<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: October 4, 1996
Commission File Number 1-5097
JOHNSON CONTROLS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-0380010
(State of Incorporation) (I.R.S. Employer
Identification No.)
5757 North Green Bay Avenue, P.O. Box 591, Milwaukee, WI 53201
(Address of principal executive office)
Registrant's telephone number, including area code (414) 228-1200
<PAGE> 2
Item 2: ACQUISITION OR DISPOSITION OF ASSETS
On October 1, 1996, Johnson Controls, Inc. (the Registrant) completed its
acquisition of Prince Holding Corporation (Prince) from its owners pursuant to
the provisions of a Stock Purchase Agreement dated as of July 17, 1996. The
Registrant paid a cash purchase price of approximately $1.2 billion.
Prince is a privately held automotive interiors supplier based in Holland,
Michigan. Prince supplies interior systems and components including overhead
systems and consoles, door panels, floor consoles, visors and armrests.
There are no material relationships between Prince and the Registrant or any of
its affiliates, any director or officer of the Registrant, or any associate of
such director or officer.
The acquisition will initially be financed with short-term debt. Permanent
financing is expected to take the form of a combination of short- term and
long-term debt securities. Actual financing has not been finalized.
Item 7: FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of Prince for the periods specified in Rule
3-05(b) (attached as Attachment 1 hereto);
(b) Pro forma financial information required pursuant to Article 11 of
Regulation S-X (attached as Attachment 2 hereto);
(c) Exhibits:
(2.1) Stock Purchase Agreement dated as of July 17, 1996 among
Johnson Controls, Inc. and Prince Holding Corporation.
(2.2) Amendment No. 1 to Stock Purchase Agreement dated as of
September 25, 1996.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
JOHNSON CONTROLS, INC.
Date: October 4, 1996 By: John P. Kennedy
Vice President, Secretary and
General Counsel
<PAGE> 4
ATTACHMENT 1
Combined Financial Statements
Prince Holding Corporation
Fiscal years ended September 30, 1995 and
October 1, 1994
Ernst & Young LLP
<PAGE> 5
Report of Independent Auditors
Board of Directors
Prince Holding Corporation
We have audited the accompanying combined balance sheets of Prince Holding
Corporation (principally comprised of the automotive interior components and
systems business of Prince Holding Corporation) as of September 30, 1995 and
October 1, 1994, and the related combined statements of shareholders' equity,
operations and cash flows for the fiscal years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Prince Holding
Corporation at September 30, 1995 and October 1, 1994, and the combined results
of their operations and their cash flows for the fiscal years then ended in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Grand Rapids, Michigan
October 30, 1995, except Notes A and C,
as to which the date is September 26, 1996
1
<PAGE> 6
Prince Holding Corporation
Combined Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30, OCTOBER 1,
1995 1994
------------ ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,034,275 $ 39,348,011
Trade accounts receivable, less allowances of $2,373,000
in 1995 and $2,073,000 in 1994 107,611,099 79,908,341
Inventories (Note B):
Finished goods and work in process 15,494,297 9,727,582
Raw materials 11,411,687 9,947,642
------------ ------------
26,905,984 19,675,224
Deferred income taxes (Note E) 8,303,000 6,810,000
Other current assets 2,566,502 2,433,917
------------ ------------
Total current assets 163,420,860 148,175,493
Property, plant and equipment (Note C):
Land 15,757,948 10,604,502
Buildings and improvements 76,046,968 57,017,880
Machinery and equipment 129,507,943 96,880,279
Construction in progress 22,760,624 8,233,560
------------ ------------
244,073,483 172,736,221
Less accumulated depreciation 101,395,896 87,651,832
------------ ------------
142,677,587 85,084,389
Other assets 863,721 2,437,369
------------ ------------
Total assets $306,962,168 $235,697,251
============ ============
</TABLE>
2
<PAGE> 7
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 OCTOBER 1,
1995 1994
------------------ ----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 51,217,114 $ 53,292,709
Salaries, wages and related withholdings 23,478,627 17,487,300
Deposits 944,978 1,155,484
Charitable contributions 7,002,243 3,711,925
Retirement plan contributions (Note D) 7,892,598 6,250,000
Distributions payable to shareholders 10,000,000 10,000,000
Export sales commissions (Note G) 7,967,947 6,087,705
Income taxes 15,011,288 9,667,288
Other accrued expenses 14,462,127 12,961,044
Current maturities of long-term debt 200,000 200,000
------------ ------------
Total current liabilities 138,176,922 120,813,455
Long-term debt, less current maturities (Note C) 70,994,000 42,290,000
Other noncurrent liabilities:
Deferred income taxes (Note E) 3,254,000 4,266,000
Other 972,841 1,454,224
------------ ------------
4,226,841 5,720,224
Shareholders' equity:
Preferred stock, $230 par value, nonvoting, 7%
cumulative: authorized 200,000 shares; issued and
outstanding 122,962 shares in 1995 and 140,979
shares in 1994 28,281,260 32,425,170
Common stock:
Class A, $0.33 par value, voting: authorized
720,000 shares; issued and outstanding 319,830 shares 106,610 106,610
Class B, $0.33 par value, nonvoting: authorized
280,000 shares; issued and outstanding 126,128 shares 42,043 42,043
Additional paid-in capital 4,197,333 4,197,333
Retained earnings 60,199,297 30,100,426
Accumulated translation adjustments 737,862 1,990
------------ ------------
Total shareholders' equity 93,564,405 66,873,572
------------ ------------
Total liabilities and shareholders' equity $306,962,168 $235,697,251
============ ============
</TABLE>
See accompanying notes to combined financial statements.
3
<PAGE> 8
Prince Holding Corporation
Combined Statements of Shareholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL ACCUMULATED TOTAL
PREFERRED ------------ PAID-IN RETAINED TRANSLATION SHAREHOLDERS'
STOCK CLASS A CLASS B CAPITAL EARNINGS ADJUSTMENTS EQUITY
------------ -------- ------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at October 3, 1993 $33,621,170 $106,610 $42,043 $4,197,333 $ 33,024,041 $(11,165) $ 70,980,032
Net earnings 34,373,114 34,373,114
Distributions to shareholders (35,000,000) (35,000,000)
Cash dividends on preferred stock (2,296,729) (2,296,729)
Redemption of 5,200 shares of
preferred stock (1,196,000) (1,196,000)
Equity adjustments from foreign
currency translation 13,155 13,155
----------- -------- ------- ---------- ------------ ---------- ------------
Balances at October 1, 1994 32,425,170 106,610 42,043 4,197,333 30,100,426 1,990 66,873,572
Net earnings 46,043,517 46,043,517
Distributions to shareholders (13,700,000) (13,700,000)
Cash dividends on preferred stock (2,244,646) (2,244,646)
Redemption of 18,017 shares of
preferred stock (4,143,910) (4,143,910)
Equity adjustments from foreign
currency translation 735,872 735,872
----------- -------- ------- ---------- ------------ ---------- ------------
Balances at September 30, 1995 $28,281,260 $106,610 $42,043 $4,197,333 $ 60,199,297 $737,862 $ 93,564,405
=========== ======== ======= ========== ============ ========== ============
</TABLE>
( ) Denotes deduction.
See accompanying notes to combined financial statements.
4
<PAGE> 9
Prince Holding Corporation
Combined Statements of Operations
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------
SEPTEMBER 30, OCTOBER 1,
1995 1994
---------------- -----------
<S> <C> <C>
Net sales $701,495,995 $508,489,008
Cost of products sold 573,719,867 409,929,836
------------ ------------
Gross margin 127,776,128 98,559,172
Selling, general and administrative expenses (Note G) 50,855,610 41,740,757
------------ ------------
Operating income 76,920,518 56,818,415
Other expenses (income):
Interest expense 2,294,170 2,345,863
Foreign currency exchange loss 2,004,669 29,902
Investment income (750,579) (934,465)
Miscellaneous (250,259) (116,999)
------------ ------------
3,298,001 1,324,301
------------ ------------
Earnings before income taxes 73,622,517 55,494,114
Income taxes (Note E) 27,579,000 21,121,000
------------ ------------
Net earnings $ 46,043,517 $ 34,373,114
============ ============
</TABLE>
See accompanying notes to combined financial statements.
5
<PAGE> 10
Prince Holding Corporation
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------
SEPTEMBER 30, OCTOBER 1,
1995 1994
------------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 46,043,517 $ 34,373,114
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 18,207,312 12,544,470
Deferred income tax credit (2,505,000) (4,804,000)
Changes in operating assets and liabilities:
Trade accounts receivable (27,529,072) (21,960,016)
Inventories (7,057,073) (5,481,113)
Other operating assets 1,441,063 (2,282,531)
Trade accounts payable (2,075,595) 27,894,772
Other operating liabilities 18,957,679 4,817,161
------------ ------------
Net cash provided by operating activities 45,482,831 45,101,857
INVESTING ACTIVITIES
Additions to property, plant and equipment (76,115,779) (24,192,270)
Other 315,269 92,791
------------ ------------
Net cash used in investing activities (75,800,510) (24,099,479)
FINANCING ACTIVITIES
Cash distributions to shareholders (13,700,000) (25,000,000)
Cash dividends on preferred stock (2,244,646) (2,296,729)
Proceeds from line-of-credit borrowings 34,074,000
Payments on line-of-credit borrowings (5,170,000)
Proceeds from long-term borrowings 40,000,000
Payments on long-term debt (200,000) (20,200,000)
Redemption of preferred stock (4,143,910) (1,196,000)
------------ ------------
Net cash provided by (used in) financing activities 8,615,444 (8,692,729)
Effect of foreign exchange rate changes 388,499
------------ ------------
Increase (decrease) in cash and cash equivalents (21,313,736) 12,309,649
Cash and cash equivalents at beginning of year 39,348,011 27,038,362
------------ ------------
Cash and cash equivalents at end of year $ 18,034,275 $ 39,348,011
============ ============
</TABLE>
( ) Denotes use of cash and cash equivalents.
See accompanying notes to combined financial statements.
6
<PAGE> 11
Prince Holding Corporation
Notes to Combined Financial Statements
September 30, 1995 and October 1, 1994
NOTE A--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
On July 17, 1996, Prince Holding Corporation entered into a stock purchase
agreement with Johnson Controls, Inc. whereby Johnson Controls, Inc. agreed to
purchase all of the Class A and B common stock of Prince Holding Corporation,
and acquire its automotive interior components and systems business and certain
of its other assets and liabilities (collectively "the Company" or "the
Business") for a stated amount of approximately $1,350,000,000, less assumed
debt and other liability adjustments.
In connection with the stock purchase, certain wholly owned subsidiaries of
Prince Holding Corporation will be spun off to its present shareholders just
prior to the consummation of the purchase transaction and, therefore, such
subsidiaries have not been included in these combined financial statements.
The accompanying financial statements have been prepared to present the
combined historical financial position, results of operations and cash flows of
the Business purchased by Johnson Controls, Inc. as if the Business existed as
a stand-alone entity. Management believes that these combined financial
statements reasonably include all historical costs of the Business for the
periods presented. All intercompany transactions have been eliminated.
FISCAL YEAR
The Company's fiscal year is the 52- or 53-week period ending on the Saturday
nearest the end of September. The fiscal years presented herein are both
52-week years.
REVENUE RECOGNITION
Revenue is recognized on the sale of products when the related items have been
shipped and legal title has passed to the customer.
8
<PAGE> 12
Prince Holding Corporation
Notes to Combined Financial Statements (continued)
NOTE A--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
CASH EQUIVALENTS
The Company considers money market accounts and all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
TRADE ACCOUNTS RECEIVABLE
The Company does not require collateral or other security on trade accounts
receivable.
INVENTORIES
Substantially all inventories are stated at the lower of last-in, first-out
cost or market (see Note B).
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded on the basis of cost and include
expenditures for new facilities, major renewals and betterments. Normal repairs
and maintenance are expensed as incurred.
Depreciation of plant and equipment is computed using the straight-line method
over the estimated useful lives of the related assets.
TRADE ACCOUNTS PAYABLE
Trade accounts payable include $9,055,000 at September 30, 1995 and $13,700,000
at October 1, 1994 which relate to checks not yet presented for payment to the
bank.
INCOME TAXES
The provision for income taxes is based on earnings reported in these combined
financial statements and assumes that the Business files a separate income tax
return.
9
<PAGE> 13
Prince Holding Corporation
Notes to Combined Financial Statements (continued)
NOTE A--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME TAXES (CONTINUED)
Deferred income tax assets and liabilities are determined by applying currently
enacted tax laws and rates to the cumulative temporary differences between the
carrying value of assets and liabilities for financial statement and income tax
purposes. Deferred income tax expense or credit is measured by the net change
in the deferred income tax asset and liability accounts during the year (see
Note E).
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company's financial instruments consist of cash equivalents and debt. The
carrying amounts of these financial instruments approximate their fair value at
September 30, 1995 and October 1, 1994. Fair value was determined using
discounted cash flow analyses and current interest rates for similar
instruments. The Company does not hold or issue financial instruments for
trading purposes.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect amounts reported in the combined financial statements and
accompanying notes. Actual results could differ from those estimates.
NOTE B--INVENTORIES
If the first-in, first-out method of inventory valuation had been used,
inventories would have been $2,478,000 and $2,290,000 higher than reported at
September 30, 1995 and October 1, 1994, respectively.
10
<PAGE> 14
Prince Holding Corporation
Notes to Combined Financial Statements (continued)
NOTE C--DEBT AND COMMITMENTS
Long-term debt consists of the following obligations:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 OCTOBER 1, 1994
------------------ ---------------
<S> <C> <C>
Term notes payable $40,000,000 $40,000,000
Unsecured line-of-credit borrowings 28,904,000
Mortgage notes payable 2,250,000 2,450,000
Other 40,000 40,000
----------- -----------
71,194,000 42,490,000
Less current maturities 200,000 200,000
----------- -----------
$70,994,000 $42,290,000
=========== ===========
</TABLE>
The term notes payable bear interest at 6.06% and require annual principal
payments totaling $5,700,000 beginning on December 20, 1996.
The Company's existing line-of-credit agreements were refinanced subsequent to
year end. The new agreements allow the Company to borrow, including the
issuance of letters of credit, up to $125,000,000. Based on current
indebtedness, borrowings bear interest at the Company's option of either the
prime rate less 2.06%, LIBOR plus 0.1875% or at rates of up to the federal
funds rate plus 0.2375% on a transaction bid loan basis. The Company may at any
time convert up to $50,000,000 of borrowings to a term loan with a maturity of
up to seven years. The new agreements expire on October 15, 1996 and,
accordingly, outstanding line-of-credit borrowings at September 30, 1995 are
considered refinanced on a long-term basis.
The line-of-credit and term note agreements contain certain restrictive
financial covenants with which the Company is in compliance at September 30,
1995. Unrestricted retained earnings based on provisions of the agreements are
approximately $20,000,000 at September 30, 1995.
The mortgage notes payable relate to two mortgages on Company buildings, which
are held by a Company-sponsored retirement trust and a retirement trust of a
related company. The mortgages require monthly principal payments of $16,667
($200,000 annually), plus interest at 14%, through December 2006 and are secured
by the related property.
11
<PAGE> 15
Prince Holding Corporation
Notes to Combined Financial Statements (continued)
NOTE C--DEBT AND COMMITMENTS (CONTINUED)
Principal maturities of long-term debt during the four years subsequent to
1996, after consideration of the terms of the new line-of-credit agreements,
are as follows: 1997--$5,920,000; 1998--$5,920,000; 1999--$34,804,000;
2000--$5,900,000.
Cash payments of interest on all of the Company's outstanding debt totaled
$3,429,000 in 1995 and $1,716,000 in 1994. Interest of $1,135,000 was
capitalized in 1995 as a result of various construction projects.
At September 30, 1995, the Company has commitments of approximately $10,000,000
for the purchase of equipment and the construction of new facilities.
NOTE D--RETIREMENT PLAN
The Company has a retirement plan which covers substantially all employees.
Contributions to the plan are at the discretion of the Board of Directors and
amounted to $7,325,000 in 1995 and $6,695,000 in 1994.
NOTE E--INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------
SEPTEMBER 30, OCTOBER 1,
1995 1994
------------- ------------
<S> <C> <C>
Currently payable:
Federal $26,979,000 $22,425,000
State 3,105,000 3,500,000
Deferred (credit) (2,505,000) (4,804,000)
------------ -----------
$27,579,000 $21,121,000
============ ===========
</TABLE>
12
<PAGE> 16
Prince Holding Corporation
Notes to Combined Financial Statements (continued)
NOTE E--INCOME TAXES (CONTINUED)
A reconciliation of the Company's total income tax expense and the amount
computed by applying the statutory federal income tax rate of 35% to earnings
before income taxes is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------
SEPTEMBER 30, OCTOBER 1,
1995 1994
------------- ------------
<S> <C> <C>
Income taxes at statutory rate $25,591,000 $19,246,000
State income taxes, net of federal income tax reduction 390,000 1,950,000
Other 1,598,000 (75,000)
------------- -----------
$27,579,000 $21,121,000
============= ===========
</TABLE>
Deferred income taxes reflect the net income tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting and income tax purposes. Significant components of the
Company's deferred income tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, OCTOBER 1,
1995 1994
------------ ----------
<S> <C> <C>
Deferred income tax assets:
Inventory and accounts receivable
valuation adjustments $ 3,572,000 $ 2,737,000
Accrued expenses not deductible until paid 4,338,000 4,900,000
Unrealized foreign currency exchange loss 719,000
Other 16,000 13,000
----------- -----------
8,645,000 7,650,000
Deferred income tax liabilities:
Accelerated depreciation for income tax purposes (3,046,000) (3,073,000)
Other (550,000) (2,033,000)
----------- -----------
(3,596,000) (5,106,000)
----------- -----------
Net deferred income tax assets $ 5,049,000 $ 2,544,000
=========== ===========
</TABLE>
13
<PAGE> 17
Prince Holding Corporation
Notes to Combined Financial Statements (continued)
NOTE E--INCOME TAXES (CONTINUED)
Undistributed earnings of the Company's foreign subsidiaries are not
significant and are considered to be indefinitely reinvested; accordingly, no
provision for federal income taxes has been provided.
Prince Holding Corporation made income tax payments of $24,600,000 in 1995 and
$29,500,000 in 1994.
NOTE F--LEASES
The Company leases certain buildings, machinery and computer equipment under
noncancelable operating leases. At September 30, 1995, minimum rental payments
due under these leases are as follows: 1996--$2,971,000; 1997--$898,000;
1998--$232,000; 1999--$18,000.
Total rental expense under all operating leases was $6,219,000 in 1995 and
$5,017,000 in 1994.
NOTE G--RELATED PARTY TRANSACTIONS
In addition to the long-term debt obligations described in Note C, the Company
paid commissions of $10,000,000 in 1995 and $8,185,000 in 1994 to Prince ESC,
Inc., a domestic international sales corporation not combined in these
financial statements, for services associated with the sale of certain of its
export products.
NOTE H--RESEARCH AND DEVELOPMENT EXPENSES
Expenses for research and development were $36,806,000 in 1995 and $39,356,000
in 1994. Research and development expenses include product conception and
ideation, design, development and engineering for new products, and significant
improvements to existing products.
14
<PAGE> 18
Prince Holding Corporation
Notes to Combined Financial Statements (continued)
NOTE I--INDUSTRY INFORMATION
The Company manufactures, sells and distributes interior components and systems
to the automotive industry. Export sales totaled $148,871,000 in 1995 and
$113,544,000 in 1994. Foreign assets and operations are not significant. Over
80% of the Company's sales in each period presented are to various operating
entities of General Motors Corporation, Ford Motor Company and Chrysler
Corporation.
15
<PAGE> 19
Prince Holding Corporation
Combined Financial Statements
Nine Months Ended June 29, 1996
<PAGE> 20
Prince Holding Corporation
Combined Balance Sheets
(Unaudited)
June 29, July 1,
1996 1995
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 30,601,288 $ 22,056,786
Trade accounts receivable - net 106,106,076 85,601,794
Inventories:
Finished goods and work-in-process 12,793,937 13,818,823
Raw materials 10,387,977 11,799,510
------------ ------------
23,181,914 25,618,333
Other current assets 10,822,629 8,958,708
------------ ------------
Total current assets 170,711,907 142,235,621
Property, plant and equipment, at cost 271,180,735 227,957,170
Less accumulated depreciation 118,201,955 96,197,782
------------ ------------
Net property, plant and equipment 152,978,780 131,759,388
Other noncurrent assets 2,852,590 2,059,979
------------ ------------
Total assets $326,543,277 $276,054,988
============ ============
The accompanying notes are an integral part of the financial statements.
1
<PAGE> 21
Prince Holding Corporation
Combined Balance Sheets
(Unaudited)
June 29, July 1,
1996 1995
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 65,897,633 $ 47,615,328
Lines of credit - 20,724,000
Salaries, wages and related withholdings 29,854,608 22,847,383
Charitable contributions 8,207,189 5,657,951
Retirement plan contributions 8,336,117 6,573,598
Income taxes 9,626,288 3,567,288
Other accrued expenses 32,259,001 19,275,867
Current maturities of long-term debt 5,900,000 200,000
------------ ------------
Total current liabilities 160,080,836 126,461,415
Long-term debt, less current maturities 36,240,000 42,140,000
Other noncurrent liabilities 4,402,713 6,148,071
Total shareholders' equity 125,819,728 101,305,502
------------ ------------
Total liabilities and shareholders' equity $326,543,277 $276,054,988
============ ============
The accompanying notes are an integral part of the financial statements
2
<PAGE> 22
Prince Holding Corporation
Combined Statements of Operations
(Unaudited)
Nine Months Ended
--------------------------------
June 29, 1996 July 1, 1995
-------------- -------------
Net Sales $ 655,514,216 $ 531,502,021
Cost of products sold 518,381,459 439,593,710
-------------- --------------
Gross Margin 137,132,757 91,908,311
Selling, general and administrative expenses 46,341,484 34,284,104
-------------- --------------
Operating income 90,791,273 57,624,207
Other expenses (income):
Interest expense 1,797,758 1,971,414
Interest income (236,052) (202,723)
Foreign currency transaction (gains) losses (41,629) 1,280,354
Miscellaneous (62,472) (280,553)
-------------- --------------
1,457,605 2,768,492
-------------- --------------
Earnings before income taxes 89,333,668 54,855,715
Income taxes 32,150,000 20,025,000
-------------- --------------
Net Earnings $ 57,183,668 $ 34,830,715
============== ==============
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 23
Prince Holding Corporation
Combined Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------------
June 29, 1996 July 1, 1995
------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 57,183,668 $ 34,830,715
Adjustments to reconcile net earnings to cash provided
by operating activities:
Noncash charges to earnings:
Depreciation and amortization 17,942,088 13,042,962
Changes in operating assets and liabilities:
Trade accounts receivable 1,505,023 (8,694,453)
Inventories 3,724,070 (5,943,109)
Amounts due from affiliated companies (1,010,207) (120,753)
Other operating assets (1,366,715) 677,932
Trade accounts payable 2,940,519 (5,677,381)
Other operating liabilities 23,439,267 (5,969,812)
------------ ------------
Net cash provided by operating activities 104,357,713 22,146,101
INVESTING ACTIVITIES
Additions to property, plant and equipment (27,868,355) (59,825,754)
Other 60,000 213,212
------------ ------------
Net cash used in investing activities (27,808,355) (59,612,542)
FINANCING ACTIVITIES
Payments on long-term debt (150,000) (150,000)
Cash distributions to shareholders (18,000,000) -
Cash dividends on preferred stock (1,480,200) (1,683,485)
Redemption of preferred stock (289,800) -
Redemption of common stock (14,738,400) -
Net (decrease) increase in line of credit (28,904,000) 20,724,000
------------ ------------
Net cash used in financing activities (63,562,400) 18,890,515
Effect of foreign exchange rate changes (419,945) 1,284,701
------------ ------------
Increase in cash and cash equivalents 12,567,013 (17,291,225)
Cash and cash equivalents at beginning of year 18,034,275 39,348,011
------------ ------------
Cash and cash equivalents at end of period $ 30,601,288 $ 22,056,786
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
4
<PAGE> 24
Prince Holding Corporation
Notes to Combined Financial Statements
(Unaudited)
June 29, 1996 and July 1, 1995
NOTE A - BASIS OF PRESENTATION
On July 17, 1996, Prince Holding Corporation entered into a stock purchase
agreement with Johnson Controls, Inc. whereby Johnson Controls, Inc. agreed to
purchase all of the Class A and B common stock of Prince Holding Corporation,
and acquire its automotive interior components and systems business and certain
of its other assets and liabilities (collectively "the Company" or "the
Business") for a stated amount of approximately $1,350,000,000, less assumed
debt and other liability adjustments.
In connection with the stock purchase, certain wholly owned subsidiaries of
Prince Holding Corporation will be spun off to its present shareholders just
prior to the consummation of the purchase transaction and, therefore, such
subsidiaries have not been included in these combined financial statements.
The accompanying financial statements have been prepared to present the
combined historical financial position, results of operations and cash flows of
the Business purchased by Johnson Controls, Inc. as if the Business existed as
a stand-alone entity. Management believes that these combined financial
statements reasonably include all historical costs of the Company for the
periods presented. All intercompany transactions have been eliminated.
NOTE B - FOOTNOTE DISCLOSURES
The condensed combined financial statements have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. The Company believes that the disclosures made in this
document are adequate to make the information presented not misleading. It is
suggested that these condensed financial statements be read in conjunction with
the Company's audited financial statements and footnotes thereto for the years
ended September 30, 1995 and October 1, 1994, included in this Form 8-K.
NOTE C - SUPPLEMENTAL CASH FLOW INFORMATION
For purposes of the Combined Statements of Cash Flows, the Company considers
all investments with a maturity of three months or less at the time of purchase
to be cash equivalents.
Prince Holding Corporation made income tax payments for the nine months ended
June 29, 1996 and July 1, 1995 of approximately $31,000,000 and $20,400,000,
respectively. Cash payments of interest on all outstanding debt of the Company
totaled approximately $3,300,000 and $3,200,000 for the nine months ended June
29, 1996 and July 1, 1995, respectively.
5
<PAGE> 25
ATTACHMENT 2
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
<PAGE> 26
JOHNSON CONTROLS, INC. AND SUBSIDIARIES
AND
PRINCE HOLDING CORPORATION
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
The following combined condensed financial statements present, on a
pro forma basis, the effect of the acquisition (Acquisition) by Johnson
Controls, Inc. (JCI) of Prince Holding Corporation (Prince) on October 1, 1996.
The pro forma data assume that the Acquisition will be accounted for as a
purchase, and as such, the assets acquired and liabilities assumed will be
recorded at their fair values at the time of the Acquisition. Studies,
including appraisals of properties and identifiable intangible assets and
evaluations of underlying business units by JCI's management, will be made to
determine the fair values of net assets acquired; however, such studies are not
expected to be completed for several months and will result in adjustments to
the estimates set forth herein. The actual allocation of the purchase price to
the net assets acquired will only be made upon final determination of the fair
values of the assets acquired and liabilities assumed.
The Pro Forma Combined Condensed Financial Statements do not
necessarily reflect the operations of JCI and Prince as they would have been
had the two companies existed as a single entity for the periods shown and the
operating results should not be deemed to be indicative of the future
operations of the combined companies.
The Pro Forma Combined Condensed Financial Statements should be read
in conjunction with the historical financial statements and notes thereto of
JCI and Prince.
1
<PAGE> 27
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
The following Pro Forma Combined Condensed Statements of Income combine (i) the
results of operations of JCI for the year ended September 30, 1995 with the
results of operations of Prince for the year ended September 30, 1995, and (ii)
the results of operations of JCI for the nine months ended June 30, 1996 with
the results of operations of Prince for the nine months ended June 30, 1996, on
the assumption the Acquisition had been consummated on October 1, 1994 on the
bases indicated in the Notes to Pro Forma Combined Condensed Financial
Statements.
<TABLE>
<CAPTION>
Twelve Months Ended September 30, 1995
-----------------------------------------------------------
Historical Pro Forma
---------------------------- ------------------------------
JCI Prince Adjustments Combined
------------ ------------ ---------------- -------------
(in millions, except per share data)
<S> <C> <C> <C> <C>
Net sales $8,330.3 $701.5 $9,031.8
Cost of sales 7,072.6 573.7 $2.3 (f) 7,655.3
6.7 (f)
------------ ---------- ---------- ------------
Gross profit 1,257.7 127.8 (9.0) 1,376.5
Selling, general and
administrative expenses 808.9 50.9 (10.0) (e) 877.6
27.8 (f)
------------ ---------- ---------- ------------
Operating income 448.8 76.9 (26.8) 498.9
Interest income 6.2 0.0 6.2
Interest expense (57.4) (2.3) (86.1) (f) (145.8)
Miscellaneous-net (9.7) (1.0) (2.2) (c) (12.9)
------------ ---------- ---------- ------------
Other income (expense) (60.9) (3.3) (88.3) (152.5)
------------ ---------- ---------- ------------
Income before income taxes
and minority interests 387.9 73.6 (115.1) 346.4
Provision for income taxes 162.9 27.6 (37.1) (f) 156.4
(0.9) (c)
3.9 (e)
Minority interests in net
earnings of subsidiaries 29.2 0.0 29.2
------------ ---------- ---------- ------------
Net income $195.8 $46.0 ($81.0) $160.8
============ ========== ========== ============
Earnings available for common
shareholders $186.4 $151.4
============ ============
Earnings per share (g)
Primary $4.53 $3.68
============ ============
Fully diluted $4.27 $3.48
============ ============
Weighted Average Shares
Primary 41.2 41.2
============ ============
Fully diluted 44.5 44.5
============ ============
</TABLE>
2
<PAGE> 28
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Continued)
<TABLE>
<CAPTION>
Nine Months Ended June 30, 1996
--------------------------------------------------------
Historical Pro Forma
-------------------------- --------------------------
JCI Prince Adjustments Combined
------------ ------------ ----------- ---------
(in millions, except per share data)
<S> <C> <C> <C> <C>
Net sales $7,332.3 $655.5 $7,987.8
Cost of sales 6,335.6 518.4 $1.5 (f) 6,860.5
5.0 (f)
-------- ------- ------- ---------
Gross profit 996.7 137.1 (6.5) 1,127.3
Selling, general and
administrative expenses 661.6 46.3 (10.2)(e) 718.5
20.8 (f)
--------- -------- ------- ---------
Operating income 335.1 90.8 (17.1) 408.8
Interest income 5.6 0.2 5.8
Interest expense (56.6) (1.8) (64.5)(f) (122.9)
Miscellaneous-net 8.5 0.1 (1.5)(c) 7.1
--------- -------- ------- ---------
Other income (expense) (42.5) (1.5) (66.0) (110.0)
--------- -------- ------- ---------
Income before income taxes
and minority interests 292.6 89.3 (83.1) 298.8
Provision for income taxes 119.9 32.1 (27.7)(f) 127.7
(0.6)(c)
4.0 (e)
Minority interests in net
earnings of subsidiaries 20.0 0.0 20.0
-------- -------- ------- ---------
Net income $152.7 $57.2 ($58.8) $151.1
======== ======== ======= =========
Earnings available for common
shareholders $145.6 $144.0
======== =========
Earnings per share (g)
Primary $3.49 $3.45
======== =========
Fully diluted $3.31 $3.28
======== =========
Weighted Average Shares
Primary 41.8 41.8
======== =========
Fully diluted 44.8 44.8
======== =========
</TABLE>
3
<PAGE> 29
PRO FORMA COMBINED CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
The following Pro Forma Combined Condensed Statement of Financial Position
combines the financial position of JCI and Prince at June 30, 1996, on the
assumption that the Acquisition had been consummated on June 30, 1996 on the
bases indicated in the Notes to Pro Forma Combined Condensed Financial
Statements.
<TABLE>
<CAPTION>
June 30, 1996
---------------------------------------------------------
Historical Pro Forma
-------------------------- ---------------------------
JCI Prince Adjustments Combined
------------- ---------- ------------ ------------
(in millions)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 164.3 $ 30.6 $ 194.9
Accounts receivable - net 1,692.2 106.1 1,798.3
Inventories 429.8 23.2 $ 2.5 (b) 455.5
Other current assets 358.3 10.8 369.1
--------- -------- --------- ---------
Current assets 2,644.6 170.7 2.5 2,817.8
Property, plant and equipment-net 1,600.9 153.0 50.0 (b) 1,803.9
Goodwill-net 586.7 0.0 1,110.8 (b) 1,697.5
Investments in partially-owned
affiliates 143.2 0.0 143.2
Other noncurrent assets 123.5 2.9 100.0 (b) 226.4
--------- -------- --------- ---------
Total assets $ 5,098.9 $ 326.6 $ 1,263.3 $ 6,688.8
========= ======== ========= =========
LIABILITIES AND EQUITY
Short-term debt $247.2 $ 0.0 $ 200.0 (d) $ 447.2
Current portion of long-term debt 21.4 5.9 27.3
Accounts payable 1,264.0 65.9 1,329.9
Accrued compensation and benefits 276.1 38.2 314.3
Accrued income taxes 76.0 9.6 85.6
Billings in excess of costs and
earnings on uncompleted contracts 100.7 0.0 100.7
Other current liabilities 372.8 40.5 60.0 (b) 473.3
--------- -------- --------- ---------
Current liabilities 2,358.2 160.1 260.0 2,778.3
Long-term debt 767.3 36.3 1,065.0 (d) 1,868.6
Postretirement health and other
benefits 167.1 0.0 167.1
Other noncurrent liabilities 368.0 4.4 36.1 (b) 436.5
28.0 (c)
Shareholders' equity 1,438.3 125.8 (125.8)(c) 1,438.3
--------- -------- --------- ---------
Total liabilities and equity $ 5,098.9 $ 326.6 $ 1,263.3 $ 6,688.8
========= ======== ========= =========
</TABLE>
4
<PAGE> 30
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(a) The Pro Forma Combined Condensed Financial Statements reflect the
purchase by JCI of Prince stock at a stated cost of $1,350 million,
less certain assumed debt and other liability adjustments of
approximately $108 million, plus acquisition expenses of approximately
$23 million, for a net purchase price of $1,265 million.
(b) In connection with the preparation of the Pro Forma Combined Condensed
Statement of Financial Position, the book values of certain assets and
liabilities of Prince were adjusted to estimated fair values as
follows:
<TABLE>
<S> <C>
(in millions)
To increase property, plant and equipment to
estimated fair value $ 50.0
To adjust patent, trade name and other
identifiable intangible assets to estimated
fair values 100.0
To eliminate LIFO inventory reserve 2.5
To record the estimated liability for nonrecurring
acquisition-related expenses to be incurred
by Prince prior to the acquisition (60.0)
To record deferred taxes on the above adjustments (36.1)
To record the estimated excess of purchase
price over acquired net assets at estimated
fair values (goodwill) 1,110.8
-------
Total increase in net assets to reflect
estimated fair values $1,167.2
========
</TABLE>
5
<PAGE> 31
These adjustments reflect estimates for the purpose of preparing the
Pro Forma Combined Condensed Financial Statements. The final
determination of fair value adjustments to be made to Prince's net
assets and liabilities will be based on appraisals and evaluations
expected to be completed over the next several months which will
result in changes to the estimates shown.
(c) The following adjustments have been made to eliminate the June 30,
1996 shareholders' equity accounts of Prince:
<TABLE>
<S> <C>
(in millions)
Preferred Stock $ 28.0
Common Class A 0.1
Capital in excess of par value 4.2
Retained earnings 93.2
Cumulative translation adjustments 0.3
------
$125.8
======
</TABLE>
The $28 million of Preferred Stock will continue to be held by the
current shareholders and, as such, this amount has been included in
Other noncurrent liabilities in the Pro Forma Combined Condensed
Statement of Financial Position.
Dividends on the Preferred Stock of $2.2 million (less the related tax
effect of $0.9 million) for the twelve months ended September 30, 1995
and $1.5 million (less the related tax effect of $0.6 million) for the
nine months ended June 30, 1996 have been reflected as an expense in
the Pro Forma Combined Condensed Statements of Income.
(d) The Acquisition is expected to be financed with an estimated $1,265
million of net proceeds from the anticipated issuance of a combination
of short-term and long-term debt securities. The short-term debt
securities are estimated to carry a 5.75% interest rate. The
long-term debt securities are estimated to have varying maturities
from 3 to 30 years, and carry a weighted average interest rate of
7.0%. Actual financing has not been finalized.
6
<PAGE> 32
(e) The following adjustments have been made in preparing the Pro Forma
Combined Condensed Statements of Income to reflect, on a pro forma
basis, the elimination of certain nonrecurring expenses from the
Prince Statements of Income.
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
September 30, June 30,
1995 1996
------------------- ----------------
(in millions)
<S> <C> <C>
To adjust for export sales commissions
paid to Prince's domestic international
sales corporation $10.0 $10.2
Tax effect related to the above
adjustment (3.9) (4.0)
----- -----
$ 6.1 $ 6.2
===== =====
</TABLE>
7
<PAGE> 33
(f) The following adjustments have been made in preparing the Pro Forma
Combined Condensed Statements of Income to reflect, on a pro forma
basis, the estimated expense adjustments and related income tax
effects associated with the anticipated debt offering and adjustments
to Prince's assets and liabilities summarized elsewhere herein:
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
September 30, June 30,
1995 1996
----------------- ---------------
(in millions)
<S> <C> <C>
Increase in interest expense
to reflect additional short-term and
long-term borrowings (at interest rates
of 5.75% and 7.0% for short-term
and long-term debt, respectively) $86.1 $64.5
Change in depreciation expense to reflect fair
value adjustment and establishment of new lives 2.3 1.5
Amortization of fair value
adjustments to identifiable
intangible assets 6.7 5.0
Tax effect and amortization of
deferred taxes relating to the
above adjustments (37.1) (27.7)
Amortization of goodwill 27.8 20.8
---- ----
$85.8 $64.1
===== =====
</TABLE>
8
<PAGE> 34
(g) Primary earnings per share are computed by dividing net income, after
deducting dividend requirements on the Series D Convertible Preferred
Stock, by the weighted average number of common shares and common
stock equivalents which would arise from the exercise of stock
options. Fully diluted earnings are computed by deducting from net
income the after-tax compensation expense which would arise from the
assumed conversion of the Series D Convertible Preferred Stock, which
was $5.8 million for the twelve months ended September 30, 1995 and
$4.2 million for the nine months ended June 30, 1996. Fully diluted
weighted average shares assume the conversion of the Series D
Convertible Preferred Stock, if dilutive, plus the dilutive effect of
the stock options.
9
<PAGE> 1
EXHIBIT 2.1
EXECUTION COPY
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
among
PRINCE HOLDING CORPORATION,
THE SELLERS LISTED ON SCHEDULE 1 HERETO
and
JOHNSON CONTROLS, INC.
-----------------------------------
Dated as of July 17, 1996
-----------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
1. Purchase and Sale of Shares . . . . . . . . . . . . . . . . . . . 2
2. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Purchase Price Adjustment . . . . . . . . . . . . . . . . . 3
3. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . 6
(a) Buyer's Obligation . . . . . . . . . . . . . . . . . . . . . 6
(b) Sellers' Obligation . . . . . . . . . . . . . . . . . . . . 6
4. Representations and Warranties of PHC and the Sellers . . . . . . 7
(a) Authority; No Conflicts . . . . . . . . . . . . . . . . . . 7
(b) Ownership of the Shares . . . . . . . . . . . . . . . . . . 8
(c) Financial Schedules . . . . . . . . . . . . . . . . . . . . 8
(d) Title to Tangible Assets Other than Real Property Interests 9
(e) Material Leases . . . . . . . . . . . . . . . . . . . . . . 9
(f) Title to Real Property . . . . . . . . . . . . . . . . . . . 10
(g) Intellectual Property . . . . . . . . . . . . . . . . . . . 11
(h) Material Contracts . . . . . . . . . . . . . . . . . . . . . 11
(i) Litigation; Decrees . . . . . . . . . . . . . . . . . . . . 12
(j) Absence of Changes or Events . . . . . . . . . . . . . . . . 13
(k) Compliance with Applicable Laws . . . . . . . . . . . . . . 13
(l) Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 13
(m) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(n) Environmental Compliance . . . . . . . . . . . . . . . . . . 14
(o) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 15
(p) Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 15
5. Covenants of PHC . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Access . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Ordinary Conduct . . . . . . . . . . . . . . . . . . . . . . 15
(c) Preservation of Business . . . . . . . . . . . . . . . . . . 16
(d) Resignations . . . . . . . . . . . . . . . . . . . . . . . . 16
6. Representations and Warranties of Buyer . . . . . . . . . . . . . 17
(a) Authority; No Conflicts . . . . . . . . . . . . . . . . . . 17
(b) Actions and Proceedings, etc. . . . . . . . . . . . . . . . 17
(c) Availability of Funds . . . . . . . . . . . . . . . . . . . 18
(d) No Knowledge of Misrepresentations or Omissions . . . . . . 18
(e) Acquisition of Shares for Investment . . . . . . . . . . . . 18
</TABLE>
- ii -
<PAGE> 3
<TABLE>
<S> <C>
(f) Plant Closings and Mass Layoffs . . . . . . . . . . . . . 18
7. Covenants of Buyer . . . . . . . . . . . . . . . . . . . . . . 18
(a) Confidentiality . . . . . . . . . . . . . . . . . . . . . 18
(b) Performance of Obligations by Buyer After Closing Date . . 19
(c) No Additional Representations; Disclaimer Regarding
Estimates and Projections . . . . . . . . . . . . . . . . 19
(d) Notification . . . . . . . . . . . . . . . . . . . . . . . 20
8. Mutual Covenants. . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Consents . . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) Cooperation . . . . . . . . . . . . . . . . . . . . . . . 20
(c) Publicity . . . . . . . . . . . . . . . . . . . . . . . . 21
(d) Best Efforts . . . . . . . . . . . . . . . . . . . . . . . 21
(e) HSR Act Compliance . . . . . . . . . . . . . . . . . . . . 21
(f) Retention of Records . . . . . . . . . . . . . . . . . . . 22
(g) Employee Benefits . . . . . . . . . . . . . . . . . . . . 22
(h) Tax Settlements . . . . . . . . . . . . . . . . . . . . . 24
(i) Use of the "Prince" Name . . . . . . . . . . . . . . . . . 24
(j) Hangar Lease and Aircraft Services Agreement . . . . . . . 25
(k) Assignment, Assumption and Indemnification Agreement . . . 25
(l) Transition Services Agreement . . . . . . . . . . . . . . 25
9. Further Assurances . . . . . . . . . . . . . . . . . . . . . . 25
10. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . 25
12. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13. Non-Survival of Representations and Warranties . . . . . . . . 27
14. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Indemnification by the Sellers . . . . . . . . . . . . . . 27
(b) Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . 27
(c) Losses Net of Insurance . . . . . . . . . . . . . . . . . 27
(d) Termination of Indemnification . . . . . . . . . . . . . . 28
(e) Procedures Relating to Indemnification . . . . . . . . . . 28
15. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
16. Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
- iii -
<PAGE> 4
<TABLE>
<S> <C>
17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
18. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
19. No Strict Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 31
20. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
21. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
22. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
23. Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
24. Representation by Counsel; Interpretation . . . . . . . . . . . . . . . . . 32
25. Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
26. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
27. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
28. Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . 32
29. Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(a) Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
EXHIBIT A* Assignment, Assumption and Indemnification Agreement Term Sheet
EXHIBIT B* Promissory Note
DISCLOSURE SCHEDULES*
SCHEDULE 1 Sellers
SCHEDULE 2(b) Adjustment Principles
SCHEDULE 4(a0(ii) Conflicts
SCHEDULE 4(b) Preferred Stock
SCHEDULE 4(c) Financial Schedules
SCHEDULE 4(d) Title to Tangible Assets
SCHEDULE 4(e) Material Leases
SCHEDULE 4(f)-1 Owned Property
SCHEDULE 4(f)-2 Leased Property
- iv -
<PAGE> 5
SCHEDULE 4(g) Intellectual Property
SCHEDULE 4(h) Material Contracts
SCHEDULE 4(i) Litigation
SCHEDULE 4(j) Changes in the Business
SCHEDULE 4(k) Compliance with Laws
SCHEDULE 4(l) Employee Benefit Plans
SCHEDULE 4(m) Taxes
SCHEDULE 4(n) Environmental Compliance
SCHEDULE 4(o) Subsidiaries
SCHEDULE 5(b) Ordinary Conduct
SCHEDULE 8(g) Management Employees Party to Employment Agreements
SCHEDULE 25 Individuals Deemed to Have Knowledge of PHC
*The Exhibits and Schedules hereto are omitted from this filing. The
registrant shall furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
- v -
<PAGE> 6
INDEX OF DEFINED TERMS
Page
----
Accounting Firm . . . . . . . . . . . . . . . . 5
Affiliate . . . . . . . . . . . . . . . . . . . 15
Agreement . . . . . . . . . . . . . . . . . . . 1
Ancillary Agreements . . . . . . . . . . . . . 6
Applicable Accounting Principles . . . . . . . 9
Applicable Rate . . . . . . . . . . . . . . . . 5
Assignment, Assumption and Indemnification
Agreement . . . . . . . . . . . . . . . . . 25
Business . . . . . . . . . . . . . . . . . . . 1
Buyer . . . . . . . . . . . . . . . . . . . . . 1
Buyer Group . . . . . . . . . . . . . . . . . . 24
Class A Common Stock . . . . . . . . . . . . . 1
Class B Common Stock . . . . . . . . . . . . . 1
Closing . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . 2
Closing Net Book Value Statement . . . . . . . 3
Code . . . . . . . . . . . . . . . . . . . . . 13
Confidentiality Agreement . . . . . . . . . . . 18
Descriptive Memorandum . . . . . . . . . . . . 19
Diligence Confidentiality Agreement . . . . . . 18
Employee Benefit Plans . . . . . . . . . . . . 13
ERISA . . . . . . . . . . . . . . . . . . . . . 13
Final Purchase Price . . . . . . . . . . . . . 5
Financial Schedules . . . . . . . . . . . . . . 9
HSR Act . . . . . . . . . . . . . . . . . . . . 6
Initial Net Book Value Statement . . . . . . . 8
Initial Purchase Price . . . . . . . . . . . . 2
Institute . . . . . . . . . . . . . . . . . . . 33
Intellectual Property . . . . . . . . . . . . . 11
knowledge . . . . . . . . . . . . . . . . . . . 32
Lease and Services Agreement . . . . . . . . . 25
Leased Property . . . . . . . . . . . . . . . . 10
Losses . . . . . . . . . . . . . . . . . . . . 27
Material Adverse Effect . . . . . . . . . . . . 6
Material Contracts . . . . . . . . . . . . . . 12
Material Leases . . . . . . . . . . . . . . . . 9
Merrill Lynch . . . . . . . . . . . . . . . . . 19
Net Book Value . . . . . . . . . . . . . . . . 5
Nontransferred Contract . . . . . . . . . . . . 20
Notice of Breach . . . . . . . . . . . . . . . 3
Notice of Disagreement . . . . . . . . . . . . 4
Owned Property . . . . . . . . . . . . . . . . 10
Permitted Liens . . . . . . . . . . . . . . . . 9
PERT . . . . . . . . . . . . . . . . . . . . . 23
PHC . . . . . . . . . . . . . . . . . . . . . . 1
Preferred Stock . . . . . . . . . . . . . . . . 8
Prince Employees . . . . . . . . . . . . . . . 22
Prince Name . . . . . . . . . . . . . . . . . . 24
Properties . . . . . . . . . . . . . . . . . . 10
Property . . . . . . . . . . . . . . . . . . . 10
Records . . . . . . . . . . . . . . . . . . . . 22
Representatives . . . . . . . . . . . . . . . . 33
Seller Information . . . . . . . . . . . . . . 19
Sellers . . . . . . . . . . . . . . . . . . . . 1
Shares . . . . . . . . . . . . . . . . . . . . 1
Stock Purchase . . . . . . . . . . . . . . . . 1
Taxes . . . . . . . . . . . . . . . . . . . . . 14
Third Party Claim . . . . . . . . . . . . . . . 28
Transition Services Agreement . . . . . . . . . 25
- vi -
<PAGE> 7
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of July 17, 1996,
by and among PRINCE HOLDING CORPORATION, a Delaware corporation (together with
its subsidiaries, "PHC"), the holders of the Class A Common Stock, par value
$.33 1/3 per share (the "Class A Common Stock"), and Class B Common Stock, par
value $.33 1/3 per share (the "Class B Common Stock"), of PHC set forth on
Schedule 1 hereto (collectively, the "Sellers") and Johnson Controls, Inc., a
Wisconsin corporation ("Buyer");
W I T N E S S E T H:
WHEREAS, PHC, through its wholly-owned subsidiary, Prince Corporation, is in
the business of manufacturing, selling and distributing automotive interior
components and systems (as currently conducted and as reflected on the Initial
Net Book Value Statement, the "Business");
WHEREAS, Buyer desires to purchase from the Sellers, and the Sellers desire
to sell to Buyer, 100% of the outstanding shares of Class A Common Stock and
Class B Common Stock (the "Shares") in order for Buyer to acquire and operate
the Business (the sale and purchase of the shares being referred to herein as
the "Stock Purchase");
WHEREAS, the Sellers intend to retain certain businesses, assets and
liabilities of PHC that are not part of the Business and to indemnify Buyer
from and against certain liabilities arising out of the operation of such
retained businesses;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Purchase and Sale of Shares. On the terms and subject to the conditions
of this Agreement, at the Closing Sellers shall sell, transfer and deliver to
Buyer, and Buyer shall purchase from Sellers, the Shares, for an aggregate cash
purchase price of $1,223,368,540 (the "Initial Purchase Price").
2. Closing.
(a) Closing. The closing (the "Closing") of the transactions contemplated
hereby shall be held at the offices of Kirkland & Ellis, 200 East Randolph
Drive, Chicago, Illinois at 9:00 a.m., local time, on October 1, 1996 or such
earlier or later date as the parties shall otherwise agree. The date on which
the Closing shall occur is hereinafter referred to as the "Closing Date," and
the Closing shall be deemed effective as of the opening of business on the
Closing Date. On the business day immediately preceding the Closing Date,
Buyer and Sellers shall conduct a pre-closing at the same location as the
Closing, commencing at 9:00 a.m., local time, at which each party shall present
for review by the other party copies in execution form of all documents
required to be delivered by such party at the Closing.
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<PAGE> 8
(i) At the Closing, subject to and on the terms and conditions set forth
in this Agreement, Buyer shall deliver to Sellers (A) by wire transfer to a
bank account designated in writing by the Sellers immediately available funds
in an amount equal to the Initial Purchase Price, (B) certified copies of
resolutions duly adopted on or prior to the date hereof by Buyer's board of
directors authorizing the execution, delivery and performance of this
Agreement and the Ancillary Agreements, (C) certified copies of Buyer's
certificate of incorporation and by- laws, (D) a certificate of the Secretary
or an Assistant Secretary of Buyer as to the incumbency of the officer(s) of
Buyer (who shall not be such Secretary or Assistant Secretary) executing this
Agreement or any Ancillary Agreement, (E) a short-form certificate of good
standing of Buyer, certified by the Secretary of State of Buyer's state of
incorporation as of a date not more than three business days prior to the
Closing Date, and (F) such other certificates and instruments that the
Sellers and their counsel may reasonably request.
(ii) At the Closing, subject to and on the terms and conditions set forth
in this Agreement, Sellers shall deliver or cause to be delivered to Buyer
(A) certificates evidencing the Shares, with appropriate stock powers and
requisite tax stamps attached properly signed, in form suitable for the
transfer of such Shares to Buyer, (B) certified copies of resolutions duly
adopted on or prior to the date hereof by the board of directors of PHC,
authorizing the execution, delivery and performance of this Agreement and the
Ancillary Agreements, to the extent each is a party hereto or thereto, (C)
certified copies of the certificate of incorporation and by-laws of PHC, and
(D) a certificate of the Secretary or an Assistant Secretary of PHC as to the
incumbency of the officer(s) (who shall not be such Secretary or Assistant
Secretary) executing this Agreement or any Ancillary Agreement, (E) a short
form certificate of good standing of PHC, certified by the Secretary of State
of the State of Delaware as of a date not more than three business days prior
to the Closing Date, and (F) such other certificates and instruments that
Buyer and its counsel may reasonably request.
(iii) On or prior to August 28, 1996 (assuming prompt compliance and
cooperation of PHC and the Sellers with the reasonable due diligence requests
of Buyer), Buyer shall deliver to the Sellers a written list describing in
reasonable detail all material breaches of the representations and warranties
contained in Section 4 hereof which Buyer has discovered or have been
disclosed since the date of this Agreement that are not reflected in accruals
or liability reserves on the Initial Net Book Value Statement or disclosed on
any Schedule attached hereto, together with the amount reasonably claimed as
a purchase price adjustment by Buyer with respect to each such claimed breach
(the "Notice of Breach"). Buyer and Sellers shall meet and attempt to
resolve whether and to what extent such breaches will be reflected in a
purchase price adjustment to be recognized in the Initial Purchase Price paid
at Closing. Notwithstanding any disputed claims, the Closing shall
nevertheless occur at a purchase price equal to the Initial Purchase Price,
subject to possible post-Closing adjustments as described in the following
sentence. Any disputed claims shall be resolved in accordance with Section
29, and upon the determination of all such disputed claims, (A) if the
aggregate amount so determined to be payable is less than or equal to
$10,000,000, no adjustment of the Initial Purchase
<PAGE> 9
Price shall be made, and (B) if the aggregate amount so determined to be
payable is more than $10,000,000, the Final Purchase Price shall include a
reduction equal to the amount so determined to be payable less $5,000,000.
To the extent any claim (or any portion thereof) is determined to be valid,
it shall be disregarded for purposes of preparing the Closing Net Book Value
Statement (it being understood that Buyer and the Sellers intend that amounts
for matters included in the Notice of Breach shall not result in further
adjustments to the Initial Purchase Price pursuant to Section 2(b)).
(iv) Notwithstanding anything to the contrary in this Agreement, to the
extent any share or shares of Preferred Stock are redeemed by PHC after June
29, 1996 and prior to the Closing, the Initial Purchase Price payable at the
Closing shall be increased by $230 for each such share redeemed. To the
extent such redemptions occur prior to the Closing, they shall be disregarded
for purposes of preparing the Closing Net Book Value Statement (it being
understood that Buyer and the Sellers intend that increases in the Initial
Purchase Price pursuant to this Section 2(a)(iv) shall not result in further
adjustments to the Initial Purchase Price pursuant to Section 2(b)).
(b) Purchase Price Adjustment.
(i) Within 60 days after the Closing Date, Sellers shall cause to be
prepared and delivered to Buyer a consolidated balance sheet of PHC as of the
close of business on the day immediately prior to the Closing Date (such
balance sheet, in its final and binding form, the "Closing Net Book Value
Statement"). The Closing Net Book Value Statement shall be prepared in
accordance with the Applicable Accounting Principles in a manner consistent
with the preparation of the Initial Net Book Value Statement (without regard
to any purchase accounting adjustments arising out of the consummation of the
transactions contemplated hereby) and the principles set forth on Schedule
2(b) hereto (the "Adjustment Principles") which, in the event of a conflict
with the Applicable Accounting Principles, shall control. The parties agree
that the adjustment contemplated by this Section 2(b) is solely intended to
show changes in the assets and the liabilities reflected in Net Book Value
from June 29, 1996 (as reflected on the Initial Net Book Value Statement) to
the close of business on the day immediately prior to the Closing and that
any such change can only be measured if the Closing Net Book Value Statement
is prepared using the same methodologies, practices and principles (subject
to the immediately preceding sentence) as were used in connection with the
preparation of the Initial Net Book Value Statement. During the preparation
of the Closing Net Book Value Statement and the period of any dispute with
respect thereto, Buyer shall (A) provide Sellers and Sellers' representatives
with full access during normal business hours to the books, records
(including work papers, schedules, memoranda and other documents), facilities
and employees of PHC, (B) provide Sellers as promptly as practicable
following the Closing Date (but in no event later than 15 days after the
Closing Date) with normal year-end closing financial information for PHC for
the period ending as of the close of business on the day immediately prior to
the Closing Date, and (C) cooperate fully with Sellers and Sellers'
representatives, including the provision on a timely basis of all information
necessary or useful in connection with the preparation of the Closing Net
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<PAGE> 10
Book Value Statement. The Closing Net Book Value Statement shall be
accompanied by a special purpose report by Ernst & Young LLP to the effect
that the Closing Net Book Value Statement has been prepared in accordance
with this Section 2(b). During the 30 days immediately following Buyer's
receipt of the Closing Net Book Value Statement, Buyer shall be permitted to
review Ernst & Young LLP's working papers relating to the Closing Net Book
Value Statement. The Closing Net Book Value Statement shall become final and
binding upon the parties on the thirtieth day following receipt thereof by
Buyer unless Buyer gives written notice of its disagreement (a "Notice of
Disagreement") to Sellers prior to such date. Any Notice of Disagreement
shall (A) specify in reasonable detail the nature and amount of any
disagreement so asserted, (B) only include disagreements based on
mathematical errors or based on the Closing Net Book Value Statement not
being prepared in accordance with this Section 2(b) and (C) be accompanied by
a certificate of Buyer that it has complied with the covenants set forth in
paragraph (iv) of this Section 2(b). If a timely Notice of Disagreement is
received by Sellers, then the Closing Net Book Value Statement (as revised in
accordance with clause (x) or (y) below) shall become final and binding upon
the parties on the earlier of (x) the date the parties hereto resolve in
writing any differences they have with respect to any matter specified in the
Notice of Disagreement or (y) the date any matters properly in dispute are
finally resolved in writing by the Accounting Firm. During the 30 days
immediately following the delivery of a Notice of Disagreement, Sellers and
Buyer shall seek in good faith to resolve in writing any differences which
they may have with respect to any matter specified in the Notice of
Disagreement. During such period, Sellers shall have full access to the
working papers of Buyer prepared in connection with Buyer's preparation of
the Notice of Disagreement. At the end of such 30-day period, Sellers and
Buyer shall submit to a "Big-Six" accounting firm (the "Accounting Firm") for
review and resolution any and all matters which remain in dispute and which
were properly included in the Notice of Disagreement, and the Accounting Firm
shall make a final determination of the Closing Net Book Value Statement
which shall be binding on the parties (it being understood, however, that the
Accounting Firm shall act as an arbitrator to determine, based solely on
presentations by Buyer and Sellers (and not by independent review), only
those matters which remain in dispute and which were properly included in the
Notice of Disagreement). The Closing Net Book Value Statement shall become
final and binding on Buyer and Sellers on the date the Accounting Firm
delivers its final resolution to the parties (which final resolution shall be
delivered as soon as practicable following the selection of the Accounting
Firm). The Accounting Firm shall be selected by Sellers and Buyer or, if the
parties are unable to agree, by Sellers' and Buyer's independent accountants.
The fees and expenses of the Accounting Firm incurred pursuant to this
Section 2(b) shall be borne 50% by Buyer and 50% by Sellers.
(ii) The Initial Purchase Price shall be either increased by the amount by
which the Net Book Value reflected on the Closing Net Book Value Statement
exceeds the Net Book Value reflected on the Initial Net Book Value Statement
or decreased by the amount by which the Net Book Value reflected on the
Initial Net Book Value Statement exceeds the Net Book Value reflected on the
Closing Net Book Value Statement (the Initial Purchase Price, as so increased
or decreased, being referred to herein as the "Final
- 4 -
<PAGE> 11
Purchase Price"). If the Initial Purchase Price is less than the Final
Purchase Price, Buyer shall, and if the Initial Purchase Price is greater
than the Final Purchase Price, Sellers shall, within five business days after
the Closing Net Book Value Statement becomes final and binding on the
parties, make payment to the other party by wire transfer in immediately
available funds of the amount of such difference, together with interest
thereon at an annual rate of eight and one-half percent (8.5%) (the
"Applicable Rate") calculated on the basis of the number of days elapsed from
and including the Closing Date to and excluding the date of payment.
(iii) The term "Net Book Value" shall mean the total assets of the Business
minus the total liabilities of the Business, in each case as reflected on the
Initial Net Book Value Statement or the Closing Net Book Value Statement, as
the case may be.
(iv) Buyer agrees that following the Closing it will not take any actions
with respect to the accounting books, records, policies and procedures of the
Business that would obstruct or prevent the preparation of the Closing Net
Book Value Statement as provided in this Section 2(b). Buyer will cooperate
in the preparation of the Closing Net Book Value Statement, including
providing customary certifications to Sellers or, if requested, to Sellers'
auditors or the Accounting Firm.
3. Conditions to Closing.
(a) Buyer's Obligation. The obligation of Buyer to
purchase and pay for the Shares is subject to the satisfaction (or waiver by
Buyer) as of the Closing of the following conditions:
(i) The representations and warranties of PHC and Sellers
made in this Agreement shall be true and correct in all material
respects as of the date hereof and on and as of the Closing Date, as
though made on and as of the Closing Date, and PHC and Sellers shall
have performed or complied with all obligations and covenants required
by this Agreement to be performed or complied with by PHC and Sellers
by the time of the Closing, except (A) with respect to breaches or
alleged breaches of the representations and warranties contained in
Section 4 that are included in a Notice of Breach delivered pursuant
to Section 2(a)(iii), (B) to the extent of changes or developments
contemplated by the terms of this Agreement, (C) for representations
and warranties that speak as of a specific date or time (which need
only be true and correct as of such date or time), and (D) for
breaches of such representations and warranties and covenants, after
taking into account all information contained in any Notice of Breach
or disclosed in any supplements, modifications and updates to the
Schedules by PHC and Sellers prior to the Closing as permitted by this
Agreement, that, in the aggregate, would not have a material adverse
effect on the Business taken as a whole (a "Material Adverse Effect");
and PHC shall have delivered to Buyer a certificate dated the Closing
Date and signed by an officer of PHC confirming the foregoing to the
best of such officer's knowledge;
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<PAGE> 12
(ii) No injunction or order of any court or administrative
agency of competent jurisdiction shall be in effect as of the Closing
which restrains or prohibits the consummation of the Stock Purchase;
(iii) The waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), shall
have expired or been terminated; and
(iv) PHC and the Sellers shall have executed and
delivered, or shall have caused to be executed and delivered, the
Lease and Services Agreement, the Assignment, Assumption and
Indemnification Agreement and the Transition Services Agreement
(collectively, the "Ancillary Agreements").
(b) Sellers' Obligation. The obligation of Sellers to
sell and deliver or cause to be delivered the Shares to Buyer is subject to the
satisfaction (or waiver by Sellers) as of the Closing of the following
conditions:
(i) The representations and warranties of Buyer made in
this Agreement shall be true and correct in all material respects as
of the date hereof and on and as of the Closing Date, as though made
on and as of the Closing Date, except to the extent of changes or
developments contemplated by the terms of the Agreement and except for
representations and warranties that speak as of a specific date or
time (which need only be true and correct as of such date or time),
and Buyer shall have performed or complied in all material respects
with the obligations and covenants required by this Agreement to be
performed or complied with by Buyer by the time of the Closing; and
Buyer shall have delivered to Sellers a certificate dated the Closing
Date and signed by an officer of Buyer confirming the foregoing to the
best of such officer's knowledge;
(ii) No injunction or order of any court or administrative
agency of competent jurisdiction shall be in effect as of the Closing
which restrains or prohibits the consummation of the Stock Purchase;
(iii) The waiting period under the HSR Act shall
have expired or been terminated; and
(iv) Buyer shall have executed and delivered, or caused to
be executed and delivered, each of the Ancillary Agreements.
4. Representations and Warranties of PHC and the
Sellers. PHC (except with respect to Section 4(b), as to which PHC makes no
representation) and the Sellers (with respect only to the representations
contained in Section 4(b) and Section 4(p) (but only to the extent Section 4(p)
relates to Section 4(b)), which each Seller makes severally and not jointly)
represent and warrant to Buyer as follows. It is understood and agreed by the
parties that all references in the following representations and warranties to
PHC shall also refer to Prince Corporation and its subsidiaries.
- 6 -
<PAGE> 13
(a) Authority; No Conflicts.
(i) Prince Holding Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Delaware. Prince Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Michigan. PHC has all requisite corporate power and
authority to enter into this Agreement and such Ancillary Agreements
as are contemplated hereby to be executed and delivered by it and to
consummate the transactions contemplated hereby and thereby. All
corporate acts and other proceedings required to be taken by PHC to
authorize the execution, delivery and performance of this Agreement
and such Ancillary Agreements, and the consummation of the
transactions contemplated hereby and thereby, have been duly and
properly taken. This Agreement has been duly executed and delivered
by PHC and each Seller, and such Ancillary Agreements as are
contemplated hereby to be executed and delivered by PHC and each
Seller will, to the extent any is a party thereto, be duly and validly
executed and delivered by PHC and such Seller. This Agreement and
such Ancillary Agreements constitute, or will constitute, as the case
may be, valid and binding obligations of PHC and each Seller, to the
extent PHC or any Seller is a party thereto, enforceable against PHC
and such Seller, in accordance with such agreement's respective terms.
(ii) Subject to the matters disclosed on Schedule
4(a)(ii), the execution and delivery of this Agreement by PHC and each
Seller and the execution and delivery of such Ancillary Agreements as
are contemplated hereby to be executed and delivered by PHC or any
Seller, to the extent PHC or any Seller is a party thereto, do not or
will not, as the case may be, and the consummation by either of PHC of
the transactions contemplated hereby and thereby and compliance by PHC
with the terms hereof and thereof will not, conflict with, or result
in any violation of or default under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss
of a benefit under, or result in the creation of any lien, claim,
encumbrance, security interest, option, charge or restriction of any
kind upon any of the assets of PHC under, or require any consent,
authorization or approval under any provision of the certificate of
incorporation or by-laws of PHC, any material contract or any material
judgment, order or decree or any material statute, law, ordinance,
rule or regulation applicable to PHC or its assets, other than any
such conflicts, violations, defaults, rights or liens, claims,
encumbrances, security interests, options, charges or restrictions
that, individually or in the aggregate, would not have a Material
Adverse Effect and would not impair the ability of Sellers to
consummate the transactions contemplated hereby, and other than any
such consents, authorizations or approvals required under the HSR Act
or that may be required solely by reason of Buyer's participation in
the transactions contemplated hereby.
(b) Ownership of the Shares. On the date hereof, the
authorized capital stock of PHC consists of 720,000 authorized shares of Class
A Common Stock, of which 319,830 shares are issued and outstanding, 280,000
authorized shares of Class B Common Stock, of which 108,328 shares are issued
and outstanding, and 200,000 authorized shares of Preferred Stock, par value
$230.00 per share (the "Preferred Stock"), of which 121,002 shares are issued
and
- 7 -
<PAGE> 14
outstanding. The material terms of the Preferred Stock are set forth on
Schedule 4(b). All of such shares have been duly authorized and are validly
issued, non-assessable and are free of pre-emptive rights of any kind. Each
Seller is the record and beneficial owner of the number of Shares set forth on
Schedule 1 opposite his, her or its name. The sale and delivery of the Shares
to Buyer by each such Seller pursuant to this Agreement will vest in Buyer all
right, title and interest in such Shares, free and clear of all adverse claims
(as defined under U.C.C. Section 8-302(2) as adopted in the State of
Michigan), other than adverse claims created by or through or suffered by
Buyer.
(c) Financial Schedules.
(i) Schedule 4(c) sets forth consolidated balance sheets
of the Business as of, and the related consolidated statements of
shareholder's equity, operations and cash flows for the Business for
the fiscal years ended, October 2, 1993, October 1, 1994 and September
30, 1995 and the unaudited consolidated balance sheet of the Business
as of, and related consolidated statements of shareholder's equity,
operations and cash flows for the Business for the nine-month period
ended, June 29, 1996 (in each case, prepared on a basis consistent
with such audited statements and presented without separate
footnotes), and a pro forma statement setting forth the Net Book Value
as of June 29, 1996 (the "Initial Net Book Value Statement"), in each
case together with the notes thereto (such schedules, together with
the Initial Net Book Value Statement, being referred to herein as the
"Financial Schedules"). The Financial Schedules have been derived
from the accounting books and records of PHC and present fairly in all
material respects the results of operations for the Business on the
basis described in the notes thereto for the respective periods
covered thereby and the statement of Net Book Value as of June 29,
1996 on the pro forma basis described in the notes thereto. The
Financial Schedules have, in each case, been prepared in accordance
with United States generally accepted accounting principles,
consistently applied, except as otherwise provided on Schedule 2(b) or
in the Financial Schedules (such accounting principles, together with
the exceptions thereto, being referred to herein as the "Applicable
Accounting Principles").
(ii) Except as set forth on Schedule 4(c) and except for
liabilities incurred in the ordinary course of the Business since the
date of the Initial Net Book Value Statement, there are no material
liabilities of any nature (matured or unmatured, fixed or contingent)
relating to the Business which were not provided for or disclosed on
the Initial Net Book Value Statement, and all liability reserves
established on the Initial Net Book Value Statement were adequate in
all material respects and there were no material loss contingencies,
as such term is used in Statement of Financial Accounting Standards
No. 5 issued by the Financial Accounting Standards Board, which were
not adequately provided for or disclosed in the Initial Net Book Value
Statement.
(d) Title to Tangible Assets Other than Real Property
Interests. PHC has good and valid title to all the material tangible assets
reflected in the Initial Net Book Value Statement, except those sold or
otherwise disposed of since the date of the Initial Net Book Value Statement in
the ordinary course of business consistent with past practice or as indicated
on Schedule 5(b),
- 8 -
<PAGE> 15
free and clear of all mortgages, liens, security interests or encumbrances of
any nature whatsoever, except (i) such as are disclosed on Schedule 4(d) or the
other Schedules hereto, (ii) mechanics', carriers', workmen's, repairmen's or
other like liens arising or incurred in the ordinary course of business, liens
arising under original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of business,
liens for taxes, and other governmental charges which are not due and payable
or which may thereafter be paid without penalty, and (iii) other imperfections
of title, restrictions or encumbrances, if any, which imperfections of title,
restrictions or encumbrances do not, individually or in the aggregate,
materially impair the continued use and operation of the assets to which they
relate in the operation of the Business as currently conducted (collectively,
the "Permitted Liens"). This Section 4(d) does not relate to real property or
interests in real property, it being the intent of the parties that such items
are the subject of Section 4(e).
(e) Material Leases. Schedule 4(e) sets forth a list of
all leases of personal property where such leases require lease or rental
payments of more than $250,000 per year ("Material Leases"). Except as set
forth on said Schedule 4(e),
(i) each Material Lease is in full force and effect and
all rent and other sums and charges payable thereunder are current in
all material respects;
(ii) to the knowledge of PHC, no notice of default or
termination under any Material Lease is outstanding;
(iii) to the knowledge of PHC, no material termination
event or condition or uncured default under any Material Lease exists;
and
(iv) to the knowledge of PHC, no material event or
condition which, with the giving of notice or the lapse of time or
both, would constitute a default or termination event or condition
under any Material Lease exists or has occurred.
(f) Title to Real Property. Schedule 4(f)-1 describes
all real property and interests in real property owned in fee by PHC and
included in the Initial Net Book Value Statement (individually, an "Owned
Property"). Schedule 4(f)-2 sets forth a list of real properties leased by PHC
pursuant to leases under which PHC (a) has an annual base rental obligation in
excess of $50,000 or (b) has an aggregate base rental liability for the
remaining term of the applicable lease in excess of $250,000 (individually, a
"Leased Property"). An Owned Property or Leased Property shall be sometimes
referred to herein individually as a "Property" and collectively as the
"Properties." Except as set forth on Schedule 4(f)-1 or as described on
Schedule 5(b), PHC has fee simple title to all Owned Property in each case free
and clear of all mortgages, liens, security interests, easements, covenants,
rights-of-way and other similar restrictions of any nature whatsoever, except
(i) Permitted Liens, (ii) easements, covenants, rights-of-way and other
restrictions of record, (iii) any conditions that may be shown by a current,
accurate survey or physical inspection of the relevant Property made prior to
the Closing, (iv) current general real estate taxes and installments for
special assessments which are not yet due and payable, (v) existing leases,
licenses and possession or occupancy agreements, if any, (vi)(A)
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zoning, building, fire, health, environmental and pollution control laws,
ordinances, rules and safety regulations and other similar restrictions, and
(B) mechanics', carriers', workmen's, repairmen's or other like liens arising
or incurred in the ordinary course of business, liens for taxes, and other
governmental charges which are not due and payable or which may thereafter be
paid without penalty, mortgages, liens, security interests or encumbrances that
have been placed by any developer, landlord or other third party on property
over which PHC has easement rights or on any Leased Property and subordination
or similar agreements relating thereto and (C) unrecorded easements, covenants,
rights of way, liens or other restrictions, (vii) acts done or suffered to be
done by, and judgments against, Buyer and those claiming by, through or under
Buyer, and (viii) any and all orders, decrees, awards or judgments related to
(A) any eminent domain or condemnation proceeding or (B) the Americans with
Disabilities Act. To the knowledge of PHC and except as disclosed on Schedule
4(f)-1, there are no unrecorded easements, covenants, rights of way, liens or
other restrictions with respect to the Owned Property and no orders, decrees,
awards or judgments with respect to the Owned Property related to (A) any
eminent domain or condemnation proceeding or (B) the Americans with
Disabilities Act.
(g) Intellectual Property. Except as disclosed on
Schedule 4(g), as of the date of this Agreement, PHC owns or has the right to
use, without payment to any other party, all of the patents, invention
disclosures, registered trademarks, trade names, registered copyrights and
registered service marks, and any patent applications or applications for
registration of the foregoing, and any goodwill associated therewith, listed on
Schedule 4(g) attached hereto and all material trade secrets and know-how which
are necessary for the Business to be conducted as it is currently conducted
(the "Intellectual Property"). Except as set forth on Schedule 4(g), no
material claims are pending in writing or, to the knowledge of PHC, threatened
in writing against PHC as of the date of this Agreement by any person with
respect to the ownership or use of intellectual property used in the Business.
Except as set forth on Schedule 4(g), no licenses, sublicenses or agreements
pertaining to any of the Intellectual Property have been granted or entered
into by PHC. To the knowledge of PHC, PHC has taken all reasonable steps in
accordance with customary industry standards to maintain the confidentiality of
the material trade secrets and know-how used exclusively in the Business. To
the knowledge of PHC, each of the trademarks and service marks included among
the Intellectual Property are valid and enforceable. Except as disclosed on
Schedule 4(g), PHC has not received any notices of, nor are any of the Sellers
aware of any facts which indicate a likelihood of, any infringement or misuse
by any third party with respect to those trademarks and service marks included
among the Intellectual Property. As between the parties, Buyer further
acknowledges and agrees that any trade secrets, know-how or other confidential
technical and business information not used primarily in or related primarily
to the Business as it is currently conducted is the exclusive property of the
Sellers and that Buyer has no rights therein except to the extent currently
used in the Business. Except as set forth on Schedule 4(g), PHC has the right
to use, without payment to any other party other than regular maintenance fees,
all software applications currently in use by the Business that are material
to the Business.
(h) Material Contracts. Schedule 4(h) sets forth a list
as of the date of this Agreement of each of the following types of written
contracts to which PHC is a party:
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(i) any employment agreement or employment contract with
any officer or director of PHC that has future liability in excess of
$200,000 per annum and is not terminable by notice of not more than 60
calendar days for a cost of less than $200,000;
(ii) any employee collective bargaining agreement;
(iii) any covenant not to compete that restricts PHC;
(iv) any lease or similar agreement under which PHC is a
lessor or sublessor of, or makes available for use by any third party,
any real property owned or leased by it or any portion of premises
otherwise occupied by the Business, in any case which has future
liability in excess of $150,000 per annum and is not terminable by
notice of not more than 60 calendar days for a cost of less than
$150,000;
(v) any agreement or contract under which PHC has
borrowed or loaned any money or issued any note, bond, indenture or
other evidence of indebtedness or directly or indirectly guaranteed
indebtedness, liabilities or obligations of others (other than
endorsements for the purpose of collection, loans made to employees
for relocation, travel or other employment-related purposes, or
purchases of equipment or materials made under conditional sales
contracts, in each case in the ordinary course of business), or any
other note, bond, indenture or other evidence of indebtedness, in each
case having an outstanding principal amount in excess of $500,000;
(vi) any agreement or contract under which any other
person has directly or indirectly guaranteed indebtedness, liabilities
or obligations of PHC (other than endorsements for the purpose of
collection in the ordinary course of business), in each case having an
outstanding principal amount or aggregate future liability in excess
of $500,000; or
(vii) any other agreement, contract, lease, license,
commitment or instrument, in each case not included in clauses (i)
through (vi) above, to which PHC is a party or by or to which any of
their assets are bound or subject which has future liability in excess
of $500,000 per annum and is not terminable by notice of not more than
60 calendar days for a cost of less than $500,000 (other than purchase
contracts and orders for inventory in the ordinary course of business
consistent with past practice).
(viii) any agreement or contract under which PHC licenses to
or receives from any third party any Intellectual Property which
requires payments per annum of more than $250,000.
PHC or the Sellers have delivered to, or made available for
inspection by, Buyer a copy of each contract, lease, license, instrument or
other agreement listed on Schedule 4(h) as amended to date. Except as
disclosed on 4(h) or the other Schedules hereto, each contract, lease, license,
commitment, instrument or other agreement of PHC described on Schedule 4(h)
(collectively, the "Material Contracts") is valid, binding and in full force
and effect and is
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<PAGE> 18
enforceable by PHC in accordance with its terms. Except as disclosed in
Schedule 4(h) or the other Schedules hereto, PHC has performed all material
obligations required to be performed by it to date under the Material Contracts
and is not (with or without the lapse of time or the giving of notice, or both)
in breach or default in any material respect thereunder.
(i) Litigation; Decrees. Schedule 4(i) sets forth a
list, as of the date of this Agreement, of all pending lawsuits or claims
(including lawsuits or claims for workers' compensation) with respect to which
PHC has received service of process against it or any of its properties,
assets, operations or businesses and which (A) involve a claim against PHC, of,
or which involve an unspecified amount which could reasonably be expected to
result in liability (after collection of any insurance payments) of, more than
$100,000, (B) seek any injunctive relief which would adversely affect Buyer's
acquisition, ownership or operation of the Business, or (C) directly relate to
the transactions contemplated by this Agreement. To the knowledge of PHC,
except as disclosed on Schedule 4(i), PHC is not in default under any material
judgment, order or decree of any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign.
(j) Absence of Changes or Events. Except as set forth on
Schedule 4(j) or the other Schedules hereto, since June 29, 1996, there has
been no material adverse change in the Business taken as a whole, other than
changes resulting from developments or occurrences relating to or affecting
United States or foreign economies in general or the industry of the Business
in general and not specifically relating to PHC, and other than changes that
are the result of actions taken by Buyer prior to the Closing Date or as
contemplated herein that have an effect on the Business. Buyer acknowledges
that there may be a disruption to the Business as a result of the execution of
this Agreement, the announcement by Buyer of its intention to purchase the
Business or the announcement by the Sellers or PHC of its intention to sell the
Business, and the consummation of the transactions contemplated hereby, and
Buyer agrees that such disruptions do not and shall not constitute a breach of
this Section 4(j).
(k) Compliance with Applicable Laws. Except as set forth
on Schedule 4(k) or the other Schedules hereto, to the knowledge of PHC, PHC is
in compliance in all respects with all applicable statutes, laws, ordinances,
rules, orders and regulations of any governmental authority or instrumentality,
except to the extent any instances of non-compliance would not result in a
Material Adverse Effect. Except as set forth on Schedule 4(k) or the other
Schedules hereto, to the knowledge of PHC, since September 30, 1995, PHC has
not received any written communication from a governmental authority that
alleges that PHC is not in compliance with all federal, state or local laws,
rules and regulations, except to the extent any instances of non-compliance
would not result in a Material Adverse Effect. This Section 4(k) does not
relate to environmental matters, it being the intent of the parties that the
only section relating to environmental matters shall be Section 4(n).
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<PAGE> 19
(l) Employee Benefit Plans.
(i) Schedule 4(l) lists all of the material employee
benefit plans (other than multi-employer plans) currently maintained
or contributed to by PHC with respect to active or retired employees
of Business (the "
Employee Benefit Plans"). PHC has delivered to, or made available for
inspection by, Buyer a copy of each Employee Benefit Plan.
(ii) All Employee Benefit Plans which are "employee
benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) are in compliance
in all material respects with the applicable requirements of law,
including ERISA and the Internal Revenue Code of 1986, as amended (the
"
Code").
(iii) Except as set forth on Schedule 4(l), each
Employee Benefit Plan which is intended to qualify under Section
401(a) of the Code has received a favorable determination letter that
it is so qualified and that its trust is exempt from taxation, and
Sellers are not aware of any facts which would cause such favorable
determination letters to be revoked.
(iv) PHC does not maintain or contribute to and has not
maintained or contributed to a "multi-employer plan," as such term is
defined in Section 4001(a) of ERISA.
(m) Taxes. Except as set forth on Schedule 4(m), (i) all
returns, reports and declarations of every nature required to be filed with
respect to Taxes by or on behalf of PHC (either separately or as part of a
consolidated group) prior to the Closing Date with respect to the Business have
been timely filed, except for any such failures to file which would not have a
Material Adverse Effect; and (ii) all Taxes relating to any period ending prior
to the Closing with respect to PHC shall have been either paid or fully
accrued for in all material respects by PHC as of or prior to the Closing Date.
"Tax" or "Taxes" means (A) all federal, state, local, or foreign income, gross
receipts, estimated, alternative minimum, add-on minimum, profits, sales, use,
occupation, value added, ad valorem, transfer, registration, franchise,
employee or other withholding, payroll, unemployment, excise, license,
property, or other tax, of any kind whatsoever, together with any interest,
penalties, or additions to tax imposed with respect thereto and (B) any
obligations under any agreements or arrangements with respect to any Taxes
described in clause (A) above.
(n) Environmental Compliance.
(i) To the knowledge of PHC, PHC is in compliance with
Environmental Requirements, except for such noncompliance as would not
have a Material Adverse Effect. "
Environmental Requirements" shall mean
all federal, state and local statutes, regulations, and ordinances
concerning pollution or protection of the environment, including
without limitation all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing,
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processing, discharge, release, threatened release, control, or
cleanup of any hazardous materials, substances or wastes, as such
requirements are enacted and in effect on or prior to the Closing
Date.
(ii) To the knowledge of PHC and except as set forth on
Schedule 4(n), PHC has not received any written notice, report or
other information regarding any actual or alleged material violation
of Environmental Requirements, or any material liabilities or
potential material liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, relating to PHC or its facilities arising
under Environmental Requirements, the subject of which would have a
Material Adverse Effect.
(iii) This Section 4(n) contains the sole and exclusive
representations and warranties of Sellers with respect to any
environmental matters, including without limitation any arising under
any Environmental Requirements. Buyer hereby waives any right,
whether arising at law or in equity, to seek contribution, cost
recovery, damages, or any other recourse or remedy from the Sellers,
and hereby releases the Sellers from any claim, demand or liability,
regarding any such environmental matter (including any arising under
any Environmental Requirements and including any arising under the
Comprehensive Environmental Response, Compensation and Liability Act,
any analogous state law, or the common law).
(o) Subsidiaries. Since September 30, 1995, the
subsidiaries listed on Schedule 4(n) are the only subsidiaries of PHC through
which any business, including the Business, has been conducted, and except as
set forth on Schedule 4(o), PHC owns 100% of the capital stock of each such
subsidiary.
(p) Disclosure. The representations and warranties
contained in Sections 4(a) through 4(o), inclusive, do not intentionally and
fraudulently contain any untrue statement of a material fact or intentionally
and fraudulently omit to state any material fact necessary in order to make the
statements contained therein not misleading.
5. Covenants of PHC. PHC covenants and agrees as
follows:
(a) Access. Prior to the Closing, PHC shall grant to
Buyer or cause to be granted to Buyer and its representatives, employees,
counsel and accountants reasonable access, during normal business hours and
upon reasonable notice, to the personnel, properties, books and records of PHC
relating to the transition of the Business to Buyer; provided, however, that
such access does not unreasonably interfere with PHC's normal operations.
Buyer shall indemnify and hold PHC and its Affiliates, officers, shareholders,
directors and employees harmless against any and all losses, liabilities,
expenses and damages or actions or claims with respect thereto resulting from
claims suffered or incurred by PHC or any of its Affiliates, officers,
shareholders, directors and employees arising out of or with respect to Buyer's
or its representatives', agents' or employees' exercise of Buyer's rights under
this Section 5(a) or the mere presence of any of them upon any of the
Properties. Notwithstanding any provision in this Agreement to the contrary,
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<PAGE> 21
Buyer's obligations under this Section 5(a) shall survive the termination of
this Agreement and the consummation of the transactions contemplated hereby.
"Affiliate" shall mean any natural person, and any corporation, partnership or
other entity, that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the party
specified.
(b) Ordinary Conduct. Except as permitted by the terms
of this Agreement or as set forth in Schedule 5(b), from the date hereof to the
Closing, the Sellers will cause the Business to be conducted in the ordinary
course. Except as provided in this Agreement or Schedule 5(b), from the date
hereof until the Closing, PHC will not do any of the following without the
prior written consent of Buyer:
(i) amend its Certificate of Incorporation or Bylaws;
(ii) redeem or otherwise acquire any shares of its capital
stock or issue any capital stock or any option, warrant or right
relating thereto or any securities convertible into or exchangeable
for any shares of capital stock;
(iii) make any material change in the conduct of the
Business, except as specifically contemplated by this Agreement;
(iv) sell, lease, license or otherwise dispose of, or
agree to sell, lease, license or otherwise dispose of, any interest in
any of the assets of the Business that are material, individually or
in the aggregate, to PHC, taken as a whole, except for sales of
inventory in the ordinary course of business consistent with past
practice;
(v) permit, allow or subject any of the assets or Owned
Properties owned by PHC to any material mortgage, pledge, security
interest, encumbrance or lien or suffer such to be imposed, except for
Permitted Liens;
(vi) except in the ordinary course of business consistent
with past practice or as required by law or contractual obligations or
other agreements existing on the date hereof, increase in any manner
the compensation of, or enter into any new bonus or incentive
agreement or arrangement with, any of its directors or officers;
(vii) assume, incur or guarantee any obligation for
borrowed money (other than intercompany indebtedness) having an
outstanding principal amount in excess of $500,000 in the aggregate,
except to the extent required for the management of working capital;
(viii) except in the ordinary course of business, (x) sell,
transfer, lease or otherwise dispose of any of its material assets; or
(y) enter into a new agreement that would be included within the
definition of Material Contracts if it had been entered into as of the
date of this Agreement or amend in a material manner any of the
Material Contracts; or
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<PAGE> 22
(ix) except in the ordinary course of business, enter into
a material lease of real property, except that Buyer acknowledges and
consents to PHC entering into any lease the negotiation of which has
commenced prior to the date of this Agreement or any renewal of a
lease to which either PHC or the Sellers, or any of their respective
Affiliates, is a party.
(c) Preservation of Business. Prior to the Closing,
subject to the terms and conditions of this Agreement, PHC shall use
commercially reasonable efforts consistent with past practices to preserve the
Business intact, to preserve the goodwill of customers and suppliers of the
Business, and to retain its key employees.
(d) Resignations. At the Closing, PHC shall cause to be
delivered to Buyer duly signed resignations, effective immediately after the
Closing, of all directors of PHC (other than those directors designated in
writing by Buyer to PHC at least five business days prior to the Closing Date),
or shall take such other action as is necessary to ensure that such persons are
not directors of PHC after the Closing.
6. Representations and Warranties of Buyer. Buyer
hereby represents and warrants to Sellers as follows:
(a) Authority; No Conflicts.
(i) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Wisconsin. Buyer has all requisite corporate power and authority to
enter into this Agreement and the Ancillary Agreements and to
consummate the transactions contemplated hereby and thereby. All
corporate acts and other proceedings required to be taken by Buyer to
authorize the execution, delivery and performance of this Agreement
and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly and properly taken.
This Agreement has been duly executed and delivered by Buyer, and the
Ancillary Agreements to be executed and delivered by Buyer will be
duly and validly executed and delivered by Buyer. This Agreement and
the Ancillary Agreements constitute, or will constitute, as the case
may be, valid and binding obligations of Buyer, enforceable against
Buyer in accordance with their terms.
(ii) The execution and delivery by Buyer of this Agreement
and the Ancillary Agreements do not, and the consummation by Buyer of
the transactions contemplated hereby and thereby and compliance by
Buyer with the terms hereof and thereof will not, conflict with, or
result in any violation of or default under, or give rise to a right
of termination, cancellation or acceleration of any obligation or to
loss of a benefit under, or result in the creation of any lien, claim,
encumbrance, security interest, option, charge or restriction of any
kind upon any of the properties or assets of Buyer under, or require
any consent, authorization or approval under any provision of (A) the
certificate of incorporation or by-laws of Buyer, (B) any material
note, bond, mortgage, indenture, deed of trust, license, lease,
contract, commitment, agreement or arrangement to which Buyer
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<PAGE> 23
is a party or by which any of its properties or assets are bound, or
(C) any material judgment, order or decree, or any material statute,
law, ordinance, rule or regulation applicable to Buyer or its property
or assets, other than any such consent, authorization or approval
required under the HSR Act.
(b) Actions and Proceedings, etc. There are no (i)
outstanding judgments, orders, writs, injunctions or decrees of any court,
governmental agency or arbitration tribunal against Buyer which have or could
have a material adverse effect on the ability of Buyer to consummate the
transactions contemplated hereby or (ii) actions, suits, claims or legal,
administrative or arbitration proceedings or investigations pending or, to the
knowledge of Buyer, threatened against Buyer, which have or could have a
material adverse effect on the ability of Buyer to consummate the transactions
contemplated hereby.
(c) Availability of Funds. Buyer has cash available, or
irrevocable commitments from financial institutions (true and correct copies of
which have been delivered to Sellers), to enable it to consummate the
transactions contemplated by this Agreement.
(d) No Knowledge of Misrepresentations or Omissions.
Buyer has no knowledge that the representations and warranties of Sellers or
PHC in this Agreement and the Schedules hereto are not true and correct in all
material respects and Buyer has no knowledge of any material errors in, or
material omissions from, the Schedules to this Agreement, except as set forth
in a Notice of Breach delivered pursuant to Section 2(a)(iii).
(e) Acquisition of Shares for Investment. The Shares
purchased by Buyer pursuant to this Agreement are being acquired for investment
only and not with a view to any public distribution thereof, and Buyer will not
offer to sell or otherwise dispose of the Shares so acquired by it in violation
of any of the registration requirements of the Securities Act of 1933, as
amended, or any comparable state law.
(f) Plant Closings and Mass Layoffs. Buyer does not
currently plan or contemplate any plant closings, reductions in force or
terminations that, in the aggregate, would constitute a mass lay-off of Prince
Employees under the Worker Adjustment and Retraining Notification Act or any
similar federal, state or local statute or ordinance.
7. Covenants of Buyer. Buyer covenants as follows:
(a) Confidentiality.
(i) Buyer acknowledges that all information provided to
any of it and its Affiliates, agents and representatives by PHC and
its Affiliates, agents and representatives is subject to the terms of
a confidentiality agreement between or on behalf of PHC and Buyer or
one or more of their respective Affiliates or other beneficial owners
(the "Diligence Confidentiality Agreement"), the terms of which are
hereby incorporated herein by reference. Effective upon, and only
upon, the Closing, the Diligence Confidentiality Agreement shall
terminate; provided, however, that Buyer acknowledges that the
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<PAGE> 24
Diligence Confidentiality Agreement shall terminate only with respect
to information provided to any of Buyer and its Affiliates, agents or
representatives that relates solely to the Business; and provided
further, however, that Buyer acknowledges that any and all information
provided or made available to any of it and its Affiliates, agents and
representatives by or on behalf of the Sellers or PHC (other than
information relating solely to the Business) shall remain subject to
the terms and conditions of the Diligence Confidentiality Agreement
after the Closing Date.
(ii) Buyer agrees that, after the Closing Date, Buyer
shall, and shall use all reasonable efforts to cause their respective
directors, officers, employees, advisors and Affiliates to, keep the
Seller Information (as defined below) confidential following the
Closing Date, except that any such Seller Information required by law
or legal or administrative process to be disclosed may be disclosed
without violating the provisions of this Section 7(a)(ii). For
purposes of this Agreement, the term "Seller Information" shall mean
all information concerning any of the Sellers, PHC or its Affiliates,
including (A) any trade secrets, know-how and other confidential
technical, business and financial information, other than information
that relates exclusively to the Business (and not to any Seller or any
other business of PHC or the Sellers) and other than any such
information that is available to the public on the Closing Date, or
thereafter becomes available to the public other than as a result of a
breach of this Section 7(a)(ii), and (B) the terms of this Agreement.
(b) Performance of Obligations by Buyer After Closing
Date. On and after the Closing Date, Buyer shall duly, promptly and faithfully
pay, perform and discharge when due, (i) all obligations and liabilities of
whatever kind and nature, primary or secondary, direct or indirect, absolute or
contingent, known or unknown, whether or not accrued, whether arising before,
on or after the Closing Date, of PHC and/or the Business, including any such
obligations or liabilities contained in each of the Material Contracts and (ii)
any liability or obligation of PHC's or Buyer's Affiliates with respect to any
of the liabilities described in clause (i), including any guarantee or
obligation to assure performance given or made by PHC and its Affiliates with
respect to any such obligation of the Business set forth in clause (i) above.
(c) No Additional Representations; Disclaimer Regarding
Estimates and Projections. Buyer acknowledges that none of the Sellers and
PHC, nor any other person or entity acting on behalf of Sellers or any
Affiliate of Sellers, (A) has made any representation or warranty express or
implied, including any implied representation or warranty as to the condition,
merchantability, suitability or fitness for a particular purpose of any of the
assets used in the Business or (ii) has made any representation or warranty,
express or implied, as to the accuracy or completeness of any information
regarding the Business except as expressly set forth in this Agreement or as
and to the extent required by this Agreement to be set forth in the Schedules
hereto. Buyer further agrees that none of the Sellers, PHC or any other person
or entity will have or be subject to any liability to Buyer or any other person
resulting from the distribution to Buyer, or Buyer's use of, any such
information, including the Descriptive Memorandum prepared by Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") in June 1996 (the
"Descriptive Memorandum") and any information, document, or material made
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<PAGE> 25
available to Buyer in certain "data rooms," management presentations or any
other form in expectation of the transactions contemplated by this Agreement.
In connection with Buyer's investigation of the Business,
Buyer has received from or on behalf of Sellers certain projections, including
projected statements of operating revenues and income from operations of the
Business for the fiscal year ending on September 30, 1996 and for subsequent
fiscal years and certain business plan information for such fiscal year and
succeeding fiscal years. Buyer acknowledges that there are uncertainties
inherent in attempting to make such estimates, projections and other forecasts
and plans, that Buyer is familiar with such uncertainties, that Buyer is taking
full responsibility for making its own evaluation of the adequacy and accuracy
of all estimates, projections and other forecasts and plans so furnished to it
(including the reasonableness of the assumptions underlying such estimates,
projections and forecasts), and that Buyer shall have no claim against Sellers
with respect thereto. Accordingly, Sellers make no representation or warranty
with respect to such estimates, projections and other forecasts and plans
(including the reasonableness of the assumptions underlying such estimates,
projections and forecasts).
(d) Notification. Prior to the Closing, Buyer shall
promptly notify Sellers if Buyer obtains knowledge that the representations and
warranties of Sellers in this Agreement and the Schedules hereto are not true
and correct in all material respects, or if Buyer obtains knowledge of any
material errors in, or omissions from, the Schedules to this Agreement.
8. Mutual Covenants. The Sellers and Buyer covenant and
agree as follows:
(a) Consents. Buyer acknowledges that certain consents
to the transactions contemplated by this Agreement (including, but not limited
to, any consents described on Schedule 4(a)(ii)) may be required from parties
to contracts, leases, licenses or other agreements (written or otherwise) to
which PHC or any of its Affiliates is a party (including but not limited to the
Material Contracts) and such consents have not been obtained. Buyer agrees PHC
and the Sellers shall not have any liability whatsoever to Buyer arising out of
or relating to the failure to obtain any consents that may have been or may be
required in connection with the transactions contemplated by this Agreement or
because of the default, acceleration or termination of any such contract,
lease, license or other agreement as a result thereof. Buyer further agrees
that no representation, warranty or covenant of Sellers contained herein shall
be breached or deemed breached and no condition of Buyer shall be deemed not to
be satisfied as a result of the failure to obtain any consent or as a result of
any such default, acceleration or termination or any lawsuit, action, claim,
proceeding or investigation commenced or threatened by or on behalf of any
persons arising out of or relating to the failure to obtain any consent or any
such default, acceleration or termination. At Buyer's written request prior to
the Closing, Sellers shall cooperate with Buyer in any reasonable manner in
connection with Buyer's obtaining any such consents; provided, however, that
such cooperation shall not include any requirement of PHC or the Sellers to
expend money, commence any litigation or offer or grant any accommodation
(financial or otherwise) to any third party. With respect to any contracts,
leases, licenses or other agreements referred to above that are not assigned to
Buyer because of the failure to obtain a required consent ("Nontransferred
Contract"), Buyer shall indemnify, defend and hold harmless
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<PAGE> 26
Sellers from and against any liability that PHC or the Sellers may have in
connection with such Nontransferred Contracts as a result of the transactions
contemplated by this Agreement. The Sellers agree to enter into reasonable
arrangements with PHC or Buyer to allow contracts, leases, licenses or other
arrangements for which a necessary consent cannot be obtained to be
restructured as subcontracts or other alternate arrangements which would allow
Buyer to receive, to the extent reasonably practicable, the benefits (and
corresponding burdens) of the contracts as intended hereunder.
(b) Cooperation. Buyer, PHC and the Sellers shall
cooperate with each other and shall cause their respective officers, employees,
agents and representatives to cooperate with each other for a period of sixty
(60) days after the Closing to provide for an orderly transition of the
Business to Buyer and to minimize the disruption to the respective businesses
of the parties hereto resulting from the transactions contemplated hereby.
Each party shall reimburse the other for reasonable out-of-pocket costs and
expenses incurred in assisting the other pursuant to this Section 8(b). No
party shall be required by this Section 8(b) to take any action that would
unreasonably interfere with the conduct of its business.
(c) Publicity. PHC, the Sellers and Buyer agree that,
from the date hereof through the Closing Date, no public release or
announcement concerning the transactions contemplated hereby shall be issued or
made by any party without the prior consent of the other party (which consent
shall not be unreasonably withheld), except (i) as such release or announcement
may be required by law or the rules or regulations of any United States
securities exchange, in which case the party required to make the release or
announcement shall allow the other party reasonable time to comment on such
release or announcement in advance of such issuance, and (ii) that PHC and
Buyer may make such an announcement to its employees. Notwithstanding the
foregoing, Buyer, PHC and the Sellers shall cooperate to prepare a joint press
release to be issued on the Closing Date and, upon the request of either Buyer
or PHC, at the time of the signing of this Agreement. PHC, the Sellers and
Buyer agree to keep the terms of this Agreement confidential, except to the
extent required by applicable law or for financial reporting purposes and
except that the parties may disclose such terms to their respective accountants
and other representatives as necessary in connection with the ordinary conduct
of their respective businesses (so long as such persons agree to keep the terms
of this Agreement confidential).
(d) Best Efforts. Subject to the terms of this Agreement
(including the limitations set forth in Section 8(a)), each party will use its
best efforts to cause the Closing to occur. Without limiting the generality of
the foregoing or the provisions of Section 8(e), for purposes of this Section
8(d) and Section 8(e), the "best efforts" of Buyer shall include Buyer's
agreement to hold separate and divest such products and assets of Buyer or its
Affiliates as may be necessary to obtain the agreement of any governmental
agency or authority not to seek an injunction against or otherwise oppose the
transactions contemplated hereby, on such terms as may be required by such
governmental agency or authority.
(e) HSR Act Compliance. Buyer and PHC shall each file or
cause to be filed with the Federal Trade Commission and the United States
Department of Justice any notifications
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<PAGE> 27
required to be filed under the HSR Act with respect to the transactions
contemplated hereby and Buyer and PHC shall bear the costs and expenses of
their respective filings; provided that Buyer shall pay the filing fee in
connection therewith. Buyer and PHC shall use their respective best efforts
to make such filings promptly (and in any event within five business days)
following the date hereof, to respond to any requests for additional
information made by either of such agencies and to cause the waiting periods
under the HSR Act to terminate or expire at the earliest possible date and to
resist in good faith, at each of their respective cost and expense (including
the institution or defense of legal proceedings), any assertion that the
transactions contemplated hereby constitute a violation of the antitrust laws,
all to the end of expediting consummation of the transactions contemplated
hereby. Each of Buyer and PHC shall consult with the other prior to any
meetings, telephone or in person, with the staff of the Federal Trade
Commission and the United States Department of Justice, and each of Buyer and
PHC shall have the right to have a representative present at any such meeting.
(f) Retention of Records. Buyer agrees to maintain
copies of any books and records of and other financial data relating to the
Business (collectively, the "Records") for a period of not less than ten years
from the Closing Date (plus any additional time during which a party has been
advised that there is an ongoing tax audit with respect to periods prior to the
Closing Date, or such period is otherwise open to assessment). During such
period, Buyer agrees to give Sellers and their representatives reasonable
cooperation, access (including copies) and staff assistance, as needed, during
normal business hours and upon reasonable notice, with respect to the Records,
and Sellers agree to give Buyer and its representatives reasonable cooperation,
access and staff assistance, as needed, during normal business hours and upon
reasonable notice, with respect to the books and records and other financial
data relating to the Business and retained by Sellers, in each case as may be
necessary for general business purposes, including the preparation of tax
returns and financial statements and the management and handling of tax audits;
provided that such cooperation, access and assistance does not unreasonably
disrupt the normal operations of Buyer or Sellers. Buyer shall not destroy or
otherwise dispose of the Records for the period set forth in the immediately
preceding sentence without the written consent of Sellers.
(g) Employee Benefits.
(i) Buyer agrees to cause PHC or its successor to
continue to employ, under substantially the same terms and conditions,
immediately following the Closing Date, all of the employees (other
than those agreed to by Buyer and Sellers) employed in connection with
the Business on the Closing Date (the "Prince Employees"), and to
provide the Prince Employees, until at least the third anniversary of
the Closing Date, with substantially the same salaries and wages, and
with employee benefits, including medical, disability and life
insurance and retirement benefits, that are substantially the same in
the aggregate, as those provided to such employees by PHC immediately
prior to the Closing Date. Buyer will not, until at least the third
anniversary of the Closing Date, terminate any Prince Employee due to
the elimination of his or her job position on account of a
consolidation of operations of Buyer or any of its Affiliates.
"Consolidation," as used in the preceding sentence, shall not include
layoffs due to loss
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<PAGE> 28
of contracts, general industry downturn or matters related to an
individual's performance. Buyer acknowledges that each person listed
on Schedule 8(g) is a party to a separate employment agreement with
PHC, copies of which have previously been provided to Buyer, and that
each such agreement shall continue to be binding on PHC or its
successor, in accordance with its terms, after the Closing Date.
Buyer will pay, within 75 days after the Closing Date, any employee
bonuses for Prince Employees accrued as of the Closing. Buyer agrees
that Prince Employees will be eligible to participate in any stock or
bonus plan, or any other incentive pay plan, of Buyer or any Affiliate
in which similarly situated employees of Buyer or such Affiliate are
eligible to participate, except, however, that Buyer shall have no
obligation to provide benefits under Buyer's plan which are, in any
way, duplicative of or greater in the aggregate than the benefits
currently provided to Prince employees. PHC has heretofore provided
or made available to Buyer copies or summaries of the Employee Benefit
Plans. All of the employee benefit plans, programs and policies
maintained for the Prince Employees shall be assumed or retained by
Buyer. Buyer agrees to continue, until the third anniversary of the
Closing Date, all of the employee benefit plans listed on Schedule
4(k). Without limiting the generality of the foregoing, until the
third anniversary of the Closing Date, Buyer agrees to continue making
the level of contributions to, and to continue the benefits currently
provided under or through, the Prince Employee Retirement Trust (the "
PERT"). In addition, Buyer agrees
that, until the third anniversary of the Closing Date, it will not
merge or consolidate the PERT or any assets thereof with or into any
defined benefit pension plan of Buyer or any of its Affiliates. If
Buyer relocates any Prince Employee more than thirty-five (35) miles
from his or her current job site within three years after the Closing
Date, Buyer shall provide such person with relocation benefits not
less favorable than those provided to similarly situated employees
employed by Buyer. Buyer agrees that, until the third anniversary of
the Closing Date, any Prince Employee's refusal to relocate his or her
principal place of employment more than thirty-five (35) miles from
his or her current place of employment or refusal to work on Sundays
shall not be grounds for termination of such employee. To the extent
any applicable statutes, laws, ordinances, rules, orders, or
regulations of any governmental authority or instrumentality requires
that Buyer provide any greater payment (including severance payments)
or provision of benefits than is required under this Agreement, Buyer
shall comply with such applicable statute, law, ordinance, rule, order
or regulation.
(ii) With respect to each Prince Employee:
(A) Buyer shall waive pre-existing condition
exclusions, evidence of insurability provisions, waiting
period requirements or any similar provisions under any
employee benefit plan or compensation arrangements maintained
or sponsored by or contributed to by Buyer after the Closing
Date.
(B) Buyer shall apply toward any deductible
requirements and out-of-pocket maximum limits under its
employee welfare benefit plans any amounts paid (or accrued)
by each Prince Employee under Sellers' welfare benefit plans
during the current plan year.
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<PAGE> 29
(C) Buyer shall recognize, for purposes of
eligibility to participate, early commencement of benefits and
vesting (but not for purposes of benefit accrual and
compensation arrangements) under its employee benefits plans,
the service of each Prince Employee with PHC or its Affiliates
prior to the Closing Date.
(iii) Buyer shall indemnify, defend and hold Sellers
harmless from and against any loss, liability, claim or damage,
including attorneys' fees, for (A) severance liability suffered by
Sellers with respect to any Prince Employee and (B) multiemployer plan
liability.
(h) Tax Settlements. Buyer agrees that, after the
Closing Date, Buyer shall not, and shall cause PHC and its affiliates not to,
enter into any settlement or take any position with any third party regarding
the reporting, assessment or payment of any Taxes, which settlement or position
could reasonably be expected to have a material effect on any of the Sellers or
the businesses of PHC (other than the Business) operated by PHC prior to the
Closing without the prior written consent of the Sellers, which consent shall
not be unreasonably withheld. Buyer shall promptly notify the Sellers of any
third party claims relating to the reporting, assessment or payment of any such
Taxes relating to any period ending on or before the Closing Date or including
the Closing Date (and the Sellers shall be entitled to meaningful participation
in any settlement discussions or negotiations relating to any such third party
claims).
(i) Use of the "Prince" Name. At any time following the
Closing, upon the written request of the Sellers (or an authorized designee
thereof), Buyer shall, and shall cause all of its subsidiaries and Affiliates
(collectively, the "Buyer Group") to, promptly (and in any event within 90 days
after the receipt of such notice) (i) cease doing business, directly or
indirectly, under any name that includes or consists of the name "Prince" or
any name confusingly similar to the name "Prince" (collectively, the "Prince
Name"), (ii) cease using the Prince Name on any and all products manufactured
or distributed by the Buyer Group, any and all real property, equipment and
other tangible assets (including stationery, letterhead and business cards)
owned, operated or used by the Buyer Group, and any and all promotional
materials used by, or on behalf of, the Buyer Group, (iii) remove the Prince
Name from any logos or other marks used by the Buyer Group, (iv) effect the
cancellation or revocation of any and all trademark and copyright registrations
(and applications therefor) that include or consist of the Prince Name, or at
the option of Elsa D. Prince (or any successor, assign, executor, trustee or
administrator appointed by her) in her or his sole discretion, effect a valid
assignment of such trademark and copyright registrations (and applications
therefor) to Elsa D. Prince (or such successor, assign, executor, trustee or
administrator), and provide written evidence of such cancellations, revocations
or assignments to the Sellers and (v) change their corporate names to names
that do not include the Prince Name. The Sellers agree that they will not, and
prior to any post-Closing sale or other disposition of Prince Machine
Corporation, the Sellers shall cause Prince Machine Corporation to agree not
to, use the Prince Name, or license, sell or transfer to any entity, whether
affiliated with Sellers or not, the right to use the Prince Name, in each case
in connection with the manufacturing, selling and/or distributing of automotive
interior components and systems. In addition, after the Closing, neither PHC
nor any member of the Buyer Group shall (x) license or permit any other person
or entity to use the Prince Name in any manner without the prior written
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<PAGE> 30
consent of the Sellers (or an authorized designee thereof) or (y) contest or
otherwise restrict (or attempt to restrict) the use of the Prince Name by any
of the Sellers, any businesses in which any of the Sellers has an ownership
interest (including Prince Machine Corporation) or any of their respective
successors or assigns. Notwithstanding any other provision of this Agreement,
the covenants contained in this Section 8(i) shall survive forever, and,
because Buyer and Seller acknowledge and agree that money damages would be an
inadequate remedy for any breach of this Section 8(i), in the event of a breach
or threatened breach of this Section 8(i), the Sellers or their respective
successors or assigns may, in addition to other rights and remedies existing in
their favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief (including attorneys' fees) in
order to enforce, or prevent any violations of, the provisions hereof (without
posting a bond or other security).
(j) Hangar Lease and Aircraft Services Agreement. Prior
to the Closing, Prince Corporation, Buyer and Wingspan Leasing, Inc. shall
negotiate in good faith a hangar facilities lease and aircraft services
agreement (the "Lease and Services Agreement"), which shall be executed and
delivered by Prince Corporation and Wingspan Leasing, Inc. at the Closing.
(k) Assignment, Assumption and Indemnification Agreement.
At the Closing, PHC, the Sellers and Buyer shall negotiate in good faith and
execute and deliver an assignment, assumption and indemnification agreement
having substantially the terms attached hereto as Exhibit A (the "Assignment,
Assumption and Indemnification Agreement").
(l) Transition Services Agreement. Prior to the Closing,
PHC, the Sellers and Buyer shall negotiate in good faith, and execute and
deliver at the Closing, a transition services agreement (the "Transition
Services Agreement").
9. Further Assurances. From time to time, as and when
requested by any party hereto, any other party hereto shall execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions (subject to any limitations set forth in this Agreement), as such other
party may reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
10. Assignment. Except as set forth below, this
Agreement and any rights and obligations hereunder shall not be assignable or
transferable by Buyer or Sellers (including by operation of law in connection
with a merger or sale of stock, or sale of substantially all the assets, of
Buyer or any Seller) without the prior written consent of the other parties and
any purported assignment without such consent shall be void and without effect;
provided that, without the consent of the Sellers, Buyer may assign its right
to purchase any of the Shares hereunder to one or more wholly-owned
subsidiaries of Buyer upon written notice of such assignment to the Sellers (it
being understood, however, that no such assignment shall limit or otherwise
affect Buyer's obligations hereunder).
11. No Third-Party Beneficiaries. This Agreement is for
the sole benefit of the parties hereto and their permitted assigns and nothing
herein express or implied shall give or be
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<PAGE> 31
construed to give to any person or entity, other than the parties hereto and
such permitted assigns and other than Prince Employees with respect to Section
8(g) hereof, any legal or equitable rights hereunder.
12. Termination.
(a) Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(i) by the mutual written consent of Sellers and Buyer;
(ii) by Sellers if any of the conditions set forth in
Section 3(b) shall have become incapable of fulfillment, and shall not
have been waived by Sellers;
(iii) by Buyer if any of the conditions set forth in
Section 3(a) shall have become incapable of fulfillment, and shall not
have been waived by Buyer; or
(iv) by Sellers if the Closing does not occur on or prior
to October 31, 1996, or December 31, 1996 if the Closing does not
occur on or prior to October 31, 1996 due solely to the fact that the
waiting period under the HSR Act has not expired or been terminated.
provided, however, that the party seeking termination pursuant to clause (ii),
(iii) or (iv) above may not terminate this Agreement if such party is in breach
of any of its representations, warranties, covenants or agreements contained in
this Agreement.
(b) In the event of termination by Sellers or Buyer
pursuant to this Section 12, written notice thereof shall forthwith be given to
the other party and the transactions contemplated by this Agreement shall be
terminated, without further action by any party. If the transactions
contemplated by this Agreement are terminated as provided herein:
(i) Buyer shall return all documents and copies and other
materials received from or on behalf of PHC or the Sellers relating to
the transactions contemplated hereby, whether so obtained before or
after the execution hereof, to the Sellers; and
(ii) all confidential information received by Buyer with
respect to the Business shall be treated in accordance with the
Diligence Confidentiality Agreement, which shall remain in full force
and effect notwithstanding the termination of this Agreement.
(c) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 12, this
Agreement shall become void and of no further force and effect, except for the
provisions of (i) Section 5(a) relating to indemnification in connection with
access to the Property, (ii) Section 7(a) relating to the obligation of Buyer
to keep confidential certain information and data obtained by it, (iii)
Section 8(c) relating to
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<PAGE> 32
publicity, (iv) Section 15 relating to certain expenses, (v) Section 22
relating to finder's fees and broker's fees, and (vi) this Section 12. Nothing
in this Section 12 shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this Agreement or to
impair the right of any party to compel specific performance by another party
of its obligations under this Agreement.
13. Non-Survival of Representations and Warranties. None
of the representations and warranties in this Agreement and in any other
document delivered in connection herewith shall survive the Closing, except
that the representation contained in Section 4(p) shall survive the Closing for
a period lasting until the third anniversary of the Closing.
14. Indemnification.
(a) Indemnification by the Sellers. The Sellers shall
indemnify and hold Buyer harmless from any loss, liability, damage or expense
(including reasonable legal fees and expenses) but excluding consequential
damages, lost profits or punitive damages ("Losses") suffered or incurred by
Buyer to the extent arising from any breach as of the Closing Date of the
representation contained in Section 4(p); provided, however, that the Sellers
shall not have any liability unless and until the aggregate of all Losses
relating thereto for which the Sellers would, but for this proviso, be required
to indemnify Buyer exceeds on a cumulative basis an amount equal to
$10,000,000, at which point the Sellers shall indemnify Buyer for the full
amount of all such Losses from the first dollar; provided further, however,
that the Sellers shall not have any liability for any breach of Section 4(p) if
Buyer had knowledge of such breach at the time of the Closing and failed to
notify the Sellers of such breach in accordance with Section 6(d), and no
Losses related thereto shall be aggregated for purposes of the first proviso to
this Section 14(a).
(b) Exclusive Remedy. Except as otherwise expressly
provided in Section 22, Buyer acknowledges and agrees that, from and after the
Closing, its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Section 14. In furtherance of the
foregoing, Buyer hereby waives, from and after the Closing, to the fullest
extent permitted under applicable law, any and all rights, claims and causes of
action it may have against the Sellers relating to the subject matter of this
Agreement arising under or based upon any federal, state, local or foreign
statute, law, ordinance, rule or regulation or otherwise, provided, however,
that Buyer does not hereby waive any tort claims it may have against the
Sellers for intentional fraudulent misrepresentation. Notwithstanding anything
to the contrary contained in this Agreement, Buyer shall have no right to
indemnification under Section 14(a) with respect to any Loss or alleged Loss if
Buyer shall have requested a reduction in the Net Book Value reflected on the
Closing Net Book Value Statement on account of any matter forming the basis for
such Loss or alleged Loss and shall have agreed, or the Accounting Firm shall
have determined, that no such reduction shall be made or with respect to any
Loss or alleged Loss if Buyer shall have included facts or alleged facts
relating to such Loss or alleged Loss in a Notice of Breach delivered pursuant
to Section 2(a)(iii).
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<PAGE> 33
(c) Losses Net of Insurance. The amount of any and all
Losses under this Section 14 shall be determined net of any amounts recovered
or recoverable by the indemnified party under insurance policies, indemnities
or other reimbursement arrangements with respect to such Losses. Each party
hereby waives, to the extent permitted under its applicable insurance policies,
any subrogation rights that its insurer may have with respect to any
indemnifiable Losses. Any indemnity payment under this Agreement shall be
treated as an adjustment to the Final Purchase Price for tax purposes.
(d) Termination of Indemnification. The obligations to
indemnify and hold Buyer harmless pursuant to Section 14(a) shall terminate
when the representation contained in Section 4(p) terminates pursuant to
Section 13; provided, however, that such obligations to indemnify and hold
harmless shall not terminate with respect to any item as to which Buyer shall
have, prior to the expiration of the applicable period, previously made a claim
by delivering a written notice (stating in reasonable detail the nature of, and
factual and legal basis for, any such claim for indemnification, and the
provisions of this Agreement upon which such claim for indemnification is made)
to Sellers.
(e) Procedures Relating to Indemnification.
(i) In order for Buyer to be entitled to any indemnification
provided for under this Agreement in respect of a breach of Section 4(p),
arising out of or involving a claim or demand made by any person, firm,
governmental authority or corporation against Buyer (a "Third Party Claim"),
Buyer must notify the Sellers in writing, and in reasonable detail, of the
Third Party Claim as promptly as reasonably possible after receipt by such
Buyer of notice of the Third Party Claim; provided, however, that failure to
give such notification on a timely basis shall not affect the indemnification
provided hereunder except to the extent the Sellers shall have been actually
prejudiced as a result of such failure. Thereafter, Buyer shall deliver to
the Sellers, within five business days after the indemnified party's receipt
thereof, copies of all notices and documents (including court papers) received
by Buyer relating to the Third Party Claim.
(ii) If a Third Party Claim is made against Buyer, the
Sellers shall be entitled to participate in the defense thereof and, if they so
choose and acknowledge their obligation to indemnify Buyer therefor, to assume
the defense thereof with counsel selected by the Sellers and reasonably
satisfactory to Buyer. Notwithstanding any acknowledgment made pursuant to the
immediately preceding sentence, the Sellers shall continue to be entitled to
assert any limitation on its indemnification responsibility contained in the
provisos to Section 14(a). Should the Sellers so elect to assume the defense
of a Third Party Claim, the Sellers shall not be liable to Buyer for legal
expenses subsequently incurred by the Buyer in connection with the defense
thereof. If the Sellers assume such defense, Buyer shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Sellers, it being understood,
however, that the Sellers shall control such defense. The Sellers shall be
liable for the fees and expenses of counsel employed by Buyer for any period
during which the Sellers have not assumed the defense thereof. If the Sellers
choose to defend any Third Party Claim, all the parties hereto shall cooperate
in the defense or prosecution of such Third Party Claim. Such cooperation
shall include the retention and (upon the Sellers' request)
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<PAGE> 34
the provision to the Sellers of records and information which are reasonably
relevant to such Third Party Claim, and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Whether or not the Sellers shall have assumed
the defense of a Third Party Claim, Buyer shall not admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim without
the Sellers' prior written consent (which consent shall not be unreasonably
withheld).
15. Expenses. Whether or not the transactions
contemplated hereby are consummated, and except as otherwise specifically
provided in this Agreement, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses (it being understood that the fees and
expenses of legal counsel to PHC and the Sellers have been incurred solely by
PHC, have been fully accrued by PHC (such accrual being reflected on the
Initial Net Book Value Statement) and shall not be more than $750,000 in the
aggregate for the services of Kirkland & Ellis and Couzens, Lansky, Fealk,
Ellis, Roeder & Lazar, P.C.).
16. Amendment and Waiver. This Agreement may be amended,
or any provision of this Agreement may be waived; provided that any such
amendment or waiver shall be binding upon the parties hereto only if set forth
in a writing executed by each such party and referring specifically to the
provision alleged to have been amended or waived. No course of dealing between
or among any persons having any interest in this Agreement shall be deemed
effective to modify, amend or discharge any part of this Agreement or any
rights or obligations of any person under or by reason of this Agreement.
17. Notices. All notices or other communications
required or permitted to be given hereunder shall be in writing and shall be
delivered by hand or sent by prepaid telex, cable or telecopy, or sent, postage
prepaid, by registered, certified or express mail, or reputable overnight
courier service and shall be deemed given when so delivered by hand, telexed,
cabled or telecopied, or if mailed, three days after mailing (one business day
in the case of express mail or overnight courier service), as follows:
(i) if to Buyer,
Johnson Controls, Inc.
Automotive Systems Group
49200 Halyard Drive
P.O. Box 8010
Plymouth, MI 48170
Attention: Vice President and General Manager
with a copy to:
General Counsel
Johnson Controls, Inc.
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<PAGE> 35
5757 N. Green Bay Avenue
P.O. Box 591
Milwaukee, WI 53201
(ii) if to PHC or the Sellers prior to the Closing,
Prince Corporation
One Prince Center
Holland, Michigan 49423
Telecopy No. (616) 394-6199
Attention: Robert Haveman
with copies to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
(312) 861-2200
Telecopy No. (312) 861-2200
Attention: Willard G. Fraumann, P.C.
and
Couzens, Lansky, Fealk, Ellis, Roeder & Lazar, P.C.
33533 West Twelve Mile Road, Suite 150
P.O. Box 9057
Farmington Hills, Michigan 48333-9057
(810) 489-8600
Telecopy No. (810) 489-4156
Attention: Donald M. Lansky, Esq.
(iii) if to the Sellers after the Closing,
Mrs. Elsa D. Prince
3006 North Fork Highway
Wapiti, Wyoming 82450
with copies to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
(312) 861-2200
Telecopy No. (312) 861-2200
Attention: Willard G. Fraumann, P.C.
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<PAGE> 36
and
Couzens, Lansky, Fealk, Ellis, Roeder & Lazar, P.C.
33533 West Twelve Mile Road, Suite 150
P.O. Box 9057
Farmington Hills, Michigan 48333-9057
(810) 489-8600
Telecopy No. (810) 489-4156
Attention: Donald M. Lansky, Esq.
18. Interpretation. The headings and captions contained
in this Agreement, in any Exhibit or Schedule hereto and in the table of
contents to this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Any capitalized
terms used in any Schedule or Exhibit and not otherwise defined therein shall
have the meanings set forth in this Agreement. The use of the word "including"
herein shall mean "including without limitation."
19. No Strict Construction. Notwithstanding the fact
that this Agreement has been drafted or prepared by one of the parties, each of
the parties confirms that both it and its counsel have reviewed, negotiated and
adopted this Agreement as the joint agreement and understanding of the parties,
and the language used in this Agreement shall be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against any person.
20. Counterparts. This Agreement may be executed in one
or more counterparts (including by means of telecopied signature pages), all of
which shall be considered one and the same agreement, and shall become
effective when one or more such counterparts have been signed by each of the
parties and delivered to the other party.
21. Entire Agreement. This Agreement and the other
agreements referred to herein (including the Diligence Confidentiality
Agreement) contain the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, whether written or oral, relating to such
subject matter.
22. Brokerage. Buyer has not used a broker or finder in
connection with the transactions contemplated by this Agreement, and there are
no claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement by or on behalf of Buyer, except pursuant to an
arrangement with Salomon Brothers Inc for which Buyer is solely responsible.
Neither the Sellers nor PHC has retained any broker or finder or incurred any
liability or obligation for any brokerage fees, commissions or finder's fees
with respect to this Agreement or the transactions contemplated hereby, except
pursuant to arrangements with Merrill Lynch and Ernst & Young LLP, for which
the Sellers are solely responsible. Buyer shall indemnify and hold the Sellers
harmless for any breach of its representation in this Section 22, and the
Sellers shall indemnify and hold Buyer harmless for any breach of their
representation in this Section 22.
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<PAGE> 37
23. Schedules. The disclosures in each of the Schedules
hereto are to be taken as relating to the representations and warranties of
Sellers as a whole, and matters disclosed on any Schedule shall be deemed to be
disclosed on all Schedules on which such matters are required to be disclosed.
The inclusion of information in the Schedules hereto shall not be construed as
an admission that such information is material to the Business. In addition,
matters reflected in the Schedules are not necessarily limited to matters
required by this Agreement to be reflected in such Schedules. Such additional
matters are set forth for informational purposes only and do not necessarily
include other matters of a similar nature. Prior to the Closing, the Sellers
shall have the right to supplement, modify or update the Schedules hereto to
reflect changes in the ordinary course of business prior to the Closing;
provided, however, that any such supplements, modifications or updates shall be
subject to Buyer's rights under Section 3(a)(i) and Section 2(a)(iii).
24. Representation by Counsel; Interpretation. The
Sellers and Buyer acknowledge that each of them has been represented by counsel
in connection with this Agreement and the transactions contemplated hereby.
Accordingly, any rule of law or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement against the party
that drafted it has no application and is expressly waived.
25. Knowledge. The term "knowledge," when used in the
phrase "to the knowledge of PHC," shall mean, and shall be limited to, the
actual knowledge of the individuals listed on Schedule 25.
26. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be valid and effective
under applicable law, but if any provision of this Agreement or the application
of any such provision to any person or circumstance shall be held invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof.
27. Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Michigan
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
28. Exhibits and Schedules. All Exhibits and Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein.
29. Dispute Resolution.
(a) Negotiation. In the event of any dispute or
disagreement between any of PHC, the Sellers and Buyer as to the interpretation
of any provision of this Agreement (or the performance of obligations
hereunder), the matter, upon written request of either party, shall be referred
to representatives of the parties for decision, each party being represented by
a senior
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<PAGE> 38
executive officer who has no direct operational responsibility for the matters
contemplated by this Agreement (the "Representatives"). The Representatives
shall promptly meet in a good faith effort to resolve the dispute. If the
Representatives do not agree upon a decision within thirty (30) calendar days
after reference of the matter to them, each of Buyer, PHC and the Sellers shall
be free to exercise the remedies available to them under Section 29(b).
(b) Arbitration. Any controversy, dispute or claim
arising out of or relating in any way to this Agreement or the other agreements
contemplated hereby or the transactions arising hereunder or thereunder that
cannot be resolved by negotiation pursuant to Section 29(a) shall, except as
otherwise provided in Section 2(b), be settled exclusively by arbitration in
the City of Holland, Michigan. Such arbitration shall be administered by the
Center for Public Resources (the "Institute") in accordance with its then
prevailing Rules for Non- Administered Arbitration of Business Disputes (except
as otherwise provided herein), by three independent and impartial arbitrators,
one of whom shall be appointed by the Sellers and one of whom shall be
appointed by Buyer. Notwithstanding anything to the contrary provided in
Section 27 hereof, the arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. Section 1 et seq. The fees and expenses of the
Institute and the arbitrators shall be shared equally by the parties and
advanced by them from time to time as required; provided that at the conclusion
of the arbitration, the arbitrators shall award costs and expenses (including
the costs of the arbitration previously advanced and the fees and expenses of
attorneys, accountants and other experts) and interest at the Applicable Rate
to the prevailing party. No pre-arbitration discovery shall be permitted,
except that the arbitrators shall have the power in their sole discretion, on
application by any party, to order pre-arbitration examination solely of those
witnesses and documents that any other party intends to introduce in its case-
in-chief at the arbitration hearing. The arbitrators shall render their award
within 90 days of the conclusion of the arbitration hearing. The arbitrators
shall not be empowered to award to any party any consequential damages, lost
profits or punitive damages in connection with any dispute between or among
them arising out of or relating in any way to this Agreement or the
transactions arising hereunder, and each party hereby irrevocably waives any
right to recover such damages. Notwithstanding anything to the contrary
provided in this Section 29(b) and without prejudice to the above procedures,
either party may apply to any court of competent jurisdiction for temporary
injunctive or other provisional judicial relief if such action is necessary to
avoid irreparable damage or to preserve the status quo until such time as the
arbitration panel is convened and available to hear such party's request for
temporary relief. The award rendered by the arbitrators shall be final and not
subject to judicial review and judgment thereon may be entered in any court of
competent jurisdiction.
* * * * *
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<PAGE> 39
IN WITNESS WHEREOF, the parties have caused this Stock
Purchase Agreement to be duly executed as of the date first written above.
JOHNSON CONTROLS, INC.
By: /s/ J.H. Keyes
Name: James H. Keyes
Title: Chairman and CEO
PRINCE HOLDING CORPORATION
By: /s/ Robert Haveman
Name: Robert Haveman
Title: Secretary and Treasurer
ALL SELLERS LISTED ON SCHEDULE 1
By: /s/ Robert Haveman
Name: Robert Haveman
Title: Attorney-in-Fact
<PAGE> 1
EXHIBIT 2.2
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
This Amendment No. 1 to the Stock Purchase Agreement, dated as of July 17,
1996 (the "Purchase Agreement"), by and among Prince Holding Corporation, the
Sellers listed on Schedule 1 thereto, and Johnson Controls, Inc., is made by
and among the Sellers, PHC and Buyer as of this 25th day of September, 1996.
Capitalized terms used but not otherwise defined herein shall have the
respective meanings accorded such terms in the Purchase Agreement.
WHEREAS, the Sellers, PHC and Buyer, as a result of negotiations between
such parties relating to the provision of certain indemnities and services from
and after the Closing Date and in order to give effect to the terms of that
certain letter agreement dated September 20, 1996 by and among the Sellers, PHC
and Buyer, wish to amend the Purchase Agreement in certain respects, all upon
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
1. The Purchase Agreement is hereby amended as follows:
1.1 Each reference to the word "Agreement" in the Purchase Agreement (when
referring to the Purchase Agreement) shall be followed by the words ", as
amended."
1.2 Section 1 of the Purchase Agreement is hereby deleted in its entirety
and replaced with the following language:
"1. Purchase and Sale of Shares. On the terms and subject to the
conditions of this Agreement, at the Closing Sellers shall sell, transfer and
deliver to Buyer, and Buyer shall purchase from Sellers, all of the Shares
outstanding on the Closing Date, for an aggregate purchase price of
$1,225,392,540 (the "Initial Purchase Price")."
1.3 Section 2(a)(i) of the Purchase Agreement is hereby deleted in its
entirety and replaced with the following language:
<PAGE> 2
"(i) At the Closing, subject to and on the terms and conditions set forth
in this Agreement, Buyer shall deliver to Sellers (A) by wire transfer to bank
accounts designated in writing by the Sellers immediately available funds in an
amount equal to $725,392,540, (B) a promissory note in the aggregate amount of
$500,000,000 substantially in the form attached hereto as Exhibit B, (C)
certified copies of resolutions duly adopted on or prior to the date hereof by
Buyer's board of directors authorizing the execution, delivery and performance
of this Agreement and the Ancillary Agreements, (D) certified copies of Buyer's
certificate of incorporation and by-laws, (E) a certificate of the Secretary or
an Assistant Secretary of Buyer as to the incumbency of the officer(s) of Buyer
(who shall not be such Secretary or Assistant Secretary) executing this
Agreement or any Ancillary Agreement, (F) a short-form certificate of good
standing of Buyer, certified by the Secretary of State of Buyer's state of
incorporation as of a date not more than three business days prior to the
Closing Date, and (G) such other certificates and instruments that the Sellers
and their counsel may reasonably request."
1.4 Notwithstanding Sections 3(a)(iv), 3(b)(iv) and 8(j) of the Purchase
Agreement, the parties hereto hereby agree to waive any requirement that the
Lease and Services Agreement be executed and delivered as a condition of
Closing and further agree to use good faith efforts to negotiate, execute and
deliver a hangar facilities lease and aircraft services agreement as soon as
reasonably practicable following the Closing Date.
1.4 All references in the Purchase Agreement, including the Schedules
thereto, to the "Assignment, Assumption and Indemnification Agreement" shall be
revised to read "Indemnification and Stock Redemption Agreement."
1.5 The reference to "Schedule 4(k)" at the end of the eighth sentence of
Section 8(g)(i) of the Purchase Agreement shall be revised to read "Schedule
4(l)."
1.6 Section 17(iii) of the Purchase Agreement is hereby amended to add,
immediately after the address for Elsa D. Prince, the following additional
address:
"PHC, L.L.C.
190 River Avenue, 3rd Floor
Holland, MI 49423
Attention: Robert Haveman".
1.7 Schedules 4(f)-1, 4(f)-2, 4(h), 4(o), 5(b), 8(g) and 25 to the Purchase
Agreement shall be replaced in their entirety with the corresponding schedules
attached to this Amendment,
<PAGE> 3
and Schedule 4(g) of the Purchase Agreement shall be amended to include the
supplemental information attached hereto as Schedule 4(g).
2. Miscellaneous.
2.1 Except as expressly set forth herein, no change is made hereby to the
terms and provisions of the Purchase Agreement and the Purchase Agreement shall
remain in full force and effect.
2.2 This Amendment may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original and all of which
shall constitute the same instrument.
* * * * *
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date first written above.
JOHNSON CONTROLS, INC.
By: /s/ Stacy L. Fox
Name: Stacy L. Fox
Title: Attorney-in-Fact
PRINCE HOLDING CORPORATION
By: /s/ Robert Haveman
Name: Robert Haveman
Title: Treasurer and Secretary
SELLERS
By: /s/ Robert Haveman
Name: Robert Haveman
Title: Their Attorney-in-Fact
