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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 29, 2000
-----------------
Clarion Technologies, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-24690 91-1407411
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
235 Central Avenue, Holland, Michigan 49423
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (616) 494-8885
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1901 N. Roselle Road, Suite 340, Schaumburg, Illinois 60195
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(Former name or former address, if changed since last report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective February 29, 2000, the Registrant, by and through its wholly
owned subsidiary, Clarion-Drake Acquisition, Inc., a Michigan corporation,
completed an acquisition of the assets of Drake Products Corporation ("Drake"),
a full-service, ISO 9001 and QS9000 certified, plastic injection molding firm
based in Greenville, Michigan. Consideration for the acquisition was determined
through negotiation of the parties and included 2,000,000 shares of the
Registrant's common stock, approximately $27.3 million in cash, subordinated
promissory notes in the aggregate principal amount of approximately $6 million
and the assumption of approximately $6.5 million of liabilities. The cash
portion of the purchase price was financed through a new $53 million senior
secured credit facility provided by LaSalle Bank National Association and Bank
One Michigan.
Drake, founded in 1970 by Steven Drake Sr., posted sales in excess of
$50 million for 1999. Approximately two-thirds of Drake's sales are to the home
appliance industry, with the remaining sales distributed between automotive,
furniture and other consumer products. In addition to injection molding, Drake
provides secondary decorating and assembly operations.
The Registrant intends to keep the Drake operations intact. Drake
employs 325 persons and operates from two facilities in Greenville and one
facility in Anderson, South Carolina. The combined locations have 330,000 square
feet and include 65 molding machines ranging from 90 to 3,000 tons of clamping
force. Jeffrey Anonick and Michael Miller, Drake's principal officers and
shareholders, have joined the Registrant's management team.
The Drake transaction is a continuation of the Registrant's strategic
plan to grow through acquisition. As a full-service supplier to the automotive,
heavy truck, furniture and consumer goods industries, the Registrant provides
capabilities ranging from product ideation, engineering and tooling, to
manufacturing and assembly of a final product. The Registrant now operates from
6 manufacturing facilities and a technical design center with a total of
approximately 700,000 square feet located in Michigan, Ohio and South Carolina.
The Registrant's manufacturing operations include 150 injection molding machines
ranging in size from 50 to 5000 tons of clamping force.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 5. OTHER EVENTS.
Not applicable.
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ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
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The financial statements required by Item 310(c) of Regulation
S-B in connection with the Drake acquisition will be provided by an amendment to
this report filed within 60 days of the date hereof.
(b) Pro forma financial information.
-------------------------------
The pro forma financial information required by Item 310(d) of
Regulation S-B with regard to the Drake acquisition will be provided by an
amendment to this report filed within 60 days of the date hereof.
(c) Exhibits.
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2.1 Asset Purchase Agreement dated as of January 27, 2000 by
and among Clarion Technologies, Inc., a Delaware corporation, Clarion-Drake
Acquisition, Inc., a Michigan corporation, Drake Products Corporation, a
Michigan corporation ("Drake"), and Jeffrey W. Anonick and Michael C. Miller,
shareholders of Drake.
2.2 First Amendment to Asset Purchase Agreement dated as of
February 28, 2000 by and among Clarion Technologies, Inc., a Delaware
corporation, Clarion-Drake Acquisition, Inc., a Michigan corporation, Drake
Products Corporation, a Michigan corporation ("Drake"), and Jeffrey w. Anonick
and Michael C. Miller, shareholders of Drake.
ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
Not applicable.
SIGNATURE
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.
Clarion Technologies, Inc.
(Registrant)
Date: March 15, 2000 By: /s/ David W. Selvius
--------------------
David W. Selvius, Chief Financial Officer
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ASSET PURCHASE AGREEMENT
Dated as of January 27, 2000
By and Among
Clarion Technologies, Inc.
Clarion-Drake Acquisition, Inc.
and
Drake Products Corporation
Jeffrey W. Anonick,
and
Michael C. Miller
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TABLE OF CONTENTS
PAGE
----
1. PURCHASE OF ASSETS....................................................1
1.1. ASSETS TO BE PURCHASED................................................1
1.2. LIABILITIES ASSUMED...................................................3
1.3. PURCHASE PRICE........................................................4
1.4. CLOSING...............................................................6
1.5. INSTRUMENTS OF TRANSFER TO PURCHASER AT THE CLOSING...................7
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................8
2.1. DISCLOSURE SCHEDULE...................................................8
2.2. CORPORATE ORGANIZATION................................................8
2.3. AUTHORIZATION.........................................................8
2.4. NON-CONTRAVENTION.....................................................9
2.5. CONSENTS AND APPROVALS................................................9
2.6. FINANCIAL STATEMENTS.................................................10
2.7. ABSENCE OF UNDISCLOSED LIABILITIES...................................10
2.8. ABSENCE OF CERTAIN CHANGES...........................................10
2.9. REAL PROPERTIES......................................................12
2.10. MACHINERY, EQUIPMENT, VEHICLES AND PERSONAL PROPERTY.................13
2.11. INVENTORIES..........................................................13
2.12. RECEIVABLES AND PAYABLES.............................................13
2.13. INTELLECTUAL PROPERTY RIGHTS.........................................14
2.14. LITIGATION...........................................................14
2.15. TAX MATTERS..........................................................14
2.16. INSURANCE............................................................16
2.17. BENEFIT PLANS........................................................16
2.18. BANK ACCOUNTS........................................................20
2.19. CONTRACTS AND COMMITMENTS; NO DEFAULT................................20
2.20. ORDERS, COMMITMENTS AND RETURNS......................................21
2.21. LABOR MATTERS........................................................21
2.22. DEALERS AND SUPPLIERS................................................22
2.23. PERMITS AND OTHER OPERATING RIGHTS...................................22
2.24. COMPLIANCE WITH LAW..................................................22
2.25. ASSETS OF BUSINESS...................................................23
2.26. ENVIRONMENTAL AND SAFETY MATTERS.....................................23
2.27. TRANSACTIONS WITH CERTAIN PERSONS....................................25
2.28. BROKERS..............................................................25
2.29. CUSTOMERS............................................................25
2.30. ABSENCE OF CERTAIN BUSINESS PRACTICES................................25
2.31. SECURITY MATTERS.....................................................26
2.32. DISCLOSURE...........................................................27
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3. REPRESENTATIONS AND WARRANTIES OF CLARION AND THE PURCHASER.............28
3.1. CORPORATE ORGANIZATION...............................................28
3.2. AUTHORIZATION........................................................28
3.3. NON-CONTRAVENTION....................................................28
3.4. CONSENTS AND APPROVALS...............................................29
3.5. BROKERS..............................................................29
3.6. LEGAL PROCEEDINGS....................................................29
3.7. CAPITALIZATION.......................................................29
3.8. SUBSIDIARIES.........................................................30
3.9. INSURANCE............................................................30
3.10. PATENTS AND TRADEMARKS...............................................30
3.11. COMPLIANCE WITH OTHER INSTRUMENTS AND LEGAL REQUIREMENTS.............30
3.12. MATERIAL AGREEMENTS..................................................31
3.13. REGISTRATION RIGHTS..................................................31
3.14 PURCHASER SEC REPORTS AND FINANCIAL STATEMENTS.......................31
3.15. CHANGES..............................................................32
3.16. TAXES................................................................33
3.17. DISCLOSURE...........................................................33
4. COVENANTS...............................................................34
4.1. COMPANY'S AGREEMENTS AS TO SPECIFIED MATTERS.........................34
4.2. NO COMPANY SOLICITATION OF ALTERNATE TRANSACTION.....................36
4.3. FULL ACCESS TO CLARION AND PURCHASER.................................36
4.4. CONFIDENTIALITY......................................................36
4.5. FILINGS; CONSENTS; REMOVAL OF OBJECTIONS.............................37
4.6. FURTHER ASSURANCES; COOPERATION; NOTIFICATION........................38
4.7. SUPPLEMENTS TO DISCLOSURE SCHEDULE...................................38
4.8. PUBLIC ANNOUNCEMENTS.................................................38
4.9. TAX MATTERS..........................................................39
4.10. BULK TRANSFERS.......................................................40
4.11. EMPLOYEE BENEFITS....................................................40
4.12. COMPETITIVE ACTIVITIES...............................................42
4.13. NAME CHANGE..........................................................43
4.14. PHASE II REPORTS.....................................................43
4.15. REAL PROPERTY; TITLE INSURANCE.......................................44
4.16. MICHIGAN REAL PROPERTY...............................................44
5. CONDITIONS TO OBLIGATIONS OF CLARION AND THE PURCHASER..................44
5.1. REPRESENTATIONS AND WARRANTIES TRUE..................................44
5.2. PERFORMANCE..........................................................44
5.3. REQUIRED APPROVALS AND CONSENTS......................................45
5.4. ADVERSE CHANGES......................................................45
5.5. NO PROCEEDING OR LITIGATION..........................................45
5.6. OPINION OF COMPANY COUNSEL...........................................45
5.7. LEGISLATION..........................................................45
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5.8. ACCEPTANCE BY COUNSEL TO CLARION AND THE PURCHASER..................45
5.9. DEBT FINANCING.......................................................45
5.10. CERTIFICATES.........................................................46
5.11. DOCUMENTATION FOR CONVEYANCE OF THE ASSETS...........................46
5.12 MICHIGAN REAL ESTATE.................................................46
5.13 DUE DILIGENCE........................................................46
5.14 NORTH AMERICAN PLASTICS CORPORATION..................................46
5.15 REAL PROPERTY........................................................46
6. CONDITIONS TO OBLIGATIONS OF COMPANY AND SHAREHOLDERS...................46
6.1. REPRESENTATIONS AND WARRANTIES TRUE..................................46
6.2. PERFORMANCE..........................................................47
6.3. CORPORATE APPROVALS..................................................47
6.4. NO PROCEEDING OR LITIGATION..........................................47
6.5. CERTIFICATES.........................................................47
6.6. OPINION OF PURCHASER COUNSEL.........................................47
6.7. PAYMENT OF CONSIDERATION.............................................47
6.8. ACCEPTANCE BY COUNSEL................................................48
6.9. EMPLOYMENT AGREEMENTS................................................47
6.10. NORTH AMERICAN PLASTICS CORPORATION..................................48
7. TERMINATION AND ABANDONMENT.............................................48
7.1. METHODS OF TERMINATION...............................................48
7.2. PROCEDURE UPON TERMINATION...........................................48
7.3. EFFECT OF TERMINATION................................................48
8. SURVIVAL AND INDEMNIFICATION............................................49
8.1. SURVIVAL.............................................................49
8.2. INDEMNIFICATION BY CLARION AND THE PURCHASER.........................49
8.3. INDEMNIFICATION BY THE COMPANY AND THE SHAREHOLDERS..................50
8.4. CLAIMS FOR INDEMNIFICATION...........................................51
8.5. BASKET AMOUNT........................................................51
8.6. RIGHT OF SET-OFF.....................................................52
8.7. EXCLUSIVE REMEDIES...................................................52
9. MISCELLANEOUS PROVISIONS................................................53
9.1. EXPENSES.............................................................53
9.2. AMENDMENT AND MODIFICATION...........................................53
9.3. WAIVER OF COMPLIANCE; CONSENTS.......................................53
9.4. NO THIRD PARTY BENEFICIARIES.........................................53
9.5. NOTICES..............................................................53
9.6. ASSIGNMENT...........................................................54
9.7. GOVERNING LAW........................................................55
9.8. COUNTERPARTS.........................................................55
9.9. HEADINGS.............................................................55
9.10. ENTIRE AGREEMENT.....................................................55
9.11. INJUNCTIVE RELIEF....................................................55
9.12. CERTAIN DEFINITIONS..................................................56
9.13. RESOLUTION OF DISPUTES BY ARBITRATION................................56
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LIST OF EXHIBITS
Name of Exhibit Number of Exhibit
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* Assets Exhibit 1.1(a)
* Excluded Assets Exhibit 1.1(b)
** Liabilities Undertaking Exhibit 1.2
** Registration and Lock-Up Agreement Exhibit 1.3(a)(ii)
** Promissory Note Exhibit 1.3(a)(iii)
** Second Promissory Note Exhibit 1.3(a)(iv)
** Allocation of Purchase Price Among the Assets Exhibit 1.3(e)
** Bill of Sale Exhibit 1.5
* Disclosure Schedule Exhibit 2
* Clarion Disclosure Schedule Exhibit 3
* Listing of Employees to be Hired Exhibit 4.11
** Opinion of Company's Counsel Exhibit 5.6
** Opinion of Purchaser's Counsel Exhibit 6.6
** Form of Employment Agreement Exhibit 6.9
** Pledge Agreement Exhibit 8.5
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* To be attached as exhibits to and delivered upon execution of the Asset
Purchase Agreement.
** To be executed and delivered at Closing on the Asset Purchase Agreement.
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LIST OF DEFINED TERMS
Term Page
- ---- ----
A
Accounts Receivable..........................................................13
Acquisition Proposals........................................................36
Affiliate....................................................................11
Affiliated Organization......................................................16
Agreement....................................................................55
Assets........................................................................2
Associate....................................................................11
Assumed Contracts.............................................................4
Assumed Liabilities...........................................................3
Authorities...................................................................9
Authority.....................................................................9
B
Basic Purchase Price..........................................................4
Basket Amount................................................................52
C
Clarion.......................................................................1
Closing.......................................................................6
Closing Balance Sheet.........................................................5
Closing Date..................................................................7
Code..........................................................................6
Company.......................................................................1
Compensation Plans...........................................................18
Confidentiality Agreement....................................................36
Consent.......................................................................9
Consents......................................................................9
D
Disclosure Schedule...........................................................8
E
Environmental and Occupational Safety and Health Law.........................24
Environmental Claim..........................................................24
Environmentally Regulated Materials..........................................24
ERISA........................................................................16
Expiration Date..............................................................49
F
Final Basic Purchase Price....................................................5
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G
GAAP.........................................................................10
I
Indemnified Party............................................................51
Indemnifying Party...........................................................51
Information..................................................................33
Intellectual Property Rights.................................................14
Inventory....................................................................13
L
Latest Unaudited Balance Sheet...............................................10
Law...........................................................................9
Laws..........................................................................9
Liabilities..................................................................10
Liabilities Undertaking.......................................................3
Liability....................................................................10
Lien.........................................................................12
M
Material Adverse Effect......................................................56
Michigan Real Estate.........................................................44
N
NAPCO.........................................................................2
Net Assets....................................................................5
P
PBGC.........................................................................17
Pension Plan.................................................................16
Performance Premium Agreement.................................................7
Permitted Liens..............................................................12
Phase I Reports..............................................................43
Phase II Reports.............................................................43
Pro-Forma Closing Balance Sheet...............................................5
Proceeding...................................................................51
Promissory Note...............................................................4
Properties...................................................................23
Purchase Price................................................................4
Purchaser.....................................................................1
R
Registration and Lock Up Agreement............................................4
Retained Liabilities..........................................................3
S
Second Promissory Note........................................................4
Shareholders..................................................................1
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T
Tax..........................................................................14
Tax Return...................................................................15
Tax Returns..................................................................15
Taxes........................................................................14
Termination Date..............................................................6
Total Assets..................................................................5
Total Liabilities.............................................................5
Transferred Employee.........................................................40
Transferred Plans............................................................42
W
Welfare Plan.................................................................17
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, is entered into as of the 27nd day of
January, 2000 by and among CLARION TECHNOLOGIES, INC., a Delaware corporation
("CLARION"), CLARION-DRAKE ACQUISITION, INC., a Michigan corporation (the
"PURCHASER"), DRAKE PRODUCTS CORPORATION, a Michigan corporation (the
"Company"), and JEFFREY W. ANONICK, and MICHAEL C. MILLER (the "SHAREHOLDERS").
A. The Company is engaged in full-service plastic injection
molding for the appliance, automotive, furniture and consumer
products industries.
B. The parties hereto wish to provide for the terms and condition
upon which the Purchaser will acquire certain assets and
assume certain specified liabilities of the Company.
C. The parties hereto wish to make certain representations,
warranties, covenants and agreements in connection with the
purchase of assets and assumption of liabilities and also to
prescribe various conditions to such transaction.
Accordingly, and in consideration of the representations, warranties,
covenants, agreements and conditions herein contained, the parties hereto agree
as follows:
1. PURCHASE OF ASSETS
1.1. ASSETS TO BE PURCHASED
(a) Upon satisfaction of all conditions to the obligations of the
parties contained herein (other than such conditions as will
have been waived in accordance with the terms hereof), the
Company will sell, transfer, convey, assign and deliver to the
Purchaser, and the Purchaser will purchase (and Clarion will
cause the Purchaser to so purchase) from the Company, at the
Closing (as hereinafter defined), all of the assets,
properties, goodwill and rights of the Company, whether
tangible or intangible, real, personal or mixed, wheresoever
located and whether or not carried or reflected on the books
and records of Company or any subsidiary or affiliate of the
Company including, without limitation:
(i) real property that is owned by the Company;
(ii) all rights of the Company in the personal property
that is owned or leased by the Company or in which it
has any right or interest;
(iii) franchises;
(iv) all right, title and interest in and to the use of
the Company's corporate names and any derivatives or
combinations thereof as used by the Company;
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(v) all of the Company's Intellectual Property Rights (as
hereinafter defined), including the goodwill
associated therewith, rights to use, licenses and
sublicenses in respect thereto and the rights
thereunder, royalties and remedies against
infringement thereof (including past infringements),
and rights of protection of interest therein;
(vi) rights under or pursuant to licenses by or to the
Company;
(vii) inventory (materials, work in process, finished
goods), equipment, machinery, furniture, fixtures,
motor vehicles and supplies;
(viii) accounts receivables;
(ix) prepaid expenses;
(x) all of the Company's rights with respect to insurance
policies (if, and to the extent, assignable),
contracts, purchase orders, customers, lists of
customers and suppliers, sales representative
agreements, and all favorable business relationships,
causes of action, judgments, claims and demands of
whatever nature;
(xi) all credit balances of or inuring to the Company,
under any state unemployment compensation plan or
fund;
(xii) all of the Company's rights with respect to
obligations of the present and former officers and
employees and of individuals and corporations;
(xiii) all of the Company's rights with respect to
partnership or joint venture agreements or
arrangements;
(xiv) files, papers and records relating to the Company's
business and assets;
(xv) the assets as reflected on the Latest Unaudited
Balance Sheet (as hereinafter defined), with only
such dispositions of such assets reflected on the
Latest Unaudited Balance Sheet as will have occurred
in the ordinary course of business of the Company
between the date thereof and the Closing and which
are permitted by the terms hereof;
(xvi) a twenty-four and one-half percent (24.5%) equity
interest in North American Plastics Corporation
("NAPCO"); and
(xvii) cash, money and deposits with financial institutions.
All of the foregoing are sometimes collectively referred to herein as
the "Assets" and are more fully described on Exhibit 1.1(a) hereto.
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(b) Notwithstanding the foregoing, the Company will not sell,
transfer, convey, assign or deliver to the Purchaser, and the
Purchaser will not purchase from the Company, the following
assets:
(i) the consideration delivered to the Company pursuant
to this Agreement (as hereinafter defined) for the
Assets;
(ii) the minute books, corporate seal and stock records of
the Company (subject to delivery of complete copies
thereof to Purchaser in connection with its due
diligence investigation);
(iii) shares of the capital stock of the Company; and
(iv) the assets specifically described on Exhibit 1.1(b)
hereto.
1.2. LIABILITIES ASSUMED.
Upon satisfaction of all conditions to the obligations of the parties
contained herein (other than such conditions as will have been made in
accordance with the terms hereof), the Purchaser will assume those
liabilities of the Company set forth on Exhibit 1.2 (the "ASSUMED
LIABILITIES") pursuant to an Assignment and Assumption Agreement in the
form set forth on Exhibit 1.2 (the "LIABILITIES UNDERTAKING"). Except
for the Assumed Liabilities, the Purchaser has not agreed to pay, will
not be required to assume and will have no liability or obligation,
direct or indirect, absolute or contingent, with respect to any other
liability or obligation of the Company or any affiliates or associates
or of any other person (the "RETAINED LIABILITIES"), including without
limitation:
(a) any debt, liability or obligation of the Company, the
Shareholders or any of their affiliates or associates, direct
or indirect, known or unknown, fixed, contingent or otherwise,
that (i) is unrelated to the Assets; (ii) is unrelated to the
business of the Company; or (iii) relates to the Assets and is
based upon or arises from any act, omission, transaction,
circumstance, sale of goods or services, state of facts or
other condition occurring or existing on or before the Closing
Date (as hereinafter defined), whether or not then known, due
or payable, except to the extent that the same was expressly
assumed by Clarion or the Purchaser pursuant to the terms of
the Liabilities Undertaking;
(b) any obligation for Taxes (as hereinafter defined) related to
any of the Assets for any Tax period or portion thereof ending
on or before the applicable Closing Date for purchase of such
Assets and any obligation for other Taxes of the Company or
its officers, directors, shareholders, or other agents or
affiliates;
(c) Environmental Claims (as hereinafter defined); and
(d) any liability of Company to any of the Company's employees,
whether pursuant to agreements between such employees and the
Company or otherwise other than liabilities arising after the
Closing Date under any employment agreement which is an
Assumed Contract.
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At the Closing, the Company will convey, transfer and assign, and the
Purchaser will accept and assume, those contracts, agreements,
obligations and commitments specifically listed on the Liabilities
Undertaking to be assumed by the Purchaser (the "ASSUMED CONTRACTS").
1.3. PURCHASE PRICE.
(a) The total consideration to be paid by the Purchaser to the
Company for the Assets (the "PURCHASE PRICE") will be an
amount equal to:
(i) Twenty-Six Million Dollars ($26,000,000) subject to
adjustment as provided in Section 1.3(d) and (f)
hereof;
(ii) Plus, two million (2,000,000) shares of Clarion's
common stock, $.001 par value (the "Shares") subject
to the terms of a Registration and Lock-Up Agreement
in the form attached hereto as Exhibit 1.3(a)(ii)
(the "REGISTRATION AND LOCK-UP AGREEMENT");
(iii) Plus, an unsecured subordinated promissory note in
the original principal amount of Five Million Dollars
($5,000,000) bearing interest at the rate of twelve
percent (12%) per annum in the form attached hereto
as Exhibit 1.3(a)(iii) (the "PROMISSORY NOTE")
subject to adjustment as provided in Section 1.3(f)
hereof;
(iv) Plus, an unsecured subordinated promissory note in
the original principal amount of Eighty Thousand
Dollars ($80,000) bearing no interest in the form
attached hereto as Exhibit 1.3(a)(iv) (the "SECOND
PROMISSORY NOTE") subject to adjustment as provided
in Section 1.3(f) hereof; and
(v) In addition, the Purchaser will assume the Assumed
Liabilities as of the Closing Date, pursuant to the
terms of the Liabilities Undertaking referenced in
Section 1.2 hereof (subparagraphs (i) - (iv),
collectively the "BASIC PURCHASE PRICE").
(b) At the Closing, the Purchaser will:
(i) Pay the Company, by federal wire transfer,
immediately available funds of Twenty-Six Million
Dollars ($26,000,000), or such lesser amount as may
be determined pursuant to Section 1.3(c) to a bank
account of the Company pursuant to written
instructions given to the Purchaser at least 72 hours
prior to the Closing;
(ii) Deliver certificates representing the Shares;
(iii) Deliver the Promissory Note;
(iv) Deliver the Second Promissory Note; and
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(v) Execute and deliver to the Company the Liabilities
Undertaking.
(c) The Basic Purchase Price set forth in Section 1.3(a) hereof
will be subject to adjustment after the Closing Date (as
hereinafter defined) as follows:
(i) Not later than two (2) business days prior to the
Closing, the Company shall prepare, or cause to be
prepared, and deliver to Purchaser a pro-forma
balance sheet (the "PRO-FORMA CLOSING BALANCE
SHEET"), as of the Closing Date, reflecting only
those assets being transferred to the Purchaser
pursuant to Section 1.1 (the "TOTAL ASSETS") and
those liabilities being assumed by the Purchaser
pursuant to Section 1.2 (the "TOTAL LIABILITIES") and
setting forth the estimated Net Assets (as defined
herein). The Pro-Forma Closing Balance Sheet will be
prepared in accordance with Exhibit 1.3(c) hereto.
The Pro-Forma Closing Balance Sheet prepared by the
Company will be subject to review and approval by the
Purchaser. The amount payable to the Company at the
Closing shall be reduced dollar for dollar by the
amount by which the estimated Net Assets set forth on
the Pro-Forma Closing Balance Sheet is less than
Fourteen Million Three Hundred Eight Thousand Dollars
($14,308,000). For purposes of this Agreement, "NET
ASSETS" shall mean the difference between the
Company's Total Assets and Total Liabilities
reflected on the Closing Balance Sheet.
(ii) Purchaser will prepare and deliver to the Company
within sixty (60) days following the Closing Date (or
as soon thereafter as practicable) a balance sheet
for the Company as of the opening of business on the
Closing Date (the "Closing Balance Sheet"). The
Closing Balance Sheet will be used to determine the
amount of Assumed Liabilities as well as any
adjustments pursuant to Section 1.3(d) hereof as of
the Closing, for purposes of determining the final
Basic Purchase Price (the "Final Basic Purchase
Price").
(iii) Within thirty (30) days after the delivery of the
Closing Balance Sheet, the Company will notify the
Purchaser as to whether it disagrees with any of the
amounts included in the Closing Balance Sheet. If
such notice is not given, the Closing Balance Sheet
will be final and conclusive for all purposes. If the
parties are unable to resolve their differences
within 60 days of their receipt of the Closing
Balance Sheet, the Purchaser and the Company agree to
retain BDO Seidman of Grand Rapids to arbitrate the
dispute and render a decision within thirty (30) days
of such retention, which decision will be final and
binding for all purposes. Any award pursuant to this
Section 1.3(c)(iii) may be entered in and enforced by
any court having jurisdiction over the matter. The
Purchaser and the Company will each pay one-half of
the costs of services rendered by said accounting
firm.
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(iv) Within five days after the expiration of the 30-day
period for giving notice of disagreement with the
Closing Date Balance Sheet or, if such notice is
given, within five days after the resolution of
disputes, if any, pursuant to subsection 1.3(c)(iii)
above, the Final Basic Purchase Price will be
determined and the Purchaser or the Company, as
appropriate, will by wire transfer in immediately
available funds make payment to the other of any
appropriate amounts, such that after such payments,
and taking into account amounts previously received
by the Company pursuant to Section 1.3(b) hereof, the
Purchaser will have paid the Company the Final Basic
Purchase Price.
(d) The amount of Net Assets (as defined herein) assigned and
conveyed to Purchaser hereunder shall be no less than Fourteen
Million Three Hundred Eight Thousand Dollars ($14,308,000). In
the event that the amount of Net Assets transferred, assigned
and conveyed to the Purchaser at Closing is less than the
estimated Net Assets set forth on the Pro-Forma Closing
Balance Sheet, then the Purchaser shall be entitled to offset
the amount of such difference from the cash portion of the
Final Basic Purchase Price.
(e) The Purchase Price will be allocated among the Assets in the
manner required by Section 1060 of the Internal Revenue Code
of 1986, as amended (the "CODE"). In making such allocation,
the allocations set forth in Exhibit 1.3(e), attached hereto
will apply, subject to adjustment after the Closing based upon
the Closing Balance Sheet. The Company will prepare and
deliver to the Purchaser Exhibit 1.3(e). Such values and
allocation determination will be binding on the Purchaser and
the Company only for the purposes of U.S. Federal, state and
local taxation. The Company and the Purchaser will file all
Tax Returns (as defined herein) and tax reports (including IRS
Form 8594) in accordance with and based upon such allocation
and will take no position in any Tax Return, tax proceeding or
tax audit which is inconsistent with such allocation.
1.4. CLOSING.
Unless this Agreement will have been terminated and the transactions
contemplated herein will have been abandoned pursuant to Section 7
hereof, a closing (the "Closing") will be held on or before February
14, 2000; provided, however, that if any of the conditions provided for
in Sections 5 and 6 hereof will not have been satisfied or waived by
such date, then the party to this Agreement which is unable to satisfy
such condition or conditions, despite the best efforts of such party,
will be entitled to postpone the Closing by notice to the other parties
until such condition or conditions will have been satisfied (which such
notifying party will seek to cause to happen at the earliest
practicable date) or waived, but in no event will the Closing occur
later than the "TERMINATION DATE" which will be February 29, 2000,
unless the parties hereto will agree in writing to extend the date of
such Closing. The parties will use their best efforts to complete the
Closing by February 14, 2000. The Closing will be held at the offices
of Borre, Peterson, Fowler & Reens, P.C., 300 Ottawa Avenue, NW, Suite
500, Grand Rapids, MI 49503, or such other place as the parties may
agree, at 11:00 a.m., local time or such other time as the parties may
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agree, at which time and place the documents and instruments necessary
or appropriate to effect the transactions contemplated herein will be
exchanged by the parties. In the event that the Closing occurs on or
before February 14, 2000, the parties agree that the Closing will have
occurred as of February 1, 2000, and the Purchase Price will increase
by Five Thousand Seven Hundred Sixty Seven Dollars ($5,767) for each
day after February 1, 2000 that the Closing occurs. In the event that
the Closing occurs after February 14, 2000, the parties agree that the
Closing will have occurred on the actual date of Closing, and that
there will be no increase in the Purchase Price as a result of this
Section 1.4. The date on which the Closing will be deemed to have
occurred pursuant to this Section 1.4 shall be the "Closing Date."
1.5. INSTRUMENTS OF TRANSFER TO PURCHASER AT THE CLOSING.
At the Closing, the Company will deliver to the Purchaser:
(a) Such bills of sale, endorsements, assignments, deeds and other
good and sufficient instruments of conveyance and transfer, in
form and substance reasonably satisfactory to the Purchaser
and its counsel, as will be required to vest in the Purchaser
title to the Assets, including without limitation:
(i) General bills of sale and deeds vesting in the
Purchaser good and marketable title to all of the
Assets in the form included in Exhibit 1.5 hereto;
(ii) Appropriate endorsements and assignments of the
contracts, licenses, agreements, permits, plans,
commitments and other binding arrangements included
in the Assets;
(iii) Specific bills of sale, endorsements and assignments
transferring to the Purchaser the Intellectual
Property Rights; and
(iv) Such written consents, agreements and other
instruments as the Purchaser will reasonably request
to enable it to use the name "Drake Products
Corporation" and all other trade names of the
Company, and all other variations or combinations
thereof as used by the Company; and
(b) All data relating to the assets, property, goodwill and
business of the Company. Simultaneously with such delivery,
the Company will take all actions necessary to put the
Purchaser in actual possession and operating control of the
Assets.
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2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and the Shareholders hereby represent and warrant to the
Purchaser and Clarion, as of the date hereof, as follows:
2.1. DISCLOSURE SCHEDULE.
The disclosure schedule attached as Exhibit 2 hereto (the "Disclosure
Schedule") is divided into sections which correspond to the subsections
of this Section 2. At Closing, the Disclosure Schedule shall be true,
complete and correct. Nothing in the Disclosure Schedule will be deemed
adequate to disclose an exception to a representation or warranty made
herein, unless the Disclosure Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item will not
be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do
with the existence of the document or other item itself). Except as
otherwise provided in this Agreement, disclosures in any subsection
thereof will not constitute disclosure for purposes of any other
subsection and any other section or subsection of this Agreement or any
exhibit to or other writing which is designated herein as being part of
this Agreement. Notwithstanding anything to the contrary, the Company
shall have the right to supplement the Disclosure Schedule up to the
Closing.
2.2. CORPORATE ORGANIZATION.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan, has full
corporate power and authority to carry on its business as it is now
being conducted and to own, lease and operate its properties and
assets, is duly qualified or licensed to do business as a foreign
corporation in good standing in every other jurisdiction in which the
character or location of the properties and assets owned, leased or
operated by it or the conduct of its business requires such
qualification or licensing, except in such jurisdictions in which the
failure to be so qualified or licensed and in good standing would not,
individually or in the aggregate, have a Material Adverse Effect (as
hereinafter defined) on the Company; and has heretofore delivered to
the Purchaser true, complete and correct copies of its articles of
incorporation and code of regulations, as presently in effect. The
Disclosure Schedule contains a list of all jurisdictions in which the
Company is qualified or licensed to do business. The Company has no
subsidiaries.
2.3. AUTHORIZATION.
The Company has full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated herein. The
Board of Directors of the Company has taken all action required by law,
the Company's articles of incorporation and code of regulations and
otherwise to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein.
This Agreement has been duly and validly executed and delivered by the
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Company and no other corporate action is necessary. This Agreement has
been duly and validly executed by the Shareholders. This Agreement is a
valid and binding legal obligation of the Company and the Shareholders
enforceable against them in accordance with its terms.
2.4. NON-CONTRAVENTION.
Except as set forth in the Disclosure Schedule, neither the execution,
delivery and performance of this Agreement, nor the consummation of the
transactions contemplated herein will: (i) violate or be in conflict
with any provision of the articles of incorporation or code of
regulations of the Company; or (ii) except for such violations,
conflicts, defaults, accelerations, terminations, cancellations,
impositions of fees or penalties, mortgages, pledges, liens, security
interests, encumbrances, restrictions, changes or other events which
could not reasonably be expected to, individually or in the aggregate,
have a Material Adverse Effect, (A) be in conflict with, or constitute
a default, however defined (or an event which, with the giving of due
notice or lapse of time, or both, would constitute such a default),
under, or cause or permit the acceleration of the maturity of, or give
rise to any right of termination, cancellation, imposition of fees or
penalties under, any debt, note, bond, lease, mortgage, indenture,
license, obligation, contract, commitment, franchise, permit,
instrument or other agreement or obligation to which the Company is a
party or by which the Company or any of the Assets is or may be bound
(unless with respect to which defaults or other rights, requisite
waivers or consents will have been obtained at or prior to the Closing)
or (B) result in the creation or imposition of any mortgage, pledge,
lien, security interest, encumbrance, restriction, adverse claim or
charge of any kind, upon the Assets under any debt, obligation,
contract, agreement or commitment to which the Company is a party or by
which the Company or any of the Assets is or may be bound; or (iii)
violate any applicable statute, treaty, law, judgment, writ,
injunction, decision, decree, order, regulation, ordinance or other
similar authoritative matters (sometimes hereinafter separately
referred to as a "Law" and sometimes collectively as "LAWS") of any
federal, state or local governmental or quasi-governmental,
administrative, regulatory or judicial court, department, commission,
agency, board, bureau, instrumentality or other governmental authority
(hereinafter sometimes separately referred to as an "AUTHORITY" and
sometimes collectively as "AUTHORITIES").
2.5. CONSENTS AND APPROVALS.
Except as set forth in the Disclosure Schedule, and with respect to the
Company, no consent, approval, order or authorization of or from, or
registration, notification, declaration or filing with (hereinafter
sometimes separately referred to as a "Consent" and sometimes
collectively as "CONSENTS") any individual or entity, including without
limitation any Authority, is required in connection with the execution,
delivery or performance of this Agreement by the Company or the
consummation by the Company of the transactions contemplated herein
except where the failure to obtain such Consent would not prevent or
delay consummation of the transactions contemplated herein, or
otherwise prevent or delay the Company from performing its obligations
under this Agreement, and would not have a Material Adverse Effect.
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2.6. FINANCIAL STATEMENTS.
The Disclosure Schedule contains true and complete copies of the
audited balance sheets of the Company as of December 31, 1998, 1997 and
1996 and the related audited statements of operations, shareholders'
equity and cash flows for each of the respective fiscal years then
ended as well as the unaudited balance sheet of the Company as of
December 31, 1999. The unaudited balance sheet as of December 31, 1999
is referred to herein as the "LATEST UNAUDITED BALANCE SHEET." Except
as disclosed therein, the foregoing financial statements (i) are in
accordance with the books and records of the Company and have been
prepared in conformity with generally accepted accounting principles
("GAAP") consistently applied for all periods, subject with respect to
the Latest Unaudited Balance Sheet to normal year end adjustments and
the absence of notes and (ii) fairly present the financial position of
the Company as of the respective dates thereof, and the results of
operations, and changes in shareholders' equity and changes in cash
flow for the periods then ended, all in accordance with GAAP
consistently applied for all periods.
2.7. ABSENCE OF UNDISCLOSED LIABILITIES.
The Company does not have any material liabilities, obligations or
claims of any kind whatsoever which are required to be set forth in
financial statements prepared in accordance with GAAP, whether secured
or unsecured, accrued or unaccrued, fixed or contingent, matured or
unmatured, direct or indirect, contingent or otherwise and whether due
or to become due (referred to herein individually as a "LIABILITY" and
collectively as "LIABILITIES"), other than: (a) Assumed Liabilities;
(b) Liabilities that are reserved for or disclosed in the Latest
Unaudited Balance Sheet; (c) Liabilities that are set forth on the
Disclosure Schedule; (d) Liabilities incurred by the Company in the
ordinary course of business after the date of the Latest Unaudited
Balance Sheet (none of which results from, arises out of, relates to,
is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement or violation of Law); or (e) Liabilities
for Assumed Contracts (other than any express executory obligations
that might arise due to any default or other failure of performance by
the Company prior to the Closing Date).
2.8. ABSENCE OF CERTAIN CHANGES.
Since the date of the Latest Unaudited Balance Sheet, the Company has
owned and operated its assets, properties and business in the ordinary
course of business and consistent with past practice. Without limiting
the generality of the foregoing and except as set forth on the
Disclosure Schedule or in the ordinary course of business, the Company
has not, since the Latest Unaudited Balance Sheet:
(a) suffered any Material Adverse Effect or experienced any event
or failed to take any action which reasonably could be
expected to result in such a Material Adverse Effect;
(b) suffered any loss, damage, destruction or other casualty
(whether or not covered by insurance) or suffered any loss of
officers, employees, dealers, distributors, independent
contractors, customers, or suppliers which had or may
reasonably be expected to result in a Material Adverse Effect;
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(c) incurred any indebtedness for borrowed money in excess of
Fifty Thousand Dollars ($50,000);
(d) mortgaged, pledged, or subjected to any lien, lease, security
interest or other charge or encumbrance any of the Assets;
(e) acquired or disposed of any assets or properties;
(f) forgiven or canceled any debts or claims, or waived any rights
in excess of Twenty-Five Thousand Dollars ($25,000);
(g) entered into any material transaction;
(h) granted to any officer or salaried employee or any other
employee or consultant or independent contractor any increase
in compensation in any form or paid any severance or
termination pay;
(i) entered into any commitment for capital expenditures for
additions to plant, property or equipment involving more than
Twenty-Five Thousand Dollars ($25,000);
(j) written down the value of any inventory (including write-downs
by reason of shrinkage or mark-down) or written off as
uncollectable any notes or accounts receivable, except for
immaterial write-downs and write-offs in the ordinary course
of business and consistent with past practices;
(k) disposed of or permitted to lapse any rights to the use of any
patent, trademark, trade name or copyright, or disposed of or
disclosed to any person other than representatives of the
Purchaser any trade secrets, formula, process or know-how not
theretofore a matter of public knowledge, other than in the
ordinary course of business consistent with past practice it
being understood that the ordinary course of business includes
obtaining confidentiality assurances from such persons;
(l) made any change in any method of financial or tax accounting
or financial or tax accounting practice;
(m) suffered any adverse change in its relationship with any
material customer, including the loss of any such material
customer or a contract with any such material customer;
(n) purchased, leased or otherwise acquired any property or
obtained any services from, or sold, leased or otherwise
disposed of any property or furnished any services to, or
otherwise dealt with, in the ordinary course of business or
otherwise, (i) any shareholder of Company or (ii) any
"AFFILIATE" or "ASSOCIATE" (as defined in Rule 405 under the
Securities Act of 1933, as amended) of Company or any
shareholder of the Company (except with respect to
compensation in the ordinary course of business for services
rendered as a director, officer or employee of Company); or
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(o) agreed, whether in writing or otherwise, to take any action
described in this subsection.
2.9. REAL PROPERTIES.
The Disclosure Schedule lists all real properties either owned or
leased by the Company. With respect to real properties owned by the
Company, the Disclosure Schedule includes a common and legal
description of each property. With respect to real properties leased by
the Company, the Disclosure Schedule includes a brief description of
the operating facilities located thereon, the annual rent payable
thereon, the length of the term, any option to renew with respect
thereto and the notice and other provisions with respect to termination
of rights to the use thereof. Except as set forth in the Disclosure
Schedule, the Company has good and marketable fee simple record title
in and to, or a leasehold interest in and to, all of the real property
assets and fixtures included in the Assets. Except as set forth in the
Disclosure Schedule, such leasehold interests are valid and in full
force and effect and enforceable in accordance with their terms and
there does not exist any violation, breach or default thereof or
thereunder. Except as set forth in the Disclosure Schedule, none of the
real property assets or fixtures owned by the Company is subject to any
mortgage, pledge, lien, security interest, encumbrance, claim,
easement, right-of-way, tenancy, covenant, encroachment, restriction or
charge of any kind or nature (whether or not of record) ("LIEN"),
except the following (herein called "PERMITTED LIENS"): (i) Liens
securing specified liabilities or obligations shown on the Latest
Unaudited Balance Sheet with respect to which no breach, violation or
default exists; (ii) mechanics', carriers', workers' and other similar
Liens arising in the ordinary course of business; (iii) minor
imperfections of title which do not materially impair the existing use
of such real property assets or fixtures; (iv) Liens for current Taxes
not yet due and payable or being contested in good faith by appropriate
proceedings; and (v) recorded real estate covenants, conditions,
restrictions, easements, building or land use restrictions, and other
encumbrances, which do not in any material respect, individually or in
the aggregate, diminish the value of, or interfere with the current use
of, such real property. Except as set forth in the Disclosure Schedule,
to the best knowledge of the Company, all real properties owned or
leased by the Company are free from structural defects, in good
operating condition and repair. Except as set forth in the Disclosure
Schedule, to the best knowledge of the Company each such real property
and its present use conform in all respects to all occupational, safety
or health, zoning, planning, subdivision, platting and similar Laws,
and there is, to the knowledge of Company, no such Law contemplated
that would affect adversely the right of Company to own or lease and
operate and use such real properties. Except as set forth in the
Disclosure Schedule, to the best knowledge of the Company all public
utilities necessary for the current use and operation of any facilities
on the aforesaid real properties are available for use or access at
such properties and there is no legal or physical impairment to free
ingress or egress from any of such facilities or real properties. The
Company is not a foreign person and is not controlled by a foreign
person, as the term foreign person is defined in Section 1445(f)(3) of
the Code.
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2.10. MACHINERY, EQUIPMENT, VEHICLES AND PERSONAL PROPERTY.
Except as set forth in the Disclosure Schedule, the Company has good
and marketable right, title and interest in and to, or a leasehold
interest in and to, the machinery, equipment, vehicles and other
personal property included in the Assets. Except as set forth in the
Disclosure Schedule, all of such leasehold interests relating to
machinery, equipment, vehicles and other personal property are valid
and in full force and effect and enforceable in accordance with their
terms and there does not exist any material violation, breach or
default thereof or thereunder. Except as set forth in the Disclosure
Schedule, none of such machinery, equipment, vehicles or other personal
property is subject to any mortgage, pledge, lien or security interest
of any kind or nature (whether or not of record) except Permitted
Liens. Except as set forth in the Disclosure Schedule, to the best
knowledge of the Company, the machinery, equipment, vehicles and other
personal property of the Company are in good operating condition and
repair, normal wear and tear excepted.
2.11. INVENTORIES.
Except as set forth in the Disclosure Schedule, all inventory as of the
date of the Latest Unaudited Balance Sheet is, and as of the Closing
Date will be, valued at the lower of cost or market. Except as set
forth on the Disclosure Schedule, all inventory of the Company (the
"INVENTORY"): (i) are of a quality and quantity usable in the ordinary
course of business, and the present quantities of Inventory of the
Company are reasonable; and (ii) meet in the aggregate the stricter of
industry or Company specifications applicable to such Inventory.
2.12. RECEIVABLES AND PAYABLES.
(a) Except as set forth on the Disclosure Schedule, (i) the
Company has good right, title and interest in and to all its
accounts and notes receivable and trade notes and trade
accounts (the "ACCOUNTS RECEIVABLE"); (ii) none of such
Accounts Receivable is subject to any Lien; (iii) except to
the extent of applicable reserves shown in the Latest
Unaudited Balance Sheet, to the best knowledge of the Company,
all of the Accounts Receivable owing to the Company constitute
valid and enforceable claims arising from bona fide
transactions in the ordinary course of business, and there are
no claims, refusals to pay or other rights of set-off against
any thereof; (iv) no account or note debtor whose account or
note balance exceeds the amount set forth in the Disclosure
Schedule at the date set forth therein was delinquent in
payment by more than ninety (90) days; (v) the aging schedule
of the Accounts Receivable as of December 31, 1999 previously
furnished to the Purchaser is complete and accurate; and (vi)
to the best knowledge of the Company, there, is no reason why
any Account Receivable will not be collected in accordance
with its terms, other than for such accounts and notes which
are not in excess of the reserves established therefor and
reflected in the Latest Unaudited Balance Sheet.
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(b) Except as set forth on the Disclosure Schedule, all accounts
payable and notes payable by the Company to be assumed by the
Purchaser pursuant to Section 1.2 arose in bona fide
transactions in the ordinary course of business and no such
account payable or note payable is delinquent by more than
ninety (90) days in its payment.
2.13. INTELLECTUAL PROPERTY RIGHTS.
The Company owns or has the unrestricted right to use all intellectual
property rights, including without limitation the patents, patent
applications, patent rights, registered and unregistered trademarks,
trademark applications, trade names, service marks, service mark
applications, logos, copyrights, computer programs and other computer
software, inventions, know-how, trade secrets, technology, proprietary
processes and formulae (collectively, "INTELLECTUAL PROPERTY RIGHTS")
necessary or required for use in connection with the Assets and for the
conduct of the business of the Company as presently conducted, free and
clear of all Liens. All Intellectual Property Rights are listed or
described on the Disclosure Schedule. Except as set forth on the
Disclosure Schedule, to the best knowledge of the Company the use of
all Intellectual Property Rights necessary or required for the conduct
of the business of the Company as presently conducted does not and will
not infringe or violate or allegedly infringe or violate the
intellectual property rights of any person or entity. Except as
described on the Disclosure Schedule, the Company (i) does not own or
use any Intellectual Property Rights pursuant to any written license
agreement; and (ii) has not granted any person or entity any rights,
pursuant to written license agreement or otherwise, to use the
Intellectual Property Rights.
2.14. LITIGATION.
Except as set forth in the Disclosure Schedule, there is no action,
suit, proceeding at law or in equity by any person or entity, or any
arbitration or any administrative or other proceeding by or before (or
any investigation by) any Authority, pending or to the best knowledge
of the Company threatened, against the Company or any of the Assets, or
which questions or challenges the validity of this Agreement or any
action taken or to be taken by the parties hereto pursuant to this
Agreement or in connection with the transactions contemplated herein,
and there does not exist any valid basis for any such action,
proceeding or investigation. The Company is not subject to any
judgment, order or decree entered in any lawsuit or proceeding to which
it is a party which may have a Material Adverse Effect on the Company.
2.15. TAX MATTERS.
For all purposes of this Agreement, the term "Taxes" means all federal,
state, local, foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits,
license, lease, service, service use, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, real or personal
property, windfall profits, customs, duties or other taxes, together
with any interest and any penalties, additions to tax or additional
amounts with respect thereto, and the term "TAX" means any one of the
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foregoing Taxes. In addition, the term "TAX RETURNS" means all returns,
declarations, reports, statements and other documents required to be
filed with any Authority in respect of Taxes, and the term "TAX RETURN"
means any one of the foregoing Tax Returns. Except as otherwise set
forth in the Disclosure Schedule, the Company hereby represents and
warrants the following with respect to the Company:
(a) LIABILITY FOR TAXES. The Company shall be responsible for and
shall pay all Taxes attributable to or arising from the
business and operations of the Company conducted on and
through the Closing Date and shall be responsible for its own
income and franchise Taxes, if any, arising from the
transactions contemplated by this Agreement. The Company
hereby acknowledges that, in preparing the Closing Balance
Sheet, all real property Taxes, personal property Taxes and
similar ad valorem obligations levied with respect to any of
the Assets prior to and including December 31, 1999 will be
allocated to the Company, and all real property Taxes,
personal property Taxes and similar ad valorem obligations
levied with respect to any of the Assets including and after
January 1, 2000 will be allocated to the Purchaser.
(b) FILING OF TAX RETURNS. There have been properly completed and
duly filed on a timely basis all Tax Returns required to be
filed on or prior to the date hereof by the Company with
respect to Taxes of the Company. All such Tax Returns were
correct and complete in all material respects.
(c) PAYMENT OF TAXES. With respect to all amounts in respect of
Taxes imposed upon the Company with respect to all taxable
periods or portions of periods ending on or before the Closing
Date, all applicable Tax Laws and agreements have been fully
complied with, and all such amounts of Taxes shown on its Tax
Returns on or before the date hereof have been duly paid and
there are no liens for such Taxes upon any property or assets
of the Company.
(d) AUDITS AND EXTENSIONS. Section 2.15(d) of the Disclosure
Schedule lists all federal income Tax Returns filed with
respect to the Company for taxable periods ended on or after
December 31, 1995 and indicates those federal income Tax
Returns that have been audited and those federal income Tax
Returns that currently are the subject of an audit, and except
to the extent shown therein, all deficiencies asserted as a
result of such completed examinations have been paid or
finally settled and no issue has been raised by the Internal
Revenue Service in any such examination which, by application
of similar principles, reasonably could be expected to result
in a proposed deficiency for any other period not so examined.
Except as set forth in the Disclosure Schedule, all
deficiencies and assessments of Taxes of the Company resulting
from an examination of any Tax Returns by any Authority have
been paid and to the best knowledge of the Company there are
no pending examinations currently being made by any Authority
nor has there been any written or oral notification to Company
of any intention to make an examination of any Taxes by any
Authority. Except as set forth in the Disclosure Schedule,
there are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any Tax Return
for any period.
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(e) INDEPENDENT CONTRACTORS AND EMPLOYEES. For purposes of
computing Taxes and the filing of Tax Returns to the best
knowledge of the Company, the Company has not failed to treat
as "employees" any individual providing services to the
Company who would be classified as an "employee" under the
applicable rules or regulations of any Authority with respect
to such classification.
(f) S CORPORATION. The Company is an "S CORPORATION," and the
Company has had in effect a valid election under Code Section
1362 to be treated as an "S corporation" for each of its
taxable years ended after December 31, 1995. Neither the
Company nor any of its shareholders have taken any action to
revoke that election, neither the Company nor any of its
shareholders are aware of any basis or the existence of any
facts that would permit the Internal Revenue Service to revoke
that election for any period prior to the date of Closing,
and, except as described in the Disclosure Schedule, since the
effective date of its election as an S corporation to and
including the date of Closing, the Company will not have
incurred or become liable for the payment of any
corporate-level income tax, or any related penalties or
interest.
2.16. INSURANCE.
The Disclosure Schedule contains an accurate and complete list of all
policies of fire and other casualty, general liability, theft, life,
workers' compensation, health, directors and officers, business
interruption and other forms of insurance owned or held by the Company,
specifying the insurer, the policy number, the term of the coverage
and, in the case of any "claims made" coverage, the same information as
to predecessor policies for the previous five years. All present
policies are in full force and effect and all premiums with respect
thereto have been paid. The Company has not been denied any form of
insurance and no policy of insurance has been revoked or rescinded
during the past five years, except as described on the Disclosure
Schedule.
2.17. BENEFIT PLANS.
Except as set forth in the Disclosure Schedule:
(a) Neither the Company nor any other "person" within the meaning
of Section 7701(a)(1) of the Code, that together with the
Company is considered a single employer pursuant to Sections
414(b), (c), (m) or (o) of the Code or Sections 3(5) or
4001(b)(1) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") (an "AFFILIATED ORGANIZATION")
sponsors, maintains, contributes to, is required to contribute
to or has or could have any liability of any nature, whether
fixed or contingent, with respect to, any "employee pension
benefit plan" ("PENSION PLAN") as such term is defined in
Section 3(2) of ERISA, including without limitation, any such
plan that is excluded from coverage by Section 4(b)(5) of
ERISA or is a "Multi-employer Plan" within the meaning of
Section 3(37) or 4001(a)(3) of ERISA. Each such Pension Plan
has been operated in accordance with its terms and in
compliance with the applicable provisions of ERISA, the Code
and all other applicable Law. All Pension Plans which the
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Company operates as plans that are qualified under the
provisions of Section 401(a) of the Code satisfy in form and
operation the requirements of Section 401(a) and all other
sections of the Code incorporated therein, except that such
Pension Plans have not been amended to comply with any changes
in the law for which the Section 401(b) remedial amendment
period expires as of the end of the plan year beginning in
2000 pursuant to IRS Rev. Proc. 99-23.
(b) Neither the Company, nor any Affiliated Organization, has or
could have any liability of any nature, whether fixed or
contingent, to any Pension Plan, the Pension Benefit Guaranty
Corporation ("PBGC") or any other person, arising directly or
indirectly under Title IV of ERISA. No "reportable event,"
within the meaning of Section 4043(b) of ERISA, has occurred
with respect to any Pension Plan. Neither the Company nor any
Affiliated Organization has been a party to a sale of assets
to which Section 4204 of ERISA applied with respect to which
it could incur any withdrawal liability (including any
contingent or secondary withdrawal liability) to any
Multi-employer Plan. Neither the Company nor any Affiliated
Organization has incurred any withdrawal liability within the
meaning of Section 4201 of ERISA or suffered or otherwise
caused a "complete withdrawal" or "partial withdrawal," as
such terms are defined respectively in Sections 4203 and 4205
of ERISA, with respect to a Multi-employer Plan, and nothing
has occurred that is reasonably likely to result in such a
complete or partial withdrawal.
(c) Neither the Company, nor any Affiliated Organization,
sponsors, maintains, contributes to, is required to contribute
to or has or could have any liability of any nature, whether
fixed or contingent, with respect to, any "employee welfare
benefit plan" ("WELFARE PLAN") as such term is defined in
Section 3(1) of ERISA, whether insured or otherwise. Each
Welfare Plan has been operated in accordance with its terms
and in compliance with the applicable provisions of ERISA, the
Code and all other applicable Law. Neither the Company nor any
Affiliated Organization has established or contributed to, is
required to contribute to or has or could have any liability
of any nature, whether fixed or contingent, with respect to
any "voluntary employees' beneficiary association" within the
meaning of Section 501(c)(9) of the Code, "welfare benefit
fund" within the meaning of Section 419 of the Code,
"qualified asset account" within the meaning of Section 419 of
the Code, "qualified asset account" within the meaning of
Section 419A of the Code or "multiple employer welfare
arrangement" within the meaning of Section 3(40) or ERISA.
Neither the Company nor any Affiliated Organization maintains,
contributes to or has or could have any liability of any
nature, whether fixed or contingent, with respect to medical,
health, life or other welfare benefits for present or future
terminated employees or their spouses or dependents other than
as required by Part 6 of Subtitle B of Title I of ERISA or any
comparable state law.
(d) Neither the Company nor any Affiliated Organization is a party
to, maintains, contributes to, is required to contribute to or
has or could have any liability of any nature, whether fixed
or contingent, with respect to, any bonus plan, incentive
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plan, stock plan or any other current or deferred
compensation, separation, retention, severance or similar
agreement, arrangement or policy ("Compensation Plans").
(e) There are no facts or circumstances which could, directly or
indirectly, subject the Company or any Affiliated Organization
to any (1) excise tax or other liability under Chapters 43, 46
or 47 of Subtitle D of the Code, (2) penalty tax or other
liability under Chapter 68 of Subtitle F of the Code or (3)
civil penalty arising under Section 502 of ERISA. The Company
does not and could not have any liability arising directly or
indirectly in connection with any failure of the Company or
any Affiliated Organization to comply with Section 4980B of
the Code or Part 6 of Subtitle B of Title I of ERISA
("COBRA"). The Disclosure Schedule lists the name of each
individual who, as of the date of the Disclosure Schedule, and
as updated immediately prior to the Closing, was covered or
eligible to be covered under any group health Plan maintained
by the Company pursuant to the group health plan continuation
requirements of COBRA.
(f) The Company and each Affiliated Organization has made adequate
provisions for reserves or accruals in accordance with
generally accepted accounting principles to meet contribution
benefit or funding obligations arising under applicable Law or
the terms of any Pension Plan or Welfare Plan or Compensation
Plan or related agreement. There will be no change on or
before Closing in the operation of any Pension Plan, Welfare
Plan or Compensation Plan or any documents with respect
thereto which will result in an increase in the benefit
liabilities under such plans, except as may be required by
law.
(g) The Company and each Affiliated Organization has timely
complied with all reporting and disclosure obligations with
respect to the Pension Plans, Welfare Plans and Compensation
Plans imposed by Title I of ERISA or other applicable Law.
(h) There are no pending or, to the Company's knowledge,
threatened audits, investigations, claims, suits, grievances
or other proceedings, and there are no facts that could give
rise thereto, involving, directly or indirectly, any Pension
Plan, Welfare Plan, or Compensation Plan, or any rights or
benefits thereunder, other than the ordinary and usual claims
for benefits by participants, dependents or beneficiaries.
(i) The transactions contemplated herein will not and do not
result in the acceleration of accrual, vesting, funding or
payment of any contribution or benefit under any Pension Plan,
Welfare Plan or Compensation Plan.
(j) The Company has delivered to Purchaser, true and complete
copies of: (i) all Pension, Welfare and Compensation Plans and
related trust agreements or other agreements or contracts
evidencing any funding vehicle with respect thereto; (ii) the
three most recent annual reports on Treasury Form 5500,
including all schedules and attachments thereto, with respect
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to any Plan for which such a report is required; (iii) the
three most recent actuarial reports with respect to any
Pension Plan that is a "defined benefit plan" within the
meaning of Section 414(j) of the Code; (iv) the form of
summary plan description, including any summary of material
modifications thereto or other modifications communicated to
participants, currently in effect with respect to each
Pension, Welfare or Compensation Plan for which such is
required; (v) the most recent determination letter with
respect to each Pension Plan intended to qualify under Section
401(a) of the Code; (vi) a copy of the notice required under
ERISA Section 204(h) for any Pension Plan for which benefit
accruals have been frozen; (vii) all professional opinions,
material internal memoranda, material correspondence with
regulatory authorities and administrative policies, manual,
interpretations and the like with respect to each Pension
Plan, Welfare Plan or Compensation Plan; and (viii) complete
and accurate employment records showing for each Transferred
Employee (as defined herein), the following: name, address,
Social Security number, date of birth, date of hire, rate of
pay, marital status, and citizenship or immigration status.
(k) In connection with the termination of any Pension Plan and
without limiting the applicability of the foregoing
representations to such Pension Plan: (i) nothing done or
omitted to be done has or could subject the Company or any
Affiliated Organization to any liability, loss, cost, charge,
expense or expenditure of any nature or result in the
imposition of any Lien in favor of the PBGC or any other
person; (ii) the Company has received a determination letter
from the Internal Revenue Service, based on complete and
accurate disclosure by the Company, that such termination did
not adversely affect the qualified status of such Pension Plan
under Section 401(a) of the Code or the tax exempt status of
its related trust under Section 501(a) of the Code; (iii) all
notices and other filings required to be submitted to the PBGC
were submitted in a timely manner and were complete and
accurate and no distributions were made until receipt of PBGC
approval in the form of a notice of sufficiency or by lapse of
any applicable time period without notice of PBGC objection,
as the case may be; (iv) all participants, beneficiaries of
deceased participants, alternate payees and other interested
Parties received all notices and disclosures required by
applicable Law in a timely manner and all such notices and
disclosures were complete and accurate and satisfied the
requirements imposed by all applicable Laws; (v) no portion of
the assets of the Plan reverted to the Company or any
Affiliated Organization; (vi) the selection of annuity
contracts and the process employed in connection therewith
satisfied all applicable Laws, including without limitation
ERISA, and each and all of the issuers of such contracts have
fully satisfied all of its or their obligations thereunder and
(vii) the termination in all respects satisfied all applicable
Laws.
(l) No action or omission of the Company or any director, officer,
employee or agent thereof in any way restricts, impairs or
prohibits the Purchaser or any successor of the Purchaser from
amending or terminating any Pension Plan, Welfare Plan or
Compensation Plan in accordance with the express terms of any
such plan and applicable law.
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(m) Nothing has occurred or failed to occur with respect to any
Pension Plan, Welfare Plan or Compensation Plan which could
result in any liability to the Purchaser or any successor of
the Purchaser other than a liability expressly assumed
pursuant to this Agreement.
2.18. BANK ACCOUNTS.
The Disclosure Schedule sets forth the names of all financial
institutions, investment banking and brokerage houses, and other
similar institutions at which the Company maintains accounts, deposits,
safe deposit boxes of any nature, and the names of all persons
authorized to draw thereon or make withdrawals therefrom.
2.19. CONTRACTS AND COMMITMENTS; NO DEFAULT.
(a) Except as set forth in the Disclosure Schedule, the Company:
(i) has no written contract, commitment, agreement or
arrangement with any person or, to the Company's
knowledge, any oral contract, commitment, agreement
or arrangement which (A) requires payments
individually in excess of Twenty Five Thousand
Dollars ($25,000) annually or in excess of One
Hundred Thousand Dollars ($100,000) over its term
(including without limitation periods covered by any
option to extend or renew by either party) and (B) is
not terminable on thirty (30) days' or less notice
without cost or other Liability;
(ii) does not pay any person or entity cash remuneration
at the annual rate (including without limitation
guaranteed bonuses) of more than Fifty Thousand
($50,000) for services rendered;
(iii) is not restricted by agreement from carrying on its
businesses or any part thereof anywhere in the world
or from competing in any line of business with any
person or entity;
(iv) is not subject to any obligation or requirement to
provide funds to or make any investment (in the form
of a loan, capital contribution or otherwise) in any
person or entity;
(v) is not party to any agreement, contract, commitment
or loan to which any of its directors, officers or
shareholders or any Affiliate or Associate (or former
Affiliate or Associate) thereof is a party;
(vi) is not subject to any outstanding sales or purchase
contracts, commitments or proposals which is
anticipated to result in any loss upon completion or
performance thereof;
(vii) is not party to any purchase or sale contract or
agreement that calls for aggregate purchases or sales
in excess over the course of such contract or
agreement of One Hundred Thousand Dollars ($100,000)
or which continues for a period of more than twelve
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months (including without limitation periods covered
by any option to renew or extend by either party)
which is not terminable on sixty (60) days' or less
notice without cost or other Liability at or any time
after the Closing; and
(viii) has no distributorship, dealer, manufacturer's
representative, franchise or similar sales contract
relating to the payment of a commission.
(b) True and complete copies (or summaries, in the case of oral
items) of all items disclosed pursuant to Section 2.19 have
been made available to the Purchaser for review. Except as set
forth in the Disclosure Schedule, all such items are valid and
enforceable by and against the Company in accordance with
their respective terms; the Company is not in breach,
violation or default, however defined, in the performance of
any of its obligations thereunder, and no facts and
circumstances exist which, whether with the giving of due
notice, lapse of time, or both, would constitute such a
breach, violation or default thereunder or thereof; and to the
best knowledge of the Company, no other parties thereto are in
breach, violation or default, however defined, thereunder or
thereof, and no facts or circumstances exist which, whether
with the giving of due notice, lapse of time, or both, would
constitute such a breach, violation or default thereunder or
thereof.
2.20. ORDERS, COMMITMENTS AND RETURNS.
Except as set forth in the Disclosure Schedule, all accepted and
unfulfilled orders for the sale of products and the performance of
services entered into by the Company and all outstanding contracts or
commitments for the purchase of supplies, materials and services were
made in bona fide transactions in the ordinary course of business.
Except as set forth in the Disclosure Schedule, to the best knowledge
of the Company there are no claims against the Company to return
products by reason of alleged over-shipments, defective products or
otherwise, or of products in the hands of customers, retailers or
distributors under an understanding that such products would be
returnable.
2.21. LABOR MATTERS.
Except as set forth in the Disclosure Schedule: (i) to the best
knowledge of the Company, the Company is and has been in material
compliance with all applicable Laws respecting employment and
employment practices, terms and conditions of employment and wages and
hours, including without limitation any such Laws respecting employment
discrimination and occupational safety and health requirements, and has
not and is not engaged in any unfair labor practice; (ii) there is no
unfair labor practice complaint against the Company pending or, to the
best knowledge of the Company, threatened before the National Labor
Relations Board or any other comparable Authority; (iii) there is no
labor strike, dispute, slowdown or stoppage by Company employees
actually pending or, to the best knowledge of the Company, threatened
against or directly affecting the Company; (iv) no labor representation
question exists respecting the employees of the Company and there is
not pending or, to the best knowledge of the Company, threatened any
activity intended or likely to result in a labor representation vote
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respecting the employees of the Company; (v) no grievance or any
arbitration proceeding arising out of or under collective bargaining
agreements is pending and no claims therefor exist or have been
threatened; (vi) no collective bargaining agreement is binding and in
force against the Company or currently being negotiated by the Company;
(vii) the Company has not experienced any significant work stoppage by
Company employees; (viii) the Company is not delinquent in payments to
any persons for any wages, salaries, commissions, bonuses or other
direct or indirect compensation owed by the Company for any services
performed by them or amounts required to be reimbursed to such persons,
including without limitation any amounts due under any Pension Plan,
Welfare Plan or Compensation Plan; (ix) upon termination of the
employment of any person, none of the Company, the Purchaser, Clarion
or any subsidiary of Clarion will, by reason of anything done by or on
behalf of the Company at or prior to or as of the Closing Date, be
liable to any of such persons for so-called "severance pay" or any
other payments; and (x) within the twelve month period prior to the
date hereof there has not been any expression of intention to the
Company by any officer or key employee to terminate such employment.
2.22. DEALERS AND SUPPLIERS.
Except as set forth in the Disclosure Schedule, there has not been in
the twelve month period prior to the date hereof any material adverse
change in the business relationship of the Company with any dealer or
supplier to the Company.
2.23. PERMITS AND OTHER OPERATING RIGHTS.
Except as set forth in the Disclosure Schedule, the Company does not
require the Consent of any Authority to permit the Company to operate
in the manner in which it presently is being operated, and the Company
possesses all permits and other authorizations from all Authorities
presently required or necessary to permit it to operate its business in
the manner in which it presently is conducted. The Company is not
restricted by agreement from carrying on its business or any part
thereof anywhere in the world or from competing in any line of business
with any person or entity.
2.24. COMPLIANCE WITH LAW.
Except as set forth in the Disclosure Schedule, and without limiting
the scope of any other representations or warranties contained in this
Agreement, but without intending to duplicate the scope of such other
representations and warranties, the assets, properties, businesses and
operations of the Company, to the best knowledge of the Company, are
and have been in compliance in all material respects with all Laws
applicable to the ownership and conduct of its assets, properties,
businesses and operations. There are no outstanding and unsatisfied
deficiency reports, plans of correction, notices of noncompliance or
work orders relating to any such Authorities, and no such discussions
with any such Authorities are scheduled or pending.
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2.25. ASSETS OF BUSINESS.
The Assets constitute all of the assets held for use or used primarily
in connection with the business of the Company and are sufficient to
conduct such businesses as presently conducted.
2.26. ENVIRONMENTAL AND SAFETY MATTERS.
Except as set forth on the Disclosure Schedule:
(a) Neither the Company, any former subsidiary of the Company, nor
any previous owner, tenant, occupant or user of any property
owned or leased by or to the Company or by or to any former
subsidiary as of the date hereof and which property is
included in the Assets (the "PROPERTIES") engaged in or
permitted, direct or indirect operations or activities upon,
or any use or occupancy of the Properties, or any portion
thereof, for the purpose of or in any way involving the
handling, manufacture, treatment, storage, use, generation,
emission, release, discharge, refining, dumping or disposal of
any Environmentally Regulated Materials (as hereinafter
defined) (whether accidental or intentional, direct or
indirect) on, under, in or about the Properties in violation
of Environmental Laws, or transported any Environmentally
Regulated Materials to, from or across the Properties in
violation of Environmental Laws, nor are any Environmentally
Regulated Materials presently constructed, deposited, stored,
placed or otherwise located on, under, in or about the
Properties in violation of Environmental Laws, nor have any
Environmentally Regulated Materials migrated from the
Properties upon or beneath other properties, nor have any
Environmentally Regulated Materials migrated or threatened to
migrate from other properties upon, about or beneath the
Properties. To the best knowledge of the Company, the
Properties do not contain in violation of Environmental Laws,
any: (i) underground or aboveground storage tanks; (ii)
asbestos; (iii) equipment using PCBs; (iv) underground
injection wells; or (v) septic tanks in which process waste
water or any Environmentally Regulated Materials have been
disposed.
(b) (i) No violation or noncompliance with Environmental and, to
the best knowledge of the Company, Occupational Safety and
Health Laws has occurred with respect to the Properties or
operations conducted thereon; the Company has obtained all
permits, licenses and authorizations required by, and the
Company and the Properties are in compliance, in all material
respects, with all Environmental and Occupational Safety and
Health Laws including, without limitation, all applicable
restrictions, conditions, standards, limitations,
prohibitions, requirements and obligations contained in the
Environmental and Occupational Safety and Health Laws or
contained in any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder;
(ii) no enforcement, investigation, cleanup, removal,
remediation or response or other governmental or
regulatory actions have been, or, to the best
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knowledge of the Company, could have been at any time
in the past, asserted or threatened with respect to
operations conducted on the Properties or the
Properties themselves or against the Company or any
subsidiary or former subsidiary with respect to or in
any way regarding the Properties pursuant to any
Environmental and Occupational Safety and Health
Laws; and
(iii) no claims or settlements with respect to the
Properties or the operations thereon, or against the
Company or any subsidiary or former subsidiaries with
respect to the Properties or operations conducted
thereon, relating to or arising out of Environmental
and Occupational Safety and Health Laws or
Environmentally Regulated Materials, have been made
or been threatened by any third party, including any
Authority, nor to the best knowledge of the Company,
does there exist any reasonable basis for any such
claim (any such enforcement, investigation, cleanup,
removal, remediation or response, other governmental
or regulatory action, claim or settlement is herein
referred to as an "ENVIRONMENTAL CLAIM").
(c) To the best knowledge of the Company, with regard to the
Company and the Properties, there are no past or present
events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or
prevent compliance or continued compliance with Environmental
and Occupational Health and Safety Laws, as in effect on the
Closing Date.
(d) The term "ENVIRONMENTAL AND OCCUPATIONAL SAFETY AND HEALTH
LAW" as used in this Agreement means any Law, that (i)
regulates, creates standards for or imposes liability or
standards of conduct concerning any element, compound,
pollutant, contaminant, or toxic or hazardous substance,
material or waste, or any mixture thereof, or relates in any
way to emissions or releases into the environment or ambient
environmental conditions, or conduct affecting such matters,
or (ii) is designed to provide safe and healthful working
conditions or reduce occupational safety and health hazards.
Such laws shall include, but not be limited to, the National
Environmental Policy Act, 42 U.S.C.ss.ss. 4321 et seq., the
Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C.ss.ss. 9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C.ss.ss. 6901 et seq.,
the Federal Water Pollution Control Act, 33 U.S.C.ss.ss. 1251
et seq., the Federal Clean Air Act, 42 U.S.C.ss.ss. 7401 et
seq., the Toxic Substances Control Act, 15 U.S.C.ss.ss. 2601
et seq., the Emergency Planning and Community Right to Know
Act, 42 U.S.C. ss. 11011, the Hazard Communication Act, 29
U.S.C.ss.ss. 651 et seq., the Occupational Safety and Health
Act, 29 U.S.C.ss.ss. 651 et seq., the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C.ss. 136, and any
caselaw interpretations, amendments or restatements thereof,
or similar enactments thereto, as is now or at any time
hereafter may be in effect, as well as their international,
state and local counterparts.
(e) The term "ENVIRONMENTALLY REGULATED MATERIALS" as used in this
Agreement means any element, compound, pollutant, contaminant,
substance, material or waste, or any mixture thereof,
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designated, listed, referenced, regulated or identified
pursuant to any Environmental and Occupational Safety and
Health Law.
2.27. TRANSACTIONS WITH CERTAIN PERSONS.
Except as set forth in the Disclosure Schedule, during the past three
years the Company has not, directly or indirectly, purchased, leased or
otherwise acquired any property or obtained any services from, or sold,
leased or otherwise disposed of any property or furnished any services
to, or otherwise dealt with, in the ordinary course of business or
otherwise, (i) any shareholder of the Company or (ii) any Affiliate or
Associate of the Company or any shareholder of the Company (except with
respect to compensation in the ordinary course of business for services
rendered as a director, officer or employee of the Company). As of the
date hereof, the Company does not owe any amount to, or have any
agreement or contract with or commitment to, any of its shareholders,
directors, officers, employees or consultants or any Affiliate or
Associate thereof (other than compensation for current services not yet
due and payable and reimbursement of expenses arising in the ordinary
course of business), and none of such persons owes any amount to the
Company.
2.28. BROKERS.
Except as set forth on the Disclosure Schedule neither the Company nor
any of its directors, officers or employees has employed any broker,
finder, or financial advisor or incurred any liability for any
brokerage fee or commission, finder's fee or financial advisory fee, in
connection with the transactions contemplated hereby, nor is there any
basis known to the Company for any such fee or commission to be claimed
by any person or entity.
2.29. CUSTOMERS.
Except as set forth on the Disclosure Schedule, there has not been in
the 12-month period prior to the date hereof any significant dispute
with any customer of the Company nor any set of circumstances which is
reasonably anticipated to have a Material Adverse Effect on the
relationship between the Company and such customer.
2.30. ABSENCE OF CERTAIN BUSINESS PRACTICES.
Neither the Company, nor any officer, director, shareholder, employee
or agent of the Company, nor any other person acting on their behalf,
has, directly or indirectly, within the past three years given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person who is or may be in a position to
help or hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction) which (i) might
subject the Company or Purchaser to any damage or penalty in any civil,
criminal or governmental litigation proceeding, (ii) if not given in
the past, might have had a Material Adverse Effect on the assets,
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business or operations of the Company as reflected in the financial
statements described in Section 2.6, or (iii) if not continued in the
future, might have a Material Adverse Effect on the Company's assets,
business, operations or prospects or which might subject the Company or
Purchaser to suit or penalty in any private or governmental litigation
or proceeding.
2.31. SECURITIES MATTERS.
(a) The Company and the Shareholders understand that (i) the
Shares have not been registered or qualified under the
Securities Act of 1933, as amended (the "1933 Act") or any
state securities or "blue sky" laws, on the ground that the
sale provided for in this Agreement and the issuance of the
securities hereunder is exempt from registration and
qualification under Sections 4(2) and 18 of the 1933 Act, and
(ii) the Purchaser's reliance on such exemptions is predicated
on the Company's and the Shareholders' representations set
forth herein.
(b) The Company and the Shareholders acknowledge that an
investment in the Purchaser involves an EXTREMELY HIGH DEGREE
OF RISK, lack of liquidity and substantial restrictions on
transferability and that the Company and the Shareholders may
lose their entire investment in the Shares.
(c) The Purchaser has made available to the Company and the
Shareholders or the Company's and the Shareholders' advisors
the opportunity to obtain information to evaluate the merits
and risks of the investment in the Shares, and the Company and
the Shareholders have received all information requested from
the Purchaser. The Company and the Shareholders have had an
opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of
the Shares and the business, properties, plans, prospects, and
financial condition of the Purchaser and to obtain additional
information as the Company and the Shareholders have deemed
appropriate for purposes of investing in the Shares pursuant
to this Agreement.
(d) The Company and the Shareholders, personally or through
advisors, have expertise in evaluating and investing in
private placement transactions of securities of companies in a
similar stage of development to the Purchaser and have
sufficient knowledge and experience in financial and business
matters to assess the relative merits and risks of an
investment in the Purchaser. In connection with the purchase
of the Shares, the Company and the Shareholders have relied
solely upon independent investigations made by the Company and
the Shareholders, and have consulted their own investment
advisors, counsel and accountants. The Company and the
Shareholders have adequate means of providing for current
needs and personal contingencies, and have no need for
liquidity and can sustain a complete loss of the investment in
the Shares.
(e) The Shares which the Purchaser is to issue hereunder will be
acquired for the recipient's own account, for investment
purposes, not as a nominee or agent, and not with a view to or
for sale in connection with any distribution of the Shares in
violation of applicable securities laws.
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(f) The Company and the Shareholders understand that no federal or
state agency has passed upon the Shares or made any finding or
determination as to the fairness of the investment in the
Shares.
(g) The Company and each Shareholder is an "Accredited Investor"
as defined in Rule 501(a) of Regulation D promulgated under
the 1933 Act. The Company and the Shareholders acknowledge
that the Shares may be purchased only by persons who come
within the definition of an "Accredited Investor" as that term
is defined in Rule 501(a) of Regulation D promulgated under
the 1933 Act.
(h) Neither the Company nor any Shareholder has received any
general solicitation or general advertising concerning the
Shares, nor is the Company nor any Shareholders aware of any
such solicitation or advertising.
2.32. DISCLOSURE.
No representation or warranty by the Company in this Agreement and no
statement contained in any document (including, without limitation, the
financial statements referred to herein and the Disclosure Schedule),
certificate, exhibit or other writing furnished or to be furnished to
Purchaser or Clarion pursuant to the provisions of this Agreement,
contains or will contain, any untrue statement of material fact or omit
or will omit to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which
they were made, not misleading, and all of the foregoing completely and
correctly present the information required or purported to be set forth
herein or therein. There is no material fact as of the date hereof
which has not been disclosed in writing to the Purchaser related to the
Company, the Assets or the Company's operations, properties, financial
condition or prospects which has a Material Adverse Effect or, in the
future may have a Material Adverse Effect on the Company or the Assets
other than any Material Adverse Effect that (i) arises predominately by
reason of a general deterioration in the economy or in the plastic
injection molding industry after the date hereof, or (ii) arises
predominantly out of either the disclosure of the fact that it is
Clarion or the Purchaser that is the prospective acquiror of the
Company's business or out of any action taken by Clarion or the
Purchaser after the date hereof; and does not arise out of or relate to
any act or omission by the Company. The representations and warranties
contained in this Section 2 or elsewhere in this Agreement or any
document delivered pursuant hereto will not be affected or deemed
waived by reason of the fact that the Purchaser or Clarion their
respective representatives knew (other than as a result of the
Disclosure Schedule or other writing delivered to the Purchasers on the
Closing Date) or should have known that any such representation or
warranty is or might be inaccurate in any respect.
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3. REPRESENTATIONS AND WARRANTIES OF CLARION AND THE PURCHASER
Clarion and the Purchaser, jointly and severally, represent and warrant
to the Company as of the date hereof as follows:
3.1. CORPORATE ORGANIZATION.
Each of Clarion and the Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization. Each of Clarion and the Purchaser is
qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the nature of the activities
conducted by it or the character of the property owned, leased or
operated by it make such qualification necessary or appropriate, except
for those jurisdictions where the failure to be so qualified has not
and could not reasonably be expected to have a Material Adverse Effect
on the ability of Clarion or the Purchaser, as the case may be, to
fulfill its obligations under this Agreement.
3.2. AUTHORIZATION.
Each of Clarion and the Purchaser has full corporate power and
authority to enter into this Agreement and to carry out the
transactions contemplated herein. The Boards of Directors of Clarion
and the Purchaser have taken all action required by law, their
respective articles of incorporation and bylaws or otherwise to
authorize the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated herein and no action
of the stockholders of Clarion is required. This Agreement is the valid
and binding legal obligation of Clarion and the Purchaser enforceable
against them in accordance with its terms.
3.3. NON-CONTRAVENTION.
Neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated herein will: (i)
violate any provision of the articles of incorporation or bylaws of
Clarion or the Purchaser; or (ii) except for such violations,
conflicts, defaults, accelerations, terminations, cancellations,
impositions of fees or penalties, mortgages, pledges, liens, security
interests, encumbrances, restrictions and charges which would not,
individually or in the aggregate, have a Material Adverse Effect on
Clarion or the Purchaser, (A) violate, be in conflict with, or
constitute a default, however defined (or an event which, with the
giving of due notice or lapse of time, or both, would constitute such a
default), under, or cause or permit the acceleration of the maturity
of, or give rise to, any right of termination, cancellation, imposition
of fees or penalties under, any debt, note, bond, lease, mortgage,
indenture, license, obligation, contract, commitment, franchise,
permit, instrument or other agreement or obligation to which Clarion or
the Purchaser is a party or by which they or any of their properties or
assets is or may be bound (unless with respect to which defaults or
other rights, requisite waivers or consents will have been obtained at
or prior to the Closing) or (B) result in the creation or imposition of
any mortgage, pledge, lien, security interest, encumbrance,
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restriction, adverse claim or charge of any kind, upon any property or
assets of Clarion or the Purchaser under any debt, obligation,
contract, agreement or commitment to which Clarion or the Purchaser is
a party or by which Clarion or the Purchaser or any of their assets or
properties is or may be bound; or (iii) violate any Law.
3.4. CONSENTS AND APPROVALS.
No Consent is required by any person or entity, including without
limitation any Authority, in connection with the execution, delivery
and performance by Clarion and the Purchaser of this Agreement, or the
consummation of the transactions contemplated herein, other than any
Consent which, if not made or obtained, will not, individually or in
the aggregate, have a Material Adverse Effect on the business of
Clarion or the Purchaser.
3.5. BROKERS.
Neither Clarion, the Purchaser nor any of their directors, officers or
key employees have employed any broker, finder or financial advisor, or
incurred any liability for any brokerage fee or commission, finder's
fee or financial advisory fee, in connection with the transactions
contemplated hereby, nor is there any basis known to Clarion or the
Purchaser for any such fee or commission to be claimed by any person or
entity.
3.6. LEGAL PROCEEDINGS.
There are no actions, suits or proceedings instituted, pending or to
the knowledge of Clarion or the Purchaser, threatened against Clarion
or the Purchaser, or against any of their affiliates or against any
property, asset, interest or right of any of them, either individually
or in the aggregate, that would prevent or delay consummation of the
transactions contemplated by this Agreement or otherwise prevent
Clarion or the Purchaser from performing their respective obligations
under this Agreement. Neither Clarion nor the Purchaser is subject to
any judgment, order, writ, injunction or decree that would prevent or
delay consummation of the transactions contemplated by this Agreement
or otherwise prevent Clarion or the Purchaser from performing their
respective obligations under this Agreement.
3.7. CAPITALIZATION.
(a) The authorized capital stock of Clarion is as set forth on the
disclosure schedule (the "Clarion Disclosure Schedule") to be
attached hereto as Exhibit 3 at the Closing. Except as set
forth on the Clarion Disclosure Schedule, there are no
outstanding securities of Clarion convertible into or
evidencing the right to purchase or subscribe for any shares
of capital stock of Clarion, there are no outstanding or
authorized options, warrants, calls, subscriptions, rights,
commitments or any other agreements of any character
obligating Clarion to issue any shares of its capital stock or
any securities convertible into or evidencing the right to
purchase or subscribe for any shares of such stock, and there
are no agreements or understandings with respect to the
voting, sale, transfer or registration of any shares of
capital stock of Clarion. No outstanding options, warrants or
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other securities exercisable for or convertible into shares of
capital stock of Clarion require anti-dilution adjustments by
reason of the consummation of the transactions contemplated
hereby. There are no preemptive rights with respect to any
securities of Clarion other than those which have been waived.
(b) The issued and outstanding shares of Common Stock of Clarion
are duly authorized, validly issued, fully paid and
nonassessable. The shares of Common Stock to be issued
pursuant to this Agreement, (i) will be validly issued, fully
paid and nonassessable and (ii) will be issued in compliance
with all applicable federal and state securities laws.
3.8. SUBSIDIARIES.
The Clarion Disclosure Schedule sets forth a complete and accurate list
of all subsidiaries of Clarion, showing (as to each such subsidiary)
the date of its incorporation and the jurisdiction of its
incorporation. Clarion is the sole stockholder of each subsidiary. The
outstanding shares of capital stock of each subsidiary are validly
issued, fully paid and nonassessable. There are no outstanding
securities of any subsidiary convertible into or evidencing the right
to purchase or subscribe for any shares of capital stock of any
subsidiary, there are no outstanding or authorized options, warrants,
calls, subscriptions, rights, commitments or any other agreements of
any character obligating any subsidiary to issue any shares of its
capital stock or any securities convertible into or evidencing the
right to purchase or subscribe for any shares of such stock, and there
are no agreements or understandings with respect to the voting, sale,
transfer or registration of any shares of capital stock of any
subsidiary.
3.9. INSURANCE.
Clarion and its subsidiaries maintain adequate insurance with respect
to their respective businesses and are in compliance with all material
requirements and provisions thereof.
3.10. PATENTS AND TRADEMARKS.
Clarion and its subsidiaries have sufficient title and ownership of (or
rights under license agreements to use) all patents, trademarks,
service marks, trade names, copyrights, trade secrets, proprietary
rights and processes ("Intellectual Property") necessary for the
conduct of their businesses in the ordinary course. There are no
outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is Clarion or any of its subsidiaries bound by or a
party to any options, licenses or agreements of any kind with respect
to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, proprietary rights and processes of any other person.
3.11. COMPLIANCE WITH OTHER INSTRUMENTS AND LEGAL REQUIREMENTS.
(a) None of Clarion or any of its subsidiaries is in violation or
default of any provisions of its certificate of incorporation,
bylaws, or comparable organizational documents. None of
Clarion or any of its subsidiaries is in violation or default
in any material respect under any provision, instrument,
judgment, order, writ, decree, contract or agreement to which
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it is a party or by which it is bound or of any provision of
any federal, state or local statute, rule or regulation
applicable to Clarion or any of its subsidiaries (including,
without limitation, any law, rule or regulation relating to
protection of the environment and the maintenance of safe and
sanitary premises). The execution, delivery and performance of
this Agreement due any agreements related thereto and the
consummation of the transactions contemplated hereby and
thereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of
time and giving of notice, either a default under any such
provision, instrument, judgment, order, writ, decree, contract
or agreement, or require any consent, waiver or approval
thereunder, or constitute an event that results in the
creation of any lien upon any assets of Clarion or any of its
subsidiaries.
(b) Clarion and its subsidiaries have all permits of all
governmental entities required to conduct their respective
businesses as proposed to be conducted, except to the extent
that the failure to have such permits would not have a
material adverse effect.
3.12. MATERIAL AGREEMENTS.
Except as disclosed in Clarion SEC reports (as defined in Section 3.14)
and except those material contracts, agreements, commitments,
understandings or proposed transactions required to be disclosed in
Clarion's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999, there are no material contracts, agreements,
commitments, understandings or proposed transactions, whether written
or oral, to which Clarion or any of its subsidiaries is a party, or by
which it is bound which requires disclosure in Clarion SEC reports.
3.13. REGISTRATION RIGHTS.
Except as set forth on the Clarion Disclosure Schedule (which sets
forth only the number of shares subject to piggyback registration
rights), Clarion has not granted or agreed to grant any registration
rights, including piggyback registration rights, to any person.
3.14. PURCHASER SEC REPORTS AND FINANCIAL STATEMENTS.
(a) Clarion has filed all periodic reports, statements and other
documents required to be filed by Clarion with the Securities
and Exchange Commission (the "SEC") under the Securities
Exchange Act of 1934 (the "Exchange Act") since December 31,
1998 (collectively, the "Purchaser SEC Reports"), each in the
form (including exhibits and any amendments thereto) required
to be filed with the SEC. As of their respective dates, each
of Clarion's SEC Reports (i) complied in all material respects
with all applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the Exchange Act,
and the rules and regulations promulgated thereunder,
respectively, (ii) were filed in a timely manner, and (iii)
did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein,
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or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not
misleading. None of the subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the audited consolidated financial statements of
Clarion (including any related notes and schedules thereto)
included (or incorporated by reference) in its Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1998, is
accurate and complete and fairly presents, in conformity with
generally accepted accounting principles ("GAAP") applied on a
consistent basis through the periods involved (except as may
be noted therein), and in conformity with the SEC's Regulation
S-B, the consolidated financial position of Clarion and its
consolidated subsidiaries as of its date and the consolidated
results of operations and changes in financial position for
the period then ended.
3.15. CHANGES.
Except as disclosed in Clarion SEC Reports and except as required to be
disclosed in Clarion's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1999, there has not been any of the following:
(a) any change in the assets, liabilities, financial condition or
operating results of Clarion or any of its subsidiaries,
except changes in the ordinary course of business that have
not had, in the aggregate, a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets,
properties, financial condition, operating results or business
of Clarion or any of its subsidiaries;
(c) any waiver by Clarion or any of its subsidiaries of a valuable
right or of a material debt owed to it outside of the ordinary
course of business or that otherwise could reasonably be
expected, individually or in the aggregate, to have a Material
Adverse Effect;
(d) any satisfaction or discharge of any lien or payment of any
obligation by Clarion or any of its subsidiaries that could
reasonably be expected, individually, or in the aggregate, to
have a Material Adverse Effect;
(e) any change or amendment to a contract or arrangement by which
Clarion or any of its subsidiaries or any of their respective
assets or properties is bound, or subject that could
reasonably be expected, individually, or in the aggregate, to
have a Material Adverse Effect; or
(f) any events or circumstances that otherwise could reasonably be
expected, individually, or in the aggregate, to have a
Material Adverse Effect.
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3.16. TAXES.
To the knowledge of Clarion, all federal, state, local and foreign tax
returns, reports and statements required to be filed by Clarion and its
subsidiaries have been filed with the appropriate governmental agencies
in all jurisdictions in which such returns, reports and statements are
required to be filed, except where failure to make such filings have
not resulted and will not result in, in the aggregate, a Material
Adverse Effect on Clarion. All taxes, charges and other impositions due
and payable by Clarion and its subsidiaries have been paid in full on a
timely basis, except where contested in good faith and by appropriate
proceedings if adequate reserves therefor have been established on the
books and records of Clarion or subsidiary in accordance with GAAP
consistently applied. The provision for taxes of each of Clarion and
its subsidiaries as shown in Clarion SEC Reports is sufficient for all
unpaid taxes, charges, and other impositions of any nature due or
accrued as of the date hereof, whether or not assessed or disputed.
Proper and accurate amounts have been withheld by Clarion and its
subsidiaries from their respective employees for all periods in full
and complete compliance with the tax, social security and unemployment
withholding provisions of applicable federal, state, local and foreign
law and such withholdings have been timely paid to the respective
governmental agencies, except where failure to so withhold has nor
resulted in and will not result in, in the aggregate, a Material
Adverse Effect on Clarion. Clarion has not received notice of any audit
or of any proposed deficiencies from any governmental authority, and no
controversy with respect to taxes of any type is pending or, to the
best knowledge of Clarion, threatened. Except for routine filing
extensions granted as a matter of right under applicable law, none of
Clarion or any of its subsidiaries has executed or filed with the
Internal Revenue Service or any other governmental authority any
agreement or other document extending, or having the effect of
extending, the period of assessment or collection of any taxes, charges
or other impositions, except where such execution or filing would not
result in a Material Adverse Effect on Clarion. None of Clarion or any
of its subsidiaries has agreed or is required to make any adjustment
under Section 481(a) of the Code by reason of a change in accounting
method or otherwise, except where such adjustment would not result in a
Material Adverse Effect on Clarion. Further, none of Clarion or any of
its subsidiaries has any obligation under any tax-sharing agreement.
3.17. DISCLOSURE.
At Closing, the Clarion Disclosure Schedule shall be true, complete and
correct. Clarion shall have the right to supplement the Clarion
Disclosure Schedule up to the Closing. No representation or warranty by
Clarion or the Purchaser in this Agreement and no statement contained
in any document, certificate, exhibit or other writing furnished or to
be furnished to the Company pursuant to the provisions of this
Agreement, contains, or will contain, any untrue statement of material
fact or omit or will omit to state any material fact necessary in order
to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading.
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4. COVENANTS
4.1. COMPANY'S AGREEMENTS AS TO SPECIFIED MATTERS.
Except as specifically set forth on the Disclosure Schedule and except
as may be otherwise agreed in writing by Clarion or the Purchaser, from
the date hereof until the Closing, the Company will conduct its
business and operations according to its ordinary and usual course of
business, to preserve substantially intact the business organizations
of the Company and to preserve the Company's current relationships with
customers, employees, suppliers and other persons with which it has
significant business relations. Without limiting the generality of the
foregoing, and, except as otherwise expressly provided in this
Agreement or in the ordinary course of business, prior to the Closing
Date, without the prior written consent of the Purchaser (which consent
will not be unreasonably withheld), the Company will not:
(a) Amend its articles of incorporation or code of regulations;
(b) Borrow or agree to borrow any funds;
(c) Incur, assume, suffer or become subject to, whether directly
or by way of guarantee or otherwise, any claims, obligations,
liabilities or loss contingencies which, individually or in
the aggregate, are material to the conduct of the businesses
of the Company or the Assets, or have or would have a Material
Adverse Effect on the financial condition of the Company or
the condition of the Assets;
(d) Pay, discharge or satisfy any claims, liabilities or
obligations except in the ordinary course of business;
(e) Permit or allow any of the Assets to be subjected to any Lien,
except Permitted Liens;
(f) Write down the value of any Inventory or write off as
uncollectable any Accounts Receivable;
(g) Cancel or amend any debts, waive any claims or rights or sell,
transfer or otherwise dispose of any properties or assets,
other than (i) Inventory in the ordinary course of business or
(ii) for such debts, claims, rights, properties or assets
which, individually or in the aggregate, are not material to
the conduct of its business;
(h) License, sell, transfer, pledge, modify, disclose, dispose of
or permit to lapse any right to the use of any Intellectual
Property Rights;
(i) (i) Terminate, enter into, adopt, institute or otherwise
become subject to or amend in any material respect any
collective bargaining agreement or employment or similar
agreement or arrangement with any of the directors, officers
or employees of the Company; (ii) terminate, enter into,
adopt, institute or otherwise become subject to or amend in
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any material respect any Compensation Plan of the Company;
(iii) contribute, set aside for contribution or authorize the
contribution of any amounts for any such Compensation Plan
except as required (and not discretionary) by the terms of
such Compensation Plan; or (iv) grant or become obligated to
grant any general increase in the compensation of any
directors, officers or employees of the Company (including
without limitation any such increase pursuant to any
Compensation Plan);
(j) Make or enter into any commitment for capital expenditures for
additions to property, plant or equipment of the Company
individually in excess of One Hundred Thousand Dollars
($100,000);
(k) (i) Declare, pay or set aside for payment any dividend or
other distribution in respect of its capital stock or other
securities (including without limitation distributions in
redemption or liquidation) or redeem, purchase or otherwise
acquire any shares of its capital stock or other securities;
(ii) issue, grant or sell any shares of its capital stock or
equity securities of any class, or any options, warrants,
conversion or other rights to purchase or acquire any such
shares or equity securities or any securities convertible into
or exchangeable for such shares or equity securities; (iii)
become a party to any merger, exchange, reorganization,
recapitalization, liquidation, dissolution or other similar
corporate transaction; or (iv) organize any new subsidiary,
acquire any capital stock or other equity securities or other
ownership interest in, or assets of, any person or entity or
otherwise make any investment by purchase of stock or
securities, contributions to capital, property transfer or
purchase of any properties or assets of any person or entity;
(l) Pay, lend or advance any amounts to, or sell, transfer or
lease any properties or assets to, or enter into any agreement
or arrangement with, any director, officer or employee of the
Company;
(m) Terminate, enter into or amend in any material respect any
item identified in Section 2.19 of the Disclosure Schedule, or
take any action or omit to take any action which will cause a
breach, violation or default (however defined) under any such
items;
(n) Take any action that can be reasonably anticipated to have a
Material Adverse Effect on Company or that could cause any
representation or warranty set forth in Section 2 hereof to be
untrue or any condition to the Closing not to be satisfied;
(o) Accelerate billings, shipments to customers, payments from
customers, orders from suppliers or payment of accounts
payable or adjust the level of inventory, except in the
ordinary course of business consistent with past practices;
(p) Acquire any of the business or assets of any other person,
firm, association or corporation;
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(q) Do any act or omit to do any act, or permit any act or
omission to act, which could cause a breach or default by
Company under any of Company's contracts, agreements,
commitments or obligations;
(r) Enter into or amend any other agreements, commitments or
contracts which, individually or in the aggregate, are
material to Company, except agreements for the purchase and
sale of goods or services in the ordinary course of business,
consistent with past practice and not in excess of current
requirements; or
(s) Agree, whether in writing or otherwise, to take any action
described in this subsection.
4.2. NO COMPANY SOLICITATION OF ALTERNATE TRANSACTION.
The Company will not, and will ensure that, the Company's directors,
officers and employees, independent contractors, consultants, counsel,
accountants, investment advisors and other representatives and agents
will not, directly or indirectly, solicit, initiate or encourage
discussions or negotiations with, provide any nonpublic information to,
or enter into any agreement with, any third party concerning (or
concerning the business of the Company in connection with) any tender
offer (including a self tender offer), spin-off, exchange offer,
merger, consolidation, sale of substantial assets or of a significant
amount of assets, sale of securities, acquisition of the Company's
securities, liquidation, dissolution or similar transactions involving
the Company (such proposals, announcements or transactions being called
herein "ACQUISITION PROPOSALS").
4.3. FULL ACCESS TO CLARION AND PURCHASER.
Throughout the period prior to the Closing, the Company will afford to
Clarion and the Purchaser and their directors, officers, employees,
counsel, accountants, investment advisors and other authorized
representatives and agents reasonable access to the facilities,
properties, books and records of the Company in order that Clarion and
the Purchaser may make such investigations as it will desire to make of
the affairs of the Company. Such access shall be afforded by the
Company upon receipt of reasonable advance notice and during normal
business hours. The Company will furnish such additional financial and
operating data and other information as Clarion or the Purchaser will,
from time to time, reasonably request, including without limitation
access to the working papers of its independent certified public
accountants; provided, however, that any such investigation shall not
affect or otherwise diminish or obviate in any respect any of the
representations and warranties of the Company herein.
4.4. CONFIDENTIALITY.
(a) Any information regarding the Company obtained from or on
behalf of the Company, other than as specifically excepted
from the definition of confidential information in Part II,
paragraph 2 of the Letter of Intent dated December 8, 1999 by
and between the Company and Clarion (the "CONFIDENTIALITY
AGREEMENT"), shall be subject to the terms of the
Confidentiality Agreement, provided, however, that any such
information regarding the Company and the transactions
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contemplated hereby that is subject to the terms of the
Confidentiality Agreement may be disclosed by Clarion or the
Purchaser to their respective directors, officers, employees,
investment advisors, accountants, counsel and other authorized
representatives and agents, provided in each case that such
recipient agrees to keep such information confidential to the
extent required under the Confidentiality Agreement.
(b) The Company will treat and hold as confidential all of the
information relating to Clarion or the Purchaser furnished to
it in connection with the transactions contemplated herein
("Information"), not use any of the Information other than in
connection with this Agreement or in the performance of
services for the Company and Purchaser, and deliver promptly
to the Purchaser or destroy, at the request and option of the
Purchaser, all tangible forms (and all copies) of the
Information that are in its possession or under its control.
If the Company is required (by oral question or request for
information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative, demand or
similar process) to disclose any Information, the Company will
notify the Purchaser promptly of the request or requirement so
that the Purchaser may seek an appropriate protective order or
waive compliance with the provisions of this section with
respect to that Information in that situation. If, in the
absence of such a protective order or the receipt of a waiver
hereunder, the Company is, on the advice of legal counsel,
compelled to disclose Information to any tribunal or lese
stand liable for contempt, that Company, after giving the
notice described above, any disclose the Information to the
tribunal if the Company uses its best efforts to obtain, at
the request of the Purchaser, an order or other assurance that
confidential treatment will be accorded to such portion of the
Information required to be disclosed as the Purchaser shall
designate. The foregoing provision shall not apply to an
Information that is generally available to the public
immediately prior to the time of the disclosure through no
fault of the Company.
4.5. FILINGS; CONSENTS; REMOVAL OF OBJECTIONS.
Subject to the terms and conditions herein provided, the parties hereto
will use their best efforts to take or cause to be taken all actions
and do or cause to be done all things necessary, proper or advisable
under applicable Laws to consummate and make effective, as soon as
reasonably practicable, the transactions contemplated hereby, including
without limitation obtaining all Consents of any person or entity,
whether private or governmental, required in connection with the
consummation of the transactions contemplated herein. In furtherance,
and not in limitation of the foregoing, it is the intent of the parties
to consummate the transactions contemplated herein at the earliest
practicable time, and they respectively agree to exert their best
efforts to that end, including without limitation: (i) the removal or
satisfaction, if possible, of any objections to the validity or
legality of the transactions contemplated herein; and (ii) the
satisfaction of the conditions to consummation of the transactions
contemplated hereby.
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4.6. FURTHER ASSURANCES; COOPERATION; NOTIFICATION.
(a) Each party hereto will, before, at and after the Closing,
execute and deliver such instruments and take such other
actions as the other party or parties, as the case may be, may
reasonably require in order to carry out the intent of this
Agreement. Without limiting the generality of the foregoing,
at any time after the Closing, at the request of the Purchaser
and without further consideration, the Company will execute
and deliver such instruments of sale, transfer, conveyance,
assignment and confirmation and take such action as the
Purchaser may reasonably deem necessary or desirable in order
to more effectively transfer, convey and assign to the
Purchaser, and to confirm the Purchaser's title to, all of the
Assets, to put the Purchaser in actual possession and
operating control thereof and to assist the Purchaser in
exercising all rights with respect thereto.
(b) Prior to the Closing, the Company will cooperate with Clarion
and the Purchaser to promptly develop plans for the management
of the business after the Closing, including without
limitation plans relating to productivity, marketing,
operations and improvements, and the Company will further
cooperate with Clarion and the Purchaser to provide for the
implementation of such plans as soon as practicable after the
Closing. Subject to applicable Law, prior to the Closing the
Company will confer on a regular and reasonable basis with one
or more representatives of Clarion or the Purchaser to report
on material operational matters and the general status of
ongoing operations.
(c) At all times from the date hereof until the Closing, each
party will promptly notify the other in writing of the
occurrence of any event which it reasonably believes will or
may result in a failure by such party to satisfy the
conditions specified in Section 5 and Section 6 hereof.
4.7. SUPPLEMENTS TO DISCLOSURE SCHEDULE.
At least 48 hours prior to the Closing, the Company will supplement or
amend the Disclosure Schedule with respect to any event or development
which, if existing or occurring at or prior to the date of this
Agreement, would have been required to be set forth or described in the
Disclosure Schedule or which is necessary to correct any information in
the Disclosure Schedule or in any representation and warranty of the
Company which has been rendered inaccurate by reason of such event or
development.
4.8. PUBLIC ANNOUNCEMENTS.
None of the parties hereto will make any public announcement with
respect to the transactions contemplated herein without the prior
consent of the other parties, which consent will not be unreasonably
withheld or delayed; provided, however, that any of the parties hereto
may at any time make any announcements which are required by applicable
Law so long as the party so required to make an announcement promptly
upon learning of such requirement notifies the other parties of such
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requirement and discusses with the other parties in good faith the
exact proposed wording of any such announcement. In the event that
either Clarion or the Purchaser makes a public announcement with
respect to the transactions contemplated herein, then Clarion and the
Purchaser shall be deemed to have waived the conditions set forth in
Sections 5.9 and 5.13 hereof.
4.9. TAX MATTERS.
(a) TRANSACTIONAL TAXES. In addition to and without limiting those
representations and warranties set forth in Section 2.15 of
this Agreement, in the event that any sales or use Tax, or any
Tax in the nature of a sales or use tax, or any transactional
Tax is payable or assessed relative to the transactions
contemplated herein, the Company will pay all such Taxes and
will not collect any part thereof from the Purchaser. The
parties hereto will cooperate to make any necessary filings
with state and local taxing Authorities and to furnish any
required supplemental information with respect to any state
and local Tax liabilities resulting from the consummation of
the transactions contemplated herein.
(b) TAX LIABILITY; POST-CLOSING TAX RETURN FILINGS; NO
DISTRIBUTIONS. In addition to and without limiting those
representations and warranties set forth in Section 2.15 of
this Agreement, the Company will pay all Taxes arising from or
relating to the transactions contemplated by this Agreement,
including without limitation Tax on any income or gains
arising from the sale of the Assets. The Company will cause to
be prepared and filed all Federal and state income Tax Returns
for the Company reflecting all activities of the Company
through and including the Closing Date. Irrespective of any
prior practice, no dividend or other distribution of property
of the Company will be made by the Company on or before the
Closing Date without the express written consent of the
Purchaser.
(c) COOPERATION AND RECORDS RETENTION. The Company and the
Purchaser will (i) each provide the other with such assistance
as may reasonably be requested by any of them in connection
with the preparation of any Tax Return, audit or other
examination by any taxing Authority or judicial or
administrative proceedings relating to liability for Taxes,
(ii) each retain and provide the other with any records or
other information which may be relevant to such Tax Return,
audit or examination, proceeding or determination, and (iii)
each provide the other with any final determination of such
audit or examination, proceeding or determination that affects
any amount required to be shown on any Tax Return of the other
for any period. Without limiting the generality of the
foregoing, the Company and the Purchaser will retain, until
the applicable statutes of limitations (including all
extensions) have expired, copies of all Tax Returns,
supporting work schedules and other records or information
which may be relevant to such Tax Returns for all Tax periods
or portions thereof ending on or before the Closings and will
not destroy or otherwise dispose of any such records without
first providing the other party with a reasonable opportunity
to review and copy the same.
(d) SECTION 461(h) LIABILITIES. Pursuant to Section 1.2 hereof,
the Purchaser is expressly assuming certain liabilities of the
Company which have not matured into a deduction under Section
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461(h) of the Code (the "Section 461(h) Liabilities"). The
Company and the Purchaser agree that, pursuant to Regs.
Section 1.461-4(d)(5) and 1.461-4(g)(1)(ii)(C), the Company
will be entitled to claim a deduction for the Section 461(h)
Liabilities assumed by the Purchaser.
4.10. BULK TRANSFERS.
The Company has requested that the Purchaser waive, and the Purchaser
hereby agrees to waive, the requirements of the Uniform Commercial Code
concerning bulk transfers, as in effect in the various states in which
the Company has assets, including without limitation the requirement of
notice to creditors. It is expressly agreed by the parties hereto that
the obligation to indemnify Clarion and the Purchaser under Section 8.3
includes any claims by creditors of the Company against Clarion or the
Purchaser arising, directly or indirectly, in connection with such
request and waiver.
4.11. EMPLOYEE BENEFITS.
(a) On or as soon as administratively practicable after the
Closing Date, the Purchaser will extend offers of immediate
employment to employees of the Company listed on Exhibit 4.11
hereto. Except as otherwise expressly provided in this
Agreement, the terms and conditions of each such offer and of
any continuing employment will be determined by the Purchaser
in its sole discretion and any resulting employment
relationship will be at will. Any employee of the Company who
accepts such an employment offer and reports for work on the
date directed by the Purchaser will be sometimes hereinafter
referred to as a "TRANSFERRED EMPLOYEE." The Company hereby
authorizes Clarion and the Purchaser to enter into discussions
with any of such employees listed on Exhibit 4.11 concerning
the future employment of such individual by the Purchaser;
provided, however, that (i) such discussions will not be
commenced prior to the giving of notice by the Company to the
employees of the transactions contemplated by this Agreement;
(ii) all such discussions will be conducted in such a manner
as not to interfere unreasonably with the business operations
of the Company; and (iii) Clarion and the Purchaser shall not
in any way obligate the Company with respect to such
employment.
(b) Purchaser shall grant to each Transferred Employee credit for
his or her service with the Company prior to the date such
Transferred Employee is actively at work with Purchaser for
purposes of eligibility, vesting and retirement eligibility
under any of Purchaser's benefit plans that are maintained or
adopted by the Purchaser for the benefit of the Transferred
Employees.
(c) The Company shall be responsible for providing any notice to
the employees of the Company and their authorized
representatives required by the Workers Adjustment and
Retraining Notification Act, 29 U.S.C.ss. 2101 ET SEQ.
("WARN"), or any state plant closing or notification law, as a
result of any employment actions taken at any time prior to or
at the Closing and the Purchaser shall be responsible for
providing any notice to employees of the Company and its
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authorized representatives required by WARN or any state plant
closing or notification law, as a result of any employment
actions taken at any time after the Closing. The Company will
not furlough, layoff or terminate the employment of any
employees of the Company, other than "for cause," as set forth
at 29 U.S.C.ss.2101(a)(6), at any time prior to the Closing
without the prior consent of the Purchaser. The Company shall
indemnify the Purchaser from and against, any Losses which may
be incurred by the Purchaser as a result of the Company's
failure to provide any notice required by this Section 4.11(c)
and the Purchaser shall indemnify the Company from and against
any losses which may be incurred by it as a result of the
Purchaser's failure to provide any notice required by this
Section 4.11(c). Upon request, the Company will promptly
provide to the Purchaser complete information regarding all
layoffs, terminations, furloughs and firings that have
occurred since January 1, 1998 and any other information that
the Purchaser may reasonably request to permit the Purchaser
to comply with WARN or any state plant closing or notification
law.
(d) The Company will not, for a period of three (3) years after
the Closing Date, take any action, other than with the written
consent of the Purchaser, which could be reasonably foreseen
to induce any Transferred Employee, while still employed by
Clarion, the Purchaser or any subsidiary of Clarion, to enter
into the employ of the Company or any affiliate of the
Company.
(e) Except for the liabilities relating to COBRA liabilities
referred to in Section 4.11(f), Transferred Plans listed on
Exhibit 4.11(g) and the liabilities associated therewith as
disclosed in Section 1.2 and in the Disclosure Schedule
pertaining to Section 2.17, Clarion and the Purchaser hereby
specifically disclaim any assumption of, or liability with
respect to, any employee benefit plan, policy, practice or
agreement to which the Company is a party or under which any
of the Company's employees or former employees are covered.
(f) With respect to each Transferred Employee, or as otherwise
required by law, in connection with any "group health plan"
(as such terms are defined in Section 4980B of the Code)
maintained by the Company or any of its affiliates, as between
the Purchaser and Clarion, on the one hand, and the Company,
on the other hand, the Purchaser and Clarion are responsible
for providing group health plan continuation coverage in
accordance with Section 4980B of the Code and Part 6 of
Subtitle B of Title I of ERISA and will indemnify, defend and
hold harmless the Company from and against any liability,
expense, cost, tax or obligation of any nature with respect to
such Transferred Employees arising in connection with group
health plan coverage required under Section 4980B of the Code
or Part 6 of Subtitle B of Title I of ERISA. Within three
business days after the Closing, the Company will deliver to
the Purchaser a complete and accurate list of the date and
nature of the qualifying event pursuant to which each
individual listed on the Disclosure Schedule pursuant to
Section 2.17(e) became covered or eligible to be covered under
any "group health plan" maintained by the Company pursuant to
the group health plan continuation requirements of COBRA and
Section 4980B of the Code, and the last known address of each
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such individual together with all documents, records, forms,
elections, notices and other materials relating to such
coverage or eligibility to elect such coverage in the
possession of any of or reasonably accessible to the Company.
With respect to each individual listed on the Disclosure
Schedule pursuant to Section 2.17(e) who received proper
notification of his or her continuation coverage rights
pursuant to COBRA, in connection with any "qualifying event"
that has occurred on or before the Closing Date or with
respect to whom the deadline for providing such notice in
connection with such qualifying event has not yet passed, as
between the Purchaser, on the one hand, and the Company, on
the other hand, the Purchaser is responsible for providing
group health plan continuation coverage in accordance with
Section 4980B of the Code and Part 6 of Subtitle B of Title I
of ERISA. With respect to any other individual who is not
listed on the Disclosure Schedule pursuant to Section 2.17(e)
or who has not received proper notification of his or her
continuation coverage rights pursuant to COBRA, but who is a
"qualified beneficiary" currently receiving or eligible to
receive group health plan continuation coverage under any
"group health plan" maintained by the Company or any
Affiliated Organization, as between the Purchaser, on the one
hand, and the Company, on the other hand, the Company is
responsible for providing group health plan continuation
coverage in accordance with COBRA (without regard to whether
the Purchaser is ultimately determined to be responsible to
provide such coverage to any such individual) and the Company
will indemnify, defend and hold harmless the Purchaser and its
affiliates from and against any liability, expense, cost, tax
or obligation of any nature with respect to such individual
arising in connection with group health plan coverage required
under COBRA.
(g) Effective as of the Closing Date, Purchaser will be
substituted for the Company as sponsor, administrator and
named fiduciary of the Pension Plans of the Company which are
listed on Exhibit 4.11(g) (the "TRANSFERRED PLANS"), and not
later than the Closing Date, the Company will prepare and the
Company and the Purchaser will cause to be authorized and
executed an amendment to the Transferred Plans effecting such
substitution. Except with respect to duties, obligations or
liabilities as to which the Company is obligated to indemnify
the Purchaser pursuant to Section 8.3 on and after the Closing
Date, the Purchaser is responsible for all powers, duties,
rights, privileges, obligations and liabilities arising under
or relating to the Transferred Plans. Following the Closing
Date, the Company and the Purchaser will, each at its own
expense, cooperate to make all required governmental filings
with respect to the Transferred Plans, including, without
limitation, the Form 5500 Annual Report for the plan year that
includes the Closing Date.
4.12. COMPETITIVE ACTIVITIES.
The Company and the Shareholders agree that, for a period of five (5)
years after the Closing Date, neither they, nor any of their
subsidiaries or affiliates will, directly or indirectly, engage in any
commercial activity anywhere in the world that is competitive with the
current business of the Company nor will the Company or Shareholders,
or their subsidiaries or affiliates, participate in the management or
operation of, or become an investor in (other than with respect to
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passive investments held in an investment portfolio by the Company or
the Shareholders, or any of their subsidiaries or affiliates; provided,
however, that neither the Company or the Shareholders, nor any of their
subsidiaries or affiliates, exercises control over the operations,
management or any other activities of such entity), any venture or
enterprise of whatever kind, the business of which is competitive with
the current business of the Company transferred to Purchaser hereunder
anywhere in the world. In addition, during a period of five (5) years
after the Closing Date, neither the Company or the Shareholders, nor
any of their subsidiaries or affiliates, will, either directly or
indirectly, alone or with others, solicit or assist anyone else in the
solicitation of, any (a) employee of Clarion or the Purchaser, or their
subsidiaries or affiliates, to terminate his or her employment with
Clarion or the Purchaser, or their subsidiaries or affiliates, as the
case may be, or become employed by the Company or the Shareholders, or
any of their subsidiaries or affiliates, or any business enterprise
with which they may then be associated, affiliated or connected or (b)
customer of Clarion or the Purchaser, or their subsidiaries or
affiliates, to change in any adverse respect its relationship with
Clarion or the Purchaser, or their subsidiaries or affiliates.
4.13. NAME CHANGE.
Within 48 hours after the Closing the Company shall change its
corporate name to one which does not include "Drake Products
Corporation" or any derivation thereof.
4.14. PHASE II REPORTS.
The Company shall obtain, at its own expense, Phase I Environmental
Site Assessment Reports ("PHASE I REPORTS") on the real properties set
forth on the Disclosure Schedule which are owned or leased by the
Company. If Clarion and the Purchaser deem it necessary and prudent,
acting reasonably, Clarion and the Purchaser may obtain, at the cost of
the Company, Phase II Environmental Site Assessment reports ("PHASE II
REPORTS"), from an environmental consulting firm reasonably acceptable
to the Company under a work plan and cost estimate reasonably
acceptable to the Company, and performed in accordance with reasonable
prudence and standard commercial practice for the real properties set
forth on the Disclosure Schedule which are owned or leased by the
Company, PROVIDED, HOWEVER, that any Phase II performed for property
located in the State of Michigan, shall be performed in accordance with
the applicable rules and Instructions of the Michigan Department of
Environmental Quality ("MDEQ") governing the Baseline Environmental
Assessment ("BEA") procedures. In the event any Michigan real property
is a "facility" under Chapter 324, Article II, Chapter 7, Part 201 of
the Michigan Natural Resources and Environmental Protection Act,
Clarion and the Purchaser, together with any proposed owner or operator
of the facility, shall complete and file a BEA with the MDEQ. The Phase
II and the BEA shall be at the Company's cost provided that the Company
has reviewed and approved any work plans and cost proposals related
thereto, such approval not to be unreasonably withheld.
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4.15. REAL PROPERTY; TITLE INSURANCE.
(a) The Company shall convey marketable title to the all real
properties owned by the Company by warranty deed, subject only
to those easements, restrictions, covenants and agreements of
record, and matters disclosed by the ALTA survey referenced in
Section 4.15(c).
(b) The Company shall obtain a commitment for title insurance to
be issued by The Chicago Title Insurance Company (the "Title
Commitment"), and at the Closing, shall pay the premium for a
standard coverage owner's or joint protection ALTA policy of
title insurance to be issued pursuant to the Title Commitment.
(c) The Company has provided the Purchaser an existing ALTA survey
prepared by Farmer & Simpson Engineers, Inc.
4.16. MICHIGAN REAL PROPERTY.
The Company and the Shareholders will use their best efforts to
effectuate a definitive purchase agreement for the real property
located at 801 Fairplains Street and 501 Cedar Street in Greenville,
Michigan (the "MICHIGAN REAL ESTATE") on terms reasonably satisfactory
to Clarion and the Purchaser.
5. CONDITIONS TO OBLIGATIONS OF CLARION AND THE PURCHASER
Notwithstanding any other provision of this Agreement to the contrary,
the obligation of Clarion and the Purchaser to effect the transactions
contemplated herein will be subject to the satisfaction or waiver at or
prior to the Closing of each of the following conditions:
5.1. REPRESENTATIONS AND WARRANTIES TRUE.
The representations and warranties of the Company and the Shareholders
contained in this Agreement, including without limitation in the
Disclosure Schedule initially delivered to the Purchaser as Exhibit 2,
will be in all material respects true, complete and accurate as of the
date when made and at and as of the Closing as though such
representations and warranties were made at and as of such time, except
for changes specifically permitted or contemplated by this Agreement,
and except insofar as the representations and warranties relate
expressly and solely to a particular date or period, in which case they
will be true and correct in all material respects at the Closing with
respect to such date or period.
5.2. PERFORMANCE.
The Company will have performed and complied in all material respects
with all agreements, covenants, obligations and conditions required by
this Agreement to be performed or complied with by the Company on or
prior to the Closing.
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5.3. REQUIRED APPROVALS AND CONSENTS.
(a) All action required by law and otherwise to be taken by the
Board of Directors and Shareholders of the Company to
authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby will have been duly and validly taken.
(b) All Consents of or from all Authorities required hereunder to
consummate the transactions contemplated herein, will have
been delivered, made or obtained, and the Purchaser will have
received copies thereof.
5.4. ADVERSE CHANGES.
No change, circumstance or event which constitutes or has resulted in,
or that is reasonably likely to result in, a Material Adverse Effect
will have occurred in the business, financial condition, prospects,
assets or operations of the Company since December 31, 1999.
5.5. NO PROCEEDING OR LITIGATION.
No suit, action, investigation, inquiry or other proceeding by any
Authority or other person or entity will have been instituted or
threatened which delays or questions the validity or legality of the
transactions contemplated hereby or which, if successfully asserted,
would individually or in the aggregate, otherwise have a Material
Adverse Effect on the Assets or on the business, financial condition,
prospects, or operations of the Company.
5.6. OPINION OF COMPANY COUNSEL.
Clarion, the Purchaser and their lender(s) will have received an
opinion from Borre, Peterson, Fowler & Reens, P.C. counsel to the
Company, dated the Closing Date, in a form and substance reasonably
satisfactory to Clarion and the Purchaser.
5.7. LEGISLATION.
No Law will have been enacted which prohibits, restricts or delays the
consummation of the transactions contemplated hereby or any of the
conditions to the consummation of such transaction.
5.8. ACCEPTANCE BY COUNSEL TO CLARION AND THE PURCHASER.
The form and substance of all legal matters contemplated hereby and of
all papers delivered hereunder will be reasonably acceptable to Clarion
and the Purchaser.
5.9. DEBT FINANCING.
Clarion and the Purchaser shall have obtained debt financing of at
least Twenty Eight Million Two Hundred Eighty Thousand Dollars
($28,280,000) on terms acceptable to Clarion and the Purchaser to fund
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the cash portion of the Purchase Price and the acquisition of the
Michigan Real Estate (as herein defined).
5.10. CERTIFICATES.
Clarion and the Purchaser will have received such certificates of
Company's officers, in a form and substance reasonably satisfactory to
Clarion and the Purchaser, dated the Closing Date, to evidence
compliance with the conditions set forth in this Section 5 and such
other matters as may be reasonably requested by Clarion and the
Purchaser.
5.11. DOCUMENTATION FOR CONVEYANCE OF THE ASSETS.
The Purchaser will have received, in a form and substance reasonably
satisfactory to Clarion and the Purchaser, dated the Closing Date, all
of the Bills of Sale, deeds, assignments and other conveyance and
transfer documentation necessary to vest title in the Assets in the
Purchaser.
5.12 MICHIGAN REAL ESTATE.
The Purchaser shall have entered into definitive purchase agreements
for the Michigan Real Estate on terms reasonably satisfactory to
Clarion and the Purchaser.
5.13 DUE DILIGENCE.
Clarion and the Purchaser and their advisors shall have completed, and
Clarion and the Purchaser shall be satisfied with, their due diligence
investigation of the Company.
5.14 NORTH AMERICAN PLASTICS CORPORATION.
The Purchaser shall have entered into definitive agreements with the
Company and the Shareholders regarding North American Plastics
Corporation and certain liabilities of the Company and the Shareholders
associated therewith.
5.15 REAL PROPERTY.
Clarion and the Purchaser and their advisors shall have received the
Title Commitment and shall be satisfied with the status of the title to
the real property described therein.
6. CONDITIONS TO OBLIGATIONS OF COMPANY AND SHAREHOLDERS.
Notwithstanding anything in this Agreement to the contrary, the
obligation of the Company to effect the transactions contemplated
herein will be subject to the satisfaction or waiver at or prior to the
Closing of each of the following conditions:
6.1. REPRESENTATIONS AND WARRANTIES TRUE.
The representations and warranties of Clarion and the Purchaser
contained in this Agreement will be in all material respects true,
complete and accurate as of the date when made and at and as of the
Closing, as though such representations and warranties were made at and
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as of such time, except for changes specifically permitted or
contemplated in this Agreement, and except insofar as the
representations and warranties relate expressly and solely to a
particular date or period, in which case they will be true and correct
in all material respects at the Closing with respect to such date or
period.
6.2. PERFORMANCE.
Clarion and the Purchaser will have performed and complied in all
material respects with all agreements, covenants, obligations and
conditions required by this Agreement to be performed or complied with
by the Purchaser at or prior to the Closing.
6.3. CORPORATE APPROVALS.
All Consents listed in Section 2.5 to the Disclosure Schedule will have
been delivered, made or obtained. All action required to be taken by
the Boards of Directors of Clarion and the Purchaser to authorize the
execution, delivery and performance of this Agreement by Clarion and
the Purchaser and the consummation of the transactions contemplated
hereby will have been duly and validly taken.
6.4. NO PROCEEDING OR LITIGATION.
No suit, action, investigation, inquiry or other proceeding by any
Authority or other person or entity will have been instituted or
threatened which delays or questions the validity or legality of the
transactions contemplated hereby or which, if successfully asserted,
would individually or in the aggregate, otherwise have a Material
Adverse Effect on Clarion's business, financial condition, prospects,
assets or operations.
6.5. CERTIFICATES.
Clarion and the Purchaser will have furnished the Company with such
certificates of Clarion and the Purchaser's officers, in a form and
substance reasonably acceptable to Company, dated the Closing Date, to
evidence compliance with the conditions set forth in this Section 6 and
such other matters as may be reasonably requested by the Company.
6.6. OPINION OF PURCHASER COUNSEL.
Clarion and the Purchaser will have delivered to the Company an opinion
from Oppenheimer Wolff & Donnelly LLP, counsel to Clarion and the
Purchaser, dated the Closing Date, in a form and substance reasonably
satisfactory to the Company and the Shareholders.
6.7. PAYMENT OF CONSIDERATION.
The Company will have received satisfactory evidence that the wire
transfer required by Section 1.3(b)(i) hereof, the Shares required by
Section 1.3(b)(ii), the duly executed Promissory Note required by
Section 1.3(b)(iii), and the duly executed Liabilities Undertaking
required by Section 1.3(b)(iv) hereof have each been delivered.
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6.8. ACCEPTANCE BY COUNSEL.
The form and substance of all legal matters contemplated hereby and of
all papers delivered hereunder will be reasonably acceptable to the
Company.
6.9. EMPLOYMENT AGREEMENTS.
The Shareholders shall each have entered into an employment agreement
substantially in the form attached hereto as Exhibit 6.9.
6.10 NORTH AMERICAN PLASTICS CORPORATION.
The Company and the Shareholders shall have entered into definitive
agreements with the Purchaser regarding North American Plastics
Corporation and certain liabilities of the Company and the Shareholders
associated therewith.
7. TERMINATION AND ABANDONMENT.
7.1. METHODS OF TERMINATION.
This Agreement may be terminated and the transactions contemplated
herein may be abandoned at any time, but not later than the Closing:
(a) By mutual written consent of Clarion, the Purchaser and the
Company; or
(b) By Clarion and the Purchaser on or after the Termination Date
or such later date as may be established pursuant to Section 1
hereof, if any of the conditions provided for in Section 5 of
this Agreement will not have been satisfied or waived in
writing by the Purchaser prior to such date; or
(c) By the Company on or after the Termination Date or such later
date as may be established pursuant to Section 1 hereof, if
any of the conditions provided for in Section 6 of this
Agreement will not have been satisfied or waived in writing by
the Company prior to such date; or
(d) By any party if the Closing will not have occurred on or
before February 29, 2000.
7.2. PROCEDURE UPON TERMINATION.
In the event of termination and abandonment pursuant to Section 7.1(a),
written notice thereof will forthwith be given to the other party or
parties, and the provisions of this Agreement will terminate, and the
transactions contemplated herein will be abandoned, without further
action by any party hereto.
7.3. EFFECT OF TERMINATION.
If this Agreement is terminated as provided herein: (i) each party
will, upon request, redeliver all documents, work papers and other
material of any other party (and all copies thereof) relating to the
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transactions contemplated herein, whether so obtained before or after
the execution hereof, to the party furnishing the same; (ii) the
confidentiality obligations of Section 4.4 will continue to be
applicable; and (iii) except as provided in this subsection, no party
will have any liability for a breach of any representation, warranty,
agreement, covenant or other provision of this Agreement, unless such
breach was due to a willful or bad faith action or omission of such
party or any representative, agent, employee or independent contractor
thereof.
8. SURVIVAL AND INDEMNIFICATION.
8.1. SURVIVAL.
All representations and warranties of the parties contained in this
Agreement will survive the Final Closing Date for a period of eighteen
(18) months, except that: (i) the representations and warranties set
forth in Sections 2.9, 2.10, and 2.13 will survive without limitation
as to time; (ii) the representations and warranties set forth in
Sections 2.15, 2.17, 2.21 and 2.26 (other than those relating solely to
OSHA) and, to the extent the representations and warranties in Section
2.5 and 2.24 relate to Taxes, environmental matters and employee
benefits, will survive until the expiration of the applicable statute
of limitations (not to exceed six (6) years); and (iii) the Company
will have no liability whatsoever as a result of any matter which is
fully and accurately disclosed in the Disclosure Schedule delivered to
Clarion and the Purchaser prior to the Closing Date, including any
supplements pursuant to Section 4.7. The covenants and agreements
contained herein and in the exhibits hereto will survive the Closing
Date without limitation as to time unless the covenant or agreement
specifies the term, in which case such covenant or agreement will
survive until the expiration of such specified term and will thereupon
expire. The respective expiration dates for the survival of the
representations and warranties and the covenants will be referred to
herein as the relevant "Expiration Date." The right to indemnification
or any other remedy based on representations, warranties, covenants and
obligations in this Agreement will not be affected by any investigation
conducted with respect to, or any knowledge acquired (or capable of
being acquired) at any time, whether before or after the execution and
delivery of this Agreement and Closing Date, with respect to the
accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant or obligation. The waiver of any condition based on
the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the
right to indemnification or any other remedy based on such
representations, warranties, covenants and obligations.
8.2. INDEMNIFICATION BY CLARION AND THE PURCHASER.
Clarion and the Purchaser, jointly and severally, agree to indemnify
the Company from and against any and all loss, liability or damage
suffered or incurred by it by reason of (i) any untrue representation
of, or breach of warranty by, Clarion or the Purchaser in any part of
this Agreement; (ii) the Purchaser's non-assumption of those sales
representation agreements identified on Exhibit 1.1(b) hereto arising
after the Closing Date; and (iii) any nonfulfillment of any covenant,
agreement or undertaking of Clarion or the Purchaser in any part of
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this Agreement which by its terms is to remain in effect after any
Closing and has not been specifically waived in writing at such Closing
by the party or parties hereof entitled to the benefits thereof.
8.3. INDEMNIFICATION BY THE COMPANY AND THE SHAREHOLDERS.
The Company and each of the Shareholders jointly and severally (subject
to Section 8.7) agree to indemnify Clarion and the Purchaser from and
against:
(a) any and all loss, liability or damage suffered or incurred by
Clarion or the Purchaser by reason of any untrue
representation of, or breach of warranty by the Company or the
Shareholders in this Agreement;
(b) any and all loss, liability or damage suffered or incurred by
it by reason of any nonfulfillment of any covenant, agreement
or undertaking of the Company or the Shareholders in this
Agreement which by its terms is to remain in effect after any
Closing and has not been specifically waived in writing at
such Closing by the party or parties hereto entitled to the
benefits thereof;
(c) any Retained Liabilities;
(d) any obligation for Taxes of the Company or the Shareholders
for any period (or portion thereof) prior to the Closing Date;
(e) the failure of the Company to comply with the requirements of
the Uniform Commercial Code concerning bulk transfers, as in
effect in the various states in which the Company has assets,
including, without limitation, the requirement of notice to
creditors;
(f) the failure of the Company to obtain any clearance certificate
or similar document required by any taxing Authority in order
to relieve Clarion and the Purchaser of any obligation to
withhold any portion of the Purchase Price or in order to
avoid any successor liability for Taxes;
(g) any liability, expense, cost, tax or obligation of any nature
with respect to such current or former employee or other
individual arising in connection with group health plan
coverage required under Section 4980B of the Code or Part 6 of
Subtitle B of Title I of ERISA;
(h) any and all loss, liability, or damage suffered or incurred by
Clarion or the Purchaser as a result of the written demand
received by the Company from Adac Plastics, Inc. for the sum
of $129,208.46; and
(h) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, without
limitation, legal fees and expenses, incident to any of the
foregoing or incurred in investigating or attempting to avoid
the same or to oppose the imposition thereof, or in enforcing
the indemnification rights of Clarion or the Purchaser
pursuant to this Section 8.3.
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8.4. CLAIMS FOR INDEMNIFICATION.
Whenever any claim will arise for indemnification hereunder, the party
seeking indemnification (the "INDEMNIFIED PARTY") will promptly notify
the party from whom indemnification is sought (the "INDEMNIFYING
PARTY") of the claim (a "Claim") and, when known, all of the facts
constituting the basis for such Claim. The failure so to notify the
Indemnifying Party will not relieve the Indemnifying Party of any
liability that it may have to the Indemnified Party except to the
extent the Indemnifying Party demonstrates that the defense of such
action is prejudiced thereby. In the case of any such Claim for
indemnification hereunder resulting from or in connection with any
claim or legal proceedings of a third party (a "PROCEEDING"), the
Indemnifying Party will be entitled to participate in such legal
proceedings and, to the extent that it will wish (unless the
Indemnifying Party is also a party to such Proceeding and the
Indemnified Party determines in good faith that joint representation
would be inappropriate or the Indemnifying Party fails to provide
reasonable assurance to the Indemnified Party of its financial capacity
to defend such Proceeding and provide indemnification with respect
thereto), to control the defense thereof with counsel reasonably
satisfactory to the Indemnified Party and, after notice from
Indemnifying Party to the Indemnified Party of its election so to
control the defense thereof, the Indemnifying Party will not be liable
to such Indemnified Party under this Section for any fees of other
counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the Indemnified Party
in connection with the defense thereof, other than reasonable costs of
investigation. If an Indemnifying Party controls the defense of such a
Proceeding, (i) no compromise or settlement thereof may be effected by
the Indemnifying Party without the Indemnified Party's consent unless
(A) there is no finding or admission of any violation of Law or any
violation of the rights of any person and no effect on any other claims
that may be made against the Indemnified Party and (B) the sole relief
provided is monetary damages that are paid in full by the Indemnifying
Party and (ii) the Indemnifying Party will have no liability with
respect to any compromise or settlement thereof effected without its
consent. If notice is given to an Indemnifying Party of the
commencement of any Proceeding and it does not, within twenty (20) days
after the Indemnified Party's notice is given, give notice to the
Indemnified Party of its election to assume the defense thereof, the
Indemnifying Party will be bound by any determination made in such
action or any compromise or settlement thereof effected by the
Indemnified Party. Notwithstanding the foregoing, if an Indemnified
Party determines in good faith that there is a reasonable probability
that a Proceeding may adversely effect it or its affiliates other than
as a result of monetary damages, or the Proceeding involves Taxes, such
Indemnified Party may, by notice to the Indemnifying Party, assume the
exclusive right to defend, compromise or settle such Proceeding, but
the Indemnifying Party will not be bound by any determination of a
Proceeding so defended or any compromise or settlement thereof effected
without its consent (which will not be unreasonably withheld).
8.5. BASKET AMOUNT.
Notwithstanding anything in Section 8.2 or 8.3 to the contrary, neither
the Company nor Clarion and the Purchaser shall be entitled to any
indemnification under either of such sections if the aggregate amount
of all Claims thereunder is equal to or less than Two Hundred Fifty
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Thousand Dollars ($250,000) (the "BASKET AMOUNT"). In the event the
aggregate amount of all Claims under Sections 8.2 or 8.3 are greater
than the Basket Amount, the amount owed shall be that amount in excess
of the Basket Amount; provided, however, that the foregoing shall not
apply to Claims for indemnification related to Environmental Claims or
Claims for breach of the representations and warranties set forth in
Section 2.26 (including the matters set forth in the Disclosure
Schedule pertaining thereto). The maximum amount which the Purchaser
can recover for all Claims under this section 8 shall not exceed, in
the aggregate, Ten Million Dollars ($10,000,000); provided however,
that if the Company, the Shareholders and each Permitted Assignee (as
defined in the Registration and Lock-Up Agreement) are the legal or
equitable holder(s), in the aggregate, of more than One Million
(1,000,000) Shares, then the maximum amount which the Purchaser can
recover for all Claims under this section 8 shall not exceed, in the
aggregate, the lesser of Ten Million Dollars ($10,000,000) and the sum
of (a) Five Million Dollars ($5,000,000) and (b) the product of (i) the
Market Price (as defined herein) of Clarion's common stock as of the
date of the Claim and (ii) One Million (1,000,000) shares of Clarion's
common stock. For purposes of this section and with respect to the
Shares, "Market Price" at any date shall be deemed to be the last
reported sale price, or, in case no such reported sales takes place on
such day, the average of the last reported sales prices for the last
three (3) trading days, in either case as officially reported by the
principal securities exchange on which Clarion's common stock is listed
or admitted to trading or as reported by the Nasdaq Stock Market, Inc.,
or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted on the Nasdaq Stock Market,
Inc., the closing bid price as furnished by (i) the National Quotation
Bureau, LLC or (ii) a similar organization if the National Quotation
Bureau, LLC, is no longer reporting such information. As collateral
security for the indemnification obligations of the Company and the
Shareholders herein, the Company shall pledge the Shares to and in
favor of the Purchaser pursuant to a pledge agreement substantially in
the form attached hereto as Exhibit 8.5.
8.6. RIGHT OF SET-OFF.
Upon notice to the Company specifying in reasonable detail the basis
therefor, the Purchaser may set off any amount to which it may be
entitled under this Section 8 against amounts otherwise payable under
the Promissory Note. The exercise of such right of set-off by Purchaser
will not constitute an event of default under the Promissory Note.
Neither the exercise of, nor the failure to exercise, such right of
set-off will constitute an election of remedies nor limit Purchaser in
any manner in the enforcement of any other remedies that may be
available to it pursuant to this Article 8.
8.7. EXCLUSIVE REMEDIES.
The indemnification provisions of this Section 8 constitute exclusive
remedies of the parties for any Claims arising under this Agreement.
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9. MISCELLANEOUS PROVISIONS.
9.1. EXPENSES.
Clarion, the Purchaser and the Company will each bear their own costs
and expenses relating to the transactions contemplated hereby,
including without limitation, fees and expenses of legal counsel,
accountants, investment bankers, brokers or finders, printers, copiers,
consultants or other representatives for the services used, hired or
connected with the transactions contemplated hereby. Clarion, the
Purchaser and the Company will each pay any commission or finder's fee
or similar amount incurred by them by agreement or otherwise for
retaining or consulting any broker, finder or investment banker in
connection with the transactions contemplated by this Agreement.
9.2. AMENDMENT AND MODIFICATION.
Subject to applicable Law, this Agreement may be amended or modified by
the parties hereto at any time prior to the Closings with respect to
any of the terms contained herein; provided, however, that all such
amendments and modifications must be in writing duly executed by all of
the parties hereto.
9.3. WAIVER OF COMPLIANCE; CONSENTS.
Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the
party entitled hereby to such compliance, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement
or condition will not operate as a waiver of, or estoppel with respect
to, any subsequent or other failure. No single or partial exercise of a
right or remedy will preclude any other or further exercise thereof or
of any other right or remedy hereunder. Whenever this Agreement
requires or permits the consent by or on behalf of a party, such
consent will be given in writing in the same manner as for waivers of
compliance.
9.4. NO THIRD PARTY BENEFICIARIES.
Nothing in this Agreement will entitle any person or entity (other than
a party hereto and his, her or its respective successors and assigns
permitted hereby) to any claim, cause of action, remedy or right of any
kind.
9.5. NOTICES.
All notices, requests, demands and other communications required or
permitted hereunder will be made in writing and will be deemed to have
been duly given and effective: (i) on the date of delivery, if
delivered personally; (ii) on the earlier of the fourth (4th) day after
mailing or the date of the return receipt acknowledgment, if mailed,
postage prepaid, by certified or registered mail, return receipt
requested; or (iii) upon confirmation of transmission, if sent by
facsimile, telecopy, telegraph, telex or other similar telegraphic
communications equipment:
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If to Company or Shareholders:
To: Jeffrey W. Anonick
4835 Meandering Creek Dr.
Belmont, MI 49306
Michael C. Miller
7486 Alaska Ridge
Alto, MI 49302
With a copy to:
Borre, Peterson, Fowler & Reens, P.C.
300 Ottawa Avenue NW, Suite 500
Grand Rapids, MI 49503-2308
Attn: James B. Peterson, Esq.
Fax: (616) 459-2393
or to such other person or address as the Company will furnish to the
other parties hereto in writing in accordance with this subsection.
If to Clarion or the Purchaser:
To: Clarion Technologies, Inc.
235 Central Avenue
Holland, MI 49423
Attn: David W. Selvius, CFO
Fax: (616) 494-8888
With a copy to:
Oppenheimer Wolff & Donnelly LLP
500 Newport Center Drive
Suite 700
Newport Beach, CA 92660
Attn: Teresa Tormey Fineman, Esq.
Fax: (949) 823-6100
or to such other person or address as the Purchaser will furnish to the
other parties hereto in writing in accordance with this subsection.
9.6. ASSIGNMENT.
This Agreement and all of the provisions hereof will be binding upon
and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of
the rights, interests or obligations hereunder will be assigned
(whether voluntarily, involuntarily, by operation of law or otherwise)
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by any of the parties hereto without the prior written consent of the
other parties, provided, however, that Clarion may assign its rights
(but not its obligations) under this Agreement, in whole or in any
part, and from time to time, to a wholly-owned, direct or indirect,
subsidiary of Clarion.
9.7. GOVERNING LAW.
This Agreement and the legal relations among the parties hereto will be
governed by and construed in accordance with the internal substantive
laws of the State of Michigan (without regard to the laws of conflict
that might otherwise apply) as to all matters, including without
limitation matters of validity, construction, effect, performance and
remedies.
9.8. COUNTERPARTS.
This Agreement may be executed simultaneously in one or more
counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
9.9. HEADINGS.
The table of contents and the headings of the sections and subsections
of this Agreement are inserted for convenience only and will not
constitute a part hereof.
9.10. ENTIRE AGREEMENT.
This Agreement, the Disclosure Schedule and the exhibits and other
writings referred to in this Agreement (including, without limitation,
the Confidentiality Agreement) or in the Disclosure Schedule or any
such exhibit or other writing are part of this Agreement, together they
embody the entire agreement and understanding of the parties hereto in
respect of the transactions contemplated by this Agreement and together
they are referred to as this "AGREEMENT" or the "AGREEMENT." There are
no restrictions, promises, warranties, agreements, covenants or
undertakings, other than those expressly set forth or referred to in
this Agreement. This Agreement supersedes all prior agreements and
understandings between the parties, whether written or oral, with
respect to the transaction or transactions contemplated by this
Agreement, including, but not limited to, the letter of intent dated
December 8, 1999. Provisions of this Agreement will be interpreted to
be valid and enforceable under applicable Law to the extent that such
interpretation does not materially alter this Agreement; provided,
however, that if any such provision will become invalid or
unenforceable under applicable Law such provision will be stricken to
the extent necessary and the remainder of such provisions and the
remainder of this Agreement will continue in full force and effect.
9.11. INJUNCTIVE RELIEF.
It is expressly agreed among the parties hereto that monetary damages
would be inadequate to compensate a party hereto for any breach by any
other party of its covenants and agreements in Sections 4.2 and 4.4
hereof. Accordingly, the parties agree and acknowledge that any such
55
<PAGE>
violation or threatened violation will cause irreparable injury to the
other and that, in addition to any other remedies which may be
available, such party will be entitled to injunctive relief against the
threatened breach of Sections 4.2 and 4.4 hereof or the continuation of
any such breach without the necessity or proving actual damages and may
seek to specifically enforce the terms thereof.
9.12. CERTAIN DEFINITIONS.
(a) For purposes of this Agreement, the term "MATERIAL ADVERSE
EFFECT" means an event, change or occurrence which has a
material negative impact on the condition (financial or
otherwise), businesses, results of operations or prospects of
the Company or Clarion, the Purchaser and Clarion's
subsidiaries, taken as a whole, as the case may be (and going
concern value, in the case of the Company), or the ability of
the Company, Clarion or the Purchaser as the case may be, to
consummate the transactions contemplated hereby.
(b) For purposes of this Agreement, a fact shall be deemed to be
within the "knowledge" or "best knowledge" of the Company if
it is either actually known to either of the Shareholders or
Robert Bronsink or if it should be known by either of the
Shareholders or Robert Bronsink under the circumstances and in
the exercise of reasonable diligence.
(c) For purposes of this Agreement, a fact shall be deemed to be
within the "knowledge" or "best knowledge" of Clarion if it is
either actually known to either David Selvius or William
Beckman or if it should be known by either David Selvius or
William Beckman under the circumstances and in the exercise of
reasonable diligence
9.13 RESOLUTION OF DISPUTES BY ARBITRATION.
(a) The parties will attempt in good faith to resolve any
controversy, claim or dispute arising out of, or relating to,
this Agreement promptly by negotiation.
(b) Any controversy, claim or dispute arising out of, or relating
to, this Agreement (other than a controversy, claim or dispute
arising out of or relating to Sections 4.11(d) or 4.12) that
is not resolved within sixty (60) days after a party gives
written notice thereof to the other parties (or any longer
period that is agreed upon by the parties) shall be settled by
arbitration in accordance with the commercial arbitration
rules of the American Arbitration Association. Judgment upon
the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction.
(c) The parties shall use a single arbitrator(s), unless the
amount claimed is greater than One Hundred Thousand Dollars
($100,000), in which case, any party may demand the use of
three arbitrators. The arbitrator(s) shall be as selected by
the parties if they can mutually agree, otherwise the
arbitrator(s) shall be selected by the American Arbitration
Association. Before the commencement of the proceeding, the
arbitrator(s) shall take an oath of impartiality. All
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arbitration hearings shall take place in Grand Rapids,
Michigan. The arbitrator(s) must agree to be bound by the
terms of this section.
(d) The arbitrator(s) will hear and determine the matter and must
agree to sign and acknowledge his or their award, in writing,
including a reasoned opinion related to the evidence
presented, and will deliver a copy to the parties by certified
mail. If requested by any of the parties, then the
arbitrator(s) will make findings of fact and conclusions of
law.
(e) The arbitrator(s) may order a pre-hearing exchange of
information by the parties, including the production of
requested documents and an exchange of a list of proposed
witnesses, together with summaries of testimony of proposed
witnesses. The arbitrator(s) may permit the parties to
participate in discovery in accordance with the Federal Rules
of Civil Procedure for a period of one-hundred eighty (180)
days after filing of the answer or other responsive pleading.
The arbitrator(s) shall supervise and coordinate the discovery
process. Unresolved disputes shall be brought to the attention
of the arbitrator(s). The arbitrator(s) may impose sanctions
for abuse or frustration of the arbitration process. The
arbitrator(s) may grant interim awards and equitable relief,
including temporary restraining orders, preliminary
injunctions, and specific performance. However, this section
and this Agreement do not preclude any party from seeking
injunctive relief in a court in order to protect its rights
until the time that a judgment is entered on an award, nor
does the filing of any action constitute a waiver by a party
of its right to seek arbitration under this Agreement.
(f) The submission of a dispute to arbitration as provided in this
section and the rendering of a decision by the arbitrator(s)
is a condition precedent to any right of legal action on the
dispute. The cost and expense of the arbitration, including
the fees of the arbitrator(s), shall be divided equally
between the Company and the Purchaser unless the arbitrator(s)
orders a different allocation of the costs and expenses. If
the arbitrator(s) determines that a party did not negotiate in
good faith to resolve the dispute, then the arbitrator(s) may
award all costs and expenses against the party who acted in
bad faith. Nothing contained in this Agreement prevents the
parties from settling any dispute, at any time, by mutual
agreement.
(g) Notwithstanding anything set forth above to the contrary, if
another person asserts a claim against a party for which the
affected party is entitled to indemnification by any other
party, the affected party may file a third party complaint
against the other party or parties in the proceeding, or
otherwise join the other party or parties in that proceeding,
and have any dispute as to indemnification claims resolved by
the tribunal.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"CLARION" "COMPANY"
CLARION TECHNOLOGIES, INC. DRAKE PRODUCTS CORPORATION
By: /s/ David W. Selvius By: /s/ Michael C. Miller
--------------------------------- ---------------------------
David W. Selvius, Michael C. Miller,
Chief Financial Officer
"SHAREHOLDERS"
"PURCHASER"
CLARION-DRAKE ACQUISITION, INC.
/s/ Jeffrey W. Anonick
---------------------------
JEFFREY W. ANONICK
By: /s/ David W. Selvius
---------------------------------
David W. Selvius,
Chief Financial Officer
/s/ Michael C. Miller
---------------------------
MICHAEL C. MILLER
58
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
This First Amendment to the Asset Purchase Agreement (the "First
Amendment") is made as of the 28th day of February, 2000 by and among CLARION
TECHNOLOGIES, INC., a Delaware corporation ("Clarion"), CLARION-DRAKE
ACQUISITION, INC., a Michigan corporation ("Purchaser"), DRAKE PRODUCTS
CORPORATION, a Michigan corporation ("Company"), and JEFFREY W. ANONICK, and
MICHAEL C. MILLER ("Shareholders").
WHEREAS, the parties entered into an Asset Purchase Agreement (the
"Purchase Agreement") concerning Purchaser's acquisition of substantially all of
Drake's assets; and
WHEREAS, the parties desire to amend the Purchase Agreement.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and subject to the conditions hereinafter set forth, the
parties do hereby declare and agree as follows:
1. AMENDMENTS. Effective on the date hereof, the Asset Purchase
Agreement shall be amended as set forth in this Section 1 of the First
Amendment.
1.1 Section 1.3(a)(ii) of the Asset Purchase Agreement is
amended in its entirety to read as follows:
"Plus, two million (2,000,000) shares of Clarion's common stock, $.001
par value (the "Shares") subject to the terms of a Registration and
Lock-Up Agreement in the form attached to the First Amendment as
Exhibit 1.3(a)(ii) (the "Registration and Lock-Up Agreement");"
1.2 Section 1.3(a)(iii) of the Asset Purchase Agreement is
amended in its entirety to read as follows:
"Plus, an unsecured subordinated promissory note in the original
principal amount of Five Million Dollars ($5,000,000) bearing interest
at the rate of twelve percent (12%) per annum in the form attached to
the First Amendment as Exhibit 1.3(a)(iii) (the "Promissory Note")
subject to adjustment as provided in Section 1.3(f) hereof; and"
1.3 Section 1.3(a)(iv) of the Asset Purchase Agreement is
amended in its entirety to read as follows:
<PAGE>
"Plus, an unsecured subordinated promissory note in the original
principal amount of Eighty Thousand Thousand Dollars ($80,000) bearing
no interest in the form attached to the First Amendment as Exhibit
1.3(a)(iii) (the "SECOND PROMISSORY NOTE") subject to adjustment as
provided in Section 1.3(f) and Section 9.14 hereof; and"
1.4 Section 8.2 of the Asset Purchase Agreement is amended in
its entirety to read as follows:
"8.2 INDEMNIFICATION BY CLARION AND THE PURCHASER.
Clarion and the Purchaser, jointly and severally, agree to indemnify
the Company and the Shareholders from and against any and all loss,
liability or damage suffered or incurred by it or them by reason of (i)
any untrue representation of, or breach of warranty by, Clarion or the
Purchaser in any part of this Agreement, (ii) Purchaser's
non-assumption of those sales representation agreements identified on
Exhibit 1.1(b) hereto arising after the Closing Date; (iii) any
nonfulfillment of any covenant, agreement or undertaking of Clarion or
the Purchaser in any part of this Agreement which by its terms is to
remain in effect after any Closing and has not been specifically waived
in writing at such Closing by the party or parties hereof entitled to
the benefits thereof, (iv) any amounts owed Derek Cushman ("Cushman")
of Post Ranstad pursuant to a certain letter agreement dated January
11, 1999 from the Company to Cushman for services performed through
January 31, 2000, limited to $170,000, (v) any failure to fully and
completely observe, pay, perform and discharge any of the Company's
outstanding obligations and liabilities assumed by Purchaser in
accordance with the Liabilities Undertaking; and (vi) any and all
actions, proceedings, claims, demands, suits, judgment, costs and
expenses, including without limitation, legal fees and expenses,
incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or
enforcing the indemnification rights of the Company or the Shareholders
pursuant to this Section 8.2"
1.5 The word "and" appearing at the end of first (1st) Section
8.3(h) is hereby deleted.
1.6 The reference to the second (2nd) Section 8.3(h) is hereby
amended to read as Section 8.3(i) and the period (.) at the end of said Section
8.3(i) is hereby deleted and replaced with a semicolon (;).
2
<PAGE>
1.7 The following Section 8.3(j) is hereby added to the Asset
Purchase Agreement:
"any liability, cost, expense, penalty or obligation incurred by it as
a result of the Company's failure to maintain, during any period prior
to Closing, authority to transact business in the State of South
Carolina."
1.8 The following Section 9.14 is hereby added to the Asset
Purchase Agreement:
9.14 DELAY IN CLOSING PENALTY.
Purchaser and Clarion jointly and severally agree to pay to Company a
penalty in the amount of twenty seven thousand five hundred dollars
($27,500), but not to exceed fifty five thousand dollars ($55,000) in
the aggregate, for each day that the Closing extends beyond February
14, 2000 ("Closing Delay Penalty"). The parties hereto agree that the
aggregate Closing Delay Penalty shall be added to the principal balance
of the Second Promissory Note.
1.9 The following Section 9.15 is hereby added to the Asset
Purchase Agreement.
9.15 CERTAIN EQUIPMENT.
Purchaser and Clarion agree, at no cost to the Company or the
Shareholders, that the Company may store on the Real Property, in its
current location, certain Laser Etch equipment (the "Laser Equipment")
for a period of up to two (2) years commencing on the date of Closing.
Any and all expenses related to the Laser Equipment shall be the
responsibility of the Company.
1.10 The following Section 9.16 is hereby added to the Asset
Purchase Agreement.
9.16 ADDITIONAL REAL ESTATE.
Purchaser and Clarion agree to purchase, or to cause their designee to
purchase, within six (6) months from the Closing Date, certain real
estate situated Centerville Township, Anderson County, State of South
Carolina, as described within an Agreement to Sell and Buy dated on or
about November, 1994, by and between Millearn GeneralPartnership and
the Company. The terms of such purchase shall be set forth in a
separate real estate purchase agreement in form and substance that is
reasonably acceptable to all parties.
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<PAGE>
1.11 The following Section 9.17 is hereby added to the Asset
Purchase Agreement.
9.17 EARLY PAYMENT OF PROMISSORY NOTE.
Purchaser and Clarion agree that in the event Clarion undertakes, at
anytime after the Closing date, a public offering or offerings of debt
or equity securities, solely for cash, with aggregate gross cash
proceeds to Clarion or Purchaser in excess of $25,000,000, they shall
use their best efforts to cause LaSalle Bank, National Association and
Bank One, Michigan, or any successor thereto, to permit Purchaser and
Clarion to make a payment of principal and accrued interest on the
Promissory Note in an amount equal to the lesser of the gross cash
proceeds to Clarion or Purchaser in excess of $25,000,000, obtained by
Clarion or Purchaser from such public offering of debt or equity
securities, or the remaining unpaid balance of principal and accrued
interest due under the Promissory Note ("Early Payment"). Upon
receiving permission for the Early Payment, Purchaser and Clarion
hereby agree to make the Early Payment.
1.12 The following Section 9.18 is hereby added to the Asset
Purchase Agreement.
9.18 PRIORITY OF SELLER SUBORDINATE DEBT
Purchaser and Clarion agree that neither one of them shall incur
indebtedness to a seller in connection with an acquisition that has
priority over the indebtedness evidenced by the Promissory Note and the
Second Promissory Note ("Seller Subordinate Debt"). Purchaser and
Clarion further agree that any Seller Subordinate Debt shall be PARI
PASSU or subordinate to the indebtedness evidenced by the Promissory
Note and the Second Promissory Note.
2. OTHER TERMS. In all other respects, the Purchase Agreement made
between the parties shall remain unchanged and in full force and effect.
4
<PAGE>
3. MISCELLANEOUS.
3.1 FURTHER ACTS. The parties agree to do all acts and things,
and will execute all writings requested by each other which shall be and become
necessary, proper or advisable to carry out, to put into effect and/or make
operative a portion or portions of this First Amendment.
3.2 SUCCESSORS. This First Amendment shall be binding upon the
parties to this First Amendment and their respective successors, assigns, heirs,
personal representatives, executors, and administrators.
3.3 CAPITALIZED TERMS. Unless otherwise specifically defined
in this First Amendment, or other reference is made, all capitalized terms shall
have the meaning ascribed to them in the Purchase Agreement.
3.4 GOVERNING LAW. This First Amendment shall be construed and
governed in accordance with the laws of the State of Michigan without regard to
conflict of laws provisions.
3.5 COUNTERPARTS. This First Amendment may be simultaneously
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument. A facsimile signature
shall have the same effect as an original signature and shall be binding upon
the parties hereto. Upon the request of a party hereto, original signatures
shall promptly be substituted for any facsimile signature.
3.6 ENTIRE AGREEMENT; AMENDMENT. This First Amendment and the
Purchase Agreement referred to herein constitute the entire agreement of the
parties to this First Amendment with respect to the subject matter of this First
Amendment. This First Amendment may be amended only by a written instrument
executed by all of the parties to this First Amendment.
[ALL SIGNATURES APPEAR ON NEXT PAGE. THE
REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the day and year first above written.
CLARION: COMPANY:
CLARION TECHNOLOGIES, INC. DRAKE PRODUCTS CORPORATION
By: /s/ David W. Selvius By: /s/ Jeffrey W. Anonick
-------------------------------- --------------------------------
Jeffrey W. Anonick
Its: Chief Financial Officer Its: President
--------------------------------
PURCHASER:
Clarion-Drake Acquisition, Inc. SHAREHOLDERS:
By: /s/ David W, Selvius /s/ Jeffrey W. Anonick
-------------------------------- --------------------------------
Jeffrey W. Anonick
Its: Chief Financial Officer
--------------------------------
/s/ Michael C. Miller
--------------------------------
Michael C. Miller
6
