Exhibit 2.1
SHARE EXCHANGE AGREEMENT
Franklin Manufacturing Company
Unique Mobility, Inc.
Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. XxXxxx
April 30, 1998
TABLE OF CONTENTS
I. THE SHARE EXCHANGE. . . . . . . . . . . . . . . . .. . . . . . . .1
1.1 The Share Exchange . . . . . . . . . . .. . . . . . . .1
1.2 Consideration. . . . . . . . . . . . . .. . . . . . . .1
1.3 Delivery of Certificates . . . . . . . .. . . . . . . .2
1.4 Closing. . . . . . . . . . . . . . . . .. . . . . . . .2
II. REPRESENTATIONS AND WARRANTIES OF
FRANKLIN AND THE SHAREHOLDERS. .. . . . . . . . . .. . . . . . . .3
2.1 Organization . . . . . . . . . . . . . .. . . . . . . .3
2.2 Capitalization . . . . . . . . . . . . .. . . . . . . .3
2.3 Authorization. . . . . . . . . . . . . .. . . . . . . .3
2.4 No Violation; Consents and Approvals . .. . . . . . . .3
2.5 Subsidiaries and Other Capital Stock . .. . . . . . . .4
2.6 Financial Statements . . . . . . . . . .. . . . . . . .4
2.7 Absence of Undisclosed Liabilities . . .. . . . . . . .4
2.8 Absence of Certain Changes or Events . .. . . . . . . .5
2.9 Title to and Condition of Non-RealEstate Assets . . . .5
2.10 Real Property. . . . . . . . . . . . . . . . . . . . . .5
2.11 Transactions with Affiliates.. . . . . . . . . . . . . .6
2.12 Trademarks and Similar Rights. . . . . . . . . . . . . .6
2.13 Insurance. . . . . . . . . . . . . . . . . . . . . . . .6
2.14 Contracts and Agreements . . . . . . . . . . . . . . . .6
2.15 Purchase Orders. . . . . . . . . . . . . . . . . . . . .7
2.16 Accounts Receivable. . . . . . . . . . . . . . . . . . .7
2.17 Licenses and Permits . . . . . . . . . . . . . . . . . .7
2.18 Bank Accounts. . . . . . . . . . . . . . . . . . . . . .7
2.19 Litigation . . . . . . . . . . . . . . . . . . . . . . .7
2.20 Employee Compensation; Employee Matters. . . . . . . . .7
2.21 Employee Benefit Plans . . . . . . . . . . . . . . . . .8
2.22 Collective Bargaining, Employment and Non-Competition
Agreements. . . . . . . . . . . . . . . . . . . .. . 10
2.23 Taxes and Tax Returns. . . . . . . . . . . . . . . . . 10
2.24 Compliance with Applicable Laws. . . . . . . . . . . . 11
2.25 SEC Disclosure . . . . . . . . . . . . . . . . . . . . 11
2.26 Inventory. . . . . . . . . . . . . . . . . . . . . . . 12
III. REPRESENTATIONS AND WARRANTIES OF
UNIQUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1 Organization . . . . . . . . . . . . . . . . . . . . . 12
3.2 Capitalization . . . . . . . . . . . . . . . . . . . . 12
3.3 Authorization. . . . . . . . . . . . . . . . . . . . . 12
3.4 No Violation; Consents and Approvals . . . . . . . . . 12
3.5 SEC Filings and Financial Statements . . . . . . . . . 13
3.6 Exchange Stock . . . . . . . . . . . . . . . . . . . . 13
3.7 Litigation . . . . . . . . . . . . . . . . . . . . . . 13
3.8 SEC Disclosure . . . . . . . . . . . . . . . . . . . . 13
IV. COVENANTS OF THE SHAREHOLDERS
AND FRANKLIN. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Announcements and Communications . . . . . . . . . . . 14
4.2 Notice of Certain Actions. . . . . . . . . . . . . . . 14
4.3 No-Shop Provision. . . . . . . . . . . . . . . . . . . 14
4.4 Conduct of Business Pending the Exchange . . . . . . . 14
4.5 Cause Conditions to be Satisfied . . . . . . . . . . . 16
V. COVENANTS OF UNIQUE. . . . . . . . . . . . . . . . . . . . . . . . 16
5.1 Announcements and Communications . . . . . . . . . . . 16
5.2 Capitalization of Franklin . . . . . . . . . . . . . . 16
5.3 Right of First Negotiation . . . . . . . . . . . . . . 16
5.4 Release of Guaranties. . . . . . . . . . . . . . . . . 16
5.5 Board Position . . . . . . . . . . . . . . . . . . . . 16
5.4 Sub S Taxes. . . . . . . . . . . . . . . . . . . . . . 16
VI. UNIQUE COMMON STOCK - REGISTRATION RIGHTS . . . . . . . . . . . . 16
6.1 Unique Common Stock to be Issued . . . . . . . . . . . 16
6.2 Restrictive Legend . . . . . . . . . . . . . . . . . . 17
6.3 Information. . . . . . . . . . . . . . . . . . . . . . 17
6.4 Registration Rights. . . . . . . . . . . . . . . . . . 18
6.5 Post-Closing Matters . . . . . . . . . . . . . . . . . 19
6.6 Additional Governmental Approval . . . . . . . . . . . 19
6.7 Registration Expenses. . . . . . . . . . . . . . . . . 19
VII. UNIQUE DUE DILIGENCE . . . . . . . . . . . . . . . . . . . . . . 20
7.1 Unique Due Diligence . . . . . . . . . . . . . . . . . 20
7.2 Supplemental Disclosure. . . . . . . . . . . . . . . . 20
VIII. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . 20
8.1 Conditions Precedent to Unique's Obligations . . . . . 20
8.2 Conditions Precedent to Franklin's and the
Shareholders' Obligations. . . . . . . . . . . . . . . 21
IX. DOCUMENTS TO BE DELIVERED AT CLOSING. . . . . . . . . . . . . . . 22
9.1 Documents to be Delivered by Franklin or the
Shareholders at the Closing. . . . . . . . . . . . . . 22
9.2 Documents to be Delivered by Unique at the Closing . . 23
X. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.1 Survival of Representations and Warranties . . . . . . 24
10.2 Indemnification. . . . . . . . . . . . . . . . . . . . 24
10.3 Escrowed Shares; Indemnification Offsets . . . . . . . 25
10.4 Indemnification Procedure; Arbitration . . . . . . . . 25
10.5 Escrow Not to Limit Indemnification. . . . . . . . . . 26
XI. CERTAIN AGREEMENTS
11.1 Distributions Prior to Closing . . . . . . . . . . . . 26
11.2 Confidential Information . . . . . . . . . . . . . . . 26
11.3 Liability for Events Prior to the Closing Date . . . . 27
11.4 Preparation of Registration Statement. . . . . . . . . 27
11.5 Destruction of Assets. . . . . . . . . . . . . . . . . 28
11.6 Termination. . . . . . . . . . . . . . . . . . . . . . 28
11.7 Assignment of Name . . . . . . . . . . . . . . . . . . 29
XII. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . 29
12.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . 29
12.3 Entire Agreement . . . . . . . . . . . . . . . . . . . 30
12.4 Headings . . . . . . . . . . . . . . . . . . . . . . . 30
12.5 Successors in Interest . . . . . . . . . . . . . . . . 30
12.6 Counterparts . . . . . . . . . . . . . . . . . . . . . 30
12.7 Governing Law. . . . . . . . . . . . . . . . . . . . . 30
12.8 Brokerage. . . . . . . . . . . . . . . . . . . . . . . 30
12.9 Waiver . . . . . . . . . . . . . . . . . . . . . . . . 30
12.10 Remedies for Breach; Specific Performance . . . . . 30
12.11 Construction. . . . . . . . . . . . . . . . . . . . 31
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT, dated as of April 30, 1998 (the
"Agreement"), is made and entered into by and among Unique Mobility, Inc., a
Colorado corporation ("Unique"), Franklin Manufacturing Company, a Missouri
corporation ("Franklin"), and Xxxxxxx X. Xxxxxxxx and Xxxxxxx X. XxXxxx
(the"Shareholders").
Whereas, the Shareholders own 100% of the issued and outstanding capital
stock of Franklin; and
WHEREAS, the Boards of Directors of each of Unique and Franklin have
approved the proposed share exchange, on the terms and conditions set forth in
this Agreement, whereby the Shareholders will exchange (the "Exchange") their
shares of common stock of Franklin (the"Franklin Common Stock"), for shares of
common stock of Unique (the "Unique Common Stock");
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained, the parties hereto agree as follows:
I. THE SHARE EXCHANGE
1.1 The Share Exchange. Subject to the terms and conditions of this
Agreement, the Shareholders shall exchange (the "Exchange") the outstanding
shares of Franklin Common Stock for cash and shares of Unique Common Stock, and
Franklin shall continue its corporate existence under the laws of the State of
Missouri as a wholly owned subsidiary of Unique.
1.2 Consideration. (a) In consideration for the Exchange, the Shareholders
shall receive the "Purchase Price" (as defined below). The Purchase Price shall
be $9,390,000 minus (i) any amount by which the book value of Franklin's assets
as of the Closing Date (as defined below) is less than the sum of $3,100,000,
(ii) the book value as of the Closing Date of Franklin's current liabilities and
long-term debt and the taxes due as described in Section 5.6 and (iii) the book
value as of the Closing Date of the Note and the Golf Clubs (as defined in
Section 11.1) distributed to Xxxxxxx X. Xxxxxxxx pursuant to Section 11.1. The
Purchase Price shall be further reduced by $74,000 representing an adjustment
with respect to JenTech (the "JenTech Adjustment"). The JenTech Adjustment may
be further adjusted after Closing if the parties agree to an adjustment. The
Shareholders shall receive $4,000,000 of the Purchase Price on the Closing Date
in immediately available funds and the balance shall be paid on the Closing Date
in the form of 286,282 shares of Unique Common Stock. 75,000 shares of the
Unique Common Stock that is due to the Shareholders on the Closing Date shall be
delivered to Norwest Investment Management & Trust as escrow agent (the "Escrow
Agent") with assignments executed in blank to be held pursuant to the Escrow
Agreement in the form attached hereto as Exhibit 1.2 (the "Escrow Shares"). The
balance of the shares due at Closing (211,282 shares) shall be delivered to
Shareholders at Closing. Unique may deliver 250,000 shares to the Shareholders'
counsel in escrow at Closing, in which case the Shareholders shall execute and
deliver to Unique stock assignments for 38,718 shares and the Shareholders'
counsel promptly after Closing shall deliver the certificates and assignments to
Unique's transfer agent for reissuance of certificates in the amount of 211,282
shares in the name of the Shareholders and the balance of the shares shall be
cancelled.
(b) Franklin has estimated the Purchase Price to be $6,247,316 (the
"Estimated Purchase Price"). The computation of the actual Purchase Price shall
initially be made by the Shareholders and delivered to Unique within 90 days
after the Closing Date along with all accountants' work papers and similar
documentation used in making such determination. If Unique objects to the
computation of the Purchase Price as of the Closing Date made by the
Shareholders, then Unique shall notify the Shareholders of such objection within
ten days of receipt of such computation. If the parties cannot resolve such
objections within 30 days of such notification by Unique, then Unique and the
Shareholders shall jointly select an accountant or accounting firm to resolve
such matters which may, if Unique in its reasonable determination believes to be
necessary, undertake an audit of Franklin. The decision of such accountant or
accounting firm shall be binding upon Franklin, Unique and the Shareholders. If
the accountant or accounting firm selected determines that the actual Purchase
Price on the Closing Date has decreased by five percent or more from that
initially determined by the Shareholders, then the Shareholders shall pay the
fees and disbursements of such accounting firm. In all other instances the fees
and expenses of such firm shall be paid by Unique. If an adjustment to the
Purchase Price is necessary, either Unique shall deliver additional shares of
Unique Common Stock to the Shareholders, or the Shareholders shall deliver to
Unique shares of Unique Common Stock received by them at the Closing. The number
of Escrow Shares shall not be adjusted.
(c) The number of shares of Unique Common Stock issued to the Shareholders
upon the Exchange shall be adjusted accordingly in the event a stock split,
stock dividend or similar event becomes effective between the date of this
Agreement and the Closing Date.
1.3 Delivery of Certificates. On the Closing Date, the Shareholders shall
surrender all certificates representing the Franklin Common Stock to Unique,
duly endorsed for transfer or with separate stock assignments.
1.4 Closing. Subject to the provisions of this Agreement, the closing (the
"Closing") of the transactions contemplated by this Agreement shall take place
at the offices of Xxxxxxxxx, P.C., 0000 Xxx Xxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxx
Xxxxxx, XX 00000, on April 30, 1998 at 10:00 a.m., or at such other time, place
or date as Unique, the Shareholders and Franklin may mutually agree; provided,
however, that if a condition to the Closing set forth in Article VIII shall not
have been fulfilled or waived at such time, any party hereto entitled to the
benefits of such condition may postpone the Closing by notice to the other
parties until such condition or conditions shall have been met or waived, except
that in no event shall the Closing occur after April 30, 1998, unless the
parties otherwise agree in writing. The date and time of such Closing are herein
referred to as the "Closing Date."
II. REPRESENTATIONS AND WARRANTIES OF
FRANKLIN AND THE SHAREHOLDERS
Franklin and the Shareholders, jointly and severally, covenant, represent
and warrant with and to Unique, its successors and assigns, as follows:
2.1 Organization. Franklin (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Missouri, (ii) has
full corporate power and authority to own, lease and operate all of its
properties and assets and to carry on its business as it is now being conducted,
(iii) is duly qualified to do business as a foreign corporation in each
jurisdiction where the character of its properties or the nature of its business
makes such qualification necessary, and all such jurisdictions are listed in
Section 2.1 of the disclosure schedule delivered by Franklin and the
Shareholders to Unique (the "Disclosure Schedule"), and (iv) is in good standing
in each jurisdiction in which it is qualified to do business. The minute books
of Franklin made available to Unique for review contain complete and accurate
records of all meetings and other corporate actions held or taken of Franklin's
Board of Directors, the committees thereof, and the Shareholders. All actions
reflected in said books were duly and validly taken in compliance with the laws
of the applicable jurisdiction.
2.2 Capitalization. The authorized capital stock of Franklin and the number
of such shares which are issued and outstanding and which are owned by the
Shareholders are as set forth on Section 2.2 of the Disclosure Schedule. All
issued and outstanding shares of Franklin's capital stock have been duly and
validly issued and are fully paid and nonassessable, free of any claim of
preemptive rights, and no shares are held in treasury, except as set forth in
Section 2.2 of the Disclosure Schedule. There are no outstanding rights to
purchase or receive, or options, warrants, puts, calls, contracts, commitments
or demands of any character relating to Franklin's authorized or issued capital
stock or which could require the issuance of capital stock by Franklin. There
are no voting trusts or other agreements or understandings to which Franklin is
a party with respect to the voting of the capital stock of Franklin.
2.3 Authorization. This Agreement, the execution and delivery hereof by
Franklin, the Exchange and the performance by Franklin of its obligations and
undertakings referenced herein, have been duly authorized and approved by the
Shareholders and the Board of Directors of Franklin. The officers executing this
Agreement on behalf of Franklin have authority to do so and upon execution of
this Agreement by such officers and the Shareholders, this Agreement shall be
the valid and binding obligation of Franklin and the Shareholders.
2.4 No Violation; Consents and Approvals. Except as set forth in Section
2.4 of the Disclosure Schedule, neither the execution and delivery of this
Agreement by Franklin, nor the consummation of the transactions contemplated
hereby and thereby, will conflict with, result in a breach of, permit any party
to terminate or accelerate the provisions of, or result in the imposition of any
lien, encumbrance or restriction upon the property or assets of Franklin under
(i) the provisions of the Articles of Incorporation or the Bylaws of Franklin,
(ii) the provisions of any obligation, indenture, agreement, permit or other
instrument to which Franklin is a party or which Franklin holds, or (iii) any
statute or law or any order, decree, judgment, rule or regulation of any court
or governmental agency or authority having jurisdiction over Franklin. Except
for any filings required in connection with the issuance of the shares of Unique
Common Stock and consents required as described in Section 2.4 of the Disclosure
Schedule, no permit, consent, approval or authorization of, or declaration,
filing or registration with, any governmental or regulatory authority or other
person (either governmental or private) is necessary in connection with the
execution and delivery by Franklin or the Shareholders of this Agreement or the
consummation by them of the transactions contemplated hereby and thereby.
2.5 Subsidiaries and Other Capital Stock. Franklin does not have any
subsidiaries. As used herein, the term "subsidiaries" means any corporation or
other entity in which Franklin is entitled by virtue of its ownership of
securities (or equivalent interests) to elect a majority of the directors (or
persons performing equivalent functions). Except as disclosed in Section 2.5 of
the Disclosure Schedule, Franklin does not own, directly or indirectly, any
capital stock or other equity securities of any corporation or have any direct
or indirect equity or ownership interest in any other business. Except as
disclosed in Section 2.5 of the Disclosure Schedule, all capital stock or other
equity securities of any corporation owned, directly or indirectly, by Franklin,
is owned free and clear of all liens, options, encumbrances, pledges, security
interests, claims or charges of any kind, and are validly issued, fully paid and
nonassessable, with no personal liability attaching to the ownership thereof,
and there are no outstanding options, rights or agreements of any kind relating
to the sale or transfer of any such capital stock or other equity securities.
2.6 Financial Statements.
(a) Section 2.6 of the Disclosure Schedule sets forth true and correct
copies of the reviewed balance sheet and income statement of Franklin as of and
for the years ended September 30, 1996 and 1997 and the unaudited balance sheet
as of April 30, 1998 and the unaudited income statement of Franklin for the six
months ended March 31, 1998. The foregoing Financial Statements and income
statements are collectively referred to herein as the "Financial Statements."
(b) The Financial Statements have been prepared from the books and records
of Franklin as, at and for the periods indicated and have been prepared in
accordance with generally accepted accounting principles consistently followed
throughout the periods indicated, and present fairly the financial position of
Franklin, and the results of its operations, as, at and for the periods
indicated. Franklin has in its possession, and will deliver to Unique upon
request, all supporting documentation and work papers relating to the Financial
Statements to permit Unique to restate its financial statements if required.
2.7 Absence of Undisclosed Liabilities. Except to the extent shown on the
Financial Statements or in Section 2.7 of the Disclosure Schedule, as of April
30, 1998 Franklin did not have any liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise.
2.8 Absence of Certain Changes or Events. Except as set forth on Section
2.8 of the Disclosure Schedule, since April 1, 1998, there has not been (a) any
adverse change in the business, properties, assets, financial condition or
results of operation which would be material to Franklin; (b) any damage,
destruction or loss, whether covered by insurance or not, materially and
adversely affecting the properties or business of Franklin; (c) any declaration,
setting aside or payment of any dividend (whether in cash, stock or property) in
respect of Franklin Common Stock, or any redemption or other acquisition of such
stock by Franklin; (d) any increase in the compensation payable or to become
payable by Franklin to its officers or key employees, or any material increase
in any bonus, insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with any such officers or key employees; (e) any
labor or employee dispute involving Franklin, other than routine matters, none
of which is material; (f) any borrowing or lending of money or guarantee of any
obligation by Franklin; (g) any adoption, amendment or termination of any
employee benefit plan or arrangement of Franklin; (h) any disposition of any
material properties or assets used in the business of Franklin other than sales
of inventory in the ordinary course of its business; (i) any engagement by
Franklin in activities outside the ordinary course of its business; (j) the
incurring of any liability of Franklin (whether absolute or contingent) except
liabilities which were incurred in the ordinary course of business; (k) any
changes in Franklin's distribution system or changes in inventory policy; (l)
any change in the general pricing policy of Franklin for its services or any
general price increase charged for Franklin's goods and services; or (m) any
agreement (whether oral or written) to do any of the foregoing.
2.9 Title to and Condition of Non-Real Estate Assets. Except for such
assets as have been disposed of in the ordinary conduct of Franklin's business,
Franklin has good and marketable title to, or valid leasehold interests in, all
non-real estate assets reflected on the Financial Statements or acquired by it
after April 30, 1998, free and clear of all liens, claims, mortgages, charges,
easements or other encumbrances of any kind whatsoever except: (i) to the extent
reflected or reserved against on the Financial Statements, or (ii) for liens for
property taxes not yet due. All the fixed assets reflected on the Financial
Statements, and those assets acquired since the date thereof, and not disposed
of as permitted hereunder, and the assets of JenTech referred to in Section
8.1(i), constitute all the fixed assets now used by Franklin and necessary to
conduct its business as it is being conducted on the date hereof and all leases
of such fixed assets will, at the Closing, be in full force and effect. To the
best of the Shareholders' knowledge, all such fixed assets, including all
mechanical and component parts thereof, are in good working condition, have been
and will be properly maintained, and are not in need of repair or replacement.
Except as reflected in the April 30, 1998 balance sheet, all items of inventory
are in good condition and consist of items of a quality and quantity usable in
the ordinary course of Franklin's business. The amount of inventory is
sufficient in quality and quantity to operate the business of Franklin in the
ordinary course. Franklin shall deliver to Unique prior to Closing a
computer-generated fixed asset register which will list all items of machinery,
equipment and similar property (including vehicles) owned by Franklin on the
Closing Date.
2.10 Real Property. Except as set forth in Section 2.10 of the Disclosure
Schedule, each parcel of real property owned by Franklin, including the legal
description and address thereof, is listed on Section 2.10 of the Disclosure
Schedule, and copies of all deeds, purchase documents, mortgages, other
encumbrances and title insurance policies or lawyer's title opinions relating to
such parcels have been provided to Unique. Franklin has good and marketable
title to such real property, and such real property is subject only to normal
easements and restrictions that do not interfere with Franklin's use and
currently intended future use of the real estate. Section 2.10 of the Disclosure
Schedule also lists all leases for real estate to which Franklin is a party.
Copies of all such leases have been delivered to Unique. Franklin is not in
default and no event of default has occurred under any such lease. Except as set
forth in Section 2.10 of the Disclosure Schedule, no consent to the consummation
of the transactions contemplated hereby is required by the terms of any such
lease.
2.11 Transactions with Affiliates. Except as set forth in Section 2.11 of
the Disclosure Schedule and except for compensation or other customary employee
benefits provided in the ordinary course of business, since April 30, 1998,
Franklin has not entered into or been a party to any transaction which provided
for payment to or from, or the transfer of, any Franklin property to or from any
Shareholder, any director, officer or other employee of Franklin, any member of
the family of any such person or any corporation, partnership, trust or other
entity in which any such person has an ownership interest or is an officer,
director, partner or trustee.
2.12 Trademarks and Similar Rights. Section 2.12 of the Disclosure Schedule
sets forth (a) all patents and patent applications, registered copyrights and
copyright registration applications, registered trademarks and trademark
registration applications, and registered trade names and trade name
registration applications, owned in whole or in part by Franklin and used in the
conduct of its business, and (b) all licenses from third parties under which
Franklin has been given the right to use any of the foregoing in the conduct of
its business. Except as indicated in Section 2.12 of the Disclosure Schedule,
neither the validity of, nor Franklin's rights under, any of the items listed
therein, is being questioned or contested by others.
2.13 Insurance. Section 2.13 of the Disclosure Schedule sets forth all
insurance contracts in force with respect to Franklin and its property, copies
of which have previously been made available to Unique; all such insurance
contracts are in full force and effect and will continue to be renewed and/or
maintained so as to be in full force and effect at the Closing. Franklin will
notify Unique if any policies contain cancellation penalties or similar
penalties upon cancellation.
2.14 Contracts and Agreements. Section 2.14 of the Disclosure Schedule sets
forth a description of (a) all contracts and agreements (whether written or
oral) and all amendments thereto or modifications thereof to which Franklin is a
party or by which it is bound which involve future payments by or to Franklin of
$50,000 or more other than contracts which are terminable by Franklin upon 30
days or less notice without cost or expense to Franklin and (b) all notes,
mortgages, pledges, deeds of trust, security, loan or credit agreements and
similar instruments or arrangements to which Franklin is a party or by which it
is bound and all amendments or modifications thereof (collectively (a) and (b),
referred to as the "Contracts"), together in each case with copies of all such
agreements, contracts and other instruments as Unique may reasonably request.
Except as set forth in Section 2.14 of the Disclosure Schedule:
(i) each Contract is a valid and binding agreement of Franklin and, to the
best of the Shareholders' and Franklin's knowledge, is a valid and binding
agreement of the other parties thereto; and
(ii) Franklin has fulfilled all obligations required pursuant to each
Contract to have been performed by Franklin on its part prior to the date
hereof, and Franklin has no reason to believe that it will not be able to
fulfill, when due, all of its obligations under the Contracts which remain to be
performed after the date hereof; and
(iii) there has not occurred any default under any Contract on the part of
Franklin; Franklin has no knowledge that any default under any Contract on the
part of the other parties thereto has occurred; and Franklin has no knowledge
that any event has occurred which with the giving of notice or the lapse of
time, or both, would constitute any default under any of the Contracts.
2.15 Purchase Orders. Franklin does not have, and will not have at Closing,
any written or oral purchase order or purchase commitment in excess of the
normal, ordinary and usual requirements of its business or at any excessive
price.
2.16 Accounts Receivable. A complete list of all accounts, notes and other
receivables of Franklin as of April 30, 1998 and the aging thereof has been
separately delivered to Unique. All such accounts receivable arose in the
ordinary course of business and no entitlement to or claims of offset or
reduction have been made or exist and, subject to any allowance for doubtful
accounts reflected in the April 30, 1998 balance sheet, all such accounts are
fully collectible without offset or compromise within 90 days of Closing except
as otherwise disclosed in Section 2.16 of the Disclosure Schedule.
2.17 Licenses and Permits. Section 2.17 of the Disclosure Schedule sets
forth a list of, by facility location, and Franklin is in possession of, all
licenses, permits and authorizations required for the conduct of Franklin's
business (the "Permits"), and the Permits are valid and in full force and
effect. Except as set forth in Section 2.17 of the Disclosure Schedule, Franklin
is in compliance with all conditions or requirements imposed by or in connection
with the Permits and with respect to the conduct of its business and Franklin
has not received notice and Franklin does not have any knowledge or reason to
believe that any authority intends to cancel, terminate or modify any of the
Permits or adopt or modify rules and regulations which would adversely affect
the Permits.
2.18 Bank Accounts. Section 2.18 of the Disclosure Schedule sets forth the
name and address of each bank in which Franklin has an account or safety deposit
box, the designation of such account and the names of all persons authorized to
draw thereon or enter therein, as may be the case.
2.19 Litigation. Section 2.19 of the Disclosure Schedule sets forth any and
all actions, suits, claims, proceedings, investigations or inspections pending
or threatened against or affecting Franklin or any of its properties or rights
in any court or before any governmental authority.
2.20 Employee Compensation; Employee Matters. Section 2.20 of the
Disclosure Schedule sets forth, by facility location, the names, positions,
dates of hire and current compensation, including bonuses and customary
commissions, of all present officers and employees of Franklin whose annual
compensation was $30,000 or more in calendar year 1997 or if not employed
throughout 1997, is expected to exceed $30,000 in calendar year 1998. Except as
set forth in Section 2.20 of the Disclosure Schedule:
(a) Franklin is in compliance with all federal and state laws respecting
employment and employment practices, terms and conditions of employment, wages
and hours, and is not engaged in any unfair labor practices.
(b) All obligations of Franklin, whether arising by operation of law, by
contract or by past custom, for payments by Franklin directly to its employees
or to trusts or other funds or to any governmental agency, for employment
compensation benefits, workers compensation benefits, accident, sickness and
disability benefits, pension, profit sharing and any other retirement benefits,
social security benefits, vacation and holiday pay, bonuses and other forms of
compensation, or any other benefits, have been paid or adequate accruals
therefor have been made on the Financial Statements or, with respect to accruals
required from April 30, 1998 through the Closing, have been made in accordance
with Franklin's normal accounting procedures and in compliance with generally
accepted accounting principles, consistently applied.
2.21 Employee Benefit Plans
(a) Except for the plans and arrangements set forth in Section 2.21 of the
Disclosure Schedule (the "Scheduled Plans"), neither Franklin nor any member of
the Controlled Group now maintains, has ever maintained or contributed to, or
has any plans or commitments for, any employee benefit plans (as such term is
defined in section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) or any other retirement, pension, stock option, stock
appreciation right, profit sharing, incentive compensation, deferred
compensation, savings, thrift, vacation pay, severance pay, or other employee
compensation or benefit plan, agreement, practice, or arrangement, whether
written or unwritten, whether or not legally binding (collectively, the
"Plans"). For purposes of this Agreement, "Controlled Group" means a controlled
or affiliated group within the meaning of Code 414(b), (c), (m), or (o) of which
Franklin is a member. Franklin has delivered to Unique correct and complete
copies of all Scheduled Plans (including a detailed written description of any
Scheduled Plan that is unwritten, including a description of eligibility
criteria, participation, vesting, benefits, funding arrangements and assets and
any other provisions relating to Franklin) and, with respect to each Scheduled
Plan, a copy of each of the following: (i) the most recent favorable
determination letter, (ii) materials submitted to the Internal Revenue Service
in support of a pending determination letter request, (iii) the most recent
letter issued by the Internal Revenue Service recognizing tax exemption, (iv)
each insurance contract, trust agreement, or other funding vehicle, (v) the
three most recently filed Forms 5500 plus all schedules and attachments, and
(vi) each summary plan description or other general explanation or communication
distributed or otherwise provided to employees with respect to each Scheduled
Plan that describes the terms of the Scheduled Plan.
(b) Each Scheduled Plan has at all times been in compliance, in form and in
operation, in all material respects with all applicable requirements of law and
regulations, including without limitation ERISA. Each Scheduled Plan that is
intended to be a qualified plan has received a favorable determination letter
from the Internal Revenue Service; nothing has occurred since the date of the
most recent favorable determination letter that would cause the loss of the
Scheduled Plan's qualification; and each such Scheduled Plan has at all times
been in compliance, in form and in operation, in all material respects with the
applicable requirements of the Internal Revenue Code and the applicable Treasury
Regulations.
(c) Neither Franklin nor any party in interest (as such term is defined in
ERISA 3(14)) nor any disqualified person (as such term is defined in Code 4975)
has engaged in any prohibited transaction within the meaning of ERISA 406 or
Code 4975 that would subject Franklin to any liability.
(d) All contributions to Scheduled Plans for all periods ending prior to
the Closing Date (including periods from the first day of the current plan year
to the Closing Date) will be made prior to the Closing Date by Franklin in
accordance with past practice and the recommended contribution in the applicable
actuarial report.
(e) All insurance premiums with respect to each Scheduled Plan have been
paid in full, subject only to normal retrospective adjustments in the ordinary
course for policy years or other applicable policy periods ending on or before
the Closing Date.
(f) Neither Franklin nor any member of the Controlled Group, nor any of
their respective directors, officers, employees, or other fiduciary (as such
term is defined in ERISA 3(21)) has any liability for failure to comply with
ERISA or the Code for any action or failure to act in connection with the
administration or investment of any Scheduled Plan.
(g) Neither Franklin nor any member of the Controlled Group has ever
maintained, contributed to, or been obligated to contribute to any plan that is
subject to Title IV of ERISA or the minimum funding requirements of Code 412.
Neither Franklin nor any member of the Controlled Group has ever contributed to,
been obligated to contribute to, or incurred any liability to a multiemployer
plan (as such term is defined in ERISA 3(37)).
(h) With respect to each Scheduled Plan, there are no actions, suits,
grievances, arbitrations or other manner of litigation, or claim with respect to
any Scheduled Plan (except for routine claims for benefits made in the ordinary
course of plan administration for which plan administrative procedures have not
been exhausted) pending, threatened or imminent against or with respect to any
Scheduled Plan or Plan, any plan sponsor, or any fiduciary (as such term is
defined in ERISA 3(21)) of such Scheduled Plan or Plan, and Franklin has no
knowledge of any facts that could give rise to any action, suit, grievance,
arbitration or other manner of litigation, or action.
(i) Neither Franklin nor any member of the Controlled Group has any
liability for post-retirement welfare benefits except for the continuation
coverage required by Code 4980B.
(j) The consummation of the transactions contemplated by this Agreement
will not result in any "excess parachute payments" within the meaning of Code
280G.
(k) No Plan provides retiree medical or retiree life insurance benefits to
any person and Franklin is not contractually or otherwise obligated (whether or
not in writing) to provide any person with life insurance or medical benefits
upon retirement or termination of employment, other than as required by the
provisions of Sections 601 through 608 of ERISA and Section 4980B of the Code.
(l) Franklin and the members of the Controlled Group have complied with the
continuation coverage requirements of Sections 601 through 608 of ERISA and
Section 4980B of the Code.
2.22 Collective Bargaining, Employment and Non-Competition Agreements.
Franklin is not a party to any collective bargaining or similar labor agreement.
Section 2.22 of the Disclosure Schedule sets forth (i) all consulting agreements
to which Franklin is a party and (ii) all employment, non-competition and
compensation agreements (whether written or oral) with officers or other
employees of Franklin, together with a copy, or in the case of any oral
agreement, a summary, of each such agreement. If a form employment or
non-competition agreement is used, a copy of such form need only be included
with a list of all such employees which have signed such form. Except as set
forth in Section 2.22 of the Disclosure Schedule, all employees of Franklin who
customarily have direct contact with Franklin customers (including all officers,
general managers, sales persons and distributors), have executed written non-
competition agreements or employment agreements containing non-competition
covenants in one of the forms attached hereto to Section 2.22. Except as set
forth in such Section 2.22 of the Disclosure Schedule, there exist no labor
grievances or other material problems involving labor relations of Franklin
which have not been fully satisfied or discharged. Neither Franklin nor any
Shareholder knows of any organizational effort to have any labor organization
certified by Franklin.
2.23 Taxes and Tax Returns. Franklin through the date of this Agreement has
duly and timely filed all federal, state and local (United States and all
foreign jurisdictions) tax returns required to be filed by it (unless a valid
extension therefore has been granted), and all such returns are, or will be when
filed, true, complete and correct in all material respects. Franklin has duly
and timely paid or made adequate provision for the payment of all taxes,
assessments and other governmental charges which have been incurred as set forth
in the aforementioned tax returns or are otherwise due and payable. All sales
taxes required to be collected and remitted by Franklin have been properly
collected and remitted. All necessary sales tax exemption certificates have been
obtained by Franklin and all such certificates have been properly completed and
maintained. No tax return filed by Franklin is under audit or examination by any
taxing authority and there are no applications or agreements for the extension
of the time for the filing of any tax return or for the assessment of any
amounts of tax nor any consent to an extension of the period of limitations
applicable to such assessment or to the collection of any tax. No issue or
issues have been raised in connection with any prior or pending inquiry into, or
audit of, any tax filings of Franklin which may be expected to be raised in the
future by such taxing authorities and no facts exist or have existed which would
constitute grounds for the assessment of any further tax liabilities, which
individually or in the aggregate are material with respect to the periods which
have not been examined by the IRS. Franklin has made available to Unique true
and complete copies of all federal, state and local (United States and foreign)
income tax returns for each of the past three years as set forth in Section 2.23
of the Disclosure Schedule which it has filed together with copies of all
schedules, work papers, elections, tax depreciation schedules and other
documents which were used in the preparation of each such tax return. There are
no liens for taxes upon the assets of Franklin except for liens for taxes not
yet due. As used herein, "taxes" mean (a) all net income, gross income, gross
receipts, sales, use, transfer, franchise, profits, withholding, payroll,
employment, excise, severance, property or windfall profits taxes, or other
taxes of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority (domestic
or foreign) upon Franklin with respect to all periods or portions thereof ending
on or before the Closing Date and/or (b) any liability of Franklin for the
payment of any amounts of the type described in the immediately preceding clause
(a) as a result of being a member of an affiliated or combined group.
2.24 Compliance with Applicable Laws. Except as set forth in Section 2.24
of the Disclosure Schedule, Franklin is conducting and has conducted its
business so as to comply with all applicable laws, ordinances, regulations,
decrees and orders, of any governmental entity, including without limitation all
city, county, state and Federal statutes, laws, regulations and ordinances
applicable to air or water pollution, environmental protection, soil
contamination, hazardous substances (as defined in any of the following statutes
which shall be deemed to include, without limitation, asbestos and PCBs),
hazardous waste generation, transportation, storage and disposal or other
environmental matters including the Resource, Conservation and Recovery Act of
1976, the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 (CERCLA), the Clean Air Act, the Toxic Substances Control Act, the
Federal Water Pollution Control Act, the Federal Hazardous Substances Act, the
Solid Waste Disposal Act and other similar and related Federal and state laws
and regulations regulating the protection of the environment, all as amended,
compliance with the National Labor Relations Act as amended, the Welfare and
Pension Plans Disclosure Act, the Fair Labor Standards Act and Equal Pay Act,
Title 7 of the Civil Rights Act of 1964, the Age Discrimination in Employment
Act of 1967, the Occupational Safety and Health Act of 1970, the Americans With
Disabilities Act of 1990, and the Employees Retirement Income Security Act of
1974, and any other law, ordinance, regulation, decree or order, the failure to
comply with which might have a material adverse effect on the financial
condition, business, properties, reputation, results of operations or prospects
of Franklin and Unique. None of the real property or assets of Franklin have
been used for hazardous waste storage or disposal or have been contaminated by
hazardous waste (as defined in the Resource Conservation and Recovery Act, or
applicable state law) or hazardous substances (as defined in 101(14), 42 U.S.C.
9601(14), of CERCLA) and neither Franklin's operations nor assets have
contaminated the lands or waters of others with hazardous waste or hazardous
substances. All underground or above-ground storage tanks contained on or under
real estate used by Franklin is described in Section 2.24 of the Disclosure
Schedule. All such tanks are registered, were installed pursuant to existing
laws and regulations at the time of such installation, and are at this date in
full compliance with all applicable rules and regulations.
2.25 SEC Disclosure. None of the information supplied or to be supplied by
Franklin for use in the Registration Statement (later defined), including
Franklin's SEC (later defined) materials, contains any untrue statements of a
material fact or omits to state all material facts which are necessary in order
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading. As used in this Agreement, the term
"Registration Statement" shall mean the registration statement referred to in
Section 6.4 hereof or as it finally is effective. "SEC" refers to the Securities
Exchange Commission. Franklin's "SEC materials" consists of the information
furnished by Franklin for inclusion in the Registration Statement.
2.26 Inventory. Except as set forth in Section 2.26 of the Disclosure
Schedule, none of the inventory reflected in the Financial Statements is
obsolete or not saleable.
III. REPRESENTATIONS AND WARRANTIES OF UNIQUE
Unique represents and warrants with and to Franklin and to the
Shareholders, their heirs, successors or assigns, as follows:
3.1 Organization. Unique is a corporation duly organized, validly existing
and in good standing under the laws of the State of Colorado and duly authorized
under its Articles of Incorporation and under applicable laws to engage in the
business conducted by it.
3.2 Capitalization. The authorized capital stock of Unique consists of
50,000,000 shares of Unique Common Stock, 15,531,420 of which were issued and
outstanding on April 20, 1998. All issued and outstanding shares of Unique
Common Stock have been duly and validly issued and are fully paid and
non-assessable and free of any claim of pre-emptive rights. Except as disclosed
in filings with the SEC or as otherwise disclosed to the Shareholders, there are
no outstanding rights to purchase or receive, or options, warrants, puts, calls,
contracts, commitments or demands of any character relating to the authorized or
issued capital stock of Unique or which could require the issuance of capital
stock by Unique.
3.3 Authorization. The Board of Directors of Unique has approved, or will
approve prior to Closing, the execution and delivery of this Agreement and the
performance by Unique of its obligations and undertakings hereunder. The
officers executing this Agreement on behalf of Unique have authority to do so,
and, upon execution by such officers, this Agreement shall be the valid and
binding obligation of Unique. The foregoing actions are sufficient to approve
this Agreement and all other transactions contemplated hereby in accordance with
applicable corporate statutes.
3.4 No Violation; Consents and Approvals. Neither the execution nor
delivery of this Agreement by Unique nor the consummation of the transactions
contemplated hereby will conflict with, result in a breach of, permit any party
to terminate or accelerate the provisions of, or result in the imposition of any
lien, encumbrance or restriction upon the property or assets of Unique or any of
its subsidiaries under (a) the provisions of their respective charters or
Bylaws, (b) the provisions of any obligation, indenture, agreement, permit or
other instrument to which Unique or any of its subsidiaries is a party or which
Unique or any of its subsidiaries holds, or (c) any statute or law or any order,
decree, judgment, rule or regulation of any court or governmental agency or
authority having jurisdiction over Unique or any of its subsidiaries, except in
the case of clause (b) above where such violations individually or in the
aggregate with all such other violations would not have a material adverse
effect on the financial condition, business, properties, results of operations
or prospects of Unique and its subsidiaries considered as a whole. Except for
any filings required in connection with the issuance of the shares of Unique
Common Stock, no permit, consent, approval or authorization of, or declaration,
filing or registration with, any governmental or regulatory authority or other
person (either governmental or private) is necessary in connection with the
execution and delivery by Unique of this Agreement or the consummation by it of
the transactions contemplated hereby.
3.5 SEC Filings and Financial Statements.
(a) Unique has furnished or, upon filing with the SEC, will furnish to the
Shareholders, true and complete copies of (i) its Annual Report on Form 10-K for
the fiscal year ended October 31, 1996, its Transition Report on Form 10-K for
the five months ended March 31, 1997, its quarterly reports on Form 10-Q for the
quarters ended June 30, 1997, September 30, 1997 and December 31, 1997 and its
Current Reports on Form 8-K dated June 18, 1997, June 30, 1997, December 9,
1997, January 20, 1998 March 17, 1998 and April 2, 1998 as filed with the SEC
pursuant to the Securities Exchange Act of 1934, as amended (the "Act"); and
(ii) its Proxy Statement relating to the Annual Meeting of stockholders of
Unique held on August 19, 1997 (collectively, the "Unique SEC Filings"). The
Unique SEC Filings did not, or will not, as of their respective dates of filing,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
(b) The Unique SEC Filings contain true and complete copies of Unique's
consolidated balance sheets as of December 31, 1997, September 30, 1997, June
30, 1997, March 31, 1997, and October 31, 1996 and 1995 and consolidated
statements of income, statements of common shareholders' equity and statements
of cash flows for the periods then ended (collectively, the "Unique Financial
Statements"). The Unique Financial Statements have been prepared from the books
and records of Unique and present fairly the consolidated financial position of
Unique and its subsidiaries as of the dates thereof, all in conformity with
United States generally accepted accounting principles applied on a consistent
basis for such periods.
3.6 Unique Common Stock. The Unique Common Stock to be issued in the
Exchange will, when issued and delivered, be duly authorized, validly issued,
fully paid, nonassessable shares of Unique Common Stock, free of all claims of
preemptive rights.
3.7 Litigation. There are no actions, suits, claims, proceedings,
investigations or inspections, pending or threatened, against or affecting
Unique or its subsidiaries which could have a material adverse effect on Unique
and its subsidiaries considered as a whole. To Unique's best knowledge formed
after reasonable inquiry, there are no matters of litigation or governmental
proceedings expected to be brought against it or its subsidiaries which could
have a material adverse effect on the financial condition of Unique and its
subsidiaries considered as a whole.
3.8 SEC Disclosure. The Registration Statement will not contain any untrue
statement of a material fact nor will it omit to state a material fact necessary
to make the statements contained therein not misleading, except that no
representation is made with respect to information to be contained therein
regarding Franklin and supplied by Franklin or the Shareholders.
IV. COVENANTS OF THE SHAREHOLDERS AND FRANKLIN
4.1 Announcements and Communications. Except as required by applicable
laws, Franklin and the Shareholders shall not, without the prior written
approval of Unique, make any public announcement or furnish any information to
the public concerning the transactions contemplated by this Agreement. Franklin
and the Shareholders shall promptly advise Unique of all communications which
they receive pertaining to the transactions contemplated by this Agreement,
including, without limitation, communications from governmental agencies and
authorities.
4.2 Notice of Certain Actions. Franklin shall promptly notify Unique of any
actions, suits, claims, investigations, or proceedings commenced or, to the best
of its knowledge, threatened against, relating to or involving or otherwise
affecting Franklin which, if pending on the date hereof, would have been
required to have been disclosed in writing pursuant to this Agreement or which
relate to the consummation of the transactions contemplated hereby.
4.3 No-Shop Provision. Until the Closing Date, neither Franklin nor any
Shareholder: (i) shall seek to merge Franklin into any entity other than Unique
or an affiliate of Unique, (ii) shall negotiate or entertain any other offer
with respect to the sale of all or part of the capital stock of Franklin or
substantially all of Franklin's assets or (iii) shall authorize or permit any
officer, director, employee, investment banker, attorney, accountant or other
representative to, solicit or encourage the making of any other proposals
reasonably expected to lead to the acquisition of all or part of the capital
stock of Franklin or substantially all of Franklin's assets. Franklin and the
Shareholders shall promptly notify Unique in writing of any such proposal.
4.4 Conduct of Business Pending the Exchange. The Shareholders and Franklin
covenant and agree, prior to the Closing Date, unless Unique shall otherwise
agree in writing (which agreement will not be unreasonably withheld or delayed)
or as otherwise expressly permitted or contemplated by this Agreement that:
(a) the business of Franklin shall be conducted only in the ordinary course
of business and consistent with past practice and Franklin shall not (i) make
any material change in its operations including any general overall increase in
pricing (which shall not prohibit price increases in the normal and ordinary
course of business) or (ii) purchase or sell any significant properties or
assets outside of the ordinary course of business or which would result in
Franklin owning in the aggregate an amount of properties and assets less than
the aggregate amount of properties and assets owned by Franklin on the date
hereof;
(b) Franklin shall not (i) split, combine or reclassify any shares of its
capital stock or (ii) declare, set aside or pay any dividend or other
distribution or make any payment in cash, stock or property in respect of any
shares of its capital stock;
(c) Franklin shall not (i) except as provided in Section 2.8 of the
Disclosure Schedule amend its Articles of Incorporation or Bylaws, (ii) issue or
sell any shares of, or rights of any kind to acquire any shares of or to receive
any payment based on the value of, its capital stock or any securities
convertible into shares of any such capital stock, (iii) incur any indebtedness
other than trade credits or working capital loans drawn on Franklin's existing
line of credit in the ordinary course of business, (iv) acquire, directly or
indirectly, by redemption or otherwise, any shares of its capital stock, (v)
cancel or decrease any existing insurance coverage, or (vi) modify any existing
contract, agreement, commitment or arrangement with respect to any of the
foregoing;
(d) Franklin shall use its best efforts to preserve intact its business
organization, to keep available the services of its current officers and key
employees, and to preserve the goodwill of those having business relationships
with it;
(e) Franklin shall not (i) except as provided in Section 2.8 of the
Disclosure Schedule increase in any manner the compensation of any of its
executive officers or key employees, (ii) except as provided in Section 2.8 of
the Disclosure Schedule increase in any manner the compensation of any of its
other officers or employees, except in the ordinary course of business, (iii)
pay or agree to pay any pension, retirement allowance or other employee benefit
not required by any existing plan, agreement or arrangement with any director,
officer or key employee, whether past or present, (iv) except as required by the
terms of any existing plan, agreement or arrangement, adopt or commit itself to
or enter into any additional pension, profit- sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, retirement or other employee benefit plan,
agreement or arrangement, or to any employment or consulting agreement with or
for the benefit of any director, officer or employee, whether past or present or
(v) amend any such plan, agreement or arrangement;
(f) other than pursuant to commitments set forth in Section 4.4(f) of the
Disclosure Schedule and other than in the ordinary course of business and
consistent with past practice, Franklin shall not make any capital expenditures
or commitments for capital expenditures which individually exceed $25,000 or
which in the aggregate exceed $100,000;
(g) except as provided in Section 4.4(g) of the Disclosure Schedule, other
than in the ordinary course of business and consistent with past practice,
Franklin shall not waive any rights of substantial value or make any payment,
direct or indirect, of any material liability of such Company before the same
comes due in accordance with its terms;
(h) Franklin shall not lease, mortgage, encumber or otherwise grant any
interest in any of its assets or properties, except for liens for current taxes
not yet due and liens or encumbrances that are not substantial in amount and do
not materially detract from the value or impair the use of the property subject
thereto;
(i) Franklin shall, at all times up to and including the Closing Date,
maintain its existing insurance coverage of all types in effect or procure
substantially similar substitute insurance policies with financially sound and
reputable insurance companies in at least such amounts and against such risks as
are currently covered by such policies; and
(j) Franklin shall not agree, in writing or otherwise, to take any of the
actions prohibited by the foregoing clauses (a) through (j).
4.5 Cause Conditions to be Satisfied. The Shareholders and Franklin shall
use their best efforts to cause all of the conditions set forth in Section 8.1
hereof to be satisfied at the earliest practical time.
V. COVENANTS OF UNIQUE
5.1 Announcements and Communications. Except as required by applicable
laws, (i) prior to the Closing, Unique shall not, without the prior written
approval of the Shareholders, make any public announcement or furnish any
information to the public concerning the transactions contemplated by this
Agreement, and (ii) following the Closing, Unique shall not, without the prior
written approval of the Shareholders, make any public announcement or furnish
any information to the public concerning the price or terms of this Agreement.
5.2 Cause Conditions to be Satisfied. Unique shall use its best efforts to
cause all of the conditions set forth in Section 8.2 hereof to be satisfied at
the earliest practical time.
5.3 Right of First Negotiation. So long as Xxxxxxx Xxxxxxxx is employed by
Unique, in the event Unique shall elect to sell all or substantially all of the
assets or stock of Franklin to any person other than Unique or a subsidiary of
Unique, Unique shall enter into good faith negotiations for a period of 60 days
with Xxxxxxx Xxxxxxxx prior to negotiating with any other potential purchaser.
5.4 Release of Guaranties. Unique shall use its best efforts to cause the
Shareholders to be released from any guaranties of Franklin's obligations at the
earliest practical time after the Closing Date.
5.5 Board Position. Unique shall appoint Xxxxxxx Xxxxxxxx to Unique's Board
of Directors on the Closing Date and shall nominate him to the Board of
Directors at each shareholder meeting after the Closing Date during the term of
the Employment Agreement (as defined in Section 9.1(f)).
5.6 Sub S Taxes. Unique shall cause Franklin to pay to the IRS all taxes
due on Franklin's taxable income for the period beginning on October 1, 1997 and
ending on the Closing Date.
VI. UNIQUE COMMON STOCK - REGISTRATION RIGHTS
6.1 Unique Common Stock to be Issued. The Unique Common Stock to be issued
in the Exchange will not be registered under the Securities Act of 1933 (the
"Act") at the time of issuance and will be issued pursuant to an exemption from
registration. As a result, such shares must be held indefinitely unless
subsequently registered under the Act or unless an exemption from such
registration is available. Unique assumes no obligation to register the shares
of Unique Common Stock except as provided below. All shares of Unique Common
Stock to be issued in the Exchange will hereafter for purposes of this Article
VI be referred to as the "Restricted Securities." The Restricted Securities will
cease to be restricted when they have been effectively registered under the Act
and disposed of in accordance with that registration or they have been
distributed to the public pursuant to Rule 144 under the Act or they have been
otherwise transferred and new certificates representing such securities have
been delivered which do not bear any legend restricting their transfer and such
securities are not subject to any stop transfer order or other restriction on
transfer. In certain circumstances after the expiration of the registration
rights provided for herein, sales of the Common Stock may be made in reliance
upon Rules 144 and 145 of the Act and the terms and conditions thereof. Unique
will supply the holders of such Unique Common Stock with such information as is
necessary to enable them to make sales of Unique Common Stock under Rules 144
and 145 of the Act.
6.2 Restrictive Legend. The certificates for shares issued pursuant to the
Exchange will each bear a legend substantially as follows:
The securities represented by this Certificate have not been registered
under the Securities Act of 1933 or the laws of any state and may not be
transferred in the absence of (a) an effective registration statement for the
securities under the Securities Act of 1933 and applicable state laws or (b) an
opinion of counsel satisfactory to Unique that such registration is not
required.
6.3 Investment Representations. Franklin and the Shareholders each
acknowledge receipt of the Unique SEC Filings. Each Shareholder acknowledges the
willingness of Unique to provide appropriate officers to answer any questions
that such Shareholder many have had with respect to the contents of the Unique
SEC Filings. Each Shareholder has such knowledge and experience in financial and
business matters that such Shareholder is capable of evaluating the merits and
risks of an investment in the Unique Common Stock. Each Shareholder is able to
bear the economic risk of the investment and has the ability to hold the Stock
indefinitely and the ability to suffer a complete loss of his or her investment.
Each Shareholder is acquiring the Unique Common Stock for investment for his own
account, for investment purposes only, without any intention of subdividing or
reselling such Stock prior to the time it is registered under the Act. Each
Shareholder understands that investment in the Unique Common Stock is
speculative and earnings therefrom are uncertain. Each Shareholder also
understands that he may not sell, offer for sale, assign, pledge, hypothecate or
otherwise transfer or encumber all or any part of his interest in the Unique
Common Stock in the absence of either (i) an effective registration statement
covering such transaction under the Act and effective qualification or
registration under all applicable state securities laws and regulations, or (ii)
an opinion of counsel satisfactory to Unique to the effect that registration
under the Act is not required and qualification or registration under any such
state securities laws and regulations is not required (or that any applicable
state qualification or registration requirements have been satisfied in full).
Each Shareholder also understands and agrees that, as a further condition to any
disposition, Unique may require that the proposed transferee furnish Unique with
written representations substantially the same as those made by the Shareholders
herein. Each Shareholder acknowledges that no representations or warranties have
been made to him or her by Unique or any officer, director, agent or employee of
Unique. Each Shareholder has had the opportunity to review the purchase of the
Unique Common Stock subscribed for with his or her tax and legal counsel and
investment representatives. Each Shareholder acknowledges that he or she may
recognize taxable income to the extent of the value of all consideration
received by him or her in the Exchange, that such income will be taxed at
ordinary income rates and that he or she will receive no opinion of tax counsel
for Unique in connection with the Exchange and must rely on his or her own tax
advisors for tax advice in connection with the Exchange. Each Shareholder agrees
to indemnify and hold harmless Unique, its directors, officers, shareholders,
agents and employees from and against any claim, demand, loss, liability and
expense (including, without limitations, attorneys' fees and disbursements)
incurred as a result of any misrepresentation or breach of any agreement,
representation, warranty or covenant made by the Shareholders herein or in any
other document furnished by the Shareholders to any of such persons in
connection with this transaction.
6.4 Registration Rights.
(a) Unique agrees to file with the SEC within 15 business days after the
Closing Date, a registration statement on Form S-3 (the "Registration
Statement") with respect to the resale by the Shareholders of (i) the Closing
Shares and (ii) the Escrow Shares, if and when such shares are released from
escrow pursuant to the Escrow Agreement, and to use reasonable efforts to cause
the Registration Statement to become effective as soon as practicable
thereafter; provided, however, that Unique shall not be responsible for any
delay in filing or failure to file a Registration Statement which results from
the failure of the Shareholders to provide to Unique such information as Unique
requests in order to comply with the Act and regulations of the SEC. Unique will
promptly prepare and file with the SEC such amendments and supplements to each
such Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to keep the Registration Statement
effective to comply with the provisions of the Act with respect to the
disposition of all of the Shares registered thereunder (collectively, the
"Registered Shares") until the earlier of (x) such time as all of the Registered
Shares have been disposed of in accordance with the intended methods of
distribution by the Shareholders set forth in the Registration Statement (which
shall consist of sales on the American Stock Exchange, in negotiated
transactions or through a combination of methods but which shall not include an
underwritten public offering), or (y) one year after the issuance of the shares
covered thereby.
(b)(i) Unique shall promptly notify the Shareholders of the issuance by the
SEC of any stop order suspending the effectiveness of the Registration Statement
or the initiation of any proceedings for that purpose. Unique shall use
reasonable efforts to obtain the withdrawal of any such stop order. In the event
of any stop order suspending the effectiveness of the Registration Statement,
Unique shall be required to keep the Registration Statement effective until the
earlier of (x) such time as all Registered Shares offered thereby have been
disposed of in accordance with the intended methods of distribution set forth in
the Registration Statement or (y) the period required by paragraph (a) above
plus an extended period equal to the number of days during which any such
suspension was in effect.
(ii) Notwithstanding anything to the contrary set forth in this Agreement,
Unique's obligations under this Section to file the Registration Statement and
to use reasonable efforts to cause the Registration Statement to become and
remain effective (and the right of the Shareholders to use the prospectus
contained therein) shall be suspended in the event and during such period as
Unique determines that the existence of any fact or the happening of any event
(including without limitation pending negotiations relating to, or the
consummation of, a transaction or the occurrence of any other event) would
require additional disclosure of material information by Unique in the
Registration Statement, the confidentiality of which Unique has a business
purpose to preserve or which fact or event would render Unique unable to comply
with SEC requirements (in either case, a "Suspension Event"). The suspension of
Unique's obligations in accordance with the preceding sentence shall not exist
for any longer period of time than such suspension exists for other similarly
restricted shareholders of Unique. Unique shall notify the Shareholders promptly
in writing of the existence of any Suspension Event. In the case of any
Suspension Event occurring prior to and delaying the filing of the Registration
Statement, Unique shall file the Registration Statement as soon as practicable
after the conclusion of the Suspension Event.
(iii) Following the effectiveness of each Registration Statement, each
Shareholder agrees that he or she will not effect any sales of the Registered
Shares offered thereby at any time after he or she has received notice from
Unique to suspend sales as a result of a stop order or the occurrence or
existence of any Suspension Event. The Shareholders may recommence effecting
sales of the Registered Shares offered thereby following further notice to such
effect from Unique, which notice shall be given by Unique promptly after the
withdrawal of any stop order or the conclusion of any such Suspension Event.
6.5 Post-Closing Matters. Unique will deliver to the holders of such
Restricted Securities after effectiveness of any registration under this
Agreement, such reasonable number of copies of a definitive prospectus included
in such Registration Statement and of any revised or supplemental prospectus
filed as such holders may from time-to-time request. Unique shall file
post-effective amendments or supplements to such Registration Statement for a
period continuing until the Shareholders have held their Restricted Stock for a
period of one year. So long as a prospectus is required to be delivered under
the Act, Unique agrees to use its reasonable best efforts to keep the
Registration Statement effective at all times during such one year period and to
at all times comply with the various applicable federal and state securities
laws (after which period Unique may withdraw such Restricted Securities from
registration), and shall deliver copies of the prospectus contained therein as
herein-above provided. Notwithstanding the above, each Shareholder agrees to
notify Unique if he or she sells all of his or her Restricted Securities within
one year of issuance. Upon receipt of such notification from all of the
Shareholders, Unique's obligation to keep the Registration Statement effective
shall terminate. Each Shareholder also agrees to notify Unique at least two full
business days in advance of any sale or series of sales of the Restricted
Securities aggregating 10,000 or more shares of Unique Common Stock.
6.6 Additional Governmental Approval. If, in connection with the
registration under the Act, any Restricted Securities require registration or
qualification with or approval of any United States or State governmental
official or authority, other than registration under the Act, before such
Restricted Securities may be sold, Unique will use its best reasonable efforts
to take all actions required to be taken by Unique to cause any such shares to
be duly registered, approved or otherwise qualified for sale, as may be
required, provided, however, that it shall not be required to give a general
consent to service of process or to qualify as a foreign corporation or subject
itself to taxation as doing business in any such state.
6.7 Registration Expenses. Unique shall pay all of the expenses in
connection with the registration referenced herein, including without limitation
costs of complying with federal and state securities laws and regulations,
attorneys' fees of Unique, accounting fees, printing expenses and filing fees;
except transfer taxes, underwriting commissions, discounts and expenses, and
other expenses including attorneys' fees, of Franklin and the Shareholders.
VII. UNIQUE DUE DILIGENCE
7.1 Unique Due Diligence. During the period prior to the Closing Date,
subject to the terms of the Mutual Nondisclosure Agreement between Franklin and
Unique dated December 31, 1997 (the "Nondisclosure Agreement"), Franklin and the
Shareholders will give to Unique and its counsel, accountants, actuaries and
other experts and other representatives, full access, during normal business
hours, to Franklin's and the Shareholders' (to the extent such items are used by
Franklin in its business) assets (including the leased real estate), contracts,
commitments and other records (including computer files, retrieval programs and
other documentation relating to Franklin's business) and will furnish Unique and
such representatives, with all such information and data concerning the affairs
of Franklin as Unique or such representatives reasonably may request for the
purposes of verifying the representations and warranties made herein and further
investigating the business and affairs of Franklin prior to the Closing. Unique
shall be permitted to conduct, through its representatives, an environmental
audit on any real estate ever leased by Franklin at the cost and expense of
Unique. The performance of the due diligence of Unique or the acquisition of
information by Unique shall not relieve any Shareholder from any representation,
warranty or covenant made by such Shareholder in this Agreement.
7.2 Supplemental Disclosure. Franklin and the Shareholders shall each have
the continuing obligation to promptly supplement or amend the Disclosure
Schedules with respect to any matter hereafter arising or discovered which, if
existing or known at the date hereof, would have been required to be set forth
or described in the Disclosure Schedules; provided, however, that for the
purpose of the rights and obligations of the parties hereunder, any such
supplemental or amended disclosure shall not be deemed to have been disclosed as
of the date hereof unless so agreed to in writing by Unique.
VIII. CONDITIONS PRECEDENT
8.1 Conditions Precedent to Unique's Obligations. The performance of the
obligations of Unique under this Agreement is subject, at the election of
Unique, to the fulfillment or written waiver of each of the following conditions
on or before the Closing:
(a) All proceedings taken in connection with the transactions contemplated
by this Agreement and all instruments and documents required in connection
therewith or incident thereto shall be reasonably satisfactory in form and
substance to Unique.
(b) The representations and warranties of Franklin and the Shareholders
contained in this Agreement, the Disclosure Schedule or any certificate or
document delivered to Unique pursuant hereto shall be true and correct in all
material respects on the date hereof and on the Closing, subject to any changes
and exceptions thereto which are contemplated in this Agreement or consented to
in writing by Unique. Franklin and the Shareholders shall have performed and
complied in all material respects with all agreements and conditions required by
this Agreement to be performed or complied with by them on or before the
Closing. Unique shall have been furnished with a certificate from Franklin
executed by the Shareholders and on behalf of Franklin by the President or a
Vice President of Franklin dated the Closing Date, certifying to the fulfillment
of the foregoing conditions by Franklin and further certifying that to the best
of such officer's knowledge there is no material pending or threatened
litigation, proceeding or governmental investigation relating to Franklin, and
that there has been no material adverse change in the financial condition or
business of Franklin or any damage or destruction of assets of Franklin which
would affect Franklin's ability to conduct business substantially as theretofore
conducted.
(c) There shall have been obtained written consents, in form and substance
reasonably satisfactory to Unique, of each party whose consent to the
transactions contemplated hereby is required including those set forth in
Section 2.4 of this Agreement.
(d) No bona fide litigation or proceeding shall be pending or threatened to
restrain, set aside or invalidate the transactions contemplated by this
Agreement.
(e) The Shareholders and the Board of Directors of Unique shall have voted
to approve the matters referred to in this Agreement and the transactions
contemplated thereby.
(f) Franklin shall have delivered to Unique the documents required to be
delivered hereunder, including those to be delivered at the Closing pursuant to
Section 9.1 hereof.
(g) Each of the directors and officers of Franklin shall have submitted his
resignation as director or officer in writing effective the Closing Date unless
otherwise approved in writing by Unique; provided, however, that Xxxxxxx
Xxxxxxxx shall not resign as president.
(h) The exchange of shares of Unique Common Stock for shares of Franklin
Common Stock pursuant to this Agreement shall be made in compliance with
applicable federal and state securities laws.
(i) The assets and certain liabilities of JenTech Enterprises, L.C.
("JenTech") shall have been assigned to Franklin and the leases of assets from
JenTech to Franklin shall have been terminated, all pursuant to an Assignment,
Assumption and Cancellation Agreement in the form attached hereto as Exhibit
8.1(i).
8.2 Conditions Precedent to Franklin's and the Shareholders' Obligations.
The performance of Franklin and the Shareholders under this Agreement is
subject, at the election of the Shareholders, to the fulfillment or written
waiver of each of the following conditions on or before the Closing:
(a) All proceedings taken in connection with the transactions contemplated
by this Agreement and all instruments and documents required in connection
therewith or incident thereto shall be reasonably satisfactory in form and
substance to Franklin and the Shareholders.
(b) The representations and warranties of Unique contained in this
Agreement or in any certificate or document delivered to the Shareholders
pursuant hereto shall be true and correct on the date hereof and shall be deemed
to have been made again on the Closing Date and speak as of the Closing and
shall then also be true and correct, subject to any changes and exceptions
thereto which are contemplated in this Agreement or consented to in writing by
the Shareholders. Unique shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied with by it
on or before the Closing. The Shareholders shall have been furnished with
certificates from Unique executed on behalf of Unique by the President or a Vice
President of Unique, dated as of the Closing, certifying to the fulfillment of
the foregoing conditions by Unique.
(c) No bona fide litigation or administrative proceeding shall be pending
or threatened to restrain, set aside or invalidate the transactions contemplated
by this Agreement.
(d) Unique shall have delivered to the Shareholders at the Closing the
documents required to be delivered pursuant to Section 9.2 hereof.
(e) At the time of Closing pursuant to this Agreement, Unique shall apply
for and use its best efforts to obtain a listing of the Restricted Securities on
the principal exchange on which any other Unique Common Stock is then listed.
(f) The exchange of shares of Unique Common Stock for shares of Franklin
Common Stock pursuant to this Agreement shall be made in compliance with
applicable federal and state securities laws.
IX. DOCUMENTS TO BE DELIVERED AT CLOSING
9.1 Documents to be Delivered by Franklin or the Shareholders at the
Closing. At the Closing, Franklin or the Shareholders shall deliver to Unique:
(a) copies certified by the Secretary or Assistant Secretary of Franklin of
the resolutions of Franklin's Board of Directors and the Shareholders approving
this Agreement and authorizing the transactions contemplated hereby and thereby;
(b) the written consents, in form and substance reasonably satisfactory to
Unique, of each party whose consent to the transactions contemplated hereby is
required;
(c) the resignations of each of the directors and officers of Franklin, in
writing effective the Closing Date; provided, however, that Xxxxxxx Xxxxxxxx
shall not resign as president;
(d) custody of all of Franklin's books, records, papers and other
documents;
(e) an Employment Agreement (the "Employment Agreement") executed by
Xxxxxxx Xxxxxxxx in the form of Exhibit 9.1(f);
(f) a Non-Competition and Non-Disclosure Agreement (the "Non-Competition
Agreement") executed by Xxxxxxx Xxxxxxxx in the form of Exhibit 9.1(g);
(g) an Escrow Agreement executed by the Shareholders in the form of Exhibit
1.2 (the "Escrow Agreement");
(h) the Officer's certificate required under Section 8.1(b);
(i) copies of the Articles of Incorporation, as amended, of Franklin as
certified by the Secretary of State of Missouri and copies of the Bylaws of
Franklin certified by the respective Secretary or an Assistant Secretary of
Franklin;
(j) certificates of Good Standing of Franklin issued by the Secretary of
State of Colorado, dated within ten days of the Closing Date;
(k) the documents set forth in Section 8.1 to be delivered by Franklin;
(l) an opinion dated the Closing Date of Xxxxxxxxx, P.C., counsel to
Franklin and Shareholders, in a form substantially as that attached as Exhibit
9.1(l) hereto;
(m) a Lease Consent and Acknowledgment, Assignment of Purchase Option and
Indemnification Agreement, in a form substantially as that attached as Exhibit
9.1(m) hereto; and
(n) a representation by the Shareholders that the book value of the assets
of Franklin as of the Closing Date is not less than $3,100,000 and the book
value of the liabilities of Franklin as of the Closing Date is not more than
$3,500,000.
9.2 Documents to be Delivered by Unique at the Closing. At the Closing,
Unique shall deliver to Franklin and the Shareholders:
(a) copies certified by the President of Unique of the resolutions of the
Board of Directors of Unique approving this Agreement and authorizing the
transactions contemplated hereby;
(b) the Employment Agreement executed by Unique in the form of Exhibit
9.1(f);
(c) the Non-Competition Agreement executed by Unique in the form of Exhibit
9.1(g);
(d) the Escrow Agreement executed by Unique in the form of Exhibit 1.2;
(e) the officer's certificate required under Section 8.2(b);
(f) an opinion dated the Closing Date of Holme Xxxxxxx & Xxxx LLP, counsel
to Unique, in a form substantially as that attached as Exhibit 9.2(f) hereto;
(g) an Indemnification Agreement in the form of Exhibit 9.2(g);
(h) a Lease Consent and Acknowledgment, Assignment of Purchase Option and
Indemnification Agreement, in a form substantially as that attached as Exhibit
9.1(m) hereto; and
(i) the documents set forth in Section 8.2 to be delivered by Unique and
such other certificates and documents as the Shareholders may reasonably
request.
X. INDEMNIFICATION
10.1 Survival of Representations and Warranties. All of the terms and
conditions of this Agreement, together with the warranties, representations and
covenants contained herein or in any instrument or document delivered or to be
delivered pursuant to or in connection with this Agreement, shall survive the
execution of this Agreement and the Closing notwithstanding any investigation or
due diligence heretofore or hereafter made by or on behalf of any party hereto;
provided, however, that (i) the agreements set forth in Articles VI and XI
hereof (other than Section 11.3) shall continue and survive until all
obligations set forth therein shall have been performed and satisfied, and (ii)
all other representations, warranties and agreements (including those made by
Unique), shall terminate on the three year anniversary of the Closing Date
except (y) as to matters with respect to which a party shall have given written
notice of any claim within such period and (z) as to the matters set forth in
Sections 2.23 and 2.24 (to the extent such representations and warranties in
Section 2.24 relate to environmental liabilities) which shall continue and
survive until such time as the applicable statute of limitations or tolling
period for such acts, laws, regulations or agreements shall have expired.
Notwithstanding the above limitations, indemnification for matters fraudulently
concealed by any party hereto shall extend indefinitely or until the applicable
statute of limitations period has expired.
10.2 Indemnification.
(a) Subject to the following provisions of this Article X, commencing on
the Closing Date, the Shareholders, jointly and severally, shall defend,
indemnify and hold harmless, Unique and any of its officers, directors,
employees and affiliates, from any and all claims, damages, losses, liabilities,
costs or expenses (including, without limitation, amounts paid in settlement,
reasonable attorneys' fees and costs of investigation), whether fixed or
contingent, matured or unmatured, liquidated or unliquidated ("Claims"), which
any of them may incur or suffer as a result of or arising out of any breach of
the representations, warranties, covenants or agreements of Franklin or the
Shareholders set forth in this Agreement except for those Claims, or portion of
a Claim, which are covered by insurance maintained by Franklin prior to Closing.
(b) Subject to the following provisions of this Article X, commencing on
the Closing Date, Unique shall indemnify and hold the Shareholders harmless from
all Claims which it may incur of suffer as a result of or arising out of (i) any
breach of the representations, warranties, covenants or agreements of Unique,
set forth in this Agreement for which Claim has been made during the applicable
periods hereunder except for those Claims, or portion of a Claim, which are
covered by insurance maintained by Franklin prior to Closing, or (ii) any action
or omission of Unique in the operation of the business of Franklin following the
Closing.
(c) The indemnification provisions contained in this Article X shall be the
exclusive basis for the assertion of Claims or the imposition of liability by
one party against another party to this Agreement arising from actions or Claims
resulting from the breach or default of any representation, warranty, covenant
or agreement contained herein. This Article X shall not, however, be the
exclusive basis for asserting Claims arising from any subsequently entered into
document or agreement including any non-competition or similar agreement to be
entered into pursuant to this Agreement.
10.3 Escrowed Shares; Indemnification Offsets. Unique may satisfy any
Purchase Price adjustment set forth in Article I or any Claim which is the
subject of indemnification herein from the Escrow Shares. Certificates
evidencing the Escrow Shares, together with stock powers executed in triplicate,
shall be delivered to the Escrow Agent under the terms and conditions of this
Article X and the Escrow Agreement. The escrow shall extend for two years
subject to the terms of the Escrow Agreement.
10.4 Indemnification Procedure; Arbitration.
(a) Upon the commencement by any third party of any administrative or
judicial proceeding or notice with respect to which any Claim is to be made,
Unique shall deliver written notice of the Claim and the nature of the liability
to the Shareholders for purposes of contesting any Claim asserted by Unique.
With respect to any Claim that the Shareholders agree could, if successful,
result in an obligation of the Shareholders to indemnify Unique under the terms
of this Article X, the Shareholders at their expense shall be entitled to
control the defense of such Claim with counsel reasonably satisfactory to
Unique. Unique shall control the defense of all other Claims. Neither party
shall incur any liability hereunder with respect to the settlement of any Claim
if such settlement is effected without such party's written consent, which
consent shall not be unreasonably withheld and shall be given or withheld within
15 days from notice of any proposed settlement.
(b) Each party shall furnish written notice of any other Claim it may have
(other than third party Claims referred to in paragraph (a) above) hereunder
(the "Indemnitees") to the others (the "Indemnitors"), setting forth the amount
of the Claim, if known, and the nature of the liability. The Indemnitors shall
have ten business days following the receipt of a notice of a Claim within which
to deliver a written objection to the Indemnitees with respect to any Claim,
setting forth the grounds for the objection (a "Disputed Claim"). Each party
shall use its best efforts to settle any Disputed Claim within 20 business days
following receipt by the Indemnitees of such objection. If any Disputed Claim is
not settled within such 20 business day period, and such Disputed Claim involves
less than $30,000, or upon agreement of the parties if such Disputed Claim
involves more than $30,000, such dispute shall be submitted to arbitration to be
conclusively determined by a panel of three arbitrators, one arbitrator being
selected by Unique, one arbitrator being selected by the Shareholders, and the
third arbitrator being selected by the two so selected by Unique and the
Shareholders or, in the event of their inability to agree on a selection of a
third arbitrator, as designated by the American Arbitration Association. All
such arbitrators shall be appointed as soon as reasonably possible but in no
event later than 60 days after the identification of a Disputed Claim. A hearing
on such Disputed Claim shall be held within 60 days of the appointment of the
last of the three arbitrators and the decision of such arbitrators shall be made
within 30 days of such hearing. Such arbitration shall be conducted in
accordance with the commercial arbitration rules of the American Arbitration
Association. A written arbitral award shall be delivered to Unique and the
Shareholders promptly following the resolution of a Disputed Claim by the
arbitrators. Such award shall be final, binding and unappealable by any party
thereto. All reasonable fees and expenses of the arbitrators and costs of the
arbitration shall be paid as determined by the arbitrators and to the extent not
so determined, each party shall pay its own expenses. Arbitration shall be
conducted in St. Louis, Missouri until such time as Unique shall have required
Xxxxxxx Xxxxxxxx to relocate to Denver, Colorado, following which arbitration
shall be conducted in Denver, Colorado.
10.5 Escrow Not to Limit Indemnification. Notwithstanding anything herein
to the contrary, the Shareholders shall indemnify Unique, its successors and
assigns, to the extent provided in this Article X and such indemnification, to
the extent provided, shall continue after the termination of the escrow provided
in this Article X and shall not be limited to the Escrow Shares. Any Shareholder
obligation arising under Article I or this Article X not satisfied by the Escrow
Shares shall first be satisfied by the Shareholder returning Unique Common Stock
to Unique valued at $8.04 per share. If a sufficient number of shares are not
retained by the Shareholders to enable the Shareholders to make such payments
using Unique Common Stock, the Shareholders shall pay Unique by the wire
transfer of immediately available funds.
XI. CERTAIN AGREEMENTS
11.1 Distributions Prior to Closing. Franklin currently owns a $1,000,000
life insurance policy on Xxxxxxx Xxxxxxxx'x life. Commencing on the Closing
Date, Xxxxxxx Xxxxxxxx will assume all premium obligations under the
aforereferenced life insurance policy. Such life insurance policy shall be
distributed to Xxxxxxx Xxxxxxxx on the Closing Date immediately prior to
Closing, provided that Xxxxxxx Xxxxxxxx shall assume responsibility for the
payment of all premium costs subsequent to the date of distribution. In
addition, Franklin currently owns a 1997 Jeep Cherokee (with vehicle
identification #0X0XX00X0XX000000; "Vehicle"), a promissory note from Xxxxx
Xxxxxxxx in the original principal amount of $16,000 (the "Note") and two
ownership/membership interests in two local golf clubs, St. Clair and Bogey
Hills (collectively, "Golf Clubs"). The Vehicle, Note and Golf Clubs shall be
distributed to Xxxxxxx Xxxxxxxx on the Closing Date immediately prior to
Closing, provided that Xxxxxxx Xxxxxxxx shall assume responsibility for any and
all obligations relating to their ownership, including, but not limited to,
premium costs for insurance on the Vehicle.
11.2 Confidential Information. Subject to the terms of the Nondisclosure
Agreement, in the event the transactions contemplated by this Agreement are not
consummated, each party hereto will hold all non-public confidential information
which it obtained from the other parties hereto in the course of negotiating
this Agreement, which it did not previously know or which was not previously in
the public domain, confidential. No party will directly or indirectly use such
information until the same shall become in the public domain (other than by
disclosure by a party hereto receiving such information for use pursuant
hereto). Each party will return to the applicable party all documents, objects
and records obtained from such other party pursuant hereto which are not in the
public domain.
11.3 Liability for Events Prior to the Closing Date.
(a) The Shareholders shall be jointly and severally responsible for, and
shall defend, indemnify and hold harmless Franklin, Unique and the officers and
directors of each, at the cost of each Shareholder, from all claims, demands,
causes of action, liabilities and losses not set forth on the Franklin Financial
Statements arising from any bodily injury, property damage, environmental
contamination or other occurrence attributable to or caused (in whole or in
part) by any product manufactured, sold, rented or supplied prior to the Closing
Date, or any service furnished prior to the Closing Date, or any property owned
or operated by Franklin prior to the Closing Date, or any other conduct of
Franklin prior to the Closing Date, except to the extent that such liability
results from actions or omissions by Unique or Franklin that occurred after the
Closing Date. Any claim against Franklin or Unique alleging any such injury,
damage or other occurrence shall be a claim for which Unique is entitled to
indemnity pursuant to Article X hereof and shall be governed by the provisions
of that Section. Unique shall notify the Shareholders upon Unique's becoming
aware of any such claims.
(b) Unique shall be responsible for, and shall defend, indemnify and hold
harmless the Shareholders. at Unique's cost, from all claims, demands, causes of
action, liabilities, including guaranties of Xxxxxxx X. Xxxxxxxx of Xxxxxxxx'x
obligations as of the Closing Date, and losses arising from any bodily injury,
property damage, environmental contamination or other occurrence attributable to
or caused (in whole or in part) by any product manufactured, sold, rented or
supplied after the Closing Date, or any service furnished after the Closing
Date, or any property owned or operated by Franklin after the Closing Date, or
any other conduct of Franklin after the Closing Date, except to the extent that
such liability results from actions or omissions by Franklin or either
Shareholder that occurred prior to the Closing Date. Any claim against Franklin
or Unique alleging any such injury, damage or other occurrence shall be a claim
for which Shareholders are entitled to indemnity pursuant to Article X hereof
and shall be governed by the provisions of that Section. The Shareholders shall
notify Unique upon the Shareholders becoming aware of any such claims.
11.4 Preparation of Registration Statement. Franklin will furnish Unique
with such information concerning the business and financial condition of
Franklin and shall provide such assistance to Unique as may be reasonably
necessary to enable Unique to describe Franklin, this Agreement and the
transactions contemplated hereby, and to disclose any other required
information, in the Registration Statement. Franklin will cooperate with Unique
to maintain the accuracy and completeness of the information in the Registration
Statement and will promptly inform Unique of any material change, whether
adverse or favorable, in the condition of Franklin, financial or otherwise,
which may affect the accuracy or completeness of the information set forth in
the Registration Statement and which may occur at any time prior to the Closing
Date.
11.5 Destruction of Assets. Notwithstanding any other provision of this
Agreement, if, on or prior to the Closing Date, assets or other material
properties of Franklin with a fair market value in excess of $50,000 shall have
suffered loss or damage on account of fire, flood, accident, act of war, civil
commotion, or any other cause or event beyond the reasonable power and control
of Franklin to an extent which materially adversely affects the value of
Franklin, Unique shall have the right, at its election, exercisable not later
than ten days after it receives notice of such loss or damage, either to
consummate the transaction contemplated by this Agreement, or, in lieu of every
other right or remedy whatsoever, to terminate this Agreement or amend this
Agreement with the consent of the Shareholders. In the event Unique terminates
this Agreement, all parties shall be released from liability hereunder except as
set forth in Section 11.2 herein. In the absence of a contrary election, it
shall be presumed that Unique has elected to complete the transaction hereunder.
If the transaction hereunder is closed, there shall be no adjustment in the
Purchase Price payable hereunder as a result of such loss or damage unless
agreed upon in writing by the parties prior to Closing, and Unique shall then be
entitled to retain all insurance proceeds and correct the damage itself through
use of insurance proceeds and other funds available to it.
11.6 Termination. Except for those obligations set forth in Section 11.2
herein which shall not terminate, either Unique or Franklin may, as applicable,
on or prior to the Closing Date, terminate this Agreement without liability as
set forth below (provided the terminating party is not responsible for the event
which permits termination hereunder):
(a) by Unique or the Shareholders, if a bona fide action or proceeding
brought by a person not a party to this Agreement is pending wherein an
unfavorable judgment, decree or order would prevent or make unlawful the
carrying out of the transaction contemplated by this Agreement;
(b) by Unique if, following examination by it of all matters set forth in
Section 7.1 and following completion of all other acts necessary to accomplish
its due diligence, should it be determined by Unique in its reasonable
discretion that the nature of Franklin's business, assets, the condition of the
real property and improvements or other matters material to this Agreement are
substantially different as represented by Franklin and the Shareholders, then
consistent with the acknowledgment of the parties that Unique executed this
Agreement based upon the representations of Franklin and the Shareholders,
without the opportunity of fully examining Franklin's business, assets and other
factors, Unique shall have the right to terminate this Agreement without any
liability whatsoever upon written notice to the Shareholders, which notice shall
be sent at any time prior to the Closing Date;
(c) by Unique or the Shareholders if any governmental body or agency having
jurisdiction and authority to prevent consummation of the transactions
hereunder, has formally asserted that consummation of such transaction violates
or would violate any applicable laws, or any rule or regulation of such body or
agency;
(d) by Unique or the Shareholders if any condition precedent to the
obligation of such party to consummate the transaction has not been satisfied or
waived;
In no event will any party entitled to terminate this Agreement pursuant to
this Section 11.6 be liable to the other party for money or other damages
(liquidated or otherwise) for failure to consummate the transactions
contemplated in this Agreement for any reason set out in this Section 11.6.
11.7 Assignment of Name. Each Shareholder agrees to assign any and all
rights he may have in the name "Franklin Manufacturing Company" to Franklin.
XII. MISCELLANEOUS
12.1 Expenses. Except as provided for herein, each party hereto shall pay
all of its or his expenses incurred by it or him in connection with this
Agreement and in consummation of the transactions contemplated hereby and in
preparation therefor, including, without limitation, the fees and expenses of
its or his respective attorneys, accountants and financial advisors.
12.2 Notices. All notices, demands and requests required or permitted to be
given under the provisions of this Agreement shall be deemed duly given if
mailed by registered mail, postage prepaid, return receipt requested, or by
Federal Express or similar overnight delivery service, or if delivered
personally or by telecopy, at the following addresses pending the designation of
another address in accordance with the provisions hereof:
(a) If to Unique:
Unique Mobility, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. French
Telecopy No. 000-000-0000
With a copy to:
Holme Xxxxxxx & Xxxx LLP
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxx Xxxxx
Telecopy No. 303-866-0200
(b) If to Franklin or the Shareholders:
Xxxxxxx Xxxxxxxx
0000 Xxx Xxxxx Xxxxxxxxxx
Xx. Xxxxxxx, Xxxxxxxx 00000
Telecopy No. 000-000-0000
With a copy to:
Xxxxxxxxx, P.C.
0000 Xxx Xxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx
12.3 Entire Agreement. This Agreement and the other exhibits hereto contain
all the terms agreed upon between the parties with respect to the subject matter
hereof and supersede all prior agreements, arrangements and communications,
whether oral or written. This Agreement may not be changed or modified, except
by agreement in writing, signed by all of the parties hereto.
12.4 Headings. The headings of the Sections of this Agreement are for
convenience of reference only and shall not be deemed to explain, limit or
amplify the provisions hereof.
12.5 Successors in Interest. Except as otherwise specifically provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives, personal
representatives, successors and assigns.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
be deemed but one and the same instrument.
12.7 Governing Law. This Agreement shall be construed and interpreted in
accordance with and governed in all respects by the laws of the State of
Missouri.
12.8 Brokerage. Franklin, the Shareholders and Unique represent and warrant
that all negotiations relating to this Agreement have been carried on by them
directly between the parties without the intervention of any person or firm,
except that Unique has engaged and shall pay all fees of Xxxxxxx and X.
Xxxxxxxxxxxx, Inc. and Franklin has engaged and shall pay all fees of X.X.
Xxxxxx & Company, Inc. Franklin, the Shareholders and Unique shall each
indemnify the others and hold them harmless against and in respect of any claim
for brokerage, finders fees, or other fees or commissions relating to this
Agreement or to the transactions contemplated hereby caused by their actions
relating to brokerage or similar fees.
12.9 Waiver. At any time prior to the Closing Date, the parties hereto by
action taken by their respective Board of Directors may (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements or conditions contained herein to the
extent permitted by law. Any agreement on the part of a party hereto to any
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
12.10 Remedies for Breach; Specific Performance. Each of the parties
acknowledges and agrees that the other party or parties would be irreparably
damaged in the event any covenant or agreement contained in this Agreement is
not performed in accordance with its specific terms or is otherwise breached.
Accordingly, each of the parties will be entitled, without bond or other
security, to an injunction or injunctions to prevent breaches of the covenants
or agreements contained in this Agreement and to enforce specifically this
Agreement and the covenants and agreements contained herein or therein in any
action instituted in any court of the United States or any state thereof having
subject matter jurisdiction, in addition to any other remedy to which such party
may be entitled, at law or in equity. Each party agrees that should any court or
other competent authority hold any provision of this Agreement or part hereof to
be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take any action required herein, the other party
shall not be entitled to specific performance of such provision or part hereof
or to any other remedy, including money damages, for breach hereof as a result
of such holding or order.
12.11 Construction. This Agreement is to be deemed to have been prepared
jointly by the parties hereto after arms-length negotiations, and any
uncertainty or ambiguity existing herein shall not be interpreted against any
party, but according to the application of the rules of interpretation of
contracts.
IN WITNESS WHEREOF, Franklin, the Shareholders, Unique has caused this
Agreement to be duly executed in its name and on its behalf, all as of the day
and year first above written.
FRANKLIN MANUFACTURING COMPANY
By:/s/Xxxxxxx X. Xxxxxxxx
_______________________________________
Xxxxxxx X. Xxxxxxxx
President
UNIQUE MOBILITY, INC.
By:/s/Xxxxxx X. French
_______________________________________
Name: Xxxxxx X. French
Treasurer
SHAREHOLDERS:
/s/Xxxxxxx Xxxxxxxx
____________________________________
Xxxxxxx Xxxxxxxx
/s/Xxxxxxx X. XxXxxx
____________________________________
Xxxxxxx X. XxXxxx
DISCLOSURE SCHEDULE INDEX
Section 2.1 States where Franklin is qualified to do business
Section 2.2 Authorized, Issued and Outstanding Capital Stock of Franklin
Section 2.4 Breaches or conflicts with other documents and agreements
Section 2.5 Other company stock owned by Franklin
Section 2.6 Financial Statements
Section 2.7 Undisclosed liabilities not on the April 30, 1998 Balance Sheet
Section 2.8 Changes or Events involving Franklin's business or assets since
April 30, 1998
Section 2.10 Legal description of all real property owned or leased by
Franklin; encumbrances against each such property; list of leased facilities;
problems, repairs needed etc.
Section 2.11 Transactions with Affiliates
Section 2.12 Patents, Trademarks and similar rights
Section 2.13 Listing of Insurance Policies
Section 2.14 Contracts and agreements
Section 2.16 Accounts Receivable
Section 2.17 Licenses and Permits
Section 2.18 Bank information
Section 2.19 Litigation summary
Section 2.21 Employee Benefit Plans
Section 2.20 Employees with compensation of $30,000 or more Employee
matters
Section 2.21 Employee Benefit Plans
Section 2.22 Employment/Consulting/Non-Competition Agreements which
Franklin is a party including copies of Agreements; List of Employees with
customer contact who have not entered into Non-Competition Agreements; and labor
certification efforts.
Section 2.23 Tax returns of Franklin provided to Unique
Section 2.24 Non-Compliance with Laws etc.
Section 2.26 Inventory
Section 4.4(f) Commitments Outside Ordinary Course of Business
Section 4.4(g) Payments Outside Ordinary Course of Business
Exhibits
Form of Escrow Agreement 1.2
Form of Assignment, Assumption and Cancellation Agreement 8.1(i)
Form of Employment Agreement 9.1(f)
Form of Non-Competition Agreement 9.1(g)
Form of Lease Consent and Acknowledgement, Assignment
of Purchase Option and Indemnification Agreement 9.1(m)
Form of Indemnification Agreement 9.2(g)
