EXHIBIT 2
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION, dated as of June 24, 1996
among Echlin Inc., a Connecticut corporation (the "Buyer"), Moto Mirror Inc., a
Texas corporation (the "Company"), and the stockholders of the Company listed on
Schedule 1.1 to this Agreement (individually, a "Seller" and collectively, the
"Sellers").
Buyer desires to acquire all of the outstanding shares of
capital stock of the Company and the Sellers desire to transfer all such shares
to Buyer on the terms and conditions hereinafter set forth.
The definitions of certain defined terms used herein are set
forth in Section 10.10 hereof.
Accordingly, in consideration of the premises and of the
respective covenants and agreements contained herein, the parties hereto hereby
agree as follows:
1. ACQUISITION AND TRANSFER OF SHARES
1.1 Acquisition and Transfer. On the terms and subject to the
conditions set forth in this Agreement, (a) the Sellers shall transfer to Buyer,
and Buyer shall acquire from the Sellers, all of the outstanding shares of
capital stock of the Company (such shares of capital stock being hereinafter
referred to as the "Shares") for an aggregate unadjusted consideration in shares
of Echlin Inc. Common Stock $1 par value (the "Echlin Common Stock") the number
of which shall be determined (to the nearest whole number of shares) by dividing
(i) $18,000,000 (the "Unadjusted Amount"), subject to adjustment pursuant to
Section 1.4 hereof, by (ii) a figure equal to the average daily closing price
(without regard to volume) of one share of Echlin Common Stock traded on the New
York Stock Exchange during the twenty business day period beginning twenty five
business days prior to the Closing Date and including the sixth business day
preceding the Closing Date; and (b) at the Closing referred to in Section 1.2
hereof:
(i) Each Seller shall assign, transfer and deliver to Buyer
the number and type of Shares set forth beside such Seller's name on
Schedule 1.1 hereto; and
(ii) Buyer shall accept and acquire the Shares from the
Sellers and in exchange therefor shall deliver to the Sellers by
delivery to Mr. Steven M. McCraw and Mr. Bobby Lutz, each acting for
himself, and to Mr. Neil F. Gibson, Jr. (the "Agent Seller") acting for
himself and as agent for the other Sellers as provided in Section 10.14
hereof, Echlin Common Stock representing the Unadjusted Amount to be
delivered to Sellers under this Agreement, less 10% of such shares of
Echlin Common Stock to be deposited into an escrow account (the "Escrow
Account"), in accordance with an escrow agreement (the "Escrow
Agreement", in the form attached hereto as Exhibit A and made a part
hereof. Such escrowed stock shall be deposited by the Sellers in the
proportions specified after the signature lines on Exhibit A.
(iii) Shares of Echlin Common Stock to be delivered to Sellers
hereunder (net of those to be deposited in the Escrow Account) shall be
delivered to Sellers in proportion to their respective Unadjustetd
Amounts shown below:
Name
Neil F. Gibson, Jr $11,870,298
Steven M. McCraw 1,079,569
Bobby Lutz 1,979,569
Gary Mackey 142,438
Robert J. Heun 142,438
Moto Mirror Employee Partners Ltd. 712,192
Antoinette Czajka 121,789
Jeffrey N. Crawford 55,000
Neil F. Gibson, Jr. and Antoinette Czajka,
Joint 96,789
TOTAL $16,200,000
1.2 Closing. Subject to the conditions set forth in this
Agreement, the acquisition and transfer of the Shares pursuant to this Agreement
(the "Closing") shall take place at the offices of Storey Armstrong Steger &
Martin, P.C., 1445 Ross Avenue, Suite 4600, Dallas, Texas 75202 at 10 a.m. on or
about (a) the fifth business day after the satisfaction of all conditions of
Closing, including, without limitation, the expiration or termination of any
waiting period required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "Hart-Scott Act") or (b) such other date, not later
than August 31, 1996, time and place which is agreed to by Buyer and the
Sellers. The date on which the Closing is to occur is herein referred to as the
"Closing Date".
1.3 Deliveries at the Closing. Subject to the conditions
set forth in this Agreement, at the Closing:
(a) The Sellers shall deliver to Buyer (i) certificates
representing all the Shares accompanied by stock powers with all
necessary stock transfer and other documentary stamps attached, and any
other documents that are necessary to transfer to Buyer good title to
all the Shares, free and clear of all pledges, liens, charges, claims,
options, encumbrances, security interests, restrictions on transfer and
rights of other persons of every nature and description whatsoever
("Security Interest"), and (ii) all opinions, certificates and other
instruments and documents required, or as reasonably may be requested,
to be delivered by the Sellers at or prior to the Closing or otherwise
required in connection herewith; and
(b) Buyer shall deliver to the Agent Seller (i) certificates
representing the shares of Echlin Common Stock as required by Section
1.1(b) hereof with any transfer taxes thereon duly paid by Buyer and
(ii) all opinions, certificates and other instruments and documents
required to be delivered by Buyer at or prior to the Closing or
otherwise required, or as reasonably may be requested, in connection
herewith.
1.4 Consideration Adjustment.
(a) Immediately after the Closing, the Company shall (i)
prepare a consolidated balance sheet of the Company and any
Subsidiaries as of the close of business on the business day
immediately preceding the Closing Date (the "Closing Date Balance
Sheet") and (ii) prepare a report setting forth a calculation, on the
basis of the Closing Date Balance Sheet, of Indebtedness and Working
Capital as at the date of the Closing Date Balance Sheet (the
"Report"). The Report and the Closing Date Balance Sheet shall promptly
be delivered to Buyer and the Sellers, but in no event more than 45
days after the Closing Date. The Closing Date Balance Sheet shall be
prepared in accordance with the books and records of the Company and
shall fairly present the consolidated financial position of the Company
and any Subsidiaries, as of the date thereof, subject to this
Agreement, in conformity with generally accepted accounting principles
consistently applied. Without limiting the foregoing, the parties agree
that the method of calculating Indebtedness and Working Capital as of
March 31, 1996 illustrated on Schedule 1.4 shall be utilized in
calculating Indebtedness and Working Capital in the Closing Date
Balance Sheet.
(b) Buyer and the Sellers shall promptly review the Closing
Date Balance Sheet and the Report. The Company shall cooperate and
shall use its best efforts to cause the Company's auditors to cooperate
with Buyer and the Sellers and, at their respective options, their
respective independent accountants, in connection with such review of
the Closing Date Balance Sheet and the Report, including to make
available any working papers relating to such matters. Should Buyer or
the Sellers determine that the Closing Date Balance Sheet or the Report
is not in accordance with this Agreement, either party shall so notify
the Company and the other party within 30 days of receipt of the
Closing Date Balance Sheet and the Report of those items on which such
party is not in agreement (the "Notice"). The parties shall then
promptly designate representatives who shall meet for the purpose of
resolving such differences. If such differences have not been resolved
within 30 days after receipt by the Company and the other party of the
Notice, the remaining items shall be submitted to a jointly selected
independent public accountant, for resolution in accordance with this
Agreement. The decision of such accountant shall be binding on both
parties and the expense of such accountant shall be shared equally by
both parties.
(c) Based on the Closing Date Balance Sheet and the Report as
finally determined, the Unadjusted Amount shall be adjusted as follows:
(i) if the amount of Indebtedness reflected on the Closing Date Balance
Sheet exceeds $2,000,000, an amount equal to such excess Indebtedness
shall be deducted from the Unadjusted Amount, and (ii) if the amount of
Working Capital reflected on the Closing Date Balance Sheet exceeds
$2,587,000, an amount equal to the positive difference in Working
Capital shall be added to the Unadjusted Amount as follows:
(i) If the consideration as adjusted in accordance
with this Section 1.4(c) hereof (the "Adjusted Amount") is
more or less than the Unadjusted Amount, the number of shares
of Echlin Common Stock provided for by Section 1.1 hereof
shall be adjusted as follows:
(A) If the Adjusted Amount is less
than the Unadjusted Amount, the Sellers shall
redeliver to Buyer (first from the Escrow Account)
the number of such shares (or the cash equivalent)
having an aggregate Share Value equal in amount to
such negative difference, or
(B) If the Adjusted Amount is more
than the Unadjusted Amount, Buyer shall deliver to
the Sellers by delivery to the Sellers a number of
such shares having an aggregate Share Value equal to
the amount of such positive difference.
(C) The value of a share of Echlin
Common Stock for the purpose of this Section 1.4
shall be the same value per share as determined for
purposes of Section 1.1 hereof (the "Share Value").
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS
The Company and each Seller represents and warrants to Buyer
as follows:
2.1 Organization and Good Standing. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the corporate power and authority
to own, lease and operate the properties used in its business and to carry on
its business as now being conducted. The Company is duly qualified to do
business and is in good standing as a foreign corporation in the jurisdictions
set forth on Schedule 2.1 and in each other jurisdiction where qualification as
a foreign corporation is required, except for such failures to be qualified and
in good standing, if any, which would not have a Material Adverse Effect (as
defined in Section 10.10 hereof). The Company has provided Buyer with complete
and correct copies of the Company's Articles or Certificate of Incorporation and
all amendments thereto to the date hereof and its By-Laws, as presently in
effect.
2.2 Subsidiaries. Set forth on Schedule 2.2 hereto is a true
and complete list of any Subsidiaries (as defined below) of the Company stating,
with respect to each Subsidiary, its jurisdiction of incorporation,
capitalization, equity ownership and jurisdictions in which qualified to do
business. As used in this Agreement, the term "Subsidiary" shall mean any
corporation in which the Company owns beneficially securities representing 20%
or more of (i) the aggregate equity or profit interests or (ii) the combined
voting power of voting interests ordinarily entitled to vote for management or
otherwise. Each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own, lease and operate
the properties used in its business and to carry on its business as now being
conducted, and is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction where qualification as a foreign
corporation is required, except for such failures to be qualified and in good
standing, if any, which would not have a Material Adverse Effect. All of the
outstanding shares of capital stock of the Subsidiaries have been validly
authorized and issued, are fully paid and non-assessable, have not been issued
in violation of any preemptive rights or of any securities law, and are owned by
the Company of record and beneficially free and clear of any Security Interest.
Except as set forth on Schedule 2.2 hereto, the Company does not own, directly
or indirectly, any ownership, equity, profits or voting interest in any
corporation, partnership, joint venture or other person (as defined in Section
10.10 hereof), and has no agreement or commitment to purchase any such interest.
The Company has provided Buyer with complete and correct copies of the charter
and by-laws (including comparable governing instruments with different names) of
each Subsidiary, as amended and presently in effect.
2.3 Capitalization. The authorized capital stock of the
Company consists of 5,000,000 shares of Common Stock, $.01 par value, of which,
as of the date hereof, 100,000 shares are issued and outstanding and 717,500
shares of Preferred Stock, par value $1.00 per share, of which, as of the date
hereof, 250,000 shares of Series A and 467,500 shares of Series B are issued and
outstanding. An additional 8,696 shares of Common Stock are subject to issuance
by the Company at or prior to the Closing pursuant to outstanding warrants (the
"Warrants"). The Shares listed on Schedule 1.1 hereto constitute all the issued
and outstanding shares of Common Stock and Preferred Stock and have been validly
authorized and issued, are fully paid and nonassessable and have not been issued
in violation of any preemptive rights or of any securities law. There is no
security, option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (i) calls for the issuance, sale, pledge or other disposition of any
shares of stock of the Company or any securities convertible into, or other
rights to acquire, any shares of stock of the Company or (ii) obligates the
Company to grant, offer or enter into any of the foregoing or (iii) relates to
the voting or control of such stock, securities or rights, except as set forth
on Schedule 2.3 hereto.
2.4 Authority, Approvals and Consents. The Company has the
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized and approved by the Board of Directors of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize and
approve this Agreement and the transactions contemplated hereby. This Agreement
has been duly executed and delivered by, and constitutes a valid and binding
obligation of, the Company, enforceable against the Company in accordance with
its terms. The execution, delivery and performance of this Agreement by the
Company and the Sellers and the consummation of the transactions contemplated
hereby do not and will not:
(i) contravene any provisions of the Articles or
Certificate of Incorporation or By-Laws of the Company;
(ii) (after notice or lapse of time or both) conflict
with, result in a breach of any provision of, constitute a
default under, result in the modification or cancellation of,
or give rise to any right of termination or acceleration in
respect of, any Company Agreement (as defined in Section 2.15
hereof) or, except as set forth on Schedule 2.4 hereto,
require any consent or waiver of any party to any Company
Agreement;
(iii) result in the creation of any Security Interest
upon, or any person obtaining any right to acquire, any
properties, assets or rights of the Company or any Subsidiary;
(iv) violate or conflict with any Legal Requirements
(as defined in Section 2.9 hereof) applicable to the Company
or any Subsidiary or any of their respective businesses or
properties; or
(v) require any authorization, consent, order, permit
or approval of, or notice to, or filing, registration or
qualification with, any governmental, administrative or
judicial authority by or with respect to the Company or the
Sellers, except as may be required to be in compliance with
the provision of the Hart-Scott Act.
Except as set forth or referred to above, no authorization, consent,
order, permit or approval of, or notice to, or filing, registration or
qualification with, any governmental, administrative or judicial
authority is necessary to be obtained or made by the Company to enable
the Company to continue to conduct its business and operations and use
its properties after the Closing in a manner which is in all material
respects consistent with that in which they are presently conducted.
2.5 Financial Statements. The Company previously has delivered
to Buyer a true and complete copy of:
(i) the consolidated balance sheets of the Company
and any Subsidiaries as of December 31, 1995 and 1994 and the
related consolidated statements of operations, stockholders'
equity, and cash flows for the fiscal years ended on such
dates, together with the notes thereto, in each case examined
by and accompanied by the report of Arthur Andersen LLP,
independent certified public accountants;
(ii) the unaudited consolidated balance sheet of the
Company and any Subsidiaries as of March 31, 1996 and the
unaudited consolidated statements of income and cash flows for
the periods ended on such date together with any schedules
thereto;
(all the foregoing financial statements, including the notes and
schedules thereto, being referred to herein collectively as the
"Company Financial Statements"). The Company Financial Statements are
in accordance with the books and records of the Company and any
Subsidiaries and fairly present the financial position, results of
operations, shareholders' equity and cash flows of the Company and any
Subsidiaries as of the dates and for the periods indicated, in each
case in conformity with generally accepted accounting principles
consistently applied (except as disclosed on Schedule 2.5 or otherwise
indicated in such statements and except that the unaudited financial
statements do not contain the footnote disclosures required by
generally accepted accounting principles) during such periods, and the
unaudited financial statements included in the Company Financial
Statements indicate all adjustments, which consist of only normal
recurring accruals, necessary for such fair presentations. The
statements of income included in the Company Financial Statements do
not contain any items of special or nonrecurring income except as
expressly specified therein, and the balance sheets included in the
Company Financial Statements do not reflect any write-up or revaluation
increasing the book value of any assets. The books and accounts of the
Company and any Subsidiaries are complete and correct and fully and
fairly reflect all of the transactions of the Company and any
Subsidiaries and are located solely at the offices of the Company and
its Subsidiaries and not at any other location. At the Closing Date no
material adverse change shall have occurred or shall be reasonably
likely to occur in the financial condition or results of operations of
the Company and any Subsidiaries except as disclosed in the Company
Financial Statements or disclosed on Schedule 2.5 hereto.
2.6 Absence of Undisclosed Liabilities. Neither the Company
nor any Subsidiary has any liability of any nature whatsoever (whether due or to
become due, accrued, absolute, contingent or otherwise) including, without
limitation, any unfunded obligation under employee benefit plans or arrangements
as described in Sections 2.17 and 2.18 hereof or liabilities for Taxes (as
defined in Section 10.10 hereof), except for (i) liabilities reflected or
reserved against in the most recent balance sheet included in the Company
Financial Statements (the "Company Balance Sheet"), (ii) current liabilities
incurred in the ordinary course of business and consistent with past practice
after the date of the Company Balance Sheet and (iii) liabilities disclosed on
Schedule 2.6 hereto. Neither the Company nor any Subsidiary is a party to any
Company Agreement, or subject to any charter or by-law provision, any other
corporate limitation or any Legal Requirement (as defined in Section 2.9
hereof), which has, or in the future can reasonably be expected to have, a
Material Adverse Effect.
2.7 Absence of Material Adverse Effect; Conduct of Business.
Since, except as disclosed pursuant to this Agreement, December 31, 1995, there
has been no occurrence resulting in and, except as disclosed pursuant to this
Agreement, there is no condition, development or contingency of any kind
existing or involving any Material Adverse Effect. Without limiting the
foregoing, except for any changes with respect to the Preferred Stock, the
Warrants or any other matters set forth on Schedule 2.7 hereto, since December
31, 1995 there has not been, occurred or arisen:
(i) any damage, destruction or loss to any asset of
the Company or any Subsidiary (whether or not covered by
insurance) that, individually or in the aggregate, would have
a Material Adverse Effect;
(ii) any change in any accounting principle or method
used for financial reporting purposes by the Company or any
Subsidiary except as expressly disclosed in the Company,
Financial Statements and concurred with by the Company's
independent public accountants;
(iii) any commitment, transaction or other action by
the Company or any Subsidiary other than in the ordinary
course of business and consistent with past practice;
(iv) any amendment or other change to the Articles or
Certificate of Incorporation or By-Laws of the Company;
(v) any declaration, setting aside, or payment of any
dividend or distribution (whether in cash, stock or property)
in respect of capital stock of the Company or any direct or
indirect redemption, purchase, or other acquisition of shares
of such capital stock or any split, combination or
reclassification of such capital stock;
(vi) any sale or other disposition of any right,
title or interest in or to any assets or properties of the
Company or any Subsidiary or any revenues derived therefrom
(other than inventories sold in the ordinary course of
business) having an aggregate value in excess of the dollar
amount set forth on Schedule 2.7 hereto;
(vii) (i) any general increase in any compensation or
benefits payable to any class or group of employees of the
Company or any Subsidiary, any increase in the compensation
payable or to become payable by the Company or any Subsidiary
to any of its directors, officers or any of its employees
whose total compensation after such increase would exceed
$75,000 per annum (collectively, "Key Employees") or any
bonus, service award, percentage compensation, or other
benefit paid, granted or accrued to or for the benefit of any
Key Employee, other than in accordance with an ERISA Plan or
Compensation Commitment expressly disclosed on Schedule 2.17
or 2.18 hereto as in effect on the date hereof or (ii) the
adoption or amendment in any material respect of any ERISA
Plan or any Compensation Commitment;
(viii) any creation, incurrence or assumption of any
indebtedness for money borrowed by the Company or any
Subsidiary, including obligations in respect of capital leases
or guarantees, other than (A) indebtedness under revolving
credit, line of credit and other working capital loan
agreements (all of which are described on Schedule 2.7 hereto)
providing for borrowings in the ordinary course of business
not exceeding the aggregate dollar amount at any time
outstanding set forth on Schedule 2.7 hereto and (B)
intercompany loans and advances to or from any Subsidiary;
(ix) any capital expenditures by the Company or any
Subsidiary, except as permitted by Section 5.3(d) hereof;
(x) any labor union organizing activity, any actual
or threatened employee strikes, work stoppages, slow-downs or
other labor disputes or disturbances or any material adverse
change in its relations with employees;
(xi) any change in any accounting principle or method
or election for federal income tax purposes used by the
Company or any Subsidiary;
(xii) any change in the authorized or issued capital
stock of the Company or securities convertible into or rights
to purchase such capital stock; or
(xiii) any authorization, approval, agreement or
commitment to do any of the foregoing.
2.8 Taxes.
(a) The Company, each Subsidiary and, for any period during
all or part of which the tax liability of any other corporation was
determined on a combined or consolidated basis with the Company or any
Subsidiary, any such other corporation have filed timely all federal,
state, local and foreign tax returns, reports and declarations required
to be filed (or have obtained or timely applied for an extension with
respect to such filing) and have paid, or made adequate provision for
the payment of, all Taxes (as defined below) which are due pursuant to
said returns or pursuant to any assessment received by the Company or
any Subsidiary or any such other corporation. The Company and any
Subsidiaries constitute an affiliated group eligible to file
consolidated federal income tax returns. Except to the extent reserves
therefor are reflected on the Company Balance Sheet, neither the
Company nor any Subsidiary is liable, or will become liable, for any
Taxes for any period ending on or prior to, or attributable to
operations through the date of the Company Balance Sheet and except to
the extent reserves therefor will be reflected on the books and records
of the Company and any Subsidiaries, neither the Company nor any
Subsidiary is liable, or will become liable, for any Taxes for any
period ending on or prior to, or attributable to operations through,
the Closing Date.
(b) The Internal Revenue Service has not conducted an audit of
any federal income tax return in which the Company or any Subsidiary is
included nor has the Company been notified of any intent to conduct
such an audit; no adjustment has been proposed by the Internal Revenue
Service with respect to any return for any subsequent year nor has the
Company or any Subsidiary entered into any agreement or waiver tolling
any statute of limitations or extending the statutory period of time as
to the assessment or reassessment of tax or the filing of any tax
return by, or any payment of any tax by, the Company or any Subsidiary.
Neither the Company, any Subsidiary, nor any corporation authorized to
act as agent for the Company or any Subsidiary has given or been
requested to give any waiver of any statutes of limitations relating to
the payment of Taxes for which the Company or any Subsidiary is liable.
Neither the Company nor any Seller knows of any basis for an assertion
of a deficiency for Taxes against the Company or any Subsidiary. The
Company and its Subsidiaries shall be entitled to control any audit of,
or claim for refund with respect to, any combined or consolidated
return in which the Company or any Subsidiary or any predecessor
thereof is included, and shall be entitled to receive any refund
received with respect to any such return, to the extent that such
audit, claim or refund relates to any item of income, gain, loss,
deduction, or credit of the Company or any Subsidiary or any
predecessor thereof. The Sellers will cooperate, and will cause each of
their Affiliates (as defined in Section 2.19 hereof) to cooperate, with
the Company and its Subsidiaries in the filing of any returns and in
any audit or refund claim proceedings involving Taxes for which the
Company or any Subsidiary may be liable or with respect to which the
Company or any Subsidiary may be entitled to a refund.
2.9 Legal Matters. Except as set forth on Schedule 2.9
hereto,
(a) (i) there is no claim, action, suit, litigation,
investigation, inquiry, review, or proceeding (collectively, "Claims")
pending against or within the past three years asserted against, or, to
the best knowledge of the Company or any Subsidiary or Seller,
threatened against or affecting, the Company, any Subsidiary, any ERISA
Plan or any of their respective properties or rights before or by any
court, arbitrator, panel, agency or other governmental, administrative
or judicial entity and (ii) neither the Company nor any Subsidiary is
subject to any judgment, decree, writ, injunction or order of any
governmental, administrative or judicial authority (collectively,
"Judgments"). Claims and Judgments are referred to herein collectively
as "Legal Proceedings". Neither the Company nor any Subsidiary is
subject to any Claims, which in the aggregate, if adversely decided,
would have a Material Adverse Effect.
(b) The businesses of the Company and any Subsidiaries are
being and have been conducted in material compliance with all laws,
ordinances, codes, rules, regulations, standards, judgments, decrees,
writs, rulings, injunctions, orders and other requirements of all
governmental, administrative or judicial entities material to the
conduct of the business (collectively, "Legal Requirements") applicable
to the Company or any Subsidiary or any of their respective businesses
or properties.
(c) The Company and any Subsidiaries hold, and are and have
been in compliance with, all franchises, licenses, permits,
registration, certificates, consents, approvals or authorizations
material to the conduct of their business (collectively, "Permits"). No
event has occurred and is continuing which permits, or after notice or
lapse of time or both would permit, any modification or termination of
any Permit.
(d) Neither the Company nor any Subsidiary (i) has received
any notice asserting any noncompliance with any Legal Requirement or
Permit, (ii) is subject to any Legal Requirement or Permit which if
enforced against or complied with by the Company or any Subsidiary
would have a Material Adverse Effect, or (iii) is subject to any Legal
Requirement proposed or under consideration which, if effective, would
have a Material Adverse Effect.
(e) No governmental, administrative or judicial authority has
indicated any intention to initiate any investigation, inquiry or
review involving the Company, any Subsidiary, any ERISA Plan or any of
their respective properties or rights.
2.10 Property.
(a) The properties and assets owned by or leased to the
Company and any Subsidiaries are adequate for the continued conduct of
their respective businesses as presently conducted. The sale of the
Shares by the Sellers pursuant hereto will effectively convey to Buyer
the business, including all tangible and intangible assets and
properties, of the Company and any Subsidiaries.
(b) Set forth on Schedule 2.10 hereto is a list of all
interests in real property owned by or leased to the Company or any
Subsidiaries and of all options or other contracts to acquire any such
interest, specifying the location of each such property and any
improvements thereon ("Improvements"). The Company or a Subsidiary has
good and transferable title to all such real properties, leases,
Improvements, options and contracts and to all other properties
reflected on the Company Balance Sheet or acquired by any of them after
the date thereof (other than properties and assets sold or otherwise
disposed of after the date thereof in the ordinary course of business),
and each such property is held free and clear of (i) all leases,
licenses and other rights to occupy or use such property and (ii) all
Security Interests, rights of way, easements, restrictions, exceptions,
variances, reservations, covenants or other title defects or
limitations of any kind, except (with respect to all such properties)
those set forth on Schedule 2.10 hereto or disclosed on the Company
Balance Sheet. No financing statement or notice of any Security
Interest with respect to any of the foregoing properties has been filed
in any jurisdiction, and the Company has not signed any such financing
statement or any security agreement authorizing any secured party
thereunder to file any such financing statement or notice, except as
set forth on Schedule 2.10 hereto.
(c) All Improvements and all machinery, equipment and other
tangible property owned or used by or leased to the Company or any
Subsidiaries are in good operating condition and in good repair. Such
tangible properties and all Improvements owned or leased by the Company
or any Subsidiaries conform in all material respects with all
applicable building, zoning, environmental and other land use laws,
ordinances, rules and regulations and other Legal Requirements and such
Improvements do not encroach in any respect on property of others. The
present and contemplated use of such real property, Improvements and
tangible property conforms in all respects with all applicable
building, zoning, environmental and other land use laws, ordinances,
rules and regulations and other Legal Requirements and all necessary
occupancy and other certificates and permits for the occupancy and
lawful use thereof have been issued and are presently in full force and
effect. All notices of violations of Legal Requirements issued by any
governmental entity having jurisdiction against or affecting any of
such real property, Improvements or tangible property have been
complied with. No use of such real property, Improvements or tangible
property is dependent upon the continuance of a non-conforming use or a
special permit or license.
(d) (i) Except as set forth on Schedule 2.10, neither the
Company nor any Subsidiary generates or otherwise owns or possesses,
stores, treats, disposes of or transports any "hazardous substance",
"hazardous material" or "hazardous waste" (as defined in or under the
Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended (42 USC Sec 9601, et seq.), the Resource
Conservation and Recovery Act of 1976, as amended (42 USC Sec 6901, et
seq.), the Toxic Substances Control Act, as amended (15 USC Sec 2601,
et seq.), or the regulations promulgated thereunder or any other
hazardous substance, material or waste (as defined in any health,
safety or environmental protection law or the regulations promulgated
thereunder) or has at any time generated or otherwise owned or
possessed, stored, treated, disposed of or transported any such
hazardous substance, material or waste. (ii) Except as set forth on
Schedule 2.10, none of the real property owned or leased by the Company
or any Subsidiaries has been contaminated by any such hazardous
substance, material or waste or is or has been the site of any dump or
sanitary landfill. (iii) Schedule 2.10 lists all permits, consents,
approvals, licenses and other like instruments issued under
environmental protection laws which are currently held by the Company
and any Subsidiaries. (iv) The Company has provided Buyer with complete
and correct copies of all environmental audits, assessments, reviews,
correspondence with environmental regulators and like documents
prepared within five years of the Closing Date in regard to the Company
and any Subsidiaries.
(e) All real property and Improvements have access to such
public roads including, but not limited to, those owned roads and
driveways presently in use and such utilities and other services as are
necessary for the present and contemplated uses thereof.
2.11 Inventories. The values at which inventories are carried
on the Company Balance Sheet reflect the normal inventory valuation policies of
the Company, and such values are in conformity with generally accepted
accounting principles consistently applied. All inventories (constituting
finished goods) reflected on the Company Balance Sheet or arising since the date
thereof are free of defects in manufacture, are currently marketable and can
reasonably be anticipated to be sold at normal mark-ups within 365 days after
the date hereof in the ordinary course of business (subject to any reserve for
obsolete, damaged, defective or excess inventory that is set forth on the
Company Balance Sheet and as reflected on the books and records of the Company
and any Subsidiaries), except for any raw material, work-in-process and spare
parts inventory which inventory is good and usable.
2.12 Accounts Receivable. Except as set forth on Schedule 2.12
hereto, all accounts receivable reflected on the Company Balance Sheet or
arising since the date thereof (subject to any reserve for bad debts, sales
returns and other sales adjustments that is reflected on the Company Balance
Sheet and as reflected on the books and records of the Company and any
Subsidiaries) are good and have been collected or are collectible on their
respective due dates, without resort to litigation or extraordinary collection
activity, but in no event more than 120 days after arising or the date thereof,
and are subject to no defenses, set-offs or counterclaims other than normal cash
discounts accrued in the ordinary course of business of the Company and any
Subsidiaries. Except as set forth on Schedule 2.12 hereto all accounts
receivable reflected on the Company Balance Sheet are for product sold in the
ordinary course of business. Set forth on Schedule 2.12 hereto is a list of all
accounts receivable of the Company as of April 30, 1996 showing separately those
receivables which as of such date have been outstanding (i) 1 to 29 days, (ii)
30 to 59 days, (iii) 60 to 89 days, (iv) 90 to 119 days and (v) more than 119
days.
2.13 Intellectual Property; Technology. The Company and any
Subsidiaries own or have valid, binding and enforceable rights to use all
patents, trademarks, trade names, service marks, service names, copyrights,
computer software, software programs, applications therefor, and license or
other rights in respect thereof ("Intellectual Property"), used or held for use
in connection with the business of the Company or any Subsidiaries, without any
known conflict with the rights of others. Schedule 2.13 hereto contains a
complete list of all Intellectual Property owned by or licensed to the Company
or any Subsidiaries, and any licenses or other agreements relating thereto and,
except as indicated on such Schedule, all such Intellectual Property has been
duly registered and filed in and issued by, the United States Patent and
Trademark Office, states of the United States or the corresponding offices of
other jurisdictions except as otherwise stated in Schedule 2.13. Except as set
forth on Schedule 2.13 hereto, the Company or a Subsidiary is the sole and
exclusive owner of the patents, copyrights and applications listed thereon and
has the sole and exclusive right to use the trademarks and trade names listed
thereon, in each case free and clear of any Security Interest and subject to no
interference or other contest proceeding. Neither the Company or any Subsidiary
has received any notice from any other person pertaining to or challenging the
right of the Company or any Subsidiary to use any Intellectual Property or any
trade secrets, proprietary information, inventions, know-how, processes and
procedures owned or used by or licensed to the Company or any Subsidiary
("Technology"). Neither the Company nor any Subsidiary has granted any
outstanding licenses or other rights, and has no obligations to grant licenses
or other rights, under, and no Seller has any rights in or to, any of the
Intellectual Property or Technology owned or used by or licensed to the Company
or any Subsidiary. No claims have been made by the Company or any Subsidiary of
any violation or infringement by others of the rights of the Company or any
Subsidiary with respect to any Intellectual Property or Technology of the
Company or any Subsidiary, and neither the Company nor any Subsidiary knows of
any basis for the making of any such claim. Neither the Company nor any
Subsidiary has been notified that the Company has violated or infringed any
Intellectual Property or Technology rights of others except as otherwise stated
on Schedule 2.13.
2.14 Insurance. All properties and assets of the Company and
any Subsidiaries which are of an insurable character are insured against loss or
damage by fire and other risks to the extent and in the manner customary for
companies engaged in similar businesses or owning similar assets. Set forth on
Schedule 2.14 hereto is a list of all policies for such insurance and of all
insurance policies held by the Company and any Subsidiaries insuring the title
of the real property owned by the Company and any Subsidiaries and the Company
previously has furnished to Buyer true and complete copies of all such policies.
All such policies are in full force and effect and neither the Company nor any
Subsidiary has received any notice of cancellation with respect thereto.
2.15 Contracts; Etc. (a) As used in this Agreement, the term
"Company Agreement" shall mean all mortgages, indentures, notes, agreements,
contracts, leases, licenses, franchises, obligations, instruments or other
commitments, arrangements or understandings of any kind (including all leases
and other agreements referred to on Schedule 2.10 hereto) to which the Company
or any Subsidiary is a party or by which the Company or any Subsidiary or any of
their respective properties may be bound or affected. Set forth on Schedule 2.15
hereto is a complete and accurate list of (i) each Company Agreement which is
material (as used in this Section, "material" shall mean involving more than (A)
$100,000 as would be reflected on a Company Balance Sheet, (B) $100,000 in
annual operating expense or (C) $100,000 in annual revenues) to the businesses,
operations, assets, condition (financial or otherwise) or prospects of the
Company and any Subsidiaries, taken as a whole, and (ii) without regard to
materiality, each of the following Company Agreements:
(i) any mortgage, indenture, note, installment
obligation or other instrument, agreement or arrangement for
or relating to any borrowing of money by the Company or any
Subsidiary;
(ii) any guaranty, direct or indirect, by the Company
or any Subsidiary of any obligation for borrowings or
otherwise, excluding endorsements made for collection in the
ordinary course of business;
(iii) any Company Agreement made other than in the
ordinary course of its business or providing for the grant of
any preferential rights to purchase or lease any of its
assets;
(iv) any Company Agreement relating to the capital
stock or other securities of the Company or any Subsidiary;
(v) any obligation to make payments, contingent or
otherwise, arising out of the prior acquisition of the
business, assets or stock of other companies;
(vi) any collective bargaining agreement with any
labor union;
(vii) any lease or similar arrangement for the use by
the Company of personal property involving payments of in
excess of $100,000 per annum;
(viii) any Company Agreement to which any Insider (as
defined in Section 10.10 hereof) is a party;
(ix) any Company Agreement with a term in excess of
one year or providing for aggregate payments to or by the
Company or any Subsidiary in excess of $100,000 per annum;
(x) any Company Agreement containing non-competition
or other limitations restricting the conduct of the business
of the Company or any Subsidiary;
(xi) any partnership, joint venture or similar
agreement or agreement for the acquisition of any business;
(xii) any Company Agreement that is a franchise or
similar distributor agreement involving payments of more than
$100,000 per annum; and
(xiii) any Company Agreement with any customer or
vendor with minimum annual payments to the Company or any
Subsidiary in excess of $100,000.
True and complete copies of all written Company Agreements referred to
on Schedule 2.15 and Schedule 2.10 hereto have heretofore been
delivered or made available to Buyer, and the Company has provided
Buyer with accurate and complete written summaries of all such Company
Agreements which are unwritten.
(b) Neither the Company nor any Subsidiary nor, to the best
knowledge of the Company or any Seller, any other party thereto is in
breach of or default under any material Company Agreement, no event has
occurred which (after notice or lapse of time or both) would become a
breach or default under, or would permit modification, cancellation,
acceleration or termination of, any Company Agreement or result in the
creation of any Security Interest upon, or any person obtaining any
right to acquire, any properties, assets or rights of the Company or
any Subsidiary, no Company Agreement with any supplier is in excess of
normal or expected requirements of the Company or any Subsidiary and
prices provided therein were agreed to as the result of arms-length
negotiations conducted in the ordinary course of business and no
Company Agreement with any customer cannot be completed without a
positive gross margin for the Company or any Subsidiary. There are no
material unresolved disputes involving the Company or any Subsidiary
under any Company Agreement.
2.16 Labor Relations.
(a) The Company and each Subsidiary has paid or made provision
for the payment of all salaries and accrued wages and has complied in
all respects with all applicable laws, rules and regulations relating
to the employment of labor, including those relating to wages, hours,
collective bargaining and the payment and withholding of taxes, and has
withheld and paid to the appropriate government authority, or is
holding for payment not yet due to such authority, all amounts required
by law or agreement to be withheld from the wages or salaries of its
employees. There are no controversies pending or, to the best knowledge
of the Company or any Seller, threatened between the Company or any
Subsidiaries and any labor union or other collective bargaining unit
representing any employees of the Company or any Subsidiaries.
(b) (i) No union or other collective bargaining unit has been
certified or recognized by the Company or any Subsidiaries as
representing any of their respective employees and (ii) during the past
five years, (A) no strike, work stoppage, slow-down or similar labor
disruption has been recommended by any labor union or collective
bargaining unit representing any employees of the Company or any
Subsidiary, (B) nor has the membership of such union or unit voted on
any call for a strike, work stoppage, slow-down or similar labor
disruption and (C) nor has any strike, work stoppage, slow-down or
similar labor disruption occurred with respect to such employees. Each
employee of the Company or any Subsidiary who has access to Technology
has executed a valid, binding and enforceable agreement to maintain
such Technology in confidence.
2.17 Employee Benefit Plans
(a) Set forth on Schedule 2.17 hereto is a true and
complete list of:
(i) each employee pension benefit plan, as defined in
Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), maintained by the Company or any
Subsidiary ("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined
in Section 3(1) of ERISA, maintained by the Company or any
Subsidiary ("Welfare Benefit Plan").
True and complete copies of all Pension Benefit Plans and Welfare
Benefit Plans (collectively, "ERISA Plans") have heretofore been
delivered or made available to Buyer together with, as applicable to
each such ERISA Plan, trust agreements, summary plan descriptions, all
Internal Revenue Service ("IRS") determination letters with respect to
any Pension Benefit Plan intended to be qualified pursuant to Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and valuation or actuarial reports, financial statements, IRS Forms
5500 and summary annual reports for the last three years.
(b) With respect to the ERISA Plans:
(i) there is no ERISA Plan which is a multiemployer
plan as that term is defined in Section 3(37) of ERISA
("Multiemployer Plan") other than those identified as such on
Schedule 2.17;
(ii) no event has occurred or (to the best knowledge
of the Company or any Seller) is threatened or about to occur
which would constitute a prohibited transaction under Section
406 of ERISA subjecting the Company or any Subsidiary to a
civil penalty under Section 502(i) of ERISA or a tax imposed
by Section 4975 of the Code;
(iii) each ERISA Plan has operated since its
inception in accordance with the reporting and disclosure
requirements imposed under ERISA and the Code and has timely
filed Forms 5500 and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state,
local or foreign taxes.
(c) Each Pension Benefit Plan intended to be qualified
under Section 401(a) of the Code:
(i) has been qualified, from its inception, under
Section 401(a) of the Code, has received a favorable
determination letter from the District Director of Internal
Revenue, and the trust established thereunder has been exempt
from taxation under Section 501(a) of the Code and is
currently in compliance with applicable federal laws;
(ii) has been operated, since its inception, in
accordance with its terms and applicable law and there exists
no fact which would adversely affect its qualified status;
(iii) is not currently under investigation, audit or
review by the IRS, or any other federal or state agency and
(to the best knowledge of the Company or any Seller) no such
action is contemplated or under consideration and the IRS has
not asserted that any Pension Benefit Plan is not qualified
under Section 401(a) of the Code or that any trust established
under a Pension Benefit Plan is not exempt under Section
501(a) of the Code.
(d) With respect to each Pension Benefit Plan which is a
defined benefit plan under Section 414(j) of the Code:
(i) no liability to the Pension Benefit Guaranty
Corporation ("PBGC") under Sections 4062-4064 of ERISA has
been incurred by the Company or any Subsidiary since the
effective date of ERISA;
(ii) the PBGC has not notified the Company, any
Subsidiary or any Pension Benefit Plan of the commencement of
proceedings under Section 4042 of ERISA to terminate any such
plan;
(iii) no event has occurred since the inception of
any Pension Benefit Plan or (to the best knowledge of the
Company or any Seller) is threatened or about to occur which
would constitute a reportable event within the meaning of
Section 4043(b) of ERISA and no Pension Benefit Plan, or trust
established thereunder or any trustee or administrator thereof
has engaged, or as of the Closing Date will have engaged, in a
"prohibited transaction" as defined in Section 4975 of the
Code;
(iv) no Pension Benefit Plan ever has incurred any
"accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code); and
(v) if any of such Pension Benefit Plans were to be
terminated on the Closing Date (1) no liability under Title IV
of ERISA would be incurred by the Company or any Subsidiary
and (2) all benefits accrued to the Closing Date (whether or
not vested) would be fully funded in accordance with the
actuarial assumptions and method utilized by such plan for
valuation purposes.
(e) With respect to each Pension Benefit Plan, Schedule 2.17
contains a list of all Pension Benefit Plans to which ERISA has applied
which have been or are being terminated, or for which a termination is
contemplated, and a description of the actions taken by the PBGC and
the IRS with respect thereto.
(f) The aggregate of the amounts of Company or Subsidiary
contributions to be paid or accrued under ERISA Plans is not expected
to exceed $100,000 for the current fiscal year. To the extent required
in accordance with generally accepted accounting principles, the
Company Balance Sheet reflects in the aggregate an accrual of all
amounts of employer contributions accrued but unpaid by the Company and
any Subsidiaries under the ERISA Plans as of the date thereof and the
Closing Date Balance Sheet will reflect all such amounts as of the
Closing Date.
(g) Each Welfare Benefit Plan intended to be qualified as a
voluntary employees' beneficiary association under Section 501(c)(9) of
the Code:
(i) has been qualified from its inception under
501(c)(9) of the Code and has been issued a favorable
determination letter by the IRS with respect to the
qualification of each such Welfare Benefit Plan;
(ii) is currently in compliance with applicable
federal laws;
(iii) has been operated, in all material respects, in
accordance with its terms and to the best knowledge of the
Company or any Seller, no fact exists that would adversely
affect its qualified status; and
(iv) is not currently under investigation, audit or
review by the IRS or any other federal or state agency and, to
the best knowledge of the Company or any Seller, no such
action is contemplated or under consideration and the IRS has
not asserted that any trust established under a Welfare
Benefit Plan is not exempt under Section 501(c)(9) of the
Code.
(h) With respect to any Multiemployer Plan (1) neither the
Company nor any Subsidiary has, since December 31, 1994 made or
suffered a "complete withdrawal" or "partial withdrawal" as such terms
are respectively defined in Sections 4203 and 5205 of ERISA; (2) the
aggregate withdrawal liability of the Company and any Subsidiaries
under all Multiemployer Plans, computed as if a "complete withdrawal"
by the Company and any Subsidiaries had occurred under each such Plan
as of December 31, 1995 would not exceed $0.00 and (3) neither the
Company nor any Subsidiary has received notice to the effect that any
Multiemployer Plan is either in reorganization (as defined in Section
4241 of ERISA) or insolvent (as defined in Section 4245 of ERISA).
2.18 Other Benefit and Compensation Plans or
Arrangements and Company Policies
(a) Set forth on Schedule 2.18 hereto is a true and
complete list of:
(i) each stock purchase, option, stock ownership,
deferred compensation, performance, bonus, incentive, expense
reimbursement, vacation pay, holiday pay, hospitalization,
major medical, disability, life, severance, retirement, excess
benefit or other plan, trust, insurance, arrangement or
standard policy with respect to employees which is not an
ERISA Plan, whether written or oral, which the Company or any
Subsidiary maintains or is required to make contributions to;
and
(ii) each other agreement, arrangement, commitment
and understanding of any kind, whether written or oral, with
any current or former Key Employee pursuant to which payments
may be required to be made at any time following the date
hereof (including, without limitation, any employment,
deferred compensation, severance, supplemental pension,
termination or consulting agreement or arrangement);
True and complete copies of all of the written plans, arrangements and
agreements referred to on Schedule 2.18 ("Compensation Commitments"),
and all employee or employment policy manuals relating to employees of
the Company or any Subsidiary, have heretofore been delivered to Buyer
together with, where prepared by or for the Company or any Subsidiary,
any valuation, actuarial or other financial reports with respect to
each Compensation Commitment for the last three years. An accurate and
complete written summary has been provided to Buyer with respect to any
Compensation Commitment which is unwritten.
(b) Each Compensation Commitment:
(i) has been operated, since its inception, in
accordance with its terms;
(ii) is not currently under investigation, audit or
review by the IRS and (to the best knowledge of the Company or
any Seller) no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local
or foreign taxes;
(iv) has no claims subject to dispute or litigation
except as disclosed on Schedule 2.9;
(v) has met all material applicable requirements, if
any, of the Code;
(vi) has operated since its inception in material
compliance with the reporting and disclosure requirements
imposed under ERISA and the Code; and
(vii) all benefits accrued are fully funded and there
are no liabilities for pension benefit guaranty insurance
premiums.
2.19 Transactions with Insiders. Set forth on Schedule
2.15(viii) and Schedule 2.19 hereto is a complete and accurate list of and
description of (i) all transactions between the Company, any Subsidiary or an
ERISA Plan, on the one hand, and any Insider, on the other hand, that have
occurred since December 31, 1994 (other than in accordance with a Compensation
Commitment expressly disclosed on Schedule 2.18 hereto as in effect on the date
hereof) and (ii) all interests of any Insider or any employee of the Company,
any Subsidiary, any Seller or any of their respective Affiliates, in any Company
Agreement or any property, real or personal, tangible or intangible (including,
without limitation, Technology and Intellectual Property), used in or pertaining
to the business of the Company or any Subsidiary, except for the normal rights
of each Seller as a holder of Shares.
2.20 Employees. Set forth on Schedule 2.20 hereto is a
complete and accurate list of the Key Employees and other senior managerial
employees of the Company and any Subsidiary and except as indicated therein, no
such employee (i) has indicated to the Company, any Subsidiary or any Seller an
intent to resign or (ii) is an officer, director or employee of any Seller or
its Affiliates (other than the Company and any Subsidiaries). The Company has
previously furnished to Buyer a correct and complete list of the officers of the
Company and each Subsidiary and except as disclosed on Schedule 2.20, no such
officer is an officer, director or employee of any Seller or its Affiliates
(other than the Company and any Subsidiaries).
2.21 Brokers. Neither the Company, nor any Subsidiary, nor any
director, officer or employee thereof, nor any Seller, has employed any broker
or finder or has incurred or will incur any broker's, finder's or similar fees,
commissions or expenses, in each case in connection with the transactions
contemplated by this Agreement, except for the obligations of the Company to
Montgomery, Jessup & Co. LLP and any other obligations of the Company or the
Sellers set forth on Schedule 2.21.
2.22 Customers and Suppliers. Schedule 2.22 sets forth (i) the
names and addresses of, and the gross sales of the Company and each Subsidiary
for the fiscal year ended December 31, 1995 to, the ten largest customers of the
Company and each Subsidiary (by dollar volume) in fiscal 1995; (ii) the names
and addresses of the ten largest suppliers (by dollar volume) of products and
services to the Company and each Subsidiary in fiscal 1995, indicating the
products and services supplied, and existing contractual arrangements for
continued supply from each such firm, and also indicating whether any such firm
is a sole-source supplier to the Company or any Subsidiary. Except as otherwise
indicated in Schedule 2.22, neither the Company nor any Seller knows of any
termination, cancellation, limitation, modification or change in the business
relationships of the Company or any Subsidiary with any supplier or customer
listed therein, or of any pending or threatened dispute of any kind with any
such supplier or customer.
2.23 Warranty Claims.
(a) Except as set forth on Schedule 2.23, as of the date
specified, there are no pending claims against the Company or any
Subsidiary under warranties, whether express or implied by the
customers of the Company or any Subsidiary. Neither the Company nor any
Subsidiary has given any guarantee or warranty or made any
representation in respect of products or services sold or contracted to
be sold by the Company or any Subsidiary except for warranties in the
standard forms attached to Schedule 2.23 and (except as aforesaid)
neither the Company nor any Subsidiary has accepted any liability or
obligation to service, repair, maintain, take back or otherwise do or
not do anything in respect of any products or services which would
apply after any such products or services have been delivered by it.
(b) To the best knowledge of the Company or any Seller,
neither the Company nor any Subsidiary has manufactured, sold or
supplied products or services which when sold were (subject to any
reserve for warranty claims reflected on the Company Balance Sheet and
as to be reflected on the Closing Date Balance Sheet) in any material
respect faulty or defective or which do not comply in any material
respect with any warranties or representations expressly or impliedly
made by the Company or any Subsidiary or with all applicable
regulations, standards and requirements in respect thereof.
2.24 Powers of Attorney. Except as disclosed on Schedule 2.24,
the Company and any Subsidiaries have no powers of attorney or comparable
delegations of authority outstanding and neither the Sellers nor any Affiliate
of any Seller (other than the Company and any Subsidiaries) nor any officer or
director of any Seller or any such Affiliate has signature authority with
respect to any bank or other similar institutional account of the Company or any
Subsidiaries.
2.25 Disclosure. Neither the Company nor any Seller has made
any material misrepresentation to Buyer relating to this Agreement or the Shares
and neither the Company nor any Seller has omitted to state to Buyer any
material fact relating to this Agreement or the Shares which is necessary in
order to make the information given by or on behalf of the Company or the
Sellers to Buyer or its representatives at or prior to Closing not misleading or
which if disclosed would reasonably affect the decision of a person considering
an acquisition of the Shares on the terms provided herein.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller hereby represents and warrants to Buyer with
respect to such Seller as follows:
3.1 Ownership of Shares; Title. Such Seller is the owner of
record and beneficially of the number and type of Shares set forth beside such
Seller's name on Schedule 1.1 hereto, and the information set forth on Schedule
1.1 with respect to such Seller is accurate and complete. Such Seller has, and
shall transfer to Buyer at the Closing, good and transferable title to the
Shares shown as owned by such Seller on Schedule 1.1 hereto, free and clear of
any and all Security Interests, proxies and voting or other agreements.
3.2 Acquisition of Stock for Investment. Such Seller is aware
that the Echlin Common Stock has not been registered under the Securities Act of
1933, as amended (the "Securities Act"). Such Seller agrees that the Echlin
Common Stock may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of (i) without registration under the
Securities Act, except pursuant to an exemption from such registration available
under such Act and (ii) except in accordance with any applicable provisions of
state securities laws. Such Seller agrees that Buyer may at its election affix a
legend to any certificates evidencing such shares summarizing or identifying
such restrictions.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company and the
Sellers as follows:
4.1 Incorporation of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
4.2 Power; Authorization; Consents. Buyer has the requisite
corporate power to enter into this Agreement and perform its obligations
hereunder. When approved by the Board of Directors of Buyer, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will have been duly authorized and no other
corporate proceedings on the part of Buyer will be necessary to authorize and
approve this Agreement and the transactions contemplated hereby and this
Agreement will constitute a valid and binding obligation of, Buyer, enforceable
against Buyer in accordance with its terms. The execution, delivery and
performance of this Agreement by Buyer and the consummation of the transactions
contemplated hereby will not:
(i) contravene any provisions of the Certificate of
Incorporation or By-Laws of Buyer;
(ii) (after notice or lapse of time or both) conflict
with, result in a breach of any provision of, constitute a
default under, result in the modification or cancellation of,
or give rise to any right of termination or acceleration in
respect of, any contract, agreement, commitment,
understanding, arrangement or restriction of any kind to which
Buyer is a party to or which Buyer or any of Buyer's property
is subject;
(iii) violate or conflict with any Legal Requirements
(as defined in Section 2.9 hereof) applicable to Buyer or any
subsidiary of Buyer or any of their respective businesses or
properties; or
(iv) require any authorization, consent, order,
permit or approval of, or notice to, or filing, registration
or qualification with, any governmental, administrative or
judicial authority by or with respect to the Buyer, except as
may be required to be in compliance with the provisions of the
Hart-Scott Act.
4.3 Brokers. Neither Buyer, nor any Affiliate of Buyer, nor
any director, officer or employee thereof, has employed any broker or finder or
has incurred or will incur any broker's, finder's or similar fees, commissions
or expenses, in each case in connection with the transactions contemplated by
this Agreement.
4.4 Acquisition of Stock for Investment. Buyer is acquiring
the Shares for investment and not with a view toward, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling the Shares. Buyer agrees that the Shares may not be sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of
(i) without registration under the Securities Act, except pursuant to an
exemption from such registration available under such Act and (ii) except in
accordance with any applicable provisions of state securities laws.
4.5 Echlin Common Stock. The Echlin Common Stock to be issued
and delivered to the Sellers pursuant to the provisions of this Agreement will
on the Closing Date have been duly authorized, validly issued and outstanding,
fully paid and non-assessable, and entitled to all rights granted to all shares
of Echlin Inc. Common Stock $1 par value, including, without limitation, the
right to vote in the election of Buyer's Board of Directors.
4.6 Financial Statements. The financial statements of Buyer
audited by Price Waterhouse, as at the close of business on August 31, 1995,
including the related notes, and unaudited as of February 29, 1996, which have
been furnished to the Sellers, present fairly, in all material respects, the
financial condition on a consolidated basis of Buyer and its consolidated
subsidiaries as of said dates, and said financial statement, including the
related notes, show all known material liabilities of Buyer, direct or
contingent, as of said dates. The unaudited financial statements do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair statement have been included in preparing the unaudited financial
statements. The unaudited financial statements are not necessarily indicative of
the results that may be expected for the year ending August 31, 1996. At the
Closing Date there will have been no material adverse change in the consolidated
financial condition of Buyer and its subsidiaries since the dates of said
financial statements.
4.7 Disclosure. Buyer has not made any material
misrepresentation to the Sellers relating to this Agreement or the Echlin Common
Stock and Buyer has not omitted to state to Sellers any material fact relating
to this Agreement or the Echlin Common Stock which is necessary in order to make
the information given by or on behalf of Buyer to the Sellers at the date hereof
or prior to Closing (including Buyer's filings under the Securities Exchange Act
of 1934) not misleading or which if disclosed would reasonably affect the
decision of a person considering an acquisition of the Echlin Common Stock on
the terms provided for herein.
5. COVENANTS
5.1 Access; Confidentiality. (a) Between the date hereof and
the Closing Date, the Company will, and will cause each Subsidiary to (i)
provide, to the officers and other authorized representatives of Buyer, full
access, during normal business hours, to any and all premises, properties,
files, books, records, documents, and other information of the Company and each
Subsidiary and will cause their officers to furnish to Buyer and their
authorized representatives any and all financial, technical and operating data
and other information pertaining to the businesses and properties of the Company
and any Subsidiaries, including, without limitation, furnish to Buyer a list of
all Permits owned or held by the Company and any Subsidiaries specifying the
governmental authority or other person from whom such Permit has been obtained
and setting forth any actions required to be taken by Buyer with respect to such
Permits in connection with the consummation of the transactions contemplated
hereby, and (ii) make available for inspection and copying by Buyer true and
complete copies of any documents relating to the foregoing.
(b) Buyer will hold in confidence and not use in any way other
than conducting its assessment of the Company and cause all of Buyer's
representatives and employees to hold in confidence and not use in any
way other than conducting its assessment of the Company (unless and to
the extent compelled to disclose by judicial or administrative process
or, in the opinion of its counsel, by other requirements of law) all
Confidential Information (as defined below) and will not disclose the
same to any third party except as may reasonably be necessary to carry
out this Agreement and the transactions contemplated hereby, including
any due diligence review by or on behalf of Buyer. Buyer agrees not to
contact third parties utilizing Confidential Information; provided,
however, that Buyer may contact customers listed in Schedule 2.22 if
such contacts are made on behalf of Buyer exclusively by Stuart Mackay.
If this Agreement is terminated, Buyer will promptly return to the
Company, upon the reasonable request of the Company, all Confidential
Information furnished by the Company and held by Buyer, including all
copies and summaries thereof. As used herein, "Confidential
Information" shall mean all information concerning the Company and any
Subsidiaries obtained by Buyer from the Company or its representatives
in connection with the transactions contemplated by this Agreement
except information (x) ascertainable or obtained from public
information, (y) received from a third party not employed by or
otherwise affiliated with the Company or any Subsidiary or (z) which is
or becomes known to the public other than through a breach of this
Agreement. Without limiting the foregoing, Buyer agrees to exercise the
same degree of care in protecting Confidential Information as it uses
in protecting Buyer's own proprietary information.
5.2 Furnishing Information; Announcements. The Company will,
as soon as practicable after reasonable request therefor, furnish to Buyer all
the information concerning the Company and any Subsidiaries required for
inclusion in any statement or application made by Buyer to any governmental or
regulatory body in connection with the transactions contemplated by this
Agreement. Neither the Company nor any Seller nor Buyer shall issue any press
releases or otherwise make any public statement with respect to the transactions
contemplated hereby, without the prior consent of the other parties hereto,
except as, in the reasonable judgment of the party determining to issue such
press release or make such public statement, is otherwise required by law and
upon prompt prior notice to the other parties hereto.
5.3 Conduct of Business of the Company Prior to the Closing.
The Company agrees that, during the period from the date hereof to the Closing
the business and operations of the Company and any Subsidiaries shall be
conducted only in the ordinary course of business and consistent with past
practice, no change shall be made in the Articles or Certificate of
Incorporation or By-Laws, as amended, of the Company or in the charters or
by-laws of any Subsidiaries and, without limiting the generality of the
foregoing, neither the Company nor any Subsidiary shall, without the prior
written consent of Buyer, directly or indirectly:
(a) (i) except upon exercise of Warrants, issue, grant or sell
any shares of its capital stock or (ii) issue, grant or sell any
security, option, warrant, call, subscription or other right of any
kind, fixed or contingent, that directly or indirectly calls for the
issuance, sale, pledge or other disposition of any shares of capital
stock of the Company or any Subsidiary, (iii) enter into any agreement,
commitment or understanding calling for any transaction referred to in
clause (i) or (ii) of this paragraph (a) or (iv) except with respect to
the Preferred Stock, make any other changes in its equity capital
structure;
(b) declare, set aside or pay any dividend or other
distribution (whether in cash, stock, property or any combination
thereof) in respect of any shares of the Company's capital stock, or,
except with respect to the Preferred Stock, purchase, redeem or
otherwise acquire, any shares of the Company's capital stock;
(c) (including through its directors, officers, employees or
advisors), solicit, initiate discussions concerning or encourage
(including by way of furnishing any non-public information concerning
the Company or any Subsidiary) any Acquisition Proposal (as defined
below). The Company will notify Buyer promptly by telephone, and
thereafter promptly confirm in writing, if any such information is
requested from, or any Acquisition Proposal is received by, the Company
and the terms thereof. As used in this Agreement, "Acquisition
Proposal" shall mean any proposal or inquiry received by the Company
for a merger or other business combination involving the Company or any
Subsidiary or for the acquisition of, or the acquisition of a
substantial equity interest in, a substantial portion of the assets of,
the Company or any Subsidiary, other than the specific transactions
with Buyer contemplated hereby;
(d) make any capital expenditures (including expenditures for
additions to plant, property and equipment) or appropriations or
commitments with respect thereto; except (i) to the extent of the total
dollar amounts and, to the extent indicated therein, as set forth on
any budget previously furnished to Buyer and (ii) such additional
expenditures, appropriations and commitments up to $50,000 as the
Company may deem appropriate;
(e) create, incur or assume any indebtedness for money
borrowed including obligations in respect of capital leases other than
(A) indebtedness under revolving credit, line of credit and other
working capital loan agreements described on Schedule 2.7 hereto
providing for borrowings in the ordinary course of business not
exceeding any amount reflected on the Company Balance Sheet in the
aggregate at any time outstanding and (B) intercompany loans and
advances to or from any Subsidiary;
(f) pay, discharge or satisfy claims, liabilities or
obligations (absolute, accrued, contingent or otherwise and whether due
or to become due) which involve payments or commitments to make
payments exceeding $50,000 in the aggregate, other than (A) liabilities
or obligations incurred in the ordinary course of business and
consistent with past practice, (B) the payment or discharge of
obligations as contemplated by this Agreement and (C) scheduled
repayments of current portions of and interest on long-term
indebtedness, the estimated amounts of which payments (which in the
case of interest payments on variable rate debt have been projected on
the basis of rates currently in effect) have prior to the execution of
this Agreement been disclosed by the Company to Buyer in a writing
which specifically refers to this Section;
(g) assume, endorse, guarantee or otherwise become liable or
responsible for (whether directly, contingently or otherwise) any
indebtedness for money borrowed or any other obligation of any other
person; provided, however, that the Company and its Subsidiaries may
endorse negotiable instruments in the ordinary course of business;
(h) except for purchases of raw materials, components,
inventory, supplies, equipment or services and sales of goods and
services, in each case in the ordinary course of business, enter into
any transaction or series of related transactions, whether or not in
the ordinary course of business, involving total payments to or by the
Company and any Subsidiaries of, or involving the acquisition or
disposition by the Company or any Subsidiary of property, assets or
rights having a value in excess of $100,000 or change any warranty,
product return or other business policy or practice;
(i) (i) approve or put into effect any general increase in any
compensation or benefits payable to any class or group of employees of
the Company or any Subsidiary, (ii) grant to any Key Employee any
increase in compensation, remuneration or benefits of any nature
whatsoever, (iii) enter into any Compensation Commitments with any Key
Employee, (iv) pay any bonus or other special compensation to any Key
Employee (except pursuant to ERISA Plans and Compensation Commitments
expressly disclosed on Schedules 2.17 and 2.18 hereto as in effect on
the date hereof) or (v) adopt or amend in any material respect any
ERISA Plan or any Compensation Commitment or, except in the ordinary
course of business and consistent with past practice, any collective
bargaining agreement;
(j) change the accounting methods, principles or
practices employed by the Company or any Subsidiary,
except as required by generally accepted accounting
principles;
(k) enter into or approve any Company Agreement to which
an Insider is a party; or
(l) change any accounting principle or method or election
for federal income tax purposes used by the Company
or any Subsidiary.
The Company will use, and will cause each of its Subsidiaries to use, its best
efforts to preserve its business organization intact, to keep available to
itself (including following the Closing) the present services of its Key
Employees; and to preserve for itself (including following the Closing) its
current relationships with its suppliers, customers and others with whom
business relationships exist; provided, however, that nothing shall permit the
Company or any Subsidiary to take any action with respect to employees,
suppliers or customers, which is inconsistent with any other provisions of this
Agreement.
5.4 Consents; Cooperation. (a) Subject to the terms
and conditions hereof, the Company, the Sellers and Buyer will, and the Company
will cause each Subsidiary to, use their respective best efforts at their own
expense:
(i) to obtain prior to the earlier of the date
required (if so required) or the Closing Date, all waivers,
permits, licenses, approvals, authorizations, qualifications,
orders and consents of all third parties and governmental
authorities, and make all filings and registrations with
governmental authorities which are required on their
respective parts for (A) the consummation of the transactions
contemplated by this Agreement, (B) the ownership or leasing
and operating after the Closing by the Company and each
Subsidiary of all their material properties and (C) the
conduct after the Closing by the Company and each Subsidiary
of their respective businesses as conducted by such entities
on the date hereof;
(ii) to defend, consistent with applicable principles
and requirements of law, any lawsuit or other Legal
Proceedings, whether judicial or administrative, whether
brought derivatively or on behalf of third persons (including
governmental authorities) challenging this Agreement or the
transactions contemplated hereby and thereby whether prior to
or after the Closing; and
(iii) to furnish each other such information and
assistance as may reasonably be requested in connection with
the foregoing.
(b) To the extent permitted by law, Buyer, the Sellers and the
Company will supply each other with copies of all correspondence,
filings or written communications between Buyer, the Sellers, the
Company or any Subsidiary or their respective representatives and any
governmental authority or members of their respective staffs with
respect to this Agreement and the transactions contemplated hereby.
5.5 Additional Agreements. Subject to the terms and conditions
of this Agreement, each of the parties hereto agrees to use it best efforts at
its own expense to take, or cause to be taken, all action and to do, or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In case at any time after the Closing, any further action is
required of the Company necessary or desirable to carry out the purposes of this
Agreement, Buyer shall cause the proper officers of the Company to take all such
necessary action.
5.6 Interim Financial Statements. Promptly when available
after the end of each fiscal month after the date hereof, the Company will
deliver to Buyer an unaudited consolidated balance sheet and the related
statement of income of the Company and any Subsidiaries.
5.7 Notification of Certain Matters. Between the date
hereof and the Closing,
(a) the Company (and the Sellers with respect to clauses (i),
(ii) and (iii) below) will give prompt notice in writing to Buyer of:
(i) any information that indicates that any representation and warranty
contained herein was not true and correct as of the date hereof or will
not be true and correct as of the Closing, (ii) the occurrence of any
event which will result, or has a reasonable prospect of resulting, in
the failure to satisfy a condition specified in Article 6 hereof, (iii)
any notice or other communication from any third person alleging that
the consent of such third person is or may be required in connection
with the transactions contemplated by this Agreement, and (iv) any
notice of, or other communication relating to, any default or event
which, with notice or lapse of time or both, would become a default
under any Company Agreement which default would have a Material Adverse
Effect. The Company will (x) promptly advise Buyer of any event that
has a Material Adverse Effect, (y) confer on a regular and frequent
basis with one or more designated representatives of Buyer to report
operational matters and to report the general status of on-going
operations, and (z) notify Buyer of any emergency or other change in
the normal course of business or in the operation of the properties of
the Company or any Subsidiary and of any governmental complaints,
investigations or hearings (or communications indicating that the same
may be contemplated) or adjudicatory proceedings involving any property
of the Company or any Subsidiary, and will keep Buyer fully informed of
such events and permit Buyer's representatives access to all materials
prepared in connection therewith (except insofar as the Company is
advised by counsel that such disclosure could prejudice the Company's
position, such as by waiving attorney-client privileges).
(b) Each Seller shall give prompt notice to Buyer of any
notice or other communication from any third person asserting any
right, title or interest in any of the Shares held by such Seller
(including, without limitation, any threat to commence, or notice of
the commencement of, any action or other proceeding with respect to the
Shares) or the occurrence of any other event of which such Seller has
knowledge which will result, or has a reasonable prospect of resulting,
in any failure to consummate the sale of the Shares as contemplated
hereby.
5.8 Assurance by Sellers. Prior to the Closing, the Sellers
shall cause the Company and any Subsidiaries to comply with their respective
covenants set forth in this Agreement.
5.9 Release of Third Party Guarantees. Buyer shall cause the
Sellers and their affiliates to be released as of the Closing Date from any
guarantees and letters of credit issued in connection with the business and
affairs of the Company or any Subsidiaries.
5.10 Covenant Not To Compete. (a) In furtherance of the sale
to Buyer of the Shares and the business represented thereby, for a period of
five years following the Closing Date, no Seller who prior to the Closing Date
has been actively engaged in the business as a full-time employee of the Company
or any Subsidiary shall, directly or indirectly, through equity ownership or
otherwise, for himself, itself or any other person, anywhere in the United
States, Mexico or Canada.
(i) compete with the Company, Buyer or any subsidiary
of Buyer, in the business of the Company as conducted as of
the Closing Date; provided, however, that nothing herein shall
be construed to prevent any Seller from owning, as an
investment, up to 5% of a class of equity securities issued by
any competitor of the Company, Buyer or any subsidiary of
Buyer, engaged in the business of the Company as conducted as
of the Closing Date, that is publicly traded and registered
under Section 12 of the Securities Exchange Act of 1934 or
from acquiring a business which has a competing business
provided the competing business does not constitute more than
10% of the revenues of the acquired business provided,
however, that, any such Seller makes a bona fide offer to
transfer to Buyer, within a reasonable time following
acquisition of the business, that portion of the business in
which such Seller is prohibited from engaging or being
involved under this Section 5.11 at a price proportionate to
the purchase price for the acquired business.
(ii) communicate with or contact any customers of the
Company, Buyer or any subsidiary of Buyer for the purpose of
soliciting such customers to purchase any goods, products or
services of the type being manufactured, offered or sold by
the Company as of the Closing Date.
(iii) contact any employee of the Company, Buyer or
any subsidiary of Buyer, engaged in the manufacture or sale of
any goods, products or services of the type being
manufactured, offered or sold by the Company as of the Closing
Date for the purpose of soliciting, hiring, attempting to hire
or in any manner attempting to induce any such employee to
leave the Company, Buyer or any subsidiary of Buyer.
(iv) use or disclose to others any trade secrets or
other confidential information relating to the Company, Buyer
or any subsidiary of Buyer and the business conducted thereby,
including the names, addresses and any other information
relating to the aforesaid customers and employees and confirms
that such information shall constitute exclusive property of
the Company, Buyer or any subsidiary of Buyer and agrees that
any such property shall not be used by the Sellers or
disclosed to other persons or business enterprises.
(b) The parties intend that the covenant contained in the
preceding sentences shall be construed as a series of separate
covenants, one for each county and city included within each state and,
except for geographic coverage, each such separate covenant shall be
deemed identical. The parties agree that the covenants deemed included
in this Section 5.10 are, taken as a whole, reasonable in their
geographic scope and their duration and no party shall raise any issue
of the reasonableness of the scope or duration of the covenants in any
proceeding to enforce any such covenants. If, in any judicial
proceeding, a court shall refuse to enforce any of the separate
covenants deemed included in this paragraph, then the unenforceable
covenant shall be deemed eliminated from these provisions for the
purpose of those proceedings to the extent necessary to permit the
remaining separate covenants to be enforced.
5.11 Certain Receivables. Except as to Moto Mirror Employee
Partners Ltd. ("MME"), the Sellers will cause any "receivables from
stockholders" to be paid to the Company in full at or prior to Closing.
5.12 Real Property Matters. Not later than 10 business days
prior to the Closing Date, the Company shall furnish to Buyer a policy or a
commitment for a policy of title insurance on the current ALTA Owner's Policy
Form issued by a reputable title company with respect to any real property owned
by the Company or any Subsidiary on Schedule 2.10 hereto, including any owned
operating facilities to be acquired from affiliated companies, containing no
exceptions to title other than exceptions (i) set forth on Schedule 2.10 hereto
or (ii) which, individually or in the aggregate, do not impair the value, or
interfere with the present use, of such property. The Company shall furnish a
current survey of any owned real property certified to Buyer, prepared by a
licensed surveyor and conforming to current ALTA Minimum Detail Requirements for
Land Title Surveys, disclosing the location of all improvements, easements,
party walls, sidewalks, roadways, utility lines, and other matters shown
customarily on such surveys, and showing access affirmatively to public streets
and roads (the "Survey"). The Survey shall not disclose any survey defect or
encroachment from or onto the real property which has not been cured or insured
over prior to the Closing.
5.13 Certain Payments. The Company and any Subsidiary shall
not be liable for, and the Sellers shall hold the Company and any Subsidiary
harmless from, any liabilities or obligations of any person to make payments to
any former shareholders of the Company or any Subsidiary (including any
predecessors thereof), including, without limitation, with respect to the
cancellation of their shares pursuant to any merger, reorganization or other
corporate transaction, and the Sellers shall pay, or cause to be paid, all such
amounts promptly upon written notice from Buyer or the Company, provided,
however that the foregoing is not intended to limit the payment by the Company
of any liabilities or obligations to the extent reflected on the Closing Date
Balance Sheet.
5.14 Securities Act Registration. As soon as practicable after
the Closing Date the Echlin Common Stock shall be registered under the
Securities Act as follows:
(a) On or before Closing Buyer shall provide to Counsel for
the Sellers and promptly after the Closing (but in any event within ten
business days after Closing) Buyer shall file with the Securities and
Exchange Commission (the "SEC") under the Securities Act, on an
appropriate form as Buyer in its sole discretion shall determine, a
registration statement under Section 5 of the Securities Act (the
"Registration Statement") for an offering to be made on a continuous or
delayed basis covering the offer and sale of the Echlin Common Stock by
the Sellers. Buyer agrees to use its best efforts to cause the
Registration Statement and any necessary state filings which Buyer
shall prepare to become effective prior to the release of the post
acquisition financials described in Section 5.15 and to remain
effective until the completion of the distribution of the Echlin Common
Stock, but in no event later than the second anniversary of the Closing
Date (the "Registration Period").
(b) Buyer shall pay all expenses (including the federal and
any state registration fee) incurred by Buyer in connection with the
preparation and execution of the Registration Statement referred to in
this Section 5.14 including, without limitation, furnishing
prospectuses to the Sellers in such quantities as they may reasonably
request; provided, however, that Buyer shall not be obligated to pay
any underwriting or brokerage commissions, discounts or fees relating
to any sale of the Echlin Common Stock or the fees and expenses of any
counsel of any of such Sellers.
(c) Buyer shall indemnify and hold harmless the Sellers
against any and all losses, liabilities, claims, damages and expenses
and reasonable counsel fees which arise out of or are based upon any
allegedly untrue statement or alleged omission to state a material fact
in connection with the Registration Statement or any prospectus
relating thereto; provided however, Buyer will not be liable to any
Seller in any such case to the extent that any such loss, liability,
claim, damage or expense arises out of or is based upon any untrue
statement or omission to state a material fact made in the Registration
Statement or any prospectus relating thereto or in any amendment or
supplement thereto, in reliance upon and in conformity with information
furnished in writing by such Seller for use in the preparation thereof.
The Sellers shall cooperate with Buyer in the preparation and filing of
the Registration Statement, amendment or supplement required hereunder
and shall furnish Buyer such information as may be needed from them in
connection with such filing and registration and each Seller shall
indemnify and save harmless Buyer, its directors, officers and agents
from any and all losses, liabilities, claims, damages and expenses and
reasonable counsel fees which arise out of or are based upon any untrue
statement or omission to state a material fact in connection with such
filing and registration, if and to the extent such untrue statement or
omission is made in reliance upon and in conformity with the
information furnished in writing by such Seller for use in the
preparation of the Registration Statement or any prospectus relating
thereto.
(d) In the event Buyer shall furnish the Sellers written
notice stating that, in the good faith judgment of counsel for Buyer,
the sale or transfer of the Echlin Common Stock pursuant to the
Registration Statement would, at such time, require the disclosure of
material information that Buyer has a bona fide business purpose for
preserving as confidential the Sellers shall suspend sales of Echlin
Common Stock under the Registration Statement for a reasonable period
until Buyer determines that such confidential information may be
disclosed; provided, however, that in no event shall any such
suspension exceed 60 days in the aggregate during any 12 month period.
Each of the Sellers agrees to keep confidential any notification by
Buyer to such Seller pursuant to this Section 5.14.
(e) Upon the effectiveness of the Registration Statement (and
any required State registrations), evidence of the effectiveness of
which Buyer agrees to furnish to the Sellers, and the issuance of post
acquisition financials in accordance with Section 5.15 hereof, Buyer
agrees to the removal of any legend affixed to any certificates
evidencing shares of Echlin Common Stock.
5.15 Post Acquisition Financials. Buyer shall promptly issue
financial results for the first calendar month ending after the Closing Date
which covers at least 30 days of post Closing Date operations combining the
Company's financial results with those of Buyer. Such results shall be included
in SEC Form 8-K or other appropriate SEC form, which shall be promptly filed by
Buyer with the SEC after such combined results become available (but in any
event within 45 days after the end of such first month of combined operations).
Notwithstanding anything herein to the contrary, the Sellers shall not dispose
of any Echlin Common Stock acquired pursuant to this Agreement until after such
filing; provided, however, that such restriction shall cease to be applicable at
such time as any affiliate (as defined under the Securities Act) of Echlin
disposes of Echlin Common Stock after the Closing Date.
5.16 Post Acquisition Insurance Coverage. Buyer agrees that
for a period of at least one year after the Closing Date it will maintain or
cause the Company to maintain insurance coverage for the Company similar to the
coverage currently maintained by the Company.
5.17 Consulting Agreement. On the Closing Date, Buyer and Mr.
Neil F. Gibson, Jr. shall enter into a consulting agreement in form approved by
Buyer and such individual. Such agreement shall contain the compensation
provided on Schedule 5.17.
6. CONDITIONS TO THE OBLIGATIONS OF BUYER TO EFFECT THE CLOSING
The obligations of Buyer required to be performed by it at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by Buyer as
provided herein except as otherwise required by applicable law:
6.1 Representations and Warranties; Agreements; Covenants.
Each of the representations and warranties of the Company and the Sellers
contained in this Agreement shall be true and correct as of the date hereof and
(having been deemed to have been made again at and as of the Closing) shall be
true and correct in all material respects as of the Closing. Each of the
obligations of the Company and the Sellers required by this Agreement to be
performed by them at or prior to the Closing shall have been duly performed and
complied with in all material respects as of the Closing. At the Closing, Buyer
shall have received a certificate, dated the Closing Date and duly executed by
an officer of the Company and the Agent Seller, on behalf of the Sellers, to the
effect that the conditions set forth in the preceding two sentences have been
satisfied and that no event has occurred between the date of this Agreement and
the Closing Date that has, to such officer's or such Agent Seller's knowledge, a
Material Adverse Effect.
6.2 Authorization; Consents. All corporate action necessary to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have been duly and
validly taken by the Company and by Buyer's Board of Directors. Any filings
required to be made in connection with the transactions contemplated hereby
shall have been made and all applicable waiting periods with respect to each
such filing, including any extensions thereof, shall have expired or been
terminated. All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies required to consummate the transactions contemplated hereby
and all consents or waivers which, either individually or in the aggregate, if
not made or obtained, would have a Material Adverse Effect shall have been made
or obtained.
6.3 Opinions of the Company's and the Sellers' Counsel. Buyer
shall have been furnished with the opinion of counsel for the Company and the
Sellers, dated the Closing Date, in form and substance satisfactory to Buyer, to
the effect set forth in Sections 2.1, 2.2, 2.3, 2.4, 2.9 (to the best of such
counsel's knowledge, after investigation described in such opinion) and 3.1 (as
to record ownership only) hereof. In rendering the foregoing opinion, such
counsel may rely as to factual matters upon certificates or other documents
furnished by officers and directors of the Company and by government officials
and upon such other documents and data as such counsel deem appropriate as a
basis for their opinions. Such counsel may specify the jurisdiction or
jurisdictions in which they are admitted to practice, that they are not admitted
to the Bar in any other jurisdiction or experts in the law of any other
jurisdiction and that such opinions are limited to the law of the jurisdiction
or jurisdictions in which they are admitted to practice, the corporate law of
the jurisdiction in which the Company is incorporated, if different, and federal
laws.
6.4 Indebtedness and Minimum Working Capital. The chief
financial officer of the Company and the Agent Seller, on behalf of the Sellers,
shall certify to Buyer that the amount of Indebtedness of the Company as at the
Closing Date is no greater than the amount of Indebtedness reflected on the
Company Balance Sheet dated March 31, 1996 and the amount of Working Capital as
at the Closing Date is at least equal to the working capital, calculated in the
same manner as Working Capital, reflected on the Company Balance Sheet dated
March 31, 1996.
6.5 Absence of Litigation. No order, stay, injunction or
decree of any court of competent jurisdiction shall be in effect (i) that
prevents or delays the consummation of any of the transactions contemplated
hereby or (ii) would impose any material limitation on the ability of Buyer
effectively to exercise full rights of ownership of the Shares. No action, suit
or proceeding before any court or any governmental or regulatory entity shall be
pending (or threatened by any governmental or regulatory entity), and no
investigation by any governmental or regulatory entity shall have been commenced
(and be pending) seeking to restrain or prohibit (or questioning the validity or
legality of) the consummation of the transactions contemplated by this Agreement
or seeking material damages in connection therewith which Buyer, in good faith
and with the advice of counsel, believes makes it undesirable or impractical to
proceed with the consummation of the transactions contemplated hereby.
6.6 Resignations. Buyer shall have received a letter, dated
the Closing Date, from each member of the Boards of Directors of the Company and
any Subsidiaries and from each of their officers stating that such director or
officer resigns such position effective at the consummation of the Closing and
releasing the Company and such Subsidiaries from any claims that such director
or officer may have against the Company and its Subsidiaries as a result of his
services as a director or as an officer other than rights of indemnification by
reason of service as a director, officer or employee pursuant to corporate law
of the State of Texas or the Certificate of Incorporation or By-Laws of the
Company or any Subsidiary.
6.7 Intentionally Deleted.
6.8 Certificates and Escrow Agreement. The Sellers shall have
furnished Buyer with an executed Escrow Agreement and such certificates of
officers and others as Buyer may reasonably request to evidence compliance with
the conditions set forth in this Article 6.
6.9 Intentionally Deleted.
6.10 Satisfactory Market Conditions. There shall not have
occurred (i) any general suspension of trading in, or limitation on prices for,
securities on the New York Stock Exchange, which suspension or limitation shall
continue for three or more consecutive trading days, (ii) any decline in either
the Dow Jones Industrial Average or the Standard and Poor's Index of Industrial
Companies by an amount in excess of 15%, measured from the date of this
Agreement, (iii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iv) any limitation (whether
or not mandatory) by any government or governmental authority or agency,
domestic or foreign, on, or other event that might materially affect, the
extension of credit by banks or other lending institutions, (v) a commencement
of a war or armed hostilities or other national or international calamity
directly or indirectly involving the United States which would reasonably be
expected to have a material adverse impact on the capital markets of the United
States, or (vi) in the case of any of the foregoing existing on the date of this
Agreement, a material acceleration or worsening thereof.
6.11 Hart-Scott Act. All applicable waiting periods (and any
extensions thereof) under the Hart-Scott Act shall have expired or otherwise
been terminated and any other required authorizations, consents and approvals of
governments and governmental agencies shall have been received.
7. CONDITIONS TO THE OBLIGATIONS OF THE SELLERS TO EFFECT THE CLOSING
The obligations of the Sellers required to be performed by
them at the Closing shall be subject to the satisfaction, at or prior to the
Closing, of each of the following conditions, each of which may be waived by the
Sellers as provided herein except as otherwise required by applicable law:
7.1 Representations and Warranties; Agreements. Each of the
representations and warranties of Buyer contained in this Agreement shall be
true and correct as of the date hereof and (having been deemed to have been made
again at and as of the Closing) shall be true and correct in all material
respects as of the Closing. Each of the obligations of Buyer required by this
Agreement to be performed by it at or prior to the Closing shall have been duly
performed and complied with in all material respects as of the Closing. At the
Closing, the Sellers shall have received a certificate, dated the Closing Date
and duly executed by an officer of Buyer, to the effect that the conditions set
forth in the preceding two sentences have been satisfied.
7.2 Authorization of the Agreement; Consents. All corporate
action necessary to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by Buyer. Any filings required to be made in
connection with the transactions contemplated hereby shall have been made and
all applicable waiting periods with respect to each such filing (including any
extensions thereof) shall have expired or been terminated.
7.3 Opinions of Buyer's Counsel. The Sellers shall have been
furnished with the opinion of counsel of Buyer, dated the Closing Date, in form
and substance satisfactory to the Company, to the effect set forth in Sections
4.1, 4.2 and 4.5 hereof. In rendering the foregoing opinion, such counsel may
rely as to factual matters upon certificates or other documents furnished by
officers and directors of Buyer and by government officials, and upon such other
documents and data as such counsel deems appropriate as a basis for his opinion.
Such counsel may specify the state or states in which he is admitted to
practice, that he is not admitted to the Bar in any other state or expert in the
law of any other state and that such opinions are limited to the law of the
jurisdiction or jurisdictions in which he is admitted to practice, the corporate
law of the jurisdiction in which, Buyer is incorporated, if different, and
federal laws.
7.4 Absence of Litigation. No order, stay, induction or decree
shall have been issued by any court and be in effect restraining or prohibiting
the consummation of the transactions contemplated hereby. No action, suit or
proceeding before any court or any governmental or regulatory entity shall be
pending (or threatened by any governmental or regulatory entity), and no
investigation by any governmental or regulatory entity shall have been commenced
(and be pending) seeking to restrain or prohibit (or questioning the validity or
legality of) the consummation of the transactions contemplated by this Agreement
or seeking material damages in connection therewith which the Sellers, in good
faith and with the advice of counsel, believe makes it undesirable or
impractical to proceed with the consummation of the transactions contemplated
hereby.
7.5 Certificates and Escrow Agreement. Buyer shall have
furnished the Sellers with an executed Escrow Agreement and such certificates of
its officers and others to evidence compliance with the conditions set forth in
this Article 7 as may be reasonably requested by the Sellers.
7.6 Satisfactory Market Conditions. There shall not have
occurred (i) any general suspension of trading in, or limitation on prices for,
securities on the New York Stock Exchange, which suspension or limitation shall
continue for three or more consecutive trading days, (ii) any increase in either
the Dow Jones Industrial Average or the Standard and Poor's Index of Industrial
Companies by an amount in excess of 15%, measured from the date of this
Agreement, (iii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iv) any limitation (whether
or not mandatory) by any government or governmental authority or agency,
domestic or foreign, on, or other event that might materially affect, the
extension of credit by banks or other lending institutions, (v) a commencement
of a war or armed hostilities or other national or international calamity
directly or indirectly involving the United States which would reasonably be
expected to have a material adverse impact on the capital markets of the United
States, or (vi) in the case of any of the foregoing existing on the date of this
Agreement, a material acceleration or worsening thereof.
7.7 Hart-Scott Act. All applicable waiting periods (and any
extensions thereof) under the Hart-Scott Act shall have expired or otherwise
been terminated and any other required authorizations, consents and approvals of
governments and governmental agencies shall have been received.
8. TERMINATION
8.1 Termination. This Agreement may be terminated prior to the
Closing:
(i) by mutual consent of Buyer and the Sellers;
(ii) by Buyer or the Sellers, if the Closing shall
not have taken place on or prior to August 31, 1996, or such
later date as shall have been approved by Buyer and the
Sellers;
(iii) by Buyer or the Sellers if any court of
competent jurisdiction or other governmental body shall have
issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and
non-appealable or, if this Agreement and the transactions
contemplated hereby have not been approved by the Board of
Directors of Buyer on or before June 26, 1996;
(iv) by Buyer, if there has been any violation or
breach by the Company or any Seller of any representation,
warranty, covenant or obligation contained in this Agreement
or by reason of the failure of any condition precedent under
Section 6 hereof (unless the failure results primarily from
Buyer itself breaching any representation, warranty, covenant
or obligation contained in this Agreement) and such violation,
breach or failure has not been waived by Buyer or been cured
by the Company or the Sellers on or prior to August 31, 1996;
or
(v) by the Sellers, if there has been a violation or
breach by Buyer of any representation, warranty, covenant or
obligation contained in this Agreement or by reason of the
failure of any condition precedent under Section 7 hereof
(unless the failure results primarily from the Company or any
Seller themselves breaching any representation, warranty,
covenant or obligation contained in this Agreement) and such
violation, breach or failure has not been waived by the
Sellers or been cured by Buyer on or prior to August 31, 1996.
If Buyer or the Sellers shall terminate this Agreement pursuant to the
provisions hereof, such termination shall be effected by notice to the other
parties specifying the provision hereof pursuant to which such termination is
made.
8.2 Effect of Termination. Except for the obligations
contained in Section 5.1(b) and 10.1 hereof, upon the termination of this
Agreement pursuant to Section 8.1 hereof, this Agreement shall forthwith become
null and void, and no party hereto or any of its officers, directors, employees,
agents, consultants, stockholders or principals shall have any liability or
obligation hereunder with respect thereto.
9. SURVIVAL AND INDEMNIFICATION
9.1 Survival. All representations, warranties, covenants and
agreements contained in this Agreement, or in any Schedule, certificate,
document or statement delivered pursuant hereto, shall survive and shall be
deemed to have been relied upon and shall not be affected in any respect by the
Closing, any investigation conducted by any party hereto or by any information
which any party may receive. Notwithstanding the foregoing, the representations
and warranties contained in Articles 2 and 4 of this Agreement shall terminate
on the earlier of the first anniversary after the Closing Date or the issuance
of Buyer's fiscal 1996 audited financials on SEC Form 10-K; provided, however,
that such representations and warranties, and the liability of any party with
respect thereto, shall not terminate with respect to any claim, whether or not
fixed as to liability or liquidated as to amount, with respect to which such
party has been given written notice prior to such termination date.
9.2 Indemnification. The parties shall indemnify each other as
set forth below:
(a) Each of the Sellers shall (i) indemnify and hold harmless
Buyer and each of its directors, officers, employees, advisors and
Affiliates (including, without limitation, the Company) from and
against any and all losses, damages, liabilities and claims arising out
of, based upon or resulting from any inaccuracy as of the date hereof
or as of the Closing Date of any representation or warranty of the
Company or the Sellers which is contained in or made pursuant to this
Agreement or any breach by the Company or the Sellers of any of their
respective obligations contained in or made pursuant to this Agreement
and (ii) reimburse Buyer and each of its directors, officers,
employees, advisors and Affiliates from and against any and all Legal
Expenses (as defined below)) provided, however, that Buyer and its
directors, officers, employees, advisors and Affiliates shall be
entitled to indemnification pursuant to this Section 9.2 only if the
aggregate gross amount of all amounts paid and all other damages and
losses of any kind suffered by such persons exceeds $200,000 (at which
point all such amounts, damages and losses, including such initial
$200,000, shall be available for indemnification); provided, however,
that the foregoing limitation shall not apply to any amounts paid and
any other damages and losses suffered arising out of, based upon or
resulting from (w) any consideration adjustment pursuant to Section
1.4(c), (x) any breach of a representation or warranty set forth in
Sections 2.4 (insofar as such Section deals with the due authorization
and validity of this Agreement), 2.21 or 3.1 hereof or (y) any breach
of any covenant or agreement of the Sellers to pay, satisfy, discharge
or perform any of their liabilities, commitments and obligations set
forth in any provision of this Agreement, including, without
limitation, the obligation to deliver the Shares, all of which amounts,
damages and losses shall be indemnified dollar-for-dollar following the
incurrence thereof and shall not, if so indemnified, reduce the then
applicable balance of such $200,000. Notwithstanding the foregoing any
liability of each Seller (excluding any such Seller's obligations under
Sections 1.3, 1.4, 2.21, 3.1, 5.10, 5.13 and 10.1 hereof) shall be
limited to his allocable portion of the Escrow Account (net of any
reduction in the Escrow Account made pursuant to Section 1.4(c)(i)(A)).
As used herein, "Legal Expenses" of a person shall mean any and all
fees, costs and expenses of any kind reasonably incurred by such person
and its counsel in investigating, preparing for, defending against or
providing evidence, producing documents or taking other action with
respect to, any threatened or asserted claim. As used herein a Seller's
"allocable portion" of the Escrow Account shall be that percentage of
the Escrow Account (net of any reduction in the Escrow Account made
pursuant to Section 1.4(c)(i)(A)) specified opposite such Seller's
signature on the Escrow Agreement.
(b) Buyer shall (i) indemnify and hold harmless the Sellers
from any and all losses, damages, liabilities and claims arising out
of, based upon or resulting from any inaccuracy as of the date hereof
or as of the Closing Date of any representation or warranty of Buyer
which is contained in or made pursuant to this Agreement or any breach
by Buyer of any of its obligations contained in or made pursuant to
this Agreement and (ii) reimburse the Sellers for any and all Legal
Expenses; provided, however, that the Sellers and their respective
directors, officers, employees, advisors and Affiliates shall be
entitled to indemnification pursuant to this Section 9.2 only if the
aggregate gross amount of all amounts paid and all other damages and
losses of any kind suffered by such persons exceeds $200,000 (at which
point all such amounts, damages and losses, including such initial
$200,000, shall be available for indemnification); provided, however,
that the foregoing limitation shall not apply to any amounts paid and
any other damages and losses suffered arising out of, based upon or
resulting from (w) any consideration adjustment pursuant to Section
1.4(c), (x) any breach of a representation or warranty set forth in
Sections 4.1, 4.2 (insofar as such Section deals with the due
authorization and validity of this Agreement), 4.3 or 4.5 hereof or (y)
any breach of any covenant or agreement of Buyer to pay, satisfy,
discharge or perform any of its liabilities, commitments and
obligations set forth in any provision of this Agreement, including,
without limitation, the obligation to deliver the Echlin Common Stock,
all of which amounts, damages and losses shall be indemnified
dollar-for-dollar following the incurrence thereof and shall not, if so
indemnified, reduce the then applicable balance of such $200,000.
Notwithstanding the foregoing, any liability of Buyer shall be limited
to an amount equal to 10% of the aggregate value of the shares of
Echlin Common Stock delivered to the Sellers under this Agreement
(excluding Buyer's obligations under Sections 1.3, 1.4, 4.3, 4.5, 5.9,
5.14, 5.15, 5.16 and 10.1 hereof).
(c) Promptly after receipt by any person entitled to
indemnification under this Section 9.2 (an "indemnified party") of
notice of the commencement of any action in respect of which the
indemnified party will seek indemnification hereunder, the indemnified
party shall notify each person that is obligated to provide such
indemnification (an "indemnifying party") thereof in writing but any
failure to so notify the indemnifying party shall not relieve it from
any liability that it may have to the indemnified party other than as
provided under this Article 9. The indemnifying party shall be entitled
to participate in the defense of such action and, provided that within
15 days after receipt of such written notice the indemnifying party
confirms in writing its responsibility therefor and reasonably
demonstrates that it will be able to pay the full amount of potential
liability in connection with any such claim, to assume control of such
defense with counsel reasonably satisfactory to such indemnified party;
provided, however, that:
(i) the indemnified party shall be entitled to
participate in the defense of such claim and to employ counsel
at its own expense to assist in the handling of such claim;
(ii) the indemnifying party shall obtain the prior
written approval of the indemnified party before entering into
any settlement of such claim or ceasing to defend against such
claim, if pursuant to or as a result of such settlement or
cessation, injunctive or other equitable relief would be
imposed against the indemnified party;
(iii) no indemnifying party shall consent to the
entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by
each claimant or plaintiff to each indemnified party of a
release from all liability in respect of such claim; and
(iv) the indemnifying party shall not be entitled to
control (but shall be entitled to participate at its own
expense in the defense of), and the indemnified party shall be
entitled to have sole control over, the defense or settlement
of (A) any claim to the extent the claim seeks an order,
injunction or other equitable relief against the indemnified
party which, if successful, could materially interfere with
the business, operations, assets, condition (financial or
otherwise) or prospects of the indemnified party or (B) any
claim relating to Taxes.
After written notice by the indemnifying party to the indemnified party
of its election to assume control of the defense of any such action,
the indemnifying party shall not be liable to such indemnified party
hereunder for any Legal Expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison counsel for the
indemnified party. If the indemnifying party does not assume control of
the defense of such claim as Provided in this Section 9.2(c), the
indemnified party shall have the right to defend such claim in such
manner as it may deem appropriate at the cost and expense of the
indemnifying party, and the indemnifying party will promptly reimburse
the indemnified party therefor in accordance with this Section 9.2. The
reimbursement of fees, costs and expenses required by this Section 9.2
shall be made by periodic payments during the course of the
investigations or defense, as and when bills are received or expenses
incurred.
(d) In the event that the indemnifying party shall be
obligated to indemnify the indemnified party pursuant to this Article
9, the indemnifying party shall, upon payment of such indemnity in
full, be subrogated to all rights of the indemnified party with respect
to the claims to which such indemnification relates.
(e) In determining a party's obligation to indemnify pursuant
to this Section 9.2, all references in this Agreement or in any
certificates delivered in connection herewith to the terms "material",
"materiality" or variants thereof, or to the phrase "to the knowledge
of", or variants thereof, shall be disregarded for the purpose of
determining any misrepresentation, breach of warranty or
non-fulfillment of any covenant.
(f) The indemnification provided for in this Article 9 shall
be the exclusive remedy in respect of any misrepresentation, breach or
default as to any obligation contained in this Agreement and no claim
or cause of action with respect thereto shall be enforceable unless
made in accordance with the procedures, and within the time periods,
set forth in this Article 9; provided, however, that the foregoing
limitation shall not apply to the Sellers' obligations under Sections
1.3, 1.4, 2.21, 3.1, 5.10, 5.13 or 10.1 hereof nor to the obligations
of Buyer under Sections 1.3, 1.4, 4.3, 4.5, 5.9, 5.14, 5.15, 5.16 or
10.1 hereof; provided, however, that notwithstanding any other
provision in this Agreement to the contrary, no Seller shall have any
liability for the breach of any other Seller's obligations under
Sections 3.1 or 5.10 hereof
(g) All indemnification or reimbursement payments required
pursuant to this Agreement shall be made net of all tax and insurance
benefits received or reasonably eligible for receipt by the party to be
indemnified or reimbursed.
10. MISCELLANEOUS
10.1 Expenses. Each of the parties hereto shall pay its own
fees and expenses (including the fees of any attorneys, accountants, investment
bankers or others engaged by such party) in connection with this Agreement and
the transactions contemplated hereby whether or not the transactions
contemplated hereby are consummated. Notwithstanding the foregoing, the Sellers
shall bear all legal or other expenses of the Company relating to this Agreement
and the transactions contemplated hereby, including, without limitation, the
obligations of the Company to Montgomery, Jessup & Co. LLP; provided, however,
the Company shall bear up to $300,000 of such fees and expenses.
10.2 Headings. The section headings herein are for convenience
of reference only, do not constitute part of this Agreement and shall not be
deemed to limit or otherwise affect any of the Provisions hereof.
10.3 Notices. All notices or other communications required or
Permitted hereunder shall be given in writing and shall be deemed sufficient if
delivered by hand (including by courier), mailed by registered or certified
mail, postage prepaid (return receipt requested), or sent by facsimile, as
follows:
If to the Company:
Moto Mirror Inc.
930 West North Carrier Parkway
Grand Prairie, TX 75050
Attention: President
Telephone: (214) 623-0077
Facsimile: (214) 623-0586
If to the Sellers to Agent Seller:
Mr. Neil F. Gibson, Jr.
2311 Table Rock Court
Arlington, TX 76007
Telephone: (817) 640-7339
Alternate: (817) 633-6140
Mr. Bobby Lutz
c/o GL Seaman & Co.
17300 Dallas Parkway, Suite 3180
Dallas, TX 75248
Telephone: (214) 380-6400
Facsimile: (817) 380-5754
Mr. Steven McCraw
2900 Beverly Drive
Plano, TX 75093
Telephone: (214) 686-4208
Facsimile: (214) 686-5009
If to the Company or the Sellers copy to:
Stephen C. Morton, Esq.
Storey Armstrong Steger & Martin, P.C.
1445 Ross Avenue, Suite 4600
Dallas, TX 75202
Telephone: (214) 855-6822
Facsimile: (214) 855-6853
If to Buyer:
Echlin Inc.
100 Double Beach Road
Branford, CT 06405
Attention: Secretary
Telephone: (203) 481-5751
Facsimile: (203) 481-6485
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or three days after the date so mailed or if by
facsimile, on production of a transmission report by the machine from which the
facsimile was sent which indicates that the facsimile was sent in its entirety
to the facsimile number of the recipient; provided, however, that any notice or
communication changing any of the addresses set forth above shall be effective
and deemed given only upon its receipt.
10.4 Assignments. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, and the provisions of Article
9 and Section 10.13 hereof shall inure to the benefit of the indemnified parties
referred to therein; provided, however, that neither this Agreement nor any of
the rights, interests, or obligations hereunder may be assigned by any of the
parties hereto without the prior written consent of the other parties, except
that this Agreement and such rights, interests and obligations may be assigned
by Buyer to an Affiliate (provided that Buyer is not relieved of its liability
hereunder).
10.5 Entire Agreement. This Agreement (including the Schedules
and Exhibits hereto) embodies the entire agreement and understanding of the
parties with respect to the transactions contemplated hereby and supersedes all
prior written or oral commitments, arrangements or understandings with respect
thereto. There are no restrictions, agreements, promises, warranties, covenants
or undertakings with respect to the transactions contemplated hereby other than
those expressly set forth herein.
10.6 Modifications, Amendments and Waivers. At any time prior
to the Closing, to the extent permitted by law, (i) Buyer and the Sellers may,
by written agreement, modify, amend or supplement any term or provision of this
Agreement and (ii) any term or provision of this Agreement may be waived in
writing by the party which is entitled to the benefits thereof.
10.7 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
10.8 Governing Law. This Agreement shall be governed by the
laws of the State of Connecticut (regardless of the laws that might be
applicable under principles of conflicts of law) as to all matters including,
but not limited to, matters of validity, construction, effect and performance.
10.9 Accounting Terms. All accounting terms used herein which
are not expressly defined in this Agreement shall have the respective meanings
given to them in accordance with generally accepted accounting principles on the
date hereof.
10.10 Certain Definitions. For purposes of this
Agreement:
(a) an "Affiliate" of a specified person is a person that
directly or indirectly, through one or more intermediaries, controls,
or is controlled by, or is under common control with, the person
specified;
(b) "Associate" used to indicate a relationship with any
person means (A) any corporation, partnership, joint venture or other
entity of which such person is an officer or partner or is, directly or
indirectly, through one or more intermediaries, the beneficial owner of
10% or more of (1) any class or type of equity securities or other
profits interest or (2) the combined voting power of interests
ordinarily entitled to vote for management or otherwise, and (B) any
trust or other estate in which such person has a substantial beneficial
interest or as to which such person serves as trustee or in a similar
fiduciary capacity;
(c) "best efforts" shall be deemed to not include any
obligation on the part of any person to undertake any liabilities or
perform any acts (except liabilities or performance, other than any
best efforts obligations, expressly required to be undertaken by the
terms of this Agreement) which are materially burdensome to such
person; provided, however, that notwithstanding the foregoing, the term
"best efforts" shall include an obligation to take such actions which
are normally incident to or reasonably foreseeable in connection with
such obligation or the transactions contemplated hereby;
(d) "Indebtedness" shall mean all obligations for borrowed
money outstanding at such time, including, without limitation, the
entire principal amount thereof and interest accrued thereon. For
purposes of Section 1.4 hereof Indebtedness shall not include certain
Indebtedness, not to exceed $225,000, plus any accrued interest, the
proceeds of which borrowing were loaned to MME (the "MME Loan") and,
which it is anticipated will not have been repaid to the Company as of
the Closing;
(e) "Insider" shall mean any Seller; any director or officer
of the Company, any Subsidiary or any Seller; and any Affiliate,
Associate or Relative of any of the foregoing persons;
(f) "knowledge" shall mean actual knowledge of a person (or of
its executive officers if a corporation) after having made due
investigation or inquiry of the appropriate employees or other persons
having responsibility for such matter or having access to such
information;
(g) "Material Adverse Effect" shall mean any change in, or
effect on, the Company or any Subsidiary (including the business
thereof) which is, or with reasonable likelihood will be, materially
adverse to the business, operations, assets, condition (financial or
otherwise) or prospects of the Company and any Subsidiaries or the
ownership or value thereof, taken as a whole;
(h) "person" shall mean and include an individual,
corporation, partnership, joint venture, association, trust, any other
unincorporated organization or entity and a governmental entity or any
department or agency thereto;
(i) a "Relative" of a person shall mean such person's spouse,
such person's parents, sisters, brothers, children and the spouses of
the foregoing, and any member of the immediate household of such
person;
(j) "Shares" shall mean all of the outstanding shares of
capital stock of the Company and any security, option, warrant, right,
call, subscription, agreement, commitment or understanding of any
nature whatsoever, fixed or contingent, that directly or indirectly (i)
calls for the issuance, sale, pledge or other disposition of any shares
of stock of the Company or any securities convertible into, or other
rights to acquire, any shares of stock of the Company or (ii) obligates
the Company to grant, offer or enter into any of the foregoing or (iii)
relates to the voting or control of such stock, securities or rights,
including as set forth on Schedule 2.3 hereto;
(k) "Taxes" shall mean all taxes, charges, fees, levies or
other assessments including, but not limited to, income, excise,
property, sales, value added, franchise, withholding, social security,
and unemployment taxes imposed by the United States, any state, county,
local or foreign government, or any subdivision or agency thereof or
taxing authority therein, and any interest, penalties or additions to
tax relating to such taxes, charges, fees, levies or other assessments;
(l) "Working Capital" shall mean for purposes of the
calculation of Working Capital as at the Closing Date, the net book
value of the total amount of tangible current assets of the Company
less the total amount of current liabilities of the Company, and the
following shall be applicable:
(i) with respect to raw materials, work in process,
semi-finished products, finished products, parts, components,
supplies and packaging ("Inventory"), a physical inventory
shall be taken as of the Closing Date by the employees of the
Company, observed by representatives of Buyer and the Sellers
and, at their respective options, their respective independent
public accountants. Inventory shall be valued on a last-in,
first-out basis at the lower of the Company's cost or market,
excluding from the valuation all obsolete, damaged and
defective items of Inventory and all Excess Inventory.
Inventory on the Closing Date shall consist of items of a
quality and quantity usable or, in the case of finished goods,
salable in the normal course of business of the Company or any
of its Subsidiaries. As used herein, the term "the Company's
cost" shall mean the Company's standard cost in effect on
December 31, 1995. The term "obsolete Inventory" as applied to
finished goods shall mean items of Inventory that do not
appear on the Company's current price lists excluding new
finished goods that would otherwise appear on the Company's
next price list. The term "Excess Inventory" shall mean items
of Inventory in excess of the last 12 months of sales of such
items or use of such items in production, as the case may be,
except that:
(A) items of Inventory for which
there is less than a 12-month history of sales and/or
production shall be valued at the Company's cost
(except to the extent that such items are obsolete,
damaged or defective); and
(B) items of Inventory which are
more economical to produce or purchase in excess of a
12 month supply shall be valued at the Company's cost
(except to the extent that such items are obsolete,
damaged or defective).
(ii) no asset shall be capitalized which has not been
historically capitalized in the ordinary course of business
and reflected on the balance sheets referred to in Section 2.5
hereof.
(iii) no notes or accounts receivable shall be
reflected that are not good and collectible on the due date
thereof, without litigation or extraordinary collection
activity, but in no event more than 120 days after the Closing
Date, and are subject to no defenses, set-offs or
counterclaims other than normal cash discounts accrued in the
ordinary course of business of the Company.
(iv) no Intellectual Property or Technology or any
backlog, goodwill or other intangible assets shall be
included.
(v) no Indebtedness, (including current maturities)
shall be reflected as a liability.
(vi) brokerage fees, commissions, legal fees and all
other transaction costs up to $300,000 shall be excluded from
current liabilities.
(vii) The receivable relating to the MME Loan shall
not be reflected as an asset and the borrowing relating to the
MME Loan shall not be reflected as a liability.
(m) the following terms have the meanings set forth
in the following Sections of this Agreement:
Section
Acquisition Proposal 5.3
Adjusted Amount 1.4
Agent Seller 1.1
Claims 2.9
Closing 1.2
Closing Date 1.2
Closing Payment 1.1
Code 2.17
Common Stock 2.3
Company Agreement 2.15
Company Balance Sheet 2.6
Company Financial Statements 2.5
Compensation Commitment 2.18
Confidential Information 5.1
Echlin Common Stock 1.1
ERISA 2.17
ERISA Plan 2.17
Escrow Account 1.1
Escrow Agreement 1.1
Hart-Scott Act 1.2
Improvements 2.10
Indemnified party 9.2
Indemnifying party 9.2
Intellectual Property 2.13
IRS 2.17
Judgments 2.9
Key Employees 2.7
Legal Expenses 9.2
Legal Proceedings 2.9
Legal Requirements 2.9
Multiemployer Plan 2.17
PBGC 2.17
Pension Benefit Plan 2.17
Permits 2.9
Preferred Stock 2.3
Securities Act 3.3
Security Interest 1.3
Shares 1.1
Subsidiary 2.2
Survey 5.13
Technology 2.13
Unadjusted Amount 1.1
Welfare Benefit Plan 2.17
10.11 Severability. If any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remaining provisions of this
Agreement shall not be affected thereby and this Agreement will be construed and
enforced as if such invalid, illegal or unenforceable provisions had not been
included herein. To the extent permitted by applicable law, each party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
10.12 Specific Performance. Buyer, the Company and the Sellers
recognize that any breach of the terms of this Agreement may give rise to
irreparable harm for which money damages would not be an adequate remedy, and
accordingly agree that, in addition to other remedies, any non-breaching party
shall be entitled to enforce the terms of this Agreement by a decree of specific
performance without the necessity of proving the inadequacy as a remedy of money
damages.
10.13 Consent to Jurisdiction. Each of the Sellers hereby
submits to the non-exclusive jurisdiction of the courts of the State of Texas
and the federal courts of the United States of America located in such state
solely in respect of the interpretation and enforcement of the provisions of
this Agreement, and hereby waives, and agrees not to assert, as a defense in any
action, suit or proceeding for the interpretation or enforcement of this
Agreement, that he or it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said courts or that this
Agreement may not be enforced in or by said courts or that his property is
exempt or immune from execution, that the suit, action or proceeding is brought
in an inconvenient forum, or that the venue of the suit, action or proceeding is
improper. Each of the Sellers agrees that service of process may be made upon
him or it in any manner permitted by the laws of the State of Texas or the
federal laws of the United States or by service upon the Agent Seller at the
address provided for purposes of Section 10.3 hereof in any such action, suit or
proceeding against the Sellers with respect to this Agreement, and hereby
irrevocably designates and appoints the Agent Seller as his or its authorized
agent upon which process may be served in any such action, suit or proceeding,
it being understood that such appointment and designation shall become effective
without any further action on the part of the Sellers. Service of process upon
such authorized agent shall be deemed, in every respect, effective service of
process upon the Sellers and shall remain effective until the Sellers shall
appoint another agent for service of process acceptable to Buyer. The Sellers
agree that final judgment (with all right of appeal having expired or been
waived) against them in any such action, suit or proceeding shall be conclusive
and that Buyer is entitled to enforce such judgment in any other jurisdiction by
suit on the judgment, a certified or exemplified copy of which shall be
conclusive evidence of the fact and amount of indebtedness arising from such
judgment.
10.14 Agent Seller. Each of the Sellers (other than Mr. Steven
M. McCraw and Mr. Bobby Lutz) hereby irrevocably designates and appoints the
Agent Seller as his or its authorized agent for purposes of this Agreement and
the transactions contemplated hereby and any payment required to be made
pursuant to this Agreement by Buyer to the Sellers (other than to Mr. Steven M.
McCraw and Mr. Bobby Lutz) may be made to the Agent Seller, who or which shall
act as agent for the other Sellers and pay or otherwise allocate to such Sellers
their allocable share of such payment.
10.15 Currency. All dollar amounts under this Agreement are in
dollars of the United States of America.
10.16 Third Parties. Nothing in this Agreement shall be deemed
to be for the benefit of, or enforceable by or on behalf of any party,
including, without limitation, any employee or former employee of the Company or
of any Subsidiary, any dependent or beneficiary of any such employee, any labor
union or other party or organization, any obligee, owner or holder of any
obligation or liability, other than the parties to this Agreement.
10.17 Adjustment of Shares. Certain share adjustments may be
required as follows:
(a) The number of shares of stock to be delivered or
redelivered under this Agreement (and any per share price set forth
herein) shall be subject to adjustment to take into account and fully
reflect the effect of any stock split, stock dividend or
recapitalization with respect to such stock.
(b) Buyer shall not be required to issue fractional shares
hereunder; all shares to be issued by it, shall be issued to the
nearest whole number of shares.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
ECHLIN INC.
By: /s/ Thomas P. Marchese
-----------------------------
Name: Thomas P. Marchese
Title: Assistant Vice President -
Corporate Development
MOTO MIRROR INC.
By: /s/ Neil F. Gibson, Jr.
-----------------------------
Name: Neil F. Gibson, Jr.
Title: President
SELLERS
/s/ Neil F. Gibson, Jr.
-----------------------------
Name: Neil F. Gibson, Jr.
/s/ Steven M. McCraw
-----------------------------
Name: Steven M. McCraw
/s/ Robert J. Heun
-----------------------------
Name: Robert J. Heun
/s/ Gary Mackey
-----------------------------
Name: Gary Mackey
/s/ Bobby Lutz
-----------------------------
Name: Bobby Lutz
/s/ Jeffrey N. Crawfor
-----------------------------
Name: Jeffrey N. Crawford
MOTO MIRROR EMPLOYEE PARTNERS LTD.
By: /s/ Thomas A. Montgomery
-----------------------------
Name: Thomas A. Montgomery
Title: President of the General
Partner
SELLER (WARRANT HOLDER)
NOT LISTED ABOVE
/s/ Antoinette Czajka
----------------------------
Name: Antoinette Czajka
Acceptance of the
Agencies described in
this Agreement
/s/ Neil F. Gibson, Jr.
- ------------------------
Neil F. Gibson, Jr.
Agent Seller