<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------------------------
FORM 10-QSB
----------------------------------------------------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 Comm. File No. 0-8115
PH GROUP INC.
(Exact name of Small Business Issuer as specified in its charter)
Ohio 31-0737351
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2365 Scioto Harper Drive, Columbus, Ohio 43204
(Address of principal executive offices)
Registrant's telephone number, including area code: (614) 279-8877
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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.
(1) YES X NO ___ (2) YES X NO ___
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date: 1,102,820 common shares, without par
value, outstanding as of March 31, 1997.
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PH GROUP INC.
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets for March 31, 1997 3 and 4
and December 31, 1996
Consolidated Statement of Income for the three 5
months ended March 31, 1997 and March 31, 1996
Consolidated Statement of Cash Flows for the 6
three months ended March 31, 1997 and
March 31, 1996
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 and 9
Part II. Other Information
Item 2. Changes in Securities 10 and 11
Item 4. Submissions of Matters to a Vote of Security Holders 11 and 12
Item 5. Other Information 12 and 13
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PH GROUP INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31 DEC. 31
ASSETS 1997 1996
----------- -----------
<S> <C> <C>
Current Assets
Cash $ 500 $ 116,449
Accounts Receivable $ 2,003,560 $ 2,135,276
Inventories $ 1,293,363 $ 764,989
Deferred Income Taxes $ 50,200 $ 50,200
Other Current Assets $ 182,090 $ 88,885
----------- -----------
Total Current Assets $ 3,529,712 $ 3,155,799
----------- -----------
Property and Equipment, at cost
Office Equipment $ 429,031 $ 407,656
Manufacturing equipment $ 975,313 $ 956,140
Leasehold improvements $ 264,018 $ 255,518
Vehicles $ 132,934 $ 132,934
----------- -----------
$ 1,801,296 $ 1,752,248
Less: Accumulated Depreciation & Amortization $ (975,084) $ (927,879)
----------- -----------
Net Property and Equipment $ 826,212 $ 824,369
----------- -----------
Other Non-Current Assets
Inventory, Longterm Portion $ 39,000 $ 39,000
Oil & Gas Royalty Interests, Net of Amort. $ 1,754 $ 4,004
Land Held for Investment $ 170,170 $ 169,720
Goodwill, net (Note 3) $ 76,247 $ 83,178
Other noncurrent assets $ 111,049 $ 102,276
----------- -----------
Total Other Non-Current Assets $ 398,220 $ 398,178
----------- -----------
TOTAL ASSETS $ 4,754,144 $ 4,378,346
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 4
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PH GROUP INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31 DEC. 31
LIABILITIES 1997 1996
----------- -----------
<S> <C> <C>
Accounts Payable $ 1,509,886 $ 735,530
Bank Line of Credit $ 968,849 $ 1,157,849
Current Portion of Long-Term Debt $ 142,940 $ 141,877
Current Portion of Capital Lease Oblig. $ 17,407 $ 16,854
Income Tax Payable $ 10,240 $ 23,500
Accrued Expenses and Taxes $ 379,838 $ 494,823
Advance Billings $ 112,172 $ 249,049
----------- -----------
Total Current Liabilities $ 3,141,332 $ 2,819,482
----------- -----------
Noncurrent liabilities, all less current portions:
Notes payable to bank $ 269,867 $ 296,247
Capital Lease Obligations $ 38,376 $ 42,940
Other long-term installment notes $ 67,526 $ 77,434
Deferred compensation $ 10,185 $ 6,366
Deferred income taxes $ 10,200 $ 10,200
----------- -----------
Total noncurrent liabilities $ 396,153 $ 433,187
----------- -----------
Total liabilities $ 3,537,486 $ 3,252,669
----------- -----------
Shareholders' Equity
Common stock, no par value, authorized,
stated value of $.01; 1,102,820 shares
issued and outstanding $ 11,078 $ 10,878
Additional Paid In Capital $ 1,258,823 $ 1,239,023
Retained Earnings (Loss), Prior Years $ (124,224) $ (491,936)
Current Year Earnings (Loss) $ 70,981 $ 367,712
----------- -----------
Total Shareholders' Equity $ 1,216,658 $ 1,125,677
TOTAL LIABILITIES AND EQUITY $ 4,754,144 $ 4,378,346
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 5
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PH GROUP INC.
CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1997 1996
----------- -----------
<S> <C> <C>
NET SALES $ 2,297,708 $ 1,796,415
Cost of Goods Sold $ 1,641,496 $ 1,248,024
----------- -----------
Gross Margin $ 656,212 $ 548,392
Selling, General and
and Administrative Expense $ 532,826 $ 384,985
----------- -----------
Operating Income (Loss) $ 123,386 $ 163,407
----------- -----------
Other Income (Expense)
Interest Income $ 418 $ 340
Interest(Expense) $ (33,302) $ (33,324)
Oil & Gas Royalties, After Amort $ (1,521) $ (1,088)
Other $ 0 $ (1,113)
----------- -----------
Total Other Income (Expense) $ (34,405) $ (35,185)
----------- -----------
Income Before Income Taxes $ 88,981 $ 128,222
Minority Interest $ 0 $ 0
Provision for Taxes $ 18,000 $ 0
----------- -----------
NET INCOME 70,981 128,222
=========== ===========
WEIGHTED AVERAGE NUMBER OF 1,102,820 1,085,820
SHARES OUTSTANDING
Income (Loss) per Common Share:
Income (Loss) before extraordinary $ 0.06 $ 0.12
----------- -----------
EARNINGS (LOSS)
PER COMMON SHARE $ 0.06 $ 0.12
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PH GROUP INC.
CONSOLIDATED CASHFLOW STATEMENT
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1997 1996
--------- ---------
<S> <C> <C>
Cash Flow From Operating Activities
Net Income (Loss) 70,981 $ 128,222
Adjustments to Reconcile Net Income to Net Cash
Depreciation and Amortization $ 56,386 $ 52,571
Loss (Gain) on sale of property and equipment $ 0 $ 1,113
Changes in certain assets and liabilities
Decrease (Increase) in Accounts Receivable $ 131,716 $(468,916)
Decrease (Increase) in Inventory $(528,374) $(314,822)
Decrease (Increase) in Other Current Assets $ (93,205) $ (21,425)
Decrease (Increase) in Other Non Current Assets $ (8,773) $ 22,919
Increase (Decrease) in Accounts Payable $ 774,357 $ 196,053
Increase (Decrease) in Income Tax Payable $ (13,260) $ (5,000)
Increase (Decrease) in Deferred Income Taxes $ 0 $ (2,100)
Increase (Decrease) in Deferred Compensation $ 3,819 $ 0
Increase (Decrease) in Accrued Exp and Taxes $(114,985) $(169,899)
Increase (Decrease) in Advanced Billings $(136,877) $ 36,292
--------- ---------
Net Cash Provided By Operating Activities $ 141,785 $(544,992)
--------- ---------
Cash Flows from Investing Activities
Proceeds from sale of equipment $ 0 $ 0
Capital expenditures for property and equipment $ (49,048) $ (35,180)
(Increase) Decrease in other long term assets $ 0 $ 0
(Increase) Decrease in Other Investments $ (450) $ 0
--------- ---------
Net Cash Used In Investing Activities $ (49,498) $ (35,180)
--------- ---------
Cash Flows from Financing Activities
Principal Payments of Debt Obligations $ (39,236) $ (36,450)
Change in Line of Credit, net $(189,000) $ 505,000
Proceeds from Notes Payable $ 0 $ 22,184
Repayment of advances from directors $ 0 $ (27,500)
Proceeds from issuance of Common Stock $ 20,000 $ 0
--------- ---------
Net Cash Used In Financing Activities $(208,236) $ 463,234
--------- ---------
Net Increase (Decrease) in Cash $(115,949) $(116,938)
Cash, Beginning of Period $ 116,449 $ 122,746
--------- ---------
CASH, END OF PERIOD $ 500 $ 5,808
========= =========
</TABLE>
Resource General (now known as PH Group Inc.) and its Subsidiaries paid $25,879
in cash for interest expense in 1997 and $33,324 in 1996.
The accompanying notes are an integral part of the financial statements.
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PART I - FINANCIAL INFORMATION
ITEM 1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
Note 1. BASIS OF FINANCIAL PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles (GAAP) for interim
financial information and with the instructions to FORM 10-QSB and Item 310(b)
of Regulation SB. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
The accounting policies followed by PH Group Inc. (the Company), are set forth
in Note 2 to the financial statements in the Company's 1995 FORM 10-KSB.
In the opinion of management, the accompanying unaudited consolidated financial
statements reflect all adjustments which are necessary for a fair presentation
of the financial results. The results of the operations for the three month
period ended March 31, 1997 are not necessarily indicative of the results to be
expected for the whole year.
Note 2. Inventories
Inventories are valued at the lower of cost (First in, first out basis) or
market. Composition of inventories at March 31, 1997 and December 31, 1996 were
as follows.
<TABLE>
<CAPTION>
March 31, 1997 Dec. 31, 1996
---------- ----------
<S> <C> <C>
Raw Materials $ 425,673 $ 346,364
Work In Process 906,690 457,623
Finished Goods 0 0
---------- ----------
Inventory included
in Current Assets $1,332,363 $ 803,987
---------- ----------
</TABLE>
The Company has in stock certain items which are not expected to be utilized or
sold currently. Inventory of $39,000 shown on the balance sheet as a long-term
asset represents an estimate of this portion of total raw materials inventory.
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PART I - FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
RESULTS OF OPERATIONS
The Company had record shipments and new orders for the first quarter of the
year. Net sales increased from $1.7 million in 1996 to $2.2 million in 1997.
This 29% increase in sales was a result of starting the year with a record
backlog of $3.3 million, most of which was shipped in the first quarter.
Continuing growth of sales of Trueblood machines also acted as a catalyst for
the sales increase in the first quarter. Shipments of Trueblood machines
increased 31% over the first quarter in 1996 and 64.5% over the first quarter in
1995.
In 1996 the Company set a record for new orders of $9.3 million. Hydraulic press
orders for the year were $5.4 million and Trueblood orders were $3.9 million. In
the first quarter of 1997 the Company had a record of $6.0 million or 64.5% of
all 1996 new orders. The majority of the increase came from Trueblood orders of
$4.5 million. Trueblood orders for the first quarter have exceeded all of
Trueblood's 1996 orders. Due to the significant increase of Trueblood orders and
the historical stability of hydraulic press orders, the Company believes that it
should receive new orders in excess of $13 million. In other words, the Company
believes that it will double new orders in 1997 over 1996.
At the end of the first quarter the Company had shipments and backlog numbers of
$8.8 million. Consequently, the Company has increased its projected sales for
the year to $12.5 million. The Company would have to average $617,000 in new
orders, per month, from April through September to reach a backlog that will
generate $3.7 million in new orders that can be shipped during the year.
Generally, orders received after September are not shipped until the following
year.
The Company's gross profit as a percent of sales decreased to 28.6% for the
first quarter of 1997 from 30.5% in 1996. To remain competitive in the local
labor market the company increased all of its labor rates. As a result the
average labor rate increased from $9.85 to $10.12 per hour which, in turn,
raised the labor cost as a percent of sales from 13.8% in 1996 to 20.0% in 1997.
Gross profit as a percent of sales was further reduced by a $7,500 increase in
engineering salaries and shop supplies increased by 17.4% over the same period
in 1996.
The gross profit decline was primarily in the hydraulic press line. Gross profit
was reduced to 28.5% in the first quarter in 1997 from 38.5% in the first
quarter in 1996. The Company has identified four customers who represented 24%
of the first quarter sales but had gross profit margins of only 14%. The Company
is increasing the sales price on all future orders for these customers.
Gross margins on the Trueblood product line increased from 24.9% to 32.4% from
the first quarter 1996 to the first quarter 1997.
Salary, General and Administrative costs increased form $385,000 or 21.4% of
sales in the first quarter 1996 to $532,000 or 23% of sales in the first quarter
1997. The major increase in SG&A costs were in salaries, taxes and benefits
which increased to $347,000 from $273,000. Starting in the third quarter of 1996
a number of employees were added in anticipation of increased sales in 1997.
However, as a percent of sales, salaries, taxes and benefits remained at 15.1%
of sales.
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<PAGE> 9
The Company is preparing to attend the National Plastics Exposition, a tradeshow
that is designed to attract attendees who are purchasing plastic material and
machinery. The Company has increased its advertising and promotion expense to
generate awareness of its Trueblood product line. The Company's advertising,
travel and entertainment expense increased by 85% to $40,601 for the quarter as
opposed to $21,910 in 1996's first quarter. Management expects to gain
considerable sales for the Trueblood product line from attendees at the show.
The Company increased its professional fees from $31,000 the first quarter 1996
to $65,000 in 1997. This 110% increase was caused by increased expenses in 1997
for the annual meeting and annual report. Also, these expenses along with audit
fees were incurred earlier in the year than in prior years due to the annual
meeting taking place much sooner than in the past. The Company completed its
annual meeting in April when in previous years the meeting was held in May or
later months.
In previous years, the Company had expensed bonus and 401(k) contributions in
the fourth quarter of the year or into the next fiscal year. In 1997, the
Company is expensing these costs over the full year based on projections at the
start of the year. In the first quarter the Company expensed $25,000 of
potential bonus and 401(k) contributions.
Operating profit in the first quarter 1997 was reduced to $123,386 or 5.4% of
sales from $163,407 or 9.1% of sales in 1996's first quarter. Increased labor
rates, business promotion and professional fees, and salary increases
contributed to the decreased profit from operations. However, these expenses are
expected to decrease as a percent of sales in the remainder of the year.
Despite increased sales interest expense remained level with last year's first
quarter.
In 1996 the Company was able to use its NOL carryforward and therefore did not
have to incur any federal tax liability for first quarter 1996. However, because
the Company has used all of the NOL due to profitability, it incurred an $18,000
tax expense for the first quarter 1997.
Net income for the first quarter decreased 45% when compared to the first
quarter in 1996. The Company believes that it will quickly add profit during the
next two quarters due to reductions of the first quarter's professional fees,
plus scheduled shipments in excess of $3.0 million each quarter which will
substantially increase profitability.
LIQUIDITY AND CAPITAL RESOURCES
The Company's balance sheet continued to improve. Working capital increased to
$388,000 at the end of the quarter 1997 from $336,000 at the end of the year
1996. Continued profitability in the first quarter reduced long term debt as a
percent of assets from 9.9% at year end 1996 to 8.3% at the end of the first
quarter 1997.
To fund a significant projected increase in business and an acquisition the
Company increased its line of credit from $1.75 million to $2.5 million in
addition to a $600,000 short term loan. In addition, the Company, at its annual
meeting, increased its authorized shares from 3.4 million to 10.0 million. This
increase in shares will allow the Company the flexibility of issuing additional
shares to the public to increase the equity of the Company. Management and the
Company's Board will investigate. The increased borrowing capability under the
expanded line of credit plus cash generated from operations is more than
sufficient to handle the increased sales activity, operating costs, debt
payments and capital expenditures.
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<PAGE> 10
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
(a) Instruments Defining the Rights of Shareholders. At the 1997 Annual
Meeting of the Company held on April 22, 1997 (the "Annual Meeting"), the
shareholders approved certain amendments to the Company's Articles of
Incorporation (the "Articles") and Code of Regulations (the "Regulations") which
affect the rights of shareholders. The general effect of the amendments is
summarized below.
(i) Elimination of Cumulative Voting. The shareholders
approved amendments to the Articles and the Regulations to
eliminate cumulative voting. Shareholders are no longer
permitted to cumulate votes in the election of directors.
(ii) Increase in Authorized Shares. The shareholders approved
an amendment to the Articles to increase the authorized number
of shares of common stock of the Company from 3,412,000 to
10,000,000. The increase does not alter the rights of the
outstanding shares. The additional authorized shares will, if
and when issued, have the same rights as the currently
authorized shares. It is not possible to describe the actual
effect of the authorization of additional shares upon the
rights of current shareholders until the Board of Directors,
if ever, issues such additional shares. However, such effects
might include dilution of the voting power of the outstanding
shares and the dilution of earnings per share and book value
per share of existing shares.
(iii) Staggered Board of Directors. The shareholders
approved an amendment to the Regulations to divide the Board
of Directors from three classes into two classes, permit the
Board to determine the number of directors who serve on the
Board and establish a retirement age for directors. The
amendment has the effect of shortening the term for directors
from three years to two years and results in a higher number
of directors being up for election each year. The Board of
Directors can now increase or decrease the number of directors
serving on the Board which could previously be done only by
the shareholders. Further, as a result of the amendment,
directors will not be eligible for reelection to the Board
upon reaching the age of 67.
(iv) Ohio Control Share Acquisition Act. The shareholders
approved an amendment to the Articles to eliminate the
applicability of the Ohio Control Share Acquisition Act. The
Ohio Control Share Acquisition Act generally requires persons
acquiring large portions of a public corporation's stock to
first obtain the shareholders' approval of the acquisition.
Shareholder approval will no longer be required for certain
acquisitions of the Company's shares.
(b) Not applicable.
(c) Recent Issuance of Unregistered Securities. 100,000 shares of the
Company's common stock were issued on April 30, 1997, to St. Lawrence Press
Company, Inc. in connection with the acquisition reported under Item 5 below.
See Item 5 for a description of the transaction and the type and amount of
consideration received for the stock. The Company relied on Section 4(2) of the
Securities Act of 1933 and Rule 506 promulgated thereunder in order to exempt
the shares from registration under the Securities Act. For information purposes,
the Company provided to St. Lawrence a copy of its annual report to shareholders
for the most recent fiscal year, the definitive proxy statement filed in
connection therewith, and all reports filed with the Securities and Exchange
Commission during 1996. St. Lawrence was given an
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opportunity to ask questions and receive answers concerning their investment in
the Company and was advised of the limitations on resale imposed on the stock.
Given that St. Lawrence was in the same line of business of the Company and the
experience of the officers, board of directors and shareholders of St. Lawrence,
the Company believed that St. Lawrence had sufficient knowledge and experience
in financial and business matters to evaluate the merits and risks of accepting
stock as a portion of the purchase price and thereby investing in the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Annual Meeting of the shareholders of the Company was held on
April 22, 1997.
(b) In connection with reclassifying the Board of Directors as
discussed in Item 2 above, all of the then serving directors resigned prior to
the Annual Meeting. Alida Breen and Charles T. Sherman were re-elected for one
year terms to expire in 1998. David H. Montgomery was newly elected for a one
year term to expire in 1998. Bob Binsky, Michael W. Gardner, Terry L. Sanborn
and Theodore P. Schwartz were re-elected for two year terms to expire in 1999.
(c) The matters voted upon at the Annual Meeting and the results of the
voting are set forth below:
(i) The shareholders voted 723,388 shares in favor, 7,088
shares against, and withheld authority on 9,570 votes with
respect to amending the Articles and Regulations to eliminate
cumulative voting.
(ii) The shareholders voted 792,742 shares in favor, 11,860
shares against, and withheld authority on 4,670 votes with
respect to amending the Articles to increase the authorized
number of shares of common stock from 3,412,000 to 10,000,000.
(iii) The shareholders voted 724,204 shares in favor, 11,588
shares against, and withheld authority on 5,720 votes with
respect to amending the Regulations to divide the Board of
Directors into two classes, permit the Board to determine the
number of directors who serve on the Board and establish a
retirement age for directors.
(iv) The shareholders voted 798,802 shares in favor, 4,150
shares against, and withheld authority on 5,970 votes with
respect to amending the Articles to change the name of the
Company to PH Group Inc.
(v) The shareholders voted 718,613 shares in favor, 7,080
shares against, and withheld authority on 11,986 votes with
respect to amending the Articles to eliminate the
applicability of the Ohio Control Share Acquisition Act.
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<PAGE> 12
(vi) The shareholders voted as follows with respect to the
election of directors:
<TABLE>
<CAPTION>
Shares in Favor Withheld Authority
<S> <C> <C>
Alida L. Breen 805,452 3,820
David H. Montgomery 805,292 3,980
Charles T. Sherman 805,952 3,320
Bob Binsky 807,392 1,880
Michael W. Gardner 787,392 21,880
Terry L. Sanborn 807,392 1,880
Theodore P. Schwartz 787,392 21,880
</TABLE>
(vii) The shareholders voted 701,947 shares in favor, 29,990 shares
against, and withheld authority on 8,254 votes with respect to terminating the
Company's existing Employees' Incentive Stock Option Plan and approving the 1997
Stock Incentive Plan of the Company.
ITEM 5. OTHER INFORMATION.
(a) Effective May 1, 1997, the Company acquired a substantial portion
of the assets of St. Lawrence Press Company, Inc., a Michigan corporation ("St.
Lawrence"), pursuant to an asset purchase agreement between the Company and St.
Lawrence. In consideration for the assets purchased, for St. Lawrence entering
into a Consulting Agreement and for St. Lawrence and certain individual persons
affiliated with St. Lawrence entering into covenants not to compete, the Company
paid or agreed to pay St. Lawrence a purchase price consisting of a cash
component, a stock component and a contingent earnout component.
Cash Component. On April 30, 1997, the Company paid St. Lawrence
$250,000 plus $77,000 for inventory, $237,635 for equipment and other tangible
personal property, $8,877 for certain prepaids and deposits related to the
Business, and $23,500 for the value of the labor and materials expended by St.
Lawrence on certain work in progress purchased by the Company. From that amount
($597,012), the following amounts were deducted: (i) the value of the trade
payables of St. Lawrence that were assumed by the Company, $252,235, and (ii)
the amount of the customer deposits previously received by St. Lawrence on the
work in progress purchased by the Company, $443,949, resulting in a net amount
of $99,172 due from St. Lawrence to the Company. St. Lawrence gave the Company a
promissory note in the amount of $99,172 which is due to be repaid in full from
accounts receivable generated from certain work in progress not purchased but to
be completed by the Company for St. Lawrence and in no event later than December
31, 1997. Inventory was purchased at the lower of cost or market and equipment
and other tangible personal property was purchased at appraised value. The
Company based its purchase price on the engineering reputation of St. Lawrence
and the diversification of its product line. Management feels that the St.
Lawrence product line will provide the vehicle to enter into the appliance and
cylinder industries. These industries will provide a counterbalance to the
automotive industry. Also, the St. Lawrence manufacturing facility will
alleviate the tight manufacturing space at the Company's Columbus location.
Stock Component. The Company issued 100,000 shares of its common stock
to St. Lawrence. The stock will be held by the Company as security for St.
Lawrence's obligations
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<PAGE> 13
under the asset purchase agreement. The Company will release to St. Lawrence
25,000 shares on April 30 in the years 1998, 1999, 2000 and 2001.
Contingent Earn Out Component. The Company will pay to St. Lawrence a
sum equal to 5% of the Company's gross sales price on orders received for
eligible product in excess of $2,500,000 during the following respective
periods: May 1, 1997 - April 30, 1998, and May 1, 1998 - April 30, 1999. In
addition, the Company will pay to St. Lawrence a sum equal to 5% of the
Company's gross sales price on orders received for eligible product in excess of
$3,000,000 during the following respective periods: May 1, 1999 - April 30,
2000, and May 1, 2000 - April 30, 2001. Eligible product consists of (i) all
hydraulic presses rebuilt or sold to any of the customers that are traditional
customers of St. Lawrence, (ii) certain presses of the Company manufactured at
the facility leased by St. Lawrence to the Company, and (iii) any hydraulic
press customarily manufactured or rebuilt by St. Lawrence. The minimum earnout
payment for any one year period is $50,000 and the maximum is $200,000.
(b) Prior to the acquisition, St. Lawrence was engaged in the business
of the production, development and sale of various multi-ton hydraulic,
compression and deep draw presses (the "Business"). The Company acquired certain
inventory and office and manufacturing equipment and all customer lists,
know-how and other intangibles related to the Business. The Company will
continue to use the purchased assets in the Business and in the manufacture of
its line of PH Hydraulics(TM) presses and Trueblood(TM)plastic injection molding
machines.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits
(2) Plan of Acquisition
2.1. Asset Purchase Agreement as executed on April
30, 1997.
(3) Articles of Incorporation and Bylaws
3.1. Amended and Restated Articles of Incorporation
of the Company effective April 28, 1997
3.2. Amended and Restated Code of Regulations
effective April 22, 1997
(4) Instruments Defining the Rights of Security-Holders,
Including Indentures
4.1 See Articles III, IV, V and VI of the Amended and
Restated Articles of Incorporation of the Company
(See Exhibit 3.1).
4.2 See Article I, Sections 1(F), 2 and 3 of Article
II, Article IV and Sections 1 and 3 of Article V of
the Amended and Restated Code of Regulations of the
Company (See Exhibit 3.2).
(27) Financial Data Schedule
27.1 Financial Data Schedule (submitted
electronically for SEC information only).
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE EXCHANGE ACT, THE REGISTRANT HAS
CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED.
PH GROUP INC.
AN OHIO CORPORATION
DATE: MAY 15, 1997 BY: /s/ CHARLES T. SHERMAN
---------------------------------
CHARLES T. SHERMAN
PRESIDENT
13
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Page #
- -------------- ----------- ------
<S> <C> <C>
2 Plan of Acquisition, Reorganization, Arrangement, 15 - 52
Liquidation, or Succession
3.1 Amended and Restated Articles of Incorporation of
PH Group Inc. 53 - 55
3.2 Amended and Restated Code of Regulations 56 - 61
27 Financial Data Schedule filed electronically
</TABLE>
14
<PAGE> 1
EXHIBIT 2.
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 30th day of April, 1997, by and between PH GROUP INC., an Ohio
corporation ("Buyer"), and ST. LAWRENCE PRESS COMPANY, INC., a Michigan
corporation ("Seller"). Capitalized terms are defined when used herein or in
Section 10.
PREAMBLE:
WHEREAS, Seller is engaged in the business (the "Business") of the
production, development and sale of various multi-ton hydraulic, compression
molding and deep draw presses at the Facility; and
WHEREAS, Buyer wishes to purchase and Seller wishes to sell certain
assets relating to the Business.
NOW THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereto, intending to be legally bound, hereby agree as
follows:
TERMS:
SECTION 1. PURCHASE AND SALE OF ASSETS.
1.1. ACQUIRED ASSETS. Subject to the terms and conditions
contained herein, Seller hereby agrees to sell, transfer, convey and assign to
Buyer, and Buyer hereby agrees to purchase from Seller, on and as of the Closing
Date, the following properties and assets of Seller and all of the rights of
Seller in, to and under such properties and assets (the "Acquired Assets") free
and clear of any and all Liens:
1.1.1. All stock inventory and component inventory
(i.e., raw materials and components) located at, or in transit to, or on order
for delivery to, the Facility as of the Closing Date and related to the Business
(the "Inventory"), including (without limitation) those items described on
Schedule 1.1.1 but excluding "Obsolete Inventory";
1.1.2. Certain manufacturing equipment related to the
Business and owned or leased by Seller that is selected by Buyer and approved by
Seller as described on Schedule 1.1.2 (the "Equipment");
1.1.3. Certain furniture, fixtures, furnishings,
office equipment, computers, leasehold improvements and tangible personal
property selected by Buyer and approved by Seller as described on Schedule 1.1.3
(the "Personal Property");
1.1.4. All patents, inventions, trademarks, trade
names, copyrights, service names, engineering processes, engineering drawings,
blueprints, bills of material, manufacturing processes ("routers"), know-how,
drawings, technology, product development information, trade secrets and other
proprietary information relating to the Business;
1.1.5. All permits, licenses, orders, authorizations
and approvals of all federal, state and local governmental or regulatory bodies
(to the extent Buyer would be required to obtain them and to the extent Seller
has them and they are transferable readily) and any quality certifications or
vendor certifications of or relating to the Business (the "Permits"), to the
extent the same are transferable, including (without limitation) those listed on
Schedule 1.1.5;
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<PAGE> 2
1.1.6. All books, records (other than employee and
personnel records), purchase orders, correspondence, active and inactive
customer files and lists, close out information on all previously sold presses,
computer software, catalog and advertising materials and similar intangible
assets related to the continued operation of the Business;
1.1.7. The benefit of any Contractual Obligations
related to the Business, including without limitation all purchase orders or
contracts to build presses listed on Schedule 1.1.7 (the "Assumed Orders") and
those other Contractual Obligations listed on the Schedule of Contracts
(collectively the "Assumed Contracts") and described on Schedule 1.1.7, to the
extent the same are transferable;
1.1.8. All goodwill of the Business and all rights of
Seller in and to the names "St. Lawrence Press Company, Inc." and "St. Lawrence
Press" as they relate to the Business or Eligible Product and any marks or logos
associated with such names;
1.1.9. All prepaid items, deposits, unbilled costs
and fees paid by Seller listed on Schedule 1.1.19 and paid for by Buyer at the
Closing (the "Prepaids");
1.1.10. Except to the extent relating to Retained
Assets or as otherwise may be provided herein, all rights or choses in action
arising out of occurrences before or after the Closing Date, including (without
limitation) all insurance claims and all rights under express or implied
warranties relating to the Acquired Assets; and
1.1.11. The benefit of any outstanding quotes by
Seller (the "Outstanding Quotes"), including, without limitation those listed on
Schedule 1.1.11.
1.2. RETAINED ASSETS. Notwithstanding the foregoing, the
following assets of Seller (the "Retained Assets") shall be retained by Seller
and no such items shall be included in the Acquired Assets:
1.2.1. All tangible assets listed on Schedule 1.2.1;
1.2.2. All cash or cash equivalents in transit, in
hand or in bank accounts and all accounts, notes and other receivables, except
Prepaids;
1.2.3. All real property related to or used in
connection with the Business including the real property located on the corner
of Taylor and Inkster in Romulus, Michigan;
1.2.4. The books of account (except as they relate to
the Acquired Assets), corporate seals, certificates of incorporation, minute
books, stock books, tax returns, or other constituent records relating to the
corporate organization of Seller;
1.2.5. All work in progress (the "Work in Progress"
or "WIP") and all accounts receivable related thereto listed on Schedule 1.2.5;
1.2.6. All tax refunds and rebates or refunds
resulting from the cancellation of any insurance policies or any other contracts
which are not Assumed Contracts;
1.2.7. All assets of St. Lawrence, Inc. whether
located at the Facility or elsewhere;
1.2.8. Property belonging to customers or vendors of
Seller, including, but not limited to, tools; and
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<PAGE> 3
1.2.9. All Obsolete Inventory.
1.3. ASSUMED LIABILITIES. Subject to the terms and conditions
contained herein, Buyer hereby agrees to assume, satisfy, perform and discharge
only the following liabilities and obligations of Seller or the Business (the
"Assumed Liabilities"):
1.3.1. Obligations relating to or arising out of or
incurred in connection with the Assumed Contracts or Outstanding Quotes which
accrue and relate to periods, circumstances and events on and after the Closing
Date, the incurrence or existence of which do not breach any representation or
warranty of Seller contained herein or in any document delivered pursuant to
this Agreement;
1.3.2. Liability for that number of vacation days and
personal hours of the respective employees of Seller as specified on Schedule
1.3.2, provided such employee continues to be employed by Buyer for at least 90
days after the Closing Date;
1.3.3. All trade accounts payable identified on
Schedule 1.3.3 (the "Payables"), which Schedule shall include the name and
business address of the creditor, the amount owed by Seller and whether such
debt is disputed by Seller;
1.3.4. The performance of all Seller's contractual
warranty repairs in the ordinary course for a period of three years pursuant and
subject to Section 7.15, provided, however, the cost of such repairs shall be at
the sole expense of Seller; and
1.3.5. Liabilities with respect to the portions of
Work in Progress completed by Buyer after the Closing Date and the Assumed
Orders.
1.4. EXCLUDED LIABILITIES. Seller shall retain, and Buyer
shall not assume, any liabilities or obligations of Seller of any nature, known
or unknown, whether arising out of any facts, occurrences or circumstances prior
to, at or after the Closing Date, other than Assumed Liabilities (the "Excluded
Liabilities"), including (without limitation) the following:
1.4.1. Liabilities arising out of the ownership of
the Acquired Assets or conduct of the Business prior to the Closing Date,
whenever the claim is made;
1.4.2. Liabilities with respect to products of the
Business sold and delivered prior to the Closing Date;
1.4.3. Liabilities with respect to products of the
Business which were finished goods held in inventory by Seller on the Closing
Date so long as such liability is not attributable to the acts or omissions of
Buyer;
1.4.4. Liabilities with respect to completed portions
of Work in Progress existing on or prior to the Closing Date;
1.4.5. Any liability or obligation of any nature
whatsoever which arises out of or relates to any action, suit, claim or legal,
administrative, arbitration, governmental or other proceeding or investigation
now pending or hereafter instituted relating to the Business to the extent the
event giving rise thereto occurred prior to the Closing Date or which results
from or arises out of any action or inaction prior to the Closing Date of Seller
or any Affiliate, officer, director, employee, agent, representative or
subcontractor of Seller;
17
<PAGE> 4
1.4.6. Any liability or claim which arises out of or
is based upon any express or implied representation, warranty, agreement or
guaranty made by Seller, or alleged to have been made by Seller, or which is
imposed or asserted to be imposed by operation of law, in connection with any
service performed or product sold, shipped or in finished goods inventory, or
completed portion of Work in Progress existing on or prior to the Closing Date,
including, without limitation, any claim seeking recovery for personal injury,
property damage or economic loss, including consequential damages, lost revenue
or income except to the extent that such liability is not attributable to the
acts or omissions of Buyer;
1.4.7. Any liability or obligation arising under or
relating to any of the Retained Assets and any liability or obligation not
expressly assumed as an Assumed Liability;
1.4.8. Except with respect to vacation and personal
time benefits assumed by Buyer as specified in Section 1.3.2, any liability or
obligation of Seller arising prior to or as a result of the Closing to any
employee, agent or independent contractor of the Seller, whether or not employed
by Buyer after the Closing, or under any benefit plan or arrangement with
respect thereto including, without limitation, whether pursuant to agreement or
otherwise, for salaries, bonuses, incentive awards, employment benefits,
vacation benefits, death benefits, fringe benefits, insurance, post-retirement
medical, medical reimbursement, deferred compensation, termination, severance,
stock option, stock purchase, accident, disability, health, medical and worker's
compensation insurance or benefits and including any obligation to provide
health care continuation coverage arising prior to or in connection with the
sale by Seller of the Acquired Assets;
1.4.9. Any liability or obligation of Seller arising
or incurred in connection with the negotiation, preparation and execution of
this Agreement and the transactions contemplated hereby, including, without
limitation, any tax liability so arising, and any fees and expenses of counsel,
accountants or other experts of Seller or any of its Affiliates;
1.4.10. Except for Assumed Liabilities, any
liabilities or obligations of Seller under any debts, notes, negotiable
instruments and written or oral commitments to repay indebtedness, including
without limitation, any intercompany debt;
1.4.11. Any and all liability, directly or
indirectly, arising out of, or resulting from any or all of the following
conditions: (i) the existence prior to the Closing of Hazardous Material upon,
within or beneath the Business Premises, or the migration from the Business
Premises before or after the Closing of the Hazardous Material existing upon,
within or beneath the Business Premises prior to the Closing; (ii) any
violations of Environmental Laws premised upon, or arising out of any of the
conditions described in and existing prior to the Closing as provided in (i)
above; (iii) any violations of Environmental Laws pertaining to the use or
operation of any of the Acquired Assets prior to the Closing, or the conduct or
operation of the Business or Facility or the use of the Business Premises prior
to the Closing;
1.4.12. Any mortgage, security interest, lien or
encumbrance upon or affecting Seller, the Acquired Assets or the Business of any
kind except to the extent they relate to Assumed Liabilities;
1.4.13. Any liabilities or obligations arising out of
any breach by Seller of any provision of any Assumed Contract, including,
(without limitation) liabilities or obligations arising out of Seller's failure
to perform any Assumed Contract in accordance with its terms prior to the
Closing Date which Seller was required to perform prior to the Closing Date;
1.4.14. Liabilities for federal, state, local and
foreign taxes, charges, fees, interest or penalties of all types, together with
interest and penalties thereon attributable to periods or activities on or prior
to the Closing Date;
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<PAGE> 5
1.4.15. Except for Assumed Liabilities, liabilities
based on occurrences or facts in existence prior to the Closing Date related to
Seller, its Affiliates, the Business, the Business Premises or the Facility;
1.4.16. Any liabilities described on Schedule 1.4.16;
and
1.4.17. The costs of all warranty repairs performed
by Buyer under Section 7.15.
1.5. CONSIDERATION AND ALLOCATION. In consideration for the
Acquired Assets transferred by Seller and for Seller entering into the
Consulting Agreement and Non-Competition Agreement, Buyer shall assume the
Assumed Liabilities and Seller shall receive the Purchase Price consisting of
the Cash Component, the Stock Component and the Contingent Earn Out Component.
Certain of the Acquired Assets will be valued as specified in Exhibit 1.5.
Fifteen percent (15%) of the remaining amount f the Purchase Price shall be paid
in consideration of Seller's obligations under the Consulting Agreement, five
percent (5%) shall be paid in consideration for the Noncompetition Agreements
delivered under Section 2.4.2, and eighty percent (80%) shall be attributable to
goodwill. At the Closing, the parties shall each prepare and file (at the
appropriate time) an Internal Revenue Service Form 8594 reflecting such
allocation of Purchase Price and the parties agree to never take a position
contrary to such allocation.
1.5.1. CASH COMPONENT. A portion of the Purchase
Price shall be paid in accordance with this Section 1.5.1. The cash component of
the Purchase Price (the "Cash Component") shall be paid on the Closing Date by a
certified, official bank check or wire transfer. The Cash Component shall be
determined in accordance with Exhibit 1.5.1.
1.5.2. STOCK COMPONENT. A portion of the Purchase
Price shall be paid in accordance with this Section 1.5.2. At Closing, Buyer
will deliver to Arter & Hadden as Escrow Agent 100,000 Shares (the "Stock") to
be delivered to Seller in accordance with the form of Escrow Agreement attached
as Exhibit 1.5.2. The certificates shall be in the name of Seller. Seller's
ownership of the Stock shall be subject to the rights and restrictions affecting
the Stock as provided herein and in the Escrow Agreement and, solely in
connection therewith, Seller shall deliver (i) irrevocable stock powers for the
Stock duly endorsed in blank, with Seller's signature guaranteed with a
guaranteed medallion, and (ii) UCC 1 financing statements to evidence Buyer's
security interest in the Stock for filing in the office of the Michigan
Secretary of State and the office of the County Recorder for the county in which
the Facility is located.
1.5.2.1. RESTRICTION ON TRANSFER. Except as otherwise
provided herein, no interest in the Stock may be given, sold, pledged, assigned,
or otherwise transferred, voluntarily or involuntarily, to or owned by any
person or entity other than Seller. Further, Seller understands that the Stock
delivered to Seller pursuant to Section 1.5.2 will not be registered under the
Securities Act of 1933 (the "Securities Act") on the ground that such issuance
would be exempt from registration under the Securities Act pursuant to Section
4(2) thereof and may only be sold pursuant to an effective registration
statement or an exemption therefrom.
1.5.2.2. LIMITED RIGHT TO TRANSFER. Subject to the
provisions of applicable state and federal securities law, Seller may sell,
transfer, dispose of or put (under Section 1.5.2.3) no more than 25,000 Shares
of the Stock, in the aggregate, beginning on the first anniversary of the
Closing Date. 25,000 additional Shares of the Stock, in the aggregate, may be
sold, transferred, disposed of or put (under Section 1.5.2.3) on the second,
third and fourth anniversaries of the Closing Date. Notwithstanding the
foregoing, no more than 25,000 Shares of the Stock may be sold, transferred or
disposed of in the aggregate, during any span of
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<PAGE> 6
twelve months. For purposes of this Section 1.5.2.2, a put under Section 1.5.2.3
shall be considered a sale, transfer or disposal.
1.5.2.3. PUT. Seller shall have four separate rights
to require Buyer to redeem that number of Shares of Stock at the time and for
the prices set forth below:
<TABLE>
<CAPTION>
Commencement Date Number of Shares Price Total Price
----------------- ---------------- ----- -----------
<S> <C> <C> <C>
First Anniversary of Closing Date 25,000 $2.00/Share $ 50,000.00
Second Anniversary of Closing Date 25,000 $3.00/Share $ 75,000.00
Third Anniversary of Closing Date 25,000 $3.50/Share $ 87,500.00
Fourth Anniversary of Closing Date 25,000 $4.00/Share $ 100,000.00
</TABLE>
Each separate put under this Section 1.5.2.3 shall not vest and be
exercisable until its commencement date as specified above, provided, however,
Seller shall first be required to attempt to sell Shares in the market, in good
faith and through one or more Market Makers, for a period of 90 days (the
"Market Sales Period") before a put shall be exercisable with respect to that
number of Shares and shall be required to complete the sale in the market if
Seller can obtain an amount per share equal to the sum of the applicable put
price and the amount of any reasonable sales commissions and selling expenses
paid by Seller calculated on a per share basis (the "Minimum Per Share Price").
Seller shall not be required to complete a sale in the market at less than the
applicable Minimum Per Share Price. Each respective put under this Section
1.5.2.3 shall expire and cease to be exercisable upon the commencement date of
the succeeding put as specified above and the put commencing on the fourth
anniversary of the Closing Date shall expire and cease to be exercisable on the
fifth anniversary of the Closing Date. Provided, however, if Seller notifies
Buyer in writing prior to the expiration of an applicable put that Shares have
been placed for sale in accordance with the provisions of this Section, such put
shall not expire until the end of the Market Sales Period for such Shares so
that, in the event Seller is unable to obtain the Minimum Per Share Price during
such Market Sales Period, Seller may put such Shares to Buyer and Buyer shall be
required to redeem such Shares as provided herein. Further, the exercise period
for a particular put shall be extended if, under the terms of the Subordination
Agreement between Buyer, Seller and Star Bank, N.A. dated April __, 1997,
Seller, after exercising a particular put, is precluded from receiving put
payments. The extension of a particular put shall continue for a period equal to
the number of days such preclusion was in effect.
Each separate put under this Section 1.5.2.3 (i) may only be exercised
by delivery of written notice thereof to the President of Buyer on or before its
expiration date; and (ii) may be exercised as to less than 25,000 Shares of the
Stock in which case such put shall lapse and cease to be exercisable with
respect to any of such remaining 25,000 Shares of Stock. Within 21 days of
receipt by Buyer of Share certificates evidencing such number of Shares of Stock
as to which a put hereunder is being exercised, Buyer shall deliver to Seller a
check for the total price of the put so exercised. Share certificates delivered
by Seller under this Section 1.5.2.3 shall be accompanied by stock powers duly
endorsed to Buyer, with Seller's signature guaranteed with a guaranteed
medallion.
1.5.2.4. PIGGY BACK REGISTRATION RIGHTS. Seller will
have such registration rights relating to the Stock as are specified in Exhibit
1.5.2.4.
1.5.2.5. ASSISTANCE WITH RESALES. Buyer will provide
reasonable assistance to Seller in connection with any resales of the Stock
issued in connection with this Agreement at no cost to Seller, including, but
not limited to, providing any required legal opinion that the resale complies
with applicable securities laws (provided Seller, at its expense, demonstrates
to Buyer's counsel's reasonable satisfaction that any such sale does in fact
comply with applicable securities laws) and that such resale is otherwise
proper, or such other opinion or information that may be required by the
Transfer Agent, assisting in filing any forms required by applicable federal and
state securities laws, including Forms 3, 4 and 5 and Schedule 13D, and
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<PAGE> 7
taking such other actions as may be reasonably required to effectuate the
resale. The parties understand that Buyer shall not be responsible for the
preparation of any such Forms 3, 4 or 5 or Schedule 13D.
1.5.3. CONTINGENT EARN OUT COMPONENT. A portion of
the Purchase Price shall be paid in accordance with this Section 1.5.3. For each
of the first and second year periods following Closing (May 1, 1997 - April 30,
1998 and May 1, 1998 - April 30, 1999), Buyer shall pay Seller a sum equal in
amount to five percent of Buyer's gross sales price on orders received for
Eligible Product in excess of $2,500,000 during each such respective period. For
each of the third and fourth year periods following Closing (May 1, 1999 - April
30, 2000 and May 1, 2000 - April 30, 2001), Buyer shall pay Seller a sum equal
in amount to five percent of Buyer's gross sales price on orders received for
Eligible Product in excess of $3,000,000 during each such respective period.
1.5.3.1. For purposes of this Agreement,
Eligible Product shall be defined as the following hydraulic presses for which
orders are received by Buyer or an Affiliate during the applicable year period:
(i) any hydraulic presses rebuilt or sold to any of the
companies that are traditional customers of Seller
and are listed on Schedule 1.5.3.1;
(ii) all PH Hydraulic presses assembled at the Facility
that are (a) of four column or straight side design
and have over 150 ton capacity and weigh over 40,000
pounds; or (b) of C-frame design and 50 ton capacity
or more and weigh over 30,000 pounds; and
(iii) any hydraulic press customarily manufactured or
rebuilt by Seller as of the Closing Date as listed on
Schedule 1.5.3.1.
Plastic injection molding machines shall be excluded from the
definition of Eligible Product. The gross sales price of Eligible Product shall
exclude any portion of such price attributable to tooling add ons manufactured
by Buyer. In the event Buyer acquires an entity or operation which manufactures
automation equipment compatible with Eligible Product, then with respect to
orders received after such acquisition, the price of Eligible Product shall not
include automation add-ons unless the add-ons are designed and made by the press
division of Buyer. It is understood by the parties that (i) presses comprising
WIP will not be considered Eligible Product hereunder, and (ii) presses
manufactured pursuant to Assumed Orders shall be considered Eligible Product
however the gross sales price of Assumed Orders shall exclude the amount paid to
Seller by Buyer in connection with the purchase of the Assumed Orders as
specified in Schedule 1.1.7 and the sales commissions with respect to the
Assumed Orders as specified in Schedule 1.1.7.
1.5.3.2. That amount of the Purchase Price
earned and paid or to be paid by the Buyer to the Seller pursuant to this
Section 1.5.3 for any one year period during the Earnout Period shall not exceed
$200,000 (the "Cap Amount"). Notwithstanding the foregoing, a minimum of $50,000
shall be paid under this Section 1.5.3 as the Minimum Annual Contingent Earn Out
Payment for each one year period during the Earnout Period. The Minimum Annual
Contingent Earn Out Payment shall be paid in cash or by check within 30 days
following the expiration of each of the four anniversaries occurring during the
Earnout Period. Any amount payable in excess of the Minimum Annual Contingent
Earn Out Payment shall be paid by Buyer to Seller, without interest, in equal
1/3 installments due on or before 90 days, 180 days and 270 days following the
expiration of the one year period for which the Contingent Earn Out applies.
1.5.3.3. Buyer shall provide Seller a
determination of the Contingent Earnout for each one year period during the
Earnout Period in writing no later than 30
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<PAGE> 8
days after the expiration of each applicable period. The determination shall
specify each Eligible Product in reasonable detail (excluding proprietary
information), the date the order is received, its shipment date and gross sales
price, and the customer. After the delivery of each such determination and upon
no less than 10 days written notice to Buyer (which notice must be provided no
later than 60 days after the receipt of such determination by Seller), Buyer
shall grant Seller or Seller's accountant reasonable access to its books and
records to verify the determination of the Contingent Earn Out for the
respective period. In addition to the foregoing, Buyer shall provide Seller with
a monthly listing of orders received in the form of Exhibit 1.5.3.3.
1.5.4. WORK IN PROGRESS.
1.5.4.1. Buyer shall use all commercially
reasonable efforts and proceed in an expeditious manner to complete each
respective WIP listed on Schedule 1.2.5 in accordance with the terms and
conditions of each quotation and purchase order therefor and, provided Buyer
uses commercially reasonable efforts and proceeds expeditiously, Buyer shall not
be liable for any delays in the manufacture or shipment of WIP. In any event,
Buyer shall not be responsible for any delays caused by events which are beyond
the reasonable control of Buyer. Buyer shall keep Seller advised on a weekly
basis of the status of each WIP.
1.5.4.2. Buyer shall be entitled to the
reimbursement specified in Schedule 1.2.5 for completion of each WIP. Buyer and
Seller acknowledge such amount is reasonable reimbursement for the cost of the
contemplated material and labor required to complete each respective WIP as of
the Closing Date and Buyer shall not be entitled to any other amounts from
Seller in connection with the performance of its obligations in completing each
item comprising WIP. With respect to each WIP, Buyer shall deduct its
reimbursement as specified above from any amounts collected by it under Section
1.5.4.3 and remit the balance, if any, to Seller within three days of receipt of
such collected amounts. If amounts collected by Buyer are insufficient to cover
Buyer's reimbursement, Buyer shall submit a written invoice to Seller for the
balance of the unreimbursed charges. Seller shall pay the balance of the
unreimbursed charges within 3 days receipt by Seller of the written invoice
which amount shall be paid free of any charges, assessments, impositions or
deductions of any kind and without abatement, deduction or set-off.
1.5.4.3. Seller shall and does hereby assign
to Buyer the right to bill all accounts receivable relating to WIP and Buyer
shall be the non-exclusive agent of Seller in connection therewith. Buyer shall
diligently issue all invoices in connection with such WIP and shall, by use of
its normal and usual billing and collection practices, but without being
required to bring suits or to refer accounts to collection agencies or
attorneys, undertake all commercially reasonable efforts to collect promptly
such accounts receivable for the account of Seller. Seller may take all actions
it deems necessary to collect any such accounts receivable with respect to which
Seller reasonably believes Buyer has not billed and attempted to collect in
conformance with Buyer's obligations hereunder or a respective accounts
receivable remains uncollected after 90 days after an invoice has been issued.
Any risk of non-collection of any amounts due under accounts receivable relating
to WIP shall be borne by the Seller. Notwithstanding the foregoing, if a
customer issues a change order that increases the price of a WIP, Buyer shall be
entitled to receive, and shall be paid by Seller if Seller collects such amount,
the entire amount of the increase and Buyer shall be solely responsible for the
collection thereof.
1.6. CONSENTS OF THIRD PARTIES. This Agreement shall not
constitute an agreement to assign any interest in any instrument, contract,
lease, permit or other agreement or arrangement or any claim, right or benefit
arising thereunder or resulting therefrom, if an assignment without the consent
of a third party would constitute a breach or violation thereof or affect
adversely the rights of Seller or Buyer thereunder. Seller shall have the
responsibility for obtaining all such consents and it shall diligently attempt
to obtain such consents upon the written request of Buyer (except with respect
to the Outstanding Quotes or the Assumed Orders
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<PAGE> 9
as to which Seller shall take no action whatsoever unless requested in writing
by Buyer). Buyer covenants that it will reasonably cooperate with the efforts of
Seller but such cooperation shall not include the payment of any money or
consideration to obtain such consent. If the consent of a third party is
required in order to assign any such interest and such consent is not obtained
prior to the Closing Date, or if an attempted assignment would be ineffective or
would adversely affect Seller's ability to convey the benefit of such
instrument, etc. to Buyer, Seller will cooperate with Buyer in any lawful
arrangement so that Buyer shall receive Seller's interest in the benefits under
any such instrument, contract, lease, permit or other agreement or arrangement,
including performance by Seller or Buyer as agent for the other.
1.7. DISCLOSURE. Seller shall not disclose the existence of
this Agreement or the transactions contemplated hereby to any sales
representative that it has under contract or previously had under contract nor
to any customers or potential customers including those specified in the
Outstanding Quotes without Buyer's written consent.
1.8. ASSUMED ORDERS AND OUTSTANDING QUOTES. Buyer shall be
solely responsible for the Assumed Orders and Outstanding Quotes and, after the
Closing, Seller shall have no further obligation or responsibility with respect
thereto, whether for warranty claims, product liability or otherwise. With
respect to the Assumed Orders, Buyer shall reimburse Seller the amount expended
by Seller with respect thereto for materials and Seller's labor incurred in
connection therewith, in the amounts set forth in Schedule 1.1.7, which amounts
shall be paid at the Closing as part of the Cash Component.
SECTION 2. DELIVERIES. The Closing shall commence at 10:00 a.m., local
time, at the offices of Clark Hill, on April 29th, 1997, or on such other date
as is mutually agreed to by the parties (the "Closing Date") and all of the
events and transactions which occur thereat shall be deemed to be simultaneous.
2.1. SELLER'S DELIVERIES TO BUYER. At the Closing, subject to
the provisions hereof, Seller will deliver to Buyer:
2.1.1. All Permits;
2.1.2. The Disclosure Schedule updated as of the
Closing Date;
2.1.3. A copy of each Assumed Contract and
Outstanding Quote;
2.1.4. A certificate of the principal executive and
financial officers of the Seller, dated the Closing Date, certifying as to the
satisfaction of the conditions set forth in Section 8;
2.1.5. A general conveyance, assignment and bill of
sale in the form attached as Exhibit 2.1.5 hereto conveying the Acquired Assets
to Buyer;
2.1.6. Specific assignments of such significant
leases, agreements, permits or other Acquired Assets as Buyer may reasonably
request in form and substance acceptable to Buyer;
2.1.7. Documentation, in form and substance
acceptable to Buyer and suitable for filing with the Secretary of State of the
State of Michigan, providing for the change of Seller's name to a name other
than "St. Lawrence Press Company, Inc.";
2.1.8. The written opinion of Clark Hill, counsel for
Seller, dated the Closing Date and addressed to Buyer, in form and substance
reasonably satisfactory to counsel to Buyer, to the effect that (i) Seller is a
corporation duly incorporated, validly existing and in
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good standing under the laws of the State of Michigan with full corporate power
to own its properties and conduct its business as currently being conducted;
(ii) the Seller has the full power and authority to enter into this Agreement,
the Consulting Agreement, the Noncompetition Agreement and the Escrow Agreement
and consummate the transactions contemplated hereby and thereby; (iii) the
execution, delivery and performance of this Agreement, the Consulting Agreement,
the Noncompetition Agreement and the Escrow Agreement by Seller and the
consummation of the transactions contemplated hereby and thereby do not conflict
with or violate the Articles of Incorporation or Bylaws of Seller; (iv) the
execution, delivery and performance of this Agreement, the Consulting Agreement,
the Noncompetition Agreement and the Escrow Agreement by Seller has been duly
authorized by all necessary corporate action; (v) this Agreement, the Consulting
Agreement and the Escrow Agreement are valid and binding obligations of Seller
enforceable in accordance with their respective terms except as limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally, now or hereafter in effect, and
judicial limitations on the right of specific performance; and (vi) Seller has
the power to transfer all its right, title and interest in and to the Acquired
Assets without the consent of any other person, unless otherwise provided in
this Agreement;
2.1.9. The written opinion of Clark Hill, counsel for
the Trust, dated the Closing Date, and addressed to Buyer, in form and substance
reasonably satisfactory to counsel to Buyer, to the effect that (i) the Trust
has been duly executed, remains in full force and effect, and is valid and
enforceable in accordance with the terms of the agreement creating the Trust
under the laws of Michigan; (ii) Patrick J. Keating and Stephen O. Stieler are
the duly appointed and serving incumbent trustees (each, a "Trustee") of the
Trust; (iii) under the terms of the Trust, the Trustees have the requisite
power, authority and discretion under Michigan law to vote the shares of Seller
owned by the Trust in favor of Seller's execution, delivery, and performance of
the Agreement, and to authorize the Trust to enter into and perform its
obligations under the Facility Lease; and (iv) upon due execution, the Facility
Lease is a valid and binding obligation of the Trust enforceable in accordance
with its terms except as limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally, now or
hereafter in effect, and judicial limitations on the right of specific
performance;
2.1.10. Copies of Lien releases indicating that any
previously existing Liens or encumbrances affecting the Acquired Assets will be
released upon the recording thereof;
2.1.11. Pay off letters from banks and other
creditors that have Liens on any of the Acquired Assets to the effect that the
obligations giving rise to the Liens have been satisfied and that the Liens will
be released;
2.1.12. The amount of the deposits received for
Assumed Orders as specified on Schedule 1.1.7 which shall be paid by Seller to
Buyer or deducted from the Cash Component at Closing; and
2.1.13. UCC 1 financing statements pursuant to
Section 1.5.2.
2.2. BUYER'S DELIVERIES TO SELLER. At the Closing, subject to
the provisions hereof, Buyer will deliver to Seller:
2.2.1. A certificate of the principal executive and
financial officers of Buyer, dated the Closing Date, certifying as to the
satisfaction of the conditions set forth in Section 9;
2.2.2. A written opinion of Arter & Hadden, counsel
for Buyer, dated the Closing Date and addressed to the Seller, in form and
substance reasonably satisfactory to
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counsel to Seller, to the effect that (i) Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Ohio and is duly authorized to transact business in the State of Michigan;
(ii) Buyer has full corporate power and authority to enter into this Agreement,
the Consulting Agreement, the Noncompetition Agreement, the Escrow Agreement and
the Facility Lease and consummate the transactions contemplated hereby and
thereby; (iii) the execution, delivery and performance of this Agreement, the
Consulting Agreement, the Noncompetition Agreement, the Escrow Agreement and the
Facility Lease by Buyer and the consummation of the transactions contemplated
hereby and thereby do not conflict with or violate the Articles of Incorporation
or Code of Regulations of Buyer; (iv) the execution, delivery and performance of
this Agreement, the Consulting Agreement, the Noncompetition Agreement, the
Escrow Agreement and the Facility Lease by Buyer has been duly authorized by all
necessary corporate action; (v) this Agreement, the Consulting Agreement, the
Noncompetition Agreement, the Escrow Agreement and the Facility Lease are valid
and binding obligations of Buyer enforceable in accordance with their respective
terms, except as limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to creditors' rights generally, now or hereafter
in effect, and judicial limitations on the right of specific performance; and
(vi) the authorized capital stock of Buyer consists of 3,412,000 shares of
common stock, without par value, all of which are voting shares, a total of
1,108,020 voting shares are issued and outstanding (excluding the 100,000 Shares
comprising the Stock) and all of the Stock to be issued to Seller pursuant to
the Agreement will, upon consummation of the transactions contemplated by the
Agreement, be duly authorized and validly issued, fully paid and nonassessable
and free of liens and encumbrances (except those contemplated by this Agreement
or the Escrow Agreement); and
2.2.3. The Cash Component.
2.3. DELIVERIES TO ESCROW AGENT. At the Closing, subject to
the provisions hereof, Buyer will deliver to the Escrow Agent the Stock in
accordance with Section 1.5.2 and Seller shall deliver irrevocable stock powers
for the Stock duly endorsed in blank, with Seller's signature guaranteed with a
guaranteed medallion in accordance with Section 1.5.2.
2.4. MUTUAL DELIVERIES. At the Closing, subject to the
provisions of this Agreement, Seller and Buyer and, where appropriate, the Trust
will deliver to each other:
2.4.1. The Consulting Agreement duly executed by
Seller and Buyer in the form attached hereto as Exhibit 2.4.1 (the "Consulting
Agreement");
2.4.2 The Non-Competition Agreements duly executed by
Seller, all beneficiaries of the Trust, and the Trustees, and Buyer in the form
attached hereto as Exhibit 2.4.2 (the "Non-Competition Agreement");
2.4.3. An assignment and assumption of the Assumed
Contracts, duly executed by Buyer and Seller in the form attached hereto as
Exhibit 2.4.3;
2.4.4. The Escrow Agreement; and
2.4.5. The Facility Lease.
SECTION 3. REPRESENTATIONS AND WARRANTIES CONCERNING SELLER. Seller
hereby represents and warrants to Buyer that:
3.1. DISCLOSURE SCHEDULE, DELIVERIES.
3.1.1. The Disclosure Schedule attached hereto sets
forth all of the information concerning the Seller required in this Section 3.
To the extent any statement in this
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Section 3 is untrue or omits to state a material fact necessary to make such
statement not misleading, the Disclosure Schedule sets forth the statements
necessary to make the statements in this Section 3 true and not misleading. All
information and statements set forth in the Disclosure Schedule shall be deemed
to supersede and correct the statements made in this Section 3 and to be, to the
extent applicable, additional representations and warranties of Seller. The
Disclosure Schedule sets forth all of the information and statements required in
numbered sections bearing the number of the Section of this Agreement calling
for such information and in the order of such numbers in this Agreement.
3.1.2. The Seller has delivered to Buyer complete and
accurate copies of: (i) any written contract or other document referred to in
the Disclosure Schedule, (ii) the articles of incorporation of the Seller,
certified by the Secretary of State of Michigan, which are in full force and
effect and have not been amended or repealed since the date of such certificate,
(iii) the Code of Regulations or Bylaws of the Seller, certified by its
Secretary, which are in full force and effect and have not been amended or
repealed since the date of such certificate, and (iv) the Financial Statements.
3.1.3. Neither this Agreement, the Disclosure
Schedule nor any financial statement, Schedule, certificate or other instrument
or document referred to herein or delivered by or on behalf of the Seller in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact required to be
stated or necessary to make the statements herein or therein not misleading.
3.2. CORPORATE MATTERS OF THE SELLER.
3.2.1. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of Michigan and has all
requisite corporate power to own and operate its properties, to carry on its
business as currently conducted or proposed to be conducted, to execute, deliver
and perform this Agreement and consummate the transactions contemplated hereby.
3.2.2. There are no contracts which provide for the
merger, consolidation, recapitalization or sale of a substantial part of the
assets of the Seller other than this Agreement. The Seller is not a party to nor
does it know of any contract restricting the transfer of any of its assets.
3.2.3. The execution, delivery and performance of
this Agreement, the Consulting Agreement, the Noncompetition Agreement and the
Escrow Agreement by Seller and the consummation of the transactions contemplated
hereby and thereby by Seller have been duly and validly authorized by all
necessary corporate proceedings of Seller. This Agreement, the Consulting
Agreement, the Noncompetition Agreement and the Escrow Agreement have been duly
and validly executed by Seller. This Agreement and each of the agreements
delivered by Seller pursuant to this Agreement constitute the valid and binding
obligations of Seller enforceable against Seller in accordance with their
respective terms.
3.2.4. The execution, delivery and performance of
this Agreement by the Seller and the consummation of the transactions
contemplated hereby will not, with or without the giving of notice or the lapse
of time, or both, (i) violate any law or order of a tribunal applicable to the
Seller or any governmental permit held by the Seller or provide the basis for
the revocation or nonrenewal of any such governmental permit; (ii) result in a
default under (A) any contract which is or should be listed on the Disclosure
Schedule or (B) the articles of incorporation of the Seller or its regulations;
(iii) require any governmental permit or the consent
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or approval of any other person; or (iv) require any severance or other payment
to any employee of the Seller or any other person.
3.3. BOOKS AND RECORDS.
3.3.1. The Seller has made and kept books, records,
and accounts, which, in reasonable detail, accurately and fairly reflect its
transactions and dispositions of assets and those of its employee benefit plans;
and have devised and maintained a system of internal accounting controls
sufficient to provide reasonable assurance that transactions have been and are
recorded as necessary (A) to permit preparation of financial statements in
conformity with past practice, and (B) to maintain accountability for assets.
3.3.2. The minute books of the Seller contain
complete and accurate records of all meetings and consents of its directors,
committees and shareholders and accurately reflect all of the corporate action
taken by its directors, committees and shareholders since incorporation. The
stock transfer books and ledgers of the Seller contain complete and accurate
records of all issuances and transfers of record of its shares of stock.
3.4. LOCATION. All Personal Property, Equipment and Inventory
included as Acquired Assets are located at or in transit to, or on order for
delivery to, the Facility, 12500 South Wayne Road, Romulus, Michigan 48174.
3.5. LITIGATION.
3.5.1. There are no claims, actions, suits,
proceedings, arbitrations, investigations or inquiries pending before any court
or governmental body or agency or any private arbitration tribunal of which
Seller has been notified, or, to Seller's knowledge, threatened against or
relating to Seller, the Acquired Assets, the Business (including any product
previously sold by Seller), the Facility, or the Business Premises nor has
Seller or its officers, managers, directors or shareholders received any formal
or informal, direct or indirect information that would indicate there is any
basis for any such claim, action, suit, proceeding, arbitration, investigation
or inquiry.
3.5.2. There is not in existence any judgment, order,
writ, injunction, or decree of any court (a) materially affecting the Acquired
Assets, the Business, the Facility, the Business Premises or the transactions
contemplated by this Agreement, (b) enjoining or requiring Seller to take action
of any kind with respect to the Business, the Business Premises or the Facility,
or (c) to which Seller, the Acquired Assets, the Business, the Facility or the
Business Premises are subject or bound.
3.5.3. Neither the Seller nor any of its officers,
directors or employees (in their capacity as officers, directors or employees)
have knowingly waived any statute of limitations or other affirmative defenses
with respect to any pending, threatened or potential litigation.
3.5.4. To Seller's knowledge, there are no claims,
actions, suits, proceedings, or arbitrations pending before any court or any
private arbitration tribunal, or threatened against or relating to the Trust
affecting the transactions contemplated by this Agreement nor is there any basis
for any such claim, action, suit, proceeding, arbitration, investigation or
inquiry.
3.6. FINANCIAL STATEMENTS.
3.6.1. The Financial Statements have been delivered
to Buyer, are complete in all material respects, and present fairly the
financial position, results of operations,
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and changes in shareholders' equity of Seller at the respective dates and for
the respective periods indicated therein. The assets and liabilities and items
of income and expense on the Financial Statements are bona fide and were not
acquired, earned or incurred pursuant to any contract or any other arrangement
which was entered into, amended or terminated in anticipation of any of the
transactions contemplated by this Agreement.
3.6.2. Since March 31, 1997, except as contemplated
herein, the Seller has not:
(i) sold, encumbered (other than an immaterial
encumbrance) or otherwise transferred any of
its assets or properties other than in the
ordinary course of business;
(ii) purchased or entered into a contract to
purchase property or assets other than in the
ordinary course of business;
(iii) defaulted on any contract or failed to pay any
obligations to any government for taxes or
otherwise when the same was due and payable;
(iv) entered into any transaction not in the
ordinary course of its business other than this
Agreement;
(v) changed the nature of its business or any
accounting methods or principles; or
(vi) suffered any material adverse change in its
properties or business.
3.6.3. Within the last year, Seller has not received
any information, whether direct or indirect, that would indicate or alleges that
(i) any of its current or previous customers are dissatisfied; (ii) any of its
existing purchase orders would be canceled; (iii) any of its products sold prior
to the Closing Date is defective or does not conform to applicable
specifications; or (iv) Seller has breached a sales contract or purchase order.
The Seller has not received any complaints from any of its customers alleging
deficiencies in its services that, if true, would cause a material adverse
change in its businesses or properties.
3.7. TAXES.
3.7.1. The Seller has (i) filed with the appropriate
governmental bodies or offices all tax returns that are required by law, which
returns were prepared in conformity with all applicable laws, (ii) paid all
taxes due and owing under any law or such tax returns or any assessment,
deficiency notice, 30-day letter, or other notice received by them, (iii) made
sufficient provision in the Financial Statements for all accrued but unpaid
taxes of the Seller as of the dates thereof including those items which (A) are
disputed, (B) are the subject of an actual or proposed assessment, or (C) are
reasonably likely to be disallowed. Neither the Internal Revenue Service nor any
other governmental body or officer has audited or examined the tax returns of
the Seller for any of its taxable years. No assessment, deficiency notice,
30-day letter, or similar notice has ever been issued to the Seller by the
Internal Revenue Service or any other governmental body or officer and the
Seller does not know of any basis for the issuance to it of any such assessment
or notice. The Seller has not executed or filed with the Internal Revenue
Service or any other governmental body or officer any agreement extending the
period for assessment or collection of any income or other taxes or any consent
to have the provisions of Section 341(f) of the Code applied to it. The Seller
has withheld or collected from each payment made to any of its employees the
amount of all taxes, including, federal income taxes, Federal
28
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Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes required
to be withheld or collected therefrom, and has paid the same to the proper
governmental bodies or officers or authorized depositories.
3.7.2. The Seller has not filed any consolidated
federal income tax return with any "affiliated group" of corporations (as such
term is used in Section 1504 of the Code), where the common parent of such group
was a corporation other than the Seller, and the Seller is not, nor has ever
been, a party to any contract relating to the allocation of taxes pursuant to
which the Seller has any liability to anyone other than the Seller.
3.8. PROPERTIES.
3.8.1. There are no Liens on the Inventory. The
Inventory conforms in all material respects with Seller's applicable
specifications, if any.
3.8.2. The Personal Property and Equipment is in good
working condition, ordinary wear and tear excepted, and suitable for its current
uses. There are no Liens on the Personal Property or on the leasehold interests
in the Personal Property leased by the Business being purchased. Each lease of
Personal Property used by the Business is the enforceable obligation of Seller
and, to Seller's knowledge, the other parties thereto and Seller is not in
default of any such lease nor does Seller know of any default by the lessor of
such property. Each such lease of Personal Property may be assigned by Seller to
Buyer without the consent of any Person which has not been obtained.
3.8.3. The Facility, Personal Property, Equipment and
Inventory is all of the real and personal property necessary to operate the
Business as currently conducted but for inventory, materials and services which
must be ordered to complete WIP as specified on Schedule 3.8.3.
3.8.4 Except as otherwise expressly provided in the
Disclosure Schedule or in any other provision of this Agreement, the Acquired
Assets shall be sold to Buyer "as is, where is".
3.9. MARKS, INTELLECTUAL PROPERTY.
3.9.1. Schedule 1.1.4 sets forth a list of the marks
and intellectual property owned or used by the Seller in the Business and a
description of any licenses thereof. The marks and intellectual property
included in the Acquired Assets are all of the marks and intellectual property
necessary to operate the Business as it is currently conducted except for the
inherent intellectual property possessed by the employees of the Business.
Seller owns its interest in such marks and intellectual property free and clear
of Liens and may use or transfer them without any governmental permit or the
consent or approval of any third party. To the extent that the ownership of such
intellectual property and marks by Seller or the transfer thereof to Seller may
be recorded, registered or filed with any Government, such ownership or transfer
has been so recorded, registered or filed and Schedule 1.1.4 sets forth a list
of such recordings, registrations and filings. To Seller's knowledge, all
licenses of intellectual property by or to Seller are the enforceable
obligations of the parties thereto. Seller is not in default under any of such
licenses nor does Seller know of any default thereof by any other party to such
licenses.
3.9.2. To Seller's knowledge, the present conduct of
the Business does not infringe upon or conflict with the marks or intellectual
property of others. To the Seller's knowledge, no material use of marks or
intellectual property owned by Seller has been or is being made by parties other
than the Seller, except pursuant to the licenses set forth on Schedule 1.1.4.
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3.9.3. To Seller's knowledge, all marks and
intellectual property owned by Seller are valid. Seller has no knowledge of any
claim or reason to believe that any mark or intellectual property of which it is
the licensee is not the valid and enforceable property of its purported owner
and that the licensor is duly authorized to license such mark or intellectual
property.
3.9.4. To Seller's knowledge, no intellectual
property that is a trade secret or confidential information has been disclosed
to any person under circumstances that would result in the loss of its secret or
confidential status. Seller has taken all reasonable precautions to ensure that
its trade secrets and confidential information remain secret or confidential.
3.10. EMPLOYEE MATTERS.
3.10.1. To Seller's knowledge, Seller is in material
compliance with all Requirements of Law respecting employment and employment
practices, occupational safety and health, terms and conditions of employment
and wages and hours and is not engaged in any unfair labor practice or pattern
or practice of discrimination as prohibited by law. There is no unfair labor
practice complaint or charge of discrimination pending or, to the knowledge of
Seller, threatened against Seller before the National Labor Relations Board or
any governmental agency relating to the Business. There are no worker's
compensation or similar claims pending or to Seller's knowledge, threatened
against Seller. There are no claims relating to occupational safety and health
or any similar law or regulation pending or, to Seller's knowledge, threatened
against Seller. There is not now nor has there been during the last three years
any labor strike, threat of labor strike, organizational attempt, boycott, or
informational or direct picketing or leafleting or, to the knowledge of Seller,
any discussions among employees, with regard to the foregoing labor matters
directed against Seller. No union representation question exists respecting the
employees of Seller relating to the Business. There are no collective bargaining
agreements binding upon Seller.
3.10.2. All accrued obligations of Seller, whether
arising by operation of law by contract or by past custom, for payments to
trusts or other funds or to any governmental agency, with respect to workers'
compensation, disability programs, social security, pension or any other
benefits for employees of the Business, have been paid and none of the foregoing
has been rendered not due by reason of any extension or waiver.
3.10.3. Schedule 1.3.2 sets forth the name, position
and starting date of each employee of the Business as of the date hereof and a
description of the fringe benefits each such employee receives and the vacation
such employee has earned in 1997 without regard to carryovers. To Seller's
knowledge, none of such persons has terminated or overtly threatened to
terminate their employment since January 1, 1997.
3.10.4. The Disclosure Schedule sets forth a list of
all contracts of the Seller relating to employment, consulting, severance,
compensation or collective bargaining and a description of the terms thereof.
Such contracts are the enforceable obligations of the parties thereto and the
Seller is not in default thereof nor does the Seller know of any default thereof
by any other person.
3.10.5. The Disclosure Schedule sets forth the most
recent ratings of the Seller, all claims against the Seller and all claims
against the Seller that alleged a violation of specific safety requirements
under any workers' compensation law since the beginning of the fifth full
previous fiscal year of the Seller.
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3.10.6. The Disclosure Schedule sets forth a list of
all of the employee benefit plans of the Seller.
3.10.7. To Seller's knowledge, each employee benefit
plan of the Seller and its operation comply with all requirements of law, the
terms thereof and any contract related to such plan. To Seller's knowledge, each
such employee benefit plan which may be a qualified plan under Section 401 of
the Internal Revenue Code, as amended (the "Code"), has sufficient assets held
in a trust or an insurance or annuity contract to provide for the payment of all
accrued benefits of such plan, whether or not vested, if such plan were
terminated on the date hereof or the Closing Date or the amount by which such
accrued benefits exceed such plans' assets is shown on the Financial Statements
or the Disclosure Schedule. To Seller's knowledge, each employee benefit plan of
the Seller which may be a qualified plan under Section 401 of the Code owns the
assets it purports to own, free and clear of Liens. To Seller's knowledge,
neither any "accumulated funding deficiency", "reportable event" nor any
"prohibited transaction" has occurred with respect to any employee benefit plan
of the Seller or its subsidiaries and no such plan is a "multiemployer plan" as
such quoted terms are defined in the Employee Retirement Income and Security Act
of 1974, as amended ("ERISA"). To Seller's knowledge, any employee benefit plan
of the Seller which may be a qualified plan under Section 401 of the Code
complies with the requirements of such Section in order to be a qualified plan,
has received a determination letter to the effect that it is a qualified plan,
has not been amended since the date thereof except to the extent disclosed in
the Disclosure Schedule and has been operated in such a manner so as not to
jeopardize its qualified status. To Seller's knowledge, Seller does not have any
liability on account of any accumulated funding deficiency under ERISA or the
Code, because of any failure to make any payments under the terms of any
employee benefit plan or any contract related thereto, because of the violation
of any law with respect to or any contractual duty to any of such plans or any
of their participants, because of its participation in or withdrawal from any
multiemployer plan, or because of termination or operation of any employee
benefit plan which is insolvent or has liabilities including accrued benefits
(whether or not vested) which exceed its assets (other than any liability of the
Seller to such plan).
3.11. COMPLIANCE WITH LAWS. Neither the Business, the Facility
nor the Business Premises is in material violation of any applicable Requirement
of Law and no claims have been made by any governmental regulatory agency to the
contrary.
3.11.1. Schedule 1.1.7 lists all of the governmental
permits held by the Seller or any of its employees which are all of the
governmental permits, licenses, authorizations or approvals that the Seller or
its employees need so that the Seller may own its assets or properties and carry
on the Business as currently conducted, or proposed to be conducted, without
materially violating any law.
3.11.2. The corporate proceedings, securities,
operations, business, management, properties, assets, contracts and financial
affairs of the Seller comply with all laws and orders of any tribunal applicable
to the Seller in all material respects and all governmental permits held by any
of them as may be required under applicable law in all material respects.
3.11.3. Neither the Seller nor any of its employees
have received notice, nor do any of them have reason to believe, that any
governmental body or officer intends to cancel or terminate any governmental
permit or that valid grounds for such cancellation or termination currently
exist. To Seller's knowledge, neither the Seller, nor any of its employees, are
subject to any order of a tribunal relating to any activities of any type in
connection with the business now engaged in by any of them, or had its or his
governmental permit to conduct, participate or be involved in any business
denied, revoked, restricted or suspended or been involved in any litigation to
deny, revoke, restrict or suspend any such governmental permit or to issue an
order of a tribunal relating to activities connected with such businesses.
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3.12. TRANSACTIONS WITH INTERESTED PERSONS. Neither Seller nor
any officer, director or stockholder of Seller or any Affiliate of any of the
foregoing owns, directly or indirectly, on an individual or joint basis, any
material interest in, or serves as an officer, director or employee of, any
customer, competitor or supplier of Seller, or any Person which has a material
contract or arrangement with Seller.
3.13. BROKERS. No agent, broker, investment banker, or other
Person acting under the authority of Seller is or will be entitled to any
brokers or finders fee or any other commission or similar fee directly or
indirectly from Buyer or any Affiliate of Buyer as a result of this Agreement.
3.14. ENVIRONMENTAL MATTERS. The Business has not and as
currently being conducted does not violate any Environmental Law. Seller has
timely filed all required reports, obtained all required approvals and permits,
and generated and maintained all required data, documentation and records under
all Environmental Laws with respect to the Business, the Facility and the
Business Premises. Neither Seller nor any other person, has placed, stored,
buried, spilled or released, used, generated, manufactured, refined, processed,
treated, dumped or disposed of, or transported to or from, any materials
produced by, or resulting from, any business, commercial, or industrial
activities, operations, or processes, including but not limited to any Hazardous
Material on, beneath, or about the Facility or the Business Premises except as
permitted by Environmental Laws. Seller has received no notice of any violation
of any Environmental Law with respect to the Business, the Facility or the
Business Premises from, and has no knowledge of any pending investigation by,
any governmental authority having jurisdiction over such matter. Seller has no
knowledge of any claim by any other person or entity claiming any violation of
any Environmental Law in connection with the Facility, the Business Premises or
Seller's conduct of the Business, or asserting any claim for damage due to any
alleged acts or failure to act on the part of Seller in connection with the
Facility, the Business Premises or Seller's conduct of the Business in relation
to the manufacture, use, treatment, storage, transportation, spillage, leakage,
dumping, discharge, emission or disposal of any substance subject to any
Environmental Law. To Seller's knowledge, all off-site locations where the
Business has stored, disposed or arranged for the disposal of hazardous
substances or Hazardous Materials are identified in the Disclosure Schedule. To
Seller's knowledge, except as set forth in the Disclosure Schedule, there is no
asbestos contained in the Facility and no polychlorinated biphenols (PCBS) or
PCB-containing items are used or stored at the Facility or on the Business
Premises.
3.15. ASSUMED CONTRACTS. Except as may be set forth in the
Schedule of Contracts on Schedule 1.1.7:
3.15.1. There are no material Contractual
Obligations, whether written or oral, to which Seller is a party or by which
Seller or any of the Acquired Assets are bound, which relate to the Business or
which are necessary to carry on the Business as currently conducted, or proposed
to be conducted;
3.15.2. Each Contractual Obligation therein listed is
in full force and effect;
3.15.3. Seller has, and to Seller's knowledge all
other parties to Contractual Obligations have, performed in all material
respects all material obligations required to be performed by them to date. To
Seller's knowledge, no party to any such Contractual Obligation is in default in
any material respect thereunder nor has there occurred any other event which,
with the passage of time or giving of notice or both, would constitute a default
thereunder;
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3.15.4. The copies of the Assumed Contracts delivered
to Buyer hereunder are true and complete and, except as set forth therein, the
Assumed Contracts have not been amended or modified; and
3.15.5. The Assumed Contracts may be assigned by
Seller to Buyer, subject to any required consent of other parties to such
Assumed Contracts.
3.16. PRIVATE OFFERING.
3.16.1. PURCHASE ENTIRELY FOR OWN ACCOUNT. The Stock
issuable as part of the Purchase Price will be acquired for investment and not
with a view to the sale or distribution of any part thereof, and the Seller has
no present intention of selling or otherwise distributing the same except as may
be provided herein.
3.16.2. RELIANCE UPON THE SELLER'S REPRESENTATIONS.
The Seller understands that the Stock is not registered under the Securities Act
of 1933, as amended, or the Michigan Securities Act on the ground that the
issuance is exempt from registration under the Securities Act pursuant to
Section 4(2) thereof and under the Michigan Securities Act pursuant to Section
451.802(b)(9) or (b)(21) thereof, and that the Company's reliance on such
exemption is predicated on the Seller's representations set forth herein.
3.16.3. RECEIPT OF INFORMATION. The Seller or its
representatives have had an opportunity to ask questions and receive answers
from the Buyer regarding the terms and conditions of the issuance of the Stock
and the business, properties, prospects, and financial condition of the Buyer
and to obtain additional information (to the extent the Buyer possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to it or to which
it had access.
3.16.4. INVESTMENT EXPERIENCE. The Seller or its
purchaser representatives have such knowledge and experience in financial and
business matters that they are capable of evaluating the merits and risks of the
investment in the Stock.
3.17. CONDEMNATION. The Business Premises have been threatened
with condemnation. Neither Seller nor any of its Affiliates have received a
notice from the condemning authority that it intends to acquire the property. No
offer from the condemning authority has been made, no amount of compensation for
the condemnation has been determined, and no negotiations concerning the
condemnation have been made. No proceedings have been commenced, to Seller's
knowledge, with respect to condemnation of such property; however, Seller and
the Trust have received requests for information from the condemning authority
with respect to the anticipated condemnation.
3.18. THE BUSINESS. There are no conditions existing with
respect to the markets, products, facilities or personnel of the Business which
would reasonably be expected to adversely affect the business or prospects of
the Business in a material manner.
3.19. WORK IN PROGRESS. Schedule 1.2.5 sets forth a complete
list of the WIP of Seller as of the Closing Date and specifies in accurate
detail with respect to each WIP: (i) the contract price; (ii) budgeted labor
hours; (iii) budgeted material costs; (iv) labor hours incurred to date; (v)
material costs to date; (vi) Seller's good faith estimate of the labor hours and
material costs required to complete each respective WIP; and (vii) the prepaids
or deposits billed and/or received by Seller.
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
and warrants to Seller as follows:
4.1. ORGANIZATION, STANDING, ETC. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Ohio and has
all requisite corporate power to own and operate its properties, to carry on its
business as currently conducted or proposed to be conducted, to execute, deliver
and perform this Agreement and consummate the transactions contemplated hereby.
4.2. AUTHORIZATION OF AGREEMENT. The execution, delivery and
performance of this Agreement, the Consulting Agreement, the Noncompetition
Agreements, the Escrow Agreement and the Facility Lease by Buyer and the
consummation of the transactions contemplated hereby and thereby by Buyer have
been duly and validly authorized by all necessary corporate proceedings of
Buyer. This Agreement, the Consulting Agreement, the Noncompetition Agreements,
the Escrow Agreement and the Facility Lease have been duly and validly executed
by Buyer. This Agreement and each of the other agreements delivered by Buyer
pursuant to this Agreement constitute the valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms.
4.3. DISCLOSURE. Neither this Agreement nor any instrument
delivered by or on behalf of Buyer in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact required herein or necessary to make the statements herein
or therein not misleading.
4.4. BROKERS. No agent, broker, investment banker or other
Person acting under the authority of Buyer is or will be entitled to any brokers
or finders fee or any other commission or similar fee directly or indirectly
from Seller or any Affiliate of Seller as a result of this Agreement.
4.5. NO VIOLATION. The execution, delivery and performance of
this Agreement by Buyer and the consummation of the transactions contemplated
hereby will not, with or without the giving of notice or lapse of time, or both,
(i) violate any law or order of an administrative board, the SEC or any tribunal
applicable to the Buyer or any governmental permit held by the Buyer or provide
the basis for the revocation or nonrenewal of any such governmental permit; (ii)
result in a default under (A) any contract, agreement or other writing to which
Buyer is a party or (B) the Code of Regulations of the Buyer or its bylaws; or
(iii) require any governmental permit or the consent or approval of any other
person.
4.6. LITIGATION.
4.6.1. To Buyer's knowledge, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries pending
before any court or governmental body or agency or any private arbitration
tribunal of which Buyer has been notified, or to Buyer's knowledge, threatened
against or relating to Buyer materially affecting the transactions contemplated
by this Agreement nor to Buyer's knowledge is there any basis for any such
claim, action, suit, proceeding, arbitration, investigation or inquiry.
4.6.2. There is not in existence any judgment, order,
writ, injunction, or decree of any court materially affecting the transactions
contemplated by this Agreement.
4.6.3. Neither the Buyer nor any of its officers,
directors or employees (in their capacity as officers, directors or employees)
have waived any statute of limitations or other affirmative defenses with
respect to any pending, threatened or potential litigation.
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4.7. REGULATORY APPROVALS. All consents, approvals,
authorizations and other requirements prescribed by any law, rule or regulation
which must be obtained or satisfied by Buyer and which are necessary for the
consummation by Buyer of the transactions contemplated by this Agreement have
been, or will prior to the Closing Date, obtained and satisfied.
4.8. QUALIFICATION. Buyer is duly qualified or otherwise
authorized as a foreign corporation to transact business and is in good standing
in Michigan.
4.9. PROXY STATEMENT, ANNUAL REPORT, ETC. Buyer has previously
delivered to Seller its 1996 Annual Report, its Proxy Statement dated as of
March 21, 1997 and all reports filed with the SEC by the Buyer during 1996. Such
reports and statements are accurate and complete and have been prepared pursuant
to the regulations prescribed by the SEC. Since the date of Seller's receipt of
these reports and statements, there has been no material adverse change in the
financial condition or results of operations of Buyer.
4.10. OUTSTANDING CAPITAL STOCK. Buyer is authorized to issue
3,412,000 shares of common stock, without par value, all of which are voting
shares, of which 1,108,020 shares are issued and outstanding (excluding the
100,000 Shares comprising the Stock delivered pursuant to Section 1.5.2). On the
Closing Date, all of the Stock to be issued and delivered to the Seller
hereunder will be free and clear of any lien, pledge, mortgage, security
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, encumbrance or any other restriction or limitation whatsoever (except
those contemplated by this Agreement or the Escrow Agreement). All of the
outstanding shares of common stock to be issued and delivered to the Seller
hereunder of Buyer are duly authorized and validly issued, fully paid and
nonassessable.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE TRUST. The Trust
represents and warrants to Buyer as follows:
5.1. FORMATION. The Trust has been duly executed, remains in
full force and effect, and is valid and enforceable in accordance with the terms
of the agreement creating the Trust;
5.2. TRUSTEES. Patrick J. Keating and Stephen O. Stieler are
the duly appointed and serving incumbent Trustees;
5.3. AUTHORITY. The Trustees have the requisite power,
authority and discretion to vote the shares of Seller owned by the Trust in
favor of Seller's execution, delivery, and performance of the Agreement, and to
authorize the Trust to enter into and perform its obligations under the Facility
Lease;
5.4. AUTHORIZATION. The Trustees have taken all action
necessary to authorize the Seller to enter into this Agreement and the Trust to
enter into the Facility Lease and consummate the transactions contemplated
hereby and thereby free from any and all claims arising by or through the Trust
or held by any beneficiary or remaindermen of the Trust;
5.5. BENEFICIARIES. Linda S. Rosbury Friedley, Daniel Rosbury,
David Rosbury, and Sharon Cox are presently all of the beneficiaries of the
Trust. No beneficiary of the Trust has expressed an interest in objecting to the
transactions contemplated by this Agreement.
5.6. NO ACTIONS. To the Trust's knowledge, there are no
claims, actions, suits, proceedings, or arbitrations pending before any court or
any private arbitration tribunal, or threatened against or relating to the Trust
affecting the transactions contemplated by this Agreement nor is there any basis
for any such claim, action, suit, proceeding, arbitration, investigation or
inquiry.
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5.7. CONDEMNATION. The Business Premises have been threatened
with condemnation. Neither Seller nor any of its Affiliates have received a
notice from the condemning authority that it intends to acquire the property. No
offer from the condemning authority has been made, no amount of compensation for
the condemnation has been determined, and no negotiations concerning the
condemnation have been made. No proceedings have been commenced, to Seller's
knowledge, with respect to condemnation of such property; however, Seller and
the Trust have received requests for information from the condemning authority
with respect to the anticipated condemnation.
SECTION 6. INDEMNIFICATION.
6.1. INDEMNITY BY BUYER. Buyer agrees to indemnify and hold
harmless Seller and its directors, officers, employees and Affiliates from and
against any and all liabilities, damages and losses resulting from (a) any
representation which is inaccurate made by Buyer in this Agreement or in any
document delivered pursuant to this Agreement, (b) the breach of any warranty
made by Buyer in this Agreement or in any document delivered pursuant to this
Agreement, (c) the breach or default in the performance or observance by Buyer
of any of the covenants or other obligations which it is to perform or observe
hereunder, or in any document delivered pursuant to this Agreement, (d) Assumed
Liabilities (including, without limitation, Assumed Orders, the Outstanding
Quotes and all products sold with respect thereto) (e) obligations arising in
connection with the operation of the Business by Buyer which accrue and relate
to periods, circumstances and events on and after the Closing Date, the
incurrence or existence of which do not result from the breach of any
representation or warranty of Seller contained herein or in any document
delivered pursuant to this Agreement, and any and all claims, actions, suits,
judgments or investigations, and the costs and expenses thereof, incident to any
of the foregoing, including but not limited to reasonable attorneys' fees and
the cost of any bonds necessary to release any attachments of the property of
Seller or its Affiliates or to stay any judgments or perfect any appeals, even
if such claims, actions, suits, judgments or investigations are groundless,
false or fraudulent.
6.2. INDEMNITY BY SELLER. Seller agrees to indemnify and hold
harmless Buyer and its directors, officers, employees and Affiliates from and
against any and all liabilities, damages and losses resulting from (a) any
representation which is inaccurate made by Seller or the Trust in this Agreement
or in any document delivered pursuant to this Agreement, (b) the breach of any
warranty made by Seller or the Trust in this Agreement or in any document
delivered pursuant to this Agreement, (c) the breach or default in the
performance or observance by Seller of any of the covenants or other obligations
which Seller is to perform or observe hereunder, or in any document delivered
pursuant to this Agreement, (d) Excluded Liabilities, (e) noncompliance with any
bulk sales or similar law in connection with the transfer of assets pursuant to
this Agreement, and (f) the cost of all warranty repairs performed by Buyer as
contemplated by Section 7.15, and any and all claims, actions, suits, judgments
or investigations, and the costs and expenses thereof incident to any of the
foregoing, including but not limited to reasonable attorneys' fees and the cost
of any bonds necessary to release any attachments of the property of Buyer or
its Affiliates or to stay any judgments or perfect any appeals, even if such
claims, actions, suits, judgments or investigations are groundless, false or
fraudulent.
6.3. NOTICE AND DEFENSE OF CLAIMS.
6.3.1. Seller or Buyer, as the case may be, shall
give prompt notice in accordance with Section 11.6 to all indemnifying parties
of any claim or event known to it for which such party believes it is entitled
to indemnification pursuant to this Section 6, stating the nature and basis of
said claims or events and the amounts thereof, to the extent known, and in the
case of any claim, action or proceeding brought by a third party, a copy of any
claim, process or legal pleadings with respect thereto, promptly after any such
documents are received by such party.
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6.3.2. The party granting indemnification pursuant to
Section 6.1 or 6.2 shall have the unconditional right, upon written notice, to
the indemnified party to assume the defense of any such claim or proceeding. If
the party granting indemnification either declines or fails in a timely manner
to assume the defense of the claim or proceeding, then the indemnified party
shall have the right to employ its own counsel and the party granting
indemnification shall pay the reasonable fees and expenses of such counsel. If
the party granting indemnification assumes the defense of a claim or proceeding,
then the indemnified party shall have the right to employ its own counsel at its
own cost and expense.
6.3.3. Seller and Buyer, as the case may be, shall be
kept reasonably informed of such claim, action, suit or proceeding, at all
material stages thereof whether or not such party is represented by its own
counsel.
6.4. RELATED OBLIGATIONS. Notwithstanding anything to the
contrary herein, Buyer may, after written notice to Seller, withhold all or any
portion of any amounts to which Buyer may be entitled to indemnification
pursuant to Section 6.2 from any payments remaining unpaid on the Stock
Component, the Contingent Earnout, the Put Option, any amounts payable under the
Consulting Agreement or the Non-Competition Agreements, or the Facility Lease.
Nothing contained in this Section 6.4 shall be construed to prejudice Buyer from
pursuing its right to indemnification hereunder by reason of having first
pursued its right to withhold all or a portion of any amount stated above or
other obligation, and such withholding shall not relieve Seller of its
obligations under this Agreement or any document delivered pursuant to this
Agreement, or constitute a waiver of any other legal or equitable rights Buyer
may have under this Agreement or otherwise. Buyer shall first resort to any
proceeds received by Buyer (net of any costs expended to collect such proceeds)
arising out of rights or choses in action contemplated by Section 1.1.10 that
relate to the liability, damage or loss giving rise to the indemnification but
only if such proceeds are received by Buyer within a reasonable time after the
event that gives rise to Buyer's rights hereunder. Buyer shall only be required
to use reasonable efforts to pursue and collect any such amounts. For purposes
of this Section 6.4, the value of any Shares of Stock withheld pursuant to this
Section 6.4, shall be equal to the greater of (i) the put price of the
applicable put corresponding to such Shares, or (ii) the average bid and asked
per share price as reported by a Market Maker at the closing of the date Buyer
provides notice of the exercise of its rights hereunder. Once the
indemnification amount has been finally determined, the remaining amounts
withheld by Buyer hereunder exceeding the indemnified amount shall be released
and paid in accordance with this Agreement.
6.5. SETTLEMENT. The party granting indemnification pursuant
to Section 6.1 or 6.2 shall not, in the defense of any claim or any litigation
resulting therefrom, consent to entry of any judgment except with the consent of
the party being indemnified, which shall not be unreasonably withheld.
6.6. COOPERATION. Seller and Buyer agree to render to each
other such assistance as they may reasonably require of each other and to
cooperate in good faith with each other in order to ensure the proper and
adequate defense of any claim, action, suit or proceeding brought by any third
party. Where counsel has been selected by the party granting indemnification
under Section 6.1 or 6.2 or the indemnified party, the party granting
indemnification or the indemnified party, as the case may be, shall be entitled
to rely upon the advice of such counsel in the conduct of the defense.
6.7. TIME PERIOD FOR ASSERTING INDEMNIFICATION. Except with
respect to claims for fraud of the Seller arising out of this transaction and
claims that have been the subject of written notice given prior to the date that
is 270 days after the fourth anniversary of the Closing Date, no claim for
indemnification pursuant to this Section 6 or any other claim arising out of the
transactions contemplated herein, whether under statute, common law or
otherwise,
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shall be brought or made after the date that is 270 days after the fourth
anniversary of the Closing Date.
6.8. LIABILITY LIMITS.
6.8.1. Notwithstanding anything to the contrary set
forth herein, the respective parties shall only be liable for liabilities,
damages and losses that during the Claims Period exceed, in the aggregate, Ten
Thousand Dollars ($10,000) and then only to such excess.
6.8.2. Seller's indemnification obligations hereunder
at any given time shall not exceed the maximum amount then remaining to be paid
by Buyer under this Agreement, the Consulting Agreement, the Noncompetition
Agreements, the Escrow Agreement or the Facility Lease.
6.9. EXCLUSIVE REMEDIES. Except with respect to claims for
fraud of Buyer arising out of this transaction, the remedies provided in Section
6.1 shall constitute the exclusive remedy against Buyer by any party indemnified
under Section 6.1 for any claim in connection with this Agreement. Except with
respect to claims for fraud of Seller arising out of this transaction, the
remedies provided in Section 6.2 shall constitute the exclusive remedy against
Seller by any party indemnified under Section 6.2 for any claim in connection
with this Agreement.
SECTION 7. CERTAIN COVENANTS.
7.1. TRANSFER TAXES. Seller shall satisfy and discharge,
promptly as they become due, all liabilities and obligations for sales, use,
transfer or similar taxes, if any, imposed by any government as a result of the
sale of the Acquired Assets. Seller shall prepare, or cause to be prepared, all
appropriate tax returns and other documents required to be filed in connection
with such taxes.
7.2. PERSONAL PROPERTY TAXES. Seller agrees to pay all
liabilities and obligations for personal property or similar taxes payable with
respect to ownership of the Acquired Assets during the calendar year ended
December 31, 1996. Seller agrees to pay all liabilities and obligations for
personal property or similar taxes payable with respect to ownership of the
Acquired Assets before the Closing Date. Buyer agrees to pay all liabilities and
obligations for personal property or similar taxes payable with respect to
ownership of the Acquired Assets from and after the Closing Date. Seller will
cooperate with Buyer in preparing Buyer's subsequent personal property tax
returns as Buyer may reasonably request.
7.3. EMPLOYEES.
7.3.1. Seller will pay when due all liabilities and
obligations, whether arising by operation of law or by contract (including
legally enforceable obligations arising by past custom), for salaries, vacation
and holiday pay, bonuses, severance pay, sick pay, and other forms of
compensation which are owed to any employees of the Business relating to the
period ending on the Closing Date. Buyer shall be responsible for any vacation
time or personal days of employees of Seller but only to the extent specified as
to be assumed by Buyer under Section 1.3.2.
7.3.2. Notwithstanding anything to the contrary
contained herein, Seller will be solely obligated to pay when due all
liabilities and obligations, whether arising by operation of law or by contract
(including legally enforceable obligations arising by past custom), to the
extent not covered by insurance, for compensation or benefits which are owed now
or in the future to any of its employees who are or become disabled due to any
state of facts, occurrences or circumstances prior to the Closing Date or who
have ceased being employed by
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Seller as of the Closing Date. Seller agrees to deliver notices concerning
continuation of health care coverage to all employees of the Business within the
time periods provided by applicable law.
7.3.3. Notwithstanding anything to the contrary
contained herein, the employment by Buyer of any individual previously employed
by Seller shall not be deemed a continuation of employment with Seller and Buyer
does not assume or agree to recognize the terms of any employment agreement,
severance plan or similar agreement or course of conduct previously binding on
Seller. Buyer shall not be required or obligated to employ any employee of
Seller, or to provide health care continuation coverage, employment contracts,
or any other compensation level or benefits to any employee of Seller employed
by Buyer subsequent to the Closing Date. No employee of the Business shall be
restricted from employment by Buyer in the Business in any capacity by reason of
any confidentiality or noncompetition agreement between such employee and Seller
or any of its Affiliates, provided, however, that employees of St. Lawrence,
Inc. will not be approached for employment or hired by Buyer for a term of three
years from the Closing Date. Seller and any Affiliate of Seller shall not
approach any employee of Buyer or hire any such employee for a period of three
years from the Closing Date.
7.3.4. Seller agrees to terminate all of its
employees prior to the Closing. Seller acknowledges and agrees that Buyer is not
nor shall be considered a successor with respect to employment and employment
practices including the payment of any employee benefits.
7.3.5. In furtherance of Section 1.4.8, Seller shall
retain liability for and shall pay when due all benefits under and in accordance
with any of Seller's employee welfare benefit plans and programs providing,
without limitation, hospitalization, medical or dental benefits attributable to
claims or expenses incurred on or prior to the Closing Date. Seller or, where
appropriate, each other ERISA plan maintained by Seller that is an "employee
welfare benefit plan," within the meaning of Section 3(1) of ERISA, shall retain
liability for and shall pay when due all benefits attributable to covered
services rendered or expenses incurred, in accordance with the terms of such
plan, as of the Closing Date.
7.3.6. A true and correct copy of Buyer's Section
401(k) Plan, known as the PH Hydraulics and Automation Savings Plan, (the
"Buyer's 401(k) Plan") has been delivered to Seller. All federal, state, and
local laws, rules and regulations affecting or pertaining to Buyer's 401(k) Plan
shall either be complied with in all material respects by or before the Closing
Date or such Plan shall be retroactively amended by Buyer after the Closing Date
to comply in all material respects with such laws, rules regulations and all
governmental returns and employee notices with respect to Buyer's 401(k) Plan
shall be timely filed. Buyer shall amend Buyer's 401(k) Plan effective as of the
Closing Date to provide that for purposes of eligibility and vesting under
Buyer's 401(k) Plan, service with Seller and St. Lawrence, Inc. shall be
credited as service with Buyer, and that employees of Seller hired by Buyer
(other than employees covered by a collective bargaining agreement) shall be
entitled to roll over eligible distributions from Seller's Section 401(k) Plan
to Buyer's 401(k) Plan.
7.3.7. As of the Closing Date, active employees of
Seller: (i) who are not covered under any collective bargaining agreement; (ii)
who currently participate in Seller's group health insurance plan; and (iii) who
are hired as employees by Buyer as of the Closing Date shall become eligible for
participation, without regard to any pre-existing conditions, in a group health
plan (as defined for purposes of Section 4980B of the Code) established and
maintained by Buyer for the general benefit of its employees and their
dependents, so that Seller shall not be required to provide continued health
coverage under Part 6 of Title 1 of ERISA or Section 4980B of the Code to any
employee of Seller, or any qualified beneficiary (as defined for purposes of
Section 4980B of the Code) with respect to any employee of Seller, who becomes
covered under such plan. Buyer is not assuming any obligation of Seller to
provide health insurance continuation coverage to employees of Seller that are
not hired by Buyer.
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7.4. ASSURANCES. If at any time either of the parties hereto
shall consider or be advised that any further assignments, conveyances or
assurances are necessary or desirable to carry out the provisions hereof and the
transactions contemplated herein, the appropriate parties hereto shall execute
and deliver, or cause to be executed and delivered, any and all proper deeds,
assignments and assurances, and do or cause to be done all things necessary or
proper to carry out fully the provisions hereof. Seller agrees to promptly
forward all correspondence, inquiries and other communications relating to the
Business to Buyer.
7.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties hereto contained herein or in the
Disclosure Schedule or Schedule of Contracts or in any certificate or document
delivered in connection herewith shall survive until the date that is 270 days
after the fourth anniversary of the Closing Date.
7.6. SELLER'S CREDITORS. Seller will pay in its ordinary
course of business to its creditors when due all amounts owing to them, to the
extent such amounts are included in Excluded Liabilities. Buyer will pay in its
ordinary course of business the Payables. Seller acknowledges and hereby agrees
that any concession or discount granted by a Payable creditor shall belong
solely to Buyer.
7.7. WAIVER OF COMPLIANCE WITH BULK SALES LAW. Buyer hereby
waives compliance by Seller with the provisions of any applicable bulk sales
law. Seller hereby agrees to indemnify and hold Buyer harmless from any loss,
cost or liability incurred by Buyer as a result of such noncompliance,
consistent with the provisions of Section 6.2 hereof.
7.9. CONDUCT OF BUSINESS AFTER CLOSING. During the Earnout
Period, Buyer shall use commercially reasonable efforts to maximize sales of
Eligible Product and will prioritize and promote sales of Eligible Product
through its St. Lawrence Division above all other products and services. During
the Earnout Period, Buyer shall actively and diligently pursue new customers for
Eligible Product and maintain good business relationships with traditional
customers of Seller, as listed on Schedule 1.5.3.1, of Eligible Product.
7.10. CONDEMNATION. Buyer acknowledges that it has been
advised by Seller that a significant likelihood exists that the Facility will be
taken by power of eminent domain. If all or any portion of the Facility is taken
by power of eminent domain or conveyed in lieu thereof (a "Condemnation"),
Buyer, seller and the Company agree, that, except as otherwise provided in the
immediately succeeding sentence, Seller shall be entitled to all damages,
awards, proceeds, and other sums of every kind and nature paid or payable or
obtainable in connection with any such Condemnation, including but not limited
to damages payable because or with respect to the leasehold interest of Buyer as
Tenant under the Facility Lease (as referred to in Section 8.6), loss of
fixtures (movable and/or in place), or business interruption, and all such
damages, awards, proceeds and other sums shall be the sole property of Seller.
Notwithstanding the foregoing, in the event the Facility is taken or Buyer is
displaced from or is forced to vacate the Facility in connection with a
Condemnation, Buyer, as Tenant, under the Lease, shall be entitled only to those
proceeds available to Buyer, as Tenant, under the FEDERAL UNIFORM RELOCATION
ASSISTANCE ACT (collectively the "Relocation Proceeds"). Any other amounts
received by Buyer as a result of a Condemnation shall be deemed to be an
additional part of the Cash Component of the Purchase Price, and the Purchase
Price shall be increased by such amount, and shall be paid over to Seller within
five (5) days after receipt by Buyer. In the event that Relocation Proceeds
available to Buyer are received by seller or the Landlord, Seller or the
Landlord shall remit such proceeds to the Buyer within five (5) days after
receipt.
7.10.1. In the event that the amount of the
Relocation Proceeds are less than $500,000, upon Buyer's receipt of the full
amount of the Relocation Proceeds, Seller shall have the option to require Buyer
to use such Relocation Proceeds received by Buyer to pre-pay
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Buyer's obligations under Section 1.5.2.3 or Buyer's obligations under Section
1.5.3, at the sole discretion of Seller. Seller's exercise of this option shall
be exercised by providing written notice to the President of Buyer. If Seller,
in its discretion, chooses the option to have Buyer pre-pay Buyer's obligations
under Section 1.5.2.3 (i) Seller may exercise, in sequential order, its options
described in Section 1.5.2.3 (notwithstanding each respective option's
commencement date) but only to the extent as to the number of Shares that the
amount of the Relocation Proceeds are sufficient to satisfy Buyer's obligations
with respect to the price per Share; and (ii) the Relocation Proceeds shall be
paid on the conditions and in the manner specified in Section 1.5.2.3. If Buyer
is required to pre-pay Buyer obligations under Section 1.5.3, the Relocation
Proceeds shall be used to the extent necessary to pre-pay any remaining Minimum
Annual Contingent Earnout. This Section 7.10.1 shall not apply if (a) a
Condemnation occurs before the first anniversary of the Closing Date, (b) if
Buyer has less than 365 days notice to vacate the Business Premises as the
result of a Condemnation, or (c) the amount of the Relocation Proceeds equals or
exceeds $50,000.
7.10.2. Each party shall, no later than three days
after receipt thereof, deliver copies or a reasonably detailed summary of all
formal and informal communications or notices between that party, any Affiliate
of that party or the owner of the Facility, and any government agency, official
or employee concerning a potential or probably Condemnation.
7.11. REPRESENTATION ON THE BOARD OF DIRECTORS OF BUYER. Buyer
shall appoint Seller's designee as a non voting consultant to the Board of
Directors of Buyer to serve until the fourth anniversary of the Closing. Seller
understands that such individual shall not be a "director" of Buyer as such term
is defined by Ohio law and will not be entitled to the rights of a director
under Ohio law nor will such individual be entitled to receive any stock options
under any stock option or other plan of the Company. Such individual will
receive notice of and have the right to attend every regular and special meeting
of the Board of Directors of Buyer occurring before the fourth anniversary of
the Closing Date. Such individual will be paid a fee of $500 for attendance at
each meeting and will be reimbursed for all reasonable travel expenses to attend
the meeting which expenses shall not exceed $150.
7.12. SURVIVAL. The provisions of this Section 7 will survive
the Closing.
7.13. SHARING OF DATA. Seller shall have the right for a
period of four years following the Closing Date (or for such longer period as
may be necessary in connection with any audit of Seller's tax returns by the
Internal Revenue Service or any state taxing authority) to have reasonable
access to such books, records and accounts, including financial and tax
information, correspondence, production records, employment records and other
similar information as are transferred to Buyer pursuant to the terms of this
Agreement for the limited purposes of concluding its involvement in the Business
prior to the Closing Date and for complying with its obligations under this
Agreement and applicable securities, tax, environmental, employment or other
laws and regulations. Buyer shall have the right for a period of four years
following the Closing Date to have reasonable access to those books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other records which are retained by Seller
pursuant to the terms of this Agreement to the extent that any of the foregoing
relates to the Business transferred to Buyer hereunder or is otherwise needed by
Buyer in order to comply with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations.
7.14. COPIES OF COMMUNICATIONS. Seller shall provide Buyer
with copies of all written communications or summaries of all verbal
communications with customers relating to the Business received from customers
or potential customers relating to the Business within three days of receipt by
Seller.
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<PAGE> 28
7.15. WARRANTY CLAIMS PROCEDURES. Seller shall provide Buyer a
copy of any written notification received from a customer relating to warranty
coverage or that claims a defect in material or workmanship with respect to any
presses manufactured by Seller as soon as practicable but in any event no later
than three business days after its receipt by Seller and Seller may, within such
three day period complete the warranty repair itself provided Seller does so in
a business-like and expeditious manner giving due regard to the requests of the
customer. Within three business days of receiving sufficient information to
estimate the cost of a warranty repair, Buyer shall notify Seller in writing of
the estimated cost of a warranty repair involving a press manufactured by
Seller. If the repair or defect is not of a serious and immediate nature, Seller
shall have the option to complete the warranty repair itself, at its own
expense, upon written notice to Buyer no later than three days after receipt by
Seller of the written estimate. In the event Seller elects to complete the
warranty repair, it shall commence the repair no later than three days after
receipt by Seller of the written estimate and it shall proceed to complete the
repair in a business-like and expeditious manner giving due regard to the
requests of the customer. If Seller does not notify Buyer in writing of its
intention to complete the warranty repair or commence the repair within three
days after receipt by Seller of the written estimate, Buyer may elect to
complete the warranty repair. Seller shall reimburse Buyer for the estimated
cost of such repair within seven days of receipt of an invoice from Buyer
detailing the costs of such repair. Buyer's reimbursement shall not exceed the
cost of an estimate without Seller's consent which shall not be unreasonably
withheld. Buyer shall not undertake any warranty repair work without complying
with the notice and estimate procedures set forth in this Section.
SECTION 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. The
obligations of Buyer under this Agreement are subject to satisfaction, on or
before the Closing Date, of each of the following conditions:
8.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller contained in this Agreement shall be
true on and as of the Closing Date with the same effect as if they were made on
and as of the Closing Date, except as affected by transactions contemplated
hereby and except that any such representation and warranty made as of a
specified date other than the date of this Agreement shall have been true on and
as of such date.
8.2. PERFORMANCE OF AGREEMENTS. Seller shall have performed
all obligations and agreements and complied with all covenants contained in this
Agreement or in any document delivered in connection herewith which are to be
performed and complied with by it on or before the Closing Date.
8.3. LITIGATION. No litigation shall be pending or overtly
threatened by any Person not a party hereto or an affiliate of such Person (a)
seeking an injunction against the transactions contemplated by this Agreement or
(b) which might adversely affect the operation of the Business by Buyer. No
injunction against the transactions contemplated by this Agreement shall exist.
8.4. MATERIAL ADVERSE CHANGE. Neither the Business nor the
Acquired Assets shall have suffered any material adverse change in, or any
events which, individually or in the aggregate, have had or may have a material
adverse effect on, its financial condition, results of operations, prospects,
properties, or business.
8.5. LICENSES. Buyer shall have obtained the necessary
licenses, use permits and governmental authorizations to conduct the Business at
the Facility.
8.6. LEASE OF FACILITY. Buyer shall have entered into an
agreement with the Trust in substantially the form attached hereto as Schedule
8.6 (the "Facility Lease") providing
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<PAGE> 29
for the lease by Buyer of the Facility at separate rates for
warehouse/manufacturing and office space.
8.7. GOVERNMENTAL APPROVALS. All governmental filings and
approvals necessary for the transfer of the Acquired Assets and the performance
of the Facility Lease shall have been made or obtained.
8.8. APPROVAL OF TRANSACTION BY BENEFICIARIES. All of the
beneficiaries of the Trust shall have authorized, and ratified the authority of
the Trust, as a shareholder of the Seller, to authorize, the transactions
contemplated by this Agreement in a writing in the form of Exhibit 8.8 which
such writings shall be delivered to Buyer at the Closing.
8.9. AGREEMENTS WITH COLQUIST AND PUGH. Gary Colquist and Mark
Pugh have entered into employment agreements with Buyer in form and substance
acceptable to Buyer.
8.10. SUBORDINATION AGREEMENT. Seller shall have executed that
certain form of Subordination Agreement required by Star Bank, N.A. in
connection with the financing obtained for this transactions by Buyer.
8.11. INTER-COMPANY DEBT. Seller shall have forgiven the debt
of St. Lawrence, Inc. reflected in Seller's Financial Statements.
SECTION 9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The
obligations of Seller under this Agreement are subject to the satisfaction, on
or before the Closing Date, of each of the following conditions:
9.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer contained in this Agreement shall be
true on the Closing Date with the same effect as if they were made on the
Closing Date, except as affected by transactions contemplated hereby and except
that any such representation and warranty made as of a specified date other than
the date of this Agreement shall have been true on and as of such date.
9.2. PERFORMANCE OF AGREEMENTS. Buyer shall have performed all
obligations and agreements and complied with all covenants contained in this
Agreement or in any document delivered in connection herewith to be performed
and complied with by the respective party on or before the Closing Date.
9.3. LITIGATION. No litigation shall be pending or overtly
threatened by any Person not a party hereto or an affiliate of such Person (a)
seeking an injunction against the transactions contemplated by this Agreement,
or (b) which might adversely affect the operation of the Business by Buyer. No
injunction against the transactions contemplated by this Agreement shall exist.
9.4. APPROVAL OF BUYER'S BOARD OF DIRECTORS. The Board of
Directors of the Buyer shall have approved and authorized the transactions
contemplated by this Agreement.
SECTION 10. DEFINITIONS.
10.1. SPECIFIC TERMS. Certain words and terms as used in this
Agreement shall have the meanings given to them by the definitions and
descriptions in this Section, and such definitions shall be equally applicable
to both the singular and plural forms of any of the words and terms defined
below.
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<PAGE> 30
"Acquired Assets" has the definition set forth in Section 1.1.
"Affiliate" of any party means any legal entity directly or indirectly
controlling, controlled by or under direct or indirect common control of or with
such party. For the purposes of this definition, "control" when used with
respect to any specified entity means the power to direct the management and
policies of such entity, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings relative to the foregoing.
"Assumed Contracts" has the definition set forth in Section 1.1.7.
"Assumed Liabilities" has the definition set forth in Section 1.3.
"Business" has the definition set forth in the Preamble.
"Business Premises" means the parcel of real estate upon which the
Facility is located.
"Closing" means the closing of the transactions contemplated hereby to
occur on the Closing Date.
"Closing Date" means the date of Closing determined pursuant to Section
2.
"Contractual Obligation" means, for any Person, any agreement,
instrument or guaranty, whether written or oral, to which such Person is a party
or by which such Person or any of its assets or properties are bound.
"Disclosure Schedule" means the schedule of information concerning
Seller or the Business as called for by this Agreement attached hereto and made
a part hereof.
"Earnout Period" means the first, second, third and fourth year periods
following Closing.
"Environmental Law" means any applicable law, ordinance, rule,
prohibition or regulation relating respectively to air, water, or noise
pollution, or the production, storage, labeling or disposition of wastes or
hazardous or toxic substances, or the environmental conditions on, beneath, or
emanating from the Facility or the Business Premises.
"Equipment" has the definition set forth in Section 1.1.2.
"Excluded Liabilities" has the definition set forth in Section 1.4.
"Facility" means the real property and improvements thereon located at
12500 South Wayne Road, Romulus, Michigan 48174 and further described in the
Facility Lease.
"Financial Statements" means the financial statements, footnotes,
accountants' reports and schedules of Seller for the fiscal years ending on
December 31 in each of 1993 through 1996, inclusive, and for the three month
period ended March 31, 1997.
"Hazardous Material" means any "Hazardous Wastes," "Hazardous
Substances," "Hazardous Materials," "Pollutants, Toxic Substances," "Solid
Wastes" or "Contaminants" (as such terms are defined in any applicable
Environmental Law).
"Lien" means any mortgage, deed of trust, lien, charge, security
interest or encumbrance of any kind upon, or pledge of, any property or asset,
whether now owned or hereafter acquired, and includes the acquisition of, or
agreement to acquire, any property or asset subject to any conditional sale
agreement or other title retention agreement.
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<PAGE> 31
"Market Maker" means any brokerage firm listed as a market maker in the
most recent Annual Report of the Buyer or in the absence of such listing any
registered broker/dealer which in fact makes a market in the Shares.
"Obsolete Inventory" means any stock or component inventory at the
Facility that was purchased more than two years prior to the Closing Date.
"Payables" has the definition set forth in Section 1.3.3.
"Permits" has the definition set forth in Section 1.1.5.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government.
"Personal Property" has the definition set forth in Section 1.1.3.
"Prepaids" has the definition set forth in Section 1.1.9.
"Purchase Price" has the definition set forth in Section 1.5.
"Registration Expenses" means (i) all registration and prospectus
filing fees, (ii) fees and expenses of compliance with securities or blue sky
laws, (iii) printing expenses, (iv) reasonable fees and disbursements of counsel
for the Buyer and customary fees and expenses for independent certified public
or chartered accountants retained by the Buyer, (v) the reasonable fees and
expenses of any special experts retained by the Buyer in connection with such
registration, (vi) fees and expenses in connection with any review of
underwriting arrangements by the NASD including fees and expenses of any
"qualified independent underwriter," (vii) fees and expenses of listing the
Shares on an exchange or other trading system, and (viii) fees and disbursements
of underwriters customarily paid by issuers or sellers of securities.
"Requirement of Law" means, for any Person, any law, rule, judgment,
regulation, order, writ, injunction or decree of any court or government and any
decision or ruling of any arbitrator to which such Person is a party or by which
such Person or any of its assets or property is bound or affected or from which
such Person derives benefits, and if such Person is a corporation, its charter
documents and code of regulations or bylaws; and means, for the Facility, any
building code, zoning, health code or similar regulation or requirement imposed
by any government or any other authorized entity.
"Retained Assets" has the definition set forth in Section 1.2.
"SEC" means the Securities and Exchange Commission.
"Schedule of Contracts" means Schedule 1.1.7.
"Shares" means the shares of common stock, without par value, of Buyer.
"Stock" means the 100,000 Shares delivered by Buyer to the Escrow Agent
under Section 1.5.2.
"Trust" means the Raymond G. Rosbury Trust under Agreement dated
November 14, 1988 as amended and restated.
"Work in Progress" has the definition set forth in Section 1.2.5.
10.2. ACCOUNTING TERMS. All accounting terms not specifically
defined in this Agreement will be construed in accordance with generally
accepted accounting principles.
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SECTION 11. MISCELLANEOUS.
11.1. WAIVER. No purported waiver by either party of any
default by the other party of any term or provision contained herein shall be
deemed to be a waiver of such term or provision unless the waiver is in writing
and signed by the waiving party. No such waiver shall in any event be deemed a
waiver of any subsequent default under the same or any other term or provision
contained herein.
11.2. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding between the parties concerning the subject matter of this
Agreement and incorporates all prior negotiations and understandings. There are
no covenants, promises, agreements, conditions or understandings, either oral or
written, between them relating to the subject matter of this Agreement other
than those set forth herein. No representation or warranty has been made by or
on behalf of either party to this Agreement (or any officer, director, employee
or agent thereto to induce the other party to enter into this Agreement or to
abide by or consummate any transactions contemplated by any terms of this
Agreement, except representations and warranties expressly set forth herein. No
alteration, amendment, change or addition to this Agreement shall be binding
upon either party unless in writing and signed by the party to be charged.
11.3. JOINT PREPARATION. This Agreement is to be deemed to
have been prepared jointly by the parties hereto and any uncertainty or
ambiguity existing herein, if any, shall not be interpreted against either
party, but shall be interpreted according to the application of the rules of
interpretation for arm's length agreements.
11.4. NO PARTNERSHIP. Nothing contained in this Agreement
shall be deemed or construed by the parties hereto or by any third Person to
create the relationship of principal and agent or of partnership or of joint
venture.
11.5. SUCCESSORS. Each and all of the provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto,
and except as otherwise specifically provided in this Agreement, their
respective successors and assigns; provided, however, that, unless otherwise
provided, neither this Agreement, nor any rights herein granted may be assigned,
transferred or encumbered by either party.
11.6. NOTICES. Any consent, waiver, notice, demand, request or
other instrument required or permitted to be given under this Agreement shall be
in writing and be deemed to have been properly given when delivered in person,
four business days after sent by certified or registered United States mail,
return receipt requested, postage prepaid or one business day after sent by (a)
national prepaid overnight delivery service, or (b) telecopy or other facsimile
transmission (followed with hard copy sent by national prepaid overnight
delivery service), addressed:
If to Seller:
St. Lawrence, Inc.
Attention: Linda S. Rosbury
12500 South Wayne Road
Romulus, Michigan 48174
Facsimile: (313) 941-4085
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<PAGE> 33
with a copy to:
John J. Hern, Jr., Esq.
Clark Hill P.L.C.
500 Woodward Avenue, Suite 3500
Detroit, Michigan 45226-3435
Facsimile: (313) 962-4348
and if to Buyer:
PH Group Inc.
2365 Scioto Harper Drive
Columbus, Ohio 43204
Attn: Charles T. Sherman
Facsimile:(614) 279-8774
with a copy to:
Arter & Hadden
10 West Broad Street
Suite 2100
Columbus, Ohio 43215-3422
Attn: D. David Carroll, Esq.
Facsimile:(614) 221-0479
Notice of change of address will be effective only upon receipt.
11.7. CAPTIONS. The captions and section numbers appearing in
this Agreement are inserted only as a matter of convenience. They do not define,
limit, construe or describe the scope or intent of the provisions of this
Agreement.
11.8. PARTIAL INVALIDITY. If any term or provision of this
Agreement or the application thereof to any Person or circumstance, shall be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to Persons or circumstances, other than those as to which
it is held invalid, shall both be unaffected thereby and each term or provision
of this Agreement shall be valid and be enforced to the fullest extent permitted
by law.
11.9. REPRESENTATIONS TO THE KNOWLEDGE OF A PARTY. Whenever a
representation or warranty is made herein as being "to the knowledge of" Seller,
it is understood that the officers and/or directors of Seller have made or
caused to be made (and the results thereof reported to them) an inquiry of its
officers, directors, its relevant employees, which in all cases shall include
Gary Colquist and Mark Pugh, and the Trustees which is appropriate to determine
the accuracy of such representation or warranty.
11.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which shall constitute one and the same
instrument, and either party hereto may execute this Agreement by signing one or
more counterparts.
11.11. THIRD PARTIES. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give any Person, other than the
parties hereto and their successors or assigns, any rights, remedies or
obligations under or by reason of this Agreement.
11.12. EXPENSES. Each party hereto shall pay its own expenses,
including attorneys and accounting fees, incurred in connection with the
transaction described herein. In
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<PAGE> 34
the event of any litigation with respect to this Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees and costs.
11.13. GOVERNING LAW: ARBITRATION. This Agreement shall be
governed and construed by the provisions hereof and in accordance with the laws
of the State of Michigan applicable to agreements to be performed in the State
of Michigan. All disputes arising out of this Agreement shall be resolved
through binding arbitration under the commercial arbitration rules of the
American Arbitration Association to be held at Toledo, Ohio (except for
condemnation proceedings which shall be held where the condemning authority
brings the action). The decision of the arbitrators shall be in writing and
contain the findings of fact and conclusions of law. The arbitrators shall have
no power to amend or modify this Agreement or issue any award which by its terms
amends or modifies this Agreement.
11.14. COOPERATION OF EMPLOYEES. Upon the written request of
Seller and at Seller's sole expense (employee's salary or wages per hour for
each hour during Buyer's business hours that such employee is assisting Seller
hereunder), Buyer shall require that Buyer's employees reasonably aid in the
prosecution or defense of lawsuits involving the conduct of the Business by
Seller about which any such employee has knowledge.
11.15. TIME IS OF THE ESSENCE. The parties agree that with
respect to the performance of all obligations under this Agreement, time will be
of the essence.
The parties have caused this Agreement to be executed as of the date first above
written.
ST. LAWRENCE PRESS COMPANY, INC.
By: /s/ Linda S. Rosbury Friedley
------------------------------------
Name: Linda S. Rosbury Friedley
Its: President
PH GROUP INC.
By: /s/ Charles T. Sherman
------------------------------------
Name: Charles T. Sherman
Its: President
THE RAYMOND G. ROSBURY TRUST
(solely with respect to Sections 2.4 and 5)
By: /s/ Patrick J. Keating
------------------------------------
Patrick J. Keating, Trustee
By: /s/ Stephen O. Stieler
------------------------------------
Stephen O. Stieler, Trustee
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<PAGE> 35
DISCLOSURE SCHEDULE
1.1.1. Inventory
1.1.2. Equipment
1.1.3. Personal Property
1.1.4. Intellectual Property
1.1.5. Permits
1.1.7. Schedule of Contracts
1.1.9. Prepaids by Seller
1.1.11. Outstanding Quotes
1.2.1. Retained Assets
1.2.5. Work in Progress and Buyer's Reimbursement to Complete
1.3.2. Vacation and Personal Day Benefits (to specify the amount assumed)
1.3.3. Payables
1.4.16. Excluded Liabilities
1.5.3.1. Seller's Customers and Seller's Presses
3.8.3. Inventory, Materials and Services Necessary to Complete WIP
7.9. Promotional Costs
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<PAGE> 36
EXHIBITS
Exhibit 1.5. Value of Acquired Assets
Exhibit 1.5.1. Calculation of Cash Component of Purchase Price (Closing
Statement)
Exhibit 1.5.2. Escrow Agreement
Exhibit 1.5.2.4. Piggy Back Registration Rights
Exhibit 1.5.3.3. Shipment Schedule
Exhibit 2.1.5. Bill of Sale
Exhibit 2.4.1. Form of Consulting Agreement
Exhibit 2.4.2. Form of Non-Competition Agreement
Exhibit 2.4.2. Assignment and Assumption Agreement
Exhibit 8.6. Facility Lease
Exhibit 8.8. Approval of Beneficiaries
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<PAGE> 37
EXHIBIT 1.5
VALUE OF ACQUIRED ASSETS AND ALLOCATION OF PURCHASE PRICE
(i) Inventory, as determined by physical count conducted by Buyer and
Seller, will be purchased at a value to be negotiated as of the Closing
Date as specified on Exhibit 1.5.1;
(ii) Equipment and Personal Property will be purchased at fair market value
as indicated by a recognized appraisal firm obtained by Buyer and
Seller unless otherwise agreed to as specified in Schedule 1.1.2;
(iii) Prepaids will be purchased at face value; and
(iv) Payables will be assumed at face value.
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<PAGE> 38
EXHIBIT 1.5.1
CALCULATION OF CASH COMPONENT OF PURCHASE PRICE
The Cash Component of the Purchase Price shall equal the sum of:
<TABLE>
<S> <C>
Paid at Closing $250,000.00
Value of Inventory $ 77,000.00
Value of Equipment $237,635.00
Value of Personal Property $ 0.00
Prepaids $ 5,770.00
Prorations $ 3,107.00
Value of Assumed Orders (Schedule 1.1.7) $ 23,500.00
-----------
$597,012.00
minus
Value of Payables $252,235.00
Value of Deposits on Assumed Orders (Schedule 1.1.7) $443,949.00
TOTAL CASH COMPONENT (99,172.00)
</TABLE>
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<PAGE> 1
EXHIBIT 3.1.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
PH GROUP INC.
These amended and restated articles supersede and replace the
original articles and all amendments thereto.
ARTICLE I
The name of said corporation shall be PH GROUP INC.
ARTICLE II
The place in Ohio where its principal office is to be located is in
Columbus, Franklin County, Ohio.
ARTICLE III
The purposes for which it is formed are to engage in any lawful act or
activity for which corporations may be formed under sections 1701.01 to 1701.98,
inclusive, of the Revised Code. This corporation reserves the right at any time
and from time to time substantially to change its purpose in the manner now or
hereafter permitted by statute. Any change of the purposes of the corporation
which is authorized or approved by the holders of shares entitling them to
exercise the proportion of the voting power of the corporation now or hereafter
required by statute, shall be binding and conclusive upon every shareholder as
if he had voted therefore. No shareholder, notwithstanding that he may have
voted against such change of purposes or may have objected thereto in writing,
shall be entitled to payment of the fair cash value of his shares.
ARTICLE IV
The maximum number of shares which the corporation is authorized to
have outstanding is ten million (10,000,000), all of which shall be common
shares without par value. Each common share shall be equal to every other common
share. The holders of common shares shall be entitled to one (1) vote for each
share upon all matters presented or required to be presented to the
shareholders. No holder of common shares of the corporation shall have any
preemptive right to purchase or subscribe to any shares or other securities of
the corporation, whether now or hereafter issued or authorized.
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<PAGE> 2
ARTICLE V
A. Notwithstanding any provision of the Revised Code of Ohio, now or
hereafter in force, requiring for any purpose the vote of the holders of shares
entitling them to exercise two-thirds or any other proportion of the voting
power of the corporation or of any class or classes of shares thereof, such
action, unless otherwise expressly required by statute, may be taken by the vote
of the holders of shares entitling them to exercise a majority of the voting
power of the corporation or of such class or classes.
B. The corporation reserves the right to amend, alter, change or repeal
any provision contained in the Articles of Incorporation, in the manner now or
hereafter prescribed or permitted by statute, and all rights conferred upon
shareholders herein are granted subject to this reservation.
C. No person shall be disqualified from being a director of the
corporation because he or she is or may be a party to, and no director of the
corporation shall be disqualified from entering into any contract or other
transaction to which the corporation is or may be a party. No contract or other
transaction to which the corporation is or may be a party shall be void or
voidable for the reason that any director or officer or other agent of the
corporation is a party thereto, or otherwise has any direct or indirect interest
in such contract or transaction or in any other party thereto, for reason that
any interested director or officer or other agent of the corporation authorizes
or participates in authorization of such contract or transaction, (a) if the
material facts as to such interest are disclosed or are otherwise known to the
Board of Directors at the time the contract or transaction is authorized and at
least a majority of the disinterested members vote for or otherwise take action
authorizing such contract or transaction even though such disinterested
directors are less than a quorum, or (b) if the contract or transaction (i) is
not less favorable to the corporation than an arm's length contract or
transaction in which no director or officer or other agent of the corporation
has any interest or (ii) is otherwise fair to the corporation as of the time it
is authorized. Any interested director may be counted in determining the
presence of a quorum at any meeting of the Board of Directors which authorizes
the contract or transaction.
D. Section 1701.831 of the Ohio Revised Code, as amended form time to
time, shall not apply to "control share acquisitions" of shares of stock of the
corporation, as defined in Section 1701.01(Z) of the Ohio Revised Code, as
amended from time to time.
E. No shareholder of the corporation may cumulate voting power in the
election of directors.
ARTICLE VI
The Board of Directors is hereby authorized to determine whether any,
and, if any, what part of the surplus, however created or arising, shall be used
or disposed of or declared in dividends or paid to shareholders, and, without
action for the shareholders, to use and apply such surplus, or any part thereof,
at any time or from time to time, in the purchase or acquisition of shares of
any class now or hereafter authorized, voting-trust certificates for shares,
bonds, debentures, notes, scrip, warrants, obligations, evidences of
indebtedness of the corporation, and other securities of the corporation, to
such extent or amount and in such manner and upon such terms as the Board of
Directors shall deem expedient.
ARTICLE VII
The provisions of Section 1701.13(E)(5)(a) of the Ohio Revised Code or
any statute of like tenor or effect which is hereafter enacted shall not apply
to the corporation. The corporation shall, to the fullest extent not prohibited
by any provision of applicable law other than Section
54
<PAGE> 3
1701.13(E)(5)(a) of the Ohio Revised Code or any statute of like tenor or effect
which is hereafter enacted, indemnify each director and officer against any and
all costs and expenses (including attorney fees, judgments, fines, penalties,
amounts paid in settlement and other disbursements) actually and reasonably
incurred by or imposed upon such person in connection with any action, suit,
investigation or proceeding (or any claim or other matter therein), whether
civil, criminal, administrative or otherwise becomes or is threatened to be made
a party by reason of being or at any time having been, while such a director or
officer, an employee or other agent of the corporation or, at the direction or
request of the corporation, a director, trustee, officer, administrator, manager
employee, adviser or other agent of or fiduciary for any other corporation,
partnership, trust venture or other entity or enterprise including any employee
benefit plan.
The corporation shall indemnify any other person to the extent such
person shall be entitled to indemnification under Ohio law by reason of being
successful on the merits or otherwise in defense of an action to which such
person is named a party by reason of being an employee or other agent of the
corporation, and the corporation may further indemnify any such person if it is
determined on a case by case basis by the Board of Directors that
indemnification is proper in the specific case.
Notwithstanding anything to the contrary in these Articles of
Incorporation, no person shall be indemnified to the extent, if any, it is
determined by the Board of Directors or by written opinion of legal counsel
designated by the Board of Directors for such purpose that indemnification is
contrary to applicable law.
55
<PAGE> 1
EXHIBIT 3.2.
AMENDED AND RESTATED CODE OF REGULATIONS
OF
PH GROUP INC.
ARTICLE I MEETINGS OF SHAREHOLDERS
Section 1. Annual Meetings. The annual meeting of the shareholders for
the election of directors, for the consideration of the reports to be laid
before such meeting, and for the transaction of such other business as may
properly come before such meeting, shall be held on the first Thursday in May or
on such other date as may be fixed by the Board of Directors.
Section 2. Special Meetings. Special meetings of the shareholders shall
be held whenever called by any of the following: President, Chairman of the
Board, a majority of the directors, and persons who hold at least one-quarter of
the outstanding common shares of the Company.
Section 3. Place of Meetings. All meetings of shareholders shall be
held at the principal office of the Company in Ohio, unless otherwise provided
by a majority of the directors. Meetings of the shareholders may be held outside
of the State of Ohio.
Section 4. Notice of Meetings.
(A) A written notice stating the time, place and purpose of every
meeting of the shareholders shall be given either by personal delivery or by
mail, not less than seven nor more than sixty days before the date of the
meeting to each shareholder of record entitled to notice of the meeting by, or
at the direction of the President or the Secretary of the Company. If mailed,
such notice shall be addressed to the shareholder at his address as it appears
on the records of the Company. If any meeting is adjourned to another time or
place, no further notice as to such adjourned meeting need be given other than
by announcement at the meeting at which such adjournment is taken.
(B) Upon request in writing delivered either in person or by registered
mail to the President or the Secretary by any persons entitled to call a meeting
of shareholders, such officer shall forthwith cause to be given to the
shareholders entitled thereto notice of a meeting to be held on a date not less
than seven nor more than sixty days after the receipt of such request, as such
officer may fix. If such notice is not given within fifteen days after the
delivery or mailing of such request, the persons calling the meeting may fix the
time of meeting and give notice thereof as provided in Division (A) of this
section. or cause such notice by any designated representative.
(C) Any shareholder, either before or after any meeting, may waive any
notice required to be given by law or under these regulations; and whenever all
of the shareholders entitled to vote shall meet in person or by proxy and
consent to holding a meeting, it shall be valid for all purposes without call or
notice, and at such meeting any action may be taken.
Section 5. Quorum. At any meeting of shareholders the holders of a
majority of the common shares of the Company then outstanding and entitled to
vote who are present in person or represented by proxy, shall constitute a
quorum for all purposes, but no action required by law or by the Articles of
Incorporation to be authorized or taken by the holders of a designated
proportion of the shares of any particular class or of each class may be
authorized or taken by a
56
<PAGE> 2
lesser proportion. The holders of a majority of the voting shares represented at
a meeting, whether or not a quorum is present, may adjourn such meeting from
time to time.
Section 6. Shareholders Entitled to Vote. At each meeting of
shareholders, every shareholder of record of shares entitled to vote shall be
entitled to such number of votes with respect to each share standing in his name
on the books of the Company on each matter properly submitted to the
shareholders for their vote as the Articles of Incorporation provide.
Section 7. Votes Necessary. At all elections of directors, the
candidates receiving the greatest number of votes shall be elected. All other
questions shall be determined by a majority vote of the shares entitled to vote
except where a greater number or proportion is required by the Ohio Revised
Code.
Section 8. Proxies. At meetings of the shareholders, any record holder
of shares as to which he is entitled to vote may be represented and may vote by
a proxy or proxies appointed by an instrument in writing if such instrument is
filed with the Secretary before the person holding such proxy votes thereunder.
No proxy shall be valid after the expiration of eleven months after the date of
its execution, unless the shareholder executing it shall have specified thereon
the length of time it is to continue in force.
Section 9. Order of Business. The order of business at all meetings of
shareholders shall be determined by the presiding officer unless otherwise
determined by a vote of a majority in interest of shareholders entitled to vote
who are present in person or represented by proxy at such meeting.
Section 10. Action Without Meeting. Any action which may be taken at
any meeting of shareholders may be taken without a meeting if authorized by a
writing signed by all of the holders of shares who would be entitled to notice
of a meeting for such purpose and who would be entitled to vote thereat.
ARTICLE II DIRECTORS
Section 1. Powers. Except where the law, the Articles, or these
Regulations require action to be authorized or taken by shareholders, all of the
authority of the Company shall be exercised by, or as directed by the Board of
Directors. Without prejudice to the general powers conferred by or implied in
the preceding section, the Directors, acting as a Board, shall have power.
(A) To fix, define and limit the powers and duties of all officers and
to fix the salaries of all officers;
(B) To appoint, and at their discretion, with or without cause, to
remove, or suspend, such subordinate officers, assistants, managers, agents and
employees as the Directors may from time to time deem advisable, and to
determine their duties and fix their compensation;
(C) To require any officer, agent or employee of the Company to furnish
a bond for faithful performance in such amount and with such sureties as the
Board may approve;
(D) To designate a depository or depositories of the funds of the
Company and the officer or officers or other persons who shall be authorized to
sign notes, checks, drafts, contracts, deeds, mortgages, and other instruments
on behalf of the Company;
(E) To appoint and remove transfer agents and/or registrars for the
Company's shares;
57
<PAGE> 3
(F) To establish such rules and regulations respecting the issuance and
transfer of shares and certificates for shares as the Board of Directors may
consider reasonable.
Section 2. Number of Directors. The Board of Directors shall be divided
into two classes; the initial term of office of those of the first class to
expire at the annual meeting next ensuring; of the second class one year
thereafter; and at each annual election held after the initial adoption of this
regulation by the shareholders and the election of Directors held at the meeting
at which this regulation is adopted, directors shall be chosen for a full term
of two years to succeed those whose terms expire. When this regulation is
initially adopted, the Board of Directors shall consist of seven members and the
first class shall consist of three members and the second class shall consist of
four members. Thereafter, the Board of Directors may fix the total number of
Directors constituting the full Board of Directors and the number of Directors
in each class, but the total number of Directors shall not exceed nine nor shall
the number of Directors in any class exceed five. Subject to the foregoing, the
classes of Directors need not have the same number of members. No reduction in
the total number of Directors or in the number of Directors in any class shall
be effective to remove any Director or to reduce the term of any Director.
Notwithstanding any other provision set forth in the Regulations of the Company,
if the Board of Directors increases the number of Directors in a class, it may
fill the vacancy created thereby for the full remaining term of a Director in
that class even though such term may extend beyond the next annual election. The
Board of Directors may fill any vacancy occurring for any other reason for the
full remaining term of the Director whose death, resignation or removal caused
the vacancy, even though such term may extend beyond the next annual election. A
director who reaches the age of 67 shall thereafter no longer be eligible for
reelection to the Board of Directors. Directors need not be either residents of
the State of Ohio or shareholders of the Company.
Section 3. Removal of Directors. All the Directors, or all the
Directors of a particular class, or any individual Director may be removed from
office, without assigning any cause, by the vote of the holders of shares
entitling them to exercise a majority of the voting power for the election of
directors; provided, that unless all the Directors, or all the Directors of a
particular class, are removed, no individual Director shall be removed in case
the votes of a sufficient number of shares are cast against his removal which,
if cumulatively voted at an election of all the Directors, or all the Directors
of a particular class, as the case may be, would be sufficient to elect at least
one Director.
Section 4. Vacancies. In case of any vacancy among the Directors,
including a vacancy caused by an increase in the number of Directors at a time
other than at the annual meeting, the remaining Directors, though less than a
majority of the whole authorized number of Directors by an affirmative vote of
the majority thereof, may elect a Director to fill such vacancy to hold office
until the next annual election and until his successor shall be elected.
Section 5. Power to Adopt By-Laws. The Board of Directors may adopt and
amend from time to time, By-Laws for its government, consistent with this Code
of Regulations, the Articles of Incorporation, and the laws of Ohio.
Section 6. Meetings. After each annual election of Directors, the
Directors shall meet as soon as practicable for the purpose of organization, the
election and appointment of officers and the transaction of other business. The
Directors shall hold such other meetings from time to time as the Directors may
deem necessary, and such meetings as may from time to time be called by the
Chairman of the Board, President, Vice President or any two Directors. Meetings
may be held at the principal office of the Company or at such other place within
or outside the State of Ohio as a majority of the Directors may, from time to
time, determine. The President or Secretary shall give each Director notice of
each meeting of the Directors either by personal delivery or by mail, telegram,
or cablegram at least two days before the meeting. Notice of the time, place and
purpose of any meeting of the directors may be waived by any Director.
58
<PAGE> 4
Section 7. Committees. The Directors may, from time to time, appoint an
Executive Committee or any other committee of the Directors, to consist of not
less than three Directors, and may delegate to any other committee any of the
authority of the Directors, however conferred, other than that of filling
vacancies among the Directors, or in any committee of the Directors. Any such
committee shall at all times act under the direction and control of the
Directors and shall make reports to the Directors of its acts, which reports
shall form a part of the records of the Company.
Section 8. Quorum. At all meetings of the Directors, a majority of all
the Directors then in office shall constitute a quorum, but less than such
majority may adjourn the meeting of the Directors from time to time, and at any
adjourned meeting any business may be transacted as if the meeting had been held
as originally called. The action of a majority of Directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors
except as other wise may be provided by law, the Articles, or in this Code of
Regulations.
Section 9. Compensation of Directors. By the affirmative vote of a
majority of those in office, and irrespective of any financial or personal
interest of any of them, the Directors shall have authority to establish
reasonable compensation, which may include pension, disability and death
benefits, for services to the Company by Directors and officers, or to delegate
such authority to one or more officers or Directors.
Section 10. Indemnification, Each Director, officer and employee,
whether or not then in office (and his heirs,' executors and administrators)
shall be indemnified by the Company against costs and expenses (including
counsel fees) reasonably incurred by him, and shall be reimbursed by the Company
for any such costs or expenses paid by him, in connection with any action, suit
or proceeding to which he may be made a party by reason of his being or having
been a Director, officer or employee of the Company or by reason of having
served at the request of the Company as a Director, officer or employee of the
Company or by reason of his having served at the request of the Company as a
Director or officer of another company, except in relation to matters as to
which he shall be finally adjudged in such action, suit or proceeding to have
been derelict in the performance of his duty as such director, officer or
employee. The foregoing qualification shall not prevent a settlement by the
Company prior to final adjudication when such settlement appears to be in the
interest of the Company. The foregoing right of indemnification shall also cover
amounts paid by any director, officer or employee (or his heirs, executors, or
administrators) in settlement of any such action, suit or proceeding if the
Company shall have previously given its written approval thereof, and shall not
be exclusive of other rights to which, any director, officer or employee may be
entitled as a matter of law.
Section 11. Action of Directors Without a Meeting. Any action which may
be authorized or taken at a meeting of the Board of Directors may be authorized
or taken without a meeting in a writing or writings signed by all of the
Directors.
ARTICLE III OFFICERS
Section 1. Executive Officers. The executive officers of the Company
shall be a Chairman of the Board, President, one or more Vice Presidents, a
Secretary and a Treasurer, and such other officers and assistant officers as the
Directors may, in their judgment, consider necessary. The same person may hold
any two or more offices of the Company. Officers may be elected at any time, but
as soon as is convenient after a meeting of shareholders at which a majority of
Directors are elected, the Directors shall hold a meeting at which they shall
consider the election of officers.
Section 2. Tenure of Officers. Any officer may be removed, either with
or without cause, at any time, by the affirmative vote of a majority of all the
Directors then in office; such removal, however, shall be without prejudice to
the contract rights of the person so removed, if any.
59
<PAGE> 5
Section 3. Chairman of the Board and/or President. The Chairman of the
Board and/or President shall be the active executive officer of the Company and
shall exercise supervision over the business of the Company and over its several
officers, subject, however, to the control of the Board of Directors. He shall
preside at all meetings of shareholders and, in the absence of, or if a Chairman
of the Board shall not have been elected, the President shall preside at
meetings of the Board of Directors. He shall have authority to sign all
certificates for shares and all deeds, mortgages, bonds, contracts, notes and
other instruments requiring his signature; and shall have all the powers and
duties prescribed by the General Corporation Act and such others as the Board of
Directors may from time to time assign him.
Section 4. Secretary. The Secretary shall: keep books for the transfer
of shares and keep the share certificate book, the stock register and such other
books and records as may be necessary in order to keep an accurate record of
shareholders; keep minutes of all proceedings of the shareholders and Directors;
give notices for the Company; issue and attest all certificates of shares; and
in general perform all the duties usually incident to such office or which may
be assigned by the shareholders or Directors.
Section 5. Treasurer. The Treasurer shall: have the custody and control
of all funds and securities belonging to the Company, except as otherwise
provided by the Directors, and shall be responsible for all monies and other
property of the Company in his custody; keep accurate accounts of the finances
of the Company and hold the books and records open for inspection and
examination of the Directors and any committee of shareholders appointed for
such inspection, and shall present abstracts of said books and records at annual
meetings of shareholders, or any other meetings requested; and perform all the
duties usually incident to such office or which may be assigned by the
shareholders or Directors. He shall give bond in such sum with such security as
the Directors may require, if any, for the faithful performance of his duties.
Section 6. Assistant and Subordinate Officers. The Board of Directors
may appoint such assistant and subordinate officers as it may deem desirable.
Each such officer shall hold office during the pleasure of the Board of
Directors, and perform such duties as the Board of directors may prescribe.
The Board of Directors may, from time to time, authorize any officer to
appoint and remove subordinate officers, to prescribe their authority and
duties, and to fix their compensation.
Section 7. Duties of Officers May be Delegated. In the absence of any
officer of the Company, or for any other reason the Board of Directors may deem
sufficient, the Board of Directors may delegate, for the time being, the powers
or duties, or any of them of such officer to any other officer, or to any
Director.
Section 8. Contracts. Checks. Notes and Other Instruments. All
contracts, agreements and notes authorized by the Board of Directors shall,
unless otherwise directed by the Board of Directors or unless otherwise required
by law, be signed by the President or Secretary. All checks shall be signed by
at least two authorized persons. The Board of Directors may, however, authorize
other officers to sign checks, drafts and orders for the payment of money, and
may designate different combinations of officers and employees who may, in the
name of the Company, execute checks, drafts, contracts, agreements and other
instruments in its behalf.
ARTICLE IV CAPITAL STOCK
Section 1. Share Certificates. Certificates for shares, certifying the
number of fully-paid shares owned, shall be issued to each shareholder in such
form as shall be approved by the
60
<PAGE> 6
Board of Directors. Such certificates shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary. Such certificates or
shares shall be transferable in person or by attorney, but, except as
hereinafter provided and in the case of lost, stolen, mutilated or destroyed
certificates, no transfer of shares shall be 'entered upon the records of the
Company until the previous certificate, if any, given for the same, shall have
been surrendered and canceled.
Section 2. Lost, Mutilated or Destroyed Certificates. If any
certificate for shares is lost, stolen, mutilated or destroyed, the Board of
Directors may authorize the issue of a new certificate in place thereof upon
such terms and conditions as it may deem advisable. The Board of Directors in
its discretion may refuse to issue such new certificates until the Company has
been indemnified to its satisfaction and until it is protected to its
satisfaction by a final order or decree of a court of competent jurisdiction.
Section 3. Registered Shareholders. A person in whose name shares are
of record on the books of the Company shall conclusively be deemed the
unqualified owner thereof for all purposes and to have capacity to exercise all
rights of ownership. Neither the Company nor any transfer agent of the Company
shall be bound to recognize any equitable interest in or claim to such shares on
the part of any other person, whether disclosed upon such certificate or other
wise, nor shall they be obliged to see the execution of any trust or obligation.
ARTICLE V MISCELLANEOUS
Section 1. Record Date. The Directors may fix a date not exceeding
sixty days preceding the date of any meeting of shareholders, the date for the
payment of any dividend or the date for any other corporate action for which a
record date is authorized by law, as record date for the determination of the
shareholders entitled to notice of, and to vote at, any such meetings and any
adjournment thereof, or entitled to receive payment of any such dividend or to
participate in any such other corporate action, and in such case the
shareholders of record on said date and only such shareholders shall be entitled
to such notice of, and to vote any such meeting and any adjournment thereof, or
to be entitled to receive payment of any such dividend or be entitled to
participate in any such other corporate action.
Section 2. Fiscal Year. The fiscal year of the company shall end on
December 31 of each year, or on such other days as may be fixed from time to
time by the Board of Directors.
Section 3. Amendments. This Code of Regulations or any Article or
Section hereof may be adopted, changed, repealed, or amended without a meeting
by the written consent of the holders of two-thirds of the shares entitled to
vote upon such proposal or by the holders of a majority of the shares entitled
to vote upon such proposal at a meeting held for that purpose.
61
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