ASSET PURCHASE AND CONTRIBUTION AGREEMENT
EXHIBIT
2.1
Note: The
following schedules and similar attachments have been omitted from the exhibit
and the Company will furnish supplementally a copy of any omitted schedule to
the SEC upon request: New BCS Operating Agreement appendix, exhibits
for forms of escrow agreement, allocation of consideration, raw material cost
savings, xxxx of sale, assignment and assumption agreement, mutual
non-competition agreement, and non-competition agreement and the Disclosure
Schedules.
ASSET
PURCHASE
This
Asset Purchase and Contribution Agreement (this “Agreement”) is entered into as
of October 9, 2009, by and among Stoneridge, Inc., an Ohio corporation
(“Stoneridge”), Xxxxxx Conductive Systems, LLC, a Michigan limited liability
company (“Old BCS”), Xxxxxx Xxxxxx (“Xxxxxx”), Xxxxxx Xxxxxxx (“Xxxxxxx”),
Xxxxxx Investments, LLC, a Michigan limited liability company (each of Xxxxxx,
Malecke and Xxxxxx Investments, LLC, a “Member” and together the “Members” of
Old BCS), Xxxxxxx Xxxxxx (“Xxxxxx”), the sole member and owner of Xxxxxx
Investments, LLC, and New Xxxxxx Conductive Systems, LLC, a Michigan limited
liability company (“New BCS”).
Capitalized
terms used but not otherwise defined herein shall have the meanings ascribed to
them in Appendix A. The Members, Xxxxxx, Old BCS, New BCS and
Stoneridge may be referred to herein each as a “Party” and collectively as the
“Parties.”
RECITALS
WHEREAS,
the Members formed Old BCS as a limited liability company under the laws of the
State of Michigan by filing Articles of Organization with the Corporation
Division of the Bureau of Commercial Services of the Michigan Department of
Energy, Labor and Economic Growth on July 20, 2004;
WHEREAS,
Old BCS was organized for the purpose of manufacturing, assembling and selling
wire harnesses for the marine, recreational, automotive, military and specialty
vehicle markets, and engaging in any related or ancillary activity within the
purposes for which limited liability companies may be formed under the Michigan
Limited Liability Company Act, being Act Xx. 00, Xxxxxx Xxxx xx 0000, XXXX §§
450.4101 - .5200, as amended;
WHEREAS,
Old BCS is an electrical system supplier that designs and manufactures a wide
variety of electrical solutions for the automotive, marine and specialty vehicle
markets and is a manufacturer of wire harnesses, panels and electronic modules
(the “Business”);
WHEREAS,
Xxxxxx and the Members, either individually or collectively, have owned, managed
and operated Old BCS since July 20, 2004;
WHEREAS,
the Members, Xxxxxx, Stoneridge and Old BCS desire to conduct the Business of
Old BCS under a new Michigan limited liability company, New BCS, with Old BCS
contributing and selling all assets and liabilities of Old BCS and the Business,
except the Retained Assets (as hereinafter defined) and Excluded Liabilities (as
hereinafter defined), to New BCS in exchange for a 49% membership interest in
New BCS and the Formation Payment and Earnout Payments, if any, and Stoneridge
receiving a 51% membership interest in New BCS in exchange for contributing
cash;
WHEREAS,
the Parties desire to treat the transaction contemplated by this Agreement for
federal income tax purposes, in part as a contribution transaction pursuant to
Section 721 of the Code, and in part a sale of assets;
WHEREAS,
the Parties, on or before the date of this Agreement, have formed New BCS as a
limited liability company under the laws of the State of Michigan by filing
Articles of Organization with the Corporation Division of the Bureau of
Commercial Services of the Michigan Department of Energy, Labor and Economic
Growth; and
WHEREAS,
on the terms and subject to the conditions herein, including the representations
and warranties of the Parties, the Members, Xxxxxx and Old BCS desire Old BCS to
acquire a 49% membership interest in New BCS and Stoneridge desires to acquire a
51% membership interest in New BCS.
TERMS OF
AGREEMENT
In
consideration of the representations, warranties, covenants and agreements
contained herein, the Parties hereto agree as follows:
ARTICLE
1
CONTRIBUTION
AND PURCHASE AND SALE OF MEMBERSHIP INTERESTS
1.1 Initial
Transactions. On and subject to the terms and conditions of
this Agreement, at the Closing:
(a) Stoneridge
agrees to contribute capital in the form of cash as specified in Section 1.3 to
New BCS and New BCS agrees to issue in exchange therefor, free and clear of all
liens, claims or encumbrances, except those set forth in the Operating Agreement
of New BCS (the “Operating Agreement”), which is to be entered into by Old BCS
and Stoneridge at the Closing, a 51% membership interest in New BCS represented
by 510 Units (as defined in the Operating Agreement);
(b) As
described in greater detail in Section 0 below, in exchange for a 49% membership
interest in New BCS, free and clear of all liens, claims or encumbrances, except
those set forth in the Operating Agreement, represented by 490 Units, and the
Formation Payment and the Earnout Payments, if any, Old BCS agrees to
contribute, sell, convey, transfer, assign and deliver to New BCS, and New BCS
agrees to purchase from Old BCS and accept the contribution, conveyance,
transfer, assignment and delivery from Old BCS, all of Old BCS’s right, title
and interest in and to the Business and all of Old BCS’s assets, property and
rights (the “Purchased and Contributed Assets”), including, but not limited to
those items listed below (but excluding the Retained Assets, as defined
below):
(1) Accounts Receivable and
Prepaid Expenses. All accounts receivable and prepaid
expenses;
(2) Cash and Cash
Equivalents. Cash and cash equivalents, loan receivables,
marketable securities, and investments;
(3) Customer Lists, Sales and
Marketing Materials. All current customer lists, sales data,
catalogs, brochures, suppliers’ names, mailing lists, photographs and
advertising materials that relate to the Business, whether in electronic form or
otherwise;
(4) Goodwill. All
right, title and interest of Old BCS in and to the goodwill incident to the
Business and the name “Xxxxxx Conductive Systems;”
(5) Inventory. All
Inventory of the Business, other than the Excluded Inventory, (the “Contributed
Inventory”);
(6) Leases. All
Leases of the Business;
(7) Equipment. All
packaging, tooling, machinery, fixtures, equipment, office supplies and other
property owned by Old BCS for use in the Business, including but not limited to
property and equipment in transit or stored at suppliers’ or customers’
facilities;
(8) Records and Files.
All records and files related to the Business;
2
(9) Personal
Property. All personal property of Old BCS used in or related
to the Business;
(10) Intellectual
Property. All intellectual property of Old BCS used in or
related to the Business;
(11) Permits. All
franchises, licenses, permits, consents, authorizations, approvals and
certificates of any regulatory, administrative or other governmental agency or
body (to the extent the same are transferable) related to the operation of the
Business;
(12) Executory Contracts. All Executory
Contracts of Old BCS used in or related to the Business; and
(13) Other
Assets. All other tangible assets owned by Old BCS and used in
the Business (the “Other Assets”).
Notwithstanding
the foregoing provisions of this Section 1.1(b), the transfer of the Purchased
and Contributed Assets pursuant to this Agreement shall not include the
assumption of any Liability or obligation related to the Purchased and
Contributed Assets, unless such Liability or obligation is expressly included in
the Assumed Liabilities. Furthermore, notwithstanding the foregoing
provisions of this Section 1.1(b), the following assets (collectively, the
“Retained Assets”) shall not be sold, assigned, transferred or contributed to
New BCS:
(1) The
medical-related business and the assets and equipment used exclusively in the
medical related business;
(2) The
CAM Logic business and the membership interest in CAM Logic Technologies,
LLC;
(3) Old
BCS’s limited liability company minute books and membership books and
records;
(4) Insurance
policies (including any life insurance policies for Old BCS’s senior
employees);
(5) Tax
returns and tax and accounting papers and records; provided, however, copies of
those portions of the same (and only such portions) that are necessary in order
to determine tax basis or other tax attributes of New BCS are to be provided to
any Party upon reasonable request;
(6) Claims
for tax refunds and other refunds from any governmental authority;
(7) The
Slow Moving and Obsolete Inventory determined by Old BCS and Stoneridge during
the physical inventory conducted or to be conducted prior to the Closing and
marked as “Excluded Inventory” with a book value on the Most Recent Financial
Statements (defined below) not to exceed $1,100,000 (the “Excluded
Inventory”);
(8) Accounts
receivable from Dynamic Supply Solutions Inc;
(9) All
artwork located in Old BCS’s facility; and
(10) All
furniture located in Xxxxxx’x office.
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1.2 Formation Payment and
Earnout Payments. As contemplated in the Operating Agreement,
at the Closing, New BCS shall make a one-time purchase consideration payment to
Old BCS of $3,350,000 (the “Formation Payment”) and thereafter, if earned, under
Section 1.3(b) hereof, 100% of all contingent amounts earned, as determined
pursuant to Section 1.3(b) and Section 1.3(c) hereof (the “Earnout
Payments”).
1.3 Stoneridge Contribution
Payments.
(a) Stoneridge
shall deliver (i) to New BCS at the Closing the sum of $4,850,000 and (ii) to
the escrow $1,000,000 as provided in Section 1.5 (together, the “Initial
Contribution”), in cash by wire transfer of immediately available
funds.
(b) In
addition to the Initial Contribution made pursuant to Section 1.3(a), above, if
earned based on New BCS’s performance as set forth below, Stoneridge shall
contribute additional capital in cash by wire transfer of immediately available
funds to New BCS, no later than March 31 of each of 2011, 2012 and 2013, the
amounts, if any, determined in accordance with the following formula based on
New BCS’s EBITDA (“Actual EBITDA” as contrasted to the Target EBIDTA set forth
below) in each of 2010, 2011 and 2012:
The
target EBITDA (“Target EBITDA”) for 2010 is $13,000,000, for 2011 is $16,700,000
and for 2012 is $11,138,000.
|
Actual EBITDA versus Target EBITDA for Each
Year
|
Additional Capital Contribution of Stoneridge and
Earnout Payment to Old BCS
|
|
|
Below
50%
|
$0
|
|
|
50%
to 64.99%
|
$0.94
million
|
|
|
65%
to 79.99%
|
$1.44
million
|
|
|
80%
to 89.99%
|
$1.94
million
|
|
|
90%
to 104.99%
|
$2.44
million
|
|
|
Above
104.99%
|
$3.19
million
|
For
purposes of this Agreement, “EBITDA” for any period shall mean the sum of (i)
after tax Net Income of New BCS for such period and (ii) (a) any federal, state,
local or foreign income or similar taxes, including the Michigan Business Tax
imposed on New BCS, for such period, (b) Net Interest Expense (as defined below)
for such period, (c) Net Other Income (as defined below) for such period, and
(d) amortization and depreciation of New BCS for such period determined in
accordance with GAAP consistently applied with New BCS’s audited financial
statements for the applicable fiscal year end. For purposes hereof,
(A) “Net Interest Expense” means, for any period, the aggregate of all interest
expense accrued, net of interest income received, of New BCS during such period
and the interest portion of capitalized lease payments, all as determined in
accordance with GAAP consistently applied with New BCS’s audited financial
statements for the applicable fiscal year end and (B) “Net Other Income” means,
for any period, the net income (or loss) (such as foreign currency
gains and losses, non-recurring, non-operating or extraordinary gains) not
attributable to the Business, the Purchased and Contributed Assets and the
Assumed Liabilities for such period determined in accordance with GAAP
consistently applied with New BCS’s audited financial statements for the
applicable fiscal year end. To the extent that New BCS financial
results include the impact of GAAP fair value/purchase accounting related to the
Purchased and Contributed Assets and/or the Assumed Liabilities of New BCS, the
impact, if any, to actual EBITDA, shall be adjusted accordingly.
Notwithstanding
anything to the contrary contained above, EBITDA of New BCS shall be determined
without taking into account any income, loss, expense or other impact of any
business that may be acquired by New BCS after the Closing by merger or purchase
of the equity interest of any entity or the purchase of substantially all of the
assets of another entity.
4
In
addition, if Xxxxxx is terminated by New BCS as an employee of New BCS by reason
other than cause, death or disability prior to December 31, 2012, each as
determined in accordance with Xxxxxx’x employment agreement with New BCS, then
Stoneridge shall promptly, but in no event later than ten (10) days from such
termination, contribute additional capital in cash by wire transfer of
immediately available funds to New BCS, in an amount (to the extent not already
previously contributed pursuant to the above provisions of this Section 1.3(b))
equal to the potential Earn Out Payments assuming that the EBITDA Target for any
fiscal year not completed for each of 2010, 2011 and 2012 was met. In
addition, in the event of Xxxxxx’x termination of employment under his
employment agreement for good reason pursuant to Section 3.d. of his employment
agreement then Stoneridge shall promptly, but in no event later than ten (10)
days from such termination, contribute additional capital in cash by wire
transfer of immediately available funds to New BCS, in an amount (to the extent
not already previously contributed pursuant to the above provisions of this
Section 1.3(b)) equal to the potential Earn Out Payment assuming that the EBITDA
Target for the year of termination and the following year, as applicable, was
met.
(c) In
addition to the Initial Contribution made pursuant to Section 1.3(a) and the
amounts paid, if any, pursuant to Section 1.3(b), Stoneridge shall contribute
additional capital in cash by wire transfer of immediately available funds to
New BCS, in the amount of (i) $450,000 within seven (7) days of receipt of
audited financial statements but in no event later than March 31, 2011 if New
BCS’s net revenue determined in accordance with GAAP for the fiscal year ending
December 31, 2010 exceeds $35,000,000 and (ii) $500,000 within seven (7) days of
receipt of audited financial statements but in no event later than March 31,
2012 if New BCS’s net revenue determined in accordance with GAAP for the fiscal
year ending December 31, 2011 exceeds $35,000,000.
Notwithstanding
anything to the contrary contained above, the net revenue of New BCS shall be
determined without taking into account any revenue, income, loss, expense or
other impact of any business that may be acquired by New BCS after the Closing
by merger or purchase of the equity interest of any entity or the purchase of
substantially all of the assets of another entity.
1.4 Net
Working Capital, Estimates and Audits.
(a) Net Working
Capital. As used herein, the term “Net Working Capital” shall
mean the aggregate current assets of Old BCS conveyed to New BCS pursuant to
Section 1.1(b) hereof (excluding those Retained Assets (as defined in Section
1.1(b)) which would otherwise be included in current assets), minus the
aggregate current liabilities of Old BCS assumed by New BCS pursuant to Section
2.2 hereof (excluding those Excluded Liabilities (as defined in Section 2.1(b))
which would otherwise be included in current liabilities), all as determined in
accordance with GAAP as applied consistently with Old BCS’s financial
statements. In any case with respect to the computation of Net
Working Capital (i) the following shall be included in current assets: accounts
receivable (net of allowances for contractual adjustments and uncollectibles
based upon a reasonable evaluation of historical collections to gross revenues),
notes receivable, cash and cash equivalents, Contributed Inventory, prepaid
expenses, and inventories and supplies, and (ii) the following shall be included
in current liabilities: accounts payable, accrued expenses, accrued salaries and
wages, and accrued paid time off with respect to employees who accept employment
with New BCS.
(b) Estimates and
Adjustments. Schedule 1.4(b) sets forth the Net Working
Capital of Old BCS as of May 31, 2009, subject to the Obsolete and Slow Moving
Inventory reserves referenced in Section 4.1(j) (the “Estimated Net Working
Capital”), together with the principles, specifications and methodologies for
determining the Estimated Net Working Capital. Old BCS and Stoneridge
both acknowledge and agree that the amount set forth on the Estimated Net
Working Capital for accrued salaries, wages and paid time off is based on an
assumption of which employees of Old BCS will accept employment with New BCS
and, if necessary, will be adjusted after the Closing Date to reflect the
correct amount for those employees who actually accept such
employment. If any such adjustment is made, then, for purposes of
this Agreement, the Estimated Net Working Capital will be the amount calculated
after such adjustment. Within one hundred twenty (120) days after the
Closing, Stoneridge shall deliver to Old BCS its determination of the Net
Working Capital as of the Closing Date (following the same principles,
specifications and methodologies used to determine the Estimated Net Working
Capital as set forth on Schedule 1.4(b)). Each party shall have full
access to the financial books, records and working papers of the other parties
and their representatives to confirm or audit Closing Date Net Working Capital
computations. Should Old BCS disagree with Stoneridge’s determination
of the Closing Date Net Working Capital, it shall notify Stoneridge within
thirty (30) days after Old BCS’s receipt of Stoneridge’s determination of the
Closing Date Net Working Capital. If Old BCS and Stoneridge fail to
agree within thirty (30) days after Old BCS’s delivery of notice of disagreement
on the amount of the Closing Date Net Working Capital, such disagreement shall
be resolved in accordance with the procedure set forth in Section 1.4(d) which
shall be the sole and exclusive remedy for resolving accounting disputes
relative to the determination of the Closing Date Net Working
Capital.
5
(c) Payments of
Adjustments. If the Closing Date Net Working Capital, as
finally determined, is more than $200,000 less than the Estimated Net Working
Capital, then within five (5) business days after determination thereof (the
“Post-Closing Adjustment Date”), Old BCS shall pay Stoneridge by wire transfer
of immediately available funds the amount by which (i) the Estimated Net Working
Capital exceeds the Closing Date Net Working, as finally determined, less (ii)
$200,000. If the Closing Date Net Working Capital, as finally
determined, is more than $200,000 greater than the Estimated Net Working
Capital, then within five (5) business days after the Post-Closing Adjustment
Date, Stoneridge shall pay Old BCS by wire transfer of immediately available
funds the amount by which (i) the Closing Date Net Working Capital, as finally
determined, exceeds the Estimated Net Working Capital, less (ii)
$200,000. The difference between the Estimated Net Working Capital
and the Closing Date Net Working Capital is the “Net Working Capital
Difference.” If a party fails to make any payment required of it
hereunder by the Post-Closing Adjustment Date, then within ten (10) days after
the Post-Closing Adjustment Date, until such payment is made, Stoneridge or Old
BCS, as applicable, will be deemed to have transferred to the other party that
number of Units as equals the total number of Units then owned by Stoneridge or
Old BCS, as applicable, multiplied by a fraction, the numerator of which equals
the Net Working Capital Difference that should have been paid and the
denominator of which equals $5,100,000.
(d) Dispute of
Adjustments. In the event that Old BCS and Stoneridge are not
able to agree on the actual Closing Date Net Working Capital within thirty (30)
days after Old BCS’s delivery of notice of disagreement, Old BCS and Stoneridge
shall each have the right to require that such disputed determination be
submitted to an independent certified public accounting firm of national
standing as Old BCS and Stoneridge may then mutually agree upon in writing (the
“Accounting Firm”) for computation or verification in accordance with the
provisions of this Agreement. The Accounting Firm shall review the
matters in dispute and, acting as arbitrators, shall promptly decide the proper
amounts of such disputed entries (which decision shall also include a final
calculation of both the Estimated Net Working Capital and the Closing Date Net
Working Capital). The submission of the disputed matter to the
Accounting Firm shall be the exclusive remedy for resolving accounting disputes
relative to the determination of Net Working Capital Difference. The
Accounting Firm’s determination shall be binding upon Old BCS and
Stoneridge. The Accounting Firm’s fees and expenses shall be borne
equally by Old BCS and Stoneridge.
1.5 Escrow. In
accordance with Section 1.3(a), at the Closing, Stoneridge shall pay over to
escrow $1,000,000 pursuant to an escrow agreement substantially in the form
attached hereto as Exhibit 1.5.
1.6 Allocation of
Consideration. The consideration received by Old BCS from New
BCS shall be allocated in accordance with Exhibit 1.6. After the
Closing, the Parties shall make consistent use of the allocation specified in
Exhibit 1.6 for all tax purposes and in all filings, declarations, and reports
with the Internal Revenue Service, including reports required to be filed under
Section 1060 of the Code. Stoneridge shall prepare on behalf of New
BCS and deliver a draft of IRS Form 8594 to Old BCS and New BCS within 60 days
after the Closing for review. Stoneridge shall prepare on behalf of New BCS and
deliver an updated IRS Form 8594 to Old BCS and New BCS within 30 days after the
final determination of Closing Date Net Working Capital pursuant to Section 1.4
for approval by the Parties and to be duly executed and filed by them with the
Internal Revenue Service. In any proceeding related to the
determination of any tax, neither Old BCS, New BCS nor Stoneridge shall contend
or represent that such allocation is not a correct allocation.
6
1.7 Form of
Transaction. The transfer of the Purchased and Contributed
Assets described in Section 1.1(b) shall be deemed to have occurred as follows:
(i) Old BCS shall have sold to New BCS an undivided interest in 51% of the
Purchased and Contributed Assets in a taxable transaction, in exchange for the
Formation Payment, the Earnout Payments and the assumption of 51% of the Assumed
Liabilities, and (ii) Old BCS shall have contributed to New BCS an undivided
interest in the remaining 49% of the Purchased and Contributed Assets, in a
tax-free contribution under Section 721 of the Code, in exchange for a 49%
membership interest in New BCS represented by 490 Units and the assumption of
the remaining 49% portion of the Assumed Liabilities not assumed pursuant to
clause (i). The Parties agree to treat the transaction contemplated
by this Agreement on their respective federal income tax returns in a manner
that is consistent with the foregoing. In applying Section 704(c) of
the Code to the contribution described in clause (ii) above, New BCS shall use
the “traditional method” (within the meaning of Treasury Regulation Section
1.704-3(b)). No Party has relied on any other Party for any tax
advice related to the transaction contemplated by this
Agreement.
1.8 Prorations. Except
as otherwise reflected in Net Working Capital, within ninety (90) days after the
Closing Date, Old BCS and New BCS shall prorate as of the Closing Date any
amounts which become due and payable on or after the Closing Date with respect
to (i) the Executory Contracts, (ii) ad valorem taxes, if any, on the Purchased
and Contributed Assets (which shall be prorated at the Closing), (iii) personal
property taxes on the Purchased and Contributed Assets (which shall be prorated
at the Closing), (iv) all utilities servicing any of the Purchased and
Contributed Assets, including water, sewer, telephone, electricity and gas
service (any such amounts which are not available within ninety (90) days after
the Closing Date shall be similarly prorated as soon as practicable thereafter),
and (v) all prepayments made by Old BCS that benefit New BCS that are not
included in Closing Date Net Working Capital.
1.9 The
Closing. The closing of the transactions contemplated by this
Agreement (the “Closing”) shall take place at the offices of Xxxxx Xxxxx Heuer
and Xxxxx, Professional Corporation, 00000 Xxxxxxxx Xxxx, Xxxxx 0000,
Xxxxxxxxxx, Xxxxxxxx 00000, commencing at 9:00 a.m. local time on the second
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at the Closing itself) or such other place, date and time as Parties may
mutually agree (the “Closing Date”).
1.10 Deliveries at the
Closing. At the
Closing, (a) the Members, Xxxxxx, Old BCS and New BCS will deliver to Stoneridge
the various certificates, instruments, and documents referred to in Section 6.1,
(b) Stoneridge will deliver to New BCS the various certificates, instruments,
and documents referred to in Section 6.2, (c) Stoneridge and Old BCS will enter
into the Operating Agreement in the form attached as Appendix A, (d) Stoneridge
will deliver to New BCS the cash capital contribution specified in Section
1.3(a), and (e) New BCS will make the Formation Payment to Old BCS specified in
Section 1.2.
ARTICLE
2
ASSUMPTION
OF LIABILITIES; EMPLOYEE MATTERS
2.1 General Limitation on
Assumption of Liabilities.
(a) New
BCS shall not, by virtue of the transfer of the Purchased and Contributed Assets
or otherwise, assume or become responsible for any liabilities or obligations of
Old BCS or any other person, except for the Assumed Liabilities. For
purposes of this Article 2, the terms “liabilities” and “obligations” shall
include, without limitation, any direct or indirect indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, fixed or unfixed, known or unknown, asserted or unasserted,
xxxxxx or inchoate, liquidated or unliquidated, secured or
unsecured.
7
(b) In
addition to Section 2.1(a), except for the Assumed Liabilities (as defined in
Section 2.2), New BCS shall not assume and under no circumstances shall New BCS
be obligated to pay or assume, and none of the assets of New BCS shall be or
become liable for or subject to any Liability, indebtedness, commitment, or
obligation of Old BCS, whether known or unknown, fixed or unfixed, asserted or
unasserted, xxxxxx or inchoate, liquidated or unliquidated, secured or unsecured
(collectively, the “Excluded Liabilities”), including, without limitation, the
following Excluded Liabilities: (i) any debt, obligation, expense or
liability that is not an Assumed Liability; (ii) any liabilities or obligations
associated with or arising out of any of the Retained Assets; (iii) liabilities
and obligations of Old BCS in respect of periods prior to the Closing Date; (iv)
federal, state or local tax liabilities or obligations of Old BCS or its members
in respect of periods prior to the Closing or resulting from the consummation of
the transactions contemplated herein including, without limitation, any income
tax, any franchise tax, any tax recapture, any sales and/or use tax, any state
and local recording fees and taxes which may arise upon the consummation of the
transactions contemplated herein, and any FICA, FUTA, workers’ compensation, and
any and all other taxes or amounts due and payable as a result of the exercise
by the employees at the Business of such employee’s right to vacation, sick
leave, and holiday benefits accrued while in the employ of Old BCS (provided,
however, that this clause (iv) shall not apply to any and all taxes payable with
respect to any accrued paid time off benefits constituting Assumed Liabilities
under Section 2.2); (v) liability for any and all claims by or on behalf of Old
BCS’s employees relating to periods prior to and including the Closing
including, without limitation, liability for any pension, profit sharing, change
in control, severance, deferred compensation, or any other employee health and
welfare benefit plans, liability for any EEOC claim, ADA claim, FMLA claim, wage
and hour claim, unemployment compensation claim, or workers’ compensation claim,
and any liabilities or obligations to former employees of Old BCS under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (provided,
however, that this clause (v) shall not apply to any and all employee benefits
constituting Assumed Liabilities under Section 2.2 hereof); (vi) liabilities or
obligations arising as a result of any breach by Old BCS at any time of any
contract or commitment, regardless of whether it is assumed by New BCS; (vii)
all obligations of Old BCS and its Affiliates with respect to any loans payable,
promissory notes, mortgages, bonds, indentures, debentures, capitalized leases,
guaranties, credit agreements and other indebtedness for borrowed money; (viii)
any liability arising solely by virtue of the assignment by Old BCS of any
Executory Contract to New BCS at Closing; (ix) any liability related to or
arising under the lease between Old BCS and BMK Investments, LLC; and (x) Old
BCS’s obligations under its promissory note to Xxxxxx.
2.2 Assumed Liabilities and
Obligations. On the Closing Date, New BCS shall assume and
thereafter discharge the following liabilities (the “Assumed Liabilities”): (i)
all obligations and liabilities of Old BCS under the Executory Contracts, listed
on Section 2.2 of the Disclosure Schedule, in relation to the operation of the
Business first accruing or arising after the Closing Date; (ii) the trade
accounts payable and current liabilities (excluding Excluded Liabilities) of Old
BCS as of the Closing Date, but only to the extent such accounts payable and
current liabilities are incurred in the ordinary course of business and are
included in Closing Date Net Working Capital, as calculated in accordance with
Section 1.4; and (iii) obligations and liabilities as of the Closing Date in
respect of accrued paid time off benefits of Old BCS’s employees at the Business
who accept employment with New BCS as of the Closing Date, and related taxes,
but only to the extent such accrued paid time off benefits and related taxes are
included in the Closing Date Net Working Capital and (iv) and those obligation
and liabilities assumed pursuant to Section 2.4. Except for the
obligations expressly assumed by New BCS pursuant to this section and except as
otherwise expressly agreed by the Parties in writing, it is understood and
agreed that New BCS does not and will not assume or become obligated to pay or
perform with respect to third parties any debts, liabilities, contracts or other
obligations of Old BCS, the Members or Xxxxxx or any of their respective
Affiliates, whether now existing or hereafter arising, for which Old BCS, the
Members or Xxxxxx or any of their Affiliates are or may become liable however
arising, including, without limitation, obligations arising pursuant to the law
of contracts, tort, strict liability, product liability or other applicable
laws, rules, regulations, or ordinances including, without limitation, any
debts, liabilities, contracts or other obligations relating to any employer –
employee laws or regulations or laws or regulations relating to health and
safety of employees (including the Equal Employment Opportunity Act and ERISA
and the NLRA) and any laws or regulations relating to pollution of the
environment or hazardous materials. In addition, New BCS shall not be
liable for (i) any claims arising from Old BCS’s assignment and New BCS’s
assumption of the Assumed Liabilities; (ii) uncured defaults in the payment
or performance of the Assumed Liabilities for periods
prior to the Closing; or (iii) rights or remedies claimed by third parties
under any of the Assumed Liabilities which broaden or vary the rights and
remedies such third parties would have had against Old BCS if the transfer of
the Purchased and Contributed Assets were not to occur.
8
2.3 Employees. New
BCS shall be obligated to (i) offer employment to the employees of Old BCS, on
substantially the same terms and conditions existing on the date hereof, who are
involved in the operation of the Business and maintain substantially the same
terms of employment for a period of no less than twelve (12) months, and (ii)
provide service credit for the time of employment at Old BCS, provided, however,
there shall be no obligation to offer employment to those Old BCS employees
primarily engaged in the business related to Old BCS’s medical-related business,
Dynamic Supply Solutions, or to the business of CAM Logic. Old BCS
shall assist New BCS in hiring such employees. Old BCS covenants and
agrees not to change the compensation or benefits of any Old BCS employee
between the date hereof and Closing without the prior consent of
Stoneridge. Further, the Parties agree that after the Closing they
shall cooperate in all efforts by New BCS and Stoneridge to cause the New BCS
employee compensation and benefit plan programs to be operated efficiently and
cost effectively under the new organizational structure, but any changes in such
compensation and benefit plan programs shall not increase any respective costs
unless agreed to and done so in the ordinary course of the operations of New
BCS. Old BCS will be responsible for any severance payments owing to
the employees of Old BCS, if any, arising as a result of their termination from
employment with Old BCS or their determination not to become employed by New
BCS. In addition, Old BCS agrees and acknowledges that it shall be
solely responsible for compliance, if required, with the Worker Adjustment and
Retraining Notification Act (29 U.S.C. Section 2101 et seq., the “WARN
Act”) prior to and in connection with the Closing, but not for any actions of
New BCS following the Closing, and shall indemnify New BCS and Stoneridge for
all liability with respect thereto without regard to the limitations of Article
9 hereof. It is expressly understood and agreed that Old BCS is not
responsible for compliance, if required, with the WARN Act arising from any
actions taken by New BCS following the Closing, any such compliance being the
obligation of New BCS, and New BCS shall indemnify Old BCS for all liability
with respect thereto without regard to the limitations of Article 9
hereof.
2.4 Employee
Benefits. The Employee Benefit Plans listed on Section 2.4 of
the Disclosure Schedule can and shall be transferred from Old BCS to New BCS,
and in connection therewith New BCS shall assume sponsorship of those Employee
Benefit Plans, as appropriate, shall receive any assets (maintained under
insurance contacts, trusts or otherwise) with respect to such
Employee Benefit Plans, and the liabilities with respect to such Employee
Benefit Plans, including but not limited to future severance payments owed to
Old BCS employees, if any, but only with respect to those Old BCS employees who
become employees of New BCS and only after their employment is terminated with
New BCS.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES CONCERNING THE TRANSACTION
3.1 Representations and
Warranties of Each Member, Xxxxxx and Old BCS. Each Member,
Xxxxxx and Old BCS represents and warrants to Stoneridge and New BCS regarding
themselves and not to each other that the statements contained in this Section
3.1 are true and correct as of the date of this Agreement and will be true and
correct, in all material respects, as of the Closing Date as though made again
as of such date:
(a) Capacity and
Authorization. Each of Xxxxxx, Xxxxxxx and Xxxxxx is a natural
person with the legal capacity to execute and deliver this Agreement and to
perform his obligations hereunder. Xxxxxx Investments, LLC is a
limited liability company duly formed and validly existing and in good standing
under the laws of the State of Michigan. This Agreement constitutes
the valid and legally binding obligation of each Member, Xxxxxx and Old BCS,
enforceable in accordance with its terms and conditions, subject to bankruptcy,
insolvency or other similar laws affecting or relating to enforcement of
creditors’ rights generally and general principles of equity.
(b) Noncontravention. Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any government, governmental agency or court to which any Member,
Xxxxxx or Old BCS is subject, or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license or instrument to which any Member,
Xxxxxx or Old BCS is a party, including the operating agreement of Old BCS, or
by which any of them is bound or to which any of their assets are subject,
except where such breaches, conflicts, results or rights would not separately or
in the aggregate have a material adverse effect on the business or financial
condition of Old BCS or New BCS, and that no such breaches,
conflicts, results or rights will impose any Liability or obligation on
Stoneridge. Except for any filings required by the rules and
regulations of the Small Business Administration, to the Knowledge of each
Member, Xxxxxx and Old BCS, Old BCS is not required to give any notice to, make
any filing with, or obtain any authorization, consent or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement, except to the extent that the
failure to obtain any such consent, approval or authorization, or to make any
such filing, separately or in the aggregate, would not have a material adverse
effect on his/its or New BCS’s business or financial condition and no such
failure by him/it will impose any Liability or obligation upon
Stoneridge.
9
(c) Brokers’
Fees. Except for the fees payable to Seneca Partners
(“Seneca”) listed on Section 3.1(c) of the Disclosure Schedule, defined below,
which the Members will cause Old BCS to pay after the receipt of the Formation
Payment, neither the Members, Xxxxxx nor Old BCS shall have any Liability or
obligation to pay any finder’s fees or commissions to any broker, financial
adviser, finder, or agent with respect to the transactions contemplated by this
Agreement for which Stoneridge or New BCS could become liable or
obligated.
(d) Investment. Old
BCS is acquiring the 49% membership interest in New BCS solely for its own
account and not with a view to, or for sale in connection with, any distribution
thereof within the meaning of the Securities Act of 1933, as
amended.
(e) Stoneridge
Equity. None of the Members or Xxxxxx or any Affiliate
thereof, nor any immediate family member of any of them, or a trust for the
benefit for any of the foregoing, currently has, or in the prior 12 months has
had, any ownership, beneficial or legal, direct or indirect, in Stoneridge’s
securities.
3.2 Representations and
Warranties of Stoneridge. Stoneridge represents and warrants
to the Members, Xxxxxx, Old BCS and New BCS that the statements contained in
this Section 3.2 are true and correct as of the date of this Agreement and will
be true and correct in all material respects as of the Closing Date as though
made again as of such date:
(a) Organization of
Stoneridge. Stoneridge is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Ohio, and
is duly qualified to do business in each jurisdiction in which Stoneridge owns
or leases real property, maintains an office or has employees residing, except
where the failure to be so qualified, separately or in the aggregate, would not
have a material adverse effect on the business or financial condition of
Stoneridge.
(b) Authorization of
Transaction. Stoneridge has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement has been duly
authorized by all necessary corporate action of Stoneridge and constitutes the
valid and legally binding obligation of Stoneridge, enforceable in accordance
with its terms and conditions, subject to bankruptcy, insolvency or other
similar laws affecting or relating to enforcement of creditors’ rights generally
and general principles of equity.
(c) Noncontravention. Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any government, governmental agency or court to which Stoneridge
is subject or any provision of Stoneridge articles of incorporation or code of
regulations, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under any
agreement, contract, lease, license or instrument to which Stoneridge is a party
or by which it is bound or to which any of its assets is subject, except where
such breaches, conflicts, results or rights would not separately or in the
aggregate have a material adverse effect on the business or financial condition
of Stoneridge or New BCS, and that no such breaches, conflicts, results or
rights will impose any Liability or obligation on Stoneridge will impose any
Liability or obligation on the Members, Xxxxxx or Old BCS. To the
Knowledge of Stoneridge, Stoneridge is not required to give any notice to, make
any filing with, or obtain any authorization, consent or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement, except to the extent that the
failure to obtain any such consent, approval or authorization, or to make any
such filing, separately or in the aggregate, would not have a material adverse
effect on the business or financial condition of Stoneridge or New BCS and no
such failure by Stoneridge will impose any Liability or obligation upon the
Members, Xxxxxx or Old BCS.
10
(d) Brokers’
Fees. Stoneridge has no Liability or obligation to pay any
finder’s fees or commissions to any broker, financial adviser, finder or agent
with respect to the transactions contemplated by this Agreement for which any of
the Members, Xxxxxx, Old BCS or New BCS could become liable or
obligated.
(e) Investment. Stoneridge
is acquiring the 51% membership interest in New BCS solely for its own account
and not with a view to, or for sale in connection with, any distribution thereof
within the meaning of the Securities Act of 1933, as amended.
(f) Financing. Stoneridge
has sufficient funds available to purchase the 51% membership interest of New
BCS pursuant to this Agreement without violating any solvency requirements
currently applicable to Stoneridge.
(g) Complete
Disclosure. No representation or warranty made by Stoneridge
in this Agreement contains or will contain, any untrue statement of material
fact or omits or will omit to state a material fact necessary to make the
statement contained herein and therein not misleading.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES CONCERNING OLD BCS
4.1 Each
Member, Xxxxxx and Old BCS, jointly and severally, represents and warrants to
Stoneridge and New BCS that the statements in this Article 4 are true and
correct as of the date of this Agreement and will be true and correct in all
material respects as of the Closing Date as though made again as of such
date.
(a) Organization, Qualification, and
Power. Old
BCS is a limited liability company, validly existing and in good standing under
the laws of the State of Michigan and is duly qualified to do business in each
jurisdiction in which Old BCS owns or leases real property, maintains an office
or has employees residing, except where the failure to be so qualified,
separately or in the aggregate, would not have a material adverse effect on the
business or financial condition of Old BCS. Section 4.1(a) of the
disclosure schedule delivered by the Members, Xxxxxx and Old BCS to Stoneridge
on the date hereof, a copy of which is attached hereto and acknowledged by the
Parties (the “Disclosure Schedule”), lists the Managers and Members of Old
BCS.
(b) Noncontravention. To
the Knowledge of the Members, Xxxxxx and Old BCS, neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (a) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge or other restriction
of any government, governmental agency or court to which Old BCS is subject, or
(b) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any agreement, contract, lease,
license or instrument to which Old BCS is a party or by which it is bound or to
which any of its assets is subject, except where such breaches, results, rights,
violations, conflicts or defaults would not separately or in the aggregate have
a material adverse effect on the business or financial condition of Old BCS,
provided, however, that no such failure by Old BCS will impose any Liability or
obligation upon New BCS.
11
(c) Financial Statements;
Liabilities. Attached hereto as Schedule 4.1(c) of the
Disclosure Schedule are the following financial statements of Old BCS
(collectively the “Financial Statements”): (a) balance sheets and
statements of income, statements of members’ interest and statement of cash flow
as of and for the fiscal years ended December 31, 2008 and 2007, reviewed by a
certified public accountant, and (b) unaudited balance sheets and related
statements of income (the “Most Recent Financial Statements”) as of and for each
of the months from January 2009 through June 30, 2009 (the “Most Recent Fiscal
Period End”). The Financial Statements (other than the Most Recent
Financial Statements), including the notes thereto, have been prepared from and
are in accordance with Old BCS’s books and records and are in accordance with
GAAP, and fairly present the financial condition of Old BCS as of the dates
stated and the results of operations of Old BCS for such periods. The
Most Recent Financial Statements have been prepared from and are in accordance
with Old BCS’s books and records in accordance with Old BCS’s accounting
policies and procedures consistently applied, which, except as set forth in
Section 4.1(d) of the Disclosure Schedule, are in accordance with GAAP, and
fairly present the financial condition of Old BCS as of the date stated and the
results of operations of Old BCS for such period, except that the Most Recent
Financial Statements contain estimates of certain accruals, lack footnotes and
other presentation items, and are subject to normal year-end
adjustments. All accounts payable of Old BCS have been incurred in
the ordinary course of Business, except for accounts payable not incurred in the
Ordinary Course of Business in an aggregate amount not to exceed
$10,000. Except as set forth on Section 4.1(c) of the Disclosure
Schedule, to the Knowledge of Members, Xxxxxx and Old BCS, Old BCS does not
have, and New BCS will not have, any material Liability or obligation of any
nature except:
(i) those
set forth or reflected in the Most Recent Financial Statements that have not
been paid or discharged since the date hereof;
(ii) those
arising under agreements or other commitments described or identified on the
Disclosure Schedule or in the ordinary course of business;
(iii) those
incurred since the dates of the Most Recent Financial Statements in the ordinary
course of business; and
(iv) those
not required under GAAP to be reflected on the financial statements of Old
BCS.
(d) Events Subsequent to Most
Recent Fiscal Period End. Since the Most
Recent Fiscal Period End, except (i) as set forth on Section 4.1(d) of the
Disclosure Schedule, (ii) as permitted or contemplated by this Agreement, or
(iii) as consented to by Stoneridge in writing, there has not been:
(i) any
material adverse change in the business or financial condition of Old
BCS;
(ii) any
transaction entered into or carried out by Old BCS other than in the ordinary
course of business;
(iii) any
material borrowing or agreement to borrow funds by Old BCS; any incurring by Old
BCS of any other material obligation or Liability, contingent or otherwise,
except liabilities incurred in the ordinary course of business that would not,
separately or in the aggregate, reasonably be expected to have a material
adverse effect on the business or financial condition of Old BCS; or any
endorsement, assumption or guarantee of payment or performance of any material
loan or obligation of any other person by Old BCS;
(iv) any
material change in Old BCS’s method of doing business or any material change in
its accounting principles or practices or its method of application of such
principles or practices;
(v) any
material mortgage, pledge, lien, security interest, hypothecation, charge or
other encumbrance imposed or agreed to be imposed on or with respect to the
properties or assets of Old BCS;
12
(vi) any
material lien, mortgage, security interest, pledge, hypothecation, charge or
other encumbrance of Old BCS discharged or satisfied, or any material obligation
or Liability, absolute or contingent, paid, except as contemplated in this
Agreement;
(vii) any
sale, lease or other disposition of, or any agreement to sell, lease or
otherwise dispose of, any of the material properties or assets of Old BCS, other
than sales of inventory in the ordinary course of business;
(viii) any
material loan or advance made by Old BCS to any person;
(ix)
any elimination of any material reserve established on Old BCS’s books or any
changing of the method of accrual unless there is any change of significant
facts or circumstances pertaining to such reserve which would justify its
elimination or change in method of accrual; or
(x)
any increase in the base compensation or other payment to any director, officer
or employee, whether now or hereafter payable or granted, other than payment of
bonuses or increases in base compensation in the ordinary course of business, or
entry into or amendments of the terms of any employment or incentive agreement
with any such person.
(e) Legal. Set
forth in Section 4.1(e) of the Disclosure Schedule is a list of all material
governmental permits, variances, licenses, registrations, certificates and other
governmental authorizations (the “Permits”) held by Old BCS and used in the
conduct of the Business. The Permits constitute all governmental
permits, variances, licenses, registrations certificates and other governmental
authorizations necessary for Old BCS to conduct its business as presently
conducted and conducted during the period covered by the Financial Statements,
except where the failure to possess any such governmental permit, variance,
license, registration, certificate or other governmental authorization would not
have a material adverse effect on the business or financial condition of Old
BCS. To the Knowledge of the Members, Xxxxxx and Old BCS, Old BCS is
in compliance in all material respects with all applicable laws, statutes,
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings and charges thereunder of federal, state, local and foreign courts or
governmental authorities (and all agencies thereof) (collectively, the
“Applicable Laws”), and Old BCS is not under investigation with respect thereto,
nor has it been charged with or given notice of any material violation of, any
of the Applicable Laws.
(f) Tax
Matters. Except as set forth on Section 4.1(f) of the
Disclosure Schedule, Old BCS has filed or caused to be filed all Tax Returns
required to be filed with respect to Old BCS. All such Tax Returns at
the time of filing complied with all applicable Tax laws in all material
respects. All Taxes owed by Old BCS shown on any Tax Return have been
paid. Old BCS is not currently the beneficiary of any extension of
time within which to file any Tax Return. No claim has been made
against Old BCS by an authority in a jurisdiction where Old BCS does not file
Tax Returns that it is subject to taxation by that
jurisdiction. There are no Security Interests on the Purchased and
Contributed Assets that arose in connection with any failure or alleged failure
to pay any Tax.
There is no dispute or claim concerning
any Tax Liability of Old BCS (i) claimed or raised by any Taxing authority in
writing, or (ii) as to which the Members, Xxxxxx or Old BCS have Knowledge based
upon personal contact with any agent of such authority. Old BCS has
delivered to Stoneridge true and correct copies of all federal income Tax
Returns filed with respect to Old BCS since December 31, 2005.
Old BCS has not waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or
deficiency.
Effective January 1, 2005, Old BCS made
a valid election to be taxed as an S Corporation under Section 1362(a) of the
Code, and such election has not been terminated under Section 1362(d) of the
Code or otherwise. Since January 1, 2005, Old BCS has met all
applicable requirements of the Code to maintain Old BCS’s election to be taxed
as an S Corporation thereunder.
13
(g) Real
Property.
(i) Owned Real
Property. Old BCS does not own any real property.
(ii) Leased Real
Property. Section 4.1(g) of the Disclosure Schedule lists all
real property leased or subleased to or by Old BCS and the leases or subleases
in respect thereof. Each lease and sublease listed in Section 4.1(g)
of the Disclosure Schedule is legal, valid, binding, enforceable and in full
force and effect. With respect to each lease and sublease listed in
Section 4.1(g) of the Disclosure Schedule, except as described in the Disclosure
Schedule:
(a) No
party to the lease or sublease is in material breach or default, and no event
has occurred which, with notice or lapse of time, would constitute a material
breach or default or permit termination, material modification or acceleration
thereunder;
(b) no
party to the lease or sublease has repudiated any material provision thereof,
and there are no material disputes, oral agreements or forbearance programs in
effect as to the lease or sublease; and
(c) Old
BCS has not assigned, transferred, conveyed, mortgaged or encumbered its
interest in the leasehold or subleasehold.
(h) Assets. Except
as described in Section 4.1(h) of the Disclosure Schedule, Old BCS has good
title to, or a valid leasehold interest in, all material, tangible, personal
property assets used in the conduct of the Business, including all fixtures,
furniture, equipment, machinery and leasehold improvements (the “Fixed Assets”),
subject to no material liens, mortgages, pledges, encumbrances or charges,
except for such exceptions which separately and in the aggregate are not
material in character, amount or extent and do not materially detract from the
value of or interfere with the use of the tangible assets subject thereto or
affected thereby. Except as set forth in Section 4.1(h) of the
Disclosure Schedule, no financing statement under the Uniform Commercial Code or
similar law naming Old BCS as debtor has been filed in any jurisdiction in
respect of the Fixed Assets. Old BCS is not a party to or, to the
Knowledge of the Members, Xxxxxx and Old BCS, bound by any agreement or legal
obligation authorizing any person to file any such financing statements in
respect of the Fixed Assets, other than agreements or obligations authorizing
the filing of a financing statement by lessors as a precautionary matter with
respect to true leases. All Fixed Assets are in good condition and
repair, ordinary wear and tear excepted, except where the failure to be
maintained in such good condition and repair would not, separately or in the
aggregate, have a material adverse effect on the business or financial condition
of Old BCS.
(i) Intellectual
Property. Section 4.1(i) of the Disclosure Schedule identifies
each patent, trademark, trade name, copyright and application therefor owned or
licensed by Old BCS as licensee, and identifies each license, agreement or other
permission which Old BCS has granted to any third party with respect to any of
the foregoing. Old BCS owns or possesses enforceable licenses or
other rights to use all material patents, trademarks, trade names, copyrights,
inventions, formulas and processes necessary to the operation of its business as
presently conducted and as conducted during the period covered by the Financial
Statements and, to the Knowledge of the Members, Xxxxxx and Old BCS, such
present use does not conflict with the lawful rights of others in any material
respect. No proceedings are pending or, to the Knowledge of the
Members, Xxxxxx and Old BCS threatened which challenge the validity or the
ownership by Old BCS of the patents, trademarks, trade names, copyrights and
applications set forth in Section 4.1(i) of the Disclosure
Schedule. The manufacture and sale of Old BCS’s products does not
result in a material infringement of any U.S. patent owned by a third party, and
the Members, Xxxxxx and Old BCS have no Knowledge of facts which would
invalidate the patents disclosed in Section 4.1(i) of the Disclosure
Schedule.
14
(j) Inventory. The
inventory of supplies, raw materials, work-in-progress and finished goods as
reflected in the balance sheet included in the Most Recent Financial Statements
is valued at the lower of cost or market value on a basis consistent with past
practices. Except as disclosed in Section 4.1(j) of the Disclosure
Schedule, all such inventories are good and merchantable in the ordinary course
of business and of a quality and quantity generally presently usable, net of
reserves established on Old BCS’s books and records. Either adequate
reserves, but not more than $1,100,000, have been (or will be following the
physical inventory being conducted pursuant Section 0) established on Old BCS’s
books of account with respect to Obsolete and Slow Moving Inventory, or such
Obsolete and Slow Moving Inventory has been written off.
(k) Contracts. Section
4.1(k) of the Disclosure Schedule lists the following contracts and other
agreements, other than those of a type disclosed in another Section to the
Disclosure Schedule, to which Old BCS is a party:
(i) each
sales agency, dealer, representative, distributorship or brokerage agreement or
franchise;
(ii) each
contract, agreement or commitment in respect of the sale of products or the
performance of services, or for the purchase of inventories, equipment, raw
materials, supplies, services or utilities which (i) involves payments or
receipts by Old BCS of $10,000 or more and is not terminable by Old BCS at any
time upon notice of 90 days or less, or (ii) is not to be fully performed within
one year from the date of this Agreement;
(iii) any
agreement for the lease of personal property to or from any person providing for
lease payments in excess of $25,000 per annum;
(iv) each
partnership, joint venture, joint operating or similar agreement;
(v) any
agreement relating to indebtedness for borrowed money, or any capitalized lease
obligation, in excess of $25,000 or under which there is a Security Interest on
any of Old BCS’s assets, tangible or intangible;
(vi) any
agreement concerning confidentiality or noncompetition;
(vii) any
agreement with any of the Members or Xxxxxx or an Affiliate of any
them;
(viii) any
deferred compensation, severance or other plan or arrangement for the benefit of
its current or former directors, officers or employees;
(ix) any
collective bargaining agreement;
(x) any
agreement under which Old BCS has advanced or loaned money to members, managers,
officers or employees outside the ordinary course of business; and
(xi) any
agreement restricting the right of Old BCS to do business anywhere in the
world.
Old BCS
has delivered to Stoneridge a true and correct copy of each written agreement
listed in Section 4.1(k) of the Disclosure Schedule (other than the leases and
subleases with Old BCS) and a written summary setting forth the terms and
conditions of each oral agreement referred to therein. With respect
to each such agreement: (i) to the Knowledge of the Members, Xxxxxx and Old BCS,
no party thereto is in material breach or default, and no event has occurred
which with notice or lapse of time would constitute a material breach or
default, or permit termination, material modification or acceleration, under the
agreement; (ii) no party has repudiated any material provision of the
agreement; (iii) to the Knowledge of the Members, Xxxxxx and Old BCS,
the agreement is legally valid and binding against the parties thereto, and (iv)
to the Knowledge of the Members, Xxxxxx and Old BCS all certificates provided by
Old BCS pursuant to the agreement to the other party or parties to the agreement
were true and correct in all material respects when provided.
15
(l) Accounts and Notes
Receivable. All notes and accounts receivable of Old BCS at
the Most Recent Fiscal Period End represent sales actually made in the ordinary
course of business and are properly reflected in the Most Recent Financial
Statements. Adequate reserves in accordance with GAAP have been
established on Old BCS’s books of account with respect to uncollectible notes
and accounts receivable.
(m) Insurance. To
the Knowledge of the Members, Xxxxxx and Old BCS, Old BCS is insured by
financially sound and reputable insurers, unaffiliated with Old BCS, with
respect to its properties and the conduct of its business in such amounts and
against such risks as are sufficient for compliance with law and as are adequate
to protect the properties and business of Old BCS in accordance with normal
industry standards. Section 4.1(m) of the Disclosure Schedule sets
forth the following information with respect to each insurance policy to which
Old BCS is a party, a named insured, or otherwise the beneficiary of coverage:
(1) the name, address, and telephone number of the agent; (2) the name of the
insurer, the name of the policyholder and the name (or group designation) of
each covered insured; and (3) the policy number and the period of
coverage. With respect to each such insurance policy to the Knowledge
of the Members, Xxxxxx and Old BCS: (i) neither Old BCS nor any other party
thereto is in material breach or default (including with respect to the payment
of premiums), and no event has occurred which, with notice or the lapse of time,
would constitute such a material breach or default, or permit termination,
material modification or acceleration, under the policy; and (ii) no party to
the policy has repudiated any material provision thereof.
(n) Material
Litigation. Section 4.1(n)
of the Disclosure Schedule sets forth each instance in which Old BCS (a) is
subject to any outstanding or unsatisfied judgment, order, decree, ruling or
charge of any court of competent jurisdiction (of other than general
application), or (b) is a party or, to the Knowledge of the Members, Xxxxxx or
Old BCS, is threatened to be made a party, to any action, suit, proceeding,
hearing or investigation of, in or before any court or administrative agency of
any federal, state, local or foreign jurisdiction or before any arbitrator,
seeking either (i) injunctive or similar relief, or (ii) damages in excess of
$25,000. There is no claim, litigation, action, arbitration, suit, or
judicial proceeding pending or, to the Knowledge of the Members, Xxxxxx or Old
BCS, threatened, nor any governmental investigation pending or to the Knowledge
of the Members, Xxxxxx or Old BCS threatened, against Old BCS, at law or equity,
before any federal, state or local court or regulatory agency, or other
governmental authority, which is reasonably likely to have a material adverse
effect on the business or financial condition of Old BCS or New
BCS.
(o) Employees. Except
as set forth in Section 4.1(o) of the Disclosure Schedule, to the Knowledge of
the Members and Xxxxxx, no executive, key employee or group of employees has any
plans to not accept New BCS’s offer of employment and each employee of Old BCS
is a U.S. citizen or otherwise a legal resident of the United
States.
(p) Employee
Benefits. Section 4.1(p) of the Disclosure Schedule lists each
Employee Benefit Plan that is or was at any time during the last five years
maintained, administered or contributed to by Old BCS or any Affiliate
thereof. Solely for purposes of this Section 4.1(p) an “Affiliate” of
any Person means any other Person which, together with such Person, would be
treated as a single employer under Section 414 of the Code. With
respect to each such Employee Benefit Plan:
(i) Each
such Employee Benefit Plan (and each related trust, insurance contract, or fund)
complies, in all material respects, in form and in operation with all applicable
legal requirements, including ERISA and the Code and the terms of the plan
documents;
(ii) All
required reports and descriptions (including Form 5500 Annual Reports, summary
annual reports, and summary plan descriptions) have been filed or distributed
appropriately with respect to each Employee Benefit Plan. The
requirements of Part 6 of Subtitle B of Title I of ERISA and of Code Section
4980B have been met with respect to each Employee Benefit Plan which is an
Employee Welfare Benefit Plan;
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(iii) All
contributions (including all employer contributions and employee salary
reduction contributions) which are due have been paid to each such Employee
Benefit Plan which is an Employee Pension Benefit Plan and which is a “qualified
plan” under Code Section 401(a), and all such contributions for any period
ending on or before the Closing Date which are not yet due have been paid to
each such Employee Pension Benefit Plan or accrued in accordance with the past
custom and practice of Old BCS. All premiums or other payments for
all periods ending on or before the Closing Date have been paid with respect to
each Employee Benefit Plan which is an Employee Welfare Benefit
Plan;
(iv) The
only Employee Pension Benefit Plan maintained by Old BCS for its employees was
the Xxxxxx Conductive Systems, LLC 401(k) Profit Sharing Plan and Trust (the
“401(k) Plan”), which 401(k) Plan was terminated in 2008, all in accordance with
ERISA and applicable law and the 401(k) Plan assets properly distributed to
401(k) Plan participants and beneficiaries, and a favorable determination letter
was requested or has been received from the IRS in connection with such 401(k)
Plan termination. No other Employee Pension Benefit Plan, subject to
Title IV of ERISA, or otherwise, has ever been maintained by or contributed to
by Old BCS (or any other entities with which they may be controlled group
members under Code Section 414) on behalf of the employees of Old BCS, or any
other such employees or individuals;
(v) There
have been no Prohibited Transactions with respect to any such Employee Benefit
Plan, and no Fiduciary has any Liability for breach of fiduciary duty or any
other failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No
action, suit, proceeding, hearing or governmental investigation of any such
Employee Benefit Plan (other than routine claims for benefits) is pending or, to
the Knowledge of Members, Xxxxxx and Old BCS, threatened;
(vi) Neither
Old BCS nor any Affiliate has incurred any Liability to the PBGC or otherwise
under Title IV of ERISA (including any withdrawal Liability) with respect to any
such Employee Benefit Plan which is an Employee Pension Benefit
Plan;
(vii) Old
BCS has delivered to Stoneridge with respect to each Employee Benefit Plan to
which Old BCS or its employees contribute or in which employees of Old BCS
participate, true and correct copies of the plan documents and summary plan
descriptions, the most recent determination letter received from the Internal
Revenue Service, the three most recent Form 5500 Annual Reports, and all related
trust agreements, insurance contracts, and other funding agreements which
implement each such Employee Benefit Plan;
(viii) Full
payment has been made of all amounts which Old BCS is required to have paid as
benefits under any Employee Benefit Plan;
(ix) There
is no Liability in respect of post-retirement health and medical benefits for
current or retired employees of Old BCS or any of its Affiliates. Old
BCS has reserved its right to amend or terminate any Employee Benefit Plan
providing health or medical benefits in respect of any employee or former
employee of Old BCS under the terms of any such plan and descriptions thereof
given to employees or former employees;
(x) There
has been no amendment to, written interpretation or announcement (whether or not
written) by Old BCS or any of its Affiliates relating to any Employee Benefit
Plan which would materially increase the expense of maintaining such Employee
Benefit Plan above the level of the expense incurred in respect thereof for the
fiscal year ended last prior to the Closing Date;
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(xi) Except
as set forth in Section 4.1(p) of the Disclosure Schedule, the execution,
delivery and consummation of the transactions contemplated by this Agreement do
not constitute a triggering event under any Employee Benefit Plan, whether or
not legally enforceable, which, either alone or upon the occurrence of any
additional or subsequent event, will or may result in any payment of severance
pay or otherwise, acceleration, increase in vesting, or increase in benefits to
any current or former participant or employee of Old BCS;
(xii) Neither
Old BCS nor any of its Affiliates has any plan or commitment to create any
additional Employee Benefit Plan or benefit arrangement that would affect any
employee or former employee of Old BCS or any of its Affiliates;
(xiii) All
Employee Benefit Plans are and remain fully terminable by Old BCS or its
Affiliates at any time (subject only to the payment of benefits accrued to date
of such plan termination); and
(xiv) Old
BCS does not have and has not had any severance plan, severance policy or
severance agreement with respect to any current or past Old BCS
employee.
(q) Guaranties. Except
as set forth in Section 4.1(q) of the Disclosure Schedule, Old BCS is not a
guarantor of any Liability or obligation (including indebtedness) of any other
person.
(r) Environment, Health and
Safety. Except as set forth in Section 4.1(r) of the Disclosure Schedule
and except as disclosed in the environmental reports provided to Stoneridge and
set forth on Schedule 4.1(r):
(i) Old
BCS has been, and currently is, in compliance in all material respects with all
Environmental, Health and Safety Laws, and there is no material contingent
liability of Old BCS relating to any Environmental, Health and Safety
Laws;
(ii) Old
BCS has and is in compliance in all material respects with all Permits required
under applicable Environmental Health and Safety Laws necessary to operate the
Business and all Permits are in full force and effect except to the extent that
the timely renewal applications have been filed but not yet acted upon and Old
BCS is not aware of any fact or circumstance that would prohibit the transfer of
any required permits to New BCS;
(iii) Old
BCS has not received any written notice of violation of Environmental Health or
Safety Laws or other written or verbal communication alleging any violation of
Environmental Health or Safety Laws, including any investigatory, remedial, or
corrective obligations relating to Old BCS, or any facility or property
currently or formerly owned, leased or otherwise operated by Old
BCS;
(iv) To
the Knowledge of the Members, Xxxxxx and Old BCS, Old BCS has no liability (i)
for damage to any site, location or body of water (surface or subsurface), or
(ii) for any illness of or personal injury to any employee or other Person under
any Environmental, Health and Safety Laws and there are no hazardous materials,
substances or wastes, in, on or under any of Old BCS’s facilities in violation
of Environmental Health and Safety Laws or in quantities that could subject Old
BCS or New BCS to any obligation to investigate, remediate, or take other action
under any Environmental Health and Safety Law;
(v) Old
BCS has not received notice that it is a potentially responsible party for a
federal or state environmental cleanup site or for corrective action under the
Comprehensive Environmental Response and Liability Act of 1980 (“CERCLA”), 42
U.S.C. § 9601 et
seq., as amended, the Resource Conservation and Recovery Act (“RCRA”), 42
U.S.C. § 6901 et
seq., as amended, or any other applicable Environmental, Health and
Safety Laws;
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(vi) To
the Knowledge of the Members, Xxxxxx and Old BCS, all properties, machinery,
equipment and product used or produced in the Business are free of asbestos,
PCB’s, dioxins, dibenzofurans and Hazardous Substances, except to the extent
their presence is in compliance in all material respects with the Environmental,
Health and Safety Laws; and
(vii) Old
BCS has delivered or made available to Stoneridge all material environmental
reports in its, its Members, or its Members’ Affiliates or its consultants’ or
agents’ possession, including, by way of example only, any Phase I, Phase II or
other reports that document, memorialize, summarize, or otherwise assess or
evaluate the environmental condition of any material parcel of property
currently or formerly owned, operated, and/or leased by Old BCS.
(s) Certain Business
Relationships with Company. Except as
described in Section 4.1(s) of the Disclosure Schedule, neither the Members or
Xxxxxx or any of their respective Affiliates has been involved in any material
business arrangement or relationship with Old BCS within the past 12 months and
no Member or Xxxxxx or any of their respective Affiliates (other than Old BCS)
owns any material asset, tangible or intangible, which is used in the
Business. All transactions between any Member or Xxxxxx or any of
their respective Affiliates on one hand, and Old BCS, on the other hand, have
been at arm’s length and on terms not materially less or more favorable to any
party than would have been obtainable from an unrelated third
party.
(t) Labor
Relations. There is no unfair labor practice complaint against
Old BCS pending before any governmental authority, and there is no labor strike,
dispute, slowdown or stoppage, or any union-organizing effort or campaign,
pending against or involving Old BCS. Old BCS is not a party to a
collective bargaining agreement and no union or collective bargaining unit
represents any employees of Old BCS.
(u) Product Liability and
Recalls; Product Warranty.
(i) Except
as set forth on Section 4.1(u) of the Disclosure Schedule, there is no (i)
claim, action, suit, inquiry or proceeding by or before any court or other
governmental authority pending, or (ii) to the Knowledge of the Members, Xxxxxx
or Old BCS, any such claim, action, suit, inquiry or proceeding or governmental
investigation threatened, against Old BCS, relating to any product alleged to
have been designed, manufactured or sold by Old BCS and alleged to have been
defective or improperly designed or manufactured.
(ii) Except
as set forth on Section 4.1(u) of the Disclosure Schedule, to the Knowledge of
the Members, Xxxxxx and Old BCS there is no pending or threatened
government-mandated recall of any product sold by Old BCS.
(iii) To
the Knowledge of the Members, Xxxxxx and Old BCS, each product manufactured,
sold, leased or delivered by Old BCS has been in conformity in all material
respects with all contractual commitments and all express and implied
warranties.
(v) Customers. Except
as set forth in Section 4.1(v) of the Disclosure Schedule, to the Knowledge of
the Members, Xxxxxx and Old BCS none of Old BCS’ top ten (10) customers measured
by revenue to Old BCS for the fiscal year 2008 and for the interim period ended
July 31, 2009 has given notice to Old BCS that any contracts or orders will not
be renewed or will be terminated or canceled prior to their expiration
date.
(w) Member, Xxxxxx and
Affiliated Party Claims. As of the Closing Date, no Member nor
Xxxxxx will have and, to the Knowledge of the Members, Xxxxxx and Old BCS, no
Affiliate of any Member or of Xxxxxx will have, any claim, demand, cause of
action or right, contractual or otherwise, known or unknown, at law or in
equity, against Old BCS that may be asserted against New BCS, other than (i)
claims for benefits arising in the ordinary course under, out of, or resulting
from participation in an Employee Benefit Plan described in the Section 4.1(p)
of the Disclosure Schedule, or (ii) claims for payment of current salary and
reimbursement of reasonable business expenses incurred through the Closing Date,
to the extent incurred in the ordinary course of business.
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(x) Complete
Disclosure. No representation or warranty made by the Members,
Xxxxxx and Old BCS in this Agreement and no exhibit or schedule related to Old
BCS contains or will contain, any untrue statement of material fact or omits or
will omit to state a material fact necessary to make the statement contained
herein and therein not misleading.
ARTICLE
5
COVENANTS
Except
for Section 0 (which covenant applies following the Closing), the Parties agree
as follows with respect to the period between the execution of this Agreement
and the Closing.
5.1 General; Timing of
Closing. Each of the Parties will use reasonable best efforts
to take all action and to do all things necessary to consummate and make
effective the transactions contemplated by this Agreement, including
satisfaction, but not waiver, of the closing conditions set forth in Article 6,
including, but not limited to, the use of reasonable best efforts to cause the
satisfaction of all closing conditions set forth in Article 6 on or before
October 31, 2009.
5.2 Notices and
Consents. The Members, Xxxxxx and Old BCS will cause Old BCS
to give any notices to third parties and to use its reasonable best efforts to
obtain any third party consents that Stoneridge reasonably may request or that
are required pursuant to the terms of any material agreement or contract listed
on the Disclosure Schedule to assign the Executory Contracts to New
BCS.
5.3 Operation of
Business. The Members will
not cause or permit Old BCS to (i) merge or consolidate with any other person or
acquire a material amount of assets of any other person, or (ii) engage in any
practice, take any action or enter into any transaction outside the ordinary
course of business.
5.4 Preservation of
Business. The Members will cause Old BCS to use reasonable
best efforts to keep its business and properties substantially intact, including
its present operations, physical facilities, working conditions and
relationships with lessors, licensors, suppliers, customers and employees, and
to conduct the business, operations, activities and practices of the Business
only in the ordinary course of business.
5.5 Full Access. Upon written notice
received by Old BCS or the Members of not less than one business day, the
Members will cause Old BCS to permit representatives of Stoneridge to have
reasonable access during normal business hours, but only in a manner so as not
to interfere with the normal business operations of Old BCS, to the premises,
properties, personnel, books, records, contracts and documents of or pertaining
to Old BCS. Old BCS and Stoneridge will comply with the terms and
conditions of the confidentiality letter agreement between Old BCS and
Stoneridge dated February 3, 2009 with respect to information received in the
course of the reviews contemplated by this Section 5.5 and will not use any such
information except in connection with this Agreement or as permitted by such
confidentiality letter agreement
5.6 Notice of
Developments. The Members, Xxxxxx and Old BCS will give prompt
written notice to Stoneridge of any development causing a material breach of any
of the representations and warranties in Article 4, whether relating to the
Members, Xxxxxx, Old BCS or Stoneridge, and Stoneridge will give prompt written
notice to the Members, Xxxxxx and Old BCS of any development causing a material
breach of any of the representations and warranties in Article 4, whether
relating to the Members, Xxxxxx, Old BCS or Stoneridge; provided, however, no
disclosure by any Party pursuant to this Section 5.6 shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation
or breach of any warranty. If before the Closing, any breach is
material and uncured and it gives Stoneridge or Old BCS, as applicable, the
right to terminate this Agreement pursuant to Article 11, then before exercise
of the right to terminate or before Closing, notwithstanding any breach, the
Parties agree to discuss in good faith, but are not obligated to agree upon, an
equitable adjustment to the Initial Contribution. Any adjustment
shall be agreed to in writing. If an adjustment to the Initial
Consideration is agreed to then the Parties agree that there shall be no right
to indemnification under Article 8 with respect to the breach or the asserted
breach that gave rise to the good faith negotiations of an equitable adjustment
to the Initial Contribution.
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5.7 Exclusivity. None
of the Members will, nor will the Members of Old BCS cause or permit Old BCS to
(a) solicit, initiate or encourage the submission of any proposal or offer from
any person relating to the acquisition of all or substantially all of the
membership interests or assets of Old BCS (including any acquisition structured
as a merger, consolidation or share exchange), or (b) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing.
5.8 Employee Benefit
Plans. Except (i) to the extent required by applicable law, or
(ii) as contemplated or permitted by this Agreement or the Operating Agreement
of New BCS, Old BCS shall not, and the Members will cause Old BCS not to, do or
agree to do any of the following without the prior written consent of
Stoneridge, grant any material increase in compensation or benefits to any
employee; adopt or materially amend the terms of any severance or termination
agreements, plans, programs, policies or procedures, with or for its employees;
or materially effect any change in retirement or any other benefit plans,
programs, policies, or procedures for any of its employees (unless such change
is required by applicable law or as a condition to obtaining a favorable
determination letter from the Internal Revenue Service with respect to an
Employee Benefit Plan) that would increase the liabilities of Stoneridge or New
BCS hereunder and the Members, Xxxxxx and Old BCS shall consult with Stoneridge
regarding matters relating to such changes in applicable law or maintaining the
tax qualified status of such Employee Benefit Plans in advance of effecting any
such change.
5.9 Compensation Arrangements;
Extraordinary Payments. Except as otherwise contemplated or
permitted by this Agreement or as set forth in Schedule 5.9 of the Disclosure
Schedule, Old BCS shall not, and the Members shall cause Old BCS not to declare
or pay distribution of any kind (whether in cash, property or a combination
thereof).
5.10 Debt. Old
BCS shall not, and the Members shall cause Old BCS not to (i) incur any
indebtedness for borrowed money in addition to indebtedness outstanding on the
date of this Agreement, except as otherwise expressly permitted by this
Agreement, (ii) assume, guarantee, endorse, or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person; or (iii) make any loans, advances or capital contributions to,
or investments in, any other person.
5.11 Accounts Payable and
Inventory. Prior to the Closing, Old BCS shall, and the
Members shall cause Old BCS to, maintain its accounts payable and inventory in
the ordinary course of business such that, as of the Closing, the accounts
payable and inventory of Old BCS shall have been maintained at levels in the
ordinary course of business.
5.12 Inventory. Prior
to the Closing, Old BCS shall conduct a physical inventory and will permit
Stoneridge to participate. During such physical inventory, Old BCS
and Stoneridge shall determine and appropriately xxxx the Excluded
Inventory.
5.13 Bank
Line. Prior to or concurrently with the Closing, Old BCS shall
pay down its bank line of credit by that amount equal to 50% of the amount of
Excluded Inventory, but in no event more than $550,000.
5.14 Raw Material
Savings. The Parties acknowledge that an intended benefit of
the formation of New BCS is the potential to generate significant raw material
cost savings for New BCS as a result of Stoneridge’s purchasing power or
negotiations. The Parties therefore agree that Old BCS, New BCS and
Stoneridge shall work cooperatively with the goal of reducing New BCS’s raw
material costs. On or shortly after the Closing, Stoneridge and New BCS
shall appoint personnel to attempt to negotiate new and more favorable raw
material prices and terms for New BCS with New BCS’s suppliers. Stoneridge
and New BCS shall share in any raw materials cost savings as calculated pursuant
to the principles set forth on Exhibit 5.14.
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ARTICLE
6
CONDITIONS
TO OBLIGATION TO CLOSE
6.1 Conditions to Obligation of
Stoneridge. The
obligation of Stoneridge to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) the
representations and warranties of set forth in Section 3.1 and 4.1 that are
qualified by reference to “materiality” or a “material adverse effect” shall be
true and correct, disregarding all such qualifications, in all respects, in each
case as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except to the extent that the failure of such
representations and warranties to be so true and correct has not had and would
not reasonably be expected to have, individually or in the aggregate, a material
adverse effect on Old BCS or New BCS, as applicable. All other
representations and warranties contained in Section 3.1 and 4.1 in this
Agreement shall be true and correct in all respects, except for such
inaccuracies as are de minimis
in the aggregate, as of the date hereof and as of the Closing Date, as
though made on and as of the Closing Date.
(b) the
Members, Xxxxxx and Old BCS shall have performed and complied with all of their
covenants hereunder in all material respects through the Closing;
(c) no
action, suit, or proceeding shall be pending or, to the Knowledge of Stoneridge,
threatened prior to the Closing, before any federal or state court wherein an
unfavorable injunction, judgment, order, decree, ruling or charge has been or
may be issued (i) preventing consummation of the transactions contemplated by
this Agreement, or (ii) causing the transactions contemplated by this Agreement
to be rescinded following consummation;
(d) Stoneridge
and Old BCS shall have executed the Operating Agreement;
(e) Old
BCS shall have delivered to New BCS, with a copy to Stoneridge, a xxxx of sale,
fully executed by Old BCS, conveying to New BCS good, valid, marketable, and
legal and equitable title to all tangible assets which are part of the Purchased
and Contributed Assets and good, valid, marketable, legal and equitable title to
all intangible assets which are part of the Purchased and Contributed Assets,
free and clear of all Liabilities, claims, liens security interests and
restrictions other than the Assumed Liabilities, in substantially the form
attached as Exhibit 6.1(e) (the “Xxxx of Sale”), and all certificates of title
and other documents evidencing an ownership interest conveyed as part of the
Purchased and Contributed Assets;
(f) Old
BCS and New BCS shall have executed and delivered to each other (with a copy to
Stoneridge) an Assignment and Assumption Agreement, in substantially the form
attached hereto as Exhibit 6.1(f) (the “Assignment and Assumption
Agreement”);
(g) there
shall not have been any Material Adverse Change in the Business, operations,
assets or financial position of Old BCS since the Most Recent Fiscal Period
End;
(h) New
BCS and Stoneridge shall have delivered to each other a Mutual Non-Competition
Agreement, in substantially the form attached hereto as Exhibit 6.1(h) (the
“Mutual Non-Compete”);
(i) Old
BCS shall have delivered to New BCS a Non-Competition Agreement, in
substantially the form attached hereto as Exhibit 6.1(i) and which contains
appropriate carve-outs for Old BCS’s sale of the Excluded Inventory, and both
the operation and the ownership of CAM Logic Technologies LLC, Dynamic Supply
Solutions Inc. and Xxxxxx Medical Devices LLC.;
(j) Old
BCS shall have changed its name so that New BCS can file an amendment to its
Articles of Organization changing its name to “Xxxxxx Conductive Systems
LLC”;
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(k) the
Members, Xxxxxx and Old BCS shall have delivered to Stoneridge a certificate to
the effect that each of the conditions specified in clauses 0, 0, 0 and 0 of
Section 6.1 is satisfied;
(l)
Stoneridge’s Board of Directors shall have approved the closing of this
Agreement and the transactions contemplated hereby;
(m)
New BCS shall have obtained financing satisfactory to both Old BCS and
Stoneridge;
(n) Stoneridge
and certain of its subsidiaries, on one hand, and various financial
institutions, on the other hand, shall have entered into an amendment to the
credit agreement among them in which National City Bank, a national banking
association, is the lead arranger, and National City Business Credit, Inc., an
Ohio corporation, is the administrative agent and collateral agent, satisfactory
to such parties, and such amendment shall have become effective,
(o) New
BCS shall have obtained hazard and liability insurance and employee benefits
substantially the same as those currently maintained by Old BCS, or commitments
for such insurance and benefits to be effective as of the commencement of
business by New BCS;
(p) BMK
Investments, LLC, a Michigan limited liability company, and New BCS shall have
entered into a lease for the premises currently leased to Old BCS;
(q) Stoneridge
and New BCS shall have entered into a tax sharing agreement; and
(r) all
other material governmental approvals or consents, if any, required by
Applicable Law, and all applicable third party consents, if any, required under
any material contract to which Old BCS is a party identified on the Disclosure
Schedule, required to assign such contracts to New BCS or for the consummation
of the transactions contemplated by this Agreement, shall have been received,
satisfied or waived.
Stoneridge
may waive any condition specified in this Section 6.1 if it executes a writing
so stating at or prior to the Closing.
6.2 Conditions to Obligation of
the Members, Xxxxxx and Old BCS. The obligation
of the Members, Xxxxxx and Old BCS to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction of
the following conditions:
(a) the
representations and warranties of set forth in Section 3.2 that are qualified by
reference to “materiality” or a “material adverse effect” shall be true and
correct, disregarding all such qualifications, in all respects, in each case as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date, except to the extent that the failure of such
representations and warranties to be so true and correct has not had and would
not reasonably be expected to have, individually or in the aggregate, a material
adverse effect on Old BCS or New BCS, as applicable. All other
representations and warranties contained in Section 3.2 in this Agreement shall
be true and correct in all respects, except for such inaccuracies as are de minimis in the aggregate,
as of the date hereof and as of the Closing Date, as though made on and as of
the Closing Date;
(b) Stoneridge
shall have performed and complied with all of its covenants hereunder in all
material respects through the Closing;
(c) no
action, suit, or proceeding shall be pending or to the Knowledge of the Members,
Xxxxxx or Old BCS, threatened, before any federal or state court wherein an
unfavorable injunction, judgment, order, decree, ruling or charge has been or
may be issued (i) preventing consummation of the transactions contemplated by
this Agreement, or (ii) causing any of the transactions contemplated by this
Agreement to be rescinded following consummation;
23
(d) Stoneridge
and Old BCS shall have executed the Operating Agreement;
(e) New
BCS and Stoneridge shall have delivered to each other the Mutual
Non-Compete;
(f) New
BCS shall have obtained financing satisfactory to both Old BCS and
Stoneridge;
(g) BMK
Investments, LLC, a Michigan limited liability company, and New BCS shall have
entered into a lease for the premises currently leased to Old BCS;
(h) New
BCS shall have entered into sublease agreements with both Dynamic Supply
Solutions, Inc., a Michigan corporation, and Xxxxxx Medical Devices, LLC;
and
(i) Stoneridge
shall have delivered to the Members, Xxxxxx and Old BCS a certificate executed
by an officer of Stoneridge to the effect that each of the conditions specified
in Section 6.2 is satisfied.
Each of
the Members, Xxxxxx and Old BCS may waive any condition specified in this
Section 6.2 if they execute a writing so stating at or prior to the
Closing.
ARTICLE
7
OPTIONS
TO PURCHASE ALL OF NEW BCS AND RELATED MATTERS
7.1 Stoneridge Option and Old
BCS Option.
(a) Stoneridge
Option. Subject to the terms of this Section 0, if at any time
from January 1, 2013 and through December 31, 2013 (the “Stoneridge Option
Period”) Stoneridge desires to purchase all, but not less than all, of Old BCS’s
membership interests (Units) in New BCS, then, within the Stoneridge Option
Period, Stoneridge shall deliver to Old BCS a written notice (“Stoneridge
Notice”) to purchase Old BCS’s Units in New BCS at the price and upon the terms
set forth or determined in accordance with Section 0 of this Agreement (the
“Section 0 Terms”). Upon Old BCS’s receipt of the Stoneridge Notice
from Stoneridge, Old BCS shall, sell all of its Units in New BCS to Stoneridge
at the Section 0 Terms.
(b) Old BCS Option. If
Stoneridge has not exercised its option pursuant to Section 7.1(a), subject to
the terms of this Section 0, if at any time from January 1, 2014 and through
December 31, 2014 (the “Old BCS Option Period”) Old BCS desires to purchase all,
but not less than all, of Stoneridge’s membership interests (Units) in New BCS,
then, within the Old BCS Option Period, Old BCS shall deliver to Stoneridge a
written notice (“Old BCS Notice”) to purchase Stoneridge’s Units in New BCS at
the Section 0 Terms. Upon Stoneridge’s receipt of the Old BCS Notice
from Old BCS, Stoneridge shall, sell all of its Units in New BCS to Old BCS at
the Section 0 Terms. Old BCS may waive its rights under this Section
0 at any time by providing written notice to Stoneridge.
(c) Terms of
Purchase. The sale of Units pursuant to the Stoneridge Option
pursuant to Section 7.1(a) and the Old BCS Option pursuant to Section 7.1(b)
shall take place no later than ten (10) days after the delivery of the
Stoneridge Notice or the Old BCS Notice, as the case may be. The
purchase price for the Units pursuant to the Stoneridge Option or the Old BCS
Option (either Old BCS’s or Stoneridge’s Units, as applicable) will be
calculated on the value of New BCS and the percentage of Units being
purchased. For purpose of calculating the purchase price the value of
New BCS shall determined by multiplying “average EBITDA” by 4.3, plus cash, less
Funded Debt (the “Calculated Valuation”).
For
Stoneridge the average EBITDA of New BCS shall be equal to the average of New
BCS’s actual EBITDA for the fiscal years 2010, 2011, 2012 and, on a pro rata
basis, that portion of 2013 that has elapsed prior to delivery of the Stoneridge
Notice.
24
For Old
BCS the average EBITDA of New BCS shall be equal to the average of New BCS’s
actual EBITDA for the fiscal years 2010, 2011, 2012 and 2013 and, on a pro rata
basis, that portion of 2014 that has elapsed prior to delivery of the Old BCS
Notice.
In both
cases EBITDA shall be adjusted to the extent, if any, that New BCS financial
results include the effect of the GAAP fair value/purchase accounting related to
the Business, the Purchased and Contributed Assets and the Assumed
Liabilities). For purposes of this Section 7.1 EBITDA shall be
determined as set forth in Section 1.3(b), above.
Payment
for the Units by Stoneridge or Old BCS, as applicable, will be made by certified
or official bank check or wire transfer in immediately available funds, payable
to the order of, or sent to the designated account(s) of, Old BCS or Stoneridge,
as applicable. The Parties shall execute reasonable and customary
agreements to effect the sale of Units pursuant to this Article 7.
7.2 Option in the Event of
Xxxxxx Incapacity or Death. If, on or before December 31,
2013, Xxxxxx becomes incapacitated and, as a result, is unable to perform his
duties as President and Chief Executive Officer of New BCS, or if he dies (a
“Triggering Event”), then Stoneridge shall have the option (“Stoneridge Second
Option”) to purchase all, but not less than all, of Old BCS’s Units in New BCS
on the Section 0 Terms (except that “average EBITDA” shall mean the average of
New BCS’s actual EBITDA for those full calendar years specified in Section 0
that have elapsed prior to the Triggering Event and, on a pro rata basis, that
portion of the calendar year in which the Triggering Event
occurs). Stoneridge may exercise the Stoneridge Second Option by
delivering to Old BCS and to Xxxxxx, his guardian or representative, as
applicable, written notice of its exercise within sixty (60) days after the
occurrence of a Triggering Event.
7.3 Expiration of Certain
Article 7 Options. At any time after December 31, 2014, either
Old BCS or Stoneridge, subject to any restrictions of the Operating Agreement,
may sell, at one time or from time to time, all or any portion of its Units to
any Person or Persons chosen by it on such terms and conditions as it may
determine in its absolute sole discretion.
7.4 Xxxxxx Option to Sell
Company. If Stoneridge does not exercise its option provided
in Section 0 above, then, at any time during the 2014 calendar year after which
Old BCS waives its option as provided in Section 0 above, and, if New BCS has
not been sold and has not entered into an agreement pursuant to which it is to
be sold prior to such date, then, during the month of June of any year after
2014, Old BCS may send Stoneridge written notice (“Sale Notice”) that it desires
to sell New BCS.
Stoneridge
and Old BCS will then cause New BCS to engage the services of an appraiser with
expertise in appraising the going-concern value of companies such as New
BCS. The mutually chosen appraiser shall provide both Old BCS and
Stoneridge such appraiser’s written determination of the going-concern fair
market value of New BCS (“New BCS Value”) within forty–five (45) days after such
appraiser’s appointment.
If Old
BCS and Stoneridge are unable to agree on a single appraiser within thirty (30)
days after delivery of the Sale Notice, then, within ten (10) days after such
30-day period, they each shall appoint an appraiser who is a member of an
appraisal institute or business valuation society that is held in repute in the
State of Michigan. If either of them fails to make such appointment,
then the New BCS Value will be determined solely by the appraiser appointed by
the other. Within forty-five (45) days of their appointment, each of
such appointed appraisers shall provide both Old BCS and Stoneridge their
written determinations of the going-concern fair market value of New BCS,
determined in accordance with recognized methods of business
valuation. If the higher of the two appraised values (“Higher
Appraisal”) exceeds the lower of the two appraised values (“Lower Appraisal”) by
ten percent (10%) or less of the Lower Appraisal, the New BCS Value will be the
average of the Higher Appraisal and the Lower Appraisal.
If the
Higher Appraisal exceeds the Lower Appraisal by more than ten percent (10%) of
the Lower Appraisal, the two appraisers shall select a third qualified business
appraiser (“Neutral Appraiser”), which Neutral Appraiser shall establish, within
forty-five (45) days after his/her/ its appointment, a going-concern fair market
value (“Neutral Appraisal”) for New BCS in accordance with recognized methods of
business valuation and shall give prompt notice of such value to both Old BCS
and Stoneridge. If the Neutral Appraisal is equal to or greater than
the Higher Appraisal, the New BCS Value will be the Higher Appraisal and if the
Neutral Appraisal is equal to or less than the Lower Appraisal the New BCS Value
will be the Lower Appraisal and if the Neutral Appraisal is between the Higher
Appraisal and the Lower Appraisal, the New BCS Value will be the Neutral
Appraisal.
25
If the
New BCS Value is determined to be less than the Calculated Valuation, Stoneridge
shall have the option (“Stoneridge Third Option”) to purchase all, but not less
than all, of Old BCS’s Units in New BCS on the Section 0 Terms, except that the
purchase price will be the percentage of Units being purchased multiplied by the
New BCS Value. Stoneridge may exercise the Stoneridge Third Option by
delivering to Old BCS written notice of its exercise within ten (10) days after
the New BCS Value has been determined. If Stoneridge does not
exercise the Stoneridge Third Option, then Old BCS shall have the option (“Old
BCS Second Option”) to purchase all, but not less than all, of Stoneridge’s
Units in New BCS on the Section 0 Terms, except that the purchase price will be
the percentage of Units being purchased multiplied by the New BCS
Value. Old BCS may exercise the Old BCS Second Option by delivering
to Stoneridge written notice of its exercise within ten (10) days after the
expiration of the Stoneridge Third Option.
If
Stoneridge does not exercise the Stoneridge Third Option and Old BCS does not
exercise the Old BCS Second Option, or if the New BCS Value is determined to be
greater than or equal to the Calculated Value, then, within thirty (30) days
after the expiration of the Stoneridge Third Option and the Old BCS Second
Option, if applicable, or, if not, the determination of the New BCS Value,
either Old BCS or Stoneridge may cause New BCS to engage an investment banker or
other person or entity with experience selling companies such as New BCS
(“Selling Agent”) to sell substantially all of the assets of or all of the
membership interests in New BCS. The Selling Agent shall have not
more than nine (9) months within which to present a willing and able buyer,
after which the Selling Agent’s authority to seek a buyer will
terminate. Old BCS and Stoneridge will cooperate in all reasonable
manner to consummate any sale proposed pursuant to the provisions of this
paragraph.
ARTICLE
8
INDEMNIFICATION
8.1 Survival of Representations
and Warranties. Subject to Article 9 of this Agreement, all
covenants, agreements, representations and warranties made by the Members,
Xxxxxx, Old BCS and Stoneridge pursuant to this Agreement shall be deemed to
have survived the Closing and shall remain effective; provided, however, unless
otherwise provided in this Agreement, including Section 9.1(c), the
representations and warranties shall remain effective for a period of eighteen
(18) months following the Closing Date.
8.2 Indemnification Provisions
for Benefit of Stoneridge. Subject to Article 9, following the
Closing the Members, Xxxxxx and Old BCS shall jointly and severally indemnify
and save and hold Stoneridge harmless from and against any Adverse Consequences
suffered or incurred by Stoneridge arising out of or resulting
from:
(a) the
inaccuracy or alleged inaccuracy in any representation or the breach or alleged
inaccuracy of any warranty made by the Members, Xxxxxx and Old BCS in this
Agreement;
(b) the
failure of any Members, Xxxxxx and Old BCS duly to perform or observe any
covenant or agreement in this Agreement required on the part of
the Members, Xxxxxx and Old BCS to be performed or observed prior to,
at or after the Closing Date;
(c) any
federal, state or local income taxes or payroll, sales and use taxes of Old BCS
or the Members or Xxxxxx for the period from July 1, 2004 through the Closing
Date and attributed to the Business (unless an Assumed Liability);
(d) any
claim asserted or made by any person against New BCS or Stoneridge in respect of
the Excluded Liabilities; and
(e) any
claim made by any Members, Xxxxxx, Old BCS or any of their Affiliated Parties
against New BCS described in Section 4.1(w), other than those items excepted
therefrom.
26
8.3 Indemnification Provisions
for Benefit of Members, Xxxxxx and Old BCS. Subject to Article
9, following the Closing, Stoneridge shall indemnify and save and hold harmless
each of the Members, Xxxxxx and Old BCS from and against any Adverse
Consequences suffered or incurred by any one or more of them arising out of or
resulting from:
(a) the
inaccuracy or alleged inaccuracy in any representation or the breach or alleged
breach of any warranty made by Stoneridge in this Agreement; and
(b) the
failure of Stoneridge duly to perform or observe any covenant or agreement in
this Agreement required on the part of Stoneridge to be performed or observed
prior to, at or after the Closing Date.
New BCS
shall indemnify and save and hold harmless each of the Members, Xxxxxx and Old
BCS from and against any Adverse Consequences suffered or incurred by any one or
more of them arising out of or resulting from any claim asserted or made by any
person against Old BCS, Xxxxxx or any Member in respect of the Assumed
Liabilities.
8.4 Exclusive
Remedy. After the Closing occurs, Article 8, as limited by the
provisions of Article 9, shall provide the sole and exclusive remedy for any and
all Adverse Consequences sustained or incurred by a Party in connection with the
transactions contemplated by this Agreement, except that the Parties shall
continue to have rights and/or remedies which may arise as a result of failure
to perform or observe the covenants contained in Article 5 and absent fraud or
willful misconduct on the part of the Party or Parties against whom damages are
sought.
ARTICLE
9
LIMITATIONS
ON INDEMNIFICATION
9.1 Term.
(a) Except
with respect to covenants, taxes and Excluded Liabilities pursuant to Section
8.2 (b), 8.2(c) and 8.2(d), respectively, any rights of Stoneridge to
indemnification under this Agreement (including under Section 8.2) shall apply
only to those claims written notice of which shall have been delivered by
Stoneridge to the Members, Xxxxxx and Old BCS on or before eighteen (18) months
following the Closing Date.
(b) Except
with respect to covenants and Assumed Liabilities pursuant to Section 8.3(b) and
8.3(c), respectively, any rights of any of the Members, Xxxxxx and Old BCS to
indemnification under this Agreement (including under Section 8.3) shall apply
only to those claims written notice of which shall have been delivered by the
Members, Xxxxxx or Old BCS to Stoneridge on or before eighteen (18) months
following the Closing Date.
(c) Notwithstanding
anything in this Article 9 to the contrary, the representations and warranties
of the Members, Xxxxxx and Old BCS contained in Sections 3.1(a), 3.2(a), 4.1(a)
and the first sentence of Section 4.1(h) shall survive indefinitely and those
contained in Sections 4.1(f), 4.1(p), 4.1(r) for thirty (30) days after the
applicable statute of limitations, and the covenants of the Parties shall
survive according to their respective terms. The rights of Old BCS to
be indemnified in respect of Assumed Liabilities shall survive
indefinitely. The rights of Stoneridge to be indemnified in respect
of Excluded Liabilities shall survive indefinitely.
9.2 Indemnification
Basket. Stoneridge’s rights to indemnification pursuant to
Section 8.2, and the Members’, Xxxxxx’x and Old BCS’s rights to indemnification
pursuant to Section 8.3 shall be subject to the provisions of this Section 9.2,
so that any right of a Party to indemnification under this Agreement shall not
apply to any claim until the aggregate of all such claims which have become
final totals $150,000 (the “General Basket”), in which event such indemnity
shall apply to all such claims which become final, but only to the extent to the
amount in excess of the General Basket; provided, however, notwithstanding
anything to the contrary contained in this Agreement, no claim asserted or made
by any Person in respect of the Assumed Liabilities or Excluded Liabilities
shall be subject to the General Basket in this Section 9.2 or the limitation on
liability in Section 9.3. In addition, notwithstanding anything to
the contrary in this Agreement this Section 9.2 shall not apply to breaches of
representations and warranties contained in Sections 3.1(a), 3.2(a), 4.1(a), the
first sentence of Section 4.1(h) or 4.1(f).
27
9.3 Limited
Recourse. Notwithstanding anything to the contrary in this
Agreement, all rights of a Party to indemnification under this Agreement shall
be limited to the aggregate sum of $750,000. Notwithstanding anything
to the contrary in this Agreement this Section 9.3 shall not apply to breaches
of representations and warranties contained in Sections 3.1(a), 3.2(a), 4.1(a),
4.1(f) and the first Sentence of Section 4.1(h) or to claims with respect to
Assumed Liabilities or Excluded Liabilities.
ARTICLE
10
COOPERATION
10.1 Notice of
Claims. Each Party will give prompt written notice to the
other Parties of any claim by a third party or by any governmental body, or any
legal, administrative or arbitration proceeding (“Third Party Claim”) which such
Party (“Indemnified Party”) discovers or of which it receives notice after the
Closing and which might give rise to a claim against any other Party or Parties
(“Indemnifying Party”) under Section 8.2 or 8.3, as the case may
be. All notices shall state in reasonable detail the nature, basis
and amount of such Third Party Claim. No delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then, subject to
Article 9, solely to the extent) the Indemnifying Party thereby is
prejudiced.
10.2 Right to
Defend.
(a) The
Indemnifying Party shall have the right to defend the Indemnified Party against
the Third Party Claim with counsel of its choice reasonably satisfactory to the
Indemnified Party so long as (i) the Indemnifying Party notifies the Indemnified
Party in writing within fifteen (15) days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party will, subject to the
limitations set forth in Article 9, indemnify the Indemnified Party from and
against any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, and (ii) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder. The
Indemnified Party shall make available to the Indemnifying Party, its attorneys
and accountants, at all reasonable times, all books and records of the
Indemnified Party or New BCS, as the case may be, relating to any Third Party
Claim and the Parties will render to each other such assistance as may
reasonably be required in order to insure proper and adequate defense of any
Third Party Claim.
(b) So
long as the Indemnifying Party is conducting the defense of the Third Party
Claim, the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party
Claim. Neither the Indemnified Party nor the Indemnifying Party will
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the other Party;
provided, however, that where the Indemnified Party is Stoneridge: (i) if
Stoneridge shall desire to effect a compromise or settlement of any Third Party
Claim and the Members, Xxxxxx and Old BCS shall refuse to consent to such
compromise or settlement, then Stoneridge shall be excused from the defense and
the Members, Xxxxxx and Old BCS shall bear all further responsibility for the
defense of the Third Party Claim, provided that such compromise or settlement is
solely for the payment of money and does not require an admission of liability,
responsibility or wrong-doing on the part of the Members, Xxxxxx or Old BCS and
requires the claimant or plaintiff to give a release from all liability in
respect of such Third Party Claim to the parties named as liable or responsible;
(ii) if the Members, Xxxxxx and Old BCS shall desire to effect a compromise or
settlement of any Third Party Claim pursuant to an offer or compromise or
settlement by the claimant or plaintiff and Stoneridge shall refuse to consent
to such compromise or settlement, then the Members’, Xxxxxx’x and Old BCS’s
Liability with respect to such Third Party Claim shall be limited to the amount
so offered in compromise or settlement, provided that such compromise or
settlement is solely for the payment of money and does not require an admission
of liability, responsibility or wrong-doing on the part of Stoneridge and
requires the claimant or plaintiff to give a release from all liability in
respect of such Third Party Claim to the parties named as liable or responsible;
and (iii) if the Members, Xxxxxx and Old BCS desire to effect a compromise or
settlement where no offer has been made by the claimant or plaintiff the
Members’, Xxxxxx’x and Old BCS’s Liability shall be limited to an amount
determined by agreement between the Parties.
28
10.3 Determination of Adverse
Consequences.
The Parties shall make appropriate adjustments for Tax benefits and
insurance coverage in determining Adverse Consequences for purposes of this
Agreement.
ARTICLE
11
TERMINATION
11.1 Termination of
Agreement. The Parties may terminate this Agreement at any
time prior to Closing as provided below:
(a) Stoneridge
and Xxxxxx and Old BCS may terminate this Agreement by mutual written
consent;
(b) Stoneridge
may terminate this Agreement by giving written notice to the Members, Xxxxxx and
Old BCS in the event that (i) any of the Members, Xxxxxx or Old BCS has breached
any representation, warranty or covenant contained in this Agreement in any
material respect, Stoneridge has notified the Members, Xxxxxx and Old BCS of the
breach, and the breach has continued without cure for a period of five (5) days
after the notice of breach, (ii) Stoneridge reasonably determines that new or
changed information regarding the Business reflects a material adverse change in
the business or financial condition of Old BCS taken as a whole and Stoneridge
gives written notice to the Members, or (iii) the Closing shall not have
occurred on or before October 31, 2009 by reason of the failure of any condition
precedent under Section 6.1 (unless the failure results primarily from
Stoneridge breaching any representation, warranty or covenant contained in this
Agreement); and
(c) The
Members, Xxxxxx and Old BCS may terminate this Agreement by giving written
notice to Stoneridge in the event that (i) Stoneridge has breached any
representation, warranty or covenant contained in this Agreement in any material
respect, the Members, Xxxxxx and Old BCS have notified Stoneridge of the breach,
and the breach has continued without cure for a period of five (5) days after
the notice of breach, (ii) or the Closing shall not
have occurred on or before October 31, 2009 by reason of the failure of any
condition precedent under Section 6.2 (unless the failure results primarily from
any of the Members, Xxxxxx or Old BCS breaching any representation, warranty or
covenant contained in this Agreement).
11.2 Effect of
Termination.
(a) If
Stoneridge or the Members, Xxxxxx and Old BCS terminate this Agreement pursuant
to Section 11.1, all rights and obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party; provided,
however, that the confidentiality provisions contained in the confidentiality
letter agreement between Old BCS and Stoneridge shall survive termination, and
provided further that Stoneridge and Members, Xxxxxx and Old BCS shall have
Liability to the extent set forth in Section 11.2(b) and Section
11.2(c).
(b) If
Stoneridge terminates this Agreement pursuant to Section 11.1(b)(i) or (iii)
because of the failure of the Closing to occur and such failure results
primarily from the Members, Xxxxxx and Old BCS breaching any material
representation, warranty or covenant contained in this Agreement, the Members,
Xxxxxx and Old BCS shall have Liability for all direct out-of-pocket expenses
incurred by Stoneridge up to $100,000 in connection with the transactions
contemplated by this Agreement (including reasonable attorneys’ and accountants’
fees and expenses) through the date of such termination, and Members, Xxxxxx and
Old BCS shall deliver such amount to Stoneridge by wire transfer of immediately
available funds as liquidated damages (and not as a penalty) within two (2)
business days after receipt of a written request therefor received from
Stoneridge (which shall include a reasonably detailed itemized statement of such
direct out-of-pocket expenses incurred by Stoneridge in connection with the
transactions contemplated by this Agreement). This Liability is not
subject to the indemnification limitations set forth in Article 9.
29
(c) If
the Members, Xxxxxx and Old BCS terminate this Agreement pursuant to Section
11.1(c)(i) or (ii) because of the failure of the Closing to occur and such
failure results primarily from Stoneridge breaching any material representation,
warranty or covenant contained in this Agreement, Stoneridge shall have
Liability for all direct out-of-pocket expenses incurred by the Members, Xxxxxx
and Old BCS up to $100,000 in connection with the transactions contemplated by
this Agreement (including reasonable attorneys’ and accountants’ fees and
expenses) through the date of such termination, and Stoneridge shall deliver
such amount to Old BCS by wire transfer of immediately available funds as
liquidated damages (and not as a penalty) within two (2) business days after
receipt of a written request therefor received from the Members, Xxxxxx and Old
BCS (which shall include a reasonably detailed itemized statement of such direct
out-of-pocket expenses incurred by the Members, Xxxxxx and Old BCS in connection
with the transactions contemplated by this Agreement). This Liability
is not subject to the indemnification limitations set forth in Article
9.
ARTICLE
12
AGREEMENTS
CONCERNING CERTAIN TAX MATTERS
12.1 Mutual
Cooperation. Members, Xxxxxx and Old BCS, on one hand, and
Stoneridge, on the other hand, shall provide each other with such assistance as
may reasonably be requested by any of them in connection with the preparation
and execution of any Tax Return, any audit or other examination by any Taxing
authority, or any judicial or administrative proceedings relating to Liability
for Taxes, and each will retain and, not later than thirty (30) days from the
written request of any other Party, provide such other Party with any records or
information which may be relevant to such return, audit, examination or
proceedings. Such assistance shall include making employees or other
representatives available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder and shall include
providing copies of any relevant Tax Returns (or portions thereof) and
supporting work schedules. The Party requesting such assistance
hereunder shall reimburse the others for reasonable out-of-pocket expenses
incurred by the others in providing such assistance.
ARTICLE
13
MISCELLANEOUS
13.1 Press Releases and Public
Announcements. Neither the Members, Xxxxxx or Old BCS shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of Stoneridge; provided, however, the Parties agree that Stoneridge may be
obligated to make public disclosures with respect to the transactions
contemplated by this Agreement pursuant to federal and state securities laws and
applicable listing or trading agreements concerning its publicly traded
securities, and Stoneridge may make any such public disclosure required by
applicable federal or state securities laws or such listing or trading agreement
and disclosures to and discussions with securities analysts and financial
institutions (and Stoneridge shall use reasonable best efforts to advise the
Members, Xxxxxx and Old BCS prior to making any such disclosure and to consult
with Xxxxxx regarding the form and content thereof), and verbal replies in
response thereto by representatives of Stoneridge in the ordinary course of
business.
13.2 Stoneridge
Consolidation. The Parties acknowledge that Stoneridge
intends, if permitted by GAAP, to include the financial statements of New BCS in
the consolidated financial statements of Stoneridge; provided, however, any such
consolidation shall not, by itself, be construed to mean that Stoneridge owns,
directly or indirectly, membership interests in New BCS constituting a majority
of the outstanding membership interests, or that Stoneridge owns, directly or
indirectly, membership interests in New BCS constituting a majority of the
voting power in any election of officers.
30
13.3 No
Solicitation. Without the prior written consent of
Stoneridge or New BCS, as applicable, neither New BCS or Stoneridge, nor any
representatives of them, shall for a period of six years
from the date of this Agreement, directly or indirectly, solicit for
employment any person who is employed by the other: provided, however, that
the foregoing clause shall not preclude Stoneridge and New
BCS from making good faith generalized solicitations for employees through
advertisements which utilize a public medium or non-directed executive searches,
and are not directly or indirectly targeted at employees of the other, or
any of its subsidiaries or from hiring any employee of Stoneridge or New
BCS, who has been terminated by the Stoneridge or New BCS, as
applicable, prior to commencement of employment discussions
between either Stoneridge or New BCS, as applicable, and such
employee.
13.4 Non-Assignable
Contracts. If any Executory Contract, by virtue of its subject
matter, or by operation of law, is not assignable to New BCS without the consent
of a third party (“Non-Assignable Contract”), and if Stoneridge either waives
the requirement that Old BCS obtain such consent or Old BCS is unable to obtain
such consent before Closing, Old BCS will use its best efforts to provide New
BCS with the same economic and other benefits of any such Non-Assignable
Contract as if it had been assigned. Nothing in this Agreement is to
be construed as an attempt or an agreement to assign or cause the assignment of
any Non-Assignable Contract, unless such consent has been given.
13.5 No Third-Party
Beneficiaries. This Agreement and the other agreements,
certificates and instruments contemplated hereby shall not confer any rights or
remedies upon any Person (including any employee or agent of Old BCS) other than
the Parties and their respective successors and permitted assigns.
13.6 Entire
Agreement. This Agreement, including the documents referred to
herein, constitutes the entire agreement among the Parties and supersedes all
prior understandings, agreements and representations by or among the Parties,
written or oral, to the extent relating in any way to the subject matter hereof,
provided, however, that the confidentiality letter agreement Stoneridge and Old
BCS dated February 3, 2009 shall not be deemed superseded hereby.
13.7 Succession and
Assignment. This Agreement shall be binding upon and inure to
the benefit of the Parties named herein and their respective successors and
permitted assigns. No Party may assign either this Agreement or any
rights, interests or obligations hereunder without the prior written approval of
the other Parties; provided, however, Xxxxxx may provide the consent of the
Members.
13.8 Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which together will constitute one and the same
instrument.
13.9 Headings. The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
13.10 Notices. All
notices, requests, demands, claims, and other communications hereunder shall be
in writing. Any notice, request, demand, claim or other communication
hereunder shall be deemed duly given if (and then two business days after) it is
sent by registered or certified mail, return receipt requested, postage prepaid,
and addressed to the intended recipient as set forth below:
If to
Members or Xxxxxx:
Xxxxxx
Conductive Systems, LLC
0000 Xxxx
Xx.
Xxxxxx
Xxxx, XX 00000
Attn: Xxxxxxx
Xxxxxx, Xxxxxx Xxxxxx and Xxxxxx Xxxxxxx
xxxxxxx@xxxxxxx.xxx,
xxxxxxx@xxxxxx.xxx, and xxxxxxxx@xxxxxx.xxx
248.669.7080
31
With a
Copy to:
Jaffe,
Raitt, Heuer & Xxxxx, P.C.
00000
Xxxxxxxx Xxxx
Xxxxx
0000
Xxxxxxxxxx,
XX 00000
Attn: Xxxxxx
X. Xxxxxx
xxxxxxx@xxxxxxxx.xxx
248.351.3082
If to Old
BCS:
Xxxxxx
Conductive Systems, LLC
0000 Xxxx
Xx.
Xxxxxx
Xxxx, XX 00000
Attn: Xxxxxxx
Xxxxxx, Xxxxxx Xxxxxx and Xxxxxx Xxxxxxx
xxxxxxx@xxxxxxx.xxx,
xxxxxxx@xxxxxx.xxx, and xxxxxxxx@xxxxxx.xxx
248.669.7080
With a
Copy to:
Jaffe,
Raitt, Heuer & Xxxxx, P.C.
00000
Xxxxxxxx Xxxx
Xxxxx
0000
Xxxxxxxxxx,
XX 00000
Attn: Xxxxxx
X. Xxxxxx
xxxxxxx@xxxxxxxx.xxx
248.351.3082
If to
Stoneridge:
Stoneridge,
Inc.
0000 Xxxx
Xxxxxx Xxxxxx
Xxxxxx,
Xxxx 00000
Attn:
Xxxxxx X. Xxxxxxxxx, Executive Vice President and CFO
xxxxxxxxxx@xxxxxxxxxx.xxx
330.856.2443
With a
Copy to:
Xxxxx
& Xxxxxxxxx LLP
3200
National City Center
0000 Xxxx
Xxxxx Xxxxxx
Xxxxxxxxx,
Xxxx 00000-0000
Attn:
Xxxxxx X. Xxxxxx Esq.
xxxxxxx@xxxxxxxx.xxx
216.861.7594
Any Party
may send any notice, request, demand, claim, or other communication hereunder to
the intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger service, telecopy,
telex, ordinary mail, or electronic mail), but no such notice, request, demand,
claim or other communication shall be deemed to have been duly given unless and
until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
32
13.11 Governing Law; Consent to
Jurisdiction. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Michigan without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Michigan or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Michigan.
THE
PARTIES HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE
STATE OF MICHIGAN AND THE UNITED STATES DISTRICT COURT LOCATED IN THE EASTERN
DISTRICT OF MICHIGAN SOLELY WITH RESPECT TO ACTIONS RELATED TO THIS
AGREEMENT. EACH PARTY HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON
CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER, AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION SHALL AFFECT THE
RIGHT OF ANY PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST ANY OTHER PARTY IN
THE COURTS OF ANY OTHER JURISDICTION.
13.12 Amendments and
Waivers. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by Stoneridge and the Members, Xxxxxx and Old
BCS. No waiver by any Party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall be
valid unless it is in writing nor shall any waiver be deemed to extend to any
prior or subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
13.13 Severability. Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any other
jurisdiction, except to the extent that giving effect to this Section 13.12
would produce inequitable results.
13.14 Expenses. Stoneridge shall
bear its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated
hereby. The Members, Xxxxxx and Old BCS shall bear their own costs
and expenses (including all legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby.
13.15 Construction. The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement.
13.16 Incorporation of Exhibits
and Schedules.
The Exhibits, Schedules and Appendices identified in this Agreement
(including the Disclosure Schedule) are incorporated herein by reference and
made a part hereof.
[signatures
are on following page]
33
IN
WITNESS WHEREOF, the Parties have executed this Agreement
on the date first above written.
By: /s/ XXXXXX X.
XXXXXXXXX
Its: Executive
Vice President , Chief Financial Officer and Treasurer
XXXXXX
CONDUCTIVE SYSTEMS, LLC
By: /s/ XXXXXXX X.
XXXXXX
Xxxxxxx
X. Xxxxxx, Manager
XXXXXX
INVESTMENTS, LLC
By: /s/ XXXXXXX X.
XXXXXX
Xxxxxxx X. Xxxxxx, Manager
NEW
XXXXXX CONDUCTIVE SYSTEMS, LLC
By: Stoneridge,
Inc., member
By:
By: Xxxxxx
Conductive Systems, LLC, member
By: /s/ XXXXXXX X. XXXXXX
Xxxxxxx
X. Xxxxxx, Manager
/s/
XXXXXX XXXXXX
XXXXXX
XXXXXX
/s/ XXXXXX XXXXXXX
XXXXXX
XXXXXXX
/s/ XXXXXXX XXXXXX
XXXXXXX
XXXXXX
34
Attachments
|
Appendices
|
||
|
Appendix
A
|
Definitions
|
|
|
Appendix
B
|
New
BCS Operating Agreement
|
|
|
Exhibits
|
||
|
Exhibit
1.5
|
Form
of Escrow Agreement
|
|
|
Exhibit
1.6
|
Allocation
of Consideration
|
|
|
Exhibit
5.14
|
Raw
Material Cost Savings
|
|
|
Exhibit
6.1 (e)
|
Xxxx
of Sale
|
|
|
Exhibit
6.1 (f)
|
Assignment
and Assumption Agreement
|
|
|
Exhibit
6.1 (h)
|
Mutual
Non-Competition Agreement between New BCS and
Stoneridge
|
|
|
Exhibit
6.1 (i)
|
Non-Competition
Agreement from Old BCS to New BCS
|
|
|
Disclosure
Schedule
|
||
|
Schedule 1.4
(b) –
|
Net
Working Capital
|
|
|
Schedule 2.2
–
|
Executory
Contracts
|
|
|
Schedule 2.4
–
|
Employee
Benefit Plans Being Assumed by New BCS
|
|
|
Schedule 3.1
(c) –
|
Brokers’
Fees
|
|
|
Schedule 4.1
(a) –
|
Managers
and Members of Old BCS
|
|
|
Schedule 4.1
(c) –
|
Financial
Statements; Obligations
|
|
|
Schedule 4.1
(d) –
|
GAAP
Exceptions; Subsequent Events
|
|
|
Schedule 4.1
(e) –
|
Permits
and Licenses
|
|
|
Schedule 4.1
(f) –
|
Tax
Matters
|
|
|
Schedule 4.1
(g)–
|
Leased
Real Property
|
|
|
Schedule 4.1
(h)–
|
Title
to Assets
|
|
|
Schedule 4.1
(i)–
|
Intellectual
Property
|
|
|
Schedule 4.1
(j)–
|
Inventory
|
|
|
Schedule 4.1
(k)–
|
Contracts
|
|
|
Schedule 4.1
(m)–
|
Insurance
|
|
|
Schedule 4.1
(n)–
|
Material
Litigation
|
|
|
Schedule 4.1
(o)–
|
Employees
|
|
|
Schedule 4.1
(p)–
|
Employee
Benefit Plans
|
|
|
Schedule 4.1
(q)–
|
Guaranties
|
|
|
Schedule 4.1
(r)–
|
Environmental,
Health and Safety
|
|
|
Schedule 4.1
(s)–
|
Certain
Relationships
|
|
|
Schedule 4.1
(t)–
|
Product
Liability
|
|
|
Schedule 4.1
(u)–
|
Customers
|
|
|
Schedule 5.9
–
|
Compensation
Arrangements
|
|
Appendix
A
Definitions
“Adverse Consequences” means all
actions, suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses and fees, including court costs and
reasonable attorneys’ fees and expenses.
“Affiliate” means any Person that
directly or indirectly controls, is controlled by, or is in common control with,
any other Person. For purposes of the preceding sentence, “control’
means possession, directly or indirectly, of the power to direct or cause
direction of management and policies through ownership of voting securities,
contract, voting trust or otherwise. Notwithstanding the foregoing,
solely for purposes of Section 4.1(p), the term “Affiliate” has the meaning set
forth in Section 4.1(p).
“Applicable Laws” has the meaning set
forth in Section 4.1(e).
“Code” means the Internal Revenue Code
of 1986, as amended.
“Employee Benefit Plan” means any (a)
nonqualified deferred compensation or retirement plan or arrangement which is an
Employee Pension Benefit Plan, (b) qualified defined contribution retirement
plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit
Plan or material fringe benefit plan or program, including any employment
agreement or severance policy.
“Employee Pension Benefit Plan” has the
meaning set forth in ERISA Section 3(2).
“Employee Welfare Benefit Plan” has the
meaning set forth in ERISA Section 3(1).
“Environmental, Health, and Safety
Laws” means any federal, state, or local statute, law, ordinance, code, order,
injunction, decree, ruling; any regulations promulgated thereunder, which
regulates or controls pollution or protection of the environment, public health
and safety, or employee health and safety, including laws relating to emissions,
discharges, releases, or threatened release of pollutants, contaminants, or
chemical, industrial, toxic or Hazardous Substances or waste into ambient air,
surface water, ground water or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, or chemical, industrial, toxic or
Hazardous Substances or waste. The term specifically includes,
without limitation: CERCLA; RCRA; the Hazardous Materials
Transportation Act (“HMTA”), 49 U.S.C. §5101 et seq., as amended;
the Toxic Substances Control Act (“TSCA”), 15 U.S.C. §2601 et seq., as amended;
the Clean Air Act (“CAA”), 42 U.S.C. §7401 et seq., as amended;
the Clean Water Act (“CWA”), 33 U.S.C. §1251 et seq., as amended;
the Safe Water Drinking Act, 42 U.S.C. §300f et seq., as amended;
the Emergency Planning and Community Right to Know Act (“EPCRA”), 42 X.X.X.
§00000 et seq.,
as amended; the Federal Insecticide, Fungicide, and Rodenticide Act (“FIFRA”), 7
U.S.C. §136 et
seq., as amended; the Occupational Safety and Health Act (“OSHA”), 29
U.S.C. §651 et
seq., as amended; the National Environmental Policy Act (“NEPA”), 42
U.S.C. §4321 et
seq., as amended; any similar state or local statutes or ordinances and
the regulations promulgated thereunder.
“ERISA” means the Employee Retirement
Income Security Act of 1974, as amended.
“Executory Contracts” shall mean those
contracts, agreements, contract rights, license agreements, franchise rights and
agreements, policies, purchase and sales orders, quotations and executory
commitments, instruments, third party guaranties, indemnifications,
arrangements, and understandings, whether oral or written, related to the
operation of the Business to which Old BCS is a party or which it is bound, and
which are listed on Section 2.2 of the Disclosure Schedule.
“Fiduciary” has the meaning set forth
in ERISA Section 3(21).
“Financial
Statements” has the meaning set forth in Section 4.1(c).
“Fixed Assets” has the meaning set
forth in Section 4.1(h).
“Funded Debt” means New BCS’s bank
debt, debt to Members (including any obligations to pay Tax Distributions under
the Operating Agreement) and the obligations under a capital lease.
“GAAP” means United States generally
accepted accounting principles as in effect from time to time.
“General Basket” has the meaning set
forth in Section 9.2.
“Governmental
Authority” means any nation or government, any state, provincial, regional,
local or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
“Hazardous
Substances” means any toxic substance, hazardous substance, hazardous waste,
hazardous material, solid waste, residual waste, infectious waste, contaminant,
pollutant, or constituent thereof, whether solid, semi-solid, liquid or gaseous,
which are regulated, listed or controlled by any Environmental, Health and
Safety Laws.
“Indemnified Party” has the meaning set
forth in Section 10.1.
“Indemnifying Party” has the meaning
set forth in Section 10.1.
“Inventory” shall mean all saleable and
usable component parts and finished goods related to the Business, including
inventory ordered and prepaid.
“Knowledge” and all similar phrases
relating to facts designated herein as known to the parties identified means the
actual knowledge of any one of the parties identified, or the party identified,
as applicable, after reasonable inquiry or investigation. Knowledge
of Old BCS means the Knowledge of the Members and Xxxxxx.
“Leases” means all rights, title and
interests in leases held by Old BCS related to the Business.
“Liability” means any liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability for
Taxes.
“Material Adverse Change” shall mean
any set of circumstances or events which is or could be reasonably expected to
be material and adverse with respect to the Business or the Purchased and
Contributed Assets or to the operations or prospects of the Business or the
Purchased and Contributed Assets. Without limiting the generality of
the foregoing, a Material Adverse Change shall have deemed to have occurred in
the event of the death or disability of Xxxxxxx Xxxxxx.
“Multiemployer
Plan” has the meaning set forth in ERISA Section 3(37).
“Obsolete Inventory” means Inventory as
to which there have been no sales during the past three years or which is
otherwise known to be obsolete.
“Ordinary Course of Business” means the
ordinary course of business consistent with past custom and practice (including
with respect to quantity and frequency).
“PBGC” means the Pension Benefit
Guaranty Corporation.
“Permits” has the meaning set forth in
Section 4.1(e).
“Person” or “person” means a natural
person, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity (or any department, agency or political
subdivision thereof).
“Prohibited Transaction” has the
meaning set forth in ERISA Section 406 and Code Section 4975.
“Reportable Event” has the meaning set
forth in ERISA Section 4043.
“Security Interest” means any mortgage,
pledge, lien, encumbrance, charge or other security interest, other than (a)
mechanic’s and similar liens, (b) liens for Taxes not yet due and payable or for
Taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of
money.
“Slow Moving Inventory” means Inventory
as to which there has been no sales during the past two years and no sales are
currently forecasted.
“Tax” means any federal, state, local
or foreign income, gross receipts, gross income, capital gains, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental, customs duties, capital stock, franchise, profits,
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum or other tax of any kind whatsoever, including any interest, penalty or
addition thereto.
“Tax
Return” means any declaration, estimate, return, report, information statement,
schedule or other document (including any related or supporting information)
with respect to Taxes that is required to be filed with any Governmental
Authority.
“Third Party Claim” has the meaning set
forth in Section 10.1.
“Treasury
Regulation” means the Income Tax Regulations, including Temporary Regulations,
promulgated under the Code, as such may be amended from time to time (including
corresponding provisions of succeeding regulations).
