<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: March 6, 1998
Date of earliest event reported: December 23, 1997
----------------
Newcor, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-5985 38-0865770
- --------------- ------------- -------------------
(State or other (Commission (IRS Employer
jurisdiction) File Number) Identification No.)
1825 S. Woodward Avenue, Suite 240, Bloomfield Hills, MI 48302
- -------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (248) 253-2400
--------------
- -------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS:
The following financial statements, pro forma financial information and
exhibits are filed as a part of this report.
(a) Financial statements of the business acquired:
<TABLE>
<CAPTION>
ITEM PAGE
- ------ ----
<S> <C>
Financial statements of Machine Tool & Gear, Inc.
Report of Independent Accountants 3
Balance Sheets as of September 30, 1997 and December 31, 1996 4
Statements of Income and Retained Earnings for the nine-months ended September 30,
1997 and 1996 and for the year ended December 31, 1996 5
Statements of Cash Flows for the nine-months ended September 30, 1997 and 1996
and for the year ended December 31, 1996 6
Notes to Financial Statements 7
(b) Pro forma financial information:
ITEM
- ----
Newcor, Inc. and Machine Tool & Gear, Inc. Unaudited Pro Forma Condensed Consolidated Financial Data:
Unaudited Pro Forma Consolidated Statement of Income 11
Unaudited Pro Forma Condensed Consolidated Balance Sheet 12
Notes to Unaudited Pro Forma Condensed Consolidated Financial Data 13
(c) Exhibits in accordance with the provisions of Item 601 of Regulation S-K:
EXHIBIT
2. Asset Purchase Agreement dated October 1, 1997 (signed December
23, 1997) between Newcor, Inc. and Machine Tool & Gear, Inc.
(complete with schedules).
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Newcor, Inc.
------------
(Registrant)
/s/ John Garber
Date March 6, 1998 ----------------------
John Garber
Vice President-Finance
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Machine Tool & Gear, Inc.:
We have audited the accompanying balance sheet of Machine Tool & Gear, Inc.
as of December 31, 1996 and the related statements of income and retained
earnings, and cash flows for the year 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Machine Tool & Gear, Inc. as
of December 31, 1996, and the results of operations and cash flows for the year
then ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
November 19, 1997, except as to the last paragraph
of Note 8 for which the date is December 24, 1997.
3
<PAGE> 4
MACHINE TOOL & GEAR, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 234,379 $ 827,891
Accounts receivable....................................... 2,393,512 2,530,031
Inventories............................................... 1,218,183 1,983,258
Prepaid expenses and other................................ 62,213 111,108
Deposits on equipment to be leased........................ 501,876 2,482,587
---------- -----------
Total current assets................................... 4,410,163 7,934,875
Property, plant and equipment, net.......................... 4,757,897 6,083,664
---------- -----------
Total assets........................................... $9,168,060 $14,018,539
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 582,053 $ 2,686,283
Borrowings under revolving credit agreement............... 250,000 1,566,500
Accounts payable.......................................... 1,444,320 2,876,706
Accrued expenses.......................................... 70,748 123,824
---------- -----------
Total current liabilities.............................. 2,347,121 7,253,313
Long-term debt, less current portion........................ 2,188,802 3,427,516
---------- -----------
Total liabilities...................................... 4,535,923 10,680,829
Common stock, par value $1 per share:
Authorized: 50,000 shares
Issued and outstanding: 14,000 shares..................... 14,000 14,000
Capital in excess of par.................................... 8,000 8,000
Retained earnings........................................... 5,051,531 3,879,575
Advances to officers/shareholders........................... (441,394) (563,865)
---------- -----------
Total shareholders' equity............................. 4,632,137 3,337,710
---------- -----------
Total liabilities and shareholders' equity............. $9,168,060 $14,018,539
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
MACHINE TOOL & GEAR, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
NINE NINE
YEAR MONTHS MONTHS
ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996
------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Sales................................................. $23,262,343 $16,596,725 $18,071,974
Cost of sales......................................... 18,033,213 13,413,924 14,002,494
----------- ----------- -----------
Gross margin.......................................... 5,229,130 3,182,801 4,069,480
Selling, general and administrative expenses.......... 2,473,105 2,662,411 1,910,905
----------- ----------- -----------
Operating income.................................... 2,756,025 520,390 2,158,575
Other expense:
Interest expense.................................... 176,045 364,716 144,167
Charitable contributions............................ 201,400 739,930 160,200
Loss on sale of fixed assets........................ 18,212 -- 18,212
----------- ----------- -----------
Net income (loss)................................... 2,360,368 (584,256) 1,835,996
Retained earnings, beginning of period................ 4,422,363 5,051,531 4,422,363
Distributions to shareholders......................... (1,731,200) (587,700) (921,200)
----------- ----------- -----------
Retained earnings, end of period...................... $ 5,051,531 $ 3,879,575 $ 5,337,159
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
MACHINE TOOL & GEAR, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE NINE
YEAR ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996
------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................... $ 2,360,368 $ (584,256) $ 1,835,996
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation..................................... 686,887 504,357 509,807
Loss on sales of fixed assets.................... 18,212 -- 18,212
Changes in operating assets and liabilities:
Accounts receivable............................ (216,053) (136,519) (694,822)
Inventories.................................... 227,974 (765,075) 191,746
Deposits....................................... (483,375) (1,980,711) (358,875)
Prepaid expenses and other assets.............. (28,558) (48,895) (10,153)
Accounts payable and accrued expenses.......... (465,395) 1,485,462 272,155
----------- ----------- -----------
Total adjustments................................ (260,308) (941,381) (71,930)
----------- ----------- -----------
Net cash provided by (used in) operating
activities..................................... 2,100,060 (1,525,637) 1,764,066
Cash flows from investing activities:
Expenditures for property, plant and equipment...... (1,359,210) (1,830,124) (1,209,229)
Proceeds from sale of assets........................ 291,000 -- 291,000
----------- ----------- -----------
Net cash used in investing activities............ (1,068,210) (1,830,124) (918,229)
Cash flows from financing activities:
Net (payments) borrowings under revolving credit
agreement........................................ (1,100,000) 1,316,500 (50,000)
Proceeds from term debt obligations................. 2,800,000 3,763,948 500,000
Payments on term debt obligations................... (919,080) (421,004) (500,290)
Distributions to shareholders....................... (1,731,200) (587,700) (921,200)
Advances to officers/shareholders................... (370,986) (122,471) (288,274)
----------- ----------- -----------
Net cash (used in) provided by financing
activities..................................... (1,321,266) 3,949,273 (1,259,764)
----------- ----------- -----------
Net increase (decrease) in cash....................... (289,416) 593,512 (413,927)
Cash, beginning of year............................... 523,795 234,379 523,795
----------- ----------- -----------
Cash, end of year..................................... $ 234,379 $ 827,891 $ 109,868
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest.............. $ 176,045
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 7
MACHINE TOOL & GEAR, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Nature of Business: Machine Tool & Gear, Inc. (the "Company") is a
manufacturer of differential pinion and side gears, output shafts and rear axle
shafts for the automotive industry.
b. Interim Financial Information: The unaudited interim basic financial
statements included herein as of September 30, 1997 and for the nine-month
periods ended September 30, 1997 and 1996, include, in the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the Company's financial position, results of
operations, and cash flows. Operating results for the nine-months ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997.
c. Accounts Receivable: The Company's trade receivables are substantially
due from customers in the automotive industry. One customer represented more
than 50 percent of the sales of the Company during 1996.
d. Inventory: Inventories are stated at the lower of cost or market with
cost being determined on the first-in, first-out basis.
e. Property, Plant and Equipment: Property, plant and equipment are stated
at cost and are depreciated using the straight-line method over the estimated
useful lives of the assets. The general range of lives is fifteen to thirty-nine
years for buildings and leasehold improvements and five to ten years for
machinery and equipment, furniture and fixtures and vehicles. Upon sale or
retirement, the cost of the assets and related accumulated depreciation are
eliminated from the respective accounts, and the resulting gain or loss is
included in income. Normal repairs and maintenance are charged to expense when
incurred.
f. Income Taxes: The Company has elected to be treated as an S corporation
under the Internal Revenue Code. Under these provisions, the Company does not
pay federal corporate income taxes on its taxable income. The shareholders of
the Company are taxed on their proportionate share of the Company's taxable
income. Accordingly, no provision for federal corporate income taxes has been
reflected in the financial statements.
g. Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
2. INVENTORY:
Inventory at December 31, 1996 consists of the following:
<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
Finished goods.............................................. $ 474,494
Work in Process............................................. 616,929
Raw Materials............................................... 126,760
-----------
$ 1,218,183
===========
</TABLE>
7
<PAGE> 8
MACHINE TOOL & GEAR, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at December 31, 1996 consists of the
following:
<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
Land........................................................ $ 101,725
Buildings................................................... 655,845
Leasehold improvements...................................... 836,282
Furniture, fixtures and other............................... 444,583
Machinery and equipment..................................... 6,587,339
Construction in progress.................................... 93,920
-----------
8,719,694
Accumulated depreciation.................................... (3,961,797)
-----------
Property, plant and equipment, net........................ $ 4,757,897
===========
</TABLE>
4. CREDIT AGREEMENTS AND LONG-TERM DEBT:
At December 31, 1996 the Company had $250,000 outstanding under a revolving
credit agreement with a bank. The credit agreement allows for maximum borrowings
of $4,300,000 with interest at the lower of the prime rate (the bank's prime
rate was 8.25 percent at December 31, 1996) or a lesser interest rate that is
based upon certain financial ratios and is due upon demand. During 1996, the
Company converted $2,300,000 from the credit agreement to two term notes. A
summary of long-term debt at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
MATURITY INTEREST RATE AMOUNT
--------- ------------- ----------
<S> <C> <C> <C>
Term notes, bank.................................. 2001-2002 8.25% $2,220,000
Mortgage notes.................................... 1999-2001 8.0-8.25% 550,855
----------
Total........................................... 2,770,855
Portion due within one year....................... 582,053
----------
Total long-term debt............................ $2,188,802
==========
</TABLE>
Borrowings under the bank credit agreement are collateralized by accounts
receivable and substantially all assets not otherwise encumbered, as well as a
first mortgage on all commercial property owned by the Company, and are
guaranteed by a related entity under common ownership. The term notes require
quarterly payments of principal and interest through maturity. The mortgage
notes require monthly payments of principal and interest through maturity. In
addition, the Company is bound by various restrictive covenants including
working capital, total debt and tangible net worth. The Company has an
additional revolving credit agreement of $1,500,000 with a bank which was unused
at December 31, 1996.
8
<PAGE> 9
MACHINE TOOL & GEAR, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
4. CREDIT AGREEMENTS AND LONG-TERM DEBT -- CONTINUED
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
Year ended December 31:
1997...................................................... $ 582,053
1998...................................................... 592,417
1999...................................................... 572,658
2000...................................................... 570,835
2001...................................................... 417,892
Thereafter................................................ 35,000
----------
$2,770,855
==========
</TABLE>
5. OPERATING LEASES:
During the year ended December 31, 1996, the Company leased an operating
facility on a month-to-month basis from a related entity under common control
for $7,500 per month. The Company leased another facility in Detroit from a
non-related entity on a month-to-month basis for $6,204 per month. Total lease
expense for both facilities for the year ended December 31, 1996 was $164,446.
The Company leases certain machinery and equipment under noncancelable
operating leases expiring in various years through 2001. Several new leases were
entered into at the end of 1996 which will increase rent expense in future
years. Total rent expense for this machinery and equipment for the year ended
December 31, 1996 was $65,181.
Minimum future lease payments under noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
1997........................................................ $ 336,381
1998........................................................ 329,671
1999........................................................ 310,332
2000........................................................ 296,519
2001........................................................ 271,809
----------
$1,544,712
==========
</TABLE>
6. RELATED PARTY TRANSACTIONS:
For the year ended December 31, 1996, the Company made contributions
totaling $201,400 to a private academy. The officers of the Company also serve
as directors of the academy. In addition, the Company owns a house on the
premises of the academy which is provided rent free to academy personnel.
7. CONTINGENCIES AND COMMITMENTS:
Various claims arising during the normal course of business are pending
against the Company. Management does not reasonably expect that the ultimate
liability, if any, of these matters will have a material effect on future
financial statements.
9
<PAGE> 10
MACHINE TOOL & GEAR, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
8. SUBSEQUENT EVENTS:
The Company has been awarded substantial new business commencing in 1997
through 2003. To accommodate this new business, the Company is currently
expanding an existing manufacturing facility. The expansion is expected to cost
approximately $2,000,000. At December 31, 1996, total costs incurred were
$93,920.
In addition, the Company has placed orders for machinery and equipment in
excess of $10,000,000 as a result of the newly acquired business. Of this
amount, machinery with an approximate value of $6,000,000 will be leased for up
to seven years based on a commitment from a leasing company and the remaining
$4,000,000 is expected to be leased for up to seven years.
In 1997, the Company refinanced existing credit agreements and obtained
additional bank credit facilities of $8,550,000.
In October 1997, the Company signed a definitive agreement to sell the
assets and business of the Company to Newcor, Inc. The sale was completed in
December 1997. Newcor, Inc. designs and manufacturers precision machined
components and assemblies and custom rubber and plastic products primarily for
the automotive and agricultural vehicle markets.
10
<PAGE> 11
NEWCOR, INC. AND MACHINE TOOL & GEAR, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
PRO FORMA
NEWCOR MT&G CONSOLIDATED
OCTOBER 1, 1996
YEAR ENDED THROUGH YEAR ENDED
OCTOBER 31, SEPTEMBER 30, PRO FORMA OCTOBER 31,
1997 1997 ADJUSTMENTS 1997
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales $ 130,848 $ 21,787 $ -- $ 152,635
Cost of sales 107,083 17,445 (1,031)(1) 123,497
--------- --------- --------- ---------
Gross profit 23,765 4,342 1,031 29,138
Selling, general and administrative 14,880 3,224 (603)(2) 17,501
Amortization expense 879 -- 1,120 (3) 1,999
Nonrecurring (income) expense (297) -- -- (297)
--------- --------- --------- ---------
Operating income 8,303 1,118 514 9,935
Interest expense (2,070) (397) (2,807)(4) (5,274)
Other income (expense) (224) (781) 781 (5) (224)
--------- --------- --------- ---------
Income (loss) before income taxes 6,009 (60) (1,512) 4,437
Provision (benefit) for income taxes 2,119 -- (534)(6) 1,585
--------- --------- --------- ---------
Net income (loss) $ 3,890 $ (60) $ (978) $ 2,852
========= ========= ========= =========
Earnings per share $ 0.79 $ 0.58
========= =========
</TABLE>
See notes to unaudited pro forma consolidated statement of income.
11
<PAGE> 12
NEWCOR, INC. AND MACHINE TOOL & GEAR, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
NEWCOR MT&G (1)
OCTOBER 31 SEPTEMBER 30, PRO FORMA PRO FORMA
1997 1997 ADJUSTMENTS CONSOLIDATED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash $ 34 $ -- $ -- $ 34
Receivables 22,523 2,530 -- 25,053
Inventories 8,084 1,983 -- 10,067
Prepaid expenses and other 8,672 2,594 (2,483)(2) 8,783
--------- --------- --------- ---------
Total current assets 39,313 7,107 (2,483) 43,937
Property, plant and equipment, net 28,119 6,084 2,016 (3) 36,219
Goodwill 16,080 -- 22,398 (3) 38,478
Other long-term assets 7,371 -- (2,500)(2) 4,871
--------- --------- --------- ---------
Total assets $ 90,883 $ 13,191 $ 19,431 $ 123,505
========= ========= ========= =========
Notes payable $ 833 $ 4,252 $ (4,252)(2) $ 833
Accounts payable 14,874 2,048 -- 16,922
Accrued expenses and other liabilities 5,668 124 500 (3) 6,292
--------- --------- --------- ---------
Total current liabilities 21,375 6,424 (3,752) 24,047
Long-term debt 32,267 3,428 32,450 (2) 62,217
(2,500)(2)
(3,428)(2)
Postretirement benefits 6,338 -- -- 6,338
Pension liability and other 3,488 -- -- 3,488
--------- --------- --------- ---------
Total liabilities 63,468 9,852 22,770 96,090
Total shareholders' equity 27,415 3,339 (3,339)(3) 27,415
--------- --------- --------- ---------
Total liabilities and shareholders' equity $ 90,883 $ 13,191 $ 19,431 $ 123,505
========= ========= ========= =========
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet.
12
<PAGE> 13
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
For purposes of the unaudited pro forma consolidated statement of income, it
has been assumed that the results of operations of Machine Tool & Gear, Inc.
(MT&G) for the twelve months ended October 31, 1997 would be comparable to
their results of operations for the twelve months ended September 30, 1997
presented herein. The unaudited pro forma statement of income data for the
twelve months ended September 30, 1997 was derived from internal financial
information for MT&G.
(1) Comprised of the following:
<TABLE>
<S> <C>
Capitalizable costs (a) $(975)
Rental (b) ( 50)
Depreciation (c) ( 6)
---------
$(1,031)
=========
</TABLE>
(a) Represents adjustments for tooling of $425 and for machinery
and equipment and plant construction costs of $300, all of which were
made to conform the accounting to Newcor's accounting practices, and
$250 of costs associated with closing a facility and moving machinery
and equipment to remaining operating facilities. This facility was
closed in early calendar 1997.
(b) Reflects elimination of rental expense for a facility leased by
MT&G which Newcor acquired as part of the acquisition, offset in part
by incremental rental expense for a facility MT&G owned which Newcor
did not acquire and has agreed to lease following the acquisition.
(c) Decreased depreciation expense due to extended estimated useful
lives, primarily for machinery and equipment, net of additional
depreciation on fair value adjustments to property, plant and
equipment.
(2) Comprised of the following:
<TABLE>
<S> <C>
Elimination of selling shareholders' salaries and benefits $(495)
Elimination of nonrecurring consulting fees (108)
------
$(603)
======
</TABLE>
(3) Represents the amortization of goodwill arising from the acquisition,
which will be amortized on a straight-line basis over twenty years.
(4) Represents the net increase in interest expense to reflect: (i) the
increase in interest expense of $3,204 resulting from financing the MT&G
acquisition and payoff of existing MT&G debt, at 9.875%, which represents
the interest rate on the recently closed Senior Subordinated Notes and
(ii)the elimination of $397 of interest on the existing MT&G debt.
(5) Represents adjustment to eliminate charitable contributions in order to
conform to Newcor's charitable giving practice.
(6) Calculated as the loss before income taxes of MT&G and the pro forma
adjustments multiplied by Newcor's incremental tax rate of 34.0%.
13
<PAGE> 14
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(1) For purposes of the unaudited pro forma condensed consolidated balance
sheet, the financial condition of MT&G as of September 30, 1997 has been
assumed to be comparable to October 31, 1997. The September 30, 1997
balance sheet was derived from internal financial information for MT&G.
Held checks at MT&G that were distributed immediately subsequent to period
end were classified as accounts payable.
(2) Reflects the net borrowings to finance the acquisition as follows:
<TABLE>
<CAPTION>
NEWCOR MT&G
<S> <C> <C>
Acquisition $ - $27,253 (a)
Retirement of existing bank credit
facilities and other debt 2,500 (a) 5,197 (b)
Application of pre-closing cash payment (2,500) -
------- -------
Net borrowings $ - $32,450
======= =======
</TABLE>
(a) Includes repayment of $5,603 of Newcor revolving credit
borrowings incurred to finance the cash portion of the MT&G
Acquisition (comprised of a $2,500 pre-closing cash payment made
prior to October 31, 1997 and recorded in other long-term assets and
a $3,103 pre-closing cash payment made subsequent to October 31,
1997) and repayment of the $21,650 MT&G Note.
(b) The $5,197 retirement of debt shown for MT&G reflects $7,680
($4,252 current and $3,428 long-term) of existing debt at September
30, 1997 less a cash deposit of $2,483 (included in prepaid expenses
in MT&G'S balance sheet) that was returned upon Newcor's conversion
of certain of MT&G's capital equipment to an operating lease.
(3) The MT&G acquisition will be accounted for by the purchase method of
accounting, pursuant to which the purchase price is allocated among the
acquired tangible and intangible assets and assumed liabilities in
accordance with their estimated fair values on the date of acquisition.
The purchase price and preliminary adjustments to historical book value as
a result of the MT&G acquisition is as follows:
<TABLE>
<S> <C>
Increase in property, plant and equipment to estimated
fair value $ 2,016
Estimated goodwill 22,398
---------
$24,414
=========
Increase in accrued liabilities $500
Proceeds used to finance acquisition 27,253
Elimination of historical shareholders'
equity as a result of purchase accounting (3,339)
---------
$24,414
=========
</TABLE>
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
EX-2 Asset Purchase Agreement dated October 1, 1997. Registrant hereby undertakes
to furnish copies of documents relating to list of schedules to the Securities
and Exchange Commission upon its request.
EX-2.1 First Amendment to Asset Purchase Agreement dated October 28, 1997
EX-2.2 Second Amendment to Asset Purchase Agreement
EX-2.3 Third Amendment to Asset Purchase Agreement dated December 12, 1997
EX-2.4 Fourth Amendment to Asset Purchase Agreement dated December 23, 1997
EX-4 Secured Promissory Note
</TABLE>
<PAGE> 1
EXHIBIT 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of the 1st day of October 1997, by and among MACHINE TOOL AND GEAR, INC., a
Michigan corporation ("Seller"), JON C. LEBLANC, DANIEL A. LEBLANC, THOMAS P.
LEBLANC, JOSEPH T. LEBLANC, and PATRICK J. LEBLANC ("Indemnitors"), JMJ AND
COMPANY, a Michigan co-partnership ("JMJ"), and NEWCOR, INC., a Delaware
corporation ("Buyer").
RECITALS
A. Seller is engaged in the manufacture, machining and sale of axles and
automotive and powertrain parts primarily for the automotive industry (the
"Business").
B. Indemnitors are shareholders of, and financially interested in, Seller,
and have agreed to become bound by the undertakings herein provided.
C. JMJ is a partnership controlled by the Indemnitors.
D. Seller desires to sell to Buyer and Buyer desires to purchase from Seller,
on a going concern basis, all of the agreed assets and business related to the
Business, upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements,
representations and warranties hereinafter set forth, Buyer, Seller,
Indemnitors and JMJ agree as follow:
AGREEMENT
1. RULES OF CONSTRUCTION
1.01. Defined Terms. As used in this Agreement, the following terms
shall have the meanings shown below:
"Closing" shall have the meaning ascribed to it in Section 12.02
hereof.
"Closing Date" means the date on which the Closing takes place, as
determined pursuant to Section 12.01 hereof.
1.02. Other Definitions. Other capitalized terms used in this
Agreement shall have the meanings ascribed to them herein.
1.03. Number and Gender. Whenever the context so requires, words
used in the singular shall be construed to mean or include the plural and vice
versa, and pronouns of any gender shall bc construed to mean or include any
other gender or genders.
1.04. Computation of Time. Whenever any time period provided for
in this Agreement is measured in "business days", there shall be excluded from
such time period each day that is a Saturday, Sunday, or recognized legal
holiday. In all other cases,
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all days shall be counted.
2. PURCHASE AND SALE OF ASSETS
2.01. Business Assets. On the Closing Date, subject to the terms and
conditions of this Agreement, Seller and JMJ shall sell, assign, transfer,
convey and deliver to Buyer, and Buyer shall purchase, assume, and accept from
Seller, all of the assets of Seller, including all assets used or useful in the
operation of the Business (the "Assets"), except for the excluded assets
identified in Section 2.02 hereof. The Assets include, without limitation, the
following:
(a) All of the fixtures, machinery, equipment, tools, vehicles and other
tangible personal property used or useful in the operation of the Business,
including, but not limited to, the personal property listed in Schedule 2.1(a),
together with all replacements thereof made between the date hereof and the
Closing Date ("Tangible Personal Property");
(b) All accounts receivable of Seller as of the Closing Date ("Accounts
Receivable");
(c) All of Seller's raw materials, supplies, work in process, and other
materials included in the inventory of the Business, and items that have been
ordered by Seller but have not yet been received by Seller ("Inventory");
(d) The leases, purchase orders, agreements and contracts relating to the
operation of the Business listed or described in Schedule 2.1(d), and such
similar contracts entered into in the ordinary course of business between the
date hereof and the Closing Date which have been approved by Buyer in advance
or by the Closing Date ("Assumed Contracts");
(e) All customer lists, supplier lists, processes, trade secrets, know-how,
drawings, engineering specifications data, design documents and other
proprietary or confidential information used in or related to the Business
("Trade Secrets");
(f) The patents, patent rights, trade marks, trade names, service marks and
copyrights (and all goodwill associated therewith) registered or unregistered,
and applications for registration thereof and licenses related to the foregoing
listed in Schedule 2.1(f) ("Patents and Trademarks");
(g) All of Seller's right, title and interest to the ownership and use of
the name "Machine Tool and Gear, Inc." or any variation thereof, all logos and
corporate identifications, all phone numbers in Seller's name, and the goodwill
associated with the Business ("Goodwill");
(h) All of Seller's rights, claims or causes of action against third
parties related to the assets, business or operation of the Business arising
out of transactions occurring prior to the
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date of Closing ("Causes of Action");
(i) All books and records (including all computer programs) of Seller,
relating to the assets, business and operation of the Business ("Books and
Records");
(j) Fee title interest to three (3) manufacturing plants and properties
located at (1) 1065 Grant Street, Fenton, Michigan, (2) 200 Second Street,
Fenton, Michigan, and (3) 1021 North Shiawassee, Corunna, Michigan, legal
descriptions of which are attached hereto as Schedule 2.1(j) (the "Plant
Properties"), which Seller uses and occupies in connection with the operation
of the Business, and which Seller covenants and agrees will be conveyed and
transferred to Buyer by warranty deed, free and clear of all liens, claims and
encumbrances, other than Assumed Liabilities, on the Closing Date; provided,
however, that in the event that Seller is unable to fulfill the conditions of
Section 10.01 with respect to one or more of the Plant Properties to the
satisfaction of Buyer on or before the Closing Date, at the option of Buyer,
any of said Plant Properties may be designated as Excluded Assets and not
included in the sale and transfer at the Closing; and in said event, the value
of any said Plant Properties shall be excluded from the Purchase Price, and, at
the Closing, Seller shall lease to Buyer each of said Plant Properties excluded
from the sale and transfer on the terms and conditions provided in a lease
agreement in a mutually acceptable form (a "Lease Agreement");
(k) Fee title interest to 308 North Leroy, Fenton, Michigan, a legal
description of which is attached hereto as Schedule 2.1(k) (the "Leroy
Property"), which Seller uses and occupies in connection with the operation of
the Business, and which JMJ covenants and agrees will be conveyed and
transferred to Buyer by warranty deed, free and clear of all liens, claims and
encumbrances on the Closing Date; provided, however, that in the event that
Seller is unable to fulfill the conditions of Section 10.01 with respect to the
Leroy Property to the satisfaction of Buyer on or before the Closing Date, at
the option of Buyer, said Leroy Property may be designated as an Excluded Asset
and not included in the sale and transfer at the Closing; and in said event,
the value of any said Leroy Property shall be excluded from the Purchase Price,
and, at the Closing, JMJ shall lease to Buyer the Leroy Property excluded from
the sale and transfer on the terms and conditions provided in a Lease
Agreement; and
(l) Cash on hand or on deposit, including checking and savings accounts,
savings certificates, certificates of deposit and other cash assets or
equivalents of the Seller as of the Closing Date.
2.02. Excluded Assets. Notwithstanding the foregoing,
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the Assets shall not include the following (the "Excluded Assets"):
(a) Seller's rights, claims or causes of action against third parties only
to the extent directly related to Excluded Assets or arising in connection with
the discharge by Seller of the liabilities and obligations of the Business
which are not expressly assumed by Buyer as "Assumed Liabilities" pursuant to
Section 5 below;
(b) All books and records of Seller not directly related to the Assets, or
the Business of Seller, including all corporate records and the minute books;
and
(c) The additional Excluded Assets, if any, listed on Schedule 2.2(d)
attached hereto and incorporated herein by reference.
3. PURCHASE PRICE AND PAYMENT TERMS; SERVICE PART INVENTORY.
3.01. Purchase Price. The total consideration for the purchased Assets and
for the Seller's and Indemnitors' agreements not to compete pursuant to the
Non-Competition Agreement and the Employment Agreements shall be Twenty-Seven
Million Six Hundred Thousand Dollars ($27,600,000.00) to be paid to Seller and
(unless the Leroy Property becomes an Excluded Asset as provided in Section
2.01(k), in which event no amount shall be paid to JMJ) Four Hundred Thousand
Dollars ($400,000.00) to be paid to JMJ (collectively, the "Purchase Price"),
subject to any adjustments made in connection with the Plant Properties and the
Leroy Property pursuant to Section 2.01(j) and 2.01(k).
3.02. Payment of Purchase Price. The Purchase Price shall be paid as
follows:
(a) The sum of Two Million Five Hundred Thousand Dollars ($2,500,000.00)
shall be paid by Buyer to Seller, by bank check or by wire transfer, on October
20, 1997 or another mutually agreeable date, provided that the Agreement has
been fully executed by all of the parties and Seller has delivered to Buyer
consents to assignments of certain leases from lessors, Cargill, Metropolitan
Life and NBD (the "Lease Assignment Consents");
(b) Not later than the close of business on the fourth (4th) business day
following the later of (i) the receipt of the consent of the Federal Trade
Commission or (ii) the receipt of the consent of the Department of Justice, and
in either case, the expiration of any applicable waiting period, pursuant to
any filings made under the HSR Act (as defined in Section 8.07), by bank check
or by wire transfer, the sum of Two Million Eight Hundred Fifty Thousand
Dollars ($2,850,000.00) shall be paid by Buyer to Seller;
(c) The sum of Fifty Thousand Dollars ($50,000.00)
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<PAGE> 5
shall be paid by Buyer to each of the Indemnitors, respectively, (for an
aggregate of Two Hundred Fifty Thousand Dollars ($250,000.00)) on the Closing
Date by bank check, as consideration for their covenants not to compete
contained in the Non-Competition Agreement and the Employment Agreements;
(d) On the Closing Date, a promissory note bearing simple interest at the
rate of 8% per annum and secured by a security interest in the Assets (which
shall expressly permit sales of Assets in the ordinary course of business)
shall be executed by Buyer in favor of Seller in the amount of Twenty-Two
Million Four Hundred Thousand Dollars ($22,400,000.00) and (unless the Leroy
Property becomes an Excluded Asset as provided in Section 2.01(k), in which
event no amount shall be paid to JMJ) a promissory note bearing simple interest
at the rate of 8% per annum and secured by a lien on the Leroy Property shall
be executed by Buyer in favor of Seller in the amount of Four Hundred Thousand
Dollars ($400,000.00) to JMJ, respectively;
(e) Not later than 120 days, following the Closing Date (the "Financing
Date"), by bank check or by wire transfer, the sums owed by Buyer to Seller
pursuant to the promissory notes described in 3.02(d) less the Holdback Amount
(as defined in Section 3.02(d) shall be paid by Buyer to Seller and (unless the
Leroy Property becomes an Excluded Asset as provided in Section 2.01(k), in
which event no amount shall be paid to JMJ) shall be paid by Buyer to JMJ;
(f) The sum of Two Million Dollars ($2,000,000.00) (the "Holdback Amount"),
shall be paid by Buyer to a mutually agreeable escrow agent on the Financing
Date, by bank check or by wire transfer; and on the Financing Date, the parties
shall execute and deliver a Holdback Escrow Agreement in the form attached
hereto as Schedule 3.2, providing for a mutually agreeable escrow agent to hold
the Holdback Amount in escrow and invest the Holdback Amount in an interest
bearing account or other income producing investment pursuant to the direction
of Seller from among a list of mutually agreeable permitted investments; the
Holdback Escrow Agreement shall provide that one half of the Holdback Amount,
less any setoff amounts for which Buyer makes a claim for indemnification
pursuant to this Agreement, shall be paid to Seller no later than twelve (12)
months after the Closing Date, and the balance of which, if any, less any
setoff amounts for which Buyer makes a claim for indemnification pursuant to
this Agreement, shall be paid to Seller no later than twenty-four (24) months
after the Closing Date, by bank check or by wire transfer; and
(g) Notwithstanding Section 3.02(e), the Financing Date may be extended for
an additional thirty (30) days, by written notice from Buyer to Seller to said
effect in the event that Buyer is unable to complete its financing arrangements
within the 120 days following the Closing Date and Buyer presents evidence to
the effect that such financing arrangements are in process and anticipated to
be completed within the additional
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thirty (30) days.
(h) In the event that a waiting period is imposed by the Federal Trade
Commission or the Department of Justice in connection with either of their
consents pursuant to any filings made under the HSR Act, interest shall accrue
on the promissory notes described in Section 3.02(d) beginning on the date that
is 4 business days following the later of (i) the receipt of the consent of the
Federal Trade Commission or (ii) the receipt of the consent of the Department
of Justice.
3.03. Service Parts Inventory. On or before October 27, 1997, a physical
inventory shall be conducted jointly by Buyer and Seller of the portion of the
Inventory described as "service parts" (the "Service Part Inventory").
4. ALLOCATION OF PURCHASE PRICE.
The Purchase Price shall be allocated between the Assets and the
non-competition provisions contained in the Non-Competition Agreement and the
Employment Agreements as follows:
Assets: $27,350,000.00
Leroy Property (unless an Excluded
Asset pursuant to Section 2.01(k)): 400,000.00
Non-competition provisions
contained in the Non-Competition
Agreement and the Employment
Agreements($50,000 to each of the
five (5)Indemnitors): $ 250,000.00
The amount allocated to the Assets shall be further allocated among the various
categories and classifications of the Assets discussed in Section 2.01 above.
On or before the Closing Date, Seller and Buyer shall agree upon an allocation
of the Purchase Price among the Assets in accordance with Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the related
Treasury Regulations. If the parties cannot agree, Buyer, at Buyer's sole
expense, shall cause an independent appraiser selected by Buyer, to prepare a
schedule allocating the Purchase Price among the Assets. The allocation set
forth on such schedule shall be reasonably satisfactory to Seller. Seller,
Indemnitors, JMJ and Buyer agree that after such allocation is agreed upon (i)
Seller, Indemnitors, JMJ and Buyer shall use such allocation for all purposes
related to the valuation of the Assets, including, without limitation, in
connection with any federal, state, county or local tax returns filed after
such allocation shall be agreed upon, and (ii) unless required to do so in
accordance with a "determination" as defined in Section 1313 (a)(l) of the
Code. Neither Seller, Indemnitors, JMJ nor Buyer shall take any position in
any tax return, tax proceedings tax audit or otherwise that is inconsistent
with such allocation.
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<PAGE> 7
5. SELLER'S LIABILITIES.
Buyer will assume and pay only the following obligations of Seller
(collectively, the "Assumed Liabilities"): (i)(a) the current liabilities, (b)
indebtedness to NBD Bank, and (c) other accrued liabilities of Seller as of the
Closing Date in each case to the extent accrued or reserved on the Seller's
balance sheet dated September 30, 1997 (the "Balance Sheet"); and (ii) Seller's
obligations under the Assumed Contracts, none of which shall be past due as of
September 30, 1997, to the extent arising from and after September 30, 1997.
Seller will be fully responsible for any and all obligations to any of Seller's
employees or former employees who were employed as of or prior to the Closing
Date. Except as provided herein, Seller will also be fully responsible for
complying with all federal and state laws relating to employment or labor
relations, or any other employment related matters arising out of Seller's
operation of the Business as of or prior to the Closing Date.
Except for the Assumed Liabilities, all other obligations, claims,
liabilities and responsibilities of Seller, known or unknown, accrued,
absolute, contingent or otherwise, shall remain and continue to be the
obligation, liability and responsibility of Seller, including, without
limitation, all obligations, liabilities and responsibilities related to taxes,
employees and environmental matters, and in no event whatsoever shall Buyer, or
any officer, director, shareholder, employee, representative or agent thereof,
have any liability for such obligations, claims, liabilities and
responsibilities of Seller. Notwithstanding anything herein to the contrary,
the fees to be paid by Seller in accordance with Section 12.05 shall not be
considered an Assumed Liability.
6. WARRANTIES AND REPRESENTATIONS OF SELLER, INDEMNITORS AND JMJ.
Seller, the Indemnitors, and JMJ, jointly and severally, hereby represent and
warrant to Buyer as follows:
6.01. (a) Organization of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Michigan,
which is the only jurisdiction which the ownership of its Assets or the conduct
of its business requires such qualification, and no other jurisdiction had
demanded, requested or otherwise indicated that Seller is required so to
qualify. Seller has the full and independent power and authority to own or
lease and to operate and use its assets and to carry on its Business as now
conducted.
(b) Organization of JMJ. JMJ is a co-partnership duly organized, validly
existing and in good standing under the laws of the State of Michigan, which is
the only jurisdiction which the ownership of its assets or the conduct of its
business requires such qualification, and no other jurisdiction had demanded,
requested or otherwise indicated that JMJ is required so to
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<PAGE> 8
qualify. JMJ has the full and independent power and authority to own or lease
and to operate and use its assets and to carry on its Business as now
conducted.
6.02. Capital Structure of Seller. As of the date of this Agreement and
at all times up to and including the Closing Date, Indemnitors shall
collectively own not less than fifty-one percent (51%) of the outstanding
voting capital stock of the Seller, including all rights and options
convertible into capital stock. The authorized capital of Seller as of the
Closing Date will be set forth on Schedule 6.02 attached hereto. As of the
Closing Date, all outstanding shares of capital stock of Seller will have been
duly and validly issued, will be fully paid and non-assessable, and will be
outstanding and owned of record, and beneficially, as set forth on Schedule
6.02 attached hereto. Except as set forth on Schedule 6.02, as of the Closing
Date, there will be no agreements, arrangements, options, warrants, calls,
rights or commitments of any character relating to the issuance, sale, purchase
or redemption of any shares of common stock of Seller. Complete and correct
copies of Seller's Articles of Incorporation and all amendments thereto, and of
its Bylaws have been delivered to Buyer. Seller does not own, directly or
indirectly, any shares of capital stock of, or equity interest in, any
corporation, partnership, joint venture or other entity.
6.03. Authority Relative to This Agreement. (a) The execution, delivery
and performance of this Agreement by Seller, and the transfer, conveyance,
assignment and delivery of the Assets, are within the full and independent
power and authority of Seller, have been duly authorized by the Board of
Directors and shareholders of Seller, and this Agreement is the legal, valid
and binding agreement of Seller and each of the Indemnitors, respectively,
enforceable in accordance with its terms.
(b) The execution, delivery and performance of this Agreement by JMJ, and
the transfer, conveyance, assignment and delivery of the Leroy Property, are
within the full and independent power and authority of JMJ, have been duly
authorized by the partners of JMJ, and this Agreement is the legal, valid and
binding agreement of JMJ and each of the Indemnitors, respectively, enforceable
in accordance with its terms.
6.04. Conflict with Existing Agreements. The execution, delivery, and
performance of this Agreement by the Seller, the Indemnitors, and JMJ and the
consummation of the transactions contemplated hereby (i) do not violate, to
Seller's knowledge after due investigation, any provisions of law applicable to
Seller, JMJ, or any Indemnitor, (ii) will not conflict with, or result in the
breach or termination of any provision of any indenture, mortgage or other
instrument, contract or agreement (except those which are not Assumed Contracts
but are to be terminated as of the Closing Date), or any order judgment,
arbitration award, or decree to which Seller, JMJ, or any Indemnitor is a party
or by which it or any of its assets and properties are bound (including the
Assets), that would materially
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<PAGE> 9
affect the Assets or Buyer's use of the Assets, and (iii) will not result in
the creation of any lien, charge or encumbrance upon the Assets. Neither
Seller, JMJ, any Indemnitor nor any of the Assets are subject to any mortgage,
security interest, lease, agreement, instrument, order, judgment, arbitration
award or decree, or to any law, statute, ordinance, or regulation, or any other
restriction of any kind or character, which would prevent Seller, JMJ, or any
Indemnitor from entering into this Agreement or from consummating the
transactions contemplated hereby, and no judicial, governmental, or creditor
committee approvals of this Agreement or the transactions contemplated hereby
are required on the part of Seller, JMJ, or any Indemnitor. In the event
consent of any lender, lessor, franchisor, customer or other person is required
to consummate or facilitate consummation of this Agreement and the transactions
contemplated hereby, Seller, JMJ, and the Indemnitors shall exercise all due
diligence to obtain such consent on or before the date the payment under
Section 3.02(a) is made.
6.05. Financial Statements; Books and Records. Attached hereto as
Schedule 6.5 are the balance sheet and income statement of Seller for the
fiscal year ending December 31, 1996 (the "1996 Financial Statements") and
prior to the Closing Date the nine months ending September 30, 1997, will be
attached hereto (the "1997 Financial Statements"). The 1996 Financial
Statements are and the 1997 Financial Statements will be complete and correct,
have been reviewed by an independent certified public accountant in accordance
with the standards for reviewed statements issued by the American Institute of
Certified Public Accountants, and fairly present the financial position of the
Seller as of the respective date of said Financial Statements and fairly
present the results of its operations for the fiscal year then ended. The
books, records and work papers of Seller are in all material respects complete
and correct, have been maintained on an accrual basis, in accordance with
accounting principles consistently applied, and accurately reflect, and will
accurately reflect, the basis for the financial condition and results of
operations of Seller.
6.06. Absence of Undisclosed Liabilities. To the best knowledge of Seller
and Indemnitors after due investigation, Seller does not have any liabilities
or obligations, whether accrued, absolute, contingent or otherwise, existing or
arising out of any transaction entered into, or state of facts existing, on or
prior to the date hereof, other than such liabilities as are specifically (i)
set forth in the Financial Statements attached hereto as Schedule 6.5; (ii)
incurred by Seller in the ordinary course of business during the period from
the date of the Financial Statements; or (iii) listed in Schedule 6.6 attached
hereto.
6.07. Title to Assets. As of the Closing Date, the Assets being
acquired by Buyer shall be owned by Seller (or in the case of the Leroy
Property by JMJ) free and clear of all indebtedness, liens, charges and
encumbrances of any nature, other than Assumed Liabilities, and Seller and JMJ,
respectively, shall
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indemnify and save Buyer harmless from any liability thereon, pursuant to the
terms of Section 13.01 hereof. No person, firm or corporation has any written
or oral agreement, option, understanding, or commitment, or any right or
privilege capable of becoming an agreement, for the purchase from the Seller
(or JMJ as the case may be) of any of the Assets, other than pursuant to
purchase orders for Inventory accepted by the Seller in the ordinary course of
its business.
6.08. Absence of Certain Changes or Events. Since August 31, 1997, (i)
there has been no material change in the condition, operation, business,
properties, assets or liabilities of Seller other than changes in the ordinary
course of business disclosed in writing to Buyer and such changes in the
ordinary course of business have not adversely affected the Business of Seller
in any material respect, (ii) the Assets, property, prospects, business and
financial condition of Seller have not been adversely affected in any material
way as a result of fire, accident or other casualty (whether or not insured) or
act of God, (iii) there has been no sale, transfer or other disposition by
Seller, other than disclosed in writing to Buyer and in the ordinary course of
business and consistent with past practice, or mortgage or pledge of or
imposition of any lien, charge or encumbrance on, any of its properties or
assets, (iv) there has been no payment of any claims or discharge or
satisfaction of any lien or encumbrance or payment of any obligation or
liability, any cancellation of debts owed to or claims held by Seller or waiver
or release of any rights of value, in each case other than in the ordinary
course of business and consistent with past practice, and (v) to Seller's
knowledge, other than as disclosed on Schedule 6.8, there has been no material
change in the prospects, business or financial condition of Seller which would
have an adverse affect on the value of the Business, other than those matters
affecting the Business or industry which would be known generally by both
Seller and Buyer, (vi) the change in the Seller's retained earnings set forth
on the Balance Sheet compared to the Seller's balance sheet dated August 31,
1997 will be less than Five Hundred Thousand Dollars ($500,000.00) (the
"Change"). In the event that the Seller's retained earnings have decreased by
an amount that is greater than $500,000.00, Buyer shall have the option to
terminate this Agreement and have its $2,500,000.00 payment made in accordance
with Section 3.02(a) immediately returned.
6.09. Employment Matters. Schedule 6.9 attached hereto lists the annual
salary or hourly wages payable to all persons presently employed at the
Business. Except as set forth in Schedule 6.9, Seller is not a party to:
(a) Any oral or written employment agreements with any person currently or
at any time in the past employed by the Seller or providing services to the
Business except for employment contracts which are terminable at will, without
notice and without costs or other liability to Seller. Seller has made no oral
or written promises to any person now or at any time in the past
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<PAGE> 11
employed at the Business, including but not limited to, such person's right to
continued employment, right to receive increased wages or any benefits, ability
to work certain hours or shifts and/or right to take a vacation other than as
provided in the Seller's employee benefits manual, a copy of which is attached
to Schedule 6.9;
(b) Any collective bargaining agreement with current or former
employees of Seller. Seller shall notify all employees in a timely manner of
the pending sale and otherwise comply with all federal and state laws with
respect to notification and disclosure of this transaction; and
(c) Any bonus, pension, profit sharing, retirement, stock purchase,
hospitalization, insurance or other similar plan providing for employee
benefits to those now or at any time in the past employed at the Business,
except for those specifically identified in Schedule 6.9, copies of which
plan(s), if any, are appended to such Schedule.
All obligations of the Seller relating to employees and agents of the
Seller, whether arising by operation of law, by contract, or by past service,
for payments to trusts or other funds or to any governmental agency, or to any
individual employee or agent (or his heirs, legatees, or legal representatives)
with respect to unemployment compensation benefits, profit sharing or
retirement benefits, or social security benefits have been paid, or shall have
been paid on or before the Closing Date, by the Seller. All obligations of the
Seller as an employer or principal relating to employees or agents, whether
arising by operation of law, by contract, or by past practice, for vacation and
holiday pay, bonuses, and other forms of compensation which are or may become
payable to such employees or agents, have been paid by the Seller, or shall
have been paid by the Seller by the Closing Date, other than the Assumed
Vacation Day Pay Obligations.
6.10. Business Taxes. (a) Seller has filed or will file all tax
returns required to be filed by it under any federal, state or local
law, and has paid all taxes for the periods covered by such returns. Seller is
not delinquent in the payment of any taxes claimed to be due by any federal,
state or local taxing authorities. Seller has and will have no accrued or
unpaid federal, state and local taxes of Seller, whether or not disputed,
including any interest and penalties in connection therewith, for all fiscal
periods ending on or before the date of Seller's financial statements or
through the Closing Date.
(b) Except as set forth in Schedule 6.10, (i) no agreements have
been made by or on behalf of Seller for any waiver or for the extension of any
statute of limitations governing the time of assessment or collection of
any federal, state or local taxes. Seller and its officers have received no
notice of any pending or threatened audit by the Internal Revenue Service or
any state or local tax agency related to Seller's tax returns or tax liability
for any period and no claim for assessment or collection
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of taxes has been asserted against Seller, and (ii) there are no tax liens
arising from taxes payable for years prior to 1997 (whether imposed by any
federal, state or local taxing authority) outstanding against any of the
assets, properties or the Business of Seller.
(c) If required pursuant to applicable state law, Seller, after Closing,
shall file a final tax return with the State of Michigan and shall pay any
taxes, penalties and interest which are required to be paid pursuant to
statute.
(d) The sale by Seller of the Assets, and the acquisition thereof by
Buyer for the intended use by Buyer in a manufacturing trade and business
following the Closing Date, will not result in the imposition of or
liability for any sales or use taxes and, if such taxes are imposed or
liability therefor incurred or asserted notwithstanding Buyer's use of the
Assets in a manufacturing trade and business following the Closing Date, Seller
will indemnify and hold Buyer harmless therefrom, pursuant to the terms of
Section 13.01 below.
6.11. Condition of Tangible Personal Property. All Tangible Personal
Property shall on September 30, 1997 be in good and working order and in
substantially the same condition as presently exists. All Tangible Personal
Property is on September 30, 1997, and on the Closing Date shall be, situated
at the Business premises and shall be used or usable by Seller in connection
with the Business. Except for the Excluded Assets, the purchased Assets owned
by Seller and being transferred to Buyer pursuant to this Agreement constitute
all of the assets used in the Business and such Assets will enable Buyer to
operate the Business in substantially the same manner as Seller is now
conducting the Business. To Seller's knowledge, the Assets are suitable for
the uses for which intended. Except as set forth in Schedule 6.11, no notice
of any violation of any law, ordinance or regulation has been received by
Seller with respect to the Business or the Assets. All of the Inventory is now
and shall be on the Closing Date, in good condition, not obsolete, nondefective
and useable or saleable within one (1) year from the Closing Date in the usual
and ordinary course of business as conducted by Seller on the date hereof,
other than the Service Parts Inventory which shall be useable or saleable
within two (2) years from September 30, 1997 in the usual and ordinary course
of business as conducted by Seller on the date hereof. All Inventory is
reflected on the current financial statements of Seller in accordance with
generally accepted accounting principles or consistent with current practices,
consistently applied, and valued at the lower of cost or market value.
6.12. Litigation Claims. Except as set forth in Schedule 6.12, no
judgment or administrative order has been entered or issued, and no
legal action, suit, arbitration, proceeding or investigation is pending as to
which Seller has received notice, claim or assertion in writing, or to the
knowledge of Seller is threatened, which individually or in the
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aggregate might adversely affect in any way (i) Buyer's ability to operate the
Business in the future as it is presently, (ii) Seller's or JMJ's title or
interest in any of the Assets sold to Buyer hereunder, (iii) Seller's or JMJ's
right or power to transfer same, or (iv) the ownership, possession or use of
any of the Assets by the Buyer.
6.13. Permits. Seller owns, holds or possesses all franchises, permits,
licenses, certificates, privileges, immunities, approvals and other
authorizations necessary to own or lease, operate and use the purchased Assets
and to carry on and conduct the Business as now conducted (hereinafter
collectively called the "Permits"), all of which are assignable to and will be
fully and effectively assigned and transferred to Buyer as of the Closing Date
without expense to Buyer or imposition of any condition or restriction binding
on Buyer. Schedule 6.13 sets forth a list and brief description of the
Permits. Complete and correct copies of all the Permits listed or described in
Schedule 6.13 have heretofore been delivered to Buyer by Seller. Seller has
fulfilled and performed its obligations under each of the Permits and, to its
knowledge, no event has occurred or condition or state of facts exists which
constitutes or, after notice or lapse of time or both, would constitute a
material breach or default under any of the Permits, or which, after notice or
lapse of time or both, would permit revocation or termination of any of the
Permits; or which may adversely affect in any material respect the rights of
Seller (or Buyer) under any of the Permits.
6.14. Assumed Contracts. (a) The Assumed Contacts are all of the
agreements and contracts in any way relating to or affecting the Business, all
of which are assignable to and will be fully and effectively assigned and
transferred to Buyer as of the Closing Date without expense to Buyer or
imposition of any condition or restriction binding on Buyer. The copies of all
Assumed Contracts have been furnished to Buyer, and are full and complete
copies, as amended, to the present date.
(b) All Assumed Contracts are now and on the Closing Date shall be in
good standing and in full force and effect without amendment thereto (unless
such amendments are clearly noted) and Seller is entitled to all benefits
thereunder. All of the transactions of Seller with third persons have been
conducted on an arms-length basis. All Assumed Contracts are valid and binding
obligations of the parties thereto in accordance with their respective terms.
(c) No material default or alleged material default exists on the part of
Seller, nor, to the knowledge of Seller or its officers, on the part of any
other party, under any Assumed Contract and there exists no state of facts,
which after notice or lapse of time, or both, would constitute a default or
breach in connection with any Assumed Contract. For purposes of this
subsection, the word "default" includes, but is not limited to, the failure to
comply with any condition precedent under the provisions of any such Assumed
Contract. Seller has received no
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information which might reasonably indicate that any party to a contract or
commitment is unable or unwilling to perform under such Assumed Contract.
(d) Seller has no information which might reasonably indicate that any
customer or supplier of Seller intends to cease purchasing from, selling to or
dealing with Seller, nor has any information been brought to the attention of
Seller which might reasonably lead Seller to believe that any customer or
supplier intends to alter in any material respect, the amount of such
purchases, sales or the extent of dealings with Seller or would alter in any
material respect its purchases from, sales to, or dealings with Buyer in the
event of the consummation of the transactions contemplated hereby.
6.15. Environmental Matters. There is no litigation or proceeding either
pending or threatened against or relating to Seller with respect to the Plant
(to JMJ with respect to the Leroy Property) and all other Business premises
known to Seller and JMJ, respectively, and there are no outstanding citations
by any federal, state or local governmental agency having jurisdiction over the
operation of the Assets and Business except as set forth in Schedule 6.15.
Seller has not and JMJ has not, and to their respective knowledge, no party
other than Seller has caused or permitted the Plant and all other Business
premises to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose, release, transfer, produce, or process hazardous, dangerous,
or toxic substances, or solid waste, except in compliance with all applicable
federal, state, and local laws or ordinances. Seller, JMJ, and the Plant and
all other Business premises are now and have been in compliance with all
environmental laws and regulations. Seller and JMJ, respectively, have
obtained all permits, licenses and other authorizations required by all
environmental laws and regulations, and all such permits, licenses and other
authorizations are in full force and effect as of the date hereof. A true and
correct list of all such permits, licenses and other authorizations is set
forth in Schedule 6.15 hereof. Except as described in Schedule 6.15, each of
the Seller and JMJ is and has at all times been in full compliance with all
such permits, licenses and authorizations. Except as described in Schedule
6.15, neither JMJ nor the Seller nor its directors, officers, employees or
agents have generated nor transported any hazardous substances at any time
which have been transported to or disposed of in any landfill or other
facility, which transportation or disposal could create liability to any unit
of government or any third party. Neither the Seller nor JMJ have received, or
is the Seller or JMJ aware of, any request for response action, administrative
or other order (or request therefor), judgment, complaint, claim,
investigation, request for information or other request for relief in any form
relating to any facility where hazardous substances generated or transported by
the Seller or JMJ have been disposed of, placed or located. A true and correct
list of all transporters, landfills and other facilities now or heretofore used
by Seller and JMJ is set forth in Schedule 6.15 hereof, including the street
address,
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county in which located, and the commonly-known name of each such landfill and
facility, if any. In addition, Seller has provided Buyer or its agents copies
of, or access to, all manifests and records maintained by Seller relating to
such transporters, landfills and other facilities. The Seller has disclosed
and delivered to Buyer all environmental reports and investigations which the
Seller has ever obtained or ordered with respect to the Plant and all other
Business premises.
6.16. Patents and Trademarks. Schedule 6.16 contains a list and
description of (i) all of Seller's patents, patent rights and applications for
patents relating to the Business; (ii) all United States, state and foreign
trademarks, servicemarks, trade names and copyrights for which registrations
have been issued or applied for, and all other United States, state and foreign
trademarks, servicemarks, trade names and copyrights owned by Seller or in
which Seller holds any right, license or interest used in or relating to the
Business, showing in each case the product, device, process, service, business
or publication covered thereby, the registered or other owner, expiration date
and number, if any, and, in the case of any such right, license or interest, a
description thereof; (iii) all agreements, commitments, contracts,
understandings, licenses, assignments and indemnities relating or pertaining to
any asset, property or right of the character described in the preceding clause
to which Seller is a party, showing in each case the parties and the material
terms; (iv) all licenses or agreements pertaining to mailing lists, know-how,
trade secrets, inventions, disclosures or uses of ideas used in or relating to
the Business to which Seller is a party, showing in each case the parties and
the material terms; and (v) all registered assumed or fictitious names under
which Seller is conducting the Business. Except as set forth in Schedule 6.16,
Seller is the sole and exclusive owner of the Patents and Trademarks and Trade
Secrets, free and clear of any claims, liens, licenses, sublicenses, charges or
encumbrances, and no governmental registration of any of said property has
lapsed, expired or been abandoned, opposed, or been the subject of a
re-examination request or canceled, and, neither the Seller, nor its officers
or directors have any knowledge of any claims, threatened claims or any basis
for challenging either the scope, validity or enforceability of any of the
copyrights, patents, trademarks, trade names and service marks which are a part
of said property. There are no instances where it has been held, claimed or
alleged, whether directly or indirectly, and neither the Seller, nor its
officers or directors have any knowledge of any basis upon which a claim may be
made, that any of Seller's Patents and Trademarks and Trade Secrets infringes
the intellectual property of any third party, or that any activity of any third
party infringes upon any of the Seller's Patents and Trademarks and Trade
Secrets. Seller has been and is now conducting the Business in a manner which
has not been and is not now in violation of any intellectual property rights of
a third person and does not require a license or other proprietary right to so
operate the Business. The manufacturing and engineering drawings, process
sheets, specifications, trade secrets, "know-how" and other like data of Seller
are in such form
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and of such quality that Buyer can, following the Closing, design, produce,
manufacture, assemble and sell the products and provide the services heretofore
provided by the Seller so that such products and services meet applicable
specifications and conform with the quality standards heretofore met by it.
6.17. Insurance. Seller maintains policies of liability (excluding
products liability) and other forms of insurance, in such amounts and against
such risks and losses as are reasonable and adequate for its business and
properties. Schedule 6.17 sets forth a list and brief description (including
carriers, policy numbers, and the nature of coverage with respect to each type
of coverage) of policies of insurance maintained, owned or held by Seller in
effect through the date hereof. Seller has complied with each of such insurance
policies and has not failed to give notice or present any claim thereunder in a
due and timely manner.
6.18. WARN Act. To the extent applicable, Seller accepts full
responsibility with respect to and agrees to abide by all provisions of the
Workers' Adjustment and Retraining Notification Act, as amended, 29 U.S.C.
Sections 2101-2109, and regulations and interpretive rules promulgated
thereunder, including, but not limited to, the providing of any notices
required thereunder.
6.19. Warranties; Product Liability. Schedule 6.19 attached hereto is a
complete and accurate list of any and all warranties made by Seller covering or
relating to any products or property sold, leased or rented by Seller related
to the Business and for any services furnished or rendered by Seller related to
the Business ("Seller's Products or Services"). Except for losses, claims,
damages and expenses adequately covered by Seller's insurance, there are not
(a) any liabilities of Seller, fixed or contingent, asserted and arising out of
or based upon incidents occurring on or before the date hereof with respect to
any product liability or any similar claim that relates to any of Seller's
Products or Services, or (b) any liabilities of Seller, fixed or contingent,
asserted and arising out of or based upon incidents occurring on or before the
date hereof with respect to any claim for the breach of any express or implied
product warranty, or any similar claim that relates to any of Seller's Products
or Services, and Seller and its officers have no knowledge of any defect or
deficiency in any of Seller's Products or Services which could give rise to any
such liabilities or claims.
6.20. No Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been conducted by Seller and Indemnitors
without the intervention of any person and shall not give rise to any valid
claim against either of the parties hereto for a brokerage commission or other
like payment.
6.21. Compliance With Laws. At all times prior to the date hereof, Seller
has complied fully and faithfully with all
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laws, orders, regulations, rules, decrees and ordinances affecting to any
extent or in any manner any aspect of its business. There are no existing
laws, orders, regulations, rules, decrees or ordinances of such a nature as
could be expected to adversely affect the continued conduct of Seller's
business in the manner presently being carried on and conducted.
6.22. Disclosure. To the best of Seller's, Indemnitors', and JMJ's
knowledge, no statement in this Agreement or in any document, schedule,
certificate or exhibit furnished or to be furnished by Seller or Indemnitors or
JMJ to Buyer pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or fail to contain any material facts necessary in order to make
the statements therein not misleading. Except as already disclosed in this
Agreement or in any document, schedule, certificate or exhibit prepared in
connection with this Agreement, including, without limitation, Schedule 6.8, to
the best of Seller's, Indemnitors' or JMJ's knowledge, there are no events,
transactions or other facts which, either individually or in the aggregate,
might reasonably give rise to circumstances or conditions which might have a
material adverse effect on any of the Assets.
7. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to Seller as follows:
7.01. Organization of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
7.02. Authority. (a) Buyer has full power and authority to enter into
this Agreement, to consummate the transactions contemplated hereby and to
comply with the terms, conditions and provisions hereof. The execution,
delivery and performance of this Agreement by Buyer have been duly authorized
by the Board of Directors of Buyer and does not require any further
authorization or consent by Buyer or its stockholders. This Agreement is the
legal, valid and binding agreement of Buyer, enforceable in accordance with its
terms.
(b) The execution, delivery, and performance of this Agreement by the
Buyer and the consummation of the transactions contemplated hereby (i) does not
violate, to Buyer's knowledge, any provisions of law applicable to Buyer, (ii)
will not conflict with, or result in the breach or termination of any provision
of any indenture, mortgage or other instrument, contract or agreement (except
those to be terminated as of the Closing Date), or any order, judgment,
arbitration award, or decree to which Buyer is a party or by which it or any of
its assets and properties are bound (including the Assets). In the event
consent of any lender, lessor, franchisor, customer or other person having a
business relationship to Buyer is required to consummate or facilitate
consummation of this Agreement and the transactions contemplated
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hereby, Buyer shall exercise all due diligence to obtain such consent prior to
the Closing Date.
(c) Buyer has had an opportunity to make a preliminary inspection of the
Assets. Upon closing the transaction contemplated by this Agreement, Buyer
agrees that it accepts the Assets, including the Tangible Personal Property in
their then present "as is" condition, "where is", with no warranties other than
those expressly set forth herein. Notwithstanding the foregoing, Buyer shall
be entitled to rely on the representations, warranties, covenants and
agreements of Seller and the Indemnitors, and no investigations nor rights to
make investigation shall in any way limit, affect or impair the right of the
Buyer to rely upon the representations, warranties, covenants and agreements of
Seller and the Indemnitors.
8. COVENANTS AND AGREEMENTS OF SELLER, INDEMNITORS AND JMJ.
Seller, Indemnitors and JMJ covenant and agree with Buyer as follows:
8.01. Conduct of Business Pending the Closing. Pending the Closing and
except as otherwise permitted by this Agreement or as consented to by Buyer in
writing (which consent shall not be unreasonably withheld or delayed) since
September 30, 1997:
(a) Seller will carry on its business diligently and in good faith on an
arm's-length and substantially in the same manner as past practice;
(b) Seller will perform in all material respects its obligations under all
contracts to which it is a party or by which it is bound or to which its
properties or assets are subject;
(c) Seller will maintain and keep the Assets in as good operating
condition and repair as at present except for such ordinary wear and tear
as will not significantly affect the viability, utility, function or value
thereof, and JMJ will maintain and keep the Leroy Property in as good operating
condition and repair as at present except for such ordinary wear and tear as
will not significantly affect the viability, utility, function or value
thereof;
(d) Seller will use its best efforts to preserve intact its business
organization and to maintain satisfactory relationships with and preserve the
good will of licensors, suppliers, distributors, customers and others having
business relationships with Seller;
(e) Seller will consult with Buyer regarding all significant developments,
transactions and proposals relating to the Business;
(f) Seller will not engage in any activities or
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transactions other than in the ordinary course of its business as conducted as
of the date hereof and that from such date until the Closing Date all cash of
the Seller and other Assets may be used or applied in payment only in respect
of Assumed Liabilities, and shall not be used or applied in payment of any
other obligations of Seller or any of its affiliates, and shall not be
transferred or distributed to any shareholder or affiliate of Seller or any
other corporation, association entity or person without the prior written
consent of Buyer;
(g)(i) Seller will not declare, authorize or pay any dividend on any shares
of its capital stock in cash, stock or other property, make any other
distribution with respect to any shares of its capital stock, directly or
indirectly redeem, purchase or otherwise acquire any of its capital stock, or
make any other distribution of its assets to its shareholders, and (ii) Seller
will not issue or sell, or issue options or warrants to purchase or rights to
subscribe to, or enter into any agreement or contract with respect to, any
shares of capital stock or make any other changes in its capital structure, or
declare, authorize or pay any dividend on any shares of its capital stock in
cash, stock or other property, make any other distribution with respect to any
shares of its capital stock, directly or indirectly redeem, purchase or
otherwise acquire any of its capital stock, or make any other distribution of
its assets to its shareholders, as a result of which the Indemnitors,
collectively, would at any time own less than fifty-one percent (51%) of the
outstanding voting capital stock of Seller, Seller may however, withdraw for
use in the Business or any other use those funds received by the Seller
pursuant to Section 3.02(a);
(h) Seller will not increase the salaries, wages, compensation, rates of
pay, commissions, expense reimbursements or allowances, bonuses or fringe
benefits payable to any of its directors, officers, employees, agents,
contractors or representatives;
(i) Seller will not amend its Articles of Incorporation (except with
respect to changing its corporate name as of or following the Closing Date) or
Bylaws;
(j) Seller will not make or enter into any material capital expenditure or
capital lease obligation, or commitment with respect thereto;
(k) Seller will not incur, assume or guarantee any long-term indebtedness
or, except in the ordinary course or for purposes of consummation of the
transactions contemplated by this Agreement and in either case following
consultation with Buyer, any short-term indebtedness. As used in this
subparagraph (k), long-term indebtedness means any indebtedness for money
borrowed and/or liabilities for the payment of money relating to capital lease
obligations maturing more than one year after the date of the incurrence,
assumption or guarantee thereof, and short-term indebtedness means indebtedness
for money borrowed and/or
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liabilities for the payment of money relating to capital lease obligations
maturing one year or less after the date of the incurrence, assumption or
guarantee thereof;
(l) Seller will not enter into any material transaction or make any
material commitment which is not in the ordinary course of business, or which
would have a material, adverse effect on the Business or Assets; and
(m) Except to the extent necessary to fund current required contributions
to the Seller's retirement or other employment benefit plans, Seller will make
no other contribution to such plans. Seller shall, however, be responsible for
and pay any funding deficit in such plans as of the Closing Date.
(n) So long as this Agreement remains in effect Seller and the Indemnitors
shall not authorize or knowingly permit any of them or their respective
representatives or affiliates, directly or indirectly, to entertain, solicit or
encourage or participate in any negotiations with, or provide any information
to, any person or group of persons (other than Buyer and its representatives)
concerning any Acquisition Proposal (as hereinafter defined) other than
pursuant to this Agreement. Seller shall notify Buyer immediately if any such
inquiry or Acquisition Proposal is received by Seller or any of the
Indemnitors, or any of their representatives or affiliates. For purposes of
this Section, "Acquisition Proposal" shall mean any (i) proposal pursuant to
which any corporation, partnership, person or other entity or group, other than
Buyer, would acquire or participate in a merger or other business combination
involving Seller, directly or indirectly; (ii) proposal by which any
corporation, partnership, person or other entity or group, other than Buyer,
would acquire the right to vote ten percent (10%) or more of the capital stock
of Seller entitled to vote thereon for the election of directors; (iii)
acquisition of ten percent (10%) or more of the Assets; or (iv) acquisition in
excess of ten percent (10%) of the outstanding capital stock of Seller, in each
case other than as contemplated by this Agreement.
(o) Seller shall not acquire or agree to acquire by merging,
consolidating with, or by purchasing a substantial portion of the assets of, or
in any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to Seller (other than supplies in the ordinary course of
business).
(p) Neither Seller nor any of the Indemnitors nor JMJ shall take any
action that would knowingly result in any of the representations and warranties
of Seller, the Indemnitors and/or JMJ set forth in this Agreement becoming
untrue in any material respect.
(q) Neither Seller nor any of the Indemnitors nor JMJ
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shall materially default in the performance of any of its or their obligations
under any undertaking where such action would have a material adverse effect on
the financial condition, results of operations or prospects of Seller.
(r) Seller shall not amend, modify, terminate or fail to renew or
preserve its business organization, material rights, franchises, permits and
licenses, material contracts and commitments, or take any action which
would jeopardize the continuance of the goodwill of its customers or where such
action would have a material adverse effect on the financial condition, results
of operations or prospects of Seller.
8.02. Approvals and Consents. Prior to the Closing, Seller, Indemnitors
and JMJ shall use good faith efforts to obtain any and all permits, approvals,
consents and other authorizations of, and shall make all filings with, all
governmental agencies and other persons required to be obtained by Seller,
Indemnitors and JMJ in the opinion of counsel for Buyer, for the consummation
of the transactions contemplated by this Agreement.
8.03. Non-Foreign Affidavit. Seller's United States taxpayer
identification number is 38-1881564; and JMJ's United States taxpayer
identification number is 38-228876. Neither Seller nor JMJ is a "foreign
person" as defined in the Internal Revenue Code Section 1445 (and in
regulations thereunder). At the time of Closing, each of Seller and JMJ will
sign an affidavit so stating to the satisfaction of Buyer, and also stating
that (i) Neither Seller nor JMJ is a foreign person; (ii) Seller and JMJ intend
to file a U.S. tax return with respect to the sale of the real property; (iii)
Neither Seller nor JMJ is subject to backup withholding requirements under any
federal, state or local tax laws or regulations; and (iv) Buyer has permission
to file a copy of such affidavit with the Internal Revenue Service and state
and local tax authorities.
8.04. Transfer and Liability. Seller has the sole responsibility for any
employment rights or benefits which any of its employees may have. Buyer has
no obligation whatsoever to employ any such employees or to pay any benefits
which any employee has or claims to have by virtue of an employment
relationship with Seller, other than the Assumed Vacation Day Pay Obligations.
Buyer shall have the right to interview all of the employees of Seller. If
Buyer elects to hire an employee of Seller, Seller agrees to cooperate and
encourage such employee to become an employee of Buyer and further agrees, on
the Closing Date, to terminate any employment relationship which such employee
may have with Seller. Seller shall be liable for any salary, wages, bonuses,
commissions, accrued vacation time, sick leave time, profit sharing or pension
benefits and any other compensation or benefits as well as any actions or
causes of action, including but not limited to, unemployment compensation
claims and workers compensation claims which may be asserted by any of its
employees which are not hired by Buyer or by any of its employees which are
hired by Buyer if the claim of such hired
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employee relates to or arises from employment with Seller or termination of
employment by Seller, other than the Assumed Vacation Day Pay Obligations.
8.05. Change of Name. Promptly following the Closing, Seller shall change
its corporate name to "North Lakes Manufacturing, Inc.", or another name not
confusingly similar to "Machine Tool and Gear, Inc."
8.06. Permitted Access. From the date hereof through the Closing Date,
Seller, Indemnitors and JMJ shall permit Buyer and its representatives to have
full access and on-site review of the business and operations of Seller as
Buyer may determine reasonably necessary or advisable, and Seller, Indemnitors
and JMJ shall cause each of their agents and representatives to cooperate fully
with such investigations, provided, however, that such investigations shall
merely be for the purpose of Buyer's remaining aware of the on-going operations
of Seller and so better determining if Seller, Indemnitors and JMJ are abiding
in all material ways with their covenants respecting actions to be taken prior
to the Closing Date, and if their representations and warranties are likely to
be true in all material respects at Closing.
8.07. Regulatory Filings. Seller shall cooperate and assist in any
regulatory filings or reports made by Buyer under the Hart-Scott-Rodino
Antitrust Improvements Act (the "HSR Act"), the Securities Act of 1933, the
Securities Exchange Act of 1934, and any other applicable statute or regulation
("Regulatory Filings"), and shall deliver to Buyer appropriate financial and
other information concerning Seller's Business and Assets as may be requested
by Buyer. Seller and Indemnitors shall use its and their best efforts,
respectively, to secure consents from their independent public accountants for
the incorporation of Seller's financial statements and accompanying notes into
any Regulatory Filings.
8.08. Financial Statements. Seller shall provide Buyer, in conformance
with Rule 3-05 of the Securities and Exchange Commission's Regulation S-X,
appropriate financial statements for the years ended December 31, 1994, 1995,
and 1996.
9. COVENANTS AND AGREEMENTS OF BUYER.
Buyer covenants and agrees with Seller as follows:
9.01. Confidential Nature of Information. Buyer shall treat in confidence
all documents, materials and other information which it shall have obtained
regarding Seller during the course of the negotiations leading to the
consummation of the transaction as contemplated hereby (whether obtained before
or after the date of this Agreement and whether or not the Closing is
completed), the investigations provided for herein, and the preparation of this
Agreement. All information obtained by Buyer or Buyer's agents, employees or
contractors ("Buyer's Agents") by reason of any
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inspection of the real Property by Buyer or Buyer's Agents, including, but not
limited to, any written reports, field notes and drawings shall be held
strictly confidential by Buyer and Buyer's Agents. All inspections and tests
performed by Buyer or Buyer's Agents shall be conducted in compliance with all
federal, state and local laws, orders, regulations and ordinances. Buyer shall
indemnify and hold Seller harmless from any and all losses, liabilities or
damages resulting from such activity by Buyer or Buyer's Agents. If the
transaction herein contemplated shall not be consummated, Buyer shall continue
to hold such information and documents in strict confidence and will return or
deliver to Seller all such documents, reports, field notes, drawings,
including, without limitation, any exhibits, schedules and other documents
obtained independently or from Seller in connection with this Agreement (or
will destroy any of the foregoing containing any notes or other information
developed by Buyer on its own), without retaining copies thereof. The
obligation of Buyer to treat such documents, materials and other information in
confidence shall not apply to any information which (a) Buyer can demonstrate
was already lawfully in its possession prior to disclosure thereof by Seller,
(b) is known to the public and did not become so known through any violation of
a legal obligation, (c) became known to the public through no fault of Buyer,
or (d) relates to the assets in the Business subsequent to Closing. Buyer shall
not in any event use, nor permit anyone else to use, such information obtained
from Seller that it is bound to keep confidential to facilitate competition
with Seller. Notwithstanding the foregoing, Buyer shall be permitted to
release such public statements concerning the transactions contemplated by this
Agreement, and to make such other public disclosures, as may be required by
law.
9.02. HSR Act Filing. Buyer shall use its best efforts to prepare and
file any regulatory filings due under the HSR Act within thirty (30) days
following the Buyer's payment of the portion of the Purchase Price under
Section 3.02(a) of this Agreement.
10. CONDITIONS TO BUYER'S PERFORMANCE.
The obligation of Buyer to complete the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing of
each of the following conditions, except to the extent any such condition is
waived in writing by Buyer:
10.01. Warranty Deeds; Title Insurance; Surveys; Baseline Environmental
Assessment Reports for Plant Properties and Leroy Property. Seller and JMJ,
respectively, shall have delivered to Buyer warranty deeds, in form and
substance satisfactory to Buyer, conveying fee title interest in and to each of
the Plant Properties and the Leroy Property to Buyer along with commitments for
owner's policies of title insurance, with premiums paid and all requirements
satisfied, insuring Buyer's fee title ownership interest in and to each of the
Plant Properties and the
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Leroy Property, free and clear of all liens, claims, encumbrances and
restrictions, other than Assumed Liabilities, certified surveys of each of the
Plant Properties and the Leroy Property, and baseline environmental assessment
reports (which Buyer directs Seller to obtain promptly following the execution
of this Agreement) for each of the Plant Properties and the Leroy Property, all
issued by companies approved by Buyer and in form and content satisfactory to
Buyer; provided, however, that in the event that Seller or JMJ, respectively,
is unable to fulfill the conditions of Section 10.01 with respect to one or
more of the Plant Properties or the Leroy Property to the satisfaction of Buyer
on or before the Closing Date, at the option of Buyer, any of said Plant
Properties or the Leroy Property may be designated as Excluded Assets and not
included in the sale and transfer at the Closing; and in said event, the value
of any said Plant Properties or Leroy Property shall be excluded from the
Purchase Price, and, at the Closing, Seller or JMJ, as the case may be, shall
lease to Buyer each of said Plant Properties or Leroy Property excluded from
the sale and transfer on the terms and conditions provided in a Lease
Agreement.
10.02. Performance by Seller, Indemnitors and JMJ. Seller, Indemnitors
and JMJ shall have performed and complied in all material respects with the
terms, provisions and conditions of this Agreement to be performed and
complied with by them at or before the Closing, and the representations and
warranties of Seller, Indemnitors, and JMJ, contained in this Agreement shall
be true in all material respects as of the date of this Agreement and as of the
Closing (except as contemplated or permitted by this Agreement). All Schedules
listed in this Agreement shall be updated for changes occurring after the date
hereof through the Closing Date and be accurate as of that date. Buyer shall
have received a certificate, dated as of the Closing Date, executed (a) on
behalf of Seller by the President of Seller acting in the capacity of corporate
officer, (b) by each of the Indemnitors, and (c) by the authorized JMJ partner,
stating that (i) the representations and warranties of Seller, Indemnitors and
JMJ made under and pursuant to this Agreement are repeated and made to speak as
of the Closing Date and, as thus repeated and made, are true and correct as of
the Closing Date; (ii) any representations and warranties regarding information
contained in any Schedule shall be deemed to relate to the updated Schedules
which are to be delivered at the Closing and shall be true and correct as of
the Closing Date; (iii) no action or proceeding has been instituted, or to
Seller's or Indemnitors' or JMJ's knowledge threatened, for the purpose, or
with the probable effect, of enjoining, or preventing, the consummation of the
transactions contemplated by this Agreement; and (iv) Seller, Indemnitors and
JMJ have complied with their agreements contained in this Agreement which are
to be performed by them prior to the Closing.
10.03. Certificate of Good Standing. Buyer shall have received a
Certificate of the Michigan Department of Consumer and Industry Services,
Corporation, Securities and Land Development Bureau, of a recent date,
certifying that Seller is a
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corporation in good standing under the laws of the State of Michigan, and Buyer
shall have received a Certificate of the Oakland County Clerk, of a recent
date, certifying that JMJ is a co-partnership in good standing under the laws
of the State of Michigan.
10.04. Required Consents. All consents from any and all third parties and
governmental agencies, including, but not limited to the Department of Justice
and the Federal Trade Commission under the HSR Act and the Lease Assignment
Consents, required to consummate or facilitate the transactions contemplated
herein shall have been obtained by Seller, Indemnitors and JMJ and shall not
have been revoked, terminated or otherwise rendered ineffective and shall be
acceptable to Buyer in form and substance.
10.05. Certificates of Secretary/Authorized Partner(s). (a) Buyer shall
have received a Certificate of the Secretary of Seller, dated as of the Closing
Date, which certifies (i) the resolutions duly adopted by the Board of
Directors of Seller approving this Agreement and the transactions contemplated
herein, (ii) the resolutions duly adopted by the shareholders of Seller
approving this Agreement and the transactions contemplated herein and thereby
and (iii) the incumbency of each officer authorized to execute this Agreement
and related documents provided for herein.
(b) Buyer shall have received a Certificate of the Authorized Partner(s) of
JMJ, dated as of the Closing Date, which certifies (i) that the partners of JMJ
approved this Agreement and the transactions contemplated herein, and (ii)
that the Authorized Partner(s) has the power to execute this Agreement and
related documents provided for herein.
10.06. Lien Search. Buyer shall have obtained from the appropriate local
and State units having responsibility therefor, complete reports dated within
twenty (20) days or less of the Closing Date to Buyer's satisfaction showing no
tax liens, and no financing statements of record or other evidence reflecting
any liens or security interests outstanding affecting the Business or Assets
(including the Plant Properties and the Leroy Property), except those securing
obligations to be paid and discharged from the Purchase Price or Assumed
Liabilities.
10.07. Termination of Employees. Seller shall have terminated all of its
employees as of the Closing Date. Buyer shall have the right, but not the
obligation, to hire any one or more of such terminated employees on terms and
conditions acceptable to Buyer; provided, however, nothing contained herein
shall be deemed to create third party beneficiary rights of any nature
whatsoever on behalf of any such terminated employees. Seller shall have the
obligation to compensate all employees not hired by Buyer for all unused
holiday or vacation days earned but not used by those employees of Seller.
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10.08. No Casualty. No fire or other casualty shall have destroyed a
material part of the Assets whether or not such casualty is covered by
insurance. Buyer shall have received certificates of insurance indicating the
Buyer to be the insured party under each of the insurance policies to be
assigned to Buyer as contemplated in this Agreement. No event shall have
occurred which has or reasonably may have a material adverse effect upon the
business of Seller or the Assets.
10.09. Non-Competition Agreement. Seller and the Indemnitors shall have
duly executed and delivered the Non-Competition Agreement to Buyer, on terms
acceptable to Buyer, substantially in the form attached hereto as Schedule
10.9.
10.10. No Litigation. No action, suit, proceeding or investigation shall
have been instituted before any court or governmental body, or instituted by
any governmental agency, to restrain or prevent the carrying out of the
transactions contemplated by this Agreement.
10.11. Seller's, Indemnitors' and JMJ's Deliveries. Seller, Indemnitors
and JMJ shall have delivered to Buyer each of the instruments and items to be
delivered by Seller and/or Indemnitors to the Buyer in accordance with Section
12.03 hereof.
10.12. Employment Agreements. Certain key employees as designated by
Buyer shall have entered into Employment Agreements with Buyer, on terms
acceptable to Buyer, substantially in the form attached hereto as Schedule
10.12.
10.13. Opinion of Counsel. Buyer shall have received the favorable
opinion of Rentrop, VanderKloot, Haynes & Morrison, PC, counsel to Seller, JMJ
and Indemnitors, in form and substance satisfactory to Buyer, with respect to
matters set forth in Sections 6.01, 6.02, 6.03, 6.04 and 6.12 of this
Agreement.
10.14. MESC Form. Buyer shall have received MESC Form 1027, prepared and
delivered by Seller dated within ten (10) days prior to the Closing Date in
compliance with MCL Section 421.15(g).
10.15. Bulk Transfers Act Compliance. Seller shall have complied with the
provisions of Article VI of the Uniform Commercial Code, as adopted in the
State of Michigan, relating to bulk transfers, in connection with this sale and
purchase of the Assets, delivering its affidavit of all creditors and other
persons to whom notice should be given, preparing all mailings and
publications, and paying all costs associated therewith, all completed to the
satisfaction of Buyer as of a date not more than twenty (20), nor less than two
(2), days prior to the Closing Date.
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11. CONDITIONS TO SELLER'S, INDEMNITORS' AND JMJ'S PERFORMANCE.
The obligation of Seller, Indemnitors and JMJ to complete the transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing of each of the following conditions, except to the extent any
such condition is waived in writing by Seller, Indemnitors and JMJ.
11.01. Performance by Buyer. Buyer shall have performed and complied
in all material respects with all of the terms, provisions and conditions of
this Agreement to be performed and complied with by Buyer at or before the
Closing, and the representations and warranties of Buyer contained in this
Agreement shall be true in all material respects as of the date of this
Agreement and as of the Closing Date (except as contemplated or permitted by
this Agreement).
11.02. No Litigation. No action, suit, proceeding or investigation
shall have been instituted before any court or governmental body, or
instituted by any governmental agency, to restrain or prevent the carrying out
of the transaction as contemplated by this Agreement.
11.03. Required Consents. All consents from third parties and
governmental agencies required to consummate the transactions contemplated
hereby shall have been obtained and shall not have been revoked, terminated or
otherwise rendered ineffective
11.04. Certificate of Secretary. Seller, Indemnitors and JMJ shall
have received a Certificate of the Secretary of Buyer, dated as of the Closing
Date, which certifies (i) the resolutions duly adopted by the Board of
Directors of Buyer approving this Agreement and the transactions contemplated
hereby; and (ii) the incumbency of the officer(s) authorized to execute this
Agreement and related documents provided for herein on behalf of Buyer.
11.05. Buyer's Deliveries. Buyer shall have delivered to Seller,
Indemnitors and JMJ each of the instruments and items to be delivered by Buyer
to the Seller, Indemnitors and JMJ in accordance with Section 12.03 hereof.
12. CLOSING; ADJUSTMENTS AND PRORATIONS.
12.01. Closing And Closing Place. The Closing of this Agreement shall
take place not later than the close of business on the fourth (4th) business
day following the later of (i) the receipt of the consent of the Federal Trade
Commission or (ii) the receipt of the consent of the Department of Justice, and
in either case, following the expiration of any applicable waiting period,
pursuant to any filings made under the HSR Act, or any mutually acceptable date
thereafter, but in no event later than March 31, 1998, provided that all
conditions have been satisfied
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(or waived) at such time. The Closing shall commence at 10:00 a.m., current
local time, or as soon thereafter as possible, on the Closing Date and shall
take place at the principal offices of Buyer, or such other location as the
parties may hereafter agree.
12.02. Closing Actions and Effectiveness. The conveyance, transfer,
assignment and delivery of the Assets to Buyer, the payment of the Purchase
Price in the manner set forth in Section 3.01, and the delivery and/or exchange
of all papers pertaining to the foregoing and otherwise provided herein shall
constitute the "Closing" hereunder, it being understood that no delivery
pursuant to this Agreement shall be effective until all required deliveries
pursuant to this Agreement shall have been made.
12.03. Closing Date Deliveries.
(a) At the Closing, Seller, Indemnitors, JMJ shall:
(i) Deliver to Buyer duly executed warranty deeds, bill of sale,
assignment and assumption documents and such other instruments of transfer and
assignment, all in mutually acceptable form, for the transfer and assignment to
Buyer of all of the Assets;
(ii) Execute and deliver to Buyer the Non-Foreign Ownership
Affidavit provided for in Section 8.03;
(iii) Deliver to Buyer the Non-Competition Agreement and the
Employment Agreements duly executed by Seller and the Indemnitors;
(iv) Deliver to Buyer the Secretary's Certificate pursuant to
Section 10.05;
(v) Deliver to Buyer the good standing certificate provided by the
Michigan Department of Consumer and Industry Services; and
(vi) Deliver to Buyer any other instruments required in order to
document the Closing of this transaction.
(b) At the Closing, Buyer shall:
(i) Deliver to Seller, Indemnitors and JMJ the Purchase Price to
be paid at the Closing, as set forth in Section 3.01 hereof;
(ii) Duly execute and deliver to Seller and Indemnitors the
assumption documents referenced in Section 12.03(a)(i) hereof;
(iii) Deliver to Seller, Indemnitors and JMJ the Secretary's
Certificate pursuant to Section 11.04;
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(iv) Deliver to Seller, Indemnitors and JMJ certified copies of its
good standing certificate; and
(v) Deliver to Seller, Indemnitors and JMJ any other instruments
reasonably required in order to document the Closing of this transaction.
12.04. Further Assurances. (a) From time to time after the Closing,
Seller, Indemnitors and JMJ shall execute and deliver to Buyer such other
instruments of conveyance and transfer in conformity with this Agreement as
Buyer may reasonably request or as may be otherwise necessary to more
effectively convey and transfer to, and vest in, Buyer and to put Buyer in
possession of, the Assets.
(b) From time to time before, at, and after the Closing Date at
the other party's reasonable request, and without further consideration,
Seller, Indemnitors, JMJ or Buyer, as the case may be, will duly execute,
acknowledge and deliver such documents and instruments and perform such further
action that may be required to more effectively carry out the intent of this
Agreement.
(c) Following the Closing: (i) Seller agrees to deliver and if
necessary, endorse over to Buyer any mail, checks, funds or monies or other
documents which Seller receives pertaining to the operation of the
Business subsequent to Closing; and (ii) Buyer agrees to deliver and, if
necessary, endorse over to Seller any mail, checks, funds or monies or other
documents which Buyer receives pertaining to the operation of the Business
prior to Closing, except any funds received in payment of Accounts Receivable
acquired by Buyer.
12.05. Financial Statement Costs. The fees for the preparation of the
financial statements to be provided pursuant to Section 8.08, shall be divided
equally between Buyer on the one hand and the Seller, on the other hand, and,
if known, shall be paid on the Closing Date, otherwise the fees shall be paid
as soon as the fees become known.
12.06 Taxable Income Update. Within forty-five (45) days of the
Closing, the Seller's taxable income shall be calculated and compared to
Seller's taxable income at September 30, 1997 according to the 1997
Financial Statements delivered in accordance with Section 6.05; in the event
the taxable income has increased Buyer shall reimburse Seller for any
additional tax liability as a result of such increase or in the event the
taxable income has decreased Buyer shall reimburse Seller for any decease in
tax liability as a result of such decrease.
13. INDEMNIFICATION.
13.01. Indemnification by Seller, Indemnitors and JMJ. Seller,
Indemnitors and JMJ, on a joint and several basis, shall defend, indemnify and
hold harmless Buyer, its directors and
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officers, and their respective heirs, representatives,successors and assigns,
from and against any and all costs, losses, claims, liabilities,
fines,expenses, penalties, and damages, including reasonable attorneys' fees,
caused by, arising out of, resulting from or in connection with:
(a) All debts, liabilities and obligations of Seller of whatsoever
kind or nature (including taxes and contract claims), whether known or unknown,
accrued, absolute, contingent or otherwise, except for the Assumed Liabilities;
(b) Any material breach, violation, falsification, failure to
satisfy, or other default in respect of any warranty, covenant or material
representation provided in this Agreement (regardless of whether the Agreement
specifically states that indemnification is a remedy for such breach or
violation), or in any exhibit, schedule, record, financial statement or other
document furnished by Seller, Indemnitors or JMJ;
(c) Any refund or credit adjustment determined to be due to a
customer of Seller not reflected on the Balance Sheet;
(d) Any prepayment penalty due as a result of the failure to
assign any Assumed Contract when such failure to assign is due solely to
Lessor's refusal to consent to such assignment;
(e) Any Accounts Receivable that has not been collected for its
full value stated on the Balance Sheet within six (6) months of the Closing
Date;
(f) Any service parts inventory that has not been used or sold
in the Business at the end of twenty-three (23) months from the
Closing Date; and
(g) Any portion of the fees to be paid by Seller in accordance
with Section 12.05, which are not paid within thirty (30) days of the fees being
billed.
In the event that Seller, Indemnitors and JMJ shall fail to undertake to
compromise or defend any suit, claim, demand or obligation required by this
Agreement within fifteen (15) days of receipt of notice thereof from Buyer
under Section 13.03 below, Buyer shall have the sole right and power to defend,
compromise, settle and/or otherwise dispose of same and to obtain payment from
Seller, Indemnitors and JMJ of its costs and expenses in connection therewith.
Buyer shall take such reasonable action as may be necessary to protect the
rights of the parties with respect to the fifteen-day notice period provided in
this paragraph.
13.02. Indemnification by Buyer. Buyer shall defend, indemnify and hold
harmless Seller, its directors and officers, and their respective heirs,
representatives, successors and assigns, from and against any and all costs,
losses, claims, liabilities, fines, expenses, penalties and damages including
reasonable attorneys' fees arising out of or in connection with:
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(a) All debts, liabilities and obligations of Buyer, whether
accrued, absolute, contingent, known or unknown, or otherwise (including
taxes and contract claims); and
(b) Any material breach, violation, falsification, failure to
satisfy, or other default in any respect of any warranty, covenant or material
representation provided herein (regardless of whether the Agreement
specifically states that indemnification is a remedy for such breach or
violation), or in any exhibit, schedule, record, financial statement or other
document furnished by Buyer; and
(c) For any Assumed Contract that has been assigned to Buyer,
(i) any prepayment penalty due on an Assumed Contract as a result of
Buyer's decision to terminate such Assumed Contract early; and (ii) any
liability to the Indemnitors as personal guarantors arising out of Buyer's
default under the Assumed Contracts.
In the event that Buyer shall fail to undertake to compromise or defend any
suit, claim, demand or obligation required by this Agreement within fifteen
(15) days of receipt of notice hereof from Seller under Section 13.03 below,
Seller shall have the sole right and power to defend, compromise, settle and/or
otherwise dispose of same and to obtain payment from Buyer of its costs and
expenses in connection therewith. Seller shall take such reasonable action as
may be necessary to protect the rights of the parties with respect to the
fifteen-day notice period provided in this paragraph.
13.03. Claims for Indemnification.
(a) The party seeking indemnification under Sections 13.01 or 13.02 of
this Agreement ("Indemnitee") shall give prompt notice to the other party or
parties ("Indemnifying Party") of any claim, liability or other circumstance as
to which recovery may be sought because of the indemnity set forth in Sections
13.01 or 13.02 and, in the case of a claim for indemnification by Buyer, in
addition to all other rights to indemnification, Buyer shall have a right to
setoff the amount of said claim against the Holdback Amount, or any portion
thereof, otherwise payable by Buyer. To the extent possible, the notice shall
describe in reasonable detail the basis for the claim, include an itemized
accounting of the claim, and provide a good faith estimate of the amount of the
indemnified loss. Within fifteen (15) days after receipt of the notice, the
Indemnifying Party shall either disburse funds to the Indemnitee as
reimbursement for the amount of the claims or notify the Indemnitee of the
Indemnifying Party's intent to dispute the claim. Failure by Indemnifying
Party to notify Indemnitee of its election to defend any such action within
fifteen (15) days after notice thereof shall be deemed a waiver by Indemnifying
Party of its right to defend such action. If Indemnifying Party assumes the
defense of any such claim or litigation resulting therefrom,
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the obligations of Indemnifying Party hereunder as to such claim shall be
limited to taking all steps necessary in the defense or settlement of such
claim or litigation resulting therefrom and to hold the Indemnitee harmless
from and against any and all costs, losses, damages and liabilities caused by
or arising out of any settlement or any judgment in connection with such claim
or litigation resulting therefrom. Indemnifying Party shall not, in the
defense of such claim or any litigation resulting therefrom, consent to the
entry of any judgment (except with the written consent of Indemnitee, which
consent shall not be unreasonably withheld) or enter into any settlement
(except with the written consent of Indemnitee, which consent shall not be
unreasonably withheld), which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnitee of a release from
all liability in respect to such claim or litigation. If such defense is
unsuccessful or abandoned by Indemnifying Party, then, upon Indemnifying
Party's failure to pay an amount sufficient to discharge any such claim or
judgment, Indemnitee may pay and settle the same in good faith and Indemnifying
Party's liability shall be conclusively established by any such payment.
(b) If Indemnifying Party shall not assume the defense of any such
claim or litigation resulting therefrom, Indemnitee may defend against
and settle such claim or litigation in such manner as it may deem appropriate
and reasonable, and Indemnifying Party shall promptly reimburse Indemnitee for
the amount of all expenses, legal or otherwise, incurred by Indemnitee in
connection with the defense against or settlement of such claim or litigation
to which the Indemnitee is entitled hereunder. If no settlement is made,
Indemnifying Party shall promptly reimburse Indemnitee for the amount of any
judgment rendered with respect to such claim or such litigation and of all
expenses, legal or otherwise, incurred by the Indemnitee in the defense thereof
to which the Indemnitee is entitled hereunder.
13.04. Seller's Liability Insurance. If Seller does not carry general and
product liability insurance on a claims incurred basis, for a period of two (2)
years after the Closing, Seller shall provide and maintain comprehensive
general liability insurance and umbrella liability insurance in an amount not
less than $2,000,000 per occurrence and an aggregate amount not less than
$4,000,000 per year providing full coverage against claims, suits, actions,
proceedings, fines, damages, liabilities, costs and expenses arising out of,
connected with or resulting from any defect or deficiency in any product
produced or service rendered by Seller prior to Closing. Seller shall provide
proof of such insurance satisfactory to Buyer at least five (5) days prior to
the Closing Date and shall name Buyer as an additional named insured, and Buyer
shall acknowledge its satisfaction of said insurance coverage on the Closing
Date.
13.05. Limitations on Seller's, Indemnitor's and JMJ's Indemnification.
Seller, Indemnitors and JMJ shall not be liable and Buyer agrees not to enforce
any claim for indemnification under this Agreement until the aggregate amount
of
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all such claims exceeds Fifty Thousand Dollars ($50,000.00) (the "Threshold
Amount"), and then Buyer shall be entitled to recover only the amount of such
claims in excess of the Threshold Amount, except that, notwithstanding the
foregoing, Seller, Indemnitors and JMJ, shall be liable and Buyer may enforce
any and all claim(s) for breach of any representation or warranty under Section
6.10 and/or 6.15, as well as any claim(s) for indemnity under Sections
13.01(c), (d), (e) and (f) without regard to the Threshold Amount.
13.06. Survival. The representations, warranties, indemnities and
agreements contained in this Agreement and in any Schedules or certificates
delivered pursuant hereto shall survive consummation of the transactions
contemplated by this Agreement and shall remain in full force and effect, for a
period of twenty-four (24) months after the Closing Date, and the parties'
undertakings under this Section 13 shall terminate on the expiration of
twenty-four (24) months after the Closing Date, except (i) as to any claim(s)
for which indemnity has been sought prior thereto, which claim(s) shall survive
until paid, satisfied and discharged, or settled, (ii) as to any claim(s) for
which indemnity is sought for breach of any representation or warranty under
Section 6.10 and/or 6.15, which shall survive beyond the Closing Date as
between the parties hereto for the applicable limitations period on the
underlying claim, (iii) as to any claim(s) for which indemnity is sought for
breach of any representation or warranty provided in the sixth sentence of
Section 6.11, the Service Parts Inventory which shall survive for twenty-four
(24) months from the Closing Date, (iv) as to any claim(s) for which indemnity
is sought for breach of Section 12.05, which shall survive beyond the Closing
Date as between the parties hereto for the applicable limitations period on the
underlying claim, and (iv) in the event of the dissolution and/or liquidation
of Seller, JMJ or Buyer, the parties' undertakings shall survive such
dissolution and/or liquidation and continue, notwithstanding such dissolution
and/or liquidation, to be performable by, and actionable and enforceable
against, any person, or persons, to whom, or to which, any of the assets of and
property of Seller, JMJ or Buyer, shall have been distributed as a result of
such dissolution and/or liquidation.
14. TERMINATION AND RISK OF LOSS.
14.01. Termination. In the event either party prior to the Closing
shall materially breach, violate, or otherwise default in respect of any
warranty, representation or covenant (the "Defaulting Party"), the other
party (the "Non-Defaulting Party") may at its option, and at any time prior to
the Closing, unless such default shall have been fully rectified and corrected
by the Defaulting Party, elect either:
A. To terminate this Agreement by giving the Defaulting Party written
notice of such election, in which case all obligations of the parties hereunder
shall terminate upon the giving of such notice.
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B. To consummate the transaction contemplated hereby, and,
(i) institute an action against the Defaulting Party to compel the
rectification and correction of, or to recover damages for, such default; or
(ii) waive such default without prejudice to the right subsequently
to offset the amount of any damages against the obligations under this
Agreement and/or institute an action as contemplated in subsection (i) above.
14.02. Risk of Loss. Regardless of cause, Seller and JMJ retain all
risks of destruction, loss or damage to any of the Assets until the
Closing, and if, prior to the Closing, any of the Assets are destroyed or lost
or have suffered more than $100,000 in damage, Seller and JMJ shall provide
prompt notice thereof to Buyer. In the event of such destruction, loss or
damage, Buyer, in its sole discretion may (i) take possession and complete the
sale, and, upon Closing, Seller and JMJ shall assign and transfer to Buyer all
insurance proceeds and rights to collect such proceeds, collectible by reason
of such destruction, loss or damage; (ii) reduce the Purchase Price by the
amount of such destruction, loss or damage as determined by Buyer, Seller and
JMJ jointly; or (iii) terminate this Agreement upon notifying Seller and JMJ
within fifteen (15) days after Buyer becomes aware of such loss or damage. All
risks of destruction, loss or damage to any of the Assets shall pass to Buyer
at the Closing, and Buyer shall retain such risks thereafter.
15. GENERAL PROVISIONS.
15.01. Notices. Notice from one party to another relating to this
Agreement shall he deemed effective if made in writing (including
telecommunications) and delivered to the recipient's address, telex number or
facsimile number set forth under its name below by any of the following means:
(a) hand delivery, (b) registered or certified mail, postage prepaid, with
return receipt requested, (c) first class or express mail, postage prepaid, (d)
Federal Express, Purolator Courier or like overnight courier service, or (e)
facsimile, telex or other wire transmission with request for assurance of
receipt in a manner typical with respect to communication of that type. Notice
made in accordance with this Section shall be deemed delivered upon receipt if
delivered by hand or wire transmission, three (3) business days after mailing
if mailed by first class registered or certified mail, or one (1) business day
after mailing or deposit with an overnight courier service if delivered by
express mail or overnight courier.
If to Seller: North Lakes Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
(Fax: 517/743-9865)
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with a copy to: Rentrop, VanderKloot, Haynes
& Morrison, PC
74 E. Long Lake Road
Bloomfield Hills, Michigan 48304
(Fax: 248/647-1022)
Attn: William R. VanderKloot
If to an
Indemnitor: To the address for said Indemnitor as
set forth on the signature page hereof
If to JMJ: JMJ and Company
1021 North Shiawassee
Corunna, Michigan 48817
(Fax: 517/743-9865)
If to Buyer: Newcor, Inc.
1825 South Woodward, Suite 240
Bloomfield Hills, Michigan 48302-0574
(Fax: 248/253-2413)
with a copy to: Miller, Canfield, Paddock and Stone, P.L.C.
1400 North Woodward Avenue, Suite 100
Bloomfield Hills, Michigan 48304
(Fax: 248/258-3036)
Attn: J. Kevin Trimmer
Notice of a change of address shall be given in accordance with the terms
of this paragraph.
15.02. Sales and Transfer Taxes. Any federal, state or local conveyance,
sales or transfer taxes owing on account of the transfer of the purchased
Assets to Buyer shall be paid by Seller and JMJ.
15.03. Access to Records. For a period of seven (7) years after the date
hereof, Seller, Indemnitors and JMJ and their representative shall have
reasonable access to all of the books and records relating to the Business and
purchased Assets to the extent that such access may reasonably be required by
Seller, Indemnitors and JMJ in connection with matters relating to or affected
by the operations of the Business and the purchased Assets prior to Closing.
Such access shall be afforded by Buyer upon receipt of reasonable advance
notice and during normal business hours. Seller, Indemnitors and JMJ shall be
solely responsible for any costs or expenses incurred by them pursuant to this
Section 15.03. If Buyer shall desire to dispose of any material tax or
accounting books and records prior to the expiration of such seven-year period,
Buyer shall, prior to such disposition, give Seller, Indemnitors and JMJ a
reasonable opportunity, at Seller's, Indemnitors' and JMJ's expense, to
segregate and remove such books and records as Seller, Indemnitors and JMJ may
select.
-35-
<PAGE> 36
15.04. Failure or Refusal to Close. (a) In the event Seller, Indemnitors
and JMJ shall fail or refuse to close this transaction on the Closing Date, or
such mutually scheduled closing date thereafter as shall have been agreed upon
by the parties in writing, after all conditions to Seller's, Indemnitors' and
JMJ's performance under this Agreement have been satisfied without any material
default of Buyer, or if Buyer shall elect not to close because of the failure
or refusal of Seller, Indemnitors and JMJ to perform any of their obligations
hereunder, then Buyer shall be entitled to terminate this Agreement and pursue
its legal remedies, including, without limitation, obtaining an immediate
refund of the Two Million Five Hundred Thousand Dollars ($2,500,000.00) paid by
Buyer pursuant to Section 3.02(a) of this Agreement, or, at its option, Buyer
may seek specific performance of this Agreement, the parties hereby
acknowledging the unique character of the Business.
(b) In the event that the Buyer shall fail or refuse to close this
transaction on the Closing Date, or such mutually scheduled closing date
thereafter as shall have been agreed upon by the parties in writing, after all
conditions to Buyer's performance under this Agreement have been satisfied
without any material default of Seller, Indemnitors and JMJ, or if Seller,
Indemnitors and JMJ shall elect not to close because of the failure or refusal
of Buyer to perform any of its obligations hereunder, then Seller, Indemnitors
and JMJ shall be entitled as their sole and exclusive remedy to terminate this
Agreement and keep and retain as liquidated damages the sum of Two Million Five
Hundred Thousand Dollars ($2,500,000.00) paid by Buyer pursuant to Section
3.02(a) of this Agreement.
15.05. Partial Invalidity. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but this Agreement
shall be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein.
15.06. Expenses. Each party hereto will pay all costs and expenses
incident to its negotiation and preparation of this Agreement and to its
performance and compliance with all agreements contained herein on its part to
be performed, including the fees, expenses and disbursements of its counsel and
accountants.
15.07. Mutual Negotiation. This Agreement has been executed after
negotiation and the opportunity by both parties to have this Agreement reviewed
and revised by legal counsel of their choice. None of the provisions of this
Agreement shall be interpreted or construed against a party hereto solely by
virtue of the fact that such provision shall have been drafted by legal counsel
representing such party.
15.08. Governing Law. This Agreement shall be
-36-
<PAGE> 37
governed by and construed in accordance with the laws of the State of Michigan.
15.09. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be considered an original counterpart,
and shall become a binding agreement when Buyer, Seller, Indemnitors and JMJ
shall have each executed one or more counterparts and delivered them to the
other parties hereto.
15.10. Titles and Headings. Titles and headings to Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meanings or interpretation of this Agreement.
15.11. Schedules. The Schedules referred to in this Agreement shall be
construed with and as an integral part of this Agreement to the same extent as
if the same had been set forth verbatim herein.
15.12. Entire Agreement; Amendments and Waivers. This Agreement,
including the Schedules, contains the entire understanding of the parties
hereto with regard to the subject matter contained herein. The parties hereto,
by mutual agreement in writing, may amend, modify and supplement this
Agreement. The failure of any party hereto to enforce at any time any
provision of this Agreement shall not be construed to be a waiver of such
provision, nor in any way affect the validity of this Agreement or any part
hereof or the right of such party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to
constitute a waiver of any other or subsequent breach.
15.13. Binding on Successors, Etc. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, their respective successors,
assigns, heirs and legal representatives.
15.14. Arbitration. Any dispute arising directly or indirectly under this
Agreement and not resolved by the parties within a thirty (30) day period shall
be submitted to, and resolved by, arbitration. The arbitration shall be
conducted by the American Arbitration Association (Southfield, Michigan)
according to its Commercial Rules with either a single arbitrator mutually
selected by Buyer, on the one hand, and Seller and Indemnitors, on the other
hand, or, if Buyer and Seller, Indemnitors and JMJ are unable to agree on a
single arbitrator, three (3) arbitrators, one (1) of whom shall be appointed by
Seller, Indemnitors and JMJ, one (1) of whom shall be appointed by Buyer, and
the third arbitrator shall be selected by the American Arbitration Association.
Each arbitrator so selected must be: an attorney; experienced in business
transactions; without conflicting interests. Anything in said Commercial Rules
to the contrary notwithstanding, the hearing on said dispute(s) shall take
place not later than sixty (60) days after filing of the
-37-
<PAGE> 38
submission and the opinion and findings of the arbitrators shall be filed in
writing within seven (7) days of the close of proofs. If either party files a
counter-claim, cross-claim, or third-party claim, the said claim shall be filed
within fourteen (14) days of the initial submission and the hearing shall
commence within sixty (60) days of the filing of the last claim. The parties
shall be entitled to reasonable discovery. The prevailing party (to the extent
that there is a "prevailing party" in the opinion of the arbitrators) shall be
awarded its reasonable costs and attorneys fees. The arbitrators are empowered
to enter equitable and declaratory relief, and shall submit their final
determination in the form of a written decision. Judgment on the decision of
the arbitrators may be entered, and action to enforce said judgment may be
taken, in Oakland County Circuit Court or in any other court of competent
jurisdiction.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-38-
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
"SELLER"
MACHINE TOOL AND GEAR, INC.,
a Michigan corporation
By: /s
/s/ Jon C. LeBlanc
Jon C. LeBlanc
Its: President
"BUYER"
NEWCOR, INC., a Delaware corporation
By:
/s/ W. John Weinhardt
W. John Weinhardt
Its: President
"INDEMNITORS"
/s/ Jon C. leBlanc
Name:Jon C. LeBlanc
Address: c/o North Lakes Manufacturing
, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
/s/ Daniel A. LeBlanc
Name:Daniel A. LeBlanc
Address: c/o North Lakes Manufacturing,
Inc.
1021 North Shiawassee
Corunna, Michigan 48817
/s/ Thomas P LeBlanc
Name:Thomas P. LeBlanc
Address: c/o North Lakes Manufacturing
, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
-39-
<PAGE> 40
"INDEMNITORS" (continued from previous page)
/s/ Joseph T. LeBlanc
Name: Joseph T. LeBlanc
Address: c/o North Lakes Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
/s/ Patrick J. LeBlanc
Name: Patrick J. LeBlanc
Address: c/o North Lakes Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
"JMJ"
JMJ and Company
/s/ Jon C. LeBlanc
Name: Jon C. LeBlanc
Partner
-40-
<PAGE> 41
SCHEDULES
All Schedules must be mutually approved prior to attachment to the Asset
Purchase Agreement, and the parties' respective obligations to close shall be
expressly conditioned on the mutual approval of all Schedules, and attachments
thereof, to the Asset Purchase Agreement on or before November 1, 1997 (failing
which, any party may terminate the Asset Purchase Agreement after November 1,
1997 by written notice, and the Buyer shall be entitled to an immediate refund
of the $2,500,000 paid by Buyer pursuant to Section 3.02(a) of the Asset
Purchase Agreement).
<PAGE> 42
LIST OF SCHEDULES
Schedule 2.1(a) Tangible Personal Property
2.1(d) Assumed Contracts
2.1(f) Patents and Trademarks
2.1(j)(1) Legal Descriptions of Plant Properties
2.1(k) Legal Description of Leroy Property
2.2(e) Additional Excluded Assets
3.2 Holdback Escrow Agreement
6.02 Capital Stock of Seller
6.5 Financial Statements
6.6 Additional Liabilities
6.8 Material Events
6.9 Employee Benefit Matters
6.10 Tax Matters
6.11 Notices
6.12 Litigation
6.13 Licenses and Permits
6.15 Environmental Matters
6.16 Patents and Trademarks
6.17 Insurance
6.19 Warranties
10.09 Form of Non-Competition Agreement
10.12 Form of Employment Agreement
<PAGE> 1
EXHIBIT 2.1
EXECUTION COPY
--------------
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
------------------------
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (the "First
Amendment") is made and entered into as of the 28th day of October 1997, by and
among MACHINE TOOL AND GEAR, INC., a Michigan corporation ("Seller"), JON C.
LEBLANC, DANIEL A. LEBLANC, THOMAS P. LEBLANC, JOSEPH T. LEBLANC, AND PATRICK
J. LEBLANC ("Indemnitors"), JMJ AND COMPANY, a Michigan co-partnership ("JMJ"),
and NEWCOR, INC., a Delaware corporation ("Buyer").
RECITALS
--------
A. Seller, Indemnitors, JMJ and Buyer entered into an Asset
Purchase Agreement dated as of October 1, 1997 (the "Agreement"), but
subsequently have determined that certain amendments to the Agreement are
necessary and appropriate and therefore wish to amend the Agreement as set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements, representations and warranties hereinafter set forth, Buyer,
Seller, Indemnitors and JMJ agree as follow:
1. Section 3.01 of the Agreement shall be and hereby is amended
and restated in its entirety to read as follows:
"3.01 Purchase Price. The total consideration for the
purchased Assets and for the Seller's and Indemnitors' agreements not to
compete pursuant to the Non-Competition Agreement and the Employment
Agreements shall be Twenty-Seven Million Four Hundred Fifty Thousand
Dollars ($27,450,000.00) to be paid to Seller and (unless the Leroy
Property becomes an Excluded Asset as provided in Section 2.01(k),
in which event no amount shall be paid to JMJ) Four Hundred Thousand
Dollars ($400,000.00) to be paid to JMJ (collectively, the "Purchase
Price"), subject to any adjustments made in connection with the Plant
Properties and the Leroy Property pursuant to Section 2.01(j) and
2.01(k)."
2. Subsection 3.02 (d) of the Agreement shall be and hereby is
amended and restated in its entirety to read as follows:
"(d) On the Closing Date, a promissory note bearing simple
interest at the rate of 8% per annum and secured by a security interest in
the Assets (which shall expressly permit sales of Assets in the ordinary
course of business) shall be executed by Buyer in favor of Seller in the
amount of Twenty-Two Million Two Hundred Fifty Thousand Dollars
($22,250,000.00) and (unless the Leroy Property becomes an Excluded Asset
as provided in Section 2.01(k), in which event no amount shall be paid to
JMJ) a promissory note bearing simple interest at the rate of 8% per annum
and secured by a lien on the Leroy Property shall be executed by Buyer in
favor
<PAGE> 2
of Seller in the amount of Four Hundred Thousand Dollars ($400,000.00) to
JMJ, respectively;"
3. Section 4 of the Agreement shall be and hereby is amended and
restated in its entirety to read as follows:
"4. ALLOCATION OF PURCHASE PRICE.
----------------------------
The Purchase Price shall be allocated between the Assets and the
non-competition provisions contained in the Non-Competition Agreement and
the Employment Agreements as follows:
Assets: $27,200,000.00
Leroy Property (unless an Excluded
Asset pursuant to Section 2.01(k)): 400,000.00
Non-competition provisions
contained in the Non-Competition
Agreements and the Employment
Agreements ($50,000 to each of the
five (5) Indemnitors): $ 250,000.00
The amount allocated to the Assets shall be further allocated among the
various categories and classifications of the Assets discussed in Section
2.01 above. On or before the Closing Date, Seller and Buyer shall agree
upon an allocation of the Purchase Price among the Assets in accordance
with Section 1060 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the related Treasury Regulations. If the parties cannot
agree, Buyer, at Buyer's sole expense, shall cause an independent
appraiser selected by Buyer, to prepare a schedule allocating the Purchase
Price among the Assets. The allocation set forth on such schedule shall
be reasonably satisfactory to Seller. Seller, Indemnitors, JMJ and Buyer
agree that after such allocation is agreed upon (i) Seller, Indemnitors,
JMJ and Buyer shall use such allocation for all purposes related to the
valuation of the Assets, including, without limitation, in connection with
any federal, state, county or local tax returns filed after such
allocation shall be agreed upon, and (ii) unless required to do so in
accordance with a "determination" as defined in Section 1313 (a) (1)
of the Code. Neither Seller, Indemnitors, JMJ nor Buyer shall take any
position in any tax return, tax proceedings tax audit or otherwise that is
inconsistent with such allocation."
4. Except as amended hereby, the Agreement is ratified and confirmed in
all respects.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date and year first above written.
"SELLER"
MACHINE TOOL AND GEAR, INC.,
a Michigan corporation
By: /s/ Jon C. LeBlanc
--------------------------------------
Jon C. LeBlanc
Its: President
"BUYER"
NEWCOR, INC., a Delaware corporation
By:
-----------------------------------
W. John Weinhardt
Its: President
"INDEMNITORS"
/s/ Jon C. LeBlanc
--------------------------------------
Name: Jon C. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
/s/ Daniel A. LeBlanc
--------------------------------------
Name: Daniel A. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
/s/ Thomas P. LeBlanc
--------------------------------------
Name: Thomas P. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date and year first above written.
"SELLER"
MACHINE TOOL AND GEAR, INC.,
a Michigan corporation
By:
-----------------------------------
Jon C. LeBlanc
Its: President
"BUYER"
NEWCOR, INC., a Delaware corporation
By: /s/ W. John Weinhardt
---------------------------------
W. John Weinhardt
Its: President
"INDEMNITORS"
--------------------------------------
Name: Jon C. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
--------------------------------------
Name: Daniel A. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
--------------------------------------
Name: Thomas P. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
-3-
<PAGE> 5
"INDEMNITORS" (continued from
previous page)
---------------------------------
Name: Joseph T. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
---------------------------------
Name: Patrick J. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
"JMJ"
JMJ and Company
---------------------------------
Name: Jon LeBlanc
Partner
-4-
<PAGE> 6
"INDEMNITORS" (continued from previous page)
/s/ Joseph T. LeBlanc
-----------------------------------
Name: Joseph T. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
/s/ Patrick J. LeBlanc
-----------------------------------
Name: Patrick J. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
"JMJ"
JMJ and Company
/s/ Jon LeBlanc
-----------------------------------
Name: Jon LeBlanc
Partner
-4-
<PAGE> 1
EXHIBIT 2.2
EXECUTION COPY
SECOND AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT (the "First
Amendment") is made and entered into as of the __th day of November 1997, by and
among MACHINE TOOL AND GEAR, INC., a Michigan corporation ("Seller"), JON C.
LEBLANC, DANIEL A. LEBLANC, THOMAS P. LEBLANC, JOSEPH T. LEBLANC, and PATRICK J.
LEBLANC ("Indemnitors"), JMJ AND COMPANY, a Michigan co-partnership ("JMJ"), and
NEWCOR, INC., a Delaware corporation ("Buyer").
RECITALS
Seller, Indemnitors, JMJ and Buyer entered into an Asset Purchase
Agreement dated as of October 1, 1997, as amended by that certain First
Amendment to Asset Purchase Agreement dated October 28, 1997 (the "Agreement"),
but subsequently have determined that certain amendments to the Agreement are
necessary and appropriate and therefore wish to amend the Agreement as set forth
herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements, representations and warranties hereinafter set forth, Buyer, Seller,
Indemnitors and JMJ agree as follow:
1. Subsection 3.02(d) of the Agreement shall be and hereby is amended
and restated in its entirety to read as follows:
"(d) On the Closing Date, a promissory note bearing simple
interest at the rate of 8% per annum and secured by a security interest
in the Assets (which shall expressly permit sales of Assets in the
ordinary course of business) shall be executed by Buyer in favor of
Seller in the amount of Twenty-One Million Eight Hundred Fifty Thousand
Dollars ($21,850,000.00) and (unless the Leroy Property becomes an
Excluded Asset as provided in Section 2.01(k), in which event no amount
shall be paid to JMJ) a promissory note bearing simple interest at the
rate of 8% per annum and secured by a lien on the Leroy Property shall
be executed by Buyer in favor of Seller in the amount of Four Hundred
Thousand Dollars ($400,000.00) to JMJ, respectively;"
2. Except as amended hereby, the Agreement is ratified and confirmed
in all respects.
(THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as of the date and year first above written.
"SELLER"
MACHINE TOOL AND GEAR, INC.,
a Michigan corporation
By:
---------------------------------
Jon C. LeBlanc
Its: President
"BUYER"
NEWCOR, INC., a Delaware corporation
By:
---------------------------------
W. John Weinhardt
Its: President
"INDEMNITORS"
-----------------------------------------
Name: Jon C. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
-----------------------------------------
Name: Daniel A. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
-----------------------------------------
Name: Thomas P. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
-2-
<PAGE> 3
"INDEMNITORS" (continued from
previous page)
-----------------------------------------
Name: Joseph T. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
-----------------------------------------
Name: Patrick J. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
"JMJ"
JMJ and Company
-----------------------------------------
Name: Jon LeBlanc
Partner
-3-
<PAGE> 1
EXHIBIT 2.3
EXECUTION COPY
THIRD AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS THIRD AMENDMENT TO ASSET PURCHASE AGREEMENT (the "First
Amendment") is made and entered into as of the 12th day of December 1997, by
and among MACHINE TOOL AND GEAR, INC., a Michigan corporation ("Seller"), JON C.
LEBLANC, DANIEL A. LEBLANC, THOMAS P. LEBLANC, JOSEPH T. LEBLANC, and PATRICK J.
LEBLANC ("Indemnitors"), JMJ AND COMPANY, a Michigan co-partnership ("JMJ"), and
NEWCOR, INC., a Delaware corporation ("Buyer").
RECITALS
A. Seller, Indemnitors, JMJ and Buyer entered into an Asset Purchase
Agreement dated as of October 1, 1997, as amended by a First Amendment to Asset
Purchase Agreement dated as of October ___, 1997, and amended by a Second
Amendment to Asset Purchase Agreement dated as of November ____, 1997 (the
"Agreement"), but subsequently have determined that certain amendments to the
Agreement are necessary and appropriate and therefore wish to amend the
Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements, representations and warranties hereinafter set forth, Buyer, Seller,
Indemnitors and JMJ agree as follow:
1. Section 3.01 of the Agreement shall be and hereby is amended and
restated in its entirety to read as follows:
"3.01. Purchase Price. The total consideration for the
purchased Assets and for the Seller's and Indemnitors' agreements
not to compete pursuant to the Non-Competition Agreement and the
Employment Agreements shall be Twenty-Seven Million Two Hundred Fifty
Thousand Dollars ($27,250,000.00), plus the Interim Interest (as
hereinafter defined), plus, if applicable, the Extension Fee (as
hereinafter defined), to be paid to Seller and (because the parties now
agree that the Leroy Property shall be an Excluded Asset as provided in
Section 2.01(k)), no amount shall be paid to JMJ (collectively, the
"Purchase Price"), subject to any adjustments made in connection with
the Plant Properties pursuant to Section 2.01(j)."
2. Subsection 3.02(a) of the Agreement shall be and hereby is amended
and restated in its entirety to read as follows:
"(a) (i) The sum of Two Million Five Hundred Thousand Dollars
($2,500,000.00) shall be paid by Buyer to Seller, by bank check or by
wire transfer, on October 20, 1997 or another mutually agreeable date,
provided that the Agreement has been fully executed by all of the
parties and Seller has delivered to Buyer consents to assignments of
certain leases from lessors, Cargill, Metropolitan Life and NBD (the
"Lease
<PAGE> 2
Assignment Consents"), and (ii) the sum of Two Hundred Fifty Thousand
Dollars ($250,000.00) shall be paid by Buyer to Seller, by bank check or by wire
transfer, on December 12, 1997;"
3. Subsection 3.02(b) of the Agreement shall be and hereby is amended
and restated in its entirety to read as follows:
"(b) Not later than the close of business on the Closing Date,
the sum of Two Million Six Hundred Thousand Dollars ($2,600,000.00)
shall be paid by Buyer to Seller, by bank check or by wire transfer;"
4. Subsection 3.02(d) of the Agreement shall be and hereby is amended
and restated in its entirety to read as follows:
"(d) On the Closing Date, (i) a sum equal to interest, accrued
on the principal sum of $19,850,000 at the rate of 8% per annum, from
December 12, 1997 until the Closing Date (the "Interim Interest"),
shall be paid by Buyer to Seller, by bank check or by wire transfer,
and (ii) a promissory note bearing simple interest at the rate of 8%
per annum in the form attached hereto as Exhibit A, and secured by a
security interest in the Assets (which shall expressly permit sales of
Assets in the ordinary course of business), shall be executed by Buyer
in favor of Seller in the amount of Twenty-One Million Six Hundred
Fifty Thousand Dollars ($21,650,000.00);"
5. The definition of the term "Holdback Amount" as set forth in
Subsection 3.02(f) of the Agreement shall be amended to the sum of One Million
Eight Hundred Thousand Dollars ($1,800,000.00).
6. Notwithstanding anything to the contrary contained in the Agreement,
(i) the so-called "Plant Property" located at 200 Second Street, Fenton,
Michigan, and (ii) the so-called "Leroy Property" located at 308 North Leroy,
Fenton, Michigan, shall be "Excluded Assets", which shall be retained by Seller
and JMJ, respectively, and excluded from the sale and transfer to Buyer, but
instead shall be leased by Seller and JMJ, as "Landlord", to Buyer, as "Tenant",
on the terms and conditions of the Lease Agreement in the form attached hereto
as Exhibit B. Furthermore, notwithstanding anything to the contrary contained in
the Agreement, although Buyer has agreed to accept transfer of title as of the
Closing to the so-called "Plant Properties" located at (a) 1065 Grant Street,
Fenton, Michigan, and (b) 1021 North Shiawassee, Corunna, Michigan, despite
Seller's failure to satisfy the conditions of Section 10.01 of the Agreement
with respect to said properties, Seller and Buyer agree that (i) following the
Closing and prior to the Financing Date, Seller shall satisfy the conditions of
Section 10.01 with respect to said properties, failing which, on the Financing
Date, Buyer, at its option, shall be entitled to transfer title by quit claim
deeds to said properties to Seller (in such case, Seller being responsible for
all transfer taxes, costs and expenses with respect
<PAGE> 3
to said transfer), Seller shall pay to buyer the net book value of said
properties as carried on Seller's Financial Statements as of September 30, 1997,
and Seller shall enter into lease agreements for said properties with Seller, as
"Landlord", and, Buyer, as "Tenant", substantially in the same form as the Lease
Agreement attached hereto as Exhibit B, except the term of said lease agreements
shall be ten (10) years, the monthly rental shall be amounts equal to 0.8333%
(or one-twelfth of one-tenth) of the respective net book value for each said
property as carried on Seller's Financial Statements as of September 30, 1997,
and the "Purchase Option Price" for each said property shall be the net book
value for each said property as carried on Seller's Financial Statements as of
September 30, 1997.
7. Section 4 of the Agreement shall be and hereby is amended and
restated in its entirety to read as follows:
"4. ALLOCATION OF PURCHASE PRICE.
The Purchase Price shall be allocated between the Assets and
the non-competition provisions contained in the Non-Competition
Agreement and the Employment Agreements as follows:
Assets: $27,000,000.00, plus
Interim Interest,
Non-competition provisions plus, if applicable,
contained in the Non-Competition the Extension Fee
Agreement and the Employment
Agreements ($50,000 to each of the
five (5) Indemnitors): $250,000.00
The amount allocated to the Assets shall be further allocated among
the various categories and classifications of the Assets discussed in
section 2.01 above. On or before the Closing Date, Seller and Buyer
shall agree upon an allocation of the Purchase Price among the Assets
in accordance with Section 1060 of the Internal Revenue Code of 1986,
as amended (the "Code"), and the related Treasury Regulations. If the
parties cannot agree, Buyer, at Buyer's sole expense, shall cause an
independent appraiser selected by Buyer, to prepare a schedule
allocating the Purchase Price among the Assets. The allocation set
forth on such schedule shall be reasonably satisfactory to Seller.
Seller, Indemnitors, JMJ and Buyer agree that after such allocation is
agreed upon (i) Seller, Indemnitors, JMJ and Buyer shall use such
allocation for all purposes related to the valuation of the Assets,
including, without limitation, in connection with any federal, state,
county or local tax returns filed after such allocation shall be
agreed upon, and (ii) unless required to do so in accordance with a
"determination" as defined in Section 1313 (a) (1) of the Code.
Neither Seller, Indemnitors, JMJ nor Buyer shall take any position in
any tax return, tax proceedings tax audit or otherwise that is
inconsistent with such allocation."
<PAGE> 4
8. The "Closing Date" for purposes of the Agreement shall be that date
determined by Buyer on or before December 24, 1997; provided, however, at
Buyer's option, with the payment of an additional Four Hundred Fifty Thousand
Dollars ($450,000.00) extension fee (the "Extension Fee") to Seller, by bank
check or wire transfer, Buyer shall be entitled to defer the Closing Date to a
date selected by Buyer on or before January 15, 1998.
9. Buyer hereby agrees to waive the requirements of Section 10.15 of
the Agreement, and Section 13.01 of the Agreement shall be amended to include
the following additional provision as subparagraph (g):
"(g) Failure to satisfy the conditions of Section 10.15 of the
Agreement, or otherwise comply with any laws or regulations governing
bulk transfers in connection with the sale and transfer of the Assets,
other than with respect to the Assumed Liabilities."
10. The dollar amounts referenced in Section 15.04(a) and 15.04(b)
shall be amended to the sum of Two Million Seven Hundred Fifty Thousand Dollars
($2,750,000.00), plus, if applicable, the Extension Fee if paid by Buyer to
Seller.
11. In consideration of the foregoing, Buyer agrees that it shall, and
does hereby, waive any right to assert a claim for indemnification or offset
against any of Buyer's obligations to Seller undertaken under or pursuant to
this Agreement based upon adverse financial performance of the Business to the
extent the same and the magnitude thereof was either (i) reported in Seller's
Financial Statements as of September 30, 1997, or other interim financial
statements of Seller delivered to Buyer prior to the Closing, or (ii) otherwise
disclosed by Seller and brought to the actual attention of the President or
Chief Financial Officer of Buyer prior to the Closing, including, without
limitation, operating losses in November and December 1997, and losses in early
1998.
12. Except as amended hereby, the Agreement is ratified and confirmed
in all respects.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment as of the date and year first above written.
"SELLER"
MACHINE TOOL AND GEAR, INC.,
a Michigan corporation
By: /s/ Jon C. LeBlanc
-----------------------------------
Jon C. LeBlanc
Its: President
"BUYER"
NEWCOR, INC., a Delaware corporation
By:
---------------------------------
W. John Weinhardt
Its: President
"INDEMNITORS"
/s/ Jon C. LeBlanc
--------------------------------------
Name: Jon C. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
/s/ Daniel A. LeBlanc
--------------------------------------
Name: Daniel A. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
/s/ Thomas P. LeBlanc
--------------------------------------
Name: Thomas P. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment as of the date and year first above written.
"SELLER"
MACHINE TOOL AND GEAR, INC.,
a Michigan corporation
By:
---------------------------------
Jon C. LeBlanc
Its: President
"BUYER"
NEWCOR, INC., a Delaware corporation
By: /s/ W. John Weinhardt
---------------------------------
W. John Weinhardt
Its: President
"INDEMNITORS"
--------------------------------------
Name: Jon C. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
--------------------------------------
Name: Daniel A. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
--------------------------------------
Name: Thomas P. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
<PAGE> 7
"INDEMNITORS" (continued from
previous page)
/s/ Joseph T. LeBlanc
--------------------------------------
Name: Joseph T. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
/s/ Patrick J. LeBlanc
--------------------------------------
Name: Patrick J. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
"JMJ"
JMJ and Company
/s/ Jon LeBlanc
--------------------------------------
Name: Jon LeBlanc
Partner
<PAGE> 8
EXHIBIT A
SECURED PROMISSORY NOTE
$21,650,000.00 Bloomfield Hills, Michigan
________________,19__
For Value Received, the undersigned, NEWCOR, INC., a Delaware
corporation ("Maker"), promises to pay to the order of NORTH LAKES
MANUFACTURING, INC. (formerly known as Machine Tool and Gear, Inc.), a Michigan
corporation ("Holder"), at the office of Holder at 1021 North Shiawassee,
Corunna, Michigan 48817, or at such other place as the holder of this Note may
from time to time designate in writing, in lawful money of the United States of
America, the principal sum of TWENTY ONE MILLION SIX HUNDRED FIFTY THOUSAND
DOLLARS ($21,650,000.00), plus accrued interest on the unpaid balance from the
date of this Note until paid at the rate of eight percent (8%) per annum, on or
before [May 24, 1998, or, if the Extension Fee has been paid, June 151 1998];
provided, a payment of principal of at least FIVE MILLION DOLLARS ($5,000,000.
00) shall be paid on or before April 15, 1998; and, provided further, Maker
shall extinguish payment of ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS
($1,800,000.00) of the principal balance evidenced by this Note upon payment
thereof to the escrow agent under that certain Holdback Escrow Agreement of even
date herewith between Maker, as the "Buyer", Payee, as the "Seller", and the
escrow agent. Interest shall be calculated for the actual number of days the
principal is outstanding on the basis of a 365-day year. All payments shall be
applied first to the payment of interest and then in reduction of the
outstanding principal balance; provided, a payment of principal of at least FIVE
MILLION DOLLARS ($5,000,000.00) shall be paid on or before April 15, 1998; and,
provided further, Maker shall extinguish payment of ONE MILLION EIGHT HUNDRED
THOUSAND DOLLARS ($1,800,000.00) of the principal balance evidenced by this Note
upon payment thereof to the escrow agent under that certain Holdback Escrow
Agreement of even date herewith between Maker, as the "Buyer", Payee, as the
"Seller", and the escrow agent.
In no contingency or event whatsoever shall the interest charged
hereunder, however such interest may be characterized or computed, exceed the
highest rate permissible under any law which a court or competent jurisdiction
shall, in a final determination, deem applicable hereto. In the event that such
a court determines that Holder has received interest hereunder in excess of the
highest rate applicable hereto, such amount shall be applied by Holder in
reduction of the principal sum.
This Note and other indebtedness and liabilities of Maker (or any of
them) to Holder is secured by that certain Security Agreement (Accounts, Chattel
Paper, Inventory and Equipment) of even date herewith (the "Security
Agreement"), and that certain Mortgage of even date herewith (the "Mortgage"),
and all of the terms, covenants, and conditions thereof and all other
instruments evidencing and/or securing the indebtedness evidenced by this Note
(collectively, the "Loan Documents"), and the Security Agreement,
<PAGE> 9
the Mortgage and all other Loan Documents are hereby made a part of this Note
and are deemed incorporated herein in full. The occurrence of an event of
default herein or in the Security Agreement, the Mortgage or any of the Loan
Documents shall entitle Holder to accelerate the entire indebtedness evidenced
by this Note and take such other action as may be provided for in the Loan
Documents and applicable law.
If this Note is signed by two or more parties (whether by all as makers
or by one or more as an accommodation party or otherwise), the obligations and
undertakings under this Note shall be that of all and any two or more jointly
and also of each severally. This Note shall bind Maker, and Maker's successors
and assigns, including, without limitation, a receiver, trustee or debtor in
possession of or for Maker.
Maker waives presentment, demand, protest, notice of dishonor, notice
of demand or intent to demand, notice of acceleration or intent to accelerate,
and all other notices and agrees that no extension or indulgence to Maker (or
any of them) or release, substitution or nonenforcement of any security, or
release or substitution of any Maker, any guarantor or any other party, whether
with or without notice, shall affect the obligations of any Maker.
NEWCOR, INC., a Delaware corporation
By:
--------------------------------
Name: W. John Weinhardt
Title: President
-2-
<PAGE> 10
EXHIBIT B
LEASE AGREEMENT
THIS LEASE AGREEMENT, made as of December, 1997, by and between
NORTH LAKES MANUFACTURING, INC. (formerly known as Machine Tool and Gear,
Inc.), a Michigan corporation, and JMJ AND COMPANY, a Michigan
co-partnership (hereinafter collectively referred to as "Landlord"), and
NEWCOR, INC., a Delaware corporation (hereinafter referred to as
"Tenant").
WHEREAS, simultaneously herewith, Landlord has sold and conveyed
certain assets of its business (the "Business") to Tenant under and
pursuant to the terms and conditions of a certain Asset Purchase
Agreement, as amended (the "Asset Purchase Agreement") and
WHEREAS, Tenant desires to accept a lease, and Landlord desires
to grant a lease, of the Leased Premises (hereafter defined) at which
Landlord currently conducts the Business.
NOW THEREFORE, intending to be legally bound, Landlord and Tenant
agree as follows:
ARTICLE 1
Definitions
Section 1.01 Certain Definitions. Landlord and Tenant agree that
the following capitalized terms when used herein shall, unless the context
otherwise requires, have the following meanings:
"Building" shall mean each of the commercial buildings located on
the Land, the current addresses of which are 308 North Leroy, and 200
Second Street, Fenton, Michigan.
"Commencement Date" shall mean the day the term of this Lease
begins as identified in Article 3 hereof.
"Expiration Date" shall mean the day the term of this Lease
expires as identified in Article 3 hereof.
"Land" shall mean the parcels of land described on Exhibit A
attached hereto, together with all appurtenances thereto and easements
benefitting such parcel.
"Leased Premises" shall mean the Building and the Land and all
improvements thereon.
"Monthly Rent" shall mean the sum of $3,333.33 per each calendar
month.
"Rent" shall mean the sums payable to Landlord under Section 4.01
hereof.
"Term" shall mean the period commencing on the Commencement Date
and expiring on the Expiration Date.
<PAGE> 11
ARTICLE 2
Leased Premises
Section 2.01 Demising Clause. Landlord hereby leases to Tenant and
Tenant hereby leases from Landlord the Leased Premises upon all of the terms,
covenants and conditions set forth herein.
Section 2.02 Representations of Landlord. Landlord represents to Tenant
that it is the lawful owner of and has fee simple title to the Land, Building
and Leased Premises and all fixtures, systems and improvements located therein
or thereon.
Section 2.03 Hazardous Substances.
(a) For the purposes of this Lease:
(i) "Hazardous Substance" means any waste,
pollutant, contaminants, hazardous or toxic substance, petroleum,
petroleum-based or petroleum-derived substance or waste, or
asbestos-containing material with respect to which liability or
standards of conduct are imposed or which are regulated, pursuant to
any Environmental Regulations.
(ii) "Environmental Regulation" means all federal,
state or local (including but not limited to, any governmental
department or agency or any other commission, board or agency or
instrumentality) statute, law, rule, regulation, permit, agreement,
ordinance, or judicial or administrative order relating to or
concerning the pollution or protection of the environment, human health
or safety, including without limitation, the Clean Air Act, the Clean
Water Act, the Solid Waste Disposal Act, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation,
and Liability Act of 1986, the Federal Insecticide, Fungicide and
Rodenticide Act, the Occupational Safety and Health Act, and the
Emergency Planning and Community Right-to-Know Act of 1986.
(c) Tenant shall not locate, store, produce, treat,
transport, discharge, handle or otherwise use any Hazardous Substance at, on, in
or under the Leased Premises, Land or Building, except as normally incident to
the conduct of the Business and at all times in compliance with all
Environmental Regulations.
(d) Tenant agrees to indemnify and hold Landlord harmless
from any and all claims, causes of actions, damages, penalties and out of pocket
costs (including reasonable attorneys' fees, consultant fees and related
expenses) which may be asserted against or incurred by Landlord resulting from
or allegedly resulting from the location, storage, production, treatment,
transportation, emission, spill, disposal, release or other handling of any
Hazardous Substance at, on, in or under the Leased Premises, Land or Building
after the date of this Agreement, caused
-2-
<PAGE> 12
by tenant, its successors or assigns thereafter or resulting from or due
to any violation of any environmental regulation by Tenant, its successors
or assigns during the Term of this Lease or during any holdover period.
Tenant's duty to indemnify and hold harmless includes, but is not limited
to, proceedings or actions commenced by any person against Landlord,
including without limitation any federal, state, or local governmental
agency or entity before any court or administrative agency.
(e) Landlord agrees to indemnify and hold Tenant
harmless from any and all claims, calls of action, damages, penalties and
out of pocket costs (including reasonable attorneys' fees, consultant fees
and related expenses) which may be asserted against or incurred by Tenant
resulting from or allegedly resulting from the location, storage,
production, treatment, transportation, emission, spill, disposal, release
or other handling of any Hazardous Substance at, on, in or under the
Leased Premises, Land or Building, whether existing at, or in or under
the Leased Premises, Land or Building on the date of this Agreement or
caused by Landlord, its successors or assigns thereafter or resulting from
or due to any violation or alleged violation of any Environmental
Regulation by Landlord, its successors or assigns. Landlord's duty to
indemnify and hold harmless includes, but is not limited to, proceedings
or actions commenced by any person against Tenant, including without
limitation any federal, state, or local governmental agency or entity
against Tenant before any court or administrative agency.
(f) The foregoing covenants and indemnifications shall
be deemed continuing covenants and indemnifications for the benefit of
Landlord and Tenant, as the case may be, and their successors and assigns,
and shall survive the expiration or termination of this Lease.
ARTICLE 3
Term of Lease
Section 3.01 Term. The Term of this Lease shall be for a period
commencing on the date hereof (the "Commencement Date"), and terminating
on December 31, 1998 (the "Expiration Date"), unless sooner terminated as
hereinafter provided.
ARTICLE 4
Rent; Other Tenant Costs
Section 4.01 Rent. Tenant shall pay to Landlord during the Term,
at the address set forth in Article 19, or at such other place as
Landlord may from time to time designate in writing, the Monthly Rent for
the Leased Premises, lawful money of the United States, payable in advance
on the first day of each month during the Initial Term.
-3-
<PAGE> 13
Section 4.02 Late Payment. All Rent payable hereunder by tenant
which is not paid within fifteen (15) days after the date due shall bear
interest from the date due to the date paid at the rate of eight percent
(8%) per annum or the highest rate permitted by law, whichever is less.
Section 4.03 Utilities; Taxes; Insurance. Tenant shall be
responsible for all utility costs and expenses, taxes and insurance
costs and expenses associated with the Leased Premises as provided
herein.
ARTICLE 5
Use
Section 5.01 Use. The Leased Premises may be used and occupied
by Tenant only for general office purposes and for the Business and
other uses which are directly related or incidental to the foregoing,
and for no other purpose.
ARTICLE 6
Surrender
Section 6.01 Time; Condition. Upon termination or lapse of this
Lease, Tenant shall immediately surrender possession of the Leased
Premises and all fixtures (except the fixtures specifically set forth in
Schedule 6.01 hereof, and any replacements or substitutions thereof) to
Landlord, in good order, condition and repair, reasonable wear and tear
and loss by casualty excepted, and except as set forth above, all
fixtures on the Leased Premises shall become the property of Landlord
without any obligation on the part of Landlord to compensate Tenant
therefor.
Section 6.02 Removal of Fixtures. Notwithstanding the preceding
paragraph hereof, if this Lease terminates by reason of the expiration
of its Term and if Tenant is not in default of its obligation to make
payment hereunder beyond any applicable grace period, Tenant may remove
any improvements, fixtures, equipment and other property constructed or
installed in or on the Leased Premises at Tenant's expense. All such
removal shall be made prior to the end of the Term and any damage
resulting from removal shall be repaired by Tenant.
ARTICLE 7
Insurance and Taxes
Section 7.01 Building Coverage. Tenant shall keep the Leased
Premises insured at all times during the Term of this Lease, in an
amount not less than $400,000.
Section 7.02 Tenant Coverage. Tenant, at Tenant's sole cost
and expense, shall keep Tenant's improvements, fixtures, equipment and
other property insured at all times during the Term
-4-
<PAGE> 14
of this Lease, in such amounts and coverage as Tenant shall determine, in
its sole discretion. Under no circumstances shall Landlord have any
liability or responsibility for insuring any of Tenant's improvements,
fixtures, equipment and other property.
Section 7.03 Waiver of Insurable Claims. Anything in this Lease to
the contrary notwithstanding, Landlord and Tenant each hereby waives and
releases any and all rights of recovery, claim, action or cause of action,
against the other, its agents or officers, directors, shareholders or
employees, for any loss or damage that may occur to the Leased Premises, or
any improvements thereto, or the Building, or any improvements thereto, or
any property of such party therein, by reason of fire, the elements or any
other cause which could be insured against under the terms of standard fire
and extended coverage insurance policies, regardless of cause or origin,
including negligence of the other party hereto, its agents, officers or
employees, and covenants so that no insurer shall hold any right of
subrogation against such other party. Each party shall cause each insurance
policy obtained by it to provide that the insurer waives all right of
recovery by way of subrogation against either party in connection with any
damage covered by such policy. The releases set forth in this Section shall
be effective whether or not the loss was actually covered by insurance.
Section 7.04 Tenant's Tax Obligation. Tenant agrees, from and af-
ter the date of commencement of the Term, to pay to the public authorities
charged with the collection thereof, promptly as the same become due and
payable, all taxes, general and special assessments and other public
charges thereafter levied or assessed against the Leased Premises and the
Building and any other buildings, structures or improvements now or
hereafter located thereon, or arising in respect of the occupancy, use or
possession of the Leased Premises and which are assessed and are to become
a lien during the continuance of this Lease, except to the extent any such
tax assessments or charges cover, or are measured or determined by, a
period of time following termination of this Lease. Tenant agrees to
provide to Landlord, on receipt of written request, copies of receipts
evidencing payment of all such taxes, assessments or public charges so
payable by Tenant. In no event shall Landlord be responsible for any
interest or penalties assessed as a result of Tenant's late payment of any
such taxes, assessments or public charges. All such taxes for the first and
last years of the Term hereof shall be prorated between the parties on a
due date basis of the appropriate taxing authority and the portion due from
one party to the other shall be paid within fifteen (15) days after the
Commencement Date and Expiration Date, whichever the case may be. Tenant
reserves the right to contest, in good faith, any tax assessment or public
charge levied against the Leased Premises, provided, Tenant holds the
Landlord harmless therefrom. In the event of any such contest initiated by
Tenant, Landlord agrees to cooperate with Tenant in connection with the
processing thereof and to sign all applications required therefor so long
as the foregoing is done at the sole cost of Tenant.
-5-
<PAGE> 15
Tenant shall not be obligated to pay any inheritance,
transfer, estate, succession or other similar tax or United States or the
State of Michigan or imposed by any political taxing subdivision thereof or by
any other governmental agency, by reason of the devolution, succession,
transfer, passing by inheritance, devise, acquisition or becoming effective as
to the right to possession and enjoyment of all or a part of the estate of
Landlord in the demised premises, by descent, deed, testamentary provision,
gift, mortgage or otherwise.
If Tenant shall default in payment of any taxes, assessments
or public charges above required to be paid by Tenant, Landlord shall have the
right to pay same, together with any penalties and interest, in which event
the amount so paid by Landlord shall be paid as additional Rent by Tenant, on
demand, in full, including any penalties and interest paid by Landlord.
In the event that Tenant shall be in default under its
obligations under this Section 7.04 Landlord shall have the right, at its sole
option, to require Tenant to pay to Landlord in twelve (12) monthly
installments on or before the first day of each calendar month, in advance, an
amount necessary for the payment, on an annual basis, of all the taxes and
assessments referred to in this Section levied or assessed for or during the
Term hereof. Landlord shall have the right to initially determine such monthly
installments and thereafter to revise same, from time to time, based upon the
actual tax bills and assessment bills. Failure of Tenant to pay any
installment of such taxes and assessments in the foregoing manner shall be
treated as a failure to pay Rent, entitling Landlord to exercise such rights
and remedies available to it in such instance.
ARTICLE 8
Indemnification
Section 8.01 Indemnification of Landlord. Tenant agrees to hold
harmless and indemnify Landlord and its officers, agents and employees
against all claims, demands, actions, liability, loss, damage, out of pocket
costs and expenses (including reasonable attorneys' fees) for injury, death,
disability or illness of any person, or damage to property, occurring in the
Leased Premises or arising out of the use, condition or occupancy of the
Leased Premises to the extent caused by the negligence of Tenant or any
subtenant, licensee or invitee of Tenant or any of its or their, agents,
contractors, employees, licensees or invitees, except to the extent caused by
the negligence or willful misconduct of Landlord or Landlord's employees,
agents, contractors, licensees, representatives or invitees.
Section 8.02 Indemnification of Tenant. Landlord agrees to hold
harmless and indemnify Tenant and its officers, agents and employees against
all claims, demands, actions, liability, loss, damage, out of pocket costs
and expenses (including reasonable attorneys' fees) for injury, death,
disability or illness of any
-6-
<PAGE> 16
person or damage to property, occurring on or about the Leased Premises,
only to the extent caused by the negligence of Landlord, or any of its
agents, contractors, employees, licensees or invitees.
ARTICLE 9
Repairs and Maintenance; Alterations
Section 9.01 Repair and Maintenance. Tenant at its cost and
expense shall maintain the roof, foundation and the structural soundness
of the exterior walls of the Building, the utility supply systems and the
air conditioning compressor, if any, and all other parts of the Leased
Premises, including, without limitation, the interior, non-structural
portions of the Leased Premises and the fixtures and equipment in the
Leased Premises, if any, in good condition and repair, reasonable wear and
tear excepted. Tenant shall provide at Tenant's sole cost and expense
building cleaning maintenance services, snow removal services and
landscaping services for the Leased Premises by firms of its choosing.
Section 9.02 Standards. The necessity for and adequacy of repairs
to the Leased Premises made or required to be made pursuant to Section 9.01
shall be measured by the standards prevailing from time to time for proper
and adequate maintenance of buildings of similar construction, class and
required standards of use in the vicinity in which the Leased Premises are
located.
Section 9.03 Alterations. Tenant may not make any change,
alteration, restoration or improvement (herein collectively referred to as
an "alteration") in or to the Leased Premises except at Tenant's sole cost
and expense, and (except in an emergency), without first, in each instance,
except in the instance of interior non-structural alterations costing
$250,000 or less, in the aggregate, obtaining the written consent of
Landlord, such consent not to be unreasonably withheld or delayed and shall
not be withheld or delayed in any case if such an alteration is in fact
required to effect compliance with any legal or governmental requirement
arising after the date hereof. Any and all alterations may be made only
subject to and in compliance with the following:
(a) Before the commencement of any alteration herein:
(1) Tenant shall, except in an emergency, give
fifteen (15) days' prior written notice thereof to
Landlord;
(2) Tenant shall, except in the case of an
interior non-structural alteration costing less than
$250,000, obtain Landlord's prior written approval of
plans and specifications prepared and approved in writing
by an architect or engineer selected by Tenant.
(b) No alteration shall be undertaken until Tenant
shall have procured so far as the same may be required from time
to
-7-
<PAGE> 17
time, all permits and authorizations of any federal, state or municipal
government or department, or subdivision of any of them, having or
asserting jurisdiction. Landlord shall join in the application for such
permits or authorizations and otherwise reasonably cooperate, if and to
the extent required, but at Tenant's sole cost and expense.
(c) Any alteration shall be made promptly and in a good and
workmanlike manner and in compliance with all applicable permits and
authorizations and building and zoning laws and with all other laws and
ordinances.
(d) The cost of any alteration shall be paid when due so that
the Leased Premises shall at all times be free of liens for labor and
materials supplied or claimed to have been supplied to the Leased
Premises and free from any encumbrances, chattel mortgages, conditional
bills of sale, or security interests.
(e) Tenant shall provide, at Tenant's sole cost and expense,
during any period of time when alterations are in progress, (1)
builder's risk insurance written on a so-called "completed value" form,
(ii) workman's compensation insurance covering all persons employed in
connection with the work and with respect to whom death or bodily
injury claims could be asserted against Landlord, Tenant or the Leased
Premises, and (iii) comprehensive general public liability insurance,
providing full coverage with respect to any accident, injury or
occurrence involving, relating to, or arising during or as a result of
such alteration, naming Landlord and the holder of any mortgage with
respect to the Leased Premises as additional insureds, with limits of
not less than those required for general liability insurance hereunder.
Tenant shall require that any contractor or subcontractor engaged with
respect to said alterations also maintain insurance in conformity with
the above requirements. Certificates evidencing the insurance required
above shall be provided Landlord at its request except in the case of
an interior non-structural alteration costing less than $250,000.
ARTICLE 10
Discharge of Liens
Section 10.01 No Liens. If any lien for work performed or materials
supplied at the request of Tenant is filed against the Land, Building or Leased
Premises or Landlord's or Tenant's interest therein, other than liens arising as
a result of acts of Landlord, Tenant shall cause same to be discharged of record
or bonded within sixty (60) days after notice of such filing. Tenant, at its
sole expense, shall defend the Leased Premises and Landlord against all suits
for the enforcement of any such lien or any bond in lieu of such lien, and
Tenant hereby indemnifies Landlord against any and all loss, cost, damage,
expense or liability resulting from any such lien or suit. Should Tenant fail to
so
-8-
<PAGE> 18
discharge any such lien, Landlord may do so by payment, bond or otherwise
on fifteen (15) days' written notice to Tenant, and the amount paid
therefor by Landlord shall be reimbursed to Landlord by Tenant forthwith
upon demand.
Section 10.02 Right to Contest. Tenant shall have the right to
contest any such mechanic's or other lien or claim filed against the Leased
Premises or any part thereof, if Tenant notifies Landlord in writing of its
intention so to do, diligently prosecutes any such contest, and pays or
otherwise satisfies any final, nonappealable judgment adjudicating or
enforcing such contested mechanic's or other lien and thereafter promptly
procures of record satisfaction and release of same.
ARTICLE 11
Compliance with Laws, Ordinances, Etc.
Section 11.01 Tenant's Compliance. Tenant shall, at Tenant's sole
cost and expense, promptly remove of record any and all violations noted or
filed against the Leased Premises arising out of or resulting from Tenant's
use and occupancy of the Leased Premises and shall promptly comply with all
laws, ordinances, orders, rules, regulations, requirements and directives
of all federal, state and municipal governments, departments, commissions,
boards and officers, and all orders, rules and regulations of the National
Board of Fire Underwriters, or any other authorities with jurisdiction,
which may be applicable to the Leased Premises, or to the use of the Leased
Premises.
ARTICLE 12
Damage or Destruction
Section 12.01 Damage or Destruction. If the Building or Leased
Premises are rendered partially or wholly untenantable by fire or other
casualty, and if the damaged property, in Landlord's reasonable estimation,
cannot be restored within ninety (90) days of the date of such damage, then
Landlord may, at its sole option, terminate this Lease as of the date of
such fire or other casualty. Landlord shall exercise its option provided
herein by written notice to Tenant within thirty (30) days of the date of
such fire or other casualty. If the Lease is not terminated as provided
above, Landlord shall, at its expense, restore the Leased Premises,
exclusive of any improvements or other changes made to the Leased Premises
by Tenant, to as near the condition which existed immediately prior to such
damage or destruction as reasonably possible, and Rent shall abate during
such period of time as the Building is untenantable in the proportion that
the untenantable portion of the Building bears to the tenantable portion of
the Leased Premises. In the event that Landlord shall fail to materially
restore the Leased Premises within ninety (90) days after the date of such
damage, Tenant may, at its option and as its sole remedy, terminate this
Lease by delivering written notice to Landlord, whereupon the Lease shall
terminate on the date provided
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<PAGE> 19
in such notice; provided, however, that if construction or repair is
delayed because of changes requested by Tenant, strikes, lockouts, acts of
God, war, material or labor shortages, governmental regulation or control
or other causes beyond the reasonable control of Landlord, the period for
restoration and repair shall be extended for the amount of time Landlord
is so delayed. Landlord shall not be responsible to Tenant for damage to,
or destruction of, any furniture, equipment, improvements or other changes
placed, installed or made by Tenant in, on or about the Leased Premises,
caused by fire or other casualty.
ARTICLE 13
Condemnation
Section 13.01 Total Taking. If the entire Building or Leased
Premises shall be condemned or taken through or under the power of eminent
domain, or if such a material portion of the Building or Leased Premises
is so taken that in the reasonable opinion of Landlord or Tenant the
restoration and continued use of the remaining portions of the Building or
Leased Premises for the uses thereof at the time of such partial taking is
economically unfeasible, this Lease and the Term hereof shall cease and
terminate upon the date of the vesting of title in the condemning
authority, and all Rent hereunder shall be apportioned to such date of
termination.
Section 13.02 Partial Taking. If less than such a material
portion of the Leased Premises shall be taken or condemned, as aforesaid,
this Lease shall continue and shall remain in full force and effect;
provided, however, that the Rent hereunder shall thereafter be
appropriately reduced in proportion to that portion of the Leased Premises
so taken. Such reduction in Rent shall become effective as of the date of
vesting of title in the condemning authority. In the event of such a
partial condemnation, Landlord shall promptly make, or cause to be made,
all demolition, repairs, reconstruction, restoration, replacement or
rebuilding and all other work necessary, as nearly as may be practicable,
to restore the Leased Premises to the value, rentability, utility and
condition immediately prior to such taking, exclusive of any improvements
or other changes made to the Leased Premises by Tenant.
ARTICLE 14
Assignment and Subletting
Section 14.01 Assignment By Tenant. Tenant agrees not to sell,
assign, mortgage, pledge or in any manner transfer this Lease to any
estate or interest thereunder and not to sublet the Leased Premises or any
part or parts thereof without the prior written consent of Landlord in
each instance. The preceding sentence notwithstanding, Tenant may assign
the Lease or sublet the Leased Premises or portion thereof to an affiliate
of Tenant. For purposes hereof "affiliate" shall mean any corporation or
other
-10-
<PAGE> 20
entity controlled by, under common control with, or controlling Tenant. If
Landlord shall consent to any assignment, sublease or other transfer of Tenant's
interest hereunder, no such consent shall be deemed a release of Tenant, who
shall continue to be primarily liable for payment and performance of all
obligations hereunder with such assigned sublessee or other transferee. Consent
by Landlord to one assignment of this Lease or to one subletting shall not be a
waiver of Landlord's rights under this Article as to any subsequent assignment
or subletting.
Section 14.02 Assignment by Landlord. If Landlord shall convey or
otherwise dispose of its title, interest or estate, or shall assign Landlord's
interest in this Lease to any party, then such successor to Landlord's interest
shall recognize and attorn in writing to Tenant, as tenant hereunder.
ARTICLE 15
Defaults
Section 15.01 Events of Default. There shall be an "event of default"
hereunder and Landlord may terminate this Lease upon thirty (30) days' written
notice to Tenant:
(a) If Tenant shall be in default in the performance of any
of the terms, covenants, conditions and provisions of this Lease on
Tenant's part to be performed (other than the covenants for the payment
of Rent) and such default is not cured within thirty (30) days after
written notice thereof is received by Tenant; or if such default shall
be of such nature that it cannot be cured completely within said thirty
(30) day period, if Tenant shall not have promptly commenced curing
such default within such period and shall not thereafter proceed with
reasonable diligence to remedy such default; or
(b) If Tenant shall be in default in the payment of Rent and
such default is not cured within fifteen (15) days after the date
such payment is due; or
(c) If Tenant shall be adjudicated a bankrupt, shall make a
general assignment for the benefit of its creditors, or invoke the
benefit of any insolvency act, or if a permanent receiver or trustee in
bankruptcy shall be appointed for Tenant's property and such
appointment is not vacated or bonded within sixty (60) days.
Section 15.02 Termination. If Landlord shall give the thirty (30) days'
notice of termination provided in Section 15.01, then, upon the expiration of
such thirty (30) day period, this Lease shall terminate as completely as if the
date specified in such notice were the date herein fixed for the expiration of
the Term of this Lease by lapse of time, and Tenant shall then quit and
surrender the Leased Premises to Landlord.
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<PAGE> 21
Section 15.03 Remedies. Notwithstanding such termination as provided
in Section 15.02, in the event Landlord shall dispossess Tenant by summary
proceedings, or by any other lawful means, the obligations of Tenant shall
survive and Tenant shall remain liable for all of its obligations hereunder
for the balance of the unexpired Term of this Lease; and Landlord shall make
reasonable efforts to sell or to re-let the Leased Premises, or any part or
parts thereof, either in the name of Landlord, or otherwise, as agent for
Tenant, on such terms and conditions and for such duration as are
commercially reasonable under the circumstances; and Tenant shall pay to the
Landlord, as liquidated and agreed current damages for the failure of Tenant
to observe and perform this Lease, and Tenant's undertakings and obligations
hereunder, any deficiency between the Rent hereby reserved and/or covenanted
to be paid, including all other charges required to be paid by Tenant
hereunder, and the net amounts, if any, of the rents collected on account of
such relettings of the Leased Premises for each month of the period which
would -otherwise have constituted the unexpired Term of this Lease, if this
Lease had remained in effect. In computing such current damages there shall
be added to the said deficiency all out-of-pocket costs and expenses as
Landlord incurs in connection with re-letting, such as reasonable attorneys'
and accountants' fees and reasonable disbursements, reasonable brokerage
commissions, reasonable advertising expenses, and the out-of-pocket cost to
keep and maintain the Leased Premises in good order and repair.
Section 15.04 No Release. Landlord, in putting the Leased Premises
in good order or preparing the same for re-rental may, at Landlord's option,
make reasonable alterations, repairs, replacements, and/or decorations in the
Leased Premises for the purpose of re-letting the Leased Premises, and the
making of such alterations, repairs, replacements and/or decorations shall
not operate or be construed to release Tenant from liability hereunder as
aforesaid. In no event shall Tenant be entitled to receive any excess, if
any, of the total rental collected over the sums otherwise payable by Tenant
to Landlord hereunder.
Section 15.05 Waiver. Landlord and Tenant, so far as permitted by
law, hereby waive and will waive any and all right to a trial by jury in the
event that summary dispossess proceedings shall be instituted by Landlord,
and in any action, proceeding or counterclaim brought by either Landlord or
Tenant against the other, on any matters whatsoever arising out of, or in any
way connected with this Lease, including, but not limited to, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Leased
Premises, or any claim of injury or damage.
Section 15.06 No Waiver. The remedies of Landlord and Tenant
provided this Lease are cumulative and shall not exclude any other remedies
to which either may be lawfully entitled. The failure of either party to
insist upon strict performance by the other of any term, covenant or
condition herein contained shall not be a waiver of such term, covenant or
condition by the non-objecting party for the future. No waiver or change of
any provision of this Lease
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<PAGE> 22
shall be effective unless contained in a written instrument signed by both
Landlord and Tenant.
ARTICLE 16
Subordination
Section 16.01 Lease Subordination. This Lease shall be and it hereby is
made, and shall at all times be, subject and subordinate to the lien of any and
all duly recorded mortgages at any time granted by Landlord, whether heretofore
or hereafter made, affecting or encumbering the Leased Premises, or premises of
which the Leased Premises shall be a part, and to all extensions, renewals,
modifications or replacements thereof; provided, however, that so long as the
Purchase Option provided in Article 20 shall remain in effect, Landlord shall
not grant any mortgage or mortgages at any time or times encumbering the Leased
Premises securing costs and indebtedness in an aggregate amount in excess of the
Purchase Option Price; and provided, further, the foregoing subordination shall
be expressly conditioned on each mortgagee agreeing not to disturb Tenant's
rights of possession, use and occupancy and Purchase Option under this Lease
except on default by Tenant which shall remain uncured after notice and
expiration of any applicable grace period.
Section 16.02 Attornment. The subordination of this Lease and Tenant's
rights hereunder, as provided in Section 16.01, shall be effective without the
execution of any further or other instruments by Tenant, but Tenant shall, at
Landlord's request, and without charges therefor to Landlord, execute and
deliver any further document or instrument to evidence the subordination of this
Lease to such mortgages, subject to the mortgagee's agreement not to disturb
Tenant, as shall comply with the provisions of Section 16.01; and, to the extent
requested by the holder of any such mortgage, Tenant shall execute and deliver
such instruments and documents as shall confirm Tenant's undertaking and
agreement hereunder to attorn under the terms and provisions of this Lease, to
such a mortgagee, or to the purchaser of the mortgaged premises at a foreclosure
sale, or at a sale of the Leased Premises pursuant to such power of sale as may
be contained in such a mortgage, and to recognize such mortgagee, or such
purchaser, as the Landlord hereunder from and after the date of such a transfer
of title, with the same force and effect as if the Leased Premises had been sold
or conveyed to such new landlord by the Landlord hereunder.
ARTICLE 17
Entry by Landlord; Performance of Covenants
Section 17.01 Entry. Tenant shall permit Landlord or its agents to
enter the Leased Premises during normal business hours upon 48 hours prior
written notice (and at any time and without notice in cases of emergency) (i)
for the purpose of inspection thereof, (ii) for showing the Leased Premises to
persons wishing to purchase the same, or in connection with mortgage or other
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<PAGE> 23
financing, and (iii) at any time within three (3) months prior to the
expiration of the term for or exhibition to persons wishing to lease
the same; and Tenant shall, within three (3) months prior to
expiration of the initial term or any extension term, permit the
usual "to let," "for rent" and "for sale" notices to be placed on
the Leased Premises and to remain thereon without hindrance or
molestation, provided said notices are reasonable in size and
appearance. Tenant shall have the right to designate in good faith
"sensitive" or "secure" areas which, except as may reasonably be
required in the case of an emergency, may be entered by Landlord
only in the company of a representative of Tenant and in accordance
with other reasonable security precautions which Tenant may in good
faith require; provided, however, that this provision shall not be
construed to in any manner impair or limit Landlord's exercise of
its remedies under this Lease.
Section 17.02 Cure of Covenants. If Tenant shall be in
default hereunder, Landlord may, with or without declaring an "event
of default," upon ten (10) days' prior notice to Tenant, or without
notice in case of an emergency, cure such default on behalf of Tenant
(unless Tenant shall itself, within such period, commence and
thereafter diligently proceed to cure such default), and for the
purpose thereof may enter upon the Leased Premises and upon demand
Tenant shall reimburse Landlord for any reasonable and necessary
out-of-pocket expenses incurred to effect such cure.
ARTICLE 18
Certificates
Section 18.01 Estoppel Certificates. Landlord and Tenant each
agrees, at any time, and from time to time, upon not less than ten
(10) days' prior written notice to the other, to execute, acknowledge
and deliver to the other, or to any mortgagee, or to any prospective
purchaser, of the Leased Premises, a statement or certificate in
writing setting forth the Rent and other charges then payable, and
specifying each element thereof, and certifying that this Lease is
unmodified and in full force and effect (or if there have been
modifications, that this Lease is in full force and effect as
modified, and setting forth the modifications), and the dates to which
the Rent and other charges payable hereunder have been paid, and
stating (to the extent known to the party so certifying) whether or
not the other party is in default in keeping, observing or performing
any of the terms contained in this Lease and, if in default,
specifying each such default (limited, as regards the other party's
defaults, to those defaults of which the party so certifying has
actual knowledge).
ARTICLE 19
Notices
Section 19.01 Notices. All notices, demands, consents, or
requests under this Lease must be in writing and shall be personally
delivered or sent postage prepaid by registered or
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<PAGE> 24
certified mail or reputable overnight courier, addressed, if the party for
whom intended is the Landlord, to North Lakes Manufacturing, Inc., 1021 North
Shiawassee, Corunna, Michigan 48817, and if such party is the Tenant, to
Tenant, at the Leased Premises (with a copy to Newcor, Inc., 1825 S. Woodward
Ave., Bloomfield Hills, Michigan 48302), or to such other address as either
party may by like notice designate. Notices, demands, consents or requests
served or given as aforesaid shall be deemed sufficiently served or given for
all purposes hereunder when personally delivered or on the day on which such
notice is deposited in the registered or certified mail or with such
overnight courier. Either party shall have the right to change the address to
which notices shall thereafter be sent by giving notice to the other party as
aforesaid.
ARTICLE 20
Option To Purchase
Section 20.1 Option. During the Term of this Lease (the "Option
Period") , subject to (a) Tenant not being in default under the Lease, and
(b) Tenant having paid in full all principal, accrued interest and other
sums owing from Tenant to Landlord as evidenced by that certain Secured
Promissory Note of even date herewith, made by Tenant and payable to the
order of Landlord in the original principal sum of $21,650,000, Tenant shall
have an option to purchase the Leased Premises (the "Purchase Option") ,
subject to applicable building codes, restrictions of record and other
exceptions to title not materially adversely affecting marketability, use or
enjoyment of the Leased Premises, from Landlord for $400,000 (the "Purchase
Option Price") . In order to exercise the Purchase Option, Tenant must
notify Landlord within the Option Period, in writing, of Tenant's desire to
exercise the Purchase Option. In the event Tenant exercises Tenant's
Purchase Option, Landlord shall transfer title by standard form of corporate
warranty deed subject to matters as aforesaid and shall pay normal costs
customarily paid by sellers of real property, including title commitment and
insurance fees for an owner's policy in favor of Tenant, and transfer taxes.
Section 20.2 Expiration. In the event that during the Option Period
Tenant does not notify Landlord, in writing, of Tenant's desire to exercise
the Purchase Option, the Purchase Option shall expire, become void and be of
no further force or effect.
ARTICLE 21
Miscellaneous
Section 21.01 Quiet Possession. Landlord covenants that Tenant shall
peaceably and quietly enjoy the Leased Premises for as long as Tenant
performs and observes its obligations hereunder.
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<PAGE> 25
Section 21.02 Holding Over by Tenant. In the event of holding over
by Tenant after expiration or termination of this Lease, and any extension
for or renewal thereof, without the written consent of Landlord, Tenant
shall pay as liquidated damages one hundred fifty percent (150%) of the
Rent then applicable to the space then being occupied by Tenant for the
entire holdover period. No holding over by Tenant after the Term of this
Lease shall operate to extend the Lease; in the event of any unauthorized
holding over, Tenant shall indemnify Landlord against all claims for
damages by any other lessee to whom Landlord may have leased all or any
part of the Leased Premises effective upon the termination of this Lease.
Any holding over with the consent of Landlord in writing shall thereafter
constitute this Lease a lease from month to month.
Section 21.03 Run With Leased Premises. The terms, covenants,
conditions and agreements herein contained shall run with the Leased
Premises and shall bind and inure to the benefit of the parties hereto and
their respective representatives, successors and assigns; it being
understood, however, that neither the provisions of this Section 21.03, nor
any other provision in this Lease contained, shall be deemed to authorize
the assignment of this Lease without the prior written consent of Landlord,
as herein required. Upon request of either party, a memorandum of lease
will be executed suitable for recording.
Section 21.04 Captions. The captions of this Lease are for
convenience and ease of reference only, and in no way define, limit or
describe the scope or intent of this Lease, nor anyway affect this Lease,
and shall be disregarded in the interpretation hereof.
Section 21.05 Severable. If any provisions of this Lease shall be
declared invalid or unenforceable, the remainder hereof shall remain
unaffected thereby and shall continue in full force and effect.
Section 21.06 Consents and Approvals. Except as otherwise
expressly provided in this Lease, whenever the consent or approval is
required under this Lease from either party, that party agrees not to
unreasonably or arbitrarily withhold or delay such consent or approval.
Section 21.07 Entire Agreement. This Lease contains the entire and
only agreement between the parties hereto; and no oral statements,
agreements or representations not embodied in this instrument shall have
any force or effect. This Lease shall not be modified or amended in any
manner except in writing, by instrument executed by both parties.
Section 21.08 Interpretation of Terms. All personal pronouns used
in this Lease shall include the other genders whether used in the masculine
or feminine or neuter gender, and the singular shall include the plural
whenever and as often as may be appropriate.
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<PAGE> 26
Section 21.09 No Partnership. This Lease does not create the
relationship of principal and agent or of partnership or of joint venture or of
any association between Landlord and Tenant, the sole relationship between the
parties being that of Landlord and Tenant. The laws of the State of Michigan
shall govern the validity, performance and enforcement of this Lease.
Section 21.10 Brokers. Landlord and Tenant each represents and warrants
to the other that no realtors, brokers or agents were involved in the
negotiation and execution of this Lease. Tenant hereby indemnifies Landlord and
agrees to hold Landlord harmless from and against the claim of any realtor,
broker or agent with whom Tenant may have dealt with regard to this Lease, or
the Leased Premises. Landlord hereby indemnifies Tenant and agrees to hold
Tenant harmless from and against the claims of any realtor, broker or agent with
whom Landlord may have dealt with regard to this Lease.
Section 21.11 Signs. Tenant shall not place or maintain any exterior
sign or advertisement on the Leased Premises without first obtaining the written
approval of Landlord, which shall not be unreasonably withheld or delayed. Any
such signage shall be at the sole expense of the Tenant and shall comply with
all applicable laws, codes and ordinances, including, without limitation,
municipal zoning regulations. Tenant shall remove all Tenant signs at the
expiration or termination of this Lease and shall restore the affected area to
its original condition normal wear and tear excepted.
IN WITNESS WHEREOF, Landlord and Tenant have each duly executed this
instrument as of the date and year first above written.
LANDLORD:
NORTH LAKES MANUFACTURING, INC., a
Michigan corporation
By:
-------------------------------
Its:
---------------------------
TENANT:
NEWCOR, INC., a Delaware corporation
By:
-------------------------------
Its:
---------------------------
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<PAGE> 27
EXHIBIT A
Legal Description of Land
<PAGE> 28
SCHEDULE 6.01
Fixtures
Any and all "Assets" (as defined in the Asset Purchase Agreement, as
amended, between Newcor, Inc., a Delaware corporation, as Buyer, and North
Lakes Manufacturing, Inc. (formerly known as Machine Tool and Gear, Inc.), a
Michigan corporation, as Seller).
<PAGE> 29
<TABLE>
<S> <C> 23504
REFERENCE NO. DESCRIPTION INVOICE DATE INVOICE AMOUNT DISCOUNT TAKEN AMOUNT PAID
- ------------------------------------------------------------------------------------------------------------------------------
Deposit on Machine Tool & 250,000.00
Gear acquisition
CHECK DATE CHECK NO. PAYEE DISCOUNTS TAKEN CHECK AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------
12/12/97 23504 Machine Tool & Gear, Inc. $250,000.00
==================================================================================================================================
NEWCOR, INC. 23504
CORP. OFFICE ACCOUNT COMERICA BANK
1825 S. WOODWARD, STE. 240 DETROIT, MI
BLOOMFIELD HILLS, MI 48302 9-33/720 259
23504 Dec 12, 1997 ****$250,000.00
CHECK NO. DATE AMOUNT
Memo:
Two Hundred Fifty Thousand and 0/100 Dollars
PAY
TO THE
ORDER Machine Tool & Gear, Inc.
OF: 1021 N. Shiawassee
Corunna,, MI 48817 /s/ John Garber
Authorized Signature
==================================================================================================================================
[SECURITY FEATURES INCLUDED. DETAILS ON BACK.]
023504 072000339 1076004694
</TABLE>
<PAGE> 1
EXHIBIT 2.4
EXECUTION COPY
FOURTH AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS FOURTH AMENDMENT TO ASSET PURCHASE AGREEMENT (the "Amendment") is
made and entered into as of the 23rd day of December, 1997, by and among
MACHINE TOOL AND GEAR, INC., a Michigan corporation ("Seller"), JON C. LEBLANC,
DANIEL A. LEBLANC, THOMAS P. LEBLANC, JOSEPH T. LEBLANC, and PATRICK J.
LEBLANC ("Indemnitors"), JMJ AND COMPANY, a Michigan co-partnership ("JMJ"),
and NEWCOR, INC., a Delaware corporation ("Buyer").
RECITALS
A. Seller, Indemnitors, JMJ and Buyer entered into an Asset Purchase
Agreement dated as of October 1, 1997, as amended by a First Amendment to Asset
Purchase Agreement dated as of October __, 1997, and amended by a Second
Amendment to Asset Purchase Agreement dated as of November __, 1997, and
amended by a Third Amendment to Asset Purchase Agreement dated as of December
12, 1997 (the "Agreement"), but subsequently have determined that certain
amendments to the Agreement are necessary and appropriate and therefore wish to
amend the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements,
representations and warranties hereinafter set forth, Buyer, Seller,
Indemnitors and JMJ agree as follow:
1. As provided by the Agreement, one of the "Excluded Assets" is a
receivable owing to Seller from one or more of the Indemnitors, as may be
evidenced by a note or notes (the "Excluded Receivable"). It is hereby
acknowledged and agreed between Seller, Indemnitors and Buyer that is the
express intent and agreement of all parties that said Excluded Receivable
excluded from the sale and transfer of Assets (as defined in the Agreement)
under the Agreement be limited in an aggregate amount on the Closing Date (as
defined in the Agreement) to a sum not exceeding the balance outstanding as
shown on Seller's financial statements as of September 30, 1997 (i.e., the sum
of $563,864.69); that (a) to the extent the aggregate Excluded Receivable
obligation owing to Seller from one or more of the Indemnitors, individually or
in any combination, exceeds $563,864.69 on the Closing Date, and (b) to the
extent there have been distributions contrary to Section 8.01(g) since
September 30, 1997, the total amount of such excess under clause (a), and
distributions under clause (b), shall be due and owing to Buyer, and Buyer
shall offset said amount due and owing to Buyer, together with the amount of
state and county transfer taxes payable in respect of real estate transferred
from Seller to Buyer and premiums for title insurance policies for said
properties, against any cash or note payment owing from Buyer to Seller and/or
any one or more of the Indemnitors.
2. As provided in Section 6 of the Third Amendment to Asset Purchase
Agreement dated as of December 12, 1997, Seller has agreed
<PAGE> 2
to satisfy the conditions of Section 10.01 of the Agreement with respect to
those two (2) Plant Properties (as defined in the Agreement) located at (a)
1065 Grant Street, Fenton, Michigan, and (b) 1021 North Shiawassee, Corunna,
Michigan, prior to the Financing Date (as defined in the Agreement). Without
limiting Seller's and/or Indemnitors' obligations or Buyer's rights thereunder,
Seller, Indemnitors and Buyer further agree that AKT Environmental Consultants,
Inc. shall be engaged, at Seller's and Indemnitors' sole cost and expense, but
according to Buyer's direction and control, to complete all "Phase I" type
work, "Phase II" type work and all other work necessary or advisable, in the
opinion of Buyer, to prepare, file with and have approved by the appropriate
state and/or federal governmental agencies and authorities having oversight of
environmental matters concerning said Plant Properties located at (a) 1065
Grant Street, Fenton, Michigan, and (b) 1021 North Shiawassee, Corunna,
Michigan, as well as the "Leroy Property" (as defined in the Agreement), on
terms and conditions satisfactory to Buyer, baseline environmental assessments
for each of said properties as promptly as possible and, in any case, no later
than forty-five (45) days from the Closing Date. Buyer shall cooperate with
Seller in any such filings, including, if required by statute or regulation,
being a signatory to such filings. If such government agencies, pursuant to
statutory or regulatory authority, require supplemental work to such work, then
AKT Environmental Consultants, Inc. shall prepare and file such supplemental
work as promptly as possible. All out-of-pocket costs and expenses, arising
from or out of any said work or activity, shall be paid, (a) if billed or paid
prior to Closing Date, solely by Indemnitors, or (b) if billed or paid after
the Closing Date, by Seller and/or Indemnitors, and Seller and the Indemnitors'
obligation in said respect shall be subject to claims for indemnification
against the Holdback Amount or any other sum available under the Escrow
Agreement; and, if said obligation is not promptly paid, Buyer may offset said
obligation against any cash or note payment owing from Buyer to Seller and/or
any one or more of the Indemnitors.
3. Except as amended hereby, the Agreement is ratified and confirmed in
all respects.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment as of the date and year first above written.
"SELLER"
MACHINE TOOL AND GEAR, INC.,
a Michigan corporation
By: /s/ Jon C. LeBlanc
-----------------------------
Jon C. LeBlanc
Its: President
"BUYER"
NEWCOR, INC., a Delaware corporation
By: /s/ W. John Weinhardt
----------------------------
W. John Weinhardt
Its: President
"INDEMNITORS"
/s/ Jon C. LeBlanc
----------------------------------
Name: Jon C. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
/s/ Daniel A. LeBlanc
----------------------------------
Name: Daniel A. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
/s/ Thomas P. LeBlanc
----------------------------------
Name: Thomas P. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
<PAGE> 4
"INDEMNITORS" (continued from previous page)
/s/ Joseph T. LeBlanc
-----------------------------------
Name: Joseph T. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
/s/ Patrick J. LeBlanc
-----------------------------------
Name: Patrick J. LeBlanc
Address: c/o North Lakes
Manufacturing, Inc.
1021 North Shiawassee
Corunna, Michigan 48817
"JMJ"
JMJ and Company
/s/ Jon LeBlanc
-----------------------------------
Name: Jon LeBlanc
Partner
<PAGE> 1
EXHIBIT 4
SECURED PROMISSORY NOTE
$21,650,000.00 Bloomfield Hills, Michigan
December 23, 1997
For Value Received, the undersigned, NEWCOR, INC., a Delaware corporation
("Maker") , promises to pay to the order of NORTH LAKES MANUFACTURING, INC.
(formerly known as Machine Tool and Gear, Inc.), a Michigan corporation
("Holder"), at the office of Holder at 1021 North Shiawassee, Corunna, Michigan
48817, or at such other place as the holder of this Note may from time to time
designate in writing, in lawful money of the United States of America, the
principal sum of TWENTY ONE MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS
($21,650,000.00), plus accrued interest on the unpaid balance from the date of
this Note until paid at the rate of eight percent (8%) per annum, on or before
May 23, 1998, but not later than the "Financing Date" (as defined in the Asset
Purchase Agreement dated as of October 1, 1997, as amended, pursuant to which
this Note is made; provided, a payment of principal of at least FIVE MILLION
DOLLARS ($5,000,000.00) shall be paid on or before April 15, 1998; and,
provided further, Maker shall extinguish payment of ONE MILLION EIGHT HUNDRED
THOUSAND DOLLARS ($1,800,000.00) of the principal balance evidenced by this
Note upon payment thereof to the escrow agent under that certain Holdback
Escrow Agreement of even date herewith between Maker, as the "Buyer", Payee, as
the "Seller", and the escrow agent; and, provided, further, that this Note is
made pursuant to an Asset Purchase Agreement dated as of October 1, 1997, as
amended, pursuant to which Maker has certain rights of offset as more
particularly provided therein. Interest shall be calculated for the actual
number of days the principal is outstanding on the basis of a 365-day year. All
payments shall be applied first to the payment of interest and then in
reduction of the outstanding principal balance; provided, a payment of
principal of at least FIVE MILLION DOLLARS ($5,000,000.00) shall be paid on or
before April 15, 1998; and, provided further, Maker shall extinguish payment of
ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS ($1,800,000.00) of the principal
balance evidenced by this Note upon payment thereof to the escrow agent under
that certain Holdback Escrow Agreement of even date herewith between Maker, as
the "Buyer", Payee, as the "Seller", and the escrow agent.
In no contingency or event whatsoever shall the interest charged
hereunder, however such interest may be characterized or computed, exceed the
highest rate permissible under any law which a court or competent jurisdiction
shall, in a final determination, deem applicable hereto. In the event that such
a court determines that Holder has received interest hereunder in excess of the
highest rate applicable hereto, such amount shall be applied by Holder in
reduction of the principal sum.
This Note and other indebtedness and liabilities of Maker (or any of them)
to Holder is secured by that certain Security
<PAGE> 2
Agreement (Accounts, Chattel Paper, Inventory and Equipment) of even date
herewith (the "Security Agreement") , and that certain Mortgage of even date
herewith (the "Mortgage") , and all of the terms, covenants, and conditions
thereof and all other instruments evidencing and/or securing the indebtedness
evidenced by this Note (collectively, the "Loan Documents"), and the Security
Agreement, the Mortgage and all other Loan Documents are hereby made a part of
this Note and are deemed incorporated herein in full. The occurrence of an
event of default herein or in the Security Agreement, the Mortgage or any of
the Loan Documents shall entitle Holder to accelerate the entire indebtedness
evidenced by this Note and take such other action as may be provided for in
the Loan Documents and applicable law.
If this Note is signed by two or more parties (whether by all as makers or
by one or more as an accommodation party or otherwise), the obligations and
undertakings under this Note shall be that of all and any two or more jointly
and also of each severally. This Note shall bind Maker, and Maker's successors
and assigns, including, without limitation, a receiver, trustee or debtor in
possession of or for Maker.
Maker waives presentment, demand, protest, notice of dishonor, notice of
demand or intent to demand, notice of acceleration or intent to accelerate, and
all other notices and agrees that no extension or indulgence to Maker (or any
of them) or release, substitution or nonenforcement of any security, or release
or substitution of any Maker, any guarantor or any other party, whether with or
without notice, shall affect the obligations of any Maker.
NEWCOR, INC., a Delaware corporation
By: /s/ W. John Weinhardt
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Name: W. John Weinhardt
Title: President
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