1
EXHIBIT INDEX
Exhibit
No. Description Page
- ------- ----------- ----
10.11 ASSET PURCHASE AGREEMENT
2
EXHIBIT 10.11
ASSET PURCHASE AGREEMENT
AGREEMENT made this 27th day of December, 1996 between Atmosphere
Annealing, Inc., a Michigan corporation, of 209 W. Mt. Hope, Lansing, Michigan
48910 ("Seller") and Michael W. Wisti of 908 Shawano, Mason, Michigan 48854;
Elden E. Gustafson of 2200 Almond Road, Williamston, Michigan 48895; Joanne L.
Coon of 3 Locust Lane, Lansing, Michigan 48910 and Robert D. Bilby of 4557
Commanche Drive, Okemos, Michigan 48864 ("Shareholders") (Seller and
Shareholders collectively the "Sellers") and Atmosphere Acquisition, Inc., a
Michigan Corporation, of 1118 Centennial Way, Lansing, Michigan 48917,
(hereinafter called "Buyer").
RECITALS
WHEREAS, except as otherwise disclosed in this Agreement, Seller owns,
and will own at the First Closing, as defined herein, all right and title to
all assets in its ongoing business; and
WHEREAS, Shareholders own, and will own at the time of the First
Closing, 100% of the issued and outstanding shares of stock of Seller; and
WHEREAS, Sellers desire to sell to Buyer substantially all of the
assets of Seller, including the goodwill and ongoing business associated with
the coating and heat treating business of Seller ("Business"), and Buyer
desires to purchase the same from Seller;
NOW, THEREFORE, it is agreed between the parties as follows:
I. Sale of Business Assets. On the terms and conditions set forth in
this Agreement, Seller shall sell and Buyer shall purchase, free from
all liability, liens, debts or encumbrances (except as provided
herein), all of Seller's interest in the following described property
("Purchased Assets"):
A. Inventory. The inventory of steel, coatings and supplies of
the Business as of the First Closing Date ("Inventory").
Seller agrees to deliver to Buyer all Inventory at its
business location(s) at Canton, Ohio; North Vernon, Indiana;
1801 Bassett St., Lansing, Michigan and 209 W. Mt. Hope,
Lansing, Michigan.
B. Accounts Receivable. All accounts receivable of the business
of Seller as reflected
1
3
on the books and records of Seller on the First Closing Date,
except as excluded in I below, subject to the provisions of
Section X. At the First Closing, Seller shall provide Buyer
with an accurate schedule of the accounts receivable as of the
First Closing shall be attached hereto as Exhibit I B. In
addition, at the First Closing, Seller shall provide Buyer
with complete detail for all accounts receivable being
purchased.
C. Fixed Assets. All furniture, fixtures, machines, equipment,
land and buildings including, but not limited to, the
furniture, fixtures, machines, equipment, land and buildings
described in Exhibit I C attached hereto. Exhibit I C shall
also disclose the description and location of any furniture,
fixtures, machines or equipment located at any place other
than Sellers' business locations described in I A above.
Exhibit I C reflects all furniture, fixtures, machines and
equipment of Seller except as excluded in I below. Seller
represents that the furniture, fixtures, machines, equipment,
land and buildings are in good working order. As to all land
being purchased herein, Seller shall provide title insurance
commitments at least 20 days prior to the First Closing. The
cost of such title insurance shall be borne by Seller as well
as the cost of any state or local transfer tax payable as a
result of this transaction. Buyer shall pay the sales tax
payable upon vehicle title transfers.
D. Goodwill. All goodwill of the Seller's Business as a going
concern, including the names "Atmosphere Annealing, Inc." and
"Advanced Bar Technology, Inc." and the telephone number(s):
(517) 482-1831, (517) 485-5090, (517) 482-7240, (517)
482-1374, (517) 485-1809, (517) 485-5246, (517) 485-5422,
(330) 478-0314, (330) 478-1096, (812) 346-1275 and (812)
346-4534, which telephone numbers shall be assigned to Buyer
to the extent of Seller's right to do so. Seller shall change
its name within five (5) business days of the First Closing.
E. Records and Files. All current customer lists and credit
records, supplier lists, customer agreements and
correspondence, price lists including special pricing
2
4
arrangements, and sales tax exemption information which relate
to the Business of Seller and all other records of the
Business ("Business Records"). At the First Closing, Seller
shall deliver the same to Buyer. From and after the First
Closing and so long as they shall remain in Seller's
possession, Seller shall make available for copying (at
Buyer's expense), during reasonable business hours, all other
business records and files of Seller which are or may be
relevant to: (i) any claim or defense Seller may have against
third persons or one another in any action or proceeding
concerning the conduct of the Business by Seller or (ii)
Seller's liability for taxes in connection with or arising out
of its conduct or ownership of the Business. Any such
information provided to Buyer will be maintained as
confidential except as required by any such action or
proceeding. Seller shall have reasonable access to material
records and files sold to Buyer herein for tax purposes and
such other reasonable purposes as Buyer deems appropriate.
For a period of two (2) years after the First Closing Buyer
shall not dispose of such records and files without fifteen
(15) days notice to Seller and Seller shall have the right to
inspect and copy any such records and files.
F. Intellectual Property. All intellectual property of Seller,
including but not limited to trade names, trade marks, service
marks, copyrights and patents or rights in or to any of the
foregoing. Sellers intellectual property is listed on Exhibit
I F.
G. Selected Contracts. All of Seller's interest in and to the
contracts listed on Exhibit I G. All life insurance policies
on the life of Max A. Coon and Michael W. Wisti shall be
included, whether or not such policies are prepaid.
H. Prepaid Accounts. All of Seller's prepaid accounts listed on
Exhibit I H.
I. Excluded Assets. The Purchased Assets shall not include cash
or cash equivalents, deposits, capitalized acquisition costs,
prepaid accounts not included in I H above, land and buildings
located in Lansing, Michigan, life insurance policies on the
lives of Elden E. Gustafson and Robert D. Bilby, and any other
assets of Seller not
3
5
specifically listed in Paragraphs I A-H, above.
II. Purchase Price/Allocation. The purchase price for the assets
specified in Section I shall be the net book value of such assets as
of December 31, 1996 plus $4,500,000 (less amount paid pursuant to the
non-compete in Section IV) and allocated as set forth on Exhibit II
attached hereto.
III. Payment of Purchase Price. The purchase price for the assets
specified in Section I shall be paid in the following manner:
A. Down Payment. Buyer shall pay to Seller the sum of Three
Million and no/100 ($3,000,000.00) Dollars ("Down Payment"),
which shall be paid and credited to the purchase price at the
First Closing. The Down Payment shall be made in the form of
a cashier's check or wire transfer. Provided, in no event
shall the aggregate amounts paid and payable by Buyer under
this Agreement exceed the purchase price plus the amount
payable for the covenants not to compete in Section IV below.
B. Assumption of Accounts and Notes Payable/Contracts. At the
First Closing, Buyer shall assume the gross accounts payable
of Seller incurred in the normal course of business, prior to
discount, and notes payable which are stated on the audited
financial statements of Seller as of December 31, 1996. The
accounts payable shall be assumed at full value and not
discounted. To the extent that the First Closing occurs after
December 31, 1996 and accounts payable and notes payable have
increased, Buyer may, in its discretion, agree to assume the
additional payables, subject to the adjustments described in E
below. The accounts payable and notes payable to be assumed
will be listed on Exhibit III B and attached at the First
Closing. Buyer agrees to pay said accounts payable in the
ordinary course and by their due date, except as may be agreed
between Buyer and the creditor. Further, Buyer shall assume
all contract obligations listed on Exhibit I G.
C. Promissory Note. At the Second Closing Buyer shall execute
and deliver to Seller
4
6
a promissory note ("Promissory Note") for the balance of the
purchase price up to one-half (1/2) of the purchase price.
The Promissory Note shall be substantially in the form
attached as Exhibit III C. The Promissory Note shall include
a guaranty by Buyer's parent corporation, Maxco, Inc., owner
of 100% of the shares of Buyer ("Shares"). Any balance of
purchase price will be paid by cashier's check at the Second
Closing.
D. Liabilities Not Assumed. Buyer does not assume any
liabilities or obligations of Seller of any type except as
specifically provided in Paragraph III B above. Sellers shall
indemnify Buyer from and against all liabilities of Seller not
specifically assumed herein, pursuant to Section IX.
E. Closing Adjustments. At the Second Closing, an adjustment in
the purchase price will be made to take into account any
increase in accounts payable and/or notes payable and any
change in assets being purchased. To the extent that the
accounts/notes payable assumed, pursuant to B above, at the
First Closing increase or decrease from the amount of such
payables shown on the audited financial statements dated
12-31-96, the amount of cash and the amount of the Promissory
Note would be correspondingly be reduced or increased by such
amount of change. To the extent that the assets purchased
increase or decrease from the amount reflected on the books at
December 31, 1996, the purchase price would be likewise
increased or decreased by such amount, as the case may be.
IV. Agreement Not to Compete. At First Closing, Buyer and Sellers shall
execute and cause to be executed, and deliver the Non-Competition
Agreement attached as Exhibit IV.
V. Closings and Announcement. Two closings are contemplated by this
transaction. The First Closing shall be held on January 3, 1997. The
Second Closing shall be on or before February 28, 1997. Each closing
shall be held at the offices of Warren, Price, Cameron, Faust &
Asciutto, P.C. or at such place as the parties shall agree, at 10:00
a.m. on the stated date.
5
7
A. First Closing. At the First Closing all documents
contemplated by this Agreement shall be executed and delivered
to the respective parties with the exception of the Promissory
Note. At the First Closing, Buyer shall deliver the Down
Payment and Seller shall deliver to Buyer paid receipts and
appropriate UCC Terminations and discharges required by
Paragraph VII L, the vehicle titles, and the deeds required by
Section XIV H.
B. Second Closing. At or prior to the Second Closing, Buyer
shall deliver to Seller the Promissory Note and any balance
due in the form of a cashier's check after adjustments
pursuant to III E above.
C. Confidentiality. Sellers agree that they will make no public
statement, release or announcement concerning the transactions
contemplated herein without the prior written consent of Buyer
except as may be required by law and except for disclosure to
its attorneys, bankers and accountants in confidence. Unless
otherwise required by law, neither Sellers nor their
representatives will, without Buyer's prior written consent,
disclose to any person (other than those representatives
actively and directly participating in this transaction) any
information about Buyer or the terms, conditions or other
facts relating to this Agreement, including the fact that
discussions are taking place or the status of such
discussions. Additionally, Sellers, their officers,
employees, agents or controlling person(s) will maintain
complete confidentiality with regard to this transaction or
any discussions relative thereto, and further agree to refrain
from trading in Buyer's stock pending a public disclosure or
termination of this agreement between the parties for failure
of a contingency.
VI. Possession. Buyer shall have possession of the Purchased Assets at
the open of business on the day following the First Closing. However,
any risk of loss of the Purchased Assets prior to Buyer receiving
actual possession (or seven (7) days after the First Closing,
whichever occurs first), shall be borne by Seller and Seller agrees to
maintain its existing insurance on said Purchased Assets until
transfer of actual possession to Buyer, but not later
6
8
than seven (7) days after the First Closing.
VII. Representations, Warranties and Covenants of Sellers. As of the date
of this Agreement and as of the First Closing, Seller and Shareholders
jointly and severally represent and warrant to and covenant with Buyer
as follows:
A. Title. That Seller is the owner of and has, or will have at
the time of the First Closing, good and marketable title to
all of the Purchased Assets, free and clear of all debts,
claims, liens, encumbrances or security interests except the
obligations of Seller being assumed pursuant to Paragraph III
B or otherwise disclosed on Exhibit VII A.
B. Existence. That Seller is a corporation organized, existing
and in good standing under and by virtue of the laws of the
State of Michigan.
C. Authorization. That Seller has full legal authority to enter
into this Agreement and consummate the transactions
contemplated herein and this Agreement will constitute the
legally valid and binding obligation of Seller, enforceable in
accordance with its terms, except as may be limited by
bankruptcy or other laws affecting creditors rights generally
or by equitable principles, and its Board of Directors and
Shareholders have authorized the execution of this Agreement
as evidenced by attached Exhibit VII C.
D. Compliance with Laws, etc. Except as disclosed on Exhibit VII
D, Seller and its agents have materially complied with all
statutes, laws, rules/regulations and ordinances of local,
state and federal governments and their respective agencies.
E. Contract for Sale. Seller has not entered into any other
outstanding or enforceable contract (including, but not
limited to, any option or right of first refusal) to sell its
business, assets or any portion thereof except pursuant to
this Agreement and the sale of inventory in the ordinary
course of business.
F. Litigation. Except as disclosed on Exhibit VII F, there are
no actions, suits, labor disputes or other legal,
administrative, or other governmental proceedings,
7
9
investigation or litigation pending or, to the best of
Seller's knowledge, threatened against or affecting Seller
relative to, or which would affect, the Purchased Assets.
G. No Breach. Except as disclosed on Exhibit VII G, the
performance of this Agreement and the transfer and sale of the
Purchased Assets will not result in any breach of, constitute
a default under, or result in the creation of any lien, charge
or penalty upon any assets or property which is being
transferred hereunder or under any material agreement to which
Seller is a party or in which Seller or Seller's property may
be bound or adversely affected.
H. Contracts. There are no outstanding agreements, leases or
contracts to which Seller is a party which could materially
adversely affect the value of the Purchased Assets except as
specifically disclosed on Exhibit VII H.
I. Warranty Claims. To the knowledge of Seller and Shareholders,
there are no warranty claims pending against Seller.
J. Taxes. Seller has paid, or will pay in a timely manner as
required by law including proper extensions, all real and
personal property taxes, all social security, withholding,
sales, use and unemployment insurance taxes and other business
taxes which Seller owed or owes to the local, state and
federal governments as of the date hereof and as of the First
Closing. Seller and Shareholder agree to indemnify Buyer with
respect to any and all tax liability Buyer shall incur as a
result of Seller's failure to pay any such taxes or
withholding incurred through the date of the First Closing.
In the event Seller shall breach this warranty, Buyer shall
have the right to withhold all payments on any sum or sums due
under the Promissory Note in Section III and the Non-Compete
Agreement in Section IV until Sellers pay the taxes and
withholding owing. Further, in the event Seller's breach
shall cause damage or expense to Buyer, including attorney
fees and expenses, Buyer may credit such damage or expense
against the Promissory Note and/or Non-Compete amounts.
Seller shall disclose its taxpayer identification number and
provide certification by
8
10
delivering a completed IRS form W-9 (see Exhibit VII J) to
Seller at the First Closing.
K. Environmental Protection. (i) Sellers have, with respect to
the Business or any property owned, leased, or used by Seller
in the Business ("Property"), complied with all applicable and
material provisions of the Environmental Protection Act, the
Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act of
1980, the Toxic Substance Control Act, the Clean Water Act and
all other federal, state and local laws, ordinances, rules and
regulations currently in effect which relate in any way to the
protection of the environment (collectively the "Environmental
Laws"); (ii) Sellers have no knowledge of any claim and have
not received notice of any claim against Seller or
Shareholders or the Property, alleging any damage to the
environment or violation of the Environmental Laws; (iii) No
facts exist which would give rise to any claim, public or
private, of violation of the Environmental Laws or damage to
the environment emanating from, occurring on, or in any way
related to the Purchased Assets or the Property; (iv)
Sellers have not disposed of any hazardous materials or toxic
chemicals on or from the Property in violation of
Environmental Laws and have no knowledge of such disposal by
any other person or entity on or from the Property; (v)
Sellers have not stored, and are not presently storing any
hazardous materials or toxic wastes on the Property in
violation of Environmental Laws.
L. MESC Form 1027. Seller has delivered to Buyer, at least 2
days prior to the date of this Agreement, a completed MESC
Form 1027.
M. Financial Representations. The compiled annual financial
statements for the years 1993 through 1995, in each case
ending on December 31, provided by Seller to Buyer were
prepared in accordance with generally accepted accounting
principals and fairly present the results of the operations
and financial position of Seller on the respective dates and
for the respective periods indicated. The year to date
internal
9
11
statement through September 30, 1996 provided to Buyer was not
prepared in accordance with generally accepted accounting
principals but was prepared consistent with prior financial
statements and does accurately reflect the results of the
operations and financial position of Seller on the respective
dates and for the respective periods indicated.
N. Conduct of Business Pending Closing. Seller warrants that
from the date of the last financial statement referenced in M
above until the First Closing, the Business was conducted only
in the ordinary course, diligently and in the same manner as
the normal course of Seller's business, except as otherwise
agreed between the parties and no significant events (other
than general economic events which are common knowledge) have
occurred which have or will affect, in a material and adverse
manner, the financial condition of the Seller or the Business
being sold to Buyer.
O. Successor Liability/COBRA. Sellers warrant to Buyer that
Buyer shall not incur any liability ("successor liability") as
successor in interest to Seller except for the accounts
payable and contract obligations (if any) expressly assumed by
Buyer pursuant to paragraph III and except for COBRA liability
for (i) employees and qualified beneficiaries of Seller that
Buyer hires as its own employees; (ii) employees and qualified
beneficiaries of Seller that are not hired by Buyer who become
entitled to COBRA coverage as a result of their termination of
employment in connection with the sale; and (iii) those
current or former employees and qualified beneficiaries listed
on Exhibit VII O who may elect or have elected COBRA
continuation coverage under Seller's group health plan
(collectively, "Limited Obligations"). Successor liability
shall include but not be limited to any liability for wages,
salaries or benefits owed to any of Seller's employees; any
liability under any collective bargaining agreement between
Seller and any labor organization representing any Seller
employee; any liability to any customer of Seller, or any
other person, for events occurring prior to the First Closing,
or related to the sale of any products sold
10
12
by Seller; liability for taxes or withholding; any liability
of Seller to any trade or other creditor which Buyer has not
specifically assumed; and any employment tax or expense
incurred due to Seller's employees under Michigan, Ohio or
Indiana law, respectively.
Sellers specifically warrant and agree that Buyer
will not be deemed to be a "successor employer" for purposes
of continuation coverage under Section 4980B of the Internal
Revenue Code of 1986, as amended, (the "Code") and 29 USC
1161-1169, as amended, ("ERISA") except as to Limited
Obligations. Buyer warrants that it will, or will cause its
plan administrator, to provide any and all required COBRA or
ERISA notices required by the Code and ERISA (as they may
apply to any group health plan provided by or for Buyer or
Seller) in connection with this sale. Such notices will be
provided in a timely fashion and will be given to all persons
and will contain all information necessary to avoid failure to
comply with the Code or ERISA, and demonstrate compliance.
Sellers acknowledge that Buyer is relying on the foregoing
representations made by Sellers, in spite of any independent investigation made
by Buyer. No such investigation by Buyer or its representatives shall affect
the representations and warranties of Sellers or Buyer's reliance on them.
VIII. Representations, Warranties and Covenants of Buyer. Buyer represents
and warrants to and covenants with Seller as follows:
A. Corporate Existence. That Buyer is a corporation organized,
existing and in good standing under and by virtue of the laws
of the State of Michigan and is, or will be at the time of the
First Closing, qualified to do business in the States of Ohio
and Indiana.
B. Board Approval. That upon receiving approval of its Board of
Directors, Buyer will have full legal authority to consummate
the transactions contemplated herein and this Agreement, the
Promissory Notes and other obligations hereunder will upon
execution constitute the legally valid and binding obligations
of Buyer, enforceable
11
13
in accordance with their terms, except as may be limited by
bankruptcy or other similar laws affecting creditors' rights
generally or by equitable principles. Buyer's Board of
Directors must authorize this transaction as set forth in
Exhibit VIII B.
C. Compliance with Laws, etc. That Buyer and its agents have
materially complied with all laws, rules and regulations of
the local, state and federal governments and their respective
agencies.
D. Litigation. That there are no actions, suits, labor disputes
or other legal, administrative, or other governmental
proceedings, investigation or litigation pending or, to the
best of Buyer's knowledge, threatened against or affecting
Buyer relative to, or which would affect, Buyer's obligations
hereunder.
IX. Indemnification.
A. Indemnification by Sellers. During the period in which any
representation or warranty shall survive, Sellers shall
indemnify and hold Buyer harmless against and in respect of:
1. Liabilities and Obligations. All liabilities and
obligations of or claims against Seller not expressly
assumed by Buyer and all costs and expenses incurred
by Buyer if Seller fails to cure the same promptly
upon notice.
2. Noncompliance with Agreement. Any damage or
deficiency resulting from any misrepresentation,
breach of warranty, or nonfulfillment of any
agreement on the part of Sellers under this
Agreement, or from any misrepresentation in, or
omission from any certificate or other instrument
furnished or to be furnished to Buyer under this
Agreement.
3. Warranty Claims. Liability or expense to Buyer as a
result of any claims made by customers of Seller
and/or users of, or persons affected by, products
and/or services of Seller which were sold or disposed
of prior to the date of the First Closing.
4. Environmental Matters. All expense, liability,
damage or obligation of every
12
14
nature which Buyer incurs as a result of acts or
failure to act of Sellers, their agents, employees,
predecessors in interest and all others, relative to
the operation of the Business, the Purchased Assets,
or the Property and which acts or failure to act
violate any federal, state or local statute, law,
ordinance, rule or regulation relating to protection
of the environment.
5. COBRA. Sellers specifically agree to indemnify
Buyer for any liability, interest, cost, penalties,
taxes or expenses and attorney fees incurred by or
assessed against Buyer: 1) if Buyer is deemed a
"successor" employer to Seller for purposes of COBRA
and ERISA, except as to Limited Obligations; 2) which
arise by reason of or relative to any failure to
comply with section 4980B of the Code and section 601
through 608 of ERISA, as a result of cessation of
Seller's business due to this sale except as to
Limited Obligations or 3) any other omission or
violation of COBRA or ERISA requirements by Sellers
prior to the First Closing.
6. Litigation. All actions, suits, proceedings,
demands, assessments, judgments, costs and expenses,
including reasonable attorneys fees, incident to any
of the foregoing subparagraphs, 1, 2, 3, 4 and 5.
B. Indemnification by Buyer. During the period in which any
representation or warranty shall survive, Buyer shall
indemnify and hold Seller harmless against and in respect of:
1. Liabilities and Obligations. All liabilities and
obligations of, or claims against, Buyer and from any
misrepresentation, breach of warranty, or
nonfulfillment of this Agreement and all cost and
expenses incurred by Seller if Buyer fails to cure
the same promptly upon notice.
2. Noncompliance with Agreement. Any damage or
deficiency resulting from any misrepresentation,
breach of warranty, or nonfulfillment of any
agreement on the part of Buyer under this Agreement,
or from any
13
15
misrepresentation in, or omission from any
certificate or other instrument furnished or to be
furnished to Seller under this Agreement.
3. Warranty Claims. Liability or expense to Seller as a
result of any claims made by customers of Buyer
and/or users of, or persons affected by, products
and/or services of Buyer which were sold or disposed
of by Buyer after the date of the First Closing.
4. Environmental Matters. All expense, liability,
damage or obligation of every nature which Seller
incurs as a result of acts or failure to act of
Buyer, its agents and employees, relative to the
operation of the Business, the Purchased Assets, or
the Property and which acts or failure to act
violate any federal, state or local statute, law,
ordinance, rule or regulation relating to protection
of the environment.
5. Litigation. All actions, suits, proceedings,
demands, assessments, judgments, costs and expenses,
including reasonable attorneys fees, incident to
subparagraphs 1, 2, 3 and 4 above.
C. Notice of Claim. Each person entitled to indemnification
under this Section IX (the "Indemnified Party") shall give
notice (including a detailed description of the claim and
copies of any accompanying documents) to the party required to
provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be available or sought, and shall
permit the Indemnifying Party to participate in the defense of
any such claim or any resulting litigation, and the
Indemnifying Party may participate in such defense at such
party's expense. The failure of any Indemnified Party to give
the notice required by this Agreement shall not relieve the
Indemnifying Party of its obligations unless such failure
results in actual detriment to the Indemnifying Party. In the
event that a claim or litigation is partially, but not wholly
covered by an indemnity set forth in this Section IX, the
Indemnified and the Indemnifying Parties
14
16
shall share in the resulting losses in proportion to their
respective liabilities. Neither party may settle or
compromise a claim for which indemnity is being sought without
the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
D. Set Off. Buyer shall be entitled, but not required, to
set-off against the amounts owing to Seller and Shareholder
pursuant to the Promissory Note in Section III C and the
Non-Compete Agreement, the Leases attached hereto or any other
sum due to Seller or Shareholder under this Agreement, any
claim of Buyer against Seller and/or Shareholder under this
Paragraph according to the following procedures:
1. Buyer shall first provide notice to Seller in writing
setting forth in detail the basis for the claimed
set-off and the amount of the claimed set-off (the
"Set-Off Notice") and the breakdown of the amount set
off against the amounts due to Seller and
Shareholder.
2. If Seller disagrees with the basis for, or the amount
of, the proposed set-off as contained in the Set-Off
Notice, then Seller shall provide notice in writing
to Buyer of such disagreement, setting forth in
detail the basis for such disagreement and the amount
thereof, on or before the twentieth (20th) day
following delivery of the Set-Off Notice.
3. Within the thirty (30) day period following the date
on which Buyer receives the notice of Seller, Buyer
or Seller may submit the dispute with respect to the
claimed set-off to arbitration, as set forth in
Section XVIII. The amounts claimed to be due from
Seller and/or Shareholders and proposed to be set-off
pursuant to this Paragraph shall be applied against
any sums due Seller or Shareholders under this
Agreement, against the first due payment(s) in any
case.
4. Any amount of Set-Off claimed by Buyer which is
disputed by Seller shall be remitted to an
institutional Escrow Agent of Buyer's choosing,
subject to
15
17
Seller's approval which shall not be unreasonably
withheld, within five days of when such Set-Off
amount would otherwise be due to Seller or
Shareholders. The amounts set-off and all earnings
thereon shall be held pursuant to a written Escrow
Agreement in reasonable form proscribed by the Escrow
Agent and subject to the reasonable approval of the
parties. If the parties are unable to agree, the
matter shall be resolved by arbitration. The failure
of the parties to agree shall not excuse the
necessity of the payment being made into escrow. The
amounts in escrow shall be disbursed in accordance
with the direction of the parties, and if they do not
agree, then pursuant to arbitration under Section
XVIII.
E. Limitation as to Amount. Sellers shall have no liability for
indemnification (or unintentional breach of warranty) with
respect to the matters described in Section IX A (1), (2), (3)
or (5) and that portion of (6) relating to the foregoing,
until the total of damages with respect thereto exceeds
$100,000.00. Provided, this limitation shall not apply to
Section IX A (4) and such portion of (6) relating to (4) and
all warranties and representations with respect to
environmental matters. Buyer shall have no liability for
indemnification with respect to the matters described in
Section IX B (1), (2), (3) or (5) and that portion of (6)
relating to the foregoing, until the total of damages with
respect thereto exceeds $100,000.00. Provided, this
limitation shall not apply to Section IX B (4) and such
portion of (6) relating to (4).
F. Exclusive Remedy. If the First Closing shall occur, the
indemnification provided in this Section shall be the sole and
exclusive remedy for any inaccuracy or breach of warranty or
representation made by any party in the Agreement or in any
certificate or document delivered pursuant to or in connection
with the Agreement; provided, however, no party shall be
precluded from seeking any remedy available for (i) any
inaccuracy or breach which constitutes fraud; or (ii) failure
by any other party to comply with any covenant or agreement
contained in this Agreement to be performed
16
18
or complied with after the First Closing.
X. Guaranty of Accounts Receivable. Sellers agree to guaranty the
Accounts Receivable purchased by Buyer as follows:
A. There shall be a complete guarantee by Seller and Shareholders
of all receivables as of the First Closing. If such
receivables are not paid within 120 days after the First
Closing, during which period Buyer will make reasonable
efforts to effect collection (Buyer need not bring a lawsuit),
Buyer may, by notice to Seller within 180 days of the First
Closing, require immediate repurchase as described in B below.
Otherwise, the right to require repurchase shall be deemed
waived.
B. Any receivable to be repurchased pursuant to Subparagraph A
above shall be paid by crediting those amounts against the
next payments due Sellers pursuant to the Promissory Note in
Section III C and the Non-Compete Agreement in Section IV.
Such accounts receivable shall be reassigned, free and clear
of all liens or security interests, to Seller or Shareholder
as appropriate when Buyer requires the repurchase. If Seller
fails to direct the reassignment, Buyer shall reassign the
receivable based upon which obligation(s) under Sections III
and IV was credited.
C. While Seller is subject to the repurchase requirement of A and
B above, payments received by Buyer on accounts shall be
credited first against the oldest invoice(s) unless payment is
accompanied by direction to apply the payment against a
specific invoice and Buyer will provide to Seller such
information regarding such accounts as Seller shall reasonably
request.
XI. Bulk Transfer Act. In connection with the transfer of property
contemplated in this Agreement, Seller has requested that it not be
required to comply with the Bulk Transfer Provisions of the Michigan
Uniform Commercial Code as well as those of Ohio and Indiana, if
applicable, and Buyer has consented to this request in exchange for
Seller indemnifying Buyer against all claims made by creditors of
Seller (other than those obligations assumed by Buyer pursuant to
Section III), which Seller has agreed to,
17
19
including but not limited to any losses, reasonable expenses and
attorney fees which are incurred by Buyer as the result of any action
taken against the Purchased Assets or any levies on the Purchased
Assets by creditors of Seller (other than those obligations assumed by
Buyer in Section III).
XII. Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants made by each party for the
benefit of the other party shall survive the Closing for a period of
three (3) years, with the exception of environmental warranties and
covenants which shall survive indefinitely. All indemnification
claims must be asserted by giving notice as provided in Section IX C
("Notice"). Anything in this Agreement notwithstanding, a party shall
not be entitled to indemnification pursuant to this Agreement unless
the Notice is given to the party from whom indemnity is sought within
the survival period specified in this Section XII.
XIII. Conditions Precedent to Obligation of Buyer. Except as waived in
writing by Buyer, the obligation of Buyer to close is conditioned upon
satisfaction at or prior to the First Closing of each of the following
conditions:
A. Representations. The representations and warranties of
Sellers shall be true as of the First Closing.
B. Covenants. Sellers shall have performed and complied in all
material respects with all agreements, terms, conditions and
covenants required by this Agreement, and shall not be in
default hereunder.
C. No Injunctions. No action or proceeding by any governmental
body or agency shall have been threatened, asserted or
instituted to restrain or prohibit, and no order shall have
been entered by any court having jurisdiction of the subject
matter of this Agreement restraining or prohibiting the
carrying out of any material transaction contemplated by this
Agreement.
D. Delivery of Documents. Sellers deliver to Buyer all documents
required to be delivered by Sellers according to this
Agreement.
18
20
E. Fairness Opinion. The receipt and acceptance by Buyer of a
"fairness opinion" by an investment banking firm chosen by
Buyer. The acceptance of such opinion is in the sole
discretion of Buyer's board of directors.
F. Due Diligence Review. Buyer's completion of such due
diligence as it shall require, including, but not limited to
review, investigation and examination of such legal, physical,
environmental, operational, future prospects and financial
matters of Seller as Buyer shall require. The results of such
review, investigation and examination must be satisfactory to
Buyer. Seller and Shareholders agree to cooperate with Buyer
in facilitating such due diligence by Buyer and be given
access to all information necessary for Buyer to make an
informed decision regarding the purchase of Sellers assets.
G. Execution of Lansing Leases/Lease Assignments. At the First
Closing, Seller and Shareholders shall execute the real estate
leases attached as Exhibits XIV G-1 and XIV G-2.
H. Title Insurance/Deeds. As to all real property being
purchased by Buyer, Seller shall provide and pay the premium
for title insurance relative thereto, in the amount of each
respective purchase price. Seller shall provide a commitment
for title insurance on each such parcel, at least 20 days
prior to the First Closing. The title insurance commitments
must be satisfactory to Buyer. At the First Closing, Seller
shall deliver to Buyer, deeds in the form of Exhibits XIV H-1
and XIV H-2.
I. Removal of Excluded Assets. Prior to, or within 3 days after,
the First Closing Seller shall have removed from the locations
occupied by Seller, all of the assets not being purchased by
Buyer, if any. This provision includes removal and disposal
by Seller, at its expense, of all waste materials, and other
rubbish in compliance with all laws, statutes and regulations
of applicable governmental authorities.
J. Confidentiality. Sellers shall have not breached their
obligation of confidentiality hereunder.
19
21
K. Board Approval. Buyer's Board of Directors shall have
approved this transaction.
L. Consents. Buyer shall have received all consents and
approvals from governmental authorities and third parties as
it deems necessary.
M. Employment of Michael Wisti. Buyer shall have received such
assurances as it shall require that Buyer will be able to
employ Michael Wisti for a minimum of two (2) years after the
First Closing.
N. Absence of Change. No material adverse change in the
financial condition, business, assets or prospects of the
Seller shall have occurred between September 30, 1996 and the
First Closing.
O. Payment of Obligations. Seller shall have paid by the First
Closing, all of its obligations of every nature except for
those being assumed by Buyer herein as set forth on Exhibit
III C and except for taxes which are not yet due.
P. MESC Form 1027. Buyer shall have received from Seller MESC
form 1027 two (2) days prior to the date of this Agreement.
Q. Satisfaction of Conditions Precedent. If the First Closing
shall occur, then all conditions precedent to the obligations
of Buyer to Close shall be deemed to have been met.
R. No Acceleration. Bank indebtedness of Seller will not be
accelerated as a result of this transaction.
XIV. Conditions Precedent to Obligations of Sellers. Except as may be
waived in writing by Sellers, the obligation of Sellers to close is
conditioned upon satisfaction at or prior to the First Closing of each
of the following conditions:
A. Representations. The representations and warranties of Buyer
shall be true as of the First Closing.
B. Covenants. Buyer shall have performed and complied in all
material respects with all agreements, terms, conditions and
covenants required by this Agreement and shall not be in
default hereunder.
20
22
C. No Injunctions. No action or proceeding by any governmental
body or agency shall have been threatened, asserted or
instituted to restrain or prohibit, and no order shall have
been entered by any court having jurisdiction of the subject
matter of this Agreement restraining or prohibiting the
carrying out of any material transaction contemplated by this
Agreement.
D. Delivery. Buyer shall deliver to Seller all documents
required to be delivered by Buyer according to this Agreement.
E. Board Approval. Seller's Board of Directors shall have
approved this transaction.
F. Shareholder Approval. Seller's Shareholders shall have
approved this transaction.
G. Satisfaction of Conditions Precedent. If the First Closing
shall occur, then all conditions precedent to the obligations
of Sellers to Close shall be deemed to have been met.
H. No Acceleration. Bank indebtedness of Seller will not be
accelerated as a result of this transaction.
XV. Transfer Documents. At the First Closing Seller shall execute the
Bill of Sale attached as Exhibit XV, the Assignment attached as
Exhibit XV A, all vehicle titles and such other instruments of
transfer as may be necessary or appropriate to the sale or delivery of
Seller's business and assets pursuant to this Agreement. From time to
time, at Buyer's or Seller's request and expense, but without further
consideration, Seller and Buyer shall take such other action as Buyer
or Seller may reasonably request, to convey and transfer more
effectively to Buyer any of the Purchased Assets. Each party agrees
to cooperate to conclude the transaction contemplated herein in a
complete and expeditious fashion.
XVI. Michigan Law. This Agreement shall be interpreted in accordance with
the laws of the State of Michigan.
XVII. Arbitration.
A. Demand for Arbitration. Except regarding a claim for an
injunction or equitable relief or a claim regarding
environmental matters, any controversy, dispute or claim
21
23
arising out of, in connection with, or in relation to, the
construction, performance or breach of this Agreement,
including without limitation, the validity, scope and
enforceability of this Section XVII, shall be adjudicated by
arbitration conducted in accordance with the then existing
rules for commercial arbitration of the American Arbitration
Association ("AAA"), or any successor organization. The
demand for arbitration ("Demand") shall be delivered in
accordance with the notice provision of this Agreement.
B. Selection of Arbitrators. Within five (5) business days after
receipt of a Demand, the parties shall jointly request a list
of arbitrators from the AAA. Upon receipt of arbitrators,
each party shall mark selections and rejections and resubmit
the list to the AAA. The selections and rejections shall take
place within seven (7) business days after receipt of the
proposed arbitrators from the AAA. The parties shall
cooperate with the AAA and the appointed arbitrator(s) for the
purpose of setting an expeditious hearing, which shall be
conducted in Lansing, Michigan.
C. Costs and Expenses. Buyer and Seller agree that the costs of
the arbitration shall be borne by the non-prevailing party.
The fees and expenses of the arbitrator(s), hearing room and
court reporter, if any, shall be borne by the non-prevailing
party. Each party may be represented by counsel.
D. Binding Nature of Decision. The parties intend this agreement
to arbitrate to be valid, enforceable and irrevocable. The
decision of the arbitrator(s) with respect to all matters,
except the validity of the Agreement, which shall be rendered
no later than six (6) months after the date the hearing
begins, shall be final and binding upon the parties and
judgment on the award may be entered by either party in any
court having jurisdiction over the person or property of the
party against whom the award is sought to be enforced. The
parties stipulate that the arbitration provisions shall be a
complete defense to any suit, action or proceeding instituted
in any Federal, state or local court, or before any
administrative tribunal with respect to any dispute,
22
24
controversy or alleged breach of this Agreement. The
arbitration provisions of this Agreement shall survive any
termination or expiration of this Agreement.
XVIII. Effective Agreement. This Agreement and its Exhibits set forth the
entire understanding of the parties. This Agreement shall not be
changed or terminated orally. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be
enforceable by the Successors and Assigns of the parties.
XIX. Notices. Any and all notices required to be sent pursuant to the
terms of this Agreement shall be sent by certified or registered mail,
return receipt requested, postage prepaid, and addressed as follows:
Sellers: Michael W. Wisti
908 Shawano
Mason, Michigan 48854
with a copy to: Richard C. Lowe
Fraser, Trebilcock, Davis & Foster, P.C.
1000 Michigan National Tower
Lansing, Michigan 48933
Buyer: Vincent Shunsky
Atmosphere Acquisition, Inc.
1118 Centennial Way
Lansing, Michigan 48917
with a copy to: Owen J. Faust
Warren, Price, Cameron, Faust & Asciutto, P.C.
P.O. Box 26067
Lansing, Michigan 48909
Notice served in the above fashion shall be deemed effective on the
earlier of receipt or the third (3rd) business day after mailing.
XX. Brokerage Fees. The parties shall indemnify each other and hold each
other harmless against expense incurred by an indemnitee from a claim
for brokerage fees, commissions or other compensation by any person,
firm or corporation introduced by the indemnitor in connection with
the transactions contemplated hereby for brokerage or other
commissions relative to this Agreement, or to the transactions
contemplated by this Agreement, including all expenses of any
character incurred by the indemnitee in connection therewith.
23
25
XXI. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, that the parties have caused this Agreement to be
duly executed as of the date and year first above written.
SELLER: BUYER:
Atmosphere Annealing, Inc., Atmosphere Acquisition, Inc.,
a Michigan corporation a Michigan corporation
S/Michael W. Wisti S/Vincent Shunsky
- ------------------ -----------------
Michael W. Wisti, President Vincent Shunsky, President
SHAREHOLDERS:
S/Michael W. Wisti S/Joanne L. Coon
- ------------------ ----------------
Michael W. Wisti Joanne L. Coon
S/Elden E. Gustafson S/Robert D. Bilby
- -------------------- -----------------
Elden E. Gustafson Robert D. Bilby
24