SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the
Securuties Exchange Act of 1934
Date of Report (Date of earliest event reported) October 21, 1996
MILLER BUILDING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-14651 36-3228778
(Commission File number) (I.R.S. Employer Identification No.)
58120 County Road 3 South
P.O. Box 1283
Elkhart, Indiana 46515
(Address of principal executive offices) (Zip Code)
(219) 295-1214
(Registrant's telephone number, including area code)
Item 2. Acquisition or Disposition of Assets.
On October 21, 1996, Miller Structures, Inc.("Seller"), an Indiana
corporation and a wholly owned subsidiary of Miller Building Systems, Inc.
(the "Registrant"), sold all of the issued and outstanding shares of common
stock of its wholly owned subsidiary, Miller Structures, Inc.("Miller
Structures"), a California corporation, to MODTECH, Inc.("Buyer") The sale
was made pursuant to an Agreement for Purchase and Sale of all of the
outstanding Capital Stock of Miller Structures, Inc., a Non-Competition
Agreement and the Supplemental Closing Agreement.
The consideration paid by the Buyer to the Seller consists of a cash
purchase price of $1,606,022 less $82,000 pending the resolution of a dispute
over the valuation of inventories. Seller and the Buyer also entered into a
three-year lease obligation for certain real property ("Property") which
lease agreement requires the Buyer, as lessee, to pay Seller rental payments
of $4,500 per month. The lease obligation is subject to cancellation if an
expanded environmental report on the Property is performed and is
satisfactory to Buyer. Upon the issuance of an acceptable expanded
environmental report, Seller and Buyer will mutually agree to cancel the
lease agreement, and Buyer will acquire the Property from Seller for a cash
purchase price of $450,000.
Item 7. Financial Statements and Exhibits.
(a) The pro forma financial information required by this Current Report
on Form 8-K is not included herein as it was impractical for the
Registrant to provide such information. Such pro forma financial
information will be filed as soon as practical, which the
Registrant believes will be within 60 days from the date of this
Current Report.
(b) The exhibits set forth on the Index to exhibits on page 4 are
incorporated herein by reference.
2
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.
MILLER BUILDING SYSTEMS, INC.
Date: November 4, 1996
By: \Edward C. Craig
Edward C. Craig,
President and Chief
Executive Officer
3
LIST OF EXHIBITS
Exhibit
Number
20.1 Supplemental Closing Agreement.
20.2 Agreement for Purchase and Sale of all of the outstanding Capital
Stock of Miller Structures, Inc.
20.3 Non-Competition Agreement
4
SUPPLEMENTAL CLOSING AGREEMENT
THIS SUPPLEMENTAL CLOSING AGREEMENT (this "Closing Agreement") is made
and entered into on October 21, 1996, by and between MODTECH, INC., a
California Corporation ("Buyer"), and MILLER STRUCTURES, INC., an Indiana
Corporation ("Seller").
RECITALS
A. Buyer and Seller have previously entered into that certain
Agreement for Purchase and Sale of All of the Outstanding Capital Stock of
Miller Structures, Inc. dated as of September 30, 1996, (the "Purchase
Agreement") providing for the purchase by Buyer from Seller of all of the
issued and outstanding capital stock of Miller Structures, Inc., a California
Corporation (the "Company"), owned beneficially and of record by Seller.
B. In connection with the Closing (as such term is defined in Section
3.1 of the Purchase Agreement) of the transactions contemplated by the
Purchase Agreement, Buyer and Seller desire to set forth certain additional
and modified terms and conditions upon which the transactions contemplated by
the Purchase Agreement will be consummated.
NOW THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, and covenants herein contained, and subject to
the terms and conditions hereinafter set forth, the parties hereby agree as
follows:
1. The Purchase Price payable pursuant to Section 2.1 of the Purchase
Agreement shall be $1,606,022.
2. It is understood and agreed that the value of the Company's
inventories is in dispute as of the Closing. Accordingly, at the Closing
Buyer shall deduct from the purchase price the sum of $82,000 and pay to
Seller the balance of the Purchase Price, pending reconciliation of the value
of the Company's inventories as of September 30, 1996 to the mutual
satisfaction of Buyer and Seller. Within 45 days following the Closing,
Seller shall reconcile the Company's inventory as to counts and obsolescence,
and provide Buyer with such reconciliation. Buyer and Seller shall then have
a period of 30 days from receipt from Seller of the inventory reconciliation
to attempt in good faith to agree upon a mutually acceptable resolution as to
the additional amount, if any, payable by Buyer to Seller in respect of the
Company's inventories at September 30, 1996. In the event that the parties
reach such a mutual agreement, the full amount agreed upon shall be paid by
Buyer to Seller within 5 business days thereafter. In the event that the
parties are unable to reach such a mutual agreement within the 30-day period
specified above, the dispute shall be resolved in accordance with the dispute
resolution provisions set forth in the Purchase Agreement. Nothing contained
herein shall limit the right of Buyer to assert a claim for indemnification
under Section 8.3 of the Purchase Agreement in the event that the value of
the Company's inventories as of September 30, 1996 is less than $82,000 below
the value thereof reflected on the Company's Balance Sheet attached as part
of Exhibit A to the Purchase Agreement.
3. The environmental report obtained by Seller and provided to Buyer
pursuant to the provisions of Section 6.9 (the "Environmental Report")
discloses certain matters which, without further investigation, suggests that
there may be facts or conditions regarding the real property and improvements
thereon referred to in Section 4.24 of the Purchase Agreement (the "Real
Property") which may not be acceptable to Buyer. Accordingly, it is
understood and agreed that the Real Property shall be transferred by the
Company to Seller prior to the Closing, and shall be leased by Seller to the
Company for a period of three full years from the date of the Closing, at a
"triple net" rental of $4,500.00 per month, with each monthly rental payment
to be made on the first business day of each calendar month. As soon as
practicable following the Closing, Buyer shall, at its expense, cause the
Environmental Report to be expanded (sort of a "Phase II" report) to more
fully address certain of the facts and conditions noted in the Environmental
Report as originally rendered. A copy of such expanded Environmental Report
shall be delivered to both Buyer and Seller. Within 10 business days
following receipt of the extended Environmental Report, Buyer shall notify
Seller in writing whether Buyer accepts the extended Environmental Report, or
objects to the expanded Environmental Report on the grounds that one or more
facts or conditions are disclosed therein (and specified in Buyer's written
notice of objection) which, in the reasonable judgement of Buyer, would give
rise to, or with the passage of time could reasonably be expected to give
rise to, liabilities, costs or expenses for remediation or otherwise which
could reasonably be expected to exceed, together with any claims for
indemnification that are subject to Section 8.3 (a) (v) of the Purchase
Agreement, $35,000. In the event that Buyer accepts the expanded
Environmental Report, the Company shall, within 10 business days, purchase
the Real Property from Seller for the purchase price of $450,000 with the
representations and warranties of Seller set forth in Section 4.24 of the
Purchase Agreement to apply to such purchase. In the event that Buyer
objects to the expanded Environmental Report, Seller shall have the right,
but not the obligation, to notify Buyer in writing, given within 10 business
days following receipt of Buyer's written notice of objection, of Seller's
intention to remediate, at Seller's sole cost and expense, the fact(s) or
condition(s) specified in Buyer's written notice of objection, provided that,
in the reasonable judgement of Buyer, such proposed remediation can be
completed within a reasonable time period, without undue interference with
the Company's business. In the event that such remediation is completed to
the reasonable satisfaction of Buyer, the Company shall, within 10 business
days following the completion of such remediation, purchase the Real Property
from Seller on the terms and for the price specified above in this paragraph
3. If Seller disputes (i) the objection of Buyer to the expanded
Environmental Report, (ii) the judgement of Buyer as to whether any proposed
remediation can be completed within a reasonable time period without undue
interference with the Company's business, or (iii) the determination of Buyer
as to the inadequacy of the remediation; the dispute shall be resolved in
accordance with the dispute resolution provisions of the Purchase Agreement.
In the event that Buyer objects to the expanded Environmental Report and
Seller elects not to undertake remediation of the fact(s) or conditions
specified in Buyer's written notice of objection, or such remediation cannot
be completed within a reasonable period of time without undue interference
with the Company's business, the lease shall continue until the expiration of
three years following the Closing Date of the Real Property to the Company by
Seller.
4. Notwithstanding any other provision of the Purchase Agreement to
the contrary, Seller agrees to indemnify and hold each of Buyer and the
Company harmless with respect to any and all claims, losses, damages,
obligations, liabilities and expenses, including without limitation
reasonable legal fees and other costs and expenses of investigation and
defense, which either Buyer or the Company shall incur or suffer following
the Closing arising out of or in connection with that certain workers
compensation claim identified on Exhibit F to the Purchase Agreement.
5. Except as and to the limited extent modified or amended hereby,
each of the provisions of the Purchase Agreement remains unimpaired and
unaffected by the provisions of this Closing Agreement, and the Purchase
Agreement remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Closing Agreement as of the day and year first above written.
"Buyer" "Seller"
BUYER, INC. MILLER STRUCTURES, INC.
By: \Evan M. Gruber By: \Edward C. Craig
Evan M. Gruber, Edward C. Craig,
President President
AGREEMENT FOR PURCHASE AND SALE OF
ALL OF THE OUTSTANDING CAPITAL STOCK OF
MILLER STRUCTURES, INC.
THIS AGREEMENT is made and entered into as of September 30, 1996, by and
between MODTECH, INC., a California corporation ("Modtech") or nominee, and
MILLER STRUCTURES, INC., an Indiana corporation ("SELLER"), that owns all of
the issued and outstanding capital stock of Miller Structures, Inc., a
California corporation (the "Company").
RECITALS
A. Seller owns, beneficially and of record, all of the issued and
outstanding shares of the capital stock (the "Stock") of the Company.
B. Modtech desires to purchase from Seller all of the outstanding
shares of the Stock owned by Seller, and Seller is willing to sell such
shares to Modtech, all on the terms and conditions set forth herein. To that
end, Modtech and Seller have heretofore entered into an purchase agreement in
principle dated August 12, 1996 (the "Agreement in Principle"), providing for
the purchase by Modtech from Seller of all of the Stock of the Company on
certain terms and conditions specified therein.
C. The parties hereto desire to set forth the definitive terms and
conditions upon which Seller shall sell to Modtech, and Modtech shall
purchase from Seller, all of the Stock of the Company, as contemplated by and
in furtherance of the Agreement in Principle.
NOW. THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, and covenants herein contained, and
subject to the terms and conditions hereinafter set forth, the parties hereby
agree as follows:
1. PURCHASE AND SALE OF STOCK
Subject to the terms and conditions hereof, at the Closing to be held in
accordance with the provisions of Section 3 hereof, Modtech agrees to
purchase from Seller, and Seller agrees to sell to Modtech, all of the shares
of the Stock owned beneficially and of record by Seller, which shares
constitute all of the issued and outstanding shares of the capital stock of
the Company.
2. PURCHASE PRICE
2.1 Purchase Price. The aggregate purchase price to be paid by
Modtech for the Stock (the "Purchase Price") shall be the Company's net book
value as of September 30, 1996, as reflected in the "Closing Balance Sheet",
payable at the Closing in the manner provided below in this Section 2.1. The
Closing Balance Sheet shall be prepared by Seller in conformance with
generally accepted accounting principles applied on a basis consistent with
that on which the Balance Sheet of the Company (defined in Section 4.7 below)
was prepared. The Closing Balance Sheet shall be delivered by Seller to
Modtech not less than three business days prior to the Closing Date. The
Purchase Price shall be paid at the Closing in cash, in immediately available
United States funds, by cashier's or bank certified check or checks.
2.2 Adjustment to the Purchase Price. The Purchase Price
otherwise payable by Modtech to Seller for the Stock as provided in Section
2.1 above shall be subject to adjustment if Modtech is entitled to
indemnification in accordance with the provisions of Section 8.3 hereof.
3. CLOSING
3.1 The Closing Date. Unless sooner terminated as provided in
Section 6.1(a) below, the consummation of the purchase and sale of the Stock
(the "Closing") shall take place at the offices of Phillips & Haddan, 4695
MacArthur Court, Suite 840, Newport Beach, California, at 10:00 a.m., local
time, on October 21, 1996 (the "Closing Date"), or at such other time date
and place as may be mutually agreed upon in writing by parties hereto;
provided, however, that, if the Closing fails to occur by December 31, 1996,
or by such later date to which the Closing may be extended as provided
hereinabove, this Agreement shall automatically terminate, all parties shall
pay their own expenses incurred in connection herewith, and neither Modtech
nor Seller shall have any further obligations hereunder; provided, however,
that no such termination shall constitute a waiver by either Modtech or
Seller who is not in default of any of its respective representations,
warranties or covenants herein, of any rights or remedies it might have at
law if the other is in default of any of its respective representations,
warranties or covenants under this Agreement.
3.2 Delivers at the Closing. At the Closing, as conditions
thereto:
(a) Modtech shall deliver to Seller, among other things:
(i) The cash specified by Section 2.1 (a); and
(b) Seller shall deliver to Modtech, among other things:
(i) A stock certificate or certificates evidencing the
ownership of all shares of the Stock owned by
Seller, duly endorsed for transfer to Modtech of
good and valid title in and to the Stock, free and
clear of all liens and other encumbrances.
(ii) The Non-Competition Agreement, dated as of the
Closing Date, between Seller, on the one hand, and
Modtech and the Company, on the other hand,
specified in Section 7.3(d) below.
4. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to, and covenants with, Modtech as
follows (it being acknowledged that Modtech is entering into this Agreement
in material reliance upon each of the following representations and
warranties, and that the truth and accuracy in all material respects of each
of which constitutes a condition precedent to Modtech's obligations
hereunder):
4.1 Organization and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California, and is duly qualified and in good standing
to do business as a foreign corporation in each jurisdiction in which such
qualifications is required and where the failure to be so qualified would
have a materially adverse effect upon the Company. The Company has all
requisite corporate power and authority to conduct its business as now being
conducted and to own and lease the properties which it now owns and leases.
The Articles of Incorporation as amended to date, certified by the Secretary
of State of California, the Bylaws of the Company, as amended to date, and
the resolutions of the Company's shareholders and directors authorizing the
execution, delivery and performance of this Agreement, all certified by the
President and the Secretary of the Company, which have previously been
provided to Modtech by Seller, are true and complete copies thereof as
currently in effect.
4.2 Capitalization. The authorized capital stock of the Company
consists of 100 shares of Common Stock. As of the date hereof, there are 100
shares of Common Stock issued and outstanding, all of which are owned,
beneficially and of record, by Seller. As of the date hereof, except as
expressly set forth hereinabove, there are no warrants, options, calls,
commitments or other rights to subscribe for or to purchase from the Company
any capital stock of the Company or any securities convertible into or
exchangeable for any shares of capital stock of the Company, or any other
securities or agreement pursuant to which the Company is or may become
obligated to issue any shares of its capital stock, nor is there outstanding
any commitment, obligation or agreement on the part of the Company to
repurchase, redeem or otherwise acquire any of the outstanding shares of its
capital stock.
4.3 Ownership of the Company. Seller is the owner of the Stock,
which constitutes all of the issued and outstanding shares of the capital
stock of the Company, free and clear of (i) any lien, charge, mortgage,
pledge, conditional sale agreement, or other encumbrance of any kind or
nature whatsoever, and (ii) any claim as to ownership thereof or any rights,
powers or interest therein by any third party, whether legal or beneficial,
and whether based on contract, proxy or other document or otherwise.
4.4 Authorization. Seller has full power and authority to enter
into this Agreement, to execute all attendant documents and instruments
necessary to consummate the transactions herein contemplated, and to perform
its obligations hereunder. This Agreement, and each and every other
agreement, document and instrument to be executed by Seller in connection
herewith, has been effectively authorized by all necessary action, corporate
and otherwise, on the part of Seller, which authorizations remain in full
force and effect, has been duly executed and delivered by Seller, no other
authorizations or proceedings on the part of Seller, or otherwise, are
required to authorize this Agreement and/or the transactions contemplated
hereby. This Agreement constitutes the legal, valid and binding act of
Seller, and this Agreement is enforceable with respect to Seller in
accordance with its terms, except as enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, priority or other laws or court
decisions relating to or affecting generally the enforcement of creditors'
rights or affecting generally the availability of equitable remedies. No
authorization, consent or approval of any public body or authority is
necessary for the consummation by Seller of the transactions contemplated by
this Agreement.
4.5 No Conflicts. Except as may be disclosed on Exhibit B
attached hereto (the "Disclosure Schedule"), neither the execution and
delivery of this Agreement, nor the consummation by Seller of any of the
transactions contemplated hereby, or compliance with any of the provisions
hereof, will (i) conflict with or result in a material breach of, violation
of, or default under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, lease, credit agreement, or other
agreement, document, instrument or obligation (including, without limitation,
any of the Company's charter documents) to which the Company or Seller is a
party or by which any of their respective assets or properties may be bound,
which could reasonably be expected to have a material adverse effect on the
Company, or (ii) violate any judgement, order, injunction, decree, statute,
rule or regulation applicable to the Company, Seller, or any of the assets or
properties of any of them. No authorization, consent or approval of any
public body or authority was or is necessary for the consummation by Seller
of the transactions contemplated by this Agreement.
4.6 Subsidiaries. The Company has no subsidiaries and no
investments, directly or indirectly, or other financial interest in any other
corporation or business organization, joint venture or partnership of any
kind whatsoever except as reflected in the Company's Balance Sheet # (defined
in Section 4.7 below) or shown on the Disclosure Schedule.
4.7 Financial Statements. Attached hereto as Exhibit A are (i)
the reviewed financial statements of the Company for each of its fiscal years
ended June 30, 1993 through 1996, consisting of the Company's balance sheets
as of such dates, the related statements of profit and loss for the periods
then ended, and the notes thereto, which have been reported upon by Coopers
& Lybrand, the Company's independent certified public accountants, and (ii)
the unaudited financial statements of the Company as of and for the three
months ended September 30, 1996, consisting of the Company's balance sheet as
of such date (the "Balance Sheet"), the related statement of profit or loss
for the period then ended, and the respective notes thereto, which have been
certified by the chief financial officer of the Company. Such financial
statements (and notes related thereto) are herein sometimes collectively
referred to as the "Financial Statements." The Financial Statements (i) are
derived from the books and records of the Company, which books and records
have been consistently maintained in a manner which reflects, and such books
and records do fairly and accurately reflect, the assets and liabilities of
the Company, (ii) fairly and accurately present the financial condition of
the Company on the respective dates of such statements and the results of its
operations for the periods indicated, except as may be disclosed in the notes
thereto, and (iii) have been prepared in all material respects in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved (except as otherwise disclosed in the notes thereto).
4.8 Absence of Undisclosed Liabilities. Except as and to the
extent reflected or reserved against in the Balance Sheet, and as to matters
arising in the ordinary course of its business since the date of the Balance
Sheet which are disclosed in the Disclosure Schedule, the Company has no
liability or obligation (whether accrued, to become due, contingent or
otherwise) which individually or in the aggregate could reasonably be
expected to have a materially adverse effect on the business, assets,
condition (financial or otherwise) or prospects of the Company.
4.9 Absence of Certain Developments. Except as set forth in the
Disclosure Schedule, since the date of the Balance Sheet there has been (i)
no declaration, setting aside or payment of any dividend or other
distribution with respect to the Stock or redemption, purchase or other
acquisition of any shares of Stock or any split-up or other recapitalization
relative to any stock or any action authorizing or obligating the Company to
do any of the foregoing; (ii) no material loss of or material destruction or
damage to any material property or asset of the Company, whether or not
insured; (iii) no acquisition or disposition of assets (or any contract or
arrangement therefor), or any other transaction by the Company otherwise
than for fair value and in the ordinary course of business; (iv) no discharge
or satisfaction by the Company of any lien or encumbrance or payment of any
obligation or liability (absolute or contingent) other than current
liabilities shown on the Balance Sheet, or current liabilities incurred since
the date thereof in the ordinary course of business, (v) no sale, assignment
or transfer by the Company of any of its tangible or intangible assets except
in the ordinary course of business, cancellation by the Company of any debt,
claims or obligations, or mortgage, pledge, subjection of any assets to any
lien, charge, security interest or other encumbrances, or waiver by the
Company of any rights of value which, in any such case, is material to the
business of the Company; (vi) no payment of any bonus to or change in the
compensation of any director, officer or employee, whether directly or by
means of any bonus, pension plan, contract or commitment except pursuant to
existing arrangement; (vii) no write-off or material reduction in the
carrying value of any asset which is material to the business of the Company;
(viii) no disposition or lapse of rights as to any intangible property which
is material to the business of the Company other than any and all trade names
and trademarks that include the name "Miller"; (ix) except for ordinary
travel advances, no loans or extensions of credit to shareholders, officers,
directors or employees of the Company, (x) no agreement to do any of the
things described in this Section 4.9, and (xi) no materially adverse change
in the condition (financial or otherwise) of the Company or in its assets,
liabilities, properties, business or prospects.
4.10 Real Property. Appendix I to the form of Lease attached
hereto as Exhibit M contains a complete and accurate legal description of the
Real Estate, which constitutes the only parcel of real property owned by or
leased to and occupied by the Company as of the date of this Agreement, and
the Company neither owns or leases, nor occupies, any other real property
except as set forth in the Disclosure Schedule. The building and all
fixtures and improvements located on such real property are in good operating
condition, ordinary wear and tear expected. The Company is not in violation
of any zoning, building or safety ordinance, regulation or requirement or
other law or regulation applicable to the operation of owned or leased
properties, and the Company has not received any notice of violation with
which it has not complied (it being understood and agreed that neither the
Company nor Modtech, directly or indirectly, will knowingly and voluntarily
take any actions to cause any examination or inspection with respect
thereto). The Company has good and marketable title to all such real
property owned by the Company, free and clear of all liens, mortgages,
encumbrances, easements, leases, restrictions, and claims of any kind
whatsoever except for (i) those matters shown on the Disclosure Schedule;
(ii) liens for taxes for the current year and tax assessments not yet due and
payable; and (iii) mechanics' or similar liens for materials or services
furnished or to be furnished after the date hereof. All leases of real
property to which the Company is a party and which are material to the
business of the Company are fully effective in accordance with their
respective terms and afford the Company peaceful and undisturbed possession
of the subject matter of the lease, and there exists no default on the part
of the Company or termination thereof, except as may be set forth in the
Disclosure Schedule.
4.11 Tangible Personal Property. Exhibit C attached hereto sets
forth a complete list of all items of tangible personal property owned or
leased and used by the Company in the current conduct of its business, where
the original cost was in excess of $750. Except as set forth in Exhibit C,
the Company has, and at the Closing will have, good and marketable title to,
or in the case of leased equipment a valid leasehold interest in, and is in
possession of, all such items of personal property owned or leased by it,
free and clear of all title defects, mortgages, pledges, security interests
conditional sales agreements, liens, restrictions or encumbrances whatsoever.
Included in Exhibit C is a list of all outstanding equipment leases and
maintenance agreements to which the Company is a part as lessee and which
individually provide for future lease payments in excess of $100 per month,
with the identities of the other parties to all such leases and agreements
shown thereon. All leases of tangible personal property to which the Company
is a party and which are material to the business of the Company are fully
effective in accordance with their respective terms, and there exists no
material default on the part of the Company or termination thereof, except as
may be set forth on Exhibit C. Each item of capital equipment reflected in
the Balance Sheet whose original cost was in excess of $5,000 which is used
in the current conduct of the Company's business is, and on the date of the
Closing will be, in operating and useable condition and repair, ordinary wear
and tear expected, and is and will be suitable for use in the ordinary course
of the Company's business, except as may be set forth in Exhibit C.
4.12 Tax Matters. The Company has, since its inception, duly
filed all federal, state, county and local tax returns required to have been
filed by it in those jurisdictions where the nature or conduct of its
business requires such filing and where the failure to so file would be
materially adverse to the Company. Copies of all such tax returns have been
made available for inspection by Modtech prior to the execution hereof. All
federal, state, county and local taxes, including but not limited to those
taxes due with respect to the Company's properties, income gross receipts,
excise, occupation, franchise, permit, licenses, sales, payroll, and
inventory due and payable as of the date of the Closing by the Company have
been paid. The amount reflected in the Balance Sheet as liabilities or
reserves for taxes which are due but not yet payable is sufficient for the
payment of all accrued and unpaid taxes of the types referred to hereinabove.
No consent to the application of Section 341(f)(2) of the Internal Revenue
Code of 1986, as amended, has been filed with respect to the Company.
4.13 Accounts Receivable. The accounts receivable reflected in
the Balance Sheet constituted all accounts receivable of the Company as of
the date thereof, other than accounts receivable fully written off as
uncollectible as of such date in accordance with consistently applied prior
practice. All such accounts receivable arose from valid sales, were recorded
in the ordinary course of business, and are not subject to any set-off or
counter claim, except as disclosed in the Disclosure Schedule. Such accounts
receivable have been collected in full since the date of the Balance Sheet
or are collectible at their full respective amounts (net of allowance for
doubtful accounts established in accordance with consistently applied prior
practice). Based upon the prior experience of the Company, the "allowance
for doubtful accounts" shown on the Balance Sheet is sufficient to cover all
doubtful accounts. Subject to such allowance for doubtful accounts, the
accounts receivable of the Company existing as of the close of business on
the Closing Date will be fully collectable within one year from the Closing
Date.
4.14 Inventories. The Company has, and on the Closing will
continue to have, good and marketable title to all of its inventoried of raw
materials, work-in-process and finished goods, including models and samples,
free and clear of all security interests, liens, claims, and encumbrances,
except as set forth in the Disclosure Schedule. All such inventories consist
of items that are useable and saleable in the ordinary course of business of
the Company and represent quantities not in excess of one year's requirements
for its business as currently conducted.
4.15 Contracts and Commitments. The Company has no contract,
agreement, obligation or commitment, written or oral, expressed or implied,
which involves a commitment or liability in excess of $7,500 (other than
obligations which are included in accounts payable), and no union contracts,
employee or consulting contracts, financing agreements, debtor or creditor
arrangements, licenses, franchise, manufacturing, distributorship, or
dealership agreements, leases, or bonus, health or stock option plans, except
as described in Exhibit D. True and complete copies of all such contracts
and other arrangements listed on Exhibit D have been made available to
Modtech prior to the execution hereof. As of the date hereof, there exists
no circumstances which would affect the validity or enforceability of any of
such contracts and other agreements in accordance with their respective
terms. The Company has performed and complied in all material respects with
all obligations required to be performed by it to date under, and is not in
material default (without giving effect to any required notice or grace
period) under, or in material breach of, the terms, conditions or provisions
of any such contracts and other agreements. The validity and enforceability
of any contract or other agreement described herein has not been and shall
not in any material manner be affected by the execution and delivery of this
Agreement without any further action. The Company has no contract,
agreement, obligation, or commitment which requires or will require future
expenditures (including internal costs and overhead) in excess of reasonably
anticipated receipts, nor which is likely to be materially adverse to the
Company's business, assets, condition, (financial or otherwise) or
prospects.
4.16 Patents, Trade Secrets and Customer Lists. The Company
does not have any patents, applications for patents, trademarks, applications
for trademarks, trade names, licenses or service marks relating to the
business of the Company, except as set forth in Exhibit E hereto, nor does
any present or former shareholder, officer, director or employee of the
Company own any patent right relating to any products manufactured, rented or
sold by the Company. Except as disclosed on Exhibit E, the Company has the
unrestricted right to use, free and clear of any claims or rights of others,
all trade secrets, customer lists, and manufacturing and secret processes
reasonably necessary to the manufacture and marketing of all products made or
proposed to be made by the Company, and the continued use thereof by the
Company following the Closing will not conflict with, infringe upon, or
otherwise violate any rights of others. The Company has not used and is not
making use of any confidential information or trade secrets of any present
or past employee of the Company.
4.17 No Pending Material Litigation or Proceedings. Except as
disclosed in Exhibit F, there are no actions, suits or proceedings pending or
to Sellers knowledge threatened, against or affecting the Company (including
actions, suits or proceedings where liabilities may be adequately covered by
insurance) at law or in equity or before or by any federal, state, municipal
or other governmental department. commission, court, board, bureau, agency or
instrumentality, domestic or foreign, or affecting any of the shareholders,
officers or directors of the Company in connection with the business,
operations or affairs of the Company, which could reasonably be expected to
result in any material adverse change in the business, properties or assets,
or in the condition (financial or otherwise) or prospects of the Company, or
which question or challenge the sale of the Stock by Seller to Modtech.
Except as disclosed in Exhibit F, the Company has not, during the past three
years, been threatened with any action, suit, proceedings or claim (including
actions, suits, proceedings or claims where its liabilities may be adequately
covered by insurance) for personal injuries allegedly attributable to
products sold or services performed by the Company asserting a particular
defect or hazardous property in any of the Company s products, services or
business practices or methods, nor has the Company been a party to or
threatened with proceedings brought by or before any federal or state agency;
and the Company has no knowledge of any defect or hazardous property claimed
or actual in any such product, service or business practice or method. The
Company is not subject to any voluntary or involuntary proceeding under the
United States Bankruptcy Code and has not made an assignment for the benefit
of creditors.
4.18 Insurance. The Company maintains insurance with reputable
insurance companies on such of its equipment, tools, machinery, inventory and
properties as are usually insured by companies similarly situated and to the
extent customarily insured, and maintains liability to persons and property
as is customary for companies similarly situated. A true and complete
listing and general description of each of the Company s insurance policies
currently are, and at the Closing Date shall be, in full force and effect.
4.19 Arrangements with Personnel. Except as set forth in
Exhibit H attached hereto, no stockholder, director, officer or employee is
presently a party to any transaction with the Company, including without
limitation any contract, loan or other agreement or arrangement providing for
the furnishing of services by, the rental of real or personal property from
or to, or otherwise requiring loans or payments to, any such stockholder,
director or officer or to any member of the family of any of the foregoing,
or to any corporation, partnership, trust or other entity in which any
stockholder, director or officer or any member of the family of any of them
has a substantial interest or is an officer, director, trustee, partner or
employee. The Company has no knowledge of any employee who is party to any
of the above transactions with any member of his family. There is set forth
on Exhibit H a list showing (I) the name, title, date and amount of last
compensation increase, and aggregate compensation, including amounts paid or
accrued pursuant to any bonus, pension, profit sharing, commission, deferred
compensation or other plans or arrangements in effect as of the date of this
Agreement, of each officer, employee, agent or contractor of the Company
whose salary and other compensation, in the aggregate, received from the
Company or accrued is at an annual rate (or aggregated for the most recently
completed fiscal year) in excess of $25,000 as well as any employment
agreements relating to any such persons; (ii) all powers of attorney from the
Company to any person or entity; and (iii) the name of each person or entity
authorized to borrow money or incur or guarantee indebtedness on behalf of
the Company.
4.20 Labor Relations. The Company has no obligations under any
collective bargaining agreement or other contract with a labor union nor is
any union, labor organization or group of employees of the Company presently
seeking the right to enter into collective bargaining with the Company on
behalf of any of its employees, except as set forth on Exhibit I. The
Company has furnished Modtech with a copy of all written personnel policies,
including without limitation vacation, severance, bonus, pension, profit
sharing and commissions policies, applicable to any of the Company s
employees.
4.21 Bank Accounts. All bank and savings accounts, and other
accounts at similar financial institutions, of the Company existing at date
of Closing are listed on Exhibit J.
4.22 Absence of Questionable Payments. Neither the Company nor
any shareholder, director, officer, agent, employee, consultant or other
person associated with or acting on behalf of the Company, has (i) used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (b) made any direct or
indirect unlawful payments to governmental officials or others from corporate
funds, engaged in any payments or activity which would be deemed a violation
of the Foreign Corrupt Practices Act or rules or regulations promulgated
thereunder, or (c) established or maintained any unlawful or unrecorded
accounts.
4.23 Compliance with Laws. The Company holds all licenses,
franchises, permits and authorizations necessary for the lawful conduct of
its business as presently conducted, has complied with all applicable
statutes, laws, ordinances, rules and regulations of all governmental bodies,
agencies and subdivisions having, asserting or claiming jurisdiction over it,
with respect to any part of the conduct of its business and corporate
affairs, where the failure to so comply could reasonably be expected to have
consequences that could have a material adverse affect upon the Company s
condition (financial or otherwise), business, assets, properties or
prospects.
4.24 Environmental Matters. Neither the Company nor, to the
best of its knowledge after due investigation, any previous owner, tenant,
occupant, user or operator of any of the real property owned, leased or
otherwise occupied by the Company, used, generated, as defined below, on,
under, in or about the site of such real property, except as disclosed in the
Disclosure Schedule. All such real property complies in all material
respects with all applicable Federal, state and local laws, ordinances and
regulations pertaining to air and water quality, Hazardous Materials, waste,
disposal or other environmental matters, including the Clean Water Act, the
Clean Air Act, the Federal Water Pollution Control Act, the Solid Waste
Disposal Act, the Resource Conservation Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act, and the rules,
regulations and ordinances of the city and county in which such real property
is located, the California Department of Health Services, the Regional Water
Quality Control Board, the State Water Resource Control Board, the
Environmental Protection Agency and all other applicable Federal, state,
regional and local agencies and bureaus. The term "Hazardous Materials"
shall mean any substance, material or waste which is regulated by any local
government authority, the state of California, or the United States
Government, including, without limitations, any matter or substance which is
(a) defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste" or "restricted hazardous waste" under
any provision of California law, (b) petroleum, (c) asbestos, (d) designated
as a "hazardous substance" pursuant to section 311 of the Clean Water Act or
listed pursuant to Section 307 of the Clean Water Act, (e) defined as
"hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act.
4.25 Relationships with Customers and Suppliers. No present
customer or substantial supplier to the Company has indicated an intention to
terminate or materially and adversely alter its existing business
relationships therewith, the Company has no reason to believe that any of the
present customers of or substantial suppliers to the Company intends to do
so.
4.26 Brokerage. Except as set forth in the Disclosure Schedule,
neither the Company nor Seller has any obligation to any person or entity for
brokerage commissions, finder s fees or similar compensation in connection
with the transactions contemplated by this Agreement, and Seller shall
indemnify and hold Modtech harmless against any liability or expenses arising
out of such a claim asserted against either Modtech or the Company by any
party.
4.27 Disclosure. Neither this Agreement, nor any certificate,
exhibit, or other written document or statement, furnished to Modtech by or
on behalf of the Company or Seller in connection with the transactions
contemplated by this Agreement contained or contains any untrue statement of
a material fact or omitted or omits to state a material fact necessary to be
stated in order to make the statements contained herein or therein not
misleading. Neither the Company nor Seller has any knowledge of any fact
which has not been disclosed in writing to Modtech which may reasonably be
expected to materially and adversely affect the business, properties,
operations, and/or prospects of the Company or the ability of the Company to
perform all of the obligations to be performed by the Company under this
Agreement and/or any other agreement between Modtech and the Company to be
entered into pursuant to any provision of this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF MODTECH.
Modtech represent and warrants to Seller as follows (it being
acknowledged and agreed that Seller is entering into this Agreement in
material reliance upon each of the following representations and warranties,
and that the truth and accuracy of each of which constitutes a condition
precedent to the obligations of Seller hereunder):
5.1 Organization and Authorization. Modtech is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California, with full power, corporate or otherwise, legal capacity
and authority to enter into and perform its obligations under this Agreement,
and to execute and deliver all attendant documents and instruments and to
consummate the transactions herein contemplated, including all attendant
acts. The execution and delivery of this Agreement, and the consummation by
Modtech of the transactions contemplated hereby, have been duly and validly
authorized by the Board of Directors of Modtech, which authorization remains
in full force and effect, and no other corporate proceedings on the part of
Modtech are necessary to authorize this Agreement and the transactions
contemplated thereby and hereby. This Agreement constitutes the legal, valid
and binding act of Modtech and is enforceable with respect to Modtech in
accordance with its terms, except as enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, priority, or other laws relating to
or affecting generally the enforcement of creditors rights or by laws
affecting generally the availability of equitable remedies. Neither the
execution and delivery by Modtech nor the consummation by Modtech of the
transactions contemplated by this Agreement, nor compliance by Modtech with
any of the provisions thereof or hereof, will (i) conflict with or result in
a breach or violation of, or default under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation (including, without limitation, its Articles
of Incorporation and Bylaws) to which Modtech is a party or by which it is
bound, or (ii) violate any judgement, order, injunction, decree, statute,
ruler or regulation applicable to Modtech or any of its properties or assets.
5.2 Consents. No governmental consents, approvals or
authorizations, and no consents or approvals by any third party, are required
to be obtained by Modtech, and no registration or declarations are required
to be filed by Modtech, in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
5.3 No Pending Material Litigation or Proceedings. There are no
actions, suits or proceedings pending or, to the best of Modtech s knowledge
threatened, against or affecting Modtech (including actions, suits or
proceedings where liabilities may be adequately covered by insurance) at law
or in equity or before or by any federal, state, municipal or other
governmental department, commission, court, board, bureau, agency or
instrumentality, domestic or foreign, which might prevent the purchase of the
Stock by Modtech from the Company pursuant to this Agreement or the
performance by Modtech of any of the obligations to be performed by Modtech
hereunder.
5.4 Brokerage. Modtech has no obligations to any person or
entity for brokerage commissions, finder s fees or similar compensation on
connection with the transactions contemplated by this Agreement, and shall
indemnify and hold Seller harmless against any liability or expenses arising
out of such a claim asserted against Seller or the Company by any party.
5.5 Purchase for Investment. Modtech is acquiring, and at the
Closing shall acquire, the Stock for investment only, and not for
distribution within the meaning of the Federal securities laws, and no one
else has, or at the time of the Closing will have, any beneficial ownership
or interest in the Stock to be purchased pursuant hereto, nor is the Stock to
be subject to any lien or pledge. Modtech acknowledges and agrees that no
further transfer of the Stock shall be made except in compliance with
applicable Federal and state securities laws. Modtech, through its principle
shareholders, has the knowledge and experience in business and financial
matters to meaningfully evaluate the merits and risks of the purchase of the
Stock contemplated hereby and has determined that it is both willing and able
to undertake the economic risk of this purchase. Modtech understands and
acknowledges that the Stock is being offered and sold by Seller pursuant to
one or more exemptions from the registration requirements of the Securities
Act of 1933, as amended, and from the qualification requirements of the
California Corporate Securities Law of 1968, the availability of which
depends upon the bona fide nature of the foregoing representations and
warranties, and agrees to indemnify and hold Seller, and its officers,
employees and agents, harmless from and against any and all damages suffered
and liabilities incurred by any of them (including costs of investigation and
defense and attorneys fees) arising out of any inaccuracy in such
representations and warranties.
5.8 Solvency. Modtech s acquisition of the Stock and payment of
the purchase will not render Modtech insolvent or unable to pay its debts as
they become due.
5.9 Disclosure. Neither the Agreements nor any certificate,
exhibit or other written document or statement furnished to Seller by or on
behalf of Modtech in connection with the transactions contemplated in this
Agreement, contained or contains an untrue statement of material fact.
COVENANTS OF THE PARTIES PRIOR TO THE CLOSING
Seller and Modtech hereby covenant to and agree with the other that
between the date hereof and the Closing:
6.1 Access to Properties and Records.
(a) Seller shall cause the Company to give to Modtech and
its authorized representatives full access, during reasonable business hours,
in such a manner as not unduly to disrupt normal business activities, to any
and all of the Company s premises, properties, contracts, books, records and
affairs, and shall cause the Company to cause its officers to furnish any and
all data and information pertaining to its business that Modtech may from
time to time reasonably require.
(b) Unless and until the transactions contemplated by this
Agreement have been consummated, Modtech and its representatives shall hold
in confidence all information so obtained and if the transactions
contemplated hereby are not consummated will return all documents hereinabove
referred to and obtained therefrom. Such obligation of confidentiality shall
not extend to any information which is shown to have been previously (i)
known to Modtech, (ii) generally known to others engaged in the trade or
business of the Company, (iii) part of public knowledge or literature, or
(iv) lawfully received by the Modtech from a third party.
6.2 Corporate Existence, Rights and Franchises. Seller shall
take all necessary actions to cause the Company to maintain in full force and
effect its corporate existence, rights, franchises and good standing. No
change shall be made in the Articles or Bylaws of the Company.
6.3 Insurance. Seller shall take all reasonable actions to
cause the Company to maintain in force all of its existing insurance
policies, subject only to variations in amounts required by the ordinary
operation of the Company s business.
6.4 Conduct of Business in the Ordinary Course. Seller shall
not permit to be done any act which would result in the breach of any of the
covenants of the Company contained herein or which would cause the
representations and warranties of the Company contained herein to become
untrue or inaccurate as of any date subsequent to the date hereof. Without
limiting the generality of the foregoing, Seller shall take all necessary
actions to cause the Company to (i) operate its business as it has in the
recent past in the ordinary course of business as an ongoing concern, and
will use its best efforts to preserve intact the Company s organization and
operations at current levels and to make available to Modtech the services of
the Company s present employees and having to preserve for Modtech the
Company s relationships with its suppliers and customers and others having
business relationships with the Company; (ii) maintain in operating
condition, ordinary wear and tear excepted, all of the Company s assets and
properties which are in such condition as of the date hereof; (iii) maintain
the books, accounts and records of the Company in the usual, regular and
ordinary manner, on a basis consistent with past practice in recent periods;
(iv) refrain from entering into any contract, agreement, sales order, lease,
capital expenditure or other commitment of a value in excess of $50,000
(other than purchases of raw materials and sales of inventory in the ordinary
course of business), or from modifying, amending, canceling or terminating
any of such contracts, agreements, lease or other commitments presently in
force, except as expressly contemplated by this Agreement, without the prior
approval of Modtech (which approval shall not be unreasonably withheld and
which may be verbal to be followed by written confirmation); (v) refrain from
paying any bonus to any employee, officer or director, other than pursuant to
an existing written contract or agreement , and from declaring or paying any
dividend, or making any other distribution in respect of, or from redeeming,
the Stock; and (vi) refrain from issuing any capital stock or other
securities convertible into capital stock.
6.5 Risk of Loss. In the event that all or a material part of
the assets or properties of the Company are destroyed or substantially
damaged prior to Closing, or are taken by eminent domain by any governmental
entity, Modtech shall be entitled to elect within five (5) days of notice
thereof to terminate this Agreement, in which case all parties hereto shall
pay their own expenses. In the event that Modtech elects not to terminate
this Agreement as provided immediately above, Modtech shall have a period of
fifteen (15) days within which to obtain the agreement of Seller as to an
appropriate adjustment to the aggregate Purchase Price for the Stock, at the
end of which period this Agreement shall terminate if such further agreement
has not been reached, and all parties shall pay their own expenses.
6.6 Consents. Each of the parties shall use its best efforts to
obtain any and all necessary permits, approvals, qualifications, consents or
authorizations from third parties and governmental authorities which are
required to be obtained prior to the Closing, and shall use its best efforts
to make or complete all filings, proceedings and waiting periods required to
be made or completed prior to the Closing.
6.7 Release of Security Interests in Assets. Seller shall cause
the Company to use its best efforts to obtain consents, in form and substance
reasonably satisfactory to Modtech, from lienholder and those holding
security interests in any of the properties or assets of the Company to all
of the transactions contemplated by this Agreement, without acceleration of
any indebtedness secured by such deeds of trusts, mortgages, liens and
security interests.
6.8 No Equitable Conversion. Prior to the Closing, neither the
execution of this Agreement nor the performance of any provision contained
herein shall cause either Modtech, on the one hand, or the Company or Seller,
on the other hand, to be or become liable for or in respect of the operations
or business of the other, for the cost of any labor or materials furnished
to or purchased by the other, for compliance with any laws, requirements or
regulations of, or taxes, assessments or other expenses whatsoever pertaining
to the conduct of the business or the ownership, title, possession, use or
occupancy of the property of the other, and each hereby agrees to indemnify
and hold the other harmless from any such liability.
7. CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
The respective obligations of the parties hereto to consummate the
transactions contemplated hereby shall be subject to the fulfillment, at or
prior to the Closing, of the following conditions:
7.1 Regulatory Approvals. There shall have been obtained any
and all permits, approvals and qualifications of, and there shall have been
made or completed all filings, proceedings and waiting periods, required by
any governmental body, agency or regulatory authority which, in the
reasonable opinion of counsel to Modtech, are required for the consummation
of the transactions contemplated hereby.
7.2 No Action or Proceeding. No claim, action, suit,
investigation or other proceeding shall be pending or threatened before any
court or governmental agency which presents a substantial risk of the
restraint or prohibition of the transactions contemplated by this Agreement
or the obtaining of material damages or other relief in connection therewith.
7.3 Obligations of Modtech. The obligation of Modtech hereunder
to consummate the transactions contemplated by this Agreement are expressly
subject to the satisfaction of each of the further conditions set forth
below, any or all of which may be waived by Modtech in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by Modtech of any other condition or of any of its
rights or remedies, at law or inequity, if Seller shall be in default or
breach of any other of the representations, warranties or covenants of Seller
under this Agreement:
(a) Seller shall have performed the agreements and covenants
required to be performed by Seller under this Agreement prior to the Closing,
there shall have been no material adverse change in the condition (financial
or otherwise), assets, liabilities, earnings, business or prospects of the
Company since the date hereof, and the representations and warranties of
Seller contained herein shall, except as contemplated or permitted by this
Agreement or as qualified in a writing dated as of the date of the Closing
delivered by Seller to Modtech with the approval of Modtech indicated thereon
(which writing is to be attached hereto as Exhibit K, be true in all material
respects on and as of the Closing Date as if made on and as of such date, and
Modtech shall have received certificates, dated as of the Closing Date,
signed by the chief executive and financial officers of Seller, reasonably
satisfactory to Modtech and its counsel, to such effect.
(b) Modtech shall have been provided with written releases
of Modtech, in form and substance reasonably satisfactory to Modtech, from
each person, if any, who may be entitled to receive a finders fee or other
commission from Seller or the Company as a consequence of the transactions
contemplated hereby.
(c) Seller shall have executed and delivered to the Company
and Modtech, effective as of the Closing Date, the Non-Competition Agreement
in the form of Exhibit L attached hereto.
(d) Each of the current officers and directors of the
Company shall have resigned all of their respective offices of the Company,
effective as of the Closing.
(e) Modtech shall have been provided a favorable opinion of
counsel to Seller, reasonably acceptable to Modtech and its counsel in form
and substance, with respect to each of the matters set forth in subsections
4.1 through 4.5, and 4.17, of this Agreement.
7.4 Obligations of Seller. The obligations of Seller hereunder
to consummate the transactions contemplated by this Agreement are expressly
subject to the satisfaction of each of the further conditions set forth
below, any or all of which may be waived, in whole or in part, by Seller
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by Seller of any other condition or of any of their
rights or remedies, at law or in equity, if Modtech shall be in default or
breach of any other of its representations, warranties or covenants under
this Agreement:
(a) Modtech shall have performed the agreements and
covenants required to be performed by Modtech under this Agreement prior to
the Closing, and the representations and warranties of Modtech contained
herein shall, except as contemplated or permitted by this Agreement or as
qualified in a writing dated as of the date of the Closing delivered by the
Modtech to Seller with the approval of Seller indicated thereon (which
writing is to be attached hereto as Exhibit N), be true in all material
respects on and as of the date of Closing as if made on and as of such date,
and Modtech shall have provided Seller with a certificate, dated as of the
date of Closing, signed by the chief executive and financial officers of
Modtech, reasonably satisfactory to Seller and its counsel, to such effect.
(b) Modtech shall have provided Seller with certified copies
of resolutions (certified as of the Closing Date as being in full force and
effect by the President of Modtech) duly adopted by the Board of Directors of
Modtech authorizing the making and performance by Modtech of this Agreement.
(c) Seller shall have been provided a favorable opinion of
counsel to Modtech, reasonably acceptable to Seller and its counsels in form
and substance, with respect to each of the matters in subsection 5.1 through
5.3 hereof.
8. ADDITIONAL AGREEMENTS OF THE PARTIES
8.1 Taxes and Expenses.
(a) Except as otherwise expressly provided in (b)
immediately below, each of Seller and Modtech shall pay all of its own
respective taxes, attorneys fees and other costs and expenses payable in
connection with or as a result of the transactions contemplated hereby and
the performance and compliance with all agreements and conditions contained
in this Agreement respectively to be performed or observed by each of them.
(b) Seller shall pay all income taxes charged to Seller or
based on Seller s income which become due on account of the sale and transfer
of the Stock to Modtech, reserving the right to contest any assessment of
taxes as a consequence of the sale and transfer of the Stock to Modtech.
8.2 Expiration of Representations and Warranties.
(a) The representations and warranties of Seller contained
herein and in any other document or instrument delivered by or on behalf of
Seller and/or the Company pursuant hereto, as such may be qualified in
Exhibit K hereto, shall survive the Closing and any investigations made by or
on behalf of Modtech made prior to the Closing, and shall remain in full
force and effect for a period of thirteen (13) full months from the date of
the Closing the ("Warranty Period"), and thereupon expire.
(b) Nothing contained in Section 8.2(a) shall in any way
affect any obligations of any party under this Agreement that are to be
performed, in whole or in part, after the Closing, nor shall it prevent or
preclude either party from pursuing any and all available remedies at law or
in equity for actual fraud in the event that, prior to the Closing, Seller
had actual knowledge of any material breach of any of the respective
representations and warranties of Seller herein but failed to disclose to or
actively concealed such knowledge from Modtech prior to the Closing.
8.3 Indemnification.
(a) Seller hereby agrees to indemnify and hold Modtech
harmless with respect to any and all claims, losses, damages, obligations,
liabilities and expenses, including without limitation reasonable legal and
other costs and expenses of investigating and defending any actions or
threatened actions, which Modtech may incur or suffer during the Warranty
Period following the Closing by reason of any breach of any of the
representations and warranties of Seller contained herein, provided that
Modtech complies with the following indemnification procedure:
(i) Modtech shall give written notice to Seller of its
claim for indemnification prior to the expiration of the Warranty Period,
which notice shall set forth the amount involved in the claim for
indemnification and contain a reasonably thorough description of the facts
constituting the basis of such claim;
(ii) Seller shall have a period of thirty (30) days
from the receipt of the notice referred to above to respond to the indemnity
claim to the mutual satisfaction of Modtech and Seller. During such 30-day
period, Modtech and Seller shall use their respective best efforts to attempt
in good faith to agree upon a mutually acceptable resolution as to their
respective rights with respect to any such claim for indemnification, in
which case the parties shall promptly prepare and sign a memorandum setting
forth such agreement;
(iii) In the event that no agreement is reached during
the 30-day period specified in subsection 8.3(ii) above, then Modtech shall
thereupon have the right to offset and deduct the amount of such claim from
any amounts remaining to be payable by Modtech to Seller under this Agreement
or otherwise, without taking any further actions.
(iv) If a third party claim is asserted which might
result in a claim for indemnification hereunder, Modtech shall, with
reasonable promptness, provide Seller with notice of any such claim, make
available to Seller all information within the knowledge or control of
Modtech which reasonably might be deemed relevant and material to the defense
of any such claim, and otherwise cooperate with Seller in the defense of the
claim. Modtech shall not settle or compromise any such claim without the
prior written consent of Seller unless suite shall have been instituted
against Modtech and Seller shall have failed, after reasonable notice of
institution of the suit, to take control of such suit as provided below. If
Seller admits in writing that Seller will be liable to Modtech with respect
to the full amount and as to all material elements of a third party claim
alleging damages, up to the maximum amount for which Seller may be liable
under this Section 8.3, should the third party prevail in such suit, then
Seller shall have the right to assume full control of the defense of such
claim, and Modtech shall be entitled to participate in the defense of such
claim only with the consent of Seller. As to any third party claim alleging
damages in excess of the maximum amount for which Seller may be liable under
this Section 8.3, Modtech shall have and retain the right to control the
defense of such claim, and Seller shall be entitled to participate in the
defense of such claim only with the consent of Modtech.
(v) Not withstanding anything to the contrary in this
Section 8.3, Seller shall not be obligated to indemnify Modtech unless and
until the aggregate amount subject indemnity exceeds $35,000, and then only
to the extend of such excess (provided the amount attributable to accounts
receivable after taking into account the allowance for bad debts) cannot
exceed $10,000 of such $35,000.
(vi) In the event that Seller asserts that Modtech has
improperly offset or deducted an amount of money pursuant to any provision of
this Section 8.3, Seller may pursue any available legal remedies against
Modtech and, in the event that Seller shall obtain a final judgment of a
court of competent jurisdiction to the effect that any indemnification
invoked by Modtech was improper, then Modtech shall pay to Seller to full
amount of any moneys improperly offset and deducted, together with interest
thereon at the highest rate permitted by applicable law from the date of the
exercise of the offset and deduction until the date of such payment, together
with reasonable attorneys fees as provided in Section 9.7 hereof.
(b) Modtech shall use reasonable efforts (including
commencing litigation if Modtech, in its sole discretion, deems such
litigation appropriate) to collect the accounts receivable of the Company
existing as of the date of the Closing during the one-year period following
the date of the Closing (the "Collection Period"). At the expiration of the
Closing Period, Modtech shall deliver to Seller a schedule of all such
accounts receivable (the "A/R Schedule") which have not been collected as of
the end of the Collection Period, together with written notice of its claim
for indemnification under this Section 8.3. Within five business thereafter,
Seller shall pay to Modtech the full uncollected amount of such accounts
receivable less allowance for bad debts plus $10,000. All accounts
receivable listed on the A/R Schedule shall be assigned to and become the
property of Seller upon the payment to Modtech by Seller as provided
hereunder, and Seller may thereafter proceed to attempt to collect such
accounts receivable in such manner as Seller, in its sole discretion, deems
appropriate (which may include litigation).
(c) Except as otherwise expressly provided below in this
subsection 8.3(c), the maximum aggregate liability of Seller to Modtech as a
consequence of any one or more breach or breaches of one or more of the
representations and warranties of Seller contained herein shall be limited to
the aggregate amount paid and payable to Seller as the aggregate Purchase
Price for the Stock. In the case of actual fraud, Modtech may, in addition
to the foregoing right of indemnification, pursue any and all legal and
equitable remedies it may have against Seller.
9. MISCELLANEOUS
9.1 Other Documents. Each of the parties hereto shall execute
and deliver such other and further documents and instruments, and take such
other and further actions, as may be reasonably requested of them for the
implementation and consummation of this Agreement and the transactions herein
contemplated.
9.2 Parties in Interest. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, the heirs, personal
representatives, successors and assigns of each of Seller and of Modtech,
but shall not confer, expressly or by implication, any rights or remedies
upon any other party.
9.3 Governing Law. This Agreement is made and shall be governed
in all respects, including validity, interpretation and effect, by the laws
of the State of California.
9.4 Notices. All notices, requests or demands and other
communications hereunder must be in writing and shall be deemed to have been
duly made if personally delivered or mailed, postage prepaid, to the parties
as follows:
(a) If to Seller, to: Edward C. Craig, President
Miller Structures, Inc.
P.O. Box 1283
Elkhart, IN 45615
With copies to: Jeffrey C. Rubenstein
Much Shelist Freed Denenberg Ament
Bell & Rubenstein
200 N. LaSalle Street
Chicago, IL 60601
(b) If to Modtech, to: Evan M. Gruber, President
Modtech, Inc.
2830 Barrett Avenue
Perris, CA 92370
With copies to: James M. Phillips, Jr., Esq.
4695 MacArthur Court, Suite 840
Newport Beach, CA 92660
Any party hereto may change its address by written notice to the other party
given in accordance with this Section 9.4.
9.5 Entire Agreement. This Agreement, together with the
exhibits attached hereto, contains the entire agreement between the parties
and supersede all prior agreements, understandings and writings between the
parties with respect to the subject matter hereof and thereof, including
without limitation the Agreement in Principle. Each party hereto
acknowledges that no representations, inducements, promises or agreements,
oral or otherwise, have been made by any party, or anyone acting with
authority on behalf of any party, which are not embodied herein or in an
exhibit hereto, and that no other agreement, statement or promise may be
relied upon or shall be valid or binding. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated orally. This
Agreement may be amended or any term hereof may be changed, waived,
discharged or terminated by an agreement in writing signed by both Seller and
Modtech.
9.6 Headings. The captions and headings used herein are for
convenience only and shall not be construed as a part of this Agreement.
9.7 Attorneys Fees. In the event of any litigation between
Seller and Modtech, the non-prevailing party shall pay the reasonable
expenses, including the attorneys fees, of the prevailing party in
connection therewith.
9.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
taken together shall constitute but one and the same document.
9.9 Publicity. Modtech and Seller agree to cause their
respective officers, employees and agents, not to issue any press release or
otherwise make any public statement with respect to the transactions
contemplated hereby without the consent of the other party (which consent
shall not be unreasonably withheld); provided, however, that notwithstanding
the foregoing, a party hereto shall be permitted to make such disclosure to
the public or governmental agencies as is deemed necessary to prevent
violation of applicable federal and state laws.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
"Modtech" "Seller"
MODTECH, INC., MILLER STRUCTURES, INC.,
a California corporation an Indiana corporation
By:/Evan M. Gruber By:\Edward C. Craig
Evan M. Gruber Edward C. Craig
Title: President Title: President
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (the "Agreement") is made and
entered into effective as of October 1, 1996, by and between MILLER
STRUCTURES, INC., an Indiana corporation ("Shareholder"), which owns,
beneficially and of record, all the issued and outstanding capital stock (the
"Stock") of Miller Structures, Inc., a California corporation (the
"Company"), and MODTECH, INC., a California corporation ("Buyer"), which this
day is purchasing the stock from Shareholder for the purpose of continuing to
engage in the conduct of the Company's business and operations from and after
the date hereof.
RECITALS
WHEREAS, Shareholder and Buyer have entered into that certain Agreement
for Purchase and Sale of All of the Outstanding Capital Stock of Miller
Structures, Inc. dated as of September 30, 1996 (the "Purchase Agreement"),
which provides, among other things, for the purchase by Buyer from
Shareholder of the Stock;
WHEREAS, the execution and delivery of this Agreement by Shareholder is
a condition precedent to the obligation of Buyer to consummate the
transactions contemplated by the Purchase Agreement;
WHEREAS, Shareholder will receive substantial consideration as a
consequence of the sale of the Stock to Buyer; and
WHEREAS, Shareholder, as the sole shareholder of the Company, possesses
confidential and proprietary information regarding the business and customers
of the Company;
NOW, THEREFORE, in consideration of the foregoing premises and the
consummation of the transactions contemplated by the Purchase Agreement, and
in furtherance thereof, and the mutual agreements of the parties contained
herein, the parties hereto agree as follows:
1. (a) Shareholder hereby agrees that Shareholder will not, at any
time within a five (5) year period (the "Effective Period") commencing
immediately following the Closing, directly or indirectly engage in, or have
any interest in any person, firm, corporation or business (whether as an
employee, officer, director, agent, security holder, creditor, consultant,
contractor or otherwise) that manufactures the products presently
manufactured by the Company ("Present Products"), market the Present Products
directly in the States of California, Nevada, or Arizona solicit for the sale
of Present Products in California, Nevada and Arizona or in any county or
counties in any of the states of California, Nevada and Arizona, for either
the above-mentioned five-year period or for so long as the Company or any of
its successors shall engage in any of such activities in any such area
(whichever period is the lesser), it being expressly understood and agreed
that Buyer is purchasing the Stock for the purpose of causing the Company to
continue to engage in such activities within such areas. Notwithstanding
anything to the contrary hereinabove, nothing contained herein shall prevent
Shareholder from engaging in the manufacture, marketing and sale or leasing
of telecommunications structures, nor from owning less than one percent (1%)
of the capital stock of a corporation the common stock of which is publicly
traded on a national securities exchange or through NASDAQ.
(b) The parties intend that the covenant contained in
subparagraph 1(a) shall be construed as a series of separate covenants, one
for each area (whether a country, state, county or other political
subdivisions) referred to, and one for each one year period. Except for
geographic coverage, each such separate covenant shall be deemed identical in
terms to the covenant contained in subparagraph 1(a). If in any judicial
proceeding a court shall refuse to enforce any of the separate covenants
deemed included in subparagraph 1(a), then such unenforceable covenant shall
be deemed eliminated from this Agreement to the extent necessary to permit
the remaining separate to be enforced.
2. Shareholder further agrees (a) to hold in strictest confidence and
not to divulge, communicate, use to the detriment of the Company or any of
its successors or for the benefit of any other person or person, or misuse in
any way, any confidential information or trade secrets of the Company,
including without limitation, personnel information, trade secrets, secret
processes, know-how, customer lists, marketing strategies or other technical
data. Buyer acknowledges that Shareholder will continue to utilize all of
the above confidential information and trade secrets in its business, but in
no case in violation of covenants set forth herein. Shareholder agrees that
during the Effective Period Shareholder will not initiate any offer of
employment to, or in any other manner solicit the services of, directly or
indirectly, any person who is an employee or service provider of the Company
as of the date hereof. In addition, Shareholder agrees that Shareholder will
not at any time within the Effective Time Period: (i) disrupt, damage,
impair or interfere with the business of the Company whether by way of
interference with or raiding its employees, disrupting its relationships with
customers, agents, representatives or vendors or otherwise (except Modtech
acknowledges that Shareholder will continue to manufacture in other states
for such customers, agents, representatives or vendors or otherwise); or (ii)
undertake planning for or organization of any such manufacturing activity in
California, Nevada or Arizona competitive with the Company's business, or
conspire with employees or representatives of the Company for the purpose of
organizing any such competitive manufacturing activity in California, Nevada
or Arizona.
3. This Agreement shall be binding upon and insure to the benefit
of the parties hereto, and the successors, heirs, personal representatives
and assigns of either.
4. The parties acknowledge and agree that the obligations of
Shareholder under this Agreement are of a unique character that gives them a
peculiar value, and therefore the extent of damages to the Company or Buyer,
or any successor of either of them, in the event of a breach by the
Shareholder of any of the covenants contained in this Agreement may be
impossible to ascertain and that there is and will be available to the
Company or Buyer, or any successor of either of them, no adequate remedy at
law to compensate it in the event of any such breach. Consequently,
Shareholder agrees that in the event of a breach of any of such covenants, in
addition to any other relief to which the Company or Buyer, or any successor
of either of them, may be entitled, and not in lieu of any other rights and
remedies available, it shall be entitled to seek to enforce any or all of
such covenants by injunctive or other equitable relief ordered by any court
of competent jurisdiction.
5. This Agreement is entered into, and shall be governed in all
respects, including validity, interpretation and effect, under the laws of
the State of California.
6. Any notice, request, demand or other communication required or
permitted hereunder shall be deemed to be properly given when personally
served in writing, or when communicated by a confirmed facsimile, addressed
to the Company, to Buyer, or to Shareholder at their respective last known
address, with a copy to each party's counsel. Any party may change its
address by written notice given in accordance with this subparagraph.
7. This Agreement may be executed in one or more counterparts ,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
8. The parties acknowledge and agree that each provision herein
shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability
of any of the other clauses herein. Moreover, if one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to scope, activity or subject so as to be unenforceable
at law, such provision or provisions shall be construed by the appropriate
judicial body by limiting and reducing it or them, so as to be enforceable to
the maximum extent compatible with the applicable law as it shall then
appear.
9. This Agreement contains the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior
understanding, whether oral or written. This Agreement may not be changed
orally, but only by an agreement in writing, signed by parties against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
10. In the event of any litigation between the parties hereto, the
non-prevailing party shall pay the "reasonable expenses", including without
limitation attorneys' fees, of the prevailing party in connection therewith.
The reasonable expenses of the prevailing party shall be determined by
multiplying the reasonable expenses by a fraction, the denominator being the
total number of allegations made by the party and the numerator being the
number of allegations made by the party which are sustained by the court.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and delivered as of the date first above written.
"Buyer" "Shareholder"
MODTECH, INC., MILLER STRUCTURES, INC.,
a California corporation an Indiana corporation
By:\Evan M. Gruber By:\Edward C. Craig
Title: CEO/President Title: President/CEO
