ASSET PURCHASE AGREEMENT
This
Asset Purchase Agreement (“Agreement”) is dated May 24, 2006, by and among
Freundlich Supply Company, Inc., a New York corporation (“Seller” or the
“Company”); and Xxxxxxx Xxxxxxxxxx, a resident of New York (“Freundlich” or the
“Shareholder”); and Delaware Fastener Acquisition Corporation, a Delaware
corporation (“Buyer”).
RECITALS
The
Company is engaged in the business of selling a broad range of nut products
used
primarily for aerospace and military applications.
Shareholder
owns one hundred (100) shares of the common stock of Seller, no par value per
share, which constitutes one hundred percent (100%) of the issued and
outstanding shares of capital stock of Seller. Seller desires to sell, and
Buyer
desires to purchase, the Assets of Seller for the consideration and subject
to
the terms set forth in this Agreement.
The
parties, intending to be legally bound, agree as follows:
SECTION
1
DEFINITIONS
AND USAGE
1.1
DEFINITIONS
For
purposes of this Agreement, the following terms and variations thereof have
the
meanings specified or referred to in this Section 1.1:
“Accounts
Receivable”-- (a) all trade accounts receivable and other rights to payment from
customers of Seller and the full benefit of all security for such accounts
or
rights to payment, including all trade accounts receivable representing amounts
receivable in respect of goods shipped or products sold or services rendered
to
customers of Seller, (b) all other accounts or notes receivable of Seller and
the full benefit of all security for such accounts or notes and (c) any claim,
remedy or other right related to any of the foregoing.
“Accounts
Receivable Assignment” - as defined in Section 2.11.
“Adjustment
Amount”-- as defined in Section 2.8.
“Agreed
Working Capital”-- as defined in Section 2.9(b).
“Allocation
of Purchase Price” -- the agreed values of the Assets and Assumed Liabilities to
be transferred from Seller to Buyer hereunder, which allocation shall be used
by
the parties for all Tax purposes and in all filings, declarations and reports
with the IRS in respect thereof, including the reports required to be filed
under Section 1060 of the Code.
“Assets”--
as defined in Section 2.1.
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“Assignment
and Assumption Agreement”-- as defined in Section 2.7(a)(ii).
“Assumed
Liabilities”-- as defined in Section 2.4(a).
“Balance
Sheet”-- as defined in Section 3.4.
“Best
Efforts”-- the efforts that a prudent Person desirous of achieving a result
would use in similar circumstances to achieve that result as expeditiously
as
possible, provided, however, that a Person required to use Best Efforts under
this Agreement will not be thereby required to take actions that would result
in
a material adverse change in the benefits to such Person of this Agreement
and
the Contemplated Transactions or to dispose of or make any change to its
business, expend any material funds or incur any other material burden.
“Xxxx
of
Sale”-- as defined in Section 2.7(a)(i).
“Breach”--
any breach of, or any material inaccuracy in, any representation or warranty
or
any breach of, or failure to perform or comply with, any covenant or obligation,
in or of this Agreement or any other Contract, or any event which with the
passing of time or the giving of notice, or both, would constitute such a
breach, inaccuracy or failure.
“Bulk
Sales Laws”-- as defined in Section 5.10.
“Business
of the Seller” - Seller is
a
stocking distributor of internally-threaded fasteners, focusing on high-quality,
domestically-manufactured nut products. The Company’s nut products are used
primarily for aerospace and military applications and for industrial/commercial
applications that require a high level of certified/assured quality.
“Business
Day”-- any day other than (a) Saturday or Sunday or (b) any other day on which
banks in New York are permitted or required to be closed.
“Buyer”--
as defined in the first paragraph of this Agreement.
“Buyer
Indemnified Persons”-- as defined in Section 11.2.
“Closing”--
as defined in Section 2.6.
“Closing
Date”-- the date on which the Closing actually takes place.
“Closing
Financial Statements”-- as defined in Section 3.9.
“Closing
Working Capital”-- as defined in Section 2.9(c).
“COBRA”--
as defined in Section 3.14(f).
“Code”--
the Internal Revenue Code of 1986.
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“Confidential
Information”-- as defined in Section 12.1.
“Consent”--
any approval, consent, ratification, waiver or other authorization.
“Consulting
Agreement”-- as defined in Section 2.7(a)(v).
“Contemplated
Transactions”-- all of the transactions contemplated by this Agreement.
“Contract”--
any agreement, contract, Lease, consensual obligation, promise or undertaking
(whether written or oral and whether express or implied), whether or not legally
binding.
“Copyrights”--
as defined in Section 3.23(a)(iii).
“Damages”--
as defined in Section 11.2.
“Employee
Plans”-- as defined in Section 3.14(a).
“Encumbrance”--
any charge, claim, community or other marital property interest, condition,
equitable interest, lien, option, pledge, security interest, mortgage, right
of
way, easement, encroachment, servitude, right of first option, right of first
refusal or similar restriction, including any restriction on use, voting (in
the
case of any security or equity interest), transfer, receipt of income or
exercise of any other attribute of ownership.
“Environment”--
soil, land surface or subsurface strata, surface waters (including navigable
waters and ocean waters), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life and any other
environmental medium or natural resource.
“Environmental,
Health and Safety Liabilities”-- any cost, damages, expense, liability,
obligation or other responsibility arising from or under any Environmental
Law
or Occupational Safety and Health Law, including those consisting of or relating
to:
a. any
environmental, health or safety matter or condition (including on-site or
off-site contamination, occupational safety and health and regulation of any
chemical substance or product);
b. any
fine,
penalty, judgment, award, settlement, legal or administrative proceeding,
damages, loss, claim, demand or response, remedial or inspection cost or expense
arising under any Environmental Law or Occupational Safety and Health Law;
c. financial
responsibility under any Environmental Law or Occupational Safety and Health
Law
for cleanup costs or corrective action, including any cleanup, removal,
containment or other remediation or response actions (“Cleanup”) required by any
Environmental Law or Occupational Safety and Health Law (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
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d. any
other
compliance, corrective or remedial measure required under any Environmental
Law
or Occupational Safety and Health Law.
The
terms
“removal,” “remedial” and “response action” include the types of activities
covered by the United States Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (CERCLA).
“Environmental
Law”-- any Legal Requirement that requires or relates to:
a. advising
appropriate authorities, employees or the public of intended or actual Releases
of pollutants or hazardous substances or materials, violations of discharge
limits or other prohibitions and the commencement of activities, such as
resource extraction or construction, that could have significant impact on
the
Environment;
b. preventing
or reducing to acceptable levels the Release of pollutants or hazardous
substances or materials into the Environment;
c. reducing
the quantities, preventing the Release or minimizing the hazardous
characteristics of wastes that are generated;
d. assuring
that products are designed, formulated, packaged and used so that they do not
present unreasonable risks to human health or the Environment when used or
disposed of;
e. protecting
resources, species or ecological amenities;
f. reducing
to acceptable levels the risks inherent in the transportation of hazardous
substances, pollutants, oil or other potentially harmful substances;
g. cleaning
up pollutants that have been Released, preventing the Threat of Release or
paying the costs of such clean up or prevention; or
h. making
responsible parties pay private parties, or groups of them, for damages done
to
their health or the Environment or permitting self-appointed representatives
of
the public interest to recover for injuries done to public assets.
“ERISA”--
the Employee Retirement Income Security Act of 1974.
“Escrow
Agent”-- as defined in Section 2.3(b)
“Escrow
Deposit” -- as defined in Section 2.3(b).
“Exchange
Act”-- the Securities Exchange Act of 1934.
“Excluded
Assets”-- as defined in Section 2.2.
“Facilities”--
any real property, leasehold or other interest in real property currently owned
or operated by Seller, including the Tangible Personal Property used or operated
by Seller. Notwithstanding the foregoing, for purposes of the definitions of
“Hazardous Activity” and “Remedial Action” and Sections 3.20 and 11.3,
“Facilities” shall mean any real property, leasehold or other interest in real
property currently or formerly owned or operated by Seller, including the
Tangible Personal Property used or operated by Seller at the Facilities
specified in Section 3.8.
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“GAAP”--
generally accepted accounting principles for financial reporting in the United
States, applied on a basis consistent with the basis on which the Balance Sheet
and the other financial statements referred to in Section 3.4 were prepared.
“Governing
Documents”-- with respect to any particular entity, (a) if a corporation, the
articles or certificate of incorporation and the bylaws; (b) if a general
partnership, the partnership agreement and any statement of partnership; (c)
if
a limited partnership, the limited partnership agreement and the certificate
of
limited partnership; (d) if a limited liability company, the articles of
organization and operating agreement; (e) if another type of Person, any other
charter or similar document adopted or filed in connection with the creation,
formation or organization of the Person; (f) all equityholders’ agreements,
voting agreements, voting trust agreements, joint venture agreements,
registration rights agreements or other agreements or documents relating to
the
organization, management or operation of any Person or relating to the rights,
duties and obligations of the equityholders of any Person; and (g) any amendment
or supplement to any of the foregoing.
“Governmental
Authorization”-- any Consent, license, registration or permit issued, granted,
given or otherwise made available by or under the authority of any Governmental
Body or pursuant to any Legal Requirement.
“Governmental
Body”-- any:
a. nation,
state, county, city, town, borough, village, district or other jurisdiction;
b. federal,
state, local, municipal, foreign or other government;
c. governmental
or quasi-governmental authority of any nature (including any agency, branch,
department, board, commission, court, tribunal or other entity exercising
governmental or quasi-governmental powers);
d. multinational
organization or body;
e. body
exercising, or entitled or purporting to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power; or
f. official
of any of the foregoing.
“Hazardous
Activity”-- 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 Material in, on, under, about or from any of the
Facilities or any part thereof into the Environment and any other act, business,
operation or thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm, to persons or property on or off the Facilities.
“Hazardous
Material”-- any substance, material or waste which is or will foreseeably be
regulated by any Governmental Body, including any material, substance or waste
which is defined as a “hazardous waste,” “hazardous material,” “hazardous
substance,” “extremely hazardous waste,” “restricted hazardous waste,”
“contaminant,” “toxic waste” or “toxic substance” under any provision of
Environmental Law, and including petroleum, petroleum products, asbestos,
presumed asbestos-containing material or asbestos-containing material, urea
formaldehyde and polychlorinated biphenyls.
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“Improvements”--
all buildings, structures, fixtures and improvements located on the Land or
included in the Assets, including those under construction.
“Income
Tax Refunds”—as defined in Section 2.1(j)
“Indemnified
Person”-- as defined in Section 11.9.
“Indemnifying
Person”-- as defined in Section 11.9.
“Intellectual
Property Assets”-- as defined in Section 3.23(a).
“Interim
Balance Sheet”-- as defined in Section 3.4.
“Inventories”--
all inventories of Seller, wherever located, including all finished goods,
work
in process, raw materials, spare parts and all other materials and supplies
to
be used or consumed by Seller in the production of finished goods.
“IRS”--
the United States Internal Revenue Service and, to the extent relevant, the
United States Department of the Treasury.
“Knowledge”--
an individual will be deemed to have Knowledge of a particular fact or other
matter if:
a. that
individual is actually aware of that fact or matter; or
b. a
prudent
individual could be expected to discover or otherwise become aware of that
fact
or matter in the course of conducting a reasonably comprehensive investigation
regarding the accuracy of any representation or warranty contained in this
Agreement.
A
Person
(other than an individual) will be deemed to have Knowledge of a particular
fact
or other matter if any individual who is serving, or who has at any time served,
as a director, officer, partner, executor or trustee of that Person (or in
any
similar capacity) has, or at any time had, Knowledge of that fact or other
matter (as set forth in (a) and (b) above), and any such individual (and any
individual party to this Agreement) will be deemed to have conducted a
reasonably comprehensive investigation regarding the accuracy of the
representations and warranties made herein by that Person or individual.
“Lease”
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as defined in Section 2.7(a)(iv).
“Legal
Requirement”-- any federal, state, local, municipal, foreign, international,
multinational or other constitution, law, ordinance, principle of common law,
code, regulation, statute or treaty.
“Liability”--
with respect to any Person, any liability or obligation of such Person of any
kind, character or description, whether known or unknown, absolute or
contingent, accrued or unaccrued, disputed or undisputed, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, and
whether or not the same is required to be accrued on the financial statements
of
such Person.
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“Marks”--
as defined in Section 3.23(a)(i).
“Material
Consents”-- as defined in Section 7.3.
“Occupational
Safety and Health Law”-- any Legal Requirement designed to provide safe and
healthful working conditions and to reduce occupational safety and health
hazards, including the Occupational Safety and Health Act, and any program,
whether governmental or private (such as those promulgated or sponsored by
industry associations and insurance companies), designed to provide safe and
healthful working conditions.
“Order”--
any order, injunction, judgment, decree, ruling, assessment or arbitration
award
of any Governmental Body or arbitrator.
“Ordinary
Course of Business”-- an action taken by a Person will be deemed to have been
taken in the Ordinary Course of Business only if that action:
(a) is
consistent in nature, scope and magnitude with the past practices of such Person
and is taken in the ordinary course of the normal, day-to-day operations of
such
Person;
(b) does
not
require authorization by the board of directors or Shareholder of such Person
(or by any Person or group of Persons exercising similar authority) and does
not
require any other separate or special authorization of any nature; and
(c) is
similar in nature, scope and magnitude to actions customarily taken, without
any
separate or special authorization, in the ordinary course of the normal,
day-to-day operations of other Persons that are in the same line of business
as
such Person.
“Patents”--
as defined in Section 3.23(a)(ii).
“Permitted
Encumbrances”-- as defined in Section 3.7.
“Person”--
an individual, partnership, corporation, business trust, limited liability
company, limited liability partnership, joint stock company, trust,
unincorporated association, joint venture or other entity or a Governmental
Body.
“Proceeding”--
any action, arbitration, audit, hearing, investigation, litigation or suit
(whether civil, criminal, administrative, judicial or investigative, whether
formal or informal, whether public or private) commenced, brought, conducted
or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
“Purchase
Price”-- as defined in Section 2.3.
“Record”--
information that is inscribed on a tangible medium or that is stored in an
electronic or other medium and is retrievable in perceivable form.
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“Related
Person”--
With
respect to a particular individual:
a. each
other member of such individual’s Family;
b. any
Person that is directly or indirectly controlled by any one or more members
of
such individual’s Family;
c. any
Person in which members of such individual’s Family hold (individually or in the
aggregate) a Material Interest; and
d. any
Person with respect to which one or more members of such individual’s Family
serves as a director, officer, partner, executor or trustee (or in a similar
capacity).
With
respect to a specified Person other than an individual:
a. any
Person that directly or indirectly controls, is directly or indirectly
controlled by or is directly or indirectly under common control with such
specified Person;
b. any
Person that holds a Material Interest in such specified Person;
c. each
Person that serves as a director, officer, partner, executor or trustee of
such
specified Person (or in a similar capacity);
d. any
Person in which such specified Person holds a Material Interest; and
e. any
Person with respect to which such specified Person serves as a general partner
or a trustee (or in a similar capacity).
For
purposes of this definition, (a) “control” (including “controlling,” “controlled
by,” and “under common control with”) means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies
of
a Person, whether through the ownership of voting securities, by contract or
otherwise, and shall be construed as such term is used in the rules promulgated
under the Securities Act; (b) the “Family” of an individual includes (i) the
individual, (ii) the individual’s spouse, (iii) any other natural person who is
related to the individual or the individual’s spouse within the second degree
and (iv) any other natural person who resides with such individual; and (c)
“Material Interest” means direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Exchange Act) of voting securities or other voting
interests representing at least ten percent (10%) of the outstanding voting
power of a Person or equity securities or other equity interests representing
at
least ten percent (10%) of the outstanding equity securities or equity interests
in a Person.
“Release”--
any release, spill, emission, leaking, pumping, pouring, dumping, emptying,
injection, deposit, disposal, discharge, dispersal, leaching or migration on
or
into the Environment or into or out of any property.
“Remedial
Action”-- all actions, including any capital expenditures, required or
voluntarily undertaken (a) to clean up, remove, treat or in any other way
address any Hazardous Material or other substance; (b) to prevent the Release
or
Threat of Release or to minimize the further Release of any Hazardous Material
or other substance so it does not migrate or endanger or threaten to endanger
public health or welfare or the Environment; (c) to perform pre-remedial studies
and investigations or post-remedial monitoring and care; or (d) to bring all
Facilities and the operations conducted thereon into compliance with
Environmental Laws and environmental Governmental Authorizations.
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“Representative”--
with respect to a particular Person, any director, officer, manager, employee,
agent, consultant, advisor, accountant, financial advisor, legal counsel or
other representative of that Person.
“Retained
Liabilities”-- as defined in Section 2.4(b).
“SEC”--
the United States Securities and Exchange Commission.
“Secured
Subordinated Promissory Note”-- as defined in Section 2.7(b)(ii).
“Securities
Act”-- as defined in Section 3.3.
“Security
Agreement” - as defined in Section 2.7(b)(ii).
“Seller”--
as defined in the first paragraph of this Agreement.
“Seller
Contract”-- any Contract (a) under which Seller has or may acquire any rights or
benefits; (b) under which Seller has or may become subject to any obligation
or
liability; or (c) by which Seller or any of the assets owned or used by Seller
is or may become bound.
“Shareholder”--
as defined in the first paragraph of this Agreement.
“Software”--
all computer software and subsequent versions thereof, including source code,
object, executable or binary code, objects, comments, screens, user interfaces,
report formats, templates, menus, buttons and icons and all files, data,
materials, manuals, design notes and other items and documentation related
thereto or associated therewith.
“Subsidiary”--
with respect to any Person (the “Owner”), any corporation or other Person of
which securities or other interests having the power to elect a majority of
that
corporation’s or other Person’s board of directors or similar governing body, or
otherwise having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests having
such power only upon the happening of a contingency that has not occurred),
are
held by the Owner or one or more of its Subsidiaries.
“Tangible
Personal Property”-- all machinery, equipment, tools, furniture, office
equipment, computer hardware, supplies, materials, vehicles and other items
of
tangible personal property (other than Inventories) of every kind owned or
leased by Seller (wherever located and whether or not carried on Seller’s
books), together with any express or implied warranty by the manufacturers
or
sellers or lessors of any item or component Part thereof and all maintenance
records and other documents relating thereto.
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“Tax”--
any income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, property, part environmental, windfall profit,
customs, vehicle, airplane, boat, vessel or other title or registration, capital
stock, franchise, employees’ income withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative, add-on minimum and
other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever
and any interest, penalty, addition or additional amount thereon imposed,
assessed or collected by or under the authority of any Governmental Body or
payable under any tax-sharing agreement or any other Contract.
“Tax
Return”-- any return (including any information return), report, statement,
schedule, notice, form, declaration, claim for refund 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.
“Third
Party”-- a Person that is not a party to this Agreement.
“Third-Party
Claim”-- any claim against any Indemnified Person by a Third Party, whether or
not involving a Proceeding.
“Threat
of Release”-- a reasonable likelihood of a Release that may require action in
order to prevent or mitigate damage to the Environment that may result from
such
Release.
“WARN
Act”-- as defined in Section 3.21(d).
1.2
USAGE
a. Interpretation.
In this Agreement, unless a clear contrary intention appears:
(i) the
singular number includes the plural number and vice versa;
(ii) reference
to any Person includes such Person’s successors and assigns but, if applicable,
only if such successors and assigns are not prohibited by this Agreement, and
reference to a Person in a particular capacity excludes such Person in any
other
capacity or individually;
(iii) reference
to any gender includes each other gender;
(iv) reference
to any agreement, document or instrument means such agreement, document or
instrument as amended or modified and in effect from time to time in accordance
with the terms thereof;
(v) reference
to any Legal Requirement means such Legal Requirement as amended, modified,
codified, replaced or reenacted, in whole or in part, and in effect from time
to
time, including rules and regulations promulgated thereunder, and reference
to
any section or other provision of any Legal Requirement means that provision
of
such Legal Requirement from time to time in effect and constituting the
substantive amendment, modification, codification, replacement or reenactment
of
such section or other provision;
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(vi) “hereunder,”
“hereof,” “hereto,” and words of similar import shall be deemed references to
this Agreement as a whole and not to any particular Article, Section or other
provision hereof;
(vii) “including”
(and with correlative meaning “include”) means including without limiting the
generality of any description preceding such term;
(viii) “or”
is
used in the inclusive sense of “and/or”;
(ix) with
respect to the determination of any period of time, “from” means “from and
including” and “to” means “to and including;” and
(x) references
to documents, instruments or agreements shall be deemed to refer as well to
all
addenda, exhibits, schedules or amendments thereto.
b. Accounting
Terms and Determinations. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with GAAP.
c. Legal
Representation of the Parties. This Agreement was negotiated by the parties
with
the benefit of legal representation, and any rule of construction or
interpretation otherwise requiring this Agreement to be construed or interpreted
against any party shall not apply to any construction or interpretation hereof.
SECTION
2
SALE
AND TRANSFER OF ASSETS; CLOSING
2.1
ASSETS TO BE SOLD
Upon
the
terms and subject to the conditions set forth in this Agreement, at the Closing,
Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer
shall purchase and acquire from Seller, free and clear of any Encumbrances
other
than Permitted Encumbrances, all of Seller’s right, title and interest in and to
all of Seller’s personal property and assets, tangible and intangible, of every
kind and description, wherever located, including the following (but excluding
the Excluded Assets):
a. all
Tangible Personal Property, including those items described in Exhibit 2.1(a);
b. all
Inventories;
c. all
Accounts Receivable;
d. all
Seller Contracts, including those listed in Exhibit 3.18(a), and all outstanding
offers or solicitations made by or to Seller to enter into any Contract;
e. all
Governmental Authorizations and all pending applications therefor or renewals
thereof, in each case to the extent transferable to Buyer, including those
listed in Exhibit 3.15(b);
f. all
data
and Records related to the operations of Seller, including client and customer
lists and Records, referral sources, research and development reports and
Records, production reports and Records, service and warranty Records, equipment
logs, operating guides and manuals, financial and accounting Records, creative
materials, advertising materials, promotional materials, studies, reports,
correspondence and other similar documents and Records and, subject to Legal
Requirements, copies of all personnel Records and other Records described in
Section 2.2(g) and certification documentation for the Inventory;
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g. all
of
the intangible rights and property of Seller, including Intellectual Property
Assets, going concern value, goodwill, telephone, telecopy and e-mail addresses
and listings and those items listed in Exhibits 3.23(d), (e) and (f);
h. all
insurance benefits, including rights and proceeds, arising from or relating
to
the Assets or the Assumed Liabilities prior to the Closing, unless expended
in
accordance with this Agreement;
i. all
claims of Seller against third parties relating to the Assets, whether xxxxxx
or
inchoate, known or unknown, contingent or noncontingent, including all such
claims listed in Exhibit 2.1(j); and
j. all
rights of Seller relating to deposits and prepaid expenses, claims for refunds
and rights to offset in respect thereof that are not listed in Exhibit 2.2(e).
As reflected in Exhibit 2.2(e), Seller and the Shareholder may be entitled
to
certain Income Tax Refunds relating to the operations of Seller. Such Income
Tax
Refunds are not included in the Assets.
All
of
the property and assets to be transferred to Buyer hereunder are herein referred
to collectively as the “Assets.”
Notwithstanding
the foregoing, the transfer of the Assets pursuant to this Agreement shall
not
include the assumption of any Liability related to the Assets unless Buyer
expressly assumes that Liability pursuant to Section 2.4(a).
2.2
EXCLUDED ASSETS
Notwithstanding
anything to the contrary contained in Section 2.1 or elsewhere in this
Agreement, the following assets of Seller (collectively, the “Excluded Assets”)
are not part of the sale and purchase contemplated hereunder, are excluded
from
the Assets and shall remain the property of Seller after the Closing:
a. all
cash,
cash equivalents and short-term investments;
b.
all
minute books, stock Records and corporate seals;
c.
the
shares of capital stock of Seller held in treasury;
d.
all
rights of Seller under this Agreement, the Xxxx of Sale, the Assignment and
Assumption Agreement, the Secured Subordinated Promissory Note, the Security
Agreement and all other documents to be delivered in connection with the
Contemplated Transactions; and
e.
the
property and assets expressly designated in Exhibit 2.2(e), including but not
limited to the Income Tax Refunds and real property owned by Seller or its
affiliates.
2.3
CONSIDERATION
a. The
consideration for the Assets (the “Purchase Price”) will be (a) Five million
dollars ($5,000,000.00) plus or minus the Adjustment Amount and (b) the
assumption of the Assumed Liabilities. In accordance with Section 2.7(b), at
the
Closing, the Purchase Price, prior to adjustment on account of the Adjustment
Amount, shall be delivered by Buyer to Seller as follows: (a) Four million
two
hundred fifty thousand dollars ($4,250,000.00) by certified check or other
immediately available funds, net of the Escrow Deposit; and (b) Seven hundred
fifty thousand dollars ($750,000.00) payable in the form of the Secured
Subordinated Promissory Note. The security for the Secured Subordinated
Promissory Note is defined in Section 2.7(b)(ii). The Adjustment Amount shall
be
paid in accordance with Section 2.8.
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b. The
Escrow Deposit, in the initial amount of $25,000.00, shall be paid by Buyer
to
Xxxxxx X. Xxxxxx, Esquire, attorney for Seller, (the “Escrow Agent”)
contemporaneous with execution of this Agreement. The Escrow Deposit shall
be
held in an interest bearing account. The full amount of the Escrow Deposit,
together will all interest earned thereon, will be credited against the cash
consideration to be paid by Buyer at Closing, subject to the provisions of
Sections 9.2(b) and 9.2(c).
2.4
LIABILITIES
a. Assumed
Liabilities. On the Closing Date, but effective as of the Closing, Buyer shall
assume and agree to discharge only the following Liabilities of Seller (the
“Assumed Liabilities”):
(i) any
trade
account payable reflected on the Interim Balance Sheet (other than a trade
account payable to any Shareholder or a Related Person of Seller or any
Shareholder) that remains unpaid at and is not delinquent as of the Closing;
(ii) any
trade
account payable (other than a trade account payable to any Shareholder or a
Related Person of Seller or any Shareholder) incurred by Seller in the Ordinary
Course of Business between the date of the Interim Balance Sheet and the Closing
that remains unpaid at and is not delinquent as of the Closing;
(iii) any
Liability to Seller’s customers incurred by Seller in the Ordinary Course of
Business for nondelinquent orders outstanding as of the Closing reflected on
Seller’s books (other than any Liability arising out of or relating to a Breach
that occurred prior to the Closing); and
(iv) any
liability to Seller’s suppliers for unfilled purchase orders, provided that such
unfilled purchase orders shall be for a quantity of parts that will be sold
in
the Ordinary Course of Business for a cost consistent with prevailing market
cost.
b. Retained
Liabilities. The Retained Liabilities shall remain the sole responsibility
of
and shall be retained, paid, performed and discharged solely by Seller.
“Retained Liabilities” shall mean every Liability of Seller other than the
Assumed Liabilities, including:
(i) any
Liability arising out of or relating to products of Seller sold prior to the
Closing other than to the extent assumed under Section 2.4(a)(iii);
(ii) any
Liability under any Contract assumed by Buyer pursuant to Section 2.4(a) that
arises after the Closing but that arises out of or relates to any Breach that
occurred prior to the Closing;
(iii) any
Liability for Taxes, including (A) any Taxes arising as a result of Seller’s
operation of its business or ownership of the Assets prior to the Closing,
(B)
any Taxes that will arise as a result of the sale of the Assets pursuant to
this
Agreement and (C) any deferred Taxes of any nature;
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(iv) any
Liability under any Contract not assumed by Buyer under Section 2.4(a),
including any Liability arising out of or relating to Seller’s credit facilities
or any security interest related thereto;
(v) any
Environmental, Health and Safety Liabilities arising out of or relating to
the
operation of Seller’s business or Seller’s leasing, ownership or operation of
real property;
(vi) any
Liability under the Employee Plans or relating to payroll, vacation, sick leave,
workers’ compensation, unemployment benefits, pension benefits, employee stock
option or profit-sharing plans, health care plans or benefits or any other
employee plans or benefits of any kind for Seller’s employees or former
employees or both;
(vii) any
Liability under any employment, severance, retention or termination agreement
with any employee of Seller or any of its Related Persons;
(viii) any
Liability arising out of or relating to any employee grievance whether or not
the affected employees are hired by Buyer;
(ix) any
Liability of Seller to any Shareholder or Related Person of Seller or any
Shareholder;
(x) any
Liability to indemnify, reimburse or advance amounts to any officer, director,
employee or agent of Seller;
(xi) any
Liability to distribute to Shareholder or otherwise apply all or any part of
the
consideration received hereunder;
(xii) any
Liability arising out of any Proceeding pending as of the Closing;
(xiii) any
Liability arising out of any Proceeding commenced after the Closing and arising
out of or relating to any occurrence or event happening prior to the Closing;
(xiv) any
Liability arising out of or resulting from Seller’s compliance or noncompliance
with any Legal Requirement or Order of any Governmental Body;
(xv) any
Liability of Seller under this Agreement or any other document executed in
connection with the Contemplated Transactions; and
(xvi) any
Liability of Seller based upon Seller’s acts or omissions occurring after the
Closing.
2.5
ALLOCATION
The
Purchase Price shall be allocated as shall be agreed at Closing. After the
Closing, the parties shall make consistent use of the allocation, fair market
value and useful lives as agreed for all Tax purposes and in all filings,
declarations and reports with the IRS in respect thereof, including the reports
required to be filed under Section 1060 of the Code. Buyer shall prepare and
deliver IRS Form 8594 to Seller within forty-five (45) days after the Closing
Date to be filed with the IRS. In any Proceeding related to the determination
of
any Tax, neither Buyer nor Seller or Shareholder shall contend or represent
that
such allocation is not a correct allocation.
2.6
CLOSING
The
purchase and sale provided for in this Agreement (the “Closing”) will take place
at the offices of Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP, 0000 Xxxxxx xx xxx
Xxxxxxxx, 00xx
Xxxxx,
Xxx Xxxx, XX 00000, on or before June 30, 2006, unless Buyer and Seller
otherwise agree. Subject to the provisions of Article 9, failure to consummate
the purchase and sale provided for in this Agreement on the date and time and
at
the place determined pursuant to this Section 2.6 will not result in the
termination of this Agreement and will not relieve any party of any obligation
under this Agreement. In such a situation, the Closing will occur as soon as
practicable, subject to Article 9.
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2.7
CLOSING OBLIGATIONS
In
addition to any other documents to be delivered under other provisions of this
Agreement, at the Closing:
a. Seller
and Shareholder, as the case may be, shall deliver to Buyer, together with
funds
sufficient to pay (i) one-half of all sales taxes, and (ii) all other Taxes
necessary for the transfer, filing or recording thereof:
(i) a
xxxx of
sale for all of the Assets that are Tangible Personal Property in the form
of
Exhibit 2.7(a)(i) (the “Xxxx of Sale”) executed by Seller;
(ii) assignments
of all Intellectual Property Assets and separate assignments of all registered
Marks, Patents and Copyrights in the form of Exhibit 2.7(a)(ii) executed by
Seller;
(iii) such
other deeds, bills of sale, assignments, certificates of title, documents and
other instruments of transfer and conveyance as may reasonably be requested
by
Buyer, each in form and substance satisfactory to Buyer and its legal counsel
and executed by Seller;
(iv) the
lease
for the Premises in the form of Exhibit 2.7(a)(iv) (the “Lease”);
(v) a
certificate executed by Seller and the Shareholder as to the accuracy of their
representations and warranties as of the date of this Agreement and as of the
Closing in accordance with Section 7.1 and as to their compliance with and
performance of their covenants and obligations to be performed or complied
with
at or before the Closing in accordance with Section 7.2 (Exhibit 2.7(a)(v));
(vi) an
opinion of counsel for the Seller and the Shareholder in form and substance
satisfactory to Buyer and its legal counsel (Exhibit 2.7(a)(vi)) ;
(vii) a
certificate of the Secretary of Seller certifying, as complete and accurate
as
of the Closing (Exhibit 2.7(a)(vii)), attached copies of the Governing Documents
of Seller, certifying and attaching all requisite resolutions or actions of
Seller’s board of directors and Shareholder approving the execution and delivery
of this Agreement and the consummation of the Contemplated Transactions and
the
change of name contemplated by Section 5.9 and certifying to the incumbency
and
signatures of the officers of Seller executing this Agreement and any other
document relating to the Contemplated Transactions and accompanied by the
requisite documents for amending the relevant Governing Documents of Seller
required to effect such change of name in form sufficient for filing with the
appropriate Governmental Body;
(viii) the
Consulting Agreement in the form of Exhibit 2.7(b)(v);
(ix) an
assignment of all of the Assets that are intangible personal property in the
form of Exhibit 2.7(a)(ix), which assignment shall also contain Buyer’s
undertaking and assumption of the Assumed Liabilities (the “Assignment and
Assumption Agreement”) executed by Seller; and
(x) the
Allocation of Purchase Price, in the form of Exhibit 2.7(a)(x).
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b. Buyer
shall deliver to Seller and Shareholder, as the case may be, together with
funds
sufficient to pay one-half of all sales taxes necessary for the transfer, filing
or recording thereof:
(i) Four
million two hundred fifty thousand dollars ($4,250,000.00) by certified check
or
other immediately available funds, net of the Escrow Deposit;
(ii) a
promissory note executed by Buyer and payable to Seller in the principal amount
of Seven hundred fifty thousand dollars ($750,000.00) in the form of Exhibit
2.7(b)(ii) (the “Secured Subordinated Promissory Note”). The Secured
Subordinated Promissory Note shall be secured with a subordinated lien on the
Assets, which subordinated lien will be evidenced by the Security Agreement.
The
Seller will agree to execute a commercially reasonable subordination agreement
proffered by lenders to Buyer either contemporaneous with or subsequent to
the
Closing, and will execute whatever documents may be reasonably necessary to
make
Seller’s security interest in the Assets subordinate to Buyer’s
lenders;
(iii) the
Security Agreement (Exhibit 2.7(b)(iii)) and Financing Statement necessary
to
perfect Seller’s security interest in the Assets, subject to the limitations in
Section 2.7(b)(ii);
(iv) the
Assignment and Assumption Agreement, as such term is defined in Section
2.7(a)(ix) above;
(v)
the
Consulting Agreement in the form of Exhibit 2.7(b)(v);
(vi) a
certificate executed by Buyer as to the accuracy of its representations and
warranties as of the date of this Agreement and as of the Closing in accordance
with Section 8.1 and as to its compliance with and performance of its covenants
and obligations to be performed or complied with at or before the Closing in
accordance with Section 8.2 (Exhibit 2.7(b)(vi));
(vii) an
opinion of counsel for the Buyer in form and substance satisfactory to Seller
and Stockholder (Exhibit 2.7(b)(vii));
(viii) a
certificate of the Secretary of Buyer certifying, as complete and accurate
as of
the Closing (Exhibit 2.7(b)(viii)), attached copies of the Governing Documents
of Buyer and certifying and attaching all requisite resolutions or actions
of
Buyer’s board of directors approving the execution and delivery of this
Agreement and the consummation of the Contemplated Transactions and certifying
to the incumbency and signatures of the officers of Buyer executing this
Agreement and any other document relating to the Contemplated
Transactions;
(ix) the
executed Lease; and
(x) the
Allocation of Purchase Price, in the form of Exhibit 2.7(a)(x).
2.8
ADJUSTMENT AMOUNT AND PAYMENT
The
“Adjustment Amount” (which may be a positive or negative number) will be equal
to the amount determined by subtracting the Closing Working Capital from the
Agreed Working Capital. If the Adjustment Amount is positive, the Adjustment
Amount shall be subtracted from the cash consideration to be paid at Closing.
If
the Adjustment Amount is negative, the Adjustment Amount shall be added to
the
cash consideration to be paid at Closing.
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2.9
ADJUSTMENT PROCEDURE
a. “Working
Capital” as of a given date shall mean the amount calculated by subtracting the
Assumed Liabilities as of that date from the sum of (i) all Accounts Receivable,
regardless of the aging thereof, and (ii) Inventory included in the Assets
as of
that date.
b. The
Agreed Working Capital Amount is $2,280,000.00.
c.
The
day
before Closing, Seller shall deliver to Buyer (i) a list of its Accounts
Receivable as of that date showing the aging thereof, (ii) a statement of its
Inventory value as of that date, and (iii) a list of the Assumed Liabilities
as
of that date. Buyer shall then determine the Working Capital as of the Closing
by subtracting the Assumed Liabilities as of that date from the sum of the
Accounts Receivable as of that date and the Inventory as of that date (the
“Closing Working Capital”).
d. The
Adjustment Amount shall be determined by subtracting the Closing Working Capital
from the Agreed Working Capital.
2.10
CONSENTS
a. If
there
are any Material Consents that have not yet been obtained (or otherwise are
not
in full force and effect) as of the Closing, in the case of each Seller Contract
as to which such Material Consents were not obtained (or otherwise are not
in
full force and effect) (the “Restricted Material Contracts”), Buyer may waive
the closing conditions as to any such Material Consent and either:
(i) elect
to
have Seller continue its efforts to obtain the Material Consents; or
(ii) elect
to
have Seller retain that Restricted Material Contract and all Liabilities arising
therefrom or relating thereto, on a cost neutral basis to Seller.
If
Buyer
elects to have Seller continue its efforts to obtain any Material Consents
and
the Closing occurs, notwithstanding Sections 2.1 and 2.4, neither this Agreement
nor the Assignment and Assumption Agreement nor any other document related
to
the consummation of the Contemplated Transactions shall constitute a sale,
assignment, assumption, transfer, conveyance or delivery or an attempted sale,
assignment, assumption, transfer, conveyance or delivery of the Restricted
Material Contracts, and following the Closing, the parties shall use Best
Efforts, and cooperate with each other, to obtain the Material Consent relating
to each Restricted Material Contract as quickly as practicable. Pending the
obtaining of such Material Consents relating to any Restricted Material
Contract, the parties shall cooperate with each other in any reasonable and
lawful arrangements designed to provide to Buyer the benefits of use of the
Restricted Material Contract for its term (or any right or benefit arising
thereunder, including the enforcement for the benefit of Buyer of any and all
rights of Seller against a third party thereunder). Once a Material Consent
for
the sale, assignment, assumption, transfer, conveyance and delivery of a
Restricted Material Contract is obtained, Seller shall promptly assign,
transfer, convey and deliver such Restricted Material Contract to Buyer, and
Buyer shall assume the obligations under such Restricted Material Contract
assigned to Buyer from and after the date of assignment to Buyer pursuant to
a
special-purpose assignment and assumption agreement substantially similar in
terms to those of the Assignment and Assumption Agreement (which special-purpose
agreement the parties shall prepare, execute and deliver in good faith at the
time of such transfer, all at no additional cost to Buyer).
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b. If
there
are any Consents not listed on Exhibit 7.3 necessary for the assignment and
transfer of any Seller Contracts to Buyer (the “Nonmaterial Consents”) which
have not yet been obtained (or otherwise are not in full force and effect)
as of
the Closing, Buyer shall elect at the Closing, in the case of each of the Seller
Contracts as to which such Nonmaterial Consents were not obtained (or otherwise
are not in full force and effect) (the “Restricted Nonmaterial Contracts”),
whether to:
(i) accept
the assignment of such Restricted Nonmaterial Contract, in which case, as
between Buyer and Seller, such Restricted Nonmaterial Contract shall, to the
maximum extent practicable and notwithstanding the failure to obtain the
applicable Nonmaterial Consent, be transferred at the Closing pursuant to the
Assignment and Assumption Agreement as elsewhere provided under this Agreement;
or
(ii) reject
the assignment of such Restricted Nonmaterial Contract, in which case,
notwithstanding Sections 2.1 and 2.4, (A) neither this Agreement nor the
Assignment and Assumption Agreement nor any other document related to the
consummation of the Contemplated Transactions shall constitute a sale,
assignment, assumption, conveyance or delivery or an attempted sale, assignment,
assumption, transfer, conveyance or delivery of such Restricted Nonmaterial
Contract, and (B) Seller shall retain such Restricted Nonmaterial Contract
and
all Liabilities arising therefrom or relating thereto.
| 2.11 |
ASSIGNMENT
OF ACCOUNTS RECEIVABLE FROM BUYER TO
SELLER
|
In
the
event that Buyer shall not receive payment of any of the Accounts Receivable
within 90 days of Closing, Buyer may assign such uncollected Accounts Receivable
to Seller at any time within 180 days after Closing (an “Accounts Receivable
Assignment”), provided, however, that if Buyer shall assign any of such Accounts
Receivable to Seller after 120 days after Closing but before 180 days after
Closing, Buyer shall provide Seller with whatever assistance Seller may
reasonably request in the collection of such Accounts Receivable. Upon the
occurrence of an Accounts Receivable Assignment, Buyer shall reduce the amount
of its next payments due under the Secured Subordinated Promissory Note by
the
total amount of the Accounts Receivable assigned. This reduction shall not
be
subject to the escrow provisions of Section 11.8 regarding items proposed to
be
set off by Buyer against its liability to Seller, but shall be deemed to be
agreed to by Seller.
SECTION
3
REPRESENTATIONS
AND WARRANTIES OF SELLER AND SHAREHOLDER
Seller
and the Shareholder represent and warrant, jointly and severally, to Buyer
as
follows:
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3.1
ORGANIZATION AND GOOD STANDING
a. Exhibit
3.1(a) contains a complete and accurate list of Seller’s jurisdiction of
incorporation and any other jurisdictions in which it is qualified to do
business as a foreign corporation. Seller is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that
it
purports to own or use, and to perform all its obligations under the Seller
Contracts. Seller is duly qualified to do business as a foreign corporation
and
is in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification.
b. Complete
and accurate copies of the Governing Documents of Seller, as currently in
effect, are attached to Exhibit 3.1(b).
c. Seller
has no Subsidiary and, except as disclosed in Exhibit 3.1(c), does not own
any
shares of capital stock or other securities of any other Person.
3.2
ENFORCEABILITY; AUTHORITY; NO CONFLICT
a. This
Agreement constitutes the legal, valid and binding obligation of Seller and
each
Shareholder, enforceable against each of them in accordance with its terms.
Upon
the execution and delivery by Seller and Shareholder of the Consulting
Agreement, the Noncompetition Agreement and each other agreement to be executed
or delivered by any or all of Seller and Shareholder at the Closing
(collectively, the “Seller’s Closing Documents”), each of Seller’s Closing
Documents will constitute the legal, valid and binding obligation of each of
Seller and the Shareholder, enforceable against each of them in accordance
with
its terms. Seller has the absolute and unrestricted right, power and authority
to execute and deliver this Agreement and the Seller’s Closing Documents to
which it is a party and to perform its obligations under this Agreement and
the
Seller’s Closing Documents, and such action has been duly authorized by all
necessary action by the Shareholder and board of directors. Each Shareholder
has
all necessary legal capacity to enter into this Agreement and the Seller’s
Closing Documents to which such Shareholder is a party and to perform his
obligations hereunder and thereunder.
b. Except
as
set forth in Exhibit 3.2(b), neither the execution and delivery of this
Agreement, nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse
of
time):
(i) Breach
(A) any provision of any of the Governing Documents of Seller or (B) any
resolution adopted by the board of directors or the Shareholder;
(ii) Breach
or
give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under
any Legal Requirement or any Order to which Seller or the Shareholder, or any
of
the Assets, may be subject;
(iii) contravene,
conflict with or result in a violation or breach of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any Governmental Authorization that is
held by Seller or that otherwise relates to the Assets or to the business of
Seller;
(iv) cause
Buyer to become subject to, or to become liable for the payment of, any Tax,
other than one-half of all sales taxes necessary for the transfer, filing or
recording of and of the Assets;
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(v) Breach
any provision of, or give any Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or payment
under, or to cancel, terminate or modify, any Seller Contract;
(vi) result
in
the imposition or creation of any Encumbrance upon or with respect to any of
the
Assets; or
(vii) result
in
any shareholder of the Seller having the right to exercise dissenters’ appraisal
rights.
c. Except
as
set forth in Exhibit 3.2(c), neither Seller nor the Shareholder is required
to
give any notice to or obtain any Consent from any Person in connection with
the
execution and delivery of this Agreement or the consummation or performance
of
any of the Contemplated Transactions.
3.3
CAPITALIZATION
The
authorized equity securities of Seller consist of two hundred (200) shares
of
common stock, no par value per share, of which one hundred (100) shares are
issued and outstanding, and all of which are owned by the Shareholder.
Shareholder is and will be on the Closing Date the record and beneficial owner
and holder of the shares owned by him, free and clear of all Encumbrances.
There
are no Contracts relating to the issuance, sale or transfer of any equity
securities or other securities of Seller. None of the outstanding equity
securities of Seller was issued in violation of the Securities Act of 1933,
as
amended (the “Securities Act”), or any other Legal Requirement.
3.4
FINANCIAL STATEMENTS
Seller
has delivered to Buyer: (a) an unaudited balance sheet of Seller as at December
31, 2005 (the “Balance Sheet”), and the related unaudited statement of income
for the year then ended; (b) unaudited balance sheets of Seller as at December
31 in each of the fiscal years 2001 through 2004, and the related unaudited
statement of income for each of the fiscal years then ended; and (c) an
unaudited balance sheet of Seller as at March 31, 2006, (the “Interim Balance
Sheet”) and the related unaudited statement of income for the two (2) months
then ended. Such financial statements fairly present (and the financial
statements delivered pursuant to Section 5.8 will fairly present) the financial
condition and the results of operations of Seller as at the respective dates
of
and for the periods referred to in such financial statements. The financial
statements referred to in this Section 3.4 and delivered pursuant to Section
5.8
reflect and will reflect the consistent application of accounting principles
throughout the periods involved, except as disclosed in the notes to such
financial statements. The financial statements have been and will be prepared
from and are in accordance with the accounting Records of Seller.
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3.5
BOOKS
AND RECORDS
The
books
of account and other financial Records of Seller, all of which have been made
available to Buyer, are complete and correct and represent actual, bona fide
transactions and have been maintained in accordance with sound business
practices and maintenance of an adequate system of internal controls. The minute
books of Seller, all of which have been made available to Buyer, contain
accurate and complete Records of all meetings held of, and corporate action
taken by, the Shareholder, the board of directors and committees of the board
of
directors of Seller, and no meeting of the Shareholder, board of directors
or
committee has been held for which minutes have not been prepared or are not
contained in such minute books.
3.6
SUFFICIENCY OF ASSETS
Except
as
set forth in Exhibit 3.6, the Assets (a) constitute all of the assets, tangible
and intangible, of any nature whatsoever, necessary to operate Seller’s business
in the manner presently operated by Seller and (b) include all of the operating
assets of Seller.
3.7
TITLE
TO ASSETS; ENCUMBRANCES
Seller
owns good and transferable title to all of the Assets free and clear of any
Encumbrances other than those described in Exhibit 3.7 (“Encumbrances”). Seller
warrants to Buyer that, at the time of Closing, all Assets shall be free and
clear of all Encumbrances other than those identified on Exhibit 3.7 as
acceptable to Buyer (“Permitted Encumbrances”).
3.8
CONDITION OF FACILITIES
a. Use
of
the Facilities for the various purposes for which it is presently being used
is
permitted as of right under all applicable zoning legal requirements and is
not
subject to “permitted nonconforming” use or structure classifications. All
Improvements are in compliance with all applicable Legal Requirements, including
those pertaining to zoning, building and the disabled, are in good repair and
in
good condition, ordinary wear and tear excepted, and are free from latent and
patent defects. No part of any Improvement encroaches on any real property
not
included in the Facilities, and there are no buildings, structures, fixtures
or
other Improvements primarily situated on adjoining property which encroach
on
any part of the Land. The Land for each owned Facility abuts on and has direct
vehicular access to a public road or has access to a public road via a
permanent, irrevocable, appurtenant easement benefiting such Land and comprising
a part of the Facilities, is supplied with public or quasi-public utilities
and
other services appropriate for the operation of the Facilities located thereon
and is not located within any flood plain or area subject to wetlands regulation
or any similar restriction. To Seller’s knowledge, after reasonable
investigation, there is no existing or proposed plan to modify or realign any
street or highway or any existing or proposed eminent domain proceeding that
would result in the taking of all or any part of any Facility or that would
prevent or hinder the continued use of any Facility as heretofore used in the
conduct of the business of Seller.
b. Each
item
of Tangible Personal Property is in repair and operating condition, ordinary
wear and tear excepted, is suitable for immediate use in the Ordinary Course
of
Business and is free from latent and patent defects. No item of Tangible
Personal Property is in need of repair or replacement other than as part of
routine maintenance in the Ordinary Course of Business. Except as disclosed
in
Exhibit 3.8(b), all Tangible Personal Property used in Seller’s business is in
the possession of Seller.
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3.9
ACCOUNTS RECEIVABLE
All
Accounts Receivable that are reflected on the Balance Sheet or the Interim
Balance Sheet or on the accounting Records of Seller as of the Closing Date
represent or will represent valid obligations arising from sales actually made
or services actually performed by Seller in the Ordinary Course of Business.
Except to the extent paid prior to the Closing Date, such Accounts Receivable
are or will be as of the Closing Date current and collectible net of the
respective reserves shown on the Balance Sheet or the Interim Balance Sheet
or
as included in the Closing Working Capital (which reserves are adequate and
calculated consistent with past practice and, in the case of the reserve in
the
Accounts Receivable included in the Closing Working Capital, will not represent
a greater percentage of the Accounts Receivable reflected in the Accounts
Receivable included in the Closing Working Capital than the reserve reflected
on
the Interim Balance Sheet represented of the Accounts Receivable reflected
thereon and will not represent a material adverse change in the composition
of
such Accounts Receivable in terms of aging). Subject to such reserves, each
of
such Accounts Receivable either has been or will be collected in full, without
any setoff, within ninety (90) days after the day on which it first becomes
due
and payable. There is no contest, claim, defense or right of setoff, other
than
returns in the Ordinary Course of Business of Seller, under any Contract with
any account debtor of an Account Receivable relating to the amount or validity
of such Account Receivable. Exhibit 3.9 contains a complete and accurate list
of
all Accounts Receivable as of the date of the Interim Balance Sheet, which
list
sets forth the aging of each such Account Receivable.
3.10
INVENTORIES
All
items
included in the Inventories consist of a quality saleable in the Ordinary Course
of Business of Seller except for items of below-standard quality, all of which
have been written off or written down to net realizable value in the Balance
Sheet or the Interim Balance Sheet or on the accounting Records of Seller as
of
the Closing Date, as the case may be. Seller is not in possession of any
inventory not owned by Seller, including goods already sold. Inventories now
on
hand that were purchased after the date of the Balance Sheet or the Interim
Balance Sheet were purchased in the Ordinary Course of Business of Seller at
a
cost not exceeding market prices prevailing at the time of purchase. All items
of Inventory meet the original quality specifications of the respective
manufacturers. The Seller has on file, and such information is included in
the
Assets, proper certification documentation for the Inventory.
3.11
NO
UNDISCLOSED LIABILITIES
Except
as
set forth in Exhibit 3.11, Seller has no Liability except for Liabilities
reflected or reserved against in the Balance Sheet or the Interim Balance Sheet
and current liabilities incurred in the Ordinary Course of Business of Seller
since the date of the Interim Balance Sheet.
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3.12
TAXES
a. Tax
Returns Filed and Taxes Paid. Seller has filed or caused to be filed on a timely
basis all Tax Returns and all reports with respect to Taxes that are or were
required to be filed pursuant to applicable Legal Requirements. All Tax Returns
and reports filed by Seller are true, correct and complete, subject to
amendments thereof in connection with the Income Tax Refunds. Seller has paid,
or made provision for the payment of, all Taxes that have or may have become
due
for all periods covered by the Tax Returns or otherwise, or pursuant to any
assessment received by Seller, except such Taxes, if any, as are listed in
Exhibit 3.12(a) and are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided in the Balance
Sheet and the Interim Balance Sheet. Except as provided in Exhibit 3.12(a),
Seller currently is not the beneficiary of any extension of time within which
to
file any Tax Return. No claim has ever been made or is expected to be made
by
any Governmental Body in a jurisdiction where Seller does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There are no
Encumbrances on any of the Assets that arose in connection with any failure
(or
alleged failure) to pay any Tax, and Seller has no Knowledge of any basis for
assertion of any claims attributable to Taxes which, if adversely determined,
would result in any such Encumbrance.
b. Delivery
of Tax Returns and Information Regarding Audits and Potential Audits. Seller
has
delivered or made available to Buyer copies of, and Exhibit 3.12(b) contains
a
complete and accurate list of, all Tax Returns filed since 2002.
c. Proper
Accrual. The charges, accruals and reserves with respect to Taxes on the Records
of Seller are adequate (determined in accordance with GAAP) and are at least
equal to Seller’s liability for Taxes. There exists no proposed tax assessment
or deficiency against Seller except as disclosed in the Balance Sheet or in
Exhibit 3.12(c).
d. Specific
Potential Tax Liabilities and Tax Situations.
(i) Withholding.
All Taxes that Seller is or was required by Legal Requirements to withhold,
deduct or collect have been duly withheld, deducted and collected and, to the
extent required, have been paid to the proper Governmental Body or other Person.
(ii) Tax
Sharing or Similar Agreements. There is no tax sharing agreement, tax allocation
agreement, tax indemnity obligation or similar written or unwritten agreement,
arrangement, understanding or practice with respect to Taxes (including any
advance pricing agreement, closing agreement or other arrangement relating
to
Taxes) that will require any payment by Seller.
(iii) Consolidated
Group. Seller (A) has not been a member of an affiliated group within the
meaning of Code Section 1504(a) (or any similar group defined under a similar
provision of state, local or foreign law) and (B) has no liability for Taxes
of
any person (other than Seller and its Subsidiaries) under Treas. Reg. sect.
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor by contract or otherwise.
(iv) S
Corporation. Seller is an S corporation as defined in Code Section 1361, and
Seller is not and has not been subject to either the built-in-gains tax under
Code Section 1374 or the passive income tax under Code Section 1375. Exhibit
3.12(d)(iv) lists all the states and localities with respect to which Seller
is
required to file any corporate, income or franchise tax returns and sets forth
whether Seller is treated as the equivalent of an S corporation by or with
respect to each such state or locality. Seller has properly filed Tax Returns
with and paid and discharged any liabilities for taxes in any states or
localities in which it is subject to Tax.
(v) Substantial
Understatement Penalty. Seller has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial understatement
of federal income Tax within the meaning of Code Section 6662, if
any.
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3.13
NO
MATERIAL ADVERSE CHANGE
Since
the
date of the Balance Sheet, there has not been any material adverse change in
the
business, operations, prospects, assets, results of operations or condition
(financial or other) of Seller, and, to Seller’s Knowledge, after reasonable
investigation, no event has occurred or circumstance exists that may result
in
such a material adverse change.
3.14
EMPLOYEE BENEFITS
a. Set
forth
in Exhibit 3.14(a) is a complete and correct list of all “employee benefit
plans” as defined by Section 3(3) of ERISA, all specified fringe benefit plans
as defined in Section 6039D of the Code, and all other bonus,
incentive-compensation, deferred-compensation, profit-sharing, stock-option,
stock-appreciation-right, stock-bonus, stock-purchase, employee-stock-ownership,
savings, severance, change-in-control, supplemental-unemployment, layoff,
salary-continuation, retirement, pension, health, life-insurance, disability,
accident, group-insurance, vacation, holiday, sick-leave, fringe-benefit or
welfare plan, and any other employee compensation or benefit plan, agreement,
policy, practice, commitment, contract or understanding (whether qualified
or
nonqualified, currently effective or terminated, written or unwritten) and
any
trust, escrow or other agreement related thereto that (i) is maintained or
contributed to by Seller or any other corporation or trade or business
controlled by, controlling or under common control with Seller (within the
meaning of Section 414 of the Code or Section 4001(a)(14) or 4001(b) of ERISA)
(“ERISA Affiliate”) or has been maintained or contributed to in the last six (6)
years by Seller or any ERISA Affiliate, or with respect to which Seller or
any
ERISA Affiliate has or may have any liability, and (ii) provides benefits,
or
describes policies or procedures applicable to any current or former director,
officer, employee or service provider of Seller or any ERISA Affiliate, or
the
dependents of any thereof, regardless of how (or whether) liabilities for the
provision of benefits are accrued or assets are acquired or dedicated with
respect to the funding thereof (collectively the “Employee Plans”). Exhibit
3.14(a) identifies as such any Employee Plan that is (w) a “Defined Benefit
Plan” (as defined in Section 414(l) of the Code); (x) a plan intended to meet
the requirements of Section 401(a) of the Code; (y) a “Multiemployer Plan” (as
defined in Section 3(37) of ERISA); or (z) a plan subject to Title IV of ERISA,
other than a Multiemployer Plan. Also set forth on Exhibit 3.14(a) is a complete
and correct list of all ERISA Affiliates of Seller during the last six (6)
years.
b. Seller
has delivered to Buyer true, accurate and complete copies of (i) the documents
comprising each Employee Plan (or, with respect to any Employee Plan which
is
unwritten, a detailed written description of eligibility, participation,
benefits, funding arrangements, assets and any other matters which relate to
the
obligations of Seller or any ERISA Affiliate); (ii) all trust agreements,
insurance contracts or any other funding instruments related to the Employee
Plans; (iii) all rulings, determination letters, no-action letters or advisory
opinions from the IRS, the U.S. Department of Labor, the Pension Benefit
Guaranty Corporation (“PBGC”) or any other Governmental Body that pertain to
each Employee Plan and any open requests therefor; (iv) the most recent
actuarial and financial reports (audited and/or unaudited) and the annual
reports filed with any Government Body with respect to the Employee Plans during
the current year and each of the three preceding years; (v) all collective
bargaining agreements pursuant to which contributions to any Employee Plan(s)
have been made or obligations incurred (including both pension and welfare
benefits) by Seller or any ERISA Affiliate, and all collective bargaining
agreements pursuant to which contributions are being made or obligations are
owed by such entities; (vi) all securities registration statements filed with
respect to any Employee Plan; (vii) all contracts with third-party
administrators, actuaries, investment managers, consultants and other
independent contractors that relate to any Employee Plan, (viii) with respect
to
Employee Plans that are subject to Title IV of ERISA, the Form PBGC-1 filed
for
each of the three most recent plan years; and (ix) all summary plan
descriptions, summaries of material modifications and memoranda, employee
handbooks and other written communications regarding the Employee Plans.
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c. Except
as
disclosed in Exhibit 3.14(c), full payment has been made of all amounts that
are
required under the terms of each Employee Plan to be paid as contributions
with
respect to all periods prior to and including the last day of the most recent
fiscal year of such Employee Plan ended on or before the date of this Agreement
and all periods thereafter prior to the Closing Date, and no accumulated funding
deficiency or liquidity shortfall (as those terms are defined in Section 302
of
ERISA and Section 412 of the Code) has been incurred with respect to any such
Employee Plan, whether or not waived. The value of the assets of each Employee
Plan exceeds the amount of all benefit liabilities (determined on a plan
termination basis using the actuarial assumptions established by the PBGC as
of
the Closing Date) of such Employee Plan. Seller is not required to provide
security to an Employee Plan under Section 401(a)(29) of the Code. The funded
status of each Employee Plan that is a Defined Benefit Plan is disclosed on
Exhibit 3.14(c) in a manner consistent with the Statement of Financial
Accounting Standards No. 87. Seller has paid in full all required insurance
premiums, subject only to normal retrospective adjustments in the ordinary
course, with regard to the Employee Plans for all policy years or other
applicable policy periods ending on or before the Closing Date.
d. Except
as
disclosed in Exhibit 3.14(d), no Employee Plan, if subject to Title IV of ERISA,
has been completely or partially terminated, nor has any event occurred nor
does
any circumstance exist that could result in the partial termination of such
Employee Plan. The PBGC has not instituted or threatened a Proceeding to
terminate or to appoint a trustee to administer any of the Employee Plans
pursuant to Subtitle 1 of Title IV of ERISA, and no condition or set of
circumstances exists that presents a material risk of termination or partial
termination of any of the Employee Plans by the PBGC. None of the Employee
Plans
has been the subject of, and no event has occurred or condition exists that
could be deemed, a reportable event (as defined in Section 4043 of ERISA) as
to
which a notice would be required (without regard to regulatory monetary
thresholds) to be filed with the PBGC. Seller has paid in full all insurance
premiums due to the PBGC with regard to the Employee Plans for all applicable
periods ending on or before the Closing Date.
e. Neither
Seller nor any ERISA Affiliate has any liability or has Knowledge of any facts
or circumstances that might give rise to any liability, and the Contemplated
Transactions will not result in any liability, (i) for the termination of or
withdrawal from any Employee Plan under Sections 4062, 4063 or 4064 of ERISA,
(ii) for any lien imposed under Section 302(f) of ERISA or Section 412(n) of
the
Code, (iii) for any interest payments required under Section 302(e) of ERISA
or
Section 412(m) of the Code, (iv) for any excise tax imposed by Section 4971
of
the Code, (v) for any minimum funding contributions under Section 302(c)(11)
of
ERISA or Section 412(c)(11) of the Code or (vi) for withdrawal from any
Multiemployer Plan under Section 4201 of ERISA.
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f. Seller
has, at all times, complied, and currently complies, in all material respects
with the applicable continuation requirements for its welfare benefit plans,
including (1) Section 4980B of the Code (as well as its predecessor provision,
Section 162(k) of the Code) and Sections 601 through 608, inclusive, of ERISA,
which provisions are hereinafter referred to collectively as “COBRA” and (2) any
applicable state statutes mandating health insurance continuation coverage
for
employees.
g. The
form
of all Employee Plans is in compliance with the applicable terms of ERISA,
the
Code, and any other applicable laws, including the Americans with Disabilities
Act of 1990, the Family Medical Leave Act of 1993 and the Health Insurance
Portability and Accountability Act of 1996, and such plans have been operated
in
compliance with such laws and the written Employee Plan documents. Neither
Seller nor any fiduciary of an Employee Plan has violated the requirements
of
Section 404 of ERISA. All required reports and descriptions of the Employee
Plans (including Internal Revenue Service Form 5500 Annual Reports, Summary
Annual Reports and Summary Plan Descriptions and Summaries of Material
Modifications) have been (when required) timely filed with the IRS, the U.S.
Department of Labor or other Governmental Body and distributed as required,
and
all notices required by ERISA or the Code or any other Legal Requirement with
respect to the Employee Plans have been appropriately given.
h. Each
Employee Plan that is intended to be qualified under Section 401(a) of the
Code
has received a favorable determination letter from the IRS, and Seller has
no
Knowledge of any circumstances that will or could result in revocation of any
such favorable determination letter. Each trust created under any Employee
Plan
has been determined to be exempt from taxation under Section 501(a) of the
Code,
and Seller is not aware of any circumstance that will or could result in a
revocation of such exemption. Each Employee Welfare Benefit Plan (as defined
in
Section 3(1) of ERISA) that utilizes a funding vehicle described in Section
501(c)(9) of the Code or is subject to the provisions of Section 505 of the
Code
has been the subject of a notification by the IRS that such funding vehicle
qualifies for tax-exempt status under Section 501(c)(9) of the Code or that
the
plan complies with Section 505 of the Code, unless the IRS does not, as a matter
of policy, issue such notification with respect to the particular type of plan.
With respect to each Employee Plan, no event has occurred or condition exists
that will or could give rise to a loss of any intended tax consequence or to
any
Tax under Section 511 of the Code.
i. There
is
no material pending or threatened Proceeding relating to any Employee Plan,
nor
is there any basis for any such Proceeding. Neither Seller nor any fiduciary
of
an Employee Plan has engaged in a transaction with respect to any Employee
Plan
that, assuming the taxable period of such transaction expired as of the date
hereof, could subject Seller or Buyer to a Tax or penalty imposed by either
Section 4975 of the Code or Section 502(l) of ERISA or a violation of Section
406 of ERISA. The Contemplated Transactions will not result in the potential
assessment of a Tax or penalty under Section 4975 of the Code or Section 502(l)
of ERISA nor result in a violation of Section 406 of ERISA.
j. Seller
has maintained workers’ compensation coverage as required by applicable state
law through purchase of insurance and not by self-insurance or otherwise except
as disclosed to Buyer on Exhibit 3.14(j).
k. Except
as
required by Legal Requirements and as provided in Section 10.1(d), the
consummation of the Contemplated Transactions will not accelerate the time
of
vesting or the time of payment, or increase the amount, of compensation due
to
any director, employee, officer, former employee or former officer of Seller.
There are no contracts or arrangements providing for payments that could subject
any person to liability for tax under Section 4999 of the Code.
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26
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l. Except
for the continuation coverage requirements of COBRA, Seller has no obligations
or potential liability for benefits to employees, former employees or their
respective dependents following termination of employment or retirement under
any of the Employee Plans that are Employee Welfare Benefit Plans.
m.
None
of
the Contemplated Transactions will result in an amendment, modification or
termination of any of the Employee Plans. No written or oral representations
have been made to any employee or former employee of Seller promising or
guaranteeing any employer payment or funding for the continuation of medical,
dental, life or disability coverage for any period of time beyond the end of
the
current plan year (except to the extent of coverage required under COBRA).
No
written or oral representations have been made to any employee or former
employee of Seller concerning the employee benefits of Buyer.
n. With
respect to any Employee Plan that is a “multiemployer plan” within the meaning
of Section 4001(a)(3) of ERISA (“Multiemployer Plan”), and any other
Multiemployer Plan to which Seller has at any time had an obligation to
contribute:
(i) all
contributions required by the terms of such Multiemployer Plan and any
collective bargaining agreement have been made when due; and
(ii) Seller
would not be subject to any withdrawal liability under Part 1 of Subtitle E
of
Title IV of ERISA if, as of the date hereof, Seller were to engage in a
“complete withdrawal” (as defined in ERISA Section 4203) or a “partial
withdrawal” (as defined in ERISA Section 4205) from such Multiemployer Plan.
3.15
COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
a. Except
as
set forth in Exhibit 3.15(a):
(i) Seller
is, and at all times since January 1, 2001, has been, in full compliance with
each Legal Requirement that is or was applicable to it or to the conduct or
operation of its business or the ownership or use of any of its assets;
(ii) no
event
has occurred or circumstance exists that (with or without notice or lapse of
time) (A) may constitute or result in a violation by Seller of, or a failure
on
the part of Seller to comply with, any Legal Requirement or (B) may give rise
to
any obligation on the part of Seller to undertake, or to bear all or any portion
of the cost of, any remedial action of any nature; and
(iii) Seller
has not received, at any time since January 1, 2001, any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible or potential violation of,
or
failure to comply with, any Legal Requirement or (B) any actual, alleged,
possible or potential obligation on the part of Seller to undertake, or to
bear
all or any portion of the cost of, any remedial action of any nature.
b. Exhibit
3.15(b) contains a complete and accurate list of each Governmental Authorization
that is held by Seller or that otherwise relates to Seller’s business or the
Assets. Each Governmental Authorization listed or required to be listed in
Exhibit 3.15(b) is valid and in full force and effect. Except as set forth
in
Exhibit 3.15(b):
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27
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(i) Seller
is, and at all times since January 1, 2001, has been, in full compliance with
all of the terms and requirements of each Governmental Authorization identified
or required to be identified in Exhibit 3.15(b);
(ii) no
event
has occurred or circumstance exists that may (with or without notice or lapse
of
time) (A) constitute or result directly or indirectly in a violation of or
a
failure to comply with any term or requirement of any Governmental Authorization
listed or required to be listed in Exhibit 3.15(b) or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation or
termination of, or any modification to, any Governmental Authorization listed
or
required to be listed in Exhibit 3.15(b);
(iii) Seller
has not received, at any time since January 1, 2001, any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible or potential violation of
or
failure to comply with any term or requirement of any Governmental Authorization
or (B) any actual, proposed, possible or potential revocation, withdrawal,
suspension, cancellation, termination of or modification to any Governmental
Authorization; and
(iv) all
applications required to have been filed for the renewal of the Governmental
Authorizations listed or required to be listed in Exhibit 3.15(b) have been
duly
filed on a timely basis with the appropriate Governmental Bodies, and all other
filings required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the appropriate
Governmental Bodies.
The
Governmental Authorizations listed in Exhibit 3.15(b) collectively constitute
all of the Governmental Authorizations necessary to permit Seller to lawfully
conduct and operate its business in the manner in which it currently conducts
and operates such business and to permit Seller to own and use its assets in
the
manner in which it currently owns and uses such assets.
3.16
LEGAL PROCEEDINGS; ORDERS
a. Except
as
set forth in Exhibit 3.16(a), there is no pending or, to Seller’s Knowledge,
threatened Proceeding:
(i) by
or
against Seller or that otherwise relates to or may affect the business of,
or
any of the assets owned or used by, Seller; or
(ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, any of the Contemplated Transactions.
To
the
Knowledge of Seller, no event has occurred or circumstance exists that is
reasonably likely to give rise to or serve as a basis for the commencement
of
any such Proceeding. Seller has delivered to Buyer copies of all pleadings,
correspondence and other documents relating to each Proceeding listed in Exhibit
3.16(a). There are no Proceedings listed or required to be listed in Exhibit
3.16(a) that could have a material adverse effect on the business, operations,
assets, condition or prospects of Seller or upon the Assets.
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28
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b. Except
as
set forth in Exhibit 3.16(b):
(i) there
is
no Order to which Seller, its business or any of the Assets is subject; and
(ii) to
the
Knowledge of Seller, no officer, director, agent or employee of Seller is
subject to any Order that prohibits such officer, director, agent or employee
from engaging in or continuing any conduct, activity or practice relating to
the
business of Seller.
c. Except
as
set forth in Exhibit 3.16(c):
(i) Seller
is, and, at all times since January 1, 2001, has been in compliance with all
of
the terms and requirements of each Order to which it or any of the Assets is
or
has been subject;
(ii) no
event
has occurred or circumstance exists that is reasonably likely to constitute
or
result in (with or without notice or lapse of time) a violation of or failure
to
comply with any term or requirement of any Order to which Seller or any of
the
Assets is subject; and
(iii) Seller
has not received, at any time since January 1, 2001, any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding any actual, alleged, possible or potential violation of, or
failure to comply with, any term or requirement of any Order to which Seller
or
any of the Assets is or has been subject.
3.17
ABSENCE OF CERTAIN CHANGES AND EVENTS
Except
as
set forth in Exhibit 3.17, since the date of the Balance Sheet, Seller has
conducted its business only in the Ordinary Course of Business and there has
not
been any:
a. change
in
Seller’s authorized or issued capital stock, grant of any stock option or right
to purchase shares of capital stock of Seller or issuance of any security
convertible into such capital stock;
b. amendment
to the Governing Documents of Seller;
c. payment
(except in the Ordinary Course of Business) or increase by Seller of any
bonuses, salaries or other compensation to any shareholder, director, officer
or
employee or entry into any employment, severance or similar Contract with any
director, officer or employee;
d. adoption
of, amendment to or increase in the payments to or benefits under, any Employee
Plan;
e. damage
to
or destruction or loss of any Asset, whether or not covered by insurance;
f. entry
into, termination of or receipt of notice of termination of (i) any license,
distributorship, dealer, sales representative, joint venture, credit or similar
Contract to which Seller is a party, or (ii) any Contract or transaction
involving a total remaining commitment by Seller;
g. sale
(other than sales of Inventories in the Ordinary Course of Business), lease
or
other disposition of any Asset or property of Seller (including the Intellectual
Property Assets) or the creation of any Encumbrance on any Asset;
h. cancellation
or waiver of any claims or rights with a value to Seller;
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29
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i. indication
by any customer or supplier of an intention to discontinue or change the terms
of its relationship with Seller;
j. material
change in the accounting methods used by Seller; or
k. Contract
by Seller to do any of the foregoing.
3.18
CONTRACTS; NO DEFAULTS
a. Exhibit
3.18(a) contains an accurate and complete list, and Seller has delivered to
Buyer accurate and complete copies, of:
(i) each
Seller Contract that involves performance of services or delivery of goods
or
materials by Seller;
(ii) each
Seller Contract that involves performance of services or delivery of goods
or
materials to Seller;
(iii) each
Seller Contract that was not entered into in the Ordinary Course of Business
and
that involves expenditures or receipts of Seller;
(iv) each
Seller Contract affecting the ownership of, leasing of, title to, use of or
any
leasehold or other interest in any real or personal;
(v) each
Seller Contract with any labor union or other employee representative of a
group
of employees relating to wages, hours and other conditions of employment;
(vi) each
Seller Contract (however named) involving a sharing of profits, losses, costs
or
liabilities by Seller with any other Person;
(vii) each
Seller Contract containing covenants that in any way purport to restrict
Seller’s business activity or limit the freedom of Seller to engage in any line
of business or to compete with any Person;
(viii) each
Seller Contract providing for payments to or by any Person based on sales,
purchases or profits, other than direct payments for goods;
(ix) each
power of attorney of Seller that is currently effective and outstanding;
(x) each
Seller Contract entered into other than in the Ordinary Course of Business
that
contains or provides for an express undertaking by Seller to be responsible
for
consequential damages;
(xi) each
Seller Contract for capital expenditures;
(xii) each
Seller Contract not denominated in U.S. dollars;
(xiii) each
written warranty, guaranty and/or other similar undertaking with respect to
contractual performance extended by Seller other than in the Ordinary Course
of
Business; and
(xiv) each
amendment, supplement and modification (whether oral or written) in respect
of
any of the foregoing.
Exhibit
3.18(a) sets forth reasonably complete details concerning such Contracts,
including the parties to the Contracts, the amount of the remaining commitment
of Seller under the Contracts and the location of Seller’s office where details
relating to the Contracts are located.
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30
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b. Except
as
set forth in Exhibit 3.18(b), Shareholder does not have nor may he acquire
any
rights under, and Shareholder does not have nor may he become subject to any
obligation or liability under, any Contract that relates to the business of
Seller or any of the Assets.
c. Except
as
set forth in Exhibit 3.18(c):
(i) each
Contract identified or required to be identified in Exhibit 3.18(a) and which
is
to be assigned to or assumed by Buyer under this Agreement is in full force
and
effect and is valid and enforceable in accordance with its terms;
(ii) each
Contract identified or required to be identified in Exhibit 3.18(a) and which
is
being assigned to or assumed by Buyer is assignable by Seller to Buyer without
the consent of any other Person; and
(iii) to
the
Knowledge of Seller, no Contract identified or required to be identified in
Exhibit 3.18(a) and which is to be assigned to or assumed by Buyer under this
Agreement will upon completion or performance thereof have a material adverse
affect on the business, assets or condition of Seller or the business to be
conducted by Buyer with the Assets.
d. Except
as
set forth in Exhibit 3.18(d):
(i) Seller
is, and at all times since January 1, 2001, has been, in compliance with all
applicable terms and requirements of each Seller Contract which is being assumed
by Buyer;
(ii) each
other Person that has or had any obligation or liability under any Seller
Contract which is being assigned to Buyer is, and at all times since January
1,
2001, has been, in full compliance with all applicable terms and requirements
of
such Contract;
(iii) no
event
has occurred or circumstance exists that (with or without notice or lapse of
time) may contravene, conflict with or result in a Breach of, or give Seller
or
other Person the right to declare a default or exercise any remedy under, or
to
accelerate the maturity or performance of, or payment under, or to cancel,
terminate or modify, any Seller Contract that is being assigned to or assumed
by
Buyer;
(iv) no
event
has occurred or circumstance exists under or by virtue of any Contract that
(with or without notice or lapse of time) would cause the creation of any
Encumbrance affecting any of the Assets; and
(v) Seller
has not given to or received from any other Person, at any time since January
1,
2001, any notice or other communication (whether oral or written) regarding
any
actual, alleged, possible or potential violation or Breach of, or default under,
any Contract which is being assigned to or assumed by Buyer.
e. There
are
no renegotiations of, attempts to renegotiate or outstanding rights to
renegotiate any material amounts paid or payable to Seller under current or
completed Contracts with any Person having the contractual or statutory right
to
demand or require such renegotiation and no such Person has made written demand
for such renegotiation.
f. Each
Contract relating to the sale, design, manufacture or provision of products
or
services by Seller has been entered into in the Ordinary Course of Business
of
Seller and has been entered into without the commission of any act alone or
in
concert with any other Person, or any consideration having been paid or
promised, that is or would be in violation of any Legal Requirement.
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3.19
INSURANCE
a. Seller
has delivered to Buyer:
(i) accurate
and complete copies of all policies of insurance (and correspondence relating
to
coverage thereunder) to which Seller is a party or under which Seller is
covered, a list of which is included in Exhibit 3.19(a); and
(ii) accurate
and complete copies of all pending applications by Seller for policies of
insurance.
b. Exhibit
3.19(b) describes:
(i) any
self-insurance arrangement by or affecting Seller, including any reserves
established thereunder;
(ii) any
Contract or arrangement, other than a policy of insurance, for the transfer
or
sharing of any risk to which Seller is a party or which involves the business
of
Seller; and
(iii) all
obligations of Seller to provide insurance coverage to Third Parties (for
example, under Leases or service agreements) and identifies the policy under
which such coverage is provided.
c. Except
as
set forth in Exhibit 3.19(c):
(i) all
policies of insurance to which Seller is a party or that provide coverage to
Seller:
(A) are
valid, outstanding and enforceable;
(B) are
issued by an insurer that is financially sound and reputable;
(C) taken
together, provide adequate insurance coverage for the Assets and the operations
of Seller for all risks normally insured against by a Person carrying on the
same business or businesses as Seller in the same location; and
(D) are
sufficient for compliance with all Legal Requirements and Seller Contracts;
(ii) Seller
has not received (A) any refusal of coverage or any notice that a defense will
be afforded with reservation of rights or (B) any notice of cancellation or
any
other indication that any policy of insurance is no longer in full force or
effect or that the issuer of any policy of insurance is not willing or able
to
perform its obligations thereunder;
(iii) Seller
has paid all premiums due, and has otherwise performed all of its obligations,
under each policy of insurance to which it is a party or that provides coverage
to Seller; and
(iv) Seller
has given notice to the insurer of all claims that may be insured thereby.
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3.20
ENVIRONMENTAL MATTERS
Except
as
disclosed in Exhibit 3.20:
a. Seller
is, and at all times has been, in full compliance with, and has not been and
is
not in violation of or liable under, any Environmental Law. Neither Seller
nor
the Shareholder has any basis to expect, nor has any of them or any other Person
for whose conduct they are or may be held to be responsible received, any actual
or threatened order, notice or other communication from (i) any Governmental
Body or private citizen acting in the public interest or (ii) the current or
prior owner or operator of any Facilities, of any actual or potential violation
or failure to comply with any Environmental Law, or of any actual or threatened
obligation to undertake or bear the cost of any Environmental, Health and Safety
Liabilities with respect to any Facility or other property or asset (whether
real, personal or mixed) in which Seller has or had an interest, or with respect
to any property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used or processed by Seller or
any
other Person for whose conduct it is or may be held responsible, or from which
Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled or received.
b. There
are
no pending or, to the Knowledge of Seller, threatened claims, Encumbrances,
or
other restrictions of any nature resulting from any Environmental, Health and
Safety Liabilities or arising under or pursuant to any Environmental Law with
respect to or affecting any Facility or any other property or asset (whether
real, personal or mixed) in which Seller has or had an interest.
c. Neither
Seller nor the Shareholder has any Knowledge of or any basis to expect, nor
has
any of them, or any other Person for whose conduct they are or may be held
responsible, received, any citation, directive, inquiry, notice, Order, summons,
warning or other communication that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual, or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual, or potential obligation
to undertake or bear the cost of any Environmental, Health and Safety
Liabilities with respect to any Facility or property or asset (whether real,
personal or mixed) in which Seller has or had an interest, or with respect
to
any property or facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used or processed by Seller or any other Person
for whose conduct it is or may be held responsible, have been transported,
treated, stored, handled, transferred, disposed, recycled or received.
d. Neither
Seller nor any other Person for whose conduct it is or may be held responsible
has any Environmental, Health and Safety Liabilities with respect to any
Facility or, to the Knowledge of Seller, with respect to any other property
or
asset (whether real, personal or mixed) in which Seller (or any predecessor)
has
or had an interest or at any property geologically or hydrologically adjoining
any Facility or any such other property or asset.
e. There
are
no Hazardous Materials present on or in the Environment at any Facility or,
to
Seller’s Knowledge, after reasonable investigation, at any geologically or
hydrologically adjoining property, including any Hazardous Materials contained
in barrels, aboveground or underground storage tanks, landfills, land deposits,
dumps, equipment (whether movable or fixed) or other containers, either
temporary or permanent, and deposited or located in land, water, sumps, or
any
other part of the Facility or such adjoining property, or incorporated into
any
structure therein or thereon. Neither Seller nor any Person for whose conduct
it
is or may be held responsible, or to the Knowledge of Seller, any other Person,
has permitted or conducted, or is aware of, any Hazardous Activity conducted
with respect to any Facility or any other property or assets (whether real,
personal or mixed) in which Seller has or had an interest except in full
compliance with all applicable Environmental Laws.
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f. There
has
been no Release or, to the Knowledge of Seller, Threat of Release, of any
Hazardous Materials at or from any Facility or at any other location where
any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by any Facility, or from any
other property or asset (whether real, personal or mixed) in which Seller has
or
had an interest, or to the Knowledge of Seller any geologically or
hydrologically adjoining property, whether by Seller or any other Person.
g. Seller
has delivered to Buyer true and complete copies and results of any reports,
studies, analyses, tests, or monitoring possessed or initiated by Seller
pertaining to Hazardous Materials or Hazardous Activities in, on, or under
the
Facilities, or concerning compliance, by Seller or any other Person for whose
conduct it is or may be held responsible, with Environmental Laws.
3.21
EMPLOYEES
a. Exhibit
3.21(a) contains a complete and accurate list of the following information
for
each employee, director, independent contractor, consultant and agent of Seller,
including each employee on leave of absence or layoff status: name; job title;
date of hiring or engagement; current compensation paid or payable and any
change in compensation since January 1, 2003; sick and vacation leave that
is
accrued but unused; and service credited for purposes of vesting and eligibility
to participate under any Employee Plan, or any other employee or director
benefit plan.
b. Exhibit
3.21(b) contains a complete and accurate list of the following information
for
each retired employee or director of Seller, or their dependents, receiving
benefits or scheduled to receive benefits in the future: name; pension benefits;
pension option election; retiree medical insurance coverage; retiree life
insurance coverage; and other benefits.
c. Exhibit
3.21(c) states the number of employees terminated by Seller since July 1, 2005,
and contains a complete and accurate list of the following information for
each
employee of Seller who has been terminated or laid off, or whose hours of work
have been reduced by more than fifty percent (50%) by Seller, in the six (6)
months prior to the date of this Agreement: (i) the date of such termination,
layoff or reduction in hours; and (ii) the reason for such termination, layoff
or reduction in hours.
d. Seller
has not violated the Worker Adjustment and Retraining Notification Act (the
“WARN Act”) or any similar state or local Legal Requirement. Seller has
terminated no employees during the ninety (90) day period prior to the date
of
this Agreement.
e. To
the
Knowledge of Seller, no officer, director, agent, employee, consultant, or
contractor of Seller is bound by any Contract that purports to limit the ability
of such officer, director, agent, employee, consultant, or contractor (i) to
engage in or continue or perform any conduct, activity, duties or practice
relating to the business of Seller or (ii) to assign to Seller or to any other
Person any rights to any invention, improvement, or discovery. No former or
current employee of Seller is a party to, or is otherwise bound by, any Contract
that in any way adversely affected, affects, or will affect the ability of
Seller or Buyer to conduct the business as heretofore carried on by Seller.
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3.22
LABOR DISPUTES; COMPLIANCE
a. Seller
has complied in all respects with all Legal Requirements relating to employment
practices, terms and conditions of employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar Taxes and occupational safety and
health. Seller is not liable for the payment of any Taxes, fines, penalties,
or
other amounts, however designated, for failure to comply with any of the
foregoing Legal Requirements.
b. Except
as
disclosed in Exhibit 3.22(b), (i) Seller has not been, and is not now, a party
to any collective bargaining agreement or other labor contract; (ii) there
has
not been, there is not presently pending or existing, and to Seller’s Knowledge
there is not threatened, any strike, slowdown, picketing, work stoppage or
employee grievance process involving Seller; (iii) to Seller’s Knowledge no
event has occurred or circumstance exists that could provide the basis for
any
work stoppage or other labor dispute; (iv) there is not pending or, to Seller’s
Knowledge, threatened against or affecting Seller any Proceeding relating to
the
alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed with the National
Labor Relations Board or any comparable Governmental Body, and there is no
organizational activity or other labor dispute against or affecting Seller
or
the Facilities; (v) no application or petition for an election of or for
certification of a collective bargaining agent is pending; (vi) no grievance
or
arbitration Proceeding exists that might have an adverse effect upon Seller
or
the conduct of its business; (vii) there is no lockout of any employees by
Seller, and no such action is contemplated by Seller; and (viii) to Seller’s
Knowledge there has been no charge of discrimination filed against or threatened
against Seller with the Equal Employment Opportunity Commission or similar
Governmental Body.
3.23
INTELLECTUAL PROPERTY ASSETS
a. The
term
“Intellectual Property Assets” means all intellectual property owned or licensed
(as licensor or licensee) by Seller in which Seller has a proprietary interest,
including:
(i) Seller’s
name, all assumed fictional business names, trade names, registered and
unregistered trademarks, service marks and applications (collectively, “Marks”);
(ii) all
patents, patent applications and inventions and discoveries that may be
patentable (collectively, “Patents”);
(iii) all
registered and unregistered copyrights in both published works and unpublished
works (collectively, “Copyrights”);
(iv) all
rights in mask works;
(v) all
know-how, trade secrets, confidential or proprietary information, customer
lists, Software, technical information, data, process technology, plans,
drawings and blue prints (collectively, “Trade Secrets”); and
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(vi) all
rights in internet web sites and internet domain names presently used by Seller
(collectively “Net Names”).
b. Exhibit
3.23(b) contains a complete and accurate list and summary description, including
any royalties paid or received by Seller, and Seller has delivered to Buyer
accurate and complete copies, of all Seller Contracts relating to the
Intellectual Property Assets, except for any license implied by the sale of
a
product and perpetual, paid-up licenses for commonly available Software programs
under which Seller is the licensee. There are no outstanding and, to Seller’s
Knowledge, no threatened disputes or disagreements with respect to any such
Contract.
c. Except
as
set forth in Exhibit 3.23(c), the Intellectual Property Assets are all those
necessary for the operation of Seller’s business as it is currently conducted.
Seller is the owner or licensee of all right, title and interest in and to
each
of the Intellectual Property Assets, free and clear of all Encumbrances, and
has
the right to use without payment to a Third Party all of the Intellectual
Property Assets, other than in respect of licenses listed in Exhibit 3.23(c).
x. Xxxxx
(i) Exhibit
3.23(d) contains a complete and accurate list and summary description of all
Marks.
(ii) Except
as
identified in Exhibit 3.23(d), all Marks have been registered with the United
States Patent and Trademark Office, are currently in compliance with all formal
Legal Requirements (including the timely post-registration filing of affidavits
of use and incontestability and renewal applications), are valid and enforceable
and are not subject to any maintenance fees or taxes or actions falling due
within ninety (90) days after the Closing Date.
(iii) No
Xxxx
has been or is now involved in any opposition, invalidation or cancellation
Proceeding and, to Seller’s Knowledge, no such action is threatened with respect
to any of the Marks.
(iv) To
Seller’s Knowledge, there is no potentially interfering trademark or trademark
application of any other Person.
(v) No
Xxxx
is infringed or, to Seller’s Knowledge, has been challenged or threatened in any
way. None of the Marks used by Seller infringes or is alleged to infringe any
trade name, trademark or service xxxx of any other Person.
(vi) All
products and materials containing a Xxxx xxxx the proper federal registration
notice where permitted by law.
e. Trade
Secrets
(i) With
respect to each Trade Secret, the documentation relating to such Trade Secret,
if any, is current, accurate and sufficient in detail and content to identify
and explain it and to allow its full and proper use without reliance on the
knowledge or memory of any individual.
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(ii) Seller
has taken all reasonable precautions to protect the secrecy, confidentiality
and
value of all Trade Secrets (including the enforcement by Seller of a policy
requiring each employee or contractor to execute proprietary information and
confidentiality agreements substantially in Seller’s standard form, and all
current and former employees and contractors of Seller have executed such an
agreement).
(iii) Seller
has good title to and an absolute right to use the Trade Secrets. The Trade
Secrets are not part of the public knowledge or literature and, to Seller’s
Knowledge, have not been used, divulged or appropriated either for the benefit
of any Person (other than Seller) or to the detriment of Seller. No Trade Secret
is subject to any adverse claim or has been challenged or threatened in any
way
or infringes any intellectual property right of any other Person.
f. Net
Names
(i) Exhibit
3.23(f) contains a complete and accurate list and summary description of all
Net
Names.
(ii) All
Net
Names have been registered in the name of Seller and are in compliance with
all
formal Legal Requirements.
(iii) No
Net
Name has been or is now involved in any dispute, opposition, invalidation or
cancellation Proceeding and, to Seller’s Knowledge, no such action is threatened
with respect to any Net Name.
(iv) To
Seller’s Knowledge, there is no domain name application pending of any other
person which would or would potentially interfere with or infringe any Net
Name.
(v) No
Net
Name is infringed or, to Seller’s Knowledge, has been challenged, interfered
with or threatened in any way. No Net Name infringes, interferes with or is
alleged to interfere with or infringe the trademark, copyright or domain name
of
any other Person.
3.24
COMPLIANCE WITH THE FOREIGN CORRUPT PRACTICES ACT AND EXPORT CONTROL AND
ANTIBOYCOTT LAWS
a. Seller
and its Representatives have not, to obtain or retain business, directly or
indirectly offered, paid or promised to pay, or authorized the payment of,
any
money or other thing of value (including any fee, gift, sample, travel expense
or entertainment with a value in excess of one hundred dollars ($100.00) in
the
aggregate to any one individual in any year) or any commission payment, to:
(i) any
person who is an official, officer, agent, employee or representative of any
Governmental Body or of any existing or prospective customer (whether government
owned or nongovernment owned);
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(ii) any
political party or official thereof;
(iii) any
candidate for political or political party office; or
(iv) any
other
individual or entity;
while
knowing or having reason to believe that all or any portion of such money or
thing of value would be offered, given, or promised, directly or indirectly,
to
any such official, officer, agent, employee, representative, political party,
political party official, candidate, individual, or any entity affiliated with
such customer, political party or official or political office.
b. Except
as
set forth in Exhibit 3.24(b), Seller has made all payments to Third Parties
by
check mailed to such Third Parties’ principal place of business or by wire
transfer to a bank located in the same jurisdiction as such party’s principal
place of business.
c. Each
transaction is properly and accurately recorded on the books and Records of
Seller, and each document upon which entries in Seller’s books and Records are
based is complete and accurate in all respects. Seller maintains a system of
internal accounting controls adequate to insure that Seller maintains no
off-the-books accounts and that Seller’s assets are used only in accordance with
Seller’s management directives.
d. Seller
has at all times been in compliance with all Legal Requirements relating to
export control and trade embargoes. No product sold or service provided by
Seller during the last five (5) years has been, directly or indirectly, sold
to
or performed on behalf of Cuba, Iraq, Iran, Libya or North Korea.
e. Except
as
set forth in Exhibit 3.24(e), Seller has not violated the antiboycott
prohibitions contained in 50 U.S.C. sect. 2401 et seq. or taken any action
that
can be penalized under Section 999 of the Code. Except as set forth in Exhibit
3.24(e), during the last five (5) years, Seller has not been a party to, is
not
a beneficiary under and has not performed any service or sold any product under
any Seller Contract under which a product has been sold to customers in Bahrain,
Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, Sudan, Syria,
United Arab Emirates or the Republic of Yemen.
3.25
RELATIONSHIPS WITH RELATED PERSONS
Except
as
disclosed in Exhibit 3.25, neither Seller nor the Shareholder nor any Related
Person of any of them has, or has had, any interest in any property (whether
real, personal or mixed and whether tangible or intangible) used in or
pertaining to Seller’s business. Neither Seller, Shareholder nor any Related
Person of any of them owns, or has owned, of record or as a beneficial owner,
an
equity interest or any other financial or profit interest in any Person that
has
(a) had business dealings or a material financial interest in any transaction
with Seller other than business dealings or transactions disclosed in Exhibit
3.25, each of which has been conducted in the Ordinary Course of Business with
Seller at substantially prevailing market prices and on substantially prevailing
market terms or (b) engaged in competition with Seller with respect to any
line
of the products or services of Seller (a “Competing Business”) in any market
presently served by Seller, except for ownership of less than one percent (1%)
of the outstanding capital stock of any Competing Business that is publicly
traded on any recognized exchange or in the over-the-counter market. Except
as
set forth in Exhibit 3.25, neither Seller, Shareholder nor any Related Person
of
either of them is a party to any Contract with, or has any claim or right
against, Seller.
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3.26
BROKERS OR FINDERS
Neither
Seller nor any of its Representatives have incurred any obligation or liability,
contingent or otherwise, for brokerage or finders’ fees or agents’ commissions
or other similar payments in connection with the sale of Seller’s business or
the Assets or the Contemplated Transactions, except the liability of Seller
to
Pinnacle Capital Corporation. Seller and the Shareholder indemnify Buyer, its
Shareholder, directors, officers, employees and agents from any liability for
payment of the fee and related costs payable to Pinnacle Capital Corporation.
3.27
SECURITIES LAW MATTERS
Seller
is
acquiring the Secured Subordinated Promissory Note for its own account and
not
with a view to its distribution within the meaning of Section 2(11) of the
Securities Act.
3.28
SOLVENCY
a. Seller
is
not now insolvent and will not be rendered insolvent by any of the Contemplated
Transactions. As used in this section, “insolvent” means that the sum of the
debts and other probable Liabilities of Seller exceeds the present fair saleable
value of Seller’s assets.
b. Immediately
after giving effect to the consummation of the Contemplated Transactions: (i)
Seller will be able to pay its Liabilities as they become due in the usual
course of its business; (ii) Seller will not have unreasonably small capital
with which to conduct its present or proposed business; (iii) Seller will have
assets (calculated at fair market value) that exceed its Liabilities; and (iv)
taking into account all pending and threatened litigation, final judgments
against Seller in actions for money damages are not reasonably anticipated
to be
rendered at a time when, or in amounts such that, Seller will be unable to
satisfy any such judgments promptly in accordance with their terms (taking
into
account the maximum probable amount of such judgments in any such actions and
the earliest reasonable time at which such judgments might be rendered) as
well
as all other obligations of Seller. The cash available to Seller, after taking
into account all other anticipated uses of the cash, will be sufficient to
pay
all such debts and judgments promptly in accordance with their terms.
3.29
DISCLOSURE
a. No
representation or warranty or other statement made by Seller or the Shareholder
in this Agreement, any Exhibit hereto, the certificates delivered pursuant
to
Section 2.7(a) or otherwise in connection with the Contemplated Transactions
contains any untrue statement or omits to state a material fact necessary to
make any of them, in light of the circumstances in which it was made, not
misleading.
b. Seller
does not have Knowledge of any fact, after reasonable investigation, that has
specific application to Seller (other than general economic or industry
conditions) and that may materially adversely affect the assets, business,
prospects, financial condition or results of operations of Seller that has
not
been set forth in this Agreement.
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SECTION
4
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
represents and warrants to Seller and Shareholder as follows:
4.1
ORGANIZATION AND GOOD STANDING
Buyer
is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, with full corporate power and authority to
conduct its business as it is now conducted.
4.2
AUTHORITY; NO CONFLICT
a. This
Agreement constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms. Upon the execution
and
delivery by Buyer of the Assignment and Assumption Agreement, the Consulting
Agreement, the Secured Subordinated Promissory Note, the Security Agreement,
the
Lease and each other agreement to be executed or delivered by Buyer at Closing
(collectively, the “Buyer’s Closing Documents”), each of the Buyer’s Closing
Documents will constitute the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its respective terms. Buyer has
the
absolute and unrestricted right, power and authority to execute and deliver
this
Agreement and the Buyer’s Closing Documents and to perform its obligations under
this Agreement and the Buyer’s Closing Documents, and such action has been duly
authorized by all necessary corporate action.
b. Neither
the execution and delivery of this Agreement by Buyer nor the consummation
or
performance of any of the Contemplated Transactions by Buyer will give any
Person the right to prevent, delay or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any
provision of Buyer’s Governing Documents;
(ii) any
resolution adopted by the board of directors or the Shareholder of Buyer;
(iii) any
Legal
Requirement or Order to which Buyer may be subject; or
(iv) any
Contract to which Buyer is a party or by which Buyer may be bound.
Buyer
is
not and will not be required to obtain any Consent from any Person in connection
with the execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
4.3
CERTAIN PROCEEDINGS
There
is
no pending Proceeding that has been commenced against Buyer and that challenges,
or may have the effect of preventing, delaying, making illegal or otherwise
interfering with, any of the Contemplated Transactions. To Buyer’s Knowledge, no
such Proceeding has been threatened.
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4.4
BROKERS OR FINDERS
Neither
Buyer nor any of its Representatives have incurred any obligation or liability,
contingent or otherwise, for brokerage or finders’ fees or agents’ commissions
or other similar payment in connection with the Contemplated Transactions.
SECTION
5
COVENANTS
OF SELLER PRIOR TO CLOSING
5.1
ACCESS AND INVESTIGATION
Between
the date of this Agreement and the Closing Date, and upon reasonable advance
notice received from Buyer, Seller shall (and Shareholder shall cause Seller
to)
(a) afford Buyer and its Representatives and prospective lenders and their
Representatives (collectively, “Buyer Group”) full and free access, during
regular business hours, to Seller’s personnel, properties (including subsurface
testing), Contracts, Governmental Authorizations, books and Records and other
documents and data, such rights of access to be exercised in a manner that
does
not unreasonably interfere with the operations of Seller; (b) furnish Buyer
Group with copies of all such Contracts, Governmental Authorizations, books
and
Records and other existing documents and data as Buyer may reasonably request;
(c) furnish Buyer Group with such additional financial, operating and other
relevant data and information as Buyer may reasonably request; and (d) otherwise
cooperate and assist, to the extent reasonably requested by Buyer, with Buyer’s
investigation of the properties, assets and financial condition related to
Seller. In addition, Buyer shall have the right to have the Real Property and
Tangible Personal Property inspected by Buyer Group, at Buyer’s sole cost and
expense, for purposes of determining the physical condition and legal
characteristics of the Real Property and Tangible Personal Property. In the
event subsurface or other destructive testing is recommended by any of Buyer
Group, Buyer shall be permitted to have the same performed. Buyer shall restore
the Real Property as close to its pre-test condition as is reasonably
practicable.
5.2
OPERATION OF THE BUSINESS OF SELLER
Between
the date of this Agreement and the Closing, Seller shall (and Shareholder shall
cause Seller to):
a. conduct
its business only in the Ordinary Course of Business;
b. except
as
otherwise directed by Buyer in writing, and without making any commitment on
Buyer’s behalf, use its Best Efforts to preserve intact its current business
organization, keep available the services of its officers, employees and agents
and maintain its relations and good will with suppliers, customers, landlords,
creditors, employees, agents and others having business relationships with
it;
x. xxxxxx
with Buyer prior to implementing operational decisions of a material nature,
other than in the Ordinary Course of Business;
d. otherwise
report periodically to Buyer concerning the status of its business, operations
and finances;
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e. make
no
material changes in management personnel without prior consultation with Buyer;
f. maintain
the Assets in a state of repair and condition that complies with Legal
Requirements and is consistent with the requirements and normal conduct of
Seller’s business;
g. keep
in
full force and effect, without amendment, all material rights relating to
Seller’s business;
h. comply
with all Legal Requirements and contractual obligations applicable to the
operations of Seller’s business;
i. continue
in full force and effect the insurance coverage under the policies set forth
in
Exhibit 3.19 or substantially equivalent policies;
j. except
as
required to comply with ERISA or to maintain qualification under Section 401(a)
of the Code, not amend, modify or terminate any Employee Plan without the
express written consent of Buyer, and except as required under the provisions
of
any Employee Plan, not make any contributions to or with respect to any Employee
Plan without the express written consent of Buyer, provided that Seller shall
contribute that amount of cash to each Employee Plan necessary to fully fund
all
of the benefit liabilities of such Employee Plan on a plan-termination basis
as
of the Closing Date;
k. cooperate
with Buyer and assist Buyer in identifying the Governmental Authorizations
required by Buyer to operate the business from and after the Closing Date and
either transferring existing Governmental Authorizations of Seller to Buyer,
where permissible, or obtaining new Governmental Authorizations for Buyer;
l. upon
request from time to time, execute and deliver all documents, make all truthful
oaths, testify in any Proceedings and do all other acts that may be reasonably
necessary or desirable in the opinion of Buyer to consummate the Contemplated
Transactions, all without further consideration; and
m. maintain
all books and Records of Seller relating to Seller’s business in the Ordinary
Course of Business.
5.3
NEGATIVE COVENANT
Except
as
otherwise expressly permitted herein, between the date of this Agreement and
the
Closing Date, Seller shall not, and Shareholder shall not permit Seller to,
without the prior written Consent of Buyer, (a) take any affirmative action,
or
fail to take any reasonable action within its control, as a result of which
any
of the changes or events listed in Sections 3.13 or 3.17 would be likely to
occur; (b) make any modification to any material Contract or Governmental
Authorization, other than in the Ordinary Course of Business; (c) allow the
levels of finished goods, supplies or other materials included in the
Inventories to vary materially from the levels customarily maintained; or (d)
enter into any compromise or settlement of any litigation, proceeding or
governmental investigation relating to the Assets, the business of Seller or
the
Assumed Liabilities.
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5.4
REQUIRED APPROVALS
As
promptly as practicable after the date of this Agreement, Seller shall make
all
filings required by Legal Requirements to be made by it in order to consummate
the Contemplated Transactions. Seller and Shareholder also shall cooperate
with
Buyer and its Representatives with respect to all filings that Buyer elects
to
make or, pursuant to Legal Requirements, shall be required to make in connection
with the Contemplated Transactions. Seller and Shareholder also shall cooperate
with Buyer and its Representatives in obtaining all Material Consents (including
taking all actions requested by Buyer to cause early termination of any
applicable waiting period under the HSR Act).
5.5
NOTIFICATION
Between
the date of this Agreement and the Closing, Seller and Shareholder shall
promptly notify Buyer in writing if any of them becomes aware of (a) any fact
or
condition that causes or constitutes a Breach of any of Seller’s representations
and warranties made as of the date of this Agreement or (b) the occurrence
after
the date of this Agreement of any fact or condition that would or be reasonably
likely to (except as expressly contemplated by this Agreement) cause or
constitute a Breach of any such representation or warranty had that
representation or warranty been made as of the time of the occurrence of, or
Seller’s or the Shareholder’s discovery of, such fact or condition. Such
delivery shall not affect any rights of Buyer under Section 9.2 and Article
11.
During the same period, Seller and Shareholder also shall promptly notify Buyer
of the occurrence of any Breach of any covenant of Seller or Shareholder in
this
Article 5 or of the occurrence of any event that may make the satisfaction
of
the conditions in Article 7 impossible or unlikely.
5.6
NO
NEGOTIATION
Until
such time as this Agreement shall be terminated pursuant to Section 9.1, neither
Seller nor the Shareholder shall directly or indirectly solicit, initiate,
encourage or entertain any inquiries or proposals from, discuss or negotiate
with, provide any nonpublic information to or consider the merits of any
inquiries or proposals from any Person (other than Buyer) relating to any
business combination transaction involving Seller, including the sale by
Shareholder of Seller’s stock, the merger or consolidation of Seller or the sale
of Seller’s business or any of the Assets (other than in the Ordinary Course of
Business). Seller and Shareholder shall notify Buyer of any such inquiry or
proposal within twenty-four (24) hours of receipt or awareness of the same
by
Seller or the Shareholder.
5.7
BEST
EFFORTS
Seller
and Shareholder shall use their Best Efforts to cause the conditions in Article
7 and Section 8.3 to be satisfied.
5.8
INTERIM FINANCIAL STATEMENTS
Until
the
Closing Date, Seller shall deliver to Buyer within ten (10) days after the
end
of each month a copy of the balance sheet and income statement for such month
prepared in a manner and containing information consistent with Seller’s current
accountant-prepared, unaudited financial statements.
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5.9
CHANGE OF NAME
On
or
before the Closing Date, Seller shall (a) amend its Governing Documents and
take
all other actions necessary to change its name to one sufficiently dissimilar
to
Seller’s present name, in Buyer’s judgment, to avoid confusion and (b) take all
actions requested by Buyer to enable Buyer to change its name to Seller’s
present name. In the event that Seller shall assume from the Buyer an
uncollectible account receivable and then collect such account receivable,
Buyer
shall cooperate with Seller to enable it to negotiate for Seller’s benefit a
check that may be payable to “Freundlich Supply Company, Inc.” or similar
name.
5.10
PAYMENT OF LIABILITIES
Seller
shall pay or otherwise satisfy in the Ordinary Course of Business all of its
Liabilities and obligations. Buyer and Seller hereby waive compliance with
the
bulk-transfer provisions of the Uniform Commercial Code (or any similar law)
(“Bulk Sales Laws”) in connection with the Contemplated Transactions.
SECTION
6
COVENANTS
OF BUYER PRIOR TO CLOSING
6.1
REQUIRED APPROVALS
As
promptly as practicable after the date of this Agreement, Buyer shall make,
or
cause to be made, all filings required by Legal Requirements to be made by
it to
consummate the Contemplated Transactions. Buyer also shall cooperate, and cause
its Related Persons to cooperate, with Seller (a) with respect to all filings
Seller shall be required by Legal Requirements to make and (b) in obtaining
all
Consents identified in Exhibit 3.2(c), provided, however, that Buyer shall
not
be required to dispose of or make any change to its business, expend any
material funds or incur any other burden in order to comply with this Section
6.1.
6.2
BEST
EFFORTS
Buyer
shall use its Best Efforts to cause the conditions in Article 8 and Section
7.3
to be satisfied.
SECTION
7
CONDITIONS
PRECEDENT TO BUYER’S OBLIGATION TO CLOSE
Buyer’s
obligation to purchase the Assets and to take the other actions required to
be
taken by Buyer at the Closing is subject to the satisfaction, at or prior to
the
Closing, of each of the following conditions (any of which may be waived by
Buyer, in whole or in part):
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7.1
ACCURACY OF REPRESENTATIONS
a. All
of
Seller’s and Shareholder’s representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), shall have been accurate in all material respects
as
of the date of this Agreement, and shall be accurate in all material respects
as
of the time of the Closing as if then made.
b. Each
of
the representations and warranties in Sections 3.2(a) and 3.4, and each of
the
representations and warranties in this Agreement that contains an express
materiality qualification, shall have been accurate in all respects as of the
date of this Agreement, and shall be accurate in all respects as of the time
of
the Closing as if then made.
7.2
SELLER’S PERFORMANCE
All
of
the covenants and obligations that Seller and Shareholder are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), shall have been duly performed and complied with
in
all material respects.
7.3
CONSENTS
Each
of
the Consents identified in Exhibit 7.3 (the “Material Consents”) shall have been
obtained and shall be in full force and effect.
7.4
ADDITIONAL DOCUMENTS
Seller
and Shareholder shall have caused the documents and instruments required by
Section 2.7(a) and the following documents to be delivered (or tendered subject
only to Closing) to Buyer:
a. an
opinion of Xxxxxx X. Xxxxxx, Esquire, dated the Closing Date, in the form of
Exhibit 7.4(a);
b. The
articles of incorporation and all amendments thereto of Seller, duly certified
as of a recent date by the Secretary of State of the jurisdiction of Seller’s
incorporation (Exhibit 7.4(b));
c. If
requested by Buyer, any Consents or other instruments that may be required
to
permit Buyer’s qualification in each jurisdiction in which Seller is licensed or
qualified to do business as a foreign corporation under the name “Freundlich
Supply Company” or any derivative thereof;
c. Releases
of all Encumbrances on the Assets, other than Permitted Encumbrances;
d. Certificates
dated as of a date not earlier than the third business day prior to the Closing
as to the good standing of Seller and payment of all applicable State Taxes
by
Seller, executed by the appropriate officials of the State of New York and
each
jurisdiction in which Seller is licensed or qualified to do business as a
foreign corporation as specified in Exhibit 3.1(a); and
e. Such
other documents as Buyer may reasonably request for the purpose of:
(i) evidencing
the accuracy of any of Seller’s representations and warranties;
(ii) evidencing
the performance by Seller or the Shareholder of, or the compliance by Seller
or
the Shareholder with, any covenant or obligation required to be performed or
complied with by Seller or such Shareholder;
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(iii) evidencing
the satisfaction of any condition referred to in this Article 7; or
(iv) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions.
7.5
NO
PROCEEDINGS
Since
the
date of this Agreement, there shall not have been commenced or threatened
against Buyer, or against any Related Person of Buyer, any Proceeding (a)
involving any challenge to, or seeking Damages or other relief in connection
with, any of the Contemplated Transactions or (b) that may have the effect
of
preventing, delaying, making illegal, imposing limitations or conditions on
or
otherwise interfering with any of the Contemplated Transactions.
7.6
NO
CONFLICT
Neither
the consummation nor the performance of any of the Contemplated Transactions
will, directly or indirectly (with or without notice or lapse of time),
contravene or conflict with or result in a violation of or cause Buyer or any
Related Person of Buyer to suffer any adverse consequence under (a) any
applicable Legal Requirement or Order or (b) any Legal Requirement or Order
that
has been published, introduced or otherwise proposed by or before any
Governmental Body, excluding Bulk Sales Laws.
7.7
GOVERNMENTAL AUTHORIZATIONS
Buyer
shall have received such Governmental Authorizations as are necessary or
desirable to allow Buyer to operate the Assets from and after the Closing.
7.8
ENVIRONMENTAL REPORT
Buyer
shall have received an environmental site assessment report with respect to
Seller’s Facilities, which report shall be acceptable in form and substance to
Buyer in its sole discretion.
7.9
WARN
ACT NOTICE PERIODS AND EMPLOYEES
a. All
requisite notice periods under the Warn Act shall have expired.
b. Substantially
all employees of Seller shall be available for hiring by Buyer, in its sole
discretion, on and as of the Closing Date.
SECTION
8
CONDITIONS
PRECEDENT TO SELLER’S OBLIGATION TO CLOSE
Seller’s
obligation to sell the Assets and to take the other actions required to be
taken
by Seller at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Seller in whole or in part):
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8.1
ACCURACY OF REPRESENTATIONS
All
of
Buyer’s representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), shall have been accurate in all material respects as of the
date
of this Agreement and shall be accurate in all material respects as of the
time
of the Closing as if then made.
8.2
BUYER’S PERFORMANCE
All
of
the covenants and obligations that Buyer is required to perform or to comply
with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), shall have been performed and complied with in all material
respects.
8.3
CONSENTS
Each
of
the Consents identified in Exhibit 8.3 shall have been obtained and shall be
in
full force and effect.
8.4
ADDITIONAL DOCUMENTS
Buyer
shall have caused the documents and instruments required by Section 2.7(b)
and
the following documents to be delivered (or tendered subject only to Closing)
to
Seller and Shareholder:
a. an
opinion of Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP, dated the Closing Date, in
the
form of Exhibit 2.7(b)(vii); and
b. such
other documents as Seller may reasonably request for the purpose of
(i) evidencing
the accuracy of any representation or warranty of Buyer,
(ii) evidencing
the performance by Buyer of, or the compliance by Buyer with, any covenant
or
obligation required to be performed or complied with by Buyer or
(iii) evidencing
the satisfaction of any condition referred to in this Article 8.
8.5
NO
INJUNCTION
There
shall not be in effect any Legal Requirement or any injunction or other Order
that (a) prohibits the consummation of the Contemplated Transactions and (b)
has
been adopted or issued, or has otherwise become effective, since the date of
this Agreement.
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SECTION
9
TERMINATION
9.1
TERMINATION EVENTS
By
notice
given prior to or at the Closing, subject to Section 9.2, this Agreement may
be
terminated as follows:
a. by
Buyer
if a material Breach of any provision of this Agreement has been committed
by
Seller or Shareholder and such Breach has not been waived by Buyer;
b. by
Seller
if a material Breach of any provision of this Agreement has been committed
by
Buyer and such Breach has not been waived by Seller;
c. by
Buyer
if any condition in Article 7 has not been satisfied as of the date specified
for Closing in the first sentence of Section 2.6 or if satisfaction of such
a
condition by such date is or becomes impossible (other than through the failure
of Buyer to comply with its obligations under this Agreement), and Buyer has
not
waived such condition on or before such date;
d. by
Seller
if any condition in Article 8 has not been satisfied as of the date specified
for Closing in the first sentence of Section 2.6 or if satisfaction of such
a
condition by such date is or becomes impossible (other than through the failure
of Seller or the Shareholder to comply with their obligations under this
Agreement), and Seller has not waived such condition on or before such date;
e. by
mutual
consent of Buyer and Seller;
f. by
Buyer
if the Closing has not occurred on or before June 30, 2006, or such later date
as the parties may agree upon, unless the Buyer is in material Breach of this
Agreement; or
g. by
Seller
if the Closing has not occurred on or before June 30, 2006, or such later date
as the parties may agree upon, unless the Seller or Shareholder are in material
Breach of this Agreement.
9.2
EFFECT OF TERMINATION
a. Each
party’s right of termination under Section 9.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of such
right of termination will not be an election of remedies. If this Agreement
is
terminated pursuant to Section 9.1, all obligations of the parties under this
Agreement will terminate, except that the obligations of the parties in this
Section 9.2 and Articles 12 and 13 (except for those in Section 13.5) will
survive, provided, however, that, if this Agreement is terminated because of
a
Breach of this Agreement by the nonterminating party or because one or more
of
the conditions to the terminating party’s obligations under this Agreement is
not satisfied as a result of the party’s failure to comply with its obligations
under this Agreement, the terminating party’s right to pursue all legal remedies
will survive such termination unimpaired.
b. In
the
event the Agreement shall be terminated by Buyer under Sections 9.1(a) or
9.1(c), the Escrow Deposit, and all interest earned thereon, shall be returned
to Buyer. In this event, all obligations of the Escrow Agent shall
cease.
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c. In
the
event the Agreement shall be terminated for any other reason, the Escrow
Deposit, and all interest earned thereon, shall be paid to Seller as liquidated
damages. In this event, all obligations of the Escrow Agent shall
cease.
SECTION
10
ADDITIONAL
COVENANTS
10.1
EMPLOYEES AND EMPLOYEE BENEFITS
a. Information
on Active Employees. For the purpose of this Agreement, the term “Active
Employees” shall mean all employees employed on the Closing Date by Seller for
its business who are:
(i) bargaining
unit employees currently covered by a collective bargaining agreement; or
(ii) employed
exclusively in Seller’s business as currently conducted, including employees on
temporary leave of absence, including family medical leave, military leave,
temporary disability or sick leave, but excluding employees on long-term
disability leave.
b. Employment
of Active Employees by Buyer.
(i) Buyer
is
not obligated to hire any Active Employee but may interview all Active
Employees. Buyer will provide Seller with a list of Active Employees to whom
Buyer has made an offer of employment that has been accepted to be effective
on
the Closing Date (the “Hired Active Employees”). Subject to Legal Requirements,
Buyer will have reasonable access to the Facilities and personnel Records
(including performance appraisals, disciplinary actions, grievances and medical
Records) of Seller for the purpose of preparing for and conducting employment
interviews with all Active Employees and will conduct the interviews as
expeditiously as possible prior to the Closing Date. Access will be provided
by
Seller upon reasonable prior notice during normal business hours. Effective
immediately before the Closing, Seller will terminate the employment of all
of
its Hired Active Employees.
(ii) Neither
Seller nor the Shareholder nor their Related Persons shall solicit the continued
employment of any Active Employee (unless and until Buyer has informed Seller
in
writing that the particular Active Employee will not receive any employment
offer from Buyer) or the employment of any Hired Active Employee after the
Closing. Buyer shall inform Seller promptly of the identities of those Active
Employees to whom it will not make employment offers, and Seller shall assist
Buyer in complying with the WARN Act as to those Active Employees.
(iii) It
is
understood and agreed that (A) Buyer’s expressed intention to extend offers of
employment as set forth in this section shall not constitute any commitment,
Contract or understanding (expressed or implied) of any obligation on the part
of Buyer to a post-Closing employment relationship of any fixed term or duration
or upon any terms or conditions other than those that Buyer may establish
pursuant to individual offers of employment, and (B) employment offered by
Buyer
is “at will” and may be terminated by Buyer or by an employee at any time for
any reason (subject to any written commitments to the contrary made by Buyer
or
an employee and Legal Requirements). Nothing in this Agreement shall be deemed
to prevent or restrict in any way the right of Buyer to terminate, reassign,
promote or demote any of the Hired Active Employees after the Closing or to
change adversely or favorably the title, powers, duties, responsibilities,
functions, locations, salaries, other compensation or terms or conditions of
employment of such employees.
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c. Salaries
and Benefits.
(i) Seller
shall be responsible for (A) the payment of all wages and other remuneration
due
to Active Employees with respect to their services as employees of Seller
through the close of business on the Closing Date, including pro rata bonus
payments and all vacation pay earned prior to the Closing Date; (B) the payment
of any termination or severance payments and the provision of health plan
continuation coverage in accordance with the requirements of COBRA and Sections
601 through 608 of ERISA; and (C) any and all payments to employees required
under the WARN Act.
(ii) Seller
shall be liable for any claims made or incurred by Active Employees and their
beneficiaries through the Closing Date under the Employee Plans. For purposes
of
the immediately preceding sentence, a charge will be deemed incurred, in the
case of hospital, medical or dental benefits, when the services that are the
subject of the charge are performed and, in the case of other benefits (such
as
disability or life insurance), when an event has occurred or when a condition
has been diagnosed that entitles the employee to the benefit.
c. Seller’s
Retirement Plans. All Hired Active Employees who are participants in Seller’s
retirement plans shall retain their accrued benefits under Seller’s retirement
plans as of the Closing Date, and Seller (or Seller’s retirement plans) shall
retain sole liability for the payment of such benefits as and when such Hired
Active Employees become eligible therefor under such plans. All Hired Active
Employees shall become fully vested in their accrued benefits under Seller’s
retirement plans as of the Closing Date, and Seller will so amend such plans
if
necessary to achieve this result. Seller shall cause the assets of each Employee
Plan to equal or exceed the benefit liabilities of such Employee Plan on a
plan-termination basis as of the Closing.
d. No
Transfer of Assets. Neither Seller nor Shareholder nor their respective Related
Persons will make any transfer of pension or other employee benefit plan assets
to Buyer.
e. General
Employee Provisions.
(i) Seller
and Buyer shall give any notices required by Legal Requirements and take
whatever other actions with respect to the plans, programs and policies
described in this Section 10.1 as may be necessary to carry out the arrangements
described in this Section 10.1.
(ii) Seller
and Buyer shall provide each other with such plan documents and summary plan
descriptions, employee data or other information as may be reasonably required
to carry out the arrangements described in this Section 10.1.
(iii) If
any of
the arrangements described in this Section 10.1 are determined by the IRS or
other Governmental Body to be prohibited by law, Seller and Buyer shall modify
such arrangements to as closely as possible reflect their expressed intent
and
retain the allocation of economic benefits and burdens to the parties
contemplated herein in a manner that is not prohibited by law.
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(iv) Seller
shall provide Buyer with completed I-9 forms and attachments with respect to
all
Hired Active Employees, except for such employees as Seller certifies in writing
to Buyer are exempt from such requirement.
(v) Buyer
shall not have any responsibility, liability or obligation, whether to Active
Employees, former employees, their beneficiaries or to any other Person, with
respect to any employee benefit plans, practices, programs or arrangements
(including the establishment, operation or termination thereof and the
notification and provision of COBRA coverage extension) maintained by Seller.
10.2
PAYMENT OF ALL TAXES RESULTING FROM SALE OF ASSETS BY SELLER
Seller
shall pay in a timely manner all Taxes resulting from or payable in connection
with the sale of the Assets pursuant to this Agreement, regardless of the Person
on whom such Taxes are imposed by Legal Requirements, except that Buyer shall
pay one-half of all sales taxes imposed on the transfer of the Assets.
10.3
PAYMENT OF OTHER RETAINED LIABILITIES
In
addition to payment of Taxes pursuant to Section 10.2, Seller shall pay, or
make
adequate provision for the payment, in full all of the Retained Liabilities
and
other Liabilities of Seller under this Agreement. If any such Liabilities are
not so paid or provided for, or if Buyer reasonably determines that failure
to
make any payments will impair Buyer’s use or enjoyment of the Assets or conduct
of the business previously conducted by Seller with the Assets, Buyer may,
at
any time after the Closing Date, elect to make all such payments directly (but
shall have no obligation to do so) and set off and deduct the full amount of
all
such payments from the first maturing installments of the unpaid principal
balance of the Secured Subordinated Promissory Note pursuant to Section 11.8.
Buyer shall receive full credit under the Secured Subordinated Promissory Note
and this Agreement for all payments so made.
10.4
REMOVING EXCLUDED ASSETS
On
or
before the Closing Date, Seller shall remove all Excluded Assets from all
Facilities and other Real Property to be occupied by Buyer. Such removal shall
be done in such manner as to avoid any damage to the Facilities and other
properties to be occupied by Buyer and any disruption of the business operations
to be conducted by Buyer after the Closing. Any damage to the Assets or to
the
Facilities resulting from such removal shall be paid by Seller at the Closing.
Should Seller fail to remove the Excluded Assets as required by this Section,
Buyer shall have the right, but not the obligation, (a) to remove the Excluded
Assets at Seller’s sole cost and expense; (b) to store the Excluded Assets and
to charge Seller all storage costs associated therewith; (c) to treat the
Excluded Assets as unclaimed and to proceed to dispose of the same under the
laws governing unclaimed property; or (d) to exercise any other right or remedy
conferred by this Agreement or otherwise available at law or in equity. Seller
shall promptly reimburse Buyer for all costs and expenses incurred by Buyer
in
connection with any Excluded Assets not removed by Seller on or before the
Closing Date.
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10.5
REPORTS AND RETURNS
Seller
shall promptly after the Closing prepare and file all reports and returns
required by Legal Requirements relating to the business of Seller as conducted
using the Assets, to and including the Closing.
10.6
ASSISTANCE IN PROCEEDINGS
Seller
will cooperate with Buyer and its counsel in the contest or defense of, and
make
available its personnel and provide any testimony and access to its books and
Records in connection with, any Proceeding involving or relating to (a) any
Contemplated Transaction or (b) any action, activity, circumstance, condition,
conduct, event, fact, failure to act, incident, occurrence, plan, practice,
situation, status or transaction on or before the Closing Date involving Seller
or its business or the Shareholder.
10.7
NONCOMPETITION, NONSOLICITATION AND NONDISPARAGEMENT
a. Noncompetition.
For a period of five (5) years after the Closing Date, neither Seller nor
Shareholder shall, anywhere in the United States, directly or indirectly invest
in, own, manage, operate, finance, control, advise, render services to or
guarantee the obligations of any Person engaged in or planning to become engaged
in the Business of the Seller (“Competing Business”), provided, however, that
Seller may purchase or otherwise acquire up to (but not more than) five percent
(5%) of any class of the securities of any Person (but may not otherwise
participate in the activities of such Person) if such securities are listed
on
any national or regional securities exchange or have been registered under
Section 12(g) of the Exchange Act.
b. Nonsolicitation.
For a period of five (5) years after the Closing Date, neither Seller nor
Shareholder shall, directly or indirectly:
(i) solicit
the business of any Person who is a customer of Buyer;
(ii) cause,
induce or attempt to cause or induce any customer, supplier, licensee, licensor,
franchisee, employee, consultant or other business relation of Buyer to cease
doing business with Buyer, to deal with any competitor of Buyer or in any way
interfere with its relationship with Buyer;
(iii) cause,
induce or attempt to cause or induce any customer, supplier, licensee, licensor,
franchisee, employee, consultant or other business relation of Seller on the
Closing Date or within the year preceding the Closing Date to cease doing
business with Buyer, to deal with any competitor of Buyer or in any way
interfere with its relationship with Buyer; or
(iv) hire,
retain or attempt to hire or retain any employee or independent contractor
of
Buyer or in any way interfere with the relationship between Buyer and any of
its
employees or independent contractors.
c. Nondisparagement.
After the Closing Date, neither Seller nor Shareholder shall disparage Buyer
or
any of Buyer’s shareholders, directors, officers, employees or agents.
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d. Modification
of Covenant. If a final judgment of a court or tribunal of competent
jurisdiction determines that any term or provision contained in Section 10.7(a)
through (c) is invalid or unenforceable, then the parties agree that the court
or tribunal will have the power to reduce the scope, duration or geographic
area
of the term or provision, to delete specific words or phrases or to replace
any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of
the
invalid or unenforceable term or provision. This Section 10.7 will be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed. This Section 10.7 is reasonable and necessary to
protect and preserve Buyer’s legitimate business interests and the value of the
Assets and to prevent any unfair advantage conferred on Seller.
10.8
CUSTOMER AND OTHER BUSINESS RELATIONSHIPS
After
the
Closing, Seller and Shareholder will cooperate with Buyer in its efforts to
continue and maintain for the benefit of Buyer those business relationships
of
Seller existing prior to the Closing and relating to the business to be operated
by Buyer after the Closing, including relationships with lessors, employees,
regulatory authorities, licensors, customers, suppliers and others, and Seller
will satisfy the Retained Liabilities in a manner that is not detrimental to
any
of such relationships. Seller and Shareholder will refer to Buyer all inquiries
relating to such business. Neither Seller nor any of its officers, employees,
agents or the Shareholder shall take any action that would tend to diminish
the
value of the Assets after the Closing or that would interfere with the business
of Buyer to be engaged in after the Closing, including disparaging the name
or
business of Buyer.
10.9
RETENTION OF AND ACCESS TO RECORDS
After
the
Closing Date, Buyer shall retain for a period consistent with Buyer’s
record-retention policies and practices those Records of Seller delivered to
Buyer. Buyer also shall provide Seller and Shareholder and their Representatives
reasonable access thereto, during normal business hours and on at least three
days’ prior written notice, to enable them to prepare financial statements or
tax returns or deal with tax audits. After the Closing Date, Seller shall
provide Buyer and its Representatives reasonable access to Records that are
Excluded Assets, during normal business hours and on at least three days’ prior
written notice, for any reasonable business purpose specified by Buyer in such
notice.
10.10
FURTHER ASSURANCES
Subject
to the proviso in Section 6.1, the parties shall cooperate reasonably with
each
other and with their respective Representatives in connection with any steps
required to be taken as part of their respective obligations under this
Agreement, and shall (a) furnish upon request to each other such further
information; (b) execute and deliver to each other such other documents; and
(c)
do such other acts and things, all as the other party may reasonably request
for
the purpose of carrying out the intent of this Agreement and the Contemplated
Transactions.
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SECTION
11
INDEMNIFICATION;
REMEDIES
11.1
SURVIVAL
All
representations, warranties, covenants and obligations in this Agreement, the
certificates delivered pursuant to Section 2.7 and any other certificate or
document delivered pursuant to this Agreement shall survive the Closing and
the
consummation of the Contemplated Transactions, subject to Section 11.7. The
right to indemnification, reimbursement or other remedy based upon such
representations, warranties, covenants and obligations shall not be affected
by
any investigation (including any environmental investigation or assessment)
conducted with respect to, or any Knowledge acquired (or capable of being
acquired) at any time, whether before or after the execution and delivery of
this Agreement or the Closing Date, with respect to the accuracy or inaccuracy
of or compliance with any such representation, warranty, covenant or obligation.
The waiver of any condition based upon the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, reimbursement or
other
remedy based upon such representations, warranties, covenants and obligations.
11.2
INDEMNIFICATION AND REIMBURSEMENT BY SELLER AND SHAREHOLDER
Seller
and each Shareholder, jointly and severally, will indemnify and hold harmless
Buyer, and its Representatives, shareholders, subsidiaries and Related Persons
(collectively, the “Buyer Indemnified Persons”), and will reimburse the Buyer
Indemnified Persons for any loss, liability, claim, damage, expense (including
costs of investigation and defense and reasonable attorneys’ fees and expenses)
or diminution of value, whether or not involving a Third-Party Claim
(collectively, “Damages”), arising from or in connection with:
a. any
Breach of any representation or warranty made by Seller or the Shareholder
in
(i) this Agreement (ii) the certificates delivered pursuant to Section 2.7
(for
this purpose, each such certificate will be deemed to have stated that Seller’s
and the Shareholder’s representations and warranties in this Agreement fulfill
the requirements of Section 7.1 as of the Closing Date as if made on the Closing
Date), (iii) any transfer instrument or (iv) any other certificate, document,
writing or instrument delivered by Seller or the Shareholder pursuant to this
Agreement;
b. any
Breach of any covenant or obligation of Seller or the Shareholder in this
Agreement or in any other certificate, document, writing or instrument delivered
by Seller or the Shareholder pursuant to this Agreement;
c. any
Liability arising out of the ownership or operation of the Assets prior to
the
Closing other than the Assumed Liabilities;
d. any
brokerage or finder’s fees or commissions or similar payments based upon any
agreement or understanding made, or alleged to have been made, by any Person
with Seller or the Shareholder (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions;
e. any
product or component thereof manufactured by or shipped, or any services
provided by, Seller, in whole or in part, prior to the Closing Date;
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f. any
noncompliance with any Bulk Sales Laws or fraudulent transfer law in respect
of
the Contemplated Transactions;
g. any
liability under the WARN Act or any similar state or local Legal Requirement
that may result from an “Employment Loss”, as defined by 29 U.S.C. sect.
2101(a)(6), caused by any action of Seller prior to the Closing or by Buyer’s
decision not to hire previous employees of Seller;
h. any
Employee Plan established or maintained by Seller; or
i. any
Retained Liabilities.
11.3
INDEMNIFICATION AND REIMBURSEMENT BY SELLER-- ENVIRONMENTAL MATTERS
In
addition to the other indemnification provisions in this Article 11, Seller
and
each Shareholder, jointly and severally, will indemnify and hold harmless Buyer
and the other Buyer Indemnified Persons, and will reimburse Buyer and the other
Buyer Indemnified Persons, for any Damages (including costs of cleanup,
containment or other remediation) arising from or in connection with:
a. any
Environmental, Health and Safety Liabilities arising out of or relating to:
(i)
the ownership or operation by any Person at any time on or prior to the Closing
Date of any of the Facilities, Assets or the business of Seller, or (ii) any
Hazardous Materials or other contaminants that were present on the Facilities
or
Assets at any time on or prior to the Closing Date; or
b. any
bodily injury (including illness, disability and death, regardless of when
any
such bodily injury occurred, was incurred or manifested itself), personal
injury, property damage (including trespass, nuisance, wrongful eviction and
deprivation of the use of real property) or other damage of or to any Person
or
any Assets in any way arising from or allegedly arising from any Hazardous
Activity conducted by any Person with respect to the business of Seller or
the
Assets prior to the Closing Date or from any Hazardous Material that was (i)
present or suspected to be present on or before the Closing Date on or at the
Facilities (or present or suspected to be present on any other property, if
such
Hazardous Material emanated or allegedly emanated from any Facility and was
present or suspected to be present on any Facility, on or prior to the Closing
Date) or (ii) Released or allegedly Released by any Person on or at any
Facilities or Assets at any time on or prior to the Closing Date.
Buyer
will be entitled to control any Remedial Action, any Proceeding relating to
an
Environmental Claim and, except as provided in the following sentence, any
other
Proceeding with respect to which indemnity may be sought under this Section
11.3. The procedure described in Section 11.9 will apply to any claim solely
for
monetary damages relating to a matter covered by this Section 11.3.
11.4
INDEMNIFICATION AND REIMBURSEMENT BY BUYER
Buyer
will indemnify and hold harmless Seller, and will reimburse Seller, for any
Damages arising from or in connection with:
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a. any
Breach of any representation or warranty made by Buyer in this Agreement or
in
any certificate, document, writing or instrument delivered by Buyer pursuant
to
this Agreement;
b. any
Breach of any covenant or obligation of Buyer in this Agreement or in any other
certificate, document, writing or instrument delivered by Buyer pursuant to
this
Agreement;
c. any
claim
by any Person for brokerage or finder’s fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on Buyer’s behalf) in connection with
any of the Contemplated Transactions;
d. any
Assumed Liabilities; or
e. any
liability arising out of the ownership or operation of the Assets after the
Closing, other than the Retained Liabilities
11.5
LIMITATIONS ON AMOUNT-- SELLER AND SHAREHOLDER
Seller
and Shareholder shall have no liability (for indemnification or otherwise)
with
respect to claims under Section 11.2(a) until the total of all Damages with
respect to such matters exceeds twenty-five thousand dollars ($25,000). Total
damages shall not exceed the Purchase Price. However, this Section 11.5 will
not
apply to claims under Section 11.2(c) through (i) or to matters arising in
respect of Sections 3.14, 3.20, 3.29, or to any Breach of any of Seller’s and
Shareholder’s representations and warranties of which the Seller had Knowledge,
after reasonable investigation, at any time prior to the date on which such
representation and warranty is made or any intentional Breach by Seller or
the
Shareholder of any covenant or obligation, and Seller and the Shareholder will
be jointly and severally liable for all Damages with respect to such Breaches.
11.6
LIMITATIONS ON AMOUNT-- BUYER
Buyer
will have no liability (for indemnification or otherwise) with respect to claims
under Section 11.4(a) until the total of all Damages with respect to such
matters exceeds twenty-five thousand dollars ($25,000). However, this Section
11.6 will not apply to claims under Section 11.4(c), 11.4(d), 11.4(e) or matters
arising in respect of Section 4.4 or to any Breach of any of Buyer’s
representations and warranties of which Buyer had Knowledge at any time prior
to
the date on which such representation and warranty is made or any intentional
Breach by Buyer of any covenant or obligation, and Buyer will be liable for
all
Damages with respect to such Breaches.
11.7
TIME
LIMITATIONS
(a) If
the
Closing occurs, Seller and Shareholder will have liability (for indemnification
or otherwise) with respect to any Breach of (i) a covenant or obligation to
be
performed or complied with prior to the Closing Date (other than those in
Sections 2.1 and 2.4(b) and Articles 10 and 12, as to which a claim may be
made
at any time) or (ii) a representation or warranty, only if Buyer notifies Seller
or Shareholder on or before May 31, 2009 of a claim specifying the factual
basis
of the claim in reasonable detail to the extent then known by Buyer.
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(b) If
the
Closing occurs, Buyer will have liability (for indemnification or otherwise)
with respect to any Breach of (i) a covenant or obligation to be performed
or
complied with prior to the Closing Date (other than those in Article 12, as
to
which a claim may be made at any time) or (ii) a representation or warranty,
only if Seller or Shareholder notify Buyer on or before May 31, 2009 of a claim
specifying the factual basis of the claim in reasonable detail to the extent
then known by Seller or the Shareholder.
11.8
RIGHT OF SETOFF
Upon
notice to Seller specifying in reasonable detail the basis therefor, Buyer
may
propose to set off any amount to which it may be entitled under this Article
11
against amounts otherwise payable under the Secured Subordinated Promissory.
Any
amount so proposed shall be deposited by Buyer into an escrow account maintained
by its attorney until such claim is agreed to by the parties or otherwise
finally determined. The proposal to exercise such right of setoff by Buyer
in
good faith, whether or not ultimately determined to be justified, will not
constitute an event of default under the Secured Subordinated Promissory Note
or
any instrument securing the Secured Subordinated Promissory Note. Neither the
exercise of nor the failure to exercise such right of setoff or to give a notice
of a claim will constitute an election of remedies or limit Buyer in any manner
in the enforcement of any other remedies that may be available to it.
11.9
THIRD-PARTY CLAIMS
a. Promptly
after receipt by a Person entitled to indemnity under Section 11.2, 11.3 (to
the
extent provided in the last sentence of Section 11.3) or 11.4 (an “Indemnified
Person”) of notice of the assertion of a Third-Party Claim against it, such
Indemnified Person shall give notice to the Person obligated to indemnify under
such Section (an “Indemnifying Person”) of the assertion of such Third-Party
Claim, provided that the failure to notify the Indemnifying Person will not
relieve the Indemnifying Person of any liability that it may have to any
Indemnified Person, except to the extent that the Indemnifying Person
demonstrates that the defense of such Third-Party Claim is prejudiced by the
Indemnified Person’s failure to give such notice.
b. If
an
Indemnified Person gives notice to the Indemnifying Person pursuant to Section
11.9(a) of the assertion of a Third-Party Claim, the Indemnifying Person shall
be entitled to participate in the defense of such Third-Party Claim and, to
the
extent that it wishes (unless (i) the Indemnifying Person is also a Person
against whom the Third-Party Claim is made and the Indemnified Person determines
in good faith that joint representation would be inappropriate or (ii) the
Indemnifying Person fails to provide reasonable assurance to the Indemnified
Person of its financial capacity to defend such Third-Party Claim and provide
indemnification with respect to such Third-Party Claim), to assume the defense
of such Third-Party Claim with counsel satisfactory to the Indemnified Person.
After notice from the Indemnifying Person to the Indemnified Person of its
election to assume the defense of such Third-Party Claim, the Indemnifying
Person shall not, so long as it diligently conducts such defense, be liable
to
the Indemnified Person under this Article 11 for any fees of other counsel
or
any other expenses with respect to the defense of such Third-Party Claim, in
each case subsequently incurred by the Indemnified Person in connection with
the
defense of such Third-Party Claim, other than reasonable costs of investigation.
If the Indemnifying Person assumes the defense of a Third-Party Claim, (i)
such
assumption will conclusively establish for purposes of this Agreement that
the
claims made in that Third-Party Claim are within the scope of and subject to
indemnification, and (ii) no compromise or settlement of such Third-Party Claims
may be effected by the Indemnifying Person without the Indemnified Person’s
Consent unless (A) there is no finding or admission of any violation of Legal
Requirement or any violation of the rights of any Person; (B) the sole relief
provided is monetary damages that are paid in full by the Indemnifying Person;
and (C) the Indemnified Person shall have no liability with respect to any
compromise or settlement of such Third-Party Claims effected without its
Consent. If notice is given to an Indemnifying Person of the assertion of any
Third-Party Claim and the Indemnifying Person does not, within ten (10) days
after the Indemnified Person’s notice is given, give notice to the Indemnified
Person of its election to assume the defense of such Third-Party Claim, the
Indemnifying Person will be bound by any determination made in such Third-Party
Claim or any compromise or settlement effected by the Indemnified Person.
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c. Notwithstanding
the foregoing, if an Indemnified Person determines in good faith that there
is a
reasonable probability that a Third-Party Claim may adversely affect it or
its
Related Persons other than as a result of monetary damages for which it would
be
entitled to indemnification under this Agreement, the Indemnified Person may,
by
notice to the Indemnifying Person, assume the exclusive right to defend,
compromise or settle such Third-Party Claim, but the Indemnifying Person will
not be bound by any determination of any Third-Party Claim so defended for
the
purposes of this Agreement or any compromise or settlement effected without
its
Consent (which may not be unreasonably withheld).
d. Notwithstanding
the provisions of Section 13.4, Seller and each Shareholder hereby consent
to
the nonexclusive jurisdiction of any court in which a Proceeding in respect
of a
Third-Party Claim is brought against any Buyer Indemnified Person for purposes
of any claim that a Buyer Indemnified Person may have under this Agreement
with
respect to such Proceeding or the matters alleged therein and agree that process
may be served on Seller and Shareholder with respect to such a claim anywhere
in
the world.
e. With
respect to any Third-Party Claim subject to indemnification under this Article
11: (i) both the Indemnified Person and the Indemnifying Person, as the case
may
be, shall keep the other Person fully informed of the status of such Third-Party
Claim and any related Proceedings at all stages thereof where such Person is
not
represented by its own counsel, and (ii) the parties agree (each at its own
expense) to render to each other such assistance as they may reasonably require
of each other and to cooperate in good faith with each other in order to ensure
the proper and adequate defense of any Third-Party Claim.
f. With
respect to any Third-Party Claim subject to indemnification under this Article
11, the parties agree to cooperate in such a manner as to preserve in full
(to
the extent possible) the confidentiality of all Confidential Information and
the
attorney-client and work-product privileges. In connection therewith, each
party
agrees that: (i) it will use its Best Efforts, in respect of any Third-Party
Claim in which it has assumed or participated in the defense, to avoid
production of Confidential Information (consistent with applicable law and
rules
of procedure), and (ii) all communications between any party hereto and counsel
responsible for or participating in the defense of any Third-Party Claim shall,
to the extent possible, be made so as to preserve any applicable attorney-client
or work-product privilege.
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11.10
OTHER CLAIMS
A
claim
for indemnification for any matter not involving a Third-Party Claim may be
asserted by notice to the party from whom indemnification is sought and shall
be
paid promptly after such notice.
SECTION
12
CONFIDENTIALITY
12.1
DEFINITION OF CONFIDENTIAL INFORMATION
a. As
used
in this Article 12, the term “Confidential Information” includes any and all of
the following information of Seller, Buyer or Shareholder that has been or
may
hereafter be disclosed in any form, whether in writing, orally, electronically
or otherwise, or otherwise made available by observation, inspection or
otherwise by either party (Buyer on the one hand or Seller and Shareholder,
collectively, on the other hand) or its Representatives (collectively, a
“Disclosing Party”) to the other party or its Representatives (collectively, a
“Receiving Party”):
(i) all
information that is a trade secret under applicable trade secret or other law;
(ii) all
information concerning product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs, graphs, drawings,
samples, inventions and ideas, past, current and planned research and
development, current and planned manufacturing or distribution methods and
processes, customer lists, current and anticipated customer requirements, price
lists, market studies, business plans, computer hardware, Software and computer
software and database technologies, systems, structures and architectures;
(iii) all
information concerning the business and affairs of the Disclosing Party (which
includes historical and current financial statements, financial projections
and
budgets, tax returns and accountants’ materials, historical, current and
projected sales, capital spending budgets and plans, business plans, strategic
plans, marketing and advertising plans, publications, client and customer lists
and files, contracts, the names and backgrounds of key personnel and personnel
training techniques and materials, however documented), and all information
obtained from review of the Disclosing Party’s documents or property or
discussions with the Disclosing Party regardless of the form of the
communication; and
(iv) all
notes, analyses, compilations, studies, summaries and other material prepared
by
the Disclosing Party to the extent containing or based, in whole or in part,
upon any information included in the foregoing.
b. Any
trade
secrets of a Disclosing Party shall also be entitled to all of the protections
and benefits under applicable trade secret law and any other applicable law.
If
any information that a Disclosing Party deems to be a trade secret is found
by a
court of competent jurisdiction not to be a trade secret for purposes of this
Article 12, such information shall still be considered Confidential Information
of that Disclosing Party for purposes of this Article 12 to the extent included
within the definition. In the case of trade secrets, each of Buyer, Seller
and
Shareholder hereby waives any requirement that the other party submit proof
of
the economic value of any trade secret or post a bond or other security.
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12.2
RESTRICTED USE OF CONFIDENTIAL INFORMATION
a. Each
Receiving Party acknowledges the confidential and proprietary nature of the
Confidential Information of the Disclosing Party and agrees that such
Confidential Information (i) shall be kept confidential by the Receiving Party;
(ii) shall not be used for any reason or purpose other than to evaluate and
consummate the Contemplated Transactions; and (iii) without limiting the
foregoing, shall not be disclosed by the Receiving Party to any Person, except
in each case as otherwise expressly permitted by the terms of this Agreement
or
with the prior written consent of an authorized representative of Seller with
respect to Confidential Information of Seller or Shareholder (each, a “Seller
Contact”) or an authorized representative of Buyer with respect to Confidential
Information of Buyer (each, a “Buyer Contact”). Each of Buyer and Seller and
Shareholder shall disclose the Confidential Information of the other party
only
to its Representatives who require such material for the purpose of evaluating
the Contemplated Transactions and are informed by Buyer, Seller or Shareholder,
as the case may be, of the obligations of this Article 12 with respect to such
information. Each of Buyer, Seller and Shareholder shall (iv) enforce the terms
of this Article 12 as to its respective Representatives; (v) take such action
to
the extent necessary to cause its Representatives to comply with the terms
and
conditions of this Article 12; and (vi) be responsible and liable for any breach
of the provisions of this Article 12 by it or its Representatives.
b. Unless
and until this Agreement is terminated, Seller and each Shareholder shall
maintain as confidential any Confidential Information (including for this
purpose any information of Seller or Shareholder of the type referred to in
Sections 12.1(a)(i), (ii) and (iii), whether or not disclosed to Buyer) of
the
Seller or Shareholder relating to any of the Assets or the Assumed Liabilities.
Notwithstanding the preceding sentence, Seller may use any Confidential
Information of Seller before the Closing in the Ordinary Course of Business
in
connection with the transactions permitted by Section 5.2.
c. From
and
after the Closing, the provisions of Section 12.2(a) above shall not apply
to or
restrict in any manner Buyer’s use of any Confidential Information of the Seller
or Shareholder relating to any of the Assets or the Assumed Liabilities.
12.3
EXCEPTIONS
Sections
12.2(a) and (b) do not apply to that part of the Confidential Information of
a
Disclosing Party that a Receiving Party demonstrates (a) was, is or becomes
generally available to the public other than as a result of a breach of this
Article 12 or the Confidentiality Agreement by the Receiving Party or its
Representatives; (b) was or is developed by the Receiving Party independently
of
and without reference to any Confidential Information of the Disclosing Party;
or (c) was, is or becomes available to the Receiving Party on a nonconfidential
basis from a Third Party not bound by a confidentiality agreement or any legal,
fiduciary or other obligation restricting disclosure. Neither Seller nor the
Shareholder shall disclose any Confidential Information of Seller or Shareholder
relating to any of the Assets or the Assumed Liabilities in reliance on the
exceptions in clauses (b) or (c) above.
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12.4
LEGAL PROCEEDINGS
If
a
Receiving Party becomes compelled in any Proceeding or is requested by a
Governmental Body having regulatory jurisdiction over the Contemplated
Transactions to make any disclosure that is prohibited or otherwise constrained
by this Article 12, that Receiving Party shall provide the Disclosing Party
with
prompt notice of such compulsion or request so that it may seek an appropriate
protective order or other appropriate remedy or waive compliance with the
provisions of this Article 12. In the absence of a protective order or other
remedy, the Receiving Party may disclose that portion (and only that portion)
of
the Confidential Information of the Disclosing Party that, based upon advice
of
the Receiving Party’s counsel, the Receiving Party is legally compelled to
disclose or that has been requested by such Governmental Body, provided,
however, that the Receiving Party shall use reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded by any Person
to
whom any Confidential Information is so disclosed. The provisions of this
Section 12.4 do not apply to any Proceedings between the parties to this
Agreement.
12.5
RETURN OR DESTRUCTION OF CONFIDENTIAL INFORMATION
If
this
Agreement is terminated, each Receiving Party shall (a) destroy all Confidential
Information of the Disclosing Party prepared or generated by the Receiving
Party
without retaining a copy of any such material; (b) promptly deliver to the
Disclosing Party all other Confidential Information of the Disclosing Party,
together with all copies thereof, in the possession, custody or control of
the
Receiving Party or, alternatively, with the written consent of a Seller Contact
or a Buyer Contact (whichever represents the Disclosing Party) destroy all
such
Confidential Information; and (c) certify all such destruction in writing to
the
Disclosing Party, provided, however, that the Receiving Party may retain a
list
that contains general descriptions of the information it has returned or
destroyed to facilitate the resolution of any controversies after the Disclosing
Party’s Confidential Information is returned.
12.6
ATTORNEY-CLIENT PRIVILEGE
The
Disclosing Party is not waiving, and will not be deemed to have waived or
diminished, any of its attorney work product protections, attorney-client
privileges or similar protections and privileges as a result of disclosing
its
Confidential Information (including Confidential Information related to pending
or threatened litigation) to the Receiving Party, regardless of whether the
Disclosing Party has asserted, or is or may be entitled to assert, such
privileges and protections. The parties (a) share a common legal and commercial
interest in all of the Disclosing Party’s Confidential Information that is
subject to such privileges and protections; (b) are or may become joint
defendants in Proceedings to which the Disclosing Party’s Confidential
Information covered by such protections and privileges relates; (c) intend
that
such privileges and protections remain intact should either party become subject
to any actual or threatened Proceeding to which the Disclosing Party’s
Confidential Information covered by such protections and privileges relates;
and
(d) intend that after the Closing the Receiving Party shall have the right
to
assert such protections and privileges. No Receiving Party shall admit, claim
or
contend, in Proceedings involving either party or otherwise, that any Disclosing
Party waived any of its attorney work-product protections, attorney-client
privileges or similar protections and privileges with respect to any
information, documents or other material not disclosed to a Receiving Party
due
to the Disclosing Party disclosing its Confidential Information (including
Confidential Information related to pending or threatened litigation) to the
Receiving Party.
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SECTION
13
GENERAL
PROVISIONS
13.1
EXPENSES
Except
as
otherwise provided in this Agreement, each party to this Agreement will bear
its
respective fees and expenses incurred in connection with the preparation,
negotiation, execution and performance of this Agreement and the Contemplated
Transactions, including all fees and expense of its Representatives. If this
Agreement is terminated, the obligation of each party to pay its own fees and
expenses will be subject to any rights of such party arising from a Breach
of
this Agreement by another party.
13.2
PUBLIC ANNOUNCEMENTS AND DISCLOSURES
Any
public announcement, press release or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Buyer determines. Except with the prior consent
of
Buyer or as permitted by this Agreement, neither Seller, Shareholder nor any
of
their Representatives shall disclose to any Person (a) the fact that any
Confidential Information of Seller or Shareholder has been disclosed to Buyer
or
its Representatives, that Buyer or its Representatives have inspected any
portion of the Confidential Information of Seller or Shareholder, that any
Confidential Information of Buyer has been disclosed to Seller, Shareholder
or
their Representatives or that Seller, Shareholder or their Representatives
have
inspected any portion of the Confidential Information of Buyer or (b) any
information about the Contemplated Transactions, including the status of such
discussions or negotiations, the execution of any documents (including this
Agreement) or any of the terms of the Contemplated Transactions or the related
documents (including this Agreement). Seller and Buyer will consult with each
other concerning the means by which Seller’s employees, customers, suppliers and
others having dealings with Seller will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication. Buyer retains the right to disclose this Agreement in its
entirety in public filings with the U.S. Securities and Exchange
Commission.
13.3
NOTICES
All
notices, Consents, waivers and other communications required or permitted by
this Agreement shall be in writing and shall be deemed given to a party when
(a)
delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid); (b) sent by facsimile or e-mail
with
confirmation of transmission by the transmitting equipment; or (c) received
or
rejected by the addressee, if sent by certified mail, return receipt requested,
in each case to the following addresses, facsimile numbers or e-mail addresses
and marked to the attention of the person (by name or title) designated below
(or to such other address, facsimile number, e-mail address or person as a
party
may designate by notice to the other parties):
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Seller
(before the Closing): Freundlich
Supply Company, Inc.
0000
Xxxxxx Xxxx Xxxx
Xxxxxx
Xxxxxx, XX 00000
Attention:
Xxxxxxx Xxxxxxxxxx
Fax
no.:
(000) 000-0000
E-mail
address: xxxxxxxxx0000@xxx.xxx
with
a
mandatory copy to:
Xxxxxx
X.
Xxxxxx, Esquire
000
Xxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Fax
no.:
(000) 000-0000
E-mail
address: xxxxx@xxx.xxx
Seller
(after the Closing):
Freundlich
Supply Company, Inc.
0000
Xxxxxx Xxxx Xxxx
Xxxxxx
Xxxxxx, XX 00000
Attention:
Xxxxxxx Xxxxxxxxxx
Fax
no.:
(000) 000-0000
E-mail
address: xxxxxxxxx0000@xxx.xxx
with
a
mandatory copy to:
Xxxxxx
X.
Xxxxxx, Esquire
000
Xxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Fax
no.:
(000) 000-0000
E-mail
address: xxxxx@xxx.xxx
Shareholder: Xxxxxxx
Xxxxxxxxxx
0000
Xxxxxx Xxxx Xxxx
Xxxxxx
Xxxxxx, XX 00000
Fax
no.:
(000) 000-0000
E-mail
address: xxxxxxxxx0000@xxx.xxx
with
a
mandatory copy to:
Xxxxxx
X.
Xxxxxx, Esquire
000
Xxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Fax
no.:
(212) (000) 000-0000
E-mail
address: xxxxx@xxx.xxx
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Buyer: Delaware
Fastener Acquisition Corporation
P.
O. Xxx
0000
Xxxxxxxxxx,
XX 00000
Attention:
Xxxx Xxxx
Fax
no.:
(000) 000-0000
E-mail
address: xxxxx@xxxxxxx.xxx
with
a
mandatory copy to:
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxx X. Xxxxxx, Esq.
Fax
no.:
(000) 000-0000
E-mail
address: xxxxxxxx@xxxx.xxx
13.4
JURISDICTION; SERVICE OF PROCESS
Any
Proceeding arising out of or relating to this Agreement or any Contemplated
Transaction may be brought in the courts of the State of New York, County of New
York, or, if it has or can acquire jurisdiction, in the United States District
Court for the Southern District of New York, and each of the parties irrevocably
submits to the exclusive jurisdiction of each such court in any such Proceeding,
waives any objection it may now or hereafter have to venue or to convenience
of
forum, agrees that all claims in respect of the Proceeding shall be heard and
determined only in any such court and agrees not to bring any Proceeding arising
out of or relating to this Agreement or any Contemplated Transaction in any
other court. The parties agree that either or both of them may file a copy
of
this paragraph with any court as written evidence of the knowing, voluntary
and
bargained agreement between the parties irrevocably to waive any objections
to
venue or to convenience of forum. Process in any Proceeding referred to in
the
first sentence of this section may be served on any party anywhere in the world.
13.5
ENFORCEMENT OF AGREEMENT
Buyer,
Seller and Shareholder acknowledge and agree that each respective party would
be
irreparably damaged if any of the provisions of this Agreement are not performed
in accordance with their specific terms and that any Breach of this Agreement
by
either party could not be adequately compensated in all cases by monetary
damages alone. Accordingly, in addition to any other right or remedy to which
a
party hereto may be entitled, at law or in equity, it shall be entitled to
enforce any provision of this Agreement by a decree of specific performance
and
to temporary, preliminary and permanent injunctive relief to prevent Breaches
or
threatened Breaches of any of the provisions of this Agreement, without posting
any bond or other undertaking.
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13.6
WAIVER; REMEDIES CUMULATIVE
The
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither any failure nor any delay by any party in exercising any
right, power or privilege under this Agreement or any of the documents referred
to in this Agreement will operate as a waiver of such right, power or privilege,
and no single or partial exercise of any such right, power or privilege will
preclude any other or further exercise of such right, power or privilege or
the
exercise of any other right, power or privilege. To the maximum extent permitted
by applicable law, (a) no claim or right arising out of this Agreement or any
of
the documents referred to in this Agreement can be discharged by one party,
in
whole or in part, by a waiver or renunciation of the claim or right unless
in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of that party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
13.7
ENTIRE AGREEMENT AND MODIFICATION
This
Agreement supersedes all prior agreements, whether written or oral, between
the
parties with respect to its subject matter (including any letter of intent
and
any confidentiality agreement between Buyer and Seller) and constitutes (along
with the Exhibits and other documents delivered pursuant to this Agreement)
a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended,
supplemented, or otherwise modified except by a written agreement executed
by
the party to be charged with the amendment.
13.8
ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS
No
party
may assign any of its rights or delegate any of its obligations under this
Agreement without the prior written consent of the other parties, except that
Buyer may assign any of its rights and delegate any of its obligations under
this Agreement to any Subsidiary of Buyer and may collaterally assign its rights
hereunder to any financial institution providing financing in connection with
the Contemplated Transactions. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon and inure to the benefit of
the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy or claim under or with
respect to this Agreement or any provision of this Agreement, except such rights
as shall inure to a successor or permitted assignee pursuant to this Section
13.9.
13.9
SEVERABILITY
If
any
provision of this Agreement is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Agreement will remain
in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to
the
extent not held invalid or unenforceable.
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13.10
CONSTRUCTION
The
headings of Articles and Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references
to
“Articles” and “Sections” refer to the corresponding Articles and Sections of
this Agreement.
13.11
TIME OF ESSENCE
With
regard to all dates and time periods set forth or referred to in this Agreement,
time is of the essence.
13.12
GOVERNING LAW
This
Agreement will be governed by and construed under the laws of the State of
New
York without regard to conflicts-of-laws principles that would require the
application of any other law.
13.13
EXECUTION OF AGREEMENT
This
Agreement may be executed in one or more counterparts, each of which will be
deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement. The exchange
of copies of this Agreement and of signature pages by facsimile transmission
shall constitute effective execution and delivery of this Agreement as to the
parties and may be used in lieu of the original Agreement for all purposes.
Signatures of the parties transmitted by facsimile shall be deemed to be their
original signatures for all purposes.
13.14
SHAREHOLDER OBLIGATIONS
The
liability of each Shareholder hereunder shall be joint and several with Seller
and with the other Shareholder. Where in this Agreement provision is made for
any action to be taken or not taken by Seller, Shareholder jointly and severally
undertake to cause Seller to take or not take such action, as the case may
be.
Without limiting the generality of the foregoing, Shareholder shall be jointly
and severally liable with Seller for the indemnities set forth in Article 11.
13.15
REPRESENTATIVE OF SELLER AND SHAREHOLDER
a. Seller
hereby constitutes and appoints Shareholder as its representative (“Selling
Parties’ Representative”) and its true and lawful attorney in fact, with full
power and authority in its name and on its behalf:
(i) to
act in
the absolute discretion of the Selling Parties Representative, but only with
respect to the following provisions of this Agreement, with the power to: (A)
designate the accounts for payment of the Purchase Price pursuant to Section
2.7(b)(i); (B) act pursuant to Section 2.9 with respect to any Purchase Price
adjustment; (C) consent to the assignment of rights under this Agreement in
accordance with Section 13.9; (D) give and receive notices pursuant to Section
13.3; (E) terminate this Agreement pursuant to Section 9.1 or waive any
provision of this Agreement pursuant to Article 8, Section 9.1 and Section
13.6;
(F) accept service of process pursuant to Section 13.4; and (G) act in
connection with any matter as to which Seller and the Shareholder, jointly
and
severally, have obligations, or are Indemnified Persons, under Article 11;
and
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(ii) in
general, to do all things and to perform all acts, including executing and
delivering all agreements, certificates, receipts, instructions and other
instruments contemplated by or deemed advisable to effectuate the provisions
of
this Section 13.15.
This
appointment and grant of power and authority is coupled with an interest and
is
in consideration of the mutual covenants made herein and is irrevocable and
shall not be terminated by any act of either of the Shareholder or Seller or
by
operation of law, whether by the death or incapacity of the Shareholder or
by
the occurrence of any other event. Each Shareholder and Seller hereby consents
to the taking of any and all actions and the making of any decisions required
or
permitted to be taken or made by the Selling Parties Representative pursuant
to
this Section 13.15. Each of the Shareholder and Seller agree that the Selling
Parties Representative shall have no obligation or liability to any Person
for
any action or omission taken or omitted by the Selling Parties Representative
in
good faith hereunder, and each of the Shareholder shall, on a proportionate
basis in accordance with his or her ownership interest in the Seller, indemnify
and hold the Selling Parties Representative harmless from and against any and
all loss, damage, expense or liability (including reasonable counsel fees and
expenses) which the Selling Parties Representative may sustain as a result
of
any such action or omission by the Selling Parties Representative hereunder.
b. Buyer
shall be entitled to rely upon any document or other paper delivered by the
Selling Parties Representative as (i) genuine and correct and (ii) having been
duly signed or sent
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by
the
Selling Parties Representative, and the Buyer shall not be liable to either
the
Shareholder or Seller for any action taken or omitted to be taken by Buyer
in
such reliance.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
|
FREUNDLICH
SUPPLY COMPANY, INC.
by:
/s/ Xxxxxxx
Xxxxxxxxxx
Xxxxxxx
Xxxxxxxxxx, President
SHAREHOLDER
/s/
Xxxxxxx
Xxxxxxxxxx
Xxxxxxx
Xxxxxxxxxx
DELAWARE
FASTENER ACQUISITION CORPORATION
by:
/s/ Xxxx
Xxxx
Name:
Xxxx Xxxx
Title:
President
ESCROW
AGENT
/s/
Xxxxxx X.
Xxxxxx
Xxxxxx
X. Xxxxxx, Esquire, with regard to
Sections
2.3(b), 9.2(b) and 9.2(c)
only
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