Asset Purchase Agreement
Exhibit
10.31
This
Asset
Purchase Agreement
(the
“Agreement”) is made and entered into this 3rd day of March, 2005, by and among
HK
Machined Parts, LLC,
an
Indiana limited liability company (“HK Parts”), XX
Xxxxxx
Properties, LLC,
an
Indiana limited liability company (“XX Xxxxxx” and collectively with HK Parts,
the “Purchaser”) and Hatch
& Xxxx, Inc.,
a
Washington corporation (“Seller”).
Background:
A. Seller
is
engaged in the business of manufacturing, distributing and installing diesel,
natural gas and duel-fuel engine parts and accessories, with facilities in
Seattle, Washington, Houston, Texas, and Hagerstown, Maryland and with a
partially-owned subsidiary, HK Castings, Inc., located in Weston, West
Virginia.
B. Seller
desires to sell to Purchaser, and Purchaser desires to purchase from Seller,
substantially all of the operating assets, properties and rights of Seller
used
in the operation of the Hagerstown, Maryland facility (the “Division”) and
certain real property owned by Seller in Weston, West Virginia, pursuant
to the
terms and conditions set forth in this Agreement.
NOW
THEREFORE,
in
consideration of the promises hereinafter made, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
recital provisions above are incorporated into the body of this Agreement
as if
fully set forth therein, and the parties agree as follows:
ARTICLE
I. PURCHASE
AND SALE OF ASSETS
1.01 Purchased
Assets.
On the
Closing Date (as defined below), Seller shall sell, assign, convey, transfer
and
deliver to Purchaser, and Purchaser shall purchase from Seller, free and
clear
of all mortgages, liens, charges, adverse claims, restrictions, agreements,
encumbrances, security interests and rights of other persons of every nature
and
description whatsoever (“Liens”), except for those Liens listed on Schedule
1.01,
all of
the assets and properties of every kind and nature, real and personal, tangible
and intangible, wherever situated, whether or not carried or reflected on
the
books and records of Seller, which are owned by Seller and used
in
or necessary for the operation of
the
Division as presently conducted, except for the Excluded Assets (as defined
below) (the “Purchased Assets”). The Purchased Assets shall include, without
limitation, the following:
(a) Equipment.
All of
Seller’s machinery, equipment, tools and dies, hand tools, motor vehicles,
rolling stock, leasehold improvements, furniture, supplies, office equipment,
computers and other data processing hardware, improvements, parts and other
tangible personal property used
or held
for use in the operation of the Division,
including, without limitation, all items listed on Schedule
1.01(a)
attached
hereto (collectively, the “Equipment”);
(b) Inventory.
All of
Seller’s inventory relating to the Division, including, without limitation, all
supplies, raw materials, work in progress and finished goods, prepaid inventory
and inventory in transit (collectively, the “Inventory ”);
(c) Prepaid
Expenses and Customer Deposits.
All
prepaid expenses, advance payments, deposits and claims for refunds (other
than
refunds pertaining to any liabilities which are not assumed by Purchaser)
relating to the Division and existing as of Closing (the “Prepaid Expenses”), as
well as any cash advances and/or deposits provided to Seller by any customers
of
the Division (“Customer Deposits”), a schedule of which shall be attached hereto
as Schedule
1.01(c)
at
Closing;
(d) Contract
and Other Rights.
All of
Seller’s rights, title and interest in and to all agreements, contracts, leases
and other agreements relating to or used in the conduct of the Division
(including contracts with customers, purchase orders and quotations, vendor
contracts and equipment and vehicle leases) which are listed on Schedule
1.01(d)
(collectively, the “Contracts”), and any and all claims, causes of action,
rights of recovery or refund, rights of set-off and other rights of every
nature, including without limitation, any and all rights against debtors
of
Seller;
(e) Real
Property.
The
real
property owned by Seller located in Weston, West Virginia, which is more
fully
described on Schedule
1.01(e),
together with all rights and appurtenances pertaining thereto, including
all
right, title and interest of Seller, if any, in and to adjacent streets,
roads,
alleys, easements and rights of way, and all improvements thereon (the “Real
Property”);
(f) Licenses
and Permits.
All of
Seller’s rights and benefits under licenses (including without limitation,
licenses to use computer software), permits, distribution and/or franchise
rights, registrations, governmental and other licenses, certificates and
permits
used in or necessary for the operation of the Division (collectively, the
“Licenses and Permits”);
(g) Records.
All of
Seller’s books and records, customer files, customer lists and records, vendor
files, vendor lists and records, cost files and records, credit information,
distribution records, business records and plans, studies, surveys, reports,
correspondence, sales and promotional literature and materials, advertising
and
advertising copy, and other similar materials, computer and other records,
and
all computer software used in or necessary for the operation of the Division,
except for the computer software listed on Schedule
1.02
(collectively, the “Books and Records”);
(h) Intellectual
Property.
All of
Seller’s right, title and interest in and to any copyright, trademark, trade
name, brand name, service xxxx, logo, symbol, trade dress, product or other
design or any expression thereof, and any invention, patent, trade secret,
technical information, know-how, proprietary right or intellectual property,
technologies, methods, designs, drawings, software (including documentation
and
source code), processes and other proprietary properties or information
used
in
or necessary for the operation of the Division (collectively,
“Intellectual Property”). The parties acknowledge
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and
agree
that Purchaser shall not acquire Seller’s right to the name “Hatch & Xxxx”
at the Closing;
provided that
Seller
(i) hereby grants Purchaser a non-exclusive and royalty-free right and license
to use the name
“Hatch & Xxxx” in Purchaser’s operations of the Division during the ninety
(90) day period following Closing, and (ii) will transfer to Purchaser
all of
its rights, title and interest in and to the name “Hatch & Xxxx” at the
closing of the sale of Seller’s assets located at its facilities in Seattle,
Washington and Houston, Texas to Purchaser in accordance with the terms of
the
Second Agreement, as defined in Section 6.01(f) below (the “Other
Assets”);
and
(i) Goodwill.
All
goodwill associated with Seller and the Division.
The
Real
Property and Improvements shall be purchased by XX Xxxxxx. The remaining
Assets
shall be purchased by HK Parts.
1.02 Excluded
Assets.
The
parties acknowledge and agree that the Purchased Assets shall not include
Seller’s tangible personal property located at and related solely to Seller’s
Seattle, Washington or Houston, Texas facilities, cash or cash equivalents,
accounts receivable, minutes book and stock records, Seller’s deferred and
prepaid income tax assets and any assets specifically listed on Schedule
1.02
(collectively, the “Excluded Assets”).
ARTICLE
II. LIABILITIES
2.01 Assumption
of Liabilities.
At the
Closing, HK Parts shall assume and agree to discharge and perform when due
only
the
liabilities and obligations of Seller accruing and arising from and after
the
Closing Date under (i) the Contracts, and (ii) the responsibility to provide
parts and labor as required to honor Seller’s standard warranty, as set forth on
Schedule
2.01,
on
sales of the Division occurring before the Closing (collectively, the “Assumed
Liabilities”).
2.02 Excluded
Liabilities.
Except
for the Assumed Liabilities, Purchaser shall not assume or be responsible
for
any debts, liabilities, obligations or commitments of Seller or the Division
whatsoever, whether actual, absolute, accrued, fixed, contingent, asserted
or
unasserted, known or unknown, and whether related or unrelated to Seller’s
business. Without in any way limiting the generality of the foregoing, Purchaser
shall not assume, nor shall Purchaser be responsible for, any obligations
or
liabilities arising out of or relating to any pending litigation, third-party
claims, unfunded pension liabilities, taxes, fees or other charges, tort
liabilities, warranty liabilities, environmental liabilities, criminal claims,
worker’s compensation liabilities, or any liabilities arising outside the
ordinary course of business or otherwise incurred prior to or after the Closing
Date. Seller agrees to pay or otherwise provide for all liabilities and perform
all obligations after Closing, other than the Assumed Liabilities, relating
to
the operation of the Division prior to Closing, including, but not limited
to,
all continuation coverage under any group health plan or plans pursuant to
the
relevant provisions of the federal Consolidated Omnibus Budget Reconciliation
Act (COBRA) with respect to any employees who do not apply for or accept
employment and are otherwise not hired by Purchaser after Closing; all costs
associated with any employee pension, profit sharing, 401(k) or similar
retirement plans of Seller; and obligations and liabilities (if any) arising
under the Worker Adjustment and Retraining Notification Act with respect
to any
employees not hired by Purchaser after Closing.
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ARTICLE
III. PURCHASE
PRICE AND CLOSING
3.01 Purchase
Price.
The
total purchase price (the “Purchase Price”) for the Purchased Assets shall be
Two Million Two Hundred Thirty Thousand Five Hundred Seven and 65/100 Dollars
($2,230,507.65).
3.02 Payment
of the Purchase Price.
(a)
At
the
Closing, Purchaser shall pay (i) One Million Seven Hundred Seventy-three
Thousand Two Hundred Sixty-three and 29/100 Dollars ($1,773,263.29) of the
Purchase Price to General Electric Capital Corporation (“GE Capital”), on behalf
of Seller, in
partial satisfaction of the debt and obligations, including but not limited
to
obligations under letters of credit, owed to GE Capital by Seller (the “GE
Indebtedness”); and Three Hundred One Thousand Four Hundred Forty-six and 57/100
and (ii) Dollars
($301,446.57) of the Purchase Price to Xxxxxx Corporation (“Xxxxxx”), on behalf
of Seller, in
complete satisfaction of the debt and obligations owed to Xxxxxx by Seller
(the
“Xxxxxx Indebtedness”).
The
Purchase Price also includes the payment by Purchaser of certain vacation
pay of
Seller pursuant to Section 6.01(a) in the amount of Fifty Thousand Three
Hundred
Seventy-one and 14/100 Dollars ($50,371.14) and the assumption of certain
lease
obligations of Seller to HKM Properties pursuant to the lease described in
Section 6.03(a) or other arrangement with HKM Properties in the amount of
One
Hundred Five Thousand Four Hundred Twenty-six and 65/100 Dollars
($105,426.65).
(b) The
GE
Indebtedness includes a Fifty Thousand Dollar ($50,000) penalty payable by
Seller. In return for Purchaser’s payment of such amount, Seller agrees to
execute and deliver a Demand Promissory Note of even date herewith (the “Note”)
and make certain amendments to existing loan documents between Purchaser
and
Seller. The GE Indebtedness also includes the payment by Purchaser of Four
Hundred Forty-five Thousand Three Hundred Eleven and 11/100 Dollars
($445,311.11) to GE to replace collateral for the Letter of Credit obligations
of Seller, which amount is equal to 110% of the face amount of the Letter
of
Credit obligations (the “Letters of Credit”). The parties acknowledge that
Egyptian National Railway (“ENR”) may draw upon the Letters of Credit in
satisfaction of certain obligations of Seller to ENR. In the event ENR draws
upon the Letters of Credit in any amount in excess of One Hundred Ninety
Thousand Dollars ($190,000), the amount of such excess shall immediately
be
added to the principal balance of the Note. Upon the request of Purchaser,
Seller immediately shall execute an amendment to the Note to reflect the
new
principal balance. The parties also acknowledge and agree that, upon termination
of the Letters of Credit, any amounts remaining under the Letters of Credit
shall be refunded immediately to Purchaser. Seller acknowledges that it does
not
have any right to any amounts under the Letters or Credit.
3.03 Allocation.
The
Purchase Price shall be allocated among the Purchased Assets as set forth
on
Schedule
3.03
attached
hereto. Purchaser and Seller agree to furnish each other and the Internal
Revenue Service with such applicable information as may be required under
Section 1060 of the Internal Revenue Code, as amended (the “Code”), and to
cooperate in the completion
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and
timely filing of IRS Form 8594 (Asset Acquisition Statement). A party may
change
the agreed-upon allocations only in order to be consistent with any
finally-adjudicated adjustments made to the federal tax returns of the other
party.
3.04 The
Closing.
The
closing of the transactions contemplated by this Agreement (the “Closing”) shall
take place at the offices of Xxxxxx & Xxxxxxxxx in South Bend, Indiana, on
March 3, 2005, or at such other location or on such other date as the parties
may mutually agree (the “Closing Date”).
3.05 Actions
at the Closing.
At the
Closing, the Seller and Purchaser shall deliver to each other the various
certificates, instruments and documents as specified in Article VII
below.
ARTICLE
IV. REPRESENTATIONS
AND WARRANTIES OF SELLER
As
of the
date hereof and as of the Closing Date, Seller hereby represents and warrants
to
Purchaser as follows:
4.01 Organization;
Power and Authority.
Seller
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Washington and is duly qualified to do business and
in good
standing under the laws all other jurisdictions in which its ownership or
use of
property for the conduct of its business requires it to qualify. Seller has
all
necessary corporate power and authority to own all of its properties and
assets,
to conduct its business as now being conducted, and to make, execute, deliver,
and perform this Agreement and the other documents and instruments contemplated
hereby.
4.02 Execution,
Delivery and Validity.
The
execution, delivery and performance of this Agreement, and the consummation
of
the transactions contemplated hereby, by Seller has been duly authorized
by all
requisite action of Seller’s Board of Directors, shareholders, participants
under Seller’s employee stock ownership plan and any other party that is
required to authorize the transactions contemplated herein by Seller. This
Agreement and all other agreements contemplated hereby have been duly and
validly executed and delivered by Seller, and each constitutes the legal,
valid
and binding obligation of Seller, enforceable against Seller in accordance
with
its terms.
4.03 Non-contravention.
Except
as set forth on Schedule
4.03,
the
execution, delivery and performance of this Agreement and the other agreements
contemplated hereby and the consummation of the transactions contemplated
hereby
or thereby or compliance with or fulfillment of the terms and provisions
hereof
or of any other agreement or instrument contemplated hereby or thereby, do
not
and will not: (i) conflict with or result in a breach of any of the provisions
of the Articles of Incorporation or By-Laws of Seller; (ii) contravene any
law,
rule or regulation or any order, writ, award, judgment, decree or other
determination which affects or binds Seller or any of its properties; (iii)
conflict with, result in a breach of, constitute a default under, or give
rise
to a right of acceleration, termination or the imposition of penalties under
any
contract, deed of trust, mortgage, trust, lease, governmental or other license,
permit or other authorization, contract, agreement, note or any other agreement,
instrument or restriction to which Seller is a party or by which any of their
properties may be affected or bound; or (iv)
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require
the approval, consent or authorization of, or the making of any declaration,
filing or registration with, any foreign, federal, state or local court,
governmental authority or regulatory body (“Governmental Authority”) or with any
lender, customer or other third party.
4.04 Capitalization.
The
issued and outstanding capital stock of Seller is owned as of the date hereof
as
set forth on Schedule
4.04.
Other
than as set forth in Schedule
4.04,
there
are no voting trusts or other agreements or understandings related to the
capital stock of Seller. Other than its interest in HK Castings, Inc., as
set
forth in Schedule
4.04,
Seller
does not own any subsidiaries. No person or entity, other than shareholders
set
forth on Schedule
4.04,
owns or
holds, has any interest in, whether legal, equitable or beneficial, or has
the
right to purchase, any capital stock or other security of Seller.
4.05 Financial
Statements.
Attached as Schedule
4.05
are true
and complete copies of: (i) an audited balance sheet and audited statements
of
operations, stockholders’ equity and cash flows of Seller for the period ended
June 30, 2000 (the “Audited Financials”), (ii) unaudited balance sheets and
statements of income, stockholders’ equity and cash flows of Seller for the
periods ended June 30, 2001, 2002, 2003 and 2004 (the “Unaudited Financials”),
and (iii) unaudited balance sheets and statements of income for each month-ended
from July 2004 through Closing (the “Monthly Financials”; and together with
Audited Financials and the Unaudited Financials, the “Financial Statements”).
The balance sheet delivered to Purchaser for the month-ended immediately
prior
to the month during which Closing occurs is referred to in this Agreement
as the
“Balance Sheet.” The Financial Statements are true and correct representations
of the financial condition and operating results of Seller with respect to
the
Division as of the dates and for the periods then ended, and are prepared
on a
consistent basis for all periods covered and in accordance in all material
respects with generally accepted accounting principles (“GAAP”). Except as set
forth on Schedule
4.05
and to
the best knowledge of Seller, Seller has no unrecorded liabilities or
obligations of any type, nature or description, known or unknown, asserted
or
unasserted, direct or indirect, absolute or contingent with respect to the
Division, except as set forth in the Financial Statements.
4.06 Operations
Since June 30, 2004.
Except
as set forth in Schedule
4.06,
since
June 30, 2004 and up to and through the Closing Date, Seller has conducted
the
business and operations of the Division in the ordinary course of business,
and
(except as otherwise contemplated by this Agreement) has not:
(a) written
off as uncollectible any account receivable, or reduced any reserves, other
than
in the ordinary course of business;
(b) made
any
change in the accounting methods or practices employed by Seller or change
in
depreciation or amortization policies;
(c) issued
or
sold, or contracted or made any other commitment for the issuance or sale
of any
shares of capital stock or securities convertible into or exchangeable for
capital stock of Seller;
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(d) terminated
or amended any material contract or license or other instrument, or suffered
any
loss or termination or threatened loss or termination of any material
contractual or business arrangement;
(e) sold,
leased to others, licensed to others, disposed of, or otherwise transferred
any
assets of Seller, including without limitation, the right to use any and
all
secrets or Intellectual Property of Seller;
(f) made
any
loans, advances or capital contributions to or investments in any person
or
entity;
(g) subjected
any assets, tangible or intangible, to any lien, encumbrance or restriction
of
any nature whatsoever;
(h) modified
or amended any relationships with suppliers or customers of the Division,
which
would adversely affect the business and operations of the Division;
(i) increased
the compensation or benefits of any employee other than in the ordinary course
of business;
(j) moved,
removed or caused to be moved or removed, any of the Equipment or Inventory
(other than the sale of Inventory in the ordinary course of business consistent
with past practice) located in or at the facility of the Division;
or
(k) entered
into any agreement to sell or granted any option to any party other than
Purchaser, to purchase any of the Purchased Assets.
4.07 Employment
Compliance.
Seller
has (i) complied with all applicable laws relating to employment or
labor,
including provisions relating to wages, hours, employment benefits, equal
opportunity, occupational safety and health, collective bargaining, and the
payment of Social Security and other taxes; and (ii) fully disclosed in writing
to Purchaser all relevant facts and issues regarding Seller’s labor and
employment matters. There are no policies or practices relating to employment
matters other than those described in the Employee Handbook dated June 1,
2000.
There have been no attempts to organize or unionize Seller’s employees within
the last five (5) years.
4.08 Employees.
All of
Seller’s employees are employees “at-will” and may be legally terminated without
prior notice and without cause at no cost to Seller or the Division, other
than
its obligation to pay employees for wages and unused or unpaid and earned
vacation and other time off, which liabilities are properly recorded on the
Financial Statements. Schedule
4.08
contains
a complete listing of:
(a) current
employees of the Division, their compensation, accrued vacation, and employee
benefits for which the employee qualifies;
(b) retired
employees of the Division who receive benefits of any kind from
Seller;
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(c) any
employee of the Division or director of Seller who is subject to a
confidentiality, non-disclosure or proprietary rights contract that in any
way
adversely affects or will affect that employee’s performance of his or her
duties for Seller or the ability of Purchaser to conduct the business and
operations of the Division in substantially the same manner as currently
conducted; and
(d) any
key
employee or group of employees of the Division that have given notice of
termination or for whom any Seller has reasonable grounds to expect to give
notice of termination
4.09 Licenses
and Permits.
The
Licenses and Permits constitute all local, state and federal licenses and
permits necessary for Seller to occupy, operate and conduct the business
and
operations of the Division, and there do not exist any defaults, waivers,
investigations or exemptions relating thereto or which would be caused by
the
transactions contemplated by this Agreement. There exists no grounds for
revocation, suspension or limitation of any of the Licenses and
Permits.
4.10 Assets.
Except
as set forth in Schedule
4.10,
Seller
owns all of the assets reflected on the Financial Statements (including any
patents, copyrights, trade names, service marks and other names and marks
used
in or necessary the business and operations of the Division), and Seller
owns
all Purchased Assets with good and marketable title free and clear of all
mortgages, security interests, liens, leases, covenants, assessments, easements,
options, rights of refusal, restrictions, reservations, defects in title,
encroachments, and other encumbrances. All of the Purchased Assets of a tangible
nature are located at or in transit to Seller’s Hagerstown, Maryland
facility.
4.11 Insurance.
Schedule
4.11
includes
a complete and accurate listing of all insurance policies (including
self-insurance) to which Seller is a party related to the Purchased Assets,
which policies are either currently in force or were in force since January
1,
2000, and also any policies for which Seller was denied coverage since January
1, 2000. Schedule
4.11
also
includes a list of all claims made against such insurance policies since
January
1, 2002. Except as set forth on Schedule
4.11,
the
insurance coverage for Seller and all Purchased Assets:
(a) is
valid,
outstanding and enforceable;
(b) is
obtained through policies issued by an insurer that is financially sound
and
reputable;
(c) shall
not
be delinquent as of the Closing Date; and
(d) complies
with any requirements for insurance under any contract to which any Seller
is
bound.
4.12 Intellectual
Property.
Schedule
4.12
lists or
describes all patents, trademarks, trade names, service marks, copyrights
and
applications for such items used in or necessary to the business and operations
of the Division. Seller owns or has a valid right to use the Intellectual
Property, and may transfer the Intellectual Property to Purchaser without
the
need for third party
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agreements
or consents. There
is
no claim or proceeding pending or threatened by any third party against or
relating to Seller, nor does Seller know or have reasonable grounds to know
of
any basis for any such action, with respect to the Intellectual
Property.
4.13 Contracts
and Commitments.
Schedule
4.13
lists
all contracts related to the Division to which Seller is a party and which
obligates Seller to pay in excess of $5,000 per year during any one year
period
after Closing. Each contract or agreement listed in Schedule
4.13
is a
valid and binding obligation of Seller and is in full force and effect,
enforceable in accordance with its terms. Seller has performed all obligations
required to be performed by it under each contract or agreement to which
it is a
party. Except as set forth on Schedule
4.13,
neither
Seller nor any other party is in breach or default in any respect under any
contract or agreement. Seller has no contracts with any shareholder of Seller
which may not be terminated immediately upon notice by Purchaser following
the
Closing, without cost or penalty. The Contracts are assignable to Purchaser
without the consent of any other party.
4.14 Condition
of Inventory and Equipment.
(a) The
Equipment is adequate for the uses for which it is being put. The Equipment
is
sufficient for the continued conduct of the business and operations of the
Division after the Closing in substantially the same manner as conducted
prior
to the Closing. Except for the representations and warranties set forth in
the
Agreement, the Equipment is being sold “AS
IS, WHERE IS.”
(b) All
Inventory, whether or not reflected in the most recent Financial Statements,
consists of a quality and quantity usable and salable in the ordinary course
of
business, except for obsolete items and items of below standard quality,
all of
which have been written off or written down to net realizable value in the
most
recent Financial Statements.
4.15 Personal
Property.
Except
as listed on Schedule
4.15
(a) All
of
the tangible property used in the business and operations of the Division
is
located at Seller’s facility in Hagerstown, Maryland;
(b) No
person, firm or corporation other than Seller has any right to the use or
possession of any of the Purchased Assets. Except for financing statements
filed
by GE Capital with respect to the GE Indebtedness (which will be terminated
on
or before the Closing), no currently effective financing statement under
the
Uniform Commercial Code with respect to any of the Purchased Assets has been
filed in any jurisdiction and no agent of Seller has signed any financing
statement or security agreement authorizing anyone to file any financing
statement.
4.16 Customers.
Except
as listed on Schedule
4.16,
Seller
has not received any notice nor has knowledge that any of its customers with
respect to the Division intends to terminate or materially reduce its commercial
relationship with Seller, and no customer of the Division has
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terminated
or materially reduced its commercial relationship with Seller in the last
twelve
(12) months.
4.17 Product
Warranty.
Except
as
listed on Schedule
4.17,
Seller
has no liability (whether known or unknown and whether absolute or contingent)
for the replacement of products sold or delivered by the Division or other
damages in connection therewith, and no product sold or delivered by Seller
relating to the Division is subject to any guaranty, express warranty or
other
indemnity.
4.18 Litigation.
No
litigation or claims, governmental or other proceedings or investigations
are
pending or to the best knowledge of Seller, threatened, nor is there any
valid
basis for such claims by or against, or relating to Seller or the Division,
or
against or affecting the Purchased Assets, except as listed on Schedule
4.18.
4.19 Environment,
Health and Safety.
(a) Except
as
set forth on Schedule
4.19,
to the
best knowledge of Seller, Seller, the Division and the Real Property are,
and at
all times prior hereto have been, in compliance with any and all Environmental
Laws and Health and Safety Laws (as defined below), and no Claim (as defined
below) relating to a violation of any such laws has been made with respect
to
Seller, the operation of the Division or the Real Property.
(b) Except
as
set forth on Schedule
4.19,
to the
best knowledge of Seller, there is no Environmental or Health and Safety
Circumstance (as defined below) related to the Real Property or to past or
present operations of Seller or the Division on or off any of the properties,
facilities or premises on which the Division has been operated.
(c) Except
as
set forth on Schedule
4.19,
Seller
has not, either expressly or by operation of law, assumed or undertaken any
liability, including without limitation, any obligation for corrective or
remedial action, of any other person or entity with respect to any Environmental
Law, nor has any Seller caused, permitted or allowed any “release” (as defined
in 42 U.S.C. § 9601(22)) of any Hazardous Substance, Pollutant or
Contaminant (as defined below) on the Real Property or on any other real
property owned, leased, operated or used by Seller in connection with the
Division.
(d) Except
as
set forth on Schedule
4.19,
Seller
has obtained (or have pending timely filed applications for) any and all
environmental permits legally required to operate the Division and any assets
used in connection therewith.
(e) Seller
has provided Purchaser with copies of any and all environmental reports
conducted with respect to the Real Property and any other real property owned,
leased, operated or used by Seller in connection with its operations and
the
conduct of the Division.
(f) For
purposes of this Section
4.19:
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(i) “Environmental
Law” means any federal, state or local statute, rule, regulation or ordinance
having as its primary purpose the protection of the environment or the
protection of human health from the effects of environmental pollutants and
any
permit, license or authorization required thereunder, as well as common
law.
(ii) “Health
and Safety Law” means any federal, state or local statute, rule, regulation or
ordinance having as its primary purpose the protection of worker safety or
health in the workplace.
(iii) “Hazardous
Substance, Pollutant or Contaminant” means any “hazardous substance” as defined
in 42 U.S.C. § 9601(14), any “pollutant or contaminant” as defined in 42
U.S.C. § 9601(33), and petroleum, including crude oil or any fraction
thereof.
(iv) “Claim”
means and includes any claim, action, suit, demand, administrative proceeding,
notice of violation, notice of deficiency, or general notice of potential
liability alleging any failure to comply with or any liability under any
Environmental Law or Health and Safety Law, including, without limitation,
any
liability under common law for damages or injury to person or
property.
(v) “Environmental
or Health and Safety Circumstance” means any fact, circumstance, activity,
practice, incident, action, plan or condition which would constitute a failure
to comply with any Environmental Law or Health and Safety Law, or would give
rise to potential liability under any such Law.
4.20 Real
Property Matters.
Seller
owns the Real Property, free and clear of all tenancies, liens, mortgages
and
any other encumbrances, except for a lease to HK Castings, Inc. (“HK Castings”),
a subsidiary of Seller and a Deed of Trust made in favor of GE Capital which
will be released at and as a condition to Purchaser’s obligation to consummate
the transactions contemplated in this Agreement. With respect to the Real
Property:
(a) To
the
best knowledge of Seller, all necessary water, sewer, gas, electric, telephone,
drainage and other utility equipment, facilities and services, and all
mechanical systems are installed and connected pursuant to valid permits,
and
are in good working order and adequate for the conduct of the business and
operations of HK Castings;
(b) To
the
best knowledge of Seller, the Real Property and the improvements thereon
do not
violate any governmental laws, ordinances, rules or regulations;
(c) Seller
has not received any notice from any insurance carrier of defects or
inadequacies which, if not corrected, could reasonably be expected to result
in
termination of insurance coverage or a material increase in the cost thereof,
and there are no such defects or inadequacies;
(d) To
the
best knowledge of Seller, the Real Property is zoned in a manner which permits
its present use, and such use and occupation are not in contravention of
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any
statute, bylaw, regulation, ordinance, order, covenant, declaration, restriction
or plan, including, without limitation, those relating to environmental
protection;
(e) There
is
no condemnation, expropriation or other proceeding in eminent domain pending
or,
to the best knowledge of Seller, threatened, affecting the Real Property,
or any
portion thereof or interest therein, and Seller has not engaged in any
negotiation with any entity possessing the power of condemnation with regard
to
the acquisition of all or any portion of the Real Property;
(f) To
the
best knowledge of Seller, the Real Property currently is not subject to any
special assessments, no special assessments have been threatened against
all or
any part of the Real Property and Seller does not have knowledge of any intended
assessments;
(g) All
real
estate taxes on the Real Property for the year 2004 and all prior years have
been paid or will be paid prior to Closing and, to the best knowledge of
Seller,
are not subject to any proposed reassessment, contest, protest, certificate
of
error or other proceedings, and all other taxes, charges, debts and other
assessments due by Seller with respect to the Real Property through the Closing
Date have been or will be paid by Seller prior to Closing;
(h) No
work
has been performed or is in progress at, and no materials have been furnished
to, the Real Property or any portion of the Real Property within sixty (60)
days
prior to the date of this Agreement which reasonably may give rise to a
mechanic’s, materialmen’s or other liens against the Real Property, or operation
thereof, which has not been or will not be paid in full by Seller by the
Closing
Date;
(i) No
written or oral contracts, management agreements, leasing agreements, repair
or
service agreements, employment agreements, easements, rights, privileges,
licenses or options to purchase affecting the Real Property exist;
(j) To
the
best knowledge of Seller, Seller
has performed all of its obligations with respect to the Real Property that
are
required to be satisfied on or before the Closing Date; and
(k) Seller
has or will comply with all laws affecting the transfer of the Real Property
and
all disclosure requirements relating thereto.
4.21 Tax
Matters.
(a) For
purposes of this Agreement, (i) “Tax” means any federal, state, local, or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Section 59A of the Code), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
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disputed
or not, and (ii) “Tax Return” means any return, report, information return, or
other document (including any related or supporting information) filed or
required to be filed with any taxing authority in connection with its
determination, assessment, collection, administration, or imposition of any
Tax.
(b) Except
as
set forth in Schedule
4.21,
Seller
has duly and timely filed all Tax Returns and have duly and timely paid all
Taxes and other charges (whether or not shown on any Tax Return) due or claimed
to be due from it by federal, foreign, state, or local taxing authorities
or has
set up an adequate reserve on the Financial Statements for all Taxes payable.
True and correct copies of all Tax Returns for the periods ending June 30,
2001
and 2002 have been heretofore delivered to Purchaser. There are no Tax liens
(other than liens for current Taxes not yet due and payable) upon any properties
or assets of Seller (whether real, personal, or mixed, tangible or intangible),
and, except as reflected in the Financial Statements or as set forth in
Schedule
4.21,
there
are no pending or, to Seller’s knowledge, threatened audits or examinations
relating to, or claims asserted for, Taxes or assessments against Seller,
and
the Seller has no knowledge of any basis for any such claims. Seller has
not
been granted or been requested to grant any extension of the limitation period
applicable to any claim for Taxes or assessments with respect to Taxes. Seller
is not a party to any Tax allocation or sharing agreement. Seller is not
liable
for the Taxes of any “affiliated group” under Treasury Regulation 1.1502-6 (or
any similar provision of state, local, or foreign law). Seller has withheld
and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
or
stockholder.
(c) Schedule
4.21
attached
hereto lists each jurisdiction in which Seller files Tax Returns for each
period
or portion thereof ending on or before the Closing Date.
4.22 Employee
Benefit Plans.
Except
as identified on Schedule
4.22,
Seller
does not maintain or contribute to (or have the obligation to contribute
to) any
Employee Benefit Plans. For purposes of this Agreement, the term “Employee
Benefit Plan” means (i) any employee benefit plan, as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974 as amended (“ERISA”), and
(ii) any other plan, trust agreement or arrangement for any bonus, severance,
hospitalization, vacation, incentive or deferred compensation, pension or
profit-sharing, retirement, payroll savings, stock option, equity compensation,
group insurance, death benefit, fringe benefit, welfare or any other employee
benefit plan or fringe benefit arrangement of any nature whatsoever, including
those benefiting retirees or former employees. As to any previously terminated
Employee Benefit Plan of Seller, Seller has not incurred, and will not incur,
any withdrawal liability, nor does any Seller have any contingent withdrawal
liability under ERISA to any Multiemployer Plan (as defined in ERISA or the
Code). Except as identified on Schedule
4.22
and with
respect to each Employee Benefit Plan, Seller is in material compliance,
in form
and operation, with the requirements provided by any and all statutes, orders
or
governmental rules or regulations currently in effect, including, but not
limited to, ERISA and the Code, and applicable to such Employee Benefit Plan.
Each Employee Benefit Plan and any related trust intended to qualify under
Section 401(a) and Section 501(a) of the Code is so qualified and nothing
has
occurred to cause the loss of such qualification.
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4.23 Compliance
with Laws.
Except
as identified on Schedule
4.23
Seller
is in material compliance with all laws applicable to it, and has not received
any written notice of any civil, criminal or administrative investigation
or
audit by any governmental entity relating to Seller or the
Division.
4.24 Broker’s
or Finder’s Fee.
Except
as identified on Schedule
4.24,
Seller
has not employed, or is liable for the payment of any fee to, any finder,
broker, consultant or similar person in connection with the transactions
contemplated by this Agreement.
4.25 No
Omissions or Misstatements.
None of
the statements or information contained in any of the representations,
warranties, covenants or agreements of Seller set forth in this Agreement
or any
information or documents delivered or to be delivered to Purchaser prior
to the
execution of this Agreement, contains any untrue statement of a material
fact or
omits a material fact necessary to make the statements contained in this
Agreement or in any exhibit or schedule to this Agreement or in any of the
other
information provided or the documents delivered to Purchaser in connection
with
the transactions contemplated by this Agreement, in light of the circumstances
in which those statements were made, not misleading.
ARTICLE
V. REPRESENTATIONS
AND WARRANTIES OF PURCHASER
As
of the
date hereof and as of the Closing Date, Purchaser hereby represents and warrants
to Seller as follows:
5.01 Organization.
Purchaser
is a limited liability company duly organized and validly existing under
the
laws of the State of Indiana. Purchaser has all necessary power and authority
to
own all of its property and assets and to make, execute, deliver, and perform
this Agreement and the other documents and instruments contemplated
hereby.
5.02 Execution,
Delivery and Validity.
The
execution, delivery and performance of this Agreement by Purchaser have been
duly authorized by all requisite action. This Agreement and all other agreements
contemplated hereby have been duly and validly executed and delivered by
Purchaser, and each constitutes the legal, valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its
terms.
5.03 Non-contravention.
The
execution, delivery and performance of this Agreement and the other agreements
contemplated hereby and the consummation of the transactions contemplated
hereby
or thereby or compliance with or fulfillment of the terms and provisions
hereof
or of any other agreement or instrument contemplated hereby or thereby, do
not
and will not: (i) conflict with or result in a breach of any of the provisions
of the Articles of Organization of Purchaser; (ii) contravene any law, rule
or
regulation or any order, writ, award, judgment, decree or other determination
which affects or binds Purchaser or any of its properties; (iii) conflict
with,
result in a breach of, constitute a default under, or give rise to a right
of
acceleration, termination or the imposition of penalties under any contract,
deed of trust, mortgage, trust, lease, governmental or other license, permit
or
other authorization, contract, agreement, note or any other agreement,
instrument or restriction to which Purchaser is a party or by which any of
its
properties may be affected or bound; or (iv) require the approval, consent
or
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authorization
of, or the making of any declaration, filing or registration with, any third
party or any foreign, federal, state or local court, governmental authority
or
regulatory body.
5.04 Broker’s
or Finder’s Fee.
Purchaser has not employed, nor is Purchaser liable for the payment of any
fee
to any finder, broker, consultant or similar person in connection with the
transactions contemplated by this Agreement.
ARTICLE
VI. RELATED
AGREEMENTS AND CONDITIONS TO CLOSING
6.01 Related
Agreements.
In
addition to any other agreements contemplated hereby or herein:
(a) Employees.
Seller
agrees to use its best efforts to retain the services of all employees of
the
Division until the Closing Date. Prior to the Closing Date, Seller shall
cooperate with Purchaser to allow Purchaser a reasonable opportunity to
interview the employees of the Division. At or immediately after Closing,
Seller
will (i) take such action as may be required to terminate its employment
of each
employee of the Division hired by Purchaser (without any liability to
Purchaser), (ii) 100% vest the entire account balance of each such employee
who
is a participant under any of Seller’s pension, profit-sharing or 401(k) plans,
if any, as of the Closing Date, (iii) make all employer contributions allocable
to each such employee under any such plans for all periods through the Closing
Date, and (iv) pay to each employee of the Division all wages and other benefits
owed by Seller in connection with the employment and termination of employment
of such employee; provided,
however,
Purchaser agrees to reimburse Seller for all earned or accrued but unpaid
vacation pay paid by Seller at the Closing per Schedule
6.01(a).
Effective
as of the Closing Date, Purchaser intends to offer at-will employment to
each
employee of the Division (other than Xxxxxxxx Xxxxx and Galliano Xxxxxx)
at the
same salary or hourly wage rate currently paid by Seller to such employee,
subject to the employee’s completion of the Purchaser’s employment application
process. All benefits and other terms and conditions of employment shall
be
determined by Purchaser in its discretion; provided,
that
such employees will be entitled to the same or comparable benefits (with
a
maximum of three weeks of vacation per year) as other similarly situated
employees of Purchaser, subject to all applicable eligibility
criteria.
(b) Conduct
of Business.
Between
the date hereof and the Closing Date, except as otherwise approved by Purchaser,
Seller will conduct the business and operations of the Division only in the
ordinary course of business consistent with past practice and in such a manner
that the representations and warranties contained in Article IV shall be
true
and correct at and as of the Closing Date and so that the conditions to be
satisfied by Seller on the Closing Date shall have been satisfied.
(c) Full
Access.
Immediately following the execution of this Agreement by all parties, Seller
shall give Purchaser and its authorized representatives full access to any
and
all premises, properties, contracts, commitments, books, records and affairs
of
Seller, including, without limitation, causing appropriate senior personnel
of
Seller to be made available for interviews by Purchaser and its authorized
representatives. Purchaser shall
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use
its
best efforts to conduct any such inspections and interviews so as to cause
minimal disruption to Seller’s business. If this Agreement is terminated, Seller
and its representatives, and Purchaser and its representatives will, upon
written request therefor, each return to the other all documents and records
(including all copies made thereof) obtained from the other at any time in
connection with the transactions contemplated hereby and will keep confidential
any such information so obtained. Seller will also permit Purchaser at any
time
after the execution of this Agreement to make economic and operational
feasibility, engineering and architectural studies, including soil tests
and
borings, and studies of estimated costs of clearance and grading on the Real
Property and any other real estate used in connection with the business and
operation of the Division. All such tests, inspections, assessments, audits
and
studies shall be at Purchaser’s cost.
(d) Public
Announcements.
Prior
to Closing, the contents of any announcements to employees, customers or
suppliers of Seller or any other public statements shall be mutually agreed
to
by the parties prior to the making of any such announcement; provided,
that
each party hereto may make disclosures that it in good faith believes, based
on
the advice of counsel, is reasonably necessary to comply with any requirement
of
law or regulation or to fulfill a party’s obligations under this
Agreement.
(e) Bulk
Sales.
Seller
represents and warrants to Purchaser that Seller’s principal business is not the
sale of merchandise from stock; that its gross income from the sale of
merchandise from stock for the past 12 months constituted six percent (6%)
of
Seller’s gross income for that period; that the sale and transfer of the Assets
being purchased by the Purchaser, described in Section 1 hereof and on
Schedules
1.01(a)-(g),
does
not constitute a transfer of a major part of its material, supplies, merchandise
or other inventory (as that term is defined in Section 9-102 of the Commercial
Law Article of the Annotated Code of Maryland); nor does it constitute a
bulk
transfer as that term is defined in Section 6-102 of the Commercial Law Article
of the Annotated Code of Maryland. In addition:
(i) Seller
agrees to provide the Purchaser with any information or documentation that
Purchase may request, within 5 business days of any such request, to establish
that the sale of the Assets described in Section 1 hereof, and in Schedule
1.01(a)-(g), is not a transfer subject to Title 6 of the Commercial Law Article
of the Annotated Code of Maryland.
(ii) If
Purchaser should discover and determine to the contrary that the sale is
subject
to Title 6 of the Commercial Law Article of the Annotated Code of Maryland,
then
Seller agrees to provide Purchaser with a list of its existing creditors
prepared in accordance with Section 6-104 of the Commercial Law Article of
the
Annotated Code of Maryland, within 5 days after Purchaser’s request for such
list. In such event, the proceeds from the sale of the Assets shall be applied
as provided in Section 6-106 of the said Commercial Law Article, and Purchaser
reserves the right to apply said proceeds in accordance with Section 6-106(4)
of
the aforesaid Commercial Law Article.
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(iii) Seller’s
warranties and obligations under this Section shall survive closing.
Nothing
herein shall be deemed to release or discharge Seller from its obligation
to pay
its creditors except to the extent such obligations constitute Assumed
Liabilities.
(f) Purchase
of Other Assets from Seller.
(i) The
parties agree to enter into a mutually acceptable purchase agreement (the
“Second Agreement”) for the purchase and sale of substantially all of Seller’s
assets used in its operations conducted in Seattle, Washington and Houston,
Texas, within sixty (60) days after the Closing, in accordance with the general
terms and conditions outlined in Purchaser’s Letter of Intent to Seller dated
January 5, 2005 and that certain letter from Purchaser to Seller dated February
7, 2005 proposing certain modifications to the January 5, 2005 Letter of
Intent;
provided, however, entering into and closing on the purchase and sale of
assets
under such agreement shall be contingent on all of the following: (A) since
January 5, 2005, Seller’s operations in Seattle, Washington and Houston, Texas,
shall have been conducted in the ordinary course of business consistent with
past practices and Seller shall not have sold, disposed of or otherwise
distributed any of its assets used in such operations except for the sale
of
inventory in the ordinary course of business, (B) Seller’s assets to be acquired
under the Second Agreement must be free and clear of all Liens, (C) there
shall
be no action, suit or proceeding before any court, governmental authority,
agency or arbitrator pending or threatened which seeks to restrain or prohibit
the sale or which affects the assets under the Second Agreement, (D) all
consents, waivers, authorizations and approvals for the transaction, if
required, shall have been obtained, (E) Seller shall have the full power
and
authority to enter into the Second Agreement and perform thereunder, (F)
all
representations and warranties made by Seller in the Second Agreement shall
be
true and correct, and (G) the assets to be acquired under the Second Agreement
at Closing must be, in all material respects (including but not limited to
the
quantity and quality of such assets), the assets of Seller that existed as
of
the January 5, 2005 Letter of Intent.
(ii) The
parties agree that the Second Agreement will contain usual and customary
representations, warranties, covenants and other agreements between the parties.
In addition, as part of the Second Agreement and in order to preserve the
value
of the goodwill purchased by Purchaser, and to reduce the cost to Purchaser
of
monitoring and enforcing the compliance of Seller with the confidentiality
obligations contained in this Agreement and the Second Agreement, Seller
shall
covenant and agree that, during the five (5) year period from and after closing
of the Second Agreement, it will not, and it will cause its shareholders,
directors, officers, employees, agents and Affiliates to not, without the
express written consent of Purchaser and only to the extent authorized by
Purchaser:
(A) Directly
or indirectly, alone or in concert with others, whether as principal, agent,
representative, partner, lender, consultant, shareholder
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or
otherwise, under or through any form of business entity, own, operate, manage,
control or actively participate in any business which competes with or is
substantially similar to the business and operations of the Seller as presently
conducted anywhere in the world (the “Prohibited Territory”);
(B) Either
for themselves or for any other person, firm, corporation or entity solicit,
divert or accept, or attempt to solicit, divert or accept any persons or
entities which were customers or suppliers of the Seller at any time within
two
(2) years prior to the Closing; and
(C) Induce
or
solicit or seek to induce or solicit any person who was engaged by the Seller
as
an employee, agent or otherwise within the one (1) year period prior to the
closing to terminate his or her engagement with Purchaser or otherwise
participate in any business activity directly or indirectly competitive with
the
Division.
(iii) Closing
of the Second Agreement will be subject to the parties obtaining all necessary
consents or approvals for the transaction and the transfer of the assets
under
the Second Agreement that may be required.
(iv) Purchaser
understands that certain capital expenditures and the infusion of working
capital may be necessary in the successful operation of the Division acquired
hereunder and other businesses of Seller and HK Castings, Inc. acquired under
the Second Agreement and the HK Castings, Inc. asset purchase
agreement.
(g) Insurance
Premiums.
Prior
to Closing, Seller shall pay all of its overdue and premiums (and any penalties,
late charges or other fees) for general and product liability insurance in
order
to ensure that there is no gap in insurance coverage up to and through
Closing.
6.02 Conditions
to Obligations of Seller.
The
obligations of Seller under this Agreement are subject to the fulfillment,
at or
prior to the Closing, of the following conditions, any one or more of which
may
be waived by Seller:
(a) Representations
and Warranties.
All
representations and warranties of Purchaser contained in or made pursuant
to
this Agreement shall be true and correct on and as of the Closing Date with
the
same force and effect as though made on and as of the Closing Date, and
Purchaser shall have delivered to Seller a certificate, signed and dated
as of
the Closing Date by an officer of Purchaser, to the foregoing
effect.
(b) Performance
of Agreement.
Purchaser shall have delivered all documents and agreements described in
Article
VII and otherwise performed in all respects all obligations required under
this
Agreement and any other agreements referenced herein to be performed by it
on or
prior to the Closing Date.
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(c) Litigation;
Injunctions.
No
order of any court or administrative agency shall be in effect which restrains
or prohibits the transactions contemplated hereby, and there shall not have
been
threatened, nor shall there be pending, any action or proceeding by or before
any court or governmental agency or other regulatory or administrative agency
or
commission, challenging any of the transactions contemplated by this
Agreement.
(d) Consents
and Approvals.
All
consents, approvals, licenses and permits, the granting of which are reasonably
necessary for the consummation of the transactions contemplated hereby, shall
have been obtained.
(e) Corporate
Certificates.
Purchaser shall have delivered to Seller: (i) a copy of Purchaser’s Certificate
and Articles of Organization; (ii) a certificate of existence of Purchaser
issued as of a current date by the Indiana Secretary of State; and (iii)
copies
of resolutions of the Board of Managers of Purchaser authorizing (A) the
execution and delivery of this Agreement and any other agreements contemplated
hereby and (B) the taking of all steps necessary to consummate the transactions
and fulfill Purchaser’s obligations under this Agreement.
6.03 Conditions
to Obligations of Purchaser.
All
obligations of Purchaser under this Agreement are subject to the fulfillment,
at
or prior to the Closing, of the following conditions, any one or more of
which
may be waived by Purchaser:
(a) Lease
Agreement.
Seller
and HKM Properties Company, a Washington general partnership, shall have
mutually terminated their existing lease for Seller’s facility located in
Hagerstown, Maryland. In addition, Purchaser and HKM Properties Company shall
have entered into a written lease agreement for Seller’s facility in Hagerstown,
Maryland on terms acceptable to Purchaser, pursuant to which Purchaser shall
lease the facility for $12,539.26 per month and pursuant to which HKM Properties
Company agrees to release any claims it may have under any previous
lease.
(b) HK
Castings, Inc. Asset Purchase Agreement.
At or
prior to Closing, Purchaser or a related entity shall enter into a written
asset
purchase agreement with HK Castings, Inc., substantially in the form of asset
purchase agreement attached hereto as Exhibit
6.03(b).
(c) Representations
and Warranties.
All
representations and warranties of Seller contained in or made pursuant to
this
Agreement shall be true and correct on and as of the Closing Date with the
same
force and effect as though made on and as of the Closing Date, and Seller
shall
have delivered to Purchaser a certificate, signed and dated as of the Closing
Date by an officer of Seller to the foregoing effect.
(d) Due
Diligence.
Purchaser shall have:
(i) Received
a title insurance policy for the Real Property issued, as of the moment of
Closing, by a reputable title company, and in a form, acceptable to
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Purchaser,
insuring the Real Property for its current fair market value as agreed to
by the
parties. The policy shall be subject only to covenants, easements, liens
and
other restrictions reasonably acceptable to Purchaser. Seller shall pay all
costs and expenses related to the issuance of the title insurance policy
(ii) Received
environmental test results as desired by Purchaser confirming that the Real
Property is of an environmental quality acceptable to Purchaser, in its sole
discretion.
(iii) Unless
waived by Purchaser, received a current survey of the Real Property prepared
by
a licensed professional surveyor and in a form reasonably acceptable to
Purchaser.
(iv) Completed
such other inspections of the Purchased Assets and such due diligence
investigations of Seller and the Division as Purchaser may deem reasonably
necessary or advisable, and Purchaser shall be satisfied in its sole and
absolute discretion with the results of such due diligence review.
(e) Performance
of Agreement.
Seller
shall have delivered all documents and agreements described in Article VII
and
otherwise performed in all respects all obligations required under this
Agreement and any other agreements referenced herein to be performed by it
on or
prior to the Closing Date.
(f) Litigation;
Injunctions.
No
order of any court or administrative agency shall be in effect which restrains
or prohibits the transactions contemplated hereby or which would limit or
affect
Purchaser’s ownership or control of the Purchased Assets or the Division, and
there shall not have been threatened, nor shall there be pending, any action
or
proceeding by or before any court or governmental agency or other regulatory
or
administrative agency or commission challenging any of the transactions
contemplated by this Agreement.
(g) Consents
and Approvals.
All
consents, approvals, licenses and permits, the granting of which are reasonably
necessary for the consummation of the transactions contemplated hereby, shall
have been obtained.
(h) Absence
of Changes.
On or
prior to the Closing Date, there shall have been no loss, damage or destruction
to the Purchased Assets which materially impairs the use or the value of
the
Purchased Assets or the Division. Seller shall not have suffered any material
adverse change in its financial condition, results of operations, assets,
liabilities, or business relating to the Division, nor shall Seller have
suffered any significant employee attrition between the date of execution
of
this Agreement and the Closing Date.
(i) Lien
Searches.
Seller
shall have delivered to Purchaser (i) final state and local tax lien and
Uniform
Commercial Code financing statement searches disclosing all
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liens
and
encumbrances on the Purchased Assets; and (ii) written releases from the
holders
of any such security interests, liens or other encumbrances with respect
thereto.
(j) Corporate
Certificates.
Seller
shall have delivered to Purchaser: (i) a copy of Seller’s Articles of
Incorporation, certified by the Washington Secretary of State as of a current
date; (ii) a certificate of good standing of Seller issued as of a current
date
by the Washington Secretary of State; and (iii) copies of resolutions of
the
Boards of Directors Seller and a certificate of the secretary regarding the
vote
of the shareholders of Seller, authorizing (A) the execution and delivery
of
this Agreement and the other agreements contemplated hereby and (B) the taking
of all steps necessary to consummate the transactions and fulfill Seller’s
obligations under this Agreement and all agreements contemplated
(k) Interim
Services Agreement.
At or
prior to Closing, Purchaser and Seller shall enter into a written interim
services agreement providing, among other things, that Seller shall provide
certain administrative and other support to Purchaser between the Closing
hereunder and the closing under the Second Agreement and that Seller shall
provide certain information on a regular basis with respect to the Seller’s
operations in Seattle, Washington and Houston, Texas between the Closing
hereunder and the closing under the Second Agreement, which agreement shall
be
substantially in the form of the interim services agreement attached hereto
as
Exhibit
6.03(k).
ARTICLE
VII. DELIVERIES
AT CLOSING
7.01 Deliveries
by Seller.
Seller
shall execute, acknowledge, deliver and cause to be executed, acknowledged
and
delivered to Purchaser documents conveying title to the Purchased Assets
as
follows:
(a) Seller
shall each execute and deliver to XX Xxxxxx a general warranty deed conveying
to
Purchaser good and indefeasible title in fee simple to the Real Property
in the
form attached hereto as Exhibit
7.01(a).
(b) Seller
shall execute and deliver to HK Parts a xxxx of sale in the form attached
hereto
as Exhibit
7.01(b).
(c) Seller
shall execute an assignment and assumption agreement (“Assignment and Assumption
Agreement”) in the form attached hereto as Exhibit
7.01(c)
together
with such other instruments and specific forms of assignment as may be necessary
to effect the transfer and registration of transfer of the Purchased Assets
and
Assumed Liabilities hereunder.
(d) Seller
shall execute and endorse to Purchaser certificates of title covering all
vehicles, if any, that are part of the Purchased Assets.
(e) Seller
shall deliver originals (to the extent available, and if not, copies) of
the
Contracts, Licenses and Permits, Business Records and other documents in
Seller’s
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possession
constituting part of the Purchased Assets, as well as Schedule
1.01(a)
and
1.01(d)
updated
as of the Closing Date.
(f) Seller
shall have delivered to Purchaser fully executed documents to Purchaser’s
satisfaction, evidencing Seller’s authority to sign this Agreement and to
consummate the transactions contemplated hereby, as well as corporate
certificates set forth in Section 6.03(j).
7.02 Deliveries
by Purchaser.
Purchaser shall execute, acknowledge, deliver and cause to be executed,
acknowledged and delivered to Seller the following items:
(a) Purchaser
shall pay the Purchase Price to GE Capital in accordance with Section 3.02.
(b) HK
Parts
shall execute and deliver the Assignment and Assumption Agreement.
(c) Purchaser
shall have delivered to Seller fully executed documents to Seller’s
satisfaction, evidencing each such Purchaser’s authority to sign this Agreement
and to consummate the transactions contemplated hereby, as well as corporate
certificates set forth in Section 6.02(e).
7.03 Additionally
Requested Documents; Post-Closing Assistance.
At the
reasonable request of Purchaser at Closing and at any time or from time to
time
thereafter, Seller shall cooperate with Purchaser to put Purchaser in actual
possession and operating control of the Division and the Purchased Assets,
execute and deliver such further instruments of sale, conveyance, transfer
and
assignment as Purchaser may reasonably request in order to effectively convey,
transfer and assign the same to Purchaser, free and clear of all Liens, except
the Assumed Liabilities.
ARTICLE
VIII. SURVIVAL
OF PROVISIONS AND INDEMNIFICATION
8.01 Survival.
The
respective representations, warranties and covenants of each of the parties
to
this Agreement, including all statements contained in any schedule or exhibit
delivered pursuant hereto, shall be deemed to be material and to have been
relied upon by the parties hereto and shall survive the Closing, and the
consummation of the transactions contemplated hereby as
follows: (i) the representations and warranties contained in Sections 4.01,
4.02, 4.04, 4.10, 5.01 and 5.02 shall survive indefinitely and shall not
terminate; (ii) the representations and warranties contained in Sections
4.07,
4.19, 4.21 and 4.22 shall survive for the applicable statutes of limitation;
and
(c) all other representations and warranties shall survive for a period of
two
(2) years after the Closing Date; provided,
that
any representation or warranty in respect of which indemnity may be sought
under
this Article 8, and the indemnity with respect thereto, shall survive the
time
at which it would otherwise terminate pursuant to this Section 8.01 if
notice
of the breach thereof giving rise to such right or potential right of indemnity
shall have been given to the party against whom such indemnity may be sought
prior to such time. No investigation by
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the
parties made heretofore or hereafter shall affect the representations and
warranties of the parties contained in or made pursuant hereto.
8.02 Indemnification
by Seller.
Subject
to the other provisions of this Article, Seller shall promptly indemnify,
defend
and hold harmless Purchaser and its shareholders, directors, officers,
employees, agents, successors and assigns (“Purchaser Indemnified Parties”)
against any and all losses, costs, claims, demands and expenses (including
reasonable costs of investigation, court costs and legal fees actually incurred)
and other damages (collectively, the “Losses”) arising our of, relating to or
resulting from: (a) any breach by Seller of, or failure by Seller to perform,
any of the covenants, obligations, representations or warranties contained
in
this Agreement; (b) any and all Excluded Liabilities; (c) any claim relating
to
bulk transfers or other principles of transferee liability by any creditor
or
former creditor of Seller, whether such claim is liquidated or unliquidated,
contingent or disputed; (d) the operation of the Division on and prior to
the
Closing Date; and (e) any claim, action, suit or proceeding relating to any
of
the foregoing.
8.03 Indemnification
by Purchaser.
Subject
to the other provisions of this Article, Purchaser shall promptly indemnify,
defend and hold harmless Seller against any and all Losses arising out of,
relating to or resulting from: (a) any breach by Purchaser of, or failure
by
Purchaser to perform, any of the covenants, obligations, representations
or
warranties contained in this Agreement; (b) any Assumed Liabilities; (c)
the
conduct of the business and operations of the Division by the Purchaser after
the Closing Date; and (d) any claim, action, suit or proceeding relating
to any
of the foregoing.
8.04 Cooperation.
Subject
to the provisions of Section 8.05, a party or parties against whom
a claim
for indemnification has been asserted (individually and collectively
“Indemnifying Party”) shall have the right, at its own expense, to defend any
action or proceeding brought by a third party which resulted in said claim
for
indemnification, and if said right is exercised, the party or parties entitled
to indemnification (individually and collectively “Indemnified Party”) and the
Indemnifying Party shall cooperate in the defense of said action or
proceeding.
8.05 Indemnification
Procedure for Third Party Claims Against Indemnified
Parties.
(a) In
the
event that subsequent to the Closing Date any Indemnified Party asserts a
claim
for indemnification under this Article VIII, on account of or in connection
with
any claim or the commencement of any action or proceeding against such
Indemnified Party by any person or entity who is not a party to this Agreement
(including any Governmental Authority) (a “Third Party Claim”), the Indemnified
Party shall give written notice thereof together with a summary of any available
information regarding such claim (the “Notice of Claim”) to the Indemnifying
Party promptly after learning of such Third Party Claim. The Indemnifying
Party
shall have the right, upon written notice to the Indemnified Party (the “Defense
Notice”) within 15 days of its receipt from the Indemnified Party of the Notice
of Claim, to conduct at its expense the defense against such Third Party
Claim
in its own name, or, if necessary, in the name of the Indemnified
Party.
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(b) In
the
event that the Indemnifying Party shall fail to give the Defense Notice within
the time and as prescribed by Section 8.05(a), the Indemnified Party shall
have
the right to conduct such defense in good faith with counsel reasonably
acceptable to the Indemnifying Party at the Indemnifying Party’s expense, but
the Indemnified Party (or any insurance carrier defending such Third Party
Claim
on the Indemnified Party’s behalf) shall be prohibited from compromising or
settling such claim without the prior written consent of the Indemnifying
Party,
which consent shall not be unreasonably withheld or delayed.
(c) In
the
event that the Indemnifying Party does deliver a Defense Notice and thereby
elects to conduct the defense of such Third Party Claim in accordance with
Section 8.05(a), the Indemnified Party will cooperate with and make available
to
the Indemnifying Party such assistance and materials as it may reasonably
request, all at the expense of the Indemnifying Party. Regardless of which
party
defends such Third Party Claim, the other party shall have the right at its
expense to participate in the defense assisted by counsel of its own choosing.
Without the prior written consent of the Indemnified Party, the Indemnifying
Party (and any insurance carrier defending such Third Party Claim on the
Indemnified Party’s behalf) will not enter into any settlement of any Third
Party Claim if pursuant to or as a result of such settlement, such settlement
would lead to liability or create any financial or other obligation on the
part
of the Indemnified Party. If a firm offer is made to settle a Third Party
Claim,
which offer the Indemnifying Party is permitted to settle under this Section
8.05, and the Indemnifying Party desires to accept and agree to such offer,
the
Indemnifying Party will give written notice to the Indemnified Party to that
effect. If the Indemnified Party objects to such firm offer within 10 days
after
its receipt of such notice, the Indemnified Party may continue to contest
or
defend such Third Party Claim and, in such event, the maximum liability of
the
Indemnifying Party as to such Third Party Claim will not exceed the amount
of
such settlement offer, plus costs and expenses paid or incurred by the
Indemnified Party up to the point such notice had been delivered. Failure
at any
time of the Indemnifying Party to diligently defend a Third Party Claim as
required herein shall entitle the Indemnified Party to assume the defense
and
settlement of said Third Party Claim as if the Indemnifying Party had never
elected to do so as provided in this Section 8.05. Failure by an Indemnified
Party to provide notice on a timely basis of a Third Party Claim shall not
relieve the Indemnifying Party of its obligations hereunder, except that
the
foregoing shall not constitute a waiver by the Indemnifying Party of any
claim
for direct damages caused by such delay.
(d) Any
judgment entered or settlement agreed upon in the manner provided herein
shall
be binding upon the Indemnifying Party, and shall be conclusively deemed
to be
an obligation with respect to which the Indemnified Party is entitled to
prompt
indemnification hereunder, subject to the Indemnifying Party’s right to appeal
an appealable judgment or order.
8.06 Nature
of Other Liabilities.
In the
event any Indemnified Party should have a claim against any Indemnifying
Party
hereunder which does not involve a Third Party Claim, the Indemnified Party
shall transmit to the Indemnifying Party a written notice (the “Indemnity
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Notice”)
describing in detail the nature of the claim and the basis of the Indemnified
Party’s request for indemnification under this Agreement. The
Indemnifying Party shall make all payments pursuant to the indemnification
provisions contained in this Article VIII within ten (10) days after its
receipt
of the Indemnity Notice or, if the Indemnifying Party delivers written notice
to
the Indemnified Party within such 10-day period that it is disputing the
Indemnified Party’s right to indemnification hereunder with respect to such
payments, immediately upon the final determination of the amount of such
indemnification obligation.
8.07 Right
to Set-Off.
Purchaser shall have the right to directly recoup and set-off any Losses
incurred or suffered by any of the Purchaser Indemnified Parties resulting
from
any failure of a Seller to reimburse Purchaser for (i) any amounts due under
this Agreement, and (ii) any claims of the Purchaser Indemnified Parties
under this Article VIII, against any and all amounts which Purchaser may
owe
Seller from time to time.
The
parties acknowledge and agree that the rights of recoupment and set off set
forth in this Section 8.07 are a condition to Purchaser agreeing to enter
into
and perform this Agreement and any other agreements contemplated hereby.
ARTICLE
IX. RESTRICTIVE
COVENANTS
9.01 Confidentiality.
Seller
acknowledges that the trade secrets and other confidential information acquired
by Purchaser pursuant to this Agreement, including, without limitation, pricing
practices, marketing strategies, technology and know-how are valuable, special
and unique assets of Purchaser. Seller agrees that it will not, and it will
cause its shareholders, directors, officers, employees, agents and Affiliates
to
not, directly or indirectly, except with the prior written consent of Purchaser,
use, divulge or disclose or communicate, or cause or permit any other person
or
entity to use, divulge, disclose or communicate, to any person, firm,
corporation or entity, in any manner whatsoever, any trade secrets or other
confidential information conveyed to Purchaser pursuant to this Agreement.
The
foregoing covenants shall remain in effect for so long as any such information
remains confidential information of Purchaser, and, in any event, for a minimum
period of five (5) years after Closing. Notwithstanding anything to the contrary
in this Agreement, Seller will not, and it will cause its shareholders,
directors, officers, employees, agents and Affiliates to not, ever disclose
or
use confidential information which remains a trade secret of Purchaser.
For
purposes of this Agreement, “Affiliate” means a person or entity that directly
or indirectly, through one or more intermediaries, controls, is controlled
by,
or is under common control with, another person or entity or which any person
or
entity owns or controls directly or indirectly 20% or more of the voting
shares
or of the value of such person or entity or has the ability to control the
management or affairs of such person or entity.
9.02 Modification.
In the
event that any term, provision or covenant contained in Section 9.01 above
is
found to be unreasonable, and therefore unenforceable, by a court of competent
jurisdiction, but would be valid and enforceable if any part thereof were
deleted or otherwise modified, then the parties expressly agree that a court
may
limit the application of, or modify any such term, provision or covenant
and
proceed to enforce this Section as so limited or modified.
-25-
9.03 Remedies.
Seller
acknowledges and agrees that any violation of Section 9.01 would cause Purchaser
irreparable damage and that if Seller violates or threatens to violate such
restrictions, Purchaser shall be entitled to injunctive relief against Seller,
without the necessity of proof of actual damage or the posting of bond, in
addition to any other remedies available under this Agreement at law or in
equity.
ARTICLE
X. MISCELLANEOUS
10.01 Termination.
This
Agreement may be terminated at any time prior to Closing: (a) by the mutual
written consent of the parties hereto; (b) by Purchaser in the event that
the
conditions to its obligations set forth in Section 6.03
hereof have not been satisfied or waived at or prior to the Closing Date;
(c) by
Seller in the event that the conditions to its obligations set forth in
Section 6.02
hereof have not been satisfied or waived at or prior to the Closing Date;
or (d)
by either Purchaser or Seller if Closing has not occurred by 11:59 p.m. on
March
15, 2005, without intentional delay. In the event this Agreement is terminated
pursuant to this Section,
all rights and obligations of the parties hereunder shall terminate and no
party
shall have any liability to any other party; provided,
that
nothing herein will relieve any party from liability for any breach of any
representation, warranty, agreement or covenant contained herein prior to
such
termination.
10.02 Risk
of Loss.
Seller
assumes all risks of destruction, loss or damage to any of the Purchased
Assets
due to fire or other casualty up to and including the Closing Date. If any
material portion of the Purchased Assets is so destroyed, lost or damaged
prior
to Closing as to impair Purchaser’s ability to operate the Division, as
determined in Purchaser’s discretion, Purchaser shall have the option to: (i)
terminate this Agreement or (ii) or proceed with the Closing, with the Purchase
Price reduced by the amount of such destruction, loss or damage as mutually
agreed by Seller and Purchaser.
10.03 Definition
of Knowledge. For
purposes of this Agreement, Seller will be deemed to have “knowledge” of a
particular fact or other matter if any individual who is serving, or who
has at
any time served, as a shareholder, director, officer or trustee of such person
(or in any similar capacity) is, or at any time was, actually aware of such
fact
or other matter or
if a
reasonable inquiry by such person could reasonably be expected to disclose
the
existence of such fact or matter.
10.04 Assignment.
Seller
may not assign any rights or delegate any obligations under this Agreement
without the prior written consent of Purchaser, and any prohibited assignment
or
delegation will be null and void. The parties hereby acknowledge and agree
that
Purchaser may assign this Agreement at any time prior to Closing to any
affiliated third party assignee, provided that such assignee agrees to assume
Purchaser’s obligations hereunder.
10.05 Other
Expenses.
Except
as otherwise provided in this Agreement, Seller shall pay all of its expenses
incurred in connection with the negotiation, execution, and implementation
of
the transactions contemplated under this Agreement, and Purchaser shall pay
all
of its expenses incurred in connection with the negotiation, execution, and
implementation of the transactions contemplated under this
Agreement.
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10.06 Notices.
All
notices, requests, demands, waivers and other communications required or
permitted to be given under this Agreement shall be in writing and shall
be
deemed to have been duly given: (a) if delivered personally or sent by
facsimile, on the date received, (b) if delivered by overnight courier, on
the
day after mailing, and (c) if mailed, four days after mailing by first class
certified mail, return receipt requested and with postage prepaid. Any such
notice shall be sent as follows:
|
To
Seller:
|
To
Purchaser:
|
||
|
Hatch
& Xxxx, Inc.
|
HK
Machined Parts, LLC
|
||
|
0000
Xxxxx Xxx. X.X.
|
XX
Xxxxxx Properties, LLC
|
||
|
Xxxxxxx,
Xxxxxxxxxx 00000
|
1125
S. Walnut
|
||
|
Attn:
Galliano Xxxxxx
|
Xxxxx
Xxxx, Xxxxxxx 00000
|
||
|
Fax:
(000) 000-0000
|
Attn:
Xxxx X. Xxxxxxx
|
||
|
|
Fax:
(000) 000-0000
|
||
|
with
a copy to:
|
with
a copy to:
|
||
|
Xxxxxxxx,
Xxxxxxx & Xxxxx PLLC
|
Xxxxxx
& Xxxxxxxxx LLP
|
||
|
000
Xxxxx Xxxxxx, Xx. 0000
|
000
0xx
Xxxxxx Xxxx Xxxxxx
|
||
|
Xxxxxxx,
Xxxxxxxxxx 00000
|
000
Xxxxx Xxxxxxxx Xx.
|
||
|
Attn:
Xxxxxx X. Xxxxxx
|
Xxxxx
Xxxx, Xxxxxxx 00000
|
||
|
Fax:
(000) 000-0000
|
Attn:
Xxxxxxx X. Xxxxx
|
||
|
Fax:
(000) 000-0000
|
10.07 Controlling
Law; Jurisdiction.
This
Agreement shall be construed, interpreted and enforced in accordance with
the
laws of the State of Indiana, without giving effect to principles of conflicts
of laws. The parties expressly consent to exclusive personal jurisdiction
and
venue in the federal and state courts of the State of Indiana.
10.08 Headings.
Any
table of contents and paragraph headings in this Agreement are for convenience
of reference only and shall not be considered or referred to in resolving
questions of interpretation.
10.09 Benefit.
This
Agreement shall be binding upon and shall inure to the exclusive benefit
of the
parties hereto and their respective heirs, legal representatives, permitted
successors and permitted assigns. This Agreement is not intended to, nor
shall
it, create any rights in any other party.
10.10 Partial
Invalidity.
The
invalidity or unenforceability of any particular provision of this Agreement
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions
were
omitted.
10.11 Waiver.
Neither
the failure nor any delay on the part of any party hereto in exercising any
rights, power or remedy hereunder shall operate as a waiver thereof, or of
any
other right, power or remedy; nor shall any single or partial exercise of
any
right, power or
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remedy
preclude any further or other exercise thereof, or the exercise of any other
right, power or remedy. No waiver of any of the provisions of this Agreement
shall be void unless it is in writing and signed by the party against which
it
is sought to be enforced.
10.12 Counterparts
and Facsimiles.
This
Agreement may be executed simultaneously in two or more counterparts each
of
which shall be deemed an original and all of which together shall constitute
but
one and the same instrument. The signature page to this Agreement and all
other
documents required to be executed at Closing may be delivered by facsimile
and
the signatures thereon shall be deemed effective upon receipt by the intended
receiving party.
10.13 Legal
Fees and Costs.
Subject
to the provisions of Article VIII, in the event any party hereto incurs legal
expenses to enforce any provision of this Agreement, the prevailing party
will
be entitled to recover such legal expenses, including, without limitation,
attorneys’ fees, costs and disbursements, in addition to any other relief to
which such party shall be entitled.
10.14 Entire
Agreement.
This
Agreement, including the schedules and exhibits hereto, constitutes the entire
agreement between the parties hereto with regard to the matters contained
herein
and it is understood and agreed that all previous undertakings, negotiations,
letter of intent, term sheets, and agreements between the parties are merged
herein. This Agreement may not be modified orally, but only by an agreement
in
writing signed by Purchaser and Seller.
[Remainder
of Page Intentionally Blank]
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IN
WITNESS WHEREOF,
the
parties hereto have executed this Agreement on the date or dates indicated
below, effective as of the date first above written.
|
“SELLER”
|
“PURCHASER”
|
||||
|
HATCH
& XXXX, INC.
|
HK
MACHINED PARTS, LLC
|
||||
|
By:
|
/s/ Galliano Mordin |
By:
|
/s/ Xxxx X. Xxxxxxx | ||
|
Its:
|
President |
Its:
|
Manager | ||
|
Dated:
|
March 4, 2005 |
Dated:
|
March 4, 2005 | ||
|
XX
XXXXXX PROPERTIES, LLC
|
|||||
|
By:
|
/s/ Xxxx X. Xxxxxxx | ||||
|
Its:
|
Manager | ||||
|
Dated:
|
March 4, 2005 | ||||
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