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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 30, 1996
Armor Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-18863 59-3392443
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
191 Nassau Place Road, Yulee, Florida 32097
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (904) 261-4035
________________________________________________________________
(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 1996, Armor Holdings, Inc. (the "Company"),
through its newly formed wholly-owned subsidiary Defense Technology Corporation
of America, a Delaware corporation ("DTC"), acquired substantially all of the
assets of Defense Technology Corporation of America, a Wyoming corporation
("DTCoA") (such acquisition, the "DTCoA Acquisition"). DTCoA is a leading
manufacturer and distributor of less-than-lethal and anti-riot products
including pepper sprays, distraction devices, flameless expulsion grenades,
specialty impact munitions and dry powdered oleoresin capsicum to law
enforcement agencies and military services in the United States and abroad. In
addition, DTCoA distributes other similar products including gas masks, riot
helmets and gun holsters. The Company and DTC (collectively, the "DTCoA
Purchaser"), acquired from DTCoA, Robert Oliver, and Sandra Oliver (DTCoA,
Robert Oliver, and Sandra Oliver, collectively, the "DTCoA Seller"),
substantially all of the assets of DTCoA (the "DTCoA Assets") pursuant to an
asset purchase agreement dated as of August 23, 1996 (the "DTCoA Asset Purchase
Agreement"), pursuant to which: (i) the DTCoA Purchaser agreed to purchase the
DTCoA Assets from the DTCoA Seller; and (ii) in consideration therefor, the
DTCoA Purchaser (x) delivered $1,000,000 in cash to the DTCoA Seller, (y)
issued to the DTCoA Seller 270,728 shares of Common Stock of the Company,
valued at $2,000,000 in accordance with the DTCoA Asset Purchase Agreement (the
"DTCoA Shares"), and (z) assumed certain liabilities of DTCoA, all as more
fully set forth in the DTCoA Asset Purchase Agreement.
In connection with the execution of the DTCoA Asset Purchase
Agreement, the DTCoA Purchaser agreed to register the DTCoA Shares for sale
under the Securities Act of 1933, as amended, by December 15, 1997.
On the closing date of the DTCoA Acquisition, the DTCoA
Purchaser delivered to the DTCoA Seller $1,000,000 in cash and the DTCoA
Shares. In addition, as part of the consideration paid for the DTCoA Assets,
the Company assumed certain liabilities of DTCoA. In order to secure the
obligations of the DTCoA Seller under the DTCoA Asset Purchase Agreement, the
DTCoA Seller agreed to deliver to Union Bank of Switzerland, New York Branch,
("UBS"), as escrow agent (the "Escrow Agent") pursuant to an escrow agreement
dated September 30, 1996 by and between the DTCoA Purchaser, the DTCoA Seller
and the Escrow Agent (the "Escrow Agreement"), the DTCoA Shares, together with
any additional shares as may be required by the DTCoA Asset Purchase Agreement.
Pursuant to the DTCoA Asset Purchase Agreement and the Escrow Agreement,
one-half of the DTCoA Shares will be held in escrow (the "Escrow Fund") until
March 15, 1998, and the remainder will be held in escrow until June 30, 1999
(each, a "Release Date").
Should any claims be made while any DTCoA Shares are held in
escrow, the DTCoA Shares will remain in escrow until the final resolution of
such claims, notwithstanding the passing of a Release Date. The DTCoA Purchaser
has the right, in the exercise of its reasonable and good faith judgment, to
set-off and deduct from the Escrow Fund that number
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of DTCoA Shares having a value equal to the amount of any losses for which the
DTCoA Seller is required to indemnify the DTCoA Purchaser pursuant to the
provisions of the DTCoA Asset Purchase Agreement; provided, however, among
other things, that prior to any such set-off, the DTCoA Seller has a right to
either: (i) cure or otherwise remedy, to the satisfaction of the DTCoA
Purchaser, any such claim within a period of 15 days; or (ii) pay to the DTCoA
Purchaser the amount of any such loss within 15 days of notice thereof.
Pursuant to the right of set-off, the value of the DTCoA Shares shall equal the
average closing price of the Company's Common Stock on the American Stock
Exchange (or such other exchange as such shares may then be listed) for the 10
consecutive trading day period ending 2 trading days prior to the date of
determination.
In the event any DTCoA Shares are sold at the request of the
DTCoA Seller while held in the Escrow Fund, the proceeds of any such sale shall
be remitted to and held as part of the Escrow Fund until released in accordance
with the provisions of DTCoA Asset Purchase Agreement. So long as there is no
breach of any representation, warranty, covenant or agreement by the DTCoA
Seller under the DTCoA Asset Purchase Agreement or the other agreements
executed in connection therewith, and subject to any rights in favor of third
parties that may be granted by the DTCoA Seller, the DTCoA Seller shall be
entitled to vote the DTCoA Shares in the Escrow Fund and to receive dividends
thereon, when, as and if declared by the Board of Directors of the Company.
In connection with the DTCoA Acquisition, the Company issued
to Key Bank of Wyoming ("Key Bank") the Key Bank Shares (as hereinafter
defined) as consideration for the release by Key Bank of its security interest
in substantially all of the assets of DTCoA. Key Bank held such security
interest pursuant to credit facilities previously made available to DTCoA in
the amounts of $3,000,000 (the "$3,000,000 Facility") and $1,000,000 (the
"$1,000,000 Facility").
Subject to the terms and conditions of a letter agreement
dated August 16, 1996 by and among the Company, Key Bank, DTCoA, Robert Oliver
and Sandra Oliver (the "Key Bank Letter Agreement"), the Company delivered to
Key Bank on September 30, 1996 (the "Closing"), as payment in full of the
$3,000,000 Facility and in complete satisfaction and discharge thereof, a
certificate registered in the name of Key Bank for 358,714 shares of Common
Stock of the Company (the "Key Bank Shares"), valued at $2,650,000 (the "Amount
Due") in accordance with the Key Bank Letter Agreement. Any amounts paid to Key
Bank on account of the Amount Due, including the Initial Amount (as hereinafter
defined), will result in a reduction of the then outstanding balance of the
Amount Due by a like amount. Pursuant to the Key Bank Letter Agreement, Key
Bank agreed that upon the registration of the Key Bank Shares, the Key Bank
Shares would be sold, provided that the Company would control, in its sole
discretion, the timing, manner and amount of Key Bank Shares to be sold; and in
connection therewith, the Company agreed to ensure that (a) Key Bank realizes
net proceeds from such sales (the "Net Sale Proceeds"), which, together with
any advances from the Deposit Account and the Initial Amount (each as
hereinafter defined) will, in the aggregate, equal the
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Amount Due, on or before September 30, 1997; (b) all sales are arranged through
UBS in accordance with all applicable laws, rules, and regulations; and (c)
none of the events of default described in the Key Bank Letter Agreement have
occurred. The Company is not considered an agent of Key Bank in effecting such
sales. So long as Key Bank is not in default of its obligations under the Key
Bank Letter Agreement, Key Bank will have all voting and dividend rights with
respect to the Key Bank Shares. The Company agreed to indemnify Key Bank
against any capital gains taxes that may be incurred by Key Bank resulting from
the sale of the Key Bank Shares.
In consideration of the issuance of the Key Bank Shares to
Key Bank, as of the Closing date the $3,000,000 Facility was deemed paid in
full, and Key Bank cancelled the promissory note evidencing the $3,000,000
Facility. In addition, Key Bank released all liens on the assets of DTCoA
relating to the $3,000,000 Facility and the $1,000,000 Facility on the Closing
date.
On the Closing date, the Company advanced to Key Bank by wire
transfer $662,500 (the "Initial Amount"). Provided none of the events of
default described in the Key Bank Letter Agreement have occurred, the Company
will thereafter be entitled to receive, before any Net Sales Proceeds are paid
to Key Bank, an amount equal to the Initial Amount plus all advances from the
Deposit Account previously paid by the Company to Key Bank and not so recouped.
Key Bank has provided UBS with irrevocable written instructions to such effect.
Upon the occurrence of any of the events of default described in the Key Bank
Letter Agreement, the Company is entitled to receive any portion of the Initial
Amount or advances from the Deposit Account not previously recouped after Key
Bank has received any unpaid balance of the Amount Due.
Pursuant to the provisions of the Key Bank Letter Agreement,
Key Bank irrevocably delivered to UBS the stock certificate of the Company
issued in the name of Key Bank representing the Key Bank Shares to be held by
UBS (the "UBS/Key Bank Account"). UBS is authorized to hold the Key Bank Shares
in its possession and to effect any sales of the Key Bank Shares as the
Company, pursuant to an Irrevocable Power of Attorney granted by Key Bank in
favor of Jonathan M. Spiller, the President and Chief Executive Officer of the
Company, may from time to time direct (the "Key Bank Power of Attorney"). Under
the Key Bank Power of Attorney, Mr. Spiller has the power to effect, in the
name of, for and on behalf of Key Bank, all sales of the Key Bank Shares.
The terms of the UBS/Key Bank Account are irrevocable and
pursuant to the UBS/Key Bank Account and the Key Bank Power of Attorney, the
Company has the right to direct the sales of the Key Bank Shares; provided
however, that in the event Key Bank has not received the Amount Due from either
the Net Sales Proceeds, the Initial Amount, the Deposit Account, or some
combination thereof, then Key Bank shall be entitled to receive such amounts
held in the Deposit Account, as will satisfy the Company's obligation to Key
Bank. In order to secure the Company's obligations to Key Bank on the Closing
date, the Company deposited
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with Key Bank (the "Deposit Account"), $1,987,5000, which will be invested by
Key Bank in 30-day certificates of deposit of Key Bank which will bear interest
at a rate per annum equal to the highest rate made available by Key Bank to its
customers for similar deposits (the "CD Rate"), and will be automatically
renewable for successive 30-day periods, subject to the provisions of the Key
Bank Letter Agreement.
The Deposit Account will be held in the name of the Company
and the principal amount of the Deposit Account will be subject to a perfected
security interest and right of set-off in favor of Key Bank. All interest
earned on the Deposit Account will be for the sole benefit of the Company, will
be free and clear of any such security interest, will not be subject to any
right of set-off in favor of Key Bank, and will be paid to the Company upon the
maturity of each certificate of deposit which at any time comprises the Deposit
Account; provided, however, that upon payment in full of the Amount Due, Key
Bank may retain any interest earned on the Deposit Account that has not been
previously paid to the Company and apply it against the Interest Equivalent
Amount (as hereinafter defined) owed by the Company and DTCoA to Key Bank.
At the maturity of each certificate of deposit which at any
time comprises the Deposit Account, the Company will be entitled to withdraw
from the Deposit Account an amount equal to any Net Sales Proceeds that have
been received by Key Bank prior thereto; provided, however: (i) the Net Sales
Proceeds received by Key Bank shall have been in good and immediately available
funds; (ii) the balance remaining in the Deposit Account after giving effect to
such withdrawal will not be less than the balance owing on the Amount Due;
(iii) the Company has given to Key Bank not less than two weeks written notice
of such withdrawal; and (iv) none of the events of default described in the Key
Bank Letter Agreement have occurred.
The Amount Due from time to time outstanding will accrue an
effective annual rate of interest equal to two thirds of the sum of the CD Rate
plus 1% (the "Interest Equivalent Amount"). Each of the Company and DTCoA
agreed to pay to Key Bank on the earlier of the Maturity Date or the date on
which the Amount Due has been paid in full one-half of the Interest Equivalent
Amount.
The Company will pay to Key Bank the remaining balance of the
Amount Due in accordance with the following schedule, subject to adjustment:
Date: Payment Amount:
----- ---------------
December 15, 1996 $300,000
January 31, 1997 $300,000
April 30, 1997 $350,000
July 31, 1997 $350,000
provided, however, that the Company will have the right, at its option, to
prepay all or a portion of the Amount Due without penalty or premium at any
time prior to the Maturity Date. All Net Sales Proceeds received by Key Bank
will be applied as a prepayment against the next Payment
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Amount(s) due. The Company will have the right to use funds in the Deposit
Account to make the payments described above.
In the event that the aggregate of the Net Sales Proceeds,
the advances from the Deposit Account and the Initial Amount realized by Key
Bank as of September 30, 1997 are less than $2,650,000, or upon the occurrence
of any of the events of default described in the Key Bank Letter Agreement, Key
Bank will be entitled to set-off from the Deposit Account (exclusive of any
interest earned thereon) an amount which, when added to the Net Sales Proceeds,
the advances from the Deposit Account and the Initial Amount received by Key
Bank for its own account, will equal $2,650,000 plus the Interest Equivalent
Amount owed by the Company and DTCoA to Key Bank, and the balance of such
Deposit Account will be returned to the Company.
Upon receipt by Key Bank of the Amount Due, plus the entire
Interest Equivalent Amount, whether from the Initial Amount, the Net Sales
Proceeds, the Deposit Account, or any combination thereof, UBS will be
instructed to deliver to the Company for cancellation any remaining Key Bank
Shares held by UBS for Key Bank and any excess Net Sales Proceeds up to
$20,000.
The foregoing description of the DTCoA Asset Purchase
Agreement and the Key Bank Letter Agreement and the transactions contemplated
thereby are not intended to be complete and are qualified in their entirety by
the complete text of the DTCoA Asset Purchase Agreement, the Key Bank Letter
Agreement, the instruction letter from Key Bank to UBS and the Key Bank Power
of Attorney.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements and Pro Forma Financial Information.
It is impracticable at this time for the Company to provide
the financial statements that may be required to be included herein. The
Company hereby undertakes to file such required financial statements as soon as
practicable, but in no event later than December 13, 1996.
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(c) Exhibits.
The following Exhibits are hereby filed as part of this
Current Report on Form 8-K.
EXHIBIT DESCRIPTION
- ------- -----------
2.1 Asset Purchase Agreement, dated as of August 23, 1996 by and among
the Company, DTC, Robert Oliver, Sandra Oliver and DTCoA.
10.1 Letter Agreement, dated August 16, 1996, by and among the Company,
Key Bank, DTCoA, Robert Oliver and Sandra Oliver.
10.2 Letter Agreement, dated September 30, 1996, by and among Key Bank and
UBS.
10.3 Irrevocable Power of Attorney, dated September 30, 1996, granted by
Key Bank in favor of Jonathan M. Spiller.
10.4 Escrow Agreement, dated September 30, 1996, by and among the Company,
DTC, Robert Oliver, Sandra Oliver, DTCoA and UBS.
10.5 Guaranty Agreement, dated August 26, 1996, by Robert Oliver and
Sandra Oliver to the Company.
10.6 Lock-Up Agreement, dated August 23, 1996, by DTCoA to the Company.
10.7 Authorized Distributor Agreement, dated September 30, 1996, by and
among DTC, XM Corporation, a Wyoming corporation, and Robert Oliver.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ARMOR HOLDINGS, INC.
/s/ Jonathan M. Spiller
Jonathan M. Spiller
President and Chief Executive Officer
Dated: October 9, 1996
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EXHIBIT INDEX
The following Exhibits are filed herewith:
EXHIBIT DESCRIPTION
- ------- -----------
2.1 Asset Purchase Agreement, dated as of August 23, 1996, by and among
the Company, DTC, Robert Oliver, Sandra Oliver and DTCoA.
10.1 Letter Agreement, dated August 16, 1996, by and among the Company,
Key Bank, DTCoA, Robert Oliver and Sandra Oliver.
10.2 Letter Agreement, dated September 30, 1996, by and among Key Bank and
UBS.
10.3 Irrevocable Power of Attorney, dated September 30, 1996, granted by
Key Bank in favor of Jonathan M. Spiller.
10.4 Escrow Agreement, dated September 30, 1996, by and among the Company,
DTC, Robert Oliver, Sandra Oliver, DTCoA and UBS.
10.5 Guaranty Agreement, dated August 26, 1996, by Robert Oliver and
Sandra Oliver to the Company.
10.6 Lock-Up Agreement, dated August 23, 1996, by DTCoA to the Company.
10.7 Authorized Distributor Agreement, dated September 30, 1996, by and
among DTC, XM Corporation, a Wyoming corporation, and Robert Oliver.
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EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
AMONG
ARMOR HOLDINGS, INC.,
a Delaware corporation
DEFENSE TECHNOLOGY CORPORATION OF AMERICA,
a Delaware corporation
ROBERT OLIVER AND SANDRA OLIVER
AND
DEFENSE TECHNOLOGY CORPORATION OF AMERICA,
a Wyoming corporation
Dated as of August 23, 1996
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TABLE OF CONTENTS
Page
----
ARTICLE I - Definitions.................................................... 2
ARTICLE II - Purchase of Assets; Consideration............................. 6
Section 2.1 Terms of the Purchase............................. 6
Section 2.2 The Closing....................................... 12
Section 2.3 Transactions at the Closing....................... 12
Section 2.4 Guarantee of the Seller's Obligations............. 14
Section 2.5 Right of Purchaser to Withhold
Future Payments............................... 15
ARTICLE III - Representations and Warranties of the
Seller, the Executive and the Stockholder.................... 17
Section 3.1 Organization...................................... 17
Section 3.2 Authorization; Enforceability..................... 17
Section 3.3 No Violation or Conflict.......................... 18
Section 3.4 Consents of Governmental Authorities
and Others...................................... 19
Section 3.5 Conduct of Business............................... 19
Section 3.6 Litigation........................................ 21
Section 3.7 Brokers........................................... 22
Section 3.8 Compliance........................................ 22
Section 3.9 Charter, Bylaws and Corporate Records............. 23
Section 3.10 Subsidiaries and Investments...................... 23
Section 3.11 Capitalization.................................... 23
Section 3.12 Rights, Warrants, Options......................... 24
Section 3.13 Financial Statements.............................. 25
Section 3.14 Absence of Undisclosed Liabilities................ 26
Section 3.15 Title to Securities............................... 26
Section 3.16 Title to and Condition of
Personal Property............................... 26
Section 3.17 Real Property..................................... 27
Section 3.18 Insurance......................................... 30
Section 3.19 Licenses.......................................... 31
Section 3.20 Proprietary Rights................................ 32
Section 3.21 Major Customers and Suppliers; Supplies........... 34
Section 3.22 Related Parties................................... 35
Section 3.23 List of Accounts.................................. 36
Section 3.24 Personnel......................................... 36
Section 3.25 Labor Relations................................... 37
Section 3.26 Employment Agreements and
Employee Benefit Plans.......................... 38
(a) Employment Agreements....................... 38
(b) Employee Benefit Plans...................... 38
Section 3.27 Tax Matters....................................... 40
Section 3.28 Material Agreements............................... 42
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Section 3.29 Guaranties........................................ 44
Section 3.30 Products.......................................... 45
Section 3.31 Environmental Matters............................. 45
Section 3.32 Certain Transfers................................. 47
Section 3.33 Non-Distributive Intent........................... 47
Section 3.34 Inventories....................................... 48
Section 3.35 Absence of Certain Business Practices............. 49
Section 3.36 Accounts and Notes Receivable..................... 50
Section 3.37 Disclosure........................................ 50
ARTICLE IV - Representations and Warranties of ABA
and the Purchaser............................................. 51
Section 4.1 Organization; Standing and Power.................. 51
Section 4.2 Authorization; Enforceability..................... 52
Section 4.3 Validity of ABA Common Stock...................... 52
Section 4.4 Brokers........................................... 52
Section 4.5 SEC Filings and Financial Statements.............. 53
Section 4.6 No Violation or Conflict.......................... 54
Section 4.7 Consents of Governmental Authorities
and Others...................................... 54
Section 4.8 Litigation........................................ 55
ARTICLE V - Additional Agreements.......................................... 55
Section 5.1 Survival.......................................... 55
Section 5.2 Investigation..................................... 56
Section 5.3 Indemnification................................... 56
(a) By Seller, the Executive and
the Stockholder............................... 56
(b) By ABA and the Purchaser...................... 58
(c) Indemnity Procedure........................... 58
(d) Escrow Provisions............................. 61
(e) Limitations................................... 64
Section 5.4 Seller to Change Name............................. 66
Section 5.5 Registration of ABA Common Stock.................. 66
Section 5.6 Preparation of Closing Date Balance Sheet......... 66
Section 5.7 Filing of Sales Tax Returns....................... 70
Section 5.8 Employee Stock Options............................ 70
ARTICLE VI - Conditions Precedent; Termination............................. 71
Section 6.1 Conditions Precedent to the Obligations
of ABA and the Purchaser........................ 71
(a) Representations and Warranties True........... 71
(b) Performance................................... 71
(c) No Adverse Change............................. 72
(d) Seller's, the Executive's and
Stockholder's Certificate..................... 72
(e) No Litigation................................. 73
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(f) Consents...................................... 74
(g) Opinion of Counsel............................ 74
(h) Certain Agreements............................ 74
(i) Completion of Due Diligence................... 74
(j) Closing Date Balance Sheet Amounts............ 75
(k) Collection of Certain Receivables............. 75
(l) Disposition of Airplane....................... 75
(m) Board Approval................................ 76
Section 6.2 Conditions Precedent to the Obligations
of Seller, the Executive and
the Stockholder................................. 76
(a) Representations and Warranties True........... 77
(b) Performance................................... 77
(d) Officers' Certificate......................... 78
(d) No Litigation................................. 78
Section 6.3 Best Efforts...................................... 78
Section 6.4 Termination....................................... 79
ARTICLE VII - Covenants.................................................... 81
Section 7.1 Interim Operations of the Company................. 81
Section 7.2 Access............................................ 84
Section 7.3 Confidentiality (through Closing Date)............ 85
Section 7.4 Notification...................................... 86
Section 7.5 Exclusivity....................................... 87
Section 7.6 Non-Competition................................... 88
Section 7.7 General Confidentiality........................... 90
Section 7.8 Continuing Obligations............................ 92
ARTICLE VIII - Miscellaneous............................................... 94
Section 8.1 Notices........................................... 94
Section 8.2 Entire Agreement.................................. 94
Section 8.3 Binding Effect.................................... 95
Section 8.4 Knowledge of the Parties.......................... 95
Section 8.5 Assignment........................................ 95
Section 8.6 Waiver and Amendment.............................. 96
Section 8.7 No Third Party Beneficiary........................ 97
Section 8.8 Severability...................................... 97
Section 8.9 Expenses.......................................... 97
Section 8.10 Headings.......................................... 98
Section 8.11 Counterparts...................................... 98
Section 8.12 Time of the Essence............................... 98
Section 8.13 Injunctive Relief................................. 98
Section 8.14 Remedies Cumulative............................... 99
Section 8.15 Governing Law; Jurisdiction....................... 99
Section 8.16 Participation of Parties..........................100
Section 8.17 Further Assurances................................100
Section 8.18 Publicity.........................................100
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LIST OF SCHEDULES
Schedule 1 Net Tangible Assets
Schedule 2.1(a)(1) Excluded Assets
Schedule 2.1(a)(2) Purchased Assets
Schedule 2.1(a)(ii) Assumed Liabilities
Schedule 2.1(a)(iii) Pricing of ABA Products
Schedule 2.1(c) Allocation of Purchase Price
Schedule 2.3 Liens, Encumbrances, Etc.
Schedule 3.1 Qualified Jurisdictions of Seller
Schedule 3.3 Instruments and Agreements
Schedule 3.4 Consents of Governmental Authorities and Others
Schedule 3.5 Conduct of Business
Schedule 3.6 Litigation
Schedule 3.10 Subsidiaries and Investments
Schedule 3.11 Capitalization
Schedule 3.12 Rights, Warrants, Options
Schedule 3.14 Undisclosed Liabilities
Schedule 3.15 Title to Securities
Schedule 3.16 Title to and Conditions of Personal Property
Schedule 3.17 Real Property
Schedule 3.18 Insurance
Schedule 3.19 Licenses
Schedule 3.20 Proprietary Rights
Schedule 3.21 Major Customers and Suppliers; Supplies
Schedule 3.22 Related Parties
Schedule 3.23 List of Accounts
Schedule 3.24 Personnel
Schedule 3.25 Labor Relations
Schedule 3.26(a) Employment, Consulting or Other Personal
Service Documents in Effect
Schedule 3.26(b) Employee Benefit Plans
Schedule 3.27 Tax Matters
Schedule 3.28 Material Agreements
Schedule 3.29 Guaranties
Schedule 3.30 Products
Schedule 3.31 Environmental Matters
Schedule 3.34 Inventories
Schedule 5.6 Closing Date Balance Sheet
Schedule 7.1 Interim Operations of the Company
LIST OF EXHIBITS
Exhibit A Guarantee Agreement
Exhibit B Lock-Up Agreement
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ASSET PURCHASE AGREEMENT
Asset Purchase Agreement, dated as of August 23, 1996, among
Armor Holdings, Inc., a Delaware corporation with offices at 191 Nassau Place
Road, Yulee, Florida 32097 ("ABA"); Defense Technology Corporation of America,
a Delaware corporation and a wholly-owned subsidiary of ABA with offices at 191
Nassau Place Road, Yulee, Florida 32097 (the "Purchaser"); Robert Oliver,
residing at 8101 S.W. 53rd Avenue, Miami, Florida 33143 (the "Executive");
Sandra Oliver, residing at 8101 S.W. 53rd Avenue, Miami, Florida 33143 (the
"Stockholder"); and Defense Technology Corporation of America, a Wyoming
corporation with offices at 2136 Oil Drive, Casper, Wyoming 82604 (the
"Seller").
W I T N E S S E T H :
WHEREAS, the Purchaser desires to acquire certain of the
properties and assets and the business and good will of the Seller in exchange
for cash, common stock, par value $.03 per share, of ABA ("ABA Common Stock"),
and the assumption by the Purchaser of certain obligations and liabilities of
the Seller as hereinafter provided, and the Seller desires to sell such assets
and effect such exchange.
NOW, THEREFORE, the parties hereto, in consideration of
the mutual promises contained herein, and for other good and
<PAGE>
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, hereby agree as follows:
<PAGE>
ARTICLE I
Definitions
In addition to terms defined elsewhere in this Agreement, the
following terms when used in this Agreement shall have the meanings indicated
below:
"Affiliate" shall mean, with respect to any Person, any
Person that directly or indirectly controls, is controlled by or is under
common control with the Person in question.
"Agreement" shall mean this Asset Purchase Agreement,
together with all exhibits and schedules referred to herein.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the Securities and Exchange
Commission.
"Common Stock" shall mean the common stock of ABA, par value
$.03 per share.
"DTC-Ohio" shall mean Def-Tec Corporation, an Ohio
corporation.
"Environmental Laws" shall mean the Resource Conservation
and Recovery Act, 42 Section 36901 et seq., as amended ("RCRA"),
the Comprehensive Environmental Response Cleanup and Liability Act,
42 Section 9601 et seq., as amended ("CERCLA"), the Clean Water
Act, 33 Section 1251 et seq., as amended ("CWA"), the Clean Air
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Act, 42 Section 7401 et seq., as amended ("CAA"), the Toxic Substances and
Control Act, 7 Section 136 et seq., as amended ("TSCA"), and the Hazardous
Materials Transportation Act 49 Section 1801 et seq., as amended, and the
federal, state and local laws, rules, regulations and programs promulgated
thereunder, together with any other similar federal, state and local laws,
rules, regulations and programs in effect regulating the environment.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Financial Statements" shall mean the unaudited balance sheet
of the Seller as at December 31, 1995 and the related statements of income,
cash flows and stockholders' equity for the fiscal year then ended (the "1995
Financial Statements"); and the audited balance sheets of the Seller as at
December 31, 1994 and December 31, 1993 and the related statements of income,
cash flows and stockholders' equity for the fiscal years then ended, in each
case including any related notes, each prepared in accordance with United
States generally accepted accounting principles, consistently applied with
prior periods.
"Guaranty" shall mean, as to any Person, all liabilities or
obligations of such Person in respect of any indebtedness or other obligations
of others guaranteed, directly or indirectly, in any manner by such Person, or
in effect guaranteed, directly or indirectly, by such Person through an
agreement, contingent or otherwise, to purchase such indebtedness or
obligation, or to
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purchase or sell property or services, primarily for the purpose of enabling
the debtor to make payment of such indebtedness or obligation or to assure the
owner of such indebtedness or obligation against loss, or to supply funds to or
in any manner invest in the debtor, or otherwise.
"Investments" shall mean, with respect to any Person, all
advances, loans or extensions of credit to any other Person, all purchases or
commitments to purchase any stock, bonds, notes, debentures or other securities
of any other Person, and any other investment in any other Person, including
partnerships or joint ventures (whether by capital contribution or otherwise)
or other similar arrangement (whether written or oral) with any Person,
including but not limited to arrangements in which (i) the Person shares
profits and losses, (ii) any such other Person has the right to obligate or
bind the Person to any third party, or (iii) the Person may be wholly or
partially liable for the debts or obligations of such partnership, joint
venture or other arrangement.
"Net Tangible Assets" shall mean the sum of the Purchased
Assets of the Seller as set forth in Schedule 2.1(a)(2) less the sum of the
Assumed Liabilities of the Seller as set forth in Schedule 2.1(a)(ii), in each
case valued in a manner provided in Section 5.6.
"Person" shall mean any natural person, corporation,
unincorporated organization, limited liability company,
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partnership, limited liability partnership, association, joint stock company,
joint venture, trust or government, or any agency or political subdivision of
any government, or any other entity.
"Recognized Environmental Condition" shall mean the presence
or likely presence of any Hazardous Substances or Petroleum Products (as such
terms are defined in CERCLA) on the real property or Leased Property owned or
leased, as the case may be, by the Seller under conditions that indicate an
existing release, a past release or a material threat of a release of any
Hazardous Substances or Petroleum Products into structures on the real property
or in the ground, groundwater or surface water of such real property. A
Recognized Environmental Condition does not include de minimis conditions that
do not present a material risk of harm to public health or the environment and
that would not be the subject of an enforcement action if brought to the
attention of appropriate agencies.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Subsidiary" of any Person shall mean any Person, whether or
not capitalized, in which such Person owns, directly or indirectly, an equity
interest of more than 50%, or which may effectively be controlled, directly or
indirectly, by such Person.
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ARTICLE II
Purchase of Assets; Consideration
Section 2.1 Terms of the Purchase
On the basis of the representations, warranties,
covenants, and agreements contained in this Agreement and subject to the terms
and conditions of this Agreement:
(a) The Seller shall sell, assign, transfer, and
convey as a going concern to the Purchaser at the Closing (as hereinafter
defined) all properties and assets of the Seller at the date of the Closing of
every kind and nature whatsoever (other than the assets listed on Schedule
2.1(a)(1) (the "Excluded Assets")), including the names, trademarks,
contractual rights, books and records (other than stock ledgers and stock
transfer books), customer lists, price lists, business, and good will of the
Seller, as more particularly set forth on Schedule 2.1(a)(2) (collectively, the
"Purchased Assets") pursuant to instruments of assignment and bills of sale
satisfactory to the Purchaser; and, in consideration therefor, the Purchaser
shall:
(i) Deliver at the Closing to the
Seller (A) $1,000,000 in immediately available funds
provided that the Net Tangible Assets of the Seller
acquired by the Purchaser are at least $1,550,000 as
set forth on the Seller's Closing Date Balance Sheet
(as defined in Section 5.6) subject to reduction, as
provided in Section 5.6; and (B) a certificate
registered in the Seller's name for that number of
unregistered shares of ABA Common Stock as will have
a value, as determined by the average closing price
of ABA's Common Stock on the American Stock Exchange
for the ten consecutive trading day period ending
two trading days prior to the Closing date, of
$2,000,000, subject to
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adjustment as set forth in Sections 2.5 and 5.6
hereof, to be held in escrow in accordance with the
terms hereof; and
(ii) Assume at the Closing only those
obligations and liabilities of the Seller as are set
forth on Schedule 2.1(a)(ii) (the "Assumed
Liabilities"). The Assumed Liabilities shall not
include, unless specifically included in Schedule
2.1(a)(ii), (A) any tax or other obligation or
liability arising out of or based upon the
transactions contemplated by this Agreement or
incurred by the Seller, the Executive or the
Stockholder by reason of the review and negotiation
of this Agreement; (B) any obligation or liability
under any contract, agreement, instrument, lease,
license, understanding, or arrangement which is
assigned by the Seller to the Purchaser (I) if
failure to obtain a required consent to assignment
by the Seller to the Purchaser deprives the
Purchaser of the enjoyment of any of the Seller's
rights thereunder, (II) if such contract, agreement,
instrument, lease, license, understanding, or
arrangement is not assigned by the Seller to the
Purchaser as a result of Section 2.1(e) or
otherwise, or (III) if a party is in default
thereunder; (C) $1,000,000 of liability, or such
greater amount as may then be outstanding, in
respect of the Seller's obligation to Key Bank of
Wyoming ("Key Bank") pursuant to that certain
Amended and Restated Line of Credit and Security
Agreement, dated March __, 1996, between Key Bank
and the Seller which represents the non-revolving
portion of such credit facility, and is secured by a
mortgage, in favor of Key Bank, on the Executive's
and the Stockholder's residence in Steamboat
Springs, Colorado; (D) any obligation or liability
arising out of or connected with, directly or
indirectly, the Excluded Assets; and (E) any
environmental, tax or other liabilities not
reflected as such in the Seller's audited Balance
Sheet as at December 31, 1995. Without limiting the
generality of the foregoing, any liabilities or
obligations, including but not limited to any
shipping and freight charges, customs duties, and
storage and warehouse costs arising out of or
connected with any inventory and products shipped by
the Seller to Syntech GMBH, shall be a liability and
obligation of the Seller and shall not constitute an
Assumed Liability; and
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(iii) In the event that the
international net sales by the Purchaser of the
products sold as of the date hereof by the Seller to
customers outside the United States of America, its
territories and possessions are equal to or greater
than (A) $3,000,000 for the consecutive 12-month
period ending on the first anniversary of the
Closing date, (B) $3,500,000 for the consecutive
12-month period ending on the second anniversary of
the Closing date, and (C) $4,000,000 for the
consecutive 12-month period ending on the third
anniversary of the Closing date, or alternatively,
such international net sales are greater than (C)
$6,500,000 for the consecutive two-year period
ending on the second anniversary of the Closing
date, or (D) $10,500,000 for the consecutive
three-year period ending on the third anniversary of
the Closing date, in each such case, as determined
in accordance with the Purchaser's and/or ABA's
audited financial statements for the year in
question, then the Purchaser shall deliver to the
Seller a certificate registered in the name of the
Seller for that number of unregistered shares of ABA
Common Stock as will have a value, as determined by
the average closing price of ABA's Common Stock on
the American Stock Exchange (or such other exchange
as such shares may then be trading) for the ten
consecutive trading day period ending two trading
days prior to the date of determination of such
international net sales by the Purchaser of such
products, of $333,333 with respect to the
consecutive 12-month period ending on the first
anniversary of the Closing date, $333,333 with
respect to the consecutive 12-month period ending on
the second anniversary of the Closing date and
$333,334 with respect to the consecutive 12-month
period ending on the third anniversary of the
Closing date, or alternatively, $666,666 with
respect to the consecutive two-year period ending on
the second anniversary of the Closing date, or
$1,000,000 with respect to the consecutive
three-year period ending on the third anniversary of
the Closing date. Pricing of the Purchaser's
products in connection with the determination of
such international net sales of such products shall
be agreed to in advance between the Purchaser and
Seller for each of the first three 12-month periods
following the Closing date. At the sole and absolute
discretion of the Purchaser, the amounts required to
be paid to the
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Seller under this Section 2.1(a)(iii) may be paid in
cash at the times and in the amounts specified in
this Section 2.1(a)(iii).
(b) Except as specifically set forth in Section
2.1(a)(ii), neither the Purchaser nor ABA shall assume or be responsible for
any obligation or liability of the Seller of any nature, whether accrued,
contingent, absolute or otherwise.
(c) The consideration paid by the Purchaser
shall be allocated among the Purchased Assets as set forth in Schedule 2.1(c),
and the parties hereto, as applicable, agree to file Internal Revenue Service
Form 8594 as set forth on Schedule 2.1(c) hereto. Such amounts represent the
fair market value of such assets arrived at in arms length negotiations by the
parties hereto, and the parties hereto agree that, for financial reporting and
tax purposes, they will not take any actions inconsistent therewith.
(d) With respect to any properties or assets
sold hereunder that cannot be physically delivered to the Purchaser because they
are in the possession of third parties or otherwise, the Seller, the Executive
and the Stockholder shall give irrevocable instructions to the party in
possession thereof, if such be the case, with copies to the Purchaser, that all
right, title, and interest therein have been vested in the Purchaser and that
the same are to be held for the Purchaser's exclusive use and benefit.
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(e) To the extent that the assignment by the
Seller to the Purchaser of any contract, agreement, instrument, lease, license,
understanding, or arrangement to be assigned to the Purchaser hereunder shall
require the consent of a party other than the Seller, the Executive or the
Stockholder which has not been obtained by the Closing and if ABA and the
Purchaser shall nevertheless elect to consummate the transactions contemplated
by this Agreement, this Agreement shall not constitute an agreement to assign
the same if an attempted assignment without such consent would constitute a
breach thereof unless the Purchaser before, at, or after the Closing elects in
a writing delivered to the Seller, specifically identifying such absent
consent, to waive such consent. Nothing in this Section 2.1(e) regarding such
non-assignment or such election shall limit any rights ABA or the Purchaser may
have against the Seller, the Executive or the Stockholder as a result of the
failure to obtain such consent.
(f) The Seller agrees that, from and after the
Closing date, the Purchaser shall have the right and authority to collect for
its own account the Receivables (as hereinafter defined), subject to the
provisions hereof, and to endorse with the name of the Seller all checks
received on account of the Receivables. The Seller agrees that it will within
one business day transfer, assign and deliver to the Purchaser all cash or
other property which it may receive with respect to any Receivable from and
after the date thereof, and pending any such receipt by Seller
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and delivery to the Purchaser of any such property, the Seller shall hold any
such property in trust for the benefit of the Purchaser. The Purchaser shall,
after the Closing date, use reasonable commercial efforts at the Purchaser's
expense to collect the Receivables of Seller incurred prior to the Closing date
but the Purchaser shall have no obligation to resort to legal action or other
third party collection methods. Seller hereby covenants that all such
Receivables shall have been collected within 90 days of the due date thereof.
Any amounts received from the account debtor of a Receivable shall be applied
as the Purchaser may determine, except for amounts which the debtor has
directed to be applied to a particular debt. To the extent that any Receivable
remains outstanding upon expiration of the 90-day period subsequent to the due
date thereof, as referred to above, the Purchaser shall give prompt notice of
the non-collectibility of such Receivable to the Seller, and the Seller shall
have the opportunity, during the ten-day period following the expiration of
such 90-day period, to consult with and advise the Purchaser with respect to
the manner in which such Receivable may be collected, it being understood by
the parties hereto that the Purchaser shall have the sole right to implement
any such collection methods and that neither the Seller nor the Executive shall
contact any account debtors in respect of such collection without the express
written consent of the Purchaser in each instance. Upon the expiration of such
ten-day period, the Purchaser shall have the right to set-off the amount of
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such uncollected Receivable against the Escrow Fund, as more particularly
described in Section 5.3(d) hereof. Upon such set-off by the Purchaser, Seller
shall have the right to pursue the collection of outstanding Receivables for
its own account within a reasonable time before the applicable statute of
limitation for the collection of such funds has run; provided, that, Seller
shall confer with the Purchaser prior to taking such action and Seller agrees
to use its best efforts not to injure any customer relationships of the
Purchaser.
Section 2.2 The Closing
(a) The closing of the transactions contemplated
by this Agreement shall take place at the offices of Kane Kessler, P.C., 1350
Avenue of the Americas, New York, New York, at 10:00 A.M., New York time on
September 30, 1996, or such other date, time or place as the parties may agree.
The closing of the transactions contemplated by this Agreement is herein called
the "Closing."
(b) All proceedings to be taken and all
documents to be executed and delivered at the Closing shall be deemed to have
been taken, executed and delivered simultaneously unless otherwise expressly
stated, and no proceeding shall be deemed taken or documents deemed executed or
delivered until all have been taken, executed and delivered.
Section 2.3 Transactions at the Closing
The following transactions shall take place at the
Closing:
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(a) The Seller, the Executive and the
Stockholder shall deliver to the Purchaser all such warranty deeds in form for
recording, bills of sale, assignments, evidences of consent, and other
instruments or documents as in the opinion of counsel to the Purchaser may be
necessary or desirable to evidence or perfect the sale, assignment, transfer,
and conveyance of good and marketable title in fee simple absolute to all real
properties and of good title to all other properties and assets to be sold to
the Purchaser by the Seller hereunder, in each case free and clear of all liens,
mortgages, security interests, pledges, charges, and encumbrances (except such
as are listed in Schedule 2.3). Any costs and expenses incurred in connection
with the assignment and transfer of the Purchased Assets (including, but not
limited to, amounts required to be paid in order to obtain necessary consents
for such assignments and transfers) shall be borne by the Seller, except that
costs and expenses in connection with the transfer of real estate included in
the Purchased Assets and the filing of mortgages with respect thereto (including
transfer, filing, recording and mortgage taxes and fees) shall be allocated
between Seller and Purchaser in accordance with local custom where such real
estate is located. The Seller shall also deliver to the Purchaser all books and
records of the Seller (except stock ledgers and stock transfer books, which
shall always be available for inspection by ABA and the Purchaser); provided,
however, that the Seller and its officers, employees, attorneys, and agents
shall be
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afforded access to its tax and accounting records relating to periods prior to
the Closing and shall be permitted to make extracts from and copies of such
records.
(b) The Purchaser shall deliver or cause to be
delivered to the Seller up to $1,000,000 in immediately available funds,
determined pursuant to Sections 2.1(a)(i) and 5.6, and to the Escrow Agent a
certificate registered in the Seller's name for unregistered shares of ABA
Common Stock, as set forth in Section 2.1(a)(i), with appropriate restrictive
legends thereon.
(c) The Purchaser shall deliver to the Seller an
instrument of assumption of the Assumed Liabilities, in form and
substance satisfactory to the Purchaser and the Seller.
Section 2.4 Guarantee of the Seller's Obligations
Without limiting such other rights as the Purchaser,
ABA, their Subsidiaries, and their respective officers, directors, controlling
persons, employees, attorneys, agents, and stockholders, in each case past,
present, or as they may exist at any time after the date of this Agreement (the
"Purchaser Parties"), may have, the Executive and the Stockholder hereby
guarantee, as more particularly set forth in the Guarantee Agreement,
substantially in the form of Exhibit A attached hereto, for the benefit of the
Purchaser Parties the obligations and liabilities of the Seller under this
Agreement, under any other document executed by the Seller or any Subsidiary of
Seller relating hereto or delivered to the Purchaser or ABA in connection
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with the transactions contemplated hereby or thereby, or under any statement,
certificate, or other instrument delivered by or on behalf of the Seller or any
Subsidiary of Seller pursuant hereto or thereto or delivered to the Purchaser
or ABA in connection with the transactions contemplated hereby or thereby.
Section 2.5 Right of Purchaser to Withhold Future Payments
Without limiting such other rights as ABA or the
Purchaser may have, if, prior to the time all shares of ABA Common Stock are
delivered pursuant to Section 2.1(a)(i), the Purchaser has learned of a breach
of any representation, warranty, covenant, or agreement of the Seller, the
Executive or the Stockholder contained in this Agreement, the Purchaser, in the
exercise of its reasonable and good faith judgment, may by written notice to
the Seller deduct from the number of shares of ABA Common Stock otherwise
deliverable by the Purchaser at such time a number of such shares the value of
which is equal to the aggregate of (a) the amount necessary to cure or make
whole such breach, and (b) the amount of losses, deficiencies, damages, and
legal and other expenses (including legal fees and expenses of attorneys chosen
by ABA or the Purchaser) incurred or demonstrably in prospect of being incurred
by ABA or the Purchaser in connection with claims, suits, actions, proceedings
(formal or informal), investigations, judgments, or settlements as a result of,
or to remedy a situation or circumstance caused by, such breach; provided,
however, that prior to any such deduction, (x) the Purchaser shall give notice
to
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the Seller of the claim for which the deduction is sought, and the Seller shall
have a period of 15 days in which to cure or otherwise remedy, to the
satisfaction of the Purchaser, any such claim, (y) during such 15-day period,
Seller and Purchaser shall hold good faith negotiations to resolve any dispute
with respect to such breach (however, such negotiations shall not extend such
15-day period), and (z) that prior to any such deduction, the Seller shall be
afforded the opportunity to pay to the Purchaser, in immediately available
funds, the amount of any such loss within 15 days of notice thereof. Shares of
ABA Common Stock shall be valued for purposes of this Section 2.5 as follows:
if shares of ABA Common Stock are traded on a national securities exchange, at
the average closing price per share during the ten consecutive trading day
period ending two trading days prior to the date of the Closing on the
principal securities exchange on which such shares are traded. In the event
Seller cures such breach to the satisfaction of Purchaser, in its sole
discretion, within 30 days following the last day of such 15-day period (time
being of the essence), Purchaser shall thereupon deposit with the Escrow Agent,
in the manner provided in Section 5.3(d), that number of shares of ABA Common
Stock withheld pursuant to this Section 2.5.
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ARTICLE III
Representations and Warranties of the Seller,
the Executive and the Stockholder
In order to induce ABA and the Purchaser to enter into this
Agreement and to consummate the transactions contemplated hereby, the Seller,
the Executive and the Stockholder, jointly and severally, make the
representations and warranties set forth below to ABA and to the Purchaser.
Section 3.1 Organization
The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Wyoming. The
Seller is duly qualified to transact business as a foreign corporation in all
jurisdictions where the ownership or leasing of its properties or the conduct
of its business requires such qualification, except where the failure to be so
qualified would not have an adverse effect on the Seller. Each jurisdiction in
which the Seller is so qualified is listed on Schedule 3.1 hereto. The Seller
has the requisite power and authority to (a) own or lease and operate its
properties and (b) conduct its business as presently conducted.
Section 3.2 Authorization; Enforceability
Each of the Seller, the Executive and the
Stockholder has the corporate power and authority and/or the capacity, as the
case may be, to execute, deliver and perform this Agreement. This Agreement and
all other documents to be executed and delivered by the Seller, the Executive
and the Stockholder
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pursuant to this Agreement have been and will be duly authorized, executed and
delivered and constitute the legal, valid and binding obligations of each of
the Seller, the Executive and the Stockholder, enforceable in accordance with
their respective terms, except to the extent that their enforcement is limited
by bankruptcy, insolvency, reorganization or other laws relating to or
affecting the enforcement of creditors' rights generally and by general
principles of equity.
Section 3.3 No Violation or Conflict
The execution, delivery and performance of this
Agreement by each of the Seller, the Executive and the Stockholder and the
consummation by each of the Seller, the Executive and the Stockholder of the
transactions contemplated hereby: (a) do not violate or conflict with any
provision of law or regulation (whether federal, state or local), or any writ,
order or decree of any court or governmental or regulatory authority, or any
provision of the Seller's Certificate of Incorporation or Bylaws; and (b)
except as set forth on Schedule 3.3 hereto, do not, with or without the passage
of time or the giving of notice, or both, result in the breach of, or
constitute a default, cause the acceleration of performance or require any
consent under, or result in the creation of any lien, charge or encumbrance
upon any property or assets of the Seller, the Executive or the Stockholder
pursuant to any instrument or agreement to which any of the Seller, the
Executive or the Stockholder is a party or by which any of the Seller, the
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Executive or the Stockholder or their respective properties may be bound or
affected, other than instruments or agreements as to which consent shall have
been obtained at or prior to the Closing (each of which instruments or
agreements is listed in Schedule 3.3 hereto).
Section 3.4 Consents of Governmental Authorities and
Others
Except as set forth on Schedule 3.4, no consent,
approval or authorization of, or registration, qualification or filing with,
any federal, state or local governmental or regulatory authority, or any other
Person, is required in connection with the execution, delivery or performance
of this Agreement by the Seller, the Executive and the Stockholder or the
consummation by the Seller, the Executive and the Stockholder of the
transactions contemplated hereby.
Section 3.5 Conduct of Business
Except as disclosed on Schedule 3.5 hereto, since
December 31, 1995, the Seller has conducted its businesses in the ordinary and
usual course and there has not occurred any material adverse change in the
condition (financial or otherwise), results of operations, properties, assets,
liabilities, business or prospects of the Seller. Without limiting the
generality of the foregoing, except as disclosed on Schedule 3.5, since
December 31, 1995, the Seller has not: (a) amended its Certificate of
Incorporation or Bylaws; (b) issued, sold or authorized for issuance or sale,
shares of any class of its securities (including,
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but not limited to, by way of stock split or dividend) or any subscriptions,
options, warrants, rights or convertible securities or entered into any
agreements or commitments of any character obligating it to issue or sell any
such securities; (c) redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of its capital stock or any option, warrant or other
right to purchase or acquire any such shares; (d) suffered any damage,
destruction or loss, whether or not covered by insurance, which has had or
could have an adverse effect on any of its properties, assets, business or
prospects that constitute the Purchased Assets; (e) granted or made any
mortgage or pledge or subjected itself or any of its properties or assets to
any lien, charge or encumbrance of any kind, except liens for taxes not
currently due; (f) made or committed to make any capital expenditures in excess
of $5,000; (g) become subject to any Guaranty; (h) granted any increase in the
compensation payable or to become payable to directors, officers, employees
(including, without limitation, any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment); (i) entered into any
agreement which would be a Material Agreement (as hereinafter defined), or
amended or terminated any existing Material Agreement or received notice of any
such amendment or termination; (j) experienced any strike, work stoppage or
slowdown; (k) received notice of any adverse change in its relationship with
any financial institution, customer or supplier with which it currently does
business, nor is it aware of
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any circumstances that could reasonably lead to such a change, nor do the
Seller, the Executive or the Stockholder have any knowledge of any of the
foregoing; or (l) experienced any other event or condition of any character
which has had or could have a material adverse effect on the condition
(financial or otherwise), results of operations, assets, liabilities,
properties, business or prospects of the Seller, or on its employee, customer
or supplier relations. None of the Seller's Affiliates sell, market,
manufacture, distribute or otherwise deal with the products so sold, marketed,
manufactured or distributed by the Seller.
Section 3.6 Litigation
Except as set forth on Schedule 3.6, there are no
actions, suits, investigations, claims or proceedings ("Litigation") pending
or, to the knowledge of any of the Seller, the Executive or the Stockholder,
threatened before any court or by or before any governmental or regulatory
authority or arbitrator, (a) affecting the Seller (as plaintiff or defendant)
which could, individually or in the aggregate, have a material adverse effect
on the condition (financial or otherwise), results of operations, properties,
assets, liabilities, business or prospects of the Seller or (b) against the
Seller relating to the Purchased Assets or the transactions contemplated by
this Agreement and there exist no facts or circumstances known to Seller, the
Executive or the Stockholder creating any reasonable basis for the institution
of any such action, suit, investigation, claim or proceeding described
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above. Schedule 3.6 sets forth a list of any Litigation commenced against the
Seller in the last five (5) years. Vantage Enterprises, Inc., doing business in
Ohio as Vanterprises, Inc., is not, and has not been, an Affiliate of the
Seller, Spotgallant Management Company, or any of their respective Affiliates.
Section 3.7 Brokers
Neither the Seller, the Executive nor the
Stockholder have employed any financial advisor, broker or finder, and none of
them has incurred or will incur any broker's, finder's, investment banking or
similar fees, commissions or expenses in connection with the transactions
contemplated by this Agreement.
Section 3.8 Compliance
The Seller is in material compliance with all
federal, state, local and foreign laws, ordinances, regulations, judgments,
rulings, orders and other requirements applicable to it including, without
limitation, those relating to (a) the development, manufacture, packaging,
distribution and marketing of products, (b) employment, safety and health, and
(c) building, zoning and land use. The Seller is not subject to any judicial,
governmental or administrative order, judgment or decree. Purchaser has been
furnished with true and correct copies of all reports of inspections of the
Seller's business and properties through the date hereof, under all applicable
federal, state, foreign and local laws and regulations, all of which are set
forth on Schedule 3.8 hereto.
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Section 3.9 Charter, Bylaws and Corporate Records
A true and complete copy of (a) the Certificate of
Incorporation of the Seller, as amended and in effect on the date hereof, (b)
the Bylaws of the Seller, as amended and in effect on the date hereof, and (c)
the minute books of the Seller have been previously delivered to Purchaser.
Such minute books contain complete and accurate records of all meetings and
other corporate actions of the board of directors, committees of the board of
directors, incorporators and shareholders of the Seller from the date of its
incorporation to the date hereof.
Section 3.10 Subsidiaries and Investments
Except as described on Schedule 3.10, the Seller has
no Subsidiaries or Investments. On December 29, 1992 (the "Merger Date"), Nina
Navigation, S.A. ("Nina"), the sole shareholder of the Seller at that time,
merged with and into the Seller with the Seller as the surviving corporation of
such merger. Prior to the Merger Date, Nina sold all of the issued and
outstanding capital stock of DTC-Ohio, a wholly-owned subsidiary of Nina, to an
unrelated third party. From and after such sale, DTC-Ohio has not been an
Affiliate of the Seller or Nina, or their respective Affiliates.
Section 3.11 Capitalization
The authorized capital stock of the Seller consists
of an unlimited number of shares of common stock, no par value, of
which 4,500 shares are issued and outstanding, all registered in
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the name of Sandra Oliver. All shares of the Seller's issued and outstanding
capital stock have been duly authorized, are validly issued and outstanding,
and are fully paid and nonassessable. No securities issued by the Seller from
the date of its incorporation to the date hereof were issued in violation of
any statutory or common law preemptive rights. There are no dividends which
have accrued or been declared but are unpaid on the capital stock of the
Seller. Except as set forth on Schedule 3.11 hereto, all taxes required to be
paid in connection with the issuance and any transfers of the Seller's capital
stock have been paid. All permits or authorizations required to be obtained
from or registrations required to be effected with any Person in connection
with any and all issuances of securities of the Seller from the date of the
Seller's incorporation to the date hereof have been obtained or effected and
all securities of the Seller have been issued and are held in accordance with
the provisions of all applicable securities or other laws. The Stockholder owns
all of the issued and outstanding capital stock of the Seller.
Section 3.12 Rights, Warrants, Options
There are no outstanding (a) securities or
instruments convertible into or exercisable for any of the capital stock or
other equity interests of the Seller; (b) options, warrants, subscriptions or
other rights to acquire capital stock or other equity interests of the Seller;
or (c) except as set forth on Schedule 3.12 hereto, commitments, agreements or
understandings of
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any kind, including employee benefit arrangements, relating to the issuance or
repurchase by the Seller of any capital stock or other equity interests of the
Seller, any such securities or instruments convertible or exercisable for
securities or any such options, warrants or rights.
Section 3.13 Financial Statements
The Seller has previously delivered to Purchaser
true and complete copies of its Financial Statements. The Seller will provide
the audited 1995 Financial Statements with an unqualified opinion of its
regular firm of certified public accountants to the Purchaser by the Closing
date, which audited 1995 Financial Statements shall be identical to the
unaudited 1995 Financial Statements previously provided to the Purchaser. The
Financial Statements: (a) have been prepared in accordance with the books of
account and records of the Seller; (b) fairly present, and are true, correct
and complete statements in all respects of the Seller's financial condition and
the results of its operations at the dates and for the periods specified in
those statements; and (c) have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") consistently applied with
prior periods. Whenever in this Agreement an inconsistency would result between
the application of GAAP and reporting consistently with a prior period with
respect to the Seller, the provisions of GAAP shall govern.
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Section 3.14 Absence of Undisclosed Liabilities
Other than as disclosed by the Financial Statements
dated December 31, 1995, or as set forth on Schedule 3.14 hereto, the Seller
does not have any direct or contingent liabilities, commitments or obligations
(other than nonmaterial liabilities, commitments or obligations incurred since
December 31, 1995, in the ordinary course of business to Persons who are not
Affiliates of the Seller, the Executive or the Stockholder) or any unrealized
or anticipated losses from any commitments of the Seller, and there is no basis
for assertion against the Seller of any such liability, commitment or
obligation.
Section 3.15 Title to Securities
The Stockholder is the record and beneficial owner
of the shares of capital stock of the Seller listed opposite its name on
Schedule 3.15, and, except as set forth on Schedule 3.15 hereto, such shares of
capital stock of the Seller are owned free and clear of any liens,
encumbrances, pledges, security interests and claims whatsoever, including,
without limitation, claims or rights under any voting trust agreements,
shareholder agreements or other agreements.
Section 3.16 Title to and Condition of Personal Property
The Seller has good and marketable title to each
item of equipment and other personal property, tangible and intangible,
included as an asset in the Financial Statements dated December 31, 1995 (other
than property disposed of in the ordinary
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course of business since December 31, 1995 to Persons who are not Affiliates of
the Seller, the Executive or the Stockholder) and to each item of equipment and
other personal property, tangible and intangible, acquired since December 31,
1995, free and clear of any security interests, liens, claims, charges or
encumbrances whatsoever, except as set forth in Schedule 3.16 hereto or
specifically identified as such in the December 31, 1995 Financial Statements.
Except as set forth in Schedule 3.16, all tangible personal property owned by
the Seller or used by the Seller on the date hereof in the operation of its
business is in good operating condition and in a good state of maintenance and
repair, and is adequate for the business conducted and proposed to be conducted
by the Seller. Except for the Leases specifically identified in Schedule 3.17,
there are no assets owned by any third party which are used in the operation of
the business of the Seller, as presently conducted or proposed to be conducted.
Section 3.17 Real Property
The Seller does not own any fee simple interest in
real property other than as set forth on Schedule 3.17. The Seller does not
lease or sublease any real property other than as set forth on Schedule 3.17.
Schedule 3.17 sets forth the street address of each parcel of real property
leased or subleased by the Seller (the "Leased Property"). The Seller has
previously delivered to Purchaser a true and complete copy of all of the lease
and sublease agreements, as amended to date (the "Leases") relating
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to the Leased Property. The Seller enjoys peaceful and undisturbed possession
of the Leased Property. All improvements located on the Leased Property are in
a state of good maintenance and repair and in a condition adequate and suitable
for the effective conduct therein of the business conducted and proposed to be
conducted by the Seller. No person other than the Seller has any right to use
or occupy any part of the Leased Property. The Leases are valid, binding and in
full force and effect, all rent and other sums and charges payable thereunder
are current, no notice of default or termination under any of the Leases is
outstanding, no termination event or condition or uncured default on the part
of the Seller or on the part of the landlord or sublandlord, as the case may
be, thereunder, exists under the Leases, and no event has occurred and, to the
Seller's knowledge, no condition exists which, with the giving of notice or the
lapse of time or both, would constitute such a default or termination event or
condition. In the event that any of the Leases is a sublease, the Seller, as
sublessee or sublessor, as the case may be, has obtained the required consent
of the prime landlord to such sublease, and such prime lease is in full force
and effect, there are no outstanding uncured notices of default or termination,
and no right of the Seller in any such sublease conflicts with such prime
lease. There are no subleases, licenses or other agreements granting to any
person other than the Seller any right to the possession, use, occupancy or
enjoyment of
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the premises demised by the Leases. All of the premises are used
in the conduct of the Seller's business.
The heating, ventilation, air conditioning, plumbing
and electrical systems at the Leased Property will be in good working order and
repair on the Closing date. The Seller has not experienced any interruption in
the services provided to any of the premises within the last six (6) months. No
landlord under the Leases has any plans to make any alterations to any of the
Leased Property, the construction of which would interfere with the use of any
portion of the Leased Property. No landlord under the Leases has any plans to
make any alterations to any of the buildings in which Leased Property is
located, the costs of which alterations would be borne in any part by a tenant
under the applicable Lease.
All permits, licenses, franchises, approvals and
authorizations (collectively, the "Real Property Permits") of all governmental
authorities having jurisdiction over each Leased Property and from all
insurance companies and fire rating and other similar boards and organizations
(collectively, the "Insurance Organizations"), required or appropriate have
been issued to the Seller to enable each Leased Property to be lawfully
occupied and used for all of the purposes for which they are currently occupied
and used, have been lawfully issued and are, as of the date hereof, in full
force and effect. Neither the Seller, the Executive nor the Stockholder has
received or been informed by a third party of the receipt by it of any notice
from any governmental authority
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having jurisdiction over any Leased Property or from any Insurance Organization
threatening a suspension, revocation, modification or cancellation of any Real
Property Permit or of any insurance policies and there is no basis for the
issuance of any such notice or the taking of any such action. Other than the
instruments of assignment contemplated hereby, and any required consents of
third parties as set forth on Schedule 3.17, Seller knows of no action required
by Seller, the Executive, the Stockholder or any other party in order for all
Real Property Permits and liability and casualty insurance policies required
under any of the Leases to become Real Property Permits and insurance policies
of Purchaser.
Neither Seller, the Executive nor the Stockholder
has received any notice nor have they any knowledge of any pending, threatened
or contemplated condemnation proceeding affecting any Leased Property or any
part thereof.
To the best of Seller's knowledge, there are no
liabilities (other than rent and other sums and charges regularly payable)
associated with any of the Leases including, without limitation, any liability
under any Environmental Law (as hereinafter defined) or regulation, which is or
which may become payable by Purchaser.
Section 3.18 Insurance
Schedule 3.18 sets forth a true and complete list of
all insurance policies providing insurance coverage of any nature
to the Seller. The Seller has previously made available to
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Purchaser a true and complete copy of all of such insurance policies, as
amended to the date hereof. Such policies are sufficient for compliance by the
Seller with all requirements of law and all agreements to which the Seller is a
party or by which any of its assets are bound. All of such policies are in full
force and effect and are valid and enforceable in accordance with their terms,
and the Seller has complied with all terms and conditions of such policies,
including premium payments. None of the insurance carriers has indicated to the
Seller an intention to cancel any such policy. Except as set forth on Schedule
3.18, the Seller has no claim pending against any of the insurance carriers
under any of such policies with respect to any of the Purchased Assets or the
Assumed Liabilities, and to the best of Seller's, Executive's and Shareholder's
knowledge after due inquiry, there has been no actual or alleged occurrence of
any kind which may give rise to any such claim. All claims with respect to
product liability involving occurrences prior to the Closing date, whether
asserted prior to or subsequent to the Closing date, shall be the
responsibility and liability of Seller.
Section 3.19 Licenses
Schedule 3.19 lists all authorizations, consents,
approvals, franchises, licenses and permits required under applicable law or
regulation for the operation of the business of the Seller as presently
operated (the "Governmental Authorizations"). All Governmental Authorizations
have been duly
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issued or obtained and are in full force and effect, and the Seller is in
compliance with the terms of all Governmental Authorizations. Neither the
Seller, the Executive nor the Stockholder has any knowledge of any facts which
could reasonably be expected to cause them to believe that the Governmental
Authorizations will not be renewed by the appropriate governmental authorities
in the ordinary course. Neither the execution, delivery nor performance of this
Agreement shall adversely affect the status of any of the Governmental
Authorizations, subject to obtaining necessary consents specifically identified
on Schedule 3.19 which Seller undertakes to obtain prior to Closing date.
Section 3.20 Proprietary Rights
Set forth on Schedule 3.20 is a list and description
of all foreign and domestic patents, patent rights, trademarks, service marks,
trade names, brands and copyrights (whether or not registered and, if
applicable, including pending applications for registration) owned, used or
controlled by the Seller (collectively, the "Rights"). Except as set forth on
Schedule 3.20: (a) the Seller is the sole and exclusive owner of all right,
title and interest in and to all of the Rights and in and to each invention,
software, trade secret, technology, product, composition, formula, method or
process used by the Seller (together with the Rights, collectively referred to
as the "Intangible Property"), and has the exclusive right to use and license
the same, free and clear of any claim or conflict with the
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rights of others; (b) no royalties or fees (license or otherwise) are payable
by the Seller to any Person by reason of the ownership or use of any of the
Intangible Property; (c) there have been no claims made against the Seller
asserting the invalidity, abuse, misuse, or unenforceability of any of the
Intangible Property, and there are no reasonable grounds for any such claims;
(d) the Seller has not made any claim of any violation or infringement by
others of its rights in the Intangible Property, and has no knowledge of any
basis for the assertion of any such claims; (e) the Seller has not received any
written notice or other type of overt notice that it is in conflict with or
infringing upon the asserted rights of others in connection with the Intangible
Property and neither the use of the Intangible Property by the Seller, the
operation of its business, the manufacture of its products, nor any formula,
method, process, part or material employed by the Seller in connection
therewith, is infringing or has infringed upon any rights of others; (f) the
Intangible Property includes all rights necessary for the Seller to be legally
entitled to conduct its business as presently being conducted; (g) the
consummation of the transactions contemplated hereby will not alter or impair
any of the Intangible Property; (h) no interest of the Seller's rights to any
Intangible Property has been assigned, transferred, licensed or sublicensed by
the Seller to third parties; (i) to the extent that any item constituting part
of the Intangible Property has been registered with, filed in or issued by, as
the case may be, any governmental
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or other regulatory authority, such registrations, filings or issuances are
listed on Schedule 3.20, and were duly made and remain in full force and
effect; (j) there is no act or failure to act by the Seller or any of its
directors, officers, employees, attorneys or authorized agents during the
prosecution or registration of, or any other proceeding relating to, any of the
Intangible Property or of any other fact which could render invalid or
unenforceable, or negate the right to any of the Intangible Property.
Section 3.21 Major Customers and Suppliers; Supplies
The Seller has provided Purchaser with a list of the
ten (10) largest customers (measured by dollar volume) of the Seller and all
suppliers of significant goods or services to the Seller for the period ended
December 31, 1995. Schedule 3.21 identifies those suppliers of significant
goods or services with respect to which alternative sources of supply are not
readily available on comparable terms and conditions. Except as indicated on
Schedule 3.21, all supplies and services necessary for the conduct of the
business of the Seller, as presently conducted, may be obtained from alternate
sources on terms and conditions comparable to those presently available to the
Seller, and no facts, circumstances or conditions exist which create a
reasonable basis for believing that the Purchaser will be unable to continue to
procure the supplies and services necessary to conduct the business conducted
by Seller on substantially the same terms and
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conditions as such supplies and services are currently procured. There has not
been and to the best of Seller's knowledge there will not be any adverse change
in the relations of the Seller with their respective customers, suppliers,
contractors, licensors and lessors, as a result of the announcement or
consummation of the transactions contemplated by this Agreement and the Seller
has no knowledge that any of the Seller's major customers or suppliers has or
is contemplating terminating its relationship with the Seller. To the best of
Seller's knowledge, no major customer or supplier has experienced any type of
work stoppage or other adverse circumstances or conditions that may jeopardize
or adversely affect the Purchaser's future relationship with any major customer
or supplier. Except as set forth on Schedule 3.21, there are no pending
disputes or controversies between any major customer or supplier of the Seller,
and there exist no facts which to the best of Seller's knowledge in the future
would impair the relationship of the Purchaser with the Seller's major
customers or suppliers.
Section 3.22 Related Parties
Except as set forth on Schedule 3.22, none of the
Seller, nor any current or former (within the past five (5) years) director,
officer or employee of the Seller (individually a "Related Party" and
collectively the "Related Parties") or any Affiliate of any of the Seller or
any Related Party: (a) owns, directly or indirectly, any interest in any person
which is a competitor of the Seller, or of a supplier or customer of the
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Seller; (b) owns, directly or indirectly, in whole or in part, any property,
asset or right, real, personal or mixed, tangible or intangible (including, but
not limited to, any of the Intangible Property) which is utilized in the
operation of the business of the Seller; or (c) has an interest in or is,
directly or indirectly, a party to any contract, agreement, lease or
arrangement pertaining or relating to the Seller, except for employment,
consulting or other personal service agreements that may be in effect and which
are listed on Schedule 3.26(a) hereto.
Section 3.23 List of Accounts
Set forth on Schedule 3.23 is: (a) the name and
address of each bank or other institution in which the Seller maintains an
account (cash, securities or other) or safe deposit box; (b) the name and
telephone number of the Seller's contact person at such bank or institution;
(c) the account number of the relevant account and a description of the type of
account; and (d) the signatories to each such account.
Section 3.24 Personnel
Schedule 3.24 contains the names, job descriptions
and annual salary rates and other compensation of all officers, directors,
consultants and employees (who are paid in excess of Twenty-Five Thousand
Dollars ($25,000.00) per annum by the Seller) of the Seller (including
compensation paid or payable by the Seller under the Seller Plans (as
hereinafter defined)). A list of all employee policies, employee manuals or
other written statements of
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rules or policies as to working conditions, vacation and sick leave is set
forth on Schedule 3.24, a complete copy of each of which has been provided to
Purchaser.
Section 3.25 Labor Relations
There is no strike, work stoppage or slowdown or
labor disturbance pending or, to the best of the Seller's knowledge, threatened
that involves any employees of the Seller. The Seller is not a party to,
otherwise bound by or threatened with any labor or collective bargaining
agreement and there have been no attempts to organize a labor union or to seek
recognition as a collective bargaining unit by or with respect to any employees
of the Seller. Without limiting the generality of Section 3.6, except as
identified on Schedule 3.25, (a) (i) no unfair labor practice complaints have
been filed against the Seller with any governmental or regulatory agency, which
either the Seller, the Executive or the Stockholder has received notice, (ii)
the Seller has not received any notice or communication reflecting an intention
or threat to file any such complaint, and (iii) no Person has made any claim,
and there is no basis for any claim, against the Seller under any statute,
regulation or ordinance relating to discrimination with respect to employees or
employment practices, and (b) no claim is pending or to the best knowledge of
the Sellers threatened against the Seller in connection with the United States
Wage and Hour Law, the Americans with Disabilities Act, the Occupational Safety
and Health Act or similar law.
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Section 3.26 Employment Agreements and Employee Benefit
Plans
(a) Employment Agreements. Except as set forth
on Schedule 3.26(a), there are no employment, consulting, severance or
indemnification arrangements, agreements or understandings between the Seller
and any officer, director, consultant or employee ("Employment Agreements"). The
Seller has previously delivered to Purchaser true and complete copies of all of
the Employment Agreements. Except as set forth in Schedule 3.26(a), the terms of
employment or engagement of all directors, officers, employees, agents,
consultants and professional advisers of the Seller are such that their
employment or engagement may be terminated upon not more than two weeks notice
given at any time without liability for payment of compensation or damages and
the Seller has not entered into any agreement or arrangement for the management
of its business or any part thereof other than with its directors or employees.
(b) Employee Benefit Plans. Except as set forth
on Schedule 3.26(b), the Seller has no pension, retirement, stock purchase,
stock bonus, stock ownership, stock option, profit sharing, savings, medical,
disability, hospitalization, insurance, deferred compensation, bonus, incentive,
welfare or any other employee benefit plan, policy, agreement, commitment,
arrangement or practice currently or previously maintained or contributed to by
the Seller for any of its directors, officers, consultants, employees or former
employees (the "Seller Plans"). The Seller has
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previously made available to Purchaser (i) a true and complete copy of all of
the Seller Plans (or, if oral, an accurate written summary thereof); (ii) a
current summary plan description (plus summaries of any subsequent
modifications thereto) for each Seller Plan; (iii) the latest IRS determination
letter obtained with respect to any Seller Plan qualified under Section 401 or
501 of the Internal Revenue Code of 1986, as amended (the "Code"); and (iv)
Forms 5500 for the last three (3) plan years for each Seller Plan required to
file such form. Except as set forth on Schedule 3.26(b), none of the Seller
Plans are subject to ERISA and except as set forth on Schedule 3.26(b), the
Seller has not established, maintained, made or been required to make any
contributions to, or terminated, and has no liability with respect to, any
"employee benefit plan" within the meaning of ERISA. The Seller has not
incurred any liability to the Pension Benefit Guaranty Corporation (the "PBGC")
and no facts or circumstances exist which might give rise to any liability of
the Seller to the PBGC or which could reasonably be anticipated to result in
any claims being made against ABA, the Purchaser or the Seller by the PBGC. No
facts or circumstances exist which might give rise to any liability of any
Seller Plan to any other Person. The Seller has paid all amounts required under
applicable law and any Seller Plan to be paid as a contribution to any Seller
Plan through the date hereof. The Seller has set aside adequate reserves to
meet contributions which are not yet due under any Seller Plan. Neither the
Seller, the
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Executive, the Stockholder nor any other Person has engaged in any transaction
with respect to any Seller Plan which would subject the Seller to any tax,
penalty or liability for prohibited transactions. No director, officer or
employee of the Seller, to the extent he is a fiduciary with respect to any
Seller Plan, has breached any of his responsibilities or obligations imposed
upon fiduciaries or which could result in any claim being made under, by or on
behalf of any Seller Plan. No Seller Plan provides post- employment medical,
health, or life insurance benefits for present or future retirees or present or
future terminated employees, except for continuation coverage provided pursuant
to the requirements of Section 4980B of the Code or Sections 601-608 of ERISA
or a similar state law.
Section 3.27 Tax Matters
The Seller has previously delivered to Purchaser
true, correct and complete copies of each of the federal, state and local
income tax returns filed by the Seller, its Subsidiaries and Affiliates for the
past five fiscal years through December 31, 1995. Except as provided on
Schedule 3.27: All tax returns and tax reports required to be filed with
respect to the business and assets of the Seller, its Subsidiaries and
Affiliates have been timely filed (or appropriate extensions have been
obtained) with the appropriate governmental agencies in all jurisdictions in
which such returns and reports are required to be filed, all of the foregoing
as filed are true, correct and complete and, in all
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respects, reflect accurately all liability for taxes of the Seller, its
Subsidiaries and Affiliates for the periods to which such returns relate, and
all amounts shown as owing thereon have been paid. All income, profits,
franchise, sales, use, value added, occupancy, property, excise, payroll, FICA,
FUTA and other taxes (including interest and penalties), if any, collectible or
payable by the Seller, its Subsidiaries or Affiliates or relating to or
chargeable against any of their respective assets, revenues or income through
December 31, 1995, and through the Closing date, were fully collected and paid
by such date or provided for by adequate reserves in the December 31, 1995
Financial Statements and all similar items due through the Closing date will
have been fully paid by that date or provided for by adequate reserves. Except
as set forth on Schedule 3.27, no taxation authority has sought to audit the
records of the Seller, its Subsidiaries or Affiliates for the purpose of
verifying or disputing any tax returns, reports or related information and
disclosures provided to such taxation authority. No claims or deficiencies have
been asserted against the Seller, its Subsidiaries or Affiliates with respect
to any taxes or other governmental charges or levies which have not been paid
or otherwise satisfied or for which accruals or reserves have not been made in
the December 31, 1995 Financial Statements, and to the best of Seller's
knowledge, there exists no reasonable basis for the making of any such claims,
all of which shall remain the responsibility of Seller whether or not
scheduled, unless
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specifically assumed by Purchaser as part of the Assumed Liabilities set forth
on Schedule 2.1(a)(ii). The Seller, its Subsidiaries or Affiliates have not
waived any restrictions on assessment or collection of taxes or consented to
the extension of any statute of limitations relating to taxation.
Section 3.28 Material Agreements
(a) Schedule 3.28 sets forth a brief description
of all material written and oral contracts or agreements relating to the Seller
(except with respect to the Leases, which are set forth on Schedule 3.17, which
is hereby incorporated by reference into Schedule 3.28 and made a part
thereof), including without limitation any: (i) contract resulting in a
commitment or potential commitment for expenditure or other obligation or
potential obligation, or which provides for the receipt or potential receipt,
involving in excess of Fifteen Thousand Dollars ($15,000.00) in any instance,
or series of related contracts that in the aggregate give rise to rights or
obligations exceeding such amount; (ii) indenture, mortgage, promissory note,
loan agreement, guarantee or other agreement or commitment for the borrowing or
lending of money or encumbrance of assets involving more than Fifteen Thousand
Dollars ($15,000.00) in each instance; (iii) agreement which restricts the
Seller from engaging in any line of business or from competing with any other
Person; (iv) warranties made with respect to products manufactured, packaged,
distributed or sold by the Seller; or (v) any other contract, agreement,
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instrument, arrangement or commitment that is material to the condition
(financial or otherwise), results of operation, assets, properties,
liabilities, business or prospects of the Seller (collectively, and together
with the Leases, Employment Agreements, Seller Plans and all other agreements
required to be disclosed on any Schedule to this Agreement, the "Material
Agreements"). The Seller has previously furnished to Purchaser true, complete
and correct copies of all written agreements, as amended, required to be listed
on Schedule 3.28. Purchaser does not assume any such agreement whether or not
listed on Schedule 3.28, and Seller acknowledges and agrees that all such
agreements and the obligations and liabilities of Seller thereunder shall
remain the responsibility of Seller, unless and to the extent expressly assumed
as an Assumed Liability set forth on Schedule 2.1 (a)(ii).
(b) Except as set forth on Schedule 3.28, none
of the Material Agreements was entered into outside the ordinary course of
business of the Seller, contains any unusual, onerous or burdensome provisions
that will impair or adversely effect in any way the operations of the Seller, or
is reasonably likely to be performed at a loss.
(c) The Material Agreements are each in full
force and effect and are the valid and legally binding obligations of the Seller
and the other parties thereto, enforceable in accordance with their respective
terms, subject only to bankruptcy, insolvency or similar laws affecting the
rights of creditors generally and to
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general equitable principles. Neither the Seller, the Executive nor the
Stockholder has received notice of default by the Seller under any of the
Material Agreements and no event has occurred which, with the passage of time
or the giving of notice or both, would constitute a default by the Seller
thereunder. None of the other parties to any of the Material Agreements is in
default thereunder, nor has an event occurred which, with the passage of time
or the giving of notice or both would constitute a default by such other party
thereunder. Neither the Seller, the Executive nor the Stockholder has received
notice of the pending or threatened cancellation, revocation or termination of
any of the Material Agreements, nor are any of them aware of any facts or
circumstances which could reasonably be expected to lead to any such
cancellation, revocation or termination.
(d) Except as otherwise indicated on Schedule
3.28, the continuation, validity and effectiveness of the Material Agreements
under the current terms thereof will in no way be affected by the consummation
of the transactions contemplated by this Agreement.
Section 3.29 Guaranties
Except as set forth on Schedule 3.29, the Seller is
not a party to any Guaranty, and no Person is a party to any
Guaranty for the benefit of the Seller.
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Section 3.30 Products
(a) Except as set forth on Schedule 3.30, there
exists no set of facts (i) which could furnish a basis for the recall,
withdrawal or suspension of any product, governmental license, approval or
consent of any governmental or regulatory agency with respect to any product
distributed or sold by the Seller (a "Product"), (ii) which could furnish a
basis for the recall, withdrawal or suspension by order of any state, federal
or foreign court of law of any Product, or (iii) which could have an adverse
effect on the continued operation of any facility of the Seller or which could
otherwise cause the Seller to recall, withdraw or suspend any such Product from
the market or to change the marketing classification of any such Product.
(b) True, correct and complete copies of all
correspondence received or sent by or on behalf of the Seller during the past
five (5) years, from or to any governmental regulatory agency have been
previously delivered to Purchaser.
Section 3.31 Environmental Matters
(a) Except as described on Schedule 3.31, the
Seller and its present and former Subsidiaries and Affiliates have complied in
all material respects with all applicable Environmental Laws; (ii) no
Recognized Environmental Condition exists on the real property and Leased
Property or improvements thereon owned or leased, as the case may be, by the
Seller except as set forth on Schedule 3.31 hereto, (iii) Seller has not
received any complaint,
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notice, order or citation of any actual, threatened or alleged noncompliance by
the Seller, the Executive or the Stockholder with any of the Environmental
Laws; and (iv) there is no proceeding, suit or investigation pending or, to the
Seller's knowledge, threatened against any of the Seller, the Executive, or the
Stockholder with respect to any violation or alleged violation of any
Environmental Laws and there is no reasonable basis for the institution of any
such proceeding, suit or investigation.
(b) In the event that the Phase I Environmental
Assessment to be performed indicates that the real property and Leased Property
or the improvements thereon identified on Schedule 3.17 are not in compliance
in all material respects with the Environmental Laws or other applicable laws,
or that a Recognized Environmental Condition exists, Purchaser shall so notify
Seller in writing within 10 days after receipt of the results of the Phase I
Environmental Assessment. The Purchaser shall elect in writing within 10 days
of receipt of such notice to either (i) require the Seller to bring the real
property or Leased Property, as applicable, into compliance with applicable
laws or to otherwise reasonably correct the defect in a good and workmanlike
manner in compliance with applicable laws; provided, however, that if the cost
to Seller of remedying any such condition is reasonably expected to exceed
$25,000, the Seller shall have the option, in its sole discretion, to not
perform any such remedial acts upon giving the Purchaser written notice within
10 days of Seller's
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receipt of Purchaser's notice, in which event, the Purchaser shall have the
option, in its sole discretion, to terminate this Agreement in accordance with
Section 6.4 hereof; or (ii) terminate this Agreement pursuant to Section 6.4 of
this Agreement. In the event that Seller elects to remedy any Recognized
Environmental Condition or other item identified by the Phase I Environmental
Assessment, Seller shall commence such action promptly, but in any event within
30 days of his election or within any such additional time upon which the
parties may mutually agree.
Section 3.32 Certain Transfers
The transfer of the Purchased Assets by the Seller
to Purchaser in accordance with the terms of this Agreement shall not
constitute a voidable preference or transfer in fraud by any creditor under
applicable federal or state insolvency law.
Section 3.33 Non-Distributive Intent
The Seller is acquiring the shares of ABA Common
Stock to be issued hereunder for its own account (and not for the account of
others) for investment and not with a view to the distribution thereof. The
Seller will not sell or otherwise dispose of such shares (whether pursuant to a
liquidating dividend or otherwise) without registration under the Securities
Act or an exemption therefrom, and the certificate or certificates representing
such shares may contain a legend to the foregoing effect. By virtue of its
position the Seller has access to the kind of financial and other information
about ABA as would be
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contained in a registration statement filed under the Securities Act. The
Seller understands that it may not sell or otherwise dispose of such shares in
the absence of either a registration statement under the Securities Act or an
exemption from the registration provisions of the Securities Act.
Section 3.34 Inventories
Except as set forth on Schedule 3.34, the
inventories of the Seller (raw materials, work-in-process and finished goods)
shown on the balance sheet included in the December 31, 1995 Financial
Statements have been valued at the lower of cost or market, reduced by all
appropriate reserves for obsolescence, valuation and other appropriate matters.
Such inventory does not and will not include any items below standard quality,
damaged or spoiled, obsolete or of a quality or quantity not useable or
saleable in the ordinary course of the business of the Seller as currently
conducted, at normal margins, or any items whose expiration date has passed or
will pass within twelve months of the date hereof, or any excess inventory, the
value of which has not been fully written down or reserved against in the
Financial Statements. The Seller has and will continue to have through the
Closing date adequate quantities and types of inventory to enable it to conduct
its business as presently conducted and as anticipated to be conducted.
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Section 3.35 Absence of Certain Business Practices
None of the Seller, the Executive, the Stockholder,
their respective Related Parties, any Affiliate of the Seller, the Executive,
the Stockholder or any Related Party, any agent of the Seller, any other Person
acting on behalf of or associated with the Seller or any individual related to
any of the foregoing Persons, acting alone or together, has: (a) received,
directly or indirectly, any rebates, payments, commissions, promotional
allowances or any other economic benefits, regardless of their nature or type,
from any customer, supplier, trading company, shipping company, governmental
employee or other Person with whom the Seller has done business directly or
indirectly; or (b) directly or indirectly, given or agreed to give any gift or
similar benefit to any customer, supplier, trading company, shipping company,
governmental employee or other Person who is or may be in a position to help or
hinder the business of the Seller (or assist the Seller in connection with any
actual or proposed transaction) which (i) may subject the Seller to any damage
or penalty in any civil, criminal or governmental litigation or proceeding,
(ii) if not given in the past, may have had an adverse effect on the assets,
business, operations or prospects of the Seller as reflected in the Financial
Statements or (iii) if not continued in the future, may adversely affect the
assets, business, operations or prospects of the Seller or subject the Seller
to suit or penalty in any private or governmental litigation or proceeding.
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Section 3.36 Accounts and Notes Receivable
The Seller has delivered to Purchaser a true and
complete aged list of unpaid accounts and notes receivable owing to the Seller
as of ten business days prior to the Closing date, setting forth the due dates
thereof, that are a part of the Purchased Assets (the "Receivables"). All of
such Receivables constitute only bona fide, valid and binding claims arising in
the ordinary course of the Seller's business, subject to no valid counterclaims
or setoffs, at the aggregate recorded amount thereof subject to normal reserves
for doubtful accounts and normal discounts. All sales underlying such
Receivables are final sales, with no right of return, and except as set forth
on Schedule 3.36 attached hereto, were made under normal sales terms in the
ordinary course of business and all related warranties have been adequately
reserved. The Seller, the Executive and the Stockholder hereby agree to
guarantee to ABA and the Purchaser the collectibility of all such Receivables,
in accordance with the terms of a Guarantee Agreement to be entered into
substantially in the form of Exhibit A attached hereto. Such guarantee shall be
a guarantee of payment and not of collection.
Section 3.37 Disclosure
No representation or warranty of the Seller, the
Executive or the Stockholder contained in this Agreement, and no statement,
report, or certificate furnished by or on behalf of the Seller, the Executive
or the Stockholder to Purchaser or its agents
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pursuant hereto or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading or omits or will omit to state a
material fact necessary in order to provide a prospective purchaser of the
Purchased Assets with full and proper information as to the business, financial
condition, assets, results of operation or prospects of the Seller and the
value of its properties.
ARTICLE IV
Representations and Warranties of ABA and the Purchaser
In order to induce the Seller, the Executive and the
Stockholder to enter into this Agreement and to consummate the transactions
contemplated hereby, ABA and the Purchaser make the representations and
warranties set forth below to the Seller, the Executive and the Stockholder.
Section 4.1 Organization; Standing and Power
Each of ABA and the Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. Each of ABA and the Purchaser is duly qualified to transact
business as a foreign corporation in all jurisdictions where the ownership or
leasing of its respective properties or the conduct of its respective
businesses requires such qualification, except where the failure to be so
qualified
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would not have an adverse effect on the business, operations or properties of
ABA or the Purchaser, as the case may be. Each of ABA and the Purchaser has all
requisite right, power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby.
Section 4.2 Authorization; Enforceability
The execution, delivery and performance of this
Agreement by ABA and the Purchaser and the consummation by ABA and the
Purchaser of the transactions contemplated hereby have been duly authorized by
all requisite corporate action on the part of ABA and the Purchaser. This
Agreement has been duly executed and delivered by ABA and the Purchaser, and
constitutes the legal, valid and binding obligation of ABA and the Purchaser,
enforceable in accordance with its terms, except to the extent that its
enforcement is limited by bankruptcy, insolvency, reorganization or other laws
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity.
Section 4.3 Validity of ABA Common Stock
The shares of ABA Common Stock to be delivered to
Seller pursuant to this Agreement, when issued in accordance with the terms and
provisions of this Agreement, will be validly authorized, validly issued, fully
paid and nonassessable.
Section 4.4 Brokers
Neither ABA nor the Purchaser has employed any
financial advisor, broker or finder and has not incurred and will
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not incur any broker's, finder's, investment banking or similar fees,
commissions or expenses, in connection with the transactions contemplated by
this Agreement.
Section 4.5 SEC Filings and Financial Statements
ABA has heretofore made available to the Seller true
and complete copies of all reports, registration statements, definitive proxy
statements and other documents (in each case together with all amendments and
supplements thereto) filed by the Company with the Commission since September
20, 1993 (such reports, registration statements, definitive proxy statements
and other documents, together with any amendments and supplements thereto, are
sometimes collectively referred to as the "SEC Filings"). The SEC Filings
constitute all of the documents (other than preliminary materials) that ABA was
required to file with the Commission since such date. As of their respective
dates, each of the SEC Filings complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as
applicable, and the rules and regulations under each such Act. None of the SEC
Filings contained as of such date any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. When filed with the Commission, the financial
statements included in the SEC Filings complied as to form in all material
respects with the applicable rules and regulations of the Commission and were
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prepared in accordance with GAAP (as in effect from time to time) applied on a
consistent basis (except as may be indicated therein or in the notes or
schedules thereto), and such financial statements fairly present in accordance
with GAAP in all material respects the financial position of ABA as at the
dates thereof and the results of its operations and its cash flows for the
periods then ended, subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end audit adjustments and the absence of
footnotes.
Section 4.6 No Violation or Conflict
The execution, delivery and performance of this
Agreement by each of ABA and the Purchaser and the consummation by each of ABA
and the Purchaser of the transactions contemplated hereby do not violate or
conflict with any provision of ABA's or the Purchaser's Certificate of
Incorporation or Bylaws, and do not, with or without the passage of time or the
giving of notice, or both, result in the breach of, or constitute a default,
pursuant to any instrument or agreement to which either ABA or Purchaser is a
party.
Section 4.7 Consents of Governmental Authorities and
Others
Except as set forth on Schedule 4.7, no consent,
approval or authorization of, or registration, qualification or filing with,
any federal, state or local governmental or regulatory authority, or any other
Person, is required in connection with the execution, delivery or performance
of this Agreement by ABA or the
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Purchaser or the consummation by ABA or the Purchaser of the transactions
contemplated hereby.
Section 4.8 Litigation
Except as set forth on Schedule 4.8, or as disclosed
in the SEC Filings, there are no actions, suits, investigations, claims or
proceedings ("Litigation") pending or, to the knowledge of ABA or the
Purchaser, threatened before any court or by or before any governmental or
regulatory authority or arbitrator, (a) affecting ABA or the Purchaser (as
plaintiff or defendant) which could, individually or in the aggregate, have a
material adverse effect on the condition (financial or otherwise), results of
operations, properties, assets, liabilities, business or prospects of ABA or
the Purchaser or (b) against ABA or the Purchaser relating to the transactions
contemplated by this Agreement and there exist no facts or circumstances known
to ABA or the Purchaser creating any reasonable basis for the institution of
any such action, suit, investigation, claim or proceeding described above.
ARTICLE V
Additional Agreements
Section 5.1 Survival
The representations, warranties, covenants and
agreements of ABA, the Purchaser, the Seller, the Executive and the Stockholder
set forth in this Agreement shall survive the Closing date; provided, however,
that the representations and warranties of
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the Seller, the Executive and the Stockholder contained in Article III and the
representations and warranties of ABA and the Purchaser contained in Article IV
shall survive the Closing date until June 30, 1999; and provided, further, that
none of the limitations of the immediately preceding proviso shall apply with
respect to indemnification obligations of a party arising in connection with
the breach of any representation or warranty set forth in Sections 3.7, 3.11,
3.12, 3.15, 3.22, 3.27, 3.30, 3.31 or 3.35 of this Agreement, and none of such
limitations shall apply with respect to any action based upon intentional or
fraudulent actions, misrepresentations or breaches of any party.
Section 5.2 Investigation
The representations, warranties, covenants and
agreements set forth in this Agreement shall not be affected or diminished in
any way by any investigation (or failure to investigate) at any time by or on
behalf of the party for whose benefit such representations, warranties,
covenants and agreements were made. All representations and warranties
contained herein or in any schedule, certificate, exhibit, list or other
document delivered pursuant hereto, shall be deemed to be representations and
warranties for purposes of this Agreement.
Section 5.3 Indemnification
(a) By Seller, the Executive and the
Stockholder. Subject to the limitations set forth in Sections 5.1 and 5.3(e),
the Seller, the Executive and the Stockholder agree, jointly and
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severally, to indemnify and hold harmless ABA, the Purchaser and their
respective directors, officers, employees and agents from, against and in
respect of, the full amount of any and all liabilities, damages, claims,
deficiencies, fines, assessments, losses, taxes, penalties, interest, costs and
expenses, including, without limitation, reasonable fees and disbursements of
counsel and accountants, arising from, in connection with, or incident to (i)
any breach or violation of any of the representations, warranties, covenants or
agreements of any of the Seller, the Executive or the Stockholder contained in
this Agreement or any agreement referred to herein and delivered at or prior to
the Closing; (ii) any and all claims arising out of, relating to, resulting
from or caused (whether in whole or in part) by any transaction, event,
condition, occurrence or situation in any way relating to the Seller or the
conduct of its business arising or occurring on or prior to the Closing date
without regard to whether such claim exists on the Closing date or arises at
any time thereafter; (iii) any obligation or liability of the Seller of any
nature, whether accrued, contingent, absolute or otherwise, not assumed by ABA
or the Purchaser in accordance with this Agreement; (iv) any and all actions,
suits, proceedings, demands, assessments or judgments, costs and expenses
incidental to any of the foregoing; and (v) any obligation or liability of the
Seller or the Stockholder for any taxes attributable to or arising from the
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ownership or sale or use of the Purchased Assets or the conduct of
any business by the Seller.
(b) By ABA and the Purchaser. Subject to the
limitations set forth in Sections 5.1 and 5.3(e), ABA and the Purchaser agree,
jointly and severally, to indemnify and hold harmless the Seller, the Executive
and the Stockholder from, against and in respect of, the full amount of any and
all liabilities, damages, claims, deficiencies, fines, assessments, losses,
taxes, penalties, interest, costs and expenses, including, without limitation,
reasonable fees and disbursements of counsel, arising from, in connection with,
or incident to (i) any breach or violation of any of the representations,
warranties, covenants or agreements of ABA or the Purchaser contained in this
Agreement or any agreement referred to herein and delivered at or prior to the
Closing; (ii) any of the Assumed Liabilities; and (iii) any and all actions,
suits, proceedings, demands, assessments or judgments, costs and expenses
incidental to any of the foregoing.
(c) Indemnity Procedure. A party or parties
hereto agreeing to be responsible for or to indemnify against any matter
pursuant to this Agreement is referred to herein as the "Indemnifying Party"
and the other party or parties claiming indemnity is referred to as the
"Indemnified Party".
An Indemnified Party under this Agreement
shall, with respect to claims asserted against such party by any third party,
give written notice to the Indemnifying Party of any
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liability which might give rise to a claim for indemnity under this Agreement
within sixty (60) business days of the receipt of any written claim from any
such third party, but not later than twenty (20) days prior to the date any
answer or responsive pleading is due, and with respect to other matters for
which the Indemnified Party may seek indemnification, give prompt written
notice to the Indemnifying Party of any liability which might give rise to a
claim for indemnity; provided, however, that any failure to give such notice
will not waive any rights of the Indemnified Party except to the extent the
rights of the Indemnifying Party are materially prejudiced.
The Indemnifying Party shall have the right, at
its election, to take over the defense or settlement of such claim by giving
written notice to the Indemnified Party at least fifteen (15) days prior to the
time when an answer or other responsive pleading or notice with respect thereto
is required. If the Indemnifying Party makes such election, it may conduct the
defense of such claim through counsel of its choosing (subject to the
Indemnified Party's approval of such counsel, which approval shall not be
unreasonably withheld), shall be solely responsible for the expenses of such
defense and shall be bound by the results of its defense or settlement of the
claim. The Indemnifying Party shall not settle any such claim without prior
notice to and consultation with the Indemnified Party, and no such settlement
involving any equitable relief or which might have an adverse effect on the
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Indemnified Party may be agreed to without the written consent of the
Indemnified Party (which consent shall not be unreasonably withheld). So long
as the Indemnifying Party is diligently contesting any such claim in good
faith, the Indemnified Party may pay or settle such claim only at its own
expense and the Indemnifying Party will not be responsible for the fees of
separate legal counsel to the Indemnified Party, unless the named parties to
any proceeding include both parties and representation of both parties by the
same counsel would be inappropriate. If the Indemnifying Party does not make
such election, or having made such election does not, in the reasonable opinion
of the Indemnified Party proceed diligently to defend such claim, then the
Indemnified Party may (after written notice to the Indemnifying Party), at the
expense of the Indemnifying Party, elect to take over the defense of and
proceed to handle such claim in its discretion and the Indemnifying Party shall
be bound by any defense or settlement that the Indemnified Party may make in
good faith with respect to such claim. In connection therewith, the
Indemnifying Party will fully cooperate with the Indemnified Party should the
Indemnified Party elect to take over the defense of any such claim.
The parties agree to cooperate in defending
such third party claims and the Indemnified Party shall provide such
cooperation and such access to its books, records and properties as the
Indemnifying Party shall reasonably request with respect to any matter for
which indemnification is sought
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hereunder; and the parties hereto agree to cooperate with each other in order
to ensure the proper and adequate defense thereof.
With regard to claims of third parties for
which indemnification is payable hereunder, such indemnification shall be paid
by the Indemnifying Party upon the earlier to occur of: (i) the entry of a
judgment against the Indemnified Party and the expiration of any applicable
appeal period, or if earlier, five (5) days prior to the date that the judgment
creditor has the right to execute the judgment; (ii) the entry of an
unappealable judgment or final appellate decision against the Indemnified
Party; or (iii) a settlement of the claim. Notwithstanding the foregoing,
provided that there is no dispute as to the applicability of indemnification,
the reasonable legal fees and expenses of counsel to the Indemnified Party
shall be reimbursed on a current basis by the Indemnifying Party if such legal
fees and expenses are a liability of the Indemnifying Party. With regard to
other claims for which indemnification is payable hereunder, such
indemnification shall be paid promptly by the Indemnifying Party upon demand by
the Indemnified Party.
(d) Escrow Provisions. In order to secure the
obligations of the Seller, the Executive and the Stockholder hereunder, Seller
will deliver to NationsBank, N.A., as escrow agent, or if NationsBank, N.A. is
not then able to act as such, such other party as the Purchaser and the Seller
shall mutually agree upon (the "Escrow Agent") pursuant to an escrow agreement
to
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be entered into by all the parties hereto and the Escrow Agent, in form and
substance reasonably acceptable to the parties hereto and the Escrow Agent (the
"Escrow Agreement"), the shares of ABA Common Stock received by Seller pursuant
to Section 2.1(a)(i) and (iii) hereof, together with any additional shares as
may be required by Section 5.6 hereof, one-half of which shares will be held in
escrow (the "Escrow Fund") until March 15, 1998, and the remainder of which
will be held in escrow until June 30, 1999 (each, a "Release Date"). Should any
claims be made while any shares are held in escrow, the same shall remain in
escrow until the final resolution of such claim, notwithstanding the passing of
March 15, 1998 or June 30, 1999, as the case may be. The Purchaser shall have
the right, in the exercise of its reasonable and good faith judgment, to
set-off and deduct from the Escrow Fund, upon written notice to the Escrow
Agent, that number of shares of ABA Common Stock having a value equal to the
amount of any losses for which Seller, the Executive or the Stockholder are
required to indemnify Purchaser pursuant to the provisions of Section 5.3(a)
above, including, but not limited to, by reason of Section 2.1(f) hereof;
provided, however, that prior to any such set-off, (x) the Purchaser shall give
notice to the Seller of the claim for which indemnity is sought, and the Seller
shall have a period of 15 days in which to cure or otherwise remedy, to the
satisfaction of the Purchaser, any such claim, and (y) during such 15 day
period, Seller and Purchaser shall hold good faith negotiations to resolve any
dispute with
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respect to any such claim for indemnification (however, such negotiations shall
not extend such 15 day period); and (z) that prior to any such set-off, the
Seller shall be afforded the opportunity to pay to the Purchaser, in
immediately available funds, the amount of any such loss within 15 days of
notice thereof. For purpose of this Section 5.3(d), the value of the shares of
ABA Common Stock shall equal the average closing price of ABA's Common Stock on
the American Stock Exchange (or such other exchange as such shares may then be
listed) for the ten consecutive trading day period ending two trading days
prior to the date of determination. If the amount of deduction is subsequently
determined to be in excess of the amount which Purchaser is legally entitled to
deduct, Purchaser shall promptly return such funds in cash or ABA Common Stock,
as the case may be, to the Escrow Fund or if the Escrow Fund has terminated,
shall pay such difference to Seller after such final determination. ABA Common
Stock returned to the Escrow Fund shall be valued as set forth above. In the
event any shares of ABA Common Stock are sold at the request of the Seller
while held in the Escrow Fund, the proceeds of any such sale shall be remitted
to and held as part of the Escrow Fund until released in accordance with the
provisions of this Section. So long as there is no breach of any
representation, warranty, covenant or agreement by the Seller, the Executive or
the Stockholder under this Agreement or the other agreements contemplated
hereby, and subject to any rights in favor of third
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parties that may be granted by the Seller, the Executive or the Stockholder,
the Seller shall be entitled to vote the shares of ABA Common Stock in the
Escrow Fund and to receive dividends thereon, when, as and if declared by the
Board of Directors of ABA.
(e) Limitations. The indemnification obligations
of the parties hereto pursuant to Sections 5.3(a) and (b) shall be subject to
the following limitations. No Indemnifying Party shall be required to indemnify
an Indemnified Party unless the aggregate of all claims of such Indemnified
Party has first reached $150,000 (the "Threshold Amount"), at which time only
claims of an Indemnified Party in excess of the Threshold Amount shall be
subject to the Indemnifying Party's indemnification obligations; provided,
however, that (v) the amount of Receivables that the Seller, the Executive and
the Stockholder have guaranteed as being collectible by the Purchaser shall not
be subject to the Threshold Amount, and any such Receivable that is not
collected by the Purchaser within the time periods herein set forth shall be an
indemnifiable claim, dollar for dollar, against the Seller, the Executive and
the Stockholder, regardless of whether the Threshold Amount has been reached;
(w) any claim asserted by Aardvark Tactical, Inc. against ABA or Purchaser
arising out of the letter agreement dated February 9, 1996 between Aardvark
Tactical, Inc. and Seller; (x) costs, expenses and/or damages in connection
with pending litigation of Vantage Enterprises, Inc. or any claim asserted by
Vantage Enterprises, Inc. or any affiliate thereof
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against ABA or Purchaser arising out of or in connection with the transactions
contemplated by this Agreement; (y) (1) any deductible amount against Seller's
product liability insurance policy with respect to any event occurring prior to
the Closing date; (2) costs, expenses and/or damages in connection with pending
litigation of Neuman U.S.A. or any claim asserted by Neuman U.S.A. or affiliate
thereof against ABA or Purchaser; (3) any claim asserted by Leslie Esterbrook
or an affiliate thereof against ABA or Purchaser; (4) any claim, including
penalties, asserted by the Department of Transportation or other governmental
authority against ABA or Purchaser arising out of or in connection with actions
of Seller taken prior to Closing date; and (5) all taxes (inclusive of any
interest and penalties) payable by Seller occurring prior to the Closing date,
known or unknown, contingent or otherwise, whether or not then due, asserted or
assessed against ABA or Purchaser; and (z) the Final Amount adjustment payments
described in Section 5.6 hereof, shall not be subject to the Threshold Amount,
and any such adjustment shall be due and payable, dollar for dollar, regardless
of whether the Threshold Amount has been reached. Notwithstanding the
foregoing, (i) the obligations of the Seller, the Executive and the
Stockholder, on the one hand, and of the Purchaser and ABA, on the other hand,
shall not exceed $4,750,000, and (ii) the limitations contained in this Section
5.3(e) shall not apply with respect to (A) any action based upon intentional or
fraudulent actions, misrepresentations or breaches
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of any party, and (B) any liabilities arising out of a breach of Sections 3.6,
3.14, 3.27, 3.30, 3.31, 3.35 or 5.7 hereof.
Section 5.4 Seller to Change Name
On the Closing date, the Seller will file an
appropriate amendment to its Certificate of Incorporation to change its name to
XM Corporation, and shall not further change or amend its name or use any other
trade or fictitious name.
Section 5.5 Registration of ABA Common Stock
ABA will use its best efforts to include the shares
of ABA Common Stock issued to the Seller in a registration statement of ABA to
be filed with the Commission on or before December 15, 1997. One-half of the
shares of ABA Common Stock received by the Seller and/or the Stockholder, as
the case may be, pursuant to this Agreement shall be subject to a lock-up
agreement through March 15, 1998, and the remainder of such shares of ABA
Common Stock shall be subject to a lock-up agreement through June 30, 1999,
substantially in the form of Exhibit B attached hereto (the "Lock-Up
Agreement"), and shall also be held in escrow until March 15, 1998 and June 30,
1999, as applicable, and be available to satisfy the Seller's, the Executive's
and the Stockholder's obligations to ABA and the Purchaser.
Section 5.6 Preparation of Closing Date Balance Sheet
(a) At Closing, Seller shall provide Purchaser
with a schedule of Purchased Assets and Assumed Liabilities correct as of the
Closing date, prepared in accordance with GAAP (the "Closing
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Date Balance Sheet") except that, with respect to those Receivables that the
Seller, the Executive and the Stockholder have guaranteed, the same shall be
stated at face value. Seller's Net Tangible Assets as of the date of Closing
shall be determined in accordance with GAAP. The Closing Date Balance Sheet
shall be accompanied by a certificate of the Executive, Chief Operating Officer
and Chief Financial Officer of Seller that such Closing Date Balance Sheet has
been prepared in accordance with GAAP. Prior to the date of Closing, the Seller
shall conduct a physical count of all of Seller's inventory and any other
physical assets as of the date as requested by the Purchaser. Such inventory
count shall be attended by the Purchaser and its accountants and other
representatives, and the Purchaser and its accountants and other
representatives shall be afforded access to the work papers and other records
of the Seller and its accountants in connection with such inventory count. The
results of such inventory count shall be used to determine the inventory value
as of the Closing in order to calculate the Net Tangible Assets included in the
Closing Date Balance Sheet.
(b) If the value of the Net Tangible Assets of
Seller, as set forth on the Closing Date Balance Sheet, is less than
$1,550,000, the purchase price and the funds to be paid at Closing by Purchaser
pursuant to Section 2.1(a)(i) shall be reduced dollar for dollar for the
difference. Subsequent to the Closing, but in no event later than seventy-five
(75) days thereafter, the Purchaser or its independent accountants shall
tentatively
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determine the Net Tangible Assets of Seller as of the Closing and submit its
calculation to the Seller for review. The Seller shall be provided reasonable
access to the work papers and all other appropriate records of Purchaser or its
independent accountants used to arrive at such calculation. The Seller shall
accept or reject the calculation by written notice to the Purchaser within
thirty (30) days thereafter; failure to reject the calculation within such
period shall be deemed conclusive acceptance of the calculation. If Seller
disputes the calculation, the parties will attempt to resolve their differences
jointly and shall provide reasonable access to each other's appropriate
records, including, but not limited to, their respective work papers, but if no
resolution is reached within ten (10) business days, then the parties agree to
submit the disputed items to a Big 6 accounting firm, or such other arbiter, as
may be mutually agreed upon, for determination within thirty (30) business
days, which determination shall be conclusive for all purposes. Such mutually
agreed arbiter's sole assignment shall be to determine whether the Net Tangible
Asset value as of the Closing has been computed in accordance with the terms of
this Section 5.6. The cost of such mutually agreed arbiter's determination
shall be borne equally by the parties.
(c) If the final Net Tangible Asset value, as
determined above (the "Final Amount"), is less than $1,550,000, then the
purchase price shall be reduced dollar for dollar and
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Seller shall pay to the Purchaser, in immediately available funds, the
difference between $1,550,000 and the Final Amount within five (5) business
days, from such determination, provided, however, no reduction shall be made to
the purchase price to the extent that the reduction in the value of the Net
Tangible Assets on the Closing Date Balance Sheet is solely attributable to
expenses of Seller having been capitalized and included in the value of
Seller's inventory as set forth on such Closing Date Balance Sheet consistent
with the Seller's audited 1995 financial statements. In the event that such
payment is not timely made, then notwithstanding any other provision contained
herein (including, but not limited to, any notice period herein described), and
in addition to all other rights and remedies available to Purchaser and ABA at
law or equity, or pursuant to this Agreement, the Guarantee, or otherwise,
Purchaser shall have the absolute right to immediately withdraw from the Escrow
Fund for the Purchaser's own account such number of shares of ABA Common Stock
as will have a value (as determined in accordance with Section 2.1(a)(i)) equal
to 150% of the difference between $1,550,000 and the Final Amount, and such
adjustment shall be deemed a reduction to the purchase price set forth in
Section 2.1(a)(i). Such shares so removed from the Escrow Fund shall not be
subject to the terms and provisions of the Escrow Fund, and shall belong to the
Purchaser. The Threshold Amount shall not be applicable to the Final Amount
adjustment
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payments hereinabove described, which shall be payable dollar for dollar as
herein provided.
(d) On the first anniversary date of the Closing,
Purchaser may sell, in which event Seller shall purchase, for cash, all unsold
inventory of Number 19 grenades included in the inventory as part of the
Purchased Assets. Payment shall be made simultaneously against delivery of such
grenades to Seller.
Section 5.7 Filing of Sales Tax Returns
The Seller shall file with all appropriate
authorities its final sales tax returns within thirty (30) days after the
Closing date. Any liabilities or obligations resulting therefrom, including,
without limitation, due to audits of said returns, shall be the liability and
obligation of the Seller, and the Purchaser shall have no obligation whatsoever
with respect thereto.
Section 5.8 Employee Stock Options
ABA hereby agrees to make available to those
employees of the Seller who become employees of the Purchaser or ABA, in the
sole discretion of ABA, options to purchase up to an aggregate of 100,000
shares of ABA Common Stock pursuant to ABA's 1996 Incentive Stock Option Plan.
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ARTICLE VI
Conditions Precedent; Termination
Section 6.1 Conditions Precedent to the Obligations of ABA
and the Purchaser
Each and every obligation of ABA and the Purchaser
to consummate the transactions described in this Agreement and any and all
liability of ABA and the Purchaser to the Seller, the Executive and the
Stockholder shall be subject to the fulfillment on or before the Closing date
of the following conditions precedent:
(a) Representations and Warranties True. Each
of the representations and warranties of the Seller, the Executive and the
Stockholder contained herein or in any certificate or other document delivered
pursuant to this Agreement or in connection with the transactions contemplated
hereby shall be true and correct in all material respects as of the Closing
date with the same force and effect as though made on and as of such date
(except for changes specifically permitted by this Agreement, including,
without limitation, Section 7.1 hereof).
(b) Performance. The Seller, the Executive and
the Stockholder shall have performed and complied in all material respects with
all of the agreements, covenants and obligations required under this Agreement
to be performed or complied with by them on or prior to the Closing date.
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(c) No Adverse Change. Except as expressly
permitted or contemplated by this Agreement, no event or condition shall have
occurred which has materially adversely affected or may materially adversely
affect in any respect the condition (financial or otherwise) of the Seller or
of the Seller's assets, liabilities (whether accrued, absolute, contingent or
otherwise), earnings, book value, business, operations or prospects.
(d) Seller's, the Executive's and Stockholder's
Certificate. The Seller, the Executive and the Stockholder shall have delivered
to Purchaser a certificate dated the Closing date, certifying that the
conditions specified in Section 6.1(a), (b) and (c) above have been fulfilled,
and that the Net Tangible Assets of Seller to be purchased by Purchaser as of
the Closing date determined in the manner provided in Section 5.6, are at least
$1,550,000; the Seller shall have delivered to Purchaser a certificate signed
by the Executive and the, Seller's Chief Operating Officer and Chief Financial
Officer certifying that the Financial Statements have been, and the Closing
Date Balance Sheet will be, prepared in accordance with the books of account
and records of the Seller, fairly present, and are true, correct and complete
statements in all respects of the Seller's financial condition as of their
respective dates, and have been prepared in accordance with GAAP, except that
the inventory valuation shall be
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computed in accordance with Section 3.34, provided that any excess inventory of
Number 19 grenades shall be treated as provided in Section 5.6(d); and as to
such other matters as Purchaser may reasonably request.
(e) No Litigation. No litigation, arbitration
or other legal or administrative proceeding shall have been commenced, be
pending or threatened by or before any court, arbitration panel or governmental
authority or official, and no statute, rule or regulation of any foreign or
domestic, national or local government or agency thereof shall have been
enacted after the date of this Agreement, and no judicial or administrative
decision shall have been rendered which enjoins or prohibits, or seeks to
enjoin or prohibit, the consummation of all or any of the transactions
contemplated by this Agreement. The litigation entitled Vantage Enterprises,
Inc. v. Def-Tec Corporation, et al., pending in the Court of Common Pleas of
Ashtabula County, Ohio, shall be settled on or before Closing on substantially
the terms of the Settlement Agreement, per the draft furnished to Purchaser on
August 21, 1996. Seller acknowledges and agrees that the amount of such
settlement may be paid directly by Purchaser at Closing, which amount shall
thereupon be deducted from the cash portion of the purchase price payable
pursuant to Section 2.1(a)(i).
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(f) Consents. The Seller shall have obtained
all authorizations, consents, waivers and approvals and given all notices as
may be required or advisable to consummate the transactions contemplated by this
Agreement including, but not limited to, the consents, waivers and approvals of
Key Bank, Raytheon, Inc., and of any of the landlords to the Leased Property
which is required in accordance with the terms of the Leases, consents with
respect to any Material Agreement and notices to creditors of the Seller in
respect of bulk transfer laws, if applicable, or otherwise.
(g) Opinion of Counsel. An opinion letter from
Stuart Cordell, Esq. and/or counsel to the Seller, the Executive and the
Stockholder addressed to ABA and the Purchaser, in form and substance
satisfactory to ABA and the Purchaser, as to such matters as ABA and the
Purchaser may reasonably request, shall have been delivered to ABA and the
Purchaser at the Closing.
(h) Certain Agreements. The Executive, the
Stockholder and the Seller, as appropriate, shall have executed and delivered
the Guarantee Agreement, the Escrow Agreement, and the Lock-Up Agreement.
(i) Completion of Due Diligence. The Purchaser
shall have completed its due diligence investigation of the Seller
including, but not limited to, tax returns filed by Seller, any
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Internal Revenue Service audit, Phase I environmental audits, any arrangements
with DTC-Ohio and Nina, title reports with respect to the Purchased Assets and,
Phase I Environmental Reviews, all to its sole and absolute satisfaction, on or
before the Closing.
(j) Closing Date Balance Sheet Amounts. The Net
Tangible Assets as of the Closing date shall not be less than $1,550,000. Any
reductions in the Assumed Liabilities from the date hereof through the Closing
date, arising through the negotiation of outstanding balances, shall accrue to
the benefit of the Purchaser and not be used as a reduction of the Assumed
Liabilities and a corresponding increase to Net Tangible Assets.
(k) Collection of Certain Receivables. All of
the Seller's Receivables from employees of the Seller shall have been collected
on or before the Closing date. All expense reimbursements or other liabilities
owed to employees of the Seller shall have been paid on or before the Closing
date.
(l) Disposition of Airplane. The airplane
listed on the Seller's balance sheet as of December 31, 1995 shall have been
disposed of, or arrangements shall have been made for its disposition, or
Seller shall retain the same; provided, however, that any such arrangement
shall be on terms that are satisfactory to the Purchaser in its sole
discretion and shall have been affected on or before September 20, 1996.
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(m) Board Approval. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of ABA and the Purchaser.
(n) 1995 Financial Statements. Seller shall
have delivered to Purchaser 1995 Financial Statements, audited by Seller's
regular firm of certified public accountants with an unqualified opinion.
(o) Seller shall have filed all of its income
tax returns (federal, state and local) for all years ended prior to and on
December 31, 1995, irrespective of whether extensions for filing such returns
have been requested, and true copies thereof shall have been furnished to
Purchaser not less than five (5) business days prior to Closing.
(p) Definitive International Sales Agreement.
ABA and Purchaser on the one hand, and a company principally owned or
controlled by Executive on the other hand (provided Executive shall be
contractually obligated to personally render the services required), shall
have entered into the definitive International Sales Agreement.
Section 6.2 Conditions Precedent to the Obligations of
Seller, the Executive and the Stockholder
Each and every obligation of Seller, the Executive
and the Stockholder to consummate the transactions described in this Agreement
and any and all liability of Seller, the Executive
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and the Stockholder to ABA and the Purchaser shall be subject to the
fulfillment on or before the Closing date of the following conditions
precedent:
(a) Representations and Warranties True. Each of
the representations and warranties of ABA and the Purchaser contained herein or
in any certificate or other document delivered pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be true and correct
in all material respects as of the Closing date with the same force and effect
as though made on and as of such date.
(b) Performance. ABA and the Purchaser shall have
performed and complied in all material respects with all of the agreements,
covenants and obligations required under this Agreement to be performed or
complied with by them on or prior to the Closing date.
(c) No Material Adverse Change. Except as
expressly permitted or contemplated by this Agreement, no event or condition
shall have occurred which has materially adversely affected or may materially
adversely affect in any respect the condition (financial or otherwise) of ABA
or of ABA's assets, liabilities (whether accrued, absolute, contingent or
otherwise), earnings, book value, business, operations or prospects.
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(d) Officers' Certificate. Purchaser shall have
delivered to the Seller, the Executive and the Stockholder a certificate
addressed to Seller, the Executive and the Stockholder executed by Purchaser's
President and Chief Executive Officer, dated the Closing date, certifying that
the conditions specified in Sections 6.2(a), (b) and (c) above have been
fulfilled.
(d) No Litigation. No litigation, arbitration or
other legal or administrative proceeding shall have been commenced or be
pending by or before any court, arbitration panel or governmental authority or
official, and no statute, rule or regulation of any foreign or domestic,
national or local government or agency thereof shall have been enacted after
the date of this Agreement, and no judicial or administrative decision shall
have been rendered which enjoins or prohibits, or seeks to enjoin or prohibit,
the consummation of all or any of the transactions contemplated by this
Agreement.
Section 6.3 Best Efforts
Subject to the terms and conditions provided in this
Agreement, each of the parties shall use their respective best efforts in good
faith to take or cause to be taken as promptly as practicable all reasonable
actions that are within its power to cause to be fulfilled each of the
conditions precedent to its obligations or the obligations of the other parties
to consummate
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the transactions contemplated by this Agreement that are dependent upon its
actions, including obtaining all necessary consents, authorizations, orders,
approvals and waivers. In furtherance of the foregoing, each of the Seller, the
Executive and the Stockholder shall use their respective best efforts to
negotiate a reduction of the Assumed Liabilities.
Section 6.4 Termination
This Agreement and the transactions contemplated
hereby may be terminated (i) at any time by the mutual consent of the parties
hereto; (ii) by Seller, the Executive and the Stockholder, jointly, or by ABA
and the Purchaser, jointly, if the Closing has not occurred on or prior to
September 30, 1996 (such date of termination being referred to herein as the
"Termination Date"), provided that the failure of the Closing to occur by the
Termination Date is not the result of the failure of the party seeking to
terminate this Agreement to perform or fulfill any of its obligations
hereunder; (iii) by Purchaser at any time at or prior to Closing in its sole
discretion if (1) any of the representations or warranties of the Seller, the
Executive or the Stockholder in this Agreement are not in all material respects
true, accurate and complete or if the Seller, the Executive or the Stockholder
breach in any material respect any covenant contained in this Agreement,
provided that such misrepresentation or breach
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is not cured within ten (10) business days after notice thereof, but in any
event prior to the Termination Date or (2) any of the conditions precedent to
ABA's or the Purchaser's obligations to conduct the Closing have not been
satisfied by the date required thereof; (iv) by Seller, the Executive or the
Stockholder at any time at or prior to Closing in their sole discretion if (1)
any of the representations or warranties of ABA or the Purchaser in this
Agreement are not in all material respects true, accurate and complete or if
ABA or the Purchaser breaches in any material respect any covenant contained in
this Agreement, provided that such misrepresentation or breach is not cured
within ten (10) business days after notice thereof, but in any event prior to
the Termination Date or (2) any of the conditions precedent to Seller's, the
Executive's or the Stockholder's obligations to conduct the Closing have not
been satisfied by the date required thereof. If this Agreement is terminated
pursuant to this Section 6.4, written notice thereof shall promptly be given by
the party electing such termination to the other party and, subject to the
expiration of the cure periods provided in clauses (iii) and (iv) above, if
any, this Agreement shall terminate without further actions by the parties and
no party shall have any further obligations under this Agreement.
Notwithstanding the preceding sentence, the respective obligations of the
parties under Sections
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7.3, 7.5(b), 7.7, 8.9 and 8.15 shall survive the termination of this Agreement.
Notwithstanding anything to the contrary contained herein, if the termination
of this Agreement is a result of the willful misrepresentation, willful
inaccuracy or omission in a representation, willful breach of warranty, fraud
or any willful failure to perform or comply with any covenant or agreement
contained herein, the aggrieved party shall be entitled to recover from the
non-performing party all out-of-pocket expenses which such aggrieved party has
incurred and the termination of this Agreement shall not be deemed or construed
as limiting or denying any other legal or equitable right or remedy of such
party.
ARTICLE VII
Covenants
Section 7.1 Interim Operations of the Company
During the period from the date of this Agreement
to the Closing date, except with Purchaser's prior specific written consent or
as expressly contemplated by this Agreement, the Seller shall, and the
Executive and the Stockholder shall cause the Seller to operate its business
only in the ordinary and usual course and to preserve intact its business
organization and good will in all respects. Additionally, during the period
from the date of this Agreement to the Closing date, the Seller shall not, and
the
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Executive and the Stockholder shall cause the Seller not to, do any of the
following (unless expressly permitted in writing by Purchaser):
(i) amend its Certificate of Incorporation or
By-Laws;
(ii) issue, sell or authorize for issuance or
sale, shares of any class of its
securities (including, but not limited
to, by way of stock split or dividend) or
any subscriptions, options, warrants,
rights or convertible securities, or
enter into any agreements or commitments
of any character obligating it to issue
or sell any such securities;
(iii) redeem, purchase or otherwise
acquire, directly or indirectly,
any shares of its capital stock or
any option, warrant or other right
to purchase or acquire any such
shares;
(iv) declare or pay any dividend or other
distribution (whether in cash, stock or
other property) with respect to its
capital stock;
(v) voluntarily sell, transfer, surrender,
abandon or dispose of any of its assets
or property rights (tangible or
intangible), other than in the ordinary
course of business;
(vi) grant or make any mortgage or
pledge or subject itself or any of
its properties or assets to any
lien, charge or encumbrance of any
kind, except liens for taxes not
currently due;
(vii) create, incur or assume any liability or
indebtedness, except in the ordinary
course of business;
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(viii) make or commit to make any capital
expenditures exceeding in the aggregate
Five Thousand Dollars ($5,000.00);
(ix) become subject to any Guaranty;
(x) apply any of its assets to the direct or
indirect payment, discharge, satisfaction
or reduction of any amount payable
directly or indirectly to or for the
benefit of the Seller or any Affiliate of
the Seller or any Related Party or to the
prepayment of any such amounts, other
than compensation benefits, and expenses
payable in the ordinary course of
business to Seller and scheduled lease
payments under Leases listed on
Schedule 3.22;
(xi) grant any increase in the compensation
payable or to become payable to
directors, officers or employees
(including, without limitation, any such
increase pursuant to any bonus, pension,
profit-sharing or other plan or
commitment);
(xii) enter into any agreement which
would be a Material Agreement, or
amend or terminate any existing
Material Agreement, which is
outside the ordinary course of
business;
(xiii) alter the manner of keeping its books,
accounts or records, or change in any
manner the accounting practices therein
reflected;
(xiv) except as set forth on Schedule
7.1, enter into any commitment or
transaction other than in the
ordinary course of business
including, but not limited to, the
making of any loan to any Person;
(xv) do any act, or omit to do any act, or
permit to the extent within the Company's
or the Seller's control, any act or
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omission to act which would cause a
violation or breach of any of the
representations, warranties or covenants
of the Seller set forth in this
Agreement;
(xvi) take any action which has an
adverse effect on the condition
(financial or otherwise), results
of operations, assets, liabilities,
properties, business or prospects
of the Seller, or on employee,
customer or supplier relations;
(xvii) alter in any manner any of the
Seller's existing working capital
facilities including, but not
limited to, the Seller's working
capital facility with Key Bank;
(xviii) provide any sample or promotional
products of the Seller to any Person
without receiving appropriate amounts in
consideration therefor; or
(xix) agree, whether in writing or otherwise,
to do any of the foregoing.
Section 7.2 Access
The Executive and the Stockholder shall, and shall
cause the Seller to, afford to Purchaser and its agents and representatives,
access throughout the period prior to the Closing date to the properties,
books, records and contracts of the Seller, for the purpose of permitting
Purchaser to fully investigate and perform a due diligence review of the
Seller, its businesses, assets and properties, and financial condition,
provided that such access shall be granted during normal business hours in such
a manner as to not unreasonably interfere with the Seller's normal
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business operations. During such period the Seller shall furnish promptly to
Purchaser copies of (i) all correspondence received or sent by or on behalf of
the Seller from or to any governmental authority and (ii) all other information
and documents concerning its business, assets, liabilities, properties and
personnel as Purchaser may reasonably request.
Section 7.3 Confidentiality (through Closing Date)
Except as otherwise required in the performance of
obligations under this Agreement and except as otherwise required by law, any
non-public information received by a party or its advisors from the other party
shall be kept confidential and shall not be used or disclosed for any purpose
other than in furtherance of the transactions contemplated by this Agreement.
Purchaser shall not use (or permit to be used) through the Closing date any
confidential information in any manner to compete against the Seller, whether
with respect to corporate acquisitions, sales, financing, development,
management, investment, or otherwise. The obligation of confidentiality shall
not extend to information (a) which is or shall become generally available to
the public other than as a result of an unauthorized disclosure by a party to
this Agreement or a person to whom a party has provided such information, (b)
which was available to a party to this Agreement on a nonconfidential basis
prior to its disclosure by one party to the
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other pursuant to this Agreement or (c) which is disclosed by Purchaser in any
legal proceeding requiring any such disclosure. Upon termination of this
Agreement, each party shall promptly return any confidential information
received from the other party and, upon request, shall destroy any copies of
such information in its possession. The covenants of the parties contained in
this Section 7.3 shall survive any termination of this Agreement until the
earlier of (i) two (2) years from the date hereof, or (ii) the date when such
information becomes generally available to the public, but shall terminate at
the Closing, if it occurs, with respect to information concerning the Seller
that is in the possession of the Executive and the Stockholder. Notwithstanding
anything to the contrary contained herein, the foregoing shall in no way
prevent or limit ABA or the Purchaser in conducting its existing and
prospective businesses.
Section 7.4 Notification
Each party to this Agreement shall promptly notify
the other party in writing of the occurrence, or pending or threatened
occurrence, of any event that would constitute a breach or violation of this
Agreement by any party or that would cause any representation or warranty made
by the notifying party in this Agreement to be false or misleading in any
respect (including without limitation, any event or circumstance which would
have been
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required to be disclosed on any schedule to this Agreement had such event or
circumstance occurred or existed on or prior to the date of this Agreement).
Any such notification or inadvertent failure to give such notification shall
not limit or alter any of the representations, warranties or covenants of the
parties set forth in this Agreement nor any rights or remedies a party may have
with respect to a breach of any representation, warranty or covenant.
Section 7.5 Exclusivity
(a) The Seller agrees that unless this
Agreement has been terminated in accordance with Section 6.4 hereof, neither
the Seller, nor its Affiliates, representatives, employees or agents
(collectively, "Agents") will, commencing on the date of this Agreement and
continuing through September 30, 1996 (the "Exclusive Period"), directly or
indirectly, (i) solicit, encourage or negotiate any proposal (whether solicited
or unsolicited) for, or execute any agreement relating to, a sale of all or any
part of the Seller or its assets or a sale of any equity or debt security of
the Seller or any merger, consolidation, recapitalization or similar
transaction involving the Seller with any other party (any of the foregoing is
referred to as an "Acquisition Proposal"), (ii) provide any information
regarding the Seller to any third party for the purpose of soliciting,
encouraging or negotiating an Acquisition Proposal (it being understood that
nothing contained in
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clauses (i) or (ii) above shall restrict the Seller or any of its Agents from
providing information as required by legal process), or (iii) operate the
business of the Seller other than in the ordinary course of business without
prior notice to, and the prior written consent of, the Purchaser.
(b) In the event that the Seller does not
consummate the transactions contemplated by this Agreement as a result of the
Seller's breach of Section 7.5(a) hereof, the Seller shall be liable to ABA for
all costs and expenses actually incurred by ABA in pursuit of the transaction,
together with the payment of liquidated damages to ABA in the agreed upon
amount of $250,000.
Section 7.6 Non-Competition
The Seller, the Executive and the Stockholder
acknowledge that in order to assure Purchaser that Purchaser will retain the
value of the Purchased Assets, the Seller, the Executive and the Stockholder
agree, on the terms set forth in this Section 7.6, not to utilize their special
knowledge of the business of the Seller and their relationships with customers,
suppliers and others to compete with ABA, the Purchaser and their respective
Subsidiaries and Affiliates at the time in question. For a period of five (5)
years beginning on the Closing date, each of the Seller, the Executive and the
Stockholder and their respective Affiliates at the time of determination, shall
not engage or have
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an interest, anywhere in the United States of America or any other geographic
area where ABA or the Purchaser does business at the date hereof or in which
its products are marketed at the date hereof (in each case after giving effect
to the purchase of the Purchased Assets), alone or in association with others,
as principal, officer, agent, employee, director, partner, lender or
stockholder (except as an employee or consultant of Purchaser or any of its
Affiliates or as an owner of two percent (2%) or less of the stock of any
company listed on a national securities exchange or traded in the
over-the-counter market), or through the investment of capital, lending of
money or property, rendering of services or capital, or otherwise, in any
business competitive with or similar to that engaged in by ABA or the Purchaser
at the date hereof (in each case after giving effect to the purchase of the
Purchased Assets). During the same period, the Seller, the Executive, the
Stockholder and their then respective Affiliates shall not (except as an
employee or consultant of Purchaser or its Affiliates), and shall not permit
any of their respective employees, agents or others then under their control
to, directly or indirectly, on behalf of the Seller, the Executive and the
Stockholder or any other Person, (i) call upon, accept competitive business
from, or solicit the competitive business of any Person who is, or who had been
at any time during the preceding three (3)
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years, a customer or supplier of the Seller or any successor to the business of
the Seller or any such successor, or (ii) recruit or otherwise solicit or
induce any person who is an employee of, or otherwise engaged by, the Seller or
any successor to the business of the Seller to terminate his or her employment
or other relationship with the Seller or such successor, or hire any person who
has left the employ of Purchaser or any such successor during the preceding
three (3) years. The Seller, the Executive and the Stockholder shall not at any
time, directly or indirectly, use or purport to authorize any Person to use any
name, mark, logo, trade dress or other identifying words or images which are
the same as or similar to those used currently or in the past by the Seller in
connection with any product or service, whether or not such use would be in a
business competitive with that of the Seller, ABA or the Purchaser. The
Executive and the Stockholder acknowledge that compliance with the restrictions
set forth in this Section 7.6 will not prevent them from earning a livelihood.
As used herein, the phrase "competitive business" means any business
competitive with the type of business engaged in by the Seller, ABA, the
Purchaser or any of their Subsidiaries or Affiliates at the date hereof.
Section 7.7 General Confidentiality
The Seller, the Executive and the Stockholder
acknowledge that the Intangible Property and all other confidential
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or proprietary information with respect to the business and operations of the
Seller are valuable, special and unique assets of the Seller and are an
integral part of the Purchased Assets. The Seller, the Executive and the
Stockholder shall not, at any time after the Closing date, disclose, directly
or indirectly, to any Person, or use or purport to authorize any Person to use
any confidential or proprietary information with respect to the Seller, ABA, or
the Purchaser whether or not for the Executive's or the Stockholder's own
benefit, without the prior written consent of Purchaser or unless required by
law, including without limitation, information as to the financial condition,
results of operations, customers, suppliers, products, products under
development, inventions, sources, leads or methods of obtaining new products or
business, Intangible Property, pricing methods or formulas, cost of supplies,
marketing strategies or any other information relating to the Seller, ABA or
the Purchaser, which could reasonably be regarded as confidential. The Seller,
the Executive and the Stockholder acknowledge that Purchaser would not enter
into this Agreement without the assurance that all such confidential and
proprietary information will be used for the exclusive benefit of ABA and the
Purchaser.
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Section 7.8 Continuing Obligations
The restrictions set forth in Sections 7.6 and 7.7
are considered by the parties to be reasonable for the purposes of protecting
the value of the business and good will purchased by the Purchaser. ABA, the
Purchaser, the Seller, the Executive and the Stockholder acknowledge that ABA
and the Purchaser would be irreparably harmed and that monetary damages would
not provide an adequate remedy to ABA and the Purchaser in the event the
covenants contained in Sections 7.6 and 7.7 were not complied with in
accordance with their terms. Accordingly, Seller, the Executive and the
Stockholder agree that any breach or threatened breach by any of them of any
provision of Sections 7.6 or 7.7 shall entitle ABA and the Purchaser to
injunctive and other equitable relief to secure the enforcement of these
provisions, in addition to any other remedies (including damages) which may be
available to ABA and the Purchaser. If the Seller, the Executive or the
Stockholder breach the covenant set forth in Section 7.6, the running of the
five (5) year non-compete period described therein shall be tolled for so long
as such breach continues. It is the desire and intent of the parties that the
provisions of Sections 7.6 and 7.7 be enforced to the fullest extent
permissible under the laws and public policies of each jurisdiction in which
enforcement is sought. If any provisions of Sections 7.6 and 7.7 relating to
the
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time period, scope of activities or geographic area of restrictions is declared
by a court of competent jurisdiction to exceed the maximum permissible time
period, scope of activities or geographic area, as the case may be, the time
period, scope of activities or geographic area shall be reduced to the maximum
which such court deems enforceable. If any provisions of Section 7.6 or 7.7
other than those described in the preceding sentence are adjudicated to be
invalid or unenforceable, the invalid or unenforceable provisions shall be
deemed amended (with respect only to the jurisdiction in which such
adjudication is made) in such manner as to render them enforceable and to
effectuate as nearly as possible the original intentions and agreement of the
parties. In addition, if any party brings an action to enforce Sections 7.3,
7.6 or 7.7 hereof or to obtain damages for a breach thereof, such party shall
not be required to post bond, and the prevailing party in such action shall be
entitled to recover from the non-prevailing party all attorney's fees and
expenses incurred by the prevailing party in such action.
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ARTICLE VIII
Miscellaneous
Section 8.1 Notices
Any notice, demand, claim or other communication
under this Agreement shall be in writing and shall be deemed to have been given
upon the delivery, mailing or transmission thereof, as the case may be, if
delivered personally or sent by certified mail, return receipt requested,
postage prepaid, or sent by facsimile or prepaid overnight courier to the
parties at the addresses set forth herein (or at such other addresses as shall
be specified by the parties by like notice). A copy of any notices delivered to
ABA or the Purchaser shall also be sent to Kane Kessler, P.C., 1350 Avenue of
the Americas, New York, New York 10019, Attention: Robert L. Lawrence, Esq.,
Fax No. (212) 245-3009. A copy of any notices delivered to the Seller, the
Executive or the Stockholder shall also be sent to Kaufman & Cumberland, 1404
East 9th Street, Third Floor, Cleveland, Ohio 44114, Attention: Frank
Cumberland, Esq., Fax No. (216) 694-6890.
Section 8.2 Entire Agreement
This Agreement contains every obligation and
understanding between the parties relating to the subject matter
hereof and merges all prior discussions, negotiations and
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agreements, if any, between them, and none of the parties shall be bound by any
conditions, definitions, understandings, warranties or representations other
than as expressly provided or referred to herein; provided, however, that the
letter agreement, dated July 17, 1996, among ABA, the Seller, the Executive and
the Stockholder shall remain in full force and effect and shall be unaffected
by the execution of this Agreement.
Section 8.3 Binding Effect
This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, heirs,
personal representatives, legal representatives, and permitted assigns.
Section 8.4 Knowledge of the Parties
Where any representation or warranty contained in
this Agreement is expressly qualified by reference to the best knowledge or to
the knowledge of any of the parties hereto, each of the parties hereto
acknowledges and confirms that it has made due and diligent inquiry as to the
matters that are the subject of such representations and warranties.
Section 8.5 Assignment
This Agreement may not be assigned by any party
without the written consent of the other party, provided, that ABA
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and/or the Purchaser may assign this Agreement to an Affiliate of
ABA and/or the Purchaser.
Section 8.6 Waiver and Amendment
Any representation, warranty, covenant, term or
condition of this Agreement which may legally be waived, may be waived, or the
time of performance thereof extended, at any time by the party hereto entitled
to the benefit thereof, and any term, condition or covenant hereof (including,
without limitation, the period during which any condition is to be satisfied or
any obligation performed) may be amended by the parties thereto at any time.
Any such waiver, extension or amendment shall be evidenced by an instrument in
writing executed on behalf of the appropriate party by its President or any
Vice President or other person, who has been authorized by its Board of
Directors to execute waivers, extensions or amendments on its behalf. No waiver
by any party hereto, whether express or implied, of its rights under any
provision of this Agreement shall constitute a waiver of such party's rights
under such provisions at any other time or a waiver of such party's rights
under any other provision of this Agreement. No failure by any party thereof to
take any action against any breach of this Agreement or default by another
party shall constitute a waiver of the former party's right to enforce any
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provision of this Agreement or to take action against such breach or default or
any subsequent breach or default by such other party.
Section 8.7 No Third Party Beneficiary
Except for the provisions of Section 5.4, nothing
expressed or implied in this Agreement is intended, or shall be construed, to
confer upon or give any Person other than the parties hereto and their
respective heirs, personal representatives, legal representatives, successors
and permitted assigns, any rights or remedies under or by reason of this
Agreement.
Section 8.8 Severability
In the event that any one or more of the
provisions contained in this Agreement shall be declared invalid, void or
unenforceable, the remainder of the provisions of this Agreement shall remain
in full force and effect, and such invalid, void or unenforceable provision
shall be interpreted as closely as possible to the manner in which it was
written.
Section 8.9 Expenses
Each party agrees to pay, without right of
reimbursement from the other party, the costs incurred by it incident to the
performance of its obligations under this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, costs incident
to the preparation of this Agreement, and the fees and disbursements of
counsel,
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accountants and consultants employed by such party in connection
herewith.
Section 8.10 Headings
The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of any provisions of this Agreement.
Section 8.11 Counterparts
This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 8.12 Time of the Essence
Wherever time is specified for the doing or
performance of any act or the payment of any funds, time shall be
considered of the essence.
Section 8.13 Injunctive Relief
It is possible that remedies at law may be
inadequate and, therefore, the parties hereto shall be entitled to equitable
relief including, without limitation, injunctive relief, specific performance
or other equitable remedies in addition to all other remedies provided
hereunder or available to the parties hereto at law or in equity.
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Section 8.14 Remedies Cumulative
No remedy made available by any of the provisions
of this Agreement is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity.
Section 8.15 Governing Law; Jurisdiction
This Agreement has been entered into and shall be
construed and enforced in accordance with the laws of the State of New York
without reference to the choice of law principles thereof. Any action or
proceeding seeking to enforce any provision of, or based on any right arising
out of, this Agreement and the transactions contemplated hereby may be brought
against any of the parties in the courts of the State of New York, County of
New York, or, if it has or can acquire jurisdiction, in the United States
District Court for the Southern District of New York, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
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Section 8.16 Participation of Parties
The parties hereto acknowledge that this Agreement
and all matters contemplated herein, have been negotiated among all parties
hereto and their respective legal counsel and that all such paries have
participated in the drafting and preparation of this Agreement from the
commencement of negotiations at all times through the execution hereof.
Section 8.17 Further Assurances
The parties hereto shall deliver any and all other
instruments or documents required to be delivered pursuant to, or necessary or
proper in order to give effect to, all of the terms and provisions of this
Agreement including, without limitation, all necessary instruments of
assignment and transfer and such other documents as may be necessary or
desirable to transfer ownership of the Purchased Assets.
Section 8.18 Publicity
No public announcement or other publicity
regarding this Agreement or the transactions contemplated hereby or thereby
shall be made prior to or after the date hereof without the prior written
consent of both ABA and the Seller as to form, content, timing and manner of
distribution. Notwithstanding the foregoing, nothing in this Agreement shall
preclude ABA or its Affiliates from making any public announcement or filing
required by federal or state securities laws or stock exchange rules.
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IN WITNESS WHEREOF, the parties hereto have each executed and
delivered this Agreement as of the day and year first above written.
SELLER:
DEFENSE TECHNOLOGY CORPORATION
OF AMERICA
By: /s/ Robert Oliver
Robert L. Oliver
CEO
EXECUTIVE:
/s/ Robert L. Oliver
Robert Oliver
STOCKHOLDER:
/s/ Sandra Oliver
Sandra Oliver
PURCHASER:
DEFENSE TECHNOLOGY CORPORATION
OF AMERICA
By: /s/ Jonathan M. Spiller
Jonathan M. Spiller
President and CEO
ARMOR HOLDINGS, INC.
By: /s/ Jonathan M. Spiller
Jonathan M. Spiller
President and CEO
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EXHIBIT 10.1
<PAGE>
AMERICAN BODY ARMOR & EQUIPMENT, INC
191 Nassau Place Road
Yulee, Florida 32097
(904) 261-4035
August 16, 1996
Mr. James R. Erskine
Vice President/Manager
Key Bank of Wyoming
1800 Carey Avenue
P.O. Box 924
Cheyenne, Wyoming 82003
Re: Defense Technology Corporation of America
Dear Mr. Erskine:
In furtherance of our previous discussions, this letter
agreement will set forth our understanding with respect to the credit
facilities made available to Defense Technology Corporation of America, a
Wyoming corporation with a place of business located at 1900 N. Loop, Casper,
Wyoming 82601 ("DTC"), by Key Bank of Wyoming, with an office at 1800 Carey
Avenue, Cheyenne, Wyoming 82003 (the "Bank"), in the amounts of $3,000,000 (the
"$3,000,000 Facility") and $1,000,000 (the "$1,000,000 Facility"; and together
with the $3,000,000 Facility, the "Facilities"). The Facilities are secured by
a lien on substantially all the assets of DTC located in Casper, Wyoming, as
well as a mortgage on certain real property in Steamboat Springs, Colorado
owned by Robert and/or Sandra Oliver. In addition, Robert and Sandra Oliver
have personally guaranteed the Facilities.
Subject to the terms and conditions of this letter agreement:
(i) the obligation of American Body Armor & Equipment, Inc. ("ABA") to pay to
the Bank the Amount Due (as hereinafter defined) shall mature on September 30,
1997 (the "Maturity Date"), subject to the right of ABA, at its option, to
prepay all or a portion of the Amount Due at any time prior to the Maturity
Date without penalty or premium; (ii) this letter agreement shall become
enforceable in accordance with its terms upon its execution by the parties
hereto; and (iii) this letter agreement shall be of no further force or effect,
and shall terminate with no party hereto having any obligation or liability to
any other party hereto pursuant to the terms hereof in the event that (A) a
definitive purchase agreement for the purchase by ABA of certain assets of DTC
has not been executed on or before August 23, 1996, or (B) if such a definitive
purchase agreement has been executed on or before August 23, 1996, if the
closing of the transactions contemplated thereby (the "Closing") has not
occurred on or before September 30, 1996 (the "Termination Date").
<PAGE>
Mr. James R. Erskine
Key Bank of Wyoming
August 16, 1996
Page 2
As we have discussed, ABA and/or one of its affiliates is in
the process of negotiating the purchase of certain assets of DTC. In order for
ABA and/or one of its affiliates to consummate such purchase of DTC's assets,
the parties hereto agree as follows:
1. ABA shall deliver to the Bank at the Closing, as payment
in full of the $3,000,000 Facility and in complete satisfaction and discharge
thereof, a certificate registered in the Bank's name for that number of
unregistered shares of ABA Common Stock as will have a value, as determined by
the average closing price of ABA's Common Stock on the American Stock Exchange
for the ten consecutive trading day period ending two trading days prior to the
Closing date, of $2,650,000 (the "Amount Due"). Any amounts paid to the Bank on
account of the Amount Due, including the Initial Amount (as hereinafter
defined), shall result in a reduction of the then outstanding balance of the
Amount Due by a like amount. The Bank agrees that, upon the registration of
such shares of ABA Common Stock, as hereinafter provided, the Bank will agree
to the sale of such shares of ABA Common Stock, as hereinafter provided, and
that ABA shall control, in its sole discretion, the timing, manner and amount
of ABA Common Stock to be sold pursuant to this letter agreement; provided,
however, that ABA will ensure that (a) the Bank realizes net proceeds from such
sales (the "Net Sales Proceeds"), which, together with any advances from the
Deposit Account and the Initial Amount (each as hereinafter defined) will, in
the aggregate, equal the Amount Due, on or before September 30, 1997; (b) all
sales shall be arranged through UBS (as hereinafter defined) in accordance with
all applicable laws, rules, and regulations; and (c) none of the events
described in Section 13 hereinbelow has occurred. ABA shall not be considered
an agent of the Bank in effecting such sales. So long as the Bank is not in
default of its obligations hereunder, the Bank shall have all voting and
dividend rights with respect to such shares of ABA Common Stock. ABA hereby
agrees that it will indemnify the Bank against any and all capital gains taxes
that may be incurred by the Bank resulting from the sale of such shares of ABA
Common Stock.
2. On the Closing date, but no later than 11:00 A.M., Cheyenne, Wyoming
time on September 30, 1996, ABA shall advance to the Bank by wire transfer or in
good and immediately available funds $662,500 (the "Initial Amount"). Provided
none of the events described in Section 13 hereinbelow has occurred, ABA shall
thereafter be entitled to receive, before any Net Sales Proceeds are paid to the
Bank, an amount equal to the Initial Amount plus all
advances from the Deposit Account previously paid by ABA to the Bank and not so
recouped, and the Bank shall have provided Union Bank of Switzerland, New York
Branch
<PAGE>
Mr. James R. Erskine
Key Bank of Wyoming
August 16, 1996
Page 3
("UBS") with irrevocable written instructions to such effect. Upon the
occurrence of any of the events described in Section 13 hereinbelow, ABA shall
be entitled to receive any portion of the Initial Amount or advances from the
Deposit Account not previously recouped after the Bank has received any unpaid
balance of the Amount Due.
3. The shares of ABA's Common Stock issued to the Bank at the
Closing shall be delivered to UBS to be held by UBS in accordance with the
terms of a letter agreement to be entered into between UBS and the Bank,
substantially in the form of Exhibit A attached hereto (the "Instruction
Letter"), and the Bank shall provide irrevocable written instructions to UBS
that UBS is entitled to rely on the instructions of ABA in order that the sales
of the shares of ABA Common Stock and the remitting of the Net Sales Proceeds,
all as described in this letter agreement, are effected as set forth in the
Instruction Letter.
4. (a) ABA ensures that the Bank will receive the Amount Due,
either from the Net Sales Proceeds, the Initial Amount, the Deposit Account, or
some combination thereof. In order to secure ABA's obligations to the Bank
hereunder, on the Closing date but no later than 11:00 A.M. Cheyenne, Wyoming
time on September 30, 1996, ABA shall deposit with the Bank in Wyoming (the
"Deposit Account") by wire transfer or in good and immediately available funds
an amount equal to $1,987,500, which shall be invested by the Bank in 30-day
certificates of deposit of the Bank which will bear interest at a rate per
annum equal to the highest rate made available by the Bank to its customers for
similar deposits (the "CD Rate"), and shall be automatically renewable for
successive 30-day periods, subject to the provisions of this letter agreement.
(b) The Deposit Account will be held in the name of ABA and the
principal amount of the Deposit Account will be subject to a perfected security
interest and right of set-off in favor of the Bank. All interest earned on the
Deposit Account shall be for the sole benefit of ABA, shall be free and clear of
any such security interest, shall not be subject to any right of set-off in
favor of the Bank, and shall be paid to ABA upon the maturity of each
certificate of deposit which at any time comprises the Deposit Account;
provided, however, that upon payment in full of the Amount Due, the Bank may
retain any interest earned on the Deposit Account that has not been previously
paid to ABA in accordance with this Section 4(b) and apply it against the
Interest Equivalent Amount (as hereinafter defined) owed by ABA and DTC to the
Bank, pursuant to Paragraph 4(e) hereof.
<PAGE>
Mr. James R. Erskine
Key Bank of Wyoming
August 16, 1996
Page 4
(c) At the maturity of each certificate of deposit which at any time
comprises the Deposit Account, ABA shall be entitled to withdraw from the
Deposit Account an amount equal to any Net Sales Proceeds that have been
received by the Bank prior thereto; provided, however, (i) the Net Sales
Proceeds received by the Bank shall have been in good and immediately available
funds; (ii) the balance remaining in the Deposit Account after giving effect to
such withdrawal will not be less than the balance owing on the Amount Due; (iii)
ABA has given the Bank not less than two weeks written notice of such
withdrawal; and (iv) none of the events described in Section 13 has occurred.
(d) At no time shall the amount in the Deposit Account, excluding
interest, be less than the outstanding balance of the Amount Due at the time in
question.
(e) The Amount Due from time to time outstanding shall accrue an
effective annual rate of interest equal to two thirds of the sum of the CD Rate
plus 1% (the "Interest Equivalent Amount"). Each of ABA and DTC hereby agree to
pay to the Bank on the earlier of the Maturity Date or the date on which the
Amount Due has been paid in full one-half of the Interest Equivalent Amount.
5. ABA shall pay to the Bank the remaining balance of the Amount Due in
accordance with the following schedule, subject to adjustment as provided in
Section 8 hereof:
Date: Payment Amount:
----- ---------------
December 15, 1996 $300,000
January 31, 1997 300,000
April 30, 1997 350,000
July 31, 199 350,000
provided, however, that ABA shall have the right, at its option, to prepay all
or a portion of the Amount Due without penalty or premium at any time prior to
the Maturity Date. All Net Sales Proceeds received by the Bank shall be applied
as a prepayment against the next Payment Amount(s) due as herein above set
forth. ABA shall have the right to use funds in the Deposit Account to make the
payments described in this Section 5.
<PAGE>
Mr. James R. Erskine
Key Bank of Wyoming
August 16, 1996
Page 5
6. In the event that the aggregate of the Net Sales Proceeds,
the advances from the Deposit Account and the Initial Amount realized by the
Bank as of September 30, 1997 are less than $2,650,000, or upon the occurrence
of any of the events described in Section 13 hereinbelow, the Bank shall be
entitled to set-off from the Deposit Account (exclusive of any interest earned
thereon) an amount which, when added to the Net Sales Proceeds, the advances
from the Deposit Account and the Initial Amount received by the Bank for its
own account, will equal $2,650,000 plus the Interest Equivalent Amount owed by
ABA and DTC to the Bank, and the balance of such Deposit Account shall be
returned to ABA.
7. Upon receipt by the Bank in good and immediately available funds of
the Amount Due, plus the entire Interest Equivalent Amount, whether from the
Initial Amount, the Net Sales Proceeds, the Deposit Account, or any combination
thereof, UBS shall be instructed to deliver to ABA for cancellation any
remaining shares of ABA Common Stock held by UBS for the Bank.
8. (a) ABA hereby agrees to include the shares of ABA Common Stock to be
issued to the Bank pursuant to this letter agreement in a registration statement
on Form SB-2 or other appropriate form to be filed with the Securities and
Exchange Commission within 45 days of the closing of the transactions
contemplated hereby, and thereafter to use its best efforts to have such
registration statement declared effective as promptly as practicable. Such
registration statement shall describe the material terms of this letter
agreement and the proposed plan of distribution of the shares of ABA Common
Stock, and a copy thereof shall be provided to the Bank promptly upon filing
with the Securities and Exchange Commission.
(b) In the event that such registration statement has not been declared
effective by January 28, 1997, then the payment schedule described in Section 5
hereof shall be revised as follows:
Date: Payment Amount:
----- ---------------
January 31, 1997 $400,000
April 30, 1997 500,000
July 31, 1997 500,000
<PAGE>
Mr. James R. Erskine
Key Bank of Wyoming
August 16, 1996
Page 6
provided, however, that once such registration statement has been declared
effective, then all subsequent payments required pursuant to Section 5 hereof
shall thereafter revert to the amounts therefor as specified in Section 5
hereof.
9. In consideration of the issuance of the shares of ABA Common Stock to
the Bank, as of the Closing date the $3,000,000 Facility shall be deemed paid in
full, and completely satisfied and discharged, and the Bank hereby agrees to
cancel the promissory note evidencing the $3,000,000 Facility and deliver it to
DTC marked paid in full, and to release any and all liens on the assets of DTC
relating to the $3,000,000 Facility and the $1,000,000 Facility on the Closing
date; provided, however, the Bank shall not be required to release its security
interest on the Steamboat Springs, Colorado real property. The Bank agrees to
deliver UCC-3 termination statements, releases and any other instruments
necessary and proper in order to give effect to the intent and purposes of this
letter agreement. In addition, the Bank will release Robert and Sandra Oliver
from any personal guarantees relating to the $3,000,000 Facility upon Closing.
In further consideration of the transactions contemplated hereby, (a) the Bank
hereby releases and forever discharges ABA and its affiliates, officers,
directors, employees and agents, and their respective successors, assigns, heirs
and legal representatives (collectively, the "ABA Releasees") of and from any
and all actions or causes of action, suits, claims, charges, complaints,
damages, liabilities, expenses, losses, costs, agreements and promises
whatsoever at law or in equity which the Bank may now have or hereafter can,
shall or may have against the ABA Releasees arising out of or relating to the
Facilities, other than the obligations of ABA under this letter agreement; and
(b) ABA hereby releases and forever discharges the Bank and its affiliates,
officers, directors, employees and agents, and their respective successors,
assigns, heirs and legal representatives (collectively, the "Bank Releasees") of
and from any and all actions or causes of action, suits, claims, charges,
complaints, damages, liabilities, expenses, losses, costs, agreements and
promises whatsoever at law or in equity which ABA may now have or hereafter can,
shall or may have against the Bank Releasees arising out of or relating to the
Facilities, other than the obligations of the Bank under this letter agreement.
10. (a) ABA hereby agrees to indemnify and hold harmless the Bank from
any damage, liability, cost or expense incurred by the Bank in connection with
a breach by ABA of its obligations hereunder or the violation by ABA of any
applicable securities laws, rules or regulations relating to the sale of the
shares of ABA Common Stock in accordance with the terms hereof; provided,
however, that ABA shall have no obligation to indemnify the Bank with
<PAGE>
Mr. James R. Erskine
Key Bank of Wyoming
August 16, 1996
Page 7
respect to or in connection with the Bank's actions relating to any aspects of
administering, processing or otherwise handling the Facilities (including, but
not limited to, the violation of any laws, rules or regulations applicable to
the Bank) or to any other actions of the Bank which constitute gross negligence
or willful misconduct.
(b) The Bank hereby agrees to indemnify and hold harmless ABA from any
damage, liability, cost, or expense incurred by ABA in connection with a breach
by the Bank of its obligations hereunder or the violation by the Bank of any
laws, rules or regulations applicable to the Bank; provided, however, that the
Bank shall have no obligation to indemnify ABA with respect to or in connection
with ABA's actions relating to the sale of the shares of ABA Common Stock in
accordance with the terms hereof (including, but not limited to, the violation
of any laws, rules, or regulations applicable to ABA) or to any other actions
of ABA which constitute gross negligence of willful misconduct.
11. The parties acknowledge that the Bank, DTC and Robert and
Sandra Oliver are negotiating a settlement of the $1,000,000 Facility. The
closing of the transactions contemplated by this letter agreement shall take
place simultaneously with the Closing of the purchase of certain DTC assets by
ABA, and to the extent practicable the closing of the transactions between the
Bank, DTC and Robert and Sandra Oliver relating to the settlement of the
$1,000,000 Facility. If for any reason the agreement between ABA and DTC for
the sale and purchase of such DTC assets is terminated, then this letter
agreement shall be null and void, with no further liability or obligation to
any party hereto. The Bank acknowledges that the settlement of the $1,000,000
Facility between the Bank, DTC and Robert and Sandra Oliver shall not be a
condition to the closing of the transactions between ABA and Key Bank
contemplated by this letter agreement. DTC and Robert and Sandra Oliver
acknowledge that ABA and DTC are negotiating the terms of a proposed agreement
pursuant to which certain DTC assets will be acquired by ABA. Each of DTC and
Robert and Sandra Oliver hereby expressly acknowledge and agree that no such
agreement has been reached between DTC and ABA with respect to such asset sale
as of the date hereof, that the execution and delivery of this letter agreement
will not be construed as creating an obligation on any party hereto to reach
such an agreement with respect to such asset sale, and that such asset sale
agreement will be deemed reached when, and only when, a definitive asset
purchase agreement and attendant documents have been executed and delivered by
and among ABA, DTC, and Robert and Sandra Oliver, and then only in accordance
with, and subject to the terms and conditions of, such asset purchase
<PAGE>
Mr. James R. Erskine
Key Bank of Wyoming
August 16, 1996
Page 8
agreement.
12. ABA hereby covenants to the Bank that ABA will comply with all laws,
rules and regulations applicable to ABA in connection with the performance by
ABA of its obligations hereunder. The Bank hereby covenants to ABA that the Bank
will comply with all laws, rules and regulations applicable to the Bank in
connection with the performance by the Bank of its obligations hereunder.
13. In the event that:
(a) a voluntary or involuntary proceeding in
bankruptcy or insolvency is filed by or
against ABA under any federal or state law,
and the same is not dismissed within 15
days of such filing; or
(b) a stop order is issued by the Securities
and Exchange Commission against ABA with
respect to the registration statement
herein described, or any enforcement
proceeding relating thereto is instituted
by the Securities and Exchange Commission,
the American Stock Exchange or the NASD,
and in each such case, the same is not
subsequently rescinded or dismissed within
30 days of the issuance or commencement
thereof; or
(c) there is a breach by ABA of any
representation, warranty, covenant or
agreement made by ABA in this letter
agreement, including, but not limited to,
the covenants contained in Sections 5 and 8
hereof, and the same is not cured within 10
business days after the Bank has provided
written notice to ABA of such breach;
then, in each such case, the entire remaining balance of the Amount Due to the
Bank by ABA at such time shall immediately become due and payable, and the Bank
shall have the right to (i) exercise its rights and remedies as a secured party
with respect to the Deposit Account, (ii) exercise its right of set-off against
the Deposit Account, and (iii) to the extent there remains anything owing on
the Amount Due after application of the remaining funds in the Deposit Account,
notify UBS of such default and outstanding balance owing on the Amount Due, and
<PAGE>
Mr. James R. Erskine
Key Bank of Wyoming
August 16, 1996
Page 9
instruct UBS to sell immediately so much of the remaining ABA Common Stock held
by it for the Bank as may be necessary to obtain Net Sales Proceeds sufficient
to pay such outstanding balance on the Amount Due plus the entire Interest
Equivalent Amount in full; provided, however, that the Bank hereby agrees that
it will give ABA three business days prior written notice before notifying UBS
of the occurrence of any such event. Any excess Net Sales Proceeds shall be
paid from the Bank's account to ABA.
14. Each of the parties hereto shall bear their own costs and expenses in
connection with the transactions contemplated hereby.
15. The parties acknowledge that time is of the essence, and
accordingly, in the event that this letter agreement is not fully executed
within two business days of the date hereof, the offer represented hereby shall
terminate, and no party shall have any obligation to any other party hereto.
16. The parties hereto acknowledge that this letter agreement has been
negotiated and executed, and is to be performed in, the State of Wyoming.
17. The Bank may assign its interest under this letter agreement to any
KeyCorp subsidiary with the written consent of ABA, which consent shall not be
unreasonably withheld or delayed; provided, however, that any such assignee
shall have a net worth equal to or greater than the net worth of the Bank. The
Bank shall notify ABA of the entity to which the assignment is
to be made (the "Assignee") and provide such information concerning it as ABA
may reasonably request. The Assignee shall agree in writing to assume all of
the Bank's duties and obligations under this letter agreement. In the event of
such assignment, the Deposit Account may continue to be maintained with the
Bank, but the rights of the Bank with respect thereto shall be transferred to
the Assignee. Upon consummation of such assignment, the Bank shall be released
from any further liability under this letter agreement.
18. In the event the definitive agreement referred to in paragraph 11
above is terminated for any reason, or ABA otherwise elects not to consummate
the acquisition of DTC's assets as contemplated therein, ABA shall immediately
give the Bank notice of such event. From the time of the execution of such
definitive agreement and prior to the Closing, ABA hereby represents and
warrants to the Bank that ABA will not manage or direct the business
<PAGE>
Mr. James R. Erskine
Key Bank of Wyoming
August 16, 1996
Page 10
operations of DTC.
19. This letter agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Facsimile signatures
shall be deemed acceptable and binding.
<PAGE>
Mr. James R. Erskine
Key Bank of Wyoming
August 16, 1996
Page 11
If the foregoing is in accordance with your understanding of the terms of
our agreement, please so indicate by signing a copy of this letter in the space
indicated below and returning a fully executed copy to us.
Very truly yours,
AMERICAN BODY ARMOR & EQUIPMENT, INC.
By: /s/ Warren B. Kanders
Warren B. Kanders
Chairman of the Board
ABOVE AGREED TO AND ACCEPTED
ON AUGUST 16, 1996:
KEY BANK OF WYOMING
By: /s/ James R. Erskine
James R. Erskine
Vice President
DEFENSE TECHNOLOGY CORPORATION OF AMERICA
By: /s/ Robert L. Oliver
Robert L. Oliver
CEO
/s/ Robert L. Oliver
Robert Oliver
/s/ Sandra A. Oliver
Sandra Oliver
<PAGE>
EXHIBIT 10.2
<PAGE>
KEY BANK OF WYOMING
1800 Carey Avenue
P.O. Box 924
Cheyenne, Wyoming 82003
September 30, 1996
Union Bank of Switzerland, New York Branch
1345 Avenue of the Americas
50th Floor
New York, New York 10105
Re: Shares of Armor Holdings, Inc., f/k/a
American Body Armor & Equipment, Inc.
Dear Sirs:
Reference is hereby made to that certain Letter Agreement (the
"Agreement"), dated August 16, 1996, among Armor Holdings, Inc., f/k/a American
Body Armor & Equipment, Inc. ("AHI"); Key Bank of Wyoming ("Key Bank"); Defense
Technology Corporation of America ("DTC"); Robert Oliver; and Sandra Oliver, a
copy of which is attached hereto as Exhibit A.
In accordance with the provisions of the Agreement, Key Bank hereby
irrevocably delivers to Union Bank of Switzerland, New York Branch ("UBS") the
stock certificate of AHI issued in the name of Key Bank representing 358,714
shares of common stock of AHI (the "Shares"). UBS is hereby authorized to hold
the Shares in its possession in a designated account ("Account") and to effect
any sales of such Shares from time to time as directed by AHI.
The first $662,500 of the Net Sales Proceeds (as defined in the
Agreement) realized from any such sales of the Shares shall be delivered to AHI.
Thereafter, subject to the provisions of the Agreement, all Net Sales Proceeds
shall be delivered to Key Bank until the sum of (i) the Net Sales Proceeds, (ii)
advances from the Deposit Account (as defined in the Agreement) and (iii) any
prepayments by AHI that are received by Key Bank, equals the sum of (y)
$1,987,500 (the "Aggregate Amount") plus (z) the Interest Equivalent Amount (as
defined in the Agreement). At the end of each day in which there is activity in
the Account, UBS will complete an accounting of the days activities and notify
each of Key Bank and AHI of such activities and the resulting balances thereof.
In the event Key Bank exercises its right of set-off against the Deposit Account
pursuant to the terms of the Agreement, then Key Bank and AHI shall jointly
notify UBS in writing of the date and amount of such set-off. In the event of a
prepayment by AHI to Key Bank prior to the Maturity Date (as defined in the
<PAGE>
Union Bank of Switzerland
New York Branch
September 30, 1996
Page 2
Agreement), AHI and Key Bank shall jointly notify UBS in writing of the date and
amount of such prepayment. Upon receipt by Key Bank from whatever source of the
Aggregate Amount plus the Interest Equivalent Amount, Key Bank and AHI shall
jointly notify UBS in writing of Key Bank's receipt thereof. Such notice shall
not be unreasonably withheld or delayed by Key Bank or AHI. On the first
business day following receipt by UBS of such notice, UBS shall promptly deliver
to AHI any assets remaining in the Account, including but not limited to any
Shares and/or excess Net Sales Proceeds not to exceed $20,000. AHI further
agrees that it shall use its reasonable best efforts to coordinate the sale of
Shares with the Aggregate Amount then outstanding plus the Interest Equivalent
Amount accrued from time to time so as to provide reasonable assurance the
amount of excess Net Sales Proceeds remaining in escrow hereunder upon payment
in full to Key Bank of the Aggregate Amount plus the Interest Equivalent Amount
shall not exceed such $20,000 limitation.
AHI shall effect any such sales of the Shares only after the
registration statement relating to the Shares has been declared effective by the
Securities and Exchange Commission. AHI shall advise UBS and Key Bank of the
effectiveness of such registration statement.
UBS hereby agrees that it will use reasonable care in the custody and
safekeeping of the Shares. UBS will not be responsible for any loss in value of
the Shares.
Key Bank hereby agrees that the terms of this letter agreement are
irrevocable, and that AHI shall at all times have the right to direct the sales
of the Shares as herein provided; provided, however, that upon the occurrence of
any of the events described in Section 13 of the Agreement, or as otherwise
prescribed by the Agreement, the provisions of this letter agreement shall
terminate, and the Shares shall be delivered to Key Bank. Key Bank shall notify
UBS of any such event. This letter agreement shall also terminate upon the sale
of all of the Shares and the disposition of the proceeds therefrom.
<PAGE>
Union Bank of Switzerland
New York Branch
September 30, 1996
Page 3
If UBS is in agreement with the foregoing, please so indicate by
signing this letter agreement in the space indicated below and returning a
fully-executed copy to us.
Very truly yours,
KEY BANK OF WYOMING
By: /s/ Cathy Ford
Cathy Ford
Assistant Vice President
ABOVE AGREED TO AND ACCEPTED:
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By: /s/ Lawrence E. Gore
Lawrence E. Gore
Managing Director
<PAGE>
EXHIBIT 10.3
<PAGE>
IRREVOCABLE POWER OF ATTORNEY
The undersigned, Key Bank of Wyoming ("Key Bank"), hereby
irrevocably constitutes and appoints Jonathan M. Spiller, the President and
Chief Executive Officer of Armor Holdings, Inc., f/k/a American Body Armor &
Equipment, Inc. ("AHI"), with full power of substitution, the true and lawful
attorney-in-fact (the "Attorney") of Key Bank with the full power in the name
of, for and on behalf of Key Bank, to effect any and all sales of the 358,714
shares of common stock of AHI delivered to Key Bank (the "Shares") pursuant to
that certain Letter Agreement (the "Agreement"), dated August 16, 1996, among
AHI, Key Bank, Defense Technology Corporation of America, Robert Oliver and
Sandra Oliver, such shares having been delivered to UBS by AHI for the account
of Key Bank pursuant to the terms of that certain Letter Agreement dated
September 30, 1996 among Key Bank and UBS.
The power and authority granted to the Attorney hereunder
shall include, but not be limited to, the power and authority to instruct all
appropriate persons to sell and deliver the Shares in accordance with the
instructions of AHI, all in conformity with the terms and provisions of the
Agreement.
This power of attorney is an agency coupled with an interest
and all authority conferred hereby shall be irrevocable; provided, however,
that upon the occurrence of any of the events described in Section 13 of the
Agreement, or as otherwise prescribed by the Agreement, this power of attorney
shall terminate. Key Bank shall notify UBS in writing of the occurrence of any
event described in Section 13 of the Agreement.
KEY BANK OF WYOMING
By: /s/ Cathy Ford
Cathy Ford
Assistant Vice President
State of Wyoming
County of Laramie ss.
On the 30th day of September, 1996, before me came Cathy Ford
to me known, who being by me duly sworn, did depose and say that he resides at
Laramie County, city of Cheyenne, state of Wyoming; that he is the Assistant
Vice President of Key Bank of Wyoming, the corporation described in and which
executed the foregoing instrument; that he knows the seal of the said
corporation; that it was so affixed by the order of the Board of Directors of
said corporation; and that he signed his name thereto by like order.
/s/ Ursula Herrera
Notary Public
Laramie County
<PAGE>
EXHIBIT 10.4
<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT made as of this 30th day of September, 1996
(the "Escrow Agreement"), by and among Armor Holdings, Inc., a Delaware
corporation with offices at 191 Nassau Place Road, Yulee, Florida 32097
("AHI"); Defense Technology Corporation of America, a Delaware corporation and
a wholly-owned subsidiary of AHI with offices at 191 Nassau Place Road, Yulee,
Florida 32097 (the "Purchaser"); Robert Oliver, residing at 8101 S.W. 53rd
Avenue, Miami, Florida 33143 (the "Executive"); Sandra Oliver, residing at 8101
S.W. 53rd Avenue, Miami, Florida 33143 (the "Stockholder"); and Defense
Technology Corporation of America, a Wyoming corporation with offices at 2136
Oil Drive, Casper, Wyoming 82604 (the "Seller") and Union Bank of Switzerland,
New York Branch, with offices at 1345 Avenue of the Americas, New York, New
York 10105 (the "Escrow Agent"), which term shall include any successor escrow
agent appointed in accordance with Section 7(b) hereof.
The parties hereto are entering into this Escrow Agreement
pursuant to that certain Asset Purchase Agreement, dated as of August 23, 1996
(the "Purchase Agreement"), among AHI, the Purchaser, the Executive, the
Stockholder and the Seller. Capitalized terms used but not otherwise defined
herein shall have the meaning ascribed to them in the Purchase Agreement.
This Escrow Agreement is designed to implement the
provisions of Section 5.3(d) of the Purchase Agreement pursuant to which the
Escrow Fund is being deposited with the Escrow Agent pending the occurrence of
the Release Dates contemplated in Section 5.3(d) of the Purchase Agreement.
Accordingly, in consideration of the mutual agreements herein
contained, the parties hereto hereby agree as follows:
1. Appointment of Escrow Agent. The Escrow Agent is
hereby appointed to act as escrow agent hereunder and the Escrow
Agent agrees to act as such, pursuant to the terms hereinafter set forth
herein.
2. Escrow Fund. On the date hereof, in accordance with
Section 5.3(d) of the Purchase Agreement, the Seller is delivering to the
Escrow Agent a certificate registered in the name of Seller for 270,728 shares
of common stock, $.01 par value per share (the "Common Stock"), of AHI,
together with a stock power duly endorsed in blank, and all necessary stock
transfer tax stamps (the "Escrow Fund"). The Escrow Fund shall be held in
escrow by the Escrow Agent, pending its disposition as hereinafter provided.
<PAGE>
3. Disposition of Escrow Fund. (a) The stock certificate
registered in the name of the Seller representing the shares of AHI shall be
held in escrow in accordance with the terms of this Escrow Agreement. One-half
of the Escrow Fund shall be held in escrow until March 15, 1998 ("First Release
Date"), and the remainder shall be held in escrow until June 30, 1999 ("Final
Release Date") (each, a "Release Date").
(b) Notwithstanding anything to the contrary
contained herein, should any claim or claims ("Claim") be made by the Purchaser
or by any third party arising out of or in connection with the Purchase
Agreement or the transactions contemplated therein while any shares of AHI
Common Stock are held in escrow, then such shares shall remain in escrow and
continue to be held by the Escrow Agent in accordance with the terms of this
Escrow Agreement until the final resolution of such Claim, notwithstanding the
occurrence or passing of a Release Date. Unless and until the Escrow Agent has
received written notice of a Claim, the Escrow Agent shall not be liable for
the release of any shares or funds otherwise in compliance with the terms,
conditions and procedures of this Escrow Agreement.
(c) The Purchaser shall have the right, in the
exercise of its reasonable and good faith judgment, upon written notice to the
Escrow Agent, to set-off and deduct from the Escrow Fund, and/or cause the
Escrow Agent to release from escrow and deliver to the Purchaser, the number of
shares of AHI Common Stock having a value equal to the amount of any losses for
which the Seller, the Executive or the Stockholder are required to indemnify
the Purchaser pursuant to the provisions of Section 5.3(a) of the Purchase
Agreement, including, but not limited to, by reason of Section 2.1(f) of the
Purchase Agreement; provided, however, that prior to any such set-off,
deduction or release of shares (x) the Purchaser shall give notice to the
Seller of the Claim for which indemnity is sought, and the Seller shall have a
period of 15 days in which to cure or otherwise remedy, to the satisfaction of
the Purchaser, any such Claim, and (y) during such 15 day period, the Seller
and the Purchaser shall hold good faith negotiations to resolve any dispute
with respect to any such Claim for indemnification (however, such negotiations
shall not extend such 15 day period); and (z) that prior to any such set-off,
deduction or release of shares the Seller shall be afforded the opportunity to
pay to the Purchaser, in immediately available funds, the amount of any such
loss within 15 days of notice thereof. For purposes of this Section 3(c) and
Section 5.3(d) of the Purchase Agreement, the value of the shares of AHI Common
Stock to be released from escrow by the Escrow Agent and delivered to Purchaser
in satisfaction of a Claim shall equal the average closing price of AHI's
Common Stock on the American Stock Exchange (or such other exchange as such
shares may then be listed) for the 10 consecutive trading day
2
<PAGE>
period ending two trading days prior to the date on which the shares are set
off, deducted or released from escrow in satisfaction of a Claim, or in the
event shares are returned to the Escrow Fund by Purchaser pursuant to Section
3(d) hereof, such shares of AHI Common Stock shall be valued in the manner
hereinabove provided, averaged over the 10 consecutive trading day period
ending two trading days prior to the date such shares are returned. Any
fractional share shall be rounded up or down to the nearest whole share or the
cash equivalent substituted in lieu thereof, as AHI may determine.
(d) If the amount of deduction is subsequently
determined to be in excess of the amount which the Purchaser is legally
entitled to deduct, the Purchaser shall promptly return such funds in cash or
AHI Common Stock, as the case may be, to the Escrow Fund or if the Escrow Fund
has terminated, shall pay such difference to the Seller after such final
determination. AHI Common Stock returned to the Escrow Fund shall be valued as
set forth in Section 3(c) of this Escrow Agreement.
(e) Notwithstanding anything contained herein to
the contrary, the Seller shall have the right to instruct the Escrow Agent to
sell any of the shares held in the Escrow Fund following the effectiveness of a
registration statement of AHI registering all of such shares with the
Securities and Exchange Commission. AHI shall notify both the Seller and the
Escrow Agent of the effectiveness of such registration statement. In the event
any shares of AHI Common Stock are sold at the request of the Seller while held
in the Escrow Fund, subject to the terms and conditions of the Purchase
Agreement, this Escrow Agreement, that certain Lock-Up Agreement dated as of
August 23, 1996 by and among AHI and the Seller (the "Lock-Up Agreement") and
all applicable laws and regulations, the proceeds of any such sale shall be
remitted to the Escrow Agent and held as part of the Escrow Fund until released
in accordance with the provisions of this Section 3.
(f) If no event enumerated in Section 3(c) of this
Escrow Agreement or event pursuant to which the Seller, the Executive or the
Stockholder are required to indemnify the Purchaser pursuant to the provisions
of Section 5.3(a) of the Purchase Agreement, including, but not limited to, by
reason of Section 2.1(f) thereof, has occurred prior to either Release Date,
then (x) upon the occurrence of the First Release Date, AHI and the Seller
shall jointly execute written instructions to the Escrow Agent to deliver to
the Seller one-half of the Escrow Fund as is deliverable to the Seller on such
Release Date; and (y) upon the occurrence of the Final Release Date, the
balance of the Escrow Fund shall be released to Seller unless the Purchaser
shall have given the Escrow Agent written notice of a Claim prior thereto, in
which event the Escrow Fund shall continue to be held in escrow
3
<PAGE>
pursuant to Section 3(b).
(g) If the Escrow Agent shall receive written
instructions signed by AHI and the Seller directing the Escrow
Agent to deliver all or any portion of the Escrow Fund as specified
in such instructions, the Escrow Agent shall do so as soon as
reasonably possible after receipt of such instructions. The
instructions shall contain the following:
(i) the total amount of funds and/or
number of shares of AHI Common Stock that the Escrow
Agent is thereby directed to pay out of the Escrow
Fund;
(ii) the party or parties to whom, or the
account or accounts to which, the Escrow Agent is
thereby directed to pay such amounts or number of
shares; and
(iii) the date upon which the Escrow Agent
is directed to pay such amount or number of shares.
The Escrow Agent may rely fully on the provisions set forth in the instructions
without any responsibility to determine whether such instructions comply with
this Section 3(g).
(h) So long as there is no breach of any
representation, warranty, covenant or agreement by the Seller, the Executive or
the Stockholder under the Purchase Agreement or the other agreements
contemplated thereby, and subject to any rights in favor of third parties that
may be granted by the Seller, the Executive or the Stockholder, the Seller
shall be entitled to vote the shares of AHI Common Stock in the Escrow Fund and
to receive dividends thereon, when, as and if declared by the Board of
Directors of AHI.
4. Rights to Escrow Fund. The Escrow Fund shall be for the
exclusive benefit of AHI and the Seller and their respective successors and
assigns, and no other person or entity shall have any right, title or interest
therein, except as otherwise contemplated herein or by the Purchase Agreement.
5. Distributions from the Escrow Fund. (a) The Escrow
Agent shall continue to hold the Escrow Fund in its possession until authorized
hereunder to distribute the Escrow Fund, or any specified portion thereof, as
follows:
(i) Pursuant to Section 3 of this Escrow
Agreement.
4
<PAGE>
(ii) If other than pursuant to Section 3,
as determined by a final order, decree or judgment
of a court of competent jurisdiction in the United
States of America in a proceeding to which AHI and
the Seller are parties (a "Final Decree"); or
(iii) as provided in Section 6 or 7(b)
hereof relating to termination and resignation
of the Escrow Agent.
(b) It is understood that the Escrow Agent may
disburse any portion of the Escrow Fund without any instructions if such
distribution is pursuant to Section 5(a)(ii) or 5(a) (iii).
6. Termination of Escrow. This Escrow Agreement may be
terminated at any time by and upon the receipt by the Escrow Agent of 10 days'
prior written notice of termination executed by AHI and the Seller, directing
the distribution of all property then held by the Escrow Agent under and
pursuant to this Escrow Agreement. In the event that a dispute arises in
connection with the release of the Escrow Fund, the Escrow Agent shall have the
sole and absolute right to resign in accordance with the provisions of Section
7(b) hereof. This Escrow Agreement shall automatically terminate if and when
all amounts in the Escrow Fund shall have been distributed by the Escrow Agent
in accordance with the terms of this Escrow Agreement.
7. The Escrow Agent.
(a) Obligations.
(i) The obligations of the Escrow Agent are
those specifically provided in this Escrow Agreement
and no other, and the Escrow Agent shall have no
liability under, and no duty to inquire into the
terms and provisions, of any agreement between the
parties hereto. The Escrow Agent is acting hereunder
as an accommodation to the parties hereto. The
duties of the Escrow Agent are purely ministerial in
nature, and it shall not incur any liability
whatsoever, except for its willful misconduct or
gross negligence. The Escrow Agent may consult with
counsel of its choice, and shall not be liable for
following the written advice of such counsel.
(ii) The Escrow Agent shall not have any
responsibility for the genuineness or validity of
any document or other item deposited with it or of
5
<PAGE>
any signature thereon or for the identity,
authority or right of any person executing or
depositing the same and shall not have any liability
for acting in accordance with any written
instructions or certificates given to it hereunder
signed by the proper parties.
(b) Resignation and Removal. The Escrow Agent
may resign from its duties hereunder at any time by giving at least 30 days'
prior written notice of such resignation to AHI and the Seller and specifying
a date upon which such resignation shall take effect; provided, however, that
the Escrow Agent shall continue to serve until its successor accepts the
Escrow Fund pursuant to a written assignment and assumption instrument
pursuant to which the rights of the Escrow Agent are assigned to such
successor and such successor expressly assumes the obligations of the Escrow
Agent hereunder. Notwithstanding the foregoing, however, the Escrow Agent
shall, in the alternative, have the right, at any time, following 10 days
written notice to the other parties hereto, to resign as Escrow Agent and
deposit the Escrow Fund with a court of competent jurisdiction and the Escrow
Agent shall thereupon have no further obligation with respect thereto. Upon
receipt of such notice, a successor escrow agent shall be appointed by AHI and
the Seller, such successor escrow agent to become the Escrow Agent hereunder
on the resignation date specified in such notice. If an instrument of
assignment and assumption by a successor escrow agent shall not have been
delivered to the Escrow Agent within 45 days after the giving of such notice
of resignation, the resigning Escrow Agent may petition any court of competent
jurisdiction for the appointment of a successor escrow agent. AHI and the
Seller, acting jointly, may at any time remove the Escrow Agent and substitute
a new escrow agent by giving 10 days' prior written notice thereof to the
Escrow Agent then acting and paying all fees and expenses of such Escrow Agent
through the date of termination.
(c) Indemnification. AHI and the Seller shall
jointly and severally, hold the Escrow Agent harmless from and against and
indemnify the Escrow Agent for any loss, liability, expense (including
reasonable attorneys' fees and expenses), claim or demand arising out of or in
connection with the performance of its obligations in accordance with the
provisions of this Escrow Agreement, except for any of the foregoing arising
out of the gross negligence or willful misconduct of the Escrow Agent. The
foregoing indemnities in this Section 7(c) shall survive the resignation or
substitution of the Escrow Agent and the termination of this Escrow Agreement.
(d) Expenses of the Escrow Agent. AHI shall
bear the cost for reasonable expenses incurred by the Escrow Agent in the
performance of services pursuant to this Escrow Agreement
6
<PAGE>
including, but not limited to, reasonable legal fees, and AHI agrees to
promptly reimburse the Escrow Agent upon receipt of a written request for
reimbursement and the presentation of proper vouchers or receipts therefor.
8. Disputes.
(a) Escrow Agent's Responsibility. If any
dispute should arise with respect to the payment and/or ownership or right of
possession of the Escrow Fund, the Escrow Agent is authorized and directed to
retain in its possession, without liability to anyone, all or any portion of
the Escrow Fund until such dispute shall have been settled either by agreement
of the parties concerned or by a Final Decree, but the Escrow Agent shall be
under no duty whatsoever to institute or defend any such proceedings.
(b) Costs. AHI and the Seller shall each bear
all of their own fees and expenses incurred by them in resolving any dispute
arising under this Escrow Agreement. Any costs incurred by the Escrow Agent in
connection with any dispute arising under this Escrow Agreement shall be
reimbursed to the Escrow Agent pursuant to the provisions of Section 7(d). If
the Escrow Agent is not reimbursed for such expenses within 30 days' written
notice thereof pursuant to Section 7(d) hereof, the Escrow Agent shall be
entitled to resign, upon 15 days' prior written notice to the parties hereto.
If no successor escrow agent is named by the end of such 15 day period, the
Escrow Agent shall have the right to deposit the Escrow Fund with an
appropriate court and the Escrow Agent shall have no further obligation under
this Escrow Agreement or, in the alternative, the Escrow Agent shall be
entitled to continue to serve as Escrow Agent if all of its costs have been
and are continuing to be paid on a current basis by the parties hereto.
9. Fees of the Escrow Agent. The fees of the Escrow Agent
shall be limited to those set forth on Schedule A attached hereto and shall be
borne by AHI and shall be billed to and paid by AHI in accordance with the
Escrow Agent's regular billing practices.
10. Notices. All notices or other communications which are
required or permitted to be given hereunder shall be in writing and shall
personally be delivered, sent by certified mail, return receipt requested, or
sent by a nationally-recognized overnight courier, to the parties hereto at the
addresses first above written, or to such other addresses as the party to whom
notice is to be given may have furnished to the other parties in writing. Any
such communication shall be deemed to have been given when (i) delivered, if
personally delivered, (ii) on receipt, if sent by mail, and (iii) on the
business day after dispatch, if sent by nationally-recognized overnight
courier.
7
<PAGE>
11. Counterparts. This Escrow Agreement may be executed
in any number of counterparts, and each such counterpart shall be
deemed to be an original instrument, but all such counterparts
together shall constitute but one agreement.
12. Governing Law and Jurisdiction. This Escrow Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, without giving effect to the principles of conflicts of laws
thereunder. This Escrow Agreement shall be subject to the exclusive
jurisdiction of the courts located in New York County, New York. The parties to
this Escrow Agreement agree that any breach of any term or condition of this
Escrow Agreement shall be deemed to be a breach occurring in the State of New
York by virtue of a failure to perform an act required to be performed in the
State of New York, and the parties irrevocably and expressly agree to submit to
the jurisdiction of the courts of the State of New York for the purpose of
resolving any disputes among the parties relating to this Escrow Agreement or
the transactions contemplated hereby. The parties hereto irrevocably waive, to
the fullest extent permitted by law, any objection which they may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Escrow Agreement, or any judgment entered by any
court in respect hereof brought in New York County, New York, and further
irrevocably waive any claim that any suit, action or proceeding brought in New
York County, New York has been brought in an inconvenient forum.
13. Benefits of Agreement. All the terms and provisions of
this Escrow Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns; and nothing in this
Escrow Agreement, express or implied, is intended to confer on any person,
corporation, group or other entity other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Escrow Agreement. Anything contained
herein to the contrary notwithstanding, this Escrow Agreement shall not be
assignable by any party hereto without the consent of the other parties hereto.
14. Full Force and Effect. This Escrow Agreement shall
remain in full force and effect until the Escrow Agent has
delivered all shares and/or funds in the Escrow Fund in accordance
with the terms hereof.
15. Modification. This Escrow Agreement shall not be
altered or otherwise amended, except pursuant to an instrument in
writing signed by each of the parties hereto.
8
<PAGE>
16. Descriptive Headings. The descriptive headings in
this Escrow Agreement are for convenience only and shall not
control or affect the meaning or constructing of any provision of
this Escrow Agreement.
17. Transfer. The Seller shall not sell, assign, transfer
exchange or otherwise dispose of, or grant any option or warrant with respect
to, all or any part of the Escrow Fund, nor shall it create, incur or permit to
exist any pledge, lien, mortgage, hypothecation, security interest, charge or
other encumbrance with respect to all or part of the Escrow Fund.
18. Purchase Agreement and Lock-Up Agreement. The
parties hereto agree that this Escrow Agreement shall be subject to the terms
and conditions of the Purchase Agreement and the Lock-Up Agreement. To the
extent any provision of Section 3 is in conflict with any provision of the
Purchase Agreement, the provisions of the Purchase Agreement shall prevail.
The parties hereto (other than the Escrow Agent) acknowledge their respective
obligations under Article V of the Purchase Agreement and the Lock-Up
Agreement, and agree to be bound by such.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Escrow Agreement to be executed and delivered on the date first above written.
ARMOR HOLDINGS, INC.
By: /s/ Robert Schiller
Robert Schiller
Vice President
DEFENSE TECHNOLOGY CORPORATION
OF AMERICA, a Delaware corporation
By: /s/ Robert Schiller
Robert Schiller
Vice President
DEFENSE TECHNOLOGY CORPORATION
OF AMERICA, a Wyoming corporation
By: /s/ Robert L. Oliver
Robert L. Oliver
CEO
/s/ Robert L. Oliver
ROBERT OLIVER
/s/ Sandra Oliver
SANDRA OLIVER
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as Escrow Agent
By: /s/ Lawrence E. Gore
Lawrence E. Gore
Managing Director
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SCHEDULE A
ESCROW AGENT FEES
$5,000.00 over the life of the escrow term, payable upon the opening of the
Escrow Fund.
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EXHIBIT 10.5
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GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (the "Guaranty Agreement" or the
"Guaranty"), dated as of August 26, 1996, is made by ROBERT OLIVER and SANDRA
OLIVER, jointly and severally (collectively, the "Guarantors") to ARMOR
HOLDINGS, INC. (the "Company").
W I T N E S S E T H:
WHEREAS, DEFENSE TECHNOLOGY CORPORATION OF AMERICA ("DTCOA")
desires to sell certain of its assets to the Company pursuant to the Asset
Purchase Agreement, dated the date hereof (the "Asset Purchase Agreement"),
between DTCOA, the Company and the other parties thereto;
WHEREAS, the Company is not willing to enter into the Asset
Purchase Agreement without the Guarantors executing and delivering this
Guaranty; and
WHEREAS, the Guarantors desire that the Company enter into
the Asset Purchase Agreement and are willing to execute and deliver this
Guaranty in connection therewith.
NOW, THEREFORE, in order to induce the Company to enter into
the Asset Purchase Agreement, the Guarantors, jointly and severally, agree as
follows:
1. Guaranty. The Guarantors, jointly and severally,
hereby unconditionally, absolutely, continually and irrevocably
guarantee to the Company the payment and performance in full of the
Guaranteed Obligations (as defined below). For purposes of this
Guaranty Agreement, "Guaranteed Obligations" means: the obligation
of DTCOA to perform and fulfill its covenants and obligations to
the Company, including, but not limited to, any indemnification
obligations, pursuant to the Asset Purchase Agreement. The
Guarantors' obligations to the Company under this Guaranty
Agreement are hereinafter collectively referred to as the
"Guarantors' Obligations."
The Guarantors agree, jointly and severally, that
they are liable for the Guaranteed Obligation to the same extent as if each was
the primary obligor thereof.
2. Payment. In the event that the DTCOA incurs any liability
to the Company pursuant to the Asset Purchase Agreement, then the Guarantors,
jointly and severally, upon demand thereof by the Company or its successors or
assigns, will, within three (3) business days of such demand, fully pay to the
Company an amount equal to such liability.
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3. Unconditional Obligations. This is a guaranty of payment
and not of collection. The Guarantors' Obligations under this Guaranty
Agreement shall be absolute and unconditional irrespective of the validity,
legality or enforceability of the Asset Purchase Agreement, and shall not be
affected by any action taken under the Asset Purchase Agreement or any other
agreement between the Company and DTCOA or any other person, in the exercise of
any right or power therein conferred, or by any failure or omission to enforce
any right conferred thereby, or by any waiver of any covenant or condition
therein provided, or by any acceleration of the maturity of any of the
Guaranteed Obligations, or by the sale, merger, consolidation, dissolution or
liquidation of DTCOA or any transfer or disposition of all or substantially all
the assets of DTCOA or by any extension or renewal of the Asset Purchase
Agreement, in whole or in part, or by any modification, alteration, amendment
or addition of or to the Asset Purchase Agreement, or any other agreement
between the Company and DTCOA or any other person, or by any other circumstance
whatsoever (with or without notice to or knowledge of the Guarantors) which may
or might in any manner or to any extent vary the risks of the Guarantors, or
might otherwise constitute a legal or equitable discharge of a surety or
guarantor; it being the purpose and intent of the parties hereto that this
Guaranty Agreement and the Guarantors' Obligations hereunder shall be absolute
and unconditional under any and all circumstances and shall not be discharged
except by payment as herein provided, or by express written release by the
Company as to any specific claim hereunder, it being understood that any such
release shall not constitute a release of the Guarantors of their remaining
obligations pursuant to this Guaranty.
4. Currency and Funds of Payment. The Guarantors hereby
guarantee, jointly and severally, that the Guarantors' Obligations will be paid
in lawful currency of the United States of America and in immediately available
funds, regardless of any law, regulation or decree now or hereafter in effect
that might in any manner affect the Guaranteed Obligations, or the rights of
the Company with respect thereto as against DTCOA, or cause or permit to be
invoked any alteration in the time, amount or manner of payment by DTCOA of any
or all of the Guaranteed Obligations.
5. Events of Default. In the event that (a) either of the
Guarantors shall file a petition to take advantage of any insolvency statute;
(b) either of the Guarantors shall commence or suffer to exist a proceeding for
the appointment of a receiver, trustee, liquidator or conservator of itself or
of the whole or substantially all of its property; (c) either of the Guarantors
shall file a petition or answer seeking reorganization or arrangement or
similar relief under the Federal bankruptcy laws or any other applicable law or
statute of the United States of America
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or any state or similar law of any other country; (d) a court of competent
jurisdiction shall enter an order, judgment or decree appointing a custodian,
receiver, trustee, liquidator or conservator of either of the Guarantors or of
the whole or substantially all of its properties, or approve a petition filed
against either of the Guarantors seeking reorganization or arrangement or
similar relief under the Federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state or similar law of any
other country, or if, under the provisions of any other law for the relief or
aid of debtors, a court of competent jurisdiction shall assume custody or
control of the Guarantors or of the whole or substantially all of its
properties and such order, judgment, decree, approval or assumption remains
unstayed or undismissed for a period of thirty (30) days; (e) there is
commenced against either of the Guarantors any proceeding or petition seeking
reorganization, arrangement or similar relief under the Federal bankruptcy laws
or any other applicable law or statute of the United States of America or any
state, which proceeding or petition remains unstayed or undismissed for a
period of thirty (30) days; (f) any default shall occur in the payment of
amounts due hereunder; or (g) any other default shall occur hereunder which
remains uncured or unwaived for a period of ten (10) days (each of the
foregoing an "Event of Default" hereunder); then at the Company's election and
without notice thereof or demand therefor, so long as such Event of Default
shall be continuing, the Guarantors' Obligations shall immediately become due
and payable.
6. Suits. The Guarantors from time to time shall pay to the
Company, jointly and severally, within three (3) business days of demand by the
Company therefor, at the Company's address set forth in the Asset Purchase
Agreement, the Guarantors' Obligations as they become due on their due date,
whether as a result of the passage of time or by acceleration following the
occurrence of an event of default by DTCOA under the Asset Purchase Agreement,
and in the event such payment is not so made, the Company may proceed to suit
against either or both of the Guarantors. At the Company's election, one or
more and successive or concurrent suits may be brought hereon by the Company
against the Guarantors, or either of them, whether or not suit has been
commenced against DTCOA, and whether or not the Company has taken or failed to
take any other action to collect all or any portion of the Guaranteed
Obligations.
7. Set-Off and Waiver. The Guarantors waive any right
to assert against the Company as a defense, counterclaim, set-off or cross
claim, any defense (legal or equitable) or other claim which such Guarantors may
now or at any time hereafter have against DTCOA or the Company, other than any
defense then otherwise available to DTCOA pursuant to the Asset Purchase
Agreement. If at
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any time hereafter the Company employs counsel for advice or other
representation to enforce the Guarantors' Obligations that arise out of an
Event of Default, then, in any of the foregoing events, all of the attorneys'
fees and disbursements arising from such services and all expenses, costs and
charges in any way or respect arising in connection therewith or relating
thereto shall be paid by the Guarantors, jointly and severally, to the Company,
on demand.
8. Waiver; Subrogation.
(a) The Guarantors hereby waive notice of the
following events or occurrences: (i) the Company's acceptance of this Guaranty
Agreement; (ii) the Company or DTCOA heretofore, now or at any time hereafter,
obtaining, amending, substituting for, releasing, waiving or modifying the
Asset Purchase Agreement; (iii) presentment, demand, notices of default,
non-payment, partial payment and protest; (iv) the Company heretofore, now or
at any time hereafter granting to DTCOA (or any other party liable to the
Company on account of the Guaranteed Obligations) any indulgence or extensions
of time of payment of the Guaranteed Obligations; and (v) the Company
heretofore, now or at any time hereafter accepting from DTCOA or any other
person, any partial payment or payments on account of the Guaranteed
Obligations or any collateral securing the payment thereof or the Company
settling, subordinating, compromising, discharging or releasing the same. The
Guarantors agree that the Company may heretofore, now or at any time hereafter
do any or all of the foregoing in such manner, upon such terms and at such
times as the Company, in its sole and absolute discretion, deems advisable,
without in any way or respect impairing, affecting, reducing or releasing the
Guarantors from the Guarantors' Obligations, and the Guarantors hereby consent
to each and all of the foregoing events or occurrences.
(b) Each of the Guarantors hereby agrees that
payment or performance by such Guarantor of the Guarantors' Obligations under
this Guaranty Agreement may be enforced by the Company upon demand by the
Company to such Guarantor without the Company being required, each Guarantor
expressly waiving any right it may have to require the Company, to prosecute
collection or seek to enforce or resort to any remedies against DTCOA, IT BEING
EXPRESSLY UNDERSTOOD, ACKNOWLEDGED AND AGREED TO BY THE GUARANTORS THAT DEMAND
UNDER THIS GUARANTY AGREEMENT MAY BE MADE BY THE COMPANY, AND THE PROVISIONS
HEREOF ENFORCED BY THE COMPANY, EFFECTIVE AS OF THE FIRST DATE ANY OF THE
GUARANTEED OBLIGATIONS IS NOT PAID BY DTCOA UNDER THE ASSET PURCHASE AGREEMENT.
The Guarantors' Obligations shall in no way be impaired, affected, reduced, or
released by reason of the Company's failure or delay to do or take any of the
acts, actions or things described in this Guaranty including, without limiting
the generality of the
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foregoing, those acts, actions and things described in this
Section 8.
(c) The Guarantors further agree with respect to
this Guaranty that each such Guarantor shall have no right of subrogation,
reimbursement or indemnity until such time as all of the Guaranteed Obligations
have been fully, finally and indefeasibly paid in full.
9. Effectiveness; Enforceability. This Guaranty Agreement
shall be effective as of the date hereof, and shall continue in full force and
effect until the Guaranteed Obligations have been fully, finally and
indefeasibly paid in full or until the Company has furnished Guarantors with a
written release of their obligations hereunder, whichever shall first occur.
This Guaranty Agreement shall be binding upon and inure to the benefit of the
Guarantors and the Company and their respective successors and assigns.
Notwithstanding the foregoing, Guarantors may not, without the prior written
consent of the Company, assign any rights, powers, duties or obligations
hereunder. Any claim or claims that the Company may at any time hereafter have
against the Guarantors under this Guaranty Agreement may be asserted by the
Company by written notice directed to the Guarantors at the addresses specified
herein.
10. Representations and Warranties. The Guarantors, jointly
and severally, warrant and represent to the Company that they are duly
authorized to execute, deliver and perform this Guaranty Agreement; that this
Guaranty Agreement is legal, valid, binding and enforceable against each such
Guarantor in accordance with its terms except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles; and that each such Guarantor's execution, delivery and performance
of this Guaranty Agreement does not violate or constitute a breach of any
agreement to which such Guarantor is a party, or any applicable laws.
11. Expenses. Each Guarantor agrees to be liable,
jointly and severally, for the payment of all fees and expenses,
including attorney's fees and expenses, incurred by the Company in
connection with the enforcement of this Guaranty Agreement.
12. Reinstatement. Each Guarantor agrees that this
Guaranty Agreement shall continue to be effective or be reinstated,
as the case may be, at any time payment received by the Company
under the Asset Purchase Agreement or this Guaranty Agreement is
rescinded or must be restored for any reason.
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13. Counterparts. This Guaranty Agreement may be
executed in any number of counterparts, each of which shall be
deemed to be an original as against any party whose signature
appears thereon, and all of which shall constitute one and the same
instrument.
14. Reliance. Each Guarantor represents and warrants to the
Company that: (a) such Guarantor has adequate means to obtain from DTCOA, on a
continuing basis, information concerning DTCOA and DTCOA's financial condition
and affairs and has full and complete access to DTCOA's books and records; (b)
such Guarantor is not relying on the Company, its agents or other
representatives, to provide such information, now or in the future; (c) such
Guarantor is executing this Guaranty Agreement freely and deliberately, and
understands the obligations and financial risk undertaken by providing this
Guaranty; (d) such Guarantor has relied solely on such Guarantor's own
independent investigation, appraisal and analysis of DTCOA and DTCOA's
financial condition and affairs in deciding to provide this Guaranty and is
fully aware of the same; and (e) such Guarantor has not depended or relied on
the Company, its agents or other representatives, for any information
whatsoever concerning DTCOA or DTCOA's financial condition and affairs or other
matters material to such Guarantor's decision to provide this Guaranty or for
any counselling, guidance, or special consideration or any promise therefor
with respect to such decision. Each Guarantor agrees that the Company has no
duty or responsibility whatsoever, now or in the future, to provide to such
Guarantor any information concerning DTCOA or DTCOA's financial condition and
affairs, and that, if such Guarantor receives any such information from the
Company, its agents or other representatives, such Guarantor will independently
verify the information and will not rely on the Company, its agents or other
representatives, with respect to such information.
15. Termination. This Guaranty Agreement and all
obligations of the Guarantors hereunder shall terminate without
delivery of any instrument or performance of any act by any party
on the date when all of the Guaranteed Obligations have been fully,
finally and indefeasibly paid in full.
16. Governing Law.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE
FULLY PERFORMED, IN SUCH STATE.
(b) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY
AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
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TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY
STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES
ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING
OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION
OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY
SUCH SUIT, ACTION OR PROCEEDING.
(c) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE
MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND
COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE
PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED HEREIN OR BY
ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE
LAWS IN EFFECT IN THE STATE OF NEW YORK.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c)
HEREOF SHALL PRECLUDE THE COMPANY FROM BRINGING ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT IN THE COURTS OF ANY PLACE WHERE THE GUARANTORS OR
ANY OF THE GUARANTORS' PROPERTY OR ASSETS MAY BE FOUND OR
LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF
ANY SUCH JURISDICTION, THE GUARANTORS HEREBY IRREVOCABLY
SUBMIT TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY
WAIVE, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE
JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR
HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR
OTHERWISE, MAY BE AVAILABLE TO IT.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE
FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND EACH PARTY
HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION THAT IT MAY HAVE THAT EACH ACTION OR PROCEEDING HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
17. Notices. Any notice hereunder shall be in writing,
and shall be delivered by overnight courier service, by facsimile
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with proof of transmission, or by certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to the Guarantors:
Robert Oliver and Sandra Oliver
8101 S.W. 53rd Avenue
Miami, Florida 33143
FAX: (305) 665-1384
with a copy to:
Kaufman & Cumberland Co., L.P.A.
1404 East 9th Street
Cleveland, Ohio 44114
FAX: (216) 694-6890
If to the Company:
Armor Holdings, Inc.
191 Nassau Place Road
Yulee, Florida, 32097
FAX: (904) 261-4408
with a copy to:
Kane Kessler, P.C.
1350 Avenue of the Americas
New York, New York 10019
Attn: Robert L. Lawrence, Esq.
FAX: (212) 245-3009
Notices sent by overnight courier service shall be
deemed delivered on the next business day, and notices sent by certified mail,
postage prepaid, return receipt requested, shall be deemed delivered three
business days after the date of mailing thereof.
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IN WITNESS WHEREOF, the parties have duly executed this
Agreement on the day and year first written above.
GUARANTORS:
/s/ Robert L. Oliver
Robert Oliver
Sworn to before me this
26th day of August, 1996
/s/ Roxana Lourido
Notary Public
/s/ Sandra Oliver
Sandra Oliver
Sworn to before me this
___ day of __________, 1996
____________________
Notary Public
COMPANY:
ARMOR HOLDINGS, INC.
By: /s/ Jonathan M. Spiller
Jonathan M. Spiller
President and CEO
Sworn to before me this
12th day of September, 1996
/s/ Kathryn Ellen Hazes
Notary Public
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EXHIBIT 10.6
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August 23, 1996
Armor Holdings, Inc.
191 Nassau Place Road
Yulee, Florida 32097
Gentlemen:
The undersigned, Defense Technology Corporation of America,
Inc. ("DTCOA"), is desirous of facilitating the proposed purchase by Armor
Holdings, Inc., a Delaware corporation (the "Company") of certain assets of
DTCOA.
In order to facilitate the aforesaid transaction, DTCOA
hereby agrees that it will not, directly or indirectly, without the prior
written consent of the Company, offer to sell, grant any option for the sale
of, assign, transfer, pledge, hypothecate or otherwise encumber or dispose of
any shares of common stock, par value $.01 per share, of the Company (the
"Common Stock") to be acquired by DTCOA in connection with the aforesaid
transaction or securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common Stock
("Purchased Common Stock") (either pursuant to Rule 144 of the Securities Act
of 1933, as amended, or otherwise) or dispose of any beneficial interest
therein, except in accordance with the following provisions: (i) fifty (50%)
percent of the Purchased Common Stock may be sold free of this Agreement
commencing on or after March 15, 1998; and (ii) the balance of the Purchased
Common Stock may be sold free of this Agreement commencing June 30, 1999;
subject, however, to the rights granted to the parties under the Asset Purchase
Agreement, dated the date hereof, between the Company, DTCOA, and the other
parties thereto.
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2--Armor Holdings, Inc. August 23, 1996.
In furtherance of the foregoing, DTCOA hereby delivers to
you, or to such person as you may direct, in pledge all certificates
representing shares of Common Stock, options and other securities of the
Company, that are owned by DTCOA, to be held by you or such other person as you
may have directed, during the periods herein provided.
Very truly yours,
Defense Technology Corporation
of America
By: /s/ Robert L. Oliver
Robert L. Oliver
CEO
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EXHIBIT 10.7
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AUTHORIZED DISTRIBUTOR AGREEMENT
AUTHORIZED DISTRIBUTOR AGREEMENT, dated as of September 30,
1996, between DEFENSE TECHNOLOGY CORPORATION OF AMERICA, a Delaware corporation
(the "Company"), XM CORPORATION, a Wyoming corporation (the "Distributor") and
ROBERT OLIVER ("Executive").
WHEREAS, the Distributor desires to be an authorized
distributor of the Company's products for international sale only and the
Company desires that the Distributor be so engaged, all in accordance with the
terms of this Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the
mutual promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby agree as follows:
1. The Company hereby appoints, and the Distributor hereby
accepts the appointment of, the Distributor as the Company's master authorized
distributor of the Company's Product Line (as hereinafter defined), to
distribute and sell at prices to be determined by the Distributor, a full and
complete line of the Company's products ("Product Line"), and under the terms
and conditions contained in this Agreement. The term of this Agreement shall
begin on the date hereof and continue for a period of three years from the date
hereof, subject to earlier termination as herein provided. All services, duties
and obligations of Distributor to be performed hereunder shall be principally
rendered by or under the direct supervision and control of the Executive on
behalf of the Distributor.
2. The Company will from time to time, as the Company in its
sole discretion deems appropriate, provide the Distributor with catalogs and
other sales aids. These materials are for the Distributor's exclusive use to
assist the Distributor in selling the Company's products to the Distributor's
customers and are not to be given to any other person other than such
customers. The Company may from time to time, in its sole discretion as deemed
appropriate by the Company, provide demonstrations of its products and their
usage for the Distributor's sales associates.
3. The Distributor agrees to sell the Company's Product Line
only in international markets, excluding, Canada, the United States of America,
its territories and possessions, except that Distributor may sell the Company's
Product Line to customers within the United States with established
international distribution system, solely for export, subject to the prior
written consent of the Company. Distributor shall provide high quality,
superior and professional customer service including, without limitation,
trained sales associates who are knowledgeable of the Company's Product Line.
The Distributor shall only use logo signs that have been approved by the
Company
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in advance. Any advertising or promotional activities involving the Company's
products or the Company brand name or logo (including any affiliates of the
Company) may only be conducted with the prior written permission of the
Company.
4. In the event that the total value of Orders (as
hereinafter defined) from the Company placed by Distributor for products within
the Product Line ("Total Orders") are equal to or greater than (A) $3,000,000
for the 12-month period ended September 30, 1997, (B) $3,500,000 for the
12-month period ended September 30, 1998, and (C) $4,000,000 for the 12-month
period ended September 30, 1999, (each such period being herein referred to as
"Target Year", and each such amount for the respective period indicated is
herein referred to as a "Target Level"), then commencing with the period
beginning October 1, 1996, the Company shall pay to the Distributor or, in the
event that the Distributor has been liquidated and dissolved, to the
Distributor's successor for such purpose, the following cash payments ("Fees"):
$250,000 per annum, payable on a monthly basis in arrears, as an advance for
achieving the Target Levels for each 12-month period herein specified (the
first such payment to be due and payable on October 31, 1996). All such Fees
paid in advance to the Distributor shall be subject to the Distributor
achieving the Target Level for the Target Year in question, and if any Target
Level for a Target Year is not attained by the Distributor, there shall be a
pro-rata reduction of the Fee paid to the Distributor, based upon the amount of
Total Orders, net of returns and allowances, for the Target Year in question in
relation to the Target Level for such Target Year, and the Distributor shall
refund to the Company any such excess payments. In the event that the
Distributor does not refund such excess payments to the Company, the Company
shall offset the amount of such refund from future advance payments of the Fee
to the Distributor. At no time during the term of this Agreement will the
Company be required to make payments of the Fee to the Distributor if at the
time of such payment, the Unearned Fee equals or exceeds $125,000. "Unearned
Fee" shall mean the Fees advanced to the Distributor hereunder, reduced by an
amount equal to the product of the Fees actually paid and a fraction, the
numerator of which is equal to the Total Orders, net of returns and allowances,
for the period in question, and the denominator of which is the Target Level
for the period in question. For purposes of this Agreement, an "Order" shall
mean an order for product from the Company's Product Line placed by Distributor
which shall be deemed received and counted toward achieving a Target Level upon
acceptance by the Company and receipt by the Company of payment in full or an
irrevocable letter of credit for the full amount of the invoice price for the
products purchased in such order, subject to reduction for returns and
allowances, other than returns, allowances or orders cancelled by a customer of
the Distributor solely as a result of the failure of the Company to fill such
order in a commercially reasonable time and
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manner. Pricing of the Company's products sold to Distributor hereunder shall
be agreed to in advance by and between the Company and the Distributor for each
12-month period ending September 30, 1997, 1998 and 1999 and shall be quoted
F.O.B. Casper, Wyoming, or as otherwise agreed. For the 12-month period ending
September 30, 1997, the Company and the Distributor hereby agree that the
pricing for the Company's products sold to the Distributor pursuant to this
Agreement shall equal the Company's cost for such product, as reflected on the
books and records of Defense Technology Corporation of America, a Wyoming
corporation, as of September 29, 1996, plus a 25% mark-up. Notwithstanding the
foregoing, the Distributor hereby agrees that the Company may from time to time
adjust its costs to take into account, among other things, increased carrying,
financing, development and sales and marketing costs. Without limiting the
generality of the foregoing, adjustments to the Company's costs of products
shall be made to take into account any increases to the Company's costs of raw
materials in excess of 3%, as well as increases in labor costs that may from
time to time occur. All costs shall be determined solely by the Company and
shall be conclusive and binding on the Distributor for all purposes under this
Agreement. In the event that any annual Target Level herein specified has not
been met by the Distributor, then the Company shall have the right, in its sole
and absolute discretion, to terminate this Agreement, upon written notice to
the Distributor, with no further obligation to the Distributor hereunder,
except for payment of Fees which have been earned but not yet paid.
5. Except as otherwise provided herein, the Distributor
agrees to pay for all Orders within thirty (30) days from the date of issuance
of an invoice by the Company or on such other terms as set by the Company. For
sales in excess of $20,000 per Order or $80,000 in the aggregate for all unpaid
Orders, the total sales value shall be paid in advance or by delivery of an
acceptable irrevocable Letter of Credit for the full invoice price. The Company
may in its sole discretion require the prepayment for any Order. The Company
shall charge interest on all past due balances at the rate of one and one-half
percent (1 1/2%) per month or the highest rate permitted by law, whichever is
lower.
6. The Distributor will arrange for all shipping and
insurance. The Distributor will be responsible for payment of
all shipping and insurance charges.
7. Any and all claims or adjustments by Distributor must be
presented to the Company for approval within 10 days of receipt by the
Distributor of notice of a claim from a customer of the Distributor (provided
such claim is made within the Company's warranty period), except for any claim
of shortages or patent damages in transit to any Order which claim must be made
within thirty (30) days of delivery of such Order, prior to any
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deduction from invoice. Distributor shall be responsible and shall pay for all
of its expenses, costs and disbursements in connection with the performance of
its duties and obligations hereunder or the sale of products sold by
Distributor hereunder.
8. The status as Distributor of the Company is not assignable
to any other individual or entity without the Company's prior written consent,
which consent shall not be unreasonably withheld, provided the services to be
performed by the assignee Distributor hereunder shall be principally performed
by or under the direct supervision and control of the Executive. Any change of
ownership, control or management of the Distributor shall be deemed an
assignment.
9. For purposes of Section 9, Section 10 and Section 11, all
references to the Company shall be deemed to include all of the Company's
affiliates and subsidiaries and all references to the Distributor shall be
deemed to include the Executive, as well as Distributor's affiliates and
subsidiaries.
(a) The Distributor acknowledges that as a result
of its relationship with the Company, the Distributor has and will continue to
have knowledge of, and access to, proprietary and confidential information of
the Company, including, without limitation, inventions, trade secrets,
technical information, know-how, plans, specifications, methods of operations,
financial and marketing information and the identity of customers and suppliers
(collectively, the "Confidential Information"), and that such information, even
though it may be contributed, developed or acquired by the Distributor,
constitutes valuable, special and unique assets of the Company developed at
great expense which are the exclusive property of the Company. Accordingly, the
Distributor shall not, at any time, either during or subsequent to the term of
this Agreement, use, reveal, report, publish, transfer or otherwise disclose to
any person, corporation or other entity, any of the Confidential Information
without the prior written consent of the Company, except to responsible
officers and employees of the Company and other responsible persons who are in
a contractual or fiduciary relationship with the Company and who have a need
for such information for purposes in the best interests of the Company, and
except for such information which is or becomes of general public knowledge
from authorized sources other than the Distributor. The Distributor
acknowledges that the Company would not enter into this Agreement without the
assurance that all such confidential and proprietary information will be used
for the exclusive benefit of the Company.
(b) Upon the termination of the Distributor's
engagement with the Company, the Distributor shall promptly deliver to the
Company all drawings, manuals, letters, notes, notebooks, reports and copies
thereof and all other materials
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relating to the Company's business, including without limitation any materials
incorporating Confidential Information, which are in the Distributor's
possession or control.
10. The Distributor will not utilize its special knowledge of
the business of the Company and its relationships with customers, suppliers of
the Company and others to compete with the Company. During the term of this
Agreement and for a period of two (2) years after the expiration or termination
of this Agreement (provided, however, that in the event that this Agreement is
terminated prior to June 30, 1999, the Distributor shall be bound by the
provisions of this Section 10 during the time period that would have remained
through June 30, 1999, plus a period of two (2) years thereafter), the
Distributor shall not engage, directly or indirectly or have an interest,
directly or indirectly, anywhere in the United States of America or any other
geographic area where the Company does business or in which its products are
marketed, alone or in association with others, as principal, officer, agent,
employee, director, partner or stockholder, or through the investment of
capital, lending of money or property, rendering of services or otherwise, in
any business competitive with or substantially similar to that engaged in by
the Company, including without limitation, the manufacture, marketing and
distribution (other than in accordance with the terms hereof) of less than
lethal products and such other products as may from time to time be
manufactured, marketed or distributed by the Company (it being understood
hereby, that the ownership by the Distributor of 5% or less of the stock of any
company listed on a national securities exchange shall not be deemed a
violation of this Section 10). During the same period, the Distributor shall
not, and shall not permit any of its employees, agents or others under its
control to, directly or indirectly, on behalf of itself or any other person,
(i) call upon, accept business from, or solicit the business of any person who
is, or who had been at any time during the preceding two (2) years, a customer
of the Company or any successor to the business of the Company, except on
behalf of the Company, or otherwise divert or attempt to divert any business
from the Company or any such successor, or (ii) directly or indirectly recruit
or otherwise solicit or induce any person who is an employee of, or otherwise
engaged by, the Company or any successor to the business of the Company to
terminate his or her employment or other relationship with the Company or such
successor, or hire any person who has left the employ of the Company or any
such successor during the preceding two (2) years. The Distributor shall not at
any time, directly or indirectly, use or purport to authorize any person to
use, except pursuant to Section 3 hereof, any name, mark, logo, trade dress or
other identifying words or images which are the same as or similar to those
used at any time by the Company in connection with any product or service,
whether or not such use would be in a business competitive with that of the
Company.
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11. The restrictions set forth in Sections 9 and 10 are
considered by the parties to be fair and reasonable. The Distributor
acknowledges that the restrictions contained in Sections 9 and 10 will not
prevent the Distributor from being gainfully engaged in business. The
Distributor further acknowledges that the Company would be irreparably harmed
and that monetary damages would not provide an adequate remedy in the event of
a breach of the provisions of Sections 9 or 10. Accordingly, the Distributor
agrees that, in addition to any other remedies available to the Company, the
Company shall be entitled to injunctive and other equitable relief to secure
the enforcement of these provisions, and shall be entitled to receive
reimbursement from the Distributor for all attorneys' fees and expenses
incurred by the Company in enforcing these provisions, provided equitable
relief is awarded to the Company. The Company shall not be required to post
bond in connection with any such equitable remedy. If any provisions of
Sections 9, 10, or 11 relating to the time period, scope of activities or
geographic area of restrictions is declared by a court of competent
jurisdiction to exceed the maximum permissible time period, scope of activities
or geographic area, the maximum time period, scope of activities or geographic
area, as the case may be, shall be reduced to the maximum which such court
deems enforceable. If any provisions of Sections 9, 10, or 11 other than those
described in the preceding sentence are adjudicated to be invalid or
unenforceable, the invalid or unenforceable provisions shall be deemed amended
(with respect only to the jurisdiction in which such adjudication is made) in
such manner as to render them enforceable and to effectuate as nearly as
possible the original intentions and agreement of the parties.
12. The Company and the Distributor mutually agree that:
(a) The Company reserves the right to cease doing
business with the Distributor at any time with cause. Termination for cause by
the Company shall include, without limitation: (i) inadequate service by the
Distributor to customers; (ii) any failure to pay an invoice in accordance with
the terms hereof; (iii) selling merchandise in contravention of any term of
this Agreement, including, but not limited to, sales to unauthorized or
undisclosed parties or sales from or to an unauthorized location; (iv) failure
to provide the Company with a copy of valid export documents, permits and
authorizations from all relevant governmental authorities with respect to each
Order; (v) failure to meet any Target Level as herein provided; (vi)
termination of the Distributor's business; (vii) breach by Distributor or
Executive of any other condition or obligation or agreement to be performed by
Distributor or Executive hereunder as the case may be, not cured within ten
(10) days following the giving of written notice thereof; and/or (viii)
bankruptcy,
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liquidation or death of the Distributor or the Executive, as the case may be.
(b) In the event of termination, the Distributor
shall, at the Company's pre-authorized cost and expense, return to the Company
any and all catalogs and advertising materials provided by the Company and
shall not present itself as an authorized Company distributor. All Company logo
signs remain the property of the Company and, upon termination, the Distributor
agrees to remove them and return them promptly to the Company.
(c) Upon any termination of this Agreement, (i)
the Company shall have no further obligation to the Distributor hereunder, and
(ii) the provisions of Sections 9, 10 and 11 shall survive any such termination
and shall be binding upon the Distributor.
13. No indemnity, severance, damages, or compensation shall
be paid by the Company to the Distributor should this Agreement terminate or
expire. No indemnity, severance, damages, or compensation shall be deemed
earned or payable to the Distributor upon termination or expiration because of
the Distributor's activities done or performed while this Agreement was in
effect, or because of the expenditures, investments, leases, agreements, or
commitments given or made in connection with the creation, development,
maintenance, growth, expansion, and financing of such distributorship, or
because of the creation or existence of distributorship goodwill.
14. Distributor agrees to indemnify, defend and hold the
Company harmless from and against any and all claims, costs, damages, expenses,
judgments (including all attorneys fees and expenses) suffered or incurred by
the Company by reason of any claim or action (whether or not groundless)
arising out of the Distributor's acts or omissions or its negligence in the
performance of its obligations hereunder.
15. (a) The Distributor shall conduct its business in its own
name and at its sole cost and expense. Distributor acknowledges the validity of
the patents, trademarks, trade names, service marks, trade secrets, copyrights
and other intellectual property rights of the Company and its affiliated
companies (collectively, the "Rights") and the exclusive title of the Company
and its affiliated companies therein and in the goodwill associated therewith.
Distributor agrees that it shall not contest, directly or indirectly, the
Company's or its affiliates' ownership, title, right or interest in and to the
Rights or in the names and marks appearing on the products sold by the Company
to the Distributor, trade secrets, methods, procedures and techniques or to the
right of the Company or its affiliated companies to register, use and to
license others to
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<PAGE>
use the Rights or any Company or affiliated company brand name in all
languages. Distributor agrees that it will not register or attempt to register
in its name or that of any person or entity affiliated with it any name or
mark, corporate name or any designation of any kind, in any language, which is
the same as, similar to or a derivative of, or otherwise utilizing any portion
of the Rights or trade names of the Company or of any of its affiliates.
Distributor acknowledges that it does not have and has not acquired any rights
in or to the Rights, product names, likenesses or any derivations of the
foregoing. Upon termination of this Agreement, Distributor shall immediately
cease all use of the Rights.
(b) The trademarks designated by the Company
shall be displayed by the Distributor, without alteration, on all products sold
by the Company for resale by the Distributor and all use of such trademarks
shall inure to the Company's benefit. Distributor shall not relabel the
Company's products without the Company's prior written consent and approval of
all such labels.
(c) Any copyrights which may be created in any
article, design, label or the like, on any product of the Company or its
affiliates shall be the property of the Company and its affiliates.
(d) The Distributor shall not use any trademark,
brand or trade dress which is the same as, or which is likely to cause
confusion or mistake with any trademark, brand or trade dress of the Company or
any of its affiliates, except that the trademarks, brands and/or trade dress
designated by the Company shall be used on products of the Company.
16. The Distributor hereby covenants and agrees that it will
advise the Company in writing of the identity of the Distributor's customers
with respect to each Order, and if any such customer is a distributor, the
identity of the end user of the Company's product that is the subject of each
Order. The Distributor further covenants that there will be no violation of any
laws, rules or regulations applicable to the Company based upon sales to the
Distributor, its customers and any end users of any products that are the
subject of any Orders. The Distributor acknowledges that the covenants
contained in this Section 16 are a material inducement for the Company to enter
into this Agreement.
17. This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York, without
giving effect to its conflict of laws rules.
18. The Distributor agrees that in the event any suit
is necessary to be brought involving any of the parties, it shall
be brought in the courts of the State of New York, New York
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<PAGE>
County, and the Distributor consents to jurisdiction of the courts of the State
of New York.
19. Any notice or demand required or to be given by the
Company or the Distributor must be in writing, sent by certified or registered
mail, return receipt requested, or by facsimile and will be considered received
within 3 days of mailing, or upon transmission if sent by facsimile with
confirmation of receipt thereof. The addresses for the Company and the
Distributor are as follows:
For the Company:
Defense Technology Corporation of America
191 Nassau Place Road
Yulee, Florida 32097
Attention: Jonathan Spiller
Facsimile: (904) 261-4408
With a copy to:
Kane Kessler, P.C.
1350 Avenue of the Americas
New York, New York 10019
Attention: Robert L. Lawrence, Esq.
Facsimile: (212) 245-3009
For the Distributor and Executive:
____________________________________
____________________________________
____________________________________
____________________________________
and if any address changes, notice must be given in the same manner, and shall
be effective upon receipt.
20. No waiver of any term of this Agreement shall be
valid unless it is in writing and is signed by both parties.
21. If a party defaults in performing any obligation under
this Agreement so that the other party is required to engage the services of an
attorney, the defaulting party shall pay all reasonable attorneys' fees,
expenses, and costs incurred.
22. Each party acknowledges that it has carefully read this
Agreement, including all exhibits and other documents to which it refers, and
that this Agreement expresses the entire agreement between the parties
concerning the subjects it purports to cover.
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<PAGE>
23. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
24. Any reference to the Company contained in this Agreement
shall be deemed to include any successors or assigns. The Distributor may not
assign its rights, obligations or duties hereunder whether by merger, operation
of law or otherwise, without the Company's prior written consent; provided,
however, this agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, heirs, personal
representatives, legal representatives, and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have executed the
Agreement as of the date first written above.
XM CORPORATION
By: /s/ Robert L. Oliver
Robert L. Oliver
President
DEFENSE TECHNOLOGY CORPORATION
OF AMERICA
By: /s/ Robert Schiller
Robert Schiller
Vice President
EXECUTIVE:
/s/ Robert Oliver
Robert Oliver
ABOVE ACKNOWLEDGED, AGREED TO
AND ACCEPTED:
/s/ Sandra Oliver
Sandra Oliver
Sole Shareholder of XM Corporation
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