SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 23, 1997
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Newcor, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-5985 38-0865770
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State or other (Commission (IRS Employer
jurisdiction) File Number) Identification No.)
1825 S. Woodward Avenue, Suite 240, Bloomfield Hills, MI 48302
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (248) 253-2400
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(Former name or former address, if changed since last report)
Item 2 Acquisition or Disposition of Assets
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On December 23, 1997, Newcor, Inc. (the Company) purchased for cash the
assets and business of Machine Tool and Gear, Inc. (MT&G) for $27.25
million plus the assumption of approximately $5.8 million of debt, which
was subsequently retired. The Company has paid $5.6 million to the former
shareholders of MT&G. A promissory note for $21.65 million, paying
interest at 8%, has been issued to the former shareholders for the balance
of the purchase price. The note is due on April 22, 1998 and may be
extended for an additional thirty days.
MT&G manufactures differential pinion and side gears, output shafts, and
rear axle shafts for the automotive industry. MT&G has production
facilities located in Fenton, Michigan and Corunna, Michigan. MT&G's
product line and customer base complement Newcor's Rochester Gear Division,
which is located in Clifford, Michigan.
Item 5 Other Events - Pending Acquisition
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The Company signed a definitive agreement to purchase the common stock of
the Deco Group ("DECO") on December 10, 1997. Assuming the satisfaction of
certain conditions, it is anticipated that the closing will occur during
the first calendar quarter of 1998 after completion of financing
arrangements for this transaction.
DECO manufactures high volume precision machined components and assemblies,
including rocker arms and assemblies, transmission shafts, pumps, accessory
drives and other related products, for the medium and heavy truck and
automotive industries.
DECO has production facilities located in Royal Oak, Michigan and Troy,
Michigan. DECO's product lines and customer base complement the Company's
other precision machining companies.
Item 7 Financial Statements, Pro Forma Financial Information and
Exhibits
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(A) (B) Financial Statements, Pro Forma Financial Information
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The Financial Statements and Pro Forma Financial Information of the
business acquired as described in Item 2 above and required by this Item
are not filed herewith because the financial statements for MT&G as of and
for the year-ended December 31, 1996 are currently being audited. The
Company intends to file such Financial Statements and Pro Forma Financial
Information under cover of Form 8-K/A as soon as practicable, but not later
than March 7, 1998.
(C) Exhibits
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2. Asset Purchase Agreement dated October 1, 1997 (signed December 23,
1997) between Newcor, Inc. and Machine Tool and Gear, Inc.
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.
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(Registrant)
Date January 6, 1998 /s/ John Garber
--------------------- John Garber
Vice President Finance
Exhibits Index
Exhibit
Number Description
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2 Asset Purchase Agreement dated October 1, 1997 (signed December 23,
1997) between Newcor, Inc. and
Machine Tool and Gear, Inc.
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, 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 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, 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) 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 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.
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 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 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 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 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 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 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
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, 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 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. 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 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 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 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 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 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 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 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 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 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.
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 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.
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 (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;
(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 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:
(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, 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 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.
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)
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.
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 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 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]
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/ 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. LeBalnc
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
-----------------------------------
/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
