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Asset Purchase Agreement

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Sectors: Transportation
Governing Law: Delaware, View Delaware State Laws
Effective Date: December 20, 2000
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ASSET PURCHASE AGREEMENT


THIS ASSET PURCHASE AGREEMENT is made and entered into as of this 25/th/ day of May, 2001, by and among AVIATION SALES COMPANY, a corporation organized and existing under the laws of the State of Delaware, CARIBE AVIATION, INC., a corporation organized and existing under the laws of the State of Florida and HAMILTON SUNDSTRAND SERVICE CORPORATION, a corporation organized and existing under the laws of the State of Delaware. Unless otherwise defined herein, terms the first letter of which are capitalized herein shall have the meanings ascribed to them in Article 1.


W I T N E S S E T H:


WHEREAS, Seller is an indirect wholly owned subsidiary of Parent;


WHEREAS, Seller is engaged in the Business; and


WHEREAS, Seller desires to sell and assign to Buyer, and Buyer desires to purchase and assume from Seller, the Purchased Assets and the Assumed Liabilities, subject to all of the terms and conditions hereof;


NOW, THEREFORE, Buyer, Parent and Seller, in consideration of the representations, warranties and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and subject to the terms and conditions hereinafter set forth, and intending to be legally bound, do hereby agree as follows:


ARTICLE 1


DEFINITIONS
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For purposes of this Agreement:


1.1. "Action" means any action, suit, arbitration, inquiry, proceeding or investigation by or before any court, governmental or other regulatory or administrative agency or commission or other tribunal, including without limitation any arbitrator.


1.2. "Adjusted Working Capital" means Net Working Capital, as shown on the Final Closing Balance Sheet, as adjusted for those items identified in the Agreed Accounting Principles.


1.3. "Adjustment Statements" shall have the meaning set forth in Section 4.3(a).


1.4. "Affiliate" means, with respect to any Entity, any other Entity directly or indirectly controlling, controlled by, or under common control with such other Entity. For purposes of the immediately preceding sentence, the term "control" (including, with correlative meanings, the terms "controlled by" and "under common control with" as used with respect to


any Entity) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Entity whether through ownership of voting securities, by contract or otherwise.


1.5. "Agreed Accounting Principles" means those accounting adjustments and principles set forth on Schedule 1.5. Schedule 1.5 also sets
------------ ------------- forth the calculation of the Target Working Capital in accordance with the Agreed Accounting Principles.


1.6. "Agreement" means this Asset Purchase Agreement.


1.7. "Assignment and Assumption Agreement" shall have the meaning set forth in Section 11.2(c).


1.8. "Assumed Liabilities" shall have the meaning set forth in Section 3.1.


1.9. "Attorneys' Fees" means all reasonable outside attorneys' fees and out-of-pocket expenses.


1.10. "Aviation Authorities" means the Federal Aviation Administration and any and all other governmental or quasi-governmental authorities regulating aspects of aviation, and any successor to any of the foregoing.


1.11. "Balance Sheet" means the unaudited balance sheet of the Seller as of March 31, 2001, which is attached hereto as part of Schedule 5.3(a).
---------------


1.12. "Bill of Sale" shall have the meaning set forth in Section 11.2(a).


1.13. "Business" means the business of maintaining, repairing and overhauling hydraulic, pneumatic, electrical and electromagnetic aircraft components, avionics and instruments as conducted by Seller as of the date hereof, with such additions or changes thereto in the ordinary course of business as shall occur after the date hereof but prior to the Closing Date in accordance with this Agreement.


1.14 "Buyer" means Hamilton Sundstrand Service Corporation, with its principal place of business located at 1 Hamilton Road, 1-2-AB52, Windsor Locks, Connecticut 06096.


1.15. "Buyer Group" shall have the meaning set forth in Section 13.1.


1.16. "Buyer Legal Opinion" shall have the meaning set forth in Section 10.2(e).


1.17. "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. (S)9601 et seq., as amended.
-------


1.18. "Closing" shall have the meaning set forth in Section 4.2.


1.19. "Closing Balance Sheet" shall have the meaning set forth in Section 4.3(a).


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1.20. "Closing Date" shall have the meaning set forth in Section 11.1.


1.21. "Closing Date Payment Amount" means $21,750,000.


1.22. "Code" means the Internal Revenue Code of 1986, as amended from time to time.


1.23. "Contracts" means all purchase orders, sales orders, distributor agreements, franchise agreements, sales representation agreements, warranty agreements, service agreements, leases and subleases of personal property, collective bargaining agreements and other contracts with labor unions, employment and consulting agreements, guaranty agreements, confidentiality agreements and other agreements and contracts, in each case to which the Seller is a party or by which it or any of the Purchased Assets may be bound or affected.


1.24. "Damages" means any and all debts, losses, claims, damages, costs, fines, judgments, penalties, obligations, payments, expenses and liabilities of every type and nature (including without limitation those arising out of any Action), together with any reasonable costs and expenses (including, without limitation, Attorneys' Fees) incurred in connection with any of the foregoing, including, without limitation, the reasonable cost of the investigation, preparation or defense of any Action in connection therewith.


1.25. "Deferred Payment Amount" means $750,000.


1.26. "Dollars" or "$" means the lawful money of the United States of America.


1.27. "Effective Date" shall have the meaning set forth in Section 9.1.


1.28. "Employees" means those employees who are employed by Seller to whom Buyer offers employment on the Effective Date applicable thereto as set forth in Section 9.1.


1.29. "Entity" means any individual, corporation, partnership, limited liability company, trust or unincorporated organization or other entity.


1.30. "Environmental Laws" means applicable federal, state, provincial, territorial, local and municipal laws; rules, regulations, orders, permits, approvals, decisions, decrees, ordinances or by-laws having the force of law; and any common or civil laws; all as adopted or enacted prior to or as of the Closing Date (or with respect to the representations and warranties made pursuant to Section 5.10(b), 5.10(c) and 5.11(b), in effect as of the respective dates such representations and warranties are made) which relate to (a) pollution or destruction of, or loss of or injury to, or any adverse effect upon, the environment, (b) the protection, cleanup or restoration of, or removal, remediation or mitigation of conditions affecting, the environment, (c) the release, discharge, emission, generation, handling, transportation, use, treatment, storage or disposal of any Hazardous Substance, (d) the regulation of the manufacture, processing, distribution or use of chemical substances for commercial purposes, (e) radioactive materials, by-products or waste, or (f) the protection of the safety or health of humans, including, but not limited to, exposure to Hazardous Substances.


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1.31. "Environmental Liabilities" means all liabilities and obligations, including, without limitation, all Damages, whether direct or indirect, known or unknown, current or potential, past, present or future, imposed by, under or pursuant to Environmental Laws, including, without limitation, those related to Remedial Actions, and all reasonable fees, disbursements and expenses of counsel, experts, personnel and consultants based on, arising out of or otherwise in respect of: (i) the ownership or operation of the Business, Real Property or any other real property, assets, equipment or facilities, by Seller or any of its predecessors or Affiliates; (ii) the environmental conditions existing on the Closing Date on, under, above, or about any Real Property or any other real property, assets, equipment or facilities currently or previously owned, leased or operated by Seller or any of its predecessors or Affiliates, to the extent that any such environmental conditions are in violation of Environmental Laws; and (iii) expenditures necessary to cause any Real Property or any aspect of the Business to be in compliance with any and all requirements of Environmental Laws as of the Closing Date necessary to make full economic use of any Real Property.


1.32. "Environmental Licenses" shall have the meaning set forth in Section 5.11(b).


1.33. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.


1.34. "ERISA Plan" means an "employee benefit plan" as defined in section 3(3) of ERISA.


1.35. "Escrow Agent" means Chase Manhattan Trust Company, National Association.


1.36. "Escrow Agreement" means the escrow agreement by and among Buyer, Seller and the Escrow Agent in substantially the form attached hereto as Exhibit B. - ---------


1.37. "Final Closing Balance Sheet" shall have the meaning set forth in Section 4.3(b).


1.38. "Financial Statements" shall have the meaning set forth in Section 5.3(a).


1.39. "Former Facility" means the facility formerly occupied by Seller and located at 2200 Northwest 84/th/ Avenue, Miami, Florida 33122.


1.40. "GAAP" means generally accepted accounting principles in the United States of America.


1.41. "Hazardous Substance" means any pollutant, contaminant, petroleum or petroleum product, asbestos, polychlorinated byphenyl, dangerous or toxic substance, hazardous or extremely hazardous substance or chemical, solid or hazardous waste, special, liquid, industrial or other waste, hazardous material, or other material, substance or agent (whether in solid, liquid or gaseous form) that is regulated pursuant to Environmental Laws.


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1.42. "Intellectual Property" means all Seller's right, title and interest in and to domestic and foreign letters patent, patents, patent applications, docketed patent disclosures, patent licenses, other patent rights, trademarks, trademark registrations, trademark applications, trademark licenses, other trademark rights, service marks, service mark registrations, service mark applications, service mark licenses, other service mark rights, company names (including, without limitation, the name "Caribe Aviation" and all variants thereof), trade names, trade name licenses, trade dress, brand names, brand marks, logos, slogans, ideas, processes, copyrights, copyright registrations, copyright applications, Know-How, Know-How licenses, computer software owned, computer software licenses, computer data, licenses and sublicenses granted and obtained with respect thereto, and any divisions, extensions, renewals, reissues, continuations, or continuations in part, and rights thereunder, remedies against infringement thereof, and rights to protection of interests therein under the laws of all jurisdictions with respect to any of the foregoing.


1.43. "Know-How" means trade secrets, know-how (including product know-how and use and application know-how), formulas, processes, product designs, inventions, specifications, quality control procedures, manufacturing, cost and pricing data, parts trading information, engineering and other drawings, technology, technical information, safety information, lab journals, engineering data and design and engineering specifications, research records, market surveys and promotional literature, customer and supplier lists and similar data, including all depictions, descriptions, drawings and plans thereof.


1.44. "Lease" means that certain Lease Agreement dated as of December 17, 1998 by and between the Trustee, as Lessor, and Parent, as Lessee, pursuant to which Parent leases the Leased Real Property.


1.45. "Leased Real Property" means the real property located at 3601 Flamingo Road, Miramar, Florida 33027 that is occupied by the Seller as of the date of this Agreement.


1.46. "Licenses" means the permits, licenses, certificates, orders, consents, authorizations, franchises and other approvals from, or required by, any governmental authority that are used by or necessary to own and to operate the Business, as currently configured and normally operated (or as proposed or required to be configured or operated), together with any applications for the issuance, renewal, modification, extension or expansion thereof and all supporting information and analyses.


1.47. "Lien" means any lien, mortgage, security interest, charge, pledge, retention of title agreement, adverse claim, easement, encroachment, restrictive covenant or other encumbrance affecting title to any property of any sort.


1.48. "Listed Hazardous Site" means any site or facility listed or proposed for listing on the National Priority List established pursuant to CERCLA or on any list established by any governmental authority or body of sites requiring or potentially requiring Remedial Action.


1.49. "Material Adverse Effect" means (a) a material adverse effect on the Business, the Purchased Assets, Assumed Liabilities, financial condition or results of operations


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of Seller, taken as a whole (without giving effect to any effect on the Retained Assets or the Retained Liabilities), or (b) a material adverse effect on the ability of Seller to consummate the transactions contemplated by this Agreement.


1.50. "NFA" means a determination of No Further Action or equivalent, with or without conditions, by the appropriate governmental authority or body.


1.51. "Party" means Buyer, Parent or Seller, referred to individually, and "Parties" means Buyer, Parent and Seller, referred to collectively.


1.52. "Plans" shall have the meaning set forth in Section 5.14(a).


1.53. "Prime Rate" means the rate per annum equal to the publicly announced prime commercial lending rate of Chase Manhattan Bank (or any successor thereof) in effect from time to time, changing as such publicly announced rate changes, effective as of the date Chase Manhattan Bank publicly announces such change.


1.54. "Purchase Price" shall have the meaning set forth in Section 4.1.


1.55. "Purchased Assets" shall have the meaning set forth in Section 2.1.


1.56. "Real Property Purchase Price" means $8,500,000 to be paid to the Trustee for the purchase of the Leased Real Property.


1.57. "Reciprocal Easement Agreement" means that certain easement agreement by and between Buyer and the Trustee in substantially the form attached hereto as Exhibit C.
---------


1.58. "Related Person" means Seller and any trade or business whether or not incorporated, which, together with the Seller would, as of any date of determination, be treated as a single employer under Section 414 of the Code.


1.59. "Remedial Action" means actions required by Environmental Laws to (a) clean up, contain, control, mitigate, remove, treat or in any other way remediate any Hazardous Substance, (b) prevent the release of any Hazardous Substance so that it does not migrate or endanger or threaten to endanger public health or welfare or the environment, or (c) perform studies, investigations and evaluations related to any such Hazardous Substances. A Remedial Action shall be deemed complete upon receipt of an NFA.


1.60. "Repairs" means the performing of maintenance, repair or overhaul activities on the components identified on Schedule 1.60.
-------------


1.61. "Retained Assets" shall have the meaning set forth in Section 2.2.


1.62. "Retained Liabilities" shall have the meaning set forth in Section 3.2.


1.63. "Returns" shall have the meaning set forth in Section 5.9.


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1.64. "Sale" means the purchase of the Purchased Assets and the assumption of the Assumed Liabilities by Buyer at the Closing.


1.65. "Sale Confidentiality Agreements" shall have the meaning set forth in Section 7.10.


1.66. "Seller" means Caribe Aviation, Inc., a corporation organized and existing under the laws of the State of Florida, with its principal place of business located at 3601 Flamingo Road, Miramar, Florida 33027.


1.67. "Seller Employee Benefit Plan" shall have the meaning set forth in Section 5.14(a).


1.68. "Seller Group" shall have the meaning set forth in Section 13.2.


1.69. "Seller's Knowledge" means the actual knowledge of the persons listed on Schedule 1.69.
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1.70. "Seller Legal Opinion" shall have the meaning set forth in Section 10.1(g).


1.71. "Survival Period" shall have the meaning set forth in Section 13.6(b).


1.72. "Target Working Capital" means $7,094,792, which is the Working Capital as of March 31, 2001 calculated in accordance with the Agreed Accounting Principles, all as shown on Schedule 1.5.
------------


1.73. "Tax" or "Taxes" means (a) all income, profits, franchise, gross receipts, capital, sales, use, withholding, municipal license (patents), value added, ad valorem, transfer, employment, social security, disability, occupation, property, severance, production, excise and other taxes, duties and other similar governmental charges and assessments imposed by or on behalf of any government or taxing authority (including interest and penalties thereon and additions thereto), and (b) any obligations under any agreements or arrangements with respect to any Taxes described in clause (a) above.


1.74. "Trustee" means Wells Fargo Bank Northwest, National Association, solely in its capacity as Owner Trustee of the Aviation Sales Trust 1998-1.


1.75. "Unaffiliated Firm" shall have the meaning set forth in Section 4.3(b).


1.76. "Underground Storage Tank" has the meaning ascribed to such term in Section 6901 et seq., as amended, of the Resource Conservation and Recovery Act of 1976, as amended, or any applicable state or local statute, law, ordinance, code, rule, regulation, order, ruling or decree governing underground storage tanks.


1.77. "United States" means the 50 states of the United States of America and the District of Columbia.


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1.78. "Working Capital" means the current assets included in the Purchased Assets minus the current liabilities included in the Assumed Liabilities, in each case as shown on the Closing Balance Sheet or the Final Closing Balance Sheet, as the case may be.


ARTICLE 2


SALE AND PURCHASE OF PURCHASED ASSETS
-------------------------------------


2.1. Purchased Assets. Subject to the terms and conditions hereof, Seller
---------------- shall sell, assign, transfer and deliver to Buyer, and Buyer shall purchase, pay for and accept from Seller, all of the Business, properties, rights and assets of Seller used in or otherwise related to the Business (except for the Retained Assets), tangible and intangible, real, personal and mixed, wherever located, whether now existing or hereafter acquired, together with all of the goodwill associated therewith (collectively, the "Purchased Assets"). The sale, assignment, transfer and delivery of the Purchased Assets shall be free and clear of all Liens. Without limiting the generality of the foregoing, the Purchased Assets shall exclude the Retained Assets and shall include, as the same exist on the Closing Date:


(a) All accounts and notes receivable of Seller (other than accounts and notes receivable that are owed by Parent or any Affiliate of Parent);


(b) All of Seller's personal property, including, without limitation, all furniture, office equipment and supplies, computer hardware, communications and peripheral equipment, tools, dies and product tooling and all vehicles, machinery and equipment listed or required to be listed on Schedule 5.3(e);
---------------


(c) The Intellectual Property;


(d) Any and all insurance claims and rights, and any and all insurance policies underlying such claims or rights, with respect to injury, damage or loss occurring on or prior to the Closing Date under all current and past insurance policies and contracts of Seller, and the proceeds thereof;


(e) All rights of Seller under the Contracts; provided, however, that
-------- ------- this Section 2.1(e) and any assignment or proposed assignment of such Contracts shall be subject to Section 7.4;


(f) All of Seller's business papers, books and records in whatever form (e.g., computerized information and written information), including, without limitation, sales records, invoices, credit records, customer lists and records, distributor records, supplier lists and records, price lists, purchasing materials and records, personnel, labor relations and payroll records, manufacturing, maintenance and quality control records and procedures, warranty and service records, blueprints, accounting and financial records, inventory records, accounts receivable and accounts payable records and files, tax records and litigation files (other than Tax records and litigation files related to Retained Assets or Retained Liabilities);


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(g) All of Seller's rights and interests under or pursuant to all warranties, representations and guarantees of or made by suppliers in connection with the Purchased Assets or the Assumed Liabilities;


(h) Any and all claims (other than insurance claims which are governed by Section 2.1(d), but including counterclaims, cross claims and other claims in the nature of indemnification or contribution), rights and choses in action against other Entities to the extent relating to any Purchased Assets (except to the extent such claims, rights or choses in action relate to Retained Liabilities) or Assumed Liabilities;


(i) All prepaid and similar items, including, without limitation, all prepaid expenses, deferred charges, deposits, rebates and discounts from vendors and advance payments;


(j) All of Seller's inventories and supplies, including, without limitation, raw materials, work in process, finished goods inventory and packaging and shipping materials, including items in transit or on consignment;


(k) All of Seller's marketing and sales literature (including catalogs and brochures);


(l) The Licenses; provided, however, that this Section 2.1(l) and any
-------- ------- transfer or proposed transfer of any of the Licenses shall be subject to Section 7.6(b); and


(m) The goodwill and going concern value and other intangible assets, if any, of Seller.


2.2. Retained Assets. Notwithstanding anything contained herein to the
--------------- contrary, Seller shall not sell, and Buyer shall not acquire, the following assets, properties, interests and rights of Seller (the "Retained Assets"):


(a) All cash and cash equivalents, such as bank deposits and marketable securities;


(b) The Lease;


(c) The shares of capital stock of Aircraft Interior Design, Inc. and the equity or ownership interests in any other Entity owned by Seller;


(d) The inventory of Seller that is the subject of that certain Excess Inventory Consignment Agreement, dated December 20, 2000, between Aviation Sales Bearings Company and Seller;


(e) The accounts receivable of Seller that are the subject of that certain Excess Accounts Receivable Collection Agreement, dated December 20, 2000, between Aviation Sales Bearings Company and Seller;


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(f) Those insurance claims for property damage to the Former Facility and insurance claims for damages related to the interruption of business caused by such property damage, the security deposit in the amount of $32,500 in respect of the Former Facility and the lease in respect of the Former Facility;


(g) The server, personal computers and other information systems equipment and software owned, leased or licensed and exclusively used by Parent but located at the Leased Real Property;


(h) The contracts and other assets identified on Schedule 2.2(h);
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(i) The Purchase Price paid to Seller pursuant to this Agreement; and


(j) All accounts and notes receivable that are owed by Parent or any Affiliate of Parent.


ARTICLE 3


LIABILITIES
-----------


3.1. Assumed Liabilities. On the Closing Date, Buyer shall assume and agree
------------------- to pay, perform and discharge only (a) those liabilities and obligations accruing or arising after the Closing Date under Licenses or Contracts forming part of the Purchased Assets, except for those liabilities and obligations described on Schedule 3.2, and (b) accounts payable, trade obligations and
------------ accrued expenses incurred in the ordinary course of business of the Business (excluding all accounts payable and trade obligations that are owed to Parent or any Affiliate of Parent) in the amounts reflected on the face of the Final Closing Balance Sheet (collectively, the "Assumed Liabilities"). Buyer shall not assume any other liabilities or obligations whatsoever of Seller.


3.2. Retained Liabilities. Notwithstanding anything herein to the contrary,
-------------------- Seller agrees that it shall retain, and acknowledges that Buyer has not agreed to pay, shall not assume and shall not have any liability or obligation with respect to, any and all liabilities and obligations of Seller, whether fixed, absolute or contingent, material or immaterial, matured or unmatured, other than the Assumed Liabilities (the "Retained Liabilities"). Without limiting the generality of the foregoing, Retained Liabilities shall include the following:


(a) Al
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