SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 25, 1997
BREED Technologies, Inc.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-11474 22-2767118
(State or Other Jurisdiction (Commission File (IRS Employee
of Incorporation) Number) Identification No.)
5300 Old Tampa Highway, Lakeland, Florida 33811
(Address of Principal Executive Offices) (Zip Code)
941-668-6000
(Registrant's Telephone Number, Including Area Code)
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Item 2. Acquisition or Disposition of Assets
On February 25, 1997, BREED Technologies, Inc., (the "Company") consummated the
acquisition of the stock of BTI Investments, Inc., ("BTI") a holding company
which owns the Custom Trim Group of Companies. The acquisition was made pursuant
to the Stock Purchase Agreement, dated as of January 3, 1997 between the Company
and BTI.
The purchase price was $70 million in cash, subject to any post closing audit
adjustments. Additionally, up to $5,000,000 may be paid on September 1, 2002
contingent upon BTI attaining certain operating profit targets for each of the
years subsequent to the acquisition date.
The funds used by the Company to acquire BTI were obtained from borrowings under
the Company's Revolving Credit Agreements.
The acquired operations which will be called Custom Trim Ltd. produces
leather-wrapped steering wheels, shift knobs and shift boots, injection molded
levers and leather/vinyl/cloth sewing of armrests, headrests and seating. Custom
Trim has annual revenues of approximately $100 million and has manufacturing
locations in Canada and Mexico.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
The acquisition of BTI does not meet the required significance tests for the
filing of audited financial statements and pro forma financial information.
Exhibits. Stock Purchase Agreement dated January 3, 1997, as amended
February 25, 1997 between BREED Technologies, Inc. and BTI
Investments, Inc.
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Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: March 5, 1997 BREED Technologies, Inc.
By: /s/ Edward H. McFadden
Edward H. McFadden
Executive Vice President and
Chief Financial Officer
STOCK PURCHASE AGREEMENT
Agreement (the "Agreement") made as of the 3rd day of January, 1997 by and among
BREED Technologies, Inc., a Delaware corporation with its principal office at
Lakeland, Florida, U.S.A. (The "Buyer"), and BTI Investments, Inc., an Ontario,
Canada corporation with its principal office at Waterloo, Ontario, Canada (the
"Company"), and the Stockholders listed on Schedule I attached hereto
(individually, a "Stockholder" and collectively, the "Stockholders"), who own
all of the issued and outstanding capital stock of the Company.
Preliminary Statement
1. Each of the Stockholders owns the number of the issued and outstanding
shares (collectively, the "Shares") as set forth in Schedule I attached
hereto, which Shares in the aggregate represent all of the issued and
outstanding shares of capital stock of the company.
2. The Buyer desires to purchase, and the Stockholders desire to sell, the
Shares for the consideration set forth below, subject to the terms and
conditions of this Agreement.
3. All references to dollars in this Agreement shall mean U.S. Dollars.
All amounts referred to herein shall be converted to U.S. Dollars at an
exchange rate of $1.00 Canadian/$0.75 U.S.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereby agree as follows:
1. Purchase and Sale of the Shares
1.01 Purchase of the Shares from the Stockholders. Subject to and upon the
terms and conditions of this Agreement, at the closing of the
transactions contemplated by this Agreement (the "Closing"), each
Stockholder shall sell, transfer, convey, assign and deliver to the
Buyer, and the Buyer shall purchase, acquire and accept from each
Stockholder either directly or indirectly, all the Shares and/or
interest owned by such Stockholder, as set forth opposite such
Stockholder's name on Schedule I attached hereto. The consideration
shall be allocated to discharge shareholder loans, purchase shares and
to fund the redemption of Shares as may be agreed upon prior to
Closing. At the Closing each Stockholder shall, to the extent each
Stockholder retains Shares at Closing, deliver to the Buyer
certificates evidencing the Shares owned by such Stockholder duly
endorsed in blank or with stock powers duly executed by such
Stockholder.
1.02 Further Assurances. At any time and from time to time after the
Closing, at the Buyer's request and without further consideration, each
of the Stockholders shall promptly execute and deliver such instruments
of sale, transfer, conveyance, assignment and confirmation, and take
all such other action as the Buyer may reasonably request, more
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effectively to transfer, convey and assign to the Buyer, and to confirm
the Buyer's title to, all of the Shares owned by such Stockholder, to
put the Buyer in actual possession and operating control of the assets,
properties and business of the Company and the Subsidiaries (as defined
in Subsection 3.03 hereof), to assist the Buyer in exercising all
rights with respect thereto and to carry out the purpose and intent of
this Agreement.
1.03 Consideration.
(a) The consideration to be paid by the Buyer shall be:
(i) Seventy Million Dollars ($70,000,000) (the "Base
Purchase Price"), subject to adjustment pursuant to
Subsections 1.04, 1.05, and 12.04 hereof. The Base
Purchase Price shall be payable in the manner
described in paragraph (b) of this Subsection 1.03.
(ii) Up to Five Million Dollars ($5,000,000) (the
"Earn Out"), to be paid five years from the date of
Closing (the "Closing Date") according to Schedule
1.03.
(b) At the Closing, the Buyer shall deliver:
(i) to the Stockholders' Representative (as defined
in Subsection 1.06 hereof), the sum of Sixty-Seven
Million Five Hundred Thousand Dollars ($67,500,000)
by wire transfer of immediately available funds to an
account designated by the Stockholders'
Representative, for distribution to the Stockholders
by the Stockholder's Representative in the amount set
forth opposite each such Stockholder's name on
Schedule I attached hereto. Such sum shall include
full repayment of any and all loans outstanding as of
the Closing Date from any Stockholder, director or
officer to the Company or any of its Subsidiaries,
and Schedule I shall indicate all such loans.
(ii) to an escrow agent to be mutually agreed upon
(the "Escrow Agent"), the sum of Two Million Five
Hundred Thousand Dollars ($2,500,000), to be held in
an interest-bearing escrow account pursuant to the
terms of the Escrow Agreement attached hereto as
Exhibit 1.03(b) (the "Escrow Agreement"), as a
reserve (the "Reserve Account") for all or part of
any adjustments pursuant to Subsection 1.04 and to
satisfy all or part of any claims for indemnity
pursuant to Section 10 hereof.
1.04 Post Closing Adjustments. The Base Purchase Price set forth in
Subsection 1.03 hereof shall be subject to adjustment after the Closing
Date as follows:
(a) Within 90 days of Closing, the Company's independent
public accountants (the "Company's Auditor") shall deliver to
the Stockholders and to the Buyer's
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independent public accountants (the "Buyer's Auditor") the
consolidated balance sheet of the Company and its Subsidiaries
as of the Closing Date (the "Closing Balance Sheet"). The
Closing Balance Sheet shall be prepared in accordance with
generally accepted accounting principles applied consistently
with the Company's past practices (to the extent that such
past practice was in accordance with generally accepted
accounting principles), without any adjustments applicable
solely as a result of the acquisition of the Shares by the
Buyer on the Closing Date, and shall be certified without
qualification by the Company's Auditor.
(b) Intentionally omitted.
(c) Buyer and Buyer's Auditor shall have full access to the
books and records of the Company and Subsidiaries and working
papers of the Company's Auditor to confirm the values
reflected in the Closing Balance Sheet. The values or amounts
for each item reflected on the Closing Balance Sheet shall be
binding upon the Buyer, unless the Buyer gives written notice
within 60 days after receipt of the Closing Balance Sheet, of
disagreement with any of the values or amounts shown on the
Closing Balance Sheet, specifying as to each such item in
reasonable detail, the nature and extent of such disagreement
(the "Dispute Notice"). If the Buyer and the Stockholders'
Representative are unable to resolve any such disagreement
within 60 days after the date of the Dispute Notice, the
disagreement shall be submitted to arbitration as provided
herein. If as a result of the resolution of any disputes by
agreement pursuant to this Subsection 1.04 or by arbitration
hereto, any amount shown in the Closing Balance Sheet is
determined to be erroneous, such erroneous amount shall be
deleted from the Closing Balance Sheet and the correct amount
shall be inserted in lieu thereof. The Closing Balance Sheet,
as so corrected, shall constitute the Closing Balance Sheet
for purposes of this Agreement.
(i) In the event of a dispute under this Section,
either the Buyer or the Stockholders' Representative
may submit the matter to arbitration by notifying the
other party and the Escrow Agent in writing. Within
10 business days after receipt of such notice, the
Buyer and Stockholders' Representative shall
designate in writing one arbitrator to resolve the
dispute. If unable to agree, an arbitrator shall be
appointed by the American Arbitration Association.
The arbitrator shall not be an employee, consultant,
officer, director or stockholder of any party hereto.
(ii) Within 15 days after the designation of the
arbitrator, the arbitrator, the Buyer and the
Stockholders' Representative shall meet, at which
time the Buyer and the Stockholders' Representative
shall set forth in writing all disputed issues and a
proposed ruling on each such issue.
(iii) The arbitrator shall set date for a hearing no
later than 30 days after the submission of proposals
pursuant to subparagraph (ii) above to discuss
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each of the issues identified by the Buyer and the
Stockholders' Representative . The arbitration shall,
as to the resolution of any dispute, shall be binding
and conclusive upon all parties hereto and shall be
governed by the rules of the American Arbitration
Association, provided that the arbitrator shall have
sole discretion with regard to the admissibility of
evidence.
(iv) The arbitrator shall use his best efforts to
rule in writing on each disputed issue within 30 days
after completion of the aforementioned hearing. The
determination of the arbitrator as to the resolution
of any dispute shall be binding and conclusive upon
all parties hereto.
(v) The parties shall pay their respective costs and
fees incurred in connection with the arbitration and
shall share the costs of the arbitrator and any
hearings.
(vi) Any arbitration held pursuant hereto shall be
conducted in Detroit, Michigan, or such other
location as the parties shall mutually agree. Any
arbitration award may be entered in and enforced by
any court having jurisdiction thereover.
(d) The Buyer shall pay the fees and disbursements of the
Buyer's Auditor. The fees and disbursements of the Company's
Auditor incurred in the audit of the Closing Balance Sheet
shall be paid by the Company. Any audit fees incurred
subsequent to delivery of the Closing Balance Sheet because of
amounts disputed by the Stockholders shall be paid by the
Stockholders, in proportion to their ownership of Shares as
set forth on Schedule I attached hereto.
(e) Immediately upon the expiration of the 60 day period for
giving the Dispute Notice, if no Dispute Notice is given, or
immediately upon resolution of disputes, if any, pursuant to
this Subsection 1.04, the Base Purchase Price shall be
adjusted as follows (as so adjusted, the "Adjusted Purchase
Price"):
(i) If the Net Worth of the Company (as such term is
defined below) on the Closing Date, as reflected on
the Closing Balance Sheet, is less than $20,000,000,
the deficiency shall be deducted from the Base
Purchase Price to obtain the Adjusted Purchase Price.
(ii) The term "Net Worth of the Company" is defined
as the excess of the depreciated book value of all
assets of the Company and the Subsidiaries, including
patents, copy rights, trademarks and other similar
intangible items, over the book value of all
liabilities, excluding loans from Stockholders and
amounts accrued as bonuses or commissions payable to
Stockholders as set forth in Exhibit 1.04 (e)(ii), of
the Company and the Subsidiaries, all as shown on the
Closing Balance Sheet.
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1.05 Payments on Account of Adjustments.
(a) The difference between the Adjusted Purchase Price and the
Base Purchase Price, together with interest thereon at the
rate of 6% per annum from the Closing Date to the payment of
such deficiency, shall be paid to the Buyer immediately upon
the expiration of the 60-day period for giving the Dispute
Notice, if no Dispute Notice is given, or immediately upon
final resolution of any dispute in connection with the
determination of the Adjusted Purchase Price.
(b) Any amounts payable to the Buyer, or the Company (if the
Closing occurs), in connection with any claim for
indemnification pursuant to Section 10 hereof, shall be paid
to the Buyer or the Company, as the case may be, immediately
upon the resolution, by agreement or arbitration, of such
indemnification claim.
(c) If an amount is payable to the Buyer pursuant to paragraph
(a) or (b) or this Subsection 1.05, such amount shall, to the
extent of available funds, be paid to the Buyer by the Escrow
Agent from the Reserve Account and, to the extent that funds
in the Reserve Account are insufficient, be paid to the Buyer
directly by the Stockholders, jointly and severally, in cash,
by cashier's or certified check or by wire transfer of
immediately available funds to an account designated by the
Buyer. Any balance remaining in the Reserve Account, after any
payment to the Buyer pursuant to the preceding sentence, and
subject to the provisions of paragraph (d) hereof, shall be
paid by the Escrow Agent to the Stockholders' Representative.
All payments to the Stockholders' Representative by the Escrow
Agent shall be distributed by the Stockholders' Representative
to each of the Stockholders in the proportion set forth
opposite their respective names on Schedule I attached hereto.
(d) Except for Payments permitted pursuant to paragraphs (a)
and (b) above, all amounts in the Reserve Account shall be
held in such Account, until the later of (i) two years from
the Closing Date, (ii) the final determination of the Adjusted
Purchase Price, whether by agreement or otherwise, or (iii)
the final resolution, whether by agreement or arbitration, of
any claims for indemnification under Section 10 hereof which
are asserted in writing by the Buyer, or the Company (if the
Closing occurs), prior to two years from the Closing Date.
1.06 Stockholders' Representative.
(a) In order to efficiently administer (i) the determination
of the Net Worth of the Company, the Adjusted Purchase Price
and the Adjusted Amount (as defined in Subsection 12.04
hereof), (ii) the waiver of any condition to the obligations
of the Stockholders to consummate the transactions
contemplated hereby, and (iii) the defense and/or settlement
of any claims for which the Stockholders may be required to
indemnify the Buyer or the Company pursuant to Section 10
hereof, the Stockholders hereby designate James Weber as their
representative (the "Stockholders' Representative").
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(b) The Stockholders hereby authorize the Stockholders'
Representative (i) to make all decisions relating to the
determination of the Net Worth of the Company, the Adjusted
Purchase Price and the Adjustment Amount, (ii) to take all
action necessary in connection with the waiver of any
condition to the obligations of the Stockholders to consummate
the transactions contemplated hereby, or the defense and/or
settlement of any claims for which the Stockholders may be
required to indemnify the Buyer or the Company pursuant to
Section 10 hereof, (iii) to give and receive all notices
required to be given under the Agreement, and (iv) to take any
and all additional action as is contemplated to be taken by or
on behalf of the Stockholders by the terms of this Agreement.
(c) In the event that the Stockholders' Representative dies,
becomes unable to perform his responsibilities hereunder or
resigns from such position, Stockholders holding, prior to the
Closing, a majority of the Shares as set forth on Schedule I
attached hereto shall select another representative to fill
such vacancy and such substituted representative shall be
deemed to be the Stockholders' Representative for all purposes
of this Agreement.
(d) All decisions and actions by the Stockholders'
Representative, including, without limitation, any agreement
between the Stockholders' Representative and the Buyer
relating to the determination of the Net Worth of the Company,
the Adjusted Purchase Price or the Adjustment Amount, or the
defense or settlement of any claims for which the Stockholders
may be required to indemnify the Buyer and/or the Company
pursuant to Section 10 hereof, shall be binding upon all of
the Stockholders, and no Stockholder shall have the right to
object, dissent, protest or otherwise contest the same.
(e) By their execution of this Agreement, the Stockholders
agree that:
(i) the Buyer shall be able to rely conclusively on
the instructions and decisions of the Stockholders'
Representative as to the determination of the Net
Worth of the Company, the Adjusted Purchase Price or
the Adjustment Amount, or the settlement of any
claims for indemnification by the Buyer or the
Company pursuant to Section 10 hereof or any other
actions required to be taken by the Stockholders'
Representative hereunder, and no party hereunder
shall have any cause of action against the Buyer for
any action taken by the Buyer in reliance upon the
instructions or decisions of the Stockholders'
Representative;
(ii) all actions, decisions and instructions of the
Stockholders' Representative shall be conclusive and
binding upon all of the Stockholders and no
Stockholder shall have any cause of action against
the Stockholders' Representative for any action
taken, decision made or instruction given by the
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Stockholders'Representative under this Agreement,
except for fraud or willful breach of this
Agreement by the Stockholders' Representative;
(iii) the provisions of this Subsection 1.06 are
independent and severable, are irrevocable and
coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any
Stockholder may have in connection with the
transactions contemplated by this Agreement;
(iv) remedies available at law for any breach of the
provisions of this Subsection 1.06 are inadequate;
therefore, the Buyer and the Company shall be
entitled to temporary and permanent injunctive relief
without the necessity of proving damages if either
the Buyer or the Company brings an action to enforce
the provisions of this Subsection 1.06; and
(v) the provisions of this Subsection 1.06 shall be
binding upon the executors, heirs, legal
representatives and successors of each Stockholder,
and any references in this Agreement to a Stockholder
or the Stockholders shall mean and include the
successors to the Stockholders' rights hereunder,
whether pursuant to testamentary disposition, the
laws of descent and distribution or otherwise.
(f) All fees and expenses incurred by the Stockholders'
Representative shall be paid by the Stockholders in proportion
to their ownership of Shares as set forth on Schedule I
attached hereto.
1.07 Closing. The Closing shall take place at the offices of McDowell Welch,
Waterloo, Ontario, within four weeks of receipt of "Hart-Scott-Rodino"
approval as required by Section 8.03, or at such other place, time or
date as may be mutually agreed upon in writing by the parties. The
transfer of the Shares by the Stockholders to the Buyer shall be deemed
to occur at 12:01 a.m., EST, on the day of the Closing.
2. Representations of the Stockholders Regarding the Shares
Each stockholder severally represents and warrants to the
Buyer as follows:
(a) Such Stockholder has good and marketable title to the
Shares which are to be transferred to the Buyer by such
Stockholder pursuant hereto, free and clear of any and all
covenants, conditions, restrictions, voting trust
arrangements, liens, charges, encumbrances, options and
adverse claims or rights whatsoever. Schedule I attached
hereto sets forth a true and correct description of all Shares
owned by such Stockholder.
(b) Such Stockholder has the full right, power and authority
to enter into this Agreement and to transfer, convey and sell
to the Buyer at the Closing the Shares to be sold by such
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Stockholder hereunder and, upon consummation of the purchase
contemplated hereby, the Buyer will acquire from such
Stockholder good and marketable title to such Shares, free
and clear of all covenants, conditions, restrictions, voting
trust arrangements, liens, charges, encumbrances, options and
adverse claims or rights whatsoever.
(c) Such Stockholder is not a party to, subject to or bound by
any agreement or any judgement, order, writ, prohibition,
injunction or decree of any court or other governmental body
which would prevent the execution or delivery of this
Agreement by such Stockholder or the transfer, conveyance and
sale of the Shares to be sold by such Stockholder to the Buyer
pursuant to the terms hereof.
(d) Except as set forth in Section 14 hereof, no broker or
finder has acted for such Stockholder in connection with this
agreement or the transactions contemplated hereby, and no
broker or finder is entitled to any brokerage or finder's fee
or other commissions in respect of such transactions based
upon agreements, arrangements or understandings made by or on
behalf of such Stockholder.
3. Representations of the Stockholders and the Company Regarding the
Company.
Each of the Stockholders and the Company, jointly and
severally, represent and warrant to the Buyer that:
3.01 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Province of
Ontario, Canada, and has all requisite power and authority (corporate
and otherwise) to own its properties, to carry on its business as now
being conducted, to execute and deliver this Agreement and the
agreements contemplated herein, and to consummate the transactions
contemplated hereby and thereby. The Company is duly qualified to do
business and is in good standing in all jurisdictions in which its
ownership of property or the character of its business requires such
qualification. Certified copies of the Certificate of Incorporation and
Bylaws of the Company, as amended to date, have been previously
delivered to the Buyer or will be promptly provided and are complete
and correct, and no amendments have been made thereto or have been
authorized since date thereof.
3.02 Capitalization of the Company. The Company's authorized and issued
capital stock is set forth in Schedule 3.02 attached hereto. Except as
set forth in Schedule 3.02, there are not, and on the Closing Date
there will not be, outstanding (i) any options, warrants or other
rights to purchase from the Company any capital stock of the Company;
(ii) any securities convertible into or exchangeable for shares of such
stock; or (iii) any other commitments of any kind for the issuance of
additional shares of capital stock or options, warrants or other
securities of the Company.
3.03 Subsidiaries.
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(a) Schedule 3.03 attached hereto sets forth:
(i) the name and percentage ownership by the Company
of each corporation, partnership, joint venture or
other entity in which the Company has, directly or
indirectly, an equity interest in the capital stock
thereof or other equity interests therein
(individually, a "Subsidiary" and, collectively, the
"Subsidiaries");
(ii) intentionally omitted.
(iii) the jurisdiction of incorporation,
capitalization and ownership of each Subsidiary and
Affiliated Entity;
(iv) the names of the officers and directors of each
Subsidiary and Affiliated Entity; and
(v) the jurisdiction in which each Subsidiary is
qualified or holds licenses to do business as a
foreign corporation.
(b) Except as set forth in Schedule 3.03, the Company owns
directly or indirectly all of the outstanding shares of
capital stock of each of the Subsidiaries free and clear of
all covenants, conditions, restrictions, liens, charges and
encumbrances.
(c) Each of the Subsidiaries is a corporation or other entity
duly organized and validly existing and in good standing under
the laws of the state of its incorporation or organization and
has all requisite power and authority to own its properties
and carry on its business as now being conducted. Each of the
Subsidiaries is duly qualified to do business and is in good
standing in all jurisdictions in which its ownership of
property or the character of its business requires such
qualification. Certified copies of the charter, bylaws and
other governing instruments of the Subsidiaries, each as
amended to date, have been previously delivered to the Buyer,
are complete and correct, and no amendments have been made
thereto or have been authorized since the date of such
delivery. The Company does not own any capital stock of or
other equity interest in any corporation, partnership or other
entity, other than the Subsidiaries. The shares of capital
stock of each Subsidiary as set forth in Schedule 3.03 have
been duly and validly issued and are fully paid and
non-assessable.
(d) Except as set forth in Schedule 3.03, none of the
Subsidiaries holds shares of its capital stock in its
treasury, and there are not, and on the Closing Date there
will not be, outstanding any (i) options, warrants or other
rights with respect to the capital stock of any of the
Subsidiaries, (ii) any securities convertible into or
exchangeable for shares of such stock, or (iii) any other
commitments of any kind for the issuance of additional shares
of capital stock or options, warrants or other securities of
any of them.
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3.04 Authorization. The execution and delivery by the Company of this
Agreement and the agreements provided for herein, and the consummation
by the Company of all transactions contemplated hereunder and
thereunder by the Company, have been duly authorized by all requisite
corporate action. This Agreement has been duly executed by the Company
and the Stockholders. This Agreement and all other agreements and
obligations entered into and undertaken in connection with the
transactions contemplated hereby to which the Company or any of the
Stockholders is a party constitute the valid and legally binding
obligations of the Company and the Stockholders, enforceable against
them in accordance with their respective terms. The execution, delivery
and performance by the Company and the Stockholders of this Agreement
and the agreements provided for herein, and the consummation by the
Company and the Stockholders of the transactions contemplated hereby
and thereby, will not, with or without the giving of notice or the
passage of time or both, (a) violate the provisions of any law, rule or
regulation applicable to the Company of any of the Stockholders; (b)
violate the provisions of the Certificate of Incorporation or Bylaws of
the Company; (c) violate any judgement, decree, order or award of any
court, governmental body or arbitrator; or (d) conflict with or result
in the breach or termination of any term or provision of, or constitute
a default under, or cause any acceleration under, or cause the creation
of any lien, charge or encumbrance upon the properties or assets of the
Company pursuant to, any indenture, mortgage, deed of trust or other
instrument or agreement to which the Company is a party or by which the
Company or any of its properties is or may be bound. No consent or
approval of any third party is required in connection with the
consummation by the Company of the transactions contemplated by this
Agreement, other than the consent of the Toronto Dominion Bank pursuant
to its lending agreement.
3.05 Financial Statements.
(a) The Stockholders have previously delivered to the Buyer
the audited and unaudited balance sheets of the Company and
the Subsidiaries as listed in Exhibit 3.05 (the "Historical
Balance Sheet") and the related statements of income, and
where applicable, shareholders'equity, retained earnings and
statements of cash flow of the Company and the Subsidiaries
for the fiscal year then ended (collectively, the "Historical
Financial Statements"). The Company's latest fiscal year end,
July 31, 1996, is hereinafter referred to as the "Balance
Sheet Date". The Stockholders will deliver promptly to the
Buyer the unaudited consolidated balance sheet of the Company
and the Subsidiaries as of November 28, 1996 (the "Interim
Balance Sheet") and the related statements of income, and
where applicable, shareholders' equity, retained earnings and
statements of cash flow of the Company and the Subsidiaries
for the four-month period then ended (collectively, the
"Interim Financial Statements"). The Historical Financial
Statements and the Interim Financial Statements (collectively,
the "Financial Statements") have been prepared in accordance
with generally accepted accounting principles applied
consistently with past practices and, in the case of the
Interim Financial Statements, have been (or will be) certified
by the Company's chief financial officer.
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(b) The Financial Statements fairly present, as of their
respective dates, the financial condition, retained earnings,
assets and liabilities of the Company and the Subsidiaries and
the results of operations of the Company's and the
Subsidiaries' business for the periods indicated. With respect
to contracts and commitments for the sale of goods or the
provision of services by the Company and the Subsidiaries, the
Financial Statements contain and reflect adequate reserves,
which are consistent with previous reserves taken, for all
reasonably anticipated material losses and costs and expenses.
The amounts shown as accrued for current and deferred income
and other taxes in the Financial Statements are sufficient for
the payment of all accrued and any unpaid taxes, interest,
penalties, assessments or deficiencies applicable to the
Company or any Subsidiary, whether disputed or not, for the
applicable period then ended and periods prior thereto.
3.06 Absence of Undisclosed Liabilities. Except as and to the extent (a)
reflected in the Interim Balance Sheet, (b) set forth on Schedule 3.06
attached hereto, or (c) incurred in the ordinary course of business or
(d) not material in amount, either individually or in the aggregate,
neither the Company nor any of the Subsidiaries has any liability or
obligation, secured or unsecured, whether accrued, absolute,
contingent, unasserted or otherwise, which is material to the condition
(financial or otherwise) of the assets, properties, business or
prospects of the Company and the Subsidiaries taken as a whole. For
purposes of this Subsection 3.06, "material" means any amount in excess
of $100,000.
3.07 Litigation. Except as set forth on Schedule 3.07 attached hereto (a)
there is no action, suit or proceeding to which the Company or any of
the Subsidiaries is a party (either as a plaintiff or defendant)
pending or, to the best knowledge of the Stockholders, threatened
before any court or governmental agency, authority, body or arbitrator
and to the best knowledge of the Stockholders, there is no basis for
any such action, suit or proceeding; (b) neither the Company nor any of
the Subsidiaries, nor, to the best knowledge of the Stockholders, any
officer, director or employee of any of the foregoing, has been
permanently or temporarily enjoined by any order, judgment or decree of
any court or any governmental agency, authority or body from engaging
in or continuing any conduct or practice in connection with the
business, assets, or properties of the Company or any of the
Subsidiaries; and (c) there is not in existence on the date hereof any
order, judgement or decree of any court, tribunal or agency enjoining
or requiring the Company or any of the Subsidiaries to take any action
of any kind with respect to its business, assets or properties.
3.08 Insurance. Schedule 3.08 attached hereto sets forth a true, correct and
complete list of all fire, theft, casualty, general liability, workers
compensation, business interruption, environmental impairment, product
liability, automobile and other insurance policies maintained by the
Company or any of the Subsidiaries and of all life insurance policies
maintained on the lives of any of their employees, specifying the type
of coverage, the amount of coverage, the premium, the insurer and the
expiration date of each such policy (collectively, the "Insurance
Policies") and all claims made under such Insurance Policies
<PAGE>
since January 1, 1992. True, correct and complete copies of all
Insurance Policies have been previously delivered by the Stockholders
or the Company to the Buyer or will be promptly provided. The Insurance
Policies are in full force and effect and are in amounts of a nature
which are adequate and customary for the Company's and the
Subsidiaries' business. All premiums due on the Insurance Policies or
renewals thereof have been paid, and there is no default under the
Insurance Policies. Except as set forth on Schedule 3.08, neither the
Company nor any of the Subsidiaries has received any notice or other
communication from any issuer of the Insurance Policies since January
1, 1993, canceling or materially amending any of the Insurance
Policies, materially increasing any deductibles or retained amounts
thereunder, or materially increasing the annual or other premiums
payable thereunder, and, to the best knowledge of the Stockholders, no
such cancellation, amendment or increase of deductibles, retainages or
premiums is threatened. Except as set forth on Schedule 3.08, neither
the Company nor any of the Subsidiaries has any outstanding claims or
any dispute with any insurance carrier regarding claims, settlements or
premiums and neither the Company nor any of the Subsidiaries has failed
to give any notice or present any claim under any Insurance Policy in
due and timely fashion. There are no outstanding requirements or
recommendations by any issuer of the Insurance Policies or by any Board
of Fire Underwriters or other similar body exercising similar functions
or by any governmental authority exercising similar functions which
requires or recommends any changes in the conduct of the business of,
or any repairs or other work to be done on or with respect to any of
the properties or assets of, the Company or any of the Subsidiaries.
3.09 Personal Property. Schedule 3.09 attached hereto sets forth (i) a
true, correct and complete list of all items of tangible personal
property owned by the Company or any of the Subsidiaries as of the date
hereof having either a net book value per unit in excess of $10,000; or
not owned by the Company or any Subsidiary but in the possession of or
used or useful in the business of the Company or any of the
Subsidiaries and having rental Payments therefore in excess of $10,000
per month or $100,000 per year (collectively, the "Personal Property");
and (ii) a description of the owner of, and any agreement relating to
the use of, each item of Personal Property not owned by the Company or
a Subsidiary and the circumstances under which such Property is used.
Except as disclosed in Schedule 3.09:
(a) the Company or the relevant Subsidiary, as the case may
be, has or will have at Closing good and marketable title to
each item of Personal Property free and clear of all liens,
leases, encumbrances, claims under bailment and storage
agreements, equities, conditional sales contracts, security
interests, charges and restrictions, except for liens, if any,
for personal property taxes not due subject to the general
security agreement in favor other Toronto Dominion Bank;
(b) no officer, director, stockholder or employee of the
Company or any Subsidiary, nor any spouse, child or other
relative or affiliate thereof, owns directly or indirectly, in
whole or in part, any of the Personal Property described in
Schedule 3.09;
<PAGE>
(c) each item of Personal Property not owned by the Company or
a Subsidiary is in such condition that upon the return of such
property to its owner in its present condition at the end of
the relevant lease term or as otherwise contemplated by the
applicable agreement between the Company or the relevant
Subsidiary, as the case may be, and the owner or lessor
thereof, the obligations of the Company or the relevant
Subsidiary, as the case may be, to such owner or lessor will
be discharged;
(d) the Personal Property is in good operating condition and
repair, normal wear and tear excepted, is currently used by
either the Company or the relevant Subsidiary in the ordinary
course of its business and normal maintenance has been
consistently performed with respect to the Personal Property;
and
(e) the Company and the Subsidiaries own or otherwise have the
right to use all of the Personal Property now used or useful
in the operation of their business or the use of which is
necessary for or useful in the performance of any material
contract, letter of intent or proposal to which any of them is
a party.
3.10 Intangible Property. Schedule 3.10 attached hereto sets forth: (i) a
true, correct and complete list and, where appropriate, a description
of, all items of intangible property owned by, or used or useful in
connection with the business of, the Company or any of the
Subsidiaries, United States and foreign patents, trade names,
trademarks, trade name and trademark registrations, copyrights and
copyright registrations, and applications for any of the foregoing (the
"Intangible Property"); and (ii) a true, correct and complete list of
all licenses or similar agreements or arrangements to which the Company
or any of the Subsidiaries is a party, either as license or licensor,
with respect to the Intangible Property. Except as otherwise disclosed
in Schedule 3.10:
(a) Subject to the general security agreement in favor of the
Toronto Dominion Bank and a lien in favor of the Stockholders
which will be discharged at or before Closing, the Company or
a Subsidiary is the sole and exclusive owner of all right,
title and interest in and to the Intangible Property and all
designs, permits, labels and packages used on or in connection
therewith, free and clear of all liens, security interests,
charges, encumbrances, equities or other adverse claims;
(b) the Company or the relevant Subsidiary has the right and
authority to use, and to continue to use after the Closing,
the Intangible Property in connection with the conduct of its
business in the manner presently conducted, and such use or
continuing use does not and will not conflict with, infringe
upon or violate any rights of any other person, corporation or
entity;
(c) neither the Company nor any of the Stockholders has
received notice of, or has any knowledge of any basis for, a
pleading or threatened claim, interference action or other
judicial or adversarial proceeding against the Company that
any of the operations, activities, products, services or
publications of the Company or any of its customers or
<PAGE>
distributors infringes or will infringe any patent,
trademark, trade name, copyright, trade secret or other
property right of a third party, or that it is illegally or
otherwise using the trade secrets, formulae or property
rights of others;
(d) there are no outstanding, nor to the best knowledge of the
Stockholders, any threatened disputes or other disagreements
with respect to any licenses or similar agreements or
arrangements described in Schedule 3.10 or with respect to
infringement by a third party of any of the Intangible
Property;
(e) the Intangible Property owned or licensed by the Company
or the relevant Subsidiary is sufficient to conduct the
Company's or the relevant Subsidiary's business as presently
conducted;
(f) the Company or the relevant Subsidiary has taken all steps
reasonably necessary to protect its right, title and interest
in and to the Intangible Property and the continued use of the
Intangible Property;
(g) no officer, director, stockholder or employee of the
Company or any Subsidiary, nor any spouse, child or other
relative or affiliate thereof, owns directly or indirectly, in
whole or in part, any of the Intangible Property; and
(h) neither the Company nor the relevant Subsidiary nor any
Stockholder has any knowledge that any third party in
infringing, or will threaten to infringe, upon or otherwise
violate any of the Intangible Property in which the Company or
any Subsidiary has ownership rights.
3.11 Leases. Schedule 3.11 attached hereto sets forth (a) a true, correct
and complete list as of the date hereof of all leases of real property,
identifying separately each ground lease, to which the Company or any
of the Subsidiaries is a party (collectively, the "Leases"). True,
correct and complete copies of all Leases and all amendments,
modifications and supplemental agreements thereto, have previously been
delivered by the Stockholders or the Company to the Buyer. The Leases
are in full force and effect, are binding and enforceable against each
of the parties thereto in accordance with their respective terms and,
except as set forth on Schedule 3.11, have not been modified or amended
since the date of delivery to the Buyer. No party to any Lease has sent
written notice to the other claiming that such party is in default
thereunder and that such default remains uncured. Except as set forth
on Schedule 3.11, there has not occurred any event which would
constitute a material breach of or default in the performance of any
covenant, agreement or condition contained in any Lease, nor has there
occurred any event which with the passage of time or the giving of
notice or both would constitute such a material breach or material
default. Neither the Company nor any of the Subsidiaries is obligated
to pay any leasing or brokerage commission relating to any lease and,
except as set forth on Schedule 3.11, will not have any obligation to
pay any leasing or brokerage commission upon the renewal of any Lease.
Except as set froth on Schedule 3.11, no construction,
<PAGE>
alteration or other leasehold improvement work with respect to any of
the Leases remains to be paid for or to be performed by the Company or
any of the Subsidiaries. The Financial Statements contain adequate
reserves to provide for the restoration of the property subject to the
Leases at the end of the respective Lease terms, to the extent required
by the Leases. Any leases for which any Stockholder has any direct or
indirect interest is currently and shall be renewed at or below fair
market value rents.
3.12 Real Estate.
(a) Schedule 3.12A attached hereto contains a true, correct
and complete list of (i) the addresses and legal descriptions
of all real property owned by the Company or any Subsidiary
(the "Real Estate"), and (ii) all liabilities, liens,
encumbrances, easements, restrictions, reservations,
tenancies, agreements or other obligations affecting the Real
Estate (collectively, the "Exceptions"). On the Closing Date,
the Company or the relevant Subsidiary will have good, clear,
record and marketable title to the Real Estate, free and clear
of all such Exceptions, other that the permitted exceptions
set forth on Schedule 3.12B (the "Permitted Exceptions").
(b) Except as set forth on Schedule 3.12A, no work has been
performed on or materials supplied to the Real Estate within
any applicable statutory period which could give rise to
mechanics or materialman's liens.
(c) There is no pending or threatened condemnation or eminent
domain proceeding with respect to the Real Estate.
(d) Except as set forth on Schedule 3.12A, there are no taxes
or betterment assessments other than ordinary real estate
taxes pending or payable against the Real Estate and there are
no contingencies existing under which any assessment for real
estate taxes may be retroactively filed against the Real
Estate, and there are no taxes or levies, permit fees or
connection fees which must be paid respecting existing curb
cuts, sewer hookups, water-main hookups or services of a like
nature.
(e) The Real Estate is legally subdivided and consists of
separate tax lots so that it is assessed separate and apart
from any other property.
(f) Except as set forth on Schedule 3.12A, all utility systems
serving the Real Estate, public or private, are in good
operating condition, all installation charges therefore have
been fully paid and all service charges therefore have been or
will be paid by the Company or the relevant Subsidiary up to
and including the Closing Date. Since January 1, 1996, neither
the Company nor any of the Subsidiaries has experienced any
material interruption in the delivery of adequate quantities
of any utilities (including, without limitation, electricity,
natural gas, potable water, water for cooling or similar
purposes and fuel oil) or other public services (including,
<PAGE>
without limitation, sanitary and industrial sewer service)
required in the operation of its business during such period.
(g) Except for the South Padre Island property, the Real
Estate is not located in any special flood hazard area
designated by any federal, state, county or local governmental
agencies having jurisdiction over the Real Estate
(collectively, the "Governmental Agencies").
(h) The Real Estate complies with the requirements of all
building, zoning, subdivision, health, safety, environmental,
pollution control, waste products, sewage control and all
other applicable statutes, laws, codes, ordinances, rules,
orders, regulations and decrees (collectively, the
"Governmental Regulations") of any and all Governmental
Agencies. The Company and its Subsidiaries have obtained, and
the Stockholders or the Company have previously provided the
Buyer with copies of, all consents, permits, licenses and
approvals required by such Governmental Regulations. Such
consents, permits, licenses and approvals are in full force
and effect and have been properly and validly issued. There is
no action pending or threatened by any Governmental Agencies
claiming that the Real Estate violates any Governmental
Regulations or threatening to shut down the business of the
Company or any of the Subsidiaries.
(i) There are no suits, petitions, notices or proceedings
pending, given or threatened by an persons or Governmental
Agencies before any court, Governmental Agencies or
instrumentalities, administrative or otherwise, which if
given, commenced or concluded would have an adverse effect on
the Company's title to the Real Estate or the operation of the
business of the Company or any Subsidiary as presently
operated.
(j) Neither the Company nor any of the Subsidiaries has
received notice from any insurer of the Real Estate
threatening to cancel any insurance coverage or requiring any
changes or corrective work to the Real Estate which has not
been satisfied.
(k) All of the buildings, fixtures and other improvements
located on the Real Estate are in good operating condition and
repair, and the operation thereof as presently conducted is
not in violation of any applicable building code, zoning
ordinance or other law or regulation.
(l) Schedule 3.12A sets forth a true, correct and complete
list of all title insurance policies, surveys engineering
reports and hazardous waste reports prepared with respect to
the Real Estate since January 1, 1992, copies of which have
previously been delivered by the Stockholders or the Company
to the Buyer or will be promptly provided.
3.13 Inventory. Schedule 3.13 attached hereto sets forth a true, correct and
complete list of the inventory of the Company and the Subsidiaries
(the "Inventory") as of the date hereof. The inventory consists
of items of a quality and quantity which are usable or saleable
without discount in the ordinary course of the business conducted by
the Company and the Subsidiaries. The value of all items of obsolete
materials and of materials of below standard quality have been written
down to net realizable market value and the values at which such
inventory is carried reflect the normal inventory valuation policy
of the Company and the Subsidiaries of stating Inventory at the
lower of cost or market value in accordance with generally accepted
accounting principles.
3.14 Accounts Receivable. Schedule 3.14 attached hereto sets forth a true,
correct and complete list of the accounts and notes receivable of the
Company and the Subsidiaries (the "Accounts Receivable"), including the
aging thereof as of the date hereof. All Accounts Receivable arose in
the ordinary course of business and are collectible in the normal
industry terms, using normal collection procedures, net of the reserve
for doubtful accounts set forth thereon, which reserve is adequate and
was calculated in accordance with generally accepted accounting
principles consistently applied.
<PAGE>
3.15 Tax Matters.
(a) Except as set forth on Schedule 3.15 attached hereto:
(i) Within the times and in the manner prescribed by
law, the Company and each of the Subsidiaries have
filed all federal, state and local tax returns and
all tax returns for foreign countries, provinces and
other governing bodies having jurisdiction to levy
taxes upon them which are required to be filed;
(ii) The Company and each of the Subsidiaries have
paid all taxes, interest, penalties, assessments and
deficiencies which have become due or which have been
claimed to be due, including without limitation
income, franchise, real estate, sales and withholding
taxes and other employee benefits, taxes and imports;
(iii) To the best knowledge of the Stockholders, all
tax returns filed by the Company and the Subsidiaries
for the taxable years ending 1990 through 1995
constitute complete and accurate representations of
the respective tax liabilities of the Company and the
Subsidiaries for such years and accurately set forth
all items (to the extent required to be included or
reflected in such returns) relevant to their future
tax liabilities, including the tax bases of their
properties and assets;
(iv) Neither the Company nor any of the Subsidiaries
has waived or extended any applicable statute of
limitations relating to the assessment of federal,
state, local or foreign taxes;
(v) No examinations of the federal, state, local or
foreign tax returns of the Company or any of the
Subsidiaries is currently in progress nor, to the
best knowledge of the Stockholders, threatened and no
deficiencies have been asserted or assessed against
either the Company or any of the Subsidiaries as a
result of any audit by the Internal Revenue Service
or any state or local taxing authority and no such
deficiency has been proposed or threatened;
(b) Schedule 3.15 attached hereto sets forth those taxable
years for which the tax returns of the Company and the
Subsidiaries have been reviewed or audited by applicable
federal, state, local and foreign taxing authorities and those
tax years for which said tax returns have received clearances
or other indications of approval from applicable federal,
state, local and foreign taxing authorities. To the best
knowledge of the Stockholders, no issue or issues have been
raised in connection with any prior or pending review or audit
of said federal, state, local or foreign tax returns which the
Stockholders reasonable believe may be expected to be raised
in the future by such taxing authorities in connection with
the audit or review of the tax returns of the Company or any
of the Subsidiaries.
3.16 Books and Records. The general ledgers and books of account of the
Company and the Subsidiaries, all federal, state and local income,
franchise, property and other tax returns filed by the Company and the
Subsidiaries are in all material respects complete and correct and have
been maintained in accordance with good business practice and in
accordance with all applicable procedures required by laws and
regulations.
<PAGE>
3.17 Contracts and Commitments.
(a) Except as set forth in Schedule 3.17(a) the Company will
make available all contracts and agreements (collectively, the
"Contracts"), including but not limited to:
(i) all loan agreements, indentures, mortgages and
guaranties to which the Company or any of the
Subsidiaries is a party or by which the Company or
any of the Subsidiaries or any of their property is
bound;
(ii) all pledges, conditional sale or title retention
agreements, security agreements, equipment
obligations, personal property leases and lease
purchase agreements to which the Company or any of
the Subsidiaries is a party or by which the Company
or any of the Subsidiaries or any of their property
is bound;
(iii) all contracts, agreements, commitments,
purchase orders or other understanding or
arrangements to which the Company or any of the
Subsidiaries is a party or by which the Company or
any of the Subsidiaries or any of their property is
bound which (A) involve Payments or receipts by the
Company or any of the Subsidiaries in the case of any
single contract, agreement, commitment, understanding
or arrangement under which full performance
(including payment) has not been rendered by all
parties thereto or (B) which may materially adversely
affect the condition (financial or otherwise) or the
properties, assets, business or prospects of the
Company or any of the Subsidiaries;
(iv) all collective bargaining agreements, employment
and consulting agreements, executive compensation
plans, bonus plans, deferred compensation agreements,
pension plans, retirement plans, employee stock
option or stock purchase plans and group life, health
and accident insurance and other employee benefit
plans, agreements, arrangements or commitments to
which the Company or any of the Subsidiaries is a
party or by which the Company or any of the
Subsidiaries or any of their property is bound;
(v) all agency, distributor, sales representative,
sales agency agreement, franchise or similar
agreements to which the Company or any of the
Subsidiaries is a party or by which the Company or
any of the Subsidiaries or any of their property is
bound;
(vi) all contracts, agreements or other
understandings or arrangements between the Company
and any of the Subsidiaries (including, but not
limited to, any tax sharing arrangements) or between
the Company and any of the Stockholders or their
affiliates:
<PAGE>
(vii) Intentionally omitted;
(viii) all contracts, agreements and other documents
or information relating to past disposal of waste
(whether or not hazardous), and sales of steel scrap,
prototypes, tools and dies;
(ix) all contracts, agreements or other arrangements
imposing a non-competition or non-solicitation
obligation on the Company or any of its Subsidiaries;
and
(b) Except as set forth on Schedule 3.17(b):
(i) each Contract is a valid and binding agreement of
the Company or the relevant Subsidiary, enforceable
against the Company or the relevant Subsidiary in
accordance with its terms, and the Company or the
relevant Subsidiary does not have any knowledge that
any Contract is not a valid and binding agreement of
the other parties thereto;
(ii) the Company or the relevant Subsidiary has
fulfilled all material obligations required pursuant
to the Contracts to have been performed by the
Company or the relevant Subsidiary, as the case may
be, on its part prior to the date hereof, and the
Company or the relevant Subsidiary, as the case may
be, has no reason to believe that is will not be able
to fulfill, when due, all of its obligations under
the Contracts which remain to be performed after the
date hereof;
(iii) the Company or the relevant Subsidiary is not
in material breach of or default under any Contract,
and no event has occurred which with the passage of
time or giving of notice or both would constitute
such a default, result in a loss of rights or result
in the creation of any lien, charge or encumbrance,
thereunder or pursuant thereto;
(iv) to the best knowledge of the Stockholders, there
is no existing material breach or default by any
other party to any Contract, and no event has
occurred which with the passage of time or giving of
notice or both would constitute a default by such
other party, result in a loss of rights or result in
the creation of any lien, charge or encumbrance
thereunder or pursuant thereto;
(v) there are not and, since January 1, 1994, have
not been, any material claims not in the normal
course of business relating to the Company or any
Subsidiary by customers of the Company or any of the
Subsidiaries under any warranties, whether express or
implied;
(vi) the Company and the Subsidiaries are not
expressly restricted by any Contract from carrying on
<PAGE>
their business anywhere in the world; (vii) neither
the Company nor any of the Subsidiaries has any
written or oral contracts to sell products or perform
services which are expected to be performed at, or
to result in, a material loss;
(viii) neither the Company nor any of the
Subsidiaries has experienced any shortages of
components or other supplies (collectively
"Supplies") within the twelve (12) month period
preceding the date hereof, and the Company and the
Subsidiaries have on hand, or have reason to believe
they can timely obtain, a sufficient quantity of
Supplies to satisfy all outstanding orders heretofore
received and all orders anticipated to be received
from the date hereof through December 31, 1997; and
(ix) neither the Company nor any of the Subsidiaries
has experienced any shortages of raw materials ("Raw
Materials") within the twelve (12) month period
preceding the date hereof, and the Company and the
Subsidiaries have on hand, or have reason to believe
they can timely obtain, a sufficient quantity of Raw
Materials to satisfy all outstanding orders
heretofore received and all orders anticipated to be
received through December 31, 1997.
(x) there are no other material agreements or
contracts entered into by the Company or any of the
Subsidiaries.
3.18 Compliance with Agreements and Laws. The Company and the Subsidiaries
each have all requisite licenses, permits and certificates, including
environmental, health and safety permits, from federal, state and local
authorities necessary to conduct their respective business and own and
operate their respective assets (collectively, the "Permits"). Schedule
3.18 attached hereto sets forth a true, correct and complete list of
all such Permits, copies of which have previously been delivered by the
Company or the Stockholders to the Buyer. Neither the Company nor any
of the Subsidiaries is in violation of any law, regulation or ordinance
(including, without limitation, laws, regulations or ordinances
relating to building, zoning, environmental, disposal of hazardous
substances, land use or similar matters) relating to its properties.
The business of the Company and the Subsidiaries as conducted since
January 1, 1992, has not violated, and on the date hereof does not
violate, in any material respect, any federal, state, local or foreign
laws, regulations or orders (including, but not limited to, any of the
foregoing relating to employment discrimination, occupational safety,
environmental protection, hazardous waste, conservation, or corrupt
practices), the enforcement of which would have a material adverse
effect on the results of operations, condition (financial or
otherwise), assets, properties business or prospects of the Company or
any of the Subsidiaries. Except as set forth on Schedule 3.18, neither
the Company nor any of the Subsidiaries has had notice or communication
from any federal, state or local governmental or regulatory authority
or otherwise since of any such violation or
<PAGE>
noncompliance.
3.19 Employee Relations.
(a) The Company and each of the Subsidiaries is in compliance
with all federal, state and municipal laws respecting
employment and employment practices, terms and conditions of
employment, and wages and hours, and is not engaged in any
unfair labor practice, and there are no arrears in the payment
of wages or social security taxes.
(b) Except as set forth on Schedule 3.19 attached hereto:
(i) none of the employees of the Company or the
Subsidiaries is represented by any labor union;
(ii) there is no unfair labor practice complaint
against the Company or any of the Subsidiaries
pending before the U.S. National Labor Relations
Board, or any federal, state or local agency of any
jurisdiction in which the Company or its Subsidiaries
conducts its operations.
(iii) there is no pending labor strike or other
material labor trouble affecting the Company or any
of the Subsidiaries (including, without limitation,
any organizational drive);
(iv) there is no material labor grievance pending
against the Company or any of the Subsidiaries;
(v) there is no pending representation question
respecting the employees of the Company or any of the
Subsidiaries:
(vi) there are no material pending arbitration
proceedings arising out of or under any collective
bargaining agreement to which the Company or any of
the Subsidiaries is a party, or to the best knowledge
of the Stockholders, any basis for which a claim may
be made under any collective bargaining agreement to
which the Company or any of the Subsidiaries is a
Party; and
(vii) neither the Company nor any of the Subsidiaries
has any continuing obligation for health, life,
medical insurance or other similar fringe benefits to
any former employee of the Company or any Subsidiary.
(c) Schedule 3.19 sets forth a true, correct and complete list
of the current payroll of the Company and the Subsidiaries,
including the job descriptions and salary or wage rates of
each of their employees, showing separately for each such
person who received an annual salary in excess of $25,000 the
maximum amounts paid or payable as salary and bonus Payments
for the fiscal year ended 1996.
<PAGE>
3.20 Employee Benefit Plans.
(a) Except as listed in Schedule 3.20 attached hereto, the
Company does not have, and is not subject to any present or
future obligation or liability under, any pension plan,
deferred compensation plan, retirement income plan, stock
option or stock purchase plan, profit sharing plan, bonus plan
or policy, employee group insurance plan, hospitalization
plan, disability plan or other employee benefit plan, program,
policy or practice, formal or informal, with respect to any of
its employees, whether or not established pursuant to statute
(the plans and programs listed in Schedule 3.20 are
collectively referred to as the "Benefit Plans"). True,
correct and complete copies of all of the written plans and
agreements and related funding arrangements and true, correct
and complete written descriptions of all of the oral
arrangements described in such Schedule 3.20 have heretofore
been delivered by the Company, or will be promptly provided.
Except as set forth in Schedule 3.20, the Company does not
have any written general policies or procedures in effect with
respect to employees of the Company, including but not limited
to policies regarding holidays, sick leave, vacation,
disability and death benefits, automobile allowances and
expense reimbursements. Any oral policies have been disclosed
to the Buyer.
(b) The employee benefit plans included in the Benefit Plans
which are required to be registered under applicable federal
and provincial laws are registered under and are in compliance
with all applicable federal and provincial laws and all
reports, returns and filings required to be made thereunder
have been made. Each of the Benefit Plans has been
administered in accordance with its terms and the provisions
of applicable law and has been funded in accordance with its
terms and provisions of applicable law. No funds have been
withdrawn by the Company from any Benefit Plans. There are no
pending claims by any employee covered under the Benefit Plans
or by any other person which allege a breach of fiduciary
duties or violation of governing law or which may result in
liability to the Company. No promises of benefit improvement
under the Benefit Plans have been made except as may be
required by law, regulation or collective bargaining
agreement.
(c) Compliance. With respect to all Employee Plans, the
Company and its Affiliates are in Compliance with the
requirements prescribed by any and all statutes, orders or
governmental rules or regulations currently in effect. The
Company and its Subsidiaries have in all respects performed
all obligations required to be performed by them under, and is
not in violation in any respect of, and there has been no
default or violation by any other party with respect to, any
of the Employee Plans.
(e) Retiree Benefits. No Employee Plan provides health or life
insurance benefits for retirees. No such plan contains any
provisions, and no commitments or agreements exist, which in
any way would limit or prohibit the Buyer from amending any
<PAGE>
such plan to reduce or eliminate such retiree benefits.
(f) No Implied Rights. Nothing expressed or implied herein
shall confer upon any past or present employee of the Company,
his or her representatives, beneficiaries, successors and
assigns, nor upon any collective bargaining agent, any rights
or remedies of any nature, including, without limitation, any
rights to employment or continued employment with the Company,
the Buyer, or any successor or affiliate.
(m) Liabilities. Except as heretofore accrued on the Interim
Financial Statements, there are no liabilities with respect to
any Employee Plan which liability relates to any period prior
to the Closing Date, including, without limitation, any taxes,
accrued vacation or sick pay (whether or not vested), accrued
vacation, sick and personal leaves, employee policies,
employee benefit claims or liability to the Pension Benefit
Guaranty Corporation. Without limitation of the foregoing,
severance pay has been accrued for any employees who have been
notified prior to the Closing Date of their termination after
the Closing Date.
3.21 Absence of Certain Changes or Events.
(a) Except as set forth on Schedule 3.21 attached hereto,
since the Balance Sheet Date, neither the Company nor any of
the Subsidiaries has entered into any transaction which is not
in the usual and ordinary course of business, and, without
limiting the generality of the foregoing, neither the Company
nor any of the Subsidiaries has:
(i) incurred any material obligation or liability for
borrowed money;
(ii) discharged or satisfied any lien or encumbrance
or paid any obligation or liability other than
current liabilities reflected in the Interim Balance
Sheet and the Stockholders' loans and/or bonuses or
commissions as listed in Schedule 1.04(e)(ii);
(iii) mortgaged, pledged or subjected to lien, charge
or other encumbrance any of their respective
properties or assets;
(iv) sold or purchased, assigned or transferred any
of its tangible assets or canceled any debts or
claims, except for inventory sold and raw materials
purchased in the ordinary course of business;
(v) made any material amendment to or termination of
any Contract or done any act or omitted to do any act
which would cause the breach of any Contract;
(vi) suffered any net losses of personal or real
property, whether insured or
<PAGE>
uninsured, and whether or not in the control of the
Company or the relevant Subsidiary, as the case may
be, in excess of $100,000 per occurrence or waived
any rights of any value.
(vii) authorized any declaration or payment of
dividends by the Company of any Subsidiary which is
not wholly owned by the Company, or paid any such
dividends, or authorized any transfer of assets of
any kind whatsoever by the Company or any such
Subsidiary to any of their respective stockholders
with respect to any shares of their capital stock,
except as set forth in Schedule 1.04(e)(ii), all of
which will be paid before Closing;
(viii) authorized or issued recall notices for any of
its products or initiated any safety investigations;
(ix) received notice of any litigation, material
warranty claim or products liability claims;
(x) made any material change in the terms, status or
funding condition of any Employee Plan, as defined in
Subsection 3.20 hereof:
(xi) engaged any new employee for a salary in excess
of $75,000 per annum;
(xii) made, or committed to make, any changes in the
compensation payable to any officer, director,
employee or agent of the Company or any Subsidiary,
or any bonus payment or similar arrangements made
to or with any of such officers, directors,
employees or agents;
(xiii) except for expenditures outlined in the
capital spending plan in Schedule 3.21(a)(xiii),
incurred any capital expenditure in excess of
$25,000 in any instance or $100,000 in the aggregate;
(xiv) made any material alteration in the manner
of keeping the books, accounts or records of
the Company or any Subsidiary, or in the
accounting practices therein reflected;
(xv) suffered any material adverse change in the
consolidated results of operation, condition
(financial or otherwise), assets, liabilities
(whether absolute, accrued, contingent or otherwise),
business or prospects of the Company and the
Subsidiaries taken as a whole.
(b) Neither the Company nor the Stockholders have knowledge of any
existing or threatened occurrence, event or development which, as far
as can be reasonably foreseen, could have a material adverse effect on
the business, properties, assets, condition (financial or otherwise) or
prospects of the Company and the Subsidiaries taken as a whole.
3.22 Customers.
(a) Schedule 3.22 attached hereto sets forth a true, correct and
complete list of (a) the names and addresses of each customer of the
Company and the Subsidiaries which accounted for more than 5% of the
consolidated revenues of the Company and the Subsidiaries in the fiscal
year ended 1996. Except as set forth on Schedule 3.22, the Company and
each of its Subsidiaries has good customer relations and none of the
customers of either the Company or any of the Subsidiaries has notified
the Company or the relevant Subsidiary, as the case may be, that it
intends to discontinue its relationship with the Company or the
relevant Subsidiary, excluding declines which may result from Buyer's
acquisition of the Company and its Subsidiaries.
(b) To the best of the Stockholders' knowledge, the three-year unit
sales projections prepared by the Company and/or it Subsidiaries, which
have been provided to the Buyer, support volume growth of 10% annually,
excluding declines which may result from Buyer's acquisition of the
Company and its Subsidiaries.
<PAGE>
(c) total sales to Petri and TRW/Izumi, collectively, are not
anticipated to exceed 15% of total consolidated sales as projected for
the fiscal year ended July 31, 1997.
(d) To the best of Stockholders' knowledge, there are no committed
price reductions on Core Products in excess of 5% of the selling price
as of the date of this Agreement for any customer program currently
in effect or anticipated to be given within 12 months after the
Closing Date except for situations where such price reductions are
offset by anticipated cost reductions as set forth in Schedule 3.22(d).
3.23 Suppliers. Schedule 3.23 attached hereto sets forth a true, correct and
complete list of (i) the names and addresses of each of the suppliers
of the Company and the Subsidiaries which accounted for a dollar volume
of purchases by the Company and the Subsidiaries in excess of $100,000
for the fiscal year ended 1996, and (ii) the present sole source
suppliers of significant goods or services, other than utilities, for
any product with respect to which practical alternative sources of
supply are not available on comparable terms and conditions, indicating
the contractual arrangements fro continued supply from each such
supplier. Except as set forth on Schedule 3.23 (a) the Company and each
of the Subsidiaries has good relations with all of its suppliers.
3.24 Warranty and Product Liability Claims. Schedule 3.24 attached hereto
contains a true correct and complete list of all material Warranty and
product liability claims made against the Company or any of the
Subsidiaries from January 1, 1994, through the date hereof, the current
status of all such claims and the costs of all actions taken in
satisfaction of such claims. All information relative to such claims
and those arising thereafter shall be available to the Buyer from and
after the date hereof.
3.25 Prepayments and Deposits. There are no Prepayments and deposits, which
have been received by the Company or any of the Subsidiaries as of the
date hereof, from customers for products to be shipped, or services to
be performed, after the Closing Date.
3.26 Indebtedness to and from Officers, Directors and Stockholders. Except
for intercompany indebtedness payable among the Company and any
Subsidiary or among the Subsidiaries, as of the Closing Date neither
the Company nor any of the Subsidiaries is indebted, directly or
indirectly, to any person who is an officer, director or stockholder of
any of the foregoing entities or any affiliate of any such person in
any amount whatsoever other than for salaries for services rendered or
reimbursable business expenses, all of which have been reflected on the
Interim Financial Statement, and no such officer, director, stockholder
or affiliate is indebted to the Company or any of the Subsidiaries
except for advances made to employees of the Company or any of the
Subsidiaries in the ordinary course of business to meet reimbursable
business expenses anticipated to be incurred by such obligor.
3.27 Banking Facilities. Schedule 3.27 attached hereto sets forth a true,
correct and complete list of:
(a) each bank, savings and loan or similar financial
institution in which the Company or any of the Subsidiaries
has an account or safety deposit box and the numbers of the
accounts or safety deposit boxes maintained by the Company or
any of the Subsidiaries thereat; and
<PAGE>
(b) the names of all persons authorized to draw on each such
account or to have access to any such safety deposit box
facility, together with a description of the authority (and
conditions thereof, if any) of each such person with respect
thereto.
3.28 Powers of Attorney and Suretyships. Except as set forth on Schedule
3.28 attached hereto, neither the Company nor any of the Subsidiaries
has any general or special powers of attorney outstanding (whether as
grantor or grantee thereof) or has any obligation or liability (whether
actual, accrued, accruing, continent or otherwise) as guarantor,
surety, co-signer, endorser, co-maker, indemnitor or otherwise in
respect of the obligation of any person, corporation, partnership,
joint venture, association, organization or other entity, except as
endorser or maker of checks or letters of credit, respectively,
endorsed or made in the ordinary course of business.
3.29 Conflicts of Interest. Except as set forth on Schedule 3.29 attached
hereto, no officer, director or Stockholder of the Company or any
Subsidiary nor, to the best knowledge of the Stockholder, any affiliate
of any such person, now has or within the last three (3) years had,
either directly or indirectly:
(a) an equity or debt interest in any corporation,
partnership, joint venture, association, organization or other
person or entity which furnishes or sells or during such
period furnished or sold services or products to the Company
or any of the Subsidiaries, or purchases or during such period
purchased from the Company or any of the Subsidiaries any
goods or services, or otherwise does nor during such period
did business with the Company or any of the Subsidiaries; or
(b) a beneficial interest in any contract, commitment or
agreement to which the Company or any of the Subsidiaries is
or was a party or under which any of them is or was obligated
or bound or to which any of their respective properties may be
or may have been subject, other than stock options and other
contracts, commitments or agreements between the Company or
any of the Subsidiaries and such persons in their capacities
as employees, officers or directors of the Company or such
Subsidiary.
3.30 Regulatory Approvals. No consents, approvals, authorizations or other
requirements are prescribed by any law, rule or regulation to be
obtained or satisfied by the Company or any of the Subsidiaries nor are
necessary for the execution and delivery by the Stockholders and the
Company of this Agreement or any documents to be executed and delivered
by the Stockholders or the Company in connection herewith.
3.31 Disclosure. The information concerning the Company and the Subsidiaries
set forth in this Agreement, the Exhibits and Schedules attached hereto
and any document, statement or certificate furnished or to be furnished
to the Buyer pursuant hereto, does not and will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated herein or therein or necessary to make the statements and
facts contained herein or therein, in light of the circumstances in
which they are made, not false and
<PAGE>
misleading. The Stockholders and the Company have disclosed to the
Buyer all material facts pertaining to the transactions contemplated by
this Agreement and the Exhibits hereto. Copies of all documents
heretofore or hereafter delivered or made available to the Buyer
pursuant to this Agreement were or will be complete and accurate copies
of such documents.
3.32 Conditions Existing as of November 28, 1996. As reflected in the
Interim Financial Statements, the Company and its Subsidiaries have
achieved the following:
(i) 35% Gross Margin on Core Products. Gross margin is defined
as: Total Sales (net of raw materials supplied by customer)
less Direct Costs. Direct Costs are defined as direct
materials, direct labor and direct selling expenses excluding
commissions paid to Cove Sales and Engineering. Core Products
is defined as leather-wrapped steering wheels, leather-wrapped
accessories, injection-molded parts and shift and lever boots.
(ii) 15% Earnings Before Taxes ("EBT") on Total Sales,
including products other than Core Products. EBT is defined as
Sales less Direct costs, both as defined in 3.32(i) less all
other costs and expenses associated with the period excluding
interest on Stockholders' loans.
(iii) Operating Cash Flow, defined as EBT plus interest
(excluding interest on Stockholders' loans), non-cash charges
and net change in working capital, is greater than $5 million.
3.33 Cash Available for Working Capital Purposes. On the Closing Date, the
Company and the Subsidiaries will have in the aggregate available cash
or borrowing capacity sufficient for working capital needs through July
31, 1997, based on the current business plans of the Company and the
Subsidiaries.
3.34 Repayment of Indebtedness. On the Closing Date, the aggregate amount of
long term indebtedness of the Company and the Subsidiaries shall not
exceed $4 million and any short-term indebtedness of the Company and
its Subsidiaries will have been incurred in the ordinary course of
business.
3.35 Trade Payables. On the Closing Date, neither the Company nor any of the
Subsidiaries will have any obligation in excess of $250,000 to any
individual supplier or vendor of goods and services and other trade
creditors outside the ordinary course of business which have been
outstanding for more than 60 days.
4. Representations of the Buyer.
The Buyer represents and warrants to each Stockholder as
follows:
4.01 Organization and Authority. The Buyer is a corporation duly organized,
validly existing
<PAGE>
and in good standing under the laws of the State of Delaware, and has
all requisite power and Authority (corporate and other) to own its
properties and to carry on its business as now being conducted. The
Buyer has full power to execute and deliver this Agreement and the
agreements contemplated herein, and to consummate the transactions
contemplated hereby and thereby. Certified copies of the Certificate of
Incorporation and the Bylaws of the Buyer, as amended to date, have
been previously delivered to the Stockholders, or will be delivered
promptly after execution hereof and are complete and correct, and no
amendments have been made thereto or have been authorized since the
date thereof.
4.02 Capitalization of the Buyer. On the date hereof, the Buyer's authorized
capital stock consists of fifty million (50,000,000) shares of common
stock, $.01 par value, of which 31,661,293 shares are issued and
outstanding. All of the outstanding shares of capital stock of the
Buyer have been and on the Closing Date will be duly and validly
issued and are, or will be, fully paid and non-assessable.
4.03 Authorization. Except as set forth in Schedule 4.03 attached hereto,
the execution and delivery of this Agreement by the Buyer, and the
agreements provided for herein, and the consummation by the Buyer of
the transactions contemplated hereby and thereby, have been duly
authorized by all requisite corporate action. This Agreement and all
such other agreements and written obligations entered into and
undertaken in connection with the transactions contemplated hereby
constitute the valid and legally binding obligations of the Buyer,
enforceable against the Buyer in accordance with their respective
terms. The execution, delivery and performance of this Agreement and
the agreements provided for herein, and the consummation by the Buyer
of the transactions contemplated hereby and thereby, will not, with or
without the giving of notice or the passage of time or both, (a)
violate the provisions of any law, rule or regulation applicable to the
Buyer; (b) violate the provisions of the Buyer's Certificate of
Incorporation or Bylaws, (c) violate any judgment, decree, order or
award of any court, governmental body or arbitrator; or (d) conflict
with or result in the breach or termination of any term or provision
of, or constitute a default under, or cause any acceleration under, or
cause the creation of any lien, charge or encumbrance upon the
properties or assets of the Buyer pursuant to, any indenture, mortgage,
deed of trust or other agreement or instrument to which the Buyer is
a party or by which the Buyer is or may be bound. Schedule 4.03
attached hereto sets forth a true, correct and complete list of all
consents and approvals of third parties that are required in connection
with the consummation by the Buyer of the transactions contemplated by
this Agreement.
4.04 Regulatory Approvals. All consents, approvals, authorizations and other
requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Buyer and which are necessary for the
consummation of the transactions contemplated by this Agreement
including, without limitation, "Hard-Scott-Rodino" approval, have been,
or will be prior to the Closing Date, obtained and satisfied.
4.05 Disclosure. No representation or warranty by the Buyer in this
Agreement or in any Exhibit hereto, or in any list, statement,
<PAGE>
document or information set forth in or attached to any Schedule
deliver or to be delivered pursuant hereto, contains or will
contain any untrue statement of a material fact or omits or will omit
any material fact necessary in order to make the statements
contained therein not misleading.
4.06 Investment Representation. The Buyer is acquiring the Shares from each
Stockholder for its own account for investment and not with a view to,
or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling the same; and, except as
contemplated by this Agreement and the agreements contemplated herein,
the Buyer has no present or contemplated agreement, undertaking,
arrangement, obligation, indebtedness or commitment providing for the
disposition thereof.
5. Access to Information; Public Announcements.
5.01 Access to Management. Properties and Records.
(a) From the date of this Agreement until the Closing Date,
the Stockholders and the Company shall afford the officers,
attorneys, accountants and other authorized representatives of
the Buyer reasonable access upon reasonable notice to such
management personnel, offices, properties, books and records
of the Company and the Subsidiaries, so that the Buyer may
have an opportunity to make such investigation as it shall
reasonable desire to make of the management, business,
properties and affairs of the Company and the Subsidiaries,
and the Buyer shall be permitted to make abstracts from, or
copies of, such books and records. The Stockholders and the
Company shall furnish to the Buyer such financial and
operating data and other information as to the business of the
Company and the Subsidiaries as the Buyer shall reasonably
request. Notwithstanding the foregoing or any other provision
of this Agreement to the contrary, certain information
relating to customer programs, product costs by function,
gross margin by product or by customer programs, suppliers and
employees and other information considered to be essential to
the Company's competitiveness, will not be provided to the
Buyer until after receipt of "Hart-Scott-Rodino" approval.
(b) If the Buyer, at its option and expense, elects within ten
days following the date hereof, to have a report or reports
prepared by an engineer or other professional selected by the
Buyer, certifying that the Real Estate (i) complies with all
applicable federal, state and local environmental and wetlands
laws, rules and regulations and that there is not now, and
never has been, manufacture, storage, or disposal of hazardous
wastes at the Real Estate in violation of said laws, rules and
regulations, (ii) complies with all applicable building,
health and fire codes, and subdivision control laws, rules and
regulations, and (iii) does not contain any friable asbestos,
the Stockholders and the Company shall cooperate with such
engineer or professional to the extent necessary to prepare
such reports, including, without limitation, providing such
engineer or professional access to the Real Estate and
necessary records, and arranging interviews with employees
<PAGE>
of the Company and the Subsidiaries.
(c) If the Buyer elects, at its option, within ten days
following the date hereof, to have an appraisal of all or any
part of the Real Estate owned by the Company, prepared by an
appraiser selected by the Buyer, the Company and the
Stockholders shall cooperate with such appraiser to the extent
necessary to prepare the appraisal, including, without
limitation, providing the appraiser with access to the Real
Estate and the necessary records, and arranging interviews
with employees of the Company and the Subsidiaries.
(d) The Stockholders and the Company shall authorize the
release to the Buyer of all files pertaining to the business
or operation of the Company and the Subsidiaries held by any
federal, state, county or local authorities, agencies or
instrumentalities. The Stockholders' and the Company's
authorization shall specifically waive all previous claims of
privilege or other restrictions, and in any case where a
release by a present or former employee of the Company or any
Subsidiary is necessary, the Stockholders and the Company
shall exercise their best efforts to obtain such a release.
5.02 Confidentiality.
(a) The Company and the Stockholders have furnished and will
continue to furnish the Buyer with certain information which
is either non-public, confidential or proprietary in nature
and which (i) [intentionally omitted], (ii) is not already
known to persons other than the Company, the Stockholder,
their representatives and third parties which have entered
into written non-disclosure agreements with the Company and
(iii) has not been independently developed by the Buyer. All
such information furnished to the Buyer its directors,
officers, employees, agents or representatives, including,
without limitation, attorneys, accountants, consultants,
potential lenders, investors and financial advisors
(collectively "representatives"), by the Company , the
Stockholders, or any of their respective representatives, and
all analyses, compilations, data, studies or other documents
prepared by the Buyer or its representatives containing or
based in whole or in part on any such furnished information or
reflecting the Buyer's review of, or interest in, the Company
is hereinafter referred to as "Information".
(b) Subject to the requirements of applicable law, the Buyer
hereby agrees to use the Information solely in connection with
the consummation of the transactions contemplated by this
Agreement and to transmit the Information only to those
representatives of the Buyer who need to know the Information.
5.03 Public Announcements. The parties agree that prior to the Closing Date
any and all general public pronouncements or other general public
communications concerning this Agreement and the purchase and sale of
the Shares by the Buyer, and the timing, manner and content of such
disclosures, shall be subject to the mutual agreement of the
<PAGE>
Company, the Stockholders' Representative and the Buyer.
6. Pre-Closing Covenants of the Stockholders, the Company and the
Subsidiaries. From and after the date hereof and until the Closing
Date:
6.01 Conduct of Business. The Company and the Subsidiaries shall carry on
their business diligently and substantially in the same manner as
heretofore and shall not make or institute any unusual or new methods
of manufacture, purchase, sale, shipment or delivery, lease,
management, accounting or operation, and shall not ship or deliver any
quantity of products in excess of normal shipment or delivery levels,
except as agreed to in writing by the Buyer. All of the property of the
Company and the Subsidiaries shall be used, operated, repaired and
maintained in a normal business manner consistent with past practice.
6.02 Absence of Material Changes. Without the prior written consent of the
Buyer, neither the Company nor any of the Subsidiaries shall:
(a) take any action to amend its charter documents or bylaws;
(b) issue any stock, bonds or other corporate securities or
grant any option or issue any warrant to purchase or subscribe
for any of such securities or issue any securities convertible
into such securities;
(c) incur any obligation or liability (absolute or
contingent), except in the ordinary course of business:
(d) declare or make any payment or distribution to its
stockholders with respect to its stock or purchase or redeem
any shares of its capital stock except as disclosed on
Schedule 1.04(d)(ii);
(e) mortgage, pledge, or subject to any lien, charge or any
other encumbrance any of their respective assets or
properties;
(f) sell, assign, or transfer any of its assets, except for
inventory sold in the ordinary course of business;
(g) cancel any debts or claims, except in the ordinary course
of business;
(h) merge or consolidate with or into any corporation or other
entity;
(i) make, accrue or become liable for any bonus, profit
sharing or incentive payment, except for accruals under
existing plans, if any, or increase the rate of compensation
payable or to become payable by it to any of its officers,
directors or employees, other than increases in the ordinary
course of business consistent with past practice;
<PAGE>
(j) make any election or give any consent under the Code or
the tax statutes of any state or other jurisdiction or make
any termination, revocation or cancellation of any such
election or any consent or compromise or settle any claim for
past or present tax due;
(k) waive any rights of material value;
(l) modify, amend, alter or terminate any of its executory
contracts of a material value or which are material in amount;
(m) take or permit any act or omission constituting a material
breach or default under any contract, indenture or agreement
by which it or its properties are bound;
(n) fail to (i) preserve the possession and control of its
assets and business, (ii) attempt to keep in faithful service
its present officers and key employees, (iii) preserve the
goodwill of its consumers, suppliers, agents, brokers and
others having business relations with it, and (iv) keep and
preserve its business existing on the date hereof until the
Closing Date, excluding the impact of the acquisition;
(o) fail to operate its business and maintain its books,
accounts and records in the customary manner and in the
ordinary and regular course of business and maintain in good
repair its business premises, fixtures, machinery, furniture
and equipment;
(p) enter into any lease, contract, agreement or
understanding, other than those entered into in the ordinary
course of business;
(q) incur any capital expenditure(s) in excess of $25,000 in
any instance or $100,000 in the aggregate except as set forth
in the capital spending plan in Schedule 3.21(a)(xiii);
(r) engage any new employee for a salary in excess of $75,000
per annum;
(s) materially alter the terms, status or funding condition of
any Employee Plan; or
(t) commit or agree to do any of the foregoing in the future.
(u) Notwithstanding the foregoing, Stockholders and Company
will be causing the occurrence of the transactions listed in
Exhibit 6.02(u).
6.03 Intentionally Omitted
6.04 Communications with Customers and Suppliers.
(a) The Company and each of the Subsidiaries will continue to
accept customer
<PAGE>
orders in the ordinary course of business and consistent with
past practice for all products offered by the Company and the
Subsidiaries but expected to be shipped after the Closing
Date.
(b) The Company, the Subsidiaries and the Buyer will cooperate
in communications with suppliers and customers to accomplish
the transfer of the Shares to the Buyer on the Closing Date.
6.05 Compliance with Laws. The Company and each of the Subsidiaries will
comply with all laws and regulations which are applicable to it or to
the conduct of its business and will perform and comply with all
contracts, commitments and obligations by which they are bound.
6.06 Continued Truth of Representations and Warranties. Neither the
Stockholders nor the Company nor any Subsidiary will take any actions
which would result in any of the representations or warranties set
forth in Sections 2 and 3 hereof being untrue.
6.07 Continuing Obligation to Inform. From time to time prior to the
Closing, the Stockholders will deliver or cause to be delivered to the
Buyer supplemental information concerning events subsequent to the date
hereof which would render any statement, representation or warranty in
this Agreement or any information contained in any Schedule attached
hereto inaccurate or incomplete in any material respect at any time
after the date hereof until the Closing Date; provided, that none of
such supplemental information shall constitute a material amendment of
any statement, representation or warranty in this Agreement or any
Schedule, Exhibit or document furnished pursuant hereto.
6.08 Exclusive Dealing. Neither the Stockholders nor the Company will,
directly or indirectly, through any officer, director, agent or
otherwise, (a) solicit, initiate or encourage submission of proposals
or offers from any person relating to an acquisition or purchase of all
or a material portion of the assets of or an equity interest in the
Company or any of the Subsidiaries or any merger, consolidation or
business combination with the Company or any of the Subsidiaries, or
(b) participate in any discussions or negotiations regarding, or
furnish to any other person, any non-public information with respect to
or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person to
do or seek any of the foregoing. The Stockholders, the Company and the
Subsidiaries agree to promptly notify the Buyer of any such proposal or
offer, or any inquiry or contact with respect thereto received by the
Company, any of the Stockholders or any Subsidiary.
6.09 Reports. Taxes. The Company and the Subsidiaries will duly and timely
file all reports or returns required to be filed with federal, state,
local and foreign authorities and will promptly pay all federal, state,
local and foreign taxes, assessments and governmental charges levied or
assessed upon them or any of their properties (unless contesting such
in good faith and adequate provision has been made therefor).
<PAGE>
7. Best Efforts to Obtain Satisfaction of Conditions.
The Stockholders, the Company, the Subsidiaries and the Buyer
covenant and agree to use their best efforts to obtain the
satisfaction of the conditions specified in this Agreement In
particular, but not by way of limitation, Buyer shall make a
diligent, good faith effort to complete the
"Hart-Scott-Rodino" filing as quickly as possible.
8A. Continued Truth of Representations and Warranties of the Stockholders
and the Company; Compliance with Covenant and Obligations.
The representations and warranties of the Stockholders and the Company
shall be true on and as of the Closing Date as though such
representations and warranties were made on and as of such date(unless
expressly provided to have been given on a date prior to the Closing
Date), except for any changes permitted by the terms hereof or
consented to in writing by the Buyer. The Stockholders, the Company
and the Subsidiaries shall have performed and complied with all terms,
conditions, covenants, obligations, agreements and restrictions
required by this Agreement to be performed or complied with by each of
them prior to or at the Closing Date.
8B. Conditions to Obligations of the Buyer. It is the intention of the
parties that this agreement be binding upon the parties hereto and may
not be terminated except as provided herein. Closing shall be subject
only to the fulfillment, at the Closing Date, of the following
conditions precedent, each of which may be waived in writing in the
sole discretion of the Buyer.
8.01 Continued Truth of Certain Representations and Warranties of the
Stockholders and the Company. The continued truth of the following
representations and warranties shall be considered Conditions to
Obligations of Buyer: 3.01, 3.02, 3.03, 3.04, 3.22(c), 3.30, 3.32.
8.02 Performance by the Stockholders and the Company. At the Closing, the
Stockholders and the Company shall have delivered to the Buyer a
certificate signed by each such Stockholder or the President and Chief
Financial Officer of the Company, as the case may be, as to their
compliance with Subsection 8.01 hereof.
8.03 Governmental Approvals. All governmental agencies, department, bureaus,
commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or
regulation for the consummations by the Stockholders, the Company or
the Subsidiaries of the transactions contemplated by this Agreement,
including approval pursuant to "Hart-Scott-Rodino" and the operation of
the business of the Company and the Subsidiaries by the Buyer shall
have consented to, authorized, permitted or approved such transactions.
8.04 Consent of Lenders, Lessors and Other Third Parties. The Stockholders,
the Company and the Subsidiaries shall have received all requisite
consents and approvals of all lenders, lessors and other third parties
whose consent or approval is required in order for
<PAGE>
the Stockholders, the Company and the Subsidiaries to consummate the
transactions contemplated by this Agreement, including without
limitation, those set forth in Schedule 3.04 attached hereto.
8.05 Adverse Proceedings. No action or proceeding by or before any court or
other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement
or which might affect the right of the Buyer to own the Shares or to
own or operate the business of the Company and the Subsidiaries after
the Closing.
8.06 Opinion of Counsel. The Buyer shall have received an opinion of counsel
to the Stockholders, the Company and the Subsidiaries, dated as of the
Closing Date, in substantially the form attached hereto as Exhibit B,
and as to such other matters as may be reasonably requested by the
Buyer or its counsel.
8.07 Intentionally Omitted.
8.08 Employment Contracts. On or prior to the Closing Date, the Buyer shall
have executed Employment contracts and other arrangements with the
individuals listed on Schedule 8.08 attached hereto, upon mutually
agreeable terms and conditions.
8.09 No Material Adverse Change to Financial Condition. Between the date of
this Agreement and the Closing Date, there shall have been no material
adverse change to the financial condition of the Company and its
Subsidiaries. For purposes of this provision, Material Adverse Change
is defined as either:
(i) Discontinuation of one or more sales programs by a
customer or customers that represented 5% or more,
individually or in the aggregate, of fiscal year 1996 net
sales of Custom Trim, Ltd., excluding declines which may
result from Buyer's acquisition of the Company and its
Subsidiaries.
(ii) An event causing an impairment in the value of the fixed
assets of the Company or its Subsidiaries in excess of $2
million in the aggregate.
8.10 Confirmation of Income and Balance Sheet Reconciliations. The Income
and Balance Sheet Reconciliations for fiscal years 1992 through 1996,
as attached in Schedule 8.10, are not deficient by more than $100,000
in any year, as sustained by Buyer's Auditor.
8.11 Closing Deliveries. The Buyer shall have received at or prior to the
Closing such documents, instruments or certificates as the Buyer may
reasonably request including, without limitation:
(a) the stock certificates representing the Shares duly
endorsed in accordance with Subsection 1.01 of this Agreement;
(b) such certificates of the Company's officers and of the
Stockholders and such other documents evidencing satisfaction
of the conditions specified in this Section 8 as the Buyer
shall reasonably request;
(c) a certificate of status from the appropriate Ontario
ministry as to the legal existence and good standing of the
Company in the Providence of Ontario;
(d) certificates of the Secretary of the Company attesting to
the incumbency of the Company's officers, the authenticity of
the resolutions authorizing the transactions contemplated by
this Agreement, and the authenticity and continuing validity
of the charter documents delivered pursuant to Subsection
3.01;
(e) where required by the applicable Lease, estoppel
certificates from each lessor from whom the Company or any
Subsidiary leases real or personal property consenting to the
acquisition of the Shares by the Buyer and the other
transactions contemplated hereby, and representing that there
are no outstanding claims against the Company or such
<PAGE>
Subsidiary under such Lease;
(f) Intentionally omitted.
(g) certificates of appropriate governmental officials in each
state in which the Company or its Subsidiaries are required
to qualify to do business as a foreign corporation as to the
due qualification and good standing of the Company in each
such jurisdiction (failure to obtain such certificates by
Closing through no fault of Stockholders shall not constitute
a breach of this condition);
(h) written resignations of all members of the Company's or
its Subsidiaries' Board of Directors as required;
(i) the original corporate minute books of the Company and its
Subsidiaries and all corporate seals; and
(j)a cross receipt executed by the Buyer and the Stockholders.
The foregoing shall constitute the only conditions to Buyer's
obligation to consummate this transaction. The sole remedies for any
other breach shall be an adjustment of the purchase price in accordance
with Section 1.04, a claim for indemnity in accordance with Section 10
or damages.
9. Conditions to Obligations of the Stockholders.
The obligations of the Stockholders under this Agreement are subject to
the fulfillment, at the Closing Date, of the following conditions
precedent, each of which may be waived in writing in the sole
discretion of the Stockholders' Representative, who shall have the
power and authority to bind all of the Stockholders:
9.01 Continued Truth, of Representations and Warranties of the Buyer;
Compliance with Covenants and Obligations. The representations and
warranties of the Buyer in this Agreement shall be true on and as of
the Closing Date as though such representations and warranties were
made on and as of such date, except for any changes consented to in
writing by the Stockholders' Representative. The Buyer shall have
performed and complied with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to
be performed or complied with by it prior to or at the Closing Date.
9.02 Corporate Proceedings. All corporate and other proceedings required to
be taken on the part of the Buyer to authorize or carry out this
Agreement shall have been taken.
9.03 Governmental Approvals. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or
approval of which is necessary under any applicable law, rule, order or
regulation for the consummation by the Buyer of the transactions
contemplated by this Agreement shall have consented to, authorized,
permitted or approval such transactions.
9.04 Consents of Lenders, Lessors and Other Third Parties. The Buyer shall
have received all requisite consents and approvals of all lenders,
lessors and other third parties whose consent or approval is required
in order for the Buyer to consummate the transactions contemplated
by this Agreement, including, without limitation, those set forth on
Schedule 4.03 attached hereto.
9.05 Adverse Proceedings. No action or proceeding by or before any court or
other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement
or which might affect the right of the Stockholders to transfer the
Shares.
9.06 Intentionally Omitted.
9.07 Closing Deliveries. The Stockholders shall have received at or prior
to the Closing such documents, instruments or certificates as the Buyer
may reasonably request including, without limitation:
(a) such certificates of the Buyer's officers and such other
documents evidencing satisfaction of the conditions specified
in this Section 9 as the Stockholders' Representative shall
reasonably request;
<PAGE>
(b) a certificate of the Secretary of State of the State of
Delaware as to the legal existence and good standing
(including tax) of the Buyer in Delaware;
(c) a certificate of the Secretary of the Buyer attesting to
the incumbency of the Buyer's officers, the authenticity of
the resolutions authorizing the transactions contemplated by
this Agreement, and the authenticity and continuing validity
of the charter documents and by-laws delivered pursuant to
Subsection 4.01;
(d) payment of the Base Purchase Price; and
(e) a cross receipt executed by the Buyer and the Stockholders.
10. Indemnification.
10.01 By the Stockholders and the Company. If the Closing occurs, the
Stockholders, jointly and severally, hereby indemnify and hold harmless
the Buyer and the Company, and if the Closing does not occur, the
Stockholders and the Company, jointly and severally, hereby indemnify
and hold harmless the Buyer, from and against all claims, damages,
losses, liabilities, costs and expenses (including, without limitation,
settlement costs and any legal, accounting or other expenses for
investigating or defending any actions or threatened actions)
(collectively, the "Losses") in connection with each and all of the
following (a "Breach of Warranty"):
(a) any misrepresentation or breach of any representation or
warranty made by the Stockholders or the Company in this
Agreement;
(b) any breach of any covenant, agreement or obligation of the
Stockholders or the Company contained in this Agreement or any
other agreement, instrument or document contemplated by this
Agreement;
(c) any misrepresentation contained in any statement,
certificate or schedule furnished by the Stockholders or the
Company pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement;
(d) any violation by the Company of, or any failure by the
Company to comply with, any law, ruling, order, decree,
regulation or zoning, environmental or permit requirement
applicable to the Company, its assets or its business, whether
or not any such violation or failure to comply has been
disclosed to the Buyer, including any costs incurred by the
Buyer (A) in order to bring the Company into compliance with
environmental laws as a consequence of noncompliance with such
laws on the Closing Date or (B) in connection with the
transfer of the Shares;
(e) any claims against, or liabilities or obligations of, the
Company with respect to obligations under Employee Plans not
specifically assumed by the Buyer pursuant to this Agreement.
10.02 Claims for Indemnification. Whenever any claim shall arise for
indemnification under this Section 10, the Buyer or the Company, as the
case may be, seeking indemnification (the "Indemnified Party"), shall
promptly notify the Stockholders' Representative of the claim and, when
known, the facts constituting the basis for such claim. In the event of
any such claim for indemnification hereunder resulting from or in
connection with any claim or legal proceedings by a third party, the
notice shall specify, if known, the amount or an estimate of the amount
of the liability arising therefrom. The Indemnified Party shall not
settle or compromise any claim by a third party for which it is
entitled to indemnification hereunder without the prior written
consent, which shall not be unreasonably withheld or delayed, of the
Stockholders' Representative, who shall have the power and authority to
bind all of the Stockholders; provided, however, that if suit shall
have been instituted against the Indemnified Party and the
Stockholders' Representative shall not have taken control of such suit
after notification thereof as provided in Subsection 10.03 of this
Agreement, the Indemnified Party shall have the right to settle or
compromise such claim upon giving notice to the Stockholders'
Representative as provided in Subsection 10.03. Any amount recoverable
hereunder shall be the net amount of loss suffered after taking into
account any benefits which the Indemnified Party may otherwise enjoy
<PAGE>
relating to the circumstances giving rise to such claim.
Notwithstanding the foregoing, Seller shall not be obligated to
indemnify and hold the Buyer harmless for any such loss, liability,
damage, or expense unless (i) the amount for which indemnity would
otherwise be due for any single item of loss, liability, damage or
expense exceeds Twenty-Five Thousand Dollars ($25,000), or (ii) the
total of all amounts for which indemnity would otherwise be due for all
such single items exceeds One Hundred Thousand Dollars ($100,000).
10.03 Defense by the Stockholders. In connection with any claim which may
give rise to, indemnity hereunder resulting from or arising out of any
claim or legal proceeding by a person other than the Indemnified Party,
the Stockholders' Representative, at the sole cost and expense of the
Stockholders, may, upon written notice to the Indemnified Party, assume
the defense of any such claim or legal proceeding if the Stockholders'
Representative acknowledges to the Indemnified Party in writing the
obligation of the Stockholders to indemnify the Indemnified Party with
respect to all elements of such claim. If the Stockholders'
Representative assumes the defense of any such claim or legal
proceeding, the Stockholders' Representative shall select counsel
reasonably acceptable to the Indemnified Party to conduct the defense
of such claims or legal proceedings and at the sole cost and expense of
the Stockholders shall take all steps necessary in the defense or
settlement thereof. The Stockholders' Representative shall not consent
to a settlement of, or the entry of any judgment arising from, any such
claim or legal proceeding, without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld or
delayed). The Indemnified Party shall be entitled to participate in
(but not control) the defense of any such action, with its own counsel
and at its own expense. If the Stockholders' Representative does not
assume the defense of any such claim or litigation resulting therefrom
within 30 days after the date such claim is made: (a) the Indemnified
Party may defend against such claim or litigation in such manner as it
may deem appropriate, including, but not limited to, settling such
claim or litigation, after giving notice of the same to the
Stockholders' Representative, on such terms as the Indemnified Party
may deem appropriate, and (b) the Stockholders' Representative shall be
entitled to participate in (but not control) the defense of such
action, with its counsel and at its own expense. If the Stockholders or
the Stockholders' Representative thereafter seek to question the manner
in which the Indemnified Party defended such third party claim or the
amount or nature of any such settlement, the Stockholders or the
Stockholders' Representative shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party did not defend
or settle such third party claim in a reasonably prudent manner.
10.04 Payment of Indemnification Obligation. Each of the Stockholders hereby
agrees that any claim for indemnification by the Buyer, or the Company
(if the Closing occurs), under this Section 10 or under any other
provision of this Agreement, including, without limitation, Subsections
1.03, 1.04, and 12.04 hereof, may, at the option of the Buyer or the
Company, as the case may be, be offset against any amount remaining in
the Reserve Account following any adjustment pursuant to Subsection
1.04 hereof. All indemnification by the Stockholders hereunder (to the
extent not satisfied in the manner specified in the preceding
sentence), and any indemnification by the Company if the Closing does
not occur, shall be effected by payment of cash or delivery of a
cashier's or certified check in the amount of the indemnification
liability.
10.05 Survival of Representations; Claims for Indemnification. All
representations and warranties made by the Stockholders and the Company
in this Agreement, or in any instrument or document furnished in
connection with this Agreement or the transactions contemplated hereby,
shall survive the Closing and any investigation at any time made by
<PAGE>
or on behalf of the Indemnified Party for a period of two years. All
such representations and warranties shall expire on the second
anniversary of the Closing Date, except for claims, if any, (a)
asserted in writing prior to such anniversary identified as a claim for
indemnification pursuant to this Section 10, or (b) which are based
upon fraud by any of the Stockholders, which shall survive until
finally resolved and satisfied in full.
11. Post-Closing Agreements.
The Stockholders agree that from and after the Closing Date:
11.01 Proprietary Information.
(a) Each of the Stockholders and each of their affiliates (for
purposes of this section, as such term is defined in the
Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder) (individually, an
"Affiliate" and collectively "Affiliates") shall hold in
confidence and shall use their best efforts to have all
officers, directors and personnel who continue after the
Closing to be employed by any such Stockholder or any
Affiliate thereof to hold in confidence all knowledge and
information of a secret or confidential nature with respect to
the business of the Company and the Subsidiaries and not to
disclose, publish or make use of the same without the consent
of the Buyer, except to the extent that such information shall
have become public knowledge other than by breach of this
Agreement by the Stockholders.
(b) If (i) the employment of an officer, director or other
employee of a Stockholder or any Affiliate thereof, to whom
secret or confidential knowledge or information concerning the
business of the Company or the Subsidiaries has been
disclosed, is terminated and (ii) such individual is subject
to an obligation to maintain such knowledge or information in
confidence after such termination, the Stockholders shall, up
request by the Buyer, take all reasonable steps at their
expense to enforce such confidentiality obligation in the
event of an actual or threatened breach thereof. Any legal
counsel retained by any such Stockholder in connection with
any such enforcement or attempted enforcement shall be
selected by such Stockholder, but shall be subject to the
approval of the Buyer, which approval shall not be
unreasonably withheld.
(c) Each Stockholder agrees that the remedy at law for any
breach of this Subsection 11.01 would be inadequate and that
the Buyer shall be entitled to injunctive relief in addition
to any other remedy it may have upon breach of any provision
of this Subsection 11.01.
11.02 No Solicitation or Hiring of Former Employees. Except as provided by
law, for a period of 2 years after the Closing Date, no Stockholder nor
any Affiliate thereof shall (a) solicit any person who was an employee
of either the Company or any of the Subsidiaries on the date hereof or
the Closing Date to terminate his employment with the Buyer (or the
<PAGE>
Company or any of the Subsidiaries, as the case may be) or to become an
employee of such Stockholder or Affiliate, or (b) hire any person who
was such an employee on the date hereof or on the Closing Date.
11.03 Non-Competition Agreement.
(a) For a period of 5 years after the Closing Date, no
Stockholder nor any Affiliate thereof shall, except as an
officer or employee of the Company: (i) develop, manufacture,
market or sell any product which competes with any existing or
proposed product manufactured by either the Company or any of
the Subsidiaries on or prior to the Closing Date, or (ii)
engage in any business competitive with the business of the
Company or any of the Subsidiaries as conducted on the date
hereof or on the Closing Date, in the United States or any
other country in which the Company or any of the Subsidiaries
conducted its business during the two years prior to the
Closing Date.
(b) The parties hereto agree that the duration and geographic
scope of the non-competition provision set forth in this
Subsection 11.03 are reasonable. In the event that any court
of competent jurisdiction determines that the duration or the
geographic scope, or both, are unreasonable and that such
provision is to that extent unenforceable, the parties hereto
agree that the provision shall remain in full force and effect
for the greatest time period and in the greatest area that
would not render it unenforceable. The parties intend that
this non-competition provision is essential to the bargain
between the parties and shall be deemed to be a series of
separate covenants, one for each and every county of each and
every state of the United States of America and each and every
political subdivision of each and every country outside the
United Sates of America where this provision is intended to be
effective. The Stockholders agree that damages are an
inadequate remedy for any breach of this provision and that
the Buyer shall, whether or not it is pursuing any potential
remedies at law, be entitled to equitable relief in the form
of preliminary and permanent injunctions without bond or other
security upon any actual or threatened breach of this
non-competition provision.
12. Termination of Agreement; Option to Proceed; Damages.
12.01 Termination by Lapse of Time. This Agreement shall terminate at 5:00
p.m., EST on March 15, 1997, if the transactions contemplated hereby
have not been consummated, unless such date is extended by the written
consent of the Company, the Buyer and the Stockholders' Representative
(whose consent shall bind each of the Stockholders).
12.02 Termination by Agreement of the Parties. This Agreement may be
terminated by the mutual written agreement of the parties hereto. In
the event of such termination by agreement, the Buyer shall have no
further obligation or liability to the Stockholders or the Company
under this Agreement, and the Stockholders shall have no further
obligation or liability to the Buyer under this Agreement.
<PAGE>
12.03 Termination by Reason of Breach. This Agreement may be terminated by
the Stockholders, if at any time prior to the Closing there shall occur
a breach of any of the representations, warranties or covenants of the
Buyer or the failure by the Buyer to perform any condition or
obligation hereunder, and may be terminated by the Buyer, if at any
time prior to the Closing there shall occur a breach of any of the
representations, warranties or covenants of the Stockholders, the
Company or any of the Subsidiaries or the failure of the Stockholder,
the Company or any of the Subsidiaries to perform any condition or
obligation hereunder (such a breach by the Stockholders, the Company or
any of the Subsidiaries shall be referred to herein as a "Pre-Closing
Breach").
12.04 Option to Proceed.
(a) Notwithstanding a Pre-Closing Breach by the Stockholders,
the Company or any of the Subsidiaries, or the inability of
the Stockholders to give title, make conveyance or deliver
possession of any of the Shares, or to satisfy all of the
terms and conditions precedent to Closing as set forth in this
Agreement, all as herein stipulated, the Buyer may elect by
written notice given to the Stockholders' Representative at or
prior to the Closing Date either to (i) terminate this
Agreement, or (ii) extend the scheduled Closing Date by 30
days, during which period the Stockholders shall use their
best efforts to remove all encumbrances, if any, not permitted
by the terms of this Agreement, and shall use reasonable
efforts to remove all other defects in title, and to deliver
possession and good, clear and marketable title to the Shares
and to satisfy all other conditions to closing as provided
herein, and to make the assets of the Company and the
Subsidiaries conform to the provisions herein, as the case may
be. If the Stockholders are unable, upon expiration of such
30-day period, to remove all such encumbrances and defects and
to satisfy all such conditions to Closing, the Buyer may
elect, by written notice given to the Stockholders'
Representative, to (x) terminate this Agreement, (y) take
title to the Shares, or (z) extend the Closing Date for an
additional 30 days.
(b) If the Buyer elects to extend the Closing Date for an
additional 30 days pursuant to clause (z) of paragraph (a)
above, the Buyer and the Stockholders' Representative shall,
within the 30-day period specified in clause (z) of paragraph
(a) above, agree upon the amount of the diminution in the
value of the Shares being transferred to the Buyer as a result
of the Pre-Closing Breach or the cost to the Buyer of curing
such defect (the "Adjustment Amount"), and the Base Purchase
Price shall be reduced by the Adjustment Amount. The Buyer and
the Stockholders' Representative shall use their best efforts
to agree upon the Adjustment Amount within such 30-day period;
provided, however, that if the Buyer and the Stockholders'
Representative cannot agree upon the Adjustment Amount within
such 30-day period, the Buyer may terminate this Agreement in
accordance with clause (i) of paragraph (a) above.
12.05 Availability of Remedies at Law. In the event this Agreement is
terminated by the Buyer
<PAGE>
or the Stockholders, pursuant to the provisions of this Section 12, the
parties hereto shall have available to them all remedies afforded to
them by applicable law.
13. Governing Law/Jurisdiction. This agreement shall be governed by and
construed in accordance with the laws of the State of Michigan. Any
legal proceedings related to this Agreement shall be filed in and
resolved by the federal courts of the State of Michigan, to whose
jurisdiction the parties hereby consent.
14. Brokers.
14.01 For the Stockholders, the Company and the Subsidiaries. Each of the
Stockholders, the Company and the Subsidiaries represent and warrant
that, no person, firm or corporation has acted in the capacity of
broker or finder on its behalf to bring about the negotiation of
this Agreement. The Stockholders jointly and severally agree to
indemnify and hold harmless the Buyer against any claims or liabilities
asserted against it by any person acting or claiming to act as a broker
or finder on behalf of the Stockholders, the Company or the
Subsidiaries.
14.02 For the Buyer. The Buyer agrees to pay all fees, expenses and
compensation owed to any person, firm or corporation who has acted in
the capacity of broker or finder on its behalf to bring about the
negotiation of this Agreement. The Buyer agrees to indemnify and hold
harmless the Stockholders against any claims or liabilities asserted
against it by any person acting or claiming to act as a broker or
finder on behalf of the Buyer.
15. Notices.
Any notices or other communications required or permitted hereunder
shall be sufficiently given if delivered personally or sent by telex,
federal express, registered or certified mail, postage prepaid,
addressed as follows or to such other address of which the parties may
have given notice:
To the Buyer:
BREED Technologies, Inc.
5300 Old Tampa Highway
Lakeland, FL 33811
ATTN: General Counsel
To the Stockholders: [c/o the Stockholders' Representative]:
James Weber
c/o McDowell Welch
100 Regina St. South, Suite 290
Waterloo, Ontario N2J 4P9
<PAGE>
Unless otherwise specified herein, such notices or other communications
shall be deemed received (a) on the date delivered, if delivered
personally, or (b) three business days after being sent, if sent by
registered or certified mail.
16. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that
the Buyer, on the one hand, and the Stockholders, the Company and the
Subsidiaries, on the other hand, may not assign their respective
obligations hereunder without the prior written consent of the other
party; provided, however, that the Buyer may assign this Agreement, and
its rights and obligations hereunder, to a subsidiary or Affiliate of
the Buyer. Any assignment in contravention of this provision shall be
void. No assignment shall release the Buyer, the Stockholders, the
Company or the Subsidiaries from any obligation or liability under this
Agreement.
17. Entire Agreement; Amendments; Attachments.
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties
pursuant hereto represent the entire understanding and
agreement between the parties hereto with respect to the
subject matter hereof and supersede all prior oral and written
and all contemporaneous oral negotiations, commitments and
understandings between such parties. The Buyer, by the consent
of its Board of Directors or officers authorized by such
Board, and the Stockholders holding a majority of the Shares
(who shall have the authority to bind all of the Stockholders)
may amend or modify this Agreement, in such manner as may be
agreed upon, by a written instrument executed by the Buyer and
such majority of the Stockholders.
(b) If the provisions of any Schedule or Exhibit to this
Agreement are inconsistent with the provisions of this
Agreement, the provisions of the Agreement shall prevail. The
Exhibits and Schedules attached hereto or to be attached
hereafter are hereby incorporated as integral parts of this
Agreement.
18. Severability.
Any provision of this Agreement which is invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provision
hereof in such jurisdiction or rendering that or any other provision of
this Agreement invalid, illegal or unenforceable in any other
jurisdiction.
19. Investigation of the Parties.
All representations and warranties contained herein which are made to
the best Knowledge of a party shall require that such party make
reasonable investigation and inquiry with respect thereto to
ascertain the correctness and validity thereof.
20. Expenses.
Except as otherwise expressly provided herein, the Buyer, on the one
hand, and the Stockholders, jointly and severally, on the other hand,
will pay all fees and expenses (including, without limitation, legal
and accounting fees and expenses) incurred by them in connection with
the transactions contemplated hereby. In no event will any of the fees
or expenses incurred in connection with this transaction by the
Stockholders or the Stockholders' Representative, including, without
limitation, the fees and expenses of counsel to the Stockholders, be
billed to or paid by the Company or any Subsidiary. Each Stockholder
shall be responsible for payment of all sales or transfer taxes arising
out of the conveyance of the Shares owned by such Stockholder.
21. Intentionally Omitted.
22. Intentionally Omitted.
<PAGE>
23. Section Headings.
The section headings are for the convenience of the parties and in no
way alter, modify, amend, limit, or restrict the contractual
obligations of the parties.
24. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall be one
and the same document.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of and on the date first above written.
Witness: BREED TECHNOLOGIES, INC.
By: /s/ Charles J. Speranzella, Jr.
Charles J. Speranzella, Jr.
/S/ George Chuchman
George Chuchman
/s/ James E. Weber
James E. Weber
/s/ Adrian Raetsen
Adrian Raetsen
/s/ Detlef Martell
Detlef Martell
CARMADY HOLDINGS, LTD.
By: /s/ Carole Epstein
Carole Epstein
By: /s/ Marvin Epstein
Marvin Epstein
By: /s/ Wendy Katz
Wendy Katz
R.A.M. HOLDINGS, INC.
By: /S/ Roman Maksymiw
Roman Maksymiw
By: /S/ Oksana Maksymiw
Oksana Maksymiw
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SCHEDULE 1.03
CONTINGENT SHARE PROCEEDS
It is the intention of "Buyer" to pay to the "Stockholders" additional share
proceeds of up to $5,000,000, contingent upon the "Company" achieving specified
levels of financial performance for each of five consecutive 12 month fiscal
periods commencing July 1, 1997.
For the purposes of the component of the "Agreement", the following definitions
shall apply:
"Contribution Margin after Directs" shall consist of "Sales Value" less "Base
Costs", "Sales Costs", "Direct Labour", and "Direct Material" based on the
consolidated financial records of BTI Investments Inc.
"Sales Values" consist of invoice amounts for third party sales and, in the case
of internal or non-arms length sales, an imputed value consistent with
comparable pricing for comparable product sold to external parties.
"Base Cost" consists of the cost of steering wheel bases and other major
components which are not subject to normal mark-up.
"Sales Cost" consists of sales commissions costs for sales services rendered by
arms-length independent sales agents and the cost of incentive or discount
programs impacting the "Sales Value" such as volume discounts, long-term price
reduction programs, etc.
"Direct Material" consists of the material purchase cost (excluding the "Base
Cost") as determined in accordance with the methods employed in prior fiscal
years.
"Direct Labour" consists of the cost of direct labour including benefits related
thereto as determined in accordance with the methods employed in prior fiscal
years.
The following represents the minimum financial performance levels that must be
met for each of the applicable 12 month fiscal periods as indicated in the
period end records:
Minimum Annual
12 Month "Contribution Margin Contingent Share
Fiscal Period After Directs" Proceeds Earned
June 30, 1998 $44,000,000 $ 500,000
June 30, 1999 $48,400,000 $ 500,000
June 30, 2000 $53,240,000 $1,000,000
June 30, 2001 $58,564,000 $1,500,000
June 30, 2002 $64,420,000 $1,500,000
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In each fiscal period that the minimum "contribution margin after directs" is
met or exceeded, the corresponding contingent share proceeds amount reflected
above will be accrued to the credit of the "Stockholders".
For the purposes of calculating the "contribution margin after directs" for the
fiscal periods ending June 30, 2001 and June 30, 2002, the percentage of sales
cost, direct labour and material to the sales value shall not exceed the
percentage amounts actually experienced for each cost element for the year ended
June 3, 2000. To the extent that the actual percentage experienced for each
category cost in 2001 or 2002 exceeds the category percentages experienced in
the fiscal year ended June 30, 2000, the actual excess cost so experienced would
be ignored for the purposes of the "contribution after directs" calculation for
that particular year.
The total of the annual contingent share proceeds amounts earned will be paid to
the stockholders on or before September 1, 2002.
The ability for the company to meet the performance objectives is contingent
upon continued investments in technology, processes, and material/supplier
development in amounts consistent with prior years. Breed warrants continued
commitment to these practices provided historical practices continue to indicate
corresponding returns and reflect sound business practice.
The "Stockholders" will notify the "Buyer" promptly in writing of any investment
decision that, in the opinion of the "Stockholders" is inconsistent with prior
investment practices and will have a material negative impact on the
"Stockholders'" ability to meet the targeted minimums.
Any significant changes directed by Breed in the corporate operating structure
that has a material negative impact on the "contribution after directs" as
calculated for any fiscal period, will be quantified and the mutually agreed
upon impact will be adjusted accordingly.
To the extent that any such changes may have occurred, it is the responsibility
of the "Stockholders" to notify the "Buyer" of such change and the negative
impact thereof on the performance in any fiscal period within 90 days of the
applicable impacted period end.
The "Stockholders" will have the burden of establishing that investment decision
or change in corporate operating structure did, in fact, negatively affect the
"Stockholders'" ability to meet the minimums.
In the event of a dispute and/or to measure performance "Stockholders
Representative" will be provided reasonable access to the "Company" books and
records for the purpose of establishing the "Stockholders" claim or compliance.
Any amounts paid pursuant to this element of the agreement will be allocated to
the stockholders on the following basis:
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CONTINGENT SHARE PROCEEDS ALLOCATION
Payor Recipient # of Shares %
- ------------------------------------------------------------------------------
Redemption 1
BTI Investments Adrian Raetsen 290 .3
BTI Investments Jim Weber 290 .3
BTI Investments RAM Holdings 2199 2.2
Redemption 2
BTI Investments Mondem 16,522 16.9
BTI Investments Adrian Raetsen 1,821 1.9
BTI Investments 1221049 Ontario Inc. 9,475 9.7
BTI Investments Jim Weber 1,620 1.7
BTI Investments Ike T Inc. 9,475 9.7
BTI Investments RAM Holdings 9,475 9.7
BTI Investments George Chuchman 41,314 42.3
BTI Investments Detlef Martell 2,842 2.9
Sale of Shares
Breed Canada Adrian Raetsen 1,127 1.2
Breed Canada Jim Weber 1,128 1.2
----- ---
97,578 100.0
====== =====
<PAGE>
AMENDMENT TO STOCK PURCHASE AGREEMENT
This Amendment to Stock Purchase Agreement (the "Amendment") is made as of the
25th day of February, 1997 by and among BREED Technologies, Inc., a United
States corporation, organized under the laws of the State of Delaware ("BREED"),
1224194 Ontario, Inc., an Ontario, Canada corporation, BTI Investments, Inc., an
Ontario, Canada corporation ("BTI"), the Original Stockholders listed on
Schedule I attached hereto, and the Successor Stockholders listed on Schedule I.
Preliminary Statement
1. BREED, BTI and the Original Stockholders entered into a Stock Purchase
Agreement dated January 3, 1997 (the "Agreement").
2. BREED, BTI and the Original Stockholders wish to amend the Agreement
to reflect certain agreements and understandings between the parties.
3. BREED and the Original Stockholders further wish to assign
their interests to other entities or individuals, without,
however, relieving themselves of their respective rights and
obligations under the Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Throughout the Agreement, 1224194 Ontario, Inc. shall be deemed the
"Buyer" and the Successor Stockholders shall be deemed the
"Stockholders". Notwithstanding this change in designation, BREED
shall remain responsible for and be entitled to all of the rights,
responsibilities, liabilities and obligations of the Buyer under the
Agreement and the Original Stockholders shall remain responsible for
and be entitled to all of the rights, responsibilities, liabilities
and obligations of the Stockholders under the Agreement according to
their respective percentage ownership of BTI on January 3, 1997.
2. Paragraph 1.01 is revised to read as follows:
1.01 Purchase of the Shares from the Stockholders. Subject
to and upon the terms and conditions of this Agreement, at the
closing of the transactions contemplated by this Agreement
(the "Closing"), each Stockholder shall sell, transfer,
convey, assign and deliver to the Buyer, and the Buyer shall
purchase, acquire and accept from each Stockholder either
directly or indirectly, all of the Shares and/or interest
owned by such Stockholder, as set forth opposite each
Stockholder's name on Schedule I attached hereto. The
consideration shall be allocated to discharge shareholder
loans, purchase shares and to fund the redemption of Shares as
described in Schedule 1.01. At the Closing each
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Stockholder shall, to the extent each Stockholder retains
Shares at Closing, deliver to the Buyer certificates
evidencing the shares owned by such Stockholder duly endorsed
in blank or with stock powers duly executed by such
Stockholder.
2. Paragraph 1.03 (b) (i) is revised to read as follows:
(i) the total sum of Sixty
Seven Million Five Hundred
Thousand Dollars
$67,500,000 by check or
wire transfer of
immediately available funds
to be distributed according
to Exhibit 1.01.
3. Paragraph 1.04 (a) is revised by substituting the following for the
last sentence of this subparagraph:
The Closing Balance Sheet shall be
prepared in accordance with
generally accepted accounting
principles applied consistently with
the Company's past practice (to the
extent that such past practice was
in accordance with generally
accepted accounting principles),
without any adjustments applicable
solely as a result of the
acquisition of the Shares by the
Buyer on the Closing Date, or as a
result of the redemption of the
Shares by the Company and the
related repayment of Stockholder
loans and shall be certified without
qualification by the Company's
Auditor.
4. Paragraph 1.06 (b) is revised by adding the following subsection (v):
(v) to represent Stockholders in all post-closing matters,
including the settlement of the Escrow Account established
pursuant to paragraph 1.03(b)(ii).
5. Paragraph 3.05 is revised to reflect that the date of the Interim
Balance Sheet shall be November 23, 1996.
6. Paragraph 3.09 is revised to reflect that a Schedule of Personal
Property shall not be required to be attached to the Agreement.
In all other respects, the Paragraph shall remain in effect.
7. Paragraph 3.13 is revised to reflect that a Schedule of Inventory is
not required to be attached to the Agreement. In all other respects,
the Paragraph shall remain in effect.
8. Paragraph 3.14 is revised to reflect that a Schedule of Accounts
Receivable is not required to be attached to the Agreement. In all
other respects, the Paragraph shall remain in effect.
9. Paragraph 3.18 is revised as follows:
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a. The first sentence of this paragraph is revised to read as
follows:
3.18 Compliance with Agreements and Laws.
Except as disclosed in Schedule 3.18, the Company and the
Subsidiaries each have all requisite
licenses, permits and certificates,
including environmental, health and
safety permits, from federal, state
and local authorities necessary to
conduct their respective business
and own and operate their respective
assets (collectively, the
"Permits").
b. The second sentence of this paragraph is deleted in its
entirety.
10. The heading of Paragraph 3.32 is revised to read :
Conditions Existing as of November 23, 1996.
11. Paragraph 4.01 is revised to reflect that the Buyer is duly
organized, validly existing and in good standing under the
laws of the Province of Ontario, Canada.
12. Paragraph 4.02 is deleted in its entirety.
13. Paragraph 4.04 is revised to add the following:
Buyer has filed a notification with the Federal Competition
Commission of the Mexican government but will not, as of the
date of closing, have received approval.
14. The preparatory language of Paragraph 6.02 is revised to read
as follows:
6.02 Absence of Material Changes. Except as set forth in
Paragraph 6.03, without the prior written consent of
the Buyer, neither the Company nor any of the Subsidiaries
shall:
15. Paragraph 6.03 is revised as follows:
6.03 Transaction Structure. At the request of the Original
Stockholders the form of the transaction and the
payment of consideration shall follow that described
in Schedule 1.01.
16. Paragraph 9.03 is revised to add the following preparatory
language:
With the exception of the approval
of the Mexican Federal Competition
Commission, ...
17. Paragraph 10.01 is revised to add the following subparagraphs:
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(f) the Stockholders' restructuring
of the sales transaction from that
originally contemplated, as
referenced in paragraph 6.03 and
described in Schedule 1.01 net of
amounts specifically set aside to
fund an obligation.
(g) the litigation matter identified in Schedule 3.07 entitled
Salazar and Salazar, et als (Cause No. 97-01-86A) as it may
be amended from time to time.
18. Paragraph 10.02 is revised as follows:
a. The entire paragraph, excluding the final sentence shall be
re-numbered as subparagraph (a).
b. The final sentence shall be revised to read as follows:
(b) Except as provided in subparagraphs (c) below, the
Stockholders shall not be obligated to indemnify and
hold the Buyer harmless for any such loss, liability,
damage or expense unless (i) the amount for which
indemnity would otherwise be due for any single
item of loss, liability, damage or expense exceeds
Twenty-Five Thousand Dollars ($25,000), or (ii) the
total of all amounts for which indemnity would
otherwise be due for all such single items exceeds
One Hundred Thousand Dollars ($100,000).
c. The following two subparagraphs shall be added:
(c) the minimum thresholds of paragraph 10.02 (b) shall
not apply to the indemnification obligation of
paragraph 10.01(f).
(d) With regard to the indemnification obligation
of paragraph 10.01(g), the Stockholders' obligation
shall exist only to the extent the Company's
liability for this matter(through settlement, judgment
or otherwise)exceeds $500,000 over any insurance coverage.
19. Paragraph 10.04 is revised to add the following to the end of the paragraph:
Notwithstanding the foregoing, any
indemnification obligation for tax
liabilities which extends beyond two
years from Closing may be offset
against any amounts owed under the
Earn Out referenced in Paragraph
1.03 (a) (ii).
<PAGE>
20. Paragraph 10.05 is revised to add the following to the end of the paragraph:
Notwithstanding the foregoing, the
Buyer shall have four years from the
Closing to assert claims for
indemnification relating to tax
liability in excess of reasonable
provisions established in the
closing balance sheet prepared in
accordance with Generally Accepted
Accounting Principles.
21. By signing this Amendment, BTI hereby ratifies its Agreement to be bound by
the terms and conditions of the Agreement.
22. This Amendment may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall be one and the
same document.
Except as set forth above, all other terms and conditions of the Agreement shall
remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed by the parties hereto
as of and on the date first above written.
Witness: BREED TECHNOLOGIES, INC.
By: /s/ Stuart D. Boyd
Stuart D. Boyd
BTI INVESTMENTS, INC.
By: /s/ James E. Weber
James E. Weber
1224194 ONTARIO, INC.
By: /s/ Stuart D. Boyd
Stuart D. Boyd
/s/ George Chuchman
George Chuchman
(as Original and Successor Stockholder)
/s/ James E. Weber
James E. Weber
(as Original and Successor Stockholder)
/s/ Adrian Raetsen
Adrian Raetsen
(as Original and Successor Stockholder)
/s/ Detlef Martell
Detlef Martell
(as Original and Successor Stockholder)
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R.A.M. HOLDINGS INC.
(As Original and Successor Stockholder)
By: /s/ Roman Maksymiw
Roman Maksymiw
MONDEM HOLDINGS LIMITED
(formerly known as Carmady Holdings Ltd.)
(As Original and Successor Stockholder)
By: /s/ Marvin Epstein
Marvin Epstein
IKE T. INC.
By: /s/ James E. Weber
James E. Weber
1221049 ONTARIO INC.
By: /s/ Adrian Raetsen
Adrian Raetsen
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