MERGER AND PLAN OF
REORGANIZATION
dated this April 23, 1999,
by and among
CLARION TECHNOLOGIES, INC.
NEWCO, INC.
Xxxxxxx Xxxxxxx
Xxxxxx Xxxxxxx
&
Xxxxx Xxxxx
Regarding the Stock of
DOUBLE "J" MOLDING, INC.
TABLE OF CONTENTS
PAGE
1. Merger.........................................................................................................2
1.1. Effective Time of Merger..................................................................................2
1.2. Effects of Merger.........................................................................................2
1.3. Outstanding Capital Stock of Each Constituent Corporation.................................................3
1.4. Effect on Capital Stock...................................................................................3
1.5. Exchange Procedures.......................................................................................3
1.6. Exchange Procedures.......................................................................................4
1.7. Adjustments to Seller Common Stock........................................................................4
1.8. Sales and Transfer Taxes..................................................................................4
1.9. Plan of Merger............................................................................................4
2. Preclosing Actions.............................................................................................4
2.1. Conduct of Business.......................................................................................4
2.2. Access to Buyer...........................................................................................5
2.3. Accuracy of Representations and Warranties and Satisfaction of Conditions.................................5
2.4. Shareholders' Meeting.....................................................................................5
3. Conditions Precedent...........................................................................................5
3.1. Conditions Precedent to Buyer's and Newco's Obligations...................................................5
3.2. Conditions to Seller Parties' Obligations.................................................................6
4. Securities Law Matters.........................................................................................6
4.1. Investment Intent; Information Disclosures................................................................6
5. Seller Parties' Representations and Warranties.................................................................8
5.1. Organization and Standing.................................................................................8
5.2. Articles and Bylaws.......................................................................................8
5.3. Capitalization..........................................................................................9
5.4. Authorization.............................................................................................9
5.5. Existing Agreements and Governmental Approvals............................................................9
5.6. No Subsidiaries..........................................................................................10
5.7. No Insolvency............................................................................................10
5.8. Permits and Licenses.....................................................................................10
5.9. Financial Statements.....................................................................................10
5.10. No Undisclosed Liabilities..............................................................................10
5.11. Conduct of Business.....................................................................................10
5.12. No Adverse Changes......................................................................................12
5.13. Employees...............................................................................................12
5.14. Employee Benefit Plans..................................................................................12
5.15. Certain Employees.......................................................................................13
5.16. Contracts and Commitments...............................................................................13
5.17. Title to Assets.........................................................................................14
5.18. Condition of Assets.....................................................................................14
5.19. Receivables.............................................................................................14
5.20. Taxes...................................................................................................14
5.21. Litigation..............................................................................................15
5.22. Product Liability.......................................................................................15
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5.23. Environmental Matters...................................................................................15
5.24. Compliance with Laws....................................................................................15
5.25. Suppliers and Customers.................................................................................15
5.26. No Brokers..............................................................................................16
5.27. Insider Transactions....................................................................................16
5.28. Bank Accounts...........................................................................................16
5.29. Intellectual Property...................................................................................16
5.30. Insurance...............................................................................................16
5.31. Materiality.............................................................................................16
6. Buyer's and Newco's Representations and Warranties............................................................17
6.1. Organization and Standing................................................................................17
6.2. Authorization............................................................................................17
6.3. Existing Agreements and Governmental Approvals...........................................................17
6.4. Federal and State Securities Laws........................................................................17
7. Indemnification and Limitations...............................................................................18
7.1. Indemnification..........................................................................................18
7.2. Indemnification in Cash..................................................................................18
7.3. Indemnification Basket...................................................................................18
7.4. Survival of Indemnification Obligation..................................................................18
7.5. Limitation of Xxxxx'x Indeminification Obligations.......................................................19
8. Expenses......................................................................................................19
9. Termination...................................................................................................19
10. Additional Covenants of Seller Parties and Buyer.............................................................20
10.1. Further Assurances and Additional Conveyances...........................................................20
10.2. General Release by Seller Shareholders..................................................................20
10.3. Employment Agreements...................................................................................20
10.4. Sourcing Agreement......................................................................................20
10.5. Charitable Contributions................................................................................21
11. Closing Deliveries...........................................................................................21
12. Miscellaneous Provisions.....................................................................................22
12.1. Representations and Warranties..........................................................................22
12.2. Severability............................................................................................22
12.3. Notices.................................................................................................22
12.4. Assignment..............................................................................................23
12.5. Incorporation by Reference..............................................................................23
12.6. Captions................................................................................................23
12.7. Number and Gender of Words; Corporation.................................................................23
12.8. Waiver..................................................................................................23
12.9. Construction............................................................................................23
12.10. Drafting...............................................................................................24
12.11. Parties in Interest....................................................................................24
12.12. Choice of Law..........................................................................................24
12.13. Counterparts...........................................................................................24
12.14. Entire Agreement.......................................................................................24
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AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made on April
23, 1999, among DOUBLE "J" MOLDING, INC., a Michigan corporation, ("Seller");
XXXXXXX XXXXXXX, ("Xxxxxxx"), XXXXXX XXXXXXX, ("Xxxxxxx") and XXXXX XXXXX
("Xxxxx"), the shareholders of Seller (collectively the "Seller Shareholders");
CLARION TECHNOLOGIES, INC., a Delaware corporation ("Buyer), and CLARION
ACQUISITIONS, INC., a Michigan corporation to be formed as a wholly owned
subsidiary of Buyer ("Newco"). Seller and Seller Shareholders are sometimes
collectively referred to as the "Seller Parties."
BACKGROUND
A. Seller is engaged in the business of manufacturing and selling
injection molded automotive parts (the "Business") at 200 and 000
Xxxxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxxxxx 00000 (collectively the
"Premises").
B. Seller Shareholders own one hundred percent (100%) of Seller's issued
and outstanding capital stock.
C. The Boards of Directors of Buyer, Newco, and Seller have determined
that it is in the best interests of Buyer, Newco, Seller, and their
respective shareholders for Newco to merge with and into Seller (the
"Merger") on the terms and subject to the conditions set forth in this
Agreement and in accordance with the Michigan Business Corporation Act,
MCL ss.450.1101 ET SEQ., (the "MBCA"), and have further duly adopted
and approved this Agreement. Seller will call and hold a special
shareholders' meeting (or take action by written consent in lieu of
such a meeting) as promptly as practicable after the date of this
Agreement to consider and vote on a proposal to approve this Agreement
and the Merger.
D. The parties intend that the Merger qualify as a reorganization under
the provisions of Section 368(a)(1)(A) and Section 368(a)(2)(E) of the
Internal Revenue Code of 1986, as amended, for federal income tax
purposes.
E. To induce Buyer and Newco to enter into this Agreement, Seller
Shareholders shall act by written consent to approve this Agreement and
the Merger and are entering into this Agreement to provide the
representations, warranties, covenants, and indemnities set forth in
this Agreement. As a further condition to Buyer's and Newco's
willingness to enter into this Agreement, Xxxxxxx and Xxxxxxx have
agreed not to compete with Buyer or Seller in the conduct of the
Business as provided in noncompetition agreements in substantially the
form attached as Exhibit A (collectively, the "Noncompetition
Agreements").
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AGREEMENTS
NOW, THEREFORE, in consideration of the Background and the terms and
conditions set forth in this Agreement, each of the Seller Parties, Buyer, and
Newco hereby agrees as follows:
1. MERGER.
1.1. EFFECTIVE TIME OF MERGER. Subject to the provisions of this Agreement,
Newco and Seller shall prepare and execute a certificate of merger (the
"Certificate of Merger") and deliver it for filing on the Closing Date (as
defined in Section 1.6 below) to the Michigan Department of Consumer and
Industry Services Corporations, Securities & Land Development Bureau, (the
"Corporations Bureau"), as provided in the MBCA. The Merger shall become
effective in accordance with the MBCA when the Certificate of Merger is filed
with the Corporations Bureau or at such time after filing as Seller, Buyer, and
Newco agree in writing to provide in the Certificate of Merger (the "Effective
Time").
1.2. EFFECTS OF MERGER.
1.2.1. At the Effective Time,
(i) the separate existence of Newco shall cease and Newco shall be merged
with and into Seller, which shall be the Surviving Corporation;
(ii) Seller's Articles of Incorporation that are in effect immediately
before the Effective Time shall be the Surviving Corporation's Articles of
Incorporation until amended in accordance with the articles and the MBCA;
(iii)Seller's Bylaws in effect immediately before the Effective Time
shall be the Surviving Corporation's Bylaws until amended in accordance with the
bylaws and the MBCA;
(iv) the directors of Newco who were in office immediately before the
Effective Time shall be the Surviving Corporation's directors until their
respective successors are duly elected and qualified or until their earlier
death, resignation, or removal (and Buyer, as the Surviving Corporation's sole
shareholder, shall take such action as may be necessary to cause the directors
to be elected); and
(v) the officers of Newco who were in office immediately before the
Effective Time shall be the Surviving Corporation's officers until their
respective successors are duly appointed and qualified or until their earlier
death, resignation or removal (and the Surviving Corporation shall take such
action as may be necessary to cause the officers to be appointed).
1.2.2. As used in this Agreement, the term "Surviving Corporation" means Seller.
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1.2.3. At and after the Effective Time, the Merger shall have the effects set
forth in Section 724(1) of the MBCA.
1.3. OUTSTANDING CAPITAL STOCK OF EACH CONSTITUENT CORPORATION.
1.3.1. Seller has an authorized capital consisting solely of 50,000 shares of
common stock ("Seller Common Stock") ($1.00 par value per share), of which
10,500 shares are issued and outstanding and entitled to vote.
1.3.2. Newco has an authorized capital consisting solely of 60,000 shares of
common stock ("Newco Common Stock") (no par value per share), of which one (1)
share is issued and outstanding and entitled to vote.
1.4. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the Merger
and without any action on the part of (a) the holders of any shares of
Seller Common Stock that are issued and outstanding at the Effective Time
of the Merger or (b) the holder of any shares of Newco Common Stock that
are issued and outstanding at the Effective Time:
1.4.1. CONVERSION OF SELLER SHARES. Each of the issued and outstanding shares of
Seller Common Stock (each, a "Seller Share") shall be converted into the right
to receive (subject to the adjustments set forth in Section 1.7 and the further
terms of this Agreement) 80.9524 shares of the $0.01 par value common stock of
Buyer ("Buyer Shares"), but not exceeding 850,000 shares, (the "Merger
Consideration"). Certificates previously representing Seller Shares
("Certificates") shall be exchanged for the Merger Consideration into which the
Seller Shares have been converted pursuant to this Section 1.4.1 upon surrender
of these certificates in accordance with Section 1.5, without interest. All
references in this Agreement to "per share Merger Consideration" shall be
appropriately adjusted to account for any stock split, stock dividend,
recapitalization, reclassification, or similar event with respect to the common
stock of the Buyer where that event occurs between the date of this Agreement
and the Effective Time
1.4.2. CONVERSION OF NEWCO COMMON STOCK. Each of the issued and outstanding
shares of Newco Common Stock shall be converted into and become one duly
authorized, validly issued, fully paid, and nonassessable share of Surviving
Corporation common stock ("Surviving Corporation Stock"). Each outstanding stock
certificate that prior to the Effective Time represented shares of Newco Common
Stock automatically and for all purposes shall be deemed to represent the number
of shares of Surviving Corporation Stock, into which the shares of Newco Common
Stock represented by the certificate shall have been converted pursuant to this
Section 1.4.2.
1.5. EXCHANGE PROCEDURES.
1.5.1. A holder of a Certificate who surrenders to Buyer a Certificate for
cancellation together with an executed and completed letter of transmittal (a
"Letter of Transmittal") in the form attached as Exhibit B shall be entitled to
receive in exchange the Merger Consideration that the holder has the right to
receive pursuant to Section 1.4.1. The Certificate surrendered shall forthwith
be canceled. No interest will be paid or accrued in respect to any such
consideration.
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1.5.2. After the Effective Time, there shall be no transfers on Seller's stock
transfer books of Seller Shares that were outstanding immediately before the
Effective Time.
1.5.3. If any Certificate is lost, stolen, or destroyed, Buyer shall issue the
Merger Consideration deliverable with respect to the Certificate in exchange for
the lost, stolen, or destroyed Certificate on the submission of an affidavit and
indemnification by a person making such a claim. Buyer may, in its discretion,
require the claimant to post a bond in the amount Buyer directs for indemnity
against any claim that may be made against it with respect to the certificate.
1.6. CLOSING AND CLOSING DATE. The closing of the transactions contemplated by
this Agreement (the "Closing") shall occur at 10:00 a.m. on a Business Day
selected by Buyer as soon as is practical under the circumstances (the "Closing
Date"), unless Buyer and Seller agree in writing to another date and/or time,
provided that in no event shall the Closing occur before the Effective Time. The
Closing shall occur at the offices of Borre, Peterson, Xxxxxx & Reens, P.C., 000
Xxxxxx Xxxxxx, X.X., Xxxxx 000, Xxxxx Xxxxxx, Xxxxxxxx 00000, or such other
place on which Buyer and Seller may mutually agree. All transactions and all
documents executed and delivered at the Closing shall be deemed to have occurred
simultaneously, and no transaction shall be deemed to have occurred and no
document shall be deemed to have been executed or delivered unless all
transactions have occurred and all documents have been executed and delivered.
For the purposes of this Agreement, the term "Business Day" means a day on which
banks are generally open for business in Grand Rapids, Michigan, and a day that
is not a Saturday or Sunday.
1.7. ADJUSTMENTS TO SELLER COMMON STOCK. All references in this Agreement to
"per share Merger Consideration" shall be appropriately adjusted to account for
any stock split, stock dividend, recapitalization, reclassification, or similar
event with respect to the Seller Common Stock where that event occurs between
the date of this Agreement and the Effective Time.
1.8. SALES AND TRANSFER TAXES. The Surviving Corporation shall bear and pay
all applicable sales, transfer, stamp, documentary, and other similar
taxes and governmental fees that are due or payable as a result of the
transactions contemplated by this Agreement.
1.9. PLAN OF MERGER. The provisions of this Section 1 and Section 8 are
intended to constitute the "plan of merger" contemplated by Section 701 of the
MBCA.
2. PRECLOSING ACTIONS. Prior to the Effective Time:
2.1. CONDUCT OF BUSINESS. Seller Parties shall use their best efforts to carry
on and conduct the Business only in the ordinary course consistent with past
practice, without any change in the policies, practices, and methods Seller
pursued before the date of this Agreement. Seller Parties will use their best
efforts to preserve the Business organization intact; to preserve the business
relationships with Seller's customers and suppliers and others having business
dealings with Seller; and to preserve the services of Seller's employees, agents
and representatives. Without limitation of the foregoing, Seller Parties will
not undertake any action without Buyer's prior written consent that, if taken
prior to the date of this Agreement, would be required to be disclosed on
Schedule 5.11.
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2.2. ACCESS TO BUYER. From the date of this Agreement through the Closing,
Seller Parties will permit Buyer and Newco and their representatives to make a
full business, financial, accounting, and legal audit of Seller. Seller Parties
will take all reasonable steps necessary to cooperate with Buyer and Newco in
conducting this audit. No such investigation by Buyer, Newco, or their
representatives shall affect Seller Parties' representations and warranties or
Buyer's or Newco's reliance on them.
2.3. ACCURACY OF REPRESENTATIONS AND WARRANTIES AND SATISFACTION OF
CONDITIONS. Seller Parties will immediately advise Buyer in writing if (a) any
of Seller Parties' representations or warranties are untrue or incorrect in any
material respect; or (b) Seller Parties become aware of the occurrence of any
event or state of facts that results in any of Seller Parties' representations
and warranties being untrue or incorrect as if then being made. Seller Parties
will not take any action, or omit to take any action, that would result in any
of the representations and warranties of Seller Parties set forth in this
Agreement being untrue or incorrect as of the Closing Date. Seller Parties will
use their best efforts to cause all conditions within any of their control that
are set forth in Section 3 to be satisfied as promptly as practicable under the
circumstances.
2.4. SHAREHOLDERS' MEETING. Seller Parties will cause a special meeting of
Seller Shareholders to be called and held (or written consents obtained in lieu
thereof) in accordance with the MBCA for the purpose of approving this Agreement
and the Merger as promptly as practicable after the date of this Agreement. The
Seller's Board of Directors, subject to their fiduciary duties as determined by
them in good faith after consultation with legal counsel, shall recommend that
all such action be approved and taken by Seller Shareholders. Seller Parties
shall deliver to Buyer copies of all documents transmitted to Seller
Shareholders in connection with the special meeting (or the solicitation of
written consents in lieu thereof). Seller shall also comply with all
requirements relating to dissenters' rights under the MBCA.
3. CONDITIONS PRECEDENT.
3.1. CONDITIONS PRECEDENT TO BUYER'S AND NEWCO'S OBLIGATIONS. Buyer's and
Newco's obligation to consummate the transactions contemplated by this Agreement
is subject to the fulfillment (or waiver by them), before or at the Effective
Time, of the following conditions:
3.1.1. SATISFACTORY DUE DILIGENCE REVIEW. Buyer and Newco shall have conducted a
review satisfactory to each of them in their sole discretion of the business,
financial, environmental, accounting, and legal aspects of Seller.
3.1.2. APPROVALS BY BUYER AND BUYER'S COUNSEL AND ACCOUNTANT. Buyer and Newco
and their counsel and accountant shall, in their sole discretion, reasonably
approve all legal, tax and financial matters and the form and substance of all
documents Seller or Buyer is to deliver at the Closing.
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3.1.3. SECURITIES EXCHANGE COMMISSION. Buyer shall have received a waiver, in
accordance with Rule 3-13 of Regulation SX, by the SEC of the requirement set
forth in Rule 3-05 of Regulation SX that Buyer have two (2) audited financial
statements on file with the SEC.
3.2. CONDITIONS TO SELLER PARTIES' OBLIGATIONS. Seller Parties' obligation to
consummate the transactions contemplated by this Agreement is subject to the
fulfillment, before or at the Effective Time, of each of the following
conditions:
3.2.1. SATISFACTORY DUE DILIGENCE REVIEW. Seller Parties shall have conducted a
review satisfactory to each of them in their sole discretion of the business,
financial, accounting and legal aspects of Buyer.
3.2.2. APPROVALS BY SELLER PARTIES AND SELLER PARTIES' COUNSEL AND ACCOUNTANTS.
Seller Parties and their counsel and accountants shall reasonably approve, in
their sole discretion, all legal, tax and financial matters and the form and
substance of all documents Seller or Buyer is to deliver at the Closing.
4. SECURITIES LAW MATTERS.
4.1. INVESTMENT INTENT; INFORMATION DISCLOSURES. Each Seller Shareholder makes
the following representations to Buyer:
4.1.1. With the exception of Xxxxx, each Seller Shareholder is an "Accredited
Investor" as that term is defined in Rule 501(a) promulgated by the United
States Securities and Exchange Commission ("SEC") under the Securities Act of
1933, as amended, ("Securities Act").
4.1.2. Each Seller Shareholder hereby acknowledges that the Buyer Shares to be
received by Seller Shareholders will be acquired for each Seller Shareholder's
own account for investment purposes only and without any view to the public
resale, public distribution or public offering of any part thereof within the
meaning of the Securities Act or any state securities or Blue Sky law and the
Buyer Shares will not be resold or otherwise disposed of except in compliance
with the Securities Act and any applicable state securities or Blue Sky laws.
With the exception of the Registration Rights Agreement and the Stock Put
Agreement, each Seller Shareholder represents that he does not have any
agreements or arrangements to sell, transfer or grant participation with respect
to the Buyer Shares.
4.1.3. Each Seller Shareholder understands that the Buyer's Shares will not be
registered prior to their issuance under the United States federal or state
securities laws and that the issuance of those shares will be exempt from
registration under the Securities Act pursuant to Section 4(2) thereof, and that
Buyer's reliance on such exemption is predicated on Seller Shareholders'
representations set forth herein.
6
4.1.4. Seller Shareholders represents that each: (i) has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment in the Buyers Shares and in Buyer and (ii)
has the ability to bear the economic risks of such investment. In making the
decision to invest in the Buyer Shares, the Seller Shareholders have relied upon
independent investigations made by them and, to the extent believed by each
Seller Shareholder to be appropriate, Seller Shareholder's representatives,
including Seller Shareholder's own professional, tax and other advisors. Seller
Shareholders further represent that each has had (i) access, prior to the
Closing Date, to all publicly available information about Buyer's assets,
operations, and business activities including the Buyer's SEC Filings, (ii) the
opportunity to ask questions of, and receive answers from, Buyer concerning
Buyer and the Buyer's Shares and (iii) the opportunity to obtain additional
information (to the extent Buyer possessed such information or could acquire it
without unreasonable expense) necessary to verify the accuracy of any
information received or to which Seller Shareholders had access. Each Seller
Shareholder has evaluated the merits and risks of an investment in the Buyer
Shares and has determined that the Buyer Shares are a suitable investment for
Seller Shareholder in light of Seller Shareholder's overall financial condition
and prospects. Buyer's SEC Filings" means Buyer's Annual Report on Form 10-KSB
for the year ended December 31, 1998 and all proxy statements, Quarterly Reports
on Form 10-QSB, Current Reports on Form 8-K and all amendments thereto and all
other periodic reports filed prior to the Closing Date. Seller Shareholders have
not relied upon any representation or warranty from Buyer or Newco or any of
their respective directors, officers, employees, agents, affiliates or
representatives, with respect to the value of the Buyer Shares, other than as
set forth in the Buyer's SEC Filings. Buyer has not made any representation,
warranty, acknowledgment or covenant, in writing or otherwise, to the Seller
Shareholders regarding the value of the Buyer Shares or the tax consequences, if
any, of the sale of the Seller Shares or of the resale of the Buyer Shares by
the Seller Shareholders. Each of the Seller Shareholders has been advised, and
are aware, that the market prices of shares of stock of publicly traded
companies fluctuate and that there can be no assurance as to the future
performance of any given securities, including the Buyer Shares.
4.1.5. Each Seller Shareholder understands and agrees that the Buyer's Shares
may not be sold, transferred or otherwise disposed of without registration under
the Securities Act and applicable state laws, unless exemptions from
registration requirements are available, and that in the absence of an effective
registration statement covering those shares or an available exemption from
applicable registration requirements, those shares must be held indefinitely. In
particular, the Buyer's Shares may not be sold pursuant to Rule 144 promulgated
under the Securities Act unless all of the conditions of such rule are met.
4.1.6. Each Seller Shareholder agrees that he will not offer, sell, mortgage,
pledge or otherwise dispose of any of the Buyer's Shares (other than pursuant to
an effective registration statement under the Securities Act) unless and until
Seller Shareholders delivers to Buyer an opinion of counsel satisfactory to
Buyer that registration under applicable United States federal or state
securities laws is not required.
4.1.7. Each Seller Shareholder agrees that, notwithstanding the fact that
earlier sales may be possible under the Securities Act, Seller Shareholders may
not sell or transfer any of the Buyer's Shares during the period ending one year
after the Closing. Each Seller Shareholder agrees to execute a separate lock-up
agreement containing the restriction set forth in this Section 4
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4.1.8. Each Seller Shareholder agrees that all certificates for the Buyer's
Shares shall bear the following legends:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY BE SOLD,
PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED ONLY IF A REGISTRATION
STATEMENT DESCRIBING SUCH PROPOSED TRANSACTION IS IN EFFECT PURSUANT TO
THE PROVISIONS OF THAT ACT OR IF, IN THE OPINION OF COUNSEL, WHICH
OPINION AND COUNSEL SHALL BE SATISFACTORY TO THE ISSUER OF THESE SHARES
AND ITS COUNSEL, AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THAT ACT IS AVAILABLE.
The shares represented by this certificate are the subject of a lock-up
agreement between Clarion Technologies, Inc. and _________ and, unless
earlier sales are permitted in accordance with that agreement, these
shares may not be sold prior to ________, 2000, without the prior
consent of Clarion Technologies, Inc.
4.1.9. Each Seller Shareholder confirms that neither Buyer, Newco nor any of
their respective directors, officers, employees or agents has represented,
warranted, covenanted or agreed that the transactions contemplated by this
Agreement qualifies or will qualify as a tax-free reorganization under the Code.
5. SELLER PARTIES' REPRESENTATIONS AND WARRANTIES. As of the date of this
Agreement and as of the Effective Time, each of the Seller Parties, jointly and
severally, represents and warrants to Buyer and Newco, and acknowledges and
confirms, that Buyer and Newco are relying on these representations and
warranties in entering into this Agreement the following (except that only
Sections 5.1, 5.3 and 5.4 of this Section 5 shall apply to Xxxxx):
5.1. ORGANIZATION AND STANDING. Seller is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Michigan,
and Seller has all requisite power and authority (corporate and otherwise) to
own its properties and conduct its business as it is now being conducted. The
nature of the business and character of the properties Seller owns or leases do
not make licensing or qualification of Seller as a foreign corporation necessary
under the laws of any other jurisdiction. Except as set forth on Schedule 5.1,
Seller has not used or assumed any other name in connection with the conduct of
its business during the past five years.
5.2. ARTICLES AND BYLAWS. Schedule 5.2 contains true and complete copies of
Seller's Articles of Incorporation and Bylaws.
8
5.3. CAPITALIZATION. Seller's authorized capital stock consists solely of
50,000 shares of Seller Common Stock, of which 10,500 shares are duly
authorized, validly issued and outstanding, fully paid, and nonassessable.
Seller Shareholders own of record and beneficially a total of 10,500 shares of
the issued and outstanding Seller Common Stock. A true and complete list of the
certificate numbers and number of shares held by each of Seller Shareholders is
set forth in Schedule 5.3. There are no options, calls, subscriptions, warrants,
agreements, or other securities or rights outstanding (a) for the purchase or
other acquisition of Seller capital stock; (b) that are convertible into,
exercisable for, or relate to Seller capital stock; or (c) that have any voting
rights. Except as set forth on Schedule 5.3, there are no outstanding
contractual obligations of Seller to repurchase, redeem, or otherwise acquire
any outstanding shares of Seller capital stock.
5.4. AUTHORIZATION. Each of the Seller Parties has all requisite legal
capacity and power to execute, deliver, and perform this Agreement and the
respective Noncompetition Agreements to which the Seller Party is a party and to
consummate any transactions contemplated thereby. Seller has taken all required
corporate action to execute, deliver, and perform this Agreement and to
consummate the transactions contemplated by the Agreement. This Agreement has
been duly executed and delivered by each of the Seller Parties. This Agreement
and the Noncompetition Agreements when executed and delivered by the parties
will be, legal, valid, and binding obligations of the Seller Parties that are a
party to them, enforceable against each of them in accordance with their
respective terms, except as such enforcement may be limited by bankruptcy,
insolvency, moratorium, or similar laws relating to the enforcement of
creditors' rights and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding at law or in equity).
5.5. EXISTING AGREEMENTS AND GOVERNMENTAL APPROVALS.
5.5.1. The execution, delivery, and performance of this Agreement and the
Noncompetition Agreements and the consummation of the transactions contemplated
by them (I) do not and will not violate any provisions of law applicable to any
of the Seller Parties; (II) except for: (A) any agreement between the Seller
Parties and Shoreline Bank; (B) any agreement executed in connection with the
Michigan Strategic Fund Variable Rate Demand Limited Obligation Revenue Bonds,
Series 1998 (Double "J" Molding Inc., Project); and (C) the term loan agreement
between the City of South Haven and Seller under the Michigan Community
Development Block Grant Program, do not and will not conflict with, result in
the breach or termination of any provision of, or constitute a default under (in
each case whether with or without the giving of notice or the lapse of time)
Seller's Articles of Incorporation or Bylaws, or any indenture, mortgage, lease,
deed of trust, or other instrument, contract, or agreement or any order,
judgment, arbitration award, or decree to which any of the Seller Parties is a
party or by which any of them or any of their respective assets and properties
are bound; and (III) do not and will not result in the creation of any
Encumbrance (as defined below) on any of the Seller Parties' properties, assets,
or business. For purposes of this Agreement, the term "Encumbrance" shall mean
any charge, claim, community property interest, condition, equitable interest,
lien, option, pledge, security interest, right of first refusal, or restriction
of any kind, including any restriction on use, voting, transfer, receipt of
income, or exercise of any other attribute of ownership.
9
5.5.2. Except for the filing of the Certificate of Merger contemplated in
Section 1.1, no approval, authority, or consent of, or filing by, any of the
Seller Parties with, or notification to, any federal, state, or local court,
authority, or governmental or regulatory body or agency or any other
corporation, partnership, individual, or other entity is necessary to authorize
the execution and delivery of this Agreement or any of the Noncompetition
Agreements or the consummation of the transactions contemplated by them.
5.6. NO SUBSIDIARIES. Seller does not have any subsidiaries, or own directly
or indirectly any interest or have any investment in any other corporation,
partnership, or other entity.
5.7. NO INSOLVENCY. No insolvency proceeding of any character, including
without limitation, bankruptcy, receivership, reorganization, composition, or
arrangement with creditors, voluntary or involuntary, affecting Seller or any of
its assets or properties is pending or, to the Best Knowledge of Seller Parties,
threatened. Neither Seller nor any of the Seller Shareholders have taken any
action in contemplation of, or that would constitute the basis for, the
institution of any such insolvency proceedings. For the purposes of this
Agreement, the phrase "Best Knowledge of Seller Parties," or words of similar
import, means such knowledge as any of the Seller Parties would have after a
reasonably comprehensive inquiry into the matter in question.
5.8. PERMITS AND LICENSES. To the knowledge of the Seller Parties, Seller has
all necessary permits, certificates, licenses, approvals, consents, and other
authorizations required to carry on and conduct the Business and to own, lease,
use, and operate its assets at the places and in the manner in which the
Business is conducted. A complete list of the permits, certificates, licenses,
approvals, consents, and other authorizations is included in Schedule 5.8.
5.9. FINANCIAL STATEMENTS. Seller Parties have delivered to Buyer the
financial statements listed in Schedule 5.9, and Seller Parties shall deliver,
before the Closing, copies of all financial statements Seller has prepared for
each full month prior to the Closing (the "Financial Statements"). The Financial
Statements have been and will be accountant audited for fiscal 1997 and 1998,
and compiled for each full month in fiscal 1999 prior to Closing and prepared in
accordance with generally accepted United States accounting principles,
consistently applied ("GAAP"), do and will fairly and accurately present
Seller's financial position as of the dates indicated and the results of its
operations as of the dates indicated and for the periods covered thereby, and
are and will be true and correct in all material respects.ts.
5.10. NO UNDISCLOSED LIABILITIES. Except as otherwise disclosed on Schedule
5.10 or in the Financial Statements, to the Best Knowledge of Seller Parties,
Seller does not have any liabilities or obligations, whether accrued, absolute,
contingent, or otherwise, and there exists no fact or circumstance that could
give rise to any such liabilities or obligations in the future.
5.11. CONDUCT OF BUSINESS. Except as otherwise disclosed on attached Schedule
5.11, since January 1, 1999, Seller has not:
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5.11.1. Issued any capital stock or other securities having voting rights or
convertible into or exchangeable or exercisable for capital stock, declared or
paid any dividend or made any other payment from capital or surplus or other
distribution of any nature, or directly or indirectly redeemed, purchased, or
otherwise acquired, recapitalized, or reclassified any of its capital stock.
5.11.2. Merged or consolidated with any other entity.
5.11.3. Altered or amended its Articles of Incorporation or Bylaws.
5.11.4. Entered into, materially amended, or terminated any contract, license,
lease, commitment, or permit, except in the ordinary course of business
consistent with past practices.
5.11.5. Incurred or become subject to any obligation or liability (absolute,
accrued, contingent, or otherwise), except (I) in the ordinary course of
business consistent with past practice and (II) in connection with the
performance of this Agreement.
5.11.6. Discharged or satisfied any Encumbrance or paid or satisfied any
obligation or liability (absolute, accrued, contingent, or otherwise) other than
(I) liabilities shown or reflected in Seller's balance sheet dated December 31,
1998 or (II) liabilities incurred since the date of the balance sheet, in each
case only in the ordinary course of business consistent with past practices and
in accordance with the express terms of this Agreement.
5.11.7. Mortgaged, pledged, or subjected to any Encumbrance any of its assets.
5.11.8. Sold, transferred, or agreed to sell or transfer any asset, property, or
business; canceled or agreed to cancel any debt or claim; or waived any right,
except in the ordinary course of business consistent with past practices.
5.11.9. Except in the ordinary course of Seller's business, granted any increase
in the rates of pay of employees or any increases in salary payable or to become
payable to any officer, employee, consultant, or agent, or by means of any bonus
or pension plan, contract, or other commitment increased the compensation of any
officer, director, employee, consultant, or agent, or hired any new officer,
employee, consultant, or agent.
5.11.10. Except for expenditures relating to the acquisition of machinery and
equipment and construction of the 48,000 square foot addition at 000 Xxxxxxx
Xxxxxx, Xxxxx Xxxxx, Xxxxxxxx, under the Michigan Strategic Fund Variable Rate
Demand Limited Obligation Revenue Bonds, Series 1998 (Double "J" Molding Inc.,
Project), made or authorized any individual capital expenditures for additions
to plant or equipment accounts in excess of $50,000.
5.11.11. Entered into any transaction (including, without limitation, any
contract or other arrangement providing for employment, furnishing of services,
rental of real or personal property, or otherwise requiring payments) with any
shareholder, officer, or director of Seller; any member of their immediate
families; or any of their affiliates.
5.11.12. Experienced any material damage, destruction, or loss (whether or not
covered by insurance) affecting its properties, assets, or business.
11
5.11.13. Failed to regularly maintain and repair its assets in the ordinary
course of business consistent with past practices.
5.11.14. Instituted or settled any litigation, action, or proceeding before any
court or governmental body relating to it or its property.
5.11.15. Made any change in any method of accounting or any accounting practice
or suffered any deterioration in accounting controls.
5.11.16. Varied, cancelled, or allowed to expire any insurance coverage.
5.11.17. Made any payment, declared or paid any dividend, or made any other
distribution or disbursement of moneys or property to or on behalf of any of
Seller's officers, directors, or shareholders or any member of the immediate
families of any of the Seller Parties, or any affiliate, other than for payment
of compensation or reimbursement of expenses in accordance with past practices.
5.11.18. Entered into any other transaction other than in the ordinary course of
business consistent with past practices.
5.12. NO ADVERSE CHANGES. Since January 1, 1999 there has not been any
occurrence, condition, or development that has materially adversely affected, or
is likely to materially adversely affect, Seller or its prospects, condition
(financial or otherwise), affairs, operations, Business, or assets.
5.13. EMPLOYEES. There is not now, nor has there been at any time during the
past five years, any strike or lockout pending or threatened against Seller or
that in any manner materially affects Seller. Seller is and has been in material
compliance with all rules regulating employee wages and hours. Seller has paid
when due, and made appropriate accruals for those that are not yet due, all of
its material obligations relating to employees (whether arising by operation of
law, by contract, or by past service) or payments to trusts or other funds, to
any governmental agency, or to any individual employee (or his or her legal
representatives) with respect to unemployment compensation benefits, profit
sharing, retirement benefits, or social security benefits.
5.14. EMPLOYEE BENEFIT PLANS.
5.14.1. Schedule 5.14 lists all of the material employee benefit plans (other
than multi-employer plans) currently maintained or contributed to by Seller with
respect to active or retired employees of business (the "Employee Benefit
Plans"). Seller has delivered to Buyer, or made available for inspection by
Buyer, a copy of each Employee Benefit Plan.
5.14.2. All Employee Benefit Plans which are "employee benefit plans" (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) are in compliance in all material respects with the
applicable requirements of law, including ERISA and the Internal Revenue Code of
1986, as amended (the "CODE").
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5.14.3. Except as set forth on Schedule 5.14, each Employee Benefit Plan which
is intended to qualify under Section 401(a) of the Code has received a favorable
determination letter that it is so qualified and that its trust is exempt from
taxation, and Sellers are not aware of any facts which would cause such
favorable determination letters to be revoked.
5.14.4. Seller does not maintain or contribute to and has not maintained or
contributed to a "multi-employer plan," as such term is defined in Section
4001(a) of ERISA.
5.15. CERTAIN EMPLOYEES. Each of the following is included in the list of
agreements in Schedule 5.14: all collective bargaining agreements, employment
and consulting agreements, executive compensation plans, bonus plans, deferred
compensation plans, employee pension or retirement plans, employee
profit-sharing plans, employee stock purchase and stock option plans,
hospitalization insurance, and other plans and arrangements providing for
employee benefits to Seller's employees.
5.15.1. The names, positions and compensation of the present directors, officers
and salaried employees have been furnished to Buyer. All of Seller's employees
are employees-at-will except to the extent the at-will status of certain
employees has been altered by letter agreements between Seller and certain
employees and these letter agreements are set forth on Schedule 5.15
5.15.2. No retired employees of Seller are receiving or are entitled to receive
any payments or health or other benefits from Seller.
5.16. CONTRACTS AND COMMITMENTS.
5.16.1. Schedule 5.16 contains a true and complete list of all of Seller's
written, and a description of all of Seller's unwritten, contracts, obligations,
agreements, plans, arrangements, and commitments of any kind (the "Contracts and
Commitments"), except
5.16.1.1. those contracts that are described in another Schedule;
5.16.1.2. each purchase contract with a customer made in the ordinary course of
business consistent with past practices under which Seller is obligated to
deliver less than $50,000 in invoice value of finished goods in each transaction
or series of related transactions; and
5.16.1.3. each purchase commitment made in the ordinary course of business
consistent with past practices at prevailing prices where that purchase
commitment is not in excess of $50,000 in each transaction or series of related
transactions.
5.16.2. All Contracts and Commitments are in full force and effect, without
any amendments (unless such amendments are clearly noted), and Seller is and
shall be entitled to all benefits under the Contracts or Commitments.
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5.16.3. True and complete copies of all Contracts and Commitments have been
delivered to Buyer and Newco. All Contracts and Commitments are the result of
bona fide, arm's-length transactions and are legal, valid, and binding
obligations of the parties, enforceable in accordance with their respective
terms subject to laws generally governing bankruptcy and the enforcement of
creditors' rights.
5.16.4. Except as set forth in attached Schedule 5.16, no default or alleged
default exists under any Contract or Commitment on the part of Seller or, to the
Best Knowledge of Seller Parties, on the part of any other person.
5.17. TITLE TO ASSETS. Except as disclosed on Schedule 5.17, Seller is the
sole and absolute owner of all the assets it owns, reflected in Seller's Balance
Sheet dated December 31, 1998, and has good and marketable title to all such
assets free and clear of any and all Encumbrances. Schedule 5.17 lists or
describes all property used in the conduct of the Business and/or situated on
the Premises that is owned by or an interest in which is claimed by any person
(whether a customer, supplier, or other person) for which Seller is responsible.
5.18. CONDITION OF ASSETS. To the Best Knowledge of Seller Parties, all items
of personal property reflected in Seller's Balance Sheet dated December 31,
1998, are functional consistent with past business practices.
5.19. RECEIVABLES. The accounts and other receivables reflected in Seller's
Balance Sheet dated December 31, 1998, are the result of bona fide sales or
other transactions. Except to the extent that a reserve against the possible
uncollectibility of such accounts and other receivables has been established and
is reflected on Seller's Balance Sheet dated December 31, 1998, all of the
accounts and other receivables are fully collectible within 90 days of the
Balance Sheet date in accordance with Seller's ordinary practice (which has been
disclosed to Buyer), without resort to legal proceedings.
5.20. TAXES.
5.20.1. For the purposes of this Agreement, TAX or TAXES shall mean all federal,
state, county, local, and other taxes (including, without limitation, income
taxes; premium taxes; single-business taxes; excise taxes; sales taxes; use
taxes; value-added taxes; real estate taxes; gross receipts taxes; franchise
taxes; ad valorem taxes; severance taxes; capital levy taxes; transfer taxes;
stamp taxes; employment, unemployment, and payroll-related taxes; withholding
taxes; and governmental charges and assessments), and include interest,
additions to tax, and penalties.
5.20.2. Except as otherwise disclosed on Schedule 5.20, Seller has filed on a
timely basis (including extensions) all Tax returns it is required to file under
federal, state, or local law and has paid or established an adequate reserve
with respect to all Taxes for the periods covered by such returns. No agreements
have been made by or on behalf of Seller for any waiver or for the extension of
any statute of limitations governing the time of assessment or collection of any
Taxes. Seller and its officers have received no notice of any pending or
threatened audit by the Internal Revenue Service, or any state or local agency,
related to Seller's Tax returns or Tax liability for any period, and no claim
for assessment or collection of Taxes has been asserted against Seller. There
are no federal, state, or local tax liens outstanding against any of Seller's
assets or properties or the Business.
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5.21. LITIGATION. Except as disclosed on Schedule 5.21, there are no claims,
disputes, actions, suits, proceedings, or investigations pending or, to the Best
Knowledge of Seller Parties, threatened against or affecting Seller, the
Business, or Seller's assets.
5.22. PRODUCT LIABILITY. To the Best Knowledge of Seller Parties, no known
defect or deficiency exists in any of the products manufactured or sold by
Seller, or in any finished inventory, that could give rise to any liabilities or
claims for breach of warranty, product liability, or similar liabilities or
claims.
5.23. ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 5.23, since
December 1987, with respect to 000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx and May
1997, with respect to 000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx:
5.23.1. The Premises have been used and operated in material compliance with all
applicable federal, state and local laws and regulations related to air quality,
water quality, waste disposal or management, hazardous or toxic substances, and
the protection of health and the environment.
5.23.2. Seller Parties have not disposed of any hazardous or toxic substances on
or in the Premises and, to the Best Knowledge of Seller Parties, the Premises
and the groundwater beneath the Premises are free from environmental
contamination of any kind.
5.23.3. The Premises does not include any "underground storage tank, as that
term is defined in the Hazardous Solid Waste Amendments of 1984 to the Resource
Conservation and Recovery Act.
5.24. COMPLIANCE WITH LAWS. At all times prior to the Effective Time, Seller
has complied in all material respects with all laws, orders, regulations, rules,
decrees, and ordinances affecting to any extent or in any manner Seller or any
aspects of the Business or its assets.
5.25. SUPPLIERS AND CUSTOMERS.
5.25.1. A complete and accurate list of all suppliers or vendors of products or
services to Seller in connection with the Business (other than legal or
accounting services) aggregating more than $100,000 (at cost) annually during
Seller's last fiscal year, and the address of each supplier or vendor and the
amount sold to Seller during that period, is set forth in Schedule 5.25.
5.25.2. A complete and accurate list of each of Seller's customers aggregating
more than $100,000 in revenues to Seller annually during the last fiscal year,
the address of each customer, and the amount each customer purchased from Seller
during the last fiscal year are set forth in Schedule 5.25.
15
5.25.3. To the Best Knowledge of Seller Parties, Seller Parties have no
information that might reasonably indicate that any customer or supplier of
Seller, listed in Schedule 5.25, intends to cease purchasing from, selling to,
or dealing with Seller. No information has been brought to the attention of any
of Seller Parties that might reasonably lead any of them to believe that any
customer or supplier intends to alter, in any material respect, the amount of
its purchases or sales or the extent of its dealings with Seller, or would alter
in any material respect its purchases from, sales to, or dealings with the
Surviving Corporation in the event that the transactions contemplated by this
Agreement are consummated.
5.26. NO BROKERS. Neither Seller nor Seller Shareholders have engaged, or are
responsible for any payment to, any finder, broker, or consultant in connection
with the transactions contemplated by this Agreement.
5.27. INSIDER TRANSACTIONS. A complete and accurate list and a brief
description of all contracts or other transactions involving Seller in which any
officer, director, employee, or shareholder of Seller; any member of their
immediate families; or any affiliate has any interest is set forth in Schedule
5.27.
5.28. BANK ACCOUNTS. Attached Schedule 5.28 contains a true and complete list
of the names and locations of all banks or other financial institutions that are
depositories for funds of Seller, the names of all persons authorized to draw or
sign checks or drafts on the accounts, the number of the accounts, and the names
and locations of any institutions in which Seller has safe-deposit boxes and the
names of the individuals having access to those boxes. Seller does not have
outstanding any powers of attorney.
5.29. INTELLECTUAL PROPERTY. To the Best Knowledge of Seller Parties, Seller
neither owns or has any interest in any intellectual property.
5.30. INSURANCE. All insurance policies covering Seller's real and personal
property or providing for business interruption, personal and product liability
coverage, and other insurance are described in Schedule 5.30 (which specifies
the insurer, policy number, type of insurance, and any pending claims). All such
policies are in full force and effect and the premiums have been paid. Except as
disclosed on Schedule 5.30 and Schedule 5.21, there are no claims, actions,
suits, or proceedings arising out of or based on any of these insurance
policies, and, to the Best Knowledge of Seller Parties, no basis for any such
claim, action, suit, or proceeding exists. Seller is not in default with respect
to any provisions contained in any such insurance policies and has not failed to
give any notice or present any claim under any such insurance policy in due and
timely fashion.
5.31. MATERIALITY. No statement in this Agreement or in any certificate
delivered to Buyer or Newco pursuant to this Agreement contains or will contain
any untrue statement of a material fact, or fails or will fail to contain any
material fact necessary to make the statements not misleading.
16
6. BUYER'S AND NEWCO'S REPRESENTATIONS AND WARRANTIES. Buyer and Newco,
jointly and severally, represent and warrant to Seller that:
6.1. ORGANIZATION AND STANDING. Buyer and Newco are each a corporation duly
organized and validly existing under the laws of the State of Michigan, and each
has all the requisite power and authority (corporate and otherwise) to own its
properties and conduct its business as it is now being conducted.
6.2. AUTHORIZATION. Buyer and Newco have taken all necessary corporate action
to approve the execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated by it. Buyer and Newco have duly
executed and delivered this Agreement. This Agreement is the legal, valid, and
binding obligation of Buyer and Newco, enforceable against each of them in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, moratorium, or similar laws relating to the enforcement
of creditors' rights and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding at law or in equity).
6.3. EXISTING AGREEMENTS AND GOVERNMENTAL APPROVALS.
6.3.1. The execution, delivery, and performance of this Agreement and the
Noncompetition Agreements and the consummation of the transactions contemplated
by them (I) do not and will not violate any provision of law applicable to Buyer
or Newco; (II) do not and will not conflict with, result in the breach or
termination of any provision of, or constitute a default under (in each case
whether with or without the giving of notice or the lapse of time) Buyer's or
Newco's Articles of Incorporation or Bylaws or any indenture, mortgage, lease,
deed of trust, or other instrument, contract, or agreement or any order,
judgment, arbitration award, or decree to which Buyer or Newco is a party or by
which Buyer or Newco or any of their assets are bound; and (III) do not and will
not result in the creation of any Encumbrance on Buyer's or Newco's properties,
assets, or business.
6.3.2. Except as set forth on Schedule 5.5, and except for the filing of a
Certificate of Merger as contemplated in Section 1.1, no approval, authority or
consent of, or filing by Buyer or Newco with, or notification to, any federal,
state, or local court, authority, or governmental or regulatory body or agency
or any other corporation, partnership, individual, or other entity is necessary
to authorize the execution and delivery of this Agreement or any of the
Noncompetition Agreements or the consummation of the transactions they
contemplate.
6.4. FEDERAL AND STATE SECURITIES LAWS.
6.4.1. Except as disclosed in Schedule 6.4, the Buyer Shares comprising the
Merger Consideration shall be in compliance with applicable federal and state
securities laws.
6.4.2. Except as disclosed in Schedule 6.4, Buyer is in compliance with all
applicable reporting requirements and obligations under applicable federal and
state securities laws. Buyer is in compliance with all requirements of any stock
exchange where its securities are traded.
17
7. INDEMNIFICATION AND LIMITATIONS.
7.1. INDEMNIFICATION. Seller Shareholders, jointly and severally, shall
defend, indemnify, and hold harmless Buyer, the Surviving Corporation, and their
respective directors, officers, shareholders, successors, and assigns from and
against any and all costs, losses, claims, liabilities, fines, penalties,
diminution in value, actions, suits, proceedings, damages (consequential,
incidental, direct, and indirect), and expenses (including reasonable legal
fees) in connection with or resulting from:
7.1.1. Any inaccuracy in any representation or warranty of any of the Seller
Parties contained in this Agreement.
7.1.2. Any failure by any of Seller Parties to perform or observe in full, or to
have performed or observed in full, any covenant, agreement, or condition to be
performed or observed by any of them under this Agreement or any Related
Agreement.
7.1.3. Each of the Seller Shareholders irrevocably waive and agree that they
will make no claim against Seller of any kind or character, whether by way of
subrogation, contribution, breach of contract or any other theory regarding any
claim made by Buyer, the Surviving Corporation, or any other person under this
Section 7 or otherwise, and each of the Seller Shareholders irrevocably releases
and discharges Seller from any such claim.
7.2. INDEMNIFICATION IN CASH. Any obligation of indemnity of the Seller
Shareholders established pursuant to the terms of this Agreement shall be
satisfied by the payment of cash to the Buyer by the Seller Shareholders.
7.3. INDEMNIFICATION BASKET. Buyer shall not be entitled to indemnification
pursuant to this Agreement until the total amount for which it shall be entitled
to such indemnification, but for this Section 7.3, exceeds Fifty Thousand
Dollars ($50,000.00) in the aggregate, provided, however, that once such amount
exceeds Fifty Thousand Dollars ($50,000.00), then in that event, Buyer shall be
entitled to indemnification for the amount for which indemnification may be
owing in excess of Fifty Thousand Dollars ($50,000.00). Notwithstanding any
provision of this Section 7.3, nothing herein shall affect or limit, in any
manner whatsoever, the liability of the Seller Shareholders for matters relating
to: (a) ownership and title to the Seller Common Stock; (b) competency to
execute and deliver documents to effect the ownership and title to the Seller
Common Stock; (b) competency to execute and deliver documents to effect the
transactions contemplated thereby and hereby, and the legal binding and
enforceable nature thereof and hereof; (c) taxes; and (d) any claim by Buyer
against the Seller Shareholders arising out of a claim of fraud, regardless of
the nature of the representations or warranties forming the basis of such claim.
7.4. SURVIVAL OF INDEMNIFICATION OBLIGATION. The obligations of the Seller
Shareholders under Section 7 shall expire, unless a claims notice is given or
litigation is commenced, prior to the following applicable dates: (i) with
respect to claims for relating to: (a) ownership and title to the Seller Common
Stock; (b) competency to execute and deliver documents to effect the ownership
18
and title to the Seller Common Stock; (b) competency to execute and deliver
documents to effect the transactions contemplated thereby and hereby, and the
legal binding and enforceable nature thereof and hereof; (c) taxes; and (d) any
claim by Buyer against the Seller Shareholders arising out of a claim of fraud,
regardless of the nature of the representations or warranties forming the basis
of such claim, the applicable statute of limitations; (ii) with respect to
claims arising under Section 5.23, the fifth (5th) anniversary of the Closing
Date; and (iii) with respect to all other claims, the first anniversary of the
Closing Date.
7.5. LIMITATION OF XXXXX'X INDEMINIFICATION OBLIGATIONS. Notwithstanding any
provision of this Section 7 to the contrary, Xxxxx'x obligation of indemnity
shall be limited to costs, losses, claims, liabilities, fines, penalties,
diminution in value, actions, suits, proceedings, damages (consequential,
incidental, direct, and indirect), and expenses (including reasonable legal
fees) in connection with or resulting from any inaccuracy in any representation
or warranty of any of Xxxxx under Sections 5.1, 5.3 and 5.4 of Section 5 of this
Agreement.
8. EXPENSES. Except for the financial audit of Seller, which shall be paid
for by the Buyer, each of the parties shall pay all of the costs that it incurs
incident to the preparation, execution, and delivery of this Agreement and the
performance of any related obligations, whether or not the transactions
contemplated by this Agreement shall be consummated. The parties acknowledge and
agree that the legal and accounting professional fees of the Seller Parties
shall be paid by the Seller.
9. TERMINATION.
9.1. This Agreement may be terminated and the Merger abandoned at any time
before the Effective Time (whether before or after the approval of Seller
Shareholders) as follows:
9.1.1. By Buyer and Seller Parties in a written instrument.
9.1.2. By either Buyer or Seller Parties if the Effective Time does not occur by
5:00 p.m. on July 1, 1999, unless extended by mutual agreement among the parties
hereto, provided that no party can terminate if the party is in breach of this
Agreement.
9.1.3. By Buyer or Seller Parties if there shall have been a material breach of
any of the representations or warranties set forth in this Agreement on the part
of the other, and this breach by its nature cannot be cured before the Effective
Time.
9.1.4. By Buyer or Seller Parties if there shall have been a breach of any of
the covenants or agreements set forth in this Agreement on the part of the
other, and this breach is not cured within 10 Business Days after the breaching
party or parties receive written notice of the breach from the other party.
9.1.5. By Buyer if Seller's Board of Directors does not recommend that Seller
Shareholders approve this Agreement and the Merger or revokes or materially
conditions or modifies its recommendation.
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9.1.6. By Buyer or Seller Parties if Seller Shareholders do not approve this
Agreement and the Merger at the shareholders' meeting to be called pursuant to
Section 2.4.
9.2. If terminated as provided in Section 9.1, this Agreement shall forthwith
become void and have no effect, except for Section 9.3 and Section 12, and
except that no party shall be relieved or released from any liabilities or
damages arising out of the party's breach of any provision of this Agreement.
9.3. Buyer, on the one hand, and the Seller Parties jointly and severally, on
the other hand, warrant and agree that if this Agreement is terminated, each
party will not, during the one-year period following the termination, directly
or indirectly solicit any employee of the other party to leave his or her
employment.
10. ADDITIONAL COVENANTS OF SELLER PARTIES AND BUYER.
10.1. FURTHER ASSURANCES AND ADDITIONAL CONVEYANCES. Following the Closing, the
Seller Shareholders and Buyer shall each deliver or cause to be delivered at
such times and places as shall be reasonably agreed upon such additional
instruments as Buyer or the Seller Shareholders may reasonably request for the
purpose of carrying out this Agreement. The Seller Shareholders will cooperate
with Buyer and Seller after the Closing Date in furnishing information,
evidence, testimony and other assistance in connection with any actions,
proceedings or disputes of any nature with respect to matters pertaining to all
periods prior to the date of this Agreement.
10.2. GENERAL RELEASE BY SELLER SHAREHOLDERS. The Seller Shareholders, each
individually and for himself, hereby fully releases and discharges the Seller
and its respective directors, officers, agents and employees from all rights,
claims and actions, known or unknown, of any kind whatsoever, which the Seller
Shareholders now have or may hereafter have against the Seller and its
respective directors, officers, agents and employees, arising out of or relating
to events arising prior to or on the Closing Date, including, but not limited to
claims for unpaid dividends, bonuses, or profit-sharing or rights or other
claims of whatever kind, except (a) as may be described in written contracts
disclosed in Schedule 10.2 and expressly described and specifically excepted
from this release in Schedule 10.2, (b) in the case of the Seller Shareholders
in the capacity of an employee of the Seller, compensation for current periods
expressly described and excepted from such releases, and (c) for the obligations
of the Seller arising after the Closing Date under this Agreement.
10.3. EMPLOYMENT AGREEMENTS. Following the Closing, Buyer agrees to cause
Seller to enter into a two year contract of employment Xxxxxxx Xxxxxxx in
accordance with the terms of the employment agreement in the form of the
attached as Exhibit C, and a one year contract of employment with Xxxxxx Xxxxxxx
in accordance with the terms of the employment agreement in the form of the
attached Exhibit D.
10.4. SOURCING AGREEMENT. Seller Parties agree to cause Ace Plastics, a
Michigan corporation, to assign, concurrent with the Closing, all open purchase
orders from Seller to Buyer's designee in accordance with an agreement which is
mutually acceptable to the parties ("Sourcing Agreement"). The Sourcing
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Agreement shall provide, among other things, that Ace Plastics shall be entitled
to any profits relating to activities between it and Seller occurring on and
prior to Closing, and that Buyer, or its designee shall be entitled to all
profits relating to activities between it and Seller occurring from and after
the Closing.
10.5. CHARITABLE CONTRIBUTIONS. Buyer agrees that for five (5) years from and
after the Closing Date, it shall cause the Surviving Corporation to make annual
charitable contributions of not less than two percent (2%) of the pre-tax income
of the Surviving Corporation, attributable to the operations of the Surviving
Corporation.
11. CLOSING DELIVERIES. At the Closing, (except for the deliveries in
accordance with Section 11.1.3 which shall be before the Closing in accordance
with applicable law), the respective parties shall make the deliveries
indicated:
11.1. SELLER PARTIES.
11.1.1. RESIGNATIONS. Each director and officer of Seller shall deliver to Buyer
and Newco resignations from their respective positions and any other positions
they held in Seller or held by Seller's appointment.
11.1.2. SHAREHOLDER APPROVAL. The Seller Shareholders shall have duly approved
this Agreement and the Merger at the shareholder meeting to be called pursuant
to Section 2.4, or by written consent in lieu of a meeting.
11.1.3. MESC CONTRIBUTION LIABILITY. Seller Parties shall have provided to Buyer
a statement from the Commissioner of the Michigan Unemployment Agency certifying
the status of Seller's contribution liability under the Michigan Employment
Security Act.
11.1.4. EMPLOYMENT AGREEMENTS. Seller Parties shall cause to be delivered the
Employment Agreements as set forth in Section 10.3.
11.1.5. SOURCING AGREEMENT. Seller Parties shall deliver to Buyer the
Sourcing Agreement as set forth in Section 10.4.
11.1.6. NONCOMPETITION AGREEMENTS. Xxxxxxx and Xxxxxxx shall execute and
deliver to Buyer the Noncompetition Agreements.
11.2. BUYER.
11.2.1. MERGER CONSIDERATION. Buyer shall deliver to the Seller Parties the
Merger Consideration in accordance with Section 1.4.1.
11.2.2. EMPLOYMENT AGREEMENTS. Buyer shall cause to be delivered the
Employment Agreements as set forth in Section 10.3.
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11.2.3. SOURCING AGREEMENT. Buyer shall deliver to Seller Parties the
Sourcing Agreement as set forth in Section 10.4.
12. MISCELLANEOUS PROVISIONS.
12.1. REPRESENTATIONS AND WARRANTIES. All representations, warranties, and
agreements made by the parties pursuant to this Agreement shall survive the
consummation of the transactions contemplated by this Agreement, without
limitation as to time.
12.2. SEVERABILITY If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
12.3. NOTICES. All notices, demands, and requests required or permitted to be
given under the provisions of this Agreement shall be in writing and shall be
deemed given (a) when personally delivered or sent by facsimile transmission to
the party to be given the notice or other communication or (b) on the Business
Day following the day such notice or other communication is sent by overnight
courier, to the following:
if to any of the Seller Parties: Xxxxxxx Xxxxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Xxxxxx Xxxxxxx
0000 Xxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Xxxxx Xxxxx
000 Xxxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxx 00000
with a copy (which shall not constitute notice) to:
Xxxxxxx X. Xxxxxx
Xxxxxx and Xxxxxx, P.C.
00 Xxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
facsimile: (000) 000-0000
if to Buyer or Newco: Clarion Technologies, Inc.
Attn: Xxxxxxx Xxxxxxx
0000 Xxxxx Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
facsimile: (000) 000-0000
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with a copy (which shall not constitute notice) to:
Xxxx X. Xxxxxx
Borre, Peterson, Xxxxxx & Reens, P.C.
000 Xxxxxx Xxxxxx, X.X., Xxx. 000
Xxxxx Xxxxxx, Xxxxxxxx 00000
facsimile: (000) 000-0000
or to such other address or facsimile number that the parties may designate
in writing.
12.4. ASSIGNMENT. Seller Parties, on the one hand, and Buyer and Newco, on the
other hand, shall not assign this Agreement, or any interest in it, without the
prior written consent of the other.
12.5. INCORPORATION BY REFERENCE. The Background and all Schedules and Exhibits
attached hereto are incorporated herein by reference as though fully set forth
at each point referred to in this Agreement.
12.6. CAPTIONS. The captions in this Agreement are for convenience only and
shall not be considered a part hereof or affect the construction or
interpretation of any provisions of this Agreement.
12.7. NUMBER AND GENDER OF WORDS; CORPORATION. Whenever the singular number is
used herein, the same shall include the plural where appropriate, and shall
apply to all of such number, and to each of them, jointly and severally, and
words of any gender shall include each other gender where appropriate.
12.8. WAIVER. No waiver by any party hereto at any time of any breach of, or
compliance with, any condition or provision of this Agreement to be performed by
any other party hereto may be deemed a waiver of similar or dissimilar
provisions or conditions at the same time or at any prior or subsequent time.
12.9. CONSTRUCTION. The language in all parts of this Agreement must be in all
cases construed simply according to its fair meaning and not strictly for or
against any party. Unless expressly set forth otherwise, all references herein
to a "day" are deemed to be a reference to a calendar day. All references to
"business day" mean any day of the year other than a Saturday, Sunday or a
public or bank holiday in Michigan. Unless expressly stated otherwise,
cross-references herein refer to provisions within this Agreement and are not
references to the overall transaction or to any other document. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation. The Seller Parties, Buyer and Newco intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any party hereto has breached any representation, warranty or covenant contained
herein in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter, regardless of the
relative levels of specificity, which the party has not breached, shall not
detract from or mitigate the fact that the party is in breach of the first
representation, warranty or covenant.
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12.10. DRAFTING. The parties to this Agreement have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
12.11. PARTIES IN INTEREST. This Agreement shall inure to the benefit of and be
binding on the named parties and their respective successors and permitted
assigns, but not any other person.
12.12. CHOICE OF LAW. This Agreement shall be governed, construed, and enforced
in accordance with the laws of the State of Michigan without regard to conflict
of laws provisions.
12.13. COUNTERPARTS. This Agreement may be signed in any number of counterparts
with the same effect as if the signature on each such counterpart were on the
same instrument.
12.14. ENTIRE AGREEMENT. This Agreement and all related documents, schedules,
exhibits, or certificates represent the entire understanding and agreement
between the parties with respect to the subject matter and supersede all prior
agreements or negotiations between the parties. The Agreement and related
documents may be amended, supplemented, or changed only by an agreement in
writing that makes specific reference to this Agreement or the agreement
delivered pursuant to it and that is signed by the party against whom
enforcement of any such amendment, supplement, or modification is sought.
[ALL SIGNATURES APPEAR ON NEXT PAGE.
THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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The parties have executed this Agreement on the date listed on the
first page of this Agreement.
CLARION TECHNOLOGIES, INC.
By:_________________________________
Xxxx X. Xxxxxxxxxx
Its: Chief Executive Officer
CLARION ACQUISITIONS, INC.
By:_________________________________
Xxxx X. Xxxxxxxxxx
Its: President
DOUBLE "J" MOLDING, INC.
By:_________________________________
Xxxxxxx Xxxxxxx
Its: President
SELLER SHAREHOLDERS:
------------------------------------
Xxxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx
------------------------------------
Xxxxx Xxxxx
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