UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the third quarterly period ended December 31, 1997
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From to
--------------------- ---------------------
Commission File Number: 001-13657
---------
STANDARD AUTOMOTIVE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 52-2018607
- ------------------------------------------- --------------------------------
(State or other Jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
321 Valley Rd., Hillsborough Township, NJ 08876-4056
- ------------------------------------------- --------------------------------
(Address of principal executive offices) (Zip Code)
(908) 369-5544
--------------
(Registrant's telephone number, including area code)
Not applicable
--------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
As of March 3, 1998 the registrant had a total of 3,095,000 shares of
Common Stock outstanding and 1,150,000 shares of Preferred Stock outstanding.
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Index to Form 10-Q
December 31, 1997
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited)
STANDARD AUTOMOTIVE CORPORATION
Balance Sheets at March 31, 1997 and December 31, 1997 3
Statements of Income for the three and nine months ended
December 31, 1997 4
Statements of Cash Flows for the nine months ended
December 31, 1997 5
Notes to Financial Statements 6-8
AJAX MANUFACTURING COMPANY
Balance Sheets at March 31, 1997 and December 31, 1997 9
Statements of Income for the three and nine months ended
December 31, 1996 and 1997 10
Statements of Cash Flows for the nine months ended December
31, 1996 and 1997 11
Notes to Financial Statements 12-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-17
PART II. OTHER INFORMATION
Item 5. Subsequent Events 17
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
2
<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
STANDARD AUTOMOTIVE CORPORATION
Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
----------- -----------
1997 1997
----------- -----------
<S> <C> <C>
Assets
Cash and cash equivalents $ - $ -
Capitalized acquisition and financing costs 375,000 1,480,000
----------- -----------
Total assets $ 375,000 $ 1,480,000
=========== ===========
Liabilities and Shareholders' Equity
Accrued expenses $ 375,000 $ 1,196,000
Accrued obligation on settlement of Bridge Notes payable - 275,000
Bridge Notes payable - 325,000
----------- -----------
Total current liabilities 375,000 1,796,000
Commitments and contingencies
Shareholders' equity:
Preferred stock, $ .001 par value 3,000,000 shares authorized,
none issued and outstanding - -
Common stock, $ .001 par value 10,000,000 shares authorized,
1,567,500 issued and outstanding 2,000 2,000
Common stock subscription receivable (2,000) (2,000)
Accumulated deficit - (316,000)
----------- -----------
Total shareholders' (deficit) - (316,000)
----------- -----------
Total liabilities and shareholders' (deficit) $ 375,000 $ 1,480,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Statements of Income
<TABLE>
<CAPTION>
Nine months Three months
----------- ------------
Ended December 31, 1997
--------------------------
<S> <C> <C>
Revenues $ - $ -
Interest expense related to Bridge Notes 316,000 144,000
----------- -----------
Total expenses 316,000 144,000
Loss before income taxes (316,000) (144,000)
Tax benefit - -
----------- -----------
Net income $ (316,000) $ (144,000)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Statement of Cash Flows
<TABLE>
<CAPTION>
Nine months ended
December 31, 1997
-----------------
<S> <C>
Cash flows from operating activities:
Net loss $(316,000)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Accretion interest expense related to settlement of Bridge Notes payable 275,000
Amortization of financing fees 32,000
Deferred taxes -
Accounts receivable -
Prepaid expenses -
Accounts payable and accrued expenses (316,000)
Income taxes payable -
---------
Net cash used in operating activities (325,000)
Cash flows from by investing activities:
Proceeds from issuance of Bridge Notes 325,000
---------
Net cash provided by investing activities 325,000
---------
Net increase in cash and cash equivalents -
Cash and cash equivalents, beginning of period -
---------
Cash and cash equivalents, end of period $ -
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Notes to Financial Statements
December 31, 1997
BASIS OF PRESENTATION AND OPERATIONS
General
The financial statements as of and for the three and nine months ended
December 31, 1997 are unaudited; however in the opinion of management all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation of the financial statements for the interim period have been
made. In November 1997, Standard Automotive Corporation ("Standard") effected a
.758162-for-one reverse stock split, which reduced the number of shares of
Standard outstanding from 2,067,500 to 1,567,500. All references to share and
per share data have been restated to reflect the effects of the split.
Organizational
Standard Automotive Corporation was formed and incorporated in January
1997. Standard has conducted no operations from the date of inception up through
the date of the completion of the acquisition of Ajax Manufacturing Company
("Ajax"), other than incurring certain costs related to this transaction.
Standard has capitalized approximately $375,000 and $1,480,000 of such costs at
March 31, 1997 and December 31, 1997, respectively. The acquisition agreement
was executed in August 1997. The acquisition of Ajax was financed from the
proceeds of an Initial Public Offering ("IPO") of Standard's common and
preferred stock. Of the total amount of 3,000,000 authorized shares of Preferred
Stock, Standard had reserved 1,150,000 shares in connection with the acquisition
of Ajax. Of the total amount of 10,000,000 authorized shares of Common Stock,
Standard had reserved 1,495,000 in connection with the acquisition.
In January 1998, Standard completed its IPO of 1,495,000 Shares of Common
Stock and 1,150,000 Shares of Convertible Redeemable Preferred Stock both of
which commenced trading on the American Stock Exchange with the symbols "AJX"
and "AJX.Pr", respectively. Standard received aggregate gross proceeds of
$28,750,000 from the offering.
Concurrent with the IPO Standard completed its acquisition of Ajax
Manufacturing Company, Inc. for consideration approximating $24,000,000. The
exact purchase price is subject to adjustment by the parties and will be based
on the financial position of Ajax on the closing date. Such estimate has not as
yet been completed.
Standard maintains its books and records on the accrual basis of
accounting.
Common Stock was issued to Standard's founders and principals at nominal
values, which approximated management's assessment of the fair values of such
securities at the date of issuance. At that time, Standard had conducted no
business and the probability of consummating the acquisition of Ajax could not
be predicted with any degree of certainty.
Taxes
Based on an assessment of all available evidence, including the lack of
historical positive operating trends, management concluded that the realization
of the deferred tax asset (approximately $126,000 at December 31, 1997) could
not be considered more likely than not. Accordingly, a valuation allowance was
established against the deferred tax asset.
Related Party Transaction
In January 1998, the Company entered into a consulting contract with a
Director of Standard for annual compensation of $100,000 and 75,000 warrants at
105% of the IPO share price which approximated the fair market value at the time
of grant.
In February 1998, the Company issued 225,000 warrants at fair market value
to a Director and Officer of Standard who is also the Secretary and Vice
President.
6
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Notes to Financial Statements
December 31, 1997
Bridge Financing
In August 1997, Standard obtained $325,000 in Bridge Financing ("Bridge
Notes") from third party investors. Upon completion of the IPO, Standard repaid
the principal amount of Bridge Notes along with interest thereon at the annual
rate of 12% from the date of issuance and issued holders of the Bridge Notes
32,5000 shares of common stock to equal the principal amount of the bridge
notes, determined by the initial public offering price of $10.00 per share of
Standard's common stock. Standard incurred a charge to operations in the period
that the Bridge Notes were outstanding. Interest expense on the anticipated
issuance of common stock to Bridge Notes investors totaled $275,000 for the nine
months ended December 31, 1997. Interest expense on the Bridge Notes and
amortization of related fees totaled $17,000 and $24,000, respectively, through
December 31, 1997.
Unaudited Combined Financial Statements
The following unaudited combined Balance Sheet and Statement of Income are
tabulations of the financial condition of Standard and Ajax as if they were
combined at December 31, 1997, without giving effect to any potential IPO and/or
closing adjustments.
<TABLE>
<CAPTION>
Unaudited Combined Balance Sheets STANDARD AJAX Combined
------------ ------------ ------------
As at December 31, 1997
-------------------------------------------
<S> <C> <C> <C>
Assets (Actual)
Cash and cash equivalents $ -- $ 488,000 $ 488,000
Accounts receivable, net -- 2,047,000 2,047,000
Inventory -- 8,177,000 8,177,000
Prepaid expenses -- 221,000 221,000
Deferred taxes -- 252,000 252,000
------------ ------------ ------------
Total current assets -- 11,185,000 11,185,000
Capitalized acquisition and financing costs 1,480,000 -- 1,480,000
Property and equipment, net -- 1,129,000 1,129,000
Loans receivable - related parties -- 326,000 326,000
------------ ------------ ------------
Total assets $ 1,480,000 $ 12,640,000 $ 14,120,000
============ ============ ============
Liabilities and Shareholders' Equity
Accounts payable $ -- 2,171,000 $ 2,171,000
Accrued expenses 1,196,000 611,000 1,807,000
Accrued obligation on Bridge Notes payable 275,000 -- 275,000
Note payable 325,000 -- 325,000
Income taxes payable -- 980,000 980,000
------------ ------------ ------------
Total current liabilities 1,796,000 3,762,000 5,558,000
Deferred income taxes payable -- 12,000 12,000
------------ ------------ ------------
Total liabilities 1,796,000 3,774,000 5,570,000
Shareholder's equity:
Common stock 2,000 1,000 3,000
Common stock subscription receivable (2,000) -- (2,000)
Contributed capital -- 270,000 270,000
Retained earnings (accumulated deficit) (316,000) 8,595,000 8,279,000
------------ ------------ ------------
Total shareholders' equity (deficit) (316,000) 8,866,000 8,550,000
------------ ------------ ------------
Total liabilities and shareholders' equity $ 1,480,000 $ 12,640,000 $ 14,120,000
============ ============ ============
</TABLE>
7
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
Notes to Financial Statements
December 31, 1997
Unaudited Combined Statements of Income and Retained Earnings
<TABLE>
<CAPTION>
STANDARD AJAX Combined
------------ ------------ ------------
For the nine months ended December 31, 1997
--------------------------------------------
<S> <C> <C> <C>
Revenues $ -- $ 19,850,000 $ 19,850,000
Cost of revenues -- 15,032,000 15,032,000
Selling, general and administrative expenses -- 1,275,000 1,275,000
------------ ------------ ------------
Total operating costs and expenses -- 16,307,000 16,307,000
------------ ------------ ------------
Operating income -- 3,543,000 3,543,000
Interest expense related to Bridge Notes (316,000) -- (316,000)
Other income (expense) -- (790,000) (790,000)
------------ ------------ ------------
Income before provision for income taxes (316,000) 2,753,000 2,437,000
Provision for income taxes -- 1,110,000 1,110,000
------------ ------------ ------------
Net income (316,000) 1,643,000 1,327,000
Retained earnings (accumulated deficit),
beginning of period -- 6,952,000 6,952,000
------------ ------------ ------------
Retained earnings (accumulated deficit),
end of period $ (316,000) $ 8,595,000 $ 8,279,000
============ ============ ============
</TABLE>
8
<PAGE>
Ajax Manufacturing Company
Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
-------------------------
1997 1997
----------- -----------
<S> <C> <C>
Assets
Cash and cash equivalents $ 1,558,000 $ 488,000
Accounts receivable, net of allowance for doubtful accounts
of $30,000 and $55,000, respectively 2,536,000 2,047,000
Inventory 3,515,000 8,177,000
Prepaid expenses 220,000 221,000
Deferred taxes 205,000 252,000
----------- -----------
Total current assets 8,034,000 11,185,000
Property and equipment, net of accumulated depreciation and
amortization of $2,539,000 and $2,638,000, respectively 994,000 1,129,000
Loans receivable - related parties 300,000 326,000
----------- -----------
Total assets $ 9,328,000 $12,640,000
=========== ===========
Liabilities and Stockholder's Equity
Accounts payable $ 1,179,000 $ 2,171,000
Accrued expenses 670,000 611,000
Income taxes payable 244,000 980,000
----------- -----------
Total current liabilities 2,093,000 3,762,000
Deferred income taxes 12,000 12,000
----------- -----------
Total liabilities 2,105,000 3,774,000
Commitments and contingencies
Stockholder's equity:
Common stock, no par value 100 shares authorized, 75 shares
issued and outstanding 1,000 1,000
Contributed capital 270,000 270,000
Retained earnings 6,952,000 8,595,000
----------- -----------
Total stockholder's equity 7,223,000 8,866,000
----------- -----------
Total liabilities and stockholder's equity $ 9,328,000 $12,640,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Ajax Manufacturing Company
Statements of Income and Retained Earnings
<TABLE>
<CAPTION>
Nine months ended Three months ended
December 31, December 31,
1996 1997 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 16,907,000 $ 19,850,000 $ 8,126,000 $ 8,680,000
Operating costs and expenses:
Cost of revenues 13,108,000 15,032,000 6,162,000 6,152,000
Selling, general and administrative
expenses 1,777,000 1,275,000 704,000 475,000
------------ ------------ ------------ ------------
Total operating costs and expenses 14,885,000 16,307,000 6,866,000 6,627,000
------------ ------------ ------------ ------------
Operating income 2,022,000 3,543,000 1,260,000 2,053,000
Interest expense -- -- -- --
Other income (expense):
Excise tax settlement -- (829,000) -- --
Investment income 50,000 39,000 18,000 7,000
------------ ------------ ------------ ------------
Income before income taxes 2,072,000 2,753,000 1,278,000 2,060,000
Provision for income taxes 891,000 1,110,000 565,000 824,000
------------ ------------ ------------ ------------
Net income 1,181,000 1,643,000 713,000 1,236,000
Retained earnings, beginning of period 5,224,000 6,952,000 5,692,000 7,359,000
------------ ------------ ------------ ------------
Retained earnings, end of period $ 6,405,000 $ 8,595,000 $ 6,405,000 $ 8,595,000
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Ajax Manufacturing Company
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months ended December 31,
-----------------------------
1996 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,181,000 $ 1,643,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Bad debt provision -- 25,000
Depreciation and amortization 113,000 99,000
Deferred taxes -- (47,000)
Accounts receivable (2,266,000) 464,000
Inventory (584,000) (4,662,000)
Other receivables 94,000 --
Prepaid expenses 13,000 (1,000)
Accounts payable and accrued expenses 1,256,000 933,000
Income taxes payable (369,000) 736,000
----------- -----------
Net cash used in operating activities (562,000) (810,000)
----------- -----------
Cash flows from investing activities:
Issuance of note receivable - related parties (307,000) (26,000)
Acquisition of property and equipment (80,000) (234,000)
----------- -----------
Net cash used in investing activities (387,000) (260,000)
----------- -----------
Cash flows provided by (used in) financing activities:
----------- -----------
Net cash provided by (used in) financing activities -- --
----------- -----------
Net decrease in cash and cash equivalents (949,000) (1,070,000)
Cash and cash equivalents, beginning of period 1,482,000 1,558,000
----------- -----------
Cash and cash equivalents, end of period $ 533,000 $ 488,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ -- $ --
Income taxes 791,000 415,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Ajax Manufacturing Company
Notes to Financial Statements
December 31, 1997
BASIS OF PRESENTATION AND OPERATIONS
Business Description
Ajax Manufacturing Company ("Company") principally manufactures and
refurbishes trailer chassis at its Hillsborough, New Jersey facility. The
Company also manufactures industrial waste and refuse containers. Certain
transactions of the Company were initially executed under the name of an
inactive, affiliated corporation controlled by the Company's Stockholder, which
related costs were funded by the Company and reflected in the accompanying
financial statements.
The financial statements as of and for the three and nine month periods
ended December 31, 1996 and 1997 are unaudited; however in the opinion of
management all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation of the financial statements for the interim
periods have been made. The results of interim periods are not necessarily
indicative of the results to be obtained in a full fiscal year.
Sale of Company
On January 26, 1998 the Company's Stockholder completed the sale of the
Company to an independent third party, Standard Automotive Corporation
("Standard"), for consideration approximating $24,000,000. The exact purchase
price is subject to adjustment by the parties and will be based on the financial
position of the Company on the closing date. Such estimate has not as yet been
completed.
In connection with the sale, the Company has executed a lease with its
Stockholder for an initial term of five years with four renewal options totaling
twenty years. The annual base rent over the initial term will be $620,000.
Summary of Significant Accounting Policies
Revenue Recognition
The Company recognizes revenue when the product is inspected and accepted
by its customers or the customers' authorized agent and title has transferred.
Inventory
Inventory is stated at the lower of cost, determined on a first-in,
first-out basis, or market.
Inventory at December 31, 1997 has been costed using the gross-profit
method that has been utilized in arriving at the cost of sales for the three and
nine months ended December 31, 1997 and 1996.
Short term Borrowings
In November 1995, the Company entered into a revolving line of credit
agreement with a bank (the "Agreement") which permits borrowings up to the
lesser of (1) $2,000,000 or (2) the sum of defined account receivables and
inventory levels, plus $750,000. Interest on the revolving line of credit is
payable monthly at the bank's rate, plus 2%. There was no outstanding balance as
of March 31, 1997 and December 31, 1997.
The Agreement contained certain restrictions, including prohibitions on
additional borrowings or guarantees, the sale of assets and the payment of
dividends. The Company was also required to maintain certain financial ratios.
As of December 31, 1997, the Company was in compliance with all financial and
operating covenants as specified in the Agreement. Substantially all of the
assets of the Company are pledged as collateral against outstanding borrowings.
This Agreement was terminated upon completion of the sale of the Company, as
previously discussed above.
12
<PAGE>
Ajax Manufacturing Company
Notes to Financial Statements
December 31, 1997
Related Party Transactions
Lease Obligations with Stockholder
The Company leases its manufacturing and office facilities from its sole
Stockholder on a monthly basis. Rent expense incurred by the Company for the
nine months ended December 31, 1997 is $465,000. At December 31, 1997 prepaid
rent totaled $51,667.
Selling, General and Administrative Expenses
The Company does not have employment agreements with its President; also
the Company's Stockholder and his son, an officer of the Company ("Officer").
The Stockholder's and Officer's compensation varies with the overall performance
of the Company and is generally subject to limitations imposed by financial
institutions, which had outstanding indebtedness with the Company. Salary and
incentives expense for the Company's Stockholder was $288,000 for nine months
ended December 31, 1997. Salaries and incentives expense for the Officer was
$142,000 for the nine months ended December 31, 1997.
Loans
At December 31, 1997 the Company had loan receivables of $326,000 from
related parties, principally an Officer and the Stockholder. The loans do not
bear interest or stipulate payment terms; accordingly, the receivables were
considered non-current. The Stockholder loans were repaid upon completion of the
sale of the Company.
Commitments and Contingencies
Internal Revenue Service ("IRS") Review
Revenue derived from sales of the Company's manufactured chassis is
subject to Federal excise tax. The Company uses certain estimates and valuation
assumptions in calculating excise tax liabilities. In July 1997, the IRS
notified the Company of an assessment totaling $1,722,000, (which includes
$287,000 of penalties) for the period from March 1995 through December 1996. In
November 1997, the Company and its outside counsel, based on discussions with
the IRS, decided to pursue a settlement agreement upon which the Company paid
approximately $829,000 to settle this matter. The Company recognized the effects
of this settlement as a charge in the six month period ended September 30, 1997.
13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read together with the
financial statements and notes thereto included in Standard Automotive
Corporation's Registration Statement on Form S-1 and the related Prospectus of
January 22, 1998.
AJAX MANUFACTURING COMPANY
Results of Operations
Overview
The Company manufactures and remanufactures trailer chassis. All of its
chassis are made to order and revenues are recognized when the finished product
is inspected and accepted by the customer or its agent. The market for chassis
is cyclical and is affected by overall economic conditions, in particular the
needs of the transportation industry. Remanufacturing existing chassis tends to
be counter-cyclical to manufacturing new chassis. To reduce the effect of
industry cyclicality on its business, in September 1996, the Company began to
manufacture roll-off refuse containers. Sales of such containers comprised less
than 1% of the Company's sales for the three and nine months ended December 31,
1997 and 1996.
The Company anticipates that the number of chassis it remanufactures will
increase as compared to the number of new chassis it manufactures as a result of
(i) a contemplated increase in the Company's marketing of its remanufacturing
capabilities, (ii) the potentially large number of purchasers of remanufactured
chassis among the lessors and steamship lines that use the Company's chassis,
(iii) the fact that the container chassis fleet is growing and aging and (iv)
potential regulatory changes affecting the container chassis fleet. The customer
provides the chassis that the Company remanufactures.
Results of Operations
The following discussion provides information regarding the Company's
results of operations for the nine months ended December 31, 1997 in comparison
to the nine months ended December 31,1996 and the results of operations for the
three months ended December 31, 1997 in comparison to the three months ended
December 31, 1996.
The following table sets forth, as a percentage of revenues, certain items
in the Company's statements of operations for the three and nine month periods
ended December 31, 1996 and 1997.
December 31,
------------
Nine months ended Three months ended
----------------- ------------------
1996 1997 1996 1997
----- ----- ----- -----
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 77.5 75.7 75.8 70.9
Selling, general and administrative
expenses 10.5 6.4 8.7 5.5
----- ----- ----- -----
Operating income 12.0 17.9 15.5 23.6
Other income (expense) 0.3 (4.0) 0.2 0.1
----- ----- ----- -----
Income before provision for taxes 12.3 14.0 15.7 23.7
Provision for income taxes 5.3 5.6 7.0 9.5
----- ----- ----- -----
Net income 7.0% 8.4% 8.7% 14.2%
===== ===== ===== =====
14
<PAGE>
Comparison of the Nine Month Periods Ended December 31, 1997 and 1996
Revenues for the nine months ended December 1997, were $19,850,000, an
increase of 17% from revenues of $16,907,000 in 1996. The increase in revenues
reflects an increase of approximately $1,613,000 in sales of remanufactured
chassis offset by a decrease of approximately $806,000 in sales of new chassis.
Also sales of replacement parts and kits to other refurbishers increased in
1997, by $1,939,000 as compared to 1996. During 1997, revenues from new chassis,
remanufactured chassis, spare parts/replacement kits and roll-off containers
represented 42%, 45%, 12% and 1% of revenues, as compared to 1996 of 54%, 42%,
4% and 0%, respectively.
Cost of revenues increased to $15,032,000 in the nine months ended
December 31, 1997, compared to $13,108,000 in 1996. Cost of revenues as a
percentage of revenues decreased to 76% of revenues in 1997 from 78% of revenues
in 1996 due to the increase in sales volume and a more favorable product mix.
Selling, general and administrative expenses ("SG&A") were $1,275,000
during the nine months ended December 31, 1997, a decrease of 28% from the
$1,777,000 of SG&A incurred during 1996. The decrease in SG&A is primarily
attributable to the fact that the Company accrued $856,000 for officers'
incentives during 1996 and accrued $188,000 in such incentives during 1997. The
decrease in officers' incentives is partially offset by increases in 1997, as
compared to 1996, of $130,000 in officers' salaries; $46,000 in office personnel
salaries, $15,000 in legal and professional fees and provision for bad debts of
$25,000. As a result of the increase in revenues and the decrease in SG&A, SG&A
represented approximately 6% of revenues in 1997, as compared to 11% of revenues
in 1996.
Other income (expense) for the nine months ended December 31, 1997
included a charge of $829,000 related to the settlement of an assessment of
excise tax liabilities with the Internal Revenue Service. In November 1997,
based on the information obtained and compiled by its outside counsel,
management reached an agreement and settled the excise tax liability assessed by
the Internal Revenue Service.
Comparison of the Three Month Periods Ended December 31, 1997 and 1996
Revenues for the three months ended December 31, 1997, were $8,680,000 an
increase of 7% from revenues of $8,126,000 during 1996. The increase in revenues
reflects an increase of approximately $951,000 in sales of remanufactured
chassis offset by a decrease of approximately $1,492,000 in sales of new chassis
and continued growth in sales of replacement parts and kits, which increased in
1997, by $793,000 as compared to revenues in 1996. During 1997, revenues from
new chassis, manufactured chassis, spare parts/replacement kits and roll-off
containers represented 48%, 41%, 11% and 0% of revenues, as compared to 1996 of
67%, 31%, 2% and 0%, respectively.
Cost of revenues decreased to $6,152,000 in the three months ended
December 31, 1997, compared to $6,162,000 in 1996. Cost of revenues as a
percentage of revenues decreased to 71% of revenues in 1997 from 76% of revenues
1996 due to the increase in sales volume and a more favorable product mix.
Selling, general and administrative expenses ("SG&A") were $475,000 during
the three months ended December 31, 1997, a decrease of 32% from the $704,000 of
SG&A incurred during 1996. The decrease in SG&A is primarily attributable to the
fact that the Company accrued $285,000 for officers' incentives during the three
months ended December 31, 1996 and accrued $63,000 of such incentives during
1997. The decrease in officers' incentives is partially offset by increases of
$70,000 in officers' salaries, $13,000 in office personnel salaries and
provision for bad debts of $25,000. Despite the increase in revenues, SG&A
represented approximately 6% of revenues in 1997, as compared to 9% of revenues
in 1996.
Other income (expense) was $7,000 for the three months ended December 31,
1997, a decrease of 61% from other income of $18,000 during 1996. Other income
consisted entirely of investment income and the decline was attributable to the
use of excess cash required to fund the Federal Excise tax settlement in
November 1997.
15
<PAGE>
Liquidity and Capital Resources
Historically and prior to the sale of the Company, the Company had
financed its operations through debt provided by its sole stockholder and loans
from financial institutions. In addition, to provide the Company with working
capital, Carl Massaro varied the amount of his compensation to reflect the
performance of the Company's business. The Company had a revolving line of
credit agreement with a bank permitting borrowing up to the lesser of $2,000,000
or the sum of certain inventory and receivables plus $750,000. As of December
31, 1997 there were no amounts outstanding on the Company's bank credit
facilities. Upon the completion of the sale of the Company, the facility was
terminated.
Capital expenditures, primarily for the acquisition of equipment at the
Company's facility were $234,000 for the nine months ended December 31, 1997.
The Company anticipates that capital expenditures during fiscal 1999 will exceed
those of the preceding years as the Company expands its roll-off refuse
container business, increases efficiency and output in its chassis line and
expands its product line to include intermodal containers. Although the Company
anticipates it will be able to finance such expenditures out of cash flow from
operations, capitalized equipment leases and funds remaining from the IPO, the
Company could require substantial additional capital if it were to seek to
expand its product lines by substantially modifying or modernizing its facility,
open additional facilities or acquire a new businesses within the chassis
industry or other related industries.
The Company used $810,000 in operating activities during the nine months
ended December 31, 1997, as compared to $562,000 used in 1996. The use of cash
in operating activities during the nine months ended December 31, 1997, reflects
primarily an increase of approximately $4,700,000 in the Company's inventory in
order to facilitate the increase in sales. Additionally, the Company funded
$829,000 as a non-recurring expense for the aforementioned IRS settlement
agreement. Net cash used by investing activities was $260,000 during the nine
months ended December 31, 1997, as compared to $387,000 used in investing
activities during 1996. The use of cash in investing activities during the
earlier period reflects a loan of $307,000 to a related party.
The terms on which the Company manufactures and remanufactures chassis
provide for payment within 30 days of acceptance and the Company's accounts
receivable were collected in an average of less than 30 days.
At December 31, 1997, the Company had working capital of $7,423,000 which
is sufficient to meet all of its current operating requirements and, if
necessary, such needs could be met out of the remaining cash on hand resulting
from Standard's IPO.
STANDARD AUTOMOTIVE CORPORATION
Results of Operations
Standard Automotive Corporation ("Standard") had no operating results
prior to the nine month period ended December 31, 1997.
At December 31, 1997, all of the Standard's assets represent capitalized
acquisition and financing costs. Standard has capitalized approximately $375,000
and $1,480,000 of such costs at March 31, 1997 and December 31, 1997,
respectively. Immediately following the completion of Standard's IPO all
relevant costs were charged to paid-in-capital. Related interest expense of
$316,000 was charged in the period.
Liquidity and Capital Resources
In January 1998, the Standard completed its IPO of 1,495,000 Shares of
Common Stock and 1,150,000 Shares of Convertible Redeemable Preferred Stock both
of which are trading on the American Stock Exchange with the symbols "AJX" and
"AJX.Pr", respectively. The Company received aggregate gross proceeds of
$28,750,000 from the offering.
16
<PAGE>
Concurrent with its IPO Standard completed its acquisition of Ajax
Manufacturing Company, Inc. for consideration approximating $24,000,000. The
exact purchase price is subject to adjustment by the parties and will be based
on the financial position of Ajax on the closing date. Such estimate has not as
yet been completed.
Until the completion of Standard's IPO it was funded by a combination of
the $325,000 in Bridge Notes and advances from Standard's founders and
principals. In February 1998, the Standard repaid the advances and Bridge Notes
including accrued interest on the notes with proceeds from the IPO.
Item 5. Subsequent Events
In February 1998, Barclay Investments, Inc., a New Jersey corporation,
entered into a Stock Purchase Agreement to purchase 100% of the stock of CPS
Trailer Company, Inc., a Missouri corporation, and a Stock Purchase Agreement to
purchase 100% of the stock of R & S Truck Body Company, Inc., a Kentucky
corporation. Subsequent thereto, Standard entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement") to purchase 100% of the stock of
Barclay Investments, Inc. from its owners, Andrew A. Levy, Farzana S. Habib,
Richard Friedman, Jeffrey Markowitz and Glenn Goldfinger. Andrew A. Levy,
Farzana S. Habib and Glenn Goldfinger are current shareholders of Standard.
The Stock Purchase Agreement calls for the purchase of 100% of the stock
of Barclay Investments, Inc. in exchange for 185,000 shares of common stock of
Standard. In addition, in connection with the acquisition, Standard is obligated
to pay Redstone Capital Corporation, a company of which Andrew A. Levy is
President, a fee of $600,000 for arranging the transactions. Standard is not
obligated to close the purchase of Barclay Investments, Inc. under the Stock
Purchase Agreement unless it simultaneously closes the purchase of CPS Trailer
Company, Inc. and R & S Truck Body Company, Inc.
Founded in 1979, CPS Trailer Co., Inc., located in Oran, MO, with annual
revenues over $12,000,000 is an innovative manufacturer of a variety of truck
trailers for hauling commodities in agricultural, construction, and
waste-hauling applications. CPS's products are sold in all 50 states through
dealers. CPS is in the process of completing a 60,000 square foot addition to
its plant, almost doubling its manufacturing capacity, to accommodate its new
aluminum body fabrication unit.
The Stock Purchase Agreement among Barclay Investments, Inc., CPS Trailer
and the shareholder of CPS Trailer provides for the payment by the purchaser of
$7,000,000, plus an amount equal to five-sixths of the net income of CPS Trailer
for the period from January 1, 1998, through the closing date; plus shares of
common stock of Standard with a value of $1,250,000 (based upon the average
closing price of the common stock for the ten days prior to closing). In
addition, the selling shareholder shall receive $1,000,000 in April 2002, if the
cumulative EBITDA of CPS Trailer for the fiscal years 1998 through 2001 exceeds
$6,000,000. In addition, upon completion of the acquisition Charles Siebert, the
sole shareholder of CPS Trailer, and Judy Siebert, his wife, shall enter into
four year employment agreements providing for initial base salaries of $100,000
and $65,000, respectively.
Founded in 1969, R&S Truck Body Company, Inc., located in Allen, KY, with
annual revenues over $20,000,000 designs, manufactures and sells customized dump
truck bodies and trailers, specialized truck suspension systems and related
products and parts. R&S also acts as a distributor for truck equipment
manufactured by other companies, including cranes, tarpaulins, spreaders, plows
and specialized service bodies. Products are sold both directly and through
distributors throughout various regions of the United States east of the
Mississippi River. R&S is in the process of completing construction on a new
145,000 square foot plant, more than doubling its current manufacturing space.
The plant is being financed under a very favorable development program with the
State of Kentucky that will provide, among other benefits, substantial future
tax credits.
The Stock Purchase Agreement among Barclay Investments, Inc., R&S Truck
Body Company and the shareholders of R&S Truck Body provides for the payment by
the purchaser of $11,900,000, plus an amount equal to the earnings of R&S Truck
Body for the period from January 1, 1998, through the closing
17
<PAGE>
date; plus shares of common stock of Standard with a value of $1,000,000 (based
upon the average closing price of the common stock for the ten days prior to
closing). In addition, upon completion of the acquisition William L. Smith, one
of the shareholders of R&S Truck Body, shall enter into a three year Consulting
Agreement providing for a consulting fee of $8,333 per month.
The closing of the three Stock Purchase Agreements is contingent upon
certain matters, including the successful completion of a due diligence review
by Standard and the consummation of a financing satisfactory to Standard to
enable it to pay the amounts due. Standard has retained Furman Selz LLC to act
as its investment banker in connection with a debt offering to finance the
contemplated acquisitions.
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
10.1 Stock Purchase Agreement between Barclay Investments, Inc., CPS
Trailer Company, Inc. and the shareholder of CPS Trailer Company,
Inc.
10.2 Stock Purchase Agreement between Barclay Investments, Inc., R&S
Truck Body, Inc. and the shareholders of R&S Truck Body, Inc.
10.3 Stock Purchase Agreement between Standard Automotive Corporation,
Barclay Investments, Inc. and the shareholders of Barclay
Investments, Inc.
18
<PAGE>
STANDARD AUTOMOTIVE CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STANDARD AUTOMOTIVE CORPORATION
------------- -------------------------------------------------
(Registrant)
Date: March 6, 1998 /s/ STEVEN MERKER
------------- -------------------------------------------------
Steven Merker
Chairman of the Board of Directors
Date: March 6, 1998 /s/ ROY CECCATO
------------- -------------------------------------------------
Roy Ceccato
Chief Financial Officer and Director
19
DRAFT
8/26/97
STOCK PURCHASE AGREEMENT
By and Among
BARCLAY PARTNERS, LLC
and
REDSTONE CAPITAL CORPORATION,
Purchasers
and
CHARLES P. SIEBERT
Seller
and
CPS TRAILER COMPANY, INC.
and
CPS ENTERPRISES, INC.
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS......................................................1
1.1 Affiliate..................................................1
1.2 Ancillary Documents........................................1
1.3 Assets1
1.4 Code .....................................................3
1.5 Commitments................................................3
2. SALE OF STOCK....................................................3
2.1 Purchase and Sale of Stock.................................3
2.2 Delivery of Possession and Instruments of Transfer.........3
3. CONSIDERATION....................................................4
3.1 Cash Consideration.........................................4
3.2 Deposit....................................................4
3.3 Payment at Closing.........................................4
3.4 Other Consideration........................................4
(a) Employment Agreements................................4
(b) Earnout..............................................4
(c) Bonus Earnout........................................5
(d) Stock................................................5
(e) Bonus to Pay Taxes...................................5
3.5 Allocation of Consideration for Tax Purposes...............5
4. CLOSING .....................................................5
Closing and Closing Date.........................................5
5. REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDER AND CPS..............................................6
5.1 Organization, Good Standing, Power, Etc....................6
5.2 Capital Stock..............................................6
5.3 Articles of Incorporation and By-Laws......................7
5.4 Subsidiaries, Divisions and Affiliates.....................7
5.5 Equity Investments.........................................7
5.6 Authorization of Agreement.................................7
5.7 Effect of Agreement........................................7
5.8 Restrictions...............................................8
5.9 Governmental and Other Consents............................8
5.10 Financial Statements.......................................8
5.11 Absence of Certain Changes or Events.......................8
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<PAGE>
5.12 Title to Assets; Absence of Liens and Encumbrances.........9
5.13 Equipment..................................................9
5.14 Insurance.................................................10
5.15 Agreements, Arrangements, Etc.............................10
5.16 Patents, Trademarks, Copyrights, Etc......................13
5.17 Permits, Licenses, Etc....................................13
5.18 Compliance with Applicable Laws...........................13
5.19 Litigation................................................14
5.20 No Interest in Competitors................................14
5.21 Customers, Suppliers, Distributors and Agents.............14
5.22 Books and Records.........................................15
5.23 Employee Benefit Plan.....................................15
5.24 Powers of Attorney........................................16
5.25 Sufficiency of Assets and Commitments.....................16
5.26 Labor Disputes, Unfair Labor Practices....................16
5.27 Past Due Obligations......................................16
5.28 Environmental Matters.....................................17
5.29 Tax and Other Returns and Reports.........................18
5.30 Certain Tax Definitions...................................18
5.31 Recent Dividends and Other Distributions..................19
5.32 Inventory.................................................19
5.33 Purchase and Sale Obligations.............................19
5.34 Other Information.........................................19
5.35 Accounts Receivable and Accounts Payable..................19
5.36 Knowledge of CPS and the Shareholder......................20
5.37 Deductible Amount.........................................20
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................20
6.1 Organization..............................................20
6.2 Authorization of Agreement................................20
6.3 Effect of Agreement.......................................20
6.4 Litigation................................................21
7. PRE-CLOSING COVENANTS OF THE SHAREHOLDER........................21
7.1 Conduct of Business Until Closing Date....................21
7.2 Approvals, Consents and Further Assurances................22
7.3 Access to Properties, Records, Suppliers, Agents, Etc.....22
7.4 Advice of Changes.........................................23
7.5 Conduct...................................................23
7.6 Employee Benefit Plans....................................23
7.7 Satisfaction of Conditions by Shareholder.................23
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<PAGE>
8. PRE-CLOSING COVENANTS OF PURCHASER..............................23
Satisfaction of Conditions by Purchaser.........................23
9. POST-CLOSING COVENANTS..........................................24
Further Assurances..............................................24
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
PURCHASER.......................................................24
10.1 Accuracy of Representations and Warranties................24
10.2 Performance of Agreements.................................24
10.3 Litigation, Etc...........................................24
10.4 Approvals and Consents....................................25
10.5 Shareholder's Certificate.................................25
10.6 Officer's Certificate.....................................25
10.7 Good Standing Certificates................................25
10.8 No Material Adverse Change................................26
10.9 Actions, Proceedings, Etc.................................26
10.10 Opinion of Counsel to CPS.................................26
10.11 Licenses, Permits, Consents, Etc..........................26
10.12 Documentation of Rights...................................26
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
SHAREHOLDER.....................................................26
11.1 Accuracy of Representations and Warranties................26
11.2 Performance of Agreements.................................26
11.3 No Injunction.............................................26
11.4 Opinion of Counsel to Purchaser...........................27
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.................................................27
12.1 Survival..................................................27
12.2 Indemnification by the Shareholder........................27
12.3 Indemnification by Purchaser..............................27
12.4 Right to Defend...........................................28
12.5 Subrogation...............................................28
13. MISCELLANEOUS...................................................28
13.1 Expenses..................................................28
13.2 Termination of Agreement..................................28
13.3 Waivers...................................................29
13.4 Binding Effect; Benefits..................................29
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<PAGE>
13.5 Assignment................................................29
13.6 Notices...................................................29
13.7 Entire Agreement..........................................30
13.8 Headings; Certain Terms...................................31
13.9 Counterparts..............................................31
13.10 Governing Law.............................................31
13.11 Severability..............................................31
13.12 Amendments................................................31
13.13 Transaction Taxes.........................................31
13.14 Section References........................................31
13.15 Brokers and Finders.......................................31
iv
<PAGE>
EXHIBIT INDEX
1. Exhibit 1.3(b) Inventory
2. Exhibit 1.3(c) Equipment
3. Exhibit 1.3(d) Rights (Patents, Trademarks, Copyrights, etc.)
4. Exhibit 1.3(h) Real Property (owned or leased) (included or
excluded)
5. Exhibit 1.3(j) Excluded Assets
6. Exhibit 3.4(b) Charles P. Siebert and Judy Siebert Employment
Agreements
7. Exhibit 3.5 Allocation of Consideration
8. Exhibit 4.l Form of Closing Memorandum
9. Exhibit 5.1 Good Standing Certificates - CPS
10. Exhibit 5.2 Outstanding Offers, Options, Warrants, Securities,
Etc.
11. Exhibit 5.3 Articles of Incorporation and By-laws of CPS
12. Exhibit 5.4 Subsidiaries, Divisions and Affiliates of CPS
13. Exhibit 5.5 Equity Investments
14. Exhibit 5.8 Restrictions
15. Exhibit 5.9 Governmental and Other Consents
16. Exhibit 5.10 Financial Statements of CPS
17. Exhibit 5.11 Material Adverse Changes
18. Exhibit 5.12 Notices, Liens and Encumbrances of CPS
19. Exhibit 5.14 Insurance Policies
20. Exhibit 5.15 Commitments
21. Exhibit 5.16 Patents, Trademarks, Copyrights
22. Exhibit 5.17 Permits, Licenses, Etc.
23. Exhibit 5.19 Material Litigation
24. Exhibit 5.20 5% Interest Ownership Table
25. Exhibit 5.21(a) Customers, Suppliers, Distributions and Agents
26. Exhibit 5.21(b) 20 Largest Purchasers and Providers
27. Exhibit 5.23 Employee Benefit Plans
28. Exhibit 5.24 Powers of Attorney
29. Exhibit 5.25 Sufficiency of Assets & Commitments
30. Exhibit 5.26 Material Labor Disputes
31. Exhibit 5.27 Past Due Obligations
32. Exhibit 5.28 Environmental Matters
33. Exhibit 5.29(a) Tax Examination Dates
34. Exhibit 5.29(b) Examinations of Tax Returns by Governmental
Agency
35. Exhibit 5.29(c) Proposal by Governmental Entity of Deficiency,
Assessment or Claim of Taxes
36. Exhibit 5.32(a) Inventory
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<PAGE>
37. Exhibit 5.32(b) Non-useable Inventory
38. Exhibit 5.35 Accounts Receivable and Accounts Payable
39. Exhibit 10.10 Opinion of Counsel to CPS
41. Exhibit 11.4 Opinion of Counsel to Redstone/Barclay
vi
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of this _____ day
of ___________, 1997, by and among Barclay Partners, LLC ("Barclay"), a Nevada
limited liability company, and Redstone Capital Corporation, a Texas corporation
having an office at 375 Park Avenue, Suite 2805, New York, New York 10152
("Redstone") (Redstone and Barclay collectively "Purchaser") or their assignees
under Section 13.5 of this Agreement, Charles P. Siebert (the "Shareholder"),
CPS Trailer Company, Inc. and CPS Enterprises, Inc. of 500 Rosati Street, Oran,
Missouri 63771 (CPS Trailer Company, Inc. and CPS Enterprises, Inc. collectively
"CPS").
RECITALS:
WHEREAS, the Shareholder is the record and beneficial owner of _________
shares of common stock of CPS Trailer Company, Inc. and ________ shares of
common stock of CPS Enterprises, Inc., which is 100% of the issued and
outstanding capital stock of both companies respectively (collectively the
"Common Stock");
WHEREAS, Purchaser desires to purchase from Shareholder, and Shareholder
desire to sell to Purchaser, the Common Stock on the terms and conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements of the parties hereinafter set forth, and for other good and
valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS
1.1 "Affiliate". As used in this Agreement, the term "Affiliate" shall
mean, as applied to any person, any other person directly or indirectly
controlling, controlled by, or under common control with, that person. For
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling", "controlled by", and "under common control with") as
applied to any person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of that
person or entity, whether through the ownership of voting securities, by
contract, or otherwise.
1.2 "Ancillary Documents" shall have the meaning set forth in Section 9
hereof.
1.3 "Assets". As used in this Agreement, the term "Assets" shall mean the
assets of CPS (as of the Closing) as follows:
<PAGE>
(a) the business of CPS as a going concern, the goodwill pertaining
thereto and all of CPS's right, title and interest in and to the names
"CPS Trailer Company, Inc.", and all other names used by CPS, as well as
all logos relating thereto;
(b) all items of inventory owned by CPS including, without limitation, all
raw materials, work-in-progress and finished products of CPS (all of which
are collectively referred to hereinafter as "Inventory"), as set forth in
Exhibit 1.3(b); all vehicles, machinery, equipment (including equipment
which has previously been fully depreciated by CPS and all equipment
loaned to customers), furniture, fixtures and non-inventory supplies of
CPS (including containers, packaging and shipping material, tools and
spare parts and other similar tangible personal property owned by CPS,
which are listed on Exhibit 1.3(c), all of which are collectively referred
to hereinafter as the "Equipment");
(c) all of CPS' right, title and interest in and to the United States and
foreign rights of CPS currently owned or used by CPS (and the rights
proposed to be used) which are set forth on Exhibit 1.3(d), in the conduct
of the business of CPS, with respect to copyrights, licenses, patents,
trademarks, trademark rights, tradenames, service marks, service right
marks, trade secrets, shop rights, know-how, technical information,
techniques, discoveries, designs, proprietary rights and non-public
information and registrations, reissues and extensions thereof and
applications and licenses therefor, including the items listed on Exhibit
1.3(d) (all of such rights being collectively referred to hereinafter as
the "Rights");
(d) all books and records of CPS including all in-house mailing lists,
other customer and supplier lists, trade correspondence, production and
purchase records, promotional literature, data storage tapes and computer
disks, computer software, order forms, accounts payable records (including
invoices, correspondence and all related documents), accounts receivable
ledger from December 31, 1995 through the Closing Date, all documents
relating to uncollected invoices, and all shipping records from January 1,
1996 through the Closing Date;
(e) all contracts, agreements and orders for goods; all corporate
opportunities under discussion and related to the business of CPS,
including any documentation related thereto;
(f) all trade receivables of CPS and all advance payments, prepaid items,
rights to offset and credits of all kinds of CPS;
(g) all real property owned or leased by CPS together with all fixtures
attached thereto, except for property excluded, as set forth in Exhibit
1.3(h) (the "Real Property");
2
<PAGE>
(h) all real property and all tangible personal property owned by CPS
which is not specifically included in, or specifically excluded by, the
foregoing subsections (a) through (j);
(i) all plans, contracts, financing commitments and other rights with
respect to the land and new plant under construction next to the existing
facility in Oran, Missouri;
(j) all options to purchase real property adjacent to the CPS facility in
Oran, Missouri; and
(k) all other assets of CPS, except as specifically excluded on Exhibit 1
.3(j) "Excluded Assets"). Mr. Charles Siebert's personal tractor shall be
excluded from the sale.
1.4 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and/or superseded.
1.5 "Commitments" shall mean all agreements, indentures, mortgages, plans,
policies, arrangements, and other instruments, including all amendments thereto
(or where they are verbal, written summaries of the materials terms thereof),
fixed or contingent, required to be disclosed on Exhibit 5.15.
2. SALE OF STOCK
2.1 Purchase and Sale of Stock. In exchange for the consideration
specified herein, and upon and subject to the terms and conditions of this
Agreement, Purchaser agrees to purchase and acquire from the Shareholder, and
the Shareholder agrees to sell, assign, transfer, convey and deliver to
Purchaser or its assignee under Section 13.5 at the Closing, all rights, title
and interest in and to the Common Stock.
2.2 Delivery of Possession and Instruments of Transfer. At the Closing,
the Shareholder shall deliver to Purchaser possession of all of the certificates
representing the shares of Common Stock, duly endorsed in blank or accompanied
by duly executed stock powers with signatures guaranteed, and such other
instruments of transfer requested by and satisfactory to Purchaser and its
counsel for the consummation of the transactions contemplated under this
Agreement and as are necessary to vest in Purchaser all of Shareholder' rights,
title and interest in and to the Common Stock, free and clear of any lien,
encumbrance, security agreement, equity, option, claim, charge or restriction,
other than restrictions imposed by federal or applicable state securities laws.
3
<PAGE>
3. CONSIDERATION
3.1 Cash Consideration. The cash consideration to be paid by Purchaser in
consideration for its purchase of the Common Stock and the other rights provided
herein shall be the sum of $6,000,000, payable as per paragraph 3.3 hereof.
3.2 Deposit. A deposit in the amount of $120,000, to be held in escrow in
an interest bearing account by Seller's attorney or broker, shall be paid by
Purchaser upon execution hereof. Should Purchaser default in its obligation to
close and should Shareholder be in all respects ready to close and, along with
CPS, in full compliance with this Agreement, the Shareholder shall be entitled
to retain the deposit with all interest thereon as liquidated damages, and
neither party shall have any further obligation to the others.
3.3 Payment at Closing. The down payment shall be released to the
Shareholder and an additional $5,880,000 in cash shall be payable at the Closing
in clearing house funds, provided good and marketable title to the Common Stock
is delivered, free and clear of any lien, or encumbrance as set forth in Section
2.2 hereof and provided all other terms and conditions of this Agreement have
been complied with. Interest on the down payment shall be a credit to the
Purchaser.
3.4 Other Consideration. In further consideration of the sale by the
Shareholder, and the purchase by Purchaser of the Common Stock, and as
additional inducements to Purchaser to enter into this Agreement, the following
shall be applicable:
(a) Employment Agreements. Mr. Charles P. Siebert and Mrs. Judy Siebert
shall, at the Closing, deliver executed Employment Agreements, and CPS
shall execute said Employment Agreements, in the form attached hereto as
Exhibit 3.4(b). Said Employment Agreements shall have a term of four years
and shall recite, among other things, that Charles Siebert shall receive a
salary of $100,000 per year as Interim President and Director of Research
& Development, that Judy Siebert shall receive a salary of $65,000 per
year as Vice President with bonus compensation and raises as the Board of
Directors shall determine, that Charles Siebert shall receive a bonus to
consist of 5% of CPS' earnings before depreciation, amortization, interest
and taxes (EBITDA) during employment of Charles Siebert for each year of
employment under the Employment Agreement and shall be subject to a
non-competition clause with respect to any products made or contemplated
to be made by CPS extending through course of employment and for one year
thereafter.
(b) Earnout. The sum of $250,000 in cash for each of the 1997, 1998, 1999
and 2000 fiscal years during which CPS earns EBITDA of at least
$1,500,000,
4
<PAGE>
payable on April 15th of the next succeeding year, all as determined by
CPS' certified public accountants.
(c) Bonus Earnout. A cash payment on April 15, 2001 equal to the amount
CPS' cumulative EBITDA for its fiscal years 1997, 1998, 1999 and 2000
exceeds $6,000,000 divided by $3,000,000 (but not more than one)
multiplied by $750,000.
(d) Stock. At the Closing, Purchaser shall cause to be allocated to the
Shareholder a total of $1,000,000 worth of shares of Standard Automotive
Corporation, valued at the average closing price of said shares on the
immediate ten trading days prior to the Closing. Said shares shall contain
no restrictions on transfer except as set forth in SEC Rule 144 or any
replacement thereof. In the alternative, Purchaser shall be entitled to
satisfy the requirement of this paragraph 3.4(d) by allocation in a
special account of $1,000,000 in cash at the Closing. One-quarter of such
amount of stock or cash, as the case may be, shall be released to the
Shareholder at the end of each fiscal year of CPS, commencing with the
1997 fiscal year, that CPS earns EBITDA of at least $1,500,000; however,
any unearned stock or cash shall be returned to the treasury of Standard
Automotive Corporation or to Purchasers, as the case may be, on the date
five years after the Closing Date.
(e) Bonus to Pay Taxes. To the extent Shareholder has unpaid tax
liabilities as of the Closing Date due to the allocation of Subchapter S
income from CPS, he shall be entitled to a bonus in cash from CPS in such
amount, payable as soon as a post closing audit is completed to determine
such amount.
3.5 Allocation of Consideration for Tax Purposes. The parties agree to
allocate the consideration paid pursuant to this Agreement in the manner and in
accordance with the values specified in Exhibit 3.5 for tax purposes. None of
the parties shall, at any time hereafter, in any tax or information return filed
with any state or federal agency or in any audit, other tax proceeding or
otherwise, take a position which is contrary to such allocation.
4. CLOSING
Closing and Closing Date. Subject to the provisions of this Agreement, the
consummation of the transactions contemplated by this Agreement (the "Closing")
shall be held at the offices of ___________________________ at 10:00 A.M. (local
time), November 15, 1997, or at such later date, place or time as the parties
shall otherwise mutually agree upon (the date of the Closing being referred to
herein as the "Closing Date"). All Closing transactions shall be deemed to take
place simultaneously, and no Closing transaction shall be deemed consummated
until all transactions to take place at the Closing have been consummated. The
actions and documents necessary for the
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consummation of transactions contemplated by this Agreement shall be set forth
in the Closing Memorandum attached hereto as Exhibit 4.1.
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER AND CPS
As an inducement to Purchaser to enter into this Agreement and perform its
obligations hereunder, the Shareholder and CPS, jointly and severally, hereby
represent and warrant to Purchaser as follows, each of which representation and
warranty is material and is being relied upon by Purchaser, and each of which is
true as of the date hereof and shall be true as of the Closing, with the same
effect as if said representations and warranties had been made at and as of the
Closing Date:
5.1 Organization, Good Standing, Power, Etc. CPS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Missouri. CPS is authorized or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction (set forth in Exhibit 5.1) in which
the character and location of its Assets or the nature of the business
transacted by CPS makes such qualification necessary. CPS has all requisite
corporate power and authority to (i) execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby and (ii) to own or lease and operate its properties and assets, and carry
on its business as it is presently being conducted.
5.2 Capital Stock.
(a) CPS Trailer Company, Inc. has authorized capital stock consisting of
_________________ (________) shares of common stock, $___________ par
value, of which ___________ (________) shares are issued and outstanding,
and all of which are duly authorized, validly issued, fully paid, non
assessable, free of preemptive rights, and were issued in compliance with
all federal and applicable state securities laws.
(b) CPS Enterprises, Inc. has authorized capital stock consisting of
_________________ (________) shares of common stock, $___________ par
value, of which ___________ (________) shares are issued and outstanding,
and all of which are duly authorized, validly issued, fully paid, non
assessable, free of preemptive rights, and were issued in compliance with
all federal and applicable state securities laws.
(c) Except as set forth in Exhibit 5.2 hereof, there are no outstanding
offers, options, warrants, rights, calls, commitments, obligations (verbal
or written), conversion rights, plans or other agreements (conditional or
unconditional) of any character providing for, requiring or permitting the
offer, sale, purchase or issuance
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of any shares of capital stock of CPS or any other securities (as such
term is defined in the Securities Act of 1933, as amended). Except as set
forth in Exhibit 5.2, there are no equity securities of the Company that
are reserved for issuance or are outstanding.
(d) The Common Stock is owned by the Shareholder free and clear of all
liens, charges, encumbrances or claims of any kind whatsoever, except for
restrictions imposed by federal or applicable state securities laws.
5.3 Articles of Incorporation and By-Laws. Included in Exhibit 5.3 hereto
are correct and complete copies of the Articles of Incorporation of CPS, as
amended to date, and the By-Laws of CPS, as amended to date. Such Articles of
Incorporation and By-Laws are in full force and effect.
5.4 Subsidiaries, Divisions and Affiliates. Except as set forth on Exhibit
5.4, there are no subsidiaries, divisions or Affiliates of CPS. Except as set
forth on Exhibit 5.4, the business of CPS has been conducted solely by CPS and
not through any Affiliate, joint venture or other entity, person or under any
other name.
5.5 Equity Investments. Except as set forth in Exhibit 5.5, CPS does not
own or have any rights to any equity interest, directly or indirectly, in any
corporation, partnership, joint venture, firm or other entity.
5.6 Authorization of Agreement. The execution, delivery and performance of
this Agreement has been, and the Ancillary Documents will be, duly and validly
executed and delivered by the Shareholder of CPS. This Agreement constitutes a
valid and binding obligation of the Shareholder enforceable in accordance with
its terms, except that such enforcement may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditor's rights generally.
5.7 Effect of Agreement. The execution, delivery and performance of this
Agreement by the Shareholder and the consummation by the Shareholder and CPS,
respectively, of the transactions contemplated hereby, will not, with or without
the giving of notice and the lapse of time, or both, (a) violate any provision
of law, statute, rule, regulation or executive order to which CPS or the
Shareholder is subject; (b) violate any judgment, order, writ or decree of any
court applicable to the Shareholder or CPS; or (c) result in the breach of or
conflict with any term, covenant, condition or provision of, result in the
modification or termination of, constitute a default under, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the Assets pursuant to, any corporate charter, by-law, commitment,
contract or other agreement or instrument, including any of the Commitments, to
which CPS or the Shareholder is a party or by which any of the Assets is or may
be bound or affected or from which CPS or the Shareholder derive benefit, which
breach, conflict, modification,
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termination, default or encumbrance described in this clause (c) would be
material to the business of CPS or any of the Assets.
5.8 Restrictions. Except as set forth on Exhibit 5.8, neither CPS nor the
Shareholder is a party to any contract, commitment or agreement, nor is any of
them, the Common Stock or Assets subject to, or bound or affected by, any
provision of the Articles of Incorporation, By-laws or other corporate
restriction, or any order, judgment, decree, law, statute, ordinance, rule,
regulation or other restriction of any kind or character, which would,
individually or in the aggregate, materially adversely affect CPS's business,
the Common Stock or any of the Assets.
5.9 Governmental and Other Consents. Except as set forth on Exhibit 5.9,
no consent, authorization or approval of, or exemption by, any governmental or
public body or authority is required in connection with the execution, delivery
and performance by the Shareholder of this Agreement or by CPS or the
Shareholder of any of the instruments or agreements herein referred to, or the
taking of any action herein contemplated.
5.10 Financial Statements. The Shareholder has delivered to Purchaser, and
included in Exhibit 5.10 hereto, correct and complete copies of financial
statements of CPS for the fiscal years ended December 31, 1996, 1995 and 1994,
and unaudited for the period ended June 30, 1997, together with such other
financial documents reasonably requested by Purchaser covering the period June
30, 1997 through the date of Closing (collectively, the "Financial Statements").
The Financial Statements are in accordance with the books and records of CPS,
have been prepared in accordance with generally accepted accounting principles
and practices consistently applied and accurately present the financial position
of CPS at their respective dates and the results of operations and cash flows
for the respective periods covered thereby and all items that could have a
material adverse effect on the willingness of a prospective purchaser to acquire
CPS have been disclosed in the Financial Statements or in the Exhibits to this
Agreement.
5.11 Absence of Certain Changes or Events. Except as set forth on Exhibit
5.1 1, since December 31, 1996, CPS has not: (a) suffered any adverse change in,
or the occurrence of any events which, individually or in the aggregate, has or
have had, or might reasonably be expected to have, a material adverse effect on,
CPS's financial condition, results of operations or business or the value of the
Assets; (b) incurred damage to or destruction of any material Asset or material
portion of the Assets, whether or not covered by insurance; (c) incurred any
material obligation or liability (fixed or contingent) except (i) current trade
or business obligations incurred in the ordinary course of business, none of
which were entered into for grossly inadequate consideration, (ii) obligations
or liabilities under the Commitments to the extent required thereby, and (iii)
obligations and liabilities under this Agreement; (d) made or entered into
contracts or
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commitments to make any capital expenditures in excess of Ten Thousand Dollars
($ 10,000.00); (e) mortgaged, pledged or subjected to lien or any other
encumbrance any of the Assets; (f) sold, transferred or leased any material
Asset or material portion of the Assets, or canceled or compromised any debt or
material claims, except in each case, in the ordinary course of business; (g)
sold, assigned, transferred or granted any rights under or with respect to any
licenses, agreements, patents, inventions, trademarks, trade names, copyrights
or formulae or with respect to know-how or any other intangible asset including,
but not limited to, the Rights; (h) amended or terminated any of the contracts,
agreements, leases or arrangements which otherwise would have been set forth on
Exhibit 5.15 hereto; (i) waived or released any other rights of material value;
or (i) entered into any transactions not in the ordinary course of business
which would, individually or in the aggregate, materially adversely affect the
Assets or the business of CPS.
5.12 Title to Assets; Absence of Liens and Encumbrances. Except as set
forth on Exhibit 5.12, (a) CPS has good title to, and owns outright, the Assets,
which include substantially all of CPS's assets reflected in the Financial
Statements (except (i) as sold, used or otherwise disposed of in the ordinary
course of business, and (ii) as disclosed in the Financial Statements), free and
clear of all mortgages, claims, liens, charges, encumbrances, security
interests, restrictions on use or transfer or other defects as to title; and (b)
immediately following the Closing, CPS will have good and marketable title to
all Assets, free and clear of all mortgages, claims, liens, charges,
encumbrances, security interests, restrictions on use or transfer, or other
defects of any nature. The leases and other agreements or instruments under
which CPS holds, leases or is entitled to the use of any real or personal
property included in the Assets are in full force and effect and all rentals,
royalties or other payments accruing thereunder prior to the date hereof have
been duly paid. CPS enjoys peaceable and undisturbed possession under all such
leases, and the change in ownership of the Assets will not adversely affect such
leases, other agreements and instruments. All Assets are in conformance with all
applicable zoning and other laws, ordinances, rules and regulations; and no
notice of violation of any law, ordinance, rule or regulation thereunder has
been received by the Shareholder or CPS.
5.13 Equipment. Set forth on Exhibit 1.3(c) is a correct and complete list
as of December 31, 1996 of all of the Equipment (in excess of a fair market
value of $3,000.00) (as defined in Section 1.3(c)), indicating for each piece of
Equipment whether it is owned or leased and setting forth where it is located.
None of the Equipment has been disposed of since June 30, 1997. Except as noted
on Exhibit 1.3(c), all of the Equipment (a) is in good working condition, with
no material defects, and generally has been suitable to CPS for the uses for
which it was designed or has been employed by CPS, and (b) conforms in all
material respects with any laws, ordinances, regulations, orders or other
similar governmental requirements relating to its use, as the same are currently
in effect.
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5.14 Insurance. There are no outstanding or unsatisfied written
requirements or verbal recommendations imposed or made by any of CPS's current
insurance companies with respect to current policies covering any of the Assets,
or by any governmental authority requiring or recommending, with respect to any
of the Assets, that any repairs or other work be done on or with respect to, or
requiring or recommending any equipment or facilities be installed on or in
connection with, any of the Assets. CPS carries, and (with respect to any period
for which a claim against CPS may still arise) has always carried product
liability insurance, worker's compensation insurance in reasonable amounts, and
other insurance which is reasonably necessary to the conduct of the CPS's
business. On Exhibit 5.14 is set forth a correct and complete list of (a) all
currently effective insurance policies and bonds covering the Assets or the
business of CPS, and their respective annual premiums (as of the last renewal or
purchase of new insurance), and (b) for the five-year period ending on the date
hereof, (i) all accidents, casualties or damage occurring on or to the Assets or
relating to the business or products of CPS which in the aggregate are in excess
or Ten Thousand Dollars ($ 10,000.00), and (ii) claims for product liability,
damages, contribution or indemnification and settlements (including pending
settlement negotiations) relating thereto which in the aggregate are in excess
of Ten Thousand Dollars ($ 10,000.00). Except as set forth on Exhibit 5.14, as
of the date hereof there are no disputes with underwriters of any such policies
or bonds, and all premiums due and payable have been paid. There are no pending
or threatened terminations or premiums increases with respect to any of such
policies or bonds and there is no condition or circumstance applicable to the
business of CPS, other than the sale of the Common Stock pursuant to this
Agreement, which may result in such termination or increase. CPS and the Assets
are in compliance with all conditions contained in such policies or bonds,
except for noncompliance which, individually or in the aggregate, would not have
a material adverse affect on the business of CPS or the Assets.
5.15 Agreements, Arrangements, Etc.
5.15.1 Except as set forth on Exhibit 5.15.1 (a)-(t), CPS is not a party
to, nor are CPS or any of the Assets bound by any:
(a) lease agreement (whether as lessor or lessee) of the Assets;
(b) license agreement, assignment or contract (whether as licensor or
licensee, assignor or assignee) relating to trademarks, trade names,
patents, or copyrights (or applications therefor), unpatented designs or
processes, formulae, know-how or technical assistance, or other
proprietary rights;
(c) employment or other contract or agreement with an employee or
independent contractor which (i) may not be terminated without liability
to CPS
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upon notice to the employee or independent contractor of not more than 30
days, or (ii) provides payments (contingent or otherwise) of more than
$30,000 per year (including all salary, bonuses and commissions);
(d) agreement, contract or order with any buying agent, supplier or other
individual or entity who assists, provides or is otherwise involved in the
acquisition, supplying or providing Assets or other goods to CPS;
(e) non-competition, secrecy or confidentiality agreements;
(f) agreement or other arrangement for the sale of goods or services by
CPS to any third party (including the government or any other governmental
authority);
(g) agreement with any labor union;
(h) policy of insurance (including bonds) in force with respect to CPS or
any of its operations, properties, assets or executive officers;
(i) agreement, contract or order with any distributor, dealer, leasing
company, sales agent or representative, other than contracts or orders for
the purchase, sale or license of goods made in the usual and ordinary
course of business at an aggregate price per contract or more than $10,000
and a term of more than six months under any such contract or order;
(j) agreement, contract or order with any manufacturer, leasing company,
supplier or customer (including those agreements which allow discounts or
allowances or extended payment terms);
(k) agreement with any distributor or brokerage company, leasing company,
management company or any other individual or entity who assists, places,
brokers or otherwise is involved with the marketing or distribution of
CPS's products to its customers;
(l) joint venture or partnership agreement with any other person or
entity;
(m) agreement guaranteeing, indemnifying or otherwise becoming liable for
the obligations or liabilities of another;
(n) agreement with any banks or other persons, other than its employees,
for the borrowing or lending of money or payment or repayment of draws on
letters of credit or currency swap or exchange agreements (other than
purchase money security interests which may, under the terms of invoices
from its suppliers, be granted to suppliers with respect to goods so
purchased);
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(o) agreement with any bank, finance company or similar organization which
acquires from CPS receivables or contracts for sales on credit;
(p) agreement granting any person a lien, security interest or mortgage on
any of the Assets, including, without limitation, any factoring or
agreement for the assignment of receivables or inventory;
(q) agreement for the incurrence of any capital expenditure in excess of
$10,000;
(r) advertising, publication or printing agreement;
(s) agreement which restricts CPS from doing business anywhere in the
world;
(t) agreement or statute or regulation giving any party the right to
renegotiate or require a reduction in prices or the repayment of any
amount previously paid; or
(u) other agreement or contract, not included in or expressly excluded
from the terms of the foregoing clauses (a) through (t), materially
affecting the Assets or CPS's business, except contracts or purchase
orders for the purchase or sale of goods or services made in the usual and
ordinary course of business.
Correct and complete copies of all Commitments required to be shown on Exhibit
5.15 have been separately delivered to Purchaser prior to the date hereof.
5.15.2 Each of the Commitments is valid, in full force and effect and
enforceable by CPS in accordance with its terms.
5.15.3 Except as set forth on Exhibit 5.15, CPS has fulfilled, or has
taken all action reasonably necessary to enable it to fulfill when due, all of
its obligations under the Commitments, except where the failure to do so would
not, individually or in the aggregate, have a material adverse affect on the
business of CPS or the Assets. Furthermore, there has not occurred any default
by CPS or any event which, with the lapse of time or the election of any person
other than CPS, will become a default, nor has there occurred any default by
others or any event which, with the lapse of time or the election of CPS, will
become a default under any of the Commitments, except for such defaults, if any,
which (a) have not resulted and will not result in any material loss to or
liability of CPS or any of its successors or assigns or (b) have been indicated
on Exhibit 5.15, CPS is not in arrears in any material respect with respect to
the performance of satisfaction of the terms or conditions to be performed or
satisfied by it under any of the Commitments and no waiver or variance has been
granted by any of the parties hereto.
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5.15.4 After the Closing, except as set forth on Exhibit 5.15, each of the
Commitments included in the Assets does not require the consent of the other
parties thereto and, with respect to any of the Commitments which do require the
consent of the other parties thereto, CPS has obtained such consent and has
provided or will provide Purchaser with copies thereof.
5.16 Patents, Trademarks, Copyrights, Etc. Exhibit 1.3(d) sets forth (i)
the registered and beneficial owner and the expiration date, to the extent
applicable, for each of the Rights set forth on such Exhibit and (ii) the
product, service, or products or services of CPS which make use of, or are sold,
licensed or made under, each such Right. All of the Rights are included in the
Assets and constitute all Rights necessary for the conduct of the business of
CPS, as such business is currently being conducted. Except as set forth on
Exhibit 5.16, CPS has not sold, assigned, transferred, licensed, sub-licensed or
conveyed the Rights, or any of them, or any interest in the Rights, or any of
them, to any person, and has the entire right, title and interest (free and
clear of all security interests, liens and encumbrances of every nature) in and
to the Rights necessary to the conduct of the business of CPS as currently being
conducted; neither has the validity of such items been, nor is the validity of
such items, nor the use thereof by CPS, the subject of any pending or threatened
opposition, interference, cancellation, nullification, conflict, concurrent use,
litigation or other proceeding. The conduct of the business of CPS as currently
operated, and the use of the Assets does not and will not conflict with, or
infringe, legally enforceable rights of third parties. Except as set forth on
Exhibit 5.16, the Rights owned by or licensed to CPS have not been used, and no
use is now being made, by any entity except CPS and other entities duly licensed
to use the same. Except as set forth on Exhibit 5.16, there is no infringement
of any proprietary right owned or licensed by CPS.
5.17 Permits, Licenses, Etc. There are no permits, licenses,
registrations, memberships, orders or approvals of governmental or
administrative authorities or required to permit CPS to carry on its business as
currently conducted (other than (i) permits, licenses, registrations, trade
memberships, orders or approvals which are set forth on Exhibit 5.17, all of
which are in full force and effect, and (ii) other permits, licenses, orders or
approvals, the failure to obtain which would not, individually or in the
aggregate, have a material adverse affect on the Assets or on CPS's business).
5.18 Compliance with Applicable Laws. The conduct by CPS of its business
does not violate or infringe, and there is no basis for any claims of violation
or infringement of, any law, statute, ordinance, regulation or executive order
(including, without limitation, the Federal Food, Drugs and Cosmetics Act, as
amended, the Occupational Safety and Health Act, the National Environmental
Policy Act and the Foreign Corrupt Practices Act and the respective regulations
thereunder and similar applicable state laws and regulations) currently in
effect, except in each case for
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violations or infringements which do not and will not, individually or in the
aggregate, have a material adverse affect on the Assets or CPS's business. CPS
is not in default under any governmental or administrative registration,
membership or license issued to it, under any governmental or administrative
order or demand directed to it, or with respect to any order, writ, injunction
or decree of any court which, in any case, materially adversely affects the
financial condition, results of operations or business of CPS or the value of
the Assets.
5.19 Litigation. Except as set forth on Exhibit 5.19, there is no claim,
action, suit, proceeding, arbitration, reparation, investigation or hearing or
notice of hearing, pending or threatened, before any court or governmental,
administrative or other competent authority or private arbitration tribunal
against or relating to or affecting (directly or indirectly, including by way of
indemnification) the business of CPS or any of the Assets, or the transactions
contemplated by this Agreement; nor are any facts known to CPS, which it
believes could reasonably give rise to any such claim, action, suit, proceeding,
arbitration, investigation or hearing, which may have any adverse affect,
individually or in the aggregate in excess of Ten Thousand Dollars ($ 10,000)
upon the business of CPS, the value of the Assets or the transactions
contemplated by this Agreement. CPS has not waived any statute of limitations or
other affirmative defense with respect to any of its obligations. There is no
continuing order, injunction or decree of any court, arbitrator or governmental,
administrative or other competent authority to which CPS is a party, or to which
the Company is subject. Neither CPS nor the Shareholder or other current
officer, director, partner or employee of CPS or any Affiliate of CPS has been
permanently or temporarily enjoined or barred by order, judgment or decree of
any court or other tribunal or any agency or other body from engaging in or
continuing any conduct or practice in connection with the business engaged in by
CPS.
5.20 No Interest in Competitors. Set forth on Exhibit 5.20 is a list
describing the extent to which CPS, the Shareholder or any other officer or
director of CPS or any Affiliate of any of the foregoing, directly or
indirectly, owns more than a five percent (5%) interest in or controls or is an
employee, officer, director, or partner of or participant in (but only to the
extent such a participation exceeds one percent), or consultant to any
corporation, partnership, limited partnership, joint venture, association or
other entity which is a competitor, supplier or customer of CPS or has any type
of business or professional relationship with CPS.
5.21 Customers, Suppliers, Distributors and Agents. Except as set forth on
Exhibit 5.21(a), CPS has no knowledge or reason to believe that any customer,
client, distributor, supplier or any other person or entity with material
business dealings with CPS, will or may cease to continue such relationship with
CPS, or will or may substantially reduce the extent of such relationship, at any
time prior to or after the
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Closing Date. Except for such common public information, CPS has no knowledge of
(1) any other existing or contemplated modification or change in the business
relationship of CPS with, or (2) any existing condition or state of facts which
has affected adversely, will adversely affect (in more than a minimal manner),
or has a reasonable likelihood of adversely affecting the business of CPS with
its customers, clients, suppliers or other persons or entities with material
business dealings with CPS or which has prevented or will prevent such business
from being carried on by CPS under its new ownership after the Closing in
essentially the same manner as it is currently carried on. Exhibit 5.21 (b) sets
forth as to CPS (a) the twenty largest (in dollar value) purchasers of its goods
and/or services and (b) the twenty largest (in dollar value) providers of goods
and/or services to it, in each case with respect to each of the fiscal years
ended December 31, 1996 and 1995 and the six months ended June 30, 1997.
5.22 Books and Records. The books of account and other financial and
corporate records of CPS are in all material respects complete, correct and up
to date, with all necessary signatures, and are in all material respects
accurately reflected in the Financial Statements.
5.23 Employee Benefit Plan. Except as described in Exhibit 5.23, CPS does
not have any hospitalization, health insurance, pension, retirement, profit
sharing, stock option or similar plans. Exhibit 5.23 sets forth a correct and
complete list of each and every employee benefit plan, including each pension,
profit sharing, stock bonus, bonus, deferred compensation, severance, stock
option or purchase plan, or other retirement plan or arrangement, covering
employees of CPS (the "Employee Benefit Plans"). For each such employee pension
plan, multi-employer plan or welfare plan as those terms are defined in Section
3 of the Employee Retirement Income Security Act of 1974, as amended, ("ERISA")
and for each Employee Benefit Plan with respect to which CPS is a "party in
interest" as defined in Section 3 of ERISA, or a "disqualified person" as
defined in Section 4975 of the Code, CPS has delivered to Purchaser complete and
accurate copies of (i) all Employee Benefit Plans and all amendments thereto;
(ii) the trust instrument or insurance contract, if any, forming a part of the
plans, and all amendments thereto; (iii) the most recent and preceding year's
Internal Revenue Service Form 5500 and all schedules thereto; (iv) the most
recent Internal Revenue Service determination letter, or if no letter has been
issued, any pending application to the Internal Revenue Service for a
determination letter regarding qualified status; (v) any bond required by
Section 412 of ERISA; and (vi) the summary plan description. CPS has complied
with all of the rules and regulations governing each of the Employee Benefit
Plans maintained for the benefit of CPS's employees, including, without
limitation, rules and regulations promulgated pursuant to ERISA and the Code, by
the Department of Treasury, Department of Labor, and the Pension Benefit Plans
Guaranty Corporation, and each of the Employee Benefit Plans now operated has
since its inception been operated in accordance with its provisions and is in
compliance with such rules and regulations.
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Neither CPS nor any Employee Benefit Plans maintained by CPS or any fiduciaries
thereof have engaged in any prohibited transaction, as that term is defined in
Section 406 of ERISA or Section 4975 of the Code, nor have any of them committed
any breach of fiduciary responsibility with respect to any of the Employee
Benefit Plans, and CPS does not have any knowledge that any other person has not
complied with these rules and regulations.
5.24 Powers of Attorney. Except as set forth on Exhibit 5.24, no person
has any power of attorney to act on behalf of CPS in connection with any of
CPS's properties or business affairs other than such powers to so act as
normally pertain to the officers of CPS .
5.25 Sufficiency of Assets and Commitments. Except as set forth in Exhibit
5.25, the Assets and the Commitments, taken in the aggregate, are sufficient,
and constitute all of the property and Rights necessary, for the continuation of
the business and operations of CPS on a basis consistent with past operations.
5.26 Labor Disputes, Unfair Labor Practices. Except as set forth on
Exhibit 5.26, CPS is not engaged in any labor practice which would have a
material adverse affect on the Assets or CPS's business. There is no pending or
affirmatively threatened (i) unfair labor practice complaint, charge, labor
dispute, strike, slowdown, walkout or work stoppage before the National Labor
Relations Board or any other authority or (ii) grievance or arbitration
proceeding arising out of or under a collective bargaining agreement involving
employees of CPS. There have been no strikes, labor disputes, slow-downs,
walkouts, or work stoppages involving employees of CPS during the last five (5)
years. Union representation of employees exists only as set forth on Exhibit
5.26. CPS has not received notice from any of its employees of such employee's
intent to terminate his or her employment or bring any action against CPS for
any reason related to the transactions contemplated by this Agreement or for any
other reason.
5.27 Past Due Obligations. Except as set forth on Exhibit 5.27, no past
due obligations of CPS over $5,000 have given rise or shall give rise within 5
days after the Closing Date (except as such will be performed by CPS prior to
the Closing so as to relieve Purchaser of all liability therefor) to any
additional liability to Purchaser on account of their being past due.
5.28 Environmental Matters.
(a) Except as set forth on Exhibit 5.28, (i) CPS is in compliance with all
environmental laws, regulations, permits and orders applicable to it, and
with all laws, regulations, permits and orders governing or relating to
asbestos removal and abatement; (ii) CPS has not transported, stored,
treated or disposed, or allowed or arranged for any third parties to
transport, store, treat or dispose, of any Hazardous
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Substances or other waste to or at any location other than a site lawfully
permitted to receive such Hazardous Substances or other waste for such
purposes, or had performed, arranged for or allowed by any method or
procedure such transportation, storage, treatment or disposal in
contravention of any laws or regulations nor has CPS disposed of, or
allowed or arranged for any third parties to dispose of, Hazardous
Substances or other waste upon property owned or leased by it in
contravention of any applicable laws or regulations; (iii) there has not
occurred, nor is there presently occurring, a Release of any Hazardous
Substance on, into or beneath the surface of any parcel of real property
in which CPS has (or will have after giving effect to the transactions
contemplated hereby) an ownership interest or any leasehold interest in
contravention of any applicable laws or regulations; (iv) CPS has not
transported or disposed of, or allowed or arranged for any third parties
to transport or dispose of, any Hazardous Substance or other waste to or
at a site which, pursuant to the U.S. comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"),
has been placed on the National Priorities List or its Kansas equivalent;
(v) CPS has not received notice and CPS has no knowledge of any facts
which could give rise to any substantive notice, that CPS is a potentially
responsible party for a federal or state environmental cleanup site or for
corrective action under CERCLA or notice of any other Environmental Claim;
(vi) CPS has not undertaken (or been requested to undertake) any response
or remedial actions or cleanup actions of any kind at the request of any
federal, state or local governmental entity, or at the request of any
other person or entity; and (vii) there are no laws, regulations,
ordinances, licenses, permits or orders relating to environmental matters
requiring any work, repairs, construction or capital expenditures with
respect to the assets or properties of CPS.
(b) For the purposes of this Agreement: (i) "Environmental Claim" shall
mean any written demand, claim, governmental notice or threat of
litigation or the actual institution of any action, suit or proceeding
which asserts that an Environmental Condition constitutes a violation of
any statute, ordinance, regulation, or other governmental requirement
relating to the emission, discharge, or Release of any Hazardous Substance
into the environment or the generation, treatment, storage,
transportation, or disposal of any Hazardous Substance, prior to Closing
Date in each case in contravention of any applicable laws or regulations;
(ii) "Environmental Condition" shall mean the presence on any real
property during the period from the date such real property was first
owned, leased or used by CPS to the Closing Date, in surface water, ground
water, drinking water supply, land surface, subsurface strata or ambient
air of any Hazardous Substance arising out of or otherwise related to the
operations or other activities of CPS or of any predecessor of CPS,
conducted or undertaken prior to the Closing Date, and in each case in
contravention of any applicable laws or regulations; (iii) "Hazardous
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Substance" shall mean any substance defined in the manner set forth in
Section 101(14) of the U.S. Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, as applicable on the
Closing Date, and shall include any additional substances designated under
Section 102(a) thereof prior to the Closing Date; and (iv) "Release" shall
mean releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing into the
environment in each case in contravention of any applicable laws or
regulations.
5.29 Tax and Other Returns and Reports. CPS has timely filed or will file
all Tax Returns and information returns required to be filed by CPS and has paid
all Taxes due for all periods ending on or before December 31, 1996. Adequate
provision has been made in the books and records of CPS and in the Financial
Statements referred to in Section 5.10 above, for all Taxes whether or not due
and payable and whether or not disputed. Exhibit 5.29(a) lists the date or dates
through which any governmental entity has examined any Tax Return of CPS. All
required Tax Returns, including amendments to date, have been prepared in good
faith without negligence or willful misrepresentation and are complete and
accurate and in all material respects. Except as set forth in Exhibit 5.29(b),
no governmental entity has, during the past three years, examined or is in the
process of examining any Tax Returns of CPS. Except as set forth on Exhibit
5.29(c), no governmental entity has proposed (tentatively or definitively),
asserted or assessed or threatened to propose or assert, any deficiency,
assessment, lien, or other claim for Taxes and there would be no basis for any
such delinquency, assessment, lien or claim. There are no agreements, waivers or
other arrangements providing for an extension of time with respect to the
assessment of any Taxes or deficiency against CPS or with respect to any Tax
Return filed or to be filed by CPS.
5.30 Certain Tax Definitions. For purposes of this Agreement, the term
"Taxes" means all taxes, including without limitation all Federal, state, local,
foreign and other income, franchise, sales, use, property, payroll, withholding,
environmental, alternative or add- on minimum and other taxes, assessments,
charges, duties, fees, levies or other governmental charges of my kind
whatsoever, and all estimated taxes, deficiency assessments, additions to tax,
penalties, and interest, and any contractual or other obligation to indemnify or
reimburse any person with respect to any such assessment. For purposes of this
Agreement, the term "Tax Return" shall mean any report, statement, return,
declaration of estimated tax or other information required to be supplied by or
on behalf of CPS to a taxing authority in connection with Taxes, or with respect
to grants of tax exemption, including any consolidated, combined, unitary, joint
or other return filed by any person that properly includes the income,
deductions or other tax information concerning CPS.
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5.31 Recent Dividends and Other Distributions. There has been no dividend
or other distribution of assets or securities whether consisting or money,
property or any other thing of value, declared, issued or paid to or for the
benefit of CPS's Shareholder subsequent to the date of the most recent Financial
Statements described in Section 5.10 by CPS.
5.32 Inventory. Except as set forth in Exhibits 5.32(a) and (b), all of
the Inventory has been received within six months of June 30, 1997 and is of a
quantity and quality saleable at regular prices or usable in the ordinary course
of business during 1997. Exhibit 5.32(a) shall specify all Inventory that was
received more than 12 months before the Closing Date, including the calendar
month in which such Inventory was received, by quantity and product family.
Exhibit 5.32(b) shall specify all Inventory which is not of a quality or
quantity saleable or usable in the ordinary course of business during 1997.
5.33 Purchase and Sale Obligations. All purchase, sales and orders and all
other commitments for purchases, sales and orders made by or on behalf of CPS
have been made in the usual and ordinary course of its business in accordance
with normal practices. On the Closing Date, the Shareholder shall deliver to
Purchaser a schedule of all such uncompleted purchase and sale orders and other
commitments with respect to any of CPS's obligations as of a date not earlier
than ten (10) days prior to the Closing.
5.34 Other Information. None of the information which has been or may be
furnished by CPS or the Shareholder or any of their representatives to Purchaser
or any of its representatives in connection with the transactions contemplated
hereby, which is contained in this Agreement (including the Exhibits hereto) or
any Ancillary Document or any certificate or instrument delivered or to be
delivered by or on behalf of CPS or the Shareholder in connection with the
transactions contemplated hereby, does or will contain any untrue statement of a
material fact or omit a material fact necessary to make the information
contained herein or therein not misleading.
5.35 Accounts Receivable and Accounts Payable. All of the accounts
receivable of CPS are actual and bona fide accounts receivable representing
obligations for the total dollar amount thereof showing on the books of CPS, and
the accounts receivable are not and will not be subject to any recoupments,
set-offs or counter-claims. Exhibit 5.35 sets forth a true and correct aged
(30-60-90 days) list of all accounts receivable and accounts payable of CPS as
of the end of the calendar month preceding the date hereof.
5.36 Knowledge of CPS and the Shareholder. As to each representation and
warranty made by the Shareholder under this Article 5, any fact or information
known to CPS or notice received by CPS, shall be imputed to the Shareholder as
if such fact or information were known to the Shareholder or such notice
received by the Shareholder.
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5.37 Deductible Amount. To the extent Shareholder has liability for breach
of any representations under this Article 5, he shall receive a credit of up to
$100,000. However, no credit shall be applicable to liability under paragraphs
5.29 and 5.30 hereof.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to CPS as follows, each of which
representation and warranty shall be true as of the Closing Date:
6.1 Organization. Barclay is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Nevada.
Redstone Capital Corporation is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas. Purchaser has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby.
6.2 Authorization of Agreement. The execution, delivery and performance of
this Agreement by Purchaser, and the consummation of the transactions
contemplated hereby have been duly and effectively authorized by Purchaser's
Managers. This Agreement has been duly and validly authorized, executed and
delivered on behalf of Purchaser. This Agreement constitutes a valid and binding
obligation of Purchaser, enforceable in accordance with its terms, except that
such enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors, rights generally.
6.3 Effect of Agreement. The execution, delivery and performance of this
Agreement by Purchaser and consummation by Purchaser of the transactions
contemplated hereby will not, with or without the giving or notice and the lapse
of time, or both, (a) violate any provision of law, statute, rule, regulation or
executive order to which the Purchaser is subject; (b) violate any judgment,
order, writ or decree of any court applicable to Purchaser; or (c) result in the
breach of or conflict with any term, covenant, condition or provision of the
organizational documents of Purchaser or any commitment, contract or other
agreement on instrument to which Purchaser is a party.
6.4 Litigation. To the best knowledge of Purchaser, there are no actions,
suits, proceedings or governmental investigations or inquiries pending or
threatened against it which, in its reasonable judgment, would prevent the
consummation of the transactions contemplated hereby.
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7. PRE-CLOSING COVENANTS OF THE Shareholder
The Shareholder hereby covenant and agree with Purchaser that the
Shareholder and CPS shall do, or cause to be done, the following, between the
date of this Agreement and the Closing Date or date of termination of this
Agreement, as the case may be:
7.1 Conduct of Business Until Closing Date. Except as permitted or
required hereby or as Purchaser may otherwise consent in writing, the
Shareholder shall cause CPS to:
7.1.1 operate the business of CPS only in the usual, regular and ordinary
manner, and use their best efforts to (a) preserve the present business
organization of CPS intact, (b) keep available the services of the present
employees of CPS, and (c) preserve the current business relationships of CPS
with customers, clients, suppliers, distributors and others having business
dealings with it;
7.1.2 bear the risk of loss or damage to the Assets on and prior to the
Closing Date where such risk of loss is not the legal obligation of another, and
maintain all properties necessary for the conduct of the business of CPS,
whether owned or leased;
7.1.3 maintain the books, records and accounts of CPS in the usual,
regular and ordinary manner, on the basis consistent with prior periods;
7.1.4 duly comply with all laws, rules and regulations applicable to CPS
and to the conduct of its business;
7.1.5 perform all of the obligations of CPS without default, unless such
default is of no significance to CPS and could have no adverse impact on CPS,
its Assets or business;
7.1.6 neither (a) amend CPS's Articles of Incorporation or By-Laws; (b)
merge with or into, consolidate, amalgamate or otherwise combine with, any other
entity; nor (c) change the character of the business of CPS;
7.1.7 neither (a) encumber, mortgage, or voluntarily subject to lien any
of the existing Assets or the Common Stock; (b) transfer, sell, lease, license
or otherwise dispose of any of, or any part of, the Assets (other than in the
ordinary course of business); (c) convey, transfer or acquire any material Asset
or property to, for or on behalf of CPS other than in the ordinary course of
business; (d) enter into any arrangement, agreement or undertaking, with respect
to any of the employees relating to the payment of bonus, severance,
profit-sharing or special compensation or any increase in the compensation
payable or to become payable to any such employee; nor (e) incur any material
fixed or contingent obligation or enter into any agreement, commitment, contract
or other transaction or arrangement relating to the business of CPS or the
Assets;
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7.1.8 not make any distributions or dividends of Assets or securities, nor
any changes to the capital structure of CPS; not agree to make or make any sales
of its securities including the issuance of any additional capital stock or
rights or options or contracts to acquire, or instruments convertible into,
common stock; however, CPS shall be entitled to make the bonus distributions
referred to in paragraph 3.4(e) hereof and further to distribute to Shareholder
sufficient cash to enable Shareholder to pay their federal and state income
taxes attributable to the Subchapter S income allocated to them from January 1,
1997 through the Closing Date;
7.1.9 neither modify, change or terminate any of its material obligations
other than in the ordinary course of business, nor grant any power of attorney
with respect to the business of CPS or the Assets to any party except Purchaser;
and
7.1.10 anything in this Section 7.1 notwithstanding, Shareholder shall
have the right in their discretion to make all decisions and expenditures
regarding the new plant and equipment therefor required to keep that project on
schedule.
7.2 Approvals, Consents and Further Assurances. The Shareholder shall use
and shall cause CPS to use its best efforts to obtain in writing as promptly as
possible all approvals, consents and waivers required in order to effectuate the
transactions contemplated hereby, and shall deliver to Purchaser copies,
reasonably satisfactory in form and substance to counsel to Purchaser, of such
approvals and consents. The Shareholder shall also use their best efforts to
assure that the other conditions set forth in Article 10 hereof are satisfied by
the Closing Date.
7.3 Access to Properties, Records, Suppliers, Agents, Etc. The Shareholder
shall cause CPS to give to Purchaser and to Purchaser's counsel, financiers,
accountants and other representatives access to and copies of such of CPS's
properties, personnel, books, tax returns, contracts, commitments and records as
relate to the Assets, suppliers, agents, distributors, etc. or other aspects of
the business of CPS; and shall furnish to Purchaser and such representatives all
such additional instruments, contracts, documents or other written obligations
(certified by officers of CPS, if so requested) and financial and other
information concerning such business, Assets, suppliers, agents, etc. as
Purchaser or its representatives may from time to time request.
7.4 Advice of Changes. If the Shareholder becomes aware of any fact or
facts which, if known at the date hereof, would have been required to be set
forth or disclosed in or pursuant to this Agreement or which, individually or in
the aggregate, could materially adversely affect the business, Assets or Common
Stock of CPS, Shareholder shall promptly advise Purchaser in writing thereof.
7.5 Conduct. Except as permitted or required hereby or as Purchaser may
otherwise consent in writing, neither CPS nor the Shareholder shall enter into
any
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transaction or take any action which would result in any of the representations
and warranties of CPS or the Shareholder contained in this Agreement or in any
Ancillary Document not being true and correct as of the time immediately after
such transaction has been entered into or such event has occurred and on the
Closing Date.
7.6 Employee Benefit Plans. Except for payment of CPS's current
obligations, CPS shall not incur any additional obligations or liabilities,
including (i) all liabilities for all claims incurred, whether or not reported,
on or before the Closing Date under all "employee welfare benefit plans," within
the meaning of Section 3(1) of ERISA, (ii) all liabilities or obligations for
vacations or sick leave or retiree, medical or life benefits to employees or
former employees of CPS, and (iii) all liabilities of CPS for all benefits
accrued under any "employee pension benefit plan," within the meaning of Section
3(2) of ERISA under each Employee Benefit Plan.
7.7 Satisfaction of Conditions by Shareholder. The Shareholder hereby
covenants and agrees with Purchaser that, between the date of this Agreement and
the Closing Date or date of termination of this Agreement, as the case may be,
they shall use their best efforts to assure that the conditions set forth in
Article 10 hereof are satisfied by the Closing Date.
8. PRE-CLOSING COVENANTS OF PURCHASER
Satisfaction of Conditions by Purchaser. Purchaser hereby covenants and
agrees with CPS that, between the date of this Agreement and the Closing Date or
date of termination of this Agreement, as the case may be, Purchaser shall cause
the conditions set forth in Article 11 hereof to be satisfied by the Closing
Date.
9. POST-CLOSING COVENANTS
Further Assurances. After the Closing hereunder, the Shareholder, at the
request of Purchaser, shall execute, acknowledge and deliver to Purchaser,
without further consideration, all such further assignments, conveyances,
endorsements, deeds, powers of attorney, consents and other documents (together
with the instruments referred to in Section 1.3, referred to herein collectively
as the "Ancillary Documents") and take such other action as Purchaser may
reasonably request (a) to transfer to and fully vest in Purchaser, and protect
Purchaser's right, title and interest in and to all of CPS's right, title and
interest in and to the Assets, and (b) otherwise to consummate the transactions
contemplated by this Agreement.
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10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER
The obligations of Purchaser pursuant to this Agreement are subject to the
satisfaction at the Closing of each of the following conditions, any or all of
which conditions may be waived by Purchaser in its sole discretion:
10.1 Accuracy of Representations and Warranties. All representations and
warranties made by the Shareholder (contained in this Agreement, any Exhibit or
Schedule hereto, or any certificate or instrument delivered to Purchaser or its
representatives by the Shareholder or their representatives) shall be true on
and as of the Closing Date with the same force and effect as though made on and
as of the Closing Date (i.e., with respect to representations that a state of
facts exists on or as of the date hereof, it is a condition that such state of
facts exists on or as of the Closing Date; and with respect to a representation
that a state of facts has or has not changed between a date prior to the date
hereof and the date hereof, it is a condition that such state of facts has or
has not changed between such prior date and the Closing Date), except as
affected by transactions contemplated hereby.
10.2 Performance of Agreements. The Shareholder and CPS shall have
performed and complied with all covenants, obligations and agreements to be
performed or complied with by them on or before the Closing Date pursuant to
this Agreement.
10.3 Litigation, Etc.
10.3.1 Except as set forth on Exhibit 5.19, no claim, action, suit,
proceeding, arbitration, investigation or hearing or note of hearing shall be
pending or threatened against or affecting the Shareholder or CPS or any of the
Assets, which (a) might result either in an action or enjoin or prevent the
consummation of the transactions contemplated by this Agreement; (b) would
materially adversely affect the business of CPS or the ability of Purchaser to
consummate the transactions contemplated by this Agreement or to own the Common
Stock or to operate the business of CPS.
10.3.2 CPS shall not be in violation of any law, statute, ordinance, rule,
regulation or executive order, the enforcement of which would, individually or
in the aggregate, materially adversely affect the Assets or the business of CPS;
or which would individually or in the aggregate, materially adversely affect the
ability of Purchaser to consummate the transactions contemplated by this
Agreement or to own the Common Stock or to operate the business of CPS.
10.3.3 No law, regulation or decree shall have been proposed, adopted or
promulgated, or have become effective, the enforcement of which would materially
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adversely affect the ability of Purchaser to consummate the transactions
contemplated by this Agreement or to own the Common Stock or to operate any such
business.
10.4 Approvals and Consents. CPS shall have obtained, and Purchaser shall
have received copies of, all of the approvals and consents referred to in
Section 7.2, each of which approvals and consents shall be in full force and
effect and reasonably satisfactory in form and substance to Purchaser and its
counsel.
10.5 Shareholder's Certificate. Purchaser shall have received an accurate
certificate of the Shareholder, dated the Closing Date, satisfactory in form and
substance to Purchaser and its counsel, certifying (a) as to the fulfillment of
the matters specified in Sections 10.1 through 10.3, and (b) any changes that
Purchaser is required to be notified of pursuant to Section 7.4, or that
previously had not been disclosed to Purchaser.
10.6 Officer's Certificate. Purchaser shall have received an accurate
certificate, dated the Closing Date, of Charles Siebert, President of CPS, dated
as of the Closing Date, stating, among other things, that he is not aware of any
material omissions or facts that would materially alter any of the Financial
Statements, nor is he aware of any facts or factors that are reasonably likely
to occur, or if known to other parties, that could have a material adverse
effect on the financial condition, business, operations, Assets, liabilities,
management or prospects of CPS.
10.7 Good Standing Certificates. Purchaser shall have received (a) a
certificate of the office of the Secretary of State of Missouri, dated within 30
days before the Closing Date, certifying that the records of such state
regarding both CPS Trailer Company, Inc. and CPS Enterprises, Inc. incorporated
in such state reflect neither a certificate of dissolution, a court order
declaring dissolution, a merger or consolidation which terminated its existence,
nor suspension of its corporate powers, rights and privileges, and that in
accordance with the records of such state, such corporation is authorized to
exercise all of its corporate powers, rights and privileges in such state and
(b) a telegram or other document from one or more appropriate officials of the
State of Missouri or an affidavit of counsel with respect to telephone
conversations with such officials, dated within two days before the Closing
Date, to the same effect.
10.8 No Material Adverse Change. There shall have been no material adverse
changes in the financial condition, business, operations, assets, liabilities,
management or prospects of CPS.
10.9 Actions, Proceedings, Etc. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this Agreement
shall have been completed.
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10.10 Opinion of Counsel to CPS. Purchaser shall have received an opinion
of ___________________________________, counsel to CPS, addressed to Purchaser,
dated the Closing Date, to the effect set forth in, and substantially in the
form, of Exhibit 10.10.
10.11 Licenses, Permits, Consents, Etc. Purchaser shall have received
evidence, in form and substance reasonably satisfactory to counsel for
Purchaser, that such licenses, permits, consents, approvals, authorizations or
orders of governmental authorities as are necessary to the consummation of the
transactions contemplated by this Agreement and the continued operation of the
business of CPS have been obtained.
10.12 Documentation of Rights. CPS shall have delivered to Purchaser true
and complete copies of all of the documentation held by CPS relating to each of
the Rights.
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SHAREHOLDER
The obligations of the Shareholder under this Agreement are subject to the
satisfaction at the Closing of each of the following conditions.
11.1 Accuracy of Representations and Warranties. All representations and
warranties by Purchaser in this Agreement shall be true as of the Closing Date
with the same force and effect as though made on and as of the Closing Date.
11.2 Performance of Agreements. Purchaser shall have performed and
complied in all material respects with all covenants, obligations and agreements
to be performed or complied with by it on or before the Closing Date pursuant to
this Agreement.
11.3 No Injunction. No third party injunction, stay or restraining order
shall be in effect prohibiting the consummation of the transactions contemplated
hereby.
11.4 Opinion of Counsel to Purchaser. The Shareholder shall have received
an opinion of counsel to Purchaser, addressed to the Shareholder, dated as of
the Closing Date, to the effect set forth in, and substantially in the form, of
Exhibit 11.4.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
12.1 Survival. The representations and warranties set forth in this
Agreement, in any Exhibit or Schedule hereto and in any certificate or
instrument delivered in connection herewith shall survive for a period of two
(2) years after the Closing Date and shall thereupon terminate and expire and
shall be of no force or effect thereafter, except (i) with respect to any claim,
written notice of which shall have been delivered to Purchaser, the Shareholder
or CPS, as the case may be, such claim shall survive the
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termination of such period and shall survive for as long as such claim is
unsettled, and (ii) with respect to any litigation which shall have been
commenced to resolve such claim on or prior to such date. Notwithstanding the
foregoing, with respect to taxes, the period shall be the applicable statute of
limitations, and with respect to customer claims, the period shall be five (5)
years.
12.2 Indemnification by the Shareholder. The Shareholder hereby covenant
and agree with Purchaser that, regardless of any investigation made at any time
by or on behalf of Purchaser or any information Purchaser may have and,
regardless of the Closing hereunder, the Shareholder shall indemnify Purchaser
and CPS and its respective directors, officers, employees and Affiliates of
Purchaser, and each of their successors and assigns (individually, a "Purchaser
Indemnified Party"), and hold them harmless from, against and in respect of any
and all costs, losses, claims, liabilities, fines, penalties, damages and
expenses (including interest which may be imposed in connection therewith, court
costs and reasonable fees and disbursements of counsel) incurred by any of them
resulting from any misrepresentation, breach of warranty or nonfulfillment of
any agreement, covenant or obligation by the Shareholder made in this Agreement
(including without limitation any Exhibit hereto and any certificate or
instrument delivered in connection herewith).
12.3 Indemnification by Purchaser. Subject to the limitations set forth in
Section 12.1, Purchaser hereby covenants and agrees with the Shareholder that
Purchaser shall indemnify the Shareholder and hold them harmless from, against
and in respect of any and all costs, losses, claims, liabilities, fines,
penalties, damages and expenses (including interest which may be imposed in
connection therewith and court costs and reasonable fees and disbursements of
counsel) incurred by any of them resulting from any misrepresentation, breach of
warranty or the nonfulfillment of any agreement, covenant or obligation by
Purchaser made in this Agreement (including without limitation any Exhibit
hereto and any certificate or instrument delivered in connection herewith).
12.4 Right to Defend. If the facts giving rise to any such indemnification
shall involve any actual claim or demand by any third party against a Purchaser
Indemnified Party or Shareholder (referred to hereinafter as an "Indemnified
Party"), the indemnifying parties shall be entitled to notice of and entitled
(without prejudice to the right of any Indemnified Party to participate at its
own expense through counsel of its own choosing) to defend or prosecute such
claim at their expense and through counsel of their own choosing if they give
written notice of their intention to do so no later than the time by which the
interest of the Indemnified Party would be materially prejudiced as a result of
its failure to have received such notice; provided, however, that if the
defendants in any action shall include both the indemnifying parties and an
Indemnified Party, and the Indemnified Party shall have reasonably concluded
that counsel selected by the indemnifying parties has a conflict of interest
because of the availability of different or
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additional defenses to the Indemnified Party, the Indemnified Party shall
cooperate fully in the defense of such claim and shall make available to the
indemnifying parties pertinent information under its control relating thereto,
but shall be entitled to be reimbursed, as provided in this Article 12, for all
costs and expense incurred by it in connection therewith.
12.5 Subrogation. If the Indemnified Party receives payment or other
indemnification from the indemnifying party hereunder, the indemnifying party
shall be subrogated to the extent of such payment or indemnification to all
rights in respect of the subject matter of such claim to which the Indemnified
Party may be entitled, to institute appropriate action for the recovery thereof,
and the Indemnified Party agrees reasonably to assist and cooperate with the
indemnifying party at no expense to the Indemnified Party in enforcing such
rights.
13. MISCELLANEOUS
13.1 Expenses. Except as and to the extent otherwise provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, the Shareholder and Purchaser shall each pay their own respective
expenses and the fees and expenses of their respective counsel and other
experts.
13.2 Termination of Agreement. This Agreement may be terminated and the
transaction contemplated hereby may be abandoned at any time, but not later than
the Closing Date by the mutual consent of the parties. In the event of the
termination of this Agreement, no party shall have any liability hereunder,
including any liability for damages. In the event that a condition precedent to
a party's obligation is not met, nothing contained herein shall be deemed to
require any party to terminate this Agreement rather than to waive such
condition precedent and proceed with the Closing.
13.3 Waivers. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein or in any other documents. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach. Any party
hereto may, at or before the Closing, waive any conditions to its obligations
hereunder which are not fulfilled.
13.4 Binding Effect; Benefits. This Agreement shall inure to the benefit
of the parties hereto and shall be binding upon the parties hereto and their
respective successors and assigns. Except as otherwise set forth herein, nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement.
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13.5 Assignment. Without limitation, and without the consent, prior,
written or otherwise, of CPS, this Agreement and all of the rights and
obligations hereunder may be assigned by Purchaser to any entity owned or
controlled by, or affiliated with it. Immediately upon such assignment,
Purchaser shall be released from any obligation, of any kind or nature, under
this Agreement.
13.6 Notices. All notices, requests, demands and other communications
which are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person or
upon receipt when transmitted by facsimile or telex or after dispatch by
certified or registered first class mail, postage prepaid, return receipt
requested, to the party to whom the same is so given or made:
If to Purchaser, to:
Mr. Steven Merker
Barclay Partners, LLC
c/o Loeb, Block & Partners LLP
505 Park Avenue
New York, New York 10022
and
29
<PAGE>
Mr. Andrew A. Levy
Redstone Capital Corporation
375 Park Avenue
Suite 2805
New York, New York 10152
If to the Shareholder or CPS, to:
Mr. Charles P. Siebert
Chief Executive Officer
CPS Trailer Company, Inc.
500 Rosati Street
Oran, Missouri 63771
With a copy to:
13.7 Entire Agreement. This Agreement (including the Exhibits hereto) and
the Ancillary Documents constitute the entire agreement and supersede all prior
agreements and understandings, oral and written, among the parties hereto with
respect to the subject matter hereof and supersede all prior agreements,
representations, warranties, statements, promises and understandings, whether
written or oral, with respect to the subject matter hereof. No party hereto
shall be bound by or charged with any written or oral arguments,
representations, warranties, statements, promises or understandings no
specifically set forth in this Agreement or in any Exhibit hereto or any
Ancillary Documents, or in certificates and instruments to be delivered pursuant
hereto on or before the Closing.
30
<PAGE>
13.8 Headings; Certain Terms. The section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement. As used in this Agreement, the term "including" means "including, but
not limited to" unless otherwise specified; the word "or" means "and/or," and
the word "person" means and refers to any individual, corporation, trust,
partnership, joint venture, government or governmental authority, or any other
entity; and the plural and singular forms are used interchangeably.
13.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed, shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
13.10 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Delaware, without giving effect to the choice of law
principles thereof.
13.11 Severability. If any term or provision of this Agreement shall to
any extent be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and each term and provision of the agreement shall be
valid and enforced to the fullest extent permitted by law.
13.12 Amendments. This Agreement may not be modified or changed except by
an instrument or instruments in writing signed by the party or parties against
whom enforcement of any such modification or amendment is sought.
13.13 Transaction Taxes. The Shareholder shall pay any and all taxes
imposed upon the sale of the Common Stock and transfer of ownership thereof.
13.14 Section References. All references contained in this Agreement to
any section number are references to sections of this Agreement unless otherwise
specifically stated.
13.15 Brokers and Finders. The Shareholder recognize that The March Group,
LLC, Nashville, Tennessee (Mr. Tom Whitton, Paducah, Kentucky office) is the
broker which brought about this transaction and the Shareholder shall be solely
responsible for the payment of all fees and expenses of The March Group, LLC at
the Closing. Each party represents and warrants there are no other brokers,
finders or similar persons to
31
<PAGE>
whom compensation will be due or owing as a result of consummation of the
transactions contemplated by this Agreement and each party hereby agrees to
indemnify and hold the other party harmless against any such claims.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement, or have
caused this Agreement to be signed in their respective names by an officer
thereunder duly authorized, on the date first above written.
CPS ENTERPRISES, INC. CPS TRAILER COMPANY, INC.
By: By:
----------------------------- -------------------------------------------
Charles P. Siebert, President Charles P. Siebert, Chief Executive Officer
Selling Shareholder:
-------------------------------------------
Charles P. Siebert, Individually
Purchasers: BARCLAY PARTNERS, LLC
By:
-------------------------------------------
William Merker, Manager
REDSTONE CAPITAL CORPORATION
By:
-------------------------------------------
Andrew A. Levy, President
32
STOCK PURCHASE AGREEMENT
By and Among
BARCLAY PARTNERS, LLC
and
REDSTONE CAPITAL CORPORATION,
Purchasers
and
WILLIAM L. SMITH and JANET R. SMITH
Sellers
and
R & S TRUCK BODY COMPANY, INC.
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS......................................................1
1.1 Affiliate..................................................1
1.2 Ancillary Documents........................................1
1.3 Assets.....................................................1
1.4 Code.......................................................3
1.5 Commitments................................................3
2. SALE OF STOCK....................................................3
2.1 Purchase and Sale of Stock.................................3
2.2 Delivery of Possession and Instruments of Transfer.........3
3. CONSIDERATION....................................................3
3.1 Cash Consideration.........................................3
3.2 Deposit....................................................4
3.3 Payment at Closing.........................................4
3.4 Other Consideration........................................4
(a) Employment Agreements................................4
(b) Accrued Bonus Compensation...........................4
(c) Consulting Contract..................................5
(d) Stock................................................5
(e) Stock Option Plan....................................5
3.5 Allocation of Consideration for Tax Purposes...............5
4. CLOSING..........................................................5
Closing and Closing Date.........................................5
5. REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS AND R & S...........................................6
5.1 Organization, Good Standing, Power, Etc....................6
5.2 Capital Stock..............................................6
5.3 Articles of Incorporation and By-Laws......................7
5.4 Subsidiaries, Divisions and Affiliates.....................7
5.5 Equity Investments.........................................7
5.6 Authorization of Agreement.................................7
5.7 Effect of Agreement........................................7
5.8 Restrictions...............................................7
5.9 Governmental and Other Consents............................8
5.10 Financial Statements.......................................8
i
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5.11 Absence of Certain Changes or Events.......................8
5.12 Title to Assets; Absence of Liens and Encumbrances.........9
5.13 Equipment..................................................9
5.14 Insurance..................................................9
5.15 Agreements, Arrangements, Etc.............................10
5.16 Patents, Trademarks, Copyrights, Etc......................13
5.17 Permits, Licenses, Etc....................................13
5.18 Compliance with Applicable Laws...........................13
5.19 Litigation................................................14
5.20 No Interest in Competitors................................14
5.21 Customers, Suppliers, Distributors and Agents.............14
5.22 Books and Records.........................................15
5.23 Employee Benefit Plan.....................................15
5.24 Powers of Attorney........................................16
5.25 Sufficiency of Assets and Commitments.....................16
5.26 Labor Disputes, Unfair Labor Practices....................16
5.27 Past Due Obligations......................................16
5.28 Environmental Matters.....................................16
5.29 Tax and Other Returns and Reports.........................18
5.30 Certain Tax Definitions...................................18
5.31 Recent Dividends and Other Distributions..................19
5.32 Inventory.................................................19
5.33 Purchase and Sale Obligations.............................19
5.34 Other Information.........................................19
5.35 Accounts Receivable and Accounts Payable..................19
5.36 Knowledge of R & S and the Shareholders...................19
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................20
6.1 Organization..............................................20
6.2 Authorization of Agreement................................20
6.3 Effect of Agreement.......................................20
6.4 Litigation................................................20
7. PRE-CLOSING COVENANTS OF THE SHAREHOLDERS.......................21
7.1 Conduct of Business Until Closing Date....................21
7.2 Approvals, Consents and Further Assurances................22
7.3 Access to Properties, Records, Suppliers, Agents, Etc.....22
7.4 Advice of Changes.........................................22
7.5 Conduct...................................................23
7.6 Employee Benefit Plans....................................23
7.7 Satisfaction of Conditions by Shareholders................23
ii
<PAGE>
8. PRE-CLOSING COVENANTS OF PURCHASER..............................23
Satisfaction of Conditions by Purchaser.........................23
9. POST-CLOSING COVENANTS..........................................23
Further Assurances..............................................23
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
PURCHASER.......................................................24
10.1 Accuracy of Representations and Warranties................24
10.2 Performance of Agreements.................................24
10.3 Litigation, Etc...........................................24
10.4 Approvals and Consents....................................25
10.5 Shareholder's Certificate.................................25
10.6 Officer's Certificate.....................................25
10.7 Good Standing Certificates................................25
10.8 No Material Adverse Change................................25
10.9 Actions, Proceedings, Etc.................................25
10.10 Opinion of Counsel to R & S...............................26
10.11 Licenses, Permits, Consents, Etc..........................26
10.12 Documentation of Rights...................................26
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
SHAREHOLDERS....................................................26
11.1 Accuracy of Representations and Warranties................26
11.2 Performance of Agreements.................................26
11.3 No Injunction.............................................26
11.4 Opinion of Counsel to Purchaser...........................26
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.................................................26
12.1 Survival..................................................26
12.2 Indemnification by the Shareholders.......................27
12.3 Indemnification by Purchaser..............................27
12.4 Right to Defend...........................................27
12.5 Subrogation...............................................28
13. MISCELLANEOUS...................................................28
13.1 Expenses..................................................28
13.2 Termination of Agreement..................................28
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<PAGE>
13.3 Waivers...................................................28
13.4 Binding Effect; Benefits..................................28
13.5 Assignment................................................29
13.6 Notices...................................................29
13.7 Entire Agreement..........................................30
13.8 Headings; Certain Terms...................................30
13.9 Counterparts..............................................30
13.10 Governing Law.............................................30
13.11 Severability..............................................31
13.12 Amendments................................................31
13.13 Transaction Taxes.........................................31
13.14 Section References........................................31
13.15 Brokers and Finders.......................................31
iv
<PAGE>
EXHIBIT INDEX
1. Exhibit 1.3(b) Inventory
2. Exhibit 1.3(c) Equipment
3. Exhibit 1.3(d) Rights (Patents, Trademarks, Copyrights, etc.)
4. Exhibit 1.3(h) Real Property (owned or leased) (included or
excluded)
5. Exhibit 1.3(j) Excluded Assets
6. Exhibit 3.4(b) Charles Collins and Paul Nunn Employment
Agreements
7. Exhibit 3.5 Allocation of Consideration
8. Exhibit 4.l Form of Closing Memorandum
9. Exhibit 5.1 Good Standing Certificates - R & S
10. Exhibit 5.2 Outstanding Offers, Options, Warrants,
Securities, Etc.
11. Exhibit 5.3 Articles of Incorporation and By-laws of R & S
12. Exhibit 5.4 Subsidiaries, Divisions and Affiliates of R & S
13. Exhibit 5.5 Equity Investments
14. Exhibit 5.8 Restrictions
15. Exhibit 5.9 Governmental and Other Consents
16. Exhibit 5.10 Financial Statements of R & S
17. Exhibit 5.11 Material Adverse Changes
18. Exhibit 5.12 Notices, Liens and Encumbrances of R & S
19. Exhibit 5.14 Insurance Policies
20. Exhibit 5.15 Commitments
21. Exhibit 5.16 Patents, Trademarks, Copyrights
22. Exhibit 5.17 Permits, Licenses, Etc.
23. Exhibit 5.19 Material Litigation
24. Exhibit 5.20 5% Interest Ownership Table
25. Exhibit 5.21(a) Customers, Suppliers, Distributions and Agents
26. Exhibit 5.21(b) 20 Largest Purchasers and Providers
27. Exhibit 5.23 Employee Benefit Plans
28. Exhibit 5.24 Powers of Attorney
29. Exhibit 5.25 Sufficiency of Assets & Commitments
30. Exhibit 5.26 Material Labor Disputes
31. Exhibit 5.27 Past Due Obligations
32. Exhibit 5.28 Environmental Matters
33. Exhibit 5.29(a) Tax Examination Dates
34. Exhibit 5.29(b) Examinations of Tax Returns by Governmental
Agency
35. Exhibit 5.29(c) Proposal by Governmental Entity of Deficiency,
Assessment or Claim of Taxes
36. Exhibit 5.32(a) Inventory
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<PAGE>
37. Exhibit 5.32(b) Non-useable Inventory
38. Exhibit 5.35 Accounts Receivable and Accounts Payable
39. Exhibit 10.10 Opinion of Counsel to R & S
41. Exhibit 11.4 Opinion of Counsel to Redstone/Barclay
vi
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of this _____ day
of ___________, 1997, by and among Barclay Partners, LLC ("Barclay"), a Nevada
limited liability company, and Redstone Capital Corporation, a Texas corporation
having an office at 375 Park Avenue, Suite 2805, New York, New York 10152
("Redstone") (Redstone and Barclay collectively "Purchaser") or their assignees
under Section 13.5 of this Agreement, William L. Smith and Janet R. Smith (the
"Shareholders"), and R & S Truck Body Company, Inc. of Route 1428, Allen,
Kentucky 41601 ("R & S").
RECITALS:
WHEREAS, the Shareholders are the record and beneficial owners of
_________ shares of common stock of R & S, which is 100% of the issued and
outstanding capital stock of R & S (the "Common Stock");
WHEREAS, Purchaser desires to purchase from Shareholders, and Shareholders
desire to sell to Purchaser, the Common Stock of R & S on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements of the parties hereinafter set forth, and for other good and
valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS
1.1 "Affiliate". As used in this Agreement, the term "Affiliate" shall
mean, as applied to any person, any other person directly or indirectly
controlling, controlled by, or under common control with, that person. For
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling", "controlled by", and "under common control with") as
applied to any person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of that
person or entity, whether through the ownership of voting securities, by
contract, or otherwise.
1.2 "Ancillary Documents" shall have the meaning set forth in Section 9
hereof.
1.3 "Assets". As used in this Agreement, the term "Assets" shall mean the
assets of R & S (as of the Closing) as follows:
(a) the business of R & S as a going concern, the goodwill pertaining
thereto and all of R & S's right, title and interest in and to the names
"R & S Truck Body
<PAGE>
Company, Inc.", and all other names used by R & S, as well as all logos
relating thereto;
(b) all items of inventory owned by R & S including, without limitation,
all raw materials, work-in-progress and finished products of R & S (all of
which are collectively referred to hereinafter as "Inventory"), as set
forth in Exhibit 1.3(b); all vehicles, machinery, equipment (including
equipment which has previously been fully depreciated by R & S and all
equipment loaned to customers), furniture, fixtures and non-inventory
supplies of R & S (including containers, packaging and shipping material,
tools and spare parts and other similar tangible personal property owned
by R & S, which are listed on Exhibit 1.3(c), all of which are
collectively referred to hereinafter as the "Equipment");
(c) all of R & S' right, title and interest in and to the United States
and foreign rights of R & S currently owned or used by R & S (and the
rights proposed to be used) which are set forth on Exhibit 1.3(d), in the
conduct of the business of R & S, with respect to copyrights, licenses,
patents, trademarks, trademark rights, tradenames, service marks, service
right marks, trade secrets, shop rights, know-how, technical information,
techniques, discoveries, designs, proprietary rights and non-public
information and registrations, reissues and extensions thereof and
applications and licenses therefor, including the items listed on Exhibit
1.3(d) (all of such rights being collectively referred to hereinafter as
the "Rights");
(d) all books and records of R & S including all in-house mailing lists,
other customer and supplier lists, trade correspondence, production and
purchase records, promotional literature, data storage tapes and computer
disks, computer software, order forms, accounts payable records (including
invoices, correspondence and all related documents), accounts receivable
ledger from December 31, 1995 through the Closing Date, all documents
relating to uncollected invoices, and all shipping records from December
31, 1995 through the Closing Date;
(e) all contracts, agreements and orders for goods; all corporate
opportunities under discussion and related to the business of R & S,
including any documentation related thereto;
(f) all trade receivables of R & S and all advance payments, prepaid
items, rights to offset and credits of all kinds of R & S;
(g) all real property owned or leased by R & S together with all fixtures
attached thereto, except for property excluded, as set forth in Exhibit
1.3(h) (the "Real Property");
2
<PAGE>
(h) all real property and all tangible personal property owned by R & S
which is not specifically included in, or specifically excluded by, the
foregoing subsections (a) through (j);
(i) all plans, contracts, financing commitments and other rights with
respect to the land and new plant to be constructed on Route ____, Allen,
Kentucky; and
(j) all other assets of R & S, except as specifically excluded on Exhibit
1 .3(j) "Excluded Assets").
1.4 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and/or superseded.
1.5 "Commitments" shall mean all agreements, indentures, mortgages, plans,
policies, arrangements, and other instruments, including all amendments thereto
(or where they are verbal, written summaries of the materials terms thereof),
fixed or contingent, required to be disclosed on Exhibit 5.15.
2. SALE OF STOCK
2.1 Purchase and Sale of Stock. In exchange for the consideration
specified herein, and upon and subject to the terms and conditions of this
Agreement, Purchaser agrees to purchase and acquire from the Shareholders, and
the Shareholders agrees to sell, assign, transfer, convey and deliver to
Purchaser or its assignee under Section 13.5 at the Closing, all rights, title
and interest in and to the Common Stock.
2.2 Delivery of Possession and Instruments of Transfer. At the Closing,
the Shareholders shall deliver to Purchaser possession of all of the
certificates representing the shares of Common Stock, duly endorsed in blank or
accompanied by duly executed stock powers with signatures guaranteed, and such
other instruments of transfer requested by and satisfactory to Purchaser and its
counsel for the consummation of the transactions contemplated under this
Agreement and as are necessary to vest in Purchaser all of Shareholders' rights,
title and interest in and to the Common Stock, free and clear of any lien,
encumbrance, security agreement, equity, option, claim, charge or restriction,
other than restrictions imposed by federal or applicable state securities laws.
3. CONSIDERATION
3.1 Cash Consideration. The cash consideration to be paid by Purchaser in
consideration for its purchase of the Common Stock and the other rights provided
herein shall be the sum of $11,000,000.
3.2 Deposit. A deposit in the amount of $400,000 to be held in escrow in
an interest bearing account by Seller's attorney shall be paid by Purchaser upon
execution
3
<PAGE>
hereof. Should Purchaser default in its obligation to close and should
Shareholders be in all respects ready to close and along with R & S are in
compliance with this Agreement, the Shareholders shall be entitled to retain the
deposit with all interest thereon as liquidated damages, and neither party shall
have any further obligation to the others.
3.3 Payment at Closing. The down payment shall be released to the
Shareholders and an additional $10,500,000 in cash shall be payable at the
Closing in clearing house funds, provided good and marketable title to the
Common Stock is delivered, free and clear of any lien, or encumbrance as set
forth in Section 2.2 hereof and provided all other terms and conditions of this
Agreement have been complied with. Interest on the down payment shall be a
credit to the Purchaser. At least ten days prior to closing, Shareholders shall
deliver to Purchaser a direction setting forth the proportion the cash portion
of the Purchase Price is to be paid among the individual Shareholders. Failing
such instruction, the cash portion of the Purchase Price shall be payable to
each individual Seller in proportion to the number of shares of R & S owned by
each such Seller.
3.4 Other Consideration. In further consideration of the sale by the
Shareholders, and the purchase by Purchaser of the Common Stock, and as
additional inducements to Purchaser to enter into this Agreement, the following
shall be applicable:
(a) Employment Agreements. Mr. Charles Collins and Mr. Paul Nunn shall, at
the Closing, deliver executed Employment Agreements, and R & S shall
execute said Employment Agreements, in the form attached hereto as Exhibit
3.4(b). Said Employment Agreements shall have a term of three years and
shall recite, among other things, that Charles Collins shall receive a
salary of $150,000 per year, that Paul Nunn shall receive a salary of
$175,000 per year, that a bonus plan shall be established for management
personnel including Messrs. Collins and Nunn to consist of 5% of R & S'
earnings before depreciation, amortization, interest and taxes (EBITDA)
during employment of Charles Collins and Paul Nunn, to be divided between
the management personnel as the Board of Directors of R & S shall
determine for each year of employment under the Employment Agreements and
a non-competition clause with respect to any products made or contemplated
to be made by R & S extending through course of employment and for one
year thereafter.
(b) Accrued Bonus Compensation. On or before the Closing Date, R & S shall
be entitled to pay out all accrued management bonuses under the current
bonus program for the period from January 1, 1997 through the date of
Closing.
4
<PAGE>
(c) Consulting Contract. At the closing William L. Smith shall enter into
a consulting contract in the form attached hereto as Exhibit 3.4(c) with R
& S for a term of three years to provide approximately ten hours per month
to R & S, to provide essentially the same services he provides now. The
consulting contract shall call for a consulting fee of $8,333 per month
payable in increments at the time R & S normally pays its payroll.
(d) Stock. At the Closing Purchaser shall cause to be allocated to the
Shareholders a total of $500,000 worth of shares of Standard Automotive
Corporation, valued at the average closing price of said shares on the
immediate ten trading days prior to the Closing. Said shares shall contain
no restrictions on transfer except as set forth in SEC Rule 144 or any
replacement thereof. In the alternative, Purchaser shall be entitled to
satisfy the requirement of this paragraph 3.4(d) by delivery of $500,000
in cash to Shareholders at the Closing.
(e) Stock Option Plan. At the Closing the Company shall establish a tax
qualified stock option plan (such as an incentive stock option plan) for
all employees in which management shall be entitled to participate.
3.5 Allocation of Consideration for Tax Purposes. The parties agree to
allocate the consideration paid pursuant to this Agreement in the manner and in
accordance with the values specified in Exhibit 3.5 for tax purposes. None of
the parties shall, at any time hereafter, in any tax or information return filed
with any state or federal agency or in any audit, other tax proceeding or
otherwise, take a position which is contrary to such allocation.
4. CLOSING
Closing and Closing Date. Subject to the provisions of this Agreement, the
consummation of the transactions contemplated by this Agreement (the "Closing")
shall be held at the offices of ___________________________ at 10:00 A.M. (local
time), November 15, 1997, or at such later date, place or time as the parties
shall otherwise mutually agree upon (the date of the Closing being referred to
herein as the "Closing Date"). All Closing transactions shall be deemed to take
place simultaneously, and no Closing transaction shall be deemed consummated
until all transactions to take place at the Closing have been consummated. The
actions and documents necessary for the consummation of transactions
contemplated by this Agreement shall be set forth in the Closing Memorandum
attached hereto as Exhibit 4.1.
5
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND R & S
As an inducement to Purchaser to enter into this Agreement and perform its
obligations hereunder, the Shareholders and R & S, jointly and severally, hereby
represent and warrant to Purchaser as follows, each of which representation and
warranty is material and is being relied upon by Purchaser, and each of which is
true as of the date hereof and shall be true as of the Closing, with the same
effect as if said representations and warranties had been made at and as of the
Closing Date:
5.1 Organization, Good Standing, Power, Etc. R & S is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Kentucky. R & S is authorized or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction (set forth in Exhibit
5.1) in which the character and location of its Assets or the nature of the
business transacted by R & S makes such qualification necessary. R & S has all
requisite corporate power and authority to (i) execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby and (ii) to own or lease and operate its properties and assets, and carry
on its business as it is presently being conducted.
5.2 Capital Stock.
(a) R & S has authorized capital stock consisting of _________________
(________) shares of common stock, $___________ par value, of which
___________ (________) shares are issued and outstanding, and all of which
are duly authorized, validly issued, fully paid, non assessable, free of
preemptive rights, and were issued in compliance with all federal and
applicable state securities laws.
(b) Except as set forth in Exhibit 5.2 hereof, there are no outstanding
offers, options, warrants, rights, calls, commitments, obligations (verbal
or written), conversion rights, plans or other agreements (conditional or
unconditional) of any character providing for, requiring or permitting the
offer, sale, purchase or issuance of any shares of capital stock of R & S
or any other securities (as such term is defined in the Securities Act of
1933, as amended). Except as set forth in Exhibit 5.2, there are no equity
securities of the Company that are reserved for issuance or are
outstanding.
(c) The Common Stock is owned by the Shareholders free and clear of all
liens, charges, encumbrances or claims of any kind whatsoever, except for
restrictions imposed by federal or applicable state securities laws.
6
<PAGE>
5.3 Articles of Incorporation and By-Laws. Included in Exhibit 5.3 hereto
are correct and complete copies of the Articles of Incorporation of R & S, as
amended to date, and the By-Laws of R & S, as amended to date. Such Articles of
Incorporation and By-Laws are in full force and effect.
5.4 Subsidiaries, Divisions and Affiliates. Except as set forth on Exhibit
5.4, there are no subsidiaries, divisions or Affiliates of R & S. Except as set
forth on Exhibit 5.4, the business of R & S has been conducted solely by R & S
and not through any Affiliate, joint venture or other entity, person or under
any other name.
5.5 Equity Investments. Except as set forth in Exhibit 5.5, R & S does not
own or have any rights to any equity interest, directly or indirectly, in any
corporation, partnership, joint venture, firm or other entity.
5.6 Authorization of Agreement. The execution, delivery and performance of
this Agreement has been, and the Ancillary Documents will be, duly and validly
executed and delivered by the Shareholders of R & S. This Agreement constitutes
a valid and binding obligation of the Shareholders enforceable in accordance
with its terms, except that such enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditor's rights
generally.
5.7 Effect of Agreement. The execution, delivery and performance of this
Agreement by the Shareholders and the consummation by the Shareholders and R &
S, respectively, of the transactions contemplated hereby, will not, with or
without the giving of notice and the lapse of time, or both, (a) violate any
provision of law, statute, rule, regulation or executive order to which R & S or
the Shareholders is subject; (b) violate any judgment, order, writ or decree of
any court applicable to the Shareholders or R & S; or (c) result in the breach
of or conflict with any term, covenant, condition or provision of, result in the
modification or termination of, constitute a default under, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the Assets pursuant to, any corporate charter, by-law, commitment,
contract or other agreement or instrument, including any of the Commitments, to
which R & S or the Shareholders is a party or by which any of the Assets is or
may be bound or affected or from which R & S or the Shareholders derive benefit,
which breach, conflict, modification, termination, default or encumbrance
described in this clause (c) would be material to the business of R & S or any
of the Assets.
5.8 Restrictions. Except as set forth on Exhibit 5.8, neither R & S nor
the Shareholders is a party to any contract, commitment or agreement, nor is any
of them, the Common Stock or Assets subject to, or bound or affected by, any
provision of the Articles of Incorporation, Bylaws or other corporate
restriction, or any order, judgment, decree, law, statute, ordinance, rule,
regulation or other restriction of any kind or
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character, which would, individually or in the aggregate, materially adversely
affect R & S's business, the Common Stock or any of the Assets.
5.9 Governmental and Other Consents. Except as set forth on Exhibit 5.9,
no consent, authorization or approval of, or exemption by, any governmental or
public body or authority is required in connection with the execution, delivery
and performance by the Shareholders of this Agreement or by R & S or the
Shareholders of any of the instruments or agreements herein referred to, or the
taking of any action herein contemplated.
5.10 Financial Statements. The Shareholders have delivered to Purchaser,
and included in Exhibit 5.10 hereto, correct and complete copies of financial
statements financial statements of R & S for the fiscal years ended December 31,
1996, 1995 and 1994, and unaudited for the period ended June 30, 1997, together
with such other financial documents requested by Purchaser covering the period
June 30, 1997 through the date of Closing (collectively, the "Financial
Statements"). The Financial Statements are in accordance with the books and
records of R & S, have been prepared in accordance with generally accepted
accounting principles and practices consistently applied and accurately present
the financial position of R & S at their respective dates and the results of
operations and cash flows for the respective periods covered thereby and all
items that could have a material adverse effect on the willingness of a
prospective purchaser to acquire R & S have been disclosed in the Financial
Statements or in the Exhibits to this Agreement.
5.11 Absence of Certain Changes or Events. Except as set forth on Exhibit
5.1 1, since December 31, 1996, R & S has not: (a) suffered any adverse change
in, or the occurrence of any events which, individually or in the aggregate, has
or have had, or might reasonably be expected to have, a material adverse effect
on, R & S's financial condition, results of operations or business or the value
of the Assets; (b) incurred damage to or destruction of any material Asset or
material portion of the Assets, whether or not covered by insurance; (c)
incurred any material obligation or liability (fixed or contingent) except (i)
current trade or business obligations incurred in the ordinary course of
business, none of which were entered into for grossly inadequate consideration,
(ii) obligations or liabilities under the Commitments to the extent required
thereby, and (iii) obligations and liabilities under this Agreement; (d) made or
entered into contracts or commitments to make any capital expenditures in excess
of Ten Thousand Dollars ($ 10,000.00); (e) mortgaged, pledged or subjected to
lien or any other encumbrance any of the Assets; (f) sold, transferred or leased
any material Asset or material portion of the Assets, or canceled or compromised
any debt or material claims, except in each case, in the ordinary course of
business; (g) sold, assigned, transferred or granted any rights under or with
respect to any licenses, agreements, patents, inventions, trademarks, trade
names, copyrights or formulae or with respect to know-how or any other
intangible asset
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including, but not limited to, the Rights; (h) amended or terminated any of the
contracts, agreements, leases or arrangements which otherwise would have been
set forth on Exhibit 5.15 hereto; (i) waived or released any other rights of
material value; or (i) entered into any transactions not in the ordinary course
of business which would, individually or in the aggregate, materially adversely
affect the Assets or the business of R & S.
5.12 Title to Assets; Absence of Liens and Encumbrances. Except as set
forth on Exhibit 5.12, (a) R & S has good title to, and owns outright, the
Assets, which include substantially all of R & S's assets reflected in the
Financial Statements (except (i) as sold, used or otherwise disposed of in the
ordinary course of business, and (ii) as disclosed in the Financial Statements),
free and clear of all mortgages, claims, liens, charges, encumbrances, security
interests, restrictions on use or transfer or other defects as to title; and (b)
immediately following the Closing, R & S will have good and marketable title to
all Assets, free and clear of all mortgages, claims, liens, charges,
encumbrances, security interests, restrictions on use or transfer, or other
defects of any nature. The leases and other agreements or instruments under
which R & S holds, leases or is entitled to the use of any real or personal
property included in the Assets are in full force and effect and all rentals,
royalties or other payments accruing thereunder prior to the date hereof have
been duly paid. R & S enjoys peaceable and undisturbed possession under all such
leases, and the change in ownership of the Assets will not adversely affect such
leases, other agreements and instruments. All Assets are in conformance with all
applicable zoning and other laws, ordinances, rules and regulations; and no
notice of violation of any law, ordinance, rule or regulation thereunder has
been received by the Shareholders or R & S.
5.13 Equipment. Set forth on Exhibit 1.3(c) is a correct and complete list
as of December 31, 1996 of all of the Equipment (in excess of a fair market
value of $3,000.00) (as defined in Section 1.3(c)), indicating for each piece of
Equipment whether it is owned or leased and setting forth where it is located.
None of the Equipment has been disposed of since May 30, 1997. Except as noted
on Exhibit 1.3(c), all of the Equipment (a) is in good working condition, with
no material defects, and generally has been suitable to R & S for the uses for
which it was designed or has been employed by R & S, and (b) conforms in all
material respects with any laws, ordinances, regulations, orders or other
similar governmental requirements relating to its use, as the same are currently
in effect.
5.14 Insurance. There are no outstanding or unsatisfied written
requirements or verbal recommendations imposed or made by any of R & S'S current
insurance companies with respect to current policies covering any of the Assets,
or by any governmental authority requiring or recommending, with respect to any
of the Assets, that any repairs or other work be done on or with respect to, or
requiring or recommending any equipment or facilities be installed on or in
connection with, any of
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the Assets. R & S carries, and (with respect to any period for which a claim
against R & S may still arise) has always carried product liability insurance,
worker's compensation insurance in reasonable amounts, and other insurance which
is reasonably necessary to the conduct of the R & S's business. On Exhibit 5.14
is set forth a correct and complete list of (a) all currently effective
insurance policies and bonds covering the Assets or the business of R & S, and
their respective annual premiums (as of the last renewal or purchase of new
insurance), and (b) for the five-year period ending on the date hereof, (i) all
accidents, casualties or damage occurring on or to the Assets or relating to the
business or products of R & S which in the aggregate are in excess or Ten
Thousand Dollars ($ 10,000.00), and (ii) claims for product liability, damages,
contribution or indemnification and settlements (including pending settlement
negotiations) relating thereto which in the aggregate are in excess of Ten
Thousand Dollars ($ 10,000.00). Except as set forth on Exhibit 5.14, as of the
date hereof there are no disputes with underwriters of any such policies or
bonds, and all premiums due and payable have been paid. There are no pending or
threatened terminations or premiums increases with respect to any of such
policies or bonds and there is no condition or circumstance applicable to the
business of R & S, other than the sale of the Common Stock pursuant to this
Agreement, which may result in such termination or increase. R & S and the
Assets are in compliance with all conditions contained in such policies or
bonds, except for noncompliance which, individually or in the aggregate, would
not have a material adverse affect on the business of R & S or the Assets.
5.15 Agreements, Arrangements, Etc.
5.15.1 Except as set forth on Exhibit 5.15.1 (a)-(t), R & S is not a party
to, nor are R & S or any of the Assets bound by any:
(a) lease agreement (whether as lessor or lessee) of the Assets;
(b) license agreement, assignment or contract (whether as licensor or
licensee, assignor or assignee) relating to trademarks, trade names,
patents, or copyrights (or applications therefor), unpatented designs or
processes, formulae, know-how or technical assistance, or other
proprietary rights;
(c) employment or other contract or agreement with an employee or
independent contractor which (i) may not be terminated without liability
to R & S upon notice to the employee or independent contractor of not more
than 30 days, or (ii) provides payments (contingent or otherwise) of more
than $30,000 per year (including all salary, bonuses and commissions);
(d) agreement, contract or order with any buying agent, supplier or other
individual or entity who assists, provides or is otherwise involved in the
acquisition, supplying or providing Assets or other goods to R & S;
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(e) non-competition, secrecy or confidentiality agreements;
(f) agreement or other arrangement for the sale of goods or services by R
& S to any third party (including the government or any other governmental
authority);
(g) agreement with any labor union;
(h) policy of insurance (including bonds) in force with respect to R & S
or any of its operations, properties, assets or executive officers;
(i) agreement, contract or order with any distributor, dealer, leasing
company, sales agent or representative, other than contracts or orders for
the purchase, sale or license of goods made in the usual and ordinary
course of business at an aggregate price per contract or more than $10,000
and a term of more than six months under any such contract or order;
(j) agreement, contract or order with any manufacturer, leasing company,
supplier or customer (including those agreements which allow discounts or
allowances or extended payment terms);
(k) agreement with any distributor or brokerage company, leasing company,
management company or any other individual or entity who assists, places,
brokers or otherwise is involved with the marketing or distribution of R &
S's products to its customers;
(l) joint venture or partnership agreement with any other person or
entity;
(m) agreement guaranteeing, indemnifying or otherwise becoming liable for
the obligations or liabilities of another;
(n) agreement with any banks or other persons, other than its employees,
for the borrowing or lending of money or payment or repayment of draws on
letters of credit or currency swap or exchange agreements (other than
purchase money security interests which may, under the terms of invoices
from its suppliers, be granted to suppliers with respect to goods so
purchased);
(o) agreement with any bank, finance company or similar organization which
acquires from R & S receivables or contracts for sales on credit;
(p) agreement granting any person a lien, security interest or mortgage on
any of the Assets, including, without limitation, any factoring or
agreement for the assignment of receivables or inventory;
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(q) agreement for the incurrence of any capital expenditure in excess of
$10,000;
(r) advertising, publication or printing agreement;
(s) agreement which restricts R & S from doing business anywhere in the
world;
(t) agreement or statute or regulation giving any party the right to
renegotiate or require a reduction in prices or the repayment of any
amount previously paid; or
(u) other agreement or contract, not included in or expressly excluded
from the terms of the foregoing clauses (a) through (t), materially
affecting the Assets or R & S's business, except contracts or purchase
orders for the purchase or sale of goods or services made in the usual and
ordinary course of business.
Correct and complete copies of all Commitments required to be shown on Exhibit
5.15 have been separately delivered to Purchaser prior to the date hereof.
5.15.2 Each of the Commitments is valid, in full force and effect and
enforceable by R & S in accordance with its terms.
5.15.3 Except as set forth on Exhibit 5.15, R & S has fulfilled, or has
taken all action reasonably necessary to enable it to fulfill when due, all of
its obligations under the Commitments, except where the failure to do so would
not, individually or in the aggregate, have a material adverse affect on the
business of R & S or the Assets. Furthermore, there has not occurred any default
by R & S or any event which, with the lapse of time or the election of any
person other than R & S, will become a default, nor has there occurred any
default by others or any event which, with the lapse of time or the election of
R & S, will become a default under any of the Commitments, except for such
defaults, if any, which (a) have not resulted and will not result in any
material loss to or liability of R & S or any of its successors or assigns or
(b) have been indicated on Exhibit 5.15, R & S is not in arrears in any material
respect with respect to the performance of satisfaction of the terms or
conditions to be performed or satisfied by it under any of the Commitments and
no waiver or variance has been granted by any of the parties hereto.
5.15.4 After the Closing, except as set forth on Exhibit 5.15, each of the
Commitments included in the Assets does not require the consent of the other
parties thereto and, with respect to any of the Commitments which do require the
consent of the other parties thereto, R & S has obtained such consent and has
provided or will provide Purchaser with copies thereof.
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5.16 Patents, Trademarks, Copyrights, Etc. Exhibit 1.3(d) sets forth (i)
the registered and beneficial owner and the expiration date, to the extent
applicable, for each of the Rights set forth on such Exhibit and (ii) the
product, service, or products or services of R & S which make use of, or are
sold, licensed or made under, each such Right. All of the Rights are included in
the Assets and constitute all Rights necessary for the conduct of the business
of R & S, as such business is currently being conducted. Except as set forth on
Exhibit 5.16, R & S has not sold, assigned, transferred, licensed, sub-licensed
or conveyed the Rights, or any of them, or any interest in the Rights, or any of
them, to any person, and has the entire right, title and interest (free and
clear of all security interests, liens and encumbrances of every nature) in and
to the Rights necessary to the conduct of the business of R & S as currently
being conducted; neither has the validity of such items been, nor is the
validity of such items, nor the use thereof by R & S, the subject of any pending
or threatened opposition, interference, cancellation, nullification, conflict,
concurrent use, litigation or other proceeding. The conduct of the business of R
& S as currently operated, and the use of the Assets does not and will not
conflict with, or infringe, legally enforceable rights of third parties. Except
as set forth on Exhibit 5.16, the Rights owned by or licensed to R & S have not
been used, and no use is now being made, by any entity except R & S and other
entities duly licensed to use the same. Except as set forth on Exhibit 5.16,
there is no infringement of any proprietary right owned or licensed by R & S.
5.17 Permits, Licenses, Etc. There are no permits, licenses,
registrations, memberships, orders or approvals of governmental or
administrative authorities or required to permit R & S to carry on its business
as currently conducted (other than (i) permits, licenses, registrations, trade
memberships, orders or approvals which are set forth on Exhibit 5.17, all of
which are in full force and effect, and (ii) other permits, licenses, orders or
approvals, the failure to obtain which would not, individually or in the
aggregate, have a material adverse affect on the Assets or on R & S's business).
5.18 Compliance with Applicable Laws. The conduct by R & S of its business
does not violate or infringe, and there is no basis for any claims of violation
or infringement of, any law, statute, ordinance, regulation or executive order
(including, without limitation, the Federal Food, Drugs and Cosmetics Act, as
amended, the Occupational Safety and Health Act, the National Environmental
Policy Act and the Foreign Corrupt Practices Act and the respective regulations
thereunder and similar applicable state laws and regulations) currently in
effect, except in each case for violations or infringements which do not and
will not, individually or in the aggregate, have a material adverse affect on
the Assets or R & S's business. R & S is not in default under any governmental
or administrative registration, membership or license issued to it, under any
governmental or administrative order or demand directed to it, or with respect
to any order, writ, injunction or decree of any court which, in any case,
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materially adversely affects the financial condition, results of operations or
business of R & S or the value of the Assets.
5.19 Litigation. Except as set forth on Exhibit 5.19, there is no claim,
action, suit, proceeding, arbitration, reparation, investigation or hearing or
notice of hearing, pending or threatened, before any court or governmental,
administrative or other competent authority or private arbitration tribunal
against or relating to or affecting (directly or indirectly, including by way of
indemnification) the business of R & S or any of the Assets, or the transactions
contemplated by this Agreement; nor are any facts known to R & S, which it
believes could reasonably give rise to any such claim, action, suit, proceeding,
arbitration, investigation or hearing, which may have any adverse affect,
individually or in the aggregate in excess of Ten Thousand Dollars ($ 10,000)
upon the business of R & S, the value of the Assets or the transactions
contemplated by this Agreement. R & S has not waived any statute of limitations
or other affirmative defense with respect to any of its obligations. There is no
continuing order, injunction or decree of any court, arbitrator or governmental,
administrative or other competent authority to which R & S is a party, or to
which the Company is subject. Neither R & S nor the Shareholders or other
current officer, director, partner or employee of R & S or any Affiliate of R &
S has been permanently or temporarily enjoined or barred by order, judgment or
decree of any court or other tribunal or any agency or other body from engaging
in or continuing any conduct or practice in connection with the business engaged
in by R & S.
5.20 No Interest in Competitors. Set forth on Exhibit 5.20 is a list
describing the extent to which R & S, the Shareholders or any other officer or
director of R & S or any Affiliate of any of the foregoing, directly or
indirectly, owns more than a five percent (5%) interest in or controls or is an
employee, officer, director, or partner of or participant in (but only to the
extent such a participation exceeds one percent), or consultant to any
corporation, partnership, limited partnership, joint venture, association or
other entity which is a competitor, supplier or customer of R & S or has any
type of business or professional relationship with R & S.
5.21 Customers, Suppliers, Distributors and Agents. Except as set forth on
Exhibit 5.21(a), R & S has no knowledge or reason to believe that any customer,
client, distributor, supplier or any other person or entity with material
business dealings with R & S, will or may cease to continue such relationship
with R & S, or will or may substantially reduce the extent of such relationship,
at any time prior to or after the Closing Date. Except for such common public
information, R & S has no knowledge of (1) any other existing or contemplated
modification or change in the business relationship of R & S with, or (2) any
existing condition or state of facts which has affected adversely, will
adversely affect (in more than a minimal manner), or has a reasonable likelihood
of adversely affecting the business of R & S with its customers, clients,
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suppliers or other persons or entities with material business dealings with R &
S or which has prevented or will prevent such business from being carried on by
R & S under its new ownership after the Closing in essentially the same manner
as it is currently carried on. Exhibit 5.21 (b) sets forth as to R & S (a) the
twenty largest (in dollar value) purchasers of its goods and/or services and (b)
the twenty largest (in dollar value) providers of goods and/or services to it,
in each case with respect to each of the fiscal years ended December 31, 1996
and 1995 and the six months ended June 30, 1997.
5.22 Books and Records. The books of account and other financial and
corporate records of R & S are in all material respects complete, correct and up
to date, with all necessary signatures, and are in all material respects
accurately reflected in the Financial Statements.
5.23 Employee Benefit Plan. Except as described in Exhibit 5.23, R & S
does not have any hospitalization, health insurance, pension, retirement, profit
sharing, stock option or similar plans. Exhibit 5.23 sets forth a correct and
complete list of each and every employee benefit plan, including each pension,
profit sharing, stock bonus, bonus, deferred compensation, severance, stock
option or purchase plan, or other retirement plan or arrangement, covering
employees of R & S (the "Employee Benefit Plans"). For each such employee
pension plan, multi-employer plan or welfare plan as those terms are defined in
Section 3 of the Employee Retirement Income Security Act of 1974, as amended,
("ERISA") and for each Employee Benefit Plan with respect to which R & S is a
"party in interest" as defined in Section 3 of ERISA, or a "disqualified person"
as defined in Section 4975 of the Code, R & S has delivered to Purchaser
complete and accurate copies of (i) all Employee Benefit Plans and all
amendments thereto; (ii) the trust instrument or insurance contract, if any,
forming a part of the plans, and all amendments thereto; (iii) the most recent
and preceding year's Internal Revenue Service Form 5500 and all schedules
thereto; (iv) the most recent Internal Revenue Service determination letter, or
if no letter has been issued, any pending application to the Internal Revenue
Service for a determination letter regarding qualified status; (v) any bond
required by Section 412 of ERISA; and (vi) the summary plan description. R & S
has complied with all of the rules and regulations governing each of the
Employee Benefit Plans maintained for the benefit of R & S's employees,
including, without limitation, rules and regulations promulgated pursuant to
ERISA and the Code, by the Department of Treasury, Department of Labor, and the
Pension Benefit Plans Guaranty Corporation, and each of the Employee Benefit
Plans now operated has since its inception been operated in accordance with its
provisions and is in compliance with such rules and regulations. Neither R & S
nor any Employee Benefit Plans maintained by R & S or any fiduciaries thereof
have engaged in any prohibited transaction, as that term is defined in Section
406 of ERISA or Section 4975 of the Code, nor have any of them committed any
breach of fiduciary responsibility with respect to any of the Employee Benefit
Plans, and R & S
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does not have any knowledge that any other person has not complied with these
rules and regulations.
5.24 Powers of Attorney. Except as set forth on Exhibit 5.24, no person
has any power of attorney to act on behalf of R & S in connection with any of R
& S's properties or business affairs other than such powers to so act as
normally pertain to the officers of R & S .
5.25 Sufficiency of Assets and Commitments. Except as set forth in Exhibit
5.25, the Assets and the Commitments, taken in the aggregate, are sufficient,
and constitute all of the property and Rights necessary, for the continuation of
the business and operations of R & S on a basis consistent with past operations.
5.26 Labor Disputes, Unfair Labor Practices. Except as set forth on
Exhibit 5.26, R & S is not engaged in any labor practice which would have a
material adverse affect on the Assets or R & S's business. There is no pending
or affirmatively threatened (i) unfair labor practice complaint, charge, labor
dispute, strike, slowdown, walkout or work stoppage before the National Labor
Relations Board or any other authority or (ii) grievance or arbitration
proceeding arising out of or under a collective bargaining agreement involving
employees of R & S. There have been no strikes, labor disputes, slow-downs,
walkouts, or work stoppages involving employees of R & S during the last five
(5) years. Union representation of employees exists as set forth on Exhibit
5.26. R & S has not received notice from any of its employees of such employee's
intent to terminate his or her employment or bring any action against R & S for
any reason related to the transactions contemplated by this Agreement or for any
other reason.
5.27 Past Due Obligations. Except as set forth on Exhibit 5.27, no past
due obligations of R & S over $5,000 have given rise or shall give rise within 5
days after the Closing Date (except as such will be performed by R & S prior to
the Closing so as to relieve Purchaser of all liability therefor) to any
additional liability to Purchaser on account of their being past due.
5.28 Environmental Matters.
(a) Except as set forth on Exhibit 5.28, (i) R & S is in compliance with
all environmental laws, regulations, permits and orders applicable to it,
and with all laws, regulations, permits and orders governing or relating
to asbestos removal and abatement; (ii) R & S has not transported, stored,
treated or disposed, or allowed or arranged for any third parties to
transport, store, treat or dispose, of any Hazardous Substances or other
waste to or at any location other than a site lawfully permitted to
receive such Hazardous Substances or other waste for such purposes, or had
performed, arranged for or allowed by any method or procedure such
transportation, storage, treatment or disposal in contravention of any
laws or
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regulations nor has R & S disposed of, or allowed or arranged for any
third parties to dispose of, Hazardous Substances or other waste upon
property owned or leased by it in contravention of any applicable laws or
regulations; (iii) there has not occurred, nor is there presently
occurring, a Release of any Hazardous Substance on, into or beneath the
surface of any parcel of real property in which R & S has (or will have
after giving effect to the transactions contemplated hereby) an ownership
interest or any leasehold interest in contravention of any applicable laws
or regulations; (iv) R & S has not transported or disposed of, or allowed
or arranged for any third parties to transport or dispose of, any
Hazardous Substance or other waste to or at a site which, pursuant to the
U.S. comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA"), has been placed on the National Priorities
List or its Kansas equivalent; (v) R & S has not received notice and R & S
has no knowledge of any facts which could give rise to any substantive
notice, that R & S is a potentially responsible party for a federal or
state environmental cleanup site or for corrective action under CERCLA or
notice of any other Environmental Claim; (vi) R & S has not undertaken (or
been requested to undertake) any response or remedial actions or cleanup
actions of any kind at the request of any federal, state or local
governmental entity, or at the request of any other person or entity; and
(vii) there are no laws, regulations, ordinances, licenses, permits or
orders relating to environmental matters requiring any work, repairs,
construction or capital expenditures with respect to the assets or
properties of R & S.
(b) For the purposes of this Agreement: (i) "Environmental Claim" shall
mean any written demand, claim, governmental notice or threat of
litigation or the actual institution of any action, suit or proceeding
which asserts that an Environmental Condition constitutes a violation of
any statute, ordinance, regulation, or other governmental requirement
relating to the emission, discharge, or Release of any Hazardous Substance
into the environment or the generation, treatment, storage,
transportation, or disposal of any Hazardous Substance, prior to Closing
Date in each case in contravention of any applicable laws or regulations;
(ii) "Environmental Condition" shall mean the presence on any real
property during the period from the date such real property was first
owned, leased or used by R & S to the Closing Date, in surface water,
ground water, drinking water supply, land surface, subsurface strata or
ambient air of any Hazardous Substance arising out of or otherwise related
to the operations or other activities of R & S or of any predecessor of R
& S, conducted or undertaken prior to the Closing Date, and in each case
in contravention of any applicable laws or regulations; (iii) "Hazardous
Substance" shall mean any substance defined in the manner set forth in
Section 101(14) of the U.S. Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, as applicable on the
Closing Date, and shall
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include any additional substances designated under Section 102(a) thereof
prior to the Closing Date; and (iv) "Release" shall mean releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing into the environment
in each case in contravention of any applicable laws or regulations.
5.29 Tax and Other Returns and Reports. R & S has timely filed or will
file all Tax Returns and information returns required to be filed by R & S and
has paid all Taxes due for all periods ending on or before December 31, 1996.
Adequate provision has been made in the books and records of R & S and in the
Financial Statements referred to in Section 5.10 above, for all Taxes whether or
not due and payable and whether or not disputed. Exhibit 5.29(a) lists the date
or dates through which any governmental entity has examined any Tax Return of R
& S. All required Tax Returns, including amendments to date, have been prepared
in good faith without negligence or willful misrepresentation and are complete
and accurate and in all material respects. Except as set forth in Exhibit
5.29(b), no governmental entity has, during the past three years, examined or is
in the process of examining any Tax Returns of R & S. Except as set forth on
Exhibit 5.29(c), no governmental entity has proposed (tentatively or
definitively), asserted or assessed or threatened to propose or assert, any
deficiency, assessment, lien, or other claim for Taxes and there would be no
basis for any such delinquency, assessment, lien or claim. There are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment of any Taxes or deficiency against R & S or with
respect to any Tax Return filed or to be filed by R & S.
5.30 Certain Tax Definitions. For purposes of this Agreement, the term
"Taxes" means all taxes, including without limitation all Federal, state, local,
foreign and other income, franchise, sales, use, property, payroll, withholding,
environmental, alternative or add- on minimum and other taxes, assessments,
charges, duties, fees, levies or other governmental charges of my kind
whatsoever, and all estimated taxes, deficiency assessments, additions to tax,
penalties, and interest, and any contractual or other obligation to indemnify or
reimburse any person with respect to any such assessment. For purposes of this
Agreement, the term "Tax Return" shall mean any report, statement, return,
declaration of estimated tax or other information required to be supplied by or
on behalf of R & S to a taxing authority in connection with Taxes, or with
respect to grants of tax exemption, including any consolidated, combined,
unitary, joint or other return filed by any person that properly includes the
income, deductions or other tax information concerning R & S.
5.31 Recent Dividends and Other Distributions. There has been no dividend
or other distribution of assets or securities whether consisting or money,
property or any other thing of value, declared, issued or paid to or for the
benefit of R & S's
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Shareholders subsequent to the date of the most recent Financial Statements
described in Section 5.10 by R & S.
5.32 Inventory. Except as set forth in Exhibits 5.32(a) and (b), all of
the Inventory has been received within six months of June 30, 1997 and is of a
quantity and quality saleable at regular prices or usable in the ordinary course
of business during 1997. Exhibit 5.32(a) shall specify all Inventory that was
received more than 12 months before the Closing Date, including the calendar
month in which such Inventory was received, by quantity and product family.
Exhibit 5.32(b) shall specify all Inventory which is not of a quality or
quantity saleable or usable in the ordinary course of business during 1997.
5.33 Purchase and Sale Obligations. All purchase, sales and orders and all
other commitments for purchases, sales and orders made by or on behalf of R & S
have been made in the usual and ordinary course of its business in accordance
with normal practices. On the Closing Date, the Shareholders shall deliver to
Purchaser a schedule of all such uncompleted purchase and sale orders and other
commitments with respect to any of R & S's obligations as of a date not earlier
than ten (10) days prior to the Closing.
5.34 Other Information. None of the information which has been or may be
furnished by R & S or the Shareholders or any of their representatives to
Purchaser or any of its representatives in connection with the transactions
contemplated hereby, which is contained in this Agreement (including the
Exhibits hereto) or any Ancillary Document or any certificate or instrument
delivered or to be delivered by or on behalf of R & S or the Shareholders in
connection with the transactions contemplated hereby, does or will contain any
untrue statement of a material fact or omit a material fact necessary to make
the information contained herein or therein not misleading.
5.35 Accounts Receivable and Accounts Payable. All of the accounts
receivable of R & S are actual and bona fide accounts receivable representing
obligations for the total dollar amount thereof showing on the books of R & S,
and the accounts receivable are not and will not be subject to any recoupments,
set-offs or counter-claims. Exhibit 5.35 sets forth a true and correct aged
(30-60-90 days) list of all accounts receivable and accounts payable of R & S as
of the end of the calendar month preceding the date hereof.
5.36 Knowledge of R & S and the Shareholders. As to each representation
and warranty made by the Shareholders under this Article 5, any fact or
information known to R & S or notice received by R & S, shall be imputed to the
Shareholders as if such fact or information were known to the Shareholders or
such notice received by the Shareholders.
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6. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to R & S as follows, each of
which representation and warranty shall be true as of the Closing Date:
6.1 Organization. Barclay is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Nevada.
Redstone Capital Corporation is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas. Purchaser has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby.
6.2 Authorization of Agreement. The execution, delivery and performance of
this Agreement by Purchaser, and the consummation of the transactions
contemplated hereby have been duly and effectively authorized by Purchaser's
Managers. This Agreement has been duly and validly authorized, executed and
delivered on behalf of Purchaser. This Agreement constitutes a valid and binding
obligation of Purchaser, enforceable in accordance with its terms, except that
such enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors, rights generally.
6.3 Effect of Agreement. The execution, delivery and performance of this
Agreement by Purchaser and consummation by Purchaser of the transactions
contemplated hereby will not, with or without the giving or notice and the lapse
of time, or both, (a) violate any provision of law, statute, rule, regulation or
executive order to which the Purchaser is subject; (b) violate any judgment,
order, writ or decree of any court applicable to Purchaser; or (c) result in the
breach of or conflict with any term, covenant, condition or provision of the
organizational documents of Purchaser or any commitment, contract or other
agreement on instrument to which Purchaser is a party.
6.4 Litigation. To the best knowledge of Purchaser, there are no actions,
suits, proceedings or governmental investigations or inquiries pending or
threatened against it which, in its reasonable judgment, would prevent the
consummation of the transactions contemplated hereby.
7. PRE-CLOSING COVENANTS OF THE SHAREHOLDERS
The Shareholders hereby covenant and agree with Purchaser that the
Shareholders and R & S shall do, or cause to be done, the following, between the
date of this Agreement and the Closing Date or date of termination of this
Agreement, as the case may be:
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<PAGE>
7.1 Conduct of Business Until Closing Date. Except as permitted or
required hereby or as Purchaser may otherwise consent in writing, the
Shareholders shall cause R & S to:
7.1.1 operate the business of R & S only in the usual, regular and
ordinary manner, and use their best efforts to (a) preserve the present business
organization of R & S intact, (b) keep available the services of the present
employees of R & S, and (c) preserve the current business relationships of R & S
with customers, clients, suppliers, distributors and others having business
dealings with it;
7.1.2 bear the risk of loss or damage to the Assets on and prior to the
Closing Date where such risk of loss is not the legal obligation of another, and
maintain all properties necessary for the conduct of the business of R & S,
whether owned or leased;
7.1.3 maintain the books, records and accounts of R & S in the usual,
regular and ordinary manner, on the basis consistent with prior periods;
7.1.4 duly comply with all laws, rules and regulations applicable to R & S
and to the conduct of its business;
7.1.5 perform all of the obligations of R & S without default, unless such
default is of no significance to R & S and could have no adverse impact on R &
S, its Assets or business;
7.1.6 neither (a) amend R & S's Articles of Incorporation or By-Laws; (b)
merge with or into, consolidate, amalgamate or otherwise combine with, any other
entity; nor (c) change the character of the business of R & S;
7.1.7 neither (a) encumber, mortgage, or voluntarily subject to lien any
of the existing Assets or the Common Stock; (b) transfer, sell, lease, license
or otherwise dispose of any of, or any part of, the Assets (other than in the
ordinary course of business); (c) convey, transfer or acquire any material Asset
or property to, for or on behalf of R & S other than in the ordinary course of
business; (d) enter into any arrangement, agreement or undertaking, with respect
to any of the employees relating to the payment of bonus, severance,
profit-sharing or special compensation or any increase in the compensation
payable or to become payable to any such employee; nor (e) incur any material
fixed or contingent obligation or enter into any agreement, commitment, contract
or other transaction or arrangement relating to the business of R & S or the
Assets;
7.1.8 not make any distributions or dividends of Assets or securities, nor
any changes to the capital structure of R & S; not agree to make or make any
sales of its securities including the issuance of any additional capital stock
or rights or options or
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contracts to acquire, or instruments convertible into, common stock; however, R
& S shall be entitled to make the bonus distributions referred to in paragraph
3.4(b) hereof and further to distribute to Shareholders sufficient cash to
enable Shareholders to pay their federal and state income taxes attributable to
the Subchapter S income allocated to them from January 1, 1997 through the
Closing Date;
7.1.9 neither modify, change or terminate any of its material obligations
other than in the ordinary course of business, nor grant any power of attorney
with respect to the business of R & S or the Assets to any party except
Purchaser; and
7.1.10 anything in this Section 7.1 notwithstanding, Shareholders shall
have the right in their discretion to make all decisions and expenditures
regarding the new plant and equipment therefor required to keep that project on
schedule.
7.2 Approvals, Consents and Further Assurances. The Shareholders shall use
and shall cause R & S to use its best efforts to obtain in writing as promptly
as possible all approvals, consents and waivers required in order to effectuate
the transactions contemplated hereby, and shall deliver to Purchaser copies,
reasonably satisfactory in form and substance to counsel to Purchaser, of such
approvals and consents. The Shareholders shall also use their best efforts to
assure that the other conditions set forth in Article 10 hereof are satisfied by
the Closing Date.
7.3 Access to Properties, Records, Suppliers, Agents, Etc. The
Shareholders shall cause R & S to give to Purchaser and to Purchaser's counsel,
financiers, accountants and other representatives access to and copies of such
of R & S's properties, personnel, books, tax returns, contracts, commitments and
records as relate to the Assets, suppliers, agents, distributors, etc. or other
aspects of the business of R & S; and shall furnish to Purchaser and such
representatives all such additional instruments, contracts, documents or other
written obligations (certified by officers of R & S, if so requested) and
financial and other information concerning such business, Assets, suppliers,
agents, etc. as Purchaser or its representatives may from time to time request.
7.4 Advice of Changes. If the Shareholders becomes aware of any fact or
facts which, if known at the date hereof, would have been required to be set
forth or disclosed in or pursuant to this Agreement or which, individually or in
the aggregate, could materially adversely affect the business, Assets or Common
Stock of R & S, Shareholders shall promptly advise Purchaser in writing thereof.
7.5 Conduct. Except as permitted or required hereby or as Purchaser may
otherwise consent in writing, neither R & S nor the Shareholders shall enter
into any transaction or take any action which would result in any of the
representations and warranties of R & S or the Shareholders contained in this
Agreement or in any Ancillary
22
<PAGE>
Document not being true and correct as of the time immediately after such
transaction has been entered into or such event has occurred and on the Closing
Date.
7.6 Employee Benefit Plans. Except for payment of R & S's current
obligations, R & S shall not incur any additional obligations or liabilities,
including (i) all liabilities for all claims incurred, whether or not reported,
on or before the Closing Date under all "employee welfare benefit plans," within
the meaning of Section 3(1) of ERISA, (ii) all liabilities or obligations for
vacations or sick leave or retiree, medical or life benefits to employees or
former employees of R & S, and (iii) all liabilities of R & S for all benefits
accrued under any "employee pension benefit plan," within the meaning of Section
3(2) of ERISA under each Employee Benefit Plan.
7.7 Satisfaction of Conditions by Shareholders. The Shareholders hereby
covenants and agrees with Purchaser that, between the date of this Agreement and
the Closing Date or date of termination of this Agreement, as the case may be,
they shall use their best efforts to assure that the conditions set forth in
Article 10 hereof are satisfied by the Closing Date.
8. PRE-CLOSING COVENANTS OF PURCHASER
Satisfaction of Conditions by Purchaser. Purchaser hereby covenants and
agrees with R & S that, between the date of this Agreement and the Closing Date
or date of termination of this Agreement, as the case may be, Purchaser shall
cause the conditions set forth in Article 11 hereof to be satisfied by the
Closing Date.
9. POST-CLOSING COVENANTS
Further Assurances. After the Closing hereunder, the Shareholders, at the
request of Purchaser, shall execute, acknowledge and deliver to Purchaser,
without further consideration, all such further assignments, conveyances,
endorsements, deeds, powers of attorney, consents and other documents (together
with the instruments referred to in Section 1.3, referred to herein collectively
as the "Ancillary Documents") and take such other action as Purchaser may
reasonably request (a) to transfer to and fully vest in Purchaser, and protect
Purchaser's right, title and interest in and to all of R & S's right, title and
interest in and to the Assets, and (b) otherwise to consummate the transactions
contemplated by this Agreement.
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER
The obligations of Purchaser pursuant to this Agreement are subject to the
satisfaction at the Closing of each of the following conditions, any or all of
which conditions may be waived by Purchaser in its sole discretion:
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<PAGE>
10.1 Accuracy of Representations and Warranties. All representations and
warranties made by the Shareholders (contained in this Agreement, any Exhibit or
Schedule hereto, or any certificate or instrument delivered to Purchaser or its
representatives by the Shareholders or their representatives) shall be true on
and as of the Closing Date with the same force and effect as though made on and
as of the Closing Date (i.e., with respect to representations that a state of
facts exists on or as of the date hereof, it is a condition that such state of
facts exists on or as of the Closing Date; and with respect to a representation
that a state of facts has or has not changed between a date prior to the date
hereof and the date hereof, it is a condition that such state of facts has or
has not changed between such prior date and the Closing Date), except as
affected by transactions contemplated hereby.
10.2 Performance of Agreements. The Shareholders and R & S shall have
performed and complied with all covenants, obligations and agreements to be
performed or complied with by them on or before the Closing Date pursuant to
this Agreement.
10.3 Litigation, Etc.
10.3.1 Except as set forth on Exhibit 5.19, no claim, action, suit,
proceeding, arbitration, investigation or hearing or note of hearing shall be
pending or threatened against or affecting the Shareholders or R & S or any of
the Assets, which (a) might result either in an action or enjoin or prevent the
consummation of the transactions contemplated by this Agreement; (b) would
materially adversely affect the business of R & S or the ability of Purchaser to
consummate the transactions contemplated by this Agreement or to own the Common
Stock or to operate the business of R & S.
10.3.2 R & S shall not be in violation of any law, statute, ordinance,
rule, regulation or executive order, the enforcement of which would,
individually or in the aggregate, materially adversely affect the Assets or the
business of R & S; or which would individually or in the aggregate, materially
adversely affect the ability of Purchaser to consummate the transactions
contemplated by this Agreement or to own the Common Stock or to operate the
business of R & S.
10.3.3 No law, regulation or decree shall have been proposed, adopted or
promulgated, or have become effective, the enforcement of which would materially
adversely affect the ability of Purchaser to consummate the transactions
contemplated by this Agreement or to own the Common Stock or to operate any such
business.
10.4 Approvals and Consents. R & S shall have obtained, and Purchaser
shall have received copies of, all of the approvals and consents referred to in
Section 7.2, each of which approvals and consents shall be in full force and
effect and reasonably satisfactory in form and substance to Purchaser and its
counsel.
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10.5 Shareholders's Certificate. Purchaser shall have received an accurate
certificate of the Shareholders, dated the Closing Date, satisfactory in form
and substance to Purchaser and its counsel, certifying (a) as to the fulfillment
of the matters specified in Sections 10.1 through 10.3, and (b) any changes that
Purchaser is required to be notified of pursuant to Section 7.4, or that
previously had not been disclosed to Purchaser.
10.6 Officer's Certificate. Purchaser shall have received an accurate
certificate, dated the Closing Date, of Charles Collins, President of R & S,
dated as of the Closing Date, stating, among other things, that he is not aware
of any material omissions or facts that would materially alter any of the
Financial Statements, nor is he aware of any facts or factors that are
reasonably likely to occur, or if known to other parties, that could have a
material adverse effect on the financial condition, business, operations,
Assets, liabilities, management or prospects of R & S.
10.7 Good Standing Certificates. Purchaser shall have received (a) a
certificate of the office of the Secretary of State of Kentucky, dated within 30
days before the Closing Date, certifying that the records of such state
regarding R & S incorporated in such state reflect neither a certificate of
dissolution, a court order declaring dissolution, a merger or consolidation
which terminated its existence, nor suspension of its corporate powers, rights
and privileges, and that in accordance with the records of such state, such
corporation is authorized to exercise all of its corporate powers, rights and
privileges in such state and (b) a telegram or other document from one or more
appropriate officials of the State of Kentucky or an affidavit of counsel with
respect to telephone conversations with such officials, dated within two days
before the Closing Date, to the same effect.
10.8 No Material Adverse Change. There shall have been no material adverse
changes in the financial condition, business, operations, assets, liabilities,
management or prospects of R & S.
10.9 Actions, Proceedings, Etc. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this Agreement
shall have been completed.
10.10 Opinion of Counsel to R & S. Purchaser shall have received an
opinion of Keating, Muething & Klekamp, P.L.L., counsel to R & S, addressed to
Purchaser, dated the Closing Date, to the effect set forth in, and substantially
in the form, of Exhibit 10.10.
10.11 Licenses, Permits, Consents, Etc. Purchaser shall have received
evidence, in form and substance reasonably satisfactory to counsel for
Purchaser, that such licenses, permits, consents, approvals, authorizations or
orders of governmental authorities as are
25
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necessary to the consummation of the transactions contemplated by this Agreement
and the continued operation of the business of R & S have been obtained.
10.12 Documentation of Rights. R & S shall have delivered to Purchaser
true and complete copies of all of the documentation held by R & S relating to
each of the Rights.
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SHAREHOLDERS
The obligations of the Shareholders under this Agreement are subject to
the satisfaction at the Closing of each of the following conditions.
11.1 Accuracy of Representations and Warranties. All representations and
warranties by Purchaser in this Agreement shall be true as of the Closing Date
with the same force and effect as though made on and as of the Closing Date.
11.2 Performance of Agreements. Purchaser shall have performed and
complied in all material respects with all covenants, obligations and agreements
to be performed or complied with by it on or before the Closing Date pursuant to
this Agreement.
11.3 No Injunction. No third party injunction, stay or restraining order
shall be in effect prohibiting the consummation of the transactions contemplated
hereby.
11.4 Opinion of Counsel to Purchaser. The Shareholders shall have received
an opinion of counsel to Purchaser, addressed to the Shareholders, dated as of
the Closing Date, to the effect set forth in, and substantially in the form, of
Exhibit 11.4.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
12.1 Survival. The representations and warranties set forth in this
Agreement, in any Exhibit or Schedule hereto and in any certificate or
instrument delivered in connection herewith shall survive for a period of two
(2) years after the Closing Date and shall thereupon terminate and expire and
shall be of no force or effect thereafter, except (i) with respect to any claim,
written notice of which shall have been delivered to Purchaser, the Shareholders
or R & S, as the case may be, such claim shall survive the termination of such
period and shall survive for as long as such claim is unsettled, and (ii) with
respect to any litigation which shall have been commenced to resolve such claim
on or prior to such date. Notwithstanding the foregoing, with respect to taxes,
the period shall be the applicable statute of limitations, and with respect to
customer claims, the period shall be five (5) years.
12.2 Indemnification by the Shareholders. The Shareholders hereby covenant
and agree with Purchaser that, regardless of any investigation made at any time
by or on
26
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behalf of Purchaser or any information Purchaser may have and, regardless of the
Closing hereunder, the Shareholders shall indemnify Purchaser and R & S and its
respective directors, officers, employees and Affiliates of Purchaser, and each
of their successors and assigns (individually, a "Purchaser Indemnified Party"),
and hold them harmless from, against and in respect of any and all costs,
losses, claims, liabilities, fines, penalties, damages and expenses (including
interest which may be imposed in connection therewith, court costs and
reasonable fees and disbursements of counsel) incurred by any of them resulting
from any misrepresentation, breach of warranty or nonfulfillment of any
agreement, covenant or obligation by the Shareholders made in this Agreement
(including without limitation any Exhibit hereto and any certificate or
instrument delivered in connection herewith).
12.3 Indemnification by Purchaser. Subject to the limitations set forth in
Section 12.1, Purchaser hereby covenants and agrees with the Shareholders that
Purchaser shall indemnify the Shareholders and hold them harmless from, against
and in respect of any and all costs, losses, claims, liabilities, fines,
penalties, damages and expenses (including interest which may be imposed in
connection therewith and court costs and reasonable fees and disbursements of
counsel) incurred by any of them resulting from any misrepresentation, breach of
warranty or the nonfulfillment of any agreement, covenant or obligation by
Purchaser made in this Agreement (including without limitation any Exhibit
hereto and any certificate or instrument delivered in connection herewith).
12.4 Right to Defend. If the facts giving rise to any such indemnification
shall involve any actual claim or demand by any third party against a Purchaser
Indemnified Party or Shareholders (referred to hereinafter as an "Indemnified
Party"), the indemnifying parties shall be entitled to notice of and entitled
(without prejudice to the right of any Indemnified Party to participate at its
own expense through counsel of its own choosing) to defend or prosecute such
claim at their expense and through counsel of their own choosing if they give
written notice of their intention to do so no later than the time by which the
interest of the Indemnified Party would be materially prejudiced as a result of
its failure to have received such notice; provided, however, that if the
defendants in any action shall include both the indemnifying parties and an
Indemnified Party, and the Indemnified Party shall have reasonably concluded
that counsel selected by the indemnifying parties has a conflict of interest
because of the availability of different or additional defenses to the
Indemnified Party, the Indemnified Party shall cooperate fully in the defense of
such claim and shall make available to the indemnifying parties pertinent
information under its control relating thereto, but shall be entitled to be
reimbursed, as provided in this Article 12, for all costs and expense incurred
by it in connection therewith.
12.5 Subrogation. If the Indemnified Party receives payment or other
indemnification from the indemnifying party hereunder, the indemnifying party
shall be
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<PAGE>
subrogated to the extent of such payment or indemnification to all rights in
respect of the subject matter of such claim to which the Indemnified Party may
be entitled, to institute appropriate action for the recovery thereof, and the
Indemnified Party agrees reasonably to assist and cooperate with the
indemnifying party at no expense to the Indemnified Party in enforcing such
rights.
13. MISCELLANEOUS
13.1 Expenses. Except as and to the extent otherwise provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, the Shareholders and Purchaser shall each pay their own respective
expenses and the fees and expenses of their respective counsel and other
experts.
13.2 Termination of Agreement. This Agreement may be terminated and the
transaction contemplated hereby may be abandoned at any time, but not later than
the Closing Date by the mutual consent of the parties. In the event of the
termination of this Agreement, no party shall have any liability hereunder,
including any liability for damages. In the event that a condition precedent to
a party's obligation is not met, nothing contained herein shall be deemed to
require any party to terminate this Agreement rather than to waive such
condition precedent and proceed with the Closing.
13.3 Waivers. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein or in any other documents. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach. Any party
hereto may, at or before the Closing, waive any conditions to its obligations
hereunder which are not fulfilled.
13.4 Binding Effect; Benefits. This Agreement shall inure to the benefit
of the parties hereto and shall be binding upon the parties hereto and their
respective successors and assigns. Except as otherwise set forth herein, nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement.
13.5 Assignment. Without limitation, and without the consent, prior,
written or otherwise, of R & S, this Agreement and all of the rights and
obligations hereunder may be assigned by Purchaser to any entity owned or
controlled by, or affiliated with it. Immediately upon such assignment,
Purchaser shall be released from any obligation, of any kind or nature, under
this Agreement.
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13.6 Notices. All notices, requests, demands and other communications
which are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person or
upon receipt when transmitted by facsimile or telex or after dispatch by
certified or registered first class mail, postage prepaid, return receipt
requested, to the party to whom the same is so given or made:
If to Purchaser, to:
Mr. Steven Merker
Barclay Partners, LLC
c/o Loeb, Block & Partners LLP
505 Park Avenue
New York, New York 10022
and
Mr. Andrew A. Levy
Redstone Capital Corporation
375 Park Avenue
Suite 2805
New York, New York 10152
If to the Shareholders or R & S, to:
Mr. William L. Smith
Chief Executive Officer
R & S Truck Body Company, Inc.
Route 1428
Allen, Kentucky 41601
With a copy to:
Timothy B. Matthews, Esq.
Keating, Muething & Klekamp, P.L.L.
1800 Provident Tower
One EASt Fourth Street
Cincinnati, Ohio 45204
Fax: (513) 579-6457
29
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13.7 Entire Agreement. This Agreement (including the Exhibits hereto) and
the Ancillary Documents constitute the entire agreement and supersede all prior
agreements and understandings, oral and written, among the parties hereto with
respect to the subject matter hereof and supersede all prior agreements,
representations, warranties, statements, promises and understandings, whether
written or oral, with respect to the subject matter hereof. No party hereto
shall be bound by or charged with any written or oral arguments,
representations, warranties, statements, promises or understandings no
specifically set forth in this Agreement or in any Exhibit hereto or any
Ancillary Documents, or in certificates and instruments to be delivered pursuant
hereto on or before the Closing.
13.8 Headings; Certain Terms. The section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement. As used in this Agreement, the term "including" means "including, but
not limited to" unless otherwise specified; the word "or" means "and/or," and
the word "person" means and refers to any individual, corporation, trust,
partnership, joint venture, government or governmental authority, or any other
entity; and the plural and singular forms are used interchangeably.
13.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed, shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
13.10 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Delaware, without giving effect to the choice of law
principles thereof.
13.11 Severability. If any term or provision of this Agreement shall to
any extent be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and each term and provision of the agreement shall be
valid and enforced to the fullest extent permitted by law.
13.12 Amendments. This Agreement may not be modified or changed except by
an instrument or instruments in writing signed by the party or parties against
whom enforcement of any such modification or amendment is sought.
13.13 Transaction Taxes. The Shareholders shall pay any and ail taxes
imposed upon the sale of the Common Stock and transfer of ownership thereof.
13.14 Section References. All references contained in this Agreement to
any section number are references to sections of this Agreement unless otherwise
specifically stated.
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13.15 Brokers and Finders. The Shareholders recognize that Winton
Associates is the broker which brought about this transaction and the
Shareholders shall be solely responsible for the payment of all fees and
expenses of Winton Associates, 8044 Montgomery Road, Suite 382, Cincinnati, Ohio
45236. Each party represents and warrants there are no other brokers, finders or
similar persons to whom compensation will be due or owing as a result of
consummation of the transactions contemplated by this Agreement and each party
hereby agrees to indemnify and hold the other party harmless against any such
claims.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement, or have
caused this Agreement to be signed in their respective names by an officer
thereunder duly authorized, on the date first above written.
R & S TRUCK BODY COMPANY, INC.
By:
--------------------------------------------
William L. Smith, Chief Executive Officer
31
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Selling Shareholders:
------------------------------------
William L. Smith, Individually
------------------------------------
Janet R. Smith
Purchasers: BARCLAY PARTNERS, LLC
By:
----------------------------------
Steven Merker, Manager
REDSTONE CAPITAL CORPORATION
By:
----------------------------------
Andrew A. Levy, President
32
STOCK PURCHASE AGREEMENT
by and among
STANDARD AUTOMOTIVE CORPORATION
as Purchaser
and
ANDREW A. LEVY, FARZANA S. HABIB,
RICHARD FRIEDMAN, JEFFREY MARKOWITZ and GLENN GOLDFINGER
as Sellers of 100% of Stock
of
BARCLAY INVESTMENTS, INC.,
Dated as of February 24, 1998
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TABLE OF CONTENTS
1. Sale and Transfer of Stock; Closing; Purchase Price and
Other Transactions; Downpayment..................................1
1.1 Stock......................................................1
1.2 Closing....................................................1
1.3 Purchase Price.............................................1
2. Representations and Warranties of the Shareholders and the
Company .........................................................2
2.1 Organization and Good Standing.............................2
2.2 Authority; No Conflict.....................................2
2.3 Capitalization.............................................3
2.4 Financial..................................................3
2.5 Books and Records..........................................4
2.6 Interests in Real Property.................................4
2.7 Accounts Receivable........................................4
2.8 Inventory..................................................4
2.9 Tax Returns and Payments...................................4
2.10 Employee Benefit Plans.....................................4
2.11 Compliance With Laws; BE Filing............................5
2.12 Litigation.................................................5
2.13 Absence of Certain Changes and Events......................5
2.14 Certain Agreements.........................................6
2.15 Insurance..................................................6
2.16 Intellectual Property Rights...............................6
2.17 Disclosure.................................................6
2.18 Relationships With Affiliates..............................7
2.19 Brokers or Finders.........................................7
3. Representations and Warranties of Standard.......................7
3.1 Organization and Good Standing.............................7
3.2 Authority; No Conflict.....................................7
3.3 Investment Intent..........................................7
4. Conditions Precedent to the Obligations of Standard..............8
4.1 Representations and Warranties; Performance................8
4.2 Delivery of Financial Statements...........................8
4.3 No Material Adverse Change.................................8
4.4 Delivery of Closing Date Balance Sheet.....................8
4.5 Opinion of Company's Counsel...............................8
4.6 No Litigation.............................................10
4.7 Resignations..............................................10
4.8 Consents..................................................10
4.9 Standard's Due Diligence Review...........................10
5. Conditions Precedent to the Obligations of the Shareholders
and the Company.................................................10
5.1 Representations and Warranties; Performance...............10
5.2 Opinion of Standard's Counsel.............................10
5.3 Consents..................................................11
5.4 Performance...............................................11
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5.5 No Litigation.............................................11
6. Covenants of the Shareholders and the Company Prior to Closing..11
6.1 Approvals of Governmental Bodies..........................11
6.2 Regular Course of Business................................12
6.3 Amendments................................................12
6.4 Capital Expenditures......................................12
6.5 Property and Assets.......................................12
6.6 Books of Account..........................................12
6.7 Loans by the Company......................................12
6.8 Changes in Existing Agreements............................13
6.9 Agreements................................................13
6.10 Full Access...............................................13
6.11 Good Faith Efforts........................................13
6.12 Notification of Certain Matters...........................13
6.13 Closing Date Balance Sheet and Schedule of Net Changes....14
7. Covenants of Standard Prior to Closing Date.....................14
7.1 Approvals of Governmental Bodies..........................14
7.2 Notification..............................................14
7.3 Good Faith Efforts........................................14
7.4 Notification of Certain Matters...........................14
8. Covenants of the Shareholders and Standard Subsequent to the
Closing Date....................................................15
Further Assurances..............................................15
9. Mutual Covenants................................................15
9.1 Expenses..................................................15
9.2 Public Announcements......................................15
9.3 Confidentiality...........................................15
9.4 Tax Matters...............................................16
10. Indemnification; Remedies.......................................17
10.1 Indemnification by the Shareholders.......................17
10.2 Indemnification by Standard...............................17
10.3 Notice and Defense of Third-Party Claims..................17
11. Termination.....................................................18
11.1 Termination Events........................................19
11.2 Effect of Termination.....................................19
12. Definitions.....................................................19
12.1 "Affiliate................................................19
12.2 "Code.....................................................19
12.3 "Encumbrance..............................................19
12.4 "Governmental Body........................................19
12.5 "Related Cost.............................................19
12.6 "Taxes....................................................20
12.7 "Tax Returns..............................................20
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13. Miscellaneous...................................................20
13.1 Notices...................................................21
13.2 Waiver....................................................21
13.3 Entire Agreement and Modification.........................21
13.4 Assignments...............................................22
13.5 Severability..............................................22
13.6 Section Headings, Construction............................22
13.7 Time of Essence...........................................22
13.8 Parties in Interest.......................................22
13.9 Governing Law.............................................22
13.10 Counterparts..............................................22
13.11 Conflicts.................................................22
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), is entered into as of
the 24th day of February , 1998 between STANDARD AUTOMOTIVE CORPORATION, a
Delaware corporation ("Standard") and BARCLAY INVESTMENTS, INC., a New Jersey
corporation (the "Company"), and the shareholders of the Company, Andrew A.
Levy, Farzana S. Habib, Richard Friedman, Jeffrey Markowitz and Glenn Goldfinger
(the "Shareholders").
WHEREAS, the Shareholders own 185 shares of common stock of the Company,
which constitutes all of the issued and outstanding shares of capital stock of
the Company (the "Stock");
NOW THEREFORE, in consideration of the promises and the representations,
warranties and agreements herein, the parties agree as follows:
1. Sale and Transfer of Stock; Closing; Purchase Price and Other
Transactions; Downpayment.
1.1 Stock. Subject to the terms and conditions of this Agreement, at the
Closing (as hereinafter defined), the Shareholders agree to sell, transfer and
deliver to Standard 185 common shares of the Company, and Standard agrees to
purchase from the Shareholders, 185 common shares of the Company (the "Company
Shares").
1.2 Closing. The purchase and sale (the "Closing") provided for in this
Agreement shall take place at the offices of Phillips, Nizer, Benjamin, Krim &
Ballon, 666 Fifth Avenue, New York, New York 10103 at 10:00 A.M. simultaneously
with the purchase by Standard of the stock of R&S Truck Body, Inc., CPS Trailer
Co., Inc. or at such other time and place as the parties hereto shall mutually
agree, provided that the Closing shall take place no later than June 30, 1998.
The time and date of the Closing is referred to herein as the "Closing Date."
1.3 Purchase Price.
(a) the purchase price shall consist of 1,000 shares of common stock of
Standard Automotive Corporation per one share of the Company for a total payment
of 185,000 shares of common stock of Standard Automotive Corporation. Such
shares shall carry a two year lockup on sale or transfer. Said shares shall be
registered as follows:
Shares of
Selling Shareholder Standard Automotive Corporation
------------------- -------------------------------
Andrew A. Levy 65,000
Farzana S. Habib 35,000
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Richard Friedman 37,500
Jeffrey Markowitz 37,500
Glenn Goldfinger 10,000
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TOTAL 185,000
(b) Standard shall assume the debt of the Company to Standard Automotive
Corporation, as shown on the Closing Balance Sheet, of approximately $1,000,000.
(c) Standard shall pay Redstone Capital Corporation a fee of $600,000,
$100,000 of which shall be paid upon signature hereof.
2. Representations and Warranties of the Shareholders and the Company. The
Company and the Shareholders represent and warrant to Standard that the
following statements are true and correct:
2.1 Organization and Good Standing.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey, and has full corporate
power and authority to carry on the business of the Company as it is now being
conducted, to own or hold the assets which it owns or holds and perform all its
obligations under the agreements and instruments to which it is a party or by
which it is bound.
(b) The Company has no subsidiaries.
2.2 Authority; No Conflict. This Agreement constitutes the legal, valid
and binding obligation of the Company and each of the Shareholders enforceable
against the Company in accordance with its terms. The Company and each of the
Shareholders has the absolute and unrestricted right, power, authority and
capacity to execute and deliver this Agreement and to perform its obligations
hereunder. Neither the execution and delivery of this Agreement by the Company
and each of the Shareholders nor the consummation of the transactions
contemplated by it will:
(a) violate or conflict with any provision of the Articles of
Incorporation or Bylaws or any other charter document of the Company (copies of
which have been delivered to Standard);
(b) violate or conflict with any provision of any law, rule, regulation,
order, permit, certificate, writ, judgment, injunction, decree, determination,
award or other decision of any court, government, governmental agency or
instrumentality, domestic or foreign, or arbitrator, binding upon the Company
and any of the Shareholders;
(c) result in a material breach of, or constitute a default under (or with
notice or lapse of time, or both, result in a material breach of or constitute a
default under) or otherwise
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give any person the right to terminate, any material lease, license, contract or
other agreement or instrument to which the Company or any Shareholder is a party
or by which it or any of the Shareholders is bound;
(d) result in, or require, the creation or imposition of, any mortgage,
deed of trust, pledge, lien, security interest or other charge or Encumbrance of
any nature ("Encumbrance") upon or with respect to the Company Shares or any of
the properties now owned or used by the Company.
2.3 Capitalization. The authorized capital stock of the Company consists
of 200 shares of common stock, of which 185 shares of common stock are issued
and outstanding. The Shareholders are and will be on the Closing Date the record
and beneficial owners and holders of, and have good title to, the Stock, free
and clear of any Encumbrance. All of the issued and outstanding shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and non-assessable, and there are no preemptive rights. There are
no existing agreements, options, warrants, rights, calls or commitments of any
character to which the Shareholders or the Company is a party or by which any of
them is bound providing for the issuance of any additional shares, the sale of
treasury shares or the repurchase or redemption of shares of the Company's
capital stock and there are no outstanding securities or other instruments
convertible into or exchangeable for shares of such capital stock and no
commitments to issue such securities or instruments.
2.4 Financial.
(a) The Shareholders have delivered to Standard the Balance Sheet of the
Company as of February 13, 1998 (the "1998 Balance Sheet"). The 1998 Balance
Sheet is true, correct and complete and fairly presents the financial condition
of the Company as at the date thereof, in accordance with generally accepted
United States accounting principles consistently applied and the historical
practices of the Company.
(b) As of the Closing Date, (i) the assets of the Company shall consist of
the assets shown on the 1998 Balance Sheet (less any accounts payable and
payments set forth on Schedule A hereto), cash represented by interest earned
therefrom subsequent to the date thereof, and contracts to purchase 100% of the
stock of R&S Truck Body Company, Inc., a Kentucky corporation, and 100% of the
stock of CPS Trailer Company, Inc., a Missouri corporation.
(c) The Company does not have any material liabilities or obligations of
any nature (known or unknown, absolute, accrued, contingent or otherwise) that
are not fully reflected or reserved against in the 1998 Balance Sheet.
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(d) Except as previously disclosed to Standard in writing, since February
13, 1998, there has not been, occurred or arisen, whether or not in the ordinary
course of business:
(i) any material adverse change, whether actual or threatened, in
the financial condition, results of operations, business, properties,
assets or business prospects of the Company; or
(ii) any declaration, setting aside or payment of a dividend
(whether in cash, stock or property) in respect of the capital stock of
the Company; or
(iii) any borrowing or lending of money or guarantee of any
obligation by the Company, except in the ordinary course of business; or
(iv) any disposition of any material properties or assets used in
the business of the Company except sales made in the ordinary course of
business; or
(v) any engagement by the Company in activities outside the ordinary
course of its business as conducted on the date hereof; or
(vi) any issuance or repurchase of its stock by the Company.
2.5 Books and Records. The minute books, stock record books and other
records of the Company, all of which have been made available to Standard, are
complete and correct and have been maintained in accordance with sound business
practices. On the Closing Date, all of those books and records will be in the
possession of the Company.
2.6 Interests in Real Property. The Company does not own real property.
2.7 Accounts Receivable. The Company does not have any accounts
receivable, except for accrued interest.
2.8 Inventory. The Company does not have any inventory.
2.9 Tax Returns and Payments.
(a) All Tax Returns required to be filed by or with respect to the Company
have been properly and correctly completed and filed on a timely basis. All such
Tax Returns are correct and complete in all material respects.
(b) All Taxes whether or not shown on any Tax Return required to be paid
or to be withheld and remitted by the Company have been duly and timely paid in
full or properly withheld and remitted. No claims are being asserted with
respect to any Taxes required to be paid or withheld by or on behalf of the
Company, and there are no Encumbrances upon any property or assets of the
Company that arose in connection with any failure (or alleged failure) to pay
any Taxes.
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(c) The Company has never been audited by a taxing authority.
(d) The Company is not a party to any allocation or sharing arrangement or
agreement (whether written or unwritten) with respect to Taxes.
2.10 Employee Benefit Plans. The Company has never had any salaried
employees, and accordingly, has never maintained any type of employee benefit
plan.
2.11 Compliance With Laws; BE Filing.
(a) Except as previously disclosed to Standard in writing, (i) the Company
is, and at all times during the period prior to the date hereof, has been, in
compliance with all statutes, orders, rules, ordinances and regulations
applicable to it or to its ownership of assets or the operation of its business,
where any failure to so be in compliance would materially and adversely affect
the business, financial position or results of operations of the Company and
(ii) neither the Shareholders nor the Company has any knowledge of any basis to
expect, nor has received, any order, notice or other communication from any
federal, state or local governmental agency, including but not limited to any
environmental protection act, of any alleged, actual or potential violation
and/or failure to comply with any such statute, order, rule, ordinance or
regulation, or of any alleged, actual or potential obligation to undertake or
bear the cost of removal or remedial action at any property now owned or
previously owned or leased by the Company or to which hazardous materials
generated by the Company may have been transported.
(b) Except as previously disclosed to Standard in writing, the Company
holds all of the consents, licenses, permits, approvals and certificates
necessary to permit the Company to own, operate, use and maintain its assets in
the manner in which they are now operated and maintained and to conduct its
businesses as now being conducted. The Shareholders shall be responsible for
filing the U.S. Department of Commerce Form BE-15 (S.F.) on behalf of the
Company.
2.12 Litigation. Neither the Shareholders nor the Company is subject to
any judgment, award, injunction, rule, order or decree in which relief is sought
involving, affecting or relating to the ownership, operation or use of its
assets or the conduct of its business or which would prevent, delay or make
illegal the transactions contemplated by this Agreement. There are no actions,
lawsuits, audits, investigations, claims or proceedings pending or threatened
against, involving, affecting or relating to the Company or to its ownership,
operation or use of its assets or to the conduct of its businesses before any
court, arbitrator, or federal, state, municipal or other governmental
department, board, agency or instrumentality.
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2.13 Absence of Certain Changes and Events. Except as previously disclosed
to Standard in writing, since February 13, 1998 the Company has conducted its
businesses only in the usual and ordinary course consistent with past practice
and there has not been any:
(i) change in any authorized or issued capital stock; grant of any
stock option or right to purchase shares of capital stock of the Company;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement or other acquisition
by the Company of any shares of any such capital stock; or declaration or
payment of any dividend or other distribution or payment in respect of
shares of capital stock;
(ii) payment or increase of any bonuses, salaries or other
compensation to any director, officer or employee or shareholder or entry
into any employment, severance or similar agreement with any director,
officer or employee;
(iii) adoption of any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement, or other employee benefit plan
for or with any employees of the Company;
(iv) damage, destruction or loss to any asset or property of the
Company, whether or not covered by insurance, affecting materially and
adversely the properties, assets, business, financial condition, or
prospects of the Company, taken as a whole;
(v) sale (other than sales in the ordinary course of business),
lease or other disposition of any asset or property of the Company or
mortgage, pledge or imposition of any Encumbrance on any material asset or
property of the Company;
(vi) cancellation or waiver of any claims or rights with a value to
the Company in excess of $25,000;
(vii) change in the amount of notes receivable, security deposits or
other noncurrent assets of the Company, determined in accordance with
generally accepted accounting principles consistently applied on a
reasonable basis;
(viii) material change in the accounting methods followed by the
Company; and
(ix) agreement, whether or not in writing, to do any of the
foregoing by the Company.
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2.14 Certain Agreements.
The Company is not a party to any agreement other than those
agreements which are set forth in Section 1.3, copies of which have been
previously delivered to Standard.
2.15 Insurance. The Company does not maintain any type of insurance.
2.16 Intellectual Property Rights. The Company does not own or have any
type of interest in intellectual property rights.
2.17 No Business Activities; No Liabilities.
(a) The Company has conducted no business prior to the date hereof other
than activities related to the date hereof other than activities
related (i) to the negotiation and execution of the agreements
referred to in Section 2.4(b) and (ii) negotiations with other
potential acquisition candidates which did not result in executed
agreements or resulted in agreements which have expired or been
terminated with no potential future obligation on the part of the
Company.
2.18 Disclosure.
(a) No representation or warranty of the Shareholders contained in this
Agreement omits to state a material fact necessary in order to make the
statements herein, in light of the circumstances under which they were made, not
misleading.
(b) There is no fact known to the Shareholders which has specific
application to the Shareholders or the Company (other than general economic or
industry conditions) which materially adversely affects the assets, business,
prospects, financial conditions or results of operations of the Company.
2.19 Relationships With Affiliates. Except as previously disclosed to
Standard in writing, neither the Shareholders nor any Affiliate of the
Shareholders has any interest in any property, real or personal, tangible or
intangible, used in or pertaining to the business of the Company.
2.20 Brokers or Finders. Except for the investment banking fee payable to
Redstone Capital Corporation of $600,000, neither the Company nor the
Shareholders has incurred any obligation or liability, contingent or otherwise,
for brokerage or finders' fees or agents' commissions or other like payment in
connection with this Agreement.
2.21 The Shareholders acknowledge that the Stock of Standard delivered in
the transaction has not been registered under the Securities Act of 1933, as
amended and will be so legended.
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3. Representations and Warranties of Standard. Standard hereby represents
and warrants to the Shareholders and to the Company as follows:
3.1 Organization and Good Standing. Standard is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
3.2 Authority; No Conflict. Standard has good and sufficient corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement has been duly authorized, executed and
delivered by Standard and constitutes the legal, valid and binding obligation of
Standard enforceable against Standard in accordance with its terms. Neither the
execution and delivery of this Agreement by Standard nor the consummation of the
transactions contemplated by it will:
(a) violate or conflict with any provision of the Certificate or By-laws
of Standard; or
(b) violate or conflict with any provision of any law, rule, regulation,
order, permit, certificate, writ, judgment, injunction, decree, determination,
award or other decision of any court, government, governmental agency or
instrumentality, domestic or foreign, or arbitrator binding upon Standard; or
(c) result in a breach of, or constitute a default under (or with notice
or lapse of time or both result in a breach of or constitute a default under) or
otherwise give any person the right to terminate, any material lease, license,
contract or other agreement or instrument to which Standard is a party or by
which it is bound.
3.3 Investment Intent. Standard acknowledges that the Company Shares has
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and that the Shareholders and the Company have disclosed to
Standard that the Company Shares may not be resold absent such registration or
unless an exemption from registration is available. Standard is acquiring the
185 shares of common stock of the Company for its own account, for investment
purposes only and not with a view to its distribution within the meaning of
Section 2(11) of the Securities Act & Legend.
4. Conditions Precedent to the Obligations of Standard. Each and every
obligation of Standard under this Agreement to be performed on or before the
Closing Date shall be subject to the satisfaction, on or before the Closing
Date, of each of the following conditions precedent, except to the extent that
Standard shall have waived in writing such satisfaction:
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4.1 Representations and Warranties; Performance. Each of the
representations and warranties made by the Shareholders and by the Company
herein shall be true and correct in all material respects on the Closing Date
with the same effect as though made on and as of such date; and the Shareholders
and the Company shall have performed and complied with all agreements, covenants
and conditions required by this Agreement to be performed and complied with by
the Shareholders and the Company on or prior to the Closing Date.
4.2 Delivery of Financial Statements. The Company shall have delivered to
Standard the 1998 Balance Sheet of the Company prepared in accordance with
generally accepted accounting principles.
4.3 No Material Adverse Change.
(a) There shall have been no material adverse change since the date of the
1998 Balance Sheet in the business, condition (financial or otherwise) or
operations of the Company.
(b) As of the date hereof, the Company has no liabilities or obligations,
accrued, contingent or otherwise, other than those set forth on Schedule 2.17.
4.4 Delivery of Closing Date Balance Sheet. The Company shall have
delivered to Standard the Closing Date Balance Sheet as required by Section 6.13
hereof.
4.5 Opinion of Company's Counsel. Standard shall have received an opinion
of Andrew A. Levy, legal counsel for the Company, dated the Closing Date, in
form and substance reasonably satisfactory to Standard and to the effect that:
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey.
(b) The authorized capital stock of the Company consists exclusively of
200 shares of common stock, of which 185 shares of common stock are issued and
outstanding. All outstanding shares of Company are owned of record by the
Shareholders, have been duly authorized and validly issued and are fully paid
and nonassessable. To the best of such counsel's knowledge and belief, there are
no (i) outstanding subscriptions, options, warrants or rights to acquire any
shares of the capital stock or other securities of the Company, (ii) outstanding
securities or obligations which are convertible into or exchangeable for any
shares of the capital stock or other securities of the Company, or (iii)
agreements or arrangements under which the Company is or may become bound to
assign or transfer or to sell or otherwise issue any shares of its capital stock
or any other securities, other than as contemplated by this Agreement.
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(c) Immediately prior to the consummation of the transactions described in
this Agreement, the Shareholders were the sole registered owners of the Stock.
Upon consummation and receipt by Standard of one or more reregistered
certificates, Standard will be the registered owner of 185 common shares of the
Company and, assuming Standard has purchased same in good faith, for value and
without notice of adverse claims, Standard will have acquired all of the rights
of the Shareholders in said shares, free of any adverse claim, any lien in favor
of the issuer, and any restrictions on transfer imposed by the Company.
(d) The Shareholders and the Company have duly executed and delivered this
Agreement and this Agreement constitutes the valid and legally binding
obligation of the Shareholders and of the Company enforceable against them in
accordance with its terms, subject to and limited by: (i) the effect of
bankruptcy, insolvency, reorganization, receivership, conservatorship,
arrangement, moratorium or other laws affecting or relating to the rights of
creditors generally, and (ii) the rules governing the availability of specific
performance, injunctive relief or other equitable remedies and general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
(e) There is no action, suit, proceeding or investigation pending or, to
the best of such counsel's knowledge and belief, threatened against any of the
Shareholders or the Company seeking to restrain or questioning the validity or
legality of any of the transactions described in this Agreement.
(f) The execution, delivery and performance of this Agreement by the
Shareholders and by the Company will not, to the best of such counsel's
knowledge and belief, (i) constitute a violation of or a default under any
material contract, agreement or instrument known to such counsel to which the
Company or the Shareholders are subject or by which any of the Shareholders' or
the Company's properties or assets are bound, or (ii) result in the creation or
imposition of any lien, security interest, claim, charge, encumbrance or
restriction on any of the Company's material properties or assets or contravene,
conflict with or result in the violation of any law, regulation or rule known to
such counsel or, to the best of such counsel's knowledge and belief, any order,
directive, judgment, arbitration award or decree to which the Shareholders or
the Company or any of their respective properties or assets are subject.
(g) To the best of such counsel's knowledge and belief, there is no
license, permit, consent or approval of, or other action by, or filing with any
federal or state court or regulatory authority which has not been obtained,
taken nor made, required for the execution, delivery or performance of this
Agreement by the Shareholders and the Company, other than those which, if not
obtained, taken or made, would not have a material
10
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adverse affect on the Company, taken as a whole; there is no license, permit,
consent or approval of, or other action by, or filing with any federal or state
court or regulatory authority which has not been obtained, taken nor made,
required for the operation by the Company after the Closing of the business
currently conducted by the Company.
4.6 No Litigation. There shall be no pending or threatened governmental or
third-party action, suit, proceeding or investigation seeking to restrain or
questioning the validity or legality of any of the transactions described in
this Agreement.
4.7 Resignations. The Shareholders shall have caused to be delivered to
Standard the written resignation of all officers and directors of the Company.
4.8 Consents. All consents, approvals and waivers from Governmental Bodies
and other third parties required to consummate the transactions contemplated
hereby shall have been obtained.
4.9 Standard's Due Diligence Review. Standard shall have completed its due
diligence review of the Company and shall be reasonably satisfied with the
condition of the Company (financial and otherwise), the interest of the
Shareholders in the Stock and the Shareholders' compliance with the
representations and warranties set forth in Section 2 hereof. Notwithstanding
anything to the contrary contained in this Agreement, in the event that the due
diligence review contemplated by this Section 4.9 does not disclose any material
aspects which affects the business or operations of the Company, then, Standard
may not rely on this Section 4.9 as a basis for not closing the transactions
contemplated in this Agreement.
4.10 Board Approval; Other Closings
(a) The consummation of the transaction contemplated hereby shall have
been approved by the Board of Directors of Standard.
(b) Standard shall have consummated the acquisitions of the stock of R&S
Truck Body Company, Inc. and CPS Trailer Company, Inc.
5. Conditions Precedent to the Obligations of the Shareholders and the
Company. Each and every obligation of the Shareholders under this Agreement to
be performed on or before the Closing Date shall be subject to the satisfaction,
on or before the Closing Date, of each of the following conditions precedent,
except to the extent that the Shareholders and the Company shall have waived in
writing such satisfaction:
5.1 Representations and Warranties; Performance. Each of the
representations and warranties made by Standard herein shall
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be true and correct in all material respects on the Closing Date with the same
effect as though made on and as of such date; Standard shall have performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by Standard on or prior to the
Closing Date.
5.2 Opinion of Standard's Counsel. The Shareholders and the Company shall
have received an opinion of Phillips Nizer Benjamin Krim & Ballon, dated the
Closing Date, in form and substance reasonably satisfactory to the Shareholders
and the Company, to the effect that:
(a) Standard is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) Standard has duly executed and delivered this Agreement and this
Agreement constitutes the valid and legally binding obligation of Standard
enforceable against it in accordance with its terms, subject to and limited by:
(i) the effect of bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting or relating to
the rights of creditors generally, and (ii) the rules governing the availability
of specific performance, injunctive relief or other equitable remedies and
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
(c) There is no action, suit, proceeding or investigation pending or, to
the best of such counsel's knowledge and belief, threatened against any of
Standard seeking to restrain or questioning the validity or legality of any of
the transactions described in this Agreement.
(d) The execution, delivery and performance of this Agreement by Standard
will not, to the best of such counsel's knowledge and belief, (i) constitute a
violation of or a default under any material contract, agreement or instrument
known to such counsel to which Standard is subject or by which any of Standard's
properties or assets are bound, or (ii) result in the creation or imposition of
any lien, security interest, claim, charge, encumbrance or restriction on any of
Standard material properties or assets or contravene, conflict with or result in
the violation of any law, regulation or rule known to such counsel or, to the
best of such counsel's knowledge and belief, any order, directive, judgment,
arbitration award or decree to which Standard or any of its respective
properties or assets are subject.
(e) To the best of such counsel's knowledge and belief, there is no
license, permit, consent or approval of, or other action by, or filing with any
federal or state court or
12
<PAGE>
regulatory authority which has not been obtained, taken nor made, required for
the execution, delivery or performance of this Agreement by Standard, other than
those which, if not obtained, taken or made, would not have a material adverse
affect on Standard, taken as a whole; there is no license, permit, consent or
approval of, or other action by, or filing with any federal or state court or
regulatory authority which has not been obtained, taken nor made, required for
the operation by Standard after the Closing of the business currently conducted
by the Company.
5.3 Consents. All consents, approvals and waivers from Governmental Bodies
and other third parties required to consummate the transactions contemplated
hereby shall have been obtained and be in form and substance reasonably
satisfactory to the Shareholders and the Company.
5.4 Performance. Standard shall have delivered or caused to be delivered
to the Shareholders and the Company the other matters required by this Agreement
to be delivered at the Closing by or for Standard.
5.5 No Litigation. There shall be no pending or threatened governmental or
third-party action, suit, proceeding or investigation seeking to restrain or
questioning the validity or legality of any of the transactions described in
this Agreement.
6. Covenants of the Shareholders and the Company Prior to Closing.
6.1 Approvals of Governmental Bodies.The Company will use reasonable
efforts, and will cooperate with Standard in taking all steps necessary,
promptly to (a) make any filing and (b) obtain any consent, approval or
authorization of any Governmental Body, in each case required by law to allow
the consummation of this Agreement and the transactions contemplated hereby,
provided that nothing herein shall require the Company to dispose of, or make
any change in, any portion of its business in order to obtain any consent,
approval or authorization. The Shareholders shall pay all filing fees, other
than those associated with the Hart Scott Rodino Notification Act, if
applicable, and all applicable transfer fees associated with the transactions
contemplated herein.
6.2 Regular Course of Business. Pending the Closing Date, the Company will
operate its businesses diligently and in good faith, consistent with past
management practices, and will use its reasonable best efforts to keep available
the services of the Company's present officers and to preserve the Company's
present relationships with persons having business dealings with the Company.
From the date of execution of this Agreement through the Closing Date, the
Company will not take any action described or enumerated in Section 2.13 hereof
without the prior written consent of Standard.
13
<PAGE>
6.3 Amendments. Pending the Closing Date, no change or amendment shall be
made in the Articles of Incorporation or Bylaws of the Company, and the Company
will not merge or consolidate with or into any other corporation and no other
corporation shall be merged into the Company and the Company will not enter into
any agreements, options, warrants, rights, calls or commitments of any character
with respect to the issuance of shares of capital stock.
6.4 Capital Expenditures. Pending the Closing Date, without the prior
approval of Standard, the Company will not make any capital expenditures, or
commitments with respect thereto.
6.5 Property and Assets. Pending the Closing Date, the business of the
Company and the assets, property and rights now owned by the Company will be
used, preserved and maintained, so far as practicable, in the ordinary course of
business, to the same extent and in the same condition as said assets, property
and rights are on the date of this Agreement (normal wear and tear excepted),
and no unusual or novel methods of manufacture, purchase, sale, management or
operation of said properties or business will be made or instituted.
6.6 Books of Account. Pending the Closing Date, the Company shall keep its
books of account and records in the usual, regular and ordinary manner, in
accordance with generally accepted accounting principles, practices and
standards applied on a consistent basis, and shall make no changes in accounting
principles.
6.7 Loans by the Company. Pending the Closing Date, the Company will not
make any loan or advance to, or assume, guarantee, endorse or otherwise become
responsible for, the obligations of any other individual, firm or corporation
other than in the ordinary course of business and consistent with past practice.
6.8 Changes in Existing Agreements. Pending the Closing Date, the Company
shall not waive any rights of substantial value or make any payment, direct or
indirect, of any material liability of the Company before the same comes due in
accordance with its terms.
6.9 Agreements. Pending the Closing Date, the Company will not enter into
an agreement to do any of the things prohibited in this Section 6.
6.10 Full Access. Pending the Closing Date, the Company shall afford to
Standard and its authorized representatives (including, without limitation, an
independent accounting firm representing Standard) reasonable access to the
officers, directors, properties, books and records, and the accountants, banker
and other experts of the Company, so that Standard may
14
<PAGE>
have full opportunity to make such investigation as it shall desire of the
affairs of the Company (including, without limitation, an examination of the
1998 Balance Sheet and the Closing Date Balance Sheet) and the Company will
cause to be furnished such financial information (including accountants' working
papers and similar records) and operating data and other information with
respect to the Company as Standard shall from time to time reasonably request.
Standard shall be permitted to make copies of the Company's books, records and
other documentation. The Shareholders and the Company shall, upon request,
provide Standard or its representatives with such information as Standard may
reasonably request in order to verify performance of and compliance with the
representations, warranties, covenants and conditions applicable to the
Shareholders and the Company hereunder.
6.11 Good Faith Efforts. The Shareholders shall use their good faith
efforts to prevent their representations and warranties hereunder from becoming
untrue, to cure any such untrue representations and warranties, to fulfill their
covenants and agreements hereunder, and to cause the conditions specified in
Section 4 hereof to be satisfied.
6.12 Notification of Certain Matters. The Shareholders and the Company
shall give prompt notice to Standard of (a) the occurrence, or failure to occur,
of any event which occurrence or failure to occur would be likely to cause any
representation or warranty contained in Section 2 of this Agreement to be untrue
or inaccurate in any material respect at any time from the date hereof to the
Closing Date; and (b) any material failure on their part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
the Shareholders and the Company hereunder; provided however, that the delivery
of any notice pursuant to this Section 6.12 shall not limit or otherwise affect
the remedies available hereunder to Standard.
6.13 Closing Date Balance Sheet and Schedule of Net Changes. The Company
and the Shareholders agree to deliver to Standard prior to the Closing Date the
Summary of Assets and Liabilities of the Company as of the Closing Date (the
"Closing Date Balance Sheet"). The Closing Date Balance Sheet to be delivered by
the Company and the Shareholders shall be true, correct and complete and shall
fairly present the consolidated financial condition of the Company as at the
date thereof, all in accordance with generally accepted United States accounting
principles and the historical practices of the Company.
7. Covenants of Standard Prior to Closing Date.
7.1 Approvals of Governmental Bodies. Between the date of this Agreement
and the Closing Date, Standard will use its reasonable efforts, and will
cooperate with the Shareholders and the Company in taking all steps necessary,
promptly to (a) make
15
<PAGE>
any filing and (b) obtain any consent, approval or authorization of any
Governmental Body, in each case required by law to allow the consummation of
this Agreement and the transactions contemplated hereby, provided that nothing
herein shall require Standard to dispose of, or make any change in, any portion
of its business or to incur any other burden in order to obtain any consent,
approval or authorization. Standard shall cause the filing of and will pay all
fees (and costs associated therefrom) of Standard, the Shareholders and the
Company associated with any filings required to be made pursuant to the Hart
Scott Rodino Merger Notification Act.
7.2 Notification. Between the date of this Agreement and the Closing Date,
Standard will promptly notify the Shareholders and the Company if it becomes
aware of any fact or condition which makes materially untrue any representation
or materially breaches any warranty made by Standard in this Agreement or if it
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) make
materially untrue any such representation or materially breach any such warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition.
7.3 Good Faith Efforts. Between the date of this Agreement and the Closing
Date, Standard will use its good faith efforts to cause the conditions specified
in Section 5 hereof to be satisfied.
7.4 Notification of Certain Matters. Standard shall give prompt notice to
the Shareholders of (a) the occurrence, or failure to occur, of any event which
occurrence or failure to occur would be likely to cause any representation or
warranty contained in Section 3 of this Agreement to be untrue or inaccurate in
any material respect at any time from the date hereof to the Closing Date; and
(b) any material failure on their part to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by Standard hereunder;
provided however, that the delivery of any notice pursuant to this Section 7.4
shall not limit or otherwise affect the remedies available hereunder to the
Shareholders.
8. Covenants of the Shareholders and Standard Subsequent to the Closing
Date.
Further Assurances. The Shareholders will, upon request of Standard
from time to time after the Closing, execute and deliver, and use its good faith
efforts to cause other persons to execute and deliver to Standard all such
further documents and instruments, and will do or use its reasonable efforts to
cause to be done such other acts, as Standard may reasonably request to
consummate and make effective the transactions contemplated hereby.
16
<PAGE>
9. Mutual Covenants.
9.1 Expenses. Except as expressly otherwise provided herein, each party to
this Agreement shall bear its respective expenses incurred in connection with
the preparation, execution and performance of this Agreement and the
transactions contemplated hereby, including all fees and expenses of agents,
representatives, counsel and accountants.
9.2 Public Announcements. Except as required by law, any public
announcement or similar publicity with respect to this Agreement or the
transactions contemplated hereby shall be issued, if at all, at such time and in
such manner as Standard and the Shareholders and the Company shall determine.
Unless agreed to by Standard and the Shareholders and the Company in advance or
required by law, prior to the Closing Date the parties hereto shall keep the
provisions of this Agreement strictly confidential and make no disclosure
thereof to any person. The Shareholders, the Company and Standard will consult
with each other concerning the means by which the Company's employees, customers
and suppliers and others having dealings with the Company will be informed of
the transactions contemplated hereby, and Standard shall have the right to be
present for any such communication.
9.3 Confidentiality. Between the date of this Agreement and the Closing
Date, each party will maintain in confidence, and cause its directors, officers,
employees, agents and advisors to maintain in confidence, any written, oral or
other information obtained from another party or the Company in connection with
this Agreement or the transactions contemplated hereby unless such information
is already known to such party or to others not bound by a duty of
confidentiality or unless such information becomes publicly available through no
fault of such party, unless the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the transactions contemplated hereby or unless the
furnishing or use of such information is required by or necessary or appropriate
in connection with legal proceedings.
If the transactions contemplated by this Agreement are not consummated,
each party will return or destroy as much of such written information as may
reasonably be requested.
9.4 Tax Matters.
(a) The Company shall be responsible for preparing and filing all Tax
Returns for the Company and for handling all tax matters related to the Company
for Tax periods ending prior to or on the Closing Date and making any required
Tax payments with respect of such Tax Returns. Such returns will report the
operations of the Company consistent with past practice. Standard agrees that
the Company's representatives shall have access to
17
<PAGE>
all records of the Company necessary to accurately prepare the aforementioned
Tax Returns.
(b) Standard shall be responsible for preparing and filing all Tax Returns
for taxable years or periods for the Company ending after the Closing Date
(including any State Tax Returns) and shall remit any Taxes due in respect of
such Tax Returns. The Company and the Shareholders agree to provide Standard
prior to the Closing with copies of all records of the Company necessary to
accurately prepare the aforementioned Tax Returns. The parties hereto
acknowledge that the fiscal year end for the Company is March 31.
(c) The Shareholders shall be entitled to all refunds of Taxes received
with respect to the Company for any Tax period ending on or prior to the Closing
Date, but if any amount of such refund is later determined to be repayable to
the appropriate taxing authority, such amount shall continue to be indemnifiable
under Section 10.4(a).
(d) Standard shall have the right and responsibility to direct the
handling of matters related to Taxes of the Company for Tax Periods ending after
the Closing Date. Notwithstanding the previous sentence, Standard shall notify
the Shareholders, in writing, within ten (10) days of the receipt by Standard of
an assessment or proposed assessment that would result in the Shareholders owing
money to Standard under any indemnifications in this Agreement. Failure to give
such notice shall not affect Standard's rights to indemnification under this
Agreement except to the extent the Shareholders demonstrate that their rights
have been prejudiced as a result of such failure.
(e) The Shareholders and Standard shall use their best efforts to provide
each other with such assistance as may reasonably be requested by any of them in
connection with Tax matters, including providing information with respect to the
preparation of any Tax Return or other document required to be filed by any
taxing authority, any audit or other examination by any taxing authority, any
judicial or administrative proceeding or dispute relating to liability for Taxes
or any claim arising under this Section 9.4 or Section 10.4, and each shall
retain and provide to the other access to such records and other information as
may be relevant to such Return, audit, examination, proceeding or determination.
10. Indemnification; Remedies.
10.1 Indemnification by the Shareholders.
Except as otherwise expressly provided in this Section 10, the
Shareholders shall defend, indemnify and hold harmless Standard for, from and
against each and every demand, claim, loss (which shall include any diminution
in value), liability,
18
<PAGE>
judgment, damage, cost and expense (including, without limitation, interest,
penalties, costs of preparation and investigation, and the reasonable fees,
disbursements and expenses of attorneys, accountants and other professional
advisors) (collectively, "Losses") imposed on or incurred by, directly or
indirectly, relating to, resulting from or arising out of any inaccuracy in any
representation or warranty in any respect, whether or not Standard relied
thereon, or any breach or nonfulfillment of any covenant, agreement or other
obligation of the Shareholders under this Agreement or any certificate or other
document delivered or to be delivered pursuant hereto; provided, however, that
the Shareholders shall have no liability under this Section 10.1 for any Loss
arising from any single matter described above unless and until the aggregate
amount of such Loss and Losses arising from all similar or related matters
exceeds $25,000, in which event the Shareholders shall be liable for all such
Losses.
10.2 Indemnification by Standard.
Except as otherwise expressly provided in this Section 10, Standard
shall defend, indemnify and hold harmless the Shareholders for, from and against
each and every demand, claim, loss (which shall include any diminution in
value), liability, judgment, damage, cost and expense (including, without
limitation, interest, penalties, costs of preparation and investigation, and the
reasonable fees, disbursements and expenses of attorneys, accountants and other
professional advisors) (collectively, "Losses") imposed on or incurred by,
directly or indirectly, relating to, resulting from or arising out of any
inaccuracy in any representation or warranty in any respect, whether or not the
Shareholders relied thereon, or any breach or nonfulfillment of any covenant,
agreement or other obligation of Standard under this Agreement or any
certificate or other document delivered or to be delivered pursuant hereto;
provided, however, that Standard shall have no liability under this Section 10.2
for any Loss arising from any single matter described above unless and until the
aggregate amount of such Loss and Losses arising from all similar or related
matters exceeds $25,000, in which event Standard shall be liable for all such
Losses.
10.3 Notice and Defense of Third-Party Claims. If any action, claim or
proceeding shall be brought or asserted under this Section 10 against any
indemnified party or successor thereto (the "Indemnified Person") in respect of
which indemnity may be sought under this Section 10 from an indemnifying person
or any successor thereto (the "Indemnifying Person"), the Indemnified Person
shall give prompt written notice of such action or claim to the Indemnifying
Person who shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Person and the payment of all
expenses; except that any delay or failure to so notify the
19
<PAGE>
Indemnifying Person shall relieve the Indemnifying Person of its obligations
hereunder only to the extent, if at all, that it is prejudiced by reason of such
delay or failure. The Indemnified Person shall have the right to employ separate
counsel in any of the foregoing actions, claims or proceedings and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Indemnified Person unless both the Indemnified
Person and the Indemnifying Person are named as parties and the Indemnified
Person shall in good faith determine that representation by the same counsel is
inappropriate. In the event that the Indemnifying Person, within ten (10) days
after notice of any such action or claim, fails to assume the defense thereof,
the Indemnified Person shall have the right to undertake the defense, compromise
or settlement of such action, claim or proceeding for the account of the
Indemnifying Person, subject to the right of the Indemnifying Person to assume
the defense of such action, claim or proceeding with counsel reasonably
satisfactory to the Indemnified Person at any time prior to the settlement,
compromise or final determination thereof. Anything in this Section 10 to the
contrary not withstanding, the Indemnifying Person shall not, without the
Indemnified Person's prior written consent, settle or compromise any action or
claim or consent to the entry of any judgment with respect to any action, claim
or proceeding for anything other than money damages paid by the Indemnifying
Person. The Indemnifying Person may, without the Indemnified Person's prior
written consent, settle or compromise any such action, claim or proceeding or
consent to entry of any judgment with respect to any such action or claim that
requires solely the payment of money damages by the Indemnifying Person and that
includes as an unconditional term thereof the release by the claimant or the
plaintiff of the Indemnified Person from all liability in respect of such
action, claim or proceeding. As a condition to asserting any rights under this
Section 10, each of Standard's Indemnified Person must appoint Standard and each
of the Shareholders' Indemnified Person must appoint the Shareholders, as its
sole agent for all matters relating to any claim hereunder.
11. Termination.
11.1 Termination Events. Subject to the provisions of Section 11.2, this
Agreement may, by written notice given at or prior to the Closing Date in the
manner hereinafter provided, be terminated:
(a) by either Standard or the Shareholders or the Company if a material
default or breach shall be made by the other party hereto with respect to the
due and timely performance of any of its covenants and agreements contained
herein, or with respect to the due compliance with any of its representations,
warranties or covenants, and such default cannot be cured prior to the Closing
Date and has not been waived;
20
<PAGE>
(b) (i) by Standard if all of the conditions set forth in Section 4 shall
not have been satisfied on or before Closing Date, other than through failure of
Standard to fully comply with its obligations hereunder, and shall not have been
waived by Standard on or before such date; or (ii) by the Shareholders and the
Company, if all of the conditions set forth in Section 5 shall not have been
satisfied on or before the Closing Date, other than through failure of the
Shareholders and the Company to fully comply with their obligations hereunder,
and shall not have been waived by the Shareholders and the Company on or before
such date;
(c) by mutual consent of Standard and the Shareholders and the Company; or
(d) by either Standard or the Shareholders and the Company if the Closing
shall not have occurred, other than through failure of any such party to fulfill
its obligations hereunder, on or before June 30, 1998 or such later date as may
be agreed upon by the parties.
Each party's right of termination hereunder is in addition to any other
rights it may have hereunder or otherwise and the exercise of a right of
termination shall not be an election of remedies.
11.2 Effect of Termination. In the event this Agreement is terminated
pursuant to Section 11.1, subject to Section 1.4, all further obligations of the
parties hereunder shall terminate, except that the obligations set forth in this
Section and Sections 9.1, 9.2 and 9.3 shall survive.
12. Definitions. The following terms shall have the following meanings:
12.1 "Affiliate" means (i) a corporation of which the Company owns
directly or indirectly less than fifty (50%) of the voting stock and (ii) any
joint venture or partnership (or equivalent legal entity under foreign law) in
which the Company has an interest in the earnings or capital or of which the
Company is a general partner.
12.2 "Code" means the Internal Revenue Code of 1986, as amended.
12.3 "Encumbrance" means any security interest, mortgage, lien, charge,
adverse claim or restriction of any kind, including, but not limited to, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.
12.4 "Governmental Body" means any domestic or foreign national, state or
municipal or other local government or
21
<PAGE>
multinational body, any subdivision, agency, commission or authority thereof, or
any quasi-governmental or private body exercising any regulatory or taxing
authority thereunder.
12.5 "Related Cost" means any liability, cost, expense (including, without
limitation, any reasonable expenses of investigation and attorneys' and
accountants' fees), loss, damage, assessment, settlement or judgment (other than
an item of Tax) which arises out of the imposition or assessment of any Tax.
12.6 "Taxes" means all taxes, fees, levies, imposts, assessments or other
charges including, but not limited to, foreign, federal, state, county or local
income, profits, gross receipts, payroll, excise, property, sales, use,
employment, value added, unitary, capital, net worth, transfer, withholding and
franchise taxes and customs duties together with any penalties, interest and
additions to tax thereon or costs or expenses related thereto.
12.7 "Tax Returns" means any return, report, information return,
questionnaire, declaration or other document (including any related or
supporting information) filed or required to be filed for any period with any
Governmental Body in connection with the determination, assessment or collection
of any Taxes or the administration of any laws, regulations or administrative
requirements relating to any Taxes (whether or not payment is required to be
made with respect to such document).
13. Miscellaneous.
13.1 Notices. Except as otherwise set forth herein, all notices given in
connection with this Agreement shall be in writing and shall be delivered either
by personal delivery, by telegram, telex, telecopy or similar facsimile means,
by certified or registered mail, return receipt requested, or by express courier
or delivery service, addressed to the parties hereto at the following addresses:
If to the Company:
Barclay Investments, Inc.
c/o Andrew A. Levy, Esq.
46 Baldwin Farms North
Greenwich, Connecticut 06831
If to Standard:
Standard Automotive Corporation
375 Park Avenue
Suite 2805
New York, New York 10152
Attention: Steven J. Merker
If to the Shareholders:
22
<PAGE>
Andrew A. Levy
46 Baldwin Farms North
Greenwich, Connecticut 06831
Farzana S. Habib
46 Baldwin Farms North
Greenwich, Connecticut 06831
Richard Friedman
c/o The Apmont Group, Inc.
500 Fifth Avenue
Suite 5520
New York, New York 10110
Jeffrey Markowitz
c/o The Apmont Group, Inc.
500 Fifth Avenue
Suite 5520
New York, New York 10110
Glenn Goldfinger
155 East 76th Street
New York, New York 10021
or at such other address and number as any of the parties shall have previously
designated by written notice given to the other parties in the manner
hereinabove set forth. Notices shall be deemed given when received, if sent by
telegram, telex, telecopy or similar facsimile means (confirmation of such
receipt by confirmed facsimile transmission being deemed receipt of
communications sent by telex, telecopy or other facsimile means); and when
delivered and receipted for (or upon the date of attempted delivery where
delivery is refused), if hand delivered, sent by express courier or delivery
service, or sent by certified or registered mail, return receipt requested.
13.2 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay on the part of
any party in exercising any right, power or privilege under this Agreement or
the documents referred to herein shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or privilege preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. To the maximum extent permitted by applicable law, (i) no claim or
right arising out of this Agreement or the documents referred to herein can be
discharged by one party hereto, in whole or in part, by a waiver or renunciation
of the claim or right unless in writing signed by the other party hereto; (ii)
no waiver which may be given by a party hereto shall be applicable except in the
specific instance for which it is given; and (iii) no notice to or demand on one
party hereto shall be deemed to be a waiver of any obligation of such party or
of the right of the party giving such notice or
23
<PAGE>
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to herein.
13.3 Entire Agreement and Modification. This Agreement is intended by the
parties to this Agreement as a final expression of their agreement with respect
to the subject matter hereof, and is intended as a complete and exclusive
statement of the terms and conditions of that agreement. This Agreement may not
be modified, rescinded, or terminated orally, and no modification, rescission,
termination or attempted waiver of any of the provisions hereof (including this
Section) shall be valid unless in writing and signed by the party against whom
the same is sought to be enforced.
13.4 Assignments. This Agreement shall apply to and be binding in all
respect upon, and shall inure to the benefit of, the successors and assigns of
the parties hereto. All parties to this Agreement shall have an absolute right
to assign all of their rights recited hereunder to a third party.
13.5 Severability. In the event any provisions of this Agreement shall be
held invalid or unenforceable by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provisions
hereof. Any provision of this Agreement held invalid or unenforceable only in
part or degree shall remain in full force and effect to the extent not held
invalid or unenforceable.
13.6 Section Headings, Construction. The headings of articles and sections
contained in this Agreement are provided for convenience only. They form no part
of this Agreement and shall not affect its construction or interpretation. All
references to articles and sections in this Agreement refer to the corresponding
articles and sections of this Agreement. All words used herein shall be
construed to be of such gender or number as the circumstances require. Unless
otherwise specifically noted, the words "herein," "hereof," "hereby,"
"hereinabove," "hereinbelow," "hereunder," and words of similar import, refer to
this Agreement as a whole and not to any particular section, subsection,
paragraph, clause or other subdivision hereof.
13.7 Parties in Interest. Nothing expressed or referred to in this
Agreement is intended or shall be construed to give any person or entity other
than the parties to this Agreement any legal or equitable right, remedy or claim
under or with respect to this Agreement, or any provision hereof, it being the
intention of the parties hereto that this Agreement and all of its provisions
and conditions are for the sole and exclusive benefit of the parties to this
Agreement, their successors and assigns, and for the benefit of no other person
or entity.
24
<PAGE>
13.8 Governing Law. This Agreement shall be governed by, and construed
under, the laws of the State of New York without regard to conflicts of laws,
all rights and remedies being governed by such laws.
13.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to constitute
but one and the same agreement.
13.10 Conflicts. In the event there is any conflict in the terms and
conditions recited in this Agreement and the terms and conditions recited in
that certain Letter of Intent dated December 20, 1996 by and between Plaza
Limited and Standard, the terms and conditions of this Agreement shall control.
IN WITNESS WHEREOF, the Shareholders, the Company and Standard have each
caused this Agreement to be executed as of the date first written above.
STANDARD AUTOMOTIVE CORPORATION
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
BARCLAY INVESTMENTS, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
SHAREHOLDERS:
- ------------------------------- --------------------------------------------
Andrew A. Levy Richard Friedman
- ------------------------------- --------------------------------------------
Farzana S. Habib Jeffrey Markowitz
- -------------------------------
Glenn Goldfinger
25
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Combined
Unconsolidated Balance Sheet and Statement of Income found on pages 7 & 8 of the
company's Form 10-Q for the three months ending December 31, 1997 and is
qualified in its entirety by reference to such combined unconsolidated financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 488,000
<SECURITIES> 0
<RECEIVABLES> 2,102,000
<ALLOWANCES> 55,000
<INVENTORY> 8,177,000
<CURRENT-ASSETS> 11,185,000
<PP&E> 3,767,000
<DEPRECIATION> 2,638,000
<TOTAL-ASSETS> 14,120,000
<CURRENT-LIABILITIES> 5,558,000
<BONDS> 0
0
0
<COMMON> 3,000
<OTHER-SE> 8,547,000
<TOTAL-LIABILITY-AND-EQUITY> 14,120,000
<SALES> 19,850,000
<TOTAL-REVENUES> 19,850,000
<CGS> 15,032,000
<TOTAL-COSTS> 16,307,000
<OTHER-EXPENSES> (790,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (316,000)
<INCOME-PRETAX> 2,437,000
<INCOME-TAX> 1,110,000
<INCOME-CONTINUING> 1,327,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,327,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
