<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: July 18, 1996
---------------
(Date of earliest event reported)
SINTER METALS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-13366 25-1677695
- ---------------------------- ------------ -------------------
(State or other jurisdiction (Commission (I.R.S. employer
of incorporation) file number) identification no.)
50 Public Square, Cleveland, Ohio 44113
------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 771-6700
----------------
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
- ----------------------------------------------
On July 18, 1996, Sinter Metals, Inc. (the "Company") acquired
all of the issued and outstanding capital stock (the "Stock") of SinterForm
Incorporated, a Michigan corporation ("SinterForm"). The acquisition was
accomplished pursuant to a Stock Purchase Agreement, dated July 18, 1996, by and
among the Company, Nancy Lundgren, John T. Weaver, Kendall S. Page and Richard
Carmichael (the "Stockholders"). A copy of the Stock Purchase Agreement is filed
as an Exhibit hereto.
As consideration for the Stock, subject to claims which may be
made under the Escrow Agreement described below and subject to adjustment, the
Company paid the Stockholders $7 million in cash. Additionally, the Company
issued to the Stockholders an aggregate of 5,000 shares of the Company's Class A
Common Stock. $350,000 of the $7 million was deposited with Key Bank, Cleveland,
Ohio, as Escrow Agent to secure certain indemnification provisions in the Stock
Purchase Agreement. A copy of the Escrow Agreement is filed as an Exhibit
hereto. The Company also paid the Stockholders an aggregate of $1.5 million in
cash as the consideration under Noncompetition Agreements, copies of which are
also attached as Exhibits hereto. Under these Noncompetition Agreements, each of
the Stockholders agreed not to compete, directly or indirectly, with the Company
for a period of three years. The purchase price for the Stock and the
consideration for the Noncompetition Agreements was determined through arm's
length negotiations among the parties.
The consideration paid by the Company was financed under a
Credit Agreement, dated as of January 18, 1996, by and between the Company and
Mellon Bank, NA and Society National Bank, as subsequently amended. The
principal amount advanced is subject to an interest rate of various floating
rate options.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
- ----------------------------------------------------------------------------
(a) Financial Statements of Businesses Acquired.*
(b) Pro Forma Financial Information.*
(c) EXHIBITS.
<TABLE>
<CAPTION>
Sequential
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
2.1 Stock Purchase Agreement, dated July 18 1996, by and
among Sinter Metals, Inc., Nancy Lundgren, John T.
Weaver, Kendall S. Page and Richard Carmichael(without
Schedules and Exhibits).**
4.1 Specimen certificate for the Class A Common Stock, par
value $0.001 per share, of the Company is incorporated
herein by reference to Exhibit 4.1 of the Company's
Amendment No. 4 to Form S-1 Registration Statement
filed October 20,1994 (Registration Statement No.
33-82390).
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
4.2 Form of certificate for the Class B Common Stock,
$0.001 par value, of the Company is incorporated herein
by reference to Exhibit 4.2 of the Company's Amendment
No. 3 to Form S-1 Registration Statement filed on
October 14, 1994 (Registration Statement No. 33-82390).
4.3 Stockholders' Agreement, dated as of November 18, 1993,
by and among the Company, its stockholders listed
therein, Powder Metal Holding, Inc., Society Venture
Capital Corporation and Heller Financial, Inc. is
incorporated herein by reference to Exhibit 4.7 of the
Company's Form S-1 Registration Statement filed on
August 3, 1994 (Registration Statement No. 33-82390).
4.4 Stockholders' Agreement, dated as of October 18, 1994,
by and among the Company, Citicorp and certain other
stockholders of the Company is incorporated herein by
reference to Exhibit 4.2 of the Company's Quarterly
Report on Form 10-Q for the period ended September 30,
1994 (Commission File No. 1-13366)
23.1 Consent of Arthur Andersen LLP.***
99.1 Escrow Agreement, dated as of July 18, 1996, by and
among SinterMetals, Inc., Key Trust Company, N.A.,
Nancy Lundgren, John T. Weaver, Kendall S. Page and
Richard Carmichael.
99.2 Noncompetition Agreement, dated as of July 18, 1996, by
and between Sinter Metals, Inc. and Nancy Lundgren.
99.3 Noncompetition Agreement, dated as of July 18, 1996, by
and between Sinter Metals, Inc. and John T. Weaver.
99.4 Noncompetition Agreement, dated as of July 18, 1996, by
and between Sinter Metals, Inc. and Kendall S. Page
99.5 Noncompetition Agreement, dated as of July 18, 1996, by
and between Sinter Metals, Inc. and Richard Carmichael
<FN>
- ---------------
* The financial statements of SinterForm for the periods
specified in Rule 3-05(b) of Regulation S-X and the pro forma
financial information required pursuant to Article 11 of
Regulation S-X currently are not available and will be filed
as soon as is practicable, but not later than 60 days after
the date that this Report is due.
** The Registrant agrees by this filing to supplementally furnish
a copy of the schedules and exhibits of this Agreement to the
Commission upon request.
*** To be filed by Amendment.
</TABLE>
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
SINTER METALS, INC.
By: /s/ Michael T. Kestner
------------------------------------
Michael T. Kestner, Vice President,
Chief Financial Officer and Secretary
Date: August 2, 1996
4
<PAGE> 1
EXHIBIT 2.1
ACQUISITION OF STOCK
OF
SINTERFORM INCORPORATED
BY
SINTER METALS, INC.
STOCK PURCHASE AGREEMENT
JULY 18, 1996
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
<S> <C> <C> <C>
ARTICLE I PURCHASE OF STOCK.......................................................................... 1
1.1 Definition Reference....................................................................... 1
1.2 Purchase of Stock.......................................................................... 1
1.3 Closing Delivery........................................................................... 1
ARTICLE II CONSIDERATION.............................................................................. 1
2.1 Purchase Price............................................................................. 1
2.2 Purchase Price Adjustment.................................................................. 1
2.2.1 Closing Balance Sheet Preparation.................................................. 1
2.2.2 Closing Balance Sheet Review....................................................... 2
2.2.3 Dispute Resolution................................................................. 2
2.2.4 Cost of Neutral Accountants........................................................ 2
2.2.5 Adjustment......................................................................... 3
2.2.6 Division; Allocation............................................................... 3
2.3 Escrow..................................................................................... 3
2.4 Closing Delivery........................................................................... 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER................................................... 4
3.1 Organization............................................................................... 4
3.1.1 Organization and Power............................................................. 4
3.1.2 Qualification...................................................................... 4
3.1.3 Other Ventures..................................................................... 4
3.1.4 Corporate Records.................................................................. 4
3.1.5 Ownership of the Company........................................................... 5
3.1.6 Capitalization of the Company...................................................... 5
3.2 Agreements................................................................................. 5
3.2.1 Authority; Enforceability.......................................................... 5
3.2.2 Consents........................................................................... 5
3.2.3 No Conflicts....................................................................... 5
3.3 Financial Statements....................................................................... 6
3.4 Liabilities................................................................................ 7
3.5 No Changes................................................................................. 7
3.6 Real Property.............................................................................. 9
3.6.1 Extent............................................................................. 9
3.6.2 Title Insurance and Surveys........................................................ 9
3.7 Owned and Leased Tangible Personal Property................................................ 10
3.8 Physical Condition of Operating Assets..................................................... 11
3.9 Inventories and Supplies................................................................... 11
3.10 Intellectual Property Rights............................................................... 11
3.11 Accounts Receivable........................................................................ 11
3.12 Insurance and Bonds........................................................................ 11
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C> <C>
3.13 Product Warranties......................................................................... 12
3.14 Product Liability.......................................................................... 12
3.15 Contracts.................................................................................. 12
3.16 Employee Benefits.......................................................................... 13
3.16.1 General............................................................................ 13
3.16.2 Multiemployer Plans................................................................ 14
3.16.3 Welfare Plans...................................................................... 14
3.16.4 Defined Benefit Plans.............................................................. 15
3.17 Employment................................................................................. 15
3.18 Suppliers and Customers.................................................................... 15
3.19 Taxes...................................................................................... 16
3.20 Compliance with Laws....................................................................... 16
3.21 Consents and Approvals..................................................................... 16
3.22 Litigation................................................................................. 17
3.23 Banking Matters............................................................................ 17
3.24 Environmental Matters...................................................................... 17
3.25 Brokers.................................................................................... 18
3.26 Conflicts of Interest...................................................................... 18
3.27 No Undisclosed Information................................................................. 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.................................................... 19
4.1 Corporate Status........................................................................... 19
4.2 Authorization; Binding Obligations......................................................... 19
4.3 Purchase for Investment.................................................................... 19
4.4 Absence of Conflict or Breach.............................................................. 19
4.5 Consents and Approvals..................................................................... 19
4.6 Brokers.................................................................................... 19
4.7 Issuance of Buyer Shares................................................................... 20
4.8 Accuracy of Information.................................................................... 20
ARTICLE V CLOSING.................................................................................... 20
5.1 Time and Place............................................................................. 20
5.2 Transfers and Deliveries by Sellers........................................................ 20
5.3 Transfer and Deliveries by Buyer........................................................... 21
ARTICLE VI ADDITIONAL COVENANTS....................................................................... 21
6.1 Publicity.................................................................................. 21
6.2 Expenses; Transfer Taxes................................................................... 22
6.3 No Assignment.............................................................................. 22
6.4 Consent to Jurisdiction.................................................................... 22
6.5 Further Assurances......................................................................... 22
6.6 Noncompetition Agreements.................................................................. 22
6.7 Repurchase of Accounts Receivable.......................................................... 22
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C> <C>
6.8 Environmental Remediation.................................................................. 23
6.8.1 Remediation........................................................................ 23
6.8.2 Cost of Remediation................................................................ 23
6.8.3 Conduct of Remediation; Limitations.................................................. 23
6.9 Sellers' Representative.................................................................... 24
6.10 Buyer Shares............................................................................... 24
6.10.1 General..................................................................... 24
6.10.2 Sophistication of the Sellers............................................... 24
6.10.3 Information Received........................................................ 24
6.10.4 Limitations on Sale......................................................... 24
6.10.5 Investment Decision......................................................... 25
6.11 Environmental Permits...................................................................... 25
ARTICLE VII INDEMNIFICATION............................................................................ 25
7.1 Survival of Representations and Warranties................................................. 25
7.2 Indemnification by the Sellers............................................................. 25
7.3 Indemnification by Buyer................................................................... 26
7.4 Third Party Claims......................................................................... 26
7.5 Limitation on Indemnification Claims....................................................... 26
7.5.1 Time Limits........................................................................ 26
7.5.2 Monetary Limits.................................................................... 27
7.5.3 Claims Adjustment.................................................................. 28
7.5.4 Nonprejudice....................................................................... 28
ARTICLE VIII CONSTRUCTION............................................................................... 28
8.1 Definitions................................................................................ 28
8.2 Headings................................................................................... 32
8.3 Exhibits and Schedules..................................................................... 32
8.4 Pronouns................................................................................... 32
8.5 Time Periods............................................................................... 32
8.6 No Strict Construction..................................................................... 32
8.7 Severability............................................................................... 32
8.8 Governing Law.............................................................................. 33
8.9 Entire Agreement........................................................................... 33
ARTICLE IX MISCELLANEOUS.............................................................................. 33
9.1 Notices.................................................................................... 33
9.2 Binding Effect............................................................................. 34
9.3 Counterparts............................................................................... 34
9.4 Waivers.................................................................................... 34
9.5 Modification............................................................................... 34
9.6 Benefits Compliance.........................................................................34
</TABLE>
(iii)
<PAGE> 5
SCHEDULES
2.2.1 Certain Pre-Closing Transactions
3.1.1 Foreign Qualifications
3.1.3 Prior operation as a subsidiary or division
3.2.3 Conflicts
3.3 Financial Statements
3.4 Liabilities
3.5 Changes
3.6.1 Real Property
3.7(a) Tangible Personal Property matters
3.7(b) Personal Property leases and licenses
3.8 Tangible Personal Property not in use
3.9 Off-site Inventory
3.10 Intellectual Property leases and licenses
3.11 Accounts Receivable
3.12 Insurance and Bonds
3.13 Product Warranty matters
3.14 Product Liability matters
3.15 Contracts
3.16 Employee Benefit Plans
3.17 Employment matters
3.18 Customers
3.20 Permits
3.22 Litigation
3.23 Banking matters
3.24 Environmental matters
3.26 Conflicts of Interest
5.2(a)(iii) Opinions of Sellers' counsel
5.3(a)(ii) Opinions of Buyer's counsel
6.7 Slow Receivables
EXHIBITS
Exhibit A: Escrow Agreement
Exhibit B: Noncompetition Agreements
Exhibit C: Power of Attorney
(iv)
<PAGE> 6
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into this
18th day of July, 1996, by and between SINTER METALS, INC., a Delaware
corporation ("Buyer") and NANCY LUNDGREN, JOHN T. WEAVER, KENDALL S. PAGE and
RICHARD CARMICHAEL, whose respective addresses are set forth on the signature
page hereto (hereinafter referred to individually as a "Seller" and collectively
as the "Sellers").
RECITALS:
---------
A. Sellers currently own all of the issued and outstanding capital stock
(the "Stock") of Sinterform Incorporated, a Michigan corporation (the
"Company"); and
B. The parties desire that Sellers sell to Buyer and Buyer purchase from
the Sellers the Stock upon the terms and conditions hereinafter set forth.
In consideration of and in reliance upon the representations and
warranties, covenants and other obligations contained in this Agreement, the
parties agree as follows:
ARTICLE I
PURCHASE OF STOCK
-----------------
1.1 DEFINITION REFERENCE. Certain capitalized terms are defined in
Section 8.1.
1.2 PURCHASE OF STOCK. Subject to the terms of this Agreement,
Sellers hereby sell, transfer and assign to Buyer free and clear of all Liens,
and Buyer hereby purchases, the Stock.
1.3 CLOSING DELIVERY. At the Closing, Sellers will deliver to
Buyer the certificates evidencing the Stock duly endorsed and in proper form for
transfer.
ARTICLE II
CONSIDERATION
-------------
2.1 PURCHASE PRICE. As consideration for the Stock, Buyer will pay
the Sellers the aggregate sum of $7,000,000 and issue to the Sellers an
aggregate of 5,000 shares of Buyer's Class A Common Stock (the "Buyer Shares")
free and clear of all Liens except as set forth in Section 6.10 (said cash and
Buyer Shares being hereinafter referred to collectively as the "Purchase Price")
subject to the terms of this Agreement, including but not limited to the
adjustment provisions of Section 2.2.
2.2 PURCHASE PRICE ADJUSTMENT.
2.2.1 CLOSING BALANCE SHEET PREPARATION. Promptly after the
Closing, the Buyer shall cause the Company to prepare a balance sheet as of the
close of business on the Closing Date, which shall reflect the transactions
described on Schedule 2.2.1. The balance
<PAGE> 7
sheet will be prepared in accordance with generally accepted accounting
principles on a basis consistent with the Company's past practice, except for
the absence of footnote disclosure. As part of its preparation of the balance
sheet, the Company will take a physical inventory. The Sellers' representative
shall be permitted to observe the physical inventory.
2.2.2 CLOSING BALANCE SHEET REVIEW. The Buyer's independent
public accountants (the "Accountants") will review the balance sheet prepared by
the Company pursuant to Subsection 2.2.1 and confirm, without audit, that said
balance sheet fairly presents the financial condition of the Company as of the
date indicated. Not later than 30 days after the Closing Date, the Buyer shall
cause the Company to deliver the balance sheet (which after review by the
Accountants is hereafter referred to as the "Preliminary Closing Balance Sheet")
to the Sellers together with the Accountants' written confirmation. All work
papers, documents and records used or generated by the Company and the
Accountants in connection with the preparation and confirmation of the
Preliminary Closing Balance Sheet will be made available to the Sellers. Unless
the Sellers deliver to the Buyer a written objection, explaining in reasonable
detail the nature of such objection and the basis for it, by the 15th day after
the Sellers' receipt of the Preliminary Closing Balance Sheet, the Preliminary
Closing Balance Sheet will become final and binding on the parties and be deemed
to be the "Final Closing Balance Sheet."
2.2.3 DISPUTE RESOLUTION. If the Sellers object, on a timely
basis as provided in the last sentence of Subsection 2.2.2, to the Preliminary
Closing Balance Sheet and Buyer and the Sellers are able to resolve their
dispute within 15 days after the Sellers' objection, the Preliminary Closing
Balance Sheet (modified to reflect the resolution) will become final and binding
on the parties and be deemed to be the Final Closing Balance Sheet. If the
Sellers object, on a timely basis as provided in the last sentence of Subsection
2.2.2, to the Preliminary Closing Balance Sheet and Buyer and the Sellers are
unable to resolve their dispute within 15 days after the Sellers' objection, the
dispute will be submitted to and resolved by the Detroit, Michigan office of
KPMG Peat Marwick (the "Neutral Accountants"). The Neutral Accountants will be
instructed to perform their services as expeditiously as possible. The
resolution by the Neutral Accountants shall be reported and explained in a Final
Closing Balance Sheet presented by the Neutral Accountants, which shall be final
and binding on the parties.
2.2.4 COST OF NEUTRAL ACCOUNTANTS. The fees and expenses of
the Neutral Accountants for the resolution of a dispute shall be shared by Buyer
and the Sellers in inverse proportion to the extent such resolution modifies the
reduction, if any, in the Purchase Price pursuant to Subsection 2.2.5 hereof in
its favor. For example, if:
(a) a reduction in the Purchase Price derived
from the Preliminary Closing Balance Sheet
were to be $100,000; and
(b) the reduction in the Purchase Price
derived from the Final Closing Balance
Sheet resulting from resolution of the
dispute were to be $20,000;
2
<PAGE> 8
then, the fees and expenses of the Neutral Accountants would be borne 80% by
Buyer and 20% by the Sellers.
2.2.5 ADJUSTMENT. The Purchase Price shall be reduced by
the aggregate of the amounts by which, if any:
(a) the Working Capital (meaning net current
assets minus current liabilities, plus any
cash used to make capital expenditures or
reduce Debt during the period from July 1,
1996 through the Closing Date) reflected
on the Final Closing Balance Sheet is
lower than the Working Capital reflected
on the Company's June 30, 1996 Balance
Sheet included as a part of Schedule 3.3.1
(the "June 30 Balance Sheet");
(b) the Debt (meaning indebtedness for
borrowed money, both long-term and
current, including all accrued interest
thereon) reflected on the Final Closing
Balance Sheet is greater than the Debt
reflected on the June 30 Balance Sheet;
and
(c) the net stockholders' equity reflected on
the Final Closing Balance Sheet is lower
than the net stockholders' equity
reflected on the June 30 Balance Sheet.
In determining the aggregate of the amounts under clauses (a), (b) and (c)
above, any duplication that would result from taking the same item or factor
into account in more than one such clause shall be eliminated. In addition, the
amount of any adjustment determined under clause (a) or (c) shall not include
the effect on Working Capital of the return of parts (having a value not in
excess of $260,000) by Caterpillar/Navistar on July 12, 1996. Sellers shall
reimburse Buyer for the full amount of any adjustment in the Purchase Price,
determined as provided above, by wire transfer within 5 days following the date
upon which the Final Closing Balance Sheet becomes final and binding upon all
parties (whether by lapse of time pursuant to Subsection 2.2.2 or the report of
the Neutral Accountants pursuant to Subsection 2.2.3).
2.2.6 DIVISION; ALLOCATION. The Purchase Price, any
adjustment thereof pursuant to Subsection 2.2.5, and the amount thereof
deposited in escrow pursuant to Section 2.3, shall be divided among and
allocated to the Sellers in proportion to their respective ownership percentages
in the equity of the Company, as set forth in Subsection 3.1.5.
2.3 ESCROW. As a readily available source for the satisfaction of
any indemnification obligations of Sellers under Section 7.2, the amount of
$350,000 of the Purchase Price shall be deposited in escrow (the "Escrow Fund")
with Key Bank, Cleveland, Ohio (the "Escrow Agent") to be administered by the
Escrow Agent in accordance with and subject to the terms of the escrow agreement
attached as Exhibit A (the "Escrow Agreement"). Nothing contained in this
Section 2.3 or the Escrow Agreement shall be construed as limiting Sellers'
liability for indemnification under Section 7.2 to the amount of the Escrow
Fund, nor shall the Escrow Fund be considered liquidated damages under this
Agreement.
3
<PAGE> 9
2.4 CLOSING DELIVERY. At the Closing, Buyer will (i) wire transfer
to Sellers in immediately available funds the sum of $6,650,000; (ii) wire
transfer to the Escrow Agent the sum of $350,000; and (iii) deliver the Buyer
Shares to the Sellers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
Sellers represent and warrant to Buyer as follows it being
expressly understood and agreed that any and all liability of Sellers with
respect to said representations and warranties shall be subject to the
limitations upon claims made in accordance with Section 7.2 of this Agreement:
3.1 ORGANIZATION.
3.1.1 ORGANIZATION AND POWER. The Company is a corporation
duly organized, validly existing and in good standing under the laws of
Michigan. The Company has full corporate power and authority to own, lease and
operate its assets and carry on its business as and where such assets are now
owned or leased and such business is presently being conducted.
3.1.2 QUALIFICATION. The Company is qualified to do business
and is in good standing in each of the jurisdictions listed on Schedule 3.1.1,
and is not required to be qualified to do business as a foreign corporation in
any other jurisdiction.
3.1.3 OTHER VENTURES. The Company does not have any
subsidiary or any ownership interest in any business entity, is not a member of
any partnership or joint venture, and except as set forth on Schedule 3.1.3 has
never operated as a subsidiary or division of any other business entity.
3.1.4 CORPORATE RECORDS. Sellers have permitted Buyer to
examine the Company's corporate minute and stock record books. The corporate
minute books contain the Certificate of Incorporation and Bylaws of Company as
in effect on the date hereof and a true and complete record of all actions by
and meetings of the directors (and committees thereof) and shareholders of the
Company and accurately reflect all transactions referred to therein. The stock
record books of the Company accurately set forth all stock issuances, transfers,
repurchases and other transactions in the shares of capital stock of the Company
since the date of its incorporation.
4
<PAGE> 10
3.1.5 OWNERSHIP OF THE COMPANY. All of the issued and
outstanding shares of the capital stock of the Company (the "Stock") are owned
of record and beneficially by the Sellers, free and clear of all Liens, as
follows:
<TABLE>
<CAPTION>
======================================================================================================================
NUMBER OF SHARES OF PERCENTAGE OF
SHAREHOLDER CLASS A COMMON STOCK TOTAL EQUITY
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nancy Lundgren 400.5 47.117647%
- ----------------------------------------------------------------------------------------------------------------------
John T. Weaver 305.5 35.9411764%
- ----------------------------------------------------------------------------------------------------------------------
Kendall S. Page 90.0 10.5882352%
- ----------------------------------------------------------------------------------------------------------------------
Richard Carmichael 54.0 6.3529411%
======================================================================================================================
</TABLE>
Upon consummation of the transactions contemplated hereby, Buyer will acquire
from the Sellers good and valid marketable to the Stock free and clear of all
Liens.
3.1.6 CAPITALIZATION OF THE COMPANY. The entire authorized
capital stock of the Company consists of 30,000 common shares of Class A common
stock, no par value, 850 of which are issued and outstanding (the "Stock"), and
30,000 shares of Class B common stock, no par value, none of which are issued
and outstanding. All of the Stock has been duly authorized and validly issued
and is fully paid and nonassessable. There are no outstanding (a) subscriptions,
options, warrants, agreements or other rights to acquire or to require the
issuance of any shares of capital stock of the Company, or (b) securities
convertible into or exchangeable for any shares of capital stock of the Company.
There are no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any outstanding shares of capital stock of the
Company.
3.2 AGREEMENTS.
3.2.1 AUTHORITY; ENFORCEABILITY. Each Seller has full power,
authority and capacity to execute, deliver and perform this Agreement and each
of the agreements and documents delivered by such Seller in connection herewith,
including, without limitation, the power and authority to transfer the Stock to
the Buyer pursuant to this Agreement. This Agreement and each other agreement
and document delivered by the Sellers in connection herewith have been duly
executed and delivered by the Sellers and constitute the valid and legally
binding obligations of the Sellers enforceable in accordance with their
respective terms.
3.2.2 CONSENTS. No approval or consent of, or filing with,
any Person or Governmental Authority is required in connection with the
transactions contemplated hereby or the execution, delivery or performance by
Sellers of this Agreement or any other agreement or document delivered by or on
behalf of the Sellers in connection herewith.
3.2.3 NO CONFLICTS. Except as set forth on Schedule
3.2.3, no action taken by or on behalf of Company or any Seller in connection
herewith, including, but not limited to,
5
<PAGE> 11
the execution, delivery and performance of this Agreement and each other
agreement and document delivered by any of them in connection herewith:
(a) creates or will create any right or
interest in any third party, or gives rise
or will give rise to a right of
termination, cancellation or acceleration,
under any Contract by which the Company or
any Seller is bound, or constitutes or
will constitute a default thereunder;
(b) to the knowledge of Sellers (but without
investigation) disrupts or impairs or will
disrupt or impair any business
relationship which the Company has with
any dealer, distributor, sales
representative, supplier or customer;
(c) conflicts with or violates, or will
conflict with or violate (i) any Law; (ii)
the Company's Articles of Incorporation or
Bylaws; (iii) any Contract by which
Company or any Seller is bound; or (iv)
any order, ruling, arbitration award,
injunction, judgment, decree or other
similar sanction or restriction to which
the Company or any Seller is subject; or
(d) constitutes or will constitute an event
which, after notice or lapse of time or
both, could result in any of the events or
consequences referred to in clauses (a) or
(c) above.
3.3 FINANCIAL STATEMENTS. Schedule 3.3 consists of:
(a) the balance sheets of the Company as of June 30, 1994
and 1995 and related statements of income and cash flow
for the fiscal years then ended, reviewed without audit
by VanderPloeg Bergakker & Associates, of Grand Rapids,
Michigan; and
(b) the balance sheet as of March 31, 1996 (the "March 31
Balance Sheet") and the June 30 Balance Sheet, and
related statements of income and cash flow for the nine
and twelve month periods then ended, prepared by the
Company.
All such financial statements were prepared from the Company's books of account,
are accurate and complete, and present fairly the financial position, results of
operations and cash flows of the Company at the dates and for the periods
indicated, in conformity with generally accepted accounting principles,
consistently applied, except for, in the case of the March 31 Balance Sheet and
June 30 Balance Sheet and related statements of income and cash flow, the
absence of footnote disclosure and customary year-end adjustments of a normal
recurring type which would not be material in the aggregate.
Schedule 3.3 also consists of the budget, containing
projected revenues and expenses, for the Company for the fiscal year ending
June 30, 1997 (the "1997 Budget"). The
6
<PAGE> 12
1997 Budget has been prepared by the Company in the ordinary course of business
on a basis consistent with past practice. Notwithstanding anything contained in
this Agreement to the contrary, the Sellers do not represent or warrant the
accuracy of any information contained in the 1997 Budget (except as and to the
extent such information may be represented and warranted elsewhere in this
Article III) and the Sellers shall not, under any circumstances, be liable for
any direct, indirect, special or consequential damages resulting from the
estimates or projections of the Company's performance made therein, including,
but not limited to, loss of revenues or loss of profits, under any theory of
recovery.
3.4 LIABILITIES. Except as set forth on Schedule 3.4, the Company
has no Liabilities of any nature (whether secured or unsecured, accrued,
absolute or contingent, unliquidated or otherwise and whether known or unknown
or due or to become due), other than (i) Liabilities disclosed or reserved
against on the June 30 Balance Sheet, and (ii) Liabilities arising in the
ordinary course of business after the date of the June 30 Balance Sheet which
are properly accrued and reflected on the books and records of the Company as of
the date hereof (none of which either individually or in the aggregate could
reasonably be expected to be material.
3.5 NO CHANGES. Since June 30, 1995, the Company has been operated
only in the ordinary course, consistent with past practice. Since that date,
there has not been any adverse change, or event or circumstance which might
reasonably be expected to result in an adverse change, in the Company's assets,
Liabilities, financial condition, operating performance, business relationships
or prospects. Without limiting the generality of the foregoing, since that date,
except as listed on Schedule 3.5, there has not been with respect to the Company
any:
(a) waiver, release, cancellation or compromise of any
debts owed to it or claims or rights against others
exceeding $10,000 in the aggregate;
(b) issuance by the Company of any notes, bonds or other
debt securities or any equity securities;
(c) declaration, setting aside or payment of any dividend
or other distribution in respect of any shares of the
Company's capital stock, or purchase or redemption of
any such shares;
(d) mortgage or pledge of, or creation of any Lien
respecting any property or assets of the Company,
except for Liens of current property taxes not yet due
and payable;
(e) borrowing of any amount of money or incurring of or
becoming subject to any Liabilities, except (i) current
Liabilities incurred in the ordinary course of business
and reflected on the books and records of the Company,
and (ii) Liabilities under contracts entered into in
the ordinary course of business;
(f) discharge or satisfaction of any Lien or payment of any
obligation or Liability, other than current Liabilities
paid in the ordinary course of business;
7
<PAGE> 13
(g) damage, theft, destruction or casualty loss, whether or
not covered by insurance, requiring a write-off of more
than $5,000 with respect to an individual occurrence or
$10,000 with respect to all such occurrences in the
aggregate;
(h) sale, lease, transfer, assignment or other disposition
of any asset (tangible or intangible) of the Company,
except for inventory sold for fair consideration and in
the ordinary course of business;
(i) increase in wages, fringe benefits, or incentive or
other compensation payable or to become payable to any
officer, director, employee, affiliate or other person
receiving compensation of any nature from the Company
except for such as are reasonable and customary in
nature and amount and consistent with past practice;
(j) commitments for capital expenditures or capitalized
leases which exceed $25,000 individually or which are
not for a business purpose of the Company in the
ordinary course of business;
(k) change in any accounting practice or procedure;
(l) change in existing credit arrangements with any bank or
other institution;
(m) (i) creation, incurrence or assumption of any debt
(other than trade payables in the ordinary course of
business), (ii) assumption, guarantee, endorsement or
other act of becoming liable or responsible for the
obligation of any other Person, or (iii) making of any
loans or advances or capital contributions to, or
investments in, any other Person;
(n) new Contract entered into, except in the ordinary
course of business consistent with past practice, or
existing Contract modified or terminated under
circumstances which might reasonably be expected to
have an adverse effect on the condition (financial or
otherwise) or prospects of the Company;
(o) delay or postponement of payment of accounts payable or
other Liabilities outside the ordinary course of
business or attempt to obtain payment of any notes or
accounts receivable owed to the Company other than in
the ordinary course of business;
(p) to the knowledge of Sellers, loss of, or deterioration
of relations with, any dealer, distributor, sales
representative, customer or supplier which,
individually or in the aggregate, has or reasonably may
be expected to have an adverse effect on the Company's
business or prospects; or
(q) Contract to do any of the foregoing.
8
<PAGE> 14
3.6 REAL PROPERTY.
3.6.1 EXTENT. The real property owned in fee or leased by the Company
is set forth in Schedule 3.6.1 (the "Real Property," which definition includes
for (i) "Owned Real Property," all buildings, structures and improvements
thereon and all fixtures attached or contained therein, and (ii) "Leased Real
Property," all leasehold interests of the Company therein and all rights of the
Company to leasehold improvements located thereon) and is separately designated
therein as owned or leased. The Company has not agreed to purchase or sell, or
become obligated to purchase, sell or lease to any other Person any of the Real
Property. The Real Property represents all real property used by the Company in
the operation of its business.
3.6.2 TITLE INSURANCE AND SURVEYS.
(a) Sellers have provided Buyer with true, correct and complete
copies of all title insurance policies and surveys with
respect to the Real Property.
(b) The Company is the sole legal and equitable owner of the
Owned Real Property and possesses good, marketable and
indefeasible fee simple title to the Owned Real Property,
free and clear of all Liens except for (i) Liens for real
estate Taxes not yet due and payable, and as to which
adequate reserves have been established on the March 31 and
June 30 Balance Sheets, (ii) zoning ordinances, and (iii)
those encumbrances, restrictions and reservations of record
listed in items 4, 5, 6, 7, 8, 9, 10 and 11 of Schedule B of
Part II to the updated commitment for title insurance
obtained by Buyer (collectively, "Permitted Liens"). No
other Person is in possession of any portion of the Owned
Real Property pursuant to a lease or otherwise.
(c) The Company has a good and valid leasehold estate in any
Leased Real Property free and clear of all Liens, except for
Permitted Liens and any lease agreement for such Leased Real
Property (a "Lease"). Each such Lease is in full force and
effect and (i) neither the Company nor, to the knowledge of
any of the Sellers, any other party thereto, is in default
under or in violation of any such Lease, (ii) no event has
occurred which, with notice or lapse of time or both, would
constitute a default under or violation of such Lease, and
(iii) the Company has not released any of its rights under
any Lease. No other Person is in possession of any portion
of any Leased Real Property.
(d) Neither the Company nor any of the Sellers has received a
notice (i) of any pending or threatened requests,
applications or proceedings to alter or restrict any zoning
or other use restrictions applicable to the Real Property,
or (ii) relating to the
9
<PAGE> 15
termination or impairment of access from
the Real Property to a public right of way
or road dedicated for public use.
(e) There are not currently any pending or, to
the knowledge of any of the Sellers
without any investigation, threatened (i)
condemnation, eminent domain or similar
proceedings which would affect any of the
Real Property or (ii) any future
improvements by any Governmental
Authority, any part of the cost of which
would be assessed against the Real
Property.
(f) Since its formation the Company has not
experienced any material interruption in
the delivery or service of any utilities.
(g) Since June 30, 1995, all Real Property has
been maintained, repaired and replaced
consistent with the past practice in a
manner which is appropriate for the
continued operation of the Company's
business in the ordinary course, except
that the roof on the Company's main
facility is in need of repair, which
condition has been brought to the Buyer's
attention.
(h) The ownership, occupancy, operation and
use of the Real Property including all
buildings, structures and improvements
located thereon (i) in all respects
comply with and do not violate any
restrictions imposed by any declaration,
covenant running with the land, lease,
permit, deed of restriction, or other
Contract affecting any of the Real
Property, and (ii) comply with and do
not violate any Law, including, without
limitation, fire and zoning Laws.
3.7 OWNED AND LEASED TANGIBLE PERSONAL PROPERTY.
(a) The Sellers have previously delivered to the Buyer a
schedule setting forth a complete and correct list of
the tangible personal property owned by the Company as
of June 30, 1996 (the "Tangible Personal Property").
Except as set forth on Schedule 3.7(a), the Company has
all rights, title and interests in, and good and
marketable title to, the Tangible Personal Property
free and clear of all Liens.
(b) Each lease and license to which the Company is a party
relating to any tangible personal property is valid and
binding and in full force and effect, and the Company
is not in default as to the payment of rent or
otherwise thereunder. Complete and correct copies of
leases and licenses relating to all material tangible
personal property which is leased or licensed by the
Company have heretofore been delivered by the Company
to Buyer, and are listed on Schedule 3.7(b).
10
<PAGE> 16
3.8 PHYSICAL CONDITION OF OPERATING ASSETS. Except for the items of
machinery listed on Schedule 3.8(a) which are in need of repair, renovation, or
upgrade, all of the Tangible Personal Property and all tangible personal
property leased or licensed by the Company which is currently used by the
Company in its business operations, (i) is in good condition and repair,
ordinary wear and tear excepted, which condition is such as to permit the
continued operation of the business of the Company as presently conducted, and
(ii) complies with applicable Laws. Schedule 3.8(b) lists all items of Tangible
Personal Property which are not currently used by the Company in its business
operations. All of Tangible Personal Property and all tangible personal property
leased or licensed by the Company is covered by one of the insurance policies
described in Section 3.12.
3.9 INVENTORIES AND SUPPLIES. All of the inventories (raw
materials, work in process and finished goods) of the Company (the "Inventory")
as of June 30, 1996 are reflected on the June 30 Balance Sheet at the lower of
actual cost (on a first-in, first-out basis) or market; consist of a quality and
quantity salable or usable in the ordinary course of the business of the
Company, except for items of obsolete or slow moving inventory and materials of
below standard quality, all of which have been written off or written down to
fair market value on the June 30 Balance Sheet; and except as set forth on
Schedule 3.23 are free and clear of all Liens. Except for the items identified
on Schedule 3.9 which are located at the places indicated on said Schedule, all
of the Inventory is located at the Company's factory in Zeeland, Michigan.
3.10 INTELLECTUAL PROPERTY RIGHTS. Schedule 3.10 contains a
complete and correct list of all patents (including all reissues, divisions,
continuations and extensions thereof), applications for patents, patent
disclosures docketed, trademarks, trademark applications, trade names and
copyrights owned by the Company, and all licenses, franchises, permits,
authorizations, agreements and arrangements that concern the same or that
concern like items owned by others and used by the Company; and complete and
correct copies of all such licenses, franchises, permits, authorizations,
agreements and arrangements have heretofore been delivered by the Sellers to the
Buyer. Except as set forth in Schedule 3.10 hereto, the Company has not received
any notice of, nor does there exist, any conflict or claimed conflict with the
asserted rights of others with respect to any of said intellectual property
rights. The Company owns, free and clear of all Liens, or is licensee of all
rights to all patents, patent applications, inventions, improvements,
trademarks, trademark applications, trade names, and copyrights necessary to
conduct its business as presently conducted. The Company does not own or use in
its business any proprietary data, information, trade secrets or know-how.
3.11 ACCOUNTS RECEIVABLE. The accounts receivable of the Company
except as set forth on Schedule 3.23, are free and clear of all Liens,
including, without limitation, rights of set-off for counterclaims, and shall be
collectible in full in the ordinary course of business but in no event later
than 120 days after the Closing, except to the extent of the allowance for
doubtful accounts maintained by the Company on its books as of the date hereof,
which shall not be greater than such allowance as reflected on the March 31
Balance Sheet. Schedule 3.11 sets forth a 30-60-90 day aging of all of the
Company's accounts receivable as of June 30, 1996.
3.12 INSURANCE AND BONDS. The Sellers have made available to
Buyer copies of all policies of insurance and all surety and other bonds to
which the Company now is a party,
11
<PAGE> 17
all of which are listed on Schedule 3.12. All of such policies and bonds are
valid and in full force and effect, and no claim has been made, or notice given,
and there exists no ground, to cancel or avoid any of said policies or bonds or
to reduce the coverage provided thereby. The Company has not during the past
three years been denied or had revoked or rescinded by a carrier any policy of
insurance. The Company is not in material default regarding the provisions of
any policy insuring the Company and has not failed to give any notice or present
any material claim under any such policy in due and timely fashion. To the
knowledge of Sellers, there are no outstanding requirements or recommendations
by any current insurer or underwriter with respect to the business of the
Company which require or recommend changes in the conduct of the business of the
Company or require any repairs or other work to be done with respect to any of
the properties, assets or operations of the Company where such changes or
repairs or other work, if not done, could, either individually or in the
aggregate, reasonably be expected to be material.
3.13 PRODUCT WARRANTIES. Except as listed on Schedule 3.13,
there:
(a) have been no product or service warranty claims
made by customers of the Company since it was
formed;
(b) have been no product recalls by the Company
since it was formed; and
(c) are no product or service warranties outstanding
or currently being offered to customers of the
Company.
3.14 PRODUCT LIABILITY. Except as listed on Schedule 3.14, no
product liability or other tort claims have been made or threatened against the
Company relating to products sold or services performed by the Company since it
was formed. There are no defects in the design (to the extent the Company is
responsible for the design) or manufacture of products manufactured or sold by
the Company or any failure by the Company to warn, test, inspect or instruct of
dangers which could form the basis for a product recall (whether or not at the
request of a Governmental Authority) or a cause of action for product liability
(including, without limitation, failure to warn, test, inspect or instruct)
against the Company, nor is there any reason for the Company to know of any such
defect or failure.
3.15 CONTRACTS. Set forth on Schedule 3.15 is a complete and
correct list of the following types of Contracts to which the Company is a
party:
(a) all unfilled purchase orders of the Company as
of 5 days preceding the date hereof, exceeding
$25,000 individually, and all other commitments
or other agreements obligating the Company to
purchase goods or services either (i)
obligating the Company to pay a total amount in
excess of $50,000 or (ii) regardless of amount,
which are not to be fully performed within one
year following the date hereof. None of such
purchase orders, commitments or agreements
exceeds the Company's normal requirements, or
requires a payment in excess of current market
price for the goods or services being
purchased;
12
<PAGE> 18
(b) all unfilled sales commitments of the Company as
of 5 days preceding the date hereof, exceeding
$50,000 individually, and all other agreements
obligating the Company to provide services or
products either (i) entitling the Company to
revenues in excess of $50,000, or (ii)
regardless of amount, which are not to be fully
performed within six months following the date
hereof;
(c) loan agreements, guarantees, suretyship
agreements, indentures, mortgages, capital
leases, pledges, hypothecations, deeds of trust,
conditional sale or title retention agreements,
security agreements and equipment financing
obligations;
(d) all agreements, understandings or arrangements
between the Company and any of its directors,
officers, shareholders or any other related or
affiliated Person or entity;
(e) all sales agency or representative, franchise,
distributorship, dealer or similar agreements
providing for an independent contractor's
services which are not terminable or cancelable
without penalty upon thirty (30) or fewer days'
notice; and
(f) other material contracts, agreements or
understandings, irrespective of subject matter
and whether or not in writing, not entered into
in the ordinary course of business.
Except as set forth on Schedule 3.15 hereto, all Contracts listed
on Schedule 3.15 are in full force and effect. No event has occurred or
condition or state of facts exists which, after notice or the passage of time,
would constitute a default by the Company or, to the knowledge of the Sellers,
by any other party, as to time or manner of performance, or as to warranties
thereunder, or otherwise, under any Contract to which the Company is a party,
except such defaults, which either individually or in the aggregate, could not
reasonably be expected to be material.
3.16 EMPLOYEE BENEFITS.
3.16.1 GENERAL.
(a) Except as otherwise set forth on Schedule 3.16,
the Company neither maintains nor is required
to contribute to any Employee Benefit Plan or
Other Plan. The Sellers have delivered to Buyer
accurate and complete copies of each such
written Employee Benefit Plan and Other Plan,
and an accurate and complete written
description of any oral Employee Benefit Plan
and Other Plan, in each case with all
modifications and amendments thereto.
13
<PAGE> 19
(b) Each Employee Benefit Plan and Other Plan
maintained by the Company has been
operated in accordance with its terms and
applicable Law.
(c) No Employee Benefit Plan or Other Plan
provides benefits for persons who are not
active employees of the Company.
(d) The Company has not, and to the
knowledge of the Sellers no other person
has, engaged in any prohibited
transaction (within the meaning of
Section 406 of ERISA or Section 4975 of
the Internal Revenue Code, excluding any
transactions which are exempt under
Section 408 of ERISA or Section 4975 of
the Internal Revenue Code) with respect
to any Employee Benefit Plan which the
Company maintains, or to which the
Company contributes, which could subject
the Company or any such other person to
any Liability. No event has occurred and
no condition exists that would subject
the Company to any Tax under Internal
Revenue Code Sections 4971, 4972, 4977
or 4979, or to a fine under ERISA
Sections 502(c) or 502(l).
(e) The Company has the right to amend or
terminate, without the consent of any
other person or entity, any Employee
Benefit Plan or Other Plan which it
maintains, except as prohibited by Law.
(f) The Company does not maintain any Employee
Benefit Plan or Other Plan under which it
would be obligated to pay benefits because
of the consummation of the transactions
contemplated by this Agreement.
(g) Except as set forth on Schedule 3.16,
since June 30, 1995 there has not been any
increase made or promised in the benefits
payable under any Employee Benefit Plan or
Other Plan of the Company.
(h) Each trust forming a part of any Pension
Plan maintained by Company meets, and
for all prior periods has met, all
requirements for qualification under
Sections 401 and 501 of the Internal
Revenue Code, and all applicable related
rules and final regulations. The Company
has timely made all contributions
(including periodic installments)
required by Law or contract to be made
to any Pension Plan or Welfare Plan or
Other Plan maintained by the Company.
3.16.2 MULTIEMPLOYER PLANS. The Company is not required,
nor has it ever been required, to contribute with respect to any Multiemployer
Plan.
3.16.3 WELFARE PLANS.
14
<PAGE> 20
(a) No Welfare Plan maintained by the Company
is funded by a trust.
(b) Each Welfare Plan maintained by the
Company intended to meet the requirements
for tax-favored treatment under subchapter
B of Chapter 1 of the Internal Revenue
Code meets such requirements.
(c) With respect to any Welfare Plan
maintained by the Company there is no
disqualified benefit, as such is defined
in Internal Revenue Code Section 4976(b),
which would subject the Company to a Tax
under Internal Revenue Code Section
4976(a).
3.16.4 DEFINED BENEFIT PLANS. The Company has never
sponsored, nor been required to contribute to, any Defined Benefit Plan.
3.17 EMPLOYMENT. Schedule 3.17 lists the names, current annual
compensation rates and other compensation arrangements of all of the Company's
employees whose annual compensation (as shown on such employee's W-2 form) for
calendar year 1995 exceeded $50,000. The Company has paid in full to all
employees, or made appropriate accruals on its books of account for, all wages,
commissions, bonuses and other direct compensation for all services performed by
them to the date hereof. The Company has withheld or collected from each payment
made to each of its employees the amount of all Taxes required to be withheld or
collected therefrom, and the Company has paid the same when due to the proper
Governmental Authorities. There are no controversies, grievances or claims by
any of the employees, former employees or beneficiaries of employees of the
Company pending with respect to their employment or benefits incident thereto,
including, but not limited to, sexual harassment and discrimination claims and
claims arising under workers' compensation laws ("Employee Claims"), and to the
knowledge of Sellers there is no state of facts or event which could reasonably
be expected to form the basis for any Employee Claims. Except as set forth on
Schedule 3.17, there have been no Employee Claims made since the formation of
the Company. There is no union representation of the Company's employees, and to
the knowledge of the Sellers, there has been no attempt by a labor organization
to organize the Company's employees into a collective bargaining unit and there
is no basis to believe that there is any imminent threat of an attempt to
organize a union. To the knowledge of the Sellers based upon the Company's
employee files, none of the Company's current salaried employees has been
convicted of any felony or drug-related criminal offense. Except as set forth on
Schedule 3.17 by employee classification or category, since June 30, 1995, there
has not been any general increase made or promised in the level or rate of
salaries or compensation (including, but not limited to, bonuses) of the
company's employees, increases made or promised in the salary or compensation
(including, but not limited to, bonuses) paid to or accrued for the benefit of
any individual employee, director, representative or agent of the Company.
3.18 SUPPLIERS AND CUSTOMERS. Except as set forth on Schedule 3.18,
no supplier or customer which accounted for more than 5% of the Company's
purchases or sales in any fiscal year ending prior to the date hereof and no
other supplier or customer material to the Company's business (including, but
not limited to, any supplier who is the Company's sole
15
<PAGE> 21
source of supply of any product or service) has since June 30, 1995 terminated,
or threatened to terminate, its relationship with the Company or has during the
past year decreased or delayed materially, or threatened to decrease or delay
materially, its services or supplies to the Company or its usage of the
Company's services or products, and to the knowledge of Sellers there is no
state of facts or event which could reasonably be expected to form the basis for
such a decrease or delay. To the knowledge of the Sellers (but without
investigation), the transactions contemplated in this Agreement will not
adversely affect the relationship of the Company with any such supplier or
customer. The Company is not required, in the ordinary course of business, to
provide any bonding or any other financial security arrangements in connection
with any transactions with any customers or suppliers.
3.19 TAXES. All Tax returns, reports, statements and declarations
(hereinafter collectively, "Tax Returns") required by any Governmental Authority
to be filed in connection with the properties, business, sales, income,
expenses, net worth, franchises or other characteristics of the Company have
been timely filed, and such returns are correct and complete. The Company has
delivered to Buyer copies of each of its most recent Tax Returns of each type.
All Taxes payable in connection with the properties, business, income, expenses,
net worth and franchises of the Company have been paid in full, other than Taxes
which are not yet due or which, if due, are not yet delinquent, are being
contested in good faith or have not been finally determined, and for which in
all cases reserves have been established on the June 30 Balance Sheet which are
sufficient to cover the payment in full of all such Taxes. There are no Tax
claims, audits or proceedings pending or threatened in connection with the
properties, business, income, expenses, net worth, franchises or other
characteristics of the Company.
3.20 COMPLIANCE WITH LAWS. Except as set forth on Schedule 3.24,
the Company, and its assets and the conduct of its business, have been since the
formation of the Company and are now in compliance with all applicable Law.
There have been no allegations of or inquiries to the Company or the Sellers
concerning any violations of Law by the Company since its formation. Except as
listed on Schedule 3.20, no permits, licenses, approvals or authorizations of
any Governmental Authority are required to conduct the Company's business. All
such required permits, licenses, approvals and authorizations have been legally
obtained and maintained by the Company and are in full force and effect. No
proceeding is pending to revoke or limit any of them or otherwise impose any
conditions or obligations on the possession or renewal of any of them. In
addition, to the knowledge of the Sellers there is no state of facts or event
which could reasonably be expected to form the basis for any revocation or
limitation of them or other imposition of conditions or obligations on the
possession or renewal of any of them. Except as set forth in Schedule 3.20,
since the formation of the Company, there have been no claims, notices, orders
or directives issued by any Governmental Authority with respect to the Company's
business or any of its assets. The Company is not currently required to make,
and has no reasonable expectation that it will be required to make, in order to
operate its business, any expenditures specifically to achieve or maintain
compliance with any Law.
3.21 CONSENTS AND APPROVALS. There are no authorizations, consents,
approvals or notices required to be obtained or given by any of the Sellers or
the Company or waiting periods required to expire, in order that this Agreement
and the transactions provided for herein may be consummated by Sellers.
16
<PAGE> 22
3.22 LITIGATION. Except as set forth on Schedule 3.22, (i) there
are no actions or suits to which the Company is or would be a party or subject
at Law or in equity, or arbitration proceedings, or claims or investigations,
pending or threatened, and there is no state of facts existing which could give
rise to any such action, proceedings, claim or investigation; (ii) there are no
proceedings pending or threatened against the Company by or before any
Governmental Authority, and there is no state of facts existing which could give
rise to any such proceedings; and (iii) the Company is not in violation of any
order, award, decree or judgment of any court or arbitration tribunal or
governmental board, department, commission, bureau, instrumentality or agency.
3.23 BANKING MATTERS. Schedule 3.23 hereto contains a complete and
correct list of: (i) the names of all banks and other financial institutions,
and account descriptions and numbers, in which the Company has an account or
safe deposit box, and of all brokerage firms and other entities and persons
holding funds or investments of the Company and the names of all persons
authorized to draw thereon or have access thereto; (ii) the names of all persons
holding powers of attorney from the Company and a summary statement of the terms
thereof; and (iii) the amount of bank indebtedness, both principal and interest,
owed by the Company as of the date hereof.
3.24 ENVIRONMENTAL MATTERS. Except as described on Schedule 3.24:
(a) There are no underground storage tanks located
on, nor to the knowledge of the Sellers have any
underground storage tanks been removed from, any
current or former facility or place of business
owned or leased by the Company;
(b) There has been no Release of any Hazardous
Substances at any or from any of the Company's
current or former facilities, during any time
period in which the Company owned or operated
such facilities, which under existing Law could
give rise to any Liability on the part of the
Company;
(c) The Sellers are not aware of any Release of any
Hazardous Substances at any or from any
properties adjacent to any of the Company's
current or former facilities;
(d) There are no asbestos-containing materials or
urea formaldehyde-containing materials
incorporated into the buildings or interior
improvements that are a part of any facility
owned or leased by the Company, or into other
assets or products of the Company, nor is there
any electrical transformer, fluorescent light
fixture with ballasts, or other equipment
containing polychlorinated biphenyls on any
facility owned or leased by the Company which,
under existing Law, could give rise to any
Liability on the part of the Company;
17
<PAGE> 23
(e) There has been no generation, Treatment or
Storage of any Hazardous Substances by the
Company which, under existing Law, could give
rise to any Liability on the part of the
Company;
(f) There has been no Disposal or arrangement for
Disposal of Hazardous Substances by the Company
on any property not owned or leased by the
Company which, under existing Law, could give
rise to any Liability on the part of the
Company;
(g) The Company does not use any Hazardous
Substances in the conduct of its business except
as permitted by Law;
(h) The Company has had and presently has each
Environmental Permit required under any
Environmental Law and has complied with and
currently is in compliance with the terms and
conditions of each Environmental Permit; and
(i) The Company has been and currently is in
compliance with all applicable Environmental
Laws.
Schedule 3.24 also contains an accurate and complete list of all environmental
reports prepared for the Company or in the Company's possession with respect to
assets owned or used by the Company. The Company maintains a set of material
safety data sheets which divulge, in compliance with applicable Law, all
Hazardous Substances in the Company's possession.
3.25 BROKERS. No person is acting or has acted for the Sellers or
the Company as an investment banker or advisor, broker or finder in connection
with the transactions provided for by this Agreement, and the Company has no
obligation to any person claiming to have acted in such capacity.
3.26 CONFLICTS OF INTEREST. Except as set forth on Schedule 3.26,
no Seller, nor to the knowledge of Sellers any director or employee of the
Company nor any relative of any Seller, director or employee of the Company nor
any Affiliate of any of the foregoing:
(a) owns, directly or indirectly, any interest in,
or is an employee or agent of, any entity which
is a competitor, lessor, lessee, customer or
supplier of the Company;
(b) owns, directly or indirectly, any interest in,
any tangible or intangible property, asset, or
right which the Company uses in its business;
(c) has any cause of action or claim against, owes
any amount to, or is owed any amount by the
Company; or
(d) is a party to any Contract with the Company.
18
<PAGE> 24
3.27 NO UNDISCLOSED INFORMATION. This Agreement, which includes the
Exhibits and Schedules hereto, all documents expressly stated herein to have
been previously delivered by the Sellers to the Buyer, and all other agreements
or certificates delivered to the Buyer pursuant hereto, does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained herein, in light of the circumstances
under which such statements were or are made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
The Buyer represents and warrants to the Sellers as follows:
4.1 CORPORATE STATUS. The Buyer is a corporation duly organized and
validly existing and in good standing under the laws of the State of Delaware.
Buyer has all requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
4.2 AUTHORIZATION; BINDING OBLIGATIONS. Buyer has taken all
corporate action necessary to authorize the execution and delivery of this
Agreement and the performance of all obligations on the part of the Buyer to be
performed hereunder. This Agreement, and the other agreements and instruments to
be executed and delivered pursuant hereto have been duly executed and delivered
by the Buyer and constitute valid and legally binding obligations of the Buyer
enforceable in accordance with their respective terms.
4.3 PURCHASE FOR INVESTMENT. The Buyer is aware that the Stock is
not registered under the Securities Act of 1933, as amended, or under any state
securities Law, and the Buyer may not further transfer the Stock under certain
circumstances without compliance with the registration and other provisions of
all applicable securities Laws. The Buyer is not an underwriter, as that term is
defined under the Securities Act of 1933, as amended, and is purchasing the
Stock solely for investment only for its own account and not with a view to or
in connection with, the further sale or transfer of all or any portion thereof.
4.4 ABSENCE OF CONFLICT OR BREACH. The execution, delivery and
performance of this Agreement and each other agreement or document delivered by
Buyer pursuant hereto does not and will not violate or conflict with (i) any
Law; (ii) Buyer's Certificate of Incorporation or Bylaws; (iii) any Contract by
which Buyer is bound; or (iv) any order, ruling, arbitration award, injunction,
judgment, decree or other similar sanction or restriction to which Buyer is
subject.
4.5 CONSENTS AND APPROVALS. There are no authorizations, consents,
approvals or notices required to be obtained or given by the Buyer or waiting
periods required to expire, in order that this Agreement and the transactions
provided for herein may be consummated by the Buyer.
4.6 BROKERS. Except for The CMA Group, Inc., of Gray, Tennessee,
whose fees will be paid by Buyer, no person is acting or has acted for the Buyer
as an investment banker or advisor, broker or finder in connection with the
transactions provided for in this Agreement.
19
<PAGE> 25
4.7 ISSUANCE OF BUYER SHARES. The Buyer Shares, upon delivery to
the Sellers, will be duly authorized and validly issued, fully paid and
nonassessable.
4.8 ACCURACY OF INFORMATION. The information furnished to the
Sellers pursuant to Subsection 6.10.3 does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which such
statements were made, not misleading.
ARTICLE V
CLOSING
-------
5.1 TIME AND PLACE. Consummation of the transactions contemplated
hereby (the "Closing") is taking place simultaneously with the execution of this
Agreement on July 18, 1996 (the "Closing Date") at the offices of Calfee, Halter
& Griswold, 1400 McDonald Investment Center, 800 Superior Avenue, Cleveland,
Ohio 44114-2688. The transfers and deliveries described in Sections 5.2 and 5.3
are mutually interdependent and regarded as occurring simultaneously, and no
such transfer or delivery shall become effective unless all the other transfers
and deliveries provided for in Sections 5.2 and 5.3 have also been consummated.
The transfers and deliveries herein contemplated shall be deemed to have
occurred and the Closing shall be effective as of the close of business on the
Closing Date.
5.2 TRANSFERS AND DELIVERIES BY SELLERS. At the Closing the
Sellers shall deliver or cause to be delivered:
(a) to the Buyer:
(i) the certificates for the Stock in accordance
with Section 1.3;
(ii) a good standing certificate from the State
of Michigan and each jurisdiction in which
the Company is qualified to do business as a
foreign corporation, dated and issued not
more than 10 days prior to the Closing Date;
(iii) the opinion of Bodman, Longley & Dahling
LLP, Sellers' counsel, dated as of the
Closing Date and satisfactory to Buyer as to
its assumptions and exceptions, to the
effect indicated on Schedule 5.2(a)(iii);
(iv) Noncompetition Agreements in accordance with
the provisions of Section 6.6, duly executed
by each of the Sellers;
(v) copies of Powers of Attorney conforming to
Exhibit C duly executed by each of the
Sellers; and
20
<PAGE> 26
(vi) such other documents as Buyer may reasonably
request, consistent with the terms hereof,
in order to consummate the transactions
herein contemplated; and
(b) to the Buyer and the Escrow Agent, the Escrow
Agreement duly executed by each Seller.
5.3 TRANSFER AND DELIVERIES BY BUYER. At the Closing the
Buyer shall deliver or cause to be delivered:
(a) to the Sellers:
(i) by wire transfer to the accounts of
the respective Sellers pursuant to
written instructions from each of
them, a portion of the Purchase
Price in the aggregate amount of
$6,650,000;
(ii) the Buyer Shares;
(iii) the opinion of Calfee, Halter &
Griswold, Buyer's counsel, dated as
of the Closing Date and satisfactory
to the Sellers as to its assumptions
and exceptions, to the effect
indicated on Schedule 5.3(a)(ii);
(iv) Noncompetition Agreements in
accordance with the provisions of
Section 6.6, duly executed by the
Buyer, together with the
consideration therein provided by
wire transfer to the accounts of the
respective Sellers pursuant to
written instructions from each of
them;
(v) such other documents as Sellers may
reasonably request, consistent with
the terms hereof, in order to
consummate the transactions herein
contemplated; and
(b) to the Sellers and the Escrow Agent, the
Escrow Agreement duly executed by the Buyer;
and
(c) to the Escrow Agent, by wire transfer
pursuant to written instructions, the sum of
$350,000.
ARTICLE VI
ADDITIONAL COVENANTS
--------------------
6.1 PUBLICITY. All public announcements and press releases
relating to this Agreement or the transactions contemplated hereby will be made
only by, or upon approval of, the Buyer.
21
<PAGE> 27
6.2 EXPENSES; TRANSFER TAXES. Buyer shall pay all of the
expenses incident to the transactions contemplated by this Agreement which are
incurred by Buyer or its representatives, and except to the extent previously
borne by the Company, as described in Schedule 2.2.1, the Sellers shall pay all
of the expenses incident to the transactions contemplated by this Agreement
which are incurred by the Company and the Sellers or their representatives. The
Sellers shall also pay all sales or other transfer Taxes, if any, which may be
payable in connection with the transactions contemplated by this Agreement.
6.3 NO ASSIGNMENT. No assignment by any Seller of this
Agreement or any right or obligation hereunder may be made without the prior
written consent of the Buyer, and any assignment attempted without that consent
will be void.
6.4 CONSENT TO JURISDICTION. Any action or proceeding brought
by a party against any other party in connection with this Agreement may be
commenced in any federal or state court located in Cleveland, Ohio, and all
objections to personal jurisdiction and venue in any action or proceeding so
commenced are hereby waived. As long as service of process is by notice as
provided in Section 8.2 or as required by any such court, all objections to
improper service of process are hereby waived.
6.5 FURTHER ASSURANCES. Each Seller agrees that, at any time
and from time to time after the Closing, such Seller will, upon the request of
Buyer and at such Seller's expense, do all such further acts as may reasonably
be required to further transfer, assign and confirm to Buyer, or to vest in
Buyer good and marketable title to such Seller's Stock.
6.6 NONCOMPETITION AGREEMENTS. The Sellers and Buyer shall
enter into agreements as of the Closing Date restricting each Seller's ability
to compete with Buyer and the Company upon the terms set forth in Exhibit B (the
"Noncompetition Agreements").
6.7 REPURCHASE OF ACCOUNTS RECEIVABLE. Buyer shall cause the
Company to use all reasonable efforts after the Closing to collect the Company's
accounts receivable outstanding as of the Closing Date (the "Outstanding
Receivables"), but the Company shall not be required to take or threaten legal
action to collect any of such receivables. From time to time after the
Settlement Date up to the first anniversary of the Closing Date, the Buyer shall
have the right, at its option, to require the Sellers to repurchase from the
Company, in proportion to their respective ownership interests in the Company as
set forth in Subsection 3.1.5, all or any portion of the Outstanding Receivables
(undiminished by any credit for shortage or returned goods or any set-off or
counterclaim) which then remain uncollected (the "Uncollected Receivables") to
the extent the aggregate amount of all such Uncollected Receivables to the date
of such repurchase shall have exceeded the reserve for uncollectible
receivables, if any, reflected on the books of the Company as of the Closing
Date in accordance with Section 3.11 by more than $10,000 (the "Excess Bad
Debts"). Any such Excess Bad Debts shall be repurchased at an amount equal to
the amount at which they were reflected on the books of the Company as of the
Closing Date (the "Repurchase Amount"). For purposes hereof, the "Settlement
Date" shall mean 120 days after the Closing Date for all Outstanding Receivables
other than those listed on Schedule 6.7, and 180 days after the Closing Date for
those Outstanding Receivables listed on Schedule 6.7. The Buyer shall exercise
its option hereunder by delivering written notice to the Sellers identifying
those accounts receivable (net of the reserve) which have not been collected
22
<PAGE> 28
and which the Buyer desires to have repurchased. The Sellers shall have the
right to verify the existence of the unpaid balance of such receivables. The
Sellers shall pay each Repurchase Amount to the Company in cash within fourteen
(14) days after the Sellers' receipt of the Buyer's written notice of the
exercise of its repurchase option. All receivables purchased by Sellers
hereunder shall be assigned in full to Sellers upon payment by Sellers to Buyer
for such receivables.
6.8 ENVIRONMENTAL REMEDIATION.
6.8.1 REMEDIATION. If at any time, any
Governmental Authority having jurisdiction over Environmental matters requires
any action be taken to remedy, alleviate or address any Environmental condition
for which the Company is responsible and which existed prior to the Closing,
Buyer or the Company shall have the exclusive right to undertake such remedial
action. Any such remedial action may include, in addition to all steps to
remedy, alleviate or address specific conditions or problems, further testing,
investigation, and evaluation. Buyer or the Company, at Buyer's direction, shall
administer the process of undertaking any such required remedial action.
6.8.2 COST OF REMEDIATION. Subject to the
provisions of Sections 6.8.3 and 7.5, the Sellers shall reimburse Buyer and/or
the Company, in proportion to the Sellers' respective ownership interests in the
Company as set forth in Subsection 3.1.5, the full cost of all remedial action
undertaken pursuant to Subsection 6.8.1 within ten (10) days after the Sellers'
receipt of an invoice from Buyer, the Company, or a third party contractor
engaged by Buyer or the Company with respect thereto.
6.8.3 CONDUCT OF REMEDIATION; LIMITATIONS. The
Buyer will, or will cause the Company to, give prompt written notice to the
Sellers upon becoming aware of any fact or circumstance which requires remedial
or other action for which the Sellers may be liable under this Section 6.8. If
practicable, such notice shall be given prior to any notice thereof to any
Governmental Authority. Thereafter the Buyer ( and the Company) and the Sellers
will cooperate fully with each other and with any Governmental Authority in
connection with any remedial action, testing or evaluation as described in
Section 6.8.1., and the Buyer (and the Company) will promptly provide to the
Sellers copies of all correspondence, test results, assessments and other
documents pertaining to such matters, which Sellers agree to keep strictly
confidential. If any remedial action is required, the parties agree that (a)
such remedial action shall be the minimum action (except as may otherwise be
required by a Governmental Authority following appropriate negotiations)
reasonably necessary to allow the Real Property subject to the remediation to be
used for the manufacture of sintered powder metal parts consistent with past
practice, and (b) the Buyer will accept reasonable property use restrictions
and/or engineering controls as a means of satisfying any environmental, remedial
or response requirements; provided, however, that nothing contained in clause
(a) or (b) of this sentence shall be applicable if the consequence thereof would
result in a significant increase in the cost of operations on the Real Property
or significantly reduce the fair market value of the Real Property. Buyer will
cause the Company to observe and be bound by the provisions of this Section
6.8.3.
23
<PAGE> 29
6.9 SELLERS' REPRESENTATIVE. Each Seller hereby appoints Nancy
Lundgren as such Seller's representative for the purposes herein stated (the
"Sellers' Representative") and agrees that the Sellers' Representative shall
have the full and exclusive power and authority to act on behalf of such Seller
after the Closing with respect to all matters relating to or arising out of this
Agreement and the Escrow Agreement, except for receipt of any payments due such
Seller. Any action taken by the Sellers' Representative pursuant hereto shall be
binding upon all Sellers and upon the heirs, legal representatives, executors,
administrators, trustees in bankruptcy and permitted assigns of the Sellers. In
furtherance of the authority granted under this Section 6.9 each Seller agrees
to execute at the Closing a power-of-attorney conforming to the provisions of
Exhibit C (the "Power-of-Attorney").
6.10 BUYER SHARES. In connection with the issuance to the
Sellers of, and the investment by the Sellers in, the Buyer Shares, each Seller
hereby represents, warrants, covenants, and agrees as follows:
6.10.1 GENERAL. Such Seller is fully aware that
the Buyer Shares are being issued and delivered to such Seller (i) without
registration under the Securities Act of 1933 (the "Act") in reliance upon the
exemption provided for by Section 4(2) of the Act and that the representations,
warranties, covenants and agreements set forth below are essential to the
claiming of such exemption, and (ii) without registration under the securities
laws of any state.
6.10.2 SOPHISTICATION OF THE SELLERS. Such Seller
has adequate knowledge and experience in financial and business matters in
general, and financial and business matters of the type in which the Buyer is
engaged in particular, and that such Seller is capable of evaluating the merits
and risks of an investment in the Buyer Shares and to make an informed
investment decision with respect thereto. In addition, such Seller is familiar
with the nature of and risks attendant to an investment of this type and is
financially capable of bearing the economic risk of such Seller's investment in
the Buyer Shares.
6.10.3 INFORMATION RECEIVED. Such Seller has
received a copy of the Buyer's (i) Annual Report to Shareholders for the fiscal
year ended December 31, 1995, (ii) Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 as filed with the Securities and Exchange
Commission ("SEC"), (iii) Proxy Statement for the Annual Meeting of Stockholders
held on May 16, 1996, (iv) Quarterly Report to Shareholders for the fiscal
quarter ended March 31, 1996, and (v) Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1996 as filed with the SEC. Further, such Seller
has had the opportunity to ask questions of and receive answers from
representatives of Buyer concerning the Buyer Shares and the business of Buyer,
and to obtain any additional information which the Buyer or its representatives
possess or can acquire without unreasonable effort or expense that such Seller
deems necessary to verify the accuracy of the information furnished pursuant to
this Subsection 6.10.3.
6.10.4 LIMITATIONS ON SALE. Such Seller is
acquiring the Buyer Shares for its own account, for investment and not with a
view to the distribution thereof and will not sell, transfer or otherwise
dispose of such shares unless (i) a registration statement filed with the
Securities and Exchange Commission pursuant to the Act with respect thereto is
in effect, and any registration requirements under state securities laws have
been complied with,
24
<PAGE> 30
or (ii) such Seller establishes to the satisfaction of the Buyer that an
exemption from such registration and compliance is available. Such Seller
acknowledges and agrees that the certificates representing the Buyer Shares to
be received by such Seller shall bear a legend stating the substance of such
restrictions and that Buyer may issue stop transfer instructions to the transfer
agent of the Buyer Shares to preclude any transfer in violation of such
restrictions.
6.10.5 INVESTMENT DECISION. Based upon a thorough
review of this Section 6.10 and the documents and information delivered to such
Seller in connection herewith, such Seller understands the terms and conditions
of this Section and the Buyer Shares to the extent necessary to make the
investment decision required hereby.
6.11 ENVIRONMENTAL PERMITS. Sellers agree to obtain on
behalf of the Company as promptly as possible after the Closing, and in any
event with six months following the Closing, all Environmental Permits
currently required to be held by the Company which have not been obtained or
have expired. All costs associated with the obtaining of such Permits,
including but not limited to any fines or penalties resulting from the conduct
of business without them, shall be borne by the Sellers, and, notwithstanding
anything in this Agreement to the contrary, shall not be subject to the
limitations of Subsection 7.5.2 (b). Any remediation associated therewith,
however, shall be governed by the provisions of Section 6.8.
ARTICLE VII
INDEMNIFICATION
---------------
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of each Seller and of Buyer made in this
Agreement or pursuant hereto shall survive the Closing and continue to be
binding regardless of any investigation made at any time by any party; however,
the right of a party to bring a claim for indemnification shall be subject to
the limitations specified in Section 7.5.
7.2 INDEMNIFICATION BY THE SELLERS. Subject to the provisions
of Section 7.5 of this Agreement and to the last sentence of this Section 7.2,
the Sellers shall indemnify Buyer and its Affiliates (including the Company) and
the shareholders, directors, employees and agents of Buyer and its Affiliates
and their respective heirs, executors, administrators, successors and permitted
assigns ("Buyer Indemnified Parties") against and hold them harmless from all
Liability, loss, damage or deficiency resulting from or arising out of (a) any
inaccuracy in or breach of any representation or warranty by any Seller herein
or in any other agreement or document delivered by or on behalf of any Seller in
connection herewith; (b) any breach or nonperformance of any covenant or
obligation made or incurred by any Seller herein or in any other agreement or
document delivered by or on behalf of any Seller in connection herewith; (c) the
Company's use, generation, production, Treatment, Storage, handling, receipt,
processing, Disposal, Release, Transport or management on or prior to the
Closing Date in a manner contrary to existing Law, or the presence for whatever
reason on or prior to the Closing Date, at the Company's facilities or the real
property on which they are located, of any Hazardous Substances (d) the claims
of any broker, finder, or other Person acting in a similar capacity on behalf of
the Company or any Seller in connection with the transactions herein
contemplated; (e) any and all costs and expenses (including, but not limited to,
legal and
25
<PAGE> 31
accounting fees) related to any of the foregoing. The indemnity obligations of
each Seller hereunder shall be several only in proportion to their respective
Allocable Portion of each claim.
7.3 INDEMNIFICATION BY BUYER. Subject to the provisions of
Section 7.5 of this Agreement, the Buyer shall indemnify each Seller against and
hold them harmless from all Liability, loss, damage or deficiency resulting from
or arising out of (a) any inaccuracy in or breach of any representation or
warranty by Buyer herein or in any other agreement or document delivered by or
on behalf of Buyer in connection herewith; (b) any breach or nonperformance of
any covenant or obligation made or incurred by Buyer herein or in any other
agreement or document delivered by or on behalf of Buyer in connection herewith;
(c) the claims of any broker, finder or other Person acting in a similar
capacity on behalf of Buyer in connection with the transactions herein
contemplated; (d) the claim of any third party (including any Governmental
Authority) against any Seller based upon (i) such Seller's relationship with the
Company after the Closing Date, and (ii) any action taken or omission made by
the Company after the Closing Date which action or omission is neither (y) the
proximate result of any action or omission of such Seller, nor (z) based upon or
the result of any inaccuracy in or breach of any representation or warranty, or
any breach or nonperformance of any covenant or obligation made or incurred, by
any Seller in this Agreement or in any other agreement or document delivered by
or on behalf of any Seller in connection herewith; and (e) any and all related
costs and expenses (including, but not limited to, legal and accounting fees)
related to any of the foregoing.
7.4 THIRD PARTY CLAIMS. If any legal proceedings shall be
instituted or any claim shall be asserted by any third party (including any
Governmental Authority) in respect of which the Sellers on the one hand, or
Buyer Indemnified Parties on the other hand, may be entitled to indemnity
hereunder, the party asserting such right to indemnity shall give the party from
whom indemnity is sought written notice thereof. A delay in giving notice shall
relieve the recipient of liability only to the extent the recipient suffers
actual prejudice because of the delay. The party from whom indemnity is sought
shall have the right, at its option and expense, to participate in the defense
of such a proceeding or claim, but not to control the defense, negotiation or
settlement thereof, which control shall at all times rest with the party
asserting such right to indemnity. The parties hereto agree to cooperate fully
with each other in connection with the defense, negotiation or settlement of any
such third party proceeding or claim.
7.5 LIMITATION ON INDEMNIFICATION CLAIMS.
7.5.1 TIME LIMITS. No claim for indemnification
under Section 7.2 or 7.3 (exclusive of fraud claims) or for recovery of costs
under Subsection 6.8.2 may be initiated later than the applicable deadline
indicated below:
(a) for indemnification claims based
upon an inaccuracy in or breach of
any of the representations and
warranties contained in this
Agreement, except for those
contained in Subsections 3.1.1,
3.1.5, 3.1.6, 3.2.1 and 3.2.2 and
Sections 3.19 and 3.24, the deadline
shall be the third anniversary of
the Closing Date;
26
<PAGE> 32
(b) for indemnification claims based
upon an inaccuracy in or breach of
the representations and warranties
contained in Subsections 3.1.1,
3.1.5, 3.1.6, 3.2.1 or 3.2.2, or a
breach of the covenants contained in
Sections 1.2 or 1.3, the deadline
shall be the applicable statute of
limitations for bringing such a
claim under the Law governing this
Agreement;
(c) for indemnification claims based
upon an inaccuracy in or breach of
the representations and warranties
contained in Section 3.19, the
deadline shall be fifteen (15) days
following the expiration of the
applicable statute of limitations
for the assessment of any tax
deficiency, penalty or other
liability with respect to the tax
matters which are the subject of
said Section 3.19; and
(d) for all other indemnification
claims, and for any claim for
recovery of costs under Subsection
6.8.2, the deadline shall be the
fifth anniversary of the Closing
Date.
Any indemnification claim, and any claim for recovery of costs under Subsection
6.8.2, initiated after the applicable deadline shall be null and void. Any such
claim initiated prior to the applicable deadline shall not be affected by the
subsequent passage of such deadline while such claim may still be pending or
unresolved.
7.5.2 MONETARY LIMITS. The indemnity obligations
of the Sellers hereunder (exclusive of fraud claims) and the obligations under
Subsection 6.8.2 shall be further limited as follows:
(a) the maximum amount which the Buyer
Indemnified Parties can recover from
any one Seller for all
indemnification claims and claims
under Subsection 6.8.2 in the
aggregate shall not exceed such
Seller's Allocable Portion of the
Purchase Price (as the same may be
adjusted) paid to such Seller
pursuant to Section 2; and
(b) the Buyer Indemnified Parties shall
not be entitled to make any claim
for indemnification with respect to
(i) any inaccuracy in or breach of
any representation or warranty made
by Sellers in this Agreement, except
for those contained in Subsections
3.1.1, 3.1.5, 3.1.6 and Sections
3.4, 3.11, 3.19, 3.24 and 3.25, or
(ii) any costs of remediation
pursuant to Subsection 6.8.3, unless
and until the aggregate amount of
all of the Buyer Indemnified
Parties' claims for indemnification
under Section 7.2 (including any
such costs of remediation pursuant
to Subsection 6.8.3) shall exceed
$100,000; provided,
27
<PAGE> 33
however, that in the event such
claims shall exceed the threshold of
$100,000 the Buyer Indemnified
Parties shall be entitled to recover
the full amount of their Liability,
loss, damage or deficiency (and all
related expenses) with respect to
such claims, it being expressly
understood and agreed that said
$100,000 threshold shall not serve
as a deductible amount.
7.5.3 CLAIMS ADJUSTMENT. All claims made under
Section 7.2 or 7.3 or Subsection 6.8.2 shall be adjusted for (a) the tax
benefit, if any, which is the direct result of the subject matter of such claim
after taking into account the tax effect of the indemnification or other payment
relating thereto, and (b) any insurance proceeds received by the party entitled
to indemnity, except to the extent such proceeds give rise to retroactive or
subsequent premium rate adjustments.
7.5.4 NONPREJUDICE. Notwithstanding anything in
this Agreement to the contrary, the limitations contained in this Section 7.5
applicable to a claim based on a particular Section or Subsection of this
Agreement shall have no application to any claim which also arises under another
Section or Subsection which is not bound by the same limitation.
ARTICLE VIII
CONSTRUCTION
------------
8.1 DEFINITIONS. Accounting terms used herein and not
otherwise defined herein shall have the meanings attributed to them under
generally accepted accounting principles. When used in this Agreement, the
following terms in all of their tenses and cases shall have the meanings
assigned to them below or elsewhere in this Agreement as indicated below:
"Accountants" is defined in Section 2.2.2.
"Act" is defined in Subsection 6.10.1.
"Affiliate" of any Person means any person directly or
indirectly controlling, controlled by, or under common control with, any such
Person and any officer, director or controlling person of such Person.
"Allocable Portion" means, with respect to each Seller, such
Seller's ownership percentage in the equity of the Company as set forth in
Subsection 3.1.5.
"Business" is defined in Subsection 6.6.2.
"Buyer" means Sinter Metals, Inc., a Delaware corporation.
"Buyer Indemnified Parties" is defined in Section 7.2.
"Buyer Shares" is defined in Section 2.1.
28
<PAGE> 34
"Closing" is defined in Section 5.1.
"Closing Date" is defined in Section 5.1.
"Confidential Information" is defined in Subsection 6.6.1.
"Contract" means any commitment, understanding, instrument,
lease, pledge, mortgage, indenture, note, license, agreement, purchase or sale
order, contract, promise, or similar arrangement evidencing or creating any
obligation, whether written or oral.
"Debt" is defined in Subsection 2.2.5(c).
"Defined Benefit Plan" means any Pension Plan which is a
defined benefit plan within the meaning of Section 3(35) of ERISA.
"Disposal" means disposal as defined by RCRA or as defined by
any applicable similar Law of any jurisdiction where the Company has conducted
business or Released Hazardous Substances.
"Employee Benefit Plan" means any employee benefit plan within
the meaning of Section 3(3) of ERISA, other than a Multiemployer Plan.
"Employee Claims" is defined in Section 3.17.
"Environment" means soil, land, surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and any
other environmental medium or natural resource.
"Environmental Law" means any Law intended to minimize,
prevent, punish, or remedy the consequences of or otherwise regulate actions
that damage or threaten to damage the Environment or public health and safety.
"Environmental Permit" means any permit, license or
authorization from any Governmental Authority relating to matters or activity
having an effect upon the Environment.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" is defined in Section 2.3.
"Excess Bad Debts" is defined in Section 6.7.
"Escrow Agreement" is defined in Section 2.3.
"Escrow Fund" is defined in Section 2.3.
29
<PAGE> 35
"Final Closing Balance Sheet" is defined in Subsection 2.2.2.
"Governmental Authority" means any foreign, federal, state,
regional or local authority, agency, body, court or instrumentality, regulatory
or otherwise, which, in whole or in part, was formed by or operates under the
auspices of any foreign, federal, state, regional or local government.
"Hazardous Substances" means hazardous substances as currently
defined by the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended, or as currently defined by any applicable similar Law
of any jurisdiction where the Company conducted business or Released Hazardous
Substances and also includes Petroleum Products, asbestos, urea formaldehyde and
poly-chlorinated biphenyls.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended.
"Inventory" is defined in Section 3.9.
"June 30 Balance Sheet" is defined in Section 2.2.5(a).
"Law" means any common law or judicial precedent and any
federal, state, regional, local or foreign law, statute, ordinance, rule, order
or regulation.
"Lease" is defined in Subsection 3.6.2(c).
"Leased Real Property" is defined in Subsection 3.6.1.
"Liabilities" and "Liability" means responsibilities,
obligations, duties, commitments, claims, debts and liabilities of any and every
kind, whether known or unknown, accrued, absolute, contingent or otherwise.
"Lien" means any lien, charge, covenant, condition, easement,
adverse claim, demand, encumbrance, limitation, security interest, option,
pledge, or any other title defect or restriction of any kind.
"March 31 Balance Sheet" is defined in Subsection 2.2.5(a).
"Multiemployer Plan" means any multiemployer plan within the
meaning of Section 3(37) of ERISA.
"Neutral Accountants" is defined in Subsection 2.2.3.
"Noncompetition Agreements" is defined in Section 6.6.
"1997 Budget" is defined in Section 3.3.
"Other Plan" means any employment, noncompetition, management,
agency or consulting arrangement, bonus, profit sharing, deferred compensation,
incentive, stock option,
30
<PAGE> 36
stock ownership or stock purchase plan, or other similar plan, policy, or
arrangement, whether or not in written form, which does not constitute an
Employee Benefit Plan.
"Outstanding Receivables" is defined in Section 6.7.
"Owned Real Property" is defined in Subsection 3.6.1.
"Pension Plan" means any employee pension benefit plan within
the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan.
"Permitted Liens" is defined in Subsection 3.6.2(b).
"Person" means any individual, corporation, partnership,
association or any other entity or organization.
"Petroleum Products" means petroleum, gasoline, oil, fuel oil,
diesel fuel and petroleum solvents.
"Preliminary Closing Balance Sheet" is defined in Subsection
2.2.2.
"Purchase Price" is defined in Section 2.1.
"RCRA" means the Resource Conservation and Recovery Act of
1976, as amended.
"Real Property" is defined in Subsection 3.6.1.
"Release" means any direct or indirect spilling, pumping,
pouring, emitting, emptying, placing, discharging, injecting, escaping, leaking,
dumping, or disposing on or into any building or facility or the environment
whether intentional or unintentional, known or unknown and includes a threatened
Release.
"Repurchase Amount" is defined in Section 6.7.
"SEC" is defined in Subsection 6.10.3.
"Sellers" means Nancy Lundgren, John T. Weaver, Kendall S.
Page and Richard Carmichael, whose addresses appear on the signature page
hereto.
"Settlement Date" is defined in Section 6.7.
"Stock" is defined in Recital A and Subsection 3.1.5.
"Storage" means storage as defined by RCRA or as defined by
any applicable similar Law of any jurisdiction where the Company has conducted
business or Released Hazardous Substances.
31
<PAGE> 37
"Tangible Personal Property" is defined in Section 3.7(a).
"Tax" or "Taxes" means any tax, levy, charge or assessment by
or liability to any Governmental Authority, including, but not limited to, any
deficiency, interest or penalty.
"Tax Returns" is defined in Section 3.19.
"To the knowledge of Sellers" means the actual knowledge of
any of the Sellers, after making diligent inquiry.
"Transport" means transport as defined by RCRA or as defined
by any applicable similar Law of any jurisdiction where the Company has
conducted business or Released Hazardous Substances.
"Treatment" means treatment as defined by RCRA or as defined
by any applicable similar Law of any jurisdiction where the Company has
conducted business or Released Hazardous Substances.
"Uncollected Receivables" is defined in Section 6.7.
"Welfare Plan" means any employee welfare benefit plan within
the meaning of Section 3(1) of ERISA, other than a Multiemployer Plan.
"Working Capital" is defined in Subsection 2.2.5(b).
8.2 HEADINGS. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
8.3 EXHIBITS AND SCHEDULES. The Exhibits and Schedules
referred to in this Agreement shall be deemed to be a part of this Agreement.
8.4 PRONOUNS. The use of a particular pronoun herein
shall not be restrictive as to gender or number but shall be interpreted in all
cases as the context may require.
8.5 TIME PERIODS. Any action required hereunder to be taken
within a certain number of days shall be taken within that number of calendar
days; provided, however, that if the last day for taking such action falls on a
Saturday, Sunday or holiday, the period during which such action may be taken
shall be automatically extended to the next business day.
8.6 NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against either party.
8.7 SEVERABILITY. In case any provision of this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
32
<PAGE> 38
8.8 GOVERNING LAW. This Agreement shall be governed by
and construed under Michigan law, without regard to conflict of laws principles.
8.9 ENTIRE AGREEMENT. This Agreement and the agreements and
documents referred to in this Agreement or delivered hereunder are the exclusive
statement of the agreement among the parties concerning the subject matter
hereof. All negotiations among the parties are merged into this Agreement, and
there are no representations, warranties, covenants, understandings, or
agreements, oral or otherwise, in relation thereto among the parties other than
those incorporated herein and to be delivered hereunder.
ARTICLE IX
MISCELLANEOUS
9.1 NOTICES. All notices and other communications
pursuant to this Agreement shall be in writing delivered as follows:
(a) If to Buyer, to:
Sinter Metals, Inc.
Terminal Tower, Suite 3200
50 Public Square
Cleveland, Ohio 44113
Attn: Chief Financial Officer
With a copy to:
Richard N. Ogle, Esq.
Calfee, Halter & Griswold
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
(b) If to the Sellers, to:
Nancy Lundgren
442 N. Division
Holland, Michigan 49424
With a copy to:
Stephen I. Greenhalgh, Esq.
Bodman, Longley & Dahling LLP
34th Floor
100 Renaissance Center
Detroit, Michigan 48243
33
<PAGE> 39
or to such other address as may have been designated in a prior notice. Notices
sent by registered or certified mail, postage prepaid, return receipt requested,
shall be deemed to have been given two business days after being mailed, and
otherwise notices shall be deemed to have been given when received.
9.2 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective heirs, executors,
administrators, successors and permitted assigns. Nothing in this Agreement is
intended or shall be construed to confer on any Person other than the parties
and the Company any rights or benefits hereunder.
9.3 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same document.
9.4 WAIVERS. Compliance with the provisions of this Agreement
may be waived only by a written instrument specifically referring to this
Agreement and signed by the party waiving compliance. No course of dealing, nor
any failure or delay in exercising any right, shall be construed as a waiver,
and no single or partial exercise of a right shall preclude any other or further
exercise of that or any other right.
9.5 MODIFICATION. No supplement, modification or amendment of
this Agreement shall be binding unless made in a written instrument which is
signed by all of the parties and which specifically refers to this Agreement.
9.6 BENEFITS COMPLIANCE. The Sellers, after consultation with,
and with the consent of the Company, shall arrange for preparation of a
voluntary compliance resolution filing with the Internal Revenue Service to
address any defects in the administration of the 401(k) Plan as promptly as
possible after the Closing, and in any event within two months following the
Closing. All costs associated with the defects, the correction thereof, and the
resolution of all tax and qualification issues related thereto, including
without limitation, legal and accounting costs associated with such filing and
any tax liability, fee or penalty incurred by the Company or the 401(k) Plan in
connection therewith, shall be borne by the Sellers, and, notwithstanding
anything in this Agreement to the contrary, shall not be subject to the
limitations of Subsection 7.5.2 (b).
34
<PAGE> 40
INTENDING TO BE LEGALLY BOUND, the parties have signed this
Agreement as of the date first above written.
Sinter Metals, Inc.
By: /s/ Ronald G. Campbell
-----------------------------------
Title: Asst. Treasurer
------------------
("Buyer")
/s/ Nancy Lundgren
-----------------------------
Nancy Lundgren
Address: 442 N. Division
Holland, Michigan 49424
/s/ John T. Weaver
-----------------------------
John T. Weaver
Address: 2900 Wood Duck Lane
Ada, Michigan 49301
/s/ Kendall S. Page
-----------------------------
Kendall S. Page
Address: 17181 Ventura
Holland, Michigan 49424
/s/ Richard Carmichael
-----------------------------
Richard Carmichael
Address: 14354 Aspen Vale Drive
Holland, Michigan 49424
("Sellers)
35
<PAGE> 1
EXHIBIT 99.1
------------
ESCROW AGREEMENT
----------------
THIS AGREEMENT is made as of July 18, 1996, by and among SINTER
METALS, INC., a Delaware corporation ("Buyer"), KEY TRUST COMPANY, N.A. (the
"Escrow Agent"), and NANCY LUNDGREN, JOHN T. WEAVER, KENDALL S. PAGE AND
RICHARD CARMICHAEL (the "Former Stockholders").
RECITALS
--------
A. The Former Stockholders are the former holders of all outstanding
capital stock (the "Stock") of SinterForm Incorporated, a Michigan corporation
("SinterForm") having held the respective percentages of such Stock set forth on
Appendix I.
B. Buyer has become the owner of the Stock pursuant to a Stock Purchase
Agreement by and among Buyer and the Former Stockholders, dated as of July 18,
1996 (the "Purchase Agreement").
C. In connection with the Purchase Agreement, an Escrow Fund is to be
established upon the terms and conditions of the Purchase Agreement and this
Escrow Agreement.
D. The Former Stockholders have appointed Nancy Lundgren as their
exclusive representative (the "Sellers' Representative") to act on their behalf
with regard to, INTER ALIA, all matters arising under this Escrow Agreement and
have agreed to be bound by the acts of the Sellers' Representative.
In consideration of the mutual covenants herein contained, the parties
agree as follows:
1. ESCROW.
1.1 Simultaneously with the execution of this Escrow
Agreement, $350,000 (representing a portion of the Purchase Price for the Stock)
has been deposited by or on behalf of Buyer with the Escrow Agent. The Escrow
Agent acknowledges receipt of said funds and agrees to hold said funds in a
separate escrow account (the "Escrow Fund").
1.2 The provisions contained in the Purchase Agreement
relating to the Escrow Fund are hereby incorporated by reference herein as if
fully set forth herein and the Buyer, the Former Stockholders and the Escrow
Agent agree to be bound by the terms of this Escrow Agreement. A copy of the
Purchase Agreement has been delivered to each of the parties. Defined terms used
herein but not defined herein shall have the meanings given such terms in the
Purchase Agreement.
<PAGE> 2
2. NATURE OF ESCROW AGENT'S OBLIGATIONS.
2.1 DUTIES AND OBLIGATIONS OF ESCROW AGENT. The Escrow Agent
shall have no duties or obligations with respect to the Escrow Fund other than
those specifically set forth in this Escrow Agreement.
2.2 FAILURE TO PERFORM. The Escrow Agent shall not be
responsible in any manner whatsoever for any failure or inability of Buyer,
Sellers' Representative, or anyone else other than the Escrow Agent to honor any
of the provisions of this Escrow Agreement.
2.3 RELIANCE UPON DOCUMENTS. The Escrow Agent shall be fully
protected in acting on and relying upon any written notice, direction, request,
waiver, consent, receipt or other paper or document which the Escrow Agent in
good faith believes to have been signed or presented by the proper party or
parties, but shall not act on oral instructions alone of any party.
2.4 OBLIGATION TO TAKE LEGAL ACTION. The Escrow Agent shall
not be obligated to take any legal action hereunder which might in its judgment
involve any expense or liability, unless it shall have been furnished with
reasonable indemnity.
2.5 ERRORS OR OMISSIONS. The Escrow Agent shall not be liable
for any error of judgment, or for any act done or step taken or omitted by it in
good faith or for any mistake in fact or law, or for anything which it may do or
refrain from doing in connection with this Escrow Agreement, except for its own
negligence, willful misconduct or act of bad faith.
2.6 RELIANCE UPON COUNSEL. The Escrow Agent may seek the
advice of legal counsel in the event of any dispute or question as to the
construction of any of the provisions of this Escrow Agreement or its duties
hereunder, and it shall incur no liability and shall be fully protected in
respect of any action taken, omitted or suffered by it in good faith in
accordance with the opinion of such counsel.
2.7 INVESTMENT PERFORMANCE. The Escrow Agent shall have no
responsibility or liability for any diminution which may result from any
investments or reinvestments made in accordance with this Escrow Agreement.
3. COMPENSATION. The Escrow Agent shall be compensated in accordance
with the provisions of Appendix II attached hereto and made a part hereof, plus
reasonable out-of-pocket expenses, including the reasonable fees and costs of
attorneys or agents which it may find necessary to engage in performing its
duties under this Escrow Agreement (the "Escrow Fees"). All of the Escrow Fees
shall be paid one-half by the Buyer and one-half by the Former Stockholders. The
Escrow Fees due from the Former Stockholders may be withdrawn from the Escrow
Fund by the Escrow Agent.
4. INDEMNIFICATION. The Escrow Agent shall be and hereby is
indemnified and saved harmless by Buyer and the Former Stockholders from all
losses, costs, and expenses (including
2
<PAGE> 3
reasonable attorneys' fees) which may be incurred by it as a result of or
arising out of this Escrow Agreement, including its involvement in any
litigation arising from performance of its duties under this Escrow Agreement,
other than litigation resulting from any action taken or omitted by the Escrow
Agent for which it shall have been adjudged negligent or guilty of willful
misconduct or bad faith; and such indemnification shall survive termination of
this Escrow Agreement until extinguished by any applicable statute of
limitations.
5. DISTRIBUTIONS. (a) Unless a controversy arises as described in
Section 6, the Escrow Agent shall distribute any and all amounts held as part of
the Escrow Fund upon the joint written authorization of Buyer and Sellers'
Representative, which Buyer and Sellers' Representative agree to deliver on a
timely basis and in conformity with the provisions of this Section 5 and the
Purchase Agreement.
(b) If no Notice of Claim (as hereinafter defined) is given by
the Buyer pursuant to Section 5(c) hereof on or before 5:00 p.m. Cleveland time
on October 1, 1997 (the "Deadline"), all funds then in the Escrow Fund shall be
forthwith distributed to the Former Stockholders at the respective addresses
shown on Appendix I, with each Former Stockholder being entitled to the
percentage thereof set forth on Appendix I.
(c) If Buyer shall have any claim for which it seeks
indemnification from the Escrow Fund as provided for in Article VII of the
Purchase Agreement, Buyer shall notify Sellers' Representative and the Escrow
Agent thereof prior to the Deadline in writing ("Notice of Claim"). If, by 5:00
p.m. Cleveland time on the thirtieth (30th) day following receipt by the
Sellers' Representative of such Notice of Claim, the Buyer and the Escrow Agent
shall not have received from the Sellers' Representative notice in writing that
the Sellers' Representative disputes the claim asserted in Buyer's Notice of
Claim (such notice of dispute being hereinafter referred to as a "Dispute
Notice"), payment from the Escrow Fund will be made to Buyer in the amount of,
and in full satisfaction of, the claim specified in Buyer's Notice of Claim. If
the Sellers' Representative gives such a Dispute Notice to Buyer and the Escrow
Agent within said thirty (30) day period, Buyer and Sellers' Representative
shall promptly meet and use their best efforts to settle the dispute. If Buyer
and Sellers' Representative are unable to reach agreement within thirty (30)
days after Buyer receives such Dispute Notice, then the undisputed portion, if
any, of the claim will be paid to Buyer from the Escrow Fund and the dispute may
be submitted to litigation by either party or may be resolved by any other final
and binding dispute resolution process as may then be mutually agreed to by the
Buyer and Sellers' Representative. The Escrow Agent shall set aside in the
Escrow Fund an amount equal to the disputed portion of such claim pending the
Final Determination (as hereinafter defined) of such claim. "Final
Determination" in respect of any disputed claim for indemnification means the
settlement of such dispute by mutual agreement of Buyer and Sellers'
Representative, or if no such settlement is reached, (i) a final judgment by a
court of competent jurisdiction which is either is non-appealable or with
respect to which the time for appeal has expired without the filing of a timely
appeal, or (ii) a binding and non-appealable final determination pursuant to
such other dispute resolution process as may be agreed to by the Buyer and the
Sellers' Representative.
3
<PAGE> 4
(d) If any claim by Buyer for indemnification from the Escrow
Fund made in accordance with the provisions of this Section 5 shall be disputed
and unresolved as of the Deadline, the amount of the Escrow Fund set aside with
respect to such disputed claim shall continue to be held in escrow until there
is a Final Determination of such claim, and all remaining funds in the Escrow
Fund shall thereupon be distributed to the Former Stockholders at the respective
addresses shown on Appendix I, with each Former Stockholder being entitled to
the percentage thereof set forth on Appendix I. Promptly after the Final
Determination of such disputed claim the remaining funds in the Escrow Fund
shall be paid to Buyer to the extent awarded by such Final Determination, and
the balance (if any) of such funds shall thereupon be distributed to the Former
Stockholders at the respective addresses shown on Appendix I, with each Former
Stockholder being entitled to the percentage thereof set forth on Appendix I.
6. CONTROVERSY. If a controversy arises between one or more of the
parties to this Escrow Agreement, or between any of the parties to this Escrow
Agreement and any persons not a party to this Escrow Agreement, as to whether or
not or to whom the Escrow Agent shall distribute any part or all of the Escrow
Fund, the Escrow Agent shall not be required to determine the controversy and
need not make any distribution from the Escrow Fund but may retain the same
until the Escrow Agent receives a joint written authorization from Sellers'
Representative and Buyer, or a final judgment by a court of competent
jurisdiction which is either non-appealable or with respect to which the time
for appeal has expired without the filing of a timely appeal.
7. INVESTMENT. (a) The Escrow Agent shall invest the Escrow Fund in
such tax-free interest bearing securities as shall be directed in writing
jointly by Sellers' Representative and Buyer from time to time. Earnings upon
such investments shall be accumulated in the Escrow Fund, will be available for
the satisfaction of claims as provided in this Escrow Agreement and Article VII
of the Purchase Agreement, and will be distributed as provided in this Escrow
Agreement.
(b) Absent written instructions to the contrary, the Escrow
Agent shall invest the Escrow Fund in The Victory Portfolios Tax-Free Money
Market Fund.
8. NOTICES. All notices given hereunder shall be in writing
delivered as follows:
(a) If to Buyer, to:
Sinter Metals, Inc.
Terminal Tower, Suite 3200
50 Public Square
Cleveland, Ohio 44113
Attn: Chief Financial Officer
Telephone: (216) 771-1711
FAX: (216) 344-7631
4
<PAGE> 5
With a copy to:
Calfee, Halter & Griswold
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Attention: Richard N. Ogle, Esq.
Telephone: (216) 622-8256
FAX: (216) 241-0816
(b) If to the Former Stockholders and/or the Sellers'
Representative, to:
Nancy Lundgren
442 N. Division
Holland, Michigan 49424
Telephone: __________________
Fax:__________________________
With a copy to:
Bodman, Longley & Dahling LLP
34th Floor
100 Renaissance Center
Detroit, Michigan 48243
Attention: Stephen I. Greenhalgh, Esq.
Telephone: (313) 259-7777
Fax: (313) 393-7579
(c) If to Escrow Agent:
Key Trust Company, N.A.
127 Public Square, 15th Floor
Cleveland, Ohio 44114
Attention: Terrence J. Stone, Trust Escrow/Custody
Dept.
Telephone: (216) 689-3226
FAX: (216) 689-3777
or to such other address as may have been designated by notice after the date
hereof. Notices sent by registered or certified mail, postage prepaid, return
receipt requested, or by a commercial courier or delivery service, shall be
deemed to have been given when received by the person to whom the notice is
addressed.
5
<PAGE> 6
9. REPLACEMENT OF ESCROW AGENT.
9.1 RESIGNATION OR REMOVAL. The Escrow Agent may resign as
such following the giving of 30 days' prior written notice to the other parties
to this Escrow Agreement. Similarly, the Escrow Agent may be removed and
replaced following the giving of 30 days' prior written notice to the Escrow
Agent by Buyer and Sellers' Representative. In either event, the duties of the
Escrow Agent shall terminate 30 days after the date of such notice (or as of
such earlier date as may be mutually agreeable), and a successor Escrow Agent
shall be appointed by Buyer and Sellers' Representative as evidenced by a
written notice filed with the Escrow Agent.
9.2 APPOINTMENT OF SUCCESSOR. If Buyer and Sellers'
Representative are unable to agree upon a successor Escrow Agent or shall have
failed to appoint a successor Escrow Agent prior to the expiration of 30 days
following the date of the notice of resignation or removal, the then acting
Escrow Agent shall petition any court of competent jurisdiction for the
appointment of a successor Escrow Agent or other appropriate relief; and any
such resulting appointment shall be binding upon all of the parties to this
Escrow Agreement.
9.3 TERMINATION OF OBLIGATIONS. Upon acknowledgement by any
successor Escrow Agent of the receipt of the Escrow Amount, the then replaced
Escrow Agent shall be fully relieved of all duties, responsibilities and
obligations under this Escrow Agreement, except with respect to actions
previously taken or omitted by such Escrow Agent.
10. TERMINATION. This Escrow Agreement shall terminate as to all
parties when the Escrow Agent has delivered and disbursed in accordance with the
applicable provisions of the Purchase Agreement and this Escrow Agreement all of
the monies subject to this Escrow Agreement in its possession.
11. MISCELLANEOUS.
11.1 SUCCESSOR SELLERS' REPRESENTATIVE. A substitute or
successor Sellers' Representative may be appointed by the joint written
agreement of all Former Stockholders.
11.2 EXCLUSIVE JURISDICTION. Legal proceedings brought in
connection with this Escrow Agreement may be commenced only in a federal or
state court located in Cleveland, Ohio, and all objections to personal
jurisdiction and venue in any action or proceeding so commenced are hereby
waived. As long as service of process is by notice as provided in Section 8 of
this Escrow Agreement or as required by any such court, all objections to
improper service of process are hereby waived.
11.3 GOVERNING LAW. This Escrow Agreement shall be deemed to
have been executed and delivered in the State of Ohio and shall be governed by
and construed in accordance with the laws of the state of Ohio without regard to
its conflicts of laws provisions.
6
<PAGE> 7
11.4 ENTIRE AGREEMENT. This Escrow Agreement, and as to Buyer
and Sellers' Representative the applicable provisions of the Purchase Agreement,
constitutes the entire agreement and supersedes all prior agreements and
understandings, oral and written, among the parties with respect to the subject
matter hereof. Nothing contained in this Escrow Agreement, however, is intended
or shall be construed as limiting Buyer's rights to indemnification under the
provisions of the Purchase Agreement. This Escrow Agreement and the Escrow
Agent's duties hereunder may not be amended or modified except by an instrument
in writing signed by Buyer, Sellers' Representative and the Escrow Agent.
11.5 ASSIGNMENT. This Escrow Agreement shall be binding on the
parties hereto, their successors and permitted assigns. No other person shall
have any rights or duties hereunder except as specifically provided for in this
Escrow Agreement or, as to Buyer and Sellers' Representative, the Purchase
Agreement. This Escrow Agreement may not be assigned by any party hereto without
the prior written consent of the nonassigning parties.
11.6 SEVERABILITY. If any provision or clause of this Escrow
Agreement or the application thereof to any person or circumstance is held
invalid or unenforceable, such invalidity or unenforceability shall not affect
other provisions or applications of this Escrow Agreement which can be given
effect without the invalid or unenforceable provision or application, and to
this end the provisions of this Escrow Agreement are declared to be severable.
11.7 COUNTERPARTS. This Escrow Agreement may be signed in any
number of counterparts with the same effect as if the signatures of all parties
were upon the same instrument, all of which counterparts taken together shall
constitute the same instrument.
11.8 CONFLICT WITH PURCHASE AGREEMENT. As between Buyer and
Sellers' Representative, in the event of a conflict between the terms of this
Escrow Agreement and the terms of the Purchase Agreement, the terms of the
Purchase Agreement shall govern.
7
<PAGE> 8
IN WITNESS WHEREOF, this Escrow Agreement has been executed by
the parties as of the date first above written.
ESCROW AGENT: BUYER:
KEY TRUST COMPANY, N.A. SINTER METALS, INC.
By /s/ Terence J. Stone By /s/ Ronald G. Campbell
---------------------- ----------------------------------
Its Its Asst. Treasurer
------------ -----------------------
SELLERS' REPRESENTATIVE:
/s/ Nancy Lundgren
------------------------------------
Nancy Lundgren
FORMER STOCKHOLDERS:
/s/ Nancy Lundgren
------------------------------------
Nancy Lundgren
/s/ John T. Weaver
------------------------------------
John T. Weaver
/s/ Kendall S. Page
------------------------------------
Kendall S. Page
/s/ Richard Carmichael
------------------------------------
Richard Carmichael
8
<PAGE> 9
APPENDIX I
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE INTEREST
- ---------------- -------------------
<S> <C>
Nancy Lundgren 47.117647%
442 N. Division
Holland, Michigan 49424
John T. Weaver 35.9411764%
2900 Wood Duck Lane
Ada, Michigan 49301
Kendall S. Page 10.5882352%
17181 Ventura
Holland, Michigan 49424
Richard Carmichael 6.3539411%
14354 Aspen Vale Drive
Holland, Michigan 49424
</TABLE>
9
<PAGE> 10
APPENDIX II
The following represents Escrow Agent's fee for services as described in this
Agreement. Annual fee payable upon closing and excution of Escrow Agreement:
$750.00 Quarterly thereafter beginning on the anniversary date of the account
opening: $187.50
10
<PAGE> 1
EXHIBIT 99.2
Noncompetition Agreement
------------------------
THIS AGREEMENT is made and entered into as of the 18th day of
July, 1996 by and between Sinter Metals, Inc., a Delaware corporation (the
"Company") and Nancy Lundgren, who resides at 442 N. Division, Holland, Michigan
49424 (the "Executive").
RECITALS
--------
A. Simultaneous with the execution of this Agreement the
Company is acquiring all of the outstanding capital stock of SinterForm
Incorporated, a Michigan corporation ("SinterForm").
B. Executive is one of the selling stockholders and a key
management employee of SinterForm.
C. As a result of Executive's employment experience with
SinterForm, Executive possesses valuable knowledge which is confidential and
proprietary to SinterForm.
D. SinterForm and the Company are both engaged in the
compressed powdered metal component business.
E. As a condition to the consummation of the acquisition
described in A above the Company desires Executive to enter into this Agreement,
and for the consideration herein set forth Executive is willing to do so.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein set forth, the Company and the Executive hereby agree as
follows:
1. CONFIDENTIALITY. Executive agrees not to disclose or use
(except as required in order to perform properly her duties as an employee of
SinterForm), directly or indirectly, any Confidential Information, at any time
after the date hereof. If the disclosure of Confidential Information is required
by applicable law, Executive agrees to use her best efforts to provide the
Company and SinterForm an opportunity to object to the disclosure (and/or obtain
a protective order with respect thereto) and as much prior written notice as is
possible under the circumstances. For purposes hereof, "Confidential
Information" means all information belonging to, used by, or which is in the
possession of SinterForm or the Executive relating to SinterForm's business to
the extent such information is not intended to be disseminated to the public or
is otherwise not generally known to competitors of SinterForm, including, but
not limited to, information relating to SinterForm's products, services,
strategies, pricing, customers, representatives, suppliers, distributors,
technology, finances, employee compensation, computer software and hardware,
inventions, developments, and trade secrets.
2. NONINTERFERENCE. Executive further agrees not to induce,
attempt to induce, or assist others in inducing or attempting to induce at any
time any employee or agent
<PAGE> 2
of SinterForm or the Company or any other person affiliated or doing business
with SinterForm or the Company to terminate his or her relationship with
SinterForm or the Company or in any other manner to interfere with the
relationship between the Company and any such person or the relationship between
SinterForm or the Company and any of their suppliers or customers.
3. NONCOMPETITION. Until the third anniversary of the
execution and delivery of this Agreement, and for as long thereafter as
Executive shall remain an employee of the Company, Executive shall not, without
prior written consent of the Company:
(a) develop, manufacture, sell, or distribute products or
perform services in competition with the Business; or
(b) perform any advisory or consulting services for,
invest in or otherwise become associated with in any
capacity, any person or entity which develops,
manufactures, sells, or distributes products or
performs services in competition with the Business;
within the continental United States. "Business" means the compressed powdered
metal component business heretofore or presently conducted by SinterForm or the
Company. Nothing in this Section 3 shall prevent Executive from acquiring an
equity interest of less than 0.5 percent in a corporation whose shares are
listed on a national securities exchange or regularly quoted in the
over-the-counter market.
4. EQUITABLE RELIEF. Executive agrees that money damages alone
will not be a sufficient remedy for any breach of the provisions of this
Agreement by her and that in addition to all other remedies SinterForm and the
Company shall be entitled to specific performance and injunctive or other
equitable relief as a remedy for any such breach, and Executive waives the
securing or posting of any bond in connection with such remedy.
5. REFORMATION. If any of the covenants contained in this
Agreement is found by a court of competent jurisdiction to be unenforceable as
against public policy or for any other reason, such court is directed to
exercise its discretion to reform such covenant to the end that the Executive
shall be subject to confidentiality, noncompetition and noninterference
covenants that are reasonable under the circumstances and are enforceable by
SinterForm and the Company.
6. CONSIDERATION. As consideration for the covenants and
agreements of Executive contained herein, the Company agrees to pay Executive
the sum of $706,764.71 immediately upon execution of this Agreement.
7. DISCLAIMER. Nothing contained in this Agreement is
intended to or shall be construed to (i) assure Executive of continued
employment with SinterForm or the Company for any period whatsoever, or (ii)
entitle Executive to any severance or similar payments or benefits upon
termination of employment.
2
<PAGE> 3
8. CONSENT TO JURISDICTION. Any action or proceeding brought
to enforce this Agreement may be commenced in any federal or state court located
in Cleveland, Ohio, and all objections to personal jurisdiction and venue in any
action or proceeding so commenced are hereby waived.
9. GOVERNING LAW. This Agreement is being executed and
delivered in Cleveland, Ohio, and shall be governed by and construed in
accordance with Ohio law, without regard to conflict of laws principles.
10. ENTIRE AGREEMENT. This Agreement is the exclusive
statement of the agreement between the parties concerning the subject matter
hereof. All negotiations between the parties hereto concerning the subject
matter hereof are merged into this Agreement, and there are no understandings or
agreements, oral or otherwise, between the parties concerning the subject matter
hereof other than those set forth herein.
11. MODIFICATION. No supplement, modification or amendment of
this Agreement shall be binding unless made in a written instrument which is
signed by all of the parties and which specifically refers to this Agreement.
12. TERMINATION. This Agreement and all obligations of the
Executive hereunder, except as set forth in the sentence next following, shall
terminate automatically if the Company shall terminate the Executive's
employment without just cause or remove the Executive from all material
positions substantially commensurate with the Executive's experience.
Nothwithstanding anything herein to the contrary, the provisions of Sections 1
and 2 hereof (and the provisions of Sections 4 and 5 as they relate to Sections
1 and 2) shall survive the termination of this Agreement and continue in full
force and effect.
Intending to be legally bound, the parties have executed this
Agreement on the date first above written.
/s/ Nancy Lundgren
------------------------------------
Nancy Lundgren
SINTER METALS, INC.
by: Ronald G. Campbell
---------------------------------
Title: Asst. Treasurer
---------------------
3
<PAGE> 1
EXHIBIT 99.3
Noncompetition Agreement
------------------------
THIS AGREEMENT is made and entered into as of the 18th day of
July, 1996 by and between Sinter Metals, Inc., a Delaware corporation (the
"Company") and John T. Weaver, who resides at 2900 Wood Duck Lane, Ada, Michigan
49301 (the "Executive").
RECITALS
--------
A. Simultaneous with the execution of this Agreement the
Company is acquiring all of the outstanding capital stock of SinterForm
Incorporated, a Michigan corporation ("SinterForm").
B. Executive is one of the selling stockholders and a
key management employee of SinterForm.
C. As a result of Executive's employment experience with
SinterForm, Executive possesses valuable knowledge which is confidential and
proprietary to SinterForm.
D. SinterForm and the Company are both engaged in the
compressed powdered metal component business.
E. As a condition to the consummation of the acquisition
described in A above the Company desires Executive to enter into this Agreement,
and for the consideration herein set forth Executive is willing to do so.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein set forth, the Company and the Executive hereby agree as
follows:
1. CONFIDENTIALITY. Executive agrees not to disclose or use
(except as required in order to perform properly his duties as an employee of
SinterForm), directly or indirectly, any Confidential Information, at any time
after the date hereof. If the disclosure of Confidential Information is required
by applicable law, Executive agrees to use his best efforts to provide the
Company and SinterForm an opportunity to object to the disclosure (and/or obtain
a protective order with respect thereto) and as much prior written notice as is
possible under the circumstances. For purposes hereof, "Confidential
Information" means all information belonging to, used by, or which is in the
possession of SinterForm or the Executive relating to SinterForm's business to
the extent such information is not intended to be disseminated to the public or
is otherwise not generally known to competitors of SinterForm, including, but
not limited to, information relating to SinterForm's products, services,
strategies, pricing, customers, representatives, suppliers, distributors,
technology, finances, employee compensation, computer software and hardware,
inventions, developments, and trade secrets.
2. NONINTERFERENCE. Executive further agrees not to induce,
attempt to induce, or assist others in inducing or attempting to induce at any
time any employee or agent
<PAGE> 2
of SinterForm or the Company or any other person affiliated or doing business
with SinterForm or the Company to terminate his or her relationship with
SinterForm or the Company or in any other manner to interfere with the
relationship between the Company and any such person or the relationship between
SinterForm or the Company and any of their suppliers or customers.
3. NONCOMPETITION. Until the third anniversary of the
execution and delivery of this Agreement, and for as long thereafter as
Executive shall remain an employee of the Company, Executive shall not, without
prior written consent of the Company:
(a) develop, manufacture, sell, or distribute products or
perform services in competition with the Business; or
(b) perform any advisory or consulting services for,
invest in or otherwise become associated with in any
capacity, any person or entity which develops,
manufactures, sells, or distributes products or
performs services in competition with the Business;
within the continental United States. "Business" means the compressed powdered
metal component business heretofore or presently conducted by SinterForm or the
Company. Nothing in this Section 3 shall prevent Executive from acquiring an
equity interest of less than 0.5 percent in a corporation whose shares are
listed on a national securities exchange or regularly quoted in the
over-the-counter market.
4. EQUITABLE RELIEF. Executive agrees that money damages alone
will not be a sufficient remedy for any breach of the provisions of this
Agreement by him and that in addition to all other remedies SinterForm and the
Company shall be entitled to specific performance and injunctive or other
equitable relief as a remedy for any such breach, and Executive waives the
securing or posting of any bond in connection with such remedy.
5. REFORMATION. If any of the covenants contained in this
Agreement is found by a court of competent jurisdiction to be unenforceable as
against public policy or for any other reason, such court is directed to
exercise its discretion to reform such covenant to the end that the Executive
shall be subject to confidentiality, noncompetition and noninterference
covenants that are reasonable under the circumstances and are enforceable by
SinterForm and the Company.
6. CONSIDERATION. As consideration for the covenants and
agreements of Executive contained herein, the Company agrees to pay Executive
the sum of $539,117.64 immediately upon execution of this Agreement.
7. DISCLAIMER. Nothing contained in this Agreement is
intended to or shall be construed to (i) assure Executive of continued
employment with SinterForm or the Company for any period whatsoever, or (ii)
entitle Executive to any severance or similar payments or benefits upon
termination of employment.
2
<PAGE> 3
8. CONSENT TO JURISDICTION. Any action or proceeding brought
to enforce this Agreement may be commenced in any federal or state court located
in Cleveland, Ohio, and all objections to personal jurisdiction and venue in any
action or proceeding so commenced are hereby waived.
9. GOVERNING LAW. This Agreement is being executed and
delivered in Cleveland, Ohio, and shall be governed by and construed in
accordance with Ohio law, without regard to conflict of laws principles.
10. ENTIRE AGREEMENT. This Agreement is the exclusive
statement of the agreement between the parties concerning the subject matter
hereof. All negotiations between the parties hereto concerning the subject
matter hereof are merged into this Agreement, and there are no understandings or
agreements, oral or otherwise, between the parties concerning the subject matter
hereof other than those set forth herein.
11. MODIFICATION. No supplement, modification or amendment
of this Agreement shall be binding unless made in a written instrument which is
signed by all of the parties and which specifically refers to this Agreement.
12. TERMINATION. This Agreement and all obligations of the
Executive hereunder, except as set forth in the sentence next following, shall
terminate automatically if the Company shall terminate the Executive's
employment without just cause or remove the Executive from all material
positions substantially commensurate with the Executive's experience.
Nothwithstanding anything herein to the contrary, the provisions of Sections 1
and 2 hereof (and the provisions of Sections 4 and 5 as they relate to Sections
1 and 2) shall survive the termination of this Agreement and continue in full
force and effect.
Intending to be legally bound, the parties have executed this
Agreement on the date first above written.
/s/ John T. Weaver
------------------------------------
John T. Weaver
SINTER METALS, INC.
by: Ronald G. Campbell
---------------------------------
Title: Asst. Treasurer
---------------------
3
<PAGE> 1
EXHIBIT 99.4
Noncompetition Agreement
------------------------
THIS AGREEMENT is made and entered into as of the 18th day of
July, 1996 by and between Sinter Metals, Inc., a Delaware corporation (the
"Company") and Kendall S. Page, who resides at 17181 Ventura, Holland, Michigan
49424 (the "Executive").
RECITALS
--------
A. Simultaneous with the execution of this Agreement the
Company is acquiring all of the outstanding capital stock of SinterForm
Incorporated, a Michigan corporation ("SinterForm").
B. Executive is one of the selling stockholders and a
key management employee of SinterForm.
C. As a result of Executive's employment experience with
SinterForm, Executive possesses valuable knowledge which is confidential and
proprietary to SinterForm.
D. SinterForm and the Company are both engaged in the
compressed powdered metal component business.
E. As a condition to the consummation of the acquisition
described in A above the Company desires Executive to enter into this Agreement,
and for the consideration herein set forth Executive is willing to do so.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein set forth, the Company and the Executive hereby agree as
follows:
1. CONFIDENTIALITY. Executive agrees not to disclose or use
(except as required in order to perform properly his duties as an employee of
SinterForm), directly or indirectly, any Confidential Information, at any time
after the date hereof. If the disclosure of Confidential Information is required
by applicable law, Executive agrees to use his best efforts to provide the
Company and SinterForm an opportunity to object to the disclosure (and/or obtain
a protective order with respect thereto) and as much prior written notice as is
possible under the circumstances. For purposes hereof, "Confidential
Information" means all information belonging to, used by, or which is in the
possession of SinterForm or the Executive relating to SinterForm's business to
the extent such information is not intended to be disseminated to the public or
is otherwise not generally known to competitors of SinterForm, including, but
not limited to, information relating to SinterForm's products, services,
strategies, pricing, customers, representatives, suppliers, distributors,
technology, finances, employee compensation, computer software and hardware,
inventions, developments, and trade secrets.
2. NONINTERFERENCE. Executive further agrees not to induce,
attempt to induce, or assist others in inducing or attempting to induce at any
time any employee or agent
<PAGE> 2
of SinterForm or the Company or any other person affiliated or doing business
with SinterForm or the Company to terminate his or her relationship with
SinterForm or the Company or in any other manner to interfere with the
relationship between the Company and any such person or the relationship between
SinterForm or the Company and any of their suppliers or customers.
3. NONCOMPETITION. Until the third anniversary of the
execution and delivery of this Agreement, and for as long thereafter as
Executive shall remain an employee of the Company, Executive shall not, without
prior written consent of the Company:
(a) develop, manufacture, sell, or distribute products or
perform services in competition with the Business; or
(b) perform any advisory or consulting services for,
invest in or otherwise become associated with in any
capacity, any person or entity which develops,
manufactures, sells, or distributes products or
performs services in competition with the Business;
within the continental United States. "Business" means the compressed powdered
metal component business heretofore or presently conducted by SinterForm or the
Company. Nothing in this Section 3 shall prevent Executive from acquiring an
equity interest of less than 0.5 percent in a corporation whose shares are
listed on a national securities exchange or regularly quoted in the
over-the-counter market.
4. EQUITABLE RELIEF. Executive agrees that money damages alone
will not be a sufficient remedy for any breach of the provisions of this
Agreement by him and that in addition to all other remedies SinterForm and the
Company shall be entitled to specific performance and injunctive or other
equitable relief as a remedy for any such breach, and Executive waives the
securing or posting of any bond in connection with such remedy.
5. REFORMATION. If any of the covenants contained in this
Agreement is found by a court of competent jurisdiction to be unenforceable as
against public policy or for any other reason, such court is directed to
exercise its discretion to reform such covenant to the end that the Executive
shall be subject to confidentiality, noncompetition and noninterference
covenants that are reasonable under the circumstances and are enforceable by
SinterForm and the Company.
6. CONSIDERATION. As consideration for the covenants and
agreements of Executive contained herein, the Company agrees to pay Executive
the sum of $158,823.53 immediately upon execution of this Agreement.
7. DISCLAIMER. Nothing contained in this Agreement is
intended to or shall be construed to (i) assure Executive of continued
employment with SinterForm or the Company for any period whatsoever, or (ii)
entitle Executive to any severance or similar payments or benefits upon
termination of employment.
2
<PAGE> 3
8. CONSENT TO JURISDICTION. Any action or proceeding brought
to enforce this Agreement may be commenced in any federal or state court located
in Cleveland, Ohio, and all objections to personal jurisdiction and venue in any
action or proceeding so commenced are hereby waived.
9. GOVERNING LAW. This Agreement is being executed and
delivered in Cleveland, Ohio, and shall be governed by and construed in
accordance with Ohio law, without regard to conflict of laws principles.
10. ENTIRE AGREEMENT. This Agreement is the exclusive
statement of the agreement between the parties concerning the subject matter
hereof. All negotiations between the parties hereto concerning the subject
matter hereof are merged into this Agreement, and there are no understandings or
agreements, oral or otherwise, between the parties concerning the subject matter
hereof other than those set forth herein.
11. MODIFICATION. No supplement, modification or amendment of
this Agreement shall be binding unless made in a written instrument which is
signed by all of the parties and which specifically refers to this Agreement.
12. TERMINATION. This Agreement and all obligations of the
Executive hereunder, except as set forth in the sentence next following, shall
terminate automatically if the Company shall terminate the Executive's
employment without just cause or remove the Executive from all material
positions substantially commensurate with the Executive's experience.
Nothwithstanding anything herein to the contrary, the provisions of Sections 1
and 2 hereof (and the provisions of Sections 4 and 5 as they relate to Sections
1 and 2) shall survive the termination of this Agreement and continue in full
force and effect.
Intending to be legally bound, the parties have executed this
Agreement on the date first above written.
/s/ Kendall S. Page
------------------------------------
Kendall S. Page
SINTER METALS, INC.
by: Ronald G. Campbell
---------------------------------
Title: Asst. Treasuer
---------------------
3
<PAGE> 1
EXHIBIT 99.5
Noncompetition Agreement
------------------------
THIS AGREEMENT is made and entered into as of the 18th day of
July, 1996 by and between Sinter Metals, Inc., a Delaware corporation (the
"Company") and Richard Carmichael, who resides at 14354 Aspen Vale Drive,
Holland, Michigan 49424 (the "Executive").
RECITALS
--------
A. Simultaneous with the execution of this Agreement the
Company is acquiring all of the outstanding capital stock of SinterForm
Incorporated, a Michigan corporation ("SinterForm").
B. Executive is one of the selling stockholders and a key
management employee of SinterForm.
C. As a result of Executive's employment experience with
SinterForm, Executive possesses valuable knowledge which is confidential and
proprietary to SinterForm.
D. SinterForm and the Company are both engaged in the
compressed powdered metal component business.
E. As a condition to the consummation of the acquisition
described in A above the Company desires Executive to enter into this Agreement,
and for the consideration herein set forth Executive is willing to do so.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein set forth, the Company and the Executive hereby agree as
follows:
1. CONFIDENTIALITY. Executive agrees not to disclose or use
(except as required in order to perform properly his duties as an employee of
SinterForm), directly or indirectly, any Confidential Information, at any time
after the date hereof. If the disclosure of Confidential Information is required
by applicable law, Executive agrees to use his best efforts to provide the
Company and SinterForm an opportunity to object to the disclosure (and/or obtain
a protective order with respect thereto) and as much prior written notice as is
possible under the circumstances. For purposes hereof, "Confidential
Information" means all information belonging to, used by, or which is in the
possession of SinterForm or the Executive relating to SinterForm's business to
the extent such information is not intended to be disseminated to the public or
is otherwise not generally known to competitors of SinterForm, including, but
not limited to, information relating to SinterForm's products, services,
strategies, pricing, customers, representatives, suppliers, distributors,
technology, finances, employee compensation, computer software and hardware,
inventions, developments, and trade secrets.
<PAGE> 2
2. NONINTERFERENCE. Executive further agrees not to induce,
attempt to induce, or assist others in inducing or attempting to induce at any
time any employee or agent of SinterForm or the Company or any other person
affiliated or doing business with SinterForm or the Company to terminate his or
her relationship with SinterForm or the Company or in any other manner to
interfere with the relationship between the Company and any such person or the
relationship between SinterForm or the Company and any of their suppliers or
customers.
3. NONCOMPETITION. Until the third anniversary of the
execution and delivery of this Agreement, and for as long thereafter as
Executive shall remain an employee of the Company, Executive shall not, without
prior written consent of the Company:
(a) develop, manufacture, sell, or distribute products or
perform services in competition with the Business; or
(b) perform any advisory or consulting services for,
invest in or otherwise become associated with in any
capacity, any person or entity which develops,
manufactures, sells, or distributes products or
performs services in competition with the Business;
within the continental United States. "Business" means the compressed powdered
metal component business heretofore or presently conducted by SinterForm or the
Company. Nothing in this Section 3 shall prevent Executive from acquiring an
equity interest of less than 0.5 percent in a corporation whose shares are
listed on a national securities exchange or regularly quoted in the
over-the-counter market.
4. EQUITABLE RELIEF. Executive agrees that money damages alone
will not be a sufficient remedy for any breach of the provisions of this
Agreement by him and that in addition to all other remedies SinterForm and the
Company shall be entitled to specific performance and injunctive or other
equitable relief as a remedy for any such breach, and Executive waives the
securing or posting of any bond in connection with such remedy.
5. REFORMATION. If any of the covenants contained in this
Agreement is found by a court of competent jurisdiction to be unenforceable as
against public policy or for any other reason, such court is directed to
exercise its discretion to reform such covenant to the end that the Executive
shall be subject to confidentiality, noncompetition and noninterference
covenants that are reasonable under the circumstances and are enforceable by
SinterForm and the Company.
6. CONSIDERATION. As consideration for the covenants and
agreements of Executive contained herein, the Company agrees to pay Executive
the sum of $95,294.12 immediately upon execution of this Agreement.
7. DISCLAIMER. Nothing contained in this Agreement is
intended to or shall be construed to (i) assure Executive of continued
employment with SinterForm or the Company
2
<PAGE> 3
for any period whatsoever, or (ii) entitle Executive to any severance or similar
payments or benefits upon termination of employment.
8. CONSENT TO JURISDICTION. Any action or proceeding brought
to enforce this Agreement may be commenced in any federal or state court located
in Cleveland, Ohio, and all objections to personal jurisdiction and venue in any
action or proceeding so commenced are hereby waived.
9. GOVERNING LAW. This Agreement is being executed and
delivered in Cleveland, Ohio, and shall be governed by and construed in
accordance with Ohio law, without regard to conflict of laws principles.
10. ENTIRE AGREEMENT. This Agreement is the exclusive
statement of the agreement between the parties concerning the subject matter
hereof. All negotiations between the parties hereto concerning the subject
matter hereof are merged into this Agreement, and there are no understandings or
agreements, oral or otherwise, between the parties concerning the subject matter
hereof other than those set forth herein.
11. MODIFICATION. No supplement, modification or amendment
of this Agreement shall be binding unless made in a written instrument which is
signed by all of the parties and which specifically refers to this Agreement.
12. TERMINATION. This Agreement and all obligations of the
Executive hereunder, except as set forth in the sentence next following, shall
terminate automatically if the Company shall terminate the Executive's
employment without just cause or remove the Executive from all material
positions substantially commensurate with the Executive's experience.
Nothwithstanding anything herein to the contrary, the provisions of Sections 1
and 2 hereof (and the provisions of Sections 4 and 5 as they relate to Sections
1 and 2) shall survive the termination of this Agreement and continue in full
force and effect.
Intending to be legally bound, the parties have executed this
Agreement on the date first above written.
/s/ Richard Carmichael
------------------------------------
Richard Carmichael
SINTER METALS, INC.
by: Ronald G. Campbell
---------------------------------
Title: Asst. Treasurer
---------------------
3
