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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): August 11, 1997
SPARTAN MOTORS, INC.
(Exact Name of Registrant as Specified in Charter)
MICHIGAN 0-13611 38-2078923
(State or Other Jurisdic- (Commission (IRS Employer
tion of Incorporation) File Number) Identification No.)
1000 REYNOLDS ROAD
CHARLOTTE, MICHIGAN 48813
(Address of principal executive offices) (Zip Code)
(517) 543-6400
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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Item 5. OTHER EVENTS.
On August 11, 1997, Spartan Motors, Inc. entered into a Stock
Purchase Agreement providing for the acquisition of all of the issued and
outstanding shares of capital stock of Luverne Fire Apparatus Co., Ltd. of
Brandon, South Dakota. A copy of the Stock Purchase Agreement is attached
to this Form 8-K as Exhibit 2. On August 12, 1997, Spartan Motors, Inc.
issued the press release attached as Exhibit 99 to this Form 8-K. The
closing on the stock purchase described in the Stock Purchase Agreement was
completed on August 21, 1997.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND
EXHIBITS.
(c) Exhibits. The following documents are filed as exhibits to this
report on Form 8-K:
2 Stock Purchase Agreement dated August 11, 1997.
99 Press Release dated August 12, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: August 21, 1997 SPARTAN MOTORS, INC.
By /S/ RICHARD J. SCHALTER
Richard J. Schalter
Secretary, Treasurer, and
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NUMBER DOCUMENT
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2 Stock Purchase Agreement dated August 11, 1997.
99 Press Release dated August 12, 1997.
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EXHIBIT 2
STOCK PURCHASE AGREEMENT
by and among
SPARTAN MOTORS, INC.,
("Buyer")
and
A. RUSSELL MELGAARD, RONALD J. BACH, ROBERT D. POTTS,
JOHN M. SCHULZETENBERG, PETER L. HAUSER,
ROGER SCHNOBRICH, AS TRUSTEE UNDER
THE HELEN C. SCHNOBRICH TRUST DATED DECEMBER 29, 1994,
BOBBI JO BRACK, AND WILLIAM J. MARKETON
("Shareholders" of Seller)
CONCERNING THE CAPITAL STOCK OF
LUVERNE FIRE APPARATUS CO., LTD.
("Seller")
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TABLE OF CONTENTS
Page
ARTICLE 1 STOCK PURCHASE. . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Shares . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE 2 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.1 Place and Date of Closing. . . . . . . . . . . . . . . . .1
2.2 Actions at Closing . . . . . . . . . . . . . . . . . . . .1
2.3 Closing Balance Sheet. . . . . . . . . . . . . . . . . . .2
2.4 Section 338(h)(10) Election. . . . . . . . . . . . . . . .3
2.5 Preparation of Tax Returns Post-Closing. . . . . . . . . .3
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . .3
3.1 Disclosure Statement . . . . . . . . . . . . . . . . . . .4
3.2 Organization and Good Standing . . . . . . . . . . . . . .4
3.3 Capitalization of Seller . . . . . . . . . . . . . . . . .4
3.4 Enforceability . . . . . . . . . . . . . . . . . . . . . .5
3.5 No Conflict with Other Instruments or Proceedings. . . . .5
3.6 Compliance with Laws and Other Regulations . . . . . . . .5
3.7 Financial Statements . . . . . . . . . . . . . . . . . . .5
3.8 Absence of Undisclosed Liabilities . . . . . . . . . . . .6
3.9 Absence of Certain Changes or Events . . . . . . . . . . .6
3.10 Customers and Suppliers. . . . . . . . . . . . . . . . . .7
3.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.12 Accounts Receivable. . . . . . . . . . . . . . . . . . . .8
3.13 Inventory. . . . . . . . . . . . . . . . . . . . . . . . .9
3.14 Real Property. . . . . . . . . . . . . . . . . . . . . . .9
3.15 Personal Property. . . . . . . . . . . . . . . . . . . . .9
3.16 Condition of Assets. . . . . . . . . . . . . . . . . . . .9
3.17 Intellectual Property. . . . . . . . . . . . . . . . . . 10
3.18 Contracts. . . . . . . . . . . . . . . . . . . . . . . . 10
3.19 Employee Relations . . . . . . . . . . . . . . . . . . . 10
3.20 Employee Benefit Plans . . . . . . . . . . . . . . . . . 11
3.21 Environmental Matters. . . . . . . . . . . . . . . . . . 11
3.22 Litigation . . . . . . . . . . . . . . . . . . . . . . . 13
3.23 Product Liabilities and Warranties . . . . . . . . . . . 13
3.24 Insurance. . . . . . . . . . . . . . . . . . . . . . . . 13
3.25 Permits and Licenses . . . . . . . . . . . . . . . . . . 14
3.26 Applications, Proxy Materials, Etc . . . . . . . . . . . 14
3.27 Books and Records. . . . . . . . . . . . . . . . . . . . 14
3.28 Relationships with Related Persons . . . . . . . . . . . 15
3.29 Minimum Net Worth. . . . . . . . . . . . . . . . . . . . 15
3.30 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 15
3.31 Accuracy of Statements . . . . . . . . . . . . . . . . . 15
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Page
ARTICLE 4 BUYER'S REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . 16
4.1 Buyer's Organization and Good Standing . . . . . . . . . 16
4.2 Enforceability . . . . . . . . . . . . . . . . . . . . . 16
4.3 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 5 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1 Access and Investigation. . . . . . . . . . . . . . . . . 16
5.2 Operation of the Business . . . . . . . . . . . . . . . . 16
5.3 Negative Covenant . . . . . . . . . . . . . . . . . . . . 17
5.4 Required Approvals. . . . . . . . . . . . . . . . . . . . 17
5.5 Notification. . . . . . . . . . . . . . . . . . . . . . . 17
5.6 No Negotiation. . . . . . . . . . . . . . . . . . . . . . 17
5.7 No Competition. . . . . . . . . . . . . . . . . . . . . . 17
5.8 Release of Claims . . . . . . . . . . . . . . . . . . . . 18
5.9 Pre-Closing Distribution of Cash. . . . . . . . . . . . . 19
5.10 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 6 CONDITIONS PRECEDENT TO BUYER'S
OBLIGATION TO CLOSE. . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 Accuracy of Representations . . . . . . . . . . . . . . . 19
6.2 Shareholders' Performance . . . . . . . . . . . . . . . . 19
6.3 Consents. . . . . . . . . . . . . . . . . . . . . . . . . 19
6.4 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . 19
6.5 Additional Documents. . . . . . . . . . . . . . . . . . . 19
6.6 No Proceedings. . . . . . . . . . . . . . . . . . . . . . 20
6.7 No Claim Regarding Sale Proceeds. . . . . . . . . . . . . 20
6.8 No Prohibition. . . . . . . . . . . . . . . . . . . . . . 20
6.9 Employment Agreement. . . . . . . . . . . . . . . . . . . 20
ARTICLE 7 CONDITIONS PRECEDENT TO THE SHAREHOLDERS'
OBLIGATION TO CLOSE. . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 Accuracy of Representations . . . . . . . . . . . . . . . 20
7.2 Buyer's Performance . . . . . . . . . . . . . . . . . . . 21
7.3 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . 21
7.4 Additional Documents. . . . . . . . . . . . . . . . . . . 21
7.5 No Injunction . . . . . . . . . . . . . . . . . . . . . . 21
7.6 Release of Guaranties . . . . . . . . . . . . . . . . . . 21
7.7 Employment Agreement. . . . . . . . . . . . . . . . . . . 21
ARTICLE 8 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.1 Termination Events. . . . . . . . . . . . . . . . . . . . 21
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . 22
ARTICLE 9 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 22
9.1 Indemnification and Reimbursement by Shareholders . . . . 22
9.2 Limitations on Indemnification. . . . . . . . . . . . . . 23
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Page
9.3 Third-Party Claims. . . . . . . . . . . . . . . . . . . . 23
9.4 Claims by Buyer . . . . . . . . . . . . . . . . . . . . . 24
9.5 Remedies Cumulative . . . . . . . . . . . . . . . . . . . 25
ARTICLE 10 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.1 Survival of Representations, Warranties, Covenants,
and Indemnities . . . . . . . . . . . . . . . . . . . . . 25
10.2 Assignment and Benefits . . . . . . . . . . . . . . . . . 25
10.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . 25
10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.5 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 26
10.6 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 26
10.7 Amendments and Waivers. . . . . . . . . . . . . . . . . . 26
10.8 No Third-Party Beneficiaries. . . . . . . . . . . . . . . 26
10.9 Severability. . . . . . . . . . . . . . . . . . . . . . . 27
10.10 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 27
10.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . 27
10.12 Construction. . . . . . . . . . . . . . . . . . . . . . . 27
10.13 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 27
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is made between
SPARTAN MOTORS, INC., a Michigan corporation ("BUYER"), A. RUSSELL
MELGAARD, RONALD J. BACH, ROBERT D. POTTS, JOHN M. SCHULZETENBERG, PETER L.
HAUSER, ROGER SCHNOBRICH, AS TRUSTEE UNDER THE HELEN C. SCHNOBRICH TRUST
AGREEMENT dated December 29, 1994, BOBBI JO BRACK, AND WILLIAM J. MARKETON
(individually, a "SHAREHOLDER" and collectively, the "SHAREHOLDERS"). The
Shareholders own all of the issued and outstanding common stock (the
"SHARES"), $0.10 par value per share, of Luverne Fire Apparatus Co., Ltd.,
a South Dakota corporation ("SELLER").
Seller is engaged in the manufacture, distribution, and sale of
fire truck apparatus from its facilities in Brandon, South Dakota (the
"BUSINESS"). Buyer desires to become affiliated with Seller through the
purchase of all of the issued and outstanding capital stock of Seller, on
the terms and subject to the conditions set forth in this Agreement.
Following the stock purchase, Seller would be a wholly owned subsidiary of
Buyer.
ARTICLE 1 STOCK PURCHASE
1.1 SHARES. Subject to the terms and conditions of this Agreement,
at the Closing, the Shareholders will sell and transfer to Buyer, and Buyer
will purchase from the Shareholders, the Shares.
1.2 PURCHASE PRICE. The aggregate purchase price for the Shares
shall be $2,000,000, to be paid to the Shareholders pro rata in cash
pursuant to Article 2.
ARTICLE 2 CLOSING
2.1 PLACE AND DATE OF CLOSING. The purchase and sale contemplated by
this Agreement (the "CLOSING") shall take place at the offices of a place
mutually agreeable to the parties, on the later of (a) August 22, 1997;
(b) the date that is three business days following the obtaining of
required governmental consents (if any); or (c) such other time and place
as the parties may agree. Subject to the provisions of Article 8, failure
to consummate the purchase and sale provided for in this Agreement on the
date and time and at the place determined pursuant to this Section will not
result in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement. The Closing shall be deemed to be
effective upon the close of business on that date (the "CLOSING DATE").
2.2 ACTIONS AT CLOSING.
2.2.1 BUYER'S ACTIONS. At the closing, Buyer will deliver to
the Shareholders:
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(a) CASH. Cash of $2,000,000, pro rata, to the Shareholders
by bank cashier's or certified check or by wire transfer to
accounts specified by the Shareholders.
(b) EMPLOYMENT AGREEMENT. The Employment Agreement, as set
forth in Section 6.9, executed by Seller.
(c) CONSULTING AGREEMENT. The consulting agreement with
Mr. Melgaard, in substantially the form as set forth in EXHIBIT
2.2.1 (the "CONSULTING AGREEMENT") executed by Seller.
(d) LEGAL OPINION, ETC. The legal opinion of Buyer's
counsel, as set forth in Section 7.3, and those supplemental
documents and certificates set forth in Section 7.4.
(e) INDEMNIFICATION AGREEMENT. The indemnification
agreement set forth in Section 7.6, executed by Buyer.
2.2.2 SHAREHOLDERS' ACTIONS. At the closing, the
Shareholders will deliver to Buyer:
(a) CERTIFICATES. Certificates representing all of the
Shares, duly endorsed (or accompanied by duly executed stock
powers), with signatures guaranteed by a commercial bank or by a
member firm of the New York Stock Exchange, for transfer to
Buyer.
(b) SECTION 338 ELECTION. An executed copy of Internal
Revenue Code Form 8023-A, executed by each Shareholder, complete
and accurate, except for such information that relates to Buyer.
(c) EMPLOYMENT AGREEMENT. The Employment Agreement, as set
forth in Section 6.9, executed by Mr. Marketon.
(d) CONSULTING AGREEMENT. The Consulting Agreement, as set
forth in Section 2.2.1, executed by Mr. Melgaard.
(e) LEGAL OPINION, ETC. The legal opinion of Buyer's
counsel, as described in Section 6.4, and those supplemental
documents and certificates set forth in Section 6.5.
(f) INDEMNIFICATION AGREEMENT. The indemnification
agreement set forth in Section 7.6, executed by the Shareholders.
2.3 CLOSING BALANCE SHEET.
2.3.1 PREPARATION. Within 90 days after the Closing, Buyer
shall prepare or cause to be prepared, a balance sheet, dated as of
the Closing, reflecting the assets and liabilities of Seller (the
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"CLOSING BALANCE SHEET"). The Closing Balance Sheet shall be prepared
in a manner that is consistent with past practice and the books and
records of Seller and that fairly presents Seller's financial
condition and results of operations as of the Closing.
2.3.2 CLOSING BALANCE SHEET DISPUTES. The Closing Balance
Sheet shall be final, conclusive, and binding on the Shareholders
unless, within 21 days after the delivery of the Closing Balance Sheet
to the Shareholders, the Shareholders shall notify Buyer in writing
of the Shareholders' collective objections to the Closing Balance
Sheet, specifically listing the disputed items and amounts and the
facts and accounting principles supporting each of the Shareholders'
objections. If the Shareholders give notice of objection, Buyer and
Shareholders shall try to resolve the objections within 14 days after
Buyer receives the notice. If Buyer and the Shareholders are unable
to resolve Seller's objections within that period, the parties shall
promptly refer the disputed matters to a nationally recognized
independent accounting firm selected by Buyer and Shareholders. The
accounting firm shall be guided in reaching a determination with
respect to the disputed matters by the applicable provisions of this
Agreement. Buyer and Shareholders shall equally pay the fees and
expenses of the independent accounting firm.
2.4 SECTION 338(H)(10) ELECTION. The Shareholders shall, at Buyer's
option, file an election under Section 338(h)(10) of the Internal Revenue
Code of 1986, as amended, and the regulations issued pursuant to the
Internal Revenue Code (the "CODE"), and any equivalent election under state
tax law for comparable treatment, in a form reasonably required by Buyer.
Buyer may require such an election at any time prior to 12 months after the
Closing Date by written notice to the Shareholders.
2.5 PREPARATION OF TAX RETURNS POST-CLOSING. Following the Closing,
the Shareholders shall cause Seller's final federal, state, and local (if
applicable) tax returns through the Closing Date (the "1997 TAX RETURNS")
to be prepared by Henry Scholten & Company, in consultation with both Buyer
and the Shareholders. Not later than the later of (a) 30 days after the
election or expiration of Buyer's option to require a Section 338(h)(10)
election, or (b) 60 days prior to the latest date that the 1997 Tax Returns
could be filed in a timely manner, the Shareholders shall cause Henry
Scholten & Company to distribute a completed draft of the 1997 Tax Returns
to Buyer. Upon the delivery of the draft 1997 Tax Returns to Buyer, Buyer
shall have 30 days to make any objection to Henry Scholten & Company and
the Shareholders (with such objection containing a statement of the basis
of the objection). Henry Scholten & Company shall then have 21 days to
resolve any issues between the parties and issue its final determination on
the 1997 Tax Returns. Henry Scholten & Company's resolution of the disputed
issues shall be final and binding on the parties.
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
The Shareholders, jointly and severally, represent and warrant to
Buyer as follows:
3.1 DISCLOSURE STATEMENT. The Shareholders have delivered to Buyer
two identical copies of individually numbered schedules (collectively, the
"DISCLOSURE STATEMENT") corresponding to the sections and subsections of
this Article. To the knowledge of the Shareholders, each individual
schedule in the Disclosure Statement contains exceptions to the
specifically identified section and subsection contained in this Article
and sets forth each exception in reasonable detail, with attached
documentation as necessary to reasonably explain the exception. Any
exception to the representations and warranties contained in a section or
subsection of this Article is described in a separate schedule of the
Disclosure Statement that specifically identifies the applicable section or
subsection of this Article. The Disclosure Statement is complete and
accurate in all respects. The Shareholders have provided Buyer with true
and complete copies of all documents referenced in the Disclosure
Statement.
3.2 ORGANIZATION AND GOOD STANDING. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation. Seller has all requisite corporate power
and authority to lease and operate the properties now leased by it and to
carry on its businesses as presently conducted. Neither the character of
the properties leased or used by Seller, nor the nature of the business
transacted by Seller, require the licensing or qualification of Seller as a
corporation in any jurisdiction. Seller is not qualified to do business as
a foreign corporation in any jurisdiction. Seller does not have any
subsidiaries and does not own or have the contractual right to acquire any
equity interest in any other entity.
3.3 CAPITALIZATION OF SELLER. The authorized equity securities of
Seller consists of 5,000,000 Shares, of which 277,778 shares are issued and
outstanding (as of the date of this Agreement and immediately prior to the
Closing) and constitute all of the Shares. Each Shareholder's ownership,
including shares evidenced by each certificate, is set forth in the
Disclosure Statement. The Shareholders are as of the date of this
Agreement and will be immediately prior to the Closing the record and
beneficial owners and holders of all of the Shares, free and clear of all
encumbrances and adverse claims. With the exception of the Shares (all of
which are owned by the Shareholders), there are no other issued or
outstanding equity securities or other securities of Seller. No legend or
other reference to any purported encumbrance appears upon any Share. All
of the Shares have been duly authorized and validly issued and are fully
paid and nonassessable. There are no agreements relating to the issuance,
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sale, or transfer of any equity securities or other securities of Seller.
None of the Shares was issued in violation of the Securities Act of 1933,
as amended (the "SECURITIES ACT") or any other applicable legal
requirement. Seller does not own, and has no contract or obligation to
acquire, any equity securities or other securities of any Shareholder or
other person or entity, or any direct or indirect equity or ownership
interest in any other business.
3.4 ENFORCEABILITY. Each Shareholder has the full capacity, power,
and authority to enter into this Agreement and to carry out the
transactions contemplated by this Agreement, and this Agreement is binding
upon each Shareholder and is enforceable against each Shareholder in
accordance with the terms of this Agreement.
3.5 NO CONFLICT WITH OTHER INSTRUMENTS OR PROCEEDINGS. Except as
disclosed in Section 3.5 of the Disclosure Statement, the execution and
delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement will not (a) result in the breach of any of
the terms or conditions of, or constitute a default under, Seller's
Articles of Incorporation or Bylaws or any contract, agreement or other
obligation to which Seller or a Shareholder is now a party or by which
Seller or the Shareholders or any of Seller's properties or assets may be
bound or affected; (b) violate any law, rule, or regulation, license, or
permit promulgated or issued by any administrative agency or governmental
body or any order, writ, injunction, or decree of any court, administrative
agency, or governmental body; (c) result in the imposition of any tax,
lien, or encumbrance on Seller or any of the assets of Seller; or (d)
result in the acceleration of any of Seller's indebtedness or increase the
rate of interest payable by Seller. There are no consents, approvals, or
authorizations of, or declarations, filings, or registrations with, any
third parties or governmental or regulatory authorities required of Seller
or a Shareholder in connection with the execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement.
3.6 COMPLIANCE WITH LAWS AND OTHER REGULATIONS. Except as disclosed
in Section 3.6 of the Disclosure Statement and to the knowledge of the
Shareholders, Seller is not subject to, nor has Seller or any Shareholder
been threatened with, any fine, penalty, liability, or disability as the
result of a failure to comply with any requirement of federal, state,
local, or foreign law, rule, or regulation (including those relating to the
environment, employment of labor, or occupational health and safety) or any
requirement of any governmental body or agency having jurisdiction over
Seller, the conduct of the Business, the use of Seller's assets or
properties or any premises occupied by Seller. Seller is in compliance
with all of those laws, rules, regulations, and other requirements.
3.7 FINANCIAL STATEMENTS. The audited financial statements of Seller
as of and for the years ended December 31, 1996, 1995, and 1994, as
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reported on by Seller's independent accountants, Henry Scholten & Company,
and the unaudited consolidated financial statements of Seller as of and for
the three and six month periods ended March 31, 1997, and June 30, 1997,
respectively, including all schedules and notes relating to such
statements, as previously delivered to Seller, are correct and complete in
all material respects. True and complete copies of such financial
statements have been provided to Buyer. These statements fairly present
Seller's financial condition and results of operations on a basis on the
dates and for the periods indicated, and have been prepared in conformity
with generally accepted accounting principles ("GAAP") applied consistently
throughout the periods indicated, except (a) as otherwise noted in such
financial statements or the notes thereto, and (b) subject, in the case of
interim financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes (that, if presented, would not differ
materially from those included in the financial statements. The financial
statements referred to in this Section 3.7 reflect the consistent
application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
Section 3.8 of the Disclosure Statement and except for (a) current
liabilities incurred in the Ordinary Course of Business (as defined below),
which liabilities would not, individually or in the aggregate, reasonably
be expected to adversely affect Seller or the Business, and (b) liabilities
and obligation reflected or reserved against in the Closing Balance Sheet,
Seller does not have any debts, liabilities, or obligations of any nature,
whether accrued, absolute, contingent, or otherwise, and whether due or to
become due, including, but not limited to, guarantees, liabilities, or
obligations on account of taxes, other governmental charges, duties,
penalties, interest, or fines, and there is no basis for the assertion
against Seller of any debt, liability, or obligation. For the purposes
of this Agreement, an action taken by Seller will be deemed to have been
taken in the "ORDINARY COURSE OF BUSINESS" only if: (a) such action is
consistent with the past practices of Seller and is taken in the ordinary
course of the normal day-to-day operations of Seller; (b) such action is
not required to be authorized by the board of directors of Seller; and (c)
such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any
person or group of persons exercising similar authority) in the ordinary
course of the normal day-to-day operations of other entities that are in
the same line of business as Seller.
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996,
Seller has conducted the Business in the Ordinary Course of Business and
has maintained Seller's records and books of account relating to the
Business in a manner that fairly and accurately reflects Seller's
transactions, assets, and liabilities in accordance with standard
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accounting practices consistently applied, and, since December 31, 1996,
there has been no adverse change in the condition of the Business,
financial or otherwise, or in Seller's properties. In particular, and
without limiting the foregoing, since December 31, 1996, Seller has not
with respect to the Business: (a) paid, discharged, or satisfied any
claim, liability, or obligation except for claims, liabilities, and
obligations disclosed or reserved against on the Closing Balance Sheet or
incurred since December 31, 1996 in the Ordinary Course of Business and
consistent with past practice; (b) written down or written off any item of
inventory or written down or written off any note or account receivable as
uncollectible; (c) canceled or waived, or agreed to cancel or waive, any
debt, claim, or right (absolute or contingent) having a value or potential
value in excess of $10,000; (d) subjected any assets to any claim, lien,
mortgage, security interest, encumbrance, charge, or other restriction;
(e) sold, transferred, or otherwise disposed of any assets except in the
Ordinary Course of Business; (f) disposed of or permitted a lapse of any
license, permit, patent, trademark, trade name, or copyright; (g) disposed
of or disclosed to any person any trade secret, formula, process, or know-
how; (h) increased the compensation of, or declared or agreed to pay a
bonus to, any officer or employee, except regularly scheduled increases in
compensation to non-officer employees in the Ordinary Course of Business
and any increase to Mr. Marketon; (i) suffered a loss of or a reduction in
working capital available for current or prospective operations; (j) made
any payment, loan, or advance to, or entered into any agreement or
arrangement (including agreements and arrangements relating to the sale,
transfer, or lease of property or other assets) with, any director,
officer, employee, or shareholder; (k) made any capital expenditure,
purchase order, or commitment in excess of $10,000 for additions to
property, plant, equipment, or otherwise; (l) purchased or placed a
purchase order for inventory, supplies, or any other items, or entered into
any other agreement or transaction other than in the Ordinary Course of
Business; (m) suffered any loss of or damage to physical property or other
assets, whether or not covered by insurance; (n) except as disclosed in
Section 3.9 of the Disclosure Statement, paid or incurred any obligation to
pay any dividends or other distributions with respect to Seller's capital
stock; (o) issued or authorized capital stock of Seller; or (p) violated
any federal, state, local, or foreign law, statute, ordinance, regulation,
or order.
3.10 CUSTOMERS AND SUPPLIERS. Since the Balance Sheet Date, there has
not been any adverse change in Seller's business relationship with any of
the 10 largest customers or dealers of the Business or the 10 largest
suppliers of the Business, nor could an adverse change be reasonably
anticipated as a result of the transactions contemplated by this Agreement.
3.11 TAXES.
3.11.1 FILINGS. Seller filed on a timely basis since 1991 all
"Tax Returns" (as defined below) that are or were required to be filed
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by or with respect to Seller or any subsidiary of Seller, either
separately or as a member of a group of corporations, pursuant to any
applicable federal, state, local, municipal, foreign, international,
or other administrative order, constitution, law, ordinance, common
law, rule, regulation, statute, or treaty (collectively, a "LEGAL
REQUIREMENT"). Seller has paid, or made provision for the payment of,
all "Taxes" (as defined below) that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by Sellers or any Seller, except such Taxes, if
any, being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the
financial statements.
3.11.2 AUDITS. Seller has never been audited by any taxing
authority other than a 1996 South Dakota sales and use tax audit with
respect to the three preceding years. Seller has not given or been
requested to give waivers or extensions (or is or would be subject to
a waiver or extension given by any other person or entity) of any
statute of limitations relating to the payment of Taxes of Seller or
for which Seller may be liable.
3.11.3 RESERVES. The charges, accruals, and reserves with
respect to Taxes on the books of Seller are adequate (determined in
accordance with GAAP) and are at least equal to Seller's liability for
Taxes. There exists no proposed tax assessment against any Seller.
No consent to the application of Section 341(f)(2) of the Code has
been filed with respect to any property or assets held, acquired, or
to be acquired by any Seller. All Taxes that Seller is or was
required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to
the proper governmental body or other person or entity.
3.11.4 S-CORP STATUS. Seller, at all times since June, 1991,
has had, and will immediately prior to the Closing have, in effect an
effective election to be treated as an S corporation under
Section 1361 of the Code and under appropriate state tax laws and
regulations that recognize such an election. Seller has at all times
since June, 1991 satisfied all requirements for taxation as an S
corporation for state and federal tax purposes.
3.11.5 BUSINESS COMBINATIONS. Since June, 1991, Seller has
not merged or consolidated with, or acquired stock of, or assumed or
became subject to any tax liabilities of, any corporation taxed under
Subchapter 1C of Subtitle A of the Code.
3.11.6 TRUE, CORRECT, AND COMPLETE. All Tax Returns filed by
(or that include on a consolidated basis) Seller are true, correct,
and complete. There is no tax sharing agreement that will require any
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payment by Seller after the date of this Agreement. During the
consistency period (as defined in Section 338(h)(4) of the Code with
respect to the sale of the Shares to Buyer), no Seller or target
affiliate (as defined in Section 338(h)(6) of the Code with respect to
the sale of the Shares to Buyer) has sold or will sell any property or
assets to Buyer or to any member of the affiliated group (as defined
in Section 338(h)(5) of the Code) that includes Buyer.
3.11.7 TAX DEFINED. "TAX" shall mean any tax (including any
income tax, capital gains tax, value-added tax, employment or
occupational-related tax, sales tax, property tax, gift tax, or estate
tax), levy, assessment, tariff, duty (including any customs duty),
deficiency, or other fee, and any related charge or amount (including
any fine, penalty, interest or addition to tax), imposed, assessed, or
collected by or under the authority of any governmental body.
3.11.8 TAX RETURN DEFINED. "TAX RETURN" shall mean any return
(including any information return), report, statement, declaration,
schedule, notice, notification, form, certificate, or other document
or information filed with or submitted to, or required to be filed
with or submitted to, any governmental body in connection with the
determination, assessment, collection, or payment of any Tax or in
connection with the administration, implementation, or enforcement of
or compliance with any Legal Requirement relating to any Tax.
3.12 ACCOUNTS RECEIVABLE. All accounts receivable of Seller that are
reflected on the Closing Balance Sheet or on the accounting records of
Seller as of the Closing (collectively, the "ACCOUNTS RECEIVABLE")
represent or will represent valid obligations arising from sales actually
made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing, the Accounts Receivable are or will be as
of the Closing current and collectible net of the respective reserves shown
on the Closing Balance Sheet or on the accounting records of Seller as of
the Closing (which reserves are adequate and calculated consistent with
past practice and, in the case of the reserve as of the Closing, will not
represent a greater percentage of the Accounts Receivable as of the Closing
than the reserve reflected in the balance sheet represented of the Accounts
Receivable reflected therein and will not represent a material adverse
change in the composition of such Accounts Receivable in terms of aging).
Subject to such reserves, each of the Accounts Receivable either has been
or will be collected in full, without any set-off, within 90 days after the
day on which it first becomes due and payable. There is no contest, claim,
or right of set-off, other than returns in the Ordinary Course of Business,
under any contract with any obligor of an Accounts Receivable relating to
the amount or validity of such Accounts Receivable.
3.13 INVENTORY. Seller has provided Buyer and its representatives the
opportunity to inspect its inventory. The inventory is duly reflected and
reserved for in Seller's books and records.
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3.14 REAL PROPERTY. Seller does not own and has never owned any real
property. The Shareholders have provided Buyer with a complete copy of the
only real property lease. To the knowledge of the Shareholders, no
building or improvement that Seller leases or uses encroaches on any
easement or property owned by another and no building or improvement owned
by another encroaches on any property that Seller leases or uses or on any
easement the benefit of which runs to Seller. To the knowledge of the
Shareholders, Seller is not in violation of any zoning regulation, building
restriction, restrictive covenant, ordinance, or other law, order,
regulation, or requirement relating to any real property that Seller leases
or uses. To the knowledge of the Shareholders, there are no ground
subsidences or slides on any real property that Seller leases or uses. All
buildings and improvements that Seller leases or uses are in good condition
(normal wear and tear excepted), are structurally sound and not in need of
repairs, are fit for their intended purposes, and are adequately serviced
by all utilities necessary for the effective operation of the Business as
presently conducted. None of the real property leased or used by Seller is
the subject of any condemnation action and there is no proposal under
consideration by any public or governmental authority or entity to use any
of the real property leased or used by Seller for some other purpose.
3.15 PERSONAL PROPERTY. Except as disclosed in Section 3.15 of the
Disclosure Statement, Seller has good title to all of its personal property
and other assets, tangible and intangible, including all property reflected
in the Balance Sheet (or that has been fully depreciated) or acquired after
the date of the Balance Sheet, except as since sold or otherwise disposed
of in the Ordinary Course of Business, subject to no security interest,
mortgage, pledge, lien, encumbrance, charge, obligation, assignment,
leasing, or other restriction. Subject to liens on personal property in
the Ordinary Course of Business, all personal property will be in the
possession of Seller on the Closing. The Shareholders have provided Buyer
with a true and complete copy of each personal property lease.
3.16 CONDITION OF ASSETS. The real and personal property (whether
owned or leased) of Seller are in good and operable condition and repair,
normal wear and tear excepted.
3.17 INTELLECTUAL PROPERTY. Seller owns the entire right, title, and
interest in and to its "Intellectual Property," free and clear of all
claims, liens, licenses, sublicenses, charges, or encumbrances.
"INTELLECTUAL PROPERTY" includes: (a) all corporate names, all fictional
business names, trading names, registered and unregistered trademarks,
service marks, and applications; (b) all patents and patent applications;
and (c) all copyrights in both published works and unpublished works that
are material to the Business, all rights in mask works, and all know-how,
trade secrets, confidential information, software, technical information,
process technology, plans, drawings, and blue prints. There is no
infringement, or unlawful use by any person or entity, of any patents,
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service marks, trade names, trademarks, logos, or copyrights owned or used
by Seller. Seller has not infringed or unlawfully used the patents,
service marks, trade names, trademarks, logos, copyrights, or other
proprietary rights of any other person or entity. Seller has proprietary
rights in the trade name, trademark, and service mark "Luverne Fire
Apparatus" (and all variations of that name). No patents, patent
applications, service marks, trade names, trademarks, trademark
registrations and applications, logos, copyrighted works, copyright
registrations or applications, or grants of licenses used by Seller are
subject to any pending or threatened claim or challenge, and there is no
valid basis for asserting any claim or challenge. The manufacturing and
engineering drawings, process sheets, specifications, bills of material,
trade secrets, "know-how," and other like data are in a form and of a
quality that Buyer can, following the Closing, design, produce,
manufacture, assemble, and sell the products and provide the services
previously provided by the Business in a manner that meets the applicable
specifications and conforms with the quality standards previously met by
Seller. Seller does not require any license or other proprietary right to
operate the Business or to manufacture or sell Seller's products other than
normal rights granted by Buyer in connection with the sale of Buyer's
products.
3.18 CONTRACTS. All agreements and other arrangements of Seller with
a third party are valid and enforceable in accordance with their terms.
Neither Seller nor any other party is in default or in arrears under the
terms of any of those agreements. Except as set forth in Section 3.18 of
the Disclosure Statement or as provided to Buyer prior to the Closing,
Seller is not a party to: (a) any agreement with respect to any real
property; (b) any distributor, dealer, or similar contract or commitment;
(c) any loan agreement, security agreement, mortgage, promissory note, or
other similar agreement or arrangement; (d) any consulting or employment
contract; (e) any contract out of the Ordinary Course of Business; (f) any
contract of guaranty or indemnification; (g) any contract containing
indemnification obligations (whether contingent or otherwise) of more than
$10,000; or (h) any contract purporting to limit the freedom of Seller to
compete in any line of business in any geographical area. Except as
previously provided to Buyer, Seller has not given any power of attorney
to any person, firm, or corporation for any purpose whatsoever.
3.19 EMPLOYEE RELATIONS. Except as disclosed in Section 3.19 of the
Disclosure Statement, to the knowledge of the Shareholders, there is not
now in existence or pending, nor has there been within the last three
years, any employment dispute of any nature, against Seller or the
Shareholders. To the knowledge of the Shareholders, Seller is, and during
all applicable limitation periods has been, in compliance with all
applicable federal, state, local, provincial, and foreign laws, executive
orders, and regulations respecting employment and employment practices.
Seller is not a party to any written or oral, express or implied,
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collective bargaining agreement or other contract, agreement, or
arrangement with any labor union or any other similar arrangement. Seller
has no knowledge of any current union organizing activity. Seller is not a
party to any agreement with any of Seller's present or former directors,
officers, employees, or consultants with respect to conditions of
employment or any form of remuneration. Seller is not a party to any
agreement with any of Seller's present or former directors, officers,
employees, shareholders, or consultants with respect to any subject matter
whatsoever not described above. There is no pending, or to the knowledge
of the Shareholders, threatened, or existing but unasserted claim against
Seller for violation of any contract, agreement, or arrangement described
above, nor is there any factual basis upon which a claim could be asserted.
A copy of each employee policy manual and handbook provided to or governing
Seller's employees are attached to the Disclosure Statement. No employee
of Seller has notified Seller of an intention to terminate employment.
3.20 EMPLOYEE BENEFIT PLANS. Except as disclosed in Section 3.20 of
the Disclosure Statement, Seller does not have, and has never had, any
employee pension benefit plans, employee welfare benefit plans, incentive
compensation plans, benefit plans for retired employees, or any other
employee benefit plans maintained by Seller, or to which Seller has made
payments or contributions on behalf of its employees, including, without
limitation, any plans or contracts providing for bonuses, pensions,
profit-sharing, stock options, stock purchase rights, phantom stock, stock
appreciation rights, restricted stock, deferred compensation, insurance, or
retirement benefits of any nature, whether formal or informal, whether
qualified or non-qualified, whether issued, whether funded or unfunded, and
whether legally binding or not. Each plan is referred to individually as a
"PLAN," and collectively as the "PLANS." True, correct, and complete
copies of all Plan texts and all agreements adopted in connection with or
in any way relating to the Plans (including descriptions of vacation,
sickness, severance, and other personnel policies) have been delivered to
Buyer. To the knowledge of the Shareholders, all Plans are, and during all
applicable limitation periods have been, in compliance with all applicable
laws. No Plan and no trust created under a Plan has been terminated,
partially terminated, curtailed, discontinued, or merged into another Plan
or trust. There are no payments that have become due from any Plan, the
trusts created under the Plan, or from Seller that have not been duly paid.
Seller has made full and timely payment of all required contributions to
the Plans and no unfunded liability exists with respect to any Plan.
Neither Seller nor any predecessor or affiliate of Seller participates in,
contributes to, or is otherwise involved with, or has participated in,
contributed to, or been otherwise involved with at any time in the past,
any multi-employer plan. In the past three years, Seller has provided, and
until the Closing shall provide, all notices required under COBRA.
3.21 ENVIRONMENTAL MATTERS. To the best of the Shareholders'
knowledge:
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3.21.1 ORDERS. Except as disclosed in Section 3.21.1 of the
Disclosure Statement, there is no consent decree, consent order, or
other agreement to which Seller is a party in relation to any
environmental matter and no agreement is necessary for Seller's
continued compliance with applicable laws and regulations. There have
been no orders or notices issued that have not been fully complied
with and cleared, investigations conducted, or other proceedings taken
or threatened by any governmental body or other regulatory authority
or any other person under or pursuant to any Environmental Law (as
defined below) with respect to the Business or its assets and Seller
has not received any written communications that have not been fully
complied with and cleared concerning alleged violations of any
Environmental Law or alleged Environmental Contamination (as defined
below).
3.21.2 PERMITS. Except as set forth in an environmental report
prepared by QST Environmental, dated July 28, 1997, Seller has
received all permits, licenses, and approvals, has kept all records,
and has made all filings and disclosures required by Environmental
Laws.
3.21.3 PROPERTIES. To the knowledge of the Shareholders, all
real or personal property that is currently, or was previously, owned,
operated, leased, or used by Seller (the "PROPERTIES"), is free of
Environmental Contamination, and no underground storage tanks,
receptacles, or other similar containers or depositories are, or ever
have been, present on any of the Properties. To the knowledge of the
Shareholders, none of the Properties is listed on or being considered
for listing on any list of contaminated sites maintained under any
Environmental Law or is subject to or being considered for enforcement
action under any Environmental Law, and none of the Properties have
been designated as an area under the control of any conservation
authority. To the knowledge of Shareholders, none of the buildings or
improvements that Seller owns, operates, leases, or uses is
constructed in whole or in part of any material that, in its present
form, releases any substance, whether gaseous (including radon gas),
liquid, or solid, that gives rise to liability under any Environmental
Law, including, without limitation, asbestos.
3.21.4 WASTE DISPOSAL. To the knowledge of the Shareholders,
Seller has not been identified as a potentially responsible party with
respect to any site at which Seller's wastes have been treated,
stored, or disposed. To the knowledge of the Shareholders, no
Hazardous Materials (as defined below), and no other materials
intended for use or generated by Seller, have been or are used,
stored, treated, or otherwise disposed of, in violation of
Environmental Laws. All Hazardous Materials removed or emitted from
any of the Properties as a result of operations on the Properties were
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and are documented, transported, and disposed of, in compliance with
Environmental Laws. To the knowledge of the Shareholders, no
materials including, without limitation, effluents, leachate,
emissions, or Hazardous Materials, generated on or emitted from any of
the Properties have caused or will cause, in whole or in part, any
Environmental Contamination. Seller has not disposed of, permitted
the disposal of, or knows of the disposal of any waste or Hazardous
Material on any of the Properties.
3.21.5 OTHER. To the knowledge of the Shareholders, the
Business as currently conducted does not constitute a nuisance and no
claim of nuisance has been made with respect to the Business by any
adjoining land owner or other party. Seller has not made complaints,
nor received complaints from their employees, about a nuisance caused
or created by any adjoining landowner or other party.
3.21.6 DEFINITIONS. For purposes of this Section:
(a) "ENVIRONMENTAL LAW" means any federal, state, local, or foreign
statute, ordinance, rule, regulation, or standard relating to air
quality, water quality, solid waste management, Hazardous Materials,
toxic substances, or the protection of public health or protection or
remediation of the environment, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"); (b) "HAZARDOUS MATERIAL" means any contaminant, pollutant,
or other substance defined, designated, or classified as hazardous,
toxic, radioactive, or dangerous, or that is otherwise regulated by
any Environmental Law; and (c) "ENVIRONMENTAL CONTAMINATION" means the
presence of any Hazardous Material in, on, or under the air, soil,
groundwater, or surface water, so as to result in any liabilities,
fines, penalties, or remedial obligations under any Environmental Law
or common law.
3.22 LITIGATION. Except as disclosed in Section 3.22 of the
Disclosure Statement, there is no suit, action, proceeding (legal,
administrative, or otherwise), claim, investigation, or inquiry (by an
administrative agency, governmental body, or otherwise) pending or, to the
knowledge of the Shareholders, threatened, by, against, or otherwise
affecting Seller or the Shareholders (in their capacity as such), or any
of the capital stock, properties, assets, or business prospects of Seller,
or the transactions contemplated by this Agreement, at law or in equity, or
before or by any federal, state, municipal, or other governmental
department, commission, board, agency, instrumentality, arbitration
tribunal, or other authority, domestic or foreign, or to which Seller or
the Shareholders (in their capacity as such) are or may become a party,
and, to the knowledge of the Shareholders, there is no factual basis upon
which any suit, action, proceeding, claim, investigation, or inquiry could
be asserted or based. To the knowledge of the Shareholders, there is no
outstanding judgment, order, writ, injunction, or decree of any court,
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administrative agency, governmental body, or arbitration tribunal against
or affecting Seller or any of the capital stock, properties, assets, or
business prospects of Seller.
3.23 PRODUCT LIABILITIES AND WARRANTIES. The Disclosure Statement
sets forth (a) a specimen copy of the form of written warranties covering
each product sold in the Business; and (b) a summary of any exception of
such warranty given to any customer of the Business that is still in
effect. The Shareholders have provided Buyer a true and complete summary
of Seller's warranty experience over the past two years. Except as
previously disclosed to Buyer, there have been no product liability claims
covering any products sold or leased by the Business asserted against
Seller during the five years before the date of this Agreement.
3.24 INSURANCE. All of the Seller's insurance policies are
outstanding and in full force, and to the extent that they are due, all
premiums with respect to those policies are currently paid, and all duties
of the insured under those policies have been fully discharged. Prior to
Closing, the Shareholders shall provide Buyer with a list of all policies
of liability, crime, fidelity, life, fire, product liability, workers'
compensation, health, director and officer liability, and all other forms
of insurance that Seller owns or holds, including for each policy the name
of the insurer, the amount of coverage, the type of insurance, the policy
number, the renewal or expiration date, and all pending claims thereunder.
Seller's present insurance coverage shall remain in effect at least until
the Closing.
3.25 PERMITS AND LICENSES. All permits, licenses, orders, and
approvals necessary to carry on the Business as presently conducted are
identified in the Disclosure Statement and are in full force and effect and
have been complied with. All fees and charges incident to those permits,
licenses, orders, and approvals have been fully paid and are current, and
no suspension or cancellation of any such permit, license, order, or
approval has been threatened or could result by reason of the transactions
contemplated by this Agreement.
3.26 APPLICATIONS, PROXY MATERIALS, ETC.
3.26.1 "DOCUMENT." The term "DOCUMENT," when capitalized in
this Agreement, shall include: (a) any notice of meeting, letters to
shareholders of Seller, proxy, proxy statement, and any other related
materials to be sent to the shareholders of Seller in connection with
a special shareholders' meeting (or action by written consent) related
to this Agreement and the transactions contemplated by it
(collectively referred to as the "PROXY MATERIALS"); and (b) any
documents to be filed with any regulatory agency in connection with
this Agreement.
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3.26.2 ACCURATE INFORMATION. None of the information to be
supplied by or on behalf of a Shareholder or Seller for inclusion in
any Document will: (a) be false or misleading with respect to any
material fact; (b) omit to state any material fact necessary to make
the statements contained therein, in light of the circumstances in
which they are made, not misleading; or (c) fail to correct any
statement or omission in any earlier filing or communication to the
extent necessary to make the statements contained therein not
misleading, in light of the circumstances in which they are made at
the respective times such Documents are filed, supplemented, or
amended, and with respect to the Proxy Materials, when they are mailed
or delivered to Shareholders and at the time of Seller's special
shareholders' meeting (or action by written consent).
3.27 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of Seller, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. The minute books of Seller contain
accurate and complete records of all meetings held of, and corporate action
taken by, the shareholders, the boards of directors, and committees of the
boards of directors of them, and no meeting of any such shareholders, board
of directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute books.
3.28 RELATIONSHIPS WITH RELATED PERSONS. No Seller or any "Related
Person" (as defined below) of Seller has, or since the first day of the
next to last completed fiscal year of Seller has had, any interest in any
property (whether real, personal, or mixed and whether tangible or
intangible), used in or pertaining to the Business. Excluding Luverne
Truck Equipment, neither Seller nor any Related Person of Seller is, or
since the first day of the next to last completed fiscal year of Seller has
owned (of record or as a beneficial owner) an equity interest or any other
financial or profit interest in, any entity that has (a) had business
dealings or a material financial interest in any transaction with Seller,
or (b) engaged in competition with Seller with respect to any line of the
products or services of Seller (a "COMPETING BUSINESS") in any market
presently served by Seller. Except for employment-related agreements,
neither Seller nor any Related Person of Seller is a party to any contract
or agreement with, or has any claim or right against, Seller. For the
purposes of this Agreement, a "RELATED PERSON" with respect to a particular
individual, shall mean (a) any person that directly or indirectly controls,
is directly or indirectly controlled by, or is directly or indirectly under
common control of Seller; (b) any person that holds a material interest in
Seller; (c) each person that serves as a director or officer of Seller; (d)
any entity in which Seller holds a material interest; and (e) any person
related (within the second degree) to any individual described in clause
(b) or (c) above.
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3.29 MINIMUM NET WORTH. The Closing Balance Sheet, as of the Closing,
shall reflect a net worth (assets less liabilities) of at least $493,000
(which is Seller's shareholders' equity as of June 30, 1997) less the
agreed upon amount of the increase in the product warranty reserve from the
June 30, 1997 Balance Sheet of $42,000.
3.30 BROKERS. Neither Seller nor the Shareholders have retained or
employed any broker, finder, investment banker, or other person, or taken
any action, or entered into any agreement or understanding that would give
any broker, finder, investment banker, or other person any valid claim
against Buyer, the Shareholders, or Seller for a commission, brokerage fee,
or other compensation.
3.31 ACCURACY OF STATEMENTS. To the knowledge of the Shareholders, no
representation or warranty made by Seller or the Shareholders in this
Agreement, or any information, statement, certificate, or schedule
furnished, or to be furnished, to Buyer pursuant to this Agreement, or in
connection with the transactions contemplated by this Agreement, contains
or will contain any untrue statement of a material fact or omits or will
omit to state a material fact necessary to make the statements not
misleading. The representations and warranties of Seller and the
Shareholders shall be deemed to be made as of the date of this Agreement
and again as of the Closing.
ARTICLE 4 BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to the Shareholders as follows:
4.1 BUYER'S ORGANIZATION AND GOOD STANDING. Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of
the State of Michigan.
4.2 ENFORCEABILITY. Buyer has full capacity, power, and authority to
enter into this Agreement and to carry out the transactions contemplated by
this Agreement, and this Agreement is binding upon Buyer and is enforceable
against Buyer in accordance with the terms of this Agreement.
4.3 BROKERS. Except for Roney & Co., Buyer has not retained or
employed any broker, finder, investment banker, or other person, or taken
any action, or entered into any agreement or understanding that would give
any broker, finder, investment banker, or other person any valid claim
against Buyer, the Shareholders, or Seller for a commission, brokerage fee,
or other compensation.
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ARTICLE 5 COVENANTS
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing or such time as this Agreement is terminated pursuant to
Article 8 (the "TERM OF THIS AGREEMENT"), the Shareholders shall, and shall
cause Seller to, (a) afford Buyer and its representatives full and free
access to Seller's personnel, properties (including subsurface and/or
"Phase I" testing), contracts, books and records, and other documents and
data, (b) furnish Buyer with copies of all such contracts, books and
records, and other existing documents and data as Buyer may reasonably
request, and (c) furnish Buyer with such additional financial, operating,
and other data and information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESS. During the Term of this Agreement,
the Shareholders shall, and shall cause Seller to:
5.2.1 ORDINARY COURSE. Conduct the business of Seller only in
the Ordinary Course of Business;
5.2.2 GOODWILL. Use their and Seller's best efforts to
preserve intact its current business organization, keep available the
services of the current officers, employees, and agents, and maintain
the relations and goodwill with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships
with Seller;
5.2.3 CONFER. Confer with Buyer concerning operational matters
of a material nature; and
5.2.4 REPORT. Otherwise report periodically to Buyer
concerning the status of its business, operations, and finances of
Seller.
5.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by
this Agreement, during the Term of this Agreement, Shareholders will not,
and will cause Seller not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any of the changes or events listed in
Section 3.9 is likely to occur.
5.4 REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Buyer and Shareholders shall, and Shareholders shall cause
Seller to, make all legal filings required to be made by them in order to
consummate the transactions contemplated by this Agreement. During the
term of this Agreement, Shareholders shall (a) cooperate with Buyer with
respect to all filings that Buyer elects to make or is required to make in
connection with the transactions contemplated by this Agreement, and (b)
cooperate with Buyer in obtaining all consents identified in Schedule 3.5
of the Disclosure Statement.
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5.5 NOTIFICATION. During the Term of this Agreement and the Closing,
the Shareholders will promptly notify Buyer in writing if Seller or any
Shareholder becomes aware of any fact or condition that causes or
constitutes a breach of any of the Shareholders' representations and
warranties as of the date of this Agreement, or if Seller or any
Shareholder becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a breach of any such
representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. If any
such fact or condition require any change in the Disclosure Statement if
the Disclosure Statement were dated the date of the occurrence or discovery
of any such fact or condition, the Shareholders will promptly deliver to
Buyer a supplement to the Disclosure Statement specifying such change.
During the same period, the Shareholders will promptly notify Buyer of the
occurrence of any breach of any covenant of the Shareholders or Seller in
this Article 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Articles 6 or 7 impossible or unlikely.
5.6 NO NEGOTIATION. Shareholders shall not, and will cause Seller
and each of their respective representatives not to, directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the
merits of any unsolicited inquiries or proposals from, any person or entity
(other than Buyer) relating to any transaction involving the sale of the
business or assets (other than in the Ordinary Course of Business) of
Seller, or any of the capital stock of Seller, or any merger,
consolidation, business combination, or similar transaction involving
Seller.
5.7 NO COMPETITION. As an inducement for Buyer to enter into this
Agreement and as additional consideration for the consideration to be paid
to the Shareholders under this Agreement, each Shareholder agrees that:
5.7.1 NO COMPETITION. For a period of three years after the
Closing, each Shareholder shall not, directly or indirectly, engage or
invest in, own, manage, operate, finance, control, or participate in
the ownership, management, operation, financing, or control of, be
employed by, associated with, or in any manner connected with, or
render services or advice to, any business whose products or
activities compete in whole or in part with the products or activities
of Seller or its successors, anywhere within the United States;
provided, that (a) any Shareholder may purchase or otherwise acquire
up to (but not more than) one percent of any class of securities of
any such enterprise, excluding Buyer, (but without otherwise
participating in the activities of such enterprise) if such securities
are listed on any national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of
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1934, as amended; and (b) the continuing activities of any Shareholder
in connection with the activities Luverne Truck Equipment as of the
date of this Agreement shall not be a breach of this Section. Each
Shareholder agrees that this covenant is reasonable with respect to
its duration, geographical area, and scope.
5.7.2 NO SOLICITATION. For a period of five years after the
Closing, each Shareholder shall not, directly or indirectly, either
for himself or any other person or entity, (a) induce or attempt to
induce any employee of Seller (or its successors) to leave its employ,
(b) employ, or otherwise engage as an employee, independent
contractor, or otherwise, any employee of Seller (or its successors),
or (c) induce or attempt to induce any customer, supplier, licensee,
or business relation of Seller or Buyer (or their successors) to cease
doing business with Seller or Buyer (or their successors) or an
affiliate of Seller or Buyer (or their successors), or in any way
interfere with the relationship between any customer, supplier,
licensee, or business relation of Seller or Buyer (or their
successors).
In the event of a breach by a Shareholder of any covenant set forth in this
Section, the term of such covenant will be extended by the period of the
duration of such breach.
5.8 RELEASE OF CLAIMS. Effective as of the Closing, each Shareholder
releases and forever discharges Seller and its affiliates (collectively,
the "RELEASES") from any and all claims, demands, proceedings, causes of
action, orders, obligations, contracts, agreements, debts, and liabilities
whatsoever, whether known or unknown, suspected or unsuspected, both at law
and in equity, that each of the Shareholders now has, has ever had, or may
hereafter have against the Releases arising contemporaneously with or prior
to the Closing or on account of or arising out of any matter, cause or
event occurring contemporaneously with or prior to the Closing, including,
but not limited to, any rights to indemnification or reimbursement from
Seller, whether pursuant to Seller's articles of incorporation or bylaws,
contract, or otherwise, and whether or not relating to claims pending on,
or asserted after, the Closing; provided, however, that nothing contained
in this Section shall operate to release any obligations of Buyer arising
under this Agreement. Further, each Shareholder, as of the Closing,
irrevocably covenants to refrain from, directly or indirectly, asserting
any claim or demand, or commencing, instituting or causing to be commenced,
any proceeding of any kind against any Releasee, based upon any matter
purported to be released hereby.
5.9 PRE-CLOSING DISTRIBUTION OF CASH. Prior to the Closing, subject
to Section 3.29, Seller may distribute to the Shareholders up to 50% of its
1997 earnings to pay federal and state tax liability of the Shareholders
relating to such earnings, provided such distribution is consistent with
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Seller's past practice and lawful under the South Dakota Business
Corporation Act.
5.10 BEST EFFORTS. During the Term of this Agreement, Buyer and
Shareholders shall use their best efforts to cause the conditions in
Articles 6 and 7 to be satisfied.
ARTICLE 6 CONDITIONS PRECEDENT TO BUYER'S
OBLIGATION TO CLOSE
Buyer's obligation to consummate the purchase of the Shares and
to take the other actions required to be taken by Buyer at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Buyer, in whole or in
part):
6.1 ACCURACY OF REPRESENTATIONS. All of the Shareholders'
representations and warranties in this Agreement (considered collectively),
and each of these representations and warranties (considered individually),
must have been accurate in all material respects as of the date of this
Agreement, and must be accurate in all material respects as of the Closing
as if made at the Closing, without giving effect to any supplement to the
Disclosure Statement. Further, each of the Shareholders' representations
and warranties in Sections 3.3 and 3.7 must have been accurate in all
respects as of the date of this Agreement, and must be accurate in all
respects as of the Closing as if made on the Closing, without giving effect
to any supplement to the Disclosure Statement.
6.2 SHAREHOLDERS' PERFORMANCE. All of the covenants and obligations
that Shareholders are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing (considered collectively), and
each of these covenants and obligations (considered individually), must
have been duly performed and complied with in all material respects.
6.3 CONSENTS. Each of the consents identified in Section 3.5 and
Schedule 3.5 of the Disclosure Statement must have been obtained and must
be in full force and effect.
6.4 LEGAL OPINION. The Shareholders must have delivered an opinion
of their counsel in substantially the form as set forth in EXHIBIT 6.4.
6.5 ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to Buyer: (a) estoppel certificates executed on behalf of
the lessor of the Real Property Lease and each Personal Property Lease,
dated as of a date not more than five days prior to the Closing; and (b)
such other documents as Buyer may reasonably request for the purpose of
(i) enabling its counsel to provide the opinion referred to in Section 6.4,
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(ii) evidencing the accuracy of any of the Shareholders' representations
and warranties, (iii) evidencing the performance by Shareholders of, or the
compliance by the Shareholders with, any covenant or obligation required to
be performed or complied with by Shareholders, (iv) evidencing the
satisfaction of any condition referred to in this Article 6, or
(v) otherwise facilitating the consummation or performance of any of the
transactions contemplated by this Agreement.
6.6 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or threatened against Buyer or any of its affiliates,
any proceeding (a) involving any challenge to, or seeking damages or other
relief in connection with, any of the transactions contemplated by this
Agreement, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the transactions contemplated
by this Agreement.
6.7 NO CLAIM REGARDING SALE PROCEEDS. There must not have been made
or threatened by any person or entity any claim asserting that such person
or entity is entitled to all or any portion of the consideration to be paid
in connection with this Agreement.
6.8 NO PROHIBITION. Neither the consummation nor the performance of
any of the transactions contemplated by this Agreement will, directly or
indirectly (with or without notice or lapse of time), materially
contravene, or conflict with, or result in a material violation of, or
cause Buyer or any of its affiliates to suffer any material adverse
consequence under, (a) any applicable Legal Requirement, or (b) any legal
requirement or order that has been published, introduced, or otherwise
formally proposed by or before any governmental body.
6.9 EMPLOYMENT AGREEMENT. Mr. Marketon must have delivered an
executed employment agreement with Seller in substantially the form as set
forth in EXHIBIT 6.9 (the "EMPLOYMENT AGREEMENT").
ARTICLE 7 CONDITIONS PRECEDENT TO THE SHAREHOLDERS'
OBLIGATION TO CLOSE
The Shareholders' obligation to consummate the sale of the Shares
and to take the other actions required to be taken by Shareholders at the
Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by the
Shareholders, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must
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be accurate in all material respects as of the Closing as if made at the
Closing.
7.2 BUYER'S PERFORMANCE. All of the covenants and obligations that
Buyer is required to perform or to comply with pursuant to this Agreement
at or prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
7.3 LEGAL OPINION. Buyer must have delivered an opinion of its
counsel in substantially the form as set forth in EXHIBIT 7.3.
7.4 ADDITIONAL DOCUMENTS. Buyer must have caused the following
documents to be delivered to the Shareholder: such documents as the
Shareholders may reasonably request for the purpose of (a) enabling their
counsel to provide the opinion referred to in Section 7.3 evidencing the
accuracy of any representation or warranty of Buyer, (b) evidencing the
performance by Buyer of, or the compliance by Buyer with, any covenant or
obligation required to be performed or complied with by Buyer,
(c) evidencing the satisfaction of any condition referred to in this
Article 7, or (d) otherwise facilitating the consummation of any of the
transactions contemplated by this Agreement.
7.5 NO INJUNCTION. There must not be in effect any legal requirement
or any injunction or other order that (a) prohibits the sale of the Shares
and (b) has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.
7.6 RELEASE OF GUARANTIES. Buyer must have delivered an agreement in
substantially the form as set forth in EXHIBIT 7.6 pursuant to which Buyer
agrees to reimburse fully any Shareholder for any liability or damages he
or she personally incurs as a result of personal guaranties of corporate
debt.
7.7 EMPLOYMENT AGREEMENT. Buyer must have delivered the Employment
Agreement, executed by Seller.
ARTICLE 8 TERMINATION
8.1 TERMINATION EVENTS. This Agreement may, by notice given prior to
or at the Closing, be terminated:
8.1.1 BREACH. By either Buyer or the Shareholders if a
material breach of any provision of this Agreement has been committed
by the other party and such breach has not been waived;
8.1.2 CONDITIONS. (a) By Buyer, if any of the conditions in
Article 6 has not been satisfied as of the Closing or if satisfaction
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of such a condition is or becomes impossible (other than through the
failure of Buyer to comply with its obligations under this Agreement)
and Buyer has not waived such condition on or before the Closing; or
(b) by the Shareholders, if any of the conditions in Article 7 has not
been satisfied as of the Closing or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
a Shareholder to comply with his or her obligations under this
Agreement) and the Shareholders have not waived such condition on or
before the Closing;
8.1.3 CONSENT. By mutual consent of Buyer and the
Shareholders; or
8.1.4 UPSET DATE. By either Buyer or the Shareholders if the
Closing has not occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before December 31, 1997, or
such later date as the parties may agree upon.
8.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 8.1 is in addition to any other rights he, she, or it may have
under this Agreement or otherwise, and the exercise of a right of
termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 8.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in
Sections 10.3 and 10.5 will survive; provided, however, that if this
Agreement is terminated by a party because of the breach of the Agreement
by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under
this Agreement, the terminating party's right to pursue all legal remedies
will survive such termination unimpaired.
ARTICLE 9 INDEMNIFICATION
9.1 INDEMNIFICATION AND REIMBURSEMENT BY SHAREHOLDERS. The
Shareholders, severally but not jointly, will indemnify and hold harmless
Buyer, Seller, and their respective representatives, shareholders,
controlling persons, and affiliates (collectively, the "INDEMNIFIED
PERSONS"), and will reimburse the Indemnified Persons, for any loss,
liability, claim, damage, expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "DAMAGES"), arising from
or in connection with: (a) any breach of any representation or warranty
made by a Shareholder in this Agreement (without giving effect to any
supplement to the Disclosure Statement), the Disclosure Statement, the
supplements to the Disclosure Statement, or any other certificate or
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document delivered by a Shareholder pursuant to this Agreement; (b) any
breach by a Shareholder of any covenant or obligation of such Shareholder
in this Agreement; or (c) any product shipped or manufactured by, or any
services provided by Seller prior to the Closing. The Shareholders'
liability under this Section is a pro rata liability; and loss which the
Shareholders incur under this Section will be borne by them in the same
proportion to which they owned Luverne Common Stock as of the date of this
Agreement.
9.2 LIMITATIONS ON INDEMNIFICATION. Notwithstanding any other
provisions in this Article, Buyer's (and Buyer's affiliates') right to
indemnification under this Article shall be limited as follows:
9.2.1 BASKET. The Shareholders shall not be obligated to
indemnify Buyer and Buyer's affiliates unless and until, and only to
the extent that, the aggregate amount of Indemnified Losses exceeds
$20,000 (the "BASKET"); provided, however, that the Basket shall not
apply to, and the Shareholders shall fully indemnify Buyer and Buyer's
affiliates for: (a) any claim arising out of a breach of a
representation or warranty relating to authorization to enter into and
enforceability of this Agreement, taxes, capitalization of Seller, or
environmental matters; and (b) any fraudulent or intentional breach of
this Agreement or any intentional failure to perform any obligation
set forth in this Agreement.
9.2.2 INDEMNIFICATION PERIOD. Buyer's right to seek
indemnification under this Article shall survive for a period of 18
months from the Closing, except that: (a) the indemnity period shall
not expire, but shall survive forever, for claims with respect to
representations, warranties, covenants regarding taxes, environmental
matters, and the enforceability of this Agreement; and (b) with
respect to any other covenant or agreement, the right to seek
indemnity shall survive until the covenant or agreement expires by its
terms that, in any event, shall not be deemed to have occurred before
90 days after any affected party has knowledge of a breach of the
covenant or agreement. The making of a claim for indemnification
under this Agreement shall toll the running of the limitation period
with respect to that claim. For purposes of the preceding sentence, a
claim shall be deemed made upon the commencement of an independent
judicial proceeding with respect to the matter underlying the claim or
receipt by any Shareholder of a written notice of claim setting forth
the amount of the claim (if known by Buyer) and a general description
of the facts underlying the claim.
9.2.3 AMOUNT. No Shareholder shall be liable to Buyer for any
Damages in excess of such Shareholder's pro rata share of $200,000,
provided that this Section will not apply to (a) any breach of any of
the Shareholders' representations and warranties of which a
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Shareholder had knowledge at any time prior to the date on which such
representation and warranty is made, or (b) any intentional breach by
a Shareholder of any covenant or obligation.
9.3 THIRD-PARTY CLAIMS.
9.3.1 NOTICE OF THIRD-PARTY CLAIMS. If any action, suit, or
proceeding (including claims by federal, state, local, or foreign tax
authorities) shall be threatened or commenced against Buyer in respect
of which Buyer may demand indemnification under this Agreement, Buyer
shall notify the Shareholders to that effect with reasonable
promptness after receiving written notice of the action, suit, or
proceeding, and the Shareholders shall have the opportunity (provided
the Shareholders shall have acknowledged in writing that the
Shareholders are obligated under the terms of this Agreement to
indemnify Buyer and Buyer shall not have determined, in Buyer's sole
judgment, to retain control over the action, suit, or proceeding) to
defend against the action, suit, or proceeding, at the Shareholder's
sole expense, subject to the limitations set forth below.
9.3.2 DEFENSE OF CLAIMS. If the Shareholders elect to defend
against an action, suit, or proceeding and Buyer does not decide to
retain control of the matter, the Shareholders shall notify Buyer to
that effect with reasonable promptness. Buyer shall have the right to
employ Buyer's own counsel and participate in the defense of the case,
but the fees and expenses of Buyer's counsel shall be at the expense
of Buyer, unless (a) the employment of Buyer's counsel at the expense
of the Shareholders shall have been authorized in writing by the
Shareholders in connection with the defense of the action, suit, or
proceeding; (b) the Shareholders shall have decided not to defend
against the action, suit, or proceeding; or (c) Buyer shall have
reasonably concluded that (i) Buyer's interests could only be
adequately protected by Buyer's direct participation in or defense of
the action, suit, or proceeding, or (ii) the action, suit, or
proceeding involves to a significant extent matters beyond the scope
of the indemnity agreement contained in this Article. In any case
described in clause (c) of the preceding sentence, the Shareholders
shall not have the right to direct the defense of the action, suit, or
proceeding on behalf of Buyer, and that portion of the fees and
expenses reasonably related to matters covered by the indemnity
agreement contained in this Article shall be borne by the
Shareholders.
9.3.3 CONDUCT OF DEFENSE. Any party granted the right to
direct the defense of a claim pursuant to this Article shall:
(a) keep the other parties to this Agreement fully informed of the
action, suit, or proceeding at all stages of the matter, whether or
not represented; (b) promptly submit to the other parties copies of
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all pleadings, responsive pleadings, motions, and other similar legal
documents and papers received in connection with the action, suit, or
proceeding; (c) permit the other parties to this Agreement and their
counsel, to the extent practicable, to confer on the conduct of the
defense of the action, suit, or proceeding; and (d) to the extent
practicable, permit the other parties to this Agreement and their
counsel an opportunity to review all legal papers to be submitted
before the submission. Subject to an appropriate confidentiality
agreement, the parties shall make available to each other and each
other's counsel and accountants all of the books and records relating
to the action, suit, or proceeding, and each party shall render to the
other any assistance as may be reasonably required in order to insure
the proper and adequate defense of the action, suit, or proceeding.
9.4 CLAIMS BY BUYER. Buyer shall notify the Shareholders in writing
with reasonable promptness after the discovery of any claim upon which
Buyer will demand indemnification from the Shareholders under this
Agreement. 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 14 days after receipt of the notice, the Shareholders shall
either reimburse Buyer for the amount of the claim (or acknowledge Buyer's
right of offset) or notify Buyer of the Shareholder's intent to dispute the
claim.
9.5 REMEDIES CUMULATIVE. The remedies provided in this Article are
cumulative and shall not prevent the assertion by Buyer of any other rights
or the seeking of any other remedies against any Shareholder.
ARTICLE 10 GENERAL
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS, AND
INDEMNITIES. All representations, warranties, covenants, and indemnities
made by any party to this Agreement shall survive the Closing and any
investigation at any time made by or on behalf of any party before or after
the Closing. No investigation by Buyer shall in any way affect Buyer's
right to rely on the representations, warranties, and covenants of the
Shareholders set forth in this Agreement or any document related to this
Agreement.
10.2 ASSIGNMENT AND BENEFITS. No party to this Agreement may assign
or transfer this Agreement, either directly or indirectly, by merger,
liquidation, consolidation, sale of stock, change of control, operation of
law, or other means, without the prior written consent of all parties to
this Agreement, except that Buyer may assign all or part of Buyer's
interest in this Agreement to one or more persons or entities controlling,
controlled by, or under common control with Buyer. Any assignment of the
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obligations of this Agreement shall not release the assignor from the duty
to perform the assignor's obligations under this Agreement. This Agreement
shall be binding upon, inure to the benefit of, and be enforceable by and
against the respective successors and permitted assigns of each of the
parties to this Agreement.
10.3 CONFIDENTIALITY. Unless otherwise required by law, the parties
to this Agreement shall not make any disclosure of the existence or terms
of this Agreement or the transactions contemplated by this Agreement
without the prior written consent of the other party or parties, except
that each party may disclose the transactions contemplated by this
Agreement to that party's professional advisers, to that party's
institutional lenders, and to that party's management employees, to the
extent that any of those persons or entities needs to know of the
transactions in connection with the person's or entity's relationship with
the disclosing party.
10.4 NOTICES. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed
to have been duly given when delivered, sent by telecopy, or sent by
express delivery service with charges prepaid and receipt requested, or, if
those services are not reasonably available, mailed (postage prepaid) by
certified mail with return receipt requested:
TO BUYER: WITH A COPY TO:
Spartan Motors, Inc. Warner Norcross & Judd LLP
1000 Reynolds Rd. 900 Old Kent Building
P.O. Box 440 111 Lyon Street, N.W.
Charlotte, Michigan 48813 Grand Rapids, Michigan 49503-2489
Attention: President Attention: Stephen C. Waterbury
Fax: (517) 543-7727 Fax: (616) 752-2500
TO SHAREHOLDERS: WITH A COPY TO:
A. Russell Melgaard Boyce, Murphy, McDowell & Greenfield, LLP
1200 East Birch Street Norwest Center, Suite 600
Brandon, SD 57005 101 N. Phillips Ave.
Fax: (605) 582-7236 Sioux Falls, SD 57104
Attention: Russ Greenfield
Fax: (605) 336-0618
Any party may change that party's address by prior written notice to the
other parties.
10.5 EXPENSES. Each party to this Agreement shall pay that party's
respective expenses, costs, and fees (including professional fees) incurred
in connection with the negotiation, preparation, execution, and delivery of
this Agreement and the consummation of the transactions contemplated by
this Agreement.
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10.6 ENTIRE AGREEMENT. This Agreement, and the exhibits and schedules
(including the Disclosure Statement) to this Agreement (which are
incorporated in this Agreement by reference), and the agreements referred
to in this Agreement, contains the entire agreement and understanding of
the parties and supersede all prior agreements, negotiations, arrangements,
and understandings relating to the subject matter of this Agreement.
10.7 AMENDMENTS AND WAIVERS. This Agreement may be amended, modified,
superseded, or canceled, and any of the terms, covenants, representations,
warranties, or conditions of this Agreement may be waived, only by a
written instrument signed by each party to this Agreement or, in the case
of a waiver, by or on behalf of the party waiving compliance. The failure
of any party at any time to require performance of any provision in this
Agreement shall not affect the right of that party at a later time to
enforce that or any other provision. No waiver by any party of any
condition, or of any breach of any term, covenant, representation, or
warranty contained in this Agreement, in any one or more instances, shall
be deemed to be a further or continuing waiver of any condition or of any
breach of any other term, covenant, representation, or warranty.
10.8 NO THIRD-PARTY BENEFICIARIES. The provisions of this Agreement
are solely between and for the benefit of the respective parties to this
Agreement, and do not inure to the benefit of, or confer rights upon, any
third party, including any employee of Buyer or Seller.
10.9 SEVERABILITY. Whenever possible, each provision and term of this
Agreement will be interpreted in a manner to be effective and valid, but if
any provision or term of this Agreement is held to be prohibited by or
invalid, then such provision or term will be ineffective only to the extent
of such prohibition or invalidity, without invalidating or affecting in any
manner whatsoever the remainder of such provision or term or the remaining
provisions or terms of this Agreement. If any of the covenants set forth
in Section 5.7 are held to be unreasonable, arbitrary, or against public
policy, such covenants will be considered divisible with respect to scope,
time, and geographic area (on a state-by-state or county-by-county basis),
and in such lesser scope, time and geographic area, will be effective,
binding and enforceable against each Shareholder.
10.10 HEADINGS. The headings of the sections and subsections of
this Agreement have been inserted for convenience of reference only and
shall not restrict or modify any of the terms or provisions of this
Agreement.
10.11 GOVERNING LAW. This Agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of South
Dakota, as applied to contracts made and to be performed in that state,
without regard to conflicts of law principles.
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10.12 CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied against any
party. Unless otherwise expressly provided, the words "include" and
"including" whenever used in this Agreement shall not limit the preceding
words or terms.
10.13 COUNTERPARTS. This Agreement may be signed in counterparts,
each of which shall be deemed to be an original, and the counterparts shall
together constitute one document. Counterparts may be signed and delivered
by a party by fax, which shall be binding on that party when faxed, with
one or more copies signed in original to be later delivered by express
delivery service or mail.
[the remainder of the page intentionally blank]
-30-
<PAGE>
This Stock Purchase Agreement is made as of August 11, 1997.
SPARTAN MOTORS, INC.
/S/ A. RUSSELL MELGAARD
A. RUSSELL MELGAARD
By /S/ JOHN E. SZTYKIEL
John E. Sztykiel
Its President and Chief /S/ RONALD J. BACH
Executive Officer RONALD J. BACH
/S/ ROBERT D. POTTS
ROBERT D. POTTS
/S/ JOHN M. SCHULZETENBERG
JOHN M. SCHULZETENBERG
HELEN C. SCHNOBRICH TRUST,
established December 29, 1994
By /S/ ROGER SCHNOBRICH
Roger Schnobrich, as Trustee
/S/ PETER L. HAUSER
PETER L. HAUSER
/S/ BOBBI JO BRACK
BOBBI JO BRACK
/S/ WILLIAM J. MARKETON
WILLIAM J. MARKETON
-31-
<PAGE>
EXHIBIT 99
[SPARTAN MOTORS LOGO]
FOR IMMEDIATE RELEASE
CONTACT: John R. Gaedert
Spartan Motors, Inc. (517) 543-6400
or
Jeffrey Lambert, Brian Edwards
Seyferth & Associates, Inc. (800) 435-9539
SPARTAN MOTORS TO ACQUIRE THREE FIRE-TRUCK COMPANIES
CHARLOTTE, Michigan, August 12, 1997 -- Spartan Motors, Inc.
(NASDAQ/NMS: SPAR) today announced agreements to acquire three privately
held fire truck apparatus manufacturers for $19.6 million in cash and
stock.
The Charlotte, Mich.-based manufacturer of custom chassis said it
plans to merge Brandon, S.D.-based Luverne Fire Apparatus, Talladega, Ala.-
based Quality Manufacturing and Snyder, Neb.-based Smeal Fire Apparatus
into Spartan Motors as separate subsidiaries. All three companies are in
the exclusive business of manufacturing and marketing fire truck bodies.
Smeal specializes in aerial ladders for fire trucks.
The three companies will contribute to Spartan an expected $46.1
million in incremental revenues on an annual basis. Luverne, Quality and
Smeal reported combined revenues of $58.3 million in 1996. The deals are
expected to close by the end of the third quarter 1997.
"These actions reflect a new direction for Spartan Motors, shifting
from a pure fire truck chassis supplier to a more progressive operation,"
said George Sztykiel, Spartan Motors Chairman and Chief Executive Officer.
<PAGE>
SPARTAN MOTORS - PAGE 2
"We are now in a better position to drive industry change in the fire truck
market."
Under terms of the agreements, the three companies will retain their
facilities, employees and management teams as wholly owned subsidiaries of
Spartan Motors. Spartan, which has been building custom fire truck chassis
since its inception in 1975, will continue to supply these companies with
custom fire truck chassis.
"The changing face of the fire truck industry drove us to look outside
our existing structure for growth opportunities, and who better to partner
with than customers who are profitable and bring complementary products to
the table," said John Sztykiel, Spartan Motors President and Chief
Operating Officer. "These three companies are leaders in their respective
product categories, profitable and, most importantly, have proven
leadership teams in place. We are extremely excited about both our short-
term and long-range prospects."
--more--
SPARTAN MOTORS, INC. - P.O. BOX 440 - 1000 REYNOLDS RD -
CHARLOTTE, MI 48813 - USA
(517) 543-8400 - FAX (517) 543-7727
<PAGE>
SPARTAN MOTORS - PAGE 3
Spartan said it ultimately expects to see increases in the number of
fire truck chassis manufactured as its chassis representation in each of
the three companies is expected to grow. Spartan plans to continue to
supply its custom fire truck chassis to all interested OEMs and will retain
its direct fire truck sales force, as will the other three companies.
"Our most important goal with this plan is enhancing shareholder
value, and we are confident it will happen given the combined products,
profitability and established expertise offered by these three companies,"
said John Sztykiel.
Sztykiel added that Luverne, Quality, Smeal and Spartan will seek to
obtain financing, insurance and supplier pricing as a group to improve the
companies' profitability.
"These companies provide value across the board," George Sztykiel
added. "First and foremost they will improve our profitability, driving
increased shareholder value. From an employee perspective, this strategy
provides new and expanded opportunities for our associates. Likewise, end-
user customers will gain improved access and innovation from the combined
strengths of Spartan and its new partners. And finally, the communities
where we all do business will reap the long-term rewards that this alliance
will bring."
Specific terms of the agreements were not disclosed.
Spartan Motors, Inc. is the world's leading engineer and manufacturer
of custom chassis for fire trucks, recreational vehicles, transit buses,
school buses, concrete mixers and other speciality vehicles. The Company
<PAGE>
SPARTAN MOTORS - PAGE 4
also owns a one-third equity stake in Carpenter Holdings, Inc., which owns
school bus manufacturer Carpenter Industries, Inc.
###
NOTE TO INVESTORS: A COMPREHENSIVE QUESTION AND ANSWER DOCUMENT ON THESE
ACQUISITIONS IS AVAILABLE VIA A FAX-ON-DEMAND SERVICE. IF YOU WOULD LIKE A
COPY, PLEASE CALL 1-888-329-5716 AND REQUEST DOCUMENT NUMBER 1000. THE
DOCUMENT CAN ALSO BE RETRIEVED AT SPARTAN MOTORS' INTERNET SITE AT
HTTP://WWW.SPARTANMOTORS.COM.
