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Stock Purchase Agreement

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STOCK PURCHASE AGREEMENT


BY AND BETWEEN


MAXCO, INC.


AND


LACY DISTRIBUTION, INC.


AND


LDI, LTD., AS GUARANTOR


2


STOCK PURCHASE AGREEMENT


THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into this 5th day of June, 1996, by and among Lacy Distribution, Inc., an Indiana corporation ("Buyer"), Maxco, Inc., a Michigan corporation ("Maxco"), which is the owner of four million forty-five thousand (4,045,000) of the issued and outstanding shares of common stock, no par value, of FinishMaster, Inc., a Michigan corporation ("FinishMaster"), and LDI, Ltd., an Indiana limited partnership ("LDI"). FinishMaster and its consolidated subsidiary are sometimes referred to collectively herein as the "Consolidated Companies."


WHEREAS, Buyer desires to purchase from Maxco, and Maxco desires to sell to Buyer, all of the issued and outstanding shares of common stock of FinishMaster owned by Maxco (the "Shares") upon the terms and subject to the conditions set forth herein and to consummate the other transactions contemplated hereby (the "Stock Purchase");


NOW, THEREFORE, the parties hereto agree as follows:


ARTICLE I


CERTAIN DEFINITIONS


As used in this Agreement the following terms shall have the meanings specified:


"ACQUISITION PROPOSAL" shall have the meaning set forth in Section 4.8 hereof.


"ANTITRUST IMPROVEMENTS ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended from time to time, and the rules promulgated thereunder.


"BLUE SKY LAWS" shall have the meaning set forth in Section 1.3 of Exhibit A attached hereto.


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"CLOSING" shall have the meaning set forth in Section 2.2 hereof.


"CLOSING DATE" shall mean July 9, 1996 or, if the required waiting period under the Antitrust Improvements Act has not yet expired on that date, a date which is seven (7) days after the expiration of the waiting period under the Antitrust Improvements Act, subject to the requirement that in no event may the Closing Date precede the date as of which all of the conditions in Articles V and VI have been satisfied or waived.


"CODE" shall mean the Internal Revenue Code of 1986, as amended. All citations to the Code or to the regulations promulgated thereunder shall include any amendments or any substitute or successor provisions thereto.


"CONFIDENTIALITY COVENANT" shall have the meaning set forth in Section 4.10 hereof.


"CONSENT" shall mean any approval, consent, ratification, permission, waiver or other required authorization (including any Governmental Authorization).


"CONSOLIDATED COMPANIES" shall mean FinishMaster and its consolidated subsidiary, which subsidiary is identified on Exhibit C.


"CONTRACT" shall mean any agreement, contract, instrument, indenture, note, bond, mortgage, lease, permit, concession, franchise, license, guaranty, power of attorney, commitment, promise, assurance, obligation or undertaking, whether written or oral.


"DAMAGES" shall have the meaning set forth in Section 8.3 hereof.


"EMPLOYEE PLANS" shall have the meaning set forth in Section 1.10 of Exhibit A attached hereto.


"ENCUMBRANCE" shall mean any lien, pledge, hypothecation, charge, mortgage, deed of trust, security interest, encumbrance, equity, trust, equitable interest, right of possession, lease tenancy, license, Order, proxy, option, right of first refusal or, in the case of any security, any restriction on the use, voting, transfer, receipt of income or other exercise of any other attribute of ownership of such security.


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"ENVIRONMENTAL LAWS" include without limitation the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1802 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 9601 et seq.; the Clean Water Act, 33 U.S.C. Section 1251 et seq.; Federal Insecticide, Fungicide and Rodentcide Act, 7 U.S.C. Section 136 et seq.; Solid Waste Disposal Act, 42 U.S.C. Section 6901 et seq.; the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 1101 et seq.; and the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; all regulations promulgated under the foregoing statutes; and all other Legal Requirements relating to the environment or Hazardous Materials.


"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.


"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended from time to time, or any successor law.


"FINISHMASTER PERSONNEL" shall have the meaning set forth in Section 4.1(b)(iii)(A) hereof. "FINISHMASTER OFFICERS" means Max A. Coon, Ronald P. White, Michael J. Siereveld, Christopher R. Banner, Roger A. Sorokin, Eric L. Cross and Vincent Shunsky.


"GOVERNMENTAL AUTHORIZATION" shall mean any permit, license, franchise, approval, consent, ratification, permission, confirmation, endorsement, waiver, certification, registration, qualification or other authorization issued, granted, given or otherwise made available by or under the authority of any governmental body or pursuant to any Legal Requirement.


"HAZARDOUS MATERIALS" shall mean hazardous wastes, hazardous substances, hazardous constituents, toxic substances or related materials, whether solids, liquids or gases, including but not limited to, substances defined as "hazardous wastes," "hazardous substances," "toxic substances," "pollutants,"


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"contaminants," "radioactive materials" (including, but not limited to, isotopes), or other similar designations in, or otherwise subject to regulation under, any Environmental Laws, and any other substances, constituents or wastes subject to environmental regulation under any applicable Legal Requirement.


"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning set forth in Section 1.14 of Exhibit A attached hereto.


"INTERCOMPANY AGREEMENT" shall have the meaning set forth in Section 4.7 hereof.


"INTERCOMPANY DEBT" shall mean all debt of the Consolidated Companies to Maxco or any Maxco Affiliate.


"INTERCOMPANY RECEIVABLES" shall mean all debt of Maxco or any Maxco Affiliate to the Consolidated Companies.


"LEGAL REQUIREMENT" shall mean any federal, state, local, municipal, foreign or other law, statute, legislation, bill, act, enactment, constitution, resolution, proposition, initiative, canon, ordinance, code, edict, decree, proclamation, treaty, convention, rule, regulation, ruling, directive, guideline or interpretation issued, enacted, adopted, passed, approved, ratified, endorsed, promulgated, made, entered, rendered, published or implemented by or under the authority of any governmental body or by the eligible voters of any jurisdiction.


"MATERIAL ADVERSE EFFECT" shall mean any change or changes, effect or effects, event or events, or condition or conditions that, to the extent not adequately covered by insurance or appropriate reserves previously established on the books of the Consolidated Companies in the ordinary course of business in accordance with their normal practice, individually or in the aggregate are or are reasonably likely to be materially adverse to the business, operations or financial condition of the Consolidated Companies taken as


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a whole, by a dollar amount in excess of $500,000; provided, however, that normal recurring seasonal variations in operating results, usual and ordinary course of business changes recorded in a customary manner on the books and records of the Consolidated Companies consistent with past practice shall not be deemed to be such change(s), effect(s) or condition(s).


"MATERIAL ENVIRONMENTAL EVENT" shall mean an event or events, effect or effects or condition or conditions that, individually or in the aggregate, are or are reasonably likely to result in the Consolidated Companies incurring fines, penalties or Damages in the amount of $50,000.00 or more.


"MAXCO AFFILIATE" shall mean any Person, other than the Consolidated Companies, which controls, is controlled by, or is under common control with, Maxco.


"MAXCO'S KNOWLEDGE", "to the knowledge of Maxco", "to the best of Maxco's knowledge", or words of similar import, shall mean the knowledge, assuming reasonable investigation, of any of the officers of Maxco or any of the FinishMaster Officers.


"MAXCO GUARANTIES" shall have the meaning set forth in Section 8.5 hereof.


"MAXCO PORTION" shall have the meaning set forth in Section 8.3 hereof.


"MOST RECENT BALANCE SHEET" means the balance sheet contained within the Most Recent Financial Statements.


"MOST RECENT FINANCIAL STATEMENTS" mean the financial statements filed with the annual report on Form 10-K of FinishMaster for the period ended March 31, 1996.


"MULTIPLE EMPLOYER PENSION PLAN" shall have the meaning set forth in Section 1.10 of Exhibit A attached hereto.


"NON-COMPETITION AGREEMENT" shall have the meaning set forth in Section 4.12 hereof.


"ORDER" shall mean any order, judgment, injunction, edict, decree, ruling, pronouncement, determination, decision, opinion, sentence, subpoena, writ or award issued, made, entered or rendered by


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any court, administrative agency or other governmental body or by any arbitrator.


"PBGC" shall have the meaning set forth in Section 1.10 of Exhibit A attached hereto.


"PENSION PLAN" shall have the meaning set forth in Section 1.10 of Exhibit A attached hereto.


"PERSON" shall mean any individual, corporation or other entity or governmental body.


"PROCEEDING" shall mean any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding or any informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court, administrative agency or other governmental body or arbitrator.


"PURCHASE PRICE" shall have the meaning set forth in Section 2.1 hereof.


"SEC" shall mean the Securities and Exchange Commission.


"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from time to time, or any successor law.


"SECURITIES DOCUMENTS" shall have the meaning set forth in Section 1.4 of Exhibit A attached hereto.


"SHARES" shall mean the issued and outstanding shares of common stock, no par value, of FinishMaster owned beneficially and of record by Maxco.


"SHORT-TERM PAYABLES" shall have the meaning set forth in Section 4.7 hereof.


"STOCK PURCHASE" shall mean the purchase of the Shares at Closing.


"SUBSIDIARY" shall have the meaning set forth in Section 1.1 of Exhibit A attached hereto.


"SUBSIDIARY SHARES" shall have the meaning set forth in Section 1.1 of Exhibit A attached hereto.


"TAKEOVER STATUTES" shall mean the Michigan Control Share Acquisition Law and the Michigan Business Combination Law, codified at Section Section 450.1790 to 450.1799 and Section Section 450.1775 to 450.1783,


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respectively, of the Michigan Business Corporation Act.


"TAX" (and, with correlative meaning, "Taxes" and "Taxable") shall mean (A) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, fuel, third structure, ad valorem, franchise, profits, license, lease, use, withholding, payroll, employment, excise, severance, property, transfer, documentary, mortgage, registration, stamp, occupation, environmental, premium, customs, duties, or other tax of any kind whatsoever, including any estimates thereof, together with any interest or any penalty, addition to tax or additional amount imposed by any domestic or foreign governmental body, (B) any penalties, interest, or other additions for the failure to collect, withhold or pay over any of the foregoing, or to accurately file any return (including without limitation, any information return, declaration or estimate) with respect to the foregoing, and (C) liability for the payment of any Tax of an affiliated, consolidated, combined or unitary group.


"TAX RETURN" shall mean any return (including any information return), report, statement, declaration, schedule, notice, notification, form, certificate or other document or information filed with or submitted to, or required to be filed with or submitted to, any governmental body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.


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ARTICLE II


SALE OF STOCK; CLOSING


SECTION 2.1. PURCHASE AND SALE. On the basis of the representations, warranties, covenants and agreements and subject to the satisfaction or waiver of the conditions set forth herein, on the Closing Date, Maxco shall sell and Buyer shall purchase the Shares. In full payment for the Shares, Buyer will pay Maxco $11.50 per Share, or an aggregate purchase price of $46,517,500 (the "Purchase Price"), at the Closing by wire transfer of immediately available funds to such account as Maxco shall designate in writing on or before the Closing.


SECTION 2.2. TIME AND PLACE OF CLOSING. The consummation of the Stock Purchase (the "Closing") shall take place on the Closing Date at 10:00 A.M., Indianapolis time, at the offices of Barnes & Thornburg in Indianapolis, Indiana, or at such other place or time as the parties may agree upon in writing. The parties agree that if the Closing Date is prior to July 15, 1996, the consummation of the Stock Purchase will be deemed effective as of July 1, 1996, and if the Closing Date is later than July 15, 1996, the consummation of the Stock Purchase will be deemed effective as of the end of the month in which the Closing occurs.


ARTICLE III


REPRESENTATIONS AND WARRANTIES


SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF MAXCO. Maxco represents and warrants to Buyer the representations and warranties contained in the attached Exhibit A, which representations and warranties are incorporated herein by reference.


SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to Maxco


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the representations and warranties contained in Exhibit B, which representations and warranties are incorporated herein by reference.


ARTICLE IV


COVENANTS OF THE PARTIES


SECTION 4.1. CONDUCT OF MAXCO AND CONSOLIDATED COMPANIES. During the period from the date of the final signing hereof to the Closing Date:


(a) Operations in the Ordinary Course of Business. Maxco shall cause the Consolidated Companies to conduct their operations in accordance with their ordinary and usual course of business, in a manner consistent with past practice, and to pay their respective obligations as they become due. Maxco shall cause each of the Consolidated Companies to use all reasonable efforts to preserve intact its business organization and to maintain its assets and properties, and all insurance and claims reserves, in a manner consistent with past practice and in accordance with applicable Legal Requirements.


(b) Forbearances by Maxco and the Consolidated Companies. Except with the written consent, or at the written request, of Buyer, Maxco shall not cause or permit either of the Consolidated Companies, directly or indirectly, to:


(i)(A) amend its Articles of Incorporation or Bylaws; (B) declare,
set aside or pay any dividend or other distribution or payment in cash,
stock or property in respect of shares of its capital stock; (C) effect
any split, combination or other similar change in the outstanding shares
of its capital stock, (D) redeem, purchase or otherwise acquire any
shares of capital stock or other securities, or (E) settle or compromise
any Proceeding for an amount in excess of $25,000 to which either of the
Consolidated Companies or its assets is a party;


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(ii)(A) issue or sell any shares of its capital stock or any
securities or obligations convertible into or exchangeable for, or giving
any Person any right to subscribe for or acquire, any shares of capital
stock of either of the Consolidated Companies; (B) sell, lease or
otherwise dispose of any assets or properties which are material to
either of the Consolidated Companies, provided, that Buyer shall not,
upon receipt of due notice, unreasonably withhold its consent to the
sale, lease or disposition of assets or properties in connection with the
closing, relocation or consolidation of retail stores by the Consolidated
Companies in the ordinary course of business and consistent with past
practice; (C) waive, release, grant or transfer any rights of material
value under, or otherwise modify or change, any material Contract; (D)
further encumber, mortgage or pledge any assets or properties of the
Consolidated Companies, except for any granting of a security interest in
assets acquired in acquisitions of retail stores to secure payment under
promissory notes or other instruments delivered in connection therewith,
consistent with past practice of the Consolidated Companies, provided
that the amounts so secured do not exceed the value or purchase price of
such assets; (E) foreclose on or accept a deed in lieu of foreclosure
with respect to any real property of the Consolidated Companies; (F)
enter into any sale and leaseback transaction; (G) serve as a credit
provider by extending any credit to any Person (other than committed
advances required under existing credit facilities or extensions of
credit to customers in the ordinary course of business and consistent
with past practice), or enter into any new credit agreement with any
Person (other than special credit arrangements with suppliers to effect
preferred buying arrangements in the ordinary course of business and
consistent with past practice), or extend or renew any existing credit
facility with any Person; or (H) utilize current assets or any borrowings
to prepay or retire any form of long-term debt except (i) in accordance
with scheduled debt repayment, and (ii) to repay the amounts outstanding
on the revolving credit facility of the Consolidated Companies.


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(iii)(A) except as provided in Schedule 4.1(b)(iii)(A), grant any
general increase in the compensation of directors or officers of
FinishMaster (including any such increase pursuant to any bonus, pension,
profit sharing or other plan or commitment) or any increase in the
compensation payable to, or to become payable to, any director or officer
of FinishMaster, (B) enter into any collective bargaining agreement, (C)
adopt any new Employee Plan (as defined in Section 1.10 of Exhibit A),
whether formal or informal, or increase in any manner the compensation or
benefits (other than compensation increases in accordance with its
customary compensation practices and related changes in benefits) of any
of its present or former directors, officers or any other persons
employed by or otherwise performing services for either of the
Consolidated Companies (the "FinishMaster Personnel"), or pay or agree to
pay any pension or retirement allowance not required by any existing
employment agreement or Employee Plan to any such present or former
directors, officers, or other members of FinishMaster Personnel (it being
understood that FinishMaster may continue to meet its obligations to
James F. White pursuant to the terms of that certain Deferred
Compensation Agreement dated April 1, 1977 and the Retirement Agreement
described in Schedule 1.12), or commit itself to an employment agreement
or Employee Plan with or for the benefit of any present or former
director, officer, employee, consultant or other Person, or alter, amend,
terminate in whole or in part, or curtail or permanently discontinue any
Employee Plan, (D) make or commit to make (x) any expenditure for any
capital asset or equipment in an individual amount equal to or greater
than $100,000, or (y) any capital expenditures in connection with the
acquisition of retail stores, except as disclosed in Schedule
4.1(b)(iii)(D)(y), or (E) incur or otherwise become liable for any
material indebtedness, other than (i) indebtedness incurred in connection
with the acquisition of retail stores approved pursuant to (D) above and
consistent with past practice of the Consolidated Companies, provided
that such indebtedness does not exceed the purchase price for such


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acquisition and is secured only by a lien on assets acquired therein
or (ii) indebtedness incurred for working capital requirements if done in
the ordinary course of business and consistent with past practice; or


(iv) enter into any agreement or commitment to do or permit any of
the actions described in clauses (i) through (iii) which are prohibited
by or require the prior written consent of Buyer pursuant to this Section
4.1.


SECTION 4.2. OBTAINING, CONSENTS AND CONDITIONS TO CLOSING.


(a) Obtaining Consents. Between the date of the final signing of this Agreement and the Closing Date, each party shall use its best efforts, and shall cooperate with the other party in taking all steps necessary, promptly to (i) make any filing (including a filing under the Antitrust Improvements Act which requests early termination of the waiting period thereunder) and (ii) obtain any required Consents necessary for the consummation of the Stock Purchase, or that may thereafter be reasonably necessary to effect the transfer, grant or renewal of any other licenses, approvals and Government Authorizations. Buyer shall pay all filing fees required in connection with filings of Maxco and Buyer under the Antitrust Improvements Act. All other expenses incurred by Maxco in connection with filings or Consents made or obtained by Maxco or the Consolidated Companies shall be borne by Maxco. All other expenses incurred by Buyer in connection with filings or Consents made or obtained by Buyer shall be borne by Buyer.


(b) Conditions to Closing. Each of Maxco and Buyer shall use all reasonable efforts to cause its representations and warranties in this Agreement to be true and correct as of the Closing Date, and to cause each condition to Closing which is reasonably within its control to be satisfied.


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SECTION 4.3. TAX PROVISIONS. (a) All Taxes and fees (including any penalties and interest) incurred by Maxco or the Consolidated Companies in connection with the sale of the Shares by Maxco shall be paid by Maxco. Maxco will, at its own expense, file all necessary Tax Returns and other documentation with respect to all such Taxes and fees.


(b) Buyer and Maxco agree to cause to be furnished to each other, upon request, as promptly as practicable, such information (including access to books and records) and assistance relating to the Consolidated Companies as is reasonably necessary for the filing of any Tax Return, and for the preparation for any Proceeding relating to any proposed adjustment. Buyer and Maxco agree to cause to be retained all books and records pertinent to the Consolidated Companies until the applicable period for assessment under applicable law (giving effect to any and all extensions or waivers) has expired, and to abide by or cause the observance of any record retention agreements entered into with any governmental body. Buyer and Maxco agree to cause the Consolidated Companies to give each of them reasonable notice prior to discarding or destroying any such books and records relating to Tax matters for the Consolidated Companies and to deliver to each of them, upon request, such books and records. Buyer and Maxco shall cooperate with each other in the conduct of any Proceedings involving the Consolidated Companies for any Tax purposes and each shall execute and deliver such powers of attorney and other documents as are necessary to carry out the intent of this Section 4.3(b).


SECTION 4.4. TERMINATION OF EXISTING TAX SHARING AGREEMENTS. Any and all existing Tax sharing agreements between the Consolidated Companies and Maxco shall be terminated as of the Closing Date. After such date neither the Consolidated Companies nor Maxco shall have any further rights or liabilities thereunder.


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SECTION 4.5. ACCESS AND INVESTIGATION. During the period from the date of the final signing of this Agreement to the Closing Date, Maxco shall, and shall cause each of the Consolidated Companies and its officers, employees, agents and representatives to, afford Buyer and its representatives (including legal counsel, financial and other advisors, consultants and independent accountants) reasonable access during normal business hours to members of FinishMaster Personnel, properties (including, but not limited to, the ability to perform environmental assessments), Contracts, books and records and other documents and data (including, but not limited to, documents and data maintained by Maxco) in order to confirm the accuracy of the representations and warranties contained herein.


SECTION 4.6. FURTHER ASSURANCES. Maxco and Buyer agree that, from time to time, whether at or after the Closing Date, each of them will execute and deliver such further instruments of conveyance and transfer and take such other action as may be reasonably appropriate to carry out the terms of this Agreement. Maxco and Buyer further agree that they will not take any action that will materially impede or delay the consummation of the Stock Purchase.


SECTION 4.7. INTERCOMPANY ACCOUNTS. Except as otherwise expressly provided in this Agreement, Maxco covenants to Buyer that all intercompany transactions between Maxco and any Maxco Affilia
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