ASSET PURCHASE AGREEMENT by and between NATIONAL PUMP COMPANY and NATIONAL PUMP COMPANY, LLC Dated as of October 1, 2010
Exhibit 2
Execution Version
by and between
NATIONAL PUMP COMPANY
and
NATIONAL PUMP COMPANY, LLC
Dated as of October 1, 2010
TABLE OF CONTENTS
Page | ||||
ARTICLE 1: DEFINITIONS |
1 | |||
ARTICLE 2: PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES |
11 | |||
2.1 Purchase and Sale of the Assets |
11 | |||
2.2 Excluded Assets |
12 | |||
2.3 Assumption of Liabilities |
13 | |||
2.4 Excluded Liabilities |
13 | |||
ARTICLE 3: PURCHASE PRICE |
13 | |||
3.1 Purchase Price |
13 | |||
3.2 Escrow Releases |
14 | |||
3.3 Purchase Price Allocation |
15 | |||
3.4 Parent Shares |
15 | |||
ARTICLE 4: DELIVERIES AND OTHER ACTIONS |
16 | |||
4.1 Deliveries by the Seller |
16 | |||
4.2 Deliveries by the Buyer |
17 | |||
ARTICLE 5: [INTENTIONALLY OMITTED] |
18 | |||
ARTICLE 6: REPRESENTATIONS AND WARRANTIES RELATING TO THE SELLER |
18 | |||
6.1 Existence and Good Standing |
18 | |||
6.2 Power; Validity and Enforceability |
18 | |||
6.3 No Conflict |
18 | |||
6.4 Required Filings and Consents |
19 | |||
6.5 Financial Statements |
19 | |||
6.6 Title to Personal Property; Sufficiency of Purchased Assets |
20 | |||
6.7 Conduct of Business |
20 | |||
6.8 Taxes |
22 | |||
6.9 Real Property |
23 | |||
6.10 Intellectual Property |
24 | |||
6.11 Contracts |
25 | |||
6.12 Insurance |
26 | |||
6.13 Litigation and Orders |
26 | |||
6.14 Compliance with Laws |
27 |
i
TABLE OF CONTENTS
(continued)
(continued)
Page | ||||
6.15 Permits |
27 | |||
6.16 Labor Matters |
27 | |||
6.17 Employee Benefit Plans |
29 | |||
6.18 Environmental |
31 | |||
6.19 Product Liability and Warranty |
32 | |||
6.20 Other Liabilities; Absence of Investments |
33 | |||
6.21 Customers and Suppliers |
33 | |||
6.22 Related Party Transactions |
34 | |||
6.23 Certain Payments |
34 | |||
6.24 Indebtedness |
34 | |||
6.25 Bank Accounts |
34 | |||
6.26 Books and Records |
34 | |||
6.27 Disclosure |
34 | |||
6.28 Brokers |
34 | |||
ARTICLE 7: REPRESENTATIONS AND WARRANTIES OF THE BUYER |
35 | |||
7.1 Existence and Good Standing |
35 | |||
7.2 Power |
35 | |||
7.3 Validity and Enforceability |
35 | |||
7.4 No Conflict |
35 | |||
7.5 Consents |
35 | |||
7.6 Brokers |
35 | |||
7.7 Parent Shares |
35 | |||
ARTICLE 8: TAX MATTERS |
35 | |||
8.1 Transfer Taxes and Fees |
35 | |||
8.2 Cooperation; Audits |
36 | |||
8.3 Prorations |
36 | |||
ARTICLE 9: COVENANTS AND AGREEMENTS |
36 | |||
9.1 Bulk-Sales Laws |
36 | |||
9.2 Payment of Real Property Expenses |
36 | |||
9.3 Accounts Receivable |
37 |
ii
TABLE OF CONTENTS
(continued)
(continued)
Page | ||||
9.4 Further Conveyances and Assumptions; Consent of Third Parties |
37 | |||
9.5 Further Assurances |
38 | |||
9.6 Preservation of Records |
38 | |||
9.7 Publicity |
38 | |||
9.8 Employee Plans; Employment Matters |
38 | |||
9.9 Competitive Activity; Non-Solicitation; Confidentiality |
39 | |||
9.10 Use of Business Name |
41 | |||
9.11 Insurance |
41 | |||
9.12 Lien Releases |
41 | |||
ARTICLE 10: REMEDIES |
41 | |||
10.1 General Indemnification Obligation |
41 | |||
10.2 Notice and Opportunity to Defend |
42 | |||
10.3 Survivability; Limitations |
43 | |||
10.4 Exclusive Remedy |
43 | |||
10.5 Specific Performance |
44 | |||
ARTICLE 11: MISCELLANEOUS |
44 | |||
11.1 Expenses |
44 | |||
11.2 No Assignment |
44 | |||
11.3 Headings |
44 | |||
11.4 Integration, Modification and Waiver |
44 | |||
11.5 Construction |
44 | |||
11.6 Severability |
44 | |||
11.7 Notices |
45 | |||
11.8 Governing Law |
46 | |||
11.9 Counterparts |
46 | |||
11.10 Consent to Jurisdiction and Service of Process |
46 |
iii
LIST OF EXHIBITS
Exhibit A
|
Form of Assignment and Assumption Agreement | |
Exhibit B
|
Form of Xxxx of Sale | |
Exhibit C
|
Form of Confidentiality Agreement | |
Exhibit D
|
Forms of Deeds | |
Exhibit E
|
Form of Escrow Agreement | |
Exhibit F
|
Form of Non-Competition Agreement | |
Exhibit G
|
Parent Shares Value Calculation | |
Exhibit H
|
Form of Investor Qualification Statement |
LIST OF SCHEDULES
Schedule 1.1
|
Permitted Liens | |
Schedule 6.1
|
Jurisdictions in which Seller Is Qualified to Do Business | |
Schedule 6.4
|
Required Consents, Filings and Notifications | |
Schedule 6.5(a)
|
Financial Statements and Interim Financial Statements | |
Schedule 6.5(b)
|
Financial Statement Exceptions | |
Schedule 6.5(c)
|
Accounts and Notes Receivable Relating to Sales Other than Sales of Goods or Services to Customers of the Business | |
Schedule 6.5(d)
|
Inventory Held by Third Parties | |
Schedule 6.7
|
Conduct of Business | |
Schedule 6.8
|
Taxes | |
Schedule 6.9(a)
|
Owned Real Property | |
Schedule 6.9(b)
|
Leased Real Property | |
Schedule 6.10
|
Intellectual Property | |
Schedule 6.11
|
Company Contracts | |
Schedule 6.12
|
Insurance | |
Schedule 6.13
|
Litigation and Orders | |
Schedule 6.15
|
Permits | |
Schedule 6.16(b)
|
List of Employees, Etc. | |
Schedule 6.16(e)
|
Unemployment, Social Security and Other Benefits | |
Schedule 6.16(g)
|
Effect of Execution and Delivery | |
Schedule 6.17
|
Employee Benefit Plans | |
Schedule 6.18(c)
|
Environmental | |
Schedule 6.19
|
Product Liability and Warranty | |
Schedule 6.20(a)
|
Other Liabilities | |
Schedule 6.20(b)
|
Absence of Investments | |
Schedule 6.21(a)
|
Customers | |
Schedule 6.21(b)
|
Suppliers | |
Schedule 6.22
|
Related Party Transactions | |
Schedule 6.24
|
Indebtedness | |
Schedule 6.25
|
Bank Accounts | |
Schedule 7.5
|
Buyer Consents | |
Schedule 9.12
|
Liens to be Released |
iv
THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of this 1st day of
October, 2010 (the “Closing Date”), is by and between National Pump Company, an Ohio corporation
(the “Buyer”), and National Pump Company, LLC, an Arizona limited liability company (the “Seller”).
RECITALS
A. WHEREAS, the Seller is engaged in the business of designing, manufacturing, servicing and
marketing vertical turbine line shaft and submersible pumps, centrifugal pumps, high pressure
booster pumps and packaged pump stations for the municipal, power generation, oil and gas,
hydrocarbon processing, agriculture and general industrial markets (the “Business”); and
B. WHEREAS, the Seller desires to sell, transfer and assign to the Buyer, and the Buyer
desires to acquire and assume from the Seller, all of the Purchased Assets and Assumed Liabilities
(as each such term is defined below), all as more specifically provided herein.
NOW, THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE 1: DEFINITIONS
“Affiliate” of any Person means any Person directly or indirectly controlling, controlled by,
or under common control with, any such Person and any officer, director, manager or controlling
person of such Person. When referring to a natural person, the term “Affiliate” also includes any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive
relationships, of such natural person.
“Agreement” has the meaning set forth in the preamble.
“Ancillary Agreements” means the Escrow Agreement, the Xxxx of Sale, the Assignment and
Assumption Agreement, the Deeds and each agreement, document, instrument or certificate
contemplated by this Agreement or to be executed by the Buyer, the Seller or any Member in
connection with the consummation of the transactions contemplated by this Agreement, in each case
only as applicable to the relevant party or parties to such Ancillary Agreement, as indicated by
the context in which such term is used.
“Asset Acquisition Statement” has the meaning set forth in Section 3.3.
“Assignment and Assumption Agreement” means that certain assignment and assumption agreement,
dated as of the Closing Date, by and between the Buyer and the Seller, substantially in the form
attached hereto as Exhibit A.
“Assumed Liabilities” has the meaning set forth in Section 2.3.
“Xxxx of Sale” means that certain xxxx of sale, dated as of the Closing Date, executed and
delivered by the Seller and delivered to the Buyer, in the form attached hereto as
Exhibit B.
“Business” has the meaning set forth in the recitals.
“Buyer” has the meaning set forth in the preamble.
“Buyer Indemnitee” has the meaning set forth in Section 10.1(a)(i).
“Claims Notice” has the meaning set forth in Section 10.2(a).
“Closing” means the closing of the transactions contemplated by this Agreement.
“Closing Date” has the meaning set forth in the preamble.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company-Level Taxes” means any Taxes imposed on the Company rather than on any of the
Members, other than Member-Level Taxes.
“Company Contracts” has the meaning set forth in Section 2.1(g).
“Confidential Information” means all information, whatever its nature and form and whether
obtained orally, by observation, from written materials or otherwise, that relates to any research,
technical, manufacturing, business or commercial activities or plans of the Seller with respect to
the Business, including, without limitation, all systems, servicing methods and business
techniques, programs, formulas, processes, compilations of technical and non-technical information,
inventions, discoveries and improvements, designs, drawings, blueprints, software, software code,
databases, product ideas, concepts, prototypes, features, procedures, training, promotional
materials, training courses and other training and instructional materials, vendor and product
information, sales intermediary lists and other sales intermediary information, and customer lists
and other customer information, whether or not patented or patentable, and all other information
that is not otherwise generally available to the public (including, without limitation, any terms
or provisions of this Agreement) and could constitute a trade secret of the Seller with respect to
the Business under the Uniform Trade Secrets Act. The term “Confidential Information” shall
exclude any information that is (or that becomes) generally available to the public through no
action of the Person (including its representatives and agents) required to maintain the
confidentiality of such information.
“Confidentiality Agreement” means, in the case of each of Xxxxxxx and Xxxxxxxxxx, those
certain confidentiality, invention disclosure and patent agreements, dated as of the Closing Date,
by and between Xxxxxxx or Xxxxxxxxxx, as applicable, and the Buyer, substantially in the form
attached hereto as Exhibit C.
“Contracts” means all contracts, agreements, leases, licenses, commitments, instruments,
guarantees, bids, orders, or proposals, whether written or oral.
2
“Controlled Group” means any trade or business (whether or not incorporated) (a) under common
control within the meaning of Section 4001(b)(1) of ERISA with the Seller or (b) that together with
the Seller is treated as a single employer under Section 414(t) of the Code.
“Copyrights” means all copyrights, whether in published or unpublished works, Documents,
databases, data collections and rights therein, software, web site content; rights to compilations,
collective works and derivative works of any of the foregoing and moral rights in any of the
foregoing; registrations and applications for registration for any of the foregoing and any
renewals or extensions thereof; and moral rights and economic rights of others in any of the
foregoing.
“Deeds” means those certain warranty deeds, dated as of the Closing Date, in the forms of
Exhibit D attached hereto, conveying Owned Real Property from the Seller to the Buyer.
“Documents” means all files, documents, instruments, papers, books, reports, business and
employment records, tapes, microfilms, photographs, letters, budgets, forecasts, ledgers, journals,
title policies, lists of past, present and/or prospective customers, supplier lists, regulatory
filings, operating data and plans, drawings, technical documentation (design specifications,
functional requirements, operating instructions, logic manuals, flow charts, etc), user
documentation (installation guides, user manuals, training materials, release notes, working
papers, etc.), marketing documentation (sales brochures, flyers, pamphlets, web pages, etc.), and
other similar materials related to the Business and the Purchased Assets, in each case whether or
not in electronic form.
“Domain Names” means Internet electronic addresses, uniform resource locators and alphanumeric
designations associated therewith registered with or assigned by any domain name registrar, domain
name registry or other domain name registration authority as part of an electronic address on the
Internet, all applications for any of the foregoing and the goodwill of the Business associated
with each of the foregoing.
“Due Inquiry” means, in each case with respect to such fact or matter, a review of such
individual’s files, communication with such individual’s direct reports, and a review of applicable
mail and written correspondence.
“Employee Plan” or collectively, “Employee Plans” has the meaning set forth in
Section 6.17(a).
“Environment” means soil, surface waters, groundwater, land, stream sediments, surface or
subsurface strata, ambient air, indoor air or indoor air quality, including any material or
substance used in the physical structure of any building or improvement.
“Environmental Condition” means any condition of the Environment existing or occurring prior
to the Closing at, under or migrating to or from (a) the Real Property, (b) any property previously
owned, leased or operated by the Seller to the extent such condition of the Environment existed at
the time of such ownership, lease or operation, or (c) any other real property at which any
Hazardous Material generated by the operation of the business of the Seller prior to the Closing
has been treated, stored or disposed of or has otherwise come to be located, which, in any such
case, violates any Environmental Law, or even though not violative
of any Environmental Law, nevertheless results in any Release, or Threat of Release, damage,
loss, cost, expense, claim, demand, order or liability.
3
“Environmental Law” means any Law, common law, policy or guideline relating to public or
workplace health or safety or protection of the Environment, Releases of Hazardous Materials or
injury to persons relating to exposure to any Hazardous Materials.
“Environmental Permit” means any Permit required by Environmental Laws for the operation of
the Business.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Escrow Account” means the account with the Escrow Agent into which the Escrow Amount is
deposited.
“Escrow Agent” means JPMorgan Chase Bank, N.A.
“Escrow Agreement” means that certain escrow agreement, dated as of the Closing Date, by and
among the Buyer, the Seller, and the Escrow Agent, in the form attached hereto as
Exhibit E.
“Escrow Amount” means $1,000,000.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Excluded Assets” has the meaning set forth in Section 2.2.
“Excluded Entities” has the meaning set forth in Section 9.9(a).
“Excluded Liabilities” has the meaning set forth in Section 2.4.
“Expiration Date” has the meaning set forth in Section 10.3(a).
“Financial Statements” has the meaning set forth in Section 6.5(a).
“Former Employee” means all individuals (including common law employees, independent
contractors and individual consultants) who were employed or engaged by the Seller in connection
with the Business but who are no longer so employed or engaged on the date hereof.
“Furniture and Equipment” means all furniture, fixtures, furnishings, equipment, vehicles,
leasehold improvements, and other tangible personal property owned or used by the Seller in the
conduct of the Business, including all artwork, desks, chairs, tables, hardware, copiers, telephone
lines and numbers, telecopy machines and other telecommunication equipment, cubicles and
miscellaneous office furnishings and supplies.
“GAAP” means U.S. generally accepted accounting principles, consistently applied.
4
“Governmental Authority” means any government or political subdivision or regulatory
authority, whether federal, state, local or foreign, or any agency or instrumentality of any such
government or political subdivision or regulatory authority, or any federal state, local or foreign
court or arbitrator.
“Hazardous Material” means any pollutant, toxic substance, including asbestos and
asbestos-containing materials, hazardous waste, hazardous material, hazardous substance,
contaminant, petroleum and petroleum-containing materials, radiation and radioactive materials,
leaded paints, toxic mold and other harmful biological agents, and polychlorinated biphenyls as
defined in, the subject of, or that could give rise to liability under any Environmental Law.
“Xxxxxxxxxx” has the meaning set forth within the definition of Member.
“Indebtedness” of any Person means: either (a) any liability of any Person (i) for borrowed
money (including the current portion thereof), (ii) under any reimbursement obligation relating to
a letter of credit, bankers’ acceptance or note purchase facility, (iii) evidenced by a bond, note,
debenture or similar instrument (including a purchase money obligation), (iv) for the payment of
money relating to leases that are required to be classified as a capitalized lease obligation in
accordance with GAAP, (v) for all or any part of the deferred purchase price of property or
services (other than trade payables), including any “earnout” or similar payments or any
non-compete payments, or (vi) under interest rate swap, hedging or similar agreements or (b) any
liability of others described in the preceding clause (a) that such Person has guaranteed, that is
recourse to such Person or any of its assets or that is otherwise its legal liability or that is
secured in whole or in part by the assets of such Person. For purposes of this Agreement,
Indebtedness includes any and all accrued interest, success fees, prepayment premiums, make-whole
premiums or penalties and fees or expenses (including attorneys’ fees) associated with the
prepayment of any Indebtedness.
“Indemnified Party” has the meaning set forth in Section 10.2(a).
“Indemnifying Party” has the meaning set forth in Section 10.2(a).
“Ineligible Accounts Receivable” has the meaning set forth in Section 3.2(a).
“Information Systems” means all computer hardware, databases and data storage systems,
computer, data, database and communications networks (other than the Internet), architecture
interfaces and firewalls (whether for data, voice, video or other media access, transmission or
reception) and other apparatus used to create, store, transmit, exchange or receive information in
any form.
“Intellectual Property” means Copyrights, Domain Names, Patents, Software, Trademarks and
Trade Secrets.
“Interim Financial Statements” has the meaning set forth in Section 6.5(a).
“Inventory Difference” has the meaning set forth in Section 3.2(a).
5
“Investment” means any equity interest (including any convertible debt, options, warrants and
similar instruments), of record or beneficially, directly or indirectly, in any Person.
“IRS” means the Internal Revenue Service.
“Xxxxxxx” means Xxxxx X. Xxxxxxx, in his individual capacity.
“Xxxxxxx Trust” has the meaning set forth within the definition of Member.
“Knowledge of the Seller” means the knowledge, after Due Inquiry, of each Member and Xxxxxx
Xxxxxxx.
“Law” means any law, statute, code, ordinance, rule, regulation or other requirement of any
Governmental Authority.
“Leased Real Property” has the meaning set forth in Section 6.9(b).
“Legend” has the meaning set forth in Section 3.4(a).
“Liability” means any debt, loss, damage, adverse claim, fines, penalties, liability or
obligation (whether direct or indirect, known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, matured or unmatured, determined or determinable, disputed or
undisputed, liquidated or unliquidated, or due or to become due, and whether in contract, tort,
strict liability or otherwise), and including all costs and expenses relating thereto (including
all fees, disbursements and expenses of legal counsel, experts, engineers and consultants and costs
of investigation).
“Liability Claim” has the meaning set forth in Section 10.2(a).
“Liens” means any mortgage, pledge, hypothecation, deed of trust, lease, rights of others,
right of first refusal, claim, security interest, encumbrance, easement, servitude, proxy, title
defect, title retention agreement, voting trust agreement, transfer restriction, community property
interest, option, lien, charge or similar restrictions or limitations.
“Litigation Conditions” has the meaning set forth in Section 10.2(b).
“Losses” has the meaning set forth in Section 10.1(a).
“Material Adverse Effect” means any change or effect having a material adverse effect on the
properties, assets, liabilities, results of operations, condition (financial or otherwise), or
employee or customer relations of the Business.
“Material Contracts” has the meaning set forth in Section 6.11.
“Material Customers” has the meaning set forth in Section 6.21(a).
“Material Suppliers” has the meaning set forth in Section 6.21(b).
6
“Member-Level Taxes” means any Taxes to which the Members are subject as a result of their
respective allocations of taxable income, gain or loss of the Company and any Taxes imposed on the
Company in lieu of Taxes to which the Members are subject as a result of their respective
allocations of taxable income, gain or loss of the Company or due to lack of jurisdiction over the
Members.
“Members” means collectively, Xxxxx X. Xxxxxxx, as trustee of the Xxxxx X. Xxxxxxx Separate
Property Revocable Trust dated May 7, 1999 (the “Xxxxxxx Trust”), Xxxxx X. Xxxxxxxxxx
(“Xxxxxxxxxx”), Xxxxx X. Xx-Xxxxxx and Xxxxx X. Xx-Xxxxxx. Each individually, is a “Member.”
“Nonassignable Assets” has the meaning set forth in Section 9.4(b).
“Non-Compete Period” means the period equal to five years following the Closing Date.
“Non-Competition Agreement” means, in the case of each Member, that certain non-competition
agreement, dated as of the Closing Date, by and between such Member and the Buyer, substantially in
the form attached hereto as Exhibit F.
“Object Code” means computer software that is substantially or entirely in binary form and
that is intended to be directly executable by a computer after suitable processing and linking but
without any intervening steps of compilation or assembly.
“Order” means any order, judgment, injunction, assessment, award, decree, ruling, charge or
writ of any Governmental Authority.
“Ordinary Course of Business” means the ordinary and usual course of day-to-day operations of
the Business consistent with past custom and practice (including with respect to quantity and
frequency).
“Owned Real Property” has the meaning set forth in Section 6.9(a).
“Parent” means The Xxxxxx-Xxxx Company, an Ohio corporation.
“Parent Common Stock” means the Parent’s common stock, without par value.
“Parent Shares” has the meaning set forth in Section 3.1(b).
“Parent Shares Recipients” has the meaning set forth in Section 3.1(b).
“Parent Shares Value” means $2,755,000, which amount represents the value of the Parent
Shares, calculated based on the averages of the high and low sales prices of a share of Parent
Common Stock on the NYSE Amex Stock Exchange for each trading day during the period beginning on
September 7, 2010 and ending on September 24, 2010, averaged together, which calculation is set
forth on Exhibit G.
7
“Patents” means all patents, industrial and utility models, industrial designs, xxxxx patents,
patents of importation, patents of addition, certificates of invention, and any other
indicia of invention ownership issued or granted by any Governmental Authority, including all
provisional applications, priority and other applications, divisionals, continuations (in whole or
in part), extensions, reissues, re-examinations or equivalents or counterparts of any of the
foregoing; and moral and economic rights of inventors in any of the foregoing.
“Payoff Letters” means the letters provided by the lenders or other holders of the Seller’s
Indebtedness to the Seller in connection with the repayment of the Indebtedness as contemplated
hereby.
“Permit” means any permit, license, approval, certificate, qualification, consent or
authorization issued by a Governmental Authority.
“Permitted Liens” means (a) all Liens reflected on Schedule 1.1, (b) all statutory
Liens for current Taxes, assessments, fees and other charges by Governmental Authorities that are
not due and payable as of the Closing Date, (c) all defects, exceptions, restrictions, easements,
rights of way and encumbrances that do not materially adversely affect the use and operation of any
Purchased Assets in the operation of the Business, and (d) mechanics’, carriers’, workers’, and
repairers’ Liens arising or incurred in the Ordinary Course of Business that are not material to
the business, operations and financial condition of the Seller’s property so encumbered and that
are not resulting from a breach, default or violation by the Seller of any Contract or Law.
“Person” means any individual, sole proprietorship, partnership, corporation, limited
liability company, unincorporated society or association, trust or other entity.
“Post-Closing Adjustment Statement” has the meaning set forth in Section 3.2(a).
“Proceeding” means any demand, charge, complaint, action, suit, proceeding, arbitration,
hearing, audit, investigation or claim of any kind (whether civil, criminal, administrative,
investigative, informal or other, at law or in equity) commenced, filed, brought, conducted or
heard by, against, to, of or before or otherwise involving, any Governmental Authority.
“Purchase Price” has the meaning set forth in Section 3.1.
“Purchased Assets” has the meaning set forth in Section 2.1.
“Purchased Intellectual Property” means all Intellectual Property owned (in whole or in part),
held or used by the Seller, together with all income, royalties, damages and payments due or
payable to the Seller as of the Closing or thereafter and the rights to xxx and collect damages for
such infringements, misappropriations or other violations, and any corresponding equivalent or
counterpart rights, title or interest that exist or may be secured hereafter anywhere in the world
and all copies and tangible embodiments of the foregoing, including the Intellectual Property
listed on Schedule 6.10.
“Real Property” means any and all real property and interests in real property of the Seller
(together with all buildings, structures, fixtures and improvements thereon), including the Owned
Real Property, the Leased Real Property, any real property leaseholds and subleaseholds, purchase
options, easements, licenses, rights to access and rights of way and any other real property
otherwise owned, occupied or used by the Seller in the operation of the Business.
8
“Real Property Leases” has the meaning set forth in Section 6.9(b).
“Release” means any releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, migrating, disposing or dumping of a Hazardous Material
into the Environment (including the abandonment or discarding of barrels, containers and other
closed receptacles containing any Hazardous Materials) and any condition that results in the
exposure of a Person to a Hazardous Material.
“Restricted Territory” means (a) the United States, (b) the geographic area(s) within a
one-hundred (100) mile radius of any and all Company location(s) in which employees or independent
contractors of the Company work or of any other geographic location to which employees or
independent contractors of the Company are assigned or have any responsibility (either direct or
supervisory); and (c) all of the specific customer accounts of the Company as of the Closing Date,
whether within or outside of the geographic areas defined in clauses (a) and (b) above.
“Revised Statement” has the meaning set forth in Section 3.3.
“Securities Act” means the Securities Act of 1933, as amended.
“Seller” has the meaning set forth in the preamble.
“Selling Expenses” means (a) all unpaid costs, fees and expenses of outside professionals
incurred by the Seller relating to the process of selling the Business pursuant to this Agreement
or otherwise, including all legal fees, accounting, tax, investment banking fees and expenses, (b)
bonuses or any other payments (including the employer portion of any payroll, social security,
unemployment or similar Taxes) that are unpaid by the Seller as of the Closing Date and have been
or should have been accrued for or are payable to employees, consultants and agents of and to the
Seller, in each case, only if as a consequence of the transactions contemplated by this Agreement
and (c) severance obligations owed by the Seller to employees, consultants and agents of and to the
Seller triggered prior to or as a consequence of the transactions contemplated by this Agreement
(including the employer portion of any payroll, social security, unemployment or similar Taxes
associated with such severance obligations).
“Software” means all computer software, programs and code, including assemblers, applets,
compilers, Source Code, Object Code, development tools, design tools, user interfaces and data, in
any form or format, however fixed.
“Source Code” means computer software that may be displayed or printed in human-readable form,
including all related programmer comments, annotations, flowcharts, diagrams, help text, data and
data structures, instructions, procedural, object-oriented or other human-readable code, and that
is not intended to be executed directly by a computer without an intervening step of compilation or
assembly.
“Standard Terms” means Seller’s current standard terms and conditions applicable to any
product sold, leased or delivered by the Seller or any service provided by the Seller, as set forth
on Schedule 6.19, or any predecessor standard terms and conditions of Seller.
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“Tax” means (a) any foreign, United States federal, state or local net income, alternative or
add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding, payroll, employment, excise, escheat, severance, stamp,
occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever, together with any
interest, penalty, addition to tax or additional amount imposed by any Law or Taxing Authority,
whether disputed or not, (b) any liability for the payment of any amounts of any of the foregoing
types as a result of being a member of an affiliated, consolidated, combined or unitary group, or
being a party to any agreement or arrangement whereby liability for payment of such amounts was
determined or taken into account with reference to the liability of any other Person, (c) any
liability for the payment of any amounts as a result of being a party to any tax sharing or
allocation agreements or arrangements (whether or not written) or with respect to the payment of
any amounts of any of the foregoing types as a result of any express or implied obligation to
indemnify any other Person, and (d) any liability for the payment of any of the foregoing types as
a successor, transferee or otherwise.
“Taxing Authority” means any Governmental Authority responsible for the administration or the
imposition of any Tax.
“Tax Returns” means all Tax returns, statements, reports, elections, schedules, claims for
refund, and forms (including estimated Tax or information returns and reports), including any
supplement or attachment thereto and any amendment thereof.
“Threat of Release” means a substantial likelihood of a Release that requires action to
prevent or mitigate damage or injury to health, safety or the Environment that might result from
such Release.
“Title Company” has the meaning set forth in Section 4.1(h).
“Title Insurance” has the meaning set forth in Section 4.1(h).
“Trademarks” means trademarks, service marks, fictional business names, trade names,
commercial names, certification marks, collective marks, and other proprietary rights to any words,
names, slogans, symbols, logos, devices or combinations thereof used to identify, distinguish and
indicate the source or origin of goods or services; registrations, renewals, applications for
registration, equivalents and counterparts of the foregoing; and the goodwill of the Business
associated with each of the foregoing.
“Trade Secrets” means anything that would constitute a “trade secret” under applicable law,
and all other inventions (whether patentable or not), industrial designs, discoveries,
improvements, ideas, designs, models, formulae, patterns, compilations, data collections, drawings,
blueprints, devices, methods, techniques, processes, know-how, confidential information,
proprietary information, customer lists, software and technical information; and moral and economic
rights of authors and inventors in any of the foregoing.
“Transfer Taxes” has the meaning set forth in Section 8.1.
“Transferred Employees” has the meaning set forth in Section 9.8(c).
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“Unpaid Taxes Amount” has the meaning set forth in Section 3.2(a).
“WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988, as amended,
and the rules and regulations promulgated thereunder.
ARTICLE 2: PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
2.1 Purchase and Sale of the Assets. Concurrently with the execution of this
Agreement, the Buyer shall purchase, or cause to be purchased, from the Seller, and the Seller
shall sell, transfer, assign, convey and deliver to the Buyer, all of the Seller’s right, title and
interest in, to and under the Purchased Assets, free and clear of all Liens other than Permitted
Liens. “Purchased Assets” means all of the business, assets, properties, contractual rights,
goodwill, going concern value, rights and claims of the Seller that are related to or used or
usable in connection with the Business, wherever situated and of whatever kind and nature, real or
personal, tangible or intangible, whether or not reflected on the books and records of the Seller
(other than the Excluded Assets), including each of the following assets:
(a) all accounts and notes receivable, unbilled revenues, reimbursable costs and
expenses and other claims for money due to the Seller;
(b) all raw materials, supplies, work in process, finished goods and other inventories
related to or used or usable in connection with the Business;
(c) all tangible personal property, including Furniture and Equipment;
(d) all deferred expenses, inventory payments and refundable deposits (including
customer deposits and security for rent, electricity, telephone or otherwise);
(e) all Real Property;
(f) the Purchased Intellectual Property;
(g) all rights and incidents of interest of, and benefits accruing to, the Seller under
all Contracts related to or used in connection with the Business (the “Company Contracts”),
including all claims or causes of action with respect to such Contracts;
(h) all Documents, whether or not physically located on any of the premises referred to
in clause (e) above;
(i) all Permits, including Environmental Permits, used by the Seller in the Business
(which includes all Permits necessary to conduct the Business as currently conducted) and
all rights, and incidents of interest therein;
(j) all rights of the Seller under non-disclosure or confidentiality, non-compete, or
non-solicitation agreements with Former Employees, employees, consultants and agents of the
Seller or with third parties to the extent relating to the Business or the Purchased Assets
(or any portion thereof);
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(k) all rights of the Seller under or pursuant to all warranties, representations and
guarantees made by suppliers, manufacturers and contractors to the extent relating to
products sold or leased or services provided to the Seller or to the extent affecting any
Purchased Assets;
(l) all claims and causes of action of the Seller against third parties relating to the
Business and all rights to proceeds therefrom;
(m) all telephone numbers and facsimile numbers;
(n) all insurance proceeds, and all rights to insurance proceeds, in each case to the
extent received or receivable in respect of the Business;
(o) all Employee Plans (including any Contracts related thereto) and all assets held
with respect to the Employee Plans;
(p) all cash and cash equivalents owned by the Seller and all Investments;
(q) all insurance policies owned or maintained by the Seller; and
(r) the Business as a going concern and all goodwill and other intangible assets
associated with the Business, including the goodwill associated with the Purchased
Intellectual Property and the Business.
2.2 Excluded Assets. Nothing herein contained is deemed to sell, transfer, assign or
convey the Excluded Assets to the Buyer, and the Seller shall retain all right, title and interest
to, in and under the Excluded Assets. “Excluded Assets” means each of the following assets:
(a) prepaid Taxes;
(b) all rights that accrue to the Seller under this Agreement or any Ancillary
Agreement;
(c) existing life insurance policies insuring the lives of Xxxxxxx and Xxxxxxxxxx
(excluding unearned premiums thereon);
(d) any Permits that are not by their nature or terms, assignable; and
(e) (i) all minute books, organizational documents and stock registers, (ii) such other
books and records of the Seller as pertain to ownership, organization or existence of the
Business prior to the Closing, and (iii) duplicate copies of such records as are necessary
to enable the Seller to file tax returns and reports.
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2.3 Assumption of Liabilities. On the terms and subject to the conditions set forth
in this Agreement, concurrently with the execution of this Agreement the Buyer shall assume only
the following Liabilities of the Seller (collectively, the “Assumed Liabilities”):
(a) all accounts payable and accrued expenses, including all accrued Company-Level
Taxes, accrued payroll and payroll taxes, 401(k) withholdings and matching contributions,
accrued sales and property taxes and accrued commissions payable, in each case, of the
Seller arising in the Ordinary Course of Business;
(b) all Liabilities of the Seller under the Company Contracts; and
(c) all other liabilities of the Seller arising in the Ordinary Course of Business,
before the Closing Date (including without limitation warranty claims arising under the
Standard Terms)
Notwithstanding the foregoing, Assumed Liabilities does not include those Liabilities
expressly designated as Excluded Liabilities in clauses (a) through (c) of
Section 2.4 below.
2.4 Excluded Liabilities. The Assumed Liabilities shall not include, and the Buyer
shall not assume or be liable for, any Excluded Liabilities. The Seller shall timely perform,
satisfy and discharge in accordance with their respective terms all Excluded Liabilities.
“Excluded Liabilities” means all Liabilities of the Seller, other than the Assumed Liabilities,
including (a) all Member-Level Taxes, (b) Selling Expenses, and (c) annual 2010 bonuses accrued
through the Closing Date (but not salaries, commission or other compensation).
ARTICLE 3: PURCHASE PRICE
3.1 Purchase Price. In full consideration for the sale, transfer and conveyance by
the Seller to the Buyer of the Purchased Assets, in addition to the assumption by the Buyer of the
Assumed Liabilities, the Buyer shall, concurrently with the execution and delivery of this
Agreement:
(a) pay, or cause to be paid, to the Seller by bank wire transfer of immediately
available funds to an account designated in writing by the Seller, an amount in cash equal
to $25,000,000 minus the Escrow Amount minus the Parent Shares Value;
(b) deliver to, as designees of the Seller, the Xxxxxxx Trust and Xxxxxxxxxx
(collectively, the “Parent Shares Recipients”), certificates issued in the names of the
Parent Shares Recipients representing, in the aggregate, 100,000 shares of Parent Common
Stock (collectively, the “Parent Shares”), with 75,000 of such shares being issued to the
Xxxxxxx Trust and 25,000 of such shares being issued to Xxxxxxxxxx; and
(c) pay, or cause to be paid, to the Persons entitled thereto, all of the Indebtedness
of the Seller pursuant to the Payoff Letters.
The consideration provided pursuant to the foregoing clauses (a) through (c) is collectively
referred to as the “Purchase Price”. In addition, concurrently with the execution and delivery of
this Agreement, the Buyer shall pay, or cause to be paid, the Escrow Amount into the Escrow Account
pursuant to the terms of the Escrow Agreement. The Seller acknowledges that any delivery or
payment made to a Person other than the Seller pursuant to this Section 3.1 is at the
Seller’s direction and is in complete satisfaction of the Buyer’s obligations under this
Section 3.1.
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3.2 Escrow Releases.
(a) Within five business days after the 18-month anniversary of the Closing Date, the
Buyer shall prepare and deliver to the Seller a statement (the “Post-Closing Adjustment
Statement”) setting forth (i) the aggregate amount of accounts receivable of the Business
that were reflected on the October 1, 2010 balance sheet of the Seller prepared by the
Seller but that remain uncollected as of the time the Post-Closing Adjustment Statement is
delivered and that the Buyer reasonably deems uncollectible (the “Ineligible Accounts
Receivable”; for the avoidance of doubt, the Ineligible Accounts Receivable will exclude any
accounts receivable reflected on the October 1, 2010 balance sheet of the Seller that are
reversed after the Closing Date as a result of a product return made after the Closing
Date), (ii) the difference between the net realizable value of the inventory of the Business
as of October 1, 2010 as reasonably determined by the Buyer and the amount of inventory
reflected on such October 1, 2010 balance sheet (the “Inventory Difference”), (iii) the
aggregate amount of any Taxes that were required to be, but were not, paid by the Seller for
the period up to and including the Closing Date pursuant to Sections 8.3 (the
“Unpaid Taxes Amount”), and (iv) the amount of any Losses specified in any pending Liability
Claim for which a Claims Notice has been duly submitted. The Post-Closing Adjustment
Statement will be conclusive and binding on the Seller, absent manifest error.
(b) Within five business days following the delivery by the Buyer to the Seller of the
Post-Closing Adjustment Statement, and subject to the penultimate sentence of Section 4.2 of
the Escrow Agreement, the Buyer and the Seller shall deliver a joint instruction letter to
the Escrow Agent instructing the Escrow Agent:
(i) to release to the Buyer from the Escrow Account an amount equal to (A) the
Unpaid Taxes Amount, plus (B) the Inventory Difference, plus (C) the
aggregate amount of Ineligible Accounts Receivable; and
(ii) to release to the Seller from the Escrow Account the full amount of funds
then remaining in the Escrow Account, if any, after making the release described in
the foregoing clause (i), less the amounts, if any, specified in any pending
Liability Claim for which a Claims Notice has been duly submitted.
(c) The Escrow Agreement addresses the manner in which releases from the Escrow Account
are to be made with respect to any Liability Claim for which a Claims Notice has been
submitted.
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3.3 Purchase Price Allocation. Within a reasonable period after the Closing Date,
anticipated to be on or about December 15, 2010, the Buyer shall prepare and deliver to the Seller
a schedule (the “Asset Acquisition Statement”) allocating the Purchase Price and the Assumed
Liabilities among the Purchased Assets in accordance with Section 1060 of the Code. The Buyer
shall prepare and deliver to the Seller from time to time revised copies of the Asset
Acquisition Statement (the “Revised Statements”) so as to report any matters on the Asset
Acquisition Statement that need updating (including purchase price adjustments, if any). The
Purchase Price paid by the Buyer for the Purchased Assets and the amount of the Assumed Liabilities
must be allocated among the Purchased Assets in accordance with the Asset Acquisition Statement,
or, if applicable, the last Revised Statement, provided by the Buyer to the Seller, and all income
Tax Returns and reports filed by the Buyer and the Seller must be prepared consistently with such
allocation. For purposes of this Section 3.3, the Purchased Assets include the covenants
not to compete as set forth in Section 9.9; provided, however, that the Seller shall not
allocate more than $100,000 toward any such covenant without the Seller’s written consent. Each of
the Buyer and the Seller shall promptly notify the other if any Taxing Authority challenges the
Asset Acquisition Statement, or, if applicable, the last Revised Statement.
3.4 Parent Shares.
(a) The Parent Shares shall not be registered under the Securities Act, nor the
securities or “Blue Sky” laws of any state, including those of Ohio or Arizona and the share
certificate(s) representing the Parent Shares shall be stamped or otherwise imprinted with a
legend (“Legend”) in substantially the following form:
“THE COMMON SHARES OF THE COMPANY REPRESENTED BY THIS CERTIFICATE
ARE ‘RESTRICTED SECURITIES’ AS THAT TERM IS DEFINED IN RULE 144
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
‘ACT’). THESE SHARES HAVE NOT BEEN REGISTERED FOR RESALE UNDER THE
ACT. ACCORDINGLY, THE SHAREHOLDER MAY NOT OFFER, SELL, TRANSFER,
PLEDGE OR HYPOTHECATE THESE SHARES UNLESS, PRIOR TO ANY PROPOSED
OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION OF ALL OR PART OF
THESE SHARES, (i) A REGISTRATION STATEMENT UNDER THE ACT WITH
RESPECT TO SUCH SHARES SHALL THEN BE EFFECTIVE, OR (ii) THE COMPANY
SHALL HAVE RECEIVED AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION
IS NOT REQUIRED BECAUSE SUCH TRANSACTION IS EITHER IN COMPLIANCE
WITH OR EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT.”
(b) With respect to the Parent Shares, the Buyer acknowledges that promptly following
receipt of a written request from a Parent Shares Recipient for removal of the Legend from
some or all of such Parent Shares Recipient’s certificates referenced in Section
3.4(a), provided such Parent Shares Recipient is not then an Affiliate of the Buyer and
provided, further, that such request is accompanied by such certificate(s) duly endorsed for
surrender and by either (i) a written opinion satisfactory to the Buyer from counsel
reasonably satisfactory to the Buyer that the Parent Shares represented by such
certificate(s) may thereafter be freely transferred under applicable federal and state
securities Laws or (ii) such other evidence as the Buyer may require in the Buyer’s
reasonable judgment to enable the Buyer to determine that removal of such Legend from such
certificates would not conflict with or be inconsistent with any other federal and state
securities laws, rules and regulations, the Buyer will cause a new certificate representing
such shares not imprinted with the Legend to be issued to such Parent Shares Recipient or
such Parent Shares Recipient’s nominees.
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ARTICLE 4: DELIVERIES AND OTHER ACTIONS
4.1 Deliveries by the Seller. Concurrently with the execution and delivery of this
Agreement, the Seller shall deliver, or cause to be delivered, to the Buyer the following items:
(a) a copy of the Escrow Agreement, duly executed by the Seller;
(b) a copy of the Xxxx of Sale, duly executed by the Seller;
(c) a copy of the Assignment and Assumption Agreement, duly executed by the Seller and,
at the request of the Buyer, separate assignment and assumption agreements relating to any
of the Real Property Leases in form and substance reasonably acceptable to the Buyer;
(d) the original Documents;
(e) the Payoff Letters and appropriate termination statements under the Uniform
Commercial Code and other instruments as may be requested by the Buyer to extinguish all
Indebtedness of the Seller and all security interests related thereto to the extent directed
by the Buyer (including evidence that all security interests in the Owned Real Property have
been released);
(f) all of the consents listed on Schedule 6.4;
(g) a non-foreign person affidavit that complies with the requirements of Section 1445
of the Code, duly executed by the Seller and in form and substance reasonably acceptable to
Buyer;
(h) ALTA Extended Owner’s Policies of Title Insurance for the Owned Real Property, or
binding commitments to issue such policies (the “Title Insurance”) issued by a title company
reasonably acceptable to the Buyer (the “Title Company”), in such amount as may be
reasonably agreeable to the Buyer, insuring that title to the Owned Real Property is vested
in the Buyer as of the Closing, subject only to the Permitted Liens. The Seller shall
provide to the Title Company such affidavits as are necessary to permit the Title Company to
(i) delete its standard exception relating to mechanics’ and materialmen’s liens; (ii) issue
an “owner’s comprehensive endorsement;” and (iii) contain such other endorsements as the
Buyer may reasonably request, it being understood that the costs of the Title Insurance
shall be borne one-half by the Buyer and one-half by the Seller;
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(i) copies of the most recent surveys available, as applicable, for the Owned Real
Property;
(j) the Deeds, duly executed and notarized by the Seller;
(k) all documents and instruments, executed and delivered in form and substance
acceptable to the Buyer, amending or terminating (as appropriate) the Seller’s articles of
organization, any foreign qualification registrations and any assumed name or d/b/a filings
to eliminate the Seller’s right to use the name “National Pump Company” or any name that, in
the reasonable judgment of the Buyer, is similar to such name, and (ii) all consents,
documents and instruments, executed and delivered in form and substance acceptable to the
Buyer, that are necessary or desirable for the Buyer to claim, register or file to use the
“National Pump Company” name or any name that, in the reasonable judgment of the Buyer, is
similar to such name;
(l) titles to any motor vehicles owned by the Seller constituting Purchased Assets,
duly endorsed or otherwise transferred to the Buyer;
(m) a domain name assignment, in a form reasonably acceptable to the Buyer,
transferring to the Buyer all right, title and interest in, to and under all of the Domain
Names held or used by the Seller, duly executed by the Seller;
(n) a trademark assignment, in a form reasonably acceptable to the Buyer, transferring
to the Buyer all right, title and interest in, to and under all of the Trademarks held or
used by the Seller, duly executed by the Seller;
(o) copies of the Confidentiality Agreements, duly executed by each of Xxxxxxx and
Xxxxxxxxxx;
(p) evidence, reasonably acceptable to the Buyer, that any required approvals of the
Members and the Manager of the Seller to this Agreement and the transactions contemplated
hereby has been obtained;
(q) for each Member that is an individual and Xxxxxxx, an executed Non-Competition
Agreement;
(r) a copy of an investor qualification statement, duly executed by each of the Xxxxxxx
Trust and Xxxxxxxxxx, in the form attached as Exhibit H; and
(s) such other documents and instruments as the Buyer reasonably requests to consummate
the transactions contemplated by this Agreement.
4.2 Deliveries by the Buyer. Concurrently with the execution and delivery of this
Agreement, the Buyer shall deliver, or cause to be delivered, to the Seller the following items:
(a) a copy of the Escrow Agreement, duly executed by the Buyer;
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(b) a copy of the Assignment and Assumption Agreement, duly executed by the Buyer;
(c) a copy of each Confidentiality Agreement, duly executed by the Buyer;
(d) a copy of each Non-Competition Agreement, duly executed by the Buyer;
(e) executed stock certificates representing the Parent Shares; provided,
however, notwithstanding anything to the contrary contained herein (including
Section 3.1), the Buyer will not be able to deliver such stock certificates
concurrently with the execution and delivery of this Agreement, but the Buyer will deliver
such stock certificates as promptly as practicable thereafter; and
(f) such other documents and instruments as the Seller reasonably requests to
consummate the transactions contemplated by this Agreement.
ARTICLE 5: [INTENTIONALLY OMITTED]
ARTICLE 6: REPRESENTATIONS AND WARRANTIES RELATING TO THE SELLER
The Seller represents and warrants to the Buyer as follows:
6.1 Existence and Good Standing. The Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of Arizona, and is
duly qualified to do business as a foreign limited liability company and is in good standing in the
jurisdictions set forth on Schedule 6.1, which are the only jurisdictions in which the
Seller is required to be so qualified.
6.2 Power; Validity and Enforceability. The Seller has the requisite power and
authority to execute, deliver and perform its obligations under this Agreement and the Ancillary
Agreements. The execution, delivery and performance of this Agreement and each of the Ancillary
Agreements, and the consummation of the transactions contemplated hereby and thereby, has been duly
authorized and approved by all required action on the part of the Seller (including any required
approval of the Members). This Agreement and each of the Ancillary Agreements have been duly
executed and delivered by the Seller and, assuming due authorization, execution and delivery by the
Buyer, represent the legal, valid and binding obligation of the Seller, enforceable against the
Seller in accordance with their respective terms.
6.3 No Conflict. Neither the execution of this Agreement or the Ancillary Agreements,
nor the performance by the Seller of its obligations hereunder or thereunder will (a) violate or
conflict with the articles of organization or the limited liability company agreement or equivalent
organizational documents of the Seller or any Law or Order applicable to the Seller or by which the
Purchased Assets are bound, (b) violate, conflict with or result in a breach or termination of, or
otherwise give any Person additional rights or compensation under, or the right to terminate or
accelerate, or the loss of a material benefit under, or constitute (with notice or lapse of time,
or both) a default under the terms of any Contract to which the Seller is a party or by which any
of the Purchased Assets are bound or (c) result in the creation or imposition of any Lien with
respect to, or otherwise have an adverse effect upon, the Purchased Assets.
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6.4 Required Filings and Consents. Except as set forth on Schedule 6.4, no
consent, waiver, approval, authorization, Order or Permit of, or declaration or filing with, or
notification to, any Person is required in connection with (a) the execution and delivery by the
Seller of this Agreement or the Seller or any Member of the Ancillary Agreements or the
consummation of the transactions contemplated hereby or thereby, or (b) the continuing validity and
effectiveness immediately following the Closing of any Permit or Contract of the Seller.
6.5 Financial Statements.
(a) Schedule 6.5(a) sets forth true and complete copies of (i) the reviewed
balance sheets of the Seller as of December 31, 2009 and December 31, 2008 and the related
reviewed statements of income, the members’ equity and cash flows for the fiscal years then
ended, together with the other financial information included therewith (collectively, the
“Financial Statements”), and (ii) the unaudited balance sheet of the Seller as of August 28,
2010 and the related unaudited statement of income, members’ equity and cash flows for the
eight-month period then ended (the “Interim Financial Statements”).
(b) The Financial Statements present fairly, in all material respects, the financial
position, results of operations, the members’ equity and cash flows of the Business at the
dates and for the time periods indicated and have been prepared and reviewed by the
management of the Seller in accordance with GAAP, consistently applied throughout the
periods indicated. The Interim Financial Statements present fairly, in all material
respects, the financial position, results of operations, members’ equity and cash flows of
the Business at the date and for the period indicated and have been prepared and reviewed by
the management of the Seller in accordance with GAAP, consistent with the Financial
Statements, except for the absence of footnote disclosure and the customary year-end
adjustments or as otherwise set forth on Schedule 6.5(b), none of which are material
individually or in the aggregate. The Financial Statements and the Interim Financial
Statements were derived from the books and records of the Seller. To the Knowledge of the
Seller, (i) there are no significant deficiencies or material weaknesses in the design or
operation of the Seller’s internal controls that adversely affect the ability of the Seller
to record, process, summarize and report financial information, and (ii) there has been no,
and there does not currently exist, any fraud, nor the existence of or allegation of
financial improprieties that involves management of the Seller.
(c) All accounts and notes receivable of the Seller represent sales actually made in
the Ordinary Course of Business or valid claims as to which full performance has been
rendered by the Seller. There are no disputes with respect to any of the accounts
receivable reflected on the balance sheet included in the Interim Financial Statements that
have not been reserved for in the Interim Financial Statements. The reserve on the
Financial Statements against the accounts receivable for returns and bad debts is adequate
and has been calculated in accordance with GAAP and in a manner consistent with past
practice. All of the accounts and notes receivable of the Seller (other than the Ineligible
Accounts Receivable) are, in the aggregate, collectible in full in the Ordinary Course of
Business, net of the reserve therefor. No counter claims, defenses or offsetting claims
with respect to the accounts or notes receivable of the Seller are pending or, to the
Knowledge of the Seller, threatened. The Seller has not agreed to any deduction, free
goods, discount or other deferred price or quantity adjustment with respect to any of its
accounts receivables. Except as set forth on Schedule 6.5(c), all of the accounts
and notes receivable of the Seller relate solely to sales of goods or services to customers
of the Business, none of whom is a Member or an Affiliate of the Seller or any Member.
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(d) The inventories of the Seller are of a quality and quantity useable and, with
respect to finished goods, saleable in the Ordinary Course of Business, and, in all cases,
fit for the purpose for which they were procured or manufactured, subject to appropriate and
adequate allowances reflected on the Financial Statements for obsolete, excess, slow-moving
and other irregular items (and subject to any adjustments reflected in the Inventory
Difference). Such allowances have been calculated in accordance with GAAP and in a manner
consistent with past practice. The quantities of each item of inventory (whether raw
materials, work-in-process or finished goods) are not excessive, but are reasonable in the
present circumstances of the Seller. Other than as set forth on Schedule 6.5(d),
none of the Seller’s inventory is held on consignment, or otherwise, by third parties.
6.6 Title to Personal Property; Sufficiency of Purchased Assets. The Seller owns and
has good and marketable title to, or a valid leasehold interest in, each of the Purchased Assets
that is personal property and all of its tangible personal property and assets, free and clear of
all Liens other than Permitted Liens. The Purchased Assets constitute all of the assets used in or
held for use in the Business and are sufficient for the Buyer to conduct the Business from and
after the Closing Date without interruption and in the Ordinary Course of Business, as it has been
conducted by the Seller. The tangible personal property and assets of the Seller are free from
defects and in good operating condition and repair (subject to normal wear and tear).
6.7 Conduct of Business. Since December 31, 2009 the business and operations of the
Seller have been conducted in the Ordinary Course of Business and there have not occurred any
facts, events, developments or circumstances that constitute, or are reasonably likely to result
in, a Material Adverse Effect. Without limiting the generality of the foregoing, since December
31, 2009, except as set forth on Schedule 6.7, the Seller has not:
(a) borrowed any amount or incurred or become subject to any liability except
borrowings under lines of credit existing on such date, other than in the Ordinary Course of
Business;
(b) (i) guaranteed the Indebtedness of any Person, (ii) cancelled any Indebtedness owed
to it or (iii) released any claim possessed by it;
(c) (i) made, changed or rescinded any Tax election, or (ii) consented to any extension
or waiver of the limitation period applicable to any claim or assessment in respect of
Taxes;
(d) suffered any theft, damage, destruction or loss (without regard to any insurance)
of or to any tangible asset or assets resulting in losses in excess of $25,000
individually or $100,000 in the aggregate;
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(e) (i) increased the salary, wages or other compensation rates of any officer,
employee, manager or consultant, other than in the Ordinary Course of Business, (ii) made or
granted any increase in any Employee Plan, or amended or terminated any existing Employee
Plan, or adopted any new Employee Plan other than as required by Law or an existing contract
or (iii) made any commitment or incurred any liability to any labor organization;
(f) sold, assigned, transferred (including transfers to any employees or Affiliates),
licensed or subjected to any Lien any tangible or intangible assets or properties, other
than sales of inventory or dispositions of obsolete assets in the Ordinary Course of
Business;
(g) authorized or made any capital expenditures or commitments therefor in excess of
$50,000 individually or $100,000 in the aggregate;
(h) amended its articles of organization, limited liability company agreement or
equivalent organizational documents;
(i) taken any other action or entered into any other transaction (including any
transactions with employees or Affiliates) other than in the Ordinary Course of Business or
other than the transactions contemplated by this Agreement and the Ancillary Agreements;
(j) instituted or settled any Proceeding;
(k) made any write-off or write-down of or made any determination to write-off or
write-down any of its assets and properties in excess of $25,000;
(l) made any change in the general pricing practices or policies or any change in the
credit or allowance practices or policies of the Seller;
(m) engaged in any activity that reasonably could be expected to result in a reduction,
temporary or otherwise, in the demand for, or an increase in the returns of the products
offered by the Seller following the Closing, including sales of products on terms or at
prices or quantities outside the Ordinary Course of Business;
(n) accelerated the collection of accounts receivable or delayed the payment of
accounts payable, in each case outside the Ordinary Course of Business;
(o) entered into any amendment, modification, termination (partial or complete) or
granted any waiver under or given any consent with respect to any agreement that is required
to be disclosed on the Schedules to this Agreement;
(p) licensed in or purchased any Intellectual Property other than in the Ordinary
Course of Business or licensed out or otherwise permitted any Person to use any Purchased
Intellectual Property;
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(q) commenced or terminated any line of business; or
(r) agreed to do any of the foregoing.
6.8 Taxes. Except as set forth on Schedule 6.8:
(a) All Tax Returns required to be filed with any Taxing Authority by or on behalf of
the Seller, to the extent required to be filed on or before the Closing Date, have been
timely filed in accordance with all applicable Laws.
(b) All such Tax Returns correctly and completely reflect the facts regarding the
income, business, assets, operations, activities and status of the Seller. The Seller is
not currently a beneficiary of any extension of time within which to file any Return.
(c) All Taxes owed by the Seller (whether or not shown as due and payable on any Tax
Return) have been timely paid to the appropriate Taxing Authority.
(d) The Seller has correctly withheld and timely remitted to the appropriate Taxing
Authority all Taxes required to have been withheld and remitted in connection with amounts
paid or owing to any employee, independent contractor, creditor, member or other Person.
(e) There are no pending or unresolved Tax audits.
(f) The Seller has not granted, or has not had granted on its behalf, any extension or
waiver of the statute of limitations period applicable to any Tax Return or within which any
Tax may be assessed or collected by any Taxing Authority, which period (after giving effect
to such extension or waiver) has not yet expired.
(g) There are no Liens for Taxes upon the assets or properties of the Seller, other
than Permitted Liens.
(h) The Seller has not been a member of an affiliated, consolidated, combined or
unitary group or participated in any other arrangement whereby any income, revenues,
receipts, gain or loss was determined or taken into account for Tax purposes with reference
to or in conjunction with any income, revenues, receipts, gain, loss, asset or liability of
any other Person other than a group of which the Seller was the common parent. The Seller
has no liability for the Taxes of any Person (other than the Seller ) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a
transferee or successor, by contract, or otherwise.
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(i) The Seller has not received notice of any claim by a Governmental Authority in a
jurisdiction where the Seller does not file Tax Returns that it is or may be subject to
taxation by that Governmental Authority.
(j) The Seller has not participated in any “reportable transaction” as defined in
Section 6707A of the Code or Treasury Regulation Section 1.6011-4 (or any predecessor
provision).
(k) The Seller has disclosed on its federal income Tax Returns all positions taken in
such Tax Returns that could give rise to a substantial understatement of federal income Tax
within the meaning of Section 6662 of the Code.
6.9 Real Property.
(a) Owned Real Property. Schedule 6.9(a) identifies the parcels of
Real Property owned by the Seller, including all appurtenances and hereditaments relating
thereto (the “Owned Real Property”). Except as set forth on Schedule 6.9(a), the
Seller is in possession of all Owned Real Property and has good and marketable indefeasible
fee simple title to such Owned Real Property, free and clear of all Liens, other than
Permitted Liens.
(b) Leased Real Property. Schedule 6.9(b) sets forth a true and
complete description of all Real Property leased, licensed to or otherwise used or occupied
(but not owned) by the Seller (collectively, the “Leased Real Property”). The Seller has a
valid and subsisting leasehold estate in the Leased Real Property. A true and correct copy
of each such lease, license, or occupancy agreement, and any amendments thereto, with
respect to the Leased Real Property (collectively, the “Real Property Leases”) has been
delivered to the Buyer, and no changes have been made to any Real Property Leases since the
date of delivery. All of the Leased Real Property is used or occupied by the Seller
pursuant to a Real Property Lease. With respect to each Real Property Lease: (i) all rents,
deposits and additional rents due pursuant to such Real Property lease have been paid in
full and no security deposit or portion thereof has been applied in respect of a breach or
default under such Real Property Lease that has not been redeposited in full, and (ii) the
Seller has not received any notice that it is in default under any Real Property Lease or
that the owner of any Leased Real Property has made any assignment, mortgage, pledge or
hypothecation of such Real Property Lease or the rents or use fees due thereunder. Except
as set forth on Schedule 6.9(b), no Affiliate of the Seller is the owner or lessor
of any Leased Real Property. The Leased Real Property is in good condition and repair
(subject to normal wear and tear). The Seller has not subleased, licensed or otherwise
granted any Person the right to use or occupy any of the Leased Real Property.
(c) Assessments. There is not now pending nor, to the Knowledge of the Seller,
contemplated any reassessment of any parcel included in the Real Property that could result
in a change in the rent, additional rent or other sums and charges payable by the Seller
under any agreement relating to the Real Property. There are no public improvements in
progress or, to the Knowledge of the Seller, proposed that will result in special
assessments against or otherwise adversely affect any of the Real Property.
(d) No Condemnation. There is no pending condemnation, expropriation, eminent
domain or similar proceeding affecting all or any portion of the Real Property. The Seller
has not received any notice of any such proceeding, and to the Knowledge of the Seller, no
such proceeding is threatened or contemplated.
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(e) Condition of Property. There has not been any material interruption in the
delivery of adequate service of any utilities required in the operation of the business of
the Seller currently conducted at the Real Property. The Seller has not experienced
any disruptions to its operations arising out of any recurring loss of electrical power,
flooding, limitations to access to public sewer and water or restrictions on septic service.
All utilities servicing the Real Property are publicly provided and maintained and such
utilities are separately metered within each parcel of Real Property. All of the streets,
roads and avenues adjoining or adjacent to the Real Property are publicly owned and
maintained without assessment or charge to the Seller. To the Knowledge of the Seller, no
fact or condition exists that would result in the termination or impairment of the access of
the Real Property to publicly dedicated roadways.
6.10 Intellectual Property.
(a) Schedule 6.10 sets forth, with owner, countries, registration and
application numbers and dates indicated, as applicable, and in the case of unregistered
Trademarks, country of use and date of first use, a complete and correct list of all the
following Purchased Intellectual Property: (i) Patents, (ii) registered Copyrights;
(iii) registered Trademarks and applications for registration of Trademarks, and
unregistered Trademarks; (iv) Software (other than “off-the-shelf” Software used in the
Ordinary Course of Business); and (v) Domain Names.
(b) Except pursuant to a Contract set forth on Schedule 6.11 or as otherwise
set forth on Schedule 6.10, all of the Intellectual Property used by the Seller in
the conduct of the Business or otherwise in its possession is owned solely by the Seller and
the Seller has the exclusive right to use and possess such Intellectual Property for the
life thereof for any purpose, free from (i) any Liens (other than Permitted Liens) and
(ii) any requirement of any past, present or future royalty payments, license fees, charges
or other payments or conditions or restrictions whatsoever. Except pursuant to a Contract
set forth on Schedule 6.11, the Seller has not licensed or otherwise granted any
right to any Person under any Purchased Intellectual Property or has otherwise agreed not to
assert any Intellectual Property against any Person.
(c) Except as set forth on Schedule 6.10, all former and current consultants or
contractors to the Seller have executed and delivered valid written instruments that assign
to the Seller all rights to any Intellectual Property developed by them in the course of
their performing services for the Seller. All employees of the Seller who participated in
the creation or contributed to the conception or development of Intellectual Property
relating to the business of the Seller were employees of the Seller at the time of rendering
such services and such services were within the scope of their employment or such employees
have otherwise validly assigned such Intellectual Property to the Seller. Except as set
forth on Schedule 6.10, no Member nor any manager, officer, employee, consultant,
contractor, agent or other representative of the Seller owns or claims any rights in (nor
has any of them made application for) any Intellectual Property owned, held or used by the
Seller. The Seller has entered into confidentiality and nondisclosure agreements with all
of its managers, officers, employees, consultants, contractors and agents and any other
Person with access to the Trade Secrets of the Business to protect the confidentiality and
value of such Trade Secrets, and there has not been any breach by
any of the foregoing of any such agreement. The Seller uses commercially reasonable
measures to maintain the secrecy of all Trade Secrets.
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(d) The operation of the Business as currently conducted or any part thereof, including
the manufacture, use, sale and importation of products of the Seller and the possession,
use, disclosure, copying or distribution of any information, data, or other tangible or
intangible in the possession of the Seller, and the possession or use of the Purchased
Intellectual Property has, does and to the Knowledge of the Seller will not infringe,
misappropriate, dilute, violate or otherwise conflict with any Intellectual Property right
of any other Person nor does or will the operation of the Business constitute unfair
competition or deceptive or unfair trade practice. To the Knowledge of the Seller, none of
the Purchased Intellectual Property is being infringed or otherwise used or available for
use by any Person other than the Seller, except pursuant to a Contract listed on
Schedule 6.11.
(e) Schedule 6.10 lists all the principal Information Systems used by the
Seller in the conduct of the Business and owned, controlled or operated by any other Person.
Except as set forth on Schedule 6.10, all Information Systems used by the Seller in
the conduct of the Business are owned, controlled and operated by the Seller and are not
wholly or partly dependent upon any Information System of any other Person. All Information
Systems used by the Seller in the conduct of the Business are sufficient for the conduct of
the Business as currently conducted and as presently proposed to be conducted by the Seller.
The Seller uses commercially reasonable means to protect the security and integrity of all
Information Systems used by the Seller.
6.11 Contracts.
(a) Schedule 6.11 sets forth each Company Contract (and in the case of an oral
Company Contract, the material terms of such Company Contract), under which the Seller’s
future liabilities or obligations thereunder exceed $10,000 per annum. The Seller has
provided to the Buyer true and complete copies of each such Company Contract, as amended
through the Closing Date. Each such Company Contract is a valid, binding and enforceable
obligation of the Seller and, to the Knowledge of the Seller, the other parties thereto,
enforceable in accordance with its terms. Upon the consummation of the transactions
contemplated by this Agreement, each such Company Contract shall continue in full force and
effect without penalty or other adverse consequence. With respect to the Contracts listed
on Schedule 6.11 (or required to be listed on Schedule 6.11): (i) neither
the Seller nor, to the Knowledge of the Seller, any other party thereto, is in default under
or in violation of any such Contract; (ii) no event has occurred that, with notice or lapse
of time or both, would constitute such a default or violation; (iii) the Seller has not
released any of its rights under any such Contract and (iv) no party to such a Contract has
repudiated any of the terms thereof or, to the Knowledge of the Seller, threatened to
terminate, cancel or not renew any such Contract. The Seller has and, except as limited
pursuant to Schedule 6.4, will transfer to the Buyer at the Closing, good and valid
title to the Company Contracts, free and clear of all Liens other than Permitted Liens.
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6.12 Insurance.
(a) Schedule 6.12 sets forth a true and complete list and brief description
(including all applicable premiums and deductibles) of all insurance policies to which the
Seller is a party, named insured or otherwise the beneficiary of coverage, or under which
the Seller or any manager or officer of the Seller is or has been a party, an insured or
otherwise the beneficiary of coverage, each of which insurance policies is valid and
enforceable and in full force and effect. No notice of cancellation or termination or
non-renewal has been received with respect to any such policy. To the Knowledge of the
Seller, the insurance maintained by the Seller is sufficient to comply with all applicable
Laws and Contracts to which the Seller is a party or by which it is bound.
(b) During the last five years, the Seller has not been refused any insurance with
respect to the Business or its assets, nor has coverage been limited by any insurance
carrier to which the Seller has applied for insurance or with which the Seller has carried
insurance. Except as set forth on Schedule 6.12, the Seller has no self-insured or
co-insurance programs.
(c) There are no uninsured exposures that have not been reserved for in the Interim
Financial Statements in accordance with GAAP, consistently applied.
6.13 Litigation and Orders.
(a) Except as set forth on Schedule 6.13, there are no Proceedings pending or,
to the Knowledge of the Seller, threatened against, related to or affecting the Seller or
the Business. To the Knowledge of the Seller, no event has occurred or circumstances exist
that could give rise to or serve as a basis for the commencement of any Proceeding against,
related to or affecting the Seller or the Business. There are no Proceedings pending or, to
the Knowledge of the Seller, threatened that question the legality, validity or
enforceability of this Agreement, the Ancillary Agreements or any of the transactions
contemplated hereby or thereby or that could, individually or in the aggregate, reasonably
be expected to materially impair the ability of the Seller to perform on a timely basis its
obligations under this Agreement or the Ancillary Agreements. Schedule 6.13 lists
all Proceedings to which the Seller was a party during the past three (3) years (whether or
not settled). None of the items set forth on Schedule 6.13, if adversely
determined, could reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth on Schedule 6.13, (i) there is no Order to which the
Seller, or any of the Purchased Assets, is subject, and (ii) no officer, manager, agent,
consultant or employee of the Seller is subject to any Order that prohibits such officer,
manager, agent, consultant or employee from engaging in or continuing any conduct, activity
or practice relating to the Business. The Seller has been in full compliance with all of
the terms and requirements of each Order to which it, or any of the assets owned or used by
it, is or has been subject. The Seller has not received any notice from any Governmental
Authority or any other Person regarding any actual or alleged violation of, or failure to
comply with, any term or requirement of any Order to which the Seller, or any of the assets
owned or used by the Business, is or has been subject.
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6.14 Compliance with Laws. The Seller is now, and has been, in compliance with all
applicable Laws and Orders. To the Knowledge of the Seller, there is no proposed Law or Order that
would be applicable to the Seller or the Business and that would have a Material Adverse Effect.
The Seller has not received any notice from any Governmental Authority or any other Person
regarding (a) any actual, alleged, possible or potential violation of, or failure to comply with,
or liability under any applicable Law, or (b) any actual, alleged, possible or potential obligation
or liability of the Seller.
6.15 Permits. Schedule 6.15 sets forth a true and complete list and
description of all Permits held by the Seller. The Seller is in compliance with the terms of such
Permits and there is no pending or, to the Knowledge of the Seller, threatened termination,
expiration, suspension, withdrawal or revocation of any of such Permits. Except for the Permits
set forth on Schedule 6.15, there are no Permits, whether written or oral, necessary or
required for the conduct of the Business. Each Permit is valid and in full force and effect, and
none of the Permits will lapse, terminate, expire or otherwise be impaired as a result of the
performance of this Agreement by the Seller or the consummation of the transactions contemplated
hereby.
6.16 Labor Matters.
(a) Union and Employee Contracts. (i) The Seller is not a party to or bound by
any union contract, collective bargaining agreement, or other similar type of contract,
(ii) the Seller has not agreed to recognize any union or other collective bargaining
representative, (iii) no union or collective bargaining representative has been certified as
representing the employees of the Seller and (iv) no organizational attempt has been made or
threatened by or on behalf of any labor union or collective bargaining unit with respect to
any employees of the Seller. The Seller has not experienced any labor strike, dispute,
slowdown or stoppage or any other labor difficulty during the past three (3) years and, to
the Knowledge of the Seller, there are no facts or circumstances that may lead to any such
labor dispute.
(b) List of Employees, Etc. Schedule 6.16(b) sets forth a list of all
employees, independent contractors and sales representatives of the Seller as of the Closing
Date, including name, job title and total compensation for the calendar year ending December
31, 2009 and for the eight-month period ended August 28, 2010. Except as set forth on
Schedule 6.16(b), the Seller does not employ any employee, independent contractor or
sales representative who cannot be dismissed immediately, whether currently or immediately
after the transactions contemplated by this Agreement and the Ancillary Agreements, without
notice and without further liability to the Seller, subject to applicable Laws relating to
employment discrimination. To the Knowledge of the Seller, no employee, independent
contractor or sales representative of the Seller intends to terminate his or her employment
relationship with the Seller.
(c) WARN Act. With respect to the employees of the Seller, during the 12-month
period ending on the Closing Date, there has been no mass layoff, plant closing, or shutdown
that implicates the WARN Act, or any similar Law. The consummation of the transaction
contemplated by this Agreement will not create liability for the Buyer for any
act by the Seller prior to or on the Closing Date under the WARN Act or any similar
Law.
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(d) IRCA. All current employees of the Seller who work in the United States
are, and all former employees of the Seller who worked in the United States whose employment
terminated, voluntarily or involuntarily, within the three years prior to the Closing Date,
were legally authorized to work in the United States. The Seller has completed and retained
the necessary employment verification paperwork under the Immigration Reform and Control Act
of 1986, as amended, for the employees hired prior to the Closing Date.
(e) Unemployment, Social Security and Other Benefits. The Seller is not liable
for any payment to any trust or other fund or to any Governmental Authority, with respect to
unemployment compensation benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the Ordinary Course of Business and
consistently with past practice). Except as set forth on Schedule 6.16(e), there
are no pending claims against the Seller under any workers’ compensation plan or policy or
for long-term disability.
(f) Former Employment Arrangements. No current employee or current officer or
manager of the Seller is a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, non-competition or proprietary rights agreement, between such
employee, officer or manager and any other Person that in any way materially and adversely
affects (i) the performance of his or her duties as an employee, officer or manager of the
Seller or (ii) the ability of the Seller to conduct its business as it is currently
conducted and proposed to be conducted. To the Knowledge of the Seller, no employee of the
Seller is in violation of any term of any employment agreement, nondisclosure agreement,
common law nondisclosure obligation, fiduciary duty, non-competition agreement or
restrictive covenant to a former employer.
(g) Effect of Execution and Delivery. Except as set forth on Schedule
6.16(g), none of the execution and delivery of this Agreement or the consummation of any
transaction contemplated hereby or any termination of employment or service in connection
therewith or subsequent thereto will (i) result in any payment (including severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due to any Person,
(ii) materially increase any benefits otherwise payable by the Seller, (iii) result in the
acceleration of the time of payment or vesting of any such benefits, (iv) increase the
amount of compensation due to any Person, or (v) result in the forgiveness in whole or in
part of any outstanding loans made by the Seller to any Person.
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6.17 Employee Benefit Plans.
(a) Schedule 6.17 sets forth a complete list of (i) all “employee benefit
plans,” as defined in Section 3(3) of ERISA, (ii) all other severance pay, salary
continuation, bonus, incentive, stock option, retirement, pension, profit sharing or
deferred compensation plans, contracts, programs, funds or arrangements of any kind and
(iii) all other employee benefit plans, contracts, programs, funds or arrangements
(whether written or oral, qualified or nonqualified, funded or unfunded, foreign or
domestic, currently effective or terminated) and any trust, escrow or similar agreement
related thereto, whether or not funded, in respect of any present or former employees,
directors, managers, officers, members, consultants, or independent contractors of the
Seller or any member of the Controlled Group that are sponsored or maintained by the Seller
or any member of the Controlled Group or with respect to which the Seller or any member of
the Controlled Group has made or is required to make payments, transfers, or contributions
(all of the above being individually or collectively referred to as “Employee Plan” or
“Employee Plans,” respectively). The Seller has no liability with respect to any plan,
arrangement or practice of the type described in the preceding sentence other than the
Employee Plans.
(b) True and complete copies of the following materials have been delivered to the
Buyer: (i) all current plan documents for each Employee Plan or, in the case of an
unwritten Employee Plan, a written description of such Employee Plan; (ii) all determination
letters from the IRS with respect to any of the Employee Plans; (iii) all current and prior
summary plan descriptions, summaries of material modifications, annual reports and summary
annual reports with respect to any of the Employee Plans; (iv) all current and prior trust
agreements, insurance contracts and other documents relating to the funding or payment of
benefits under any Employee Plan; and (v) any other documents, forms or other instruments
relating to any Employee Plan reasonably requested by the Buyer.
(c) Each Employee Plan has been maintained, operated and administered in compliance
with its terms and any related documents or agreements and in compliance with all applicable
Laws. There have been no prohibited transactions or breaches of any of the duties imposed
on “fiduciaries” (within the meaning of Section 3(21) of ERISA) by ERISA with respect to the
Employee Plans that could result in any liability or excise Tax under ERISA or the Code
being imposed on the Seller.
(d) Each Employee Plan intended to be qualified under Section 401(a) of the Code is so
qualified and has been determined by the IRS to be so qualified, and each trust created
under an Employee Plan has been determined by the IRS to be exempt from Tax under the
provisions of Section 501(a) of the Code, and nothing has occurred since the date of any
such determination that could reasonably be expected to give the IRS grounds to revoke such
determination.
(e) Neither the Seller nor any member of the Controlled Group has, and at no time in
the past has had, an obligation to contribute to a “defined benefit plan” as defined in
Section 3(35) of ERISA, a pension plan subject to the funding standards of Section 302 of
ERISA or Section 412 of the Code, a “multiemployer plan” as defined in Section 3(37) of
ERISA or Section 414(f) of the Code or a “multiple employer plan” within the meaning of
Section 210(a) of ERISA or Section 413(c) of the Code.
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(f) With respect to each group health plan benefiting any current or former employee of
the Seller or any member of the Controlled Group that is subject to Section 4980B of the
Code, the Seller and each member of the Controlled Group has
complied with the continuation coverage requirements of Section 4980B of the Code and
Part 6 of Subtitle B of Title I of ERISA.
(g) No Employee Plan is or at any time was funded through a “welfare benefit fund” as
defined in Section 419(e) of the Code, and no benefits under any Employee Plan are or at any
time have been provided through a voluntary employees’ beneficiary association (within the
meaning of subsection 501(c)(9) of the Code) or a supplemental unemployment benefit plan
(within the meaning of Section 501(c)(17) of the Code).
(h) All contributions, transfers and payments in respect of any Employee Plan have been
or are fully deductible under the Code.
(i) There is no pending or threatened assessment, complaint, proceeding, or
investigation of any kind in any court or government agency with respect to any Employee
Plan (other than routine claims for benefits), nor is there any basis for one.
(j) All (i) insurance premiums required to be paid with respect to, (ii) benefits,
expenses, and other amounts due and payable under, and (iii) contributions, transfers, or
payments required to be made to, any Employee Plan prior to the Closing Date will have been
paid, made or accrued on or before the Closing Date.
(k) With respect to any insurance policy providing funding for benefits under any
Employee Plan, (i) there is no liability of the Seller in the nature of a retroactive rate
adjustment, loss sharing arrangement, or other actual or contingent liability, nor would
there be any such liability if such insurance policy was terminated on the date hereof, and
(ii) no insurance company issuing any such policy is in receivership, conservatorship,
liquidation or similar proceeding and, to the Knowledge of the Seller, no such proceedings
with respect to any such insurer are imminent.
(l) No Employee Plan provides benefits, including, without limitation, death or medical
benefits, beyond termination of service or retirement other than (i) coverage mandated by
law or (ii) death or retirement benefits under any Employee Plan that is intended to be
qualified under Section 401(a) of the Code.
(m) The execution and performance of this Agreement will not (i) constitute a stated
triggering event under any Employee Plan that will result in any payment (whether of
severance pay or otherwise) becoming due from the Seller to any current or former officer,
employee, director or consultant (or dependents of such Persons), or (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due to any current or
former officer, employee, director or consultant (or dependents of such Persons) of the
Seller.
(n) The Seller has not agreed or committed to institute any plan, program, arrangement
or agreement for the benefit of employees or former employees of the Seller other than the
Employee Plans, or to make any amendments to any of the Employee Plans.
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(o) The Seller has reserved all rights necessary to amend or terminate each of the
Employee Plans without the consent of any other person.
(p) No Employee Plan provides benefits to any individual who is not a current or former
employee of the Seller, or the dependents or other beneficiaries of any such current or
former employee.
(q) No amount that could be received (whether in cash or property or the vesting of
property) as a result of any of the transactions contemplated by this Agreement by any
employee, officer or director of the Seller or any of its affiliates who is a “disqualified
individual” (as such term is defined in Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement or Employee
Plan currently in effect would be characterized as an “excess parachute payment” (as such
term is defined in Section 280G(b)(1) of the Code).
6.18 Environmental.
(a) To the Knowledge of the Seller, there are no underground tanks and related pipes,
pumps or other facilities regardless of their use or purpose, whether active or abandoned,
at the Real Property.
(b) To the Knowledge of the Seller, there is no asbestos nor any asbestos-containing
materials used in, applied to or in any way incorporated in any building, structure or other
form of improvement on the Real Property. The Seller does not sell or lease and has not
sold or leased any product containing asbestos or that utilizes or incorporates
asbestos-containing materials in any way.
(c) The Seller is presently and for the past five (5) years has been in compliance with
all Environmental Laws applicable to the Real Property, formerly owned, leased or operated
locations of the Business, or to the Seller’s Business, and, except as set forth on
Schedule 6.18(c), no Environmental Conditions exist that require reporting,
investigation, assessment, cleanup, remediation or any other type of response action
pursuant to any Environmental Law or that, to the Knowledge of the Seller, could be the
basis for any liability of any kind pursuant to any Environmental Law.
(d) The Seller has not used, generated, manufactured, refined, transported, treated,
stored, handled, disposed, transferred, produced or processed any Hazardous Materials at,
under or upon the Real Property or formerly owned, leased or operated property, except in
compliance with all applicable Environmental Laws; there has been no Release or Threat of
Release of any Hazardous Material at, under or in the vicinity of the Real Property that
requires or may require reporting, investigation, assessment, cleanup, remediation or any
other type of response action pursuant to any Environmental Law; and there has been no
Release or Threat of Release of any Hazardous Material at, under or in the vicinity of
property formerly owned or leased by the Seller that requires or may require reporting,
investigation, assessment, cleanup, remediation or any other type of response action by the
Seller pursuant to any Environmental Law.
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(e) The Seller has not (i) entered into or been subject to any consent decree,
compliance order or administrative order relating to any Environmental Law with respect to
the Real Property or formerly owned, leased or operated property of the Business;
(ii) received notice under the citizen suit provisions of any Environmental Law;
(iii) received any request for information, notice, demand letter, administrative inquiry or
formal or informal complaint or claim with respect to any Environmental Condition; or
(iv) been subject to or threatened with any governmental or citizen enforcement action with
respect to any Environmental Law.
(f) (i) There currently are effective all Permits required under any Environmental Law
that are necessary for the Seller’s activities and operations at the Real Property and for
the operation of the Business; (ii) any applications for renewal of such Permits have been
submitted on a timely basis; and (iii) such Permits can be transferred without changes to
their terms or conditions.
(g) The Real Property and the Business will not require a material capital expenditure
or annual operating expense increase during the one year following the Closing Date to
achieve compliance with any Environmental Law.
(h) The Seller has delivered, or caused to be delivered, to the Buyer copies of all
documents, records and information in its possession or control concerning Environmental
Conditions and potential liability under Environmental Laws, including previously conducted
environmental site assessments, compliance audits, asbestos surveys and documents regarding
any Release of Hazardous Materials at, upon or from the Real Property or formerly owned or
leased property, spill control plans and environmental agency reports and correspondence.
6.19 Product Liability and Warranty.
(a) Subject to any claims that may arise or may have arisen under the Standard Terms,
each product sold or leased or service provided by the Seller has been in conformity with
all applicable contractual commitments and all express and implied warranties, and the
Seller has no liability (and, to the Knowledge of the Seller, there is no basis for any
present or future Proceeding against the Seller) for replacement or repair of any such
products or other damages or other costs in connection therewith. There have been no
product recalls by the Seller. No product sold, leased or delivered by the Seller or
service provided by the Seller is subject to any guaranty, warranty or other indemnity
beyond the applicable Standard Terms, which are set forth on Schedule 6.19.
(b) Other than with respect to any claims that may arise or may have arisen under the
Standard Terms, the Seller has no liability and, to the Knowledge of the Seller, there is no
basis for any present or future Proceeding against the Seller giving rise to any liability,
arising out of any injury to Person or property as a result of the ownership, possession or
use of a product designed, assembled, repaired, sold, leased, delivered, installed or
otherwise distributed, or services rendered, by the Seller.
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6.20 Other Liabilities; Absence of Investments.
(a) The Seller has no Liabilities arising out of transactions or events entered into
prior to the Closing Date, or any action or inaction, or any state of facts existing, with
respect to or based upon transactions or events occurring prior to the Closing Date, except
(i) liabilities reflected in the Financial Statements, (ii) liabilities that have arisen
after the date of the Financial Statements in the Ordinary Course of Business (none of which
relates to breach of Contract, breach of warranty, tort, infringement, violation of Law or
Environmental liability), or (iii) as otherwise set forth on Schedule 6.20(a).
(b) Except as set forth on Schedule 6.20(b), the Seller holds no Investments of
any kind or nature whatsoever.
6.21 Customers and Suppliers.
(a) Schedule 6.21(a) sets forth the top fifteen customers of the Business
(based on the dollar amount of sales to such customers) for each of the years ended December
31, 2009 and December 31, 2008 and for the eight-month period ended August 28, 2010 (the
“Material Customers”). Except as set forth on Schedule 6.21(a), (i) all Material
Customers continue to be customers of the Business and none of such Material Customers has
materially reduced its business with the Business from the levels achieved during the year
ended December 31, 2009, and, to the Knowledge of the Seller, no such reduction will occur;
(ii) no Material Customer has terminated its relationship with the Business, nor has the
Seller received notice that any Material Customer intends to do so; (iii) the Seller is not
involved in any claim, dispute or controversy with any Material Customer and (iv) the Seller
is not involved in any claim, dispute or controversy with any of its other customers that,
individually or in the aggregate, could reasonably be anticipated to have a Material Adverse
Effect.
(b) Schedule 6.21(b) sets forth the top eight suppliers of the Business (based
on the dollar amount of purchases from such suppliers) for each of the years ended December
31, 2009 and December 31, 2008 and for the eight-month period ended August 28, 2010
(“Material Suppliers”). Except as set forth on Schedule 6.21(b), (i) all Material
Suppliers continue to be suppliers of the Business and none of such Material Suppliers has
materially reduced its business with the Business from the levels achieved during the year
ended December 31, 2009, and, to the Knowledge of the Seller, no such reduction will occur;
(ii) no Material Supplier has terminated its relationship with the Business, nor has the
Seller received notice that any Material Supplier intends to do so; (iii) the Seller is not
involved in any material claim, dispute or controversy with any Material Supplier; and
(iv) the Seller is not involved in any claim, dispute or controversy with any of its other
suppliers that, individually or in the aggregate, could reasonably be anticipated to have a
Material Adverse Effect. No supplier to the Seller represents a sole source of supply for
goods and services used in the conduct of the Business.
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6.22 Related Party Transactions. Except as set forth on Schedule 6.22,
neither the Seller, nor any of its Affiliates, nor any current or former manager, officer or
employee of the Seller: (a) has or during the last three (3) fiscal years has had any direct or
indirect interest (i) in,
or is or during the last three (3) fiscal years was, a director, manager, officer or employee
of, any Person that is a client, customer, supplier, lessor, lessee, debtor, creditor or competitor
of the Seller or (ii) in any material property, asset or right that is owned or used by the Seller
in the conduct of the Business, or (b) is, or during the last three (3) fiscal years has been, a
party to any agreement or transaction with the Seller. Except as set forth on Schedule
6.22, there is no outstanding Indebtedness to the Seller of any current or former manager,
officer, members, employee or consultant of the Seller or any of their respective Affiliates.
6.23 Certain Payments. Neither the Seller, nor any director, manager, officer,
employee or other Person associated with or acting on behalf of the Seller, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback or
other payment to any Person, regardless of form, whether in money, property or services, (i) to
obtain favorable treatment in securing business for the Seller, (ii) to pay for favorable treatment
for business secured by the Seller, (iii) to obtain special concessions or for special concessions
already obtained, for or in respect of the Seller or (iv) in violation of any Law, or (b)
established or maintained any fund or asset with respect to the Seller that has not been recorded
in the books and records of the Seller.
6.24 Indebtedness. Schedule 6.24 set forth a true and complete list of all
individual components (including the amount and the Person to whom such amount is owed) of all
Indebtedness outstanding with respect to the Seller.
6.25 Bank Accounts. Schedule 6.25 sets forth a true and complete list of (a)
the name and address of each bank with which the Seller has an account or safe deposit box, (b) the
name of each Person authorized to draw thereon or have access thereto and (c) the account number
for each bank account of the Seller.
6.26 Books and Records. All books, records and accounts of the Seller are accurate
and complete and are maintained in accordance with good business practice and all applicable Laws.
6.27 Disclosure. To the Knowledge of the Seller, there exists no material fact that
has specific application to the Seller that has not been disclosed to the Buyer and that would
reasonably be expected to result in a Material Adverse Effect. Neither this Agreement (including
the exhibits and schedules hereto) or the Ancillary Agreements nor any other agreement, document,
certificate or written statement furnished to the Buyer by or on behalf of the Seller in connection
with this Agreement, the Ancillary Agreements or the transactions contemplated hereby or thereby
contains any untrue statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
6.28 Brokers. No Person has acted directly or indirectly as a broker, finder or
financial advisor for the Seller or any Member in connection with the negotiations relating to the
transactions contemplated by this Agreement or any other contemplated sale of the Business or the
equity or assets of the Seller, and no Person is entitled to any fee or commission or like payment
in respect thereof based in any way on any agreement, arrangement or understanding made by or on
behalf of the Seller or any Member.
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ARTICLE 7: REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
7.1 Existence and Good Standing. The Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of Ohio.
7.2 Power. The Buyer has the corporate power and authority to execute, deliver and
perform fully its obligations under this Agreement and the Ancillary Agreements.
7.3 Validity and Enforceability. This Agreement and each of the Ancillary Agreements
have been duly authorized, executed and delivered by the Buyer and, assuming due authorization,
execution and delivery by the Seller and, as applicable, any Member, represent the legal, valid and
binding obligation of the Buyer, enforceable against the Buyer in accordance with their respective
terms.
7.4 No Conflict. Neither the execution of this Agreement or the Ancillary Agreements,
nor the performance by the Buyer of its obligations hereunder or thereunder, will violate or
conflict with the Buyer’s articles of incorporation or code of regulations (or equivalent
documents) or any Law or Order applicable to the Buyer.
7.5 Consents. Except as set forth on Schedule 7.5, no consent, approval or
authorization of any Person or Governmental Authority is required in connection with the execution
and delivery by the Buyer of this Agreement or the Ancillary Agreements or the consummation of the
transactions contemplated hereby or thereby.
7.6 Brokers. No Person has acted directly or indirectly as a broker, finder or
financial advisor for the Buyer in connection with the negotiations relating to the transactions
contemplated by this Agreement, and no Person is entitled to any fee or commission or like payment
in respect thereof based in any way on any agreement, arrangement or understanding made by or on
behalf of the Buyer.
7.7 Parent Shares. Upon the Closing, as the designees of the Seller, the Parent
Shares Recipients will acquire good and valid title to the Parent Shares, free and clear of all
Liens (other than Liens imposed by applicable federal and state securities Laws). The Parent
Shares will, when issued in accordance with the provisions of this Agreement, be validly issued,
fully paid and non-assessable.
ARTICLE 8: TAX MATTERS
8.1 Transfer Taxes and Fees. All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees (including any penalties and interest)
imposed on the Buyer or the Seller in connection with this Agreement and the Ancillary Agreements
(“Transfer Taxes”) will be borne and paid by the Seller when due, and the Seller, at its own
expense, will prepare or cause to be prepared and cause to be timely filed all necessary Tax
Returns and other documentation with respect to all such Transfer Taxes.
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8.2 Cooperation; Audits. In connection with the preparation and/or filing of Tax
Returns of any of the parties hereto, their Affiliates or their agents, audit examinations, and any
Proceedings relating to Taxes, the Buyer and the Seller shall cooperate fully with each other,
including the furnishing or making available during normal business hours of records, personnel (as
reasonably required), books of account, powers of attorney or other materials necessary or helpful
for the preparation and/or filing of such Tax Returns, the conduct of audit examinations or the
defense of claims by Taxing Authorities as to the imposition of Taxes. The Seller shall deliver
within five days of Buyer’s request therefor any information required to be reported by the Buyer
or the Seller pursuant to Section 6043A of the Code.
8.3 Prorations. The Seller and/or the Members, as applicable, shall bear all income
tax liability with respect to the Purchased Assets and/or the operating of the Business accrued (or
should have accrued) on or prior to the Closing Date (including all Member-Level Taxes)
irrespective of the reporting and payment dates of such Taxes. All other Taxes, including real
property taxes, personal property taxes, or ad valorem obligations and similar recurring taxes and
fees on the Purchased Assets for taxable periods beginning before, and ending after, the Closing
Date, or for which the lien or assessment date arises on, prior to or after the Closing Date, are
to be borne by the Buyer as of the Closing Date. The Buyer is responsible for all taxes and fees
on the Purchased Assets accruing during any period after the Closing Date. With respect to Taxes
described in this Section 8.3, the Seller shall timely file all Tax Returns with respect to
income accrued before the Closing Date and the Buyer shall prepare and timely file all Tax Returns
due after the Closing Date with respect to any other Taxes. If one party remits to the appropriate
Taxing Authority payment for Taxes, which are subject to proration under this Section 8.3
and such payment includes the other party’s share of such Taxes, such other party shall promptly
reimburse the remitting party for its share of such Taxes.
ARTICLE 9: COVENANTS AND AGREEMENTS
9.1 Bulk-Sales Laws. The Buyer hereby waives compliance by the Seller with the
requirements and provisions of any “bulk-transfer” Laws of any jurisdiction that may otherwise be
applicable with respect to the sale of any or all of the Purchased Assets to the Buyer;
provided, however, that the Seller agrees (a) to pay and discharge when due or to
contest or litigate all claims of creditors that are asserted against the Buyer or the Purchased
Assets by reason of such noncompliance, (b) to indemnify, defend and hold harmless the Buyer from
and against any and all such claims in the manner provided in Article 10 and (c) to take
promptly all necessary action to remove any Lien that is placed on the Purchased Assets by reason
of such noncompliance. Any “bulk-transfer” Law that addresses Taxes is governed by Article
8 and not by this Section 9.1.
9.2 Payment of Real Property Expenses. The Buyer is responsible for payment of all
rents, charges and other payments (including any prepaid amounts) due under the Real Property
Leases and any other leases constituting part of the Purchased Assets or with respect to the Owned
Real Property (including any utility charges incurred with respect thereto) accruing during the
period prior to and after the Closing Date, in each case, to the extent such rents, charges or
other payments, as applicable, constitute Assumed Liabilities.
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9.3 Accounts Receivable.
(a) If the Seller receives any payment relating to any Purchased Asset, including any
account receivable, outstanding on or after the Closing Date, such payment will be the
property of, and the Seller shall immediately forward and remit it to, the Buyer. The
Seller shall promptly endorse and deliver to the Buyer any cash, checks or other documents
received by the Seller on account of any such Purchased Asset, including accounts
receivable. The Seller shall advise the Buyer (promptly following the Seller’s becoming
aware thereof) of any counterclaims or set-offs that may arise subsequent to the Closing
Date with respect to any such Purchased Asset, including any account receivable.
(b) The Buyer shall use its commercially reasonable efforts to collect all accounts
receivable reflected on the October 1, 2010 balance sheet of the Seller until the 18-month
anniversary of the Closing Date (or such earlier time as such receivables are fully
collected).
9.4 Further Conveyances and Assumptions; Consent of Third Parties.
(a) From time to time following the Closing Date, the Seller and the Buyer shall, and
shall cause their respective Affiliates to, execute, acknowledge and deliver all such
further conveyances, notices, assumptions, releases and aquittances and such other
instruments, and shall take such further actions, as may be necessary or appropriate to
assure fully to the Buyer and its respective successors or assigns, all of the Purchased
Assets and to assure fully to the Seller and its Affiliates and their successors and
assigns, the assumption of the Assumed Liabilities, and to otherwise make effective the
transactions contemplated by this Agreement and the Ancillary Agreements.
(b) Nothing in this Agreement nor the Ancillary Agreements will constitute an agreement
to assign any Purchased Asset, including any Contract, Permit, certificate, approval,
authorization or other right, that by its terms or by Law is nonassignable without the
consent of a third party or a Governmental Authority or is cancelable by a third party in
the event of an assignment (“Nonassignable Assets”) unless and until such consent is
obtained. The Seller shall, and shall cause its Affiliates to, use its best efforts to
obtain such consents promptly. To the extent permitted by applicable Law, in the event
consents to the assignment thereof cannot be obtained, such Nonassignable Assets are to be
held, as of and from the Closing Date, by the Seller or the applicable Affiliate of the
Seller in trust for the Buyer and the covenants and obligations thereunder are to be
performed by the Buyer in the Seller’s or such Affiliate’s name and all benefits and
obligations existing thereunder will be for the Buyer’s account. The Seller shall take or
cause to be taken at the Seller’s expense such actions in its name or otherwise as the Buyer
may reasonably request so as to provide the Buyer with the benefits of the Nonassignable
Assets and to effect collection of money or other consideration that becomes due and payable
under the Nonassignable Assets, and the Seller or the applicable Affiliate of Seller shall
promptly pay over to the Buyer all money or other consideration received by it in respect of
all Nonassignable Assets. As of and from the Closing Date, the Seller, on behalf of itself
and its Affiliates, authorizes the Buyer, to the extent permitted by applicable Law and the
terms of the Nonassignable Assets, at the Buyer’s expense, to perform all the obligations
and receive all the benefits of the Seller or
its Affiliates under the Nonassignable Assets and appoints the Buyer or its
attorney-in-fact to act in its name on its behalf or in the name of the applicable Affiliate
of the Seller and on such Affiliate’s behalf with respect thereto.
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9.5 Further Assurances. The Seller shall use its commercially reasonable efforts to
take, or cause to be taken, all actions necessary or appropriate to consummate the transactions
contemplated by this Agreement.
9.6 Preservation of Records. Subject to any retention requirements relating to the
preservation of Tax records, the Seller shall, and shall cause the Members to, preserve and keep
the records held by it or the Members and relating to the Business from and after the Closing Date
and shall make such records (with an opportunity to make copies) and personnel available to the
Buyer during normal business hours and upon reasonable notice. If the Seller or any Member wishes
to destroy (or permit to be destroyed) such records, the Seller shall first give 90 days prior
written notice to the Buyer and the Buyer will have the right at its option and expense, upon prior
written notice given to such party within that 90-day period, to take possession of the records
within 180 days after the date of such notice.
9.7 Publicity. The Seller shall not, and shall cause the Members not to, issue any
press release or public announcement concerning this Agreement or the transactions contemplated
hereby without obtaining the prior written approval of the other parties hereto, which approval
will not be unreasonably withheld or delayed, unless, in the sole judgment of the Buyer, disclosure
is otherwise required by applicable Law.
9.8 Employee Plans; Employment Matters.
(a) Effective as of the Closing Date, the Buyer shall assume sponsorship of and all
obligations under, Liabilities with respect to, and assets with respect to, the Employee
Plans. The Buyer and the Seller shall take all actions necessary to transfer such
sponsorship and assets to the Buyer as of the Closing Date. Prior to the Closing, the
Seller shall cause the members of any committee charged with administrative and/or fiduciary
responsibility with respect to the Employee Plans to relinquish their membership in such
committee effective as of the Closing Date.
(b) No provision in this Section 9.8 shall (i) create any third-party
beneficiary or other rights in any employee or Former Employee (including any beneficiary or
dependent thereof) of the Seller or any other Person other than the parties hereto and their
respective successors and permitted assigns, (ii) constitute or create an employment
agreement or (iii) constitute or be deemed to constitute an amendment to any employee
benefit plan sponsored or maintained by the Buyer.
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(c) Concurrently with the Closing, the Buyer shall make offers of employment, on an
at-will basis, to those employees of the Seller who are primarily involved in the conduct of
the Business as of the Closing Date, on employment terms, including compensation and
benefits, that are substantially similar in the aggregate to those applicable to such
employees immediately prior to the execution of this Agreement under the employment
relationship with the Seller; provided, however, that nothing in
this Agreement shall obligate the Buyer to employ any such employee for any period of
time or continue any term or condition of employment or any employment benefits or policies
for any period of time. Unless an employee declines Buyer’s offer of employment, each of
the active employees of the Seller who are primarily involved in the conduct of the Business
as of the Closing Date shall be deemed to have accepted Buyer’s offer of employment and
shall become an employee of Buyer as of the Closing Date. The employees who accept (or are
deemed to accept) employment with the Buyer shall be referred to herein as “Transferred
Employees.” The Buyer shall take such reasonable actions as are necessary to allow the
Transferred Employees to continue to participate in the Employee Plans, and shall cause each
of the Employee Plans to recognize service with the Seller prior to the Closing Date solely
for (i) eligibility purposes and (ii) purposes of vacation or sick day accrual after the
Closing Date, as if such service with the Seller was service with the Buyer. To the extent
the Buyer substitutes any of the Seller’s medical or dental benefit plans with comparable
plans of the Buyer, then where applicable, the Buyer shall (A) waive any pre-existing
condition exclusion, actively-at-work requirements and similar limitations, eligibility
waiting periods and evidence of insurability requirements under any of the Buyer’s group
health plans to the extent permitted by such plans, and (B) provide that any covered
expenses incurred on or before the Closing Date during the calendar year that includes the
Closing Date by the Transferred Employees and their dependents shall be taken into account
for purposes of satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions after the Closing Date to the same extent as such expenses are taken into account
for the benefit of similarly situated employees of the Buyer.
9.9 Competitive Activity; Non-Solicitation; Confidentiality.
(a) Non-Competition. The Seller agrees that during the Non-Compete Period, it
shall not, directly or indirectly, (i) enter into, engage in, consult, manage or otherwise
participate in the operation of any business which competes with the Business (as conducted
by the Buyer) within the Restricted Territory; (ii) solicit customers, business, patronage
or orders for, or sell, any products and services in competition with, or for any business
that competes with, the Business (as conducted by the Buyer) within the Restricted
Territory; (iii) divert, entice or otherwise take away any customers, business, patronage or
orders of the Buyer, or attempt to do so; or (iv) promote or assist, financially or
otherwise, any Person engaged in any business which competes with the Business (as conducted
by the Buyer) within the Restricted Territory. Nothing contained in this Section
9.9 shall prohibit the Seller from acquiring or holding at any one time a passive
investment of less than five percent (5%) of the outstanding shares of capital stock of any
publicly traded corporation that may compete with the Buyer within the Restricted Territory.
For the purposes of this Section 9.9, the Buyer shall also include any Affiliate of
the Buyer. Notwithstanding the foregoing, but subject to Sections 9.9(b) and
9.9(c) below, the provisions of this Section 9.9(a) shall not apply to the
Seller in connection with any relationship the Seller has or any activities the Seller
engages in with respect to, in each case as of the Closing Date, plus reasonable
continuations and extensions thereof, each of Saudi Mechanical Industries Co., Globe
Industries, LLC (including its subsidiaries P&M Supply Co., Global Steel & Casting Company,
LLC, Allsun Properties, LLC and JG Holdings, LLC) (collectively, the “Excluded Entities”),
or any of the
respective businesses as conducted thereby; provided that this sentence is only
effective to the extent of the business operations (including customers) of the Excluded
Entities as conducted on the Closing Date, plus reasonable continuations and extensions
thereof. For purposes of clarification, the Excluded Entities are not parties to this
Agreement and are not subject to the restrictions imposed on the Seller pursuant to this
Section 9.9(a), it being understood that certain activities of the Excluded Entities
beyond those permitted in the preceding sentence could serve as the basis of a claim against
the Seller pursuant to this Section 9.9(a).
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(b) Non-Solicitation. During the Non-Compete Period, the Seller agrees that it
shall not directly or indirectly at any time solicit or induce or attempt to solicit or
induce any employee(s), sales representative(s), agent(s) or consultant(s) of the Buyer or
any of its Affiliates to terminate their employment, representation or other association
with the Buyer or its Affiliates, without obtaining written consent of the Buyer prior to
such solicitation or inducement.
(c) Non-Disclosure. The Seller will keep in strict confidence, and will not,
directly or indirectly, at any time, (i) disclose, divulge or make accessible to any Person
(including the Excluded Entities) any Confidential Information, without the prior written
consent of the Buyer, unless and except to the extent that such disclosure is necessary in
the performance of employment duties for the Buyer or as required by any subpoena or other
legal process, or (ii) use any Confidential Information for such Person’s own account, for
the account of any other Person (including the Excluded Entities), or to the detriment of
the Buyer, without the prior written consent of the Buyer. Upon request by the Buyer, the
Seller shall deliver to the Buyer all tangible embodiments relating to the Confidential
Information that such Person possesses or has under his, her or its control.
(d) Acknowledgment and Relief. The Seller acknowledges that (i) its
obligations under this Section 9.9 are reasonable in the context of the nature of
the Business and the competitive injuries likely to be sustained by the Buyer if it were to
violate such obligations, (ii) the covenants in this Section 9.9 are adequately
supported by consideration from the Buyer for the benefit of the Business after the Closing
Date, and (iii) the foregoing makes it necessary for the protection of the Business that it
not compete with the Buyer for the reasonable period contained herein. Accordingly, the
Seller acknowledges and agrees that the remedy at law available to the Buyer for breach of
its obligations under this Section 9.9 would be inadequate; therefore, in addition
to any other rights or remedies that the Buyer may have at law or in equity, temporary and
permanent injunctive relief may be granted in any proceeding which may be brought to enforce
any provision contained in this Section 9.9, without the necessity of proof of
actual damage. If it shall be judicially determined that the Seller has violated this
Section 9.9, then the period applicable to each obligation that such Person has been
determined to have violated will automatically be extended by a period of time equal in
length to the period during which such violation(s) occurred.
(e) Other Agreements. The obligations and restrictions set forth in this
Section 9.9 are in addition to the provisions of any employment or other agreement
of Seller that may be entered into from time to time and addresses the same or similar
subject matter covered by this Section 9.9.
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9.10 Use of Business Name. Following the Closing Date, the Seller shall immediately
cease to use or do business, and cease to allow any Affiliate of the Seller to use or do business,
under the name “National Pump Company, LLC” or any name that is derivative of or similar to such
name or any tradenames currently used by the Business, except as provided under that certain Design
License Agreement dated as of April 1, 1997, by and between Saudi Mechanical Industries Company,
Limited, and the Seller. The name of the Seller following the Closing is expected to be NPC
Holdings, LLC.
9.11 Insurance. The Seller acknowledges that the insurance policies required to be
listed on Schedule 6.12 may provide coverage with respect to certain of the Assumed
Liabilities and the Buyer and the Seller shall reasonably cooperate to provide the Buyer with the
benefits of such coverage, if any.
9.12 Title Insurance Endorsements. Within 30 days following the Closing Date, the
Seller shall cause the Title Company to deliver to the Buyer endorsements to the Title Insurance,
in form and substance reasonably satisfactory to the Buyer, deleting from such Title Insurance any
exceptions for the Liens set forth on Schedule 9.12 (to the extent such exceptions are
actually taken by the Title Company).
ARTICLE 10: REMEDIES
10.1 General Indemnification Obligation.
(a) The Seller shall indemnify and hold harmless the Buyer and its officers, directors,
employees, agents, members and Affiliates (each, a “Buyer Indemnitee”) from and against any
and all losses, liabilities, claims, damages, penalties, fines, judgments, awards,
settlements, Taxes, costs, fees, expenses (including reasonable attorneys’ fees) and
disbursements (collectively “Losses”) based upon, arising out of or otherwise in respect of
(A) any inaccuracies in or any breach of any representation or warranty of the Seller
contained in this Agreement (including any schedule or exhibit attached hereto or
certificate delivered in connection herewith) or any Ancillary Agreement (determined in each
case without regard to any qualification with respect to materiality, material adverse
effect or similar qualification); (B) any breach of the covenants or agreements of the
Seller contained in this Agreement (including any schedule or exhibit attached hereto or
certificate delivered in connection herewith) or any Ancillary Agreement; (C) any product
liability or warranty claims with respect to products manufactured and shipped by the Seller
before the Closing Date; and (D) the Excluded Liabilities.
(b) The Buyer shall indemnify and hold harmless the Seller from and against any and all
Losses based upon, arising out of or otherwise in respect of (i) any inaccuracies in or any
breach of any representation, warranty, covenant or agreement of the Buyer contained in this
Agreement (including any schedule or exhibit attached hereto or certificate delivered in
connection herewith) or any Ancillary Agreement, and (ii) any Assumed Liability.
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10.2 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. As soon as is reasonably practicable after
the Seller, on the one hand, or a Buyer Indemnitee, on the other hand, becomes aware of any
direct or third-party claim that such party has or may reasonably be expected to have under
Section 10.1 that may result in a Loss (a “Liability Claim”), such party (the
“Indemnified Party”) shall give notice of such Liability Claim (a “Claims Notice”) to the
other party (the “Indemnifying Party”) and, if such notice is being delivered on or before
the 18-month anniversary of the Closing Date, the Escrow Agent. A Claims Notice must
describe the Liability Claim in reasonable detail and must indicate the amount (estimated,
if necessary and to the extent feasible) of the Loss that has been or may be suffered by the
Indemnified Party. No delay in or failure to give a Claims Notice by the Indemnified Party
to the Indemnifying Party pursuant to this Section 10.2(a) will adversely affect any
of the other rights or remedies that the Indemnified Party has under this Agreement or alter
or relieve the Indemnifying Party of its obligation to indemnify the Indemnified Party to
the extent that such delay or failure has not materially prejudiced the Indemnifying Party.
(b) Opportunity to Defend. The Indemnifying Party has the right, exercisable
by written notice to the Indemnified Party within 30 days after receipt of a Claims Notice
from the Indemnified Party of the commencement or assertion of any Liability Claim in
respect of which indemnity may be sought under this Article 10, to assume and
conduct the defense of such Liability Claim in accordance with the limits set forth in this
Agreement with counsel selected by the Indemnifying Party and reasonably acceptable to the
Indemnified Party; provided, however, that the (i) defense of such Liability
Claim by the Indemnifying Party will not, in the reasonable judgment of the Indemnified
Party, have a material adverse effect on the Indemnified Party; (ii) Indemnifying Party has
sufficient financial resources, in the reasonable judgment of the Indemnified Party, to
satisfy the amount of any adverse monetary judgment that is reasonably likely to result;
(iii) Liability Claim solely seeks (and continues to seek) monetary damages; (iv) Liability
Claim does not include criminal charges and (v) Indemnifying Party expressly agrees in
writing to be fully responsible for all Losses relating to such Liability Claim (the
conditions set forth in clauses (i) through (v) are, collectively, the “Litigation
Conditions”). If the Indemnifying Party does not assume the defense of a Liability Claim in
accordance with this Section 10.2(b), the Indemnified Party may continue to defend
the Liability Claim. If the Indemnifying Party has assumed the defense of a Liability Claim
as provided in this Section 10.2(b), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnified Party in connection with the
defense of the Liability Claim; provided, however, that if (i) any of the
Litigation Conditions ceases to be met or (ii) the Indemnifying Party fails to take
reasonable steps necessary to defend diligently such Liability Claim, the Indemnified Party
may assume its own defense, and the Indemnifying Party will be liable for all reasonable
costs or expenses paid or incurred in connection with such defense. The Indemnifying Party
or the Indemnified Party, as the case may be, has the right to participate in (but not
control), at its own expense, the defense of any Liability Claim that the other is defending
as provided in this Agreement; provided, that any such participation by the
Indemnified Party is at the Indemnifying Party’s expense if, in the reasonable judgment of
the Indemnified Party, there exists an actual or potential conflict of interests between
the Indemnifying Party and the Indemnified Party. The Indemnifying Party, if it has assumed
the defense of any Liability Claim as provided in this Agreement, may not, without the prior
written consent of the Indemnified Party, consent to a settlement of, or the entry of any
judgment arising from, any such Liability Claim that (i) does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified
Party of a complete release from all liability in respect of such Liability Claim,
(ii) grants any injunctive or equitable relief or (iii) may reasonably be expected to have
an adverse effect on the affected business of the Indemnified Party. The Indemnified Party
has the right to settle any Liability Claim, the defense of which has not been assumed by
the Indemnifying Party.
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10.3 Survivability; Limitations.
(a) The representations and warranties of the Seller and the Buyer contained in this
Agreement will survive for a period ending on the 18-month anniversary of the Closing Date
(the “Expiration Date”); provided, however, that any Liability Claim pending
on any Expiration Date for which a Claims Notice has been given in accordance with
Section 10.2 on or before such Expiration Date may continue to be asserted and
indemnified against until finally resolved. All of the covenants and agreements of the
Seller and the Buyer contained in this Agreement will survive after the Closing Date in
accordance with their terms.
(b) Notwithstanding anything to the contrary contained in this Article 10, the
Seller will not have any liability pursuant to Section 10.1(a) (other than a breach
of the covenant set forth in Section 9.12) until the aggregate amount of all such
Losses sustained by the Buyer exceeds $75,000, in which case the Seller will be liable for
all such Losses in excess of such amount.
(c) All indemnity payments are to be treated as adjustments to the Purchase Price for
all income Tax purposes except to the extent otherwise required by Law.
10.4 Exclusive Remedy. Notwithstanding any other provision of this Agreement to the
contrary, or any other rights to which a party may otherwise be entitled at law or in equity, the
Buyer expressly agrees that a claim for indemnification pursuant to the provisions of this
Article 10 shall be the sole and exclusive remedy of the Buyer Indemnitees from and after
the Closing Date for any claims of any inaccuracy in or breach of any representation or warranty of
the Seller or any Affiliate thereof contained in this Agreement, any Ancillary Agreement or in any
other certificate, document or instrument delivered in connection herewith or therewith or
otherwise in connection with the transactions contemplated herein. The Buyer, on behalf of itself
and the other Buyer Indemnitees, hereby expressly waives all other remedies or rights to recover
(or exercise a right of set-off with respect to) damages from the Seller or any Affiliate thereof
on account of any such inaccuracy or breach. Notwithstanding anything to the contrary contained in
this Article 10, the Buyer further agrees that any indemnification obligations of the
Seller to the Buyer Indemnitees for Losses arising out of the circumstances described in
Section 10.1(a)(A) must be drawn solely and exclusively from the funds subject to the
Escrow Agreement, which funds shall be the Buyer’s sole and exclusive remedy for Losses arising out
of
the circumstances described in Section 10.1(a)(A); provided that the
limitations set forth in this Section 10.4 will not apply in the case of the fraud on the
part of the Seller, any Member or Xxxxxxx.
43
10.5 Specific Performance. Each party’s obligation under this Agreement is unique.
If either party should breach its covenants under this Agreement, the parties each acknowledge that
it would be extremely impracticable to measure the resulting damages; accordingly, the nonbreaching
party or parties, in addition to any other available rights or remedies, will be entitled to
specific performance, injunction or such other equivalent equitable relief, and each party
expressly waives the defense that a remedy in damages will be adequate.
ARTICLE 11: MISCELLANEOUS
11.1 Expenses. Except as otherwise provided in this Agreement, each of the parties
shall bear their respective expenses incurred or to be incurred in connection with the execution
and delivery of this Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby.
11.2 No Assignment. The rights and obligations of the Buyer under this Agreement may
not be assigned without the prior written consent of the other parties hereto. Notwithstanding the
previous sentence, the Buyer may without the consent of the Seller, assign its rights under this
Agreement to any Affiliate of the Buyer. The rights and obligations of the Seller under this
Agreement may not be assigned without the prior written consent of the Buyer.
11.3 Headings. The headings contained in this Agreement are included for purposes of
convenience only, and do not affect the meaning or interpretation of this Agreement.
11.4 Integration, Modification and Waiver. This Agreement, together with the
exhibits, schedules and certificates or other instruments delivered under this Agreement,
constitutes the entire agreement among the parties with respect to the subject matter of this
Agreement and supersedes all prior understandings of the parties. No supplement, modification or
amendment of this Agreement will be binding unless executed in writing by the Buyer and the Seller.
No waiver of any of the provisions of this Agreement will be deemed to be or will constitute a
continuing waiver. No waiver will be binding unless executed in writing by the party making the
waiver.
11.5 Construction. The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement must be construed as if drafted jointly by the parties and no presumption or
burden of proof must arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word “including” means including without limitation. Any
reference to the singular in this Agreement also includes the plural and vice versa.
11.6 Severability. If any provision of this Agreement or the application of any
provision of this Agreement to any party or circumstance is, to any extent, adjudged invalid or
unenforceable, the application of the remainder of such provision to such party or circumstance,
the application of such provision to other parties or circumstances, and the application of the
remainder of this Agreement will not be affected thereby.
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11.7 Notices. All notices and other communications required or permitted under this
Agreement must be in writing and will be deemed to have been duly given (a) when delivered in
person, (b) when dispatched by electronic facsimile transfer (with a confirmation report that the
transmission was successful), (c) one business day after having been dispatched by a nationally
recognized overnight courier service or (d) five business days after being sent by registered or
certified mail, return receipt requested, postage prepaid, to the appropriate party at the address
or facsimile number specified below:
If to the Seller:
RABS Holdings, LLC
c/o Xxxxx X. Xxxxxxx
0000 X. 00xx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000
Facsimile No.: (000) 000-0000
c/o Xxxxx X. Xxxxxxx
0000 X. 00xx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx, P.A.
0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx Xxxxxxxxx Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx Xxxxxxxxx Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to the Buyer:
National Pump Company
000 Xxxxx Xxxxxxx Xxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
000 Xxxxx Xxxxxxx Xxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx Day
Xxxxx Xxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Xxxxxxx X. Xxxxxxx, Xx., Esq.
Facsimile No.: (000) 000-0000
Xxxxx Xxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Xxxxxxx X. Xxxxxxx, Xx., Esq.
Facsimile No.: (000) 000-0000
Any party may change its address or facsimile number for the purposes of this Section 11.7
by giving notice as provided in this Agreement.
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11.8 Governing Law. This Agreement will be governed by and construed and enforced in
accordance with the laws of the State of Ohio without regard to principles of conflicts of law.
11.9 Counterparts. This Agreement may be executed in two or more counterparts
(including by electronic or facsimile transmission), each of which will be deemed an original, but
all of which together will constitute one and the same instrument.
11.10 Consent to Jurisdiction and Service of Process. The parties hereto hereby
submit to the jurisdiction of the courts of Ohio or the courts of the United States located in the
State of Ohio in respect of the interpretation and enforcement of the provisions of this Agreement
and the Ancillary Agreements and hereby waive, and agree not to assert, any defense in any action,
suit or proceeding for the interpretation or enforcement of this Agreement and any Ancillary
Agreement, that they are not subject thereto or that such action, suit or proceeding may not be
brought or is not maintainable in such courts or that this Agreement may not be enforced in or by
such courts or that their property is exempt or immune from execution, that the suit, action or
proceeding is brought in an inconvenient forum, or that the venue of the suit, action or proceeding
is improper. Service of process with respect thereto may be made upon the Buyer or the Seller by
mailing a copy thereof by registered or certified mail, postage prepaid, to such party at its
address as provided in Section 11.7 hereof.
[Signatures on Following Page]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first
above written.
NATIONAL PUMP COMPANY |
||||
By: | /s/ Xxxxx X. Xxxxxx | |||
Name: | Xxxxx X. Xxxxxx | |||
Title: | Treasurer | |||
NATIONAL PUMP COMPANY, LLC |
||||
By: | /s/ Xxxxx X. Xxxxxxx | |||
Name: | Xxxxx X. Xxxxxxx | |||
Title: | Manager |
[Signature Page to NPC Asset Purchase Agreement]