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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 8, 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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<PAGE>
Item 5. OTHER EVENTS.
On August 8, 1997, Spartan Motors, Inc. entered into an Agreement
and Plan of Merger with CTS Holding Company, Inc. in connection with its
acquisition of Quality Manufacturing, Inc. of Talladega, Alabama. A copy
of the Agreement and Plan of Merger 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 merger
described in the Agreement and Plan of Merger was completed on August 14,
1997.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND
EXHIBITS.
(c) The following documents are filed as exhibits to this report on
Form 8-K:
2(a) Agreement and Plan of Merger dated August 8, 1997.
2(b) Amendment No. 1 to the Agreement and Plan of Merger dated
August 13, 1997.
99 Press Release dated August 12, 1997.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
-2-
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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 14, 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
- -------------- --------
2(a) Agreement and Plan of Merger dated August 8, 1997.
2(b) Amendment No. 1 to the Agreement and Plan of Merger
dated August 13, 1997.
99 Press Release dated August 12, 1997.
<PAGE>
EXHIBIT 2(a)
AGREEMENT AND PLAN OF MERGER
by and among
CTS HOLDING COMPANY, INC.,
(CTS)
SPARTAN MOTORS, INC.,
(Buyer)
and
SPARTAN QUALITY, INC.
(MergerSub)
and joined in by
DUANE K. SHOMBER, EUGENE H. HALL, JOHNNIE W. HAWKINS,
JIMMY L. CUNNINGHAM, AND CHRISTOPHER SHOMBER
(Shareholders of CTS)
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TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 Articles of Incorporation and Bylaws of Surviving
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.4 Officers and Directors of Surviving Corporation . . . . . . . .1
1.5 Further Assurances. . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE 2 VOTING AND CONVERSION OF SHARES. . . . . . . . . . . . . . . .2
2.1 Effect on Shares and MergerSub's Capital Stock. . . . . . . . .2
2.2 Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . .2
2.3 Place and Date of Closing . . . . . . . . . . . . . . . . . . .2
2.4 Consummation of the Merger. . . . . . . . . . . . . . . . . . .3
2.5 Closing Obligations . . . . . . . . . . . . . . . . . . . . . .3
2.6 Closing Balance Sheet . . . . . . . . . . . . . . . . . . . . .4
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . .4
3.1 Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . .4
3.2 Organization and Good Standing. . . . . . . . . . . . . . . . .4
3.3 Capitalization of CTS . . . . . . . . . . . . . . . . . . . . .4
3.4 Capitalization of Subsidiary. . . . . . . . . . . . . . . . . .5
3.5 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . .5
3.6 No Conflict with Other Instruments or Proceedings . . . . . . .5
3.7 Compliance with Laws and Other Regulations. . . . . . . . . . .6
3.8 Financial Statements. . . . . . . . . . . . . . . . . . . . . .6
3.9 Absence of Undisclosed Liabilities. . . . . . . . . . . . . . .6
3.10 Absence of Certain Changes or Events. . . . . . . . . . . . . .6
3.11 Customers and Suppliers . . . . . . . . . . . . . . . . . . . .6
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.13 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . .7
3.14 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.15 Real Property . . . . . . . . . . . . . . . . . . . . . . . . .8
3.16 Personal Property . . . . . . . . . . . . . . . . . . . . . . .8
3.17 Condition of Assets . . . . . . . . . . . . . . . . . . . . . .8
3.18 Intellectual Property . . . . . . . . . . . . . . . . . . . . .8
3.19 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.20 Employee Relations. . . . . . . . . . . . . . . . . . . . . . .9
3.21 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . .9
3.22 Environmental Matters . . . . . . . . . . . . . . . . . . . . .9
3.23 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.24 Product Liabilities and Warranties. . . . . . . . . . . . . . 11
3.25 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.26 Permits and Licenses. . . . . . . . . . . . . . . . . . . . . 11
i
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Page
3.27 Qualified Investor. . . . . . . . . . . . . . . . . . . . . . 11
3.28 Acknowledgments Regarding Buyer's Restricted Common
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.29 Applications, Proxy Materials, Etc. . . . . . . . . . . . . 12
3.30 Books and Records . . . . . . . . . . . . . . . . . . . . . . 13
3.31 Relationships with Related Persons. . . . . . . . . . . . . . 13
3.32 Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . . 13
3.33 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.34 Accuracy of Statements. . . . . . . . . . . . . . . . . . . . 13
ARTICLE 4 BUYER'S REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . 13
4.1 Buyer's Organization and Good Standing. . . . . . . . . . . . 13
4.2 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Financial Statements. . . . . . . . . . . . . . . . . . . . . 14
4.4 Buyer's Capital Stock . . . . . . . . . . . . . . . . . . . . 14
4.5 Capitalization of MergerSub . . . . . . . . . . . . . . . . . 14
4.6 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.7 Private Placement Memorandum. . . . . . . . . . . . . . . . . 15
4.8 Issuance of Buyer's Common Stock. . . . . . . . . . . . . . . 15
4.9 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 5 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Access and Investigation. . . . . . . . . . . . . . . . . . . 15
5.3 Operation of the Business . . . . . . . . . . . . . . . . . . 15
5.4 Negative Covenant . . . . . . . . . . . . . . . . . . . . . . 15
5.5 Required Approvals. . . . . . . . . . . . . . . . . . . . . . 16
5.6 Notification. . . . . . . . . . . . . . . . . . . . . . . . . 16
5.7 No Negotiation. . . . . . . . . . . . . . . . . . . . . . . . 16
5.8 No Competition. . . . . . . . . . . . . . . . . . . . . . . . 16
5.9 Resale Restrictions . . . . . . . . . . . . . . . . . . . . . 17
5.10 Buyer's Post-Closing Filings. . . . . . . . . . . . . . . . . 17
5.11 Release of Claims . . . . . . . . . . . . . . . . . . . . . . 17
5.12 Pledges Shares. . . . . . . . . . . . . . . . . . . . . . . . 18
5.13 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 6 CONDITIONS PRECEDENT TO BUYER'S
OBLIGATION TO CLOSE. . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1 Accuracy of Representations . . . . . . . . . . . . . . . . . 18
6.2 CTS's and the Shareholders' Performance . . . . . . . . . . . 18
6.3 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.4 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . 18
6.5 Additional Documents. . . . . . . . . . . . . . . . . . . . . 19
6.6 No Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 19
6.7 No Claim Regarding Sale Proceeds. . . . . . . . . . . . . . . 19
6.8 No Prohibition. . . . . . . . . . . . . . . . . . . . . . . . 19
6.9 Due Diligence Investigation . . . . . . . . . . . . . . . . . 19
ii
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Page
6.10 Employment Agreements . . . . . . . . . . . . . . . . . . . . 19
6.11 Related Transactions. . . . . . . . . . . . . . . . . . . . . 19
6.12 Release of Pledge . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 7 CONDITIONS PRECEDENT TO SELLERS'
OBLIGATION TO CLOSE. . . . . . . . . . . . . . . . . . . . . . . . . 19
7.1 Accuracy of Representations . . . . . . . . . . . . . . . . . 20
7.2 Buyer's Performance . . . . . . . . . . . . . . . . . . . . . 20
7.3 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . 20
7.4 Additional Documents. . . . . . . . . . . . . . . . . . . . . 20
7.5 No Injunction . . . . . . . . . . . . . . . . . . . . . . . . 20
7.6 Release of Guaranties . . . . . . . . . . . . . . . . . . . . 20
7.7 Employment Agreements . . . . . . . . . . . . . . . . . . . . 20
7.8 Related Transactions. . . . . . . . . . . . . . . . . . . . . 20
7.9 Release of Pledge . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 8 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.1 Termination Events. . . . . . . . . . . . . . . . . . . . . . 20
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 9 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 21
9.1 Indemnification and Reimbursement by Shareholders . . . . . . 21
9.2 Limitations on Indemnification. . . . . . . . . . . . . . . . 21
9.3 Third-Party Claims. . . . . . . . . . . . . . . . . . . . . . 22
9.4 Claims by Buyer . . . . . . . . . . . . . . . . . . . . . . . 23
9.5 Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.6 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 10 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.1 Survival of Representations, Warranties, Covenants, and
Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.2 Assignment and Benefits . . . . . . . . . . . . . . . . . . . 24
10.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 24
10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.5 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.6 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 25
10.7 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . 25
10.8 No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . 25
10.9 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 25
10.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 26
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is made
between SPARTAN MOTORS, INC., a Michigan corporation ("BUYER"), SPARTAN
QUALITY, INC., an Alabama corporation ("MERGERSUB"), and CTS HOLDING
COMPANY, INC., an Alabama corporation ("CTS"), and is joined in by DUANE K.
SHOMBER, EUGENE H. HALL, JOHNNIE W. HAWKINS, JIMMY L. CUNNINGHAM, AND
CHRISTOPHER SHOMBER (each a "SHAREHOLDER"). CTS and MergerSub are
sometimes collectively referred to as the "CONSTITUENT CORPORATIONS."
CTS and its wholly owned subsidiary, Quality Manufacturing, Inc.,
an Alabama corporation (the "SUBSIDIARY"), are engaged in the manufacture,
distribution, and sale of fire truck apparatus from their facilities in
Talladega, Alabama (the "BUSINESS"). Buyer desires to become affiliated
with CTS through the merger of MergerSub with and into CTS. The
Shareholders own all of the outstanding shares of CTS's capital stock and
join in this Agreement to make certain representations and covenants and to
jointly and severally guaranty the prompt performance of CTS's obligations
under this Agreement.
ARTICLE 1 THE MERGER
1.1 THE MERGER. At the Effective Time (as defined below), CTS shall
be merged with and into MergerSub (the "MERGER"), and MergerSub shall be
the surviving corporation (the "SURVIVING CORPORATION"). At the Effective
Time, the separate existence of CTS shall cease. The name of the Surviving
Corporation shall be "Spartan Quality, Inc." The Merger shall have the
effects on CTS and MergerSub as Constituent Corporations of the Merger as
provided under the Alabama Business Corporation Act (the "ACT").
1.2 EFFECTIVE TIME. The Merger shall become effective at the time
(the "EFFECTIVE TIME") of filing of, or at such later time specified in, a
certificate of merger (the "CERTIFICATE OF MERGER"), in the form required
by and executed in accordance with the Act, filed with the Alabama
Secretary of State (the "SECRETARY OF STATE").
1.3 ARTICLES OF INCORPORATION AND BYLAWS OF SURVIVING CORPORATION.
The Articles of Incorporation and Bylaws of MergerSub shall be the Articles
of Incorporation and Bylaws of the Surviving Corporation until thereafter
amended as provided by the Act.
1.4 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. Subject to
applicable law, the executive officers and directors of MergerSub
immediately prior to the Effective Time shall be the initial executive
officers and directors, respectively, of the Surviving Corporation.
1.5 FURTHER ASSURANCES. If, at any time after the Effective Time,
the Surviving Corporation shall consider that any other actions or things
are necessary to fully effectuate this Agreement, the Surviving Corporation
<PAGE>
shall be authorized to execute and deliver, in the name and on behalf of
each of the Constituent Corporations or otherwise, all such documents and
to take all such actions and things as may be necessary or desirable to do
so.
ARTICLE 2 VOTING AND CONVERSION OF SHARES
2.1 EFFECT ON SHARES AND MERGERSUB'S CAPITAL STOCK. In the
aggregate, the Shareholders are entitled to receive One Million Nine
Hundred Thousand Dollars ($1,900,000) in cash and 253,334 shares of Buyer's
Common Stock (as defined below), as set forth below:
2.1.1 CTS'S COMMON STOCK. As of the Effective Time, each
share of CTS's common stock, $1.00 par value (each a "SHARE" and
collectively the "SHARES" or "CTS'S COMMON STOCK") outstanding
immediately prior to the Effective Time (other than any Shares in the
treasury of CTS, or held by any wholly owned subsidiary of CTS, which
Shares shall be canceled) shall be converted into the right to receive
(a) $1,900 net to the holder in cash, and (b) 253.334 restricted
shares of Buyer's common stock, $0.01 par value ("BUYER'S COMMON
STOCK"), payable to the holder of such Shares, without interest
thereon; provided that all Buyer's Common Stock issued to each
Shareholder under this Agreement shall be a "restricted security," as
that term is defined in Securities and Exchange Commission ("SEC")
Rule 144, promulgated under the Securities Act of 1933, as amended
(the "SECURITIES ACT").
2.1.2 MERGERSUB'S COMMON STOCK. As of the Effective Time,
each share of common stock of MergerSub, $0.01 par value ("MERGERSUB
COMMON STOCK"), outstanding immediately prior to the Effective Time
shall be converted into one full share of common stock, no par value,
of the Surviving Corporation.
2.2 SHAREHOLDERS' MEETING.
2.2.1 CTS'S ACTIONS. CTS, acting through its board of
directors (the "BOARD") shall, in accordance with applicable law, duly
call, give notice of, convene, and hold a special meeting of its
shareholders (the "SPECIAL MEETING") as soon as practicable following
the execution of this Agreement for the primary purpose of considering
and adopting this Agreement.
2.2.2 SHAREHOLDER'S ACTIONS. Each Shareholder agrees that he
will vote all of the Shares then owned by such Shareholder in favor of
the approval and adoption of this Agreement.
2.2.3 BUYER'S ACTION. Buyer agrees that it will vote all of
its shares of MergerSub Common Stock in favor of the approval and
adoption of this Agreement.
2
<PAGE>
2.3 PLACE AND DATE OF CLOSING. The closing of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the
offices of Shareholders' counsel, on the later of (a) August 14, 1997;
(b) Buyer's satisfaction or written waiver of the condition set forth in
Section 6.9; 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 Sections 2.3 will not result in the
termination of this Agreement and will not relieve any party of any
obligation hereunder.
2.4 CONSUMMATION OF THE MERGER. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Articles 6 and 7, the
parties shall execute and file the Certificate of Merger with the Secretary
of State and take such other actions as may be required by law to make the
Merger effective as promptly as is practicable.
2.5 CLOSING OBLIGATIONS.
2.5.1 BUYER'S OBLIGATIONS. At the Closing, Buyer shall
deliver to the Shareholders:
(a) CASH. In the aggregate, cash of $1,900,000 (pro rata
to each Shareholder) by certified check or wire transfer to
accounts specified by the respective Shareholders.
(b) STOCK. In the aggregate, 253,334 shares of Buyer's
Common Stock; such shares shall be issued in the names of each
Shareholder, pro rata based on their respective ownership
interest in CTS.
(c) EMPLOYMENT AGREEMENTS. The Employment Agreements
described in Section 6.10, executed by MergerSub, for Messrs.
Hall, Cunningham, and C. Shomber.
(d) INDEMNIFICATION AGREEMENT. The Indemnification
Agreement described in Section 7.6, executed by MergerSub and
Buyer.
(e) LEGAL OPINION. The legal opinion described in Section
7.3 and those supplemental documents set forth in Section 7.4.
(f) ARTICLES OF MERGER. Articles of Merger, as required by
the Act and reasonably acceptable to counsel for the
Shareholders, executed by MergerSub.
2.5.2 SHAREHOLDERS' OBLIGATIONS. At or prior to the Closing,
the Shareholders shall deliver to Buyer:
3
<PAGE>
(a) OLD CERTIFICATES. Certificates representing 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) SHAREHOLDER QUESTIONNAIRES. The Shareholder
Questionnaires described in Section 3.27, duly completed and
executed by each Shareholder.
(c) EMPLOYMENT AGREEMENTS. The Employment Agreements
described in Section 6.10, executed by Messrs. Hall, Cunningham,
and C. Shomber, respectively.
(d) INDEMNIFICATION AGREEMENT. The Indemnification
Agreement described in Section 7.6, executed by the Shareholders
and related parties.
(e) LEGAL OPINION. The legal opinion described in Section
6.4 and those supplemental documents set forth in Section 6.5.
(f) ARTICLES OF MERGER. Articles of Merger, as required by
the Act and reasonably acceptable to counsel for the Buyer,
executed by CTS.
2.6 CLOSING BALANCE SHEET. Within 90 days after the Closing, Buyer
may prepare a balance sheet, dated as of the Closing, reflecting the assets
and liabilities of CTS (the "CLOSING BALANCE SHEET"). If prepared, the
Closing Balance Sheet shall be prepared in a manner that is consistent with
past practice and the books and records of CTS and that fairly presents
CTS's financial condition and results of operations as of the Closing.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
The Shareholders, jointly and severally, represent and warrant to
Buyer as follows:
3.1 DISCLOSURE SCHEDULE. Two identical copies of individually
numbered schedules (collectively, the "DISCLOSURE SCHEDULE") corresponding
to the sections of this Article have been prepared. To the knowledge of
the Shareholders, each individual schedule in the Disclosure Schedule
contains all applicable exceptions to the specifically identified section
contained in this Article and sets forth each exception in reasonable
detail. The Shareholders have provided Buyer with true and complete copies
of all documents referenced in the Disclosure Schedule.
4
<PAGE>
3.2 ORGANIZATION AND GOOD STANDING. CTS and Subsidiary are
corporations duly organized, validly existing, and in good standing under
the laws of State of Alabama. CTS and Subsidiary have all requisite
corporate power and authority to carry on their respective businesses as
presently conducted. Except for Subsidiary, CTS does not own, and has no
obligation to acquire, any interest in any other person or entity.
3.3 CAPITALIZATION OF CTS. The authorized equity securities of CTS
consists of 5,000 Shares, of which 1,000 Shares are issued and outstanding
(as of the date of this Agreement and immediately prior to the Effective
Time) and constitute all of the CTS's Common Stock. Each Shareholder's
ownership of the Shares is set forth below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Certificate No. 6 Duane K. Shomber 521 shares
Certificate No. 7 Eugene H. Hall 288 shares
Certificate No. 8 Johnnie W. Hawkins 105 shares
Certificate No. 9 Jimmy L. Cunningham 60 shares
Certificate No. 10 Christopher Shomber 26 shares
</TABLE>
Except as disclosed in Section 3.3 of the Disclosure Schedule, the
Shareholders are, and will be immediately prior to the Effective Time, the
record and beneficial owners and holders of all of the Shares, free and
clear of all encumbrances and adverse claims. There are no other issued or
outstanding equity securities or other securities of CTS. No legend or
other reference to any purported encumbrance appears upon any Share
certificate. 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, sale, or transfer of any equity securities or
other securities of CTS.
3.4 CAPITALIZATION OF SUBSIDIARY. The authorized equity securities
of Subsidiary consists of 500 shares of common stock, par value $10 per
share, of which two shares are issued and outstanding and owned by CTS, and
1,000 shares of preferred stock, par value $10 per share, of which no
shares are issued and outstanding and owned by CTS. Except as disclosed in
Section 3.4 of the Disclosure Schedule, CTS is and will be immediately
prior to and after the Effective Time, the owner of all outstanding shares
of common stock of Subsidiary, free and clear of all encumbrances and
adverse claims. There are no agreements relating to the issuance, sale, or
transfer of any equity securities or other securities of Subsidiary.
3.5 ENFORCEABILITY. CTS and each Shareholder have full capacity,
power, and authority to execute and perform this Agreement. This Agreement
is binding upon CTS and each Shareholder and is enforceable against CTS and
each Shareholder in accordance with its terms.
5
<PAGE>
3.6 NO CONFLICT WITH OTHER INSTRUMENTS OR PROCEEDINGS. Except as
disclosed in Section 3.6 of the Disclosure Schedule, the execution and
performance of this Agreement will not (a) result in a breach of or
constitute a default under any agreement or other obligation to which CTS,
Subsidiary, or the Shareholders is now a party or by which they or any of
their assets may be bound or affected; (b) violate any law, rule,
regulation, license, or permit of any governmental body or any order or
decree of any court; (c) result in the imposition of any tax or encumbrance
on CTS or Subsidiary or any of their assets; or (d) affect in any way the
terms of any of CTS's or Subsidiary's indebtedness. All consents,
approvals, or authorizations of, or declarations, filings, or registrations
with, any third parties or governmental bodies required of CTS or
Subsidiary in connection with the execution, delivery, and performance of
this Agreement, as set forth in Schedule 3.6 of the Disclosure Schedule,
will be obtained or made by CTS or Subsidiary before the Closing.
3.7 COMPLIANCE WITH LAWS AND OTHER REGULATIONS. To the knowledge of
the Shareholders, CTS and Subsidiary are in full compliance with all laws,
rules, regulations and other requirements applicable to the conduct of
CTS's or Subsidiary's business or their assets or properties, or any
premises occupied by CTS and Subsidiary.
3.8 FINANCIAL STATEMENTS. The audited, consolidated financial
statements of CTS and Subsidiary as of and for the fiscal years ended
August 31, 1996 and 1995, as reported on by CTS's independent accountants,
Kirkland & Company, P.C. of Anniston, Alabama, including all schedules and
notes relating to such statements, as previously delivered to CTS, are
correct and complete in all material respects. True and complete copies of
such financial statements are attached to the Disclosure Schedule. These
statements fairly present CTS's and Subsidiary's financial condition and
results of operations on a consolidated 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 as otherwise noted in such financial statements
or the notes thereto. The financial statements referred to in this Section
3.8 reflect the consistent application of such accounting principles
throughout the periods involved, except as disclosed in the notes to such
financial statements. In this Agreement, CTS's balance sheet as of August
31, 1996, is referred to as the "BALANCE SHEET" and August 31, 1996, is
referred to as the "BALANCE SHEET DATE."
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
Section 3.9 of the Disclosure Schedule and except for (a) current
liabilities incurred in the ordinary course of business which would not,
individually or in the aggregate, reasonably be expected to adversely
affect CTS, Subsidiary, or the Business, and (b) financing liabilities and
obligations, CTS and Subsidiary do not have any debts, liabilities, or
obligations of any nature, and there is no basis for the assertion against
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CTS or Subsidiary of any debt, liability, or obligation. No Shareholder or
person related to such Shareholder has received notice of a pending or
threatened claim or dispute regarding the performance bonds issued by
Hartford Insurance Company.
3.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet
Date, CTS and Subsidiary have conducted the Business in the ordinary course
of business and have maintained CTS's and Subsidiary's records relating to
the Business in a manner that fairly and accurately reflects transactions,
assets, and liabilities in accordance with standard accounting practices
consistently applied. Since the Balance Sheet Date, there has been no
adverse change in the condition of the Business or in CTS's or Subsidiary's
properties.
3.11 CUSTOMERS AND SUPPLIERS. Since the Balance Sheet Date, there has
not been any adverse change in CTS's or Subsidiary's relationship with any
of their respective 10 largest customers, dealers, or suppliers, nor could
an adverse change be reasonably anticipated as a result of this Agreement.
There are no known claims against CTS or Subsidiary to return merchandise
in excess of an aggregate of Ten Thousand Dollars ($10,000) by any one
purchaser, or Twenty-five Thousand Dollars ($25,000) for all purchasers
considered collectively.
3.12 TAXES.
3.12.1 FILINGS. CTS has filed on a timely basis since 1992
all tax returns that are or were required to be filed 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"). The Shareholders have delivered to Buyer's
representative copies of complete and accurate tax returns filed since
1992. CTS has paid, or made provision for the payment of, all taxes
that have or may have become due pursuant to those tax returns or
otherwise, or pursuant to any assessment received by CTS.
3.12.2 AUDITS. Neither CTS nor Subsidiary has ever had an
audit with respect to any of its tax returns in the past six years.
All tax returns are closed by the applicable statute of limitations
for all taxable years through 1992. CTS has not given or been
requested to give waivers or extensions of any limitation period
relating to the payment of taxes of CTS or for which CTS may be
liable.
3.12.3 RESERVES. The charges, accruals, and reserves with
respect to taxes on the books of CTS and Subsidiary are adequate
(determined in accordance with GAAP) and are at least equal to CTS's
and Subsidiary's liability for taxes. There exists no proposed tax
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assessment against CTS or Subsidiary. No consent to the application
of Section 341(f)(2) of the Internal Revenue Code of 1986, as amended
(the "CODE") has been filed with respect to any property or assets
held, acquired, or to be acquired by CTS. All taxes that CTS or
Subsidiary 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 person or entity.
3.12.4 TRUE, CORRECT, AND COMPLETE. All tax returns filed by
CTS are true, correct, and complete. There is no tax sharing
agreement that will require any payment by CTS after the date of this
Agreement. Neither CTS nor Subsidiary is, nor within the five-year
period preceding the Closing, has been, an "S" corporation. 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 CTS 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.
3.13 ACCOUNTS RECEIVABLE. CTS has provided Buyer and its
representatives the opportunity to review Subsidiary's records regarding
accounts receivable, including an accounts receivable aging report as of
June 30, 1997, and as of Closing, an aging report as of July 31, 1997.
Such information provided by CTS to Buyer or its representatives regarding
such accounts receivable is accurate and complete.
3.14 INVENTORY. CTS has provided Buyer and its representatives the
opportunity to inspect the inventory of Subsidiary. The inventory of
Subsidiary is not less than the inventory reflected on the books and
records of Subsidiary.
3.15 REAL PROPERTY. To the knowledge of the Shareholders, no building
or improvement that CTS or Subsidiary owns or uses encroaches on any
easement or property owned by another and no building or improvement owned
by another encroaches on any property that CTS or Subsidiary owns or uses
or on any easement the benefit of which runs to CTS or Subsidiary. To the
knowledge of the Shareholders, CTS and Subsidiary are not in violation of
any law, order, regulation, or other requirement relating to any real
property that CTS or Subsidiary owns or uses. To the knowledge of the
Shareholders, there are no ground subsidences or slides on any real
property that CTS or Subsidiary owns or uses. All buildings and
improvements that CTS or Subsidiary owns or uses are in good condition
(normal wear and tear excepted), are structurally sound and not in need of
repairs and are adequately serviced by all necessary utilities.
3.16 PERSONAL PROPERTY. Except as disclosed in Section 3.16 of the
Disclosure Schedule, CTS and Subsidiary have good title to all of their
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respective personal property and other assets, except as since sold or
otherwise disposed of in the ordinary course of business, subject to no
lien, encumbrance, or other restriction. Subject to liens on personal
property in the ordinary course of business, all personal property will be
in the possession of CTS or Subsidiary on the Closing.
3.17 CONDITION OF ASSETS. The real and personal property (whether
owned or leased) of CTS and Subsidiary are in good condition and repair,
normal wear and tear excepted.
3.18 INTELLECTUAL PROPERTY. CTS or Subsidiary does not own any
"Intellectual Property" (as defined below) other than any rights to use the
name "Quality Manufacturing, Inc." and other than common law rights that
may have accrued in Subsidiary's diamond-shaped logo. "INTELLECTUAL
PROPERTY" includes: corporate names, fictional business names, trading
names, registered and unregistered trademarks, service marks, and
applications, patents and patent applications, copyrights, rights in mask
works, and know-how, trade secrets, confidential information, software,
technical information, process technology, plans, drawings, and blue
prints. Neither CTS nor Subsidiary has infringed or unlawfully used any
Intellectual Property of any other person or entity. 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 conduct the Business as
previously conducted.
3.19 CONTRACTS. All agreements and other arrangements of CTS or
Subsidiary with a third party are valid and enforceable in accordance with
their terms. Neither CTS, Subsidiary, nor any other party is in default or
in arrears under the terms of any of those agreements. Except as set forth
in the Disclosure Schedule or as provided to Buyer prior to the Closing,
neither CTS nor Subsidiary is a party to: (a) any other agreement with
respect to any real property; (b) any joint venture, distributor, dealer,
advertising, agency, manufacturer's representative, sales representative,
sales agent, franchise, license, or similar agreement; (c) any loan
agreement, security agreement, mortgage, indenture, or promissory note;
(d) any consulting or employment agreement; (e) any contract out of the
ordinary course of business; (f) any contract of guaranty or
indemnification; or (g) any contract purporting to limit the freedom of CTS
or Subsidiary to compete in any line of business in any geographical area.
Except for customers in the ordinary course of business, no person or
entity has any agreement or understanding for the purchase from CTS or
Subsidiary of any of their respective assets.
3.20 EMPLOYEE RELATIONS. Except as set forth in Section 3.20 of the
Disclosure Schedule, to the knowledge of the Shareholders, neither CTS nor
Subsidiary has had, within the last three years, any union organizational
effort, claim of unfair labor practice, wrongful discharge, employment
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discrimination, or sexual harassment dispute. To the knowledge of the
Shareholders, CTS and Subsidiary have complied with all applicable laws,
rules, and regulations respecting employment practices, occupational
safety, wages, and hours. Neither CTS nor Subsidiary has been within the
last five years a party to any express or implied contract or agreement
with any of CTS's or Subsidiary's present or former employees with respect
to length, duration, or conditions of employment, compensation, or any
other form of remuneration. A copy of each employee handbook governing
CTS's and Subsidiary's employees, and a copy of the employment application
forms currently used by CTS or Subsidiary are attached to the Disclosure
Schedule. Except for Messrs. D. Shomber and Hawkins, no employee of CTS or
Subsidiary has notified CTS or Subsidiary of an intention to terminate
employment.
3.21 EMPLOYEE BENEFIT PLANS. Except as set forth in the Disclosure
Schedule, CTS and Subsidiary have never maintained any employee pension
benefit plans, employee welfare benefit plans, incentive compensation
plans, benefit plans for retired employees, or any other employee benefit
plans ("PLANS"). True, correct, and complete copies of all Plan texts and
all agreements in any way relating to the Plans have been delivered to
Buyer. To the knowledge of the Shareholders, all Plans are and always have
been, in compliance with all applicable laws and no Plan has been involved
in a prohibited transaction. CTS or Subsidiary has made full and timely
payment of all required contributions to the Plans and no unfunded
liability or accumulated funding deficiency exists with respect to any
Plan. In the past three years, Subsidiary has provided, and until the
Closing, shall provide, all notices required under COBRA.
3.22 ENVIRONMENTAL MATTERS.
3.22.1 ORDERS. There is no consent decree, consent order, or
other agreement to which CTS is a party in relation to any
environmental matter and no agreement is necessary for CTS's or
Subsidiary'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 to the best of the Shareholders' knowledge,
threatened by any person or entity under or pursuant to any
Environmental Law (as defined below) with respect to the Business or
its assets and neither CTS nor Subsidiary has 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).
3.22.2 PERMITS. Except as set forth in an environmental
report prepared by ATC Associates Inc., dated July 29, 1997, CTS and
Subsidiary have received all permits, licenses, and approvals, have
kept all records, and have made all filings and disclosures required
by Environmental Laws.
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3.22.3 PROPERTIES. To the knowledge of the Shareholders, all
real or personal property that is currently, or was previously, owned,
operated, leased, or used by CTS or Subsidiary (the "PROPERTIES"), is
free of Environmental Contamination, and no underground storage tanks
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 the Shareholders, none of the
buildings or improvements that CTS or Subsidiary owns, operates,
leases, or uses is constructed in whole or in part of any material
that releases any substance that gives rise to liability under any
Environmental Law.
3.22.4 WASTE DISPOSAL. To the knowledge of the Shareholders,
neither CTS nor Subsidiary have been identified as a potentially
responsible party with respect to any site at which CTS'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 CTS or Subsidiary, 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 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. Neither CTS nor Subsidiary has
disposed of, permitted the disposal of, or knows of the disposal of
any waste or Hazardous Material on any of the Properties.
3.22.5 OTHER. To the knowledge of the Shareholders, the
Business as currently conducted does not constitute a nuisance and no
claim or allegation of nuisance has been made with respect to the
Business by any adjoining land owner or other person or entity.
3.22.6 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; (b) "HAZARDOUS MATERIAL" means any
substance defined, designated, or classified as hazardous, toxic,
radioactive, or dangerous, or that is otherwise regulated by any
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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.
3.23 LITIGATION. Except as disclosed in Section 3.23 of the
Disclosure Schedule, there is no pending or, to the knowledge of the
Shareholders, threatened, suit, proceeding or inquiry affecting CTS,
Subsidiary, or the Shareholders (in their capacity as such), or any of the
capital stock, properties, assets, or business prospects of CTS or
Subsidiary, or the transactions contemplated by this Agreement. To the
knowledge of the Shareholders, there is no factual basis upon which any
suit, proceeding, or inquiry could be asserted or based. To the knowledge
of the Shareholders, there is no outstanding order or decree of any court,
governmental body, or arbitration tribunal against or affecting CTS,
Subsidiary, or any of the capital stock, properties, assets, or business
prospects of them.
3.24 PRODUCT LIABILITIES AND WARRANTIES. The Disclosure Schedule 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 CTS's
warranty experience over the past five years. There have been no personal
injury product liability claims asserted against CTS or Subsidiary during
the last five years.
3.25 INSURANCE. All of the CTS's insurance policies are outstanding
and in full force and to the extent that they are due, all premiums are
currently paid, and all duties of the insured have been fully
discharged. The Disclosure Schedule contains a list and complete
description of all insurance policies and all other forms of insurance that
CTS or Subsidiary owns or holds. CTS's present insurance coverage shall
remain in effect at least until the Closing.
3.26 PERMITS AND LICENSES. All permits, licenses, orders, and
approvals necessary to carry on the Business as presently conducted are
identified in the Disclosure Schedule 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 to the best of the Shareholders' knowledge, threatened or
could result by reason of this Agreement.
3.27 QUALIFIED INVESTOR. Each Shareholder has delivered to Buyer a
duly executed Shareholder Questionnaire in the form attached as EXHIBIT
3.27 that is correct, complete, and not misleading; and is acquiring
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Buyer's Common Stock for his own account for the purpose of investment and
not with a view to distribution or resale.
3.28 ACKNOWLEDGMENTS REGARDING BUYER'S RESTRICTED COMMON STOCK.
3.28.1 RESTRICTED. Each Shareholder has been advised that the
Buyer's Common Stock to be received in connection with this Agreement
has not been registered under the Securities Act, or registered or
qualified under any state securities law (a "BLUE SKY LAW"). Each
Shareholder understands that Buyer is relying on the representations
of the Shareholders for purposes of claiming exemptions from
registration under the Securities Act and applicable Blue Sky Laws and
that the basis for such exemptions may not be present if a Shareholder
intends to acquire the Buyer's Common Stock for resale on the
occurrence or non-occurrence of some predetermined event. No
Shareholder has any such intention.
3.28.2 RULE 144. Each Shareholder understands that the
Buyer's Common Stock received in connection with this Agreement will
be "restricted securities" as that term is defined in Rule 144 under
the Securities Act. Each Shareholder understands that Buyer is under
no obligation so to register or qualify the restricted shares under
the Securities Act or any Blue Sky Law.
3.28.3 LEGEND. Each Shareholder understands and agrees that
any certificates representing or relating to the restricted Buyer's
Common Stock may bear such legends as Buyer may consider necessary or
advisable to facilitate compliance with the Securities Act, Blue Sky
Laws, and any other securities law.
3.28.4 PRIVATE PLACEMENT MEMORANDUM. As of the Closing, each
Shareholder acknowledges receipt of the Private Placement Memorandum
and the exhibits thereto (collectively, the "PPM"), and acknowledges
that he has been furnished with such financial and other information
concerning Buyer and the business of Buyer as he considers necessary
in connection with the investment in the Buyer's Common Stock.
Further, no oral representations have been made or oral information
furnished to a Shareholder or his adviser(s) in connection with the
Buyer's Common Stock that are in any way inconsistent with the
statements made in the PPM.
3.29 APPLICATIONS, PROXY MATERIALS, ETC. None of the information to
be supplied by or on behalf of a Shareholder, CTS, or Subsidiary for
inclusion in any document relating to this Agreement or the Special Meeting
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
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filing or communication to the extent necessary to make the statements
contained therein, in light of the circumstances in which they are made at
the respective times such documents are filed, supplemented, or amended.
3.30 BOOKS AND RECORDS. All of the corporate record books and
shareholder records of CTS and Subsidiary (a) have been made available to
Buyer and (b) are complete and correct and have been maintained in
accordance with sound business practices. No meeting or written consent of
any shareholders, board of directors, or committee has been held for which
minutes are not contained in such minute books.
3.31 RELATIONSHIPS WITH RELATED PERSONS. Neither CTS nor any Related
Person (defined below) of CTS is, or since the first day of the next to
last completed fiscal year of CTS has had an interest in, any entity that
has (a) had business dealings or a material interest in any transaction
with CTS, or (b) engaged in competition with CTS. Except for employment-
related agreements, neither CTS nor any Related Person of CTS is a party to
any agreement with, or has any claim or right against, CTS. For the
purposes of this Agreement, a "RELATED PERSON" with respect to a particular
person, shall mean (a) any person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under
common control with such person; (b) any person that holds a material
interest in such person; (c) each person that serves as a director or
officer of such person; (d) any entity in which such person holds a
material interest; and (e) any person related to any individual described
in clause (b) or (c).
3.32 MINIMUM NET WORTH. The Closing Balance Sheet, as of the Closing,
shall reflect a net worth (assets less liabilities) of at least $2,200,000.
3.33 BROKERS. Neither CTS, Subsidiary, nor the Shareholders have
retained or employed any broker, finder, investment banker, or other
person, or taken any action that would give any person any valid claim
against Buyer, the Shareholders, or CTS for a commission, brokerage fee, or
other compensation.
3.34 ACCURACY OF STATEMENTS. To the knowledge of the Shareholders, no
representation or warranty made by CTS or the Shareholders in this
Agreement, or any information, statement, certificate, or schedule
furnished, or to be furnished, to Buyer in connection with 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 CTS and the Shareholders
shall be deemed to be made as of the date of this Agreement and again as of
the Closing.
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ARTICLE 4 BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to CTS and 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. This Agreement is binding upon Buyer and is enforceable
against Buyer in accordance with its terms.
4.3 FINANCIAL STATEMENTS. The audited, consolidated financial
statements of Buyer and Buyer's subsidiaries as of and for the years ended
December 31, 1996, 1995, and 1994, as reported on by Buyer's independent
accountants, Deloitte & Touche LLP, including all schedules and notes
relating to such statements, as previously delivered to the Shareholders or
CTS, are correct and complete in all material respects. These statements
fairly present Buyer's and Buyer's subsidiaries' financial condition and
results of operations on a consolidated basis on the dates and for the
periods indicated, and have been prepared in conformity with GAAP applied
consistently throughout the periods indicated, except as otherwise noted in
such financial statements or the notes thereto. The financial statements
referred to in this Section 4.3 reflect the consistent application of GAAP
throughout the periods involved, except as disclosed in the notes to such
financial statements.
4.4 BUYER'S CAPITAL STOCK.
4.4.1 CLASSES AND SHARES. The authorized capital stock of
Buyer consists of (a) 23,900,000 shares of Buyer's Common Stock, of
which, as of June 30, 1997, a total of 12,288,372 shares were legally
issued and outstanding; and (b) 2,000,000 shares of preferred stock,
without par value (of which 130,000 shares are designated Series A
Preferred Stock), none of which are issued and outstanding as of the
date of this Agreement.
4.4.2 NO OTHER CAPITAL STOCK. As of the execution of this
Agreement: (a) other than Buyer's Common Stock, there is no security
issued and outstanding that represents or is convertible into capital
stock of Buyer; and (b) there are no outstanding subscriptions,
options, warrants, or rights to acquire any capital stock of Buyer, or
agreements to which Buyer is a party or by which it is bound to issue
capital stock, except as set forth in, or as contemplated by, this
Agreement, except (i) stock options awarded pursuant to stock option
plans; (ii) provisions for the grant or sale of shares to, or for the
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account of, employees and directors pursuant to benefit plans; (iii)
"Buyer Rights" issued pursuant to a Rights Agreement, dated as of June
4, 1997, between Buyer and American Stock Transfer & Trust Company,
presently associated with each share of Buyer's Common Stock; and (iv)
shares issuable to former shareholders of corporations previously
acquired by Buyer pursuant to the agreements governing such
acquisitions.
4.5 CAPITALIZATION OF MERGERSUB. Buyer is and will be immediately
prior to the Effective Time, the record and beneficial owner and holder of
the issues and outstanding shares of MergerSub Common Stock, free and
clear of all encumbrances and adverse claims. There are no other issued or
outstanding equity securities or other securities of MergerSub.
4.6 SEC FILINGS. In the last two years, Buyer has filed in a timely
manner all required filings with the SEC. All such filings, as amended,
were complete and accurate in all material respects.
4.7 PRIVATE PLACEMENT MEMORANDUM. None of the information to be
supplied by Buyer for inclusion in the PPM will be false or misleading with
respect to any material fact, or will omit to state any material fact
necessary to make the statements therein not misleading at the time such
document is mailed or otherwise delivered.
4.8 ISSUANCE OF BUYER'S COMMON STOCK. The shares of Buyer's Common
Stock to be issued in connection with this Agreement have been duly
authorized and, when issued as contemplated by this Agreement, will be
legally issued, fully paid, and nonassessable shares.
4.9 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 CTS for a commission, brokerage fee, or
other compensation.
ARTICLE 5 COVENANTS
5.1 BROKER'S FEES. Buyer shall reimburse the Shareholders for any
and all broker's fees, finder's fees, agent's commissions, financial
adviser's fees, and other similar fees resulting from any of Buyer actions
in connection with this Agreement.
5.2 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing, CTS shall (a) afford Buyer and its representatives full and
free access to Subsidiary's personnel, properties, contracts, books and
records, and other documents and data, (b) furnish Buyer with copies of all
such documents and data as Buyer may reasonably request, and (c) furnish
Buyer with such additional information as Buyer may reasonably request.
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5.3 OPERATION OF THE BUSINESS. Between the date of this Agreement
and the Closing, CTS shall, and cause Subsidiary to: (a) conduct its
business only in the ordinary course of business; (b) use its 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 it; and
(c) confer with Buyer concerning operational matters of a material nature
and otherwise report periodically to Buyer concerning the status of its
business, operations, and finances.
5.4 NEGATIVE COVENANT. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Effective Time
or such time as this Agreement is terminated pursuant to Article 8 (the
"TERM OF THIS AGREEMENT"), neither CTS, Subsidiary, nor any Shareholder
will 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 3.10 is likely to occur.
5.5 REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Buyer, Shareholders, and CTS shall 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 and CTS 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 3.6 of the
Disclosure Schedule.
5.6 NOTIFICATION. During the Term of this Agreement and the
Effective Time, the Shareholders promptly will notify Buyer in writing 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 CTS or any Shareholder becomes aware of the occurrence of
any fact or condition that would 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 requires any change in the Disclosure Schedule if
the Disclosure Schedule were dated the date of the occurrence or discovery
of any such fact or condition, the Shareholders will promptly supplement
the Disclosure Schedule. During the same period, the Shareholders will
promptly notify Buyer of the occurrence of any breach of any covenant of
the Shareholders or CTS 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.
5.7 NO NEGOTIATION. Neither CTS, Subsidiary, nor any Shareholder
shall solicit, initiate, or encourage any inquiries or proposals from,
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discuss or negotiate with, provide any 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 CTS
or Subsidiary, or any of the capital stock of CTS, or Subsidiary, or any
merger or business combination involving CTS or Subsidiary.
5.8 NO COMPETITION. As an inducement for Buyer to enter into this
Agreement and as additional consideration for the consideration to be paid
to CTS under this Agreement, each Shareholder agrees that:
5.8.1 NO COMPETITION. For a period of three years after the
Effective Time, 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 or in any way associated 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 CTS or
Subsidiary or their successors, anywhere within the United States;
provided, that any Shareholder may purchase or otherwise acquire up to
(but not more than) one percent (1%) 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 1934, as amended
(the "EXCHANGE ACT"). Each Shareholder agrees that this covenant is
reasonable with respect to its duration, geographical area, and scope.
5.8.2 NO SOLICITATION. For a period of three years after the
Effective Time, 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 CTS or Subsidiary (or their
successors) to leave their employment, (b) employ, or otherwise engage
as an employee, independent contractor, or otherwise, any employee of
CTS or Subsidiary (or their successors), or (c) induce or attempt to
induce any customer, supplier, licensee, or business relation of CTS,
Subsidiary, or Buyer (or their successors) to cease doing business
with CTS, Subsidiary, or Buyer (or their successors) or an affiliate
of CTS, Subsidiary, or Buyer (or their successors), or in any way
interfere with the relationship between any customer, supplier,
licensee, or business relation of CTS, Subsidiary, or Buyer (or their
successors).
In the event of a breach by a Shareholder of any covenant set forth in this
Section 5.8, the term of such covenant will be extended by the period of
the duration of such breach. In the case of Messrs. Hall, Cunningham, and
C. Shomber, in the event of a termination of employment without cause under
their respective Employment Agreement, such Shareholder's obligations under
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Section 5.8.1 shall terminate automatically effective as of the time of
such termination without cause.
5.9 RESALE RESTRICTIONS. For a period of one year following the
Closing, each Shareholder agrees that he shall in no event pledge,
hypothecate, sell, transfer, assign, or otherwise dispose of any restricted
Buyer's Common Stock, nor receive any consideration for such shares from
any person, unless and until: (a) such shares shall be effectively
registered or qualified under the Securities Act and applicable Blue Sky
Laws or (b) the Shareholder shall have furnished Buyer with an opinion of
counsel in form and substance satisfactory to Buyer to the effect that such
disposition will not require such registration or qualification and counsel
for Buyer shall have concurred in such opinion and advised the Shareholder
of such concurrence.
5.10 BUYER'S POST-CLOSING FILINGS. Buyer shall file the reports
required to be filed by it under the Exchange Act, and the rules and
regulations adopted by the SEC thereunder, all to the extent required from
time to time to enable CTS and/or a Shareholder to sell the Buyer's Common
Stock issued in connection with this Agreement pursuant to and in
compliance with SEC Rule 144, for a period of one year after delivery of
the Buyer's Common Stock under this Agreement.
5.11 RELEASE OF CLAIMS. Effective as of the Effective Time, each
Shareholder releases and forever discharges CTS and its affiliates
(including Subsidiary and the other Shareholders) (collectively, the
"RELEASED PERSONS") from any and all claims, demands, proceedings, causes
of action, orders, obligations, contracts, agreements, debts, and
liabilities whatsoever, that each of the Shareholders now has, has ever
had, or may hereafter have against the Released Persons arising at or prior
to the Effective Time or on account of or arising out of any matter, cause,
or event occurring at or prior to the Effective Time, including, but not
limited to, any rights to indemnification or reimbursement from CTS or
Subsidiary, and whether or not relating to claims pending on, or asserted
after, the Effective Time; provided, however, that nothing contained in
this Section shall operate to release any obligations of Buyer or MergerSub
arising under this Agreement. Further, each Shareholder, as of the
Effective Time, 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 Released
Person, based upon any matter purported to be released hereby.
5.12 PLEDGES SHARES. With respect to the Shares pledged to The First
National Bank of Talladega ("FNB") pursuant to the Business Loan Agreement,
dated August 19, 1996, between FNB, CTS, and Subsidiary (the "BUSINESS LOAN
AGREEMENT"), Buyer shall cause the release of such pledged Shares from FNB
to the respective Shareholders effective as of the Closing.
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5.13 BEST EFFORTS. During the Term of this Agreement, Buyer, CTS, and
the 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 Merger and to take the other
actions required of it 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 CTS's and 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 respects as of the date of this Agreement,
and must be accurate in all material respects as of the Closing as if then
made, without giving effect to any supplement to the Disclosure Schedule.
6.2 CTS'S AND THE SHAREHOLDERS' PERFORMANCE. All of the covenants
and obligations that CTS and the Shareholders are required to perform or to
comply with 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 3.6 and
Schedule 3.6 of the Disclosure Schedule must have been obtained and must be
in full force and effect.
6.4 LEGAL OPINION. CTS and 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: such documents as Buyer may reasonably request for
the purpose of (a) enabling its counsel to provide the opinion referred to
in Section 7.3, (b) evidencing the accuracy of any of CTS's or the
Shareholders' representations and warranties, or the performance by CTS or
the Shareholders of, or the compliance by CTS or the Shareholders with, any
covenant or obligation required hereunder, (c) evidencing the satisfaction
of any condition referred to in this Article 6, or (d) 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 relating in any way to
this Agreement, or (b) that may prevent, delay, make illegal, or otherwise
interfere with any of the transactions contemplated by this Agreement.
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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 paid to
the Shareholders in connection with the Merger.
6.8 NO PROHIBITION. The consummation of any of the transactions
contemplated by this Agreement will not materially contravene, conflict
with, or result in a material violation of, or cause Buyer or any of its
affiliates to suffer any material adverse consequence under, any applicable
Legal Requirement.
6.9 DUE DILIGENCE INVESTIGATION. Buyer must be reasonably satisfied
with the results of its inspections of the real property owned and/or used
by CTS in the operation of the Business (including any title and survey
inspections), with such inspections to be performed at Buyer's direction
and at its expense within 30 days of the date of this Agreement.
6.10 EMPLOYMENT AGREEMENTS. Messrs. Hall, Cunningham, and C. Shomber
must have executed and delivered to Buyer, respectively, employment
agreements in the form as set forth in EXHIBIT 6.10 (the "EMPLOYMENT
AGREEMENTS").
6.11 RELATED TRANSACTIONS. Buyer must have entered into a definitive
acquisition agreement with Luverne Fire Apparatus Co., Ltd.
6.12 RELEASE OF PLEDGE. The Shares pledged to FNB pursuant to the
Business Loan Agreement must have been released.
ARTICLE 7 CONDITIONS PRECEDENT TO SELLERS'
OBLIGATION TO CLOSE
CTS's and the Shareholders' obligation to consummate the Merger
and to take the other actions required to be taken by CTS and the
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 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
be accurate in all material respects as of the Closing as if then made.
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.
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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 to be delivered to
CTS such documents as CTS may reasonably request for the purpose of
(a) enabling its counsel to provide the opinion referred to in
Section 6.4 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 hereby.
7.5 NO INJUNCTION. There must not be in effect any legal requirement
or any injunction or other order that prohibits the Merger and 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 (the "INDEMNITY
AGREEMENT").
7.7 EMPLOYMENT AGREEMENTS. MergerSub must have executed and
delivered to Messrs. Hall, Cunningham, and C. Shomber their respective
Employment Agreements.
7.8 RELATED TRANSACTIONS. Buyer must have entered into definitive
acquisition agreements with Luverne Fire Apparatus Co., Ltd.
7.9 RELEASE OF PLEDGE. The Shares pledged to FNB pursuant to the
Business Loan Agreement must have been released.
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 this Agreement has been committed by the other 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
of such a condition is or becomes impossible (other than through
Buyer's fault) 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 CTS'
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or a Shareholder's fault) 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 fault of the party
seeking to terminate this Agreement) on or before December 31, 1997,
or such later date as the parties may agree upon.
8.2 EFFECT OF TERMINATION. The exercise of a party's right of
termination under Section 8.1 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 unimpaired.
ARTICLE 9 INDEMNIFICATION
9.1 INDEMNIFICATION AND REIMBURSEMENT BY SHAREHOLDERS. The
Shareholders, severally but not jointly, will indemnify and hold harmless
Buyer, MergerSub, CTS, 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 CTS or a Shareholder in this Agreement or any other certificate or
document delivered by CTS or the Shareholders pursuant to this Agreement;
or (b) any breach by either CTS or a Shareholder of any covenant or
obligation of such CTS or Shareholder in this Agreement. The Shareholders'
liability under this Section is a pro rata liability; any loss which the
Shareholders incur under this Section will be borne by them in the same
proportion to which they owned CTS's 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 the aggregate
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amount of Indemnified Losses exceeds $40,000 (the "BASKET"), in which
case the Shareholders shall be liable for all claims for
indemnification including the Basket amount, up to a maximum aggregate
amount of $380,000 (the "CEILING"); provided, however, that the Basket
and Ceiling 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, or the
capitalization of CTS or Subsidiary; and (b) any fraudulent or
intentional breach of 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, and the
enforceability of this Agreement; and (b) with respect to the covenant
contained in Section 5.8, the right to seek indemnity shall survive
until the covenant 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. 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 WARRANTY CLAIMS. Based on Buyer's and its
representatives' review of information regarding Subsidiary's history
of warranty claims, the Shareholders shall not be obligated to
indemnify Buyer for Damages arising from warranty claims made by
customers of Subsidiary.
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
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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 CTS 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
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
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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 OFFSET. Buyer may, as one of Buyer's remedies in the event of
any breach of this Agreement by any Shareholder or to effect
indemnification against any Shareholder under this Article, withhold sums
payable to any Shareholder pursuant to this Agreement or otherwise, to the
extent of any claim asserted by Buyer, and offset against the amounts due
under this Agreement or otherwise any amounts or estimated amounts that
Buyer is entitled pursuant to indemnification or reimbursement under this
Agreement or otherwise. Any sums so withheld shall operate as a discharge,
to the extent of the amount withheld, of Buyer's payment obligations to the
applicable Shareholder under this Agreement or otherwise.
9.6 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 and all other documents related hereto
shall survive the Closing and any investigation made by or on behalf of any
party.
10.2 ASSIGNMENT AND BENEFITS. No party to this Agreement may assign
or transfer this Agreement, either directly or indirectly, 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
of its affiliates. Any assignment 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 may be enforced 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 without the prior written consent of the other party or
parties, except that each party may disclose the transactions contemplated
by this Agreement to persons that have a professional need to know thereof.
10.4 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given
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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
Attn.: President Attn.: Stephen C. Waterbury
Fax: (517) 543-7727 Fax: (616) 752-2500
TO CTS OR SHAREHOLDERS: WITH A COPY TO:
c/o Duane K. Shomber Isom Jackson Bailey
1420 Nimitz Avenue 822 Leighton Avenue
Talladega, Alabama 35160 Anniston, Alabama 36207
Fax: (205) 362-9299 Attn.: C. Edward Isom
Fax: (205) 237-3381
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.
10.6 ENTIRE AGREEMENT; COUNTERPARTS. This Agreement, and the exhibits
and schedules (including the Disclosure Schedule) 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. 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.
10.7 AMENDMENTS AND WAIVERS. This Agreement may be amended,
superseded, or canceled, and any of the terms 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
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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 CTS.
10.9 SEVERABILITY. This Agreement shall be interpreted in all
respects as if any invalid or unenforceable provision were omitted from
this Agreement. All provisions of this Agreement shall be enforced to the
full extent permitted by law.
10.10 GOVERNING LAW. This Agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of
Alabama, as applied to contracts made and to be performed in that state,
without regard to conflicts of law principles.
[remainder of this page intentionally blank]
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This Agreement and Plan of Merger is signed as of August 8,
1997.
SPARTAN MOTORS, INC.
By /S/ JOHN E. SZTYKIEL
John E. Sztykiel
Its President and Chief Executive
Officer
SPARTAN QUALITY, INC.
By /S/ JOHN E. SZTYKIEL
John E. Sztykiel
Its Chairman
CTS HOLDING COMPANY, INC.
By /S/ DUANE K. SHOMBER
Duane K. Shomber
Its President
/S/ DUANE K. SHOMBER
DUANE K. SHOMBER
/S/ EUGENE H. HALL
EUGENE H. HALL
/S/ JOHNNIE W. HAWKINS
JOHNNIE W. HAWKINS
/S/ JIMMY L. CUNNINGHAM
JIMMY L. CUNNINGHAM
/S/ CHRISTOPHER SHOMBER
CHRISTOPHER SHOMBER
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EXHIBIT 2(b)
AMENDMENT NO. 1 TO THE
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 (the "AMENDMENT") is made as of August 13,
1997 between SPARTAN MOTORS, INC., a Michigan corporation ("BUYER"),
SPARTAN QUALITY, INC., an Alabama corporation ("MERGERSUB"), and CTS
HOLDING COMPANY, INC., an Alabama corporation ("CTS"), and is joined in by
DUANE K. SHOMBER, EUGENE H. HALL, JOHNNIE W. HAWKINS, JIMMY L. CUNNINGHAM,
AND CHRISTOPHER SHOMBER (the "SHAREHOLDERS"). This Amendment amends the
Agreement and Plan of Merger dated August 8, 1997 between Buyer, MergerSub,
CTS, and the Shareholders (the "MERGER AGREEMENT"). Capitalized terms used
but not defined in this Amendment shall have the meanings defined to them
in the Merger Agreement.
The parties agree as follows:
1. Notwithstanding any provision in the Merger Agreement, no
fractional shares of Buyer's Common Stock shall be issued in connection
with the Merger.
2. Sections 2.5.1(a) and (b) of the Merger Agreement are deleted in
their entirety and the following is substituted in lieu thereof:
(a) CASH. In the aggregate, cash of $1,900,006 by
certified check distributed as follows:
Duane K. Shomber $989,900
Eugene H. Hall $547,201
Johnnie W. Hawkins $199,500
James L. Cunningham $114,000
Christopher Shomber $ 49,405
(b) STOCK. In the aggregate, 253,338 shares of Buyer's
Common Stock; such shares shall be issued in the names of each
Shareholder, as follows:
Duane K. Shomber 131,988 shares
Eugene H. Hall 72,961 shares
Johnnie W. Hawkins 26,601 shares
James L. Cunningham 15,201 shares
Christopher Shomber 6,587 shares
3. Except as amended hereby, all of the terms and conditions of the
Merger Agreement are ratified, and shall remain in full force and effect.
<PAGE>
The parties have executed this Amendment as of the date first
written above.
SPARTAN MOTORS, INC.
By /S/ RICHARD J. SCHALTER
Richard J. Schalter
Its Chief Financial Officer,
Secretary, and Treasurer
SPARTAN QUALITY, INC.
By /S/ RICHARD J. SCHALTER
Richard J. Schalter
Its Vice President and Assistant
Secretary
CTS HOLDING COMPANY, INC.
By /S/ DUANE K. SHOMBER
Duane K. Shomber
Its President
/S/ DUANE K. SHOMBER
DUANE K. SHOMBER
/S/ EUGENE H. HALL
EUGENE H. HALL
/S/ JOHNNIE W. HAWKINS
JOHNNIE W. HAWKINS
/S/ JIMMY L. CUNNINGHAM
JIMMY L. CUNNINGHAM
/S/ CHRISTOPHER SHOMBER
CHRISTOPHER SHOMBER
-2-
<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.
