<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED DECEMBER 31, 1996
Commission File Number 0-2762
MAXCO, INC.
(Exact Name of Registrant as Specified in its Charter)
Michigan 38-1792842
------------------------------- ----------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1118 Centennial Way
Lansing, Michigan 48917
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (517) 321-3130
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Indicate by check mark whether the registrant (1) has filed all annual,
quarterly and other reports required to be filed by Section 12 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding twelve months and (2) has
been subject to the filing requirements for at least the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding for each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 31, 1996
------------ --------------------------------
Common Stock 3,682,780 shares
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1
<PAGE> 2
PART I
FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
MAXCO, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
(Restated-
Note 2)
------------------------
(in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,322 $ 735
Marketable securities--Note 4 4,510
Accounts and notes receivable, less allowance of
$352,000 in 1996 ($327,000 at March 31, 1996) 11,452 6,699
Inventories--Note 3 3,836 3,729
Prepaid expenses and other 36 345
Net current assets of discontinued businesses--Note 2 668 27,169
------- ---------
TOTAL CURRENT ASSETS 23,824 38,677
MARKETABLE SECURITIES - LONG TERM--Note 4 9,277
PROPERTY AND EQUIPMENT
Land 470 470
Buildings 6,569 6,399
Machinery, equipment, and fixtures 8,033 6,876
------- ---------
15,072 13,745
Allowances for depreciation (5,895) (4,506)
------- ---------
9,177 9,239
OTHER ASSETS
Investments - Note 5 6,246 8,177
Notes and contracts receivable and other 4,655 942
Intangibles 468 496
Net non-current assets of discontinued businesses--Note 2 1,061 11,013
------- ---------
12,430 20,628
------- ---------
$54,708 $68,544
======= =========
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
(Restated-
Note 2)
------------------------
(in thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 226 $ 236
Accounts payable 4,185 4,778
Employee compensation 1,242 821
Taxes, interest, and other liabilities 4,322 265
Current maturities of long-term obligations 659 1,026
------- -------
TOTAL CURRENT LIABILITIES 10,634 7,126
LONG-TERM OBLIGATIONS, less current maturities 5,628 26,815
DEFERRED INCOME TAXES 2,708 4,973
INTERESTS OF MINORITY HOLDERS IN
DISCONTINUED BUSINESS 10,304
STOCKHOLDERS' EQUITY
Preferred stock:
Series Two: 12% cumulative redeemable, convertible,
$50 par value; 18,000 shares issued - Note 8 900 900
Series Three: 10% cumulative redeemable, $60 face
value; 15,931 shares issued and outstanding
(16,050 at March 31, 1996) 746 754
Common stock, $1 par value; 10,000,000 shares
authorized, 3,682,780 issued shares (4,227,442 at
March 31, 1996) 3,683 4,227
Additional paid-in capital 686
Net unrealized gain on marketable securities 39
Retained earnings 30,370 12,759
------- -------
35,738 19,326
------- -------
$54,708 $68,544
======= =======
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF OPERATIONS (CONDENSED)
MAXCO, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended December 31,
1996 1995
(Unaudited) (Unaudited)
(Restated-
Note 2)
------------------ ------------------
(in thousands, except per share data)
<S> <C> <C>
Net sales $ 15,955 $14,485
Costs and expenses:
Cost of sales and operating expenses 13,200 11,856
Selling, general and administrative 2,095 2,139
-------- -------
15,295 13,995
-------- -------
OPERATING EARNINGS 660 490
Other income (expense) (526) (2,208)
INCOME (LOSS) FROM CONTINUING OPERATIONS -------- -------
BEFORE FEDERAL INCOME TAXES 134 (1,718)
Federal income tax expense (benefit) 47 (589)
-------- -------
INCOME (LOSS) FROM CONTINUING OPERATIONS 87 (1,129)
Income (loss) from discontinued businesses--Note 2 (693) 54
-------- -------
NET INCOME (606) (1,075)
Less preferred stock dividend (51) (51)
-------- -------
NET INCOME APPLICABLE
TO COMMON STOCK (657) (1,126)
======== =======
NET INCOME (LOSS) PER COMMON SHARE--Primary
Continuing operations $ .01 $ (.27)
Discontinued businesses (.18) .01
-------- -------
$ (.17) $ (.26)
======== =======
Weighted average number of shares of common stock
and common stock equivalents outstanding 3,760 4,349
======== =======
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF OPERATIONS (CONDENSED)
MAXCO, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Nine Months Ended December 31,
1996 1995
(Unaudited) (Unaudited)
(Restated-
Note 2)
-------------------------------------
(in thousands, except per share data)
<S> <C> <C>
Net sales $54,172 $49,106
Costs and expenses:
Cost of sales and operating expenses 45,492 41,158
Selling, general and administrative 6,711 6,380
------- -------
52,203 47,538
------- -------
OPERATING EARNINGS 1,969 1,568
Other income (expense) 34,633 (3,729)
------- -------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE FEDERAL INCOME TAXES 36,602 (2,161)
Federal income tax expense (benefit) 13,723 (757)
------- -------
INCOME (LOSS) FROM CONTINUING OPERATIONS 22,879 (1,404)
Income (loss) from discontinued businesses--Note 2 (594) 405
------- -------
NET INCOME 22,285 (999)
Less preferred stock dividend (153) (153)
------- -------
NET INCOME APPLICABLE
TO COMMON STOCK 22,132 (1,152)
======= =======
NET INCOME (LOSS) PER COMMON SHARE--Primary
Continuing operations $ 5.66 $ (.35)
Discontinued businesses (.15) .09
------- -------
5.51 $ (.26)
======= =======
NET INCOME (LOSS) PER COMMON SHARE--Fully Diluted
Continuing operations $ 5.37
Discontinued businesses $ (.14)
-------
$ 5.23
=======
Weighted average number of shares of common stock
and common stock equivalents outstanding 4,018 4,377
======= =======
</TABLE>
See notes to consolidated financial statements
5
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONDENSED)
MAXCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
MAXCO, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Nine Months Ended December 31,
1996 1995
(Unaudited) (Unaudited)
(Restated-
Note 2)
----------- -----------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 22,285 $ (999)
(Income) loss from Discontinued Businesses 594 (405)
--------- --------
Income (Loss) from Continuing Operations 22,879 (1,404)
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Cash received in excess of gain recognized on sale of
FinishMaster stock 23,275
Deferred taxes and other non-cash charges 1,184 297
Changes in operating assets and liabilities (4,479) (1,576)
--------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 42,859 (2,683)
INVESTING ACTIVITIES
Purchase of additional shares of Medar stock (876)
Investment in marketable securities (13,641)
Purchases of property and equipment (781) (2,987)
Other 178 (2,665)
--------- --------
NET CASH USED IN INVESTING ACTIVITIES (15,120) (5,652)
FINANCING ACTIVITIES
Redemption of preferred stock (8) (2)
Proceeds from long-term obligations 487 9,522
Repayments on long-term obligations and notes payable (19,726) (332)
Proceeds from exercise of stock options 170 10
Acquisition and retirement of common stock (5,922) (577)
Dividends paid on preferred stock (153) (153)
--------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (25,152) 8,468
--------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 2,587 133
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 735 254
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,322 $ 387
======== ========
</TABLE>
See notes to consolidated financial statements
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAXCO, INC. AND SUBSIDIARIES
DECEMBER 31, 1996
NOTE 1 - Basis of Presentation and Significant Accounting Policies
The accompanying unaudited, condensed, consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation of the results of the interim periods covered have
been included. For further information, refer to the consolidated financial
statements and notes thereto included in Maxco's annual report on Form 10-K
for the year ended March 31, 1996.
Previously issued financial statements have been restated as a result of the
Company entering into certain transactions regarding its consolidated
subsidiaries and its investment in Medar, Inc. (see Notes 2 and 5).
The results of operations for the interim periods presented are not
necessarily indicative of the results for the full year. Certain other
amounts in the consolidated financial statements have been reclassified to
conform with the current presentation. The effect of stock options and
potential conversion of redeemable convertible preferred stock was
antidilutive for the three months ended December 31, 1996 and the three and
nine months ended December 31, 1995.
Effective April 1, 1996, the Company adopted FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are
presented and the undiscounted cash flows estimated to be generated by those
assets are less than the assets carrying amount. This statement also
addresses the accounting for long-lived assets that are expected to be
disposed. The effect of adopting FASB Statement No. 121 was not material.
NOTE 2 - Discontinued Businesses
On July 9, 1996, Maxco completed an agreement to sell its 4,045,000 shares
(67 percent interest) of FinishMaster, Inc. and for Maxco to enter into an
agreement not to compete for a total consideration of $62.6 million. More
than 90 percent of the total consideration was in cash with the balance
payable over the five year term of the non-compete agreement. As a result of
this transaction, an after tax gain of $22.0 million was recognized in the
second quarter.
7
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAXCO, INC. AND SUBSIDIARIES
Effective October 31, 1996, Maxco sold the business and substantially all the
assets (consisting principally of accounts receivable, inventory and fixed
assets) of Maxco's wholly owned subsidiary, Wright Plastic Products, Inc.,
including substantially all the assets of Wright's subsidiary, Pacer Tool and
Mold, Inc. to Plastic Acquisition Co. LLC, a privately held company. The
assets of approximately $10 million were purchased for cash, assumption of
certain liabilities and a note. The assets were sold for an amount which
approximates book value.
Effective January 27, 1997, Maxco sold the business and certain assets
(consisting of accounts receivable, inventory, fixed assets and intangibles)
of Maxco's wholly owned subsidiary, Akemi, Inc. to Axson North America, a
Houston based subsidiary of privately held Axson, S.A., based in Paris,
France. Agreement of the sales price of approximately $2.0 million in cash
was reached based on an arms-length negotiation. In addition, Maxco
purchased approximately 7.4 percent of the capital stock of Axson, S.A. for
approximately $1.9 million.
As a result of these sales, the results of operations for these units have
been reported separately as discontinued operations in the consolidated
statements of operations for the current and prior periods.
NOTE 3 - Inventories
The major classes of inventories, at the dates indicated were as follows:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
----------- ---------
(Unaudited) (Restated-Note 2)
(in thousands)
<S> <C> <C>
Raw materials $623 $587
Finished goods and
work in progress 1,390 1,574
Purchased products
for resale 1,823 1,568
----------- ---------
$3,836 $3,729
=========== =========
</TABLE>
NOTE 4 - Marketable Securities
The Company classifies its marketable securities as securities available for
sale under FASB 115, Accounting for Certain Investments in Debt and Equity
Securities. Available-for-sale securities are carried at fair value, with
the unrealized gains and losses, net of tax, reported as a separate component
of stockholders' equity. Application of this method resulted in an
unrealized gain, net of deferred tax, of approximately $39,000 being reported
as part of stockholders' equity at December 31, 1996.
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAXCO, INC. AND SUBSIDIARIES
The following is a summary of marketable securities held at December 31, 1996.
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Loss Fair Value
--------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Corporate Securities $ 6,810 $ 40 $ 61 $ 6,789
U.S. Government Notes 6,918 81 1 6,998
--------- ---------- ---------- ----------
$13,728 $ 121 $ 62 $13,787
========= ========== ========== ==========
</TABLE>
The amortized cost and estimated fair value of marketable securities at
December 31, 1996, by contractual maturity is as follows:
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
---------------------
<S> <C> <C>
(in thousands)
Available-for-Sale
Due in one year or less $ 4,561 $ 4,510
Due after one year through five years 4,491 4,531
Due after five years through ten years 4,676 4,746
--------- ---------
$13,728 $13,787
========= =========
</TABLE>
NOTE 5 - Investment in Medar, Inc.
During the three months ended December 31, 1996, Maxco purchased 156,000
shares of Medar stock bringing its ownership percentage to over 20%.
Accordingly, the Company is required to change its method of carrying its
Medar investment from a security available for sale under FASB 115 to the
equity method for accounting for investments. At December 31, 1996, Maxco
owned 1,893,405 shares of Medar's common stock (aggregate market value of
$10.7 million).
The financial statements have been restated to show Medar as an equity
investment as if the change had occurred as of April 1, 1995, the date that
Maxco first reported the Medar investment as available for sale under FASB
115. The effect of the restatement was to decrease net income as reported
previously for the three and nine months ended December 31, 1995, by
$1,157,000 or $.27 per share for the three months and $1,543,000 or $.37 per
share for the nine months. This restatement has required a reversal of the
amount previously reflected as a separate component of stockholders equity
which at September 30, 1996 amounted to $3 million.
NOTE 6 - Long-Term Debt
As a result of the sale of the Company's FinishMaster stock on July 9, 1996,
Maxco's revolving line of credit was reduced to zero at that date. Maxco's
revolving credit agreement allows Maxco to borrow up to $12.0 million on an
unsecured basis. There was no balance outstanding under this line on
December 31, 1996.
9
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAXCO, INC. AND SUBSIDIARIES
NOTE 7 - Acquisition of Business
Effective January 1, 1997, Maxco acquired the business and substantially all
of the assets (consisting principally of accounts receivable, inventory and
fixed assets) of Lansing, Michigan based Atmosphere Annealing, Inc. This
entity was privately owned by four individuals, including a 25% ownership by
the spouse of Maxco Chairman, Max A. Coon. Atmosphere Annealing provides
metal heat treating to Midwestern industrial users and employs approximately
370 people at facilities in Lansing, Michigan; Canton, Ohio; and North
Vernon, Indiana.
The net assets were acquired for approximately $13 million subject to the
audited financial statements of the seller as of December 31, 1996, which
have not been issued at this date. The determination of the final purchase
price will be made by February 28, 1997. The audited financial statements
and proforma financial information will be filed at a later date.
The consideration to be paid for these assets will consist of the assumption
of funded debt of approximately $6.5 million, cash and the issuance of a
subordinated note. Once the final purchase price is determined, the sellers
will have received one half of the purchase price, net of funded debt
assumed, in cash with the balance in the form of a subordinated note. At the
preliminary closing of this transaction $3.0 million was paid to the sellers.
NOTE 8 - Redemption of Series Two Preferred Stock
Effective January 1, 1997, the Company redeemed its entire issue of
cumulative non-voting Series Two Preferred Stock. The redemption of this
stock eliminated a class of stock which had rights to convert into
approximately 230,000 shares of common stock. At the option of the holder,
this redemption was accomplished in some cases by issuing shares of a newly
established Series Four Preferred Stock which is redeemable, is non-voting,
has no conversion rights, and will pay a dividend at the rate of 10% a year.
Alternatively, certain holders of the Series Two Preferred Stock accepted
payment in the form of an unsecured subordinated note which bears interest at
the rate of 10% a year. In addition, 140,000 shares of common stock were
exchanged in January 1997 for shares of the Series Four Preferred Stock.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MAXCO, INC. AND SUBSIDIARIES
DECEMBER 31, 1996
MATERIAL CHANGES IN FINANCIAL CONDITION
On July 9, 1996, Maxco completed an agreement to sell its 67 percent interest
in FinishMaster, Inc. The agreement called for Maxco to sell its 4,045,000
shares of FinishMaster and for Maxco to enter into an agreement not to compete
for a total consideration of $62.6 million. More than 90 percent of the total
consideration was in cash, with the balance payable over the five year term of
the non-compete agreement. As a result of this transaction, an after tax gain
of $22.0 million was reported during the second quarter and in the nine-months
ended December 31, 1996.
$21.3 million of the proceeds were used to retire Maxco's revolving line of
credit on that date. The credit agreement was subsequently amended to allow
Maxco to borrow up to $12.0 million on an unsecured basis (none of which was
outstanding at December 31, 1996). Remaining net proceeds from the sale were
invested in marketable securities.
Financing activities other than the repayment of debt were the acquisition and
retirement of approximately 600,000 shares of Maxco's common stock for $5.9
million through December 31, 1996. Net cash provided by operating activities
was $43.0 million resulting primarily from the sale of FinishMaster stock.
During the three months ended December 31, 1996, Maxco purchased 156,000 shares
of Medar stock bringing its ownership percentage to over 20%. Accordingly, the
company was required to change its method of carrying its Medar investment from
a security available for sale under FASB 115 to an equity investment. The
financial statements have been restated to show Medar as an equity investment
as if the change had occurred as of April 1, 1995. The effect of the
restatement was to decrease net income as reported previously for the three
months ended December 31, 1995 by $1,157,000 or $.27 per share and $1,543,000
or $.37 per share for the nine months ended December 31, 1995. This
restatement has required the reversal of the amount previously reflected as a
separate component of stockholders equity which at September 30, 1996 amounted
to $3 million.
Effective October 31, 1996, Maxco sold the business and substantially all the
assets of Wright Plastic Products, Inc. The assets of approximately $10
million were purchased for cash, the assumption of certain liabilities, and a
note.
Subsequent to December 31, 1996, Maxco sold the business and certain assets of
Akemi, Inc. for approximately $2.0 million in cash. In addition, Maxco
purchased approximately 7.4% of the capital stock of Axson, S.A. for $1.9
million. Results of operations for Akemi, Wright and FinishMaster have been
classified as discontinued businesses in the accompanying financial statements.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MAXCO, INC. AND SUBSIDIARIES
(CONTINUED)
The recent divestitures of Akemi and Wright have eliminated operations that had
posted operating losses during the last two years. For the nine months ended
December 31, 1996, Akemi incurred a net loss of $1.2 million and Wright
recorded net earnings of approximately $100,000. In the comparable period of
the prior year, Akemi incurred a net loss of $500,000 while Wright's net loss
for that period was approximately $900,000. Offsetting these losses was the
net income contributed by FinishMaster's operations. For the nine months ended
December 31, 1996, this contribution amounted to $470,000 compared to net
earnings for the same period of the prior year of $1.8 million. The net amount
of these losses have been included in the statement of operations under the
caption income (loss) from discontinued businesses.
Subsequent to December 31, 1996, Maxco completed several transactions that will
impact its future performance.
Effective January 1, 1997, Maxco acquired the business and assets of Atmosphere
Annealing, Inc., a Lansing based metal heat treating company with annual
revenues of approximately $27 million. It additionally acquired a 50% interest
in a new limited liability company which owns and develops real estate in
central Michigan and purchased 15 percent of the common stock of Strategic
Interactive, which provides web based training, education and other corporate
communication solutions.
Maxco also redeemed in January 1997, its series two preferred stock,
eliminating a class of stock which had rights to convert into approximately
230,000 shares of common stock. This redemption was accomplished by either, at
the option of the holder, issuing shares of series four preferred stock which
is redeemable but has no conversion rights or issuing subordinated debt. The
Company also acquired and retired 140,000 shares of its common stock in
exchange for shares of series four preferred stock.
The Company believes that its current financial resources, together with cash
generated from operations, cash received from the sale of its discontinued
businesses, and its available resources under its unsecured line of credit will
be adequate to meet its cash requirements for the next year.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MAXCO, INC. AND SUBSIDIARIES
(CONTINUED)
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Three Months Ended December 31, 1996 Compared to 1995
Net sales from continuing operations increased to $15.9 million compared to
$14.5 million in last year's third quarter. Third quarter results reflect
income from continuing operations of approximately $87,000 compared to a loss
of $1,129,000 for the comparable period in 1995. The current period reflects a
net loss of $606,000 or $.17 per share compared to last year's net loss of
$1,075,000 or $.26 per share. Prior year results have been restated to reflect
Maxco's change in its accounting for its investment in Medar from a security
available for sale under FASB 115 to an equity investment. The effect of these
restatements was to reduce net income as reported previously in 1995 by
$1,157,000 or $.27 per share.
The sales growth for the three months ended December 31, 1996, was primarily
attributable to the construction supplies group (Ersco and Wisconsin Wire).
Sales increased $1.2 million at Maxco's construction supplies businesses as a
result of increased market share.
Operating earnings increased for the three months primarily because of the
higher volume in the current period. Operating earnings were impacted, however
at the construction supplies group as gross margin percentage at this unit was
lower than those of the comparable prior period as a result of a highly
competitive market for the resteel portion of their business.
Higher operating earnings were recognized at Pak-Sak during this period
primarily as a result of an increase in sales caused by a changing customer mix
and an improvement in gross margin percentage at this unit.
A significant improvement in income from continuing operations was achieved due
to a lower level of losses from other income and expense items during the
current period. A principal cause of this improvement was that interest income
was generated as a result of the investment earnings of the cash proceeds for
the sale of Maxco's interest in FinishMaster. Interest expense was also
reduced as a portion of these proceeds were used to retire $21.3 million in
debt under Maxco's revolving line of credit. Additionally, operating results
at Medar during this current period contributed to the year to year
improvement.
Losses from discontinued businesses for the three month period increased as a
result of operating losses incurred at Akemi.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MAXCO, INC. AND SUBSIDIARIES
(CONTINUED)
Nine Months Ended December 31, 1996 Compared to 1995
Net sales from continuing operations increased to $54.2 million compared to
$49.1 million in last year's nine month period. Nine month results reflect
earnings from continuing operations of $22.9 million compared to a loss of
$1,404,000 for the comparable period in 1995. Net income was $22.3 million or
$5.23 on a fully diluted basis per share compared to a net loss of $999,000 or
$.26 per share. Prior year results have been restated to reflect Maxco's
change in its accounting for its investment in Medar from a security available
for sale under FASB 115 to an equity investment. The effect of this
restatement was to reduce net income as reported previously for the nine months
ended December 31, 1995 by $1,543,000 or $.37 per share.
The primary contribution to the increase in volume for the nine months was the
construction supplies group. Sales increased $3.9 million at Maxco's
construction supplies businesses as a result of increased market share. Sales
also improved at Pak-Sak due to improved market share during this period.
Increased volumes experienced by the Company during the first nine months
allowed earnings from operations to increase from the comparable period of the
prior year. An increase in operating earnings at Pak-Sak, due primarily to its
sales volume increase, was offset partially by a reduction in operating
earnings for the construction supplies group. Operating earnings at the
construction supplies group decreased despite the sales volume increase for
this unit as gross margin percentage was lower than those of the comparable
period due to a highly competitive market for the resteel portion of their
business.
A significant improvement in income from continuing operations was the
recognition of other income of $34.6 million for the nine months ended December
31, 1996, compared to a loss of $3,729,000 in the prior nine months. This
improvement was due primarily to the recognition of approximately a $35 million
pre tax gain on the sale of Maxco's interest in FinishMaster stock which
occurred on July 9, 1996. In addition, interest income was generated in the
current period as a result of the investment of the cash proceeds received from
the sale of Maxco's interest in FinishMaster. Interest expense was also
reduced as a portion of these proceeds were used to retire $21.3 million in
debt under Maxco's revolving line of credit. Additionally, operating results
at Medar during this current period contributed to the year to year
improvement.
Losses from discontinued businesses for the nine month period increased from
the prior year primarily as a result of operating losses, through the date of
sale for Akemi.
14
<PAGE> 15
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
Effective January 1, 1997, the Company redeemed all 18,000 shares of
its previously issued Series Two Preferred Stock. The redeemed
shareholders had the option of exchanging their shares for newly
issued Series Four Preferred Stock or for a subordinated note of equal
face value. 24,688 shares of Series Four Preferred Stock with face
values of $51.50 and 4 notes with a total value of $582,000 were
issued to the ten former Series Two Preferred Stockholders.
Two common stockholders, Douglas E. Crist and Lewis D. Johns, also
received 21,746 shares of Series Four Preferred Stock in exchange for
140,000 shares of common stock. There were no underwriters or brokers
involved in the transaction and no commissions were paid. The Company
relied on Section 3(a)(9) of the Securities Act of 1933 for
exemption of the securities from registration.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
3 Restated Articles of Incorporation and By-laws are hereby incorporated
by reference from Form S-4 dated November 4, 1991 (File No. 33-43855).
4.1 Resolution establishing Series Two Preferred Shares is hereby
incorporated by reference from Form S-4 dated November 4, 1991 (File
No. 33-43855).
4.2 Resolution establishing Series Three Preferred Shares is hereby
incorporated by reference from Form S-4 dated November 4, 1991 (File
No. 33-43855).
4.3* Resolution authorizing the redemption of Series Two Preferred Stock
and establishing Series Four Preferred Stock and the terms of the
subordinated notes.
15
<PAGE> 16
PART II
OTHER INFORMATION (CONTINUED)
10.1 Incentive stock option plan adopted August 15, 1983, including the
amendment (approved by shareholders August 25, 1987) to increase the
authorized shares on which options may be granted by two hundred fifty
thousand (250,000), up to five hundred thousand (500,000) shares of
the common stock of the company is hereby incorporated by reference
from the registrant's annual report on Form 10-K for the fiscal year
ended March 31, 1988.
10.3 Amended and restated loan agreement between Comerica Bank and Maxco,
Inc. dated as of October 31, 1994 is hereby incorporated by reference
from registrant's Form 10-K dated June 13, 1995.
10.4 First amendment to the amended and restated loan agreement between
Comerica Bank and Maxco, Inc., dated as of May 9, 1995 is hereby
incorporated by reference from registrants Form 10-K dated June 13,
1995.
10.5 Second amendment to the amended and restated loan agreement between
Comerica Bank and Maxco, Inc., dated as of September 8, 1995, is
hereby incorporated by reference from registrants Form 10-Q dated
November 10, 1995.
10.6 Third amendment to the amended and restated loan agreement between
Comerica Bank and Maxco, Inc., dated as of May 15, 1996, is hereby
incorporated by reference from registrants Form 10-K dated June 18,
1996.
10.7 Fourth amendment to amended and restated loan agreement dated as of
July 9, 1996 is hereby incorporated by reference from registrants Form
10-Q dated August 9, 1996.
10.8 Stock Purchase Agreement (sale of FinishMaster, Inc.) effective July
9, 1996, is hereby incorporated by reference from registrants Form
10-K dated June 18, 1996.
10.9 Asset purchase agreement - Wright Plastic Products, Inc. is hereby
incorporated by reference from registrants Form 10-Q dated November
14, 1996.
10.10 Amended and restated loan agreement between Comerica Bank and Maxco,
Inc. dated September 30, 1996 is hereby incorporated by reference from
registrants Form 10-Q dated November 14, 1996.
10.11 Asset purchase agreement for the purchase of Atmosphere Annealing,
Inc. is hereby incorporated by reference from registrants Form 8-K
dated January 17, 1997.
10.12* Asset purchase agreement - Axson North America, Inc.
11* Statement Re: Computation of Per Share Earnings
27* Financial Data Schedule
*Filed herewith
16
<PAGE> 17
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 thereunto duly authorized.
MAXCO, INC.
Date February 14, 1997 \S\ VINCENT SHUNSKY
----------------- ---------------------------------------
Vincent Shunsky, Vice President-Finance
and Treasurer (Principal Financial and
Accounting Officer)
17
<PAGE> 18
EXHIBIT INDEX
4.3 Memorandum of Action By Written Consent of the Board of Directors
10.12 Asset Purchase Agreement
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 4.3
MEMORANDUM OF ACTION BY WRITTEN
CONSENT OF THE BOARD OF DIRECTORS
OF
MAXCO, INC.
The following action is taken by written action of the Board of Directors
of Maxco, Inc. pursuant to MCLA 450.1525 effective November 26, 1996.
WHEREAS, there are presently outstanding 18,000 shares of Series Two
Preferred Stock of Maxco, Inc. and;
WHEREAS, such Series Two Preferred Stock is eligible to be redeemed at its
face value of $50.00 per share at the option of the Board of Directors, and;
WHEREAS, such Series Two Preferred Stock is convertible into the Common
Stock of Maxco, Inc. at the option of the holder any time up to five days prior
to the date designated for redemption at a conversation rate of $3.8828 dollars
per share and;
WHEREAS, the Board of Directors has determined that it is in the best
interest of the corporation to redeem the Series Two Preferred Stock or to
provide new conversion options to allow conversion of such Series II Preferred
Stock into a new non-convertible preferred stock at a rate equal to the rate
for conversion into Common Stock, or alternatively into a Maxco, Inc. Corporate
Note with a principle amount equal to the current fair market value of the
Series Two Preferred Stock, based on a price for the common stock of $8.00 per
share.
NOW THEREFORE IT IS RESOLVED:
1. The corporation's Series Two Preferred Stock shall be redeemed
effective January 1, 1997.
2. Notice shall be provided to the holders of Series Two Preferred Stock
no later than December 1, 1996.
3. In addition to the option to convert to Maxco, Inc. Common Stock
already available to the holders of Series Two Preferred Stock, the following
alternative options shall be provided:
Option A: Series Two Preferred Stock may be converted into a new
Series of Preferred Stock to be established. The conversion shall be at the
conversion rate of two shares of new Series Four Preferred stock for each share
of Series Two Preferred Stock. An additional cash payment of $.0184 shall be
made for each share of Series Two Preferred Stock converted. Series Four
Preferred Stock will have a face value of $51.50 per share and will pay a
dividend of 10% per annum. It will not be convertible into any other stock of
Maxco, Inc. and will be redeemable at the option of the Maxco, Inc. Board of
Directors after the third year following issuance.
Option B: Series Two Preferred Stock may alternatively be exchanged
for a Maxco, Inc. Note. The principle amount of the note shall be equal to
$103.0184 for each share of Series Two of Preferred Stock rounded down to the
nearest $1,000, with
<PAGE> 2
the balance paid in cash. The Note will be subordinated to Maxco's indebtedness
to its bank, and bear interest at 10% per annum, will pay interest only for the
first three years following issuance and will then be amortized over the next
eight years. The corporation will be given the right to prepay the Note without
penalty.
4. The Board of Directors hereby establishes Series Four Preferred Stock
with the following rights, privileges and restrictions:
A. Series Four Preferred Stock. Series Four Preferred Stock of
Maxco, Inc. shall be 50,000 shares with a face value of $51.50 per
shares.
B. Dividends. The Corporation shall pay a Dividend upon such
Series Four Preferred Stock as follows:
1. Such Dividend shall be equal to 10% per annum of the
face value of each share.
2. The Corporation shall be obligated to declare a
Dividend each and every quarter if it shall then be legally
entitled to do so.
3. If the Dividend set forth herein is not paid and if
such Dividend did not, under the circumstances, have to be paid,
then such Dividend shall be payable in the next period when such
Dividend legally can be made.
4. Should the surplus of said Corporation prior to any
Dividend Day be insufficient to pay the Dividend on the Series
Four Preferred Shares, such Dividend shall be payable from future
surplus, but without interest, and no Dividend shall at any time
be paid on the Common Shares until the full amount of 10% per
annum up to such time and for the then current fiscal year upon
all of the Preferred Shares issued shall have been paid or set
apart.
C. Redemption. The Series Four preferred Shares are redeemable
at any time after the third anniversary of their issuance in whole or
in part, at the Company's option, at 100% of principal amount plus a
declining premium amount which shall be equal to 5% until the fourth
anniversary of issuance and shall decline 1% annually thereafter to
zero following the eighth anniversary, and plus any accumulated and
unpaid Dividends to the date of redemption.
Notice of the election of the Corporation to redeem all or a portion
of the Series Four Preferred Stock shall be given by the Corporation
by mailing a copy of such notice, not less than 30 nor more than 90
days prior to the date designated therein as the date for such
redemption, to the holders of record of the Series Four Preferred
Stock to be redeemed, addressed to them at their respective address
appearing on the books of the Corporation.
<PAGE> 3
D. Voting. The Series Four Preferred Shares are nonvoting;
provided however if accrued but unpaid dividends on the Series Four
Preferred Shares are in arrears for six consecutive fiscal quarters of
the Company, the holders shall have the right to elect as a class, one
member of the Board of Directors of the Corporation. Also, the
consent of the holders of two-thirds of the Series Four Preferred
Stock will be required to create or authorize any series of stock
ranking prior in liquidation to the Series Four Preferred Stock, or to
change any of the express terms of the Series Four Preferred Stock in
a manner prejudicial to the holders thereof.
E. Liquidation. In any event of dissolution of the
Corporation, the holders of Series Four Preferred Stock shall be
entitled to receive the face value of their shares, together with
accumulated dividends thereon to the date of payment, before holders
of the Common Shares shall be entitled to receive anything thereon.
Thereafter, the Series Four Preferred Stock shall not be entitled to
share in the assets of the Corporation.
F. The holders acknowledge the Corporation has no obligation to
register this instrument under any federal or state security law or to
provide a prospectus for offer or transfer thereof by the holders.
The Series Four Preferred Shares, and any common shares into which it
is converted will be restricted securities within the meaning of the
Securities Act of 1933, and Rule 144 promulgated thereunder.
5. The corporation is hereby authorized to issue shares of Series Four
Preferred Stock or to issue its Promissory Notes in exchange for Series Two
Preferred Stock upon the terms as provided in the above resolutions.
/s/ Max A. Coon /s/ Eric L. Cross
- -----------------------------------------------------------------------------
Max A. Coon Eric L. Cross
/s/ Charles J. Drake /s/ Joel I. Ferguson
- -----------------------------------------------------------------------------
Charles J. Drake Joel I. Ferguson
/s/ Richard G. Johns /s/ Vincent Shunsky
- -----------------------------------------------------------------------------
Richard G. Johns Vincent Shunsky
/s/ J. Michael Warren /s/ James F. White
- -----------------------------------------------------------------------------
J. Michael Warren James F. White
/s/ Andrew S. Zynda
- --------------------
Andrew S. Zynda
<PAGE> 1
EXHIBIT 10.12
ASSET PURCHASE AGREEMENT
DATED
JANUARY 27, 1997
AMONG
AXSON NORTH AMERICA, INC.,
AXSON S.A.,
AKEMI, INC.
AND
MAXCO, INC.
<PAGE> 2
i
TABLE OF CONTENTS
ARTICLE I
CERTAIN DEFINITIONS ............................. 2
1.01 "Acquired Assets" .................................................. 2
1.02 "Assumed Liabilities"............................................... 3
1.03 "Excluded Assets"................................................... 3
1.04 "Retained Liabilities".............................................. 3
1.05 "Taxes"............................................................. 5
1.06 "Employee Benefit Plan"............................................. 5
ARTICLE II
PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES .................... 5
2.01 Purchase and Sale of Assets ........................................ 5
2.02 Consideration....................................................... 5
ARTICLE III
THE CLOSING .......................... 6
3.01 Time and Place ..................................................... 6
3.02 Deliveries by the Seller............................................ 6
3.03 Deliveries by Purchaser............................................. 6
3.04 Further Assurances ................................................. 7
ARTICLE IV
RELATED AGREEMENTS AND TRANSACTIONS...................... 7
4.01 Hold Harmless ...................................................... 7
<PAGE> 3
ii
4.02 Bulk Sales Laws..................................................... 7
4.03 Mail Received After Closing ........................................ 7
4.04 Access by Seller ................................................... 8
4.05 Change of Name ..................................................... 8
4.06 Allocation Agreement ............................................... 8
4.07 Confidentiality; Competition ....................................... 8
4.08 Purchase of Stock by Parent ........................................ 9
4.09 Parent Loan ........................................................ 9
4.10 Axson Loan.......................................................... 10
4.11 Axson's Board of Directors ......................................... 10
4.12 Stockholders' Agreement............................................. 10
4.13 Employee Matters.................................................... 10
4.14 Computer System..................................................... 10
4.15 Lease of Factories and Equipment.................................... 10
4.16 Supply Agreement.................................................... 10
4.17 Certain Agreements.................................................. 10
4.18 Consents and Approvals.............................................. 11
4.19 Employee Benefit Plans; Insurance................................... 11
4.20 Post-Closing Adjustment............................................. 11
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SELLER ........................... 12
5.01 Due Authorization and Execution; Valid and Binding Agreements;
No Violation ..................................................... 12
5.02 Corporate Organization; Etc......................................... 13
5.03 No Violation ....................................................... 13
5.04 Consents and Approvals of Governmental Authorities; Etc............. 14
5.05 Financial Statements ............................................... 14
5.06 No Undisclosed Liabilities; Etc..................................... 14
5.07 Absence of Certain Changes ......................................... 14
5.08 Title to Properties; Encumbrances................................... 16
5.09 Plant and Equipment ................................................ 16
5.10 Leases ............................................................. 16
5.11 No Condemnation or Expropriation ................................... 16
5.12 Patents, Trademarks, Trade names, Etc............................... 16
5.13 Litigation.......................................................... 17
5.14 Subsidiaries........................................................ 18
<PAGE> 4
iii
5.15 Toxic and Hazardous Substances and Other Environmental, Health and
Safety Issues .................................................... 18
5.16 Good Title Conveyed, Etc............................................ 19
5.17 Compliance with Law ................................................ 19
5.18 Insurance .......................................................... 20
5.19 Contracts and Commitments........................................... 20
5.20 Akemi GmbH Agreement................................................ 21
5.21 Accounts Receivable................................................. 21
5.22 Personnel........................................................... 21
5.23 Labor Difficulties.................................................. 21
5.24 Customers and Suppliers............................................. 22
5.25 No Product Liabilities.............................................. 22
5.26 Inventory........................................................... 22
5.27 Backlog ............................................................ 23
5.28 Product and Service Warranties...................................... 23
5.29 Disclosure.......................................................... 23
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND AXSON ............. 23
6.01 Corporate Organization: Etc......................................... 23
6.02 Authorization, Etc.................................................. 24
6.03 No Violation ....................................................... 24
6.04 Axson's Financial Statements........................................ 24
6.05 Power to Issue Axson Stock.......................................... 25
6.06 Capitalization...................................................... 25
6.07 Consents and Approvals of Governmental Authorities; Etc............. 25
6.08 No Undisclosed Liabilities; Etc..................................... 25
6.09 Title to Properties; Encumbrances................................... 25
6.10 Plant and Equipment................................................. 26
6.11 Litigation.......................................................... 26
6.12 Compliance with Law................................................. 26
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE CLOSING ............... 27
7.01 Regular Course of Business ......................................... 27
7.02 Amendments ......................................................... 27
7.03 Capital Changes..................................................... 27
7.04 Organization ....................................................... 27
7.05 General ............................................................ 27
<PAGE> 5
iv
7.06 Insurance; Property................................................. 27
7.07 No Default.......................................................... 27
7.08 Compliance with Laws................................................ 27
7.09 Inventory........................................................... 27
ARTICLE VIII
OBLIGATIONS PENDING THE CLOSING ..................... 28
8.01 Access ............................................................. 28
8.02 Confidentiality .................................................... 28
8.03 Other Transactions; Etc............................................. 28
8.04 Further Assurances ................................................. 29
8.05 Supplements to Schedules ........................................... 29
8.06 Foam Boards; Waste Drums ........................................... 29
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND AXSON ............ 29
9.01 Representations and Warranties True ................................ 29
9.02 Performance ........................................................ 29
9.03 Investigations; Etc................................................. 30
9.04 No Government Proceeding or Litigation.............................. 30
9.05 Material Adverse Change............................................. 30
9.06 Consents ........................................................... 30
9.07 Related Transactions................................................ 30
9.08 Key Employees....................................................... 30
9.09 Financing........................................................... 30
9.10 Insurance........................................................... 30
9.11 Certificates........................................................ 30
ARTICLE X
CONDITIONS TO THE OBLIGATIONS OF SELLER AND PARENT .............. 31
10.01 Representations and Warranties True ............................... 31
10.02 Performance ....................................................... 31
10.03 Certificates....................................................... 31
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION ...... 31
<PAGE> 6
v
11.01 Survival of Representations and Warranties ......................... 31
11.02 Statements as Representations ...................................... 31
11.03 Agreement to Indemnify.............................................. 31
11.04 Indemnification for Claims.......................................... 32
11.05 Accounts Receivable................................................. 33
11.06 Remedies Cumulative................................................. 33
ARTICLE XII
TERMINATION AND REMEDIES ............................. 33
12.01 Termination ........................................................ 33
12.02 Remedies............................................................ 34
ARTICLE XIII
MISCELLANEOUS PROVISIONS ............................. 35
13.01 Commissions and Finders' Fees ...................................... 35
13.02 Amendment and Modification.......................................... 35
13.03 Waiver of Compliance................................................ 35
13.04 Expenses............................................................ 35
13.05 Notices............................................................. 35
13.06 Assignment.......................................................... 36
13.07 Governing Law; Etc.................................................. 36
13.08 Counterparts........................................................ 36
13.09 Effectiveness; Binding Effect....................................... 37
13.10 Headings............................................................ 37
13.11 Entire Agreement.................................................... 37
13.12 Third Parties....................................................... 37
13.13 Mutual Agreement.................................................... 37
13.14 Severability........................................................ 37
<PAGE> 7
vi
EXHIBITS AND SCHEDULES
EXHIBITS
A Instrument of Assumption
B Bill of Sale
C Axson Note
D Purchaser Note
E New Factory Lease and Equipment Lease
F Old Factory Lease
G Supply Agreement
SCHEDULES
1.01(a) Tangible Personal Property
1.01(b) Inventory
1.01(c) Receivables
1.01(d) Contracts
1.01(g) Government Permits
1.03 Excluded Assets
4.17 Certain Agreements
5.04 Consents (Seller)
5.07 Certain Changes
5.10 Leases
5.12 Intellectual Property
5.18 Insurance
5.19 Contracts and Commitments
5.22 Personnel
5.24 Customers and Suppliers
5.27 Backlog
5.28 Product Warranties
6.06 Convertible Securities
6.07 Consents (Purchaser)
6.11 Litigation
7.04 Certain Officers
9.08 Key Employees
<PAGE> 8
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated January 27, 1997 among Axson North
America, Inc., a Texas corporation ("Purchaser"), Axson S.A., a French societe
anonyme ("Axson"), Akemi Inc., a Michigan corporation ("Seller"), and Maxco,
Inc., a Michigan corporation ("Parent").
This Agreement sets forth the terms and conditions upon which Seller
will sell to Purchaser, and Purchaser will purchase from Seller, certain assets
of Seller.
In consideration of the mutual agreements contained herein, the parties
agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement each of the following terms shall have the
following meaning:
1.01 "Acquired Assets" shall mean all right, title and interest
in the businesses currently conducted by Seller (collectively the "Business"),
excluding any liabilities not expressly assumed under this Agreement, and in
all of Seller's assets, other than the Excluded Assets (as hereinafter
defined), including, without limitation, the following:
(a) all machinery, equipment, supplies, tools, spare parts,
vehicles and other items of tangible personal property owned by Seller and all
leasehold interests in tangible personal property held by Seller, all as listed
on Schedule 1.01(a);
(b) all inventories of raw materials, work-in-process,
finished products, supplies, spare parts, goods in transit (i.e. goods ordered
by and invoiced to Seller which have not yet been delivered) and packaging
materials, including those listed on Schedule 1.01(b) (collectively
"Inventory");
(c) all trade accounts and notes receivable, billed or
unbilled (collectively "Receivables"), prepaid expenses and deferred charges,
and security deposits under leases to be assumed by Purchaser including those
listed on Schedule 1.01(c);
1
<PAGE> 9
(d) all rights and interest of Seller in, to and under the
contracts, licenses, leases, purchase orders, commitments, letters of intent,
proposals and agreements which are listed on Schedule 1.01(d).
(e) all patents, trademarks, patent and trademark
applications, trade names, licenses, copyrights and inventions of Seller,
including, without limitation, the trade name and trademark "Akemi," any
derivatives thereof and all trademarks and logotypes relating thereto;
(f) all of the books and records of Seller, including,
without limitation, all books of account and records relating to employees to
be hired by Purchaser, the purchase of materials, supplies or services,
production and sale of products or services, and all other existing records of
Seller, catalogs, manuals, promotion materials, and computerized books and
records, together with the related documentation used in connection therewith;
(g) all Federal, state and local governmental licenses,
permits, approvals and authorizations held by Seller, including, without
limitation, those listed on Schedule 1.01(g);
(h) all intangible assets of Seller, including telephone
numbers, customer, prospect and reference lists, trade secrets, formulae,
computer software, processes, technology, innovations, inventions, engineering
drawings, designs, patterns and similar information generally described as
know-how, research, marketing and other data, together with the goodwill
relating thereto and to the Business; and
(i) all of Seller's other rights, properties, assets,
claims, contracts and businesses of every kind, character and
description, whether tangible or intangible, real, personal or mixed, whether
accrued, contingent or otherwise and wherever located, except the Excluded
Assets.
1.02 "Assumed Liabilities" shall mean (and are expressly limited to)
all obligations of Seller to be performed or satisfied after the Closing under
all contracts, leases, purchase orders, commitments and agreements of Seller
which are included in the Acquired Assets, but not liabilities or obligations
resulting from any default by Seller thereunder prior to the Closing.
1.03 "Excluded Assets" shall mean the assets of Seller described on
Schedule 1.03 hereof, which are not being transferred to Purchaser at the
Closing pursuant to this Agreement.
1.04 "Retained Liabilities" shall mean all liabilities and
obligations of, or claims against, Seller of whatever nature, whether accrued,
absolute, contingent or otherwise, other than the Assumed Liabilities,
including, without limitation, the following:
2
<PAGE> 10
(a) all liabilities and obligations of Seller to pay Taxes
(as hereinafter defined), including all Taxes of whatever nature arising from
the transactions contemplated by this Agreement, except those to be paid by
Purchaser pursuant to Section 13.04;
(b) all liabilities arising from or with respect to any
Employee Benefit Plan (as defined hereinafter) of Seller or Parent;
(c) any liabilities with respect to any alleged or actual
injury or damage allegedly or actually resulting from the use of any product
manufactured or sold by, or services provided by, Seller or any other business
the assets of which have been purchased by Seller prior to the Closing Date;
(d) any liabilities with respect to any actual or alleged
employee or former employee work-related injury which occurred on or prior to
the Closing Date;
(e) any liability of any kind (including, without
limitation, life, medical, accident and other insurance coverage) relating to
any employee or former employee of Seller arising out of or relating to any
event which occurred prior to the Closing Date, including, without limitation,
any liability with respect to accrued vacation through the Closing Date
(whether or not the employee is hired by Purchaser);
(f) any liability of Seller under any litigation,
proceeding or claim of any nature by any person or entity arising out of or
relating to any event which occurred prior to the Closing Date, whether or not
such litigation, proceeding or claim is pending, threatened or asserted before,
on or after the Closing Date;
(g) any liability relating to any Environmental Condition
(as hereinafter defined) which existed or occurred on or prior to the Closing
Date;
(h) any liability resulting from any defect or other
deficiency (whether in design, materials, workmanship, labeling, instruction or
otherwise) with respect to any product manufactured or sold or any service
provided by Seller or any other business the assets of which have been
purchased by Seller prior to the Closing, or any liability relating to any
warranty obligation incurred by Seller or such other business for any such
product or service;
(i) any liability or obligation of Seller to Parent or any
affiliate or associate (as hereinafter defined) of Parent;
(j) all liabilities and obligations of Seller for accounts
payable, whether or not reflected on the Balance Sheet (as hereinafter
defined), except accounts payables relating to goods in transit which shall be
assumed by Purchaser; and
3
<PAGE> 11
(k) any liability, obligation or claim of whatever nature,
whether accrued, absolute, contingent or otherwise, which is not specifically
assumed by Purchaser pursuant to this Agreement.
1.05 "Taxes" shall mean all taxes, charges, fees, levies or other
similar assessments or liabilities, including, without limitation, income,
gross receipts, ad valorem, premium, value-added, excise, real property,
personal property, sales, use, transfer, withholding, employment, payroll and
franchise taxes imposed by the United States of America or any state, local or
foreign government, or any agency thereof, or other political subdivision of
the United States or any such government, and any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or incurred in
connection with any tax or any contest or dispute thereof.
1.06 "Employee Benefit Plan" shall mean any "employee pension
benefit plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), any "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA), and any other written or oral
plan, agreement or arrangement involving direct or indirect severance benefits,
disability benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation maintained or contributed by
Seller or Parent.
ARTICLE II
PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES
2.01 Purchase and Sale of Assets. Subject to the terms and
conditions of this Agreement and in reliance upon the representations,
warranties and covenants set forth herein, at the Closing, Seller will sell,
transfer, convey, assign and deliver to Purchaser, and Purchaser will purchase,
acquire and accept the Acquired Assets, free and clear of all liens, security
interests, charges, claims, equities or encumbrances of whatever nature.
2.02 Consideration. In consideration of the sale, assignment,
transfer and delivery of the Acquired Assets, Purchaser will deliver to Seller
at the Closing the following:
(a) Subject to adjustment pursuant to Section 4.20,
$2,043,000 in cash, to be paid by certified or official bank check or wire
transfer of funds to an account designated by Seller at least five business
days prior to the Closing; and
(b) an Instrument of Assumption in the form of Exhibit A
hereto, relating to the Assumed Liabilities.
4
<PAGE> 12
ARTICLE III
THE CLOSING
3.01 Time and Place. The Closing of the transactions contemplated
by this Agreement will take place at the offices of the Bureau Francis
Lefebvre-New York, 712 Fifth Avenue, New York, New York at 10:00 A.M. local
time, on the Closing Date (as hereinafter defined). Subject to Section 12.01
hereof, the Closing shall occur as soon as possible after all conditions set
forth in Articles IX and X have been satisfied or waived, on a date specified
in a written notice from Seller to Purchaser, given at least five business days
prior to such date. The date of the Closing is hereinafter sometimes referred
to as the "Closing Date."
3.02 Deliveries by Seller. As a condition to the obligations of
Purchaser and Axson hereunder, Seller will deliver to Purchaser at the Closing
the following:
(a) a duly executed Bill of Sale in the form of Exhibit B
hereto;
(b) all documents of title necessary to transfer ownership
to Purchaser of any of the assets listed on Schedule 1.01(a);
(c) all other deeds, endorsements, assignments and other
instruments as, in the reasonable opinion of counsel for Purchaser, are
necessary to vest in Purchaser good and marketable title to the Acquired
Assets;
(d) all documents as, in the reasonable opinion of counsel
for Purchaser, are necessary to release and extinguish all liens and
encumbrances on any of the Acquired Assets; and
(e) all other previously undelivered documents required to
be delivered by Seller at or prior to the Closing in connection with the
transactions contemplated by this Agreement.
3.03 Deliveries by Purchaser. As a condition to the obligations of
Seller hereunder, Purchaser will deliver to Seller at the Closing the
following:
(a) the consideration set forth in Section 2.02; and
(b) all other previously undelivered documents required to
be delivered by Purchaser at or prior to the Closing in connection with the
transactions contemplated by this Agreement.
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3.04 Further Assurances. After the Closing, Seller and Parent shall
from time to time, at the request of Purchaser and without further cost or
expense to Purchaser, execute and deliver such other instruments of conveyance
and transfer and take such other actions as Purchaser may reasonably request in
order to more effectively consummate the transactions contemplated hereby and
to vest in Purchaser good and marketable title to the Acquired Assets.
ARTICLE IV
RELATED AGREEMENTS AND TRANSACTIONS
4.01 Hold Harmless.
(a) Seller and Parent, jointly and severally, covenant and
agree to hold Purchaser, Axson and their affiliates and associates harmless
from and defend Purchaser, Axson and their affiliates and associates against
any liability and out-of-pocket expenses, including attorneys' fees and
disbursements, arising out of claims made, or suits or proceedings brought,
against Purchaser, Axson or their affiliates and associates by any party
relating to the Retained Liabilities.
(b) Purchaser and Axson, jointly and severally, covenant
and agree to hold Seller, Parent and their affiliates and associates harmless
from and defend Seller, Parent and their affiliates and associates against any
liability and out-of-pocket expenses, including attorneys' fees and
disbursements, arising out of claims made, or suits or proceedings brought,
against Seller, Parent or their affiliates and associates by any party relating
to any Assumed Liabilities.
4.02 Bulk Sales Laws. Seller and Parent, jointly and severally,
covenant and agree to indemnify and hold harmless Purchaser from any and all
claims made by creditors of Seller (other than creditors with respect to the
Assumed Liabilities) relating to provisions of the "bulk sales laws" of any
State or other jurisdiction which may be applicable to the transactions
contemplated hereby and from all reasonable out-of-pocket costs (including
reasonable attorneys' fees) incurred in the defense of any claims made under
such laws.
4.03 Mail Received After Closing. Following the Closing, Purchaser
may receive and open all mail addressed to Seller and deal with the contents
thereof in its discretion to the extent that such mail and the contents thereof
relate to the Acquired Assets or the Assumed Liabilities. Purchaser agrees to
deliver or cause to be delivered to Seller all other mail addressed to Seller
which does not relate to the Acquired Assets or the Assumed Liabilities; and
Seller agrees to deliver or cause to be delivered to Purchaser all mail
received by Seller relating to the Acquired Assets or the Assumed Liabilities.
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4.04 Access by Seller. After the Closing, Purchaser shall afford
Seller, its counsel, accountants and other representatives reasonable access
during regular business hours upon reasonable prior notice to such books and
records of Seller acquired by Purchaser pursuant hereto as may be reasonably
necessary in order for Seller to prepare tax reports and returns required to be
filed by it or to respond to inquiries by governmental authorities or for other
appropriate reasons. Purchaser shall not dispose of any such books or records
of Seller until it has given reasonable notice to Seller of its intention to do
so and given Seller a reasonable opportunity to take possession of such books
and records to be disposed of.
4.05 Change of Name. Promptly following the Closing, Seller shall
amend its Certificate of Incorporation so as to change its name to a name not
including "Akemi" or any derivative thereof. Thereafter, neither Seller nor
any affiliate thereof shall use the name "Akemi" or any derivative thereof.
4.06 Allocation Agreement. At the Closing, Purchaser and Seller
shall enter into an allocation agreement satisfying the requirements of Section
1060 of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations promulgated pursuant thereto. Neither Purchaser nor Seller shall
take a reporting position contrary to the allocation agreement.
4.07 Confidentiality; Competition.
(a) The parties acknowledge that the value of confidential
information developed by Seller is attributable substantially to the fact that
such information is maintained by Seller in the strictest confidentiality and
secrecy and is not available to others without the expenditure of substantial
time, effort and money. Seller and Parent acknowledge that Purchaser would be
irreparably damaged if Seller' s or Parent's confidential knowledge of the
business and affairs of Seller were disclosed to or utilized on behalf of
Seller, Parent or any other person, firm, corporation or other business
organization which is in competition in any respect with any line or lines of
business of Seller, and Seller and Parent jointly and severally covenant and
agree that they shall not at any time, and shall ensure that none of their
respective employees, affiliates, associates (as the terms "affiliate" and
"associate" are defined by the rules and regulations promulgated under the
Securities Act of 1933, as amended) or any other person whose behavior can be
controlled by Seller or Parent (a "Controlled Person") shall at any time,
without the prior written consent of Purchaser, disclose or use any such
confidential information.
(b) To further secure the interests of Purchaser hereunder,
Seller and Parent jointly and severally covenant and agree that for a period of
five (5) years from the Closing Date, neither Seller nor Parent shall, directly
or indirectly, engage (and shall assure that none of their respective
employees, affiliates, associates or Controlled Persons directly or indirectly
engages) in competition with, or directly or indirectly perform services (as
employee, manager, consultant, independent contractor, advisor or otherwise)
for any
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business, or own any equity interest in any enterprise (other than an aggregate
of not more than one percent (1%) of the stock issued by any publicly held
corporation) that engages in competition with the business conducted presently
or at the Closing Date by Seller, Purchaser, Axson or any of its affiliates;
provided, however, that this restriction is not intended to prohibit the
distribution and resale of products purchased under (i) the Supply Agreement
(as hereinafter defined) by Parent's construction distribution supply
subsidiaries, or (ii) Section 8.06. In addition, during such period, neither
Seller nor Parent shall (and shall assure that none of their respective
employees, affiliates, associates or Controlled Persons) directly or indirectly
solicit, raid or entice, or otherwise induce any customer of Purchaser or Axson
to cease doing business therewith or to do business with a competitor with
respect to products that are competitive with the products of Purchaser or
Axson.
(c) To further secure the interests of Purchaser hereunder,
Seller and Parent jointly and severally agree that for a period of five (5)
years from the Closing Date, neither Seller nor Parent shall, directly or
indirectly, solicit for employment, offer employment to, or employ for its own
account or the account of any other person, any person who is on the Closing
Date or thereafter becomes an employee or consultant of Purchaser or Axson. For
purposes of this Section 4.07(c), however, no employee of Parent or any
subsidiary of Parent, other than Seller nor any officer of Seller not
compensated by Seller, would be deemed to be a consultant of Seller.
(d) To further secure the interests of Purchaser hereunder,
Seller and Parent jointly and severally agree that neither Seller nor Parent
shall, and shall assure that none of their respective employees, affiliates,
associates or Controlled Persons, at any time disparage the business
reputation, products or services of Purchaser or Axson.
(e) Seller and Parent expressly agree that, in addition to any
other rights or remedies which Purchaser may have, Purchaser shall be entitled
to injunctive and other equitable relief to prevent a breach of this Section
4.07 by Seller or Parent including a temporary restraining order or an
injunction from any court of competent jurisdiction restraining any threatened
or actual violation, and Seller and Parent consent to the entry of such an
order and injunctive relief and waive the making of a bond or undertaking as a
condition for obtaining such relief.
4.08 Purchase of Stock by Parent. At the Closing, Parent shall
purchase 8,305 shares of Common Stock of Axson (the "Axson Stock") for an
aggregate purchase price of FF 10,505,825.
4.09 Parent Loan. At the Closing, Parent shall make a loan to Axson
(the "Parent Loan") in the principal amount of $43,000. The Parent Loan shall
be memorialized by the issuance to Parent of Axson's promissory note in the
form annexed hereto as Exhibit C (the "Axson Note").
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4.10 Axson Loan. At the Closing, Axson shall lend the proceeds of
the Parent Loan to Purchaser (the "Axson Loan"). The Axson Loan shall be
memorialized by the issuance to Axson of Purchaser's promissory note in the
form annexed hereto as Exhibit D (the "Purchaser Note").
4.11 Axson's Board of Directors. Axson shall seek the approval of
its stockholders for (a) the election of Parent's nominee to Axson's Board of
Directors and (b) the requisite amendment to Axson's organizational documents
to permit such election. Subject to receipt of such approval, Parent would be
entitled to nominate one director to Axson's Board of Directors for so long as
Parent owns five percent (5%) or more of Axson's outstanding Common Stock.
4.12 Stockholders' Agreement. Parent has been provided with a copy
of Axson's Stockholders' Agreement dated December 21, 1994, as amended by
amendment dated June 19, 1995 (the Stockholders' Agreement"), together with an
English translation thereof. Parent shall be considered a "financial
stockholder" of Axson for purposes of the Stockholders' Agreement, and, at the
Closing, Parent shall execute and deliver to Axson a counterpart of the French
version of the Stockholders' Agreement.
4.13 Employee Matters. Seller shall be responsible and liable for
any and all severance and other costs and liabilities relating to all
terminations of employees prior to the Closing or any employee who is not
employed by Purchaser following the Closing and Seller shall indemnify and hold
Purchaser harmless with respect to any liability or expense (including
reasonable attorneys' fees) arising from such terminations.
4.14 Computer System. Prior to the Closing, Parent shall take, and
shall cause Seller to take, any and all steps necessary to assure that Seller's
computer systems operate autonomously and independent of Parent's computer
system.
4.15 Lease of Factories and Equipment. At the Closing, Purchaser
and Seller or the affiliate of Parent to whom Seller's two factory properties
are transferred shall enter into Leases with respect to such factories and
certain equipment in the forms annexed hereto as Exhibits E and F, respectively
(the "Leases").
4.16 Supply Agreement. At the Closing, Purchaser and two affiliates
of Parent shall enter into a Supply Agreement in the form annexed hereto as
Exhibit G (the "Supply Agreement").
4.17 Certain Agreements. Schedule 4.17 sets forth an accurate
description of Seller's agreements and course of dealing with Akemi GmbH.
Following the Closing, Purchaser and Axson agree to make a good faith effort to
enter into a written agreement with Akemi GmbH, or its successor, in such form
as may be acceptable to Purchaser and Axson. In the event Purchaser and Axson
are unable to reach such an agreement with Akemi GmbH, if Purchaser and Axson
continue to honor and abide by the terms of the course of dealing
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described in Schedule 4.17, then Seller and Parent shall jointly and severally
indemnify and hold Purchaser and Axson harmless with respect to any liability,
loss, damage, including loss or damage to the stone, wood and marble product
lines acquired from Seller, or expense (including reasonable attorney's fees)
arising from Purchaser's relationship and course of dealing with Akemi GmbH,
including the termination thereof or the restrictive covenant set forth
therein; provided, however, that in no event shall Seller's liability under
this Section 4.17 exceed the total amount of Three Hundred Seventy Five
Thousand Dollars ($375,000); and further provided, however, that in no case
shall Purchaser be entitled to make any claim for indemnification under this
Section 4.17 after the tenth anniversary of the Closing Date; and further
provided, however, that nothing in this Section 4.17 shall limit the liability
of Seller and Parent with respect to any breach of the representation and
warranty set forth in Section 5.20.
4.18 Consents and Approvals. Prior to the Closing, Seller shall
obtain and deliver to Purchaser all consents and approvals required for
consummation of all transactions contemplated by this Agreement from all
government and regulatory authorities and any other person or entity,
including, without limitation, the consent of Comerica Bank and the release of
its liens on the Acquired Assets.
4.19 Employee Benefit Plans; Insurance. Parent shall assist
Purchaser to establish Employee Benefit Plans for the employees of Purchaser
following the Closing. In addition, Parent shall assist Purchaser in obtaining
business insurance coverage following the Closing comparable to that now
carried by Seller. Parent and Seller acknowledge that they will be obligated
to offer coverage under Seller' s group medical plan to the employees of
Seller following termination of their employment pursuant to the provisions of
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"). Purchaser agrees to use its best efforts to obtain health
insurance coverage for its employees comparable to that offered by Seller as
soon as practicable after the Closing. As an interim measure, Purchaser shall
reimburse Parent for the Cost (as hereinafter defined) of such COBRA coverage
for any former employee of Seller hired by Purchaser ("Covered Employees")
within 30 days after invoice from Parent. "Cost" shall mean, with respect to
COBRA coverage extended to Covered Employees, allocable premiums plus the
direct cost actually incurred by Seller (rather than its reinsurer) of all
claims initiated by Covered Employees after the Closing in excess of such
premiums.
4.20 Post-Closing Adjustment (a) Seller has prepared and delivered
to Purchaser an unaudited statement reflecting Seller's Inventory and
Receivables as at the close of business on December 31, 1996 (the "Pre-Closing
Statement"). The parties agree that the purchase price payable at the Closing
is based in part on the Pre-Closing Statement. The parties further agree that
if the sum of Inventory and Receivables on the Closing Statement (as
hereinafter defined) varies (positive or negative) from the sum of Inventory
and Receivables reflected on the Pre-Closing Statement by $20,000 or more, then
the purchase price shall be adjusted in accordance with this Section 4.20.
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(b) As soon as practicable after the Closing, Purchaser shall
prepare and deliver to Seller a statement (the "Closing Statement") of the
Inventory and Receivables as at the close of business on the Closing Date,
valued in a manner consistent with the methodology used in preparing the
Pre-Closing Statement.
(c) Seller shall have 20 days from the date of delivery of the
Closing Statement during which to review and dispute the Closing Statement. In
connection with such review, Seller and its accountants shall be given access
to the work papers of Purchaser. Within such 20-day period, Seller must advise
Purchaser if it disputes the Closing Statement. If Seller does not so timely
advise Purchaser, the Closing Statement shall become final for all purposes of
this Agreement. If Seller so advises Purchaser, the parties shall use their
best efforts to resolve such dispute in good faith. If such dispute is not
resolved by negotiations within 30 days of Purchaser's advice to Seller of the
dispute, the dispute shall be submitted as promptly as practicable to [Arthur
Andersen and Co.] (the "Review Firm"). The decision of the Review Firm shall
be final and binding upon all parties and the Closing Statement, as modified by
the decision of the Review Firm, shall be final for all purposes of this
Agreement. The fees and expenses of the Review Firm shall be borne equally by
Purchaser and Seller.
(d) If the sum of Inventory and Receivables on the Closing
Statement varies (positive or negative) from that reflected on the Pre-Closing
Statement by $20,000 or more, then as soon as practicable, but in no case more
than 10 days after the Closing Statement has become final in accordance with
subsection 4.20(c) above, the parties shall hold a post-closing (the
"Post-Closing"). If the sum of Inventory and Receivables reflected on the
Closing Statement is less than that reflected on the Pre-Closing Statement by
$20,000 or more, then at the Post-Closing Seller shall refund an amount equal
to the entire difference to Purchaser without interest, by certified or
official bank check or wire transfer of funds. If the sum of Inventory and
Receivables reflected on the Closing Statement exceeds that reflected on the
Pre-Closing Statement by $20,000 or more, then at the Post-Closing Purchaser
shall pay an amount equal to the entire excess to Seller without interest, by
certified or official bank check or wire transfer of funds.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SELLER AND PARENT
Seller and Parent jointly and severally represent and warrant to
Purchaser and Axson as follows:
5.01 Due Authorization and Execution; Valid and Binding Agreements;
No Violation. The execution, delivery and performance by Seller and Parent of
this Agreement have been duly authorized by all necessary corporate action.
The copies of the corporate minutes or records of corporate action of Seller
and Parent authorizing the execution of this
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Agreement and the actions contemplated thereby, heretofore delivered to
Purchaser, are accurate and complete copies of such minutes and records and
such minutes and records reflect in all material respects the corporate actions
of Seller's and Parent's respective boards of directors and shareholders. This
Agreement has been duly executed and delivered by Seller and Parent and
constitutes a valid and binding agreement of Seller and Parent, enforceable in
accordance with its terms. Neither the execution and delivery of this Agreement
by Parent nor the consummation of the transactions contemplated hereby will
violate any provision of the organizational documents of Parent, or violate, or
be in conflict with, or constitute a default under, or cause the amendment,
modification or acceleration of, or gives any party the right to amend, modify
or refuse to perform, or modify the time within which duties are to be
performed or rights or benefits are to be received under, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result
in the creation or imposition of any security interest, lien or other
encumbrance upon any property or asset of Parent under, any lease, agreement,
understanding, restriction or commitment to which Parent is a party or by which
Parent is bound, or to which the property of Parent is subject, or violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or governmental or regulatory authority or agency.
5.02 Corporate Organization; Etc. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan and has full power and authority to carry on its business as it is now
being conducted and to own the properties and assets it now owns; and is duly
qualified or licensed to do business as a foreign company in good standing in
all jurisdictions in which the ownership of property or the conduct of its
business requires such qualification. The copies of the organizational
documents of Seller and the certificate evidencing its good standing heretofore
delivered to Purchaser are accurate and complete copies of such instruments as
presently in effect. The copies of the corporate minutes or records of
corporate action of Seller heretofore delivered to Purchaser are accurate and
complete copies of such minutes and records and such minutes and records
reflect in all material respects the corporate actions of Seller's board of
directors and shareholders. The copies of the stock transfer books or records
Seller heretofore delivered to Purchaser are accurate and complete copies of
such books and records.
5.03 No Violation. Neither the execution and delivery of this
Agreement by Seller nor the consummation of the transactions contemplated
hereby will violate any provision of the organizational documents of Seller, or
violate, or be in conflict with, or constitute a default under, or cause the
amendment, modification or acceleration of, or give any party the right to
amend, modify or refuse to perform, or modify the time within which duties are
to be performed or rights or benefits are to be received under, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result
in the creation or imposition of any security interest, lien or other
encumbrance upon any property or assets of Seller under, any lease, agreement,
understanding, restriction or commitment to which Seller is a party or by which
Seller is bound, or to which the property of Seller is subject, or violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or governmental or regulatory authority or agency.
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5.04 Consents and Approvals of Governmental Authorities; Etc.
Except as disclosed on Schedule 5.04, no consent, approval or authorization of,
or declaration, filing or registration with, any governmental or regulatory
authority, or consent or approval of any other person or entity, is required in
connection with the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby.
5.05 Financial Statements. Seller has heretofore delivered to
Purchaser: (i) a balance sheet of Seller as at March 31, 1995 and 1996 and
statements of income for each of the years then ended; and (ii) an unaudited
balance sheet of Seller as at December 31, 1996 (the "Balance Sheet") and a
statement of income for the seven-month period then ended. Such balance sheets
are true, complete and accurate and fairly present the assets, liabilities and
financial condition of Seller as at the respective dates thereof, and such
statements of income are true, complete and accurate and fairly present the
results of operations for the periods therein referred to; all in accordance
with generally accepted accounting principles, consistently followed throughout
the periods involved.
5.06 No Undisclosed Liabilities; Etc. Seller has no liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) which
were not fully reflected or reserved against in the Balance Sheet, except for
liabilities and obligations incurred in the ordinary course of business and
consistent with past practice since the date thereof; and the reserves
reflected in the Balance Sheet are adequate, appropriate and reasonable.
5.07 Absence of Certain Changes. Except in the ordinary course of
business consistent with past practice, and except as disclosed on Schedule
5.07, since the date of the Balance Sheet, Seller has not:
(a) Suffered any adverse change in its working capital,
financial condition, assets, liabilities (absolute, accrued, contingent or
otherwise), reserves, business, operations or prospects;
(b) Permitted or allowed any of its property or assets
(real, personal or mixed, tangible or intangible) to be subjected to any
mortgage, pledge, lien, security interest, encumbrance, restriction or charge
of any kind, except for liens for current taxes not yet due;
(c) Written down the value of any inventory or written off
as uncollectible any notes or accounts receivable;
(d) Cancelled any debts or waived any claims or rights of
value;
(e) Disposed of or permitted to lapse any rights to the use
of any patent, trademark, trade name or copyright, or disposed of or disclosed
to any person any trade secret, formula, process or know-how not theretofore a
matter of public knowledge;
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(f) Entered into any employment contracts or granted any
increase in the compensation of officers or employees (including any such
increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or any increase in the compensation payable or to become payable to
any officer or employee, and no such increase is required by agreement or
understanding;
(g) Made any change in any method of accounting or
accounting practice;
(h) Made any material change in any purchasing, production
or marketing practice;
(i) Suffered any labor dispute or threatened labor dispute
or commenced any negotiations with labor unions involving terms or conditions
of labor nor has any such negotiation been proposed to Seller by employees or
employee representatives;
(j) Become aware of any actual or threatened disputes with
any significant supplier of Seller or any actual or threatened significant loss
of business from any customers, sales representatives, distributors, dealers or
brokers;
(k) Suffered the cancellation of any purchase order or
letter of intent; or
(l) Sold, transferred, or otherwise disposed of any of its
properties or assets (real, personal or mixed, tangible or intangible), except
sales of inventory in the ordinary course of business and consistent with past
practice;
(m) Made any single capital expenditure or commitment in
excess of $10,000 for additions to property, plant, equipment or intangible
capital assets or made aggregate capital expenditures and commitments in excess
of $10,000 for additions to property, plant, equipment or intangible capital
assets;
(n) Suffered any damage or destruction to its assets,
whether or not covered by insurance;
(o) Paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with,
any of its officers or directors or any affiliate or associate of any of its
officers or directors, except for compensation to officers at rates not
exceeding the rates of compensation paid during the year ended March 31, 1996;
or
(p) Agreed, whether in writing or otherwise, to take or
suffer to be taken any action described in this Section.
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5.08 Title to Properties; Encumbrances. Seller has good, valid and
marketable title to all its properties and assets (real, personal and mixed,
tangible and intangible), including, without limitation, all the properties and
assets reflected in the Balance Sheet (except for inventory sold in the
ordinary course of business since that date). With the exception of intangible
assets such as good will, all properties and assets have a fair market or
realizable value at least equal to the value thereof as reflected therein, and
none of such properties or assets are subject to any mortgage, pledge, lien,
security interest, encumbrance or charge of any kind except (a) liens shown on
the Balance Sheet as securing specified Assumed Liabilities with respect to
which no default exists and (b) liens for current taxes not yet due. The
rights, properties and other assets presently owned, leased or licensed by
Seller and described elsewhere in this Agreement include all rights, properties
and other assets necessary to permit Seller to conduct its business in the same
manner as its business has been conducted prior to the date hereof.
5.09 Plant and Equipment. The plants, structures and equipment of
Seller are structurally sound with no known defects and in good operating
condition and repair and are adequate for the uses to which they are being put;
and none of such plants, structures or equipment are in need of maintenance or
repairs except for ordinary, routine maintenance and repairs which are not
material in nature or cost. Seller has not received notification that it is in
violation of any applicable building, zoning, anti-pollution, health,
occupational safety or other law, ordinance or regulation in respect of its
plants or structures or their operations and, to the best knowledge of Seller
and Parent, no such violation exists.
5.10 Leases. Schedule 5.10 hereto contains an accurate and complete
list of all leases pursuant to which Seller leases real or personal property,
true and complete copies of which have heretofore been delivered to Purchaser.
All such leases are valid, binding and enforceable in accordance with their
terms, and are in full force and effect; there are no existing defaults
thereunder; no event of default has occurred which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute a default thereunder; and all lessors under such leases have
consented (where such consent is necessary) to the consummation of the
transactions contemplated by this Agreement without requiring modification of,
the rights or obligations of the lessee under such leases.
5.11 No Condemnation or Expropriation. Neither the whole nor any
portion of the leaseholds or any other assets of Seller is subject to any
governmental decree or order to be sold or is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor has any such condemnation, expropriation or taking been proposed.
5.12 Patents, Trademarks, Trade names; Etc.
(a) Schedule 5.12(a) lists:
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(i) all patents held by Seller and all
reissues, divisions, continuations, continuations in part and extensions
thereof and all pending patent applications by Seller including for each such
patent the serial or patent number, country, filing and expiration date and
title;
(ii) all registered trademarks of Seller and
pending registrations by Seller of trademarks, including for each such
trademark, the registration number, country, filing and expiration date, mark
and class;
(iii) all registered copyrights of Seller and
applications by Seller for registration of copyrights, including the
registration number, country and filing and expiration date of each such
copyright; and
(iv) a general description of all know-how
and proprietary information in the nature of trade secrets of Seller.
(b) Schedule 5.12(b) identifies all licenses and other
contracts or commitments to which Seller is a party (either as licensor or
licensee) or otherwise subject relating to patents, trademarks, trade names or
copyrights (or applications for any thereof), trade secrets or other
proprietary know-how or technical information or assistance; and no claims have
been asserted by any person to the use of any such patents, trademarks, trade
names, copyrights, technology, know-how or processes or challenging or
questioning the validity or effectiveness of any such license or agreement, and
there is no valid basis for any such claim.
(c) Seller's use and transfer to Purchaser pursuant to this
Agreement of the trademark and trade name "Akemi" do not infringe or violate
the rights of any other person. To the best knowledge of Seller and Parent,
Seller has not infringed upon any patent, trademark, trade name or copyright or
misappropriated or misused any invention, trade secret or other proprietary
information entitled to legal protection, and Seller has not been alleged to
have infringed upon any patent, etc., except as set forth in Schedule 5.12.
Seller has never asserted any claim of infringement, misappropriation or
misuse.
(d) Each item identified in Schedule 5.12(b) is a valid,
legally binding obligation of all parties thereto, enforceable in accordance
with its terms. With respect to each there is no default (or event which with
the giving of notice and/or passage of time would constitute a default) by any
party thereto.
(e) Except as listed on Schedule 5.12, Seller has not
granted any outstanding licenses or other rights to any copyright, patent,
invention, know-how, technology, trade secret, innovation, formula, process,
trademark or trade name listed on Schedule 5.12(a), nor is Seller under any
obligation to grant the same, nor has Seller given any indemnification for
patent, copyright or trademark infringement as to any equipment, materials or
supplies manufactured, produced or sold by it.
5.13 Litigation. There is no action, suit, claim, counterclaim,
arbitration, proceeding or investigation pending or, to the best knowledge of
Seller or Parent,
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threatened against or involving Seller, or which questions or challenges the
validity of this Agreement or any action taken or to be taken pursuant to this
Agreement or in connection with the transactions contemplated hereby; and
neither Seller nor Parent knows or have any reason to know of any basis for any
such action, proceeding or investigation. Seller is not in default under or in
violation of, nor is there any basis for any claim of default under or
violation of, any material contracts, commitments or restrictions to which it
is a party or by which it is bound. Seller is not subject to any judgment,
order or decree entered in any lawsuit or proceeding.
5.14 Subsidiaries. Seller has no subsidiaries and does not,
directly or indirectly, own or have the power to vote or to acquire the power
to vote, or to exercise a controlling influence with respect to, equity
interests or any option, right, warrant or other right or instrument
convertible into or exchangeable or exercisable for any such equity interest of
any entity, corporate or otherwise.
5.15 Toxic and Hazardous Substances and Other Environmental, Health
and Safety Issues.
(a) No underground tanks or storage facilities are now
located, or at any time have been located, on the real property used at any
time in the business of Seller or its predecessors in interest and there are no
present or past Environmental Conditions (as hereinafter defined) in any way
relating to the business, property or assets of Seller. "Environmental
Condition" means (i) any environmental pollution, including, without
limitation, any contaminant, irritant or pollutant, from any spill, discharge,
leak, emission, escape, injection, deposit, emanation, dumping or release of
any kind, in any amount whatsoever, or any substance or exposure of any type in
any work place or elsewhere or to any medium, including, without limitation,
air, land, surface waters or subsurface waters or from any generation,
transportation, treatment, discharge, storage or disposal of waste materials,
raw materials, hazardous materials, hazardous constituents, toxic materials or
products of any kind or from the storage, use or handling of any waste, raw,
hazardous, radioactive, infectious or toxic materials or products of any kind
or from the storage, use or handling of any waste, raw, hazardous, radioactive,
infectious or toxic materials or other substances, or (ii) any noncompliance
with any federal, state or local environmental law, rule, regulation or order
as a result of, or in connection with, any of the foregoing. The operation of
the business of Seller does not violate and has not violated any applicable
law, rule, regulation or order, whether state, federal, or local, relating to
air, water, or noise pollution, or the production, storage, labeling,
transportation or disposition of waste or hazardous or toxic substances or
hazardous constituents. Except in compliance with all legal requirements in
the ordinary course of its business as a developer and manufacturer of resins
and polyester, neither Seller nor any other person has stored any chemical
substances, including, without limitation, any waste materials, petroleum,
crude oil, PCB's, asbestos or any "Hazardous Substances," "Pollutants,"
"Hazardous Constituents" or "Contaminants" (collectively, the "Contaminants"),
as such terms are defined in the
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Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, on, beneath or about any of the properties or assets used at any
time in the business of Seller. Seller has received no notice advising Seller
that it is potentially responsible for response or other costs or remediation
with respect to a release or threatened release of Contaminants, and no facts
exist which might give rise to such responsibility. Except in compliance with
all legal requirements in the ordinary course of its business as a developer
and manufacturer of resins and polyesters, neither Seller nor any employee,
affiliate, associate or Controlled Person of Seller nor any person with whom
Seller arranged for the transport, disposal or treatment of any Contaminants
has transported, buried, dumped or otherwise disposed of any Contaminants on,
beneath or about any other property. Seller has not violated and has no
knowledge of any alleged or potential violation of, any applicable
environmental, zoning or land use ordinance, law, rule, regulation or order
relating to the operation of the business of Seller, or any of the processes
followed or products made thereby.
(b) Seller has not exposed or permitted the exposure of any
of Seller's employees or any of Seller's customers' employees to chemical or
hazardous substances, which exposure could give rise to any liability for
occupational injury or illness which is not covered by insurance.
5.16 Good Title Conveyed, Etc. Seller has complete and unrestricted
power and the unqualified right to sell, assign, transfer and deliver to
Purchaser, and Purchaser is acquiring, good, valid and marketable title to the
Acquired Assets, free and clear of all mortgages, pledges, liens, security
interests, conditional sales agreements, encumbrances, claims or charges of any
kind, except those referred to in Section 5.08 hereof. The Bill of Sale and
the deeds, endorsements, assignments and other instruments being executed and
delivered to Purchaser by Seller at the Closing are valid and binding
obligations of Seller, enforceable in accordance with their terms, and will
effectively vest in Purchaser good, valid and marketable title to all the
Acquired Assets, subject to the obligations of Seller set forth in Section 3.04
to provide further assurances.
5.17 Compliance with Law. The operations of Seller have been
conducted in accordance with all applicable laws, regulations and other
requirements of all federal and state governmental authorities, and of all
municipalities and other political subdivisions and agencies thereof, having
jurisdiction over Seller, including, without limitation, all such laws,
regulations and requirements relating to antipollution, consumer protection,
environmental, equal opportunity, health, occupational safety, pension and
securities matters. Seller has not received any notification of any asserted
present or past failure by Seller to comply with any law, rule or regulation.
Seller has all permits, governmental licenses, registrations and approvals
necessary to carry out its business as currently conducted and as required by
applicable law or regulation.
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5.18 Insurance. Schedule 5.18 contains an accurate and complete
description of all policies of fire, liability, workmen's compensation and
other forms of insurance owned or held by Seller, including self-insurance
programs. Purchaser acknowledges that Purchaser will not be eligible to
participate in such insurance coverage after the Closing and that Purchaser
will be required to obtain such insurance coverage as it deems necessary
following the Closing.
5.19 Contracts and Commitments. Except as set forth in Schedule
5.19:
(a) Seller has no agreements, contracts, commitments or
restrictions (oral or written) which are for an amount in excess of $5,000 or
are material to its business, operations or prospects;
(b) No purchase contracts or commitments of Seller continue
for a period of more than 12 months or are in excess of the normal, ordinary
and usual requirements of business or in excess of prevailing market prices;
(c) There are no outstanding sales contracts, commitments
or proposals of Seller which will result in any loss to Seller upon completion
or performance thereof, nor are there any outstanding contracts, bids or sales
or service proposals quoting prices which will not result in a normal profit;
(d) Seller has no outstanding contracts with officers,
employees, agents, consultants, advisors, salesmen, sales representatives,
distributors or dealers that are not cancelable by it on notice of not longer
than 60 days and without liability, penalty or premium or any agreement or
arrangement providing for the payment of any bonus or commission based on sales
or earnings;
(e) Seller has no employment agreement, or any other
agreement that contains any severance or termination pay liabilities or
obligations;
(f) Seller has no collective bargaining or union contracts
or agreements;
(g) Seller is not restricted by agreement from carrying on
its business in any geographic location;
(h) Seller is under no liability or obligation with respect
to the return of inventory or merchandise in the possession of wholesalers,
distributors, retailers or other customers;
(i) Seller has not experienced any shortage of raw
materials or other supplies which are used in the operation of any of Seller's
businesses which has interfered with its ability to conduct any such business;
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(j) Seller is not subject to any obligation or requirement
to provide funds to or make an investment (in the form of a loan, capital
contribution or otherwise) in any person or entity; and
(k) Seller has no agreements, commitments or restrictions
which were entered into outside the ordinary course of business.
5.20 Akemi GmbH Agreement. Seller has provided Purchaser with
accurate copies of, and Schedule 4.17 accurately describes the terms and
conditions of, Seller's agreement with Akemi GmbH. Seller's production and
sale of polyester products (other than wood and stone polyester products) is
not restricted by its agreement with Akemi GmbH, and production and sale of
polyester products (other than wood and stone polyester products) does not
require the payment of any royalty to Akemi GmbH and would not be adversely
affected by termination of Seller's agreement with Akemi GmbH.
5.21 Accounts Receivable. All Receivables of Seller, whether
reflected in the Balance Sheet or otherwise, represent sales actually made in
the ordinary course of business, and are current and collectible net of any
reserves shown on the Balance Sheet (which reserves are adequate and were
calculated in a manner consistent with past practice). Subject to such
reserves, each of the Receivables either has been collected in full or will be
collected in full, without any set-off or reduction, within 90 days after the
day on which it became due and payable. It is expressly agreed, however, that
Purchaser is not acquiring any reserves shown on the Balance Sheet relating to
Receivables as Seller and Parent are indemnifying Purchaser with respect to any
uncollected Receivables pursuant to Section 11.05.
5.22 Personnel. Schedule 5.22 sets forth a true and complete list
of:
(a) the names and current salaries of all officers (other
than those compensated solely by Parent) and other salaried employees of
Seller; and
(b) the wage rates for non-salaried and non-executive
salaried employees of Seller by classification.
5.23 Labor Difficulties. (a) Seller is in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and is not engaged in any unfair
labor practice; (b) there is no unfair labor practice, wrongful termination or
employment discrimination (age, sex, race or otherwise) charge or complaint
against Seller pending, or to the best knowledge of Seller or Parent,
threatened; (c) there is no labor strike, dispute, slowdown or stoppage
actually pending or threatened against or affecting Seller; (d) no
representation question exists
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respecting the employees of Seller; (e) no grievance or arbitration proceedings
arising out of or under collective bargaining agreements is pending and no
claim therefor exists; (f) no collective bargaining agreement which is binding
on Seller restricts it from relocating or closing any of its operations;
and (g) no organizational effort has been or to the best knowledge of Seller
and Parent is being made by or on behalf of any labor union with respect to any
employees of Seller.
5.24 Customers and Suppliers. Schedule 5.24 sets forth:
(a) a list of the customers of Seller during the last two
fiscal years showing the approximate total sales by Seller to each such
customer during each such fiscal year; and
(b) a list of the suppliers of Seller during the last two
fiscal years, showing the approximate total purchases by Seller from each such
supplier during each such fiscal year. Except to the extent set forth in
Schedule 5.24, Seller has not been advised by any customer or supplier of a
refusal to deal with Seller in the future based upon past actions or
performance of Seller or a refusal to extend credit in accordance with terms
previously extended to Seller due to Seller's past payment history.
5.25 No Product Liabilities. Seller has not incurred nor will it
incur any liability, damage, loss, cost or expense as a result of any defect or
other deficiency (whether of design, materials, workmanship, labeling,
instructions or otherwise) with respect to any product manufactured or sold by
Seller or any other business the assets of which have been acquired by Seller
prior to the Closing, whether such liability, damage, loss, cost or expense is
incurred by reason of any express or implied warranty (including without
limitation any warranty of merchantability or fitness), any doctrine of common
law (tort, contract or other), any statutory provision or otherwise.
5.26 Inventory. All Inventory of Seller, whether reflected in the
Pre-Closing Statement or otherwise, has been acquired in the ordinary course of
business, in the ordinary and customary quantities and amounts, and at
prevailing market prices. The Inventory reflected on the Pre-Closing Statement
has been valued at cost or market, whichever is lower, in accordance with
generally accepted accounting principles, consistently applied; and all damaged
or otherwise unmerchantable Inventory has been written off. All Inventory of
Seller, other than that written off in accordance with the preceding sentence,
is usable and saleable in the ordinary course of business. It is expressly
acknowledged that Purchaser is not acquiring any reserves on the Balance Sheet
with respect to Inventory as the consideration paid by Purchaser for the
Acquired Assets has been established after the write-off of certain damaged or
otherwise unmerchantable Inventory.
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5.27 Backlog. Schedule 5.27 sets forth the dollar amount (i.e.,
amount of payment remaining on the contract assuming full delivery or
performance) of backlog orders by customers for products and services of Seller
as of October 31, 1996, together with a statement as to the shipping schedule
of the backlog orders and seasonal or other material aspects of such backlog
orders. All of such backlog orders are the subject of valid and binding
written agreements enforceable in accordance with their respective terms; and
Seller has received no indication that any such order will be cancelled or
materially altered. All of such outstanding contracts, bids or sales or
service proposals quote prices which exceed all direct costs, including,
without limitation, materials, labor, royalties and commissions.
5.28 Product and Service Warranties. Except as set forth in
Schedule 5.28, neither Seller nor any other business the assets of which have
been purchased by Seller has given any third party any product or service
guaranties or warranties, rights of return or other indemnity relating to
products manufactured or delivered by Seller or any such other business prior
to the Closing or services performed by Seller or such other business.
5.29 Disclosure. Seller and Parent have disclosed to Purchaser all
facts material to the condition, assets, liabilities, businesses, operations
and prospects of Seller. No representations or warranties by Seller or Parent
in this Agreement and no statement contained in any document (including without
limitation, financial statements and exhibits), certificate, or other writing
furnished or to be furnished by Seller or Parent to Purchaser pursuant to the
provisions hereof or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of material fact or omits or will
omit to state any material fact necessary in order to make the statements
herein or therein not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND AXSON
Purchaser and Axson jointly and severally hereby represent and warrant
to Seller and Parent as follows:
6.01 Corporate Organization; Etc. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has full corporate power and authority to carry on its business as it
is now being conducted and to own the properties and assets it now owns; and
Purchaser is duly qualified or licensed to do business as a foreign corporation
in good standing in all jurisdictions in which the ownership of property or the
conduct of its business requires such qualification. Axson is a soci#t#
anonyme duly organized, validly existing and in good standing under the laws of
France and has full corporate power and authority to carry on its business as
it is now being conducted and to own the properties and assets it now owns.
The copies of the organizational documents of Axson and the certificate
evidencing its current good standing
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heretofore delivered to Parent are accurate and complete copies of such
instruments as presently in effect.
6.02 Authorization, Etc. Purchaser has full corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby and thereby. Purchaser has taken all action required by
law, its Certificate of Incorporation, its By-Laws or otherwise to authorize
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and thereby, and this Agreement is a valid and
binding agreement of Purchaser enforceable in accordance with its terms. Axson
has full corporate power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby. Subject to approval of the
issuance of the Axson Stock by Axson's stockholders, Axson has taken all
corporate action required by law or its organizational documents to authorize
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and this Agreement is a valid and binding
agreement of Axson enforceable in accordance with its terms. The copies of
corporate minutes or records of corporate action of Axson's Board of Directors
authorizing the execution of this Agreement and the actions contemplated hereby
heretofore delivered to Parent are, and the copies of the corporate minutes or
records of corporate action of Axson's stockholders authorizing the issuance of
the Axson Stock to be delivered to Parent will be, accurate and complete copies
of such minutes and records and such minutes and records reflect (or will
reflect) in all material respects the corporate actions of Axson's Board of
Directors and stockholders.
6.03 No Violation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate any provision of the organizational documents of Purchaser or Axson, or
violate, or be in conflict with, or constitute a default under, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result
in the creation or imposition of any security interest, lien or other
encumbrance upon any property or assets of Purchaser or Axson under any
agreement or commitment to which Purchaser or Axson is a party or to which
Purchaser or Axson is subject, or violate any statute or law or any judgment,
decree, order, regulation or rule of any court or governmental authority.
6.04 Axson's Financial Statements. Axson has heretofore delivered
to Parent (i) a balance sheet of Axson as at December 31, 1995 audited by
Axson's independent accountants (the "Axson Balance Sheet") and (ii) an
unaudited statement of income for the nine months ended September 30, 1996.
The Axson Balance Sheet and the notes thereto are true, complete and accurate
and fairly present the assets, liabilities and financial condition of Axson as
at the date thereof, and such income statement is true, complete and accurate
and fairly presents the results of operations of Axson for the period referred
to therein; all in accordance with French generally accepted accounting
principles, consistently followed throughout the periods involved..
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6.05 Power to Issue Axson Stock. Axson, upon approval thereof by
its stockholders, will have complete and unrestricted power and the unqualified
right to issue, sell, assign, transfer and deliver to Purchaser good and
marketable title to the Axson Stock, free and clear of all security interests,
liens, claims, pledges, assessments, options, equities, charges, proxies and
encumbrances whatsoever, and with no restriction on the voting rights and other
incidents of record and beneficial ownership pertaining thereto, and there are
no outstanding options, warrants, calls, commitments or rights to purchase or
acquire, or agreements relating to, any of such Axson Stock, except as provided
in the Stockholders' Agreement.
6.06 Capitalization. As of the date hereof, the authorized capital
stock of Axson consist of 103,817 shares of Common Stock, 100FF par value per
share, all of which are issued and outstanding. All issued and outstanding
shares of capital stock of Axson are validly issued, fully paid and
nonassessable. Except as set forth on Schedule 6.06, there are no outstanding
(a) securities convertible into, exchangeable for or evidencing the right to
purchase any registered capital of Axson; (b) options, warrants, calls or other
rights to purchase or subscribe to Axson's capital stock or securities
convertible into, exchangeable for or evidencing the right to purchase, any
shares of Axson's capital stock; or (c) contracts, commitments, agreements,
understandings or arrangements of any kind relating to the issuance of any
capital stock of Axson, any such convertible or exchangeable securities or any
such other securities evidencing the right to purchase any such options,
warrants or rights.
6.07 Consents and Approvals of Governmental Authorities; Etc.
Except as set forth in Schedule 6.07, no consent, approval or authorization of,
or declaration, filing or registration with, any governmental or regulatory
authority, or consent or approval of any other person or entity, is required by
Purchaser or Axson in connection with the execution, delivery and performance
of this Agreement or the consummation of the transactions contemplated hereby.
6.08 No Undisclosed Liabilities; Etc. Axson has no liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) which
were not fully reflected or reserved against in the Axson Balance Sheet, except
for liabilities and obligations incurred in the ordinary course of business and
consistent with past practice since the date thereof, and to the best knowledge
of Axson, the reserves reflected therein are adequate, appropriate and
reasonable.
6.09 Title to Properties; Encumbrances. Axson has good, valid and
marketable title to all its properties and assets (real, personal and mixed,
tangible and intangible), including, without limitation, all the properties and
assets reflected in the Axson Balance sheet (except for inventory sold in the
ordinary course of business since that date). All properties and assets
reflected in the Axson Balance Sheet have a fair market or realizable
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value at least equal to the value thereof as reflected therein, and none of such
properties or assets are subject to any mortgage, pledge, lien, security
interest, encumbrance or charge of any kind except (a) the pledge of the shares
of Axson's subsidiaries to secure a line of credit, (b) liens shown on the
Axson Balance Sheet as securing specified liabilities or obligations with
respect to which no default exists and (c) liens for current taxes not yet due.
The rights, properties and other assets presently owned, leased or licensed by
Axson are sufficient to permit Axson to conduct its business in the same manner
as its business has been conducted prior to the date hereof.
6.10 Plant and Equipment. The plants, structures and equipment of
Axson are structurally sound with no known defects and are in good operating
condition and repair and are adequate for the uses to which they are being put;
and none of such plants, structures or equipment are in need of maintenance or
repairs except for ordinary, routine maintenance and repairs which are not
material in nature or cost. Axson has not received notification that it is in
violation of any applicable building, zoning, anti-pollution, health,
occupational safety or other law, ordinance or regulation in respect of its
plants or structures or their operations and, to Axson's best knowledge, no
such violation exists.
6.11 Litigation. Except as set forth on Schedule 6.11, there is no
action, suit, claim, counterclaim, arbitration, proceeding or investigation
pending or, to Axson's best knowledge, threatened against or involving Axson,
or which questions or challenges the validity of this Agreement or any action
taken or to be taken pursuant to this Agreement or in connection with the
transactions contemplated hereby; and Axson does not know or have any reason to
know of any basis for any such action, proceeding or investigation. Axson is
not in default under or in violation of, nor is there any basis for any claim
of default under or violation of, any material contracts, commitments or
restrictions to which it is a party or by which it is bound. Axson is not
subject to any judgment, order or decree entered in any lawsuit or proceeding.
6.12 Compliance with Law. The operations of Axson have been
conducted in accordance with all applicable laws, regulations and other
requirements of all national governmental authorities, and of all
municipalities and other political subdivisions and agencies thereof, having
jurisdiction over Axson, including, without limitation, all such laws,
regulations and requirements relating to antipollution, consumer protection,
environmental, equal opportunity, health, occupational safety, pension and
securities matters. Axson has not received any notification of any asserted
present or past failure by Axson to comply with any law, rule or regulation.
Axson has all permits, governmental licenses, registrations and approvals
necessary to carry out its business as currently conducted and as required by
applicable law or regulation.
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ARTICLE VII
CONDUCT OF BUSINESS PENDING THE CLOSING
Pending the Closing, and except as otherwise consented to or approved
by Purchaser in writing, Seller agrees to do, and Parent agrees to cause Seller
to do, the following:
7.01 Regular Course of Business. Seller shall carry on its business
diligently and substantially in the same manner as heretofore conducted, and
Seller shall not institute any new methods of manufacture, purchase, sale,
lease, management, accounting or operation or engage in any transaction or
activity, enter into any agreement or make any commitment, except in the
ordinary course of business and consistent with past practice.
7.02 Amendments. No change or amendment shall be made in the
organizational documents of Seller.
7.03 Capital Changes. Seller will not issue or sell any shares or
interests of its capital stock or other securities, acquire directly or
indirectly, by redemption or otherwise, any such capital stock, reclassify or
split-up any such capital stock, declare or pay any dividends thereon or make
any other distribution with respect thereto, or grant or enter into any
options, warrants, calls or commitments of any kind with respect thereto.
7.04 Organization. Seller shall use its best efforts to preserve
its legal existence and its business organization intact and to preserve its
relationships with licensors, suppliers, distributors, customers and others
having business relations with it. Except for the officers and key employees
of Seller listed on Schedule 7.04, who are also employees of Parent, Seller
shall use its best efforts to keep available its officers and key employees.
7.05 General. Without limiting the generality of the foregoing,
Seller shall not take, or voluntarily suffer to be taken, any of the actions
listed in Section 5.07 hereof.
7.06 Insurance; Property. Seller shall adequately insure all
property, real, personal and mixed, owned or leased by Seller against all
ordinary and insurable risks; and all such property shall be used, operated,
maintained and repaired in a careful and reasonably efficient manner.
7.07 No Default. Seller shall not do any act or omit to do any act,
or permit any act or omission to act, which will cause a breach of any contract
or commitment of Seller, or which would cause the breach of any warranty made
hereunder.
7.08 Compliance With Laws. Seller shall duly comply with all laws
and regulations applicable to it and its properties, operations, business and
employees.
7.09 Inventory. Seller shall not place orders for Inventory which
would be classified as "goods in transit" on the Closing Date.
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ARTICLE VIII
OBLIGATIONS PENDING THE CLOSING
Seller and Parent hereby jointly and severally covenant and agree with
Purchaser and Axson, and Purchaser and Axson hereby jointly and severally
covenant and agree with Seller and Parent that:
8.01 Access. Seller shall afford, and Parent shall cause Seller to
afford, to Purchaser and Axson, their counsel, accountants and other authorized
representatives, including their environmental consultants, reasonable access
to the plants, offices, warehouses, properties, books and records of Seller in
order that Purchaser and Axson may have full opportunity to make such
investigations as they shall desire to make of the affairs of Seller; and will
cause Seller's officers and accountants to furnish such additional financial
and operating data and other information as Purchaser or Axson shall from time
to time reasonably request.
8.02 Confidentiality. Each party will hold and will cause its
consultants and advisors to hold in strict confidence, unless compelled to
disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all documents and information concerning
the other party furnished it by such other party or its representatives in
connection with the transactions contemplated by this Agreement (except to the
extent that such information can be shown to have been (i) previously known by
the party to which it was furnished, (ii) in the public domain through no fault
of such party, or (iii) later lawfully acquired from other sources by the party
to which it was furnished) and each party will not release or disclose such
information to any other person, except its auditors, attorneys, financial
advisors, bankers and other consultants and advisors in connection with this
Agreement. If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except to the extent such
information comes into the public domain through no fault of the party required
to hold it in confidence, and such information shall not be used to the
detriment of, or in relation to any investment in, the other party and all such
documents (including copies thereof) shall immediately thereafter be returned
to the other party upon the written request of such other party. Each party
shall be deemed to have satisfied its obligation to hold such information
confidential if it exercises the same care as it takes to preserve
confidentiality for its own similar information.
8.03 Other Transactions; Etc. From the date hereof until the
earlier of (a) the Closing contemplated hereby or (b) the termination of this
Agreement, (i) Parent shall not (and shall assure that neither Seller nor any
officer, director, employee, agent, or representative of Parent or Seller
shall), directly or indirectly, solicit or entertain offers from, enter into
negotiations with, or furnish information to, other parties with respect to any
sale of assets (except inventory in the ordinary course of business),
securities or control of Seller or any business combination transaction
involving Seller, however structured. The foregoing
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shall not prohibit Parent or Seller from providing information to governmental
authorities if required by law or court order.
8.04 Further Assurances. Each party hereto shall execute and
deliver such instruments and take such other actions as the other party or
parties, as the case may be, may reasonably require in order to carry out the
intent of this Agreement.
8.05 Supplements to Schedules. From time to time prior to the
Closing, Seller shall promptly supplement or amend the Schedules hereto with
respect to any matter hereafter arising which, if existing or occurring at the
date of this Agreement, would have been required to be set forth or described
in a Schedule hereto. For purposes of determining the satisfaction of the
condition set forth in Section 9.01 hereof, the Schedules shall be deemed to
include only the information contained therein on the date hereof, without
regard to any supplement or amendment.
8.06 Foam Boards; Waste Drums. Prior to the Closing, Seller shall
at its own expense: (a) sell or otherwise dispose of all Z-Tech foam products
in its inventory and all foam sign and model boards in its inventory which
Seller has rated B or poorer in quality; and (b) dispose of all drums of waste
on Seller's premises, such that on the Closing Date all such inventory and
drums shall have been removed from Seller's premises. All such disposals shall
comply with all applicable laws, rules and regulations relating thereto.
Seller and its affiliates may continue to sell such inventory after the
Closing, provided they shall not do so under any trademark listed on Schedule
5.12.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND AXSON
Each and every obligation of Purchaser and Axson under this Agreement
to be performed on or before the Closing Date shall be subject to the
satisfaction, on or before the Closing Date, of each of the following
conditions, unless waived in writing by Purchaser and Axson:
9.01 Representations and Warranties True. The representations and
warranties of Seller and Parent contained in Article V hereof, the Schedules
hereto and in all certificates and other documents delivered by Seller and
Parent to Purchaser or Axson pursuant hereto or in connection with the
transactions contemplated hereby shall be in all material respects true and
accurate as of the date when made and at and as of the Closing Date as though
such representations and warranties were made at and as of such date.
9.02 Performance. Seller and Parent shall have performed and
complied with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date.
28
<PAGE> 36
9.03 Investigations; Etc. No investigation of Seller by Purchaser
or Axson pursuant to Section 8.01 hereof nor the Schedules hereto or any
supplement thereto, shall have revealed any facts or circumstances which, in
the good faith judgment of Axson, reflect in a materially adverse way on the
financial condition, assets, liabilities (absolute, accrued, contingent or
otherwise), reserves, business, operations or prospects of Seller.
9.04 No Government Proceeding or Litigation. No suit, action,
investigation, inquiry or other proceeding by any governmental body or other
person or legal or administrative proceeding shall have been instituted or
threatened which if adversely determined could have a material adverse effect
on the business, prospects, financial condition, working capital, cash flow,
assets, liabilities, reserves or operations of Seller or which questions the
validity or legality of the transactions contemplated hereby.
9.05 Material Adverse Change. From the date of the Balance Sheet to
the Closing Date, Seller shall not have suffered any material adverse change in
its business, prospects, financial condition, working capital, cash flow,
assets, liabilities (absolute, accrued, contingent or otherwise), reserves or
operations.
9.06 Consents. All government and third party consents referred to
in Section 4.18 shall have been obtained.
9.07 Related Transactions. All transactions referred to in Article
IV hereof shall have been consummated.
9.08 Key Employees. No key employee of Seller listed on Schedule
9.08 hereto shall have terminated his or her employment or have indicated an
intention to do so, and Purchaser shall have entered into employment agreements
or arrangements satisfactory to Purchaser with all such key employees,
including provisions to protect the confidential information and trade secrets
of Purchaser and Axson.
9.09 Financing. Axson shall have successfully completed
arrangements, satisfactory to Axson in its sole discretion, with banks, other
financial institutions or investors for sufficient equity and/or debt financing
for completion of the acquisition of the Acquired Assets and the external
financing needs of Purchaser after the Closing.
9.10 Insurance. Purchaser shall have obtained insurance coverage
for the Acquired Assets and the business and operations of Purchaser after the
Closing, satisfactory to Purchaser in its sole discretion.
9.11 Certificates. Seller and Parent shall have furnished Purchaser
and Axson with such certificates of Seller and Parent to evidence compliance
with the conditions set forth in this Article IX as may reasonably be requested
by Axson.
29
<PAGE> 37
ARTICLE X
CONDITIONS TO THE OBLIGATIONS OF SELLER AND PARENT
Each and every obligation of Seller and Parent under this Agreement to
be performed on or before the Closing Date shall be subject to the
satisfaction, on or before the Closing Date, of each of the following
conditions, unless waived in writing by Seller and Parent.
10.01 Representations and Warranties True. The representations and
warranties of Purchaser and Axson contained in Article VI hereof, shall be in
all material respects true and accurate as of the date when made and at and as
of the Closing Date as though such representations and warranties were made at
and as of such date, except for changes expressly permitted or contemplated by
the terms of this Agreement.
10.02 Performance. Purchaser and Axson shall have complied with and
performed all agreements, obligations and conditions required by this Agreement
to be complied with or performed by them on or prior to the Closing Date.
10.03 Certificates. Purchaser and Axson shall have furnished Seller
and Parent with such certificates of its officers to evidence compliance with
the conditions set forth in this Article X as may reasonably be requested by
Seller and Parent.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.01 Survival of Representations and Warranties. All
representations and warranties made by any party in this Agreement or pursuant
hereto, shall survive the Closing hereunder and any investigation at any time
made by or on behalf of any other party for a period of two years following the
Closing; provided, however, that the representations and warranties set forth
in Sections 5.12, 5.20, 5.25, and 5.28 shall survive until the expiration of
the respective statutes of limitations applicable to the subject matter of such
representations and warranties; and further provided, however, that the
representations and warranties set forth in Sections 5.15and 5.16 hereof shall
survive forever.
11.02 Statements as Representations. All statements contained herein
or in any certificate, schedule, list, exhibit, document or other writing
delivered pursuant hereto or in connection with the transactions contemplated
hereby shall be deemed representations and warranties within the meaning of
Section 11.01 hereof.
11.03 Agreement to Indemnify.
(a) Seller and Parent hereby jointly and severally agree to
indemnify, defend and hold harmless Purchaser and Axson and each subsidiary,
affiliate, director, officer,
30
<PAGE> 38
employee or agent of Purchaser or Axson from and against all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities,
costs and expenses, including, without limitation, interest, penalties and
attorneys' fees (collectively "Damages"), asserted against or imposed upon or
incurred by Purchaser, Axson, or any subsidiary or affiliate, director,
officer, employee or agent of Purchaser or Axson resulting from a breach of any
representation, warranty or covenant of Seller contained in or made pursuant to
this Agreement; provided, however, that Seller and Parent shall have no
liability for Damages unless and until the aggregate amount of such Damages
equals $20,000, in which case Seller and Parent shall be required to pay all
such Damages from the first dollar; and further provided, however, that Seller
and Parent shall not be liable for Damages in excess of $2,100,000 in the
aggregate, except for Damages resulting from a breach of the representations
and warranties set forth in Sections 5.15, 5.16, 5.20, 5.25 and 5.28, as to
which liability of Seller and Parent shall be unlimited.
(b) Purchaser and Axson hereby jointly and severally agree
to indemnify, defend and hold harmless Seller and Parent, and each subsidiary,
affiliate, director, officer, employee or agent of Seller or Parent from and
against all Damages asserted against or imposed upon or incurred by Seller,
Parent or any subsidiary, affiliate, director, officer, employee or agent of
Seller or Parent resulting from a breach of any representation, warranty or
covenant of Purchaser or Axson contained in or made pursuant to this Agreement;
provided, however, that Purchaser and Axson shall have no liability for Damages
unless and until the aggregate amount of such Damages equals $20,000, in which
case Purchaser and Axson shall be required to pay all such Damages from the
first dollar; and further provided, however, that Purchaser and Axson shall not
be liable for Damages in excess of $2,000,000 in the aggregate.
11.04 Indemnification for Claims. The obligations and liabilities of
the party owing the indemnity under Section 11.03 hereof ("Indemnitor") to the
party to whom an indemnity is owed ("Indemnitee") with respect to claims for
Damages resulting from the assertion of liability by third parties ("Claims"),
shall be subject to the following terms:
(a) Indemnitee will give Indemnitor prompt notice of any
Claim asserted against or imposed upon or incurred by Indemnitee, and the
Indemnitor shall undertake the defense thereof by representatives of its own
choosing. Failure by Indemnitee to give any such notice shall not affect the
obligations of Indemnitor to indemnify hereunder.
(b) In the event that Indemnitor, within a reasonable time
after notice of any such Claim, fails to defend, Indemnitee, then Indemnitee
will (upon further notice to Indemnitor) have the right to undertake the
defense, compromise or settlement of such Claim for the account of the
Indemnitor, subject to the right thereof to assume the defense of such Claim at
any time prior to settlement, compromise or final determination thereof.
31
<PAGE> 39
(c) Anything in this Section 11.04 to the contrary
notwithstanding, (i) if there is a reasonable probability that a Claim may
materially and adversely affect Indemnitee, then Indemnitee shall have the
right to defend, compromise or settle such Claim, and (ii) Indemnitor shall
not, without Indemnitee's prior written consent, settle or compromise any Claim
or consent to entry of any judgment which does not include as an unconditional
term thereof the release by the claimant or the plaintiff of Indemnitee from
all liability in respect of such Claim.
11.05 Accounts Receivable. Notwithstanding the foregoing provisions
of this Article XI, Seller and Parent shall jointly and severally indemnify,
compensate and save harmless Purchaser and Axson with respect to Receivables of
Seller, as follows:
(a) Purchaser shall use commercially reasonable efforts to
collect the Receivables. If any Receivable has not been collected within 90
days after said Receivable became due and payable, Parent, upon written notice
from Purchaser, shall pay Purchaser the amount of said Receivable within five
days after receiving notice thereof and Purchaser shall assign said Receivable
to Parent and promptly deliver to Parent the records relating thereto. After
such assignment, Purchaser agrees that upon receipt of any payment on the
assigned Receivable, Purchaser will immediately remit the same to Parent.
Parent may employ all commercially reasonable means to collect the assigned
Receivables.
(b) The provisions of subsection (a) to the contrary
notwithstanding, Parent shall only be obligated to pay Purchaser with respect
to the Receivables listed on Schedule 11.05 to the extent the same have not
been collected by Purchaser within 30 days after the Closing Date.
(c) All payments received by Purchaser with respect to its
Receivables shall be deemed to have been made with respect to the earliest
accruing receivables from such customer, except to the extent the customer
specifies otherwise with respect to any such payment.
11.06 Remedies Cumulative. The remedies provided herein shall be
cumulative and shall not preclude a party from asserting any other rights or
seeking any other remedies against the other party or its successors or
assigns.
ARTICLE XII
TERMINATION AND REMEDIES
12.01 Termination. Anything in this Agreement to the contrary
notwithstanding:
(a) Mutual Consent. This Agreement may be terminated by
the mutual consent of the parties hereto.
32
<PAGE> 40
(b) Default. In the event that a party hereto shall,
contrary to the terms of this Agreement, intentionally fail or refuse to
consummate the transactions contemplated herein or to take any other action
referred to herein necessary to consummate the transactions contemplated
herein, then the non-defaulting party, after affording the defaulting party a
10-day period after notice in which to cure such breach or default, shall have
the right, in addition to the other rights specified in Section 12.02 below, to
terminate this Agreement by written notice given to the other party hereto.
(c) Upset Date. In the event that the Closing shall not
have occurred on or prior to February 28, 1997, then, unless otherwise agreed
to in writing between the parties hereto, this Agreement shall terminate on or
following such date (as such date may be postponed pursuant hereto), upon
written notice given by one party to the other, unless the absence of such
occurrence shall be due to the failure or refusal of the party seeking to
terminate this Agreement of the type described in Section 12.01(b).
(d) Legal Restraint. Either party may, by written notice
to the other party, terminate this Agreement if at the time the written notice
of termination is given, there is in effect a preliminary or permanent
injunction enjoining consummation of the transactions contemplated hereby.
12.02 Remedies.
(a) Specific Performance. Subject to compliance with the
terms of Section 12.02(d) hereof, any party desiring to proceed with the
Closing despite any failure or refusal of the other party hereto of the type
described in Section12.01(b) hereof shall have the right to pursue the remedy
of specific performance.
(b) Damages. Subject to compliance with the terms of
Section 12.02(d) hereof, any party terminating this Agreement pursuant to
Section 12.01(b) hereof shall, if the failure or refusal referred to in Section
12.01(b) hereof constituted a material breach of this Agreement, have the right
to sue for damages and all reasonable out-of-pocket costs and expenses
theretofore suffered and sustained by the non-defaulting party; provided, that
no party shall be liable to the other for special, consequential or punitive
damages by reason of such breach.
(c) Effect of Termination. Except as set forth in Section
12.02(b) above, any termination of this Agreement by any party hereto shall
have the effect of causing this Agreement to thereupon become void and of no
further force or effect whatsoever, and thereupon no party hereto will have any
rights, duties, liabilities or obligations of any kind or nature whatsoever
against any other party hereto based upon either this Agreement or the
transactions contemplated hereby, except in each case the obligations of each
party for its own expenses incurred in connection with the transactions
contemplated by this Agreement as provided in Section 13.04 and the obligations
of each party with respect to confidentiality set forth in Section 7.02 hereof.
33
<PAGE> 41
(d) Cure Period. Any party seeking any form of relief
referred to in Sections 12.02(a) or (b) hereof shall, as a condition to the
right to seek such relief, afford the defaulting party hereto with a 10-day
period to effect reasonable cure of such breach or default.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.01 Commissions and Finders' Fees. Each of the parties represents
that the negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on by Seller directly with Purchaser in
such manner as not to give rise to any claims against any of the parties hereto
for a brokerage commission, finders' fee or other like payment. Insofar as any
such claims are made which are alleged to be based on an agreement or
arrangements made by, or on behalf of, a party, such party agrees to indemnify
and hold the other party harmless from and against all liability, loss, cost,
charge or expense, including reasonable counsel fees, arising therefrom.
13.02 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented by written agreement of
Purchaser and Seller with respect to any of the terms contained herein.
13.03 Waiver of Compliance. Any failure of Seller or Parent, on the
one hand, or Purchaser or Axson, on the other, to comply with any obligation,
covenant, agreement or condition herein may be expressly waived in writing by
Axson or Parent, respectively, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
13.04 Expenses. Each of the parties hereto will pay its own expenses
incurred by it or on its behalf in connection with this Agreement or any
transaction contemplated by this Agreement, whether or not such transaction
shall be consummated, including, without limitation, all fees of its counsel.
In addition, Seller shall bear the expense of any transfer tax or sales tax
applicable to the transactions contemplated hereby, except that Purchaser shall
bear any stock transfer tax or sales tax applicable to the purchase of the
Axson Stock by Parent [and any applicable vehicle transfer tax].
13.05 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered by hand or mailed, certified or
registered mail with postage prepaid or delivered by express delivery or
facsimile transmission (with copy by mail):
34
<PAGE> 42
(a) If to Seller or Parent, to:
Maxco, Inc.
1118 Centennial Way
Lansing, MI 48917
Attn: President
or to such other person or address as Seller or Parent shall furnish to Axson
in writing.
(b) If to Purchaser or Axson, to:
Axson SA
14 rue de Prony
75017 Paris, France
Attn: President
or to such other person or address as Purchaser or Axson shall furnish to
Parent in writing.
13.06 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any
party hereto without the prior written consent of the other party, except that
Purchaser may assign this Agreement to an affiliate of Axson.
13.07 Governing Law; Etc. (a) This Agreement and the legal relations
among the parties hereto shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its conflicts of law
doctrine. In the event of a breach of this Agreement by Seller or Parent on
the one hand, or Purchaser or Axson on the other hand, the non-breaching party
shall be entitled to recover its costs, and expenses (including reasonable
legal fees) incurred in enforcing this Agreement.
(b) The parties hereto, acting for themselves and for their
respective successors and assigns, without regard to domicile, citizenship or
residence, hereby expressly and irrevocably consent and subject themselves to
the exclusive jurisdiction of the United States District Court for the District
of Delaware or any Delaware state court in respect of any and all matters
arising under or in connection with this Agreement and service of process,
notices and demands of any such court and any other notices or the
communications required or permitted under this Agreement may be made upon any
of them by personal service at any place where they may be found or by mailing
copies of such process, notices, demands and communications by certified or
registered mail, postage prepaid and return receipt requested, to the addresses
hereinabove set forth
13.08 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
35
<PAGE> 43
13.09 Effectiveness; Binding Effect. This Agreement shall become
effective as to each party hereto when and only when this Agreement shall have
been executed by such party; provided, however, that this Agreement shall be
null and void ab initio as to each party hereto in the event that both parties
hereto shall not have executed this Agreement within five (5) days of the date
upon which any party hereto shall have executed this Agreement.
13.10 Headings. The headings of the Sections and Articles of this
Agreement are inserted for convenience only and shall not constitute a part
hereof.
13.11 Entire Agreement. This Agreement including the Exhibits and
Schedules hereto and other documents and certificates delivered pursuant to the
terms hereof, set forth the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein, and supersedes all
prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer,
employee or representative of any party hereto.
13.12 Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any person or entity other than the parties hereto
and their successors or assigns, any rights or remedies under or by reason of
this Agreement.
13.13 Mutual Agreement. This Agreement embodies the arm's-length
negotiation and mutual agreement among the parties hereto and shall not be
construed against any party as having been drafted by it.
13.14 Severability. If in any jurisdiction, any provision of this
Agreement or its application to any party or circumstance is restricted,
prohibited or unenforceable, such provision shall, as to such jurisdiction, be
ineffective only to the extent of such restriction, prohibition or
unenforceability without invalidating the remaining provisions hereof and
without affecting the validity or enforceability of such provision in any other
jurisdiction or its application to other parties or circumstances. In
addition, if any one or more of the provisions contained in this Agreement
shall for any reason in any jurisdiction be held to be excessively broad as to
time, duration, geographical scope, activity or subject, it shall be construed,
by limiting and reducing it, so as to be enforceable to the extent compatible
with the application law of such jurisdiction as it shall then appear.
36
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
each by its duly authorized officer, all as of the day and year first above
written.
AXSON NORTH AMERICA, INC.
By: Lionel Puget
----------------------------
Lionel Puget
President
AXSON, S.A.
By: Lionel Puget
-----------------------------
Lionel Puget
President Directeur General
AKEMI, INC.
By: Vincent Shunsky
----------------------------
Vincent Shunsky
Vice President
MAXCO, INC.
By: Vincent Shunsky
----------------------------
Vincent Shunsky
Vice President - Finance
37
<PAGE> 1
EXHIBIT 11
MAXCO, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended December 31,
1996 1995
------------------ ------------------
(In thousands except per share data)
<S> <C> <C>
NET INCOME FOR COMPUTATION
OF PER SHARE AMOUNTS
Net income (loss) from continuing operations $ 87 $ (1,129)
Net income (loss) from discontinued operations (693) 54
------------ -----------
Net income (606) (1,075)
Preferred stock dividends (51) (51)
Net Income (Loss) Attributable To Common Stock-Primary
Continuing operations 36 (1,180)
Discontinued operations (693) 54
------------ -----------
(657) (1,126)
============ ===========
Net Income (Loss) Attributable To Common Stock-Fully Diluted
Continuing operations 63 (1,153)
Discontinued operations (693) 54
------------ -----------
(630) (1,099)
============ ===========
PRIMARY
- -------
Average shares outstanding 3,690,096 4,231,899
Net effect of dilutive stock options--based on the
Treasury Stock Method using average market price 70,361 116,659
------------ -----------
TOTAL 3,760,457 4,348,558
Net income (loss) per share:
Continuing operations $ .01 $ (.27)
Discontinued operations (.18) .01
------------ -----------
$ (.17) $ (.26)
============ ===========
FULLY DILUTED
- -------------
Average shares outstanding 3,690,096 4,231,899
Net effect of dilutive stock options--based on the Treasury
Stock Method using the quarter-end market price if
higher than average market price 70,361 116,659
Assumed conversion of series two 12% cumulative
redeemable convertible preferred stock 231,840 231,840
------------ -----------
TOTAL 3,992,297 4,580,398
Net income (loss) per share:
Continuing operations $ .01 $ (.25)
Discontinued operations (.17) .01
------------ -----------
$ (.16) $ (.24)
============ ===========
</TABLE>
<PAGE> 2
EXHIBIT 11
MAXCO, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Nine Months Ended December 31,
1996 1995
------------------ ------------------
(In thousands except per share data)
<S> <C> <C>
NET INCOME FOR COMPUTATION
OF PER SHARE AMOUNTS
Net income (loss) from continuing operations $ 22,879 $ (1,404)
Net income from discontinued operations (594) 405
------------ ------------
Net income 22,285 (999)
Preferred stock dividends (153) (153)
Net Income (Loss) Attributable To Common Stock-Primary
Continuing operations 22,726 (1,557)
Discontinued operations (594) 405
------------ ------------
22,132 (1,152)
============ ============
Net Income (Loss) Attributable To Common Stock-Fully Diluted
Continuing operations 22,807 (1,476)
Discontinued operations (594) 405
------------ ------------
22,213 (1,071)
============ ============
PRIMARY
- -------
Average shares outstanding 3,945,921 4,258,619
Net effect of dilutive stock options--based on the
Treasury Stock Method using average market price 71,944 118,641
------------ ------------
TOTAL 4,017,865 4,377,260
Net income (loss) per share:
Continuing operations $ 5.66 $ (.35)
Discontinued operations (.15) .09
------------ ------------
$ 5.51 $ (.26)
============ ============
FULLY DILUTED
- -------------
Average shares outstanding 3,945,921 4,258,619
Net effect of dilutive stock options--based on the Treasury
Stock Method using the quarter-end market price if
higher than average market price 71,944 118,641
Assumed conversion of series two 12% cumulative
redeemable convertible preferred stock 231,840 231,840
------------ ------------
TOTAL 4,249,705 4,609,100
Net income (loss) per share:
Continuing operations $ 5.37 $ (.32)
Discontinued operations (.14) .09
------------ ------------
$ 5.23 $ (.23)
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,322
<SECURITIES> 4,510
<RECEIVABLES> 11,804
<ALLOWANCES> (352)
<INVENTORY> 3,836
<CURRENT-ASSETS> 23,824
<PP&E> 15,072
<DEPRECIATION> (5,895)
<TOTAL-ASSETS> 54,708
<CURRENT-LIABILITIES> 10,634
<BONDS> 5,628
0
1,646
<COMMON> 3,683
<OTHER-SE> 30,409
<TOTAL-LIABILITY-AND-EQUITY> 54,708
<SALES> 54,172
<TOTAL-REVENUES> 54,172
<CGS> 45,492
<TOTAL-COSTS> 52,203
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 36,602
<INCOME-TAX> 13,723
<INCOME-CONTINUING> 22,879
<DISCONTINUED> (594)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,285
<EPS-PRIMARY> 5.51
<EPS-DILUTED> 5.23
</TABLE>
