco Aeroplex subsidiary in
the amount of $1 million compensatory and $3 million punitive
damages. The case involved an employee who alleged a
supervisor had made sexual advances against her. Pemco was
sued for the actions of its employee undertaken in the course
of employment. However, the jury found in favor of the
supervisor and against Pemco. Various post-trial motions
resulted in the trial court reducing the verdict to $1 million
in compensatory damages. Pemco has appealed this decision.
The Company believes it will successfully reverse the decision
upon appeal as the supervisor was not found liable. However,
an accrual was established in the fourth quarter of 1997 for
the compensatory damage award pending outcome of the appeal.
In addition to the above, the Company is involved in various
legal proceedings arising in the normal course of business.
Management does not believe the ultimate outcome of all such
litigation will have a material adverse effect on the
consolidated financial position or results of operations.
Environmental Compliance - In December, 1997, the Company
received an inspection report from the Environmental
Protection Agency ("EPA") which cited certain violations. The
Company has taken action to correct items raised by the
inspection. On April 2, 1998, the Company received a
complaint and compliance order from EPA proposing penalties of
$225,256. The Company disagrees with the citations and
intends to contest the citations and penalties, but has
recorded an accrual in the fourth quarter of 1997 for the
above penalties and certain other related charges.
7. STOCKHOLDERS' DEFICIT
At March 31, 1998 the Company had 300,000,000 authorized
shares of $.0001 par value common stock, with 14,771,870
shares outstanding.
At a special meeting held on April 15, 1998 and effective on
that date, the Company's shareholders approved a 1-for-4
reverse stock split of the common shares. There was no change
in the number of authorized shares or par value of the common
stock. Each four issued shares of the common stock were
automatically converted to one share of Common Stock and
fractional shares were exchanged for one full share. As of
April 15, 1998, 3,692,993 shares of Common Stock were issued
and outstanding.
All per share data herein have been restated to reflect the
reverse stock split.
8. TRANSACTIONS AFFECTING SUBSIDIARY OPERATIONS
On November 11, 1997, a supplier filed a request for
bankruptcy against Pemco World Air Services A/S ("PWAS"), the
Company's Danish subsidiary. On November 20, 1997, the
Maritime and Commercial Court in Copenhagen granted that
supplier's request and appointed trustees to operate the
facility. The Company has guaranteed certain obligations of
PWAS. As a result of the subsidiary being placed in
involuntary bankruptcy, PWAS has been excluded from the
Company's 1998 consolidated financial statement presentation.
Related to the deconsolidation, the Company continues to
maintain a liability of $1.3 million related to its basis in
the Company at time of bankruptcy for claims which may be made
against the Company.
Net sales, expenses, and net loss of PWAS which are included
in the consolidated statements of operations for the three
months ended March 31, 1997 are as follows:
1997
Net Sales $3,481,000
Expenses 3,854,000
Net Loss (373,000)
On January 29, 1998, the Company completed the sale of the net
assets of its Hayes Targets division in Leeds, Alabama. The
sale yielded net proceeds of approximately $5,000,000 and
resulted in a gain of $3.4 million.
Net sales and operating income contributed by the Hayes
operation for three months ended March 31, 1998 was not
material and for three months ended March 31, 1997 was as
follows:
1997
Net Sales $571,000
Operating Income 21,000
9. COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130 on January 1, 1998, which
establishes standards for reporting and display of
comprehensive income and its components. Comprehensive income
is a measure of all nonowner changes in equity of an
enterprise that result from transactions and other economic
events of the period. The Company did not have any material
differences in net income and comprehensive income for the
quarters ended March 31, 1998 or 1997.
10. PENDING ACCOUNTING PRONOUNCEMENTS
The AICPA has issued Statements of Position 98-1, ACCOUNTING
FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR
INTERNAL USE. This statement requires capitalization of
external direct cost of materials and services; payroll and
payroll-related costs for employees directly associated; and
interests costs during development of computer software for
internal use (planning and preliminary costs should be
expensed). Also, capitalized costs of computer software
developed or obtained for internal use should be amortized on
a straight-line basis unless another systematic and rational
basis is more representative of the software's use.
This statement is effective for financial statements for
fiscal years beginning after December 15, 1998 (prospectively)
and is not expected to have a material effect on the
consolidated financial statements.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the
Company's consolidated financial statements and notes thereto
included herein.
During the first quarter of 1998, the Company returned to
profitability. As of March 31, 1998, the Company reported
operating income of $2.0 million. In addition, the Company
generated additional profit, after adjustments, of $3.2 million
from the sale of the Hayes Targets division and other income
sources. Total income before taxes for the first quarter of 1998
was $4.5 million.
RESULTS OF OPERATIONS
Three months ended March 31, 1998
versus three months ended March 31, 1997
Revenues for the first quarter of 1998 were essentially unchanged
from the first quarter of 1997, decreasing only about 1% from $35.0
million in 1997 to $34.5 million in 1998. Both government and
commercial sales remained fairly constant. Government sales
decreased approximately 3% from $20.2 million in 1997 to $19.6
million in 1998, and commercial sales changed less than 1% from
$14.8 million in 1997 to $14.9 million in 1998. The Company's mix
of business between government and commercial customers moved from
42% commercial and 58% government in 1997 to 43% commercial and 57%
government in 1998.
Government sales in the first quarter of 1998 decreased
approximately $1.5 million due to the expiration of the C-130 PDM
contract at the Birmingham facility during 1997. Also reducing
government sales were decreases in government sales volume of
approximately $0.9 million at the Company's Space Vector subsidiary
and $0.6 million at the Dothan facility under the Navy H-3
contract.Largely offsetting these reductions was an increase of
approximately $2.5 million in government sales under the Birmingham
facility's KC-135 contract. This increase primarily resulted from
contract amendments effective October 1, 1997, that provide for
additional pricing, additional workscope, incentives and limited
cost/benefit sharing, and an increase in aircraft redeliveries.
Commercial sales were impacted by the closure of the Company's
Danish subsidiary in November 1997. The Danish subsidiary
contributed $3.4 million in revenues in the first quarter of 1997.
Additionally, the sale of the Company's Hayes Targets division in
January, 1998 resulted in a decrease in commercial revenue of $0.6
million. Offsetting these decreases were increases in commercial
sales of $3.3 million under aircraft maintenance/modification
contracts at the Dothan facility and $0.6 million at the Nacelle
facility in Clearwater, Florida.
The ratio of cost of sales ($27.8 million in 1998; $31.8 million in
1997) to net sales ($34.5 million in 1998; $35.0 million in 1997)
decreased from 91% in the first quarter of 1997 to 81% in 1998.
The decrease in the cost of sales was the result of restructuring
efforts undertaken during 1997 and strike-related costs recognized
in the first three months of 1997.
Selling, general and administrative expenses decreased from $5.0
million in the first quarter of 1997 to $4.5 million in 1998, and
decreased as a percentage of sales from 14% in 1997 to 13% in 1998.
These decreases resulted primarily due to the Company's reduction
of overhead expenses and corporate management changes.
Interest expense was $0.7 million in first quarter 1998 versus $0.3
million in 1997. The effective average interest rate in the first
quarter of 1998 on the Revolving Credit facility was 10% as
compared to 12.40% on the Term Credit facility in place in the
first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash resources continued to be strained in 1998
primarily due to delays and reductions in progress payments for
amounts billed to the U.S. Government, increased workloads under
government contracts, and costs associated with the strikes at the
Birmingham and Dothan facilities.
The following is a discussion of the significant items in the
Company's Consolidated Statement of Cash Flows for the quarters
ending March 31, 1998 and 1997.
The Company's pension expense as determined by its actuary for the
year 1998 is $1.2 million as compared to $1.45 million in 1997. In
the first quarter of 1998, the Company made no contributions to the
pension plan and expensed approximately $.08 million. In the first
quarter of 1997, the Company made no contributions to the pension
plan and expensed approximately $0.25 million.
Accounts payable and accrued expenses decreased from $31.7 million
in the first quarter of 1997 to $29.2 million in 1998. The
decrease primarily reflects the sale of the Hayes Targets
division's net assets in the first quarter of 1998. Accrued
interest payments at March 31, 1998 were $0.7 million representing
a $0.4 million increase over that due at March 31, 1997. This
increase was primarily due to borrowings made under the Company's
new Revolving Credit facility.
Accounts receivable increased $2.7 million in the first quarter of
1998, after adjustments for the sale of Hayes Targets assets, due
to an increase in progress payment billings and increased amounts
that the Company is allowed to bill under new cost/benefit sharing
provisions on the KC-135 contract that became effective October 1,
1997.
The Company did not record a provision for losses on work in
process for the first quarter of 1998. However, in the first
quarter 1997, the Company recognized $1.3 million of reserves for
losses attributable to work in process.
Net inventories decreased $2.5 million in the first quarter of 1998
primarily due to a reduction in the total work in process caused in
part by the sale of the Hayes Targets division. (See Notes 3 and
8 to Financial Statements).
During the first quarter of 1998, the Company's operating
activities used $2.2 million in cash. In addition, investing
activities provided net cash of $5.0 million and $3 million was
used for financing activities. In the first quarter of 1997, $0.5
million of cash was used for operating activities, no cash was used
for investing activities, and $0.2 million was applied to financing
activities under various capital leases.
During 1996, 1997 and 1998, inflation and changing prices have had
no significant impact on the Company's net sales or revenues or on
income from continuing operations.
BACKLOG
The following table presents the Company's backlog (in thousands of
dollars) at March 31, 1998 and 1997:
1998 1997
U.S. Government $151,751 $135,129
Commercial 25,755 25,389
$177,506 $160,518
The above numbers for 1997 have been adjusted to exclude backlog
related to the Hayes Targets division sold in January 1998, and the
Danish subsidiary closed in November 1997. Based on this
adjustment, as of March 31, 1998, 85% of the Company's backlog
related to work for the U.S. Government versus 84% for the period
ending March 31, 1997. The Company's Government backlog increased
$16 million primarily related to additional aircraft input under
the Company's KC-135 contract and a contract for the painting of C-
130 aircraft awarded to the Birmingham facility.
1998 1997
Firm, unfunded Backlog $47.8 million $49.1 million
Estimated sales to be
derived from backlog
contracts $214 million $261 million
The $214 million of estimated backlog is associated with the option
periods for the KC-135 contract and the Space Vector CTTS program.
CONTINGENCIES
See Note 6 to the Consolidated Financial Statements.
FORWARD LOOKING STATEMENTS
With the exception of historical facts, statements contained in
Management's Discussion and Analysis are forward looking
statements. Statements contained herein concerning anticipated
results of operations, award of contracts, the outcome of pending
and future litigation, the outcome of audits, reviews and
investigations by the U.S. Government, the outcome of claims filed
with the U.S. Government, estimates of backlog, the outcome of
claims related to the Copenhagen facility, and the Company's intent
to take certain action in the future are forward looking
statements, the accuracy of which cannot be guaranteed by the
Company. These forward looking statements are subject to a variety
of business risks and other uncertainties, including but not
limited to the effect of economic conditions, the impact of
competitive products and pricing, new product development, the
actual performance of work under contract, customer contract
awards, and actions with respect to utilization and renewal of
contracts.
PRECISION STANDARD,INC.
OTHER INFORMATION
PART II.
Item 1 Legal Proceedings
In May 1998, the Company's Pemco Aeroplex subsidiary was served
with a complaint filed by National Union Fire Insurance Company,
the Company's current insurer, seeking a declaration that the
policies issued by such insurer between 1987 and 1996 are not
required to provide defense costs or indemnity payments with
respect to the litigation arising out of the Supplementary Type
Certificates for 747 cargo conversions owned by GATX and others.
The complaint, filed in the U.S. District Court for the Northern
District of California, also names American International Airway,
Inc., a plaintiff in one of the underlying cases, as a defendant.
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
a) Exhibits
10 Asset purchase agreement between the Company's
Pemco Aeroplex subsidiary and Endevco Corporation,
an affiliate of Meggitt PLC, dated January 29,
1998.
27 Financial Data Schedule
b) Reports on Form 8-K
Reports on Form 8-K and Form 8-K/A dated January 29, 1998
under Item 4 were filed with the Commission on February
13, 1998 and March 2, 1998, respectively. In addition,
a Report on Form 8-K dated March 23, 1998 under Item 4
was filed with the Commission on March 27, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PRECISION STANDARD, INC.
Date: 5/18/98 By: /s/ Matthew L. Gold
Matthew L. Gold
Chairman, President and
Chief Executive Officer
and Director
(Principal Executive Officer
and Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 101,706
<SECURITIES> 0
<RECEIVABLES> 14,045,174
<ALLOWANCES> 1,234,312
<INVENTORY> 14,595,072
<CURRENT-ASSETS> 28,397,750
<PP&E> 29,041,556
<DEPRECIATION> 17,631,251
<TOTAL-ASSETS> 45,321,424
<CURRENT-LIABILITIES> 50,963,923
<BONDS> 0
0
0
<COMMON> 369
<OTHER-SE> (11,799,833)
<TOTAL-LIABILITY-AND-EQUITY> 45,321,424
<SALES> 34,453,916
<TOTAL-REVENUES> 34,453,916
<CGS> 27,813,422
<TOTAL-COSTS> 32,461,963
<OTHER-EXPENSES> 3,238,201
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 667,472
<INCOME-PRETAX> 4,562,682
<INCOME-TAX> 25,000
<INCOME-CONTINUING> 4,587,682
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,587,682
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.16
</TABLE>
ASSET PURCHASE AGREEMENT
- ------------------------
ASSET PURCHASE AGREEMENT, dated as of 29, January, 1998, by and among
Pemco Aeroplex, Inc., an Alabama corporation ("Seller") with offices
at 1943 North 50th Street, Birmingham Alabama 35212, and Endevco
Corporation, a Delaware corporation ("Buyer,") with offices at 30700
Rancho Viejo Road, San Juan Capistrano, California 92675.
WHEREAS, Seller, through its Hayes Target Division, is engaged in the
business of manufacture, design and sale of aerial targets, infrared
augmentation devices and infrared suppressers devices (the
"Business"); and
WHEREAS, subject to the limitations and exclusions contained in this
Agreement and on the terms and conditions hereinafter set forth,
Seller desires to sell and Buyer desires to purchase certain assets of
Seller.
NOW THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 AGREEMENT TO SELL. At the Closing hereunder (as defined in
Section 2.1 hereof), Seller shall grant, sell, convey, assign,
transfer and deliver to Buyer or its designee, upon and subject to the
terms and conditions of this Agreement, the Assets as defined in
SECTION 1.1.1 free and clear of all mortgages, liens, pledges,
security interests, charges, claims, restrictions and encumbrances of
any nature whatsoever.
1.1.1 INCLUDED ASSETS. The "Assets" as defined herein shall
include all tangible and intangible assets of Seller used or useful
primarily in, or necessary for, the Business, including without
limitation the following assets, properties and rights of Seller used
directly or indirectly primarily in or necessary for the conduct of,
or generated by or constituting, the Business of the Hayes Target
Division, but excluding those assets expressly set forth in SECTION
1.1.2 hereof:
(a) the Business of Seller as a going concern and the goodwill
pertaining thereto, together with the exclusive right to the name
"Hayes Targets" and all trademarks and service marks associated
therewith (excluding those trademarks and service marks utilizing the
crescent logo of Precision Standard, Inc. and its operating
companies);
(b) all vehicles, machinery, equipment, computer hardware, tools,
furniture, furnishings, leasehold improvements, fixtures, goods, and
other tangible personal property primarily related to, necessary for,
or used primarily by or necessary for the Business;
(c) the accounts, notes and other receivables of Seller relating
exclusively to the Business accrued on or prior to the Closing Date
(collectively the "Accounts Receivable");
(d) all prepaid items relating exclusively to the Business;
(e) all items of useable and salable supplies and inventories and
office and other supplies of the Business, including without
limitation raw materials, work-in-process and finished goods;
(f) all non-inventory supplies of the Business (including, without
limitation, containers, packaging and shipping material, tools and
spare parts and other similar removable tangible personal property)
wherever located;
(g) to the extent permitted by applicable law and except as set forth
in SECTION 1.1.2, all rights (but only those obligations specified in
SECTION 1.1.3) under any written or oral contract, agreement, license,
lease, instrument, registration, certificate of occupancy, other
permit or approval of any nature, or other document, commitment,
arrangement, undertaking, practice or authorization used primarily by
or necessary for the Business;
(h) all United States and foreign patents, patent rights, patent
applications and licenses, trademarks, trademark rights, service
marks, service mark rights, trade names, trade name rights,
copyrights, trade secrets, data bases, engineering drawings and
notebooks, inventions, know-how, formulae, technical information,
unpatented inventions, technologies, methods, formulations, inventions
techniques, discoveries, designs, proprietary rights and other non-
public information, whether patentable or not, and registrations,
reissues and extensions thereof and applications and licenses therefor
currently owned, used, licensed or proposed to be used or licensed ,
primarily in, or necessary to, the conduct of the Business, including,
but not limited to the intellectual property rights listed in SCHEDULE
3.1.18 (all of such rights being collectively referred to hereinafter
as the "Rights", but shall not include any trademark, tradename,
service mark, or any rights or licenses thereof utilizing the crescent
logo of Precision Standard, Inc. and its operating Companies);
(i) all computer software and software licenses used exclusively by
or useful exclusively to, or necessary for the conduct of, the
Business as presently conducted;
(j) all rights or choses in action of the Business arising out of
occurrences before or after the Closing, including without limitation
all rights under express or implied warranties relating to the Assets;
(k) all information, files, bids, proposals, records, data, plans,
contracts and recorded knowledge, including customer and supplier
lists, related to the Business; all books and records, including
without limitation the following: supplier, distributor, sales agent
and customer lists; trade correspondence; production and purchase
records; sales and promotional literature; accounts payable records
(including tax records, financial reports, invoices, correspondence
and all related documents); accounts receivable ledgers; all documents
relating to uncollected invoices; and all shipping records (but all
such shall information listed in this subparagraph (k) shall exclude
any such items to the extent they do not relate to the Business or any
part thereof);
(l) all certificates of deposit and securities instruments that are
exclusively related to the Business,
(m) the contracts, agreements and orders included in the Assumed
Obligations (as defined in SECTION 1.1.3);
(n) all advance payments, prepaid items, rights to offset and credits
of all kinds, related exclusively to the Business other than (i)
prepayments of federal, state and local taxes; and (ii) advance
payments, prepaid items, rights to offset and credits relating to
obligations of the Business not included in the Assumed Obligations;
(o) all licenses, permits, authorizations, franchises and other
approvals from any governmental, quasi governmental, public or self-
regulatory body or authority exclusively used or held for use in
connection with, or necessary for, the conduct of the Business,
including, but not limited to, the items listed on Schedule 3.1.13
(all of such rights being collectively referred to hereinafter as the
"Permits");
(p) the Commitments described in SCHEDULE 3.1.15;
(q) all contract rights and accounts arising out of any of the items
listed above and/or out of any of the Assumed Obligations (defined
below);
(r) all other tangible and intangible personal property owned by the
Seller which is not specifically included in, or specifically excluded
from the foregoing subsections, which is used exclusively in or
necessary for the conduct of the Business as presently conducted, and
which is not excluded under SECTION 1.1.2 below.
All of such assets described above are collectively referred to herein
as the "Assets." All Assets shall be in the same condition on the
Closing Date as on the date hereof, changes in the ordinary course of
business only excepted.
1.1.2 EXCLUDED ASSETS. Notwithstanding the foregoing, the Assets
shall not include any of the following:
(a) the corporate seals, certificates of incorporation, minute books,
stock books, tax returns, books of account or other records having to
do with the corporate organization of Seller;
(b) the rights of Seller under any employment agreement or
arrangement or employee benefit plan or arrangement (whether written
or oral);
(c) the rights of Seller under this Agreement;
(d) the Unisys Computer System and related software at the Seller's
Birmingham facility the use of which has been shared;
(e) cash and cash equivalents;
(f) inter-company (i.e. between the Business and Seller or any
affiliate of Seller) accounts receivable;
(g) the use of the name "Hayes" (but not "Hayes Targets") with
respect to any and all other purposes or businesses other than towed
targets and infrared radiation suppression devices and the crescent
logo of Precision Standard;
(h) the assets, properties or rights (if any) set forth on SCHEDULE
1.1.2(h); and
(i) the Consulting Agreement with S. W. Teague dated May 20, 1997,
(and Buyer covenants that it shall not otherwise contract for the
services of Mr. Teague on or before May 30, 1998).
1.1.3 ASSUMED OBLIGATIONS. The Assumed 0bligations shall include:
(a) the trade accounts payable and accrued expenses (excluding
payables to Seller and any affiliate of Seller) set forth on the
Closing Statement (defined in SECTION 1.3.3) but specifically
excluding those accounts payable listed on SCHEDULE 1.1.3;
(b) the contract obligations of the Business specifically included
among the Assets;
(c) all obligations under any written or oral contract, agreement,
license, lease, instrument, registration, certificate of occupancy,
other permit or approval of any nature, or other document, commitment,
arrangement, undertaking, practice or authorization to the extent
assumed under SECTION 1.1.1(g);
(d) all product liability claims arising after the Closing for goods
and services sold after the Closing; and
(e) any and all other liabilities and obligations accruing for any
act of the Business after the Closing.
Except to the extent specifically assumed above, all other
obligations, debts and liabilities of Seller shall remain the sole and
exclusive responsibility of Seller and are collectively referred to
herein as "Excluded Obligations. By way of example, Assumed
Obligations do not include bank and other debt obligations, product
liability claims for products sold prior to the Closing Date, tax
liabilities of any kind arising prior to the Closing, inter-company
accounts payable (i.e. between the Business and Seller or any
affiliate of Seller) of the Seller, or employment contracts of any
kind, all of which shall be deemed Excluded Obligations.
1.1.4 RIGHT OF ENFORCEMENT AND SETTLEMENT. From and after the
Closing Date, the Buyer shall have complete control over the payment,
settlement or other disposition of the Assumed Obligations and the
right to commence, conduct and control all negotiations and
proceedings with respect thereto. The Seller shall notify the Buyer
promptly of any claim made with respect to any such Assumed Obligation
and shall not, except with the latter's prior written consent, make
any payment of, settle or offer to settle, or consent to any
compromise or admit liability with respect to, any such Assumed
Obligation. The Seller shall cooperate with the Buyer in any
reasonable manner requested by the Buyer in connection with any
negotiations or proceedings involving any Assumed Obligation. The
Buyer shall cooperate with Seller in any reasonable manner requested
by the Seller in connections with any negotiations or proceedings
involving any Excluded Obligation.
1.2 AGREEMENT TO PURCHASE. At the Closing hereunder, Buyer shall
purchase and Seller shall sell to Buyer the Assets, upon and subject
to the terms and conditions of this Agreement and in reliance on the
representations, warranties and covenants of Seller and Buyer
contained herein, in exchange for the Purchase Price (as defined in
Section 1.3) hereof,).
1.3 THE PURCHASE PRICE.
1.3.1 PURCHASE PRICE. The Purchase Price shall be an amount equal
to Six Million Dollars ($6,000,000) plus the Purchase Price Adjustment
amount as defined in SECTION 1.3.3, payable in the manner set forth in
SECTION 1.3.2. The Purchase Price Adjustment may be positive or
negative.
1.3.2 PAYMENT OF PURCHASE PRICE. On the Closing Date Buyer shall
pay as the Purchase Price the following:
(a) Five Million Dollars ($5,000,000) in the form of a wire transfer
to the account of Seller at the Bank of New York; and
(b) The balance of the Purchase Price (as adjusted) shall be payable
in accordance with the provisions of Section 1.3.4 below; and
(c) $500,000 shall be deposited by Buyer with Sheehan, Phinney, Bass
+ Green, ("SPB+G") counsel for Buyer, which amount shall be held in
escrow and distributed under the terms of SECTION 1.3.4 below (the
"Escrowed Funds") Neither SPB+G nor any attorney of the firm shall be
precluded from acting on behalf of, or representing the Buyer by
virtue of SPB+G holding of the Escrowed Funds. Its sole obligation
with respect to the Escrowed Funds shall be to disburse them in
accordance with either (i) written instructions signed by an
authorized representative of both Buyer and Seller, or (ii) in
accordance with an award of arbitration pursuant to dispute resolution
as set forth in SECTION 8.17 of this Agreement. SPB+G shall be
entitled to rely upon (a) in the case of Seller, any certificates
signed by Darryl Mazow, or the President or any Vice President of
Seller, and (b) in the case of Buyer, any certificates signed by
Bennett Moore or the President or any Vice President of Buyer. SPB+G
shall have no liability either to Buyer or Seller for actions taken or
payment made in accordance with such certificates, or in accordance
with the award of arbitration, including payment of the costs of
arbitration. Buyer and Seller shall each defend, indemnify and hold
SPB+G harmless from and against any liability from acting in
accordance with its obligations hereunder.
1.3.3 PURCHASE PRICE ADJUSTMENT. Not later than ten business days
after Closing, Seller shall present to Buyer its final accounting
records summarizing activity of the Business to the Closing Date. Not
later than twenty business days after receipt of this data, Buyer
shall provide Seller with a Closing Statement setting forth the Net
Book Assets of the Business (as defined below) and the Purchase Price
Adjustment. The Purchase Price Adjustment shall be equal to the Net
Book Assets (as defined below) less $2,687,437 (two million six
hundred eighty seven thousand four hundred thirty seven dollars.) The
Purchase Price Adjustment may be positive or negative.
"NET BOOK ASSETS" shall mean:
(1) the book value of the Assets as of the Closing Date determined in
accordance with generally accepted accounting principles and
consistent with Seller's historical practices and Representations and
Warranties herein contained; minus
(2) the amount of the Assumed Obligations as of the Closing Date.
The accounting principles used for valuing the Net Book Assets shall
be the same as used to prepare the October 31, 1997 Balance Sheet.
Buyer and Seller agree that the existing reserve for inventory is to
be increased by $200,000 on the Closing Balance Sheet, which increase,
however, will be disregarded for purposes of determining the Net Book
Assets and/or the Purchase Price Adjustment and/or the Adjusted
Purchase Price.
1.3.4 PAYMENT OF UNPAID BALANCE OF THE PURCHASE PRICE. The
determination of the Purchase Price Adjustment as set forth on the
Closing Statement shall be conclusive and binding upon the parties
hereto and their respective successors and assigns, unless, (i) Seller
notifies Buyer in writing that it accepts the Purchase Price
Adjustment or (ii) within fifteen (15) business days after delivery of
the Closing Statement to Seller, Seller gives the Buyer notice that it
objects to the determination set forth on the Closing Statement. Any
undisputed balance shall be paid within two (2) business days after
notice to Buyer. Such notice shall set forth the specific item or
items to which objection is made (herein called "disputed items") and
the basis for such objection. If such notice is given, the Seller and
the Buyer shall, for a period of 15 business days after the giving of
such notice, endeavor to agree upon a settlement of the disputed
items. If the Seller and the Buyer fail to so agree upon all disputed
items, the disputed items on which such parties have failed to so
agree shall be submitted for arbitration under the dispute resolution
provisions in SECTION 8.17. below. The Purchase Price Adjustment
shall be modified to the extent, if any, necessary to reflect (a) any
such agreement between the Seller and the Buyer with respect to
disputed items, or (b) any such determination made pursuant to dispute
resolution, and the Purchase Price Adjustment as so modified shall be
conclusive and binding upon the parties hereto and their respective
successors and assigns for purposes specified above.
Upon agreement (or determination pursuant to dispute resolution) of
the amount of the Purchase Price Adjustment, the "Adjusted Purchase
Price" shall be calculated by adding the Purchase Price Adjustment to
the Purchase Price. The "Unpaid Balance" shall be equal to the
Adjusted Purchase Price less $5,000,000. Within two business days
after final determination of the Unpaid Balance as set forth above,
the Unpaid Balance shall be paid as follows:
(a) If the Unpaid Balance is positive, the amount thereof shall be
paid out of the Escrowed Funds to Seller together with a PRO RATA
share of the interest thereon, and the balance of the Escrowed Funds
and accrued interest shall be returned to Buyer. If the amount of the
Unpaid Balance is greater than $500,000, the entire amount of the
Escrowed Funds and accrued interest will be paid to Seller, and Buyer
shall pay the remaining Unpaid Balance to Seller within two days of
the final agreement (or determination pursuant to dispute resolution)
of the Purchase Price Adjustment.
(b) If the Unpaid Balance is negative, the amount thereof shall be
paid by Seller to Buyer within two days of the final agreement (or
determination pursuant to dispute resolution) of the Purchase Price
Adjustment, and the entire Escrowed Funds and accrued interest will be
returned to Buyer.
1.3.5 ALLOCATION OF PURCHASE PRICE. The parties agree to
cooperate in allocating the Adjusted Purchase Price among the
transferred assets in accordance with the requirements of Section 1060
of the Internal Revenue Code of 1986 as amended. The allocation of
the Adjusted Purchase Price shall be completed no later than 30 days
after determination of the Purchase Price Adjustment. In the event
the parties cannot agree on the allocation by such date, the
allocation shall be made by an agreed appraisal firm as soon as
practicable. If the parties cannot agree upon a single appraiser,
they shall each appoint an appraiser and each such appraiser shall
decide upon a third appraiser. The third appraiser shall perform the
appraisal. The parties hereby agree to prepare all state, federal,
and local income tax returns on the basis of the allocation as
determined.
1.4 NO ASSUMPTION OF LIABILITIES. Except for those obligations of
Seller expressly assumed by Buyer under SECTION 1.1.3 above, Buyer
does not hereby, and shall in no event be deemed to, assume or incur
any liability or obligation of Seller whatsoever relating in any way
to Seller or operation of Seller's Business prior to Closing,
whensoever arising, including without limitation any of the following:
(a) except as specifically assumed above, any liability or obligation
to any shareholder, director, officer, employee, agent or consultant
of Seller, whether for or on account of any loan, advance of funds or
other consideration or forbearance;
(b) any product liability or similar claim for injury to person or
property, regardless of when made or asserted, which arises out of or
is based upon any express or implied representation, warranty,
agreement or guarantee made by Seller, or alleged to have been made by
Seller, or which is imposed or asserted to be imposed by operation of
law, in connection with any service performed or product sold or
leased by or on behalf of Seller on or prior to the Closing, including
without limitation any claim relating to any product delivered in
connection with the performance of such service and any claim seeking
recovery for consequential damage, lost revenue or income, or any
liability or claim for injury to any employee or invitee of the
Business, regardless of when made or asserted, which arises out of or
is based upon, or alleged to have been made or based upon any event on
or prior to Closing;
(c) any federal, state or local income or other tax imposed on Seller
(i) payable with respect to the business, assets, properties or
operations of Seller or (ii) incident to or arising as a consequence
of the negotiation or consummation by Seller of this Agreement and the
transactions contemplated hereby;
(d) any liability or obligation under or in connection with the
assets excluded from the Assets under SECTION 1.1.2;
(e) any liability or obligation arising prior to or as a result of
the Closing to any employees, agents or independent contractors of
Seller, whether or not employed by Buyer after the Closing, or under
any employment agreement, union contract or arrangement or employee
benefit plan or arrangement (whether written or oral) with respect
thereto;
(f) any liability or obligation of Seller: (i) arising or incurred in
connection with the negotiation, preparation and execution of this
Agreement and the transactions contemplated hereby; and (ii) fees and
expenses of counsel, accountants and other experts and brokers of
Seller; or
(g) any other liability of Seller not otherwise specifically assumed
under this Agreement.
1.5 RIGHT OF ENDORSEMENT. After the Closing, the Buyer shall have
the right and authority to endorse, without recourse, the name of the
Seller on any check or any other evidence of indebtedness received by
the Buyer on account of any Accounts Receivable or other Asset
transferred by the Seller pursuant hereto, and the Seller shall
deliver to the Buyer at the Closing copies of resolutions adopted by
the Board of Directors of the Seller, certified by the Secretary or an
Assistant Secretary thereof, and letters of instruction, and/or
special powers of attorney sufficient to permit the Buyer to deposit
such checks or other evidences of indebtedness in bank accounts in the
name of the Buyer.
1.6 GOVERNMENT APPROVALS ETC. Each party hereto shall cooperate as
necessary in the preparation and filing of a joint voluntary notice to
the Committee on Foreign Investment in the United States ("CFIUS")
with respect to the possible application of the Exon-Florio Amendment
(Section 721 of the Defense Production Act of 1950, as amended)
("Section 721 ") to the transactions contemplated by this Agreement.
Each party hereto shall promptly provide the other party with copies
of all correspondence received by it from, and the substance of all
communications with, any person with respect thereto and copies of all
correspondence proposed to be sent by it to any person with respect
thereto at least two business days prior to dispatch. The parties
shall (i) cooperate in giving notification to, making filings with and
providing information to governmental entities with respect thereto
and (ii) respond promptly to any requests for further information with
respect thereto; PROVIDED HOWEVER, that this Section shall not require
either party hereto to deliver confidential information to the other
party in the absence of reasonably satisfactory assurances with
respect to the maintenance of confidentiality. Buyer shall pay the
costs of the notification process and related matters.
ARTICLE II
CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS,
CHANGE IN NAME AND FURTHER ASSURANCES
2.1 CLOSING. The closing (the "Closing") of the sale and purchase of
the Assets shall take place at 10:00 a.m., local time, on January 29,
1998 at the offices of Sheehan Phinney Bass + Green, 1000 Elm Street,
Manchester NH or on such other date and location as may be mutually
agreed upon in writing by Buyer and Seller. The date of the Closing
is sometimes herein referred to as the "Closing Date."
2.2 ITEMS TO BE DELIVERED AT CLOSING. At the Closing and subject to
the terms and conditions herein contained:
(a) Seller shall deliver to Buyer the following:
(1) a Bill of Sale in the form of EXHIBIT A attached hereto, an
Assignment of Contracts and Other Rights in the form of EXHIBIT B
attached hereto, and releases, if any are required, of any and all
liens on the Assets of Seller;
(2) such other bills of sale with covenants of warranty, assignments,
endorsements, and other good and sufficient instruments and
documents of conveyance and transfer, in form reasonably satisfactory
to Buyer and its counsel, as shall be necessary and effective to
transfer and assign to, and vest in, Buyer the full and exclusive
right, title and interest in and to the Assets except as otherwise
disclosed in any schedules hereto; and
(3) all of the agreements, contracts, licenses, commitments, leases,
plans, bids, quotations, proposals, instruments, computer programs and
software, data bases whether in the form of computer tapes or
otherwise, price books and price lists, customer and subscriber lists,
supplier lists, sales records, files, correspondences, and other
documents, books, records, papers, files, office supplies and data
belonging to Seller which are part of the Assets;
and simultaneously with such delivery, all such steps will be taken as
may be required to put Buyer in actual possession and operating
control of the Assets;
(b) Buyer shall deliver to or on behalf of the Seller the Purchase
Price as required under SECTION 1.3.2.
(c) As of the Closing Date, the Buyer will assume and thereafter pay,
perform and discharge and satisfy the liabilities of the Business set
forth in SECTION 1.1.3.
2.3 THIRD PARTY CONSENTS. To the extent that Seller's rights under
any agreement, contract, license, commitment, lease, Authorization (as
defined in SECTION 3.1.13) or other Asset to be assigned to Buyer
hereunder may not be assigned without the consent of another person
which has not been obtained, this Agreement shall not constitute an
agreement to assign the same if an attempted assignment would
constitute a breach thereof or be unlawful, and Seller, at its
expense, shall use its best efforts to obtain any such required
consent(s) as promptly as possible. Seller and Buyer shall cooperate
to obtain novations of sales and other contracts as Buyer may request.
2.4 FURTHER ASSURANCES. Seller from time to time after the Closing,
at Buyer's request, will execute, acknowledge and deliver to Buyer
such other instruments of conveyance and transfer and will take such
other actions and execute and deliver such other documents,
certifications and further assurances as Buyer may reasonably require
in order to vest more effectively in Buyer, or to put Buyer more fully
in possession of, any of the Assets.
2.5 TRANSITION PERIOD FOR LOGOS. Buyer shall have thirty (30) days
from the Closing Date in which to remove the Crescent logo and any
reference to the name "Precision Standard, Inc." and/or "Pemco
Aeroplex, Inc." from all packaging, containers, and shipping material
as well as stationery. Immediately after Closing, Buyer shall affix
to all such supplies a mark identifying that the Business is no longer
affiliated with Precision Standard, Inc. and/or Pemco Aeroplex, Inc.
Seller shall immediately after the Closing Date cancel its
registration in any and all jurisdictions of any and all trademarks or
service marks to the extent they contain the mark "Hayes Targets," but
not the word "Hayes" in other formatives.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby
represents and warrants to Buyer as of the Closing Date as follows:
3.1.1 CORPORATE EXISTENCE. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Alabama. Seller is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the
conduct of the Business by it requires it to be so qualified.
3.1.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
Seller has the corporate power, authority and legal right to execute,
deliver and perform this Agreement. The execution, delivery and
performance of this Agreement by Seller has been duly authorized by
all necessary corporate and shareholder action. This Agreement has
been, and the other agreements, documents and instruments required to
be delivered by Seller in accordance with the provisions hereof (the
"Seller's Documents") will be duly executed and delivered on behalf of
Seller, and this Agreement constitutes, and the Seller's Documents
when executed and delivered will constitute, the legal, valid and
binding obligations of such Seller as is a party thereto, enforceable
against such party in accordance with their respective terms.
3.1.3 NO INTEREST IN OTHER ENTITIES. No shares of any corporation
or any ownership or other investment interest, either of record,
beneficially or equitably, in any association, partnership, limited
partnership, limited liability company, limited liability partnership,
joint venture or other legal entity are included in the Assets.
3.1.4 VALIDITY OF CONTEMPLATED TRANSACTIONS, ETC. The execution,
delivery and performance of this Agreement and the other Seller's
Documents by Seller does not and will not violate, conflict with or
result in the breach of any term, condition or provision of, or
require the consent of any other person under, (a) any existing law,
ordinance, or governmental rule or regulation to which Seller is
subject, (b) any judgment, order, writ, injunction, decree or award of
any court, arbitrator or governmental or regulatory official, body or
authority which is applicable to Seller, (c) the charter documents of
Seller or any securities issued by Seller, or (d) any mortgage,
indenture, agreement, contract, commitment, lease, plan, Permit (as
defined in SECTION 3.1.13,) or other instrument, document or
understanding, oral or written, to which Seller is a party or by which
any of the Assets may be bound or affected, or give any party with
rights thereunder the right to terminate, modify, accelerate or
otherwise change the existing rights or obligations of Seller
thereunder. Except as aforesaid, no authorization, approval or
consent of, and no registration or filing with, any governmental or
regulatory official, body or authority is required in connection with
the execution, delivery or performance of this Agreement and the other
Seller's Documents by Seller.
3.1.5 NO THIRD PARTY OPTIONS. There are no existing agreements,
options, commitments or rights with, of or to any person to acquire
any substantial part of Seller's assets, properties or rights included
in the Assets.
3.1.6 FINANCIAL STATEMENTS. Seller, as related solely to the
Business and Assets, has delivered to Buyer true and complete copies
of (a) Income statement for the ten month period ending October 31,
1997; and (b) a Balance Sheet dated as of October 31, 1997
(collectively the "Financial Statements.") which are set forth in
SCHEDULE 3.1.6. Except as set forth in SCHEDULE 3.1.6, the Financial
Statements
(a) fairly present the financial position, assets and liabilities
(whether accrued, absolute, contingent or otherwise) of the Business
of Seller for the periods indicated and such statements of profits and
loss fairly present the results of operations for the periods
indicated;
(b) were prepared in accordance with generally accepted accounting
principles, uniformly applied on a basis consistent with prior years
or periods; and
(c) contain or reflect all necessary adjustment for a fair and
accurate presentation of the results of operations for the periods
covered by the Financial Statements.
3.1.7 INVENTORY. All inventory of Seller used in the conduct of
the Business, including without limitation raw materials, work-in
process and finished goods, was acquired and has been maintained in
the ordinary course of the Business; is of good and merchantable
quality; consists of a quality, quantity and condition usable,
leaseable or saleable in the ordinary course of the Business; is
valued at reasonable amounts based on the ordinary course of business
of Seller during the past six months; and is not subject to any write-
down or write-off. Seller is not under any liability or obligation
with respect to the return of inventory in the possession of
wholesales, retailers or other customers.
3.1.8 ABSENCE OF UNDISCLOSED LIABILITIES. Seller has no
liabilities or obligations with respect to the Seller or the Business,
either direct or indirect, matured or un-matured or absolute,
contingent or otherwise, to which Buyer may become subject by the
consummation of the transaction contemplated hereunder, excepting only
the Assumed Obligations or liabilities arising as a result of a change
of law after the Closing Date.
For purposes of this Agreement, the term "liabilities" shall include,
without limitation, any direct or indirect indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, choate or inchoate, liquidated or un-
liquidated, secured or unsecured or other item requires to be carried
as a liability under generally accepted accounting principles.
3.1.9 TAX AND OTHER RETURNS AND REPORTS. As relates to the
Business, all federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by Seller
(the "Tax Returns") with respect to any federal, state, local or
foreign taxes, assessments, interest, penalties, deficiencies, fees
and other governmental charges or impositions (the "Taxes") have been
filed with the appropriate governmental agencies in all jurisdictions
in which such Tax Returns are required to be filed, and all such Tax
Returns properly reflect the liabilities of Seller for Taxes for the
periods, property or events covered thereby. As relates to the
Business, all Taxes have been properly accrued or paid. Seller has
not received any notice of assessment or proposed assessment in
connection with any Tax Returns and there are not pending tax
examinations of or tax claims asserted against Seller or any of its
assets or properties. Seller has not extended, or waived the
application of, any statute of limitations of any jurisdiction
regarding the assessment or collection of any Taxes. There are no tax
liens (other than any lien for current taxes not yet due and payable)
on any of the Assets. Seller has no knowledge of any basis for any
additional assessment of any Taxes. Seller has made all deposits
required by law to be made with respect to employees' withholding and
other employment taxes, including without limitation the portion of
such deposits relating to taxes imposed upon Seller.
3.1.10 ABSENCE OF CHANGES. Except as otherwise disclosed in
SCHEDULE 3.1.10, since October 31, 1997, Seller, with respect to the
Business has not:
(a) incurred any liabilities, other than liabilities incurred in the
ordinary course of business consistent with past practice, or paid any
liabilities, other than in the ordinary course of business consistent
with past practice;
(b) except in the ordinary course of business, sold, encumbered,
assigned or transferred any assets or properties which would have been
included in the Assets if the Closing had been held on October 31,
1997 or on any date since then;
(c) created, incurred, assumed or guaranteed any indebtedness for
money borrowed, or mortgaged, pledged or subjected any of its Assets
to any mortgage, lien, pledge, security interest, conditional sales
contract or other encumbrance of any nature whatsoever;
(d) made or suffered any amendment or termination of any material
agreement, contract, license, commitment, lease or plan to which it is
a party or by which it is bound, or canceled, modified or waived any
substantial debts or claims held by it or waived any rights of
substantial value, whether or not in the ordinary course of business;
(e) suffered any damage, destruction or loss, whether or not covered
by insurance, (i) materially and adversely affecting the Business,
operations, assets, properties or prospects or (ii) of any item or
items carried on its books of account individually or in the aggregate
at more than $1,000;
(f) suffered any material adverse change in the Business, operations,
assets, properties, prospects or condition (financial or otherwise);
(g) except as otherwise disclosed in SCHEDULE 3.1.14, received notice
or had knowledge of any actual or threatened occurrence, event or
condition of any similar character which has had or might have an
adverse effect on the Business, operations, Assets, properties or
prospects;
(h) changed any of the accounting principles followed by it or the
methods of applying such principles; or
(i) to Seller's knowledge, entered into any transaction other than in
the ordinary course of business consistent with past practice.
3.1.11 TITLE TO PROPERTIES. The Seller has and will have at the
Closing good and marketable title to the Assets free and clear of all
mortgages, claims, liens, charges, encumbrances, security interests,
restrictions on use or transfer or other defects as to title. All
leases and other agreements contained in the Assets are in full force
and effect and all rentals, royalties or other payments accruing
thereunder prior to the date hereof have been duly paid when due and
the Seller enjoys quiet and undisturbed possession and use under all
such leases and agreements. Seller has received no notice of default
under any such lease or agreement, and, to Seller's knowledge, no
default or event which, with the giving of notice or lapse of time or
both, would constitute a default under the terms or provisions,
express or implied, of any such lease or agreement has occurred.
Seller has not waived any of its rights under any of the leases or
agreements.
3.1.12 TANGIBLE ASSETS. All facilities, equipment and other
material items of tangible property and assets which are included in
the Assets are in good operating condition and repair, subject to
normal wear and maintenance and are usable in the regular and ordinary
course of business. No person other than Seller owns any equipment or
other tangible assets or properties situated on the premises of Seller
or necessary to the operation of the Business, except for leased items
disclosed in SCHEDULE 3.1.12.
3.1.13 COMPLIANCE WITH LAW; PERMITS, LICENSES AND APPROVALS. To
Seller's knowledge, Seller has complied with each, and is not in
violation of, any law, ordinance, or governmental or regulatory rule
or regulation, whether federal, state, local or foreign, to which the
Business or Assets is subject ("Regulations"). Seller owns, holds,
possesses or lawfully uses in the operation of the Business all
franchises, licenses, permits, easements, rights, applications,
filings, registrations and other authorizations ("Permits") which are
in any manner necessary for it to own or operate the Business as
presently conducted and for the use of the Assets owned or used by
Seller in the conduct of the Business, free and clear of all liens,
charges, restrictions and encumbrances and in compliance with all
Regulations. All such Permits are listed and described in SCHEDULE
3.1.13. Seller has not received any notice of any claim of default
with respect to any such Permit, and to Seller's knowledge, Seller is
not in default with respect to any such permit. To Seller's
knowledge, after due inquiry, none of such Permits will be adversely
affected by consummation of the transactions contemplated hereby. All
of the Permits are in full force and effect and are assignable,
without additional condition or the payment of money, to the Buyer
pursuant to the terms of this Agreement, and Seller knows of no
pending or threatened suspension or cancellation of any of them.
3.1.14 LITIGATION. Except as set forth on SCHEDULE 3.1.14, to
Seller's knowledge there is no claim, action, suit, proceeding,
arbitration, investigation or hearing pending or threatened, before
any court or governmental, quasi-governmental or administrative
authority or private arbitration tribunal relating to or affecting the
Business of the Seller or any of the Assets, or the transactions
contemplated by this Agreement. No facts are known to the Seller
which could reasonably give rise to any such claim, action, suit,
proceeding, arbitration, investigation or hearing which may have any
material adverse effect upon the financial condition, results of
operations, properties, Business or prospects of the Seller or the
value of the Assets, or which might hinder the consummation of the
transactions contemplated by this Agreement. The Seller has not
waived any statute of limitations or other affirmative defense with
respect to any of the Assumed Obligations. To Seller's knowledge,
there is no continuing order, injunction or decree of any court,
arbitrator or governmental, quasi-governmental or administrative
authority to which the Seller is a party, or to which the Assets are
subject. Neither the Seller nor any current officer, director or
employee of the Seller has been permanently or temporarily enjoined or
barred by order, judgment or decree of any court or other tribunal or
any agency or self-regulatory body from engaging in the Business
engaged in by the Seller.
3.1.15 CONTRACTS AND COMMITMENTS. Except for such matters set
forth in SCHEDULE 3.1.24, SCHEDULE 3.1.15 describes all of the
following commitments relating to the Business and to which Seller is
a party, together with a statement as to whether such is included
among or excluded from the Assets (the "Commitments") (when used in
this SECTION 3.1.15, references to Seller shall mean only as related
to the Business):
(a) real or personal property leases under which Seller is either
lessor or lessee relating to the Assets or any property at which the
Assets are located;
(b) license agreements, assignments, contracts (whether as licensor
or licensee, assignor or assignee) relating to trademarks, trade
names, patents or copyrights (or applications therefor), unpatented
designs or processes, formulae, know-how or technical assistance, or
other proprietary rights;
(c) agreements and other arrangements for the sale of goods or
services by the Seller to any government, governmental, quasi-
governmental or regulatory authority;
(d) agreement, contract or commitment to sell, supply, purchase or
receive goods ("Goods Contracts") or to perform services ("Services
Contracts") involving in any one case $ 1,000 or more other than those
described in (c) above;
(e) agreements with any labor union or other collective bargaining
agreement;.
(f) agreements with distributors, dealers, sales agents or
representatives which may not be terminated by the Seller without
liability unless not more than 30 days' notice is given;
(g) material agreements with manufacturers, suppliers of customers
with respect to discounts and allowances and extended payment terms;
(h) joint venture or partnership agreements with any other person;
(i) agreements guaranteeing, indemnifying or otherwise becoming
liable for the obligations or liabilities of another;
(j) agreements (other than purchase money security interests which
may, under the terms of invoices from suppliers of the Seller, be
granted to such suppliers with respect to goods so purchased) for the
borrowing or lending of money;
(k) agreements with any bank, finance company or similar
organization;
(1) agreements granting any person a power of attorney, lien,
security interest or mortgage on any of the Assets (except purchase
money security interests created under customers' purchase orders and
securing only the amounts owed for the goods so purchased), including,
without limitation, factoring agreements or agreements for the
assignment of Accounts Receivable or Inventory;
(m) note, debenture, bond, equipment trust agreement, letter of
credit
agreement, loan agreement or other contract or commitment (whether
written or oral) for the borrowing, lending or advance of money or
agreement or arrangement for a line of credit or guarantee, pledge or
undertaking of the indebtedness of any other person relating to the
Business;
(n) agreements for the incurrence (whether singly or as a series of
related expenditures) of any capital expenditure in excess of $
10,000;
(o) advertising agreements;
(p) license, franchise, distributorship or other agreement which
relates in whole or in part to any software, patent, trademark, trade
name, service mark or copyright or to any ideas, technical assistance
or other know-how of or used by the Business;
(q) agreements which restrict the Business from doing business
anywhere in the world;
(r) long-term sale and private brand agreements; and
(s) all other material agreements, not included in or expressly
excluded from the terms of the foregoing clauses (a) through (q),
affecting the Assets or the Business. Written contracts and purchase
orders for the purchase or sale of goods made in the ordinary and
regular course of business shall only be considered material if they
provide for payment of more than $10,000 in any one case (or $100,000
in the aggregate) or have a term of six months or more.
Except as set forth on SCHEDULE 3.1.15:
(a) each Commitment is a valid and binding agreement of the Seller,
enforceable against the Business in accordance with its terms, and the
Seller does not have any knowledge that any Commitment is not a valid
and binding agreement of the other parties thereto;
(b) with respect to the Business, the Seller has fulfilled all
material obligations required pursuant to the Commitments to have been
performed by the Seller as the case may be, on its part prior to the
date hereof, and the Seller has no reason to believe that it will not
be able to fulfill, when due, all of its obligations under the
Commitments which remain to be performed after the date hereof,
(c) to Seller's knowledge, the Seller is not in breach, in any
material respect, of or default under any Commitment, and no event has
occurred which with the passage of time or giving of notice or both
would constitute such a default, result in a loss of rights or result
in the creation of any lien, charge or encumbrance, thereunder or
pursuant thereto;
(d) to Seller's knowledge, there is no existing material breach or
default by any other party to any Commitment, and no event has
occurred which with the passage of time or giving of notice or both
would constitute a default by such other party, result in a loss of
rights or result in the creation of any encumbrance thereunder or
pursuant thereto;
(e) to Seller's knowledge, there are not and, since January 1, 1997
have not been, any claims of a non-routine nature relating to the
Business by customers of the Business under any warranties, whether
express or implied;
(f) the Seller does not have any written or oral Commitments related
to the Business to sell products or perform services which are
expected to be performed at, or to result in, a loss; and
(g) no consent of any party to any Commitment is required in
connection with the execution, delivery or performance of this
Agreement.
SCHEDULE 3.1.15(a) accurately discloses with respect to each Goods
Contract and each Services Contract disclosed therein, the customer or
supplier name; the form from which such contract has been derived;
whether or not the contract amount is fixed or may be varied based on
services performed; the contract amount (or, if the contract amount is
not fixed, a good faith, reasonable estimate of the contract amount)
and whether or not Seller has any reason to believe that its profit
margin with respect to such contract might be less than it has
customarily achieved in the past for similar contracts. Correct and
complete copies of all Commitments (or, where they are oral, written
summaries of the material terms thereof), have been and will continue
to be delivered to the Buyer by the Seller.
3.1.16 AVAILABILITY OF DOCUMENTS. Seller has made available to
Buyer copies of all documents, including without limitation all
agreement, contracts, commitments, insurance policies, leases, plans,
instruments, undertakings authorizations, permits, licenses, patents,
trademarks, trade names, service marks copyrights and applications
therefor listed in the Schedules hereto or referred to herein. Such
copies are true and complete and include all amendments, supplements
and modifications thereto or waivers currently in effect thereunder.
3.1.17 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS; EMPLOYMENT
AGREEMENTS. Except as otherwise set forth in SCHEDULE 3.1.17:
(a) For purposes of this Agreement: (1) "Benefit Plan" means any
employee benefit plan, arrangement, policy or commitment (whether or
not an employee benefit plan within the meaning of section 3(3) of
ERISA), including, without limitation, any employment consulting or
deferred compensation agreement, executive compensation, bonus,
incentive, pension, profit-sharing, savings, retirement, stock option,
stock purchase or severance pay plan, any life, health, disability or
accident insurance plan or any holiday or vacation practice, as to
which the Seller or any Commonly Controlled Entity has or in the
future could have any direct or indirect. actual or contingent
liability; (ii) "Code" means the Internal Revenue Code of 1986, as
amended; (iii) "Commonly Controlled Entity" means any entity which is
under common control with the Seller within the meaning of Code
section 414(b), (c), (m), (o) or (t); (iv) "Seller Benefit Plan" means
any Benefit Plan that provides benefits within respect to current or
former Employees, (v) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
(b) There are no employment agreements, Benefit Plans or consulting
agreements constituting any part of the Assets or Assumed Obligations.
Buyer does not assume or become subject to any obligation or
responsibility with respect to any Seller Benefit Plan as a result of
this Agreement, and there is no liability with respect to the Business
under any Employee Benefit Plan of Seller as to which Buyer may become
liable as a result of the transactions contemplated by this Agreement.
(c) There are no actions, liens, suits or claims pending or
threatened (other than routine claims for benefits) with respect to
any Benefit Plan or against the assets of any Benefit Plan. No assets
of the Business are subject to any lien under ERISA section 302(f) or
Code section 412(n).
(d) The consummation of the transaction under this Agreement will
not: (i) entitle any Employee employed by Buyer to severance pay,
unemployment compensation or any similar payment; (ii) accelerate the
time of payment or vesting, or increase the amount of any compensation
due to, or in respect of, any transferred, current or former employee;
(iii) result in or satisfy a condition to the payment of compensation
that would, in combination with any other payment, result in an
"excess parachute payment" within the meaning of Code section 28OG(b).
(e) No event has occurred or will occur as a result of the
consummation of the transaction under this Agreement and no
circumstances currently exist which do or will result in (i) any civil
penalty being assessed pursuant to ERISA section 502, (ii) a
prohibited transaction (as defined in ERISA section 406 or Code
section 4975), (iii) a breach of fiduciary responsibility under ERISA,
or (iv.) any other violation, penalty, or excise tax under ERISA or
the Code.
(f) Seller has not incurred, and will not incur as a result of or in
connection with the purchase of the Assets hereunder, any withdrawal
liability, nor has Seller had, nor will it have as a result of or in
connection with the purchase of the Assets hereunder, any contingent
withdrawal liability to any multi-employer plan under ERISA, as
amended by the Multi-Employer Pension Plan Amendments Act of 1980.
3.1.18 INTELLECTUAL PROPERTY. SCHEDULE 3.1.18 sets forth (i) the
registered and/or beneficial owner and the expiration date, to the
extent applicable, for each of the Rights and (ii) the product or
products of the Seller which make use of, or are sold or made under,
any patent or license includable within such Rights. The Rights
constitute all rights and all know-how necessary for or used in the
operation of the Business as such Business is currently being
conducted (including such business as has been quoted or formally
proposed by the Business) by Seller. Except as specifically listed in
SCHEDULE 3.1.18, Seller has obtained, and will convey with the Assets,
exclusive right, title and interest in and to any and all computer
software used by it in the conduct of the Business in any manner,
excluding only such software subject to license specifically listed in
SCHEDULE 3.1.18, copies of which licenses have been provided to Buyer,
each of which are assignable to Buyer by their terms without further
condition or payment of money, or for which Seller has obtained
written consent to the assignment to Buyer. Except as set forth on
SCHEDULE 3.1.18, the Seller has not sold, assigned, transferred,
licensed, sub-licensed or conveyed the Rights, or any of them, or any
interest in the Rights, or any of them, to any person, and has or will
have at the Closing the entire right, title and interest (free and
clear of all security interests, liens and encumbrances of every
nature) in and to the Rights; neither the validity of the Rights, nor
the use thereof by the Seller, is or has been the subject of any
pending or, to the best knowledge of the Seller, threatened
opposition, interference, cancellation, nullification, conflict,
concurrent use, litigation or other proceeding. To Seller's
knowledge, the Business as currently being conducted (including, but
not limited to, the use by the Business' customers of the Business'
products for the uses for which the Business markets its products to
its customers in the ordinary and regular course of business) does not
conflict with or infringe upon rights of third parties. All Rights
previously owned or held by any present or former employee or officer
of the Seller and currently used in the Business and relating to the
Business have been duly and effectively transferred to the Seller. A
true and complete copy of the documentation held by the Seller, if
any, relating to each of the Rights, has been previously delivered to
the Buyer by the Seller. Seller has received no notice of, nor has
any knowledge of any basis for, a pending or threatened claim,
interference action or other proceeding affecting the Assets or that
any of the operations, activities, products, services or publications
of the Business infringes or will infringe any patent, trademark,
trade name, copyright, trade secret or other property right of a third
party, or that the Seller, in the conduct of the Business, is using or
has used, illegally or otherwise the trade secrets, formulae or
property rights of others.
3.1.19 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE
3.1.19:
(a) Seller is not liable or responsible for any violation of any laws
relating to pollution or protection of the environment arising out of
Seller's past or present ownership, use or operations of the Business
and the premises in connection with the conduct of the Business;
(b) With respect to the Business, Seller has no license, permit or
other authorization from any governmental entity relating to pollution
or protection of the environment or the treatment, storage or disposal
of hazardous materials or wastes;
(c) Seller has received no notice of violation or communication
alleging that that Seller is a potentially responsible party with
respect to any releases or threats of release of any hazardous, toxic,
carcinogenic, mutagenic substance or waste, including but not limited
to virgin or used chemicals, solvents or petroleum products or
derivatives thereof,
(d) there has been no storage, generation, manufacture, refinement,
transportation, production, treatment or disposal of toxic, hazardous
or solid wastes or substances by the Seller (or any of its
predecessors in interest) at any location at which Seller in the
conduct of the Business has at any time done business, or to which it
has sent such waste of any kind, directly or indirectly, in violation
of any applicable law, ordinance, rule, regulation, order, judgment,
decree, permit or license or which would subject Seller to liability
therefor or require remedial action under any applicable law,
ordinance, rule, regulation, order, judgment, decree, permit or
license;
(e) Seller has not caused, nor to Seller's knowledge has it suffered,
any spill, discharge, leak, emission, injection, escape, dumping or
any other release of any kind onto any location at which the Seller
has it any time conducted activities related to the Business or into
the environment surrounding such locations of any toxic wastes or
hazardous wastes or substances as such terms are defined under any
federal, state, county or local law, statute or regulation;
(f) there are no underground storage tanks on or at any location
currently used or occupied by Seller relating to the Business;
(g) to Seller's knowledge, the Seller has made all filings with
governmental authorities required by the Resource Conservation
Recovery Act, 42 U.S.C. Section 6901 et seq., as amended, and any
applicable state statute and county regulation with respect to the
tanks listed in Schedule 3.1.19 and correct and complete copies of
such filings have previously been delivered to the Buyer by the
Seller;
(h) to Seller's knowledge, the Seller is in full compliance with
applicable laws and regulations concerning reporting of environmental
matters and usage or storage of hazardous or toxic materials or
wastes.
3.1.20 EQUIPMENT. Set forth on SCHEDULE 3.1.20 is a correct and
complete list of all of the equipment included among the Assets having
an original cost in excess of $10,000 (the "Equipment"), indicating
for each piece of Equipment whether it is owned or leased and setting
forth where it is located. Except as set forth on SCHEDULE 3.1.20,
all of the Equipment
(a) is in good operating condition and repair (ordinary wear and tear
which does not affect materially and adversely the operation of the
Business excepted) and suitable for the uses for which intended;
(b) to Seller's knowledge, conforms with all applicable laws,
ordinances, regulations, permit orders and other requirements relating
to its present use; and
(c) to Seller's knowledge, has been maintained and repaired in
accordance with all manuals, brochures or manufacturer's instructions
and can be assigned and transferred to Buyer without the consent of
any other party.
3.1.21 INVENTORY. All of the inventory is now and will be at
Closing of a quality and quantity salable at current market prices or
usable in the ordinary and regular course of business and the value at
which the Inventory is carried on the books of the Seller is the lower
of cost or market value on a first-in, first-out basis in accordance
with generally accepted accounting principles.
3.1.22 ACCOUNTS RECEIVABLE. All of the Accounts Receivable (i)
will have arisen on or prior to the Closing, Date in the ordinary and
regular course of business and (ii) will represent on the Closing Date
bona fide indebtedness incurred by the applicable account debtors and
collectible for not less than the face amount of such receivables (net
of any reserves therefor contained on the Financial Statements).
3.1.23 INSURANCE. On SCHEDULE 3.1.23 is set forth a correct and
complete list of (a) all currently effective insurance policies and
fidelity and surety bonds covering the Assets and/or Business; and (b)
for the five-year period ending on the date hereof (i) all accidents,
casualties or damage occurring on or to the Assets or relating to the
Business (excluding medical insurance and worker's compensation
claims) and (ii) claims for damages, contribution or indemnification
and settlements (including pending settlement negotiations) relating
thereto. With respect to the Business, except as set forth on
SCHEDULE 3.1.23, there are no disputes with underwriters of any such
policies or bonds, and all premiums due and payable have been paid.
To Seller's knowledge, there are no pending or threatened terminations
with respect to any of such policies or bonds and, to the best
knowledge of the Seller, there is no condition or circumstance other
than the sale of the Assets and assumption of the Assumed Obligations,
which may result in such termination. The Seller and the Assets are
in compliance in all material respects with all conditions contained
in such policies or bonds. Except as disclosed in Schedule , to
Seller's knowledge there are no outstanding or unsatisfied
requirements or recommendations imposed or made by any of the Seller's
current insurance companies with respect to current policies covering
any of the Assets or the Business, or by any governmental or quasi-
governmental authority requiring or recommending, with respect to any
of the Assets or the Business, that any repairs or other work be done
on or with respect to, or requiring or recommending any equipment or
facilities be installed on or in connection with, any of the Assets or
the Business. The Seller carries, and (with respect to any period for
which a claim against the Seller may still arise) has always carried
product liability insurance in amounts, scope and coverage as set
forth in SCHEDULE 3.1.23 each of which policies were in full force and
effect for the full term identified therein, on an occurrence basis
without any claims being made. The Seller carries or, with respect to
health benefits and workers' compensation is self insured, and (with
respect to any period for which a claim against the Seller may still
arise) has always carried or self insured workmen's compensation
insurance in reasonable amounts, and other insurance which is
reasonably prudent for the conduct of the Business.
3.1.24 SUPPLIERS, DISTRIBUTORS AND CUSTOMERS. SCHEDULE 3.1.24
contains a correct and complete list of (i) each of the suppliers of
the Business each of whom has supplied goods and/or services to the
Business in an aggregate amount of at least $10,000 since January 1,
1996, (ii) each of the distributors and sales agents of the Business
each of whom has sold goods produced or manufactured by the Business
to third parties in an aggregate amount of at least $10,000 since
January 1, 1996, and (iii) each of the customers of the Business each
of whom has purchased from the Business goods and/or services in an
aggregate amount of at least $20,000 since January 1, 1997. The
Seller has no knowledge or reason to believe that any supplier,
distributor, sales agent or customer set forth on SCHEDULE 3.1.24, or
any other person or entity with material business dealings with the
Seller relating to the Business, will cease to continue such
relationship with the Buyer, or will substantially reduce the extent
of such relationship, at any time prior to or after the Closing Date.
3.1.25 PURCHASE AND SALE OBLIGATIONS. Except as set forth on
SCHEDULE 3.1.25, since January 1, 1997, all material purchase and
sales orders and all other material commitments for purchases and
sales made by or on behalf of the Business have been made in the
ordinary and regular course of its business. Except as set forth on
SCHEDULE 3.1.25, none of such orders or commitments call for
deliveries thereunder beyond a period of ninety (90) days from the
date hereof or contain any agreements granting special discounts or
rebates. On the Closing Date, the Seller shall deliver to the Buyer a
schedule of all uncompleted purchase and sale orders and other
commitments with respect to any of the Assumed Obligations as of a
date not earlier than ten days prior to the Closing Date.
3.1.26 BOOKS AND RECORDS. The books of account and other financial
records of the Seller relating to the Business are in all material
respects complete, correct and up to date, with all necessary
signatures, are maintained in accordance with good business practices
and generally accepted accounting principles, and are accurately
reflected in the Financial Statements.
3.1.27 GOVERNMENTAL AND OTHER CONSENTS, ETC. Except as set forth
in SCHEDULE 3.1.27, no consent, authorization or approval of, or
exemption by, or declaration, filing or registration with, any
governmental, quasi-governmental, public or self-regulatory body or
authority is required in connection with the execution, delivery and
performance by the Seller of this Agreement.
3.1.28 CONTRACT WORK IN PROCESS. To Seller's knowledge, the
Contract Work In Process of the Business (the "CWIP") consists of
items of a quality and quantity which are usable or salable without
discount in the ordinary course of business conducted by the Business
and which are required by valid sales contracts in effect with
customers. The value of all items of obsolete material and of
material of below standard quality have been written down to
realizable market value and/or reserved for in the ordinary course of
business according to standard practices of Seller in accordance with
GAAP, and the values at which such CWIP is carried reflect the normal
valuation policy of the Seller of stating CWIP at the lower of cost or
market value in accordance with GAAP.
3.1.29 ASSETS. The Assets include all rights and property
necessary or useful to the conduct of the Business in the manner it is
presently conducted by Seller and no property excluded from the Assets
under SECTION 1.1.2 hereof constitutes property or rights material to
the Business.
3.1.30 COMPLETENESS OF DISCLOSURE. To Seller's knowledge, no
representation or warranty by Seller in this Agreement nor any
certificate, schedule, statement, document or instrument furnished or
to be furnished to Buyer pursuant hereto, or in connection with the
negotiation, execution or performance of this Agreement, contains any
untrue statement of a material fact or omits a material fact required
to be stated herein or therein or necessary to make any statement
herein or therein not misleading.
3.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller as follows:
3.2.1 CORPORATE EXISTENCE. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware.
3.2.2 AUTHORIZATION. Buyer has the corporate power, authority and
legal right to execute, deliver and perform this Agreement. The
execution, delivery and performance of this Agreement by Buyer have
been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by Buyer and
constitutes the legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms.
3.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by the parties in this Agreement or in any
certificate, schedule, statement, document or instrument furnished
hereunder or in connection with negotiation, execution and performance
of this Agreement shall survive the Closing for a period of eighteen
(18) months; PROVIDED, HOWEVER, that the representations and
warranties set forth in SECTIONS 3. 1.11 and 3.1.19 shall continue in
perpetuity beyond such period, and with respect to the representations
and warranties in SECTION 3.1.8, for three years from the Closing
Date, and with respect to the representations and warranties in
SECTIONS 3.1.9 and 3.1.17, until the expiration of all applicable
statutes of limitations (including all extensions thereof.)
Notwithstanding any investigation or audit conducted before or after
the Closing Date or the decision of any party to complete the Closing,
each party shall be entitled to rely upon the representations and
warranties set forth herein and therein.
ARTICLE IV
CONDITIONS PRECEDENT TO THE CLOSING
4.1 CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. All obligations of
Buyer under this Agreement are subject to the fulfillment or
satisfaction, prior to or at the Closing, of each of the following
conditions precedent:
4.1.1 REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING DATE.
The representations and warranties of Seller contained in this
Agreement or in any schedule, certificate or document delivered by
Seller to Buyer pursuant to the provisions hereof will be true and
correct in all material respects at the time of Closing.
4.1.2 COMPLIANCE WITH THIS AGREEMENT. Seller shall have performed
and complied with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the
Closing, including without limitation covenants of Seller regarding
Seller's deliveries.
4.1.3 CLOSING CERTIFICATE. Buyer shall have received a
certificate from Seller dated the Closing Date, certifying in such
detail as Buyer may reasonably request that the conditions specified
in SECTIONS 4.1.1 and 4.1.2 hereof have been fulfilled and certifying
that Seller has obtained all consents and approvals required with
respect to it or the Business by SECTION 4.1.5 hereof.
4.1.4 NO THREATENED OR PENDING LITIGATION. On the Closing Date,
no suit, action or other proceeding, or injunction or final judgment
relating thereto, shall be threatened or be pending before any court
or governmental or regulatory official, body or authority in which it
is sought to restrain or prohibit or to obtain damages or other relief
in connection with this Agreement or the consummation of the
transactions contemplated hereby.
4.1.5 CONSENTS AND APPROVALS. The lessors or lessees of any real
or personal property or assets leased by the Business, the parties
(other than Seller) to any contract, commitment or agreement to which
the Business is a party or subject, any governmental or regulatory
official, body or authority or any other person which owns or has
authority to grant any Permit and any governmental, judicial or
regulatory official, body or authority having jurisdiction over Seller
or Buyer to the extent that their consent or approval is required or
necessary under the pertinent lease, contract, license, commitment or
agreement or other document or instrument or under applicable orders,
laws, rules or regulations, for the consummation of the transactions
contemplated hereby in the manner herein provided, shall have granted
such consent or approval.
4.1.6 ABSENCE OF MATERIAL ADVERSE CHANGE. The business,
operations, assets, properties or prospects of the Business shall not
have been and shall not be threatened to be materially adversely
affected in any way as a result of any event or occurrence.
4.1.7 OPINION OF SELLER'S COUNSEL. Buyer shall have received an
opinion of counsel to Seller, in form and substance satisfactory to
counsel to Buyer.
4.1.8 COMPLIANCE WITH APPLICABLE LAWS. All requirements of
applicable foreign, federal, state and local law applicable to the
transactions contemplated by this Agreement, including without implied
limitation and to the extent applicable, Section 721 of Title VII of
the Defense Production Act of 1950 ("Exon-Florio"), shall have been
complied with, all necessary approvals and/or consents obtained, or
Buyer shall be reasonably certain the such approvals or consents will
be obtained. In specific, and not in limitation of the foregoing,
Buyer shall have obtained receipt of final, written clearance from the
Committee on Foreign Investment in the United States ("CFIUS") or
Buyer shall be reasonably certain that it will receive final, written
clearance, indicating either (i) that, based on CFIUS' examination of
the information presented in a joint voluntary notice, no further
investigation is warranted; or (ii) in the event an investigation is
convened, that a determination has been reached that the transactions
may proceed, consistent with Section 721.
4.1.9 ENVIRONMENTAL AUDIT. Prior to Closing, Buyer shall have
completed an environmental compliance audit and site investigation of
the premises at which the Business is conducted, which shall not have
disclosed any violations of applicable state, local or federal laws or
regulations related to the protection of the environment, nor any
releases of hazardous substances into the environment from or on the
Premises.
4.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. All
obligations of Seller under this Agreement are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of
the following conditions precedent:
4.2.1 REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING DATE.
The representations and warranties of Buyer contained in this
Agreement or in any list, certificate or document delivered by Buyer
to Seller pursuant to the provisions hereof shall be true on the
Closing Date, including without limitation comments regarding Buyer's
deliveries pursuant to Section 2.2.
4.2.2 COMPLIANCE WITH THIS AGREEMENT. Buyer shall have performed
and complied with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the
Closing, including without limitation covenants of Buyer regarding
Buyer's deliveries pursuant to SECTION 2.2.
4.2.3 CLOSING CERTIFICATES. Seller will be furnished with such
certificates or other instruments of the Buyer or of officers of the
Buyer as the Seller may reasonably think necessary in order to
establish that the terms, covenants and conditions contained in this
Agreement have been performed or complied with by the Buyer at or
prior to the time of closing have been performed or complied with and
that the representations and warranties of the Buyer herein given are
true and correct at the time of closing.
4.2.4 OPINION OF BUYER'S COUNSEL. Buyer shall have delivered to
Seller a favorable opinion of Buyer's counsel in form and substance
satisfactory to Seller.
ARTICLE V
(Purposely Omitted)
ARTICLE VI
INDEMNIFICATION
6.1 GENERAL INDEMNIFICATION OBLIGATION OF SELLER. The Seller shall
indemnify and hold Buyer and its successors and assigns and any
director, shareholder, employee or officer thereof (collectively,
together with the Buyer, the "Buyer Indemnitees") harmless against and
from any claim or loss which may be made or brought against the Buyer
or the Buyer's indemnities, or which the Buyer or Buyer's Indemnitees
may suffer or incur, in respect of, or arising out of.
(a) any and all damages, losses, deficiencies, liabilities, costs and
expenses incurred or suffered by any of the Buyer Indemnitees that
result from, relate to or arise out of:
(i) any and all liabilities and obligations of Seller of any nature
whatsoever; any and all actions, suits, claims, or legal,
administrative, arbitration, governmental or other proceedings or
investigations against any of Buyer Indemnitees that relate to Seller
or the Business in which the principal event giving rise thereto
occurred prior to the Closing Date or which result from or arise out
of any action or inaction prior to the Closing Date of Seller or any
director, officer, employee, agent, representative or subcontractor of
Seller, except for those which Buyer specifically assumes pursuant to
this Agreement; or any misrepresentation, breach of warranty or non-
fulfillment of any agreement or covenant on the part of Seller under
this Agreement, or from any misrepresentation in or omission from any
certificate, schedule, statement, document or instrument furnished to
Buyer pursuant hereto or in connection with the negotiation, execution
or performance of this Agreement;
(ii) all claims made by employees or former employees of the Business.
assumed by the Buyer, from and after the Closing Date for wages,
vacation pay, severance pay, pay in lieu of notice of termination,
damages for wrongful dismissal and other employee benefits and claims
which were accrued in respect of or arose out of service with the
Business prior the Closing Date.
(b) any and all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments, costs and other
expenses (including, without limitation, reasonable legal fees and
expenses) incident to any of the foregoing or to the enforcement of
this SECTION 6.1.
6.2 GENERAL INDEMNIFICATION OBLIGATION OF BUYER. The Buyer shall
indemnify and hold Seller and its successors and assigns and any
director, shareholder, employee or officer thereof (collectively,
together with the Seller, the "Seller Indemnitees") harmless against
and from any claim or loss which may be made or brought against any of
the Seller Indemnities, or which the Seller or Seller's indemnitees
may suffer or incur, in respect of, or arising out of:
(a) any and all liabilities and obligations of Buyer of any nature
whatsoever; any and all actions, suits, claims, or legal,
administrative, arbitration, governmental or other proceedings or
investigations against any of the Seller Indemnitees that relate to
Buyer or the Business in which the principal event giving rise thereto
occurred after to the Closing Date or which result from or arise out
of any action or inaction after the Closing Date of Buyer or any
director, officer, employee, agent, representative or subcontractor of
Buyer, except for those which Seller retains pursuant to this
Agreement; or
(b) any misrepresentation, breach of warranty or non-fulfillment of
any agreement or covenant on the part of Buyer under this Agreement,
or from any misrepresentation in or omission from any certificate,
schedule, statement, document or instrument furnished to Seller
pursuant hereto or in connection with the negotiation, execution or
performance of this Agreement;
(c) all claims made by employees or former employees of the Business
assumed by the Buyer, from and after the Closing date for wages,
vacation pay, severance pay, pay in lieu of notice of termination,
damages for wrongful dismissal and other employee benefits and claims
which were accrued in respect of or arose out of service with the
Business after the Closing date; and
(d) all claims made under the Assumed Obligations.
6.3 PROCEDURE FOR INDEMNIFICATION. Following receipt from the
Seller, Seller Indemnitees, the Buyer or the Buyer Indemnitees as the
case may be (the "Indemnified Party"), of a notice of a Claim for
indemnification, the party who is in receipt of such notice (the
"Indemnifying Party") shall have 30 days to make such investigation of
the Claim as the Indemnifying Party considers necessary or desirable.
For the purpose of such investigation, the Indemnified Party shall
make available to the Indemnifying Party the information relied upon
by the Indemnified Party to substantiate the Claim.
6.4 ADDITIONAL RULES AND PROCEDURES. The obligation of the parties
to indemnify each other pursuant to this Article VI shall also be
subject to the following:
6.4.1 An Indemnified Party shall only be entitled to make a Claim
for indemnification pursuant to SECTION 6.1 or 6.2 if written notice
containing a summary of the facts underlying such Claim is given to
the
Indemnifying Party within the time periods provided for in Section 3.3
in which case the matter to which such notice applies shall survive
until the final determination or settlement.
6.4.2 No Claim for indemnification may be made pursuant to SECTION
6.1 or 6.2 until the aggregate amount of all such Claims under such
section exceeds $50,000 after which the each party will indemnify the
other and save it harmless with respect to the amount of all such
Claims over and above the said $50,000 threshold up to a maximum
aggregate amount of $2.25 Million for all such Claims.
6.4.3 The Indemnified Party shall not negotiate, settle,
compromise or pay any third party Claim except with prior written
consent of the Indemnifying Party (which consent shall not be
unreasonably withheld or delayed); provided, however, that if the
Indemnifying Party refuses to accept a bona fide offer of settlement
within the limits of indemnity as provided herein, then it shall have
no limit on its obligation of indemnity with respect to such claim if
the ultimate award is greater than the offered but declined
settlement.
6.4.4 The Indemnifying Party shall have the right to elect by
written notice delivered to the Indemnified Party within 30 days of
receipt of a notice of Claim, at the expense of the Indemnifying
Party, to assume control of the investigation, defense, negotiation,
or settlement of the matter or Claim in question (including choice of
counsel and other advisors), provided, however, that if the
Indemnifying Party is not responsible, or does not agree to be
responsible, for the full amount of any such matter or Claim, then the
Indemnifying Party may not settle such matter or Claim without the
prior written consent of the Indemnified Party (which consent shall
not be unreasonably withheld or delayed).
6.4.5 If an Indemnifying Party does not so elect, or having
elected to assume control of the investigation, defense or settlement
of a Claim thereafter fails to proceed in a diligent manner therewith,
the Indemnifying Party will provide the Indemnified Party with any
information and documents relevant to that Claim which are in its
possession and thereafter the Indemnified Party may investigate,
defend, negotiate or settle such Claim. If the Indemnified Party has
assumed control of the investigation, defense, negotiation or
settlement of a Claim, the Indemnifying Party may retain such counsel
as it deems appropriate. The Indemnifying Party shall reimburse the
Indemnified Party for all of the Indemnified Party's out-of-pocket
expenses as a result of such assumption, including, without
limitation, the reasonable fees and expenses of its counsel.
6.4.6 The Indemnifying Party and the Indemnified Party shall each
cooperate fully with the other in respect of any Claim including
providing each other on an ongoing basis with all information which
may be relevant to the other's liability hereunder and supplying
copies of all relevant
documentation promptly as it becomes available and each shall make
available such witnesses as are under its control.
6.5 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The indemnification
rights of the parties under this ARTICLE VI are independent of and in
addition to such rights and remedies as the parties may have at law or
in equity or otherwise for any misrepresentation, breach of warranty
or failure to fulfill any agreement or covenant hereunder on the part
of any party hereto.
ARTICLE VII
POST CLOSING MATTERS
7.1 SOLICITATION OF EMPLOYEES. As of the Closing Date, Buyer may,
but is in no way obligated to, offer employment to, and Seller shall
use its best efforts to assist Buyer in employing as new employees of
Buyer, those persons presently engaged in the Business who are
identified by Buyer prior to the Closing Date (the "Employees").
Seller agrees to hereby waive any existing non-competition,
nondisclosure and non-solicitation covenants by the Employees in its
favor as to the Buyer only as those non-competition, non-disclosure
and non-solicitation covenants relate to the Business, and not as such
covenants relate to other businesses of the Seller.
7.2 PROTECTION OF CONFIDENTIAL INFORMATION. The Seller covenants and
agrees that it will not at any time during the five year period
commencing on the Closing Date reveal, divulge, or make known to any
person, firm, corporation or other business organization (other than
the Buyer or any of its authorized representatives or affiliates) or
use for its own account or for the account of any other person, any
client lists, trade secrets or formulae, or any secret or confidential
information whether then or formerly held or used by the Seller in the
conduct of the Business or concerning the Business in competition with
the Buyer as relates to the Business only. Additionally, Buyer
acknowledges that this Section 7.2 shall not apply to such information
required to be disclosed in connection with government filings.
7.3 MAINTENANCE OF BOOKS AND RECORDS. Each of Seller and Buyer shall
preserve until the third anniversary of the Closing Date all records
possessed or to be possessed by such party relating to any of the
Assets, Assumed Obligations or the Business prior to the Closing Date.
After the Closing Date, where there is a legitimate purpose, such
party shall provide the other parties with access, upon prior
reasonable written request specifying the need therefor, during
regular business hours, to (i) the officers and employees of such
party and (ii) the books of account and records of such party, but, in
each case, only to the extent relating to the Assets, Assumed
Liabilities or the Business prior to the Closing Date, and the other
parties and their representatives shall have the right to make copies
of such books and records. From and after the Closing Date, each of
the Buyer and Seller will each preserve in accordance with its own
record retention policies and will make available to one another (at
no cost), books, records and personnel relating to the Business upon
reasonable notice, during normal business hours at the premises where
such books and records are normally maintained or such personnel are
normally employed and the each shall have the right to make extracts
from the copies of any of such books and records and have access to
appropriate personnel of the other for tax audit and tax return
preparation and other similar purposes. In addition, until the last
of any governmental limitation periods and any other legislation
imposing tax on the Business or the Seller subsequent to the
expiration of which an assessment, reassessment or other form or
recognized document assessing liability for tax, interest or penalties
for a period ended on the Closing Date cannot be issued, the Buyer and
Seller shall each retain and, without first giving the other party at
least 30 days prior written notice, an opportunity to take custody of
such records at such party's own expense, shall not destroy any books
and records of the Business relating to tax accounts or tax records of
the Business in connection with this Agreement.
7.4 USE OF NAME. From and after the Closing Date, Seller will sign
such consents and take such other action as Buyer shall reasonably
request in order to permit Buyer to use the name "Hayes Targets." and
variants thereof, exclusive of such mark to the extent it contains the
crescent logo of Precision Standard, Inc. and its operating companies.
From and after the Closing Date, neither Seller nor any affiliate of
Seller shall use the name "Hayes Targets" or any names similar thereto
or variants thereof, but Seller is permitted to continue to use the
name "Hayes" with respect to any and all products, services or other
purposes other than those similar to those sold by the Business.
7.5 SELLER'S COVENANT NOT TO COMPETE. Seller and each of its
affiliates agrees that for a period of five (5) years after the
Closing Date, neither it nor any of its affiliates will, directly or
indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of, any business whether
in corporate, proprietorship or partnership form or otherwise as more
than a five percent owner in such business where such business is
competitive with the Business as sold to Buyer. Buyer acknowledges
that this SECTION 7.5 shall not apply to any services the Business
provides to the Seller or any of the Seller's other businesses that do
not relate directly or indirectly to the manufacture or sale of aerial
tow targets, infrared augmentation devices and infrared suppressers.
The parties hereto specifically acknowledge and agree that the remedy
at law for any breach of the foregoing will be inadequate and that the
Buyer, in addition to any other relief available to it, shall be
entitled to temporary and permanent injunctive relief without the
necessity of proving actual damage. In the event that the provisions
of this SECTION 7.5 should ever be deemed to exceed the limitation
provided by applicable law, then the parties hereto agree that such
provisions shall be reformed to set forth the maximum limitations
permitted.
7.6 BUYER'S COVENANT NOT TO COMPETE. Buyer and each of its
affiliates agree that neither it nor any of its affiliates will use,
either directly or indirectly, any confidential information received
from the Seller relating to any of the Seller's businesses other than
the Business in competition with the Seller or any of the Seller's
businesses as they exist as of the Closing Date.
ARTICLE VIII
MISCELLANEOUS
8.1 BROKERS' AND FINDERS' FEES. Seller represents and warrants to
Buyer, and Buyer represents and warrants to Seller, that all
negotiations relative to this Agreement have been carried on by it
without the intervention of any person who may be entitled to any
brokerage or finder's fee or other commission in respect of this
Agreement or the consummation of the transactions contemplated hereby.
Seller agrees to indemnify and hold harmless Buyer against any and
all claims, losses, liabilities and expenses which may be asserted
against or incurred by it as a result of Seller's dealings,
arrangements or agreements with any such person. Buyer agrees to
indemnify and hold harmless Seller against any and all claims, losses,
liabilities and expenses which may be asserted against or incurred by
it as a result of Buyer's dealings, arrangements or agreements with
any such person.
8.2 SALES, TRANSFER AND DOCUMENTARY TAXES, ETC. Each party shall pay
any and all taxes imposed on it, whether federal, state or local due
as a result of the transactions which are the subject of this
Agreement, and each shall indemnify, reimburse and hold harmless the
other in respect of the liability for payment of or failure to pay any
such taxes or the filing of or failure to file any reports required in
connection therewith applicable to the indemifying party.
8.3 COOPERATION IN NECESSARY FILINGS. Each party hereto shall
cooperate as necessary in the preparation and filing of a joint
voluntary notice to the CFIUS with respect to the possible application
of the Exon-Florio Amendment (Section 721 of the Defense Production
Act of 1950, as amended) ("Section 721 ") to the transactions
contemplated by this Agreement. Each party hereto shall promptly
provide the other party with copies of all correspondence received by
it from, and the substance of all communications with, any person with
respect thereto and copies of all correspondence proposed to be sent
by it to any person with respect thereto at least two business days
prior to dispatch. The parties shall (i) cooperate in giving
notification to, making filings with and providing information to
governmental entities with respect thereto and (ii) respond promptly
to any requests for further information with respect thereto; PROVIDED
HOWEVER that this Section shall not require either party hereto to
deliver confidential information to the other party in the absence of
reasonably satisfactory assurances with respect to the maintenance of
confidentiality. Buyer shall pay all costs of the filing of the joint
notification and related matters, not including Seller's cost of
gathering information.
8.4 EXPENSES. Except as otherwise provided in this Agreement, each
party hereto shall pay its own expenses incidental to the preparation
of this Agreement, the carrying out of the provisions of this
Agreement and the consummation of the transactions contemplated
hereby.
8.5 CONTENTS OF AGREEMENT; PARTIES IN INTEREST. This Agreement
(including the exhibits and schedules hereto, and any other agreements
to be executed and delivered in connection with the transactions
contemplated hereby) sets forth the entire understanding of the
parties hereto with respect to the transactions contemplated hereby.
It shall not be amended or modified except by a written instrument
duly executed by each of the parties hereto. Any and all previous
agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral, are superseded by
this Agreement. There are no representations, warranties, terms,
conditions, undertakings, or collateral agreements, express, implied
or statutory, between the parties other than as expressly set forth in
this Agreement. This Agreement will inure to the benefit of and be
binding upon the respective heirs, executors, administrators,
successors and permitted assigns of the parties hereto.
8.6 ASSIGNMENT AND BINDING EFFECT. Except as provided below, this
Agreement may not be assigned prior to the Closing by any party hereto
without the prior written consent of the other parties. Buyer may
assign this Agreement to an affiliate or wholly-owned subsidiary, but
notwithstanding such assignment, Buyer shall remain liable for causing
the payment of the Purchase Price and any indemnity obligation to
Seller. Upon such assignment, each subject to the foregoing, all of
the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the successors and
assigns, of Seller and Buyer.
8.7 WAIVER. Any term or provision of this Agreement may be waived at
any time by the party entitled to the benefit thereof by a written
instrument duly executed by such party.
8.8 NOTICES. Any notice, request, demand, waiver, consent, approval
or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given only if delivered personally
or sent by overnight courier or by registered or certified mail,
postage prepaid, as follows:
If to Buyer, to:
Endevco Corporation
C/O Meggitt-USA, Inc.
340 Commercial Street
Manchester, NH 03101
Attention: Bennett F. Moore, or President
With a required copy to:
Sheehan Phinney Bass + Green,
Professional Association
1000 Elm Street
P.0. Box 3701
Manchester, NH 03105-3701
Attention: Daniel S. Coolidge, Esq.
If to Seller, to:
Pemco Aeroplex, Inc.
c/o Precision Standard, Inc.
1225 17th St., Suite 1800
Denver, Colorado 80202
Attention: Matthew L. Gold, or President
or to such other address as the addressee may have specified in a
notice duly given to the sender as provided herein. Such notice,
request, demand, waiver, consent, approval or other communication will
be deemed to have been given as of the date so delivered, or, in the
case of mailing, three days after having been mailed.
8.9 NEW HAMPSHIRE LAW TO GOVERN; CHOICE OF FORUM. This Agreement
shall be governed by and interpreted and enforced in accordance with
the laws of the State of New Hampshire applicable to contracts
executed and to be performed entirely within New Hampshire without
giving effect to conflict of laws principles. This agreement was
executed in New Hampshire by both parties. In the event of any
litigation with respect to this agreement, the parties agree that such
litigation shall and may only be brought in a court sitting within the
State of New Hampshire.
8.10 HEADINGS AND "PERSON". All section headings contained in this
Agreement are for convenience of reference only, do not form a part of
this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. Any reference to a "person" herein
shall include an individual, fin-n, corporation, partnership, trust,
governmental authority or body, association, unincorporated
organization or any other entity.
8.11 SCHEDULES AND EXHIBITS. All Exhibits and Schedules referred to
herein are intended to be and hereby are specifically made a part of
this Agreement.
8.12 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and
if the rights or obligations of the Seller or the Buyer under this
Agreement shall not be materially and adversely affected thereby, (a)
such provision shall be fully severable; (b) this Agreement shall be
construed and enforced as if such provision had never comprised a part
hereof; (c) the remaining provisions of this Agreement shall remain in
full force and effect; and (d) in lieu of the illegal, invalid or
unenforceable provision, there shall be added to this Agreement a
legal and enforceable provision as similar in terms to such provision
as may be possible.
8.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart,
each of which when executed and delivered shall be deemed to be an
original and all of which counterparts taken together shall constitute
but one and the same instrument. This Agreement shall become binding
when one or more counterparts taken together shall have been executed
and delivered by the parties. It shall not be necessary in making
proof of this Agreement or any counterpart hereof to produce or
account for any of the other counterparts.
8.14 WIND TUNNEL. Buyer shall have twelve months from the Closing
Date, or until Seller is no longer the tenant of the premises,
whichever is shorter, to move all equipment relating to the jet engine
powered wind tunnel from the Seller's facility in Birmingham, Alabama.
Until such time as the equipment is removed or the time limit has
expired, Buyer shall have a limited right of access to the wind tunnel
provided Buyer gives 24 hours written notice to Seller via facsimile
transmission. Buyer shall not have any right of access to any other
portion of Seller's property including but not limited to the hangar
facilities or the administrative services buildings. In the event
Buyer shall not have moved such equipment within 6 months after the
Closing Date, Buyer shall pay to Seller the sum of $1,000 per month
for each month or part thereof such equipment remains at Seller's
Birmingham facility after six months after the Closing Date, but in no
event shall such equipment remain thereon longer than 12 months after
Closing.
8.15 WARRANTY CLAIMS. In the event of a claim made after the Closing
Date for breach of warranty with respect to a product sold by the
Business prior to the Closing Date, to the extent covered by such
warranty, Buyer shall perform as required thereunder and Seller shall
promptly reimburse Buyer the reasonable cost thereof. Seller's
obligation to reimburse Buyer shall be limited to reimbursement for
warranty claims made within 18 months after the Closing Date, and only
to the extent such claims for reimbursement in the aggregate exceed
$50,000.
8.16 NO THIRD PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended solely for the benefit of the parties hereto
and their respective successors or assigns, and it is not the
intention of the parties to confer third-party beneficiary rights upon
any other person.
8.17 DISPUTE RESOLUTION.
(a) UNAIDED NEGOTIATIONS. Should there develop any disagreement or
dispute between any of the parties hereto in connection with this
Agreement, it shall be settled by the procedures specified in this
SECTION 8.17. Except as otherwise specified in this Agreement, (i) if
one party believes the other party has breached this Agreement, notice
thereof setting out in reasonable detail the particulars of such
claimed breach shall be given to the other in writing; (ii) the
receiving party shall respond in writing to any such notice within
thirty (30) days after receipt; and (iii) if the dispute is not
promptly resolved, there shall follow within ten (1O) business days,
or at such later time as may be mutually agreed to by the parties to
the disagreement or dispute, a meeting of the parties to the
disagreement or dispute. The purpose of such meeting shall be to
discuss and negotiate in good faith a resolution to any outstanding
disputes. The location of the meeting shall be chosen by the party
responding to the first notice.
(b) MEDIATION. Should the procedure outlined in SECTION 8.17(a) fail
to bring about a prompt resolution of the parties' disagreement or
dispute, then thirty (30) days following the meeting of the parties to
the disagreement or dispute, such parties shall initiate a voluntary,
non-binding mediation conducted by a mutually-agreed mediator. If
within such thirty (30) day period the parties are unable to agree on
such third person, if the mediation is not completed within five (5)
days of the mediator's appointment, or if on completion of such
mediation, the parties are unable to agree and settle the dispute
within five (5) days after such completion, the dispute shall be
referred to arbitration in accordance with SECTION 8.17(c) below upon
any party's demand for arbitration. Each of the parties shall bear
its own costs and expenses (including attorneys' fees) and their
proportionate share of any other costs, fees, or expenses associated
with this mediation and endeavor in good faith to resolve their
differences. The mediation shall be held in Chicago, Illinois or such
other location upon which the parties may agree.
(c) ARBITRATION. All disputes under this Agreement, which are not
otherwise settled pursuant to the other terms of this Agreement, shall
be settled by arbitration in Chicago, Illinois or such other location
upon which the parties may agree, before a panel of three arbitrators;
provided, however, that a party shall be entitled to seek and obtain
from a court of competent jurisdiction a temporary or permanent
injunction to prohibit a violation or continuing violation of the
covenants contained in this Agreement. Each party shall select one of
the arbitrators. The party-appointed arbitrators shall select the
third arbitrator. The arbitration shall be conducted pursuant to the
rules of the American Arbitration Association (the "AAA"), but not
under the auspices thereof, subject, however, to the following:
(i) Any demand for arbitration shall be in writing and must be made
within a reasonable time after the claim, dispute or other matter in
question has arisen. In no event shall the demand for arbitration be
made after the date that such claim dispute or other matter would be
barred by the terms of SECTION 3.3 of this Agreement, or otherwise
after the date that institution of legal or equitable proceedings
based upon such claim, dispute or other matter would be barred by the
applicable statute of limitations.
(ii) The arbitrators appointed must have experience in commercial
matters.
(iii) All proceedings involving the parties shall be reported by a
certified shorthand court reporter and written transcripts of the
proceedings shall be prepared and made available to the parties.
(iv) The arbitrators shall prepare in writing and provide to the
parties factual findings and reasons on which the decision of the
arbitrator is based, according to the terms and provisions of this
Agreement.
(v) Final decision by the arbitrators must be made within sixty (60)
days from the date arbitration proceedings are initiated.
(vi) The prevailing party shall be awarded reasonable expert and non-
expert witness costs and expenses incurred in connection with the
arbitration, including without limitation attorneys' fees, unless the
arbitrators for good cause determine otherwise.
(vii) Costs and fees of the arbitrators shall be borne by the non-
prevailing party, unless the arbitrators for good cause determine
otherwise.
(viii) The award or decision of the arbitrator, which may include
equitable relief, shall be final and judgment may be entered on it in
accordance with applicable law in any court having jurisdiction over
the matter.
This provision for arbitration shall be specifically enforceable by
the parties in a court and the decision of the arbitrators in
accordance herewith shall be final and binding and there shall be no
right of appeal therefrom, except as otherwise provided by applicable
law. To the extent that arbitration may not be legally permitted
hereunder and the parties to any dispute hereunder may not at the time
of such dispute mutually agree to submit such dispute to arbitration,
any party may commence a civil action in a court of appropriate
jurisdiction to resolve disputes hereunder. Nothing contained in this
SECTION 8.17 shall prevent the parties from settling any dispute by
mutual agreement at any time.
8.18 CONFIDENTIALITY. Except as may be required by law, or for
compliance with applicable financial disclosure requirements or tax
returns, or to their respective legal and accounting advisors, neither
Seller nor Buyer will disclose to third parties the purchase price for
the Assets without first notifying the other party.
8.19 GOOD FAITH. As of the Closing, each party represents to the
other that such party has no actual knowledge of any breach by the
other party of any representation, warranty or covenant applicable to
such party under this agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written.
ATTEST: Pemco Aeroplex, Inc. ("SELLER)
- ------------------------- By:/s/Darryl Mazow
ATTEST: Endevco Corporation ("BUYER)
- ------------------------- By:/s/Bennett F. Moore
EXHIBITS
A. Form of Bill of Sale
B. Form of Assignment of Contracts
SCHEDULES
1.1.2(h) Other Excluded Assets
1.1.3 Certain Excluded Obligations
3.1.6 Financial Statements
3.1.10 Certain Changes in Condition
3.1.12 Leased Assets
3.1.13 Permits, Licenses and Approvals
3.1.14 Litigation
3.1.15 Contracts and Commitments
3.1.15(a) Goods Contracts and Services Contracts
3.1.15(d) Real and Personal Property Leases
3.1.17 Employee Benefit Matters
3.1.18 Intellectual Property
3.1.19 Environmental Matters
3.1.20 Equipment
3.1.23 Insurance
3.1.24 Suppliers, Distributors and Customers
3.1.25 Purchase and Sale Orders
3.1.26 Consents
4.1.9 Key Personnel
EXHIBIT A
BILL OF SALE
PEMCO AEROPLEX, INC., an Alabama corporation ("Seller"), pursuant to
the terms of an Asset Purchase Agreement, dated to be effective as of
January 29, 1998 (the "Agreement") among Endevco Corporation, a
Delaware corporation ("Buyer") and Seller for the consideration set
forth in the Agreement, the receipt and sufficiency of which is hereby
acknowledged, does hereby sell, convey, transfer, set over and deliver
to Buyer all assets, properties, and rights owned by the Seller as of
the Closing Date which are used by it in the conduct of the Business
of its Hayes Targets Division as a "going concern", including, without
limitation, all assets reflected on the balance sheet of the Business
as of the Closing Date, exclusive of the Excluded Assets as set forth
below (collectively the "Acquired Assets"). Without limiting the
generality of the foregoing, the Acquired Assets will include all of
Seller's right, title, and interest in and to the following types and
classes of assets (other than Excluded Assets as set forth below), as
the same shall exist as of Closing:
All tangible and intangible assets of Seller used or useful primarily
in, or necessary for, the Business, including without limitation the
following assets, properties and rights of Seller used directly or
indirectly primarily in or necessary for the conduct of, or generated
by or constituting, the Business of the Hayes Target Division, but
excluding those assets expressly set forth below under "Excluded
Assets":
(a) the Business of Seller as a going concern and the goodwill
pertaining thereto, together with the exclusive right to the name
"Hayes Targets" and all trademarks and service marks associated
therewith (excluding those trademarks and service marks utilizing the
crescent logo of Precision Standard, Inc. and its operating
companies);
(b) all vehicles, machinery, equipment, computer hardware, tools,
vehicles, furniture, furnishings, leasehold improvements, fixtures,
goods, and other tangible personal property primarily related to,
necessary for, or used primarily by or necessary for the Business;
(c) the accounts, notes and other receivables of Seller relating
exclusively to the Business accrued on or prior to the Closing Date;
(d) all prepaid items relating exclusively to the Business;
(e) all items of useable and salable supplies and inventories and
office and other supplies of the Business, including without
limitation raw materials, work-in-process and finished goods;
(f) all non-inventory supplies of the Business (including, without
limitation, containers, packaging and shipping material, tools and
spare parts and other similar removable tangible personal property)
wherever located;
(g) to the extent permitted by applicable law and except as set forth
in the Excluded Assets as defined below, all rights (but only those
obligations specified in the Assumption Agreement of even date between
Buyer and Seller) under any written or oral contract, agreement,
license, lease, instrument, registration, certificate of occupancy,
other permit or approval of any nature, or other document, commitment,
arrangement, undertaking, practice or authorization used primarily by
or necessary for the Business;
(h) all United States and foreign patents, patent rights, patent
applications and licenses, trademarks, trademark rights, service
marks, service mark rights, trade names, trade name rights,
copyrights, trade secrets, data bases, engineering drawings and
notebooks, inventions, know-how, formulae, technical information, un-
patented inventions, technologies, methods, formulations, inventions
techniques, discoveries, designs, proprietary rights and other non-
public information, whether patentable or not, and registrations,
reissues and extensions thereof and applications and licenses therefor
currently owned, used, licensed or proposed to be used or licensed ,
primarily in, or necessary to, the conduct of the Business, including
but not limited to the intellectual property rights listed in SCHEDULE
3.1.18 (all of such rights being collectively referred to hereinafter
as the "Rights", but shall not include any trademark, tradename,
service mark, or any rights or licenses thereof utilizing the crescent
logo of Precision Standard, Inc. and its operating Companies);
(i) all computer software and software licenses used exclusively by
or useful exclusively to, or necessary for the conduct of, the
Business as presently conducted;
(j) all rights or choses in action of the Business arising out of
occurrences before or after the Closing, including without limitation
all rights under express or implied warranties relating to the Assets;
(k) all information, files, bids, proposals, records, data, plans,
contracts and recorded knowledge, including customer and supplier
lists, related to the Business; all books and records, including
without limitation the following: supplier, distributor, sales agent
and customer lists; trade correspondence; production and purchase
records; sales and promotional literature; accounts payable records
(including tax records, financial reports, invoices, correspondence
and all related documents); accounts receivable ledgers; all documents
relating to uncollected invoices; and all shipping records (but all
such information listed in this Subparagraph (k) shall exclude any
such items to the extent they do not relate to the Business or any
part thereof);
(l) all certificates of deposit and securities instruments that are
exclusively related to the Business;
(m)the contracts, agreements and orders included in the Assumed
Obligations (as defined in the Agreement)
(n) all advance payments, prepaid items, rights to offset and credits
of all kinds, related exclusively to the Business other than (i)
prepayments of federal, state and local taxes; and (ii) advance
payments, prepaid items, rights to offset and credits relating to
obligations of the Business not included in the Assumed Obligations;
(o) all licenses, permits, authorizations, franchises and other
approvals from any governmental, quasi governmental, public or self-
regulatory body or authority exclusively used or held for use in
connection with, or necessary for, the conduct of the Business,
including, but not limited to, the items listed on SCHEDULE 3.1.13 of
the Agreement (all of such rights being collectively referred to
hereinafter as the "Permits");
(p) the Commitments described in SCHEDULE 3.1.15 to the Agreement;
(q) all contract rights and accounts arising out of any of the items
listed above and/or out of any of the Assumed Obligations (as defined
in the Agreement);
(r) all other tangible and intangible personal property owned by the
Seller which is not specifically included in, or specifically excluded
from the foregoing subsections, which is used exclusively in or
necessary for the conduct of the Business as presently conducted, and
which is not an Excluded Asset as defined below.
EXCLUDED ASSETS. The Acquired Assets shall not include any of the
following:
(a) the corporate seals, certificates of incorporation, minute books,
stock books, tax returns, books of account or other records having to
do with the corporate organization of Seller;
(b) the rights of Seller under any employment agreement or
arrangement or employee benefit plan or arrangement (whether written
or oral);
(c) the rights of Seller under the Agreement;
(d) the Unisys Computer System and related software at the Seller's
Birmingham facility the use of which has been shared;
(e) cash and cash equivalents;
(f) inter-company (i.e. between the Business and Seller or any
affiliate of Seller) accounts receivable;
(g) the use of the name "Hayes" (but not "Hayes Targets") with
respect to other businesses than towed targets and infrared radiation
suppression devices and the crescent logo of Precision Standard;
(h) the Consulting Agreement with S. W. Teague dated May 20, 1997,
(and Buyer covenants that it shall not otherwise contract for the
services of Mr. Teague on or before May 30, 1998).
All capitalized terms used but not otherwise defined herein shall have
the meanings accorded to them in the Agreement.
As provided in the Agreement, Seller represents, warrants and
covenants that it has good, marketable and valid title to the assets
being conveyed hereby as the legal and beneficial owner thereof and
that except as noted in the various Schedules to the Agreement, and
except with respect to certain liabilities to be expressly assumed by
Buyer pursuant to the terms of the Agreement and the Schedules
thereto, such assets are free from all liens, claims and encumbrances,
and Seller will warrant and defend same to Buyer and its successors
and assigns in accordance with the terms and provisions of the
Agreement.
This Bill of Sale shall inure to the benefit of, and shall bind Seller
and Buyer and their respective successors and assigns.
This Bill of Sale is executed pursuant to and is subject to the terms
and conditions of the Agreement and is being delivered in
consideration of, among other things, the payment to Seller of the
Purchase Price as defined in said Agreement, receipt of which is
hereby acknowledged. All representations and warranties, covenants
and indemnity obligations of the Seller and the Buyer set forth in the
Agreement (or in any document given pursuant to either of those
agreements) and which pertain to the assets being conveyed hereby
shall remain in effect after the date hereof and until the expiration
thereof as provided in the Agreement(or in any document given pursuant
to the agreements).
Seller hereby constitutes and appoint Buyer, its successors and
assigns, the true and lawful attorney or attorneys of Seller, for
Seller and in its name and stead or otherwise, by and on behalf and
for the benefit of Buyer, its successors and permitted assigns, to
demand and receive from time to time any and all of the properties and
assets hereby conveyed and to give receipts and releases for or in
respect of the same and any part thereof, and from time to time to
institute and prosecute in the name of Seller or otherwise, but at the
expense and for the benefit of Buyer, its successors and permitted
assigns, any and all proceedings at law, in equity, or otherwise which
are reasonably necessary and proper in order to collect, assert, or
enforce any claim, right, or title of any kind in or to the properties
and assets hereby conveyed, assigned, and transferred, and to defend
or compromise any and all actions, suits, or proceedings in respect of
any of said properties or assets and to do all such acts and things in
relation thereto as are reasonably necessary and desirable; Seller
hereby declaring that the appointment made and the powers hereby
granted are coupled with an interest and are and shall be irrevocable
by Seller in any manner or for any reason.
Seller covenants with Buyer that it will do, execute, and deliver or
cause to be done, executed, and delivered all such further acts,
documents, or things, including without limitation, transfers,
assignments, conveyances, powers of attorney, and assurances for
better assuring, conveying, and confirming unto Buyer, its successors
and assigns, all and singular, the entire right, title, and interest
of Seller throughout the world in, to, and under the assets and
properties hereby transferred, sold, assigned, and conveyed or
intending so to be as Buyer, its successors and assigns, shall
reasonably require, provided, however, that in no event shall Seller
be required to incur out-of-pocket expenses in connection with such
actions.
IN WITNESS WHEREOF, Pemco Aeroplex, Inc. has caused its duly
authorized officer to execute this Bill of Sale on this 29th day of
January, 1998.
WITNESS PEMCO AEROPLEX, INC.
- -------------------------- By:/s/Darryl Mazow
Name: Darryl Mazow
Title: Vice President
State of
County of
The foregoing instrument was acknowledged before me this ----- day of
- ------------------ 1998 by ------------------------ its duly
authorized officer of Pemco Aeroplex, Inc., on behalf of the
corporation.
- -------------------------------
Notary Public/Justice of the Peace
My Commission Expires:-----------------------
EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement is executed this 29th day of
January, 1998, by and between Pemco Aeroplex, Inc., an Alabama
corporation with a principal place of business in Birmingham, Alabama
("Seller") and Endevco Corporation, a Delaware corporation with a
principal place of business in San Juan Capistrano California
("Buyer").
RECITALS
A. Buyer and Seller have entered into an Asset Purchase Agreement
dated to be effective as of January 29, 1998 (the "Agreement"),
pursuant to which Seller agreed to sell and Buyer agreed to purchase
certain of Seller's assets (capitalized terms used but not otherwise
defined herein shall have the respective meanings accorded to them in
the Agreement).
B. Pursuant to the terms of the Agreement, and for the consideration
set forth in the Agreement, the Seller has agreed to assign its rights
under certain contracts and agreements to the Buyer and Buyer has
agreed to assume certain related obligations of Seller with respect
thereto following the Closing as of the date hereof.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Seller hereby assigns and delivers to Buyer, its successors, and
assigns all of its rights under the following contracts and agreements
and to the extent of such assignment Buyer does hereby assume and
agrees to be bound by and perform all of the obligations and
liabilities of Seller relating to periods of time or events subsequent
to the Closing Date, but excluding any penalties or liquidated damages
arising either from events occurring prior to Closing or from the
assignment of any of the following orders, contracts and commitments:
(a) The trade accounts payable and accrued expenses (excluding
payables to Seller and any affiliate of Seller) set forth in SCHEDULE
1.1.3 of the Agreement;
(b) The contract obligations of the Business specifically included
among the Assets;
(c) All obligations under any written or oral contract, agreement,
license, lease, instrument, registration, certificate of occupancy,
other permit or approval of any nature, or other document, commitment,
arrangement, undertaking, practice or authorization to the extent
assumed under section 1.1.1(g) of the Agreement.
(d) All product liability claims arising after the Closing for goods
and services sold after the Closing;
(e) Any and all other liabilities and obligations accruing for any
act of the Business after the Closing.
Except to the extent specifically assumed above, Assumed Obligations
do not include bank and other debt obligations, product liability
claims for products sold prior to the Closing Date, tax liabilities of
the Seller of any kind arising or relating to periods prior to the
Closing, inter-company accounts payable (i.e. between the Business and
Seller or any affiliate of Seller) of the Seller, or employment
contracts of any kind.
2. To the extent that the assignment of Seller's rights and claims
under or with respect to any of the foregoing shall require the
consent of the other party thereto, this Agreement shall not
constitute an assignment of the same if an attempted assignment
thereof would constitute a breach or default thereunder or would be in
violation of law. At the request of the Buyer, the officers of the
Seller shall use their best efforts to obtain the consent of the other
parties to the foregoing in all cases where consent is required and
has not been obtained prior to the date hereof. If their consent is
not obtained, the officers of the Seller will cooperate with the Buyer
in any arrangement which Buyer shall consider reasonably designed to
provide for itself the benefits of such rights and claims, including
the enforcement (at the cost and for the benefit of the Buyer) of any
and all such rights and claims of the Seller against the other parties
thereto arising out of the breach or cancellation by such other
parties or otherwise.
3. Seller hereby constitutes and appoints Buyer, its successors and
assigns, the true and lawful attorney or attorneys of Seller, for
Seller and in its name and stead or otherwise, by and on behalf and
for the benefit of Buyer, its successors and assigns, to demand and
receive from time to time any and all of the properties and assets
hereby conveyed and to give receipts and releases for or in respect of
the same and any part thereof, and from time to time to institute and
prosecute in the name of Seller or otherwise, but at the expense and
for the benefit of Buyer, its successors and assigns, any and all
proceedings at law, in equity, or otherwise which are reasonably
necessary and proper in order to collect, assert, or enforce any
claim, right, or title of any kind in or to the properties and assets
hereby conveyed, assigned, and transferred, and to defend or
compromise any and all actions, suits, or proceedings in respect of
any of said properties or assets and to do all such acts and things in
relation thereto as are reasonably necessary and desirable; Seller
hereby declaring that the appointment made and the powers hereby
granted are coupled with an interest and are and shall be irrevocable
by Seller in any manner or for any reason.
4. This Assignment Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the parties hereto.
5. Seller covenants with Buyer that it will do, execute, and deliver
or cause to be done, executed, and delivered all such further acts,
documents, or things, including without limitation, transfers,
assignments, conveyances, powers of attorney, and assurances for
better assuring, conveying, and confirming unto Buyer, its successors
and assigns, all and singular, the entire right, title, and interest
of Seller throughout the world in, to and under the assets and
properties hereby transferred, sold, assigned, and conveyed or
intending so to be as Buyer, its successor and assigns, shall
reasonably require, provided, however, that in no event shall Seller
be required to incur any cost of fees or expenses of any kind in
connection with such actions.
6. This Assignment and Assumption Agreement is executed pursuant to
and is subject to the terms and conditions of the Agreement. All
representations, warranties, covenants and indemnity obligation set
forth in the Agreement(or in any document given pursuant to those
agreements) relating to the contracts and agreements being assigned
and assumed hereby shall remain in effect after the date hereof and
until the expiration thereof as provided in the Agreement(or in any
document given pursuant to those agreements).
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Agreement in their names and on their behalf
as of the day and year first above written.
WITNESS: PEMCO AEROPLEX, INC.
- ------------------------- By:/s/Darryl Mazow
Name: Darryl Mazow
Title: Vice President
WITNESS: ENDEVCO CORPORATION
- ------------------------- By:/s/Bennett F. Moore
Name: Bennett F. Moore
Title: Director, duly authorized
