UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): March 18, 1998
SECOM GENERAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-14299 87-0410875
(State or other (Commission (IRS Employer
jurisdiction of incorporation) of File Number) Identification No.)
46035 GRAND RIVER AVENUE, NOVI, MICHIGAN 48374
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (248) 305-9410
<PAGE>
Item 2. Acquisition or Disposition of Assets
On March 18, 1998, the Registrant's ("Secom" or the "Company")
wholly-owned subsidiary Milford Manufacturing Corporation ("Milford"), sold
all of its assets relating to its machined brake valve parts business in
transactions with Varity Kelsey Hayes ("VKH") and PGK Acquisition Corp.
("PGK"). VKH was Milford's primary customer and Secom had acquired the assets
and business of Milford from VKH on November 1, 1996. Milford sold back to
VKH, for $3 million in cash, the machinery, equipment and tooling used in
connection with the manufacture of machined brake valve body parts along with
its 80,000-sq. ft. industrial facility located on 6.6 acres in Milford,
Michigan. In addition to the cash portion of the purchase price, VKH also
assumed any funding contributions required to be made to the Milford pension
plan.
PGK acquired other machined valve related assets in exchange for
the assumption of approximately $1.2 million in accounts payable, other
accruals of approximately $700,000, and the bargaining unit employee retiree
health care obligation, recorded at $3.4 million. PGK will operate the
Milford business and also assumed Milford's obligations under a supply
agreement with VKH.
After the sales to VKH and PGK, Secom and its Milford unit have
machinery and equipment remaining that are used in the manufacture of parts
for three customers other than VKH. Sales of those parts were $885,000 in the
fiscal year ended September 30, 1997 and $1,238,000 in the quarter ended
December 31, 1997.
The Company expects to consummate the sale of the remaining Milford
assets and related business in the quarter ending June 30, 1998. Accordingly,
the estimated gain or loss on those transactions was aggregated with the VKH
and PGK transactions for the presentation of Milford as a discontinued
operation in the proforma financial information contained in Item 7 of this
Report. Milford entered into a subcontract arrangement with PGK for the
manufacture of the remaining parts until those transactions are completed.
In an unrelated transaction, Secom's wholly owned subsidiary,
Uniflow Corporation sold its FX1250 parts forming machine to Horizon
Technology LLC on March 24, 1998. Uniflow received $2.5 million in cash at
closing and a note receivable for $700,000 payable over five years. Uniflow
will also receive royalty payments of 2% on sales made by Horizon relating to
accounts transferred to it by Uniflow.
Item 7. Financial Statements and Exhibits. Page (a) Not applicable
(b) Proforma Financial Information
Headnote to Proforma Condensed Financial Statements F-2
Proforma Balance Sheet as of December 31, 1997 F-3
Footnotes to Proforma Financial Information F-4
Proforma Statement of Operations for the quarter
ended December 31, 1997 F-5
Proforma Statement of Operations for the year ended
September 30, 1997 F-6
(c) Exhibits. See the Exhibit index on the following page.
<PAGE>
EXHIBIT LIST
EXHIBIT NO. DESCRIPTION
2.1 Agreement dated March 18, 1998 between Milford
Manufacturing Corporation and Kelsey Hayes Company
2.2 Agreement dated March 16, 1998 between Milford and
and PGK Acquisition Corp.
2.3 Asset Purchase Agreement between Uniflow Corporation
and Horizon Technology, LLC dated February 5, 1998
2.4 Promissory Note from Horizon Technology LLC to
Uniflow Corporation dated March 24, 1998
2.5 Subordinated Security Agreement between Horizon
Technology LLC and Uniflow Corporation dated March 24,
1998
<PAGE>
SECOM GENERAL CORPORATION
PROFORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited proforma condensed balance sheet as of
December 31, 1997 and statements of operations for the three months ended
December 31, 1997 and the year ended September 30, 1997, give effect to the
Milford discontinued operating segment.
The unaudited proforma condensed balance sheet of Secom has been
prepared based on its historical unaudited consolidated balance sheet as of
December 31, 1997. The adjustments shown reflect the elimination of Milford's
assets and liabilities as if the disposal of the Milford operation had been
completed prior to December 31, 1997.
The proforma statements of operations may not be indicative of the
results that would have actually occurred if the Milford segment had been
discontinued effective as of the beginning of the respective period shown.
The proforma financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the Company's Form
10-K for the fiscal year ended September 30, 1997.
F-2
<PAGE>
SECOM GENERAL CORPORATION
PROFORMA CONDENSED BALANCE SHEET
(UNAUDITED)
December 31, 1997
<TABLE>
<CAPTION>
Historical Proforma
Consolidated Proforma Consolidated
Dec. 31, 1997 Adjustments Dec. 31, 1997
------------- ------------ -------------
<S> <C> <C> <C>
CURRENT ASSETS
Accounts receivable, net $ 7,606,600 $ (3,283,200)(3) $ 4,423,400
Inventories 5,706,600 (468,900)(1) 5,237,700
Other current assets 1,323,700 (22,500)(1) 1,301,200
----------- ------------ -----------
TOTAL CURRENT ASSETS 14,736,900 (3,774,600) 10,962,300
Cash restricted for equipment 14,000 (14,000)(1) --
Property, plant & equipment,
net 27,915,200 (9,320,800)(1) 18,594,400
Other assets 3,040,300 (815,900)(1) 2,224,400
----------- ------------ -----------
TOTAL ASSETS $45,706,400 $(13,925,300) $31,781,100
=========== ============ ===========
CURRENT LIABILITIES
Current maturities of long-
term obligations $ 2,745,100 $ (300,000)(1) $ 2,445,100
Trade accounts payable 5,196,500 (1,200,000)(1) 3,996,500
Accrued wages and benefits 934,200 (165,000)(1) 769,200
Accrued other 509,500 509,500
----------- ------------ -----------
TOTAL CURRENT LIABILITIES 9,385,300 (1,665,000) 7,720,300
Long-term obligations 17,513,700 (4,955,600)(1) 9,014,900
(260,000)(2)
(3,283,200)(3)
Post retirement health care
benefits 3,452,500 (3,452,500)(1) --
Other liabilities 1,980,000 (569,000)(1) 1,411,000
----------- ------------ -----------
TOTAL LIABILITIES 32,331,500 (14,185,300) 18,146,200
----------- ------------ -----------
STOCKHOLDER EQUITY:
Common Stock 533,500 533,500
Additional paid-in capital 18,410,000 18,401,000
Accumulated deficit (5,559,600) 260,000 (2) (5,299,600)
----------- ------------ -----------
TOTAL STOCKHOLDERS' EQUITY 13,375,900 260,000 13,634,900
----------- ------------ -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $45,706,400 $(13,925,300) $31,781,100
=========== ============ ===========
<FN>
See F-4 for footnotes referenced above.
</TABLE>
F-3
<PAGE>
Secom General Corporation
Proforma Condensed Balance Sheet
Footnotes
1. To record the elimination of the Company's Milford assets and
liabilities as if the operation had been discontinued and disposed of
prior to December 31, 1997.
2. To record estimated gain on disposal (net of federal tax provision of
$85,000) of Milford assets and operations. Gain offset shown as
reduction of long term obligations.
3. To record the elimination of Milford accounts receivable with the offset
as reduction in long term obligations.
F-4
<PAGE>
SECOM GENERAL CORPORATION
PROFORMA CONDENSED STATEMENT OF OPERATIONS
For the Three Months Ended December 31, 1997
The following unaudited proforma adjustments reflect the
elimination of the results of operations of Milford for the three months
ended December 31, 1997. This proforma condensed statement of operations has
been prepared from the Company's unaudited consolidated results of operations
for the three months ended December 31, 1997.
<TABLE>
<CAPTION>
Historical Proforma
Consolidated Consolidated
Three Months Three Months
Ended Proforma Ended
Dec. 31, 1997 Adjustments Dec. 31, 1997
-------------- ------------ -------------
<S> <C> <C> <C>
NET SALES $12,134,800 $3,780,800 $8,354,000
COST OF SALES 10,926,900 3,634,200 7,292,700
----------- ----------- -----------
GROSS PROFIT 1,207,900 146,600 1,061,300
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,872,600 555,200 1,317,400
----------- ----------- -----------
LOSS FROM OPERATIONS (664,700) (408,600) (256,100)
OTHER INCOME (EXPENSE)
Interest (400,500) (65,300) (335,200)
Other, net (9,200) (56,600) 47,400
----------- ----------- -----------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (1,074,400) (530,500) (543,900)
BENEFIT FROM INCOME TAXES 161,600 95,500 66,100
----------- ----------- -----------
LOSS FROM CONTINUING OPERATIONS $ (912,800) $ (435,000) $ (477,800)
=========== =========== ===========
BASIC AND DILUTED PER COMMON
SHARE $ (0.17) $ (0.09)
=========== =========== ===========
BASIC AND DILUTED WEIGHTED
AVERAGE SHARES OUTSTANDING 5,335,900 5,335,900
</TABLE>
F-5
<PAGE>
SECOM GENERAL CORPORATION
PROFORMA CONDENSED STATEMENT OF OPERATIONS
For the Year Ended September 30, 1997
The following unaudited proforma adjustments reflect the
elimination of the results of operations of Milford for the year ended
September 30, 1997. Milford was acquired effective November 1, 1996. This
proforma condensed statement of operations has been prepared from the
Company's audited consolidated results of operations for the year ended
September 30, 1997.
<TABLE>
<CAPTION>
Historical Proforma
Consolidated Proforma Consolidated
Year Ended Adjustments Year Ended
Sept. 30, 1997 Sept. 30, 1997 Sept. 30, 1997
-------------- -------------- --------------
<S> <C> <C> <C>
NET SALES $47,756,300 $12,718,100 $35,037,200
COST OF SALES 39,713,600 10,550,600 29,163,000
----------- ----------- -----------
GROSS PROFIT 8,041,700 2,167,500 5,874,200
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 6,196,900 1,286,900 4,910,000
----------- ----------- -----------
INCOME FROM OPERATIONS 1,844,800 880,600 964,200
OTHER INCOME (EXPENSE)
Interest (1,262,900) (105,000) (1,157,900)
Other, net (46,400) (207,400) 161,000
----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 535,500 568,200 (32,700)
INCOME TAX EXPENSE 226,900 198,900 26,000
----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS $ 308,600 $ 369,300 $ (60,700)
=========== =========== ===========
BASIC AND DILUTED INCOME PER
COMMON SHARE $ 0.06 $ (0.01)
=========== =========== ===========
BASIC AND DILUTED WEIGHTED
AVERAGE SHARES OUTSTANDING 5,461,300 5,461,300
</TABLE>
F-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized:
SECOM GENERAL CORPORATION
(Registrant)
By: /s/ David J. Marczak
---------------------------
David J. Marczak
Chief Financial Officer
Dated: April 2, 1998
AGREEMENT
---------
THIS AGREEMENT is made on March 18, 1998, between Milford
Manufacturing Corporation, a Michigan corporation (referred to as "MMC" and
"Seller") and Kelsey-Hayes Company, a Delaware corporation ("Buyer").
RECITALS
--------
A. On October 31, 1996, Milford Manufacturing Corporation ("MMC")
purchased from Kelsey-Hayes ("K-H") a business engaged in the manufacture and
sale of machined fluid valve products for use in the production of fluid
valve bodies for the automobile industry ("Business").
B. MMC and K-H have decided that K-H shall re purchase some of the
assets and assume some of the liabilities from MMC.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the background and
pursuant to the terms and conditions set forth in this Agreement, Seller
agrees to sell and the Buyer agrees to purchase the Business and related real
estate as follows:
1. Assets Purchased. At Closing, Seller shall sell, assign, convey,
transfer, set over, and deliver to Buyer all of the assets described below
which are owned by Seller and used in the production of fluid valve bodies
for K-H (collectively, the "Purchased Assets").
1.1 Definition of Purchased Assets. For purposes of this
Agreement, the term Purchased Assets shall be defined as including
only the following:
1.1.1 Real Property. The real property listed in Schedule 1.1.1.
1.1.2 Tangible Personal Property. All tangible personal
property listed in Schedule 1.1.2
2. Liabilities Assumed. Seller agrees that Buyer assumes no liabilities of
Seller, whether accrued, absolute, contingent, known, unknown, or otherwise,
except that Buyer agrees to assume as of the Closing Date, and thereafter
pay, perform and discharge the following liabilities ("Assumed Liabilities"):
2.1 Real Properties. Seller's obligations and liabilities relating
to the real properties listed in Schedule 1.1.1, provided that
utility charges, prepaid charges and real property taxes will be
pro-rated to the Closing Date.
2.2 Tangible Personal Properties. Seller's obligations and
liabilities relating to the tangible personal properties listed in
Schedule 1.1.2, provided that utility charges, prepaid charges and
personal property taxes will be pro-rated to the Closing Date.
<PAGE>
2.3 Pension Underfunding. Buyer and Seller are parties to an
agreement entitled Pension Plan Succession Agreement, which
agreement is incorporated by reference and attached hereto as
Schedule 2.3, and which provides for the handling of pension assets,
funding, and liabilities o the Business' Pension Plan for Bargaining
Unit Employees.
2.4 Environmental. Buyer shall assume and pay, and indemnify Seller
(pursuant to the terms and conditions of Section 9) for any
environmental issues, which arise in connection with, or concerning
the Purchased Assets (including real estate) under any Relevant
Environmental Law. For the purpose of this Agreement, "Relevant
Environmental Laws" shall mean all applicable federal, state and
local rules, regulations, orders and determinations by any judicial,
legislative or executive body of any governmental entity, including
those occurring in the future, with respect to: (a) the
installation, existence or removal of, or exposure to, asbestos at
the Premises, (b) the existence on, discharge or release from, or
removal from the Premises of any hazardous wastes and the disposal
thereof, (c) adverse effects on the environment occurring by reason
of activities conducted on the Premises and (d) adverse effects on
the environment that are manifested on the Premises occurring from
other sources or unknown sources. Such laws shall include, without
limitation, the Comprehensive Environmental Response, Compensation
and Liability Act, 41 USC 9601 et seq.; (as amended by the Superfund
Amendments and Reauthorization Act); the Emergency Planning and
Community Right-to-Know- Act, 42 USC 11001 et seq.; the Resource
Conservation and Recovery Act, 42 USC 691 et seq.; the National
Environmental Policy Act, 42 USC 4321 et seq.; the Safe Drinking
Water Act, 42 USC 300 f et seq.; the Toxic Substance Control Act, 15
USC 2601 et seq.; the Clean Air Act, 42 USC 7401 et seq.;
regulations promulgated in connection with the foregoing;
regulations pertaining to asbestos, including 40 CFR Part 61,
Subpart M and 29 CFR 1910.1001 and 1926, 58; and any state, local or
foreign laws or regulations pertaining to the environment.
3. Purchase Price for Purchased Assets.
------------------------------------
3.1 The Purchase Price. In addition to the Assumed Liabilities, the
purchase price to be paid by Buyer to Seller for the Purchased
Assets (the "Purchase Price") shall be $3,000,000.00.
3.2 Payment of Purchase Price. Buyer shall pay the Purchase Price on
the Closing Date as follows:
3.2.1 Payment at Closing. At Closing, Buyer shall pay
the Purchase Price by wire transfer of immediately
available funds to the account of and/or for the
benefit of Seller as directed at Closing. Seller
may instruct Buyer to pay jointly to Seller and to
Seller's creditor(s) to facilitate the release of
certain liens against the Purchased Assets.
3.3 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets in accordance with attached
Schedule 3.3. Buyer and Seller agree to execute and deliver at the
Closing duplicate IRS Forms 8594, with an allocation of the Purchase
Price in accordance with this Section 3.3 which is mutually
acceptable to both
2
<PAGE>
parties, and to file all other returns and reports in a manner
consistent with the allocations in this Section.
4. Delivery Free of Encumbrances. Seller shall deliver good title to the
Purchased Assets free and clear of all mortgages, liens, and security
interests ("Encumbrances"). Additionally, Seller shall provide Buyer a
commitment of title insurance from a reputable title insurance company. If
Buyer objects, in writing, to the condition of title, Seller shall have
thirty (30) days to correct the problem.
5. Preclosing Actions. Before the Closing:
5.1 Conduct of Business. Seller shall carry on and conduct the
Business in the ordinary course consistent with past practices.
5.2 Buyer's Access. From the date of this Agreement through the
Closing, Seller shall permit Buyer and its representatives to make a
full business, financial, accounting, and legal audit of the
Purchased Assets, and the Assumed Liabilities. Seller shall take all
reasonable steps necessary to cooperate with Buyer in undertaking
this audit.
6. Closing Matters.
6.1 Closing. The closing of the transactions contemplated in this
Agreement (the "Closing") shall take place at the offices of Munro
and Munro, P.C., 3250 West Big Beaver, Suite 520, Troy, Michigan at
10:00 a.m. on Monday, March 16, 1998 or at such other place and/or
on such other date as the parties may agree on (the "Closing Date").
6.2 Certain Closing Expenses; Prorations. Seller shall be liable for
and shall pay all federal, state, and local sales, use, excise, and
documentary stamp taxes and all other taxes, duties, or other like
charges properly payable on and in connection with Seller's
conveyance and transfer of the Purchased Assets to Buyer. Personal
and real property taxes, utility charges (including electricity,
gas, water, sewer, and telephone) refuse collection, and other
service contracts whether or not assumed by Buyer shall be prorated
ratably, using the fiscal period method as though said items were
paid in advance, as of the Closing Date. To the extent practicable,
all such prorations shall be computed and paid at the Closing, and
to the extent not practicable, as soon as practicable thereafter.
Title insurance shall be the Buyer's cost.
7. Seller's Representations and Warranties. As of the date of this
Agreement and as of the Closing, the Seller represents and warrants to Buyer,
and acknowledges and confirms, that Buyer is relying on these representations
and warranties in entering into this Agreement:
7.1 Organization and Standing. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of
the State of Michigan, and Seller has all requisite power and
authority (corporate and otherwise) to own its properties and
conduct its business as it is now being conducted.
7.2 Authorization. Seller has all requisite power and authority
(corporate and otherwise), and has all requisite legal capacity (a)
to execute, deliver, and perform this Agreement, to which it is a
party and (b) to consummate the transactions contemplated under this
Agreement. Seller has taken all necessary corporate action
(including the approval of its board of directors and shareholders)
to approve the execution, delivery,
3
<PAGE>
and performance of this Agreement to be executed and delivered by it
and the consummation of the transactions contemplated in this
Agreement. The Seller has duly executed and delivered this
Agreement. This Agreement, when executed and delivered, will create,
legal, valid, and binding obligations of the Seller, enforceable
against it, except as such enforcement may be limited by bankruptcy,
insolvency, moratorium, or similar laws relating to the enforcement
of creditors' rights.
7.3 Existing Agreements and Governmental Approvals.
--------------------------------------------------------
7.3.1 Existing Agreements. To the Seller's knowledge, the
execution, delivery, and performance of this Agreement and
the consummation of the transactions contemplated by them:
(i) do not and will not violate any provisions of law
applicable to the Seller or the Purchased Assets; (ii) do
not and will not conflict with, result in the breach or
termination of any provision of, or constitute a default
under (in each case whether with or without the giving of
notice or the lapse of time or both) Seller's Articles of
Incorporation or Bylaws, or any indenture, mortgage, lease,
deed of trust, or other instrument, contract, or agreement
or any order, judgment, arbitration award, or decree to
which the Seller is a party or by which any of them or any
of their respective assets and properties are bound which
would not be paid at closing (including, without
limitation, the Purchased Assets); and (iii) do not and
will not result in the creation of any Encumbrance on any
of the Seller's properties or assets (including, without
limitation, the Purchased Assets).
7.3.2 Approvals. Except as separately scheduled, no
approval, authority, or consent of, or filing by, the
Seller with, or notification to, any federal, state, or
local court, authority, or governmental or regulatory body
or agency or any other corporation, partnership,
individual, or other entity is necessary (i) to authorize
the execution and delivery of this Agreement or any of the
related agreements by Seller, (ii) to authorize the
consummation of the transactions contemplated by this
Agreement, or (iii) to continue Buyer's use and operation
of the Purchased Assets after the Closing Date.
7.4 Title to Purchased Assets. Seller is the sole and absolute owner
of the Purchased Assets and has good title to all of the Purchased
Assets which at Closing shall be free and clear of any and all
Encumbrances. Buyer is not acquiring any of the equipment, related
fixtures, related inventory, tooling, and related supplies being
used by Seller in producing its DRA, Allied, or Delphi jobs.
7.5 Condition of Purchased Assets. Buyer has examined the Purchased
Assets and is accepting them in "as is" condition, without
representation or warranty from Seller of any kind other than
warranty of title with respect to the period of Seller's ownership
only.
7.6 No Brokers. Seller has not engaged, and is not
responsible for any payment to, any finder, broker, or consultant in
connection with the transactions contemplated by this Agreement.
8. Buyer's Representations and Warranties. Buyer represents and
warrants to Seller that:
8.1 Organization and Standing. Buyer is a corporation duly organized
and validly
4
<PAGE>
doing business under the laws of the State of Delaware, and Buyer
has all the requisite power and authority (corporate and otherwise)
to own its properties and to conduct its business as it is now being
conducted.
8.2 Authorization. Buyer has taken all necessary corporate action
(a) to duly approve the execution, delivery, and performance of this
Agreement, and (b) to consummate any related transactions. Buyer has
duly executed and delivered this Agreement. This Agreement, when
executed and delivered, will create legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with
its terms, except as such enforcement may be limited by bankruptcy,
insolvency, moratorium, or similar laws relating to the enforcement
of creditor's rights.
8.3 Environmental and Other Matters. Buyer is aware of the
environmental condition of the Purchased Assets and agrees to accept
the same "as is". Further, K-H has in place certain environmental
and other commitments under an Acquisition Agreement between Seller
and Buyer, effective October 31, 1996; nothing within this Agreement
shall modify, change, or supersede any environmental or any other
non-environmental commitment(s) that survived the closing of the
Acquisition Agreement.
9. Indemnification. All of the representations and warranties of Seller in
Section 7 of this Agreement shall survive the Closing (unless the Buyer knew
of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for a period of one year thereafter. All of
the other representations and warranties of the Buyer and the Seller
contained in this Agreement shall survive the Closing (unless the damaged
Party knew of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect forever thereafter subject to
any applicable statutes or limitations.
9.1 Seller Breach and Indemnification. In the event Seller breaches any
of its representations, warranties, and covenants contained in this
Agreement, and Buyer makes a timely written claim for
indemnification against Seller, then Seller agrees to indemnify the
Buyer from and against the entirety of any Adverse Consequences the
Buyer shall suffer through and after the date of the claim for
indemnification (but excluding any Adverse Consequences the Buyer
shall suffer after the end of any applicable survival period) caused
proximately by the breach. Seller agrees to indemnify the Buyer from
and against the entirety of any Adverse Consequences the Buyer shall
suffer caused proximately by any liability of Seller, which is not
an Assumed Liability.
9.2 Buyer Breach and Indemnification. In the event the Buyer breaches
any of its representations, warranties, and covenants (including
environmental covenants in Section 2.4) contained in this Agreement,
and Seller makes a timely written claim for indemnification against
the Buyer, then the Buyer agrees to indemnify Seller from and
against the entirety of any Adverse Consequences the Seller shall
suffer through and after the date of the claim of indemnification
caused proximately by the breach. Buyer agrees to indemnify Seller
from and against the entirety of any Adverse Consequences the Seller
shall suffer caused proximately by any liability of the Seller,
which is an Assumed Liability.
9.3 Third Party Claims. If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for
5
<PAGE>
indemnification against the other Party (the "Indemnifying Party")
under this Section 9, then the Indemnified Party shall promptly (and
in any event within five business days after receiving notice of the
Third Party Claim) notify the Indemnifying Party thereof in writing.
The Indemnifying Party will have the right at any time to assume and
thereafter conduct the defense of the Third Party Claim with counsel
of its choice reasonably satisfactory to the Indemnified Party;
provided, however, that the Indemnifying Party will not consent to
the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably) unless the
judgment or proposed settlement involves only the payment of money
damages and does not impose an injunction or other equitable relief
upon the Indemnified Party. Unless and until the Indemnifying Party
assumes the defense of the Third Party Claim as provided
hereinabove, however, the Indemnified Party may defend against the
Third Party Claim in any manner it reasonably may deem appropriate.
In no event will the Indemnified Party consent to the entry of any
judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnifying
Party (not to be withheld unreasonably).
9.4 Determination of Adverse Consequences. The Parties shall make
appropriate adjustments for tax benefits and insurance coverage and
take into account a reasonable in determining Adverse Consequences
for purposes of this Section. All indemnification payments under
this Section shall be deemed adjustments to the Purchase Price. For
purposes of this Section, Adverse Consequences shall mean all
actions, suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders,
decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses.
9.5 UCC Bulk Sales Indemnification. The parties hereby waive
Seller's compliance with the Uniform Commercial Code provision of
Michigan law regarding bulk transfers. Other provisions hereof
notwithstanding, Seller will indemnify and hold Buyer harmless from
all losses, costs, damages, assessments, administrative fines or
penalties, liabilities, obligations, claims or expenses (including
reasonable professional fees and similar expenses) attributable to
Seller's failure to comply with the Uniform Commercial Code
provision of Michigan law regarding bulk transfers in respect of the
Purchased Assets sold to Buyer hereunder.
10. Expenses. Each of the parties shall pay all of the costs that it incurs
incident to the preparation, execution, and delivery of this Agreement and
the performance of any related obligations, whether or not the transactions
contemplated by this Agreement shall be consummated, except that all such
costs and all liabilities of Seller other than the Assumed Liabilities,
including, without limitation, tax liabilities, shall be paid out of the
proceeds of the Purchase Price.
11. Risk of Loss. The risk of loss of or damage to the Purchased Assets from
fire or other casualty or cause shall be on Seller at all times up to the
Closing, and it shall be the responsibility of Seller to repair, or cause to
be repaired, and to restore the property to the condition it was before the
loss or damage.
12. Termination. Excluding the release provisions contained in paragraph
13.11, which
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shall survive any termination of this Agreement, or Closing, this
Agreement may be terminated at any time before the Closing Date as
follows:
(a) By Buyer and Seller jointly in writing, or
(b) By Buyer or Seller if there has been a material breach
of any of the representations or warranties, covenants or
agreements set forth in this Agreement on the part of the
other, and this breach by its nature cannot be cured before
the Closing.
13. Miscellaneous Provisions.
-------------------------
13.1 Representations and Warranties. All representations,
warranties, and agreements made by the parties pursuant to this
Agreement shall survive the consummation of the transactions
contemplated by this Agreement, without limitation as to time.
13.2 Notices. All notices, demands, and requests required or
permitted to be given under the provisions of this Agreement shall
be in writing and shall be deemed given (a) when personally
delivered or sent by facsimile transmission to the party to be given
the notice or other communication or (b) on the business day
following the day such notice or other communication is sent by
overnight courier to the following:
if to Seller: c/o Andrew J. Munro
Munro and Munro, P.C.
3250 West Big Beaver Road
Suite 520
Troy, Michigan 48084
Tel (248) 643-9494
Fax (248) 643-0786
if to Buyer: John F. McCuen
Vice President Legal
Kelsey-Hayes
12025 Tech Center Drive
Livonia, Michigan 48150
Tel (313) 226-2603
Fax (313) 226-4590
or to such other address or facsimile number that the parties may
designate in writing.
13.3 Assignment. Buyer may not assign this Agreement, or any
interest in it, without the prior written consent of the other,
except that Buyer may assign any or all of its rights under this
Agreement to any subsidiary without Seller's consent.
13.4 Parties in Interest. This Agreement shall inure to the benefit
of, and be binding on, the named parties and their respective
successors and permitted assigns, but not any other person.
13.5 Choice of Law. This Agreement shall be governed, construed, and
enforced in
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accordance with the laws of the State of Michigan. Buyer and Seller
shall be jointly considered the authors and drafters of this
Agreement.
13.6 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each
counterpart were on the same instrument.
13.7 Entire Agreement. This Agreement and all related documents,
schedules, exhibits, or certificates represent the entire
understanding and agreement between the parties with respect to the
subject matter and shall supersede all prior agreements or
negotiations between the parties other than those commitments as set
forth in Sections 2.2.6, 2.3, 3.4.6, 3.4.8, 4.1.6, 8.3, 8.9, 8.10,
of the Acquisition Agreement dated October 31, 1996 between the
parties. This Agreement may be amended, supplemented, or changed
only by an agreement in writing that makes specific reference to
this Agreement or the agreement delivered pursuant to it and that is
signed by the party against whom enforcement of any such amendment,
supplement, or modification is sought.
13.8 Receivables. For parts delivered to it by MMC after February 1,
1998, K-H shall pay at the rate of the pre-February 1, 1998 part
prices plus 20%. K-H shall recalculate all invoices for parts
delivered since February 1, 1998 using the increased parts prices.
To the extent that payment has not already been made, at Closing K-H
shall pay to MMC the recalculated difference plus any outstanding
parts invoices at closing, or if not verified by the time of
closing, after verification of the amounts owed in due course and
according to standard course of dealings between the parties..
13.9 Press Releases. Neither party to this Agreement shall issue any
press release of make any public announcement relating to the
subject matter of this Agreement without the prior written approval
of the other party; provided however, that any party may make any
public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities, or required to be made to its
shareholders, in which case the disclosing party will use reasonable
efforts to advise the other party prior to making the disclosure(s).
13.10 Arbitration.
13.10.1 AAA Any dispute, controversy, or claim arising out
of or relating to this Agreement or relating to the breach,
termination, or invalidity of this Agreement, whether
arising in contract, tort, or otherwise, shall be resolved
in binding arbitration. Any arbitration shall proceed in
accordance with the current Commercial Arbitration Rules
(the "Arbitration Rules") of the American Arbitration
Association ("AAA").
13.10.2 Final and Binding. Any award, order, or judgment
made pursuant to arbitration shall be deemed final and may
be entered in any court having jurisdiction over the
enforcement of the award, order, or judgment. Each party
agrees to submit to the jurisdiction of any court for
purposes of the enforcement of the award, order, or
judgment.
13.10.3 Number of Arbitrators. The arbitration shall be
held before one
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arbitrator knowledgeable in the general subject matter of the
dispute, controversy, or claim and selected by AAA in accordance
with the Arbitration Rules, except that any arbitration in which the
disputed, controverted, or claimed amount (as reflected on the
demand for arbitration, as the same may be amended) exceeds
$50,000.00 shall be held before three arbitrators, one arbitrator
being selected by Buyer, one by the Seller, and the third selected
by the other two from a panel of persons identified by AAA who are
knowledgeable in the general subject matter of the dispute,
controversy, or claim.
13.10.4 Location. The arbitration shall be held at the
office of AAA located in Southfield, Michigan (as the same
may be from time to time relocated), or at another place
the parties agree on.
13.10.5 Expenses and Costs. In any arbitration proceeding
under this Section, each party shall pay all its own
expenses, an equal share of the fees and expenses of the
arbitrator, and, if applicable, the fees and expenses of
its own appointed arbitrator; provided, however, the
arbitrator(s) shall have the power to award recovery of
costs and fees (including reasonable attorney fees,
administrative and AAA fees, and arbitrators' fees) among
the parties as the arbitrators determine to be equitable
under the circumstances.
13.11 Releases and Covenant not to Sue.
---------------------------------
13.11.1 Releases. Except for the enforcement of the terms,
conditions, and obligations undertaken by the parties within
this Agreement (including certain obligations of Buyer under
the prior Acquisition Agreement), the parties in
consideration of their mutual promises, covenants and
considerations made herein, do hereby expressly release,
waive, acquit and forever discharge the other and the
other's respective subsidiaries, divisions, affiliates,
directors, officers, shareholders, employees, agents, legal
representatives, successors, predecessors and assigns from,
and hereby waive, any and all claims, demands, actions,
causes of action, suits, debts, contracts, agreements,
damages (including attorney's fees) costs, expenses,
liabilities, obligations, including claims of economic
duress, product liability and controversies whatsoever, in
law or in equity, that either party, their representatives
or executors had or now have against the other party and its
respective subsidiaries, divisions, affiliates, directors,
officers, shareholders, employees, agents, legal
representatives, successors, predecessors and assigns for,
upon or by reason of any matter, cause or thing whatsoever
in any way relating to the Milford facility and business,
including any third party claims, from the beginning of
time to the date of Closing and thereafter. Buyer does
further release, waive, acquit and forever discharge Seller
and Seller's respective subsidiaries, divisions,
affiliates, directors, officers, shareholders, employees,
agents, legal representatives, successors, predecessors and
assigns from, and hereby waives, any and all claims,
demands, actions, causes of action, suits, debts,
contracts, agreements, damages (including attorney's fees)
costs, expenses, liabilities, obligations, including claims
of economic duress, product liability and controversies
whatsoever, in law or in equity, that Buyer, its
representatives, assigns, or executors had or have at
Closing or might have after Closing with respect to the
obligations undertaken by Buyer within Section 2.3,
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2.4, or for any product liability claims.
13.11.2 Enforcement of Agreement. Notwithstanding the
above, it is specifically agreed, however, that if either
party shall breach any of the terms and conditions of this
Agreement, the other party may bring a claim in arbitration
to enforce this Agreement, and if said party is successful
in enforcing the Agreement, said party will not only be
entitled to the benefits previously available and withheld
contrary to this Agreement, but also all actual attorney
fees and litigation costs incurred. Further, should any
party bring an action or claim in arbitration which
attempts to, or which will have the effect of, overturning,
voiding, modifying, and/or nullifying the release within
Section 13.11, then in addition to any other relief or
damages, such party shall be responsible to the other party
for the following: (a) to indemnify and hold the other
party harmless from any and all costs, including actual
attorney fees; and (b) payment to the other party of
liquidated damages in the amount of $1,000,000.00, which
both parties agree is reasonable under the circumstances
given the difficulty of calculating actual damages.
13.11.3 Full Release. Except for the enforcement of the
terms and conditions of the Agreement, this release is
intended to be a full, final and complete release of all
claims by either party against the other and the terms
contained herein are not mere recitals. Further, the
releases and covenant not to sue contained within this
Section 13.11 shall survive any termination of this
Agreement or Closing.
13.11.4 Covenant not to Sue. The parties hereto in
consideration of their mutual promises, covenants and
considerations made herein, do, except for the enforcement
of the terms and conditions of this Agreement, hereby
expressly covenant with each other not to sue or arbitrate
against the other, and/or the other's respective
subsidiaries, divisions, affiliates, directors, officers,
shareholders, employees, agents, legal representatives,
successors, predecessors and assigns for any claims,
demands, actions, causes of action, suits, debts,
contracts, agreements, damages (including attorney's fees)
costs, expenses, liabilities, obligations, including claims
of economic duress, product liability and controversies
whatsoever, in law or in equity, that either party, their
representatives or executors had or now have against the
other party and its respective subsidiaries, divisions,
affiliates, directors, officers, shareholders, employees,
agents, legal representatives, successors, predecessors and
assigns for, upon or by reason of any matter, cause or
thing whatsoever in any way relating to the Milford
facility and business, including any third party claims,
from the beginning of time to the date of Closing. Both
parties expressly state that this covenant not to sue was
bargained for in good faith.
13.12 Subcontract. The Closing of this Agreement, but not the
provisions of Section 13.11, shall be conditioned upon Seller
entering into and closing the sale of the remaining MMC business and
assets (subject to certain liabilities) to PGK Acquisition.
13.13 Post Closing. Through June, 1998 K-H shall permit PGK
Acquisition, Inc. to lease space to MMC, if K-H's permission is
requried or necessary, and in any case, K-H shall permit and not
interfere with MMC's continued use and possession, including ingress
and egress, of that portion of the real property listed in Section
1.1.1 which runs
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Seller's DRA business.
The parties have executed this Agreement on the date set forth on
the first page of this Agreement.
SELLER
Milford Manufacturing Corporation
By:/s/ Robert A. Clemente
------------------------------
Robert A. Clemente, President
BUYER
Kelsey-Hayes Company
By: /s/ John F. McCuen
------------------------------
Its: Authorized Officer
11
AGREEMENT
---------
THIS AGREEMENT is made on March 18, 1998, between Milford
Manufacturing Corporation, a Michigan corporation (referred to as "MMC" and
"Seller") and PGK Acquisition Corp. ("Buyer").
RECITALS
--------
WHEREAS, upon the terms and conditions set forth herein, Buyer
desires to acquire certain assets of Seller and Seller desires to sell those
assets to Buyer; and
WHEREAS, in a separate transaction (the "K-H Sale"), Seller is
selling other assets to Kelsey-Hayes Company ("K-H"), and K-H will then
subsequently sell those assets to Buyer.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual terms and conditions set forth herein and pursuant to the terms and
conditions set forth in this Agreement, Seller agrees to sell and the Buyer
agrees to purchase certain assets that are used by Seller in the production
of parts for K-H (the "K-H Business") as follows:
1. Assets Purchased. At Closing, Seller shall sell, assign, convey,
transfer, set over, and deliver to Buyer all of the scheduled assets, whether
tangible or intangible (which are not being sold by Seller to K-H in the K-H
Sale) which on the Closing Date are owned by Seller and used by it
exclusively in the K-H Business (collectively, the "Purchased Assets").
1.1 Definition of Purchased Assets. For purposes of this Agreement,
the term Purchased Assets shall be defined as including only the following:
1.1.1 Tangible Personal Property. The water debur unit described
in Schedule 2.1.2 that is used in the production of ZWAL,
together with, to the extent transferable, all express and
implied warranties by manufacturers or sellers of that
equipment and all maintenance records, brochures,
catalogues and other documents relating to that equipment
or to their installation or functioning.
1.1.2 Inventory and Supplies. All inventories of raw materials, operating
supplies, packaging materials, component parts, replacement and spare parts,
work in process and finished goods relating to the K-H Business (the
"Inventories") and listed in Schedule 1.1.2.
1.1.3 Prepaid Items. The prepaid items are listed in Schedule
1.1.3, subject to any prorations.
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1.1.4 Permits. All transferable local, state, and federal
franchises, licenses, bonds, permits, and similar items
pertaining to the K-H Business and/or the Purchased Assets.
1.1.5 Name, Telephone Number and Advertising. All telephone and
FAX numbers, yellow-page advertisements, and Seller's right
to use the name "Milford Manufacturing Corporation" and all
related names and derivations.
1.1.6 Purchase Contracts. All of Seller's rights in and to
contracts made or orders given by Seller relating to the
purchase of materials, parts, supplies and commodities for
use in the K-H Business (the "Purchase Contracts") listed
in Schedule 1.1.6.
1.1.7 Other Contracts. All of Seller's rights in and to those
contracts, licenses or other agreements listed on Schedule
1.1.7 (or otherwise entered into in the ordinary course of
business) to which Seller is a party and entered into for
the benefit of the K-H Business (the "Other Contracts").
1.1.8 K-H Contract. All of Seller's rights in and to the Machined
Valve Products Supply Agreement dated October 31, 1996 which
is attached as Schedule 1.1.8.
1.1.9 Books and Records. Books and records, files and other
documents (including such items recorded on computer
storage media) used exclusively in the ongoing operation of
the K-H Business and access to all other books, records,
files and other documents which may be necessary to such
ongoing operations for the purpose of copying such
materials on reasonable notice to Seller by Purchaser.
1.1.10 Other Intangible Assets. All licenses, copyrights, patents,
patent applications and trade secrets owned by Seller and
used in the K-H Business.
1.2 Excluded Assets. Other provisions notwithstanding, Seller
shall not sell to Buyer and Seller shall retain as its own
property the following assets, properties and rights
(whether or not related to or used in the K-H Business):
1.2.1 Cash, Cash Equivalents, and Accounts Receivables. All cash,
bank deposits, certificates of deposit, and accounts
receivable of Seller.
1.2.2 Corporate and Business Records. All corporate documents and
records, including, without limitation, minute books, stock
records, certificates, all tax records and any records
relating to any asset retained by Seller and any
liabilities or obligation of Seller, which Buyer is not
required to assume hereunder.
1.2.3 Non K-H Business Assets, Machinery, Equipment, Inventory
and Supplies. All Seller's right, title and interest in the
assets, machinery, equipment, inventory and supplies
related to Seller's business on behalf of Delco Remy
America ("DRA"), Allied Signal Corp. a/k/a Breed
Technologies ("Allied"), and Delphi Corp. ("Delphi") see
items listed in Schedule 1.2.3.
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1.2.4 Scrap. All Seller's right, title and interest in any
sellable scrap generated prior to the date of closing and
either removed from the premises or marked by Seller and
removed from the premises promptly following the Closing
Date.
1.2.5 K-H Sale. All Seller's right, title and interest in the
assets being sold to K-H pursuant to the K-H Sale.
2. Liabilities Assumed. Seller agrees that Buyer assumes no
liabilities of Seller, whether accrued, absolute,
contingent, known, unknown, or otherwise, except that Buyer
agrees to assume as of the Closing Date, and thereafter pay,
perform and discharge the following liabilities ("Assumed
Liabilities"):
2.1.1 Assigned Contracts. All of Seller's obligations and
liabilities either continuing after or arising after the
Closing Date under the Purchase Contracts and Other
Contracts listed in Schedules 1.1.6, and 1.1.7, and the K-H
Machined Valve Products Supply Agreement described in
Section 1.1.8 and attached as Schedule 1.1.8.
2.1.2 Capital Expenditures. Anything to the contrary herein
notwithstanding, the Buyer hereby assumes the obligations
and liabilities, and agrees to pay pursuant to their terms
and conditions, certain purchase orders for the purchase of
water deburring equipment related to or used in the K-H
Business listed in Schedule 2.1.2, and other capital
expenditures listed therein. To the extent that Seller has
paid in full, or in part, the cost of any listed capital
expenditure, Buyer shall reimburse Seller at Closing.
2.1.3 Accounts Payable and Accruals.
------------------------------
a) All accounts payable relating to goods and
services ordered in the usual and ordinary course
of the K-H Business after the Effective Date,
b) all accounts payable or obligations attributable
to goods or services relating to the K-H Business
that were ordered in the usual and ordinary course
of the K-H Business on or before the Effective
Date but not received as of 11:00 pm on the
Effective Date,
c) the assumption and payment of $1,200,000.00 of
Seller's outstanding accounts payable listed on
Schedule 2.1.3 or relating to goods and services
that were received by Seller on or before 11:00 pm
on the Effective Date, and
d) the first $200,000 (or as may be adjusted pursuant
to footnote 1 on Schedule 2.1.3)of any accruals
related to Pre Closing period(s), which accruals
will be specifically identified and allocated at
Closing, and
e) the capital expenditures which are unpaid at
Closing pursuant to Section 2.1.2.
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<PAGE>
2.1.4 Employee Matters; Collective Bargaining Agreement. For
purposes of this Agreement, all of Seller's current,
former, active, inactive, hourly and salaried employees are
collectively referred to herein as the "Transferred
Employees". Except as otherwise provided in this Agreement,
Seller shall assign and Buyer shall assume, pay, and/or
perform the following items relating to Seller and its
business.
a) Buyer shall hire all union employees. Buyer shall
hire substantially all salaried employees of
Seller under the terms and conditions of the
employment agreements in Schedule 2.1.4. Buyer
shall bear the responsibility to comply with, and
pay for any notification under, or employee
benefits required by the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA").
b) Any and all claims, causes of action, judgments,
damages, penalties and liabilities related to the
Transferred Employees under Section 2.1.4(a),
2.1.4(c), 2.1.4 (d), 2.1.5, 2.1.6, 2.1.7, 2.1.8,
or 2.1.9, asserted after the Closing Date
regardless of when the underlying facts and
circumstances occurred,
c) Any and all of Seller's duties, obligations, and
liabilities under the following Agreements and
plans related to the Transferred Employees:
i) Milford Value Plant Insurance Program for
Hourly-Rated Employees
ii) Supplemental Unemployment Plan for Hourly-Rated
Employees at Milford
iii) Varity Kelsey-Hayes Savings Plan for Represented
Employees now known as Milford
Manufacturing Corporation Profit Sharing
and 401(k) Plan and Trust
iv) Kelsey-Hayes Company Milford Hourly Pension Plan,
and the Special Maintenance Skilled Trade
Retirement Plan
v) Medical and Dental Plans for both hourly and
salaried employees
vi) Life Insurance, Short and Long Term Disability
Plans for both hourly and salaried
employees
vii) Any holiday pay and vacation pay owing and/or
accrued for Seller's employees
viii) Any other fringe benefit plans for the
benefit of Seller's employee.
ix) $.40 per hour target benefit Plan described in
the ratified Proposed Settlement
Agreement dated March 28, 1997 (which
plan was to replace the Hourly Pension
Plan described in Section 2.1.4(c)(iv)),
including any payment required for time
during which Seller owned the K-H
Business, and
x) Seller's liability and/or contingent liability for
all currently retired and/or Transferred
Employees' retiree health benefits under
any collective bargaining agreement.
d) Any and all obligations arising under the
Collective Bargaining Agreement, the ratified
Proposed Settlement Agreement dated March 28,
1997, all related exhibits, schedules, ancillary
agreements (herein collectively referred to as the
"Collective Bargaining Agreement") between the
International Union, United Automobile, Aerospace
and Agricultural Implement
Page -4-
<PAGE>
Workers of America ("UAW") and its Local 985, and
Seller, which Collective Bargaining Agreement will
be assigned by Seller and assumed by Buyer.
2.1.5 Benefit Plans. Buyer will succeed Seller as the successor
employer-sponsor of all plans listed in Section 2.1.4,
including but not limited to pension and welfare benefit,
health care plans for past, present, and retired employees,
and shall assume all of the duties and obligations as the
successor employer-sponsor of such plans, or in the case of
health care, provide a replacement plan with substantially
identical benefits.
2.1.6 Post-Retirement Health Benefits. Seller's liability and/or
contingent liability for all retired and Transferred
Employees' retiree health benefits under any collective
bargaining agreement.
2.1.7 Workers' Compensation. Buyer is obligated for all workers'
compensation claims made by Transferred Employees
regardless of when the injury occurred or when the claim is
made, except that for a period of sixty (60) days after
Closing, Seller shall be liable for injuries which occurred
during Seller's ownership of the K-H Business, and which
are not aggravated during Post Closing employment. Seller's
insurance company's determination of when the injury
occured and whether it was aggravated Post-Closing shall be
determinate of Seller's obligation under this Section
2.1.7.
2.1.8 Medical. Buyer is obligated to insure, or in lieu of
insurance to pay, as the successor employer to Seller, the
Post Closing medical expenses of the Transferred Employees.
Post closing medical expenses means medical expense claims
made after the Closing regardless of when the illness,
disease process, injury or medical necessity was first
incurred.
2.1.9 Grievances. Buyer agrees to assume, defend, and/or
prosecute to resolution the grievances related to
Transferred Employees described in Schedule 2.1.9, and to
assume and pay the cost of any resolution therefrom.
2.1.10 Leased Assets. Buyer agrees to pay the attributed portion
of a master lease for the assets set forth in Section
1.1.7. Buyer acknowledges that the leased assets are a
portion of a multi company Applicon equipment lease.
Buyer's payment represents that potion of the master lease
attributable to the equipment located on the Business
premises. Buyer shall have the right to exercise any
purchase option under the master lease with respect to the
equipment located on the Business Premises.
2.2 Retained Liabilities. Buyer shall not assume or be liable for
any liabilities or obligations of the Seller arising during Seller's
ownership , whether primary or secondary, direct or indirect, absolute or
contingent, contractual, tortious or otherwise, other than those specifically
Page -5-
<PAGE>
identified or described in this Agreement (all such liabilities and
obligations of Seller other than those specifically assumed by Buyer
identified or described in this Agreement are hereinafter collectively
referred to as the "Retained Liabilities"). To the extent Buyer does not
assume such Retained Liabilities, Buyer shall also not be entitled to any
benefits related thereto. To the extent Buyer does not assume the obligations
under a contract involving capital expenditures, Buyer shall not be entitled
to the uses or benefit of such capital items.
3. Purchase Price for Purchased Assets.
3.1 The Purchase Price. The amount of the Assumed Liabilities plus
any amounts to be paid pursuant to Section 3.2.3 shall equal the purchase
price to be paid by Buyer to Seller for the Purchased Assets (the "Purchase
Price").
3.2 Payment of Purchase Price. Buyer shall pay the Purchase Price
on the Closing Date as follows:
3.2.1 At Closing, Buyer shall execute an assumption agreement in the
form attached hereto as Schedule 3.2.1 wherein Buyer agrees to
assume and pay the Assumed Liabilities.
3.2.2 At Closing, Buyer shall pay any remaining adjusted Purchase
Price by wire transfer of immediately available funds to the
account of Seller as directed at Closing.
3.2.3 a) The Purchase Price shall be adjusted at closing should
actual inventory, work in process, and supplies inventory
exceed $750,000.00 (increase) or are less than $700,000.00
(decrease). The parties agree that the indirect inventory
will be caused at $340,000.00. The actual value of the
direct Inventory shall be based upon a physical inventory
of the direct Inventories conducted by representatives of
the Seller and Buyer on March 16, 1998 ("Physical
Inventory"). Such inventory shall be valued in a manner
consistent with Seller's previous valuations of its
inventory.
b) The Purchase Price shall further be adjusted
by the amount that the total of account payables and
accruals described in Section 2.1.3 are less than
$1,400,000.00 (minus any amount by which Buyer's share of
the accruals is reduced below $200,000.00 pursuant to the
formula and terms within footnote 1 of Schedule 2.1.3).
3.2.4 At Closing Buyer shall reimburse Seller for capital
expenditures pursuant to Section 2.1.2.
3.3 Allocation of Purchase Price. The Purchase Price shall be
allocated among the
Page -6-
<PAGE>
Purchased Assets in accordance with attached Schedule 3.3. Buyer and Seller
agree to execute and deliver at the Closing duplicate IRS Forms 8594, with an
allocation of the Purchase Price in accordance with this Section 3.3 which is
mutually acceptable to both parties, and to file all other returns and
reports in a manner consistent with the allocations in this Section.
4. Delivery Free of Encumbrances. Except with respect to the water
debur unit's expenses being assumed by Buyer, Seller shall deliver good title
to the Purchased Assets free and clear of all mortgages, liens, claims,
demands, charges, options, equity interests, leases, tenancies, easements,
pledges, security interests, and other encumbrances ("Encumbrances").
5. Preclosing Actions. Before the Closing:
5.1 Conduct of Business. Seller shall carry on and conduct the K-H
Business in the ordinary course consistent with past practices.
5.2 Buyer's Access. From the date of this Agreement through the
Closing, Seller shall permit Buyer and its representatives to make a full
business, financial, accounting, and legal audit of Seller, the K-H Business,
the Purchased Assets, and the Assumed Liabilities. Seller shall take all
reasonable steps necessary to cooperate with Buyer in undertaking this audit.
5.3 MESC Notice. Pursuant to the provisions of Section 15(g) of the
Michigan Employment Security Act (M.C.L.A. 421.15(g)), Seller has provided
Buyer with an accurately and fully completed copy of MESC Form 1027 -
Business Transferor's Notice to Transferee of Unemployment Tax Liability and
Rate. That completed form has been provided to Buyer at least two days (not
including Saturday, Sunday or legal holidays) before the date hereof.
6. Closing Matters.
6.1 Closing. The closing of the transactions contemplated in this
Agreement (the "Closing") shall be effective as of 11:00 p.m. Sunday, March
15, 1998 ("Effective Date") and take place at the offices of Munro and Munro,
P.C., 3250 West Big Beaver, Suite 520, Troy, Michigan at 10:00 a.m. on Monday,
March 16, 1998 or at such other place and/or on such other date as the parties
may agree on (the "Closing Date").
6.2 Certain Closing Expenses; Prorations. Personal property taxes
paid with respect
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to the Purchased Assets shall be prorated ratably as of the Closing Date and
paid at the Closing. Security and other deposits shall be reimbursed by Buyer
to Seller.
7. Seller's Representations and Warranties. As of the date of this
Agreement and as of the Closing, the Seller represents and warrants to Buyer,
and acknowledges and confirms, that Buyer is relying on these representations
and warranties in entering into this Agreement:
7.1 Organization and Standing. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Michigan, and Seller has all requisite power and authority (corporate and
otherwise) to own its properties and conduct its business as it is now being
conducted.
7.2 Authorization. Seller has all requisite power and authority
(corporate and otherwise), and has all requisite legal capacity (a) to
execute, deliver, and perform this Agreement, to which it is a party and (b)
to consummate the transactions contemplated under this Agreement. Seller has
taken all necessary corporate action (including the approval of its board of
directors and shareholders) to approve the execution, delivery, and
performance of this Agreement to be executed and delivered by it and the
consummation of the transactions contemplated in this Agreement. The Seller
has duly executed and delivered this Agreement. This Agreement, when executed
and delivered, will be, legal, valid, and binding obligations of the Seller,
enforceable against it, except as such enforcement may be limited by
bankruptcy, insolvency, moratorium, or similar laws relating to the
enforcement of creditors' rights.
7.3 Existing Agreements and Governmental Approvals.
a) To the Seller's knowledge, the execution, delivery, and
performance of this Agreement and the consummation of the
transactions contemplated by them: (i) do not and will
not violate any provisions of law applicable to any of
the Seller, the K-H Business, or the Purchased Assets;
(ii) do not and will not conflict with, result in the
breach or termination of any provision of, or constitute
a default under (in each case whether with or without the
giving of notice or the lapse of time or both) Seller's
Articles of Incorporation or Bylaws, or any indenture,
mortgage, lease, deed of trust, or other instrument,
contract, or agreement or any order, judgment,
arbitration award, or decree to which the Seller is a
party or by which any of them or any of their respective
assets and properties are bound which would not be paid
at closing (including, without limitation, the Purchased
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Assets); and (iii) do not and will not result in the
creation of any Encumbrance on any of the Seller's
properties, assets, or K-H Business (including, without
limitation, the Purchased Assets).
b) Except as separately scheduled, no approval, authority, or
consent of, or filing by, the Seller with, or
notification to, any federal, state, or local court,
authority or governmental or regulatory body or agency or
any other corporation, partnership, individual or other
entity is necessary (i) to authorize the execution and
delivery of this Agreement or any of the Agreements
attached as Schedules hereto by Seller, (ii) to authorize
the consummation of the transactions contemplated by this
Agreement, or (iii) to continue Buyer's use and operation
of the Purchased Assets after the Closing Date.
7.4 No Subsidiaries. Seller does not have any subsidiaries or
directly or indirectly own any interest or have any investment in any other
corporation, partnership, or other entity.
7.5 No Insolvency. No insolvency proceeding of any character,
including, without limitation, bankruptcy, receivership, reorganization,
composition, or arrangement with creditors, voluntary or involuntary,
affecting Seller or any of its assets or properties is pending or threatened.
7.6 Employees. There is not now, nor has there been at any time
since November 1, 1996, a strike, lockout, grievance, other labor dispute, or
trouble of any nature pending or threatened against Seller that is not listed
on a Schedule hereto, or that Buyer is unaware of.
7.7 Employee Agreements. Schedule 2.1.4 contains a true and complete
list of all employment agreements, plans, Union contracts, programs, and
arrangements (including, but not limited to, collective bargaining
agreements, pensions, retirement, hospitalization, insurance, and other
employee benefit plans, programs, or arrangements) maintained since November
1, 1996 by Seller or under which Seller has had any obligations with respect
to former, current, laid off, and/or retired employees of Seller (the
"Plans").
7.8 Contracts. Except as described within this Agreement, including
but not limited to the Contracts and Commitments referenced in Sections
1.1.6, 1.1.7, and 1.1.8, which have been made available to Buyer, Seller is
not a party to nor bound by any agreement or commitment that materially
affect the K-H Business, the Purchased Assets, or the Assumed Liabilities.
Buyer is
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not acquiring any of the equipment, related fixtures, related inventory,
tooling, and related supplies being used by Seller in producing its DRA,
Allied, or Delphi jobs.
7.9 Title to Purchased Assets. Seller is the sole and absolute owner
of the Purchased Assets and has good title to all of the Purchased Assets,
and at Closing shall be free and clear of any and all encumbrances.
7.10 Condition of Purchased Assets. In material respect, the
Inventory being sold to Buyer, whether finished goods, work in process, raw
materials or indirect factory supplies, are items usable in the ordinary
course of the K-H Business. The water deburr process was used in obtaining he
part submission warrant dated 12/4/97 with K-H which is attached as
Schedule7.10.
7.11 Taxes.
a) For the purposes of this Agreement, Tax or Taxes
shall mean all federal, state, county, local, and
other taxes (including, without limitation, income
taxes; premium taxes; single-business taxes;
excise taxes; sales taxes; use taxes; value-added
taxes; gross receipts taxes; franchise taxes; ad
valorem taxes; real estate taxes; severance taxes;
capital levy taxes; transfer taxes; stamp taxes;
employment, unemployment, and payroll-related
taxes; withholding taxes; and governmental charges
and assessments), and include interest, additions
to tax, and penalties.
b) Seller has filed on a timely basis all Tax returns it is
required to file under federal, state, or local
law and has paid or established an adequate
reserve with respect to all Taxes for the periods
covered by such returns. No agreements have been
made by or on behalf of Seller for any waiver or
for the extension of any statute of limitations
governing the time of assessment or collection of
any Taxes. Seller and its officers have received
no notice of any pending or threatened audit by
the IRS or any state or local agency related to
Seller's Tax returns or Tax liability for any
period, and no claim for assessment or collection
of Taxes has been asserted against Seller. There
are no federal, state, or local tax liens
outstanding against any of Seller's assets
(including, without limitation, the Purchased
Assets) or the K-H Business.
c) The sale by Seller of the Purchased Assets and the
Buyer's acquisition of such assets will not result
in the imposition of or liability for any sales or
use taxes except in connection with the transfer
of any motor vehicles that are part of the
Purchased Assets.
d) All Taxes related to the Purchased Assets or the
Transferred Employees which Seller is required by
law to withhold or collect have been duly withheld
or collected, and have been timely paid to the
proper authorities to the extent due and payable.
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7.12 Litigation. Except as disclosed within this Agreement and
attached Schedules, there are no claims, disputes, actions, suits,
proceedings, or investigations pending or, to the best knowledge of Seller,
threatened against or affecting Seller, the K-H Business, or the Purchased
Assets, which threats are unknown to Buyer.
7.13 Compliance with Laws. At all times prior to the Closing Date,
and to the best of Seller's knowledge and belief, Seller has complied, in all
material respects, with all laws, orders, regulations, rules, decrees, and
ordinances affecting to any extent or in any manner any aspects of the
Purchased Assets.
7.14 Bulk Transfer Act. Buyer acknowledges that Seller will not
comply with the provisions of Michigan's bulk transfer act. However, Seller
agrees to indemnify and hold Buyer harmless from all losses attributable to
Seller's failure to comply with the provisions of that Act with respect to
the Purchased Assets.
7.15 No Brokers. Seller has not engaged, and is not responsible for
any payment to, any finder, broker, or consultant in connection with the
transactions contemplated by this Agreement.
7.16 Progress Payments. Seller has received no progress payments or
prepayments from customers for work or products not heretofore completed and
delivered.
7.17 Warranties; Product Liability. In connection with the K-H
Business, there are no (a) liabilities of Seller, fixed or contingent,
asserted and arising out of or based upon incidents occurring on or before
the Closing Date with respect to any products liability or any similar claim
that relates to any product sold by Seller to K-H before the effective date
of closing or (b) liabilities of Seller, fixed or contingent asserted and
arising out of or based upon incidents occurring with respect to any claim
for the breach of any express or implied product warranty, or any similar
claim that relates to any product sold by Seller on or before the Closing
Date, and Seller has no knowledge of any product defects which could give
rise to any such liabilities or claims.
7.18. Environmental Matters. To the best of Seller's knowledge,
Seller's operations
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have not added to the environmental issues as disclosed in the Baseline
Environmental Assessment, attached as Schedule 7.18, that Seller had prepared
with respect to the premises occupied by the K-H Business. The Baseline
Environmental Assessment shows numerous environmental issues that were caused
prior to Seller's occupation of those premises and which are subject to an
agreement with K-H for remediation.
7.19 Intellectual Property Rights. Other than the nontransferable
license contained in the supply agreement between Seller and K-H, to Seller's
knowledge, Seller does not own or have any rights in any patents, patent
applications, inventions or proprietary processes that are needed in the
continuing operation of the K-H Business. Buyer will be responsible for
obtaining its own license from K-H. No claim, suit or action is pending or,
to the best of Seller's knowledge, threatened alleging that the K-H Business
conducted by Seller infringes upon the intellectual property rights of
others.
8. Buyer's Representations and Warranties. Buyer represents and
warrants to Seller that:
8.1 Organization and Standing. Buyer is a corporation duly organized
and validly doing business under the laws of the State of Michigan, and Buyer
has all the requisite power and authority (corporate and otherwise) to own its
properties and to conduct its business as it is now being conducted.
8.2 Authorization. Buyer has taken all necessary corporate action
(a) to duly approve the execution, delivery, and performance of this
Agreement, and (b) to consummate any related transactions. Buyer has duly
executed and delivered this Agreement. This Agreement, when executed and
delivered, will be, legal, valid, and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms, except
as such enforcement may be limited by bankruptcy, insolvency, moratorium, or
similar laws relating to the enforcement of creditor's rights and by general
principles of equity (regardless of whether such enforceability is considered
in a proceeding at law or in equity).
8.3 Environmental Condition. Seller has provided Buyer with a copy
of the Baseline
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Environmental Assessment that Seller had obtained with respect to the plant,
property and real estate currently occupied by Seller that Buyer will lease
from K-H. Accordingly, Buyer is aware of the environmental condition of and
agrees to accept that real property "as is".
9. Employees. Buyer shall have no obligation to hire any of Seller's
salaried employees; PROVIDED, HOWEVER, that Buyer shall be free to negotiate
with and hire any of Seller's salaried employees, and Seller shall cooperate
and encourage such employees to accept employment with Buyer.
10. Postclosing Receipts. After the Closing, Seller will immediately
notify and transfer to Buyer any payments or other receipts it receives with
respect to any of the Purchased Assets. Pending any such transfer, Seller
will segregate any such payments from its other assets and will clearly mark
or designate them as the property of Buyer. Buyer shall immediately notify
and transfer, without setoff or deduction, to Seller any payment or other
receipt Buyer receives with respect to an Excluded Asset(s). Further, Buyer
agrees that Seller may place labels on Excluded Assets identified within
Schedule 1.2.3.
11. Indemnification. All of the representations and warranties of
Seller contained in Sections 7 through 7.16 of this Agreement shall survive
the Closing (unless the Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue
in full force and effect for a period of one year thereafter. All of the
other representations and warranties of the Buyer and the Seller contained in
this Agreement shall survive the Closing (unless the damaged Party knew or
had reason to know of any misrepresentation or breach of warranty at the time
of Closing) and continue in full force and effect forever thereafter subject
to any applicable statutes or limitations.
a). In the event Seller breaches any of its
representations, warranties, and covenants
contained in this Agreement, and, if there is an
applicable survival period pursuant to Section 11
above, provided that the Buyer makes a written
claim for indemnification against Seller pursuant
to Section 11 below within such survival period,
then Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences
(as defined below) the Buyer shall suffer through
and after the date of the claim for
indemnification (but excluding any Adverse
Consequences the Buyer shall suffer after the end
of any applicable
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<PAGE>
survival period) caused proximately by the breach.
b) Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences
the Buyer shall suffer caused proximately by any
liability of Seller which is not an Assumed
Liability.
c) In the event the Buyer breaches any of its
representations, warranties, and covenants
contained in this Agreement, and provided that
Seller makes a written claim for indemnification
against the Buyer pursuant to Section 11 below
within such survival period, then the Buyer agrees
to indemnify Seller from and against the entirety
of any Adverse Consequences the Seller shall
suffer through and after the date of the claim of
indemnification (but excluding any Adverse
Consequences the Seller shall suffer after the end
of any applicable survival period) caused
proximately by the breach.
d) Buyer agrees to indemnify Seller from and against
the entirety of any Adverse Consequences the
Seller shall suffer caused proximately by any
liability of the Seller which is an Assumed
Liability.
e) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a
"Third Party Claim") which may give rise to a
claim for indemnification against the other Party
(the "Indemnifying Party") under this Section 11,
then the Indemnified Party shall promptly (and in
any event within five business days after
receiving notice of the Third Party Claim) notify
the Indemnifying Party thereof in writing.
f) The Indemnifying Party will have the right at any
time to assume and thereafter conduct the defense
of the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified
Party; provided, however, that the Indemnifying
Party will not consent to the entry of any
judgment or enter into any settlement with respect
to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be
withheld unreasonably) unless the judgment or
proposed settlement involves only the payment of
money damages and does not impose an injunction or
other equitable relief upon the Indemnified Party.
g) Unless and until the Indemnifying Party assumes
the defense of the Third Party Claim as provided
in Section 11(f) above, however, the Indemnified
Party may defend against the Third Party Claim in
any manner it reasonably may deem appropriate.
h) In no event will the Indemnified Party consent to
the entry of any judgment or enter into any
settlement with respect to the Third Party Claim
without the prior written consent of the
Indemnifying Party (not to be withheld
unreasonably).
i) Determination of Adverse Consequences. The Parties
shall make appropriate adjustments for tax
benefits and insurance coverage and take into
account a reasonable in determining Adverse
Consequences for purposes of this Section 11. All
indemnification payments under this Section 11
shall be deemed adjustments to the Purchase Price.
j) For purposes of this Section 11, Adverse
Consequences shall mean all actions, suits,
proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings,
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damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities,
obligations, taxes, liens, losses, expenses, and
fees, including court costs and reasonable
attorneys' fees and expenses.
12. Expenses. Each of the parties shall pay all of the costs that
it incurs incident to the preparation, execution, and delivery of this
Agreement and the performance of any related obligations, whether or not the
transactions contemplated by this Agreement shall be consummated.
13. Risk of Loss. The risk of loss of or damage to the Purchased
Assets from fire or other casualty or cause shall be on Seller at all times
up to the Closing, and it shall be the responsibility of Seller to repair, or
cause to be repaired, and to restore the property to the condition it was
before the loss or damage.
14. Seller's Name. Seller agrees that from and after the Closing
Date, Buyer shall have the right to use in or in connection with the conduct
of any business (whether carried on by it directly or through any related
corporation) the name "Milford Manufacturing Corporation". Buyer shall permit
Seller to use the name "Milford Manufacturing Corporation" post closing for
purposes of completing the liquidation of Seller's business.
15. Termination.
15.1 This Agreement may be terminated at any time before the
Closing Date as follows:
a) By Buyer and Seller jointly in writing, or
b) By Buyer or Seller if there has been a material
breach of any of the representations or
warranties, covenants or agreements set forth
in this Agreement on the part of the other, and
this breach by its nature cannot be cured before
the Closing.
16. Miscellaneous Provisions.
16.1 Representations and Warranties. All representations,
warranties, and agreements made by the parties pursuant to this Agreement
shall survive the consummation of the transactions contemplated by this
Agreement, without limitation as to time except as set forth in Section 11.
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<PAGE>
16.2 Notices. All notices, demands, and requests
required or permitted to be given under
the provisions of this Agreement shall be
in writing and shall be deemed given (a)
when personally delivered or sent by
facsimile transmission to the party to be
given the notice or other communication
or (b) on the business day following the
day such notice or other communication is
sent by overnight courier to the
following:if to Seller Parties: Robert A.
Clemente, President
Milford Manufacturing Corporation
46035 Grand River
Novi, Michigan 48374
with a copy (which shall not constitute notice) to:
Andrew J. Munro, Esquire
Munro and Munro, P.C.
3250 West Big Beaver Road;Suite 520
Troy, Michigan 48084
Tel (248) 643-9494
Fax (248) 643-0786
if to Buyer: Mr. Patrick Kirby
PGK Acquisition Corp.
1960 Research Drive
Troy, Michigan 48083
with a copy (which shall not constitute notice) to
Robert A. Hudson, Esquire
Berry Moorman P.C.
600 Woodbridge Place
Detroit, Michigan 48226
Tel (313) 567-1000
Fax (313) 567-1001
or to such other address or facsimile number that the parties may
designate in writing.
16.3 Assignment. Buyer may not assign this Agreement, or any
interest in it, without the prior written consent of the other, except that
Buyer may assign any or all of its rights under this Agreement to any
subsidiary without Seller's consent.
16.4 Parties in Interest. This Agreement shall inure to the benefit
of, and be binding on, the named parties and their respective successors and
permitted assigns, but not any other person.
16.5 Choice of Law. This Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Michigan. Buyer and
Seller shall be jointly considered
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the authors and drafters of this Agreement.
16.6 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each counterpart
were on the same instrument.
16.7 Entire Agreement. This Agreement and all related documents,
schedules, exhibits, or certificates, including the terms and conditions of a
certain Pension Plan Succession Agreement which has or will be executed,
represent the entire understanding and agreement between the parties with
respect to the subject matter and supersede all prior agreements or
negotiations between the parties. This Agreement may be amended,
supplemented, or changed only by an agreement in writing that makes specific
reference to this Agreement or the agreement delivered pursuant to it and
that is signed by the party against whom enforcement of any such amendment,
supplement, or modification is sought.
16.8 Operation of K-H Business. Seller will not engage in any
practice, take any action, or enter into any transaction outside the ordinary
course of business between the time the Agreement is executed and Closing.
16.9 Litigation Support. In the event and for so long as any party
to this Agreement, its agents, successors, assigns, owners, is actively
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction involving the Milford
business, the other party to this Agreement will, upon payment for the cost
thereof, cooperate with the contesting or defending party and its counsel in
the contest or defense, make available its personnel, and provide such
testimony and access to its books and records as shall be necessary in
connection with the contest or defense.
16.10 Press Releases. Neither party to this Agreement shall issue
any press release of make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other
party; provided however, that any party may make any public disclosure it
believes in good faith is required by applicable law or any listing or
trading
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agreement concerning its publicly-traded securities, or required to
be made to its shareholders, in which case the disclosing party will use
reasonable efforts to advise the other party prior to making the
disclosure(s).
16.11 Arbitration.
a) Any dispute, controversy, or claim arising out of
or relating to this Agreement or relating to the
breach, termination, or invalidity of this
Agreement, whether arising in contract, tort, or
otherwise, shall be resolved in binding
arbitration. Any arbitration shall proceed in
accordance with Title 9 of the United States Code,
as it may be amended or recodified from time to
time ("Title 9"), and the current Commercial
Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association ("AAA") to the
extent that Title 9 and the Arbitration Rules do
not conflict with any provision of this Section
16.11.
b) No provision of or the exercise of any rights under
this Section 16.11 shall limit the right of any
party to seek and obtain provisional or ancillary
remedies (such as injunctive relief, attachment,
or the appointment of a receiver) from any court
having jurisdiction before, during, or after the
pendency of an arbitration proceeding under this
Section. The institution and maintenance of any
such action or proceeding shall not constitute a
waiver of the right of any party (including the
party taking the action or instituting the
proceeding) to submit a dispute, controversy, or
claim to arbitration under this Section.
c) Any award, order, or judgment made pursuant to
arbitration shall be deemed final and may be
entered in any court having jurisdiction over the
enforcement of the award, order, or judgment. Each
party agrees to submit to the jurisdiction of any
court for purposes of the enforcement of the
award, order, or judgment.
d) The arbitration shall be held before one arbitrator
knowledgeable in the general subject matter of the
dispute, controversy, or claim and selected by AAA
in accordance with the Arbitration Rules, except
that any arbitration in which the disputed,
controverted, or claimed amount (as reflected on
the demand for arbitration, as the same may be
amended) exceeds $50,000.00 shall be held before
three arbitrators, one arbitrator being selected
by Buyer, one by the Seller, and the third by the
other two from a panel of persons identified by
AAA who are knowledgeable in the general subject
matter of the dispute, controversy, or claim.
e) The arbitration shall be held at the office of AAA
located in Southfield, Michigan (as the same may
be from time to time relocated), or at another
place the parties agree on.
f) In any arbitration proceeding under this Section
16.11, subject to the award of the arbitrator(s),
each party shall pay all its own expenses, an
equal share of the fees and expenses of the
arbitrator, and, if applicable, the fees and
expenses of its own appointed arbitrator. The
arbitrator(s) shall have the power to award
recovery of costs and fees (including reasonable
attorney fees, administrative and AAA fees, and
arbitrators' fees) among the parties as the
arbitrators determine to be equitable under the
circumstances.
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<PAGE>
g) The interpretation and construction of this Section
16.11 including, but not limited to, its validity
and enforceability, shall be governed by Title 9
of the U.S. Code, notwithstanding the choice of
law set forth in Section 16.5 of this Agreement.
16.12 Other Agreements . The Closing of this Agreement shall be
conditioned upon Seller and Buyer executing the Product Supply Agreement
attached hereto as Schedule 16.12, and the closing of the K-H Sale. The
Closing of this Agreement shall be further conditioned upon the Seller and
UAW entering into a novation with respect to the Collective Bargaining
Agreement.
16.13 Post Closing Inspection. For the purpose of closing out
Seller's accounting period(s), employees of Seller shall have the right to
maintain Scott's office at the Business premises, to enjoy necessary ingress
and egress from said office, and to access information concerning the
operation of Seller's business prior to the Closing Date that are contained
in any transferred books and records, whether kept as computer records or as
tangible records, for a period of ninety (90) days after Closing. Buyer
agrees to retain any transferred books and records for a period not less than
four (4) years from Closing, and to permit Seller reasonable access to such
books and records for all reasonable purposes.
17. Conditions to Closing.
17.1 Conditions Precedent to Obligations of Buyer. The obligations
of Buyer under this Agreement are subject to the satisfaction, at or before
the Closing, of each of the following conditions precedent:
a) Representations and Warranties. The
representations and warranties made by Seller
herein shall be true on and as of the Closing
Date, as though such representations and
warranties had been made at and as of such time.
b) Performance. Seller shall have performed and
complied with all agreements and conditions
contained herein required to be performed or
complied with by it prior to or at the Closing.
c) Copies of Agreements. Seller shall have provided
and/or made available to Buyer, copy of all
agreements (or ratified Settlement Proposals in
the cases of the Collective Bargining Agreement)
to be assigned to, and assumed by, Buyer
hereunder.
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<PAGE>
d) Release of Liens. The Purchased Assets shall be
delivered to the Buyer free and clear of all liens
and encumbrances.
e) No Adverse Proceeding. There shall be no pending
or threatened claim, action, litigation or
proceeding against Seller, Buyer or the Purchased
Assets for the purpose of enjoining or preventing
the consummation of this Agreement or otherwise
claiming that this Agreement or the consummation
hereof is illegal.
f) Consents. Seller shall have received the written
consent from the appropriate parties, if required,
to the assignment to Buyer of all agreements to be
assigned to Buyer hereunder.
g) No Material Adverse Change. Prior to the Closing
Date, there shall not have occurred any material
adverse change in the Purchased Assets nor shall
any event have occurred which, with the lapse of
time or the giving of notice, may cause or create
any material adverse change in the Purchased
Assets.
h) Purchase of Assets from K-H. The K-H Sale shall
have been completed and Buyer shall have acquired
from K-H all of the assets acquired by K-H in the
K-H Sale, other than the real estate which shall
be leased to Buyer.
i) Proceedings and Documents. All proceedings in
connection with the transactions contemplated by
this Agreement and all documents and instruments
incident to such transactions shall be reasonably
satisfactory in substance and form to Buyer and
its counsel and Buyer shall have received all such
counterpart originals or certified or other copies
of such documents as it may reasonably request.
j) Opinion of Counsel to Seller. Buyer shall receive
an opinion dated the Closing Date of Munro and
Munro, P.C., counsel to Seller, in form
satisfactory to Buyer, to the effect that:
i) Seller is a corporation validly existing
and in good standing under the laws of
the State of Michigan;
ii) The execution and delivery by Seller of
this Agreement and the consummation of
the transactions contemplated hereby will
not conflict with or result in the breach
of any provision of Seller 's Articles of
Incorporation or Bylaws;
iii) This Agreement has been duly and validly
authorized, executed and delivered by
Seller; and
iv) Such counsel does not know of any suit,
action, arbitration or legal,
administrative or other proceeding or
governmental investigation pending
against Seller or its business or
properties or financial or other
condition, which would have a material
effect on the Purchased Assets.
17.2 Conditions Precedent to Seller's Obligations. The obligations
of Seller hereunder are subject to the satisfaction, at or before the
Closing, of each of the following conditions precedent:
a) Representations and Warranties. The
representations and warranties made by Buyer
herein shall be true on and as of the Closing Date
as though such
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<PAGE>
representations and warranties had been made at
and as of such time.
b) Performance. Buyer shall have performed and
complied with all agreements and conditions
contained herein required to be performed or
complied with by it prior to the Closing.
c) No Material Adverse Change. Prior to the Closing
Date, there shall not have occurred any material
adverse change in the financial condition,
business or operations of Buyer, nor shall any
event have occurred which, with the lapse of time
or the giving of notice, may cause or create any
material adverse change in the financial
condition, business or operations of Buyer.
d) No Adverse Proceeding. There shall be no pending
or threatened claim, action, litigation or
proceeding against Seller, Buyer or the Purchased
Assets for the purpose of enjoining or preventing
the consummation of this Agreement or otherwise
claiming that this Agreement or the consummation
hereof is illegal.
f) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions
contemplated by this Agreement and all documents
and instruments incident to such transactions
shall be reasonably satisfactory in substance and
form to Seller and its counsel and Seller and its
counsel shall have received all such counterpart
originals or certified or other copies of such
documents as they may reasonably request.
g) Opinion of Counsel to Buyer. Seller shall receive
an opinion dated the Closing Date of Berry Moorman
P.C., counsel to Buyer, in form satisfactory to
Seller, to the effect that:
i) Buyer is a corporation validly existing
and in good standing under the laws of
the State of Michigan;
ii) The execution and delivery by Buyer of
this Agreement and the consummation of
the transactions contemplated hereby will
not conflict with or result in the breach
of any provision of Buyer's Articles of
Incorporation or Bylaws;
iii) This Agreement has been duly and validly
authorized, executed and delivered by
Buyer; and
iv) Such counsel does not know of any suit,
action, arbitration or legal,
administrative or other proceeding or
governmental investigation pending
against Buyer or its business or
properties or financial or other
condition, which would have a material
effect on the purposed benefits of each
party's bargain.
The parties have executed this Agreement on the date set forth on
the first page of this Agreement.
SELLER
Milford Manufacturing Corporation
By: ___________________________
Robert A. Clemente, President
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<PAGE>
BUYER
PGK Acquisition Corp.
By: /s/ Patrick Kirby
---------------------------
Patrick Kirby, President
Patrick Kirby in his capacity as President of PGK Services, Inc. does hereby
guarantee the prompt payment by PGK Acquisition Corp. of the accounts
payables and accruals assumed by PGK Acquisition Corp. in Sections 2.1.2,
2.1.3(c) & 2.1.3(d). PGK Services, Inc. agrees to be liable for the entire
amount of said unpaid account payables and unpaid accruals and agrees to
indemnify and hold Seller harmless therefrom, including reasonable
attorney fees and costs.
PGK Services, Inc.
DATED: 3/18/98 By:/s/ Patrick Kirby
-------------------------
Patrick Kirby, President
Robert A. Clemente as the President of Secom General Corporation does hereby
guarantee the prompt payment by Secom General Corporation of any accounts
payable or obligations attributable to goods or services relating to the
K-H Business that were ordered in the usual and ordinary course of the K-H
Business on or before the Effective Date and received as of the Effective
Date, which obligations were not scheduled on Schedule 2.1.3, and any
payables or accruals on Schedule 2.1.3 which are MMC's responsibility to
pay which are not paid at closing.
Secom General Corporation
DATED: 3/18/98 By: /s/ Robert A. Clemente
-----------------------------
Robert A. Clemente, President
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ASSET PURCHASE AGREEMENT
Providing for the purchase of certain assets of
UNIFLOW CORPORATION
("Seller")
By
HORIZON TECHNOLOGY L.L.C.
("Buyer")
February 5, 1998
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TABLE OF CONTENTS
ARTICLE 1 - PURCHASE AND SALE OF ASSETS
1.1 Agreement to Purchase and Sell Assets
1.2 Purchase Consideration
1.3 Assumed Liabilities
1.4 Allocation of Purchase Price
ARTICLE 2 - CLOSING
2.1 Place and Date of Closing
2.2 Deliveries at Closing
2.3 Conditions to Buyer's Closing Obligations
2.4 Conditions to Seller's Closing Obligations
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF SELLERS
3.1 Seller's Organization and Good Standing
3.2 Enforceability
3.3 No Conflict with Other Instruments or Proceedings
3.4 Personal Property
3.5 Contracts
3.6 Brokers
3.7 Accuracy of Statements
ARTICLE 4 - BUYER'S REPRESENTATIONS AND WARRANTIES
4.1 Buyer's Organization and Good Standing
4.2 Enforceability
4.3 No Conflict with Other Instruments or Proceedings
4.4 Brokers
ARTICLE 5 - COVENANTS
5.1 Conduct of Business Pending the Closing
5.2 Pre-Closing Access
5.3 Disclosure of Breaches
5.4 Consents
5.5 Publicity
5.6 Further Assurances
5.7 Post Closing Access and Removal
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ARTICLE 6 - INDEMNIFICATION
6.1 Indemnity
6.2 Indemnity Period
ARTICLE 7 - TERMINATION
7.1 Termination Events
7.2 Termination Procedure
7.3 Effect of Termination and Breach of Agreement
ARTICLE 8 - GENERAL
8.1 Risk of Loss
8.2 Survival of Representations, Warranties, Covenants,
and Indemnities
8.3 Confidentiality
8.4 Assignment and Benefits
8.5 Notices
8.6 Expenses
8.7 Entire Agreement
8.8 Amendments and Waivers
8.9 No Third-Party Beneficiaries
8.10 Severability
8.11 Headings
8.12 Governing Law
8.13 Construction
8.14 Counterparts
8.15 Tooling Supply
SCHEDULES AND EXHIBITS
Schedule 1.1(a) Equipment
Schedule 1.1(b) FX Business
Exhibit 1.2(b) Short Term Note
Exhibit 1.2(c) Royalty Agreement
Schedule 3.5 Contracts
Schedule 8.3 Confidentiality Agreement
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of
February 5, 1998, by HORIZON TECHNOLOGY, L.L.C., a Michigan limited liability
company ("Buyer"), and UNIFLOW CORPORATION, a Michigan corporation
("Seller").
Seller desires to sell to Buyer, certain assets and business, on the
terms and subject to the conditions set forth in this Agreement.
ARTICLE 1 PURCHASE AND SALE OF ASSETS
1.1 Agreement to Purchase and Sell Assets. On the terms and
subject to the conditions of this Agreement, Buyer shall purchase and acquire
from Seller, and Seller shall sell, convey, assign, transfer, and deliver to
Buyer as of the Closing Date, certain tangible and intangible assets of
Seller, as described below ("Purchased Assets"):
(a) Equipment. National FX85 Coldformer and related items
as more fully described in Schedule 1.1(a), to be attached prior to Closing,
together with, to the extent transferable, any express and implied warranties
by the manufacturer of those items, and all available maintenance records,
brochures, catalogues, and other documents relating to those items or to the
installation or functioning of those items.
(b) FX Business. Subject to obtaining any necessary
third-party consents, all of Seller's right, title, benefit, and interest in
and to the FX Business as more fully described in Schedule 1.1(b), to be
attached prior to Closing.
(c) Records. Subject to Buyer's obligation to retain and
grant Sellers' reasonable access, all product information, product drawings,
production documentation, material specifications, equipment lists, formulae,
specifications, drawings, plans, reports, data, notes, correspondence, and
other records and documents concerning the FX Business in Seller's
possession.
1.2 Purchase Condition. As consideration for the transfer of
Purchased Assets to Buyer and Seller's other covenants in this Agreement,
Buyer shall pay to Seller the following (the "Purchase Price"):
(a) Cash Payment. Subject to adjustments as provided below,
Buyer shall pay to Seller at Closing Two Million Five Hundred Thousand
Dollars ($2,500,000) in immediately available funds (the "Cash Payment") less
any earnest money deposit paid by Buyer.
(b) Short-Term Note. Buyer shall deliver to Seller at
Closing Buyer's nonnegotiable, nonassignable promissory note in the principal
amount of Seven Hundred Thousand Dollars ($700,000), non-interest bearing,
payable in sixty equal monthly payments of Eleven Thousand Six-hundred
Sixty-six Dollars and Sixty-seven Cents ($11,666.67) each beginning thirty
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(30) days after the Closing Date and in each succeeding month thereafter
until fully paid (the "Short- Term Note"). The short-term Note shall be in
the form of Exhibit 1.2(b), to be attached prior to Closing.
(c) Royalty Agreement. Buyer shall deliver to Seller at
Closing a Royalty Agreement (the "Royalty Agreement") providing for fixed
royalty payments of two percent (2%) of net sales collected by Buyer with
respect to the FX Business, payable monthly for the life of the part or any
modification thereof. The Royalty Agreement shall be in the form of Exhibit
1.2(c) to be attached prior to Closing. Further, Buyer agrees to supply
Seller's requirements for starter motor shafts (approximately 140,000 -
150,000 pieces monthly) for the continuing term of the Delco Remy purchase
order, at a per unit price of $.485 (FOB shipping point) pursuant to this
Agreement and Seller's standard purchase order terms and conditions, with
price adjustments as necessary to reflect material cost increases. Seller
further agrees that any future sale of the machining from the FX Business
will be conditioned upon the machining purchaser agreeing to buy the starter
motor shafts exclusively from Buyer.
(d) Earnest Money Deposit. In order to evidence Buyer's
good faith upon execution of this Agreement, Buyer shall pay Seller an
earnest money deposit of fifty thousand dollars ($50,000). This deposit will
be applied against the purchase consideration at Closing; otherwise, the
deposit shall be distributed pursuant to Section 7.2.
1.3 Assumed Liabilities. At the Closing, Buyer shall assume and
agree to pay, perform, and discharge, when due, only the following
liabilities and obligations of Seller (collectively, the "Assumed
Liabilities"):
(a) Contract Liabilities. The liabilities and obligations
of Seller with respect to the FX Business, such as purchase orders, sales
agreements and supply agreements, provided such agreements have been attached
hereto as Schedule 3.5 and have been fully assigned to buyer, with third
party consents or other arrangements satisfactory to Buyer.
1.4 Allocation of Purchase Price. Prior to the Closing, and as a
condition of, Buyer and Seller shall mutually agree to a Certificate of
Allocation detailing the allocation of the Purchase Price among the Purchased
Assets and Seller's other covenants set forth in this Agreement.
ARTICLE 2 CLOSING
2.1 Place and Date of Closing. Subject to fulfillment or waiver
of the conditions precedent set forth in this Agreement, the purchase and
sale contemplated by this Agreement (the "Closing"),shall take place at the
offices of Honigman Miller Schwartz and Cohn, at 2 p.m. local time on March
24, 1998, or at any other place time, and date mutually agreeable to the
parties, (the "Closing Date"). The Closing shall be deemed to be effective
upon the close of business on the Closing Date.
2.2 Deliveries at Closing.
(a) Buyer's Deliveries. At or before the Closing, Buyer
shall execute and/or deliver, or cause to be executed and/or delivered, to
Seller (i) the Cash Payment; (ii) the Short Term Note, (iii) the Royalty
Agreement, (iv) written instruments or agreements, reasonably acceptable to
Seller, that provides for Buyer's assumption of the Assumed Liabilities; (v)
certified copies
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of resolutions of Buyer's directors, reasonably acceptable to Seller, that
provides for Buyer's directors, reasonably acceptable to Seller, authorizing
the consummation of the transactions contemplated by this Agreement, (vi)
good standing certificates for Buyer from Michigan, (vii) certificates from a
duly authorized officer of Buyer certifying that (A) the representations and
warranties of Buyer contained in this Agreement are true and correct in all
material respects as of the Closing Date as though made on and as of that
date, (B) no condition has occurred or is continuing or will result from the
execution and delivery of this Agreement that constitutes a material breach
of this Agreement, and (C) Buyer has, in all material respects, performed (or
Seller has waived) all of Buyer's obligations and complied with all of
Buyer's covenants set forth in this Agreement to be performed and complied
with before or on the Closing; and (viii) any and all other agreements,
certificates, instruments, and other documents required of Buyer under this
Agreement.
(b) Sellers' Deliveries. At or before the closing, Seller
shall execute and/or deliver, or cause to be executed and/or delivered, to
Buyer (i) bills of sale, assignments, and other instruments of conveyance,
reasonably acceptable to Buyer, that shall be sufficient to transfer clear
title to the Purchased Assets to Buyer, (ii) written consents of third
parties, if necessary, with respect to the transfer of the Purchased Assets
to Buyer; (iii) certified copies of resolutions of Seller's directors,
reasonably acceptable to Buyer; authorizing the consummation of the
transactions contemplated by this Agreement; (iv) good standing certificates
for Seller from Michigan; (v) copies of all documents evidencing other
necessary corporate or other action and governmental approvals, if any, with
respect to this Agreement and the transactions contemplated by this
Agreement,ythat Buyer reasonably requests; (vi) certificates from a duly
authorized officer of Seller certifying that (A) the representations and
warranties of Seller contained in the Agreement are true and correct in all
material respects as of the Closing Date as though made on and as of that
date, (B) no condition has occurred or is continuing or will result from the
execution and delivery of this Agreement that constitutes a material breach
of this Agreement, and (C) Seller has, in all material respects, performed
all of Seller's covenants set forth in this Agreement to be performed and
complied with on or before the Closing; (vii) all records and other documents
included in the Purchased Assets; (viii) any and all other agreements,
certificates, instruments, and other documents required of Seller under this
Agreement.
(c) Further Actions. Buyer and Seller shall take all
further actions and execute and deliver any additional agreements,
certificates, instruments, and other documents on or after the Closing as
Buyer or Seller shall deem reasonably necessary to effectuate the
transactions contemplated by this Agreement.
2.3 Conditions to Buyer's Closing Obligations. Notwithstanding
anything to the contrary contained in this Agreement, Buyer's closing
obligations under this Agreement are, except to the extent expressly waived
in writing by Buyer, subject to Buyer's satisfaction at or before the
Closing, of all of the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects when made, and shall be true and
correct in all material respects as of the Closing Date, with the same force
an effect as if made again as of the Closing Date.
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<PAGE>
(b) Performance. Seller shall have performed and complied
in all material respects with all agreements and conditions required by this
Agreement to be performed or complied with by Seller at or before the
Closing, including all bills of sale, assignments, and other documents
required by this Agreement to be delivered by Seller at the Closing, all
reasonably acceptable to Buyer.
(c) Closing Certificates. Buyer shall have received
certificates reasonably acceptable to Buyer, signed by Seller and dated as of
the Closing Date, to the effect that all representations, warranties, and
covenants made in this Agreement by Seller are on the Closing Date true and
correct in all material aspects and that Seller has performed in all material
respects the obligations, agreements, and covenants undertaken by it in this
Agreement to be performed on or before the Closing Date.
(d) No Material Adverse Change. Except as contemplated by
this Agreement, there shall have been no material adverse change in the
condition of the Purchased Assets, from the date of this Agreement to the
Closing Date.
(e) Necessary Consents and Notices. All consents by third
parties to the assignment of any contracts that are necessary for the
consummation of the transactions contemplated by this Agreement shall have
been received in writing and shall be in full force and effect.
(f) Release of Claims. Any liens on Purchased Assets shall
have been released by Seller's obligees.
(g) Buyer's Examination. Buyer shall be satisfied with the
results of Buyer's examination of the Purchased Assets and the FX Business.
2.4 Conditions to Seller's Closing Obligations. Notwithstanding
anything to the contrary contained in this Agreement, Seller's closing
obligations under this Agreement are, except to the extent expressly waived
by Seller, subject to Seller's satisfaction at or before the Closing, of all
the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects when made, and shall be true and
correct in all material aspects as of the Closing Date, with the same force
and effect as if made again as of the Closing Date.
(b) Performance. Buyer shall have performed and complied in
all material respects with all agreements and conditions required by this
Agreement to be performed or complied with by Buyer at or before the Closing,
including payment of the Purchase Price and delivery of the assumption
documents and other documents required by this Agreement to be delivered by
Buyer at the Closing, all reasonably acceptable to Seller.
(c) Closing Certificate. Seller shall have received a
certificate reasonable acceptable to Seller, signed by Buyer and dated as of
the Closing Date, to the effect that all representations and warranties in
this Agreement are true and correct in all material respects as if made again
on the Closing Date and that Buyer has performed in all material respects the
obligations, agreements, and covenants undertaken by Buyer in this Agreement
to be performed on or before the Closing Date.
(d) Deliveries by Buyer. Buyer shall have delivered, to the
reasonable satisfaction of Seller, the other items listed above in this
Article.
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 Seller Organization and Good Standing. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Michigan.
3.2 Enforceability. Seller has full capacity, power, and
authority to enter into this Agreement and to carry out the transactions
contemplated by this Agreement, and this Agreement is binding upon Seller and
is enforceable against Seller in accordance with the terms of this Agreement.
3.3 No Conflict with Other Instruments or Proceedings. The
execution and delivery of this Agreement and consummation of the transactions
contemplated by this Agreement will not (a) result in the breach of any of
the terms or conditions of, or constitute a default under Seller's corporate
charter or bylaws or any contract, agreement, lease, commitment, indentury,
mortgage, pledge, note, bond, license, or other instrument or obligation to
which Seller is now a party or by which either Seller may be bound or
affected; (b) violate any law, rule, or regulation of any administrative
agency or governmental body or any order, writ, injunction, or decree of any
court, administrative agency, or governmental body; (c) result in the
imposition of any lien or encumbrance on any of the Purchased Assets; or (d)
give rise to any right of first refusal or similar right to any third party
with respect to any interest in any of the Purchased Assets.
3.4 Personal Property. Seller has good and marketable title to
the Purchased Assets, subject only to security interests which shall be
discharged at Closing. All personal property included in the Purchased Assets
will be in the possession of Seller on the Closing Date. As of the Closing
Date, the Purchased Assets shall be in good operating condition, and Seller
is aware of no material defects therein, reasonable wear and tear excepted.
Nonetheless, Buyer shall accept the Purchased Assets in an "as is" condition.
3.5 Contracts. Prior to Closing, Schedule 3.5 shall detail all
contracts to which Seller is a party and which affect the FX Business or the
Purchased Assets. To Seller's knowledge, all of the contracts are in effect,
and are valid, binding and enforceable in accordance with their respective
terms.
3.6 Information. Information (not including projections)
provided by Seller to Buyer regarding FX Business done by Seller, including
production, shipping, quality, returns, and engineering data shall be
materially accurate and complete.
3.7 Brokers. Seller has not retained or employed any broker,
finder, investment banker, or other person, or taken any action, or entered
into any agreement or understanding that would give any broker, finder,
investment banker, or other person any valid claim against Buyer and Seller
for a commission, brokerage fee, or other compensation.
3.8 Accuracy of Statements. No representation or warranty made
by Seller in this Agreement contains or will contain any untrue statement of
a material fact. Nonetheless, any financial projections submitted to Buyer by
Seller were for illustration purposes and based upon several assumptions
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regarding operational efficiencies, successful developments, projected costs
and potential commitments of customers. Buyer should not and has not
indicated that it will not rely on these projections; rather, Buyer shall
perform its own customer investigation and due diligence analysis with
respect to the FX Business and its possible benefits. The representations and
warranties of Seller shall be deemed to be made as of the date of this
Agreement and again as of the Closing Date.
ARTICLE 4 BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller as follows:
4.1 Buyer's Organization and Good Standing. Buyer is a limited
liability company duly organized, validly existing, and in good standing
under the laws of the State of Michigan.
4.2 Enforceability. Buyer has full capacity, power, and
authority to enter into this Agreement and to carry out the transactions
contemplated by this Agreement, and this Agreement is binding upon Buyer and
is enforceable against Buyer in accordance with the terms of this Agreement.
4.3 No Conflict with Other Instruments or Proceedings. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement will not (a) result in the breach
of any of the terms or conditions of, or constitute a default, under Buyer's
corporate charter or bylaws or any contract, agreement, lease, commitment,
indenture, mortgage, pledge, note, bond, license, or other instrument or
obligation to which Buyer is now a party or by which Buyer may be bound or
affected or (b) violate any law, rule, or regulation of any administrative
agency or governmental body or any order, writ, injunction, or decree of any
court, administrative agency, or governmental body. All consents, approvals,
or authorizations of, or declarations, filings, or registrations with, any
third parties or governmental or regulatory authorities required of Buyer in
connection with the execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated by this Agreement will
be obtained or made, as applicable, by Buyer before the Closing Date.
4.4 Brokers. Buyer has not retained or employed any broker,
finder, investment banker, or other person any valid claim against Buyer or
Seller for a commission, brokerage fee or other compensation.
ARTICLE 5 COVENANTS
5.1 Conduct of Business Pending the Closing. During the period
from the date of this Agreement to the Closing Date, Sellers shall conduct
the FX Business in the ordinary and usual course. Further, Seller will
arrange meetings with Seller, Buyer and FX Business customers and suppliers
to confirm current and potential part volume, pricing, delivery and quality
requirements, among other things.
5.2 Pre-Closing Access. During the period from the date of this
Agreement to the Closing Date, Seller shall cause Buyer and Buyer's
designated representatives and agents to be given access to the records and
production facility of Seller, for the purpose of conducting an investigation
of the FX Business and the Purchased Assets; provided, however, that the
investigation shall be conducted in a manner that does not unreasonably
interfere with Seller's normal operations. Buyer, and Buyer's representatives
and agents, will
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use all reasonable commercial efforts to maintain in strict confidence all
documents and information obtained by Buyer or Buyer's designated
representatives and agents during Buyer's investigation and shall use the
information solely for the purpose of evaluating and completing the
transaction described in this Agreement.
5.3 Disclosure of Breaches. Buyer and Seller shall promptly
notify the other of the occurrence of any event or condition that could
reasonably be expected to adversely affect the ability of any party to
perform fully the transactions contemplated by this Agreement or to make that
party's respective representations and warranties set forth in this Agreement
not be materially true and correct at the Closing.
5.4 Consents. Each party to this Agreement will use all
reasonable efforts to obtain all authorizations and consents of third parties
that may or become necessary for that party's execution and delivery of, and
the performance of that party's obligations pursuant to, this Agreement, and
will cooperate fully with each other party in promptly seeking to obtain all
those authorizations, consents, orders, and approvals.,
5.5 Publicity. Buyer and Seller shall simultaneously make an
announcement regarding the transactions contemplated by this Agreement in a
mutually agreed upon form. After the announcement, during the period form the
date or this Agreement to the Closing Date, neither Buyer nor Seller shall
issue any press release or otherwise make any public statements or
announcement concerning this Agreement or the transactions contemplated by
this Agreement without the prior written consent of the other parties other
than to customers and suppliers in the ordinary course of business.
Notwithstanding the foregoing, neither Buyer nor Seller shall be prevented at
any time from furnishing any required information to any governmental agency
or authority or from complying with that party's legal obligations nor
prevented from publishing any information that is publicly available as a
result.
5.6 Further Assurances. Buyer and Seller shall execute all
documents and take all further actions as may be reasonably required or
desirable to carry out the provisions of this Agreement and the transactions
contemplated by this Agreement at or after the Closing to evidence the
consummation of the transactions contemplated pursuant to this Agreement.
Upon the terms and subject to the conditions of this Agreement, Buyer and
Seller shall take all actions and do, or cause to be done, all other things
necessary, proper, or advisable to consummate and make effective as promptly
as practicable the transactions contemplated by this Agreement and obtain in
a timely manner all necessary waivers, consents, and approvals. Buyer shall
purchase any raw materials with acceptable quality as determined by Buyer,
related to the FX Business, at Seller's delivered cost.
5.7 Post Closing Access and Removal. Buyer, at its sole expense,
will relocate the Purchased Assets on or about March 30, 1998. Seller will
provide Buyer with access to the Purchased Assets after Closing for
production purposes and removal; provided if Buyer remains in Seller's
premises after April 10, 1998, the parties shall later enter into a lease
with standard terms and indemnifications and providing for reimbursement of
direct expenses; between the time of closing and the time the parties enter
into any lease, Buyer will reimburse Seller for direct expenses incurred
related to the operation of the purchased assets until such removal from
Seller's premises.
ARTICLE 6 INDEMNIFICATION
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6.1 Indemnity. Seller shall defend, indemnify and hold harmless
Buyer against and with respect to any and all loss, cost, damage, liability,
obligation, claim or expense (including reasonable professional fees and
similar expenses - collectively, the "Indemnified Losses") arising in
connection with any material misrepresentation, breach, or nonperformance of
any representation, warranty, covenant, undertaking, condition, or agreement
made or to be performed by Seller under this Agreement.
6.2 Indemnification Period. Buyer's right to seek
indemnification under this Article shall survive for a period of two (2)
years from the Closing Date (the "Indemnity Period").
ARTICLE 7 TERMINATION
7.1 Terminated Events. This Agreement may, by notice given
before or at the Closing, be terminated:
(a) by either Buyer or Seller if a material breach of any
provision of this Agreement has been committed by the other party and the
breach has not been waived;
(b) by Buyer if any of the conditions precedent to Buyer's
closing obligations have not been satisfied as of the Closing Date or if
satisfaction of a condition is or becomes impossible (other than through the
failure of Buyer to comply with Buyer's obligations under this Agreement) and
Buyer has not waived the condition on or before the Closing Date;
(c) by Seller if any of the conditions precedent to
Seller's closing obligations have not been satisfied as of the Closing Date
or if satisfaction of a condition is or becomes impossible (other than
through failure of Seller to comply with Seller's obligations under this
Agreement) and Seller have not waived the condition on or before the Closing
Date;
(d) by mutual consent of Buyer and Seller; or
(e) by either Buyer or Seller if the Closing has not
occurred (other than through the failure of any party seeking to terminate
this Agreement to comply fully with that party's obligations under this
Agreement) on or before March 15, 1998, or any later date as the parties may
agree.
7.2 Notice. The party terminating shall provide written notice
thereof to the other, specifying the reason(s) for the termination.
7.3 Effect of Termination and Breach of Agreement. If this
Agreement is terminated other than pursuant to a breach by Seller or by
Buyer, the parties shall have no further duties, obligations, or rights to or
against each other except for the provisions of this Agreement relating to
confidentiality and use of confidential or proprietary information and the
earnest money deposit shall be promptly refunded to Buyer. If this Agreement
is terminated pursuant to a breach of this Agreement by Buyer, Seller shall
have the right to retain the earnest money deposit and may also pursue any
additional rights and remedies as Seller may have, at law or in equity,
against Buyer with respect to the breach. If this Agreement is terminated
pursuant to a breach of this Agreement by Seller, Buyeryshall have the right
to pursue any rights and remedies as Buyer may have, at law or in equity,
against Seller with respect to the breach.
11
<PAGE>
ARTICLE 8 GENERAL
8.1 Risk of Loss. The risk or loss of destruction of, or damage
to, the Purchased Assets (a "Loss"), shall be on Seller at all times on or
before the Closing Date. Seller shall take all reasonable steps consistent
with Seller's normal business practices to repair, replace, and restore the
Purchased Assets as soon as possible after any Loss. All insurance proceeds
received by Seller with respect to any Loss shall be applied to replacement,
restoration, or repair. Any obligation of Seller to repair, replace, and
restore the Purchased Assets shall terminate on the Closing Date or upon the
termination of this Agreement. Notwithstanding any other provision of this
Section, Seller shall be entitled to retain any insurance proceeds to the
extent Seller has previously expended amounts to repair, replace, or restore
a Loss to the Purchased Assets on or before the Closing Date. Should Seller,
due to a Loss, not be able to deliver Purchased Assets on the Closing Date in
condition acceptable to Buyer, this Agreement shall terminate, and Seller
shall promptly return the earnest money to Buyer.
8.2 Survival of Representations, Warranties, Covenants, and
Indemnities. Subject to the limitations of the Indemnity Period described
above, all representations, warranties, covenants, and indemnities made by
any party to this Agreement shall survive the Closing and any investigation
at any time made by or on behalf of any party before or after the Closing for
a period of three (3) years.
8.3 Confidentiality. Buyer shall remain subject to the terms of
a Confidentiality Agreement previously executed by Buyer, attached hereto.
(Schedule 8.3), except Buyer may make employment offers to Seller's employees
as permitted by Seller.
8.4 Assignment and Benefits. No party to this Agreement may
assign or transfer this Agreement, either directly or indirectly, by merger,
liquidation, consolidation, sale of stock, change of control, operation of
law, or other means, without the prior written consent of all parties to this
Agreement. This Agreement shall be binding upon, inure to the benefit of, and
be enforceable by and against the respective successors and permitted assigns
of each of the parties to this Agreement.
8.5 Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed
to have been duly given when delivered, sent by telecopy, or sent by express
delivery service with charges prepaid and receipt requested, or, if those
services are not reasonably available, mailed (postage prepaid) by certified
mail with return receipt requested:
To Buyer at: With a copy to:
Gregory D. Bird, CEO A. David Mikesell
Horizon Technology Group Honigman Miller Schwartz and Cohn
20400 Superior Road 2290 First National Building
Taylor, Michigan 48180-5347 Detroit, Michigan 48226-3583
Fax: (734) 374-9209 Fax: (313) 962-0176
To Seller at: With a copy to:
Robert A. Clemente, Chairman Andrew Munro Esq.
Uniflow Corporation Munro and Munro
12
<PAGE>
26600 Heyn Drive 3250 W. Big Beaver Road, Suite 520
Novi, Michigan 48374 Troy, Michigan 48084
Fax: (248) 348-0021 Fax: (248) 643-0786
Any party may change that party's address by prior written
notice to the other parties.
8.6 Expenses. Each party to this Agreement shall pay that
party's respective expenses, costs, and fees (including professional fees)
incurred in connection with the negotiation, preparation, execution, and
delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement.
8.7 Entire Agreement. This Agreement, and the exhibits and
schedules to this Agreement (which are incorporated in this Agreement by
reference), and the agreements referred to in this Agreement, contains the
entire agreement and understanding of the parties and supersede all prior
agreements, negotiations, arrangements, and understandings related to the
subject matter of this Agreement.
8.8 Amendments and Waivers. This Agreement may be amended,
modified, superseded, or canceled, and any of the terms, covenants,
representations, warranties, or conditions of this Agreement may be waived,
only by a written instrument signed by each party to this Agreement, or, in
the case of a waiver, by or on behalf of the party waiving compliance. The
failure of any party at any time to require performance of any provision in
this Agreement shall not affect the right of that party at a later time to
enforce that or any other provision. No waiver by any party of any condition,
or of any breach of any term, covenant, representation, or warranty contained
in this Agreement, in any one or more instances, shall be deemed to be a
further or continuing waiver of any condition or of any breach of any other
term, covenant, representation, or warranty.
8.9 No Third-Party Beneficiaries. The provisions of this
Agreement are solely between and for the benefit of the respective parties to
this Agreement, and do not inure to the benefit of, or confer rights upon any
third party, including any employee of Buyer or Seller.
8.10 Severability. Except as otherwise specifically provided in
this Agreement, this Agreement shall be interpreted in all respects as if any
invalid or unenforceable provision were omitted from this Agreement. All
provisions of this Agreement shall be enforced to the full extent permitted
by law.
8.11 Headings. The headings of the sections and subsections of
this Agreement have been inserted for convenience of reference only and shall
not restrict or modify any of the terms or provisions of this Agreement.
8.12 Governing Law. This Agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of
Michigan, as applied to contracts made and to be performed in that state,
without regard to conflicts of law principles.
8.13 Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied against any
party. Unless otherwise expressly provided, the words "include" and
"including" (and variations of those words) whenever used in this Agreement
shall not limit the preceding words or terms.
13
<PAGE>
8.14 Counterparts. This Agreement may be signed in counterparts,
each of which shall be deemed to be an original, and the counterparts shall
together constitute one complete document. Counterparts may be signed and
delivered by a party by fax, which shall be binding on that party when faxed,
with one or more copies signed in original to be later delivered by express
delivery service or mail.
8.15 Tooling Supply. Buyer will enter into an agreement with an
affiliate of Seller to purchase its perishable tooling requirements for the
FX Business. This agreement will be for a term of five (5) years and will be
conditioned upon the Seller's affiliate meeting competitive pricing, quality
and delivery standards.
Signed as of the date first written above.
HORIZON TECHNOLOGY, L.L.C. UNIFLOW CORPORATION
By/s/ Gregory D. Bird By/s/ Robert A. Clemente
------------------------------ --------------------------------
Gregory D. Bird Robert A. Clemente
Chief Executive Officer Chairman
"Buyer" "Seller"
14
PROMISSORY NOTE
$700,000.00 March 24, 1998
Novi, Michigan
For value received, the undersigned, HORIZON TECHNOLOGY, L.L.C., a
Delaware limited liability company (hereinafter referred to as "Maker")
promises to pay to UNIFLOW CORPORATION, a Michigan corporation, at Novi,
Michigan, (hereinafter referred to as "Payee"), the principal sum of Seven
Hundred Thousand Dollars ($700,000.00) in lawful money of the United States
of America, together with default interest from the date of default until its
cure, upon the unpaid principal balance at the rate of Nine and one-half
percent (9.5%) per annum as follows:
PLACE OF PAYMENT
All payments shall be made at the office of Payee or at such place
as the Payee shall specify in writing.
INSTALLMENT PAYMENTS
The principal and interest of this Note shall be payable in sixty
(60) equal monthly installments of Eleven Thousand Six Hundred and Sixty-Six
and 67/100 Dollars ($11,666.67), plus default interest at the rate of Nine
and one-half (9.5%) per annum. The first payment shall be due on April 24,
1998 and all subsequent payments shall be due on the same day of each
succeeding month thereafter. This Note shall be paid in full on or before
five (5) years from the date hereof. Monthly default interest shall be due
and computed on the outstanding principal balance for any period of default
in payment or otherwise.
PREPAYMENT
This Note may be prepaid in part or in full, with accrued interest,
without penalty, at any time. All prepayments shall first be applied against
any unpaid interest which shall be then due and owing and the balance shall
be applied against the principal.
<PAGE>
ACCELERATION; CROSS-DEFAULT
It is understood and agreed that (i) on default in the payment of
any installment of principal or interest, or any part thereof, when due; (ii)
if the Maker hereof makes a general assignment for the benefit of creditors;
(iii) there is filed by or against the Maker any petition in bankruptcy or
any proceeding under any law relating to the relief of debtors, or for the
appointment of a receiver of the Maker's property; (iv) a warrant of
attachment is issued against any material portion of the Maker's property;
(v) the Maker is in material default under its obligations under a certain
Royalty Agreement, of even date herewith, executed by Maker and Payee
(respectively the Royalty Agreement; (vi) if the Maker shall suspend business
or become insolvent; (vii) if the Maker transfers, sells, exchanges or
assigns greater than fifty percent (50%) of its assets; or (viii) if the
Maker is dissolved; the Maker shall be in default and the Payee may, at its
option in writing, declare all liabilities of the Maker hereunder forthwith
due and payable.
Notwithstanding anything in this Note to the contrary, prior to a
default existing hereunder, the Maker shall have thirty (30) days to cure any
such event of default prior to the Payee exercising any of its default rights
or remedies hereunder. The Payee must provide the Maker notice in writing of
the event of default in the payment of principal or interest, or in default
under the Royalty Agreement (which notice shall contain specific details of
such event of default).
SECURITY INTEREST
To secure payment of this Note and of any liability or liabilities
of the Maker to the holder hereof, due or to become due, or that may
hereafter be contracted or existing, however acquired by the holder, the
Maker has transferred, pledged and given a secured interest in, and delivered
to the Payee the property set forth in the Subordinated Security Agreement
executed by Maker and Payee on even date herewith.
USURY SAVINGS CLAUSE
Notwithstanding anything in this Note to the contrary, nothing
herein contained, or any transaction related hereto, shall be construed or
shall operate either presently or prospectively to: (a) require Maker to pay
interest at a rate greater than is now lawful in such case to contract for,
but shall require payment of interest only to the extent of the highest
lawful rate; or (b) require Maker to make any payment or do any act contrary
to law; and if any clause or provision herein contained shall otherwise so
operate to invalidate this Note, in whole or in part, then such clauses or
provisions only shall be held for naught as though not herein contained, and
the remainder of this Note shall remain operative and in full force and
effect.
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<PAGE>
WAIVER OF PROTEST
Except as herein provided, the undersigned hereby waives
presentment, demand for payment, notice of dishonor, notice of protest and
protest delivery, acceptance, performance, default and all other demands and
notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note assents to any extension or postponement of the time
of payment or any other indulgence, or any substitution, exchange or release
of collateral.
COSTS OF COLLECTION
The Maker will pay on demand all costs of collection, legal
expenses, and attorneys' fees incurred or paid by the holder in collecting or
enforcing this Note on default.
In addition to the remedies provided by this Note, the Payee shall
have all legal and equitable rights and remedies provided by law and by
Security Agreement and any other agreement of Maker.
DELINQUENCY CHARGE
The Maker agrees to pay a delinquency and collection charge on each
installment payment not made within ten (10) days from its due date in an
amount equal to four percent (4%) of the installment payment due
(Administrative Charge). The Maker acknowledges that the Administrative
Charge is not additional interest, but is a charge to compensate the Payee
for any administrative inconvenience caused by the late payment. Furthermore,
during any period of default under the terms of this Note, the Security
Agreement, or the Royalty Agreement, at the option of the Payee, Maker shall
pay interest on all past-due interest and principal payments at the rate of
fifteen percent (15%)per annum. In the event the Maker cures any event of
default the interest rate charged hereunder shall revert to the non-default
interest rate, until such time as a default event occurs.
WAIVER
No delay or omission on the part of the Payee in exercising any
right hereunder shall operate as a waiver of such right or of any other right
under this Note. A waiver on any one occasion shall not be construed as a bar
to or waiver of any right to remedy on any future occasion.
MISCELLANEOUS
This Note shall be governed and construed in accordance with the
laws of Michigan.
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<PAGE>
If any provision of this Note is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue in full force without being impaired or
invalidated in any way unless such enforcement would materially alter the
underlying intent of the Parties to this Note, as originally contemplated by
the parties hereto, at the time this Note was executed.
This Note shall be binding upon and shall inure to the benefit of
the respective successors and assigns of the Maker and Payee of this Note.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed,
and accepted its terms and provisions this 24th day of March, 1998.
WITNESSES: MAKER:
HORIZON TECHNOLOGY, L.L.C.
a Delaware limited liability company
______________________________ By: /s/ Gregory Bird
_______________________________
Its: President and CEO
______________________________
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SUBORDINATED SECURITY AGREEMENT
This security agreement is made on March 24, 1998, between Horizon
Technology, L.L.C., a Delaware limited liability company, of 20400 Superior
Road, Taylor, Michigan 48180-5347("Debtor"), and Uniflow Corporation, a
Michigan corporation, 26600 Heyn Drive, Novi, Michigan 48374 ("Secured
Party").
1. Grant of Security Interest. Debtor grants to Secured Party a
continuing security interest in all equipment, contracts and
intangible assets purchased by Debtor from Secured Party, together
with (i) all proceeds of the foregoing; and (ii) all books, records,
and documents at any time evidencing or relating to any of the
foregoing. All of the foregoing properties and assets of Debtor are
referred to collectively in this agreement as the "collateral."
2. Indebtedness Secured. The foregoing security interest is given to
secure payment and performance of ALL OBLIGATIONS AND INDEBTEDNESS
OF DEBTOR NOW OR LATER OWING TO SECURED PARTY, including but not
limited to all future advances and all obligations and indebtedness
of Debtor to Secured Party under this agreement and under all other
purchase agreements, notes, and other agreements, instruments, and
documents that have been or are in the future signed by Debtor, and
all extensions or renewals of the indebtedness and obligations. The
indebtedness and obligations now owing by Debtor to Secured Party
include, BUT ARE NOT NECESSARILY LIMITED TO, the obligations and
indebtedness evidenced by the following instrument(s), document(s),
or agreement(s) that have been executed by Debtor:
Royalty Agreement, dated of even date herewith.
Short Term Note in the amount of Seven Hundred Thousand
Dollars ($700,000.00), of even date herewith evidencing the
aggregate unpaid balance of the purchase price of all
equipment and other assets sold to Debtor by Secured Party
as of this date.
The indebtedness and obligations that are secured by this security
interest are collectively called the "indebtedness."
3. Warranties, Representations, and Agreements. Debtor warrants and
represents to, and agrees with, Secured Party as follows:
(a) Debtor is a limited liability company and is organized and
validly existing in good standing under the laws of the
state of Michigan, Debtor has full power and authority to
enter into and perform its obligations under this
agreement; the
<PAGE>
execution, delivery, and performance of this agreement have
been duly authorized by all necessary action of Debtor's
managing board and will not violate Debtor's articles of
organization, bylaws, or the like; and this agreement is
the valid and binding obligation of Debtor, enforceable in
accordance with its terms.
(b) Debtor is the owner of the collateral, and none of the
collateral is subject to any lien, security interest,
encumbrance, or claim in favor of any third party, and no
financing statement is on file in any public office
covering any of the collateral, except MetLife Capital
Corporation.
(c) None of the collateral is, and Debtor will not permit any
of the collateral to be, contaminated or the source of
contamination of any other property, by any substance that
is now or later regulated by or subject to any past,
present, or future federal, state, local, or foreign law,
ordinance, rule, regulation, or order that regulates or is
intended to protect public health or the environment or
that establishes liability for the investigation, removal,
or cleanup of, or damage caused by, any environmental
contamination, including without limitation any law,
ordinance, rule, regulation, or order that regulates or
prescribes requirements for air quality, water quality, or
the disposition, transportation, or management of waste
materials or toxic substances. Debtor will operate and
maintain the collateral in compliance with all such laws
and regulations.]
(d) Debtor's address set forth on the face of this agreement is
the location of Debtor's / chief executive office.
4. Agreements of Debtor. Debtor agrees that:
(a) Debtor will not cause or permit any lien, security interest
or encumbrance to be placed on any collateral, except in
favor of Secured Party and except in favor of MetLife
Capital Corporation ["permitted lien(s)"], and Debtor will
not sell, assign, or transfer any collateral or permit any
collateral to be transferred by operation of law.
(b) Debtor will maintain all records concerning the collateral
at Debtor's address appearing on the first page of this
agreement and will keep all tangible collateral at 4261
Thirteenth, Wyandotte, Michigan 48192.
(c) Debtor will furnish Secured Party with the information
regarding the collateral that Secured Party shall from time
to time request and will allow Secured Party at any
reasonable time to inspect the collateral and Debtor's
records regarding the collateral.
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<PAGE>
(d) Debtor will execute, file, record, or procure from third
persons the financing statements, subordination agreements,
and other documents and take all other action that Secured
Party may deem necessary to perfect, to continue perfection
of, or to maintain Secured Party's security interest in the
collateral subject to permitted lien(s), and Debtor will
place upon the collateral and/or documents evidencing the
collateral the notice of Secured Party's security interest
that Secured Party may from time to time require.
(e) Secured Party may file a photocopy of this agreement as a
financing statement evidencing Secured Party's security
interest in the collateral.
(f) Debtor will immediately notify Secured Party in writing of
any change in Debtor's name, identity, or corporate
structure, and of any change in the location of Debtor's
chief executive office.
(g) Debtor will indemnify Secured Party with respect to all
losses, damages, liabilities, and expenses (including
attorney fees) incurred by Secured Party by reason of any
failure of Debtor to comply with any of Debtor's
obligations under this agreement or by reason of any
warranty or representation made by Debtor to Secured Party
in this agreement being false in any material respect.
(h) Debtor will maintain all tangible collateral in good
condition and repair and maintain fire and extended
coverage insurance covering all tangible collateral in the
amounts and against the risks that is customarily
maintained by similar businesses. Each insurance policy
will provide that its proceeds will be payable to Secured
Party to the extent of Secured Party's interest in the
collateral and that the policy will not be canceled, and
the coverage will not be reduced, without at least 10 days
prior written notice by the insurer to Secured Party.
Debtor will provide Secured Party with evidence of the
insurance coverage.
5. Events of Default and Acceleration. Any part or all of the
indebtedness shall, at the option of Secured Party, become
immediately due and payable without notice or demand upon the
occurrence of any of the following events of default:
(a) If default occurs in the payment or performance of any of
the indebtedness, when and as it shall be due and, and if
the default continues for 10 days after Secured Party has
given written notice of it to Debtor.
(b) If default occurs in the performance of any obligation of
Debtor to Secured Party under this agreement or under any
promissory note or other instrument at any time evidencing
any indebtedness or under any other or other agreement that
now or later secures or relates to any indebtedness or
obligation now or later owing by Debtor to Secured Party
("security documents").
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<PAGE>
(c) If any warranty, representation, or statement made to
Secured Party by Debtor in this agreement or in any
security document, credit application, financial statement,
or otherwise, was false in any material respect when made
or furnished.
(d) If Debtor dissolves, becomes insolvent, or makes an
assignment for the benefit of creditors.
If a voluntary or involuntary case in bankruptcy,
receivership, or insolvency is at any time commenced by or against
Debtor, then the entire indebtedness shall automatically become
immediately due and payable, without notice or demand. All or part
of the indebtedness also may become, or may be declared to be,
immediately due and payable under the terms of any note at any time
evidencing any of the indebtedness or of any other agreement entered
into between Debtor and Secured Party.
6. Secured Party's Rights and Remedies. Secured Party shall have all
rights and remedies of a secured party under applicable laws.
Without limiting these rights and remedies:
(a) If all or any part of the indebtedness is not paid at
maturity, Debtor, upon demand by Secured Party, shall
deliver the collateral and proceeds of collateral to
Secured Party at such place as Secured Party shall
designate, and Secured Party may dispose of the collateral
in any commercially reasonable manner. Any notification
required to be given by Secured Party to Debtor regarding
any sale or other disposition of collateral shall be
considered reasonable if mailed at least five days before
the sale or other disposition.
(b) The proceeds of any collection or disposition of collateral
shall be applied first to Secured Party's attorney fees and
expenses, as provided in paragraph 7, and then to the
indebtedness, and Debtor shall be liable for any deficiency
remaining. Excess proceeds, if any, shall be returned to
Debtor.
All rights and remedies of Secured Party shall be cumulative and may
be exercised from time to time; provided, however, this security interest
shall be subject to a Subordination Agreement (as to collateral only) with
Buyer's lender.
7. Expenses. Debtor shall reimburse Secured Party on demand for all
attorney fees, legal expenses, and other expenses that Secured Party
incurs in protecting and enforcing its rights under this agreement.
This includes fees and expenses incurred in trying to take
possession of collateral from Debtor, a trustee or receiver in
bankruptcy, or any other person. Secured Party may apply any
proceeds of collection or disposition of collateral to Secured
Party's reasonable attorney fees, legal expenses, and other
expenses.
8. Amendments and Waivers. No provision of this agreement may be
modified or waived except by a written agreement signed by Secured
Party. Secured Party will continue to
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<PAGE>
have all of its rights under this agreement even if it does not
fully and promptly exercise them on all occasions.
9. Notices. Any notice to Debtor or to Secured Party shall be deemed to
be given if and when mailed, with postage prepaid, to the respective
address of Debtor or Secured Party appearing on the first page of
this agreement, or if and when delivered personally.
10. Other. In this agreement, maturity of any of the indebtedness means
the time when that indebtedness has become due and payable, for any
reason (including, for example, acceleration due to default or
bankruptcy). This agreement will be governed by, and interpreted
according to, Michigan law.
11. Binding Effect. This agreement shall be binding upon and inure to
the benefit of Debtor and Secured Party and their respective
successors and permitted assigns.
Debtor and Secured Party have executed this Security Agreement on
the date listed on the first page of this agreement.
DEBTOR:
Horizon Technology, L.L.C.
a Delaware limited liability company
By: /s/ Gregory Bird
___________________________
Its: President and CEO
_______________________
SECURED PARTY:
Uniflow Corporation
By: /s/ Robert A. Clemente
____________________________
Its: Chairman
________________________
