ASSET PURCHASE AGREEMENT
BY AND AMONG
GERDAU AMERISTEEL US INC.,
A FLORIDA CORPORATION,
GATE CITY STEEL, INC.,
AN INDIANA CORPORATION,
XX XXXXX, INC.,
AN INDIANA CORPORATION,
REBAR EXPRESS OF CINCINNATI, LLC,
AN INDIANA LIMITED LIABILITY COMPANY,
AND
XXXX X. XXXXXX AND XXXXXXX X. XXXXXX
TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS.......................................................... 1
ARTICLE 2 PURCHASED ASSETS; PURCHASE PRICE; RETAINED AMOUNT.................... 4
2.1 Purchased Assets..................................................... 4
2.2 Excluded Assets...................................................... 6
2.3 Assumption of Certain Liabilities.................................... 6
2.4 Excluded Liabilities................................................. 7
2.5 Purchase Price....................................................... 8
2.6 Purchase Price Adjustment............................................ 8
ARTICLE 3 CLOSING.............................................................. 9
3.1 Closing Date......................................................... 9
3.2 Closing Deliveries................................................... 10
3.3 The Buyer Closing Deliveries......................................... 11
3.4 Prorations........................................................... 11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE
STOCKHOLDERS AND THE SELLERS......................................... 12
4.1 Organization and Standing............................................ 12
4.2 Qualification To Do Business......................................... 13
4.3 No Interest in Properties............................................ 13
4.4 Ownership of the Sellers; Corporate Approvals........................ 13
4.5 Authority............................................................ 13
4.6 No Violations........................................................ 13
4.7 Financial Statements................................................. 14
4.8 Absence of Undisclosed Liabilities................................... 14
4.9 Title to Purchased Assets............................................ 14
4.10 Equipment and Vehicles............................................... 15
4.11 Inventory............................................................ 15
4.12 Leased Real Property................................................. 15
4.13 Contractual Obligations.............................................. 16
4.14 Intellectual Property................................................ 16
4.15 Tax Matters.......................................................... 17
4.16 Litigation........................................................... 17
4.17 Compliance With Applicable Laws...................................... 17
4.18 Employment-Related Matters........................................... 18
4.19 OSHA................................................................. 19
4.20 Insurance Coverage................................................... 19
4.21 Accounts Receivable; Returns and Cancellations....................... 19
4.22 Employee Benefit Plans............................................... 19
4.23 Environmental Matters................................................ 22
4.24 Absence of Changes................................................... 23
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4.25 Approvals and Consents............................................... 24
4.26 Disclosure........................................................... 24
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER.............................. 24
5.1 Organization and Standing............................................ 25
5.2 Authority............................................................ 25
5.3 No Violations........................................................ 25
5.4 Approvals and Consents............................................... 25
5.5 Disclosure........................................................... 25
ARTICLE 6 COVENANTS AND OBLIGATIONS OF THE SELLERS AND
BUYER................................................................ 25
6.1 Actions Prior to Closing............................................. 25
6.2 Conduct of the Business Until Closing................................ 26
6.3 Action, Approvals and Consents....................................... 27
6.4 Prohibition on Solicitation or Consideration of Other Offers......... 27
6.5 Access to Properties and Records, Etc................................ 28
6.6 Supplemental Disclosure.............................................. 28
6.7 Additional Reports................................................... 28
6.8 Capital Expenditures................................................. 28
6.9 Satisfaction of Conditions........................................... 29
6.10 Employment Matters................................................... 29
6.11 Closing Deliveries................................................... 30
6.12 WARN Act Compliance.................................................. 30
6.13 Bulk Sales Compliance................................................ 30
6.14 Retention and Access to Records...................................... 30
6.15 Payment of Excluded Liabilities...................................... 30
6.16 Environmental Due Diligence.......................................... 30
6.17 Accounts Receivable.................................................. 31
6.18 Detailing Services Agreement......................................... 31
6.19 Sellers' Purchase Orders............................................. 31
6.20 CIT Landlord's Waiver and Consent Agreement.......................... 31
ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER..................... 31
7.1 Accuracy of Representations and Warranties; Documents................ 31
7.2 Compliance........................................................... 32
7.3 No Litigation, Etc................................................... 32
7.4 Material Adverse Change.............................................. 32
ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS AND
THE STOCKHOLDERS..................................................... 32
8.1 Accuracy of Representations and Warranties........................... 32
8.2 Compliance........................................................... 32
8.3 No Litigation, Etc................................................... 32
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ARTICLE 9 RESTRICTIVE COVENANTS................................................ 33
9.1 Noncompetition....................................................... 33
9.2 Nonsolicitation...................................................... 33
9.3 Non-Disclosure....................................................... 34
9.4 Enforcement.......................................................... 34
ARTICLE 10 INDEMNIFICATION...................................................... 35
10.1 Losses............................................................... 35
10.2 Indemnification by the Stockholders and the Sellers.................. 35
10.3 Indemnification by the Buyer......................................... 35
10.4 Procedures for Indemnification....................................... 36
10.5 Defense of Third Party Claims........................................ 37
10.6 Settlement of Third Party Claims..................................... 37
10.7 Cooperation.......................................................... 37
10.8 Settlement of Indemnification Obligation; Setoff..................... 37
10.9 Time Limitation...................................................... 38
10.10 Basket and Aggregate Dollar Limitation............................... 38
10.11 Exclusive Post-Closing Remedy........................................ 39
10.12 Attorneys' Fees...................................................... 39
ARTICLE 11 TERMINATION.......................................................... 39
11.1 Right to Terminate................................................... 39
11.2 Effectiveness of Termination......................................... 40
11.3 Effective Termination................................................ 40
ARTICLE 12 GENERAL.............................................................. 40
12.1 Joint and Several Liability.......................................... 40
12.2 No Brokers........................................................... 40
12.3 Waivers.............................................................. 40
12.4 Specific Enforcement................................................. 40
12.5 Expenses............................................................. 41
12.6 Press Releases....................................................... 41
12.7 Notices.............................................................. 41
12.8 Schedules and Exhibits............................................... 42
12.9 Assignability........................................................ 42
12.10 Further Assurances................................................... 42
12.11 Counterparts......................................................... 42
12.12 Applicable Law; Venue; Construction and Interpretation............... 43
12.13 Time of the Essence.................................................. 43
12.14 Integration of Agreement............................................. 43
12.15 Submission of Draft.................................................. 43
12.16 Schedules............................................................ 44
12.17 Waiver of Jury Trial................................................. 44
12.18 Passage of Title and Risk of Loss.................................... 44
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INDEX OF EXHIBITS
Exhibit 2.5(b) Escrow Agreement
Exhibit 2.6(b) Working Capital Calculation
Exhibit 3.2(a) Xxxx of Sale
Exhibit 3.2(d) Assignment and Assumption Agreement
Exhibit 3.2(e) Assignment and Assumption of Lease Agreements
Exhibit 3.2(f) Form of Owned Real Property Lease
Exhibit 3.2(g) Consulting Agreement
Exhibit 3.2(k) Opinion of Sellers' Counsel
Exhibit 9.1(a) Description of Related Businesses
INDEX OF SCHEDULES
Schedule 2.2(h) Additional Excluded Assets
Schedule 2.3(d) Rebates and Future Discounts
Schedule 2.3(f) Additional Included Liabilities
Schedule 2.5(c) Allocation of Purchase Price
Schedule 4.3 Stockholders' Ownership in Other Businesses
Schedule 4.7 Financial Statements
Schedule 4.10 Equipment and Vehicles
Schedule 4.12(a) Leased Real Property
Schedule 4.12(b) Owned Real Property
Schedule 4.12(f) Defect in Design or Improvements
Schedule 4.13 Material Contracts
Schedule 4.14 Intellectual Property
Schedule 4.16 Litigation
Schedule 4.17 Compliance with Applicable Law
Schedule 4.18(a) Employees/Salaries
Schedule 4.20 Insurance Coverage
Schedule 4.21(a) Aged Accounts Receivable
Schedule 4.21(b) Product Claims
Schedule 4.22(a) Medical Plans
Schedule 4.22(b) Benefit Plans
Schedule 4.22(d) COBRA Employees
Schedule 4.23(a) Environmental Permits
Schedule 4.23(b) Hazardous Materials Locations
Schedule 4.24 Absence of Changes
Schedule 4.25 Approvals and Consents
Schedule 6.19 Sellers' Purchase Orders
Schedule 9.2(a) Employees not subject to Nonsolicitation
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is dated as of
November 23, 2004, by and among GERDAU AMERISTEEL US INC., a Florida corporation
(the "Buyer"); GATE CITY STEEL, INC., an Indiana corporation ("GCS"), XX XXXXX,
INC., an Indiana corporation ("RJR"), REBAR EXPRESS OF CINCINNATI, LLC, an
Indiana limited liability company ("REC") (hereinafter, GCS, RJR, and REC are
each a "Seller" and collectively referred to as the "Sellers"); and XXXX X.
XXXXXX and XXXXXXX X. XXXXXX (each a "Stockholder" and collectively the
"Stockholders").
WITNESSETH:
WHEREAS, the Sellers are primarily engaged in the fabrication and sale
of concrete construction supplies and steel reinforcing bars (collectively, the
"Business"); and
WHEREAS, the Buyer desires to purchase substantially all of the assets
used in the operation of the Business and lease the real property used by
Sellers in the Business, and the Sellers desire to sell such assets and make and
assign such leases, all upon the terms and subject to the conditions hereinafter
set forth; and
WHEREAS, the Stockholders will derive substantial benefit from the
sale of the assets of the Sellers, and, therefore, are willing to make certain
representations, warranties and indemnifications regarding the Sellers.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained in this Agreement, and in order to consummate
the purchase and sale of the assets aforementioned, it is by this Agreement
agreed as follows:
ARTICLE 1
DEFINITIONS
In addition to such other terms as elsewhere defined herein, the
following terms shall have the following meanings for all purposes of this
Agreement and all other documents issued under or delivered pursuant hereto,
unless the context requires otherwise:
"Accounts Payable" shall mean all trade payables and accrued expenses
of the Sellers which, in any case, are payable as a result of goods sold to, or
otherwise provided for or to, the Sellers or the Business.
"Accounts Receivable" shall have the meaning set forth in Section
2.1(b).
"Accrued Wages" shall have the meaning set forth in Section 2.4.
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934.
"Assignment and Assumption Agreement" shall have the meaning set forth
in Section 3.2(d) of this Agreement.
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"Assignment and Assumption of Lease Agreements" shall have the meaning
set forth in Section 3.2(e) of this Agreement.
"Assumed Liabilities" shall have the meaning set forth in Section 2.3
of this Agreement.
"Best Efforts" shall mean 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.
"Books and Records" shall have the meaning set forth in Section 2.1(f)
of this Agreement.
"Closing" and "Closing Date" shall have the meanings set forth in
Article 3 of this Agreement.
"Closing Balance Sheet" shall have the meaning set forth in Section
2.6 of this Agreement.
"Closing Payment" shall have the meaning set forth in Section 2.5(b)
of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercial Paper Rate" shall mean the interest rate from time to time
quoted in the Money Rates section of The Wall Street Journal for high-grade
unsecured notes sold through dealers by major corporations for ninety (90) days.
"Consulting Agreement" shall have the meaning set forth in Section
3.2(g) of this Agreement.
"Contracts" shall have the meaning set forth in Section 2.1(c) of this
Agreement.
Discount Obligations shall have the meaning set forth in Section
2.3(d) of this Agreement.
"Effective Time" shall mean 11:59 p.m. Eastern Standard Time on the
day preceding the Closing Date.
"Encumbrances" shall mean security interests, claims, liens,
encumbrances, equities, charges or other interests of third parties.
"Equipment" shall have the meaning set forth in Section 2.1(d) of this
Agreement.
"Escrow Agent" shall mean the party named as such in the Escrow
Agreement.
"Escrow Agreement" shall mean the Agreement in the form attached
hereto as Exhibit 2.5(b).
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"Excluded Assets" shall have the meaning set forth in Section 2.2 of
this Agreement.
"Excluded Liabilities" shall have the meaning set forth in Section 2.4
of this Agreement.
"Final Closing Balance Sheet" shall have the meaning set forth in
Section 2.6(c) of this Agreement.
"Frankfort Lease" shall have the meaning set forth in Section 2.1(a)
of this Agreement.
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
"Indemnification Claim" shall have the meaning set forth in Section
10.4(a) of this Agreement.
"Independent Accounting Firm" shall have the meaning set forth in
Section 2.6(c) of this Agreement.
"Intellectual Property" shall have the meaning set forth in Section
2.1(g) of this Agreement.
"Inventory" shall have the meaning set forth in Section 2.1(h) of this
Agreement.
"Knowledge", when used with respect to the Sellers, means the actual
knowledge, or the knowledge they would have following reasonable inquiry, of the
following officers and directors of the Sellers: Xxxx X. Xxxxxx, President;
Xxxxxx Xxxxx, Vice President of Sales; Xxxx Xxxxxxxx, Chief Accountant; Xxxx
Xxxxxxxxx, Manager Rebar Express, Trussville, Alabama; Xxxxxx Xxxxxxx, Manager
Rebar Express, Lemont, Illinois, and Gate City Steel, Sterling Operations; Xxxxx
Xxxxx, Manager Gate City Steel, Indianapolis Operations; Xxxxxx Xxxxx, Manager
Gate City Steel, Birmingham Operations; Xxxx Xxxxxxx, Manager XX Xxxxx
Operations; and Xxx Xxxx, Manager Rebar Express, Hamilton, Ohio.
"Leased Real Property" shall have the meaning set forth in Section
2.1(a) of this Agreement.
"Losses" shall have the meaning set forth in Section 10.1 of this
Agreement.
"Ordinary course of business" shall mean the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Outstanding Checks" shall have the meaning set forth in Section 2.4
of this Agreement.
"Owned Real Property" shall have the meaning set forth in Section
2.1(a) of this Agreement.
"Owned Real Property Leases" shall have the meaning set forth in
Section 3.2(f) of this Agreement.
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"Permitted Encumbrances" shall mean (i) liens for taxes not yet due
and payable, and (ii) Encumbrances relating to the assets and properties of the
Sellers that have been properly disclosed to the Buyer on an appropriate exhibit
or schedule to this Agreement.
"Person" shall mean any individual, corporation, general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union or other entity or governmental body.
"Purchase Price" shall have the meaning set forth in Section 2.5(a) of
this Agreement.
"Purchase Order" means any order or Contract for the purchase of goods
or services from the Sellers.
"Purchased Assets" shall have the meaning set forth in Section 2.1 of
this Agreement.
"Retained Amount" shall have the meaning set forth in Section 2.5(b)
of this Agreement.
"Tax" means any foreign, federal, state, county or local income, sales
and use, excise, franchise, real and personal property, transfer, gross receipt,
capital stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax or charge imposed by any Governmental
Entity, any interest and penalties (civil or criminal) related thereto or to the
non-payment thereof, and any Loss in connection with the determination,
settlement or litigation of any Tax liability.
"Tax Return" means a report, return or other information required to
be supplied to a Governmental Entity with respect to Taxes including, where
permitted or required, combined or consolidated returns for any group of
entities that include Sellers.
"Unaudited Statements" shall have the meaning set forth in Section 4.7
of this Agreement.
"Vehicles" shall have the meaning set forth in Section 2.1(e) of this
Agreement.
"Working Capital" shall have the meaning set forth in Section 2.6(b).
"Year End Statements" shall have the meaning set forth in Section 4.7
of this Agreement.
ARTICLE 2
PURCHASED ASSETS; PURCHASE PRICE; RETAINED AMOUNT
2.1 Purchased Assets. In reliance upon the warranties,
representations, and covenants contained in this Agreement, and on the terms and
subject to the conditions of this Agreement, the Stockholders and the Sellers
agree that at the Closing, the Sellers will sell, convey, transfer, assign and
deliver to the Buyer, and the Buyer agrees that at the Closing it will purchase
from the Sellers free and clear of all liabilities (fixed or contingent),
obligations, and Encumbrances of any nature or kind whatsoever, all of the
right, title, and interest of the Sellers in and to (i) the Business as a going
concern and (ii) all of the assets, properties, and rights of the Stockholders
and the Sellers constituting the Business or used by the Sellers therein, of
every type and
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description, real and personal, tangible and intangible, wherever located and
whether or not reflected on the books and records of the Sellers including,
without limitation, the following, but excluding the Excluded Assets:
(a) excluding the lease with respect to the idle facility located
in Frankfort, Indiana (the "Frankfort Lease"), all of Sellers' rights, in, to
and under the real estate leases, together with all of the Sellers' rights,
title, and interest in the fixtures and improvements (including equipment
related thereto) located on the real property subject to such leases, and all
assignable warranties of third parties with respect to the fixtures and
improvements (including equipment related thereto) located on the parcels of
real property listed on Schedule 4.12(a) which are subject to such leases in
favor of the Sellers (collectively, the "Leased Real Property"), and all
assignable warranties of third parties with respect to Purchased Assets located
on the parcels of real property listed on Schedule 4.12(b) (collectively, the
"Owned Real Property");
(b) all accounts, notes, and other receivables of the Sellers
from sales to customers (collectively, the "Accounts Receivable");
(c) all of the contracts, leases, warranties, commitments,
agreements, arrangements, credit guaranties, and purchase and sales orders of
the Sellers, whether oral or written related to the Business, pursuant to which
the Sellers enjoy any right or benefit (which term includes the right to receive
income in respect thereof on and after the Closing Date) (collectively, the
"Contracts");
(d) all machinery, equipment (including office equipment and
machines), tools, computers, computer software, telephones and telephone
systems, parts, accessories and the like, wherever located and all assignable
warranties of third parties with respect thereto (collectively, the
"Equipment");
(e) all motor vehicles, trucks, forklifts, trailers and other
rolling stock of the Sellers (collectively, the "Vehicles");
(f) all data, data bases, books, records, correspondence,
business plans and projections, records of sales, customer and vendor lists,
files, papers, historical personnel records, manuals and printed instructions
relating to the Purchased Assets or to the operation of the Business of the
Sellers (collectively, the "Books and Records");
(g) all of the Sellers' patents, designs, art work,
designs-in-progress, formulations, know-how, prototypes, inventions, trademarks,
trade names, including without limitation the trade name "Rebar Express," trade
styles, service marks and copyrights; domestic (but not foreign) registrations
and applications therefor, both registered and unregistered, trade secrets or
processes; confidential or proprietary information; and computer software and
modifications thereof, both source and object code licensed to or from or
authored by the Sellers together with all documentation, manuals, flow charts
and logic diagrams related thereto (collectively, the "Intellectual Property");
(h) all raw materials, work-in-process, finished goods/products,
scrap inventory, and supplies wherever located of the Sellers, including but not
limited to, all rights of the Sellers against suppliers of such materials, and
including, without limitation, the Sellers'
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rights to receive refunds or rebates in connection with their purchases thereof
(collectively the "Inventory");
(i) all causes of action, claims, and demands relating to the
Business or the Purchased Assets; and
(j) all other assets owned or used by the Sellers or others in
connection with the Business, wherever located, real or personal, tangible or
intangible, including prepaid expenses; provided, however, that the Purchased
Assets shall not include, and the Buyer shall not acquire, any right, title, or
interest of the Sellers in or to the Excluded Assets.
All of the items described in this Section 2.1 to be purchased by the
Buyer and that are not Excluded Assets are hereinafter collectively referred to
as the "Purchased Assets."
2.2 Excluded Assets. The Sellers shall not sell and the Buyer shall
not purchase or acquire and the Purchased Assets shall not include:
(a) the Sellers' corporate record books containing minutes of
meetings of the Board of Directors and Stockholders, Tax Returns and records
(except such relating to the Business, e.g., employee and tax records, other
than income tax records, that are needed by the Buyer in connection with its use
of the Purchased Assets after the Closing);
(b) records having to do with the Sellers' organization;
(c) any rights that accrue or will accrue to the Sellers under
this Agreement;
(d) cash, including without limitation, the Sellers' bank
accounts and marketable securities of the Sellers;
(e) any reimbursements, settlement or other amounts receivable
with respect to self-insured health care claims of employees of the Sellers;
(f) the trade name "Gate City Steel";
(g) the Owned Real Property;
(h) the property described on Schedule 2.2(h); and
(i) the refund of tax deposits to RJR in the amount of
approximately $70,000.
The assets described in this Section 2.2 are herein collectively
referred to as the "Excluded Assets."
2.3 Assumption of Certain Liabilities. At the Closing, as additional
consideration for the sale, conveyance, transfer, and delivery of the Purchased
Assets, the Buyer shall assume, pay, perform, and become obligated for,
commencing on and effective from the Effective Time, only the following
liabilities and obligations of the Sellers as they existed and in the amounts
immediately prior to the Effective Time, but excluding any obligations or
liabilities
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under Contracts arising from any then existing event which constitutes, or with
the passage of time if not remedied will constitute, a breach or violation of or
default by the Sellers under the such Contracts; and provided further that the
Buyer shall be liable only for performance under such Contracts with respect to
periods subsequent to the Effective Time (the "Assumed Liabilities"):
(a) to the extent assigned to the Buyer, Contracts listed on
Schedule 4.13 and those not required to be listed thereon as a result of the
provisions of Section 4.13;
(b) Accounts Payable attributable to the Business and owed by
Sellers as of the Effective Time;
(c) to the extent assigned to Buyer, Purchase Orders of Sellers
attributable to the Business as of the Effective Time;
(d) to the extent assigned to Buyer, the Sellers' obligations
listed on Schedule 2.3(d) to provide rebates and future discounts as a result of
material change orders received from Sellers' customers in an aggregate amount
not to exceed $2,000,000, excluding any rebates or discounts related to
purchases as to which Sellers receive payment of a retroactive price increase
from the State of Ohio or its contractors as reserved to Sellers on Schedule
2.2(h) (the "Discount Obligations");
(e) the leases for the Leased Real Property; and
(f) the liabilities and obligations described on Schedule
2.13(f).
2.4 Excluded Liabilities. Except as expressly provided in Section 2.3,
the Buyer shall not assume or become liable for any obligations, commitments, or
liabilities of the Sellers, whether known or unknown, absolute, contingent, or
otherwise, and whether or not related to the Purchased Assets. The obligations
and liabilities of the Sellers not assumed by the Buyer shall be retained and
discharged by the Sellers and are referred to as the "Excluded Liabilities".
Without limiting the generality of the preceding sentence, the Excluded
Liabilities include: accrued wages attributable to employees of the Business as
of the Effective Time ("Accrued Wages"); the outstanding checks attributable to
the Business as of the Effective Time (the "Outstanding Checks"); the amount of
any Discount Obligations in excess of $2,000,000; and any liability with respect
to any claim or cause of action, regardless of when made or asserted, that
arises (A) out of or in connection with the operations of the Business prior to
the Effective Time (except as to the Assumed Liabilities) or (B) with respect to
any product purchased or manufactured or any service provided by the Sellers on
or prior to the Effective Time, including, without limitation, any liability or
obligation (i) pursuant to any express or implied representation, warranty,
agreement, or guarantee made by the Sellers or alleged to have been made by the
Sellers or (ii) imposed or asserted to be imposed by operation of law, in
connection with any service performed or product designed, manufactured, sold,
or leased by or on behalf of the Sellers on or prior to the Effective Time,
including without limitation, any claim related to any product delivered in
connection with the performance of such service and any claims seeking to
recover for consequential damage, lost revenue or income, pursuant to any
doctrine of product liability.
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2.5 Purchase Price.
(a) General. Subject to the fulfillment or written waiver of the
conditions set forth in this Agreement, as consideration for the sale, transfer,
and conveyance of the Purchased Assets, the Buyer shall pay the Sellers the sum
of: (i) $16,830,000, plus (ii) an amount equal to the Accrued Wages, plus (ii)
an amount equal to the Outstanding Checks, (collectively, the "Purchase Price").
The Purchase Price will be subject to adjustment as provided below. As
additional consideration, the Buyer shall assume the Assumed Liabilities as
provided in Section 2.3 above.
(b) Payment of Purchase Price. Of the Purchase Price, the sum of
(i) $15,830,000 plus (ii) an amount equal to the Accrued Wages plus (iii) an
amount equal to the Outstanding Checks (collectively, the "Closing Payment")
shall be paid to the Sellers at Closing by wire transfer of immediately
available federal funds in accordance with the written directions of the Sellers
as provided to the Buyer. Subject to possible set-off as provided in Section
10.8, the remaining $1,000,000 (the "Retained Amount") shall be paid by the
Buyer to the Escrow Agent by wire transfer at Closing for future payment to the
Sellers as follows: $600,000 on the date that is one hundred twenty (120) days
after the Closing Date, and the remaining $400,000 shall be paid to the Sellers
on the date that is three hundred sixty (360) days after the Closing Date, in
each case with interest thereon at the Commercial Paper Rate, less any
Indemnification Claims made pursuant to Section 10.3, that have been made but
have not yet been paid from the Retained Amount. The Retained Amount will be
held subject to the terms and conditions of the Escrow Agreement.
(c) Allocation of Purchase Price. The consideration paid for the
Purchased Assets shall be allocated among the Sellers and the Purchased Assets
acquired from each Seller as provided on Schedule 2.5(c), and all parties shall
be bound by such allocation and report the transactions contemplated by this
Agreement for state and federal income tax purposes in accordance with such
allocation.
2.6 Purchase Price Adjustment.
(a) As soon as practicable, but in no event later than sixty (60)
days after the Closing Date, Sellers shall prepare and deliver to the Buyer a
balance sheet of the Business as of the Effective Time (the "Closing Balance
Sheet") setting forth a true, correct and complete listing of each of the
components making up Working Capital and setting forth in reasonable detail the
calculation thereof. The Closing Balance Sheet shall be prepared by the Sellers
in accordance with GAAP using the same methodology as was used to prepare the
Year End Statements and Unaudited Statements and consistent with past practices
without regard to any effects of the transactions related to the Closing or any
simultaneous or subsequent action. Sellers shall be given access by the Buyer to
all records and information relevant to the preparation of the Closing Balance
Sheet.
(b) The Buyer and its independent auditors and other
representatives shall have the right to review and to verify the Closing Balance
Sheet when received (including reviewing such work papers and other documents
and information reasonably requested by the Buyer and interviewing those
individuals who prepared the Closing Balance Sheet on behalf of
8
the Seller). For purposes of this Agreement, the term "Working Capital" consists
of the following items relating to the Business as of the Effective Time and
shall be calculated consistent with Exhibit 2.6(b): (i) the sum of Accounts
Receivable net of reserves; plus Inventory; plus prepaid expenses; minus (ii)
the sum of Accounts Payable; plus Accrued Wages; plus Outstanding Checks.
(c) The Buyer shall have thirty (30) days following receipt by it
of the Closing Balance Sheet during which to dispute the Closing Balance Sheet.
The Buyer shall notify the Sellers of any such dispute by delivering written
notice to the Sellers which shall specifically describe each line item of the
Closing Balance Sheet in dispute and the reasons therefore. If the Buyer fails
to notify the Sellers in writing of any such dispute within such thirty (30) day
period, the Closing Balance Sheet and calculation of Working Capital shall be
final and binding on both the Buyer and the Sellers and shall be the "Final
Closing Balance Sheet." If the Buyer timely notifies the Sellers of any such
dispute, and the Sellers and the Buyer cannot resolve any such dispute within
twenty (20) days after receipt by the Sellers of such notice, such dispute shall
be resolved by an independent accounting firm agreed to by the Seller and the
Buyer (the accounting firm so engaged shall act as an expert and shall
hereinafter be referred to as the "Independent Accounting Firm"). The Sellers
shall comply with any reasonable request for information made by the Independent
Accounting Firm. The determination of the Independent Accounting Firm shall be
made as promptly as practicable and in any event within forty-five (45) days
after the submission of the dispute to the Independent Accounting Firm and shall
be final and binding on both the Buyer and the Sellers. Any expenses relating to
engagement of the Independent Accounting Firm shall be shared equally by the
Buyer and the Sellers. In the event of a dispute, the Closing Balance Sheet and
calculation of Working Capital, as modified in writing by the Buyer and the
Sellers, or by the Independent Accounting Firm, shall be the "Final Closing
Balance Sheet."
(d) Determination of Excess or Deficit Working Capital. If
Working Capital exceeds $5,181,610 (the "Working Capital Baseline Amount"), such
excess shall be referred to in this Agreement as the "Excess Amount." If Working
Capital is less than the Working Capital Baseline Amount, such deficit shall be
referred to in this Agreement as the "Deficit Amount."
(e) Adjustment of Amount of Purchase Price. In the event there
shall be either an Excess Amount or Deficit Amount, the Buyer shall pay the
Excess Amount (plus interest thereon from the Closing Date at the Commercial
Paper Rate) to the Sellers, or the Sellers shall pay the Deficit Amount to the
Buyer (plus interest thereon from the Closing Date at the Commercial Paper
Rate), in immediately available federal funds, within ten (10) days after the
determination thereof. Any such payment not made within ten (10) days after the
determination of the Working Capital shall accrue interest at the Commercial
Paper Rate plus two percent (2%) per annum until paid.
ARTICLE 3
CLOSING
3.1 Closing Date. Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated hereby (the "Closing")
shall be held at the offices of Sellers' Counsel, Xxxxxx & Xxxxxxxxx, LLP,
Indianapolis, Indiana, at 9:00 a.m. on December 3, 2004, or
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at such other time, date and place as the parties to this Agreement may
otherwise agree. The date on which the Closing actually occurs is herein
referred to as the "Closing Date."
3.2 Closing Deliveries. At the Closing on the Closing Date, the
Sellers and the Stockholders shall deliver or shall cause to be delivered to the
Buyer the following, each dated the Closing Date and duly executed by the
Sellers, or Xxxx X. Xxxxxx, as appropriate:
(a) The Xxxx of Sale in the form attached as Exhibit 3.2(a);
(b) Certificates of title for all Vehicles duly endorsed for
transfer;
(c) Such other instruments of transfer necessary or appropriate
to transfer to and vest in the Buyer all of Sellers' right, title and interest
in and to the Purchased Assets;
(d) The General Assignment and Assumption Agreement in the form
attached as Exhibit 3.2(d) (the "Assignment and Assumption Agreement");
(e) The Assignment and Assumption of Lease Agreements for each of
the leases for the Leased Real Property and related Estoppel Certificates, in
the form attached hereto as Exhibit 3.2(e) (the "Assignment and Assumption of
Lease Agreements");
(f) The Leases between the GSC and the Buyer for the Owned Real
Property in the form attached hereto as Exhibit 3.2(f) and a form of
Subordination, Non-Disturbance and Attornment Agreement in a form reasonably
satisfactory to the Buyer (collectively, the "Owned Real Property Leases");
(g) The Consulting Agreement between the Buyer and Xxxx X. Xxxxxx
in the form attached hereto as Exhibit 3.2(g) (the "Consulting Agreement");
(h) Certificates of existence and good standing for each Seller,
as of a recent date, from their respective state of incorporation/organization
and all other states in which the Sellers are qualified to do business;
(i) Certificates of the secretary of each Seller certifying, as
of the Closing Date, the incumbency and signatures of each officer signing on
behalf of the Sellers and that the following documents are true, complete and
correct and are in full force and effect as of the Closing Date: (i) the
Articles of Incorporation/Organization of each Seller, together with all
amendments thereto; (ii) the Bylaws/Operating Agreements of each Seller; and
(iii) resolutions that have been duly adopted by the Board of Directors/Managers
and the shareholders/members of each Seller to authorize and approve the
execution and delivery of this Agreement and the performance of the transactions
contemplated hereby;
(j) An opinion of Sellers' Counsel, dated as of the Closing Date,
in the form attached hereto as Exhibit 3.2(k);
(k) The Escrow Agreement;
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(l) The written consents, approvals, and authorizations referred
to in Section 4.25 and such other consents and waivers otherwise required for
the execution of this Agreement and the consummation of the transactions
contemplated hereby, each of which shall be in the form and substance reasonably
satisfactory to the Buyer; and
(m) All such certificates or other documents as the Buyer shall
reasonably request to evidence the fulfillment by the Sellers and the
Stockholders, as of the Closing Date, of the terms and conditions of this
Agreement.
3.3 The Buyer Closing Deliveries. At the Closing on the Closing Date,
the Buyer shall deliver to Sellers, or Xxxx X. Xxxxxx, as appropriate, the
following, each dated as of the Closing Date and duly executed by the Buyer:
(a) The Closing Payment and the Retained Amount to the Escrow
Agent;
(b) The Assignment and Assumption Agreement;
(c) The Assignment and Assumption of Lease Agreements;
(d) The Owned Real Property Leases;
(e) The Consulting Agreement;
(f) The Escrow Agreement duly executed by the Escrow Agent;
(g) A certificate of the secretary of the Buyer certifying, as of
the Closing Date, the incumbency and signatures of each officer signing on
behalf of the Buyer and that the following documents are true, complete and
correct and are in full force and effect as of the Closing Date: resolutions
that have been duly adopted by the Board of Directors to authorize and approve
the execution and delivery of this Agreement and the performance of the
transactions contemplated hereby; and
(h) All such certificates or other documents as Sellers shall
reasonably request to evidence the fulfillment by the Buyer, as of the Closing
Date, of the terms and conditions of this Agreement.
3.4 Prorations. The Buyer and the Sellers shall apportion the
following items with respect to the Purchased Assets as of the Effective Time:
(a) personal property Taxes payable by the Sellers, prorated upon
the basis of the tax year for which assessed (unless undeterminable as of the
Effective Time and then based upon the previous year's personal property Taxes)
and payable and apportioned upon the basis of the actual number of days in such
year; and
(b) utility charges payable by the Sellers, prorated upon the
basis of the payment period and payable and apportioned upon the basis of the
actual number of days in such period.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS AND THE SELLERS
As an inducement to the Buyer entering into this Agreement and
consummating the transactions contemplated hereby, and with the knowledge that
the Buyer shall rely thereon, the Sellers and the Stockholders, jointly and
severally, make the following representations and warranties to the Buyer, each
of which is true and correct on the date hereof and will be true and correct as
of the Closing Date, shall be unaffected by any investigation heretofore or
hereafter made by the Buyer, or any knowledge of the Buyer, and shall survive
the Closing as provided for in Section 10.9 below. All statements and
information made or provided by the Sellers or the Stockholders contained in any
schedule or document delivered as an attachment to this Agreement or as a
closing delivery by or on behalf of the Sellers shall be deemed representations
or warranties by the Sellers and the Stockholders.
4.1 Organization and Standing.
(a) GCS is a corporation duly organized, validly existing and in
good standing under the laws of the State of Indiana. GCS has full corporate
power and authority to carry on the Business as it is now being conducted and to
own, lease and/or operate its properties in the places where the Business is
being conducted and where such properties are owned, leased or operated. GCS has
provided the Buyer with a true and correct copy of GCS' (i) Articles of
Incorporation and all amendments thereto to date and (ii) Bylaws, as now in
effect. The minute and stock books of GCS will be made available for inspection
by the Buyer and its representatives at any reasonable time or times prior to
the Closing and will be complete and correct in all material respects as of the
date of any such inspection and on the Closing Date.
(b) RJR is a corporation duly organized, validly existing and in
good standing under the laws of the State of Indiana. RJR has full corporate
power and authority to carry on the Business as it is now being conducted and to
own, lease and/or operate its properties in the places where the Business is
being conducted and where such properties are owned, leased or operated. RJR has
provided the Buyer with a true and correct copy of RJR's (i) Articles of
Incorporation and all amendments thereto to date and (ii) Bylaws, as now in
effect. The minute and stock books of RJR will be made available for inspection
by the Buyer and its representatives at any reasonable time or times prior to
the Closing and will be complete and correct in all material respects as of the
date of any such inspection and on the Closing Date.
(c) REC is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Indiana. REC has
full power and authority to carry on the Business as it is now being conducted
and to own, lease and/or operate its properties in the places where the Business
is being conducted and where such properties are owned, leased or operated. REC
has provided the Buyer with a true and correct copy of the REC's (i) Articles of
Organization and all amendments thereto to date and (ii) the Operating
Agreement, as now in effect. The books of REC will be made available for
inspection by the Buyer and its representatives at any reasonable time or times
prior to the Closing and will be complete and correct in all material respects
as of the date of any such inspection and on the Closing Date.
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4.2 Qualification To Do Business. The Sellers are duly qualified to do
business as a foreign corporation or limited liability company, as the case may
be, and are in good standing in each jurisdiction in which, by reason of the
character of its properties owned or leased or the nature of its activities or
otherwise, they are required to be so qualified.
4.3 No Interest in Properties. There is no corporation, partnership or
other business organization in which any of the Sellers own, directly or
indirectly, any capital stock or other equity interest, or with respect to which
any of the Sellers, alone or in combination with others, is a control person.
Except as disclosed on Schedule 4.3, neither the Stockholders nor any officer of
the Sellers nor any member of their families (i) owns, directly or indirectly,
in whole or in part, any of the properties necessary for the Business as
currently conducted, or (ii) owns, directly or indirectly, any interest in
(except for the ownership of marketable securities of publicly owned
corporations, representing in no case more than one percent of the outstanding
shares of such class of securities) or controls or is an employee, officer,
director or partner of, participant in or consultant to any corporation,
association, partnership, limited partnership, joint venture or other business
organization which is a competitor, supplier, customer, landlord or tenant of
any of the Sellers.
4.4 Ownership of the Sellers; Corporate Approvals. The Stockholders
own all of the issued and outstanding voting capital stock or membership
interests, as the case may be, of the Sellers. There are no existing warrants,
options, stock or membership purchase agreements, redemption agreements,
restrictions of any nature, calls or rights to subscribe of any character
relating to the capital stock or the membership interests of the Sellers.
4.5 Authority. The execution, delivery and performance of this
Agreement by each of the Sellers and the Stockholders and the transactions
contemplated have been duly and validly authorized and approved by all necessary
action on the part of, and this Agreement has been duly and validly executed and
delivered by, each of the Sellers and the Stockholders. This Agreement is the
legal, valid, and binding obligation of each of the Sellers and the
Stockholders, enforceable against each of them in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditor's rights generally and subject, as to enforceability, to general
principles of equity (whether applied in a proceeding in equity or at law).
4.6 No Violations. The execution, delivery and performance of this
Agreement by the Sellers and Stockholders will not (i) in the case of the
Sellers, violate Sellers' Articles of Incorporation or Organization, as the case
may be, or Bylaws or Operating Agreement, as the case may be, (ii) violate any
provisions of law or any order of any court or any Governmental Entity to which
either of them is subject, or by which the Purchased Assets may be bound, (iii)
except as to loan documents related to indebtedness of Sellers that will be paid
in full in connection with the Closing and except as to the Purchase Orders and
any Contracts listed on Schedule 4.25 (a) conflict with, result in a breach of,
or constitute a default under, any indenture, mortgage, lease, agreement, or
other instrument to which either of them is a party or by which either of them
or any of the Purchased Assets may be bound, or (b) result in the creation of
any Encumbrance upon any of the Purchased Assets, or result in the acceleration
of the maturity of any payment date of any of the liabilities of either of them
or increase or adversely affect the obligations of either of them thereunder, or
(iv) violate any term or provision of, or result in a
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default, give rise to any right of termination, cancellation or acceleration or
cause the loss of any right or option under any contract to which the either of
them is a party.
4.7 Financial Statements. Schedule 4.7 contains the following
financial statements of the Sellers: the financial statements of the Sellers for
the fiscal years ended September 30, 2002 and 2003 (the "Year End Statements"),
audited by Xxxxx Xxxxxx Xxxxxxx, LLC, together with the report thereon of such
firm, and the unaudited financial statements of the Sellers for the period ended
June 30, 2004 (the "Unaudited Statements"), all of which statements (1) are in
all material respects in accordance with the books and records of the Sellers;
(2) are true and accurate statements in all material respects and fairly set
forth the financial condition and results of the operations of each such entity
as of the relevant dates thereof and for the periods covered thereby; (3) have
been prepared in accordance with GAAP consistently applied; and (4) contain and
reflect all necessary material adjustments for a fair presentation of the
results of operations and financial condition for the periods covered by the
statements, subject to the qualification that the Unaudited Statements are
subject to normal year-end adjustments (the aggregate of which will not be
material) and lack complete footnotes and other presentation items. The Sellers
have not received any advice or notification from its independent certified
public accountants that the Sellers have used any improper accounting practice
that would have the effect of not reflecting or incorrectly reflecting in the
Year End Statements, the Unaudited Statements or the books and records of the
Sellers any material properties, assets, liabilities, revenues, or expenses of
the Sellers and no such improper accounting practice has been used. The Year End
Statements and the Unaudited Statements do not contain or reflect any material
items of special or nonrecurring income, or other material income not earned in
the ordinary course of business, except as set forth in the notes thereto. The
books, records, and accounts of the Sellers maintained with respect to the
Business accurately and fairly reflect in all material respects, in reasonable
detail, the transactions and the assets and liabilities of the Sellers with
respect to the Business. The Sellers have not engaged in any transaction with
respect to the Business, maintained any bank account for the Business or used
any of the funds of the Sellers in the conduct of the Business of the Sellers,
except for transactions, bank accounts, and funds which have been and are
reflected in all material respects in the normally maintained books and records
of the Sellers.
4.8 Absence of Undisclosed Liabilities. Except as disclosed on the
Unaudited Statements, the Sellers were not, as of June 30, 2004, obligated for,
nor were any of their assets or properties subject to, as of June 30, 2004, an
amount of liabilities and obligations of any kind in the aggregate (whether
known or unknown, secured or unsecured, accrued, absolute, direct or indirect,
contingent or otherwise, and whether due or to become due) that are required to
be included in the Unaudited Statements in accordance with GAAP and that are in
excess of the aggregate amount of liabilities and obligations shown on the
Unaudited Statements. To the Sellers' Knowledge there are no facts in existence
on the date hereof that might reasonably serve as the basis now or in the future
for any such includable liabilities or obligations, other than those liabilities
and obligations specifically disclosed in the Unaudited Statements or in this
Agreement or the schedules or exhibits hereto.
4.9 Title to Purchased Assets. Except for dispositions in the ordinary
course of business consistent with past practice made since June 30, 2004, the
Sellers have good and marketable title to all of the Purchased Assets, and such
Purchased Assets are subject to no mortgage, guaranty, judgment, execution,
pledge, lien, conditional sales agreement, security
14
agreement, encumbrance or charge, except as disclosed pursuant to this Agreement
(with respect to which no default exists). All such Purchased Assets referred to
above, to the Sellers' Knowledge, are operated in conformity with all applicable
laws, ordinances and regulations.
4.10 Equipment and Vehicles. Schedule 4.10 contains a true and correct
list and a brief description (including, in the case of Vehicles, vehicle
registration or tag numbers) as of a recent date (but not prior to June 30,
2004), which date is so specified thereon, of all Equipment and Vehicles
wherever located or, if leased, to whom or from whom leased, and any and all
assignable warranties of third parties with respect thereto owned by the
Sellers. To the Knowledge of Sellers all of the Equipment and Vehicles that are
used in or necessary to the conduct of the business as presently conducted by
the Sellers are in good operating condition (reasonable wear and tear excepted)
and have been adequately maintained at all times while owned by or under the
control of the Sellers and are usable for the continued operation of the
Business as the same are presently conducted. To the Knowledge of Sellers none
of the Equipment or Vehicles that is used in or necessary to the conduct of the
Business as presently conducted by the Sellers is in need of maintenance or
repairs necessary to perform its respective functions, except for ordinary,
routine maintenance and repairs, which heretofore has been performed as needed
in accordance with good industry standards, the cost of which is not reasonably
expected to vary from historic patterns.
4.11 Inventory. All Inventory reflected on the Unaudited Statements
is, and all Inventory on the Closing Date will be, in all material respects, of
a quantity and quality usable or salable in the ordinary course of the business;
is now and on the Closing Date will be located on or in route to the Business
and has been or will be acquired by the Sellers only in bona fide transactions
entered into in the ordinary course of business. Such Inventory is valued on the
Unaudited Statements and will be valued on the Closing Date Balance Sheet in
accordance with the historical inventory cost value accounting practices of
Sellers, consistently applied and in accordance with GAAP.
4.12 Leased Real Property.
(a) Schedule 4.12(a) contains a true and correct list of each
parcel of Leased Real Property leased by the Sellers and utilized by the Sellers
in the Business. True, correct and complete copies of all documents evidencing
the leases described in Schedule 4.12(a) have been delivered to the Buyer prior
to the date of this Agreement. Each of the leases described on Schedule 4.12(a)
(other than the Frankfort Lease, which is not being assumed by the Buyer) is
now, and will be on the Closing Date, in full force and effect; and there are
not now, and will not be on the Closing Date, any existing defaults or events of
default, real or claimed, or events which with notice or lapse of time or both
would constitute defaults, thereunder. All such leases except as otherwise
indicated on Schedule 4.12(a) are fully assignable without the consent of any
third party.
(b) Schedule 4.12(b) contains a true and correct description of
the Owned Real Property and the indebtedness secured thereby. GCS has good and
marketable fee simple title to the Owned Real Property, free and clear of any
and all Encumbrances except for Permitted Encumbrances. Copies of all documents
evidencing Encumbrances upon the Owned Real Property shall have been delivered
to the Buyer prior to the date of this Agreement.
15
(c) The improvements on the Leased Real Property and the Owned
Real Property do not violate any applicable state or local laws, private
restrictive covenant or governmental use restrictions (including zoning),
building ordinances, or health and safety ordinances except to the extent that
such violation would not have a material, adverse effect on the Business or
Purchased Assets.
(d) There are no pending or, to the Sellers' Knowledge,
threatened condemnations, planned public improvements, annexation, special
assessments, zoning, or subdivision changes, or other adverse claims affecting
the Leased Real Property and the Owned Real Property.
(e) All licenses, permits and approvals required for the
occupancy and operation of the Leased Real Property and the Owned Real Property
(with appurtenant parking uses) have been obtained and are in full force and
effect, and there are not violations in connection with such items.
(f) Except as disclosed on Schedule 4.12(f), none of the Sellers
nor the Stockholders possess any studies or reports that indicate any defects in
the design or construction of any of the improvements on the Leased Real
Property and the Owned Real Property.
(g) There are no past due Taxes, assessments, or other charges
affecting the Owned Real Property.
4.13 Contractual Obligations. All material Contracts existing as of
the date of this Agreement are listed on Schedule 4.13, and except for the
Purchase Orders, true and correct copies have been delivered to the Buyer. For
purposes hereof, "material" shall not include routine contracts, agreements or
commitments that do not exceed $25,000 in amount and that are made in the usual
and ordinary course of business of the Sellers; provided, however, all purchase
orders or other agreements relating to outstanding orders shall be deemed
material regardless of amount. Each of the listed Contracts is in full force and
effect and there are no existing defaults or events of default, real or claimed,
or events, which, with notice or lapse of time or both, would constitute
defaults except with respect to Contracts referred to on Schedule 4.13. To the
Sellers' Knowledge, there is no Contract that contains any contractual
requirement with which there is a reasonable likelihood that the Sellers or any
other party thereto will be unable to comply except with respect to Contracts
referred to on Schedule 4.13. There exists no actual or, to the Sellers'
Knowledge, any threatened termination, cancellation, or limitation of, or any
amendment, modification, or change to any Contract except with respect to
Contracts referred to on Schedule 4.13. The Sellers have not granted any power
of attorney with respect to the Business, the Purchased Assets or Leased Real
Property that remains outstanding.
4.14 Intellectual Property. Schedule 4.14 contains a true and accurate
list of all material Intellectual Property. No Intellectual Property infringes
upon or conflicts with any rights claimed therein by third parties, and no use
by the Sellers of any Intellectual Property licensed to it, violates the terms
of any agreement pursuant to which it is licensed or, violates or infringes upon
the asserted rights of others. The Sellers do not manufacture products that are
the subject of patents, patent applications, copyrights, copyright applications,
trademarks, trademark applications, trade styles, service marks, or trade
secrets owned by or licensed to third parties.
16
Neither the manufacture, use or sale by the Sellers of products, or any
component or part thereof, nor any manufacturing operation or machinery employed
by the Sellers violates or infringes upon any claims of any United States or
foreign patent or patent application owned or held by any third party. No suit,
action, proceeding or claim has ever been instituted, is presently pending or,
to the Sellers' Knowledge is threatened, that disputes the Sellers' ownership or
use of any of the Intellectual Property.
4.15 Tax Matters. Except as may result from the consummation of the
transactions contemplated hereby, neither the Sellers nor the Stockholders have
any liability for Taxes that would affect in any way whatsoever the Buyer's
rights, title and interest in or the Buyer's right to use or enjoy (free and
clear of any lien or restriction other than Permitted Encumbrances) any of the
Purchased Assets or any aspect of the Business acquired by the Buyer pursuant to
this Agreement. Except for issues arising in the ordinary course of business
that are not material in amount or effect, each of the Sellers (i) has prepared
and filed in a timely manner all federal, state and local Tax Returns as are and
have been required to be filed by it, which returns were true and correct in all
material respects and prepared on a basis consistent with applicable federal,
state and local law, all Taxes and other amounts due were shown thereon to be
due, and all such amounts have been paid in full; (ii) has not executed or filed
with the Internal Revenue Service or any other taxing authority any agreement
extending the period for assessment or collection of any income or other Taxes;
(iii) is not a party to any pending action or proceeding by any Governmental
Entity for assessment or collection of Taxes, and no claim for assessment or
collection of Taxes has been asserted against any of them; and (iv) no formal
claims have been made or asserted against any of the Sellers by the United
States government or by any state or foreign country or local government for
income or any other Taxes, except such as have been paid or (whether or not
disputed) are disclosed in this Agreement.
4.16 Litigation. Except as described in Schedule 4.16, none of the
Sellers or the Stockholders: (i) are engaged in, a party to, subject to or, to
their Knowledge, threatened with any claim, controversy, legal or equitable
action or other proceeding (whether as plaintiff, defendant or otherwise)
involving the Purchased Assets or the Business; or (ii) is a party to or subject
to any judgment, order, decree or restriction against them or any of the
Purchased Assets or the Business. Except as set forth in Schedule 4.16, there
has been no reservation of rights by any insurance carrier.
4.17 Compliance With Applicable Laws.
(a) Except as disclosed on Schedule 4.17, none of the Sellers or
the Stockholders are subject to any judgment, order, writ, injunction, or decree
that adversely affects the Purchased Assets or the Business. The Sellers and the
Stockholders have at all times, including in connection with the operation of
the Business, complied with all laws, ordinances, rules and regulations of all
applicable jurisdictions, whether federal, state, local or foreign, and of all
authorities having jurisdiction over the Sellers or any of the Purchased Assets,
including but not limited to the Foreign Corrupt Practices Act, 15 U.S.C.
Sections 78dd-1 (1988), et seq.
(b) None of the Sellers, the Stockholders, any employee or agent
of the Business, or any other person acting on behalf of the Sellers or the
Business has directly or indirectly (i) made any contribution, gift, bribe,
payoff, influence payment, kickback or other
17
payment to any person, private or public, regardless of form, whether in money,
property or services, in order to obtain favorable treatment in securing
business, or to pay for favorable treatment for business secured, or to obtain
special concessions in connection with the Business, or (ii) established or
maintained any fund or asset of the Sellers which has not been recorded on the
books of the Sellers or violated, any federal, state or local law, ordinance or
regulation regulating or prohibiting anti-competitive conduct, activities or
policies, including but not limited to, the Xxxxxxx and Xxxxxxx Antitrust Acts
and the Xxxxxxxx-Xxxxxx Act, as amended.
4.18 Employment-Related Matters.
(a) Schedule 4.18(a) contains a true and correct list of all
salaried employees as of the date of this Agreement whose aggregate compensation
during 2003 was in excess of $40,000 as reflected on their federal form W-2, and
all independent sales representatives, distributors, manufacturer's
representatives, consultants (other than legal and accounting) and independent
contractors employed or engaged by the Sellers as of the date of this Agreement,
the basis of their remuneration, their total remuneration for the year ended
December 31, 2003, and a description of all perquisites and fringe benefits they
receive or are eligible to receive.
(b) Except for oral at-will employment agreements with current
employees, the Sellers are not a party, nor do the Sellers have any obligation
pursuant, to any oral or written agreement, collective bargaining or otherwise,
with any party regarding the rates of pay or working conditions of any of the
employees of the Sellers nor are the Sellers obligated under any agreement to
recognize or bargain with any labor organization or union on behalf of such
employees. Neither the Sellers nor any of their officers, directors, or
employees has been charged or, to the Sellers' Knowledge, threatened, with the
charge of any unfair labor practice.
(c) The Sellers are in compliance with all applicable federal and
state laws and regulations concerning the employer-employee relationship and
with all agreements relating to the employment of the Sellers' employees, as the
case may be, including applicable wage and hour laws, worker compensation
statutes, unemployment laws, and social security laws and the federal Health
Insurance Portability and Accountability Act. There are no pending or, to the
Sellers' Knowledge, threatened claims, investigations, charges, citations,
hearings, consent decrees, or litigation concerning: wages, compensation, bonus,
commissions, awards, or payroll deductions; equal employment or human rights
violations regarding race, color, religion, sex, national origin, age, handicap,
veteran's status, marital status, disability or any other recognized class,
status, or attribute under any federal, state or foreign equal employment law
prohibiting discrimination; representation petitions or unfair labor practices;
grievances or arbitrations pursuant to current or expired collective bargaining
agreements; occupational safety and health; workers' compensation; wrongful
termination, negligent hiring, invasion of privacy or defamation; or
immigration.
(d) The Sellers are not liable for any unpaid wages, bonuses or
commissions (other than those not yet due) or any Tax, penalty, assessment or
forfeiture for failure to pay when due any of the foregoing.
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(e) All officers, employees, and agents of the Sellers are
employees at will and for indefinite terms and there are no outstanding
agreements or arrangements with respect to severance payments.
4.19 OSHA. The Sellers are in compliance with all applicable laws
relating to employee health and safety; and neither past or present conditions
of the Purchased Assets violated or violate any material and applicable legal
requirements or otherwise can be made the basis of any claim, proceeding, or
investigation based on violations of the rules and regulations of the
Occupational Safety and Health Administration or any state law.
4.20 Insurance Coverage. The Purchased Assets and the Business are
insured under various policies of general liability and other forms of
insurance, the principal terms of all of such policies being described on
Schedule 4.20. During the period of time in which the Stockholders have owned
the outstanding capital stock of Sellers, the Sellers have never experienced an
insured claim that was in excess of its coverage limits. The Sellers have not
been refused any insurance with respect to the Business or the Purchased Assets,
nor has coverage been limited, by any insurance carrier to which the Sellers
have applied for insurance or with which the Sellers have carried insurance
during the past five (5) years.
4.21 Accounts Receivable; Returns and Cancellations.
(a) All Accounts Receivable are: (i) reflected properly on the
Books and Records of the Sellers, (ii) bona fide receivables that arose in the
ordinary course of business, and (iii) except to the extent previously written
off or reserved against on the Final Closing Balance Sheet, are collectable in
full when due or within a reasonable time thereafter, and are not subject to any
defense, discount, set-offs or counter-claims. Schedule 4.21(a) sets forth the
aging history of the Accounts Receivable as of the Effective Time. Except as
described on Schedule 4.21(a), since June 30, 2004, the Seller has not
accelerated the collection of accounts receivable or provided terms to customers
that are not consistent with terms provided in the ordinary course of business.
(b) Except as disclosed on Schedule 4.21(b), there are no claims
with respect to returns, or trial use arrangements that could result in the
return of products sold by the Sellers by reason of alleged over shipments,
defective or unsatisfactory products, the expiration of trial use arrangements
or otherwise. There are no products in the hands of customers under an
understanding that such product would be refundable other than as set forth in
the Contracts. The Sellers do not know or have reason to believe that either the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby will result in any cancellations or withdrawals of accepted
and unfilled orders for the sale, license, lease or other transfer of any
product.
4.22 Employee Benefit Plans.
(a) The Sellers have, for the benefit of their employees,
maintained or participated in those self-insured health plans or health
insurance plans listed on Schedule 4.22(a) (such plans being collectively
referred to as the "Medical Plans").
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(b) Except as described in Schedule 4.22(b), none of the Sellers
have in force, are a party to, or maintain, or ever have had in force, been a
party to, or maintained, any employee welfare benefit plan or employee pension
benefit plan ("Benefit Plans") within the respective meanings of Section 3(1) or
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and as to all Benefit Plans, the Sellers have met all their
respective funding obligations thereunder such that all vested rights for future
payments may be satisfied.
(c) The Sellers have complied with the applicable requirements
for their Benefit Plans as set forth in the Code and ERISA, including, without
limitation, 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." After the
Closing Date, the Sellers shall be solely responsible for complying with all
applicable requirements of COBRA, including all applicable employee notice
requirements, with respect to all employees of Sellers and their beneficiaries
who lose health benefits as a result of this transaction and with respect to any
and all other employees of Sellers and their beneficiaries who first become
eligible for COBRA continuation benefits before the Closing. The Buyer (whether
based on claims or allegations that the Buyer is a successor employer or
otherwise) shall not be subject to or suffer any damage or liability directly or
indirectly resulting from any failure of the Sellers to so comply with all
applicable requirements of the Code and ERISA, including COBRA. At all times
when applicable prior to the Closing, the Sellers have complied with the
requirements of COBRA and ERISA Sections 601 through 609.
(d) With respect to the Medical Plans, the Sellers have at all
times complied with the nondiscrimination requirements of Section 105(h) of the
Code. With respect to the Medical Plans and Benefit Plans, the Sellers are, and
each of the Medical Plans and each of the Benefit Plans are, in full compliance
with ERISA, the Code and other applicable laws. All of the employees of the
Sellers whose service with the Sellers was terminated within the past three (3)
years had been offered continuation coverage under COBRA and the persons listed
on Schedule 4.22(d) attached are such of those employees who have accepted the
continuation coverage requirements of COBRA and as to whom eligibility for such
continuation coverage extends through the Effective Time.
(e) Within the past five (5) years, none of the Sellers (nor any
entity under common control within the meaning of Sections 414(b), 414(c),
414(m) or 414(o) of the Code) did at any time, nor do any of them now, maintain,
participate in or have any obligation to contribute to any multiemployer plan,
as defined in ERISA Section 3(37). None of the Sellers or any entity under
common control has at any time withdrawn from any multiemployer plan with
respect to which there is any withdrawal or other liability (whether assessed or
not) as of the Effective Time.
(f) There are no actions, audits or claims pending or threatened
against the Sellers, the Purchased Assets or the Business with respect to the
maintenance of any Benefit Plan, other than routine claims for benefits by
employees.
(g) The Sellers have operated, and have caused their appointees
and nominees to operate, each pension plan (within the meaning of Section 3(2)
of ERISA) in a manner that is
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in compliance with the terms thereof and with all applicable law, regulations
and administrative agency rulings and requirements applicable thereto, except
for any such violations that individually or in the aggregate would not have a
material adverse effect on the Sellers or the Business. There is no action
pending, or, to the Sellers' Knowledge, threatened litigation relating to any
pension plan.
(h) Full payment has been made of all amounts that the Sellers
are required, under applicable law or under any pension plan to have paid as
contributions thereto as of the last day of the most recent fiscal year of each
pension plan ended prior to the date hereto. For each pension plan, as of the
last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities," within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of actuarial
assumptions contained in the plan's most recent actuarial valuation), did not
exceed the then current value of assets of such plan, and there has been no
material adverse change in the financial condition of such plan since the last
day of the most recent plan year. Benefits under all pension plans are as
represented and have not been increased subsequent to the date of such
documents.
(i) There does not exist any accumulated funding deficiency
within the meaning of Section 412 of the Code or Section 302 of ERISA nor has
there been issued a waiver of the minimum funding standards imposed by the Code
with respect to any pension plan nor are there any excise taxes due or to become
due under Section 4971 of the Code with respect to the funding of any such plan
for any plan year or other fiscal period prior to the Closing Date. The Sellers
have not provided, nor are the Sellers required to provide, security to any
pension plan of the Sellers pursuant to Section 401(a)(29).
(j) With respect to each pension plan and that is subject to the
provisions of Title IV of ERISA, each and every one of the following is true:
(1) There has not occurred any "reportable event" within the
meaning of Section 4043 of ERISA or the regulations thereunder for which the
30-day reporting requirement has not been waived;
(2) There exists no ground upon which the Pension Benefit
Guaranty Corporation ("PBGC") would require termination of such plan or
appointment of itself or its nominee as trustee;
(3) All PBGC premiums for all plan years ended prior to the
Closing Date, to the extent due and payable, have been paid in full, and all
premiums required to be paid as of the Effective Time for the current plan year,
have been paid in full, including late fees, interest and penalties, if and to
the extent applicable; and
(4) No condition or event currently exists or currently is
expected to occur that could result, directly or indirectly, in any liability of
the Sellers under Title IV of ERISA, whether to the PBGC or otherwise (except
for required premium payments under Title IV of ERISA which payments have been
or will be made when due) on account of termination of the plan.
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4.23 Environmental Matters.
(a) The Sellers and the Stockholders, with respect to the
Business and the Leased Real Property and Owned Real Property:
(1) are in compliance with all laws, rules and regulations
relating to environmental protection (the "Environmental Laws"). Neither the
Sellers nor the Stockholders have (x) been notified that they are potentially
liable under, or (y) received any requests for information or other
correspondence concerning any site or facility under, nor have the Sellers any
reason to believe that any of them is considered potentially liable under, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or any similar federal or state law;
(2) have accurately prepared and timely filed with the
appropriate jurisdictions all reports and filings required pursuant to any
federal, state, or local law, regulation, statute, or order applicable to or
affecting the Sellers, the Business or the Purchased Assets;
(3) have not entered into or received any consent decree,
compliance order, or administrative order relating to environmental protection;
(4) have not entered into or received nor are the Sellers or
the Stockholders in default under any judgment, order, writ, injunction or
decree of any federal, state, or municipal court or other Governmental Entity
relating to environmental protection;
(5) have obtained all environmental permits that are
required under federal, state, or local laws, rules, and regulations in
connection with the Business or the ownership, use, or lease of the Purchased
Assets, and Schedule 4.23(a) contains a complete list and description of each
such environmental permit. The Sellers and the Stockholders are in compliance
with each such environmental permit (including any information provided on the
applications therefore), and no environmental permit restricts the Sellers or
the Stockholders from operating any of the Equipment covered by such
environmental permit to the full capacity of such Equipment, twenty-four (24)
hours a day, seven (7) days a week; and
(b) With respect to the Business and the Leased Real Property and
Owned Real Property:
(1) there are no actions, suits, claims, arbitration
proceedings, or complaints pending or, to the Sellers' Knowledge, threatened or
under consideration by any Governmental Entity, municipality, community,
citizen, or other entity, against the Sellers relating to environmental
protection, nor is there any basis for any such action, suit, claim, proceeding,
or complaint;
(2) there has been no disposal, release, burial, or
placement of hazardous or toxic substances, pollutants, contaminants, petroleum,
gas products, or asbestos-containing materials (as any of such terms may be
defined under current federal, state, or local law) (hereinafter collectively
referred to as "Hazardous Materials") on, in, at, or about any facilities or
Leased Real Property or Owned Real Property used for or in connection with the
22
Business; and other than as disclosed on Schedule 4.23(b) there has been no
disposal, release, burial, or placement of Hazardous Materials, in a manner
which is in violation of applicable law, on, in, at, or about any other facility
to which Hazardous Materials from the Business or the Leased Real Property or
Owned Real Property may have been taken. Schedule 4.23(b) contains a list of all
facilities or locations to which Hazardous Materials from the Business may have
been taken;
(3) other than as disclosed on Schedule 4.23(b), there has
been no disposal, release, burial, or placement of Hazardous Materials on any
property or facility not owned or operated in the present or the past by the
Sellers or the Stockholders which may result or has resulted in contamination of
or beneath any properties or facilities used by or for the benefit of the
Sellers (other than a disposal, release, burial or placement for which such
other owner has full liability (including for any and all fines and remediation
associated with such contamination) and for which such other owner has, and can
reasonably be expected to continue to have, more than sufficient financial
ability to satisfy).
(4) other than as disclosed on Schedule 4.23(b), there are
no underground storage tanks.
4.24 Absence of Changes. Since June 30, 2004 through the date of this
Agreement, except as disclosed on Schedule 4.24 there has not been any
transaction or occurrence in which the Sellers have:
(a) suffered any material adverse change in their business,
operations, condition (financial or otherwise), liabilities, assets, earnings,
or prospects nor has there been any event that has had or may have a material
adverse effect on any of the foregoing;
(b) incurred any obligations or liabilities of any nature other
than items incurred in the regular and ordinary course of business consistent
with past practice, or increased (or experienced any change in the assumptions
underlying or the methods of calculating) any bad debt, contingency, or other
reserve, other than in the ordinary course of business consistent with past
practice;
(c) paid, discharged, or satisfied any claim, lien, encumbrance,
obligation, or liability (whether absolute, accrued, contingent, and whether due
or to become due), other than the payment, discharge, or satisfaction in the
ordinary course of business consistent with past practice of claims, liens,
encumbrances, obligations, or liabilities that are reflected or reserved against
in the Unaudited Statements;
(d) permitted, allowed, or suffered any of the Purchased Assets
of the Sellers to be subjected to any Encumbrance other than the Permitted
Encumbrances;
(e) written down or written up the value of any the Inventory
(including write-downs by reason of shrinkage or markdowns);
(f) other than immaterial adjustments made in the ordinary course
of business canceled any debts or waived any claims or rights;
23
(g) made any capital expenditure or commitment in any one case in
excess of $10,000 for additions to property, plant, equipment, intangible, or
capital assets, other than for emergency repairs or replacement;
(h) incurred any long term indebtedness;
(i) paid, loaned, distributed, or advanced any amounts to, sold,
transferred, or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, purchased, leased, licensed, or otherwise acquired
any properties or assets from, or entered into any other agreement or
arrangement with (i) any stockholder or officer of the Sellers, (ii) any
corporation or partnership in which any Affiliate of the Sellers is an officer,
director, or holder directly or indirectly of five percent (5%) or more of the
outstanding equity or debt securities, or (iii) any person controlling,
controlled by, or under common control with any such partner, stockholder,
officer, director, or Affiliate of the Sellers;
(j) made any declaration or setting aside or payment of any
dividend or other distribution in respect of any of the Stockholders, or any
direct or indirect redemption, purchase or other acquisition of such stock
ownership;
(k) issued any shares in the Sellers or granted any options for
the purchase thereof;
(l) sold, transferred, or otherwise disposed of any of the assets
or properties of the Sellers except in the ordinary course of business
consistent with past practice; or
(m) made any change in any method of accounting or accounting
principle, practice, or policy.
4.25 Approvals and Consents. Except as to those Purchase Orders that
cannot be assigned without the consent of the purchaser and except as provided
on Schedule 4.25, no authorization, consent, approval, designation, or
declaration by, or filing with, any Governmental Entity and no approval or
consent from any party to a Contract, is necessary or required as a condition to
the validity of this Agreement and the consummation of the transactions
contemplated hereby.
4.26 Disclosure. No representation or warranty made by the Sellers or
the Stockholders in this Agreement, or any of the documents and papers required
to be delivered by or on behalf of the Sellers or the Stockholders pursuant to
this Agreement or in connection with the consummation of the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer hereby represents and warrants to the Sellers the following:
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5.1 Organization and Standing. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has full corporate power and authority to carry on its business as
it is now being conducted and to own, lease and/or operate its properties in the
places where its business is being conducted and where such properties are
owned, leased or operated.
5.2 Authority. The execution, delivery and performance of this
Agreement by the Buyer and the transactions contemplated hereby have been duly
and validly authorized and approved by all necessary action on the part of, and
this Agreement has been duly and validly executed and delivered by, the Buyer.
This Agreement is the legal, valid, and binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditor's rights
generally and subject, as to enforceability, to general principles of equity
(whether applied in a proceeding in equity or at law).
5.3 No Violations. The execution, delivery and performance of this
Agreement by the Buyer and the consummation of the transactions contemplated
hereby will not (i) violate the Buyer's Articles of Incorporation or Bylaws,
(ii) violate any provisions of law or any order of any court or any Governmental
Entity to which the Buyer is subject, or (iii) conflict with, result in a breach
of, or constitute a default under, any indenture, mortgage, lease, agreement, or
other instrument to which the Buyer is a party.
5.4 Approvals and Consents. No authorization, consent, approval,
designation, or declaration by, or filing with, any Governmental Entity, and no
approval or consent from any party to a Contract, is necessary or required as a
condition to the validity of this Agreement and the consummation of the
transactions contemplated hereby.
5.5 Disclosure. No representation, warranty or statement made by the
Buyer in this Agreement, or any of the documents and papers required to be
delivered, by or on behalf of the Buyer pursuant to this Agreement or in
connection with the transactions contemplated hereby contains or will contain
any untrue statement of material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE 6
COVENANTS AND OBLIGATIONS OF THE SELLERS AND BUYER
6.1 Actions Prior to Closing. From the date of this Agreement through
the Closing Date, except to the extent expressly contemplated by this Agreement,
the Sellers covenant that the Sellers shall not, without the prior written
consent of the Buyer, and the Stockholders covenant that the Stockholders will
not, without the written consent of the Buyer, take any action or fail to take
any action so as to allow the Sellers to:
(a) enter into any transaction, take any action or fail to take
any action that would result in, or could reasonably be expected to result in or
cause, any of the representations or warranties of the Sellers contained in this
Agreement, the exhibits hereto or any document delivered pursuant to this
Agreement or in connection with the consummation of the transactions
contemplated hereby to not be true and complete at and as of the time
immediately after the occurrence of such transaction or after the action is
taken or failed to be taken, and also on the
25
Closing Date, except, in any such case, representations and warranties that
speak only as of the date of this Agreement;
(b) other than in the ordinary course of business, enter into any
contract that extends for a period in excess of six (6) months or that involves
aggregate liability in excess of $5,000;
(c) make any change in any method of accounting or accounting
principle, practice or policy, or increase (or change any assumption underlying
or method of calculating) any bad debt, contingency, or other reserve other than
in the ordinary course of business consistent with past practice;
(d) write-down or write-up the value of any of the Purchased
Assets;
(e) breach, terminate, or waive, other than in the ordinary
course of business, any provision under any of the Contracts;
(f) either declare, set aside or pay any dividend or distribution
to any Stockholder;
(g) pay off any note payable to, or make any payment to, any
stockholder, debenture holder, or officer of the Sellers other than in the
ordinary course of business consistent with past practices;
(h) incur any increase in its liabilities from that reflected in
the Unaudited Statements, except in the ordinary course of business consistent
with past practices; or
(i) amend its Articles of Incorporation/Organization or
Bylaws/Operating Agreement.
6.2 Conduct of the Business Until Closing. Except as the Buyer may
otherwise consent in writing, from the date of this Agreement through the
Closing Date, the Sellers hereby covenant that they will do the following:
(a) operate the Business substantially as previously operated and
only in the regular and ordinary course, not make any purchase or sale of the
Purchased Assets except Inventory sold in the ordinary course of business, or
introduce any new method of management or operation, and use Best Efforts to
maintain and preserve intact the goodwill, reputation, present business
organization, and relationships of the Sellers with persons having business
dealings with them;
(b) maintain the assets and properties of the Sellers, real and
personnel, in good order and condition, reasonable wear and use excepted, and
maintain all policies of insurance covering the assets and properties of the
Sellers in amounts and on terms substantially equivalent to those in effect on
the date hereof;
26
(c) maintain the average number of days of Accounts Payable at
not more than the average reflected in the Unaudited Statements and collect all
Accounts Receivable in accordance with prudent business practices;
(d) comply with all laws applicable to the conduct of the
Business; and
(e) maintain the Books and Records of the Sellers in the usual,
regular, and ordinary manner, on a basis consistent with past practices; and,
consistent with past practices, prepare and file all federal, state, local and
foreign Tax Returns and amendments thereto required to be filed by the Sellers
after taking into account any extensions of time granted by such taxing
authorities.
6.3 Action, Approvals and Consents. Schedule 4.25 discloses the extent
to which the sale, transfer, assignment or delivery by the Sellers to the Buyer
of any asset included in the Purchased Assets (other than the Purchase Orders)
is not permitted without the consent, approval, or novation of a third party.
Sellers will use their Best Efforts, at their sole cost and expense, to obtain
prior to the Closing all consents and approvals necessary or appropriate for the
consummation of the transactions contemplated hereby, other than with respect to
the Purchase Orders. All such consents and approvals will be in writing and in
form and substance reasonably satisfactory to the Buyer, and executed
counterparts thereof will be delivered to the Buyer at Closing. This Agreement
will not constitute an agreement to assign or transfer any interest in any
instrument, contact, lease, permit or other agreement or arrangement, of the
Business or any claim, right or benefit arising thereunder or resulting
therefrom, if an assignment or transfer without the consent or approval of a
third party would constitute a breach or violation thereof or adversely affect
the rights of the Buyer or the Business. If a consent or approval of a third
party that is required to assign any instrument, contract, lease, permit, or
other agreement or arrangement (other than the Purchase Orders), or any claim,
right or benefit arising thereunder or resulting therefrom, is not obtained
prior to the Closing, or if an attempted assignment would be ineffective or
would adversely affect any interest of the Buyer or the Business, Sellers will
indemnify buyer and hold the Buyer harmless from any damage or loss resulting
from the failure to obtain such consent or approval and will cooperate with the
Buyer, at Sellers' expense, in any reasonable arrangement to provide that the
Buyer will receive the interest of Sellers in the benefits under any such
instrument, contract, lease, permit, or other agreement or arrangement.
6.4 Prohibition on Solicitation or Consideration of Other Offers.
During the period from the date of this Agreement until December 15, 2004, the
Stockholders and the Sellers hereby covenant that they will take such steps as
are reasonably necessary to assure that the Stockholders and the Sellers: (i)
will not solicit, entertain, encourage, discuss or negotiate with any other
person, or provide any person with nonpublic information relating to, the
possible merger, consolidation, reorganization or acquisition of the Sellers, or
a sale of all or substantially all of the Sellers' assets or effect same, (ii)
will not solicit, entertain, encourage, discuss, negotiate or effect a sale of a
controlling interest in the Sellers, (iii) will not solicit, entertain,
encourage, discuss or negotiate any offers to sell any of the Sellers' assets
(except in the ordinary course of business) or effect same, and (iv) will notify
the Buyer upon receipt of any unsolicited offer to enter into any of the
transactions described in this paragraph.
27
6.5 Access to Properties and Records, Etc. Between the date of this
Agreement and the Closing, the Buyer and its counsel, accountants and other
representatives will be given full access during normal business hours to all of
the properties, personnel, Books and Records, Tax Returns, Contracts, Purchase
Orders, documents evidencing or relating to the Discount Obligations,
commitments and records of the Sellers, and the Buyer will be furnished with all
such additional documents (certified if requested) and information with respect
to the affairs of the Sellers as the Buyer or its counsel or accountants may
from time to time reasonably request.
6.6 Supplemental Disclosure. The Stockholders hereby covenant that
between the date of this Agreement and the Closing, they will promptly advise
the Buyer in writing of any fact that, if existing or known by the Stockholders
at the date of this Agreement, would have been required to be set forth in or
disclosed pursuant to Article 4 of this Agreement and will supplement promptly
or amend the Schedules to Article 4 with respect to any matter hereafter arising
or discovered that, if existing or known by him at the date of this Agreement,
would have been required to be set forth or listed in any such Schedule and (b)
the Sellers hereby covenant that they will promptly advise the Buyer in writing
of any fact that, if existing or known by the Sellers at the date of this
Agreement, would have been required to be set forth in or disclosed pursuant to
this Agreement and will supplement promptly or amend the Schedules hereto with
respect to any matter hereafter arising or discovered by the Sellers that, if
existing or known by it at the date of this Agreement, would have been required
to be set forth or listed in any such Schedule, including any default by the
Sellers or any other party under any Contract; provided, however, that in either
case and for the purpose of the rights and obligations of the parties hereunder,
any such supplemental disclosure shall not be deemed to have been disclosed as
of the date of this Agreement unless so agreed to in writing by the Buyer or
after such disclosure to the Buyer in writing, the Buyer elects to close anyway;
and, in either such event, such disclosure shall be considered to amend the
Schedules hereto.
6.7 Additional Reports. From the date of this Agreement through the
Closing Date, the Sellers and the Stockholders will deliver to the Buyer,
promptly after they become available, true and correct copies of all internal
management and control reports (including aging of accounts receivables,
listings of accounts payable, and inventory control reports) and financial
statements related to the Sellers, the Business or the Purchased Assets. Each
such report shall be in accordance with the books and records of the Sellers,
and, in the case of financial statements, shall present fairly the financial
condition of the Sellers as of the dates indicated and the results of operations
for the periods then ended, and be prepared in accordance with GAAP consistently
applied throughout the periods involved (with any unaudited financial statements
being subject to normal year end adjustments and lacking certain footnotes and
other presentation items), and shall reflect reserves, based upon the Sellers'
Knowledge, for all known liabilities and reasonably anticipated losses.
6.8 Capital Expenditures. From the date of this Agreement through the
Closing Date, the Sellers shall cause their management to discuss with the Buyer
any capital expenditure in excess of $5,000 proposed to be made prior to making
and prior to entering into any contract or commitment for such capital
expenditure, other than emergency capital expenditures. No capital expenditure
in excess of $5,000 (other than emergency capital expenditures for repairs and
maintenance of the assets and properties of the Sellers) shall be made by the
Sellers prior to the Closing Date without the prior consent of the Buyer, which
consent shall not be unreasonably
28
withheld. The Sellers will promptly notify the Buyer of the nature and extent of
emergency capital expenditures made by the Sellers without the prior written
consent of the Buyer.
6.9 Satisfaction of Conditions. From the date of this Agreement
through the Closing Date, the Sellers and the Buyer collectively shall use their
Best Efforts to cause to be satisfied all conditions to the obligation of the
Buyer and the Sellers to consummate the transactions contemplated hereby.
6.10 Employment Matters. The Sellers acknowledge and agree to each of
the following:
(a) Simultaneous with the transfer of the Business to the Buyer
at the Effective Time, the Sellers will discontinue their operations of the
Business and terminate the employees employed at the Business who the Buyer has
advised the Sellers it intends to hire. Any severance pay, accrued vacation pay,
retirement-related benefits, commissions, accrued compensation, workers'
compensation claims, medical claims, or any employment or termination claim
arising out thereof, if any, shall be for the account of Sellers for such
employees to the date of their termination or arising hereafter relative to
their employment by the Sellers.
(b) The Buyer does not accept any collective bargaining or other
employment agreements between the Sellers and its employees, and expressly
declines to accept or be bound by the terms of any such collective bargaining or
other employment agreements. The Buyer is not obligated and does not accept or
adopt any wage rates, employee benefits, employment policies, or any other terms
or conditions of employment currently or previously maintained by the Sellers.
(c) The Buyer has and will exercise the right to establish its
own wages, benefits, and other terms and conditions of employment.
(d) The Buyer does not assume, undertake, or accept any
obligations, duties, responsibilities or liabilities of the Sellers that may
presently exist or arise in the future to employees or former employees of the
Sellers arising out of their employment by the Sellers under any federal, state
or municipal law or regulation.
(e) The Buyer neither has nor assumes any obligations with regard
to future or continued employment of employees of the Sellers and makes no
representations with regard to the intent of the Buyer to retain or employ
employees of the Sellers. Employees of the Sellers will be permitted to apply
for employment with the Buyer. Any employee of the Sellers who applies for
employment with the Buyer will be considered on the same basis as any other
applicant. Offers of employment, if any, by the Buyer to any employees of the
Sellers shall be conditioned upon acceptance of the employment terms and
conditions established by the Buyer.
(f) The Buyer shall not adopt or maintain any Medical Plans or
Benefit Plans previously maintained by the Sellers for the benefit of any
employee employed by, or previously employed by, the Sellers, or any of such
employee's or former employee's dependents or beneficiaries.
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(g) The Buyer (whether based on claims or allegations that the
Buyer is a successor employer or otherwise) shall not be subject to or suffer
any damage or liability directly or indirectly resulting from any failure of the
Sellers to so comply with all applicable requirements of the Code and ERISA,
including COBRA.
6.11 Closing Deliveries. The parties shall execute and deliver such
other documents, certificates, agreements and other writings and to take such
other actions as may be reasonable, necessary or desirable in order to
consummate or implement expeditiously the transactions described in this
Agreement, and any agreement, document or instrument described in this
Agreement, including without limitation the closing deliveries set forth in
Section 3 of this Agreement.
6.12 WARN Act Compliance. The Sellers shall have complied with any
conditions and obligations of the Worker Adjustment and Retraining Notification
Act (the "WARN Act") by the Closing Date. The Buyer shall not be liable for any
liability resulting from any failure of the Sellers to comply with the
requirements of the WARN Act including any filings thereunder. It is the Buyer's
current intention, subject to the Buyer's standard hiring practice, to offer
employment to all of the employees of the Sellers.
6.13 Bulk Sales Compliance. The Buyer and the Sellers waive compliance
with the provisions of any applicable statutes relating to bulk transfers or
bulk sales. The Buyer and the Sellers mutually agree to cooperate in securing
any available exemptions from any such provisions. Notwithstanding the
foregoing, any liability assessed on the Buyer arising out of or relating to the
Sellers' failure to comply with applicable statutes relating to bulk transfers
or bulk sales, and that is not included in the Assumed Liabilities, shall be an
indemnification obligation of the Sellers under the "Excluded Liabilities"
category pursuant to Section 10.2(c) of this Agreement.
6.14 Retention and Access to Records. The Buyer shall retain all Books
and Records included in the Purchased Assets in accordance with its standard
document retention policies, but in any event not less than three (3) years
following the Closing, and shall provide access to, and a right to copy, all of
such Books and Records to Sellers and the Stockholders, and their respective
successors in interest, and to the designated representatives of all of them, to
enable such parties to prepare and file all necessary tax returns and other
reports required, to evaluate, respond to and defend Indemnification Claims and
to otherwise attend to any and all matters requiring attention and relating to
the conduct of the Business prior to the Effective Time.
6.15 Payment of Excluded Liabilities. The Sellers and Stockholders
covenant to pay, fulfill, perform and discharge as and when the same are due,
all indebtedness, payables, duties and obligations arising from the Excluded
Liabilities.
6.16 Environmental Due Diligence. Subject to the limitations of the
leases for the Leased Real Property, Buyer shall have the right to perform any
environmental tests and inspections of the Leased Real Property, including
without limitation, Phase I and II environmental testing, geotechnical studies
and soils testing (collectively, the "Environmental Testing") within 180 days
following the Closing Date in order to determine the environmental condition of
the Leased Real Property as of the Closing Date. Buyer shall deliver the results
of
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the Environmental Testing to the Sellers upon the completion thereof. The
environmental condition of the Leased Real Property on the Closing Date, as
determined by the Environmental Testing, shall be deemed the baseline
environmental condition of the Leased Real Property only with regard to those
matters that were specifically tested, evaluated and specifically described
therein (the "Environmental Baseline"). The parties acknowledge and agree that
Buyer is under no obligation to perform comprehensive or complete Environmental
Testing and may choose to take only limited random samples and tests, and the
Buyer shall not be liable or responsible for or assume any obligations for any
matters that more complete, comprehensive or accurate testing might have
discovered. The Sellers shall indemnify and hold harmless the Buyer for any
obligation, liability, indemnification, or the like relating to any Hazardous
Materials or environmental condition of the Leased Real Property or any existing
defect, problem or other condition or circumstance existing as of the Closing
Date, whether known, unknown, latent or patent or as otherwise referred to, as
determined with reference to the Environmental Baseline (as hereinafter
described), notwithstanding that the Environmental Baseline shall be completed
following the Closing Date.
6.17 Accounts Receivable. If the Buyer makes an Indemnification Claim
for a breach of Section 4.21 as a result of the failure of the Buyer to collect
in full an account receivable, upon the payment of such Indemnification Claim,
the Buyer shall transfer and assign to the Sellers all rights with respect to
any such account receivable.
6.18 Detailing Services Agreement. Subject to the Buyer and the
Stockholders mutually agreeing to commercially reasonable terms and conditions,
the Sellers shall cause Gate City Software Solutions, Private, LTD to enter into
a Detailing Services Agreement with the Buyer on or before the Closing Date.
6.19 Sellers' Purchase Orders. The Sellers shall have compiled and
delivered to the Buyer a list of all Purchase Orders outstanding as of the close
of business on the day immediately prior to the date of Closing.
6.20 CIT Landlord's Waiver and Consent Agreement. The Sellers shall
make their best efforts to cause the landlord of each of the Leased Real
Property locations to execute a CIT Landlord's Waiver and Consent Agreement
prior to the Closing Date, or if not obtained by Closing, after the Closing
Date.
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
The obligations of the Buyer under this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(the fulfillment of any of which may be waived in writing by the Buyer):
7.1 Accuracy of Representations and Warranties; Documents. The
representations and warranties of the Sellers contained in this Agreement and
any documents delivered in connection herewith shall not only have been true and
complete in all material respects as of the date of this Agreement and when made
but shall also be true and complete in all material respects as though again
made on the Closing Date.
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7.2 Compliance. The Stockholders and the Sellers shall have performed
and complied in all material respects with all agreements, covenants and
conditions required by this Agreement to be performed and complied with by them
at or prior to the Closing.
7.3 No Litigation, Etc. There shall not be any action, litigation,
proceeding, investigation, regulation, or legislation pending or threatened that
seeks to enjoin, restrain, prohibit or invalidate the consummation of the
transactions contemplated hereby, or to obtain damages from any party in
connection with such transactions or in respect of the consummation of the
transactions contemplated hereby, or which seeks to enjoin the operation of all
or a portion of the Purchased Assets or the Business that, in the reasonable
judgment of the Buyer, would be reasonably likely to involve material expense to
the Buyer or lapse of time that would be materially adverse to the interests of
the Buyer or otherwise make it inadvisable for the Buyer to consummate the
transactions contemplated by this Agreement.
7.4 Material Adverse Change. After the date of this Agreement, there
shall not have occurred any material adverse change in the Business or Purchased
Assets of the Sellers, including, without limitation, any material damage to or
material destruction or material loss of any material Purchased Assets or
material Contracts of the Sellers (regardless of whether insured).
ARTICLE 8
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS
AND THE STOCKHOLDERS
The obligations of the Sellers and the Stockholders under this
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (the fulfillment of any one of which may be waived
in writing by the Sellers and the Stockholders):
8.1 Accuracy of Representations and Warranties. The representations
and warranties of the Buyer contained in this Agreement shall not only have been
true and complete on the date of this Agreement and when made but shall also be
true and complete in all material respects as though again made on the Closing
Date.
8.2 Compliance. The Buyer shall have performed and complied with all
agreements, covenants and conditions required by this Agreement hereto to be
performed and complied with by the Buyer at or prior to the Closing.
8.3 No Litigation, Etc. There shall not be any action, litigation,
proceeding, investigation, regulation, or legislation pending or threatened that
seeks to enjoin, restrain, prohibit or invalidate the consummation of the
transactions contemplated hereby, or to obtain damages from any party in
connection with such transactions or in respect of the consummation of the
transactions contemplated hereby, or which seeks to enjoin the operation of all
or a portion of the Purchased Assets or the Business.
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ARTICLE 9
RESTRICTIVE COVENANTS
9.1 Noncompetition.
(a) The Sellers and the Stockholders agree that, unless they
obtain Buyer's prior written authorization, for a period of five years from and
after the Closing Date, they shall not, directly or indirectly, (i) in any
state, county or city where any of the Sellers operate the Business as of the
date of this Agreement, enter into, engage in, be employed by, consult with,
conduct or have any ownership interest in any business that fabricates and sells
concrete construction supplies and steel reinforcing bar in competition with any
of the businesses conducted by the Sellers or the Buyer or their Affiliates as
of the date of this Agreement, or (ii) solicit, sell or service any of the
customers of any of the businesses conducted by the Sellers, the Buyer, their
Affiliates as of the date of this Agreement with products and/or services
similar to the products or services offered by the Sellers, the Buyer, their
Affiliates as of the date of this Agreement; provided, however, that the
foregoing restrictions shall not apply to the Stockholders' ownership interest
in or activities with respect to Gate City Software Solutions, Private LTD,
Xxxxxxx Industries, Inc., and Furnish and Install, Inc., as such businesses are
operated as of the Closing Date (which operations are more particularly
described on Exhibit 9.1(a) attached hereto).
(b) Conduct shall be prohibited by this Section 9.1 regardless of
how it is carried out, whether as an independent contractor, partner or joint
venturer, or as an officer, director, stockholder, agent, employee or salesman
for any person, time partnership, corporation or other entity. The foregoing
restrictions shall not apply to the ownership by a stockholder of no more than
one percent of the then outstanding securities of any company whose stock is
traded on a national securities exchange or is quoted on NASDAQ.
9.2 Nonsolicitation.
(a) The Sellers and the Stockholders agree that upon consummation
of the Closing, for a period of five years from and after the Closing Date, they
will refrain from soliciting and will not, without the prior written consent of
the Buyer, either directly or indirectly, as independent contractor, employee,
consultant, agent, partner or joint venturer, or as an officer, director,
stockholder, member, agent or employee of any firm, person, partnership or
corporation, or otherwise, solicit the employees of the Buyer or its Affiliates
to leave the service of their employer or employ any such employees; provided,
however, that this Section 9.2(a) shall not apply to those employees of Sellers
listed upon Schedule 9.2(a); and provided, further, that solicitation for
employees through general advertisements shall not be prohibited by this
Section.
(b) Conduct shall be prohibited by this Section 9.2 regardless of
how it is carried out whether as an independent contractor, partner or joint
venturer, or as an officer, director, stockholder, member, agent, employee or
salesman for any person, firm, partnership, corporation or other entity. The
foregoing restrictions shall not be deemed to be violated if the solicitation is
made by a company in which a stockholder owns no more than one percent of the
then outstanding securities where such stock is traded on a national securities
exchange or is quoted on NASDAQ.
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9.3 Non-Disclosure. The Stockholders acknowledge that during the
course of the Stockholders' relationship with the Sellers and through the
Closing Date, the Stockholders may have received or obtained or may receive or
obtain proprietary and confidential technical and business information with
respect to the business operations of the Sellers, including, by way of
illustration and not limitation, technical know-how, tooling techniques,
customer lists, research data, business and financial methods and practices,
business plans, and marketing, pricing and selling techniques (collectively, the
"Confidential Information"); provided, however, that the term Confidential
Information shall not include that portion of such information, if any, that (i)
is publicly available and has not become such by action of any stockholder of
the Sellers, (ii) is disclosed by a third party who is not an employee or agent
of the Sellers or a former employee or agent of the Sellers or in breach of an
obligation of confidentiality or (iii) becomes publicly available after the date
of this Agreement through no prohibited act of any stockholder of the Sellers.
The Stockholders further acknowledge that the Sellers would be substantially
damaged by any association of the Stockholders with a competitive business in
which the Stockholders used the Confidential Information gained during the
Stockholders' association with the Sellers to compete directly with the Business
or the Buyers. In view of the foregoing, the Stockholders agree that upon
consummation of the Closing they will not, for a period of five years from and
after the Closing Date, without the Buyer's prior written approval, print,
publish, divulge or communicate in any manner to any Person, except as required
by law, or use, directly or indirectly, any Confidential Information; provided,
however, that the foregoing restrictions shall not apply to prevent the
Stockholders' from associating with Gate City Software Solutions, Private LTD,
Xxxxxxx Industries, Inc. and Furnish and Install, Inc. in connection with the
operations of such businesses as more particularly described on Exhibit 9.1(a)
attached hereto. The Stockholders further agree that they will keep confidential
all records, papers and computer data and any copies thereof relating to the
Confidential Information.
9.4 Enforcement.
(a) It is agreed and understood by and among the parties to this
Agreement that the restrictive covenants set forth in Sections 9.1, 9.2 and 9.3
are each individually essential elements of this Agreement and that, but for the
agreement of the Sellers and the Stockholders to comply with such covenants, the
Buyer would not have agreed to enter into this Agreement. Such covenants of the
Sellers and the Stockholders shall be construed as agreements independent of any
other provision of this Agreement and independent of each other. The existence
of any claim or cause of action of a stockholder against the Sellers, the Buyer
or any Affiliate thereof, whether predicated on this Agreement, or otherwise,
shall not constitute a defense to the enforcement by the Buyer of such
restrictive covenants.
(b) It is agreed by the parties to this Agreement that if any
portion of the restrictive covenants set forth in Sections 9.1, 9.2 or 9.3 is
held to be unreasonable, arbitrary or against public policy, then each such
covenant shall be considered divisible both as to time and geographical area,
with each month of a specified period being deemed a separate period of time and
each state being deemed a separate geographical area, it being the intention of
the parties that a lesser period of time or geographical area shall be enforced
so long as the same is not unreasonable, arbitrary or against public policy. The
parties to this Agreement agree that, in the event any court of competent
jurisdiction determines that a specified time period or a specified geographical
area is unreasonable, arbitrary or against public policy, a lesser time period
or
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geographical area which is determined to be reasonable, nonarbitrary and not
against public policy may be enforced against the Stockholders. The parties to
this Agreement further agree that, in the event any court having jurisdiction
does not, or will not, revise a provision or restriction of this Article 9, then
the parties agree that this Agreement automatically shall be deemed modified
such that the contested provision or restriction will have the closest effect
permitted by law to the original form.
(c) The parties hereto agree that damages at law will be an
insufficient remedy to the Buyer in the event that the restrictive covenants of
this Article 9 are violated and that, in addition to any remedies or rights that
may be available to the Buyer, the Buyer shall also be entitled, upon
application to a court of competent jurisdiction, to obtain a temporary
restraining order, preliminary injunction and/or permanent injunction to enforce
the provisions of this Article 9 without any requirement that the Company post
any bond or security.
ARTICLE 10
INDEMNIFICATION
10.1 Losses. For the purposes of this Article 10, "Losses" shall mean
any and all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs, and expenses (including without limitation,
interest, penalties, and reasonable attorneys' and other professional fees and
expenses and other costs and expenses incident to any suit, action,
investigation or other proceeding, whether before or at trial or upon appeal),
less in any such case sums paid or recovered under an applicable policy or
policies of insurance.
10.2 Indemnification by the Stockholders and the Sellers. The
Stockholders and the Sellers agree that, notwithstanding the delivery of any
instruments of conveyance, and any transfer of the Purchased Assets or any
liquidation or dissolution of Sellers, subject to the limitations in Section
10.10, they, jointly and severally, will indemnify and hold harmless the Buyer,
its Affiliates and their respective officers, directors and employees from, for
and against any Losses incurred by the Buyer and arising in connection with or
from:
(a) any breach of any representation or warranty made by the any
of the Sellers or the Stockholders either in (i) this Agreement; (ii) any
transfer instrument, or (iii) any schedule or document delivered by the Sellers
or the Stockholders pursuant to this Agreement;
(b) any failure of any of the Sellers or the Stockholders,
whether prior to, at or after the Closing, duly to perform or observe any
covenant, obligation or agreement hereunder on the part of any of the Sellers or
the Stockholders to be performed or observed;
(c) the Excluded Liabilities;
(d) any matter disclosed upon Schedule 4.16 or Schedule 4.17; and
(e) any breach or violation of the restrictive covenants set
forth in Article 9.
10.3 Indemnification by the Buyer. Subject to the limitations in
Section 10.10, the Buyer covenants and agrees that, notwithstanding the delivery
of any instruments of conveyance, and any liquidation or dissolution of the
Buyer, the Buyer will indemnify and hold harmless the
35
Sellers and the Stockholders from, for and against any Losses incurred by the
Sellers or the Stockholders and arising out of or resulting from:
(a) failure to pay the Closing Payment or the Retained Amount,
net of claims for indemnification;
(b) any breach of any representation or warranty made by the
Buyer either in (i) this Agreement, (ii) any transfer instrument, or (iii) any
other certificate, document, writing or instrument delivered by the Buyer
pursuant to this Agreement;
(c) any failure of the Buyer, whether prior to, at or after the
Closing, duly to perform or observe any covenant or agreement hereunder on the
part of the Buyer to be performed or observed; and
(d) the Assumed Liabilities.
10.4 Procedures for Indemnification. As used herein, the term
"Indemnitor" means the party against whom indemnification hereunder is sought,
and the term "Indemnitee" means the party seeking indemnification hereunder.
(a) A claim for indemnification hereunder ("Indemnification
Claim") shall be made by Indemnitee by delivery of a written declaration to
Indemnitor requesting indemnification and specifying the basis on which
indemnification is sought and the amount of asserted Losses and, in the case of
a Third Party Claim (as hereinafter defined), containing (by attachment or
otherwise) such other information as Indemnitee shall have concerning such Third
Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim,
the procedures set forth in Section 10.5 shall be observed by Indemnitee and
Indemnitor.
(c) If the Indemnification Claim involves a matter other than a
Third Party Claim, Indemnitor shall have thirty (30) business days from the
receipt of written declaration of such claim to either accept or object to such
Indemnification Claim by delivery of a written notice of acceptance or objection
to Indemnitee specifying in reasonable detail the basis for any such objection.
Failure of Indemnitor to timely so object to an Indemnification Claim based on
Section 10.2 or 10.3 be deemed to be an objection to such Indemnification Claim
that was received by Indemnitee at the expiration of such thirty (30) day
period. Acceptance of an Indemnification Claim by Indemnitor shall constitute a
final and binding acceptance of the Indemnification Claim by Indemnitor and the
Indemnification Claim shall be paid in accordance with Section 10.4(d). If an
objection is timely interposed (or deemed to have been interposed) by Indemnitor
and the dispute is not resolved by Indemnitor and Indemnitee on or before the
date which is forty-five (45) days from the date Indemnitee receives (or is
deemed to have received) such objection (such period is hereinafter the
"Negotiation Period"), such dispute may be resolved in any manner, including by
court proceedings, or if the parties agree, by arbitration or otherwise.
(d) Upon determination of the amount of an Indemnification Claim,
whether by agreement between Indemnitor and Indemnitee or by a binding
arbitration decision or by a
36
nonappealable decision of a court of competent jurisdiction, Indemnitor shall
pay (or shall cause the Escrow Agent to pay) the amount of such Indemnification
Claim in cash, within ten (10) days of the date such amount is determined.
10.5 Defense of Third Party Claims. Should any claim be made, or suit
or proceeding (including, without limitation, a binding arbitration or an audit
by any taxing authority) be instituted against Indemnitee that, if prosecuted
successfully, would be a matter for which Indemnitee is entitled to
indemnification under this Agreement (a "Third Party Claim"), the obligations
and liabilities of the parties hereunder with respect to such Third Party Claim
shall be subject to the terms and conditions set forth in this Section 10.5.
Indemnitee shall give Indemnitor written notice of any such claim after receipt
by Indemnitee of notice thereof, and Indemnitor will undertake the defense
thereof by representatives of its own choosing reasonably acceptable to
Indemnitee. The assumption of the defense of any such claim by Indemnitor shall
be an acknowledgment by Indemnitor of its obligation to indemnify Indemnitee
with respect to such claim hereunder. If, however, Indemnitor fails or refuses
to undertake the defense of such claim within ten (10) business days after
written notice of such claim has been given to Indemnitor by Indemnitee,
Indemnitee shall have the right to undertake the defense and, subject to Section
10.5, settlement of such claim with counsel of its own choosing. In the
circumstances described in the preceding sentence, Indemnitee shall, promptly
upon its assumption of the defense of such claim, make an Indemnification Claim
as specified in Section 10.4(a) which shall be deemed an indemnification Claim
that is not a Third Party Claim for the purposes of the procedures set forth
herein. Notwithstanding any decision by Indemnitor to undertake the defense of
the claim, Indemnitee shall be entitled at its own expense and through counsel
of its own choosing to participate in (but not control) the defense of such
claim and the settlement negotiations relating thereto. Such participation shall
not relieve any Indemnitor of its obligation to indemnify Indemnitee under this
Article 10.
10.6 Settlement of Third Party Claims. No settlement of a Third Party
Claim involving the asserted liability of Indemnitor under this Article 10 shall
be made without the prior written consent by or on behalf of Indemnitor, which
consent shall not be unreasonably withheld or delayed. Consent shall be presumed
in the case of settlements of $5,000 or less where Indemnitor has not responded
within seven (7) business days of receipt of notice of a proposed settlement.
10.7 Cooperation. For purposes of this Article 10, the parties to this
Agreement shall execute such powers of attorney as may reasonably be necessary
or appropriate to permit participation of counsel selected by any party hereto
and, as may reasonably be related to any such claim or action, shall provide
access, to the extent reasonably necessary under the circumstances, to the
counsel, accountants and other representatives of each party during normal
business hours to all properties, personnel, books, tax records, contracts,
commitments and all other business records of such other party and will furnish
to such other party copies of all such documents as may reasonably be requested
(certified, if requested).
10.8 Settlement of Indemnification Obligation; Setoff. Subject to the
limitations in Section 10.10, the amount by which the Stockholders and the
Sellers are liable to the Buyer for Indemnification Claims hereunder (either by
agreement of the parties, pursuant to an arbitration award or otherwise) shall
first be covered by recourse against the Retained Amount held by the
37
Escrow Agent that remains at such time, and the excess of such Indemnification
Claims over the Retained Amount that remains may be satisfied by setoff against
any amounts owed by the Buyer under the Owned Real Property Leases or by a
payment of cash by the Sellers or the Stockholders. The parties agree that the
Buyer may setoff against the Losses from any Indemnification Claims any amounts
owed by the Buyer under the Owned Real Property Leases, notwithstanding that
such set-off would permit the Buyer to recover Losses in excess of the Aggregate
Dollar Limitation.
10.9 Time Limitation. The representations, warranties, covenants and
agreements made by the parties, including the right to bring an Indemnification
Claim pursuant to this Article 10, shall survive the Closing until the eighteen
(18) month anniversary of the Closing Date, provided, however:
(a) The right of the Buyer to bring an Indemnification Claim
against the Sellers and the Stockholders for each of the following shall survive
the Closing until the applicable statute of limitations with respect thereto
shall have expired: (i) any breach of a representation, warranty, covenant or
agreement contained in Section 4.5 Authority, Section 4.9 Title to Purchased
Assets, Section 4.15 Tax Matters, and/or Section 4.23 Environmental Matters,
(ii) any matter that is based successfully upon fraud, and (iii) any matter
relating to Section 10.2(c) and/or Section 10.2(d); and provided, further, that
any matter that is the subject of a claim or dispute asserted in writing prior
to the expiration of the applicable of the above-stated periods shall survive
with respect to such claim or dispute until the final resolution thereof.
(b) The right of the Sellers and the Stockholders to bring an
Indemnification Claim against the Buyer for each of the following shall survive
the Closing until the applicable statute of limitations with respect thereto
shall have expired: any matter relating to Section 10.3(a) and/or Section
10.3(d); and provided, further, that any matter that is the subject of a claim
or dispute asserted in writing prior to the expiration of the applicable of the
above-stated periods shall survive with respect to such claim or dispute until
the final resolution thereof.
10.10 Basket and Aggregate Dollar Limitation.
(a) Except as provided in Section 10.10(c), the aggregate
liability of the Buyer for Indemnification Claims under this Article 10 shall
not exceed a maximum aggregate amount of $6,000,000 (the "Aggregate Dollar
Limitation"), and, except as provided in Section 10.10(c), the combined
aggregate liability of the Sellers and the Stockholders for Indemnification
Claims under this Article 10 shall not exceed the Aggregate Dollar Limitation.
(b) Except as provided in Section 10.10(c), no Indemnification
Claim may be asserted by a party except to the extent that the aggregate amount
of Losses of such party for all Indemnification Claims exceed $100,000 (the
"Basket Limitation"). In the event the aggregate amount of Losses of a party for
all Indemnification Claims exceeds the Basket Limitation, the party seeking an
Indemnification Claim shall be entitled to recover the aggregate amount of
Losses without application of the Basket Limitation. For purposes of this
section, the Sellers and the Stockholders shall be considered one party.
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(c) Notwithstanding Sections 10.10(a) and (b) above, the
Aggregate Dollar Limitation and the Basket Limitation shall not apply with
respect to any Indemnification Claim:
(1) asserted against the Buyer relating to Section 10.3(a)
and/or Section 10.3(d) of this Agreement or
(2) asserted against the Sellers relating to (A) any breach
of a representation, warranty, covenant or agreement contained in Section 4.5
Authority and/or Section 4.9 Title to Purchased Assets (B) any matter that is
based successfully upon fraud, and (C) any matter relating to Sections 10.2(c),
(d), and/or (e).
10.11 Exclusive Post-Closing Remedy. After the Closing, and except for
any non-monetary, equitable relief to which any Indemnitee may be entitled, the
rights and remedies set forth in this Article 10 shall constitute the sole and
exclusive rights and remedies of the Indemnitees under or with respect to the
subject matter of this Agreement; provided, however, that nothing in this
Section is intended to limit or shall be construed to limit any right of any
Indemnitee with respect to a common law fraud claim against an Indemnitor.
10.12 Attorneys' Fees. In the event of any litigation, arbitration or
other proceedings commenced by a party to enforce this Agreement or to recover
damages or seek other redress for a breach hereof, the prevailing party in any
such litigation, arbitration or other proceeding shall be entitled to recover
its attorneys' fees and other litigation expenses in addition to any other award
or relief granted to such prevailing party therein.
ARTICLE 11
TERMINATION
11.1 Right to Terminate. This Agreement may be terminated at any time
prior to the Closing, and the transactions contemplated hereby may be abandoned
at any such time, as provided below:
(a) The Buyer and the Stockholders and the Sellers may terminate
this Agreement by mutual consent of Buyer and the Stockholders and the Sellers;
(b) The Buyer may terminate this Agreement by giving written
notice to the Sellers and the Stockholders (i) in the event the Sellers or the
Stockholders have breached any representation, warranty or covenant contained in
this Agreement so as to cause a condition precedent to closing set forth in
Article 7 to be unsatisfied, the Buyer has notified the Sellers and the
Stockholders of the breach, and the breach has continued without cure for a
period of fifteen (15) days after the notice of breach, or (ii) if the Closing
shall not have occurred on or before December 15, 2004, by reason of a failure
of any condition precedent under Article 7 hereof (unless the failure results
primarily from the Buyer breaching any representation, warranty or covenant
contained in this Agreement); and
(c) The Stockholders and the Sellers may terminate this Agreement
by giving written notice to the Buyer (i) in the event the Buyer has breached
any representation, warranty or covenant contained in this Agreement so as to
cause a condition precedent to closing set forth in Article 8 to be unsatisfied,
the Sellers and the Stockholders have notified the Buyer of the
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breach, and the breach has continued without cure for a period of fifteen (15)
days after the notice of breach, or (ii) if the Closing shall not have occurred
on or before December 15, 2004, by reason of a failure of any condition
precedent under Article 8 hereof (unless the failure results primarily from the
Sellers or the Stockholders breaching any representation, warranty or covenant
contained in this Agreement).
11.2 Effectiveness of Termination. Termination of this Agreement and
abandonment of the transactions contemplated hereby shall be deemed effective on
the date mutually agreed upon by the parties, or, in the event of termination by
unilateral action, on the date specified in a written notice to the other
parties.
11.3 Effective Termination. If any party terminates this Agreement
pursuant to Section 11.1, all rights and obligations of the parties hereunder
shall terminate without any liability of any party to any other party except
that a party then in breach of any representation, warranty or covenant herein
made by or applicable to such party shall not be relieved of liability in
connection with such breach. The provisions of Sections 10.12 and 11.3 of this
Agreement shall survive any such termination of this Agreement. Additionally,
the Confidentiality and Non-Disclosure Agreement between the Sellers and the
Buyer dated July 23, 2004, shall remain in effect and survive the termination of
this Agreement.
ARTICLE 12
GENERAL
12.1 Joint and Several Liability. Subject to the limitations of
Section 10.10, the Stockholders and the Sellers agree and acknowledge that they
shall be jointly and severally liable for the performance of any obligations,
the fulfillment of any conditions or any liabilities of either of them arising
pursuant to or the transactions contemplated by the terms of this Agreement.
12.2 No Brokers. Each of the parties to this Agreement represents and
warrants, each to the others, that it has not utilized the services of any
finder, broker or agent. Each of the parties agrees to indemnify the other
parties against and hold them harmless from any and all liabilities to any
person, firm or corporation claiming any broker's or finder's fee or commission
of any kind on account of services rendered on behalf of such corporation in
connection with the transactions contemplated by this Agreement.
12.3 Waivers. No waiver of any breach or delay in enforcing the terms
of this Agreement shall be valid and effective unless the same shall be in
writing and signed by the waiving party. No waiver of any breach or delay in
enforcing the terms of this Agreement shall operate or be construed as a waiver
of any subsequent breach. No action taken pursuant to this Agreement, including
any investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein, therein and in any document
delivered in connection herewith or therewith.
12.4 Specific Enforcement. The parties agree and acknowledge that in
the event of a breach by any of the parties of any material provision of this
Agreement, damages at law will be an insufficient remedy to the other party.
Accordingly, the parties agree that, in addition to any
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other remedies or rights that may be available to any of them the parties shall
also each be entitled, upon application to a court of competent jurisdiction, to
obtain temporary or permanent injunctions to compel specific performance of the
obligations of the other party under this Agreement.
12.5 Expenses. Each of the Sellers and the Stockholders and the Buyer
shall pay their own expenses in connection with this Agreement and the
transactions contemplated hereby, including the fees and expenses of their
respective counsel and certified public accountants and other experts. The Buyer
shall pay all costs of environmental surveys or reports, filing or recording any
deed, certificate of title, or other instrument of conveyance. The Sellers and
the Stockholders shall pay all costs of all transfer, documentary stamp,
intangible or other Taxes or fees, all sales and use Taxes payable with respect
to the sale and transfer of the Purchased Assets.
12.6 Press Releases. Neither the Sellers nor the Stockholder shall
make or release any statement or public disclosure concerning this Agreement or
the transactions contemplated by this Agreement to any medium of public
communication except (1) upon the prior written agreement of the Buyer or (2) as
counsel may advise is required by law, and then only after giving the Buyer an
opportunity to comment thereon.
12.7 Notices. Any notice, request, demand or other communication that
is required or my be given under this Agreement shall be in writing and shall be
deemed to have been duly given (1) if transmitted by telecopy, electronic
telephone line facsimile transmission or other similar electronic or digital
transmission method, when transmitted with confirmation of transmission by the
transmitting equipment; (2) if sent by a nationally recognized next day delivery
service that obtains a receipt on delivery, the day after it is sent; (3) if
received or rejected by the addressee, if sent by first class registered or
certified mail return receipt requested; and (4) in any other case, when
actually received. In each case, notice shall be sent to:
If to the Buyer:
Gerdau Ameristeel US Inc.
0000 X. Xxxxx Xxxxxx
Xxxxx, XX 00000
Telecopier: (000) 000-0000
Attn: J. Xxxx XxXxxxxxx, Vice President
With copies to:
Trenam, Kemker, Scharf, Barkin, Frye, X'Xxxxx & Xxxxxx, P.A.
000 X. Xxxxxxx Xxxx., Xxxxx 0000
Xxxxx, XX 00000-0000
Telecopier: (000) 000-0000
Attn: Xxxxxx X. X'Xxxxx, Xx., Esq.
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If to the Sellers or the Stockholders:
Xxxx X. Xxxxxx
00000 Xxxxxx Xxxxx Xxxx Xxxxx
Xxxxxx, XX 00000
Xxxxxxx X. Xxxxxx
00000 Xxxxxx Xxxxx Xxxx Xxxxx
Xxxxxx, XX 00000
With copies to:
Xxxxxx & Xxxxxxxxx LLP
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
or to such other address as a party may have specified in writing to the other
parties using the procedures specified above in this Section 12.7.
12.8 Schedules and Exhibits. For purposes of this Agreement, the term
"this Agreement" shall be deemed to include the Schedules and Exhibits
associated therewith or any closing documents associated therewith delivered by
any of the parties in connection with this Agreement and the transactions
contemplated thereby and the Closing.
12.9 Assignability. No party hereto may assign either this Agreement
or any of his or its rights, interests or obligations hereunder without the
prior written consent of all other parties; provided however that after the date
hereof the Buyer may, without prior consent of the Sellers, (i) assign all or
part of the Buyer's rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
12.10 Further Assurances. Each party to this Agreement will execute
and deliver, or cause to be executed and delivered, such additional or further
documents, agreements or instruments and shall cooperate with one another in all
respects for the purpose of carrying out the transactions contemplated by this
Agreement.
12.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, but all of which
together shall constitute one and the same instrument, and shall become
effective when each of the parties has received evidence that each of the
parties has executed at least one of the counterparts even if all the parties
have not executed the same counterpart. Delivery of executed signature pages by
facsimile transmission will constitute effective and binding execution and
delivery of this Agreement.
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12.12 Applicable Law; Venue; Construction and Interpretation.
(a) This Agreement shall be construed pursuant to and governed by
the substantive laws of the State of Florida (but any provision of Florida law
shall not apply if the application of such provision would result in the
application of the law of a state or jurisdiction other than Florida).
(b) The parties to this Agreement agree that jurisdiction and
venue shall properly lie in the Thirteenth Judicial Court of the State of
Florida, in and for Hillsborough County, Florida, or in the United States
District Circuit for the Middle District of Florida, Tampa Division, or in the
United States District Court for the Southern District of Indiana, Indianapolis
Division, with respect to any legal proceedings arising from this Agreement. The
parties further agree that the mailing of any process shall constitute valid and
lawful process against them, without the necessity for service by any other
means otherwise provided by statute or rule of Court, and further agree to bring
all legal proceedings arising under this Agreement only in the Courts listed
above.
(c) The headings of the various Sections in this Agreement are
inserted for the convenience of the parties and shall not affect the meaning,
construction or interpretation of this Agreement.
(d) Any provision of this Agreement that is determined by a court
of competent jurisdiction to be prohibited, unenforceable or not authorized in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or nonauthorization without invalidating the
remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction. In any such case, such
determination shall not affect any other provision of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect. If
any provision or term of this Agreement is susceptible to two or more
constructions or interpretations, one or more of which would render the
provision or term void or unenforceable, the parties agree that a construction
or interpretation, which renders the term or provision valid, shall be favored.
12.13 Time of the Essence. Time is of the essence under this
Agreement.
12.14 Integration of Agreement. This Agreement supersedes all prior
agreements, oral and written, between the parties hereto with respect to the
subject matter hereof. Neither this Agreement, nor any provision hereof, may be
changed, waived, discharged, supplemented, or terminated orally, but only by an
agreement in writing signed by the party against which the enforcement of such
change, waiver, discharge, or termination is sought.
12.15 Submission of Draft. The submission of a draft of this Agreement
or a summary of some or all of its provisions does not constitute an offer to
acquire or to sell the Purchased Assets, it being understood and agreed that
neither the Buyer nor the Stockholders or the Sellers shall be legally obligated
with respect to an acquisition of the Purchased Assets unless and until this
Agreement has been executed by all parties hereto and a fully executed copy has
been delivered.
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12.16 Schedules. Any information included on any Schedule or Exhibit
in response to the disclosure required in such Schedule or Exhibit shall be
deemed to be included in any other Schedule or Exhibit to this Agreement if (i)
it is apparent from the face of the disclosure made in the first Schedule or
Exhibit that such disclosure is also responsive to the disclosure required in
the other Schedule or Exhibit and (ii) the disclosure in the first Schedule or
Exhibit contains all information which would be required to be disclosed with
respect to such matter in the other Schedule or Exhibit.
12.17 Waiver of Jury Trial. The parties hereby waive any right to
trial by jury in any proceeding arising out of or relating to this Agreement,
whether now existing or hereafter arising, and whether grounded in contract,
tort, strict liability or otherwise. The parties agree that either of them may
file a copy of this Section with any court as written evidence of the knowing,
voluntary and bargained for agreement among the parties irrevocably to waive
trial by jury and that any proceeding whatsoever between them relating to this
Agreement or any of the contemplated transactions shall instead be tried in a
court of competent jurisdiction by a judge sitting without a jury.
12.18 Passage of Title and Risk of Loss. Legal title, equitable title,
and risk of loss in respect of the Purchased Assets will pass to the Buyer at
the Closing, which transfer, once it has occurred, will be deemed effective for
tax, accounting, and other computational purposes as of the Effective Time.
[SIGNATURES FOLLOW ON NEXT PAGE]
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IN WITNESS WHEREOF, this Agreement has been signed by the individual
party hereto and signed by an officer thereunto duly authorized, all as of the
date first above written.
GERDAU AMERISTEEL US INC., a Florida
corporation
By: /s/ J. Xxxx XxXxxxxxx
------------------------------------
J. Xxxx XxXxxxxxx, Vice President
GATE CITY STEEL, INC., an Indiana
corporation
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Xxxx X. Xxxxxx, President
XX XXXXX, INC., an Indiana corporation
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Xxxx X. Xxxxxx, President
REBAR EXPRESS OF CINCINNATI, LLC, an
Indiana limited liability company
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Xxxx X. Xxxxxx, President
/s/ Xxxx X. Xxxxxx
----------------------------------------
XXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxxxx
----------------------------------------
XXXXXXX X. XXXXXX
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