<PAGE> 1
Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1 to
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report April 24, 1998
(Date of earliest event reported) (February 24, 1998)
Engineered Support Systems, Inc.
--------------------------------
(Exact name of Registrant as Specified in Charter)
Missouri 0-13880 43-1313242
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
1270 North Price Road 63132
St. Louis, Missouri (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (314) 993-5880
<PAGE> 2
Engineered Support Systems, Inc. hereby amends the following items, financial
statements, exhibits or other portions of its Current Report, dated
February 24, 1998, on Form 8-K:
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
(1) Audited Financial Statements of Nuclear Cooling, Inc., d/b/a
Marlo Coil, for the three year period ended June 30, 1997
(2) Consolidated Statements of Income (Unaudited) of Nuclear
Cooling, Inc., d/b/a Marlo Coil, for the seven month periods
ended January 31, 1998 and January 31, 1997
(3) Condensed Consolidated Balance Sheet (Unaudited) of Nuclear
Cooling, Inc., d/b/a Marlo Coil, as of January 31, 1998
(4) Consolidated Statements of Cash Flows (Unaudited) of Nuclear
Cooling, Inc., d/b/a Marlo Coil, for the seven month periods
ended January 31, 1998 and January 31, 1997
(b) Pro Forma Financial Information
(1) Pro Forma Combined Statements of Income (Unaudited) for the
year ended October 31, 1997
(2) Pro Forma Combined Statements of Income (Unaudited) for the
three months ended January 31, 1998
(3) Pro Forma Combined Balance Sheets (Unaudited) as of January 31,
1998
(4) Notes to Condensed Pro Forma Financial Statements (Unaudited) for
the year ended October 31, 1997 and for the three months ended
January 31, 1998
(c) Exhibits
(1) Asset Purchase Agreement, dated as of February 9, 1998, by and
among Nuclear Cooling, Inc., d/b/a Marlo Coil, David G. Ault,
Rita R. Ault and R. Bruce Earls, and Engineered Coil Company,
a wholly-owned subsidiary of Engineered Support Systems, Inc.
<PAGE> 3
Item 7 (a)(1) -- Audited Financial Statements of Nuclear Cooling, Inc.,
d/b/a Marlo Coil, for the three year period ended June
30, 1997
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Nuclear Cooling, Inc.
d/b/a Marlo Coil:
We have audited the accompanying balance sheets of Nuclear Cooling, Inc. (a
Missouri corporation), d/b/a Marlo Coil, as of June 30, 1997 and 1996, and the
related statements of income, stockholders' equity and cash flows for each of
the three years in the period ended June 30, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nuclear Cooling, Inc., d/b/a
Marlo Coil, as of June 30, 1997 and 1996, and the results of its operations and
its cash flows for each of the three years in the period ended June 30, 1997
in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
St. Louis, Missouri
August 22, 1997
<PAGE> 5
NUCLEAR COOLING, INC.
---------------------
d/b/a MARLO COIL
----------------
<TABLE>
<CAPTION>
June 30
---------------------------
1997 1996
----------- -----------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 810,476 $ 166,954
Accounts receivable-trade and other 3,423,422 3,647,202
Inventory 2,614,172 2,258,277
Prepaid expenses 106,426 95,927
Advance to stockholder 200,000
----------- -----------
Total current assets 6,954,496 6,368,360
PROPERTY AND EQUIPMENT, net 2,734,761 2,554,178
REAL ESTATE OTHER, net 641,535 665,113
LAND HELD FOR SALE 226,638 242,837
DEPOSITS 413,448 371,336
OTHER ASSETS 493,316 512,406
----------- -----------
$11,464,194 $10,714,230
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Note payable to bank $ $ 1,026,000
Note payable to related party 269,974 311,453
Accounts payable 976,172 465,130
Accrued payroll and commissions 242,136 320,967
Other accrued expenses 1,160,824 787,674
Deferred revenue 51,506 152,540
----------- -----------
Total current liabilities 2,700,612 3,063,764
----------- -----------
DEFERRED COMPENSATION LIABILITY 204,475 205,502
DEFERRED REVENUE 123,696 169,000
----------- -----------
Total noncurrent liabilities 328,171 374,502
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value. Authorized 30,000 shares; issued and
outstanding 5,000 shares. 5,000 5,000
Additional paid-in capital 80,591 80,591
Retained earnings 8,349,820 7,190,373
----------- -----------
8,435,411 7,275,964
----------- -----------
Total stockholders' equity $11,464,194 $10,714,230
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 6
NUCLEAR COOLING, INC.
---------------------
d/b/a MARLO COIL
----------------
<TABLE>
STATEMENTS OF INCOME
--------------------
<CAPTION>
Year Ended June 30
-------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES $25,761,886 $22,585,616 $21,664,668
COST OF GOODS SOLD 17,833,713 16,562,604 15,382,966
----------- ----------- -----------
Gross profit 7,928,173 6,023,012 6,281,702
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 4,960,027 4,132,365 4,524,338
----------- ----------- -----------
Income from operations 2,968,146 1,890,647 1,757,364
----------- ----------- -----------
OTHER INCOME (EXPENSES):
Interest income 68,101 106,561 121,919
Interest expense (113,923) (50,857) (95,914)
Gain (loss) on sale of assets 13,272 17,750 (62,172)
Other income 73,851 73,940 70,000
----------- ----------- -----------
41,301 147,394 33,833
----------- ----------- -----------
Net income $ 3,009,447 $ 2,038,041 $ 1,791,197
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 7
NUCLEAR COOLING, INC.
---------------------
d/b/a MARLO COIL
----------------
<TABLE>
STATEMENTS OF STOCKHOLDERS' EQUITY
----------------------------------
<CAPTION>
Additional Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
BALANCE, JUNE 30, 1994 $5,000 $80,591 $ 8,199,135 $ 8,284,726
Dividends (1,600,000) (1,600,000)
Net income 1,791,197 1,791,197
------ ------- ----------- -----------
BALANCE, JUNE 30, 1995 5,000 80,591 8,390,332 8,475,923
Dividends (3,238,000) (3,238,000)
Net income 2,038,041 2,038,041
------ ------- ----------- -----------
BALANCE, JUNE 30, 1996 5,000 80,591 7,190,373 7,275,964
Dividends (1,850,000) (1,850,000)
Net income 3,009,447 3,009,447
------ ------- ----------- -----------
BALANCE, JUNE 30, 1997 $5,000 $80,591 $ 8,349,820 $ 8,435,411
====== ======= =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 8
NUCLEAR COOLING, INC.
---------------------
d/b/a MARLO COIL
----------------
<TABLE>
STATEMENTS OF CASH FLOWS
------------------------
<CAPTION>
Year Ended June 30
-------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,009,447 $ 2,038,041 $ 1,791,197
----------- ----------- -----------
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation 363,815 254,767 267,069
(Gain) loss on sale of assets (13,272) (17,750) 62,172
Decrease (increase) in accounts receivable-trade and other 223,780 (551,257) (121,905)
(Increase) decrease in inventory (355,895) 171,419 157,599
(Increase) decrease in prepaid expenses (10,499) (28,098) 24,548
Increase in deposits (42,112) (116,679) (9,412)
Decrease (increase) in other assets 19,179 (95,245) (30,583)
Increase in accounts payable 510,952 255,779 13,900
Decrease in accrued payroll and commissions (78,831) (47,073) (73,995)
Increase (decrease) in other accrued expenses 373,150 (218,686) 235,040
Decrease in deferred compensation liability (1,027) (16,047) (6,084)
(Decrease) increase in deferred revenues (146,338) 321,540
----------- ----------- -----------
Total adjustments 842,902 (87,330) 518,349
----------- ----------- -----------
Net cash provided by operating activities 3,852,349 1,950,711 2,309,546
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (525,837) (356,674) (91,175)
Proceeds from sale of assets 34,489 71,000 56,786
----------- ----------- -----------
Net cash used in investing activities (491,348) (285,674) (34,389)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in due to bank (278,161)
Payments received on notes payable from related parties 805,468
(Repayments) borrowings on note payable, net (1,026,000) 1,026,000 (600,000)
(Repayments) borrowings on note payable to related party, net (41,479) 35,383 276,070
Payment of dividends (1,850,000) (3,238,000) (1,600,000)
Decrease (increase) in advance to stockholder 200,000 (200,000)
----------- ----------- -----------
Net cash used in financing activities (2,717,479) (2,376,617) (1,396,623)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 643,522 (711,580) 878,534
CASH AND CASH EQUIVALENTS, beginning of year 166,954 878,534
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 810,476 $ 166,954 $ 878,534
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 9
NUCLEAR COOLING, INC.
---------------------
d/b/a MARLO COIL
----------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND OPERATING POLICIES:
---------------------------------------------------------
Business Activities
- -------------------
Nuclear Cooling, Inc., d/b/a Marlo Coil (the Company) is a manufacturer of
industrial and commercial heat transfer equipment which is generally
produced to customer specifications. Its principal products are coils
and air handling units and its primary customers are defense contractors,
mechanical contractors and industrial users located throughout the United
States.
Revenue Recognition
- -------------------
Revenue from sales transactions is generally recognized upon shipment of
goods, at which time all rights and obligations are transferred to the
customer.
Approximately 48%, 45% and 50% of the Company's 1997, 1996 and 1995 sales,
respectively, were made to its 10 largest customers. Receivables from these 10
customers were approximately 49% and 47% of trade accounts receivable at June
30, 1997 and 1996, respectively.
Use of Estimates
- ----------------
The preparation of these financial statements required the use of certain
estimates by management in determining the Company's assets, liabilities,
revenues and expenses.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents are stated at cost. Cash equivalents consist
of highly liquid investments with original maturities of three months
or less when purchased.
Inventory
- ---------
Inventory is stated at the lower of cost or market (net realizable value).
Cost is determined principally on a first-in, first-out basis.
The Company uses the last-in, first-out (LIFO) accounting method for
certain inventories. If the Company had used the first-in, first-out method of
computing inventory costs for these items, inventories would have been
approximately $50,900 and $80,700 higher than reported at June 30, 1997 and
1996, respectively.
Land Held for Sale
- ------------------
Land held for sale is stated at the lower of cost or estimated net realizable
value. The Company capitalizes all direct acquisition and development
costs, including interest.
Revenue on sales of land held for sale is recognized when title passes and
adequate cash payments are received.
<PAGE> 10
Property and Equipment
- ----------------------
Depreciation of property and equipment is provided over the estimated useful
lives of the respective assets. Depreciation is provided principally on
accelerated methods. The depreciable lives used are:
Years
-----
Buildings 15-45
Office furniture, computer components and equipment 5- 7
Machinery and equipment 5- 7
Automobiles and trucks 5
Asset Impairment
- ----------------
If facts and circumstances suggest that a long-lived asset may be impaired,
the carrying value is reviewed. If this review indicates that the value of
the asset will not be recoverable, as determined based on projected
undiscounted cash flows related to the asset over the remaining life, then
the carrying value of the asset is reduced to its estimated fair value.
Income Taxes
- ------------
The Company has made the election to be treated as an S corporation under the
provisions of the Internal Revenue Code. As such, all income and losses flow
through to the stockholders who are liable for all applicable taxes.
Accordingly, no provision or credit is made for federal and state income taxes
for the Company. The net difference between the tax bases and the reported
amounts of the Company's assets and liabilities is not significant.
Deposits are required to be kept with the Internal Revenue Service, due to the
time lag between the fiscal year-end of the Company and the calendar year-end of
its stockholders. These deposits were approximately $413,000 and $371,000 at
June 30, 1997 and 1996, respectively.
2. INVENTORY:
----------
The components of inventory are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Raw materials $2,010,137 $1,751,436
Work in process 654,940 587,552
LIFO reserve (50,905) (80,711)
---------- ----------
$2,614,172 $2,258,277
========== ==========
FIFO inventories $1,911,545 $1,803,243
LIFO inventories 702,627 455,034
---------- ----------
$2,614,172 $2,258,277
========== ==========
</TABLE>
<PAGE> 11
3. PROPERTY AND EQUIPMENT:
-----------------------
Following is a summary of property and equipment, at cost:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Land and land improvements $ 220,340 $ 220,340
Buildings 4,010,392 3,928,561
Office furniture, computer components and equipment 557,426 589,087
Machinery and equipment 4,233,608 3,893,780
Automobiles and trucks 93,143 72,219
---------- ----------
9,114,909 8,703,987
Less accumulated depreciation 6,380,148 6,149,809
---------- ----------
$2,734,761 $2,554,178
========== ==========
</TABLE>
4. NOTES PAYABLE:
--------------
The Company maintains an unsecured line of credit agreement with a bank for
maximum borrowings of $4,200,000, with interest payable monthly at the prime
rate less .25%, 8.25% at June 30, 1997. The line of credit expires October
15, 1997. There are no compensating balance requirements or other restrictions
associated with this line of credit agreement.
The Company has a note payable to an officer. The note was executed during
1995, is due on demand and accrues interest at the prime rate.
Interest expense on all debt during 1997, 1996 and 1995 was approximately
$114,000, $51,000 and $96,000, respectively. Cash paid for interest during
these same periods was approximately $119,000, $46,000 and $97,000,
respectively.
5. EMPLOYEE BENEFIT PLANS:
-----------------------
The Company has a defined contribution plan, the Marlo Coil Employees
Retirement Plan (the Plan). All full-time employees of the Company who
have completed one year of service and are age 21 or older or were participants
in prior plans are eligible to participate. Under the terms of the Plan, the
Company, at its option, can contribute to the Plan a yearly amount based on
compensation paid or an additional match to participating employees as
defined by the Plan. Participants may also elect to defer a certain portion of
their compensation to the Plan on which the Company must make a matching
contribution. During 1997, 1996 and 1995, Company contributions were
approximately $140,000, $112,000 and $142,000, respectively.
Effective July 1, 1995, the Plan was restated. This restatement changed the
investment options available for participant directed contributions. The
restatement also increased the employer matching contributions to 50% of
each participant's deferred compensation up to 4% of compensation and also
made loans available to participants based on their vested account balances.
During 1997 the Company made additional matching contributions which increased
total contributions for the year to 67% of 6% of compensation.
The Company has a nonparticipatory deferred compensation plan which is given
to certain key employees. This plan provides for benefits of a fixed amount
each year for nine years to participants who are employed by the Company at
age 55. The annual payment will vary by participant. If the participant dies
prior to age 55 while still actively employed, the Company shall pay a lump
sum death benefit in lieu of any future benefit payments vested at time of
death. The Company employs a 10% discount rate in calculating the
outstanding liability. The Company incurred expenses of approximately $24,000,
$8,000 and $0 related to this plan for the years ended June 30, 1997, 1996
and 1995, respectively.
<PAGE> 12
The Company had a deferred compensation plan for participating employees over
the age of 50, which was terminated during 1992. Participants who elected to
retire early receive $10,000 annual payments for a total of 10 years. All
others received cash settlements. In connection with the plan termination,
the Company redeemed certain life insurance policies.
The Company owns various life insurance policies on plan participants. These
policies were purchased to fund deferred compensation benefits described above.
The cash surrender value on these policies is recorded as an other asset on the
balance sheet, and was approximately $151,000 and $145,000 at June 30, 1997
and 1996, respectively. All liabilities related to the deferred compensation
benefits are recorded at the present value of expected future cash payments.
6. RELATED-PARTY TRANSACTIONS:
--------------------------
The Company has entered into a land development agreement with David
Enterprises, Inc., a related entity, whereby land owned by the Company is
developed and sold by the related party. Revenues derived from land sales
and the profit thereon are based on the current market value of the land at
date of sale. During 1997, land sales resulted in a gain of approximately
$12,400, which is included in gain on sale of assets in the accompanying
income statement. Land sales during 1996 resulted in a gain of approximately
$17,750. Land sales during 1995 resulted in a loss of approximately $64,000.
In 1993, the Company purchased a building from the stockholders of the Company
for approximately $740,000. The purchase price was financed with a cash payment
of approximately $170,000 and relief of a note receivable from the stockholders
of approximately $570,000. The building was leased in July 1993, to an
unrelated third party for $5,833 per month for an initial term of two years,
with an additional option for two separate and successive two year terms. The
lease has been renewed for the first additional term. The lessee is responsible
for the payment of all property taxes, insurance and maintenance of the roofing
structure. The building is recorded on the balance sheet as Real Estate Other,
net at an amount equal to the related party seller's basis, which approximates
fair market value. The building is being depreciated over 31.5 years, which
approximates its estimated useful life.
Periodic loans made by the Company to the owners and an affiliated entity bear
interest at the prime rate. Interest earned on these notes, as well as advances
to employees, amounted to approximately $0, $0 and $67,000 for 1997, 1996 and
1995, respectively.
During 1997, 1996 and 1995, the Company paid approximately $931,000, $542,000
and $596,000, respectively, to affiliated companies for material components and
subcontract labor.
The Company is the beneficiary of a $550,000 whole life insurance policy on the
life of its chairman and chief executive officer. The cash surrender value of
this policy is recorded as an other asset on the balance sheet, and was
approximately $211,000 and $204,000 at June 30, 1997 and 1996, respectively.
The Company's portion of cash surrender value of an additional life insurance
policy was approximately $50,000 and $54,000, respectively, at June 30, 1997
and 1996, and is recorded as an other asset. The Company is not the beneficiary
of this policy, but is the owner and will recognize that amount upon his death.
During 1996, the Company guaranteed a $3,500,000 bank line of credit for Eureka
Springs, Inc., a related entity. The debt outstanding on this line of credit
was $3,270,000 at June 30, 1997.
The Company has agreements with two individuals whereby, upon the sale of the
business, each will receive 5% and 2%, respectively, of the "total gross sales
price," as defined in the agreements. In addition, under the terms of these
agreements the Company is obligated to pay these individuals an annual bonus
based on a formula defined in the agreements. The amount of bonuses paid was
approximately $123,000, $79,000 and $75,000 in 1997, 1996 and 1995,
respectively.
<PAGE> 13
7. CONTINGENCIES:
-------------
Effective May 1, 1996, the Company entered into a five-year production agreement
with a customer whereby the Company will produce and sell modular rooftop air
handler units according to certain design and delivery specifications. The
customer paid the Company approximately $350,000 prior to June 30, 1996, to
reimburse the Company for certain start-up costs including engineering, training
and plant changeover expenses. The Company will recognize the reimbursement into
income as related costs are incurred. The unrecognized portion of this deferred
revenue, totaling approximately $105,000 and $240,000 at June 30, 1997 and 1996,
respectively, is separately stated on the accompanying balance sheet in current
and long-term liabilities, according to management's estimates of when the
related costs will be incurred. Cancellation of the agreement without cause by
either party during 1997 and 1998 would require a cash payout of $750,000
during 1997 or $300,000 during 1998.
From time to time, the Company is a party to certain lawsuits and other claims
related to the normal conduct of its business. Management believes that
liabilities, if any, resulting from the resolution of pending or threatened
proceedings would not materially affect the financial condition or results of
operations of the Company.
<PAGE> 14
Item 7(a)(2)--Consolidated Statements of Income
(Unaudited) of Nuclear Cooling, Inc., d/b/a Marlo Coil,
for the seven month periods ended January 31, 1998
and January 31, 1997.
<PAGE> 15
<TABLE>
Nuclear Cooling, Inc., d/b/a Marlo Coil
Consolidated Statements of Income (Unaudited)
<CAPTION>
Seven Months Ended January 31
-----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net sales $14,535,135 $12,920,766
Cost of goods sold 10,218,728 9,066,232
----------- -----------
Gross profit 4,316,407 3,854,534
Selling, general & administrative expense 3,015,931 2,950,230
----------- -----------
Income from operations 1,300,476 904,304
Net interest expense 32,497 75,857
----------- -----------
Income before income taxes 1,267,979 828,447
Income tax provision (Note 1) 0 0
----------- -----------
Net income $ 1,267,979 $ 828,447
=========== ===========
<FN>
Note 1--Nuclear Cooling, Inc., d/b/a Marlo Coil, elected S corporation status
under the provisions of the Internal Revenue Code. As such, all
income and losses flow through to the stockholders who are liable
for all applicable taxes. Accordingly, no provision or credit has
been made for federal and state income taxes.
</TABLE>
<PAGE> 16
Item 7(a)(3)--Condensed Consolidated Balance Sheet
(Unaudited) of Nuclear Cooling, Inc., d/b/a Marlo Coil,
as of January 31, 1998
<PAGE> 17
<TABLE>
Nuclear Cooling, Inc., d/b/a Marlo Coil
Condensed Consolidated Balance Sheet (Unaudited)
January 31, 1998
<S> <C>
ASSETS
Current Assets:
Cash $ 30,030
Accounts receivable 6,378,412
Inventory 2,151,305
Prepaid expenses and other assets 218,555
-----------
Total Current Assets 8,778,302
Property, Plant & Equipment, net of
accumulated depreciation of $6,373,587 2,630,039
Other Assets 1,763,140
-----------
Total Assets $13,171,481
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 1,075,961
Accounts payable 1,646,172
Advance payments on contracts 962,304
Other current liabilities 1,631,440
-----------
Total Current Liabilities 5,315,877
Other Liabilities 318,101
Stockholders' Equity:
Common stock 5,000
Additional paid-in capital 80,591
Retained earnings 7,451,912
-----------
Total Stockholders' Equity 7,537,503
-----------
Total Liabilities and Stockholders' Equity $13,171,481
===========
</TABLE>
<PAGE> 18
Item 7(a)(4)--Consolidated Statements of Cash Flows
(Unaudited) of Nuclear Cooling, Inc., d/b/a Marlo Coil,
for the seven month periods ended January 31, 1998
and January 31, 1997.
<PAGE> 19
<TABLE>
Nuclear Cooling, Inc., d/b/a Marlo Coil
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
SEVEN MONTHS ENDED JANUARY 31
-------------------------------
1998 1997
----------- ----------
<S> <C> <C>
Cash Flow from Operating Activities:
Net income $ 1,267,979 $ 828,447
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation 215,817 197,985
Loss on disposal of assets 3,876 0
----------- ----------
Cash provided before changes in operating
assets and liabilities 1,487,672 1,026,432
Changes in operating assets and liabilities:
Accounts receivable (2,954,990) (185,082)
Inventory 462,867 105,734
Accounts payable 670,000 273,132
Advance payments on contracts 962,304 82,111
Other assets and liabilities 66,572 (145,534)
----------- ----------
Net cash provided by operations 694,425 1,156,793
----------- ----------
Cash Flow from Investing Activities:
Additions to property, plant and equipment (114,971) (479,151)
----------- ----------
Net cash used in investing activities (114,971) (479,151)
----------- ----------
Cash Flow from Financing Activities:
Net proceeds of notes payable 805,987 1,205,230
Cash dividends (2,165,887) (879,029)
Advance to stockholders 0 (770,970)
----------- ----------
Net cash used in financing activities (1,359,900) (444,769)
----------- ----------
Net Increase (Decrease) in Cash (780,446) 232,873
Cash at Beginning of Period 810,476 166,954
----------- ----------
Cash at End of Period $ 30,030 $ 399,827
=========== ==========
</TABLE>
<PAGE> 20
Item 7(b)--Pro Forma Financial Information, including
Combined Statements of Income for the year
ended October 31, 1997 and for the three months
ended January 31, 1998, Combined Balance
Sheets as of January 31, 1998 and Notes to the
Condensed Pro Forma Financial Statements.
<PAGE> 21
<TABLE>
Engineered Support Systems, Inc.
Pro Forma Combined Statements of Income (Unaudited)
For the Year Ended October 31, 1997
<CAPTION>
Pro Forma Pro Forma
ESSI Marlo Adjustments Total
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenues $88,570,970 $26,341,555 $ $114,912,525
Cost of revenues 73,816,030 18,509,639 53,046 92,378,715
----------- ----------- ----------- ------------
14,754,940 7,831,916 (53,046) 22,533,810
Selling, general and
administrative expense 7,087,026 4,842,804 714,753 12,644,583
----------- ----------- ----------- ------------
Income from operations 7,667,914 2,989,112 (767,799) 9,889,227
Net interest expense (income) (64,032) 32,146 1,634,132 1,602,246
----------- ----------- ----------- ------------
Income before income taxes 7,731,946 2,956,966 (2,401,931) 8,286,981
Income tax provision 3,093,000 0 222,000 3,315,000
----------- ----------- ----------- ------------
Net income $ 4,638,946 $ 2,956,966 $(2,623,931) $ 4,971,981
=========== =========== =========== ============
Earnings per share:
Basic $1.40 $1.51
=========== ============
Diluted $1.39 $1.49
=========== ============
Average shares outstanding:
Basic 3,303,191 3,303,191
=========== ============
Diluted 3,341,319 3,341,319
=========== ============
See notes to condensed pro forma financial statements.
</TABLE>
<PAGE> 22
<TABLE>
Engineered Support Systems, Inc.
Pro Forma Combined Statements of Income (Unaudited)
For the Three Months Ended January 31, 1998
<CAPTION>
Pro Forma Pro Forma
ESSI Marlo Adjustments Total
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenues $16,238,139 $ 6,708,243 $ $22,946,382
Cost of revenues 12,934,370 4,679,487 12,954 17,626,811
----------- ----------- --------- -----------
3,303,769 2,028,756 (12,954) 5,319,571
Selling, general and
administrative expense 1,844,460 1,293,673 178,510 3,316,643
----------- ----------- --------- -----------
Income from operations 1,459,309 735,083 (191,464) 2,002,928
Net interest expense (income) (72,852) 16,067 408,533 351,748
----------- ----------- --------- -----------
Income before income taxes 1,532,161 719,016 (599,997) 1,651,180
Income tax provision 613,000 0 47,000 660,000
----------- ----------- --------- -----------
Net income $ 919,161 $ 719,016 $(646,997) $ 991,180
=========== =========== ========= ===========
Earnings per share:
Basic $.29 $.31
=========== ===========
Diluted $.28 $.30
=========== ===========
Average shares outstanding:
Basic 3,174,755 3,174,755
=========== ===========
Diluted 3,311,577 3,311,577
=========== ===========
See notes to condensed pro forma financial statements.
</TABLE>
<PAGE> 23
<TABLE>
Engineered Support Systems, Inc.
Pro Forma Combined Balance Sheets (Unaudited)
January 31, 1998
<CAPTION>
Pro Forma Pro Forma
ESSI Marlo Adjustments Total
---- ----- ----------- -----
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 4,486,393 $ 30,030 $(3,975,961) $ 540,462
Accounts receivable 4,646,402 6,378,412 11,024,814
Contracts in process and inventories,
net of progress payments received 7,167,724 2,151,305 9,319,029
Prepaid expenses and other assets 1,427,854 218,555 1,646,409
----------- ----------- ----------- -----------
17,728,373 8,778,302 (3,975,961) 22,530,714
----------- ----------- ----------- -----------
Property, plant and equipment 29,330,407 9,003,626 (4,014,301) 34,319,732
Less accumulated depreciation 15,163,034 6,373,587 (6,373,587) 15,163,034
----------- ----------- ----------- -----------
14,167,373 2,630,039 2,359,286 19,156,698
----------- ----------- ----------- -----------
Other Assets:
Intangible assets 756,788 17,099,938 17,856,726
Other assets 1,341,174 1,763,140 (1,596,727) 1,507,587
----------- ----------- ----------- -----------
2,097,962 1,763,140 15,503,211 19,364,313
----------- ----------- ----------- -----------
Total $33,993,708 $13,171,481 $13,886,536 $61,051,725
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ $ 1,075,961 $(1,075,961) $
Current portion of long-term debt 1,458,335 1,458,335
Accounts payable 3,962,909 1,646,172 5,609,081
Advanced payments on contracts 962,304 962,304
Other accrued expenses 2,166,922 1,631,440 3,798,362
----------- ----------- ----------- -----------
6,129,831 5,315,877 382,374 11,828,082
Long-term debt 21,041,665 21,041,665
Deferred income taxes 2,642,295 2,642,295
Other liabilities 318,101 318,101
ESOP guaranteed bank loan 836,400 836,400
Shareholders' Equity:
Common stock 37,819 5,000 (5,000) 37,819
Additional paid-in capital 9,784,979 80,591 (80,591) 9,784,979
Retained earnings 18,902,241 7,451,912 (7,451,912) 18,902,241
----------- ----------- ----------- -----------
28,725,039 7,537,503 (7,537,503) 28,725,039
Less treasury stock at cost 3,503,457 3,503,457
Less ESOP guaranteed bank loan 836,400 836,400
----------- ----------- ----------- -----------
Total Shareholders' Equity 24,385,182 7,537,503 (7,537,503) 24,385,182
----------- ----------- ----------- -----------
Total $33,993,708 $13,171,481 $13,886,536 $61,051,725
=========== =========== =========== ===========
See notes to condensed pro forma financial statements.
</TABLE>
<PAGE> 24
ENGINEERED SUPPORT SYSTEMS, INC.
Notes to Condensed Pro Forma Financial Statements
(Unaudited)
Note A - Basis of Presentation
On February 1, 1998, Engineered Support Systems, Inc. (ESSI), through its
wholly-owned subsidiary Engineered Coil Company (ECC), acquired substantially
all of the net assets of Nuclear Cooling, Inc., d/b/a Marlo Coil (Marlo),
a manufacturer of military, industrial and commercial heat transfer and air
movement equipment, which is generally produced to customer specifications.
Marlo's principal products are coils and air handling units used in commercial,
industrial, U.S. Navy and OEM markets. The purchase price of $25.4 million
was financed with $2.9 million of available cash resources and a bank term
loan of $22.5 million.
The unaudited pro forma financial statements present a combination of the
historical financial statements for ESSI and Marlo as adjusted to reflect
purchase transactions in accordance with the purchase method of accounting
and to reflect an income tax provision for Marlo as if it were filing on a
consolidated basis with ESSI as a C corporation under the provisions of the
Internal Revenue Code for the periods presented. Pro forma income statements
are presented for the fiscal year ended October 31, 1997 and the quarter
ended January 31, 1998 as if the acquisition had occurred as of November 1,
1996. A pro forma balance sheet is presented as of January 31, 1998 to
illustrate the estimated effects of the acquisition as if such event had
occurred on this date.
The Unaudited pro forma results are not necessarily indicative of the combined
results that would have occurred had the acquisition actually taken place on
November 1, 1996, nor are they necessarily indicative of the results that may
occur in the future. The pro forma financial statements should be read in
conjunction with the related historical financial statements.
Note B - Income Taxes
Prior to being acquired by ESSI, Marlo elected S corporation status under
the provisions of the Internal Revenue Code. As such, all pre-acquisition
income and losses subsequent to this election flowed through to the
stockholders who were liable for all applicable taxes. Accordingly, no
provision is presented for federal and state income taxes in the Marlo
Statements of Income. Pro forma adjustments to the Statements of Income
include an income tax provision as if Marlo had filed as a C corporation
on a consolidated basis with ESSI for the periods presented.
<PAGE> 25
Note C - Pro Forma Adjustments
The condensed balance sheet has been adjusted to reflect the purchase and
financing of the acquisition and the allocation of the purchase price based
upon preliminary appraisals of property, plant and equipment. The pro forma
adjustments to the balance sheet have been computed assuming the transaction
was consummated as of the balance sheet date. The adjusting entries related to
the acquisition and the financing are set forth below:
<TABLE>
<S> <C>
Cash payment $ 2,900,000
Bank term loan 22,500,000
-----------
Total $25,400,000
===========
</TABLE>
The purchase price was allocated as follows:
<TABLE>
<S> <C>
Net book value of Marlo
assets $ 7,538,000
Marlo assets not acquired (1,597,000)
Adjustment of acquired
assets to fair market
value 2,359,000
Cost in excess of net
assets acquired 17,100,000
-----------
Total $25,400,000
===========
</TABLE>
Pro forma adjustments to the condensed pro forma income statements include
amortization of goodwill (over a twenty-five year period), depreciation,
interest on acquisition indebtedness and the income tax provision as
described in Note B. These adjustments to the income statements were
computed assuming the transaction was consummated at the beginning of the
periods presented.
<PAGE> 26
Item 7(c)(1)--Asset Purchase Agreement, dated as of February 9,
1998, by and among Nuclear Cooling, Inc., d/b/a/
Marlo Coil, et al and Engineered Coil Company, a
wholly-owned subsidiary of Engineered Support
Systems, Inc.
<PAGE> 27
===============================================================================
ASSET PURCHASE AGREEMENT
among
NUCLEAR COOLING, INC., d/b/a MARL0 COIL,
A Missouri Corporation,
DAVID G. AULT,
RITA R. AULT,
R. BRUCE EARLS,
and
ENGINEERED COIL COMPANY, A Missouri Corporation
February 9 , 1998
-----
===============================================================================
<PAGE> 28
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT ("Agreement"), is made as of February
9 , 1998 ("Effective Date") by and among NUCLEAR COILING, INC., d/b/a
- -----
MARL0 COIL, a Missouri corporation ("Marlo"), DAVID G. AULT ("D. Ault"), RITA
R. AULT ("R. Ault"), and R. BRUCE EARLS ("Earls") (D. Ault, R. Ault and
Earls are sometimes hereinafter collectively referred to as "Marlo
Principals"), on the one hand, and ENGINEERED COIL COMPANY, a Missouri
corporation ("Buyer"), on the other hand.
RECITALS
--------
A. D. Ault and R. Ault own all of the outstanding shares of capital
stock ("Shares") of Marlo. The Shares consist of five thousand (5,000)
shares of common stock, one Dollar par value per share, of which D. Ault and
R. Ault own the number of Shares set forth opposite their respective names
below:
NAME NO. OF SHARES
---- -------------
David G. Ault 3,334 Shares
Rita R. Ault 1,666 Shares
TOTAL: 5,000 Shares
B. Marlo is in the business of manufacturing units for cooling,
humidifying, and/or conditioning air or gas with or without filtering and
parts components thereof, fans and parts and coils and coils assemblies for
heating and cooling (collectively "Coil Business").
C. Marlo conducts its Coil Business at its manufacturing plant
located at 6060 Highway PP, High Ridge, Missouri, on real property consisting
of approximately +/- 23.91 acres with improvements thereon more fully
described on Exhibit A to this Agreement ("Marlo Realty").
---------
D. Buyer desires to purchase from Marlo and Marlo desires to sell to
Buyer substantially all of the assets of Marlo, including without limitation,
the Marlo Realty, the machinery and equipment located at the Marlo Realty
site, certain intangible assets, and working capital of Marlo on the terms
and subject to the conditions set forth herein.
E. Marlo Principals will realize substantial benefits from the
transactions contemplated herein and have agreed to provide certain
representations and warranties to the Buyer as set forth herein.
<PAGE> 29
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants and agreements contained herein, the parties hereto agree as
follows:
1. Transaction Upon Closing Date.
-----------------------------
1.1 Sale and Purchase of Purchased Assets.
-------------------------------------
(a) At the Closing (as defined in Section 2 hereof), Buyer
shall purchase from Marlo, and Marlo shall sell to Buyer, the hereinafter
described "Purchased Assets" for an amount equal to Twenty Five Million Five
Hundred Eighty-Eight Thousand and Twenty Seven Dollars ($25,588,027.00), less
an amount equal to the Marlo Interest in the insurance policies insuring the
life of D. Ault, ("Purchase Price").
(b) The "Purchased Assets" that Marlo shall sell,
transfer, convey and deliver to Buyer, and Buyer shall purchase from Marlo,
at Closing, shall consist of the following properties, interests and other
assets:
(i) The Marlo Realty described on Exhibit A to
---------
this Agreement;
(ii) Unimproved real property described on Exhibit
-------
B to this Agreement ("Vacant Land");
- -
(iii) All of the finished goods inventory, work-in-
progress and raw materials inventory identified on Exhibit C to this Agreement
---------
(collectively "Inventory");
(iv) All of the accounts receivable identified on
Exhibit D to this Agreement (collectively "Accounts Receivable");
- ---------
(v) All of the machinery and equipment identified
on Exhibit E to this Agreement (collectively "Machinery and Equipment");
---------
(vi) All trademarks, service marks, trade names
(including without limitation, Marlo's corporate name and its trademarks of
"Marlo," "Marlo Coil," "Stratomizer," and "Stratohandler"), trade secrets,
labels, business names, copyrights, patents, inventions, industrial models,
processes, designs, know-how, trade secrets, and other general intangibles
and proprietary information, or any registration or application for
registration for any of the foregoing, described on Exhibit F to this
---------
Agreement (including the specific location of each writing, computer program
or other intangible medium containing its complete description,
specifications, source codes, charts, procedures, manuals and other
descriptive material relating to it) (collectively "Proprietary Property");
- 2 -
<PAGE> 30
(vii) All operating data and business files related
to the Coil Business, including, without limitation, the customer list
described on Exhibit G in this Agreement; all marketing information; all
current record-keeping information; all business systems; all lists and
contracts of current suppliers of inventory and other materials related to
the Coil Business; all, advertising, letterhead, envelopes, labels, operating
instructions, and warranty materials related to the Purchased Assets, as well
as printing plates and negatives related thereto; all prepaid insurance and
other prepayments, described on Exhibit H to this Agreement; and Marlo's
---------
telephone numbers and telephone directory listings, described on Exhibit I to
---------
this Agreement (collectively "Records");
(viii) All licenses, permits, authorizations and
other interests in governmental licenses and permits that relate to the
Purchased Assets or the business or operations of Marlo (except to the extent
such licenses, permits and authorizations are not transferable) described on
Exhibit J to this Agreement (collectively "Permits and Licenses");
- ---------
(ix) All contracts, teaming agreements, joint
venture agreements, basic ordering agreements, letter contracts, purchase
orders, delivery orders, change orders, arrangement or other commitment of
any kind between (a) Marlo and any other person or entity at any tier,
wherein the ultimate beneficiary of performance is the United States
Government identified on Exhibit K ("Government Contracts and Subcontracts")
---------
of this Agreement; and (b) Marlo and any other person or entity regarding
commercial transactions, identified on Exhibit L to this Agreement ("Customer
Contracts", Exhibits K and L collectively, "Contracts");
(x) All contracts, leases and other agreements of
or relating to the operation of the Coil Business, other than Contracts,
identified on Exhibit M to this Agreement ("Operation Agreements");
---------
(xi) All manufacturers' and vendors' warranties and
guaranties to the extent that the same relate to any of the Purchased Assets
(collectively "Warranties"); and
(xii) All other assets of every kind and nature,
tangible or intangible, owned by Marlo, except those assets (including the
Marlo Interest in life insurance policies on the life of D. Ault) described
on Exhibit N (the "Excluded Assets") to this Agreement.
----------
1.2 Assumption of Certain Liabilities. Buyer shall assume and
---------------------------------
agree to pay and discharge when due all liabilities and obligations of Marlo
of the following (collectively "Assumed Liabilities"):
(i) The Contracts identified on Exhibits K and L hereof;
(ii) The Operation Agreements identified on Exhibit M
---------
hereof;
- 3 -
<PAGE> 31
(iii) All of the accounts payable identified on Exhibit O to
---------
this Agreement (collectively "Accounts Payable"); and
(iv) All other liabilities of every kind and nature of
Marlo, except those relating in any way whatsoever to the Excluded Assets,
including, without limitation, those specifically identified on Exhibit P of
---------
this Agreement.
Marlo shall retain, and Buyer shall not assume, perform or pay, and
shall not be responsible for any and all liabilities or obligations relating
in any way whatsoever to the Excluded Assets, including, without limitation,
those specifically identified on Exhibit P of this Agreement (the "Retained
----------
Liabilities").
1.3. Payment of Purchase Price. The Purchase Price shall be paid
-------------------------
by Buyer to Marlo in cash, certified or bank check or wire transfer as follows:
At Closing, Twenty Five Million Five Hundred Eighty-Eight
Thousand and Twenty Seven Dollars ($25,588,027.00), less the Marlo Interest
in life insurance policies on the life of D. Ault, shall be delivered by
Buyer to Marlo, plus simple interest at 8-1/2% per annum from February 1,
1998.
2. Closing. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") shall take place: (i) at the offices designated by
Buyer at 8:00 a.m. local time, on February 20, 1998, or at such other place,
date or time as the parties may agree, provided that in no event shall the
Closing be later than February 24, 1998.
The Closing shall be effective as of February 1, 1998. At
Closing, all income earned for the period prior to February 1, 1998 will be
distributed to the Marlo shareholders. Income from February 1, 1998 will be
the property of Buyer.
At the Closing, and, if necessary, after Closing, Marlo shall
execute and/or cause to be delivered such agreements, instruments, bills of
sale, assignments, certificates, waivers, releases, documents and materials,
and each party shall take such other actions, as may be reasonably requested
by Marlo or Buyer, as the case may be, for the purpose of carrying out,
facilitating and/or evidencing the contemplated transactions set forth in
this Agreement.
At Closing, Marlo will deliver possession of the Marlo Realty to
Buyer; provided, however, that Marlo and D. Ault shall have thirty (30) days
following Closing to remove all Excluded Assets (other than those Excluded
Assets currently located in the garage or warehouse on the Marlo Realty);
and Marlo and D. Ault shall have ninety (90) days following Closing to
remove Excluded Assets located in the garage and warehouse, provided that no
use of the warehouse shall extend beyond thirty (30) days which will
interfere with the storage by Buyer of Ship Sets.
- 4 -
<PAGE> 32
3. Representations and Warranties of Sellers Marlo, D. Ault and B.
-----------------------------------------
Earls (hereinafter sometimes collectively referred to as "Sellers Group")
jointly and severally represent to and warrant to Buyer as follows, and R.
Ault joins in only those warranties set forth in Sections 3.1 and 3.2, only
as they apply to her shares, and Section 3.19:
3.1 Organization and Qualification. Marlo is duly incorporated
------------------------------
and organized and validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation, with the corporate power to
own or lease and operate its properties and assets and to carry on its
business in the manner in which such business is now being conducted, and is
not qualified as a foreign corporation in any jurisdiction.
Marlo has full corporate power and on the Closing Date will have taken
all corporate action necessary to execute, deliver and perform this
Agreement. This Agreement and all other agreements herein contemplated to be
executed in connection herewith by Marlo have been duly executed and
delivered by Marlo, have been effectively authorized by all necessary action,
corporate or otherwise, by Marlo and constitute (or upon execution will
constitute) legal, valid and binding obligations of Marlo enforceable in
accordance with their respective terms.
3.2 Capitalization.
--------------
(a) The authorized capital stock of Marlo consists solely
of five thousand (5,000) shares of Common Stock, of which only the Shares
have been issued. As of the date hereof and on the Closing Date, D. Ault and
R. Ault own the number of Shares set forth in Recital A opposite such
person's name;
(b) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of Marlo, D. Ault
and R. Ault.
3.3 Financial Statements.
--------------------
(a) Marlo has furnished to Buyer: (i) Marlo's audited
financial statements at and for each of the years ended June 30, 1995, 1996
and 1997, consisting of a balance sheet at such date and the related
statement of operations, statement of cash flows and statement of
stockholders' equity for the year ended on such date (the "Annual
Financial Statements"), accompanied by the audit report of Marlo's
Accountants; (ii) the unaudited balance sheet and statement of operations at
and for the six (6) month period ended December 31, 1997 (the "Interim
Financial Statements"). The Annual Financial Statements and the Interim
Financial Statements are hereinafter referred to collectively as the
"Financial Statements."
(b) The Financial Statements: (i) have been prepared in
accordance with the books and records of Marlo; (ii) the Annual Financial
Statements have been prepared
- 5 -
<PAGE> 33
in accordance with generally accepted accounting principles consistently
applied throughout the periods covered; (iii) the Interim Financial
Statements have been prepared in accordance with standard company policies
consistently followed by Marlo; and (iv) reflect, to the knowledge of Seller
Group, the financial position and results of operations of Marlo at and for
the fiscal periods indicated therein.
3.4 Material Effect. Since December 31, 1997, there has not
---------------
been:
(a) except as set forth on Schedule 3.4(a), any increase
---------------
in the salary or other compensation payable or to be become payable to any
officer, director or employee of Marlo, or the declaration, payment,
commitment or obligation of any kind for the payment of a bonus or other
additional salary, compensation or benefit, other than normal cost-of-living
and normal merit increases;
(b) except as set forth in this Agreement or in any of the
Schedules, any transaction by Marlo not in the ordinary and usual course of
business that would have any Material Adverse Effect (as defined below in
this Section);
(c) alteration in the manner in which Marlo keeps its
books, accounts or records or in the accounting practices therein reflected;
(d) except as set forth on Schedule 3.4(d), a termination,
---------------
or a threatened termination, or substantial modification of the relationship
of Marlo with a customer or supplier which would have a Material Adverse
Effect, or the occurrence of any event having a Material Adverse Effect;
(e) except as set forth on Schedule 3.4(e), any
---------------
acquisitions or leases of or commitments to acquire or lease any realty, or
any item of personal property in excess of Fifty Thousand Dollars
($50,000.00) in the aggregate, other than inventory in the ordinary course of
business;
(f) any change in the operations, business or manner of
conducting the business of Marlo, other than changes in the ordinary and
usual course of business consistent with prior practice, none of which,
individually or in the aggregate, has had or is expected to have a Material
Adverse Effect.
As used in this Agreement, "Material Adverse Effect" means any change in
or effect on the business of Marlo that is or is reasonably likely to be
materially adverse to the business, operations, properties, condition
(financial or otherwise), assets or liabilities or prospects of Marlo.
3.5 Tax Matters.
-----------
(a) For purposes of this Agreement:
- 6 -
<PAGE> 34
(i) the term "Taxes" means (A) all federal, state,
local, foreign and other net income, gross income, gross receipts, sales,
use, ad valorem, value added, intangible, unitary, capital gain, transfer,
franchise, profits, license, lease, service, service use, withholding, backup
withholding, payroll, employment, estimated, alternative minimum, excise,
severance, stamp, occupation, premium, property, environmental, self-dealing,
prohibited transactions, windfall or excess profits, customs duties or other
taxes, fees, assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts with
respect thereto, (B) any liability for payment of amounts described in
clause (A) whether as a result of transferee liability, of being a member of
an affiliated, consolidated, combined or unitary or other similar group for
any period, or otherwise through operation of law and (C) any liability for
the payment of amounts described in clauses (A) or (B) as a result of any tax
sharing, tax indemnity or tax allocation agreement or any other express or
implied agreement to indemnify any other person; and the term "Tax" means any
one of the foregoing Taxes; and
(ii) the term "Returns" means all returns,
declarations, reports, statements and other documents filed or required to be
filed in respect of Taxes; and the term "Return" means any one of the
foregoing Returns.
(b) Except as described on Schedule 3.5(b):
----------------
(i) Marlo has properly filed on a timely basis all
Returns required to have been filed and has paid all Taxes shown thereon as
due on a timely basis.
(ii) Marlo has provided to representatives of Buyer
access to all federal and state income and franchise Returns, and other
written correspondence (other than requests for extension of time to file
Returns and tax payment vouchers), filed or submitted by Marlo with or to the
relevant taxing authorities with respect to all periods for which the
applicable statutes of limitations remain open, and has produced for Buyer's
inspection all sales tax, use tax, property tax, and other tax and
information returns filed by Marlo.
3.6 Litigation, Compliance and Environmental Matters.
------------------------------------------------
(a) Litigation Pending or Threatened. Except as set forth
--------------------------------
on Schedule 3.6(a), there is, to the knowledge of Seller Group, no action,
---------------
suit, arbitration, proceeding, or grievance or investigation, pending or,
threatened, before any court, tribunal, panel, master or governmental
agency, authority or body to which Marlo is a party or to which its
respective businesses or properties are subject, nor is any officer or
employee of Marlo enjoined from any action or subject to any continuing
restriction which would have a Material Adverse Effect, and, to the knowledge
of Seller Group, and there are no facts or circumstances that could
reasonably be expected to give rise to any action, suit, arbitration,
proceeding, or grievance or investigation that would be required to be
disclosed pursuant to Section 3.6(a).
- 7 -
<PAGE> 35
(b) Violation of Law. To the knowledge of Seller Group,
----------------
Marlo is not in violation of any provision of any law, decree, order or
regulation (including, without limitation, those relating to antitrust or
prohibiting other anti-competitive business practices, those relating to
employment practices (such as discrimination, health and safety)), applicable
to Marlo or any of its businesses or properties. None of the businesses,
properties or operations of Marlo has constituted or constitutes a nuisance
or otherwise has constituted or constitutes a tortious condition with respect
to any third party. Marlo has all federal, state, local and foreign
licenses, permits and other governmental authorizations required in the
conduct of its business and the operation of its properties. Marlo is not a
party to any consent decree issued by any governmental agency, authority or
body.
(c) Environmental Matters.
---------------------
(i) Notice of Violations. Marlo has not received
--------------------
notice or other communication concerning any alleged violation of
Environmental Requirements, or notice or other communication concerning
alleged liability for Environmental Damages (as hereafter defined) in
connection with the Real Property, and to the knowledge of Seller Group,
there is no (i) writ, injunction, decree, order or judgment outstanding, nor
any lawsuit, claim, proceeding, citation, directive, summons or
investigation, pending or threatened, relating to the ownership, use,
maintenance or operation of the Real Property by any person or concern, (ii)
alleged violation of Environmental Requirements, or (iii) suspected presence
of Hazardous Material thereon. Marlo has not been ordered or requested by
any regulatory authority to take any steps to remedy any condition on the
Real Property not constituting a violation of Environmental Requirements.
(ii) Underground Unit. Marlo has not placed, nor
----------------
caused to be placed on the Real Property any underground improvement,
including without limitation any treatment or storage tank or water, gas or
oil well that requires any remedial action.
(iii) For the purposes of this Agreement:
"Hazardous Materials" means any substance: (A)
the presence of which requires investigation or remediation
under any applicable domestic or foreign federal, state or
local statute, regulation, ordinance, order, action or
policy or common law; (B) that is defined as a "hazardous
waste" or "hazardous substance" under any applicable
domestic or foreign federal, state or local statute,
regulation or ordinance; (C) that is toxic, explosive,
corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is
regulated by any applicable domestic or foreign
governmental authority, agency, department, commission,
board, agency or instrumentality; (D) that contains
gasoline, diesel fuel or other petroleum hydrocarbons in
any unconfined manner; or (E) that contains PCBS, asbestos,
or urea formaldehyde foam insulation.
- 8 -
<PAGE> 36
"Environmental Damages" shall mean all claims,
judgments, damages, losses, penalties, fines, liabilities
(including strict liability), encumbrances, liens, costs
and expenses of investigation and defense of any claim,
whether or not such claim is ultimately defeated, and of
any good faith settlement or judgment, of whatever kind or
nature, contingent or otherwise, matured or unmatured,
foreseeable or unforeseeable, including without limitation
reasonable attorneys' fees and disbursements and
consultants' fees, any of which are incurred at any time as
a result of the existence prior to the Closing Date of
Hazardous Material upon about, or beneath the Real Property
or migrating or threatening to migrate to or from the Real
Property, or the existence of a violation of Environmental
Requirements pertaining to the Real Property, regardless of
whether the existence of such Hazardous Material or the
violation of Environmental Requirements arose prior to the
present ownership or operation of the Real Property, and
including without limitation: (A) damages for personal
injury, or injury to property or natural resources
occurring on or off the Real Property, foreseeable or
unforeseeable, including, without limitation, lost profits,
consequential damages, the cost of demolition and
rebuilding of any improvements on Real Property; interest
and penalties including but not limited to claims brought
by or on behalf of employees of Marlo, with respect to
which Marlo waives any immunity to which it may be entitled
under any industrial or worker's compensation laws; (B)
fees incurred for the services of attorneys, consultants,
contractors, experts, laboratories and all other costs
incurred in connection with the investigation or
remediation of such Hazardous Material or violation of
Environmental Requirements including, but not limited to,
the preparation of any feasibility studies or reports or
the performance of any cleanup, remedial, removal,
response, abatement, containment, closure, restoration,
reclamation or monitoring work required by any federal,
state or local governmental agency or political
subdivision, or reasonably necessary to make full economic
use of the Real Property or any other Property or otherwise
expended in connection with such conditions, and including
without limitation any attorneys' fees, costs and expenses
incurred in enforcing this Agreement or collecting any sums
due hereunder; (C) liability to any third person or
governmental agency to indemnify such person or agency for
costs expended in connection with the items referenced in
subparagraph (B) herein; and (D) diminution in the value of
the interest of Marlo in the Real Property, and damages for
the loss of business and restriction on the use of or
adverse impact on the marketing of rentable or usable space
or of any amenity of the Real Property.
- 9 -
<PAGE> 37
"Environmental Requirements" shall mean all
applicable present and future statutes, regulations, rules,
ordinances, codes, licenses, permits, orders, approvals,
plans, authorizations, concessions, franchises and similar
items, of all governmental agencies, departments
commissions, boards, bureaus or instrumentalities of the
United States, the states and political subdivisions
thereof and all applicable judicial and administrative and
regulatory decrees, judgments and orders relating to the
protection of human health or the environment, including,
without limitation: (A) all requirements, including but not
limited to those pertaining to reporting, licensing,
permitting, investigation and remediation of emissions,
discharges, releases or threatened releases of Hazardous
Material, chemical substances, pollutants, contaminants or
hazardous or toxic substances, materials or wastes whether
solid, liquid or gaseous in nature, into the air, surface
water, groundwater or land, or relating to the manufacture,
processing, distribution, use, treatment, storage,
disposal, transport or handling of chemical substances,
pollutants, contaminants or hazardous or toxic substances,
materials, or wastes, whether solid, liquid or gaseous in
nature; (B) all requirements pertaining to the protection
of the health and safety of employees or the public; (C)
all requirements pertaining to the reclamation or
restoration of land; and (D) all requirements pertaining to
underground storage tanks.
3.7 Properties and Assets.
---------------------
3.7.1 Real Property.
----
(a) Marlo owns or otherwise has the right to use
all of the properties and assets, real and personal, tangible and intangible,
now used in the operation of its businesses. The Marlo Realty and the Vacant
Land are hereinafter referred to collectively as the "Real Property."
(b) Marlo has good and marketable title to the
Real Property free and clear of all mortgages, liens, encumbrances, leases,
equities, security interests, claims, charges, easements, rights-of-way,
covenants, conditions and restrictions, except for easements and restrictions
of record (collectively, "Liens"), except for the Liens set forth on Schedule
--------
3.7.1(b) and liens, if any, for property taxes not yet due.
- --------
(c) All of the buildings, fixtures and other real
property improvements included in the Real Property or otherwise used in Coil
Business are in good operating condition and repair, ordinary wear and tear
excepted, and, to the knowledge of Seller Group, the operation thereof as
presently conducted is not in violation of any applicable building code,
zoning ordinance or other law or regulation.
- 10 -
<PAGE> 38
(d) There is no proceeding pending or, to the
knowledge of Seller Group, threatened to which Marlo is or may become a party
in which any taxing authority having jurisdiction over any of the Real
Property is seeking to increase the assessed value thereof.
(e) Where required by applicable law, Marlo holds
valid and effective certificates of occupancy, underwriters' certificates
relating to electrical work, zoning, building, housing, safety, fire and
health approvals and all other permits and licenses required by applicable
law relating to the operation of the Real Property, which are material to the
Operation of the Coil Business.
(f) Marlo has not experienced during the three
years preceding the date hereof any material interruption in the delivery of
adequate quantities of any utilities (including, without limitation,
electricity, natural gas, potable water, water for cooling or similar
purposes and fuel oil) or other public services (including, without
limitation, sanitary and industrial sewer service) required by Marlo in the
operation of the Coil Business during such period.
(g) To the knowledge of Seller Group, there is no
condemnation or eminent domain proceeding pending which relates to the Real
Property, and, there is no such proceeding threatened by any relevant
governmental authority nor any such proceeding to which Marlo is not a party
but as to which the Real Property is subject which would have a Material
Adverse Effect.
3.7.2 Tangible Personal Property. Except as otherwise
--------------------------
indicated on Schedule 3.7.2, Marlo owns all of the Inventory, and the
--------------
Machinery and Equipment free and clear of all Liens. All items of such
tangible personal property are located on the Real Property and except as
otherwise indicated on Schedule 3.7.2, are in good operating condition and
--------------
repair, ordinary wear and tear excepted; Marlo's maintenance practices are
substantially similar to those practices existing during the two-year period
ended June 30, 1997; and the operation thereof is not in material violation
of any applicable building code, zoning ordinance or other law or regulation.
3.7.3 Proprietary Property.
--------------------
(a) Exhibit F sets forth, among other things, a
---------
description of the following: (i) each United States and foreign patent,
patent license, patent application, trade name, trademark, service mark,
trade name registration, trademark registration, service mark registration,
copyright, copyright registration and any application for any of the
foregoing owned, possessed or used by Marlo in the conduct of its business
(the "Registered Intangible Personal Property"); (ii) a description of each
license and similar agreement or arrangement to which Marlo is a party either
as licensee or licensor for each such item of Registered Intangible Personal
Property; and (iii) a description of all confidential and material
inventions, processes, designs, trade secrets, computer programs and
software, other than off
- 11 -
<PAGE> 39
the shelf products, and formulae owned by, in the possession of or used in
the business of Marlo.
(b) Except as otherwise indicated on Schedule
--------
3.7.3(b), Marlo is the owner of all right, title and interest in and to each
- --------
item of the Registered Intangible Personal Property and all inventions,
processes, designs, trade secrets, computer programs and software, other than
off the shelf products, know-how and other intangible personal property used
by Marlo in its business (collectively, with the Registered Intangible
Personal Property, the "Proprietary Property"), free and clear of all Liens.
Marlo has the right and authority to use each item of Proprietary Property in
connection with the conduct of its business in the manner presently
conducted. To the knowledge of Seller Group, neither such use nor the
conduct of the business of Marlo conflicts with, infringes upon or violates
any patent, trademark, service mark, trade name, trade secret or other right
of any other person, firm or corporation in any way. There is no outstanding
or, to the knowledge of Seller Group, threatened dispute or other
disagreement with respect to any license or similar agreement used in the
Coil Business. There have not been any actions or other judicial or
adversary proceedings involving Marlo concerning any of the Proprietary
Property, nor, is any such action or proceeding threatened.
3.8 Insurance. Schedule 3.8 includes a summary description of
--------- ------------
all material insurance coverage of any nature covering the Purchased Assets,
which description includes, among other things, the property or liabilities
covered, the insurer and the amount and period of coverage. There are no
outstanding requirements or recommendations of any insurance company that
issued any policy of fire or extended coverage insurance covering the
properties of Marlo by any Board of Fire Underwriters or other similar body
exercising similar functions or by any governmental authority exercising
similar functions which requires or recommends any repairs or other work to
be done on or with respect to any of the properties insured in any of said
policies. Marlo has not received any notice or other communication within
three years prior to the date hereof canceling or materially amending or
materially increasing the premium payable under any insurance policies
providing any such coverage, and no such cancellation, amendment or increase
of premiums is threatened.
3.9 Contracts and Operation Agreements.
----------------------------------
(a) There has not occurred any material default under any
Contract or any Operation Agreement on the part of the Marlo or, to the
knowledge of Marlo, on the part of the other parties thereto, and to the
knowledge of Seller Group, no event has occurred which with the giving of
notice or the lapse of time, or both, would constitute any material default
under any Contract or any Operation Agreement. Except as set forth on
Schedule 3.9(a), no consent of any party to any Contract or any Operation
- ---------------
Agreement is required in order to permit the execution, delivery or
performance of this Agreement, the consummation of the actions contemplated
hereby (including the assignment of the Contracts and Operation Agreements to
Buyer) nor will the execution, delivery or performance of this Agreement, the
consummation of the transactions contemplated hereby (including the assignment
of the
- 12 -
<PAGE> 40
Contracts and the Operation Agreements to Buyer) result in a breach of any of
the terms and provisions of, or constitute a default under, or conflict with,
or result in a material modification of, any Contract or any Operation
Agreement.
(b) Schedule 3.9(b) contains a list of all Contracts and
---------------
Operation Agreements which, to the knowledge of Seller Group, is true and
complete.
(c) Included on Schedule 3.9(c) is the quote log of Marlo
---------------
as of January 31, 1998, which quote log, to the knowledge of Seller Group,
contains a list of all outstanding bids or proposals for a contract under
which the value of services to be performed or goods to be provided by Marlo
or the cost of the goods to be sold by Marlo is expected to exceed Fifty
Thousand Dollars ($50,000.00).
(d) Included on Schedule 3.9(d) is a summary of those
---------------
contracts, or items used to determine the warranty reserve reflected on the
Interim Financial Statement and which reflects those items included in the
warranty reserve amount. To the knowledge of Seller Group, there are no
claims by customers for back charges, rebates, price reductions or
settlements, or for breaches of product or service warranties, or for product
or service liability for products manufactured or sold, as of that date which
would collectively exceed the warranty reserve amount.
(e) Marlo has not experienced any material shortages of
raw materials or other supplies within the three years preceding the date
hereof and Marlo has on hand, or has reason to believe that it can timely
obtain, raw materials and other supplies sufficient to satisfy all unfilled
orders heretofore received and a sufficient quantity of raw materials and
other supplies at reasonable prices to satisfy orders anticipated to be
received during the period prior to the Closing Date at levels of sales
achieved prior to the Closing Date.
3.10 Government Subcontracts.
-----------------------
(a) Government Contracts Compliance. With respect to each
-------------------------------
and every Government Subcontract and Government Bid to which Marlo is a party
(all as such terms are defined in Section 3.10(j) hereof), and except as set
forth on Schedule 3.10(a): (i) to the knowledge of Seller Group, Marlo has
----------------
complied with all terms and conditions of such Government Subcontract or
Government Bid, including all clauses, provisions and requirements
incorporated expressly, by reference or by operation of law therein; (ii) to
the knowledge of Seller Group, Marlo has complied with all requirements of
statute, rule, regulation, order or agreement pertaining to such Government
Subcontract or Government Bid; (iii) all representations and certifications
executed, acknowledged or set forth in or pertaining to such Government
Subcontract or Government Bid were current, accurate and complete as of their
effective date, and, to the knowledge of Seller Group, Marlo has complied
with all such representations and certifications, including, without
limitation, all representations and certifications required by or relating to
the Truth-In-Negotiations-Act, the
- 13 -
<PAGE> 41
Procurement Integrity Act, the Foreign Corrupt Practices Act, the Cost
Accounting Standards, the regulations and rules relating to Foreign Military
Sales and the regulations and rules relating to the submission of progress
payment requests; (iv) no Governmental Entity (as such term is defined in
Section 3.10 hereof) nor any prime contractor, subcontractor or other person
has notified Marlo, either orally or in writing, that Marlo has breached or
violated any statute, rule, regulation, certification, representation,
clause, provision or requirement; (v) no termination for convenience,
termination for default, cure notice or show cause notice has been issued;
(vi) no cost incurred by Marlo has been questioned or disallowed; and (vii)
no money due to Marlo has been withheld or set off or been the subject of any
attempt to withhold or set-off.
Marlo is not a party to any Government Contracts, as such term is
defined in Section 3.10(j) hereof under which the purchase price of Marlo
goods exceeds One Hundred Thousand Dollars ($100,000.00).
(b) Investigations and Audits. Except as set forth on
-------------------------
Schedule 3.10(b): (i) neither Marlo nor any of Marlo's directors, officers,
- ----------------
employees, agents or consultants is (or for the last five years has been)
under administrative, civil or criminal investigation, including as a result
of a qui tam action brought under the Civil False Claims Act, indictment or
-------
information, audit or internal investigation with respect to any alleged
irregularity, misstatement or omission arising under or relating to any
Government Contract, Government Subcontract or Government Bid; (ii) Marlo has
not made a voluntary disclosure to the U.S. Government with respect to any
alleged irregularity, misstatement or omission arising under or relating to
any Government Contract, Government Subcontract or Government Bid that has
led or could lead, either before or after the Closing Date, to any of the
consequences set forth above or any other damage, penalty assessment,
recoupment of payment or disallowance of cost.
(c) Financing Arrangements and Claims. Except as set
---------------------------------
forth on Schedule 3.10(c), there exist (i) no financing arrangements with
-----------------
respect to performance of any current or Government Subcontract; (ii) no
material outstanding claims against Marlo, either by the U.S. Government or
by any prime contractor, subcontractor, vendor or other third party, arising
under or relating to any Government Contract or Government Subcontract; (iii)
no facts that are known by Seller Group upon which such a claim is likely to
may be based in the future; (iv) no disputes between Marlo and the U.S.
Government or any prime contractor, subcontractor or vendor arising under or
relating to any Government Contract, Government Subcontract or Government
Bid; and (v) no material facts that are known by Seller Group over which such
a dispute may arise in the future. Except as set forth on Schedule 3.1 Marlo
-------------
has no interest in any pending or potential claim against the U.S. Government
or any prime contractor, subcontractor or vendor arising under or relating to
any Government Contract, Government Subcontract or Government Bid.
(d) No Suspension or Debarment. Except as set forth on
--------------------------
Schedule 3.1 neither Marlo, nor any of Marlo's directors, officers or
- ------------
employees is (or for the last five
- 14 -
<PAGE> 42
years has been) suspended or debarred from doing business with the U.S.
Government or has been declared nonresponsible or ineligible for U.S.
Government contracting. Marlo knows of no circumstances that would warrant
the institution of suspension or debarment proceedings or the finding of
nonresponsibilty or ineligibility on the part of Marlo or any of Marlo's
directors, officers or employees.
(e) Customer Furnished Assets. To the knowledge of
-------------------------
Seller Group, Marlo is in compliance with all of its obligations relating to
the customer furnished items, including, but not limited to, government
furnished equipment, government furnished property, government furnished
information, and like categories of customer furnished assets provided by
Marlo's prime contractors. Marlo's rights, title and interests, if any, in all
customer furnished items will be transferred to Buyer effective on the Closing
Date.
(f) Clearances. Except to the extent prohibited by the
----------
Industrial Security Manual For Safeguarding Classified Information, Schedule
--------
3.10(f) sets forth all facility security clearances held by Marlo and all
- -------
personnel security clearances held by any officer, director or employee of
Marlo relating to the business of Marlo.
(g) Accounting and Procurement Systems. Except as set
----------------------------------
forth on Schedule 3.10(g), to the knowledge of Seller Group, Marlo's cost
----------------
accounting and procurement systems with respect to Government Subcontracts
are in compliance in all material respects with all applicable governmental
regulations and rules.
(h) Offset Obligations. Except as set forth in Schedule
------------------ --------
3.10(h). Marlo has no material outstanding Offset Obligations, as defined in
- -------
Section 3.10(j) hereof. Marlo is in compliance with any Offset Obligations
referenced in Schedule 3.10(h).
----------------
(i) Independent Research & Development ("IR&D"). Marlo
-------------------------------------------
has, to the knowledge of Seller Group, current advance agreements with its
customers for the allocation and reimbursement of IR&D expenses, and the IR&D
expenses incorporated into the pricing of Marlo's Government Subcontracts and
Government Bids are fully reimbursable and allocable at substantially the
rates specified in said advance agreements.
(j) Certain Definitions.
-------------------
"Government Contract" means any prime contract, teaming
agreement, joint venture, basic ordering agreement, letter contract, purchase
order, delivery order, change order, arrangement or other commitment of any
kind between Marlo and any entity of the United States Government.
"Government Subcontract" means any contract, teaming
agreement, joint venture, basic ordering agreement, letter contract, purchase
order, delivery order, change order, arrangement or other commitment of any
kind between Marlo and another company at any tier, wherein the ultimate
beneficiary of performance is the United States Government.
- 15 -
<PAGE> 43
"Government Bid" means any quotation, offer, bid, or
proposal for the design, development, manufacture, sale, overhaul, repair, or
maintenance of products or the provision of services made by Marlo that, if
accepted or awarded, would lead to a contract or subcontract, wherein the
ultimate beneficiary of performance is the United States Government.
"Governmental Entity" means any foreign, domestic, federal,
territorial, state, or local governmental authority, quasi-governmental
authority, instrumentality, administrative or other agency, or any political
subdivision, department or branch of any of the foregoing.
"Offset Obligations" means offset, countertrade or barter
obligations arising under, or relating to, any Government Contract,
Government Subcontract, Government Bid or other Contract or otherwise.
3.11 Loss Contracts. To the knowledge of Seller Group, all bids
--------------
and quotes by Marlo made with the intention of entering into a Contract are
bid with the intention and expectation of making a profit.
3.12 Labor and Employment Agreements.
-------------------------------
(a) Schedule 3.12(a) attached hereto contains (i) a
----------------
description of each collective bargaining agreement and other labor agreement
to which Marlo is a party or by which it is bound; and (ii) a description of
each plan, contract or arrangement (except those described in Section 3.13
hereof) under which fringe benefits (including, but not limited to, plans or
programs relating to vacations, sick leave and severance and related
benefits) are afforded to employees of Marlo.
(b) Neither Marlo nor, to the knowledge of Marlo, any
other party to any agreement, plan or contract listed on Schedule 3.12(a) is
----------------
in default with respect to any term or condition thereof, nor has any event
occurred which through the passage of time or the giving of notice, or both,
would constitute a default thereunder. Marlo has withheld and paid to the
appropriate governmental authorities or is withholding for payment not yet
due to such authorities all amounts required to be withheld from their
respective employees and are not liable for any material arrears of wages,
Taxes, penalties or other sums for failure to comply with any of the
foregoing.
(c) Except as set forth on Schedule 3.12(c), there is no:
----------------
(i) unfair labor practice complaint against Marlo pending before the National
Labor Relations Board or any other federal, state, local or foreign agency;
(ii) pending or threatened labor strike or other organized labor disturbance
affecting Marlo; (iii) grievance proceeding pending or threatened against
Marlo; (iv) pending, or to the knowledge of Seller Group, threatened
representation question respecting the employees of Marlo; (v) pending or
threatened arbitration proceeding arising out of or under any collective
bargaining agreement to which Marlo is a party; (vi) to the knowledge of
Seller Group, attempt by any union to represent
- 16 -
<PAGE> 44
employees of Marlo as a collective bargaining agent; or (vii) basis for which
a material claim may be made against Marlo under any collective bargaining
agreement to which Marlo is a party.
(d) All accrued and material obligations of Marlo (whether
arising by operation of law or by contract) for payments by Marlo to trusts
or other funds or to any governmental agency, with respect to unemployment
compensation benefits, social security benefits or any other benefits for
employees of Marlo with respect to employment of said employees have been
paid or adequate accruals therefor have been made in Marlo's Interim
Financial Statements for obligations accrued through the date of the balance
sheet included in such Financial Statements, and in the books and records of
Marlo for obligations accruing thereafter.
(e) Except as set forth on Schedule 3.12(e), all material
----------------
obligations of Marlo (whether arising by operation of law or by contract) for
salaries, vacation and holiday pay, sick pay, bonuses and other forms of
compensation payable to the officers, directors or other employees of Marlo
in respect of the services rendered by any of them have been paid or adequate
accruals therefor have been made in Marlo's Interim Financial Statements for
obligations accrued through the date of the balance sheet included in such
Financial Statements, and in the books and records of Marlo for obligations
accruing thereafter.
3.13 Employee Benefit Plans.
----------------------
(a) Schedule 3.13(a) attached hereto contains a
----------------
description of each pension, retirement, profit-sharing, deferred
compensation, bonus or other incentive plan, or other employee benefit
program, arrangement, agreement or understanding, or medical, vision, dental
or other health plan, life insurance plan, severance plan, plan for the
payment of legal expenses, vacation plan, or any other employee benefit plan,
including without limitation, any "Employee Benefit Plan" as defined in
Section 3(2) and Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA), to which Marlo has any present or future
obligation or liability or under which any employee or former employee of a
member of Marlo, or a beneficiary of any employee or former employee, has any
present or future rights to benefits (collectively the "Plans").
(b) Marlo does not participate in or have any present or
future obligation or liability under any "Multi-Employer Plan", as defined in
Section 4001(a)(3) of ERISA.
(c) Except as set forth and specifically identified on
Schedule 3.13(a), no Plan provides medical or health benefits to retirees.
- ----------------
(d) Except as set forth on Schedule 3.13(d), to the
----------------
knowledge of Seller Group, each Plan has been maintained in material
accordance with the respective terms
- 17 -
<PAGE> 45
and conditions and applicable provisions of ERISA and the Code and state
insurance laws, including all rules and regulations promulgated thereunder.
(e) All reports and information required to be filed with
the United States Department of Labor, Internal Revenue Service, The Pension
Benefit Guarantee Corporation, or distributed to Plan participants and their
beneficiaries with respect to each Plan, have been timely filed or
distributed, except as set forth in Schedule 3.13(e) attached hereto.
----------------
3.13 Agreement Not in Breach of Certain Instruments. Neither the
----------------------------------------------
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will violate or conflict with any provision
of the Articles of Incorporation or Bylaws of Marlo or result in a breach of
any of the terms or provisions of, or constitute a violation or default
under, or conflict with, (i) any judgment, decree, order or award of any
court, governmental body or arbitrator to which any of Sellers Group is a
party or may be bound, or (ii) any law, rule or regulation applicable to any
of Sellers Group.
3.14 Regulatory Approvals. No consent, approval or authorization
--------------------
of, or declaration, filing or registration with, any federal, state,
municipal or local Governmental or regulatory authority or any other person
is required of any of Sellers Group in connection with the execution and
delivery of this Agreement.
3.15 Accounts Receivable. The Accounts Receivable arose out of
-------------------
sales in the ordinary course of business and represent bona fide indebtedness
of the applicable account debtor.
3.16 Inventory. The Inventory has been valued in accordance with
---------
generally accepted accounting principles applied consistently with Annual
Financial Statements. The raw materials and work-in-process inventories of
Marlo are usable, and the finished goods inventories of Marlo are salable, in
each case in the ordinary course of business of Marlo, at, to the knowledge
of Seller Group, a value which is no less than the value at which such
inventories are carried in the books and records of Marlo. The Inventory is
adequate for the conduct of the business of Marlo and inventory levels are
not in excess of normal operating requirements of Marlo. Except as disclosed
in the notes to Financial Statements, all items included in the Inventory are
the property of Marlo, free and clear of any Lien, have not been pledged as
collateral, are not held by Marlo on consignment from others and conform to
all standards applicable to such inventory or its use or sale imposed by any
Governmental or regulatory authority.
3.17 Certain Unlawful Practices. To the knowledge of Seller
--------------------------
Group, Marlo nor any officer, employee or agent of Marlo or any person acting
on their behalf has, directly or indirectly, given or agreed to give any
material gift or similar benefit to any customer, supplier, competitor or
governmental employee or official or has engaged in any other practice
(including but not limited to violation of any anti-trust law) or received or
retained
- 18 -
<PAGE> 46
any such gift or similar benefit, which in any case would subject Marlo to
any damage or penalty in any civil, criminal or Governmental litigation or
proceeding or which would be grounds for termination or modification of any
material contract, license or other instrument that is included in the
Purchased Assets.
3.18 Disclosure. Sellers Group have disclosed to Buyer all facts
----------
known to them (after reasonable investigation and inquiry) material to Marlo
and its businesses, properties, operations, prospects and financial
condition. Except as contemplated by or disclosed in this Agreement, Sellers
Group knows of no fact or circumstance which might reasonably result in any
Material Adverse Effect. None of the statements or information contained in
any of the representations, warranties or covenants of Sellers Group set
forth in this Agreement or any document, written statement, certificate,
Schedule or Exhibit furnished or made available, or to be furnished or made
available, to Buyer by or on behalf of Sellers Group pursuant hereto,
contains or will contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements herein, in
the light of the circumstances under which they were made, not misleading.
3.19 Brokerage. With the exception of Manchester Partners,
---------
L.L.C., Marlo and Marlo Principals have not dealt with, nor are obligated to
make any payment to, any finder, broker, investment banker or financial
advisor in connection with any of the transactions contemplated by this
Agreement or the negotiations looking toward the consummation of such
transactions.
3.20 Bank Accounts. Schedule 3.20 attached hereto contains an
-----------------------------
accurate and complete list of (i) the names and addresses of each bank in
which Marlo has an account; (ii) the account numbers of such accounts; and
(iii) the authorized signatories for such accounts.
3.21 Knowledge. Certain of the representations and warranties
---------
are made "to the knowledge" of a person or refer to what is "known" to a
person or of what a person is "aware." The parties hereto agree that the
meaning of such expressions shall in all cases be understood as comprising
the knowledge and belief of the person designated or any officer, director or
employee of such person.
4. Representations and Warranties of Buyer. Buyer represents and
---------------------------------------
warrants to Sellers as follows:
4.1 Organization. Buyer is duly organized and is validly
------------
existing as a corporation in good standing under the laws of the State of
Missouri with the corporate power to own its properties and carry on its
business in the manner in which such business is now being conducted, and is
qualified to do business in each jurisdiction in which it is required to be
qualified.
4.2 Authority. Buyer has full corporate power and on the
---------
Closing Date will have taken all corporate action necessary to execute,
deliver and perform this Agreement.
- 19 -
<PAGE> 47
This Agreement and all other agreements herein contemplated to be executed in
connection herewith by Buyer have been duly executed and delivered by Buyer,
have been effectively authorized by all necessary action, corporate or
otherwise, by Buyer and constitute (or upon execution will constitute) legal,
valid and binding obligations of Buyer enforceable in accordance with their
respective terms.
4.3 Brokerage. Buyer has not dealt with, or is not obligated to
---------
make any payment to, any finder, broker, investment banker or financial
advisor in connection with any of the transactions contemplated by this
Agreement or the negotiations looking toward the consummation of such
transactions.
4.4 Regulatory Approvals. No consent, approval or authorization
--------------------
of, or declaration, filing or registration with, any federal, state,
municipal or local governmental or regulatory authority or any other person
is required of Buyer in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
4.5 Agreement Not in Breach of Certain Instruments. Neither the
----------------------------------------------
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will violate or conflict with any provision
of the Articles of Incorporation or Bylaws of the Buyer or result in a breach
of any of the terms or provisions of, or constitute a violation or default
under, or conflict with, (i) any mortgage, indenture, lease, agreement,
contract, license, permit, trust or other instrument or commitment of any
kind to which Buyer is or may be bound, (ii) any judgment, decree, order or
award of any court, governmental body or arbitrator to which Buyer is a party
or may be bound or (iii) any law, rule or regulation applicable to Buyer.
5. Covenants and Agreements of Sellers Group. Sellers Group shall
-----------------------------------------
comply with each of the covenants and agreements set forth in this Section 5,
the fulfillment of each of which shall constitute a condition precedent to
Buyer's obligations to purchase the Purchased Assets at the Closing, but each
of which may be waived by the Buyer.
5.1 Corporate Existence and Rights; Conduct in Ordinary Course.
--------------------------------------------------
Except as specifically required by this Agreement, between the date hereof
and the Closing Date, Marlo will take all necessary actions to keep in full
force and effect the corporate existence of Marlo and will cause the
operations of Marlo to be conducted only according to its ordinary and usual
course of business. Marlo shall use its best efforts to preserve intact its
present business organization, keep available the services of its officers
and employees, and preserve its relationships with customers, suppliers and
others having business dealings with it. Marlo shall maintain its records
and books of account in a manner that fairly and correctly reflects its
income, expenses, assets and liabilities in a manner sufficient to permit the
preparation of financial statements in accordance with GAAP.
5.2 Access and Information Before the Closing. Between the date
-----------------------------------------
hereof and the Closing Date, Marlo will cause to be afforded to Buyer and
Buyer's counsel,
- 20 -
<PAGE> 48
accountants and other representatives reasonable access to all of the
properties, books, contracts and records of Marlo and will furnish Buyer and
Buyers counsel, accountants and other representatives with all information,
including copies of books, contracts and records, concerning the affairs of
Marlo which Buyer may reasonably request.
5.3 Current Information. Sellers Group shall advise Buyer in
-------------------
writing immediately, but in any event prior to the Closing, of (i) the
occurrence of any event which renders any of the representations or
warranties set forth herein inaccurate in any material respect or the
awareness of any of Sellers Group that any representation or warranty set
forth herein was not accurate in all material respects when made; and (ii)
the failure of any of Sellers Group to comply with or accomplish any of the
covenants or agreements set forth herein in any material respect. Marlo will
also provide Buyer promptly on becoming available copies of all operating and
financial statements reports prepared by or for the normal conduct of
business of Marlo.
5.4 Consents. Marlo will, as soon as possible, commence to take
--------
all action required to obtain all material consents, approvals, novations and
agreements of and to give all notices and make all other filings with any
third parties, including governmental authorities, necessary to authorize,
approve or permit the transfer of the Purchased Assets to Buyer and Buyer
shall cooperate with Marlo with respect thereto. In addition, subject to the
terms and conditions herein provided, each of the parties hereto covenants
and agrees to use their best efforts to take or cause to be taken all action
or do, or cause to be done, all things necessary proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby and to cause the fulfillment of the parties'
obligations hereunder.
5.5 Contracts and Operation Agreements. Between the date hereof
----------------------------------
and the Closing Date, Marlo shall not, other than in the ordinary course of
business, without the prior written consent of Buyer (a) amend in any
material respect or terminate any contract, agreement, instrument, purchase
order, lease, license, warranty, indenture, bid, proposal or commitment,
whether written or oral to which it is a party, or (b) enter into or become a
party to or submit any bid or proposal for any contract, agreement,
instrument, arrangement, purchase order or commitment with any customer of
Marlo.
5.6 Insurance. Between the date hereof and the Closing Date,
---------
Marlo shall continue in force its existing insurance policies.
5.7 Insider Restriction. Marlo and Marlo Principals acknowledge
-------------------
that Engineered Support Systems, Inc. ("ESSI") is a public company and that
this Agreement and the transactions contemplated herein may be material to
ESSI. Therefore, until the earlier of the Closing or five (5) days after the
termination of this Agreement as provided in Section 10 hereof, Marlo
Principals shall not purchase or sell, directly or indirectly, any ESSI
stock, and shall cause Marlo, and advise its directors, and any other members
of management,
- 21 -
<PAGE> 49
employees, or agents who are aware of the transactions contemplated herein
not to purchase or sell, directly or indirectly, any ESSI stock.
5.8 No Shopping. Marlo and Marlo Principals shall not, directly
-----------
or indirectly, through any officer, director, employee or agent or otherwise,
solicit, initiate, encourage, participate in any negotiation or discussion or
enter into any agreement in respect of or cooperate with any person regarding
(including without limitation, by way of furnishing any non-public
information concerning or affording access to, the business, properties or
assets of Marlo) any Acquisition Proposal (as hereinafter defined). The term
"Acquisition Proposal" means any proposal (other than this Agreement) for the
acquisition for all or a substantial portion of the stock or assets of Marlo,
or for a merger, consolidation or other business combination pursuant to
which any other person would acquire Marlo or any substantial equity interest
in Marlo. Marlo and Marlo Principals shall promptly communicate to Buyer the
fact that they have received any proposal or inquiry regarding an Acquisition
Proposal.
5.9 Public Statements. Before any party hereto shall release
-----------------
any information concerning this Agreement or the contemplated transactions
which is intended for or may result in public dissemination thereof, they
shall furnish drafts of all documents or proposed oral statements to the
other party for comments, and shall not release any such information without
the prior written consent of the other party. Nothing contained herein shall
prevent either party from furnishing any information to any governmental
authority if required to be disclosed by applicable law or regulation, and
after having given prior written notice to the other party of any such
contemplated disclosure.
5.10 Employment Agreement. Sellers Group shall cause Earls to
--------------------
negotiate, execute and deliver on the Closing Date, an employment agreement
between Buyer and Earls for a three (3) year term, whereby Earls shall serve
as President and Chief Executive Officer of Buyer at an annual base salary of
Two Hundred Thousand Dollars ($200,000.00), plus a minimum bonus of One
Hundred Thousand Dollars ($100,000.00) and benefits comparable to those
currently provided by Marlo to Earls, substantially in the form attached as
Exhibit Q.
- ---------
5.11 Consulting Agreement. Sellers Group shall cause Raymond
--------------------
Lohmann to negotiate, execute and deliver on the Closing Date, a consulting
agreement between Buyer and Raymond Lohmann for a term of not less than one
(1) year, whereby Raymond Lohmann shall serve as a consultant to Buyer with
respect to the Coil Business for not more than eight (8) hours per week at an
annual base compensation of Forty Thousand Dollars ($40,000.00), plus
automotive allowance and standard benefits, substantially in the form
attached as Exhibit R.
---------
5.12 Distributions. No distributions or other withdrawal of
-------------
funds will be made to or by David Ault, or on behalf of D. Ault affiliated
entities, or Marlo Principals during the period from December 31, 1997
through Closing, except for payments or
- 22 -
<PAGE> 50
distributions made in the ordinary course of business by Marlo for salary,
bonus, or other benefits as otherwise permitted by the provisions of this
Agreement, or costs incurred in the consummation of the transactions
contemplated by this Agreement, except for distributions of any undistributed
income existing as of January 31, 1998.
6. Covenants and Agreements of Buyer. Buyer covenants and agrees:
---------------------------------
6.1 Confidentiality. Buyer shall use all reasonable precautions
---------------
to cause all such information regarding Marlo to be treated as confidential
and will not use any such information in a manner detrimental to Marlo or
beneficial to the Buyer provided that the foregoing shall not apply to
information to the extent (i) such information was known by Buyer or one of
its affiliates when received, (ii) such information is or thereafter becomes
lawfully obtainable from other sources, or (iii) it is necessary or
appropriate to disclose the same to a regulatory authority having
jurisdiction over Marlo or Buyer, or an affiliate of Buyer or as otherwise
required by law. Buyer shall have no liability under this Section unless
such prohibited use resulted from its gross negligence or willful misconduct;
and provided, further, that this obligation to maintain the confidentiality
of such information as it relates to Marlo shall cease upon the Closing. If
the transactions contemplated by this Agreement are not consummated for any
reason whatsoever, Buyer will return to Marlo upon request all documents or
copies or excerpts thereof containing or reflecting such information that was
furnished to it by Sellers or Marlo.
6.2 Current Information. Buyer will advise Marlo in writing
-------------------
immediately, but in any event prior to the Closing, of: (i) the occurrence of
any event which renders any of the representations or warranties set forth
herein inaccurate in any material respect or the awareness of Buyer that any
representation or warranty set forth herein was not accurate in all material
respects when made; and (ii) the failure of Buyer to comply with or
accomplish any of the covenants or agreements set forth herein in any
material respect.
6.3 Marlo Employees. Following Closing, Buyer will employ or
offer employment to such of the present Marlo employees as Buyer deems
necessary or appropriate. Buyer anticipates that immediately following
Closing, most of the existing Marlo employees will be offered employment with
Buyer and that, for those employees, Buyer anticipates that their
compensation and benefits will be similar to that which those employees were
receiving prior to the closing of this sale and purchase. Those Marlo
employees who are employed by Buyer will, for purposes of eligibility and
vesting, be given credit for all years of service with Marlo in determining
their eligibility for all benefits (including, but not by way of limitation,
vacation and retirement benefits). Notwithstanding anything herein to the
contrary, nothing herein is intended to obligate Buyer to offer employment
for a term to any employee of Marlo, and it is expressly intended by the
parties that employment of Marlo employees by Buyer following Closing will be
at will, with the exception only of B. Earls, as specifically provided in
Section 5.10 hereof. Nothing in this paragraph 6.3 is intended to create any
rights in or to a Marlo employee as a third party beneficiary.
- 23 -
<PAGE> 51
7. Conditions to Obligations of Marlo. The obligations of Marlo to
----------------------------------
make the deliveries contemplated at the Closing shall, in addition to the
conditions set forth elsewhere herein, be subject to satisfactory completion
on or prior to the Closing Date of each of the following conditions, any of
which may be waived by Marlo:
7.1 Correctness of Representations and Warranties. All of the
---------------------------------------------
representations and warranties of the Buyer contained in this Agreement shall
have been true and complete on the date hereof and shall be true and complete
on the Closing Date in all material respects with the same effect as if made
on the Closing Date, and the Buyer shall have executed and delivered to Marlo
at Closing a certificate to such effect.
7.2 Performance of Covenants and Agreements. All of the
---------------------------------------
covenants and agreements of the Buyer contained in this Agreement and
required to be performed by the Buyer on or before the Closing Date shall
have been performed in all material respects and the Buyer shall have
executed and delivered to Marlo at Closing a certificate to such effect.
7.3 Opinion of Counsel for Buyer. Marlo shall have received an
----------------------------
opinion of counsel for Buyer, Bearden, Mattern, Breckenridge, Washburn,
Gidlow & Kazanas, LLC, addressed to Marlo and dated the Closing Date
substantially in the form set forth in Exhibit S. In rendering such opinion,
---------
counsel may rely upon certificates of public officials and upon certificates
of officers of Buyer as to factual matters and on opinions of other counsel
of good standing, whom such counsel believes to be reliable.
7.4 No Legal Bar. There shall not have been instituted or
------------
threatened any legal proceeding seeking to prohibit the consummation of the
transactions contemplated by this Agreement or to obtain substantial damages
with respect thereto. None of the parties hereto shall be prohibited by any
order, writ, injunction or decree of any Governmental body of competent
jurisdiction from consummating the transactions contemplated by this
Agreement, and no action or proceeding shall then be pending which questions
the validity of this Agreement, any of the transactions contemplated hereby
or any action which has been taken by any of the parties or any corporate
entity, in connection herewith, or in connection with any of the transactions
contemplated hereby.
8. Conditions to Obligations of the Buyer. The obligations of the
--------------------------------------
Buyer to make the deliveries contemplated at the Closing shall, in addition
to conditions set forth elsewhere herein, be subject to the satisfactory
completion on or prior to the Closing Date of each of the following
conditions, any of which may be waived by the Buyer:
8.1 Correctness of Representations and Warranties. All
---------------------------------------------
representations and warranties of Sellers Group contained in this Agreement
shall have been true and complete on the date hereof and shall be true and
complete on the Closing Date with the same effect as if made on the Closing
Date and Sellers Group shall have executed and delivered to the Buyer at
Closing a certificate from each member of Sellers Group to that effect.
- 24 -
<PAGE> 52
8.2 Performance of Covenants and Agreements. All of the
---------------------------------------
covenants and agreements of Sellers Group contained in this Agreement and
required to be performed on or before the Closing Date shall have been
performed in all material respects and Sellers Group shall have delivered to
the Buyer at Closing a certificate from each member of Sellers Group to that
effect.
8.3 Opinion of Counsel for Sellers Group. Buyer shall have
------------------------------------
received an opinion of counsel for Sellers Group, Paule, Camazine &
Blumenthal, P.C., addressed to Buyer and dated the Closing Date, in the form
of Exhibit T. In rendering such opinion, counsel may rely upon certificates
---------
of public officials and upon certificates of officers of Marlo as to factual
matters and on opinions of other counsel of good standing, whom such counsel
believes to be reliable.
8.4 Good Standing Certificates. Marlo shall have delivered to
--------------------------
Buyer (i) copies of the Articles of Incorporation, including all amendments
thereto, of Marlo certified by the Secretary of State or other appropriate
official of the jurisdiction of incorporation, (ii) certificates from the
Secretary of State or other appropriate official of the respective
jurisdictions of incorporation to the effect that Marlo is in good standing
or subsisting in such jurisdiction, listing all charter documents of Marlo on
file and attesting to its payment of all franchise or similar Taxes, and
(iii) a certificate from the Secretary of State or other appropriate official
in each jurisdiction in which Marlo is qualified or admitted to do business
to the effect that Marlo is duly qualified or admitted and in good standing
in such jurisdiction.
8.5 No Legal Bar. There shall not have been instituted or
------------
threatened any legal proceeding seeking to prohibit the consummation of the
transactions contemplated by this Agreement or to obtain substantial damages
with respect thereto. None of the parties hereto shall be prohibited by any
order, writ, injunction or decree of any governmental body of competent
jurisdiction from consummating the transactions contemplated by this
Agreement and no action or proceeding shall then be pending which questions
the validity of this Agreement, any of the transactions contemplated hereby
or any action which has been taken by any of the parties in connection
herewith or in connection with any of the transactions contemplated hereby.
8.6 Third Party Consents and Approvals. Notwithstanding
----------------------------------
anything herein to the contrary, it shall be the responsibility of Buyer to
obtain all consents and approvals of third parties required under the
Contracts and Operation Agreements, and Marlo shall cooperate with and use
reasonable efforts to assist Buyer in obtaining such consents and approvals.
8.7 Allocation of Purchase Price. The purchase price, as
----------------------------
finally determined pursuant to Section 1.4 above, shall be allocated among
Marlo's assets in the manner agreed upon by Marlo and Buyer at Closing.
Marlo, Marlo Principals, and Buyer will not take any position on their
respective income tax returns that is inconsistent with such allocation.
- 25 -
<PAGE> 53
8.8 Employees. Marlo shall terminate the employment of all of
---------
the employees that Buyer expressed an interest to Marlo to offer employment
with Buyer commencing the Closing Date. Such termination to be effective as
of the Closing Date. In connection with such termination, Marlo shall
provide all required notification under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") to all such terminated
employees. Marlo, in terminating its employees pursuant to this Section 8.8,
shall do so in a manner so that no such terminated employee shall have any
valid claim for severance benefits on or after the Closing Date. On the
Closing Date, Marlo shall pay or provide all of its terminated employees the
accrued and unpaid wages, vacation pay and other employee benefits to which
they are entitled.
8.9 Employment Agreement and Consulting Agreement. The
---------------------------------------------
employment agreement and consulting agreement referred to Sections 5.12 and
5.13 hereof, shall be negotiated, executed and delivered on the Closing Date.
8.10 Assignment and Sale of Registered Trademarks. A due
--------------------------------------------
execution and delivery of certain assignment and sale of registered
trademarks by Marlo in favor of Buyer whereby Marlo assigns to Buyer the
Registered Intangible Personal Property referred to in Section 3.7.3 hereof,
substantially in the form of Exhibit U.
---------
8.11 Warranty Deeds. A due execution and delivery of certain
--------------
Special Warranty Deeds by Marlo in favor of Buyer whereby Marlo transfers and
conveys to Buyer the Marlo Realty and the Vacant Land referred to in Section
1.1(b) hereof, substantially in the form of Exhibit V.
---------
8.12 Bill of Sale. A due execution and delivery of certain
------------
Bill(s) of Sale by Marlo in favor of Buyer whereby Marlo transfers and
conveys to Buyer the personal property referred to in Section 1.1(b) hereof,
substantially in the form of Exhibit W.
---------
9. Indemnification.
---------------
9.1 General Indemnification by Sellers Group. Sellers Group
----------------------------------------
covenants and agrees to indemnify, defend, protect and hold harmless each
Buyer and their respective officers, directors, employees, stockholders,
assignees, successors and affiliates (individually, an Indemnified Party and
collectively, Indemnified Parties) from, against and in respect of:
(a) all liabilities, losses, claims, damages, punitive
damages, causes of action, lawsuits, administrative proceedings (including
informal proceedings), investigations, audits, demands, assessments,
adjustments, judgments, settlement payments, deficiencies, penalties, fines,
interest (including interest from the date of such damages) and costs and
expenses (including without limitation reasonable attorneys' fees and
disbursements of every kind, nature and description) (collectively,
"Damages") suffered, sustained, incurred or paid by the Indemnified Parties
in connection with, resulting from or arising out of, directly or indirectly:
- 26 -
<PAGE> 54
(1) any breach of any representation or warranty
of Sellers Group set forth in this Agreement or any Schedule, Exhibit or
certificate, delivered by or on behalf of any member of Marlo or Marlo
Principals in connection herewith; or
(2) any nonfulfillment of any covenant or
agreement by Marlo or Marlo Principals or any member thereof under this
Agreement; or
(3) the business, operations or assets of Marlo
prior to the Closing Date or the actions or omissions of Marlos' directors,
officers, shareholders, employees or agents prior to the Closing Date, other
than Damages arising from matters expressly disclosed in the Financial
Statements, this Agreement or the Schedules and Exhibits to this Agreement.
(b) any and all Damages incident to any of the foregoing
or to the enforcement of this Section 9.1.
9.2 Limitation and Expiration. Notwithstanding the above:
-------------------------
(a) there shall be no liability for indemnification under
Section 9.1 with respect to Damages with respect to anything other than Tax
Matters unless, and solely to the extent that, the aggregate amount of
Damages exceeds One Hundred Thousand Dollars ($100,000) (the Indemnification
Threshold). There shall be no liability for indemnification under Section
9.1 for Damages for Tax Matters unless, and solely to the extent that, the
aggregate amount of Damages exceeds Twenty Five Thousand Dollars ($25,000.00)
(the "Tax Matter Indemnification Threshold");
(b) the aggregate amount of Sellers' liability under this
Article 9 shall not exceed the amount of One Million Four Hundred Thousand
Dollars ($1,400,000);
(c) the indemnification obligations under this Article 9,
or under any certificate or writing furnished in connection herewith, shall
terminate at the date that is the later of clause:
(1) except as to representations and warranties
specified in Section 9.3(a)(2) of this Article 9, the second anniversary of
the Closing Date, or
(2) the final resolution of claims or demands
pending as of the second anniversary of the Closing Date (such claims
referred to as "Pending Claims").
9.3 Indemnification Procedures. All claims or demands for
--------------------------
indemnification under this Article 9 ("Claims") shall be asserted and
resolved as follows:
(a) In the event that any Indemnified Party has a Claim
against Sellers Group which does not involve a Claim being asserted against
or sought to be collected
- 27 -
<PAGE> 55
by a third party, the Indemnified Party shall with reasonable promptness
notify Sellers Group of such Claim, specifying the nature of such Claim and
the amount or the estimated amount thereof to the extent then feasible (the
Claim Notice). If Sellers Group does not notify the Indemnified Party within
thirty (30) days after the date of delivery of the Claim Notice that Sellers
Group disputes such Claim, with a detailed statement of the basis of such
position, the amount of such Claim shall be conclusively deemed a liability
of Sellers Group hereunder. In case an objection is made in writing in
accordance with this Section 9.3.1, the Indemnified Party shall respond in a
written statement to the objection within thirty (30) days and, for sixty
(60) days thereafter, the parties shall attempt in good faith to agree upon
the rights of the respective parties with respect to each of such Claims
(and, if the parties should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties).
(1) In the event that any Claim for which Sellers
Group would be liable to an Indemnified Party hereunder is asserted against
an Indemnified Party by a third party (a Third Party Claim), the Indemnified
Party shall deliver a Claim Notice to Sellers Group. Sellers Group shall
have thirty (30) days from the date of delivery of the Claim Notice to notify
the Indemnified Party (A) whether Sellers Group disputes liability to the
Indemnified Party hereunder with respect to the Third Party Claim, and, if
so, the basis for such a dispute, and (B) if Sellers Group does not dispute
liability, whether or not Sellers Group desires, at their sole cost and
expense, to defend against the Third Party Claim, provided that the
Indemnified Party is hereby authorized (but not obligated) to file any
motion, answer or other pleading and to take any other action which the
Indemnified Party shall deem necessary or appropriate to protect the
Indemnified Party's interests.
(2) In the event that Sellers Group timely
notifies the Indemnified Party that Sellers Group does not dispute their
obligation to indemnify with respect to the Third Party Claim, Sellers Group
shall defend the Indemnified Party against such Third Party Claim by
appropriate proceedings, provided that, unless the Indemnified Party
--------
otherwise agrees in writing, Sellers Group may not settle any Third Party
Claim (in whole or in part) if such settlement does not include a complete
and unconditional release of the Indemnified Party. If the Indemnified Party
desires to participate in, but not control, any such defense or settlement
the Indemnified Party may do so at its sole cost and expense. If Sellers
Group elects not to defend the Indemnified Party against a Third Party Claim,
whether by failure of Sellers Group to give the Indemnified Party timely
notice as provided herein or otherwise, then the Indemnified Party, without
waiving any rights against Sellers Group, may settle or defend against such
Third Party Claim in the Indemnified Party's sole discretion and the
Indemnified Party shall be entitled to recover from Sellers Group the amount
of any settlement or judgment and, on an ongoing basis, all indemnifiable
costs and expenses of the Indemnified Party with respect thereto, including
interest from the date such costs and expenses were incurred.
(3) If at any time, in the reasonable opinion of
the Indemnified Party, notice of which shall be given in writing to Sellers
Group, any Third Party Claim seeks material prospective relief which could
have an adverse effect on any
- 28 -
<PAGE> 56
Indemnified Party, the Indemnified Party shall have the right to control or
assume (as the case may be) the defense of any such Third Party Claim and the
amount of any judgment or settlement and the reasonable costs and expenses of
defense shall be included as part of the indemnification obligations of
Sellers Group hereunder. If the Indemnified Party elects to exercise such
right, Sellers Group shall have the right to participate in, but not control,
the defense of such Third Party Claim at Sellers Group's sole cost and
expense.
(b) Nothing herein shall be deemed to prevent the
Indemnified Party from making a Claim, and an Indemnified Party may make a
Claim hereunder, for potential or contingent Damages provided the Claim
Notice sets forth the specific basis for any such potential or contingent
claim or demand to the extent then feasible and the Indemnified Party has
reasonable grounds to believe that such Claim may be made.
(c) At such time as Buyers have knowledge of facts from
which a reasonable person would be aware that Buyers may have a claim, Buyers
shall give reasonably prompt notice of such claim to Sellers Group.
(d) The parties will make appropriate adjustments for any
Tax benefits, Tax detriments or insurance proceeds in determining the amount
of any indemnification obligation under this Article 9, provided that no
Indemnified Party shall be obligated to continue pursuing any payment
pursuant to the terms of any insurance policy.
9.4 Remedies Cumulative. The remedies set forth in this Section
-------------------
9 are cumulative and shall not be construed to restrict or otherwise affect
any other remedies that may be available to the Indemnified Parties under any
other agreement or pursuant to statutory or common law.
10. Covenant Not to Compete.
-----------------------
(a) Marlo and D. Ault each acknowledge that the products and
services of the Coil Business are currently distributed in and throughout the
world. Marlo and D. Ault each acknowledge that an important part of the
benefits that Buyer will receive in connection with the transactions
contemplated hereby is the ability to carry on the Coil Business free from
either direct or indirect competition from Marlo or D. Ault. In order that
Buyer may enjoy such benefits, Marlo and D. Ault each agree that for a period
of five years after the Closing Date, Marlo and/or D. Ault shall not engage
at any place in the Area, directly or indirectly (including through a family
member), in the Coil Business, or own shares in the earnings of or invest in
the equity securities of, any entity engaged at any place in the Area in the
Coil Business; provided, however, that Marlo and D. Ault may purchase equity
securities in a publicly-traded company that is engaged in the Coil Business
in an amount not to exceed five percent of the total equity interest in such
company and provided further, however, that nothing in this Section shall
prohibit the current investment by, or business interest of, D.
- 29 -
<PAGE> 57
Ault in Mil Spec, Inc. The restrictions contained in this Section 10(a) are
made and given to protect and preserve the business of Buyer, and the
goodwill associated therewith. Marlo and D. Ault further each acknowledge
and agree that such restrictions are fair and reasonable, that such
restrictions are necessary to protect Buyer and are necessary for the
protection of the legitimate business interests of Buyer, and are ancillary
to the sale of certain business assets such that there is legal consideration
for purposes of enforcing the foregoing covenants.
(b) Marlo and D. Ault each hereby agree that Buyer's remedies at
law for any breach or threat of breach by Marlo or D. Ault of this Section 10
will be inadequate, and that Buyer shall be entitled to seek a temporary
restraining order, a preliminary injunction, and a permanent injunction or
injunctions to prevent breaches of the provisions of this Section 10 and to
enforce specifically the terms and provisions hereof. Should any provision
of these covenants be held invalid, illegal or unenforceable, in whole or in
part, the validity, legality or enforceability of the other provisions
hereof, shall not be affected thereby. If any invalidity shall be caused by
the length of any period of time, the size of the Area, or the scope of
activities set forth herein, such period of time, such area, such scope or
all of such factors shall be considered to be reduced to the maximum period,
area or scope would cure such invalidity and still be enforceable. Any
provision of this Section 10 which is held invalid, illegal or unenforceable
in any jurisdiction shall be not deemed invalid, illegal or unenforceable in
any other jurisdiction.
11. Termination of Agreement. This Agreement (except as to Section 13
------------------------
hereof) shall terminate prior to the Closing Date and be of no further force
or effect between the parties hereto, except as to liabilities for
misrepresentation, breach or default in connection with any warranty,
representation, covenant, duty or obligation given, occurring or arising
prior to the date of termination, upon the occurrence of any of the
following:
(a) Misrepresentation by the Sellers Group. By Buyer at its
--------------------------------------
election immediately upon any misrepresentation or breach of or failure to
satisfy timely on the part of Sellers Group any condition, warranty,
representation or agreement of Sellers Group contained herein, and Buyer's
written notice to Marlo thereof five (5) days prior to the date of
termination.
(b) Misrepresentations by Buyer. By Marlo at its election
---------------------------
immediately upon any misrepresentation or breach of or failure to satisfy
timely on the part of Buyer any condition, warranty, representation or
agreement of Buyer contained herein, and Marlo's written notice to Buyer
thereof five (5) days prior to the date of termination.
(c) Expiration of Time. By either Marlo, on the one hand, or
------------------
the Buyer, on the other hand, immediately if the Closing shall not have taken
place by February 24, 1998.
12. Miscellaneous Provisions.
------------------------
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<PAGE> 58
12.1 Construction. This Agreement shall be construed and
------------
enforced in accordance with and governed by the laws of the State of
Missouri.
12.2 Notices. All notices, requests, demands and other
-------
communications called for or contemplated hereunder shall be in writing and
shall be deemed to have been duly given when delivered to the party to whom
addressed or when sent by telecopy, telegram, telex or wire (if promptly
confirmed by registered or certified mail, return receipt requested, prepaid
and addressed) to the parties, their successors in interest, or their
assignees at the following addresses, or at such other addresses as the
parties may designate by written notice in the manner aforesaid:
If to Buyer: Engineered Coil Company
c/o Gary C. Gerhardt
1270 North Price Road
St. Louis, Missouri 63132
(314) 993-5680
(314) 993-4615 - FAX
With copies to: Bearden, Mattern, Breckenridge, Washburn,
Gidlow & Kazanas, LLC
Suite 1250, University Club Tower
1034 South Brentwood Boulevard
St. Louis, Missouri 63117-1212
(314) 726-6618
(314) 726-6757 - FAX
Attention: David D. Mattern, Esq. and Dan J.
Kazanas, Esq.
If to the Sellers Group
including Marlo: R. Bruce Earls
Nuclear Cooling, Inc., d/b/a Marlo Coil
6060 Highway PP
P.O. Box 171
High Ridge, MO 63049
(314) 677-6600
(314) 677-1023 - FAX
With copies to: Manchester Partners, L.L.C.
9900A Clayton Road
St. Louis, MO 63124
(314) 997-3501
(314) 812-9491 - FAX
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<PAGE> 59
and
Paule, Camazine & Blumenthal, P.C.
165 N. Meramec Avenue, 6th Floor
Clayton, MO 63105
(314) 727-2266
(314) 727-7101 - FAX
Attention: Donald W. Paule, Esq.
12.3 Assignment. Neither this Agreement nor any right, remedy,
----------
obligation or liability arising hereunder or by reason hereof nor any of the
documents executed in connection herewith may be assigned by any party
without the consent of the other parties; provided, however, that the Buyer
shall have the right to assign all of its rights and obligations under this
Agreement to any corporation, 100% of the voting capital stock of which is
owned, directly or indirectly, by the Buyer if such transferee corporation
agrees to assume all the Buyer's obligations under this Agreement, provided
that such transfer shall not discharge the Buyer from its obligation
hereunder, unless Marlo consents to such discharge, which consent shall not
be unreasonably withheld; and provided, further, that the Buyer may assign
its rights hereunder for security purposes to any financing institution
extending credit to the Buyer. Nothing contained herein, express or implied,
is intended to confer upon any person or entity other than the parties hereto
and their successors in interest and permitted assignees any rights or
remedies under or by reason of this Agreement unless so stated herein to the
contrary.
12.4 Amendments and Waivers. This Agreement and all Exhibits and
----------------------
Schedules hereto may be modified only by a written instrument duly executed
by each party. No condition to any party's obligations and no breach of any
covenant, agreement, warranty or representation shall be deemed waived unless
expressly waived in writing by the party whose obligations are subject to
such condition or who might assert such breach. No waiver of any right
hereunder shall operate as a waiver of any other right or of the same or a
similar right on another occasion.
12.5 Survival. All representations, warranties and covenants
--------
made by Sellers and Buyers in or pursuant to this Agreement or in any
document delivered pursuant hereto shall be deemed to have been made on the
date of this Agreement (except as otherwise provided herein) and, if a
Closing occurs, as of the Closing Date (except with respect to Exhibits and
Schedules which are accurate as of the date or dates reflected thereon). The
covenants, agreements, warranties and representations entered into or made
pursuant to this Agreement, irrespective of any investigation made by or on
behalf of any party, shall be continuing and shall survive the Closing,
subject to the limitations provided in Section 9.
12.6 Remedies. No remedy conferred by any of the specific
--------
provisions of this Agreement is intended to be exclusive of any other remedy.
Each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder now or
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<PAGE> 60
hereafter existing at law or in equity or by statute or otherwise, and the
election by a party of one or more remedies shall not constitute a waiver of
the party's right to pursue any other available remedies.
12.7 Attorneys' Fees. In the event that any action, proceeding
---------------
or arbitration is commenced by any party hereto for the purpose of enforcing
any provision of this Agreement, the parties to such action, proceeding or
arbitration may receive as part of any award, judgment, decision or other
resolution of such action, proceeding or arbitration their costs and
reasonable attorneys' fees as determined by the person. or body making such
award, judgment, decision or resolution. Should any claim hereunder be
settled short of the commencement of any such action, proceeding or
arbitration, the parties in such settlement shall be entitled to include as
part of the damages alleged to have been incurred reasonable costs of
attorneys or other professionals in investigation or counseling on such
claim.
12.8 Binding Nature of Agreement. The Agreement includes each of
---------------------------
the Schedules and Exhibits which are referred to herein or attached hereto,
all of which are incorporated by reference herein. All the terms and
provisions of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective executors, heirs, legal
representatives, successors and assignees.
12.9 Expenses. The costs and expenses of Sellers Group, legal
--------
fees and disbursements of Paule, Camazine & Blumenthal, P.C. and the
broker/finder fees of Manchester Partners, L.L.C. shall be borne by Sellers
Group. The costs and expenses of the Buyer, including the legal fees and
disbursements of Bearden, Mattern, Breckenridge, Washburn, Gidlow & Kazanas,
LLC shall be borne by the Buyer.
12.10 Entire Agreement. This Agreement contains the entire
----------------
understanding of the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof.
12.11 Severability. Any provision of this Agreement which is
------------
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions
hereof in such jurisdiction or rendering that or any other provision of this
Agreement invalid, illegal or unenforceable in any other jurisdiction.
12.12 Counterparts. This Agreement may be executed by the parties
------------
in separate counterparts, each of which when so executed and delivered shall
be an original, but all such counterparts shall together constitute but one
and the same instrument.
12.13 Section Headings. The headings of each Section, subsection
----------------
or other subdivision of this Agreement are for reference only and shall not
limit or control the meaning thereof.
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<PAGE> 61
13. Arbitration.
-----------
(a) Agreement to Arbitrate. Except with respect to enforcement
----------------------
of the covenant not to compete as provided for in Section 10 hereof, or as
provided in paragraph (d) below, any controversy, dispute or claim arising
out of, in connection with, or in relation to the interpretation, performance
or breach of this Agreement, including any claim based on contract, tort or
statute, shall be settled, at the request of either party, by arbitration
conducted in the Metropolitan St. Louis, Missouri area or such other location
upon which the parties may mutually agree, before and in accordance with the
then existing Rules of Commercial Arbitration of the American Arbitration
Association ("AAA"), and judgment upon any award rendered by the arbitrator
may be entered by any State or Federal court having jurisdiction thereof Any
controversy concerning whether a dispute is an arbitrable dispute shall be
determined by the arbitrator. The parties intend that this agreement to
arbitrate be valid, specifically enforceable and irrevocable. The
designation of a suits or specifically a governing law for this agreement or
the arbitration shall not be deemed an election to preclude application of
the Federal Arbitration Act, if it would be applicable.
(b) Selection of Arbitrator. The sole arbitrator, who shall be
-----------------------
selected in accordance with the procedures of the AAA, shall be a retired or
former judge of any Federal court appointed under Article III of the United
States Constitution who presided in a court located in the State in which the
arbitration is conducted, or a retired or former judge of a trial court of
general jurisdiction or a higher court of the State in which the arbitration
is conducted.
(c) Expenses. The arbitrator shall award to the prevailing
--------
party in any arbitration proceeding commenced hereunder, and the court shall
include in its judgment for the prevailing party in any claim arising under
this Agreement or relating to the transactions contemplated hereby, the
prevailing party's costs and expenses (including expert witness expenses and
reasonable attorneys' fees) of investigating, preparing and presenting such
arbitration claim or cause of action.
(d) Aid to Arbitration. Any party hereto may request a court of
------------------
competent jurisdiction to grant provisional injunctive relief to such, party
solely for the purpose of maintaining the status quo until an arbitrator can
render an award on the matter in question and such award can be confirmed by
a court having jurisdiction thereof.
14. Submission to Jurisdiction; Agent for Service. EACH OF THE PARTIES
---------------------------------------------
HERETO CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN THE CITY OR COUNTY OF ST. LOUIS, STATE OF MISSOURI, AND IRREVOCABLY
AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY
AGREEMENT OR INSTRUMENT EXECUTED HEREUNDER, OTHER THAN ANY ACTION OR
PROCEEDING REQUIRED BY SECTION 13 HEREOF TO BE SUBMITTED TO ARBITRATION,
SHALL BE LITIGATED IN SUCH COURTS, AND EACH OF THE PARTIES WAIVES ANY
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<PAGE> 62
OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS
--------------------
TO THE CONDUCT OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS TO ALL SUCH
SERVICE OF PROCESS MADE IN THE MANNER SET FORTH IN SECTION 12.2 HEREOF.
Nothing contained in this Section 14 shall affect the right of any party to
serve legal process on any other party in any other manner permitted by law.
Nothing contained in this Section 14 shall affect the obligations of the
parties with respect to the arbitration of disputes under Section 13 hereof.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION
WHICH MAY BE ENFORCED BY THE PARTIES
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed with the intention of being bound thereby as of the "Effective
Date".
ENGINEERED COIL COMPANY,
A Missouri Corporation
By: /s/ Michael F. Shanahan, Sr.
-------------------------------------
MICHAEL F. SHANAHAN, SR., CEO
MARLO COIL
By: /s/ R. Bruce Earls
-------------------------------------
R. BRUCE EARLS, PRESIDENT
/s/ R. Bruce Earls
-------------------------------------
R. BRUCE EARLS, INDIVIDUALLY
/s/ David G. Ault
-------------------------------------
DAVID G. AULT, INDIVIDUALLY
/s/ Rita R. Ault
-------------------------------------
RITA R. AULT, INDIVIDUALLY
- 35 -
<PAGE> 63
INDEX TO EXHIBITS TO ASSET PURCHASE AGREEMENT
EXHIBIT DESCRIPTION
A Marlo Realty
B Vacant Land
C Inventory
D Accounts Receivable
E Machinery and Equipment
F Proprietary Property
G Customer List
H Prepaid Insurance and Other Prepayments
I Telephone Numbers and Telephone Directory Listing
J Permits and Licenses
K Government Contracts and Subcontracts
L Customer Contracts
M Operation Agreements
N Excluded Assets
O Accounts Payable
P Retained Liabilities
Q Employment Agreement of R. Bruce Earls
R Consulting Agreement of Raymond Lohmann
S Opinion of Counsel for Buyer
T Opinion of Counsel for Sellers Group
U Assignment and Sale of Registered Trademarks
V General Warranty Deeds
W Bills of Sale
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<PAGE> 64
INDEX TO SCHEDULES TO ASSET PURCHASE AGREEMENT
----------------------------------------------
Schedule Description
- -------- -----------
3.4(a) Compensation Exceptions
3.4(d) Unresolved Customer/Supplier Matters
3.4(e) Acquisitions or Leases of Property in Excess of $50,000.00
3.5(b) Other Unresolved Tax Matters
3.6(a) Litigation Pending or Threatened
3.7.1(b) Liens on Real Property
3.7.2 Liens on Personal Property
3.7.3(b) Registered Intangible Personal Property Not Owned By Marlo But
Used By Marlo
3.8 Summary Description of Insurance Coverage of Purchased Assets
3.9(a) Consents Needed For Assignment of Contracts and Operation Agreements
3.9(b) List of Contracts and Operation Agreements
3.9(c) Quote Log
3.9(d) Warranty Reserve Worksheet Against Such Contracts
3.10(a) Unresolved Matters Pertaining to Government Subcontracts and
Government Bids
3.10(b) Government Investigations and Audits
3.10(c) Government Financing Arrangements and Claims
3.10(d) Government Suspension or Disbarments
3.10(f) Facility Security Clearances
3.10(g) Non-Compliance of Accounting and Procurement Systems With Respect
to Government Contracts
3.10(h) Government Offset Obligations
- 37 -
<PAGE> 65
3.12(a) Labor and Employment Agreements
3.12(c) Labor Practice Complaints, Grievances and Arbitration Matters
3.12(e) Material Obligations of Marlo
3.13(a) Employee Benefit Plans
3.13(d) ERISA Exceptions to Employee Benefit Plans
3.13(e) Unresolved Reports and Information to be Filed Regarding Employee
Benefit Plans
3.20 Bank Accounts
- 38 -
<PAGE> 66
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Engineered Support Systems, Inc.
Dated: April 24, 1998 By: /s/ Gary C. Gerhardt
---------------------------- -------------------------------
Gary C. Gerhardt
Executive Vice President
and Chief Financial Officer
