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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): December 14, 1995
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BE AEROSPACE, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 0-18348 06-1209796
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(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
1400 Corporate Center Way, Wellington, FL 33414
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER: (407) 791-5000
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N/A
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 5. OTHER EVENTS
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On December 14, 1995, BE Aerospace Inc. (the "Company") signed a definitive
agreement to acquire all the issued and outstanding capital stock of Burns
Aerospace Corporation ("Burns"), a wholly owned subsidiary of Eagle Industries,
Inc. The purchase price for Burns is expected to be approximately $42.5
million, all in cash. The acquisition of Burns will be funded with a portion of
the proceeds from a planned offering of senior subordinated debt in the
aggregate amount of approximately $75 million. Completion of the acquisition is
subject to a number of conditions, including the expiration of the waiting
period under the Hart-Scott-Rodino Act.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
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(C) EXHIBITS:
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1. Acquisition Agreement dated as of December 14, 1995 by and among the
Company, Eagle Industrial Products Corporation, Eagle Industries, Inc.
and Great American Management and Investment, Inc. (including an index
of schedules thereto).
2. Unaudited Pro Forma Combined Financial Information.
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SIGNATURE
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 under
signed hereunto duly authorized.
BE AEROSPACE, INC.
Date: December 28, 1995 By: /s/ Thomas P. McCaffrey
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EXHIBIT INDEX
The following designated exhibits are filed herewith:
<TABLE>
<CAPTION>
Page Number
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<S> <C>
Exhibit
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1. Acquisition Agreement dated as of December 14, 5
1995 by and among the Company, Eagle Industrial
Products Corporation, Eagle Industries, Inc. and
Great American Management and Investment, Inc.
(including an index of schedules thereto).
2. Unaudited Pro Forma Combined Financial Information. 63
</TABLE>
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ACQUISITION AGREEMENT
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This ACQUISITION AGREEMENT is made as of December 14, 1995 (the
"Agreement") among BE Aerospace, Inc., a Delaware corporation ("BEA" or
"Buyer"), Burns Aerospace Corporation, a Delaware corporation (the "Company"),
Eagle Industrial Products Corporation, a Delaware corporation and the sole
stockholder of the Company ("Seller"), Eagle Industries, Inc., a Delaware
corporation and the sole stockholder of Seller ("Eagle") and (to the limited
extent set forth above its signature) Great American Management and Investment,
Inc., a Delaware corporation and the sole stockholder of Eagle ("GAMI").
In consideration of the respective representations, warranties, covenants
and conditions contained herein, BEA, the Company, Seller, Eagle and (to the
limited extent set forth below) GAMI hereby agree as follows:
1. Acquisition of the Company by BEA.
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a. Sale of the Company's Stock and Receivables.
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i. Seller agrees to sell and transfer to BEA, and BEA agrees to
purchase from Seller, at the Closing (as defined in Section 2),
all of the issued and outstanding capital stock of the Company
(the "Outstanding Stock") for the consideration and subject to
the terms and conditions stated herein.
ii. BEA agrees to purchase from the Receivables Trustee (as defined
in Section 3.1.11), and the Company agrees to cause the
Receivables Trustee to sell to BEA, certain accounts receivable
pursuant to that certain Receivables Sale Agreement by and among
BEA, the Company and the Receivables Trustee, a form of which is
attached hereto as Exhibit A (the "Receivables Sale Agreement").
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b. Purchase Price. In consideration of the assignment, transfer,
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conveyance and delivery (a) by Seller of the Outstanding Stock to BEA
and the other agreements of Seller and the Company stated herein and
(b) by the Receivables Trustee (as hereinafter defined) to BEA of
certain accounts receivable pursuant to the Receivables Sales
Agreement (as hereinafter defined), the aggregate purchase price (the
"Purchase Price") shall be forty-two million-five hundred-thousand
dollars ($42,500,000). The Purchase Price shall be subject to
adjustment as provided in Section 1.3 hereof. At the Closing, BEA
shall pay the Purchase Price (less the Receivables Purchase Price (as
hereinafter defined) and the Escrow Amount (as hereinafter defined))
to Seller, by wire transfer of immediately available federal funds, to
an account designated by Seller in
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writing at least one business day prior to the Closing Date, against
delivery of certificates representing the Outstanding Stock, duly
endorsed for transfer or accompanied by an appropriately executed
assignment separate from certificate.
At the Closing BEA shall deposit with the Escrow Agent referred to in the
Escrow Agreement attached hereto as Exhibit B the sum of $2,500,000 (the "Escrow
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Amount"), to be held and disposed of by the Escrow Agent in accordance with the
terms of the Escrow Agreement. The Escrow Agreement shall terminate on the 18-
month anniversary of the Closing Date.
At the Closing, BEA shall pay to the Receivables Trustee an amount
determined pursuant to the Receivables Sale Agreement (the "Receivables Purchase
Price"), by wire transfer of immediately available federal funds, to an account
designated by the Receivable Trustee in writing at least one business day prior
to the Closing Date.
c. Purchase Price Adjustment. After the Closing, as more particularly
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hereinafter provided, the Purchase Price shall be increased or
decreased by the amount that the Adjusted Capital (as hereinafter
defined) as of the Closing Date is greater than or less than
$40,832,000, (the "Purchase Price Adjustment").
d. Calculation of Adjusted Capital. "Adjusted Capital" as of the Closing
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Date shall be calculated by (i) deducting from Stockholders' Equity as
set forth on the Closing Balance Sheet (as hereinafter defined) the
amounts reflected on such Closing Balance Sheet as goodwill, (ii)
adding to such Stockholders' Equity (a) an amount equal to the amount
of accounts receivable acquired by BEA pursuant to the Receivables
Purchase Agreement and related deferred income and (b) the amounts set
forth on the Closing Balance Sheet as advances from affiliates and
(iii) making appropriate adjustments to Stockholders' Equity to
eliminate the effect of prepaid Income Taxes (as hereinafter defined),
accrued Income Taxes and deferred Income Taxes. Schedule 1.4 sets
forth the calculation of Adjusted Capital as of June 30, 1995, based
upon the balance sheet as of June 30, 1995 attached hereto as Schedule
1.5. To the extent that the categories of assets and liabilities set
forth on the Closing Balance Sheet do not correspond to the categories
set forth on Schedule 1.5, the calculation of Adjusted Capital shall
be adjusted accordingly, consistent with the foregoing.
e. Preparation and Audit of Closing Balance Sheet. Within forty-five
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(45) days following the Closing Date, Seller will prepare a balance
sheet (the "Closing Balance Sheet") of the Company, as of the close of
business on the day immediately prior to the consummation of the
Closing, prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a basis consistent with the basis
applied in preparing the Company's balance sheet as of June 30, 1995,
attached as Schedule 1.5 hereto, but without giving effect to any
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changes attributable to the purchase of the Company. Seller shall
engage Deloitte & Touche L.L.P. to audit the Closing Balance Sheet,
and Seller shall request Deloitte & Touche L.L.P. to deliver to Seller
an opinion (the "Opinion") on the Closing Balance Sheet within ninety
(90) days following the Closing Date.
Within ten (10) days following Seller's receipt of the Opinion, Seller
shall deliver the Closing Balance Sheet together with the Opinion and the
calculations of the Adjusted Capital and the Purchase Price Adjustment prepared
pursuant to Sections 1.3 and 1.4. If Buyer agrees with the Purchase Price
Adjustment prepared by Seller, then the parties shall proceed to make any
payment required pursuant to procedures described below. If Buyer disagrees
with the Purchase Price Adjustment prepared by Seller, then Buyer may deliver
written notice ("Objection Notice") to Seller objecting to the Purchase Price
Adjustment. Such Objection Notice shall: (i) be delivered within twenty (20)
days after Buyer receives the Purchase Price Adjustment; (ii) identify those
items to which Buyer objects, and (iii) state in reasonable detail the reasons
for such objection. Any items contained in the calculation of Adjusted Capital
or Purchase Price Adjustment to which Buyer does not set forth an objection in
such Objection Notice shall be deemed accepted by Buyer. During the fifteen
(15) day period following delivery of the Objection Notice, each party will
deliver to the other party any supporting documentation reasonably requested and
necessary to verify disputed items and cooperate fully and in good faith to
resolve any disputes they may have with respect to the Purchase Price
Adjustment. If the parties cannot agree on the Purchase Price Adjustment within
such fifteen (15) day period, any such dispute will be resolved within thirty
(30) days (or as soon thereafter as practicable) after submission by either
party of a request for binding arbitration by Price Waterhouse & Co. (the
"Accounting Firm"). BEA represents and warrants to Seller, and Seller
represents and warrants to BEA, that it has not maintained, within the preceding
12-month period, a material professional relationship with the Accounting Firm.
The Accounting Firm will calculate only those portions of the calculation of
Adjusted Capital or Purchase Price Adjustment that have not been agreed upon by
the parties and its calculation will be based solely on the books, records and
other information relevant to the resolution of such disputes as of the Closing
Date, which information shall be submitted or made available to the Accounting
Firm by Seller or Buyer. Any fees or expenses payable to the Accounting Firm
will be shared by Seller and Buyer as shall be determined by such Accounting
Firm, taking into account the relative merits of the parties' respective
adjustment proposals.
Upon the final determination of the Purchase Price Adjustment, whether such
determination is made by agreement of the parties or by the Accounting Firm, in
accordance with the foregoing, the parties will proceed as follows:
(i) If such final determination results in an increase
in the Purchase Price in accordance with Section
1.3 above, then within five (5) business days
after such
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final determination, Buyer will pay to Seller the
amount of such increase.
(ii) If such final determination results in a decrease
in the Purchase Price in accordance with Section
1.3 above, then within five (5) business days
after such final determination, Seller will pay to
Buyer the amount of such decrease.
f. Form Of Payment. Payment of a Purchase Price Adjustment, if any,
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shall be made by wire transfer of immediately available federal funds,
together with interest thereon at LIBOR plus one percent (1%) per
annum from the Closing Date until the date of payment. If such
adjustment (including the interest component, if any) is not paid
within five (5) business days after final determination of the
Purchase Price Adjustment, then such payment shall accrue interest at
LIBOR plus three (3%) from the Closing Date until the date of actual
payment.
g. Access to Books and Records. After the Closing, Buyer shall permit
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Seller, the Accounting Firm (if applicable) and their respective
representatives, during normal business hours, to have reasonable
access to and to examine and make copies of any books and records of
the Company and its Subsidiaries which are reasonably required for
purposes of preparing the Closing Balance Sheet and the calculation of
Adjusted Capital and/or the Purchase Price Adjustment. After the
Closing, Seller shall permit Buyer and their representatives, during
normal business hours, to have reasonable access to, and to examine
and make copies of, the books and records of the Company and its
Subsidiaries which are in the possession of any of them and are
necessary for Buyer, the Accounting Firm, or their respective
representatives to review the calculation of Adjusted Capital and/or
the Purchase Price Adjustment.
h. Outstanding Letter of Credit, Surety and Performance Bonds. At the
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Closing, BEA shall replace all outstanding letters of credit and
surety or performance bonds issued for the benefit of the Company
based on the credit, or at the risk, of Seller or its Affiliates
(other than the Company). With respect to those letters of credit or
bonds BEA is unable to replace as of Closing, BEA shall deliver to
Seller at Closing a letter of credit or cash in the amount of such
outstanding letters of credit and bonds as security. Seller will
allow for a reduction in such letters of credit (or return cash to
BEA) if after the Closing Date the requirement to provide such letters
of credit or bonds is reduced or eliminated. With respect to letters
of credit provided relating to the self-issued retention referenced in
Section 15, BEA shall provided to Seller a letter of credit in an
amount equal to the balance sheet reserves of the Company, with
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respect to such retention, as of the date immediately prior to the
Closing Date, with such other terms as are contained in the letters of
credit provided by Seller (or its Affiliates) to its insurance
carriers.
i. Repayment of Intercompany Debt. Except as set forth in the Disclosure
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Schedule, or as otherwise contemplated by this Agreement, concurrent
with or prior to the Closing, the entire amount of debt owed by the
Company to Seller and/or its Affiliates shall be deemed to constitute
a capital contribution of Seller to the Company and the entire amount
of debt owed by Seller and/or its Affiliates to the Company
outstanding on the Closing Date, shall be canceled and/or forgiven
without the further payment of any money in connection therewith.
Notwithstanding the foregoing, intercompany payables owed by the
Company to Seller and/or its Affiliates for goods or services provided
in the ordinary course of business through the Closing Date shall not
be canceled at the Closing and shall be reflected on the Closing
Balance Sheet.
2. Closing.
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a. Closing. Subject to the termination rights provided in Section 18,
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the closing ("Closing") of the transactions contemplated by this
Agreement shall be at the offices of Ropes & Gray, One International
Place, Boston, Massachusetts at such date and time or at such other
place as may be agreed upon by BEA and Seller (the "Closing Date") but
not later than February 28, 1996.
b. Form of Closing Documents. At the Closing, the parties shall deliver
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the documents, and shall perform the acts, which are set forth in
paragraphs 2.3 and 2.4. All documents which Seller shall deliver
shall be in form and substance reasonably satisfactory to BEA and
BEA's counsel. All documents which BEA shall deliver shall be in form
and substance reasonably satisfactory to Seller and Sellers' counsel.
c. BEA's Deliveries to Seller. Subject to the fulfillment or waiver of
--------------------------
the conditions set forth in Section 12, BEA shall execute and/or
deliver to Seller at Closing all of the following:
i. the Purchase Price (less the Receivables Purchase Price and the
Escrow Amount) as provided in Section 1.2;
ii. a copy of BEA's Certificate of Incorporation, certified by the
Secretary of State of the State of Delaware as of a date not
more than 30 days prior to the Closing, and a copy of BEA's
Certificate of Incorporation and by-laws certified by BEA's
Secretary as true and correct as of the Closing Date and as of
the date of the adoption of the resolutions of
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BEA's board of directors, authorizing the execution, delivery
and performance of this Agreement, and each other document
delivered by BEA hereunder;
iii. a certificate of good standing of BEA, issued not earlier than
ten (10) days prior to the Closing Date by the Secretary of
State of Delaware;
iv. an incumbency and specimen signature certificate with respect to
the officers of BEA executing this Agreement, and each other
document delivered hereunder, on behalf of BEA;
v. a copy of resolutions of BEA's board of directors, authorizing
the execution, delivery and performance of this Agreement, and
each other document delivered by BEA hereunder, certified by
BEA's Secretary as true and correct;
vi. a closing certificate executed by the President of BEA (or any
other officer of BEA specifically authorized to do so), on
behalf of BEA, pursuant to which BEA represents and warrants to
Seller that BEA's representations and warranties to Seller are
true and correct in all material respects as of the Closing Date
as if then originally made (or, if any such representation or
warranty is untrue in any material respect, specifying the
material respect in which the same is untrue), that all
covenants required by the terms hereof to be performed by BEA on
or before the Closing Date, to the extent not waived by Seller
in writing, have been so performed (or, if any such covenant has
not been so performed, indicating that such covenant has not
been performed), and that all documents to be executed and
delivered by BEA at the Closing have been executed by duly
authorized officers of BEA;
vii. copies of the Receivable Sales Agreement and the Escrow
Agreement, duly executed on behalf of BEA;
viii. the outstanding letters of credit, surety and performance bonds
and/or cash required pursuant to Section 1.8;
ix. the written opinion of Ropes & Gray, counsel for BEA, dated as
of the Closing Date, in form and substance reasonably
satisfactory to Seller and its counsel; and
x. without limitation by specific enumeration of the foregoing, all
other documents reasonably required from BEA to consummate the
transaction contemplated hereby.
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d. Additional BEA Deliveries.
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i. Subject to the fulfillment or waiver of the conditions set forth
in Section 12, BEA shall deliver to the Receivables Trustee at
Closing the Receivables Purchase Price pursuant to the
Receivables Sale Agreement.
ii. Subject to the fulfillment or waiver of the conditions set forth
in Section 12, BEA shall deliver to the Escrow Agent at Closing
the Escrow Amount pursuant to the Escrow Agreement.
e. Seller's Deliveries. Subject to the fulfillment or waiver of the
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conditions set forth in Section 13, Seller shall execute or deliver to
BEA all of the following:
i. certificates representing all shares of Outstanding Stock, duly
endorsed in blank or with duly executed stock powers attached;
ii. copies of the respective Certificates of Incorporation of
Seller, Eagle and GAMI, certified by the State of Delaware as of
a date not more than 30 days prior to Closing, copies of the
respective Certificates of Incorporation and by-laws of Seller,
Eagle and GAMI and, certified by Secretary of Seller, Eagle or
GAMI, as the case may be, as true and correct as of the Closing
Date and as of the date of the adoption of the resolutions of
the applicable board of directors, authorizing the execution,
delivery and performance of this Agreement, and each other
document delivered by Seller, Eagle or GAMI hereunder;
iii. a certificate of good standing of each of Seller, the Company
Eagle and GAMI, issued not earlier than ten (10) days prior to
the Closing Date by the Secretary of State of Delaware;
iv. incumbency and specimen signature certificates with respect to
the officers of Seller, Eagle and GAMI executing this Agreement,
and each other document delivered hereunder on Seller's behalf;
v. copies of the resolutions of the respective boards of directors
of Seller, Eagle and GAMI, authorizing the execution, delivery
and performance of this Agreement, and each other document
delivered by Seller , Eagle or GAMI hereunder, certified by the
Secretary of Seller, Eagle and GAMI, as the case may be, as true
and correct;
vi. closing certificates executed by the President of Seller and of
Eagle, respectively, (or any other officer of Seller or Eagle
specifically
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authorized to do so), pursuant to which Seller and Eagle
represent and warrant to BEA that Seller and Eagle's
representations and warranties to BEA are true and correct in
all material respects as of the Closing Date as if then
originally made (or, if any such representation or warranty is
untrue in any material respect, specifying the material respect
in which the same is untrue), that all covenants required by
the terms hereof to be performed by Seller or Eagle on or
before the Closing Date, to the extent not waived by BEA in
writing, have been so performed (or, if any such covenant has
not been so performed, indicating that such covenant has not
been performed), and that all documents to be executed and
delivered by Seller or Eagle at the Closing have been executed
by duly authorized officers of Seller or Eagle, as the case may
be;
vii. a copy of the Escrow Agreement duly executed on behalf of
Seller;
viii. a copy of the Receivables Sales Agreement, duly executed on
behalf of the Receivables Trustee;
ix. the written opinion of Gus J. Athas, Esq., General Counsel of
Seller, dated as of the Closing Date, in form and substance
reasonably satisfactory to BEA and its counsel;
x. a Certificate of Insurance for all Current Insurance (as
defined in Section 15.1); and
xi. a duly executed release of all liens and other obligations of
the Company under the Senior Credit Facility (as defined in
Section 3.1.8(a) below), in form and substance reasonably
satisfactory to BEA.
xii. without limitation by specific enumeration of the foregoing,
all other documents reasonably required from Seller to
consummate the transaction contemplated hereby.
f. Closing Procedure. All proceedings to be taken and all documents to
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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.
3. Representations and Warranties by Seller.
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a. Seller represents and warrants, except as and to the extent set forth
in the Disclosure Schedule delivered concurrently herewith and
constituting a part hereof, to BEA as follows:
i. Corporate Status. The Company is a corporation duly organized,
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validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority
to carry on its business as now conducted and to own or lease and
operate its properties. The Company has qualified as a foreign
corporation, and is in good standing, under the laws of all
jurisdictions where the nature of its business or the nature or
location of its assets requires such qualification and where the
failure to so qualify would have a "Material Adverse Effect".
For purposes of this Agreement, "Material Adverse Effect" means,
a material adverse effect on the assets, liabilities, financial
condition or results of operation of the Company's business,
taken as a whole. All jurisdictions in which the Company is
qualified as a foreign corporation are set forth in the
Disclosure Schedule. The Company has delivered to BEA complete
and correct copies of its Articles of Incorporation and by-laws,
as amended to date.
ii. Capitalization. The authorized, issued and outstanding capital
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stock of the Company is as set forth in the Disclosure Schedule.
All of the outstanding shares of the capital stock of the Company
are owned of record and beneficially by Seller, subject to no
lien, encumbrance, voting trust or similar agreement; and no
other person has or shares any direct or indirect interest or
right with respect to such shares. All issued and outstanding
shares of the capital stock of the Company have been duly
authorized and validly issued and are fully paid and
nonassessable. There are no options, warrants, conversion or
other rights, agreements or commitments of any kind obligating
Seller or the Company, contingently or otherwise, to issue or
sell any shares of the Company's capital stock of any class or
any securities convertible into or exchangeable for any such
shares, and no authorization therefor has been given. No
"phantom" stock or stock appreciation rights or agreements or
similar rights or agreements exist that are intended to or that
confer on any person rights similar to any rights accruing to
owners of capital stock of the Company or of any subsidiary
thereof.
iii. Subsidiaries. The Company does not directly or indirectly own
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any shares of capital stock or have any other equity interest in
any corporation, partnership, joint venture, association or other
entity or business enterprise nor any commitment to contribute to
the capital of, make loans to or share the losses of any
enterprise. Except as set forth
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in the Disclosure Schedule, no obligations, contracts or
agreements exist between the Company and any of its subsidiaries.
iv. Authority for Agreement. Each of the Company, Seller, Eagle and
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GAMI has all necessary corporate power and authority to execute
and deliver this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by the respective Boards of Directors of Seller,
the Company, Eagle and GAMI and no other corporate proceeding or
approval on the part of the Company, Seller, Eagle or GAMI is
necessary for the execution, delivery and performance of this
Agreement. This Agreement constitutes the valid, legal and
binding obligation of the Company, Seller, Eagle and GAMI and is
enforceable against each of them in accordance with its terms,
except to the extent such enforceability may be limited by
bankruptcy, reorganization, insolvency or similar laws of general
applicability governing the enforcement of the rights of
creditors or by the general principles of equity (regardless of
whether considered in a proceeding at law or in equity). The
execution and delivery of this Agreement by the Company, Seller,
Eagle or GAMI and the consummation of the transactions
contemplated hereby will not conflict with or result in any
violations of or defaults under any provisions of the Articles of
Incorporation or By-laws of the Company, Seller, Eagle or GAMI or
result in any violation of, or default with respect to, any
mortgage, indenture, lease, agreement or other instrument,
permit, concession, grant, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to
the Company, Seller, Eagle or GAMI, except in each case where any
such conflict, violation or default would not have a Material
Adverse Effect. Such execution, delivery and consummation will
not accelerate the maturity of or otherwise modify the terms of
any indebtedness of the Company, Seller, Eagle or GAMI now
existing or proposed to be incurred, or result in the creation of
any lien, charge, encumbrance or security interest upon any of
the property or assets of the Company. No consent, approval,
order or authorization of, or registration, declaration or filing
with, any governmental authority, other than as may be required
to comply with the securities laws of any jurisdiction or
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act"), is required of the Company, Seller, Eagle
or GAMI in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated
hereby by the Company, Seller, Eagle or GAMI.
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v. Financial Statements. Included in the Disclosure Schedule are
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(i) audited balance sheets of the company as of December 31, 1994
and December 31, 1993 (the "Balance Sheets") and the related
statements of income, statements of stockholder's equity and
statements of cash flow of the Company for the years ended
December 31, 1994, 1993 and 1992, together with the report
thereon of Arthur Andersen L.L.P. (the "Audited Financial
Statements"), and (ii) the unaudited balance sheet and the
related statements of income and statements of cash flow of the
Company as of and for the six months ended June 30, 1995 and the
nine months ended September 30, 1995 (the "Unaudited Financial
Statements"). Such financial statements fairly present in all
material respects the financial condition and results of
operations of the Company as of the dates thereof and for the
periods then ended in accordance with all applicable requirements
of Regulation S-X under the Securities Act of 1933, as amended
(the "Securities Act"), and GAAP consistently applied (except as
described in such statements), subject in the case of the
Unaudited Financial Statements to normal recurring year-end
adjustments which will not in the aggregate be significant and
the absence of notes.
vi. Absence of Certain Changes. Since December 31, 1994, to Seller's
--------------------------
knowledge, the Company has not:
(a) undergone any material adverse change in its assets,
liabilities, financial condition or results of
operations, taken as a whole;
(b) maintained and conducted its business in a manner
other than in the ordinary course of business;
(c) declared, set aside, made or paid any dividend or
other distribution in respect of its capital stock or
purchased or redeemed any shares of its capital
stock;
(d) issued or sold any shares of its capital stock of any
class or any options, warrants, conversion or other
rights to purchase any such shares or any securities
convertible into or exchangeable for such shares;
(e) incurred any indebtedness for borrowed money (other
than intercompany indebtedness to Seller or its
Affiliates which will be canceled or forgiven at or
prior to the Closing in accordance with the terms of
this Agreement)
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or issued or sold any debt securities, other than in
the ordinary course of business;
(f) mortgaged, pledged or subjected to any lien, lease,
security interest or other charge or encumbrance any
of its properties or assets, tangible or intangible,
except Permitted Encumbrances (as defined in Section
3.1.8);
(g) acquired or disposed of any assets or properties of
material value in any transaction with Seller, Eagle
or GAMI, any officer, director, shareholder or
monthly salaried employee of the Company, or any
relative by blood or marriage or any Affiliate of any
of them, or, except in the ordinary course of
business, acquired or disposed of any assets or
properties of material value in any transaction with
any other person;
(h) forgiven or canceled any debts or claims of material
value, or waived any rights of material value, except
in the ordinary course of business;
(i) granted to any officer or salaried employee or any
class of other employees any increase in compensation
in any form (including any increase in value of any
benefits), or any severance or termination pay, other
than increases in the usual and ordinary course of
business in accordance with past practices;
(j) suffered any physical damage, destruction or loss
(whether or not covered by insurance) resulting in a
Material Adverse Effect;
(k) suffered any labor strike, slowdown or stoppage that
materially adversely affects its relations with its
employees or been the subject of any effort to
organize its workforce, or any part thereof, into a
bargaining unit;
(l) sold, assigned, licensed, transferred, or otherwise
disposed of or permitted to lapse any material rights
in or to the use of any material patents, trademarks,
trade names, copyrights, licenses, or computer
software programs;
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(m) disposed of any material records related to its
assets or business at any time earlier than it would
have done consistent with past practices;
(n) incurred any material liability or obligation
(whether absolute, accrued, contingent or otherwise)
(i) to Seller, Eagle or GAMI, or any Affiliate of any
of them, or (ii) other than in the ordinary course of
business; or
(o) changed any accounting principle used in the
preparation of its books, records and financial
statements, whether or not such change was permitted
by GAAP;
(p) agreed to do any of the foregoing, whether or not in
writing.
For purposes of this Agreement, "Affiliate" shall mean, in relation to any
party hereto, any entity directly or indirectly controlling, controlled by, or
under common control with such party; provided, however, that, notwithstanding
the foregoing, the term "Affiliate" shall not include any: (i) party which
either (A) controls GAMI, or (B) is under common control with GAMI, except
directly or indirectly through GAMI, or (ii) Public Company (as defined in
Section 8.1(a)) other than GAMI. For this purpose, "control" of any entity or
party means ownership of a majority of the voting power of the entity or party,
as the case may be.
vii. Taxes.
-----
(1) General. The Company and its predecessors have been (since
-------
the taxable year ended July 31, 1990) and the Company will
be (through the Closing) included in the affiliated group
(as defined in Section 1504 of the Internal Revenue Code, of
1986, as amended (the "Code")) and the consolidated Income
Tax Returns of Seller and GAMI (the "GAMI Consolidated
Group"). All Tax Returns and Income Tax Returns required to
have been filed on or prior to the date hereof (taking into
account all extensions of due dates) by or on behalf of the
Company or its predecessors for each taxable period have
been filed on or prior to the date hereof and such returns
are true, correct and complete in all material respects.
All Tax Returns and Income Tax Returns (including, in each
case, extensions) required to be filed on or prior to
Closing by or on behalf of the Company or its predecessors
shall be filed on or prior to Closing and such returns shall
be accurate and complete in all material respects.
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(2) Payment of Taxes. With respect to all amounts of Income
----------------
Taxes and Other Taxes that are due and payable on or before
the Closing, all such amounts required to be paid by or on
behalf of the Company or its predecessors to taxing
authorities or others on or before the Closing have been
paid.
(3) Audit History. Except as set forth in the Disclosure
-------------
Schedule, there is no dispute or claim currently pending
concerning any Tax Return or Income Tax Return of the
Company or its predecessors either (i) claimed or raised by
any authority in writing or (ii) as to which Seller has
knowledge. Except as set forth in the Disclosure Schedule,
no waivers of statutes of limitation with respect to Other
Taxes or Income Taxes have been given by or requested from
the Company or any of its predecessors or the GAMI
Consolidated Group on behalf of the Company or any of its
predecessors.
(4) Tax-Sharing or Allocation Agreements. Any tax-indemnity,
------------------------------------
tax-sharing, tax-allocation or similar agreements of the
Company or any of its predecessors and any liability or
obligation of the Company or any of its predecessors under
such agreements, if any, will terminate and be canceled
without any payment (and all inter company tax accounts
shall be canceled without payment) by the Company or by the
GAMI Consolidated Group, except as provided for in this
Agreement, as of the Closing Date and be of no further force
or effect (whether for the current year, a future year or a
past year).
(5) Prior Affiliated Groups. Since September 12, 1989, except
-----------------------
for the GAMI Consolidated Group, neither the Company nor any
of its predecessors has been a member of an Affiliated group
of corporations as defined in Code Section 1504.
(6) Tax Liens. There are no security interests on any of the
---------
assets of Seller or any of its subsidiaries that arose in
connection with any failure (or alleged failure) to pay any
Income Tax or Other Tax when due.
(7) Withholding Taxes. The Company and its predecessors have
-----------------
withheld and paid all Other Taxes required to have been
withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor,
stockholder, or other third party.
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(8) Powers of Attorney. Except as set forth in the Disclosure
------------------
Schedule, there are no powers of attorney with respect to
Income Taxes or Other Taxes of the Company currently in
force, and all such powers of attorney (other than for Other
Taxes or Income Taxes for the period through the Closing
Date) will be terminated effective as of the Closing.
(9) Golden Parachute. Neither the Company, any of its
----------------
predecessors nor any Affiliate with respect to the Company
or any of its predecessors has made any payments, is
obligated to make any payments, nor is a party to any
agreement that under certain circumstances could obligate it
to make any payments that will not be deductible under
Section 280G of the Code.
(10) Tax Definitions. As used in this Agreement, "Other Taxes"
---------------
shall mean any federal, state, local or foreign gross
receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, customs
duties, capital stock, net worth, franchise, profits,
withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use,
transfer, registration, value added, estimated, or other
tax, charge, fee, levy, or other assessment of any kind
whatsoever, including any interest, penalty, or addition
thereto, and shall include any obligations to contribute to
the payment of Other Taxes determined on a consolidated,
combined or unitary basis, but shall exclude any Income
Taxes (as defined below). As used in this Agreement,
"Income Taxes" shall mean only any federal, state, local or
foreign income, environmental (including Section 59A of the
Code), alternative or add-on minimum or estimated tax,
including any interest, penalty or addition thereto whether
disputed or not, and shall include any obligation to
contribute to the payment of Income Taxes determined on a
consolidated or unitary basis. As used in this Agreement,
"Taxes" shall mean Income Taxes and Other Taxes. As used in
this Agreement, "Tax Return" or "Income Tax Return" shall
mean any return, declaration, report, claim for refund, or
information return or statement relating to Other Taxes or
Income Taxes, as the case may be, including any schedule or
attachment thereto, and including any amendment thereof.
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viii. Properties. The Disclosure Schedule contains a complete and
----------
correct list as of the date hereof of all real properties and
interests therein owned or leased by the Company as of the date
hereof.
(a) Title; Encumbrances. The Company holds fee simple title
-------------------
to the real estate identified as owned by it in the
Disclosure Schedule, subject to real estate taxes not
delinquent and to covenants, conditions, restrictions
and easements of record described in the Disclosure
Schedule, has good title to its other tangible assets
and has valid leasehold interests in all real
properties identified as leased by it in the Disclosure
Schedule and all tangible personal properties leased by
it, in each of the foregoing cases free and clear of
all mortgages, liens, charges, encumbrances, easements,
security interests or title imperfections except: (i)
liens for current Other Taxes not due and payable; (ii)
purchase money security interests incurred in the
ordinary course of business; (iii) statutory liens of
landlords, liens of carriers, warehousemen, mechanics
and materialmen incurred in the ordinary course of
business for sums not yet due; (iv) liens incurred or
deposits made in the ordinary course of business in
connection with workers' compensation, unemployment
insurance and other types of social security or to
secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return of money
bonds and similar obligations; and (v) minor
irregularities of title which do not in the aggregate
materially detract from the value or use of the
Company's assets (the exceptions described in the
foregoing clauses (i) through (v), together with those
described above relating to the real estate owned by
the Company being referred to collectively herein as
"Permitted Encumbrances"). In addition, the Company's
assets are subject to liens under that certain Amended
and Restated Credit Agreement dated as of October 28,
1994, among Seller, Chemical Bank as Administrative
Agent, Citicorp North America, Inc., as Collateral
Agent, and the Financial Institutions From Time to Time
Party thereto (the "Senior Credit Facility"), all of
which will be released prior to the Closing.
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<PAGE>
(b) Leases. To Seller's knowledge, all real property
------
leases under which the Company operates are valid and,
subject to the provisions of the applicable lease, the
Company enjoys peaceful and undisturbed possession of
the premises to which such leases relate. Seller has
no knowledge of any default on the part of the Company
or any other party in respect of any such real property
lease and, to Seller's knowledge, neither the Company
nor any other party is under default in respect of any
such lease, in each of the foregoing cases other than
with respect to any default which would not have a
Material Adverse Effect.
(c) Condition. To Seller's knowledge all plants, buildings
---------
and improvements, and all machinery and equipment
contained therein and all operations conducted therein,
and all other real property owned or leased by the
Company comply in all material respects with all
applicable building and zoning and other laws,
ordinances, regulations and permits in effect at the
date hereof, and the continuation of any such operation
as currently conducted will not result in the
enforcement or the threat of enforcement of any such
building and zoning and other laws, ordinances,
regulations and permits in effect on the date hereof,
except where the failure to so comply would not have a
Material Adverse Effect. All structures and other
improvements located on such real properties and all
such tangible personal property reasonably necessary to
the conduct of the business of the Company as currently
conducted are in good operating condition in all
material respects for property of its type and age,
subject to ordinary wear and tear.
ix. Material Contracts. The Disclosure Schedule contains a complete
------------------
and correct list as of the date hereof of all written agreements,
contracts and commitments of the following types to which, to
Seller's knowledge, the Company is a party or by which it or any
of its property is bound as of the date hereof:
(a) notes, loans, credit agreements, mortgages, indentures,
security agreements, guaranties, pledge agreements,
deeds of trust, indemnification arrangements and other
agreements and instruments relating to the borrowing of
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<PAGE>
money or extension of credit to the Company in an
amount in excess of $25,000 other than documents
pertaining to the Senior Credit Facility;
(b) bonus, profit-sharing, compensation, stock purchase,
stock option, pension, insurance, retirement, deferred
compensation, collective bargaining plans or
agreements, employment agreements, consulting
agreements, benefit or welfare plans, or other plans,
agreements, trusts, funds or arrangements for the
benefit of employees;
(c) sales agency, representative, broker or distributorship
agreements, franchise or similar agreements;
(d) agreements, orders or commitments for the purchase by
the Company of raw materials, supplies or finished
products exceeding $25,000 in value;
(e) agreements, orders or commitments for the sale or lease
to customers of goods or services exceeding $25,000 in
value or that involve pricing or other terms
inconsistent with usual practice;
(f) agreements or commitments for capital expenditures in
excess of $25,000 in value for any single project;
(g) contracts, agreements or other arrangements
constituting a non- competition or non-solicitation
obligation;
(h) powers of attorney, except routine powers of attorney
relating to representation before governmental agencies
or given in connection with qualification to conduct
business in another jurisdiction and powers of attorney
to transfer title to financed motor vehicles upon loan
defaults or other power of attorneys granted to secured
lenders;
(i) over-the-counter derivatives, activities or
transactions, such as interest rate, currency, equity
and commodity swaps, over-the-counter options
(including caps, floors and collars) and currency
forwards; and
(j) any other written agreements, contracts or commitments
with an individual value of $25,000 or more.
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<PAGE>
The Company has delivered or made available to BEA complete and correct
copies of all such written agreements, contracts and commitments, together with
all amendments thereto, listed in the Disclosure Schedule. To Seller's
knowledge: (i) all such agreements, contracts and commitments are in full force
and effect, and (ii) the parties to such agreements, contracts and commitments
have in all material respects performed all obligations required to be performed
by them to date and are not in default, except where the failure to so perform
or the existence of such default would not have a Material Adverse Effect.
x. Employee Benefit Plans.
----------------------
(1) Exempt and Non-Exempt Employees and Agents. The Disclosure
------------------------------------------
Schedule contains a complete and correct list of all exempt
and non-exempt employees, independent contractors,
consultants and agents employed by the Company, showing for
each the positions held, the length of service and rate of
compensation. Except as set forth on the Disclosure
Schedule, none of such persons is covered by any union,
collective bargaining or similar agreement, nor is any such
person covered by an agreement of employment (including any
comparable services agreement in the case of a person not an
employee) which cannot be terminated at will by the Company
or which provides for severance pay or other compensation
upon termination of employment or upon change of control of
the Company.
(2) Employee Benefit Matters.
------------------------
3.1.10.2.1. Schedule of Employee Benefit Plans. The Disclosure
----------------------------------
Schedule contains a true and complete list, as of the date of this
Agreement, of all plans, practices or arrangements maintained or
contributed to by the Company, or with respect to which the Company
has any liability as of the date of this Agreement, which are
"employee benefit plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
or "specified fringe benefit plans" within the meaning of Code Section
6039D or otherwise provide for a welfare, retirement or other fringe
benefit or in which any one or more of the employees (including former
employees and beneficiaries of employees or former employees) of the
Company participates or is eligible to participate by virtue of their
status as such. True, current and complete copies of such plans
(collectively, the "Plans"), all amendments thereto, if any, and to
the extent applicable, the following have been furnished to BEA: (i)
the most recent determination letter of the Internal Revenue Service
("IRS") and any outstanding request for a determination letter; (ii)
Form 5500 and attached schedules (including any
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<PAGE>
related actuarial valuation report for each Plan subject to Section 412 of
the Code) with respect to the last three plan years; (iii) the most recent
certified financial statements; (iv) the most recent attorney's response to
an auditor's request for information; (v) summary plan descriptions and
statements of material modifications, if any; (vi) trust agreements; (vii)
insurance contracts; (viii) any ruling letter and any outstanding request
for any ruling letter with respect to the tax-exempt status of any
voluntary employees' beneficiary association through which any such Plan is
funded; and (ix) ruling letter or interpretative letter issued by the
Department of Labor ("DOL"), the IRS, the PBGC, or any other governmental
agency with respect to such Plan, or any outstanding requests for such a
letter.
3.1.10.2.2. Compliance with Terms of Plans. Each Plan and each
------------------------------
trust or funding vehicle related to such Plan is in compliance in all
material respects with, and has been administered and operated in all
material respects in accordance with, its terms. There has been no
violation of any term of any Plan which would have a Material Adverse
Effect.
3.1.10.2.3. Compliance with Applicable Law and
----------------------------------
Regulations/Required Filings Made. Each Plan and each trust or funding
-------------------- ------------
vehicle related to such Plan is in compliance in all material respects
with, and has been administered and operated in all material respects in
compliance with, all applicable statutes, orders, rules and regulations,
including where applicable and without limitation, ERISA and the Code.
3.1.10.2.4. Qualified Plans. Each Plan which is intended to be a
---------------
"qualified plan" as described in Section 401(a) of the Code has been
determined by the IRS to so qualify (or a timely application for such
determination has been submitted to the IRS) and neither Eagle, the Company
nor the Sellers know of any fact or facts which might adversely affect such
qualification. Each related trust is exempt from Tax under Section 501(a)
of the Code.
3.1.10.2.5. No Material Liability from Pension Plan Termination.
No Plan which is a pension plan as described in Section 3(1) of ERISA has
been terminated or amended in a manner which has resulted or may result in
any material liability of the Company to such Plan or any other party.
There exists no condition or set of circumstances which present a risk of
termination or partial termination of any Plan which could result in any
liability on the part of the Company or BEA.
3.1.10.2.6. Title IV Plans. None of the Plans is covered by
--------------
Title IV of ERISA.
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<PAGE>
3.1.10.2.7. Accumulated Funding Deficiency. There is no
------------------------------
accumulated funding deficiency as defined in Section 302 of ERISA or
Section 412 of the Code with respect to any Plan. The Company is not
required to provide security to any Plan under Section 401(a)(29) of
the Code due to a plan amendment that results in an increase in
current liability for the plan year.
3.1.10.2.8 Multiemployer Plan. The Company does not contribute to
------------------
and has never contributed to a multiemployer plan as defined in
Section 4001(a)(3) of ERISA that is covered by Title IV of ERISA. The
Company does not have any current or contingent liability with respect
to any multiemployer plan, except as set forth in the Disclosure
Schedule.
3.1.10.2.9. Contributions to Plans Have been Made. The Company
-------------------------------------
has made or will make prior to the Closing Date all payments and
contributions (including insurance premiums) due and payable on or
before the Closing Date to each Plan as required to be made under the
terms of such Plan.
3.1.10.2.10. Prohibited Transactions. Neither the Company nor
-----------------------
any fiduciary of any Plan nor any party-in-interest to any Plan has
engaged in any transaction in connection with which it, directly or
indirectly, would be subject to either a penalty pursuant to Section
502(i) of ERISA or a Tax imposed by Section 4975 of the Code, and the
consummation of the transaction contemplated by this Agreement will
not constitute such a prohibited transaction.
3.1.10.2.11. No Claims Against the Plan. No event has occurred
--------------------------
nor has there been any omission which would result in a violation of
any laws, rulings or regulations applicable to any Plan, and there are
no actions, suits, arbitrations or claims (other than routine claims
for benefits by employees, beneficiaries or dependents arising in the
normal course of operations of such Plan) pending, or current or
impending examination by any governmental agency with respect to any
Plan, or to the knowledge of Eagle, the Company or the Sellers
threatened, with respect to any such Plan or any fiduciary or sponsor
of such Plan with respect to their duties under such Plan or the
assets of any trust under any such Plan.
3.1.10.2.12. No Excise Tax Liability. No event has occurred and
-----------------------
no condition exists that would subject the Company or BEA to any Tax
under Sections 4971, 4972, 4976, 4977 or 4979 of the Code or to a fine
under Section 502(c) of ERISA.
3.1.10.2.13. No Restriction on Termination of Plan. No provision
-------------------------------------
of any Plan nor any amendment to any Plan would result in any
limitation on the
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<PAGE>
Company's or BEA's right to terminate such Plan or subject BEA or
the Company to any liability with respect to any such
termination.
3.1.10.2.13. Retiree Medical. The Company has no
---------------
obligation under any Plan or otherwise to provide health benefits
in the nature of post-termination or retiree benefits to former
employees of the Company or to any other individuals except as
specifically required by the continuation requirements of Section
601, et seq., of ERISA.
-- ---
3.1.10.2.14. Control Group Liability. Except as set
-----------------------
forth in the Disclosure Schedule the Company has no current or
contingent liability with respect to any employee benefit plan
(within the meaning of Section 3.(3) of ERISA or otherwise) not
sponsored or maintained by the Company where such liability would
be imposed as a result of the Company being or having been part
of a controlled group of trades or businesses (whether or not
incorporated) within the meaning of Section 414 of the Code.
xi. Accounts Receivable; Inventories.
--------------------------------
(a) Notwithstanding anything to the contrary in this
Agreement, title to certain trade accounts
receivable generated by the Company and reflected
in Schedule 1.4 is held by Bank of America,
Illinois, as Trustee under the Eagle Trade
Receivables Master Trust (the "Receivables
Trustee"). All such trade accounts receivable
existing as of the Closing Date represent arm's
length sales actually made by the Company in the
ordinary course of business.
(b) All inventory of the Company is located on
premises owned or leased by the Company or is in
transit.
xii. Patents, Trademarks, etc. All patents, patent
------------------------
applications, trade names, trademarks, trademark
applications, service marks, copyrights and copyright
applications owned or used by the Company (the
"Intellectual Property"), together with any license
agreements relating to the same, are set forth in the
Disclosure Schedule. To Seller's knowledge, the Company
owns, or possesses adequate rights to use, all
Intellectual Property and other proprietary rights
reasonably necessary for the conduct of its business, with
no infringement of the rights of others.
xiii. Insurance. The Disclosure Schedule sets forth the
---------
following information with respect to each insurance
policy (including policies
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<PAGE>
providing property, casualty, liability, auto and workers'
compensation coverage and bond and surety arrangements) to which
the Company has been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past five (5)
years to the extent the records of the Company contain such
information:
(a) the name address, and telephone number of the agent;
(b) the name of the insurer, the name of the policy holder,
and the name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other
basis) and amount (including a description of how
deductibles, sublimits and ceilings are calculated and
operate) of coverage; and
(e) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
The Disclosure Schedule describes any self-insurance arrangements affecting the
Company which will survive the Closing. The Disclosure Schedule identifies
those insurance policies, if any, with respect to which the insured entity is
the Company (the "Insurance Policies"), which are to continue in full force and
effect following the Closing Date with respect to occurrences, or claims made,
during the applicable policy period, in each case, as indicated in the
Disclosure Schedule. Each of the Insurance Policies is in full force and
effect, all premiums due thereon have been paid, and, to Seller's knowledge, the
Company has complied in all material respects with the provisions of such
policies. The insurance, including, without limitation, product liability
insurance, maintained by or on behalf of the Company is not less than the amount
of insurance recommended in writing by any broker or consultant in the past
three years. The Company has not received any notices of any pending
termination with respect to any such policy. Coverage under all such insurance
policies (to the extent maintained by Seller or its Affiliates other than the
Company) will cease as of the Closing Date with respect to occurrences after the
Closing Date.
xiv. Litigation. Other than the Hart-Scott-Rodino filing referred to
----------
in Section 3.1.22 and any judicial or administrative actions,
suits, proceedings or investigations which may result therefrom
or in connection therewith, there are no judicial or
administrative actions, suits, proceedings or investigations
pending or, to Seller's knowledge, threatened to which the
Company or Seller is a party that, if decided against Seller or
the
27 of 69
<PAGE>
Company, would result in a Material Adverse Effect or that
question the validity of this Agreement or the transactions
contemplated hereby nor, to Seller's knowledge, is there any
basis in fact for any such action, suit, proceeding or
investigation. Notwithstanding the foregoing, this Section
3.1.14 shall not apply to any matters or conditions covered
under Section 3.1.21.
xv. Warranty and Product Liability Matters. To Seller's knowledge,
--------------------------------------
all products and services which have been provided by the Company
to its customers were in compliance with and satisfied the
requisite standards of all applicable laws and regulations and
any express written warranty given by the Company at the time
such products or services were provided, except to the extent
that failures to so comply with or satisfy such standards would
not in the aggregate have a Material Adverse Effect. The Company
has not provided written or, to Seller's knowledge, oral
warranties on any of its products which differ in any material
respect from the form of standard written warranty included in
the Disclosure Schedule. Except as set forth in the Disclosure
Schedule, no product or service warranty or liability claims are
pending or threatened against the Company or in respect of
products or services leased or sold by it and, to Seller's
knowledge, no basis for any such claims exists, except to the
extent that, in the aggregate, such claims, together with any
failures referred to in the second preceding sentence above,
would not have a Material Adverse Effect. Notwithstanding the
foregoing, this Section 3.1.15 shall not apply to any matters or
conditions covered under Section 3.1.16(b) or 3.1.21.
xvi. Compliance with Instruments, Laws: Governmental Authorizations.
--------------------------------------------------------------
(a) The Company is not in violation of any term or
provision of its Articles of Incorporation or by-laws
or of any contract, agreement or other instrument or
any governmental license or permit or in violation or
default under any statute, law, ordinance, rule,
regulation, judgment, order, decree, permit,
concession, grant, franchise, license or other
governmental authorization or approval applicable to it
or to any of its properties, which violation could
result in a Material Adverse Effect. The Company has
duly obtained all permits, concessions, grants,
franchises, licenses and other governmental
authorizations and approvals which are necessary for
the conduct of the business of the Company as currently
conducted and the lack of which could result in a
Material Adverse Effect. To Seller's knowledge all such
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<PAGE>
permits, concessions, grants, franchises, licenses and
other governmental authorizations and approvals are in
full force and effect and there are no proceedings
pending or threatened that may result in the
revocation, cancellation or suspension, or any
materially adverse modification, of any thereof.
Notwithstanding the foregoing, this Section 3.1.16(a)
shall not apply to any matters or conditions covered
under Sections 3.1.16(b) and 3.1.21.
(b) The Disclosure Schedule sets forth a complete and
accurate list of all aircraft seats sold by the Company
which purport to comply with the requirements of
Technical Standard Order C127 of the United States
Federal Aviation Agency; to Seller's knowledge, all
such seats in fact complied with such Order at the time
of sale, and, as to seats covered by such Order the
Company possesses adequate documentation to demonstrate
such compliance.
xvii. Brokers, Finders, etc. All negotiations relating to this
---------------------
Agreement and the transactions contemplated hereby have been
carried on without the intervention of any person acting on
behalf of either of the Company or Seller in such manner as to
give rise to any valid claim against either or both of them,
and/or BEA, for any brokerage or finder's commission, fee or
similar compensation.
xviii. Bank Accounts and Letters of Credit. The Disclosure Schedule
-----------------------------------
contains a true and complete list, as of the date hereof, of
each bank or other financial institution, trust company or
brokerage firm in which the Company has an account or safe
deposit box, and the names of all persons authorized to draw
thereon, or who have access or transact business with respect
thereto, and a description of all letters of credit and surety
or performance bonds for which the Company is the account
party or are issued for the benefit of the Company.
xix. Certain Transactions. Neither Seller nor any of its
--------------------
Affiliates (including, without limitation, the Company) nor
any of its and their directors, officers, employees or agents,
nor, to Seller's knowledge, any relative by blood or marriage
of any of the foregoing is currently a party to any material
transaction with the Company (other than for services as an
agent, employee, officer or director in the ordinary course of
business), including, without limitation, any contract,
agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal
property to or from, or otherwise requiring
29 of 69
<PAGE>
payments to or from, any such person, or any corporation,
partnership, trust or other entity in which any such person
has a substantial interest or is an officer, director,
trustee, or partner, or any officer, director or employee of
such an entity. The Disclosure Schedule sets forth a complete
list of all corporations, firms or entities in which Seller or
the Company of any of either of their Affiliates has any
direct or indirect interest or any direct or indirect business
relationship with the Company or any customer or supplier or
vendor or provider of service to the Company.
xx. Commissions. The Disclosure Schedule contains a true and
-----------
complete list of all commissions, finder's, broker's or other
intermediary's fees, rebates or similar payments made (in
money, goods or services) by, on behalf of or for the benefit
of the Company, directly or indirectly, since December 31,
1994, in connection with work performed or to be performed by
the Company under contracts currently in place, stating the
contract or contracts in respect of which such payment has
been made, the amount or value of such payment, the manner of
payment and the person or persons to whom such payments were
made.
xxi. Hazardous Materials; Disclosure of Environmental Information.
------------------------------------------------------------
(a) Definitions. The term "Hazardous Materials," as used
-----------
herein, shall mean and include any and all substances
(including, without limitation, petroleum and any
derivative thereof), wastes or materials (where present
in regulated concentrations or quantities or in
concentrations or quantities which pose any threat to
health, the environment or natural resources)
classified as hazardous or toxic under, or otherwise
regulated under, any applicable law, rule, ordinance,
statute or regulation pertaining to environmental,
health, safety or natural resource matters, including,
without limitation, the following: the Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA"), the Resource Conservation and Recovery Act
("RCRA"), the Clean Air Act, the Clean Water Act, the
Toxic Substances Control Act, the Emergency Planning
and Community Right-to-Know Act of 1986, and the Safe
Drinking Water Act (all such laws, rules, ordinances,
statutes and regulations being referred to collectively
as "Environmental Laws"). The term "Environmental
Liabilities" shall mean any liability, claim, demand,
charge, obligation, deficiency, loss (but excluding any
claim based
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<PAGE>
on diminution in value), expenditure, cost or expense
(including, without limitation, reasonable attorney's
fees and disbursements and costs of response or
remediation) to the extent imposed or incurred by
reason of (i) any noncompliance in any respect with any
Environmental Laws by or on behalf of the Company or
any predecessor entities on or prior to the Closing
Date or (ii) (a) the on-site or off-site disposal of
any Hazardous Materials by or on behalf of the Company
or any predecessor entities on or prior to the Closing
Date or (b) the release into the environment of, or
threat of release into the environment of, or exposure
to, any Hazardous Material on or prior to the Closing
Date, whether generated, handled or possessed by the
Company or any predecessor entities or located at or
emanating from or to a site now or heretofore owned,
leased or otherwise used by the Company or any
predecessor entities.
(b) Seller has delivered to BEA copies of all environmental
audits, environmental risk assessments and
environmental site assessments prepared or caused to be
prepared by or received by the Company. There are no
criminal, civil or administrative proceedings relating
to Environmental Laws pending or, to the knowledge of
Seller, threatened against the Company or its
directors, officers, employees or agents.
xxii. No Bribes, Illegal Payments, etc. To Seller's knowledge
--------------------------------
neither the Seller nor any of its Affiliates (including,
without limitation, the Company), nor any of its and their
directors, officers, employees or agents has directly or
indirectly given or agreed to give any gift, contribution,
payment or similar benefit to any supplier, customer,
governmental employee or other person who was, is or may be in
a position to help or hinder the Company, or assist in
connection with any actual or proposed transaction involving
the Company, (a) which could subject the Company and/or BEA to
any damage or penalty in any civil, criminal or governmental
litigation or proceeding, or (b) the non-continuation of which
in the future could result in a Material Adverse Effect or (c)
which has resulted or could result, individually or in the
aggregate, in any material adverse effect upon the business,
operations, assets, or condition, financial or otherwise, of
the Company. Neither the Seller nor the Company nor any of its
and their directors, officers, employees or agents has (i)
established or maintained any material unrecorded fund or asset
of the Company for any purpose, or (ii)
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<PAGE>
intentionally made any false entries on any books or records
furnished in connection herewith to BEA.
b. Definition of Knowledge. For the purposes of this Agreement, the
-----------------------
knowledge of Eagle, the Seller or the Company shall be deemed to be
limited to the actual knowledge as of the Closing Date of Cliff Brake,
Duane Woodford, John Versaggi, Chuck Covington, Mike Beroch, Russ
Smith, Walt Knollenberg, Sam Villegas, Bill Good and Bill Waskey,
without giving effect to imputed knowledge.
c. Limitation on Representations and Warranties. Except as expressly set
--------------------------------------------
forth in Section 3.1, Seller makes no express or implied warranty of
any kind whatsoever, including, without limitation, any representation
or warranty as to (a) physical condition or value of any of the assets
of the Company, (b) the future profitability or future earnings
performance of the Company or (c) the accuracy, adequacy or
completeness of any forward looking information provided to BEA or
possessed by the Company, such as budgets, projections, business plans
and strategic plans. ALL IMPLIED WARRANTIES OF MERCHANTIBILITY AND
FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY INCLUDED.
d. Schedules. The schedules attached to this Agreement may be updated or
---------
replaced and new schedules may be added for each representation and
warranty, whether or not the representation and warranty contemplates
the attachment of a schedule, at any time up to the time of Closing,
but only with respect to matters arising after the date of this
Agreement which are not in violation of Seller's and the Company's
obligations under this Agreement. In the event that an updated,
replacement or new schedule relates to a representation and warranty
which does not contemplate such schedule, such representation and
warranty shall be interpreted to accommodate such schedule.
4. Representations and Warranties by BEA. BEA represents and warrants to
-------------------------------------
Seller as follows:
a. Corporate Status. BEA is a corporation duly organized, validly
----------------
existing and in good standing under the laws of the State of Delaware
and has all corporate power and authority to execute, deliver and
perform this Agreement and to consummate the transactions contemplated
hereby.
b. Authority for Agreement. This Agreement has been duly authorized,
-----------------------
executed and delivered by BEA and constitutes the valid and legally
binding obligation of BEA and is enforceable against BEA in accordance
with its terms, except to the extent such enforceability may be
limited by bankruptcy, reorganization,
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insolvency or similar laws of general applicability governing the
enforcement of the rights of creditors or by the general principles of
equity (regardless of whether considered in a proceeding at law or in
equity). The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not
materially conflict with or result in any violation of or default
under any provision of the certificate of incorporation or by-laws of
BEA or any mortgage, indenture, lease, agreement or other instrument,
permit, concession, grant, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to BEA
or any of its properties. No consent, approval, order or authorization
of, or registration, declaration or filing with, any governmental
authority (other than as may be required to comply with the securities
laws of any jurisdiction or pursuant to the HSR Act) is required in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby by BEA.
c. Litigation. There are no judicial or administrative actions, suits,
----------
proceedings or investigations pending, or to the knowledge of BEA
threatened, which seek rescission of, seek to enjoin the consummation
of or question the validity of this Agreement or of any action taken
or to be taken pursuant to or in connection with the provisions of
this Agreement, nor does BEA know of any basis for any such action,
suit, proceeding or investigation.
d. Brokers, Finders, etc. All negotiations relating to this Agreement
---------------------
and the transactions contemplated hereby have been carried on without
the intervention of any person acting on behalf of BEA in such manner
as to give rise to any valid claim against BEA, for any brokerage or
finder's commission, fee or similar compensation.
e. Insolvency, Source of Funds. As of the date hereof and after giving
---------------------------
effect to the closing of the transactions contemplated hereby: (i)
the fair value of BEA's assets, and the present fair saleable value of
its assets, will be greater than its total liabilities (including,
without limitation, unliquidated, contingent and disputed
liabilities); (ii) BEA will be able to pay its debts and other
liabilities as they become due; and (iii) BEA will have adequate
capital for the business in which it is engaged and in which it
intends to be engaged.
5. Expenses. Each party hereto shall assume and bear all of its expenses,
--------
costs and fees incurred or assumed by Seller, the Company, Eagle and GAMI,
on the one hand, and BEA, on the other, in the preparation and execution of
this Agreement, whether or not the transactions herein provided for shall
be consummated, it being understood and agreed that Seller and not the
Company shall assume and bear the legal and other expenses, costs and fees
of the Company.
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<PAGE>
6. Survival of Representations and Warranties. Subject to Section 7.2, all
------------------------------------------
representations, warranties, covenants and agreements of Seller, the
Company and BEA contained herein (including all schedules and exhibits
hereto) or in each document, statement, certificate or other instrument
referred to herein or delivered hereunder in connection with the
transactions contemplated hereby shall survive the execution and delivery
of this Agreement and the Closing.
7. Indemnities.
------------
a. Indemnification by Seller.
-------------------------
(a) Tax Indemnification. Seller and Eagle hereby agree,
-------------------
jointly and severally, to indemnify BEA and the Company
and their successors and assigns (collectively, the
"BEA Indemnitees") against and hold them harmless from
(i) all liability for Income Taxes of the Company, or
for which the Company might otherwise be liable,
attributable to the Pre-Closing Income Tax Period and
(ii) all liability for Income Taxes and Other Taxes of
Seller and any entity, other than the Company, which is
or has been Affiliated with Seller as a result of
Treasury Regulation (S) 1.1502-6(a), as a transferee or
successor, by contract or otherwise and (iii) all
liability for Income Taxes and Other Taxes (including,
without limitation, income or franchise taxes and any
sales, use or transfer tax) of the Company arising as a
result of the treatment, for Tax purposes, of the
transactions contemplated by this Agreement as a sale
of its assets pursuant to Section 338(h)(10) of the
Code and comparable provisions of any state or local
Tax laws.
BEA hereby agrees to indemnify Seller, the Company and their successors
and assigns (collectively, the "Seller Indemnitees") and hold them harmless
from any liability for Income Taxes of the Company other than those
described in clauses (i), (ii) and (iii) of the first sentence of this
Section 7.1(a).
For purposes of this Agreement, the "Pre-Closing Income Tax Period" shall
mean any taxable year (or portion thereof) or other period ending on or
before the close of the Closing Date and shall include the period through
the Closing Date. In order to appropriately allocate income Taxes relating
to any taxable year or period that begins before and ends after the Closing
Date, the parties hereto shall, to the extent permitted by applicable law,
elect with the relevant taxing authority to terminate the taxable year as
of the Closing Date. In any case where applicable law does not permit the
Company to treat such date as of the end of a taxable year of the Company,
then for
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<PAGE>
purposes of determining Seller's liability for state, local or foreign
income Taxes of the Company for a portion of a taxable year, such
determination shall be determined by a closing of the Company's books
except that exemptions, allowances or deductions that are calculated on an
annual basis, such as the deduction for depreciation, shall be apportioned
on a time basis. In order appropriately to apportion any Other Taxes,
relating to any taxable year or period that begins before and ends after
the Closing Date, (i) ad valorem Taxes (including, without limitation, real
-- -------
and personal property Taxes) shall be accrued on a monthly basis over the
period for which such Taxes are levied, or if it cannot be determined over
what period such Taxes are being levied, over the fiscal period of the
relevant taxing authority, in each case irrespective of the lien or
assessment date of such Taxes, and (ii) franchise and other privilege Taxes
not measured by income shall be accrued on a monthly basis over the period
to which the privilege relates.
(b) Other Indemnification. Seller and Eagle hereby agree,
---------------------
jointly and severally, to indemnify and hold harmless
the BEA Indemnitees against and in respect of any and
all actions, suits, proceedings, demands, assessments,
judgments, claims, losses, obligations, liabilities,
costs and expenses, including, without limitation,
reasonable attorneys' fees and expenses (hereinafter
called a "Loss" or "Losses") relating to any of the
following:
(i) any inaccuracy in or breach of any
representation and warranty made by Seller to
BEA herein (other than Section 3.1.21) or in any
other document delivered to BEA in connection
herewith;
(ii) the breach by Seller of, or failure of Seller to
comply with, any of the covenants or obligations
under this Agreement to be performed by Seller;
(iii) the breach by the Company of, or failure of the
Company to comply with, any of the covenants or
obligations under this Agreement to be performed
by the Company, which breach or failure occurs
on or prior to the Closing Date;
(iv) any and all Environmental Liabilities, including
without limitation, those relating to the so-
called Seaboard Chemical Corporation waste
disposal site in Jamestown, North Carolina (the
"Seaboard Site"); provided, however, that with
-------- -------
respect to
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<PAGE>
Environmental Liabilities (other than those
related to the Seaboard Site) incurred, other
than pursuant to directives of governmental
authorities, such Environmental Liabilities are
incurred by the BEA Indemnitees in a reasonably
cost efficient manner as necessary to satisfy
applicable Environmental Laws; or
(v) the failure by Seller, Eagle, the Company or
their respective employees and agents to operate
the Savings Plan, the Burns Aerospace
Corporation Hourly Tax-Sheltered Retirement Plan
or the Burns Aerospace Corporation Money
Purchase Pension Plan prior to the Closing on a
qualified basis and in compliance with
applicable law and each plan's terms .
b. Limitations on Indemnification Obligations. The obligations of Seller
------------------------------------------
and Eagle pursuant to the provisions of Section 7.1(b) are subject to
the following limitations:
(a) the BEA Indemnitees shall not be entitled to recover
under Section 7.1(b)(i) or Section 7.1(b)(ii), until
the aggregate amount which the BEA Indemnitees would be
entitled to recover thereunder, but for this Section
7.2(a), exceeds $150,000 and then only for the excess
over such amount;
(b) the BEA Indemnitees shall not be entitled to recover
under Section 7.1(b) unless a claim has been asserted
by written notice, specifying in reasonable detail the
alleged breach of representation and warranty, covenant
or obligation delivered to Seller on or prior to the
applicable "Expiration Date" (as hereinafter defined).
For purposes of this Section 7.2(b), the following
claims shall have the following Expiration Dates:
(i) the expiration of any applicable statute of
limitations for claims made under Section
7.1(b)(i) in respect of Section 3.1.7 (Taxes) or
Section 3.1.10 (Employee Benefits);
(ii) the fifth anniversary of the Closing Date for
claims made under (A) Section 7.1(b)(iv)
(Environmental)
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<PAGE>
(except claims relating to the Seaboard Site) or
(B) Section 7.1(b)(i) with respect to third
party claims relating to the subject matter of
Section 3.1.15 (Warranty and Product Liability);
(iii) the eighteen months anniversary of the Closing
Date for claims made (A) under Section 7.1(b)(i)
in respect of any representations or warranties
contained in Section 3.1, other than those
referred to in Section 7.1(b)(i) or 7.1(b)(ii)
above or in Section 7.2(b)(iv) below; or (B)
under Sections 7.1(b)(ii) or 7.1(b)(iii); and
(iv) there shall be no Expiration Date (A) for claims
made under Section 7.1(b)(i) in respect of
Sections 3.1.1 (Corporate Status), 3.1.2
(Capitalization), 3.1.3 (Subsidiaries) and 3.1.4
(Authority for Agreement) or (B) for claims made
under Section 7.1(b)(iv) relating to the
Seaboard Site, and accordingly, claims may be
made in respect thereof at any time.
(c) the BEA Indemnitees shall not be entitled to recover
under Section 7.1(b) (other than with respect to claims
under Section 7.1(b)(iv) relating to the Seaboard Site)
to the extent the aggregate claims under Section 7.1(b)
of the BEA Indemnitees exceed $7,500,000;
(d) the BEA Indemnitees shall not be entitled to recover
under Section 7.1(b):
(i) with respect to title to any real property
described as owned or leased by the Company in
the Disclosure Schedule;
(ii) with respect to a misrepresentation or breach of
warranty, covenant or condition by or of Seller
or the Company which is contained herein if, at
the time of Closing, BEA had actual knowledge of
the misrepresentation or breach of warranty,
covenant or condition, which for purposes of
this paragraph (ii) shall mean the actual
knowledge of Robert J.
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<PAGE>
Khoury, Thomas P. McCaffrey, Larry Beard and
Edmund J. Moriarty;
(iii) to the extent the Loss to which the claim
relates is covered by insurance (including title
insurance) held by the Company; or
(iv) to the extent the matter in question, taken
together with all similar matters, does not
exceed the amount of any reserves with respect
to such matter which are reflected in the
Closing Date Balance Sheet.
(e) The BEA Indemnitees right to recover under Section
7.1(b)(iv) (Environmental Liabilities) (other than with
respect to the Seaboard Site) shall be subject to the
following terms and conditions:
(i) the BEA Indemnitees shall not be entitled to
recover any amount until the aggregate amount
which the BEA Indemnitees would be entitled to
recover thereunder, but for this Section
7.2(e)(i), exceeds $250,000 and then only for
the excess over such amount, subject to the
remainder of this Section 7.2(e);
(ii) the amount which the BEA Indemnitees shall be
entitled to recover, after satisfying the
deductible referred to in Section 7.2(e)(i),
shall be limited to fifty percent (50%) of the
Losses incurred for Environmental Liabilities,
until such Losses exceed $1,250,000 (ignoring
the application of any payment of
indemnification under this Agreement), with the
effect that the Seller Indemnitees and the BEA
Indemnitees shall share, on a fifty-fifty basis,
responsibility for such Losses which in the
aggregate are in excess of $250,000 but not more
than $1,250,000, subject to the remainder of
this Section 7.2(e);
(iii) the Seller Indemnitees shall be solely
responsible for Losses incurred for
Environmental Liabilities to the extent they
exceed $1,250,000 (ignoring the
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<PAGE>
application of any payment of indemnification
under this Agreement), subject to the remainder
of this Section 7.2(e); and
(iv) the BEA Indemnitees shall not be entitled to
recover and shall be solely responsible for, and
the Seller Indemnitees shall have no
responsibility for, Losses incurred for
Environmental Liabilities to the extent they
exceed $3,250,000 (ignoring the application of
any payment of indemnification under this
Agreement).
c. Indemnification by BEA. BEA hereby agrees to indemnify and hold
----------------------
harmless Seller, Eagle, GAMI, the Company and their successors and
assigns (collectively, the "Seller Indemnitees") against and in
respect of any and all Losses relating to any of the following:
(i) any inaccuracy in or breach of any
representation and warranty made by BEA to
Seller herein or in any other document delivered
to Seller, Eagle, GAMI or the Company in
connection herewith;
(ii) the breach by BEA of, or failure of BEA to
comply with, any of the covenants or obligations
under this Agreement to be performed by BEA;
(iii) any liabilities to pay severance benefits to
employees of the Company whose employment is
terminated after the Closing Date or any
liability under any Federal or state civil
rights or similar law, or the so-called "WARN
Act", resulting from the termination of
employment of employees after the Closing Date;
(iv) the liabilities and obligations of Eagle
Industries, Inc. and its Affiliates in respect
of (A) the leases for two (2) Mitsui Seiki
Machining Centers (IER 3061-9-002 and IER 3061-
9-005) subleased to the Company under a certain
master lease agreement and (B) the Guaranty of
Eagle Industries, Inc. dated October 6, 1993, of
the Company's performance under certain
equipment leases with United States Leasing
Corporation;
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<PAGE>
(v) any liabilities or obligations incurred by a
Seller Indemnitee as a result of any BEA
Offering Material, including without limitation,
any such liabilities or obligations resulting
from any untrue statement of a material fact
relating to such Seller Indemnitee contained in
any BEA Offering Material or the omission from
any BEA Offering Material of any material fact
relating to such Seller Indemnitee required to
be stated therein or necessary to make the
statements therein, in light of the
circumstances under which they are made, not
misleading, except to the extent such liability
or obligation results from the fact that any
Company Material included in or used with any
BEA Offering Material contained any untrue
statement of a material fact or failed to state
any material fact required to be stated therein
or necessary to make the statements therein, in
light of the circumstances under which they are
made, not misleading, considering for the
purposes of this exception only the Company
Material on its own, apart from other BEA
Offering Material and not in the context of
other BEA Offering Material not consisting of
Company Material. For purposes of this
Agreement, any and all private placement
memoranda, offering circulars, financial
statements, schedules, exhibits and/or other
material, documents or information of any nature
whether oral or written provided to investors,
prospective investors, investment bankers,
brokers, placement agents, other financial
intermediaries, or institutions, national
securities exchanges, over-the-counter markets
or other third parties, which relate to the
public or private sale or offer for sale of any
equity or debt securities of BEA, including,
without limitation pursuant to Rule 144A of the
Securities Act, and which refer to the Company
or Seller in any manner or include or
incorporate in any manner any financial or other
information concerning the Company or Seller,
whether or not provided to BEA by the Company or
Seller, are referred to hereinafter collectively
as "BEA Offering Material." Any
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<PAGE>
financial statements or other written documents
concerning the Company or Seller which are
provided to BEA by Seller which are included in
or with any BEA Offering Material in form and
substance as provided by Seller are referred to
hereinafter collectively as "Company Material."
(vi) any damage to Seller's property or injury to
third persons resulting from BEA's negligence or
misconduct in connection with the exercise of
its rights under Section 9 hereof; or
(vii) the operation of the Savings Plan after the
Closing, provided Seller effects the transfers
contemplated by Section 16.1(a).
d. Certification of Losses, etc. Promptly after the receipt by a BEA
----------------------------
Indemnitee or a Seller Indemnitee of notice of any claim or the
commencement of any action or proceeding which may result in a Loss or
Losses for which indemnification may be sought hereunder (a "Claim"),
the party so seeking indemnification (the "Indemnified Party") shall
give to each party from whom indemnification may be sought (the
"Indemnifying Party") written notice (the "Indemnification Notice")
reasonably identifying such claim or the commencement of such action
or proceeding and give the Indemnifying Party a copy of such claim
and/or process and all legal pleadings in connection therewith;
provided, however, that, subject to the limitations contained in
-------- -------
Section 7.2(b), the failure to give such notice or of such notice so
to identify such claim or commencement shall not relieve the
Indemnifying Party of any indemnification obligations contained in
this Section 7, except where, and solely to the extent that, such
failure actually and materially prejudices the rights of the
Indemnifying Party or otherwise increases the liability for which the
Indemnifying Party is responsible.
i. Third Party Claims. If the Indemnification Notice relates to a
------------------
Claim by a third party, then the Indemnifying Party shall have,
upon request within sixty (60) days after receipt of the
Indemnification Notice, but not in any event after the settlement
or compromise of such Claim as permitted by this Agreement, the
right to defend, at its own expense and by its own counsel, any
such matter involving the asserted liability by the Indemnified
Party; provided, however, that if the Indemnified Party
-------- -------
determines that there is a reasonable probability that a Claim
may materially and adversely affect it, other than as a result of
money payments required to be reimbursed by the Indemnifying
Party under this Section 7, the Indemnified Party shall have the
right to defend,
41 of 69
<PAGE>
compromise or settle such Claim; and provided, further, that such
-------- -------
settlement or compromise shall not, unless consented to in
writing by the Indemnifying Party, be relevant as to the
liability of the Indemnifying Party to the Indemnified Party. In
any event, the Indemnifying Party and its counsel shall cooperate
with the Indemnified Party in the defense against, or compromise
of, any such Claim, and both the Indemnified Party and the
Indemnifying Party shall have the right to participate in the
defense of such Claim. In the event that the Indemnifying Party
shall decline to participate in or assume the defense of such
Claim, prior to paying or settling such Claim, the Indemnified
Party shall first supply the Indemnifying Party with a copy of a
final court judgment or decree holding the Indemnified Party
liable on such Claim or, failing such judgment or decree, the
terms and conditions of the settlement or compromise of such
Claim. The failure of the Indemnified Party to supply such final
court judgment or decree or the terms and conditions of a
settlement or compromise shall not relieve the Indemnifying Party
of any of its indemnification obligations contained in this
Section 7, except where, and solely to the extent that, such
failure actually and materially prejudices the rights of the
Indemnifying Party.
ii. Non-Third Party Claim; Arbitration. If the Indemnification
----------------------------------
Notice does not relate to a Claim by a third party, the
Indemnifying Party shall have fifteen (15) business days after
receipt of such Indemnification Notice to object to the subject
matter and/or the amount of the Claim for indemnification set
forth in such Indemnification Notice by delivering written notice
thereof to the Indemnified Party. If the Indemnifying Party does
not so object within such fifteen-business-day period, it shall
be conclusively deemed to have agreed to the matters set forth in
such Indemnification Notice. If the Indemnifying Party sends
notice to the Indemnified Party objecting to the matters set
forth in such Indemnification Notice, the parties shall use their
best efforts to settle such claim for indemnification. If the
parties are unable to settle such dispute, the question shall be
submitted to a single arbitrator to be settled by arbitration in
Winston-Salem, North Carolina, in accordance with the Expedited
Procedures provisions of the Commercial Arbitration Rules of the
American Arbitration Association existing at the date thereof, to
the extent not inconsistent with this Agreement, by a single
arbitrator experienced in the matters at issue jointly selected
by BEA and Seller. The decision of the arbitrator shall be final
and binding as to any matters submitted to him or her under this
Agreement, and to the extent this decision is that a Loss has
been suffered for which either party is to be indemnified under
this Agreement, it shall be promptly satisfied; provided,
however, that, if necessary, such decision and satisfaction
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<PAGE>
procedure may be enforced by either party in any court of record
having jurisdiction over the subject matter or over any of the
parties hereto. All costs and expenses incurred in connection
with any such arbitration proceeding shall be borne by the party
against whom the decision is rendered. If no decision is
rendered, the party initiating the claim for indemnification will
bear all costs and expenses in connection with arbitration
proceedings. If the decision is a compromise, the parties shall
each pay their own costs and expenses in connection with
arbitration proceeding.
e. Termination of Rights Hereunder. Notwithstanding any other provision
-------------------------------
hereof, no Claim for any Loss resulting from the inaccuracy of any
representation or warranty shall be made or lawsuit instituted (except
for Reserved Claims) after the applicable Expiration Date for such
representation and warranty. "Reserved Claims" shall mean any Claims
as to which the BEA Indemnitee has given an Indemnification Notice
prior to the applicable Expiration Date for the matter with respect to
which the Claim is made.
f. Indemnification Exclusive Remedy. In the absence of fraud,
--------------------------------
indemnification pursuant to the provisions of this Section 7 shall be
the exclusive remedy of the parties for any misrepresentation or
breach of any warranty or covenant contained in this Agreement or in
any closing document executed and delivered pursuant to the provisions
of this Agreement; and the only legal action which may be asserted by
any party with respect to any matter which is the subject of this
Agreement shall be a contract action to enforce, or to recover damages
under this Section 7. Without limiting the generality of the
preceding sentence, no legal action sounding in tort or strict
liability may be maintained by any party. Excepting only the specific
remedies provided in this Agreement, BEA hereby forever waives and
releases Seller from any and all claims, causes of action or remedies
that BEA may now have or hereafter acquire against Seller, whether
under any statute, ordinance, regulation, theory or principle of
common law or otherwise, for any Environmental Liabilities or
diminution in value.
g. Coordination on Environmental Liability. In connection with any Claim
---------------------------------------
relating to an Environmental Liability, BEA or the BEA Indemnitee
shall cause to be furnished to Seller drafts of all proposed
remediation plans or other material documents not less than five
business days prior to the date on which they are submitted to any
governmental authorities or any third party claimant or potential
claimants, give Seller a reasonable opportunity to comment on such
draft plans, and consider in good faith all changes proposed by Seller
or its representatives thereto. Inadvertent failure of BEA or the BEA
Indemnitee to provide such drafts in a timely manner shall not impair
BEA or the BEA
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Indemnitee's Claims for indemnity hereunder, except to the extent
Seller is actually prejudiced thereby.
8. Certain Covenants of Seller.
---------------------------
a. Non-Competition and Confidentiality.
-----------------------------------
(a) Non-Competition. Neither Seller, Eagle, GAMI nor any
---------------
of their respective Affiliates shall, directly or
indirectly, for a period of five years after the
Closing:
(i) engage or participate, anywhere in the world, as
an owner, partner, shareholder, consultant or
(without limitation by the specific enumeration
of the foregoing) otherwise in any business
which competes with the business conducted by
the Company as of the Closing Date;
(ii) offer employment to any employee of the Company,
without the prior written consent of BEA, unless
(A) such employee has been terminated by the
Company without cause or (B) the employment with
the Company of such employee has otherwise been
terminated for more than one (1) year; or
(iii) solicit any customer of the Company which has
been a customer of the Company within the past
three (3) years to purchase any product or
service which could be supplied by the Company
as of the Closing Date;
provided, however, that the foregoing shall not prohibit the ownership of
securities of corporations which are listed on a national securities
exchange or traded in the national over-the-counter market ("Public
Companies") in an amount which shall not exceed 5% of the outstanding
shares of any such corporation and further provided that the foregoing
shall not prohibit the purchasing, owning, managing or operating of or
having an interest in any business that is included in a larger acquisition
by Seller or any of its Affiliates after the date hereof, if such business
generates at the time of the acquisition less than ten percent (10%) of the
gross revenues of all of the businesses acquired.
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(b) Confidentiality. Neither Seller, Eagle, GAMI nor any
---------------
of their Affiliates shall at any time from and after
the Closing Date, directly or indirectly, without the
prior written consent of BEA, disclose or use for the
benefit of any party other than BEA or the Company in
any way any confidential information involving or
relating to the business of the Company, whether now
existing or hereafter arising. Confidential
Information means any and all information of the
Company and its Affiliates that is not generally known
by others with whom they compete or do business, or
with whom they plan to compete or do business and any
and all information, which, if disclosed would assist
in competition against them. Confidential Information
may include without limitation such information
relating to (i) the development, research, testing,
manufacturing, marketing and financial activities of
the Company and its Affiliates, (ii) the costs, sources
of supply, financial performance and strategic plans of
the Company and its Affiliates, (iii) the identity and
special needs of the customers of the Company and its
Affiliates and (iv) the people and organizations with
whom the Company and its Affiliates have business
relationships and those relationships. Confidential
Information also includes comparable information that
the Company or any of its Affiliates have received
belonging to others or which was received by the
Company or any of its Affiliates with any
understanding, express or implied, that it would not be
disclosed. This Section 8.1(b) shall not apply to
information (i) which was in the public domain (other
than as a result of disclosure in violation hereof by
Seller an Affiliate thereof) or independently received
from a third party with a right to disclose such
information or (ii) to the extent that disclosure is
required by law. Seller and its Affiliates shall
advise the Company of any request, including a subpoena
or similar legal inquiry, to disclose any such
Confidential Information, so that the Company can seek
appropriate legal relief.
(c) Remedies. Seller, Eagle and GAMI acknowledge and agree
--------
that, because BEA's legal remedies may be inadequate in
the event of a breach of the covenants of Seller in
this Section 8, in addition to damages, such covenants
may be enforced by injunction or other equitable
remedies. Seller, Eagle and GAMI also acknowledge and
agree that no
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breach by BEA to perform any of the covenants and
obligations of BEA under this Agreement or otherwise
shall relieve Seller, Eagle or GAMI of any of their
obligations under this Section 8.
(d) Acknowledgment; Severability. The parties agree that
----------------------------
the provisions set forth in this Section 8, including,
without limitation, as to duration and scope, are
reasonable to protect the legitimate interests of BEA
and the Company and the good will of their respective
businesses. The provisions of this Section 8 are
severable, and in the event that any provision hereof
should, for any reason, be held invalid or
unenforceable in any respect, it shall not invalidate,
render unenforceable or otherwise affect any other
provision hereof, and such invalid or unenforceable
provision shall be construed by limiting it so as to be
valid and enforceable to the maximum extent compatible
with, and possible under, applicable law.
9. Access, Information, Documents, Consultation, etc. On and prior to the
-------------------------------------------------
Closing Date, the parties agree to provide access and information to each
other and to cooperate, as follows:
a. Access by BEA to the Company. Subject to the Environmental Access
----------------------------
Agreement between Seller, the Company and BEA of even date herewith,
the Company shall, and Seller shall cause the Company to, (a) give to
BEA, and to its counsel, accountants and other representatives, full
and free access at all times during normal business hours to all of
the properties, documents, books, records, contracts, commitments and
records of the Company and furnish to BEA all such documents and
copies of documents (certified as authentic if requested) and
information BEA or its representatives from time to time may
reasonably request, (b) authorize its independent public accountants,
(i) to permit BEA's accounting personnel and other representatives of
BEA to examine all records and working papers pertaining to their
audits and other reviews of the Company's financial statements, and
(ii) to meet and confer with and disclose fully to such
representatives such information concerning the business and financial
condition and prospects of the Company, and (c) keep BEA informed as
to any material developments in the affairs of the Company.
b. Preparation for Closing. BEA, the Company and Seller each agree to
-----------------------
use commercially reasonable efforts to bring about the fulfillment of
the conditions precedent contained in this Agreement.
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10. No Solicitation of Other Offers. Until the Closing or the earlier
-------------------------------
termination of this Agreement, neither GAMI, Eagle, Seller nor the Company
will, and each will cause its respective Affiliates, directors, officers,
employees, representatives and agents not to, directly or indirectly,
solicit or initiate or enter into discussions or transactions with, or
encourage, or provide any information to, any corporation, partnership or
other entity or group (other than BEA) concerning any sale of stock of, or
any merger or sale of securities or substantially all the assets of, or any
similar transaction involving, the Company.
11. Conduct Prior to Closing.
------------------------
a. Obligations of the Company and Seller. From the date hereof to the
--------------------------------------
Closing or the prior termination of this Agreement, except as
expressly called for by this Agreement or otherwise consented to by
BEA in writing, the Company shall, and Seller shall cause the Company
to:
(a) carry on the business of the Company in, and only in,
the usual, regular and ordinary course in substantially
the same manner as heretofore carried on and, to the
extent consistent with such business, use reasonable
efforts to preserve intact its present business
organization, keep available the services of its
present officers and employees, and preserve its
relationships with customers, suppliers and others
having business dealings with them, so that they will
all be available to BEA and the Company after the
Closing;
(b) maintain in all material respects all of the material
structures, equipment and other tangible personal
property of the Company in good repair, order and
condition in all material respects except for
depletion, depreciation, ordinary wear and tear and
damage by fire or other casualty;
(c) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried
by the Company;
(d) maintain the books of account and records of the
Company in the usual, regular and ordinary manner;
(e) comply in all material respects with all statutes,
laws, ordinances, rules and regulations applicable to
the Company and the conduct of its business;
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(f) not amend the charter or by-laws of the Company;
(g) not merge or consolidate with, or agree to merge or
consolidate with, or purchase substantially all of the
assets of, or otherwise acquire any business or any
corporation, partnership, association or other business
organization or division thereof;
(h) not take, or permit or suffer to be taken, any action
which is represented and warranted in Section 3.1.6 not
to have been taken; and
(i) promptly advise BEA in writing of any material adverse
change in the financial condition, operations or
business of the Company of which Seller has knowledge.
b. Obligations of BEA. Until the Closing, BEA shall not disclose to any
------------------
third party (other than to its directors, officers, employees, agents,
attorneys, consultants, accountants and lenders, and the officers,
directors and employees of BEA's Affiliates, having a need to know
such information in connection with the transaction contemplated
hereby), or use for any purpose other than evaluating and carrying out
the transaction contemplated hereby, any confidential information
involving or relating to the business of the Company, whether now
existing or hereafter arising. Confidential information means any and
all information of the Company and its Affiliates that is not
generally known by others with whom they compete or do business, or
with whom they plan to compete or do business and any and all
information, which, if disclosed by BEA or its Affiliates would assist
in competition against the Company or its Affiliates. Confidential
information may include without limitation such information relating
to (i) the development, research, testing, manufacturing, marketing
and financial activities of the Company and its Affiliates, (ii) the
costs, sources of supply, financial performance and strategic plans of
the Company and its Affiliates, (iii) the identity and special needs
of the customers of the Company and its Affiliates and (iv) the people
and organizations with whom the Company and its Affiliates have
business relationships and those relationships. This Section 11.2
shall not apply to information (i) which was in the public domain
(other than as a result of disclosure in violation hereof by BEA or an
Affiliate thereof) or independently received from a third party with a
right to disclose such information, (ii) which was previously known by
BEA, or (iii) to the extent that disclosure is required by law. BEA
shall advise the Company of any request, including a subpoena or
similar legal inquiry, to
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disclose any such Confidential Information, so that the Company can
seek appropriate legal relief.
12. Conditions Precedent to BEA's Obligations. All obligations of BEA under
-----------------------------------------
this Agreement are subject to the fulfillment prior to or at the Closing of
each of the following conditions:
a. Representations and Warranties. The representations and warranties
------------------------------
made by Seller in this Agreement (including all exhibits and schedules
hereto) or in any statement, list or certificate furnished pursuant to
an express requirement hereof, shall be true and correct when made and
shall be repeated and shall be true and correct in all material
respects at and as of the time of the Closing without giving effect to
any updated or new schedules provided pursuant to Section 3.4.
b. Performance by the Company and Seller; Certificate. The Company and
--------------------------------------------------
Seller shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with
by them prior to or at the Closing.
c. Consents. All consents, approvals, permits or waivers necessary to
--------
permit the consummation of the transactions contemplated hereby or
otherwise reasonably requested by BEA, without affecting any rights of
BEA or Seller under any contractual obligations, shall have been
obtained.
d. Due Diligence. BEA shall have completed and be fully satisfied with
-------------
its due diligence review of the Company, provided, however, that BEA's
right to terminate this Agreement pursuant to this Section 12.4 shall
expire on January 12, 1996, except with respect to matters relating to
possible Environmental Liabilities, as to which such right shall
expire on January 31, 1996.
e. Availability of Financing. Financing in an amount at least equal to
-------------------------
the Purchase Price shall be available to BEA on the Closing Date on
terms commercially reasonably acceptable to BEA.
f. Absence of Litigation. No action or proceeding shall have been
---------------------
instituted and no bona fide threat of the same shall have been made
prior to or at the Closing Date before any court or governmental body
or authority pertaining to the transactions contemplated hereby, the
result of which could prevent or make illegal the consummation of such
transactions or which could result in a Material Adverse Effect.
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<PAGE>
g. Approval of Proceedings; Documentation. All corporate and other
--------------------------------------
proceedings in connection with the transactions contemplated by this
Agreement, including, without limitation, all applicable statutes and
regulations, and the form and substance of all opinions, certificates
and other documents hereunder shall be reasonably satisfactory in form
and substance to BEA and its counsel and, where appropriate, certified
by proper corporate or governmental authorities.
h. HSR Act. The waiting period required by the HSR Act (as hereinafter
-------
defined) (and any extension thereof) shall have expired or been
terminated.
i. Release of Liens. Release of all liens and encumbrances, other than
----------------
Permitted Encumbrances, on the Outstanding Stock and the Company's
assets.
13. Conditions Precedent to the Obligations of Seller. The obligation of
-------------------------------------------------
Seller to consummate the transactions contemplated hereby shall be subject
to the fulfillment prior to or at the Closing of each of the following
conditions:
a. Representations and Warranties. The representations and warranties
------------------------------
made by BEA in this Agreement shall be true and correct when made and
shall be repeated and shall be true and correct in all material
respects at and as of the time of Closing.
b. Performance of BEA; Certificate of BEA Officer. BEA shall have
----------------------------------------------
performed and complied with all agreements and conditions required by
this Agreement to be performed or complied with by it prior to or at
the Closing.
c. Absence of Litigation. No action or proceeding shall have been
---------------------
instituted and no bona fide threat of the same shall have been made
prior to or at the Closing Date before any court or governmental body
or authority pertaining to the transactions contemplated hereby, the
result of which could prevent or make illegal the consummation of such
transactions.
d. Approval of Proceedings; Documentation. All corporate and other
--------------------------------------
proceedings in connection with the transactions contemplated by this
Agreement and the form and substance of all opinions, certificates and
other documents hereunder shall be satisfactory in form and substance
to Seller and their counsel and, where appropriate, certified by
proper corporate or governmental authorities.
e. HSR Act. The waiting period required by the HSR Act (and any
-------
extension thereof) shall have expired or been terminated.
f. Assumption of Lease Obligations and Guarantees. BEA shall have
----------------------------------------------
assumed the obligations of Eagle Industries, Inc. and its Affiliates
in respect of (a) the leases
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for two (2) Mitsui Seiki Machining Centers (IER 3061-9-002 and IER
3061-9-005) subleased to the Company under a certain master lease
agreement and (b) the Guaranty of Eagle Industries, Inc. dated October
6, 1993, of the Company's performance under the equipment leases with
United States Leasing Corporation set forth in the Disclosure
Schedule.
g. Consents. All consents, approvals, permits or waivers necessary to
--------
permit the consummation of the transactions contemplated hereby or
otherwise reasonably requested by BEA shall have been obtained.
h. BEA shall have furnished to Seller a copy of any BEA Offering Material
in which specific reference to the Company or Seller is made, and
Seller shall have consented to all references in such BEA Offering
Material to the Seller or the Company (other than in financial
statements furnished by Seller to BEA), which consent shall not be
unreasonably withheld. If Seller fails to notify BEA that it objects
to any such reference within three business days after being furnished
the BEA Offering Material in which such reference is contained, Seller
shall be deemed for all purposes to have consented thereto.
14. Tax Matters.
-----------
(a) Each of BEA and Seller agrees to make a timely election
pursuant to Section 338(h)(10) of the Code, and each of
BEA and Seller agrees to make any comparable elections
under any applicable state or local Tax laws, in each
case with respect to the acquisition of the Company.
Seller will pay any Taxes attributable to the making of
the Section 338(h)(10) Election and will indemnify the
Buyer and the Company against any such Taxes.
(b) Upon the election made under Section 338(h)(10) of the
Code or comparable provisions of any state or local Tax
laws, BEA, Seller and the Company agree that they will
allocate the Purchase Price on the sale of assets
deemed to occur as a result of the election in a manner
consistent with applicable law and regulations and in
accordance with an appraisal of those assets to be
obtained by BEA (at its own expense). Seller, BEA and
the Company each agree that for Income Tax and Other
Tax and book purposes they will report the transaction
(and any deemed sale resulting from such election) in a
manner consistent with the foregoing allocations and
neither BEA, Seller nor the Company will, without the
written consent of each other, take a position
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for Income Tax or Other Tax purposes inconsistent with
the foregoing allocations on audit, in a claim for
refund or otherwise.
(c) Seller will include the income of the Company
(including any deferred income triggered into income by
Treas. Reg. (S) 1.1502-13 and Treas. Reg. (S) 1.1502-14
and any excess loss accounts taken into income under
Treas. Reg. (S) 1.1502-19) on the GAMI Consolidated
Group consolidated Income Tax Returns for all periods
through the Closing Date and pay any Income Taxes
attributable to such income. The Company will furnish
information to Seller for inclusion in Seller
Consolidated Group consolidated Income Tax Return for
the period which includes the Closing Date in
accordance with the Company's past custom and practice.
Seller will allow the Buyer an opportunity to review
and comment upon such Income Tax Returns (including any
amended returns) to the extent that they relate to the
Company. Seller will take no position on such returns
that relate to the Company that would result in a
Material Adverse Effect.
(d) For any taxable period of the Company that includes
(but does not end on) the Closing Date, BEA shall
timely prepare and file with the appropriate
authorities all Income and Other Tax Returns required
to be filed, and (subject to the provisions of Section
7.1(a) above) will pay all Other Taxes due with respect
to such Tax Returns, reports and forms.
(e) Seller shall be liable for any sales, use, conveyance,
stamp, duty, transfer, reporting, recording and similar
fees and Other Taxes in connection with any of the
transactions contemplated by this Agreement.
(f) Seller, the Company and BEA shall cooperate and shall
cause their respective officers, employees, agents,
auditors and representatives to cooperate in preparing
and filing all returns, reports and forms relating to
Taxes, including maintaining and making available to
each other all records necessary in connection with the
Taxes and in resolving all disputes and audits with
respect to all taxable periods relating to Taxes.
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15. Responsibility for Insurance Coverage.
-------------------------------------
a. Liability and Workers Compensation Insurance. As set forth in Section
3.1.13 and/or the Disclosure Schedule, the Company is an insured party
under current general liability, products liability, auto liability,
employers' liability and workers' compensation insurance policies of
Seller or its Affiliates other that the Company (a "Seller Insured
Entity"), which provide coverage on an "occurrence" basis during the
applicable policy period (the "Current Insurance"). As between Seller
Insured Entity and the Company, Seller Insured Entity shall be
responsible and liable for all claims associated with occurrences
prior to the Closing of a category or type subject to coverage under
the Current Insurance but only to the extent, it (or a third party on
its behalf) actually receives insurance proceeds or protection
relating thereto (a "Covered Claim"). To the extent such Covered Claim
is subject to a deductible or self-insured retention, or the liability
exceeds the proceeds received, or such insurance proceeds are not
otherwise available, the Company shall be responsible and liable for
said amount and shall reimburse Seller Insured Entity within thirty
(30) days of receipt of a request for reimbursement, with interest
accruing at the rate of 10% per annum for payments not received within
such thirty (30) day period. In the event Seller determines to enter
into a "buy-out agreement" with an insurance carrier pursuant to which
Seller pays consideration to eliminate the deductible or self-insured
retention with respect to all or a portion of a particular policy
period, then Seller shall notify BEA of its intention to enter into
such transaction and the terms thereof. BEA shall have thirty (30)
days from the receipt of such notice to elect to participate in such
transaction by irrevocably agreeing to pay its portion of the
consideration paid by Seller. If BEA elects not to so participate, it
will continue to be charged pursuant to this Section 15.1 as though
such buy-out transaction had not occurred. In the event BEA or the
Company determines to enter into such a "buy-out agreement" after the
closing with respect to claims relating to the Company, Seller and/or
Eagle will consent to such agreement so long as Seller and Eagle are
released from liability with respect to such claims, upon terms
reasonably acceptable to Eagle.
b. Seller Insured Entity or its insurer shall have sole right to assume
and conduct the defense of any Covered Claims; provided however that
in the event a Covered Claim could result in liability to the Company
in an amount exceeding $10,000, any decisions with respect to
disposition of the claim shall be made on a joint basis by Seller and
BEA, and BEA shall have the right to participate in the defense of
such claim at its own expense. Seller Insured Entity shall not be
obligated to BEA for any legal or other expenses incurred with respect
to the defense of Covered Claims. BEA shall cause the Company to
cooperate in the
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defense of the Covered Claims and to provide records and other
information necessary or appropriate to such defense, as requested by
Seller Insured Entity or its insurer. BEA shall not take any action,
or omit to take any action, which may materially adversely affect the
availability of insurance coverage with respect to Covered Claims.
16. Employee Benefits Matters.
-------------------------
a. Retirement Plans
----------------
(a) Seller shall cause the trustee of the Eagle Industrial
Products Corporation Employee Savings Plan (the
"Savings Plan") to transfer to the trustee of a
qualified defined contribution plan maintained by BEA
or an entity which is treated as a single employer with
BEA pursuant to Section 414(b), (c) or (m) of the Code
("BEA Affiliate"), either currently existing or
hereinafter established by BEA or a BEA Affiliate (the
"Transferee Savings Plan"), in cash or in marketable
securities acceptable to BEA, the entire value of each
Transferred Employee's accounts under the Savings Plan
as determined under the provisions of the Savings Plan.
"Transferred Employee" means each employee of the
Company on the Closing Date who is a participant in the
Savings Plan. Unless otherwise agreed by Seller and
BEA, the transfer shall occur within ninety (90)
calendar days after BEA obtains and presents to Seller
a determination letter issued by the Internal Revenue
Service evidencing that the Transferee Savings Plan is
qualified under the applicable provisions of the Code,
or evidence reasonably satisfactory to Seller that an
application for a determination letter for the
Transferee Savings Plan has been filed with the IRS
prior to the end of the applicable remedial amendment
period, or other evidence satisfactory to Seller that
the Transferee Savings Plan is qualified under the
applicable provisions of the Code. Such evidence of
qualification shall be provided by BEA within sixty
(60) days of the Closing Date.
(b) After the transfers described above, none of Seller,
any affiliate of Seller, nor the Savings Plan shall
have any liability or obligation to pay or otherwise
provide to the Transferred Employees any benefits
accrued or provided for under the Savings Plan, and BEA
shall assume full liability for such benefits; all
Transferred Employees shall cease
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active participation in the Savings Plan as of the
Closing Date.
(c) The Transferee Savings Plan (i) shall provide that all
benefits transferred to such plan pursuant to Section
16.1(a) shall remain fully vested; and (ii) shall
recognize the service with the Company of the
Transferred Employees who participated in the Savings
Plan immediately prior to the Closing Date for
eligibility and vesting purposes under the Transferee
Savings Plan.
(d) Within forty-five (45) days after the Closing, the
Company shall pay to the trustee of the Savings Plan
all required Employer and Employee Contributions of the
Company to the Savings Plan not made as of the Closing
Date for all calendar months ending on or prior to the
Closing Date and for the calendar month in which the
Closing Date occurs. For purposes of this paragraph,
the Employee Contributions shall be those amounts
withheld or required to be withheld from employees'
compensation for the period which includes the Closing
Date, and Employer Contributions shall be the Employer
Contributions that would be required to be made with
respect to such Employee Contributions. Seller shall
cause the Company to pay to the trustee of the Savings
Plan all required Employer and Employee Contributions
relating to all periods prior to that referred to in
the preceding sentence.
(e) BEA shall have no liability whatsoever for any failure
by Seller or the Company, their employees or agents, to
operate the Savings Plan, the Burns Aerospace
Corporation Hourly Tax-Sheltered Retirement Plan or the
Burns Aerospace Corporation Money Purchase Pension Plan
prior to the Closing on a qualified basis and in
compliance with applicable law and each plan's terms.
b. Welfare Benefits. BEA acknowledges that employees of the Company
----------------
shall be ineligible to participate in any employee welfare benefit
plans maintained by Seller or its affiliates after the Closing and
agrees that none of Seller, its affiliates nor any employee welfare
benefit plan (within the meaning of Section (3)(1) of ERISA)
maintained by Seller or its affiliates shall be liable for any claim
incurred by an employee of the Company after the Closing, and the
Company shall bear all such liability, if any. For purposes of the
preceding
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sentence, a claim shall be deemed incurred when the service which
results in such claim is rendered, irrespective of when the illness or
injury giving rise to such services, was first contracted or incurred.
17. HSR Compliance. Each of the parties will use reasonable efforts to comply
--------------
with requests for information received from any antitrust agency (whether
pursuant to the terms of a "second request" or otherwise) with respect to
the respective premerger notification filings of the parties under the Hart
Scott Rodino Antitrust Improvements Act of 1976, as amended and the rules
promulgated thereunder (the "HSR Act"). Each of the parties shall pay its
own legal and other expenses in connection with the performance of its
obligations under this Section 17.
18. Right to Terminate. Notwithstanding anything to the contrary herein, this
------------------
Agreement and the transaction contemplated hereby may be terminated at any
time prior to the Closing by prompt notice given in accordance with Section
25:
(a) by the mutual written consent of BEA and Seller; or
(b) by either of such parties if the Closing shall not have
occurred at or before 11:59 p.m. on February 29, 1996;
provided, however, that the right to terminate this
Agreement under this Section 18.1(b) shall not be
available to any party whose failure to fulfill any of
its obligations under this Agreement has been the cause
of or resulted in the failure of the Closing to occur
on or prior to the aforesaid date.
(c) by either party in the event that the waiting period
under the HSR Act shall not have expired or been
terminated on or before February 29, 1996, and the
termination right set forth in this sub-paragraph (c)
shall be exercisable by either party at any time after
February 29, 1996 until the waiting period shall have
expired or have been terminated.
19. Publicity. Except as otherwise required by law or applicable stock
---------
exchange or NASDAQ rules, press releases concerning this transaction shall
be made only with the prior agreement of BEA and Seller.
20. Entire Agreement. This Agreement, together with the schedules and exhibits
----------------
hereto, constitutes the entire agreement between the parties hereto
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties,
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and there are no warranties, representations or other agreements between
the parties in connection with the subject matter hereof except as
specifically set forth herein.
21. Amendment. This Agreement may be amended by the parties hereto at any
---------
time, but only by an instrument in writing duly executed and delivered on
behalf of each of the parties hereto.
22. Headings. Section headings are not to be considered part of this Agreement
--------
and are included solely for convenience and are not intended to be full or
accurate descriptions of the content thereof. References to sections are to
portions of this Agreement, unless the context otherwise requires.
23. Exhibits. etc. Exhibits, schedules and other documents referred to in this
-------------
Agreement are an integral part of this Agreement.
24. Successors and Assigns. All of the terms and provisions of this Agreement
----------------------
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective transferees, successors and assigns. This Agreement
shall not be assigned, in whole or in part, prior to the Closing by any
party, without the prior written consent of the other parties.
25. Notices. All notices, requests, demands and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if
delivered or mailed, first-class postage prepaid,
(a) If to Seller or Eagle, to it at:
Eagle Industrial Products Corporation
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: Gus J. Athas, Esq., Vice President and General Counsel
Fax No.: (312) 906-8402
(b) If to GAMI, to it at:
Great American Management and Investment, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Attention:
(c) If to BEA, to it at:
57 of 69
<PAGE>
BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, Florida 33414
Attention: Mr. Amin J. Khoury
Chairman of the Board
Fax No.: (407) 791-1272
and: Edmund J. Moriarty, Esq.
Vice President and General Counsel
Fax No.: (407) 791-1272
or, in each case, at such other address as the party receiving notice shall have
furnished in writing to the party giving notice and shall be deemed effective
upon receipt by the recipient or addressee, as the case may be.
26. Accounting Terms. All accounting terms not otherwise defined herein or in
----------------
the Audited Financial Statements or the Unaudited Financial Statements have
the meanings assigned to them in accordance with generally accepted
accounting principles as in effect in the United States.
27. Governing Law. This Agreement and all amendments hereof and waivers and
-------------
consents hereunder shall be governed by and construed in accordance with
the laws (other than the conflict of laws rules) of the State of Delaware.
28. Severability. The provisions of this Agreement are severable, and in the
------------
event that any one or more provisions are deemed illegal or unenforceable,
the remaining provisions shall remain in full force and effect.
29. Counterparts. This Agreement may be executed simultaneously 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.
58 of 69
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
BE AEROSPACE, INC.
By: /s/ Thomas P. McCaffrey
--------------------------------------------
Title: Vice President and Chief Financial Officer
BURNS AEROSPACE CORPORATION
By: /s/ Gus J. Athas
---------------------------------------------
Title: Vice President
EAGLE INDUSTRIAL PRODUCTS
CORPORATION
By: /s/ Gus J. Athas
---------------------------------------------
Title: Senior Vice President
EAGLE INDUSTRIES, INC.
By: /s/ Gus J. Athas
----------------------------------------------
Title: Senior Vice President
GREAT AMERICAN MANAGEMENT AND
INVESTMENT, INC. (with respect only to
Sections 8 and 10 of the Agreement)
By: /s/ Gus J. Athas
---------------------------------------------
Title: Senior Vice President
59 of 69
<PAGE>
Schedule 1.4
Calculation of Adjusted Capital
-------------------------------
<TABLE>
<CAPTION>
June 30, 1995 Closing Date
------------- ------------
<S> <C> <C>
Stockholder's equity $ (540) $ -
Less: Goodwill 52,480
Prepaid income taxes 2,182
Plus: Trade receivables sold under
Eagle's Asset Securitization Program
and related deferred income 15,637
Accrued income taxes (3,927)
Deferred income taxes 5,544
Advance from affiliate 78,780
------- ------------
Adjusted Capital $40,832 $ -
======= ===========
</TABLE>
60 of 69
<PAGE>
Schedule 1.5
Burns Aerospace Corporation
Unaudited Consolidating Balance Sheet
as of June 30, 1995
(in thousands)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash & equivalents $ (754)
Trade receivables, net 1,825
Inventories, net 17,770
Current prepaid/(deferred) taxes 2,182
Other current assets 840
-------
Total current assets $21,863
Property and equipment, net 18,776
Goodwill, net 52,480
Other assets 3,540
-------
Total assets $96,659
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable $ 9,173
Accrued income taxes (3,927)
Accrued expenses 5,649
-------
Total current liabilities 10,895
Other long-term liabilities 1,980
Deferred income taxes 5,544
Advances from affiliate 78,780
-------
Total liabilities $97,199
Common stock 1
Paid in capital 7,633
Retained earnings (8,174)
-------
Total stockholder's equity (540)
-------
Total liabilities and equity $96,659
=======
</TABLE>
61 of 69
<PAGE>
INDEX OF SCHEDULES
TO
ACQUISITION AGREEMENT
SCHEDULE 1.4 Calculation of Adjusted Capital
SCHEDULE 1.5 Balance Sheet of 6/30/95
SCHEDULE 1.9 Exceptions to Repayment of Intercompany Debt
SCHEDULE 3.1.1 Qualifications
SCHEDULE 3.1.2 Capital Stock
SCHEDULE 3.1.3 Interests in Subsidiaries
SCHEDULE 3.1.5 Financial Statements
SCHEDULE 3.1.6 Absence of Certain Changes
SCHEDULE 3.1.7.3 Audit History; Pending Tax Claims
SCHEDULE 3.1.7.8 Powers of Attorney Covering Tax Matters
SCHEDULE 3.1.8(a) Owned Real Property
SCHEDULE 3.1.8(b) Leased Real Property
SCHEDULE 3.1.9(a) Notes, Loans, Credit Agreements, Etc.
SCHEDULE 3.1.9(b) Employee Bonus, Profit-Sharing, Compensation, Etc.
SCHEDULE 3.1.9(c) Representative/Distributor Agreements
SCHEDULE 3.1.9(d) Purchase Agreements Exceeding $25,000
SCHEDULE 3.1.9(e) Agreements for Sales Exceeding $25,000
SCHEDULE 3.1.9(f) Agreements for Capital Expenditures Exceeding $25,000
SCHEDULE 3.1.9(g) Agreements for Capital Expenditures Exceeding $25,000
SCHEDULE 3.1.9(h) Noncompetition/Nonsolicitation (Non disclosure) Agreements
SCHEDULE 3.1.9(i) Powers of Attorney (Non-routine)
SCHEDULE 3.1.9(j) Derivatives, Commodity Swaps, Etc.
SCHEDULE 3.1.9(k) Other Agreements, Contracts Exceeding $25,000
SCHEDULE 3.1.10.1 Non-Exempt Employees and Agents
SCHEDULE 3.1.10.2.1 Employee Benefit Plans
SCHEDULE 3.1.10.2.8 Multi-Employer Plans
SCHEDULE 3.1.12 Patents, Trademarks, Etc.
SCHEDULE 3.1.13 Insurance
SCHEDULE 3.1.14 Litigation
SCHEDULE 3.1.15 Warranty, Product Liability Claims Threatened or Pending
SCHEDULE 3.1.16(b) TSO C-127
SCHEDULE 3.1.18 Bank Accounts; Letters of Credit
SCHEDULE 3.1.19 Certain Transactions
SCHEDULE 3.1.20 Commissions
SCHEDULE 3.1.21(b) Environmental
62 of 69
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined statements of operations and unaudited pro
forma combined balance sheet give effect to the acquisition of Burns Aerospace
Corporation ("Burns") (the "Acquisition") by BE Aerospace, Inc. ("BEA" and,
together with Burns, the "Company") on a purchase accounting basis, the
offering of $75 million of unsecured senior subordinated debt (the "Offering")
and the application of the net proceeds therefrom. The pro forma combined
statement of operations for the fiscal year ended February 25, 1995 is
comprised of the results of BEA for the fiscal year ended February 25, 1995 and
the results of Burns for the year ended December 31, 1994. The pro forma
combined statement of operations for the six months ended August 26, 1995 is
comprised of the results of BEA for the six months ended August 26, 1995 and
the results of Burns for the six months ended June 30, 1995. The pro forma
combined balance sheet as of August 26, 1995 has been prepared by combining the
consolidated balance sheet of BEA as of August 26, 1995 with the balance sheet
of Burns as of June 30, 1995.
The pro forma combined statements of operations for the fiscal year ended
February 25, 1995 and the six months ended August 26, 1995 assume that the
Acquisition and the Offering occurred on February 27, 1994. The pro forma
combined balance sheet as of August 26, 1995 assumes that the Acquisition and
the Offering occurred on August 26, 1995. The pro forma combined statements of
operations and balance sheet do not purport to represent the results of
operations or financial position of the Company had the transactions and events
assumed therein occurred on the dates specified, nor are they necessarily
indicative of the results of operations that may be achieved in the future.
Certain of the pro forma adjustments represent estimates of costs to be
incurred and cost savings expected to be realized in connection with the
Acquisition. No assurance can be given as to the amount of costs that will
actually be incurred or cost savings that will actually be realized. The pro
forma adjustments are based on management's preliminary assumptions regarding
purchase accounting adjustments. The actual allocation of the purchase price
will be adjusted to the extent that actual amounts differ from management's
estimates in accordance with FAS No. 38, "Accounting for Preacquisition
Contingencies of Purchased Enterprises."
The pro forma combined financial information is based upon certain
assumptions and adjustments described in the notes to the pro forma financial
statements.
63 of 69
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 25, 1995
------------------------------------------------------
ADJUSTED
BEA BURNS COMBINED ADJUSTMENTS PROFORMA
-------- ------- -------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............... $229,347 $93,494 $322,841 $ -- $322,841
Cost of sales........... 154,863 75,880 230,743 (5,389)(a) 221,081
(968)(b)
(3,305)(c)
-------- ------- -------- --------
Gross profit............ 74,484 17,614 92,098 101,760
Operating expenses:
Selling, general and
administrative....... 31,787 10,729 42,516 (5,321)(a) 37,195
Management fees....... -- 3,359 3,359 (3,359)(d) 750
750 (d)
Research and develop-
ment................. 12,860 1,615 14,475 (1,223)(a) 16,557
3,305 (c)
Amortization ......... 9,954 1,509 11,463 (109)(b) 11,354
Other expenses........ 23,736 738 24,474 -- 24,474
-------- ------- -------- --------
Total operating ex-
penses................. 78,337 17,950 96,287 90,330
-------- ------- -------- --------
Operating earnings
(loss)................. (3,853) (336) (4,189) 11,430
Interest expense, net... 15,019 6,374 (e) 21,393 (6,374)(e) 21,507
6,488 (f)
-------- ------- -------- --------
Loss before income taxes
(benefit).............. (18,872) (6,710) (25,582) (10,077)
Income taxes (benefit).. (6,806) (2,200) (9,006) 4,975 (g) (4,031)
-------- ------- -------- --------
Net loss ............... $(12,066) $(4,510) $(16,576) $ (6,046)
======== ======= ======== ========
Net loss per share...... $ (.75) $ (.38)
======== ========
Weighted average shares
outstanding............ 16,021 16,021
======== ========
</TABLE>
- --------
(a) The Company has specifically identified cost reductions resulting from a
business integration plan which is expected to be implemented following
the Acquisition. The business integration plan contemplates (i) the
elimination of duplicate executive, sales and marketing, research and
engineering and administrative functions at Burns, (ii) shifting Burns'
seat assembly operations to BEA's facilities and (iii) shifting certain of
BEA's seating fabrication operations to Burns. The cost reductions
presented below for cost of sales, selling, general and administrative
expenses and research and development expenses are comprised of labor and
overhead expenses that are expected to be eliminated in conjunction with
the implementation of the business integration plan. The Company's
business integration plan provides for the events generating the cost
reductions to occur in phases, beginning in the initial year. Therefore,
the pro forma expected cost savings for the fiscal year ended February 25,
1995 reflect only a portion of the expected ongoing annual savings.
Assuming the Acquisition occurred on February 27, 1994 and the phase-in of
the business integration plan commenced as of such date, the expected cost
reductions, on a pro forma basis, for the fiscal year ended February 25,
1995 are as follows:
<TABLE>
<S> <C>
Cost of sales.................................................... $5,389
Selling, general and administrative.............................. 5,321
Research and development......................................... 1,223
</TABLE>
64 of 69
<PAGE>
Upon full implementation of the integration plan, the Company estimates
aggregate annualized cost of sales savings from the business integration
plan as follows:
<TABLE>
<S> <C>
Cost of sales................................................... $10,368
Selling, general and administrative............................. 5,514
Research and development........................................ 1,482
</TABLE>
See Note (b) to the pro forma combined balance sheet for purchase reserves
established related to the cost of the business integration plan.
(b) Reflects adjustments to depreciation and amortization based on the
preliminary purchase accounting allocation related to property, plant and
equipment and intangible assets acquired in connection with the
Acquisition and the difference between depreciation expense recorded by
Burns and that determined under the methods used by the Company. The
Company uses periods of 20 years for manufacturing facilities, five to
seven years for machinery and equipment and 20 years for intangible
assets.
(c) Reflects adjustments to reclassify certain Burns expenses in a manner
consistent with BEA's financial presentation, in which BEA classifies
certain engineering related expenditures as a component of research and
development as compared to a component of cost of sales.
(d) Reflects the elimination of management fees allocated from Eagle of $3,359
which is partially offset by the addition of $750 of incremental selling,
general and administrative expenses. Such incremental expense amounts are
related to legal, accounting, tax, auditing, purchasing, human resources
and management information services, which are the portion of the
allocated selling, general and administrative expenses that are estimated
by the Company as necessary to operate Burns as a division of the Company.
The balance of the remaining allocated selling, general and administrative
expenses that is being eliminated generally reflects indirect cost
allocations from Eagle for which no direct benefit was received.
(e) Burns participates in its parent's cash management system under which its
cash funding requirements are met by its parent and, therefore, Burns
itself did not have any indebtedness to nonaffiliates. Interest expense
appearing on the Burns Financial Statements is attributable to interest on
intercompany indebtedness.
(f) Represents the additional interest expense for the year ended February 25,
1995 that would have been incurred had the Acquisition and the Offering
taken place on February 27, 1994, offset by the elimination of
intercompany indebtedness of Burns owed to Eagle which will be forgiven
upon consummation of the Acquisition.
(g) Adjustments to reflect income tax effects assuming a combined state and
federal statutory income tax rate of 40%.
65 of 69
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED AUGUST 26, 1995
------------------------------------------------------
ADJUSTED
PRO
BEA BURNS COMBINED ADJUSTMENTS FORMA
-------- ------- -------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales................ $113,045 $49,461 $162,506 $ -- $162,506
Cost of sales............ 76,071 40,472 116,543 (5,184)(a) 109,428
(484)(b)
(1,447)(d)
-------- ------- -------- --------
Gross profit............. 36,974 8,989 45,963 53,078
Operating expenses:
Selling, general and
administrative........ 16,743 5,969 22,712 (2,757)(a) 19,955
Management fees........ -- -- -- 350 (c) 350
Research and develop- 7,980 1,210 9,190 (741)(a) 9,896
ment.................. 1,447 (d)
Amortization........... 4,693 750 5,443 (54)(b) 5,389
-------- ------- -------- --------
Total operating ex-
penses.............. 29,416 7,929 37,345 35,590
-------- ------- -------- --------
Operating earnings....... 7,558 1,060 8,618 17,488
Interest expense, net.... 8,149 3,831 (e) 11,980 (3,831)(e) 11,369
3,220 (f)
-------- ------- -------- --------
Earnings (loss) before
income taxes (benefit).. (591) (2,771) (3,362) 6,119
Income taxes (benefit)... (216) (905) (1,121) 3,569 (g) 2,448
-------- ------- -------- --------
Net earnings (loss)...... $ (375) $(1,866) $ (2,241) $ 3,671
======== ======= ======== ========
Net earnings (loss) per
share................... $ (.02) -- -- $ .23
======== ======= ======== ========
Weighted average shares
outstanding............. 16,108 -- -- 16,108
======== ======= ======== ========
</TABLE>
- --------
(a) The Company has specifically identified cost reductions resulting from a
business integration plan which is expected to be implemented following
the Acquisition. The business integration plan contemplates (i) the
elimination of duplicate executive, sales and marketing, research and
engineering and administrative functions at Burns, (ii) shifting Burns'
seat assembly operations to BEA's facilities and (iii) shifting certain of
BEA's seating fabrication operations to Burns. The cost reductions
presented below for cost of sales, selling, general and administrative
expenses and research and development expenses are comprised of labor and
overhead expenses that are expected to be eliminated in conjunction with
the implementation of the business integration plan. Assuming the
acquisition occurred on February 27, 1994 and the phase-in of the business
integration plan commenced as of such date, the expected cost reductions,
on a pro forma basis, for the six months ended August 26, 1995 are as
follows:
<TABLE>
<S> <C>
Cost of sales.................................................... $5,184
Selling, general and administrative.............................. 2,757
Research and development......................................... 741
</TABLE>
Upon full implementation of the business integration plan, the Company
estimates aggregate annualized cost of sales savings from the business
integration plan as follows:
<TABLE>
<S> <C>
Cost of sales................................................... $10,368
Selling, general and administrative............................. 5,514
Research and development........................................ 1,482
</TABLE>
See Note (b) to the pro forma combined balance sheet for purchase reserves
established related to the cost of the business integration plan.
66 of 69
<PAGE>
(b) Reflects adjustments to depreciation and amortization based on the
preliminary purchase accounting allocation related to property, plant and
equipment and intangible assets acquired in connection with the
Acquisition and the difference between depreciation expense recorded by
Burns and that determined under the methods used by the Company. The
Company uses periods of 20 years for manufacturing facilities, five to
seven years for machinery and equipment and 20 years for intangible
assets.
(c) Reflects incremental associated selling, general and administrative
expenses which are estimated by the Company as necessary to operate Burns
as a business unit of the Company.
(d) Reflects adjustments to reclassify certain Burns expenses in a manner
consistent with BEA's financial presentation, in which BEA classifies
certain engineering related expenditures as a component of research and
development as compared to a component of cost of sales.
(e) Burns participates in its parent's cash management system under which its
cash funding requirements are met by its parent and, therefore, Burns
itself did not have any indebtedness to nonaffiliates. Interest expense
appearing on the Burns financial statements is attributable to the
intercompany indebtedness.
(f) Represents the additional interest expense for the six months ended August
26, 1995 that would have been incurred had the Acquisition and the
Offering taken place on February 27, 1994, offset by the elimination of
intercompany indebtedness of Burns owed to Eagle which will be forgiven
upon consummation of the Acquisition.
(g) Adjustments to reflect income tax effects assuming a combined state and
federal statutory income tax rate of 40%.
67 of 69
<PAGE>
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
BEA AS OF BURNS AS OF PRO FORMA
AUGUST 26, JUNE 30, COMBINED
1995 1995 ADJUSTMENTS BALANCE
---------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash .......................... $ 7,490 $ 129 $ -- $ 7,619
Accounts receivable............ 44,249 1,825 15,637 (c) 61,711
Inventories.................... 91,885 17,770 -- 109,655
Deferred income taxes.......... 5,779 -- -- 5,779
Other current assets........... 7,608 2,758 -- 10,366
-------- -------- --------
Total current assets......... 157,011 22,482 195,130
Net property and equipment...... 64,466 18,776 (7,500)(b) 75,742
Intangibles and other assets.... 173,372 56,020 7,000 (a) 206,342
18,500 (b)
(48,550)(c)
-------- -------- --------
$394,849 97,278 $477,214
======== ======== ========
LIABILITIES & STOCKHOLDERS' EQ-
UITY:
Liabilities:
Accounts payable............... $ 38,614 $ 10,056 $ -- $ 48,670
Other current liabilities...... 20,939 6,621 7,000 (b) 34,560
Income taxes payable........... 385 -- -- 385
Current portion of long-term
debt.......................... 5,090 -- -- 5,090
-------- -------- --------
Total current liabilities.... 65,028 16,677 88,705
Long-term bank revolver......... 63,435 -- (25,500)(a) 37,935
Long-term debt.................. 125,000 -- 75,000 (a) 200,000
Deferred income taxes........... 10,953 -- -- 10,953
Advances from affiliate......... -- 81,331 (81,331)(c) --
Other long-term liabilities..... 4,234 5,188 4,000 (b) 13,422
-------- -------- --------
Total Liabilities............ 268,650 103,196 351,015
Stockholders' equity
Preferred stock................ -- -- -- --
Common stock................... 161 1 (1)(c) 161
Additional paid-in capital..... 119,719 -- -- 119,719
Retained earnings (deficit)..... 7,045 (5,919) 5,919 (c) 7,045
Cumulative currency translation
adjustment..................... (726) -- (726)
-------- -------- --------
Total stockholders' equity... 126,199 (5,918) 126,199
-------- -------- --------
$394,849 $ 97,278 $477,214
======== ======== ========
</TABLE>
68 of 69
<PAGE>
- --------
(a) Reflects the incurrence of debt required to finance the Acquisition and
the net cash resulting from such borrowings after payment of the purchase
price and acquisition costs as follows:
<TABLE>
<S> <C>
Gross proceeds from the Offering.................................. $75,000
Offering discount, consent, bank amendment and acquisition related
fees.............................................................. (7,000)
Repayment of unsecured bank borrowings and a portion of the exist-
ing bank credit facility.......................................... (25,500)
Cost of Acquisition............................................... (42,500)
</TABLE>
(b) The Acquisition will be accounted for as a purchase pursuant to APB
Opinion No. 16, "Business Combinations." The purchase cost will be
allocated to the assets and the liabilities of the Burns based on their
relative fair values. Such allocations are subject to final determination
based on valuations and other studies to be performed prior to the
Closing. The final values may differ from those set forth below.
Purchase cost:
<TABLE>
<S> <C>
Cash.............................................................. $ 42,500
Purchase accounting reserves...................................... 11,000
Less estimated book value of net assets to be purchased........... (42,500)
--------
Excess of purchase cost over book value........................... $ 11,000
========
Allocation of excess of purchase cost over book value to assets of
the Company:
Property, plant and equipment, net................................ $ (7,500)
Other assets, primarily patents, processes, trademarks and other
intellectual properties.......................................... 18,500
--------
Total............................................................. $ 11,000
========
</TABLE>
Purchase accounting reserves include the costs to implement the business
integration plan, including severance, relocation, systems conversion and
other business acquisition related costs.
(c) Eliminates advances from affiliates and Burns' intangible assets as of the
Closing and reflects the purchase of Burns' trade accounts receivable held
in trust pursuant to Eagle's existing asset securitization program.
69 of 69
