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EXHIBIT 10.16
STOCK PURCHASE AGREEMENT
AMONG
▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
INDIVIDUALLY AND AS TRUSTEE OF THE ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ REVOCABLE LIVING TRUST,
▇▇▇▇▇ ▇▇▇▇▇▇ AND VS ACQUISITION CO.
NOVEMBER 8, 1996
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INDEX
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ARTICLE 1 -- PURCHASE AND SALE OF SHARES.................................... 2
1.1 Purchase and Sale of Shares....................................... 2
1.2 Purchase Price.................................................... 2
1.3 Payment of the Purchase Price..................................... 3
1.4 Preparation of Closing Net Worth Statement........................18
1.5 Allocation of Purchase Price......................................20
ARTICLE 2 -- CLOSING........................................................20
2.1 Closing...........................................................20
2.2 Closing Date Deliveries...........................................21
ARTICLE 3 -- REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇ ▇▇▇▇▇▇...............24
3.1 Corporate Standing and Authority..................................24
3.2 Stock.............................................................26
3.3 Financial Statements..............................................27
3.4 No Material Changes...............................................30
3.5 Leases and Real Estate............................................32
3.6 Contracts.........................................................34
3.7 Employee Benefit Plans............................................36
3.8 Employees.........................................................37
3.9 Governmental Regulations and Litigation...........................38
3.10 Environmental Compliance..........................................38
3.11 Labor and Employment Relations....................................42
3.12 Title to and Operating Condition of Assets........................42
3.13 Intangible Assets.................................................43
3.14 Insurance.........................................................44
3.15 Customers and Commitments.........................................45
3.16 Finder's or Broker's Fee..........................................46
3.17 Licenses, Permits and Approvals...................................47
3.18 Competitive Interests.............................................47
3.19 Related Party Transactions........................................47
3.20 Sellers Non-Residents.............................................48
3.21 General Warranty..................................................48
3.22 Continuation of Representations and Warranties of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇..48
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES OF BUYER........................49
4.1 Corporate Standing and Authority..................................49
4.2 Ownership of Buyer, VS Holdings, Inc. and VS Holdings No. 2, Inc..50
4.3 Finder's or Broker's Fee..........................................51
4.4 Litigation........................................................51
4.8 General Warranty..................................................52
4.9 Continuation of Representations and Warranties of Buyer...........52
ARTICLE 5 -- INDEMNITIES....................................................53
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5.1 Indemnification by Sellers....................................53
5.2 Limitations on Purchasers Indemnifiable Claims ...............55
5.3 Indemnification by Buyer .....................................59
5.4 Limitations on Sellers Indemnifiable Claims ..................60
5.5 Third Party Claims ...........................................61
5.6 Payment and Interest .........................................62
5.7 Presentment of Claims ........................................63
5.8 Arbitration ..................................................64
ARTICLE 6 - CONVENANTS ...............................................64
6.1 Convenants After Closing .....................................64
6.2 Other Covenants ..............................................67
ARTICLE 7 - MISCELLANEOUS .............................................68
7.1 Additional Documents .........................................68
7.2 Interpretation ...............................................68
7.3 Entire Agreement .............................................68
7.4 Notices ......................................................69
7.5 Governing Law ................................................69
7.6 Waivers ......................................................70
7.7 Expenses .....................................................70
7.8 Partial Invalidity ...........................................70
7.9 Assignment ...................................................71
7.10 No Third Party Beneficiaries ................................71
7.11 Counterparts ................................................71
7.12 Dollars .....................................................71
7.13 Fees and Expenses ...........................................71
7.14 Knowledge ...................................................72
7.15 Press Releases and Public Announcements .....................72
7.16 Schedules ...................................................72
7.17 Affiliate ...................................................72
7.18 Registration ................................................72
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement"), is made as of the ____ day of
November, 1996, by and among ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, individually and as trustee of the
▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇ Revocable Living Trust under agreement dated December 17,
1992 ("▇▇▇▇▇▇▇ ▇▇▇▇▇▇"), residing in Bloomfield Hills, Michigan, and ▇▇▇▇▇
▇▇▇▇▇▇ ("▇▇▇▇▇ ▇▇▇▇▇▇"), residing in Bloomfield Hills, Michigan, (▇▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ are collectively referred to herein as the "Sellers"),
and VS ACQUISITION CO., a Nova Scotia company, ("Buyer").
WITNESSETH:
WHEREAS, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ owns all of the issued and outstanding shares of
capital stock of ▇▇▇▇▇▇ Holdings Limited ("▇▇▇▇▇▇ Ltd."), an Ontario
corporation, and, ▇▇▇▇▇▇ Holdings USA, Inc. d/b/a ▇▇▇▇▇▇ International, an
Indiana corporation ("▇▇▇▇▇▇ Holdings"), and twenty-four (24%) percent of the
issued and outstanding shares of capital stock of North American Precision Tool
Ltd. ("NAPT"), an Ontario corporation (▇▇▇▇▇▇ Ltd., ▇▇▇▇▇▇ Holdings and NAPT
are collectively referred to herein as the "Companies");
WHEREAS, ▇▇▇▇▇ ▇▇▇▇▇▇ owns seventy-six (76%) percent of the issued and
outstanding shares of capital stock of NAPT;
WHEREAS, ▇▇▇▇▇▇ Ltd. owns all of the issued and outstanding shares of
capital stock of ▇▇▇▇▇▇ Stamping Corporation (the "Subsidiary"), an Ontario
corporation, which in turn owns the following trade names or divisions: ▇▇▇▇▇▇
Glencoe; Talbot Assembly; MTJ Enterprises; ATF Automotive Group; and ▇▇▇▇▇▇
Modular Assembly (the Companies and the Subsidiary are sometimes collectively
referred to herein as the "▇▇▇▇▇▇ Group" and each individually a "▇▇▇▇▇▇ Group
Member"); and
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WHEREAS, the Sellers desire to sell to the Buyer, and the Buyer desires to
purchase from the Sellers, all of the issued and outstanding shares of capital
stock of ▇▇▇▇▇▇ Ltd. (the "▇▇▇▇▇▇ Ltd. Shares"), NAPT (the "NAPT Shares") and
▇▇▇▇▇▇ Holdings (the "▇▇▇▇▇▇ Holdings Shares") (the ▇▇▇▇▇▇ Ltd. Shares, the
NAPT Shares and the ▇▇▇▇▇▇ Holdings Shares are collectively referred to herein
as the "Shares"), for the consideration, upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth herein, the parties hereto agree as follows:
ARTICLE 1 - PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Shares. One the Closing Date (as hereinafter
defined), upon the terms and subject to the satisfaction of the conditions
precedent set forth in this Agreement, Sellers shall sell, transfer, assign,
convey and deliver the Shares to Buyer, and Buyer shall purchase and acquire
the Shares from Sellers.
1.2 Purchase Price. The purchase price shall be as follows:
(a) The purchase price for the NAPT Shares (the "NAPT Share Purchase
Price") shall be equal to the sum of One Million Eight Hundred Thousand
(Cdn. $1,800,000) Cdn. Dollars.
(b) The purchase price for the ▇▇▇▇▇▇ Ltd. Shares (the "▇▇▇▇▇▇ Ltd.
Share Purchase Price") shall be equal to the sum of:
(i) Ten Million Six Hundred Ten Thousand Four Hundred Sixty
(Cdn. $10,610,460) Cdn. Dollars (the "Initial Amount"), which amount
shall be subject to adjustment as follows:
(A) in the event that the Consolidated Net Worth (as
hereinafter defined) as of the Closing Date is less than
negative Two
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Million One Hundred Ninety Four Thousand Three Hundred
Twenty Eight (Cdn. -$2,194,328.00) Cdn. Dollars (the "Base
Net Worth"), then the Initial Amount shall be subject to
reduction as provided in Section 1.4 hereof;
(B) in the event that the EBIT (as hereinafter
defined) for the calendar year ending December 31, 1996
shall be less than Seven Million Five Hundred Thousand (Cdn.
$7,500,000) Cdn. Dollars, then the Initial Amount shall be
subject to reduction as provided in Section 1.3(a)(iii)
hereof; or
(C) in the event that the EBIT for the calendar year
ending December 31, 1997 shall be greater than Six Million
Five Hundred Thousand (Cdn. $6,500,000) Cdn. Dollars or less
than Six Million (Cdn. $6,000,000) Cdn. Dollars, then the
Initial Amount shall be subject to adjustment as provided in
Section 1.3(a)(iv) hereof;
(ii) the Earn-Out Amounts (as hereinafter defined); and
(iii) Six Hundred Fifty Eight Thousand Three Hundred Twenty Five
(U.S. $658,325) U.S. Dollars (the "Note Amount").
(c) The aggregate purchase price for the ▇▇▇▇▇▇ Holdings Shares (the
"▇▇▇▇▇▇ Holdings Share Purchase Price") shall be equal to the sum of One
Thousand and 00/100 (Cdn. $1,000) Cdn. Dollars.
1.3 Payment of the Purchase Price. The NAPT Share Purchase Price shall be
paid by Buyer to Sellers (in accordance with the NAPT Share Purchase Price
allocation under Section 1.5 hereof) in full at the Closing by certified check
or wire transfer. The ▇▇▇▇▇▇ Holdings Share Purchase
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Price shall be paid by Buyer to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in full at the Closing by
certified check or wire transfer. The ▇▇▇▇▇▇ Ltd. Share Purchase Price shall be
paid by Buyer to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ as follows:
(a) The Initial Amount shall be paid as follows:
(i) Nine Million One Hundred Ten Thousand Four Hundred Sixty
(Cdn. $9,110,460) Cdn. Dollars (the "Cash Payment") shall be paid
to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ at the Closing by certified check or wire
transfer;
(ii) One Million Five Hundred Thousand and 00/100 (Cdn.
$1,500,000.00) Cdn. Dollars (the "Escrowed Amount") shall be
placed into escrow at the Closing with Comerica Bank, who shall
place such funds in an interest bearing demand account, and paid
to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and/or Buyer in accordance with Section 1.4
hereof; and
(iii) in the event that the EBIT for the calendar year
ending December 31, 1996 is less than Seven Million Five Hundred
Thousand (Cdn. $7,500,000) Cdn. Dollars, then ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
shall pay to the Buyer on March 31, 1997 an amount equal to the
lesser of (A) Four Hundred Ninety Seven Thousand (Cdn. $497,000)
Cdn. Dollars, or (B) the amount by which EBIT for the calendar
year ending December 31, 1996 is less than Seven Million Five
Hundred Thousand (Cdn. $7,500,000) Cdn. Dollars;
(iv) in the event that the EBIT for the calendar year ending
December 31, 1997 is:
(A) greater than Six Million Five Hundred Thousand
(Cdn. $6,500,000) Cdn. Dollars, then in such event:
(i) Buyer shall pay to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ on March 31,
1998 an amount equal to the lesser of (a) One Million
(Cdn.
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$1,000,000) Cdn. Dollars or (b) fifty (50%)
percent of the amount by which such EBIT
shall be in excess of Six Million Five Hundred
Thousand (Cdn. $6,500,000) Cdn. Dollars, less any
applicable withholding required pursuant to
Section 116 (as hereinafter defined); and
(ii) the EBIT Threshold (as hereinafter
defined) for purposes of the 1998 Earn-Out (as
hereinafter defined) shall be reduced by an
amount equal to the lesser of (a) One Million
(Cdn. $1,000,000) Cdn. Dollars or (b) fifty (50%)
percent of the amount by which such EBIT shall be
in excess of Six Million Five Hundred Thousand
(Cdn. $6,500,000) Cdn. Dollars;
(B) less than Six Million (Cdn. $6,000,000) Cdn.
Dollars, then in such event;
(i) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall pay to Buyer on
March 31, 1998 an amount equal to the lesser of
(a) One Million (Cdn. $1,000,000) Cdn. Dollars or
(b) fifty (50%) percent of the amount by which
such EBIT shall be less than Six Million (Cdn.
$6,000,000) Cdn. Dollars;
(ii) the EBIT Threshold for purposes of the
1998 Earn-Out shall be increased by an amount
equal to the lesser of (i) One Million (Cdn.
$1,000,000) Cdn. Dollars or (ii) fifty (50%)
percent of the amount by which such EBIT shall be
less than Six Million (Cdn. $6,000,000) Cdn.
Dollars; and
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(iii) the Conversion Threshold and the
Maximum Earn-Out Amount shall each be increased by
an amount equal to the lesser of (i) One Million
(Cdn. $1,000,000) Cdn. Dollars or (ii) fifty (50%)
percent of the amount by which such EBIT shall be
less than Six Million (Cdn. $6,000,000) Cdn.
Dollars.
(b) An amount (the "Earn-Out Amounts") not to exceed the Maximum
Earn-Out Amount (as hereinafter defined), which shall be paid to ▇▇▇▇▇▇▇
▇▇▇▇▇▇ in accordance with the following:
(i) With respect to each of the calendar years ending
December 31, 1998 and December 31, 1999 (which, together with the
calendar years ending December 31, 1996 and December 31, 1997, are
the referred to herein as the "EBIT Years"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be
paid the Earn-Out Percentage (as hereinafter defined) of the amount
by which the EBIT (as hereinafter defined) shall be in excess of Six
Million Five Hundred Thousand (Cdn. $6,500,000) Cdn. Dollars (the
"EBIT Threshold") (which EBIT Threshold shall be subject to
adjustment as provided in Section 1.3(a)(iv) hereof);
(ii) For each of such calendar years, the Earn-Out Percentage
shall be (A) one hundred (100%) percent up to and until the
cumulative total of the Earn-Out Amounts payable under this
Section 1.3(b) shall total Ten Million (Cdn. $10,000,000) Cdn.
Dollars (the "Conversion Threshold") (which Conversion Threshold
shall be subject to adjustment as provided in Section 1.3(a)(iv)
hereof); and (B) fifty (50%) percent commencing as of that point, if
any, in either of such calendar years in which the cumulative total
of the Earn-Out Amounts payable
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hereunder shall total the Conversion Threshold; provided, however
that notwithstanding the foregoing, in no event shall the cumulative
total of all Earn-Out Amounts payable hereunder exceed the sum of
Fifteen Million (Cdn. $15,000,000) Cdn. Dollars (the "Maximum
Earn-Out Amount")(which Maximum Earn-Out Amount shall be subject to
adjustment as provided in Section 1.3(a)(iv) hereof).
(iii) "EBIT" means the consolidated sum of the Net Income and
Losses (as hereinafter defined) of the ▇▇▇▇▇▇ Group and Buyer
(collectively, the "New ▇▇▇▇▇▇ Group", and each individually a
"New ▇▇▇▇▇▇ Group Member") for a calendar year consisting of twelve
(12) consecutive months determined in accordance with GAAP (as
hereinafter defined) on a basis consistent with the historic
practices and methodologies used by the ▇▇▇▇▇▇ Group for the calendar
years 1994 and 1995, adjusted as follows:
(a) There shall be no deduction for or amortization of any
interest expenses, loan finance costs, loan restructuring costs,
loan refinancing costs, loan administration costs, loan
prepayment costs or other similar material fees or charges by
any lender, or any lessor under any capital leases;
(b) There shall be no deduction for any income taxes (or any
penalties, interest, or fines relating thereto);
(c) EBIT shall not include any deduction for or benefit of
any additional charges for depreciation or amortization, or
incremental changes in depreciation or amortization,
arising out of (i) the transactions contemplated by this
Agreement, including, without limitation, with respect to the
Amalgamation (as hereinafter defined) or any covenant
not-to-compete, intangible assets, goodwill or going concern
value recorded as a result of the
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transactions contemplated by this Agreement, (ii) any merger,
amalgamation, consolidation, reorganization, restructuring or
initial public offering affecting the New ▇▇▇▇▇▇ Group, or (iii)
any changes in depreciation or amortization periods, practices
or methodologies following the Closing Date,
(d) EBIT shall not include any deduction for or benefit of
any loss, gain, income, cost or expense relating to any
issuance or redemption of stock, public or private sale
of stock or any merger, amalgamation, consolidation,
reorganization or restructuring affecting the New ▇▇▇▇▇▇ Group;
(e) There shall be no deduction for any management,
administrative, accounting, sales, marketing or other expenses,
charged by Buyer or any Affiliate (as hereinafter defined) of
Buyer without the prior written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (which
consent shall not be unreasonably withheld), except to the
extent such expenses are (i) directly incurred for the New
▇▇▇▇▇▇ Group and not an allocation of the cost of the resources,
overhead, personnel or other indirect costs of the Buyer or any
Affiliate of Buyer, (ii) for services directly rendered by an
employee or outside contractor of the Buyer or any Affiliate of
Buyer, (iii) consistent with historical practices and in
replacement of and not in excess of existing levels of such
expenses, and (iv) not in excess of Two Hundred Thousand (Cdn.
$200,000) Cdn. Dollars per year;
(f) EBIT shall not be increased or decreased as a result of
any changes in accounting principles or methodology (except
to the extent such changes are made to conform to GAAP
where GAAP does not permit the prior practice);
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(g) Inventory shall calculated on a lower cost of cost or
market, first-in, first-out basis;
(h) Extraordinary items of income, gains or losses (as
determined in accordance with GAAP) shall be excluded;
(i) Any loss or expense recorded during any EBIT Year
which is recovered from insurance carriers, third parties, or
Sellers (whether pursuant to claims for indemnity, set-off or
otherwise) during such EBIT Year shall be excluded and the EBIT
for such year shall not include the recovery as income;
provided, however, in the event any such recovery occurs in a
year other than the EBIT Year in which such loss or expense is
recorded, then in such event the EBIT for the EBIT Year in which
such loss or expense was recorded shall be recomputed taking
into effect such recovery and the EBIT for the EBIT Year in
which such recovery occurred shall not include the recovery as
income;
(j) EBIT shall not be increased or decreased for the
carryover or carryback of operating income or losses generated
in other years;
(k) There shall be no deduction for design or engineering
costs in excess of those amounts set forth on Schedule 1.3(b)(i)
to the extent such excess costs relate to specific
products, services, programs or platforms not listed on Schedule
1.3(b)(ii) (the "Scheduled Items"); provided, however,
notwithstanding the foregoing, such excess design or engineering
costs shall be deducted to the extent that they result in
additional income during an EBIT Year;
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(l) There shall be no deduction for any additional or
incremental depreciation or amortization charges arising out of
any capital expenditures in excess of those set forth in
Schedule 1.3(b)(iii) to the extent such excess costs relate to
specific products, services, programs or platforms other than
the Scheduled Items; provided, however, notwithstanding the
foregoing, such excess capital expenditure charges shall be
deducted to the extent that they result in additional income
during an EBIT Year;
(m) There shall be no deduction for any accrual or
payments to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ pursuant to Sections 4(c) and
4(d) of the Employment Agreement (as hereinafter defined);
(n) There shall be no deduction for any expense, cost or
amortization arising out of the accrual or payment of any
Earn-Out Amounts, or for any costs or expenses incurred in
determining the Earn-Out Amounts (including, without limitation,
any costs incurred with respect to Buyer's Accountants, Veltri's
Accountants and the Independent Accountants) to the extent that
such costs or expenses exceed the aggregate sum of Five Thousand
(Cdn. $5,000) Cdn. Dollars per EBIT Year;
(o) There shall be no deduction for any loss, cost or
expense for any third party claims to the extent that (i) such
claims arise out of the actions of Talon Automotive Group
L.L.C. (or any Affiliate thereof), and (ii) do not relate to the
operations of the New ▇▇▇▇▇▇ Group;
(p) EBIT shall not be decreased for any loss, cost or
expense incurred in any EBIT year which applies against the
Indemnity Floor (as hereinafter defined);
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(q) In the event that any severance payments are payable
to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ under Section 7(c) of the Employment
Agreement, there shall be no deduction for any salary,
wages, benefits, bonuses or other compensation expenses incurred
by the New ▇▇▇▇▇▇ Group in connection with any person or persons
replacing ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or otherwise incurred in obtaining any
services now or hereafter provided by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, and any
severance payments or benefits payable to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall
be expenses for purposes hereof ratably over the period for
which the same shall be payable pursuant to the Employment
Agreement.
(r) Tooling income shall be accounted for in accordance
with the historic accounting and business practices of the
▇▇▇▇▇▇ Group, notwithstanding any contrary GAAP treatment, as
set forth in Schedule 1.3(b)(iv);
(s) There shall be no change in the historic components or
elements of overhead which are to be allocated to inventory;
(t) All current and deferred foreign exchange gains and
losses shall be excluded;
(u) EBIT shall not include any deduction for or benefit of
any loss, gain, income, cost or expense which Buyer may incur as
a result of any breach by Buyer of the terms of this Agreement,
the Security Agreements (as hereinafter defined), the Debentures
(as hereinafter defined), or the Employment Agreement (except
for severance payments and severance benefits thereunder which
may be deducted as provided in Section 1.3(b)(iii)(q) hereof);
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(v) EBIT shall not include any deduction for or benefit of
any loss, gain, income, cost or expense attributable to any item
listed in Schedule 1.4(b) hereof which has an impact upon
the income of the New ▇▇▇▇▇▇ Group or any item which causes the
Consolidated Net Worth as of the Closing Date to be less than
the Base Net Worth to the extent that the Initial Amount is
reduced by the amount of such difference pursuant to Sections
1.2(b)(i)(A) and Section 1.4 hereof;
(w) EBIT shall not include any deduction for or benefit of
any loss, gain, income, cost or expense attributable to
the write-off of any intercompany loans of the ▇▇▇▇▇▇ Group;
(x) In the event that any engineering, development or
tooling costs are recouped through an increased piece price or
other revenues ("Recoupment") in a year other than the EBIT
Year that such costs would otherwise constitute a charge against
EBIT, the amount of such costs chargeable to said EBIT year
shall be reversed, reduced or otherwise equitably adjusted to
account for such Recoupment;
(y) EBIT shall not include any deduction for or benefit
of any piece price increases or decreases or other income or
expense adjustments made in an EBIT year which relate to a
non-EBIT Year;
(z) EBIT shall not include any professional fees or other
transactional expenses incurred prior to the date of Closing
with respect to the consummation of the transactions
contemplated hereby;
(aa) There shall be no deduction for any amortization or
other costs arising out of any deviation from the method
currently employed by the ▇▇▇▇▇▇
▇▇
▇▇
Group for the capitalization and amortization of start-up costs
associated with the Modular Assembly operations and
facilities as set forth in Sche- dule 1.3(b)(v);
(bb) EBIT shall not include any benefit from any
adjustments of year-end accruals which represent
adjustments from a non-EBIT Year.
(iv) In the event that the foregoing definition of EBIT does
not adequately address a particular transaction or situation, then
additional adjustments to the foregoing definition of EBIT shall
be made to be consistent with the principles herein contained and the
traditional operations and business practices of the ▇▇▇▇▇▇ Group as
are fair and equitable under the circumstances. Prior to any
transfers of business from and to the New ▇▇▇▇▇▇ Group and other
Affiliates of Buyer (which transfers may be made with the prior
consent of each of such parties, which consent shall not be
unreasonably withheld), the parties shall agree in writing on
additional adjustments to increase or decrease EBIT, as the case may
be, based upon an agreed upon level of gross profit on such business,
in order to equitably adjust for any such transfers of business. In
the event that the product launch date of any of the Scheduled Items
is delayed for a period of more than three (3) months due to causes
or events beyond the New ▇▇▇▇▇▇ Group's reasonable control, then the
parties shall agree to make equitable adjustments in the EBIT
calculations for the EBIT Years which are affected as result thereof.
The parties hereto further agree that, for purposes hereof, the
business of the New ▇▇▇▇▇▇ Group shall be operated on an autonomous
basis substantially similar to the historical operations of the
▇▇▇▇▇▇ Group, and the Buyer shall maintain separate books and records
for the determination of the EBIT of the New ▇▇▇▇▇▇ Group. Further,
the parties hereto shall act in good faith with respect to
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each other and the business and operations of the New ▇▇▇▇▇▇ Group.
Buyer shall not, and shall not permit Buyer's Affiliates to,
directly or indirectly, take any action (or cause any action to be
taken) which would reasonably be expected to decrease the Earn-Out
Amounts in any material respect.
(v) EBIT shall be determined by Buyer's independent certified
public accounting/chartered firm ("Buyer's Accountants") within
seventy-five (75) days following the end of each of the
calendar years ending December 31, 1996, December 31, 1997, December
31, 1998 and December 31, 1999. Upon such determination, Buyer shall
submit such written determination (the "Initial Determination"),
together with all reasonably appropriate worksheets and schedules
relating to such determination, to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ for review by
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and/or an independent certified/chartered public
accounting firm selected by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("Veltri's Accountants"),
who shall either accept or reject such Initial Determination within
forty five (45) days following the receipt thereof (or within forty
five (45) days following the receipt of any materials requested by
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ pursuant to the next sentence, if later). Any
documents, records, worksheets or information in Buyer's possession
or under Buyer's control (irrespective of any accountant/client
privilege) which are reasonably requested by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and/or
Veltri's Accountants in this connection shall be promptly furnished
by Buyer to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and/or Veltri's Accountants upon request;
provided, however, that the parties requesting the same shall execute
and deliver to Buyer a reasonable confidentiality agreement upon
terms and conditions mutually satisfactory to the parties. In the
event after reasonable discussions Buyer and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ are
unable to agree as to the amount of EBIT for a calendar year, they
shall submit the determinations of
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their respective Accountants (collectively, the "Accountants") to a
third independent certified public accountant/chartered firm (the
"Independent Accountants") to be mutually agreed upon by the
Accountants in writing, who shall review each such determination and
establish EBIT for purposes of this Agreement. The final
determination of EBIT as provided herein shall be referred to herein
as the "Final Determination". In connection with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇'▇
review of the Initial Determination for each of the calendar years
ending December 31, 1998 and December 31, 1999, Buyer hereby agrees
to reimburse ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ for any out-of-pocket expenses so
incurred by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in an amount up to Five Thousand (Cdn.
$5,000) Cdn. Dollars for each such determination. Except for such
reimbursement, Buyer and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall each pay their
respective costs and expenses (including all costs of their
respective Accountants) incident to the foregoing and in connection
with such EBIT determinations.
(vi) "GAAP" shall mean generally accepted accounting
principles as adopted and existing in Canada as of the date hereof
(regardless of future pronouncements or modifications to GAAP after
the date hereof).
(vii) "Net Income and Losses" shall mean the sum of all income
and losses from operations (i.e., gross sales minus cost of goods
sold) less all selling, general, administrative and other
operational expenses, determined in accordance with GAAP consistently
applied and in accordance with the historical accounting practices
and methods used by the ▇▇▇▇▇▇ Group.
(viii) The Earn-Out Amounts shall be paid as follows:
(A) Subject to the foregoing, the Earn-Out Amounts, if any,
payable with respect to the calendar year ending December 31,
1998, (the
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"1998 Earn-Out"), shall be payable in two (2) equal annual
installments on March 31, 1999 and March 31, 2000 (less any
applicable withholding required pursuant to Section 116, as
hereinafter defined), together with interest on the unpaid
balance of such amount at the Prime Rate (as hereinafter
defined) from and after December 31, 1998 until such amount is
paid in full, which interest shall be payable in quarterly
installments (less any applicable withholding) on the last day
of each calendar quarter and shall commence on March 31, 1999;
provided, however, in the event (i) any such installment of
interest or the 1998 Earn-Out is not paid when due, and such
failure shall continue for a period of ten (10) days following
written notice thereof to Buyer, (ii) or the sale of all or
substantially all of the assets of the New ▇▇▇▇▇▇ Group, or
(iii) of the direct or indirect sale, transfer, issuance or
other disposition (in one or a series of transactions) of an
aggregate amount of fifty (50%) percent or more of the
outstanding voting stock of any New ▇▇▇▇▇▇ Group Member, VSH or
VSH No. 2 (other than any of the foregoing in connection with an
IPO, as hereinafter defined, or to or among existing
shareholders, their family members or trusts for their benefit,
or to Affiliates, provided such Affiliates remain as Affiliates
after such transfer), then in any of such events the entire 1998
Earn-Out, and all accrued and unpaid interest thereon shall be
immediately due and payable, but in no event sooner than March
31, 1999, and any amounts remaining unpaid shall thereafter bear
interest at a rate equal to the Prime Rate plus Two (2%) percent
until the same is paid in full; and
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(B) Subject to the foregoing, the Earn-Out Amounts, if
any, payable with respect to the calendar year ending December
31, 1999 (the "1999 Earn-Out") shall be payable in three (3)
installments (less any applicable withholding required pursuant
to Section 116), as follows:
(i) fifty (50%) percent on March 31, 2000;
(ii) twenty five (25%) percent on September 1, 2000;
and
(iii) twenty five (25%) percent on March 31, 2001;
-- together with interest on the unpaid balance of such amount
at the Prime Rate from and after December 31, 1999 until such
amount is paid in full, which interest shall be payable in
quarterly installments (less any applicable withholding) on the
last day of each calendar quarter and shall commence on March
31, 2000; provided, however, in the event (i) any such
installment of interest or the 1999 Earn-Out is not paid when
due, and such failure shall continue for a period of ten (10)
days following written notice thereof to Buyer, (ii) of the sale
of all or substantially all of the assets of the New ▇▇▇▇▇▇
Group, or (iii) of the direct or indirect sale, transfer,
issuance or other disposition (in one or a series of
transactions) of an aggregate amount of fifty (50%) percent or
more of the outstanding voting stock of any New ▇▇▇▇▇▇ Group
Member, VSH or VSH No. 2 (other than any of the foregoing in
connection with an IPO or to or among existing shareholders,
their family members or trusts for their benefit, or to
Affiliates, provided such Affiliates remain as Affiliate after
such transfer), then in any such events the entire 1999
Earn-Out, and all accrued and unpaid interest thereon shall be
immediately due and payable, but in no event sooner than March
31, 2000,
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and any amounts remaining unpaid shall thereafter bear interest
at a rate equal to the Prime Rate plus Two (2%) percent
until the same is paid in full.
(c) The Note Amount shall be paid by the Buyer's execution and
delivery at the Closing of a Promissory Note for such amount in the form
attached hereto as Exhibit A (the "Promissory Note").
1.4 Preparation of Closing Net Worth Statement.
(a) Within sixty (60) days following the Closing Date, Buyer shall cause
Buyer's Accountants to prepare an audited statement of the Consolidated Net
Worth of the ▇▇▇▇▇▇ Group as of the close of business on the Closing Date (the
"Closing Net Worth Statement"). As used herein, the term "Consolidated Net
Worth" shall mean the total amount of the ▇▇▇▇▇▇ Group's assets, on a
consolidated basis, less the total amount of the ▇▇▇▇▇▇ Group's liabilities, on
a consolidated basis. Upon the preparation of the Closing Net Worth Statement,
Buyer shall submit such determination (the "Original Determination"), together
with all reasonably appropriate worksheets and schedules relating to such
Original Determination, to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ for review by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and/or
Veltri's Accountants, who shall either accept or reject such Original
Determination within forty-five (45) days following receipt thereof (or within
forty five (45) days following the receipt of any materials requested by
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ pursuant to the next sentence, if later). Any documents,
records, worksheets or information in Buyer's possession or under Buyer's
control (irrespective of any accountant/client privilege) which are reasonably
requested by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and/or Veltri's Accountants upon request; provided,
however, that the parties requesting the same shall execute and deliver to
Buyer a reasonable confidentiality agreement upon terms and conditions mutually
satisfactory to the parties. In the event after reasonable discussions,
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Buyer and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ are unable to agree as to the Consolidated Net Worth
as of the Closing Date, they shall submit the determinations of their
respective Accountants to the Independent Accountants, who shall review each
such determination and establish the Consolidated Net Worth for purposes of
this Agreement. The final determination of the Consolidated Net Worth as
provided above shall be referred to herein as the "Conclusive Determination."
In the event that the Original Determination of the Consolidated Net Worth
reflects a Consolidated Net Worth less than the Base Net Worth, then Buyer
hereby agrees to reimburse ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ an amount up to Five Thousand (Cdn.
$5,000) Cdn. Dollars for any out-of-pocket expenses incurred by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
in connection with his review of the Consolidated Net Worth Statement. Except
for such reimbursement, Buyer and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall each pay their
respective costs and expenses (including all costs of their respective
Accountants) incident to the foregoing and in connection with such
determination.
(b) The Closing Net Worth Statement shall be prepared in accordance with
GAAP on a basis consistent with the historic practices and methodologies used
by the ▇▇▇▇▇▇ Group for the calendar years 1994 and 1995, but as adjusted in
accordance with the provisions of Schedule 1.4(b) hereof.
(c) In the event that the Consolidated Net Worth as of the Closing Date
(as set forth in the Closing Net Worth Statement) is greater than the Base Net
Worth, the entire Escrowed Amount, plus interest earned on the Escrowed Amount
while such amount was being held in escrow, shall be paid to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇. In
the event that the Consolidated Net Worth as of the Closing Date (as set forth
in the Closing Net Worth Statement) is less than the Base Net Worth, the amount
of such deficiency, plus interest on such deficiency at the prime rate of
interest charged by Comerica Bank as in effect from time to time (the "Prime
Rate") from the Closing Date, shall be paid to Buyer and the remainder of the
Escrowed
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Amount, plus interest earned on such remainder while such amount was being held
in escrow, shall be paid to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇; provided, however, in the event
that the amount of such deficiency is in excess of the Escrowed Amount, the
entire Escrowed Amount, plus all interest earned on the Escrowed Amount while
such amount was being held in escrow, shall be paid to Buyer and ▇▇▇▇▇▇▇
▇▇▇▇▇▇ shall promptly pay to Buyer the amount of such deficiency in excess of
the Escrowed Amount, plus interest at the Prime Rate until paid (which amounts
payable hereunder shall not be subject to the Floor or Ceiling set forth in
Sections 5.2(a) and (b) below). The Escrowed Amount shall be paid to Buyer
and/or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as the case may be, in accordance within the foregoing,
within ten (10) days of the finalization of the Closing Net Worth Statement.
(d) Buyer hereby represents that, except as otherwise described in
Schedules 1.4(b) or 1.4(d) hereof, Buyer's due diligence investigation
has not revealed any material adjustments to the ▇▇▇▇▇▇ Group's financial
statements, net worth or accounting practices which would reasonably be
expected to cause the Consolidated Net Worth as of the Closing to be less than
negative Two Million One Hundred Ninety Four Thousand Three Hundred Twenty
Eight (Cdn. -$2,194,328) Cdn. Dollars.
1.5 Allocation of Purchase Price. The NAPT Share Purchase Price shall
be allocated among the NAPT Shares in the manner set forth in Schedule 1.5
attached hereto.
ARTICLE 2 - CLOSING
2.1 Closing. The consummation of the purchase and sale of the Shares
(the "Closing") shall take place at the offices of Timmis & ▇▇▇▇▇ L.L.P.,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ contemporaneously with the execution of
this Agreement. The time and date of the Closing are referred to herein as the
"Closing Date".
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2.2 Closing Date Deliveries. At the Closing:
(a) Sellers shall deliver to Buyer the original stock certificates
representing the ▇▇▇▇▇▇ Ltd. shares and the NAPT Shares, together with the
appropriate assignments of stock separate from certificate duly endorsed
for transfer, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall deliver to Buyer, or Buyer's
designees listed on Schedule 2.2(a) attached hereto ( the "Designees"), the
original stock certificates representing the ▇▇▇▇▇▇ Holdings Shares,
together with the appropriate assignments of stock separate from
certificate duly endorsed for transfer;
(b) Buyer shall pay the NAPT Share Purchase Price to Sellers (in
accordance with the NAPT Share Purchase Price allocation under Section 1.5
hereof), Buyer (or the Designees) shall pay the ▇▇▇▇▇▇ Holdings Share
Purchase Price to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, and Buyer shall pay the Cash Payment to
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Escrowed Amount into escrow as provided in Section
1.3 hereof;
(c) Buyer and Sellers shall receive from each other executed copies
of the following agreements:
(i) Agreement Not to Compete and Confidentiality Agreement among
the Sellers and Buyer in the form attached hereto as Exhibit B; and
(ii) Employment Agreement among ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ Holdings
and Buyer in the form attached hereto as Exhibit C (the "Employment
Agreement");
(d) Buyer shall receive from Sellers the original minute books and
stock ledgers of each ▇▇▇▇▇▇ Group Member.
(e) Buyer shall receive from Sellers an opinion of ▇▇▇▇, ▇▇▇▇▇▇▇ &
▇▇▇▇▇, P.L.C., counsel for Sellers and the ▇▇▇▇▇▇ Group, with respect to
the matters set forth on Schedule 2.2(e)(i) attached hereto and an opinion
of Bartlet & Richardes, Canadian counsel
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25
for Sellers and the ▇▇▇▇▇▇ Group, with respect to the matters set forth on
Schedule 2.2(e)(ii) attached hereto;
(f) Buyer shall have received the applicable Certificates of
Compliance related to the Disposition of Taxable Canadian Property from
Revenue Canada pursuant to Section 116 of the Canada Income Tax Act
("Section 116"), and the Buyer and Sellers shall have entered into that
certain Memorandum of Agreement in the form attached hereto as Exhibit D
regarding the required withholding under Section 116;
(g) Buyer shall receiver from the Sellers a copy of the following:
(i) All waivers or other consents, if any, required from
Canadian Imperial Bank of Commerce, together with the consent of ABB
Robotics with respect to the Amalgamation, but not including any other
consents to the Amalgamation;
(ii) Certified copies of the Articles of Incorporation and
By-laws of each ▇▇▇▇▇▇ Group Member;
(iii) Certificates of Good Standing for each ▇▇▇▇▇▇ Group Member
from the jurisdiction in which each ▇▇▇▇▇▇ Group Member is qualified
to transact business; and
(iv) Certified copy of the resolutions of the Board of Directors
or shareholders of each ▇▇▇▇▇▇ Group Member approving and authorizing
the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby;
(h) Buyer shall receive from Sellers releases from (i) all current
officers and directors of each ▇▇▇▇▇▇ Group Member, (ii)
▇▇▇▇▇▇-▇▇▇▇▇▇-▇▇▇▇▇, Inc. f/k/a ATF Automotive Group, Inc. and
▇▇▇▇▇▇▇-▇▇▇▇-▇▇▇▇▇▇, Inc. f/k/a MTJ Enterprises, Inc., and (iii) ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇.
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(i) Buyer shall receive from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ a certified copy of the
relevant portions of the ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ Revocable Living Trust
Agreement dated December 17, 1992 confirming the power and authority of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ to execute and deliver this Agreement and to consummate the
transactions contemplated hereby;
(j) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall execute and deliver to Buyer a Subordination
Agreement (the "Subordination Agreement") in the form attached hereto as
Exhibit E; and
(k) Sellers shall receive an opinion of Buyer's counsel, Timmis &
▇▇▇▇▇ L.L.P., with respect to the matters set forth on Schedule 2.2(k)(i)
attached hereto, an opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Stirling Scales, Nova
Scotia counsel to Buyer, with respect to the matters set forth on Schedule
2.2(k)(ii) attached hereto, and an opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
Ontario counsel to Buyer, with respect to the matters set forth on Schedule
2.2(k)(iii) attached hereto;
(l) Sellers shall receive from Buyer a copy of the following:
(i) Certified copy of the Memorandum of Association and Articles
of Association of Buyer;
(ii) Certificates of Good Standing from the jurisdiction in which
the Buyer is organized; and
(iii) Certified copy of the resolution of the Buyer's Board of
Directors approving and authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby;
(m) Buyer shall executive and deliver to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ of the
Security Agreements (the "Security Agreements") in the form attached hereto
as Exhibit F;
(n) Buyer shall executed and deliver to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ of the
Debentures (the "Debentures") in the form attached hereto as Exhibit G;
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(o) ▇▇▇, ▇▇▇ ▇▇. ▇ and their shareholders shall execute and deliver to
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ a side agreement in the form attached hereto as Exhibit H
(the "Side Agreement");
(p) VSH shall execute and deliver to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ a Subordination
Agreement in the form attached hereto as Exhibit I;
(q) Subsidiary shall execute and deliver to ▇▇▇▇ ▇▇▇▇▇▇ an Employment
Agreement in the form attached hereto as Exhibit J;
(r) Sellers shall execute and deliver terminations, releases and
discharges of all liens and other interests held, directly or indirectly,
by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and Canadian Imperial Bank of Commerce ("CIBC") in the
▇▇▇▇▇▇ Group, and the Buyer shall discharge and refinance the existing
indebtedness of the ▇▇▇▇▇▇ Group to CIBC; and
(s) The parties hereto shall execute and deliver to each other such
other reasonable documents, instruments and agreements in order to
effectuate the transactions described herein as reasonably requested by any
other party hereto.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ represents and warrants to Buyer on the date hereof and
as of the Closing Date that:
3.1 Corporate Standing and Authority.
(a) Each ▇▇▇▇▇▇ Group Member is a corporation duly organized and
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation, which jurisdictions of incorporation are as
set forth in Schedule 3.1(a)(i) attached hereto, and each ▇▇▇▇▇▇ Group
Member has full corporate power and authority to own their respective
assets and to conduct their respective businesses. No ▇▇▇▇▇▇ Group Member
is required to be qualified as a foreign corporation with respect to any
of their respective businesses under the laws of any other jurisdiction,
except where presently qualified as listed on Schedule
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3.1(a)(ii) attached hereto, and except where the lack of such
qualification would not have a material adverse effect on any such
▇▇▇▇▇▇ Group Member. To the best knowledge of Sellers and the ▇▇▇▇▇▇
Group, no ▇▇▇▇▇▇ Group Member has any material assets located in any
jurisdiction other than those listed on Schedule 3.1(a)(ii). Except for
the Subsidiary and as set forth on Schedule 3.1(a)(ii). Except for the
Subsidiary and as set forth on Schedule 3.1(a)(iii), none of the Companies
own any equity interest in any other entity.
(b) Sellers have the legal capacity and authority to execute this
Agreement and to perform the transactions contemplated hereby. The
execution, delivery and performance of this Agreement (excluding the
Amalgamation) does not and will not violate or cause a default under any
provision of the respective Articles of Incorporation or By-Laws of each
▇▇▇▇▇▇ Group Member, or result in the breach, termination or acceleration
of any material obligation or constitute a default or permit the
termination of any right under any material mortgage, indenture, lien,
lease, contract, agreement, instrument, order, arbitration award, judgment
or decree to which any of Sellers or any ▇▇▇▇▇▇ Group Member is a party or
by which any of their respective properties are bound, except as described
in Schedule 3.1(b)(i). Sellers and each ▇▇▇▇▇▇ Group Member have taken all
necessary action required by law, their respective Articles of
Incorporation and By-Laws to authorize the execution, delivery and
performance of this Agreement in accordance with and subject to the terms
and conditions of this Agreement. This Agreement and each document and
instrument executed pursuant to this Agreement by Sellers and any ▇▇▇▇▇▇
Group Member constitutes a valid and binding obligation of Sellers and
such ▇▇▇▇▇▇ Group Member, as the case may be, enforceable in accordance
with their respective terms, except as such enforcement may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally. Neither Sellers nor any ▇▇▇▇▇▇ Group Member
is required to obtain the consent,
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29
approval or waiver of any person not a party of this Agreement to enter
into this Agreement or to consummate the transaction contemplated
hereby, except for (i) the consents of the parties listed in Schedules 3.5
and 3.6 attached hereto, and (ii) those consents which, if not obtained,
would not have a material adverse effect on any ▇▇▇▇▇▇ Group Member or
their respective businesses following the Closing.
(c) All material actions of each ▇▇▇▇▇▇ Group Member which are
required to be recorded in their respective corporate minute books by law
and/or their respective Articles of Incorporation or By-Laws have
been duly recorded in their respective corporate minute books and duly
authorized and adopted in accordance with the requirements of applicable
law and their respective By-Laws and Articles of Incorporation. Schedule
3.1(c) attached hereto identifies all directors and officers of each
▇▇▇▇▇▇ Group Member.
3.2 Stock.
(a) The authorized capitalization and registered and beneficial
ownership of the issued and outstanding shares of capital stock of each
▇▇▇▇▇▇ Group Member is as set forth on Schedule 3.2(a)(i) attached
hereto. Except as described in such Schedule, no other shares of capital
stock of any ▇▇▇▇▇▇ Group Member are issued or outstanding. All of the
shares of capital stock of each ▇▇▇▇▇▇ Group member issued and outstanding
are validly issued, fully paid and nonassessable. All of the rights,
preferences and limitations of the capital stock of each ▇▇▇▇▇▇ Group
Member are set forth in the respective Articles of Incorporation and
Bylaws of each such ▇▇▇▇▇▇ Group member, as attached hereto as Schedule
3.2(a)(ii). No person or entity (other than Buyer) has any rights to
acquire any shares of capital stock of any ▇▇▇▇▇▇ Group Member and there
are no options, calls, warrants or other securities or rights outstanding
which are convertible into, exercisable for or relate to any shares of
capital stock of any Companies or the Subsidiary.
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(b) Sellers currently own, and, subject to the terms of this
Agreement, will convey to Buyer on the Closing Date, good title to the
Shares, free and clear of any and all liens, encumbrances, forfeitures,
pledges, penalties, charges, judgments, security interests, buy-sell
agreements, restrictive agreements, transfer restrictions (other than any
restrictions imposed by any securities laws on Buyer's purchase or holding
of the shares), options, rights of first refusal, rights to dividends,
warrants, or claims or rights of others of any nature whatsoever. At the
Closing, the Shares will represent all of the issued and outstanding
shares of capital stock of the Companies. Sellers have the right, power
and capacity to sell and transfer the Shares to Buyer in accordance with
the terms of this Agreement.
3.3 Financial Statements.
(a) Sellers have made available to Buyer (i) the unaudited
consolidating balance sheets and income statements of the ▇▇▇▇▇▇ Group as
of and for the six (6), seven (7), eight (8) and nine (9) month periods
ended June 29, 1996, July 27, 1996, August 24, 1996 and September 28, 1996
(the "Interim Financial Statements"), and (ii) the audited consolidating
balance sheet of the ▇▇▇▇▇▇ Group as of and for the calendar years ended
December 31, 1995 and December 31, 1994, and the related audited
statements of income and retained earnings and statements of cash flows
for the periods then ended, including the notes hereto and any
supplemental information provided therewith (the "Audited Statement") (the
Audited Statement and the Interim Financial Statements are collectively
referred to herein as the "Financial Statements").
Except as disclosed in Schedule 3.3(a) hereof, the Interim Financial
Statements fairly present the properties, assets, financial position and
results of operations of the business of each ▇▇▇▇▇▇ Group Member as of the
respective dates and for the respective periods stated above.
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The Audited Financial Statements:
(i) Fairly present the properties, assets, financial position
and results of operations of the business of each ▇▇▇▇▇▇ Group Member
as of the respective dates and for the respective periods
stated above; and
(ii) Have been prepared pursuant to and in accordance with GAAP
consistently applied, except as otherwise disclosed in the Audited
Financial Statements or in the notes thereto.
(b) The Financial Statements reflect (i) all inventories at the
lower of cost or market with cost being valued using the first-in,
first-out method, (ii) an adequate provision for doubtful accounts, and
(iii) accounts receivables and sales net of discounts, returns and
allowances. Except as set forth on Schedule 3.3(b), the Audited
Statements, the August 24, 1996 and the September 28, 1996 Interim
Financial Statements reflect an accrual or liability, or otherwise provide
for all taxes not yet due and payable. To the best knowledge of Sellers
and the ▇▇▇▇▇▇ Group, except to the extent reflected in the Audited
Financial Statements and the August 24, 1996 and the September 28, 1996
Interim Financial Statements or in Schedule 3.3(b), no ▇▇▇▇▇▇ Group Member
has any material liability or obligations, whether accrued, absolute, or
contingent, arising out of transactions entered into or any condition
existing as of the dates thereof (other than liabilities and obligations
(i) which are not required by GAAP to be reported in the Financial
Statements, (ii) not yet due and payable, (iii) set forth in the Leases,
Contracts, Employee Benefit Plans or other contracts and agreements
entered into in the ordinary course of business, (iv) incurred thereafter
in the ordinary course of business which are consistent with historical
operations, or (v) otherwise disclosed as a liability or obligation in any
Schedule attached hereto). Except as set forth in Schedule 3.3(b) attached
hereto, no material accounts payable under any customer steel resale
program of any ▇▇▇▇▇▇
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Group Member have been written off since January 1, 1992. No provision in
the Financial Statements is necessary (except as otherwise disclosed
therein), under GAAP, for liability on account of product warranties or
with respect to the manufacture or sale of defective products. All
material items of income or expense which are unusual or of a
non-recurring nature are separately disclosed in the Audited Financial
Statements to the extent required by GAAP.
(c) Except with respect to any tax returns described on Schedule
3.3(c)(i), each ▇▇▇▇▇▇ Group Member has duly and accurately filed or
caused to be filed all tax returns which are required to be filed through
the date hereof with respect to the operations of the ▇▇▇▇▇▇ Group,
including, without limitation, all federal, state, provincial, local and
foreign tax returns relating to all periods ending on or before December
31, 1995, and all tax returns for all federal, state, provincial, local or
foreign income, franchise, real property, personal property, withholding,
employment, sales, ad valorem, goods and services and other taxes payable
or collectible by any ▇▇▇▇▇▇ Group Member which are required to be filed
through the date hereof (all of the foregoing are collectively referred to
herein as the "Tax Returns"). Except as set forth on Schedule 3.3(c)(ii),
each ▇▇▇▇▇▇ Group Member has paid in full and remitted all taxes and other
amounts required to be paid (including interest, penalties and related
charges and fees in respect thereof) pursuant to the Tax Returns. Sellers
have made available to Buyer true, correct and complete copies of the Tax
Returns. The annual federal and provincial income tax returns of each
▇▇▇▇▇▇ Group Member have been assessed by Revenue Canada and by provincial
revenue authorities through the dates set forth on Schedule 3.3(c)(iii).
Except as set forth on Schedule 3.3(c)(iv), to the best of the knowledge
of the Sellers and the ▇▇▇▇▇▇ Group, there are no pending audits of any
Tax Returns of any ▇▇▇▇▇▇ Group Member, and neither Sellers nor any ▇▇▇▇▇▇
Group Member has received any written
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notices of any threatened audits or proposed reassessments of any Tax
Returns of any ▇▇▇▇▇▇ Group Member. There are not in effect any waivers or
extensions of statutes of limitations by any ▇▇▇▇▇▇ Group Member, except as
set forth on Schedule 3.3(c)(v). Except as set forth on Schedule
3.3(c)(vi), each ▇▇▇▇▇▇ Group Member has remitted and paid in full, or
accrued, reserved or otherwise provided for in the Financial Statements or
its books and records, all federal, provincial, state, local and foreign
income, franchise, real property, personal property, withholding,
employment, sales, ad valorem, goods and services and other taxes payable
or collectible by any ▇▇▇▇▇▇ Group Member, including interest, penalties
and related charges in respect thereof, if any, for all periods covered by
the Tax Returns and continuing through the date hereof, other than current
and deferred taxes of any ▇▇▇▇▇▇ Group Member not yet due which arise
solely from income earned after the date of the most recent Financial
Statements and which are consistent in character and amounts with the tax
accruals reflected in the Financial Statements. Except as set forth on
Schedule 3.3(c)(vii), each ▇▇▇▇▇▇ Group Member has withheld from each
payment made to any of its officers, directors, former directors, employees
and former employees and third parties (including payments to any other
▇▇▇▇▇▇ Group Member), the amount of all taxes and other deductions
(including without limitation, income taxes, unemployment, disability, and
other required taxes and contributions) required to be withheld and has
paid the same together with the employer's share of same, if any (to the
extent required to be paid so no such amount is past due), to the proper
tax or other receiving officers within the prescribed times and has filed,
incomplete and accurate form, all information and other returns required
pursuant to any applicable legislation within the prescribed times.
3.4 No Material Changes. Except as disclosed on Schedule 3.4(a) (or any
other Schedule to this Agreement) or as reflected in the Financial Statements,
since December 31, 1995, there has
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34
not been any material adverse change in the business operations or properties
of any ▇▇▇▇▇▇ Group Member, and the business operations of each ▇▇▇▇▇▇ Group
Member have been conducted in the ordinary course of business as theretofore
conducted. Except as disclosed on Schedule 3.4(b) (or any other Schedule to
this Agreement) or as reflected in the Financial Statements, since August 24,
1996, there has not been any material adverse change in the financial position,
results of operations or net worth of any ▇▇▇▇▇▇ Group Member. Except as set
forth in Schedule 3.4(c), since August 24, 1996, no ▇▇▇▇▇▇ Group Member has:
(a) sole or transferred any assets, other than in the ordinary
course of business;
(b) entered into any transactions affecting any assets or the
business or operations of any ▇▇▇▇▇▇ Group Member, or incurred or
increased any obligation or liability (absolute or contingent), other than
in the ordinary course of business;
(c) paid or otherwise satisfied any obligations other than the
obligations arising in the ordinary course of business;
(d) entered into any transaction other than in the ordinary course of
business;
(e) incurred any obligation for or paid for any capital expenditures
in excess of One Hundred Thousand (Cdn, $100,000) Cdn. Dollars in the
aggregate;
(f) issued any capital stock or declared or paid any dividend
(including capital dividends within the meaning of Section 83(2) of the
Income Tax Act (Canada)) or made any other payment from capital or
surplus or other distribution of any nature, or directly or indirectly,
redeemed, purchased or otherwise acquired or recapitalized or reclassified
any capital stock or liquidated in whole or in part;
(g) created, incurred, or assumed any indebtedness or other
liability, except for accounts payable or other liabilities (other than
for borrowed money) incurred in the ordinary course of business;
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35
(h) raised salaries or hourly rates or the rate of bonuses or
commissions or other compensation of any employee, other than those made
which were consistent with past practices;
(i) amended or terminated any Leases, Contracts, or Licenses and
Permits, other than in the ordinary course of business;
(j) entered into any agreement or commitment with respect to any of
the foregoing; or
(k) suffered any casualty, loss, damage or destruction to any of its
properties, whether or not covered by or compensated under any insurance
policy, which would have a material adverse effect on any ▇▇▇▇▇▇ Group
Member.
All of the transactions referred to in items 1(g), 4 (except as to ▇▇▇▇
▇▇▇▇▇▇'▇ Employment Agreement), and 7 of Schedule 3.4(b) and items 2, 9 and 11
of Schedule 3.4(c) comply with all applicable laws, and none of such
transactions will result in any net tax or other liabilities to the ▇▇▇▇▇▇
Group following the Closing (other than tax on the profits of item 2 of
Schedule 3.4(c)).
3.5 Leases and Real Estate. Schedule 3.5(a) sets forth a list of every
lease (a) requiring lease payments after the date hereof in excess of Five
Thousand (Cdn. $5,000) Cdn. Dollars per month, or (b) which has a term after
the date hereof longer than six (6) months (other than those which provide for
aggregate lease payments totaling less than Fifty Thousand (Cdn. $50,000) Cdn.
Dollars over the remaining lease term), and, under which any ▇▇▇▇▇▇ Group
Member is a lessee of, or holds or operates, any property, real or personal,
owned by any third party and used in the respective businesses of any ▇▇▇▇▇▇
Group Member (the "Lessee").
All other leases under which any ▇▇▇▇▇▇ Group Member is a party and which
fail to meet the requirements set forth in Sections 3.5(a) or (b) above have
been entered into in the ordinary course of business. The Leases are in full
force and effect, and are the valid and binding obligations of the
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36
parties thereto, except as limited by bankruptcy, insolvency and similar laws
affecting creditor's rights generally. Except as set forth in Schedule 3.5(a),
no ▇▇▇▇▇▇ Group Member is in breach, violation or default of any of the terms of
the Leases; to the best knowledge of Sellers and the ▇▇▇▇▇▇ Group, no other
party to any of the Leases is in breach, violation or default of any of the
terms thereof. Except as set forth on Schedule 3.5(a), the Leases do not contain
any provision prohibiting or requiring the consent of any third-party to the
sale of the Shares to Buyer. Sellers have made available to Buyer true and
complete copies of all Leases.
All real estate owned or leased by any ▇▇▇▇▇▇ Group Member, or in which
any of them owns any interest, is listed on Schedule 3.5(b) attached hereto
(collectively, the "Real Estate"). All Real Estate owned by any ▇▇▇▇▇▇ Group
Member (the "Owned Real Estate") is identified on Schedule 3.5(b) as owned by
the applicable ▇▇▇▇▇▇ Group Member. Except as set forth on Schedule 3.5(b), the
rights of the ▇▇▇▇▇▇ Group with respect to the Real Estate are not subordinate
to, or defeasible by, any mortgage, lien or any prior lease thereon. To the
best knowledge of the Sellers and the ▇▇▇▇▇▇ Group, and except as otherwise
disclosed in Schedule 3.5(c) attached hereto, (i) the Real Estate and the
improvements thereon are reasonably accessible by public roads, (ii) neither
the Sellers nor the ▇▇▇▇▇▇ Group has received any written notice that the
improvements on the Real Estate encroach onto the property of other persons,
and (iii) the use of such Real Estate by the ▇▇▇▇▇▇ Group complies with all
applicable zoning laws and ordinances. No governmental authority having
jurisdiction over such Real Estate has given any written notice to any ▇▇▇▇▇▇
Group Member of possible future impositions of assessments affecting the
properties in excess of an aggregate amount of Twenty Five Thousand (Cdn.
$25,000) Cdn. Dollars, or to exercise the power of eminent domain. To the best
knowledge of the Sellers and the ▇▇▇▇▇▇ Group, the Real Estate is adequately
serviced by water, sewage, gas, waste disposal, electricity and telephone
utilities.
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37
Except as described in Schedule 3.5(a), each ▇▇▇▇▇▇ Group Member listed on
Schedule 3.5(b) as the owner of the Owned Real Estate is the registered owned
of the Owned Real Estate. Except as listed on Schedule 3.5(a) or Schedule
3.5(c), (i) there are no tenancies, agreements to lease, licenses agreements,
offers to purchase or options to purchase in existence in respect of the Owned
Real Estate, (ii) there are no actions, suits or proceedings pending or
threatened with respect to the Owned Real Estate nor are there any appeals or
other proceedings pending in respect of the municipal taxes and tax assessments
for the Owned Real Estate, (iii) no state, provincial, local, municipal or
other governmental authority has made any order or other provision respecting
the use or occupation of any part of the Owned Real Estate, other than as
contained in the local or municipal by-laws or ordinances of general
application, and neither the Sellers nor the ▇▇▇▇▇▇ Group has received any
notice from any such authority directing any alteration, repair, improvement or
other work to be done or performed to or in respect of the Owned Real Estate or
any part thereof, (iv) the buildings and the use thereof on the Owned Real
Estate do not violate any applicable zoning or other by-law, ordinance, or
regulation, and neither the Sellers nor the ▇▇▇▇▇▇ Group has received any
notice of any impending or intended rezoning of the Owned Real Estate; (v)
there are no local improvement charges or special levies or assessments against
the Owned Real Estate nor have the Sellers or the ▇▇▇▇▇▇ Group received any
proposed local improvement charges or special levies or assessments, (vi) all
state, provincial, local and municipal taxes, rates, levies and assessments
with respect to the Owned Real Estate are paid in full to the extent due, and
(vii) the Owned Real Estate is not the subject of any condemnation or eminent
domain proceedings, presently pending, and neither Sellers nor any ▇▇▇▇▇▇ Group
Member has received notice that such premises or properties are or will be
threatened by any such proceedings.
3.6 Contracts. Schedule 3.6(a) contains a list of all of the following
contracts, agreements and other instruments (collectively, the "Contracts"):
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38
(a) all contracts, agreements and other instruments (i) requiring
payments after the date hereof (or performance valued) in excess of Five
Thousand (Cdn. $5,000) Cdn. Dollars per month, or (ii) which have a term
longer than six (6) months after the date hereof (other than those which
provide for aggregate payments totalling less than Fifty Thousand (Cdn.
$50,000) Cdn. Dollars over the remaining term), and under which any ▇▇▇▇▇▇
Group Member is a party;
(b) All manufacturer's representative, distributor, sales agency and
consulting agreements; and
(c) all guarantees of any obligations of customers or others;
---excluding those contracts, agreements and other instruments described in
Sections 3.5 and 3.15 and excluding oral employment agreements terminable by the
▇▇▇▇▇▇ Group at will without penalty under which the only obligation of any
▇▇▇▇▇▇ Group Member is to make current wage payments and provide current fringe
benefits, COBRA benefits, severance or other benefits not exceeding Fifty
Thousand (Cdn. $50,000) Cdn. Dollars in the aggregate per employee). Sellers
have made available to Buyer true and complete copies of all Contracts described
on Schedule 3.6(a).
All other contracts, agreements or instruments which fail to meet the
requirements set forth in Section 3.6(a)(i) or (ii) above have been entered into
in the ordinary course of business. The Contracts are in full force and effect,
and are the valid and binding obligations of the parties thereto, except as
limited by bankruptcy, insolvency and similar laws affecting creditor's rights
generally. No ▇▇▇▇▇▇ Group Member is in breach, violation or default of any of
the terms of the Contracts. To the best knowledge of Sellers and the ▇▇▇▇▇▇
Group, no other party to any of the contracts is in breach, violation or default
thereof. There are no outstanding defaults or violations by any of the parties
to the Contracts which would permit the acceleration of any obligation or the
creation of a lien or encumbrance upon the Shares or any of the assets of any
▇▇▇▇▇▇ Group member, except as
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39
otherwise set forth on Schedule 3.6(b). Except as otherwise provided in
Schedule 3.6(b), the Contracts do not contain any provision prohibiting or
requiring the consent of any third party to the sale of the Shares to Buyer.
3.7 Employee Benefit Plans. Schedule 3.7(a) lists each current employee
welfare benefit plan, employee pension benefit plan, deferred compensation
plan, bonus plan, stock option plan, employee stock purchase plan,
hospitalization plan, employees' insurance plan or other employee or
independent contractor benefit plan maintained or contributed to, directly or
indirectly, by any ▇▇▇▇▇▇ Group Member (all of the foregoing are collectively
referred to herein as the "Employee Benefit Plans"), excluding, however, any
policies concerning holidays and vacations or any requirements under the
Ontario Employment Standards Act, or any Employee Benefit Plans disclosed in
any other Schedule to this Agreement. All Employee Benefit Plans have at all
times been administered in compliance with all applicable laws, rules,
regulations, orders, judgments, decrees and other requirements of governmental
authorities (collectively the "Employee Benefit Laws"). With respect to each
Employee benefit Plan: (1) all required reports have been timely filed, (2) all
notices required by the Employee Benefit Laws have been timely filed, (3) all
funding requirements and/or contributions have been timely made, and (4) during
the past five (5) years there have been no actions, lawsuits, grievances or
other litigation or written claims with respect thereto, the assets thereof or
any fiduciary thereof (other than routine claims for benefits in accordance
with the terms thereof). Except as disclosed on Schedule 3.7(a), there are no
Employee Benefit Plans which are subject to qualification under the Employee
Benefit Laws. The value of all accrued benefits are fully funded by the assets
of such Employee Benefit Plans. True and complete copies of all Employee
Benefit Plans have been made available to Buyer, together with copies of the
most recent determination letters, if any, with respect to each such Employee
Benefit Plan, copies of all annual reports with respect thereto, and, to the
extent applicable, copies of the most recent actuarial reports
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40
and trustee reports with respect to each such Employee Benefit Plan. Except as
disclosed on Schedule 3.7(b), no ▇▇▇▇▇▇ Group Member has participated in any
multiemployer plan or has at any time maintained or contributed to, directly or
indirectly, any defined benefit employee plan. The terminations of all employee
benefit plans have been approved, where required, by all appropriate
governmental authorities, and the ▇▇▇▇▇▇ Group has no liabilities or
obligations for any employee benefit plans which have at any time been
terminated, except as disclosed in the Financial Statements or on Schedule
3.7(c). No liens under the Employee Benefit Laws exist on any of the assets of
any ▇▇▇▇▇▇ Group Member, except to the extent reflected in the Financial
Statements or which have arisen after the date of the most recent Financial
Statements in the ordinary course of business and which are consistent with the
past amounts as reflected in the Financial Statements. Except as set forth on
Schedule 3.7(d), each ▇▇▇▇▇▇ Group Member has paid or accrued in the Financial
Statements or otherwise accrued or provided for in its books and records all
amounts due and owing through the date hereof to their respective employees
(including bonuses or any other accrued compensation), under all Employee
Benefit Plans and each ▇▇▇▇▇▇ Group Member has withheld all amounts required by
law or any Employee Benefit Plan to be withheld from the wages or salaries of
its employees.
3.8 Employees. Schedule 3.8(a) attached hereto contains a true and
complete list showing the names of all current employees of any ▇▇▇▇▇▇ Group
Member whose current annual compensation (including bonuses) in the aggregate
equaled or exceeded Eighty Thousand (Cdn. $80,000) Cdn. Dollars during 1995,
such employees present annual salary and any agreed-upon bonuses for the
calendar year ending December 31, 1996. Schedule 3.8(a) also contains the names
of all employees of any ▇▇▇▇▇▇ Group Member who received any compensation
whatsoever (including bonuses) from Sellers or any Affiliate of Sellers (other
than the ▇▇▇▇▇▇ Group) and the amount of such compensation received. Schedule
3.8(b) lists all membership fees in any social, country or other similar clubs
or organizations which have been paid for or reimbursed by any ▇▇▇▇▇▇ Group
Member during 1996 and
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41
for which the membership fees exceed the sum of Five Thousand (Cdn. $5,000)
Cdn. Dollars per year. Schedule 3.8(c) lists all officers and employees whose
salary exceeded Eighty Thousand (Cdn. $80,000) Cdn. Dollars per year and whose
employment with any ▇▇▇▇▇▇ Group Member has terminated since January 1, 1995.
Except as otherwise disclosed in Schedule 3.8(d), Sellers have not received any
notice (whether oral or written) that any of the employees listed on Schedule
3.8(a) will be terminating such person's employment within the next twelve (12)
months.
3.9 Governmental Regulations and Litigation. Except as set forth in
Schedule 3.9, each ▇▇▇▇▇▇ Group Member has complied with all applicable laws,
orders and other requirements of all governmental authorities; provided,
however, the foregoing shall not apply to the Environmental Laws (as
hereinafter defined). Except as set forth in Schedule 3.9, no ▇▇▇▇▇▇ Group
Member is subject to any court or administrative order, judgment or decree.
Except as set forth in Schedule 3.9, no investigation, governmental or
administrative proceeding or other litigation of any kind or nature of which
any ▇▇▇▇▇▇ Group Member has received written notice of and is a party, is now
pending, or, to the best knowledge of the Sellers and the ▇▇▇▇▇▇ Group,
threatened; no written claim which has not ripened into litigation or other
proceeding has been made, or, to the best knowledge of the Sellers and the
▇▇▇▇▇▇ Group, threatened against any ▇▇▇▇▇▇ Group Member. No ▇▇▇▇▇▇ Group
Member has received any written notice of any claimed violation of any
applicable laws, ordinances or regulations; provided, however, the foregoing
shall not apply to the Environmental Laws (as defined below).
3.10 Environmental Compliance.
(a) Except as described on Schedule 3.10(a) and as reflected in the
documents or reports listed on Schedule 3.10(e):
i. To the best knowledge of the Sellers and the ▇▇▇▇▇▇ Group,
the Real Estate, the use of such Real Estate and the conduct of the
respective businesses of the
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▇▇▇▇▇▇ Group thereon is in compliance with all applicable federal,
provincial, state, local and municipal environmental laws, rules,
regulations, ordinances, codes, bylaws, policies and guidelines
governing environmental matters of all governmental authorities
(collectively, the "Environmental Laws");
ii. Neither the Sellers nor any ▇▇▇▇▇▇ Group Member has at any
time during the past three (3) years received any written notice of
any claimed violation of any of the Environmental Laws, and, to the
best knowledge of the Sellers and the ▇▇▇▇▇▇ Group, neither the
sellers nor any ▇▇▇▇▇▇ Group Member has at any time during the past
five (5) years received any written notice of any claimed violation
of any of the Environmental Laws;
iii. To the best knowledge of the Sellers and the ▇▇▇▇▇▇ Group,
each ▇▇▇▇▇▇ Group member has utilized, stored, disposed of and
transported all hazardous, polluting and toxic substances, including,
without limitation, petroleum products, asbestos, PCB's, and
ureaformldehyde, and all wastes, whether hazardous or not, in
compliance with all Environmental Laws;
iv. To the best knowledge of the Sellers and ▇▇▇▇▇▇ Group, the
Real Estate (including, without limitation, the soils, groundwater
and surface waters located on or under such Real Estate) is not
and has not been contaminated, tainted or polluted at a level which
would constitute a violation of any of the Environmental Laws, nor
will such Real Estate become contaminated, tainted or polluted in any
manner whatsoever from the conduct of any activities prior to the
Closing Date or from the migration of contaminants from property
adjacent to such Real Estate;
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v. To the best knowledge of the Sellers and the ▇▇▇▇▇▇ Group,
the Real Estate does not appear on any national, federal, provincial
or state listing which identifies sites for remedial clean-up or
investigatory actions;
vi. There are no underground storage tanks on or under the Real
Estate;
vii. There are no outstanding or pending federal, provincial or
state administrative orders which Sellers or the ▇▇▇▇▇▇ Group have
received notice of with respect to the Real Estate, the use of
such Real Estate or the conduct of the respective businesses of the
▇▇▇▇▇▇ Group thereon;
viii. To the best knowledge of the Sellers and the ▇▇▇▇▇▇ Group,
all clean-up and remediation, including, but not limited to, the
removal of underground storage tanks, that has been undertaken by
the ▇▇▇▇▇▇ Group on the Real Estate has been conducted in accordance
with, and to the standards of, all Environmental Laws.
(b) Each ▇▇▇▇▇▇ Group Member possess all permits, licenses and
authorizations required under the Environmental Laws to conduct their
respective operations as heretofore conducted, and all such permits,
licenses and authorizations are valid and in full force and effect.
(c) Schedule 3.10(c) lists, to the best knowledge of the Sellers and
the ▇▇▇▇▇▇ Group, all waste hauling companies at which wastes generated by
the Sellers have been disposed of (in each case identifying such
wastes). Neither the Sellers nor the ▇▇▇▇▇▇ Group has received any notice
during the past three (3) years (i) of any claim or potential
responsibility for the cost of remedial clean-up or investigating any
sites or areas at which such waste hauling companies disposed of any
wastes generated by the ▇▇▇▇▇▇ Group, or (ii) that any such waste hauling
companies has violated any applicable Environmental Law. To the best
knowledge of the Sellers and the ▇▇▇▇▇▇ Group, neither the Sellers nor the
▇▇▇▇▇▇
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Group has received any notice during the past five (5) years (i) of any
claim or potential responsibility for the cost of remedial clean-up or
investigating any sites or areas at which such waste hauling
companies disposed of any wastes generated by the ▇▇▇▇▇▇ Group, or (ii)
that any such waste hauling companies has violated any applicable
Environmental Law. Schedule 3.10(c) also lists, to the best knowledge of
the Sellers and the ▇▇▇▇▇▇ Group, all sites other than the Real Estate at
which wastes owned or generated by each ▇▇▇▇▇▇ Group Member have been
stored or disposed. To the best knowledge of the Sellers and the ▇▇▇▇▇▇
Group, none of the sites listed on Schedule 3.10(c) are or have been
contaminated, tainted or polluted at a level that would constitute a
violation of any of the Environmental Laws, nor will such sites become
contaminated, tainted or polluted in any manner whatsoever from the
conduct of any activities of the ▇▇▇▇▇▇ Group prior to the Closing. To the
best knowledge of the Sellers and the ▇▇▇▇▇▇ Group, there are no
outstanding or pending federal, provincial or state administrative orders
with respect to any of the sites listed on Schedule 3.10(c).
(d) No written claims, actions, protests or complaints have been
made by any of the employees or agents of any ▇▇▇▇▇▇ Group Member or any
other persons or entities during the past three (3) years with
respect to the presence, use, storage or disposal of any hazardous or
toxic wastes, materials or other substances by any ▇▇▇▇▇▇ Group Member
through the Closing Date. To the best knowledge of the Sellers and the
▇▇▇▇▇▇ Group, no written claims, actions, protests or complaints have been
made by any of the employees or agents of any ▇▇▇▇▇▇ Group Member or any
other persons or entities during the past five (5) years with respect to
the presence, use, storage or disposal of any hazardous or toxic wastes,
materials or other substances by any ▇▇▇▇▇▇ Group Member through the
Closing Date, and, to the best knowledge of the Sellers and the ▇▇▇▇▇▇
Group, no reasonable basis for any such claims exist.
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(e) Schedule 3.10(e) lists all written environmental reports, audits,
assessments and written notices from any governmental agency in the
possession of Sellers or the ▇▇▇▇▇▇ Group which relate in any way to the
environmental condition of the Real Estate and which have been prepared for
or received by the Sellers or the ▇▇▇▇▇▇ Group since January 1, 1990,
together with, to the best knowledge of the Sellers and the ▇▇▇▇▇▇ Group,
all written environmental reports, audits, assessments and written notices
from any governmental agency in the possession of Sellers or the ▇▇▇▇▇▇
Group which relate in any way to the environmental condition of the Real
Estate and which have at any time been prepared for or received by the
Sellers or the ▇▇▇▇▇▇ Group (collectively, the "Environmental Reports").
Sellers have made available to Buyer true and complete copies of all
Environmental Reports.
3.11 Labor and Employment Relations. Except as set forth in Schedule 3.11,
no ▇▇▇▇▇▇ Group Member is a party to or bound by any collective bargaining
agreement with any union/association or labor organization. Schedule 3.11 also
contains a true and complete list of all actions before federal, state or
provincial bodies (including arbitration cases), pending or closed, wherein any
▇▇▇▇▇▇ Group Member is a party and has received written notice of the action,
which involve labor or employment matters relating to the businesses of any
▇▇▇▇▇▇ Group Member during the last three (3) years. Except as disclosed on
Schedule 3.11, no ▇▇▇▇▇▇ Group Member has been the subject of (or received
written notice of) within the last three (3) years any strike, work stoppage,
union organization drive, demands for representation, primary or secondary
boycott, unfair labor practice claim or employment discrimination charge.
3.12 Title to and Operating Condition of Assets.
(a) Except as disclosed on Schedule 3.12(a), and except for inchoate
liens for taxes not yet due and payable and Liens (as hereinafter defined)
which would not have a material adverse effect on any ▇▇▇▇▇▇ Group Member,
each ▇▇▇▇▇▇ Group Member owns good
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title to all of its assets (and good and marketable title to any real
estate owned by any ▇▇▇▇▇▇ Group Member), free and clear of all liens,
pledges, security interests, leases, claims or encumbrances (the "Liens").
▇▇▇▇▇▇-▇▇▇▇▇▇-▇▇▇▇▇, Inc. f/k/a/ ATF Automotive Group, Inc. and
▇▇▇▇▇▇▇-▇▇▇▇-▇▇▇▇▇▇, Inc. f/k/a/ MTJ Enterprises, Inc. have no operating
assets or business operations of any kind or nature. Except as described in
Schedule 3.12(b) attached hereto, all material tangible personal property
owned or used by any ▇▇▇▇▇▇ Group Member is situated at their respective
business premises. Schedule 3.12(c) lists or describes all material
tangible personal property (other than any personal property covered by the
Leases) owned by or an interest in which is claimed by any other person
(whether a customer, supplier or other person) for which any ▇▇▇▇▇▇ Group
Member is responsible (copies of all agreements relating thereto have been
delivered to Buyer), and all such property is in the actual possession of
such ▇▇▇▇▇▇ Group Member and is in such condition that upon the return of
such property in its present condition to its owner, such ▇▇▇▇▇▇ Group
Member will not be liable in any amount to such owner.
(b) The real property, plants, buildings, machinery, fixtures,
equipment, tools, dies, jigs, and improvements which are owned, used,
leased or held by each ▇▇▇▇▇▇ Group Member are in fair operating and usable
condition, subject to normal maintenance and repair, in a manner consistent
with the ▇▇▇▇▇▇ Group's past practices.
(c) All bank accounts, certificates of deposit and other deposits or
accounts of any ▇▇▇▇▇▇ Group Member are as set forth on Schedule 3.12(d)
atached hereto.
3.13 Intangible Assets. Except for Shelf Software (as hereinafter
defined), Schedule 3.13 contains a listing of all material patents and patent
applications (pending or in the process of preparation), domestic or foreign,
patent rights, trademarks, trade names and licenses of the intellectual
property rights of others, copyrights, trade secrets, secret processes and
other material
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propriety rights (collectively, the "Intellectual Rights") which are owned,
controlled, used or necessary for use by any ▇▇▇▇▇▇ Group Member in their
respective business operations as presently conducted or, to the best knowledge
of the Sellers and the ▇▇▇▇▇▇ Group, owned or controlled in whole or in part by
any of the officers, directors or key employees of any ▇▇▇▇▇▇ Group Member. All
such Intellectual Rights are valid and effective in accordance with their
terms. Except for personal computer software programs licensed or otherwise
used for office purposes in the ordinary course of business and other software
programs generally available to the public for a total cost under Two Thousand
(Cdn. $2,000) Cdn. Dollars ("Shelf Software"), and except as disclosed in
Schedule 3.13, there are no material agreements, contracts, licenses or
obligation under which any ▇▇▇▇▇▇ Group Member is obligated with respect to, or
is using, any Intellectual Rights owned or controlled by others.
To the best knowledge of the Sellers and the ▇▇▇▇▇▇ Group, the conduct of
the respective businesses of each ▇▇▇▇▇▇ Group Member, including the
manufacture and sale of their products, does not infringe upon the Intellectual
Rights of any other party; and no ▇▇▇▇▇▇ Group Member has received written
notice of any claim of infringement during the past five (5) years, except as
described in Schedule 3.13 attached hereto. To the best knowledge of the
Sellers and the ▇▇▇▇▇▇ Group, neither Seller nor any ▇▇▇▇▇▇ Group Member has
outside the ordinary course of business wilfully or negligently disclosed in
any way to any third party any material confidential information or trade
secrets, including, but not by way of limitation, confidential product or
process data, confidential information as to new product developments and
product costs data related to the operations of the ▇▇▇▇▇▇ Group, nor entered
into any contract or agreement to disclose any of the above to a third party
outside of the ordinary course of business.
3.14 Insurance. Schedule 3.14 attached hereto contains a listing of all
material insurance policies held by any ▇▇▇▇▇▇ Group Member with respect to
their respective businesses, assets, and
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any property of others under the care, custody and/or control of any ▇▇▇▇▇▇
Group Member, including, but not limited to all policies of fire, liability and
other forms of casualty insurance, product liability insurance, and group and
workers' compensation insurance held by any ▇▇▇▇▇▇ Group Member with respect to
their respective businesses. All such policies (copies of which have been made
available to Buyer) are maintained in full force and effect by each such ▇▇▇▇▇▇
Group Member and no ▇▇▇▇▇▇ Group Member is in default under any of such
policies. To the best knowledge of the Sellers and the ▇▇▇▇▇▇ Group, no ▇▇▇▇▇▇
Group Member has been refused any material customary insurance coverage by any
insurance carrier at any time during the past three (3) years.
3.15 Customers and Commitments.
(a) Schedule 3.15(a)(i) lists the ten (10) largest customers of, and
the ten (10) largest steel and component part suppliers to, the ▇▇▇▇▇▇
Group on a consolidated basis during the twelve (12) month period ended
December 31, 1995 (stating for each the dollar volume of the sales or
purchases, as the case may be). All of the existing executory contracts and
commitments and purchase orders of each ▇▇▇▇▇▇ Group Member with their
respective customers and trade suppliers have been entered into in the
ordinary course of business, are not in default by any ▇▇▇▇▇▇ Group Member,
or the best knowledge of the Sellers and the ▇▇▇▇▇▇ Group, by any other
party to the same. The ▇▇▇▇▇▇ Group has purchase orders (subject to
releases issued in the ordinary course of business) from those customers
listed on Schedule 3.15(a)(ii) with respect to all parts listed on Schedule
3.15(a)(iii). All outstanding purchase orders from those customers listed
on Schedule 3.15(a)(ii) are substantially the same as the forms of
customers purchase orders attached hereto to Schedule 3.15(a)(iv). Attached
hereto as Schedule 3.15)(a)(v) is a listing of the only production parts
which, as of the fiscal month of October, 1996, were being shipped by the
▇▇▇▇▇▇ Group without customer purchase orders. All outstanding purchase
orders to all suppliers of the ▇▇▇▇▇▇ Group are substantially the same
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as the form of vendor purchase order attached hereto as Schedule
3.15(a)(vi). Sellers have provided to Buyer (i) true, correct and complete
copies of all purchase orders issued by any ▇▇▇▇▇▇ Group Member in excess
of One Hundred Thousand (Cdn. $100,000) Cdn Dollars to any supplier
regarding the 1998 Chrysler LH program, (ii) a true and complete listing (a
copy of which is attached to Schedule 3.15(a)(vii) with respect to all
purchase commitments in excess of Fifty thousand (Cdn. $50,000) Cdn.
Dollars for the start-up of the ▇▇▇▇▇▇ Modular Assembly plant, (iii) a true
and complete listing (a copy of which is attached to Schedule 3.15(a)(vii)
with respect to all purchase commitments in excess of Fifty Thousand
(Cdn.$50,000) Cdn. Dollars for the expansion of the ▇▇▇▇▇▇ Glencoe
facility, and (iv) a true and complete listing (a copy of which is attached
to Schedule 3.15(a)(vii) with respect to all other purchase commitments in
excess of Three Hundred Fifty Thousand (Cdn. $350,000) Cdn. Dollars in each
transaction.
(b) Except as disclosed in Schedule 3.15(b) attached hereof, neither
Sellers nor any ▇▇▇▇▇▇ Group Member has received any notice (whether oral
or written) during the past twelve (12) months that any customer of any
▇▇▇▇▇▇ Group Member listed on Schedule 3.15(a)(i) intends to cease dealing
with any such ▇▇▇▇▇▇ Group Member or intends to substantially decrease the
amount of its vehicle program content with any such ▇▇▇▇▇▇ Group Member
from the levels realized during the past twelve (12) months, or that any
material customer of any ▇▇▇▇▇▇ Group Member would substantially decrease
the amount of such vehicle program content in the event of the consummation
of the transactions contemplated hereby.
3.16 Finders or Brokers Fee. There are no broker's commissions, finder's
fees or other payments of like nature payable to any person or entity in
connection with the transactions contemplated by this Agreement as a result of
the actions of the Sellers or the ▇▇▇▇▇▇ Group, except
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50
for the fees to be paid to ▇▇▇▇▇ & Co., which shall be the sole obligation of
and paid by Sellers, and in no event will Buyer or the ▇▇▇▇▇▇ Group have any
liability for any such fee or commission in connection with the transactions
contemplated hereby.
3.17 Licenses, Permits and Approvals. Schedule 3.17 and the Environmental
Reports contain a list and description of all licenses, permits, authorizations
and approvals required by any federal, provincial, state or local governments'
administrative or judicial authorities or required by any of the material
customers or material suppliers of each ▇▇▇▇▇▇ Group Member, which are material
to the operations of the respective businesses of the ▇▇▇▇▇▇ Group ( the
"Licenses and Permits"). Except as disclosed on Schedule 3.17, all Licenses and
Permits are valid and in full force and effect and no notice to or approval
under any License and Permit is required for the consummation of the
transactions contemplated by this Agreement (excluding the Amalgamation), or
which would adversely affect or impair the right or ability of the ▇▇▇▇▇▇ Group
Members to carry on their respective operations as heretofore conducted.
3.18 Competitive Interests. Except as disclosed on Schedule 3.18, to the
best knowledge of the Sellers and the ▇▇▇▇▇▇ Group, none of the officers,
directors, shareholders or key employees of any ▇▇▇▇▇▇ Group Member (including
purchasing agents and departmental managers) owns any interest or has any
investment or profit participation in any corporation or other entity which is
a competitor of or which otherwise transacts business with any ▇▇▇▇▇▇ Group
Member, except for marketable stock in publicly-trade companies and severance
and retirement benefits.
3.19 Related Party Transactions. Except as set forth on Schedule 3.19(a),
all of the transactions of the ▇▇▇▇▇▇ Group during the past three (3) years
have been conducted on an arms-length basis. To the best knowledge of the
Sellers and the ▇▇▇▇▇▇ Group, no employee of any ▇▇▇▇▇▇ Group Member has,
within the last three (3) years, violated in any material respect the published
business policies of any governmental agency or customer or supplier with
respect to gifts, services
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51
or corporate business practices. Except as described in Schedule 3.19(b), no
▇▇▇▇▇▇ Group Member has any outstanding loans or other advances directly or
indirectly to or from either Sellers, any officer, director, employee or
Affiliate or relative of Sellers or any entity in which either Sellers or the
Companies have a direct or indirect interest, other than travel and business
advances in the usual and ordinary course of business. Except as disclosed in
Schedule 3.19(c), since December 31, 1995, no ▇▇▇▇▇▇ Group Member has forgiven
or canceled, without receiving full consideration, any indebtedness owing to it
by either Sellers, any officer, director or other employee of any ▇▇▇▇▇▇ Group
Member or any entity in which either Sellers, has a direct or indirect interest.
3.20 Sellers Non-Residents. The Sellers are "non-residents" of Canada
within the meaning of the Income Tax Act (Canada).
3.21 General Warranty. The representations and warranties of ▇▇▇▇▇▇▇
▇▇▇▇▇▇ contained in this Agreement, all schedule attached hereto and all
certificates furnished to Buyer by Sellers or the ▇▇▇▇▇▇ Group at the Closing
pursuant to this Agreement are accurate and complete, and do not and will not
contain any untrue statement of fact, or omit to state a fact necessary to make
the statements herein and therein not misleading.
3.22 Continuation of Representations and Warranties of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
Except for the representations and warranties contained in Sections 3.2(b),
3.3(c), and 3.10 hereof and in the first sentence of Section 3.12(a), the
representations and warranties contained in this Article 3 shall survive the
Closing Date and continue in full force and effect for a period of two (2)
years following the Closing Date. The representations and warranties contained
in:
(a) Section 3.10 shall survive the Closing Date and continue in full
force and effect for a period of four (4) years following the Closing Date;
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52
(b) Sections 3.2(b) and the first sentence of Section 3.12(a) shall
survive the Closing Date and continue in full force and effect for a
period of six (6) years following the Closing Date;
(c) Section 3.3(c) hereof with respect to any tax period shall,
subject to compliance with Section 6.1(c) hereof, each survive and
continue in full force and effect until thirty (30) days following the
last day that any taxation authority of competent jurisdiction,
administering any taxation legislation pursuant to which any ▇▇▇▇▇▇ Group
Member is subject, has any right to assess, reassess or make additional
assessments pursuant to the taxation legislation of such jurisdiction (the
"Tax Expiration Date").
The applicable expiration dates referred to in this Section are hereinafter
collectively referred to as the "Representation Expiration Dates."
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers on the date hereof and as of the
Closing Date that:
4.1 Corporate Standing and Authority.
(a) Buyer is a company duly organized and validly existing and in
good standing under the laws of the Province of Nova Scotia and has the
power and authority to own its assets and to conduct its business.
(b) Buyer has legal capacity and authority to execute this Agreement
and to perform the transactions contemplated hereby. The execution,
delivery and performance of this Agreement (including, without limitation,
the Amalgamation) does not and will not violate or cause a default under
any provision of Buyer's Memorandum of Association or Articles of
Association. The execution delivery and performance of this Agreement
(excluding the amalgamation) does not and will not result in the breach,
termination or acceleration of any obligation or constitute a default or
permit the termination of any right
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53
under any mortgage, indenture, lien, lease, contract, agreement,
instrument, order,arbitration award, judgment or decree to which Buyer is
a party or by which either of them or their properties are bound. Buyer
has taken all necessary action required by law, Buyer's Articles of
Incorporation and By-laws or by any contract or agreement to which Buyer
is a party, to authorize the execution, delivery and performance of this
Agreement. This Agreement and each document and instrument executed
pursuant to this Agreement by Buyer constitutes a valid and binding
obligation of Buyer, enforceable in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally. Buyer is not
required to obtain the consent, approval or waiver of any person not a
party to this Agreement to enter into this Agreement or to consummate the
transactions contemplated hereby.
4.2 Ownership of Buyer, VS Holdings, Inc. and VS holdings No. 2, Inc..
(a) The complete ownership of Buyer, VS Holdings, Inc. ("VSH"), and
VS Holdings No., 2, Inc. ("VSH No. 2 ") is set forth on Schedule 4.2
attached hereto.
(b) Neither Buyer, VSH nor VSH No. 2, either individually or in the
aggregate, presently has One Hundred Million (U.S. $100,000,000) U.S.
Dollars or more in assets, neither Buyer, VSH nor VSH No. 2, either
individually or in the aggregate, have ever had One Hundred Million (U.S.
$100,000,000) U.S. Dollars or more in assets.
(c) Neither Buyer, VSH nor VSH No. 2, either individually or in the
aggregate, had annual net sales in excess of One Hundred Million (U.S.
$100,000,000) U.S. Dollars or more, as stated in their last regularly
prepared annual statement of income and expenses.
(d) Buyer, VSH and VSH No. 2 each have outstanding voting securities.
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54
(e) VSH holds more than fifty (50%) percent or more of the
outstanding voting securities of Buyer, and has the contractual power to
designate fifty (50%) percent or more of the directors of Buyer.
(f) No person (together with their respective spouses and minor
children) holds (beneficially, directly or indirectly through fiduciaries,
agents, controlled entities or other means) fifty (50%) percent or more
of the outstanding voting securities of VSH or VSH No. 2, as the case may
be, or has the contractual power to designate fifty (50%) percent or more
of the directors of VSH or VSH No. 2, as the case may be.
For purposes of this Section 4.2, the terms "person," "control," and
"hold(s)" shall have the meanings prescribed by the ▇▇▇▇-▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, 15 U.S.C. Sec. 18a, et seq. and the rules
promulgated by the Federal Trade Commission thereunder.
4.3 Finder's or Broker's Fee. There are no broker's commissions, finder's
fees or other payments of like nature payable to any person or entity in
connection with the transactions contemplated by this Agreement as a result of
the actions of the Buyer, except for the advisory fees to be paid to Ernst &
Young, which shall be the sole obligation of and paid by Buyer, and in no event
will Sellers have any liability for any such fee or commission in connection
with the transaction contemplated hereby.
4.4 Litigation. No investigation, governmental or administrative
proceeding or other litigation of any kind or nature of which Buyer or any
Affiliate of Buyer has received written notice of and is a party, is not
pending, or, to the best knowledge of Buyer, threatened which would, if
adversely determined, materially prevent or delay the transactions contemplated
by this Agreement or have a material adverse effect upon the Buyer or the
operations of the New ▇▇▇▇▇▇ Group following the Closing. Buyer is not subject
to any court or administrative order, judgment or decree
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which would, if adversely determined, materially prevent of delay the
transactions contemplated by this Agreement or have a material adverse effect
upon the Buyer or the operations of the New ▇▇▇▇▇▇ Group following the Closing.
Buyer has complied in all material respects with all applicable laws,
orders and other requirements of all governmental authorities, and the
Amalgamation complies in all material respects with all applicable laws, orders
and other requirements of all governmental authorities. Buyer is not subject
to any court or administrative order, judgment or decree.
4.5 Hawthorne Metal Products Company Financial Statements. Buyer has
made available to Sellers true and complete copies of the audited balance
sheets of Hawthorne Metal Products Company as of and for the calendar years
ending December 31, 1994 and December 31, 1995, and the related audited
statements of income and retained earnings and statements of cash flows for the
periods then ended, including the notes thereto and any supplemental
information provided therewith.
4.6 Liabilities. Buyer has no material liabilities as of the date
hereof, except for liabilities incurred in connection with the transactions
contemplated by this Agreement and except as otherwise set forth on Schedule
4.6.
4.7 Investment Purpose. Buyer and, as to ▇▇▇▇▇▇ holdings, the Designees,
are acquiring the Shares for their own account for investment and not with a
view to immediate distribution, fractionalization or resale to any other person.
4.8 General Warranty. The representations and warranties of Buyer
contained in this Agreement and all certificates furnished to sellers pursuant
to this Agreement are accurate and complete, and do not and will not contain
any untrue statement of fact, or omit to state a fact necessary to make the
statements herein and therein not misleading.
4.9 Continuation of Representations and Warranties of Buyer. The
representations and warranties contained in this Article 4 shall survive the
Closing Date and continue in full force and
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56
effect for a period of two (2) years following the Closing Date; provided, the
representations and warranties contained in Section 4.2 shall survive the
Closing Date and continue for a period of six (6) years. The applicable
expiration dates referred to in this Section are hereinafter collectively
referred to as the "Representation Termination Dates."
ARTICLE 5 - INDEMNITIES
5.1 Indemnification by Sellers. Sellers, jointly and severally, shall
indemnify, defend and hold Buyer harmless from, against and with respect to any
claim, liability, obligation, tax, loss, damage, assessment, judgment, cost and
expense (including, without limitation, reasonable attorney's fees and costs
and expenses reasonably incurred in connection therewith), after deduction for
any net tax savings, insurance reimbursement or other third party recoveries
received by such party as result thereof, which are incurred by Buyer or its
shareholders, officers, directors and employees (collectively "Purchasers'
Damages") resulting from or attributable to any of the following (collectively
"Purchasers Indemnifiable Claims"):
(a) any breach or failure of any representation or warranty of the
Sellers or any ▇▇▇▇▇▇ Group Member contained in this Agreement or in any
of the certificates delivered to Buyer by the Sellers or any ▇▇▇▇▇▇
Group Member pursuant to Section 2.2 of this Agreement;
(b) any failure by the Sellers or any ▇▇▇▇▇▇ Group Member to perform
or observe, or to have performed or observed, in full any covenant or
agreement to be performed or observed by Sellers or any ▇▇▇▇▇▇ Group
Member under this Agreement (other than Section 6.1 below);
(c) any liability or claim resulting from the conduct of the
businesses of any ▇▇▇▇▇▇ Group Member through the Closing (other than
those (i) reflected in the Financial Statements received by Buyer prior
toe Closing Date, (ii) incurred or accruing after the dates of the
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Financial Statements in the ordinary course of business through the
Closing (iii) incurred in the ordinary course of business and resulting
from the Leases, Contracts, Employee Benefit Plans or other instruments
entered into through the Closing in the ordinary course of business on a
basis consistent with historical practices, (iv) those reflected in
Schedule 5.1 (c)(iv) attached hereto, or (vi) those resulting from any
violations of any applicable Environmental Laws, to the extent that such
violation does not constitute a breach of the representations and
warranties set forth in Section 3.1), including, without limitation;
(i) any liability or claim for personal injury or damage to
property based on or resulting from any product sold by any
▇▇▇▇▇▇ Group Member through the Closing;
(ii) any liability or claim for any federal, state, provincial,
local or foreign income, franchise, real property, personal property,
withholding, employment, sales, ad valorem, goods and services and
other taxes payable or collectible by any ▇▇▇▇▇▇ Group Member, or any
penalty or interest payable with respect to any of the foregoing,
which relates to any ▇▇▇▇▇▇ Group Member for any period through the
Closing;
(iii) any liability or claim for workers' compensation benefits,
health, life or other insurance benefits, or any other employee
benefits or claims for or by any of the employees of any
▇▇▇▇▇▇ Group Member for any period through the Closing (other than
any liability or claim covered by insurance or the workers'
compensation system or any liability for any increase in any
insurance premiums or workers' compensation contributions after
Closing which results from an event prior to the Closing), or any
liability or claim resulting from or relating to any occurrence
during any period through the Closing; or
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(iv) any liability or claim resulting from the termination of any
employee of any ▇▇▇▇▇▇ Group member prior to the Closing;
(d) any agreements, contracts, negotiations or other dealings by
Sellers or any ▇▇▇▇▇▇ Group Member with any person concerning the sale of
all or substantially all of the stock, assets or businesses of any ▇▇▇▇▇▇
Group Member;
(e) any liability or claim by any third party resulting from the
conduct of the businesses of any ▇▇▇▇▇▇ Group Member through the Closing in
violation of any law, rule or regulation of any governmental authority,
excluding any federal, state or local Environmental Laws to the extent such
violation does not constitute a breach of the representations and
warranties set forth in Section 3.10 above;
(f) any liability or claim resulting from any of the matters disclosed
in Schedules 3.3(b), 3.3(c)ii or 3.3(c)(vi) attached hereto (except to the
extent that any unpaid or unaccrued taxes referenced therein are accrued
for in the September 28, 1996 interim financial statements), or from any of
the matters disclosed in Schedules 3.3(c)(i), 3.5(c), 3.6(b), 3.9 (other
than with respect to item 26 on Schedule 3.6(a) and the consideration of
▇▇▇▇▇▇ Ltd. pursuant to item 25 on Schedule 3.6(a)) or items 4, 5 and 6 of
Schedule 3.11 attached hereto.
5.2 Limitations on Purchasers Indemnifiable Claims. Notwithstanding
anything contained in this Agreement to the contrary, Purchasers Indemnifiable
Claims are subject to the following limitations:
(a) Except for any Purchasers Indemnifiable Claims results from a
breach of the representations and warranties set forth in Sections 3.2(b)
and 3.16 hereof and the first sentence of Section 3.12(a) hereof (which
shall not be subject to the limitations set forth in this Section 5.2(a)),
after the Closing, Buyer shall have no right to assert any Purchasers
Indemnifiable Claims until the aggregate amount of all Purchasers
Indemnifiable Claims shall
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59
exceed the sum of Five Hundred Thousand (Cdn. $500,000) Cdn. Dollars (the
"Floor"), in which event the Buyer shall only be entitled to indemnity
hereunder for the amount of such Purchasers Indemnifiable Claims in excess
of the Floor; provided, however, in the event that the Buyer shall be
entitled to any Purchasers Indemnifiable Claims resulting from a breach of
the representations and warranties set forth in Sections 3.3(c) or
pursuant to Section 5.1(c)(ii), then in such event the Floor shall be
increased by an amount, if any, equal to the lesser of (i) the aggregate
amount of such Purchasers Indemnifiable Claims resulting from a breach of
the representations and warranties set forth in Section 3.3(c) and
pursuant to Section 5.1(c)(ii), or (b) the amount realized by the ▇▇▇▇▇▇
Group from the research and development tax credits described on Schedule
5.2(a) attached hereto resulting from the operations of the ▇▇▇▇▇▇ Group
prior to Closing.
(b) Except for any Purchasers Indemnifiable Claims resulting from a
breach of the representations and warranties set forth in Sections 3.2(b)
hereof and the first sentence of Section 3.12(a) hereof (which shall not
be subject to the limitations set forth in this Section 5.2(b)), the
Sellers aggregate liability for any Purchasers Indemnifiable Claims shall
not, under any circumstances, exceed Ten Million (Cdn. $10,000,000) Cdn.
Dollars (the "Ceiling") of which Two Million Five Hundred Thousand (Cdn.
$2,500,000) Cdn Dollars (the "Base Liability Amount") shall be collectable
by Buyer and payable by Sellers irrespective of any Earn-Out Amounts which
may become due to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (including by way of set-off as set forth
in Section 5.2(f) below) and of which Seven Million five Hundred Thousand
(Cdn. $7,500,000) Cdn. Dollars shall be collectable by Buyer and payable
only from the Earn-Out Amounts which may be or have been paid to or become
due to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇; provided, however:
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(i) in the event any such Purchasers Indemnifiable Claims have
been asserted hereunder, and in the event that any portion of the
Earn-Out Amounts have been finally determined, then in such event
Buyer shall first set-off and reduce such portion of the Earn-Out
Amounts prior to collecting any portion of the Base Liability Amount
from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇); and
(ii) in the event that the Buyer shall be entitled to any
Purchasers Indemnifiable Claims resulting from a breach of the
representations and warranties set forth in Section 3.3(c) or
pursuant to Section 5.1(c)(ii) ("Tax Claim"), and the aggregate
amount of such Tax Claims shall be equal to or exceed Three Hundred
Fifty Thousand (Cdn. $350,000) Cdn. Dollars (without regard to the
limitations set forth in Section 5.2(a) hereof), then in such event
the Base Liability Amount shall be increased by the aggregate amount
of all such Tax Claims which are in excess of such Three Hundred
Fifty Thousand (Cdn. $350,000) Cdn. Dollars, but in no event shall
the Base Liability Amount exceed the sum of Three Million (Cdn.
$3,000,000) Cdn. Dollars.
(c) The Sellers aggregate liability for any Purchasers Indemnifiable
Claims resulting from a breach of the representations and warranties set
forth in Sections 3.2(b) hereof and the first sentence of Section 3.12(a)
hereof, shall not, under any circumstances, exceed the sum of the NAPT
Share Purchase Price, the ▇▇▇▇▇▇ Ltd. Share Purchase Price and the ▇▇▇▇▇▇
Holdings Share Purchase Price.
(d) In addition to the other limitations set forth in this Section.
5.2:
(i) ▇▇▇▇▇ ▇▇▇▇▇▇'▇ aggregate liability for any Purchaser's
Indemnifiable Claims shall be limited to the amount of all cash,
assets, property or other consideration of any kind which is
transferred, directly or indirectly, by ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ to ▇▇▇▇▇ on or after the Closing to the extent that the same
totals in excess of One Million (Cdn. $1,000,000) Cdn. Dollars, but
shall not, under any circumstances, exceed the sum of the NAPT Share
Purchase Price, the ▇▇▇▇▇▇ Ltd. Share Purchase Price and the ▇▇▇▇▇▇
Holdings share Purchase Price;
(ii) In the event that the Consolidated Net Worth as of the
Closing Date is less than the Base Net Worth, and in the event that
the Initial Amount is reduced by the amount of such difference
pursuant to Sections 1.2(b)(i)(A) and Section 1.4 hereof (the
"Reduction"), then in such event any Purchasers' Damages directly
resulting from those specific items which caused such Consolidated Net
Worth as of the Closing to be less than the Base Net Worth shall be
reduced by the amount of the Reduction; and
(iii) In no event shall any Purchasers Indemnifiable Claims
include any claim, liability, obligation, loss, damage, cost or
expense resulting from the Amalgamation.
(e) As a precondition to Purchasers Indemnifiable Claims, the
following limitations shall apply:
(i) Any claim pursuant to Section 5.1(a) hereof must be Properly
Presented prior to the Representation Expiration Date of the
representation and warranty which is the basis for such claim;
(ii) Any claim pursuant to Sections 5.1(b), 5.1(c) (excluding any
claim within any subparagraph thereof), 5.1(c)(iii), 5.1(c)(iv),
5.1(d), 5.1(e) or 5.1(f) hereof must be Properly Presented (as
hereinafter defined) prior to the expiration of the two (2) year
period following the Closing Date;
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(iii) Any claim pursuant to Section 5.1(c)(i) hereof must be
Properly Presented prior to the expiration of the three (3) year
period following the Closing Date; and
(iv) Any claim pursuant to Section 5.1(c)(ii) hereof must be
Properly Presented prior to the expiration of the Tax Expiration Date;
---provided, however, any claim which is Properly Presented within the
applicable time periods set forth above shall survive thereafter until such
claim is finally resolved; provided, further, however, any claim which is
not Properly Presented within the applicable time periods set forth above
shall be barred.
(f) In the event the Buyer is entitled to indemnification under this
Agreement, in addition to all other rights and remedies available to Buyer
subject to the limits set forth in this Section 5.2, and in the event that
such amounts are not paid within fifteen (15) days after written notice
thereof to the Sellers, then such event Buyer shall in its discretion be
entitled to set-off the amount of such claim against any amounts due to
Sellers hereunder (including the Earn-Out Amounts), under the Promissory
Note or under the Employment Agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, provided, that
Buyer shall place such amounts as may be set-off in escrow in an interest
bearing account with an escrow agent mutually acceptable to the parties,
pending an agreement of the parties or a final order of a court of
competent jurisdiction (or any agreed upon arbitration panel) designating
the party or parties entitled to the same.
5.3 Indemnification by Buyer. The Buyer shall indemnify, defend and hold
Sellers harmless from, against and with respect to any claim, liability,
obligation, tax, loss, damage, assessment, judgment, cost and expense
(including, without limitation, reasonable attorney's fees and costs and
expenses reasonably incurred in connection therewith), after deduction for any
net tax savings, insurance reimbursement or third party recoveries received by
Sellers as result thereof, which are
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incurred by Sellers or its shareholders, officers, directors and employees
(collectively "Sellers' Damages") resulting from or attributable to any of the
following (collectively "Sellers Indemnifiable Claims"):
(a) any breach or failure of any representation or warranty of the
Buyer contained in this Agreement or in any of the certificates delivered
to Sellers by the Buyer pursuant to Section 2.2 of this Agreement;
(b) any failure by the Buyer to perform or observe, or to have
performed or observed, in full any covenant, agreement or condition to be
performed or observed by Buyer under this Agreement;
(c) any activities, operations or conduct of the businesses of any
▇▇▇▇▇▇ Group Member, the Buyer, the New York ▇▇▇▇▇▇ Group, VSH and VSH
No. 2 following the Closing (except to the extent that the same is a
result of any actions or omissions of either of the Sellers), including,
without limitation, the Amalgamation, and which results in the incurrence
of Sellers' Damages; or
(d) any liability or claim resulting from the conduct of the
business of Buyer prior to the Closing Date.
5.4 Limitations on Sellers Indemnifiable Claims. Notwithstanding anything
contained in this Agreement to the contrary, Sellers Indemnifiable Claims are
subject to the following limitations:
(a) Except for any Sellers Indemnifiable Claims resulting from a
breach of Sections 1.2, 1.3, 1.4, 4.2, 5.3(c), 5.3(d), 6.1 or 6.2(a)
hereof (which shall not be subject to the limitations set forth in this
Section 5.4(a)) Sellers shall have no right to assert any Sellers
Indemnifiable Claims until the aggregate amount of all Sellers
Indemnifiable Claims shall exceed One Hundred Fifty Thousand (Cdn.
$150,000) Cdn. Dollars, in which event
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Buyer shall only be liable to Sellers hereunder for the amount of such
Sellers Indemnifiable Claims in excess such One Hundred Fifty Thousand
(Cdn. $150,000) Cdn. Dollars.
(b) Except for any Sellers Indemnifiable Claims resulting from a
breach of Sections 1.2, 1.3, 1.4, 4.2 or 6.1 hereof (which shall not be
subject to the limitations set forth in this Section 5.4(b)), the Buyer's
aggregate liability for any Sellers Indemnifiable Claims shall not, under
any circumstances, exceed One Million (Cdn. $1,000,000) Cdn. Dollars.
(c) As a precondition to Sellers Indemnifiable Claims:
(i) any such claim pursuant to Sections 5.3(b), 5.3(c) or 5.3(d)
hereof must be Properly Presented prior to the expiration of the two
(2) year period following the Closing Date, except for (a) any claims
with respect to the covenants set forth in Sections 1.3 and 6.1 hereof
which must be Properly Presented prior to the expiration of the five
(5) year period following the Closing Date, (b) any claim pursuant to
Section 6.2(a) hereof as otherwise provided in Section 5.4(c)(iii),
and (c) any claim pursuant to the Promissory Note; and
(ii) any claim pursuant to Section 5.3(a) hereof must be
Properly Presented prior to the expiration of the applicable
Representation Termination Date;
(iii) any claim pursuant to Section 6.2(a) hereof must be
Properly Presented prior to the expiration of the applicable survival
period set forth therein;
---provided, however, any claim which is Properly Presented within such
time period shall survive thereafter until such claim is finally resolved;
provided, further, however, any claim which is not Properly Presented
within such time period shall be barred.
5.5 Third Party Claims. In the event any party has Properly Presented and
is entitled to a claim for indemnification under this Agreement as a result of
any action, suit, proceeding, claim,
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demand, tax assessment, notice or other assessment brought by a third party (a
"Third Party Claim"), then the party seeking indemnification (the "Indemnitee")
shall Properly Present the same to the indemnifying party (the "Indemnitor"),
and, subject to the terms and conditions set forth in this Article 5, such
Third Party Claim shall be administered as follows:
(a) The Indemnitor shall, at its own cost and expense, contest and
defend such Third Party Claim; provided, however, Indemnitee shall have
the right, at its own cost and expense, to participate in such defense;
and, provided, further, in the event the Indemnitor shall fail to proceed
with reasonable diligence in defending any Third Party Claim, then the
Indemnitee, upon reasonable written notice to the Indemnitor stating its
objections to the conduct of the defense by the Indemnitor and the failure
of the Indemnitor to proceed within twenty (20) days to conduct a
reasonably diligent defense, shall have the right to take over the defense
of the Third Party Claim, with the costs and expenses of such defense to
be borne by the Indemnitor. In no event shall the Indemnitee or Indemnitor
have the right to settle any Third Party Claim without the prior written
consent of the other, which consent shall not be unreasonably withheld or
withheld in bad faith.
(b) Each party shall cooperate with each other in connection with
any Third Party Claim and provide each other with reasonable access to any
books, records or other documents or information which they may possess
relating to such claim.
5.6 Payment and Interest. In the event any party has Properly Presented
and is entitled to indemnification hereunder as a result of any Third Party
Claim, any loss, damage, cost or expense (including, without limitation,
reasonable attorney's fees and costs and expenses reasonably incurred in
connection therewith) incurred by such party shall be paid by the indemnifying
party within sixty (60) days following such indemnifying party's receipt of
notice of the same. In the event such amounts are not paid within such sixty
(60) day period, such unpaid amounts shall bear interest from
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and after the expiration of such sixty (60) day period at the Prime Rate plus
one (1%) percent per annum.
5.7 Presentment of Claims.
(a) For purposes of this Agreement, a claim for indemnification shall
be "Properly Presented" only where it is presented in good faith, where the
party presenting such claim reasonably believes that it may incur damages
as a result thereof, and only where written notice of such claim is
provided to the recipient and such written notice contains, with reasonable
specificity, the nature of the relevant facts pertaining to the claim and
damages, and is accompanied by any relevant documents relating thereto
("Indemnity Notice"). A claim shall not be Properly Presented to the extent
that it is made in bad faith solely for the purpose of avoiding any time
limitations or avoiding the expiration of any right or provision under this
Agreement.
(b) The parties hereto shall have a duty to take all reasonable
actions required by law in order to mitigate any damages with respect to
any matter for which a claim for indemnity is brought.
(c) The parties hereto agree that the indemnification provided by this
Article 5 shall be their sole and exclusive remedy for any actions arising
out of this Agreement or the transactions contemplated hereby, except for
any remedies provided in the Agreement Not to Compete, the Employment
Agreement, the Side Agreement, the Security Agreements, the Debentures, or
the Promissory Note, and except for any claims by Sellers with respect to
the activities, operations or conduct of the businesses of any ▇▇▇▇▇▇ Group
Member, the Buyer, the New ▇▇▇▇▇▇ Group, VSH and VSH No. 2 following the
Closing (except to the extent that the same is a result of any actions or
omissions of either of the Sellers), including, without limitation, the
Amalgamation; provided, however, the foregoing shall in no way limit any
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statutory or common law tort claims for fraud in the inducement, which
claims (i) must be Properly Presented within three (3) years following the
Closing, and (ii) shall be subject to the limitations and provisions set
forth in Section 5.2(a) and 5.2(c) hereof.
5.8 Arbitration. The parties hereto will endeavor to resolve in good faith
any controversy, disagreement or claim arising between them relating to the
provisions of this Agreement. If they are unable to do so, except as otherwise
provided in Sections 1.3 and 1.4 hereof and except for any claim for specific
performance or injunctive relief pursuant to Section 6.1(d) hereof, any such
controversy, disagreement or claim will be submitted, for final resolution
without appeal, to binding arbitration, by either party giving written notice
to the other of the existence of a dispute which it desires to have arbitrated.
The place of arbitration will be Detroit, Michigan and the arbitration will be
conducted in accordance wit the rules of the AAA. The decision and award (if
any) of the arbitrators shall be final and binding, i.e., not subject to
appeal, and the parties hereby mutually agree that any such determination shall
have the same effect as an arbitration pursuant to Michigan Compiled Laws
Annotated Section 600.5001, and a judgment upon the award may be entered in any
court having jurisdiction thereof, or application may be made to such court for
a judicial acceptance of the award and an order of enforcement, as the case may
be. The expenses of arbitration will be borne in accordance with the
determination of the arbitrators with respect hereto.
ARTICLE 6 - COVENANTS
6.1 Covenants After Closing. Buyer, VSH, VSH No. 2, ▇▇▇▇▇▇ Ltd., ▇▇▇▇▇▇
Holdings, NAPT and Subsidiary, jointly and severally, agree that, from and
after the Closing Date until that date that the Earn-Out Amounts and the
Promissory Note are paid in full:
(a) Each New ▇▇▇▇▇▇ Group Member, VSH and VSH No. 2 shall not, without
the prior written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (which consent shall not be
unreasonably withheld):
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(i) Amend, revoke, restate or otherwise alter in any material respect
any of their respective Articles of Incorporation or Organization, Bylaws
or Charter, in any manner which would reasonably be expected to have a
material adverse effect on the amount or payment of the Earn-Out Amounts or
would effectuate any of the transactions prohibited by Section 6.1(a)(ii);
provided, however, the foregoing shall not in any way prohibit the
continuance of the Subsidiary, NAPT and ▇▇▇▇▇▇ Ltd. into Nova Scotia and
the amalgamation of the Subsidiary, NAPT and ▇▇▇▇▇▇ Ltd. into the Buyer
(collectively the "Amalgamation"); and
(ii) Engage in any of the following transactions (whether in a single
transaction or a series of transactions):
(a) merge, amalgamate, consolidate or enter into a share exchange
with any other entity which would reasonably be expected to have a
material adverse effect on the amount or payment of the Earn-Out
Amounts; provided, however, the foregoing shall not in any way
prohibit the Amalgamation;
(b) transfer, sell, assign or otherwise convey any significant
part of their assets (other than inventory in the ordinary course of
business, other property in a manner consistent with historical
practices, or in connection with the Amalgamation);
(c) purchase or otherwise acquire any material amount of the
assets, capital stock, or other ownership interests, of another
entity;
(d) declare or pay any dividends or authorize any other
distributions (other than stock dividends or stock splits) on any
stock, security or other equity interest, whether now or hereafter
issued and outstanding, or redeem or otherwise acquire any of their
respective stock, securities or other equity
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interests (other than in connection with any stock option plans for
the benefit of employees), which, when aggregated with the amounts
permitted pursuant to Section 6.1(a)(ii)(e) hereof, would exceed an
annual amount equal to One Hundred Thousand (Cdn $100,000) Cdn.
Dollars per year;
(e) make any loans or advances to, or become a guarantor,
surety or pledge its credit to become liable for any undertakings of
any person or entity (other than any other member of the New ▇▇▇▇▇▇
Group), which, when aggregated with the amounts permitted pursuant to
Section 6.1(a)(ii)(d) hereof, would exceed an annual amount equal to
One Hundred Thousand (Cdn $100,000) Cdn. Dollars per year; provided,
however, the foregoing shall not apply to advances to employees in
the ordinary course of business or for the endorsement of instruments
payable to their order in the ordinary course of collection;
(f) enter into any transactions with any Affiliate of Buyer,
except that the Buyer may enter into transactions with Talon
Automotive Group L.L.C. ("Talon") pursuant to which Talon may
charge the New ▇▇▇▇▇▇ Group management, consulting and administrative
fees in an aggregate amount not to exceed Four Hundred Fifty Thousand
(U.S. $450,000) U.S. Dollars per year, plus any amounts permitted by
Section 1.3(b)(iii)(e)(iv) above; and
(g) permit or be subject to any direct or indirect sale,
issuance, transfer or other disposition (in one or a series of
transactions) of an aggregate amount of fifty (50%) percent or more
of their respective outstanding voting stock which would reasonably
be expected to have a material adverse effect on the amount or
payment of the Earn-Out Amounts;
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provided, however, the foregoing shall not in any way prohibit any of
the foregoing to or among existing shareholders, their family members
or trusts for their benefit, or to Affiliates, provided such
Affiliates remain Affiliates after such transfer;
-- provided, however, that, notwithstanding the foregoing, the New ▇▇▇▇▇▇
Group and VSH No. 2 shall be entitled to enter into any transaction in
preparation for and in connection with an initial public offering
("IPO"), provided that such transaction and such IPO would not reasonably
be expected to have a material adverse effect on the amount or payment of
the Earn-Out Amounts, and provided that the New ▇▇▇▇▇▇ Group shall
nevertheless be maintained as a separate division with separate books and
records for the determination of the EBIT of the New ▇▇▇▇▇▇ Group.
(b) The business of the New ▇▇▇▇▇▇ Group shall be operated on an
autonomous basis substantially similar to the historical operations of the
▇▇▇▇▇▇ Group, and the Buyer shall maintain separate books and records for
the determination of the EBIT of the New ▇▇▇▇▇▇ Group.
(c) Each New ▇▇▇▇▇▇ Group Member shall not extend or consent to the
extending of the statutes of limitations for any tax without the prior
written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
(d) In the event of any breach or threatened breach of the
covenants set forth in this Section 6.1, then in such event, in addition
to any other rights or remedies of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
shall be entitled to injunctive relief and specific performance of such
covenants in order to prevent and/or remedy any such breach or threatened
breach.
6.2 Other Covenants.
(a) The New ▇▇▇▇▇▇ Group shall continue to provide to ▇▇▇▇▇ ▇▇▇▇▇▇
and his wife with (i) medical insurance coverage for the rest of
their lives or until ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ is no
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longer employed by any member of the New ▇▇▇▇▇▇ Group, if sooner, provided
that the cost of such coverage shall not exceed Two Thousand Five Hundred
(Cdn. $2,500) Cdn. Dollars in the aggregate in each year and (ii) medical
reimbursement coverage for the rest of their lives or until ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
is not longer employed by any member of the New ▇▇▇▇▇▇ Group, if sooner,
provided, that the cost of such coverage shall not exceed Ten Thousand
(U.S. $10,000) U.S. Dollars in the aggregate in each year, provided,
however, in each case, that they continue to qualify for such coverage
under the existing plans or comparable plans which are available to the
Buyer. The parties agree that ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be permitted to enforce
or recover damages for a breach of this Section 6.2(a) and that such claims
shall survive for the lives of ▇▇▇▇▇ ▇▇▇▇▇▇ and his wife.
(b) The name of Buyer, upon the completion of the Amalgamation, will
be changed to "▇▇▇▇▇▇ Metal Products Co."
ARTICLE 7 - MISCELLANEOUS
7.1 Additional Documents. Following the Closing Date, Buyer and Sellers
shall execute and deliver any and all other documents and take such other
actions as may be reasonably requested which are necessary or desirable to
effectuate the terms of this Agreement.
7.2 Interpretation. Article titles, Schedule titles and headings to
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement. The recitals, Schedules and Exhibits referred to herein shall be
deemed an integral part of this Agreement to the same extent as if they were
set forth verbatim herein.
7.3 Entire Agreement. This Agreement, the related agreements referenced
herein and executed in connection herewith and the Schedules and Exhibits
attached hereto, constitute the entire agreement among the parties pertaining
to the agreements, representations, and understandings of
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the parties. All prior negotiations, writings and discussions between the
parties are merged into an superseded by this Agreement. There are no oral or
other representations, warranties, covenants or agreements of the parties which
are not set forth herein and in the Schedules and Exhibits attached hereto. The
parties hereto may amend, modify and supplement this Agreement only by the
written agreement of the parties. Any supplement, modification, or amendment of
this Agreement shall not be binding unless executed in writing.
7.4 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice
is to be given, or on the date of mailing if mailed to the party to whom notice
is to be given, by first class mail, registered or certified, postage prepaid,
and properly addressed as follows:
(a) To Buyer at: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with a copy to: Timmis & ▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
(b) To Sellers at: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
with a copy to: ▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.L.C.
One Detroit Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇, Esq.
Any party may change its address for purposes of this paragraph by giving the
other party written notice of the new address in the manner set forth above.
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7.5 Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Michigan. Any action to enforce the
terms and conditions of this Agreement, or otherwise arising in connection with
this Agreement and the transactions contemplated hereby, shall be resolved in
accordance with the terms of Sections 1.3, 1.4 and 5.8 hereof, and the parties
hereby consent to the personal and subject matter jurisdiction of such panels
and/or persons.
7.6 Waivers. Any term or provision of this Agreement may be waived, or
the time for its performance may be extended, by the party or parties entitled
to the benefit thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes of this Agreement if it is in writing and, as to
the Sellers, if it is authorized by the Sellers, and as to Buyer, if it is
authorized by ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
7.7 Expenses. Buyer and Sellers will each pay their respective costs and
expenses incident to their negotiation and preparation of this Agreement and to
their performance and compliance with all agreements and conditions contained
herein on their respective parts to be performed or complied with, including
the fees, expenses and disbursements of their respective counsel and
accountants. In the event any amounts to be paid by Sellers hereunder are paid
by any ▇▇▇▇▇▇ Group Member, Sellers shall immediately pay such amounts to
Buyer, and any amounts payable hereunder by Sellers to Buyer shall not be
subject to the limitations set forth in Sections 5.1(c) and (d) above.
7.8 Partial Invalidity. Wherever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in
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any respect, such invalidity, illegality or unenforceability shall not
affect any other provisions of this Agreement and this Agreement and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions has never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
completion of the transactions contemplated hereby to be unreasonable.
7.9 Assignment. The rights and obligations under this Agreement may not
be assigned by any party without the prior written consent of each of the other
parties hereto (which consent shall not be unreasonably withheld), except that
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ may assign his rights (but not his obligations hereunder) to a
revocable living trust of which ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ is sole trustee during this
lifetime, and except that the Buyer may assign its rights (but not its
obligations hereunder) with respect to ▇▇▇▇▇▇ Holdings to the Designees (as
defined herein). This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors or permitted assigns.
7.10 Not Third Party Beneficiaries. There are not third party
beneficiaries to this Agreement and nothing in this Agreement, express or
implied, is intended or shall be construed to confer upon any person (other than
the parties hereto and their respective successors or permitted assigns) any
right, remedy or claim under or by reason of this Agreement.
7.11 Counterparts. This Agreement may be executed in one (1) or more
counterparts, each and all of which shall be deemed for all purposes to be one
agreement.
7.12 Dollars. Except as otherwise expressly designated herein, all
references to currency, monetary values and dollars set forth herein shall mean
Canadian (Cdn.) Dollars.
7.13 Fees and Expenses. In connection with any action or proceeding
brought to enforce the terms and conditions of this Agreement, or otherwise
arising in connection with this Agreement
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and the transactions contemplated hereby, the nonprevailing party in such
action or proceeding shall pay the reasonable attorneys' fees, and related
costs and expenses, of the prevailing party.
7.14 Knowledge. For the purposes of Article 3 of this Agreement, any
representation or warranty therein limited to Sellers' or the ▇▇▇▇▇▇ Group's
knowledge shall encompass all facts and information which are within the actual
present knowledge of those individuals identified on Schedule 7.14.
7.15 Press Releases and Public Announcements. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other parties to this Agreement.
7.16 Schedules. Capitalized terms used in any schedules attached hereto
and not otherwise defined therein shall have the meanings assigned to them in
this Agreement.
7.17 Affiliate. For purposes hereof, "Affiliate" or "Affiliates" of any
specific person or entity shall mean any person or entity (i) listed or
described in Schedule 7.17 hereof with respect to such specified person or
entity (the "Listed Affiliates"), (ii) which is a direct or indirect
shareholder or subsidiary of any specified person or of any of the Listed
Affiliates with respect to such specified person or entity (the "Held
Affiliates"), or (iii) is a relative of or is owned or controlled, in whole or
in part, by any specified person or entity, or any Listed Affiliates or Held
Affiliates with respect to any specified person or entity; provided, however,
that Timmis & ▇▇▇▇▇ L.L.P. shall not be deemed an Affiliate of Buyer or any of
its Affiliates.
7.18 Registration. Buyer acknowledges that: (a) the Shares have never been
registered under the Securities Act of 1933, as amended or under any other
applicable securities laws ("Securities Laws"), (b) the Shares may not be
resold or otherwise disposed of except in compliance with the Securities Laws,
and (c) Buyer has not relied upon any officer, director, employee or agent of
any ▇▇▇▇▇▇ Group Member for any explanation of the application of the
Securities Laws.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SELLERS: BUYER:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ VS ACQUISITION CO.
--------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, individually
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as trustee of the By: ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ Revocable Living Trust -----------------------------
u/a/d December 17, 1992 Its: Vice President
-----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, individually
The undersigned hereby execute this Agreement for the sole purpose of
agreeing to be bound by the terms of Sections 4.2, 6.1 and 6.2(a) hereof and no
other purpose whatsoever:
▇▇▇▇▇▇ HOLDINGS LIMITED NORTH AMERICAN PRECISION TOOL
LIMITED
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------- -----------------------------
Its: President Its: President
--------------------------- -----------------------------
▇▇▇▇▇▇ STAMPING CORPORATION VS HOLDINGS NO. 2, INC.
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------- -----------------------------
Its: President Its: Vice President
--------------------------- -----------------------------
▇▇▇▇▇▇ HOLDINGS USA, INC. VS HOLDINGS, INC.
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------- -----------------------------
Its: President Its: Vice President
--------------------------- -----------------------------
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SCHEDULE 1.4(b)
ADJUSTMENTS TO CLOSING NET WORTH STATEMENT
1. The value of the Consolidated Net Worth shall not be adjusted for any
items which would record or increase a liability or reduce the balance of
any asset if such recording was on account of the transactions contemplated
by this Agreement or if such recording was due to premature or early
payment of any outstanding liability including, but not limited to,
previously incurred expenses due to the CIBC loan, such as professional
fees, loan restructuring fees, etc. which have been previously capitalized
but will be expensed when such loan is replaced by the Purchaser.
2. The amount of all capitalized costs incurred in establishing ▇▇▇▇▇▇
Modular Assembly which are currently an asset on the books and records of
the ▇▇▇▇▇▇ Group shall remain an asset for the purpose of the calculation
of Consolidate Net Worth and shall be determined consistent with the
provisions of Section 1.3(b)(iii)(aa) hereof.
3. For the purposes of calculating Consolidated Net Worth, the balance of
the income taxes payable (recoverable) and deferred income taxes payable
(recoverable) shall not include any adjustments that reflect any changes in
calculation, assumptions and estimates relative to the operations of the
▇▇▇▇▇▇ Group prior to December 31, 1995.
4. For purposes of calculating Consolidated Net Worth, the balance of the
income taxes payable (recoverable) and deferred income taxes payable
(recoverable) shall not include any research and development tax credits
relative to the operations of the ▇▇▇▇▇▇ Group prior to December 31, 1995.
5. The Consolidated Net Worth calculation shall not include any
adjustments for items which have also been utilized by the Purchasers to
reduce the Purchase Price pursuant to any other provision contained in the
Purchase Agreement.
6. Any liability or claim payable to ▇▇▇▇ ▇▇▇▇▇▇ shall not be included
for purposes of calculating Consolidated Net Worth.
7. The Consolidated Net Worth shall not include any income or gain
realized by the ▇▇▇▇▇▇ Group upon the sale of the facility previously owned
by the ▇▇▇▇▇▇ Group located in Indianapolis, Indiana.
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Schedule 1.4(d)
1. Buyer's due diligence identified that the ▇▇▇▇▇▇ Group has
historically had difficulty in establishing appropriate cut-off of accounts
receivable and accounts payable. Buyer is not aware of any current cut-off
issues in accounts receivable and accounts payable.
2. Buyer's due diligence identified that the ▇▇▇▇▇▇ Group has
historically had difficulties in interim reporting of inventory and cost of
sales which have resulted in material book to physical adjustments. Buyer
is not aware of any current inventory valuation issues.
3. In our review of management letters from KPMG for 1993, 1994 and 1995,
their commentary indicated that the Sellers accounting process and certain
aspects of its operations were not well-disciplined, controlled or
effectively performed. In addition, these reports stated that "The dollar
value and number of unadjusted audit differences is significant, and is
borderline material from a financial perspective". Buyer is not aware of
any material unadjusted audit differences that would impact the New Worth
Statement.
4. Buyer's due diligence identified that the Sellers historical interim
financial statements have not been in compliance with GAAP based on the
number and magnitude of year end adjustments during the annual KPMG audit
process. Buyer is not aware of any issues where ▇▇▇▇▇▇ Group is currently
not in non-compliance with GAAP other than potential lack of an accrual for
vacation pay earned but not used.
5. All items which are disclosed on the Schedules to Section 3.3 of the
Agreement.
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SCHEDULE 2.2(a)
BUYER'S DESIGNEES
DESIGNEE SHARES HELD
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as Trustee under that certain 247
Amended and Restated Revocable Living Trust Agreement
dated March 29, 1988, as amended, between ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ as Grantor and Trustee thereof
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as Trustee under that certain Amended 163
Trust Agreement dated March 29, 1988, as amended,
between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ as Grantor and Trustee thereof
▇▇▇▇▇ ▇. ▇▇▇▇▇ 104
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 104
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Trustee under that certain Amended 91
and Restated Trust Agreement dated December 6, 1985, as
amended, between ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as Grantor and Trustee
thereof
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Trustee under that certain Amended 90
Trust Agreement dated March 22, 1995, as amended,
between ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as Grantor and Trustee thereof
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Trustee of the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 181
Irrevocable Trust Agreement dated November 14, 1994,
for the benefit of ▇▇▇▇▇▇▇ ▇ ▇'▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇, as Trustee under that certain Amended 10
and Restated Revocable Living Trust Agreement dated
October 21, 1989, as amended, between ▇▇▇▇▇ ▇. ▇▇▇▇▇
as Grantor and Trustee thereof
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as Trustee under 10
Trust Agreement dated October 30, 1992
TOTAL: 1,000
------
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SCHEDULE 5.1(c)(iv)
The following items:
SCHEDULE 3.3(a)
Items 2-7 of SCHEDULE 3.4(a)
Items 1 (except ot the extent of a breach of the representations and
warranties of Section 3.4), 2, 4 (except provided in Section 5.1(f)),
5 and 7 (except to the extent of a breach of the representations and
warranties of Section 3.4) of SCHEDULE 3.4(b)
Items 1, 3, 5, 7, 8 and 9 (except to the extent of a breach of the
representations and warranties of Section 3.4) of SCHEDULE 3.4(c)
SCHEDULE 3.5(a)
SCHEDULE 3.5(b)
SCHEDULE 3.6(a)
SCHEDULE 3.7(a)
SCHEDULE 3.7(c)
Items 1, 2 (except to the extent provided in Section 5.1(f) and 3 of
SCHEDULE 3.8(a)
Item 2 of SCHEDULE 3.8(c)
SCHEDULE 3.10(a)
SCHEDULE 3.10(c) (except to the extent of a breach of the
represenations and warranties of Section 3.10)
SCHEDULE 3.10(e)
Items 1, 2 and 3 of SCHEDULE 3.11
Items 3-8 of SCHEDULE 3.12(a)
SCHEDULES 3.15(a)(i)-(vii) (except to the extent of a breach of the
representations and warranties of Section 3.15)
SCHEDULE 3.15(b) (except to the extent of a breach of the
representations and warranties of Section 3.15)
SCHEDULES 3.19(a), (b) and (c)
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SCHEDULE 7.14
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
79