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UNITED STATES
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
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Date of Report (Date of earliest event reported) January 28, 1998 (January 13, 1998)
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BANNER AEROSPACE, INC.
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(Exact name of Registrant as specified in its charter)
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DELAWARE 1-10561 95-2039311
- -------------------------------------- ------------------------------ ---------------------
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification No.)
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300 WEST SERVICE ROAD, PO BOX 20260
WASHINGTON, DC 20041
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (703) 478-5790
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ITEM 2. DISPOSITION OF ASSETS
On January 13, 1998, certain subsidiaries (the "Selling Subsidiaries") of
Banner Aerospace, Inc. ("the Company") completed the disposition of
substantially all of the assets and certain liabilities of the Selling
Subsidiaries to AS BAR LLC and AS BAR PBH LLC, two wholly-owned subsidiaries of
AlliedSignal Inc., in exchange for unregistered shares of AlliedSignal Inc.
common stock with an aggregate value equal to $345 million. The value of the
AlliedSignal Inc. common stock received by the Selling Subsidiaries was
determined by the average closing price of such stock on the New York Stock
Exchange for a period of twenty days preceding the closing.
The Selling Subsidiaries were Adams Industries, Inc., Aerospace Bearing
Support, Inc., Aircraft Bearing Corporation, Banner Distribution, Inc., Burbank
Aircraft Supply, Inc., Harco, Inc., PB Herndon Aerospace, Inc. (which
collectively comprise the Company's Hardware Group), Banner Aerospace Services,
Inc. (which transferred only those assets related to the Hardware Group
business) and PacAero. The transaction was evidenced by: (i) an Asset Purchase
Agreement dated as of December 8, 1997, attached hereto as Exhibit 2.1, among
the Company, seven of the Selling Subsidiaries (Adams Industries, Inc.,
Aerospace Bearing Support, Inc., Aircraft Bearing Corporation, Banner
Distribution, Inc., Burbank Aircraft Supply, Inc., Harco, Inc. and PacAero),
AlliedSignal Inc. and AS BAR LLC; and (ii) an Asset Purchase Agreement dated as
of December 8, 1997, attached hereto as Exhibit 2.2, among the Company, two of
the Selling Subsidiaries (PB Herndon Aerospace, Inc. and Banner Aerospace
Services, Inc.), AlliedSignal Inc. and AS BAR PBH LLC. (AS BAR LLC and AS BAR
PBH LLC are collectively referred to as the "Buyers"). Reference is made to
Exhibits 2.1 and 2.2 hereto for the complete terms and conditions of the two
Asset Purchase Agreements.
The purchase price received by the Selling Subsidiaries ($345 million) was
based on the consolidated net worth as reflected on an Estimated Closing Date
Balance Sheet for the assets (and liabilities) conveyed by the Selling
Subsidiaries to the Buyers. Such Estimated Closing Date Balance Sheet is subject
to review by the parties, and the purchase price shall be adjusted (up or down)
based on the net worth as reflected on the final Closing Date Balance Sheet. The
purchase price was allocated among the Selling Subsidiaries in the following
proportions: Adams Industries, Inc., 4.4%; Aerospace Bearing Support, Inc.,
8.4%; Aircraft Bearing Corporation, 8.5%; Banner Distribution, Inc., 1.5%;
Burbank Aircraft Supply, Inc., 43.5%; Harco, Inc., 23.5%; PacAero, 3.6%; PB
Herndon Aerospace, Inc., 6.1%; Banner Aerospace Services, Inc., 0.5%.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The following financial statements, pro forma financial information and
exhibits are filed as a part of this report.
(b) Unaudited Pro Forma Financial Information:
The following unaudited pro forma consolidated income statements for the
fiscal year ended March 31, 1997 and for the six months ended September 30, 1997
and unaudited balance sheet as of September 30, 1997 give effect of the
disposition of substantially all of the assets and certain liabilities of the
Selling Subsidiaries. A portion of the common stock of AlliedSignal Inc. is
assumed to repay outstanding debt. The unaudited pro forma consolidated
financial information is based on the historical financial information of the
Company for the fiscal year ended March 31, 1997, for the six months ended
September 30, 1997 and as of September 30, 1997. The unaudited pro forma
consolidated financial information is presented for informational purposes only
and is not necessarily indicative of what earnings and results of operations
would have been had the Selling Subsidiaries disposed of their assets and
liabilities at the beginning of the periods presented, nor is such information
intended necessarily to be indicative of the future results of operations that
may occur.
The Press Release of the Company, dated December 8, 1997, announcing the
execution of the Asset Purchase Agreements is attached hereto as Exhibit 99.1,
and the Press Release of the Company, dated January 13, 1998, announcing the
closing under the Asset Purchase Agreements, is attached hereto as Exhibit
99.2.
2
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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1997
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ASSETS
(1)
(IN THOUSANDS) HISTORICAL ADJUSTMENTS PRO FORMA
------------------ ------------------- ------------------
<S> <C> <C> <C>
Current Assets:
Marketable securities $ --- $ 172,508(2) $ 172,508
Accounts receivable, net 85,399 (48,184) 37,215
Inventories 275,159 (176,790) 98,369
Future tax benefits 12,007 (9,283) 2,724
Other current assets 10,786 (873) 9,913
------------------ ------------------- ------------------
Total current assets 383,351 (62,622) 320,729
------------------ ------------------- ------------------
Net fixed assets 16,200 (12,553) 3,647
Other Assets:
Cost in excess of net tangible assets of
purchased business, net 32,627 (19,089) 13,538
Other 4,111 (2,646)(2) 1,465
------------------ ------------------- ------------------
Total other assets 36,738 (21,735) 15,003
------------------ ------------------- ------------------
Total assets $ 436,289 $ (96,910) $ 339,379
================== =================== ==================
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LIABILITIES AND STOCKHOLDERS' EQUITY
(1)
HISTORICAL ADJUSTMENTS PRO FORMA
------------------ ------------------ -------------------
<S> <C> <C> <C>
Current Liabilities:
Accounts payable $ 51,287 $ (30,518) $ 20,769
Other current liabilities 22,342 43,525(3) 65,867
------------------ ------------------ -------------------
Total current liabilities 73,629 13,007 86,636
Long-Term Liabilities:
Long-term debt, less current maturities 164,746 (164,746)(2) ---
Other 7,477 (5,969) 1,508
------------------ ------------------ -------------------
172,223 (170,715) 1,508
------------------ ------------------ -------------------
Total liabilities 245,852 (157,708) 88,144
------------------ ------------------ -------------------
Stockholders' Equity:
Preferred stock 37 --- 37
Common stock 23,435 --- 23,435
Paid-in capital 147,155 --- 147,155
Retained earnings 19,810 60,798 80,608
------------------ ------------------ -------------------
Total stockholders' equity 190,437 60,798 251,235
------------------ ------------------- ------------------
Total liabilities & stockholders' equity $ 436,289 $ (96,910) $ 339,379
================== ================== ===================
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UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
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(1)
(IN THOUSANDS EXCEPT PER SHARE DATA) HISTORICAL ADJUSTMENTS PRO FORMA
------------------ ------------------- -------------------
<S> <C> <C> <C>
Net sales $ 239,844 $ (121,513) $ 118,331
Cost of goods sold 172,340 (78,899) 93,441
------------------ ------------------- -------------------
Gross profit 67,504 (42,614) 24,890
Selling, general and administrative 49,446 (29,977) 19,469
------------------ ------------------- -------------------
Operating income 18,058 (12,637) 5,421
Interest expense, net 7,777 (7,777)(2) ---
------------------ ------------------- -------------------
Income from operations 10,281 (4,860) 5,421
Provision for taxes 4,010 (1,623) 2,387
------------------ ------------------- -------------------
Net income $ 6,271 $ (3,237) $ 3,034
================== =================== ===================
Preferred stock dividends 689 --- 689
------------------ ------------------- -------------------
Net income available to common shareholders $ 5,582 $ (3,237) $ 2,345
================== =================== ===================
Earnings per common share $ 0.24 $ (0.14) $ 0.10
================== =================== ===================
Weighted average number of shares 23,428 --- 23,428
================== =================== ===================
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UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED MARCH 31, 1997
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(1)
(IN THOUSANDS EXCEPT PER SHARE DATA) HISTORICAL ADJUSTMENTS PRO FORMA
------------------- ------------------ -------------------
<S> <C> <C> <C>
Net sales $ 389,111 $ (212,237) $ 176,874
Cost of goods sold 279,041 (143,188) 135,853
------------------- ------------------ -------------------
Gross profit 110,070 (69,049) 41,021
Selling, general and administrative 84,557 (49,591) 34,966
------------------- ------------------ -------------------
Operating income 25,513 (19,458) 6,055
Interest expense, net 13,090 (13,090)(2) ---
------------------- ------------------ -------------------
Income from operations 12,423 (6,368) 6,055
Provision for taxes 4,970 (1,544) 3,426
=================== ------------------ ===================
Net income $ 7,453 $ (4,824) $ 2,629
=================== ================== ===================
Earnings per common share $ 0.32 $ (0.21) $ 0.11
=================== ================== ===================
Weighted average number of shares 23,408 --- 23,408
=================== ================== ===================
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(1) Represents the elimination of the results of Adams Industries, Inc.,
Aerospace Bearing Support, Inc., Aircraft Bearing Corporation, Banner
Distribution, Inc., Burbank Aircraft Supply, Inc., Harco, Inc., PacAero,
and PB Herndon Aerospace, Inc. from the results of the Company, except as
indicated in footnotes (2) and (3) below.
(2) Represents the receipt of AlliedSignal Inc. common stock and simultaneous
repayment of outstanding debt. Accordingly, all interest expense and
deferred financing fees have been eliminated. No investment income was
recognized on the remaining holdings of AlliedSignal Inc. common stock.
(3) Represents (i) a provision for taxes incurred in association with the
disposition of $42,583; (ii) an increase of $10,000 in accruals for
transaction fees, indemnifications and other costs associated with the
disposition; (iii) a decrease in accrued interest of $2,447 associated
with the defeasance of outstanding debt; and (iv) the elimination of
$6,611 of accruals related to the Selling Subsidiaries.
(c) Exhibits:
2.1 Asset Purchase Agreement dated as of December 8, 1997, among
Banner Aerospace, Inc. and seven of its subsidiaries (Adams
Industries, Inc., Aerospace Bearing Support, Inc., Aircraft
Bearing Corporation, Banner Distribution, Inc., Burbank Aircraft
Supply, Inc., Harco, Inc. and PacAero), AlliedSignal Inc. and AS
BAR LLC. (Certain Schedules and Exhibits have been omitted. Such
Schedules are listed and described in the Asset Purchase
Agreement. The Registrant hereby agrees to furnish to the
Securities and Exchange Commission, upon its request, any or all
such omitted Schedules and Exhibits.)
2.2 Asset Purchase Agreement dated as of December 8, 1997, among
Banner Aerospace, Inc. and two of its subsidiaries (PB Herndon
Aerospace, Inc. and Banner Aerospace Services, Inc.),
AlliedSignal Inc. and AS BAR PBH LLC.
99.1 Press Release of the Registrant dated December 8, 1997.
99.2 Press Release of the Registrant dated January 13, 1998.
5
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANNER AEROSPACE, INC.
By /s/ WARREN D. PERSAVICH
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Warren D. Persavich
Senior Vice President
Chief Financial Officer
By /s/ EUGENE W. JURIS
----------------------------------
Eugene W. Juris
Vice President
Finance & Secretary
Dated: January 28, 1998
6
<PAGE> 1
EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
by and among
Banner Aerospace, Inc.,
the Sellers listed on Annex A,
AlliedSignal Inc.
and
AS BAR LLC
dated as of December 8, 1997
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TABLE OF CONTENTS
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ARTICLE I
The Transaction
1.1 Purchase and Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Acquisition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Assumption of Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.4 Initial Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.5 Escrow of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.6 Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.7 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.8 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.9 Deliveries and Proceedings at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.10 Stock Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.11 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE II
Representations And Warranties Of Parent And Sellers
2.1 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.2 Ownership of the Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.3 Authorization and Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.4 No Violation of Laws or Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.7 No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.8 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.9 Permits and Compliance With Laws Generally . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.11 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.12 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.13 Acquired Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.15 Intellectual Property and Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.16 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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2.17 Product Warranties and Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.18 Products Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.19 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.20 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.21 No Pending Litigation or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.23 Customers; Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.24 Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.25 All Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.26 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.27 Securities Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.28 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.29 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.30 Business Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE III
Representations And Warranties Of AlliedSignal and Buyer
3.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.2 Authorization and Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.3 No Violation of Laws or Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.5 AlliedSignal Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.6 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.8 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IV
Additional Covenants
4.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.2 Mutual Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.3 Filings and Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.4 Public Announcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.5 Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.7 Certain Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.8 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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4.9 Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.10 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.11 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.12 Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.13 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.14 Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.15 U.S. Government Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.16 NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.17 Continued Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.18 Company Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.19 Side Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.20 Product Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.21 Harco Northern Ireland, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE V
Conditions Precedent
5.1 Conditions Precedent to Obligations of Allied Signal and Buyer . . . . . . . . . . . . . . . 48
5.2 Conditions Precedent to Obligations of Parent and Sellers . . . . . . . . . . . . . . . . . 50
ARTICLE VI
Certain Additional Covenants
6.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.2 Maintenance of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.4 Non-Competition/Non-Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.5 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VII
Survival; Indemnification
7.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.2 Indemnification by Parent, Sellers and Herndon Sellers . . . . . . . . . . . . . . . . . . . 55
7.3 Indemnification by AlliedSignal and Buyer . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.4 Notification of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
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ARTICLE VIII
Employees And Employee Benefits
8.1 Scope of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.2 U.S. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.3 Foreign Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE IX
Termination; Miscellaneous
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.3 Entire Agreement; Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.4 Benefit; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.5 No Presumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.7 Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.8 Counterparts; Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.10 No Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.12 Submission to Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.13 Bulk Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.14 Use of Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.15 Herndon Price Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.16 Relationship with Herndon Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Annex A Sellers
Annex B Seller Subsidiaries and Jurisdictions of Organization
Annex C Definitions
Annex 1.4 Closing Date Shares
Annex 1.6(f) Closing Date Shares Delivered to Parent and Sellers
Exhibit 1.9(a)(xi)* Delaware Counsel Opinion
Exhibit 1.9(a)(xiii)(A)* Jeffrey Steiner Side Letter
Exhibit 1.9(a)(xiii)(B)* The Fairchild Corporation Side Letter
Exhibit 1.9(a)(xiii)(C)* The Fairchild Corporation Side Letter
Exhibit 1.9(b)(vi)* Registration Rights Agreement
Exhibit 1.9(c)* Escrow Agreement
</TABLE>
-iv-
<PAGE> 6
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
<S> <C>
Schedule 1.6(a)* Inventory Reserve Policy
Schedule 1.6(b)* Physical Inventory
Schedule 2.2* Ownership of Subsidiary Shares
Schedule 2.4* Violation of Laws or Agreements
Schedule 2.5* Consents
Schedule 2.6(a)* Balance Sheet
Schedule 2.7* No Changes in Financial Statements
Schedule 2.8* Contracts
Schedule 2.9* Permits
Schedule 2.10* Environmental Matters
Schedule 2.11* Transactions with Affiliates
Schedule 2.13* Real Property
Schedule 2.14* Tax Matters
Schedule 2.15* Intellectual Property
Schedule 2.19* Labor Matters
Schedule 2.20* Employee Benefits
Schedule 2.21* Pending Litigation
Schedule 2.22* Insurance
Schedule 2.23* Customers, Suppliers
Schedule 2.24* Condition of Assets
Schedule 2.25* All Assets
Schedule 2.26* Undisclosed Liabilities
Schedule 2.27* Securities Matters
Schedule 2.28* Bank Accounts
</TABLE>
*not filed herewith
-v-
<PAGE> 7
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of December 8, 1997, by and
among Banner Aerospace, Inc., a Delaware corporation ("Parent"), the seven
companies listed on Annex A hereto (individually, a "Seller" and, collectively,
"Sellers"), AlliedSignal Inc., a Delaware corporation ("AlliedSignal") and AS
BAR LLC, a Delaware limited liability company ("Buyer"). Sellers and the
Subsidiaries of Sellers listed on Annex B hereto (the "Seller Subsidiaries")
are referred to herein collectively as the "Companies".
The Companies are engaged in, among other things, the
businesses of supplying to the aerospace industry (i) aircraft hardware
(including bearings, nuts, bolts, screws, rivets and other types of fasteners),
(ii) chemical products (including adhesives, sealants, lubricants, cleaners and
paint) and (iii) related support services (including Inventory management
services). The term "Business", as used herein, shall mean the compilation of
all the businesses of all of the Companies, except that when this Agreement
refers to a single Company and the Business, it refers to that portion of the
Business which is conducted by that particular Company.
Buyer desires to purchase, and AlliedSignal desires to cause
the purchase of, substantially all of the Assets of Sellers (including all of
the Subsidiary Shares (as hereinafter defined)), and Sellers desire to
transfer, and Parent desires to cause the transfer of, such Assets to Buyer,
all on the terms and subject to the conditions set forth in this Agreement.
Capitalized terms used herein without definition shall have
the meanings assigned to them in Annex C hereto, which is hereby incorporated
into this Agreement as if set forth in full herein.
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and agreements contained herein and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE TRANSACTION
1.1 Purchase and Transfer. Upon the terms and subject to
the conditions set forth in this Agreement, at the Closing, (i) Sellers shall,
and Parent shall cause Sellers to, transfer, convey, assign and deliver to
Buyer, and Buyer shall purchase, acquire and accept from the Sellers, all of
Sellers' right, title and interest in and to the Purchased Assets, and (ii)
Buyer shall pay to Sellers the Initial Purchase Price and shall assume, and
agree to thereafter pay, perform and discharge when due, the Assumed
Liabilities.
<PAGE> 8
2
1.2 Acquisition of Assets.
(a) Subject to Section 1.2(b), "Purchased Assets" means
all of the Assets of Sellers owned, used or held for use in connection with, or
that are otherwise related to or required for the conduct of, the Business
including, without limitation, all of the Assets set forth below:
(i) all Subsidiary Shares;
(ii) all Owned Real Property;
(iii) all Equipment;
(iv) all Inventory;
(v) all Accounts Receivable;
(vi) all credits, prepaid expenses, deferred
charges, advance payments, security deposits and deposits owned, used
or held for use by any Company with respect to the Business ("Prepaid
Expenses") to the extent that such items will accrue to the benefit of
Buyer immediately following the Closing;
(vii) all Intellectual Property;
(viii) all Technology;
(ix) all Contracts;
(x) all Permits;
(xi) all books, records, ledgers, files, documents
(including originally executed copies of written Contracts, customer
and supplier lists (past, present or future), correspondence,
memoranda, forms, lists, plats, architectural plans, drawings and
specifications, copies of documents evidencing Intellectual Property
or Technology, new product development materials, creative materials,
advertising and promotional materials, studies, reports, sales and
purchase correspondence, books of account and records relating to the
employees of the Business, photographs, records of plant operations
and materials used, quality control records and procedures, equipment
maintenance records, manuals and warranty information, research and
development files, data and laboratory books, inspection processes, in
each case, whether in hard copy or magnetic format, in each instance,
to the extent used or held for use with respect to the Business or the
employees of the Business;
(xii) all rights or choses in action arising out of
occurrences before or after the Closing Date and related to any
portion of the Business, including third party warranties and
guarantees and all related claims, credits, rights of recovery and
set-off and other similar contractual rights, as to third parties held
by or in favor of Sellers and arising out of, resulting from or
relating to the Business or the Acquired Assets, other
<PAGE> 9
3
than as a result of the allegations of James Fairchild of wrongful
termination by Burbank Aircraft Supply, Inc. (collectively, "Third
Party Rights");
(xiii) all rights to insurance and condemnation
proceeds relating to the damage, destruction, taking or other
impairment of the Acquired Assets which damage, destruction, taking or
other impairment occurs on or prior to the Closing Date, except to the
extent Buyer receives a credit against the Initial Purchase Price
pursuant to Section 1.2(d)(i)(y) or 1.2(d)(ii)(y);
(xiv) all Assets (other than Subsidiary Assets)
that (A) are reflected on the Balance Sheet (other than Assets
reflected on the Balance Sheet that are disposed of prior to the
Closing Date in accordance with this Agreement) or (B) have been or
are acquired by the Companies after the date of the Balance Sheet and
would be reflected on a balance sheet for the Business prepared on a
basis consistent with that on which the Balance Sheet was prepared
(other than any such Assets that are disposed of prior to the Closing
Date in accordance with this Agreement); and
(xv) the Business and the goodwill thereof.
(b) Notwithstanding anything to the contrary contained
herein, Purchased Assets shall not include any Excluded Assets. "Excluded
Assets" means:
(i) cash and cash equivalents on hand or in bank
accounts;
(ii) all accounts owing between and among each
Company and its Affiliates, other than trade receivables;
(iii) except as otherwise set forth herein, Assets
attributable or related to any Plan;
(iv) all rights of Parent and each Seller under
this Agreement;
(v) all stock and minute books and similar
records of the Sellers;
(vi) all Third Party Rights arising out of
Non-Assumed Liabilities or Excluded Assets;
(vii) all shares of capital stock of (or other
ownership interests in) Burbank Aircraft International, Inc., Banner
Aero (Australia) Pty, Ltd. and TriFast S.a.r.l;
(viii) all Prepaid Expenses to the extent that such
items will not accrue to the benefit of Buyer immediately following
the Closing;
(ix) all Plans of Sellers (including, without
limitation, the deferred compensation agreement with Charles Lovin
(the "Lovin Agreement"), the two non-competition agreements with Lee
Brenner (the "Brenner Agreements") and those referenced on Schedule
2.20(a)(iii));
<PAGE> 10
4
(x) all Contracts referenced on Schedule
2.8(a)(i) other than (i) the purchase orders described thereon and
(ii) distributorship agreements with Fairchild Fasteners that are
terminable by the Companies on not more than 60 days notice without
any penalty;
(xi) all Contracts pursuant to which any business
included in the Business or any Company was purchased; and
(xii) all rights of any Seller under the Second
Amended and Restated Credit Agreement, dated as of December 12, 1996,
among Parent, Burbank Aircraft Supply, Inc. and other Subsidiaries of
Parent, Citicorp USA, Inc. (as Administrative Agent and Arranger),
NationsBank, N.A. (as Co-Arranger) and the Institutions as Lenders and
Issuing Banks thereunder.
(c) Nonassignable Rights. Anything in this Agreement to
the contrary notwithstanding, but subject to AS's and Buyer's rights under
Section 7.2, this Agreement shall not constitute an agreement to assign any of
the Contracts, Intellectual Property, Technology or Permits or any claim or
right or any benefit arising thereunder or resulting therefrom if an attempted
assignment thereof, without the consent of a third Person thereto, would
constitute a breach or other contravention thereof or in any way adversely
affect the rights of Buyer thereunder. (Any Asset that, but for this Section
1.2(c) would be sold and assigned at the Closing shall remain a "Purchased
Asset" for purposes of this Agreement.) Parent and Sellers will use all
reasonable best efforts to obtain the consent of the other parties to any such
Contract or Permit for the assignment thereof to Buyer and Buyer shall
reasonably cooperate with such efforts. If such consent is not obtained prior
to the Closing, or if an attempted assignment thereof would be ineffective or
would adversely affect the rights of Parent and Sellers thereunder so that
Buyer would not in fact receive all such rights, subject to Section 5.1(d), the
Closing shall nevertheless take place and, thereafter, Parent, Sellers and
Buyer will cooperate in a mutually agreeable arrangement under which Buyer
would obtain the benefits and assume the obligations thereunder (but only to
the extent such obligations would have constituted Assumed Liabilities if such
assignment occurred on the Closing Date) from and after the Closing Date in
accordance with this Agreement, including subcontracting, sublicensing or
subleasing to Buyer, or under which Parent and each Seller would enforce for
the benefit of Buyer, with Buyer assuming each Seller's obligations to the same
extent as if it would have constituted an Assumed Liability and any and all
rights of Parent or any Seller against a third Person thereto. Parent and each
Seller will pay promptly to Buyer when received all monies received by Parent
or any Seller after the Closing Date under any of the Contracts or any claim or
right or any benefit arising thereunder to the extent that Buyer would be
entitled thereto pursuant hereto. The provisions of this Section 1.2 shall in
no way limit the Closing condition set forth in Section 5.1(d).
(d) Damage; Condemnation.
(i) If, prior to the Closing, any Acquired Real
Property is damaged by fire, vandalism, acts of God, or other casualty
or cause (and such damage is not repaired by the Closing), Buyer shall
have the option of (x) accepting such property as it is
<PAGE> 11
5
together with the insurance proceeds, if any, and the right to receive
the same, in which case no adjustment shall be made in respect of the
decreased value of such Asset pursuant to Section 1.4(b), or (y)
excluding such Acquired Real Property from the Acquired Assets and
receiving a credit against the Initial Purchase Price equal to the
fair market value thereof, in which case no adjustment shall be made
in respect of the decreased value of such Asset pursuant to Section
1.4(b) other than such credit against the Initial Purchase Price. If
Buyer elects option (x) above, Parent hereby agrees to cooperate with
Buyer in any loss adjustment negotiations, legal actions and
agreements with the insurance company, and to assign (pursuant to a
writing in form satisfactory to Buyer,) to Buyer at Closing its rights
to such insurance proceeds (and pay over to Buyer any such proceeds
already received), and Parent will not settle any insurance claims or
legal actions relating thereto without Buyer's prior written consent.
(ii) If, prior to the Closing, all or any portion
of any Acquired Real Property is taken by eminent domain, Buyer shall
have the option of (x) proceeding with the Closing and accepting the
property as affected by such taking, together with all compensation
and damages awarded, if any, and the right to receive the same, in
which case, no adjustment shall be made in respect of the decreased
value of such Asset pursuant to Section 1.4(b), or (y) excluding such
Acquired Real Property from the Acquired Assets and receiving credit
against the Initial Purchase Price equal to the fair market value
thereof, in which case no adjustment shall be made in respect of the
decreased value of such Asset pursuant to Section 1.4(b) other than
such credit against the Initial Purchase Price. If Buyer elects
option (x) above, Parent hereby agrees to assign to Buyer at Closing
its rights to such compensation and damages (and pay over to Buyer any
such compensation and damages already received), and will not settle
any proceedings relating to such taking without Buyer's prior written
consent.
(iii) Parent shall promptly notify AlliedSignal of
any material casualty or any actual or threatened condemnation
affecting all or any portion of any Acquired Real Property. Any such
notice relating to casualty shall be accompanied by Parent's selection
of an architect or engineer to determine the cost of repair and/or
replacement.
(iv) Nothing in this Section 1.2(d) limits the
condition to Closing set forth in Section 5.1(a).
1.3 Assumption of Assumed Liabilities.
(a) "Assumed Liabilities" shall mean (i) all Liabilities
of the Business (including bank overdrafts, if any) to the extent included on
the Closing Date Balance Sheet, (ii) Liabilities under the Contracts, Permits,
Intellectual Property or Technology to the extent (but not only to the extent)
arising from, and accruing with respect to, the operation of the Business after
the Closing, and (iii) Liabilities relating to the employees of the Business
expressly assumed pursuant to Article VIII.
(b) Notwithstanding anything to the contrary contained
herein, neither Buyer nor AlliedSignal shall assume or be bound by, or be
obligated or responsible for, any Non-
<PAGE> 12
6
Assumed Liabilities. "Non-Assumed Liabilities" shall mean (x) all Liabilities
of Sellers relating to the Purchased Assets or the Business and any claims in
respect thereof, other than the Assumed Liabilities, and (y) any Liabilities or
claims which may be asserted against or imposed upon Buyer by reason of its
being a successor or transferee of Sellers or as an acquiror of the Purchased
Assets or the Business or otherwise as a matter of law. Without limitation of
the foregoing, all of the following shall be Non-Assumed Liabilities for the
purposes of this Agreement:
(i) any product Liability, or Liability relating
to any toxic tort or similar claim for injury to person or property,
regardless of when made or asserted that arises out of or is based
upon any express or implied representation, warranty, agreement or
guarantee made by any Company or any of its Affiliates, or alleged to
have been made by any of such Persons, or that it is imposed or
asserted to be imposed by operation of law, in connection with any
service performed or product manufactured, distributed or sold by or
on behalf of any Company or any of its Affiliates (in the case of the
Seller Subsidiaries prior to the Closing) or which arises out of any
condition existing as of the Closing, including any claim relating to
any product delivered, manufactured or distributed by any Company or
any of its Affiliates (in the case of the Seller Subsidiaries prior to
the Closing) and any claim seeking recovery for consequential damages,
lost revenue or income;
(ii) except for Assumed Tax Liabilities, any
Liability of Parent or any Company (including under any Contract) for
Taxes, including without limitation, any (1) Tax payable (A) with
respect to the Business, Assets or operations of Parent or Sellers,
(B) by any member of any consolidated, affiliated or unitary group of
which Parent or any Company is a member, or (C) by any other person
for whose Tax Parent or any Company may be liable under Contract or
otherwise, and (2) Tax incident to or arising as a consequence of the
negotiation or consummation by Parent or any Seller or any member of
any affiliate group of which Parent or Sellers is a member of this
Agreement and the transactions contemplated hereby;
(iii) except as expressly provided in clause (iii)
of the definition of Assumed Liabilities, any Liability with respect
to compensation or employee benefits of any nature owed to any
employees, agents or independent contractors of any Company or any of
its Affiliates, whether or not employed by Buyer after the Closing, or
any of their beneficiaries, heirs or assigns, that arises out of or
relates to events or conditions to the extent occurring before the
Closing, including, but not limited to, Liabilities for supplemental
unemployment benefits, vacation pay, sick pay, severance benefits,
Liabilities under any Plan whether arising prior to, on or after the
Closing Date, Liabilities to provide any retiree benefits to former
hourly and/or salaried employees of the Business or any retiree
benefits to be provided to current hourly and/or salaried employees of
the Business, and any other benefits, withholding tax Liabilities,
workers compensation or unemployment compensation premiums,
hospitalization or medical claims, occupational injury, disease or
disability claims or claims for discrimination,
<PAGE> 13
7
unfair labor practices, violations of the collective bargaining
agreements or wrongful discharge;
(iv) Liabilities relating to the operation of the
Business prior to the Closing arising by operation of law under any
common law or statutory doctrine (including successor Liability or de
facto merger);
(v) any Liability with respect to or arising out
of any Contract (A) that is not capable of being assigned to Buyer at
the Closing (except to the extent provided in Section 1.2(c)) (B) to
the extent arising out of any breach or default thereof by Parent or
any Company on or prior to the Closing Date (including any event
occurring on or prior to the Closing Date that, with the passing of
time or the giving of notice, or both, would become a breach or
default) under any Contract, or (C) required by the terms thereof to
be discharged on or prior to the Closing Date;
(vi) any Liability of Parent or any of the
Companies or any of their predecessors (including under any Contract)
with respect to any claim, action, suit or proceeding made or
threatened (whether prior to, at or after the Closing Date) which
asserts Losses arising from (x) the presence, at any time prior to the
Closing Date, of asbestos at the Acquired Real Property, any other
real property owned or leased at any time by Parent, Sellers or any of
their past, present or future Subsidiaries or any other third-party
location or (y) the presence of asbestos in any product at any time
prior to the Closing Date manufactured, used, sold or serviced by
Parent, Sellers or any of their past, present or future Subsidiaries,
or which otherwise asserts any asbestos-related personal injury or
property damage.
(vii) any Liability to the extent the existence of
such Liability constitutes a breach of any representation or warranty
of Parent or any Seller contained in or made pursuant to this
Agreement;
(viii) any Environmental Liability, including,
without limitation, any Environmental Claim that relates to or arises
in connection with the Business, the Acquired Assets, or any other
Assets (including, but not limited to facilities used for the off-site
disposal of waste) formerly owned, leased, operated or used by any of
the Companies or any predecessors-in-interest to any of the Companies,
if the Environmental Claim is based on any act or omission of the
Business or any of the Companies on or prior to the Closing Date;
(ix) any Liability in respect of the Excluded
Assets;
(x) any Debt or other amounts (except to the
extent reflected on the Closing Date Balance Sheet) owing by the
Companies to Parent or any of Parent's Affiliates (other than the
Companies) including, without limitation, any negative balances in
intercompany accounts, but excluding any trade payables incurred in
the ordinary course of business consistent with past practice;
<PAGE> 14
8
(xi) any Liability that arises out of or relates
to the employment or termination of employment of any employees,
agents or independent contractors by Parent, Sellers or any of their
Affiliates, except any such Liability caused by Buyer's failure to
perform its obligations under Article VIII;
(xii) any Liability to past, present or future
stockholders of Parent or Sellers;
(xiii) any Liability arising out of the Lovin
Agreement or the Brenner Agreements;
(xiv) any Liability that arises out of or relates
to any claim, action, suit, proceeding or investigation, whether civil
or criminal, pending or threatened as of the Closing Date, relating to
the conduct or activities of the Business, or the ownership, use or
possession of the Acquired Assets, on or prior to the Closing Date;
(xv) any Liability relating to any broker's or
finder's fee or commission incurred by Parent, any of the Companies or
any of their Affiliates as a result of the transactions contemplated
hereunder;
(xvi) any Liability arising under, resulting from
or relating to the matters referred to on Schedule 2.20(a)(iii),
including, without limitation, the Plans described thereon;
(xvii) any Liability arising under, resulting from,
or relating to matters set forth on Schedule 2.8(a)(i) (other than
with respect to the purchase orders described thereon and
distributorship agreements with Fairchild Fasteners that are
terminable by the Companies on not more than 60 days notice without
any penalty) including, without limitation, the agreement with Shared
Technologies Fairchild, Inc. and the tax sharing agreement described
thereon, except to the extent reflected on the Closing Date Balance
Sheet; and
(xviii) except for the Assumed Liabilities, any
Liability arising out of or relating to the conduct or activities of
the Business (including any predecessor operations) or the ownership,
use or possession of the Acquired Assets on or prior to the Closing
Date, any Liabilities or claims arising out of or relating to events,
circumstances or conditions occurring on or before the Closing Date,
and any Liability associated with any other business of Parent,
Sellers and their Affiliates.
Parent and each Seller hereby irrevocably waives and releases, and has caused
the Parent Subsidiaries to waive and release, AlliedSignal and Buyer from all
Non-Assumed Liabilities, including any Liabilities created or which arise by
statute or common law.
<PAGE> 15
9
1.4 Initial Purchase Price.
(a) No later than the third Business Day prior to the
Closing Date, Parent shall deliver to AlliedSignal a written notice setting
forth Parent's good faith estimate of the Closing Date Net Worth (without
giving effect to the proviso in the second sentence of Section 1.6(a)) (the
"Estimated Closing Date Net Worth") and the basis for the calculation thereof.
(b) The initial purchase price for the Purchased Assets
to be paid at the Closing (the "Initial Purchase Price") shall consist of a
number of shares of AlliedSignal Common Stock (the "Closing Date Shares") equal
to (1) the number (rounded to the nearest whole share) (the "Estimated Share
Number") obtained by dividing (A) an amount equal to Three Hundred Twenty-Two
Million Dollars ($322,000,000) plus (x) the Adjustment Amount if Estimated
Closing Date Net Worth exceeds Target Net Worth and minus (y) the Adjustment
Amount if Estimated Closing Date Net Worth is less than Target Net Worth, by
(B) the Average Trading Price as of the Closing Date, minus (2) the sum of the
Purchase Price Escrow Shares and the Indemnification Escrow Shares, to be
delivered by Buyer to Sellers in the proportions set forth on Annex 1.6(f)
hereto.
1.5 Escrow of Shares.
(a) At the Closing, Buyer shall deliver to the Escrow
Agent (i) the Purchase Price Escrow Shares, to be held in an escrow account
pursuant to the terms of the Escrow Agreement until released from escrow
pursuant to the terms of Section 1.6(f), and (ii) the Indemnification Escrow
Shares, to be held in an escrow account pursuant to the terms of the Escrow
Agreement until released as set forth in Section 1.5(b) or (d).
(b) At any time on or after the Closing Date, Parent
shall have the right, upon not less than 10 Business Days' written notice to
Buyer and the Escrow Agent, to deliver Escrow Cash to the Escrow Agent to be
held pursuant to the terms of the Escrow Agreement in lieu of the
Indemnification Escrow Shares. Upon delivery by Parent of Escrow Cash to the
Escrow Agent, the Escrow Agent shall release to Parent the number of
Indemnification Escrow Shares (rounded to the nearest whole share) obtained by
dividing (i) the face amount of the Escrow Cash by (ii) the Average Trading
Price as of the date the shares are released. Any notice delivered pursuant to
this Section 1.5(b) shall set forth either the face amount of the Escrow Cash
to be delivered by Parent or the number of Indemnification Escrow Shares to be
released by the Escrow Agent.
(c) If, on or prior to the first anniversary of the
Closing Date (the "Escrow Release Date"), a Buyer Indemnified Party has given
notice of a claim for indemnification for Losses in accordance with Section 7.4
(all such claims, the "Buyer Escrow Claims"), Buyer shall give written notice
thereof to Parent on or prior to such date setting forth Buyer's good faith
estimate of the aggregate amount of such Losses in reasonable detail for which
Buyer has not been reimbursed (the "Buyer Escrow Claim Loss Estimate");
provided, however, Buyer's failure to deliver a notice pursuant to this Section
1.5(c) shall not relieve any party from any liability that it may have to such
Buyer Indemnified Party in respect of any matter under Section 7.2(a);
<PAGE> 16
10
(d) The Indemnification Escrow Shares shall be released
from escrow as follows:
(i) On the Escrow Release Date a number of shares
of AlliedSignal Common Stock (rounded to the nearest whole share)
equal to (1) the number of Indemnification Escrow Shares minus (2) a
number (which shall not be less than zero) equal to the quotient of
(A) an amount equal to (x) the Buyer Escrow Claim Loss Estimate for
which AlliedSignal or Buyer has not been reimbursed minus (y) the
amount of the Basket (to the extent not previously applied), divided
by (B) the Average Trading Price as of the Escrow Release Date, shall
be released from escrow and delivered to Parent;
(ii) Upon resolution of a Buyer Escrow Claim
following the Escrow Release Date, to the extent it is determined
pursuant to Article VII that such Losses are payable by Parent or
Sellers to a Buyer Indemnified Party with respect to such claim, a
number of shares of AlliedSignal Common Stock (rounded to the nearest
whole share) equal to the lesser of (1) the quotient of (x) the amount
of Losses for which Parent and Sellers must indemnify Buyer
Indemnified Parties in respect of such claim, divided by (y) the
Average Trading Price as of the date of the release of such shares,
and (2) the number of Indemnification Escrow Shares that remain in
escrow, shall be released to Buyer; and
(iii) Upon resolution of all Buyer Escrow Claims
and release to Buyer of all Indemnification Escrow Shares to which it
is entitled pursuant to clause (ii) above, all remaining
Indemnification Escrow Shares shall be released to Parent.
(e) Notwithstanding anything to the contrary contained
herein, any party entitled to have Indemnification Escrow Shares released and
delivered to it in accordance with Section 1.5(d) may elect, by written notice
to the Escrow Agent not less than two Business Days prior to the release, to
receive the value (or any portion thereof) of the Indemnification Escrow Shares
to which the party is entitled (based on the Average Trading Price as of the
date the collateral is to be released) in Escrow Cash to the extent Escrow Cash
is being held as collateral pursuant to the Escrow Agreement.
1.6 Purchase Price Adjustment.
(a) Within sixty (60) days after the Closing Date, Buyer
shall prepare and deliver to Parent a proposed Closing Date Balance Sheet
conforming to the requirements set forth in this Section 1.6 (the "Proposed
Closing Date Balance Sheet"). The Proposed Closing Date Balance Sheet shall be
a pro forma unaudited consolidated balance sheet of the Combined Business as of
the Closing Date reflecting only Acquired Assets, Assumed Liabilities, Herndon
Purchased Assets and Herndon Assumed Liabilities, prepared in accordance with
GAAP on a basis consistent with the Balance Sheet (including, without
limitation, accounting for Inventory in accordance with the procedures and
criteria set forth on Schedule 1.6(a)) and presenting fairly the financial
condition of the Combined Business as of the Closing Date; provided, however,
that the Proposed Closing Date Balance Sheet shall not include (i) as an asset
any future tax benefits
<PAGE> 17
11
that relate to the allowance for doubtful accounts or (ii) as a Liability any
allowance for doubtful accounts (which is $2,263,000 on Schedule 2.6). During
the period following the Closing Date and prior to the delivery of the Closing
Date Balance Sheet, Parent shall make available to Buyer the appropriate
personnel and the books and records of the Companies to assist in the
preparation of the Closing Date Balance Sheet. The Proposed Closing Date
Balance Sheet shall include appropriate adjustments as if it were prepared for
a fiscal year-end and will set forth and designate the net worth, on a combined
basis, of the Combined Business as of the Closing Date ("Closing Date Net
Worth").
(b) In connection with the preparation of the Proposed
Closing Date Balance Sheet, Sellers, the Herndon Sellers, Parent and Buyer
shall, at Buyer's option upon notice to Parent as provided in Schedule 1.6(b),
cooperate with each other in the taking of a physical count of the Inventory in
accordance with the procedures set forth in Schedule 1.6(b). Parent and
Sellers shall be entitled to have a representative present to observe the
taking of the physical count of the inventory described in this Section 1.6(b).
(c) Following the Closing, Buyer shall provide to Parent
and Sellers, and their respective employees, agents and advisers, upon not less
than two business days prior written request, reasonable access during regular
business hours to the financial books and records, personnel and facilities
relating to the Combined Business necessary for the review and analysis of the
Proposed Closing Date Balance Sheet. If Parent fails to give written notice of
its disagreement with any item on such Proposed Closing Date Balance Sheet
within sixty (60) days after receipt of such Proposed Closing Date Balance
Sheet (the "Review Period"), such Proposed Closing Date Balance Sheet shall be
deemed accepted and shall become the Closing Date Balance Sheet and be final
and binding upon the parties hereto. If, before the expiration of the Review
Period, Parent provides Buyer with a written notice setting forth in reasonable
detail its disagreement with one or more items on the Proposed Closing Date
Balance Sheet (a "Dispute Notice"), Buyer and Parent shall negotiate in good
faith to resolve all matters set forth in the Dispute Notice ("Disputes")
during the sixty (60) day period following receipt of the Dispute Notice by
Parent (the "Resolution Period"). Items on the Proposed Closing Date Balance
Sheet shall be deemed final to the extent they are not referenced in the
Dispute Notice. To the extent Disputes are resolved to the mutual satisfaction
of Buyer and Parent during the Resolution Period, such resolutions shall be
reflected on the Proposed Closing Date Balance Sheet and deemed final, and if
all Disputes are so resolved, the Proposed Closing Date Balance Sheet, as
modified to reflect the resolution of such Disputes shall be deemed final and
become the Closing Date Balance Sheet.
(d) If all Disputes cannot be resolved within the
Resolution Period, then within fifteen (15) days of the end of the Resolution
Period, Parent and Buyer (i) shall set forth in writing their respective
positions on the Disputes still at issue and (ii) shall submit the unresolved
Disputes to a Big Six accounting firm (other than the principal outside
accountants for either Parent or Buyer or any of their Affiliates) mutually
acceptable to Parent and Buyer (the "Firm").
(e) The Firm shall make a determination with respect to
the Disputes so submitted as well as such modifications, if any, to be made to
the Proposed Closing Date
<PAGE> 18
12
Balance Sheet in accordance with such determination within thirty (30) days
after the engagement of the Firm and the Proposed Closing Date Balance Sheet as
so modified shall be deemed final and shall become the Closing Date Balance
Sheet; provided, however, that in no event shall the Firm determine, with
respect to any Dispute submitted to it, an amount that is outside of the range
of the amounts submitted by Parent and Buyer nor shall it address or consider
any issue other than the issues involved in the Disputes. Such determinations
by the Firm shall be conclusive and binding upon, and shall not be appealable
by the parties hereto. The fees and expenses of the Firm shall be shared
equally by Parent and Buyer.
(f) Promptly, and in any event within five Business Days,
after the Closing Date Balance Sheet becomes final and binding on the parties
hereto:
(i) If Closing Date Net Worth is equal to the
Estimated Closing Date Net Worth, Buyer shall take all steps
reasonably practical (including, without limitation, giving notice to
the Escrow Agent), to cause the release and delivery to Sellers, in
the proportions set forth on Annex A to the Escrow Agreement, of all
the Purchase Price Escrow Shares.
(ii) If Closing Date Net Worth is more than
Estimated Closing Date Net Worth, (A) Buyer shall take all steps
reasonably practical (including, without limitation, giving notice to
the Escrow Agent), to cause the release and delivery to Sellers, in
the proportions set forth on Annex A to the Escrow Agreement, of all
the Purchase Price Escrow Shares and (B) AlliedSignal shall issue and
Buyer shall deliver to Sellers, in the proportions set forth on Annex
A to the Escrow Agreement, an additional number of shares of
AlliedSignal Common Stock having a value (based on the Average Trading
Price as of the Closing Date) (rounded to the nearest whole share)
equal to the excess of Closing Date Net Worth over Estimated Closing
Date Net Worth.
(iii) If Estimated Closing Date Net Worth is more
than Closing Date Net Worth, (A) a number of Purchase Price Escrow
Shares having a value (based on the Average Trading Price) (rounded to
the nearest whole share) equal to the excess of Estimated Closing Date
Net Worth over Closing Date Net Worth (the "Shortfall Amount") shall
be released from escrow and returned to AlliedSignal, and Buyer shall
take all steps reasonably practical (including, without limitation,
giving notice to the Escrow Agent), to cause the release and delivery
to the Sellers, in the proportions set forth on Annex A to the Escrow
Agreement, of the balance, if any, of the Purchase Price Escrow Shares
and (B) if the value (based on the Average Trading Price as of the
Closing Date) of all of the Purchase Price Escrow Shares is less than
the Shortfall Amount, (x) all of the Purchase Price Escrow Shares
shall be released from escrow and returned to AlliedSignal and (y)
Parent shall indemnify AlliedSignal for, and shall promptly pay to
AlliedSignal in cash, an amount equal to the excess of the Shortfall
Amount over the value (based on the Average Trading Price as of the
Closing Date) of the Purchase Price Escrow Shares. Such payment shall
be made by wire transfer of immediately available funds to a bank
account designated by AlliedSignal to Parent within five Business Days
<PAGE> 19
13
after the Closing Date Balance Sheet has become final and binding
upon the parties hereto.
1.7 Accounts Receivable.
(a) After the Closing, Buyer shall have full right and
authority to collect for its own account all Accounts Receivable reflected on
in the Closing Date Balance Sheet without any allowance for doubtful accounts
("Closing Accounts Receivable"). Each Seller and each Herndon Seller shall
immediately pay to Buyer any amount received by such Seller after the Closing
attributable to payment of any Closing Accounts Receivable, except with respect
to Assigned Receivables after assignment thereof to Parent as provided below.
In the event that as of the date that is 180 days after the Closing Date (the
"Adjustment Date") Buyer shall not have been paid in full in respect of Closing
Accounts Receivable an amount equal to the Closing Accounts Receivable, Buyer
shall give Parent written notice (the "Receivables Notice") specifying the sum
of (i) the aggregate amount of Closing Accounts Receivable collected by Buyer
during the period from the Closing Date through the Adjustment Date and (ii)
the aggregate amount of Inventory (valued at original cost) that (x) is the
subject of a Closing Accounts Receivable, (y) has been returned to Buyer during
the period from the Closing Date through the Adjustment Date and (z) is not
Defective Inventory (the "Collected Amount"). If the face amount of the
Closing Accounts Receivable exceeds the Collected Amount, (i) such excess (the
"Receivables Deficiency"), plus interest accrued on the amount thereof from and
including the Closing Date to but excluding the date of payment at a rate per
annum equal to the Prime Rate in effect from time to time, shall be paid by
Parent to Buyer within five Business Days after the date that the Receivables
Notice is given in immediately available funds and (ii) upon receipt of such
payment, Buyer shall assign to Parent any Closing Accounts Receivable that were
not collected during the period from the Closing Date through the Adjustment
Date (the "Assigned Receivables"). Upon an assignment to Parent of Assigned
Receivables pursuant to this Section, Buyer shall have no further
responsibility with respect to any such Assigned Receivables and shall not be
entitled to receive any portion of any amounts collected by Parent with respect
thereto, and Parent shall be entitled to undertake any and all collection
efforts with respect to any such Assigned Receivables. Buyer shall promptly
pay to Seller any amount received by Buyer after the Adjustment Date
attributable to payment of any Assigned Receivables. In calculating the
amount, if any, which Parent must pay to Buyer pursuant to this Section 1.7,
payments received by Buyer on account of receivables from a particular customer
shall be credited first to the oldest account receivable of that customer until
all accounts receivable with respect to that customer are paid in full;
provided, however, that no such payment shall be so credited to any pre-Closing
account receivable with respect to a Disputed Account Receivable of such
customer (as defined below) unless such customer shall have specifically
advised Buyer to credit such payment to such Closing Account Receivable. For
purposes of this Agreement, "Disputed Account Receivable" means any Closing
Account Receivable owed:
(i) by a customer who is bankrupt;
(ii) by a customer who has asserted in writing a
bona fide claim that the products or services sold and which are the
subject matter of the Closing Account
<PAGE> 20
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Receivable were defective or that the cost of the products or services
received from Seller were less than the amount invoiced;
(iii) by a customer who, in the reasonable opinion
of Buyer, has a bona fide claim that an error has been made on the
invoice to such customer; or
(iv) by a customer who has asserted that the
invoice and shipping documentation did not comply with the customer's
requirement
In connection with such acquisition of Closing Accounts
Receivable by Parent, Buyer agrees to execute assignments, in form and
substance reasonably satisfactory to Buyer, as are reasonably requested by
Parent in order to effectively transfer to Parent such Closing Accounts
Receivable.
(b) From and after the Closing, Buyer shall use
reasonable efforts to collect all of the Closing Accounts Receivable at their
full face value and shall be prompt, and shall exercise reasonable diligence,
in such efforts, but in no event shall Buyer be required to resort to
litigation to try to collect any such Closing Accounts Receivable. Parent and
each Seller shall provide reasonable assistance to Buyer with respect to the
collection of the Closing Accounts Receivable. Buyer shall provide to Parent
and each Seller reasonable access during regular business hours to all books
and records relating to the Closing Accounts Receivable and any payments made
with respect thereto. Prior to the Adjustment Date, neither Parent nor any
Seller shall contact directly or indirectly any customer from which a Closing
Accounts Receivable is due with respect to any matters contemplated by this
Agreement, including any outstanding Closing Account Receivable, without
Buyer's prior consent in each case.
(c) Commencing 60 days after the Closing Date, and
continuing not less frequently than monthly during the 120 days thereafter,
Buyer shall deliver written reports to Parent setting forth in reasonable
detail the status of the collection of the Closing Accounts Receivable, on a
customer by customer basis, the collection efforts made by Buyer relating
thereto and the status of the payment of any other receivables from such
customers to Buyer. Buyer shall in all respects, including its collection
efforts, treat the Closing Accounts Receivable in the same manner as it treats
its other accounts receivable.
1.8 Closing.
(a) Closing Date. The closing of the transactions
contemplated under this Agreement (the "Closing") shall take place at 10:00
a.m. Eastern Time at the offices of Hughes Hubbard & Reed LLP, One Battery Park
Plaza, New York, New York, on the fifth Business Day after all conditions to
the obligations of the parties under Article V and under Article V of the
Herndon Agreement shall have been satisfied or waived (other than those
requiring a delivery of a certificate or other document, or the taking of other
action, at the Closing and the conditions set forth in Sections 5.1(j) and
5.2(g) and in Sections 5.1(g) and 5.2(g) of the Herndon Agreement), or at such
other place and on such other date as the parties may mutually agree in writing
(such date on which the Closing occurs hereinafter is referred to as the
"Closing Date"). Each of the parties acknowledges that, with respect to the
Closing Date, time is of the essence.
<PAGE> 21
15
(b) Effectiveness. The consummation of the transactions
contemplated by this Agreement and the Closing shall be deemed to take place at
11:59 p.m., Eastern Time, on the Closing Date and no transaction shall be
deemed to have been completed and no document or certificate shall be deemed to
have been delivered until all transactions are completed and all documents are
delivered.
1.9 Deliveries and Proceedings at the Closing. Subject
to the terms and conditions of this Agreement, at the Closing:
(a) Deliveries to AlliedSignal and Buyer. Parent and
Sellers shall deliver to AlliedSignal and Buyer:
(i) bills of sale and instruments of assignment,
in forms reasonably satisfactory to Buyer, to evidence the transfer to
Buyer of the Purchased Assets (other than the Owned Real Property) in
accordance herewith, duly executed by Sellers;
(ii) certificates (or other appropriate evidence
of transfer) representing all of the Subsidiary Shares accompanied,
except with respect to the certificates representing shares of Banner
Aircraft International, GmbH and Harco Northern Ireland, Ltd., by
stock powers duly executed in blank with all necessary stock transfer
and other documentary stamps attached;
(iii) any consents to transfer of all transferable
or assignable Contracts and Permits obtained by Parent and the
Companies as of Closing and all consents referred to in Section
5.1(d);
(iv) title certificates to any motor vehicles
included in the Purchased Assets, duly executed by each Seller with
any interest therein (together with any other transfer forms necessary
to transfer title to such vehicles);
(v) one or more deeds of conveyance to Buyer of
the Owned Real Property, in forms customarily delivered for similar
Real Property conveyances and reasonably satisfactory to Buyer,
sufficient to transfer to Buyer good and marketable, and insurable,
fee simple title to the Owned Real Property included in the Purchased
Assets in accordance herewith, duly executed and acknowledged by each
Seller with any interest therein and in recordable form;
(vi) one or more title insurance policies, in
form, substance and amount, and issued by title insurance companies
reasonably acceptable to Buyer, and containing such endorsements and
affirmative coverage as Buyer shall reasonably request (including,
with respect to Owned Real Property that is a Purchased Asset,
nonimputation endorsements), insuring Buyer's fee simple title to the
Owned Real Property subject only to the Permitted Liens, the cost of
which shall be paid 50% by Parent and Sellers and 50% by AlliedSignal
and Buyer;
<PAGE> 22
16
(vii) U.C.C. termination statements in recordable
form and other appropriate releases, in form and substance reasonably
satisfactory to Buyer, with respect to all recorded Liens in the
Purchased Assets;
(viii) the Foreign Investment in Real Property Tax
Act Certification and Affidavit for each parcel of Owned Real
Property, in form reasonably satisfactory to Buyer, duly executed by
each Seller transferring Owned Real Property (the "FIRPTA Affidavit");
(ix) the certificates and other documents required
to be delivered by Parent and Sellers pursuant to Section 5.1 hereof
and certified resolutions evidencing the authority of Parent and
Sellers as set forth in Section 2.3 hereof;
(x) the Release contemplated by Section 4.9;
(xi) an opinion of Potter Andersen & Corroon,
Delaware counsel, substantially in the form of Exhibit 1.9(a)(xi), to
the effect that no approval of the holders of Parent Common Stock is
required in connection with the execution, delivery and performance of
this Agreement by Parent and Sellers;
(xii) the Escrow Agreement, duly executed by
Parent;
(xiii) the letters of Jeffrey Steiner and Fairchild,
dated as of the Closing Date, substantially in the form of Exhibit
1.9(a)(xiii)(A-C) (the "Side Letters"); and
(xiv) all such other documents and instruments as
shall, in the reasonable opinion of Buyer or its title insurance
company (including affidavits and indemnities in connection with
nonimputation endorsements), be necessary in connection with the
transfer to Buyer of the Purchased Assets in accordance herewith and,
where necessary or desirable, in recordable form.
(b) Deliveries to Parent and Sellers. AlliedSignal and
Buyer will deliver to Parent and Sellers, as applicable:
(i) the Closing Date Shares, issued by
AlliedSignal and delivered by Buyer to Sellers in the proportions set
forth in Annex 1.6(f) hereto;
(ii) an assumption agreement, in form reasonably
satisfactory to Parent, to evidence the assumption by Buyer of the
Assumed Liabilities in accordance with Section 1.3, duly executed by
Buyer;
(iii) the certificates and other documents required
to be delivered by AlliedSignal and Buyer pursuant to Section 5.2
hereof and certified resolutions evidencing the authority of
AlliedSignal and Buyer as set forth in Section 3.2 hereof;
(iv) the Escrow Agreement duly executed by Buyer;
<PAGE> 23
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(v) all such other documents and instruments of
assumption as shall, in the reasonable opinion of Parent, be necessary
for Buyer to assume the Assumed Liabilities in accordance herewith;
and
(vi) the Registration Rights Agreement, in the
form attached as Exhibit 1.9(b)(vi), duly executed by AlliedSignal.
(c) Escrow Agreement. Parent and Buyer shall use their
reasonable best efforts to cause the Escrow Agent to execute and deliver an
escrow agreement substantially in the form of Exhibit 1.9(c) at the Closing
(the "Escrow Agreement").
1.10 Stock Legend.
(a) Each certificate representing the shares of
AlliedSignal Common Stock issued to Sellers at the Closing shall be endorsed
with a legend in substantially the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE
TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED
UNDER SUCH ACT OR THE CORPORATION RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDERS OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE CORPORATION STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENT OF SUCH
ACT.
1.11 Prorations. The parties hereto agree that the
following expenses shall be calculated and pro rated as of the Closing Date,
with Parent and Sellers jointly responsible for such expenses for the period up
to the Closing Date (it being understood that any such expense not paid prior
to the Closing shall be reflected as a liability on the Closing Date Balance
Sheet), and Buyer to be responsible for the period on and after the Closing
Date:
(a) personal property, real property and payroll
taxes (on the basis on which the same were assessed and paid), in each
case to the extent relating to the Combined Business and except as
otherwise provided in Section 4.6(i);
(b) electric, fuel, gas, telephone, sewer and
utility charges, in each case to the extent relating to the Combined
Business;
<PAGE> 24
18
(c) rentals and other charges under Combined
Contracts to be assumed by Buyer pursuant hereto; and
(d) charges under maintenance and service
contracts and other Combined Contracts, and fees under Permits to be
transferred to Buyer as part of the Purchased Assets or the Herndon
Purchased Assets.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLERS
Parent and each Seller hereby jointly and severally represent
and warrant to AlliedSignal and Buyer as follows:
2.1 Qualification. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each Company is a legal entity of the type described on Annex A or
Annex B, as the case may be, duly organized, validly existing and in good
standing under the laws of the jurisdiction set forth next to such Company's
name on such Annex, and has all requisite corporate power and authority to own
and lease its Assets and to conduct its Business as presently being conducted.
Each Company is qualified to do business and is in good standing as a foreign
corporation in all jurisdictions wherein the nature of its Business or such
Company's ownership or use of its Assets make such qualification necessary,
except such failures to be qualified or to be in good standing, if any, which
when taken together with all such other failures of such Company would not have
a Material Adverse Effect on such Company. None of the Companies is currently
insolvent, has suspended payments, is subject to any judicial receivership or
liquidation proceedings or is in bankruptcy, nor has any such similar
proceedings been commenced with respect to any of them.
2.2 Ownership of the Companies.
(a) Except as set forth on Schedule 2.2, all of the
outstanding shares of capital stock of (or other ownership interests in) each
of the Sellers are owned of record and beneficially solely by Parent free and
clear of any Liens. The ownership of the Subsidiary Shares is described on
Schedule 2.2. All of the Subsidiary Shares are (i) duly authorized, validly
issued, fully paid and nonassessable and free of preemptive rights and were
issued in compliance with all applicable Laws and (ii) except for nominal or
qualifying shares identified on Schedule 2.2, owned of record and beneficially
solely by one or more Sellers and/or other Seller Subsidiaries, free and clear
of any Liens. There are no options, warrants, calls, rights or agreements to
which Parent or any of the Companies is a party obligating any of them to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of (or other ownership interests in) any of the
Companies or obligating Parent or any of the Companies to grant, extend or
enter into any such option, warrant, call, right or agreement. There are no
agreements, voting trusts or proxies with respect to the voting of the
Subsidiary Shares. The transfer of the nominal or qualifying shares of the
Seller Subsidiaries not owned by any of the Companies to Persons designated by
Buyer (i) shall be accomplished at or prior to the Closing and (ii) shall not
require
<PAGE> 25
19
any payment by AlliedSignal or Buyer to any Person or result in the creation of
any Liability of AlliedSignal or Buyer to any Person.
(b) Except for the Subsidiary Shares and except as set
forth on Schedule 2.2, none of the Companies owns any shares of capital stock
of (or other ownership interests in) any other Person, including any joint
venture.
2.3 Authorization and Enforceability. With respect to
each of Parent and the Sellers: (a) such entity has full corporate power and
authority to execute, deliver and perform this Agreement and all other
agreements, instruments and documents to be executed in connection herewith
(such other agreements and instruments being hereinafter referred to
collectively as the "Transaction Documents") to which such entity is a party,
(b) the execution, delivery and performance by such entity of this Agreement
and the Transaction Documents to which such entity is a party have been duly
authorized by all necessary corporate action on the part of such entity and no
approval by the holders of any security issued by Parent is required in
connection therewith, (c) this Agreement has been duly executed and delivered
by such entity, and, as of the Closing Date, the other Transaction Documents to
which any such entity is a party will be duly executed and delivered by such
entity, (d) this Agreement is a legal, valid and binding obligation of such
entity, enforceable against such entity in accordance with its terms, and (e)
as of the Closing Date, each of the other Transaction Documents to which such
entity is a party will constitute the legal, valid and binding obligations of
such entity, enforceable against such entity in accordance with its terms.
2.4 No Violation of Laws or Agreements. The execution,
delivery, and performance by Parent and each Seller of this Agreement and the
Transaction Documents to which such entities (as applicable) are parties do
not, and the consummation by Parent and each Seller (as applicable) of the
transactions contemplated hereby and thereby, will not, (a) contravene any
provision of the charter, bylaws or any other organizational documents of
Parent or any Company, or (b) except as set forth on Schedule 2.4 and subject,
in the case of clause (i) below, to such exceptions as would not in the
aggregate have a Material Adverse Effect, violate, conflict with, result in a
breach of, or constitute a default (or an event which would, with the passage
of time or the giving of notice or both, constitute a default) under, or result
in or permit the termination, modification, acceleration, or cancellation of,
or result in the creation or imposition of any Lien of any nature whatsoever
upon any of the Acquired Assets or give to others any interests or rights
therein under, (i) any personal property lease with payments in excess of
$50,000 per year, lease of Real Property, indenture, mortgage, loan or credit
agreement, license, instrument, contract, plan, permit or other agreement or
commitment, oral or written, to which Parent or any Company is a party, other
than such agreements or commitments involving any customer or supplier of the
Business (including any supplier of Intellectual Property), or by which the
Business or any of the Acquired Assets may be bound or affected (including
without limitation any agreement or instrument pertaining to Debt), or (ii) any
judgment, injunction, writ, award, decree, restriction, ruling, or order of any
arbitrator or Governmental Entity or any applicable Law to which Parent, any
Company or the Acquired Assets is subject.
<PAGE> 26
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2.5 Consents. Except (i) as set forth on Schedule 2.5 or
(ii) for agreements or commitments involving any customer or supplier of the
Business (including any supplier of Intellectual Property), no consent,
approval or authorization of, or registration or filing with, any Person
(governmental or private) is required in connection with the execution,
delivery and performance by Parent or any Seller of this Agreement, the other
Transaction Documents to which Parent or any Seller is a party, or the
consummation by Parent and each Seller (as applicable) of the transactions
contemplated hereby or thereby, including without limitation in connection with
the assignment of the Contracts and Permits contemplated hereby, except as
required by the HSR Act and except for any required, consent, approval or
authorization of, or registration or filing with, any foreign governmental
authority.
2.6 Financial Statements.
(a) Schedule 2.6(a) sets forth (i) an unaudited combined
pro forma balance sheet of the Combined Business as of September 30, 1997 (the
"Balance Sheet") and related unaudited combined pro forma statement of income
of the Combined Business for the six months ended September 30, 1997 (together
with the Balance Sheet, the "Financial Statements"). The Excluded Assets, the
Herndon Excluded Assets, the Non-Assumed Liabilities, and the Herndon
Non-Assumed Liabilities are excluded from the Balance Sheet. The Financial
Statements are in accordance with the books and records of the Companies and
the Herndon Sellers and except for the Excluded Assets, the Herndon Excluded
Assets, the Non-Assumed Liabilities, the Herndon Non-Assumed Liabilities, and
as set forth in Schedule 2.6(a), fairly present the financial position and
results of operations of the Combined Business on a stand-alone basis as of the
date and for the period indicated, in conformity with GAAP throughout the
period specified and in accordance with the procedures and criteria set forth
on Schedule 1.6(a), except as expressly set forth therein and except that the
Financial Statements may omit notes and are subject to normal year-end
adjustments which are not, in the aggregate, material. Except as described on
Schedule 2.6(a), all fees, charges, costs and expenses associated with the
ownership, leasing, operation, maintenance and management of the Combined
Business and the Assets owned, used or held for use by the Combined Business
have been fully and properly reflected and charged on the Financial Statements
in accordance with GAAP (to the extent such items are required to be so
reflected and charged in accordance with GAAP). All Acquired Assets, Assumed
Liabilities, Herndon Purchased Assets and Herndon Assumed Liabilities are
disclosed on or reflected in the Balance Sheet except (i) as disclosed on
Schedule 2.6(a), and (ii) as disposed of or transferred between September 30,
1997 and the Closing Date in the ordinary course of business consistent with
past practice and in accordance with this Agreement.
(b) The future tax benefits set forth in the Balance
Sheet as of the date hereof ("Preliminary Future Tax Benefits") represent
future tax benefits as of March 31, 1997. No later than 30 days after the date
hereof, Parent shall deliver written notice to AlliedSignal of the amount of
future tax benefits as of September 30, 1997 ("Final Future Tax Benefits"), and
the Balance Sheet shall be adjusted accordingly.
<PAGE> 27
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2.7 No Changes. Since September 30, 1997, the Companies
have conducted the Business only in the ordinary course of business consistent
with past practice and, except as set forth on Schedule 2.7, there has not
been:
(a) any Material Adverse Effect;
(b) any change in the salaries or other
compensation payable or to become payable to, or any advance
(excluding advances for ordinary business expenses) or loan to, any
employee of the Business, or material change or material addition to,
or material modification of, other benefits (including any bonus,
profit-sharing, pension or other plan in which any of the employees of
the Business participate) to which any of the employees of the
Business may be entitled, other than in the ordinary course of the
Business consistent with past practice;
(c) any material change or modification in any
manner of the Companies' existing Inventory management and collection
and payment policies, procedures and practices with respect to
Inventory and accounts receivable and accounts payable, respectively,
of the Business, acceleration of payment of payables or failure to pay
or delay in payment of payables and any change in the Companies'
existing policies, procedures and practices, with respect to the
provision of discounts, rebates or allowances insofar as they relate
to the Business;
(d) any cancellation or waiver by any Company of
any right material to the Business or any cancellation or waiver of
any material Debts of or claims of the Business against Parent or any
other Affiliate of any Company or any disposition of or failure to
keep in effect any rights in, to or for the use of any Permit material
to the Business;
(e) any damage, destruction or loss, or eminent
domain or other condemnation proceeding affecting the distribution
center located in Salt Lake City, Utah, or the Business which
individually or in the aggregate has had a Material Adverse Effect,
whether or not covered by insurance;
(f) any change by any Company in its method of
accounting or keeping its books of account or accounting practices
with respect to the Business except as required by GAAP;
(g) any acquisition, sale, transfer or other
disposition of any material Assets of the Business other than the
disposition of (i) Inventory in the ordinary course of the Business
consistent with past practice or (ii) Assets not used or useful in the
Business;
(h) any commencement or termination of any line
of business;
(i) any action that would be prohibited to be
taken after the date of this Agreement under Section 4.1(c); or
<PAGE> 28
22
(j) any agreement in writing or otherwise to
take any of the foregoing actions.
2.8 Contracts.
(a) As of the date of this Agreement, Schedule 2.8(a)
contains a true, correct and complete list of (i) all Contracts (other than any
guarantee of any Seller that does not directly or indirectly support or benefit
the Business) to which Parent or any of its Affiliates (other than the
Companies) is a party or which benefit Parent or any of its Affiliates (other
than the Companies); (ii) all Contracts under which any Company is a licensee
or licensor of Intellectual Property or Technology which are material to the
Business; (iii) all Contracts under which any Company is a lessee or lessor of
(or has an obligation to lease) Real Property; (iv) all Contracts providing for
the formation or operation of a partnership or other joint venture; (v) all
material Contracts which afford customers any right to return Inventories at
the option of the customer; (vi) all Government Contracts with a backlog in
excess of $100,000; (vii) all Contracts requiring forward stocking locations;
and (viii) except for agreements or commitments involving any customer or
supplier of the Business (including any supplier of Intellectual Property), all
other Contracts (other than with respect to which the Business' total annual
Liability or expense is less than $1,000,000 per such non-listed Contract).
Parent and Sellers have made available to AlliedSignal a correct and complete
copy of each written agreement.
(b) Except as set forth on Part A of Schedule 2.8(b),
with respect to each Contract described in Schedule 2.8(a), neither any Company
nor, to the best of Parent's and each Seller's knowledge, any other party
thereto, is in material breach or default and no event has occurred which with
notice or lapse of time would constitute a material breach or default, or
permit termination, modification, or acceleration, under such Contract. Except
as set forth on Part B of Schedule 2.8(b), there are no disputes pending or, to
the best of Parent's and each Seller's knowledge, threatened, under or in
respect of any of the Contracts described in Schedule 2.8(a) and no
counterparty to any such Contract has given notice to any Company or Affiliate
thereof with respect to any material breach or default hereunder. Each of the
Contracts described in Schedule 2.8(a) is in full force and effect and
constitutes the legal and binding obligation of, and is legally enforceable
against, such Company as the Contracts relate, and, to the best of Parent's and
each Seller's knowledge, any other party thereto, in accordance with its terms.
(c) Except as identified with an asterisk on Schedule
2.8(a), each of the Contracts listed thereon is fully assignable to Buyer (or,
in the case of Contracts of the Seller Subsidiaries, will remain in full force
and effect upon the sale of the Subsidiary Shares to Buyer) without the
consent, approval or waiver of any other Person. None of such Contracts
contains any provision which, after the Closing, will restrict Buyer or any of
the Seller Subsidiaries from conducting any portion of the Business in any
jurisdiction, except such Contracts which may be terminated by Buyer or the
applicable Seller Subsidiary without penalty or Liability on no more than 30
days' notice. With respect to those Contracts that were assigned, novated or
subleased to any Company by a third party, all necessary consents to such
assignments, novations or subleases have been obtained.
<PAGE> 29
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(d) Subject to such exceptions as would not in the
aggregate have a Material Adverse Effect, with respect to each and every
Government Contract that has a backlog in excess of $100,000 or binding or
non-binding bid for such a Government Contract ("Bid") to which any Company is
a party: (i) such Company has fully complied with all material terms and
conditions of such Government Contract or Bid, including all clauses,
provisions and requirements incorporated expressly, by reference or by
operation of law therein; (ii) such Company has fully complied with all
requirements of Law applicable to such Government Contract or Bid and no
Government Contract is subject to any adjustment in price as a result of a
claim by the U.S. Government or U.S. Government prime contractor or
subcontractor on the basis of (w) defective pricing pursuant to FAR 52.215-22,
FAR 52.215-23, FAR 52.215-24, FAR 52.215-25, (x) CAS violations pursuant to FAR
52.230-2, (y) any submission for progress payments of invoices or (z) any
claims arising out of or related to the Government Contracts occurring on or
before the Closing Date; (iii) all representations and certifications executed,
acknowledged or set forth in or pertaining to such Government Contract or bid
for a Government Contract were current, accurate and complete as of their
effective date, and such Company has fully complied with all such
representations and certifications; (iv) neither the U.S. Government nor any
prime contractor, subcontractor or other Person has notified such Company,
either orally or in writing, that such Company has breached or violated any
Law, certification, representation, clause, provision or requirement, (v) no
termination for convenience, termination for default, cure notice or show cause
notice has been issued; (vi) no cost incurred by such Company has been
questioned or disallowed; and (vii) no money due to such Company has been (or
has attempted to be) withheld or set off.
2.9 Permits and Compliance With Laws Generally.
(a) Subject to such exceptions as would not in the
aggregate have a Material Adverse Effect, (i) except as set forth on Part A of
Schedule 2.9(a), the Companies possess and are in compliance with all Permits
required to operate the Business as presently operated and to own, lease or
otherwise hold the Acquired Assets under all applicable Laws and (ii) except as
set forth on Part B of Schedule 2.9(a), to the best of Parent's and each
Seller's knowledge, the Business is conducted by the Companies in compliance
with, and the use, construction and operation of all Real Property constituting
any part of the Acquired Assets conforms to, all applicable Laws (including the
Occupational Safety and Health Act and the rules and regulations thereunder
("OSHA") and other similar Laws, and zoning, building and other similar Laws)
and all restrictions and conditions affecting title. All material Permits of
the Companies are in full force and effect. There are no proceedings pending
or, to the best of Parent's and each Seller's knowledge, threatened that seek
the revocation, cancellation, suspension or any adverse modification of any
material Permits presently possessed by the Companies. Parent and Sellers are
aware of no facts, conditions or circumstances reasonably likely to result in
the revocation, cancellation, suspension, or adverse modification of any
material Permit. Except as set forth on Part C of Schedule 2.9(a), all
material Permits of the Companies are assignable to and at the Closing will be
assigned to Buyer (or, in the case of Permits of the Seller Subsidiaries, will
continue to be possessed by the Seller Subsidiaries upon the sale of the
Subsidiary Shares to Buyer) and no approvals or consents are required for such
assignment (or continued possession)
<PAGE> 30
24
and the sale of the Business or Acquired Assets hereunder will not result in a
default under or termination of any such material Permit.
(b) Except as set forth on Schedule 2.9(b), no
outstanding notice, citation, summons or order has been issued, no outstanding
complaint has been filed, no outstanding penalty has been assessed and no
investigation or review is pending or, to the best of Parent's and each
Seller's knowledge, threatened, by any Governmental Entity or other Person with
respect to any alleged (i) violation by any Company relating to the Business or
the Acquired Assets of any Law or (ii) failure by any Company to have any
Permit required in connection with the conduct of the Business or otherwise
applicable to the Business (including the Acquired Assets) except in such cases
as would not in the aggregate have a Material Adverse Effect.
2.10 Environmental Matters. As of the Closing Date,
except as set forth on Schedule 2.10,
(a) There are no reports in Parent's, the Companies' or
any of their respective Affiliates' possession or control of environmental site
assessments or audits of the Business, the Acquired Assets or any other Assets
(including but not limited to facilities used for the off-site disposal of
waste) formerly owned, leased, operated or used by the Companies, or any
predecessor-in-interest to the Companies.
(b) The Companies possess and are in compliance with all
Environmental Permits required to operate the Business as presently operated
and to own, lease or otherwise hold the Acquired Assets under all Environmental
Laws. The operations of the Business and Acquired Assets (including the use,
construction and operation of all Real Property constituting any part of the
Acquired Assets) are in compliance with all Environmental Laws and are
conducted in a manner that does not pose a risk to the safety or health of
workers or other individuals or to the environment. All Environmental Permits
of the Companies relating to the operation of the Business are in full force
and effect. There are no proceedings pending or, to the best of Parent's and
each Seller's knowledge, threatened that seek the revocation, cancellation,
suspension or any adverse modification of any such Environmental Permits
presently possessed by the Companies. Parent and Sellers are aware of no
facts, conditions or circumstances reasonably likely to result in the
revocation, cancellation, suspension or adverse modification of any
Environmental Permits.
(c) There are no environmental conditions with respect to
the Business, Acquired Assets or any other Assets (including but not limited to
facilities used for the off-site disposal of waste) formerly owned, leased,
operated or used by any of the Companies, or any predecessor-in-interest to
any of the Companies that (i) pose a risk to human health or the environment,
or (ii) are otherwise required to be remediated under applicable Environmental
Laws due to evidence of soil or groundwater contamination on, under or
migrating onto or from the Business, Acquired Assets or any such other Assets.
(d) There are no Environmental Claims currently pending
nor has Parent, any of the Companies or any of their respective Affiliates
received any notice of an Environmental Claim with respect to the Business, the
Acquired Assets, or any other Assets (including, but not
<PAGE> 31
25
limited to, facilities used for the off-site disposal of waste) formerly owned,
leased, operated or used by the Companies or any predecessors-in-interest to
the Companies that a Hazardous Material has been (i) disposed, released, or
discharged or (ii) produced, stored, handled, used or emitted onto, under, or
from the Business, Acquired Assets or any such other Assets.
(e) Neither the Business nor the Acquired Assets are
subject to the requirements of any Laws that condition, restrict, prohibit or
require notification or disclosure upon the transfer, sale, lease or closure of
certain property for environmental reasons.
(f) No outstanding notice, citation, summons or order has
been issued, no outstanding complaint has been filed, no outstanding penalty
has been assessed and no investigation or review is pending or, to the best of
Parent's and each Seller's knowledge, threatened, by any Governmental Entity or
other Person with respect to any alleged (i) violation by any Company or any of
its Affiliates relating to the Business or the Acquired Assets of any
Environmental Law or (ii) failure by any Company or any of its Affiliates to
have any Environmental Permit required in connection with the conduct of the
Business or otherwise applicable to the Business (including the Acquired
Assets).
2.11 Transactions with Affiliates
(a) Set forth on Schedule 2.11(a) is a true, correct and
complete list and description of (a) all services and other support provided to
the Business by Parent and its Affiliates (other than the Companies) since
April 1, 1996, (b) all other overhead charges allocated to the Companies since
April 1, 1996, and (c) all other transactions between one or more Companies, on
the one hand, and Parent or any of its Affiliates (other than the Companies),
on the other hand, since April 1, 1996 (other than payment of compensation or
other benefits to employees).
(b) To the best of Parent's and each Seller's knowledge,
except as set forth on Schedule 2.11(b), (i) as of the Closing, no employee,
officer or director (or any member of his or her immediate family) of Parent or
of any Company or any of their Affiliates will be indebted to any Company, nor
is any Company indebted (or committed to make loans or extend or guarantee
credit) to any of such individuals, (ii) no such individual, except Eric
Steiner and Jeffrey Steiner and any such individual whose position is with
Fairchild or any of its Affiliates (other than Parent or any of the Companies)
has any direct or indirect ownership interest in any Person with which any
Company has a business relationship, or any Person that competes with any
Company and (iii) no member of the immediate family of any officer or director
of any Company is an interested party with respect to any Contract.
2.12 Title. The Sellers have, and at the Closing will
transfer to the Buyer, good and marketable title to all personal property owned
by them respectively, good and marketable title to all Owned Real Property,
valid and enforceable leasehold interests in Leased Real Property and personal
property leased by them, and good and valid title to or rights to use, all
intangible properties and rights used by them, in each case free and clear of
all Liens, except Permitted Liens. The Seller Subsidiaries have good and
marketable title to all Subsidiary Assets free and clear of all Liens, except
Permitted Liens.
<PAGE> 32
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2.13 Acquired Real Property.
(a) Part A of Schedule 2.13(a) sets forth a true, correct
and complete list and legal descriptions of all Real Property owned
(beneficially or of record) by any of the Companies in the conduct of the
Business, and Part B of Schedule 2.13(a) sets forth a true, correct and
complete list of all Real Property leased by any of the Companies in the
conduct of the Business, and in each case identifies the street address
thereof.
(b) Except in such cases as would not in the aggregate
have a Material Adverse Effect, all structures and other improvements on such
properties are within the lot lines and do not encroach on the properties of
any other Person (and improvements on adjacent Real Property do not encroach on
any of the Real Property constituting any part of the Acquired Assets), and the
use, construction and operation of all Real Property constituting any part of
the Acquired Assets or otherwise owned or leased by the Companies in the
conduct of the Business conform to all applicable building, zoning, safety,
environmental and other Laws, permits, licenses and certificates and all
restrictions and conditions affecting title.
(c) Other than as set forth on of Schedule 2.13(c), there
are no leases, subleases, options or other agreements, written or oral,
granting to any Person (other than the Companies) the right to purchase, use or
occupy the Acquired Real Property or any portion thereof. None of Parent, the
Companies and any of their respective Affiliates has received any written or
oral notice or order by any Governmental Entity, any insurance company which
has issued a policy with respect to any of such properties or any board of fire
underwriters or other body exercising similar functions which (i) relates to
violations of building, safety, fire or other ordinances or regulations, (ii)
claims any defect or deficiency with respect to any of such properties or (iii)
requests the performance of any repairs, alterations or other work to or in any
of such properties or in the streets bounding the same, except such as would
not individually or in the aggregate have a Material Adverse Effect. Parent
and Sellers have made available to Buyer true, correct and complete copies of
all leases and financing documents affecting all or any portion of the Acquired
Real Property.
(d) None of Parent, the Companies and any of their
respective Affiliates has received any written or oral notice for assessments
for public improvements against the Acquired Real Property which remains
unpaid, and, to the best of Parent's and each Seller's knowledge, no such
assessment has been proposed. Except as set forth on Schedule 2.13(d), there
is no pending condemnation, expropriation, eminent domain or similar proceeding
affecting all or any portion of any of the Acquired Real Property and, to the
best of Parent's and each Seller's knowledge, no such proceeding is threatened.
(e) Except as set forth on Schedule 2.13(e), no Person
other than the Companies is in possession of (or has any right, absolute or
contingent, to possess which is superior to any Company's right to possess) all
or any portion of the Acquired Real Property.
(f) Except as set forth on Schedule 2.13(f), all Acquired
Real Property has direct and unrestricted access over currently utilized
facilities and land to such public roads, owned roads and driveways presently
in use, and such utilities and other services, as are
<PAGE> 33
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necessary for the uses thereof and the conduct of the Business, and neither any
Company nor any other Person has applied for any change in the zoning or land
use classification of any such Real Property.
(g) Except as set forth on Part A of Schedule 2.13(g),
the Acquired Real Property has adequate arrangements for supplies of water,
electricity, gas and/or oil for all operations at the 1996 or current operating
levels, whichever is greater. Except as set forth on Part B of Schedule
2.13(g), there are no actions or proceedings pending or, to the best of
Parent's and each Seller's knowledge, threatened that would adversely affect
the supply of water, electricity, gas and/or oil to the Acquired Real Property
except for those which individually and in the aggregate would not have a
Material Adverse Effect.
2.14 Taxes.
(a) Parent and each Company has (i) timely filed all
returns and reports for Taxes, including information returns, that are required
to have been filed in connection with, relating to, or arising out of the
Business or the Acquired Assets, (ii) paid to the appropriate Tax Authority all
Taxes that are shown to have come due pursuant to such returns or reports and
(iii) paid to the appropriate Tax Authority all other Taxes not required to be
reported on returns in connection with, relating to, or arising out of, or
imposed on the property of the Business for which a notice of assessment or
demand for payment has been received or which have otherwise become due except
for Taxes being properly contested in good faith.
(b) All such returns or reports were complete and
accurate in all material respects at the time of filing and such returns which
have not been audited do not contain a disclosure statement under Code Section
6662 (or any predecessor provision or comparable provision of any Law).
(c) There are no unpaid Taxes with respect to any period
ending on or before the Closing Date which are or could give rise to a lien on
the Acquired Assets or the Business, except for current Taxes not yet due and
payable.
(d) Except as set forth on Schedule 2.14(d), (i) there
are no pending audits or, to the best of Parent's and each Seller's knowledge,
threatened audits or assessments relating to Taxes with respect to the Business
or the Acquired Assets and (ii) there is no unassessed Tax deficiency proposed
or to the best of Parent and each Seller's knowledge threatened against Parent
or any Company relating to or affecting the Acquired Assets or the Business,
nor is any action or proceeding pending, or to the best of Parent's and each
Seller's knowledge, threatened by any Governmental Entity for assessment,
reassessment or collection of Taxes.
(e) Except as set forth on Schedule 2.14(e), none of the
Acquired Assets (i) is property that is required to be treated as owned by
another Person pursuant to the "safe harbor lease" provisions of former Section
168(f)(8) of the Code, (ii) is "tax-exempt use property" within the meaning of
Code Section 168(h) or (iii) directly or indirectly secures any Debt the
interest on which is tax-exempt under Code Section 103(a).
<PAGE> 34
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(f) Except as set forth on Schedule 2.14(f), no Company
has agreed to make, or is required to make, any adjustment under Code Section
263A or 481(a) or any comparable provision of state or foreign Tax Laws by
reason of a change in accounting method or otherwise and no Company has changed
a method of accounting or Inventory method, made or changed a tax election, or
otherwise taken any action which is not in accordance with past practice that
could accelerate a tax deduction from a period after the Closing Date to a
period before the Closing Date or defer income from a period before the Closing
Date to a period after the Closing Date.
(g) Except as set forth on Schedule 2.14(g), no Company
is a party to any agreement, contract, arrangement or plan that has resulted or
would or could result, separately or in the aggregate, in connection with this
Agreement or any change of control of the Company, in the payment of any
"excess parachute payment" within the meaning of Code Section 280G.
(h) The aggregate adjusted tax basis in the Inventory,
the accounts receivable and the property, plant and equipment that constitute
the Purchased Assets for federal Tax purposes as of March 31, 1997, was at
least $150,000,000, $29,000,000 and $8,000,000, respectively.
(i) The amount of the reserves for value-added Taxes,
real property Taxes, property Taxes and payroll Taxes reflected on the Closing
Date Balance Sheet will be adequate to pay all Assumed Tax Liabilities.
2.15 Intellectual Property and Technology.
(a) Schedule 2.15(a) contains a true, correct and
complete list of all patents, trademarks, trade names, service marks and
applications for the foregoing owned, used or held for use by any Company with
respect to the Business, except for matters listed on Schedule 2.15(b).
(b) Schedule 2.15(b) contains a true, correct and
complete list of all Intellectual Property which has been registered in, filed
in or issued by the PTO, the United States Copyright Office, any state
trademark offices and the patent, trademark, copyright and other corresponding
offices of foreign jurisdictions. All such registrations have been duly filed,
registered and issued and are in full force and effect.
(c) Except as set forth on Schedule 2.15(c), Section 8
and 15 declarations and applications for renewal with respect to all U.S.
registered trademarks and service marks listed in Schedule 2.15(b) were timely
filed in and accepted by the PTO. No trademarks or service marks listed in
Schedule 2.15(b) have been abandoned.
(d) Schedule 2.15(d) sets forth all licenses or other
agreements from or with third Persons under which any Company uses or exercises
any rights with respect to any of the Intellectual Property or Technology,
other than such licenses and other agreements that involve payments of no more
than $25,000 per year ("Small Licenses"). At the Closing, Sellers will
<PAGE> 35
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transfer to Buyer all Intellectual Property and Technology without payment of
royalties, free and clear of any Liens.
(e) Except (i) as set forth on Schedule 2.15(e) or (ii)
with respect to Small Licenses, the Companies (as applicable) are the sole and
exclusive owners of the Intellectual Property and Technology, free and clear of
any Liens.
(f) Except as set forth on Schedule 2.15(f), no Company
has received (and Parent and Sellers have no knowledge of) any written notice
from any other Person pertaining to or challenging the right of any Company (or
any other Person) to use any of the Intellectual Property or any Technology,
and there is no interference, opposition, cancellation, reexamination or other
contest proceeding, administrative or judicial, pending or threatened with
respect to any Intellectual Property or Technology.
(g) Except as set forth on Schedule 2.15(g), no licenses
have been granted by any Company and no Company has any obligation to grant
licenses with respect to any Intellectual Property or Technology. No written
claims have been made by any Company of any violation or infringement by others
of rights with respect to any Intellectual Property or Technology, and neither
Parent nor Sellers know of any basis for the making of any such claim. Except
in such cases as would not in the aggregate have a Material Adverse Effect, the
use by each Company of the Intellectual Property and Technology (past and
present) has not violated or infringed any rights of other Persons, or
constituted a breach of any Contract (or other agreement or commitment).
(h) The Intellectual Property and Technology includes all
such rights necessary to conduct the Business as now conducted and, except (i)
as set forth on Schedule 2.15(d) or (ii) with respect to Small Licenses, such
rights will not be adversely affected by the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(i) There are no licenses or service, maintenance or
other agreements or obligations of any nature whatsoever regarding the
Intellectual Property or Technology between or among any such Company, on the
one hand, and any Affiliate(s) of such Company, on the other hand. All
statements and representations made by each Company or any of its Affiliates in
any pending patent, copyright and trademark applications with respect to the
Intellectual Property were true in all material respects as of the time they
were made.
2.16 Brokerage. Neither Parent nor any Company nor any of
their respective Affiliates has made any agreement or taken any other action
which might cause AlliedSignal or Buyer to become liable for a broker's or
finder's fee or commission as a result of the transactions contemplated
hereunder.
2.17 Product Warranties and Guarantees. Parent and each
Company has provided Buyer with true and correct copies of all written product
and service warranties and guarantees in connection with Contracts listed on
Schedule 2.8(a).
<PAGE> 36
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2.18 Products Liability. There are no Liabilities of any
Company, fixed or contingent, asserted or, to the best of Parent's and each
Seller's knowledge, unasserted, (a) with respect to any product Liability or
any similar claim that relates to any product sold by any of the Companies to
others prior to the Closing, or (b) with respect to any claim for the breach of
any express or implied product warranty or any other similar claim with respect
to any product sold by any of the Companies to others prior to the Closing,
other than standard warranty obligations (to replace, repair or refund) made by
any Company in the ordinary course of the conduct of the Business to buyers of
the respective products, and except in the case of the preceding clauses (a)
and (b) where such Liabilities would not exceed $500,000 in the aggregate for
the Combined Business.
2.19 Labor Matters.
(a) To the best of Parent's and each Seller's knowledge,
there have been no union organizing efforts with respect to any Company
conducted within the last three years and there are none now being conducted
with respect to any Company. The Companies have not at any time during the
three years prior to the date of this Agreement had, nor, to the best of
Parent's and each Seller's knowledge, is there now threatened, a strike, work
stoppage, work slowdown or other material labor dispute with respect to or
affecting the Business. Except as set forth on Schedule 2.19, (i) no employee
of any Company is represented by any union or other labor organization; (ii)
there is no charge or complaint, including any unfair labor practice charge or
any claim of discrimination, which is pending with any Governmental Entity or,
to the best of Parent's and each Seller's knowledge, threatened against any
Company relating to any of its employees; and (iii) there is no commitment or
agreement to increase wages or modify the terms and conditions of employment of
employees of any Company other than ordinary course of the Business consistent
with past practice. Parent and Sellers have provided Buyer with copies of any
collective bargaining agreement or other agreement with any union or other
labor organization representing employees of any Company.
(b) Within six months prior to the date hereof, (i) no
Company has effectuated (x) a "plant closing" (as defined in the WARN Act)
affecting any site of employment or one or more facilities or operating units
within any site of employment or facility of the Business or (y) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
the Business, (ii) no Company has been affected by any transaction or engaged
in layoffs or employment terminations with respect to the Business sufficient
in number to trigger application of any similar foreign, state or local law,
and (iii) none of the Companies' employees has suffered an "employment loss"
(as defined in the WARN Act).
2.20 Employee Benefits.
(a) Set forth on Schedule 2.20(a) is a true, correct and
complete list of the following:
(i) Separately by location, the names, job titles
and current salary or wage rates of all employees of each Company and
their hourly or yearly salary, together
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with a summary of all bonus, incentive compensation or other
additional compensation or similar benefits paid to such persons for
the 1997 fiscal year and estimated for the 1998 fiscal year;
(ii) Separately by location, the names, job titles
and current salary or wage rates of all independent contractors,
including any consultants, and leased employees who perform services
for a Company; and
(iii) All of (x) the employee benefit plans,
arrangements or policies (whether or not written, whether U.S. or
foreign, and whether or not subject to ERISA), including, without
limitation, any stock option, stock purchase, stock award, retirement,
pension, deferred compensation, profit sharing, savings, incentive,
bonus, health, dental, hearing, vision, drug, life insurance,
cafeteria, flexible spending, dependent care, fringe benefit, vacation
pay, holiday pay, disability, sick pay, workers compensation,
unemployment, severance pay, employee loan, educational assistance
plan, policy or arrangement, and (y) any employment, indemnification,
consulting or severance agreement, under which any employee or former
employee of a Company has any present or future right to benefits or
under which a Company has any present or future Liability
(collectively, the "Plans"). Schedule 2.20(a) indicates which Plans
are maintained for employees employed in the United States
(collectively, "U.S. Plans"); which Plans are maintained for employees
employed outside of the United States (collectively, "Foreign Plans");
and which Plans cover only employees of one or more Seller
Subsidiaries (collectively, "Free-Standing Plans").
(b) Parent or Sellers have made available to Buyer a
complete and correct copy of each Plan document or a written description of any
unwritten plan; the most recent summary plan description or similar booklet for
any Plan; any employee handbook applicable to employees of a Company; and with
respect to any Free-Standing Plan, any related trust agreement or insurance
contract, the most recent actuarial valuation report, and the most recent
financial statements.
(c) Except (i) as set forth on Schedule 2.20(c) or (ii)
in such cases as would not in the aggregate have a Material Adverse Effect:
(i) Neither Parent nor any Company nor any of
their Affiliates has communicated to present or former employees of a
Company, or formally adopted or authorized, any additional Plan or any
change in or termination of any existing Plan.
(ii) Each Plan has been operated and administered
in accordance with its terms, the terms of any applicable collective
bargaining agreement, and all applicable Laws.
(iii) Each U.S. Plan which is a "group health plan"
subject to the continuation coverage requirements of Section 4980B of
the Code and Part 6 of Title I of ERISA ("COBRA") which is maintained
by a Company or any of its Affiliates has been operated and
administered, in all material respects, in accordance with such
requirements.
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(d) Schedule 2.20(d) identifies each U.S. Plan which
provides health, life insurance or other welfare benefits to retired or other
terminated employees of a Company other than continuation coverage required by
COBRA and the Companies have the ability to amend or terminate any such Plan.
(e) Except in such cases as would not in the aggregate
have a Material Adverse Effect, with respect to any Plan, no actions, suits,
claims or proceedings (other than routine claims for benefits) are pending or,
to the best of Parent's and each Seller's knowledge, threatened, and no facts
or circumstances exist which could be reasonably expected to give rise to any
such actions, suits, claims or proceedings.
(f) Except in such cases as would not in the aggregate
have a Material Adverse Effect, no Plan is currently under governmental
investigation or audit, and to the best of Parent's and each Seller's
knowledge, no such investigation or audit is contemplated or under
consideration.
(g) Except (i) for benefits payable under the terms of
any Free-Standing Plan or (ii) in such cases as would not in the aggregate have
a Material Adverse Effect, no event has occurred and no condition exists that
could be reasonably expected to subject AlliedSignal, Buyer or any Seller
Subsidiary, directly or indirectly, to any tax, fine, penalty or other
Liability arising under, or with respect to, any employee benefit plan
currently or previously maintained by any Company or any Person that is or was
a member of a controlled group with, under common control with, or otherwise
required to be aggregated with, any Company under Section 414(b), (c), (m) or
(o) of the Code.
(h) No lien has arisen or is expected to arise under the
Code or ERISA on the Purchased Assets.
(i) No U.S. Plan is a "multiemployer plan" within the
meaning of Section 3(37)(A) of ERISA, and no Company has any outstanding
Liability with respect to any such plan (contingent or otherwise).
(j) Except (i) as set forth on Schedule 2.20(j) or (ii)
in such cases as would not in the aggregate have a Material Adverse Effect,
neither the execution of this Agreement nor the consummation of the
transactions contemplated by this Agreement, will (x) increase the amounts of
benefits otherwise payable under any Plan, (y) result in the acceleration of
the time of payment, exercisability, funding or vesting of any such benefits,
or (z) result in any payment (whether severance pay or otherwise) becoming due
to, or with respect to, any employee or director of a Company.
(k) Except in such cases as would not in the aggregate
have a Material Adverse Effect, with respect to each Foreign Plan:
(i) All contributions and premium payments
required to have been made under or with respect to each Foreign Plan
have been timely paid; and
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(ii) Each Foreign Plan is either fully funded (or
fully insured) based upon generally accepted local actuarial and
accounting practice and procedure.
(l) No employee benefits are provided to any employee of
a Company who is employed outside of the United States except to the extent
required by law.
(m) Each Foreign Plan has been operated, in all material
respects, in compliance with all applicable Laws with such exceptions as would
not individually or in the aggregate result in a Material Adverse Effect..
(n) Each Foreign Plan is a Free-Standing Plan.
2.21 No Pending Litigation or Proceedings. Except as set
forth on Part A of Schedule 2.21, there are no actions, suits, investigations
or proceedings pending against or affecting, or, to the best of Parent's and
each Seller's knowledge, threatened against, Parent, any Company, the Business
or any of the Acquired Assets before any arbitrator or Governmental Entity
(including the United States Environmental Protection Agency, the United States
Equal Employment Opportunity Commission or any similar Governmental Entity)
that would materially and adversely affect their ability to perform their
obligations under this Agreement. Except as set forth on Part B of Schedule
2.21, there are no outstanding judgments, decrees, writs, injunctions or orders
of any arbitrator or Governmental Entity against Parent or any Company which
relate to or arise out of the conduct of the Business or the ownership,
condition or operation of the Business or the Acquired Assets except in such
cases as would not in the aggregate have a Material Adverse Effect.
2.22 Insurance. Schedule 2.22 lists each Company's
policies and contracts in effect as of the date hereof for insurance covering
the Acquired Assets or Assumed Liabilities and the operation of the facilities
constituting the Business owned or held by the Companies, together with the
risks insured against, coverage limits and deductible amounts. Sellers have
made available to Buyer complete and correct copies of all such policies
together with all riders and amendments thereto. Such policies are in full
force and effect and all premiums due thereon have been paid. Each of the
Companies has complied in all material respects with the terms and conditions
of such policies. The Companies have made available to Buyer all books and
records relating to workers compensation claims and all claims made by the
Companies under any policy of insurance during the five years prior to the date
hereof with respect to the Business other than employee claims under health or
medical insurance policies or coverage.
2.23 Customers; Suppliers. As of the date of this
Agreement, Part A of Schedule 2.23 contains a true, correct and complete list
of (i) all Contracts to which any Major Customer is a party and (ii) all Major
Suppliers, together with an estimate of all purchases from each Major Supplier
for the last 12 months. Except as identified with an asterisk on Part A of
Schedule 2.23, each of the Contracts listed thereon is fully assignable to
Buyer (or, in the case of Contracts of the Seller Subsidiaries, will remain in
full force and effect upon the sale of the Subsidiary Shares to Buyer) without
the consent, approval or waiver of any other Person. Except as set forth on
Part B of Schedule 2.23, as of the date of this Agreement, neither Parent nor
any Company has received written notice within the preceding 12 months of any
development
<PAGE> 40
34
(a) which could reasonably be expected to result in a Material Adverse Effect
or (b) which indicates that a Major Customer will not purchase products of the
Combined Business from Buyer during the 1998 fiscal year in amounts
substantially equivalent (on a pro rata basis) to such purchases from such
Company in the 1997 fiscal year. Except as set forth on Part C of Schedule
2.23, as of the date hereof, no supplier of the Business (including any
supplier of Intellectual Property) has threatened to refuse to sell its
products or services to the Business except in such cases as would not in the
aggregate have a Material Adverse Effect.
2.24 Condition of Assets. Except as set forth on Schedule
2.24, the buildings, machinery, equipment, tools, furniture, improvements,
sewers, pipes, transportation equipment and other fixed tangible Assets of the
Business (a) included in the Acquired Assets or (b) subject to any Contract
included in the Acquired Assets are in sufficiently good operating condition
and repair to conduct the Business as presently conducted, reasonable wear and
tear excepted.
2.25 All Assets. Except as set forth on Schedule 2.25 and
for the Excluded Assets, the Acquired Assets (including any Assets, properties
and rights subject to any Contract included in the Acquired Assets) constitute
all the assets, properties and rights owned, used, or held for use in
connection with, or that are otherwise related to or required for the conduct
of, the Business as currently conducted by the Companies on the date of this
Agreement. Except as set forth on Schedule 2.25, none of the Acquired Assets
are owned, in whole or in part, by any Person other than the Companies.
2.26 Undisclosed Liabilities. None of the Seller
Subsidiaries has any Liability of any nature, mixed, contingent or otherwise,
liquidated or unliquidated and whether due or to become due, except for
Non-Assumed Liabilities and except for (i) Liabilities reflected on the Balance
Sheet, other than those discharged since September 30, 1997, (ii) Liabilities
under Contracts, (iii) Liabilities disclosed on Schedule 2.26 and (iv)
Liabilities incurred in the ordinary course of business since the date of the
Balance Sheet, none of which would constitute a violation of any covenant
herein or give rise to the failure of any condition herein. None of the Seller
Subsidiaries has any Liability of any nature, mixed, contingent or otherwise,
liquidated or unliquidated and whether due or to become due, which does not
relate to the Business.
2.27 Securities Matters. Except as set forth on Schedule
2.27, Sellers are acquiring the AlliedSignal Common Stock for their own account
and without a present view to any distribution thereof or any present intention
of distributing or selling the AlliedSignal Common Stock in violation of the
federal securities laws. Each Seller is an "accredited investor" as such term
is defined in Regulation D promulgated under the Securities Act. In evaluating
the suitability of an investment in the AlliedSignal Common Stock, each Seller
has relied solely upon the representations, warranties, covenants and
agreements made by AlliedSignal herein and has not relied upon any other
representations or other information (whether oral or written and including any
estimates, projections or supplemental data) made or supplied by or on behalf
of AlliedSignal or any Affiliate, employee, agent or other representative of
AlliedSignal. Each Seller understands and agrees that it may not sell or
dispose of any of the AlliedSignal Common Stock other than pursuant to a
registered offering or in a transaction exempt from the registration
requirements of the Securities Act.
<PAGE> 41
35
2.28 SEC Filings. Parent has heretofore delivered to
Buyer and Buyer acknowledges receipt of the following documents (the "Parent
Reports"): (a) Parent's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997, (b) Parent's Quarterly Reports on Form 10-Q for the fiscal
quarters ended June 30, and September 30, 1997, (c) Parent's proxy statement
relating to its 1997 Annual Meeting of Stockholders, (d) Parent's Annual Report
to Stockholders for 1997, and (e) any other report filed during 1997, and prior
to the date of this Agreement, with the Securities and Exchange Commission
under the Securities Act or the Exchange Act. Each Parent Report, as of its
filing date, insofar as it relates to the Business, did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of circumstances under which
they were made, not misleading.
2.29 Bank Accounts. Schedule 2.29 contains a true,
correct and complete list of all bank accounts used or held for use by the
Seller Subsidiaries and the authorized signatures associated therewith.
2.30 Business Conduct. Except as discussed between Parent
and Buyer on December 7, 1997, to the best of Parent's and each Seller's
knowledge, during the past three years neither any Company, nor any director,
officer, employee or third party acting on behalf thereof, has, in violation of
any Law: (i) made any bribes, kickbacks or other payments, directly or
indirectly, to any Person or any representative thereof, to obtain favorable
treatment in securing business or otherwise to obtain special concessions for
any Company; (ii) made any bribes, kickbacks or other payments, directly or
indirectly, to or for the benefit of any Governmental Entity or any official,
employee or agent thereof, for the purpose of affecting his or her action or
the action of the Governmental Entity that he or she represents to obtain
favorable treatment in securing business or to obtain special concessions for
the Company or any Subsidiary; (iii) made any unlawful political contributions
on behalf of any Company; or (iv) otherwise used corporate funds of any Company
for any illegal purpose, including without limitation, any violation of the
Foreign Corrupt Practices Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ALLIEDSIGNAL AND BUYER
AlliedSignal and Buyer hereby jointly and severally represent
and warrant to Parent and Sellers as follows:
3.1 Organization and Good Standing. (a) AlliedSignal is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware.
(b) Buyer is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware.
AlliedSignal is the sole member of Buyer. AlliedSignal owns all of the
outstanding equity and profit interests in Buyer, free and clear of all Liens.
Buyer is disregarded as an entity separate from AlliedSignal for federal tax
purposes.
<PAGE> 42
36
3.2 Authorization and Enforceability. With respect to
each of AlliedSignal and Buyer: (a) such entity has full power and authority
to execute, deliver and perform this Agreement and Transaction Documents to
which such entity is a party, (b) the execution, delivery and performance by
such entity of this Agreement and the Transaction Documents to which such
entity is a party have been duly authorized by all necessary action on the part
of such entity, (c) this Agreement has been duly executed and delivered by such
entity, and, as of the Closing Date, the other Transaction Documents to which
either entity is a party will be duly executed and delivered by such entity,
(d) this Agreement is a legal, valid and binding obligation of such entity,
enforceable against such entity in accordance with its terms, and (e) as of the
Closing Date, each of the other Transaction Documents to which such entity is a
party will constitute the legal, valid and binding obligations of such entity,
enforceable against such entity in accordance with its terms.
3.3 No Violation of Laws or Agreements. The execution,
delivery, and performance by AlliedSignal and Buyer of this Agreement and the
Transaction Documents to which such entities (as applicable) are parties do
not, and the consummation by AlliedSignal and Buyer (as applicable) of the
transactions contemplated hereby and thereby, will not, (a) contravene any
provision of the Certificate of Incorporation or Bylaws of AlliedSignal nor the
Certificate of Formation or Limited Liability Company Agreement of Buyer, or
(b) violate, conflict with, result in a breach of, or constitute a default (or
an event which would, with the passage of time or the giving of notice or both,
constitute a default) under, or result in or permit the termination,
modification, acceleration, or cancellation of, (i) any indenture, mortgage,
loan or credit agreement, license, instrument, lease, contract, plan, permit or
other agreement or commitment, oral or written, to which either AlliedSignal or
Buyer is a party, or by which any of either entity's Assets may be bound or
affected, or (ii) any judgment, injunction, writ, award, decree, restriction,
ruling, or order of any arbitrator or Governmental Entity or any applicable Law
to which AlliedSignal or Buyer is subject.
3.4 Consents. No consent, approval or authorization of,
or registration or filing with, any Person (governmental or private) is
required in connection with the execution, delivery and performance by
AlliedSignal or Buyer of this Agreement, the other Transaction Documents to
which AlliedSignal or Buyer is a party, or the consummation by AlliedSignal or
Buyer of the transactions contemplated hereby or thereby except (a) as required
by the HSR Act, (b) as required by the NYSE to list AlliedSignal Common Stock
and (c) any required consent, approval of, or authorization of, or registration
or filing with, any foreign governmental authority.
3.5 AlliedSignal Common Stock. As of the date hereof,
1,000,000,000 shares of AlliedSignal Common Stock are authorized for issuance.
As of November 30, 1997, 562,554,971 shares of AlliedSignal Common Stock were
issued and outstanding and 153,902,513 shares of AlliedSignal Common Stock were
held in the treasury of AlliedSignal or owned by any Subsidiary of
AlliedSignal. AlliedSignal has a sufficient number of unreserved shares of
AlliedSignal Common Stock to perform the transactions contemplated hereby. All
shares of AlliedSignal Common Stock to be issued at the Closing, when so
issued, will be duly authorized, validly issued, fully paid and non-assessable,
free of preemptive rights and all Liens
<PAGE> 43
37
and will be issued in compliance with all applicable Laws. Parent acknowledges
that AlliedSignal has disclosed to Parent that AlliedSignal will be making open
market and/or block purchases of AlliedSignal Common Stock during the period
between the date hereof and the Closing Date. All such purchases shall comply
with Rule 10b-18 under Exchange Act.
3.6 SEC Filings. AlliedSignal has heretofore delivered
to Parent, and Parent acknowledges receipt of, the following documents (the
"AlliedSignal Reports"): (a) AS's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, (b) AS's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1997, June 30, 1997 and September 30, 1997, (c)
AS's proxy statement relating to its 1997 Annual Meeting of Stockholders, (d)
AS's Annual Report to Stockholders for 1996, and (e) any other report filed
during 1997, and prior to the date of this Agreement, with the Securities and
Exchange Commission under the Securities Act or the Exchange Act. As of their
respective dates, each of the AlliedSignal Reports complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and none contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. Since January 1, 1996, AlliedSignal has timely
filed all reports, registration statements and made all filings required to be
filed with the SEC under the rules and regulations of the SEC.
3.7 Financial Statements. The audited consolidated
financial statements and unaudited consolidated interim financial statements of
AlliedSignal and its consolidated Subsidiaries included in or incorporated by
reference into the AlliedSignal Reports (including any related notes and
schedules) have been prepared in accordance with GAAP (except as may be
indicated in the notes thereto or as permitted by the Securities Act or the
Exchange Act in the case of unaudited financial statements included in or
incorporated by reference into the AlliedSignal Reports) and fairly present the
consolidated financial position of AlliedSignal and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations for the periods then ended, subject, in the case of the unaudited
consolidated interim financial statements, to normal year-end adjustments and
any other adjustments described therein.
3.8 Brokerage. Neither AlliedSignal, Buyer nor any of
their respective Affiliates has made any agreement or taken any other action
which might cause Parent or any Seller to become liable for a broker's or
finder's fee or commission as a result of the transactions contemplated
hereunder.
ARTICLE IV
ADDITIONAL COVENANTS
4.1 Conduct of Business. Except (i) as otherwise
specifically permitted by this Agreement or (ii) with the prior written consent
of Buyer, from and after the date of this Agreement and until the Closing Date,
Parent and Sellers agree that:
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(a) Sellers shall, and Parent and Sellers shall
cause the Seller Subsidiaries to:
(i) conduct the Business as presently
conducted and only in the ordinary course of business
consistent with past practice; and
(ii) use their reasonable best efforts to
preserve the business organization of the Business
substantially intact, to keep available to Buyer the services
of their respective employees, and to preserve for Buyer the
goodwill of the suppliers, distributors, customers and others
having business relationships with the Business.
(b) Parent and Sellers shall promptly inform
AlliedSignal in writing of any specific event or circumstance
(including, without limitation, any consecutive two week period in
which any Major Customer fails to place orders with the Company or
Companies with which it transacts business) of which any of them (or
any Seller Subsidiary) is aware, or of which any of them (or any
Seller Subsidiary) receives written or oral notice, that (i) has or is
likely to have, individually or in the aggregate, taken together with
other events or circumstances, a Material Adverse Effect, (ii)
indicates that any Major Customer is terminating or intends to
terminate any Contract (excluding termination upon expiration of the
term of any Contract so long as such customer continues to purchase
goods from the Combined Business) and/or indicates that any such
customer intends to reduce its purchases from any Company or (iii)
indicates that any Major Supplier is terminating or intends to
terminate any Contract (excluding termination upon expiration of the
term of any Contract so long as such supplier continues to sell goods
to the Combined Business) and/or indicates that any such Major
Supplier intends to reduce its sales to any Company, provided that any
such oral notice reportable under this Section 4.1(b) shall be
directed to a responsible management Person at Parent or any Company;
and
(c) Sellers shall not, and Parent and Sellers
shall cause the Seller Subsidiaries not to:
(i) change or modify in any material
respect existing Inventory management or credit and
collection policies, procedures and practices with respect to
accounts receivable in any case relating to the Business;
(ii) enter into any Contracts, waive any
rights or enter into any other transactions which individually
or in the aggregate would have a Material Adverse Effect;
(iii) mortgage, pledge or subject to any
Lien (other than Permitted Liens) any of the Acquired Assets;
(iv) change any compensation or benefits
or grant any material new compensation or benefits payable to
or in respect of any employee of the
<PAGE> 45
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Business (except, for regularly scheduled merit increases in
the ordinary course of business consistent with past
practice);
(v) sell, lease or otherwise transfer
any Assets, except Inventory in the ordinary course of the
Business, necessary, or otherwise material to the conduct of,
the Business which would constitute Acquired Assets;
(vi) change any Company's method of
accounting or keeping its books of account or accounting
practices with respect to the Business, except as required by
GAAP;
(vii) take or omit to take any action
which if taken or omitted prior to the date hereof would
constitute or result in a breach of any representations or
warranties of Parent or Sellers set forth herein;
(viii) enter into any Contract (except
sales contracts with customers in the ordinary course of the
Business and except for such Contracts which may be terminated
by Buyer or the applicable Seller Subsidiary without penalty
or Liability on no more than 30 days' notice) that would
create a Liability for the Business in excess of $200,000 per
year without obtaining AS's prior written consent, such
consent not to be unreasonably withheld;
(ix) create, incur or assume any Debt not
currently outstanding, other than current Liabilities incurred
in the ordinary course of business;
(x) amend their charters, bylaws or
other organizational documents;
(xi) authorize, issue, sell or otherwise
dispose of any capital stock of any Company or amend the terms
thereof;
(xii) split, combine or reclassify any
shares of capital stock of any of the Seller Subsidiaries,
declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination
thereof) in respect of the capital stock of any of the
Companies, or redeem or otherwise acquire any of the capital
stock of any of the Companies;
(xiii) make any loans, advances or capital
contributions to, or investments in, any Person;
(xiv) acquire, sell, lease or dispose of
any Assets used or held for use in the Business, other than
(x) sales of Inventory in the ordinary and usual course of
business consistent with past practice or (y) purchases of
goods for use in the Business in the ordinary and usual course
of business consistent with past practice;
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(xv) with respect to the Business, pay,
discharge or satisfy any claims, Liabilities (absolute,
accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the
ordinary course of business of Liabilities reflected or
reserved against in, or contemplated by, the Balance Sheet or
incurred in the ordinary course of business consistent with
past practice;
(xvi) disclose to any third party or enter
into any Technology license or agreement to disclose to any
third party any Intellectual Property, except in the ordinary
and usual course of business and pursuant to written
confidentiality agreements;
(xvii) enter into any labor agreement;
(xviii) sell or dispose of any significant
amount of old or obsolete Inventory; or
(xix) make capital expenditures in excess
of $50,000 individually or $250,000 in the aggregate for the
Combined Business;
(xx) agree in writing or otherwise to
take any of the foregoing actions.
4.2 Mutual Covenants. The parties hereto mutually
covenant from the date of this Agreement to the Closing Date (and subject to
the other terms of this Agreement):
(a) to cooperate with each other in determining
whether filings are required to be made or consents required to be
obtained in any jurisdiction in connection with the consummation of
the transactions contemplated by this Agreement and in making or
causing to be made any such filings promptly and in seeking to obtain
timely any such consents (each party hereto shall furnish to the other
and to the other's counsel all such information as may be reasonably
required in order to effectuate the foregoing action); and
(b) to advise the other parties promptly if such
party determines that any condition precedent to its obligations
hereunder will not be satisfied in a timely manner.
4.3 Filings and Authorizations. The parties hereto will,
as promptly as practicable, and in the case of filings under the HSR Act no
later than five Business Days after the date of this Agreement, make or cause
to be made all such filings and submissions under Laws applicable to them or
their Affiliates as may be required to consummate the terms of this Agreement,
including all notifications and information to be filed or supplied pursuant to
the HSR Act. The parties hereto shall also provide as promptly as possible
full responses to any requests for additional information made of them under
the HSR Act. Any such filings, including any supplemental information and
requests for additional information under the HSR
<PAGE> 47
41
Act, will be in substantial compliance with the requirements of the applicable
Law. Each of AlliedSignal and Buyer, on the one hand, and Parent and Sellers,
on the other hand, shall furnish to the other such necessary information and
reasonable assistance as the other may request in connection with its
preparation of any filing or submission which is necessary under the HSR Act.
Parent, Sellers, AlliedSignal and Buyer shall keep each other apprised of the
status of any communications with, and inquiries or requests for additional
information from, any Governmental Entity, including the FTC and the Antitrust
Division, and shall comply promptly with any such inquiry or request. Each of
Parent and AlliedSignal shall use its reasonable efforts to obtain any
clearance required under the HSR Act for the purchase and sale of the Purchased
Assets in accordance with the terms and conditions hereof. Nothing contained
in this Agreement, including under this Section 4.3 and Sections 4.8 and 4.13,
will require or obligate (a) Parent, the Companies, AlliedSignal, Buyer or
their respective Affiliates to initiate, pursue or defend any litigation to
which any Governmental Entity (including the Antitrust Division and the FTC) is
a party or (b) AlliedSignal, Buyer or their respective Affiliates (i) to agree
or otherwise become subject to any limitations on (x) the right of
AlliedSignal, Buyer or their respective Affiliates effectively to control or
operate the Business, (y) the right of AlliedSignal, Buyer or their respective
Affiliates to acquire or hold the Business, or (z) the right of AlliedSignal or
Buyer to exercise full rights of ownership of the Business or all or any
portion of the Acquired Assets, or (ii) to agree or otherwise be required to
sell or otherwise dispose of, hold separate (through the establishment of a
trust or otherwise), or divest itself of all or any portion of the business,
Assets or operations of AlliedSignal, Buyer, any Affiliate of AlliedSignal or
Buyer or the Business. The parties agree that no representation, warranty or
covenant of Parent, Sellers, AlliedSignal or Buyer contained in this Agreement
shall be breached or deemed breached as a result of the failure by any party
hereto or any of its Affiliates to take any of the actions specified in the
preceding sentence.
4.4 Public Announcement. No party hereto shall make or
issue, or cause to be made or issued, any public announcement or written
statement concerning this Agreement or the transactions contemplated hereby
without the prior written consent of the other party hereto (which will not be
unreasonably withheld or delayed), unless counsel to such party advises that
such announcement or statement is required by law or the rules of any
securities exchange on which securities of any Affiliate of Parent are traded
(in which case the parties hereto shall make reasonable efforts to consult with
each other prior to such required announcement).
4.5 Investigation. Sellers shall, and Parent and Sellers
shall cause the Seller Subsidiaries to, give AlliedSignal and its
representatives (including AS's accountants, consultants, counsel and
employees), upon reasonable notice and during normal business hours, reasonable
access to the properties (including any Equipment and any Acquired Real
Property), Contracts, employees, books, records and affairs of the Companies to
the extent relating to the Business and the Acquired Assets (provided that such
access does not unreasonably disrupt the conduct of the Business), and shall
cause their respective officers, employees, agents and representatives to
furnish to AlliedSignal all documents, records and information (and copies
thereof), to the extent relating to the Business and the Acquired Assets, as
AlliedSignal may reasonably request. Parent and Sellers may reasonably limit
the number of representatives of AlliedSignal provided access hereby. No
investigation or receipt of information by AlliedSignal
<PAGE> 48
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pursuant to, or in connection with, this Agreement, shall diminish or obviate
any of the representations, warranties, covenants or agreements of Parent or
Sellers under this Agreement or the conditions to the obligations of Buyer
under this Agreement. All information provided to AlliedSignal or Buyer under
this Agreement shall be held subject to the terms and conditions of the
Confidentiality Agreement.
4.6 Taxes.
(a) Parent and each Seller shall jointly and severally be
responsible for and shall pay any and all Taxes arising or resulting from the
conduct of the Business or the ownership of the Acquired Assets on or prior to
the Closing Date, which Liability shall be a Non-Assumed Liability (including,
without limitation, the sale of the Business and the Purchased Assets on the
Closing Date pursuant to this Agreement).
(b) Buyer shall be responsible for and shall pay any and
all Taxes arising or resulting from the conduct of the Business or the
ownership of the Acquired Assets after the Closing Date (excluding without
limitation, the sale of the Business and the Purchased Assets or the Closing
Date pursuant to this Agreement), which Liability shall be an Assumed
Liability.
(c) Each Seller hereby acknowledges that for FICA and
FUTA purposes, Buyer qualifies as a successor employer with respect to the
retained employees. In connection with the foregoing, the parties agree to
follow the "Alternative Procedures" set forth in Section 5 of the Revenue
Procedure 96-60, 1996-2C.B.399. Each affected Seller and Buyer understands
that Buyer shall assume the affected Seller's entire obligation to furnish a
Form W-2, Wage and Tax Statement to the employees of the Business for calendar
year ending December 31, 1998.
(d) In addition to all personnel files and records
relating to employees of the Business that each Seller shall deliver to the
Buyer when their employment commences with Buyer as otherwise required by this
Agreement, each Seller shall timely provide Buyer with any and all other
information it needs to properly comply with the requirements of the final
sentence of Section 4.6(c).
(e) Each Seller acknowledges that for state unemployment
Tax purposes, each Seller will permit Buyer to apply for a transfer of such
Seller's rating account with respect to its Business. Each Seller shall
deliver to Buyer within a reasonable time after request therefor, with respect
to its Business, copies of such Seller's (i) Form 940, Employer's Annual
Federal Unemployment Tax Returns for 1995 and 1996, (ii) state unemployment tax
rate notices for 1995 and 1996, and (iii) benefit change statements that
itemize claims charged against the state account of such Seller in each state
in which the Business is operated for the four most recent calendar quarters.
(f) Parent, Sellers and Buyer shall (i) each provide the
other with such assistance as may reasonably be requested by any of them in
connection with the preparation of any Tax return, any audit or other
examination by any Taxing Authority or any judicial or administrative
proceeding with respect to Taxes, (ii) each retain and provide to the other any
records or other information which may be relevant to such return, audit
examination or
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proceeding, and (iii) each provide to the other any final determination of any
such audit or examination, proceeding or determination that affects any amount
required to be shown on any Tax return of the other for any period (which shall
be maintained confidentially). Without limiting the generality of the
foregoing, Buyer, Sellers and Parent shall retain, until the applicable
statutes of limitations (including all extensions) have expired, copies of all
Tax returns, supporting workpapers, and other books and records or information
which may be relevant to such returns for all Tax periods or portions thereof
ending before or including the Closing Date, and shall not destroy or dispose
of such records or information without first providing the other party with a
reasonable opportunity to review and copy the same.
(g) AlliedSignal, Buyer, Parent and Sellers intend that
Buyer's acquisition of the Business and Purchased Assets from each Seller
pursuant to this Agreement shall qualify as and constitute a reorganization
under Code Section 368 (a)(1)(C) and each of the parties agrees to treat such
acquisitions in such manner for all tax purposes, including, without
limitation, for all purposes on any federal or state income or franchise tax
return filed by any party after the Closing Date.
(h) Neither Parent nor any Company shall make a new or
change any existing Tax election, change a method of accounting or Inventory
method, file any amended Tax return, enter into any closing agreement, settle
any Tax claim or assessment, or take or omit to take any other action not
consistent with past practice, if any such action or omission would have the
effect of increasing the Tax Liability of AlliedSignal or Buyer with respect to
the Business and Acquired Assets for any period after the Closing Date.
(i) AlliedSignal and Buyer, on the one hand, and Parent
and Sellers, on the other hand, shall equally bear all Transfer Taxes. Parent,
Sellers and Buyer shall cooperate in timely making and filing all Tax Returns
as may be required to comply with the provisions of any Transfer Tax laws. To
the extent legally able to do so, Buyer shall deliver to Parent and Sellers
exemption certificates satisfactory in form and substance to Parent and Sellers
with respect to Transfer Taxes if such delivery would reduce the amount of
Transfer Taxes that would otherwise be imposed.
(j) AlliedSignal, Buyer, Parent and each Seller
acknowledge that no affirmative election under Code Section 338 can be made
with respect to any Subsidiary Shares.
(k) No later than 10 days prior to the due date for
filing, Buyer shall provide to Parent copies of Tax Returns for taxable periods
that include but do not end on the Closing Date to be filed by any Seller
Subsidiary and shall provide Parent the opportunity to comment on such Tax
Returns.
(l) Buyer shall cause Harco Aerospace Fasteners Ltd. and
Burbank Aircraft International, GmbH not to make any distribution of property
during the period beginning on the Closing Date and ending March 31, 1998 that
would result in a diminution of the earnings and profits of such entity for
Federal income tax purposes.
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4.7 Certain Deliveries.
(a) Within thirty (30) days after the end of each month
ending after the date of this Agreement and prior to the Closing Date, Parent
and Sellers shall prepare and furnish to or cause to be furnished to
AlliedSignal a copy of the monthly financial reports for the Combined Business
after September 30, 1997 (including unaudited balance sheet and income
statements) for each such month and the fiscal year to the end of such month).
All of the foregoing financial statements shall comply with the requirements
concerning unaudited financial statements set forth in Section 2.6. In
addition, Parent and Sellers shall furnish AlliedSignal, upon request, with
copies of regular management reports, if any, concerning the operation of the
Business within ten (10) days after such reports are prepared.
(b) Each Seller shall, and Parent and Sellers shall cause
the Seller Subsidiaries to, provide AlliedSignal, within five days of the
execution or the date of receipt thereof, a copy of each Contract entered into
by any Company after the date hereof and prior to the Closing Date which, if
entered into prior to the date hereof would have been required to be disclosed
on Part A of Schedule 2.8(a).
(c) Within five days after the date of filing thereof,
AlliedSignal or Parent, as the case may be, shall furnish to the other a copy
of each report filed by AlliedSignal or Parent, as the case may be, after the
date of this Agreement and prior to the Closing Date under the Securities Act
or the Exchange Act.
4.8 Consents. Prior to the Closing, Parent and Sellers
shall give any notices and obtain all waivers, licenses, agreements, permits,
consents, approvals or authorizations of any Governmental Authority that are
required to be obtained by any Company pursuant to any Contract or Permit or
otherwise in order to consummate the transactions contemplated hereunder, and
all of such shall be in a written form agreeable to AlliedSignal and in full
force and effect and without conditions or limitations that restrict the
ability of the parties hereto to carry out the transactions contemplated
hereby. Concurrently with or immediately prior to the Closing, Parent and
Sellers shall cause the Seller Subsidiaries to be released from any guarantees
made by any Seller Subsidiary of any indebtedness or other Liabilities of
Parents, Sellers or any of their Affiliates.
4.9 Releases. At the Closing, all intercompany Debt
(other than receivables and payables arising from ordinary course commercial
transactions) between the Companies, on the one hand, and the Parent and its
Subsidiaries other than the Companies, on the other hand, shall be canceled and
all such amounts shall be deemed to be capital contributions to the entity
owing such Debt. Parent, Sellers and their Affiliates shall release any and
all claims, causes of action, demands of any kind, Liabilities, Debts, damages,
suits, or offsets, whether known or unknown, suspected or unsuspected, that any
of them have or may have against any Seller Subsidiary (other than receivables
and payables arising from ordinary course commercial transactions).
4.10 Real Property. Within thirty (30) days after the
date hereof, Parent and Sellers shall deliver or cause to be delivered to Buyer
current, as-built ALTA surveys of the
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Owned Real Property (the cost of which shall be borne 50% by Parent and 50% by
Buyer); such surveys to be dated within thirty (30) days of the date hereof and
to be reasonably acceptable to Buyer. Such surveys shall be performed by
licensed surveyors designated by Buyer and shall be certified to Buyer, Buyer's
title insurance companies and others as Buyer shall request. The surveys shall
be in form sufficient to cause Buyer's title insurance companies to insure such
surveys, and shall be an ALTA/ACSM Land Title Survey, prepared in accordance
with the "Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys
as adopted by American Land Title Association and American Congress on
Surveying & Mapping", and shall meet the currently effective Accuracy Standards
for an Urban Survey adopted by said organizations and shall include such
optional survey responsibilities and specifications as Buyer reasonably shall
select.
4.11 Environmental. At or prior to Closing, Parent and
Sellers shall deliver or cause to be delivered all such necessary applications,
approvals or consents required to transfer (or, in the case of the Seller
Subsidiaries, required to permit the Seller Subsidiaries to continue to hold)
all Permits required for the continued operation of the Business and the
Acquired Assets after the Closing Date in compliance with Environmental Laws.
Within thirty (30) days after execution of this Agreement, Sellers shall
identify to Buyer any of the Acquired Assets that are subject to the
requirements of any Laws that condition, restrict, prohibit or require
notification or disclosure for environmental reasons upon the transfer, sale,
lease or closure of certain property; and Sellers shall deliver on or prior to
the Closing Date, all necessary applications, approvals, or consents required
by such Laws.
4.12 Ancillary Agreements. At or prior to the Closing,
the applicable parties shall enter into each of the Ancillary Agreements.
4.13 Reasonable Best Efforts. Without limiting the
specific obligations of any party hereto under any covenant or agreement
hereunder, each party hereto shall use reasonable best efforts to take all
action and do all things necessary in order to promptly consummate the
transactions contemplated hereby, including, without limitation, satisfaction,
but not waiver, of the Closing conditions set forth in Article V.
4.14 Negotiations. From the date hereof until the
termination of this Agreement in accordance with its terms, Parent and Sellers,
on behalf of themselves and their Affiliates, agree that Parent, Sellers and
their Affiliates will deal exclusively and in good faith with AlliedSignal and
Buyer with respect to any transaction involving the sale, transfer or other
disposition of the Acquired Assets or the Business; and neither Parent,
Sellers, their Affiliates nor any of their officers, directors, employees,
lenders, investment banking firms, advisors or other agents, or any Person
acting on their behalf, will solicit any inquiries or proposals by, or engage
in any discussions or negotiations with, or furnish any nonpublic information
to or enter into any agreement with, any Person other than AlliedSignal or
Buyer concerning the sale or other disposition of the Acquired Assets or the
Business or the merger, consolidation, sale of securities or other transaction
involving Parent or any of the Companies, if such merger, consolidation, sale
or other transaction would be inconsistent, in any respect, with the
transactions contemplated by this Agreement, and will promptly notify
AlliedSignal of the
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substance of any inquiry or proposal concerning any such transaction that may
be received by Parent, Sellers or their Affiliates; provided, however, that
notwithstanding any other provision hereof, Parent may (i) engage in
discussions or negotiations with a third party who (without any solicitation,
initiation, encouragement, discussion or negotiation, directly or indirectly,
by or with Parent or Sellers after the date hereof) seeks to initiate such
discussions or negotiations and may furnish such third party information
concerning the Combined Business, the Acquired Assets and the Herndon Purchased
Assets if, and only to the extent that, (A)(x) the third party has first made
an Acquisition Proposal that is financially superior to the transactions
contemplated by this Agreement and has demonstrated that the funds necessary
for the Acquisition Proposal are reasonably likely to be available (as
determined in good faith in each case by Parent's Board of Directors after
consultation with its financial advisors) and (y) Parent's Board of Directors
shall conclude in good faith, after considering applicable provisions of state
law, on the basis of advice of outside counsel, that such action is necessary
for the Board of Directors to act in a manner consistent with its fiduciary
duties under applicable law and (B) prior to furnishing such information to or
entering into discussions or negotiations with such Person, Parent (x) provides
prompt notice to AlliedSignal to the effect that it is furnishing information
to or entering into discussions or negotiations with such Person and (y)
receives from such Person an executed confidentiality agreement in reasonably
customary form and (ii) provided Parent terminates this Agreement pursuant to
Section 9.1(a)(iv), accept an Acquisition Proposal from a third party. Parent
shall notify AlliedSignal in writing of any such inquiries, offers or proposals
(including, without limitation, the terms and conditions of any such proposal
and the identity of the Person making it), within 24 hours of the receipt
thereof, shall keep AlliedSignal informed of the status and details of any such
inquiry, offer or proposal, and shall give AlliedSignal five days' advance
notice of any agreement to be entered into with, or any information to be
supplied to, any Person making such inquiry, offer or proposal. As used
herein, "Acquisition Proposal" shall mean a proposal or offer (other than by
AlliedSignal) for a purchase of Assets, merger or other business combination
involving Sellers and the Herndon Sellers, or any proposal to acquire in any
manner a substantial equity interest in, or all or substantially all of the
Assets of, Sellers and the Herndon Sellers or otherwise relating to the
Combined Business.
4.15 U.S. Government Contracts. As soon as practicable
following the date of this Agreement and only after Buyer's written request,
with respect to each Government Contract, AlliedSignal and Buyer shall assist
Parent and Sellers to either obtain written confirmation reasonably
satisfactory in form and substance to Buyer that novation of such Government
Contract is not required, or, if not received prior to the Closing Date, submit
to the cognizant responsible contracting officer, as soon as practicable after
the Closing Date (i) a written request that the U.S. Government enter into a
novation agreement contemplated by FAR 42.1204 (a "Novation Agreement") with
Buyer with respect to each Government Contract and (ii) a Novation Agreement
executed by the Company or any Subsidiary party thereto for each Government
Contract. Parent, Sellers, AlliedSignal and Buyer shall coordinate their
efforts to facilitate the actions required by this Section 4.15 and Parent
agrees to take all necessary action to assist Sellers prior to and after the
Closing in connection therewith, including without limitation, upon Buyer's
written request, obtaining such consents after the Closing, informing the
appropriate governmental personnel of the pending transaction and of the
planned novation.
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4.16 NYSE Listing. AlliedSignal shall take all reasonable
action required to obtain from the NYSE, prior to the Closing Date to have duly
approved for listing, subject to official notice of issuance, the shares of
AlliedSignal Common Stock to be issued hereunder at the Closing.
4.17 Continued Existence. Unless Parent makes other
provisions for its obligations under Article VII that are reasonably
satisfactory to AlliedSignal, (A) for a period of three years after the Closing
Date, Parent shall (i) maintain its corporate existence, (ii) not authorize or
take any other action to implement a dissolution of Parent, and (iii) maintain
a minimum net worth of Fifty Million Dollars ($50,000,000) and (B) following
such three year period, for so long as any claim by a Buyer Indemnified Party
for indemnification pursuant to Article VII remains unresolved, Parent shall
(i) maintain its corporate existence, (ii) not authorize or take any other
action to implement a dissolution of Parent, and (iii) maintain a minimum net
worth equal to the lesser of (x) Fifty Million Dollars ($50,000,000) or (y) the
amount of such unresolved claims then outstanding; provided, however, that
nothing in this Section 4.17 shall (i) prevent Parent from engaging in a
merger, sale of substantially all its assets or other business combination
after the Closing Date if (x) prior to the consummation of such transaction,
the successor in interest to Parent (or the purchaser of such assets, as the
case may be) in such transaction agrees in writing (for the benefit of the
Buyer Indemnified Parties) to assume and become fully responsible for, pursuant
to an agreement reasonably satisfactory in form and substance to AlliedSignal,
all of Parent's obligations under this Agreement (including, without
limitation, Parent's obligations under Article VII) and (y) immediately after
consummation of such transaction, such successor in interest (or purchaser, as
the case may be) has a net worth of not less than the net worth then required
to be maintained by Parent pursuant to this Section 4.17 or (ii) limit the
rights of the parties under Section 4.14.
4.18 Company Debt. Prior to the Closing, Parent shall (i)
cause the Debt which is secured by a mortgage on the distribution center
located in Salt Lake City, Utah, to be repaid, (ii) cause all remaining
payments on all capitalized leases of the Companies to be paid and (iii) use
its reasonable best efforts to cause all cash accounts of the Companies to be
reduced to zero with no negative or positive balances. Buyer acknowledges that
the funding of negative balances will increase Closing Date Net Worth.
4.19 Side Letters. At or prior to the Closing, Parent
shall deliver or cause to be delivered, to AlliedSignal, the Side Letters.
4.20 Product Liability Insurance. At Parent's request,
AlliedSignal shall use reasonable commercial efforts to procure, to the extent
available, at Parent's expense, product liability insurance covering products
manufactured or distributed by the Companies prior to the Closing Date. Upon
receipt of any premium notice relating to such insurance, AlliedSignal shall
notify Parent and Parent shall promptly pay to AlliedSignal the amount of the
premium due. Parent acknowledges and agrees that AlliedSignal is free to
ascribe any adverse claim experience, to the extent reasonably identifiable to
products manufactured or distributed by the Companies prior to the Closing
Date, to such policy, so that (to such extent) such adverse claim experience
does not adversely affect other product liability premiums being paid by
AlliedSignal.
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4.21 Harco Northern Ireland, Ltd. At or prior to the
Closing, Parent will cause Eric Steiner to convey to Buyer or Buyer's designee
the share of capital stock of (or other equity interest in) Harco Northern
Ireland, Ltd. owned by him, free and clear of all Liens.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions Precedent to Obligations of AlliedSignal
and Buyer. The obligations of Buyer to purchase (and of AlliedSignal to cause
Buyer to purchase) the Purchased Assets and assume (and of AlliedSignal to
cause Buyer to assume) the Assumed Liabilities and to consummate the other
transactions contemplated hereby are subject to the satisfaction, on or prior
to the Closing Date, of each of the following conditions (any one or more of
which may be waived in writing in whole or in part by Buyer in its sole
discretion):
(a) Representations, Warranties and Covenants. Each of
the representations and warranties of Parent and Sellers contained in this
Agreement or in any Transaction Document delivered in connection herewith shall
be true and correct in all material respects on and as of the date of this
Agreement and at and as of the Closing with the same effect as though such
representations and warranties had been made at and as of the Closing, except
for representations and warranties that speak as of a specific date or time
other than the Closing (which need only be true and correct in all material
respects as of such date or time); provided, however, that if any such
representation or warranty is already qualified by materiality, for purposes of
determining whether this condition has been satisfied, such representation or
warranty as so qualified shall be true and correct in all respects. Parent and
Sellers shall have performed and complied in all material respects with each
covenant and agreement required by this Agreement to be performed or complied
with by them at or prior to the Closing. Parent and each Seller shall furnish
AlliedSignal and Buyer with a certificate of such company dated the Closing
Date and signed by a senior executive officer of Parent or such Seller, as the
case may be, to the effect that the conditions set forth in this Section 5.1(a)
have been satisfied.
(b) HSR Act. The applicable waiting period under the HSR
Act (including any extensions thereof) with respect to the transactions
contemplated hereby shall have expired or been terminated.
(c) Stock Exchange Listing. The NYSE shall have duly
approved for listing, subject to official notice of issuance, the shares of
AlliedSignal Common Stock to be issued hereunder at the Closing.
(d) Required Consents. Parent and the Companies shall
have obtained all statutory and regulatory consents and approvals which are
required under any applicable Laws in order to consummate the transactions
contemplated hereby and to permit Buyer to conduct the Business as conducted as
of the date of this Agreement and all other necessary consents and approvals of
third parties (other than any customer or supplier of the Business) to the
transactions contemplated hereby, other than those the failure of which to
obtain, individually and in the aggregate, would not have a Material Adverse
Effect.
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(e) Customer/Supplier Concurrence. During the period
from November 1, 1997 through the date immediately preceding the Closing Date,
Parent, Sellers, Herndon Sellers, AlliedSignal and/or Buyer shall not have
received written notice from (i) customers indicating that such customers are
terminating or intend to terminate Combined Contracts (excluding termination
upon expiration of the term of any Combined Contract so long as such customer
continues to purchase goods from the Combined Business) and/or indicating that
any such customer intends to reduce its purchases from any Company or any
Herndon Seller, which terminations and/or reductions in the aggregate would
reasonably be expected to result in the revenues of the Combined Business for
the 12 months immediately following the Closing Date being $40 million or more
less than the revenues of the Combined Business for the 12 months immediately
preceding the Closing Date or (ii) suppliers (including suppliers of
Intellectual Property) indicating that such suppliers are terminating or intend
to terminate Combined Contracts (excluding termination upon expiration of the
term of any Combined Contract so long as such supplier continues to provide
goods or Intellectual Property to the Combined Business) and/or indicating that
any such supplier intends to reduce its sales to any Company or any Herndon
Seller, which terminations and/or reductions in the aggregate would reasonably
be expected to result in supplier sales to the Combined Business for the 12
months immediately following the Closing Date being $10 million or more less
than supplier sales to the Combined Business for the 12 months immediately
preceding the Closing Date.
(f) Injunction; Litigation; Legislation. (i) Parent, the
Companies, AlliedSignal and Buyer shall not be subject to any order or
injunction by any Governmental Entity restraining or prohibiting the
consummation of the transactions contemplated hereby, (ii) no action or
proceeding shall have been instituted before any Governmental Entity to
restrain or prohibit, or to obtain substantial damages in respect of, the
consummation of the transactions contemplated hereby, (iii) none of the parties
hereto or any Seller Subsidiary shall have received written notice from any
Governmental Entity of (x) its intention to institute any action or proceeding
to restrain, enjoin or nullify this Agreement or the transactions contemplated
hereby, or to commence any investigation (other than a routine letter of
inquiry, including a routine civil investigative demand) into the consummation
of the transactions contemplated hereby or (y) the actual commencement of such
investigation, (iv) there shall not be any pending or threatened litigation,
suit, action or proceeding by any party which would reasonably be expected to
limit or materially adversely affect Buyer's ownership of the Acquired Assets
or the Buyer under the Herndon Agreement's ownership of and the Herndon
Purchased Assets, and (v) no Law shall have been promulgated or enacted by any
Governmental Entity, which would prevent or make illegal the consummation of
the transactions contemplated hereby.
(g) Transition Services Agreement. Parent, Sellers and
Buyer shall have entered into a mutually satisfactory transition services
agreement provided that charges for services rendered shall be customary and
reasonable.
(h) Side Letters. Fairchild and Jeffrey Steiner, as
appropriate, shall have executed and delivered to AlliedSignal the three Side
Letters substantially in the form of Exhibits 1.9(xiii)(A-C).
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(i) Documents. Parent and the Companies shall have
delivered to Buyer at the Closing such other documents and instruments as shall
be reasonably necessary to transfer to Buyer the Purchased Assets as
contemplated by this Agreement. Parent and Sellers shall have delivered all
the certificates, instruments, contracts and other documents specified to be
delivered by each of them hereunder.
(j) Herndon Closing. (i) All conditions to the Closing
(as defined in the Herndon Agreement) shall have been satisfied or waived and
(ii) the Closing (as defined in the Herndon Agreement) shall be consummated
simultaneously with the consummation of the Closing hereunder.
(k) Harco Northern Ireland, Ltd. Eric Steiner shall have
conveyed to Buyer or Buyer's designees the share of capital stock of (or other
equity interest in) Harco Northern Ireland, Ltd. owned by him, free and clear
of all Liens.
(l) Escrow Agreement. Parent and the Escrow Agent shall
have executed and delivered to AlliedSignal the Escrow Agreement.
5.2 Conditions Precedent to Obligations of Parent and
Sellers. The obligations of Sellers to sell, and Parent to cause to be sold,
the Purchased Assets and to consummate the other transactions contemplated
hereby are subject to the satisfaction, on or prior to the Closing Date, of
each of the following conditions (any one or more of which may be waived in
writing in whole or in part by Parent (acting on its own behalf and on behalf
of Sellers) in its sole discretion):
(a) Representations, Warranties and Covenants. Each of
the representations and warranties of AlliedSignal and Buyer contained in this
Agreement and in any Transaction Document delivered in connection herewith
shall be true and correct in all material respects on and as of the date of
this Agreement and at and as of the Closing with the same effect as though such
representations and warranties had been made at and as of the Closing, except
for representations and warranties that speak as of a specific date or time
other than the Closing (which need only be true and correct in all material
respects as of such date or time); provided, however, that if any such
representation or warranty is already qualified by materiality, for purposes of
determining whether this condition has been satisfied, such representation or
warranty as so qualified shall be true and correct in all respects.
AlliedSignal and Buyer shall have performed or complied in all material
respects with each covenant and agreement required by this Agreement to be
performed or complied with by it at or prior to the Closing. AlliedSignal or
Buyer, as the case may be, shall furnish Sellers with a certificate of such
company dated the Closing Date and signed by a senior executive officer of
Buyer to the effect that the conditions set forth in this Section 5.2(a) have
been satisfied.
(b) HSR Act. The applicable waiting period under the HSR
Act (including any extensions thereof) with respect to the transactions
contemplated hereby shall have expired or been terminated.
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(c) Stock Exchange Listing. The NYSE shall have duly
approved for listing, subject to official notice of issuance, the shares of
AlliedSignal Common Stock to be issued hereunder at the Closing.
(d) Injunction; Litigation; Legislation. (i) Parent, the
Companies, AlliedSignal and Buyer shall not be subject to any order or
injunction by any Governmental Entity restraining or prohibiting the
consummation of the transactions contemplated hereby, (ii) no action or
proceeding shall have been instituted before any Governmental Entity to
restrain or prohibit, or to obtain substantial damages in respect of, the
consummation of the transactions contemplated hereby, (iii) none of the parties
hereto or any Seller Subsidiary shall have received written notice from any
Governmental Entity of (x) its intention to institute any action or proceeding
to restrain, enjoin or nullify this Agreement or the transactions contemplated
hereby, or to commence any investigation (other than a routine letter of
inquiry, including a routine civil investigative demand) into the consummation
of the transactions contemplated hereby or (y) the actual commencement of such
investigation and (iv) no Law shall have been promulgated or enacted by any
Governmental Entity, which would prevent or make illegal the consummation of
the transactions contemplated hereby.
(e) Registration Rights Agreement. AlliedSignal shall
have executed and delivered to Parent a registration rights agreement
substantially in the form of Exhibit 1.9(b)(vi) with such changes as may
reasonably be requested by Citicorp USA, Inc. provided that such changes shall
not provide for (i) more than a single demand registration right, (ii) a period
of longer than 180 days during which the Registration Statement must be kept in
effect or (iii) the payment of expenses by a party other than Citicorp USA,
Inc. or Parent.
(f) Documents. AlliedSignal and Buyer shall have
delivered to Sellers at the Closing such other documents and instruments as
shall be reasonably necessary for the assumption by Buyer of the Assumed
Liabilities as contemplated by this Agreement. AlliedSignal and Buyer shall
have delivered all the certificates, instruments, contracts and other documents
specified to be delivered by it hereunder.
(g) Herndon Closing. (i) All conditions to the Closing
(as defined in the Herndon Agreement) shall have been satisfied or waived and
(ii) the Closing (as defined in the Herndon Agreement) shall be consummated
simultaneously with the consummation of the Closing hereunder.
(h) Escrow Agreement. AlliedSignal and the Escrow Agent
shall have executed and delivered to Parent the Escrow Agreement.
ARTICLE VI
CERTAIN ADDITIONAL COVENANTS
6.1 Expenses. Except as otherwise expressly provided in
this Agreement, each of the parties hereto shall each bear its respective
accounting, legal and other expenses incurred in connection with the
transactions contemplated by this Agreement.
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6.2 Maintenance of Books and Records. Parent, Sellers
and Buyer shall cooperate fully with each other after the Closing so that
(subject to any limitations that are reasonably required to preserve any
applicable attorney-client privilege) each party hereto has access to the
business records, contracts and other information existing at the Closing Date
and relating in any manner to the Acquired Assets, the Assumed Liabilities or
the conduct of the Business (whether in the possession of Parent, Sellers or
Buyer). No files, books or records existing at the Closing Date and relating
in any manner to the Acquired Assets or the conduct of the Business prior to
the Closing Date shall be destroyed by any party hereto for a period of six
years after the Closing Date without giving the other party at least 30 days'
prior written notice, during which time such other party shall have the right
(subject to the provisions hereof) to examine and to remove any such files,
books and records prior to their destruction. The access to files, books and
records contemplated by this Section 6.2 shall be during normal business hours
and upon not less than two business days' prior written request, shall be
subject to such reasonable limitations as the party having custody or control
thereof may impose to preserve the confidentiality of information contained
therein, and shall not extend to material subject to a claim of privilege
unless expressly waived by the party entitled to claim the same.
6.3 Financial Statements. Upon the request of
AlliedSignal, Parent and Sellers shall, as promptly as practicable (but in no
event later than 30 days after such request), provide AlliedSignal with such
financial statements relating to the Combined Business as may be required under
Rule 3-05, Article 11 of Regulation S-X or other rule or regulation promulgated
under the Securities Act or the Exchange Act in connection with the preparation
and filing of any registration statement or periodic report of AlliedSignal
pursuant to such laws, including unqualified opinions thereon of independent
public accountants and consents therefor as required by such laws and the rules
and regulations thereunder.
6.4 Non-Competition/Non-Solicitation.
(a) Parent and each Seller covenants and agrees that, if
the Closing is consummated, for a period of three years after the Closing Date,
it will not, and will cause Parent Subsidiaries not to, engage in the business
of supplying to the aerospace industry aircraft hardware, chemicals or related
support services (or any portion thereof) anywhere in the world (the
"Competitive Activities"), except for (i) the sale of any Inventory of such
hardware or chemicals owned by such Person or consigned to such Person as of
the date hereof, the value of which Inventory is estimated to be approximately
$5,000,000 or (ii) the sale of any Inventory of such hardware or chemicals
hereafter acquired by such Person as part of a bulk purchase or hereafter
consigned to such person as part of a bulk consignment, but only after such
Person has offered to sell such hardware or chemicals to Buyer at commercially
reasonable prices for such quantities as would be charged to distributors of
such products; provided, however, that nothing herein shall be construed to
prevent Parent, Sellers and/or any of their respective Affiliates from owning,
in the aggregate, up to 10% of the stock or equity interest in any Person that
engages in such business or any portion thereof. It is the desire and intent
of the parties hereto that the provisions of this Section 6.4 shall be enforced
to the fullest extent permitted under the laws and public policies of each
jurisdiction in which enforcement is sought. If any court determines that any
provision of this Section 6.4 is unenforceable, such court shall have the power
to reduce the
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duration or scope of such provision, as the case may be, or terminate such
provision and, in reduced form, such provision shall be enforceable; it is the
intention of the parties that the foregoing restrictions shall not be
terminated, unless so terminated by a court, but shall be deemed amended to the
extent required to render them valid and enforceable, such amendment to only
apply with respect to the operation of this Section 6.4 in the jurisdiction of
the court that has made the adjudication. Notwithstanding the foregoing,
nothing in this Section 6.4(a) shall prohibit Parent, any Seller or any of
their respective Affiliates from acquiring any Person or business that engages
in Competitive Activities provided that (x) such activities do not constitute
the principal activities of the Person or business to be acquired (based on the
sales of such business during the preceding four (4) full calendar quarters)
and (y) if Competitive Activities constitute in excess of fifteen percent (15%)
of the revenues of the Person or business acquired, Sellers use their
reasonable efforts to divest that portion of such Person or business that
engages in Competitive Activities within twelve (12) months after the
acquisition thereof.
(b) Each of Parent and each Seller covenants and agrees
that, if the Closing is consummated, for a period of one year after the Closing
Date, it will not, and will cause Parent Subsidiaries not to, directly or
indirectly, solicit for employment, either as an employee or a consultant, any
employee or independent contractor of AlliedSignal, Buyer or any of their
respective Affiliates who is engaged in the Business and was an employee or
independent contractor of any Company engaged in the Business as of the Closing
Date to become an employee or consultant or otherwise provide services to
Parent, such Seller or any Parent Subsidiary, except for persons whose
employment is solicited or procured through general media advertisements.
(c) The parties acknowledge and agree that the
restrictions contained in Sections 6.4(a) and 6.4(b) are a reasonable and
necessary protection of the immediate interests of AlliedSignal and Buyer, and
any violation of these restrictions would cause substantial injury to
AlliedSignal or Buyer, as the case may be and that AlliedSignal and Buyer would
not have entered into this Agreement without receiving the additional
consideration offered by Parent and each Seller in binding itself to these
restrictions. In the event of a breach or a threatened breach by Parent, any
Seller or any Parent Subsidiary of these restrictions, AlliedSignal and Buyer
shall be entitled to apply to any court of competent jurisdiction for an
injunction restraining such Person from such breach or threatened breach
(without the necessity of proving the inadequacy of money damages as a remedy);
provided, however, that the right to apply for injunctive relief shall not be
construed as prohibiting AlliedSignal or Buyer, as the case may be, from
pursuing any other available remedies for such breach or threatened breach.
(d) Each of AlliedSignal and Buyer covenant and agree
that, if the Closing is consummated, for a period of one year after the Closing
Date, and if not consummated for a period of one year from the date of
termination of this Agreement, it will not, and will cause its Affiliates not
to, directly or indirectly, solicit for employment, either as an employee or a
consultant, any employee or independent contractor of Parent or any Parent
Subsidiary (other than any employee or independent contractor of any of the
Companies) to become an employee or consultant or otherwise provide services to
AlliedSignal, Buyer or any of their respective
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Affiliates, except for persons whose employment is solicited or procured
through general media advertisements.
(e) The parties acknowledge and agree that the
restrictions contained in Section 6.4(d) are a reasonable and necessary
protection of the immediate interests of Parent and Sellers, and any violation
of these restrictions would cause substantial injury to Parent or Sellers, as
the case may be, and that Parent and Sellers would not have entered into this
Agreement without receiving the additional consideration offered by
AlliedSignal and Buyer in binding itself to these restrictions. In the event
of a breach or a threatened breach by AlliedSignal, Buyer or any of their
respective Affiliates of these restrictions, Parent and any such Seller shall
be entitled to apply to any court of competent jurisdiction for an injunction
restraining such Person from such breach or threatened breach (without the
necessity of proving inadequacy of money damages as a remedy); provided,
however, that the right to apply for injunctive relief shall not be construed
as prohibiting Parent or such Seller from pursuing any other available remedies
for such breach or threatened breach.
6.5 Confidential Information. Parent and Sellers shall,
and shall cause Parent Subsidiaries to, maintain the confidentiality of, and
shall not use, and shall cause Parent Subsidiaries not to use, for the benefit
of itself or others, any confidential information concerning the Business or
the Acquired Assets, including any information with respect to the Intellectual
Property or Technology (the "Confidential Information"); provided, however,
that this Section 6.5 shall not restrict (a) any disclosure by any such Person
of any Confidential Information required by applicable Law, securities exchange
or any court of competent jurisdiction; provided, that AlliedSignal and Buyer
are given notice and an adequate opportunity to contest such disclosure, (b)
any disclosure on a confidential basis to any such Person's attorneys,
accountants, lenders and investment bankers and (c) any disclosure of
information (i) which is available publicly as of the date of this Agreement,
(ii) which, after the date of this Agreement, becomes available publicly
through no fault of the disclosing party or any of its Affiliates or (iii)
which is received by such Person from a third party not, to the best of such
Person's knowledge, subject to any obligation of confidentiality with respect
thereto.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 Survival. All representations, warranties, covenants
and agreements contained in this Agreement or the Transaction Documents shall
survive (and not be affected in any respect by) the Closing, any investigation
conducted by any party hereto and any information which any party may receive.
Notwithstanding the foregoing, the representations and warranties contained in
or made pursuant to this Agreement and the related indemnity obligations set
forth in Sections 7.2(a)(i) and 7.3(a)(i) shall terminate on, and no claim or
action with respect thereto may be brought after, the date three years after
the Closing Date, except that (a) the representations and warranties contained
in Sections 2.3 and 2.12 and the related indemnity obligations contained in
Section 7.2 shall survive indefinitely and (b) the representations and
warranties contained in Sections 2.10, 2.14 and 2.20 and the related indemnity
obligations
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contained in Section 7.2 shall survive until 30 days after the expiration of
the applicable statute of limitations (or extensions or waivers thereof). The
representations and warranties which terminate on the date three years after
the Closing Date and the representations and warranties referred to in the
foregoing clause (b), and the Liability of any party hereto with respect
thereto pursuant to this Article VII, shall not terminate with respect to any
claim, whether or not fixed as to Liability or liquidated as to amount, with
respect to which the Indemnifying Party has been given written notice prior to
the date three years after the Closing Date or such 30th day after the
expiration of the applicable statute of limitations (or extensions or waivers
thereof), as the case may be.
7.2 Indemnification by Parent, Sellers and Herndon
Sellers.
(a) Subject to Section 7.1 Parent, Sellers and Herndon
Sellers shall jointly and severally indemnify and hold AlliedSignal, Buyer,
Buyer as defined in the Herndon Agreement, and their respective employees,
officers, directors, agents and Affiliates (collectively, the "Buyer
Indemnified Parties") harmless from and against, and agree promptly to defend
any Buyer Indemnified Party from and reimburse any Buyer Indemnified Party for,
any and all Losses which any Buyer Indemnified Party may at any time suffer or
incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy as of the date of
this Agreement, the date of the Herndon Agreement or the Closing Date
of any of the representations and warranties made (w) by Parent or
Sellers in or pursuant to this Agreement, (x) in any Transaction
Document delivered by Parent or any Seller at the Closing in
accordance herewith, (y) made by Parent or the Herndon Sellers in or
pursuant to the Herndon Agreement or (z) in any Transaction Document
delivered by Parent or any Herndon Seller at the Closing under the
Herndon Agreement in accordance with the Herndon Agreement (it being
understood and agreed that, notwithstanding anything to the contrary
contained in this Agreement or the Herndon Agreement, to determine if
there had been an inaccuracy or breach of a representation or warranty
of Parent, any Seller or any Herndon Seller and the Losses arising
from such inaccuracy or breach, such representation and warranty shall
be read as if it were not qualified by materiality, including, without
limitation, qualifications indicating accuracy in all material
respects, or accuracy except to the extent the inaccuracy would not
have a Material Adverse Effect);
(ii) any failure by Parent, any Seller or any
Herndon Seller to carry out, perform, satisfy and discharge any of
their respective covenants, agreements, undertakings or Liabilities
under (w) this Agreement, (x) any of the Transaction Documents
delivered by Parent or any Seller pursuant to this Agreement, (y) the
Herndon Agreement or (z) any of the Transaction Documents delivered by
Parent or any Herndon Seller pursuant to the Herndon Agreement;
(iii) the Non-Assumed Liabilities and the Herndon
Non-Assumed Liabilities; and
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(iv) the ownership, use and possession of the
Excluded Assets or the Herndon Excluded Assets prior to, on or after
the Closing Date.
(b) Notwithstanding any other provision herein to the
contrary, (i) neither Parent, Sellers nor the Herndon Sellers shall be required
to indemnify and hold harmless any Buyer Indemnified Party pursuant to Section
7.2(a)(i) unless the applicable Buyer Indemnified Party has asserted a claim
with respect to such matters within the applicable survival period set forth in
Section 7.1 hereof, (ii) neither Parent, Sellers nor the Herndon Sellers shall
have any Liability pursuant to Section 7.2(a)(i) until the cumulative aggregate
amount of all Losses which are otherwise recoverable thereunder by Buyer
Indemnified Parties exceed an amount equal to Six Million Nine Hundred Thousand
Dollars ($6,900,000) (the "Basket"), and then only for the amount by which such
Losses exceed the Basket, (iii) the cumulative indemnification obligation of
Parent, Sellers and the Herndon Sellers under Section 7.2(a)(i), except as it
applies to a breach of the representations and warranties contained in Section
2.3, shall in no event exceed 50% of the Cash Equivalent Purchase Price, (iv)
the cumulative indemnification obligation of Parent and Sellers under Section
7.2(a)(i) with respect to a breach of the representations and warranties
contained in Section 2.3 shall in no event exceed the Cash Equivalent Purchase
Price, (v) the amount of any Loss for which indemnification is provided under
this Section 7.2 shall be net of any amount actually recovered by AlliedSignal
or Buyer under insurance policies with respect to such Losses, and (vi) neither
Parent, Sellers, nor the Herndon Sellers shall have any Liability for
consequential damages, except that the provisions of this clause (vi) shall not
apply to the breach of the representations and warranties contained in Section
2.3 or the breach of any covenant contained in Section 4.19. Notwithstanding
anything in this Agreement to the contrary, neither Parent, Sellers, nor the
Herndon Sellers shall have any obligation to indemnify any Buyer Indemnified
Party for any Special Claims (as defined in Section 7.4(b)) that are less than
$20,000 per claim (a "Small Claim") and Losses in respect of Small Claims shall
be disregarded for purposes of determining whether Losses pursuant to Sections
7.2(a)(i) and 7.2(a)(iv) exceed the Basket.
7.3 Indemnification by AlliedSignal and Buyer.
(a) Subject to Section 7.1 AlliedSignal and Buyer shall
jointly and severally indemnify and hold Parent, Sellers, the Herndon Sellers
and their respective employees, officers, directors, agents and Affiliates
(collectively, the "Seller Indemnified Parties") harmless from and against, and
agree promptly to defend any Seller Indemnified Party from and reimburse any
Seller Indemnified Party for, any and all Losses which any Seller Indemnified
Party may at any time suffer or incur, or become subject to, as a result of or
in connection with:
(i) any breach or inaccuracy as of the date of
this Agreement, or the Herndon Agreement or the Closing Date of any of
the representations and warranties made (w) by AlliedSignal or Buyer
in or pursuant to this Agreement, (x) in any Transaction Document
delivered by AlliedSignal or Buyer at the Closing in accordance
herewith, (y) made by AlliedSignal or the Buyer under the Herndon
Agreement in or pursuant to the Herndon Agreement or (z) in any
Transaction Document delivered by AlliedSignal or the Buyer under the
Herndon Agreement at the Closing under the
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Herndon Agreement in accordance with the Herndon Agreement (it being
understood and agreed that, notwithstanding anything to the contrary
contained in this Agreement or the Herndon Agreement, to determine if
there had been an inaccuracy or breach of a representation or warranty
of AlliedSignal, Buyer or the Buyer under the Herndon Agreement and
the Losses arising from such inaccuracy or breach, such representation
and warranty shall be read as if it were not qualified by materiality,
including, without limitation, qualifications indicating accuracy in
all material respects, or accuracy except to the extent the inaccuracy
will not have a material adverse effect on the ability of AlliedSignal
or Buyer to perform its obligations under this Agreement and the other
Transaction Documents to which it is a party);
(ii) any failure by AlliedSignal, Buyer or the
Buyer under the Herndon Agreement to carry out, perform, satisfy and
discharge any of their respective covenants, agreements, undertakings,
Liabilities under (w) this Agreement, (x) any of the Transaction
Documents delivered by AlliedSignal or Buyer, as the case may be,
pursuant to this Agreement, (y) the Herndon Agreement or (z) any of
the Transaction Documents delivered by AlliedSignal or the Buyer under
the Herndon Agreement, as the case may be, pursuant to the Herndon
Agreement;
(iii) the Assumed Liabilities and the Herndon
Assumed Liabilities; and
(iv) the operation of the Combined Business after
the Closing.
(b) Notwithstanding any other provision herein to the
contrary, (i) neither AlliedSignal nor Buyer shall be required to indemnify and
hold harmless any Seller Indemnified Party pursuant to Section 7.3(a)(i) unless
the applicable Seller Indemnified Party has asserted a claim with respect to
such matters within the applicable survival period set forth in Section 7.1
hereof, (ii) the cumulative indemnification obligation of AlliedSignal and
Buyer under Section 7.3(a)(i) shall in no event exceed 50% of the Cash
Equivalent Purchase Price, and (iii) neither AlliedSignal nor Buyer shall have
any Liability for consequential damages.
7.4 Notification of Claims.
(a) If any Buyer Indemnified Party, on the one hand, or
Seller Indemnified Party, on the other hand (an "Indemnified Party"), has a
claim or potential claim or receives notice of any claim, potential claim or
the commencement of any action or proceeding which could give rise to an
obligation on the part of Parent or Sellers, on the one hand, or AlliedSignal
or Buyer, on the other hand, to provide indemnification (the "Indemnifying
Party") pursuant to Section 7.2 or 7.3, respectively, the Indemnified Party
shall promptly give the Indemnifying Party notice setting forth in reasonable
detail the facts giving rise to the claim to the extent known (an
"Indemnification Claim"); provided, however, that the failure to give such
prompt notice shall not prevent any Indemnified Party from being indemnified
hereunder for any Losses, except to the extent that the failure to so promptly
notify the Indemnifying Party actually damages the Indemnifying Party or except
to the extent such notice is not received during the applicable survival period
set forth in Section 7.1.
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(b) In the event of a claim, a potential claim or the
commencement of any action or proceeding by a third party which could give rise
to an obligation to provide indemnification pursuant to Section 7.2 or 7.3, the
Indemnified Party shall give the Indemnifying Party prompt written notice
thereof setting forth in reasonable detail the facts giving rise to the claim
to the extent known (the "Third Party Indemnification Claim"); provided,
however, that the failure of the Indemnified Party to so promptly notify the
Indemnifying Party shall not prevent any Indemnified Party from being
indemnified for any Losses, except to the extent that the failure to so
promptly notify actually damages the Indemnifying Party or except to the extent
such notice is not received during the applicable survival period set forth in
Section 7.1. If the Indemnifying Party confirms in writing (the "Confirmation
of Indemnification") to the Indemnified Party within fifteen (15) days after
receipt of the Third Party Indemnification Claim the Indemnifying Party's
responsibility to indemnify and hold harmless the Indemnified Party therefor in
accordance herewith and within such fifteen (15) day period demonstrates to the
Indemnified Party's reasonable satisfaction that as of such time (i) in the
event the Indemnifying Party is Parent and Sellers, Parent is in compliance
with the covenants set forth in Section 4.17 and the face value of the Third
Party Indemnification Claim, when aggregated with the face value of all other
outstanding claims of Buyer Indemnified Parties, does not exceed the net worth
of Parent, or (ii) in the event the Indemnifying Party is AlliedSignal and
Buyer, AlliedSignal and Buyer have sufficient financial resources in order to
indemnify for the full amount of any potential Liability in connection with
such claim, the Indemnifying Party may elect to compromise or defend, at such
Indemnifying Party's own expense and by such Indemnifying Party's own counsel,
which counsel shall be reasonably satisfactory to the Indemnified Party, any
such matter involving the asserted Liability of the Indemnified Party. If the
Indemnifying Party elects to compromise or defend any such asserted Liability,
it shall within fifteen (15) days (or sooner, if the nature of the asserted
Liability so requires) notify the Indemnified Party of its intent to do so, and
the Indemnified Party shall cooperate, at the expense of the Indemnifying
Party, in the compromise of, or defense against, any such asserted Liability;
provided that (i) the Indemnified Party may, if it so desires, employ counsel
at its own expense to assist in the handling of any such third party claim,
(ii) the Indemnifying Party shall keep the Indemnified Party advised of all
material events with respect to any such third party claim, (iii) the
Indemnifying Party shall obtain the prior written approval of the Indemnified
Party (which approval may not be unreasonably withheld) before ceasing to
defend against such third party claim or entering into any settlement,
adjustment or compromise of such third party claim involving injunctive or
similar equitable relief being asserted against any Indemnified Party or any
Affiliate thereof and (iv) no Indemnifying Party shall, without the prior
written consent of each Indemnified Party, settle or compromise or consent to
the entry of any judgment in any pending or threatened demand, claim, action or
cause of action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any such Indemnified Party is a party to such
demand, claim, action or cause of action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of all such
Indemnified Parties from all Liability arising out of such claim, action, suit
or proceeding. With respect to claims for indemnification arising out of or
relating to trade disputes, warranty claims, ordinary course returns and
allowances disputes and similar contractual disputes (including late deliveries
or delivery of non-conforming goods) ("Special Claims"), (i) if the Special
Claim or Claims related to a single third party aggregates less than $1,000,000
on the face of such Special Claim
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or Claims, AlliedSignal and Buyer shall control the defense and settlement of
such claims with such third party, and (ii) if the Special Claim or Claims
related to a single third party aggregates more than $1,000,000 on the face of
such Special Claim or Claims, Parent and Sellers shall control the defense of
such claims, provided that Parent shall have delivered a Confirmation of
Indemnification and demonstrated that Parent has sufficient financial resources
in accordance with clause (i) of the second sentence of this Section 7.4(b).
Notwithstanding anything contained herein to the contrary, the Indemnifying
Party shall not be entitled to have sole control over the defense, settlement,
adjustment or compromise of any third party non-monetary claim that seeks an
order, injunction or other equitable relief against any Indemnified Party or
any Affiliate thereof, which, if successful, could materially interfere with
the business, Assets, Liabilities, financial condition or results of operations
of the Indemnified Party or any of its Affiliates. If the Indemnifying Party
elects not to compromise or defend against the asserted Liability, or fails to
notify the Indemnified Party of its election as herein provided, the
Indemnified Party may, at the Indemnifying Party's expense, pay, compromise or
defend against such asserted Liability.
ARTICLE VIII
EMPLOYEES AND EMPLOYEE BENEFITS
8.1 Scope of Article. This Article VIII contains the
covenants and agreements of the parties with respect to (a) the status of
employment of the employees of Sellers and the Seller Subsidiaries employed in
the Business ("Employees") upon the sale of the Business to Buyer, and (b) the
employee benefits and employee benefit plans provided or covering such
Employees and former employees of Sellers and the Seller Subsidiaries who
terminated employment with the Sellers or the Seller Subsidiaries while
employed in the Business or who retired from the Business ("Former Employees").
Nothing herein expressed or implied confers upon any Employee or Former
Employee of Sellers or the Seller Subsidiaries any rights or remedies of any
nature or kind whatsoever.
8.2 U.S. Employees. This Section 8.2 applies only to
Employees and Former Employees employed or previously employed by Sellers in
the United States.
(a) Employment. Buyer shall offer employment effective
as of the Closing Date to each Employee of a Seller who is employed in the
United States (a "U.S. Employee") and is actively at work immediately prior to
the Closing Date or is not actively at work immediately prior to the Closing
Date due solely to vacation, holiday or jury duty. Such initial offer of
employment shall be for a position and for base salary or wages which are
comparable to that which Employee had with Sellers immediately prior to the
Closing and shall include employee benefits which are comparable in the
aggregate to that which such Employees had with Sellers immediately prior to
the Closing; provided, however, that no such employment shall be offered to
Tucker E. Nason, Frank Saltzman and James Fairchild. Buyer shall offer
employment to each other U.S. Employee who is not actively at work immediately
prior to the Closing Date (including, but not limited to, any such employee who
is not actively at work due to medical leave, sick leave, short-term
disability, long-term disability, layoff or leave of absence) (an "Inactive
Employee") who is willing and able to return to work within 90 days after the
Closing
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Date or such later date as may be required by law, with such employment with
Buyer to commence on the date the Inactive Employee first commences active
employment with Buyer. Sellers shall be responsible for any obligation to
provide employee benefits to an Inactive Employee prior to such employee's date
of hire by Buyer. U.S. Employees who accept Buyer's offer of employment and
become employees of Buyer shall be referred to herein as "U.S. Transferred
Employees." Notwithstanding the foregoing, nothing herein shall be construed
to limit Buyer's ability to thereafter terminate the employment of any Employee
or to amend or terminate any employee benefit plan or to otherwise change the
terms and conditions of employment of any Employee.
(b) Past Service Credit. Buyer shall credit the service
of all U.S. Transferred Employees with Sellers and their Affiliates prior to
the Closing Date for purposes of eligibility and vesting under all employee
benefit plans provided by Buyer for U.S. Transferred Employees (but not for
purposes of benefit accrual). Buyer shall also: (i) cause to be waived any
pre-existing condition limitation under any Buyer medical plans applicable to
U.S. Transferred Employees or their dependents (except to the extent that any
such pre-existing condition limitation would not have been waived under
Sellers' medical plans), and (ii) recognize (or cause to be recognized) the
dollar amount of all covered expenses incurred by U.S. Transferred Employees
and their dependents under Sellers' applicable medical plans during the
calendar year in which the Closing Date occurs for purposes of satisfying such
calendar year's deductibles and co-payment limitations under any applicable
Buyer medical plans; provided, that the U.S. Transferred Employee enrolls in
the applicable Buyer medical plan at such time and in such manner as is
reasonably specified by Buyer.
(c) Severance; WARN Act. Sellers shall pay and be solely
liable for, and shall indemnify and hold AlliedSignal and Buyer harmless
against, any obligation, cost or expense for (i) severance pay, termination
indemnity pay, salary continuation, special bonuses or like compensation under
Sellers' plans, policies or arrangements and (ii) liability under the WARN Act,
or any similar state or local law, arising from, relating to or claimed by
reason of the Closing or the transactions contemplated by this Agreement or
which result from or relate to actions taken by Sellers on or before the
Closing Date.
(d) Vacation. Buyer shall adopt and assume Sellers'
liability for accrued, unused vacation entitlement of U.S. Transferred
Employees as of the Closing to the extent listed on the Balance Sheet.
(e) Workers Compensation. Sellers shall be responsible
for all workers compensation claims filed by or on behalf of a U.S. Transferred
Employee to the extent attributable to events, occurrences or exposures prior
to the Closing. Buyer shall be responsible for all workers compensation claims
filed by or on behalf of a U.S. Transferred Employee to the extent attributable
to events, occurrences or exposures following the Closing.
(f) Employment and Plan Liabilities. It is understood
and agreed that neither AlliedSignal nor Buyer is assuming any obligations or
liabilities arising under any Plan (except to the extent provided in Sections
8.2(d) above and 8.2(g) below) or as a result of any
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Employee's or Former Employee's employment with, or termination of employment,
from Sellers, and Sellers shall remain responsible for any such obligations and
liabilities.
(g) Employment Agreements. Buyer shall reimburse Sellers
for any Liabilities incurred after the Closing Date under the employee
agreements listed under "Employee Agreement" on Schedule 2.20(a), other than
the agreement relating to the employment of Tucker E. Nason.
(h) Post-Closing Liability. AlliedSignal and Buyer shall
pay and be solely liable for, and shall indemnify and hold Parent and Sellers
harmless against, any obligation, cost or expense for severance pay,
termination pay, salary continuation, special bonuses or like compensation
under any Buyer plan, policy or arrangement which result from, or relate to,
actions taken by AlliedSignal or Buyer or any Affiliate thereof after the
Closing Date.
(i) Cooperation. The parties agree to furnish each other
with such information concerning employees and employee benefit plans, and to
take all such other action, as is necessary or appropriate to effect the
transactions contemplated by this Article VIII.
8.3 Foreign Employees. This Section 8.3 applies only to
Employees and Former Employees employed or previously employed by Sellers or
the Seller Subsidiaries outside of the United States.
(a) Employment. Buyer shall continue the employment
without changes in terms immediately after the Closing of each Employee of a
Seller Subsidiary who is employed outside of the United States (a "Foreign
Employee"). Nothing herein shall be construed to limit Buyer's ability to
terminate the employment of any Foreign Employee or to amend or terminate any
employee benefit plan applicable to Foreign Employees or to otherwise change
the terms and conditions of employment.
(b) Severance. Sellers shall pay and be solely liable
for, and shall indemnify and hold AlliedSignal and Buyer harmless against, any
obligation, cost or expense for severance pay, termination indemnity pay,
salary continuation, special bonuses or like compensation under (i) any Seller
or Seller Subsidiary plan, policy or arrangement or (ii) any applicable Laws,
which result from or relate to actions taken by any Seller or Seller Subsidiary
on or before the Closing Date (other than the consummation of the Closing,
which shall be the responsibility of Buyer and Allied Signal).
(c) Cooperation. The parties agree to furnish each other
with such information concerning employees and employee benefit plans, and to
take all such other action, as is necessary or appropriate to effect the
transactions contemplated by this Article VIII.
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ARTICLE IX
TERMINATION; MISCELLANEOUS
9.1 Termination.
(a) This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date, as
follows:
(i) by the mutual written agreement of Buyer and
Parent;
(ii) by Buyer or Parent if the Closing has not
occurred on or before September 30, 1998; provided, however, that the
right to terminate this Agreement pursuant to this Section 9.1(a)(ii)
shall be suspended as to any party whose failure to fulfill any
material obligation under this Agreement shall have been the cause of,
or shall have resulted in, the failure of the Closing to occur prior
to such date until the fifth Business Day after such failure has been
cured;
(iii) by Buyer or Parent in the event of the issuance
by any Governmental Entity of a final, nonappealable order or
injunction restraining or prohibiting the consummation of the
transactions contemplated hereby; or
(iv) by Parent, upon five days' prior notice to
AlliedSignal, if, as a result of an Acquisition Proposal received by
Parent from a person other than a party to this Agreement or any of
its Affiliates, the Board of Directors of Parent determines in good
faith that their fiduciary obligations under applicable law require
that such Acquisition Proposal be accepted; provided, however, that
(x) the Board of Directors of Parent shall have concluded in good
faith, after considering applicable provisions of state law and after
giving effect to all concessions which may be offered by AlliedSignal
pursuant to clause (y) below, on the basis of advice of outside
counsel, that such action is necessary for the Board of Directors to
act in a manner consistent with its fiduciary duties under applicable
law and (y) prior to any such termination, Parent shall, and shall
cause its respective financial and legal advisors to, negotiate with
AlliedSignal to make such adjustments in the terms and conditions of
this Agreement as would enable AlliedSignal to proceed with the
transactions contemplated hereby; provided further, however, that no
termination shall be effective pursuant to this clause (iv) unless
concurrently with such termination a termination fee of Thirty-Four
Million Five Hundred Thousand Dollars ($34,500,000) is paid in cash by
Parent to AlliedSignal.
(b) Except for the obligations contained in Section 6.1,
the last sentence of Section 4.5 and this Article IX (other than Sections 9.2,
9.13 and 9.14) and the representations and warranties contained in Sections
2.16 and 3.8 (and the related indemnity obligations under Sections 7.2(a)(i)
and 7.3(a)(i), respectively), all of which shall survive any termination of
this Agreement, upon the termination of this Agreement pursuant to Section
9.1(a), this Agreement shall forthwith become null and void, and no party
hereto or any of its officers, directors, employees, agents, consultants,
stockholders or principals shall have any rights or Liabilities
<PAGE> 69
63
hereunder or with respect hereto, including without limitation for any breach
of warranty or representation; provided, however, that nothing contained herein
shall relieve any party hereto from Liability for any willful failure to comply
with any covenant or agreement contained herein.
9.2 Further Assurances. From time to time after the
Closing, AlliedSignal, Buyer, Parent and Sellers shall execute and deliver or
cause to be executed and delivered such further documents, certificates,
instruments of conveyance, assignment and transfer and take such further action
as AlliedSignal, Buyer, Parent or Sellers may reasonably request in order to
more effectively to sell, assign, convey, transfer, reduce to possession and
record title to any of the Purchased Assets to Buyer or to better enable Buyer
to complete, perform and discharge any of the Assumed Liabilities.
AlliedSignal, Buyer, Parent and Sellers agree to cooperate with each other in
all reasonable respects to assure to Buyer the continued title to and
possession of the Purchased Assets in the condition and manner contemplated by
this Agreement. Each party hereto shall cooperate and deliver such instruments
and take such action as may be reasonably requested by any other party hereto
in order to carry out the provisions and purposes of this Agreement and the
transactions contemplated hereby. AlliedSignal, Buyer, Parent and Sellers
shall cooperate and shall cause their respective Affiliates, officers,
employees, agents and representatives to cooperate to ensure the orderly
transition of the Business from Sellers to Buyer and to minimize the disruption
to the Business resulting from the transactions contemplated hereby.
9.3 Entire Agreement; Amendments; Waivers. This
Agreement, the Confidentiality Agreement, and the documents referred to herein
and to be delivered pursuant hereto constitute the entire agreement between the
parties hereto pertaining to the subject matter hereof, and supersede all prior
and contemporaneous agreements, understandings, negotiations and discussions of
the parties, whether oral or written. No amendment, supplement, modification,
waiver or termination of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver of any other
provision or breach of this Agreement, whether or not similar, unless otherwise
expressly provided.
9.4 Benefit; Assignment. This Agreement shall be binding
upon and inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and permitted assigns. This Agreement
shall not be assigned by any party hereto without the prior written consent of
the other party hereto; provided, however, that AlliedSignal or Buyer may
assign any or all of their respective rights hereunder to one or more
Affiliates of AlliedSignal or Buyer, as the case may be, without the consent of
Parent or Sellers provided that AlliedSignal or Buyer, as the case may be,
shall continue to be obligated to perform all of its obligations hereunder.
9.5 No Presumption. AlliedSignal, Buyer, Parent and
Sellers have participated jointly in the negotiation and drafting of this
Agreement. In the event any ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by
AlliedSignal, Buyer, Parent and Sellers, and no presumption or burden of proof
shall
<PAGE> 70
64
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
9.6 Notices. Notices and other communications provided
for herein shall be in writing and shall be deemed given only if delivered to
the party personally or sent to the party by telecopy, by registered or
certified mail (return receipt requested) with postage and registration or
certification fees thereon prepaid, or by any nationally recognized overnight
courier, addressed to the party at its address set forth below:
<TABLE>
<S> <C>
If to Parent or Sellers: Banner Aerospace
P.O. Box 20260
Washington, DC 20041
Attention: Chief Financial Officer
Telecopy No.: 703-478-5795
with copy to: Donald E. Miller
10704 Riverwood Drive
Potomac, MD 20854
If to AlliedSignal or Buyer: AlliedSignal Inc.
P.O. Box 2245
101 Columbia Road
Morristown, NJ 07962-2245
Attention: General Counsel
Telecopy No.: 973-455-4413
</TABLE>
or to such other address as a party may from time to time designate in writing
in accordance with this section. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.
9.7 Terms Generally.
(a)(i) Words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the
other genders as the context requires, (ii) the terms "hereof," "herein," and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including all of the Annexes,
Schedules and Exhibits hereto) and not to any particular provision of this
Agreement, and Article, Section, paragraph, Exhibit and Schedule references are
to the Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement
unless otherwise specified, (iii) the word "including" and words of similar
import when used in this Agreement shall mean "including, without limitation,"
unless otherwise specified, (iv) the word "or" shall not be exclusive, and (v)
provisions shall apply, when appropriate, to successive events and
transactions.
<PAGE> 71
65
(b) Each reference in this Agreement (or in any other
document or instrument furnished to AlliedSignal or Buyer by Parent or any
Seller pursuant to this Agreement) to "the best of Parent's and each Seller's
knowledge", or words of similar import referring to Parent and Sellers
(including Parent and Sellers not being aware of a particular event or other
matter), means the actual knowledge, after due inquiry, of each executive
officer of Parent and each of the Companies.
9.8 Counterparts; Headings. This Agreement may be
executed in several counterparts, each of which shall be deemed an original,
but such counterparts shall together constitute but one and the same Agreement.
The Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
9.9 Severability. If any provision, clause or part of
this Agreement or the application thereof under certain circumstances is held
invalid or unenforceable, the remainder of this Agreement, or the application
of such provision, clause or part under other circumstances, shall not be
affected thereby.
9.10 No Reliance. Except for any assignees permitted by
Section 9.4 of this Agreement and the indemnified persons pursuant to Sections
7.2 and 7.3: (i) no third party is entitled to rely on any of the
representations, warranties or agreements of the parties hereto contained in
this Agreement; and (ii) the parties hereto assume no Liability to any third
party because of any reliance on the representations, warranties or agreements
of such parties contained in this Agreement.
9.11 Governing Law. This Agreement shall be construed and
interpreted according to the laws of the State of New York, without regard to
the conflict of law principles thereof.
9.12 Submission to Jurisdiction; Waivers. The parties
hereto hereby irrevocably and unconditionally agree that:
(a) All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in a New York state or
federal court sitting in the City of New York, and the parties hereto hereby
irrevocably submit to the exclusive jurisdiction of such courts in any such
action or proceedings and irrevocably waive the defense of an inconvenient
forum to the maintenance of any such action or proceeding.
(b) Service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to such party at its
address as provided in Section 9.6.
9.13 Bulk Transfer. The parties hereto hereby waive
compliance with the provisions of any applicable bulk sales law of any
jurisdiction in connection with the transactions contemplated hereby and no
representation, warranty or covenant contained in this Agreement shall be
deemed to have been breached as a result of such non-compliance. Parent and
Sellers hereby agree, jointly and severally, to indemnify, defend and hold
AlliedSignal and Buyer
<PAGE> 72
66
harmless from and against any and all Losses arising out of or relating to
claims which may be asserted by third Persons, including Governmental Entities,
against the Acquired Assets or any Buyer Indemnified Parties as a result of
non-compliance with any applicable bulk sales law. Nothing in this Agreement
shall be construed as an admission by any party as to the applicability of any
bulk sales laws.
9.14 Use of Names. During the first 180 days after the
Closing Date, Buyer shall have the right to use all of the logos, trademarks
and trade identification of Parent as are located at the Acquired Real Property
or on the Acquired Assets (collectively, the "Trademarks"). Buyer's use of the
Trademarks shall be in accordance with such reasonable quality control
standards as shall be promulgated by Parent and provided to Buyer. If Parent
shall notify Buyer in writing of Buyer's material failure to comply with such
reasonable quality control standards and Buyer continues to not comply with
such reasonable quality control standards for more than 20 days after receipt
of such notice, Parent shall have the right to terminate Buyer's right under
this Section 9.14 to use the Trademarks.
9.15 Herndon Price Allocation. In connection with the
purchase price adjustment contemplated by Section 1.6, Parent and AlliedSignal
shall agree on an appropriate allocation of the Adjustment Amount to the
Initial Purchase Price under the Herndon Agreement (expressed as a positive or
negative number) and the Initial Purchase Prices under this Agreement and the
Herndon Agreement shall be adjusted accordingly. Similarly, Parent and
AlliedSignal shall agree on an appropriate allocation of any post-Closing
adjustments of the purchase price required under Section 1.6(f).
9.16 Relationship with Herndon Agreement. The parties
acknowledge and agree that it is the intent of the parties that,
notwithstanding any other provision of this Agreement or the Herndon Agreement,
the representations, warranties and covenants contained in this Agreement and
in the Herndon Agreement that (i) have substantially the same language (without
regard to the identity of the parties making such representation or warranty or
about whom such representation or warranty is made) and (ii) contain either the
language "in the aggregate" or a similar combining concept or a reference to a
Material Adverse Effect (a "Collective Representation" or a "Collective
Covenant", as the case may be) shall be deemed to be a single representation
and warranty or a single covenant, as the case may be, for purposes of
determining whether such representation and warranty has been breached or such
covenant has been complied with and all relevant facts relating to such
Collective Representation or Collective Covenant in both agreements shall be
considered. As examples, if there should be an issue regarding whether a
Collective Representation contained in this Agreement has been breached, the
parties would consider inaccuracies in such Collective Representation as well
as inaccuracies in the corresponding Collective Representation in the Herndon
Agreement in determining whether a breach of such Collective Representation had
occurred and in determining the materiality of any breach of a Collective
Representation relating to the Business, reference shall be made to the
Combined Business.
<PAGE> 73
67
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
<TABLE>
<S> <C>
BANNER AEROSPACE, INC. ALLIEDSIGNAL INC.
By: /s/ Warren D. Persavich By: /s/ Joe Leonard
----------------------------------- ------------------------------------
Name: Warren D. Persavich Name: Joe Leonard
Title: Senior Vice President Title: Senior Vice President
ADAMS INDUSTRIES, INC. AS BAR LLC
By: /s/ Warren D. Persavich By: ALLIED SIGNAL INC.
-----------------------------------
Name: Warren D. Persavich
Title: Vice President
By: /s/ Joe Leonard
AEROSPACE BEARING SUPPORT, INC. ------------------------------
Name: Joe Leonard
Title: Senior Vice President
By: /s/ Warren D. Persavich
-----------------------------------
Name: Warren D. Persavich
Title: Vice President
AIRCRAFT BEARING SUPPORT, INC.
By: /s/ Warren D. Persavich
-----------------------------------
Name: Warren D. Persavich
Title: Vice President
</TABLE>
<PAGE> 74
68
BANNER DISTRIBUTION, INC.
By: /s/ Warren D. Persavich
-----------------------------------
Name: Warren D. Persavich
Title: Vice President
BURBANK AIRCRAFT SUPPLY, INC.
By: /s/ Warren D. Persavich
-----------------------------------
Name: Warren D. Persavich
Title: Vice President
HARCO, INC.
By: /s/ Warren D. Persavich
-----------------------------------
Name: Warren D. Persavich
Title: Vice President
PACAERO
By: /s/ Warren D. Persavich
-----------------------------------
Name: Warren D. Persavich
Title: Vice President
<PAGE> 75
ANNEX A
SELLERS
<TABLE>
<CAPTION>
Name of Entity Jurisdiction of Organization
- -------------- ----------------------------
<S> <C>
Adams Industries, Inc. Connecticut
Aerospace Bearing Support, Inc. California
Aircraft Bearing Corporation California
Banner Distribution, Inc. Delaware
Burbank Aircraft Supply, Inc. Delaware
Harco, Inc. Delaware
PacAero California
</TABLE>
<PAGE> 76
ANNEX B
SELLER SUBSIDIARIES
<TABLE>
<CAPTION>
Name of Entity Jurisdiction of Organization
- -------------- ----------------------------
<S> <C>
Burbank Aircraft International, GmbH Germany
Harco Aerospace Fasteners, Ltd. Canada
Harco Northern Ireland, Ltd. United Kingdom
</TABLE>
<PAGE> 77
ANNEX C
DEFINITIONS
The following terms shall have the respective meanings
ascribed to them in this Annex C. References to Sections constitute references
to Sections of the Agreement.
"Accounts Receivable" means all billed and unbilled accounts
receivable and all trade notes receivable relating to the Combined Business
whether recorded or unrecorded, including, without limitation, all trade
receivable from other divisions or Affiliates of Parent and the Companies.
"Acquired Assets" means the Purchased Assets and the Subsidiary
Assets.
"Acquired Real Property" means, collectively, the Leased Real
Property and Owned Real Property.
"Acquisition Proposal" has the meaning set forth in Section 4.14.
"Adjustment Amount" means an amount equal to the difference between
Estimated Closing Date Net Worth and Target Net Worth expressed as a positive
number, as adjusted pursuant to Section 9.15.
"Adjustment Date" has the meaning set forth in Section 1.7(a).
"Affiliate" of any Person means any Person directly or indirectly
controlling, controlled by or under common control with such Person.
"Agreement" means the Asset Purchase Agreement, dated as of December
___, 1997, by and among Parent, Sellers, AlliedSignal and Buyer, together with
the Annexes, Schedules and Exhibits attached thereto, as the same may be
amended from time to time in accordance with the terms thereof.
"AlliedSignal" had the meaning set forth in the Preamble of the
Agreement.
"AlliedSignal Common Stock" means the common stock, par value $1 per
share, of AlliedSignal.
"AlliedSignal Reports" has the meaning set forth in Section 3.6.
"Ancillary Agreements" means the agreements to be delivered pursuant
to Sections 5.1 and 5.2.
"Antitrust Division" means the Antitrust Division of the United States
Department of Justice.
<PAGE> 78
2
"Assets" means businesses, properties, assets, goodwill, rights,
interests and privileges of every kind, nature or description, wherever
located, whether real, personal or mixed, tangible or intangible, and without
regard to whether they have value for accounting purposes or are carried on or
reflected in relevant books and records or financial statements.
"Assigned Receivables" has the meaning set forth in Section 1.7(a).
"Assumed Liabilities" has the meaning set forth in Section 1.3(a).
"Assumed Tax Liabilities" means Tax liabilities for value-added Taxes,
real property Taxes, personal and intangible property Taxes and payroll Taxes,
in each case only to the extent included on the Closing Balance Sheet.
"Average Trading Price" means, as of a specified date, the average of
the daily high and low closing prices of AlliedSignal Common Stock as reported
on the NYSE Composite Tape on each of the twenty (20) consecutive trading days
immediately preceding (and not including) such date.
"Balance Sheet" has the meaning set forth in Section 2.6.
"Basket" has the meaning set forth in Section 7.2(b).
"Bid" has the meaning set forth in Section 2.8(d).
"Business" has the meaning set forth in the Recitals of the Agreement.
"Business Day" or "business day" means any day other than a Saturday,
Sunday, or a day on which banking institutions in the City of New York are
authorized or obligated by law or executive order to close.
"Buyer" has the meaning set forth in the Preamble of the Agreement.
"Buyer Escrow Claims" has the meaning set forth in Section 1.5(c).
"Buyer Escrow Claim Loss Estimate" has the meaning set forth in
Section 1.5(c).
"Buyer Indemnified Parties" has the meaning set forth in Section
7.2(a).
"Cash Equivalent Purchase Price" means an amount equal to Three
Hundred Forty-Four Million Seven Hundred Seventy-Four Thousand Dollars
($344,774,000) plus (x) the excess, if any, of the Closing Date Net Worth over
the Target Net Worth and minus (y) the excess, if any, of the Target Net Worth
over the Closing Date Net Worth.
"Closing" has the meaning set forth in Section 1.8(a).
"Closing Accounts Receivable" has the meaning set forth in Section
1.7(a).
<PAGE> 79
3
"Closing Date" has the meaning set forth in Section 1.8(a).
"Closing Date Balance Sheet" shall mean the Proposed Closing Date
Balance Sheet as accepted or deemed final pursuant to Section 1.6(d) or (f), as
the case may be.
"Closing Date Net Worth" has the meaning set forth in Section 1.6(a).
"Closing Date Shares" has the meaning set forth in Section 1.4(b).
"COBRA" has the meaning set forth in Section 2.20(c)(iii).
"Code" means the Internal Revenue Code of 1986, as amended.
"Collected Amount" has the meaning set forth in Section 1.7(a).
"Combined Business" means collectively the Business and the Business
as defined in the Herndon Agreement.
"Combined Contracts" means, collectively, all Contracts and all
Contracts as defined in the Herndon Agreement.
"Companies" has the meaning set forth in the Preamble of the
Agreement, and "Company" means any one of the Companies.
"Competitive Activities" has the meaning set forth in Section 6.4(a).
"Confidentiality Agreement" means that certain confidentiality
agreement dated June 27, 1997 between AlliedSignal and Parent.
"Confidential Information" has the meaning set forth in Section 6.5.
"Confirmation of Indemnification" has the meaning set forth in Section
7.4(b).
"Contracts" means (a) all written and oral contracts, licenses,
commitments, agreements and instruments, including all customer contracts,
operating contracts and distribution contracts relating to the Business, (b)
all sales and purchase orders and supply agreements and other agreements
relating to the Business, (c) all leases of Equipment and Real Property
relating to the Business and (d) all other contracts, licenses, agreements and
instruments relating to the Business; provided, however, that the term
"Contract" shall not include any collective bargaining agreement or any
employment agreement or other Plan.
"Debt" means, with respect to any Person, the following Liabilities,
whether incurred by such Person, directly or indirectly, without duplication:
(i) its Liabilities for borrowed money;
<PAGE> 80
4
(ii) its Liabilities for the deferred purchase price of
property acquired by it (excluding accounts payable arising in the
ordinary course of business but including, without limitation, all
liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such property);
(iii) the amount of the obligation of such Person as the
lessee under any Capital Lease that would, in accordance with GAAP,
appear as a Liability on a balance sheet of such Person ("Capital
Lease" meaning, at any time, a lease with respect to which such
Person, as lessee, is required concurrently to recognize the
acquisition of an asset and the incurrence of a Liability in
accordance with GAAP);
(iv) amounts secured by any Lien with respect to any
property owned by such Person (whether or not it has assumed or
otherwise become liable for such amounts);
(v) all of its Liabilities in respect of letters of
credit or instruments serving a similar function issued or accepted
for its account by banks and other financial institutions (whether or
not representing obligations for borrowed money);
(vi) any Guarantee of such Person with respect to
Liabilities of any Person of the character described in any of the
clauses described in (i) through (vi) above ("Guarantee" meaning, with
respect to any Person, any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or
collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other Debt or obligation of any other Person
in any manner, whether directly or indirectly, including (without
limitation) obligations incurred through an agreement, contingent or
otherwise, by such Person);
(vii) all Liabilities of any Subsidiary of such Person of
the character described in clauses (i) through (vii) above; and
(viii) all Liabilities of the character described in clauses
(i) through (vii) above with respect to which, and to the extent that,
such Person remains legally liable, notwithstanding that such
Liability or obligation is deemed extinguished under GAAP.
"Defective Inventory" means the aggregate of all (i) excess Inventory,
(ii) obsolete or substandard Inventory, and (iii) Inventory that is not
Traceable Inventory, in each case determined in accordance with the procedures
and criteria set forth on Schedule 1.6(a).
"Disputed Account Receivable" has the meaning set forth in Section
1.7(a).
"Dispute Notice" has the meaning set forth in Section 1.6(c).
<PAGE> 81
5
"Disputes" has the meaning set forth in Section 1.6(c).
"Employees" has the meaning set forth in Section 8.1.
"Environmental Claim" shall mean any third party or governmental
written claim, notice, request for information, demand, investigation, lawsuit,
proceeding, judgment, award, penalty, order or other action that could expose
Parent, the Companies, AlliedSignal or Buyer to Losses under any Environmental
Law or to Losses for personal injuries (including death) or property damage
relating to or arising from the presence of, or exposure to, Hazardous
Materials.
"Environmental Law" means all applicable Laws relating to the
protection of the environment (including, but not limited to, natural
resources) and human health and safety, including, without limitation (a) all
requirements pertaining to reporting, licensing, permitting, investigation and
remediation of emissions, discharges, releases or threatened releases of
Hazardous Materials or other environmental conditions into the air, surface
water, groundwater or land or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, and (b) all requirements pertaining to the protection of
the health and safety of employees and other workers, and the protection of or
compensation to individuals from or related to exposures to Hazardous
Materials.
"Environmental Liability" means any Liability (existing at, or arising
after, the Closing) under Environmental Law, or any remedial action (at or
after the Closing), in connection with the Acquired Assets or the Business to
the extent arising from any condition (including any Hazardous Materials
condition) existing, or any act or omission the Companies or any of their
predecessors or any of their past, present or future Subsidiaries, at or prior
to the Closing Date, including claims, demands, assessments, judgments, orders,
causes of action (including toxic tort suits), notices of actual or alleged
violations or Liability (including such notices regarding the disposal or
release of Hazardous Materials on the Acquired Real Property or elsewhere),
proceedings and any associated Losses.
"Environmental Permit" means any Permit issued under any Environmental
Law or issued by any Governmental Entity responsible for environmental matters.
"Equipment" means all tangible assets and properties, except Real
Property, owned, used or held for use by any Company, including cars, trucks
and other transportation equipment, machinery and equipment, tools, spare
parts, furniture, office equipment, furnishings and fixtures and machinery and
equipment under order or construction.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means the escrow agent under the Escrow Agreement.
"Escrow Agreement" has the meaning set forth in Section 1.9(c).
"Escrow Cash" means any of the following: (i) any investment in
Government Obligations; (ii) investments in time deposit accounts, certificates
of deposit and money market
<PAGE> 82
6
deposits maturing within 180 days of the date of acquisition issued by a bank
or trust issuer which is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States, and which bank or trust issuer has capital, surplus and undivided
profits aggregating in excess of $50,000,000 (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act) or any money market fund sponsored by a registered broker dealer or mutual
fund distributor; (iii) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (ii) above; and
(iv) investments in securities with maturities of six months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by Standard & Poor's Ratings
Group or "A" by Moody's Investors Service, Inc.
"Escrow Release Date" has the meaning set forth in Section 1.5(c).
"Estimated Closing Date Net Worth" has the meaning set forth in
Section 1.4(a).
"Estimated Share Number" has the meaning set forth in Section 1.4(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" has the meaning set forth in Section 1.2(b).
"FAA" means the Federal Aviation Administration.
"Fairchild" means The Fairchild Corporation, a Delaware corporation.
"Final Future Tax Benefits" has the meaning set forth in Section
2.6(b).
"Financial Statements" has the meaning set forth in Section 2.6.
"Firm" has the meaning set forth in Section 1.6(d).
"FIRPTA Affidavit" has the meaning set forth in Section 1.9(a)(viii).
"Foreign Employees" has the meaning set forth in Section 8.3(a).
"Foreign Plan" has the meaning set forth in Section 2.20(a)(iii).
"Former Employees" has the meaning set forth in Section 8.1.
"Free-Standing Plan" has the meaning set forth in Section
2.20(a)(iii).
"FTC" means the United States Federal Trade Commission.
<PAGE> 83
7
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Government Contract" shall mean any written prime contract,
subcontract, grant or cooperative agreement with (i) the US Government, (ii)
any prime contractor of the US Government or (iii) any subcontractor with
respect to any contract described in clauses (i) or (ii) above.
"Governmental Entity" means (a) any multinational, federal,
provincial, state, municipal, local or other governmental or public department,
court, commission, board, bureau, agency, legislative or quasi-legislative body
or instrumentality, domestic or foreign; (b) any subdivision, agent,
commission, board, or department, authority, or similar body or instrumentality
of any of the foregoing; or (c) any quasi-governmental or private body
exercising any regulatory, expropriation or taxing governmental authority under
or for the account of any of the foregoing.
"Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged.
"Hazardous Material" means any substance, material or waste (a) the
presence of which requires investigation or remediation under any Environmental
Law, (b) which is regulated by an applicable Governmental Entity, which
substance, material or waste includes, without limitation, petroleum and its
by-products, friable asbestos, and any material or substance which is defined
as a "hazardous waste," "hazardous substance," "hazardous material,"
"restricted hazardous waste," "industrial waste," "solid waste," "contaminant,"
"pollutant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, (c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous, or (d)
the presence of which causes or threatens to cause a nuisance or trespass to
any property or poses or threatens to pose a hazard to the health or safety of
individuals on or about any such property.
"Herndon" means PB Herndon Aerospace, Inc., a Missouri corporation.
"Herndon Agreement" means the Asset Purchase Agreement, dated as of
the date of this Agreement, by and among Parent, Herndon, Banner Aerospace
Services, Inc., AlliedSignal and AS BAR PBH LLC, as the same may be amended
form time to time in accordance with the terms thereof.
"Herndon Assumed Liabilities" means Assumed Liabilities as defined in
the Herndon Agreement.
"Herndon Excluded Assets" means the Excluded Assets as defined in the
Herndon Agreement.
"Herndon Non-Assumed Liabilities" means the Non-Assumed Liabilities as
defined in the Herndon Agreement.
<PAGE> 84
8
"Herndon Purchased Assets" means the Purchased Assets as defined in
the Herndon Agreement.
"Herndon Sellers" means the Sellers under the Herndon Agreement.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Inactive Employee" has the meaning set forth in Section 8.2(a).
"Indemnification Claim" has the meaning set forth in Section 7.4(a).
"Indemnification Escrow Shares" means (i) as of the Closing Date, a
number of shares of AlliedSignal Common Stock equal to five percent (5%) of the
Estimated Share Number and (ii) thereafter, the initial number of
Indemnification Escrow Shares less any Indemnification Escrow Shares from time
to time released from escrow pursuant to Section 1.5(b) or (d).
"Indemnified Party" has the meaning set forth in Section 7.4(a).
"Indemnifying Party" has the meaning set forth in Section 7.4(a).
"Initial Purchase Price" has the meaning set forth in Section 1.4(b).
"Intellectual Property" means all foreign and domestic patents
(including all reissues, divisions, continuations and extensions thereof),
patent rights, service marks, trademarks and tradenames, trade dress, all
product names, all assumed or fictitious names and the logos associated
therewith, copyrights, applications for the foregoing, licenses and other
contractual rights with respect to the foregoing and other such property and
intangible rights owned, used or held for use by any Company, including
financial and marketing business data, pricing and cost information, business
and marketing plans and customer and suppliers lists, together with the
goodwill of the Business in connection with which such trademarks, tradenames,
product names and service marks are used.
"Inventory" means all inventory of the Combined Business, including
finished goods, work-in-progress, raw materials, operating chemical and
catalysts, parts, accessories, packaging, manufacturing, administrative and
other supplies on hand, goods held for sale or lease or to be furnished under
Assumed Contracts, and other inventory owned, used or held for use by any
Company.
"IRS" means the United States Internal Revenue Service.
"Laws" means all laws, constitutions, statutes, codes, ordinances,
decrees, rules, regulations, municipal by-laws, judicial or arbitral or
administrative or ministerial or departmental or regulatory judgments, orders,
decisions, rulings or awards, consent orders, consent decrees, policies,
voluntary restraints, guidelines, or any provisions or interpretations of the
foregoing, including general principles of common and civil law and equity,
binding on or affecting the Person referred to in the context in which such
word is used.
<PAGE> 85
9
"Leased Real Property" means all leased Real Property relating to the
Business including, without limitation, all Real Property listed on Part B of
Schedule 2.13(a).
"Liabilities" means, as to any Person, all debts, liabilities,
obligations and responsibilities of any kind or nature whatsoever of such
Person, whether direct or indirect, fixed or contingent, known or unknown,
accrued, vested or otherwise, whether in contract, tort, strict Liability or
otherwise, and whether or not actually reflected, or required by GAAP to be
reflected, in such Person's balance sheets or other books and records.
"Lien" means any lien, charge, claim, pledge, security interest,
conditional sale agreement or other title retention agreement, lease, mortgage,
security agreement, right of first refusal, option, restriction, tenancy,
license, covenant, right of way, easement or other encumbrance (including the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or statute or law of any jurisdiction).
"Losses" means any losses, costs, expenses, damages including
compensatory, exemplary, or punitive damages, Taxes, penalties, fines, charges,
demands, Liabilities and claims of any kind (including interest, penalties and
reasonable attorneys' and consultants' fees, expenses and disbursements),
except that Losses shall not include attorneys' fees of AlliedSignal or Buyer
if Parent has delivered a Confirmation of Indemnification in respect of a Third
Party arbitration claim and offered to assume the defense thereof which offer
was not accepted because the amount of such indemnification claim exceeded
Parent's net worth and Parent was in compliance with Section 4.17 of the
Agreement.
"Major Customer" means any customer of the Combined Business that
accounted for $500,000 or more in revenues of the Combined Business in the 1997
fiscal year or could reasonably be expected to account for more than $500,000
or more in revenues of the Combined Business in the 1998 fiscal year.
"Major Supplier" means any supplier of the Combined Business
(including any supplier of Intellectual Property) that accounted for $1,000,000
or more in sales to the Combined Business in the 1997 fiscal year or could
reasonably be expected to account for more than $1,000,000 or more in sales to
the Combined Business in the 1998 fiscal year.
"Material Adverse Effect" means (i) a material adverse effect upon, or
material adverse change in, the operations, Assets, Liabilities, condition
(financial or otherwise), or results of operations of the Combined Business,
taken as a whole (ii) any event, condition, circumstance or change that is
reasonably likely to have a Material Adverse Effect referred to in preceding
clause (i), or (iii) a significant risk that Buyer and the Buyer under the
Herndon Agreement, in any material respect, will not be able after the Closing
to operate the Combined Business substantially as operated by, or to own,
possess and use the Acquired Assets and the Herndon Purchased Assets
substantially as owned, possessed and used by, the Companies and the Herndon
Sellers, taken as a whole, as of the date hereof; provided, however, that the
loss of business from customers and suppliers of the Combined Business
(including through termination of contracts or reduction of purchases) shall
not be deemed a Material Adverse Effect unless the condition in Section 5.1(e)
of the Agreement has not been satisfied.
<PAGE> 86
10
"Non-Assumed Liabilities" has the meaning set forth in Section 1.3(b).
"Novation Agreement" has the meaning set forth in Section 4.15.
"NYSE" means the New York Stock Exchange, Inc.
"OSHA" has the meaning set forth in Section 2.9(a) hereof.
"Owned Real Property" means all Real Property owned by Sellers or any
Seller Subsidiary, including, without limitation, all Real Property listed on
Part A of Schedule 2.13(a).
"Parent" has the meaning set forth in the Preamble of the Agreement.
"Parent Common Stock" means the common stock, par value $1 per share,
of Parent.
"Parent Subsidiaries" means the direct or indirect Subsidiaries of
Parent or any other corporation or entity in which Parent owns a majority of
the capital stock or other equity interest.
"Parent Reports" has the meaning set forth in Section 2.28.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" means all franchises, approvals, permits, authorizations,
licenses, orders, registrations, certificates, variances, exemptions and other
similar permits or rights obtained from any Governmental Entity relating to the
conduct of the Business or the Acquired Real Properties and all pending
applications therefor.
"Permitted Liens" means (a) Liens securing Taxes, assessments,
governmental charges or levies, all of which are not yet due and payable, (b)
Liens (other than any Lien imposed by ERISA) incurred or deposits made in the
ordinary course of the Business and on a basis consistent with past practice in
connection with worker's compensation, unemployment insurance or other types of
social security, (c) mechanics, materialman's, carrier's, warehousemen's,
landlords and other similar Liens under state or common law or (d) such other
Liens which, individually and in the aggregate, do not and would not detract
from the value of or impair the use of any Acquired Asset; it being understood
that to the extent a Permitted Lien relates to or arises from a Non-Assumed
Liability, the applicable Company shall still be liable for such Non-Assumed
Liability to the extent set forth herein.
"Person" means an individual, a corporation, a partnership, a limited
Liability company, an association, a firm, a Governmental Entity, a trust or
other entity or organization.
"Plans" has the meaning set forth in Section 2.20(a)(iii).
"Preliminary Future Tax Benefits" has the meaning set forth in Section
2.6(b).
"Prime Rate" means the rate of interest publicly announced by Citicorp
USA, Inc. in New York, New York from time to time as its base rate.
<PAGE> 87
11
"Proposed Closing Date Balance Sheet" has the meaning set forth in
Section 1.6(a)
"PTO" means the United States Patent and Trademark Office.
"Purchase Price Escrow Shares" means a number of shares of
AlliedSignal Common Stock equal to one percent (1%) of the Estimated Share
Number.
"Purchased Assets" has the meaning set forth in Section 1.2(a).
"Real Property" means all real property, together with all fixtures,
fittings, buildings, structures and other improvements erected thereon, and
easements, rights of way, water lines, rights of use, licenses, hereditaments,
tenements, privileges and other appurtenances thereto (such as appurtenant
rights in and to public streets).
"Receivables Deficiency" has the meaning set forth in Section 1.7(a).
"Receivables Excess" has the meaning set forth in Section 1.7(a).
"Receivables Notice" has the meaning set forth in Section 1.7(a).
"Receivables Reserve" has the meaning set forth in Section 1.7(a).
"Registration Rights Agreement" means an agreement substantially in
the form of Exhibit 1.9(b)(vi).
"Resolution Period" has the meaning set forth in Section 1.6(c).
"Review Period" has the meaning set forth in Section 1.6(c).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" and "Sellers" have the respective meanings set forth in the
Preamble of the Agreement.
"Seller Indemnified Parties" has the meaning set forth in Section
7.3(a).
"Seller Subsidiaries" has the meaning set forth in the Preamble of the
Agreement, and "Seller Subsidiary" means any one of the Seller Subsidiaries.
"Shortfall Amount" has the meaning set forth in Section 1.6(f)(iii).
"Side Letters" has the meaning set forth in Section 1.9(a)(xiii).
"Small Claim" has the meaning set forth in Section 7.2(b).
"Small Licenses" has the meaning set forth in Section 2.15(d).
<PAGE> 88
12
"Special Claim" has the meaning set forth in Section 7.4(b).
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or other entity with respect to which
such Person directly or indirectly owns or controls more than 50% of (i) the
issued and outstanding capital stock having ordinary voting power to elect a
majority of the board of directors or other governing body of such corporation
(irrespective of whether at the time capital stock of any other class or
classes of such corporation shall or might have voting power upon the
occurrence of any contingency), (ii) the interest in the capital or profits of
such partnership, joint venture or limited liability company or (iii) the
beneficial interest in such trust.
"Subsidiary Assets" means all Assets of the Seller Subsidiaries.
"Subsidiary Shares" means all of the outstanding shares of capital
stock of (or other ownership interests in) the Seller Subsidiaries.
"Target Net Worth" means Two Hundred Twenty Million Twenty Five
Thousand Dollars ($220,025,000) plus the amount, if any, by which Final Future
Tax Benefits exceeds Preliminary Future Tax Benefits, but in any event not less
than $220,025,000.
"Tax" means any tax imposed under Subtitle A of the Code and any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, value added, transfer, franchise, profits, license, lease,
service, service use, withholding on amounts paid to or by any Company,
payroll, employment, excise, severance, stamp, capital stock, occupation,
property, environmental or windfall profits tax, premium, custom duty or other
tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalty, addition to tax or additional
amount imposed by any Governmental Entity responsible for the imposition of any
such tax (domestic or foreign) (a "Tax Authority").
"Tax Authority" has the meaning set forth in the definition of "Tax".
"Technology" means all formulae, processes, procedures, designs,
ideas, research records, inventions (whether or not patentable), records of
inventions, test information, technical information, engineering data,
marketing know-how, proprietary information, manufacturing information,
know-how, and trade secrets (and all related manuals, books, files, journals,
models, instructions, patterns, drawings, blueprints, plans, designs
specifications, equipment lists, parts lists, descriptions, data, art work,
software, computer programs and source code data related thereto including all
current and historical data bases) owned, used or held for use by any Company
(it being understood that, to the extent any such technology is licensed to a
Company, "Technology" shall mean any and all rights of such Company under such
license).
"Third Party Indemnification Claim" has the meaning set forth in
Section 7.4(b).
"Third Party Rights" has the meaning set forth in Section
1.2(a)(xiii).
<PAGE> 89
13
"Traceable Inventory" means Inventory held pursuant to good and valid
parts manufacturer approvals issued by the FAA, supplemental type certificates
issued by the FAA or other certificates required by applicable Laws including,
without limitation, those promulgated by the FAA.
"Trademarks" has the meaning set forth in Section 9.14.
"Transaction Documents" has the meaning set forth in Section 2.3.
"Transfer Taxes" means all state, local and foreign sales, use,
transfer, real property transfer, documentary stamp, recording and other
similar taxes arising from and with respect to the sale and purchase of the
Purchased Assets.
"U.S. Employee" has the meaning set forth in Section 8.2(a).
"US Government" shall mean the United States Government and any
agencies, instrumentalities and departments thereof.
"U.S. Plans" has the meaning set forth in Section 2.20(a)(iii).
"U.S. Transferred Employees" has the meaning set forth in Section
8.2(a).
"WARN Act" means the Worker Adjustment and Retraining Notification
Act, as codified at 29 U.S.C. Sections 2101 - 2109, as amended.
<PAGE> 90
ANNEX 1.4
CLOSING DATE SHARES DELIVERED TO PARENT AND SELLERS
<TABLE>
<CAPTION>
Sellers Amount
- ------------------------------- ---------------------
<S> <C> <C>
PB Herndon Aerospace, Inc. $20,974,000 92.1%
Banner Aerospace Services, Inc. 1,800,000 7.9%
--------------------- -----------
TOTAL $22,774,000 100.0%
</TABLE>
<PAGE> 91
ANNEX 1.6(f)
CLOSING DATE SHARES DELIVERED TO PARENT AND SELLERS
<TABLE>
<CAPTION>
Sellers Amount
- ------------------------------- ----------------------
<S> <C> <C>
Adams Industries, Inc. $15,000,000 4.7%
Aerospace Bearing Support, Inc. 29,100,000 9.0%
Aircraft Bearing Corporation 29,300,000 9.1%
Banner Distribution, Inc. 5,300,000 1.6%
Burbank Aircraft Supply, Inc. 150,000,000 46.6%
Harco, Inc. 81,000,000 25.2%
PacAero 12,300,000 3.8%
---------------------- -----------
TOTAL $322,000,000 100.0%
</TABLE>
<PAGE> 1
EXHIBIT 2.2
-----------------------------------------------
ASSET PURCHASE AGREEMENT
by and among
Banner Aerospace, Inc.,
PB Herndon Aerospace, Inc.,
Banner Aerospace Services, Inc.
and
AlliedSignal Inc.
and
AS BAR PBH LLC
dated as of December 8, 1997
-----------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE I
The Transaction
1.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Acquisition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Assumption of Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 5
1.4 Initial Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.5 Escrow of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.6 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.7 Deliveries and Proceedings at the Closing . . . . . . . . . . . . . . . . . . . . 9
1.8 Stock Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE II
Representations And Warranties Of Parent And Sellers
2.1 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Ownership of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3 Authorization and Enforceability . . . . . . . . . . . . . . . . . . . . . . . . 12
2.4 No Violation of Laws or Agreements . . . . . . . . . . . . . . . . . . . . . . . 12
2.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.7 No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.8 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.9 Permits and Compliance With Laws Generally . . . . . . . . . . . . . . . . . . . 16
2.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.11 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.12 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.13 Acquired Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.15 Intellectual Property and Technology . . . . . . . . . . . . . . . . . . . . . . 21
2.16 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.17 Product Warranties and Guarantees . . . . . . . . . . . . . . . . . . . . . . . . 22
2.18 Products Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
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<S> <C> <C>
2.19 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.20 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.21 No Pending Litigation or Proceedings . . . . . . . . . . . . . . . . . . . . . . 25
2.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.23 Customers; Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.24 Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.25 All Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.26 [Intentionally omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.27 Securities Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.28 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.29 [Intentionally omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.30 Business Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE III
Representations And Warranties Of AlliedSignal and Buyer
3.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.2 Authorization and Enforceability . . . . . . . . . . . . . . . . . . . . . . . . 28
3.3 No Violation of Laws or Agreements . . . . . . . . . . . . . . . . . . . . . . . 28
3.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.5 AlliedSignal Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.6 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.8 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IV
Additional Covenants
4.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.2 Mutual Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.3 Filings and Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.4 Public Announcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.5 Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.7 Certain Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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(continued)
<TABLE>
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<S> <C>
4.8 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.9 Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.10 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.11 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.12 Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.13 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.14 Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.15 U.S. Government Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.16 NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.17 [Intentionally omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.18 Seller Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.19 [Intentionally omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.20 Product Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.21 United Kingdom Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE V
Conditions Precedent
5.1 Conditions Precedent to Obligations of AlliedSignal and Buyer . . . . . . . . . . 38
5.2 Conditions Precedent to Obligations of Parent and Sellers . . . . . . . . . . . . 40
ARTICLE VI
Certain Additional Covenants
6.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.2 Maintenance of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . 42
6.3 [Intentionally omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.4 Non-Competition/Non-Solicitation . . . . . . . . . . . . . . . . . . . . . . . . 42
6.5 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VII
Survival
7.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
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(continued)
<TABLE>
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<S> <C>
ARTICLE VIII
Employees And Employee Benefits
8.1 Scope of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.2 U.S. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE IX
Termination; Miscellaneous
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.3 Entire Agreement; Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . 48
9.4 Benefit; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.5 No Presumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.7 Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.8 Counterparts; Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.10 No Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.12 Submission to Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . . 50
9.13 Bulk Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.14 Use of Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.15 Relationship with Aerospace Agreement . . . . . . . . . . . . . . . . . . . . . . 51
9.16 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
EXHIBITS
Annex A Definitions
Annex B Jurisdictions of Incorporation
-iv-
<PAGE> 6
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of December 8, 1997, by and
among Banner Aerospace, Inc., a Delaware corporation ("Parent"), PB Herndon
Aerospace, Inc., a Missouri corporation ("Herndon"), Banner Aerospace Services,
Inc., an Ohio corporation ("BAS") (Herndon and BAS each individually, a
"Seller" and, collectively, "Sellers"), AlliedSignal Inc., a Delaware
corporation ("AlliedSignal") and AS BAR PBH LLC, a Delaware limited liability
company ("Buyer").
Herndon is engaged in, among other things, the business of
supplying to the aerospace industry (i) aircraft hardware (including bearings,
nuts, bolts, screws, rivets and other types of fasteners) and (ii) related
support services (including Inventory management services) and the BTG of BAS
is engaged in, among other things, the business of management information
systems (collectively, the "Business").
Buyer desires to purchase, and AlliedSignal desires to cause the
purchase of, substantially all of the Assets of Herndon and all of the Assets
of the BTG of BAS described on Schedule 2.6(a) (the "BTG Assets") relating to
the Business, and Sellers desire to sell and transfer, and Parent desires to
cause the sale and transfer of, such Assets to Buyer, all on the terms and
subject to the conditions set forth in this Agreement.
Except as otherwise expressly provided herein, capitalized terms
used herein without definition shall have the meanings assigned to them in
Annex A hereto, which is hereby incorporated into this Agreement as if set
forth in full herein. NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and agreements contained herein and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE TRANSACTION
1.1 Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, (i) Sellers shall, and
Parent shall cause Sellers to, sell, transfer, convey, assign and deliver to
Buyer, and Buyer shall purchase, acquire and accept from the Sellers, all of
Sellers' right, title and interest in and to the Purchased Assets, and (ii)
Buyer shall pay to Sellers the Initial Purchase Price and Buyer shall assume,
and agree to thereafter pay, perform and discharge when due, the Assumed
Liabilities.
1.2 Acquisition of Assets.
(a) Subject to Section 1.2(b), "Purchased Assets" means all of
the Assets of Sellers owned, used or held for use in connection with, or that
are otherwise related to or required for the conduct of, the Business,
including, without limitation, all of the Assets set forth below:
<PAGE> 7
2
(i) all Owned Real Property;
(ii) all Equipment;
(iii) all Inventory;
(iv) all Accounts Receivable;
(v) all credits, prepaid expenses, deferred charges,
advance payments, security deposits and deposits owned, used or held for
use by either Seller with respect to the Business ("Prepaid Expenses") to
the extent that such items will accrue to the benefit of Buyer
immediately following the Closing;
(vi) all Intellectual Property;
(vii) all Technology;
(viii) all Contracts;
(ix) all Permits;
(x) all books, records, ledgers, files, documents
(including originally executed copies of written Contracts, customer and
supplier lists (past, present or future), correspondence, memoranda,
forms, lists, plats, architectural plans, drawings and specifications,
copies of documents evidencing Intellectual Property or Technology, new
product development materials, creative materials, advertising and
promotional materials, studies, reports, sales and purchase
correspondence, books of account and records relating to the employees of
the Business, photographs, records of plant operations and materials
used, quality control records and procedures, equipment maintenance
records, manuals and warranty information, research and development
files, data and laboratory books, inspection processes, in each case,
whether in hard copy or magnetic format, in each instance, to the extent
used or held for use with respect to the Business or the employees of the
Business;
(xi) all rights or choses in action arising out of
occurrences before or after the Closing Date and related to any portion
of the Business, including third party warranties and guarantees and all
related claims, credits, rights of recovery and set-off and other similar
contractual rights, as to third parties held by or in favor of Sellers
and arising out of, resulting from or relating to the Business or the
Purchased Assets (collectively, "Third Party Rights");
(xii) all rights to insurance and condemnation proceeds
relating to the damage, destruction, taking or other impairment of the
Purchased Assets which damage, destruction, taking or other impairment
occurs on or prior to the Closing Date, except to the extent Buyer
receives a credit against the Initial Purchase Price pursuant to Section
1.2(d)(i)(y) or 1.2(d)(ii)(y);
<PAGE> 8
3
(xiii) all Assets that (A) are reflected on the Balance
Sheet (other than Assets reflected on the Balance Sheet that are disposed
of prior to the Closing Date in accordance with this Agreement) or (B)
have been or are acquired by the Sellers after the date of the Balance
Sheet and would be reflected on a balance sheet for the Business prepared
on a basis consistent with that on which the Balance Sheet was prepared
(other than any such Assets that are disposed of prior to the Closing
Date in accordance with this Agreement); and
(xiv) the Business and the goodwill thereof.
(b) Notwithstanding anything to the contrary contained herein,
Purchased Assets shall not include any Excluded Assets. "Excluded Assets"
means:
(i) cash and cash equivalents on hand or in bank
accounts;
(ii) all accounts owing between and among each Seller
and its Affiliates (including the Sellers under the Aerospace Agreement)
other than trade receivables;
(iii) except as otherwise set forth herein, Assets
attributable or related to any Plan;
(iv) all rights of Parent and each Seller under this
Agreement;
(v) all stock and minute books and similar records of
the Sellers;
(vi) all Third Party Rights arising out of Non-Assumed
Liabilities or Excluded Assets;
(vii) all Prepaid Expenses to the extent that such
items will not accrue to the benefit of Buyer immediately following the
Closing;
(viii) all Contracts pursuant to which any business
included in the Business or either Seller was purchased (other than the
DA Agreement);
(ix) all Plans of Sellers (including, without
limitation, those referenced on Schedule 2.20(a)(ii));
(x) all Contracts referenced on Schedule 2.8(a)(i)
other than (i) the purchase orders described thereon and (ii)
distribution agreements with Fairchild Fasteners that are terminable by
the Sellers on not more than 60 days notice without any penalty;
(xi) the Note for $226,000 payable to Herndon listed
on Schedule 2.11(b); and
<PAGE> 9
4
(xii) all rights of any Seller under the Second Amended
and Restated Credit Agreement dated as of December 12, 1996, among
Parent, Burbank Aircraft Supply, Inc. and other Subsidiaries of Parent,
Citicorp USA, Inc. (as Administrative Agent and Arranger), NationsBank,
N.A. (as Co-Arranger) and the Institution as Lenders and Issuing Banks
thereunder.
(c) Nonassignable Rights. Anything in this Agreement to the
contrary notwithstanding, but subject to AlliedSignal's and Buyer's rights
under Section 7.2 of the Aerospace Agreement, this Agreement shall not
constitute an agreement to assign any of the Contracts, Intellectual Property,
Technology or Permits or any claim or right or any benefit arising thereunder
or resulting therefrom if an attempted assignment thereof, without the consent
of a third Person thereto, would constitute a breach or other contravention
thereof or in any way adversely affect the rights of Buyer thereunder. (Any
Asset that, but for this Section 1.2(c) would be sold and assigned at the
Closing shall remain a "Purchased Asset" for purposes of this Agreement.)
Parent and Sellers will use all reasonable best efforts to obtain the consent
of the other parties to any such Contract or Permit for the assignment thereof
to Buyer and Buyer shall reasonably cooperate with such efforts. If such
consent is not obtained prior to the Closing, or if an attempted assignment
thereof would be ineffective or would adversely affect the rights of Parent and
Sellers thereunder so that Buyer would not in fact receive all such rights,
subject to Section 5.1(d), the Closing shall nevertheless take place and,
thereafter, Parent, Sellers and Buyer will cooperate in a mutually agreeable
arrangement under which Buyer would obtain the benefits and assume the
obligations thereunder (but only to the extent such obligations would have
constituted Assumed Liabilities if such assignment occurred on the Closing
Date) from and after the Closing Date in accordance with this Agreement,
including subcontracting, sublicensing or subleasing to Buyer, or under which
Parent and each Seller would enforce for the benefit of Buyer, with Buyer
assuming each Seller's obligations to the same extent as if it would have
constituted an Assumed Liability and any and all rights of Parent or any Seller
against a third Person thereto. Parent and each Seller will pay promptly to
Buyer when received all monies received by Parent or any Seller after the
Closing Date under any of the Contracts or any claim or right or any benefit
arising thereunder to the extent that Buyer would be entitled thereto pursuant
hereto. The provisions of this Section 1.2 shall in no way limit the Closing
condition set forth in Section 5.1(d).
(d) Damage; Condemnation.
(i) If, prior to the Closing, any Acquired Real
Property is damaged by fire, vandalism, acts of God, or other casualty or
cause (and such damage is not repaired by the Closing), Buyer shall have
the option of (x) accepting such property as it is together with the
insurance proceeds, if any, and the right to receive the same, in which
case no adjustment shall be made in respect of the decreased value of
such Asset pursuant to Section 1.4(b), or (y) excluding such Acquired
Real Property from the Purchased Assets and receiving a credit against
the Initial Purchase Price equal to the fair market value thereof, in
which case no adjustment shall be made in respect of the decreased value
of such Asset pursuant to Section 1.4(b) other than such credit against
the Initial Purchase Price. If Buyer elects option (x) above, Parent
hereby agrees to cooperate with
<PAGE> 10
5
Buyer in any loss adjustment negotiations, legal actions and agreements
with the insurance company, and to assign (pursuant to a writing in form
satisfactory to Buyer,) to Buyer at Closing its rights to such insurance
proceeds (and pay over to Buyer any such proceeds already received), and
Parent will not settle any insurance claims or legal actions relating
thereto without Buyer's prior written consent.
(ii) If, prior to the Closing, all or any portion of
any Acquired Real Property is taken by eminent domain, Buyer shall have
the option of (x) proceeding with the Closing and accepting the property
as affected by such taking, together with all compensation and damages
awarded, if any, and the right to receive the same, in which case, no
adjustment shall be made in respect of the decreased value of such Asset
pursuant to Section 1.4(b), or (y) excluding such Acquired Real Property
from the Purchased Assets and receiving credit against the Initial
Purchase Price equal to the fair market value thereof, in which case no
adjustment shall be made in respect of the decreased value of such Asset
pursuant to Section 1.4(b) other than such credit against the Initial
Purchase Price. If Buyer elects option (x) above, Parent hereby agrees
to assign to Buyer at Closing its rights to such compensation and damages
(and pay over to Buyer any such compensation and damages already
received), and will not settle any proceedings relating to such taking
without Buyer's prior written consent.
(iii) Parent shall promptly notify AlliedSignal of any
material casualty or any actual or threatened condemnation affecting all
or any portion of any Acquired Real Property. Any such notice relating
to casualty shall be accompanied by Parent's selection of an architect or
engineer to determine the cost of repair and/or replacement.
(iv) Nothing in this Section 1.2(d) limits the
condition to Closing set forth in Section 5.1(a).
1.3 Assumption of Assumed Liabilities.
(a) "Assumed Liabilities" shall mean (i) all Liabilities of the
Business (including bank overdrafts, if any) to the extent included on the
Closing Date Balance Sheet, (ii) Liabilities under the Contracts, Permits,
Intellectual Property or Technology to the extent (but not only to the extent)
arising from, and accruing with respect to, the operation of the Business after
the Closing, (iii) Liabilities relating to the employees of the Business
expressly assumed pursuant to Article VIII and (iv) Liabilities under the DA
Agreement.
(b) Notwithstanding anything to the contrary contained herein,
neither Buyer nor AlliedSignal shall assume or be bound by, or be obligated or
responsible for, any Non-Assumed Liabilities. "Non-Assumed Liabilities" shall
mean (x) all Liabilities of Sellers relating to the Purchased Assets or the
Business and any claims in respect thereof, other than the Assumed Liabilities,
and (y) any Liabilities or claims which may be asserted against or imposed upon
Buyer by reason of its being a successor or transferee of Sellers or as an
acquiror of the Purchased Assets or the Business or otherwise as a matter of
law. Without limitation of the foregoing, all of the following shall be
Non-Assumed Liabilities for the purposes of this Agreement:
<PAGE> 11
6
(i) any product Liability, or Liability relating to
any toxic tort or similar claim for injury to person or property,
regardless of when made or asserted that arises out of or is based upon
any express or implied representation, warranty, agreement or guarantee
made by either Seller or any of its Affiliates, or alleged to have been
made by any of such Persons, or that it is imposed or asserted to be
imposed by operation of law, in connection with any service performed or
product manufactured, distributed or sold by or on behalf of either
Seller or any of its Affiliates or which arises out of any condition
existing as of the Closing, including any claim relating to any product
delivered, manufactured or distributed by either Seller or any of its
Affiliates and any claim seeking recovery for consequential damages, lost
revenue or income;
(ii) except for Assumed Tax Liabilities, any Liability
of Parent, DA or either Seller (including under any Contract) for Taxes,
including without limitation, any (1) Tax payable (A) with respect to the
Business, Assets or operations of Parent or Sellers, (B) by any member of
any consolidated, affiliated or unitary group of which Parent or either
Seller is a member, or (C) by any other person for whose Tax Parent or
either Seller may be liable under Contract or otherwise, and (2) Tax
incident to or arising as a consequence of the negotiation or
consummation by Parent or any Seller or any member of any affiliate group
of which Parent or Sellers is a member of this Agreement and the
transactions contemplated hereby;
(iii) except as expressly provided in clause (iii) of
the definition of Assumed Liabilities, any Liability with respect to
compensation or employee benefits of any nature owed to any employees,
agents or independent contractors of either Seller or any of its
Affiliates, whether or not employed by Buyer after the Closing, or any of
their beneficiaries, heirs or assigns, that arises out of or relates to
events or conditions to the extent occurring before the Closing,
including, but not limited to, Liabilities for supplemental unemployment
benefits, vacation pay, sick pay, severance benefits, Liabilities under
any Plan whether arising prior to, on or after the Closing Date,
Liabilities to provide any retiree benefits to former hourly and/or
salaried employees of the Business or any retiree benefits to be provided
to current hourly and/or salaried employees of the Business, and any
other benefits, withholding tax Liabilities, workers compensation or
unemployment compensation premiums, hospitalization or medical claims,
occupational injury, disease or disability claims or claims for
discrimination, unfair labor practices, violations of the collective
bargaining agreements or wrongful discharge;
(iv) Liabilities relating to the operation of the
Business prior to the Closing arising by operation of law under any
common law or statutory doctrine (including successor Liability or de
facto merger);
(v) any Liability with respect to or arising out of
any Contract (A) that is not capable of being assigned to Buyer at the
Closing (except to the extent provided in Section 1.2(c)) (B) to the
extent arising out of any breach or default thereof by Parent or either
Seller on or prior to
<PAGE> 12
7
the Closing Date (including any event occurring on or prior to the
Closing Date that, with the passing of time or the giving of notice, or
both, would become a breach or default) under any Contract, or (C)
required by the terms thereof to be discharged on or prior to the Closing
Date;
(vi) any Liability of Parent or any of the Sellers or
any of their predecessors (including under any Contract) with respect to
any claim, action, suit or proceeding made or threatened (whether prior
to, at or after the Closing Date) which asserts Losses arising from (x)
the presence, at any time prior to the Closing Date, of asbestos at the
Acquired Real Property, any other real property owned or leased at any
time by Parent, Sellers or any of their past, present or future
Subsidiaries or any other third-party location or (y) the presence of
asbestos in any product at any time prior to the Closing Date
manufactured, used, sold or serviced by Parent, Sellers or any of their
past, present or future Subsidiaries, or which otherwise asserts any
asbestos-related personal injury or property damage.
(vii) any Liability to the extent the existence of such
Liability constitutes a breach of any representation or warranty of
Parent or any Seller contained in or made pursuant to this Agreement;
(viii) any Environmental Liability, including, without
limitation, any Environmental Claim that relates to or arises in
connection with the Business, the Purchased Assets, or any other Assets
(including, but not limited to facilities used for the off-site disposal
of waste) formerly owned, leased, operated or used by any of the Sellers
or any predecessors-in-interest to any of the Sellers, if the
Environmental Claim is based on any act or omission of the Business or
any of the Sellers on or prior to the Closing Date;
(ix) any Liability in respect of the Excluded Assets;
(x) any Debt or other amounts (except to the extent
reflected on the Closing Date Balance Sheet) owing by the Sellers to
Parent or any of Parent's Affiliates (other than the Sellers) including,
without limitation, any negative balances in intercompany accounts, but
excluding any trade payables incurred in the ordinary course of business
consistent with past practice;
(xi) any Liability that arises out of or relates to
the employment or termination of employment of any employees, agents or
independent contractors by Parent, Sellers or any of their Affiliates,
except any such Liability caused by Buyer's failure to perform its
obligations under Article VIII;
(xii) any Liability to past, present or future
stockholders of Parent or Sellers;
(xiii) any Liability that arises out of or relates to
any claim, action, suit, proceeding or investigation, whether civil or
criminal, pending or threatened as of the
<PAGE> 13
8
Closing Date, relating to the conduct or activities of the Business, or
the ownership, use or possession of the Acquired Assets, on or prior to
the Closing Date;
(xiv) any Liability relating to any broker's or
finder's fee or commission incurred by Parent, either Seller or any of
their Affiliates as a result of the transactions contemplated hereunder;
(xv) any Liability arising under, resulting from or
relating to the matters referred to on Schedule 2.20(a)(iii), including,
without limitation, the Plans described thereon;
(xvi) any Liability arising under, resulting from, or
relating to matters set forth on Schedule 2.8(a)(i) (other than with
respect to the purchase orders described thereon and distributorship
agreements with Fairchild Fasteners that are terminable on not more than
60 days notice without any penalty) including, without limitation, the
agreement with Shared Technologies Fairchild, Inc. and the tax sharing
agreement described thereon, except to the extent reflected on the
Closing Date Balance Sheet; and
(xvii) except for the Assumed Liabilities, any Liability
arising out of or relating to the conduct or activities of the Business
(including any predecessor operations) or the ownership, use or
possession of the Purchased Assets on or prior to the Closing Date, any
Liabilities or claims arising out of or relating to events, circumstances
or conditions occurring on or before the Closing Date, and any Liability
associated with any other business of Parent, Sellers and their
Affiliates.
Parent and each Seller hereby irrevocably waives and releases, and has caused
the Parent Subsidiaries to waive and release, AlliedSignal and Buyer from all
Non-Assumed Liabilities, including any Liabilities created or which arise by
statute or common law.
1.4 Initial Purchase Price. The initial purchase price for the
Purchased Assets to be paid at the Closing (the "Initial Purchase Price") shall
consist of a number of shares of AlliedSignal Common Stock (the "Closing Date
Shares") equal to the number (rounded to the nearest whole share) (the
"Estimated Share Number") obtained by dividing (A) an amount equal to Twenty
Two Million Seven Hundred Seventy-Four Thousand Dollars ($22,774,000) plus (x)
the Herndon Adjustment Amount if the Herndon Adjustment Amount is a positive
number and minus (y) the Herndon Adjustment Amount if the Herndon Adjustment
Amount is a negative number, by (B) the Average Trading Price as of the Closing
Date, to be issued by Buyer to Sellers in the proportions set forth on Annex
1.4 hereto. The Initial Purchase Price shall be adjusted as provided in
Section 1.6(f) and Section 9.15 of the Aerospace Agreement.
1.5 Escrow of Shares. At the Closing, AlliedSignal shall issue
and deliver to the Escrow Agent (i) the Purchase Price Escrow Shares, to be
held in an escrow account pursuant to the terms of the Escrow Agreement until
released from escrow pursuant to the terms of Section 1.6(f) of the Aerospace
Agreement, and (ii) the Indemnification Escrow Shares, to be held in an escrow
account pursuant to the terms of the Escrow Agreement until released as set
forth in Section 1.5(b) or (d) of the Aerospace Agreement.
<PAGE> 14
9
1.6 Closing.
(a) Closing Date. The closing of the transactions contemplated
under this Agreement (the "Closing") shall take place at 10:00 a.m. Eastern
Time at the offices of Hughes Hubbard & Reed LLP, One Battery Park Plaza, New
York, New York, on the fifth Business Day after all conditions to the
obligations of the parties under Article V and under Article V of the Aerospace
Agreement shall have been satisfied or waived (other than those requiring a
delivery of a certificate or other document, or the taking of other action, at
the Closing and the conditions set forth in Sections 5.1(g) and 5.2 (g) and in
Sections 5.1(j) and 5.2(g) of the Aerospace Agreement), or at such other place
and on such other date as the parties may mutually agree in writing (such date
on which the Closing occurs hereinafter is referred to as the "Closing Date").
Each of the parties acknowledges that, with respect to the Closing Date, time
is of the essence.
(b) Effectiveness. The consummation of the transactions
contemplated by this Agreement and the Closing shall be deemed to take place at
11:59 p.m., Eastern Time, on the Closing Date and no transaction shall be
deemed to have been completed and no document or certificate shall be deemed to
have been delivered until all transactions are completed and all documents are
delivered.
1.7 Deliveries and Proceedings at the Closing. Subject to the
terms and conditions of this Agreement, at the Closing:
(a) Deliveries to AlliedSignal and Buyer. Parent and Sellers
shall deliver to AlliedSignal and Buyer:
(i) bills of sale and instruments of assignment, in
forms reasonably satisfactory to Buyer, to evidence the transfer to Buyer
of the Purchased Assets (other than the Owned Real Property) in
accordance herewith, duly executed by Sellers;
(ii) any consents to transfer of all transferable or
assignable Contracts and Permits obtained by Parent and the Sellers as of
Closing and all consents referred to in Section 5.1(d);
(iii) title certificates to any motor vehicles included
in the Purchased Assets, duly executed by each Seller with any interest
therein (together with any other transfer forms necessary to transfer
title to such vehicles);
(iv) one or more deeds of conveyance to Buyer of the
Owned Real Property, in forms reasonably satisfactory to Buyer,
sufficient to transfer to Buyer good and marketable, and insurable, fee
simple title to the Owned Real Property included in the Purchased Assets
in accordance herewith, duly executed and acknowledged by each Seller
with any interest therein and in recordable form;
(v) one or more title insurance policies, in form,
substance and amount, and issued by title insurance Sellers reasonably
acceptable to Buyer, and containing such endorsements and affirmative
coverage as Buyer shall reasonably
<PAGE> 15
10
request, insuring Buyer's fee simple title to the Owned Real Property
subject only to the Permitted Liens, the cost of which shall be paid 50%
by Parent and Sellers and 50% by AlliedSignal and Buyer;
(vi) U.C.C. termination statements in recordable form
and other appropriate releases, in form and substance reasonably
satisfactory to Buyer, with respect to all recorded Liens in the
Purchased Assets;
(vii) the Foreign Investment in Real Property Tax Act
Certification and Affidavit for each parcel of Owned Real Property, in
form reasonably satisfactory to Buyer, duly executed by each Seller
transferring Owned Real Property (the "FIRPTA Affidavit");
(viii) the certificates and other documents required to
be delivered by Parent and Sellers pursuant to Section 5.1 and certified
resolutions evidencing the authority of Parent and Sellers as set forth
in Section 2.3;
(ix) all such other documents and instruments of
conveyance as shall, in the reasonable opinion of Buyer, be necessary to
transfer to Buyer the Purchased Assets in accordance herewith and, where
necessary or desirable, in recordable form.
(b) Deliveries to Parent and Sellers. AlliedSignal and Buyer
will deliver to Parent and Sellers, as applicable:
(i) the Closing Date Shares, issued and delivered to
Sellers in the proportions set forth in Annex 1.4 hereto;
(ii) an assumption agreement, in form reasonably
satisfactory to Parent, to evidence the assumption by Buyer of the
Assumed Liabilities in accordance with Section 1.3, duly executed by
Buyer;
(iii) the certificates and other documents required to
be delivered by AlliedSignal and Buyer pursuant to Section 5.2 and
certified resolutions evidencing the authority of AlliedSignal and Buyer
as set forth in Section 3.2; and
(iv) all such other documents and instruments of
assumption as shall, in the reasonable opinion of Parent, be necessary
for Buyer to assume the Assumed Liabilities in accordance herewith.
1.8 Stock Legend. Each certificate representing the shares of
AlliedSignal Common Stock issued to Sellers at the Closing shall be endorsed
with a legend in substantially the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY
<PAGE> 16
11
NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE
WITH RULE 144 PROMULGATED UNDER SUCH ACT OR THE CORPORATION
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDERS OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE CORPORATION STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENT OF SUCH ACT.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLERS
Parent and each Seller hereby jointly and severally represent and
warrant to AlliedSignal and Buyer as follows:
2.1 Qualification. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Each Seller is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction set forth next to such Seller's
name on Annex B, and has all requisite corporate power and authority to own and
lease its Assets and to conduct its Business as presently being conducted.
Each Seller is qualified to do business and is in good standing as a foreign
corporation in all jurisdictions wherein the nature of its Business or such
Seller's ownership or use of its Assets make such qualification necessary,
except such failures to be qualified or to be in good standing, if any, which
when taken together with all such other failures of such Seller would not have
a Material Adverse Effect on such Seller. Neither of the Sellers is currently
insolvent, has suspended payments, is subject to any judicial receivership or
liquidation proceedings or is in bankruptcy, nor has any such similar
proceedings been commenced with respect to either of them.
2.2 Ownership of the Sellers.
(a) All of the outstanding shares of capital stock of (or other
ownership interests in) Herndon are owned of record and beneficially solely by
DA and all of the outstanding shares of capital stock of (or other ownership
interests in) BAS are owned of record and beneficially solely by Parent, in
each case, free and clear of any Liens. There are no options, warrants, calls,
rights or agreements to which Parent, DA or either Seller is a party obligating
any of them to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of (or other ownership interests in)
either Seller or obligating Parent, DA or either Seller to grant, extend or
enter into any such option, warrant, call, right or agreement.
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(b) Except as set forth on Schedule 2.2, neither of the Sellers
owns any shares of capital stock of (or other ownership interests in) any other
Person, including any joint venture.
2.3 Authorization and Enforceability. With respect to each of
Parent and the Sellers: (a) such entity has full corporate power and authority
to execute, deliver and perform this Agreement and all other agreements,
instruments and documents to be executed in connection herewith (such other
agreements and instruments being hereinafter referred to collectively as the
"Transaction Documents") to which such entity is a party, (b) the execution,
delivery and performance by such entity of this Agreement and the Transaction
Documents to which such entity is a party have been duly authorized by all
necessary corporate action on the part of such entity and no approval by the
holders of any security issued by Parent is required in connection therewith,
(c) this Agreement has been duly executed and delivered by such entity, and, as
of the Closing Date, the other Transaction Documents to which any such entity
is a party will be duly executed and delivered by such entity, (d) this
Agreement is a legal, valid and binding obligation of such entity, enforceable
against such entity in accordance with its terms, and (e) as of the Closing
Date, each of the other Transaction Documents to which such entity is a party
will constitute the legal, valid and binding obligations of such entity,
enforceable against such entity in accordance with its terms.
2.4 No Violation of Laws or Agreements. The execution, delivery,
and performance by Parent and each Seller of this Agreement and the Transaction
Documents to which such entities (as applicable) are parties do not, and the
consummation by Parent and each Seller (as applicable) of the transactions
contemplated hereby and thereby, will not, (a) contravene any provision of the
charter, bylaws or any other organizational documents of Parent or either
Seller, or (b) except as set forth on Schedule 2.4 and subject, in the case of
clause (i) below, to such exceptions as would not in the aggregate have a
Material Adverse Effect, violate, conflict with, result in a breach of, or
constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or result in or permit
the termination, modification, acceleration, or cancellation of, or result in
the creation or imposition of any Lien of any nature whatsoever upon any of the
Purchased Assets or give to others any interests or rights therein under, (i)
any personal property lease with payments in excess of $50,000 per year, lease
of Real Property, indenture, mortgage, loan or credit agreement, license,
instrument, contract, plan, permit or other agreement or commitment, oral or
written, to which Parent or either Seller is a party, other than such
agreements or commitments involving any customer or supplier of the Business
(including any supplier of Intellectual Property), or by which the Business or
any of the Purchased Assets may be bound or affected (including without
limitation any agreement or instrument pertaining to Debt), or (ii) any
judgment, injunction, writ, award, decree, restriction, ruling, or order of any
arbitrator or Governmental Entity or any applicable Law to which Parent, either
Seller or the Purchased Assets is subject.
2.5 Consents. Except (i) as set forth on Schedule 2.5 or (ii) for
agreements or commitments involving any customer or supplier of the Business
(including any supplier of Intellectual Property), no consent, approval or
authorization of, or registration or filing with, any Person (governmental or
private) is required in connection with the execution, delivery and
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performance by Parent or either Seller of this Agreement, the other Transaction
Documents to which Parent or either Seller is a party, or the consummation by
Parent and each Seller (as applicable) of the transactions contemplated hereby
or thereby, including without limitation in connection with the assignment of
the Contracts and Permits contemplated hereby, except as required by the HSR
Act and except for any required consent, approval or authorization of, or
registration or filing with a foreign governmental authority.
2.6 Financial Statements.
(a) Schedule 2.6(a) sets forth (i) an unaudited combined pro
forma balance sheet of the Combined Business as of September 30, 1997 (the
"Balance Sheet") and related unaudited combined pro forma statement of income
of the Combined Business for the six months ended September 30, 1997 (together
with the Balance Sheet, the "Financial Statements"). The Excluded Assets, the
Aerospace Excluded Assets, the Non-Assumed Liabilities and the Aerospace
Non-Assumed Liabilities are excluded from the Balance Sheet. The Financial
Statements are in accordance with the books and records of the Sellers and the
Sellers under the Aerospace Agreement and except for the Excluded Assets, the
Aerospace Excluded Assets, the Non-Assumed Liabilities, the Aerospace
Non-Assumed Liabilities and as set forth in Schedule 2.6(a) fairly present the
financial position and results of operations of the Combined Business on a
stand-alone basis as of the date and for the period indicated, in conformity
with GAAP throughout the period specified and in accordance with the procedures
and criteria set forth on Schedule 1.6(a), except as expressly set forth
therein and except that the Financial Statements may omit notes and are subject
to normal year-end adjustments which are not, in the aggregate, material.
Except as described on Schedule 2.6(a), all fees, charges, costs and expenses
associated with the ownership, leasing, operation, maintenance and management
of the Combined Business and the Assets owned, used or held for use by the
Combined Business have been fully and properly reflected and charged on the
Financial Statements in accordance with GAAP (to the extent such items are
required to be so reflected and charged in accordance with GAAP). All
Purchased Assets, Assumed Liabilities, Aerospace Acquired Assets and Aerospace
Assumed Liabilities are disclosed on or reflected in the Balance Sheet except
(i) as disclosed on Schedule 2.6(a), and (ii) as disposed of or transferred
between September 30, 1997 and the Closing Date in the ordinary course of
business consistent with past practice and in accordance with this Agreement.
(b) The future tax benefits set forth in the Balance Sheet as of
the date hereof represent future tax benefits as of March 31, 1997. No later
than 30 days after the date hereof, Parent shall deliver written notice to
AlliedSignal of the amount of future tax benefits as of September 30, 1997, and
the Balance Sheet shall be adjusted accordingly.
2.7 No Changes. Since September 30, 1997, the Sellers have
conducted the Business only in the ordinary course of business consistent with
past practice and, except as set forth on Schedule 2.7, there has not been:
(a) any Material Adverse Effect;
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(b) any change in the salaries or other compensation
payable or to become payable to, or any advance (excluding advances for
ordinary business expenses) or loan to, any employee of the Business, or
material change or material addition to, or material modification of, other
benefits (including any bonus, profit-sharing, pension or other plan in which
any of the employees of the Business participate) to which any of the employees
of the Business may be entitled, other than in the ordinary course of the
Business consistent with past practice;
(c) any material change or modification in any manner of
the Sellers' existing Inventory management and collection and payment policies,
procedures and practices with respect to Inventory and accounts receivable and
accounts payable, respectively, of the Business, acceleration of payment of
payables or failure to pay or delay in payment of payables and any change in
the Sellers' existing policies, procedures and practices, with respect to the
provision of discounts, rebates or allowances insofar as they relate to the
Business;
(d) any cancellation or waiver by either Seller of any
right material to the Business or any cancellation or waiver of any material
Debts of or claims of the Business against Parent or any other Affiliate of any
Seller or any disposition of or failure to keep in effect any rights in, to or
for the use of any Permit material to the Business;
(e) any damage, destruction or loss, or eminent domain or
other condemnation proceeding affecting the Business which individually or in
the aggregate has had a Material Adverse Effect, whether or not covered by
insurance;
(f) any change by either Seller in its method of accounting
or keeping its books of account or accounting practices with respect to the
Business except as required by GAAP;
(g) any acquisition, sale, transfer or other disposition of
any material Assets of the Business other than the disposition of (i) Inventory
in the ordinary course of the Business consistent with past practice or (ii)
Assets not used or useful in the Business;
(h) any commencement or termination of any line of
business;
(i) any action that would be prohibited to be taken after
the date of this Agreement under Section 4.1(c); or
(j) any agreement in writing or otherwise to take any of
the foregoing actions.
2.8 Contracts.
(a) As of the date of this Agreement, Schedule 2.8(a) contains a
true, correct and complete list of (i) all Contracts (other than any guarantee
of either Seller that does not directly or indirectly support or benefit the
Business) to which Parent or any of its Affiliates (other than the Sellers) is
a party or which benefit Parent or any of its Affiliates
<PAGE> 20
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(other than the Sellers); (ii) all Contracts under which either Seller is a
licensee or licensor of Intellectual Property or Technology which are material
to the Business; (iii) all Contracts under which either Seller is a lessee or
lessor of (or has an obligation to lease) Real Property; (iv) all Contracts
providing for the formation or operation of a partnership or other joint
venture; (v) all material Contracts which afford customers any right to return
Inventories at the option of the customer; (vi) all Government Contracts with a
backlog in excess of $100,000; (vii) all Contracts requiring forward stocking
locations; and (viii) except for agreements or commitments involving any
customer or supplier of the Business (including any supplier of Intellectual
Property), all other Contracts (other than with respect to which the Business'
total annual Liability or expense is less than $1,000,000 per such non-listed
Contract). Parent and Sellers have made available to AlliedSignal a correct
and complete copy of each written agreement.
(b) Except as set forth on Part A of Schedule 2.8(b), with
respect to each Contract described in Schedule 2.8(a), neither Seller nor, to
the best of Parent's and each Seller's knowledge, any other party thereto, is
in material breach or default and no event has occurred which with notice or
lapse of time would constitute a material breach or default, or permit
termination, modification, or acceleration, under such Contract. Except as set
forth on Part B of Schedule 2.8(b), there are no disputes pending or, to the
best of Parent's and each Seller's knowledge, threatened, under or in respect
of any of the Contracts described in Schedule 2.8(a) and no counterparty to any
such Contract has given notice to either Seller or any Affiliate thereof with
respect to any material breach or default hereunder. Each of the Contracts
described in Schedule 2.8(a) is in full force and effect and constitutes the
legal and binding obligation of, and is legally enforceable against, such
Seller as the Contracts relate, and, to the best of Parent's and each Seller's
knowledge, any other party thereto, in accordance with its terms.
(c) Except as identified with an asterisk on Schedule 2.8(a),
each of the Contracts listed thereon is fully assignable to Buyer without the
consent, approval or waiver of any other Person. None of such Contracts
contains any provision which, after the Closing, will restrict Buyer from
conducting any portion of the Business in any jurisdiction, except such
Contracts which may be terminated by Buyer without penalty or Liability on no
more than 30 days' notice. With respect to those Contracts that were assigned,
novated or subleased to either Seller by a third party, all necessary consents
to such assignments, novations or subleases have been obtained.
(d) Subject to such exceptions as would not in the aggregate have
a Material Adverse Effect, with respect to each and every Government Contract
that has a backlog in excess of $100,000 or binding or non-binding bid for such
a Government Contract ("Bid") to which either Seller is a party: (i) such
Seller has fully complied with all material terms and conditions of such
Government Contract or Bid, including all clauses, provisions and requirements
incorporated expressly, by reference or by operation of law therein; (ii) such
Seller has fully complied with all requirements of Law applicable to such
Government Contract or Bid and no Government Contract is subject to any
adjustment in price as a result of a claim by the U.S. Government or U.S.
Government prime contractor or subcontractor on the basis of (w) defective
pricing pursuant to FAR 52.215-22, FAR 52.215-23, FAR 52.215-24, FAR 52.215-25,
(x) CAS
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violations pursuant to FAR 52.230-2, (y) any submission for progress payments
of invoices or (z) any claims arising out of or related to the Government
Contracts occurring on or before the Closing Date; (iii) all representations
and certifications executed, acknowledged or set forth in or pertaining to such
Government Contract or bid for a Government Contract were current, accurate and
complete as of their effective date, and such Seller has fully complied with
all such representations and certifications; (iv) neither the U.S. Government
nor any prime contractor, subcontractor or other Person has notified such
Seller, either orally or in writing, that such Seller has breached or violated
any Law, certification, representation, clause, provision or requirement, (v)
no termination for convenience, termination for default, cure notice or show
cause notice has been issued; (vi) no cost incurred by such Seller has been
questioned or disallowed; and (vii) no money due to such Seller has been (or
has attempted to be) withheld or set off.
2.9 Permits and Compliance With Laws Generally.
(a) Subject to such exceptions as would not in the
aggregate have a Material Adverse Effect, (i) except as set forth on Part A of
Schedule 2.9(a), the Sellers possess and are in compliance with all Permits
required to operate the Business as presently operated and to own, lease or
otherwise hold the Purchased Assets under all applicable Laws and (ii) except
as set forth on Part B of Schedule 2.9(a), to the best of Parent's and each
Seller's knowledge, the Business is conducted by the Sellers in compliance
with, and the use, construction and operation of all Real Property constituting
any part of the Purchased Assets conforms to, all applicable Laws (including
the Occupational Safety and Health Act and the rules and regulations thereunder
("OSHA") and other similar Laws, and zoning, building and other similar Laws)
and all restrictions and conditions affecting title. All material Permits of
the Sellers are in full force and effect. There are no proceedings pending or,
to the best of Parent's and each Seller's knowledge, threatened that seek the
revocation, cancellation, suspension or any adverse modification of any
material Permits presently possessed by the Sellers. Parent and Sellers are
aware of no facts, conditions or circumstances reasonably likely to result in
the revocation, cancellation, suspension, or adverse modification of any
material Permit. Except as set forth on Part C of Schedule 2.9(a), all
material Permits of the Sellers are assignable to and at the Closing will be
assigned to Buyer and no approvals or consents are required for such assignment
(or continued possession) and the sale of the Business or Purchased Assets
hereunder will not result in a default under or termination of any such
material Permit.
(b) Except as set forth on Schedule 2.9(b), no outstanding
notice, citation, summons or order has been issued, no outstanding complaint
has been filed, no outstanding penalty has been assessed and no investigation
or review is pending or, to the best of Parent's and each Seller's knowledge,
threatened, by any Governmental Entity or other Person with respect to any
alleged (i) violation by either Seller relating to the Business or the
Purchased Assets of any Law or (ii) failure by either Seller to have any Permit
required in connection with the conduct of the Business or otherwise applicable
to the Business (including the Purchased Assets) except in such cases as would
not in the aggregate have a Material Adverse Effect.
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2.10 Environmental Matters. As of the Closing Date, except
as set forth on Schedule 2.10,
(a) There are no reports in Parent's, the Sellers' or any
of their respective Affiliates' possession or control of environmental site
assessments or audits of the Business, the Purchased Assets or any other Assets
(including but not limited to facilities used for the off-site disposal of
waste) formerly owned, leased, operated or used by the Sellers, or any
predecessor-in-interest to the Sellers.
(b) The Sellers possess and are in compliance with all
Environmental Permits required to operate the Business as presently operated
and to own, lease or otherwise hold the Purchased Assets under all
Environmental Laws. The operations of the Business and Purchased Assets
(including the use, construction and operation of all Real Property
constituting any part of the Purchased Assets) are in compliance with all
Environmental Laws and are conducted in a manner that does not pose a risk to
the safety or health of workers or other individuals or to the environment.
All Environmental Permits of the Sellers relating to the operation of the
Business are in full force and effect. There are no proceedings pending or, to
the best of Parent's and each Seller's knowledge, threatened that seek the
revocation, cancellation, suspension or any adverse modification of any such
Environmental Permits presently possessed by the Sellers. Parent and Sellers
are aware of no facts, conditions or circumstances reasonably likely to result
in the revocation, cancellation, suspension or adverse modification of any
Environmental Permits.
(c) There are no environmental conditions with respect to
the Business, Purchased Assets or any other Assets (including but not limited
to facilities used for the off-site disposal of waste) formerly owned, leased,
operated or used by either of the Sellers, or any predecessor-in-interest to
either of the Sellers that (i) pose a risk to human health or the environment,
or (ii) are otherwise required to be remediated under applicable Environmental
Laws due to evidence of soil or groundwater contamination on, under or
migrating onto or from the Business, Purchased Assets or any such other Assets.
(d) There are no Environmental Claims currently pending nor
has Parent, either of the Sellers or any of their respective Affiliates
received any notice of an Environmental Claim with respect to the Business, the
Purchased Assets, or any other Assets (including, but not limited to,
facilities used for the off-site disposal of waste) formerly owned, leased,
operated or used by the Sellers or any predecessors-in-interest to the Sellers
that a Hazardous Material has been (i) disposed, released, or discharged or
(ii) produced, stored, handled, used or emitted onto, under, or from the
Business, Purchased Assets or any such other Assets.
(e) Neither the Business nor the Purchased Assets are
subject to the requirements of any Laws that condition, restrict, prohibit or
require notification or disclosure upon the transfer, sale, lease or closure of
certain property for environmental reasons.
(f) No outstanding notice, citation, summons or order has
been issued, no outstanding complaint has been filed, no outstanding penalty
has been assessed and no investigation or review is pending or, to the best of
Parent's and each Seller's knowledge, threatened, by any Governmental Entity or
other Person with respect to any alleged (i) violation
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by either of the Sellers or any of its Affiliates relating to the Business or
the Purchased Assets of any Environmental Law or (ii) failure by either of the
Sellers or any of its Affiliates to have any Environmental Permit required in
connection with the conduct of the Business or otherwise applicable to the
Business (including the Purchased Assets).
2.11 Transactions with Affiliates
(a) Set forth on Schedule 2.11(a) is a true, correct and
complete list and description of (a) all services and other support provided to
the Business by Parent and its Affiliates (other than the Sellers) since April
1, 1996, (b) all other overhead charges allocated to the Sellers since April 1,
1996, and (c) all other transactions between one or more Sellers, on the one
hand, and Parent or any of its Affiliates (other than the Sellers), on the
other hand, since April 1, 1996 (other than payment of compensation or other
benefits to employees).
(b) To the best of Parent's and each Seller's knowledge,
except as set forth on Schedule 2.11(b), (i) as of the Closing, no employee,
officer or director (or any member of his or her immediate family) of Parent or
of either Seller or any of their Affiliates will be indebted to either Seller,
nor is either Seller indebted (or committed to make loans or extend or
guarantee credit) to any of such individuals, (ii) no such individual, except
Eric Steiner and Jeffrey Steiner and any such individual whose position is with
Fairchild or any of its Affiliates (other than Parent or either of the Sellers)
has any direct or indirect ownership interest in any Person with which either
Seller has a business relationship, or any Person that competes with either
Seller and (iii) no member of the immediate family of any officer or director
of either Seller is an interested party with respect to any Contract.
2.12 Title. The Sellers have, and at the Closing will
transfer to the Buyer, good and marketable title to all personal property owned
by them respectively, good and marketable title to all Owned Real Property,
valid and enforceable leasehold interests in Leased Real Property and personal
property leased by them, and good and valid title to or rights to use, all
intangible properties and rights used by them, in each case free and clear of
all Liens, except Permitted Liens.
2.13 Acquired Real Property.
(a) Part A of Schedule 2.13(a) sets forth a true, correct
and complete list and legal descriptions of all Real Property owned
(beneficially or of record) by either of the Sellers in the conduct of the
Business, and Part B of Schedule 2.13(a) sets forth a true, correct and
complete list of all Real Property leased by either of the Sellers in the
conduct of the Business, and in each case identifies the street address
thereof.
(b) Except in such cases as would not in the aggregate have
a Material Adverse Effect, all structures and other improvements on such
properties are within the lot lines and do not encroach on the properties of
any other Person (and improvements on adjacent Real Property do not encroach on
any of the Real Property constituting any part of the Purchased Assets), and
the use, construction and operation of all Real Property constituting any part
of the Purchased Assets or otherwise owned or leased by the Sellers in the
conduct of the Business
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conform to all applicable building, zoning, safety, environmental and other
Laws, permits, licenses and certificates and all restrictions and conditions
affecting title.
(c) Other than as set forth on of Schedule 2.13(c), there
are no leases, subleases, options or other agreements, written or oral,
granting to any Person (other than the Sellers) the right to purchase, use or
occupy the Acquired Real Property or any portion thereof. None of Parent, the
Sellers and any of their respective Affiliates has received any written or oral
notice or order by any Governmental Entity, any insurance company which has
issued a policy with respect to any of such properties or any board of fire
underwriters or other body exercising similar functions which (i) relates to
violations of building, safety, fire or other ordinances or regulations, (ii)
claims any defect or deficiency with respect to any of such properties or (iii)
requests the performance of any repairs, alterations or other work to or in any
of such properties or in the streets bounding the same, except such as would
not individually or in the aggregate have a Material Adverse Effect. Parent
and Sellers have made available to Buyer true, correct and complete copies of
all leases and financing documents affecting all or any portion of the Acquired
Real Property.
(d) None of Parent, the Sellers and any of their respective
Affiliates has received any written or oral notice for assessments for public
improvements against the Acquired Real Property which remains unpaid, and, to
the best of Parent's and each Seller's knowledge, no such assessment has been
proposed. Except as set forth on Schedule 2.13(d), there is no pending
condemnation, expropriation, eminent domain or similar proceeding affecting all
or any portion of any of the Acquired Real Property and, to the best of
Parent's and each Seller's knowledge, no such proceeding is threatened.
(e) Except as set forth on Schedule 2.13(e), no Person
other than a Seller is in possession of (or has any right, absolute or
contingent, to possess which is superior to such Seller's right to possess) all
or any portion of the Acquired Real Property.
(f) Except as set forth on Schedule 2.13(f), all Acquired
Real Property has direct and unrestricted access over currently utilized
facilities and land to such public roads, owned roads and driveways presently
in use, and such utilities and other services, as are necessary for the uses
thereof and the conduct of the Business, and neither Seller nor any other
Person has applied for any change in the zoning or land use classification of
any such Real Property.
(g) Except as set forth on Part A of Schedule 2.13(g), the
Acquired Real Property has adequate arrangements for supplies of water,
electricity, gas and/or oil for all operations at the 1996 or current operating
levels, whichever is greater. Except as set forth on Part B of Schedule
2.13(g), there are no actions or proceedings pending or, to the best of
Parent's and each Seller's knowledge, threatened that would adversely affect
the supply of water, electricity, gas and/or oil to the Acquired Real Property
except for those which individually and in the aggregate would not have a
Material Adverse Effect.
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2.14 Taxes.
(a) Parent and each Seller has (i) timely filed all returns
and reports for Taxes, including information returns, that are required to have
been filed in connection with, relating to, or arising out of the Business or
the Purchased Assets, (ii) paid to the appropriate Tax Authority all Taxes that
are shown to have come due pursuant to such returns or reports and (iii) paid
to the appropriate Tax Authority all other Taxes not required to be reported on
returns in connection with, relating to, or arising out of, or imposed on the
property of the Business for which a notice of assessment or demand for payment
has been received or which have otherwise become due except for Taxes being
properly contested in good faith.
(b) All such returns or reports were complete and accurate
in all material respects at the time of filing and such returns which have not
been audited do not contain a disclosure statement under Code Section 6662 (or
any predecessor provision or comparable provision of any Law).
(c) There are no unpaid Taxes with respect to any period
ending on or before the Closing Date which are or could give rise to a lien on
the Purchased Assets or the Business, except for current Taxes not yet due and
payable.
(d) Except as set forth on Schedule 2.14(d), (i) there are
no pending audits or, to the best of Parent's and each Seller's knowledge,
threatened audits or assessments relating to Taxes with respect to the Business
or the Purchased Assets and (ii) there is no unassessed Tax deficiency proposed
or to the best of Parent and each Seller's knowledge threatened against Parent
or any Seller relating to or affecting the Purchased Assets or the Business,
nor is any action or proceeding pending, or to the best of Parent's and each
Seller's knowledge, threatened by any Governmental Entity for assessment,
reassessment or collection of Taxes.
(e) Except as set forth on Schedule 2.14(e), none of the
Purchased Assets (i) is property that is required to be treated as owned by
another Person pursuant to the "safe harbor lease" provisions of former Section
168(f)(8) of the Code, (ii) is "tax-exempt use_property" within the meaning of
Code Section 168(h) or (iii) directly or indirectly secures any Debt the
interest on which is tax-exempt under Code Section 103(a).
(f) Except as set forth on Schedule 2.14(f), neither Seller
has agreed to make, or is required to make, any adjustment under Code Section
263A or 481(a) or any comparable provision of state or foreign Tax Laws by
reason of a change in accounting method or otherwise and neither Seller has
changed a method of accounting or Inventory method, made or changed a tax
election, or otherwise taken any action which is not in accordance with past
practice that could accelerate a tax deduction from a period after the Closing
Date to a period before the Closing Date or defer income from a period before
the Closing Date to a period after the Closing Date.
(g) Except as set forth on Schedule 2.14(g), neither Seller
is a party to any agreement, contract, arrangement or plan that has resulted or
would or could result, separately or
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in the aggregate, in connection with this Agreement or any change of control
of the Seller, in the payment of any "excess parachute payment" within the
meaning of Code Section 280G.
(h) The amount of the reserves for value-added Taxes, real
property Taxes, property Taxes and payroll Taxes reflected on the Closing Date
Balance Sheet will be adequate to pay all Assumed Tax Liabilities.
2.15 Intellectual Property and Technology
(a) Schedule 2.15(a) contains a true, correct and complete
list of all patents, trademarks, trade names, service marks and applications
for the foregoing owned, used or held for use by either Seller with respect to
the Business, except for matters listed on Schedule 2.15(b).
(b) Schedule 2.15(b) contains a true, correct and complete
list of all Intellectual Property which has been registered in, filed in or
issued by the PTO, the United States Copyright Office, any state trademark
offices and the patent, trademark, copyright and other corresponding offices of
foreign jurisdictions. All such registrations have been duly filed, registered
and issued and are in full force and effect.
(c) Except as set forth on Schedule 2.15(c), Section 8 and
15 declarations and applications for renewal with respect to all U.S.
registered trademarks and service marks listed in Schedule 2.15(b) were timely
filed in and accepted by the PTO. No trademarks or service marks listed in
Schedule 2.15(b) have been abandoned.
(d) Schedule 2.15(d) sets forth all licenses or other
agreements from or with third Persons under which either Seller uses or
exercises any rights with respect to any of the Intellectual Property or
Technology other than such licenses or other agreements that involve payments
of no more than $25,000 per year ("Small Licenses"). At the Closing, Sellers
will transfer to Buyer all Intellectual Property and Technology without payment
of royalties, free and clear of any Liens.
(e) Except (i) as set forth on Schedule 2.15(e) or (ii)
with respect to Small Licenses, the Sellers (as applicable) are the sole and
exclusive owners of the Intellectual Property and Technology, free and clear of
any Liens.
(f) Except as set forth on Schedule 2.15(f), neither Seller
has received (and Parent and Sellers have no knowledge of) any written notice
from any other Person pertaining to or challenging the right of either Seller
(or any other Person) to use any of the Intellectual Property or any
Technology, and there is no interference, opposition, cancellation,
reexamination or other contest proceeding, administrative or judicial, pending
or threatened with respect to any Intellectual Property or Technology.
(g) Except as set forth on Schedule 2.15(g), no licenses
have been granted by either Seller and neither Seller has any obligation to
grant licenses with respect to any Intellectual Property or Technology. No
written claims have been made by either Seller of any
<PAGE> 27
22
violation or infringement by others of rights with respect to any Intellectual
Property or Technology, and neither Parent nor Sellers know of any basis for
the making of any such claim. Except in such cases as would not in the
aggregate have a Material Adverse Effect, the use by each Seller of the
Intellectual Property and Technology (past and present) has not violated or
infringed any rights of other Persons, or constituted a breach of any Contract
(or other agreement or commitment).
(h) The Intellectual Property and Technology includes all
such rights necessary to conduct the Business as now conducted and, except (i)
as set forth on Schedule 2.15(d) or (ii) with respect to Small Licenses, such
rights will not be adversely affected by the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(i) There are no licenses or service, maintenance or other
agreements or obligations of any nature whatsoever regarding the Intellectual
Property or Technology between or among a Seller, on the one hand, and any
Affiliate(s) of such Seller, on the other hand. All statements and
representations made by each Seller or any of its Affiliates in any pending
patent, copyright and trademark applications with respect to the Intellectual
Property were true in all material respects as of the time they were made.
2.16 Brokerage. Neither Parent nor either Seller nor any of
their respective Affiliates has made any agreement or taken any other action
which might cause AlliedSignal or Buyer to become liable for a broker's or
finder's fee or commission as a result of the transactions contemplated
hereunder.
2.17 Product Warranties and Guarantees. Parent and each
Seller has provided Buyer with true and correct copies of all written product
and service warranties and guarantees in connection with Contracts listed on
Schedule 2.8(a).
2.18 Products Liability. There are no Liabilities of either
Seller, fixed or contingent, asserted or, to the best of Parent's and each
Seller's knowledge, unasserted, (a) with respect to any product Liability or
any similar claim that relates to any product sold by either of the Sellers to
others prior to the Closing, or (b) with respect to any claim for the breach of
any express or implied product warranty or any other similar claim with respect
to any product sold by either of the Sellers to others prior to the Closing,
other than standard warranty obligations (to replace, repair or refund) made by
a Seller in the ordinary course of the conduct of the Business to buyers of the
respective products, and except in the case of the preceding clauses (a) and
(b) where such Liabilities would not exceed $500,000 in the aggregate for the
Combined Business.
2.19 Labor Matters.
(a) To the best of Parent's and each Seller's knowledge,
there have been no union organizing efforts with respect to either Seller
conducted within the last three years and there are none now being conducted
with respect to either Seller. The Sellers have not at any time during the
three years prior to the date of this Agreement had, nor, to the best of
Parent's and each Seller's knowledge, is there now threatened, a strike, work
stoppage, work slowdown or
<PAGE> 28
23
other material labor dispute with respect to or affecting the Business. Except
as set forth on Schedule 2.19, (i) no employee of either Seller is represented
by any union or other labor organization; (ii) there is no charge or complaint,
including any unfair labor practice charge or any claim of discrimination,
which is pending with any Governmental Entity or, to the best of Parent's and
each Seller's knowledge, threatened against either Seller relating to any of
its employees; and (iii) there is no commitment or agreement to increase wages
or modify the terms and conditions of employment of employees of either Seller
other than ordinary course of the Business consistent with past practice.
Parent and Sellers have provided Buyer with copies of any collective bargaining
agreement or other agreement with any union or other labor organization
representing employees of either Seller.
(b) Within six months prior to the date hereof, (i) neither
Seller has effectuated (x) a "plant closing" (as defined in the WARN Act)
affecting any site of employment or one or more facilities or operating units
within any site of employment or facility of the Business or (y) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
the Business, (ii) neither Seller has been affected by any transaction or
engaged in layoffs or employment terminations with respect to the Business
sufficient in number to trigger application of any similar foreign, state or
local law, and (iii) neither of the Sellers' employees has suffered an
"employment loss" (as defined in the WARN Act).
2.20 Employee Benefits.
(a) Set forth on Schedule 2.20(a) is a true, correct and
complete list of the following:
(i) Separately by location, the names, job
titles and current salary or wage rates of all employees of each Seller
and their hourly or yearly salary, together with a summary of all bonus,
incentive compensation or other additional compensation or similar
benefits paid to such persons for the 1997 fiscal year and estimated for
the 1998 fiscal year;
(ii) Separately by location, the names, job
titles and current salary or wage rates of all independent contractors,
including any consultants, and leased employees who perform services for
a Seller; and
(iii) All of (x) the employee benefit plans,
arrangements or policies (whether or not written, whether U.S. or
foreign, and whether or not subject to ERISA), including, without
limitation, any stock option, stock purchase, stock award, retirement,
pension, deferred compensation, profit sharing, savings, incentive,
bonus, health, dental, hearing, vision, drug, life insurance, cafeteria,
flexible spending, dependent care, fringe benefit, vacation pay, holiday
pay, disability, sick pay, workers compensation, unemployment, severance
pay, employee loan, educational assistance plan, policy or arrangement,
and (y) any employment, indemnification, consulting or severance
agreement, under which any employee or former employee of a Seller has
any present or future right to benefits or under which a Seller has any
present or future Liability
<PAGE> 29
24
(collectively, the "Plans"). Schedule 2.20(a) indicates which Plans are
maintained for employees employed in the United States (collectively,
"U.S. Plans") and which Plans are maintained for employees employed
outside of the United States (collectively, "Foreign Plans").
(b) Parent or Sellers have made available to Buyer a
complete and correct copy of each Plan document or a written description of any
unwritten plan; the most recent summary plan description or similar booklet for
any Plan; and any employee handbook applicable to employees of a Seller.
(c) Except (i) as set forth on Schedule 2.20(c) or (ii) in
such cases as would not in the aggregate have a Material Adverse Effect:
(i) Neither Parent nor either Seller nor any of
their Affiliates has communicated to present or former employees of a
Seller, or formally adopted or authorized, any additional Plan or any
change in or termination of any existing Plan.
(ii) Each Plan has been operated and
administered in accordance with its terms, the terms of any applicable
collective bargaining agreement, and all applicable Laws.
(iii) Each U.S. Plan which is a "group health
plan" subject to the continuation coverage requirements of Section 4980B
of the Code and Part 6 of Title I of ERISA ("COBRA") which is maintained
by a Seller or any of its Affiliates has been operated and administered,
in all material respects, in accordance with such requirements.
(d) Schedule 2.20(d) identifies each U.S. Plan which provides
health, life insurance or other welfare benefits to retired or other terminated
employees of a Seller other than continuation coverage required by COBRA and
the Sellers have the ability to amend or terminate any such Plan.
(e) Except in such cases as would not in the aggregate have a
Material Adverse Effect, with respect to any Plan, no actions, suits, claims or
proceedings (other than routine claims for benefits) are pending or, to the
best of Parent's and each Seller's knowledge, threatened, and no facts or
circumstances exist which could be reasonably expected to give rise to any such
actions, suits, claims or proceedings.
(f) Except in such cases as would not in the aggregate have a
Material Adverse Effect, no Plan is currently under governmental investigation
or audit, and to the best of Parent's and each Seller's knowledge, no such
investigation or audit is contemplated or under consideration.
(g) Except in such cases as would not in the aggregate have a
Material Adverse Effect, no event has occurred and no condition exists that
could be reasonably expected to subject AlliedSignal or Buyer, directly or
indirectly, to any tax, fine, penalty or other Liability arising under, or with
respect to, any employee benefit plan currently or previously maintained
<PAGE> 30
25
by either Seller or any Person that is or was a member of a controlled group
with, under common control with, or otherwise required to be aggregated with,
either Seller under Section 414(b), (c), (m) or (o) of the Code.
(h) No lien has arisen or is expected to arise under the Code or
ERISA on the Purchased Assets.
(i) No U.S. Plan is a "multiemployer plan" within the meaning of
Section 3(37)(A) of ERISA, and neither Seller has any outstanding Liability
with respect to any such plan (contingent or otherwise).
(j) Except (i) as set forth on Schedule 2.20(j) or (ii) in such
cases as would not in the aggregate have a Material Adverse Effect, neither the
execution of this Agreement nor the consummation of the transactions
contemplated by this Agreement, will (x) increase the amounts of benefits
otherwise payable under any Plan, (y) result in the acceleration of the time of
payment, exercisability, funding or vesting of any such benefits, or (z) result
in any payment (whether severance pay or otherwise) becoming due to, or with
respect to, any employee or director of a Seller.
(k) No employee of any Seller is employed outside of the United
States and Sellers have no Foreign Plans.
2.21 No Pending Litigation or Proceedings. Except as set forth on
Part A of Schedule 2.21, there are no actions, suits, investigations or
proceedings pending against or affecting, or, to the best of Parent's and each
Seller's knowledge, threatened against, Parent, either Seller, the Business or
any of the Purchased Assets before any arbitrator or Governmental Entity
(including the United States Environmental Protection Agency, the United States
Equal Employment Opportunity Commission or any similar Governmental Entity)
that would materially and adversely affect their ability to perform their
obligations under this Agreement. Except as set forth on Part B of Schedule
2.21, there are no outstanding judgments, decrees, writs, injunctions or orders
of any arbitrator or Governmental Entity against Parent or either Seller which
relate to or arise out of the conduct of the Business or the ownership,
condition or operation of the Business or the Purchased Assets except in such
cases as would not in the aggregate have a Material Adverse Effect.
2.22 Insurance. Schedule 2.22 lists each Seller's policies and
contracts in effect as of the date hereof for insurance covering the Purchased
Assets or Assumed Liabilities and the operation of the facilities constituting
the Business owned or held by the Sellers, together with the risks insured
against, coverage limits and deductible amounts. Sellers have made available
to Buyer complete and correct copies of all such policies together with all
riders and amendments thereto. Such policies are in full force and effect and
all premiums due thereon have been paid. Each of the Sellers has complied in
all material respects with the terms and conditions of such policies. The
Sellers have made available to Buyer all books and records relating to workers
compensation claims and all claims made by the Sellers under any policy of
insurance during the five years prior to the date hereof with respect to the
Business other than employee claims under health or medical insurance policies
or coverage.
<PAGE> 31
26
2.23 Customers; Suppliers. As of the date of this Agreement, Part
A of Schedule 2.23 contains a true, correct and complete list of (i) all
Contracts to which any Major Customer is a party and (ii) all Major Suppliers,
together with an estimate of all purchases from each Major Supplier for the
last 12 months. Except as identified with an asterisk on Part A of Schedule
2.23, each of the Contracts listed thereon is fully assignable to Buyer without
the consent, approval or waiver of any other Person. Except as set forth on
Part B of Schedule 2.23, as of the date of this Agreement, neither Parent nor
either Seller has received written notice within the preceding 12 months of any
development (a) which could reasonably be expected to result in a Material
Adverse Effect or (b) which indicates that a Major Customer will not purchase
products of the Combined Business from Buyer during the 1998 fiscal year in
amounts substantially equivalent (on a pro rata basis) to such purchases from
such Seller in the 1997 fiscal year. Except as set forth on Part C of Schedule
2.23, as of the date hereof, no supplier of the Business (including any
supplier of Intellectual Property) has threatened to refuse to sell its
products or services to the Business except in such cases as would not in the
aggregate have a Material Adverse Effect.
2.24 Condition of Assets. Except as set forth on Schedule 2.24,
the buildings, machinery, equipment, tools, furniture, improvements, sewers,
pipes, transportation equipment and other fixed tangible Assets of the Business
(a) included in the Purchased Assets or (b) subject to any Contract included in
the Purchased Assets are in sufficiently good operating condition and repair to
conduct the Business as presently conducted, reasonable wear and tear excepted.
2.25 All Assets. Except as set forth on Schedule 2.25 and for the
Excluded Assets, the Purchased Assets (including any Assets, properties and
rights subject to any Contract included in the Purchased Assets) constitute all
the assets, properties and rights owned, used, or held for use in connection
with, or that are otherwise related to or required for the conduct of, the
Business as currently conducted by the Sellers on the date of this Agreement.
Except as set forth on Schedule 2.25, none of the Purchased Assets are owned,
in whole or in part, by any Person other than the Sellers.
2.26 [Intentionally omitted.].
2.27 Securities Matters. Except as set forth on Schedule 2.27,
Sellers are acquiring the AlliedSignal Common Stock for their own account and
without a present view to any distribution thereof or any present intention of
distributing or selling the AlliedSignal Common Stock in violation of the
federal securities laws. Each Seller is an "accredited investor" as such term
is defined in Regulation D promulgated under the Securities Act. In evaluating
the suitability of an investment in the AlliedSignal Common Stock, each Seller
has relied solely upon the representations, warranties, covenants and
agreements made by AlliedSignal herein and has not relied upon any other
representations or other information (whether oral or written and including any
estimates, projections or supplemental data) made or supplied by or on behalf
of AlliedSignal or any Affiliate, employee, agent or other representative of
AlliedSignal. Each Seller understands and agrees that it may not sell or
dispose of any of the AlliedSignal Common
<PAGE> 32
27
Stock other than pursuant to a registered offering or in a transaction exempt
from the registration requirements of the Securities Act.
2.28 SEC Filings. Parent has heretofore delivered to Buyer,
and Buyer acknowledges receipt of, the following documents (the "Parent
Reports"): (a) Parent's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997, (b) Parent's Quarterly Reports on Form 10-Q for the fiscal
quarters ended June 30, and September 30, 1997, (c) Parent's proxy statement
relating to its 1997 Annual Meeting of Stockholders, (d) Parent's Annual Report
to Stockholders for 1997, and (e) any other report filed during 1997, and
prior to the date of this Agreement, with the Securities and Exchange
Commission under the Securities Act or the Exchange Act. Each Parent Report,
as of its filing date, insofar as it relates to the Business, did not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of circumstances
under which they were made, not misleading.
2.29 [Intentionally omitted.].
2.30 Business Conduct. Except as discussed between Parent
and Buyer on December 7, 1997, to the best of Parent's and each Seller's
knowledge, during the past three years neither Seller, nor any director,
officer, employee or third party acting on behalf thereof, has, in violation of
any Law: (i) made any bribes, kickbacks or other payments, directly or
indirectly, to any Person or any representative thereof, to obtain favorable
treatment in securing business or otherwise to obtain special concessions for
either Seller; (ii) made any bribes, kickbacks or other payments, directly or
indirectly, to or for the benefit of any Governmental Entity or any official,
employee or agent thereof, for the purpose of affecting his or her action or
the action of the Governmental Entity that he or she represents to obtain
favorable treatment in securing business or to obtain special concessions for
the Seller; (iii) made any unlawful political contributions on behalf of either
Seller; or (iv) otherwise used corporate funds of either Seller for any illegal
purpose, including without limitation, any violation of the Foreign Corrupt
Practices Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ALLIEDSIGNAL AND BUYER
AlliedSignal and Buyer hereby jointly and severally represent
and warrant to Parent and Sellers as follows:
3.1 Organization and Good Standing. (a) AlliedSignal is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware.
(b) Buyer is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware.
AlliedSignal is the sole member of Buyer. AlliedSignal owns all of the
outstanding equity and profit interests in Buyer, free and clear of all Liens.
Buyer is disregarded as an entity separate from AlliedSignal for federal tax
purposes.
<PAGE> 33
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3.2 Authorization and Enforceability. With respect to each
of AlliedSignal and Buyer: (a) such entity has full power and authority to
execute, deliver and perform this Agreement and the Transaction Documents to
which such entity is a party, (b) the execution, delivery and performance by
such entity of this Agreement and the Transaction Documents to which such
entity is a party have been duly authorized by all necessary action on the part
of such entity, (c) this Agreement has been duly executed and delivered by such
entity, and, as of the Closing Date, the other Transaction Documents to which
either entity is a party will be duly executed and delivered by such entity,
(d) this Agreement is a legal, valid and binding obligation of such entity,
enforceable against such entity in accordance with its terms, and (e) as of the
Closing Date, each of the other Transaction Documents to which such entity is a
party will constitute the legal, valid and binding obligations of such entity,
enforceable against such entity in accordance with its terms.
3.3 No Violation of Laws or Agreements. The execution,
delivery, and performance by AlliedSignal and Buyer of this Agreement and the
Transaction Documents to which such entities (as applicable) are parties do
not, and the consummation by AlliedSignal and Buyer (as applicable) of the
transactions contemplated hereby and thereby, will not, (a) contravene any
provision of the Certificate of Incorporation or Bylaws of AlliedSignal nor the
Certificate of Formation or Limited Liability Company Agreement of Buyer, or
(b) except as set forth on Schedule 3.3, violate, conflict with, result in a
breach of, or constitute a default (or an event which would, with the passage
of time or the giving of notice or both, constitute a default) under, or result
in or permit the termination, modification, acceleration, or cancellation of,
(i) any indenture, mortgage, loan or credit agreement, license, instrument,
lease, contract, plan, permit or other agreement or commitment, oral or
written, to which either AlliedSignal or Buyer is a party, or by which any of
either entity's Assets may be bound or affected, or (ii) any judgment,
injunction, writ, award, decree, restriction, ruling, or order of any
arbitrator or Governmental Entity or any applicable Law to which AlliedSignal
or Buyer is subject.
3.4 Consents. No consent, approval or authorization of, or
registration or filing with, any Person (governmental or private) is required
in connection with the execution, delivery and performance by AlliedSignal or
Buyer of this Agreement, the other Transaction Documents to which AlliedSignal
or Buyer is a party, or the consummation by AlliedSignal or Buyer of the
transactions contemplated hereby or thereby except (a) as required by the HSR
Act, (b) as required by the NYSE to list AlliedSignal Common Stock and (c) any
required consent, approval or authorization of, or registration or filing with,
any foreign governmental authority.
3.5 AlliedSignal Common Stock. As of the date hereof,
1,000,000,000 shares of AlliedSignal Common Stock are authorized for issuance.
As of November 30, 1997, 562,554,971 shares of AlliedSignal Common Stock were
issued and outstanding and 153,902,513 shares of AlliedSignal Common Stock were
held in the treasury of AlliedSignal or owned by any Subsidiary of
AlliedSignal. AlliedSignal has a sufficient number of unreserved shares of
AlliedSignal Common Stock to perform the transactions contemplated hereby. All
shares of AlliedSignal Common Stock to be issued at the Closing, when so
issued, will be duly authorized, validly issued, fully paid and non-assessable,
free of preemptive rights and all Liens and will be issued in compliance with
all applicable Laws. Parent acknowledges that
<PAGE> 34
29
AlliedSignal has disclosed to Parent that AlliedSignal will be making open
market and/or block purchases of AlliedSignal Common Stock during the period
between the date hereof and the Closing Date. All such purchases shall comply
with Rule 10b-18 under the Exchange Act.
3.6 SEC Filings. AlliedSignal has heretofore delivered to
Parent, and Parent acknowledges receipt of, the following documents (the
"AlliedSignal Reports"): (a) AlliedSignal's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, (b) AlliedSignal's Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1997, June 30, 1997 and
September 30, 1997, (c) AlliedSignal's proxy statement relating to its 1997
Annual Meeting of Stockholders, (d) AlliedSignal's Annual Report to
Stockholders for 1996, and (e) any other report filed during 1997, and prior to
the date of this Agreement, with the Securities and Exchange Commission under
the Securities Act or the Exchange Act. As of their respective dates, each of
the AlliedSignal Reports complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
none contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Since January 1, 1996, AlliedSignal has timely filed all reports,
registration statements and made all filings required to be filed with the SEC
under the rules and regulations of the SEC.
3.7 Financial Statements. The audited consolidated
financial statements and unaudited consolidated interim financial statements of
AlliedSignal and its consolidated Subsidiaries included in or incorporated by
reference into the AlliedSignal Reports (including any related notes and
schedules) have been prepared in accordance with GAAP (except as may be
indicated in the notes thereto or as permitted by the Securities Act or the
Exchange Act in the case of unaudited financial statements included in or
incorporated by reference into the AlliedSignal Reports) and fairly present the
consolidated financial position of AlliedSignal and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations for the periods then ended, subject, in the case of the unaudited
consolidated interim financial statements, to normal year-end adjustments and
any other adjustments described therein.
3.8 Brokerage. Neither AlliedSignal, Buyer nor any of their
respective Affiliates has made any agreement or taken any other action which
might cause Parent or either Seller to become liable for a broker's or finder's
fee or commission as a result of the transactions contemplated hereunder.
ARTICLE IV
ADDITIONAL COVENANTS
4.1 Conduct of Business. Except (i) as otherwise
specifically permitted by this Agreement or (ii) with the prior written consent
of Buyer, from and after the date of this Agreement and until the Closing Date,
Parent and Sellers agree that:
(a) Sellers shall:
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30
(i) conduct the Business as presently conducted
and only in the ordinary course of business consistent with past
practice; and
(ii) use their reasonable best efforts to
preserve the business organization of the Business substantially
intact, to keep available to Buyer the services of their respective
employees, and to preserve for Buyer the goodwill of the suppliers,
distributors, customers and others having business relationships
with the Business.
(b) Parent and Sellers shall promptly inform AlliedSignal
in writing of any specific event or circumstance (including, without
limitation, any consecutive two week period in which any Major Customer
fails to place orders with the Seller or Sellers with which it transacts
business) of which any of them is aware, or of which any of them receives
written or oral notice, that (i) has or is likely to have, individually
or in the aggregate, taken together with other events or circumstances, a
Material Adverse Effect, (ii) indicates that any Major Customer is
terminating or intends to terminate any Contract (excluding termination
upon expiration of the term of any Contract so long as such customer
continues to purchase goods from the Combined Business) and/or indicates
that any such customer intends to reduce its purchases from either Seller
or (iii) indicates that any Major Supplier is terminating or intends to
terminate any Contract (excluding termination upon expiration of the term
of any Contract so long as such supplier continues to sell goods to the
Combined Business) and/or indicates that any such Major Supplier intends
to reduce its sales to either Seller, provided that any such oral notice
reportable under this Section 4.1(b) shall be directed to a responsible
Person at Parent or either Seller; and
(c) Sellers shall not:
(i) change or modify in any material respect
existing Inventory management or credit and collection policies,
procedures and practices with respect to accounts receivable in any
case relating to the Business;
(ii) enter into any Contracts, waive any rights
or enter into any other transactions which individually or in the
aggregate would have a Material Adverse Effect;
(iii) mortgage, pledge or subject to any Lien
(other than Permitted Liens) any of the Purchased Assets;
(iv) change any compensation or benefits or
grant any material new compensation or benefits payable to or in
respect of any employee of the Business (except, for regularly
scheduled merit increases in the ordinary course of business
consistent with past practice);
<PAGE> 36
31
(v) sell, lease or otherwise transfer any
Assets, except Inventory in the ordinary course of the Business,
necessary, or otherwise material to the conduct of, the Business
which would constitute Purchased Assets;
(vi) change either Seller's method of accounting
or keeping its books of account or accounting practices with
respect to the Business, except as required by GAAP;
(vii) take or omit to take any action which if
taken or omitted prior to the date hereof would constitute or
result in a breach of any representations or warranties of Parent
or Sellers set forth herein;
(viii) enter into any Contract (except sales
contracts with customers in the ordinary course of the Business and
except for such Contracts which may be terminated by Buyer without
penalty or Liability on no more than 30 days' notice) that would
create a Liability for the Business in excess of $200,000 per year
without obtaining AlliedSignal's prior written consent, such
consent not to be unreasonably withheld;
(ix) create, incur or assume any Debt not
currently outstanding, other than current Liabilities incurred in
the ordinary course of business;
(x) amend their charters, bylaws or other
organizational documents;
(xi) authorize, issue, sell or otherwise dispose
of any capital stock of either Seller or amend the terms thereof;
(xii) declare, set aside or pay any dividend or
other distribution (whether in cash, stock or property or any
combination thereof) in respect of the capital stock of either of
the Sellers, or redeem or otherwise acquire any of the capital
stock of either of the Sellers;
(xiii) make any loans, advances or capital
contributions to, or investments in, any Person;
(xiv) acquire, sell, lease or dispose of any
Assets used or held for use in the Business, other than (x) sales
of Inventory in the ordinary and usual course of business
consistent with past practice or (y) purchases of goods for use in
the Business in the ordinary and usual course of business
consistent with past practice;
(xv) with respect to the Business, pay,
discharge or satisfy any claims, Liabilities (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of
business of Liabilities reflected or reserved against in, or
contemplated
<PAGE> 37
32
by, the Balance Sheet or incurred in the ordinary course of
business consistent with past practice;
(xvi) disclose to any third party or enter into
any Technology license or agreement to disclose to any third party
any Intellectual Property, except in the ordinary and usual course
of business and pursuant to written confidentiality agreements;
(xvii) enter into any labor agreement;
(xviii) sell or dispose of any significant amount
of old or obsolete Inventory; or
(xix) make capital expenditures in excess of
$50,000 individually or $250,000 in the aggregate for the Combined
Business;
(xx) agree in writing or otherwise to take any
of the foregoing actions.
4.2 Mutual Covenants. The parties hereto mutually covenant from
the date of this Agreement to the Closing Date (and subject to the other terms
of this Agreement):
(a) to cooperate with each other in determining whether
filings are required to be made or consents required to be obtained in
any jurisdiction in connection with the consummation of the transactions
contemplated by this Agreement and in making or causing to be made any
such filings promptly and in seeking to obtain timely any such consents
(each party hereto shall furnish to the other and to the other's counsel
all such information as may be reasonably required in order to effectuate
the foregoing action); and
(b) to advise the other parties promptly if such party
determines that any condition precedent to its obligations hereunder will
not be satisfied in a timely manner.
4.3 Filings and Authorizations. The parties hereto will, as
promptly as practicable, and in the case of filings under the HSR Act no later
than five Business Days after the date of this Agreement, make or cause to be
made all such filings and submissions under Laws applicable to them or their
Affiliates as may be required to consummate the terms of this Agreement,
including all notifications and information to be filed or supplied pursuant to
the HSR Act. The parties hereto shall also provide as promptly as possible
full responses to any requests for additional information made of them under
the HSR Act. Any such filings, including any supplemental information and
requests for additional information under the HSR Act, will be in substantial
compliance with the requirements of the applicable Law. Each of AlliedSignal
and Buyer, on the one hand, and Parent and Sellers, on the other hand, shall
furnish to the other such necessary information and reasonable assistance as
the other may request in connection with its preparation of any filing or
submission which is necessary under the HSR
<PAGE> 38
33
Act. Parent, Sellers, AlliedSignal and Buyer shall keep each other apprised of
the status of any communications with, and inquiries or requests for additional
information from, any Governmental Entity, including the FTC and the Antitrust
Division, and shall comply promptly with any such inquiry or request. Each of
Parent and AlliedSignal shall use its reasonable efforts to obtain any
clearance required under the HSR Act for the purchase and sale of the Purchased
Assets in accordance with the terms and conditions hereof. Nothing contained
in this Agreement, including under this Section 4.3 and Sections 4.8 and 4.13,
will require or obligate (a) Parent, the Sellers, AlliedSignal, Buyer or their
respective Affiliates to initiate, pursue or defend any litigation to which any
Governmental Entity (including the Antitrust Division and the FTC) is a party
or (b) AlliedSignal, Buyer or their respective Affiliates (i) to agree or
otherwise become subject to any limitations on (x) the right of AlliedSignal,
Buyer or their respective Affiliates effectively to control or operate the
Business, (y) the right of AlliedSignal, Buyer or their respective Affiliates
to acquire or hold the Business, or (z) the right of AlliedSignal or Buyer to
exercise full rights of ownership of the Business or all or any portion of the
Purchased Assets, or (ii) to agree or otherwise be required to sell or
otherwise dispose of, hold separate (through the establishment of a trust or
otherwise), or divest itself of all or any portion of the business, Assets or
operations of AlliedSignal, Buyer, any Affiliate of AlliedSignal or Buyer or
the Business. The parties agree that no representation, warranty or covenant
of Parent, Sellers, AlliedSignal or Buyer contained in this Agreement shall be
breached or deemed breached as a result of the failure by any party hereto or
any of its Affiliates to take any of the actions specified in the preceding
sentence.
4.4 Public Announcement. No party hereto shall make or issue, or
cause to be made or issued, any public announcement or written statement
concerning this Agreement or the transactions contemplated hereby without the
prior written consent of the other party hereto (which will not be unreasonably
withheld or delayed), unless counsel to such party advises that such
announcement or statement is required by law or the rules of any securities
exchange on which securities of any Affiliate of Parent are traded (in which
case the parties hereto shall make reasonable efforts to consult with each
other prior to such required announcement).
4.5 Investigation. Sellers shall give AlliedSignal and its
representatives (including AlliedSignal's accountants, consultants, counsel and
employees), upon reasonable notice and during normal business hours, reasonable
access to the properties (including any Equipment and any Acquired Real
Property), Contracts, employees, books, records and affairs of the Sellers to
the extent relating to the Business and the Purchased Assets (provided that
such access does not unreasonably disrupt the conduct of the Business), and
shall cause their respective officers, employees, agents and representatives to
furnish to AlliedSignal all documents, records and information (and copies
thereof), to the extent relating to the Business and the Purchased Assets, as
AlliedSignal may reasonably request. Parent and Sellers may reasonably limit
the number of representatives of AlliedSignal provided access hereby. No
investigation or receipt of information by AlliedSignal pursuant to, or in
connection with, this Agreement, shall diminish or obviate any of the
representations, warranties, covenants or agreements of Parent or Sellers under
this Agreement or the conditions to the obligations of Buyer under this
Agreement. All information provided to AlliedSignal or Buyer under this
Agreement shall be held subject to the terms and conditions of the
Confidentiality Agreement.
<PAGE> 39
34
4.6 Taxes.
(a) Parent and each Seller shall jointly and severally be
responsible for and shall pay any and all Taxes arising or resulting from the
conduct of the Business or the ownership of the Purchased Assets on or prior to
the Closing Date, which Liability shall be a Non-Assumed Liability (including,
without limitation, the sale of the Business and the Purchased Assets on the
Closing Date pursuant to this Agreement).
(b) Buyer shall be responsible for and shall pay any and all
Taxes arising or resulting from the conduct of the Business or the ownership of
the Purchased Assets after the Closing Date (excluding without limitation, the
sale of the Business and the Purchased Assets or the Closing Date pursuant to
this Agreement), which Liability shall be an Assumed Liability.
(c) Each Seller hereby acknowledges that for FICA and FUTA
purposes, Buyer qualifies as a successor employer with respect to the retained
employees. In connection with the foregoing, the parties agree to follow the
"Alternative Procedures" set forth in Section 5 of the Revenue Procedure 96-60,
1996-2C.B.399. Each affected Seller and Buyer understands that Buyer shall
assume the affected Seller's entire obligation to furnish a Form W-2, Wage and
Tax Statement to the employees of the Business for calendar year ending
December 31, 1998.
(d) In addition to all personnel files and records relating to
employees of the Business that each Seller shall deliver to the Buyer when
their employment commences with Buyer as otherwise required by this Agreement,
each Seller shall timely provide Buyer with any and all other information it
needs to properly comply with the requirements of the final sentence of Section
4.6(c).
(e) Each Seller acknowledges that for state unemployment Tax
purposes, each Seller will permit Buyer to apply for a transfer of such
Seller's rating account with respect to its Business. Each Seller shall
deliver to Buyer within a reasonable time after request therefor, with respect
to its Business, copies of such Seller's (i) Form 940, Employer's Annual
Federal Unemployment Tax Returns for 1995 and 1996, (ii) state unemployment tax
rate notices for 1995 and 1996, and (iii) benefit change statements that
itemize claims charged against the state account of such Seller in each state
in which the Business is operated for the four most recent calendar quarters.
(f) Parent, Sellers and Buyer shall each, and Parent shall cause
DA to (i) provide the other with such assistance as may reasonably be requested
by any of them in connection with the preparation of any Tax return, any audit
or other examination by any Taxing Authority or any judicial or administrative
proceeding with respect to Taxes, (ii) retain and provide to the other any
records or other information which may be relevant to such return, audit
examination or proceeding, and (iii) provide to the other any final
determination of any such audit or examination, proceeding or determination
that affects any amount required to be shown on any Tax return of the other for
any period (which shall be maintained confidentially). Without limiting the
generality of the foregoing, Buyer, Sellers and Parent shall, and Parent shall
cause DA to, retain, until the applicable statutes of limitations (including
all extensions) have expired, copies of all Tax returns, supporting workpapers,
and other books and records or
<PAGE> 40
35
information which may be relevant to such returns for all Tax periods or
portions thereof ending before or including the Closing Date, and shall not
destroy or dispose of such records or information without first providing the
other party with a reasonable opportunity to review and copy the same.
(g) Parent agrees that neither Seller will be liquidated
and that Sellers in the aggregate will retain assets of at least $1,000,000.
Buyer, Parent and each Seller intend that Buyer's acquisition of the Business
and Purchased Assets from the Sellers pursuant to this Agreement shall be a
taxable transaction and, assuming compliance by Parent with the covenant set
forth in the immediately preceding sentence, each of the parties agrees to
treat such acquisition in such manner for all tax purposes, including, without
limitation, for all purposes on any federal or state income or franchise tax
return filed by any party after the Closing Date. Parent, Sellers and Buyer
mutually agree to the allocation of the Initial Purchase Price among such
Purchased Assets, in accordance with Code Section 1060. In the event of an
adjustment to the Initial Purchase Price as provided in Section 1.6(f) and
Section 9.15 of the Aerospace Agreement, any such adjustment due to a change in
a particular class of Purchased Assets shall be allocated on a dollar for
dollar basis to the applicable class. The parties shall mutually agree to the
allocation of the adjustment within thirty (30) days after the determination of
such adjusted Initial Purchase Price. Each of the parties agrees to report
this transaction for tax purposes in accordance with such allocation of the
Initial Purchase Price or the adjusted Initial Purchase Price, including,
without limitation, for all purposes on any federal or state income or
franchise tax return filed by any party after the Closing Date.
(h) Neither Parent nor either Seller shall, and Parent
shall cause DA not to, make a new or change any existing Tax election, change a
method of accounting or Inventory method, file any amended Tax return, enter
into any closing agreement, settle any Tax claim or assessment, or take or omit
to take any other action not consistent with past practice, if any such action
or omission would have the effect of increasing the Tax Liability of
AlliedSignal or Buyer with respect to the Business and Purchased Assets for any
period after the Closing Date.
(i) AlliedSignal and Buyer, on the one hand, and Parent and
Sellers, on the other hand, shall equally bear all Transfer Taxes. Parent,
Sellers and Buyer shall, and Parent shall cause DA to, cooperate in timely
making and filing all Tax Returns as may be required to comply with the
provisions of any Transfer Tax laws. To the extent legally able to do so,
Buyer shall deliver to Parent and Sellers exemption certificates satisfactory
in form and substance to Parent and Sellers with respect to Transfer Taxes if
such delivery would reduce the amount of Transfer Taxes that would otherwise be
imposed.
(j) [Intentionally omitted.]
(k) [Intentionally omitted.]
(l) [Intentionally omitted.]
<PAGE> 41
36
4.7 Certain Deliveries.
(a) Within thirty (30) days after the end of each month
ending after the date of this Agreement and prior to the Closing Date, Parent
and Sellers shall prepare and furnish to or cause to be furnished to
AlliedSignal a copy of the monthly financial reports for the Combined Business
prepared after September 30, 1997 (including unaudited balance sheet and income
statements) for each such month and the fiscal year to the end of such month).
All of the foregoing financial statements shall comply with the requirements
concerning unaudited financial statements set forth in Section 2.6. In
addition, Parent and Sellers shall furnish AlliedSignal, upon request, with
copies of regular management reports, if any, concerning the operation of the
Business within ten (10) days after such reports are prepared.
(b) Each Seller shall provide AlliedSignal, within five
days of the execution or the date of receipt thereof, a copy of each Contract
entered into by either Seller after the date hereof and prior to the Closing
Date which, if entered into prior to the date hereof would have been required
to be disclosed on Part A of Schedule 2.8(a).
(c) Within five days after the date of filing thereof,
AlliedSignal or Parent, as the case may be, shall furnish to the other a copy
of each report filed by AlliedSignal or Parent, as the case may be, after the
date of this Agreement and prior to the Closing Date under the Securities Act
or the Exchange Act.
4.8 Consents. Prior to the Closing, Parent and Sellers
shall give any notices and obtain all waivers, licenses, agreements, permits,
consents, approvals or authorizations of any Governmental Authority that are
required to be obtained by either Seller pursuant to any Contract or Permit or
otherwise in order to consummate the transactions contemplated hereunder, and
all of such shall be in a written form agreeable to AlliedSignal and in full
force and effect and without conditions or limitations that restrict the
ability of the parties hereto to carry out the transactions contemplated
hereby.
4.9 Releases. At the Closing, all intercompany Debt (other
than receivables and payables arising from ordinary course commercial
transactions) between the Sellers, on the one hand, and the Parent and its
Subsidiaries other than the Sellers, on the other hand, shall be canceled and
all such amounts shall be deemed to be capital contributions to the entity
owing such Debt.
4.10 Real Property. Within thirty (30) days after the date
hereof, Parent and Sellers shall deliver or cause to be delivered to Buyer
current, as-built ALTA surveys of the Owned Real Property (the cost of which
shall be borne 50% by Parent and 50% by Buyer); such surveys to be dated within
thirty (30) days of the date hereof and to be reasonably acceptable to Buyer.
Such surveys shall be performed by licensed surveyors designated by Buyer and
shall be certified to Buyer, Buyer's title insurance companies and others as
Buyer shall request. The surveys shall be in form sufficient to cause Buyer's
title insurance companies to insure such surveys, and shall be an ALTA/ACSM
Land Title Survey, prepared in accordance with the "Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys as adopted by American Land Title
Association and American Congress on Surveying & Mapping", and shall
<PAGE> 42
37
meet the currently effective Accuracy Standards for an Urban Survey adopted by
said organizations and shall include such optional survey responsibilities and
specifications as Buyer reasonably shall select.
4.11 Environmental. At or prior to Closing, Parent and
Sellers shall deliver or cause to be delivered all such necessary applications,
approvals or consents required to transfer all Permits required for the
continued operation of the Business and the Purchased Assets after the Closing
Date in compliance with Environmental Laws. Within thirty (30) days after
execution of this Agreement, Sellers shall identify to Buyer any of the
Purchased Assets that are subject to the requirements of any Laws that
condition, restrict, prohibit or require notification or disclosure for
environmental reasons upon the transfer, sale, lease or closure of certain
property; and Sellers shall deliver on or prior to the Closing Date, all
necessary applications, approvals, or consents required by such Laws.
4.12 Ancillary Agreements. At or prior to the Closing, the
applicable parties shall enter into each of the Ancillary Agreements.
4.13 Reasonable Best Efforts. Without limiting the specific
obligations of any party hereto under any covenant or agreement hereunder, each
party hereto shall use reasonable best efforts to take all action and do all
things necessary in order to promptly consummate the transactions contemplated
hereby, including, without limitation, satisfaction, but not waiver, of the
Closing conditions set forth in Article V.
4.14 Negotiations. From the date hereof until the
termination of this Agreement in accordance with its terms, Parent and Sellers,
on behalf of themselves and their Affiliates, agree that, except as permitted
under the Aerospace Agreement, Parent, Sellers and their Affiliates will deal
exclusively and in good faith with AlliedSignal and Buyer with respect to any
transaction involving the sale, transfer or other disposition of the Purchased
Assets or the Business; and neither Parent, Sellers, their Affiliates nor any
of their officers, directors, employees, lenders, investment banking firms,
advisors or other agents, or any Person acting on their behalf, will solicit
any inquiries or proposals by, or engage in any discussions or negotiations
with, or furnish any nonpublic information to or enter into any agreement with,
any Person other than AlliedSignal or Buyer concerning the sale or other
disposition of the Purchased Assets or the Business or the merger,
consolidation, sale of securities or other transaction involving Parent or
either of the Sellers, if such merger, consolidation, sale or other transaction
would be inconsistent, in any respect, with the transactions contemplated by
this Agreement, and will promptly notify AlliedSignal of the substance of any
inquiry or proposal concerning any such transaction that may be received by
Parent, Sellers or their Affiliates.
4.15 U.S. Government Contracts. As soon as practicable
following the date of this Agreement and only after Buyer's written request,
with respect to each Government Contract, AlliedSignal and Buyer shall assist
Parent and Sellers to either obtain written confirmation reasonably
satisfactory in form and substance to Buyer that novation of such Government
Contract is not required, or, if not received prior to the Closing Date, submit
to the cognizant responsible contracting officer, as soon as practicable after
the Closing Date (i) a
<PAGE> 43
38
written request that the U.S. Government enter into a novation agreement
contemplated by FAR 42.1204 (a "Novation Agreement") with Buyer with respect to
each Government Contract and (ii) a Novation Agreement executed by the Seller
party thereto for each Government Contract. Parent, Sellers, AlliedSignal and
Buyer shall coordinate their efforts to facilitate the actions required by this
Section 4.15 and Parent agrees to take all necessary action to assist Sellers
prior to and after the Closing in connection therewith, including without
limitation, upon Buyer's written request, obtaining such consents after the
Closing, informing the appropriate governmental personnel of the pending
transaction and of the planned novation.
4.16 NYSE Listing. AlliedSignal shall take all reasonable
action required to obtain from the NYSE, prior to the Closing Date to have duly
approved for listing, subject to official notice of issuance, the shares of
AlliedSignal Common Stock to be issued hereunder at the Closing.
4.17 [Intentionally omitted.]
4.18 Seller Debt. Prior to the Closing, Parent shall cause
all remaining payments on all capitalized leases to be paid and use its
reasonable best efforts to cause all cash accounts of the Sellers to be reduced
to zero with no negative or positive balances. Buyer acknowledges that the
funding of negative balances will increase Closing Date Net Worth.
4.19 [Intentionally omitted.]
4.20 Product Liability Insurance. At Parent's request,
AlliedSignal shall use reasonable commercial efforts to procure, to the extent
available, at Parent's expense, product liability insurance covering products
manufactured or distributed by the Sellers prior to the Closing Date. Upon
receipt of any premium notice relating to such insurance, AlliedSignal shall
notify Parent and Parent shall promptly pay to AlliedSignal the amount of the
premium due. Parent acknowledges and agrees that AlliedSignal is free to
ascribe any adverse claim experience, to the extent reasonably identifiable to
products manufactured or distributed by the Sellers prior to the Closing Date,
to such policy, so that (to such extent) such adverse claim experience does not
adversely affect other product liability premiums being paid by AlliedSignal.
4.21 United Kingdom Assets. Parent shall cause the transfer
to Buyer or its designee of the Assets located in the United Kingdom related to
the Combined Business.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions Precedent to Obligations of AlliedSignal and
Buyer. The obligations of Buyer to purchase (and of AlliedSignal to cause
Buyer to purchase) the Purchased Assets and assume (and of AlliedSignal to
cause Buyer to assume) the Assumed Liabilities and to consummate the other
transactions contemplated hereby are subject to the satisfaction, on or prior
to the Closing Date, of each of the following conditions (any one or more of
which may be waived in writing in whole or in part by Buyer in its sole
discretion):
<PAGE> 44
39
(a) Representations, Warranties and Covenants. Each of the
representations and warranties of Parent and Sellers contained in this
Agreement or in any Transaction Document delivered in connection herewith shall
be true and correct in all material respects on and as of the date of this
Agreement and at and as of the Closing with the same effect as though such
representations and warranties had been made at and as of the Closing, except
for representations and warranties that speak as of a specific date or time
other than the Closing (which need only be true and correct in all material
respects as of such date or time); provided, however, that if any such
representation or warranty is already qualified by materiality, for purposes of
determining whether this condition has been satisfied, such representation or
warranty as so qualified shall be true and correct in all respects. Parent and
Sellers shall have performed and complied in all material respects with each
covenant and agreement required by this Agreement to be performed or complied
with by them at or prior to the Closing. Parent and each Seller shall furnish
AlliedSignal and Buyer with a certificate of such company dated the Closing
Date and signed by a senior executive officer of Parent or such Seller, as the
case may be, to the effect that the conditions set forth in this Section 5.1(a)
have been satisfied.
(b) HSR Act. The applicable waiting period under the HSR
Act (including any extensions thereof) with respect to the transactions
contemplated hereby shall have expired or been terminated.
(c) Stock Exchange Listing. The NYSE shall have duly
approved for listing, subject to official notice of issuance, the shares of
AlliedSignal Common Stock to be issued hereunder at the Closing.
(d) Required Consents. Parent and the Sellers shall have
obtained all statutory and regulatory consents and approvals which are
required under any applicable Laws in order to consummate the transactions
contemplated hereby and to permit Buyer to conduct the Business as conducted as
of the date of this Agreement and all other necessary consents and approvals of
third parties (other than any customer or supplier of the Business) to the
transactions contemplated hereby, other than those the failure of which to
obtain, individually and in the aggregate, would not have a Material Adverse
Effect.
(e) Injunction; Litigation; Legislation. (i) Parent, the
Sellers, AlliedSignal and Buyer shall not be subject to any order or injunction
by any Governmental Entity restraining or prohibiting the consummation of the
transactions contemplated hereby, (ii) no action or proceeding shall have been
instituted before any Governmental Entity to restrain or prohibit, or to obtain
substantial damages in respect of, the consummation of the transactions
contemplated hereby, (iii) none of the parties hereto shall have received
written notice from any Governmental Entity of (x) its intention to institute
any action or proceeding to restrain, enjoin or nullify this Agreement or the
transactions contemplated hereby, or to commence any investigation (other than
a routine letter of inquiry, including a routine civil investigative demand)
into the consummation of the transactions contemplated hereby or (y) the actual
commencement of such investigation, (iv) there shall not be any pending or
threatened litigation, suit, action or proceeding by any party which would
reasonably be expected to limit or materially adversely affect Buyer's
ownership of the Purchased Assets or the Buyer under the Aerospace Agreement's
<PAGE> 45
40
ownership of the Aerospace Purchased Assets and (v) no Law shall have been
promulgated or enacted by any Governmental Entity, which would prevent or make
illegal the consummation of the transactions contemplated hereby.
(f) Documents. Parent and the Sellers shall have delivered
to Buyer at the Closing such other documents and instruments as shall be
reasonably necessary to transfer to Buyer the Purchased Assets as contemplated
by this Agreement. Parent and Sellers shall have delivered all the
certificates, instruments, contracts and other documents specified to be
delivered by each of them hereunder.
(g) Aerospace Closing. (i) All conditions to the Closing
(as defined in the Aerospace Agreement) shall have been satisfied or waived and
(ii) the Closing (as defined in the Aerospace Agreement) shall be consummated
simultaneously with the consummation of the Closing hereunder.
(h) Escrow Agreement. Parent and the Escrow Agent shall
have executed and delivered to AlliedSignal the Escrow Agreement.
5.2 Conditions Precedent to Obligations of Parent and
Sellers. The obligations of Sellers to sell, and Parent to cause to be sold,
the Purchased Assets and to consummate the other transactions contemplated
hereby are subject to the satisfaction, on or prior to the Closing Date, of
each of the following conditions (any one or more of which may be waived in
writing in whole or in part by Parent (acting on its own behalf and on behalf
of Sellers) in its sole discretion):
(a) Representations, Warranties and Covenants. Each of the
representations and warranties of AlliedSignal and Buyer contained in this
Agreement and in any Transaction Document delivered in connection herewith
shall be true and correct in all material respects on and as of the date of
this Agreement and at and as of the Closing with the same effect as though such
representations and warranties had been made at and as of the Closing, except
for representations and warranties that speak as of a specific date or time
other than the Closing (which need only be true and correct in all material
respects as of such date or time); provided, however, that if any such
representation or warranty is already qualified by materiality, for purposes of
determining whether this condition has been satisfied, such representation or
warranty as so qualified shall be true and correct in all respects.
AlliedSignal and Buyer shall have performed or complied in all material
respects with each covenant and agreement required by this Agreement to be
performed or complied with by it at or prior to the Closing. AlliedSignal or
Buyer, as the case may be, shall furnish Sellers with a certificate dated the
Closing Date and signed by a senior executive officer of Buyer to the effect
that the conditions set forth in this Section 5.2(a) have been satisfied.
(b) HSR Act. The applicable waiting period under the HSR
Act (including any extensions thereof) with respect to the transactions
contemplated hereby shall have expired or been terminated.
<PAGE> 46
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(c) Stock Exchange Listing. The NYSE shall have duly
approved for listing, subject to official notice of issuance, the shares of
AlliedSignal Common Stock to be issued hereunder at the Closing.
(d) Injunction; Litigation; Legislation. (i) Parent, the
Sellers, AlliedSignal and Buyer shall not be subject to any order or injunction
by any Governmental Entity restraining or prohibiting the consummation of the
transactions contemplated hereby, (ii) no action or proceeding shall have been
instituted before any Governmental Entity to restrain or prohibit, or to obtain
substantial damages in respect of, the consummation of the transactions
contemplated hereby, (iii) none of the parties hereto shall have received
written notice from any Governmental Entity of (x) its intention to institute
any action or proceeding to restrain, enjoin or nullify this Agreement or the
transactions contemplated hereby, or to commence any investigation (other than
a routine letter of inquiry, including a routine civil investigative demand)
into the consummation of the transactions contemplated hereby or (y) the actual
commencement of such investigation and (iv) no Law shall have been promulgated
or enacted by any Governmental Entity, which would prevent or make illegal the
consummation of the transactions contemplated hereby.
(f) Documents. AlliedSignal and Buyer shall have delivered
to Sellers at the Closing such other documents and instruments as shall be
reasonably necessary for the assumption by Buyer of the Assumed Liabilities as
contemplated by this Agreement. AlliedSignal and Buyer shall have delivered
all the certificates, instruments, contracts and other documents specified to
be delivered by it hereunder.
(g) Aerospace Closing. (i) All conditions to the Closing
(as defined in the Aerospace Agreement) shall have been satisfied or waived and
(ii) the Closing (as defined in the Aerospace Agreement) shall be consummated
simultaneously with the consummation of the Closing hereunder.
(h) Registration Rights Agreement. AlliedSignal shall have
executed and delivered to Parent a registration rights agreement substantially
in the form of Exhibit 1.9(b)(vi) of the Aerospace Agreement with such changes
as may reasonably be requested by Citicorp USA, Inc. provided that such changes
shall not provide for (i) more than a single demand registration right, (ii) a
period of longer than 180 days during which the Registration Statement must be
kept in effect or (iii) the payment of expenses by a party other than Citicorp
USA, Inc. or Parent.
(i) Escrow Agreement. AlliedSignal and the Escrow Agent
shall have executed and delivered to Parent the Escrow Agreement.
<PAGE> 47
42
ARTICLE VI
CERTAIN ADDITIONAL COVENANTS
6.1 Expenses. Except as otherwise expressly provided in this
Agreement, each of the parties hereto shall each bear its respective
accounting, legal and other expenses incurred in connection with the
transactions contemplated by this Agreement.
6.2 Maintenance of Books and Records. Parent, Sellers and Buyer
shall cooperate fully with each other after the Closing so that (subject to any
limitations that are reasonably required to preserve any applicable
attorney-client privilege) each party hereto has access to the business
records, contracts and other information existing at the Closing Date and
relating in any manner to the Purchased Assets, the Assumed Liabilities or the
conduct of the Business (whether in the possession of Parent, Sellers or
Buyer). No files, books or records existing at the Closing Date and relating
in any manner to the Purchased Assets or the conduct of the Business prior to
the Closing Date shall be destroyed by any party hereto for a period of six
years after the Closing Date without giving the other party at least 30 days'
prior written notice, during which time such other party shall have the right
(subject to the provisions hereof) to examine and to remove any such files,
books and records prior to their destruction. The access to files, books and
records contemplated by this Section 6.2 shall be during normal business hours
and upon not less than two business days' prior written request, shall be
subject to such reasonable limitations as the party having custody or control
thereof may impose to preserve the confidentiality of information contained
therein, and shall not extend to material subject to a claim of privilege
unless expressly waived by the party entitled to claim the same.
6.3 [Intentionally omitted.]
6.4 Non-Competition/Non-Solicitation.
(a) Parent and each Seller covenants and agrees that, if the
Closing is consummated, for a period of three years after the Closing Date, it
will not, and will cause Parent Subsidiaries not to, engage in the business of
supplying to the aerospace industry aircraft hardware, chemicals or related
support services (or any portion thereof) anywhere in the world (the
"Competitive Activities"), except for (i) the sale of any Inventory of such
hardware or chemicals owned by such Person or consigned to such Person as of
the date hereof, the value of which Inventory is estimated to be approximately
$5,000,000 or (ii) the sale of any Inventory of such hardware or chemicals
hereafter acquired by such Person as part of a bulk purchase or hereafter
consigned to such person as part of a bulk consignment, but only after such
Person has offered to sell such hardware or chemicals to Buyer at commercially
reasonable prices for such quantities as would be charged to distributors of
such products; provided, however, that nothing herein shall be construed to
prevent Parent, Sellers, and/or any of their respective Affiliates from owning,
in the aggregate, up to 10% of the stock or equity interest in any Person that
engages in such business or any portion thereof. It is the desire and intent
of the parties hereto that the provisions of this Section 6.4 shall be enforced
to the fullest extent permitted under the laws and public policies of each
jurisdiction in which enforcement is sought. If any court determines that any
provision of this Section 6.4 is unenforceable, such court shall have the power
to reduce the
<PAGE> 48
43
duration or scope of such provision, as the case may be, or terminate such
provision and, in reduced form, such provision shall be enforceable; it is the
intention of the parties that the foregoing restrictions shall not be
terminated, unless so terminated by a court, but shall be deemed amended to the
extent required to render them valid and enforceable, such amendment to only
apply with respect to the operation of this Section 6.4 in the jurisdiction of
the court that has made the adjudication. Notwithstanding the foregoing,
nothing in this Section 6.4(a) shall prohibit Parent, any Seller or any of
their respective Affiliates from acquiring any Person or business that engages
in Competitive Activities provided that (x) such activities do not constitute
the principal activities of the Person or business to be acquired (based on the
sales of such business during the preceding four (4) full calendar quarters)
and (y) if Competitive Activities constitute in excess of fifteen percent (15%)
of the revenues of the Person or business acquired, Sellers use their
reasonable efforts to divest that portion of such Person or business that
engages in Competitive Activities within twelve (12) months after the
acquisition thereof.
(b) Each of Parent and each Seller covenants and agrees
that, if the Closing is consummated, for a period of one year after the Closing
Date, it will not, and will cause Parent Subsidiaries not to, directly or
indirectly, solicit for employment, either as an employee or a consultant, any
employee or independent contractor of AlliedSignal, Buyer or any of their
respective Affiliates who is engaged in the Business and was an employee or
independent contractor of either Seller engaged in the Business as of the
Closing Date to become an employee or consultant or otherwise provide services
to Parent, such Seller or any Parent Subsidiary, except for persons whose
employment is solicited or procured through general media advertisements.
(c) The parties acknowledge and agree that the restrictions
contained in Sections 6.4(a) and 6.4(b) are a reasonable and necessary
protection of the immediate interests of AlliedSignal and Buyer, and any
violation of these restrictions would cause substantial injury to AlliedSignal
or Buyer, as the case may be and that AlliedSignal and Buyer would not have
entered into this Agreement without receiving the additional consideration
offered by Parent and each Seller in binding itself to these restrictions. In
the event of a breach or a threatened breach by Parent, any Seller or any
Parent Subsidiary of these restrictions, AlliedSignal and Buyer shall be
entitled to apply to any court of competent jurisdiction for an injunction
restraining such Person from such breach or threatened breach (without the
necessity of proving the inadequacy of money damages as a remedy); provided,
however, that the right to apply for injunctive relief shall not be construed
as prohibiting AlliedSignal or Buyer, as the case may be, from pursuing any
other available remedies for such breach or threatened breach.
(d) Each of AlliedSignal and Buyer covenant and agree that,
if the Closing is consummated, for a period of one year after the Closing Date,
and if not consummated for a period of one year from the date of termination of
this Agreement, it will not, and will cause its Affiliates not to, directly or
indirectly, solicit for employment, either as an employee or a consultant, any
employee or independent contractor of Parent or any Parent Subsidiary (other
than any employee or independent contractor of any of the Sellers) to become an
employee or consultant or otherwise provide services to AlliedSignal, Buyer or
any of their respective
<PAGE> 49
44
Affiliates, except for persons whose employment is solicited or procured
through general media advertisements.
(e) The parties acknowledge and agree that the restrictions
contained in Section 6.4(d) are a reasonable and necessary protection of the
immediate interests of Parent and Sellers, and any violation of these
restrictions would cause substantial injury to Parent or Sellers, as the case
may be, and that Parent and Sellers would not have entered into this Agreement
without receiving the additional consideration offered by AlliedSignal and
Buyer in binding itself to these restrictions. In the event of a breach or a
threatened breach by AlliedSignal, Buyer or any of their respective Affiliates
of these restrictions, Parent and any such Seller shall be entitled to apply to
any court of competent jurisdiction for an injunction restraining such Person
from such breach or threatened breach (without the necessity of proving
inadequacy of money damages as a remedy); provided, however, that the right to
apply for injunctive relief shall not be construed as prohibiting Parent or
such Seller from pursuing any other available remedies for such breach or
threatened breach.
6.5 Confidential Information. Parent and Sellers shall, and
shall cause Parent Subsidiaries to, maintain the confidentiality of, and shall
not use, and shall cause Parent Subsidiaries not to use, for the benefit of
itself or others, any confidential information concerning the Business or the
Purchased Assets, including any information with respect to the Intellectual
Property or Technology (the "Confidential Information"); provided, however,
that this Section 6.5 shall not restrict (a) any disclosure by any such Person
of any Confidential Information required by applicable Law, securities exchange
or any court of competent jurisdiction; provided, that AlliedSignal and Buyer
are given notice and an adequate opportunity to contest such disclosure, (b)
any disclosure on a confidential basis to any such Person's attorneys,
accountants, lenders and investment bankers and (c) any disclosure of
information (i) which is available publicly as of the date of this Agreement,
(ii) which, after the date of this Agreement, becomes available publicly
through no fault of the disclosing party or any of its Affiliates or (iii)
which is received by such Person from a third party not, to the best of such
Person's knowledge, subject to any obligation of confidentiality with respect
thereto.
ARTICLE VII
SURVIVAL
7.1 Survival. All representations, warranties, covenants and
agreements contained in this Agreement or the Transaction Documents shall
survive (and not be affected in any respect by) the Closing, any investigation
conducted by any party hereto and any information which any party may receive.
Notwithstanding the foregoing, the representations and warranties contained in
or made pursuant to this Agreement and the related indemnity obligations set
forth in Sections 7.2(a)(i) and 7.3(a)(i) of the Aerospace Agreement shall
terminate on, and no claim or action with respect thereto may be brought after,
the date three years after the Closing Date, except that (a) the
representations and warranties contained in Sections 2.3 and 2.12 and the
related indemnity obligations contained in Section 7.2 of the Aerospace
Agreement shall survive indefinitely and (b) the representations and warranties
contained in Sections 2.10, 2.14 and 2.20
<PAGE> 50
45
and the related indemnity obligations contained in Section 7.2 of the Aerospace
Agreement shall survive until 30 days after the expiration of the applicable
statute of limitations (or extensions or waivers thereof). The representations
and warranties which terminate on the date three years after the Closing Date
and the representations and warranties referred to in the foregoing clause (b),
and the Liability of any party hereto with respect thereto pursuant to Article
VII of the Aerospace Agreement, shall not terminate with respect to any claim,
whether or not fixed as to Liability or liquidated as to amount, with respect
to which the Indemnifying Party has been given written notice prior to the date
three years after the Closing Date or such 30th day after the expiration of the
applicable statute of limitations (or extensions or waivers thereof), as the
case may be. Sellers hereby confirm their joint and several obligations under
Section 7.2 of the Aerospace Agreement.
ARTICLE VIII
EMPLOYEES AND EMPLOYEE BENEFITS
8.1 Scope of Article. This Article VIII contains the covenants
and agreements of the parties with respect to (a) the status of employment of
the employees of Sellers employed in the Business ("Employees") upon the sale
of the Business to Buyer, and (b) the employee benefits and employee benefit
plans provided or covering such Employees and former employees of Sellers who
terminated employment with the Sellers while employed in the Business or who
retired from the Business ("Former Employees"). Nothing herein expressed or
implied confers upon any Employee or Former Employee of Sellers any rights or
remedies of any nature or kind whatsoever.
8.2 U.S. Employees. This Section 8.2 applies only to Employees
and Former Employees employed or previously employed by Sellers in the United
States.
(a) Employment. Buyer shall offer employment effective as of the
Closing Date to each Employee of a Seller who is employed in the United States
(a "U.S. Employee") and is actively at work immediately prior to the Closing
Date or is not actively at work immediately prior to the Closing Date due
solely to vacation, holiday or jury duty. Such initial offer of employment
shall be for a position and for base salary or wages which are comparable to
that which such Employee had with Sellers immediately prior to the Closing and
shall include employee benefits which are comparable in the aggregate to that
which such Employee had with Sellers immediately prior to the Closing;
provided, however, that no such employment shall be offered to Tucker E. Nason,
Frank Saltzman and James Fairchild. Buyer shall offer employment to each other
U.S. Employee who is not actively at work immediately prior to the Closing Date
(including, but not limited to, any such employee who is not actively at work
due to medical leave, sick leave, short-term disability, long-term disability,
layoff or leave of absence) (an "Inactive Employee") who is willing and able to
return to work within 90 days after the Closing Date or such later date as may
be required by law, with such employment with Buyer to commence on the date the
Inactive Employee first commences active employment with Buyer. Sellers shall
be responsible for any obligation to provide employee benefits to an Inactive
Employee prior to such employee's date of hire by Buyer. U.S. Employees who
accept Buyer's
<PAGE> 51
46
offer of employment and become employees of Buyer shall be referred to herein
as "U.S. Transferred Employees." Notwithstanding the foregoing, nothing herein
shall be construed to limit Buyer's ability thereafter to terminate the
employment of any Employee or to amend or terminate any employee benefit plan
or to otherwise change the terms and conditions of employment of any Employee.
(b) Past Service Credit. Buyer shall credit the service of all
U.S. Transferred Employees with Sellers and their Affiliates prior to the
Closing Date for purposes of eligibility and vesting under all employee benefit
plans provided by Buyer for U.S. Transferred Employees (but not for purposes of
benefit accrual). Buyer shall also: (i) cause to be waived any pre-existing
condition limitation under any Buyer medical plans applicable to U.S.
Transferred Employees or their dependents (except to the extent that any such
pre-existing condition limitation would not have been waived under Sellers'
medical plans), and (ii) recognize (or cause to be recognized) the dollar
amount of all covered expenses incurred by U.S. Transferred Employees and their
dependents under Sellers' applicable medical plans during the calendar year in
which the Closing Date occurs for purposes of satisfying such calendar year's
deductibles and co-payment limitations under any applicable Buyer medical
plans; provided, that the U.S. Transferred Employee enrolls in the applicable
Buyer medical plan at such time and in such manner as is reasonably specified
by Buyer.
(c) Severance; WARN Act. Sellers shall pay and be solely liable
for, and shall indemnify and hold AlliedSignal and Buyer harmless against, any
obligation, cost or expense for (i) severance pay, termination indemnity pay,
salary continuation, special bonuses or like compensation under Sellers' plans,
policies or arrangements and (ii) liability under the WARN Act, or any similar
state or local law, arising from, relating to or claimed by reason of the
Closing or the transactions contemplated by this Agreement or which result from
or relate to actions taken by Sellers on or before the Closing Date.
(d) Vacation. Buyer shall adopt and assume Sellers' liability
for accrued, unused vacation entitlement of U.S. Transferred Employees as of
the Closing to the extent listed on the Balance Sheet.
(e) Workers Compensation. Sellers shall be responsible for all
workers compensation claims filed by or on behalf of a U.S. Transferred
Employee to the extent attributable to events, occurrences or exposures prior
to the Closing. Buyer shall be responsible for all workers compensation claims
filed by or on behalf of a U.S. Transferred Employee to the extent attributable
to events, occurrences or exposures following the Closing.
(f) Employment and Plan Liabilities. It is understood and agreed
that neither AlliedSignal nor Buyer is assuming any obligations or liabilities
arising under any Plan (except to the extent provided in Section 8.2(d) above
8.2(g) below) or as a result of any Employee's or Former Employee's employment
with, or termination of employment, from Sellers, and Sellers shall remain
responsible for any such obligations and liabilities.
(g) Employment Agreements. Buyer shall reimburse Sellers any
Liabilities incurred after the Closing Date under the employee agreements
listed under "Employee
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47
Agreement" on Schedule 2.20(a), other than the agreement relating to the
employment of Tucker E. Nason.
(h) Post-Closing Liability. AlliedSignal and Buyer shall pay and
be solely liable for, and shall indemnify and hold Parent and Sellers harmless
against, any obligation, cost or expense for severance pay, termination pay,
salary continuation, special bonuses or like compensation under any Buyer plan,
policy or arrangement which result from, or relate to, actions taken by
AlliedSignal or Buyer or any Affiliate thereof after the Closing Date.
(i) Cooperation. The parties agree to furnish each other with
such information concerning employees and employee benefit plans, and to take
all such other action, as is necessary or appropriate to effect the
transactions contemplated by this Article VIII.
ARTICLE IX
TERMINATION; MISCELLANEOUS
9.1 Termination.
(a) This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date, as
follows:
(i) by the mutual written agreement of Buyer and Parent;
(ii) by Buyer or Parent if the Closing has not occurred on or
before September 30, 1998; provided, however, that the right to terminate
this Agreement pursuant to this Section 9.1(a)(ii) shall be suspended as
to any party whose failure to fulfill any material obligation under this
Agreement shall have been the cause of, or shall have resulted in, the
failure of the Closing to occur prior to such date until the fifth
Business Day after such failure has been cured; or
(iii) by Buyer or Parent in the event of the issuance by any
Governmental Entity of a final, nonappealable order or injunction
restraining or prohibiting the consummation of the transactions
contemplated hereby.
(b) This Agreement shall terminate automatically upon any
termination of the Aerospace Agreement.
(c) Except for the obligations contained in Section 6.1, the last
sentence of Section 4.5 and this Article IX (other than Sections 9.2, 9.13 and
9.14) and the representations and warranties contained in Sections 2.16 and 3.8
(and the related indemnity obligations under Sections 7.2(a)(i) and 7.3(a)(i)
of the Aerospace Agreement, respectively), all of which shall survive any
termination of this Agreement, upon the termination of this Agreement pursuant
to Sections 9.1(a) or (b), this Agreement shall forthwith become null and
void, and no party hereto or any of its officers, directors, employees, agents,
consultants, stockholders or principals shall have any rights or Liabilities
hereunder or with respect hereto, including without limitation for
<PAGE> 53
48
any breach of warranty or representation; provided, however, that nothing
contained herein shall relieve any party hereto from Liability for any willful
failure to comply with any covenant or agreement contained herein.
9.2 Further Assurances. From time to time after the Closing,
AlliedSignal, Buyer, Parent and Sellers shall execute and deliver or cause to
be executed and delivered such further documents, certificates, instruments of
conveyance, assignment and transfer and take such further action as
AlliedSignal, Buyer, Parent or Sellers may reasonably request in order to more
effectively to sell, assign, convey, transfer, reduce to possession and record
title to any of the Purchased Assets to Buyer or to better enable Buyer to
complete, perform and discharge any of the Assumed Liabilities. AlliedSignal,
Buyer, Parent and Sellers agree to cooperate with each other in all reasonable
respects to assure to Buyer the continued title to and possession of the
Purchased Assets in the condition and manner contemplated by this Agreement.
Each party hereto shall cooperate and deliver such instruments and take such
action as may be reasonably requested by any other party hereto in order to
carry out the provisions and purposes of this Agreement and the transactions
contemplated hereby. AlliedSignal, Buyer, Parent and Sellers shall cooperate
and shall cause their respective Affiliates, officers, employees, agents and
representatives to cooperate to ensure the orderly transition of the Business
from Sellers to Buyer and to minimize the disruption to the Business resulting
from the transactions contemplated hereby.
9.3 Entire Agreement; Amendments; Waivers. This Agreement, the
Confidentiality Agreement, and the documents referred to herein and to be
delivered pursuant hereto constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof, and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions of the
parties, whether oral or written. No amendment, supplement, modification,
waiver or termination of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver of any other
provision or breach of this Agreement, whether or not similar, unless otherwise
expressly provided.
9.4 Benefit; Assignment. This Agreement shall be binding upon and
inure to the benefit of and shall be enforceable by the parties hereto and
their respective successors and permitted assigns. This Agreement shall not be
assigned by any party hereto without the prior written consent of the other
party hereto; provided, however, that AlliedSignal or Buyer may assign any or
all of their respective rights hereunder to one or more Affiliates of
AlliedSignal or Buyer, as the case may be, without the consent of Parent or
Sellers provided that AlliedSignal or Buyer, as the case may be, shall continue
to be obligated to perform all of its obligations hereunder.
9.5 No Presumption. AlliedSignal, Buyer, Parent and Sellers have
participated jointly in the negotiation and drafting of this Agreement. In the
event any ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by AlliedSignal, Buyer,
Parent and Sellers, and no presumption or burden of proof shall
<PAGE> 54
49
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
9.6 Notices. Notices and other communications provided for herein
shall be in writing and shall be deemed given only if delivered to the party
personally or sent to the party by telecopy, by registered or certified mail
(return receipt requested) with postage and registration or certification fees
thereon prepaid, or by any nationally recognized overnight courier, addressed
to the party at its address set forth below:
If to Parent or Sellers: Banner Aerospace
P.O. Box 20260
Washington, DC 20041
Attention: Chief Financial Officer
Telecopy No.: 703-478-5795
with copy to: Donald E. Miller
10704 Riverwood Drive
Potomac, MD 20854
If to AlliedSignal or Buyer: AlliedSignal Inc.
P.O. Box 2245
101 Columbia Road
Morristown, NJ 07962-2245
Attention: General Counsel
Telecopy No.: 973-455-4413
or to such other address as a party may from time to time designate in writing
in accordance with this section. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.
9.7 Terms Generally.
(a)(i) Words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the
other genders as the context requires, (ii) the terms "hereof," "herein," and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including all of the Annexes,
Schedules and Exhibits hereto) and not to any particular provision of this
Agreement, and Article, Section, paragraph, Exhibit and Schedule references are
to the Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement
unless otherwise specified, (iii) the word "including" and words of similar
import when used in this Agreement shall mean "including, without limitation,"
unless otherwise specified, (iv) the word "or" shall not be exclusive, and (v)
provisions shall apply, when appropriate, to successive events and
transactions.
<PAGE> 55
50
(b) Each reference in this Agreement (or in any other
document or instrument furnished to AlliedSignal or Buyer by Parent or any
Seller pursuant to this Agreement) to "the best of Parent's and each Seller's
knowledge", or words of similar import referring to Parent and Sellers
(including Parent and Sellers not being aware of a particular event or other
matter), means the actual knowledge, after due inquiry, of each executive
officer of Parent and each of the Sellers.
9.8 Counterparts; Headings. This Agreement may be executed
in several counterparts, each of which shall be deemed an original, but such
counterparts shall together constitute but one and the same Agreement. The
Article and Section headings in this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof.
9.9 Severability. If any provision, clause or part of this
Agreement or the application thereof under certain circumstances is held
invalid or unenforceable, the remainder of this Agreement, or the application
of such provision, clause or part under other circumstances, shall not be
affected thereby.
9.10 No Reliance. Except for any assignees permitted by
Section 9.4 of this Agreement and the indemnified persons pursuant to Sections
7.2 and 7.3 of the Aerospace Agreement: (i) no third party is entitled to rely
on any of the representations, warranties or agreements of the parties hereto
contained in this Agreement; and (ii) the parties hereto assume no Liability to
any third party because of any reliance on the representations, warranties or
agreements of such parties contained in this Agreement.
9.11 Governing Law. This Agreement shall be construed and
interpreted according to the laws of the State of New York, without regard to
the conflict of law principles thereof.
9.12 Submission to Jurisdiction; Waivers. The parties hereto
hereby irrevocably and unconditionally agree that:
(a) All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in a New York state or
federal court sitting in the City of New York, and the parties hereto hereby
irrevocably submit to the exclusive jurisdiction of such courts in any such
action or proceedings and irrevocably waive the defense of an inconvenient
forum to the maintenance of any such action or proceeding.
(b) Service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to such party at its
address as provided in Section 9.6.
9.13 Bulk Transfer. The parties hereto hereby waive
compliance with the provisions of any applicable bulk sales law of any
jurisdiction in connection with the transactions contemplated hereby and no
representation, warranty or covenant contained in this Agreement shall be
deemed to have been breached as a result of such non-compliance. Parent and
Sellers hereby agree, jointly and severally, to indemnify, defend and hold
AlliedSignal and Buyer
<PAGE> 56
51
harmless from and against any and all Losses arising out of or relating to
claims which may be asserted by third Persons, including Governmental Entities,
against the Purchased Assets or any Buyer Indemnified Parties (as defined in
the Aerospace Agreement) as a result of non-compliance with any applicable bulk
sales law. Nothing in this Agreement shall be construed as an admission by any
party as to the applicability of any bulk sales laws.
9.14 Use of Names. During the first 180 days after the
Closing Date, Buyer shall have the right to use all of the logos, trademarks
and trade identification of Parent as are located at the Acquired Real Property
or on the Purchased Assets (collectively, the "Trademarks"). Buyer's use of
the Trademarks shall be in accordance with such reasonable quality control
standards as shall be promulgated by Parent and provided to Buyer. If Parent
shall notify Buyer in writing of Buyer's material failure to comply with such
reasonable quality control standards and Buyer continues to not comply with
such reasonable quality control standards for more than 20 days after receipt
of such notice, Parent shall have the right to terminate Buyer's right under
this Section 9.14 to use the Trademarks.
9.15 Relationship with Aerospace Agreement. The parties
acknowledge and agree that it is the intent of the parties that,
notwithstanding any other provision of this Agreement or the Aerospace
Agreement, the representations, warranties and covenants contained in this
Agreement and in the Aerospace Agreement that (i) have substantially the same
language (without regard to the identity of the parties making such
representation and warranty or covenant) and (ii) contain either the language
"in the aggregate" or a similar combining concept or a reference to a Material
Adverse Effect (a "Collective Representation" or a "Collective Covenant", as
the case may be) shall be deemed to be a single representation and warranty to
be a single covenant, as the case may be, for purposes of determining whether
such representation and warranty has been breached or such covenant has been
complied with and all relevant facts relating to such Collective Representation
or Collective Covenant in both agreements shall be considered. As examples, if
there should be an issue regarding whether a Collective Representation
contained in this Agreement has been breached, the parties would consider
inaccuracies in such Collective Representation as well as inaccuracies in the
corresponding Collective Representation in the Aerospace Agreement in
determining whether a breach of such Collective Representation had occurred and
in determining the materiality of any breach of a Collective Representation
relating to the Business, reference shall be made to the Combined Business.
9.16 Schedules. All references herein to any Schedule or to
Annex 1.4 shall refer to the Schedule of the same title or to Annex 1.4, as the
case may be, which are attached to the Aerospace Agreement, and such Schedule
or Annex 1.4 shall be considered a part of this Agreement as though attached
hereto.
<PAGE> 57
52
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
ALLIEDSIGNAL INC. BANNER AEROSPACE, INC.
By: /s/ Joe Leonard By: /s/ Warren D. Persavich
-------------------------------- ----------------------------------
Name: Joe Leonard Name: Warren D. Persavich
Title: Senior Vice President Title: Senior Vice President
AS BAR PBH LLC PB HERNDON AEROSPACE, INC.
By: ALLIEDSIGNAL INC. By: /s/ Warren D. Persavich
----------------------------------
Name: Warren D. Persavich
Title: Vice President
By: /s/ Joe Leonard
--------------------------------
Name: Joe Leonard
Title: Senior Vice President
BANNER AEROSPACE SERVICES, INC.
By: /s/ Warren D. Persavich
---------------------------------
Name: Warren D. Persavich
Title: Vice President
<PAGE> 58
ANNEX A
DEFINITIONS
The following terms shall have the respective meanings
ascribed to them in this Annex A. References to Sections constitute references
to Sections of the Agreement.
"Accounts Receivable" means all billed and unbilled accounts
receivable and all trade notes receivable relating to the Combined Business
whether recorded or unrecorded, including, without limitation, all trade
receivable from other divisions or Affiliates of Parent and the Sellers.
"Acquired Real Property" means, collectively, the Leased Real Property
and Owned Real Property.
"Affiliate" of any Person means any Person directly or indirectly
controlling, controlled by or under common control with such Person.
"Aerospace Agreement" means the Asset Purchase Agreement, dated as of
the date of this Agreement, by and among Parent, Sellers listed in Annex A
thereto, AlliedSignal and Buyer, together with the Annexes, Schedules and
Exhibits attached thereto, as the same may be amended from time to time in
accordance with the terms thereof.
"Aerospace Acquired Assets" means the Acquired Assets as defined in
the Aerospace Agreement.
"Aerospace Assumed Liabilities" means the Assumed Liabilities as
defined in the Aerospace Agreement.
"Aerospace Excluded Assets" means the Excluded Assets as defined in
the Aerospace Agreement.
"Aerospace Non-Assumed Liabilities" means the Non-Assumed Liabilities
as defined in the Aerospace Agreement.
"Aerospace Purchased Assets" means the Purchased Assets as defined in
the Aerospace Agreement.
"Agreement" means the Asset Purchase Agreement, dated as of December
__, 1997, by and among Parent, BAS, Herndon, AlliedSignal and Buyer, together
with the Annexes, Schedules and Exhibits attached thereto, as the same may be
amended from time to time in accordance with the terms thereof.
"AlliedSignal" had the meaning set forth in the Preamble of the
Agreement.
<PAGE> 59
2
"AlliedSignal Common Stock" means the common stock, par value $1 per
share, of AlliedSignal.
"AlliedSignal Reports" has the meaning set forth in Section 3.6.
"Antitrust Division" means the Antitrust Division of the United States
Department of Justice.
"Assets" means businesses, properties, assets, goodwill, rights,
interests and privileges of every kind, nature or description, wherever
located, whether real, personal or mixed, tangible or intangible, and without
regard to whether they have value for accounting purposes or are carried on or
reflected in relevant books and records or financial statements.
"Assumed Liabilities" has the meaning set forth in Section 1.3(a).
"Assumed Tax Liabilities" means Tax liabilities for value-added Taxes,
real property Taxes, personal and intangible property Taxes and payroll Taxes,
in each case only to the extent included on the Closing Balance Sheet.
"Average Trading Price" means, as of a specified date, the average of
the daily high and low closing prices of AlliedSignal Common Stock as reported
on the NYSE Composite Tape on each of the twenty (20) consecutive trading days
immediately preceding (and not including) such date.
"BAS" has the meaning set forth in the Preamble to the Agreement.
"Balance Sheet" has the meaning set forth in Section 2.6.
"Bid" has the meaning set forth in Section 2.8(d).
"BTG" means the Banner Technology Group.
"BTG Assets" has the meaning set forth in the Preamble to the
Agreement.
"Business" has the meaning set forth in the Recitals of the Agreement.
"Business Day" or "business day" means any day other than a Saturday,
Sunday, or a day on which banking institutions in the City of New York are
authorized or obligated by law or executive order to close.
"Buyer" has the meaning set forth in the Preamble of the Agreement.
"Closing" has the meaning set forth in Section 1.6(a).
"Closing Date" has the meaning set forth in Section 1.6(a).
<PAGE> 60
3
"Closing Date Balance Sheet" means the Closing Date Balance Sheet as
defined in the Aerospace Agreement.
"Closing Date Net Worth" means the Closing Date Net Worth as defined
in the Aerospace Agreement.
"Closing Date Shares" has the meaning set forth in Section 1.4.
"COBRA" has the meaning set forth in Section 2.20(c)(iii).
"Code" means the Internal Revenue Code of 1986, as amended.
"Combined Purchased Assets" means, collectively, the Purchased Assets
and the Purchased Assets as defined in the Aerospace Agreement.
"Combined Business" means the Business and Business as defined in the
Aerospace Agreement.
"Competitive Activities" has the meaning set forth in Section 6.4(a).
"Confidentiality Agreement" means that certain confidentiality
agreement dated June 27, 1997 between AlliedSignal and Parent.
"Confidential Information" has the meaning set forth in Section 6.5.
"Contracts" means (a) all written and oral contracts, licenses,
commitments, agreements and instruments, including all customer contracts,
operating contracts and distribution contracts relating to the Business, (b)
all sales and purchase orders and supply agreements and other agreements
relating to the Business, (c) all leases of Equipment and Real Property
relating to the Business and (d) all other contracts, licenses, agreements and
instruments relating to the Business; provided, however, that the term
"Contract" shall not include any collective bargaining agreement or any
employment agreement or other Plan.
"DA" means Dallas Aerospace, Inc., a Texas corporation and a
wholly-owned Subsidiary of Parent.
"DA Agreement" shall mean the rights and obligations arising under the
contingent payment provisions set forth in the Agreement dated January 16, 1997
relating to the acquisition of Herndon.
"Debt" means, with respect to any Person, the following Liabilities,
whether incurred by such Person, directly or indirectly, without duplication:
(i) its Liabilities for borrowed money;
(ii) its Liabilities for the deferred purchase
price of property acquired by it (excluding accounts payable arising
in the ordinary course of business but
<PAGE> 61
4
including, without limitation, all liabilities created or arising
under any conditional sale or other title retention agreement with
respect to any such property);
(iii) the amount of the obligation of such Person
as the lessee under any Capital Lease that would, in accordance with
GAAP, appear as a Liability on a balance sheet of such Person
("Capital Lease" meaning, at any time, a lease with respect to which
such Person, as lessee, is required concurrently to recognize the
acquisition of an asset and the incurrence of a Liability in
accordance with GAAP);
(iv) amounts secured by any Lien with respect to
any property owned by such Person (whether or not it has assumed or
otherwise become liable for such amounts);
(v) all of its Liabilities in respect of letters
of credit or instruments serving a similar function issued or accepted
for its account by banks and other financial institutions (whether or
not representing obligations for borrowed money);
(vi) any Guarantee of such Person with respect to
Liabilities of any Person of the character described in any of the
clauses described in (i) through (vi) above ("Guarantee" meaning, with
respect to any Person, any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or
collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other Debt or obligation of any other Person
in any manner, whether directly or indirectly, including (without
limitation) obligations incurred through an agreement, contingent or
otherwise, by such Person);
(vii) all Liabilities of any Subsidiary of such
Person of the character described in clauses (i) through (vii) above;
and
(viii) all Liabilities of the character described in
clauses (i) through (vii) above with respect to which, and to the
extent that, such Person remains legally liable, notwithstanding that
such Liability or obligation is deemed extinguished under GAAP.
"Employees" has the meaning set forth in Section 8.1.
"Environmental Claim" shall mean any third party or governmental
written claim, notice, request for information, demand, investigation, lawsuit,
proceeding, judgment, award, penalty, order or other action that could expose
Parent, the Sellers, AlliedSignal or Buyer to Losses under any Environmental
Law or to Losses for personal injuries (including death) or property damage
relating to or arising from the presence of, or exposure to, Hazardous
Materials.
<PAGE> 62
5
"Environmental Law" means all applicable Laws relating to the
protection of the environment (including, but not limited to, natural
resources) and human health and safety, including, without limitation (a) all
requirements pertaining to reporting, licensing, permitting, investigation and
remediation of emissions, discharges, releases or threatened releases of
Hazardous Materials or other environmental conditions into the air, surface
water, groundwater or land or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, and (b) all requirements pertaining to the protection of
the health and safety of employees and other workers, and the protection of or
compensation to individuals from or related to exposures to Hazardous
Materials.
"Environmental Liability" means any Liability (existing at, or arising
after, the Closing) under Environmental Law, or any remedial action (at or
after the Closing), in connection with the Purchased Assets or the Business to
the extent arising from any condition (including any Hazardous Materials
condition) existing, or any act or omission the Sellers or any of their
predecessors or any of their past, present or future Subsidiaries, at or prior
to the Closing Date, including claims, demands, assessments, judgments, orders,
causes of action (including toxic tort suits), notices of actual or alleged
violations or Liability (including such notices regarding the disposal or
release of Hazardous Materials on the Acquired Real Property or elsewhere),
proceedings and any associated Losses.
"Environmental Permit" means any Permit issued under any Environmental
Law or issued by any Governmental Entity responsible for environmental matters.
"Equipment" means all tangible assets and properties, except Real
Property, owned, used or held for use by either Seller, including cars, trucks
and other transportation equipment, machinery and equipment, tools, spare
parts, furniture, office equipment, furnishings and fixtures and machinery and
equipment under order or construction.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means the escrow agent under the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement as defined in the
Aerospace Agreement.
"Estimated Share Number" has the meaning set forth in Section 1.4.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" has the meaning set forth in Section 1.2(b).
"Fairchild" means The Fairchild Corporation, a Delaware corporation.
"FAA" means the Federal Aviation Administration.
"Financial Statements" has the meaning set forth in Section 2.6.
<PAGE> 63
6
"FIRPTA Affidavit" has the meaning set forth in Section 1.7(a)(vii).
"Former Employees" has the meaning set forth in Section 8.1.
"FTC" means the United States Federal Trade Commission.
"GAAP" means United States generally accepted accounting
principles, consistently applied.
"Government Contract" shall mean any written prime contract,
subcontract, grant or cooperative agreement with (i) the US Government, (ii)
any prime contractor of the US Government or (iii) any subcontractor with
respect to any contract described in clauses (i) or (ii) above.
"Governmental Entity" means (a) any multinational, federal,
provincial, state, municipal, local or other governmental or public department,
court, commission, board, bureau, agency, legislative or quasi-legislative body
or instrumentality, domestic or foreign; (b) any subdivision, agent,
commission, board, or department, authority, or similar body or instrumentality
of any of the foregoing; or (c) any quasi-governmental or private body
exercising any regulatory, expropriation or taxing governmental authority under
or for the account of any of the foregoing.
"Hazardous Material" means any substance, material or waste (a) the
presence of which requires investigation or remediation under any Environmental
Law, (b) which is regulated by an applicable Governmental Entity, which
substance, material or waste includes, without limitation, petroleum and its
by-products, friable asbestos, and any material or substance which is defined
as a "hazardous waste," "hazardous substance," "hazardous material,"
"restricted hazardous waste," "industrial waste," "solid waste," "contaminant,"
"pollutant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, (c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous, or (d)
the presence of which causes or threatens to cause a nuisance or trespass to
any property or poses or threatens to pose a hazard to the health or safety of
individuals on or about any such property.
"Herndon" has the meaning set forth in the Preamble to this Agreement.
"Herndon Adjustment Amount" means the amount determined in accordance
with Section 1.4(b) of the Aerospace Agreement as allocated to the Initial
Purchase Price pursuant to Section 9.15 of the Aerospace Agreement.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Inactive Employee" has the meaning set forth in Section 8.2(a).
"Indemnification Escrow Shares" means (i) as of the Closing Date, a
number of shares of AlliedSignal Common Stock equal to five percent (5%) of the
Estimated Share Number and (ii) thereafter, the initial number of
Indemnification Escrow
<PAGE> 64
7
Shares less any Indemnification Escrow Shares from time to time released from
escrow pursuant to Section 1.5(b) or (d) of the Aerospace Agreement.
"Indemnifying Party" means the Indemnifying Party as defined in the
Aerospace Agreement.
"Initial Purchase Price" has the meaning set forth in Section 1.4.
"Intellectual Property" means all foreign and domestic patents
(including all reissues, divisions, continuations and extensions thereof),
patent rights, service marks, trademarks and tradenames, trade dress, all
product names, all assumed or fictitious names and the logos associated
therewith, copyrights, applications for the foregoing, licenses and other
contractual rights with respect to the foregoing and other such property and
intangible rights owned, used or held for use by either Seller, including
financial and marketing business data, pricing and cost information, business
and marketing plans and customer and suppliers lists, together with the
goodwill of the Business in connection with which such trademarks, tradenames,
product names and service marks are used.
"Inventory" means all inventory of the Combined Business, including
finished goods, work-in-progress, raw materials, operating chemical and
catalysts, parts, accessories, packaging, manufacturing, administrative and
other supplies on hand, goods held for sale or lease or to be furnished under
Assumed Contracts, and other inventory owned, used or held for use by either
Seller.
"IRS" means the United States Internal Revenue Service.
"Laws" means all laws, constitutions, statutes, codes, ordinances,
decrees, rules, regulations, municipal by-laws, judicial or arbitral or
administrative or ministerial or departmental or regulatory judgments, orders,
decisions, rulings or awards, consent orders, consent decrees, policies,
voluntary restraints, guidelines, or any provisions or interpretations of the
foregoing, including general principles of common and civil law and equity,
binding on or affecting the Person referred to in the context in which such
word is used.
"Leased Real Property" means all leased Real Property relating to the
Business including, without limitation, all Real Property listed on Part B of
Schedule 2.13(a).
"Liabilities" means, as to any Person, all debts, liabilities,
obligations and responsibilities of any kind or nature whatsoever of such
Person, whether direct or indirect, fixed or contingent, known or unknown,
accrued, vested or otherwise, whether in contract, tort, strict Liability or
otherwise, and whether or not actually reflected, or required by GAAP to be
reflected, in such Person's balance sheets or other books and records.
"Lien" means any lien, charge, claim, pledge, security interest,
conditional sale agreement or other title retention agreement, lease, mortgage,
security agreement, right of first refusal, option, restriction, tenancy,
license, covenant, right of way, easement or other
<PAGE> 65
8
encumbrance (including the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code or statute or law of any
jurisdiction).
"Major Customer" means any customer of the Combined Business that
accounted for $500,000 or more in revenues of the Combined Business in the 1997
fiscal year or could reasonably be expected to account for more than $500,000
or more in revenues of the Combined Business in the 1998 fiscal year.
"Major Supplier" means any supplier of the Combined Business
(including any supplier of Intellectual Property) that accounted for $1,000,000
or more in sales to the Combined Business in the 1997 fiscal year or could
reasonably be expected to account for more than $1,000,000 or more in sales to
the Combined Business in the 1998 fiscal year.
"Material Adverse Effect" means (i) a material adverse effect upon, or
material adverse change in, the operations, Assets, Liabilities, condition
(financial or otherwise), or results of operations of the Combined Business,
taken as a whole (ii) any event, condition, circumstance or change that is
reasonably likely to have a Material Adverse Effect referred to in preceding
clause (i), or (iii) a significant risk that Buyer and the Buyer under the
Aerospace Agreement, in any material respect, will not be able after the
Closing to operate the Combined Business substantially as operated by, or to
own, possess and use the Purchased Assets and the Aerospace Acquired Assets
substantially as owned, possessed and used by, the Sellers and the Sellers
under the Aerospace Agreement, taken as a whole, as of the date hereof;
provided, however, that the loss of business from customers and suppliers of
the Combined Business (including through termination of contracts or reduction
of purchases) shall not be deemed a Material Adverse Effect unless the
condition in Section 5.1(e) of the Aerospace Agreement has not been satisfied.
"Non-Assumed Liabilities" has the meaning set forth in Section 1.3(b).
"Novation Agreement" has the meaning set forth in Section 4.15.
"NYSE" means the New York Stock Exchange, Inc.
"OSHA" has the meaning set forth in Section 2.9(a) hereof.
"Owned Real Property" means all Real Property owned by Sellers,
including, without limitation, all Real Property listed on Part A of Schedule
2.13(a).
"Parent" has the meaning set forth in the Preamble of the Agreement.
"Parent Subsidiaries" means the direct or indirect Subsidiaries of
Parent or any other corporation or entity in which Parent owns a majority of
the capital stock or other equity interest.
"Parent Reports" has the meaning set forth in Section 2.28.
"PBGC" means the Pension Benefit Guaranty Corporation.
<PAGE> 66
9
"Permits" means all franchises, approvals, permits, authorizations,
licenses, orders, registrations, certificates, variances, exemptions and other
similar permits or rights obtained from any Governmental Entity relating to the
conduct of the Business or the Acquired Real Properties and all pending
applications therefor.
"Permitted Liens" means (a) Liens securing Taxes, assessments,
governmental charges or levies, all of which are not yet due and payable, (b)
Liens (other than any Lien imposed by ERISA) incurred or deposits made in the
ordinary course of the Business and on a basis consistent with past practice in
connection with worker's compensation, unemployment insurance or other types of
social security, (c) mechanics, materialman's, carrier's, warehousemen's,
landlords and other similar Liens under state or common law or (d) such other
Liens which, individually and in the aggregate, do not and would not detract
from the value of or impair the use of any Purchased Asset; it being understood
that to the extent a Permitted Lien relates to or arises from a Non-Assumed
Liability, the applicable Seller shall still be liable for such Non-Assumed
Liability to the extent set forth herein.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a firm, a Governmental Entity, a trust or
other entity or organization.
"Plans" has the meaning set forth in Section 2.20(a)(iii).
"PTO" means the United States Patent and Trademark Office.
"Purchase Price Escrow Shares" means a number of shares of
AlliedSignal Common Stock equal to one percent (1%) of the Estimated Share
Number.
"Purchased Assets" has the meaning set forth in Section 1.2(a).
"Real Property" means all real property, together with all fixtures,
fittings, buildings, structures and other improvements erected thereon, and
easements, rights of way, water lines, rights of use, licenses, hereditaments,
tenements, privileges and other appurtenances thereto (such as appurtenant
rights in and to public streets).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" and "Sellers" have the respective meanings set forth in the
Preamble of the Agreement.
"Small Licenses" has the meaning set forth in Section 2.15(d).
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or other entity with respect to which
such Person directly or indirectly owns or controls more than 50% of (i) the
issued and outstanding capital stock having ordinary voting power to elect a
majority of the board of directors or other governing body of such corporation
(irrespective of whether at the time capital stock of any other class or
classes of such
<PAGE> 67
10
corporation shall or might have voting power upon the occurrence of any
contingency), (ii) the interest in the capital or profits of such partnership,
joint venture or limited liability company or (iii) the beneficial interest in
such trust.
"Tax" means any tax imposed under Subtitle A of the Code and any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, value added, transfer, franchise, profits, license, lease,
service, service use, withholding on amounts paid to or by either Seller,
payroll, employment, excise, severance, stamp, capital stock, occupation,
property, environmental or windfall profits tax, premium, custom duty or other
tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalty, addition to tax or additional
amount imposed by any Governmental Entity responsible for the imposition of any
such tax (domestic or foreign) (a "Tax Authority").
"Tax Authority" has the meaning set forth in the definition of "Tax".
"Technology" means all formulae, processes, procedures, designs,
ideas, research records, inventions (whether or not patentable), records of
inventions, test information, technical information, engineering data,
marketing know-how, proprietary information, manufacturing information,
know-how, and trade secrets (and all related manuals, books, files, journals,
models, instructions, patterns, drawings, blueprints, plans, designs
specifications, equipment lists, parts lists, descriptions, data, art work,
software, computer programs and source code data related thereto including all
current and historical data bases) owned, used or held for use by either Seller
( it being understood that, to the extent any such technology is licensed to a
Seller, "Technology" shall mean any and all rights of such Seller under such
license).
"Third Party Rights" has the meaning set forth in Section 1.2(a)(xi).
"Trademarks" has the meaning set forth in Section 9.14.
"Transaction Documents" has the meaning set forth in Section 2.3.
"Transfer Taxes" means all state, local and foreign sales, use,
transfer, real property transfer, documentary stamp, recording and other
similar taxes arising from and with respect to the sale and purchase of the
Purchased Assets.
"U.S. Employee" has the meaning set forth in Section 8.2(a).
"US Government" shall mean the United States Government and any
agencies, instrumentalities and departments thereof.
"U.S. Transferred Employees" has the meaning set forth in Section
8.2(a).
"WARN Act" means the Worker Adjustment and Retraining Notification
Act, as codified at 29 U.S.C. Sections 2101 - 2109, as amended.
<PAGE> 68
ANNEX B
JURISDICTIONS OF ORGANIZATION
<TABLE>
<CAPTION>
Name of Entity Jurisdiction of Organization
-------------- ----------------------------
<S> <C>
PB Herndon Aerospace, Inc. Missouri
Banner Aerospace Services, Inc. Ohio
</TABLE>
<PAGE> 1
EXHIBIT 99.1
BANNER AEROSPACE, A LEADING WORLDWIDE DISTRIBUTOR
OF AEROSPACE PRODUCTS, TO SELL HARDWARE GROUP TO ALLIEDSIGNAL
WASHINGTON, DC, DECEMBER 8, 1997 - Banner Aerospace (NYSE: BAR) announced today
that AlliedSignal has agreed to acquire the Hardware Group and PacAero unit of
Banner Aerospace, one of the world's premier independent distributors of
aircraft hardware available for "just-in-time" delivery, for approximately $345
million of AlliedSignal common stock. Banner Aerospace expects to realize a
pre-tax gain of more than $100 million from the transaction.
Annualized 1997 sales of the Banner Aerospace operations to be acquired by
AlliedSignal are expected to be approximately $250 million, principally to
commercial air transport and general aviation customers. These operations
represent approximately 50 percent of Banner Aerospace's expected fiscal 1998
sales.
Jeffrey Steiner, Chief Executive Officer of Banner said, "We were presented
with a unique opportunity to capitalize on the sale of a part of our aerospace
distribution unit for a significant return that greatly advances our goal of
creating shareholder value. The divestiture will allow the Company to
concentrate its efforts on the rotables and jet engine businesses. The
proceeds will enable us to eliminate Banner Aerospace's debt and increase cash
and marketable securities by $165 million.
"The retention of Banner Aerospace's rotables and engine segments, with fiscal
1998 sales of approximately $250 million, anchored by Solair and Dallas
Aerospace, positions Banner as a premier worldwide distributor of these product
lines in the commercial and regional aviation markets.
"Banner's long-term business strategy remains intact," Steiner concluded.
The acquisition, which is subject to regulatory approval, is expected to close
in the first quarter of calendar 1998.
Banner Aerospace is a diversified family of companies providing the aviation
community with reliable, single source solutions through a global distribution
network delivering rotables and engines to aftermarkets in the commercial,
regional and corporate sectors of the aviation industry.
###
<PAGE> 1
EXHIBIT 99.2
BANNER AEROSPACE COMPLETES THE DISPOSITION
OF ITS HARDWARE GROUP TO ALLIEDSIGNAL
WASHINGTON, DC, JANUARY 13, 1998 - Banner Aerospace, Inc. announced today that
it has closed on the disposition of its Hardware Group and PacAero unit to
AlliedSignal for approximately $345 million of AlliedSignal common stock,
subject to adjustment.
Banner Aerospace will use the proceeds to reduce its debt by $170 million and
increase cash and marketable securities by approximately $175 million. The
Company will retain its rotables and engine groups, with estimated fiscal 1998
sales of approximately $250 million, anchored by Solair and Dallas Aerospace.
The operations transferred to AlliedSignal aggregate approximately $250 million
in annualized sales, representing approximately 50 percent of Banner's
anticipated fiscal 1998 sales.
Banner Aerospace is a diversified family of companies providing the aviation
community with reliable, single source solutions through a global distribution
network.
###
