Asset Purchase Agreement

EXHIBIT 10.7


ASSET PURCHASE AGREEMENT


This Asset Purchase Agreement is entered into as of December 8, 2003, by and between Sypris Technologies, Inc., a Delaware corporation (" Buyer" ), and Dana Corporation, a Virginia corporation (" Dana" ).


This Agreement contemplates a transaction in which Buyer will purchase certain of the assets (and assume certain of the liabilities) of the Morganton Plant (the " Business" ) of Dana in return for cash. In return for this cash consideration and the assumption of certain liabilities, Dana has agreed to enter into an eight-year Supply Agreement to (i) preserve the existing business of the Business, (ii) transfer additional business to Buyer and its affiliates, and (iii) provide opportunities for Buyer and its affiliates to generate additional business with Dana.

This Agreement and the Supply Agreement are integral parts of the same transaction. Each is, in part, consideration for the other. It is Dana' s intention to deliver, subject to market conditions, the estimated annual production volumes contemplated by Exhibit 1 and Exhibit 2 of the Supply Agreement to Buyer over the term of the Supply Agreement.


The Supply Agreement provides for Buyer to serve as the sole-source for the part numbers (and their replacements and/or substitutions, if any) listed on Exhibits 1 and 2, but Dana in no way guarantees that the actual production volumes to be received by Buyer will be equal to the estimated annual production volumes listed on Exhibits 1 and 2 of the Supply Agreement.

Under this Agreement, as provided more specifically herein, Dana will retain responsibility for all liabilities and obligations arising out of or related to the ownership or operation of the Acquired Assets or the business of the Business prior to Closing, including events related thereto which occur prior to Closing.


The Parties agree as follows:

1. Definitions.

1.1. " Actual Cash Purchase Price" is defined in a72.7 below.


1.2. " Acquired Assets" means all right, title, and interest in and to the following assets of Dana, other than the Excluded Assets, constituting and relating primarily to the Business:

(a) personal property leases listed in Part 1.2(a) of the Disclosure Letter (the " Personal Property Leases" );

(b) those contracts including, without limitation, customer contracts, distributor agreements, agency agreements, royalty and license agreements and rights, purchase agreements, rights to use technology owned by others and all other agreements of whatever nature used by or affecting the Business, which are listed in Part 1.2 (b) of the Disclosure Letter (the " Purchased Contracts" );

(c) inventory including, but not limited to, supplies, raw materials, component parts, work-in-progress and finished goods on hand, the most recently available list of which is listed in Part 1.2(c) of the Disclosure Letter (the " Inventory" ), except for those raw materials or components, if any, which have been consigned to the Business by its customers under the consignment arrangements identified and described in Part 1.2(c) of the Disclosure Letter and transferred subject thereto and except for the inventory specifically associated with the Retained Products;

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(d) equipment, dies, tooling, tooling fixtures, racks, spare parts, fittings, vans, trucks, trailers, office furniture, fixtures, supplies, process, maintenance and equipment drawings and other tangible personal property, including, without limitation, the personal property listed in Part 1.2(d) of the Disclosure Letter (the " Fixed Assets" ), except for customer tooling which has been consigned to the Business by its customers (both unrelated customers and other facilities of Dana), the possession of which shall be transferred to Buyer subject to the terms of the consignment arrangements, if any, identified and described in Part 1.2(d) of the Disclosure Letter (and transferred subject thereto) and the terms and conditions of the Supply Agreement;

(e) on-site computer and telecommunications hardware and software owned and used primarily by Dana, which hardware is listed in Part 1.2(d) of the Disclosure Letter as Fixed Assets and which software is listed in Part 1.2(e) of the Disclosure Letter (the " Software" ), but excluding software licensed on a Dana-wide basis, designated in Part 1.2(e) of the Disclosure Letter (the " Excluded Software" );

(f) real property and improvements located thereon listed in Part 1.2(f) of the Disclosure Letter (the " Real Property" );


(g) Trademarks and Trade Secrets, goodwill associated therewith, licenses and sublicenses granted and obtained with respect thereto, and rights thereunder, remedies against infringements thereof, and rights to protection of interests therein under the laws of all jurisdictions, including, without limitation, the intangible assets set forth in Part 1.2(g) of the Disclosure Letter;

(h) all operating data, books and records of Dana relating to the Business, including customer lists and information relating to customers and suppliers of the Business;


(i) to the extent permitted by law, all licenses, certificates, permits and other governmental authorizations relating to the Business, including, without limitation, those set forth in Part 1.2(i) of the Disclosure Letter (the " Licenses and Permits" );


(j) all prepaid expenses to the extent that Buyer derives a benefit after Closing, as set forth on Part 1.2(j) of the Disclosure Letter;

(k) the Know-How and all other assets, whether tangible or intangible, which are used in, held by, or useful to the Business except for any Excluded Assets and except for any leases or contracts not included within the Personal Property Leases and the Purchased Contracts;

(l) a nonexclusive, worldwide, perpetual, fully-paid license to use the Process Patents; and

(m) a quantity of unused spare parts (that have been fully expensed and therefore has zero book value on the Estimated and Closing Balance Sheets) that is equal to the average of two month' s usage, or roughly $130,000 of original cost, and a quantity of unused perishable tooling (that has been fully expensed and therefore has zero book value on the Estimated and Closing Balance Sheets) that is equal to the average of one month' s usage, or roughly $160,000 of original cost and the balance of which is carried by vendors to Dana).


1.3. " Adverse Consequences" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses.


1.4. " Affiliate" is defined in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended.


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1.5. " Assumed Liabilities" means the following liabilities and obligations directly related to the ownership of the Acquired Assets or the operation of the business of the Business, but excluding any Excluded Liabilities, and no others:

(a) all liabilities and obligations of Dana which arise or (to the extent reflected on the Closing Balance Sheet) are to be performed after the Closing Date (except for those relating to pre-Closing defaults (including actions, events or practices which may be the basis for a claim of such a pre-Closing default)) under any Purchased Contract or Personal Property Lease;


(b) any operating liabilities (if required by GAAP to be reflected on the Closing Balance Sheet, then to the extent reflected on the Closing Balance Sheet) that have been specifically agreed to by the parties in order to facilitate the smooth transfer of the manufacturing operation of the Business and which are listed in Part 1.5(b) of the Disclosure Letter;


(c) all warranty liability arising from services performed by Buyer or the Business with respect to products marked with a code or other device indicating manufacture after the Closing Date;

(d) any liability or obligation resulting from workers' compensation claims having a date of injury (or, in the case of a claim relating to illness or occupational disease, the last significant exposure, except to the extent the illness or occupational disease was caused by a breach of representation under this Agreement and Buyer makes a claim for indemnification under the applicable survival period) after the Closing Date and any liabilities resulting from any such claims to the extent arising out of any violation of environmental laws occurring after the Closing; and


(e) all liabilities and obligations of or related to the Acquired Assets arising after the Closing Date to the extent such liabilities and obligations resulted from circumstances and/or events occurring after the Closing Date.

1.6. " Business" is defined in the preface above.


1.7. " Buyer" is defined in the preface above.


1.8. " Closing" is defined in a72.5 below.


1.9. " Closing Balance Sheet" means a statement prepared in accordance with Section 2.7 on a consistent basis with the Estimated Closing Balance Sheet, in accordance with GAAP, that reflects as of the Closing Date the sum of (a) the actual book value of the inventory (before reserves), (b) the actual net book value of the PP&E (net of accumulated depreciation), and (c) the actual book value of the prepaid expenses listed on Part 1.2(j) of the Disclosure Letter; less the actual book value of the Assumed Liabilities listed on Part 1.5(b) of the Disclosure Letter (the " Actual Cash Purchase Price" ).


1.10. " Closing Date" is defined in a72.5 below.


1.11. " Code" means the Internal Revenue Code of 1986, as amended.

1.12. " Confidential Information" means any information concerning the businesses and affairs of Dana or of the Business that is not already generally available to the public.


1.13. " Dana" is defined in the preface above.


1.14. " Disclosure Letter" is defined in a73 below.


1.15. " Employee Benefit Plan" means each bonus, pension (as defined in ERISA a73(2)), profit sharing, deferred compensation arrangement, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization,


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medical, employment, consulting, termination or indemnification agreement, welfare or other plan, arrangement or understanding (whether or not legally binding), including multi-employer plans as defined in ERISA a73(37), providing compensation or benefits to any current or former employee, officer or director of Dana maintained, or contributed to, by Dana.

1.16. " Encumbrance" means any charge, claim, community property interest, equitable interest, lien, option, pledge, security interest, right of first refusal or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.


1.17. " Environment" means soil, land surface or subsurface strata, surface waters (including navigable waters, streams, ponds, drainage basins and wet lands), ground waters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other environmental medium or natural resource.


1.18. " Environmental, Health and Safety Requirements" means all federal, state, local and foreign statutes, regulations, ordinances and similar provisions having the force or effect of law, all judicial and administrative orders and determinations, and all common law concerning public health and safety, worker health and safety, and pollution or protection of the Environment, including, without limitation, all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any hazardous materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation.

1.19. " Environmental, Health and Safety Liabilities" means any cost, damage, expense, liability, obligation or other responsibility arising pursuant to Environmental, Health and Safety Requirements and consisting of or relating to:

(a) any environmental, health or safety matters or conditions (including on-site or off-site contamination, occupational safety and health, and regulation of chemical substances or products);


(b) fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, investigative, remedial, or inspection costs and expenses arising under Environmental, Health and Safety Requirements;


(c) financial responsibility under Environmental, Health and Safety Requirements for cleanup costs or corrective action, including any investigation, cleanup, removal, containment, or other remediation or response actions (" Cleanup" ) required by applicable Environmental, Heath and Safety Requirements (whether or not such Cleanup has been required or requested by any governmental body or any other Person) and for any natural resource damages; or


(d) any other compliance, corrective, investigative or remedial measures required under Environmental, Health and Safety Requirements.


The terms " removal," " remedial," and " response action," include the types of activities covered by the United States Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. a79601 et seq., as amended (" CERCLA" ).


1.20. " Environmental Law" means any applicable federal, state, local or foreign law (including common law), judicial decision, permit, statute, ordinance, rule, regulation, code, order, judgment, decree or injunction relating to (a) the protection of the Environment (including, without limitation, air, water, vapor, surface water, groundwater, drinking water and surface water and surface or subsurface land), (b) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, protection, release or disposal of, pollutants, contaminants, wastes or chemicals or any


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toxic, radioactive, ignitable, corrosive, reactive or otherwise Hazardous Substance, waste or Material or (c) the effect of the environment on human health or safety.


1.21. " Estimated Cash Purchase Price" is defined in a72.3 below.


1.22. " Estimated Closing Balance Sheet" means an estimated balance sheet of the Business prepared by Dana and accepted by Buyer in accordance with GAAP reflecting the estimated net book value of the sum of: (a) the inventory (before reserves), (b) the PP&E (net of accumulated depreciation), and (c) the prepaid expenses listed on Part 1.2(j) of the Disclosure Letter; less the estimated book value of the Assumed Liabilities listed on Part 1.5(b) of the Disclosure Letter as of the Closing Date.


1.23. " ERISA" means the Employee Retirement Income Security Act of 1974, as amended.


1.24. " Excluded Assets" means:


(a) any cash and cash equivalents presented on a basis consistent with the Financial Statements, whether on deposit or in lock boxes or otherwise;


(b) any accounts receivable and intercompany accounts;

(c) the Excluded Software;

(d) customer-owned and supplier-owned equipment and tooling, including those items listed on Part 1.24(d) of the Disclosure Letter;


(e) all returnable containers;


(f) all unused perishable tooling and all unused spare parts in excess of the amounts referred to in Section 1.2(m);

(g) all prepaid expenses listed on Part 1.2(j) of the Disclosure Letter;


(h) all tax refund claims, to the extent relating to periods prior to the Closing Date;

(i) any rights of Dana in and with respect to the assets associated with its Employee Benefit Plans;


(j) any of the rights of Dana under this Agreement (or under any side agreement between Dana on the one hand and Buyer on the other hand entered into on or after the date of this Agreement);

(k) any capitalized Oracle costs, non-deployed assets (including those stored in the " Butler Shed" ), and all equipment used exclusively for the production of those Retained Products other than Mack, including those items listed on Part 1.24(k) of the Disclosure Letter; and

(l) all inventory, tooling (perishable or durable) and spare parts used exclusively for the production of Parts for the Retained Products.


1.25. " Excluded Liabilities" means:

(a) any intra-company obligation between the Business, Dana and any other Affiliate of Dana;

(b) any accounts payable or accrued liabilities existing on the Closing Date (including work completed, but not yet invoiced) (other than those liabilities specifically assumed under a71.5(a) or (b);

(c) any liability or obligation of Dana for any local, state or federal income, personal property, real property or other tax, assessment or levy of any kind;


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(d) any current or long-term liability or obligation of Dana with respect to indebtedness for borrowed money;


(e) any liability or obligation of Dana with respect to occurrences prior to the Closing Date;


(f) any liability or obligation of Dana for any injury to or death of any person or damage to or destruction of any property, whether based on negligence, strict liability, enterprise liability, products liability or any other legal or equitable theory (including consequential damages) arising from products manufactured or sold or services rendered by Dana on or prior to the Closing Date, in all cases;

(g) any liability of Dana for (i) occurrences prior to the Closing Date with respect to any past or present employee which could give such employee a cause of action against Dana, including, but not limited to, any employment discrimination claims, (ii) any claims, damages, liability or other amounts with respect to Employee Benefit Plans, arising at any time, and (iii) expenses paid or payable to former employees whose employment has been terminated by Dana prior to the Closing Date;


(h) any action, suit, claim or proceeding against Dana based on facts or circumstances occurring prior to the Closing Date;


(i) any liability or obligation of Dana arising prior to the Closing Date with respect to the Personal Property Leases and the Purchased Contracts, whenever asserted, that arises as a result of a breach or violation thereof occurring prior to the Closing Date;


(j) any liabilities resulting from medical coverage, dental coverage and/or disability coverage of Dana' s employees and former employees with respect to claims at any time for any former employee who is retired as of the Closing, and with respect to claims for any employee who is on a personal medical leave or long term disability leave as of the Closing, for all claims incurred during such leave both before and after the Closing (with respect to the foregoing, Dana shall bear these liabilities as set forth in Section 6.14), and with respect to any claims incurred prior to the Closing Date, whether or not reported as of the Closing Date. A claim shall be deemed to have been incurred when the service is provided; provided, however, a claim for a hospitalization stay (and medical treatment during such stay) which begins prior to the Closing Date and which ends after the Closing Date shall be deemed to have been incurred prior to the Closing Date;


(k) any liability or obligation of Dana resulting from workers' compensation claims having a date of injury (or, in the case of a claim relating to illness or occupational disease, the last significant exposure) prior to the Closing Date and any liabilities resulting from any such claims arising out of any violation of environmental laws occurring prior to the Closing;


(l) any liability or obligation of Dana arising from events occurring prior to the Closing Date with respect to the property or assets of third parties which may be in its possession or control;


(m) any liability or obligation of Dana arising out of any violation by Dana of Environmental, Health and Safety Requirements or relating to Hazardous Activity, Hazardous Materials or environmental matters;

(n) any action, suit, claim or proceeding against Dana for infringement of a third party' s intellectual property rights based upon facts or circumstances occurring prior to the Closing Date;


(o) any liabilities resulting from agreements made between Dana and its employees for purposes of assisting Dana with the divestiture of the Business, including, without limitation, pay-to-stay contracts, contracts which pay a commission based upon the completion of the


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divestiture by Dana and agreements to pay a bonus based upon the completion of a sale of the Business;

(p) any liability resulting from any lease for real property;


(q) any liability or obligation of Dana accruing on or before the Closing Date relating to unpaid wages, salaries, service bonuses, incentive bonuses, " personal excuse day" benefits or other benefits (including taxes and allowances, if any) or any other employee cost whatsoever for any and all individuals and any liability or obligation under the Employee Benefit Plans (other than those specific liabilities or obligations assumed under a71.5(b)).


(r) any liability, obligation or costs related to the reduction or termination of the production of Retained Products, including without limitation, fifty percent of the costs associated with reductions in the employee force pursuant to Section 6.19, all of the costs of removal of the equipment pursuant to Section 6.14, and similar costs or expenses related to such operations;


(s) all warranty liability arising from any product marked with a code or other device indicating manufacture prior to the Closing Date; and

(t) any other liability of Dana not reflected on the Closing Balance Sheet, other than those liabilities specifically assumed under a71.5.


1.26. " Financial Statements" is defined in a73.6 below.


1.27. " GAAP" means United States generally accepted accounting principles, consistently applied, as in effect from time to time; provided, however, that for purposes of the Closing Balance Sheet, no assets will be considered " impaired" that were not so considered on the Estimated Closing Balance Sheet.


1.28. " Governmental Entity" means any government or any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, whether Federal, state, local or foreign.

1.29. " Hazardous Activity" means the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment, or use (including any withdrawal or other use of groundwater) of Hazardous Materials in, on, under, about or from the facilities of the Business or any part thereof into the Environment, and any other act, business, operation or thing that is regulated by any Environmental, Health and Safety Requirements or Environmental Law.

1.30. " Hazardous Materials" means any waste or other substance that is listed, defined, designated, or classified as or otherwise determined to be hazardous, radioactive, or toxic or a pollutant or a contaminant under or pursuant to any Environmental, Health and Safety Requirements, including any admixture or solution thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefor and asbestos or asbestos-containing materials.


1.31. " Hazardous Substances" means any hazardous substances within the meaning of 101(14) of CERCLA, 42 U.S.C. a79601(14), or any pollutant, contaminant, waste chemical or other toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substance, waste or material that, in each case, is regulated under any Environmental Law, including, without limitation, petroleum, its derivatives, by-products or other hydrocarbons, asbestos-containing materials, polychlorinated biphenyls and urea formaldehyde.


1.32. " Intellectual Property Rights" means the Trademarks and Trade Secrets and other similar rights in technology that are owned, used or controlled by Dana and used in, held by or useful primarily to the business of the Business.


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1.33. " Key Employee" means any of the following individuals: Brad Kendall, Scott Jackson, Paul Ingle, Todd McGee, Bob Patrick and Scott McDougal.


1.34. " Know-How" means all proprietary and non-proprietary know-how and information used in or useful to the business of the Business on the Closing Date including, without limitation (a) design drawings, (b) specifications and performance criteria, (c) operating instructions and maintenance manuals, (d) manufacturing and service information, including production documentation, methods, layouts and supplier and cost information, (e) copies of on-site computer software and related documentation that pertain to the operation of the business of the Business, including, without limitation, available source and object code listings, (f) prototypes, models or samples, (g) computer-aided design or computer-aided manufacturing data, (h) information related to the business of the Business communicated to Dana in meetings or conferences regarding customers and/or products, but excluding any proprietary internal correspondence, (i) files relating to applications for Intellectual Property Rights, and (j) all files relating to customers and other tangible materials that are used in or useful to the business of the Business on the Closing Date.

1.35. " Knowledge" means the actual knowledge, after reasonable investigation, of the Key Employees, Greg DiMarco, Trisha Schachtschneider, Bill Hennessy, Bill Gieseler, and Robert Steimle.

1.36. " Most Recent Balance Sheet" means the balance sheet contained within the Most Recent Financial Statements.

1.37. " Most Recent Financial Statements" is defined in a73.6 below.


1.38. " Most Recent Fiscal Month End" is defined in a73.6 below.


1.39. " Most Recent Fiscal Year End" is defined in a73.6 below.


1.40. " Ordinary Course of Business" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

1.41. " Parts" is as defined in the Supply Agreement.


1.42. " Party" means either Buyer or Dana. " Parties" means both Buyer and Dana.


1.43. " Permitted Encumbrances" means Encumbrances (other than Encumbrances imposed under ERISA or any Environmental, Health and Safety Requirements) for ad valorem taxes or other similar assessments or charges of governmental bodies that are not yet due and payable.


1.44. " Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof).


1.45. " Pre-Closing Environmental Liability" means any and all liabilities, whether accrued, contingent, absolute, determined, determinable, known, unknown or otherwise, arising under or relating to Environmental Laws or relating to Hazardous Substances and arising from events occurring or conditions existing prior to the Closing Date in connection with the Acquired Assets.


1.46. " Process Patents" means all patents and other intellectual property of Dana relating to manufacturing processes used in the Business, to the extent necessary to carry out the operations of the Business as conducted on the Closing Date. " Process Patents" does not include any patents or other intellectual property relating to the design, function, or other aspects of the Parts themselves.

1.47. " PP&E" means all property, plant and equipment of the Business, excluding any Excluded Assets or Excluded Liabilities.


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1.48. " Purchase Price Adjustment" is defined in a72.7 below.

1.49. " Release" means any spilling, leaking, emitting, discharging, depositing, escaping, leaching, dumping or other releasing ...