STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 29, 1999
FOR THE PURCHASE OF THE COMMON STOCK OF
WAMAR TOOL & MACHINE, INC.
BETWEEN
CLARION PLASTICS TECHNOLOGIES, INC.
BUYER
AND
SHAREHOLDERS OF WAMAR TOOL & MACHINE, INC.
SELLER
AND
CLARION TECHNOLOGIES, INC.,
AS AN ADDITIONAL PARTY
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of June
28,1999, is entered into by and among Clarion Plastics Technologies, Inc., an
Ohio corporation (the "Buyer"), on the one hand, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("Seller")
on the other hand with respect to all of the outstanding shares of the capital
stock of WAMAR TOOL & MACHINE, INC., a Michigan corporation ("Company"). Clarion
Technologies, Inc., a Delaware corporation ("Parent") joins as an additional
party hereto.
A. The parties hereto wish to provide for the terms and conditions upon
which the Buyer will acquire from the Seller all of the issued and outstanding
shares of capital stock of the Company solely in exchange for shares of the
common stock, $.001 par value of the Parent ("Parent Common Stock").
B. The Seller owns all of the issued and outstanding shares of capital
stock of the Company.
C. The parties hereto wish to make certain representations, warranties,
covenants and agreements in connection with the purchase of all of the issued
and outstanding capital stock of the Company and also to prescribe various
conditions to such transaction.
D. Concurrently herewith, Buyer has entered into a stock purchase
agreement with the shareholders of Wamar Products, Inc. pursuant to which Buyer
has agreed to purchase and such shareholders have agreed to exchange all of the
outstanding common stock of Wamar Products, Inc. for cash and for Parent common
stock (the "Wamar Products Agreement").
E. At Closing Wamar Products shall enter into a "Lease" and "Option and
Put Agreement for Real Property" which contains certain lease and purchase and
sale rights with ▇▇▇▇▇▇▇▇▇, L.L.C. relating to the real estate where Company and
Wamar Products, Inc. currently conduct their business.
Accordingly, and in consideration of the representations, warranties,
covenants, agreements and conditions herein contained, the parties hereto agree
as follows:
1. EXCHANGE OF STOCK.
1.1. SHARES TO BE ACQUIRED.
----------------------
Upon satisfaction of all conditions to the obligations of the parties
contained herein (other than such conditions as shall have been waived in
accordance with the terms hereof), Seller will sell, transfer, assign and
deliver to Buyer, and Buyer will acquire from Seller, at the Closing, the number
of shares of common stock of the Company (the "Company Common Stock"), set forth
on Exhibit 1.1 attached hereto (the "Shares"), representing all of the issued
and outstanding capital stock of the Company.
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1.2. ACQUISITION PRICE.
------------------
Parent will, in full payment for the Shares to be acquired from all of
the Seller pursuant to this Agreement, deliver to Seller at the Closing stock
certificates aggregating 200,000 shares of Parent Common Stock (the "Parent
Shares") in amounts pro rata based upon the number of Shares held by Seller as
set forth on Exhibit 1.1 attached hereto.
1.3. GENERAL HOLDBACK.
-----------------
(a) There shall be no general holdback under this Agreement.
However, the obligations of Seller to Buyer for breach of representations and
warranties under this Agreement and for any amount due under Article 8 of this
Agreement, shall be subject to a general right of offset against the General
Holdback as set forth under Section 1.3 of the Wamar Products Agreement. The
maximum liability of the Seller hereunder shall be subject to the maximum
limitation as set forth in Section 1.4 below, considered in the aggregate with
the maximum limitations of liability under Section 1.4 of the Wamar Products
Agreement.
(b) The Buyer and the Seller will in good faith negotiate to
resolve any dispute between them with respect to any matters subject to offset
against the General Holdback of Wamar Products promptly and amicably and without
resort to any legal process. If the Seller and Buyer cannot agree, then, unless
otherwise mutually agreed, the dispute will be submitted to nonbinding mediation
in Grand Rapids, Michigan. The parties will jointly appoint a mutually
acceptable independent mediator, which mediator shall have thirty (30) days
following the appointment to resolve such dispute. If not resolved thereby, the
parties shall then have the right to pursue any other remedies set forth herein,
under Michigan law or in equity.
1.4 LIMITATION OF LIABILITY.
------------------------
The liability of Seller under this Agreement with respect to any breach
or failure of representations or warranties under Article 2 hereof, shall be
subject to the following special rules and limitations:
(a) Liability of Seller for breach or failure of any
representation or warranty hereunder resulting in liability shall be limited to
the sum of all items or claims thereof in excess of Seventy-Five Thousand
Dollars ($75,000) as so finally determined under the Agreement (the "Basket").
The Basket shall be in the aggregate determined jointly with the Wamar Products
Basket under the Wamar Products Agreement. For this purpose, the accounting
adjustments set forth on Exhibit 4.11 shall not be counted as adjustments toward
the $75,000 Basket described herein.
(b) Notwithstanding the above, but subject to Section 1.4(c)
below, the maximum liability of Seller under Article 2 and/or Article 8 of this
Agreement arising from a breach of representations and warranties shall be
limited to the amount of Five Hundred Thousand Dollars ($500,000), chargeable by
right of offset first against the General Holdback as described under Section
1.3 of the Wamar Products Agreement. To the extent there is liability under
Article 2 and/or Article 8 in excess of such General Holdback after the
application of the preceding rule, then Seller shall reimburse Buyer for such
excess liability up to the maximum amount of the $500,000 limitation described
herein.
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(c) The collective liability for breach of the representations
and warranties as set forth above shall be further limited by an aggregate
amount of Five Hundred Thousand Dollars ($500,000), such aggregate limitation to
be reduced by the sum of any amount of any breach or claim of a violation of any
representation and warranty under the terms and conditions of (i) the Stock
Purchase Agreement between Wamar Products, Inc., Clarion Plastics Technologies,
Inc., Clarion Technologies, Inc., and the respective shareholders of Wamar
Products, Inc., dated June 29, 1999, (ii) the Lease between Wamar Products, Inc.
and ▇▇▇▇▇▇▇▇▇, L.L.C. dated as of the Closing and (iii) the Option and Put For
Real Property dated as of the Closing between Wamar Products, Inc. and
▇▇▇▇▇▇▇▇▇, L.L.C.
1.5. CLOSING.
--------
Unless this Agreement has been terminated and the transactions
contemplated have been abandoned pursuant to Article 7 hereof, a closing (the
"Closing") will be held on August 2, 1999 at 1:00 p.m., Grand Rapids, Michigan
local time or at such other time as the parties may agree upon (the "Closing
Date"); provided, however, that if any of the conditions provided for in
Articles 5 and 6 hereof have not been satisfied or waived by such date, then the
party to this Agreement which is unable to satisfy such condition or conditions,
despite the best efforts of such party, will be entitled to postpone the Closing
by notice to the other parties until such condition or conditions will have been
satisfied (which such notifying party will seek to cause to happen at the
earliest practicable date) or waived, but in no event will the Closing occur
later than August 6, 1999 (the "Termination Date"). The Closing will be held at
the offices of ▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.L.C. in Grand Rapids, Michigan or such other
place as the parties may agree, at such time as the parties may agree, at which
time and place the documents and instruments necessary or appropriate to effect
the transactions contemplated herein will be exchanged by the parties.
1.6. EFFECTIVE DATE.
---------------
The effective date of this Agreement for financial accounting and tax
purposes shall be May 31, 1999 ("Effective Date").
2. REPRESENTATIONS AND WARRANTIES OF SELLER.
For the purposes of these representations and warranties the following
definitions shall apply:
"Seller's knowledge" or "knowledge" shall mean (i) the actual knowledge
of the person making the representation and warranty, but without any
investigation or inquiry, and (ii) knowledge which such person would ordinarily
have if such person exercised customary and reasonable diligence in his capacity
as an Officer and Director of the Company.
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"Material Adverse Effect" with respect to the Company means an
individual or cumulative adverse change in or effect on the business, customers,
customer relations, operations, properties, working capital condition (financial
or otherwise), assets, properties or liabilities of the Company which is
reasonably expected in the foreseeable future to be materially adverse to the
business, properties, working capital condition (financial or otherwise),
assets, or liabilities of the Company or would prevent the Company or the Seller
from consummating the transactions contemplated hereby.
Subject to the limitations of Sections 1.3 and 1.4 above, Seller hereby
represents and warrants to the Buyer and Parent as follows:
2.1. DISCLOSURE SCHEDULE.
--------------------
The disclosure schedule dated the date hereof shall be delivered by
Seller to the Buyer and Parent within two (2) weeks of the date of execution of
this Agreement (the "Disclosure Schedule"). The Disclosure Schedule is divided
into sections which correspond to the sections of this Article 2. The Disclosure
Schedule is true, accurate and complete. Nothing in the Disclosure Schedule will
be deemed adequate to disclose an exception to a representation or warranty made
herein, however, unless the Disclosure Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable detail.
2.2. CORPORATE ORGANIZATION.
-----------------------
The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Michigan with corporate power and
authority to carry on its business as it is now being conducted and to own,
operate and lease its properties and assets, and to the knowledge of Seller is
duly qualified or licensed to do business as a foreign corporation in good
standing in every other jurisdiction in which the character or location of the
properties and assets owned, leased or operated by it or the conduct of its
business requires such qualification or licensing except in such jurisdictions
in which the failure to be so qualified or licensed and in good standing would
not have a Material Adverse Effect. The Disclosure Schedule contains a list of
all jurisdictions in which the Company is qualified or licensed to do business.
The Company does not own (and has not at any time during the five (5) years
preceding the date set forth above owned) of record or beneficially any
outstanding equity securities or other ownership interest in any corporation,
partnership or other legal entity.
2.3. CAPITALIZATION.
---------------
The authorized capital stock of the Company is set forth in the
Disclosure Schedule. The Shares, as set forth in the Disclosure Schedule,
represent all of the issued and outstanding capital stock of the Company. All
issued and outstanding shares of capital stock are duly authorized, validly
issued, fully paid and non-assessable and are without, and were not issued in
violation of, preemptive rights. The Shares are free and clear of all
Encumbrances, and, except as set forth on the Disclosure Schedule, there are no
agreements relating to any of the Seller's ownership of such Shares. Upon the
consummation of the transactions contemplated hereby, the Buyer will acquire
good and marketable title to the Shares free and clear of all Encumbrances.
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There are no issued and outstanding options, warrants, rights, conversion
privileges, securities, contracts, commitments, understandings or arrangements
by which the Company is bound to issue any additional shares of its capital
stock, equity securities or options or warrants to purchase shares of its
capital stock or any securities convertible into or exchangeable for such
shares, securities or rights. For purposes of this Agreement, "Encumbrances"
means pledges, liens, security interests, restrictions, claims or charges of any
kind.
2.4. AUTHORIZATION.
--------------
The Seller has full power and authority to enter into this Agreement
and to carry out the transactions contemplated hereby (including, without
limitation, the power to sell, transfer and convey the Shares). The Seller is
not a resident of any state that has enacted community property statutes nor is
the Seller subject to any community property statutes. Seller has the legal
capacity to enter into this Agreement and to carry out the transactions
contemplated herein, including, without limitation, the legal capacity to
execute, deliver and perform the agreements or contracts, if any, required by
this Agreement to be executed and delivered by any of them, including, without
limitation, the Lease and Option and Put for Real Property (the "Closing
Agreements"). This Agreement has been duly and validly executed by the Seller
and is the valid and binding legal obligation of the Seller enforceable against
them in accordance with its terms, except as may be limited by (i) any
applicable bankruptcy, reorganization, arrangement, winding-up, solvency,
moratorium, fraudulent conveyance, or other similar laws now or in the future in
effect relating to creditors' rights generally, and (ii) the effects of general
principles of equity (regardless of whether considered in a proceeding at equity
or at law), including, without limitation, the possible unavailability of
specific performance, injunctive relief, appointment of a receiver or any other
equitable remedy. At Closing, the Closing Agreements will be duly and validly
executed by the Seller and will constitute valid and binding legal obligations
of the Seller enforceable against the Seller in accordance with their respective
terms, except as may be limited by (i) any applicable bankruptcy,
reorganization, arrangement, winding-up, solvency, moratorium, fraudulent
conveyance, or other similar laws now or in the future in effect relating to
creditors' rights generally, and (ii) the effects of general principles of
equity (regardless of whether considered in a proceeding at equity or at law),
including, without limitation, the possible unavailability of specific
performance, injunctive relief, appointment of a receiver or any other equitable
remedy.
2.5. NON-CONTRAVENTION.
------------------
Except as set forth in the Disclosure Schedule, neither the execution,
delivery and performance of this Agreement nor the consummation of the
transactions contemplated herein will: (i) violate or be in conflict with any
provision of the articles of incorporation or bylaws of the Company; (ii) be in
conflict with, or constitute a default, however defined (or an event which, with
the giving of due notice or lapse of time, or both, would constitute such a
default), under, or cause or permit the acceleration of the maturity of, or give
rise to any right of termination, cancellation, imposition of fees or penalties
under any debt, note, bond, lease, mortgage, indenture, license, obligation,
contract, commitment, franchise, permit, instrument or other agreement or
obligation to which the Company or Seller is a party or by which the Company or
Seller is or may be bound; or (iii) to the knowledge of Seller, violate any Law
of any Authority. "Laws" means any statute, treaty, law, judgment, writ,
5
injunction, decision, decree, order, regulation, ordinance or other similar
authoritative matters. "Authority" or "Authorities" means any foreign, federal,
state or local governmental or quasi-governmental, administrative, regulatory or
judicial court, department, commission, agency, board, bureau, instrumentality
or other authority.
2.6. CONSENTS AND APPROVALS.
-----------------------
Except as set forth in the Disclosure Schedule, with respect to the
Company and Seller, no Consent from any individual or entity, including, without
limitation, any Authority, is required in connection with the execution,
delivery or performance of this Agreement by the Company or Seller or the
consummation by the Company or Seller of the transactions contemplated herein.
"Consent" means any consent, approval, order or authorization of or from, or
registration, notification, declaration or filing with any individual or entity,
including, without limitation, any Authority.
2.7. FINANCIAL STATEMENTS.
---------------------
Buyer acknowledges that it has received complete copies of all of the
Company's balance sheets as of December 31, 1998 and 1997, statements of income
for the fiscal years then ended, all such financial statements having been
prepared by the Company's management and that none of such financial statements
have been audited, as well as an unaudited balance sheet as of March 31, 1999
and unaudited statements of income, for the period ended March 31, 1999
(collectively the "Financial Statements") and have had full opportunity to
review and ask questions of the same. Except as disclosed therein or in the
Disclosure Schedule, to the knowledge of Seller, the Financial Statements: (i)
are in accordance with the books and records of the Company and have been
prepared in conformity with generally accepted accounting principles ("GAAP")
consistently applied for all periods (except as stated therein or in the notes
thereto); (ii) there are no unbooked Liabilities; and (iii) are true, complete
and accurate in all material respects and fairly present the financial position
of the Company as of the respective dates thereof, and the income or loss for
the periods then ended. The representations herein are qualified and limited in
their entirety with respect to any matters contrary to the above that Buyer or
Buyer's representatives acquire knowledge of by virtue of their audit of
Company's books and records. The balance sheet as of March 31, 1999 is
hereinafter referred to as the "Most Recent Balance Sheet" and the statement of
income for the period ending March 31, 1999 is hereinafter referred to as the
"Most Recent Income Statement".
2.8. ABSENCE OF UNDISCLOSED LIABILITIES.
-----------------------------------
There are no Liabilities of the Company including Liabilities which may
become known or which arise only after the Closing and which result from acts,
omissions or occurrences of the Seller or the Company prior to the Closing other
than: (i) Liabilities and obligations which are fully reflected or reserved for
in the Most Recent Balance Sheet; (ii) Liabilities for express executory
obligations to be performed after the Closing under the contracts described in
Sections 2.13 and 2.14 of the Disclosure Schedule; and (iii) Liabilities
incurred by the Company in the ordinary course of business since the Most Recent
6
Balance Sheet. "Liability" or "Liabilities" means any liabilities, obligations
or claims of any kind whatsoever whether absolute, accrued or unaccrued, fixed
or contingent, matured or unmatured, asserted or unasserted, known or unknown,
direct or indirect, contingent or otherwise and whether due or to become due,
including, without limitation, any foreign or domestic tax liabilities or
deferred tax liabilities incurred in respect of or measured by the Company's
income, or any other debts, liabilities or obligations relating to or arising
out of any act, omission, transaction, circumstance, sale of goods or services,
state of facts or other condition which occurred or existed on or before the
date hereof, whether or not known, due or payable. To the knowledge of Seller,
the Company is not subject to any obligation or requirement to provide funds to,
or make any investment (in the form of a loan, capital contribution or
otherwise) in, any person or entity.
2.9. ABSENCE OF CERTAIN CHANGES.
---------------------------
To the knowledge of Seller, except as set forth in the Disclosure
Schedule, since the date of the Most Recent Balance Sheet, the Company has owned
and operated its assets, properties and business in the ordinary course of
business and consistent with past practice. Buyer or Buyer's representatives
have had an opportunity and will again be given an opportunity prior to closing
to review the sales, expense, and other business records of the Company, and to
ask questions or make inquiries of Seller of same, from the Effective Date to
Closing to verify the accuracy of this representation and warranty.
2.10. ASSETS; NET WORTH.
------------------
(a) The Company owns no real property.
(b) To the knowledge of Seller, except as set forth in the
Disclosure Schedule, all real properties owned and leased by the
Company are free from any structural defects, in good operating
condition and repair, with no material maintenance, repair or
replacement having been deferred or neglected, suitable for the
intended use and free from other Material defects. To the knowledge of
Seller, except as set forth in the Disclosure Schedule, each such real
property and its present use conform in all respects to all
occupational, safety or health, zoning, planning, subdivision, platting
and similar Laws. To the knowledge of Seller, except as set forth in
the Disclosure Schedule, all public utilities necessary for the use and
operation of any facilities on the aforesaid real properties are
available for use or access at such properties and there is no legal or
physical impairment to free ingress or egress from any of such
facilities or real properties. Neither the Company nor Seller is a
foreign person, as the term foreign person is defined in Section
1445(f)(3) of the Internal Revenue Code of 1986, as amended (the
"Code").
(c) Except as set forth in the Disclosure Schedule, the Company
has good and marketable title to all of its assets and properties
whether or not reflected in the Most Recent Balance Sheet or acquired
after the date thereof, free and clear of any Lien, other than
Permitted Liens. "Liens" means any pledge, lien, security interest,
conditional or installment sales agreement, encumbrance or claim.
"Permitted Liens" means (i) liens securing specific Liabilities shown
on the Most Recent Balance Sheet with respect to which no breach,
violation or default exists; (ii) mechanics', carriers', workers' or
7
other like liens arising in the ordinary course of business; (iii)
minor imperfections of title which do not individually or in the
aggregate, impair the continued use and operation of the assets and
fixtures to which they relate in the operation of the Company as
currently conducted; and (iv) liens for current taxes not yet due and
payable.
(d) Except as set forth in the Disclosure Schedule, to the
knowledge of Seller, the machinery, equipment, vehicles and other
personal property used by the Company (whether or not reflected on the
Most Recent Balance Sheet or acquired after the date thereof) are in
good operating condition and repair and fit for the intended purposes
thereof, and no substantial maintenance, replacement or substantial
repair has been deferred or neglected, taking into account the age and
usage of such machinery, equipment, vehicles, and other personal
property.
(e) To the knowledge of Seller, the Company owns or leases all of
the assets and properties, and is a party to all licenses and other
agreements, presently used or necessary to carry on the business or
operations of the Company as presently conducted; (ii) the Company does
not own or lease any assets or properties that are not used in the
ordinary course of the Company's business; and (iii) all leasehold
interests relating to real property, machinery, equipment, vehicles and
other personal property are valid and in full force and effect and
enforceable in accordance with their terms and there does not exist any
violation, breach, or default thereof or thereunder.
(f) Upon the Closing of the transactions contemplated by this
Agreement, Seller will have any claim against any of the assets of the
Company, Buyer or Parent as a result of any buy-sell, tax sharing or
other similar agreement.
(g) Upon the Closing of the transactions contemplated by this
Agreement, the net worth of the Company shall be at least equal to the
amount of Four Million Two Hundred Twenty Thousand Dollars
($4,220,000), taking into account all adjustments allowed as set forth
in Exhibit 4.11 hereof, and using generally accepted accounting
principles consistently applied. For this purpose, the net worth of the
Company shall be considered in the aggregate with the net worth of
Wamar Products, Inc.
2.11. INVENTORIES.
------------
To the knowledge of Seller, except as set forth in the Disclosure
Schedule, all work in process as of the date of the Most Recent Balance Sheet
is, and as of the Closing Date will be, valued at cost. To the knowledge of
Seller, except as set forth in the Disclosure Schedule, all inventory of the
Company, whether reflected in the Most Recent Balance Sheet or otherwise, (i)
consists of a quality and quantity useable and salable in the ordinary course of
business, and (ii) the present quantities of all inventory of the Company are
reasonable in the present circumstances for the business as currently conducted
or as proposed to be conducted. The representation and warranty is qualified by
the fact that Buyers' auditors will take prior to closing a complete and full
inventory and Seller shall have full and complete opportunity to review and ask
questions of Buyers of the same. Seller shall review such inventories in detail
with Buyer as Buyer reasonably requests.
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2.12. TRADE ACCOUNTS RECEIVABLE; NOTES RECEIVABLE AND PAYABLES.
---------------------------------------------------------
To the knowledge of Seller:
(a) The most recent Balance Sheet reflects all of the receivables,
if any, of the Company and Buyer shall have full opportunity to review
the business records of Company, audit the same and ask questions of
Seller regarding the same prior to Closing. To the knowledge of Seller,
except as set forth on the Disclosure Schedule, (i) the Company has
good right, title and interest in and to all trade accounts receivable
and notes receivable reflected in the Most Recent Balance Sheet and
those acquired and generated since the date of the Most Recent Balance
Sheet (except for those paid since the date of the Most Recent Balance
Sheet) (the "Account Receivables"); (ii) none of such Account
Receivables is subject to any Lien, other than Permitted Liens; (iii)
all of the Account Receivables owing to the Company constitute valid
and enforceable claims arising from bona fide transactions in the
ordinary course of business, and there are no known material claims,
refusals to pay or other rights of set-off against any thereof; and
(iv) the aging schedule of the Account Receivables of the Company
attached to the Disclosure Schedule is complete and accurate in all
material respects and Buyers have had opportunity to audit the same.
Seller hereby covenant and agree to review the detailed accounts
receivable
(b) To the knowledge of Seller:
(i) all trade accounts payable and notes payable of the
Company are reflected in the Most Recent Balance Sheet and those
acquired and generated since the date of the Most Recent Balance
Sheet (except for those paid since the date of the Most Recent
Balance Sheet) (the "Accounts Payables"); and
(ii) all such Accounts Payables arose from bona fide
transactions in the ordinary course of the Company's business.
2.13. SCHEDULES; NO CONTRACT DEFAULTS.
--------------------------------
(a) The Disclosure Schedule contains an accurate and complete list
and description of all real property in which the Company has a
leasehold or other interest or which is used by the Company in
connection with the operation of its business, together with a copy of
each such lease and any amendments.
(b) To the knowledge of Seller, the Company's business records
accurately reflect in all material respects (and Buyers acknowledge
that they have had opportunity to review the same as part of their
audit prior to closing):
(i) All machinery, tools, equipment, motor vehicles, rolling
stock and other tangible personal property (other than inventory
and supplies), owned, leased or used by the Company, and all
leases, Liens, restrictions, covenants and conditions relating
thereto (except for small tools and equipment which are expensed
as part of Company's business practices.)
9
(ii) All contracts, agreements and commitments, whether or not
fully performed, in respect of the issuance, sale or transfer of
the capital stock, bonds, options, warrants or other securities of
the Company or pursuant to which the Company has acquired any
substantial portion of its business or assets.
(iii) All contracts, agreements, commitments or understandings
that restrict the Company from carrying on its businesses or any
part thereof anywhere in the world or from competing in any line
of business with any person or entity.
(iv) All material purchase or sale contracts or agreements for
purchases or sales.
(v) All collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, employee pension plans or
retirement plans, employee stock options or stock purchase plans,
group life, health and accident insurance and other employee
benefit plans, agreements, arrangements or commitments, whether or
not legally binding, including, without limitation, holiday,
vacation and other bonus practices, to which the Company is a
party or is bound or which relate to the operation of the
Company's business.
(vi) All contracts, commitments, agreements and arrangements
with any "disqualified individual" (as defined in Section 280G(c)
of the Code) which contains any severance or termination pay
liabilities which would result in a disallowance of the deduction
for any "excess parachute payment" (as defined in Section
280G(b)(1) of the Code) under Section 280G of the Code.
(vii) The names and current annual salary rates of all persons
(including independent commission agents) whose annual
compensation (direct or indirect) from the Company is currently at
the rate of more than Fifty Thousand Dollars ($50,000) per annum.
(viii) The names of all of the Company's directors and
officers.
(ix) All material written contracts, agreements and
commitments, and tooling purchase orders, relating to the sale of
the Company's products, including, without limitation, any sales
representative, distributor or reseller agreements (the "Sales
Agreements").
(x) The social security number and address of the Seller.
(xi) All material contracts, agreements and commitments,
whether or not fully performed, relating to or arising out of the
business of the Company and not otherwise disclosed pursuant to
this Section 2.13.
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(c) To the knowledge of Seller, (i) all material contracts,
agreements, leases, licenses and commitments (the "Assumed Contracts")
referred to or which may be required to be listed on Sections 2.13 and
2.14 of the Disclosure Schedule (other than those which have been fully
performed) are valid and binding, enforceable in accordance with their
respective terms, and are in full force and effect; (ii) the Company is
not in breach, violation or default, however defined, in the
performance of any of its material obligations under any Assumed
Contract, and no facts or circumstances exist which, whether with the
giving of due notice, lapse of time, or both, would constitute such a
material breach, violation or default thereunder or thereof; and (iii)
no other parties thereto are in breach, violation or default, however
defined, thereunder or thereof, and no facts or circumstances exist
which, whether with the giving of due notice, lapse of time, or both,
would constitute such a breach, violation or default thereunder or
thereof. True and complete copies of all material Assumed Contracts
(together with any and all amendments thereto) have been supplied to
Buyer. Buyer acknowledges it has had full access thereto for purposes
of its audit and other due diligence.
2.14. INTELLECTUAL PROPERTY RIGHTS.
-----------------------------
(a) The Company owns no (i) patents, patent applications
(collectively the "Patents"), (ii) copyrights, copyright applications
(the "Copyrights"), (iii) tradenames, registered and common law
trademarks, trademark applications (the "Trademarks"), (iv) service
marks, service ▇▇▇▇ applications (the "Service Marks"), and (v)
computer programs and other computer software, trade secrets, plans and
specifications, inventions, know-how, technology, proprietary processes
and formulae (the "Trade Secrets") which are necessary or used in
connection with the conduct of the business of the Company (the
Patents, Copyrights, Trademarks, Service Marks and Trade Secrets are
collectively referred to as "Intellectual Property Rights"). All issued
Patents and registered Copyrights, Trademarks and Service Marks are
collectively referred to as the "Registered Intellectual Property
Rights." To the knowledge of Seller, the Company does not need to own
any Intellectual Property Rights to conduct the Company's business as
presently conducted.
(b) To the knowledge of Seller, the Company is not obligated or
under any Liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner of, licensor of, or other
claimant to, any Intellectual Property Rights or Third Party
Intellectual Property Rights.
(c) To the knowledge of Seller, no employee, contractor or
consultant of the Company has entered into any agreement which
restricts or limits in any way the scope or type of work in which such
employee, contractor or consultant may be engaged or requires such
employee, contractor or consultant to transfer, assign or disclose
information concerning such employee's, contractor's or consultant's
work to anyone other than the Company.
11
2.15. LITIGATION.
-----------
There is no legal, administrative, arbitration, or other proceeding,
suit, claim or action of any nature or investigation, review or audit of any
kind (including, without limitation, a proceeding, suit, claim or action, or an
investigation, review or audit, involving any Environmental Law or matter),
judgment, decree, decision, injunction, writ or order pending, noticed,
scheduled or, to the knowledge of Seller, threatened by or against or involving
the Company or its assets, properties or business or the Company's directors,
officers, agents or employees (but only in their capacity as such), whether at
law or in equity, before or by any person or entity or Authority, or which
questions or challenges the validity of this Agreement or any action taken or to
be taken by the parties hereto pursuant to this Agreement or in connection with
the transactions contemplated herein.
2.16. TAX MATTERS.
------------
Except as set forth in the Disclosure Schedule, the Seller hereby
represents and warrants the following with respect to the Company:
(a) There have been properly completed and duly filed on a timely
basis and in correct form, all Tax Returns required to be filed on or
prior to the date hereof by the Company or the Seller with respect to
Taxes of the Company. As of the time of filing, the foregoing Tax
Returns correctly reflected the facts regarding the income, business,
assets, operations, activities, status or other matters of the Company
or any other information required to be shown thereon. There is no
omission, deficiency, error, misstatement or misrepresentation, whether
innocent, intentional or fraudulent, in any Tax Return filed by the
Company for any period. Any Tax Returns filed after the date hereof,
but on or before the Closing Date, will conform with the provisions of
this subsection 2.16(a).
(b) With respect to all amounts in respect of Taxes imposed upon
the Company or the Seller, or for which the Company or the Seller are
or could be liable, whether to taxing Authorities (as, for example,
under Law) or to other persons or entities (as, for example, under tax
allocation agreements), with respect to all taxable periods or portions
of periods ending on or before the Closing Date, all applicable Tax
Laws and agreements have been or will be fully complied with, and all
such amounts of Taxes required to be paid by the Company or the Seller
to taxing Authorities or others on or before the date hereof have been
duly paid or will be paid on or before the Closing Date. There are no
Liens for such Taxes upon any property or assets of the Company. The
Company has withheld and remitted all amounts required to be withheld
and remitted by it in respect of Taxes.
(c) Except as set forth in the Disclosure Schedule, neither the
federal Tax Returns of the Company (and of the Seller to the extent the
operations of the Company are reflected in the Seller' Tax Returns) nor
any state or local Tax Return of the Company, have been examined by the
Internal Revenue Service or any similar state or local Authority, and,
except to the extent shown therein, all deficiencies asserted as a
12
result of such examinations have been paid or finally settled and no
issue has been raised by the Internal Revenue Service or any similar
state or local Authority in any such examination which, by application
of similar principles, reasonably could be expected to result in a
proposed deficiency for any other period not so examined. Except as set
forth in the Disclosure Schedule, all deficiencies and assessments of
Taxes of the Company (or any of the Seller to the extent attributable
to the business or operations of the Company) resulting from an
examination of any Tax Returns by any Authority have been paid and
there are no pending examinations currently being made by any Authority
nor has there been any written or oral notification to the Company or
Seller of any intention to make an examination of any Taxes by any
Authority. Except as set forth in the Disclosure Schedule, there are no
outstanding agreements or waivers extending the statutory period of
limitations applicable to any Tax Return for any period.
(d) For purposes of computing Taxes and the filing of Tax Returns,
the Company has not failed to treat as "employees" any individual
providing services to the Company who would be classified as an
"employee" under the applicable rules or regulations of any Authority
with respect to such classification.
For purposes of this Agreement, the term "Taxes" means all federal,
state, local, foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits,
license, lease, service, service use, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, real or personal
property, windfall profits, customs, duties or other taxes, fees,
assessments, charges or levies or any kind whatever, together with any
interest and any penalties, additions to tax or additional amounts with
respect thereto, and the term "Tax" means any one of the foregoing
Taxes. In addition, the term "Tax Returns" means all returns,
declarations, reports, statements and other documents required to be
filed with any Authority in respect of Taxes, and the term "Tax Return"
means any one of the foregoing Tax Returns.
2.17. BENEFIT PLANS.
--------------
Other than as set forth in the Disclosure Schedule, neither the Company
nor any affiliate of the Company sponsors, maintains, contributes to or is
required to contribute to any pension, welfare, incentive, perquisite, paid time
off, severance or other benefit plan, policy, practice or agreement subject to
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). To
the knowledge of Seller, there are no facts or circumstances which could,
directly or indirectly, subject the Buyer or any of its affiliates to any
Liability of any nature with respect to any pension, welfare, incentive,
perquisite, paid time off, severance or other benefit plan, policy, practice or
agreement sponsored, maintained or contributed to by the Company or any
affiliate, to which the Company or any affiliate is a party or with respect to
which the Company or any affiliate could have any liability.
2.18. LABOR MATTERS.
--------------
Except as set forth in the Disclosure Schedule, to the knowledge of
Seller:
13
(a) the Company is and has been in compliance in all material
respects with all applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours,
including, without limitation, any such Laws respecting employment
discrimination and occupational safety and health requirements, and has
not and is not engaged in any unfair labor practice;
(b) there is no unfair labor practice complaint against the
Company pending or threatened before the National Labor Relations Board
or any other comparable Authority;
(c) there is no labor strike, dispute, slowdown or stoppage
actually pending or threatened against or directly affecting the
Company;
(d) no labor representation question exists respecting the
employees of the Company and there is not pending or threatened any
activity intended or likely to result in a labor representation vote
respecting the employees of the Company;
(e) no grievance or any arbitration proceeding arising out of or
under collective bargaining agreements is pending and no claims exist
or have been threatened;
(f) no collective bargaining agreement is binding and in force
against the Company or currently being negotiated by the Company;
(g) the Company has not experienced any significant work stoppage
or other significant labor difficulty;
(h) the Company is not delinquent in payments to any persons for
any wages, salaries, commissions, bonuses or other direct or indirect
compensation for any services performed by them or amounts required to
be reimbursed to such persons, including, without limitation, any
amounts due under any Pension Plan, Welfare Plan or Compensation Plan;
and
(i) upon termination of the employment of any person, neither the
Company, the Buyer, or any subsidiary or affiliate of the Buyer will,
by reason of anything done at or prior to or as of the Closing Date, be
liable to any of such persons for so-called "severance pay" or any
other payments, except for the agreement with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ referred
to in Section 2.13(b)(ix).
2.19. PERMITS AND OTHER OPERATING RIGHTS.
-----------------------------------
Except as set forth in the Disclosure Schedule, to the knowledge of
Seller, (i) the Company does not require the Consent of any Authority to permit
it to operate in the manner in which its business is presently being operated;
and (ii) the Company possesses all permits, licenses and other authorizations
from all Authorities necessary to permit it to operate its business in the
manner in which it presently is conducted and the consummation of the
transactions contemplated by this Agreement will not prevent the Company from
being able to continue to use such permits and operating rights.
14
2.20. COMPLIANCE WITH LAW.
--------------------
To the knowledge of Seller, the Company has not previously failed and
is not currently failing to comply with any applicable Laws relating to the
business of the Company or the operation of its assets, including, without
limitation, any import, export and immigration laws. There are no proceedings
and no proceedings are pending or to the Seller's knowledge threatened, nor has
any officer of the Company or the Seller received any written notice regarding
any violation of any Law.
2.21. ENVIRONMENTAL MATTERS.
----------------------
Except as set forth in the Disclosure Schedule:
(a) The Company, any subsidiary or former subsidiary of the
Company, any previous owner, tenant, occupant or user of any property
owned or leased by or to the Company or by or to any subsidiary or
former subsidiary (the "Properties") have complied in all material
respects with all law relating to any Environmentally Regulated
Materials and have complied in all material respects with all
Environmental and Occupational Safety and Health Law.
(b) No enforcement, investigation, cleanup, removal, remediation
or response or other governmental or regulatory actions have been
asserted or threatened (A) with respect to operations conducted by the
Company on the Properties or, (B) with respect to the Properties
themselves or, (C) against the Company or any subsidiary or former
subsidiary with respect to or in any way regarding the Properties
pursuant to any Environmental and Occupational Safety and Health Laws.
(c) No claims or settlements relating to or arising out of
Environmental and Occupational Safety and Health Laws or
Environmentally Regulated Materials, have been made or, to the
knowledge of the Seller, been threatened by any third party, including
any Authority, nor, to the knowledge of the Seller, does there exist
any basis for any such claim (any such enforcement, investigation,
cleanup, removal, remediation or response, other governmental or
regulatory action, claim or settlement is herein referred to as an
"Environmental Claim") against the Company or any subsidiary or former
subsidiaries with respect to the Properties or operations conducted
thereon, or with respect to the Properties or the operations thereon.
(d) To the knowledge of Seller, with regard to the Company and the
Properties, there are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans which
may interfere with or prevent compliance or continued compliance with
Environmental and Occupational Health and Safety Laws, as in effect on
the Closing Date.
15
(e) For purposes of this Agreement, "Environmental and
Occupational Safety and Health Law" means any common law or duty, case
law or other Law, that (i) regulates, creates standards for or imposes
liability or standards of conduct concerning any element, compound,
pollutant, contaminant, or toxic or hazardous substance, material or
waste, or any mixture thereof, or relates in any way to emissions or
releases into the environment or ambient environmental conditions, or
conduct affecting such matters, or (ii) is designed to provide safe and
healthful working conditions or reduce occupational safety and health
hazards. Such laws shall include, but not be limited to, the National
Environmental Policy Act, 42 U.S.C. ▇▇.▇▇. 4321 et seq., the
Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. ▇▇.▇▇. 9601 et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. ▇▇.▇▇. 6901 et seq., the Federal Water Pollution Control
Act, 33 U.S.C. ▇▇.▇▇. 1251 et seq., the Federal Clean Air Act, 42
U.S.C. ▇▇.▇▇. 7401 et seq., the Toxic Substances Control Act, 15 U.S.C.
▇▇.▇▇. 2601 et seq., the Emergency Planning and Community Right to Know
Act, 42 U.S.C. ss. 11011, the Hazard Communication Act, 29 U.S.C.
▇▇.▇▇. 651 et seq., the Occupational Safety and Health Act, 29 U.S.C.
▇▇.▇▇. 651 et seq., the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. ss. 136, and any case law interpretations, amendments or
restatements thereof, or similar enactments thereto, as is now or at
any time hereafter may be in effect, as well as their international,
state and local counterparts. For purposes of this Agreement,
"Environmentally Regulated Materials" means any element, compound,
pollutant, contaminant, substance, material or waste, or any mixture
thereof, designated, listed, referenced, regulated or identified
pursuant to any Environmental and Occupational Safety and Health Law.
2.22. INSURANCE.
----------
The Company's normal business records reflect accurately in all
material respects all policies of fire and other casualty, auto, liability,
general liability, theft, life, workers' compensation, health, directors and
officers, business interruption and other forms of insurance owned or held by
the Company, and copies of all such policies have been provided or made
available to Buyer or Buyer's representatives. With respect to each such
insurance policy to the knowledge of Seller: (i) the policy is legal, valid,
binding, enforceable, and in full force and effect in all material respects;
(ii) neither the Company nor any other party to the policy is in material breach
or default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a material breach or default, or permit termination,
modification, or acceleration, under the policy; and (iii) no party to the
policy has repudiated any material provision thereof. The Disclosure Schedule
describes any material self-insurance arrangements affecting the Company. Buyers
acknowledge that they will review such insurance policies and matters as part of
their audit and have had fully and complete access to Company's books and
records regarding the same.
2.23. BANK ACCOUNTS.
--------------
The Disclosure Schedule contains a list of the names of all financial
institutions, investment banking and brokerage houses, and other similar
institutions at which the Company maintains accounts, deposits, safe deposit
boxes of any nature, and the names of all persons authorized to draw thereon or
make withdrawals therefrom; and the names of all persons, if any, holding tax or
other powers of attorney from the Company and a summary of the terms thereof.
16
2.24. ABSENCE OF CERTAIN BUSINESS PRACTICES.
--------------------------------------
The Seller, and to the knowledge of Seller, no director, officer,
employee or agent of the Company, nor any other person acting on behalf of the
Company or the Seller, has, directly or indirectly, within the past five (5)
years given or agreed to give any illegal gift or similar benefit to any
customer, supplier, governmental employee or other person who is or may be in a
position to help or hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction) which might subject the
Company, the Seller or Buyer to any damage or penalty in any civil, criminal or
governmental litigation proceeding, or (ii) if not given in the past, might have
had an adverse effect on the assets, business or operations of the Company as
reflected in the Financial Statements.
2.25. ORDERS, COMMITMENTS AND RETURNS.
--------------------------------
Except as set forth in the Disclosure Schedule, to the knowledge of
Seller, all accepted and unfulfilled orders for the sale of products with a
customer and the performance of services entered into by the Company and all
outstanding contracts or commitments for the purchase of supplies, materials and
services were made in bona fide transactions in the ordinary course of business.
Except as set forth in the Disclosure Schedule, to the knowledge of Seller,
there are no material claims against the Company to return products by reason of
alleged over-shipments, defective products or otherwise, or of products in the
hands of customers, retailers or distributors under an understanding that such
products would be returnable.
2.26. PRODUCTS AND WARRANTIES.
------------------------
To the knowledge of Seller, each product manufactured, sold, leased, or
delivered by the Company has been in conformity in all Material respects with
all applicable contractual commitments and all express and implied warranties,
and meets or exceeds the standards required by all Laws now in effect and
neither the Company nor the Seller know of any pending legislation, ordinance or
regulation, which if adopted, would have a Material Adverse Effect upon the
products sold by the Company. To the knowledge of Seller, the Company does not
have any Liability (and there is no basis for any present or any future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of it giving rise to any Liability) for replacement or repair of any
product manufactured, sold, leased, or delivered by the Company or other damages
in connection therewith other than may occur in the ordinary course of business.
To the knowledge of Seller, no product manufactured, sold, leased, or delivered
by the Company is subject to any guaranty, warranty, or other indemnity beyond
the applicable standard terms and conditions of sale or lease. To the knowledge
of Seller, the Disclosure Schedule includes copies of the standard terms and
conditions of sale or lease for the Company (containing applicable guaranty,
warranty, and indemnity provisions).
17
2.27. PRODUCT LIABILITY; AUTO LIABILITY AND WORKERS' COMPENSATION.
------------------------------------------------------------
To the knowledge of Seller, the Company does not have any Liability
(and there is no basis for any present or any future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability) arising out of: (i) any injury to individuals or
property as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by the Company; or (ii) any injury to
individuals or property as a result of the ownership or lease by the Company of
any automobile. Except as set forth in the Disclosure Schedule, to the knowledge
of Seller, there are no open workers' compensation claims against the Company.
2.28. CUSTOMER.
---------
Except as set forth in the Disclosure Schedule, the Seller has no
knowledge that the Company has received any notice (written or oral) that any
material customer of the Company will terminate its relationship with the
Company or, as the case may be, significantly decrease its business with the
Company, as a result of the transactions contemplated by this Agreement or for
any other reason.
2.29. TRANSACTIONS WITH CERTAIN PERSONS.
----------------------------------
Except as set forth in the Disclosure Schedule, during the past three
(3) years, the Company has not, directly or indirectly, purchased, leased or
otherwise acquired any property or obtained any services from, or sold, leased
or otherwise disposed of any property or furnished any services to, or otherwise
dealt with, in the ordinary course of business or otherwise, (i) Seller or (ii)
any affiliate or associate of the Seller or any officer, director, member,
shareholder, or partner of any affiliate or associate of the Seller (except with
respect to compensation in the ordinary course of business for services rendered
as an officer, director or employee of the Company). The Company does not owe
any amount to, or have any agreement or contract with or commitment to, any of
its officers, directors, shareholders, employees or consultants or any affiliate
or associate thereof (other than compensation for current services not yet due
and payable and reimbursement of expenses arising in the ordinary course of
business), and none of such persons owes any amount to the Company.
2.30. BOOKS AND RECORDS.
------------------
The books of account, minute books, stock record books, and other
records of the Company, all of which have been made available to the Buyer, are
complete and correct in all material respects and have been maintained in
accordance with reasonable business practices. The minute books of the Company
contain accurate and complete records of all formal meetings held of, and
corporate action taken by, the shareholders, the Board of Directors, and
committees of the Board of Directors of the Company. At the Closing, all of
those books and records will be in the possession of the Company.
2.31. BUSINESS GENERALLY.
-------------------
Except as set forth in the Disclosure Schedule, to the knowledge of
Seller, there has been no event, transaction or information which has come to
the attention of the Seller as of the date of this Agreement which, as it
relates directly to the business of the Company, would, individually or in the
aggregate, reasonably be expected in the foreseeable future to have a Material
Adverse Effect on the Company.
18
2.32. BROKERS.
--------
Except as set forth in the Disclosure Schedule, neither the Company,
the Seller nor any of its directors, officers or employees has employed any
broker, finder, or financial advisor or incurred any liability for any brokerage
fee or commission, finder's fee or financial advisory fee, in connection with
the transactions contemplated hereby, nor is there any basis known to the Seller
for any such fee or commission to be claimed by any person or entity.
2.33. AUTHORITY TO TRANSFER SHARES.
-----------------------------
Seller has full legal right, power and authority to sell, transfer,
assign and deliver the Shares to the Buyer at Closing and delivery of the Shares
at Closing will transfer to the Buyer valid legal and beneficial ownership
thereto free and clear of all Encumbrances.
2.34. ACCESS TO INFORMATION; FULL KNOWLEDGE.
--------------------------------------
(a) The Parent Shares to be received by the Seller pursuant to
this Agreement are being acquired for the Seller's own account, for
investment purposes only and not with a view to any public resale,
public distribution or public offering thereof within the meaning of
the Securities Act of 1933, as amended (the "1933 Act") or any state
securities or Blue Sky law and such Parent Shares will not be sold or
otherwise disposed of except in compliance with the 1933 Act, or in
reliance upon an exemption therefrom and in compliance with any state
securities or Blue Sky laws. The Parent Shares have not been registered
under the 1933 Act or any state securities or Blue Sky law.
(b) The Seller agrees that Seller, either alone or with a
representative, has such knowledge and experience in financial and
business matters that the Seller is capable of evaluating the merits
and risks of the prospective investment in the Parent Shares and are
able to bear the economic consequences thereof. In making the decision
to invest in the Parent Shares, the Seller has relied upon independent
investigations made by him and, to the extent believed by him to be
appropriate, Seller's representatives, including the Seller's own
professional, tax and other advisors.
(c) The Seller and his representatives have been given a full
opportunity to examine all documents and to ask questions of, and to
receive answers from Buyer and its representatives concerning the terms
of the transfer of the Shares to Buyer, the Seller's investment in the
Parent Shares and the business of Buyer and Parent and such other
information as the Seller desires in order to evaluate an investment in
the Parent Shares, and all such questions have been answered to the
full satisfaction of the Seller. The Seller has evaluated the merits
and risks of an investment in the Parent Shares and have determined
that the Parent Shares are a suitable investment for the Seller in
light of the Seller's overall financial condition and prospects. The
Seller has been furnished with all publicly available information about
Buyer's and Parent's assets, operations, and business activities which
the Seller has requested and which the Seller considers necessary or
relevant to enable the Seller to make a prudent decision about the sale
of the Shares to Buyer and the Seller's acquisition of the Parent
19
Shares. The Seller acknowledges that he has reviewed the following
reports filed by Parent with the Securities and Exchange Commission
during the past twelve (12) months pursuant to Section 13(a) of the
Securities Exchange Act of 1934: Annual Report on Form 10-KSB for the
year ended December 31, 1998, Quarterly Reports on Form 10-QSB for the
quarters ending June 30, 1998, September 30, 1998 and March 31, 1999
and Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 13, 1999.
(d) The Seller has not relied upon any representation or warranty
from Buyer, Parent or any of their directors, officers, employees,
agents, affiliates or representatives, with respect to the value of the
Parent Shares, other than as set forth in the publicly available
information described in this Section 2.34 and as set forth in Section
3.6. Buyer and Parent have not made any representation, warranty,
acknowledgment or covenant, in writing or otherwise, to the Seller
regarding the value of the Parent Shares or the tax consequences, if
any, of the sale of the Shares or of the resale of the Parent Shares by
the Seller other than as set forth in Section 3.6. The Seller has been
advised, and is aware, that the market prices of shares of stock of
publicly traded companies fluctuate and that there can be no assurance
as to the future performance of any given securities, including shares
of Parent Common Stock.
(e) The Seller acknowledges that the Shares are personal to the
Seller and may not be transferred or assigned. Seller has consented to
the placing of the following legend on the certificates for the Parent
Shares.
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY BE SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED ONLY
IF A REGISTRATION STATEMENT DESCRIBING SUCH PROPOSED
TRANSACTION IS IN EFFECT PURSUANT TO THE PROVISIONS OF THAT
ACT OR IF, IN THE OPINION OF COUNSEL, WHICH OPINION AND
COUNSEL SHALL BE SATISFACTORY TO THE ISSUER OF THESE SHARES
AND ITS COUNSEL, AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THAT ACT IS AVAILABLE.
(f) The Parent hereby covenants to use its best efforts to file
with the Securities and Exchange Commission on a timely basis all
information that the Securities and Exchange Commission may require and
take all actions that may be required as a condition to the
availability of Rule 144 under the 1933 Act (or any successor exemptive
rule in effect) with respect to the Parent Shares. This covenant will
survive Closing for a period of two (2) years.
20
2.35. ACCURACY OF INFORMATION.
------------------------
To the knowledge of Seller, no representation or warranty made by the
Seller in this Agreement, the Disclosure Schedule, or in any agreement,
instrument, document, certificate, statement or letter furnished to the Buyer at
or prior to the Closing by or on behalf of the Company or the Seller in
connection with any of the transactions contemplated by this Agreement contains
any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements herein or therein not misleading in
light of the circumstances in which they are made, and all of the foregoing
completely and correctly present the information required or purported to be set
forth herein or therein. To the knowledge of Seller, there is no material fact
as of the date hereof which has not been disclosed to the Buyer to which the
Seller has knowledge related to the Company, its operations, properties,
financial condition or prospects which has a Material Adverse Effect or, to the
knowledge of the Seller, in the foreseeable future may have a Material Adverse
Effect on the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND PARENT
The Buyer and Parent represent and warrant to the Seller as follows:
3.1. CORPORATE ORGANIZATION.
-----------------------
The Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
3.2. AUTHORIZATION.
--------------
The Buyer and Parent have full corporate power and authority to enter
into this Agreement and to carry out the transactions contemplated herein. The
Board of Directors of both the Buyer and Parent have taken all action required
by law, their certificate or articles of incorporation and bylaws or otherwise
to authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein and no action of the
stockholders of the Buyer or Parent is required. This Agreement is the valid and
binding legal obligation of the Buyer and Parent enforceable against the Buyer
and Parent in accordance with its terms.
3.3. NON-CONTRAVENTION.
------------------
Neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated herein will: (i) violate any
provision of the certificate or articles of incorporation or bylaws of the Buyer
or Parent; or (ii) except for such violations, conflicts, defaults,
accelerations, terminations, cancellations, impositions of fees or penalties,
mortgages, pledges, and Liens which would not, individually or in the aggregate,
have a Material Adverse Effect on the Buyer or Parent, (A) violate, be in
conflict with, or constitute a default, however defined (or an event which, with
the giving of due notice or lapse of time, or both, would constitute such a
default), under, or cause or permit the acceleration of the maturity of, or give
21
rise to, any right of termination, cancellation, imposition of fees or penalties
under, any debt, note, bond, lease, mortgage, indenture, license, obligation,
contract, commitment, franchise, permit, instrument or other agreement or
obligation to which the Buyer or Parent is a party or by which the Buyer or
Parent or any of their respective properties or assets is or may be bound
(unless with respect to which defaults or other rights, requisite waivers or
consents shall have been obtained at or prior to the Closing) or (B) result in
the creation or imposition of any Lien, except Permitted Liens, upon any
property or assets of the Buyer or Parent under any debt, obligation, contract,
agreement or commitment to which the Buyer or Parent is a party or by which the
Buyer or Parent or any of their respective assets or properties is or may be
bound; or (iii) violate any Law.
3.4. CONSENTS AND APPROVALS.
-----------------------
No Consent is required by any person or entity, including, without
limitation, any Authority, in connection with the execution, delivery and
performance by the Buyer or Parent of this Agreement, or the consummation of the
transactions contemplated herein, other than any Consent which, if not made or
obtained, will not, individually or in the aggregate, have a material adverse
effect on the business of the Buyer or Parent taken as a whole.
3.5. ISSUANCE OF PARENT COMMON STOCK.
--------------------------------
The Parent Shares to be issued to the Seller, upon delivery to the
Seller and receipt of the certificates for the Shares by the Buyer, will be
validly issued, fully paid and nonassessable. Parent has all requisite power and
authority to issue, sell and deliver the Parent Shares in accordance with and
upon the terms and conditions set forth herein; and all corporate action
required to be taken by Parent for the due and proper authorization, issuance,
sale and delivery of the Parent Shares has been validly and sufficiently taken.
Upon delivery of the Shares by the Seller to the Buyer, the Parent Shares will
be, upon issuance and delivery thereof, duly authorized, validly issued, fully
paid and nonassessable.
3.6 BUSINESS GENERALLY.
-------------------
Buyer is experienced in business and employs people knowledgeable in
the Company's industry generally and the type of Company's business
specifically, and such persons have made full investigation (including
preparation of an appropriate business plan), regarding the purchase of the
stock of Company and the industry in which Company conducts its business. Buyer
acknowledges that Seller has not reviewed Buyer's business plan and makes no
representation or warranty with respect thereto.
4. COVENANTS OF THE PARTIES
4.1. CONDUCT OF BUSINESS OF THE COMPANY.
-----------------------------------
Except as contemplated by this Agreement, during the period from the
date of this Agreement to the Closing Date, the Seller will cause the Company to
conduct its business and operations according to its ordinary and usual course
of business, to preserve substantially intact its business organizations and to
preserve its current relationships with customers, employees, suppliers and
other persons with which it has significant business relations.
22
(a) adopt any amendment to its articles of incorporation or
bylaws;
(b) issue, reissue, sell, deliver or pledge or authorize or
propose the issuance, reissuance, sale, delivery or pledge of shares of
capital stock of any class, or debt or other securities convertible
into capital stock of any class, or any rights, warrants or options to
acquire any convertible securities or capital stock;
(c) adjust, split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase or
otherwise acquire, any shares of its capital stock, or any of its other
securities;
(d) (i) excluding regularly scheduled principal payments, create,
incur, assume or repay any long-term debt (including obligations in
respect of capital leases), or, except in the ordinary course of
business, create, incur, assume, repay, maintain or permit to exist any
short-term debt; or (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person;
(e) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, redeem or otherwise acquire any shares of
its capital stock;
(f) other than in the ordinary course of business, increase in any
manner the compensation of any of its directors, officers or other
employees;
(g) (i) sell, transfer, or otherwise dispose of, or agree to sell,
transfer, or otherwise dispose of, any properties or assets, real,
personal or mixed, (other than inventory in the ordinary course of
business) or (ii) mortgage or encumber any properties or assets, real,
personal or mixed;
(h) permit any of its current insurance policies to be canceled or
terminated, unless replacement policies with equal or greater coverage
are in full force and effect;
(i) enter into other agreements, commitments or contracts not in
the ordinary course of business or in excess of current requirements;
(j) make or enter into any commitment of the Company for capital
expenditures for additions to property, plant, equipment or intangible
capital assets; or
(k) pay, lend or advance any amount to, or sell, transfer or lease
any of the Company's properties or assets (real, personal or mixed,
tangible or intangible) to, or enter into any agreement or arrangement
with, any of its officers, directors, shareholders or employees or any
affiliate or associate of any of its officers, directors, shareholders
or employees;
23
(l) terminate, enter into or amend in any material respect any
contract, agreement, lease, license or commitment identified in the
Disclosure Schedule, or take any action or omit to take any action
which will cause a breach, violation or default (however defined) under
any such items, except in the ordinary course of business and
consistent with past practice; or
(m) acquire any of the business or assets of any other person or
entity;
(n) agree in writing or otherwise to take any of the foregoing
actions.
4.2. NO SOLICITATION OF ALTERNATE TRANSACTION.
-----------------------------------------
From the date of this Agreement until Closing or termination as
provided in Article 7 hereof, the Seller will not, and will ensure that the
Company, its directors, officers and employees, independent contractors,
consultants, counsel, accountants, investment advisors and other representatives
and agents will not, directly or indirectly, solicit or entertain offers from,
negotiate with, provide any nonpublic information to, enter into any agreement
with, or in any manner encourage, discuss, accept or consider any proposal of,
any third party relating to the acquisition of the Company, its assets or
business, in whole or in part. The Company will promptly inform the Buyer of any
written inquiry (including the terms thereof and the identity of the third party
making such inquiry) which it may receive in respect of the above and furnish to
the Buyer a copy of any such written inquiry.
4.3. FULL ACCESS TO BUYER.
---------------------
Throughout the period prior to Closing, the Company and the Seller will
cause the Company to afford to Buyer and its directors, officers, employees,
counsel, accountants, investment advisors and other authorized representatives
and agents, access to the facilities, properties, books and records of the
Company in order that Buyer may have full opportunity to make such
investigations as it desires to make of the affairs of the Company. The Company
will furnish such additional financial and operating data and other information
as Buyer will, from time to time, reasonably request, including, without
limitation, access to the working papers of its independent certified public
accountants; provided, however, that any such investigation shall not affect or
otherwise diminish or obviate in any respect any of the representations and
warranties of the Seller herein.
4.4. CONFIDENTIALITY OF INFORMATION.
-------------------------------
After the Closing, the Seller will hold in confidence all Intellectual
Property Rights, trade secrets and other confidential or proprietary documents
and information related to the Company or Buyer and will refrain from disclosing
or using any such confidential information for Seller's own benefit (other than
with respect to any decisions of Seller whether to hold or sell the Parent
Shares to be received hereunder), or to or for the benefit of any third party.
This obligation of confidentiality and non-use will not apply, or will cease to
apply, to such information which is in the public domain as of the Closing Date
or subsequently comes into the public domain through a source other than the
Seller, or which is required to be disclosed by order of any court or
governmental agency of competent jurisdiction.
24
4.5. FILINGS; CONSENTS; REMOVAL OF OBJECTIONS.
-----------------------------------------
Subject to the terms and conditions herein provided, the parties hereto
will use their best efforts to take or cause to be taken all actions and do or
cause to be done all things necessary, proper or advisable under applicable Laws
to consummate and make effective, as soon as reasonably practicable, the
transactions contemplated hereby, including, without limitation, obtaining all
Consents of any person or entity, whether private or governmental, required in
connection with the consummation of the transactions contemplated herein. In
furtherance, and not in limitation of the foregoing, it is the intent of the
parties to consummate the transactions contemplated herein at the earliest
practicable time, and they respectively agree to exert their best efforts to
that end, including, without limitation: (i) the removal or satisfaction, if
possible, of any objections to the validity or legality of the transactions
contemplated herein; and (ii) the satisfaction of the conditions to consummation
of the transactions contemplated hereby.
4.6. FURTHER ASSURANCES; COOPERATION; NOTIFICATION.
----------------------------------------------
(a) Each party hereto will, before, at and after Closing, execute
and deliver such instruments and take such other actions as the other
party or parties, as the case may be, may reasonably require in order
to carry out the intent of this Agreement. Without limiting the
generality of the foregoing, at any time after the Closing, at the
request of Buyer and without further consideration, the Company and
Seller will execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation and take such action as Buyer
may reasonably deem necessary or desirable in order to more effectively
consummate the transactions contemplated hereby and to vest in the
Buyer good and marketable title to the Shares without further cost or
expense to the Buyer.
(b) The Seller will cause the Company to cooperate with Buyer to
promptly develop plans for the management of the business after the
Closing, including, without limitation, plans relating to productivity,
marketing, operations and improvements, and the Company will further
cooperate with Buyer to provide for the implementation of such plans as
soon as practicable after the Closing. Subject to applicable Law, the
Seller will confer on a regular and reasonable basis with one or more
representatives of Buyer to report on material operational matters and
the general status of ongoing operations. This obligation of Seller
shall terminate at Closing.
(c) At all times from the date hereof until the Closing, each
party will promptly notify the other in writing of the occurrence of
any event which it reasonably believes will or may result in a failure
by such party to satisfy the conditions specified in this Article 4.
25
4.7. DISCLOSURE OF DEVELOPMENTS.
---------------------------
During the period prior to Closing, the Seller will promptly notify the
Buyer of any event or development of which they acquire knowledge, which, if
existing or occurring at or prior to the date of this Agreement, would have been
required to be set forth or described in the Disclosure Schedule or which is
necessary to correct any information in the Disclosure Schedule or in any
representation and warranty of the Seller which has been rendered inaccurate by
reason of such event or development.
4.8. PRESS RELEASES AND ANNOUNCEMENTS.
---------------------------------
Buyer and Seller agree that the existence, nature and terms and
conditions of this Agreement and discussions between the parties regarding the
transactions contemplated hereby will be treated as confidential by the parties.
Accordingly, each party agrees that it will not make any public comment
concerning or announcement of the transactions contemplated hereby prior to
Closing and will take reasonable steps to restrict knowledge of the transactions
contemplated hereby to those who need to know. Notwithstanding the foregoing,
the parties acknowledge and agree that as a public company, Parent is subject to
certain disclosure requirements under applicable securities laws. For this
reason, Parent reserves the right to disclose the existence of and the status of
negotiations at any time prior to Closing if it determines that the securities
laws or the rules of any stock exchange require such disclosure; provided that
each party will notify the other parties if it intends to make such a
disclosure. Following the Closing, Parent and Buyer may make any and all such
disclosures of the terms of this Agreement and the transactions contemplated
hereby as they deem appropriate.
4.9. TAX MATTERS.
------------
(a) No new elections with respect to Taxes, or any changes in
current elections with respect to Taxes, will be made after the date of
this Agreement.
(b) The Seller will, on the date hereof, provide the Buyer with
any clearance certificates or similar documents which may be required
by any state taxing authority in order to relieve the Buyer of any
obligation to withhold any portion of the Acquisition Price or to
assume any Liability with respect to sales taxes attributable to
operations of the Company prior to the Effective Date.
(c) The Seller and the Buyer will: (i) each provide the other, and
the Buyer will cause the Company to provide the Seller, with such
assistance as may reasonably be requested by any of them in connection
with the preparation of any Tax Return, audit or other examination by
any taxing authority or judicial or administrative proceedings relating
to liability for Taxes; (ii) each retain and provide the other, and the
Buyer will cause the Company to retain and provide the Seller, with any
records or other information which may be relevant to such Tax Return,
audit or examination, proceeding or determination; and (iii) each
provide the other with any final determination of any such audit or
examination, proceeding or determination that affects any amount
required to be shown on any Tax Return of the other for any period.
26
(d) Without limiting the generality of the foregoing, the Buyer
will retain, and will cause the Company to retain, and the Seller will
retain, until the applicable statutes of limitations (including any
extensions) have expired, copies of all Tax Returns, supporting work
schedules and other records or information which are relevant to such
returns for all tax periods or portions thereof ending before or
including the date hereof and will not destroy or otherwise dispose of
any such records without first providing the other party with a
reasonable opportunity to review and copy the same. The Seller will
request that records in the possession of their accountants be retained
by them for the customary retention period established by the firm (but
in no event less than ten (10) years) and that such records be made
available to the Buyer upon its request.
(e) Except as provided hereinbelow, the Company and the Seller
will exercise complete control over the handling, disposition and
settlement of any governmental inquiry, examination or proceeding (at
their sole cost and expense) that could result in a determination with
respect to Taxes due or payable by the Buyer or the Company for which
the Seller may be liable, or against which the Seller may be required
to indemnify the Buyer or the Company pursuant to this Agreement. The
Seller will promptly notify the Buyer if, in connection with any such
inquiry, examination or proceeding, any government authority proposes
in writing to make any assessment or adjustment with respect to items
of Taxes of the Company, which assessments or adjustments could affect
the Company following the date hereof, and will consult with the Buyer
with respect to any such proposed assessment or adjustment. The Buyer
will notify Seller in writing promptly upon learning of any such
inquiry, examination or proceeding. The Seller will not enter into any
settlement or litigation with respect to an inquiry, examination or
proceeding without the prior written consent of the Buyer, which
consent will not be unreasonably withheld. In the event the Seller is
not diligent or reasonable in his handling, disposition or settlement
of any such governmental inquiry, examination or proceeding, Buyer will
have the right, at Seller's expense, to pursue any and all remedies and
actions available to it relating to such governmental inquiry,
examination or proceeding and Seller will no longer exercise any
control over such governmental inquiry, examination or proceeding.
(f) Each Party will pay its own sales, use, transfer or
documentary taxes and recording and filing fees applicable to the
transactions contemplated by this Agreement.
(g) The Buyer and the Company will file and control any Tax
Returns required to be filed by the Company for periods beginning on or
after the Closing Date. The Seller agrees that he will provide, and
will cause his accountants and other representatives to provide, to the
Buyer on a timely basis the information, including, but not limited to,
all work papers and records relating to the Company, that it or the
accountants or other representatives have within their control and that
may be reasonably necessary or related to: (i) the preparation of any
and all Tax Returns, information returns and reports required to be
filed by the Buyer or the Company with governmental agencies; and (ii)
audits or other tax determinations or proceedings by or before such
agencies, such information to be provided in the form in which it has
in the past been maintained by the Company, the Seller, his respective
accountants or other representatives.
27
4.10. NON-COMPETITION COVENANT.
-------------------------
(a) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇") agrees that from the date hereof
and for the period ending July 31, 2004 (the "Restricted Period"),
▇▇▇▇▇▇ will not, for himself or on behalf of any person, partnership,
trust, corporation or other entity, other than the Company, either as
an employee, officer, director, partner, shareholder, consultant or
independent contractor, directly or indirectly:
(i) act, manage, consult, advise, or in any other capacity
whatsoever own, manage, or in any way "participate" in the
operation of any business competitive with the business of the
Company. For purposes of this subparagraph, the term "participate"
shall mean, in addition to the capacities listed above, to carry
on, or otherwise be engaged, or concerned or interested in, or act
as a consultant or advisor to, either solely or jointly, or
together with or as an employee, manager or agent for any other
person;
(ii) engage in any business substantially similar to that
carried on by the Company as of the date hereof within those areas
in the United States and foreign countries in which the Company is
doing business as of the date hereof or in which, at this time,
the Company contemplates doing business;
(iii) engage in providing products or services or offering to
provide products or services of the kind provided by the Company
as of the date hereof for those customers of the Company for whom
the Company: (A) is engaged in providing products or services as
of the date hereof, or (B) has either provided products or
services within the twelve (12) month period prior to the date
hereof, or (C) has contacted, prior to or as of the date hereof,
for the purpose of offering to provide products or services (all
of which are hereinafter referred to as the "Customers");
(iv) solicit or attempt to solicit the Customers for the
purposes of providing or offering to provide any products or
services of a type which the Company provides or contemplates
providing as of the date hereof, on behalf of those Customers,
whether directly or through any other persons, partnerships,
corporations or other entities; or
(v) solicit, interfere with or endeavor to entice away from
the Company any employee of the Company.
(b) Ownership by ▇▇▇▇▇▇, as a passive investment without any
management role or other active involvement, of less than five percent
(5%) of the outstanding shares of any company listed on a United States
stock exchange or publicly traded in the over-the-counter market will
not constitute a breach of this Section 4.10.
28
4.11 ACCOUNTING ACCRUALS.
--------------------
Buyer and Seller hereby consent and agree to the expense accruals
adjusting the net worth of the Company as described on Exhibit 4.11. They
further agree to review, adjust and agree to any additional or new expense
accrual as of Closing, and that none of the expense accruals as so agreed shall
be a claim against Seller for any breach of a representation or warranty
hereunder, or an adjustment to the purchase price for the Company Common Stock
being purchased hereunder.
5. CONDITIONS TO THE BUYER'S OBLIGATIONS.
Notwithstanding any other provision of this Agreement to the contrary,
the obligation of the Buyer to effect the transactions contemplated herein will
be subject to the satisfaction at or prior to the Closing of each of the
following conditions:
5.1. REPRESENTATIONS AND WARRANTIES TRUE.
------------------------------------
The representations and warranties of the Seller contained in this
Agreement, including, without limitation, in the Disclosure Schedule initially
delivered to the Buyer, will be in all material respects true, complete and
accurate as of the date when made and at and as of the Closing as though such
representations and warranties were made at and as of such time, except insofar
as the representations and warranties relate expressly and solely to a
particular date or period, in which case they shall be true and correct in all
material respects at the Closing with respect to such date or period.
5.2. PERFORMANCE.
------------
The Seller will have performed and complied in all material respects
with all agreements, covenants, obligations and conditions required by this
Agreement to be performed or complied with by the Seller on or prior to the
Closing.
5.3. REQUIRED APPROVALS AND CONSENTS.
--------------------------------
All action required by Law and otherwise to be taken by the Seller to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will have been duly and
validly taken. All Consents of or from all Authorities required hereunder to
consummate the transactions contemplated herein, will have been delivered, made
or obtained, and the Buyer will have received copies thereof.
5.4. ADVERSE CHANGES.
----------------
No material adverse change shall have occurred in the business,
financial condition, prospects, assets or operations of the Company since the
Most Recent Balance Sheet.
29
5.5. NO PROCEEDING OR LITIGATION.
----------------------------
No suit, action, investigation, inquiry or other proceeding by any
Authority or other person or entity will have been instituted or threatened
which delays or questions the validity or legality of the transactions
contemplated hereby or which, if successfully asserted, would individually or in
the aggregate, otherwise have a Material Adverse Effect on the Company's
business, financial condition, prospects, assets or operations.
5.6. LEGISLATION.
------------
No Law shall have been enacted which prohibits, restricts or delays the
consummation of the transactions contemplated hereby or any of the conditions to
the consummation of such transaction.
5.7. ACCEPTANCE BY COUNSEL TO THE BUYER.
-----------------------------------
The form and substance of all documents to be delivered at Closing
hereunder will be reasonably acceptable to the Buyer and ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, counsel to Buyer and Parent.
5.8. CERTIFICATES.
-------------
The Buyer will have received such certificates of Seller, in a form and
substance reasonably satisfactory to the Buyer, dated the Closing Date, to
evidence compliance with the conditions set forth in this Article 5 and such
other matters as may be reasonably requested by the Buyer.
5.9. NO OUTSTANDING EQUITY INTERESTS.
--------------------------------
The Seller will have caused the Company to terminate all outstanding
stock options, warrants, convertible securities and other rights to acquire
capital stock of the Company.
5.10. DUE DILIGENCE.
--------------
The Buyer will have received all information requested by it pursuant
to Section 4.3 of this Agreement, and shall be fully satisfied, determined in
its absolute sole discretion, with the results of its due diligence conducted of
Company, including, without limitation, review of Buyer's Phase I environmental
report and Buyer's other all environmental investigation.
30
5.11. ASSIGNMENT OF INVENTIONS.
-------------------------
The Seller and each employee of the Company will have assigned all of
their inventions, trade secrets and know-how relating to the Company's business,
to the Company, in a form and substance satisfactory to the Buyer.
5.12. DELIVERY OF COMPANY STOCK CERTIFICATES.
---------------------------------------
The Buyer will have received from Seller certificates representing the
Shares, properly endorsed for transfer, with signature guaranteed if so
requested by the Buyer.
5.13. APPROPRIATE DOCUMENTATION.
--------------------------
Buyer will have received, in a form and substance reasonably
satisfactory to Buyer, dated the Closing Date, all certificates and other
documents, instruments and writings to evidence the fulfillment of the
conditions set forth in this Article 5 as Buyer may reasonably request.
5.14. FINANCIAL STATEMENTS.
---------------------
Buyer shall have received the Financial Statements of the Company
referred to in Section 2.7 of this Agreement as being deliverable after the date
hereof and before the Closing.
5.15. FINANCING.
----------
Buyer shall have received assurances of financing for the stock
purchase satisfactory to Buyer.
5.16. LEASE AND OPTION AND PUT FOR REAL PROPERTY.
-------------------------------------------
Wamar Products, Inc. and ▇▇▇▇▇▇▇▇▇, L.L.C. shall have executed and
delivered to the Buyer the Lease and Option and Put for Real Property in the
forms of Exhibits 5.16.1. and 5.16.2.
5.17. ABSENCE OF CERTAIN CHANGES.
---------------------------
Except as set forth in the Disclosure Schedule, since the date of the
Most Recent Balance Sheet, the Company has owned and operated its assets,
properties and business in the ordinary course of business and consistent with
past practice. Without limiting the generality of the foregoing,
(a) the Company has not experienced any change which has had a
Material Adverse Effect on the Company or experienced any event or
failed to take any action which reasonably could be expected to result
in a Material Adverse Effect on the Company;
(b) the Company has not suffered any material loss, damage,
destruction of property or assets or other casualty to property or
assets (whether or not covered by insurance);
(c) the Company has not suffered any loss of officers, directors,
employees, dealers, distributors, independent contractors, customers or
suppliers which had or may reasonably be expected to result in a
Material Adverse Effect on the Company; and
31
(d) no event has taken place which if consummated following the
date hereof would constitute a violation of Section 4.1 hereof.
5.18. CUSTOMER.
---------
Company shall not have received any notice (written or oral) that any
material customer of the Company will terminate its relationship with the
Company or, as the case may be, significantly decrease its business with the
Company, as a result of the transactions contemplated by this Agreement or for
any other reason.
5.19. CONDUCT OF BUSINESS OF THE COMPANY.
-----------------------------------
During the period from the date of this Agreement to the Closing Date,
the Buyer shall have been satisfied in their sole and absolute discretion that
Seller has caused the Company to conduct its business and operations according
to its ordinary and usual course of business, to preserve substantially intact
its business organizations and to preserve its current relationships with
customers, employees, suppliers and other persons with which it has significant
business relations, and that there are no breaches any the obligations under
Section 4.1 hereof.
32
5.20 ACCRUALS.
---------
Seller and Buyer shall have agreed in writing as to the appropriate
accounting expense accruals described in Section 4.11.
6. CONDITIONS TO OBLIGATIONS OF THE SELLER.
Notwithstanding anything in this Agreement to the contrary, the
obligations of the Seller to effect the transactions contemplated herein will be
subject to the satisfaction at or prior to the Closing of each of the following
conditions:
6.1. REPRESENTATIONS AND WARRANTIES TRUE.
------------------------------------
The representations and warranties of the Buyer and Parent contained in
this Agreement will be in all material respects true, complete and accurate as
of the date when made and at and as of the Closing, as though such
representations and warranties were made at and as of such time, except for
changes permitted or contemplated in this Agreement, and except insofar as the
representations and warranties relate expressly and solely to a particular date
or period, in which case they will be true and correct in all material respects
at the Closing with respect to such date or period.
6.2. PERFORMANCE.
------------
The Buyer and Parent will have performed and complied in all material
respects with all agreements, covenants, obligations and conditions required by
this Agreement to be performed or complied with by the Buyer and the Parent at
or prior to the Closing.
6.3. CORPORATE APPROVALS.
--------------------
All action required to be taken by the Board of Directors of both the
Buyer and Parent to authorize the execution, delivery and performance of this
Agreement by the Buyer and Parent and the consummation of the transactions
contemplated hereby will have been duly and validly taken.
6.4. ADVERSE CHANGES.
----------------
No material adverse change shall have occurred in the business,
financial condition, prospects, assets or operations of the Buyer or Parent
since the date of this Agreement.
6.5. NO PROCEEDING OR LITIGATION.
----------------------------
No suit, action, investigation, inquiry or other proceeding by any
Authority or other person or entity will have been instituted or threatened
which delays or questions the validity or legality of the transactions
contemplated hereby.
33
6.6. OPINION OF SELLER' TAX COUNSEL.
-------------------------------
The Seller will have received an opinion from ▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.L.C.,
tax counsel to Seller, dated the Closing Date, regarding the tax consequences of
the transactions contemplated herein reasonably satisfactory to Seller.
6.7. ACCEPTANCE BY COUNSEL.
----------------------
The form and substance of all documents to be delivered to Seller at
Closing hereunder will be reasonably acceptable to ▇▇▇▇▇▇▇ & Bowie, P.L.C.,
counsel to the Seller.
6.8. CERTIFICATES.
-------------
The Buyer will have furnished to the Seller such certificates and other
documents, instruments and writings to evidence the fulfillment of the
conditions set forth in this Article 6 as the Seller may reasonably request.
6.9. RECEIPT OF ACQUISITION PRICE.
-----------------------------
The Buyer shall have delivered to the Seller certificates for 200,000
of the Parent Shares.
6.10. ACCRUALS.
--------
Seller and Buyers shall have agreed in writing as to the appropriate
accounting expense accruals described in Section 4.11.
6.11. MARKET VALUE OF PARENT SHARES.
------------------------------
The Parent Shares to be delivered to Seller will have a minimum value
reasonably acceptable to Seller at the Closing Date.
6.12. LEASE AND OPTION AND PUT FOR REAL PROPERTY.
-------------------------------------------
Wamar Products, Inc. and ▇▇▇▇▇▇▇▇▇, L.L.C. shall have executed and
delivered to the Seller the Lease and Option and Put for Real Property in the
forms of Exhibits 5.16.1 and 5.16.2 hereto.
7. TERMINATION AND ABANDONMENT.
7.1. TERMINATION BY MUTUAL CONSENT.
------------------------------
This Agreement may be terminated at any time prior to the Closing by
the written consent of the Seller and the Buyer.
34
7.2. TERMINATION BY EITHER THE SELLER OR BUYER.
-----------------------------------------
This Agreement may be terminated by either the Seller or Buyer if:
(a) the Closing has not been consummated by 5:00 p.m. (Michigan
time) on August 6, 1999 (provided that the right to terminate this
Agreement under this Section 7.2(a) will not be available to any party
whose failure to fulfill any obligation under this Agreement has been
the cause of or resulted in the failure of the Closing to occur on or
before such date); or
(b) any court of competent jurisdiction in the United States or
some other governmental body or regulatory authority will have issued
an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Closing or
permitting consummation of the Closing only subject to a condition or
restriction unacceptable to Buyer and such order, decree, ruling or
other action will have become final and nonappealable.
7.3. TERMINATION BY BUYER.
---------------------
This Agreement may be terminated at any time prior to the Closing Date
by Buyer, if:
(a) the Seller has failed to comply in any material respect with
any of the covenants, conditions or agreements contained in this
Agreement required to be performed or complied with by the Seller prior
to the Closing Date;
(b) any representation or warranty of the Seller contained in this
Agreement is or becomes untrue or incorrect in a material way (except
for changes permitted by this Agreement and those representations which
address matters only as of a particular date that remain true and
correct as of such date); or
(c) Buyer is not fully satisfied (in its sole discretion) with the
results of its due diligence conducted under this Agreement, including,
without limitation, its Phase I Environmental Report or any other
environmental investigation, and its inspection of the "premises"
subject to the "Lease."
7.4. TERMINATION BY THE SELLER.
--------------------------
This Agreement may be terminated prior to the Closing Date by action of
the Seller, if:
(a) the Buyer has failed to comply in any material respect with
any of the covenants, conditions or agreements contained in this
Agreement required to be performed on or complied with by the Buyer
prior to the Closing Date;
(b) any representation or warranty of the Buyer or Parent
contained in this Agreement is or becomes untrue or incorrect in a
material way (except for changes permitted by this Agreement and those
representations which address matters as of a particular date that
remain true and correct as of such date);
35
(c) Seller is not fully satisfied (in his sole discretion) with
the results of his due diligence of buyer and parent conducted under
this Agreement.
7.5. PROCEDURE AND EFFECT OF TERMINATION.
------------------------------------
In the event of termination of this Agreement and abandonment of the
transactions contemplated hereby by the Seller or Buyer pursuant to this Article
7, written notice must be given to all other parties and this Agreement will
terminate (other than Sections 4.2, 4.4, 4.8, 8.2, 8.3, 9.1, 9.2, 9.3 and 9.13)
and the transactions contemplated hereby will be abandoned, without further
action by any of the parties hereto. If this Agreement is terminated as provided
herein:
(a) Upon request therefor, each of the parties hereto will
redeliver all documents, workpapers and other material of the other
parties relating to the transactions contemplated hereby, whether
obtained before or after the execution hereof, to the party furnishing
the same;
(b) No party will have any further obligation to the other party
to this Agreement pursuant to the terms of this Agreement except for
liability of any breach of this Agreement; and
(c) All filings, applications and other submissions made pursuant
to the terms of this Agreement will, to the extent practicable, be
withdrawn from the agency or other person to which made.
8. SURVIVAL; INDEMNIFICATION; RELEASE.
8.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
INVESTIGATION.
------------------------------------------------------
All representations and warranties, covenants and agreements contained
herein and in the exhibits hereto will survive the Closing for a period of two
(2) years after Closing, except that matters relating to Sections 2.16 and 2.17
shall continue until the expiration of the applicable statute of limitation
provided by applicable Law, and any matter with respect to Section 2.21 shall
survive after Closing for a period of five (5) years.
8.2. INDEMNIFICATION BY THE BUYER.
-----------------------------
The Buyer agrees to indemnify, defend and hold the Seller harmless from
and against any and all losses, liabilities, obligations, demands, judgments,
settlements, damages (but excluding consequential damages, lost profits or
punitive damages) or expense (including, but not limited to, interest,
penalties, fees and reasonable professional fees and expenses) and against all
claims in respect thereof (including, without limitation, amounts paid in
settlement and costs of investigation) or diminution in value, whether or not
involving a third-party claim (collectively, "Seller's Loss" or "Seller's
Losses" to which the Seller may suffer or incur, directly or indirectly, as a
result from or in connection with:
36
(a) any untrue representation of, or breach of warranty by, the
Buyer in any part of this Agreement;
(b) the breach of or nonfulfillment of any covenant, agreement or
undertaking of Buyer in this Agreement; and
(c) any obligation for Taxes attributable to income of the Company
for any period (or portion thereof) following the Effective Date.
8.3. INDEMNIFICATION BY THE SELLER.
------------------------------
The Seller agrees to indemnify Buyer and its subsidiaries and
affiliates (including the Company following Closing) and each of their
respective shareholders, officers, directors, employees, subsidiaries and
affiliates (collectively the "Buyer Indemnified Parties") against all losses,
liabilities, obligations, demands, judgments, settlements, damages (but
excluding any claims for consequential damages, lost profits or punitive damages
suffered directly by Buyer as opposed to consequential damages, lost profits or
punitive damages paid by Buyer to a third party), Taxes, or expenses (including,
but not limited to, interest, penalties, fees, and reasonable professional fees
and expenses) and against all claims in respect thereof (including, without
limitation, amounts paid in settlement and costs of investigation) or diminution
in value, whether or not involving a third-party claim (herein referred to
collectively as "Buyer's Losses" or individually as a "Buyer's Loss") to which
the Buyer Indemnified Parties may become subject to or which they may suffer or
incur, directly or indirectly, as a result from or in connection with:
(a) any untrue representation of or breach of warranty, by the
Seller in any part of this Agreement;
(b) the breach of or nonfulfillment of any covenant, agreement or
undertaking of the Seller in this Agreement;
(c) any obligation for Taxes of the Seller for any period (or
portion thereof) prior to the Effective Date;
8.4. CLAIMS FOR INDEMNIFICATION.
---------------------------
(a) General. The parties intend that all indemnification claims be
made as promptly as practicable by the party seeking indemnification
(the "Indemnified Party"). Whenever any claim shall arise for
indemnification hereunder the Indemnified Party shall promptly notify
the party from whom indemnification is sought (the "Indemnifying
Party") of the claim and, when known, the facts constituting the basis
for such claim (the "Notice"). The failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any
liability that it may have to the Indemnified Party except to the
extent the Indemnifying Party demonstrates that the defense of such
action is materially prejudiced thereby. For purposes of this
Agreement, the date the Notice is first mailed or otherwise released
for dispatch to the Indemnifying Party is hereinafter referred to as
the "Notice Delivery Date."
37
(b) Claims by Third Parties. With respect to claims made by third
parties, the Indemnifying Party shall be entitled to assume control of
the defense of such action or claim with counsel reasonably
satisfactory to the Indemnified Party; provided, however, that:
(i) the Indemnified Party shall be entitled to participate in
the defense of such claim and to employ counsel at its own expense
to assist in the handling of such claim;
(ii) no Indemnifying Party shall consent to (A) the entry of
any judgment or enter into any settlement that does not include as
an unconditional term thereof the giving by each claimant or
plaintiff to each Indemnified Party of a release from all
liability in respect of such claim or (B) if, pursuant to or as a
result of such consent or settlement, injunctive or other
equitable relief would be imposed against the Indemnified Party or
such judgment or settlement could materially interfere with the
business, operations or assets of the Indemnified Party; and
(iii) if the Indemnifying Party does not assume control of the
defense of such claim in accordance with the foregoing provisions
within ten (10) business days after the Notice Delivery Date, the
Indemnified Party shall have the right to defend such claim in
such manner as it may deem appropriate at the cost and expense of
the Indemnifying Party, and the Indemnifying Party will promptly
reimburse the Indemnified Party therefore in accordance with this
Article 8; provided that the Indemnified Party shall not be
entitled to consent to the entry of any judgment or enter into any
settlement of such claim that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to each
Indemnifying Party of a release from all liability in respect of
such claim without the prior written consent of the Indemnifying
Party if, pursuant to or as a result of such consent or
settlement, injunctive or other equitable relief would be imposed
against the Indemnifying Party or such judgment or settlement
could materially interfere with the business, operations or assets
of the Indemnifying Party.
(c) Remedies Cumulative. The remedies provided herein shall be
cumulative and shall not preclude assertion by any party of any rights
or the seeking of any other remedies against any other party.
38
8.5. RELEASE OF PRIOR CLAIMS.
------------------------
The Seller hereby releases the Company, Buyer and their respective
subsidiaries, officers, directors, shareholders, employees and affiliates
(collectively, the "Released Parties") of and from any and all claims,
complaints, causes of action or demands of whatever kind, known or unknown
(collectively, the "Claims"), which the Seller has or may have against the
Released Parties for any actions, conduct, decisions, behavior or events
relating to or arising out of either of the Seller's status or relationship as
an employee, officer, director or shareholder of the Company. The Seller
understands that this release extends to, but is not limited to, Claims for
breach of contract, breach of any express or implied promise, retaliation,
breach of public policy, negligence, intentional infliction of emotional
distress, defamation or any other tortious conduct or any Claims under the
federal or state securities laws.
9. MISCELLANEOUS PROVISIONS.
9.1. EXPENSES.
---------
The Buyer and Seller shall bear their own costs and expenses, subject
to the obligation of Wamar Products, Inc. to bear the costs and expenses of
Seller to a maximum amount of $30,000, relating to the transactions contemplated
hereby, including, without limitation, fees and expenses of legal counsel,
accountants, investment bankers, brokers or finders, printers, copiers,
consultants or other representatives for the services used, hired or connected
with the transactions contemplated hereby.
9.2. AMENDMENT AND MODIFICATION.
---------------------------
Subject to applicable Law, this Agreement may be amended or modified by
the parties hereto at any time prior to the Closing with respect to any of the
terms contained herein; provided, however, that all such amendments and
modifications must be in writing duly executed by all of the parties hereto.
9.3. WAIVER OF COMPLIANCE; CONSENTS.
-------------------------------
Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the party
entitled hereby to such compliance, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. No single or partial exercise of a right or remedy will preclude any
other or further exercise thereof or of any other right or remedy hereunder.
Whenever this Agreement requires or permits the consent by or on behalf of a
party, such consent will be given in writing in the same manner as for waivers
of compliance.
9.4. NO THIRD PARTY BENEFICIARIES.
-----------------------------
Nothing in this Agreement will entitle any person or entity (other than
a party hereto and his, her or its respective successors and assigns permitted
hereby) to any claim, cause of action, remedy or right of any kind.
39
9.5. NOTICES.
--------
All notices, requests, demands and other communications required or
permitted hereunder must be made in writing and will be deemed to have been duly
given and effective: (i) on the date of delivery, if delivered personally; (ii)
on the earlier of the fourth (4th) day after mailing or the date of the return
receipt acknowledgment, if mailed, postage prepaid, by certified or registered
mail, return receipt requested; or (iii) on the date of transmission, if sent by
facsimile, telecopy, telegraph, telex or other similar telegraphic
communications equipment:
If to the Seller: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.L.C.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇., ▇.▇.
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as the Seller furnish to the Buyer in writing
in accordance with this subsection.
If to Buyer: Clarion Plastics Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to: Clarion Technologies, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as Buyer furnishes to the other parties
hereto in writing in accordance with this subsection.
40
9.6. ASSIGNMENT.
-----------
This Agreement and all of the provisions hereof will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder will be assigned (whether voluntarily,
involuntarily, by operation of law or otherwise) by any of the parties hereto
without the prior written consent of the other parties, provided, however, that
the Buyer may assign its rights (but not its obligations) under this Agreement,
in whole or in any part, and from time to time, to a wholly owned, direct or
indirect, subsidiary of Buyer or to Parent.
9.7. GOVERNING LAW.
--------------
This Agreement and the legal relations among the parties hereto will be
governed by and construed in accordance with the internal substantive laws of
the State of Michigan (without regard to the laws of conflict that might
otherwise apply) as to all matters, including without limitation, matters of
validity, construction, effect, performance and remedies.
9.8. COUNTERPARTS.
-------------
This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.9. HEADINGS.
---------
The table of contents and the headings of the sections and subsections
of this Agreement are inserted for convenience only and shall not constitute a
part hereof.
9.10. ENTIRE AGREEMENT.
-----------------
This Agreement, the Disclosure Schedule, the Confidentiality Agreements
dated May 6, 1999, copies of which are attached hereto as Exhibit 9.12 (the
"Confidentiality Agreements") and the exhibits and other writings referred to in
this Agreement, in the Disclosure Schedule or in the Confidentiality Agreements
or any such exhibit or other writing are part of this Agreement, together they
embody the entire agreement and understanding of the parties hereto in respect
of the transactions contemplated by this Agreement and together they are
referred to as the "Agreement". There are no restrictions, promises, warranties,
agreements, covenants or undertakings, other than those expressly set forth or
referred to in this Agreement. This Agreement supersedes all other prior
agreements and understandings between the parties with respect to the
transaction or transactions contemplated by this Agreement, including, but not
limited to, the letter of intent dated May 6, 1999. Provisions of this Agreement
will be interpreted to be valid and enforceable under applicable Law to the
extent that such interpretation does not materially alter this Agreement;
provided, however, that if any such provision shall become invalid or
unenforceable under applicable Law such provision will be stricken to the extent
necessary and the remainder of such provisions and the remainder of this
Agreement will continue in full force and effect.
41
9.11. INJUNCTIVE RELIEF.
------------------
It is expressly agreed among the parties hereto that monetary damages
would be inadequate to compensate a party hereto for any breach by any other
party of its covenants and agreements in Sections 4.2, 4.4, 4.8 and 4.10 hereof.
Accordingly, the parties agree and acknowledge that any such violation or
threatened violation will cause irreparable injury to the other and that, in
addition to any other remedies which may be available, such party will be
entitled to injunctive relief against the threatened breach of Sections 4.2,
4.4, 4.8 and 4.10 hereof or the continuation of any such breach without the
necessity or proving actual damages and may seek to specifically enforce the
terms thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"SELLER"
___________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
"BUYER"
CLARION PLASTICS TECHNOLOGIES,
INC., an Ohio corporation
By:_________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Executive
Officer
"PARENT"
CLARION TECHNOLOGIES, INC.,
a Delaware corporation
By:_________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Chief Executive
Officer
42