STOCK AND ASSET PURCHASE AGREEMENT
AMONG
SPARTON CORPORATION,
AS SHAREHOLDER OF ITS
KPI GROUP OF SUBSIDIARIES,
SPARTON ENGINEERED PRODUCTS,
INC.--LAKE ODESSA GROUP
AND
DURA AUTOMOTIVE SYSTEMS, INC.
DATED OCTOBER 3, 1996
TABLE OF CONTENTS
Page
Article I--Purchase and Sale of Stock........................................ 1
1.1 Stock Purchase..................................................... 1
1.2 Asset Purchase; Assumption of Liabilities.......................... 1
1.3 Purchase Price..................................................... 4
1.4 Adjustment in Purchase Price....................................... 4
Article II--Lease of Leased Real Estate
2.1 Lease of Leased Real Estate........................................ 4
Article III--Closing
3.1 Closing............................................................ 5
3.2 Concurrent Closing................................................. 5
3.3 Release of Liens at Closing........................................ 5
Article IV--Conditions to Closing
4.1 Conditions to Buyer's Obligations.................................. 5
4.2 Conditions to Obligations of Sparton............................... 8
Article V--Covenants Prior to Closing
5.1 Operation of KPI Subsidiaries Since June 30, 1996.................. 9
5.2 Affirmative Covenants of Sparton................................... 9
5.3 Covenants of Buyer.................................................11
5.4 Title Insurance....................................................11
5.5 Surveys............................................................12
5.6 Closing of Lake Odessa Plant.......................................12
5.7 Negative Covenants of Xxxx and Sparton.............................12
5.8 Proxy; shareholders' Vote..........................................13
Article VI--Representations and Warranties Concerning Sparton
and the KPI Subsidiaries
6.1 Organization and Corporate Power...................................14
6.2 Authorization of Transactions......................................14
6.3 Capitalization.....................................................14
6.4 Subsidiaries.......................................................15
6.5 Absence of Conflicts...............................................15
6.6 Financial Statements...............................................15
6.7 Absence of Undisclosed Liabilities.................................16
6.8 Absence of Certain Developments....................................16
6.9 Real Property...................................................... 18
6.10 Tangible Assets.................................................... 19
6.11 Title to Personal Property......................................... 19
6.12 Environmental Matters.............................................. 19
6.13 Accounts Receivable................................................ 22
6.14 Inventory.......................................................... 22
6.15 Taxes.............................................................. 22
6.16 Contracts and Commitments.......................................... 25
6.17 Intellectual Property Rights....................................... 27
6.18 Litigation; Proceedings............................................ 28
6.19 Brokerage.......................................................... 28
6.20 Governmental Licenses and Permits.................................. 28
6.21 Employees.......................................................... 29
6.22 Employee Benefit Plans............................................. 29
6.23 Insurance.......................................................... 30
6.24 Officers and Directors; Bank Accounts.............................. 31
6.25 Affiliate Transactions............................................. 31
6.26 Compliance with Laws............................................... 31
6.27 Disclosure......................................................... 31
6.28 Closing Date....................................................... 31
6.29 Product Warranties................................................. 32
6.30 Tooling Invoices................................................... 32
Article VII--Representations and Warranties of Buyer
7.1 Organization and Corporate Power................................... 32
7.2 Authorization...................................................... 32
7.3 No Violation....................................................... 32
7.4 Governmental Authorities and Consents.............................. 32
7.5 Brokerage.......................................................... 33
7.6 Litigation......................................................... 33
7.7 Buyer's Investment Representations................................. 33
7.8 Disclosure......................................................... 33
7.9 Closing Date....................................................... 33
Article VIII--Termination
8.1 Termination........................................................ 33
8.2 Effect of Termination.............................................. 34
Article IX--Additional Agreements
9.1 Survival........................................................... 34
9.2 Sparton's Guaranty; Buyer's Indemnification........................ 34
ii
9.3 General Indemnification............................................ 34
9.4 Investigation and Confidentiality.................................. 38
9.5 Expenses.......................................................... 38
9.6 Noncompete......................................................... 38
9.7 Tax Claims......................................................... 38
9.8 Sparton's Access to Records........................................ 42
9.9 Sparton Shares in Retirement Trusts................................ 42
9.10 Product Warranty Claims............................................ 43
9.11 Change of Corporate Name........................................... 43
9.12 Assignment of Xxxxxxxx Judgment.................................... 44
9.13 Environmental Matters.............................................. 44
9.14 Exclusivity........................................................ 46
Article X--Miscellaneous
10.1 Press Releases and Announcements................................... 46
10.2 Further Transfers.................................................. 46
10.3 Specific Performance............................................... 46
10.4 Amendment and Waiver............................................... 46
10.5 Notices............................................................ 46
10.6 Binding Agreement; Assignment...................................... 48
10.7 Severability....................................................... 48
10.8 Captions........................................................... 48
10.9 Entire Agreement................................................... 48
10.10 Counterparts....................................................... 48
10.11 Governing Law...................................................... 49
10.12 Parties in Interest................................................ 49
EXHIBITS
A. List of KPI Subsidiaries
B. Opinion of Sparton's Counsel
C. Certificate of Officer of Sparton
D. Opinion of Buyer's Counsel
E. Certificate of Officer of Buyer
iii
LIST OF SCHEDULES
6.5 Restrictions Schedule
6.7 Liability Schedule
6.8 Developments Schedule
6.9(a) Real Property Lease Schedule
6.9(b) Real Property Schedule
6.11 Encumbrances Schedule
6.12 Environmental Schedule
6.15 Taxes Schedule
6.16 Contracts Schedule
6.17 and Intellectual Property Rights Schedules
6.17(c) and Intellectual Property Rights Schedules
6.17(d) Intellectual Property Rights Schedules
6.18 Litigation Schedule
6.20 Licenses Schedule
6.22 Employee Benefit Plans Schedule
6.23 Insurance Schedule
6.24 Officers and Directors Schedule
6.25 Affiliate Transactions Schedule
9.2 Guarantied Obligations Schedule
iv
STOCK AND ASSET PURCHASE AGREEMENT
STOCK AND ASSET PURCHASE AGREEMENT dated as of October 3, 1996, among
SPARTON CORPORATION, an Ohio corporation ("Sparton"), SPARTON ENGINEERED
PRODUCTS, INC., LAKE ODESSA GROUP, a Michigan corporation ("Xxxx"), and DURA
AUTOMOTIVE SYSTEMS, INC., a Delaware corporation ("Buyer").
RECITALS
Sparton owns 100 percent of the issued and outstanding capital stock of
each of the corporations listed on Exhibit A attached hereto (collectively, the
"KPI Subsidiaries"), consisting of the number of shares of common stock set
opposite the name of each (together, "Common Stock"). Upon the terms and
conditions set forth in this Agreement, Buyer desires to acquire from Sparton,
and Sparton desires to sell to Buyer, all of the Common Stock.
Sparton also owns 100 percent of the outstanding capital stock of Xxxx.
Upon the terms and conditions set forth in this Agreement, Buyer desires to
acquire from Xxxx, and Xxxx and Sparton desire that Xxxx sell to Buyer, the
business and certain of the assets of Xxxx which are operating as a going
concern, subject to certain liabilities.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 Stock Purchase. Upon the terms and conditions set forth in this
Agreement, at the Closing (as defined in Article III), Buyer agrees to purchase
from Sparton and Sparton agrees to sell and transfer to Buyer all of the Common
Stock, free and clear of all liens, charges, security interests, claims,
pledges, taxes, options, warrants, rights, proxies, voting trusts, voting
agreements, and other encumbrances and restrictions ("Liens"). As provided in
Section 3.3, at the Closing the existing lien on the Common Stock shall be
released.
1.2 Asset Purchase; Assumption of Liabilities.
(a) Upon the terms and conditions set forth in this Agreement, at the
Closing (as defined in Article III), Buyer agrees to purchase from Xxxx,
and Xxxx agrees to sell, transfer, convey, and deliver to Buyer, all right,
title, and interest in and to the following assets of Xxxx (collectively,
the "Acquired Assets"), but excluding the "Excluded Assets" defined below:
(i) all cash, cash equivalents, accounts receivable, and
notes receivable;
(ii) all inventories of raw materials and supplies,
purchased and service parts, work-in-process, finished goods,
tooling, and all other items of inventory;
(iii) the land, building, and improvements located at
0000 Xxxxx Xxxx, Xxxxxxx, Xxxxxxxx (the "Gladwin Plant"),
and all licenses, rights of way, permits, and appurtenances
thereon;
(iv) all machinery, equipment, furniture, fixtures,
vehicles, tooling, molds, dies, and other tangible personal
property located at or used in the operations of the Gladwin
Plant;
(v) all Xxxx agreements, contracts, and purchase
orders related to or connected with operations at the Gladwin
Plant, including those listed on attached Schedule 6.16;
(vi) all prepayments and deposits made with respect to
operations at the Gladwin Plant to the extent any will inure to
the benefit of Buyer after Closing.
(vii) any permits, licenses, or other rights obtained from
governments or government agencies, including those listed on
attached Schedule 6.20;
(viii) all books, records, files, documents, drawings,
specifications, and other written materials, including copies of
financial and accounting books and records;
(ix) all other property, including all Intellectual
Property, in which Xxxx has an interest and which is connected
with the operations at the Gladwin Plant.
(b) The following assets of Xxxx ("Excluded Assets") shall be
excluded from the sale to Buyer of the Acquired Assets:
(i) all insurance policies;
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(ii) charter documents, minute books, stock transfer
records, corporate seal;
(iii) the land, building, and improvements comprising
Xxxx'x plant located in Lake Odessa, Michigan (the "Lake
Odessa Plant"), and a parcel of unimproved land in the vicinity
of Lake Odessa;
(iv) all machinery, equipment, furniture, fixtures,
vehicles, tooling, molds, dies, and inventories located at the
Lake Odessa Plant (which are not to be transferred to the KPI
Subsidiaries pursuant to Section 5.6), a list of which has been
furnished to Buyer, and all other tangible personal property
located at the Lake Odessa Plant.
(c) Subject to the terms and conditions of this Agreement, Buyer
agrees to assume the following obligations of Xxxx connected with the
operations of the Gladwin Plant ("Assumed Liabilities"):
(i) all current liabilities, except "Excluded
Liabilities," defined below, recorded on the books and records
of Xxxx as of the Closing Date to the extent such current
liabilities have been incurred in the Ordinary Course of
Business, consistent with past custom and practice;
(d) Buyer does not assume and is not liable for the following
liabilities and obligations of Xxxx ("Excluded Liabilities"):
(i) except for obligations and liabilities incurred in
the Ordinary Course of Business with respect to operations at
the Gladwin Plant (other than cash advances which are dealt
with in Section 1.4), obligations or liabilities due to corporations
affiliated with Xxxx, including obligations or liabilities to
Sparton for funds advanced to Xxxx prior to the Closing Date;
(ii) obligations or liabilities connected with the
operations of the Lake Odessa Plant;
(iii) any other obligations or liabilities which are not
"Assumed Liabilities".
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1.3 Purchase Price. The total purchase price for the Common Stock and the
Acquired Assets shall be Eighty Million Five Hundred Thousand Dollars
($80,500,000) (the "Purchase Price"), subject to adjustment as provided in
Section 1.4, payable in cash at the Closing in immediately available funds, plus
or minus any adjustments to the Purchase Price provided for in this Agreement.
The Purchase Price shall be allocated between the Common Stock and the Acquired
Assets as provided as mutually agreed upon by Buyer and Sparton.
1.4 Adjustment in Purchase Price. The purchase price shall be increased
dollar for dollar to the extent the sum of all cash advances by Sparton to the
KPI Subsidiaries and Xxxx exceeds the sum of all cash advances by the KPI
Subsidiaries and Xxxx to Sparton during the period beginning July 1, 1996, to
the Closing Date, or shall be decreased dollar for dollar to the extent the sum
of all cash advances by Sparton to the KPI Subsidiaries and Xxxx is less than
the sum of all cash advances by the KPI Subsidiaries and Xxxx to Sparton during
the same period. Such adjustment shall be determined and paid by Buyer to
Sparton or by Sparton to Buyer at the Closing. The purchase price will be
reduced to the extent that cash generated by the Gladwin Plant, or any other KPI
Subsidiary, was used to fund the operations of the Lake Odessa Plant since July
1, 1996, to the Closing Date. From time to time as reasonably requested by Buyer
following the date of this Agreement and as of and at the Closing, Sparton shall
furnish to Buyer a detailed accounting of all such cash advances and a
computation of the amount of such adjustment. If Buyer disputes the adjustment
calculated by Sparton as of Closing, then Deloitte & Touche shall determine the
amount of such adjustment and its determination shall be final and binding upon
Sparton and Buyer.
ARTICLE II
LEASE OF LEASED REAL ESTATE
2.1 Lease of Leased Real Estate. KPI has leased from Xxxx X. Xxxxx and
wife a parcel of real estate in Grand Haven, Michigan, and from Xxxxxx X. Xxxxx
and Xxxx X. Xxxxx and wife a parcel of real estate in White Cloud, Michigan (the
"Leased Real Estate"). At or before the Closing, Xxxx will purchase the Leased
Real Estate. By separate customary agreements consistent with the terms of this
Agreement and to be mutually agreed upon by Buyer and Xxxx, the Buyer and Xxxx
will enter into leases providing for the lease of the Leased Real Estate by
Buyer from Xxxx. Xxxx X. Xxxxx and wife and Xxxxxx X. Xxxxx are collectively
referred to herein as the "Smiths." The lease agreements shall be "triple net"
leases and shall provide for an aggregate annual rental equal to One Hundred
Thirty-five Thousand Dollars ($135,000). The leases shall also provide for a
purchase option to be exercised at the end of their five-year terms upon payment
of an aggregate option price equal to Fifty Thousand Dollars ($50,000). The
purchase option shall provide that both parcels of Leased Real Estate must be
purchased if the purchase option is exercised. The parties shall negotiate the
definitive lease agreements in good faith.
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ARTICLE III
CLOSING
3.1 Closing. The closing of the purchase and sale of the Common Stock and
Acquired Assets and Buyer's lease of the Leased Real Estate (the "Closing") will
be held at the offices of Varnum, Riddering, Xxxxxxx & Xxxxxxx, Grand Rapids,
Michigan, at 10 a.m. on a date which is no later than five (5) business days
following the date on which all the conditions set forth in Article IV hereof
have been fully satisfied or waived, or at such other place or on such other
date as may be mutually agreeable to the Buyer and Sparton. The date of closing
is referred to herein as the Closing Date. Subject to fulfillment of the
conditions set forth in this Agreement, at the Closing:
(a) Sparton will deliver stock certificates representing all the
shares of Common Stock, duly endorsed for transfer or accompanied by duly
executed stock powers, and Xxxx will deliver instruments of transfer and
conveyance of the Acquired Assets;
(b) Buyer will pay the Purchase Price as provided in Section 1.2
hereof, and deliver an instrument assuming the Assumed Liabilities;
3.2 Concurrent Closing. The closing of the purchase and sale of Common
Stock and Acquired Assets is conditioned upon the concurrent closing of the
lease of the Leased Real Estate and vice versa. The closing of each of the
transactions shall be effective simultaneously, and the closing of one shall not
be effective except upon the simultaneous closing of the others.
3.3 Release of Liens at Closing. At the Closing, Sparton agrees to use a
portion of the Purchase Price to obtain from lenders the release and discharge
of all security interests and liens then existing on the Common Stock, the
assets of the KPI Subsidiaries, and the Acquired Assets.
ARTICLE IV
CONDITIONS TO CLOSING
4.1 Conditions to Buyer's Obligations. The obligations of Buyer to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions on or before the Closing Date:
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(a) The representations and warranties of Sparton in Article VI
hereof will be true and correct in all material respects at and as of the
Closing Date as though then made.
(b) Sparton will have performed and complied in all material respects
with all of the covenants and agreements required to be performed by it
under this Agreement prior to the Closing.
(c) All third-party consents, waivers, and approvals which are
required for the sale and transfer of the Common Stock, the Acquired
Assets, and the consummation of the transactions contemplated hereby will
have been obtained upon terms reasonably satisfactory to Buyer, including
the waiver of any right to terminate any contracts to which any of the KPI
Subsidiaries or Xxxx is a party to or is bound. Consents to the assignment
of customer purchase orders are waived by Buyer and will not be required.
(d) All governmental filings, authorizations, and approvals which are
required for the sale and transfer of the Common Stock, the Acquired
Assets, and the consummation of the transactions contemplated hereby will
have been duly made and obtained on terms reasonably satisfactory to Buyer.
(e) No action or proceeding before any court or government body will
be pending or threatened wherein an unfavorable judgment, decree,
injunction, or order would prevent the performance of this Agreement or any
of the transactions contemplated hereby, or which might adversely affect
the right of Buyer to own, operate, or control the KPI Subsidiaries and the
Acquired Assets.
(f) All intercompany indebtedness reflected in the advance account
between Sparton and the KPI Subsidiaries shall have been satisfied at or
prior to the Closing Date.
(g) The shareholders of Sparton shall have authorized the sale of the
Common Stock and Acquired Assets to the Buyer upon the terms and conditions
of this Agreement, as required by the applicable provisions of the General
Corporation Law of the state of Ohio.
(h) Buyer will have received the opinion addressed to Buyer, dated
the Closing Date, of Varnum, Riddering, Xxxxxxx & Xxxxxxx LLP, counsel for
Sparton, with respect to the matters set forth in Exhibit B attached hereto
and in form and substance reasonably satisfactory to Buyer and its counsel.
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(i) On or prior to the Closing Date, Sparton will have delivered, or
caused to be delivered, to Buyer all of the following:
(i) a certificate in the form set forth in Exhibit C
attached hereto, dated the Closing Date, stating that the
conditions specified in Sections 4.1(a) through (g) above,
inclusive, have been satisfied;
(ii) copies of all third-party and governmental
consents, approvals, and filings required in connection with the
consummation of the transactions contemplated herein;
(iii) certificates representing the Common Stock and
instruments of Xxxx'x transfer and conveyance of the Acquired
Assets as required by Section 3.1(a);
(iv) the minute books, stock transfer records, and
corporate seals of the KPI Subsidiaries;
(v) resignations of the directors of the KPI
Subsidiaries, effective as of the Closing Date;
(vi) a good standing certificate for each of the
KPI Subsidiaries in their respective states of incorporation
and good standing certificates for each jurisdiction
in which each is required to be qualified to do business,
dated as of a date within ten (10) business days prior
to the Closing Date;
(vii) the articles of incorporation of each of the KPI
Subsidiaries certified by its state of incorporation and bylaws of
certified by its secretary;
(viii) the documents required by Sections 5.4 and 5.5
and, if required by Buyer's lenders, an estoppel letter from each
of the landlords of Leased Real Property and each other parcel
of real property leased by the KPI Subsidiaries or Xxxx, in form
and content reasonably satisfactory to Buyer and its lenders;
(ix) such other documents or instruments as Buyer
reasonably requests to effect the transactions contemplated
hereby.
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(j) The closing of Buyer's lease of the Leased Real Estate shall be
completed concurrently as contemplated by Section 3.2.
(k) The $100 million loan commitment issued to Buyer by Bank of
America, a copy of which has been furnished to Sparton, shall have been
funded at or before the Closing, or Buyer shall have obtained other
financing satisfactory to it needed to consummate the purchase of the
Common Stock and the Acquired Assets.
Any condition specified in this Section 4.1 may be waived in writing by
Buyer.
4.2 Conditions to the Obligations of Sparton. The respective obligations
of Sparton to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions on or before the Closing
Date:
(a) The representations and warranties of Buyer in Article VII hereof
will be true and correct in all material respects at and as of the Closing
Date.
(b) Buyer will have performed and complied in all material respects
with all of the covenants and agreements required to be performed by it
under this Agreement prior to the Closing.
(c) All governmental filings, authorizations, and approvals which are
required for the sale and transfer of the Common Stock and Acquired Assets
and the consummation of the transactions contemplated hereby will have been
duly made and obtained on terms reasonably satisfactory to Sparton.
(d) All intercompany indebtedness reflected in the advance account
between Sparton and the KPI Subsidiaries shall have been satisfied at or
prior to the Closing Date.
(e) The shareholders of Sparton shall have authorized the sale of the
Common Stock and Acquired Assets to the Buyer upon the terms and conditions
of this Agreement, as required by the applicable provisions of the General
Corporation Law of the state of Ohio.
(f) Sparton shall have received an opinion, dated the Closing Date,
of Xxxxxxxx & Xxxxx, counsel to Buyer, with respect to the matters set
forth in Exhibit D attached hereto, and in form and substance reasonably
satisfactory to Sparton and its counsel.
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(g) On or prior to the Closing Date, Buyer will have delivered to
Sparton all of the following:
(i) a certificate from Buyer in the form set forth in
Exhibit E attached hereto, dated the Closing Date, stating that
the preconditions specified in Sections 4.2(a) through (c) above
have been satisfied;
(ii) certified copies of the resolutions of Buyer's Board
of Directors approving the transactions contemplated by this
Agreement;
(iii) an instrument assuming the Assumed Liabilities;
(iv) such other documents or instruments as Sparton
may reasonably request to effect the transactions contemplated
hereby; and
(v) the Purchase Price.
(h) The closing of Buyer's lease of the Leased Real Estate shall be
completed concurrently as contemplated by Section 3.2
Any condition specified in this Section 4.2 may be waived in writing by
Sparton.
ARTICLE V
COVENANTS PRIOR TO CLOSING
5.1 Operation of KPI Subsidiaries Since June 30, 1996. Since June 30,
1996, neither Xxxx nor the KPI Subsidiaries have, without Buyer's written
consent, changed any officer's compensation, incentive arrangements, or other
benefits, except for customary annual increases in compensation.
5.2 Affirmative Covenants of Sparton. Prior to the Closing, Sparton
covenants and agrees as follows:
(a) Sparton will cause Xxxx and each of the KPI Subsidiaries to
conduct its business and maintain its properties in the ordinary course in
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accordance with past custom and practice, other than the winding down of
the affairs and relocation of jobs and assets of the plant at Lake Odessa,
Michigan.
(b) Sparton will, and will cause Xxxx and the KPI Subsidiaries to,
permit Buyer and its employees, agents, accounting and legal
representatives to have reasonable access at reasonable times and in a
manner so as not to interfere with the normal business operations of Xxxx
or the KPI Subsidiaries to their books, records, invoices, contracts,
leases, personnel, facilities, equipment, and other things reasonably
related to the business and assets of Xxxx and the KPI Subsidiaries.
(c) Promptly after Sparton acquires knowledge thereof, it will
inform Buyer in writing if any representation or warranty contained in
Article VI hereof was when made, or has subsequently become, untrue in any
material respect, or if any covenant of Sparton has been breached in any
material respect.
(d) Sparton will, and will cause Xxxx and the KPI Subsidiaries to,
cooperate with Buyer and use their reasonable best efforts to obtain all
governmental, third-party, or other consents and approvals necessary for
the consummation of the transactions contemplated hereby and to cause the
other conditions to Buyer's obligation to close to be satisfied;
(e) As requested by Buyer from time to time, Sparton will confer on a
regular and reasonably frequent basis with representatives of Buyer to
report on operational matters and the general status of ongoing operations;
(f) Sparton will maintain in effect until the Closing Date current
insurance policies providing coverage for the KPI Subsidiaries and the
Acquired Assets, or to replace such policies with coverage equal to or
greater than the coverage under the cancelled, terminated, or lapsed
policies; and
(g) Sparton will cause each of the KPI Subsidiaries and Xxxx to:
(i) use its best efforts to preserve intact its business
organization and goodwill, keep available the services of its
officers and employees as a group and maintain satisfactory
relationships with suppliers, distributors, customers, and others
having business relationships with it;
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(ii) not take any action which would render, or which
reasonably may be expected to render, any representation or
warranty made by Sparton in this Agreement untrue at, or prior
to, the Closing Date; and
(iii) notify Buyer of any emergency or other change in
the normal course of its business or in the operation of its
properties, or of any governmental or third-party complaints,
investigations, or hearings, if material to the operations or
financial condition of Xxxx and the KPI Subsidiaries as a whole,
or to Sparton's or Buyer's ability to consummate the transactions
contemplated by this Agreement.
(h) Sparton will, and will cause the KPI Subsidiaries and Xxxx to,
maintain the assets of the KPI Subsidiaries and the Acquired Assets in good
repair, order, and condition consistent with current needs, replace in
accordance with prudent practices its inoperable, worn out, or obsolete
assets with assets of good quality consistent with prudent practices and
current needs and, in the event of a casualty, loss, or damage to any of
such assets or properties prior to the Closing Date, whether or not the KPI
Subsidiaries or Acquired Assets are insured, either repair or replace such
damaged property or use the proceeds of such insurance in such other manner
as mutually agreed upon by Sparton and Buyer.
5.3 Covenants of Buyer. Prior to the Closing, Buyer will:
(a) Promptly (once it has knowledge thereof) inform Sparton in
writing of any material variances from the representations and warranties
contained in Article VII hereof or any material breach of any covenant
hereunder by Buyer; and
(b) Cooperate with Sparton and use its reasonable best efforts to
obtain all governmental, third-party, or other consents and approvals
necessary for the consummation of the transactions contemplated hereby and
to cause the other conditions to Sparton's obligation to close to be
satisfied.
5.4 Title Insurance. At Sparton's and Buyer's equal expense, Sparton
shall, with respect to real estate constituting the Gladwin Plant and to each
parcel of real estate owned by the KPI Subsidiaries at Closing, procure prior to
the Closing and furnish to Buyer an Owner's Policy of Title Insurance issued by
a title insurer satisfactory to the Buyer, insuring title to each such parcel to
be, respectively, in Xxxx or in the KPI Subsidiaries as of the
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Closing Date (subject only to the title exceptions described in Schedule
6.9(b)). The real estate constituting the Gladwin Plant and each parcel of real
estate owned by the KPI Subsidiaries at the Closing Date are also described in
Schedule 6.9(b).
5.5 Surveys. With respect to the Gladwin Plant and each parcel of real
property owned by the KPI Subsidiaries and as to which a title insurance policy
is to be procured pursuant to Section 5.4 above, at Buyer's request Sparton
shall furnish to Buyer, prior to the Closing, a survey of the real property,
prepared by a licensed surveyor, disclosing the location of all improvements,
easements, roadways, utility lines and other matters shown customarily on such
surveys, and showing access to public streets and roads (the "Survey"). The
Survey shall not disclose any encroachment from or onto the real property which
has not been cured or insured over prior to the Closing. The expense of such
surveys shall be borne equally by Buyer and Sparton.
5.6 Closing of Lake Odessa Plant. Prior to the Closing Date, Sparton will
cause Xxxx, at Sparton's expense, to:
(a) Discontinue operations at its plant in Lake Odessa, Michigan.
(b) Resource all customer jobs for which Xxxx has active purchase
orders, either to the Gladwin Plant or to other plants operated by the KPI
Subsidiaries, and terminate purchase orders for customer jobs which are not
resourced.
(c) Transfer and deliver to such plants all inventories, machinery,
equipment, and other assets (excluding real estate) owned by Xxxx which are
required to produce the customer jobs resourced to such plants.
Prior to the Closing, Sparton will offer to sell and transfer to Buyer
any of the machinery and equipment or other personal properties remaining
in the plant at Lake Odessa after the transfer of assets contemplated by
Section 5.6(b) has been completed. The cost of removing, transporting, and
reinstalling the machinery, equipment, or other properties purchased by
Buyer shall be borne by Buyer.
5.7 Negative Covenants of Xxxx and Sparton. Prior to the Closing, without
Buyer's prior written consent, Sparton shall cause Xxxx and the KPI Subsidiaries
not to, and Xxxx and the KPI Subsidiaries shall not, except as expressly
contemplated by this Agreement:
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(a) Terminate, modify, enter into any new, or amend any existing,
material contracts, agreements, commitments, or licenses to which Xxxx or
either of the KPI Subsidiaries is a party, except (i) in the ordinary
course of business consistent with past custom and practice (including, as
applicable, with respect to quantity and frequency) ("Ordinary Course of
Business"), and (ii) at arm's length with unaffiliated persons;
(b) Make any loans, enter into any transaction with any stockholders,
officers, directors, or affiliates of Sparton or the KPI Subsidiaries other
than intercompany transactions in the Ordinary Course of Business among
affiliates of Sparton and the KPI Subsidiaries, or make, other than in the
Ordinary Course of Business, or grant any increase in any employee's or
officer's compensation, or make or grant any increase in any employee
benefit plan, incentive arrangement or other benefit covering any of the
employees of Xxxx or the KPI Subsidiaries;
(c) Establish or, except in accordance with past practice, contribute
to any pension, retirement, profit sharing or stock bonus plan or
multiemployer plan covering the employees of Xxxx or the KPI Subsidiaries;
(d) Sell, transfer, contribute, distribute, or otherwise dispose of
any securities or assets of the KPI Subsidiaries or connected with the
Gladwin Plant, or agree to do any of the foregoing to any person, or
negotiate or have any discussions with any person with respect to any of
the foregoing, other than transactions in the Ordinary Course of Business
and except as contemplated by this Agreement.
5.8 PROXY; SHAREHOLDERS' VOTE. Promptly upon execution of this Agreement,
Sparton shall file with the Securities Exchange Commission a preliminary proxy
statement which shall include a statement to the effect that the Board of
Directors of Sparton unanimously recommends that the shareholders of Sparton
vote in favor of and adopt and approve this Agreement and the sale of the Common
Stock and the sale of the Acquired Assets pursuant to this Agreement, which
unanimous recommendation shall not be withdrawn. Sparton shall take all actions
necessary in accordance with applicable law to call and convene a meeting of the
shareholders of Sparton to consider, act upon, and vote upon the adoption and
approval of this Agreement, the sale of the Common Stock of the KPI
Subsidiaries, and the sale of the Acquired Assets. Sparton's shareholders'
meeting shall be held as promptly as practicable. Sparton shall ensure that the
shareholders' meeting is called, held, and conducted, and that all proxies
solicited in connection therewith are solicited in compliance with applicable
law.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
CONCERNING SPARTON AND THE KPI SUBSIDIARIES
As a material inducement to Buyer to enter into this Agreement, Sparton
represents and warrants to Buyer:
6.1 ORGANIZATION AND CORPORATE POWER. Xxxx and each of the KPI
Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the laws of the state of its incorporation and is qualified to do
business in every jurisdiction in which the nature of its business or its
ownership of property requires it to be qualified. Each has full corporate power
and authority and all licenses, permits, and authorizations necessary to own and
operate its properties and to carry on its business as now conducted. All such
authorizations and licenses are in full force and effect and shall remain in
full force and effect until the consummation of the transactions provided for in
this Agreement. The copies of the articles of incorporation and bylaws of each
which have been furnished to Buyer are correct and complete. The stock
certificate books and the stock record books of the KPI Subsidiaries are correct
and complete. None of the KPI Subsidiaries or Xxxx is in default under or in
violation of its respective articles of incorporation or bylaws.
6.2 AUTHORIZATION OF TRANSACTIONS. Sparton and Xxxx have full power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, subject to approval by Sparton's shareholders
as contemplated by Sections 4.1(g) and 4.2(e). This Agreement has been duly
executed and delivered by Sparton and Xxxx and constitutes the valid and binding
agreement of Sparton and Xxxx, enforceable in accordance with its terms, except
as enforceability hereof may be limited by bankruptcy or other laws affecting
creditors' rights generally and limitations on the availability of equitable
remedies.
6.3 CAPITALIZATION. The authorized and issued capital stock of the KPI
Subsidiaries is accurately described in Exhibit A. All of the issued shares
described therein are issued and outstanding and are owned of record by Sparton
in the number of shares set forth opposite their names, and at the Closing Date
will be free and clear of any security interests, claims, liens, pledges,
options, encumbrances, charges, voting trusts, proxies, or other arrangements or
restrictions whatsoever. All of the outstanding Common Stock has been duly
authorized by all necessary corporate action and is validly issued, fully paid,
and nonassessable. There are no outstanding or authorized stock appreciation
rights, phantom stock rights, or similar rights with respect to any of the KPI
Subsidiaries. There are no rights, subscriptions, warrants, options, conversion
rights or agreements of any kind outstanding to purchase or otherwise acquire
any shares of Common Stock or securities or obligations of
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any kind convertible into or exchangeable or exercisable for any shares of
Common Stock, except pursuant to this Agreement. No shares of the Common Stock
are reserved for any purpose.
6.4 SUBSIDIARIES. Neither of the KPI Subsidiaries has any subsidiaries.
6.5 ABSENCE OF CONFLICTS. The consummation of the transactions
contemplated hereby will not:
(a) Violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, or other restriction of any government,
governmental agency, regulatory body, or court to which Sparton, Xxxx, or
any of the KPI Subsidiaries is subject;
(b) Violate any provision of the articles of incorporation or bylaws
of Sparton, Xxxx, or any of the KPI Subsidiaries ;
(c) Conflict with, result in a breach of, constitute a default under,
or give any party the right to terminate any agreement, contract, lease,
license, instrument, or other arrangement to which Sparton, Xxxx, or any of
the KPI Subsidiaries is a party or by which any of them is bound or to
which any of their respective assets is subject; or
(d) Result in the imposition of any Liens upon any of the Acquired
Assets or any assets or the capital stock of any of the KPI Subsidiaries.
Except as set forth on Schedule 6.5 (the "Restrictions Schedule"), neither
Sparton, Xxxx, nor any KPI Subsidiary is required to give any notice, or obtain
the approval of any government or governmental agency in order for Xxxx to
transfer the Acquired Assets or for Sparton to transfer the Common Stock or
otherwise consummate the transactions contemplated by this Agreement.
6.6 FINANCIAL STATEMENTS. Sparton has furnished or prior to the Closing
Date will furnish Buyer with copies of the consolidated balance sheets and
statements of income and cash flow of Xxxx and the KPI Subsidiaries, unaudited
for the fiscal year ended June 30, 1995, and unaudited for the fiscal year ended
June 30, 1996, except for the KPI Subsidiaries, which are audited for the fiscal
year ended June 30, 1996. Each of the foregoing financial statements (including
the notes thereto) (the "Financial Statements") presents fairly the financial
condition and results of operations of Xxxx and the KPI Subsidiaries as of the
times and for the periods referred to therein, and has been prepared in
accordance with generally accepted accounting principles consistently applied
(except as noted therein). The balance
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sheet as of June 30, 1996, is referred to herein as the "Latest Balance Sheet,"
and June 30, 1996, as the "Balance Sheet Date."
6.7 ABSENCE OF UNDISCLOSED LIABILITIES. Neither Xxxx, with respect to the
Assumed Liabilities, nor either of the KPI Subsidiaries has any obligation or
liability in excess of $50,000 (whether accrued or unaccrued, whether absolute
or contingent, whether liquidated or unliquidated, whether known or unknown,
whether due or to become due) except:
(a) Obligations under contracts or commitments, other than breaches
thereof, described in Schedule 6.7 ("Liability Schedule"), or under
contracts and commitments which are not required to be disclosed thereon
due solely to the specific dollar thresholds and other requirements
contained in Schedule 6.7;
(b) Liabilities reflected on the Latest Balance Sheet;
(c) Liabilities which have arisen after the date of the Latest
Balance Sheet in the Ordinary Course of Business or otherwise in accordance
with the terms and conditions of this Agreement, none of which is a
liability for breach of contract, breach of warranty, tort, or
environmental liability; and
(d) Liabilities otherwise expressly disclosed in Schedule 6.7
attached hereto.
With respect to product warranty claims, Sparton's liability under this
Section 6.7 is limited as provided in Section 9.10.
6.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth in Schedule 6.8
(the "Developments Schedule"), and except as expressly contemplated by this
Agreement, since June 30, 1996, neither Xxxx nor either of the KPI Subsidiaries
has:
(a) Redeemed or repurchased, directly or indirectly, any shares of
capital stock or declared, set aside, or paid any dividends or made any
other distributions with respect to any shares of its capital stock, except
as contemplated by Sections 4.1(f) and 4.2(d);
(b) Issued or sold any notes, bonds, or other debt securities or any
equity securities, securities convertible, exchangeable, or exercisable
into equity securities, or warrants, options, or other rights to acquire
equity securities;
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(c) Mortgaged, pledged, or subjected to any lien, charge, or any
other encumbrance, any portion of its properties or assets;
(d) Entered into, amended, or terminated any lease, license,
agreement, or commitment involving more than $500,000 in the aggregate,
other than in the Ordinary Course of Business;
(e) Made or granted any bonus or any wage, salary, or compensation
increase in excess of $10,000 per year to any director, officer, or
employee, or modified or terminated any Plan (as defined in Section 6.22),
other than in the usual and Ordinary Course of Business, including bonuses
paid or payable to employees for the fiscal year ended June 30, 1996, in an
aggregate of not more than $130,000 (including $24,000 to Xx. Xxxxx);
(f) Made any capital expenditures or commitments therefor other
than capital expenditures in the Ordinary Course of Business, not exceeding
$500,000 in the aggregate.
(g) Suffered an adverse change to its business, assets, operations,
financial conditions, or operating results, or casualty loss or damage or
thefts of assets in excess of $50,000 (whether or not covered by insurance)
other than in the Ordinary Course of Business;
(h) Incurred or become subject to any liabilities, except liabilities
incurred in the Ordinary Course of Business;
(i) Discharged or satisfied any encumbrance or paid any obligation
or liability other than liabilities paid in the Ordinary Course of
Business, or prepaid any amount of indebtedness for borrowed money other
than adjustments of intercompany debt contemplated by this Agreement;
(j) Sold, leased, assigned, or transferred a portion of its tangible
assets, except in the Ordinary Course of Business, or cancelled without
fair consideration any debts or claims owing to or held by it; or
(k) Entered into any other material transaction or made any new
material investments, other than in the Ordinary Course of Business, or
materially changed any business practice.
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6.9 Real Property.
(a) Except as set forth in Schedule 6.9(a), neither Xxxx nor either
of the KPI Subsidiaries is a party to any real estate lease or sublease,
other than the leases of the Leased Real Estate.
(b) Schedule 6.9(b) attached hereto (the "Real Property Schedule")
lists and describes the Leased Real Estate, the Gladwin Plant, and all real
property which will be owned by the KPI Subsidiaries at the Closing Date.
With respect to each parcel of real property listed on Schedule 6.9(b) as
owned by Xxxx or the KPI Subsidiaries:
(i) except as disclosed on Schedule 6.9(b), each
owner has good and marketable title to the parcel of real
property owned by it, free and clear of all mortgages, pledges,
security interests, encumbrances, charges or other liens,
easements and other restrictions, other than easements,
covenants, and restrictions which do not materially or
unreasonably impair the current use or marketability of title of
the property subject thereto;
(ii) the legal description for the parcel contained in the
deed thereof describes such parcel fully and adequately and,
except as described in Schedule 6.9(b), the buildings and
improvements are located within the boundary lines of the
described parcels of land and are not in violation of applicable
zoning laws and ordinances;
(iii) all facilities have received all approvals of
governmental authorities (including licenses and permits)
required in connection with the ownership or operation thereof
and have been operated and maintained in accordance with
applicable laws, rules, and regulations;
(iv) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to
any party the right of use or occupancy of any portion of the
parcels of real property, except for the leases of the Leased Real
Estate;
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(v) there are no outstanding options or rights of first
refusal to purchase any parcel of real property, or any portion
thereof or interest therein;
(vi) there are no parties (other than Xxxx or the KPI
Subsidiaries) in possession of any parcel of real property;
(vii) all facilities located on the parcel of real property
are supplied with utilities and other services necessary for the
operation of such facilities as currently operated by Xxxx or the
KPI Subsidiaries, including gas, electricity, water, telephone,
and sanitary sewer;
(viii) each parcel of real property abuts on and has direct
vehicular access to a public road or access to a public road via
a permanent, irrevocable, appurtenant easement benefiting the
parcel of real property.
The representations in subsections (iii), (vii), and (viii) shall also
apply to the Leased Real Estate.
(c) There are no pending or, to Sparton's knowledge, threatened
condemnation proceedings, litigation, or administrative actions relating to
real property owned or leased by Xxxx or the KPI Subsidiaries.
6.10 Tangible Assets. The Acquired Assets and assets owned or leased by
the KPI Subsidiaries include all buildings, machinery, equipment, and other
tangible assets that are sufficient for the conduct of their businesses as
presently conducted, and such assets are, subject to normal wear and tear, in
good operating condition and repair.
6.11 Title to Personal Property. As of the Closing Date, Xxxx, with
respect to the Gladwin Plant, and each of the KPI Subsidiaries will have good
title to, or a valid leasehold interest in, all personal property used in
connection with the operation of its business. All personal property owned by
them will be free and clear of all Liens, except (a) as set forth in Schedule
6.11 attached hereto (the "Encumbrances Schedule"), and (b) liens for Taxes not
yet due and payable or being contested in good faith by appropriate proceedings
and in respect of which adequate reserves have been established.
6.12 Environmental Matters. Except as set forth in Schedule 6.12
("Environmental Schedule"):
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(a) Xxxx (with respect to the Gladwin Plant) and each of the KPI
Subsidiaries has complied and is in compliance with all Environmental and
Safety Requirements (as defined in subsection (j) below).
(b) Xxxx (with respect to the Gladwin Plant) and each of the KPI
Subsidiaries has obtained and is in compliance with all permits, licenses,
and other authorizations that are required pursuant to Environmental and
Safety Requirements for the occupation of its facilities and the operation
of its business, a list of which is set forth on Schedule 6.12.
(c) Neither Xxxx nor either of the KPI Subsidiaries (nor any of their
respective predecessors) has received any written or oral notice, report,
or information regarding actual or alleged violations of Environmental and
Safety Requirements or any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial, or corrective obligations relating to it or its
facilities arising under Environmental and Safety Requirements, the subject
of which has not been fully resolved or settled.
(d) None of the following exists at any property or facility owned or
operated by Xxxx or the KPI Subsidiaries: (i) underground storage tanks, or
(ii) landfills, surface impoundments, or disposal areas.
(e) None of the KPI Subsidiaries, Xxxx, or their respective
predecessors has treated, stored, disposed of, arranged for or permitted
the disposal of, transported, handled, or released any substance, including
without limitation any hazardous substance, or owned or operated any
property or facility (and no such property or facility is contaminated by
any such substance) in a manner that has given or would give rise to
liabilities, including any liability for response costs, corrective action
costs, personal injury, property damage, natural resources damages, or
attorney fees, pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Solid
Waste Disposal Act, as amended ("SWDA"), or any other Environmental and
Safety Requirements.
(f) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any obligations for
site investigation or cleanup, or notification to or consent of government
agencies, pursuant to any of the so-called "transaction-triggered" or
"responsible property transfer" Environmental and Safety Requirements.
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(g) Neither Xxxx (with respect to the Gladwin Plant) nor either of
the KPI Subsidiaries nor their respective predecessors or affiliates,
either expressly or by operation of law, has assumed or undertaken any
liability, including without limitation any corrective or remedial
obligations of any other person or entity relating to Environmental and
Safety Requirements.
(h) No Environmental Lien has attached to any of the Acquired Assets
or any property owned, leased, or operated by any of the KPI Subsidiaries.
(i) No facts, events, or conditions prior to Closing relating to the
past or present facilities, properties, or operations of the KPI
subsidiaries or any of their respective predecessors or affiliates will
prevent, hinder, or limit continued compliance with Environmental and
Safety Requirements in effect at the time of Closing, give rise to any
investigatory, remedial, or corrective obligations pursuant to
Environmental and Safety Requirements, or give rise to any other
liabilities (whether accrued, absolute, contingent, unliquidated, or
otherwise) pursuant to Environmental and Safety Requirements, including
without limitation any relating to onsite or offsite releases or threatened
releases of hazardous materials, substances or wastes, personal injury,
property damage, or natural resources damage.
(j) As used in this Agreement, the following terms shall have the
following respective meanings:
(i) "Environmental and Safety Requirements" shall
mean all federal, state, and local statutes, regulations,
ordinances, and similar provisions having the force or effect of
law, all judicial and administrative orders and determinations,
all contractual obligations, and all common law concerning
public health and safety, worker health and safety, and pollution
or protection of the environment in effect at or prior to the
Closing Date, including without limitation all those relating to
the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or
cleanup of any hazardous or otherwise regulated materials,
substances, or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls,
noise, or radiation,
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(ii) "Environmental Lien" shall mean a lien, either
recorded or unrecorded, in favor of any governmental entity
relating to any liability of Xxxx or either of the KPI Subsidiaries
arising under Environmental and Safety Requirements.
6.13 Accounts Receivable. Except as provided by Section 4.2(d), all of the
accounts receivable of Xxxx (of the kind to be included in the Acquired Assets)
and of the KPI Subsidiaries reflected on the Latest Balance Sheet and to be
reflected on their books and records as of the Closing Date have been collected
or will be collectible (net of the allowance for doubtful accounts and for
customary credits and allowances in the ordinary course consistent with past
practice) in the Ordinary Course of Business after the Closing Date at the
aggregate net amount recorded therefor on the books and records of Xxxx or the
KPI Subsidiaries as of the Closing Date. As of the Closing Date, no person or
entity will have any lien on such receivables or any part thereof.
At the Balance Sheet Date there were, and at the Closing Date Sparton
anticipates there will be, claims by Xxxx and the KPI Subsidiaries against
customers or others, and other receivables owed to them, relating to
transactions prior to the Closing Date which are not recorded or which are
underrecorded on their books and records at the Closing Date ("Unbooked and
Underbooked Receivables"). If, after the Closing Date, any Unbooked or
Underbooked Receivables are collected by the KPI Subsidiaries or the Buyer, the
Threshold Loss Amount stated in Section 9.3(b) shall be increased dollar for
dollar by the amount collected in excess of the amount recorded at the Closing
Date.
6.14 Inventory. The inventories of the KPI Subsidiaries reflected on the
Latest Balance Sheet Date on the Closing Date will be, stated at the lower of
original cost or market value in accordance with generally accepted accounting
principles consistently applied. The inventories reflected on the Latest Balance
Sheet, net of reserves applicable thereto, have been or will be utilized in the
Ordinary Course of Business.
6.15 Taxes.
(a) Sparton has timely filed consolidated income Tax Returns for
itself and members of the Affiliated Group of which Sparton is the common
parent (the "Sparton Affiliated Group"), including Xxxx and the KPI
Subsidiaries, required to be filed under the Internal Revenue Code of 1986,
as amended ("Code"). All material federal income Taxes due and payable by
the Sparton Affiliated Group with respect to each taxable period during
which Xxxx and either of the KPI Subsidiaries was a member of the Sparton
Affiliated Group have been paid. The KPI Subsidiaries have timely filed all
Tax Returns required to be filed by them. Each such Tax Return has been
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prepared in compliance with all applicable laws and regulations, and all
such Tax Returns are true and accurate in all respects. All Taxes due and
payable by Xxxx and the KPI Subsidiaries have been paid, and all such Taxes
accrued but not yet due as of June 30, 1996, are accrued on the Latest
Balance Sheet. Since June 30, 1996, neither Xxxx nor either of the KPI
Subsidiaries has incurred any liability for Taxes other than in the
Ordinary Course of Business.
The following Section 6.15(b) relates to the Michigan SBT returns and
income Tax Returns required to be filed by the KPI Subsidiaries.
(b) Except as set forth in Schedule 6.15 (the "Taxes Schedule"):
(i) neither Xxxx nor either of the KPI Subsidiaries has
waived any statute of limitations in respect of Taxes or
requested or been granted an extension of the time for filing any
Tax Return which has not yet been filed;
(ii) there is no action, suit, taxing authority proceeding
or audit now in progress, pending or, to Sparton's knowledge,
threatened against Xxxx or either of the KPI Subsidiaries with
respect to their Tax Returns;
(iii) there is no unresolved claim by a taxing authority
that Xxxx or either of the KPI Subsidiaries may be subject to
Taxes in a jurisdiction where Tax Returns are not filed;
(iv) neither Xxxx nor either of the KPI Subsidiaries is
a party to or bound by any Tax allocation or Tax sharing
agreement or has any current or potential contractual obligation
to indemnify any other person with respect to Taxes;
(v) no deficiency or proposed adjustment which has
not been settled or otherwise resolved for (A) any amount of
Tax has been proposed, asserted, or assessed by any taxing
authority against Xxxx or either of the KPI Subsidiaries, or (B)
any material amount of federal income Tax has been proposed,
asserted, or assessed against the Sparton Affiliated Group with
respect to any taxable period during which Xxxx or either of the
KPI Subsidiaries was a member of such Affiliated Group;
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(vi) neither Xxxx nor either of the KPI Subsidiaries will be required
(A) as a result of a change in method of accounting for a taxable period
ending on or prior to the Closing Date, to include any adjustment in
taxable income for any taxable period (or portion thereof) ending after the
Closing Date, (B) as a result of any "closing agreement" as described in
Code Section 7121 (or any corresponding provision of state, local, or
foreign law), to include any item of income in, or exclude any item of
deduction from, taxable income for any period (or portion thereof) ending
after the Closing Date, or (C) as a result of any deferred intercompany
gain described in Treasury Regulations Section 1.1502-13 (or any
corresponding or similar provision of state, local, or foreign law), to
include any item of income in taxable income for any period (or portion
thereof) ending after the Closing Date; and
(vii) since January 1, 1987, neither Xxxx nor either of
the KPI Subsidiaries has been a member of an Affiliated Group
other than Sparton Affiliated Group.
(c) The Buyer will not be required to deduct and withhold any
amount pursuant to Section 1445(a) of the Code upon the transfer of the
Common Stock to the Buyer.
(d) Schedule 6.15 contains a list of states, territories, and
jurisdictions (whether foreign or domestic) in which each of the KPI
Subsidiaries is required to file Tax Returns relating to its income Taxes.
(e) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Affiliated Group" means an affiliated group as
defined in Section 1504 of the Code (or any analogous
combined, consolidated, or unitary group defined under state,
local or foreign income Tax law).
(ii) "Tax" or "Taxes means any federal, state,
provincial, local, foreign, or other income, gross receipts, ad
valorem, franchise, profits, single business, sales or use,
transfer, registration, excise, utility, environmental,
communications, real or personal property, capital stock,
license, payroll, wage or other withholding, employment, social
security, severance, stamp, occupation, alternative, or add-on
minimum, estimated, or other Taxes of any kind whatsoever
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(including, without limitation, deficiencies, penalties, additions
to Tax, and interest attributable thereto), whether disputed or
not.
(iii) "Tax Return" means any return, information
report, or filing with respect to Taxes, including any schedules
attached thereto and including any amendment thereof.
(iv) "Treasury Regulations" means the United States
Treasury Regulations promulgated under the Code, and any
reference to any particular Treasury Regulation section shall be
interpreted to include any final or temporary revision of or
successor to that section regardless of how numbered or
classified.
6.16 CONTRACTS AND COMMITMENTS.
(a) Except as specifically contemplated by this Agreement and
except as set forth or referred to in Schedule 6.16 (the "Contracts
Schedule"), neither Xxxx nor either of the KPI Subsidiaries is a party to
nor bound by, whether written or oral, any:
(i) collective bargaining agreement or contract with
any labor union;
(ii) contract for the employment of any officer,
individual employee, or other person, or any severance
termination agreements (other than at-will employment
agreements with its employees);
(iii) agreement under which Xxxx or either of the KPI
Subsidiaries has incurred, assumed, or guarantied any
indebtedness for borrowed money or any capitalized lease
obligation, or created or suffered to exist a security interest,
pledge, or other lien on any of its assets;
(iv) contract which prohibits it from freely engaging
in business anywhere in the world;
(v) agreement pursuant to which Xxxx or either of the
KPI Subsidiaries subcontracts work to third parties;
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(vi) other agreement material to it whether or not
entered into in the Ordinary Course of Business.
(vii) license or royalty agreements;
(viii) lease or agreement under which it is lessee of, or
holds or operates, any personal property owned by any other
party calling for payments in excess of $100,000 annually;
(ix) except for customer purchase orders, contract or
group of related contracts with the same party for the purchase
of supplies, products, or other personal property, or for the
receipt of services which either calls for performance over a
period of more than six (6) months or involves a sum of more
than $100,000, provided that the list of such contracts in this
Section 6.16(a)(ix) shall be delivered to Buyer after the date
hereof but prior to the date of Closing;
(x) take or pay contracts; or
(xi) contracts or agreements with any officers,
stockholder, or affiliate of Sparton, Xxxx, or the KPI
Subsidiaries.
(b) With respect to each agreement and contract required to be
disclosed on Schedule 6.16:
(i) such agreement or contract is legal, valid, binding,
and enforceable in accordance with its terms, and is in full force
and effect;
(ii) neither Xxxx nor either of the KPI Subsidiaries is
in breach or default of any such contract or agreement to which
it is a party and no event has occurred which with notice or lapse
of time would constitute a breach or default; or
(iii) to the best of Sparton's knowledge, no third party
is in breach or default of any such contract or agreement, and no
event has occurred which with notice or lapse of time would
constitute a breach or default by such third party.
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(c) Sparton, Xxxx, or the KPI Subsidiaries have provided Buyer with
a true and correct copy of all written contracts which are referred to on
Schedule 6.16, together with all amendments thereto.
6.17 INTELLECTUAL PROPERTY RIGHTS.
(a) "Intellectual Property Rights" shall mean all of the following
items owned by, issued to, or licensed to each of Xxxx and the KPI
Subsidiaries, along with all income, royalties, and payments due or payable
at the Closing or thereafter; patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not
reduced to practice) and any reissues, continuations, continuations in
part, revisions, extensions, or reexamintions thereof, trademarks, service
marks, logos, trade names, (but not corporate names), together with all
goodwill associated therewith, copyrights and copyrightable works, Internet
domain names, and all registrations, applications, and renewals of any of
the foregoing; trade secrets and confidential business information;
computer software; and any other intellectual property rights, including
without limitation those listed on Schedule 6.17 (the "Intellectual
Property Rights Schedule"). "Intellectual Property Rights" expressly do not
include the right or license to use the name "Sparton" in any trade name or
otherwise, or to use any other intellectual property rights owned by or
licensed to Sparton. The right of use of the name "Sparton" by the KPI
Subsidiaries shall terminate as of the Closing Date. The right to use the
name "Sparton" is not included in the Acquired Assets.
(b) The Intellectual Property Rights comprise all of the intellectual
property rights necessary for the operation of the business of Xxxx and
each of the KPI Subsidiaries as currently conducted or as currently
proposed to be conducted.
(c) Except as set forth in Schedule 6.17(c):
(i) as a group, Xxxx and the KPI Subsidiaries own
and at the Closing will own all right, title, and interest in and to,
or have a valid and enforceable license to use, the Intellectual
Property Rights, and no written claim by any third party
contesting the validity, enforceability, use, or ownership of any
of the Intellectual Property Rights has been made to an officer
or director of Xxxx or any of the KPI Subsidiaries;
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(ii) neither Xxxx nor either of the KPI Subsidiaries has received
any written notice of, nor, to the knowledge of their respective
directors and officers, is aware of any facts which indicate the
likelihood of, any infringement or misappropriation by or conflict
with any third party with respect to the Intellectual Property Rights.
All of the Intellectual Property Rights are or will be owned by, or
properly assigned or licensed to, Xxxx or the KPI Subsidiaries at the time of
the Closing, as set forth in the Intellectual Property Rights Schedule. Except
as set forth in the Intellectual Property Rights Schedule, the transactions
contemplated by this Agreement will have no material adverse effect on the
right, title, and interest in and to the Intellectual Property Rights or the
validity and enforceability thereof. Xxxx and the KPI Subsidiaries have taken
all necessary and desirable action to maintain and protect the Intellectual
Property Rights and will continue to maintain and protect the Intellectual
Property Rights prior to the Closing so as to not materially adversely affect
the validity or enforceability of the Intellectual Property Rights. To the best
knowledge of Xxxx and the KPI Subsidiaries, the owners of any Intellectual
Property Rights licensed to them have taken all necessary and desirable action
to maintain and protect the Intellectual Property Rights subject to such
licenses.
6.18 LITIGATION; PROCEEDINGS. Except as set forth on Schedule 6.18 (the
"Litigation Schedule"), there are no actions, suits, proceedings, orders, or
investigations pending or, to the best of Sparton's knowledge, threatened
against Xxxx or either of the KPI Subsidiaries before any federal, state,
municipal, or other governmental department, commission, board, bureau, agency,
or instrumentality, domestic or foreign, and neither Xxxx nor the KPI
Subsidiaries is subject to any judicial orders, judgments, or decrees.
6.19 BROKERAGE. Except for claims under Sparton's agreement with Xxxxxxx
Associates, Inc., there are no claims for brokerage commissions, finder's fees,
or similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of Sparton,
Xxxx, or the KPI Subsidiaries.
6.20 GOVERNMENTAL LICENSES AND PERMITS. Schedule 6.20 (the "Licenses
Schedule") sets forth permits, licenses, approvals, and other authorizations of
federal, state, and local governments, or other similar rights (collectively,
the "Government Licenses") owned by Xxxx or the KPI Subsidiaries or used in the
conduct of their respective businesses. Except as indicated on Schedule 6.20,
Xxxx and each of the KPI Subsidiaries owns or possesses all right, title, and
interest in and to all of the government licenses which are necessary to conduct
its business as presently constituted. No loss or expiration of any
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government license is pending or, to Sparton's knowledge, threatened, other than
expiration in accordance with the terms thereof.
6.21 EMPLOYEES. To Sparton's and Xxxx'x knowledge, no key executive
employee and no group of employees of Xxxx or either of the KPI Subsidiaries has
any plans to terminate employment. Xxxx and each of the KPI Subsidiaries has
complied in all material respects with all applicable laws relating to the
employment of personnel and labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining, and the payment of
social security and other taxes.
Xxxx and each of the KPI Subsidiaries has complied with the requirements of
the Workers Adjustment and Retraining Notification Act (WARN) and all similar
state laws, and the closing of Xxxx'x plant at Lake Odessa, Michigan, will not
result in any obligation to any of the KPI Subsidiaries under WARN or similar
state law.
6.22 EMPLOYEE BENEFIT PLANS.
(a) Schedule 6.22 (the "Employee Benefit Plans Schedule") contains
an accurate and complete list of all Plans, as defined below, maintained by
Xxxx or each of the KPI Subsidiaries. For purposes of this Agreement, the
term "Plans" shall mean:
(i) employee benefit plans as defined in the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"); and
(ii) fringe benefit plans, policies, programs, and
arrangements, including without limitation stock bonus, deferred
compensation, pension, severance, bonus, vacation, incentive,
and health and welfare plans.
Except as set forth on Schedule 6.22, neither Xxxx nor either of the KPI
Subsidiaries has any obligation to contribute to any "multiemployer pension
plan," as such term is defined in Section 3(37) of ERISA, or with respect
to any employee benefit plan of the type described in Sections 4063 and
4064 of ERISA or in Section 413(c) of the Code.
(b) Neither Xxxx nor either of the KPI Subsidiaries contributes to
any Plan which provides health, life insurance, accident, or other
"welfare-
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type" benefits to current or future retirees, their spouses or dependents,
other than in accordance with applicable federal or state continuation
coverage law.
(c) Each Plan and all related trusts, insurance contracts and funds
have been maintained, funded, and administered in compliance in all
respects with all applicable laws and regulations, including but not
limited to ERISA and the Code.
(d) Each Plan that is intended to be qualified under Section 401(a)
of the Code, and each trust (if any) forming a part thereof, has received a
favorable determination letter from the Internal Revenue Service ("IRS") as
to the qualification under the Code of such Plan and the tax-exempt status
of such related trust, and nothing has occurred since the date of such
determination letter that could adversely affect the qualification of such
Plan or the tax-exempt status of such related trust.
(e) With respect to each Plan, Sparton has provided Buyer with true,
complete and correct copies, to the extent applicable, of:
(i) all documents pursuant to which the Plans are maintained,
funded, and administered;
(ii) the June 30, 1995, annual report (Form 5500 series) filed
with the IRS;
(iii)the June 30, 1995, financial statements;
(iv) all governmental rulings, determinations, and opinions (and
pending requests for governmental rulings, determinations, and
opinions); and
(f) None of the KPI Subsidiaries nor any member of the controlled
group of companies (within the meaning of Section 414 of the Code), which
includes the KPI Subsidiaries, has incurred any liability to the PBGC
(other than PBGC premiums) or otherwise under Title IV of ERISA, and no
event exists which would reasonably be expected to result in any such
liability.
6.23 Insurance. Schedule 6.23 attached hereto (the "Insurance Schedule")
sets forth the following information with respect to each insurance policy
insuring the properties, business, or assets of Xxxx and each of the KPI
Subsidiaries:
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(a) The name of the insurer, the name of the policyholder, and the
name of each covered insured;
(b) The scope, period, and amount of coverage; and
(c) A description of any retroactive premium adjustments or other
loss-sharing arrangements.
6.24 Officers and Directors; Bank Accounts. Schedule 6.24 attached hereto
(the "Officers and Directors Schedule") lists all officers and directors of each
of the KPI Subsidiaries and all of the bank accounts of Xxxx and the KPI
Subsidiaries (designating each authorized signatory).
6.25 Affiliate Transactions. Except for the sale of the Leased Real
Property by the Smiths to Xxxx and except as disclosed on Schedule 6.25 attached
hereto (the "Affiliate Transactions Schedule"), no officer or director of
Sparton or Xxxx or any of the KPI Subsidiaries, or any person related by blood
or marriage to any such person or any entity in which any such person owns any
beneficial interest (collectively, the "insiders"), is a party to any agreement,
contract, commitment, or transaction with Xxxx or either of the KPI Subsidiaries
or has any interest in any property, real or personal or mixed, tangible or
intangible, used in or pertaining to the business of Xxxx or any of the KPI
Subsidiaries.
6.26 Compliance with Laws. Xxxx and each of the KPI Subsidiaries and its
officers, directors, agents, and employees have complied in all material
respects with all applicable laws and regulations of federal, state, and local
governments and all agencies thereof (other than Environmental and Safety
Requirements which are covered by Section 6.12) which affect their business, and
no claims have been filed against any of them alleging a violation of any such
laws or regulations.
6.27 Disclosure. Neither this Agreement, nor any of the schedules,
attachments, or exhibits hereto prepared by Sparton, contain any untrue
statement of a material fact with respect to Xxxx or the KPI Subsidiaries, or
omit a material fact necessary to make the statement contained herein or
therein, in light of the circumstances in which they were made, misleading.
6.28 Closing Date. All of the representations and warranties contained in
this Article VI and elsewhere in this Agreement and all information delivered to
Buyer in any schedule, attachment or exhibit hereto are true and correct on the
date of this Agreement and will be true and correct on the Closing Date, except
to the extent that Sparton has otherwise advised Buyer in writing prior to the
Closing.
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6.29 Product Warranties. Xxxx and the KPI Subsidiaries have not made any
warranties with respect to the products manufactured and/or sold by them other
than those warranties expressly made in the literature accompanying such
products, the purchase orders for such products, and warranties implied by law.
6.30 Tooling Invoices. All invoices issued by the KPI Subsidiaries prior
to June 30, 1996, to customers for tooling costs correctly reflect the amount
owed for such tooling.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to Sparton to enter into this Agreement, Buyer
hereby represents and warrants to Sparton that:
7.1 Organization and Corporate Power. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the state of
Delaware, with full corporate power and authority to enter into this Agreement.
7.2 Authorization. The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all requisite corporate action on the part of
Buyer, and no other corporate proceedings on its part are necessary to authorize
the execution, delivery, or performance of this Agreement. This Agreement
constitutes a valid and binding obligation of Buyer, enforceable in accordance
with its terms, except as enforceability hereof may be limited by bankruptcy or
other laws affecting creditor's rights generally and limitations on the
availability of equitable remedies.
7.3 No Violation. Buyer is not subject to or obligated under its articles
of incorporation, its bylaws, any applicable law, or rule or regulation of any
governmental authority, or any agreement or instrument, or any license,
franchise, or permit, or subject to any order, writ, injunction, or decree,
which would be breached or violated by its execution, delivery, or performance
of this Agreement.
7.4 Governmental Authorities and Consents. Except for its filing under
the Xxxx-Xxxxx-Xxxxxx Act, Buyer is not required to submit any notice, report or
other filing with any governmental authority in connection with the execution or
delivery by it of this Agreement or the consummation of the transactions
contemplated hereby or thereby. No consent, approval, or authorization of any
governmental or regulatory authority or any other party or person is required to
be obtained by Buyer in connection with its execution, delivery, and performance
of this Agreement or the transactions contemplated hereby or thereby.
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7.5 Brokerage. There are no claims for brokerage commissions, finders'
fees, or similar compensation in connection with the transactions contemplated
by this Agreement based on any arrangement or agreement made by or on behalf of
Buyer.
7.6 Litigation. There are no actions, suits, proceedings, orders, or
investigations pending or, to the best of Buyer's knowledge, threatened against
Buyer before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign,
which would adversely affect Buyer's performance under this Agreement or the
consummation of the transactions contemplated hereby.
7.7 Buyer's Investment Representations. Buyer represents that it is
acquiring the Common Stock purchased hereunder with the present intention of
holding such securities for investment purposes and that it has no intention of
selling such securities in a public distribution in violation of federal or
state securities laws; provided that nothing contained herein will prevent Buyer
from transferring such securities pursuant to:
(a) Public offerings registered under the Securities Act of 1933, as
amended;
(b) Rule 144 of the Securities and Exchange Commission (or any
similar rule then in force) if such rule is available; or
(c) Any other legally available means of transfer.
7.8 Disclosure. Neither this Agreement, nor any of the schedules,
attachments, or exhibits hereto prepared by Buyer, contain any untrue statement
of a material fact with respect to the Buyer or, omit a material fact necessary
to make the statements contained herein or therein, in light of the
circumstances in which they were made, misleading.
7.9 Closing Date. All of the representations and warranties contained in
this Article VII and elsewhere in this Agreement, and all information delivered
to Sparton in any schedule, attachment or exhibit hereto are true and correct in
all material respects on the date of this Agreement and will be true and correct
in all material respects on the Closing Date, except to the extent that Buyer
has advised Sparton otherwise in writing prior to the Closing.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
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(a) By mutual written consent of Buyer and Sparton; or
(b) By either Buyer or Sparton if the Closing has not occurred on or
prior to December 31, 1996, provided that neither Buyer nor Sparton will be
entitled to terminate this Agreement pursuant to this Section 8.1(b) if
such person's willful breach of this Agreement has prevented satisfaction
of the conditions or the consummation of the transactions contemplated
hereby at or prior to such time.
8.2 Effect of Termination. If this Agreement is terminated as provided
above, this Agreement will forthwith become void and there will be no liability
on the part of any party hereto to any other party hereto, except for the
obligations of the parties hereto in Sections 9.4, 9.5, and 10.1, and except
that nothing herein will relieve any party from any breach of this Agreement
prior to such termination.
ARTICLE IX
ADDITIONAL AGREEMENTS
9.1 Survival. Subject to the limitations set forth in Section 9.3 below,
all representations, warranties, covenants, and agreements set forth in this
Agreement or in any writing delivered in connection with this Agreement will
survive the Closing Date and the consummation of the transactions contemplated
hereby.
9.2 Sparton's Guaranty; Buyer's Indemnification. Schedule 9.2 sets forth
the obligations of any of the KPI Subsidiaries which are guarantied by Sparton
("Guarantied Obligations"). Buyer agrees to indemnify Sparton and hold it
harmless against any loss, liability, damage, or expense (including reasonable
legal fees and costs) which Sparton may suffer, sustain, or become subject to by
reason of any claim, suit, action, or liability brought or asserted against
Sparton for payment of all or any part of the Guarantied Obligations. The
provisions in Section 9.3(d) relating to the defense of the claim by Buyer, as
the Indemnifying Party, and the rights of Sparton, as the Indemnified Party,
shall apply to claims, suits, actions, and liabilities brought or asserted
against Sparton relating to Guarantied Obligations.
9.3 General Indemnification.
(a) Subject to the limitations set forth in (b) below, Sparton agrees
to indemnify Buyer, its officers, directors, and stockholders (the "Buyer
Parties") and hold them harmless against any loss, liability, deficiency,
damage, or expense (including reasonable legal expenses and costs) which
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Buyer Parties may suffer, sustain or become subject to, as a result of (i)
the breach of any representation or warranty made by Sparton in Article VI
of this Agreement, provided that, for purposes of determining whether a
breach of any representation or warranty set forth in Section 6.12 of this
Agreement has occurred, such representation and warranty shall be read
without any exception for disclosed matters, and, in particular, any
reference to the matters set forth on Schedule 6.12 shall be disregarded
and ignored, (ii) the breach of any other representation, warranty,
covenant, or agreement made by Sparton in this Agreement, and (iii) the
Excluded Liabilities.
(b) The indemnification provided for by Sparton in Section 9.3(a)(i)
above is subject to the following limitations:
(i) Sparton will be liable to Buyer Parties only if
Buyer gives Sparton written notice thereof within twelve (12)
months after the Closing Date; except for claims arising from
breaches of the representations and warranties; (A) set forth in
Section 6.12 as to which claims must be made within forty-two
(42) months after the Closing Date; (B) set forth in Sections 6.7,
6.18, and 6.22 as to which claims must be made within twenty-four
(24) months after the Closing Date; (C) set forth in
Section 6.15 as to which claims must be made prior to the
expiration of the applicable statute of limitation with respect
thereto; and (D) set forth in Sections 6.1, 6.2, 6.3, 6.5 and 6.19
as to which claims may be made at any time.
(ii) except for those matters set forth in Sections 6.15
and 6.18, Sparton will not be liable to Buyer Parties for any such
loss, liability, damage, or expense unless the aggregate amount
of all such losses, liabilities, damages, and expenses relating to
all such breaches exceeds $1,000,000 (the "Threshold Loss
Amount") and, in the event that the aggregate amount of all such
losses, liabilities, damages, and expenses exceeds the Threshold
Loss Amount, Sparton shall be liable only for the excess over
the Threshold Loss Amount and, in any event, Sparton's liability
for such losses, liabilities, damages, and expenses shall not
exceed $15 million (except that the limitation on Sparton's
liability to Buyer with respect to losses, liabilities, damages, and
expenses resulting from a breach of Sections 6.1, 6.2, 6.3, 6.5,
and 6.19 shall not exceed the Purchase Price and shall not be
subject to the condition of the Threshold Loss Amount). The
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Threshold Loss Amount shall be increased dollar for dollar, both
as provided in Section 6.13, and, if after the Closing Date, any
liability recorded on the books and records of a KPI Subsidiary
at the Closing Date or included in the Acquired Assets is
satisfied for an amount less than the recorded amount.
(iii) If Sparton becomes liable to Buyer after the
aggregate amount of losses ($1,000,000) set forth in
subparagraph (ii) is exceeded, Sparton nevertheless shall not be
liable for any losses, liabilities, damages, or expenses the Buyer
Parties may suffer, sustain, or become subject to, if such losses,
liabilities, damages, or expenses resulting from a claim with
respect to any particular breach are less than $10,000; provided
that (A) if the losses, liabilities, damages, or expenses related to
such claim equals or exceeds $10,000, Sparton shall be liable for
the entire amount of the losses, liabilities, damages, or expenses
related thereto, and (B) for purposes of this provision, any claim
or series of claims arising out of or relating to the same, similar,
or related facts, circumstances, occurrences, transactions, or
conditions shall constitute one claim with respect to any
particular breach.
(iv) Sparton's agreement to indemnify Buyer against
losses, liabilities, deficiencies, damages, or expenses arising
from customer product liability claims shall be governed by and
limited as provided in Section 9.10.
(c) Buyer agrees to indemnity Sparton and hold it harmless against
any loss, liability, damage, or expense (including reasonable legal
expenses and costs) which Sparton may suffer, sustain, or become subject
to, as the result of a breach of any representation, warranty, covenant, or
agreement by Buyer contained in this Agreement; provided, however, that
Buyer will not be liable to Sparton for any such loss, liability,
deficiency, damage, or expense relating to breaches of Buyer's
representations and warranties contained in Article VII hereof unless the
aggregate amount of such losses, liabilities, deficiencies, damages, or
expenses resulting to Sparton from all breaches or claims exceeds
$1,000,000, and in the event that the aggregate amount of all such losses,
liabilities, damages, and expenses exceeds $1,000,000, Buyer shall be
liable only for the excess over $1,000,000; provided further, that Buyer
will not be liable for any loss, liability, deficiency, damage, or expense
relating to breaches of Buyer's representations and warranties contained in
Article VII
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(except Sections 7.1, 7.2, and 7.3) hereof unless written notice of such
breach is given by Sparton to Buyer within two (2) years of the Closing
Date.
(d) If a party hereto seeks indemnification under this Section 9.3 or
Section 9.10, such party (the "Indemnified Party") shall give written
notice to the other party (the "Indemnifying Party") of the facts and
circumstances giving rise to the claim. If any suit, action, claim,
liability, or obligation shall be brought or asserted by any third party
which, if adversely determined, would entitle the Indemnified Party to
indemnity pursuant to this Section 9.3 or Section 9.10, the Indemnified
Party shall promptly notify the Indemnifying Party of the same in writing,
specifying in detail the basis of such claim and the facts pertaining
thereto and the Indemnifying Party, if it so elects, shall assume and
control the defense thereof (and shall consult with the Indemnified Party
with respect thereto),including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of expense. If the
Indemnifying Party elects to assume and control the defense, the
Indemnified Party shall have the right to employ counsel separate from
counsel employed by the Indemnifying Party in any such action and to
participate in the defense thereof, but the fees and expenses of such
counsel employed by the Indemnified Party shall be at the expense of the
Indemnified party unless the Indemnifying Party has failed to assume the
defense or employ counsel reasonably acceptable to the Indemnified Party.
The Indemnifying Party shall not be liable for any settlement of any such
action or proceeding effected without the written consent of the
Indemnifying Party, provided that, if there shall be a final judgment for
the plaintiff in any such action, the Indemnifying Party agrees to
indemnify and hold harmless the Indemnified Party from and against any loss
or liability by reason of such judgment.
(e) The foregoing indemnification provisions are in addition to, and
not in derogation of, any statutory or common law remedy any party may have
for misrepresentation, breach of warranty, or breach of covenant.
9.4 Investigation and Confidentiality.
(a) Prior to the Closing Date, Buyer may make or cause to be made
such investigation of the business and properties of the KPI Subsidiaries
and the Acquired Assets as it deems necessary or advisable to familiarize
itself therewith. Sparton agrees to permit Buyer, its representatives and
representatives of the financial institutions which are considering
participation in the financing of this transaction to (i) have full access
to the premises, books, and records of Xxxx and the KPI Subsidiaries at
reasonable hours, (ii)
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visit and inspect any of their properties, and (iii) discuss their affairs,
finances, and accounts with the directors, officers, key employees, key
customers, key suppliers, and independent accountants.
(b) If the transactions contemplated by this Agreement are not
consummated, Buyer will not disclose or use at any time any information and
materials obtained during its investigation, and Buyer and its
representatives will return to Sparton originals of and destroy copies of
all memoranda, notes, plans, records, documentation, and other materials
obtained in connection with the transactions contemplated by this Agreement
no matter where such material is located and no matter what form the
material may be in, which Buyer may then possess or have under its control.
In the event of the breach of any of the provisions of this Section 9.4,
Sparton may apply to any court of law or equity of competent jurisdiction
for specific performance and/or injunctive or other relief (without the
posting of bond or other security) in order to enforce or prevent any
violations of the provisions hereof.
9.5 Expenses. Except as otherwise provided herein, Buyer will pay all of
its, and Sparton will pay all of its, expenses (including fees and expenses of
legal counsel, investment bankers, brokers, or other representatives and
consultants, and appraisal fees and expenses) incurred in connection with the
negotiation of this Agreement, the performance of its obligations hereunder, and
the consummation of the transactions contemplated hereby.
9.6 Noncompete. Sparton and Xxxx agree that for a period of four (4)
years after the Closing Date, (a) they will not, directly or indirectly, engage
in any business which is the same or substantially similar to the business now
conducted at the Gladwin Plant or by any of the KPI Subsidiaries, provided that
Sparton may purchase up to an aggregate of 5 percent of the outstanding voting
securities of any entity whose securities are listed on a national securities
exchange or traded in the NASDAQ national market system, (b) it will not induce
or attempt to induce any employee at the Gladwin Plant or of the KPI
Subsidiaries to accept employment by Sparton or one of its affiliated
corporations, (c) induce or attempt to induce any customer or supplier of Buyer
as owner of the Acquired Assets or any of the KPI Subsidiaries to cease doing
business with any of them, or otherwise to interfere with the business
relationship between any of the customers and suppliers of the KPI Subsidiaries
or the Gladwin Plant, or (d) disclose to any third party any confidential or
proprietary information about the businesses or operations of the KPI
Subsidiaries.
9.7 Tax Matters.
(a) Tax Claims. Sparton is responsible for payment of all federal
and state income Taxes and state of Michigan SBT taxes owed for all periods
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through June 30, 1996, and shall indemnify Buyer for any such Income Taxes
which are not accrued on the Latest Balance Sheet, and for any income Taxes
with respect to any consolidated Tax Return for any period ending on or
prior to the Closing Date, subject to Buyer's obligation to indemnify
Sparton for certain of such income Taxes and state of Michigan SBT taxes as
set forth in Section 9.7(c). Buyer agrees that Sparton shall have the right
and authority in its own name and in the name of the KPI Subsidiaries both
to defend claims by any taxing authorities for additional Taxes with
respect to such taxable periods, and to pursue claims for refunds of Taxes
paid or payable with respect to such fiscal years. With respect to claims
for refunds, Sparton shall retain all amounts collected in pursuit of such
claims. Sparton shall also have the right to settle claims by taxing
authorities for additional Taxes, and to settle its claims for refunds,
upon such terms and conditions as it shall see fit in its discretion,
provided that, Sparton shall not, without Buyer's consent, agree to any
settlement with respect to any Tax if such settlement could adversely
affect the past, present, or future Tax liability of Buyer, any of its
affiliates or, upon the Closing, any of the KPI Subsidiaries. Sparton shall
be responsible for all costs and expenses incurred in connection with the
defense of or in pursuit of such Tax claims, including legal fees and
expenses, litigation costs, and the cost of filing amended Tax Returns.
Buyer agrees to cause the KPI Subsidiaries, their officers, agents, and
employees to cooperate with and assist Sparton, as reasonably requested, in
Sparton's defense of or pursuit of such Tax claims.
(b) Section 338(h)(10) Elections.
(i) Sparton agrees, if so directed by Buyer, to join
with Buyer in making an election under Code
Section 338(h)(10) with respect to the sale and purchase of any
of the KPI Subsidiaries and to make any analogous elections
under applicable state law provisions (including such state
elections, the "Section 338(h)(10) Elections"). Sparton and
Buyer shall jointly prepare Internal Revenue Service
Form 8023-A, and such other forms and schedules as are
necessary or required to make the Section 338(h)(10) Elections,
and each covenants and agrees with the other that it shall
execute such forms and schedules and shall take all such other
acts as are necessary to make or perfect such Section 338(h)(10)
Elections. Sparton shall pay all Taxes payable by reason of such
Section 338(h)(10) Elections, subject to Buyer's obligation to
reimburse Sparton for any net increase in Taxes, other than
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income Taxes, incurred by Sparton as a result of such Section
338(h)(10) Election.
(ii) With respect to the Acquired Assets and each KPI
Subsidiary for which a Section 338(h)(10) Election is made
pursuant to Section 9.7(a)(i) hereof, Buyer and Sparton shall
allocate the portion of the Purchase Price (including the amount
of liabilities) among the Acquired Assets and the assets of each
KPI Subsidiary as set forth on the Allocation Schedule attached
hereto, and such Allocation Schedule shall be used by the parties
and their affiliates in preparing (A) all Tax Returns, and (B)
Form 8023-A (and such other forms and schedules required to
make the Section 338(h)(10) Elections) for Sparton and the
Buyer. All allocations made pursuant to this Section 9.7(b)(ii)
shall be binding upon the parties, their affiliates, and upon each
of their successors and assigns, and the parties shall report the
transactions contemplated by this Agreement in accordance with
such allocations for all Tax purposes.
(iii) Buyer agrees to indemnify and hold Sparton
harmless from and against any and all Taxes, other than income
Taxes, paid by Sparton or any affiliated entity as a result of the
Section 338(h)(10) Elections or the sale of the Acquired Assets,
to the extent such Taxes would not have been incurred had such
Elections or sale not been made, including, without limitation,
real estate transfer taxes, vehicle transfer taxes, and recapture of
Michigan Single Business Tax capital acquisition deductions,
but excluding taxes paid by Sparton on the gains resulting from
such Elections and from the sale of the Acquired Assets, but
only to the extent of the net excess of such Taxes over the
amount of such Taxes that would have been incurred had such
Elections or sale not been made.
(c) Short Tax Year
(i) Sparton and Buyer acknowledge that Sparton will
prepare and file consolidated Tax Returns for the period July 1,
1996, through the Closing Date and include each of the KPI
Subsidiaries in such Tax Returns and shall report all items with
respect to the KPI Subsidiaries consistent with past practice.
Sparton and Buyer agree that Sparton shall be liable for payment
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of all Taxes to which such Tax Returns relate for the period
covered by such Tax Returns, provided that, Buyer shall be
responsible for, and shall reimburse Sparton within ten (10)
business days after request therefor, for the amount by which
Sparton's liability (excluding the effect of any tax credits or tax
loss carryforwards) for Taxes attributable to the taxable income
of the KPI Subsidiaries for the period July 1, 1996, through the
Closing Date (including income Taxes attributable to the gains
resulting from the transactions contemplated by this Agreement)
exceeds the liability that Sparton would have incurred for
income Taxes attributable to the gains resulting from the
transactions contemplated by this Agreement if such
transactions had been consummated on July 1, 1996.
(ii) Sparton shall prepare all state of Michigan SBT
Tax Returns required to be filed with respect to any of the KPI
Subsidiaries for the period beginning July 1, 1996, and ending
on the Closing Date in accordance with past practice, and shall
submit such Tax Returns to Buyer at least fifteen (15) days prior
to the due date for filing such Tax Returns for Buyer's approval,
which approval shall not be unreasonably withheld. Buyer shall
cooperate as reasonably requested in assisting Sparton in the
preparation of such state of Michigan SBT Tax Returns.
Sparton shall pay all state of Michigan SBT taxes due with
respect to any of the KPI Subsidiaries for the period beginning
on July 1, 1996, and ending on the Closing Date, and Buyer
shall be responsible for, and shall reimburse Sparton within ten
(10) days after request therefor, for the amount of such SBT
taxes to the extent such SBT taxes are not attributable to any
Section 338(h)(10) Elections, provided that, Buyer shall
reimburse Sparton for such SBT taxes to the extent such state of
Michigan SBT taxes are incurred as the result of the recapture
of capital acquisition deductions attributable to any
Section 338(h)(10) Elections.
(d) Taxes of Other Persons. Sparton agrees to, and hereby does,
indemnify and hold harmless Buyer from and against any liability of each
KPI Subsidiary for Taxes of any person other than such KPI Subsidiary (i)
under Treasury Regulations Section 1.1502-6 (or any successor provision or
any similar provision of state, local, or foreign law), (ii) as a
transferee or successor, (iii) by contract, or (iv) otherwise.
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(e) Cooperation on Tax Matters. Buyer, Sparton, and each KPI
Subsidiary shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax
Returns pursuant to this Section 9.7 and any audit, litigation, or
other proceeding with respect to Taxes. Such cooperation shall include
the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation, or other proceeding and making employees available on
a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Buyer, Sparton, and
the KPI Subsidiaries agree (i) to retain all books and records with
respect to Tax matters and pertinent to the KPI Subsidiaries relating
to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified
by Buyer or Sparton, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into
with any taxing authority, and (ii) to give the other party reasonable
written notice prior to transferring, destroying, or discarding any
such books and records and, if the other party so requests, the KPI
Subsidiaries or Sparton, as the case may be, shall allow the other party
to take possession of such books and records. Buyer and Sparton further
agree, upon request, to use their best efforts to obtain any certificate or
other document from any governmental authority or any other person as may
be necessary to mitigate, reduce, or eliminate any Tax that could be
imposed (including, but not limited to, with respect to the transactions
contemplated hereby).
(f) Tax Sharing Agreements. All Tax sharing agreements or similar
agreements with respect to or involving any KPI Subsidiary shall be
terminated as of the Closing Date and, after the Closing Date, no KPI
Subsidiary shall be bound thereby or have any liability thereunder.
9.8 SPARTON'S ACCESS TO RECORDS. After the Closing, Buyer will, and will
cause the KPI Subsidiaries and their respective successors and assigns to,
permit Sparton, its employees, agents, accounting and legal representatives, to
have reasonable access at reasonable times in a manner so as not to interfere
with the normal business operations of the KPI Subsidiaries, to their books and
records for periods prior to the Closing Date as required by Sparton for the
prosecution of the claims referred to in Section 9.7 and for all other proper
purposes.
9.9 SPARTON SHARES IN RETIREMENT TRUSTS. Certain profit sharing
retirement trusts, maintained by Xxxx and the KPI Subsidiaries for the benefit
of their employees, own shares of common stock of Sparton among the assets of
the plan. Following the Closing,
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Buyer agrees to use its best efforts to cause the trustees of such trusts,
should they decide to sell any of the Sparton common stock, to offer the same
for sale to Sparton at the then current market price.
9.10 PRODUCT WARRANTY AND LIABILITY CLAIMS. This Section 9.10 applies to
products, assemblies, and components of assemblies which are (a) produced by the
Gladwin Plant or by a KPI Subsidiary prior to the Closing Date, and (b) which
either have been designed by the customer or with respect to which the customer
has approved or retained the right to approve the design thereof. Such products,
assemblies, and components, collectively, are referred to in this Section 9.10
as "Products." This Section 9.10 applies notwithstanding any warranty,
representation, covenant, agreement, understanding, or indemnification made by
Sparton in this Agreement or otherwise.
If, after the date of this Agreement, a customer claims that a KPI
Subsidiary has breached a warranty to the customer with respect to a Product or
otherwise is liable to reimburse the customer for damages, losses, or expenses
incurred or to be incurred by the customer in connection with a recall, repair,
or replacement program involving a Product, Sparton's liability to Buyer under
this Agreement shall be limited to and shall not exceed the reasonable cost to
repair or replace such Product, provided, however, that in the event the
customer makes claim for damages, losses, or expenses in excess of the
reasonable cost to repair or replace such Product, Sparton shall either (i)
agree to reimburse Buyer's payment of an amount necessary to settle the claim of
the customer, or (ii) assume defense of and liability for such customer claims,
in which event the "basket" provisions set forth in Section 9.3(b)(ii) shall not
apply to such excess and shall pay all such claims.
If, after the date of this Agreement, a person claims (a "Product Liability
Claim") that a KPI Subsidiary or the Buyer as owner of the Acquired Assets is
liable for injuries or death caused by a Product, Sparton shall be liable with
respect to such claim only to the extent such claim is covered by insurance
maintained by Sparton and Sparton shall pay any deductible payable under such
insurance. Any such product liability in excess of Sparton's insurance coverage+
shall be the responsibility of Buyer.
The provisions of Section 9.3(d) shall apply to Sparton's indemnification
rights and responsibilities under this Section 9.10.
As of the date of this Agreement, neither Sparton, Xxxx, nor any KPI
Subsidiary has received notice from a customer seeking reimbursement for
damages, losses, or expenses of the kind covered by this Section 9.10.
9.11 CHANGE OF CORPORATE NAME. Promptly following the Closing, Buyer will
cause the charters of each of the KPI Subsidiaries to be amended to change the
corporate
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name of each to a name which does not include "Sparton" or any other name which
is confusingly similar to "Sparton."
9.12 ASSIGNMENT OF XXXXXXXX JUDGMENT AND KPI V XXXXXXX XXXXXXX. Sparton
Engineered Products, Inc.--KPI Group has assigned, or prior to the Closing will
assign, to Sparton a judgment in its favor in the amount of $206,000 entered in
the Michigan Circuit Court for the County of Ottawa, Case No. 91-15782-CB,
entitled Sparton Engineered Products, Inc.--KPI Group v Xxxxxxx X. Xxxxxxxx, et
al.
Sparton shall have the right and obligation at its expense to conduct in
the name of Sparton Engineered Products, Inc.--KPI Group, as plaintiff, its
pending case against Xxxxxxx xxXxxxx et al., defendant. Sparton shall bear all
expenses, including legal fees and expenses, shall have the right to collect and
retain any settlement or judgment in plaintiff's favor obtained in such case,
and shall be liable for any judgment or settlement amount in favor of defendant
in such case.
9.13 ENVIRONMENTAL MATTERS.
(a) In addition to any and all other indemnities Sparton has provided
to Buyer, Sparton shall be responsible for, indemnify, and hold harmless
the Buyer Parties from and against, any loss, liability, damage,
obligation, or expense (including reasonable legal and consultant fees and
costs, and any damages or expenses associated with any investigation,
abatement, remediation, corrective action, personal injury, or natural
resource damage) related to (i) the underground storage tanks located at
the Gladwin Plant, and (ii) any asbestos-containing materials ("ACM") at
the White Cloud facility. Such indemnification shall not be subject to the
limitations set forth in Section 9.3(b) of this Agreement.
(b) To the extent not completed prior to the Closing, Sparton shall,
at Sparton's sole cost and expense, conduct the following actions to remove
the underground storage tanks at the Gladwin Plant through Xxxxxxx
Environmental or another nationally Qualified Underground Storage Tank
Consultant (as defined in Michigan Statute Section 324.21542) reasonably
satisfactory to Buyer:
(i) within thirty (30) days after the Closing Date,
submit all necessary notifications to governmental agencies in
order to obtain the required approvals to remove the tanks;
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(ii) within sixty (60) days after receiving all approvals
requested pursuant to subsection (b)(i), remove and properly
dispose of the tanks and sample for the presence of a release
where contamination is most likely to be present;
(iii) promptly conduct such remedial actions and other
actions required by the Michigan Fire Marshal and the Michigan
Department of Environmental Quality ("DEQ") or any other
governmental agency, fill and regrade the areas, and return the
areas around the tanks to their prior condition;
(iv) promptly upon the completion of all field work,
prepare and submit to DEQ a closure report documenting in
reasonable detail the actions taken to address the tanks and
remediate any releases;
(v) within sixty (60) days after the submission of the
closure report, provide Buyer with DEQ confirmation of receipt
of such report and a letter from DEQ or a Qualified
Underground Storage Tank Consultant indicating that no further
action is required in connection with the tanks.
(c) All actions of Sparton required by or relating to subsection
9.13(b) of this Agreement shall be conducted in compliance with all
applicable Environmental and Safety Requirements and in a manner that does
not unreasonably interfere with Buyer's operations at the Gladwin Plant or
the White Cloud facility. All such actions shall be subject to Buyer's
approval, provided that such approval shall not be unreasonably withheld.
Sparton shall, at its expense, promptly restore to its prior condition any
property that is altered or damaged as a result of such actions. Sparton
shall, at its expense, promptly and properly dispose of all soil,
groundwater, decontamination water, samples, waste, ACM, or other material
generated in connection with such actions. Sparton shall keep Buyer
reasonably apprised of material facts and events related to the removal of
the tank or the ACM. In particular, Sparton shall: (i) provide Buyer with
reasonable advance notice regarding any meetings between Sparton and DEQ or
any other governmental agency and allow Buyer to attend, at Buyer's
expense, such meetings; (ii) provide Buyer with copies of letters and
notices it receives from DEQ or any other governmental agency; and (iii)
provide Buyer with copies of any material submittals to DEQ or any other
governmental agency, including reports, analytical data, letters, or other
documents.
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9.14 EXCLUSIVITY. Sparton, on behalf of itself and its affiliated
entities, agrees that neither it nor any of its representatives, directors,
officers, agents, or affiliates will entertain or discuss a possible sale or
other disposition of the Common Stock, the Acquired Assets, or the capital stock
of Xxxx, or the assets of the KPI Subsidiaries (other than inventory in the
Ordinary Course of Business) or any interest therein with any other party, or
provide any information to any other party in connection therewith.
ARTICLE X
MISCELLANEOUS
10.1 PRESS RELEASES AND ANNOUNCEMENTS. No press releases related to this
Agreement or the transactions contemplated herein, or other announcements to the
employees, customers, or suppliers of Sparton, Xxxx, or the KPI Subsidiaries
will be issued without the mutual approval of all parties hereto, except any
public disclosure which any party in good faith believes is required by law or
regulation.
10.2 FURTHER TRANSFERS. Sparton and Xxxx will execute and deliver such
further instruments of conveyance and transfer and take such additional action
as Buyer may reasonably request to effect, consummate, confirm, or evidence the
transfer to Buyer of the Common Stock and the Acquired Assets and any other
transactions contemplated hereby.
10.3 SPECIFIC PERFORMANCE. Sparton acknowledges that, in the event of a
breach by Sparton of this Agreement, money damages may be inadequate and Buyer
may have no adequate remedy at law. Accordingly, Sparton agrees that Buyer shall
have the right, in addition to any other rights and remedies existing in its
favor, to enforce its rights and the obligations of Sparton and Xxxx, not only
by an action or actions for damages, but also by an action or actions for
specific performance, injunctive, and/or other equitable relief.
10.4 AMENDMENT AND WAIVER. This Agreement may be amended and any
provision of this Agreement may be waived, provided that any such amendment or
waiver will be binding upon a party only if such amendment or waiver is set
forth in a writing executed by Buyer, Xxxx, and Sparton. No course of dealing
between or among any persons having any interest in this Agreement will be
deemed effective to modify, amend, or discharge any part of this Agreement or
any rights or obligations of any party under or by reason of this Agreement.
10.5 NOTICES. All notices, demands, and other communications given or
delivered under this Agreement will be in writing and will be deemed to have
been given when personally delivered, mailed by first class mail, return receipt
requested, or delivered by express courier service or facsimile transmissions.
Notices, demands, and communications
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to the parties will, unless another address is specified in writing, be sent to
the address indicated below:
To Sparton or Xxxx: Sparton Corporation
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Chairman
Fax: 000-000-0000
With copies to: Mr. R. Xxx Xxxxx
Vice President and General Counsel
Sparton Corporation
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax: 000-000-0000
and Varnum, Riddering, Xxxxxxx & Xxxxxxx LLP
X.X. Xxx 000
Xxxxx Xxxxxx, Xxxxxxxx 00000-0000
Attention: Xx. Xxxxx X. XxXxxx
Fax: 000-000-0000
To Buyer: Dura Automotive Systems, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx Xxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx
Fax: 000-000-0000
With a copy to: Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Xxxxxxx X. Xxxxxx
Fax: 000-000-0000
and to: Dura Automotive Systems, Inc.
0000 XXX Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Vice President
Fax: 000-000-0000
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10.6 Binding Agreement; Assignment.
(a) This Agreement and all of the provisions hereof will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests, or obligations hereunder may be assigned by Sparton or
Xxxx without the prior written consent of Buyer or by Buyer (except as
provided in (b) or (c) below) without the prior written consent of Sparton.
(b) Buyer may (at any time prior to the Closing), at its sole
discretion, assign, in whole or in part, its rights and obligations
pursuant to this Agreement to one or more of its wholly owned subsidiaries;
provided that, in the event of any such assignment, Buyer will guaranty the
obligations of any such assignee under this Agreement (such guaranty to be
in form and substance reasonably satisfactory to Sparton).
(c) Buyer may assign its rights under this Agreement for collateral
security purposes to the lenders providing financing for the transactions
contemplated hereby and all extensions, renewals, replacements,
refinancings, and refundings thereof, in whole or in part.
10.7 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity without invalidating the remainder of
such provisions or the remaining provisions of this Agreement.
10.8 Captions. The captions used in this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and will not be
deemed to limit, characterize, or in any way affect any provision of this
Agreement, and all provisions of this Agreement will be enforced and construed
as if no caption had been used in this Agreement.
10.9 Entire Agreement. This Agreement and the documents referred to
herein contain the entire agreement between the parties and supersede any prior
understandings, agreements, or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
10.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which taken
together will constitute one and the same instrument.
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10.11 Governing Law. All questions concerning the construction, validity,
and interpretation of this Agreement and the Exhibits and Schedules hereto and
the performance of the obligations imposed by the transactions contemplated
hereby shall be governed by and construed in accordance with the domestic laws
of the state of Michigan, except that wherever applicable the Ohio General
Corporation Law shall govern issues relating to Sparton's corporate power and
authority.
10.12 Parties in Interest. Nothing in this Agreement, express or implied,
is intended to confer on any person other than the parties and their respective
successors and assigns any rights or remedies under or by virtue of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SPARTON CORPORATION DURA AUTOMOTIVE SYSTEMS, INC.
By /s/ Xxxx X. Xxxxx By /s/ Xxxxx X. Xxxxx
----------------------- -------------------------
Xxxx X. Xxxxx Xxxxx X. Xxxxx
Its Chairman Its Vice President and
Chief Financial Officer
SPARTON ENGINEERED PRODUCTS, INC.,
LAKE ODESSA GROUP
By /s/ Xxxx X. Xxxxx
--------------------------------
Xxxx X. Xxxxx
Its President
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EXHIBIT A
LIST OF KPI SUBSIDIARIES
Authorized Shares Outstanding Shares of
Name of Common Stock Common Stock
---- --------------- ---------------------
Sparton Engineered Products, Inc.
KPI Group, a Michigan corporation 5,000 1,050
Sparton Engineered Products, Inc.,
KPI Group, an Indiana corporation 1,000 10
EXHIBIT B
---------
FORM OF OPINION OF SPARTON'S COUNSEL
1. Sparton, Xxxx, and the KPI Subsidiaries are validly existing and in
good standing under the laws of their respective jurisdictions of incorporation.
2. Xxxx and the KPI Subsidiaries have the necessary corporate power and
authority to own their respective properties and to conduct their respective
businesses in the manner and in the locations presently owned and conducted.
3. The Stock and Asset Purchase Agreement is a valid and binding
obligation of Sparton and Xxxx, enforceable in accordance with its terms.
4. The execution and delivery by Sparton and Xxxx of the Stock and Asset
Purchase Agreement, the Sale of the Common Stock and the Acquired Assets, and
the fulfillment of and the compliance with the respective terms thereof by
Sparton, do not result in a breach of, or default under, or result in any
violation of, or give any third party the right to accelerate any obligation
under, or result in the creation of any lien upon any of the capital stock or
assets of the KPI Subsidiaries, pursuant to (a) the articles of incorporation or
bylaws of Sparton or the KPI Subsidiaries, or (b) any order, judgment, or decree
to which they are subject, and which has been identified to us by them.
The execution and delivery by Sparton and Xxxx of the Stock and Asset
Purchase Agreement, the sale of the Common Stock and the Acquired Assets, and
the fulfillment of and the compliance with the terms thereof by Sparton do not
violate any provision of statutory law to which Sparton or Xxxx is subject which
are generally applicable to transactions of the nature contemplated by the Stock
and Asset Purchase Agreement.
5. The Schedule of KPI Subsidiaries attached to this opinion correctly sets
forth the number of shares of each class of the authorized capital stock of each
of the KPI Subsidiaries and the number of outstanding shares of each such class.
All of the outstanding shares of capital stock of each of the KPI Subsidiaries
have been duly authorized, validly issued, and are fully paid and nonassessable.
All outstanding shares are owned by Sparton free and clear of any lien,
mortgage, security interest, charge, or encumbrance.
6. There are no securities issued by the KPI Subsidiaries convertible into
or exchangeable or exercisable for shares of their capital stock. There are no
outstanding options for the purchase of, or any agreements providing for the
issuance (contingent or otherwise) of, any of the capital stock of the KPI
Subsidiaries, or any shares of stock or securities convertible into or
exchangeable or exercisable for any such capital stock. There
are no obligations (contingent or otherwise) of the KPI Subsidiaries to
repurchase, exchange, or otherwise acquire or retire any of their capital stock
or any shares of stock or securities convertible into or exchangeable or
exercisable for any such capital stock.
7. The certificates and instruments delivered by Sparton to Buyer are
sufficient to convey to Buyer all of Sparton's right, title, and interest in the
outstanding Common Stock of the KPI Subsidiaries. The instruments of conveyance
delivered by Xxxx to Buyer are sufficient to convey to Buyer all Xxxx'x right,
title, and interest in the Acquired Assets.
8. We confirm to you that there are no actions or proceedings against the
KPI Subsidiaries pending before any court, government agency or arbitrator,
except as disclosed in Schedule 6.18 of the Stock and Asset Purchase Agreement.
9. Except as set forth on Exhibit A attached to this opinion, no
declaration to, filing with, or approval of any government or regulatory
authority is required in connection with the execution of the Stock and Asset
Purchase Agreement by Sparton or Xxxx or by their consummation of the
transactions contemplated thereby.
-----------------------------
Opinion to cover Michigan law and federal law.
ABA Legal Opinion Accord to apply, except the opinion will address Michigan and
federal securities law with respect to the transaction being exempt from
registration under such laws.
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EXHIBIT C
---------
CERTIFICATE OF SPARTON CORPORATION
Sparton Corporation, an Ohio corporation ("Sparton"), is a party to a Stock
and Asset Purchase Agreement dated as of _______________, 1996, with Dura
Automotive Systems, Inc. ("Buyer") (the "Stock and Asset Purchase Agreement").
This Certificate is being delivered to Buyer to satisfy the conditions to the
Closing set forth in Section 4.1 (i)(i) of the Stock and Asset Purchase
Agreement.
Sparton hereby certifies that the conditions specified in subsections (a)
through (g) of Section 4.1 of the Stock and Asset Purchase Agreement have been
satisfied.
This Certificate is executed on _________________, 1996.
SPARTON CORPORATION
By
------------------------
Its
EXHIBIT D
---------
FORM OF OPINION OF BUYER'S COUNSEL
1. Buyer is a corporation validly existing and in good standing under the
laws of the state of Delaware.
2. Buyer has all necessary corporate power and authority to enter into
the Stock and Asset Purchase Agreement and perform its obligations thereunder.
3. The Stock and Asset Purchase Agreement has been duly authorized,
executed, and delivered by Buyer, and such agreement is a valid and binding
obligation of Buyer, enforceable in accordance with its terms.
4. To our knowledge, Buyer is not subject to or obligated under its
certificate of incorporation, its bylaws, or any applicable law or rule or
regulation of any governmental authority applicable to transactions similar to
those transactions contemplated by the Stock and Asset Purchase Agreement, or
subject to any order, writ, injunction, or decree which would be breached or
violated by its execution, delivery, or performance of the Stock Purchase
Agreement.
5. To our knowledge, Buyer is not required to submit any notice, report,
or other filing with any governmental authority in connection with the execution
or delivery by it of the Stock and Asset Purchase Agreement or the consummation
of the transactions contemplated thereby, except as set forth on Exhibit A
attached to this opinion. To our knowledge, no consent, approval, or
authorization of any governmental or regulatory authority or any other party or
person is required to be obtained by Buyer in connection with its execution,
delivery, and performance of the Stock and Asset Purchase Agreement or the
transactions contemplated thereby, except as set forth on Exhibit A.
6. To our knowledge, there are no actions, suits, proceedings, orders, or
investigations pending or threatened against Buyer at law or in equity, or
before or by any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign,
which would adversely affect Buyer's performance under the Stock and Asset
Purchase Agreement or the consummation of the transactions contemplated thereby.
EXHIBIT E
---------
CERTIFICATE OF BUYER
Dura Automotive Systems, Inc. a Delaware corporation ("Buyer") is a party
to a Stock and Asset Purchase Agreement dated _________, 1996, with Sparton
Corporation ("Sparton") and Sparton Engineered Products, Inc.--Lake Odessa
Group. This Section 4.2(g)(i) of the Stock and Asset Purchase Agreement.
Buyer hereby certifies that the conditions specified in subsections (a)
through (c) of Section 4.2 of the Stock and Asset Purchase Agreement have been
satisfied.
This Certificate is executed on __________, 1996.
DURA AUTOMOTIVE SYSTEMS, INC.
BY
---------------------------
Its
