UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D/A
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)*
BANNER AEROSPACE, INC.
- ----------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $1.00 per share
- ----------------------------------------------------------------------------
(Title of Class of Securities)
06652510
- ----------------------------------------------------------------------------
(CUSIP Number)
Banner Aerospace, Inc., 300 West Service Road Washington, DC 20041
(703) 478-5790. Attn: Warren Persavich
- ---------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
March 12, 1996
- ---------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box /_/.
Check the following box if a fee is being paid with the statement |X|. (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class
of securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such
class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Page 1 of 6 Pages
<PAGE>
SCHEDULE 13D
CUSIP NO. 06652510 PAGE 2 OF 6 PAGES
--------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
THE FAIRCHILD CORPORATION ("TFC") - IRS EIN 34-0728587
RHI HOLDINGS, INC. ("RHI") - IRS EIN 34-1545939
FAIRCHILD HOLDING CORP. ("FHC") - IRS EIN APPLIED FOR FEBRUARY
22, 1996
2 CHECK THE APPROXIMATE BOX IF A MEMBER OF A GROUP (a) /_/
(b) /_/
3 SEC USE ONLY
4 SOURCE OF FUNDS
PF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E) /_/
6 CITIZENSHIP OR PLACE OR ORGANIZATION
THE REPORTING PERSONS ARE INCORPORATED UNDER THE LAWS OF DELAWARE
7 SOLE VOTING POWER
TFC - 12,913,992
RHI - 12,913,992
FHC - 4,413,992
8 SHARED VOTING POWER
0
9 SOLE DISPOSITIVE POWER
TFC - 12,913,992
RHI - 12,913,992
FHC - 4,413,992
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
TFC - 12,913,992
RHI - 12,913,992
FHC - 4,413,992
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES /_/
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
57.6%
Page 2 of 6 Pages
<PAGE>
14 TYPE OF REPORTING PERSON
CO
Page 3 of 6 Pages
<PAGE>
Item 1. Security and Issuer.
This Amendment No. 1 amends the statement on Schedule 13D (the
"Schedule 13D") filed with the Securities and Exchange Commission on
February 14, 1996 with respect to the common stock, par value $1.00 per share
(the "Common Stock") of Banner Aerospace, Inc., a Delaware corporation (the
"Issuer"), whose principal executive offices are located at 300 West
Service Road, Washington, D.C. 20041. The capitalized terms not otherwise
defined herein shall have the meanings ascribed thereto in the Schedule 13D.
Other than as set forth herein, there has been no material change
in the information set forth in the Schedule 13D.
Item 2. Identity and Background
Item 2 of the Schedule 13D is hereby amended in its entirety to
read as
follows:
This statement is filed by The Fairchild Corporation ("TFC"), RHI
Holdings, Inc. ("RHI") and Fairchild Holdings Corp. ("FHC" and together
with TFC and RHI, the "Reporting Persons"), each a Delaware corporation. The
address for each of the Reporting Persons is 300 West Service Road, Chantilly,
VA 22021. TFC is a worldwide aerospace fasteners manufacturer and distributor
and semiconductor process equipment company. RHI is a wholly-owned subsidiary
of TFC and FHC is a wholly-owned subsidiary of RHI.
Exhibit A, which is incorporated herein by reference, sets forth the
name, business address, the present principal occupation or employment, and
the citizenship of the executive officers and directors of the Reporting
Persons.
During the five years prior to the date hereof, none of the
Reporting Persons, and to each of the Reporting Persons' knowledge no
executive officer or director of the Reporting Persons has (i) been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors)
during the last five years nor has been (ii) a party to any civil proceeding of
a judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree, or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities law or finding any violation with respect to
such laws.
Item 3. Source and Amount of Funds or Other Consideration
Item 3 of the Schedule 13D is hereby amended to add the following:
On March 12, 1996, FHC acquired 4,413,992 shares of Common Stock
of the Issuer pursuant to the Exchange Agreement.
Item 4. Purpose of Transaction
Item 4 of the Schedule 13D is hereby amended to add the following:
The Issuer and TFC entered into a definitive Stock Exchange
Agreement on February 22, 1996 (the "Exchange Agreement"). A copy of the
Exchange Agreement is attached as Exhibit B hereto and is incorporated herein
by reference. On March 12, 1996, the stockholders of the Issuer approved the
transaction and 4,413,992 shares of Common Stock were issued to FHC.
Page 4 of 6 Pages
<PAGE>
The Reporting Persons have from time to time, and will continue to
from time to time, consider various alternatives with respect to its investment
in the Issuer. None of the Reporting Persons have any current plans to acquire
any additional shares of Common Stock. None of the Reporting Persons currently
have any plans or proposals which relate to or could result in the Issuer
becoming a privately held company. None of the Reporting Persons currently have
specific plans or proposals that relate to or would result in any of the matters
described in subparagraphs (b) through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
Item 5 of the Schedule 13D is hereby amended in its entirety to
read as follows:
(a) Based on the Issuer's proxy statement dated February 23, 1996,
TFC's beneficial ownership of 12,913,992 shares of Common Stock, through
RHI and FHC, constitutes approximately 57.6% of the Common Stock outstanding,
based upon 22,420,292 shares of Common Stock issued and outstanding as of March
12, 1996. The number of shares of Common Stock beneficially owned by the
executive officers and directors of each of the Reporting Companies is listed
in Exhibit A hereto, which is incorporated herein by reference.
(b) The information required by this paragraph is set forth in
Items 7 through 11 of the cover page of this Schedule.
(c) through (e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer.
Item 6 of the Schedule 13D is hereby amended to add the following:
On March 12, 1996, the registration rights agreement was amended
to provide registration rights for the shares of Common Stock of the Issuer
acquired by FHC pursuant to the Exchange Agreement.
Item 7. Items to be Filed as Exhibits.
Item 7 of the Schedule 13D is hereby amended to update the
information provided and add as follows:
Exhibit A. Information concerning the executive officers and directors of
the Reporting Persons with respect to FHC.
Exhibit B. Stock Exchange Agreement, dated as of February 22, 1996
by and between Banner Aerospace, Inc. and The Fairchild Corporation.
Page 5 of 6 Pages
<PAGE>
Signature
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
March __, 1996
THE FAIRCHILD CORPORATION
By: /s/ Donald E. Miller
-----------------------------
Donald E. Miller
Senior Vice President
General Counsel
and Secretary
RHI HOLDINGS, INC.
By: /s/ Donald E. Miller
-----------------------------
Donald E. Miller
Vice President
and Secretary
FAIRCHILD HOLDINGS CORP.
By: /s/ Donald E. Miller
-----------------------------
Donald E. Miller
Senior Vice President
and Secretary
Page 6 of 6 Pages
<PAGE>
EXHIBIT A
DIRECTORS AND EXECUTIVE OFFICERS OF THE FAIRCHILD CORPORATION ("TFC")
The names, titles, present principal occupation, five year
employment history and business addresses of each of the directors and
executive officers of TFC are set forth below. The business address of each of
the directors and executive officers of TFC, with respect to positions, offices
or employment with TFC, is 300 West Service Road, Chantilly, VA 22021. All
directors and officers listed below are citizens of the United States, with
the exception of Jeffrey J. Steiner, Chairman of the Board, Chief Executive
Officer and President of TFC who is a citizen of Austria.
Title, Present Principal Occupation,
Name Five Year Employment History and Business Addresses
Michael T. Alcox Senior Vice President and the Chief Financial
Officer of TFC since December 1987. He also
served as Treasurer of TFC from September 1990
until November 1991. Since 1990, Mr. Alcox also
has served as Vice President and the Chief
Financial Officer of RHI Holdings, Inc. ("RHI")
and Fairchild Industries, Inc. ("Fairchild
Industries"), two subsidiaries of TFC and is
currently President of Fairchild Holdings Corp.
("FHC"), a subsidiary of TFC. He is a director of
RHI, Fairchild Industries, FHC and Banner
Aerospace, Inc. ("Banner Aerospace"). He became a
director of TFC in 1988.<F1>
Mortimer M. Caplin Director of TFC since 1990. Senior member of
Caplin & Drysdale (attorneys) since 1964. Mr.
Caplin serves as a director of Fairchild
Industries, Presidential Realty Corporation and
Danaher Corporation.
Philip David Director of TFC since 1985. Consultant to TFC
from January 1988 to June 1993. He was also an
employee of TFC from January 1988 to December
1989. He was a Professor of Urban Development at
Massachusetts Institute of Technology until June
1988. Dr. David is also a director of Advanced
NMR Systems, Inc.
Thomas J. Flaherty Director of TFC since 1993. Joined TFC in April
1993, as the Chief Operating Officer. Since 1993,
he also has served as a director and the Chief
Operating Officer of Fairchild Industries. He was
President and the Chief Operating Officer of IMO
Industries, Inc. from 1992 to April 1993. He was
the Chief Executive Officer & President of
Transnational Industries, Inc. from 1990 to 1992.
From 1977 to 1990, he held various executive
positions with the Hamilton Standard and Pratt &
Whitney units of United Technologies Corporation.
Harold J. Harris Director of TFC since 1985. President of Wm. H.
Harris, Inc. (retailer). He is a director of
Capital Properties Incorporated of Rhode Island.
Samuel J. Krasney Director since 1968. Retired in 1993 as the
Chairman of the Board, the Chief Executive
Officer and President of Banner Aerospace,
positions he had held since June 1990. He
continues to serve as a member of the Board of
Banner Aerospace (since June 1990) and
-1-
<PAGE>
Title, Present Principal Occupation,
Name Five Year Employment History and Business Addresses
also serves as the Vice Chairman of the Board of
TFC (since December 1985). He served as the Chief
Operating Officer of TFC from December 1985 until
December 1989. Mr. Krasney has served as the
managing partner of ABBA Capital Enterprises
since October 1985. Mr. Krasney is a director of
FabriCenters of America, Inc. and Waxman
Industries, Inc.<F2>
Frederick W. McCarthy Director since 1986. Chairman of the Board of
Triumph Capital Group, Inc. and a Managing
Director of Triumph Corporate Finance Group, Inc.
(investment bankers), a position held since March
1990. Prior thereto, he was a Managing Director
of Drexel Burnham Lambert Incorporated ("Drexel
Burnham"), investment bankers, from 1974 until
January 1990. Mr. McCarthy serves as a director
of RHI, RC/Arby's Corporation, Nutra Max
Products, Inc., and EnviroWorks, Inc.
Herbert S. Richey Director since 1977. Served as President of
Richey Coal Company (coal properties brokerage
and consulting) until December 1993. Mr. Richey
is a director of Fairchild Industries and Sifco
Industries, Inc.
Robert A. Sharpe II Director since 1995. Joined Smithfield Foods,
Inc. as Vice President, Corporate Development, in
July 1994. Prior to that time Mr. Sharpe served
as Senior Vice President of NationsBank
Corporation and held other management positions
with NationsBank.
Dr. Eric I. Steiner Served as Senior Vice President, Operations of
TFC since May 1992, and is currently President of
Fairchild Fasteners, a division of VSI
Corporation, a wholly owned subsidiary of
Fairchild Industries and a Vice President of FHC.
Prior thereto, he served as President of
Camloc/RAM Products, one of TFC's operating
units, from September 1993 to February 1995. He
served as Vice President, Business Planning of
TFC from March 1991 until May 1992. He has also
served as Vice President of Fairchild Industries
since May 1992. He received an M.B.A. from Insead
in France in 1990. Prior thereto, he received an
M.D. in 1988 from Faculte de Medicine de Paris
and was a medical doctor at Hospitaux De Paris in
France until November 1989. He is a director of
Banner Aerospace. Dr. Steiner became a director
of TFC in 1988. He is the son of Jeffrey J.
Steiner.
Jeffrey J. Steiner Chairman of the Board and the Chief Executive
Officer of TFC since December 1985, and as
President of TFC since July 1, 1991. Mr. Steiner
also served as President of TFC from November
1988 until January 1990. He has served as the
Chairman of the Board, the Chief Executive
Officer and President of Banner Aerospace since
September 1993. He served as the Vice Chairman of
the Board of Rexnord Corporation from July 1992
to December 1993. He has served as the Chairman,
President, and the Chief Executive Officer of
Fairchild Industries since July 1991 and of RHI
since 1988. Mr. Steiner is and for the past five
years has been President of Cedco Holdings Ltd.,
-2-
<PAGE>
Title, Present Principal Occupation,
Name Five Year Employment History and Business Addresses
a Bermuda corporation (a securities investor). He
serves as a director of The Franklin Corporation
and The Copley Fund. He became a director of TFC
in 1985. He is the father of Dr. Eric I.
Steiner.<F3>
Mel D. Borer Vice President of TFC since September 1993. Mr.
Borer has also served as Vice President of
Fairchild Industries since 1991 and as President
of Fairchild Communications Services Company
since 1989.
Robert D. Busey Vice President of TFC since September 1992. Mr.
Busey has also served as Vice President of
Fairchild Industries since November 1993. Prior
to September 1992, Mr. Busey was Assistant Vice
President of TFC and held other management
positions with Fairchild Industries.
Christopher Colavito Vice President and Controller of TFC since
November 1990. Mr. Colavito also has served as
Vice President and Controller of Fairchild
Industries since August 1989. Prior thereto, Mr.
Colavito, who is a Certified Public Accountant,
was Assistant Controller of Fairchild Industries
and held other financial management positions
with Fairchild Industries.
John L. Flynn Senior Vice President, Tax of TFC since September
1994 and as Vice President, Tax since August
1989. Mr. Flynn is currently a Vice President and
director of FHC. Mr. Flynn also has served as
Vice President, Tax of Fairchild Industries since
November 1986.
Harold R. Johnson Brig. Gen., USAF (Ret.), has served as Senior
Vice President, Business Development of TFC since
November 1990. General Johnson has also served as
Vice President of Fairchild Industries since
February 1988.
Robert H. Kelley Vice President, Employee Benefits of TFC since
November 1993. He also has served as Vice
President of Fairchild Industries since November
1993. Prior thereto, he held other management
positions with Fairchild Industries.
Donald E. Miller Senior Vice President and General Counsel of TFC
since January 1991 and Corporate Secretary since
January 1995. Mr. Miller also has served as Vice
President and General Counsel of Fairchild
Industries since November 1991 and is currently
Vice President and Secretary and a director of
FHC. Prior to 1991, Mr. Miller was a principal of
the law firm of Temkin & Miller, Ltd. in
Providence, Rhode Island.
-3-
<PAGE>
Title, Present Principal Occupation,
Name Five Year Employment History and Business Addresses
Karen L. Schneckenburger Vice President of TFC since September 1992 and as
Treasurer of TFC since November 1991. Ms.
Schneckenburger also has served as Treasurer of
Fairchild Industries since August 1989 and is
currently Vice President and Treasurer of FHC.
Prior thereto, she served as Director of Finance
of Fairchild Industries from 1986 through 1989.
- ------------------------
[FN]
(1) Beneficially owns 39,000 shares of Banner Common Stock, which
includes stock options for 7,000 shares.
(2) Beneficially owns 91,000 shares of Banner Common Stock.
(3) Beneficially owns approximately 58% of the outstanding Banner
Common Stock.
-4-
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF RHI HOLDINGS, INC.
The names, titles, present principal occupation, five year
employment history and business addresses of each of the directors and executive
officers of RHI are set forth below. The business address of each of the
directors and executive officers of RHI with respect to positions, offices or
employment with RHI is 300 West Service Road, Chantilly, VA 22021. All directors
and officers listed below are citizens of the United States, with the exception
of Jeffrey J. Steiner, Chairman of the Board, Chief Executive Officer and
President of RHI who is a citizen of Austria.
Title, Present Principal Occupation,
Name Five Year Employment History and Business Addresses
Michael T. Alcox See "Directors and Executive Officers of The
Fairchild Corporation."
Frederick W. McCarthy See "Directors and Executive Officers of The
Fairchild Corporation."
Jeffrey J. Steiner See "Directors and Executive Officers of The
Fairchild Corporation."
John L. Flynn See "Directors and Executive Officers of The
Fairchild Corporation."
Donald E. Miller See "Directors and Executive Officers of The
Fairchild Corporation."
Karen L. Schneckenburger See "Directors and Executive Officers of The
Fairchild Corporation."
Robert D. Busey See "Directors and Executive Officers of The
Fairchild Corporation."
Irving Levine Director since 1989. Mr. Levine is President and
Chairman of the Board of Directors of the Copley
Fund, Inc. (a management investment company), and
has been a director, consultant and employee of
investment companies and investment advisory
firms for approximately 25 years. He serves as a
director of the Franklin Corporation.
-5-
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF FAIRCHILD HOLDINGS CORP.
The names, titles, present principal occupation, five year
employment history and business addresses of each of the directors and
executive officers of FHC are set forth below. The business address of each of
the directors and executive officers of FHC with respect to positions, offices
or employment with FHC is 300 West Service Road, Chantilly, VA 22021. All
directors and officers listed below are citizens of the United States.
Title, Present Principal Occupation,
Name Five Year Employment History and Business Addresses
Michael T. Alcox See "Directors and Executive Officers of The
Fairchild Corporation."
Eric I. Steiner See "Directors and Executive Officers of The
Fairchild Corporation."
John L. Flynn See "Directors and Executive Officers of The
Fairchild Corporation."
Donald E. Miller See "Directors and Executive Officers of The
Fairchild Corporation."
Karen L. Schneckenburger See "Directors and Executive Officers of The
Fairchild Corporation."
-6-
<PAGE>
STOCK EXCHANGE AGREEMENT
DATED AS OF FEBRUARY 22, 1996
BY AND BETWEEN
BANNER AEROSPACE, INC.
AND
THE FAIRCHILD CORPORATION
WITH RESPECT TO ALL
OUTSTANDING CAPITAL STOCK OF
HARCO INC.
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to
which it is attached but is inserted for convenience only.
Page
No.
ARTICLE I
EXCHANGE OF SHARES AND CLOSING
1.01 Exchange of Shares.......................................... 1
1.02 Closing..................................................... 3
1.03 Further Assurances; Post-Closing Cooperation................ 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FAIRCHILD
2.01 Organization of Fairchild, Harco Parent and VSI............. 5
2.02 Authority................................................... 6
2.03 Organization of the Company................................. 6
2.04 Capital Stock............................................... 7
2.05 Subsidiaries................................................ 7
2.06 No Conflicts................................................ 8
2.07 Governmental Approvals and Filings.......................... 9
2.08 Books and Records........................................... 9
2.09 Financial Statements........................................ 9
2.10 Absence of Changes.......................................... 10
2.11 No Undisclosed Liabilities of the Harco Business............ 12
2.12 Taxes....................................................... 12
2.13 Legal Proceedings........................................... 14
2.14 Compliance With Laws and Orders............................. 14
2.15 Benefit Plans; ERISA........................................ 15
2.16 Real Property............................................... 18
2.17 Tangible Personal Property; Investment Assets............... 19
2.18 Intellectual Property Rights................................ 19
2.19 Contracts................................................... 20
2.20 Licenses.................................................... 22
2.21 Insurance................................................... 22
2.22 Affiliate Transactions...................................... 23
2.23 Employees; Labor Relations.................................. 24
2.24 Environmental Matters....................................... 24
2.25 Substantial Customers and Suppliers......................... 25
2.26 Bank and Brokerage Accounts................................. 26
2.27 No Powers of Attorney....................................... 26
2.28 Accounts Receivable......................................... 26
2.29 Inventory................................................... 27
2.30 Entire Business............................................. 27
2.31 Brokers..................................................... 27
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<PAGE>
Page
No.
2.32 Purchase for Investment..................................... 27
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BANNER
3.01 Organization................................................ 28
3.02 Capitalization.............................................. 28
3.03 Authority................................................... 28
3.04 No Conflicts................................................ 28
3.05 Governmental Approvals and Filings.......................... 29
3.06 Legal Proceedings........................................... 29
3.07 Banner Shares Authorized.................................... 29
3.08 Banner SEC Documents........................................ 29
3.09 No Share Restrictions....................................... 30
3.10 No Undisclosed Liabilities.................................. 30
3.11 Absence of Material Changes................................. 30
3.12 Compliance With Law......................................... 30
3.13 Disclosure.................................................. 31
3.14 Purchase for Investment..................................... 31
3.15 Brokers..................................................... 31
ARTICLE IV
COVENANTS OF FAIRCHILD
4.01 Regulatory and Other Approvals............................... 31
4.02 Formation of the Company..................................... 32
4.03 Investigation by Banner...................................... 32
4.04 Transfer of the Harco Business to the Company................ 32
4.05 Conduct of Business.......................................... 36
4.06 Financial Statements and Reports; Filings.................... 37
4.07 Employee Matters............................................. 37
4.08 Certain Restrictions......................................... 38
4.09 Affiliate Transactions....................................... 40
4.10 Books and Records............................................ 40
4.11 Notice and Cure.............................................. 40
4.12 Fulfillment of Conditions.................................... 41
ARTICLE V
COVENANTS OF BANNER
5.01 Regulatory and Other Approvals............................... 41
5.02 Notice and Cure.............................................. 42
5.03 Fulfillment of Conditions.................................... 42
5.04 Cooperation As To Certain Matters............................ 42
ARTICLE VI
- ii -
<PAGE>
Page
No.
CONDITIONS TO OBLIGATIONS OF BANNER
6.01 Representations and Warranties.............................. 43
6.02 Performance................................................. 43
6.03 Officers' Certificates...................................... 43
6.04 Orders and Laws............................................. 43
6.05 Regulatory Consents and Approvals........................... 44
6.06 Third Party Consents........................................ 44
6.07 Resignations of Directors and Officers...................... 44
6.08 Proceedings................................................. 45
6.09 Fairness Opinion............................................ 45
6.10 Continued Employment of Certain Employees................... 45
6.11 Payment of Accrued Employee Compensation.................... 45
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF FAIRCHILD
7.01 Representations and Warranties.............................. 45
7.02 Performance................................................. 46
7.03 Officers' Certificates...................................... 46
7.04 Orders and Laws............................................. 46
7.05 Regulatory Consents and Approvals........................... 46
7.06 Third Party Consents........................................ 46
7.07 Proceedings................................................. 47
7.08 Fairness Opinion............................................ 47
7.09 Registration Rights Agreement............................... 47
ARTICLE VIII
TAX MATTERS AND POST-CLOSING TAXES
8.01 Transfer Taxes.............................................. 47
8.02 Tax Periods Ending on or Before February 25, 1996........... 47
8.03 Taxes for Stub Period....................................... 48
8.04 Consistent Tax Treatment.................................... 48
8.05 Section 338................................................. 48
8.06 Books and Records........................................... 48
8.07 Post-Closing Dividends...................................... 48
8.08 Payroll Tax Reporting....................................... 49
- iii -
<PAGE>
Page
No.
ARTICLE IX
EMPLOYMENT AND BENEFITS MATTERS
9.01 Employment and Benefits..................................... 49
9.02 No Assumption or Continuity of Liabilities.................. 49
ARTICLE X
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
10.01 Survival of Representations, Warranties, Covenants and
Agreements................................................. 50
ARTICLE XI
INDEMNIFICATION
11.01 Tax Indemnification........................................ 51
11.02 Other Indemnification...................................... 53
11.03 Method of Asserting Claims................................. 54
ARTICLE XII
TERMINATION
12.01 Termination................................................ 57
12.02 Effect of Termination...................................... 58
ARTICLE XIII
DEFINITIONS
13.01 Definitions................................................ 58
ARTICLE XIV
MISCELLANEOUS
14.01 Notices.................................................... 70
14.02 Entire Agreement........................................... 71
14.03 Expenses................................................... 71
14.04 Public Announcements....................................... 71
14.05 Confidentiality............................................ 71
14.06 Waiver..................................................... 72
14.07 Amendment.................................................. 72
14.08 No Third Party Beneficiary................................. 73
14.09 No Assignment; Binding Effect.............................. 73
- iv -
<PAGE>
Page
No.
14.10 Headings................................................... 73
14.11 Submission to Jurisdiction; Waivers........................ 73
14.12 Invalid Provisions......................................... 74
14.13 Governing Law.............................................. 74
14.14 Counterparts............................................... 74
SCHEDULE 3.04 Conflicts
SCHEDULE 3.05 Governmental Consents
SCHEDULE 6.10 Certain Employees
SCHEDULE 14.03 Shared Expenses
EXHIBIT A Officer's Certificate of
Fairchild
EXHIBIT B Secretary's Certificate of
Fairchild
EXHIBIT C Officer's Certificate of Banner
EXHIBIT D Secretary's Certificate of
Banner
EXHIBIT E Amendment to Registration
Rights Agreement
- v -
<PAGE>
This STOCK EXCHANGE AGREEMENT dated as of February 22,
1996 is made and entered into by and between Banner Aerospace, Inc., a Delaware
corporation ("Banner"), and The Fairchild Corporation, a Delaware corporation
("Fairchild"). Capitalized terms not otherwise defined herein have the
meanings set forth in Section 13.01.
WHEREAS, Fairchild is currently engaged through the Harco division of
VSI Corporation, a Delaware corporation and an indirect wholly owned subsidiary
of Fairchild ("VSI"), and certain subsidiaries of VSI in the Harco Business;
WHEREAS, pursuant to this Agreement, Fairchild shall cause all of
the Assets and Properties of VSI currently used or held for use in connection
with the operation of the Harco Business (including all of the issued and
outstanding shares of capital stock of the Subsidiaries but excluding the
Excluded Assets) to be contributed and certain Liabilities of VSI arising
in connection with the operation of the Harco Business to be assigned, to
Harco Inc., a Delaware corporation (the "Company"), which shall be a
newly-formed wholly-owned subsidiary of Fairchild Holding Corp., a Delaware
corporation ("Harco Parent"), which in turn shall be a newly-formed
wholly-owned subsidiary of VSI;
WHEREAS, Fairchild desires to dispose of, and Banner desires
to acquire, the Harco Business solely through the exchange of the Harco
Shares held by Harco Parent for the voting common stock of Banner, on the terms
and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants
and agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
EXCHANGE OF SHARES AND CLOSING
1.01 Exchange of Shares. (a) Fairchild agrees to cause Harco
Parent to assign and deliver to Banner all of Harco Parent's right, title
and interest in and to the Harco Shares, and Banner agrees to acquire the Harco
Shares, solely in exchange for that number of newly issued shares of the
voting common stock, par value $1.00 per share, of Banner (the "Banner Shares")
as isdetermined in accordance with paragraph (b) below, subject to adjustment
in accordance with paragraph (c) below, on the terms and subject to the
conditions set forth in this Agreement.
(b) The number of Banner Shares to be exchanged for the Harco Shares
at the Closing shall be a number equal to the
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quotient obtained by dividing the Harco Value by the Average Banner Price.
(c) (i) Within sixty (60) days following the Closing Date, Fairchild
shall cause to be delivered to Banner a balance sheet of the Company as of
February 25, 1996 audited by Arthur Andersen LLP (the "February Balance
Sheet"), which shall be prepared in a manner consistent with the preparation
of the Audited Balance Sheet. To the extent requested by Fairchild, Banner
shall, prior to the delivery of the February Balance Sheet, make available to
Fairchild such of the Books and Records in the possession of Banner as shall
be reasonably necessary for the preparation of the February Balance Sheet.
Banner's Representatives may participate in and observe the preparation of
the February Balance Sheet. Fairchild shall make all of its work papers and
other relevant documents in connection with the preparation of the February
Balance Sheet available to Banner and Banner's Representatives, and shall
make the persons in charge of the preparation of the February Balance Sheet
available for reasonable inquiry by Banner and Banner's Representatives. If
Banner fails to notify Fairchild of its disagreement with the Net Worth of
the Company based on the February Balance Sheet in accordance with the first
sentence of the next succeeding paragraph, the Net Worth of the Company based
on the February Balance Sheet shall be final and binding on Fairchild and
Banner for all purposes of this Agreement.
(ii) Banner shall notify Fairchild in writing within fifteen (15)
days following receipt of the February Balance Sheet if it does not agree with
the calculations set forth thereon, in which case Fairchild and Banner will use
good faith efforts during the 30-day period following the date of such written
notice to resolve any differences they may have. Such written notice will
identify with specificity the calculations with which Banner disagrees or
other bases for such disagreement; provided that (x) Banner may not set forth
any disagreement with any item on the February Balance Sheet to the extent
that such item is calculated in a manner consistent with the preparation of
the Audited Balance Sheet and consistent with the operations of the Harco
Business from the date hereof to February 25, 1996 in accordance with the
provisions of this Agreement and (y) any such disagreements shall be limited
to events occurring subsequent to the Audited Financial Statement Date. If
Fairchild and Banner cannot reach agreement during such 30-day period, their
disagreements shall be promptly submitted to an independent public accounting
firm jointly selected by Fairchild and Banner (the "Independent Accountant"),
which shall conduct such additional review as is necessary to resolve the
specific disagreements referred to it and, based thereon and having due
regard for consistency with the policies and practices used in the preparation
of the Audited Balance Sheet, shall determine the Net Worth of the Company as
of February 25, 1996. The review of
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the Independent Accountant will be restricted as to scope to address only those
matters as to which Fairchild and Banner have not reached agreement pursuant to
the preceding sentence. The Independent Accountant's determination of the Net
Worth of the Company based on the February Balance Sheet, which shall be
completed as promptly as practicable but in no event later than 30 days
following its selection, shall be confirmed by the Independent Accountant in
writing to, and shall be final and binding on, Fairchild and Banner for purposes
of this paragraph (c).
(iii) To the extent that the Net Worth of the Company based on the
February Balance Sheet, determined in accordance with this paragraph (c) (the
"Final Net Worth"), is less than the Net Worth of the Harco Business based on
the Unaudited Balance Sheet (such difference being a "Post-Closing Decrease") or
more than the Net Worth of the Harco Business based on the Unaudited Balance
Sheet (such difference being a "Post-Closing Increase"), then: (i) in the event
of a Post-Closing Decrease, Fairchild shall, within five Business Days following
the date of the determination of the Final Net Worth, deliver to Banner that
number of Banner Shares equal to the quotient obtained by dividing the
Post-Closing Decrease by the Average Banner Price; and (ii) in the event of a
Post-Closing Increase, Banner shall, within five Business Days following the
date of the determination of the Final Net Worth, deliver to Fairchild or its
designee that number of Banner Shares equal to the quotient obtained by dividing
the Post-Closing Increase by the Average Banner Price. Any Banner Shares to be
delivered in accordance with this subparagraph (iii) shall be delivered free and
clear of all Liens by delivery of a certificate or certificates representing the
number of Banner Shares calculated in accordance with this subparagraph (iii),
in genuine and unaltered form, with the requisite stock transfer stamps, if any,
attached.
(iv) The fees of and expenses incurred by Arthur Andersen LLP in
connection with the determination of the Final Net Worth shall be paid by
Fairchild. The fees of and expenses incurred by the Independent Accountant in
connection with the determination of the Final Net Worth shall be shared equally
by Banner and Fairchild.
1.02 Closing. The Closing will take place at the offices of Milbank,
Tweed, Hadley & McCloy, One Chase Manhattan Plaza, New York, New York 10005, or
at such other place as Banner and Fairchild mutually agree, at 12:00 Noon local
time, on the Closing Date. At the Closing, Banner will issue and deliver to
Harco Parent or any other designee of Fairchild, the Banner Shares to be
delivered at the Closing free and clear of all Liens, by delivery of
acertificate or certificates representing the Banner Shares, in genuine and
unaltered form, with the requisite stock transfer stamps, if any, attached.
Immediately
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following the issuance and delivery of the Banner Shares pursuant to the
preceding sentence, Fairchild shall cause Harco Parent to assign and transfer to
Banner all right, title and interest in and to the Harco Shares free and clear
of all Liens by delivering to Banner a certificate or certificates representing
the Harco Shares, in genuine and unaltered form, duly endorsed in blank or
accompanied by duly executed stock powers endorsed in blank, with requisite
stock transfer tax stamps, if any, attached. The parties hereby agree that the
issuance and delivery of the Banner Shares to be delivered at the Closing shall
be deemed to occur immediately prior to the delivery of the Harco Shares to
Banner.
1.03 Further Assurances; Post-Closing Cooperation. (a) At any time or
from time to time after the Closing, Fairchild or Banner, as the case may be,
shall execute and deliver, or cause to be executed and delivered, to the other
such other documents and instruments, provide such materials and information and
take such other actions as such party may reasonably request more effectively to
vest title to the Harco Shares in Banner or the Banner Shares in Harco Parent or
any other designee of Fairchild, as the case may be, and Fairchild, to the full
extent permitted by Law, shall execute and deliver, and shall cause Harco Parent
and the Subsidiaries to execute and deliver, to Banner such other documents and
instruments, provide such materials and information and take such other actions
as Banner may reasonably request to put Banner in actual possession and
operating control of the Company and to put the Company in actual possession and
operating control of the Assets and Properties Related to the Harco Business
(other than the Excluded Assets) and the Books and Records as the same shall
exist immediately prior to the Closing, and otherwise to cause Fairchild to
fulfill its obligations under this Agreement and the Operative Agreements to
which it is a party.
(b) Following the Closing, each party will afford, or shall cause to be
afforded, the other party, its counsel and its accountants, during normal
business hours, reasonable access to the books, records and other data relating
to the Condition of the Harco Business in its or any of its Affiliate's
possession with respect to periods prior to the Closing and the right to make
copies and extracts therefrom, to the extent that such access may be reasonably
required by the requesting party in connection with (i) the preparation of Tax
Returns, (ii) the determination or enforcement of rights and obligations under
this Agreement, (iii) compliance with the requirements of any Governmental or
Regulatory Authority, (iv) the determination or enforcement of the rights and
obligations of any party to this Agreement or any of the Operative Agreements or
(v) in connection with any actual or threatened Action or Proceeding. Further,
each party agrees for a period extending six (6) years after the Closing Date
not to destroy or otherwise dispose of, and to cause their respective Affiliates
not to destroy or otherwise dispose
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of, any such books, records and other data unless such party shall first
offer in writing to surrender such books, records and other data to the other
party and such other party shall not agree in writing to take possession thereof
during the ten (10) day period after such offer is made.
(c) If, in order properly to prepare its Tax Returns, other documents
or reports required to be filed with Governmental or Regulatory Authorities or
its financial statements or to fulfill its obligations hereunder, it is
necessary that a party be furnished with additional information, documents or
records relating to the Condition of the Harco Business not referred to in
paragraph (b) above, or the business of the Company as carried on following the
Closing, and such information, documents or records are in the possession or
control of the other party or its Affiliates, such other party shall use its
best efforts to furnish or make available such information, documents or records
(or copies thereof) at the recipient's request, cost and expense. Any
information obtained by Fairchild or its Affiliates in accordance with this
paragraph shall be held confidential by Fairchild and its Affiliates in
accordance with Section 14.05.
(d) Notwithstanding anything to the contrary contained in this Section,
if the parties are in an adversarial relationship in litigation or arbitration,
the furnishing of information, documents or records in accordance with any
provision of this Section shall be subject to applicable rules relating to
discovery, including withholding privileged documents.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FAIRCHILD
Fairchild hereby represents and warrants to Banner as follows:
2.01 Organization of Fairchild, Harco Parent and VSI. Fairchild and VSI
are, and as of the Closing Date Harco Parent will be, corporations duly
organized, validly existing and in good standing under the Laws of the State of
Delaware. Fairchild has full corporate power and authority to execute and
deliver this Agreement and the Operative Agreements to which it is a party and
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby, including without limitation to
cause, in accordance with the provisions of this Agreement, (i) VSI and Harco
Parent to contribute the Harco Business to the Company and (ii) Harco Parent to
transfer the Harco Shares. VSI has, and upon its formation Harco Parent will
have, full corporate power and authority to perform the actions and consummate
the transactions
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contemplated to be performed or consummated by each of them pursuant to this
Agreement and the Operative Agreements including without limitation (x) VSI
having full corporate power and authority to contribute the Harco Business to
Harco Parent and (y) Harco Parent having, full corporate power and authority to
contribute the Harco Business to the Company and to own, hold and transfer the
Harco Shares to Banner, in each instance, in accordance with Section 4.04.
2.02 Authority. The execution and delivery by Fairchild of
this Agreement and the Operative Agreements to which it is a party, and the
performance by Fairchild of its obligations hereunder and thereunder, have been
duly and validly authorized by the Board of Directors of Fairchild, no other
corporate action on the part of Fairchild or its stockholders being necessary.
This Agreement has been duly and validly executed and delivered by Fairchild and
constitutes, and upon the execution and delivery by Fairchild of the Operative
Agreements to which it is a party, such Operative Agreements will constitute,
legal, valid and binding obligations of Fairchild enforceable against Fairchild
in accordance with their terms. The performance by VSI and Harco Parent of the
actions contemplated to be taken by each of them under this Agreement and the
Operative Agreements will, as of the Closing Date, have been duly authorized by
the respective Boards of Directors of VSI and Harco Parent, no other corporate
action on the part of VSI, Harco Parent or their respective stockholders being
necessary.
2.03 Organization of the Company. As of the Closing Date, the
Company shall be a corporation duly organized, validly existing and in good
standing under the Laws of the State of Delaware, having full corporate power
and authority to conduct the Harco Business as and to the extent now conducted
by VSI and to own, use and lease its Assets and Properties. As of the Closing
Date, the Company shall be duly qualified, licensed or admitted to do business
and shall be in good standing in those jurisdictions specified in Section 2.03
of the Disclosure Schedule, which are the only jurisdictions in which the
ownership, use or leasing of the Assets and Properties Related to the Harco
Business, or the conduct or nature of the Harco Business, makes such
qualification, licensing or admission necessary, except for those jurisdictions
in which the effects of all such failures by the Company and the Subsidiaries to
be qualified, licensed or admitted and in good standing would not reasonably be
expected to have a material adverse effect on the Condition of the Harco
Business (a "Company Material Adverse Effect"). The name of each individual who
shall be a director and/or an officer of the Company on the Closing Date, and
the position with the Company to be held by each, are listed in Section 2.03 of
the Disclosure Schedule. Fairchild has, prior to the execution of this
Agreement, delivered to Banner true and
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complete copies of the certificate of incorporation and by-laws of the Company
as shall be in effect on the Closing Date.
2.04 Capital Stock. As of the Closing Date, the authorized capital
stock of the Company shall consist solely of one thousand (1,000) shares of
Common Stock, of which only the Harco Shares shall have been issued. Upon
issuance thereof, the Harco Shares shall be duly authorized, validly issued,
outstanding, fully paid and nonassessable. As of the Closing Date, Harco Parent
shall own the Harco Shares, beneficially and of record, free and clear of all
Liens and there shall be no outstanding Options with respect to the Company. The
delivery of a certificate or certificates at the Closing representing the Harco
Shares, in the manner provided in Section 1.02 will transfer to Banner good and
valid title to the Harco Shares, free and clear of all Liens.
2.05 Subsidiaries. Section 2.05 of the Disclosure Schedule lists the
name of each Subsidiary and all lines of business in which each Subsidiary is
participating or engaged or will be participating or engaged as of the Closing
Date. Each Subsidiary is, or as of the Closing Date will be, a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation identified in Section 2.05 of the Disclosure
Schedule, and has, or as of the Closing Date will have, full corporate power and
authority to conduct its business as and to the extent now conducted and to own,
use and lease its Assets and Properties. Each Subsidiary is, or as of the
Closing Date will be, duly qualified, licensed or admitted to do business and is
in good standing in those jurisdictions specified in Section 2.05 of the
Disclosure Schedule, which are the only jurisdictions in which the ownership,
use or leasing of such Subsidiary's Assets and Properties, or the conduct or
nature of its business, makes, or as of the Closing Date will make, such
qualification, licensing or admission necessary, except for those jurisdictions
in which the effects of all such failures by the Company and the Subsidiaries to
be qualified, licensed or admitted and in good standing would not reasonably be
expected to have a Company Material Adverse Effect. Section 2.05 of the
Disclosure Schedule lists for each Subsidiary the amount of its authorized
capital stock, the amount of its outstanding capital stock and the record owners
of such outstanding capital stock. All of the outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly issued, are fully
paid and nonassessable, and, as of the date hereof, VSI or Subsidiaries
wholly-owned by VSI (and as of the Closing Date, the Company or Subsidiaries
wholly-owned by the Company) own any and all such capital stock of the
Subsidiaries, beneficially and of record, free and clear of all Liens. Thereare
no outstanding Options with respect to any Subsidiary. The name of each director
and officer of each Subsidiary on the date hereof and as of the Closing Date,
and the position with such Subsidiary held or to be
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held by each, are listed in Section 2.05 of the Disclosure Schedule. Fairchild
has prior to the execution of this Agreement delivered to Banner true and
complete copies of the certificate or articles of incorporation and by-laws (or
other comparable corporate charter documents) of each of the Subsidiaries.
2.06 No Conflicts. The execution and delivery by Fairchild of this
Agreement do not, and the execution and delivery by Fairchild of the Operative
Agreements to which it is a party, the performance by Fairchild of its
obligations under this Agreement and such Operative Agreements and the
consummation of the transactions contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate or articles of incorporation
or by-laws (or other comparable corporate charter documents) of Fairchild, VSI,
Harco Parent, the Company or any Subsidiary;
(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices disclosed in Section 2.07 of the Disclosure
Schedule, conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to Fairchild, VSI, Harco Parent, the
Company or any Subsidiary or any of their respective Assets and Properties; or
(c) except as disclosed in Section 2.06 of the Disclosure Schedule, (i)
conflict with or result in a violation or breach of, (ii) constitute (with or
without notice or lapse of time or both) a default under, (iii) require
Fairchild, VSI, Harco Parent, the Company or any Subsidiary to obtain any
consent, approval or action of, make any filing with or give any notice to any
Person as a result or under the terms of, (iv) result in or give to any Person
any right of termination, cancellation, acceleration or modification in or with
respect to, (v) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments under,
or (vi) result in the creation or imposition of any Lien upon Fairchild, VSI,
Harco Parent, the Company or any Subsidiary or any of their respective Assets
and Properties under, any Contract or License to which Fairchild, VSI, Harco
Parent, the Company or any Subsidiary is a party or by which any of their
respective Assets and Properties is bound.
2.07 Governmental Approvals and Filings. Except as disclosed
in Section 2.07 of the Disclosure Schedule, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part of
Fairchild, VSI, Harco Parent, the Company or any Subsidiary is required in
connection with the execution, delivery and performance of this Agreement or
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any of the Operative Agreements to which it is a party or the
consummation of the transactions contemplated hereby or thereby.
2.08 Books and Records. The minute books and other similar records of
the Subsidiaries as made available to Banner prior to the execution of this
Agreement contain a true and complete record, in all material respects, of all
action taken at all meetings and by all written consents in lieu of meetings of
the stockholders, the boards of directors and committees of the boards of
directors of the Subsidiaries. The stock transfer ledger and other similar
records of the Subsidiaries as made available to Banner prior to the execution
of this Agreement accurately reflect all recorded transfers prior to the
execution of this Agreement in the capital stock of the Subsidiaries. Except as
set forth in Section 2.08 of the Disclosure Schedule, the Subsidiaries do not
have any of their respective Books and Records recorded, stored, maintained,
operated or otherwise wholly or partly dependent upon or held by any means
(including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of a Subsidiary or the
Company.
2.09 Financial Statements. Prior to the execution of this Agreement,
Fairchild has delivered to Banner true and complete copies of the following
financial statements:
(a) the unaudited balance sheets of the Harco Business as of June 30,
1992 and 1993, and the related unaudited statements of operations and cash flows
for each of the fiscal years then ended;
(b) the audited balance sheets of the Harco Business for the fiscal
years ended June 30, 1994 and 1995 and the related audited consolidated
statements of operations and cash flows for the periods then ended, together
with a true and correct copy of the report on such audited information by Arthur
Andersen LLP, and all letters from such accountants with respect to the results
of such audits; and
(c) the unaudited balance sheet of the Harco Business for the three (3)
months ended September 30, 1995 and the related unaudited statement of
operations and cash flows for the period then ended.
Except as set forth in the notes thereto and as disclosed in Section 2.09 of the
Disclosure Schedule, all such financial statements (i) were prepared in
accordance with GAAP, (ii) fairly present the consolidated financial condition
and results of operations of the Harco Business as of the respective dates
thereof and for the respective periods covered thereby, and (iii) were compiled
from the Books and Records regularly maintained by
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management and used to prepare the financial statements of the Harco Business
in accordance with the principles stated therein. Fairchild, VSI and the
Subsidiaries have maintained their respective Books and Records in a manner
sufficient to permit the preparation of financial statements in accordance with
GAAP.
Except for those Subsidiaries listed in Section 2.09 of the Disclosure
Schedule, the financial condition and results of operations of each Subsidiary
are, and for all periods referred to in this Section 2.09 have been,
consolidated with those of the Harco Business.
2.10 Absence of Changes. Except for the execution and delivery of this
Agreement and the transactions to take place pursuant hereto on or prior to the
Closing Date, since the Audited Financial Statement Date there has not been any
change which has had a Company Material Adverse Effect, or any event or
development which, individually or together with other such events, could
reasonably be expected to result in a Company Material Adverse Effect. Without
limiting the foregoing, except as disclosed in Section 2.10 of the Disclosure
Schedule, there has not occurred between the Audited Financial Statement Date
and the date hereof:
(i) any authorization, issuance, sale or other
disposition of capital stock of any Subsidiary;
(ii) any increase in the salary, wages or other compensation of any
officer or employee involved in the Harco Business in an amount greater
than (A) 10% of such officer's, employee's or consultants' salary,
wages or compensation or (B) $5,000;
(iii) (A) incurrences in respect of the Harco Business of
Indebtedness in an aggregate principal amount exceeding $25,000 (net of
any amounts discharged during such period), or (B) any voluntary
purchase, cancellation, prepayment or complete or partial discharge in
advance of a scheduled payment date with respect to, or waiver of any
right in respect of the Harco Business under, any Indebtedness of or
owing in respect of the Harco Business;
(iv) any physical damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any of the plant, real or
personal property or equipment Related to the Harco Business in an
aggregate amount exceeding $25,000;
(v) any material change in (x) any pricing, investment, accounting,
financial reporting, inventory, credit, allowance or Tax practice or
policy of the Harco Business, or (y) any method of calculating any bad
debt, contingency or other reserve of in respect of the Harco Business
for
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accounting, financial reporting or Tax purposes, or any
change in the fiscal year in respect of the Harco Business;
(vi) any write-off or write-down (other than write-offs or
write-downs of accounts receivable and inventory in the ordinary course
of business consistent with past practice) of or any determination to
write-off or write-down any of the Assets and Properties Related to the
Harco Business in an aggregate amount exceeding $25,000;
(vii) any acquisition or disposition of, or incurrence of a Lien
(other than a Permitted Lien) on, any Assets and Properties Related to
the Harco Business, other than in the ordinary course of business
consistent with past practice;
(viii) any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any
consent with respect to (A) any Contract which is required (or had it
been in effect on the date hereof would have been required) to be
disclosed in the Disclosure Schedule pursuant to Section 2.19(a) or (B)
any material License held in respect of the Harco Business;
(ix) capital expenditures or commitments for additions to property,
plant or equipment Related to the Harco Business constituting capital
assets in an aggregate amount exceeding $25,000;
(x) any commencement or termination of any line of
business engaged in by the Harco Business;
(xi) any transaction in respect of the Harco Business with
Fairchild, any officer, director or Affiliate of Fairchild (other than
VSI or any Subsidiary) (A) outside the ordinary course of business
consistent with past practice or (B) other than on an arm's-length
basis, other than pursuant to any Contract in effect on the Audited
Financial Statement Date and disclosed pursuant to Section 2.19(a)(vii)
of the Disclosure Schedule;
(xii) any entering into of a Contract to do or engage in
any of the foregoing after the date hereof; or
(xiii) any other transaction in excess of $25,000 involving the
Harco Business or development which has had an effect on the Harco
Business in excess of $25,000, in either instance, that is outside the
ordinary course of business consistent with past practice.
2.11 No Undisclosed Liabilities of the Harco Business.
To the Knowledge of Fairchild, except as reflected or reserved
against in the Unaudited Balance Sheet or in the notes thereto or
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as disclosed in Section 2.11 of the Disclosure Schedule or any other Section of
the Disclosure Schedule, there are no Liabilities against, relating to or
affecting the Harco Business or any Assets and Properties Related to the Harco
Business, other than Liabilities incurred in the ordinary course of business
consistent with past practice of the Harco Business.
2.12 Taxes.
(a) Tax Return Filings. Except as set forth in Section 2.12 of
the Disclosure Schedule, VSI, the Company and each Subsidiary have filed all Tax
Returns (or such Tax Returns have been filed on behalf of VSI, the Company and
each Subsidiary) required to be filed by applicable law on a timely basis. VSI,
the Company and each Subsidiary (i) have paid all Taxes that are shown to be
due, or claimed or asserted by any taxing authority to be due, from VSI, the
Company and each Subsidiary for the periods covered by such Tax Returns or (ii)
have duly and fully provided reserves adequate to pay all Taxes in accordance
with GAAP.
(b) Tax Reserves. Except as set forth in Section 2.12 of the
Disclosure Schedule, the Company and each Subsidiary will have established prior
to the Closing on their books and records reserves adequate to pay all Taxes not
yet due and payable as of the Closing in accordance with GAAP.
(c) Tax Liens. Except as set forth in Section 2.12 of
the Disclosure Schedule, there are no Tax Liens upon any Assets
and Properties Related to the Harco Business, except for
Permitted Liens.
(d) Withholding Taxes. Except as set forth in Section 2.12 of
the Disclosure Schedule, VSI, the Company and each Subsidiary have complied (and
until the Closing will comply) with all applicable laws, rules, and regulations
relating to the payment and withholding of Taxes (including withholding and
reporting requirements under Code ss.ss.1441 through 1464, 3401 through 3406,
6041 and 6049 and similar provisions under any other laws) and have, within the
time and in the manner prescribed by law, withheld from employee wages and paid
over to the proper governmental authorities all amounts required.
(e) Extensions of Time for Filing Returns. Except as set forth
in Section 2.12 of the Disclosure Schedule, neither the Company nor any
Subsidiary has requested any extension of time within which to file any Tax
Return, which Tax Return has not since been filed.
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(f) Waivers of Statute of Limitations. Except as set forth in
Section 2.12 of the Disclosure Schedule, neither VSI, the Company nor any
Subsidiary has executed any outstanding waivers or comparable consents regarding
the application of the statute of limitations with respect to any Taxes or Tax
Returns.
(g) Powers of Attorney. Except as set forth in Section 2.12 of
the Disclosure Schedule, no power of attorney currently in force has been
granted by VSI, the Company or any Subsidiary concerning any Tax matter.
(h) Availability of Tax Returns. Fairchild has made available
(or, in the case of Tax Returns filed after the Closing Date, will make
available) to Banner complete and accurate copies of all Tax Returns, and any
amendments thereto relating to the Harco Business, filed by or on behalf of VSI,
the Company and each Subsidiary for all taxable years ending on or prior to the
Closing Date.
(i) Tax Sharing Agreements. Except as provided in this
Agreement, no agreements relating to allocating or sharing of Taxes (i) shall
exist among Fairchild, VSI, the Company or any Subsidiary on the Closing Date,
or (ii) shall bind the Company or any Subsidiary after the Closing Date.
(j) Code ss.280G. Except as set forth in Section 2.12 of the
Disclosure Schedule, neither VSI, the Company nor any Subsidiary is a party to
any agreement, contract, or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Code ss.280G.
(k) Intercompany Transactions. Except as set forth in Section
2.12 of the Disclosure Schedule, neither VSI, the Company nor any Subsidiary has
engaged in any transaction with Fairchild or any Affiliate of Fairchild (other
than Banner or any subsidiary of Banner) which would result in the recognition
of income by Company or any Subsidiary with respect to such transaction for any
period ending after the Closing Date.
(l) Code ss.341(f). Except as set forth in Section 2.12 of the
Disclosure Schedule, neither the Company nor any Subsidiary has filed (or will
file prior to Closing) a consent pursuant to Code ss.341(f) or agreed to have
Code ss.341(f)(2) apply to any disposition of a subsection (f) asset (as that
term is defined in Code ss.341(f)(4)) owned by the Company or any Subsidiary.
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(m) Tax Indemnity Agreements. Neither the Company
nor any Subsidiary is liable for any Taxes of another person
pursuant to any Tax indemnity agreement.
2.13 Legal Proceedings. Except as disclosed in
Section 2.13 of the Disclosure Schedule:
(a) there are no Actions or Proceedings pending or, to the
Knowledge of Fairchild, threatened against, relating to or affecting Fairchild
or any of its Affiliates or any of their respective Assets and Properties which
(i) could reasonably be expected to result in the issuance of an Order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Operative Agreements or otherwise result in a material diminution of the
benefits contemplated by this Agreement or any of the Operative Agreements to
Banner, or (ii) could reasonably be expected to result in (x) any injunction or
other equitable relief against VSI, Harco Parent, the Company or any Subsidiary
that would interfere in any material respect with the Harco Business or (y)
Losses in respect of the Harco Business, individually or in the aggregate with
Losses in respect of other such Actions or Proceedings, exceeding $25,000;
(b) there are no Orders outstanding against VSI (in respect of
the Harco Business), Harco Parent, the Company or any Subsidiary.
Prior to the execution of this Agreement, Fairchild has delivered to Banner the
most recent responses of counsel for Fairchild, VSI and the Subsidiaries for the
last two years to auditors' requests for information delivered in connection
with the Audited Financial Statements (together with any updates provided by
such counsel) regarding Actions or Proceedings pending or threatened against,
relating to or affecting the Harco Business.
2.14 Compliance With Laws and Orders. Except as disclosed in
Section 2.14 of the Disclosure Schedule, neither Fairchild, VSI, Harco Parent,
the Company nor any of the Subsidiaries is or has at any time within the last
three (3) years been, or has received any notice that it is or has at any time
within the last two (2) years been, in violation of or in default under, in any
material respect, any Law or Order applicable to the Harco Business or any
Assets and Properties Related to the Harco Business.
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2.15 Benefit Plans; ERISA.
(a) Section 2.15(a) of the Disclosure Schedule (i) contains a
true and complete list and description of each of the Benefit Plans, (ii)
identifies each of the Benefit Plans that is a Qualified Plan, and (iii)
identifies each Benefit Plan which is or was a Defined Benefit Plan. Neither
Fairchild nor any of its Affiliates has scheduled or agreed upon future
increases of benefit levels (or creation of new benefits) with respect to any
Benefit Plan (or through establishing new Plans), and no such increases or
creation of benefits have been proposed, made the subject of representations to
employees or requested or demanded by employees under circumstances which make
it reasonable to expect that such increases or creation of benefits will be
granted.
(b) Except as provided on Section 2.15(b) of the Disclosure
Schedule, neither Fairchild nor any of its Affiliates maintains any Benefit Plan
that provides, or is otherwise obligated to provide, any life, medical, health
or dental benefits to current or future retirees or other terminated employees
other than benefit continuation rights under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
(c) Neither VSI, the Company, any Subsidiary, any ERISA
Affiliate nor any other corporation or organization controlled by or under
common control with any of the foregoing within the meaning of Section 4001 of
ERISA (other than Fairchild Communications Services Company) has at any time
contributed to any "multiemployer plan", as that term is defined in Section 4001
of ERISA. No such entity (including Fairchild Communications Services Company)
has at any time incurred any "withdrawal liability", within the meaning of
Section 4201 of ERISA, with respect to any such "multiemployer plan".
(d) Each of the Benefit Plans is, and its administration is
and has been since inception, in all material respects in compliance with, and
neither Fairchild nor any of its Affiliates have received any claim or notice
that any such Benefit Plan is not in compliance with, all applicable Laws and
Orders and prohibited transactions exemptions, including the requirements of
ERISA, the Code, the Age Discrimination in Employment Act, the Equal Pay Act and
Title VII of the Civil Rights Act of 1964. Each Qualified Plan is qualified
under Section 401(a) of the Code, and, if applicable, complies with the
requirements of Section 401(k) of the Code. Each Benefit Plan which is intended
to provide for the deferral of income, the reduction of salary or other
compensation or to afford other Tax benefits complies with the requirements of
the applicable provisions of the Code or other Laws required in order to provide
such Tax benefits.
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(e) Neither Fairchild nor any of its Affiliates is in default
in performing any of its contractual obligations under any of the Benefit Plans
or any related trust agreement or insurance contract. All contributions and
other payments required to be made by Fairchild or any of its Affiliates to any
Benefit Plan with respect to any period ending before or at or including the
Closing Date have been made or reserves adequate for such contributions or other
payments have been or will be set aside therefor and have been or will be
reflected in Financial Statements in accordance with GAAP. There are no material
outstanding Liabilities of any Benefit Plan other than Liabilities for benefits
to be paid to participants in such Benefit Plan and their beneficiaries in
accordance with the terms of such Benefit Plan.
(f) No event has occurred, and there exists no condition or
set of circumstances in connection with any Benefit Plan, under which the
Company or any Subsidiary, directly or indirectly (through any indemnification
agreement or otherwise), could reasonably be expected to be subject to any risk
of material Liability under Section 409 of ERISA, Section 502(i) of ERISA, or
Section 4975 of the Code.
(g) No transaction contemplated by this Agreement will result
in Liability to the PBGC, the IRS or any other Person under Section 302(c)(11),
4062, 4063, 4064, 4069 or Section 4212(c) of ERISA, or Section 412(c)(11) of the
Code, with respect to the Company, any Subsidiary, Banner or any corporation or
organization controlled by or under common control with any of the foregoing
within the meaning of Section 4001 of ERISA, and no event or condition exists or
has existed which has resulted in or could reasonably be expected to result in
any such Liability with respect to Banner, the Company, any Subsidiary, or any
such corporation or organization. No "reportable event" within the meaning of
Section 4043 of ERISA has occurred with respect to any Subject Defined Benefit
Plan. No Subject Defined Benefit Plan has incurred any accumulated funding
deficiency whether or not waived. No filing has been made and no proceeding has
been commenced for the complete or partial termination of, or withdrawal from,
any Benefit Plan which is a Pension Benefit Plan.
(h) No benefit under any Benefit Plan (other than theRetirement Plan
for the employees of The Fairchild Corporation- Fairchild Fastener Group
Retirement Plan and the Savings Plan for employees of Fairchild)or agreement,
including, without limitation, any severance, change of control or parachute
payment plan or agreement, will be established or become accelerated,
vested, funded or payable by reason of the execution or delivery of this
Agreement or any transaction contemplated under this Agreement.
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(i) To the Knowledge of Fairchild, there are no pending or
threatened claims by or on behalf of any Benefit Plan, by any Person covered
thereby, or otherwise, which allege violations of Law which could reasonably be
expected to result in liability on the part of Banner, the Company, any
Subsidiary or any fiduciary of any such Benefit Plan, nor is there any basis for
such a claim.
(j) No employer securities, employer real property or other
employer property is included in the assets of any Benefit Plan (other than the
Retirement Plan for the employees of The Fairchild Corporation-Fairchild
Fastener Group Retirement Plan and the Savings Plan for employees of Fairchild).
(k) The fair market value of the assets of each Subject
Defined Benefit Plan, as determined as of the last day of the plan year of such
plan which coincides with or first precedes the date of this Agreement, was not
less than the present value of the projected benefit obligations under such plan
at such date as established on the basis of the actuarial assumptions applicable
under such Subject Defined Benefit Plan at said date and, to the Knowledge of
Fairchild, there have been no material changes in such values since said date.
(l) Complete and correct copies of the following documents
have been furnished or made available to Banner prior to the execution of this
Agreement:
(i) the Benefit Plans and any predecessor plans referred to
therein, any related trust agreements, and service provider agreements,
insurance contracts or agreements with investment managers, including
without limitation, all amendments thereto;
(ii) current summary plan descriptions of each Benefit
Plan subject to ERISA, and any similar descriptions of all
other Benefit Plans;
(iii) the most recent Form 5500 and Schedules thereto
for each Benefit Plan subject to ERISA reporting
requirements;
(iv) the most recent determination of the IRS with
respect to the qualified status of each Qualified Plan;
(v) the most recent financial statements with respect
to any Benefit Plan funded through a trust;
(vi) the most recent actuarial report of the qualified actuary of
any Subject Defined Benefit Plan or any other Benefit Plan with respect
to which actuarial valuations are conducted; and
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(vii) all qualified domestic relations orders or other
orders governing payments from any Benefit Plan.
2.16 Real Property. (a) Section 2.16(a) of the Disclosure
Schedule contains a true and correct list of each parcel of real property leased
in connection with the operation of the Harco Business (such leases of real
property being referred to herein as the "Real Property Leases"). Neither VSI,
Harco Parent, the Company nor any Subsidiary (i) owns any real property that is
Related to the Harco Business or (ii) is lessor under any Real Property
Lease.
(b) As of the date hereof, VSI or a Subsidiary is (and as of
the Closing Date, the Company or a Subsidiary shall be) in possession of each
parcel of real property covered by the Real Property Leases, together with all
buildings, structures, facilities, fixtures and other improvements thereon. As
of the date hereof, VSI and the Subsidiaries have (and as of the Closing Date,
the Company and the Subsidiaries shall have) adequate rights of ingress and
egress with respect to the real property listed in Section 2.16(a) of the
Disclosure Schedule and all buildings, structures, facilities, fixtures and
other improvements thereon. To the Knowledge of Fairchild, none of such real
property, buildings, structures, facilities, fixtures or other improvements, or
the use thereof, contravenes or violates any building, zoning, administrative,
occupational safety and health or other applicable Law in any material respect
(whether or not permitted on the basis of prior nonconforming use, waiver or
variance).
(c) As of the date hereof, VSI or a Subsidiary has (and as of
the Closing Date, the Company or a Subsidiary shall have) a valid and subsisting
leasehold estate in the real properties leased by it for the full term of the
lease thereof in each case subject to no Lien (including, without limitation,
any Lien affecting the fee title to the real property covered by the Real
Property Leases) except Permitted Liens. Each lease referred to in paragraph (a)
above is a legal, valid and binding agreement, enforceable in accordance with
its terms, of VSI, Harco Parent, the Company or a Subsidiary, as the case may
be, and of each other Person that is a party thereto, and except as set forth in
Section 2.16(c) of the Disclosure Schedule, to the Knowledge of Fairchild there
is no, and neither Fairchild, VSI, Harco Parent, the Company nor any Subsidiary
has received given notice of any, default (or any condition or event which,
after notice or lapse of time or both, would constitute a default) thereunder.
Neither Fairchild nor any of its Affiliates owes any brokerage commissions with
respect to any such leased space.
(d) Fairchild has made available to Banner prior to the
execution of this Agreement true and complete copies of all leases (including
any amendments and renewal letters) and, to the
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extent reasonably available, all deeds, leases, mortgages, deeds of trust,
certificates of occupancy, title insurance policies, title reports, surveys
andsimilar documents, and all amendments thereof, with respect to the real
property that is leased and is Related to the Harco Business.
(e) Except as disclosed in Section 2.16(e) of the Disclosure
Schedule, to the Knowledge of Fairchild, there are no condemnation or
appropriation proceedings pending or threatened against any of the real property
identified in Section 2.16(a) of the Disclosure Schedule or the buildings,
structures, facilities, fixtures, and other improvements thereon.
2.17 Tangible Personal Property; Investment Assets. (a) As of
the date hereof, VSI or a Subsidiary is (and, as of the Closing Date, the
Company or a Subsidiary shall be) in possession of and has good title to, or has
valid leasehold interests in or valid rights under Contract to use, all tangible
personal property Related to the Harco Business, including all tangible personal
property reflected on the balance sheet included in the Unaudited Financial
Statements and tangible personal property acquired since the Unaudited Balance
Sheet Date other than property disposed of since such date in the ordinary
course of business consistent with past practice (the "Tangible Personal
Property"). The Tangible Personal Property is free and clear of all Liens, other
than Permitted Liens and Liens disclosed in Section 2.17(a) of the Disclosure
Schedule, and is in good working order and condition, ordinary wear and tear
excepted (except for required repairs to any item of Tangible Personal Property
that do not exceed $10,000; provided, however, that all such repairs shall not
exceed $50,000 in the aggregate), and its use complies in all material respects
with all applicable Laws.
(b) There are no Investment Assets Related to the
Harco Business.
2.18 Intellectual Property Rights. Other than the Harco Name,
there is no Intellectual Property Related to the Harco Business. As of the date
hereof, VSI or a Subsidiary (and as of the Closing Date, the Company or a
Subsidiary) has all right, title and interest in the Harco Name. The Harco Name
is the only Intellectual Property necessary to conduct the Harco Business as
currently operated. Except as disclosed in Section 2.18 of the Disclosure
Schedule, (i) as of the date hereof, VSI or a Subsidiary has (and as of the
Closing Date, the Company or a Subsidiary shall have) the exclusive right to use
the Harco Name, (ii) any and all registrations with and applications to
Governmental or Regulatory Authorities in respect of the Harco Name are valid
and in full force and effect and are not subject to the payment of any Taxes or
maintenance fees or the taking of any other actions by VSI, the Company or a
Subsidiary to maintain their validity or effectiveness, (iii)
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there are no Contracts in respect of the Harco Name and (iv) to the Knowledge of
Fairchild, the Harco Name is not being infringed by any other Person. Neither
VSI, the Company nor any Subsidiary has received notice that the Harco Business
is infringing any Intellectual Property of any other Person, no claim is pending
or, to the Knowledge of Fairchild, has been made to such effect that has not
been resolved and, to the Knowledge of Fairchild, neither VSI, the Company nor
any Subsidiary is infringing any Intellectual Property of any other Person.
2.19 Contracts. (a) Section 2.19(a) of the Disclosure Schedule
(with paragraph references corresponding to those set forth below) contains a
true and complete list of each of the following Contracts or other arrangements
(true and complete copies or, if none, reasonably complete and accurate written
descriptions of which, together with all amendments and supplements thereto and
all waivers of any terms thereof, have been made available to Banner prior to
the execution of this Agreement), Related to the Harco Business and to which VSI
or any Subsidiary is a party or by which any of the Assets and Properties
Related to the Harco Business is bound:
(i) (A) all Contracts (excluding Benefit Plans) providing for
a commitment of employment or consultation services for a specified or
unspecified term or otherwise relating to employment or the termination
of employment, the name, position and rate of compensation of each
Person party to such a Contract and the expiration date of each such
Contract; and (B) any written representations, commitments, promises,
communications or courses of conduct (excluding Benefit Plans and any
such Contracts referred to in clause (A)) involving an obligation in
respect of the Harco Business to make payments in any year, other than
with respect to salary or incentive compensation payments in the
ordinary course of business, to any Employee exceeding $10,000 or any
group of employees exceeding $25,000 in the aggregate;
(ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of VSI (in respect of the
Harco Business) or any Subsidiary to engage in any business activity or
compete with any Person or prohibiting or limiting the ability of any
Person to compete with VSI (in respect of the Harco Business) or any
Subsidiary;
(iii) all partnership, joint venture, shareholders' or
other similar Contracts with any Person;
(iv) all Contracts relating to Indebtedness arising or
incurred in connection with the Harco Business in excess of
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$25,000 or to preferred stock issued by VSI or any
Subsidiary;
(v) all Contracts with distributors, dealers,
manufacturer's representatives, sales agencies or
franchisees that involve payment to or by the Harco Business
in excess of $10,000;
(vi) all Contracts relating to (A) the future disposition or
acquisition of any Assets and Properties, other than dispositions or
acquisitions in the ordinary course of business consistent with past
practice, that involve payment to or by the Harco Business in excess of
$10,000, and (B) any merger or other business combination;
(vii) all Contracts between or among VSI or any Subsidiary, on the
one hand, and Fairchild, any officer, director or Affiliate (other than
VSI or any Subsidiary) of Fairchild, on the other hand;
(viii) all collective bargaining or similar labor
Contracts;
(ix) all Contracts that (A) limit or contain restrictions on the
ability of the Company or any Subsidiary to declare or pay dividends
on, to make any other distribution in respect of or to issue or
purchase, redeem or otherwise acquire its capital stock, to incur
Indebtedness, or to incur or suffer to exist any Lien, (B) limit or
contain restrictions on the ability of the Company or any Subsidiary to
purchase or sell any Assets and Properties, to change the lines of
business in which it participates or engages or to engage in any
Business Combination or (B) require the Company or any Subsidiary to
maintain specified financial ratios or levels of net worth or other
indicia of financial condition; and
(x) all other Contracts (other than Benefit Plans, leases
listed in Section 2.16(a) of the Disclosure Schedule and insurance
policies listed in Section 2.21 of the Disclosure Schedule) that (A)
involve the payment or potential payment, pursuant to the terms of any
such Contract, by or to VSI or any Subsidiary of more than $50,000
annually and (B) cannot be terminated within sixty (60) days after
giving notice of termination without resulting in any material cost or
penalty to VSI or any Subsidiary.
(b) Each Contract required to be disclosed in Section 2.19(a)
of the Disclosure Schedule is in full force and effect and constitutes a legal,
valid and binding agreement, enforceable in accordance with its terms, of each
party thereto;
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and except as disclosed in Section 2.19(b) of the Disclosure Schedule, to the
Knowledge of Fairchild neither VSI, any Subsidiary nor any other party to such
Contract is, or has any received notice that it is, in violation or breach of or
default under any such Contract (or with notice or lapse of time or both, would
be in violation or breach of or default under any such Contract) in any
material respect.
2.20 Licenses. Section 2.20 of the Disclosure Schedule
contains a true and complete list of all Licenses used in and material,
individually or in the aggregate, to the Harco Business (and all pending
applications for any such Licenses), setting forth the grantor, the grantee, the
function and the expiration and renewal date of each. Prior to the execution of
this Agreement, Fairchild has delivered to Banner true and complete copies of
all such Licenses. Except as disclosed in Section 2.20 of the Disclosure
Schedule:
(i) as of the date hereof, VSI and each Subsidiary own or
validly hold (and, as of the Closing Date, the Company and each
Subsidiary shall own or validly hold) all Licenses that are material,
individually or in the aggregate, to its business or operations;
(ii) each License listed in Section 2.20 of the
Disclosure Schedule is valid, binding and in full force and
effect; and
(iii) to the Knowledge of Fairchild, neither VSI, the Company, nor
any Subsidiary is, nor has any such Person received any notice that it
is, in default (or with the giving of notice or lapse of time or both,
would be in default) under any such License.
2.21 Insurance. Section 2.21 of the Disclosure Schedule
contains a true and complete list (including the names and addresses of the
insurers, the names of the Persons to whom such Policies have been issued, the
expiration dates thereof, the annual premiums and payment terms thereof, whether
it is a "claims made" or an "occurrence" policy and a brief description of the
interests insured thereby) of all liability, property, workers' compensation,
directors' and officers' liability and other insurance policies currently in
effect that insure the business, operations or employees of VSI (in respect of
the Harco Business) or any Subsidiary or affect or relate to the ownership, use
or operation of any of the Assets and Properties Related to the Harco Business
and that (i) have been issued to any Subsidiary or (ii) have been issued to any
Person (other than a Subsidiary) for the benefit of the Harco Business. The
insurance coverage provided by any of the policies described in clause (i) above
will not terminate or lapse by reason of the transactions contemplated by this
Agreement. Each policy listed in
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Section 2.21 of the Disclosure Schedule is in full force and effect, no premiums
due thereunder have not been paid and neither Fairchild, VSI, any Subsidiary nor
the Person to whom such policy has been issued has received any notice of
cancellation or termination in respect of any such policy or is in default
thereunder. Neither VSI, any Subsidiary, nor the Person to whom such policy has
been issued has received notice that any insurer under any policy referred to in
this Section is denying liability with respect to a claim thereunder or
defending under a reservation of rights clause.
2.22 Affiliate Transactions. Except as disclosed in Section
2.19(a)(vii) or Section 2.22(a) of the Disclosure Schedule, (i) there are no
Liabilities between the Harco Business on the one hand, and Fairchild, any
officer, director or Affiliate (other than VSI (in respect of the Harco
Business) or any Subsidiary) of Fairchild, on the other, (ii) neither Fairchild
nor any such officer, director or Affiliate provides or causes to be provided
any assets, services or facilities to the Harco Business, and (iii) the Harco
Business does not provide or cause to be provided any assets, services or
facilities to Fairchild or any such officer, director or Affiliate. Except as
disclosed in Section 2.22(b) of the Disclosure Schedule, each of the Liabilities
and transactions listed in Section 2.22(a) of the Disclosure Schedule was
incurred or engaged in, as the case may be, on an arm's-length basis. Except as
disclosed in Section 2.22(c) of the Disclosure Schedule, since the Audited
Financial Statement Date, all settlements of Liabilities between the Harco
Business, and Fairchild or any such officer, director or Affiliate, on the
other, have been made, and all allocations of intercompany expenses have been
applied, in the ordinary course of business consistent with past practice.
2.23 Employees; Labor Relations. (a) Section 2.23 of the
Disclosure Schedule contains a list of the name of each officer and employee
employed or engaged in respect of the Harco Business at the date hereof,
together with each such person's position or function, annual base salary or
wages and any incentive or bonus arrangement with respect to such person in
effect on such date. Neither Fairchild, VSI, Harco Parent, the Company nor any
Subsidiary has received any information that would lead it to believe that a
material number of such persons, or any of the persons listed on Section 6.10 of
the Disclosure Schedule, will or may cease to be Employees, or will refuse
offers of employment from Banner, because of the consummation of the
transactions contemplated by this Agreement.
(b) Except as disclosed in Section 2.23 of the Disclosure
Schedule, (i) no Employee is presently a member of a collective bargaining unit
and, to the Knowledge of Fairchild, there are no threatened attempts to organize
for collective bargaining purposes any of the Employees, and (ii) no unfair
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labor practice charge or complaint or sex, age, race or other discrimination
claim has been brought during the last three (3) years against Fairchild, VSI,
the Company or any Subsidiary before the National Labor Relations Board, the
Equal Employment Opportunity Commission or any other Governmental or Regulatory
Authority in respect of the Harco Business and, to the Knowledge of Fairchild,
there are no facts or circumstances that could reasonably be expected to give
rise to any such charge, claim or complaint. Since December 31, 1993 there has
been no work stoppage, strike or other concerted action by Employees. During
that period, the Harco Business has complied in all material respects with all
applicable Laws relating to the employment of labor, including, without
limitation those relating to wages, hours and collective bargaining.
2.24 Environmental Matters. Except as set forth in
Section 2.24 of the Disclosure Schedule (with paragraph
references corresponding to those set forth below):
(a) As of the date hereof, each of VSI and the Subsidiaries
has (and as of the Closing Date, the Company and the Subsidiaries shall have)
obtained all Licenses which are required under applicable Environmental Laws in
connection with the Harco Business. Each of such Licenses is in full force and
effect and the Harco Business is in compliance with the terms and conditions of
all such Licenses and with any applicable Environmental Law except for such
noncompliance as could not lead to a fine or penalty in excess of $10,000.
(b) No Order has been issued, and to the Knowledge of
Fairchild, no investigation, action or proceeding has been initiated or
threatened by any Governmental or Regulatory Authority, with respect to any
actual, alleged or suspected failure by Fairchild, VSI, the Company or any
Subsidiary to comply with any Environmental Laws or any License required under
applicable Environmental Law in connection with the Harco Business or with
respect to any Liability arising under any Environmental Law.
(c) No Environmental Claim is pending and, to the Knowledge of
Fairchild, there are no facts or circumstances relating to the past or present
operation of the Harco Business which could form the basis for any such
Environmental Claim.
(d) No treatment, storage or disposal facility requiring a
License under the Resource Conservation and Recovery Act, as amended, or under
any other comparable state or local Law is owned, operated or leased by
Fairchild, VSI, the Company or any Subsidiary in connection with the operation
of the Harco Business;
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(e) To the Knowledge of Fairchild, no Hazardous Material has
been Released at, on or under any site or facility now or previously owned,
operated or leased in connection with the Harco Business (except in compliance
with the terms of a License or Order identified Section 2.24(e) of the
Disclosure Schedule);
(f) To the Knowledge of Fairchild, no site or facility now or
previously owned, operated or leased in connection with Harco Business is
currently listed or proposed for listing on the NPL, CERCLIS or any similar
state or local list of sites requiring investigation or clean-up.
(g) No Liens arising under or pursuant to any Environmental
Law are currently effective with regard to any site or facility now owned,
operated or leased, or to the best knowledge of Fairchild, previously owned,
operated or leased in connection with the Harco Business.
(h) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or that are in the
possession of, Fairchild, Harco Parent, VSI, the Company or any Subsidiary in
relation to any site or facility now owned, operated or leased in connection
with the Harco Business which have not been delivered to Banner prior to the
execution of this Agreement.
2.25 Substantial Customers and Suppliers. Section 2.25(a) of
the Disclosure Schedule lists the ten (10) largest customers of the Harco
Business, on the basis of revenues for goods sold or services provided for the
most recently- completed fiscal year. Section 2.25(b) of the Disclosure Schedule
lists the five (5) largest suppliers of the Harco Business, on the basis of cost
of goods or services purchased for the most recently-completed fiscal year.
Except as disclosed in Section 2.25(c) of the Disclosure Schedule, no such
customer or supplier has ceased or materially reduced its purchases from, use of
the services of, or sales or provision of services to the Harco Business since
the Audited Financial Statement Date, or to the Knowledge of Fairchild, has
threatened to cease or materially reduce such purchases, use, sales or provision
of services after the date hereof. Except as disclosed in Section 2.24(d) of the
Disclosure Schedule, to the Knowledge of Fairchild, no such customer or supplier
is threatened with bankruptcy or insolvency.
2.26 Bank and Brokerage Accounts. Section 2.26 of the
Disclosure Schedule sets forth (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which an account or safe deposit box or a banking, custodial,
trading or other similar relationship is maintained in respect of the Harco
Business (the "Business Bank Accounts") and (b) a true and
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complete list and description of each such account, box and relationship,
indicating in each case the account number and the names of the respective
officers, employees, agents or other similar representatives having signatory
power with respect thereto.
2.27 No Powers of Attorney. Except as set forth in Section
2.27 of the Disclosure Schedule, no powers of attorney or comparable delegations
of authority in respect of the Harco Business or any Assets and Properties
Related to the Harco Business are outstanding.
2.28 Accounts Receivable. Except as set forth in Section 2.28
of the Disclosure Schedule, the accounts and notes receivable in respect of the
Harco Business reflected on the Unaudited Balance Sheet, and all accounts and
notes receivable arising subsequent to the Unaudited Financial Statement Date,
(i) arose from bona fide sales transactions in the ordinary course of business
and are payable on ordinary trade terms, (ii) are legal, valid and binding
obligations of the respective debtors enforceable in accordance with their
terms, (iii) are not subject to any valid set-off or counterclaim, (iv) do not
represent obligations for goods sold on consignment, on approval or on a
sale-or-return basis or subject to any other repurchase or return arrangement,
(v) are collectible in the ordinary course of business consistent with past
practice in the aggregate recorded amounts thereof, net of any applicable
reserve reflected in the balance sheet included in the Unaudited Financial
Statements, and (vi) are not the subject of any Actions or Proceedings brought
by or on behalf of VSI or any Subsidiary. Section 2.28 of the Disclosure
Schedule sets forth a description of any security arrangements and collateral
securing the repayment or other satisfaction of receivables in respect of the
Harco Business. All steps necessary to render all such security arrangements
legal, valid, binding and enforceable, and to give and maintain VSI, the Company
or a Subsidiary, as the case may be, a perfected security interest in the
related collateral, have been taken.
2.29 Inventory. Except as disclosed Section 2.29 of the
Disclosure Schedule, all inventory reflected on the Unaudited Balance Sheet and
all inventory acquired since the Unaudited Financial Statement Date, in either
instance, other than inventory sold in the ordinary course of the Harco Business
consistent with past practice (the "Business Inventory") is, as of the date
hereof, the property of VSI or a Subsidiary (and, as of the Closing Date,
property of the Company or a Subsidiary), free and clear of any Lien other than
Permitted Liens, has not been pledged as collateral, is not held on consignment
from others and conform in all material respects to all standards applicable to
the Business Inventory or its use or sale imposed by Governmental or Regulatory
Authorities.
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2.30 Entire Business. The contribution by VSI to the Company
of the Assets and Properties Related to the Harco Business pursuant to Section
4.04 shall effectively convey to the Company the entire Harco Business as
operated by VSI and all of the Assets and Properties Related to the Harco
Business material to the Condition of the Harco Business.
2.31 Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by Fairchild directly
with Banner without the intervention of any Person on behalf of Fairchild in
such manner as to give rise to any valid claim by any Person against Banner, the
Company or any Subsidiary for a finder's fee, brokerage commission or similar
payment.
2.32 Purchase for Investment. The Banner Shares will be
acquired by Harco Parent or other designee of Fairchild for its own account for
the purpose of investment, it being understood that the right to dispose of such
Banner shares shall be entirely within the discretion of Fairchild, Harco Parent
or other such designee of Fairchild. Fairchild shall, and shall cause Harco
Parent or other designee to, refrain from transferring or otherwise disposing of
any of the Banner Shares, or any interest therein, in such manner as to cause
Banner to be in violation of the registration requirements of the Securities Act
of 1933, as amended, or applicable state securities or blue sky laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BANNER
Banner hereby represents and warrants to Fairchild as follows:
3.01 Organization. Banner is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware.
Banner has full corporate power and authority to execute and deliver this
Agreement and the Operative Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby including without limitation to issue and
transfer (pursuant to this Agreement) the Banner Shares.
3.02 Capitalization. As of January 3, 1996, the authorized
capital stock of Banner consists of 30,000,000 shares of common stock, of which
18,002,100 shares are outstanding (not including 1,054,900 shares of common
stock reserved for issuance pursuant to stock options). All of the foregoing
shares and stock options have been duly authorized by all necessary corporate
action and all outstanding shares are validly issued,
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fully paid and nonassessable. Except as set forth in Banner's SEC Documents, no
subscriptions, options, calls or rights of any kind to purchase or otherwise
acquire, and no securities convertible into or exchangeable for, capital stock
of Banner are outstanding.
3.03 Authority. The execution and delivery by Banner of this
Agreement and the Operative Agreements to which it is a party, and the
performance by Banner of its obligations hereunder and thereunder, have been
duly and validly authorized by the Board of Directors of Banner and, other than
the consent of the stockholders of Banner referred to in Section 6.01, no other
corporate action on the part of Banner or its stockholders being necessary under
applicable law. This Agreement has been duly and validly executed and delivered
by Banner and constitutes, and upon the execution and delivery by Banner of the
Operative Agreements to which it is a party, such Operative Agreements will
constitute, legal, valid and binding obligations of Banner enforceable against
Banner in accordance with their terms.
3.04 No Conflicts. The execution and delivery by Banner of
this Agreement do not, and the execution and delivery by Banner of the Operative
Agreements to which it is a party, the performance by Banner of its obligations
under this Agreement and such Operative Agreements and the consummation of the
transactions contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach
of any of the terms, conditions or provisions of the certificate
of incorporation or by-laws of Banner;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Schedule 3.05 hereto,
conflict with or result in a violation or breach of any term or provision of any
Law or Order applicable to Banner or any of its Assets and Properties; or
(c) except as disclosed in Schedule 3.04 hereto, (i) conflict
with or result in a violation or breach of, (ii) constitute (with or without
notice or lapse of time or both) a default under, (iii) require Banner to obtain
any consent, approval or action of, make any filing with or give any notice to
any Person as a result or under the terms of, or (iv) result in the creation or
imposition of any Lien upon Banner or any of its Assets or Properties under, any
Contract or License to which Banner is a party or by which any of its Assets and
Properties is bound.
3.05 Governmental Approvals and Filings. Except as
disclosed in Schedule 3.05 hereto, no consent, approval or action
of, filing with or notice to any Governmental or Regulatory
Authority on the part of Banner is required in connection with
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the execution, delivery and performance of this Agreement or the Operative
Agreements to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
3.06 Legal Proceedings. There are no Actions or Proceedings
pending or, to the knowledge of Banner, threatened against, relating to or
affecting Banner or any of its Assets and Properties which could reasonably be
expected to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or any of the Operative
Agreements.
3.07 Banner Shares Authorized. At or before the Closing Date,
the Banner Shares to be issued to Fairchild, Harco Parent or their designees, as
the case may be, will have been duly authorized by the Board of Directors of
Banner and, when so issued, will have been validly issued and will be fully
paid, non-assessable and free of preemptive rights and rights of refusal.
3.08 Banner SEC Documents. Banner has made available to
Fairchild a copy of each of Banner's SEC Documents filed since January 1, 1994.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as the case may be, and the rules
and regulations of the SEC thereunder applicable to such SEC Documents. As of
their respective dates, the SEC Documents did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial statements of
Banner included in such SEC Documents have been prepared in accordance with GAAP
applied on a consistent basis (except as may be indicated therein or in the
notes thereto and except with respect to unaudited statements as permitted by
Form 10-Q of the SEC) and fairly present the financial position of Banner and
its subsidiaries as at the dates thereof and the results of their operations and
changes in financial position for the periods then ended, subject, in the case
of the unaudited interim financial statements, to normal year-end and audit
adjustments and any other adjustments described therein.
3.09 No Share Restrictions. The Banner Shares to be issued to
Fairchild, Harco Parent or their designees shall not be bound, limited or
affected by any agreement, arrangement or proxy, or be restricted as to voting,
sale, purchase, transfer or issue, except as restricted by the Securities Act of
1933, as amended,and the rules and regulations promulgated thereunder.
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3.10 No Undisclosed Liabilities. To the knowledge of Banner,
Banner does not have any Liabilities except (i) Liabilities that are fully
reflected in Banner's SEC Documents, (ii) Liabilities not required to be
reflected in Banner's SEC Documents or reserved against in the financial
statements incorporated within Banner's SEC Documents, and (iii) Liabilities
incurred in the ordinary course of business and consistent with past practice
since the dates of the respective SEC Documents.
3.11 Absence of Material Changes. Except as and to the extent
set forth in Banner's SEC Documents, since the date of the respective SEC
Documents, Banner has not suffered any change which has had a material adverse
effect on its financial condition, assets, liabilities, reserves, business or
operations taken as a whole (a "Banner Material Adverse Effect") or any
development which, individually or together with other such events, would
reasonably be expected to result in a Banner Material Adverse Effect.
3.12 Compliance With Law. Banner is in material compliance
with all laws, regulations and orders applicable to it and its Assets and
Properties. Except as set forth in Banner's SEC Documents, Banner has not
received any notification that it is in violation of any such laws, regulations
or orders and no such violation exists.
3.13 Disclosure. No representations or warranties by Banner in
this Agreement contain any untrue statement of material fact or, when all such
representations, warranties and statements are taken as a whole, omits or will
omit to state any material fact necessary in order to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading.
3.14 Purchase for Investment. The Harco Shares will be
acquired by Banner (or, if applicable, its assignee pursuant to Section
14.09(b)(i)) for its own account for the purpose of investment, it being
understood that the right to dispose of such Harco Shares shall be entirely
within the discretion of Banner (or such assignee, as the case may be). Banner
(or such assignee, as the case may be) will refrain from transferring or
otherwise disposing of any of the Harco Shares, or any interest therein, in such
manner as to cause Fairchild to be in violation of the registration requirements
of the Securities Act of 1933, as amended, or applicable state securities or
blue sky laws.
3.15 Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by Banner directly
with Fairchild without the intervention of any Person on behalf of Banner in
such manner as to give rise to any valid claim by any Person against Fairchild,
VSI
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or Harco Parent for a finder's fee, brokerage commission or
similar payment.
ARTICLE IV
COVENANTS OF FAIRCHILD
Fairchild covenants and agrees with Banner that, at all times
from and after the date hereof until the Closing and, with respect to any
covenant or agreement by its terms to be performed in whole or in part after the
Closing, for the period specified therein or, if no period is specified therein,
indefinitely, Fairchild will comply with all covenants and provisions of this
Article IV, except to the extent Banner may otherwise consent in writing.
4.01 Regulatory and Other Approvals. Fairchild will, and will
cause VSI, Harco Parent, the Company and the Subsidiaries to, as promptly as
practicable (a) take all commercially reasonable steps necessary or desirable to
obtain all consents, approvals or actions of, make all filings with and give all
notices to Governmental or Regulatory Authorities or any other Person required
of Fairchild, VSI, Harco Parent, the Company or any Subsidiary to consummate the
transactions contemplated hereby and by the Operative Agreements, including
without limitation those described in Sections 2.06 and 2.07 of the Disclosure
Schedule, (b) provide such other information and communications to such
Governmental or Regulatory Authorities or other Persons as Banner or such
Governmental or Regulatory Authorities or other Persons may reasonably request
in connection therewith and (c) cooperate with Banner in connection with the
performance of its obligations under Section 5.01. Fairchild will provide prompt
notification to Banner when any such consent, approval, action, filing or notice
referred to in clause (a) above is obtained, taken, made or given, as
applicable, and will advise Banner of any communications (and, unless precluded
by Law, provide copies of any such communications that are in writing) with any
Governmental or Regulatory Authority or other Person regarding any of the
transactions contemplated by this Agreement or any of the Operative
Agreements.
4.02 Formation of the Company. Prior to the Closing, Fairchild
shall form, or cause to be formed, Harco Parent and the Company and shall cause
Harco Parent and the Company to be corporations duly organized, validly existing
and in good standing under the Laws of the State of Delaware.
4.03 Investigation by Banner. Fairchild will, and will cause
VSI, Harco Parent, the Company and the Subsidiaries to (a) provide Banner's
officers, directors, employees, agents, counsel, accountants, financial
advisors, consultants and other
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representatives (together "Representatives") with full access, upon reasonable
prior notice and during normal business hours, to all officers, employees,
agents and accountants of the Harco Business and to its Assets and Properties
and Books and Records, and (b) furnish Banner and such other Persons with all
such information and data (including without limitation copies of Contracts,
Benefit Plans and other Books and Records) concerning the operations of the
Harco Business as Banner or any of such other Persons reasonably may request in
connection with such investigation.
4.04 Transfer of the Harco Business to the Company. (a) Assets
Transferred. Prior to the Closing, Fairchild shall cause VSI to transfer,
convey, assign and deliver to Harco Parent, and, in turn, shall cause Harco
Parent to transfer, convey, assign and deliver to the Company all of their
respective rights, title and interests in, to and under any and all Assets and
Properties Related to the Harco Business, including all Assets and Properties
reflected on the Unaudited Balance Sheet and not disposed of or discharged in
the ordinary course of business since the Unaudited Balance Sheet Date
(collectively with the proceeds and awards referred to in subclause (e) below,
the "Business Assets") free and clear of all Liens other than Permitted Liens,
and including, without limitation, all right, title and interest of VSI in, to
and under:
(i) the Real Property Leases;
(ii) the Tangible Personal Property;
(iii) the Business Inventory, together with any rights with respect
to any third party collection procedures or any other Actions
or Procedures which have been commenced in connection
therewith;
(iv) the Harco Name;
(v) the Business Contracts;
(vi) the Business Licenses;
(vii) the Business Bank Accounts;
(viii) the Business Accounts Receivable;
(ix) all issued and outstanding shares of capital stock of
the Subsidiaries; and
(x) the Interim Cash Flow;
provided, that, any instruments or other documents pursuant to which VSI and
Harco Parent shall transfer the Business Assets or
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(as provided in paragraph (b) below) pursuant to which the Company shall assume
the Business Liabilities shall be reasonably satisfactory, in form and
substance, to Banner.
(b) Liabilities Assumed. Prior to the Closing and in
connection with the transfer, conveyance, assignment and delivery of the
Business Assets by VSI and Harco Parent to the Company, Fairchild shall cause
VSI to assign and Harco Parent to assume, and, in turn, shall cause Harco Parent
to assign and the Company to assume, the following Liabilities in respect of the
Harco Business (the "Business Liabilities"), and no others:
(i) all obligations of VSI under the Real Property Leases,
Business Contracts, and Business Licenses;
(ii) except as provided for in Article IX, the Balance Sheet
Liabilities of VSI;
provided, however, that, notwithstanding anything to the contrary contained in
this Agreement, Fairchild or one or more of its Affiliates (other than the
Company or any Subsidiary) shall pay, perform and discharge when due any and all
(x) other Liabilities of any kind, character or description whatsoever of VSI or
any of its Affiliates or (y) Liabilities of any Subsidiary that are not Balance
Sheet Liabilities, in either instance, in respect of which the Company or any
Subsidiary may become obligated by operation of Law or otherwise, whether or not
arising in connection with the Harco Business and whether or not any such
Liabilities arose prior to or after the Closing, including, without limitation,
all Liabilities (I) arising out of any Actions or Proceedings, or any claims
that could result in Actions or Proceedings, to the extent relating to the
conduct or operations of the Harco Business prior to the Closing Date
(including, without limitation, any and all Liabilities arising out of any
Action or Proceeding with Harvard Industries, Inc. or any of its current or
former affiliates) and (II) relating to unknown Releases or threatened Releases
of Hazardous Materials on or originating from the properties at which the Harco
Business is, or formerly was, conducted which by operation of Law become
Liabilities of the Company or any Subsidiary (the Liabilities described above in
this proviso being referred to herein as the "Retained Liabilities"); provided,
further, that in no event shall VSI or any of its Affiliates have any obligation
to pay, perform or discharge when due any Liabilities of the Company or any
Subsidiary arising from the operation of the Harco Business from and after the
Closing Date and any and all such Liabilities shall not constitute Retained
Liabilities.
(c) Excluded Assets. Notwithstanding anything to the contrary
contained in paragraph (a) above, the following Assets and Properties of VSI
shall be excluded from and shall not constitute Business Assets (the "Excluded
Assets"):
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(i) Cash. Except as provided in paragraph (e) below, cash,
commercial paper, certificates of deposit and other bank deposits,
treasury bills and other cash equivalents (collectively, "Cash");
provided, however, that any Cash that constitutes part of the Interim
Cash Flow shall not be an Excluded Asset and shall constitute a
Business Asset;
(ii) Insurance. Except as provided in paragraph (e)
below, the insurance policies Related to the Harco Business
and described in clause (ii) of Section 2.21;
(iii) Employee Benefit Plans. All assets owned or held
by any of the Benefit Plans; and
(iv) Rights Under Certain Claims, Actions or Proceedings. Except as
provided in Section 4.04(a)(iii), all of VSI's rights under or arising
out of Actions or Proceedings, or any claims that could result in
Actions or Proceedings, to which VSI is, or may become a party to,
solely relating to or arising out of the conduct or operations of the
Harco Business prior to the Closing Date including, without limitation,
any rights under or arising out of any Action or Proceeding with
Harvard Industries, Inc. or any of its current or former affiliates
(but excluding, however, any claims or Actions or Proceedings against
SPS, Inc. pursuant to the Contract referred to in item (v) of Section
2.19(a) of the Disclosure Schedule).
(d) Third-Party Consents. To the extent that any Business
Contract or Business License is not assignable without the consent of another
party, Fairchild shall use its best efforts to obtain the consent of such other
party to the assignment of any such Business Contract or Business License to the
Company in all cases in which such consent is or may be required for such
assignment. If any such consent shall not be obtained, Fairchild shall, and
shall cause VSI to, cooperate with Banner in any reasonable arrangement designed
to provide for the Company the benefits intended to be assigned to the Company
under the relevant Business Contract or Business License, including without
limitation, enforcement at the cost and for the account of the Company of any
and all rights of VSI against the other party thereto arising out of the breach
of cancellation thereof by such other party or otherwise. If and to the extent
that such arrangement cannot be made, Banner shall have no obligation pursuant
to paragraph (b) above or otherwise with respect to any such Business Contract
or Business License. The provisions of this paragraph (d) shall not affect the
right of Banner not to consummate the transactions contemplated by this
Agreement if the conditions to its obligations hereunder contained in Sections
6.05 and 6.06 have not been fulfilled.
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(e) Insurance Proceeds. If any of the Business Assets are
destroyed or damaged or taken in condemnation, the insurance proceeds or
condemnation award with respect thereto shall be a Business Asset. At or prior
to the Closing, Fairchild shall pay or credit to the Company any such insurance
proceeds or condemnation awards received by it on or prior to the Closing and
shall assign to or assert for the benefit of the Company all of its rights
against any insurance companies, Governmental or Regulatory Authorities and
others with respect to such damage, destruction or condemnation. As and to the
extent that there is available insurance under policies maintained by Fairchild
and its Affiliates, predecessors and successors in respect of any Business
Liability assumed by the Company pursuant to paragraph (b) above, except for any
such insurance proceeds with the respect to which the insured is directly or
indirectly self-insured or has agreed to indemnify the insurer, Fairchild shall
cause such insurance to be applied toward the payment of such Business
Liability. The provisions of this paragraph (e) shall not affect the right of
Banner not to consummate the transactions contemplated by this Agreement if the
condition to its obligations hereunder contained in Section 6.01 has not been
fulfilled.
4.05 Conduct of Business. Fairchild will cause the Harco
Business to be conducted only in the ordinary course consistent with past
practice. Without limiting the generality of the foregoing, Fairchild will:
(a) cause VSI, the Company and the Subsidiaries to use
commercially reasonable efforts to (i) preserve intact the present business
organization and reputation of the Harco Business, (ii) keep available (subject
to dismissals and retirements in the ordinary course of business consistent with
past practice of the Harco Business) the services of the present officers,
employees and consultants employed or engaged in respect of the Harco Business,
(iii) maintain the Assets and Properties Related to the Harco Business in good
working order and condition, ordinary wear and tear excepted, (iv) maintain the
good will of customers, suppliers, lenders and other Persons to whom the Harco
Business sells goods or provides services or with whom the Harco Business has
significant business relationships and (v) continue all current sales, marketing
and promotional activities relating to the Harco Business;
(b) except to the extent required by applicable Law, (i) cause
the Books and Records to be maintained in the usual, regular and ordinary
manner, (ii) not permit any material change in (A) any pricing, investment,
accounting, financial reporting, inventory, credit, allowance or Tax method of
accounting of the Harco Business, or (B) any method of calculating any bad debt,
contingency or other reserve in respect of the Harco Business for
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accounting, financial reporting or Tax purposes and (iii) not
permit any change in the fiscal year of the Harco Business;
(c) (i) use, and will cause, VSI, Harco Parent, the Company
and the Subsidiaries to use, commercially reasonable efforts to maintain in full
force and effect until the Closing substantially the same levels of coverage as
the insurance afforded under the Contracts listed in Section 2.21 of the
Disclosure Schedule and (ii) cause any and all benefits under such Contracts
paid or payable (whether before or after the date of this Agreement) with
respect to the business, operations, Employees of the Harco Business or Assets
and Properties Related to the Harco Business to be paid to the Company and the
Subsidiaries; and
(d) cause VSI, Harco Parent, the Company and the Subsidiaries
to comply, in all material respects, with all Laws and Orders applicable to the
Harco Business, and promptly following receipt thereof to give Banner copies of
any notice received from any Governmental or Regulatory Authority or other
Person alleging any violation of any such Law or Order.
4.06 Financial Statements and Reports; Filings.
(a) As promptly as practicable and in any event no later than
forty-five (45) days after the end of each fiscal quarter ending after the date
hereof and before the Closing Date (other than the fourth quarter, in which
instance, not later than ninety (90) days) and before the Closing Date,
Fairchild will deliver to Banner true and complete copies of the unaudited
consolidated balance sheet, and the related unaudited consolidated statements of
operations of the Harco Business as of and for each such fiscal quarter and the
portion of the fiscal year then ended, together with the notes, if any, relating
thereto, which financial statements shall be prepared on a basis consistent with
the Audited Financial Statements.
(b) As promptly as practicable, Fairchild will deliver to
Banner true and complete copies of such other financial statements, reports and
analyses as may be prepared or received by Fairchild, Harco Parent, VSI, the
Company or any Subsidiary relating to the Harco Business or as Banner may
otherwise reasonably request.
(c) As promptly as practicable, Fairchild will deliver copies
of all License applications and other filings made by VSI, Harco Parent, the
Company or any Subsidiary after the date hereof and before the Closing Date with
any Governmental or Regulatory Authority (other than routine, recurring filings
made in the ordinary course of business consistent with past practice).
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4.07 Employee Matters. Except as may be required by
Law, Fairchild will refrain, and will cause VSI, Harco Parent,
the Company and the Subsidiaries to refrain, from directly or
indirectly:
(a) making any representation or promise, oral or written, to
any officer, Employee or consultant of the Harco Business concerning any Benefit
Plan, except for statements as to the rights or accrued benefits of any officer,
Employee or consultant under the terms of any Benefit Plan;
(b) making any increase in the salary, wages or other
compensation of any officer, Employee or consultant of the Harco Business which
such increase constitutes an amount greater than (A) 10% of such officer's,
Employee's or consultants' salary, wages or compensation or (B) $5,000.
(c) adopting, entering into or becoming bound by any Benefit
Plan, employment-related Contract or collective bargaining agreement, or
amending, modifying or terminating (partially or completely) any Benefit Plan,
employment-related Contract or collective bargaining agreement, except to the
extent required by applicable Law and, in the event compliance with legal
requirements presents options, only to the extent that the option which VSI, the
Company or Subsidiary reasonably believes to be the least costly is chosen;
(d) establishing or modifying any (i) targets, goals, pools or
similar provisions in respect of any fiscal year under any Benefit Plan,
employment-related Contract or other employee compensation arrangement or (ii)
salary ranges, increase guidelines or similar provisions in respect of any
Benefit Plan, employment-related Contract or other employee compensation
arrangement; or
(e) terminating, other than for cause as established under
ordinary prior conduct of the Harco Business, any Employees or inducing any
Employees to terminate their employment in the Harco Business, transferring such
Employees out of the Harco Business, or otherwise making such Employees
unavailable to Banner, the Company and the Subsidiaries from and after the
Closing Date.
Fairchild will cause each Benefit Plan to be administered, in
all material respects in accordance with the applicable provisions of the Code,
ERISA and all other applicable Laws. Fairchild will promptly notify Banner in
writing of each receipt by Fairchild, Harco Parent, VSI, the Company or any
Subsidiary (and furnish Banner with copies) of any notice of investigation or
administrative proceeding by the IRS, Department of Labor, PBGC or other Person
involving any Benefit Plan.
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4.08 Certain Restrictions. Without the prior written
consent of Banner, Fairchild will cause VSI, Harco Parent, the
Company and the Subsidiaries to refrain from:
(a) amending the certificates or articles of incorporation or
by-laws (or other comparable charter documents) of the Company or the
Subsidiaries or taking any action with respect to any such amendment or
effecting any recapitalization, reorganization, liquidation or dissolution of
the Company or any Subsidiary;
(b) other than the transactions contemplated by Section 4.04,
authorizing, issuing, selling or otherwise disposing of any shares of capital
stock of or any Option with respect to the Company or any Subsidiary, or
modifying or amending any right of any holder of outstanding shares of capital
stock of the Company or any Subsidiary;
(c) other than the transactions contemplated by Section 4.04,
acquiring or disposing of, or incurring any Lien (other than a Permitted Lien)
on, any Assets and Properties Related to the Harco Business, other than in the
ordinary course of business consistent with past practice of the Harco Business;
(d) (i) other than in the ordinary course of business
consistent with past practice, entering into, amending, modifying, terminating
(partially or completely), granting any waiver under or giving any consent with
respect to (A) any Contract that would, if in existence on the date of this
Agreement, be required to be disclosed in the Disclosure Schedule pursuant to
Section 2.19(a) or (B) any License or (ii) granting any irrevocable powers of
attorney;
(e) violating, breaching or defaulting under in any material
respect, or taking or failing to take any action that (with or without notice or
lapse of time or both) would constitute a material violation or breach of, or
default under, any term or provision of any License Related to the Harco
Business or any Contract to which VSI (in respect of the Harco Business), the
Company or any Subsidiary is a party or by which any of the Assets and
Properties Related the Harco Business is bound;
(f) (i) incurring Indebtedness in respect of the Harco
Business in an aggregate principal amount exceeding $10,000 (net of any amounts
of Indebtedness discharged during such period), or (ii) voluntarily purchasing,
canceling, prepaying or otherwise providing for a complete or partial discharge
in advance of a scheduled payment date with respect to, or waiving any right of
VSI, the Company or any Subsidiary under, any Indebtedness of or owing in
respect of the Harco Business;
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(g) engaging with any Person in any merger or other
business combination;
(h) making capital expenditures or commitments for
additions to property, plant or equipment constituting capital
assets in an aggregate amount exceeding $50,000;
(i) making any change in the lines of business in
which the Harco Business is engaged;
(j) writing off or writing down any of the Assets and
Properties Relating to the Harco Business outside the ordinary course of
business consistent with past practice of the Harco Business;
(k) increasing the value of (i) the Business Inventory (from
the value of the Business Inventory that is reflected on the Audited Balance
Sheet) or (ii) the inventory held by the Subsidiaries (from the value of the
inventory held by the Subsidiaries that is reflected on the Audited Balance
Sheet), in either instance, by an amount greater than twenty-five percent
(25%);
(l) making expenditures or accruing Liabilities in respect of
inventory purchased or committed to be purchased in respect of the Harco
Business from Fairchild or any of its Affiliates (including VSI, but excluding
the Subsidiaries) in amounts in excess of those expenditures made or Liabilities
accrued during the six (6) months immediately preceding the Audited Balance
Sheet Date.
(m) entering into any Contract to do or engage in any
of the foregoing.
4.09 Affiliate Transactions. Except as set forth in Section
4.09 of the Disclosure Schedule, immediately prior to the Closing, all
Indebtedness and other amounts owing under Contracts between Fairchild, any
officer, director or Affiliate (other than the Company or any Subsidiary) of
Fairchild, on the one hand, and the Company or any Subsidiary, on the other,
will be paid in full, and Fairchild will terminate and will cause any such
officer, director or Affiliate to terminate each Contract with the Company or
any Subsidiary. Other than the transactions contemplated by Section 4.04, prior
to the Closing Fairchild shall cause VSI (in respect of the Harco Business), the
Company and the Subsidiary to refrain from entering into any Contract or amend
or modify any existing Contract, or engaging in any transaction (other than
pursuant to Contracts disclosed pursuant to Section 2.19(a)(vii) of the
Disclosure Schedule), with Fairchild or any such officer, director or
Affiliate.
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4.10 Books and Records. On the Closing Date, Fairchild will
deliver or make available to Banner at the offices of the Company and the
Subsidiaries all of the Books and Records (including, without limitation, any
and all invoices, purchase orders, test reports and certifications from
manufacturers or other documentation or records in respect of the Business
Inventory), and if at any time after the Closing Fairchild discovers in its or
any of its Affiliate's possession or under its or any of its Affiliate's control
any other Books and Records, it will forthwith deliver, or cause to be
delivered, such Books and Records to Banner.
4.11 Notice and Cure. Fairchild will notify Banner in writing
(where appropriate, through updates to the Disclosure Schedule) of, and
contemporaneously will provide Banner with true and complete copies of any and
all information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing, any event, transaction or
circumstance, as soon as practicable after it becomes Known to Fairchild,
occurring after the date of this Agreement that causes or will cause any
covenant or agreement of Fairchild under this Agreement to be breached or that
renders or will render untrue any representation or warranty of Fairchild
contained in this Agreement as if the same were made on or as of the date of
such event, transaction or circumstance. No notice given pursuant to this
Section shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein or shall in any way limit Banner's right to
seek indemnity under Article XI.
4.12 Fulfillment of Conditions. Fairchild will execute and
deliver at the Closing each Operative Agreement that Fairchild is required
hereby to execute and deliver as a condition to the Closing, take, and shall
cause Harco Parent and VSI to take, all commercially reasonable steps necessary
or desirable and proceed diligently and in good faith to satisfy each other
condition to the obligations of Banner contained in this Agreement and will not,
and will not permit Harco Parent, VSI, the Company or any Subsidiary to, take or
fail to take any action that could reasonably be expected to result in the
nonfulfillment of any such condition.
ARTICLE V
COVENANTS OF BANNER
Banner covenants and agrees with Fairchild that, at all times
from and after the date hereof until the Closing, Banner will comply with all
covenants and provisions of this Article V, except to the extent Fairchild may
otherwise consent in writing.
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5.01 Regulatory and Other Approvals. Banner will as promptly
as practicable (a) take all commercially reasonable steps necessary or desirable
to obtain all consents, approvals or actions of, make all filings with and give
all notices to Governmental or Regulatory Authorities or any other Person
required of Banner to consummate the transactions contemplated hereby and by the
Operative Agreements, including without limitation the consent of the
stockholders of Banner to the issuance of the Banner Shares as required by Rule
312.03 of The New York Stock Exchange and the other transactions contemplated
hereby and those additional consents described in Schedules 3.04 and 3.05
hereto, (b) provide such other information and communications to such
Governmental or Regulatory Authorities or other Persons as Fairchild or such
Governmental or Regulatory Authorities or other Persons may reasonably request
in connection therewith and (c) cooperate with Fairchild, the Company and the
Subsidiaries in connection with the performance of their obligations under
Sections 4.01. Banner will provide prompt notification to Fairchild when any
such consent, approval, action, filing or notice referred to in clause (a) above
is obtained, taken, made or given, as applicable, and will advise Fairchild of
any communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by this
Agreement or any of the Operative Agreements.
5.02 Notice and Cure. Banner will notify Fairchild in writing
of, and contemporaneously will provide Fairchild with true and complete copies
of any and all information or documents relating to, and will use all
commercially reasonable efforts to cure before the Closing, any event,
transaction or circumstance, as soon as practicable after it becomes known to
Banner, occurring after the date of this Agreement that causes or will cause any
covenant or agreement of Banner under this Agreement to be breached or that
renders or will render untrue any representation or warranty of Banner contained
in this Agreement as if the same were made on or as of the date of such event,
transaction or circumstance. No notice given pursuant to this Section shall have
any effect on the representations, warranties, covenants or agreements contained
in this Agreement for purposes of determining satisfaction of any condition
contained herein or shall in any way limit Fairchild's right to seek indemnity
under Article XI.
5.03 Fulfillment of Conditions. Banner will execute and
deliver at the Closing each Operative Agreement that Banner is hereby required
to execute and deliver as a condition to the Closing, will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each other condition to the obligations of Fairchild contained in
this Agreement and will not take or fail to take any action that
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could reasonably be expected to result in the nonfulfillment of
any such condition.
5.04 Cooperation As To Certain Matters. Banner will cooperate
with Fairchild with respect to the Actions or Proceedings being retained by
Fairchild pursuant to Section 4.04(c)(iv) herein. Such cooperation shall include
making available employees, books and records as are reasonably requested by
Fairchild and Fairchild shall reimburse Banner for all out-of-pocket expenses
payable to third parties as a result of such cooperation.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF BANNER
The obligations of Banner hereunder to purchase the Harco
Shares are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
Banner in its sole discretion):
6.01 Representations and Warranties. Each of the
representations and warranties made by Fairchild in this Agreement (other than
those made as of a specified date earlier than the Closing Date) shall be true
and correct in all respects (without regard to any materiality qualifier) on and
as of the Closing Date as though such representation or warranty was made on and
as of the Closing Date, and any representation or warranty made as of a
specified date earlier than the Closing Date shall have been true and correct in
all respects on and as of such earlier date (except if any breaches of such
representations and warranties have not, in the aggregate, resulted in, and
would not reasonably be expected to result in, a Company Material Adverse
Effect).
6.02 Performance. Fairchild shall have performed and complied
with, in all material respects, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by Fairchild at or before
the Closing.
6.03 Officers' Certificates. Fairchild shall have delivered to
Banner a certificate, dated the Closing Date and executed in the name and on
behalf of Fairchild by the Chairman of the Board, the President or any Vice
President of Fairchild, substantially in the form and to the effect of Exhibit A
hereto, and a certificate, dated the Closing Date and executed by the Secretary
or any Assistant Secretary of Fairchild, substantially in the form and to the
effect of Exhibit B hereto.
6.04 Orders and Laws. There shall not be in effect on
the Closing Date any Order or Law restraining, enjoining or
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otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or any of the Operative Agreements
or which could reasonably be expected to otherwise result in a material
diminution of the benefits of the transactions contemplated by this
Agreement orany of the Operative Agreements to Banner, and there shall not be
pending or threatened on the Closing Date any Action or Proceeding in, before or
by any Governmental or Regulatory Authority which could reasonably be expected
to result in the issuance of any such Order or the enactment, promulgation or
deemed applicability to Banner, the Company, and Subsidiary or the transactions
contemplated by this Agreement or any of the Operative Agreements of any such
Law.
6.05 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit Banner and Fairchild to perform their
obligations under this Agreement and the Operative Agreements and to consummate
the transactions contemplated hereby and thereby (a) shall have been duly
obtained, made or given, (b) shall be in form and substance reasonably
satisfactory to Banner, (c) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (d) shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement and the Operative Agreements shall
have occurred.
6.06 Third Party Consents. The consent of the stockholders of
Banner to the issuance of the Banner Shares and the other transactions
contemplated hereby required by Rule 312.03 of The New York Stock Exchange shall
have been obtained. In addition to such consent of the stockholders of Banner,
the consents (or in lieu thereof waivers) listed in Section 6.06 of the
Disclosure Schedule, and all other consents (or in lieu thereof waivers) to the
performance by Banner and Fairchild of their obligations under this Agreement
and the Operative Agreements or to the consummation of the transactions
contemplated hereby and thereby as are required under any Contract to which
Banner, Fairchild, VSI, Harco Parent, the Company or any Subsidiary is a party
or by which any of their respective Assets and Properties are bound (a) shall
have been obtained, (b) shall be in form and substance reasonably satisfactory
to Banner, (c) shall not be subject to the satisfaction of any condition that
has not been satisfied or waived, (d) shall be in full force and effect and (e)
the Closing shall be in conformity with the terms of all such consents, except
where the failure to obtain any such consent (or in lieu thereof waiver)could
not reasonably be expected, individually or in the aggregate with other such
failures, to have a Company Material Adverse Effect or materially adversely
affect Banner or
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otherwise result in a material diminution of the benefits of the transactions
contemplated by this Agreement and the Operative Agreements to Banner.
6.07 Resignations of Directors and Officers. Such members of
the boards of directors and such officers of the Company and the Subsidiaries as
are designated in a written notice delivered at least two (2) Business Days
prior to the Closing Date by Banner to Fairchild shall have tendered, effective
at the Closing, their resignations as such directors and officers.
6.08 Proceedings. All proceedings to be taken on the part of
Fairchild, Harco Parent, and VSI in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to Banner, and Banner shall have
received copies of all such documents and other evidences as Banner may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
6.09 Fairness Opinion. Banner shall have received the written
opinion of Houlihan, Lokey, Howard & Zukin, Inc., the financial adviser to
Banner, dated the Closing Date, to the effect that the transactions contemplated
by this Agreement, taken as a whole, are fair to the holders of Banner's common
stock (other than Fairchild) from a financial point of view.
6.10 Continued Employment of Certain Employees. On the Closing
Date, the individuals listed on Schedule 6.10 shall be employees of the Harco
Business in the capacities set forth opposite their respective names and such
individuals shall have agreed in writing and in form and substance reasonably
acceptable to Banner to continue their employment with the Harco Business.
6.11 Payment of Accrued Employee Compensation. Certain
employees of VSI who will be employees of the Company have accrued and unpaid
bonus compensation under a bonus plan. All such accrued, fully earned
compensation in respect of persons who shall be employees of the Company at the
Closing shall be considered a Retained Liability.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF FAIRCHILD
The obligations of Fairchild hereunder to cause Harco Parent
to transfer the Harco Shares are subject to the fulfillment, at or before
the Closing, of each of the following
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conditions (all or any of which may be waived in whole or in part
by Fairchild in its sole discretion):
7.01 Representations and Warranties. Each of the
representations and warranties made by Banner in this Agreement shall be true
and correct in all respects (without regard to any materiality qualifier) on and
as of the Closing Date as though such representation or warranty was made on and
as of the Closing Date (except if any breaches of such representations and
warranties have not, in the aggregate, resulted in, and would not reasonably be
expected to result in, a Banner Material Adverse Effect.
7.02 Performance. Banner shall have performed and complied
with, in all material respects, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by Banner at or before the
Closing.
7.03 Officers' Certificates. Banner shall have delivered to
Fairchild a certificate, dated the Closing Date and executed in the name and on
behalf of Banner by the Chairman of the Board, the President, or any Vice
President of Banner, substantially in the form and to the effect of Exhibit C
hereto, and a certificate, dated the Closing Date and executed by the Secretary
or any Assistant Secretary of Banner, substantially in the form and to the
effect of Exhibit D hereto.
7.04 Orders and Laws. There shall not be in effect on the
Closing Date any Order or Law that became effective after the date of this
Agreement restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Operative Agreements.
7.05 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit Fairchild and Banner to perform their
obligations under this Agreement and the Operative Agreements and to consummate
the transactions contemplated hereby and thereby (a) shall have been duly
obtained, made or given, (b) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (c) shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement and the Operative Agreements.
7.06 Third Party Consents. All consents (or in lieu
thereof waivers) to the performance by Fairchild of its
obligations hereunder and to the consummation of the transactions
contemplated hereby as are required under the Contracts listed in
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Section 7.06 of the Disclosure Schedule (a) shall have been obtained, (b) shall
not be subject to the satisfaction of any condition that has not been satisfied
or waived, (c) shall be in full force and effect and (d) the Closing shall be in
conformity with the terms of all such consents.
7.07 Proceedings. All proceedings to be taken on the part of
Banner in connection with the transactions contemplated by this Agreement and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Fairchild, and Fairchild shall have received copies of all such
documents and other evidences as Fairchild may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
7.08 Fairness Opinion. Fairchild shall have received the
written opinion of Donaldson Lufkin & Jenrette Securities Corporation, dated the
Closing Date, to the effect that the transactions contemplated by this
Agreement, taken as a whole, are fair to the holders of Fairchild's common stock
from a financial point of view.
7.09 Registration Rights Agreement. An amendment,
substantially in the form of Exhibit E hereto, to the Registration Rights
Agreement, dated as of August 2, 1990, between Banner and Banner
AerospaceHolding Company II, Inc. shall have been entered into by the Company.
ARTICLE VIII
TAX MATTERS AND POST-CLOSING TAXES
8.01 Transfer Taxes. Fairchild and Banner shall each pay half
of all sales, use, transfer, real property transfer, recording, gains, stock
transfer and other similar Taxes and fees ("Transfer Taxes") arising out of or
in connection with the transactions effected pursuant to this Agreement,
including without limitation the transfer of the Business Assets by VSI to the
Company through Harco Parent. Fairchild shall file all necessary documentation
and Returns with respect to such Transfer Taxes.
8.02 Tax Periods Ending on or Before February 25, 1996.
Fairchild shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns for the Company and any Subsidiary for all periods ending on or
prior to February 25, 1996, which are filed after February 25, 1996. Fairchild
shall permit Banner to review and comment on each Tax Return described in the
preceding sentence prior to filing. Banner shall provide Fairchild (at
Fairchild's sole cost and expense) with all assistance reasonably requested by
Fairchild to prepare or cause
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to be prepared or to file or cause to be filed such Tax Returns. Fairchild shall
indemnify Banner and its Affiliates for Taxes of the Company and its
Subsidiaries with respect to such periods to the extent such Taxes are not
reflected in the reserve for Tax liability (other than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
shown on the Financial Statements.
8.03 Taxes for Stub Period. Fairchild and Banner will, to the
extent permitted by applicable law, elect with the relevant state and local
taxing authorities to close the taxable period of the Company and each
Subsidiary on February 25, 1996. In any case where applicable law does not
permit the Company or a Subsidiary to close its taxable year on February 25,
1996, Banner will cause to be prepared and duly filed all Tax Returns relating
to Taxes of the Company and any Subsidiary for any taxable period which includes
and ends after the February 25, 1996 (the "Stub Period"), provided, however,
that Fairchild shall provide Banner (at no cost to Banner, the Company or any
Subsidiary) with all assistance requested by Banner, the Company or any
Subsidiary that Banner, the Company or any Subsidiary reasonably deems necessary
to prepare or cause to be prepared or to file or cause to be filed all Tax
Returns.
8.04 Consistent Tax Treatment. Fairchild and Banner
agree to report the transfer of shares of Harco Inc. to Banner in
exchange solely for Banner common stock on their Federal and
state income tax returns as a reorganization under ss.368(a)(1)(B)
of the Code.
8.05 ss.338. Banner is responsible for, and shall not be
indemnified for, any taxes arising out of an affirmative election, but not a
deemed election, under ss.338 of the Code, and Banner shall not make any
affirmative election under ss.338 of the Code regarding the transactions
contemplated by the Stock Exchange Agreement. In the event of a deemed election
under Code ss.338, any reduction in tax payable by Banner as a result of such
deemed election shall result in payment by Banner to Fairchild of an amount
equal to the reduction in actual tax otherwise payable by Banner. Said payment
shall be made at the time the Tax Return reflecting such reduction in tax is
filed by Banner.
8.06 Books and Records. Banner shall retain the books and
records necessary for preparing tax returns relating to the Harco business for a
period of six years following the Closing Date and shall not dispose of such
books and records thereafter until after giving 30 days' notice to Fairchild.
Banner shall provide Fairchild with copies of such books and records as
Fairchild may reasonably request. Banner and Fairchild shall cooperate in the
preparation of Tax Returns and the conduct of audits and examinations, which
cooperation shall include making
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relevant books and records reasonably available and providing reasonable access
to necessary personnel.
8.07 Post-Closing Dividends. Banner shall cause the
Subsidiaries not to make any distribution of property other than intercompany
loans during the period beginning on February 25, 1996, and ending June 30,
1996, that would result in a diminution of the earnings and profits of such
entity for Federal income taxes purposes.
8.08 Payroll Tax Reporting. Banner and Fairchild agree to use
the alternative procedure specified in Section 5 of Revenue Procedure ss.4-77,
1984-2 C.B. 753, and Banner shall furnish to employees Internal Revenue Service
Forms W-2 which include the wages paid and the taxes withheld in the calendar
year ended December 31, 1996, by Fairchild and VSI.
ARTICLE IX
EMPLOYMENT AND BENEFITS MATTERS
9.01 Employment and Benefits. Effective as of the Closing,
Banner shall have sole discretion regarding the hiring and retention of
employees of the Company and the Subsidiaries, including, without limitation,
sole discretion regarding whether to hire as employees any individual who is or
was employed or engaged in respect of the Harco Business at any time prior to
the Closing (each such individual, an "Employee"). In addition, Banner shall
have (i) sole discretion regarding the terms and conditions of employment,
including without limitation compensation and employee benefits, to be provided
to the employees of the Company and the Subsidiaries from and after the Closing
and (ii) sole responsibility, effective as of the Closing, for (A) compensation
and employee benefits for all Employees and (B) any benefits or payments due to
Employees under any Benefit Plan or severance, termination or change of control
agreement by reason of any Employee's termination from employment ("Severance
Costs") following the Closing Date.
9.02 No Assumption or Continuity of Liabilities.
Notwithstanding anything to the contrary in subclause (ii)(B) of Section 9.01
above, Fairchild and its Affiliates (other than the Company and the
Subsidiaries) shall have sole responsibility for any Severance Costs arising out
of (i) any Employee's termination from employment on or prior to the Closing
Date or (ii) the execution or delivery of this Agreement or the transactions
contemplated hereby. Additionally, Banner shall not assume, and Fairchild and
its Affiliates (other than the Company and the Subsidiaries) shall be solely
responsible for, any and all Liabilities to Employees arising out of the
employment of the Employees by Fairchild, VSI, the Company and any of their
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Affiliates on or prior to the Closing Date (other than accrued vacation or sick
pay set forth on the February Balance Sheet which shall be assumed by Banner)
including, without limitation, any and all Liabilities that have accrued or
arisen under or in connection with any Benefit Plan. Without limiting the
foregoing sentence, Fairchild, Harco and VSI shall be solely responsible for (i)
any accrued benefits of Employees under any Benefit Plans that are Qualified
Plans or any other Pension Benefit Plans, (ii) any benefits or payments due to
Employees under any Benefit Plan or severance, termination or change of control
agreement by reason of any Employee's termination from employment on or prior to
the Closing Date, the execution or delivery of this Agreement or the
transactions contemplated under this Agreement, (iii) any Liability under the
Worker Adjustment and Retraining Notification Act, as amended, arising out of
events occurring on or prior to the Closing Date, (iv) any Liability with
respect to health care continuation coverage under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, arising out of the cessation of
coverage of any Employee under any Benefit Plan that is a medical or dental
plan, (v) any Liability with respect to retiree medical, dental or life
insurance coverage provided under any Benefit Plan, (vi) all expenses and
benefits for claims under any medical or dental Benefit Plans for any Employee
or any covered dependents of the same in respect of medical treatment or
services rendered or expenses incurred prior to the Closing Date and (vii) all
expenses and benefits for claims under any life insurance or disability Benefit
Plans but only with respect to events which give rise to any such claims that
occur prior to the Closing Date.
ARTICLE X
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
10.01 Survival of Representations, Warranties, Covenants and
Agreements. Notwithstanding any right of Banner (whether or not exercised) to
investigate the affairs of the Company and the Subsidiaries or any right of any
party (whether or not exercised) to investigate the accuracy of the
representations and warranties of the other party contained in this Agreement,
Fairchild and Banner have the right to rely fully upon the representations,
warranties, covenants and agreements of the other contained in this Agreement.
The representations, warranties, covenants and agreements of Fairchild and
Banner contained in this Agreement will survive the Closing (a) indefinitely
with respect to (i) the representations and warranties contained in Sections
2.02, 2.04, 2.05 (but only insofar as it relates to the capital stock of the
Subsidiaries) 2.31, 3.03 and 3.15 and (ii) the covenants and agreements
contained in Sections 1.03, 14.03 and 14.05; (b) until sixty (60)
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days after the expiration of all applicable statutes of limitation (including
all periods of extension, whether automatic or permissive) with respect to
matters covered by Sections 2.12 and 2.24 and Article VIII and (insofar as they
relate to ERISA or the Code) Section 2.15 and Article IX; (c) until not later
than the third anniversary of the Closing Date in the case of all other
representations and warranties and any covenant or agreement to be performed in
whole or in part on or prior to the Closing or (d) with respect to each other
covenant or agreement contained in this Agreement, until sixty (60) days
following the last date on which such covenant or agreement is to be performed
or, if no such date is specified, indefinitely; provided that any
representation, warranty, covenant or agreement that would otherwise terminate
in accordance with clause (b), (c) or (d) above will continue to survive if a
Claim Notice or Indemnity Notice (as applicable) shall have been timely given
under Article XI on or prior to such termination date, until the related claim
for indemnification has been satisfied or otherwise resolved as provided in
Article XI.
ARTICLE XI
INDEMNIFICATION
11.01 Tax Indemnification.
(a) After the Closing Date, Fairchild will indemnify and hold
harmless the Banner Indemnified Parties from and against any and all claims,
actions, causes of action, liabilities, losses, damages, and reasonable
out-of-pocket expenses and costs resulting from, arising out of or relating to
Taxes for all taxable periods or portions thereof ending on or before February
25, 1996, and as provided in subsection (b) below, for the Stub Period,
including, without limitation, any Tax liability that arises solely by reason of
the Company being severally liable for any Tax of Fairchild's consolidated group
pursuant to Treasury Regulation ss.1.1502-6 or any analogous state or local Tax
provision, and any Tax liability (other than a Transfer Tax liability) incurred
in connection with the transactions to be executed pursuant to this Agreement,
including the contribution of the Harco Business to and the formation of Harco
Parent and the Company, and the sale of the Harco Shares.
(b) The liability for Taxes for the Stub Period for which
Fairchild will indemnify and hold harmless the Banner Indemnified Parties
pursuant to Section 11.01(a) shall be determined as the Tax Liability that would
have resulted had the last day of the period been February 25, 1996, and had the
books of the Company and its Subsidiaries been closed on that date, and using
the actual tax rate imposed on a particular category of income under the
applicable taxing jurisdiction.
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(c) Taxes other than income Taxes (but not Transfer Taxes) for
which the last day of the taxable period is not February 25, 1996, will be
allocated pro rata per day between the period ending on February 25, 1996, and
the period commencing on February 26, 1996.
(d) Any amount payable by Fairchild as computed by the Banner
Indemnified Parties under this Section 11.01 will be remitted to Banner at least
three (3) Business Days prior to the due date of the respective Tax Returns
(with interest being imposed at the underpayment rate, as that term is defined
in Code ss.6621, for any late payment). Any amount payable by Banner as computed
by Fairchild under this Section 11.01 will be remitted to Fairchild at least
three (3) Business Days prior to the due date of the respective Tax Returns
(with interest imposed at the underpayment rate, as that term is defined in Code
ss.6621, for any late payment).
(e) Fairchild shall have the right to control any audit or
examination relating to Taxes by any taxing authority, initiate any claim for
refund, file any amended return, contest, resolve and defend against any
assessment, notice of deficiency or other adjustment or proposed adjustment
relating or with respect to any Taxes of the Company or any Subsidiary for all
taxable periods or portions thereof prior to or including February 25,
1996.
(f) Banner shall pay Fairchild and indemnify Fairchild and
shall hold Fairchild harmless to the extent of any reduction in tax payable by
Banner for any taxable year beginning after February 25, 1996, as a result of a
final disallowance of any loss, deduction, or credit claimed by VSI, the
Company, or any Subsidiary in a period or portion thereof ending on or before
February 25, 1996 (a "Pre-Closing Period") and the allowance of such deduction
or credit in a period or portion thereof ending after February 25, 1996 (a
"Post-Closing Period") (or as a result of a final determination that additional
income is to be recognized in a Pre-Closing Period in lieu of income which has
been recognized in a Post-Closing Period). Said payment shall be made at the
time the Tax Return reflecting such reduction in Tax is filed by Banner.
(g) Any reduction in tax payable by Banner for a Post- Closing
Period as a result of utilization of net operating loss carryforwards or tax
credit carryforwards of VSI, the Company, or a Subsidiary originating in a
Pre-Closing Period shall result in payment by Banner to Fairchild of the
reduction in actual tax otherwise payable by Banner to the extent such net
operating loss carryforwards or tax credit carryforwards had not been reflected
in the February Balance Sheet. Said payment shall be made at the time the Tax
Return reflecting such reduction in Tax to Banner, the Company or a
Subsidiary is filed by Banner.
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(h) Any reduction in tax payable by Fairchild and VSI as the
result of the allowance of any additional loss, deduction or credit claimed by
Fairchild on a claim for refund or amended return filed after February 25, 1996,
for a Pre-Closing Period shall result in payment by Fairchild to Banner of an
amount equal to the increase in actual tax otherwise payable by Banner caused by
the allowance of the loss, deduction, or credit claimed by Fairchild. Said
payment shall be made at the time the increase in tax is paid by Banner.
(i) Any reduction in tax payable by Fairchild and VSI as a
result of utilization of net operating losses or tax credits of the Company or
any Subsidiary that originated in a Post- Closing Period shall result in payment
by Fairchild to Banner of an amount equal to the decrease of actual tax
otherwise payable by Fairchild caused by Fairchild's use of such net operating
loss or credit. Fairchild is not required to take any action to reduce its taxes
to the extent such reduction causes a permanent tax detriment to Fairchild.
11.02 Other Indemnification.
(a) Subject to paragraph (c) of this Section and the other
Sections of this Article XI, Fairchild shall indemnify the Banner Indemnified
Parties in respect of, and hold each of them harmless from and against, any and
all Losses suffered, incurred or sustained by any of them or to which any of
them becomes subject, resulting from, arising out of or relating to (i) any
breach of representation or warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Fairchild contained in this Agreement
(determined in all cases as if the terms "material" or "materially" were not
included therein), and (ii) the Retained Liabilities.
(b) Subject to paragraph (c) of this Section and the other
Sections of this Article XI, Banner shall indemnify the Fairchild Indemnified
Parties in respect of, and hold each of them harmless from and against, any and
all Losses suffered, incurred or sustained by any of them or to which any of
them becomes subject, resulting from, arising out of or relating to any breach
of representation or warranty or nonfulfillment of or failure to perform any
covenant or agreement on the part of Banner contained in this Agreement.
(c) No amounts of indemnity shall be payable in the case of a
claim in respect of a Loss arising under clause (i) of paragraph (a) or
paragraph (b) of this Section 11.02 (A) unless and until the Indemnified Parties
thereunder have suffered, incurred, sustained or become subject to Losses
referred to in paragraph (a) or paragraph (b), as the case may be, of this
Section 11.02 in excess of $50,000 in the aggregate; in which event such
Indemnified Parties shall be entitled to claim
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indemnity for the full amount of such Losses; and (B) unless upon payment
thereof the Indemnified Parties thereunder have received payments in respect of
claims made under clause (i) of paragraph (a) or paragraph (b), as the case may
be, of this Section 11.02 of $27,000,000 or less in the aggregate; provided that
this paragraph (c) shall not apply to a breach of a representation or warranty
contained in Section 2.02, 2.04, 2.06, 2.07, 2.31, 3.03, 3.04, 3.05 or 3.15 or
to a breach of a covenant contained in Section 1.03, 14.03 or 14.05.
11.03 Method of Asserting Claims. All claims for
indemnification by any Indemnified Party under Section 11.02 will
be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which an
Indemnified Party might seek indemnity under Section 11.02 is asserted against
or sought to be collected from such Indemnified Party by a Person other than
Fairchild or any Affiliate of Fairchild or of Banner (a "Third Party Claim"),
the Indemnified Party shall deliver a Claim Notice with reasonable promptness to
the Indemnifying Party. If the Indemnified Party fails to provide the Claim
Notice with reasonable promptness after the Indemnified Party receives notice of
such Third Party Claim, the Indemnifying Party will not be obligated to
indemnify the Indemnified Party with respect to such Third Party Claim to the
extent that the Indemnifying Party's ability to defend has been irreparably
prejudiced by such failure of the Indemnified Party. The Indemnifying Party will
notify the Indemnified Party as soon as practicable within the Dispute Period
whether the Indemnifying Party disputes its liability to the Indemnified Party
under Section 11.02 and whether the Indemnifying Party desires, at its sole cost
and expense, to defend the Indemnified Party against such Third Party
Claim.
(i) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend
the Indemnified Party with respect to the Third Party Claim pursuant to
this Section 11.03(a), then the Indemnifying Party will have the right
to defend, with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of the Indemnifying Party, such
Third Party Claim by all appropriate proceedings, which proceedings
will be vigorously and diligently prosecuted by the Indemnifying Party
to a final conclusion or will be settled at the discretion of the
Indemnifying Party (but only with the consent of the Indemnified Party,
which consent will not be unreasonably withheld, in the case of any
settlement that provides for any relief other than the payment of
monetary damages as to which the Indemnified Party will be indemnified
in full). The Indemnifying Party will be deemed to have waived its
right to dispute its liability to the Indemnified Party under Section
11.02 with
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respect to any Third Party Claim as to which it elects to control the
defense. The Indemnifying Party will have full control of such defense
and proceedings, including (except as provided in the immediately
preceding sentence) any settlement thereof; provided, however, that the
Indemnified Party may, at the sole cost and expense of the Indemnified
Party, at any time prior to the Indemnifying Party's delivery of the
notice referred to in the first sentence of this clause (i), file any
motion, answer or other pleadings or take any other action that the
Indemnified Party reasonably believes to be necessary or appropriate to
protect its interests; and provided further, that if requested by the
Indemnifying Party, the Indemnified Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnifying Party in contesting any Third Party Claim that the
Indemnifying Party elects to contest. The Indemnified Party may retain
separate counsel to represent it in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying
Party pursuant to this clause (i), and the Indemnified Party will bear
its own costs and expenses with respect to such separate counsel,
except as provided in the preceding sentence and except that the
Indemnifying Party will pay the costs and expenses of such separate
counsel if (x) in the Indemnified Party's good faith judgment, it is
advisable, based on advice of counsel, for the Indemnified Party to be
represented by separate counsel because a conflict or potential
conflict exists between the Indemnifying Party and the Indemnified
Party which makes representation of both parties inappropriate under
applicable standards of professional conduct or (y) the named parties
to such Third Party Claim include both the Indemnifying Party and the
Indemnified Party and the Indemnified Party determines in good faith,
based on advice of counsel, that defenses are available to it that are
unavailable to the Indemnifying Party. Notwithstanding the foregoing,
the Indemnified Party may retain or take over the control of the
defense or settlement of any Third Party Claim the defense of which the
Indemnifying Party has elected to control if the Indemnified Party
irrevocably waives its right to indemnity under Section 11.02 with
respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to
defend the Third Party Claim pursuant to Section 11.03(a), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously
and diligently or settle the Third Party Claim, then the Indemnified
Party will have the right to defend, at the sole cost and expense of
the Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings will
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be prosecuted by the Indemnified Party in good faith or will be
settled at the discretion of the Indemnified Party (with the consent
of the Indemnifying Party, which consent will not be unreasonably
withheld). The Indemnified Party will have full control of such
defense and proceedings, including (except as provided in the
immediately preceding sentence) any settlement thereof; provided,
however, that if requested by the Indemnified Party, the
Indemnifying Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the
Indemnified Party and its counsel in contesting any Third Party
Claim which the Indemnified Party is contesting. Notwithstanding the
foregoing provisions of this clause (ii), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that the
Indemnifying Party disputes its liability hereunder to the Indemnified
Party with respect to such Third Party Claim and if such dispute is
resolved in favor of the Indemnifying Party in the manner provided in
clause (iii) below, the Indemnifying Party will not be required to bear
the costs and expenses of the Indemnified Party's defense pursuant to
this clause (ii) or of the Indemnifying Party's participation therein
at the Indemnified Party's request, and the Indemnified Party will
reimburse the Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in connection with such
litigation.
(iii) If the Indemnifying Party notifies the Indemnified Party that
it does not dispute its liability to the Indemnified Party with respect
to the Third Party Claim under Section 11.02 or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying
Party disputes its liability to the Indemnified Party with respect to
such Third Party Claim, the Loss arising from such Third Party Claim
will be conclusively deemed a liability of the Indemnifying Party under
Section 11.02 and the Indemnifying Party shall pay the amount of such
Loss to the Indemnified Party on demand following its final
determination. If the Indemnifying Party has timely disputed its
liability with respect to such claim, the Indemnifying Party and the
Indemnified Party will proceed in good faith to negotiate a resolution
of such dispute, and if not resolved through negotiations within the
Resolution Period, such dispute shall be resolved by litigation in a
court of competent jurisdiction.
(b) In the event any Indemnified Party should have a claim
under Section 11.02 against any Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
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hereunder except to the extent that an Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in such Indemnity
Notice, the Loss arising from the claim specified in such Indemnity Notice will
be conclusively deemed a liability of the Indemnifying Party under Section 11.02
and the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand following its final determination. If the Indemnifying Party has
timely disputed its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party will proceed in good faith to negotiate a resolution
of such dispute, and if not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by litigation in a court of competent
jurisdiction.
ARTICLE XII
TERMINATION
12.01 Termination. This Agreement may be terminated,
and the transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written
agreement of Fairchild and Banner;
(b) at any time before the Closing, by Fairchild or Banner, in
the event (i) of a material breach hereof by the non- terminating party if such
non-terminating party fails to cure such breach within five (5) Business Days
following notification thereof by the terminating party or (ii) upon
notification of the non-terminating party by the terminating party that the
satisfaction of any condition to the terminating party's obligations under this
Agreement becomes impossible or impracticable with the use of commercially
reasonable efforts (including the failure of the stockholders of Banner to
consent to the issuance of the Banner Shares and the other transactions
contemplated hereby) if the failure of such condition to be satisfied is not
caused by a breach hereof by the terminating party; or
(c) at any time after March 12, 1996 by Fairchild or Banner
upon notification of the non-terminating party by the terminating party if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of this Agreement by the terminating party.
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12.02 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 12.01, this Agreement will forthwith become null
and void, and there will be no liability or obligation on the part of Fairchild
or Banner (or any of their respective officers, directors, employees, agents or
other representatives or Affiliates), except as provided in the next succeeding
sentence and except that the provisions with respect to expenses in Section
14.03 and confidentiality in Section 14.05 will continue to apply following any
such termination. Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to Section 12.01(b), (c)
or (d), Fairchild will remain liable to Banner for any willful breach of this
Agreement by Fairchild existing at the time of such termination, and Banner will
remain liable to Fairchild for any willful breach of this Agreement by Banner
existing at the time of such termination, and Fairchild or Banner may seek such
remedies, including damages and fees of attorneys, against the other with
respect to any such breach as are provided in this Agreement or as are otherwise
available at Law or in equity.
ARTICLE XIII
DEFINITIONS
13.01 Definitions. (a) Defined Terms. As used in
this Agreement, the following defined terms have the meanings
indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means any Person that directly, or indirectly
through one of more intermediaries, controls or is controlled by or is under
common control with the Person specified. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract or
otherwise and, in any event and without limitation of the previous sentence, any
Person owning ten percent (10%) or more of the voting securities of another
Person shall be deemed to control that Person.
"Agreement" means this Stock Purchase Agreement and the
Exhibits, the Disclosure Schedule and the Schedules hereto and the certificates
delivered in accordance with Sections 6.03 and 7.03, as the same shall be
amended from time to time.
"Assets and Properties" of any Person means all assets
and properties of every kind, nature, character and description
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(whether real, personal or mixed, whether tangible or intangible, whether
absolute, accrued, contingent, fixed or otherwise and wherever situated),
including the goodwill related thereto, operated, owned or leased by such
Person, including without limitation cash, cash equivalents, Investment Assets,
accounts and notes receivable, chattel paper, documents, instruments, general
intangibles, real estate, equipment, inventory, goods and Intellectual
Property.
"Audited Balance Sheet" means the balance sheet of the Harco
Business for the fiscal year ended June 30, 1995 delivered to Banner pursuant to
Section 2.09(b).
"Audited Financial Statement Date" means June 30, 1995.
"Audited Financial Statements" means the Financial Statements
of the Harco Business delivered to Banner pursuant to Section 2.09(b).
"Average Banner Price" means the average of the closing sales
prices of the common stock of Banner as reported on the NYSE Composite Tape on
each of the fifteen (15) consecutive trading days immediately preceding the
fifth trading day prior to the Closing Date; provided, however, that if the
Average Banner Price is less than $6.00 it shall be $6.00 and if it is greater
than $7.50 it shall be $7.50.
"Balance Sheet Liabilities" means any and all Liabilities in
respect of the Harco Business that are (i) reflected or reserved against in the
Unaudited Balance Sheet, (ii) incurred since the Unaudited Balance Sheet Date in
the normal course of the operation of the Harco Business consistent with the
provisions of this Agreement and reflected in the February Balance Sheet or
(iii) incurred in the normal course of the operation of the Harco Business
consistent with the provisions of this Agreement during the period from, but
excluding, February 25, 1996 to, and including, the Closing Date.
"Banner" has the meaning ascribed to it in the forepart
of this Agreement.
"Banner Indemnified Parties" means Banner and its officers,
directors, employees, agents and Affiliates.
"Banner Material Adverse Effect" has the meaning
ascribed to it in Section 3.11.
"Banner Shares" has the meaning ascribed to it in
Section 1.01(a).
"Benefit Plan" means any Plan (i) that, as of the date hereof
or as of the Closing Date, is established or maintained by VSI, the Company or
any Subsidiary, or, in respect of the Harco
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Business, any predecessor or Affiliate of the foregoing, (ii) to which VSI (in
respect of the Harco Business), the Company or any Subsidiary or, in respect of
the Harco Business, any predecessor or Affiliate of the foregoing, contributes
or has an obligation to contribute, or (iii) under which any employee, former
employee, director or former director of VSI, the Company or any Subsidiary or,
in respect of the Harco Business, any predecessor or Affiliate of the foregoing,
or any beneficiary thereof is covered, is eligible for coverage or has benefit
rights by reason of service with VSI, the Company or any Subsidiary or, in
respect of the Harco Business, any predecessor or Affiliate of the foregoing, or
(iv) that is or was a Defined Benefit Plan during the six-year period preceding
the date hereof, and at any time during such period has been maintained or
contributed to by Fairchild, VSI, the Company or any ERISA Affiliate, or with
respect to which Fairchild, VSI, the Company or any ERISA Affiliate has had an
obligation to contribute at any time during such period in respect of the Harco
Business.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Condition of the Harco Business,
including without limitation financial statements, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental studies
and plans.
"Business Accounts Receivable" means all accounts receivable,
and all notes, bonds and other evidences of indebtedness and rights to receive
payments, of VSI and arising out of the operation of the Harco Business, and the
security arrangements and collateral securing the repayment or satisfaction of
the foregoing, including any rights of Fairchild with respect to any third party
collection procedures or any other Actions or Proceedings which have been
commenced in connection therewith.
"Business Assets" has the meaning ascribed to it in
Section 4.04.
"Business Bank Accounts" has the meaning ascribed to it
in Section 2.26.
"Business Combination" means with respect to any Person, any
merger, consolidation or combination to which such Person is a party, any sale,
dividend, split or other disposition of capital stock or other equity interests
of such Person or any sale, dividend or other disposition of all or
substantially all of the Assets and Properties of such Person.
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"Business Contracts" means the Contracts and other
arrangements to which VSI is a party and which are Related to the Harco
Business.
"Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of New York are authorized or obligated
to close.
"Business Inventory" has the meaning ascribed to it in
Section 2.29.
"Business Liabilities" has the meaning ascribed to it
in Section 4.04.
"Business Licenses" means all Licenses held by VSI and used or
held for use in connection with the operation of the Harco Business.
"Cash" has the meaning ascribed to it in Section 4.04(c).
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, and the rules and
regulations promulgated thereunder.
"CERCLIS" means the Comprehensive Environmental
Response and Liability Information System, as provided for by 40
C.F.R. ss.300.5.
"Claim Notice" means written notification pursuant to Section
11.03(a) of a Third Party Claim as to which indemnity under Section 11.02 is
sought by an Indemnified Party, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party's claim against the Indemnifying Party under Section 11.02,
together with the amount or, if not then reasonably determinable, the estimated
amount, determined in good faith, of the Loss arising from such Third Party
Claim.
"Closing" means the closing of the transactions
contemplated by Section 1.01.
"Closing Date" means (a) the third Business Day after the day
on which the last of the consents, approvals, actions, filings, notices or
waiting periods described in or related to the filings described in Sections
6.04 through 6.06 and Sections 7.04 through 7.06 has been obtained, made or
given or has expired, as applicable, or (b) such other date as Banner and
Fairchild mutually agree upon in writing.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
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"Common Stock" means the common stock, par value $.01
per share, of the Company.
"Company" has the meaning ascribed to it in the
forepart of this Agreement.
"Company Material Adverse Effect" has the meaning
ascribed to it in Section 2.03.
"Condition of the Harco Business" means the business,
condition (financial or otherwise), results of operations, Assets and Properties
and prospects of the Harco Business taken as a whole.
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral).
"Defined Benefit Plan" means each Plan which is subject to
Part 3 of Subtitle B of Title I of ERISA, Section 412 of the Code or Title IV of
ERISA.
"Disclosure Schedule" means the record delivered to Banner by
Fairchild herewith and dated as of the date hereof, containing all lists,
descriptions, exceptions and other information and materials as are required to
be included therein by Fairchild pursuant to this Agreement.
"Dispute Period" means the period ending thirty (30) days
following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Employee" has the meaning ascribed to it in Section
9.01.
"Environmental Claim" means any written or oral notice, claim,
demand or other communication (collectively, a "claim") alleging or asserting
liability for damages, contribution, indemnification, cost recovery,
compensation, injunctive relief, fines or penalties arising out of, based on or
resulting from (a) a Release or threatened Release, of any Hazardous Material at
any location or (b) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
"Environmental Law" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. 9601 et
seq.; the Toxic Substances Control Act, 15 U.S.C. 2601 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. 1802 et seq.; the Solid Waste Disposal
Act, also known as the Resource Conservation and Recovery Act. 42 U.S.C. 6901 et
seq.; Emergency Planning and
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Community Right-to-Know Act, 42 U.S.C. 11001 et seq.; the Clean Water Act, also
known as the Federal Water Pollution Control Act, 33 U.S.C. 1251 et seq.; the
Safe Drinking Water Act, 42 U.S.C. 300(f) et seq.; the Clean Air Act, 42 U.S.C.
7401 et seq.; and all analogous state and local counterparts.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any Person who is in the same
controlled group of corporations or who is under common control or, solely for
purposes of liability under Section 412 of the Code or Section 302 of ERISA, who
is otherwise treated as a single employer (all as determined under Section 414
of the Code), with the Company or any Subsidiary or, before the Closing, with
Fairchild.
"Exon-Florio Amendment" means Section 721 of the Defense
Production Act of 1950, as amended, and any successor thereto and the
regulations issued pursuant thereto or in consequence thereof.
"Excluded Assets" has the meaning ascribed to it in
Section 4.04(c).
"Fairchild" has the meaning ascribed to it in the
forepart of this Agreement.
"Fairchild Indemnified Parties" means Fairchild and its
officers, directors, employees, agents and Affiliates.
"February Balance Sheet" has the meaning ascribed to it
in Section 1.01(c).
"Final Net Worth" has the meaning ascribed to it in
Section 1.01(c)(iii).
"Financial Statements" means the consolidated financial
statements of the Company and its consolidated Subsidiaries delivered to Banner
pursuant to Section 2.09 or 4.06.
"GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in the immediately
prior comparable period.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country, any domestic or
foreign state, county, city or other political subdivision, and any entity
established by legislation having the
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power to issue orders lawfully binding any party to this Agreement.
"Harco Business" means the business and operations carried on
by the Harco division of VSI and the Subsidiaries.
"Harco Name" means the name "Harco" or any derivative
thereof or the Harco logo.
"Harco Parent" has the meaning ascribed to it in the
forepart of this Agreement.
"Harco Shares" means all of the issued and outstanding shares
of capital stock of Harco Inc., hereinafter sometimes referred to as the
"Company".
"Harco Value" means $26,815,000.
"Hazardous Material" means (A) any petroleum or petroleum
products, and petroleum wastes; radioactive materials; asbestos, urea
formaldehyde foam insulation; and polychlorinated biphenyls ("PCBs"); (B) any
materials, wastes or substances which are now or hereafter become defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances", or "toxic pollutants."
"Indebtedness" of any Person means all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (iv) under capital leases and (v) in the nature of guarantees of the
obligations described in clauses (i) through (iv) above of any other
Person.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article XI.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article XI.
"Indemnity Notice" means written notification pursuant to
Section 11.03(b) of a claim for indemnity under Article XI by an Indemnified
Party, specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably determinable, the estimated amount, determined
in good faith, of the Loss arising from such claim.
"Intellectual Property" means all patents and patent
rights, trademarks and trademark rights, trade names and trade
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name rights, service marks and service mark rights, service names and service
name rights, brand names, inventions, processes, formulae, copyrights and
copyright rights, trade dress, business and product names, logos, slogans, trade
secrets, industrial models, processes, designs, methodologies, computer programs
(including all source codes) and related documentation, technical information,
manufacturing, engineering and technical drawings, know-how and all pending
applications for and registrations of patents, trademarks, service marks and
copyrights.
"Interim Cash Flow" means the excess of (A) cash transfers
from the Harco Business to Fairchild or an Affiliate of Fairchild over (B) cash
transfers from Fairchild or an Affiliate of Fairchild to the Harco Business for
the period from February 25, 1996 to the Closing Date, inclusive. To the extent
that (C) cash transfers from Fairchild or an Affiliate of Fairchild to the Harco
Business exceed (D) cash transfers from the Harco Business to Fairchild or an
Affiliate of Fairchild, the amount of excess shall be treated as an increase in
the Final Net Worth.
"Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by VSI or any of
the Subsidiaries and issued by any Person other than VSI, the Company or any
Subsidiary (other than trade receivables generated in the ordinary course of the
Harco Business.
"IRS" means the United States Internal Revenue Service.
"Knowledge of Fairchild" or "Known to Fairchild" means the
actual knowledge of any officer or director of Fairchild, Harco Parent, VSI, the
Company or any Subsidiary including, without limitation, the actual knowledge of
Tucker Nason and Richard Mineo.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other decisions, opinions and pronouncements having the effect of
law of the United States, any foreign country or any domestic or foreign state,
county, city or other political subdivision or of any Governmental or Regulatory
Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, franchises and similar
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consents granted or issued by any Governmental or Regulatory Authority and any
notices, filings, requests or registrations required to be submitted to any
Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation interest, court
costs, fees of attorneys, accountants and other experts or other expenses of
litigation or other proceedings or of any claim, default or assessment).
"Net Worth" means the net worth of the Harco Business or the
Company, as the case may be, as set forth in the Unaudited Balance Sheet or the
February Balance Sheet, as the case may be, net of any cash or cash equivalents
reflected therein or any Excluded Assets or Excluded Liabilities.
"NPL" means the National Priorities List under CERCLA.
"Operative Agreements" means any support or other agreements
to be entered into in connection with the transaction.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of such Person or
(ii) receive or exercise any benefits or rights similar to any rights enjoyed by
or accruing to the holder of shares of capital stock of such Person, including
any rights to participate in the equity or income of such Person or to
participate in or direct the election of any directors or officers of such
Person or the manner in which any shares of capital stock of such Person are
voted.
"Order" means any writ, judgment, decree, injunction or
similar order lodged with or issued by any Governmental or Regulatory Authority
(in each such case whether proposed, preliminary or final).
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA.
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"Pension Benefit Plan" means each Benefit Plan which is a
pension benefit plan within the meaning of Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for current Taxes not yet due or
delinquent or Taxes being contested in good faith by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP, (ii) any
Lien arising in the ordinary course of business for sums not now due or sums
being contested in good faith by appropriate proceedings, (iii) any Lien
described in Section 13.01 of the Disclosure Schedule and (iv) covenants,
conditions and restrictions of record arising in the ordinary course of business
consistent with past practice, which covenants, conditions and restrictions are
not violated by existing uses or improvements, do not materially interfere with
the use of the property in the conduct of the Harco Business, do not affect the
merchantability of title or contain any provision for reversion or forfeiture
and do not, individually or in the aggregate with other such Liens, materially
impair the value of the property subject to such Lien.
"Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, other business organization,
trust, union, association or Governmental or Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation, change of control or other employee benefit plan,
practice, policy or arrangement of any kind, whether written or oral, including,
but not limited to, any "employee benefit plan" within the meaning of Section
3(3) of ERISA.
"Post-Closing Decrease" has the meaning ascribed to it
in Section 1.01(c)(iii).
"Post-Closing Increase" has the meaning ascribed to it
in Section 1.01(c)(iii).
"Qualified Plan" means each Benefit Plan which is intended to
qualify under Section 401 of the Code.
"Real Property Leases" has the meaning ascribed to it
in Section 2.16(a).
"Related to the Harco Business" means used or held for use in
connection with the Harco Business.
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"Release" means any the presence, release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment, including, without
limitation, subsurface strata and ground water.
"Representatives" has the meaning ascribed to it in
Section 4.03.
"Resolution Period" means the period ending thirty (30) days
following receipt by an Indemnified Party of a written notice from an
Indemnifying Party stating that it disputes all or any portion of a claim set
forth in a Claim Notice or an Indemnity Notice.
"Retained Liabilities" has the meaning ascribed to it
in Section 4.04.
"SEC Documents" means each form, report, schedule,
registration statement, definitive proxy statement and other document (together
with all amendments thereof and supplements thereto) filed with the Securities
and Exchange Commission.
"Severance Costs" has the meaning ascribed to it in
Section 9.01.
"Shares" has the meaning ascribed to it in the forepart
of this Agreement.
"Stub Period" has the meaning ascribed to it in Section
8.03.
"Subject Defined Benefit Plan" means each Defined
Benefit Plan that is a Benefit Plan.
"Subsidiary" means any Person, other than the Company or
Banner, (i) in which VSI or the Company, as the case may be, directly or
indirectly through Subsidiaries or otherwise, beneficially owns, or as of the
Closing Date will own, more than fifty percent (50%) of either the equity
interests in, or the voting control of, such Person and (ii) that is engaged in
the Harco Business.
"Tangible Personal Property" has the meaning ascribed
to it in Section 2.17.
"Tax Returns" means a report, return or other information
required to be supplied to a governmental entity with respect to Taxes
including, where permitted or required, combined or consolidated returns for any
group of entities that includes Company or any Subsidiary.
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"Taxes" means any federal, state, county, local or foreign
taxes, charges, fees, levies, other assessments, or withholding taxes or charges
imposed by any governmental entity, and includes any interest and penalties
(civil or criminal) on or additions to any such taxes and any expenses incurred
in connection with the determination, settlement or litigation of any Tax
liability.
"Third Party Claim" has the meaning ascribed to it in
Section 11.03(a).
"Transfer Taxes" has the meaning ascribed to it in
Section 8.01.
"Unaudited Balance Sheet" means the balance sheet of the Harco
Business delivered to Purchaser pursuant to Section 2.09(c).
"Unaudited Balance Sheet Date" means September 30,
1995.
(b) Construction of Certain Terms and Phrases. Unless the
context of this Agreement otherwise requires, (i) words of any gender include
each other gender; (ii) words using the singular or plural number also include
the plural or singular number, respectively; (iii) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire Agreement; (iv)
the terms "Article" or "Section" refer to the specified Article or Section of
this Agreement; and (v) the phrases "ordinary course of business" and "ordinary
course of business consistent with past practice" refer to the business and
practice of the Harco Business. Whenever this Agreement refers to a number of
days, such number shall refer to calendar days unless Business Days are
specified. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP.
ARTICLE XIV
MISCELLANEOUS
14.01 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to Banner, to:
Banner Aerospace, Inc.
P.O. Box 20260
300 West Service Road
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Washington, D.C. 20041
Facsimile No.: (703) 478-5795
Attn: Warren Persavich
with a copy to:
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: (212) 530-5219
Attn: Albert F. Lilley, Esq.
If to Fairchild, to:
The Fairchild Corporation
300 West Service Road
Chantilly, Virginia 22021
Facsimile No.: (703) 478-5775
Attn: Donald E. Miller, Esq.
with a copy to:
Cahill Gordon & Reindel
Eighty Pine Street
New York, New York 10005
Facsimile No.: (212) 269-5420
Attn: James J. Clark, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
14.02 Entire Agreement. This Agreement and the Operative
Agreements supersedes all prior discussions and agreements between the parties
with respect to the subject matter hereof and thereof, and contains the sole and
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof.
14.03 Expenses. Except as otherwise expressly pro-
vided in this Agreement (including without limitation as provided
in the proviso below and in Section 12.02), whether or not the
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transactions contemplated hereby are consummated, each party will pay its {own
costs and expenses, and Fairchild shall pay the costs and expenses of VSI, the
Company and the Subsidiaries, incurred in connection with the negotiation,
execution and closing of this Agreement and the Operative Agreements and the
transactions contemplated hereby and thereby; provided, however, that the
expenses set forth in Schedule 14.03 hereto shall be shared equally by Banner
and Fairchild.
14.04 Public Announcements. At all times at or before the
Closing, Fairchild and Banner will not issue or make any reports, statements or
releases to the public or generally to the employees, customers, suppliers or
other Persons to whom the Harco Business sells goods or provides services or
with whom the Harco Business otherwise has significant business relationships
with respect to this Agreement or the transactions contemplated hereby without
the consent of the other, which consent shall not be unreasonably withheld. If
either party is unable to obtain the approval of its public report, statement or
release from the other party and such report, statement or release is, in the
opinion of legal counsel to such party, required by Law in order to discharge
such party's disclosure obligations, then such party may make or issue the
legally required report, statement or release and promptly furnish the other
party with a copy thereof. Fairchild and Banner will also obtain the other
party's prior approval of any press release to be issued immediately following
the Closing announcing the consummation of the transactions contemplated by this
Agreement.
14.05 Confidentiality Each party hereto will hold, and will
use its best efforts to cause its Affiliates, and their respective
Representatives to hold, in strict confidence from any Person (other than any
such Affiliate or Representative), unless (i) compelled to disclose by judicial
or administrative process (including without limitation in connection with
obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Governmental or Regulatory Authorities) or by other
requirements of Law or (ii) disclosed in an Action or Proceeding brought by a
party hereto in pursuit of its rights or in the exercise of its remedies
hereunder, all documents and information concerning the other party or any of
its Affiliates furnished to it by the other party or such other party's
Representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously known by the party receiving such documents
or information, (b) in the public domain (either prior to or after the
furnishing of such documents or information hereunder) through no fault of such
receiving party or (c) later acquired by the receiving party from another source
if the receiving party is not aware that such source is under an obligation to
another party hereto to keep such documents and information confidential;
provided that
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following the Closing the foregoing restrictions will not apply to Banner's use
of documents and information concerning the Harco Business furnished by
Fairchild hereunder. In the event the transactions contemplated hereby are not
consummated, upon the request of the other party, each party hereto will, and
will cause its Affiliates and their respective Representatives to, promptly
redeliver or cause to be redelivered all copies of documents and information
furnished by the other party in connection with this Agreement or the
transactions contemplated hereby and destroy or cause to be destroyed all notes,
memoranda, summaries, analyses, compilations and other writings related thereto
or based thereon prepared by the party furnished such documents and information
or its Representatives.
14.06 Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by Law or otherwise afforded, will be cumulative
and not alternative.
14.07 Amendment. This Agreement may be amended, supplemented
or modified only by a written instrument duly executed by or on behalf of each
party hereto.
14.08 No Third Party Beneficiary. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the intention of
the parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Article XI.
14.09 No Assignment; Binding Effect. Neither this Agreement
nor any right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other party hereto and any
attempt to do so will be void, except (a) for assignments and transfers by
operation of Law and (b) that Banner may assign any or all of its rights,
interests and obligations hereunder (including without limitation its rights
under Article XI) to a wholly-owned subsidiary, provided that any such
subsidiary agrees in writing to be bound by all of the terms, conditions and
provisions contained herein, but no such assignment shall relieve Banner of its
obligations hereunder. Subject to the preceding sentence, this Agreement is
binding upon, inures to the benefit of and is enforceable by the parties hereto
and their respective successors and assigns.
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14.10 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
14.11 Submission to Jurisdiction; Waivers. Each of Banner and
Fairchild irrevocably agrees that any Action or Proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect thereof
brought by the other party hereto or its successors or assigns, may be brought
and determined in the Supreme Court of the State of New York in New York County
or in the United States District Court for the Southern District of New York,
and each of Banner and Fairchild hereby irrevocably submits with regard to any
such Action or Proceeding for itself and in respect to its Assets and
Properties, generally and unconditionally, to the nonexclusive jurisdiction of
the aforesaid courts provided, however, that such consent to jurisdiction is
solely for the purpose referred to in this Section and shall not be deemed to be
a general submission to the jurisdiction of said courts or in the State of New
York other than for such purpose. Each of Banner and Fairchild hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise in any Action or Proceeding with respect to this
Agreement, any claim that it is not personally subject to the jurisdiction of
the above-named courts for any reason other than the failure to serve process in
accordance with this Section 14.11, that it or its Assets and Properties are
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts, and to the fullest extent permitted by applicable Law,
that the Action or Proceeding in any such court is brought in an inconvenient
forum, that the venue of such Action or Proceeding is improper, or that this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts and further irrevocably waives, to the fullest extent permitted by
applicable Law, the benefit of any defense that would hinder, fetter or delay
the levy, execution or collection of any amount to which the party is entitled
pursuant to the final judgment of any court having jurisdiction. Each of Banner
and Fairchild hereby irrevocably designates CT Corporation System (in such
capacity, the "Process Agent"), with an office at 1633 Broadway, New York, New
York 10019, as their respective designee, appointee and agent to receive, for
and on their behalf service of process in such jurisdiction in any Action or
Proceeding with respect to this Agreement, but for no other purpose, and such
service shall be deemed complete upon delivery thereof to the Process Agent.
Each of Banner and Fairchild further irrevocably consents to the service of
process out of any of the aforementioned courts in any such Action or Proceeding
by the mailing of copies thereof by registered mail, postage prepaid, to such
party at its address set forth in this Agreement, such service of process to be
effective upon acknowledgement of receipt of such registered mail. Nothing
herein shall affect the right of either party to
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serve process in any other manner permitted by Law or to commence any Action or
Proceeding or otherwise proceed against the other party in any other
jurisdiction in which the other party may be subject to suit.
14.12 Invalid Provisions. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.
14.13 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York applicable to a
Contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
14.14 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
BANNER AEROSPACE, INC.
By: /s/ Warren Persavich
--------------------------
Name: Warren Persavich
Title: Senior Vice President
THE FAIRCHILD CORPORATION
By: /s/ Donald Miller
-------------------------
Name: Donald Miller
Title: Senior Vice President,
General Counsel &
Secretary
