Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
SET ENTERPRISES, INC.
SUMITOMO CORPORATION OF AMERICA
SUMITOMO CORPORATION
NOBLE INTERNATIONAL, LTD.
AND
NOBLE MANUFACTURING GROUP, INC.
AUGUST 1, 2003
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of August 1,
2003, is among SET Enterprises, Inc., a Michigan corporation ("SET"), Sumitomo
Corporation of America, a New York corporation ("SCOA"), Sumitomo Corporation, a
Japanese corporation ("Sumitomo," and, together with SCOA, the "Owners"), Noble
International, Ltd., a Delaware corporation ("Noble International") and Noble
Manufacturing Group, Inc., a Michigan corporation ("Noble Manufacturing," and,
together with Noble International, the "Noble Companies"). SET, SCOA, Sumitomo,
Noble International and Noble Manufacturing are referred to in this Agreement
together as the "Parties" and individually as a "Party."
BACKGROUND
A. SCOA is the owner of 1,382 shares (the "SCOA Shares") of the capital stock
of Michigan Steel Processing, Inc., a Michigan corporation ("MSP"), and
Sumitomo is the owner of 345.5 shares (the "Sumitomo Shares") of the
capital stock of MSP. The SCOA Shares and the Sumitomo Shares are
collectively referred to as the "MSP Shares."
B. SET's authorized capital stock includes common stock ("SET Common Stock")
of which there are 980 shares issued and outstanding, $1,000 stated value
Series A Preferred Stock ("Existing A Preferred Stock") of which there are
7,600 shares issued and outstanding to Noble International, $1,000 stated
value Series A Preferred Stock ("Series A Preferred Stock") and $1,000
stated value Series B Preferred Stock ("Series B Preferred Stock"). There
are no shares issued or outstanding of either the Series A or Series B
Preferred Stock.
X. Xxxxx Manufacturing is a wholly-owned subsidiary of Noble International.
D. MSP operates a steel service center which is engaged in the business of
slitting and blanking steel sheet for the automotive industry.
E. SET provides steel processing services including slitting, blanking,
forming, assembly, welding, warehousing and packaging of steel sheet and
also provides related services including prototype development and services
related to engineering and in-house tooling.
F. The Owners and SET desire to combine the businesses of SET and MSP.
G. In furtherance of such combination, the Boards of Directors of the Owners,
SET and MSP have each approved the merger of MSP with and into SET (the
"Merger") in accordance with the applicable provisions of the Michigan
Business Corporation Act (the "MBCA") and upon the terms and subject to the
conditions of this Agreement.
H. SET has also agreed to exchange 7,600 shares of newly issued Series A
Preferred Stock ("Series A Preferred Stock") of SET for the Existing A
Preferred Stock.
I. SET has agreed to issue to Noble Manufacturing 76.8627 shares of SET Common
Stock in exchange for previously provided consideration.
AGREEMENT
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 CERTAIN DEFINITIONS.
(a) For purposes of this Agreement:
"Affiliate" means, with respect to any Person, (i) a Person directly
or indirectly Controlling, Controlled by or under common Control with that
Person, (ii) a Person owning twenty percent or more of the outstanding voting
securities of that Person, (iii) any officer, director, member or partner of
that Person, or (iv) a Person who is an officer, director, member, partner or
holder of twenty percent or more of any of the voting interests of any Person
described in clauses (i) through (iii) of this sentence.
"Certificate of Merger" is defined in Section 2.2.
"Claims" means any and all claims, demands, suits, settlements, and
causes of action allegedly resulting from, arising out of, or in connection with
a matter for which a Party is entitled to indemnification under this Agreement.
"Closing Date" means August 1, 2003 or such other date as is agreed
upon in writing by the Parties.
"Control" and other forms of the word Control mean the ability to
direct the management and policies of a Person by stock ownership, by contract
or otherwise.
"Effective Time" means the time that the Certificate of Merger is
filed with the Michigan Department of Consumer and Industry Services.
"Environmental Laws" means any currently applicable federal, state,
local or foreign statutory or common law, and any rule, regulation, code, plan,
ordinance, order, decree, judgment, permit, grant, franchise, concession,
restriction, agreement, requirement or injunction issued, entered, promulgated
or approved thereunder, relating to the environment, including, without
limitation, any law relating to emissions, discharges, disseminations, releases
or threatened releases of Regulated Substances into the environment (including,
without limitation, air, surface water, groundwater and land surface or
subsurface), or relating to the presence, manufacture, generation, processing,
distribution, use, sale, treatment, recycling, receipt, storage, disposal,
transport, arranging for transportation, removal, remediation, clean up,
treatment of disposal, or handling of Regulated Substances;
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"Environmental Permits" means, collectively, permits, consents,
licenses, approvals, registrations, certifications and authorizations required
under Environmental Laws;
"Environmental Matter" means any matter arising out of, relating to,
or resulting from: (a) any matters relating to emissions, discharges,
disseminations, releases or threatened releases, of Regulated Substances into
the air (indoor and outdoor), surface water, ground water, soil, land surface or
subsurface, buildings, facilities, real or personal property or fixtures, or (b)
otherwise arising out of, relating to, or resulting from the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
handling, release or threatened release of Regulated Substances.
"Hazardous Substances" will be construed to include any toxic or
hazardous substance, pollutant, contaminant, material or waste, and any other
constituent thereof, whether liquid, solid, semisolid, sludge or gaseous,
including chemicals, compounds, by-products, pesticides, asbestos-containing
materials, petroleum or petroleum products, and polychlorinated biphenyls, or
which are or become regulated, listed or controlled by, under or pursuant to any
Environmental Laws, or under any other statute, law, regulation, order, code,
rule, order or decree.
"Intellectual Property" means:
(i) any invention (whether patentable or unpatentable and whether or
not reduced to practice), any improvements to any invention, and any
patent, patent application, or patent disclosure, together with any
reissuance, continuation, continuation-in-part, revision, extension, or
reexamination of any patent;
(ii) any trademark, service xxxx, trade dress, logo, trade name, or
corporate name, together with any translation, adaptation, derivation, or
combination and including any associated goodwill, and any application,
registration, or renewal;
(iii) any copyrightable work, any copyright, and any application,
registration, or renewal;
(iv) any trade secret or confidential business information (including
any idea, research and development, know-how, formula, composition,
manufacturing and production process or technique, technical data, design,
drawing, specification, customer or supplier list, pricing and cost
information, and business and marketing plan or proposal);
(v) any computer software (including data and related documentation),
(vi) any other proprietary right; and
(vii) any copies or tangible embodiment of any Intellectual Property.
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"Knowledge" or "known" and words of similar import mean (i) written
notice received by a Person and (ii) the actual knowledge of specific
individuals which, with respect to SET, mean actual knowledge of Xxx X. Xxxxxx,
Xxxxx Xxxxx, Xxx Xxxxxx, Xxxxxxx Xxxx or Xxxxx Xxxxxxxx and, with respect to the
Owners, mean actual knowledge of Naoki ("Xxxx") Hidaka, Xxxx Xxxx, Hiroaki
("Xxxx") Yoshioka, or Xxxxx Xxxx.
"Lien" means any pledge, lien (including any tax lien), charge, claim,
community property interest, condition, equitable interest, encumbrance,
security interest, mortgage, option, restriction on transfer (including any
buy-sell agreement or right of first refusal or offer), forfeiture, penalty,
equity or other right of another Person of every nature and description
whatsoever.
"Person" or "person" means an individual or any corporation,
partnership, joint venture, association, limited liability company, trust,
unincorporated organization or other business organization, any legal entity or
a government or governmental entity.
"Regulated Substance" means any substance, compound or material
regulated by or pursuant to any Environmental Law.
1.2 CONSTRUCTION AND INTERPRETATION.
(a) The Parties have participated jointly in the negotiation and
drafting of this Agreement. If an ambiguity or question of intent or
interpretation arises, this Agreement will be construed as if drafted jointly by
the Parties and no presumption or burden of proof may arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement.
(b) Each definition in this Agreement includes the singular and the
plural, and references to any gender include the other genders where
appropriate.
(c) Any reference to any federal, state, local or foreign statute or
law will be deemed also to refer to all rules and regulations promulgated under
such statute or law, unless the context requires otherwise. References to any
statute or regulation mean such statute or regulation as amended at the time and
include any successor legislation or regulation.
(d) The word "including" means including without limitation. The word
"or" is not exclusive. The headings to the Articles and Sections are for
convenience of reference and will not affect the meaning or interpretation of
this Agreement.
(e) References to Articles, Sections, Exhibits and Schedules mean the
Articles, Sections, Exhibits and Schedules of this Agreement. The Exhibits and
Schedules are incorporated by reference into and will be deemed a part of this
Agreement.
(f) All references to dollar amounts in this Agreement are references
to United States Dollars unless otherwise provided.
1.3 PARTIAL INVALIDITY. Insofar as possible, each provision of this
Agreement must be interpreted so as to render it valid and enforceable under
applicable law and severable from the
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remainder of this Agreement. A finding that any provision is invalid or
unenforceable in any jurisdiction will not affect the validity or enforceability
of any other provision or the validity or enforceability of such provision under
the laws of any other jurisdiction.
1.4 ACCOUNTING TERMS. "GAAP" means generally accepted accounting principles
as used in the United States, consistently applied in the financial statements
of the entity specified. Except as otherwise specifically provided in this
Agreement, any accounting terms used in this Agreement refer to such terms as
defined by GAAP.
ARTICLE II
MERGER, ISSUANCE OF SHARES AND CLOSING
2.1 THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time, MSP shall be merged with and into SET and the separate
corporate existence of MSP shall cease. SET shall continue as the surviving
corporation in the Merger (sometimes referred to as the "Surviving
Corporation").
2.2 EFFECTIVE TIME. The Owners, MSP and SET will cause an appropriate
Certificate of Merger (the "Certificate of Merger") to be executed and filed on
the Closing Date (or on such other date as the Owners and SET may agree) with
the Michigan Department of Consumer & Industry Services, Bureau of Commercial
Services. The Merger shall become effective at the Effective Time.
2.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Certificate of Merger, and the
applicable provisions of the MBCA. At the Effective Time, the Surviving
Corporation shall continue its corporate existence under the laws of the State
of Michigan and shall possess all the rights, privileges, powers and franchises,
and be subject to all debts, liabilities, and duties of MSP and SET.
2.4 ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION.
(a) The Articles of Incorporation of SET at the Effective Time shall
be the Articles of Incorporation of the Surviving Corporation.
(b) The Bylaws of SET at the Effective Time shall be the Bylaws of the
Surviving Corporation.
2.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
(a) The directors of SET at the Effective Time shall, from and after
the Effective Time, be the directors of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws.
(b) The officers of SET at the Effective Time shall, from and after
the Effective Time, be the officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
death, resignation or removal in accordance with the Surviving Corporation's
Articles of Incorporation and Bylaws.
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2.6 MERGER CONSIDERATION. The consideration to be paid by SET for the MSP
Shares pursuant to the Merger shall be (i) issuing to SCOA (1) 6,080 newly
issued shares of Series A Preferred Stock, (2) 4,800 newly issued shares of
Series B Preferred Stock and (0) 000.0000 newly issued shares of SET Common
Stock; and (ii) issuing to Sumitomo (4) 1,520 newly issued shares of Series A
Preferred Stock, (5) 1,200 newly issued shares of Series B Preferred Stock and
(0) 000.0000 newly issued shares of SET Common Stock (collectively, the "Merger
Consideration").
2.7 SHARE CONSIDERATION FOR THE MERGER; CONVERSION OR CANCELLATION OF
SHARES. The manner of converting and canceling the MSP Shares in the Merger
shall be as follows.
(a) At the Effective Time, each MSP Share issued and outstanding
immediately prior to the Effective Time will, by virtue of the Merger and
without any action on the part of its holder, be converted into and become the
right to receive (rounded to the nearest one hundreth of one full share) (i)
4.3994 shares of Series A Preferred Stock, (ii) 3.4732 shares of Series B
Preferred Stock, and (iii) 0.5005533 shares of SET Common Stock.
(b) At the Effective Time, each MSP Share to be converted into the
Merger Consideration pursuant to this Section 2.7 will, by virtue of the Merger
and without any action on the part of its holder, cease to be outstanding, be
canceled and retired, and cease to exist, and each holder of a certificate
representing any such MSP Share will cease to have any rights with respect to
such share, except the right to receive for each share, upon the surrender of
such certificate in accordance with Section 2.8, the Merger Consideration with
respect to such share.
2.8 PAYMENT FOR MSP SHARES IN THE MERGER. At the Closing, MSP will deliver
to SET any and all certificates representing outstanding MSP Shares (the
"Certificates"), duly endorsed for transfer, and such other documents,
instruments, and agreements related to the Certificates as SET may reasonably
request in order to effect payment of the Merger Consideration. At the Closing,
SET will deliver to the holders of the MSP Shares certificates representing the
Merger Consideration. No interest on the Merger Consideration will accrue or be
paid to the holder of any outstanding MSP Shares.
2.9 TRANSFER OF MSP SHARES AFTER THE CLOSING DATE. No transfers of MSP
Shares will be made on the stock transfer books of MSP after the close of
business on the day prior to the Closing Date.
2.10 SET SHARE ISSUANCE.
(a) At the Closing, in exchange for previously provided consideration,
SET will issue to Noble Manufacturing 76.8627 newly issued shares of SET Common
Stock (the "SET-Noble Common Shares").
(b) At the Closing, in exchange for 7,600 shares of Existing A
Preferred Stock, SET will issue to Noble International 7,600 shares newly issued
shares of Series A Preferred Stock (the "SET-Noble Preferred Shares").
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2.11 CLOSING.
(a) The closing of the Merger and the other transactions contemplated
by this Agreement (the "Closing") will take place at the offices of Xxxxxx
Xxxxxxx PLLC, 000 Xxxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx, at 10:00 a.m., Detroit
time, on the Closing Date.
(b) At the Closing, SET will deliver to Noble Manufacturing a
certificate representing the SET-Noble Common Shares.
(c) At the Closing, in consideration of Noble International's delivery
to SET of the Existing A Preferred Stock, SET will deliver to Noble
International a certificate representing the SET-Noble Preferred Shares.
(d) At the Closing, SET will deliver to the Owners certificates
representing the Merger Consideration.
(e) At the Closing, the Owners will deliver to SET certificates
representing the MSP Shares.
(f) At the Closing, the Parties shall take such actions and execute
and deliver such agreements and other instruments and documents as are necessary
or appropriate to effect the transactions contemplated by this Agreement in
accordance with its terms, including the following:
(i) the Services Agreement between SET and SCOA;
(ii) the Amended and Restated Services Agreement between SET and
Noble Manufacturing;
(iii) the Supply Agreement between SET and SCOA;
(iv) the Processing Agreement between SET and Noble
Manufacturing;
(v) the Amended and Restated Shareholder Agreement among Xxx X.
Xxxxxx, SCOA, Sumitomo, Noble Manufacturing and Noble International;
(vi) the Lease Termination and Release Agreement regarding the
real property lease dated February 14, 2001 between Noble Land Holdings, Inc.
and SET (as successor to Noble Metal Processing - Midwest, Inc.) for the lease
of real property located at 0000 Xxxx 00xx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxx; and
(vii) a fully executed Revolving Credit and Term Loan Agreement
between SET as the borrower and Comerica Bank as agent for the lenders with
terms satisfactory to each of the Parties together with all related documents
and agreements required by Comerica Bank.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE OWNERS
The Owners jointly and severally represent and warrant to SET as of the
Closing Date and as of the Effective Time the following.
3.1 ORGANIZATION OF MSP; QUALIFICATION; CAPITALIZATION.
(a) MSP (i) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan, and (ii) has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
(b) Except where the failure to do so would not have a material
adverse effect on the business, assets, operations or prospects of MSP, MSP is
duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which (i) property owned, leased or
operated by it, or (ii) the nature of its business makes such qualification
necessary.
(c) The MSP Shares represent all of the issued and outstanding shares
of capital stock of MSP. The MSP Shares are validly issued and outstanding,
fully paid and nonassessable. The MSP Shares are owned beneficially and of
record by the Owners, free and clear of all Liens. Except for this Agreement:
(i) MSP has not granted, issued or entered into any security,
option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (A) calls for the issuance, sale, pledge or other disposition of any
capital stock or any securities convertible into, or exchangeable for, or other
rights to acquire, any capital stock, or (B) obligates MSP to grant, offer or
enter into any of the foregoing;
(ii) there are no outstanding phantom stock rights or other
equity-based rights issued by MSP;
(iii) there are no outstanding contractual obligations by MSP to
repurchase, redeem or otherwise acquire any capital stock; and
(iv) as of the date of this Agreement there are no voting trusts,
proxies or other agreements or understandings to which either of the Owners or
MSP is a party with respect to the (A) voting of capital stock of MSP, (B)
dividends or distributions on account of such capital stock, or (C) the transfer
or disposition of such capital stock.
3.2 AUTHORITY; NO VIOLATION OR CONSENT.
(a) Each of the Owners has full power and authority to enter into this
Agreement and to carry out the transactions contemplated by this Agreement and
all corporate proceedings required to be taken by or on its part to authorize
the execution, delivery and performance of this Agreement have been duly and
properly taken. This Agreement has been duly and validly executed and delivered
by the Owners and constitutes a valid and binding
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agreement of the Owners enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good faith and fair
dealing.
(b) The execution and delivery of this Agreement, the consummation of
the transactions contemplated by this Agreement, and the compliance with the
terms of this Agreement do not and will not:
(i) conflict with or result in any breach of any provision of the
Certificate of Incorporation, Articles of Incorporation, bylaws, or the
equivalent of any of the foregoing, of the Owners or MSP;
(ii) conflict with, result in a breach of any provision of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the modification or cancellation of, or give rise to any right
of termination or acceleration in respect of, any contract, agreement,
commitment, understanding, arrangement or restriction of any kind to which
either of the Owners or MSP is a party or to which any of them or their
respective property is subject;
(iii) result in the creation of any Lien upon, or any Person
obtaining the right to acquire, any of the MSP Shares or any of the assets of
MSP;
(iv) violate or conflict with any law, ordinance, code, rule,
regulation, decree, order or ruling of any court or governmental authority, to
which the Owners, MSP, any of their respective assets or any of the MSP Shares
is subject;
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority; or
(vi) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with, any
Person.
3.3 NO SUBSIDIARIES OR INVESTMENTS. MSP does not own, beneficially or of
record, directly or indirectly, any outstanding voting stock, capital stock,
partnership interests or other equity interests of any other Person.
3.4 FINANCIAL STATEMENTS. Schedule 3.4 contains the unaudited balance sheet
as of December 31, 2002 and related income statements and statements of cash
flows for MSP for the period then ended (the "MSP Year-End Statements") and the
unaudited interim balance sheet as of March 31, 2003 and related income
statement and statement of cash flows for MSP for the period then ended (the
"MSP Interim Statements"). The MSP Year-End Statements and the MSP Interim
Statements are referred to collectively in this Agreement as the "MSP Financial
Statements." The MSP Financial Statements have been prepared in accordance with
GAAP (except that the MSP Interim Statements do not contain footnotes or normal
year-end adjustments) and are consistent with MSP's books and records. The
accounting principles and methods used in the preparation of the MSP Financial
Statements are consistent with the prior
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principles and methods used by MSP in the preparation of its internal financial
statements. The MSP Financial Statements fairly present the financial condition
and results of operations of MSP as of the dates and for the periods indicated.
Except as set forth on Schedule 3.4(b), the accounts receivable shown in the MSP
Financial Statements have arisen from bona fide transactions in the ordinary
course of business and are not subject to any counterclaim or set-off.
3.5 AFFILIATE TRANSACTIONS. Except as set forth on Schedule 3.5, there are
no contracts or business relationships between MSP and any of its Affiliates.
MSP has not charged off, forgiven, or cancelled any indebtedness of any of its
Affiliates. For the purposes of this section 3.5, MSP's Affiliates do not
include any Person Controlled by Sumitomo (other than SCOA) unless that Person
would also be Controlled by SCOA.
3.6 PERSONAL PROPERTY.
(a) Schedule 3.6 lists any lease pursuant to which MSP leases personal
property as lessee or lessor. The machinery, equipment (other than
de-commissioned machinery and equipment in storage or held for possible future
use), furniture, leasehold and other improvements, fixtures, vehicles, any
related capitalized items and other tangible property used in the business or
operations of MSP (the "MSP Personal Property") are free of any material
structural or engineering defects.
(b) MSP has good, valid and marketable title to the MSP Personal
Property, free and clear of all Liens except for (i) Liens for current Taxes (as
defined below), assessments or governmental charges not yet due or delinquent,
(ii) those which do not, individually or in the aggregate, materially interfere
with the use of items of MSP Tangible Property or materially detract from their
value, and (iii) liens of mechanics, materialmen, laborers, warehousemen,
carriers and other similar common law or statutory liens arising in the ordinary
course of business which are not yet due and payable or, if due and payable,
have been adequately bonded.
3.7 REAL PROPERTY. Schedule 3.7 lists all real property and interests in
real property owned ("MSP Owned Real Property"), leased ("MSP Leased Real
Property") or used ("MSP Used Real Property") (collectively, the "MSP Real
Property") by MSP, including any leases and material easements.
(a) Since December 31, 2002, MSP has not purchased or contracted to
purchase, lease, or otherwise acquire or take options on, nor has MSP sold or
contracted to sell, lease, otherwise dispose of, or give options on, any MSP
Real Property.
(b) No charges or violations have been filed, served, made, or
threatened against or relating to any of the operations of MSP's business as a
result of any violation or alleged violation of any applicable restrictive
covenants, ordinances, regulations, and zoning laws or as a result of any
encroachment or alleged encroachment on the property of others.
(c) MSP has good and marketable title in fee simple to all of the MSP
Owned Real Property, including fixtures, free and clear of all Liens or other
encumbrances, other than Liens for taxes, the payment for which is not yet due
or materialmen's, warehousemen's, mechanics' or other Liens arising by operation
of law in the ordinary course of business for
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sums not due and which do not detract from the value of such property or impair
the operation of MSP's business now being conducted and with permanent and
adequate rights of egress and ingress.
(d) No part of any MSP Owned Real Property is within a flood plain or
any area subject to flooding as determined by the United States Department of
Housing and Urban Development or the Army Corps of Engineers except for flood
plains or areas subject to flooding, if any, which do not materially restrict
the continued use of such MSP Owned Real Property for the purposes for which it
is now employed or adversely affect the value of such MSP Owned Real Property.
(e) The leases of all MSP Leased Real Property (the "MSP Leases") are
valid and legally binding in accordance with their respective terms free and
clear of all Liens, and there is not under any MSP Lease any existing default or
event of default which, with notice or lapse of time or both, would constitute a
default. None of the rights of MSP under any MSP Lease is subject to termination
or modification as a result of the transactions contemplated by this Agreement
or such modifications as may be required in connection with the obtaining of
consents to the transactions contemplated by this Agreement in accordance with
this Section 3.7.
(f) There are no condemnation proceedings or eminent domain
proceedings of any kind pending or threatened against the MSP Real Property.
(g) The use and occupancy of the MSP Leased Real Property by MSP in
operating its business does not constitute a default under the terms of each
applicable lease and there are no facts which would prevent the MSP Leased Real
Property from being occupied after the Effective Time in the same manner as
before.
(h) All improvements on the MSP Owned Real Property and the present
use and conditions of the MSP Owned Real Property do not violate any applicable
deed restrictions or other applicable covenants, restrictions, agreements,
existing site plan approvals, zoning or subdivision regulations or urban
redevelopment plans as modified by any duly issued variances, and no permits,
licenses or certificates pertaining to the ownership or operation of all
improvements on the MSP Owned Real Property, are required by any governmental
agency having jurisdiction over the MSP Owned Real Property.
(i) All improvements on any MSP Owned Real Property are wholly within
the lot limits of such MSP Owned Real Property and do not encroach on any
adjoining premises and there are no encroachments on any MSP Owned Real Property
by any improvements located on any adjoining premises.
(j) MSP in connection with the operation of its business enjoys
peaceful and quiet possession of each parcel of MSP Owned Real Property and
enjoys peaceful and quiet possession of each parcel of MSP Leased Real Property
except for variations, if any, which do not materially restrict the continued
use of such MSP Owned Real Property or MSP Leased Real Property for the purposes
for which each is now employed or adversely affect the value of such MSP Owned
Real Property or MSP Leased Real Property.
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(k) The rental set forth in each MSP Lease is the actual rental being
paid, and there are no separate agreements or understandings with respect to the
same.
(l) MSP has the full right to exercise the renewal options contained
in each MSP Lease on the terms and conditions contained in that MSP Lease and
upon due exercise would be entitled to enjoy the use of each MSP Leased Real
Property for the full term of such renewal options.
(m) All title documents and any surveys and title opinions or other
assurances with respect to the MSP Owned Real Property in the possession of MSP
have been provided to SET.
3.8 ENVIRONMENTAL MATTERS.
(a) Except where the failure to do so would not have a material
adverse effect on the business, assets, operations or prospects of MSP, MSP
holds all Environmental Permits necessary to conduct its business as presently
conducted. All such Environmental Permits are in full force and effect and MSP
has timely made all appropriate filings and registrations where necessary for
the issuance or renewal of such Environmental Permits. Schedule 3.8(a) lists (i)
each Environmental Permit now held, (ii) the governmental entity which has
jurisdiction with respect to such Environmental Permit, (iii) the entity which
is required to hold such Environmental Permit and (iv) the effective date and
duration of such Environmental Permit. MSP is in material compliance with all
terms and conditions of all such Environmental Permits and all Environmental
Laws.
(b) Except as set forth on Schedule 3.8(b), consummation of the
transactions contemplated hereby will not require SET or MSP to provide notice,
obtain governmental approval or take any other actions in order to enable MSP to
continue to hold all Environmental Permits and to remain in compliance with the
terms and conditions of all Environmental Permits and all Environmental Laws.
None of the Owners or MSP has obtained information from regulatory agencies
having jurisdiction or any other Person, which would lead a reasonable person or
entity with knowledge of the facts and circumstances to believe that such
Environmental Permits may not be issued, renewed, extended or reissued in due
course and as requested without material cost or penalty.
(c) Except as set forth on Schedule 3.8(c), there is not pending
against MSP, or its Affiliates, with respect to the operations or properties of
MSP, any civil, criminal or administrative action, suit, summons, citation,
complaint, claim, notice of violation, demand, judgment, order, lien, proceeding
or hearing or any study, inquiry, proceeding or investigation (collectively,
"Environmental Actions"), based on or related to any Environmental Permit or any
Environmental Law or the presence, manufacture, generation, processing,
distribution, use, sale, treatment, recycling, receipt, storage, disposal,
transport, arranging for transportation, treatment or disposal, or handling, or
the emission, discharge, release or threatened release into the environment, of
any Regulated Substance, nor to Owners' Knowledge, has any such Environmental
Action been threatened within the last five years.
(d) Except as set forth on Schedule 3.8(d), MSP has not manufactured,
generated, processed, distributed, used, sold, treated, recycled, received,
stored, disposed of,
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transported, arranged for transportation, treatment or disposal of, handled or
conducted any other activity involving, any Regulated Substance except in
compliance in all material respects with Environmental Laws and Environmental
Permits and in a manner that would not give rise to any liability or obligation
under any Environmental Laws.
(e) Except as set forth in Schedule 3.8(e), there are no past or
present conditions, events, circumstances, facts, activities, practices,
incidents, actions, agreements, omissions or plans relating to Owners, MSP or,
to Owners' Knowledge, any third parties: (i) that will interfere with or prevent
material compliance by MSP with Environmental Laws and the requirements of
Environmental Permits, (ii) that will give rise to any liability or other
obligation under any Environmental Laws that will require MSP to incur any
actual or potential Environmental Costs, or (iii) that will form the basis of
any claim, action, suit, proceeding, hearing, investigation or inquiry against
or involving MSP based on or related to any Environmental Matter or which will
require MSP to incur any Environmental Costs.
(f) Except as set forth on Schedule 3.8(f), there are, to Owners'
Knowledge, no underground or aboveground storage tanks, incinerators, surface
impoundments, asbestos-containing materials, PCB's or lagoons at, on, under or
within the real estate now or in the past owned or operated by MSP.
(g) MSP has not received any written notice or other communication
that it is or may be a potentially responsible person or otherwise liable, nor
to Owners' Knowledge is MSP otherwise liable, in connection with an
Environmental Matter relating to any waste disposal site or other location
allegedly containing, used for, or resulting from the disposal of, any Regulated
Substances.
(h) MSP has not used any waste disposal or waste treatment site, or
otherwise disposed of or treated, transported for disposal or treatment, or
arranged for the transportation for disposal or treatment of, any Hazardous
Substances to any place or location in violation of any Environmental Laws. MSP
has not received, nor are the Owners or MSP aware of, any request for response
action, administrative or other order (or request therefor), judgment,
complaint, claim, investigation, request for information or other request for
relief in any form relating to any facility where Hazardous Substances generated
or transported by MSP have been or may have been handled, stored, disposed of,
placed or located. Except as set forth on Schedule 3.8(h)(2), MSP has not been
requested nor required by any governmental authority or any other person to
perform any investigatory or remedial activity or other action in connection
with any Environmental Matter.
(i) There has been no release or other discharge of any Regulated
Substances at, on, or about, under or within the real estate currently leased,
operated or controlled by MSP (other than pursuant to and in accordance with
Environmental Permits held by them) during the time that MSP has leased,
operated or controlled such real estate; nor to the Owners' Knowledge has there
been a release or other discharge of any Regulated Substances at, on, or about,
under or within such real estate before the time that MSP leased, operated or
controlled it. Such real estate is not and never has been listed on the United
States Environmental Protection Agency's National Priorities List, or any
analogous state listing.
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(j) All real estate described at Section 3.7 is, to Owners' Knowledge,
in substantial compliance with all Environmental Laws.
(k) As used in this Section 3.8, "Environmental Costs" means, without
limitation, any actual or potential cleanup costs, remediation, removal, or
other response costs (which without limitation shall include costs to cause MSP
to come into compliance with Environmental Laws), investigation costs (including
fees of consultants, counsel, and other experts in connection with any
environmental investigation, testing, audits or studies), fees, losses,
liabilities or obligations (including liabilities or obligations under any lease
or other contract), payments, damages (including any actual, punitive or
consequential damages under any statutory laws, common law cause of action or
contractual obligations or otherwise, including without limitation damages (i)
of third parties for personal injury or property damage, or (ii) to natural
resources), civil, administrative or criminal fines or penalties, judgments and
amounts paid in settlement arising out of or relating to or resulting from any
Environmental Matter.
3.9 OCCUPATIONAL SAFETY AND HEALTH. The New Boston, Michigan facility of
MSP is maintained and operated in material compliance with OSHA, any similar
applicable state statute, and the rules and regulations promulgated thereunder.
3.10 LEGAL PROCEEDINGS, ETC. Except as set forth on Schedule 3.10, there is
no claim, suit, action, proceeding or investigation pending or, to Owners'
Knowledge, threatened against MSP before any court or governmental or regulatory
authority or body, or any arbitral body.
3.11 TAXES.
(a) MSP has duly and timely filed (or caused to be filed) all Tax
returns required to be filed by it on or prior to the Closing Date, and has
timely paid all Taxes for all periods covered by such returns. All consolidated,
combined or similar Tax returns required to be filed on or prior to the Closing
Date that include (or are required to include) MSP have been duly and timely
filed on or prior to the Closing Date, and all Taxes for all periods covered by
such returns have been timely paid. All Tax returns referenced in this Section
3.11(a) were correct and complete in all material respects.
(b) Except as set forth on Schedule 3.11, no action or proceeding for
the assessment or collection of any Taxes is pending or proposed against MSP,
either of the Owners, or any other Person (a "MSP Tax Affiliate") which files
consolidated, combined, or similar returns of Taxes which include (or are
required to include) MSP, and no deficiency, assessment or other claim for any
Taxes has been asserted or made against MSP or any MSP Tax Affiliate that has
not been fully paid or otherwise resolved. Except as set forth on Schedule 3.11,
neither MSP nor any MSP Tax Affiliate has received any reports or other written
assertions by agents of any taxing authority of any deficiencies or other
liabilities for Taxes which have not been paid or otherwise resolved with
respect to periods for which the limitations period has not run. Neither MSP nor
any MSP Tax Affiliate currently is the beneficiary of any extension of time
within which to file any return of Taxes. No claim has been made by an authority
in a jurisdiction where MSP or a MSP Tax Affiliate does not file returns of
Taxes that is or may be subject to taxation by that jurisdiction. Except as set
forth on Schedule 3.11,
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neither MSP nor any MSP Tax Affiliate has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(c) Except as set forth on Schedule 3.11, all Taxes which MSP has been
required to collect or withhold have been duly withheld or collected and, to the
extent required, have been paid to the proper Taxing authority.
(d) As used in this Agreement, "Taxes" means all taxes, charges, fees,
levies or other assessments, including income, excise, property, transfer,
payroll, withholding, employment, value added, capital, net worth, estimated,
sales, use and franchise taxes, imposed by the United States, or any state,
county, local or foreign government or subdivision or agency thereof, and
including any interest, penalties or additions attributable thereto, whether or
not disputed.
3.12 PATENTS, TRADEMARKS, TRADE NAMES, ETC. MSP owns or has the right to
use, pursuant to license, sublicense, agreement or permission, all Intellectual
Property necessary for the operation of its business as presently conducted. MSP
has not received any charge, complaint, claim, demand or notice alleging any
interference, infringement, misappropriation or violation with or of any
Intellectual Property rights of a third party (including any claims that MSP
must license or refrain from using any Intellectual Property rights of a third
party). To Owners' Knowledge, MSP has not interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual Property
rights of third parties and, to Owners' Knowledge, no third party has interfered
with, infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property rights of MSP. With respect to each item of Intellectual
Property owned by MSP, it possesses all right, title and interest in and to the
item, free and clear of any Lien. With respect to each item of Intellectual
Property that MSP is licensed or authorized to use, the license, sublicense,
agreement or permission covering such item (i) is legal, valid, binding,
enforceable and in full force and effect and will not be affected by the
consummation of the transactions contemplated by this Agreement, and (ii) has
not been breached by any party.
3.13 LABOR MATTERS. Except as set forth on Schedule 3.13, MSP is not a
party to or subject to any labor union or collective bargaining agreement. MSP
is in compliance in all material respects with all agreements set forth on
Schedule 3.13 and all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice. There is not actually pending or
threatened against MSP (i) any labor strike, slowdown or work stoppage, (ii) any
material grievance or arbitration proceeding arising out of or under any
collective bargaining agreements, or (iii) any unfair labor practice complaint
against MSP before the National Labor Relations Board. Since January 1, 1998,
(x) no representation petition respecting the employees of MSP has been filed
with the National Labor Relations Board of which MSP or the Owners has notice,
and (y) MSP has not experienced any primary work stoppage or labor strike
involving its employees.
3.14 ABSENCE OF CERTAIN COMMERCIAL PRACTICES. MSP has not, and to Owners'
Knowledge, no director, officer, agent, employee or other person acting on
behalf of MSP has, in violation of federal or state law: (i) given or agreed to
give any gift or similar benefit of more
15
than nominal value to any customer, supplier, governmental employee or official
or any other Person who is or may be in a position to help or hinder MSP or
assist in connection with any proposed transaction, or (ii) used any corporate
or other funds for unlawful contributions, payments, gifts, or entertainment, or
made any unlawful expenditures relating to political activity to governmental
officials or others or established or maintained any unlawful or unrecorded
funds. MSP has not, and to Owners' Knowledge, no director, officer, agent,
employee or other person acting on behalf of MSP has, with respect to MSP,
accepted or received any unlawful contributions, payments, gifts, entertainment
or expenditures.
3.15 ERISA; BENEFIT PLANS.
(a) Schedule 3.15(a) contains a true and complete list of all
employment-related plans, including but not limited to, employment or consulting
agreements, collective bargaining and supplemental agreements, pension, profit
sharing, stock bonus, defined contribution, supplemental executive retirement,
incentive, bonus, deferred compensation, retirement, stock option, stock
purchase, severance, medical and hospitalization, disability, life insurance,
long term care, vacation, salary continuation, sick pay, welfare, fringe benefit
and other employee benefit plans, contracts, programs, policies and
arrangements, whether written or oral, which MSP maintains or has maintained, or
under which MSP has or had any obligations with respect to any employee of MSP,
now or at any time during the five year period ending on the Closing Date (the
"MSP Plans").
(b) Except as set forth in Schedule 3.15(b), (i) MSP has no unfunded
liabilities in connection with any of the MSP Plans; (ii) all contributions,
premium payments and other payments due from MSP to or under such MSP Plans have
been paid in a timely manner; and (iii) all additional contributions, premium
payments and other payments due on or before the Effective Time have been paid.
(c) Except as set forth in Schedule 3.15(c), MSP has not made any
commitments or taken any actions to adopt or establish any additional MSP Plans
or to materially increase the benefits under any of the MSP Plans.
(d) Except as set forth in Schedule 3.15(d), with respect to each of
the MSP Plans:
(i) each MSP Plan has been established, maintained, funded and
operated and administered, in all material respects, in substantial compliance
with its governing documents, and all applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Internal
Revenue Code of 1986, as amended (the "Code"), other applicable law, and all
regulations thereunder;
(ii) all disclosures to employees and all government filings and
other reports relating to each such MSP Plan and required (under ERISA, the
Code, other applicable law, including federal and state securities laws, and all
regulations thereunder) to have been made or filed on or before the Effective
Time have been or will be duly and timely made or filed by that date;
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(iii) each of the MSP Plans which is intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined by the IRS
to be so qualified and MSP has obtained favorable determination letters from the
IRS to such effect;
(iv) no such determination letter has been revoked by the IRS,
nor has the IRS given any written notice to MSP that it intends to revoke any
such determination letter;
(v) no reportable event within the meaning of Section 4043 of
ERISA, or non-exempt prohibited transaction within the meaning of Section 406 of
ERISA, has occurred with respect to the MSP Plans and no excise tax has been
imposed pursuant to Section 4975 of the Code in respect thereof;
(vi) except with respect to income taxes on benefits paid or
provided, no income, excise (including those under Code Sections 4975, 4976,
4980B and 4980D), or other tax or penalty (federal or state) has been waived or
excused or has been paid or is owed by any person (including any MSP Plan, any
MSP Plan fiduciary, and MSP) with respect to the operations of, or any
transactions with respect to, any MSP Plan and no action has been taken, nor has
there been any failure to act, that would subject any person or entity to any
liability, tax or penalty in connection with any MSP Plan (including any tax or
penalty for the failure to withhold income taxes in connection with fringe
benefits);
(vii) there are no pending, threatened or anticipated claims,
other than ordinary claims for benefits, involving any of the MSP Plans,
including litigation or arbitration claims by participants or beneficiaries,
complaints filed by government agencies, claims with respect to any bond or any
fiduciary liability or other similar insurance with regard to actions of any
person in connection with the MSP Plans, or notice of any such claim to any
insurer under such bond or policy with regard to the MSP Plans; and
(viii) no fiduciary of any of the MSP Plans has any liability for
breach of fiduciary duty or any other failure to act or comply in connection
with the administration of or investment of the assets of any of the MSP Plans.
(e) MSP has provided or will provide promptly to SET copies of all of
the written MSP Plans listed on Schedule 3.15(a) and all related current and
prior material documentation, including: plan documents and all amendments
thereto, summary plan descriptions, collective bargaining agreements that
require the provision of employee benefits, trust agreements, insurance
contracts, evidence of any other funding medium related to any of the MSP Plans,
trustee reports, custodial reports, insurance contracts, fidelity bonds, and
fiduciary liability policies and applications for such coverages, investment
manager and investment advisory contracts, third-party administration
agreements, loan agreements, actuarial reports and valuations, administrative
rules or guidelines, audited or unaudited financial reports or statements, asset
valuation reports, liability valuation reports, agreements concerning plan
mergers and/or plan-to-plan transfers of assets and liabilities, any IRS Form
5500, IRS determination letters and/or private letter rulings and advisory
opinions from either DOL or
17
PBGC sought by any of the MSP Plans. For purposes of this subsection, "prior"
means at least the three plan years preceding the Effective Time.
(f) With respect to each of the MSP Plans, MSP will deliver promptly
to SET true and complete copies of the participant and beneficiary records for
the MSP Plans which accurately state the history of each participant and
beneficiary in connection with the MSP Plans and which accurately state the
benefits earned and/or owed to each person under the MSP Plans.
(g) Except as set forth in Schedule 3.15(g), MSP is not a contributing
employer to any multiemployer plan.
(h) Except as set forth in Schedule 3.15(h), none of the MSP Plans
provide, or have an obligation or commitment to provide, health benefits to any
current or former employee of MSP, or any dependent of any such employee, beyond
such employee's retirement or other termination of service, other than coverage
mandated by Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the
Code ("COBRA").
(i) No amount payable under the MSP Plans is likely to fail to be
deductible for federal income tax purposes by virtue of Section 280G of the
Code.
(j) Except as sent forth in Schedule 3.15(j), the MSP Plans that are
subject to COBRA continuation coverage and the Health Insurance Portability and
Accountability Act ("HIPAA") have been maintained in compliance with COBRA and
HIPAA requirements, including all notice and certification requirements.
3.16 EMPLOYEE COMPENSATION. Schedule 3.16 sets forth (i) the name and total
calendar year 2002 compensation (including bonuses, commissions, or incentive
compensation) of each employee of MSP whose aggregate compensation for federal
income tax purposes during calendar year 2002 exceeded $100,000, and (ii) the
employee benefits provided to each such employee during calendar year 2002.
3.17 INDEPENDENT CONTRACTORS; AGENTS; REPRESENTATIVES. Schedule 3.17 sets
forth the name and total compensation (including bonuses, commissions or
incentive compensation) of all independent contractors, consultants, agents and
representatives retained by MSP at any time since December 31, 2002 to provide
services to MSP.
3.18 COMPLIANCE WITH LAW. The operations of MSP have been conducted in
accordance with all applicable laws, regulations and other requirements of all
governmental authorities, whether federal, state, local or foreign, having
jurisdiction over them except where a failure to comply would not have a
material adverse effect on the business, assets, operations or prospects of MSP.
The Owners do not Know of any asserted present or past failure to comply with
any such laws, rules, regulations or requirements.
3.19 CUSTOMERS AND SALES. Schedule 3.19 is a true, complete and correct
list of the ten largest customers (by dollar volume of sales) of MSP for the
12-month period ending March 31, 2003. Except as set forth on Schedule 3.19, the
Owners do not Know that any of these customers intends to cease doing business
with MSP or materially alter the amount of the
18
business it is presently doing with MSP whether as a consequence of the
transactions contemplated in this Agreement or otherwise.
3.20 SUPPLIERS AND CONTRACTORS. Schedule 3.20 is a true, complete and
correct list of the ten largest suppliers and contractors (by dollar volume of
expense) to MSP for the 12-month period ending March 31, 2003. Except as set
forth on Schedule 3.20, MSP has received no written notice that, nor do the
Owners' have Knowledge that, any of these suppliers and contractors intends to
cease doing business with MSP or materially alter the amount of the business it
is presently doing with MSP whether as a consequence of the transactions
contemplated in this Agreement or otherwise.
3.21 ABSENCE OF CHANGES OR EVENTS. Except as set forth on Schedule 3.21,
since December 31, 2002, MSP has conducted its business in the ordinary course
and in a manner consistent with past practice and, without limiting the
generality of the foregoing, there has not been:
(a) any change by MSP or by the Owners (to the extent relating to MSP)
in its accounting methods, principles or practices;
(b) any revaluation by MSP of any material asset (including any
writing down of the value of inventory or writing off of notes or accounts
receivable);
(c) any declaration or setting aside or payment of any dividend or
distribution in respect of any shares of MSP's capital stock or any redemption,
purchase or other acquisition of any of MSP's securities;
(d) any incurrence of indebtedness for borrowed money;
(e) any granting of a mortgage or pledge on any properties or assets
of MSP or subjecting of such property or assets to any Lien (except Liens for
current property taxes not yet due and payable);
(f) any damage, destruction or casualty loss which has had or could
reasonably be expected to have a material adverse effect on the business,
properties condition (financial or otherwise) or results of operation of MSP;
(g) any material modification, material amendment or termination of
any material contract; or
(h) any information, fact or circumstance that has come to the
attention of the Owners or MSP that could lead any of them to believe that the
reserves for the accounts receivable set forth on the MSP Financial Statements
are inadequate.
In addition, since December 31, 2002, there have not been any extraordinary
losses or waivers of rights of material value by or with regard to MSP, whether
or not in the ordinary course of business or consistent with past practices.
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3.22 CORPORATE RECORDS. The Owners have previously furnished to SET true,
correct and complete copies of the Articles of Incorporation or Certificate of
Incorporation and bylaws, or the equivalent of the foregoing, of MSP and of the
Owners as amended through the date of this Agreement. The Owners have made
available for review by SET true, correct and complete copies of the corporate
minute books and stock records for MSP.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SET
SET represents and warrants to the Owners as of the Closing Date and as of
the Effective Time the following.
4.1 ORGANIZATION OF SET; QUALIFICATION; CAPITALIZATION.
(a) SET (i) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan, and (ii) has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
(b) SET is, as of the date of this Agreement, a Minority Business
Enterprise (a "MBE") as defined and certified by the Michigan Minority Business
Development Council (the "MMBDC"). As of the Closing Date, neither SET nor its
shareholders have received written notice from the MMBDC indicating that SET's
status as a MBE might change as a result of the Merger or for any other reason.
(c) Except where the failure to do so would not have a material
adverse effect on the business, assets, operations or prospects of SET, SET is
duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which (i) property owned, leased or
operated by it, or (ii) the nature of its business makes such qualification
necessary.
(d) The Existing SET Shares represent all of the issued and
outstanding shares of capital stock of SET. Except for this Agreement and the
Shareholder Agreement, effective as of February 1, 2001, among Noble
International, Xxx X. Xxxxxx and S.E.T. Steel, Inc. (now known as SET
Enterprises, Inc.):
(i) SET has not granted, issued or entered into any security,
option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (A) calls for the issuance, sale, pledge or other disposition of any
capital stock or any securities convertible into, or exchangeable for, or other
rights to acquire, any capital stock, or (B) obligates SET to grant, offer or
enter into any of the foregoing;
(ii) there are no outstanding phantom stock rights or other
equity-based rights issued by SET;
(iii) there are no outstanding contractual obligations by SET to
repurchase, redeem or otherwise acquire any capital stock; and
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(iv) as of the date of this Agreement there are no voting trusts,
proxies or other agreements or understandings to which SET is a party with
respect to the (A) voting of capital stock of SET, (B) dividends or
distributions on account of such capital stock, or (C) the transfer or
disposition of such capital stock.
4.2 AUTHORITY; NO VIOLATION OR CONSENT.
(a) SET has full power and authority to enter into this Agreement and
to carry out the transactions contemplated by this Agreement and all corporate
proceedings required to be taken by or on its part to authorize the execution,
delivery and performance of this Agreement have been duly and properly taken.
This Agreement has been duly and validly executed and delivered by SET and
constitutes a valid and binding agreement of SET enforceable in accordance with
its terms, subject to bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by an implied covenant of
good faith and fair dealing.
(b) The execution and delivery of this Agreement, the consummation of
the transactions contemplated by this Agreement, and the compliance with the
terms of this Agreement do not and will not:
(i) conflict with or result in any breach of any provision of the
Certificate of Incorporation or bylaws of SET;
(ii) conflict with, result in a breach of any provision of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the modification or cancellation of, or give rise to any right
of termination or acceleration in respect of, any contract, agreement,
commitment, understanding, arrangement or restriction of any kind to which SET
is a party or to which it or its property is subject;
(iii) result in the creation of any Lien upon, or any Person
obtaining the right to acquire, any of the Existing SET Shares or any of the
assets of SET;
(iv) violate or conflict with any law, ordinance, code, rule,
regulation, decree, order or ruling of any court or governmental authority, to
which SET, any of its assets or any of the Existing SET Shares is subject;
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority; or
(vi) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with, any
Person.
4.3 NO SUBSIDIARIES OR INVESTMENTS. SET does not own, beneficially or of
record, directly or indirectly, any outstanding voting stock, capital stock,
partnership interests or other equity interests of any other Person.
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4.4 FINANCIAL STATEMENTS. Schedule 4.4 contains the unaudited balance sheet
as of December 31, 2002 and related income statements and statements of cash
flows for SET for the period then ended (the "SET Unaudited Statements") and the
unaudited interim balance sheet as of March 31, 2003 and related income
statement and statement of cash flows for SET for the period then ended (the
"SET Interim Statements"). The SET Unaudited Statements and the SET Interim
Statements are referred to collectively in this Agreement as the "SET Financial
Statements." The SET Financial Statements have been prepared in accordance with
GAAP (except that the SET Interim Statements do not contain footnotes or normal
year-end adjustments) and are consistent with SET's books and records. The
accounting principles and methods used in the preparation of the SET Financial
Statements are consistent with the prior principles and methods used by SET in
the preparation of its internal financial statements. The SET Financial
Statements fairly present the financial condition and results of operations of
SET as of the dates and for the periods indicated. The accounts receivable shown
in the SET Financial Statements have arisen from bona fide transactions in the
ordinary course of business and are not subject to any counterclaim or set-off.
4.5 AFFILIATE TRANSACTIONS. Except as set forth on Schedule 4.5, there are
no contracts or business relationships between SET and any of its Affiliates.
SET has not charged off, forgiven, or cancelled any indebtedness of any of its
Affiliates.
4.6 PERSONAL PROPERTIES; TITLE.
(a) Schedule 4.6 lists any lease pursuant to which SET leases personal
property as lessee or lessor. The machinery, equipment (other than
de-commissioned machinery and equipment in storage or held for possible future
use), furniture, leasehold and other improvements, fixtures, vehicles, any
related capitalized items and other tangible property used in the business or
operations of SET (the "SET Personal Property") are free of any material
structural or engineering defects.
(b) SET has good, valid and marketable title to the SET Personal
Property, free and clear of all Liens except for (i) Liens for current Taxes,
assessments or governmental charges not yet due or delinquent, (ii) those which
do not, individually or in the aggregate, materially interfere with the use of
items of SET Tangible Property or materially detract from their value, and (iii)
liens of mechanics, materialmen, laborers, warehousemen, carriers and other
similar common law or statutory liens arising in the ordinary course of business
which are not yet due and payable or, if due and payable, have been adequately
bonded.
4.7 REAL PROPERTY. Schedule 4.7 lists all real property and interests in
real property owned ("SET Owned Real Property"), leased ("SET Leased Real
Property") or used ("SET Used Real Property") (collectively, the "SET Real
Property") by SET, including any leases and material easements.
(a) Since December 31, 2002, SET has not purchased or contracted to
purchase, lease, or otherwise acquire or take options on, nor has SET sold or
contracted to sell, lease, otherwise dispose of, or give options on, any SET
Real Property.
(b) No charges or violations have been filed, served, made or
threatened against or relating to any of the operations of SET's business as a
result of any violation or
22
alleged violation of any applicable restrictive covenants, ordinances,
regulations and zoning laws or as a result of any encroachment or alleged
encroachment on the property of others.
(c) SET has good and marketable title in fee simple to all of the SET
Owned Real Property, including fixtures, free and clear of all Liens or other
encumbrances, other than Liens for taxes, the payment for which is not yet due
or materialmen's, warehousemen's, mechanics' or other Liens arising by operation
of law in the ordinary course of business for sums not due and which do not
detract from the value of such property or impair the operation of SET's
business now being conducted and with permanent and adequate rights of egress
and ingress.
(d) No part of any SET Owned Real Property is within a flood plain or
any area subject to flooding as determined by the United States Department of
Housing and Urban Development or the Army Corps of Engineers except for flood
plains or areas subject to flooding, if any, which do not materially restrict
the continued use of such SET Owned Real Property for the purposes for which it
is now employed or adversely affect the value of such SET Owned Real Property.
(e) The leases of all SET Leased Real Property (the "SET Leases") are
valid and legally binding in accordance with their respective terms free and
clear of all Liens, and there is not under any SET Lease any existing default or
event of default which, with notice or lapse of time or both, would constitute a
default. None of the rights of SET under any SET Lease is subject to termination
or modification as a result of the transactions contemplated by this Agreement
or such modifications as may be required in connection with the obtaining of
consents to the transactions contemplated by this Agreement in accordance with
this Section 4.7.
(f) There are no condemnation proceedings or eminent domain
proceedings of any kind pending or threatened against the SET Real Property.
(g) The use and occupancy of the SET Leased Real Property by SET in
operating its business does not constitute a default under the terms of each
applicable lease and there are no facts which would prevent the SET Leased Real
Property from being occupied after the Effective Time in the same manner as
before.
(h) All improvements on the SET Owned Real Property and the present
use and conditions of the SET Owned Real Property do not violate any applicable
deed restrictions or other applicable covenants, restrictions, agreements,
existing site plan approvals, zoning or subdivision regulations or urban
redevelopment plans as modified by any duly issued variances, and no permits,
licenses or certificates pertaining to the ownership or operation of all
improvements on the SET Owned Real Property, are required by any governmental
agency having jurisdiction over the SET Owned Real Property.
(i) All improvements on any SET Owned Real Property are wholly within
the lot limits of such SET Owned Real Property and do not encroach on any
adjoining premises and there are no encroachments on any SET Owned Real Property
by any improvements located on any adjoining premises.
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(j) SET in connection with the operation of its business enjoys
peaceful and quiet possession of each parcel of SET Owned Real Property and
enjoys peaceful and quiet possession of each parcel of SET Leased Real Property
except for variations, if any, which do not materially restrict the continued
use of such SET Owned Real Property or SET Leased Real Property for the purposes
for which each is now employed or adversely affect the value of such SET Owned
Real Property or SET Leased Real Property.
(k) The rental set forth in each SET Lease is the actual rental being
paid, and there are no separate agreements or understandings with respect to the
same.
(l) SET has the full right to exercise the renewal options contained
in each SET Lease on the terms and conditions contained in that SET Lease and
upon due exercise would be entitled to enjoy the use of each SET Leased Real
Property for the full term of such renewal options.
(m) All title documents and any surveys and title opinions or other
assurances with respect to the SET Owned Real Property in the possession of SET
have been provided to the Owners.
4.8 ENVIRONMENTAL MATTERS.
(a) Except where the failure to do so would not have a material
adverse effect on the business, assets, operations or prospects of SET, SET
holds all Environmental Permits necessary to conduct its business as presently
conducted. All such Environmental Permits are in full force and effect and SET
has timely made all appropriate filings and registrations where necessary for
the issuance or renewal of such Environmental Permits. Schedule 4.8(a) hereto
lists (i) each Environmental Permit now held, (ii) the governmental entity which
has jurisdiction with respect to such Environmental Permit, (iii) the entity
which is required to hold such Environmental Permit and (iv) the effective date
and duration of such Environmental Permit. SET is in material compliance with
all terms and conditions of all such Environmental Permits and all Environmental
Laws.
(b) Except as set forth on Schedule 4.8(b), consummation of the
transactions contemplated hereby will not require MSP or SET to provide notice,
obtain governmental approval or take any other actions in order to enable SET to
continue to hold all Environmental Permits and to remain in compliance with the
terms and conditions of all Environmental Permits and all Environmental Laws.
SET has not obtained information from regulatory agencies having jurisdiction or
any other Person, which would lead a reasonable person or entity with knowledge
of the facts and circumstances to believe that such Environmental Permits may
not be issued, renewed, extended or reissued in due course and as requested
without material cost or penalty.
(c) Except as set forth on Schedule 4.8(c), there is not pending
against SET or any of its Affiliates with respect to the operations or
properties of SET any Environmental Actions, based on or related to any
Environmental Permit or any Environmental Law or the presence, manufacture,
generation, processing, distribution, use, sale, treatment, recycling, receipt,
storage, disposal, transport, arranging for transportation, treatment or
disposal, or handling, or the emission, discharge, release or threatened release
into the environment, of any
24
Regulated Substance, nor to SET's Knowledge, has any such Environmental Action
been threatened within the last five years.
(d) Except as set forth on Schedule 4.8(d), since October 1, 1998, SET
has not manufactured, generated, processed, distributed, used, sold, treated,
recycled, received, stored, disposed of, transported, arranged for
transportation, treatment or disposal of, handled or conducted any other
activity involving, any Regulated Substance except in compliance in all material
respects with Environmental Laws and Environmental Permits and in a manner that
would not give rise to any liability or obligation under any Environmental Laws.
(e) Except as set forth in Schedule 4.8(e), there are no past or
present conditions, events, circumstances, facts, activities, practices,
incidents, actions, agreements, omissions or plans relating to SET or, to SET's
Knowledge, any third parties: (i) that will interfere with or prevent material
compliance by SET with Environmental Laws and the requirements of Environmental
Permits, (ii) that will give rise to any liability or other obligation under any
Environmental Laws that will require SET to incur any actual or potential
Environmental Costs, or (iii) that will form the basis of any claim, action,
suit, proceeding, hearing, investigation or inquiry against or involving SET
based on or related to any Environmental Matter or which will require SET to
incur any Environmental Costs.
(f) There are, to SET's Knowledge, no underground or aboveground
storage tanks, incinerators, surface impoundments, asbestos-containing
materials, PCB's or lagoons at, on, under or within the real estate now or in
the past owned or operated by SET.
(g) SET has not received any written notice or other communication
that it is or may be a potentially responsible person or otherwise liable, nor
to SET's Knowledge is SET otherwise liable, in connection with an Environmental
Matter relating to any waste disposal site or other location allegedly
containing, used for, or resulting from the disposal of, any Regulated
Substances.
(h) Since October 1, 1998, SET has not used any waste disposal or
waste treatment site, or otherwise disposed of or treated, transported for
disposal or treatment, or arranged for the transportation for disposal or
treatment of, any Hazardous Substances to any place or location in violation of
any Environmental Laws. SET has not received, nor is SET aware of, any request
for response action, administrative or other order (or request therefor),
judgment, complaint, claim, investigation, request for information or other
request for relief in any form relating to any facility where Hazardous
Substances generated or transported by SET have been or may have been handled,
stored, disposed of, placed or located. Except as set forth on Schedule
4.8(h)(2), SET has not been requested nor required by any governmental authority
or any other person to perform any investigatory or remedial activity or other
action in connection with any Environmental Matter.
(i) There has been no release or other discharge of any Regulated
Substances at, on, or about, under or within the real estate currently leased,
operated or controlled by SET (other than pursuant to and in accordance with
Environmental Permits held by them) during the time that SET has leased,
operated or controlled such real estate; nor to SET's Knowledge has there been a
release or other discharge of any Regulated Substances at, on, or about, under
or within such real
25
estate before the time that SET leased, operated or controlled it. Such real
estate is not and never has been listed on the United States Environmental
Protection Agency's National Priorities List, or any analogous state listing.
(j) All real estate described at Section 4.7 is, to SET's Knowledge,
in substantial compliance with all Environmental Laws.
(k) As used in this Section 4.8, "Environmental Costs" means, without
limitation, any actual or potential cleanup costs, remediation, removal, or
other response costs (which without limitation shall include costs to cause SET
to come into compliance with Environmental Laws), investigation costs (including
fees of consultants, counsel, and other experts in connection with any
environmental investigation, testing, audits or studies), fees, losses,
liabilities or obligations (including liabilities or obligations under any lease
or other contract), payments, damages (including any actual, punitive or
consequential damages under any statutory laws, common law cause of action or
contractual obligations or otherwise, including without limitation damages (i)
of third parties for personal injury or property damage, or (ii) to natural
resources), civil, administrative or criminal fines or penalties, judgments and
amounts paid in settlement arising out of or relating to or resulting from any
Environmental Matter.
4.9 OCCUPATIONAL SAFETY AND HEALTH. Each of the Detroit, Michigan, Warren,
Michigan, North Xxxxxx, Illinois and Chicago, Illinois facilities of SET are
maintained and operated in material compliance with OSHA, any similar applicable
state statute, and the rules and regulations promulgated thereunder.
4.10 LEGAL PROCEEDINGS, ETC. There is no claim, suit, action, proceeding or
investigation pending or, to SET's Knowledge, threatened against SET before any
court or governmental or regulatory authority or body, or any arbitral body.
4.11 TAXES.
(a) SET has duly and timely filed (or caused to be filed) all Tax
returns required to be filed by it on or prior to the Closing Date, and has
timely paid all Taxes for all periods covered by such returns. All consolidated,
combined or similar Tax returns required to be filed on or prior to the Closing
Date that include (or are required to include) SET has been duly and timely
filed on or prior to the Closing Date, and all Taxes for all periods covered by
such returns have been timely paid. All Tax returns referenced in this Section
4.11(a) were correct and complete in all material respects.
(b) No action or proceeding for the assessment or collection of any
Taxes is pending or proposed against SET or any other Person (a "SET Tax
Affiliate") which files consolidated, combined, or similar returns of Taxes
which include (or are required to include) SET, and no deficiency, assessment or
other claim for any Taxes has been asserted or made against SET or any SET Tax
Affiliate that has not been fully paid or otherwise resolved. Neither SET nor
any SET Tax Affiliate has received any reports or other written assertions by
agents of any taxing authority of any deficiencies or other liabilities for
Taxes which have not been paid or otherwise resolved with respect to periods for
which the limitations period has not run. Neither SET nor any SET Tax Affiliate
currently is the beneficiary of any extension of time within which to file any
return of Taxes. No claim has been made by an authority in a
26
jurisdiction where SET or a SET Tax Affiliate does not file returns of Taxes
that is or may be subject to taxation by that jurisdiction. Neither SET nor any
SET Tax Affiliate has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.
(c) All Taxes which SET has been required to collect or withhold have
been duly withheld or collected and, to the extent required, have been paid to
the proper Taxing authority.
4.12 PATENTS, TRADEMARKS, TRADE NAMES, ETC. SET owns or has the right to
use, pursuant to license, sublicense, agreement or permission, all Intellectual
Property necessary for the operation of its business as presently conducted. SET
has not received any charge, complaint, claim, demand or notice alleging any
interference, infringement, misappropriation or violation with or of any
Intellectual Property rights of a third party (including any claims that SET
must license or refrain from using any Intellectual Property rights of a third
party). To SET's Knowledge, SET has not interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual Property
rights of third parties and, to SET's Knowledge, no third party has interfered
with, infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property rights of SET. With respect to each item of Intellectual
Property owned by SET, it possesses all right, title and interest in and to the
item, free and clear of any Lien. With respect to each item of Intellectual
Property that SET is licensed or authorized to use, the license, sublicense,
agreement or permission covering such item (i) is legal, valid, binding,
enforceable and in full force and effect and will not be affected by
consummation of the transactions contemplated by this Agreement, and (ii) has
not been breached by any party.
4.13 LABOR MATTERS. Except as set forth on Schedule 4.13, SET is not a
party to or subject to any labor union or collective bargaining agreement. SET
is in compliance in all material respects with all agreements set forth on
Schedule 4.13 and all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice. There is not actually pending or
threatened against SET (i) any labor strike, slowdown or work stoppage, (ii) any
material grievance or arbitration proceeding arising out of or under any
collective bargaining agreements, or (iii) any unfair labor practice complaint
against SET before the National Labor Relations Board. Since January 1, 1998,
(x) no representation petition respecting the employees of SET has been filed
with the National Labor Relations Board of which SET or the Owners has notice,
and (y) SET has not experienced any primary work stoppage or labor strike
involving its employees.
4.14 ABSENCE OF CERTAIN COMMERCIAL PRACTICES. SET has not, and to SET's
Knowledge, no director, officer, agent, employee or other person acting on
behalf of SET has, in violation of federal or state law: (i) given or agreed to
give any gift or similar benefit of more than nominal value to any customer,
supplier, governmental employee or official or any other Person who is or may be
in a position to help or hinder SET or assist in connection with any proposed
transaction, or (ii) used any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or made any unlawful
expenditures relating to political activity to governmental officials or others
or established or maintained any unlawful or unrecorded funds. SET has not, and
to SET's Knowledge, no director, officer, agent, employee or other
27
person acting on behalf of SET has, with respect to SET, accepted or received
any unlawful contributions, payments, gifts, entertainment or expenditures.
4.15 ERISA; BENEFIT PLANS.
(a) Schedule 4.15(a) contains a true and complete list of all
employment-related plans, including employment or consulting agreements,
collective bargaining and supplemental agreements, pension, profit sharing,
stock bonus, defined contribution, supplemental executive retirement, incentive,
bonus, deferred compensation, retirement, stock option, stock purchase,
severance, medical and hospitalization, disability, life insurance, long term
care, vacation, salary continuation, sick pay, welfare, fringe benefit and other
employee benefit plans, contracts, programs, policies and arrangements, whether
written or oral, which SET or any entity that, together with SET, would be
treated as a single employer under Code Section 414(b), (c) or (m) ("SET ERISA
Affiliate") maintains or has maintained, or under which SET has or had any
obligations with respect to any employee of SET, now or at any time during the
five year period ending on the Closing Date (the "SET Plans").
(b) Except as set forth in Schedule 4.15(b), (i) SET has no unfunded
liabilities in connection with any of the SET Plans; (ii) all contributions,
premium payments and other payments due from SET to or under such SET Plans have
been paid in a timely manner; and (iii) all additional contributions, premium
payments and other payments due on or before the Effective Time have been paid.
(c) Except as set forth in Schedule 4.15(c), none of SET nor any SET
ERISA Affiliates have made any commitments or taken any actions to adopt or
establish any additional SET Plans or to materially increase the benefits under
any of the SET Plans.
(d) Except as set forth in Schedule 4.15(d), with respect to each of
the SET Plans:
(i) each SET Plan has been established, maintained, funded
and operated and administered, in all material respects, in
substantial compliance with its governing documents, and all
applicable provisions of ERISA, the Code, other applicable law, and
all regulations thereunder;
(ii) all disclosures to employees and all government filings
and other reports relating to each such SET Plan and required (under
ERISA, the Code, other applicable law, including federal and state
securities laws, and all regulations thereunder) to have been made or
filed on or before the Effective Time have been or will be duly and
timely made or filed by that date;
(iii) each of the SET Plans which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has been
determined by the IRS to be so qualified and SET or the SET ERISA
Affiliate sponsoring such SET Plans have obtained favorable
determination letters from the IRS to such effect;
28
(iv) no such determination letter has been revoked by the
IRS, nor has the IRS given any written notice to SET or any SET ERISA
Affiliate that it intends to revoke any such determination letter;
(v) no reportable event within the meaning of Section 4043
of ERISA, or non-exempt prohibited transaction within the meaning of
Section 406 of ERISA, has occurred with respect to the SET Plans and
no excise tax has been imposed pursuant to Section 4975 of the Code in
respect thereof;
(vi) except with respect to income taxes on benefits paid or
provided, no income, excise (including those under Code Sections 4975,
4976, 4980B and 4980D), or other tax or penalty (federal or state) has
been waived or excused or has been paid or is owed by any person
(including any SET Plan, any SET Plan fiduciary, SET and any SET ERISA
Affiliate) with respect to the operations of, or any transactions with
respect to, any SET Plan and no action has been taken, nor has there
been any failure to act, that would subject any person or entity to
any liability, tax or penalty in connection with any SET Plan
(including but not limited to any tax or penalty for the failure to
withhold income taxes in connection with fringe benefits);
(vii) there are no pending, threatened or anticipated
claims, other than ordinary claims for benefits, involving any of the
SET Plans, including litigation or arbitration claims by participants
or beneficiaries, complaints filed by government agencies, claims with
respect to any bond or any fiduciary liability or other similar
insurance with regard to actions of any person in connection with the
SET Plans, or notice of any such claim to any insurer under such bond
or policy with regard to the SET Plans; and
(viii) no fiduciary of any of the SET Plans has any
liability for breach of fiduciary duty or any other failure to act or
comply in connection with the administration of or investment of the
assets of any of the SET Plans.
(e) SET has provided or will provide promptly to the Owners copies of
all of the written SET Plans listed on Schedule 4.15(a) and all related current
and prior material documentation, including: plan documents and all amendments
thereto, summary plan descriptions, collective bargaining agreements that
require the provision of employee benefits, trust agreements, insurance
contracts, evidence of any other funding medium related to any of the SET Plans,
trustee reports, custodial reports, insurance contracts, fidelity bonds, and
fiduciary liability policies and applications for such coverages, investment
manager and investment advisory contracts, third-party administration
agreements, loan agreements, actuarial reports and valuations, administrative
rules or guidelines, audited or unaudited financial reports or statements, asset
valuation reports, liability valuation reports, agreements concerning plan
mergers and/or plan-to-plan transfers of assets and liabilities, any IRS Form
5500, IRS determination letters and/or private letter rulings and advisory
opinions from either DOL or PBGC sought by any of the SET Plans. For purposes of
this subsection, "prior" means at least the three plan years preceding the
Effective Time.
29
(f) With respect to each of the SET Plans, SET will deliver promptly
to the Owners true and complete copies of the participant and beneficiary
records for the SET Plans which accurately state the history of each participant
and beneficiary in connection with the SET Plans and which accurately state the
benefits earned and/or owed to each person under the SET Plans.
(g) Except as set forth in Schedule 4.15(g), neither SET nor any SET
ERISA Affiliates are contributing employers to any multiemployer plan.
(h) Except as set forth in Schedule 4.15(h), none of the SET Plans
provide, or have an obligation or commitment to provide, health benefits to any
current or former employee of SET, or any dependent of any such employee, beyond
such employee's retirement or other termination of service, other than coverage
mandated by COBRA.
(i) No amount payable under the SET Plans is likely to fail to be
deductible for federal income tax purposes by virtue of Section 280G of the
Code.
(j) Except as sent forth in Schedule 4.15(j), the SET Plans that are
subject to COBRA continuation coverage and HIPAA have been maintained in
compliance with COBRA and HIPAA requirements, including all notice and
certification requirements.
4.16 EMPLOYEE COMPENSATION. Schedule 4.16 sets forth (i) the name and total
calendar year 2002 compensation (including bonuses, commissions, or incentive
compensation) of each employee of SET whose aggregate compensation for federal
income tax purposes during calendar year 2002 exceeded $100,000, and (ii) the
employee benefits provided to each such employee during calendar year 2002.
4.17 INDEPENDENT CONTRACTORS; AGENTS; REPRESENTATIVES. Schedule 4.17 sets
forth the name and total compensation (including bonuses, commissions or
incentive compensation) of all independent contractors, consultants, agents and
representatives retained by SET at any time since December 31, 2002 to provide
services to SET.
4.18 COMPLIANCE WITH LAW. The operations of SET have been conducted in
accordance with all applicable laws, regulations and other requirements of all
governmental authorities, whether federal, state, local or foreign, having
jurisdiction over them except where a failure to comply would not have a
material adverse effect on the business, assets, operations or prospects of SET.
SET does not Know of any asserted present or past failure to comply with any
such laws, rules, regulations or requirements.
4.19 CUSTOMERS AND SALES. Schedule 4.19 is a true, complete and correct
list of the ten largest customers (by dollar volume of sales) of SET for the
12-month period ending December 31, 2002. Except as set forth on Schedule 4.19,
SET does not Know that any of these customers intends to cease doing business
with SET or materially alter the amount of the business it is presently doing
with SET whether as a consequence of the transactions contemplated in this
Agreement or otherwise.
4.20 SUPPLIERS AND CONTRACTORS. Schedule 4.20 is a true, complete and
correct list of the ten largest suppliers and contractors (by dollar volume of
expense) to SET for the 12-month
30
period ending December 31, 2003. Except as set forth on Schedule 4.20, SET has
received no written notice that, nor does SET have Knowledge that, any of these
suppliers and contractors intends to cease doing business with SET or materially
alter the amount of the business it is presently doing with SET whether as a
consequence of the transactions contemplated in this Agreement or otherwise.
4.21 ABSENCE OF CHANGES OR EVENTS. Except as set forth on Schedule 4.21,
since December 31, 2002, SET has conducted its business in the ordinary course
and in a manner consistent with past practice and, without limiting the
generality of the foregoing, there has not been:
(a) any change by SET in its accounting methods, principles or
practices;
(b) any revaluation by SET of any material asset (including any
writing down of the value of inventory or writing off of notes or accounts
receivable);
(c) any declaration or setting aside or payment of any dividend or
distribution in respect of any shares of SET's capital stock or any redemption,
purchase or other acquisition of any of SET's securities;
(d) any incurrence of indebtedness for borrowed money;
(e) any granting of a mortgage or pledge on any properties or assets
of SET or subjecting of such property or assets to any Lien (except Liens for
current property taxes not yet due and payable);
(f) any damage, destruction or casualty loss which has had or could
reasonably be expected to have a material adverse effect on the business,
properties condition (financial or otherwise) or results of operation of SET;
(g) any material modification, material amendment or termination of
any material contract; or
(h) any information, fact or circumstance that has come to the
attention of SET that could lead it to believe that the reserves for the
accounts receivable set forth on the SET Financial Statements are inadequate.
In addition, since December 31, 2002, there have not been any extraordinary
losses or waivers of rights of material value by or with regard to SET, whether
or not in the ordinary course of business or consistent with past practices.
4.22 CORPORATE RECORDS. SET has previously furnished to MSP true,
correct and complete copies of the Articles of Incorporation and bylaws of SET
as amended through the date of this Agreement. SET has made available for review
by MSP true, correct and complete copies of the corporate minute books and stock
records for SET.
31
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE NOBLE COMPANIES
The Noble Companies jointly and severally represent to the Owners as of the
Closing Date and as of the Effective Time the following.
5.1 ORGANIZATION OF THE NOBLE COMPANIES. Each of the Noble Companies (i) is
a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation, and (ii) has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.
5.2 AUTHORITY; NO VIOLATION OR CONSENT.
(a) Each of the Noble Companies has full power and authority to enter
into this Agreement and to carry out the transactions contemplated by this
Agreement and all corporate proceedings required to be taken by or on its part
to authorize the execution, delivery and performance of this Agreement have been
duly and properly taken. This Agreement has been duly and validly executed and
delivered by each of the Noble Companies and constitutes a valid and binding
agreement of each of the Noble Companies enforceable in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law) or by an implied covenant of good faith and
fair dealing.
(b) The execution and delivery of this Agreement, the consummation of
the transactions contemplated by this Agreement, and the compliance with the
terms of this Agreement do not and will not:
(i) conflict with or result in any breach of any provision of the
Certificate of Incorporation or bylaws of either of the Noble Companies;
(ii) conflict with, result in a breach of any provision of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the modification or cancellation of, or give rise to any right
of termination or acceleration in respect of, any contract, agreement,
commitment, understanding, arrangement or restriction of any kind to which
either of the Noble Companies is a party or to which it or its property is
subject;
(iii) violate or conflict with any law, ordinance, code, rule,
regulation, decree, order or ruling of any court or governmental authority, to
which either of the Noble Companies or any of its assets is subject;
(iv) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority; or
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any Person to
the execution, delivery or performance of this Agreement or to the consummation
of the transactions contemplated by this
32
Agreement or to the operation of SET's business after the Effective Time
substantially as operated before the Effective Time.
5.3 OWNERSHIP BY NOBLE INTERNATIONAL. Except as permitted under the Amended
and Restated Shareholder Agreement, the Series A Preferred Stock and the SET
Common Stock issued to Noble International and Noble Manufacturing will be held
by Noble International or one or more entities Controlled by Noble
International.
ARTICLE VI
COVENANTS OF THE PARTIES
6.1 ADDITIONAL AGREEMENTS. Subject to the terms and conditions of this
Agreement, each of the Parties agrees to use its commercially reasonable
efforts, at its own expense, to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. If at any time after the Closing
any further action is necessary to carry out or perform a Party's obligations
under this Agreement, such Party may take, at its own expense, such necessary
action.
6.2 TAX MATTERS.
(a) TAX SHARING AGREEMENTS. Any tax sharing agreements between MSP and
any MSP Tax Affiliate will be terminated as of the Effective Time and will have
no further effect for any year (whether the current year, a future year, or a
past year).
(b) RETURNS FOR PERIODS THROUGH THE EFFECTIVE TIME. The Owners will
include the income of MSP (including any deferred income required to be included
in income by Treas. Reg. Section 1.1502-13 and former Treas. Reg. Section
1.1502-19) on Owners' consolidated, combined, or similar returns of Taxes, as
applicable, for all periods through the day immediately preceding the Effective
Date and pay any Taxes attributable to such income. MSP will furnish Tax
information to the Owners, for inclusion in the Tax returns of the Owners for
the period up to and including the day immediately preceding the Effective Date
in accordance with the past customs and practices of MSP. Neither Owner will
take a position on such returns that relate to MSP that would adversely affect
MSP on or after the Effective Date. The income of MSP will be apportioned to the
period up to the Effective Date and the period including and after the Effective
Date by closing the books of MSP as of the end of the day immediately preceding
the Effective Date, or by such other methodology as is permissible and agreed
upon by the Parties.
(c) AUDITS. None of the Parties will settle any audit in a manner
which would adversely affect SET or MSP after the Closing Date without the prior
written consent of the other Parties.
(d) CARRYBACKS. Either of the Owners will immediately pay to SET any
Tax refund (or reduction in Tax liability) resulting from a carryback of a
post-Closing tax attribute of MSP into that Owner's consolidated, combined or
similar Tax return. Further, that Owner will cooperate with SET in obtaining
such refunds (or reduction in Tax liability), including through the filing of
amended Tax returns or refund claims.
33
(e) RETENTION OF TAX ATTRIBUTES. Without the prior written consent of
SET, neither Owner will make any election to retain any net operating loss
carryovers, capital loss carryovers or other tax attributes of MSP. Moreover,
the Owners will take any actions reasonably requested by SET to ensure that any
such tax attributes will be available to the maximum extent possible to MSP
after the Effective Time.
6.3 EMPLOYEE BENEFIT MATTERS.
(a) SET 401(k) Plan. Effective on the Closing Date, employees of MSP
who become employees of SET on the Closing Date shall (i) be immediately
eligible to participate in the SET Steel, Inc. Employees 401(k) Plan (the "SET
401(k) Plan") and to defer salary on a pre-tax basis on at least the same levels
as available to MSP employee participants in the Sumitomo Corporation of America
Steel Service Center 401(k) Savings Plan (the "Sumitomo Plan") as of the Closing
Date; (ii) be entitled to matching contributions pursuant to the SET 401(k) Plan
at least at the same rate, and pursuant to the same vesting schedule, as was
available to MSP employees participating in the Sumitomo Plan, which level of
minimum matching contribution shall remain in effect for the next two SET 401(k)
Plan years (except as may otherwise be required to comply with applicable laws
and regulations and provided that such employees are not subject to a collective
bargaining agreement during such period); (iii) and be credited with all MSP
service as if it were SET service for purposes of vesting under the SET 401(k)
Plan. SET shall take any and all action necessary to amend the SET 401(k) Plan
to provide for the foregoing provisions.
SCOA and SET agree that Sumitomo Plan assets and liabilities related
to employees of MSP who become employees of SET on the Closing Date shall be
transferred to the SET Plan within a reasonable time after the Closing Date,
that SCOA and SET shall take any and all action necessary for such transfer to
satisfy Internal Revenue Code Section 414(l), and that SET shall take any and
all action required to timely inform participants of any related blackout
period.
(b) Health Insurance. Effective on the Closing Date, SET will adopt
and assume sponsorship of MSP's current employee health plan ("MSP Health
Plan"), and the MSP Health Plan (or a health plan with comparable coverage) will
continue, for the next two Plan Years, to provide health care coverage to those
employees of MSP who became employees of SET on the Closing Date, as well as to
those former employees of MSP entitled to COBRA continuation coverage as of the
Closing Date (provided that such employees are not subject to a collective
bargaining agreement during such period); provided no health plan contributions,
other than COBRA contributions, shall be required of such former MSP employees
for the next two plan years.
(c) Insurance Coverage. Effective on the Closing Date, SET will adopt
and/or assume current life insurance, short term disability insurance, long term
disability insurance, and dental insurance policies which cover MSP employees
immediately prior to the Closing Date, and shall make coverage under such
policies available for the next two plan years to former MSP employees who
became employees of SET on the Closing Date (provided that such employees are
not subject to a collective bargaining agreement during such period).
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(d) Employee Policies. Effective on the Closing Date, SET will adopt
and/or assume all employee policies of MSP as in effect immediately prior to the
Closing Date, and shall make such policies available for the next two plan years
to former MSP employees who became employees of SET on the Closing Date
(provided that such employees are not subject to a collective bargaining
agreement during such period).
(e) New Hires. New hires and transfers to SET's business unit
employing former MSP employees shall be eligible to participate in the benefits
described in Section 6.3(a) through (d) as if they were former MSP employees.
6.4 RESIGNATION OF SET OFFICERS. SET shall obtain the resignations
effective no later than the Effective Time of Xxxxxxxxxxx Xxxxx and Xxxxxxx Xxxx
as officers of SET.
6.5 RESIGNATION OF MSP DIRECTORS AND OFFICERS. MSP shall obtain the
resignation effective as of the Effective Time of each director and officer of
MSP.
6.6 CONDUCT OF BUSINESS BY MSP PENDING THE MERGER. During the period from
the date of this Agreement and continuing until the Effective Time (the "Interim
Period"), unless SET otherwise agrees in advance and in writing, MSP will
conduct its business in the ordinary course consistent with past practices,
other than actions taken by MSP as contemplated by this Agreement. During the
Interim Period, MSP shall use all reasonable commercial efforts to preserve
substantially intact its business organization and to keep available the
services of its present officers, employees, and consultants. During the Interim
Period, MSP will consult with SET prior to entering into any "Material
Contracts" (which, for purposes of this Section 6.7 only, shall mean contracts
involving payments or receipts of at least $25,000). MSP shall provide SET with
notice of any new Material Contract entered into, or any material Claim,
proceeding or action brought against MSP, during the Interim Period. By way of
illustration and not limitation, except as contemplated by this Agreement, MSP
will not, during the Interim Period, directly or indirectly do, or agree to do,
any of the following without the prior written consent of SET (which consent
shall not be unreasonably withheld):
(a) amend, restate or otherwise change the Articles of Incorporation
or Bylaws of MSP;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) in MSP;
(c) sell, pledge, dispose of or encumber any assets of MSP, except for
(i) sales of assets in the ordinary course of business, (ii) dispositions of
obsolete or worthless assets, and (iii) sales of immaterial assets not in excess
of $10,000 in the aggregate;
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock or (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock;
35
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any Person or division thereof, (ii) incur any indebtedness for borrowed
money, other than draws in the ordinary course of business under existing lines
of credit, (iii) enter into any material new capitalized leases, other than
capitalized leases under existing capital lease facilities, (iv) authorize any
capital expenditures or purchase of fixed assets in excess of $25,000, or (v)
modify any payment or collection terms with current customers or suppliers;
(f) increase the compensation payable or to become payable to its
officers and senior management, or grant any severance or termination pay to, or
enter into any employment or severance agreement, or amendments thereto, with
any director, officer or senior manager of MSP, or establish, adopt, enter into
or amend any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any current or former directors or officers,
except, in each case (i) in the ordinary course of business, or (ii) as may be
required by law or by an existing agreement or policy; or
(g) make any downward adjustment in (i) reserves other than to the
extent actually used or as required in accordance with GAAP, or (ii) "other
accrued expenses" except to the extent actually paid or as required in
accordance with GAAP.
6.7 CONDUCT OF BUSINESS BY SET PENDING THE MERGER. During the Interim
Period, unless the Owners otherwise agree in advance and in writing, SET will
conduct its business in the ordinary course consistent with past practices,
other than actions taken by SET as contemplated by this Agreement. During the
Interim Period, SET shall use all reasonable commercial efforts to preserve
substantially intact its business organization and to keep available the
services of its present officers, employees, and consultants. During the Interim
Period, SET will consult with the Owners prior to entering into any "Material
Contracts" (which, for purposes of this Section 6.8 only, shall mean contracts
involving payments or receipts of at least $25,000). SET shall provide the
Owners with notice of any new Material Contract entered into, or any material
Claim, proceeding or action brought against SET, during the Interim Period. By
way of illustration and not limitation, except as contemplated by this
Agreement, SET will not, during the Interim Period, directly or indirectly do,
or agree to do, any of the following without the prior written consent of the
Owners (which consent shall not be unreasonably withheld):
(a) amend, restate or otherwise change the Articles of Incorporation
or Bylaws of SET;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) in SET;
(c) sell, pledge, dispose of or encumber any assets of SET, except for
(i) sales of assets in the ordinary course of business, (ii) dispositions of
obsolete or worthless assets, and (iii) sales of immaterial assets not in excess
of $10,000 in the aggregate;
36
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock or (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any Person or division thereof, (ii) incur any indebtedness for borrowed
money, other than draws in the ordinary course of business under existing lines
of credit, (iii) enter into any material new capitalized leases, other than
capitalized leases under existing capital lease facilities, (iv) authorize any
capital expenditures or purchase of fixed assets in excess of $25,000, or (v)
modify any payment or collection terms with current customers or suppliers;
(f) increase the compensation payable or to become payable to its
officers and senior management, or grant any severance or termination pay to, or
enter into any employment or severance agreement, or amendments thereto, with
any director, officer or senior manager of SET, or establish, adopt, enter into
or amend any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any current or former directors or officers,
except, in each case (i) in the ordinary course of business, or (ii) as may be
required by law or by an existing agreement or policy; or
(g) make any downward adjustment in (i) reserves other than to the
extent actually used or as required in accordance with GAAP, or (ii) "other
accrued expenses" except to the extent actually paid or as required in
accordance with GAAP.
6.8 UPDATE OF SCHEDULES. Each Party will promptly notify the other Parties,
prior to the Closing Date, of any changes in the information contained in the
Schedules or in any document or information supplied to the other Parties
pursuant to a Schedule. Such information will not be deemed to amend such
schedules.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES
7.1 FINANCING. The obligations of each of the Parties under this Agreement
shall, at the option of each, be subject to, on or before the Closing Date, SET,
SCOA and Noble delivering a Revolving Credit and Term Loan Agreement (the
"Credit Agreement") between SET and Comerica Bank, as Agent, together with all
other documents and agreements contemplated by the Credit Agreement that have
been executed by all parties to such documents and agreements.
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ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION. The Parties will indemnify each other as set forth
below.
(a) The Owners will jointly and severally indemnify, defend and hold
harmless SET and its shareholders, officers, directors, employees,
representatives, and agents, from and against any and all Losses, as defined in
this Section, arising out of, based upon or resulting from (i) any breach of any
representation or warranty made by them contained in this Agreement, (ii) any
breach or nonfulfillment by the Owners of any of their covenants, agreements or
other obligations contained in this Agreement, (iii) any employment-related
plans (including those types of plans described in Section 3.15(a) which any
entity that, together with MSP, would be treated as a single employer under Code
Section 414(b), (c), (m) or (o), maintains or has maintained, now or at any time
during the five year period ending on the Closing Date (each an "ERISA Loss"),
or (iv) any assessment or deficiency for Taxes arising from the audits listed on
Schedule 3.11 to the extent that the aggregate amount of all such assessments
and deficiencies exceeds the amount recorded on the MSP Interim Statements as a
reserve for such assessments and deficiencies (each a "Tax Audit Loss").
(b) SET will indemnify, defend and hold harmless the Owners and their
shareholders, officers, directors, employees, representatives, and agents, from
and against any and all Losses, as defined in this Section, arising out of,
based upon or resulting from (i) any breach of any representation or warranty
made by SET contained in this Agreement or (ii) any breach or nonfulfillment by
SET of any of its covenants, agreements or other obligations contained in this
Agreement.
(c) The Noble Companies will jointly and severally indemnify, defend
and hold harmless the Owners, SET, and their respective shareholders, officers,
directors, employees, representatives, and agents, from and against any and all
Losses, as defined in this Section, arising out of, based upon or resulting from
(i) any breach of any representation or warranty made by the Noble Companies
contained in this Agreement or (ii) any breach or nonfulfillment by the Noble
Companies of any of their covenants, agreements or other obligations contained
in this Agreement.
(d) For purposes of this Article VIII, "Losses" shall mean and include
damages, liabilities and claims, costs and expenses, and, to the extent that the
person that is obligated to provide such indemnification (an "Indemnifying
Party") maintains or has maintained liability insurance and such coverage is
applicable to the person entitled to indemnification (an "Indemnified Party"),
insurance benefits paid to or for the benefit or protection of the Indemnified
Party. Losses shall include, without limitation, all reasonable fees, costs and
expenses related thereto, including, without limitation, any and all of the
Indemnified Party's Legal Expenses. As used herein, "Legal Expenses" shall mean
the fees (including attorney's fees), costs and expenses reasonably incurred by
the Indemnified Party in investigating, preparing for, defending against or
providing evidence, producing documents or taking other action with respect to,
any threatened or asserted Claim, prior to assumption of control of the defense
of such Claim by the Indemnifying Party.
(e) Promptly after receipt of notice of the commencement of any Claim
by a third party in respect of which the Indemnified Party may seek
indemnification, the Indemnified Party shall promptly notify each Indemnifying
Party. The Indemnifying Party shall be entitled to control the defense of such
action; provided, however, that:
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(i) the Indemnified Party shall be entitled to participate
in the defense of such Claim and to employ counsel at its own expense
to assist in the handling of such Claim;
(ii) the Indemnifying Party shall obtain the prior written
approval of the Indemnified Party before entering into any settlement
of such Claim unless the settlement provides only for the payment of
money damages (in which case approval is not needed), or ceasing to
defend against such Claim (with such approval not to be unreasonably
withheld);
(iii) no Indemnifying Party shall consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to
each Indemnified Party of a release from all liability in respect of
such Claim; and
(iv) the Indemnifying Party shall not be entitled to control
(but shall be entitled to participate at its own expense in the
defense of), and the Indemnified Party shall be entitled to have sole
control over, the defense or settlement of any Claim to the extent the
Claim seeks an injunction, non-monetary or other equitable relief
against the Indemnified Party which, if successful, would materially
interfere with the business, operations, assets, condition (financial
or otherwise) or prospects of the Indemnified Party.
After written notice by the Indemnifying Party to the Indemnified Party of its
election to assume control of the defense of any such Claim, the Indemnifying
Party shall not be liable to such Indemnified Party for any Legal Expenses
subsequently incurred by the Indemnified Party. If the Indemnifying Party does
not assume control of the defense of such Claim as provided in this Section
8.1(d), the Indemnified Party shall have the right to defend such Claim in such
manner as it may deem appropriate at the cost and expense of the Indemnifying
Party, and the Indemnifying Party will promptly reimburse the Indemnified Party
therefor in accordance with this Section 8.1. The reimbursement of fees, costs
and expenses required by this Section 8.1 shall be made by periodic payments
during the course of the investigations or defense, as and when bills are
received or expenses incurred.
(f) If the Indemnifying Party shall be obligated to indemnify the
Indemnified Party pursuant to this Section 8.1, the Indemnifying Party shall,
upon payment of such indemnity in full, be subrogated to all rights of the
Indemnified Party with respect to the Claims to which such indemnification
relates.
(g) All indemnification or reimbursement payments required pursuant to
this Agreement shall be made net of all Taxes and, to the extent that the
Indemnifying Party maintains or has maintained liability insurance and such
coverage is applicable to the Indemnified Party, insurance benefits actually
received by the party to be indemnified or reimbursed. If any claim for
indemnification is, or may be, the subject of the Indemnified Party's liability
insurance or other right to indemnification or contribution from any third
person, the Indemnified Party expressly agrees that it will, at the cost and
expense of the Indemnifying Party, promptly notify the applicable insurance
carrier of any such claim or loss and tender defense to the carrier, and shall
also promptly notify any potential third party
39
indemnitor or contributor which may be liable for any portion of such losses or
claims. The Indemnified Party agrees to pursue, at the cost and expense of the
Indemnifying Party, such claims diligently and to reasonably cooperate, at the
cost and expense of the Indemnifying Party, with each applicable insurance
carrier and third party indemnitor or contributor.
(h) If a dispute arises between any of the Parties in connection with
a claim for indemnification, the Parties agree to use reasonable efforts to
resolve such disputes in a mutually satisfactory manner.
8.2 SURVIVAL. Except as otherwise set forth in this Article VIII, all
representations, warranties, covenants and agreements made by any Party
contained in this Agreement will survive for a period of eighteen months after
the Closing and will be deemed to have been relied upon and will not be affected
in any respect by the Closing. Notwithstanding the foregoing,
(a) the representations and warranties made in Sections 3.1(a),
3.1(c), 3.2, 3.3, 3.6(b), 3.7(c), 3.15, 4.1(a), 4.1(d), 4.2, 4.3, 4.6(b),
4.7(c), 4.15, 5.1, 5.2, and 5.3 shall not expire;
(b) the representations and warranties made in Sections 3.8 and 4.8
shall survive for a period of ten years after the Closing; and
(c) the representations and warranties made in Sections 3.11 and 4.11
shall expire ninety days after the expiration of the applicable statutes of
limitations governing the period during which a claim may be brought against a
Party with respect to the subject matter of those Sections.
8.3 LIMITS ON LIABILITY. The Parties' indemnification obligation in this
Article VIII is subject to the following limitations.
(a) Subject to Subsection 8.3(c), no Party shall have any obligation
to indemnify another Party under this Article VIII until such other Party has
suffered Losses in excess of $500,000 (the "Indemnification Threshold"), after
which point the Indemnifying Party will be obligated to indemnify such other
Party only from and against further such Losses.
(b) Subject to Subsection 8.3(c), the maximum aggregate obligation of
any of the Owners in the aggregate, SET, or the Noble Companies in the aggregate
to indemnify another Party from and against Losses under this Article VIII shall
not exceed $1,000,000 (the "Indemnity Limitation").
(c) Subsections 8.3(a) and 8.3(b) do not apply to (i) ERISA Losses,
(ii) Tax Audit Losses, or (iii) losses based on the representations and
warranties made in Sections 3.1(a), 3.1(c), 3.2, 3.3, 3.6(b), 3.7(c), 3.11,
3.15, 4.1(a), 4.1(d), 4.2, 4.3, 4.6(b), 4.7(c), 4.11 and 4.15 (the "Excluded
Losses"). The Excluded Losses will not be taken into account to determine
whether an Indemnification Threshold or an Indemnity Limitation has been met.
(d) The following examples illustrate the limits on indemnification
liability described in this Section.
40
Example 1. The Indemnified Party experiences aggregate Losses of
$400,000, none of which are Excluded Losses. There is no indemnification
obligation on the part of the Indemnifying Party as the Losses do not
exceed the Indemnification Threshold of $500,000.
Example 2. The Indemnified Party experiences aggregate Losses of
$300,000, all of which are Excluded Losses. The Indemnifying Party has an
indemnification obligation of $300,000 as the Losses are all of a type for
which there is no Indemnification Threshold.
Example 3. The Indemnified Party experiences aggregate Losses of
$600,000, none of which are Excluded Losses. The Indemnifying Party has an
indemnification obligation of $100,000 which is the amount by which the
Losses claimed exceed the $500,000 Indemnification Threshold.
Example 4. The Indemnified Party experiences aggregate Losses of
$1,800,000, of which $100,000 are Excluded Losses. The Indemnifying Party
has an indemnification obligation of $1,100,000, of which $100,000 is
attributable to the losses for which there is no Indemnification Threshold
nor Indemnity Limit. Of the remaining $1,700,000 in Losses, $500,000 are
below the Indemnification Threshold and $200,000 are above the Indemnity
Limit, therefore, the Indemnifying Party has an obligation of $1,000,000,
8.4 NOBLE GUARANTEE.
(a) Subject to the limitations described in this Section 8.4, Noble
guarantees to the Owners collection of indemnification obligations owed to them
by SET pursuant to this Article VIII in an aggregate amount not to exceed
$1,000,000; provided that Noble's obligations under this Section 8.4 for Losses
based on representations and warranties made in Article IV other than those made
in Sections 4.1(a), 4.1(d), 4.2, 4.3, 4.6(b), 4.7(c) and 4.15 shall not exceed,
in the aggregate, $500,000.
(b) Noble has no obligation under this Section 8.4 to guarantee
indemnification obligations of SET arising from Losses based on the
representations and warranties made in Sections 4.8, 4.11, or attributable to
fraud on the part of officers of SET (collectively, "Non-Covered Claims").
(c) Noble's obligations under this Section 8.4 will not apply to the
first $1,000,000 of Losses (not counting Losses for Non-Covered Claims) incurred
by the Owners. The first $500,000 of Losses will be less than the
Indemnification Threshold and will not be subject to indemnification by SET. In
addition, $500,000 of Losses will be the sole responsibility of SET and will not
be subject to Noble's obligations under this Section 8.4
(d) Noble's guarantee of SET's indemnification obligations is a
guarantee of collection and the Indemnified Party must first demonstrate that
SET is unable to pay the claim (determined in accordance with Section 8.4(f))
before Noble will have any obligation under this Section 8.4. Accordingly, no
claim against Noble under this Section 8.4 will be enforceable against Noble
unless both SET's obligation to pay the claim and SET's inability to pay the
41
claim has been determined either (1) with Noble's written consent or (2) by a
Qualified Arbitration (as defined in Section 8.4(e)).
(e) "Qualified Arbitration" means an arbitration proceeding conducted
in compliance with the following requirements.
(i) The proceeding is conducted in the Detroit, Michigan,
metropolitan area.
(ii) The proceeding is conducted before a single arbitrator
selected by the agreement of the parties to the arbitration
who is a retired or senior federal judge.
(iii) The proceeding is conducted, as nearly as practical, in
accordance with the procedural rules and substantive law
that would be applied in a civil trial in the federal
District Court for the Eastern District of Michigan,
Southern Division, including the Federal Rules of Evidence
and the Federal Rules of Civil Procedure.
(iv) In connection with the proceeding, each of the parties pays
its own fees and expenses, and an equal share of the costs
of the proceeding.
The decision of the arbitrator in a Qualified Arbitration will be binding and
may be enforced in a court of competent jurisdiction. The decision of the
arbitrator in a Qualified Arbitration will also be final and non-appealable.
(f) The Owners may show that SET is unable to pay a claim by proving
that SET is insolvent, bankrupt, or precluded from paying by a financial
covenant in an agreement with an institutional lender. To prove that SET is
precluded from paying by a financial covenant in an agreement with an
institutional lender, the Owners must prove all of the following:
(i) SET's business had been conducted in the ordinary course
consistent with past practice for a period of not less than
90 days before the indemnification claim was first asserted;
(ii) SET had continued to conduct its business in the ordinary
course consistent with past practice during the pendency of
the indemnification claim and the Owners' attempts to
collect on the indemnification claim; and
(iii) for a period of 90 days or more after determination of
SET's obligation to pay the claim, payment of the claim had
been precluded by a financial covenant in SET's credit
agreement with its institutional lender.
42
Whether payment of a claim had actually been precluded by a financial covenant
would be an appropriate subject of negotiation and agreement or, ultimately,
Qualified Arbitration. The methods described in this Section 8.4(f) would not be
the exclusive methods of proving that SET were unable to pay a claim.
(g) If SET were liable to pay part of a Claim but would not be able to
pay the full amount of the Claim as described in this Section 8.4, then, for
Noble's guarantee to be enforceable, SET must have paid and the Owners must have
accepted any partial payments of the Claim that SET is able to pay. If SET is
able to pay part of a Claim then the Owners would have a claim against Noble
under this Section 8.4 for the difference between the full amount of the Claim
and the aggregate of all partial payments of the Claim.
(h) The Owners and Noble will use commercially reasonable efforts to
resolve any claim under this Section 8.4 through negotiation and agreement.
(i) The following examples illustrate Noble's guarantee of SET's
indemnification liability. Each of the examples assumes that requirements of
Section 8.4(d) have been satisfied.
Example 1. SET has an aggregate indemnification obligation to the
Owners of $400,000. The Owners have no claim against Noble under the
guarantee because SET's indemnification obligation is less than the
$500,000 regardless of the nature of the underlying Losses. Note that in
this case, the Owners would have experienced Losses of $900,000 since the
first $500,000 of Losses results in no indemnification obligation on the
part of SET.
Example 2. SET has an aggregate indemnification obligation to the
Owners of $600,000, none of which are Losses based on representations and
warranties made in Sections 4.1(a), 4.1(d), 4.2, 4.3, 4.6(b), 4.7(c) or
4.15. The Owners have a claim against Noble under the guarantee of
$500,000. The Owners have no claim against Noble for the remaining $100,000
as it exceeds the $500,000 limit on Noble's guarantee for such Losses.
Example 3. SET has an aggregate indemnification obligation to the
Owners of (i) $600,000, none of which are Losses based on representations
and warranties made in Sections 4.1(a), 4.1(d), 4.2, 4.3, 4.6(b), 4.7(c) or
4.15 and (ii) $700,000 in Losses which are based on such representations
and warranties. The Owners have a claim against Noble under the guarantee
of $1,000,000. The Owners have no claim against Noble for the remaining
$100,000 under (i) as it exceeds the $500,000 limit for such Losses, nor
for the remaining $200,000 under (ii) as it exceeds the $1,000,000
aggregate limit on Noble's guarantee.
Example 4. SET has an aggregate indemnification obligation to the
Owners of (i) $600,000 attributable to a Non-Covered Claim and (ii)
$300,000, none of which are Losses based on representations and warranties
made in Sections 4.1(a), 4.1(d), 4.2, 4.3, 4.6(b), 4.7(c) or 4.15. The
Owners have no claim against Noble under the
43
guarantee because (i) Noble has no obligation under the guarantee for
Losses attributable to Non-Covered Claims and (ii) SET's remaining
indemnification obligation is less than the $500,000.
Example 5. SET has an aggregate indemnification obligation to the
Owners of $1,500,000, all attributable to Losses based on representations
and warranties made in Sections 4.1(a), 4.1(d), 4.2, 4.3, 4.6(b), 4.7(c) or
4.15. The Owners have a claim against Noble under the guarantee of
$1,000,000. None of the claims are subject to the $500,000 limit described
in Section 8.4(c) but are subject to the $1,000,000 aggregate limit on
Noble's guarantee.
ARTICLE IX
TERMINATION
9.1 TERMINATION. This Agreement may be terminated, by written notice
promptly given to the other Parties, at any time before the Closing Date as
follows:
(a) by mutual written consent of the Parties; or
(b) by any Party, if a court of competent jurisdiction or other
governmental authority shall have issued an order, decree or ruling or taken any
other action, in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and nonappealable.
9.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to this
Article IX, this Agreement (except for Article I (Definitions and
Interpretations), Article VIII (Indemnification), Article IX (Termination) and
Article X (Miscellaneous), all of which shall continue) shall become void and
have no effect, without any liability on the part of any of the Parties or their
directors or officers or stockholders or other Affiliates with respect to this
Agreement.
9.3 FEES AND EXPENSES. Except as set forth in this Section 9.3, all actual,
documented and reasonable out-of-pocket fees and expenses incurred in connection
with the preparation, negotiation, execution and performance of this Agreement
and the transactions contemplated hereby shall be paid by the Party incurring
such fees and expenses, regardless of whether the transactions contemplated
herein is consummated.
ARTICLE X
MISCELLANEOUS
10.1 NOTICES. All notices or other communications required or permitted
under this Agreement must be in writing and will be deemed to have been duly
given (i) if physically delivered, when delivered, (ii) five days after having
been deposited in the United States mail as certified mail with return receipt
requested and with postage prepaid, (iii) one business day after having been
transmitted to a third party providing delivery services in the ordinary course
of business which guarantees delivery on the next business day after such
transmittal (e.g. via Federal Express), or (iv) if transmitted by telecopier or
other similar means, with subsequent oral
44
confirmation, when confirmed, and transmittal in accordance with (ii) or (iii)
above, all of which notices or other communications shall be addressed to the
recipient as follows:
If to SET, to:
Xx. Xxx X. Xxxxxx
SET Enterprises, Inc.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
(000) 000-0000 (phone)
(000) 000-0000 (fax)
with a copy to:
Xxxxxx X. Xxxxxxxx, Esq.
00000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000-0000
(000) 000-0000 (phone)
(000) 000-0000 (fax)
If to the Owners, to:
Xx. Xxxxx Xxxxxx
SVP and GM
Sumitomo Corporation of America
0000 Xxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
(000) 000-0000 (phone)
(000) 000-0000 (fax)
with a copy to:
Xxxxxxxxx Xxxxxx, Esq.
Sumitomo Corporation of America
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
(000) 000-0000 (phone)
(000) 000-0000 (fax)
If to Noble International or to Noble Manufacturing, to:
Xx. Xxxxxxxxxxx X. Xxxxx
Noble International, Ltd.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
(000) 000-0000 (phone)
(000) 000-0000 (fax)
45
10.2 ASSIGNMENT. This Agreement and all of the provisions of this Agreement
will be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns, and the provisions of Article V of
this Agreement will inure to the benefit of the indemnified parties referred to
therein; provided, however, that neither this Agreement nor any of the rights,
interests, or obligations under this Agreement may be assigned by any of the
Parties without the prior written consent of the other Parties.
10.3 WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (i) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing; (ii) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (iii) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
10.4 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all prior
and contemporaneous agreements, whether written or oral, between the Parties
with respect to its subject matter and constitutes (along with the Schedules,
Exhibits and other documents delivered pursuant to this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by each of the Parties.
10.5 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
10.6 COUNTERPARTS. This Agreement may be executed with counterpart
signature pages or in two or more counterparts (including facsimile
transmissions of such signature pages), all of which will be considered one and
the same agreement and each of which will be deemed an original.
10.7 GOVERNING LAW. This Agreement will be governed by the laws of the
United States and the State of Michigan (regardless of the laws that might be
applicable under principles of conflicts or choice of law) as to all matters
including matters of validity, construction, effect and performance.
10.8 THIRD PARTIES. Nothing in this Agreement may be deemed to be for the
benefit of, or enforceable by or on behalf of any Party, including any employee
or former employee of MSP, any dependent or beneficiary of any such employee,
any labor union or other organization,
46
any obligee, owner or holder of any obligation or liability, other than the
Parties and the Indemnified Parties.
10.9 EXPENSES. Each Party will pay its own fees and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement (including the fees of any attorneys, financial advisors and others),
whether or not such transactions are consummated.
The Parties executed this Contribution Agreement as of the day and year
first above written.
SET ENTERPRISES, INC.
By:
---------------------------------------
Name: Xxx X. Xxxxxx
---------------------------------------
Its: Chief Executive Officer
---------------------------------------
SUMITOMO CORPORATION OF AMERICA
By:
---------------------------------------
Name: Xxxxx Xxxxxx
---------------------------------------
Its: Senior Vice President
---------------------------------------
SUMITOMO CORPORATION
By:
---------------------------------------
Name: Xxxxx Xxxxxx
---------------------------------------
Its: Attorney-in-Fact
---------------------------------------
NOBLE INTERNATIONAL, LTD.
By:
---------------------------------------
Name: Xxxxxxxxxxx X. Xxxxx
---------------------------------------
Its: President
---------------------------------------
47
NOBLE MANUFACTURING GROUP, INC.
By:
---------------------------------------
Name: Xxxxxxxxxxx X. Xxxxx
---------------------------------------
Its: President
---------------------------------------
48
