ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of February 2, 2005 (the
"Agreement"), by and between Green Manufacturing, Inc., a Delaware corporation
(the "Seller") and Xxxxx Products, Inc., an Ohio corporation (the "Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Seller operates a division known as the Access Division (the
"Division"), which is engaged in the business of fall protection equipment
through the sale of products under the G-RAFF product line and certain other
product lines.
WHEREAS, the Buyer desires to purchase certain assets of the Seller
comprising the Division, and the Seller desires to sell such assets to the
Buyer, in each case upon the terms and subject to the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements hereinafter contained, the parties hereby agree as
follows:
SECTION 1. Definitions.
-----------
As used in this Agreement, the following terms shall have the
following meanings:
"Access Products" shall have the meaning set forth in Section 3.2(a).
"Access Sales" shall have the meaning set forth in Section 3.2(a).
"Access Sales Books" shall have the meaning set forth in Section
3.2(c).
"Account" shall have the meaning set forth in Section 9.2.
"Accounts Receivable" means certain debts owed to the Seller, from
customers of the Seller from the sale of Products by the Division, that have
arisen in the ordinary course of business and are not supported by negotiable
paper as specifically described on Schedules 9.1 and 9.2 attached hereto and
made a part hereof.
"Acquiror" shall have the meaning set forth in Section 3.2(e).
"Additional Consideration" shall have the meaning set forth in Section
3.2(a).
"Affiliate" of any specified Person shall mean any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Allocation" shall have the meaning set forth in Section 10.1.
"Assigned Contracts" shall mean the rights of the Seller under the
Enumerated Contracts.
"Assignment Documents" shall have the meaning set forth in Section
9.1.
"Assumed Liabilities" shall have the meaning set forth in Section 2.2.
"Bank" shall have the meaning set forth in Section 12.1(h).
"Xxxxxx Guarantor" shall have the meaning set forth in Section
12.2(e).
"Xxxxxx Guaranty" shall have the meaning set forth in Section 12.2(e).
"Xxxxxx Mortgage" shall have the meaning set forth in Section 12.2(o).
"Binding Quote" shall have the meaning set forth in Section 8.1(a).
"Business" shall mean the business of the Division.
"Business Day" shall mean days other than Saturdays, Sundays and
holidays or days on which banks in the States of New York or Ohio are authorized
or required by law to close.
"Buyer" shall have the meaning set forth in the Recitals hereto.
"Buyer Collateral Agreements" shall have the meaning set forth in
Section 5.3(a).
"Buyer Indemnitees" shall have the meaning set forth in Section 11.1.
"Buyer Severance Policies" shall have the meaning set forth in Section
7.2(a).
"Buyer Vacation Policies" shall have the meaning set forth in Section
7.2(a).
"Buyer's Event of Breach" shall have the meaning set forth in Section
11.3.
"Cancelled Purchase Orders" shall have the meaning set forth in
Section 13(c).
"Claim Threshold" shall have the meaning set forth in Section 8.1(d).
"Closing Payment" shall have the meaning set forth in Section 3.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral Agreements" shall mean all agreements executed and
delivered by the Seller pursuant to this Agreement or to which the Seller is a
party or signatory and contemplated hereby, as the case may be.
"Comprehensive Statement" shall have the meaning set forth in Section
8.1(b).
2
"Continuing Business" shall have the meaning set forth in Section
3.2(a).
"Controlled Group" shall mean any trade or business (whether or not
incorporated) under common control with the Seller within the meaning of
Sections 414(b), (c), (m) or (o) of the Code.
"Delinquent Receivable" shall have the meaning set forth in Section
9.1.
"Delinquent Receivables Amount" shall have the meaning set forth in
Section 9.1.
"Determined Amount" shall have the meaning set forth in Section 3.1.
"Division Employees" shall have the meaning set forth in Section 7.1.
"Earn-Out Period" shall have the meaning set forth in Section 3.2.
"Employment and Labor Agreements" shall mean (i) any outstanding
employment agreements or contracts with officers or employees of the Business;
(ii) any agreement, policy or practice that requires the Seller to pay
termination or severance pay to salaried, non-exempt or hourly employees of the
Business (other than as required by law); and (iii) any collective bargaining
agreement or other labor union contract applicable to employees of the Business.
"Enumerated Contracts" shall mean, collectively, the Purchase Orders,
Sales Orders and Other Contracts specifically described on Schedule 4.15
attached hereto and made a part hereof.
"Equipment" shall mean certain equipment used by the Business and
specifically described on Schedule 4.22 attached hereto and made a part hereof.
"Excluded Assets" shall mean all assets of the Seller (other than the
Purchased Property), including, without limitation: (i) the cash and cash
equivalents of the Seller; (ii) any contract, order, payable, commitment,
obligation, agreement, lease, or undertaking, whether oral or written, of the
Seller (other than the Assigned Contracts); (iii) any security deposits and
bonds; (iv) the name "Green Manufacturing, Inc."; (v) marketable and other
securities; (vi) all rights of the Seller under this Agreement and under any
agreement, instrument or document executed in connection herewith or
contemplated hereby, including, without limitation, the Collateral Agreements,
the Buyer Collateral Agreements and the Third Party Documents; (vii) all books,
records and other assets of the Seller relating to corporate level activities,
including, without limitation, those relating to filings with the Securities and
Exchange Commission and the Internal Revenue Service and those relating to
accounting and tax functions; (viii) any corporate minute books, stock ledgers
and other corporate books and records of the Seller; (ix) all books and records
relating, exclusively and non-exclusively, to each and every division and/or
line of business and/or each and every aspect of the Seller's business other
than the Files and Records (as hereinafter defined); (x) all books and records
relating, exclusively and non-exclusively, to matters other than the Purchased
Property (as hereinafter defined) or the Assumed Liabilities; (xi) all claims
against third parties for inventory sold prior
3
to the date of this Agreement, including, without limitation, rights under any
manufacturer's or vendor's warranties and insurance claims and proceeds with
respect to such inventory, and all other claims against third parties arising
from or in connection with the Division or the Purchased Property prior to the
date hereof; (xii) all federal, state and local income tax refunds due to the
Seller; (xiii) title to any Real Property (as hereinafter defined) owned by the
Seller and all buildings and other structures located thereon, and all leasehold
interests in and to any Real Property; (xiv) all prepaid expenses and rentals;
(xv) the Seller's right, title and interest in and to certain equipment
identified on Schedule A attached hereto and made a part hereof; and (xvi) the
Seller's right, title and interest in and to all intangible and tangible assets,
including, without limitation, the Retained Accounts Receivable, other than
those as specifically described on Schedule 9.1, Schedule 4.11(a), Schedule
4.11(c), Schedule 4.12, Schedule 4.15, Schedule 4.22 and Schedule B, each as
attached hereto and made a part hereof.
"Excluded Liabilities" shall have the meaning set forth in Section
2.2.
"Files and Records" shall mean one copy of certain files and records,
whether in hard copy, computer or magnetic format, of the Seller exclusively
relating to the Division or the Purchased Property, as specifically described on
Schedule B attached hereto and made a part hereof.
"Financial Statements" shall have the meaning set forth in Section
4.6.
"Further Additional Consideration" shall have the meaning set forth in
Section 3.2(d).
"GAAP" shall mean United States generally accepted accounting
principles.
"Government" shall mean any agency, division, subdivision, audit group
or procuring office of the government of the United States or any foreign
government, including the employees or agents thereof.
"Guarantees" shall have the meaning set forth in Section 12.2(e).
"Guarantor" shall have the meaning set forth in Section 12.2(d).
"Guarantors" shall have the meaning set forth in Section 12.2(e).
"Guaranty" shall have the meaning set forth in Section 12.2(d).
"Health And Medical Coverage" shall have the meaning set forth in
Section 7.2(a).
"Indemnification Threshold" shall have the meaning set forth in
Section 11.6(a).
"Information" shall have the meaning set forth in Section 14.14.
"Intangible Assets" shall mean certain intangible personal property
rights, including, without limitation, phone numbers and domain names used
exclusively in the
4
Business by the Seller, in each case exclusively in connection with the
Business, and all goodwill of the Seller exclusively relating to the Business,
as specifically described on Schedule 4.11(c) attached hereto and made a part
hereof.
"Intellectual Property" shall mean: (i) certain inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures related thereto, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof
("Patents"); (ii) certain trademarks, service marks, trade dress, logos, trade
names (including the names G-RAFF and all derivatives thereof), together with
all translations, adaptations, derivations and combinations thereof and
including all goodwill associated therewith, and all applications, registrations
and renewals in connection therewith ("Trademarks"); (iii) certain copyrightable
works (including, without limitation, certain software developed by the Seller),
certain copyrights and all applications, registrations and renewals in
connection therewith; (iv) certain mask works and all applications,
registrations and renewals in connection therewith; (v) certain trade secrets
and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals); (vi) certain computer software (including data
and related documentation); (vii) certain other proprietary rights, including
certain rights under agreements related to the foregoing; and (viii) all copies
and tangible embodiments thereof (in whatever form or medium); with respect to
clauses (i) through (viii) above, inclusive, to the extent material to and used
exclusively in the Business and as specifically described on Schedule 4.11(a)
attached hereto and made a part hereof.
"Inventory" shall mean (i) the finished goods, raw materials, work in
process and inventoriable supplies of the Division owned by the Seller on the
date of this Agreement as set forth on Schedule C attached hereto and made a
part hereof, and (ii) any and all rights of the Seller to the warranties
received from its suppliers with respect to such inventory (to the extent
assignable) (but only to the extent related to Products sold by the Buyer
following the date hereof) and related claims, credits, rights of recovery and
set-off with respect thereto.
"Lease Termination" shall have the meaning set forth in Section
12.1(j).
"License Agreement" shall have the meaning set forth in Section 12.1
(i).
"License Termination" shall have the meaning set forth in Section
12.1(g).
"Licenses and Permits" shall have the meaning set forth in Section
4.12.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or other) or conditional sale agreement.
"Losses" shall have the meaning set forth in Section 11.1.
"Mortgage 1" shall have the meaning set forth in Section 12.2(f).
"Mortgage 2" shall have the meaning set forth in Section 12.2(g).
5
"Mortgage 3" shall have the meaning set forth in Section 12.2(h).
"Mortgages" shall have the meaning set forth in Section 12.2(h).
"Note 1" shall mean that certain Promissory Note of even date made
payable by the Buyer to the order of the Seller in the original principal amount
of Eight Hundred Thirty-Six Thousand Seven Hundred Eighty-Three and Thirty-Five
One-Hundredths ($836,783.35) Dollars.
"Note 2" shall mean that certain Promissory Note of even date made
payable by the Buyer to the order of the Seller in the original principal amount
of One Hundred Twenty Thousand Eighty Hundred Sixty-Two and Twenty-Seven
One-Hundredths ($120,862.27) Dollars.
"Notes" shall mean Note 1 and Note 2.
"Notice" shall have the meaning set forth in Section 9.1(a).
"Occurrence" shall have the meaning set forth in Section 4.21(b).
"Option Period" shall have the meaning set forth in Section 9.1(a).
"Other Contracts" shall mean certain partnership or joint venture
agreements, license agreements, service contracts, employment, commission and
consulting agreements, suretyship contracts, letters of credit, reimbursement
agreements, distribution agreements, contracts or commitments limiting or
restraining the Seller from engaging or competing in any lines of business or
with any Person, documents granting the power of attorney with respect to the
affairs of the Seller, agreements not made in the ordinary course of business of
the Seller, options to purchase any assets or property rights of the Seller,
working capital maintenance or other form of guaranty agreements, and certain
other agreements to which the Seller is a party and which are related
exclusively to the operation of the Business, but excluding Employment and Labor
Agreements, Purchase Orders, Sales Orders and Plans, and specifically described
on Schedule 4.15 attached hereto and made a part hereof.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
Government.
"Plans" shall mean all pension, savings, retirement, health,
insurance, severance and any other employee benefit or fringe benefit plans
maintained or sponsored by the Seller or any other member of the Controlled
Group.
"Product Defect" shall have the meaning set forth in Section 8.1(d).
"Product Defect Claim" shall have the meaning set forth in Section
8.1(a).
"Product Defect Warranty Costs" shall have the meaning set forth in
Section 8.1(a).
"Product Liability Lawsuits" shall have the meaning set forth in
Section 4.21(a).
6
"Products" shall mean, exclusively with respect to the Business: (i)
the products manufactured, or in the process of design or development for
manufacturing by the Seller as of the date of this Agreement (including, without
limitation, any product necessary and useful for the performance of any
Enumerated Contract); and (ii) any products manufactured or which were in the
process of design or development for manufacturing by the Seller (or its
predecessors in interest) in the last five years.
"Purchase Orders" shall mean all the Seller's outstanding purchase
orders, contracts or other commitments to suppliers of goods and services for
materials, supplies or other items used exclusively in the Business and
specifically described on Schedule 4.15 attached hereto and made a part hereof.
"Purchase Price" shall have the meaning set forth in Section 3.
"Purchased Property" shall mean the Transferred Accounts Receivable,
Assigned Contracts, Files and Records, Intangible Assets, Intellectual Property,
Inventory, Equipment, Licenses and Permits (to the extent transferable by the
Seller) and the Seller's right to participate as an exhibitor in the 2005 ILTA
Trade Show (the "Trade Show"); provided, however, that the term "Purchased
Property" shall not include the Excluded Assets.
"Rate of Compensation" shall have the meaning set forth in Section
7.2(c).
"Real Property" means all real property owned or leased by the Seller.
"Record Date" shall have the meaning set forth in Section 9.1.
"Reimbursement Amount" shall have the meaning set forth in Section
8.1(b).
"Reimbursement Period" shall have the meaning set forth in Section
8.1(b).
"Retained Accounts Receivable" shall have the meaning set forth in
Section 9.2.
"Retained Accounts Receivable Schedule" shall have the meaning set
forth in Section 9.2.
"Retrofits" shall have the meaning set forth in Section 4.21(a).
"RMT" shall have the meaning set forth in Section 12.1(j).
"Sales Orders" shall mean certain of the Seller's sales orders,
contracts or other commitments to purchasers of goods and services of the
Business specifically described on Schedule 4.15 attached hereto and made a part
hereof.
"Schedule 7.2 Employee" shall have the meaning set forth in Section
7.2(b).
"Section 9.1 Adjustment Date" shall have the meaning set forth in
Section 9.1(a).
"Security Agreement" shall have the meaning set forth in Section
12.1(a).
7
"Selected Firm" shall have the meaning set forth in Section 3.2.
"Seller" shall have the meaning set forth in the Recitals hereto.
"Seller Indemnitees" shall have the meaning set forth in Section 11.3.
"Seller Severance Policies" shall have the meaning set forth in
Section 7.2(a).
"Seller Vacation Policies" shall have the meaning set forth in Section
7.2(a).
"Seller's Event of Breach" shall have the meaning set forth in Section
11.1.
"Similar Employment Terms" shall have the meaning set forth in Section
7.1.
"Subordination Agreement" shall have the meaning set forth in Section
12.1(h).
"Tax Returns" shall mean any return, report, information return or
other document (including any related or supporting information) filed or
required to be filed with any governmental body in connection with the
determination, assessment, collection or administration of any Taxes.
"Taxes" shall mean for all purposes of this Agreement all taxes
however denominated, including any interest, penalties or additions to tax that
may become payable in respect thereof, imposed by any governmental body, which
taxes shall include, without limiting the generality of the foregoing, all
income taxes, payroll and employee withholding taxes, unemployment insurance,
social security, sales and use taxes, excise taxes, franchise taxes, gross
receipts taxes, occupation taxes, real and personal property taxes, stamp taxes,
transfer taxes, gains taxes, workmen's compensation taxes and other obligations
of the same or a similar nature, whether arising before, on or after the date of
this Agreement; and "Tax" shall mean any one of them.
"Third Party" shall have the meaning set forth in Section 5.3(b).
"Third Party Documents" shall have the meaning set forth in Section
5.3(b).
"Transfer Taxes" shall have the meaning set forth in Section 10.2.
"Transferred Accounts Receivable" shall have the meaning set forth in
Section 9.1.
"Transferred Accounts Receivable Schedule" shall have the meaning set
forth in Section 9.1.
"Warranty Claims" shall have the meaning set forth in Section 8.1(a).
"Warranty Costs" shall have the meaning set forth in Section 8.1(a).
8
SECTION 2. Purchase and Sale of the Purchased Property.
-------------------------------------------
Section 2.1. Transfer of Assets. Subject to the terms and conditions
herein set forth, except for the Excluded Assets, the Seller hereby sells,
conveys, transfers, assigns and delivers to the Buyer, and the Buyer hereby
purchases and accepts from the Seller, all rights, titles and interests of the
Seller in and to the Purchased Property, wherever located.
Section 2.2. Assumption of Liabilities. On and after the date of this
Agreement, the Buyer hereby assumes and the Buyer hereby agrees to pay, perform
and discharge as and when due, those liabilities and obligations of the Seller
(a) arising pursuant to, or in connection with, the terms of the Enumerated
Contracts, the Employment and Labor Agreements and/or the Trade Show; (b) as
contemplated by Section 7 with respect to the Division Employees and the
Schedule 7.2 Employees; (c) arising under and with respect to Warranty Claims,
subject to the provisions of Section 8.1 hereof; (d) arising in connection with
any items of software listed on Schedule 4.22 attached hereto and made a part
hereof, and under and with respect to any license with respect to any such
software; and (e) arising under Section 8.4 hereof (each of the foregoing as
described in clauses (a), (b), (c), (d) and (e) above, collectively, the
"Assumed Liabilities"). Without limiting the foregoing, the Buyer shall not
assume (and the term "Assumed Liabilities" shall not be deemed to include) (i)
income Taxes of the Seller; (ii) except as provided in Section 10.2 of this
Agreement, all other Taxes attributable to periods ending on or prior to the
date of this Agreement; (iii) Taxes of any other Person for which the Seller may
be liable by contract or otherwise; (iv) any liability of any kind due to
illegal or tortious conduct prior to the date of this Agreement by the Seller,
or the Seller's officers, directors or employees, whether to employees or third
parties; (v) any liability for product liability lawsuits arising from the sale
of any Product before the date of this Agreement; (vi) any liability for the
infringement of any item of Intellectual Property in connection with the sale of
any Product before the date of this Agreement; and (vii) any other liability not
expressly assumed by the Buyer pursuant to this Agreement. All the liabilities
and obligations of the Seller other than the Assumed Liabilities are hereinafter
referred to as the "Excluded Liabilities".
SECTION 3. Purchase Price.
--------------
Section 3.1. Certain Consideration.
(a) The purchase price (the "Purchase Price") for the sale and
transfer of the Purchased Property is an aggregate of (i) One Million Eight
Hundred Thirty-Seven Thousand Seven Hundred Fourteen and Sixty-Four
One-Hundredths ($1,837,714.64) Dollars (the "Determined Amount"); and (ii) the
Additional Consideration, as such term is defined and as contemplated by Section
3.2.
(b) The Determined Amount is being paid as follows:
(i) Eight Hundred Eighty Thousand Sixty-Nine and Two
One-Hundredths ($880,069.02) Dollars by the Buyer's execution and delivery
contemporaneously herewith to the Seller of a certified check of the Buyer made
payable to the order of the Seller, or at the Seller's option, by wire transfer
of immediately available funds contemporaneously herewith to an account
designated in writing by the Seller (in either case, the "Closing Payment"); and
9
(ii) Eight Hundred Thirty-Six Thousand Seven Hundred Eighty-Three
and Thirty-Five One-Hundredths ($836,783.35) Dollars by the Buyer's execution
and delivery to the Seller of Note 1; plus
(iii) One Hundred Twenty Thousand Eight Hundred Sixty-Two and
Twenty- Seven One-Hundredths ($120,862.27) Dollars by the Buyer's execution and
delivery to the Seller of Note 2.
Section 3.2 Additional Consideration.
(a) The Buyer shall pay to the Seller an amount equal to (i) twenty
(20%) percent of Access Sales during each of the two (2) successive twelve (12)
month periods commencing the date hereof (each such twelve (12) month period, an
"Earn-Out Period") aggregating, with respect to each Earn-Out Period, to an
amount equal to or greater than Two Million Five Hundred Thousand ($2,500,000)
Dollars up to and including Three Million Five Hundred Thousand ($3,500,000)
Dollars in such period, and (ii) two (2%) percent of the Access Sales
aggregating, with respect to each Earn-Out Period, to an amount in excess of
Three Million Five Hundred Thousand ($3,500,000) Dollars in such period (in each
case, the "Additional Consideration"). For purposes of this Section 3.2, "Access
Sales" shall mean the gross sales, whether direct or indirect, of the Buyer or
any subsidiary, whether direct or indirect, or Affiliate thereof, during each
Earn-Out Period arising in any respect from any and all of the following: (x)
the Business and any expansion, by acquisition or otherwise, or other
modification, of the Business, or of the operations, product and service lines
thereof (as so expanded or modified, the "Continuing Business"); (y) products
of, or services provided by or related to, the Continuing Business, including,
without limitation, the Products (collectively, "Access Products"), or products
or services similar or related to, replacing, substituting for or in any way
competitive with, any such Access Products; and (z) intellectual property of the
Continuing Business, including, without limitation, the Intellectual Property,
whether now owned or hereafter acquired, or products or services produced,
marketed or sold, or business conducted, thereunder or in connection therewith.
Access Sales shall be determined in accordance with GAAP, consistently applied
to each Earn-Out Period, consistent with the past practices of the Seller.
(b) For purposes of this Agreement, the Additional Consideration shall
be initially determined by the Buyer. The Buyer shall, make such determination
and deliver a written report thereof (together with all supporting schedules and
details of the calculation) to the Seller within thirty (30) days following the
end of each Earn-Out Period. Simultaneously with the delivery of such report,
the Buyer shall pay to the Seller the Additional Consideration by certified
check of the Buyer made payable to the order of the Seller, or at the Seller's
option, by wire transfer of immediately available funds to an account designated
in writing by the Seller.
(c) The Seller shall have sixty (60) days from receipt of each such
report (and sixty (60) days from the receipt of the Comprehensive Statement) to
object to the Buyer's calculation of the Additional Consideration (and/or the
Reimbursement Amount, as the case may be). In the event that, within such sixty
(60) period, the Seller provides a written objection to such calculation, and
such objection is not resolved by the parties within fifteen (15) days
thereafter, all remaining disagreements with respect to such calculation of
Additional Consideration (and/or the Reimbursement Amount, as the case may be)
shall, within five (5) days following a written
10
request from the Seller to the Buyer, be submitted to an accounting firm of
national reputation selected jointly by the Seller and the Buyer; if the Seller
and the Buyer are unable to agree on an accounting firm within such five (5) day
period, each shall, within five (5) days following a written request from the
Seller to the Buyer, select an accounting firm of national reputation and,
within five (5) days following the selection of both such accounting firms, such
firms shall select a third accounting firm of national reputation to resolve all
remaining disagreements with respect to the calculation of the Additional
Consideration (and/or the Reimbursement Amount, as the case may be). The
accounting firm so selected shall sometimes hereinafter be referred to as the
"Selected Firm". The Seller and the Buyer shall use their respective best
efforts to cause the Selected Firm to resolve all submitted disputes within
thirty (30) days following submission of such thereto by delivery to the Seller
and the Buyer of a statement in writing setting forth the conclusion of the
Selected Firm as to the disputed item or items and the effect of such
conclusions on the Additional Consideration (and/or the Reimbursement Amount, as
the case may be). The determination of the Selected Firm with respect to the
Additional Consideration (and/or the Reimbursement Amount, as the case may be)
shall be final, conclusive and binding, and judgment may be entered thereon in
any court of competent jurisdiction. Nothing contained herein shall be deemed a
consent to arbitrate any other issue or dispute which may hereafter arise among
the parties to this Agreement. The costs and fees of the Selected Firm shall be
borne equally by the Seller, on the one hand, and the Buyer, on the other hand.
At all times during the Earn-Out Periods and for one year thereafter, the Buyer
shall (i) keep separate books and records with respect to the Access Sales (the
"Access Sales Books"), and (ii) allow the Seller and its representatives full
and free access to such books and records of the Buyer and its subsidiaries and
Affiliates, including, without limitation, the Access Sales Books (and/or the
books and records of the Buyer and its subsidiaries and Affiliates relating to
the calculation of the Reimbursement Amount), as the Seller shall deem
necessary, appropriate or advisable, and allow the Seller to make extracts
therefrom and copies thereof of any of the same at the Seller's own cost and
expense. In connection with its review, the Selected Firm shall have the right
to undertake such auditing procedures as it may deem appropriate and to examine
all work papers utilized in the accounting and determination of the Additional
Consideration (and/or the Reimbursement Amount, as the case may be).
(d) If any further Additional Consideration ("Further Additional
Consideration") is due the Seller under Section 3.2(c), the Buyer shall make
payment of such amount within five (5) days following the earlier of settlement
or the issuance of the Selected Firm's decision. Any Further Additional
Consideration shall bear interest at the Default Rate from the date the Buyer
delivers the report contemplated by Section 3.2(b) to the Seller until paid.
(e) During the Earn-Out Periods, the Buyer will use commercially
reasonable efforts in good faith to maximize the Access Sales. In the event that
the Buyer transfers or assigns all or substantially all of the business or
assets of the Continuing Business to any other entity (whether by sale of stock,
sale of assets, merger or otherwise) (an "Acquiror"), the Buyer will cause the
Acquiror to assume liability for payment of the Additional Consideration
pursuant to the terms of this Agreement (with the Buyer remaining jointly and
severally liable). Notwithstanding the foregoing, or any other provision of this
Agreement, the parties intend that the business, operations, product and service
lines of the Continuing Business, including, without limitation, the Division,
not be altered, fragmented, dispersed or otherwise changed, having the effect of
diminishing the Additional Consideration. In the event of any such change, or in
the event that
11
the Buyer shall fail to use commercially reasonable efforts in good faith to
maximize the Access Sales, the parties shall use their best efforts to
calculate, and the Buyer shall pay, the Additional Consideration consistent with
the Access Sales that would have been produced by the Continuing Business in
keeping with the intent of this Agreement.
SECTION 4. Representations and Warranties of the Seller.
The Seller hereby represents and warrants to the Buyer as follows,
which representations and warranties shall apply exclusively to the period from
and after January 22, 2002:
Section 4.1. Corporate Organization. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own its
properties and assets and to conduct its businesses as now conducted. Copies of
the Certificate or Articles of Incorporation and By-laws (or equivalent
documents) of the Seller, with all amendments thereto to the date hereof, have
been furnished to the Buyer or its representatives, and such copies are accurate
and complete as of the date hereof.
Section 4.2. Qualification to Do Business. The Seller is duly
qualified to do business as a foreign corporation and is in good standing in
every jurisdiction in which the character of the properties owned or leased by
it or the nature of the business conducted by it makes such qualification
necessary and in which the failure to be so qualified would have a material
adverse effect on the Business. Schedule 4.2 attached hereto and made a part
hereof sets forth all jurisdictions in which the Seller is qualified to do
business.
Section 4.3. Authorization and Validity of Agreement. The Seller has
all requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the performance of the Seller's obligations hereunder have been
duly authorized by all necessary corporate action by the Board of Directors and
stockholder of the Seller, and no other corporate proceedings on the part of the
Seller are necessary to authorize such execution, delivery and performance. This
Agreement has been duly executed by the Seller and constitutes its valid and
binding obligation, enforceable against it in accordance with its terms.
Section 4.4. No Conflict or Violation. The execution, delivery and
performance by the Seller of this Agreement do not and will not violate or
conflict with any provision of the Certificate or Articles of Incorporation or
By-laws (or equivalent documents) of the Seller and do not and will not violate
any provision of law, or any order, judgment or decree of any court or other
governmental or regulatory authority, nor (after giving effect to any applicable
consents, waivers, authorizations or approvals contemplated by Section 4.5)
violate nor will result in a breach of or constitute (with due notice or lapse
of time or both) a default under any contract, lease, loan agreement, mortgage,
security agreement, trust indenture or other agreement or instrument to which
the Seller is a party or by which it is bound or to which any of its properties
or assets is subject, nor will result in the creation or imposition of any Lien
upon any of the Purchased Property, nor will result in the cancellation,
modification, revocation or suspension of
12
any of the Licenses and Permits referred to in Section 4.12, to the extent that
any of the foregoing would have a material adverse effect on the Business.
Section 4.5. Consents and Approvals. Schedule 4.5 attached hereto and
made a part hereof sets forth a true and complete list of each consent, waiver,
authorization or approval of any governmental or regulatory authority, domestic
or foreign, or of any other Person, and each declaration to or filing or
registration with any such governmental or regulatory authority, that is
required in connection with the execution and delivery of this Agreement by the
Seller or the performance by the Seller of its obligations hereunder, which if
not obtained would have a material adverse effect on the Business.
Section 4.6. Financial Statements. Schedule 4.6 attached hereto and
made a part hereof sets forth (a) the statement of income for the Division for
the eleven (11) month period ended November 30, 2004, and (b) the statement of
income for the Division for the nine (9) month period ended September 30, 2004
(all the financial statements referred to in clauses (a) and (b) above being
hereinafter collectively referred to as the "Financial Statements"). The
Financial Statements, (i) present fairly the results of operations of the Seller
with respect to the Business for the periods then ended; and (ii) with respect
to the Business, are complete, correct and in accordance with the books of
account and records of the Seller. Notwithstanding anything contained herein,
the Seller makes no representation or warranties with respect to the Accounts
Receivable or Inventory.
Section 4.7. Absence of Certain Changes or Events.
-------------------------------------------------
(a) Except as set forth on Schedule 4.7 attached hereto and made
a part hereof and as contemplated by this Agreement, since September 30, 2004,
there has not been:
(i) any material adverse change in the Business or Purchased
Property (financial or other) of the Seller, or any event that has had a
material adverse effect on the foregoing;
(ii) any material loss, material damage, material
destruction or other material casualty to the Purchased Property;
(iii) any change in any method of accounting or accounting
practice of the Business or the Seller relating to the Business; or
(iv) any loss of the employment, services or benefits of any
key employee of Seller, who worked during such period exclusively in the
Business.
(b) Except as set forth on Schedule 4.7 and as contemplated by
this Agreement, since September 30, 2004, the Seller has operated the Business
in the ordinary course of its business consistent with past practice and has
not:
(i) incurred any material obligation or material liability
(whether absolute, accrued, contingent or otherwise) relating to the operations
of the Business except in the ordinary course of business consistent with past
practice;
13
(ii) failed to discharge or satisfy any material Lien or pay
or satisfy any material obligation or material liability (whether absolute,
accrued, contingent or otherwise) arising exclusively from the operation of the
Business, other than liabilities being contested in good faith and for which
adequate reserves have been provided and Liens arising in the ordinary course of
business that do not, individually or in the aggregate, interfere with the use,
operation, enjoyment or marketability of any of the Purchased Property;
(iii) mortgaged, pledged or subjected to any material Lien
any of the Purchased Property, except for mechanics' liens and Liens for Taxes
not yet due and payable and Liens arising in the ordinary course of business
that do not, individually or in the aggregate, interfere with the use,
operation, enjoyment or marketability of any of the Purchased Property;
(iv) sold or transferred any of the material assets of the
Business or canceled any material debts or material claims or waived any
material rights relating exclusively to the operations of the Business, except
in the ordinary course of business consistent with past practice;
(v) disposed of any material patents, material trademarks or
material copyrights or any material patent, material trademark or material
copyright applications used exclusively in the operations of the Business;
(vi) defaulted on any material obligation relating
exclusively to the operations of the Business;
(vii) entered into any material transaction relating
exclusively to the Business, except in the ordinary course of business
consistent with past practice;
(viii) other than in connection with the execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby, incurred any material obligation or material liability for
the payment of severance benefits; or
(ix) entered into any agreement or made any commitment to do
any of the foregoing.
Section 4.8. Tax Matters. Except as provided in Section 10.2, all Tax
Returns required to be filed before the date hereof in respect of the Seller
have been filed, and the Seller has paid, accrued or otherwise adequately
reserved for the payment of all Taxes required to be paid in respect of the
periods covered by such returns and has adequately reserved for the payment of
all Taxes with respect to periods ended on or before the date hereof for which
Tax Returns have not yet been filed. Except as provided in Section 10.2, all
Taxes of the Seller have been paid or adequately provided for and the Seller
knows of no proposed additional tax assessment against it not adequately
provided for on its regularly prepared financial statements. In the ordinary
course of business, the Seller makes adequate provision on its books for the
payment of Taxes (including for the current fiscal period) owed by the Seller.
The Seller has withheld and paid all Taxes required to be withheld with respect
to amounts paid or owing to any employee, creditor, independent contractor or
other third party.
Section 4.9. [INTENTIONALLY OMITTED].
14
Section 4.10. Solvency. On the date of this Agreement and at all times
during the six (6) months immediately preceding the date of this Agreement,
except for those disputed in good faith, the Seller is and has been paying all
of its material debts, material liabilities and material obligations accruing
with respect to or resulting from the conduct of the Business as the same shall
have become due and owing, and, except for those disputed in good faith, none of
such payment obligations are past due or otherwise delinquent. Immediately after
the date of this Agreement, the Seller (i) will be solvent (i.e., the sum of its
debts will be less than all of its property, at a fair valuation); (ii) will
have sufficient capital to conduct the business, if any, it conducts after the
date of this Agreement; and (iii) will be able to pay its current and
anticipated debts as such debts mature. The Seller is executing this Agreement
in good faith, for fair value and without intent to hinder, delay or to defraud
its present and future creditors.
Section 4.11. Intellectual Property; Intangible Assets. Schedule
4.11(a) attached hereto and made a part hereof sets forth a listing of certain
Intellectual Property used by the Seller exclusively in connection with the
Business and described thereon, which listing is correct in all material
respects. The Seller owns all right, title and interest in and to, or has a
valid and enforceable license or otherwise has the right to use, in all
jurisdictions in which it carries on the Business, all Intellectual Property
without, to the knowledge of the Seller, materially violating or materially
conflicting with the rights of others. Except as set forth on Schedule 4.11(a),
to the extent that the Seller is the owner of any Intellectual Property, all
such owned Intellectual Property is owned by the Seller, free and clear of all
material Liens. All of the Seller's Intellectual Property is valid, subsisting,
unexpired, in proper form and enforceable, and all renewal fees and other
maintenance fees that have fallen due on or prior to the date of this Agreement
have been paid. There has not been communicated to the Seller the threat of any
material claim that the holder of such Intellectual Property is in violation or
infringement of any material Intellectual Property right of any other Person, or
challenging the Seller's ownership or use of, or the validity or enforceability
of, any of the Seller's Intellectual Property and, to the knowledge of the
Seller, none of the Products or operations of the Business involve any
infringement of any material proprietary right of any other Person. Other than
with respect to the License Termination, the consummation of the transactions
contemplated by this Agreement will not prohibit the Buyer from using any of the
Intellectual Property in a manner substantially similar to the Seller's current
use of such Intellectual Property in the Business.
Except as contemplated by this Agreement, Schedule 4.11(b) attached
hereto and made a part hereof sets forth a complete list of certain: (i)
material licenses, sublicenses and other agreements in which the Seller or any
sublicensee of the Seller has granted to any Person the right to use the
Intellectual Property exclusively with respect to the Business; and (ii) other
consents, indemnifications, forbearances to xxx, settlement agreements and
licensing or cross-licensing arrangements to which the Seller is a party
relating to the Intellectual Property or the proprietary rights of any third
party, exclusively with respect to, and to the extent material to, the Business
and described thereon. Except as set forth on Schedule 4.11(b) and as
contemplated by this Agreement, the Seller is not under any material obligation
to pay royalties or other payments in connection with any license, sublicense or
other agreement, nor restricted from assigning its rights under any sublicense
or agreement respecting Intellectual Property, nor will the Seller otherwise be,
as a result of the execution and delivery of this Agreement or the performance
of its obligations under this Agreement, in material breach of any material
license, material sublicense or other material agreement relating to the
Intellectual Property.
15
Schedule 4.11(c) attached hereto and made a part hereof sets forth a
complete list of certain Intangible Assets utilized by the Seller exclusively in
the Business and described thereon. Each of the Intangible Assets is valid and
in good standing, is not currently being challenged, and is not involved in any
pending or, to the knowledge of the Seller, threatened administrative or
judicial proceeding which could have a material adverse effect on the Business,
and does not conflict with any material rights of any other Person.
Section 4.12. Licenses and Permits. Schedule 4.12 attached hereto and
made a part hereof sets forth a true and complete list of certain licenses,
permits, certificates of occupancy, franchises, authorizations and approvals
issued or granted to the Seller, exclusively with respect to, and which are
material to, the Business, by the Government, any state or local government
(whether domestic or foreign), or any department, agency, board, commission,
bureau or instrumentality of any of the foregoing, to the extent described on
such schedule (the "Licenses and Permits"), and all pending applications
therefor. Such list contains a summary description of each such item and, where
applicable, specifies the date issued, granted or applied for, the expiration
date and the current status thereof. Each License and Permit has been duly
obtained, is valid and in full force and effect, and is not subject to any
pending or threatened administrative or judicial proceeding to revoke, cancel,
suspend or declare such License and Permit invalid in any respect. None of the
operations of the Business are being conducted in a manner that materially
violates any of the terms or conditions under which any License and Permit was
granted. No License and Permit will in any way be materially affected or
materially modified by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement.
Section 4.13. Compliance with Law. The operations of the Business have
been conducted in accordance with all applicable laws, regulations, orders and
other requirements of all courts and other governmental or regulatory
authorities having jurisdiction over the Seller and its assets, properties and
operations, including, without limitation, all such laws, regulations, orders
and requirements promulgated by or relating to consumer protection, currency
exchange, equal opportunity, health, architectural barriers to the handicapped,
fire, zoning and building, occupation safety, pension, securities and
trading-with-the-enemy matters each to the extent material to the operation of
the Business. The Seller has not received notice of any material violation of
any such law, regulation, order or other legal requirement, and is not in
default with respect to any material order, material writ, material judgment,
material award, material injunction or material decree of any national, state or
local court or governmental or regulatory authority or arbitrator, domestic or
foreign, applicable to the Business or any of the Purchased Property.
Section 4.14. Litigation. To the Seller's knowledge, except as
described on Schedule 4.14 attached hereto and made a part hereof, there are no
claims, actions, suits, proceedings, labor disputes or investigations pending
or, to the Seller's knowledge, threatened, before any national, state or local
court or governmental or regulatory authority, domestic or foreign, or before
any arbitrator of any nature, brought by or against the Seller or any of its
officers, directors, employees or agents involving, affecting or relating to the
Business, the Purchased Property or the transactions contemplated by this
Agreement, nor is any basis known to the Seller or any of its directors or
officers for any such action, suit, proceeding or investigation, which, with
respect to each of the foregoing, if determined adversely to the Seller, could
have a material adverse effect on the Business. Neither the Business nor the
Purchased Property is
16
subject to any material order, material writ, material judgment, material award,
material injunction or material decree of any national, state or local court or
governmental or regulatory authority or arbitrator, domestic or foreign, that
materially adversely affects or might materially adversely affect the Business
or the Purchased Property, or that would or might materially adversely interfere
with the transactions contemplated by this Agreement.
Section 4.15. Enumerated Contracts.
--------------------
(a) Schedule 4.15 attached hereto and made a part hereof sets forth a
complete and correct list and a summary description of certain Enumerated
Contracts (as in effect on the date hereof) described thereon.
(b) Each Enumerated Contract is valid, binding and enforceable against
the parties thereto in accordance with its terms, and in full force and effect
on the date hereof. The Seller has performed all material obligations required
to be performed by it to date under, and is not in material default or
delinquent in performance, status or any other respect (claimed or actual) in
connection with, any Enumerated Contract, and no event has occurred which, with
due notice or lapse of time or both, would constitute such a default under any
Enumerated Contract. To the Seller's knowledge, no other party to any Enumerated
Contract is in material default in respect thereof, and no event has occurred
which, with due notice or lapse of time or both, would constitute such a
default. The Seller has delivered to the Buyer or its representatives true and
complete originals or copies of all the Enumerated Contracts.
(c) With respect to each Enumerated Contract, the Seller has complied
with all material terms thereof, all material certifications and material
representations of the Seller with respect thereto and all material statutes and
material regulations applicable thereto.
Section 4.16. [INTENTIONALLY OMITTED]
Section 4.17. Customers, Suppliers, Distributors and Authorized Sales
Representatives. Schedule 4.17 attached hereto and made a part hereof sets forth
a complete and correct list of (a) all customers whose purchases exceeded Fifty
Thousand ($50,000) Dollars in net sales of the Business during the Seller's last
full fiscal year; (b) the suppliers by dollar volume of the Business that
exceeded Fifty Thousand ($50,000) Dollars during the Seller's last full fiscal
year; (c) all distributors of any Products whose purchases from the Seller
exceeded Fifty Thousand ($50,000) Dollars during the Seller's last full fiscal
year; and (d) all authorized sales representatives of the Business. To the
Seller's knowledge, other than with respect to Transbulk Systems, Inc., none of
such customers, suppliers, distributors or authorized sales representatives
intends to terminate or change significantly its relationship with the Business.
Section 4.18. [INTENTIONALY OMITTED]
Section 4.19. Transactions with Directors, Officers and Affiliates.
Except as set forth on Schedule 4.19 attached hereto and made a part hereof,
since September 30, 2004, there have been no transactions between the Seller and
any director, officer, employee, stockholder or other Affiliate of the Seller
with respect to the Business. To the Seller's knowledge, other than as set forth
on Schedule 4.19(a), during the three years ended December 31, 2003, none of the
officers, directors or employees of the Seller, or any spouse or relative of any
of such Persons, has been a
17
director or officer of, or has had any direct or indirect interest in, any
Person which during such period has been a supplier, customer or sales agent of
the Seller or has competed with or been engaged in any business of the kind
being conducted by the Business. No Affiliate of the Seller owns or has any
rights in or to any of the Purchased Property.
Section 4.20. Labor Matters. The Seller has not breached or otherwise
failed to comply with any provisions of any Employment and Labor Agreement, and
there are no grievances outstanding thereunder to the extent any of the
foregoing would have a material adverse effect on the Business. The Seller is in
compliance with all applicable laws relating to employment and employment
practices, wages, hours and terms and conditions of employment, in each case
exclusively with respect to, and to the extent that failure to comply could have
a material adverse effect on, the Business.
Section 4.21. Products Liability.
------------------
(a) (i) There is no notice, demand, claim, action, suit, inquiry,
hearing, proceeding, notice of violation or investigation of a civil, criminal
or administrative nature before any court or governmental or other regulatory or
administrative agency, commission or authority, domestic or foreign, against or
involving any Product or any Product distributed by or on behalf of the
Business, or class of claims or lawsuits involving the same or similar Product
or any Product distributed by or on behalf of the Business which is pending or
threatened, resulting from an alleged defect in design, manufacture, materials
or workmanship of any Product or any Product distributed or sold by or on behalf
of the Business, or any alleged failure to warn, or from any breach of implied
warranties or representations (collectively, "Product Liability Lawsuits"); (ii)
there has not been any Occurrence; and (iii) there has not been, nor is there
under consideration or investigation by the Seller, any Product rework or
retrofit (collectively, "Retrofits") conducted by or on behalf of the Seller
concerning any Products manufactured, produced, distributed or sold by or on
behalf of the Business, which, with respect to each of the foregoing, if
determined adversely to the Seller, could have a material adverse effect on the
Business.
(b) For purposes of this Section 4.21, the term "Occurrence" shall
mean any accident, happening or event which took place at any time prior to the
date hereof which is caused or allegedly caused by any alleged hazard or alleged
defect in manufacture, design, materials or workmanship, including, without
limitation, any alleged failure to warn or any breach of express or implied
warranties or representations with respect to, or any such accident, happening
or event otherwise involving, any Product or any Product distributed by or on
behalf of the Business (including any parts or components), that is likely to
result in a claim or loss that could have a material adverse effect on the
Business.
Section 4.22. Equipment. Schedule 4.22 attached hereto and made a part
hereof sets forth a complete and correct list of certain office equipment used
by the Seller exclusively in the Business.
SECTION 5. Representations and Warranties of the Buyer.
-------------------------------------------
The Buyer hereby represents and warrants to the Seller as follows:
18
Section 5.1. Corporate Organization. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio, and has all requisite corporate power and authority to own its properties
and assets and to conduct its businesses as now conducted.
Section 5.2. Qualification to Do Business. The Buyer is duly qualified
to do business as a foreign corporation and is in good standing in every
jurisdiction in which the character of the properties owned or leased by it or
the nature of the business conducted by it makes such qualification necessary.
Section 5.3. Authorization and Validity.
--------------------------
(a) The Buyer has all requisite corporate power and authority to enter
into this Agreement and all agreements, instruments and documents executed
and/or delivered by the Buyer pursuant to or in connection with this Agreement
or to which the Buyer is a party or signatory or contemplated hereby
(collectively, the "Buyer Collateral Agreements"), and to carry out its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Buyer Collateral Agreements, and the performance of the
Buyer's obligations hereunder and thereunder, have been duly authorized by all
necessary corporate action by the Board of Directors of the Buyer, and no other
corporate proceedings on the part of the Buyer are necessary to authorize such
execution, delivery and performance. This Agreement and the Buyer Collateral
Agreements have been duly executed by the Buyer and constitute its valid and
binding obligation, enforceable against it in accordance with their respective
terms.
(b) Each party other than the Buyer and the Seller, including, without
limitation, the Guarantors under the Guarantees, and the grantors under the
Mortgages (each, a "Third Party"), to any agreement, instrument or document
executed and/or delivered pursuant to or in connection with this Agreement or
contemplated hereby or thereby (collectively, the "Third Party Documents") has
all requisite power and authority to enter into each such Third Party Document
to which it is a party, and to carry out its obligations thereunder. The
execution and delivery of each Third Party Document, and the performance of each
Third Party's obligations thereunder, have been duly authorized by all necessary
corporate action (or other action, as applicable), and no other corporate
proceedings (or other proceedings, as applicable) on the part of any such Third
Party are necessary to authorize such execution, delivery and performance. Each
Third Party Document has been duly executed by the relevant Third Parties, and
constitutes the valid and binding obligation of each such Third Party,
enforceable against it in accordance with its terms.
Section 5.4. No Conflict or Violation. The execution, delivery and
performance by the Buyer of this Agreement and the Buyer Collateral Agreements,
and by each Third Party of the Third Party Documents to which it is a party, do
not and will not violate or conflict with any provision of the Certificate of
Incorporation or Code of Regulations (or equivalent documents) of the Buyer or
such Third Party, and do not and will not violate any provision of law, or any
order, judgment or decree of any court or other governmental or regulatory
authority, nor violate nor will result in a breach of or constitute (with due
notice or lapse of time or both) a default under any material contract, lease,
loan agreement, mortgage, security agreement, trust indenture or
19
other agreement or instrument to which the Buyer or such Third Party is a party
or by which it is bound.
Section 5.5. Consents and Approvals. The execution, delivery and
performance of this Agreement and the Buyer Collateral Agreements on behalf of
the Buyer, and of each Third Party Document by or on behalf of such Third Party,
do not require the consent or approval of, or filing with, any Government,
governmental body or agency or other Person except for such consents, approvals
and filings, of which the failure to obtain or make would not, individually or
in the aggregate, have a material adverse effect on the ability of the Buyer or
the relevant Third Party or Third Parties to consummate the transactions
contemplated hereby or thereby.
SECTION 6. Covenants of the Seller.
-----------------------
The Seller covenants as follows:
Section 6.1. Further Assurances. Upon the request of the Buyer at any
time after the date hereof, the Seller shall forthwith execute and deliver such
further instruments of assignment, transfer, conveyance, endorsement, direction
or authorization and other documents as the Buyer or its counsel may request to
perfect title of the Buyer and its successors and assigns to the Purchased
Property or otherwise to effectuate the purposes of this Agreement.
Section 6.2. Covenant Not To Compete.
-----------------------
(a) Provided that there shall have been no breach of any
representation or warranty of the Buyer, nor any default in the performance of
any covenant or obligation of the Buyer, hereunder, or under any of the Buyer
Collateral Agreements (including, without limitation, the Notes and the Security
Agreement), nor of any Third Party under any Third Party Document, including,
without limitation, of the Guarantors under the Guarantees, or of the grantors
under the Mortgages, the Seller agrees that for a period of five (5) years after
the date of this Agreement, it shall not compete with or engage or participate,
directly or indirectly, in the Business as conducted as of the date hereof in
any geographical area where the Business is conducted as of the date hereof.
(b) The Seller agrees that a monetary remedy for a breach of the
agreement set forth in Section 6.2(a) hereof will be inadequate and
impracticable and further agrees that such a breach would cause the Buyer
irreparable harm, and that the Buyer shall be entitled to temporary and
permanent injunctive relief without the necessity of proving actual damages. In
the event of such a breach, the Seller agrees that the Buyer shall be entitled
to such injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions, as a court of competent jurisdiction
shall determine.
(c) If any provision of this Section 6.2 is invalid in part, it shall
be curtailed, both as to time and location, to the minimum extent required for
its validity under the laws of the United States, and shall be binding and
enforceable with respect to the Seller as so curtailed.
Section 6.3. Assignment of Enumerated Contracts and Warranties.
Notwithstanding anything contained herein, no Enumerated Contract shall be
assigned contrary to law or the terms of such Enumerated Contract and, with
respect to Enumerated Contracts that cannot be
20
assigned to the Buyer at the date of this Agreement, the performance obligations
of the Seller thereunder shall, unless not permitted by such Enumerated
Contract, be deemed to be subleased or subcontracted to the Buyer until such
Enumerated Contract has been assigned. The Buyer shall assist the Seller in
obtaining any necessary approvals to such subleases and subcontracts. The Seller
shall use its best efforts to obtain all necessary consents and the Buyer shall
take all necessary actions to perform and complete all Enumerated Contracts in
accordance with their terms if neither assignment, subleasing nor subcontracting
is permitted by the other party, and the Seller shall pay over to the Buyer any
amounts received by the Seller after the date of this Agreement as a result of
performance by the Buyer of such Enumerated Contracts.
SECTION 7. Employees and Employee Plans.
----------------------------
Section 7.1. Continuation of Employment. On and after the date hereof,
the Buyer shall offer employment to each of the Seller's employees identified on
Schedule 7.1 attached hereto and made a part hereof (the "Division Employees")
on terms and with compensation, employment terms and benefits no less favorable
to the Division Employees than the terms, compensation, employment terms and
benefits that each such employee enjoyed up to the date hereof from the Seller
(such terms, compensation and benefits, the "Similar Employment Terms"). The
Buyer shall offer such employment to the Division Employees at the location
where each such employee performed his or her respective duties for the Seller
prior to the date of this Agreement. The starting date of employment of each
such employee with the Buyer shall be the date of this Agreement. The Seller
has, and shall have, no obligation to the Buyer to transfer to the Buyer any
Internal Revenue Service Forms W-4 and W-5. Nothing herein shall be deemed to
prevent the Buyer from terminating the employment of any Division Employee
following the date of this Agreement.
Section 7.2. Vacation, Severance and Other Liabilities.
-----------------------------------------
(a) If a Division Employee has been offered employment by the Buyer
and has accepted such employment, the Buyer shall be responsible for (i) payment
of all accrued and vested vacation obligations with respect to such Division
Employee under the relevant polices of the Buyer (the "Buyer Vacation Policies")
and the Seller (the "Seller Vacation Policies"); and (ii) upon the termination
of the employment of any such Division Employee, (x) payment of any applicable
severance pay and other costs of termination, including, without limitation, as
may be payable under the relevant polices of the Buyer (the "Buyer Severance
Policies") and the Seller, (if any), (the "Seller Severance Policies"); and (y)
providing each such Division Employee with the health and medical plan coverage
(if any) required to be provided to such Division Employee by the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("Health And Medical
Coverage"). The Buyer shall reimburse the Seller in full, within five (5)
business days of the receipt by the Buyer of a written request therefor, for any
sums paid by the Seller to any such Division Employee on or after the date of
this Agreement pursuant to the Seller Vacation Policies and/or the Seller
Severance Policies.
(b) Schedule 7.2 attached hereto and made a part hereof identifies
each of the Seller's employees engaged principally in the operation of the
Business with respect to whom the Buyer shall not make an offer of employment
pursuant to the terms of Section 7.1 hereof (each, a "Schedule 7.2 Employee").
With respect to each Schedule 7.2 Employee who is offered and
21
accepts employment on Similar Employment Terms by the Buyer within thirty (30)
days following the date of this Agreement, the Buyer shall be responsible for
(i) payment of all accrued and vested vacation obligations with respect to such
Schedule 7.2 Employee under the Buyer Vacation Policies and the Seller Vacation
Policies; and (ii) upon the termination of the employment of any such Schedule
7.2 Employee, (x) payment of any applicable severance pay and other costs of
termination, including, without limitation, as may be payable under the Buyer
Severance Policies and the Seller Severance Policies; and (y) providing each
such Schedule 7.2 Employee with Health And Medical Coverage. The Buyer shall
reimburse the Seller in full, within five (5) business days of the receipt by
the Buyer of a written request therefor, for any sums paid by the Seller to any
such Schedule 7.2 Employee on or after the date of this Agreement pursuant to
the Seller Vacation Policies and/or the Seller Severance Policies.
(c) The Buyer shall deliver to the Seller, not later than the first
Business Day following the date which is thirty-five (35) days after the date of
this Agreement, a listing, certified as true, complete and correct by a
responsible senior officer of the Buyer, of each Schedule 7.2 Employee hired by
the Buyer during the thirty (30) day period following the date of this
Agreement, together with (i) the Rate of Compensation of each such hired
Schedule 7.2 Employee; and (ii) such other information as the Seller shall deem
necessary or appropriate to enable the Seller to determine whether the
employment of such Schedule 7.2 Employee by the Buyer is on Similar Employment
Terms. For purposes of this Section 7.2(c), "Rate of Compensation" shall mean
the rate of compensation for the performance of regular duties of the relevant
Schedule 7.2 Employee's position, excluding bonuses, overtime or any other
compensation.
Section 7.3. Additional Responsibilities of the Buyer. The Buyer shall
give credit to each Division Employee and each Schedule 7.2 Employee who is
offered and accepts employment by the Buyer on, or within thirty (30) days
following, the date of this Agreement for all periods worked for the Seller, as
if during each such period such employee had worked for the Buyer, with respect
to the determination of vacation, severance and any and all other rights to
which such employee is entitled. Notwithstanding anything to the contrary set
forth herein or in any other agreement, instrument or document, the
determination as to which of the Seller's employees shall be Division Employees,
on the one hand, or Schedule 7.2 Employees, on the other hand, has been made
exclusively by the Buyer.
Section 7.4. No Assumption of Liabilities. Except as set forth in this
Section 7, the Buyer shall not assume any of the Plans. In addition, except as
set forth in this Section 7, and except as provided in Section 2.2 hereof, the
Buyer shall not have any direct or indirect obligation or liability of any
nature, whether matured or unmatured, accrued or contingent, due or to become
due or otherwise, to any employee, former employee or independent contractor of
the Seller, or to any dependent, survivor or beneficiary thereof, arising out of
or in relation to such person's employment or engagement with the Seller or the
termination of such employment prior to the date hereof.
SECTION 8. Covenants of the Buyer.
----------------------
Section 8.1 Warranty Claims.
---------------
22
(a) The Buyer hereby assumes and agrees to pay, perform and/or discharge when
due any and all liabilities and obligations of the Seller (including, without
limitation, any and all liabilities and obligations heretofore assumed by the
Seller) with respect to warranty claims arising out of any and all products
manufactured, sold and/or shipped by the Seller or any predecessor of the Seller
in connection with the Business prior to the date of this Agreement ("Warranty
Claims"). The Seller shall reimburse the Buyer for its actual, direct
out-of-pocket cost of repair or replacement ("Warranty Costs") with respect to
each Warranty Claim (a "Product Defect Claim") based exclusively upon a Product
Defect, as hereinafter defined, but only to the extent that the aggregate of
such Warranty Costs, calculated in a manner identical to, and consistent with
the past practices of the Seller ("Product Defect Warranty Costs"), during the
Reimbursement Period, as hereinafter defined, exceeds the Claim Threshold, as
hereinafter defined; provided, however, that the Buyer shall be entitled to such
reimbursement only if (i) the Buyer notifies the Seller in writing at least
thirty (30) days prior to any such repair or replacement of its receipt of any
such Product Defect Claim, specifying the relevant information with respect
thereto, including, without limitation, the nature thereof, (ii) the Buyer
provides a binding written quote (the "Binding Quote") to the Seller in advance
of any such repair or replacement, itemizing the proposed cost of repair or
replacement, as applicable, (iii) the Buyer receives from the Seller a written
authorization of the proposed repair or replacement pursuant to such Binding
Quote, (iv) pursuant to such written authorization, the Buyer promptly performs
the relevant repair or replacement, and (v) the Buyer's response to such Product
Defect Claim shall in all respects be in accordance with the warranty policy in
effect with respect to the relevant product as of the date of this Agreement.
(b) Within sixty (60) days following the end of the twelve (12) month period
commencing on the date of this Agreement (such twelve (12) month period, the
"Reimbursement Period"), the Buyer shall deliver to the Seller a comprehensive
itemized written statement (the "Comprehensive Statement") setting forth a full
and complete accounting of all Product Defect Claims received and processed
during such Reimbursement Period, including, without limitation, the remedial
action taken with respect to each such Product Defect Claim, and the extent to
which the aggregate Product Defect Warranty Costs have exceeded the Claim
Threshold (any such excess, the "Reimbursement Amount"). The Seller shall remit
the Reimbursement Amount to the Buyer within thirty (30) days following the
earlier of (i) the Seller's written notice to the Buyer indicating that the
Seller agrees with the Buyer's calculation of the Reimbursement Amount, or (ii)
the issuance of the decision of the Selected Firm with respect thereto pursuant
to the terms of Section 3.2(c) hereof.
(c) The Seller may, in its sole and absolute discretion, which shall be final,
conclusive and binding, make alternate arrangements with respect to any and all
Product Defect Claims, in which event the Buyer shall cooperate with the Seller
with respect thereto. In no event shall the Seller be required to make any such
alternate arrangements. The Seller shall not have any liability or obligation
with respect to any Product Defect Claim made or processed, or any other
warranty or repair matter, after the end of the Reimbursement Period.
23
(d) For purposes of this Agreement, "Product Defect" shall mean any Warranty
Claim based exclusively on a product design defect, material defect, and/or
workmanship defect in any particular product; and "Claim Threshold" shall mean
five tenths of one (.5%) percent of the Buyer's revenue from Access Sales during
the Reimbursement Period, determined in a manner consistent with the past
practice of the Seller.
Section 8.2 Files and Records. Within thirty (30) days following the
execution and delivery of this Agreement, the Buyer shall grant the Seller, upon
the Seller's reasonable request, access to the books, records and files of the
Seller, of whatever nature and in whatever form, together with all similar and
related items and documents, including, without limitation, the Files and
Records and any original files and records copies of which constitute the Files
and Records, to appropriately organize, pack, and ship, at the Seller's expense,
all such books, records, files and other items and documents of the Seller on
any media (including, without limitation, paper and electronic media) to the
Seller c/o P&F Industries, Inc., 000 Xxxxx Xxxxxx, Xxxxxxxxxxx, XX 00000-0000.
At such time, the Seller shall provide the Buyer, at the Buyer's request, one
(1) copy of any original files and records which constitute the Files and
Records that the Buyer may desire. The cost of photocopying shall be shared
equally by the Seller and the Buyer. In the event the Buyer desires additional
copies of any such original files and records which constitute the Files and
Records after the Seller has shipped them to New York, the Seller shall, at the
Buyer's expense, provide such copies to the Buyer. If the Buyer has not
previously obtained copies as provided herein, if at any time the Seller desires
to dispose of the original files and records which constitute the Files and
Records, which original files and records have been previously shipped to New
York pursuant to this Section 8.2, it shall first give reasonable (but no less
than thirty (30) days' written notice thereof) to the Buyer, which may obtain
copies of the same at its expense.
Section 8.3 Cooperation. With respect to the litigation described on
Schedule 4.14 attached hereto and made a part hereof, and with respect to any
and all actions, proceedings, claims, investigations, arbitrations and the like
that may be commenced against the Seller, the Buyer shall cooperate with the
Seller in the defense thereof, which cooperation shall include, without
limitation, making employees of the Buyer available to the Seller and its
representatives on a mutually convenient basis and to provide additional
information and explanation of any materials provided hereunder, including,
without limitation, providing such employees to serve as witnesses, and the
Seller shall reimburse the Buyer for any reasonable out-of-pocket expenses
incurred by the Buyer in connection therewith.
Section 8.4 Phone and Fax Numbers. The Seller shall use commercially
reasonable efforts to transfer the phone and fax numbers identified on Schedule
8.4 attached hereto and made a part hereof to the Buyer. The Buyer hereby
assumes and agrees to pay, perform and discharge as and when due those
liabilities and obligations of the Seller relative to the above-mentioned phone
and fax numbers accruing on and after the date hereof.
SECTION 9. Accounts Receivable.
-------------------
Section 9.1 Transferred Accounts Receivable.
-------------------------------
(a) Schedule 9.1 attached hereto and made a part hereof sets forth the
name, address,
24
amount owed and time outstanding through and including the date of this
Agreement (the "Transferred Accounts Receivable Schedule") with respect to
certain Accounts Receivable of the Seller that are being sold, assigned,
transferred and conveyed to the Buyer pursuant to the terms of this Agreement
(the "Transferred Accounts Receivable"). Subject to the below provisions of this
Section 9.1, from and after the date of this Agreement, the Buyer shall, at its
own expense, collect the Transferred Accounts Receivable in a manner consistent
with the past business practices of the Seller, including, without limitation,
referring same to outside collection services and counsel, but only with the
prior written consent of the Seller. Any amounts received by the Buyer from any
person or entity identified on the Transferred Accounts Receivable Schedule
shall be applied to the oldest of the Transferred Accounts Receivable with
regard to such person or entity, notwithstanding any amounts due from such
person or entity to the Buyer and regardless of whether such payment is made to
or for the account of the Buyer or the Seller; provided, however, that in the
event that there are amounts outstanding in connection with any Retained
Accounts Receivable with respect to such person or entity, any such amounts
received by the Buyer from such person or entity (whether received for the
account of the Buyer or the Seller) shall first be applied pursuant to the terms
of Section 9.2 hereof. The Buyer shall not (i) settle, negotiate or otherwise
compromise any of the Transferred Accounts Receivable without written
authorization with respect thereto from the Seller, or (ii) suggest to or
influence any account debtor of the Seller or offer any incentive to any account
debtor of the Seller or otherwise take any action that would or does cause any
such account debtor to fail to pay an amount due the Seller, or pay an amount
due the Buyer in lieu thereof. During the period commencing as of the one
hundred twentieth (120th) day following the date of this Agreement (the "Record
Date") and ending fifteen (15) days thereafter (the "Option Period"), the Buyer
may, but shall not be obligated to, notify the Seller in writing (the "Notice")
as to which of the Transferred Accounts Receivable are outstanding as of the
Record Date (the "Delinquent Receivables"). Any such Notice shall include
therewith an assignment of the Delinquent Receivables to the Seller in such form
as the Seller may reasonably request, including, without limitation,
representations and warranties to the effect that such Delinquent Receivables
are being sold to the Seller free and clear of any and all Liens, and that the
Buyer has received no payments on account of any such Delinquent Receivable,
among other things, together with documentation duly executed by the Bank, in
form and substance satisfactory to the Seller, in its sole discretion, which
shall be final, conclusive and binding, releasing any and all Liens of the Bank
with respect to such Delinquent Receivables (collectively, the "Assignment
Documents"). On the fifteenth (15th) day following the Seller's receipt of the
Notice (the "Section 9.1 Adjustment Date"), together with the Assignment
Documents, a credit shall be applied in favor of the Buyer as set forth in
Section 9.1(b) in an amount equal to the amount of each of such Delinquent
Receivables (in the aggregate, the "Delinquent Receivables Amount").
Notwithstanding anything contained herein, the Seller shall have the right to
collect the Delinquent Receivables. Following the Notice, in the event that the
Buyer receives any check from an account debtor who is named on the list of
Delinquent Receivables, and made payable to the order of the Seller, the Buyer
shall deliver same to Seller within one (1) day of the Buyer's receipt thereof,
whether or not paid on account of such Delinquent Receivables. In the event that
the Buyer receives any monies from any account debtor who is named on the list
of Delinquent Receivables, whether or not paid on account of such Delinquent
Receivables, such amounts shall be held in trust for the Seller by the Buyer in
a segregated bank account maintained by the Buyer for such purpose. Promptly
(but in no event beyond five (5) days) following receipt of such
25
payment, the Buyer shall deliver same to the Seller. Any amount received by the
Seller shall be applied to the Delinquent Receivables in accordance with the
Seller's sole discretion, which shall be final, conclusive and binding.
Notwithstanding anything contained herein, the Seller shall have no obligations
under this Section 9.1 unless and until the Buyer has complied with each of its
obligations hereunder.
(b) In the event that a credit is to be applied in favor of the Buyer
pursuant to the terms of Section 9.1(a), the Delinquent Receivables Amount to be
so credited shall be deducted pro rata from the payments then outstanding under
Note 1, such that the amount to be applied as a credit in accordance with
Section 9.1(a) shall be divided by the number of payments which remain
outstanding under Note 1 as of the Section 9.1 Adjustment Date, and the quotient
so obtained shall be deducted from each payment then outstanding under Note 1.
Section 9.2 Retained Accounts Receivable. Schedule 9.2 attached hereto
and made a part hereof sets forth the name, address, amount owed and time
outstanding through and including the date of this Agreement (the "Retained
Accounts Receivable Schedule") with respect to certain Accounts Receivable of
the Seller that are being retained by the Seller pursuant to the terms of this
Agreement (the "Retained Accounts Receivable"). Subject to the below provisions
of this Section 9.2, from and after the date of this Agreement, the Buyer shall,
at its own expense, collect, on behalf of the Seller, the Retained Accounts
Receivable in a manner consistent with the past business practices of the
Seller, including, without limitation, referring same to outside collection
services and counsel, but only with the prior written consent of the Seller. In
the event that the Buyer receives any checks made payable to the order of the
Seller, the Buyer shall deposit such checks on behalf of the Seller to an
account or accounts designated by the Seller in writing from time to time (in
any case, the "Account") within one (1) day of the Buyer's receipt thereof. Any
amounts received by the Buyer from any person or entity identified on the
Retained Accounts Receivable Schedule shall be applied to the oldest of the
Retained Accounts Receivable with regard to such person or entity,
notwithstanding any amounts due from such person or entity to the Buyer or
pursuant to any Transferred Accounts Receivable, and regardless of whether such
payment is made to or for the account of the Buyer or the Seller. The Buyer
shall not (i) settle, negotiate or otherwise compromise any of the Retained
Accounts Receivable without written authorization with respect thereto from the
Seller, or (ii) suggest to or influence any account debtor of the Seller or
offer any incentive to any account debtor of the Seller or otherwise take any
action that would or does cause any such account debtor to fail to pay an amount
due the Seller, or to pay an amount due the Buyer, including, without
limitation, pursuant to any Transferred Account Receivable, in lieu thereof. In
the event that the Buyer receives any monies on account of the Retained Accounts
Receivable, such amounts shall be held in trust for the Seller by the Buyer in a
segregated bank account maintained by the Buyer for such purpose. Promptly (but
in no event beyond five (5) days) following receipt of such payment, the Buyer
shall deposit same in the Account, or upon the written request of the Seller,
deliver same to the Seller. Notwithstanding anything contained herein, the
Seller shall have the right to collect the Retained Accounts Receivable. Any
amount received by the Seller shall be applied to the Retained Accounts
Receivable in accordance with the Seller's sole discretion, which shall be
final, conclusive and binding.
26
SECTION 10. Taxes.
-----
The parties hereto hereby covenant and agree as follows:
Section 10.1. Allocation of Purchase Price. The Buyer and the Seller
agree to allocate the Purchase Price and Assumed Liabilities among the Purchased
Property and the covenants contained in Section 6.2 of this Agreement in
accordance with Schedule 10.1 (the "Allocation"). The Seller and the Buyer will
cooperate in filing with the Internal Revenue Service their respective Forms
8594 as provided for in Section 1060 of the Code on a basis consistent with the
Allocation, and the Allocation shall be reflected on any Tax Returns required to
be filed as a result of the transactions contemplated hereby.
Section 10.2. Transfer Taxes. All transfer, documentary, sales, use,
registration, value-added and other similar Taxes and related fees (including
any penalties, interest and additions to Tax ("Transfer Taxes") incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by and shared equally between the Seller and the Buyer. The Seller and the
Buyer shall cooperate in timely making all filings, returns, reports and forms
as may be required to comply with the provisions of all laws relating to
Transfer Taxes. To the extent legally able to do so, the Buyer shall deliver to
the Seller exemption certificates, satisfactory in form and substance to the
Seller, with respect to Transfer Taxes if such delivery would reduce the amount
of Transfer Taxes that would otherwise be imposed.
SECTION 11. Indemnification; Survival.
-------------------------
Section 11.1. Indemnification by the Seller. Notwithstanding the
execution and delivery hereof or the delivery of the Purchased Property and
regardless of any investigation at any time made by or on behalf of the Buyer or
of any knowledge or information that the Buyer may have, the Seller shall
indemnify and fully defend, save and hold the Buyer, any Affiliate of the Buyer
and their respective directors, officers and employees (the "Buyer
Indemnitees"), harmless if any Buyer Indemnitee shall at any time or from time
to time suffer any damage, liability, loss, cost, expense (including all
reasonable attorneys', consultants' or experts' fees), deficiency, interest,
penalty, impositions, assessments or fines (collectively, "Losses") arising out
of or resulting from, or shall pay or become obligated to pay any sum on account
of, any Seller's Event of Breach. As used herein, "Seller's Event of Breach"
shall be and mean any one or more of the following:
(a) any untruth or inaccuracy in any representation of the Seller or
the breach of any warranty of the Seller contained in this Agreement (including,
without limitation, any misrepresentation in, or omission from, any statement,
certificate, schedule, exhibit, annex or other document furnished pursuant to
this Agreement by the Seller (or any of its representatives) to the Buyer (or
any representative of the Buyer));
(b) any failure of the Seller duly to perform or observe any term,
provision, covenant, agreement or condition on the part of the Seller to be
performed or observed pursuant to this Agreement; and
(c) any claim or cause of action by any party against any Buyer
Indemnitee with respect to the Excluded Liabilities.
27
Section 11.2. Procedures for Indemnification by the Seller. If a
Seller's Event of Breach occurs or is alleged and a Buyer Indemnitee asserts
that the Seller has become obligated to such Buyer Indemnitee pursuant to
Section 11.1, or if any suit, action, investigation, claim or proceeding is
begun, made or instituted as a result of which the Seller may become obligated
to a Buyer Indemnitee hereunder, such Buyer Indemnitee shall give written notice
thereof to the Seller within ten (10) days of receiving notice thereof, or
discovery of facts related thereto (but the failure to so notify within such
time shall not relieve the Seller from any liability it may have under this
Section 11 except to the extent it has been prejudiced in any material respect
by such failure). The Seller agrees to defend, contest or otherwise protect the
Buyer Indemnitee against any such suit, action, investigation, claim or
proceeding at its sole cost and expense. The Buyer Indemnitee shall have the
right, but not the obligation, to participate at its own expense in the defense
thereof by counsel of the Buyer Indemnitee's choice and shall in any event
cooperate with and assist the Seller to the extent reasonably possible. If the
Seller fails timely to defend, contest or otherwise protect against such suit,
action, investigation, claim or proceeding, the Buyer Indemnitee shall have the
right to do so, including, without limitation, the right to make any compromise
or settlement thereof, and the Buyer Indemnitee shall be entitled to recover the
entire cost thereof from the Seller including, without limitation, reasonable
attorneys', consultants' and experts' fees, disbursements and amounts paid as
the result of such suit, action, investigation, claim or proceeding.
Section 11.3. Indemnification by the Buyer. Notwithstanding the
execution and delivery hereof or the delivery of the Purchased Property, the
Buyer shall indemnify and fully defend, save and hold the Seller, any Affiliate
of the Seller and their respective directors, officers and employees (the
"Seller Indemnitees"), harmless if any Seller Indemnitee shall at any time or
from time to time suffer any Losses arising out of or resulting from, or shall
pay or become obligated to pay any sum on account of, any Buyer's Event of
Breach. As used herein, "Buyer's Event of Breach" shall be and mean any one or
more of the following:
(a) any untruth or inaccuracy in any representation of the Buyer or
the breach of any warranty of the Buyer contained in this Agreement (including,
without limitation, any misrepresentation in, or omission from, any statement,
certificate, schedule, exhibit, annex or other document furnished pursuant to
this Agreement by the Buyer (or any of its representatives) to the Seller (or
any representative of the Seller));
(b) any failure of the Buyer duly to perform or observe any term,
provision, covenant, agreement or condition contained in this Agreement on the
part of the Buyer to be performed or observed; and/or
(c) any claim or cause of action by any party against any Seller
Indemnitees with respect to Assumed Liabilities and/or the Cancelled Purchase
Orders.
Section 11.4. Procedures for Indemnification by the Buyer. If a
Buyer's Event of Breach occurs or is alleged and a Seller Indemnitee asserts
that the Buyer has become obligated to it pursuant to Section 11.3, or if any
suit, action, investigation, claim or proceeding is begun, made or instituted as
a result of which the Buyer may become obligated to a Seller Indemnitee
hereunder, such Seller Indemnitee shall give written notice thereof to the Buyer
within ten (10) days of receiving notice thereof, or discovery of facts related
thereto (but the failure to so notify
28
within such time shall not relieve the Buyer from any liability it may have
under this Section 11 except to the extent it has been prejudiced in any
material respect by such failure). The Buyer agrees to defend, contest or
otherwise protect such Seller Indemnitee against any such suit, action,
investigation, claim or proceeding at its sole cost and expense. Such Seller
Indemnitee shall have the right, but not the obligation, to participate at its
own expense in the defense thereof by counsel of its choice and shall in any
event cooperate with and assist the Buyer to the extent reasonably possible. If
the Buyer fails timely to defend, contest or otherwise protect against such
suit, action, investigation, claim or proceeding, the Seller Indemnitee shall
have the right to do so, including, without limitation, the right to make any
compromise or settlement thereof, and the Seller Indemnitee shall be entitled to
recover the entire cost thereof from the Buyer, including, without limitation,
reasonable attorneys', consultants' and experts' fees, disbursements and amounts
paid as the result of such action, investigation, claim or proceeding.
Section 11.5. Survival. Each of the representations and warranties set
forth in this Agreement shall survive the execution and delivery hereof,
notwithstanding any investigation on the part of the Buyer or the Seller, for a
period terminating on the second anniversary of the date of this Agreement;
provided, however, that the representations and warranties contained in Sections
4.3 and 5.3 (Authorization and Validity of Agreement) shall survive indefinitely
and the representations and warranties contained in Section 4.8 (Tax Matters)
shall survive for a period terminating on the fifth anniversary of the date of
this Agreement. The covenants contained in this Agreement shall survive the
execution and delivery hereof and the consummation of the transactions
contemplated by this Agreement. No claim for indemnification under Section
11.1(a) or 11.3(a) shall be asserted or maintained by any party hereto after the
expiration of the period referred to in this paragraph with respect to the
reason for which indemnification is sought, except for claims made in writing
prior to such expiration or actions (whether instituted before or after such
expiration) based on any claims made in writing prior to such expiration.
Section 11.6 Limitations.
-----------
(a) Notwithstanding anything herein to the contrary, as to matters
which are subject to indemnification pursuant to Section 11, the Seller shall
not be liable unless and until the aggregate claims, liabilities, losses, costs
and expenses to the Buyer resulting from such otherwise indemnifiable matters
shall exceed a cumulative aggregate of Fifty Thousand ($50,000) Dollars (the
"Indemnification Threshold") and then shall only be liable for the excess above
the Indemnification Threshold.
(b) The total indemnification to which the Buyer shall be entitled
under this Section 11 (inclusive of fees and expenses) and the liability of the
Seller for any and all matters which are the subject of indemnification under
this Agreement shall be limited to an amount not to exceed One Million
($1,000,000) Dollars in the aggregate.
(c) All amounts payable by Seller hereunder on account of any and all
matters subject to indemnification shall be net of all insurance proceeds and/or
tax benefits received by the Buyer with respect thereto (less the present value
of any premium increases occurring as a result of such claim).
29
Section 11.7 Exclusive Rights and Remedies.
-----------------------------
Except for the Buyer's rights under Section 6.2 hereof, the
indemnification rights of the parties under this Section 11 shall be the
exclusive rights and remedies the parties may have at law or in equity or
otherwise with regard to matters subject to indemnification for any
misrepresentation, breach of warranty or failure to fulfill any agreement or
covenant hereunder on the part of any party hereto, including, without
limitation, the right to seek specific performance, rescission or restitution.
SECTION 12. Deliveries
----------
Section 12.1 Deliveries of the Seller. Contemporaneously with the execution
and delivery hereof, the Seller is delivering, or causing to be delivered, to
the Buyer:
(a) That certain Security Agreement of even date, between the Seller and
the Buyer (the "Security Agreement"), duly executed by the Seller.
(b) [INTENTIONALLY OMITTED].
(c) [INTENTIONALLY OMITTED].
(d) [INTENTIONALLY OMITTED].
(e) [INTENTIONALLY OMITTED].
(f) [INTENTIONALLY OMITTED].
(g) That certain Termination of License Agreement of even date, between the
Seller and the Buyer (the "License Termination"), duly executed by the Seller.
(h) That certain Subordination Agreement of even date, among National City
Bank (the "Bank"), the Seller and the Buyer (the "Subordination Agreement"),
duly executed by the Seller.
(i) That certain License Agreement of even date between the Seller and the
Buyer (the "License Agreement"), duly executed by the Seller.
(j) That certain Termination of Lease of even date between the Seller and
Xxxxxxxxx Machine & Tool, Inc. ("RMT"), duly executed by the Seller.
(k) A certificate, executed by a duly authorized officer of the Seller,
certifying and attaching (i) appropriate resolutions of the board of directors
of the Seller; (ii) the consent of the shareholders of the Seller, with respect
to each of clauses (i) and (ii), authorizing the transactions contemplated by
this Agreement and by the Collateral Agreements; and (iii) true and complete
copies of the Certificate or Articles of Incorporation and By-laws (or
equivalent documents) of the Seller.
30
(l) A Certificate of the Secretary of State of the State of Delaware, dated
as of a date reasonably close to the date of this Agreement, as to the due
incorporation and good standing of the Seller.
Section 12.2 Deliveries of the Buyer. Contemporaneously with the execution
and delivery hereof, the Buyer is delivering, or causing to be delivered, to the
Seller:
(a) The Closing Payment.
(b) The Notes, duly executed by the Buyer.
(c) The Security Agreement, duly executed by the Buyer.
(d) That certain Guaranty of even date, by Xxxx X. Xxxxx (the "Guarantor")
in favor of the Seller (the "Guaranty"), duly executed by the Guarantor and, as
to certain provisions, Xxxxxxx X. Xxxxx.
(e) That certain Guaranty of even date, by Xxxxxx Inc. (the "Xxxxxx
Guarantor"; and together with the Guarantor, the "Guarantors") in favor of the
Seller (the "Xxxxxx Guaranty"; and together with the Guaranty, the
"Guarantees"), duly executed by the Xxxxxx Guarantor.
(f) That certain Open-End Mortgage Deed of even date, with respect to real
property located at 00000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxx 00000-0000, granted by
Xxxx X. Xxxxx and Xxxxxxx X. Xxxxx to the Seller ("Mortgage 1"), duly executed
by each of the grantors.
(g) That certain Open-End Mortgage Deed of even date, with respect to real
property located at 00000 Xxxx Xxxx Xxxx #0X, Xxxxx Xxxxxxxxxx, Xxxx 00000-0000,
granted by Xxxx X. Xxxxx and Xxxxxxx X. Xxxxx to the Seller ("Mortgage 2"), duly
executed by each of the grantors.
(h) That certain Open-End Mortgage Deed of even date, with respect to real
property located at 0000 Xxxxxxxxx Xxxxxxx, Xxxxxxxxx Xxxxxxx, Xxxx 00000-0000,
granted by Xxxxxx, Inc. to the Seller ("Mortgage 3"; and together with Mortgage
1 and Mortgage 2, the "Mortgages"), duly executed by the grantor.
(i) [INTENTIONALLY OMITTED].
(j) The License Termination, duly executed by the Buyer.
(k) The Subordination Agreement, duly executed by the Buyer and the Bank.
(l) The License Agreement, duly executed by the Buyer.
(m) The Lease Termination, duly executed by RMT.
(n) A certificate or certificates, executed in each case by a duly
authorized senior officer of the Buyer, (i) certifying and attaching (x)
appropriate resolutions of the board of directors of the Buyer; (y) the consent
of the shareholders of the Buyer, with respect to each of clauses (x) and (y),
authorizing the transactions contemplated by this Agreement and by the
31
Buyer Collateral Agreements; and (z) true and complete copies of the Certificate
of Incorporation and Code of Regulations (or equivalent documents) of the Buyer;
and (ii) as to the incumbency and signature of the officers of the Buyer
executing this Agreement and the Buyer Collateral Agreements.
(o) A certificate or certificates, executed in each case by a duly
authorized senior officer of the Xxxxxx, Inc., (i) certifying and attaching (x)
appropriate resolutions of the board of directors of Xxxxxx, Inc.; (y) the
consent of the shareholders of Xxxxxx, Inc., with respect to each of clauses (x)
and (y), authorizing the transactions contemplated by the Xxxxxx Guaranty and
the Mortgage executed by Xxxxxx, Inc. in connection with this Agreement and the
transactions contemplated hereby, by the Buyer Collateral Agreements and by the
Third Party Documents (the "Xxxxxx Mortgage"); and (z) true and complete copies
of the Certificate of Incorporation and Code of Regulations (or equivalent
documents) of Xxxxxx, Inc.; and (ii) as to the incumbency and signature of the
officers of Xxxxxx, Inc. executing the Xxxxxx Guaranty and the Xxxxxx Mortgage.
(p) Certificates of the Secretary of State of the State of Ohio, dated as
of a date reasonably close to the date of this Agreement, as to the due
incorporation and good standing of each of the Buyer and Xxxxxx, Inc.
(q) Evidence of filing of that certain Uniform Commercial Code release
statement on form UCC-3, duly filed with the Secretary of State of the State of
Ohio, releasing the lien of any financing statement filed against the Buyer by
Lorain National Bank.
SECTION 13. Cancelled Purchased Orders.
--------------------------
(a) Contemporaneously with the execution and delivery of this Agreement,
the Seller shall issue on its letterhead a letter in, or substantially in, the
form attached hereto as Exhibit A, to the vendors identified on Schedule 13
attached hereto and made a part hereof.
(b) Contemporaneously with the execution and delivery of this Agreement,
the Buyer shall issue on its letterhead a letter in, or substantially in, the
form attached hereto as Exhibit B, to the vendors identified on Schedule 13
attached hereto and made a part hereof.
(c) For purposes of this Agreement, the term "Cancelled Purchase Orders"
shall mean those purchase orders of the Seller described on Schedule 13.
SECTION 14. Miscellaneous.
-------------
Section 14.1. Successors and Assigns. Except as otherwise provided in this
Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
hereto, and any such attempted assignment without such prior written consent
shall be void and of no force and effect; provided, that the Buyer may assign
its rights hereunder to an Affiliate; provided, further, that the Seller and
each successor and assign of the Seller shall be permitted to assign its rights
to this Agreement or any rights or obligations hereunder in its sole and
absolute discretion; and provided, further, that no such assignment pursuant to
this Section 14.1 shall reduce or otherwise vitiate any of the respective
32
obligations of the Seller or the Buyer hereunder. This Agreement shall inure to
the benefit of and shall be binding upon the successors and permitted assigns of
the parties hereto.
Section 14.2. Choice Of Law; Jurisdiction. This Agreement shall be
construed in accordance with, and governed by, the laws of the State of New
York, excluding choice of law principles thereof. The Buyer hereby irrevocably
and unconditionally: (i) consents and submits for itself and its property in any
action relating to this Agreement, or for recognition and enforcement of any
judgment in respect thereof, to the exclusive jurisdiction of the federal courts
located within the Eastern District of New York and state courts located within
the County of Suffolk in the State of New York; (ii) consents that any such
action or proceeding may be brought in such courts, and waives any objection
that it may now or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same; (iii) agrees that
service of process in any such action or proceeding may be effected by mailing a
copy thereof by registered or certified mail (or any substantially similar form
of mail), postage prepaid, to Xxxxx Products, Inc. at its address set forth in
Section 14.6 of this Agreement or at such other address of which the sender
shall have been previously notified in writing and in accordance with Section
14.6; and (iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law.
Section 14.3. Expenses. Except as otherwise provided herein, each of the
parties hereto shall pay its own expenses in connection with this Agreement and
the transactions contemplated hereby, including, without limitation, any legal
and accounting fees, whether or not the transactions contemplated hereby are
consummated.
Section 14.4. Broker's and Finder's Fees. The Buyer represents and warrants
that it has dealt with no broker or finder in connection with any of the
transactions contemplated by this Agreement. The Seller represents and warrants
that it has dealt with no broker or finder in connection with any of the
transactions contemplated by this Agreement.
Section 14.5 Severability. In the event that any part of this Agreement is
declared by any court or other judicial or administrative body to be null, void
or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in full
force and effect.
Section 14.6. Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given; (ii) on the day of transmission if sent via
facsimile transmission to the facsimile number given below, and telephonic
confirmation of receipt is obtained promptly after completion of transmission;
(iii) on the day after delivery to Federal Express or similar overnight courier
or the Express Mail service maintained by the United States Postal Service; or
(iv) on the fifth day after mailing, if mailed to the party to whom notice is to
be given, by first class mail, registered or certified, postage prepaid and
properly addressed, to the party as follows:
33
If to the Seller:
c/o P&F Industries, Inc.
000 Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxx Xxxx 00000
Attn: Chief Financial Officer
Telecopy: (000) 000-0000
Copy to:
Certilman Balin Xxxxx & Xxxxx, LLP
00 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxx Xxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxxxxx, Esq.
Telecopy: (000) 000-0000
If to Buyer:
Xxxxx Products, Inc.
0000 Xxxxxxxxx Xxxxxxx
Xxxxxxxxx Xxxxxxx, Xxxx 00000-0000
Telecopy: (000) 000-0000
Attn: Xxxx Xxxxx, President
Copy to:
Xxx Xxxxxx, Esq.
Xxx X. Xxxxxx & Associates, LPA
000 Xxxx Xxxxxx Xxxx
Xxxxx 0
Xxxx Xxxx, Xxxx 00000
Telecopy: (000) 000-0000
Any party may change its address for the purpose of this Section by
giving the other party written notice of its new address in the manner set forth
above.
Section 14.7. Amendments; Waivers. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties hereto, or in the case of a waiver, by the party waiving compliance. Any
waiver by any party of any condition, or of the breach of any provision, term,
covenant, representation or warranty contained in this Agreement, in any one or
more instances, shall not be deemed to be nor construed as a further or
continuing waiver of any such condition, or of the breach of any other
provision, term, covenant, representation or warranty of this Agreement.
Section 14.8. Public Announcements. The parties agree that after the
signing of this Agreement, neither party shall make any press release or public
announcement concerning this transaction without the prior written approval of
the other party unless a press release or public announcement is required by law
or by the rules of any securities exchange or association on which the
securities of such party are listed or included for trading. If any such
announcement or
34
other disclosure is required by law or by such rules, the disclosing party
agrees to give the nondisclosing party prior notice and an opportunity to
comment on the proposed disclosure.
Section 14.9. Entire Agreement. This Agreement and the exhibits and
schedules hereto, together with the Collateral Agreements, the Buyer Collateral
Agreements, the Third Party Documents, and the exhibits and schedules to each of
the foregoing, constitutes the entire understanding between the parties hereto
with respect to the transactions contemplated hereby and supersedes and replaces
all prior and contemporaneous agreements and understandings, oral or written,
with regard to such transactions. All exhibits and schedules hereto, and any
agreements, documents and instruments delivered pursuant to any provision
hereof, are expressly made a part of this Agreement as fully as though
completely set forth herein.
Section 14.10. Parties in Interest. Nothing in this Agreement is
intended to confer any rights or remedies under or by reason of this Agreement
on any persons other than the Seller and the Buyer and their respective
successors and permitted assigns. Nothing in this Agreement is intended to
relieve or discharge the obligations or liability of any third persons to the
Seller or the Buyer. No provision of this Agreement shall give any third persons
any right of subrogation or action over or against the Seller or the Buyer.
Section 14.11. Scheduled Disclosures. Disclosure of any matter, fact
or circumstance in a Schedule to this Agreement shall be deemed to be disclosure
thereof for purposes of any other Schedule hereto.
Section 14.12. Section and Paragraph Headings. The section and
paragraph headings in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
Section 14.13. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but both of which shall
constitute the same instrument.
Section 14.14. Confidential Information. Each party agrees that such
party and its representatives at all times hereafter will hold in a fiduciary
capacity and in strict confidence all information, data and documents received
from the other party at any time prior to, on or after the date of this
Agreement (collectively, "Information") and will not, without the consent of the
disclosing party, use or disclose, directly or indirectly, the Information in
any manner whatsoever, in whole or in part. Notwithstanding the foregoing, the
obligations under this Section 14.14 to maintain such confidentiality shall not
apply to any Information (a) that is in the public domain at the time furnished
by the disclosing party, (b) that becomes in the public domain thereafter
through any means other than as a result of any act of the receiving party or of
its agent, officers, directors or shareholders which constitutes a breach of
this Agreement, or (c) that is required by applicable law to be disclosed.
Section 14.15. Disclaimer; Damages. THE BUYER ACNOWLEDGES AND AGREES
THAT, EXCEPT AS OTHERWISE STATED IN SECTION 4 HEREOF, THE SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES WHATSOEVER RELATING TO THE PURCHASED PROPERTY, THE
BUSINESS, THE DIVISION OR ANY OTHER MATTER, INCLUDING, WITHOUT LIMITATION, AS TO
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. EXCEPT AS PROVIDED IN
35
SECTION 4 HEREOF, THE PURCHASED PROPERTY IS BEING SOLD AS IS, WHERE IS, WITH ALL
FAULTS. THE BUYER EXPRESSLY REPRESENTS AND WARRANTS THAT IT HAS NOT RELIED ON
ANY FINANCIAL DATA, PROJECTIONS OR REPRESENTATIONS WHICH IT HAS OBTAINED FROM
THE SELLER, OR ANY OTHER PARTY, AND THAT THE BUYER HAS CONDUCTED ITS OWN DUE
DILIGENCE INVESTIGATION OF THE SELLER AND FORMED ITS INDEPENDENT JUDGMENT AS TO
THE FUTURE PROSPECTS OF THE PURCHASED PROPERTY, THE BUSINESS AND THE DIVISION.
IN NO EVENT SHALL THE SELLER BE LIABLE FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL,
INDIRECT, INCIDENTIAL OR PUNITIVE DAMAGES RELATING TO OR BASED ON LOSS OF
PROFITS OR SALES, WHETHER SUCH DAMAGES ARE ALLEGED IN TORT, CONTRACT OR
INDEMNITY, EVEN IF THE SELLER HAS BEEN ADVISED OF THE POSSIBILITY THEREOF.
Section 14.16. Seller's Acknowledgement. EXCEPT AS PROVIDED IN THIS
AGREEMENT, THE BUYER COLLATERAL AGREEMENTS AND/OR ANY THIRD PARTY AGREEMENTS, IN
NO EVENT SHALL THE BUYER BE LIABLE FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL,
INDIRECT, INCIDENTIAL OR PUNITIVE DAMAGES RELATING TO OR BASED ON LOSS OF
PROFITS OR SALES, WHETHER SUCH DAMAGES ARE ALLEGED IN TORT, CONTRACT OR
INDEMNITY, EVEN IF THE BUYER HAS BEEN ADVISED OF THE POSSIBILITY THEREOF.
36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
XXXXX PRODUCTS, INC.
By:/s/ Xxxx X. Xxxxx
-------------------------------------
Xxxx X. Xxxxx, President
GREEN MANUFACTURING, INC.
By:/s/ Xxxxxx X. Xxxxxx, Xx.
-----------------------------
Xxxxxx X. Xxxxxx, Xx., Vice President
