EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
by and among
NEBS Acquisition Corp.,
Champion Enterprises, Inc.
and
Carolina Building Solutions, L.L.C.
Dated July 18, 2005
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND USAGE............................................................................ 1
1.1 Definitions................................................................................ 1
1.2 Usage...................................................................................... 11
2. SALE AND TRANSFER OF ASSETS; CLOSING............................................................. 12
2.1 Assets To Be Sold.......................................................................... 12
2.2 Excluded Assets............................................................................ 14
2.3 Payment of Purchase Price.................................................................. 14
2.4 Liabilities................................................................................ 15
2.5 Allocation................................................................................. 17
2.6 Closing.................................................................................... 17
2.7 Closing Obligations........................................................................ 17
2.8 Baseline Net Assets, Audited Closing Balance Sheet and Net Assets.......................... 19
2.9 Aggregate and Seller Shortfall Amounts, Seller Shortfall Payment........................... 20
2.10 Consents................................................................................... 21
3. REPRESENTATIONS AND WARRANTIES OF SELLER......................................................... 22
3.1 Organization And Good Standing............................................................. 22
3.2 Enforceability; Authority; No Conflict..................................................... 22
3.3 Member Distributions....................................................................... 23
3.4 Financial Statements....................................................................... 23
3.5 Books and Records.......................................................................... 24
3.6 Sufficiency of Assets...................................................................... 24
3.7 Description of Owned Real Property......................................................... 24
3.8 Description of Leased Real Property........................................................ 24
3.9 Title to Assets; Encumbrances.............................................................. 24
3.10 Condition of Facilities.................................................................... 25
3.11 Accounts Receivable........................................................................ 25
3.12 Inventories................................................................................ 26
3.13 No Undisclosed Liabilities................................................................. 26
3.14 Taxes...................................................................................... 26
3.15 No Material Adverse Change................................................................. 28
3.16 Employee Benefits.......................................................................... 28
3.17 Compliance With Legal Requirements; Governmental Permits................................... 30
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TABLE OF CONTENTS
(CONTINUED)
PAGE
3.18 Legal Proceedings; Orders.................................................................. 31
3.19 Absence of Certain Changes And Events...................................................... 32
3.20 Contracts; No Defaults..................................................................... 33
3.21 Insurance.................................................................................. 35
3.22 Environmental Matters...................................................................... 36
3.23 Employees.................................................................................. 37
3.24 Labor Disputes; Compliance................................................................. 38
3.25 Intellectual Property Assets............................................................... 38
3.26 RESERVED................................................................................... 41
3.27 Relationships with Related Persons......................................................... 41
3.28 Brokers or Finders......................................................................... 41
3.29 Compliance with Building Codes and other Legal Requirements................................ 42
3.30 Solvency................................................................................... 42
3.31 Disclosure................................................................................. 42
4. REPRESENTATIONS AND WARRANTIES OF BUYER.......................................................... 42
4.1 Organization and Good Standing............................................................. 42
4.2 Authority; No Conflict..................................................................... 42
4.3 Certain Proceedings........................................................................ 43
4.4 Brokers Or Finders......................................................................... 43
5. COVENANTS OF SELLER PRIOR TO CLOSING............................................................. 43
5.1 Access and Investigation................................................................... 43
5.2 Operation of the Business.................................................................. 44
5.3 Negative Covenant.......................................................................... 45
5.4 Required Approvals; Material Consents and Nonmaterial Consents............................. 45
5.5 Notification............................................................................... 46
5.6 No Negotiation............................................................................. 46
5.7 Best Efforts............................................................................... 46
5.8 Interim Financial Statements............................................................... 46
5.9 Change Of Name............................................................................. 46
5.10 Payment Of Liabilities..................................................................... 46
5.11 Current Evidence of Title.................................................................. 46
5.12 Qualification of Buyer to Engage in the Business........................................... 48
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TABLE OF CONTENTS
(CONTINUED)
PAGE
6. COVENANTS OF BUYER PRIOR TO CLOSING.............................................................. 48
6.1 Required Approvals; Material Consents and Nonmaterial Consents ............................ 48
6.2 Best Efforts............................................................................... 48
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.............................................. 48
7.1 Accuracy of Representations................................................................ 49
7.2 Performance of Seller...................................................................... 49
7.3 Material Consents and Nonmaterial Consents, Expiration of Waiting Periods.................. 49
7.4 Additional Documents....................................................................... 49
7.5 No Material Adverse Affect; No Proceedings................................................. 50
7.6 No Conflict................................................................................ 50
7.7 Satisfactory Completion of Investigation................................................... 50
7.8 Title Insurance............................................................................ 50
7.9 Governmental Permits....................................................................... 51
7.10 Environmental Report....................................................................... 51
7.11 WARN Act And Employees..................................................................... 51
7.12 Ancillary Agreements....................................................................... 51
7.13 Board Approval............................................................................. 51
7.14 Closing under the Other Purchase Agreements ............................................... 51
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE............................................. 51
8.1 Accuracy of Representations................................................................ 51
8.2 Buyer's Performance........................................................................ 52
8.3 Expiration of HSR Waiting Period........................................................... 52
8.4 Management Board and Member Approval....................................................... 52
8.5 Additional Documents....................................................................... 52
9. TERMINATION...................................................................................... 52
9.1 Termination Events......................................................................... 52
9.2 Effect Of Termination...................................................................... 53
10. ADDITIONAL COVENANTS............................................................................. 53
10.1 Employees and Employee Benefits............................................................ 53
10.2 Payment of all Taxes Resulting From Sale of Assets by Seller............................... 55
10.3 Payment of Other Retained Liabilities...................................................... 56
10.4 Restrictions on Seller Dissolution and Distributions....................................... 56
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TABLE OF CONTENTS
(CONTINUED)
PAGE
10.5 Removing Excluded Assets................................................................... 56
10.6 Reports and Returns........................................................................ 57
10.7 Assistance in Proceedings.................................................................. 57
10.8 Noncompetition and Confidentiality......................................................... 57
10.9 Customer and Other Business Relationships.................................................. 57
10.10 Retention of and Access to Records......................................................... 57
10.11 Further Assurances......................................................................... 57
10.12 Procurement of Tax Clearance Certificates.................................................. 57
11. INDEMNIFICATION; REMEDIES........................................................................ 58
11.1 Survival................................................................................... 58
11.2 Indemnification and Reimbursement by Seller ............................................... 58
11.3 Indemnification and Reimbursement by Seller--Environmental Matters......................... 59
11.4 Indemnification and Reimbursement by Buyer................................................. 60
11.5 Limitations on Amount--Seller.............................................................. 60
11.6 Limitations on Amount--Buyer............................................................... 60
11.7 Time Limitations........................................................................... 61
11.8 Set Off; Escrow............................................................................ 61
11.9 Third-Party Claims......................................................................... 62
11.10 Other Claims............................................................................... 63
11.11 Indemnification in Case of Strict Liability or Indemnitee Negligence....................... 63
11.12 Additional Limitations of Liability........................................................ 63
11.13 Effect of Insurance Proceeds............................................................... 64
12. GENERAL PROVISIONS............................................................................... 64
12.1 Expenses................................................................................... 64
12.2 Public Announcements; Confidentiality...................................................... 64
12.3 Notices.................................................................................... 65
12.4 Jurisdiction; Service of Process; Waiver of Jury Trail..................................... 65
12.5 Enforcement of Agreement................................................................... 66
12.6 Waiver; Remedies Cumulative................................................................ 66
12.7 Entire Agreement and Modification.......................................................... 66
12.8 Disclosure Schedule........................................................................ 67
12.9 Assignments, Successors and no Third-Party Rights.......................................... 67
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TABLE OF CONTENTS
(CONTINUED)
PAGE
12.10 Severability................................................................................... 67
12.11 Construction................................................................................... 67
12.12 Time of Essence................................................................................ 68
12.13 Governing Law.................................................................................. 68
12.14 Execution of Agreement......................................................................... 68
12.15 Guaranty of Champion........................................................................... 68
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is dated July 18, 2005, by and
among NEBS Acquisition Corp., a Michigan corporation ("Buyer"), having a
principal business address of 0000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxx Xxxxx,
Xxxxxxxx 00000; Carolina Building Solutions, L.L.C., a Delaware limited
liability company ("Seller"), having a principal business address of 000 Xxxx
Xxxxxxx Xxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx 00000; and Champion Enterprises, Inc.,
a Michigan corporation ("Champion"), having a principal business address of 0000
Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxx Xxxxx, Xxxxxxxx 00000 (solely to the extent
of its guaranty obligations hereunder as set forth in Section 12.15).
RECITALS
Seller desires to sell, and Buyer desires to purchase, the Assets of
Seller for the consideration and on the terms set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
1. Definitions and Usage
1.1 Definitions
For purposes of this Agreement, the following terms and variations thereof
have the meanings specified or referred to in this Section 1.1:
"Accounts Receivable"-- (a) all trade accounts receivable and other rights
to payment from customers of Seller and the full benefit of all security for
such accounts or rights to payment, including all trade accounts receivable
representing amounts receivable in respect of goods shipped or products sold or
services rendered to customers of Seller; (b) all other accounts or notes
receivable of Seller and the full benefit of all security for such accounts or
notes; and (c) any claim, remedy or other right related to any of the foregoing.
"Aggregate Shortfall Amount" -- as defined in Section 2.9(a).
"Allocation Ratio" -- as defined in Section 2.9(a).
"Appurtenances"-- all privileges, rights, easements, hereditaments and
appurtenances belonging to or for the benefit of the Land, including all
easements appurtenant to and for the benefit of any Land (a "Dominant Parcel")
for, and as the primary means of access between, the Dominant Parcel and a
public way, or for any other use upon which lawful use of the Dominant Parcel
for the purposes for which it is presently being used is dependent, and all
rights existing in and to any streets, alleys, passages and other rights-of-way
included thereon or adjacent thereto (before or after vacation thereof) and
vaults beneath any such streets.
"Assets"-- as defined in Section 2.1.
"Assignment and Assumption Agreement"-- as defined in Section 2.7(a)(ii).
"Assumed Seller Contracts"-- as defined in Section 2.1(f)
"Assumed Liabilities"-- as defined in Section 2.4(a).
"Audited Closing Balance Sheet"-- as defined in Section 2.8(b).
"Audited Closing Net Assets"-- as defined in Section 2.8(b).
"Backlog List"-- as defined in Section 3.20(a)(i).
"Balance Sheet"-- as defined in Section 3.4.
"Baseline Net Assets"-- as defined in Section 2.8(a).
"Basket Amount"-- as defined in Section 11.5.
"Best Efforts"-- the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to achieve that result as
expeditiously as possible, provided; however, that a Person required to use Best
Efforts under this Agreement will not be thereby required to take actions that
would result in a material adverse change in the benefits to such Person of this
Agreement and the Contemplated Transactions or to dispose of or make any change
to the Business, expend any material funds or incur any other material burden.
"Xxxx of Sale"-- as defined in Section 2.7(a)(i).
"Breach"-- any breach of, or any inaccuracy in, any representation or
warranty or any breach of, or failure to perform or comply with, any covenant or
obligation, in or of this Agreement or any other Contract, or any event which
with the passing of time or the giving of notice, or both, would constitute such
a breach, inaccuracy or failure.
"Building Codes"-- residential housing codes, including any Department of
Housing and Urban Development (HUD) codes, Council of American Building
Officials (CABO) codes, or local codes regulating modular and manufactured
housing.
"Bulk Sales Laws"-- any laws in the States of Delaware or North Carolina
or in any other jurisdiction in which Seller is licensed or qualified to do
business as a foreign limited liability company as specified in Part 3.1(a),
regulating the sale of quantities of inventory outside the Ordinary Course of
Business to prevent sellers from defrauding creditors.
"Business"-- the modular and manufactured housing business, including the
design, manufacture, construction, sale, distribution, and/or service of modular
and/or manufactured housing units and components thereof to or for developers,
builders, dealers, and homeowners as conducted by Seller.
"Business Day"-- any day other than: (a) Saturday or Sunday; or (b) any
other day on which banks in Michigan are permitted or required to be closed.
"Buyer Indemnified Persons"-- as defined in Section 11.2.
"Buyer Transaction Taxes"-- as defined in Section 10.2(a).
"Cash Amount"-- as defined in Section 2.3.
"Castle Housing"-- Castle Housing of Pennsylvania, Ltd., a Pennsylvania
limited liability company.
"Champion"-- as defined in the first paragraph of this Agreement.
"Closing"-- as defined in Section 2.6.
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"Closing Date" -- as defined in Section 2.6.
"COBRA"-- as defined in Section 3.16(f).
"Code"-- the Internal Revenue Code of 1986, as amended.
"Consent"-- any approval, consent, ratification, waiver or other
authorization.
"Contemplated Transactions"-- all of the transactions contemplated by this
Agreement.
"Contract"-- any agreement, contract, Lease, consensual obligation,
promise or undertaking (whether written or oral and whether express or implied),
whether or not legally binding.
"Copyrights"-- as defined in Section 3.25(a)(iii).
"Damages"-- as defined in Section 11.2.
"Disclosure Schedule"-- the disclosure schedule (delineated therein by
Parts) to this Agreement, and delivered by Seller to Buyer concurrently with the
execution and delivery of this Agreement.
"Effective Time" -- 5 p.m. Eastern Daylight Time on the Closing Date.
"Employee Plans"-- as defined in Section 3.16(a).
"Encumbrance"-- any charge, claim, community or other marital property
interest, condition, equitable interest, lien, option, pledge, security
interest, mortgage, right of way, easement, encroachment, servitude, right of
first option, right of first refusal or similar restriction, including any
restriction on use, voting (in the case of any security or equity interest),
transfer, receipt of income or the exercise of any other attribute of ownership
related thereto or the commencement, conduct, or prosecution of any Proceeding
related thereto.
"Environment"-- soil, land surface or subsurface strata, surface waters
(including navigable waters and ocean waters), ground waters, drinking water
supply, stream sediments, ambient air (including indoor air), plant and animal
life and any other environmental medium or natural resource.
"Environmental, Health and Safety Liabilities"-- any cost, damages,
expense, liability, obligation or other responsibility arising from or under any
Environmental Law or Occupational Safety and Health Law, including those
consisting of or relating to:
(a) any environmental, health or safety matter or condition related
to the Real Property or Facilities (including on-site contamination or off-site
contamination that has migrated from the Real Property or Facilities at levels
above applicable cleanup standards, and any occupational safety and health and
regulation of any chemical substance or product);
(b) any fine, penalty, judgment, award, settlement, legal or
administrative proceeding, damages, loss, claim, demand or response, remedial or
inspection cost or expense (including, but not limited to, reasonable attorneys
fees) arising under any Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under any Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any cleanup, removal, containment or other remediation or response
actions ("Cleanup") required by any Environmental Law or Occupational
3
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective or remedial measure required
under any Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial" and "response action" include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA).
"Environmental Law"-- any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees or the public of
intended or actual Releases of Hazardous Materials, violations of discharge
limits or other prohibitions and the commencement of activities, such as
resource extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable levels the Release of
Hazardous Materials into the Environment;
(c) reducing the quantities, preventing the Release or minimizing
the hazardous characteristics of any wastes generated;
(d) assuring that products are designed, formulated, packaged and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of Hazardous Materials;
(g) cleaning up Hazardous Materials that have been Released,
preventing the Threat of Release or paying the costs of such clean up or
prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA"-- the Employee Retirement Income Security Act of 1974.
"Escrow Agreement"-- as defined in Section 2.7(a)(viii).
"Escrow Amount"-- as defined in Section 2.3.
"Escrow Tranche"-- Five Hundred Thousand ($500,000.00) Dollars of the
Escrow Amount.
"Excluded Assets"-- as defined in Section 2.2.
"Excluded Seller Contracts"-- as defined in Section 2.2(c)
"Fabri and Xxxxx Letter Agreements"-- as defined in Section 2.7(a)(vi).
4
"Facilities"-- any real property, leasehold or other interest in real
property currently owned or operated by Seller, including the Tangible Personal
Property used or operated by Seller at the locations of the Real Property
specified in Section 3.7. Notwithstanding the foregoing, for purposes of the
definitions of "Hazardous Activity" and "Remedial Action" and Sections 3.22 and
11.3, "Facilities" shall mean any real property, leasehold or other interest in
real property currently or formerly owned or operated by Seller, including the
Tangible Personal Property used or operated by Seller at the locations of the
Real Property specified in Part 3.7.
"GAAP"-- generally accepted accounting principles in the United States of
America for financial reporting in the United States.
"GAAS"-- generally accepted auditing standards in the United States of
America for financial reporting in the United States.
"Governing Documents"-- with respect to any particular entity: (a) if a
corporation, the articles or certificate of incorporation and the bylaws; (b) if
a general partnership, the partnership agreement and any statement of
partnership; (c) if a limited partnership, the limited partnership agreement and
the certificate of limited partnership; (d) if a limited liability company, the
articles of organization and operating agreement; (e) if another type of Person,
any other charter or similar document adopted or filed in connection with the
creation, formation or organization of the Person; (f) all equity holders'
agreements, voting agreements, voting trust agreements, joint venture
agreements, registration rights agreements or other agreements or documents
relating to the organization, management or operation of any Person or relating
to the rights, duties and obligations of the equity holders of any Person; and
(g) any amendment or supplement to any of the foregoing.
"Governmental Body"-- any:
(a) nation, state, county, city, town, borough, village, district or
other jurisdiction;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any agency, branch, department, board, commission, court, tribunal or
other entity exercising governmental or quasi-governmental powers);
(d) multinational organization or body;
(e) body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power; or
(f) official of any of the foregoing.
"Governmental Permit"-- any permit, Consent, license, franchise,
certificate, or registration issued, granted, given or otherwise made available
by or under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"Ground Lease"-- any long-term lease of land in which most of the rights
and benefits comprising ownership of the land and the improvements thereon or to
be constructed thereon, if any, are transferred to the tenant for the term
thereof.
"Ground Lease Property"-- any land, improvements and appurtenances subject
to a Ground Lease in favor of Seller.
5
"Hazardous Activity"-- the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment or use (including any withdrawal or other
use of groundwater) of Hazardous Material in, on, under, about or from any of
the Facilities or any part thereof into the Environment and any other act,
business, operation or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm, to persons or property on or off the
Facilities.
"Hazardous Material"-- any substance, material or waste which is regulated
by any Governmental Body, including any material, substance or waste which is
defined as a "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "contaminant," "toxic
waste" or "toxic substance" under any provision of Environmental Law, and
including petroleum, petroleum products, asbestos, presumed asbestos-containing
material or asbestos-containing material, urea formaldehyde and polychlorinated
biphenyls.
"House Plans"-- elevation plans, floor plans, foundation plans,
specifications, data, know-how, formulae, compositions, designs, sketches,
blueprints, photographs, graphs, drawings, samples, inventions and manufacturing
or building methods and processes related to a modular and/or manufactured
house, building or other structure.
"HSR Act"-- the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended.
"Improvements"-- all buildings, structures, fixtures and improvements
located on the Land or included in the Assets, including those under
construction.
"Indemnified Person"-- as defined in Section 11.9.
"Indemnifying Person" -- as defined in Section 11.9.
"Independent Accountants"-- either Deloitte & Touche LLP, Ernst & Young
LLP, or KPMG LLP, as mutually selected by Buyer and Seller for the purposes set
forth in Section 2.8(d).
"Intellectual Property Assets"-- as defined in Section 3.25(a).
"Interim Balance Sheet"-- as defined in Section 3.4.
"Inventories"-- all inventories of Seller, wherever located, including all
finished goods, work in process, raw materials, spare parts and all other
materials and supplies to be used or consumed by Seller in the production of
finished goods.
"IRS"-- the United States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury.
"Knowledge"-- an individual will be deemed to have Knowledge of a
particular fact or other matter if:
(a) that individual is actually aware of that fact or matter; or
(b) a prudent individual could be expected to discover or otherwise
become aware of that fact or matter in the course of conducting a reasonably
comprehensive investigation regarding the accuracy of any representation or
warranty contained in this Agreement.
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A Person (other than an individual) will be deemed to have Knowledge of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor or trustee of that
Person (or in any similar capacity) has, or at any time had, Knowledge of that
fact or other matter (as set forth in (a) and (b) above), and any such
individual (and any individual party to this Agreement) will be deemed to have
conducted a reasonably comprehensive investigation regarding the accuracy of the
representations and warranties made herein by that Person or individual.
"Land"-- all parcels and tracts of land in which Seller has an ownership
interest.
"Lease"-- any Real Property Lease or any lease or rental agreement,
license, right to use or installment and conditional sale agreement to which
Seller is a party and any other Seller Contract pertaining to the leasing or use
of any Tangible Personal Property.
"Legal Requirement"-- any federal, state, local, municipal, foreign,
international, multinational or other constitution, law, ordinance, principle of
common law, code, regulation, statute or treaty, including Building Codes, Bulk
Sales Laws, the HSR Act, and the WARN Act.
"Liability"-- with respect to any Person, any liability or obligation of
such Person of any kind, character or description, whether known or unknown,
absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated
or unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, and
whether or not the same is required to be accrued on the financial statements of
such Person.
"Line of Credit"-- as defined in Section 2.3.
"Line of Credit Amount"-- as defined in Section 2.3.
"Marks"-- as defined in Section 3.25(a)(i).
"Material Adverse Effect"-- any material adverse change in the Business,
Assets, or the operations, properties, or condition of Seller taken as a whole,
other than: (a) general economic conditions, or (b) conditions which affect the
modular home industry generally that are not specific to Seller.
"Material Consents"-- as defined in Section 2.10(a).
"Negative Shortfall Amounts" -- as defined in Section 2.9(a).
"Net Assets"-- as defined in Section 2.8(a).
"New Era"-- New Era Building Systems, Inc., a Pennsylvania corporation.
"Noncompetition and Confidentiality Agreement"-- as defined in Section
2.7(a)(vii).
"Nonmaterial Consents"-- as defined in Section 2.10(b).
"Occupational Safety and Health Law"-- any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, including the Occupational Safety and Health Act, and any
program, whether governmental or private (such as those promulgated or sponsored
by industry associations and insurance companies), designed to provide safe and
healthful working conditions.
7
"Order"-- any order, injunction, judgment, decree, ruling, assessment or
arbitration award of any Governmental Body or arbitrator.
"Ordinary Course of Business"-- an action taken by a Person will be deemed
to have been taken in the Ordinary Course of Business only if that action:
(a) is consistent in nature, scope and magnitude with the past
practices of such Person and is taken in the ordinary course of the normal,
day-to-day operations of such Person;
(b) does not require authorization by the board of directors,
management board, members, or shareholders of such Person (or by any Person or
group of Persons exercising similar authority) and does not require any other
separate or special authorization of any nature; and
(c) is similar in nature, scope and magnitude to actions customarily
taken, without any separate or special authorization, in the ordinary course of
the normal, day-to-day operations of other Persons that are in the same line of
business as such Person.
"Other Selling Companies"-- New Era and Castle Housing.
"Other Purchase Agreements"--
(a) the Asset Purchase Agreement for the sale and purchase of
substantially all of the assets of New Era, by and among New Era, Buyer, and
other parties thereto, dated the same date as this Agreement; and
(b) the Asset Purchase Agreement for the sale and purchase of
substantially all of the assets of Castle Housing, by and among Castle Housing,
Buyer, and other parties thereto, dated the same date as this Agreement.
"Part"-- a part or section of the Disclosure Schedule.
"Patents"-- as defined in Section 3.25(a)(ii).
"Permitted Encumbrances"-- as defined in Section 3.9.
"Person"-- an individual, partnership, corporation, business trust,
limited liability company, limited liability partnership, joint stock company,
trust, unincorporated association, joint venture or other entity or a
Governmental Body.
"Proceeding"-- any action, arbitration, audit, hearing, investigation, Tax
Controversy, litigation or suit (whether civil, criminal, administrative,
judicial or investigative, whether formal or informal, whether public or
private) commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Pro Forma Balance Sheet"-- as defined in Section 2.8(a).
"Purchase Price"-- as defined in Section 2.3.
"Real Property"-- the Land and Improvements and all Appurtenances thereto
and any Ground Lease Property.
"Real Property Lease"-- any Ground Lease or Space Lease.
8
"Record"-- information that is inscribed on a tangible medium or that is
stored in an electronic or other medium and is retrievable in perceivable form.
"Related Person"--
With respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by any one
or more members of such individual's Family;
(c) any Person in which members of such individual's Family hold
(individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which one or more members of such
individual's Family serves as a director, officer, partner, executor or trustee
(or in a similar capacity).
With respect to a specified Person other than an individual:
(e) any Person that directly or indirectly controls, is directly or
indirectly controlled by or is directly or indirectly under common control with
such specified Person;
(f) any Person that holds a Material Interest in such specified
Person;
(g) each Person that serves as a director, officer, partner,
executor or trustee of such specified Person (or in a similar capacity);
(h) any Person in which such specified Person holds a Material
Interest; and
(i) any Person with respect to which such specified Person serves as
a general partner or a trustee (or in a similar capacity).
For purposes of this definition, (a) "control" (including "controlling,"
"controlled by," and "under common control with") means the possession, direct
or indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise; (b) the "Family" of an individual includes (i) the
individual, (ii) the individual's spouse, (iii) any other natural person who is
related to the individual or the individual's spouse within the second degree
and (iv) any other natural person who resides with such individual; and (c)
"Material Interest" means direct or indirect beneficial ownership of voting
securities or other voting interests representing at least ten percent (10%) of
the outstanding voting power of a Person or equity securities or other equity
interests representing at least ten percent (10%) of the outstanding equity
securities or equity interests in a Person.
"Release"-- any spill, emission, leaking, pumping, pouring, dumping,
emptying, escaping, injection, deposit, disposal, discharge, dispersal, leaching
or migration on or escaping into the Environment or into or out of any property.
"Remedial Action"-- all actions, including any capital expenditures,
required or voluntarily undertaken: (a) to clean up, remove, treat or in any
other way address any Hazardous Material or other substance; (b) to prevent the
Release or Threat of Release or to minimize the further Release of any Hazardous
Material or other substance so it does not migrate or endanger or threaten to
endanger public
9
health or welfare or the Environment; (c) to perform pre-remedial studies and
investigations or post-remedial monitoring and care; or (d) to bring all
Facilities and the Real Property and the operations conducted thereon into
compliance with Environmental Laws and environmental Governmental Permits.
"Representative"-- with respect to a particular Person, any director,
officer, manager, employee, agent, consultant, advisor, accountant, financial
advisor, legal counsel or other representative of that Person.
"Restricted Material Contracts"-- as defined in Section 2.10(a).
"Restricted Nonmaterial Contracts"-- as defined in Section 2.10(b).
"Retained Liabilities"-- as defined in Section 2.4(b).
"Sales and Use Tax Exemptions"-- as defined in Section 5.4.
"Seller"-- as defined in the first paragraph of this Agreement.
"Seller Contract"-- any Contract listed in Part 3.20(a) and any other
Contract: (a) under which Seller has or may acquire any rights or benefits; (b)
under which Seller has or may become subject to any obligation or liability; or
(c) by which Seller, or any of the assets owned or used by Seller is or may
become bound.
"Seller Shortfall Amount"-- as defined in Section 2.9(a).
"Seller Shortfall Payment"-- as defined in Section 2.9(b).
"Seller Transaction Taxes"-- as defined in Section 10.2(b).
"Shortfall Amount" -- the Seller Shortfall Amount or the Shortfall Amount
of either of the Other Selling Companies, as the term, Shortfall Amount, is
defined and determined in the corresponding Other Purchase Agreements.
"Software"-- all computer software and subsequent versions thereof,
including source code, object, executable or binary code, objects, comments,
screens, user interfaces, report formats, templates, menus, buttons and icons
and all files, data, materials, manuals, design notes and other items and
documentation related thereto or associated therewith.
"Space Lease"-- any lease or rental agreement pertaining to the occupancy
of any improved space on any Land.
"Subsidiary"-- with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred), are held by the Owner or one or more of its Subsidiaries.
"Tangible Personal Property"-- all machinery, equipment, tools, furniture,
fixtures, office equipment, computer hardware, supplies, materials, automobiles,
trucks, other vehicles and other items of tangible personal property (other than
Inventories) of every kind owned or leased by Seller (wherever located and
whether or not carried on Seller's books), together with any express or implied
warranty by
10
the manufacturers or sellers or lessors of any item or component part thereof
and all maintenance records and other documents relating thereto.
"Tax"-- any income, loans, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental, windfall
profit, customs, vehicle, airplane, boat, vessel or other title or registration,
capital stock, franchise, employees' income withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative, add-on minimum and
other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever
and any interest, penalty, addition or additional amount thereon imposed,
assessed or collected by or under the authority of any Governmental Body or
payable under any tax-sharing agreement or any other Contract.
"Tax Clearance Certificate"-- any tax clearance certificate applied for in
Delaware, North Carolina, and in each other jurisdiction in which Seller is
licensed or qualified to do business as a foreign limited liability company as
specified in Part 3.1(a).
"Tax Controversy"-- any inquiry, examination or proceeding by any
Governmental Body that could result in a determination with respect to Taxes due
or payable by the Buyer, including, without limitation, any audit, proposed
adjustment or deficiency, assessment, claim, suit or other proceeding relating
to any Taxes or Tax Return by any Governmental Body.
"Tax Liability" -- Liability for the payment of Taxes.
"Tax Return"-- any return (including any information return), report,
statement, schedule, notice, form, declaration, claim for refund or other
document or information filed with or submitted to, or required to be filed with
or submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"Third Party"-- a Person that is not a party to this Agreement.
"Third-Party Claim"-- any claim against any Indemnified Person by a Third
Party, whether or not involving a Proceeding.
"Threat of Release"-- a reasonable likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"WARN Act"-- as defined in Section 3.23(d).
1.2 Usage
(a) Interpretation. In this Agreement, unless a clear contrary
intention appears:
(i) the singular number includes the plural number and vice
versa;
(ii) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are not
prohibited by this Agreement, and reference to a Person in a particular capacity
excludes such Person in any other capacity or individually;
(iii) reference to any gender includes each other gender;
11
(iv) reference to any agreement, document or instrument means
such agreement, document or instrument as amended or modified and in effect from
time to time in accordance with the terms thereof;
(v) reference to any Legal Requirement means such Legal
Requirement as amended, modified, codified, replaced or reenacted, in whole or
in part, and in effect from time to time, including rules and regulations
promulgated thereunder, and reference to any section or other provision of any
Legal Requirement means that provision of such Legal Requirement from time to
time in effect and constituting the substantive amendment, modification,
codification, replacement or reenactment of such section or other provision;
(vi) reference to Part or Parts means the corresponding parts
(sections) in the Disclosure Schedule attached to this Agreement;
(vii) "hereunder," "hereof," "hereto," and words of similar
import shall be deemed references to this Agreement as a whole and not to any
particular Article, Section or other provision hereof;
(viii) "including" (and with correlative meaning "include")
means including without limiting the generality of any description preceding
such term;
(ix) "or" is used in the inclusive sense of "and/or";
(x) with respect to the determination of any period of time,
"from" means "from and including" and "to" means "to and including"; and
(xi) references to documents, instruments or agreements shall
be deemed to refer as well to all addenda, exhibits, schedules or amendments
thereto.
(b) Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP.
(c) Legal Representation of the Parties. This Agreement was
negotiated by the parties with the benefit of legal representation, and any rule
of construction or interpretation otherwise requiring this Agreement to be
construed or interpreted against any party shall not apply to any construction
or interpretation hereof.
2. Sale and Transfer of Assets; Closing
2.1 Assets To Be Sold
Upon the terms and subject to the conditions set forth in this Agreement,
at the Closing, but effective as of the Effective Time, Seller shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer shall purchase and
acquire from Seller, free and clear of any Encumbrances other than Permitted
Encumbrances, all of Seller's right, title and interest in and to all of
Seller's property and assets, real, personal or mixed, tangible and intangible,
of every kind and description, wherever located, including, but not limited to,
the following (but excluding the Excluded Assets):
(a) all cash, cash equivalents of Seller, including all cash related
to customer prepayments, advances, deposits, and installment payments, and all
marketable securities, notes receivable, or other similar instruments, in
transit, in hand or in bank accounts;
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(b) all Real Property of the Business, including the Real Property
described in Parts 3.7 and 3.8;
(c) all Tangible Personal Property of the Business, including those
items described in Part 2.1(c);
(d) all Inventories of the Business;
(e) all Accounts Receivable of the Business;
(f) all Seller Contracts listed in Part 2.1(f) and any other Seller
Contract (other than an Excluded Seller Contract), which Buyer elects to assume
on or after the Closing Date pursuant to the terms, conditions, and limitations
of a written assumption or novation agreement entered into and signed by Seller
("Assumed Seller Contracts");
(g) all Governmental Permits of the Business and all pending
applications therefor or renewals thereof, in each case to the extent
transferable to Buyer, including those listed in Part 3.17(b);
(h) all data, House Plans (including those listed in Part 2.1(h)),
and Records of the Business, including client, customer, and supplier lists and
Records, referral sources, research and development reports and Records,
production reports and Records, service and warranty Records, equipment logs,
operating guides and manuals, financial and accounting Records, creative
materials, marketing materials, advertising materials, promotional materials,
studies, reports, correspondence and other similar documents and Records and,
subject to Legal Requirements, copies of all personnel Records and other Records
described in Section 2.2(d);
(i) all Software;
(j) all of the intangible rights and property of the Business,
including Intellectual Property Assets (including any contained in or forming a
part of other Assets), going concern value, goodwill, telephone, telecopy and
e-mail addresses and listings and those items listed in Parts 3.25(d), (e), (f)
and (h);
(k) except for those relating to the Employee Plans, all insurance
policies, including all insurance benefits, rights and proceeds thereunder,
arising from or relating to the Business, the Assets or the Assumed Liabilities
prior to the Effective Time;
(l) all claims of Seller against third parties, arising from or
relating to the Business or the Assets, whether xxxxxx or inchoate, known or
unknown, contingent or non-contingent, including all such claims listed in Part
2.1(l);
(m) all rights of Seller relating to Business deposits and prepaid
expenses, claims for refunds and rights to offset in respect thereof; and
(n) RESERVED.
All of the property and assets to be transferred to Buyer hereunder are
herein referred to collectively as the "Assets."
Notwithstanding the foregoing, the transfer of the Assets pursuant to this
Agreement shall not include the assumption of any Liability related to the
Assets unless Buyer expressly assumes that Liability pursuant to Section 2.4(a).
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2.2 Excluded Assets
Notwithstanding anything to the contrary contained in Section 2.1 or
elsewhere in this Agreement, the following assets of Seller (collectively, the
"Excluded Assets") are not part of the sale and purchase contemplated hereunder,
are excluded from the Assets and shall remain the property of Seller after the
Closing:
(a) all minute books, member Records and company seals (although
Seller shall provide copies thereof to Buyer);
(b) reserved;
(c) all of the Seller Contracts listed in Part 2.2(c) ("Excluded
Seller Contracts");
(d) all personnel Records and other Records that Seller is required
by law to retain in its possession (although Seller shall provide copies thereof
to Buyer);
(e) all claims for refund of Taxes and other governmental charges of
whatever nature relating solely to periods prior to the Closing Date, other than
claims for refunds of those sales and use Taxes assumed by Buyer under Section
2.4(a)(viii) hereof;
(f) all rights in connection with and assets of the Employee Plans;
(g) all rights of Seller under this Agreement, the Xxxx of Sale, the
Assignment and Assumption Agreement, and the Escrow Agreement; and
(h) the property and assets expressly designated in Part 2.2(h).
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2.3 Payment of Purchase Price
The consideration for the Assets (the "Purchase Price") will be: (a) Eight
Million, Nine Hundred Thousand ($8,900,000.00) Dollars, less any Seller
Shortfall Amount, if applicable under Sections 2.8 and 2.9 and less any Escrow
Amount released to Buyer, if applicable under Article 11 hereof and/or the
Escrow Agreement, plus (b) the assumption of the Assumed Liabilities, and plus
(c) the payoff of the outstanding principal balance, together with any interest
accrued thereon ("Line of Credit Amount") under its bank line of credit ("Line
of Credit") with S & T Bank ("Bank"). In accordance with Section 2.7(b), at the
Closing, the Purchase Price, prior to any required adjustment on account of a
Seller Shortfall Amount, shall be delivered by Buyer to Seller as follows: (a)
by wire transfer of Seven Million, Four Hundred Thousand ($7,400,000.00)
Dollars, less: (i) any term loans, mortgages, and capital leases of Seller to be
paid off by Buyer at Closing, as set forth in Exhibit 2.3 attached hereto, (ii)
any other amount required to be paid to any third Person (other than for the
Assumed Liabilities) for Seller to sell, convey, assign, transfer, and deliver
to Buyer the Assets, free and clear of any Encumbrances other than Permitted
Encumbrances to the extent not paid by Seller prior to Closing, (iii) any Tax
withholdings that are not the obligation of the Buyer required by reason of the
Contemplated Transactions, and (iv) any other amounts which are the
responsibility of Seller as provided herein which are to be paid by Buyer ("Cash
Amount"); (b) by wire transfer of the Line of Credit Amount to the Bank, (c) by
wire transfer of One Million, Five Hundred Thousand ($1,500,000.00) Dollars to
the escrow agent pursuant to the Escrow Agreement ("Escrow Amount"); and (d)
execution and delivery of the Assignment and Assumption Agreement. The Seller
Shortfall Amount, if any, shall be paid by Seller in accordance with Section
2.9. The Escrow Amount shall be released to Seller and/or Buyer, as applicable,
pursuant to the terms and conditions of the Escrow Agreement and Article 11
hereof.
2.4 Liabilities
(a) Assumed Liabilities. On the Closing Date, but effective as of
the Effective Time, Buyer shall assume and agree to discharge only the following
Liabilities of Seller (the "Assumed Liabilities"):
(i) any trade account payable reflected on the Audited Closing
Balance Sheet incurred by Seller in the Ordinary Course of Business that remains
unpaid as of the Effective Time, but specifically excluding any non-Ordinary
Course of Business trade account payable to: (A) a member of Seller, or (B) a
Related Person of a member of Seller;
(ii) any Liability to Seller's customers incurred by Seller in
the Ordinary Course of Business for non-delinquent orders outstanding as of the
Effective Time described in Part 2.4(a)(ii) (other than any Liability arising
out of or relating to a Breach that occurred prior to the Effective Time);
(iii) any Liability under written warranty agreements in the
forms attached to and those other warranty and/or repair commitments
specifically set forth in Part 2.4(a)(iii) given by Seller in the Ordinary
Course of Business prior to the Effective Time (other than any Liability arising
out of or relating to a Breach that occurred prior to the Effective Time), but
solely for, and only to the extent of, claims or requests of customers for
service and/or repair;
(iv) any Liability arising after the Effective Time under the
Assumed Seller Contracts (other than any Liability under any Assumed Seller
Contract, which: (A) arises out of or relates to a Breach that occurred prior to
the Effective Time, (B) arises out of or relates to a Breach that occurred after
the Effective Time but before Buyer's assumption or novation as an Assumed
Seller Contract, or (C) is otherwise specifically described on Part 2.4(b)(ii));
15
(v) any Liability for Buyer Transaction Taxes;
(vi) any Liability of Seller described in Part 2.4(a)(vi);
(vii) any payroll and/or employee related Liability set forth
in Part 2.4(a)(vii); and
(viii) any Liability for payment of sales and/or use Tax
Liability as set forth in the Audited Closing Balance Sheet.
(b) Retained Liabilities. The Retained Liabilities shall remain the
sole responsibility of and shall be retained, paid, performed and discharged
solely by Seller. "Retained Liabilities" shall mean every Liability of Seller
other than the Assumed Liabilities, including but not limited to:
(i) any Liability arising out of or relating to products of
Seller to the extent manufactured or sold prior to the Effective Time other than
to the extent assumed under Section 2.4(a)(ii), (iii) or (iv);
(ii) any Liability under any Assumed Seller Contracts, which:
(A) arises out of or relates to a Breach that occurred prior to the Effective
Time, (B) arises out of or relates to a Breach that occurred after the Effective
Time but before Buyer's assumption of the Assumed Seller Contract, or (C) is
otherwise specifically described on Part 2.4(b)(ii);
(iii) except for the Buyer Transaction Taxes and except as set
forth in Section 2.4(a)(viii), any Liability for Taxes, including (A) any Taxes
arising as a result of Seller's operation of the Business or ownership of the
Assets prior to the Effective Time, (B) any Seller Transaction Taxes, and (C)
any deferred Taxes of any nature;
(iv) any Liability under any Excluded Seller Contract and any
other Contract not expressly assumed by Buyer under Section 2.4(a), including
any Liability arising out of or relating to Seller's credit facilities or any
revolving (operating) lines of credit, term loans, notes payable, security
interests related thereto, including any Liability under the Line of Credit
after Buyer has paid the corresponding Line of Credit Amount;
(v) any Liability arising out of or connected with any
guaranty, surety, or indemnity granted by Seller in favor any Person to secure
the performance, payment, or other obligation of any other Person, including any
Related Person of Seller or any member of Seller;
(vi) any Environmental, Health and Safety Liabilities arising
out of or relating to Seller's operation of the Business or Seller's leasing,
ownership or operation of any Facilities or the Real Property prior to the
Closing;
(vii) except as set forth in Part 2.4(a)(vii), any Liability
under the Employee Plans or relating to payroll, vacation, sick leave, workers'
compensation, unemployment benefits, pension benefits, employee stock option or
profit-sharing plans, health care plans or benefits or any other employee plans
or benefits of any kind for Seller's employees or former employees or both;
(viii) any Liability under any employment, severance,
retention or termination agreement with any employee or former employee of
Seller or any of its Related Persons;
(ix) any Liability arising out of or relating to any employee
grievance whether or not the affected employees are hired by Buyer;
16
(x) any Liability of Seller to: (A) a Related Person of a
member of Seller, (B) a member of Seller, or (C) any other Related Person of
Seller, other than for a trade account payable incurred by Seller in the
Ordinary Course of Business to the extent assumed by Buyer under Section
2.4(a)(i) or for warranty service and/or repair obligations assumed by Buyer
under Section 2.4(a)(iii);
(xi) any Liability to indemnify, reimburse or advance amounts
to any officer, director, employee or agent of Seller;
(xii) any Liability to distribute to any of Seller's members
or otherwise apply all or any part of the consideration received hereunder;
(xiii) any Liability arising out of any Proceeding pending as
of the Effective Time;
(xiv) any Liability arising out of any Proceeding commenced
after the Effective Time and arising out of or relating to any occurrence or
event happening prior to the Effective Time;
(xv) any Liability arising out of or resulting from Seller's
compliance or noncompliance with any Legal Requirement or Order of any
Governmental Body;
(xvi) any Liability of Seller under this Agreement or any
other document executed in connection with the Contemplated Transactions; and
(xvii) any Liability of Seller based upon Seller's acts or
omissions occurring after the Effective Time.
2.5 Allocation
The Purchase Price shall be allocated in accordance with Exhibit 2.5
attached hereto. After the Closing, the parties shall adjust Exhibit 2.5 to
correspond to the amounts set forth in the Audited Closing Balance Sheet and
then make consistent use of the allocation, fair market value and useful lives
specified in Exhibit 2.5 for all Tax purposes and in all filings, declarations
and reports with the IRS in respect thereof, including the reports required to
be filed under Section 1060 of the Code. Within seventy-five (75) days after the
Closing Date, Buyer and Seller shall mutually prepare for filing IRS Forms 8594
in accordance with the allocation of Purchase Price set forth in Exhibit 2.5. In
any Proceeding related to the determination of any Tax, neither Buyer nor Seller
shall contend or represent that such allocation is not a correct allocation.
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2.6 Closing
The purchase and sale provided for in this Agreement (the "Closing") will
take place at the offices of Buyer's counsel at 000 Xxxx Xxxx Xxxx Xxxx, Xxxxx
000, Xxxx Xxxxxxxx, commencing at 10:00 a.m. (local time) on the later of (a)
August 8, 2005, or (b) the date that is five (5) Business Days following the
termination of the applicable waiting period under the HSR Act, unless Buyer and
Seller otherwise agree ("Closing Date"). Subject to the provisions of Article 9,
failure to consummate the purchase and sale provided for in this Agreement on
the date and time and at the place determined pursuant to this Section 2.6 will
not result in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement. In such a situation, the Closing will
occur as soon as practicable, subject to Article 9 and Section 12.5.
2.7 Closing Obligations
In addition to any other documents to be delivered under other provisions
of this Agreement, at the Closing:
(a) Seller shall deliver to Buyer, together with funds sufficient
to pay all Seller Transaction Taxes:
(i) a xxxx of sale transferring and conveying all of the
Assets to Buyer in a form to be agreed upon by the parties prior to Closing (the
"Xxxx of Sale") executed by Seller;
(ii) an assignment of all of the Assets that are intangible
personal property in a form to be agreed upon by the parties prior to Closing,
which assignment shall also contain Buyer's undertaking and assumption of the
Assumed Liabilities (the "Assignment and Assumption Agreement") executed by
Seller;
(iii) for each interest in Real Property identified on Part
3.7, a recordable warranty deed and such other appropriate document or
instrument of transfer, as the case may require, each in form and substance
satisfactory to Buyer and its counsel and executed by Seller;
(iv) assignments of all Intellectual Property Assets and
separate assignments of all registered Marks, Patents and Copyrights in forms to
be agreed upon by the parties prior to Closing, executed by Seller;
(v) such other deeds, bills of sale, assignments, certificates
of title, documents and other instruments of transfer and conveyance as may
reasonably be requested by Buyer, each in form and substance satisfactory to
Buyer and its legal counsel and executed by Seller;
(vi) letter agreement regarding employment, noncompetition,
and confidentiality obligations between the Buyer and Xxxxxx Xxxxx and between
the Buyer and Xxxxx Xxxxx incorporating the terms of the term sheet attached
hereto as Exhibit 2.7(a)(vi), executed by Xxxxxx Xxxxx and Xxxxx Xxxxx on the
Closing Date ("Fabri and Xxxxx Letter Agreements");
(vii) noncompetition and confidentiality agreement in a form
to be agreed upon by the parties prior to Closing, each executed by Seller (the
"Noncompetition and Confidentiality Agreement");
(viii) an escrow agreement in a form to be agreed upon by the
parties prior to Closing, executed by Seller and the escrow agent (the "Escrow
Agreement");
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(ix) a certificate executed on behalf of Seller by an
executive officer of Seller as to the accuracy of its representations and
warranties as of the date of this Agreement and as of the Closing in accordance
with Section 7.1 and as to its compliance with and performance of its covenants
and obligations to be performed or complied with at or before the Closing in
accordance with Section 7.2;
(x) RESERVED;
(xi) a certificate of the Secretary of Seller certifying, as
complete and accurate as of the Closing, attached copies of the Governing
Documents of Seller, certifying and attaching all requisite resolutions or
actions of Seller's management board and members approving the execution and
delivery of this Agreement and the consummation of the Contemplated Transactions
and the change of name contemplated by Section 5.9 and certifying to the
incumbency and signatures of the officers of Seller executing this Agreement and
any other document relating to the Contemplated Transactions and accompanied by
the requisite documents for amending the relevant Governing Documents of Seller
required to effect such change of name in form sufficient for filing with the
appropriate Governmental Body;
(xii) for each Real Property Lease identified on Part 3.8, an
Assignment and Assumption of Lease attached in a form to be agreed upon by the
parties prior to Closing, together with (A) a Landlord Estoppel Letter attached
in a form to be agreed upon by the parties prior to Closing, and (B) such other
appropriate document or instrument, as the case may require, each in form and
substance satisfactory to Buyer and its counsel and executed by Seller and each
respective landlord;
(xiii) for each other parcel of Real Property which Seller my
use or occupy or on which Seller may store or display any manufactured or
modular unit, an Estoppel Letter attached in form a to be agreed upon by the
parties prior to Closing from such landowner confirming that no lease or other
ongoing obligation exists with regard to such a parcel, executed by Seller and
each respective landowner; and
(xiv) all documents set forth in Sections 5.11(d) and 7.4.
(b) Buyer shall deliver to Seller:
(i) the Cash Amount by wire transfer to an account specified
by Seller pursuant to the written wire transfer instructions provided by Seller
prior to Closing;
(ii) the Escrow Agreement, executed by Buyer and the escrow
agent, together with wire transfer confirmation of payment of the Escrow Amount
to the escrow agent thereunder, by wire transfer to an account specified by the
escrow agent pursuant to the written wire transfer instructions provided by the
escrow agent prior to Closing;
(iii) wire transfer confirmation of payment of the Line of
Credit Amount to the Bank by wire transfer to an account specified by the Bank
pursuant to the written wire transfer instructions provided by the Bank prior to
Closing;
(iv) the Assignment and Assumption Agreement executed by
Buyer;
(v) the Fabri and Xxxxx Letter Agreements executed by Buyer;
(vi) the Noncompetition and Confidentiality Agreement executed
by Buyer, Fabri, and Xxxxx;
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(vii) a certificate executed by Buyer as to the accuracy of
its representations and warranties as of the date of this Agreement and as of
the Closing Date in accordance with Section 8.1 and as to its compliance with
and performance of its covenants and obligations to be performed or complied
with at or before the Closing Date in accordance with Section 8.2; and
(viii) a certificate of the Secretary of Buyer certifying, as
complete and accurate as of the Closing, attached copies of the Governing
Documents of Buyer and certifying and attaching all requisite resolutions or
actions of Buyer's board of directors approving the execution and delivery of
this Agreement and the consummation of the Contemplated Transactions and
certifying to the incumbency and signatures of the officers of Buyer executing
this Agreement and any other document relating to the Contemplated Transactions.
2.8 Baseline Net Assets, Audited Closing Balance Sheet and Net Assets
(a) "Net Assets" means Assets, net of Assumed Liabilities, as
valued, realized, and recognized in accordance with GAAP. Based in part on the
pro forma balance sheet of the Business prepared by Seller and approved by Buyer
in a form to be attached hereto as Exhibit 2.8(a) prior to Closing ("Pro Forma
Balance Sheet"), the baseline Net Assets agreed upon between Buyer and Seller is
Six Million Five Hundred Thirty Thousand Eighty-Eight Dollars ($6,530,088)
("Baseline Net Assets").
(b) Buyer shall have prepared a balance sheet of the Business as of
the Closing Date at the Effective Time in accordance with: (i) GAAP and (ii)
Buyer's accounting policies to be attached hereto as Exhibit 2.8(b) prior to
Closing, which shall be audited by PricewaterhouseCoopers LLP in accordance
with: (i) GAAS, (ii) a physical inventory taken by Seller and observed by Buyer,
Buyer's Representatives and PricewaterhouseCoopers LLP as of the Closing Date
and (iii) Buyer's accounting policies set forth on Exhibit 2.8(b) ("Audited
Closing Balance Sheet"). Buyer shall then determine the Net Assets as of the
Closing Date at the Effective Time in accordance with GAAP and any accounting
principles, policies and practices to be used in preparing the Audited Closing
Balance Sheet set forth on Exhibit 2.8(b), which determination shall be based
upon those Assets and Assumed Liabilities recognized and included in the Audited
Closing Balance Sheet ("Audited Closing Net Assets"). Buyer shall deliver the
Audited Closing Balance Sheet and its determination of the Audited Closing Net
Assets to Seller within one hundred twenty (120) days following the Closing
Date.
(c) If within thirty (30) days following delivery of the Audited
Closing Balance Sheet and the Audited Closing Net Assets calculation Seller has
not given Buyer written notice of its objection as to the Audited Closing Net
Assets calculation (which notice shall state the basis of Seller's objection),
then the Audited Closing Net Assets calculated by Buyer shall be binding and
conclusive on the parties and be used in computing any Aggregate Shortfall
Amount, Seller Shortfall Amount and the Seller Shortfall Payment.
(d) If Seller duly gives Buyer such notice of objection, and if
Seller and Buyer fail to resolve the issues outstanding with respect to the
Audited Closing Balance Sheet and the calculation of the Audited Closing Net
Assets within thirty (30) days of Buyer's receipt of Seller's objection notice,
Seller and Buyer shall submit the issues remaining in dispute to the Independent
Accountants for resolution, applying: (i) GAAP and (ii) Buyer's accounting
policies set forth on Exhibit 2.8(b). If issues are submitted to the Independent
Accountants for resolution, (i) Seller and Buyer shall furnish or cause to be
furnished to the Independent Accountants such work papers and other documents
and information relating to the disputed issues as the Independent Accountants
may request and are available to that party or its agents and shall be afforded
the opportunity to present to the Independent Accountants any material relating
to the disputed issues and to discuss the issues with the Independent
Accountants; (ii) the determination by the Independent Accountants, as set forth
in a notice to be delivered to both Seller and Buyer within sixty (60) days of
the submission to the Independent Accountants of the issues remaining in
20
dispute, shall be final, binding and conclusive on the parties and shall be used
in the calculation of the Audited Closing Net Assets; and (iii) Seller and Buyer
will each bear fifty percent (50%) of the fees and costs of the Independent
Accountants for such determination.
2.9 Aggregate and Seller Shortfall Amounts, Seller Shortfall Payment
(a) The "Aggregate Shortfall Amount" shall equal the sum of the
Seller Shortfall Amount and the Shortfall Amounts of each of the Other Selling
Companies. The "Seller Shortfall Amount" shall equal the positive difference, if
any, of the Baseline Net Assets, minus Audited Closing Net Assets; provided
that: (i) if both of the Shortfall Amounts of the Other Selling Companies are
negative ("Negative Shortfall Amount(s)"), then the Seller Shortfall Amount
shall be reduced by the sum of the Negative Shortfall Amounts, or (ii) if only
one of the Shortfall Amounts of the Other Selling Companies is negative, then
the Seller Shortfall Amount shall be reduced by the Negative Shortfall Amount,
multiplied by the Allocation Ratio. The "Allocation Ratio," as referred to in
this Section 2.9, shall mean and be equal to the Seller Shortfall Amount divided
by sum of the Seller Shortfall Amount and positive Shortfall Amount of the Other
Selling Company. Solely for purposes of determining the "Aggregate Shortfall
Amount" and the "Seller Shortfall Amount", the "Audited Closing Net Assets"
shall be calculated as provided in Section 2.8(b) hereof, except that the
Seller's existing policy for determining revenue recognition shall be applied.
(b) If both the Aggregate Shortfall Amount and the Seller Shortfall
Amount (after any adjustment under Section 2.9(a)) are positive, then: (i) the
Seller Shortfall Amount (after any adjustment under Section 2.9(a)) shall be
applied to and deducted from the Escrow Amount, to the extent of such Escrow
Amount, whereby such amount shall be released by the escrow agent to the Buyer
pursuant to the Escrow Agreement, and (ii) the amount of the Seller Shortfall
Amount (after any adjustment under Section 2.9(a)) in excess of the Escrow
Amount (if any) shall be paid by Seller to Buyer, in immediately available funds
(by wire transfer to an account specified in writing by Buyer) within three (3)
Business Days after the calculation of the Audited Closing Net Assets becomes
binding and conclusive on the parties pursuant to Section 2.8 (collectively,
"Seller Shortfall Payment"). If either the Aggregate Shortfall Amount and/or the
Seller Shortfall Amount (after any adjustment under Section 2.9(a)) are negative
or zero, then no deduction shall be made from the Escrow Amount and no Seller
Shortfall Payment shall otherwise be made hereunder.
(c) Seller shall not be entitled to any increase in the Purchase
Price or other payment from Buyer in the event of any negative Aggregate
Shortfall Amount or any negative Shortfall Amount.
2.10 Consents
(a) Except for those Consents designated as Nonmaterial Consents on
Part 2.10(b), Part 2.10(a) sets forth a complete and accurate list prepared by
Seller of all Consents required to consummate the Contemplated Transactions,
including those Consents required to assign the Seller Contracts and the
Governmental Permits to the Buyer on the Closing Date ("Material Consents"). If
there are any Material Consents that have not yet been obtained (or otherwise
are not in full force and effect) as of the Closing, in the case of each Seller
Contract as to which such Material Consents were not obtained (or otherwise are
not in full force and effect) (the "Restricted Material Contracts"), Buyer may
waive in a signed writing the closing conditions as to any such Material Consent
and either:
(i) elect to have Seller continue its efforts to obtain the
Material Consents; or
(ii) elect to have Seller retain that Restricted Material
Contract and all Liabilities arising therefrom or relating thereto.
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If Buyer elects to have Seller continue its efforts to obtain any Material
Consents and the Closing occurs, notwithstanding Sections 2.1 and 2.4, neither
this Agreement nor the Assignment and Assumption Agreement nor any other
document related to the consummation of the Contemplated Transactions shall
constitute a sale, assignment, assumption, transfer, conveyance or delivery or
an attempted sale, assignment, assumption, transfer, conveyance or delivery of
the Restricted Material Contracts, and following the Closing, the parties shall
use Best Efforts, and cooperate with each other, to obtain the Material Consent
relating to each Restricted Material Contract as quickly as practicable. Pending
the obtaining of such Material Consents relating to any Restricted Material
Contract, the parties shall cooperate with each other in any reasonable and
lawful arrangements designed to provide to Buyer the benefits of use of the
Restricted Material Contract for its term (or any right or benefit arising
thereunder, including the enforcement for the benefit of Buyer of any and all
rights of Seller against a third party thereunder). Once a Material Consent for
the sale, assignment, assumption, transfer, conveyance and delivery of a
Restricted Material Contract is obtained, Seller shall promptly assign,
transfer, convey and deliver such Restricted Material Contract to Buyer, and
Buyer shall assume the obligations under such Restricted Material Contract
assigned to Buyer from and after the date of assignment to Buyer pursuant to a
special-purpose assignment and assumption agreement substantially similar in
terms to those of the Assignment and Assumption Agreement (which special-purpose
agreement the parties shall prepare, execute and deliver in good faith at the
time of such transfer, all at no additional cost to Buyer).
(b) Part 2.10(b) sets forth a full and complete list prepared by
Seller of those Consents (other than Material Consents) required to consummate
the Contemplated Transactions, including those Consents required to assign the
Seller Contracts and the Governmental Permits (to the extent assignable) to the
Buyer on the Closing Date ("Nonmaterial Consents"), to which Buyer has consented
to designation as a nonmaterial Consents. If there are any Nonmaterial Consents
which have not yet been obtained (or otherwise are not in full force and effect)
as of the Closing, Buyer shall elect at the Closing, in the case of each of the
Seller Contracts as to which such Nonmaterial Consents were not obtained (or
otherwise are not in full force and effect) (the "Restricted Nonmaterial
Contracts"), whether to:
(i) accept the assignment of such Restricted Nonmaterial
Contract, in which case, as between Buyer and Seller, such Restricted
Nonmaterial Contract shall, to the maximum extent practicable and
notwithstanding the failure to obtain the applicable Nonmaterial Consent, be
transferred at the Closing pursuant to the Assignment and Assumption Agreement
as elsewhere provided under this Agreement; or
(ii) reject the assignment of such Restricted Nonmaterial
Contract, in which case, notwithstanding Sections 2.1 and 2.4, (A) neither this
Agreement nor the Assignment and Assumption Agreement nor any other document
related to the consummation of the Contemplated Transactions shall constitute a
sale, assignment, assumption, conveyance or delivery or an attempted sale,
assignment, assumption, transfer, conveyance or delivery of such Restricted
Nonmaterial Contract, and (B) Seller shall retain such Restricted Nonmaterial
Contract and all Liabilities arising therefrom or relating thereto.
3. Representations and Warranties of Seller
Seller represents and warrants to Buyer as follows:
3.1 Organization And Good Standing
(a) Part 3.1(a) contains a complete and accurate list of Seller's
jurisdiction of organization and any other jurisdictions in which Seller is
qualified to do business as a foreign limited liability company. Seller is a is
a limited liability company duly organized, validly existing and in good
22
standing under the laws of the State of Delaware, with full power and authority
to conduct the Business as it is now being conducted, to own or use the
properties and assets that it purports to own or use, and to perform all its
obligations under the Seller Contracts. Except as disclosed on Part 3.1(a),
Seller is duly qualified to do business as a foreign limited liability company
and is in good standing under the laws of North Carolina each other state or
jurisdiction in which either the ownership or use of the properties owned or
used by Seller, or the nature of the activities conducted by Seller, requires
such qualification to the extent that a failure to have such qualification would
have a Material Adverse Effect.
(b) Except as disclosed on Part 3.1(b), complete and accurate copies
of the Governing Documents of Seller, as currently in effect, are attached as
part of Part 3.1(b).
(c) Except as disclosed in Part 3.1(c), Seller has no Subsidiary and
do not own any shares of capital stock or other securities of any other Person.
3.2 Enforceability; Authority; No Conflict
(a) This Agreement constitutes the legal, valid and binding
obligation of Seller enforceable in accordance with its terms. Upon the
execution and delivery by Seller of the Escrow Agreement, the Seller's
Noncompetition and Confidentiality Agreement and each other agreement to be
executed and/or delivered by Seller at the Closing (collectively, the "Seller's
Closing Documents"), each of Seller's Closing Documents will constitute the
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms. Seller has the absolute and unrestricted right, power
and authority to execute and deliver this Agreement and the Seller's Closing
Documents to which it is a party and to perform its obligations under this
Agreement and the Seller's Closing Documents, and such action has been duly
authorized by all necessary action by Seller's management board and members.
(b) Except as set forth in Part 3.2(b), neither the execution
and delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time):
(i) Breach (A) any provision of any of the Governing Documents
of Seller or (B) any resolution adopted by the management board or members of
Seller;
(ii) Breach or give any Governmental Body or other Person the
right to challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under any Legal Requirement or any Order to which
Seller or any of the Assets, may be subject;
(iii) contravene, conflict with or result in a violation or
breach of any of the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Permit held by Seller or that otherwise relates to the Assets or to
the Business;
(iv) cause Buyer to become subject to, or to become liable for
the payment of, any Tax other than the Buyer Transaction Taxes;
(v) Breach any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or payment under, or to cancel, terminate or modify, any Seller
Contract; or
(vi) result in the imposition or creation of any Encumbrance
upon or with respect to any of the Assets.
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(c) Except as set forth in Parts 2.10(a) and 2.10(b), Seller is not
required to obtain any Consent from, and except as set forth in Part 3.2(c),
Seller is not required to give any notice to, any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
3.3 Member Distributions
Except for distributions made to or for the benefit of Seller's members to
cover member Tax Liabilities consistent with past practices and consented to by
Buyer in advance in a signed writing, which consent shall not be unreasonably
withheld, Seller has not made and will not make any distributions to Seller's
members since December 31, 2004 other than distributions to Seller's members to
cover Tax Liabilities made in June 2005 in the aggregate amount of Three Hundred
Three Thousand Four Hundred Seventy-Seven Dollars ($303,477).
3.4 Financial Statements
Seller has delivered to Buyer: (a) a reviewed balance sheet of Seller as
at December 31, 2003, and the related reviewed statements of income, changes in
members' equity and cash flows for the fiscal year then ended, including in each
case the notes thereto, together with the report thereon of Seller's independent
certified public accountants; (b) a compiled balance sheet of Seller as of
December 31, 2004 prepared on the same basis as prior balance sheets (including
the notes thereto, the "Balance Sheet") and the related compiled statements of
income, changes in members' equity and cash flows for the fiscal years then
ended prepared on the same basis as prior statements, including in each case the
notes thereto; and (c) an unaudited balance sheet of Seller as at March 31, 2005
(the "Interim Balance Sheet"), and the related unaudited statement(s) of income,
changes in members' equity, and cash flows for the three (3) months then ended.
Such financial statements fairly present (and the financial statements delivered
pursuant to Section 5.8 will fairly present) in all material respects the
financial condition and the results of operations, changes in members' equity
and cash flows of Seller as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP. The
financial statements referred to in this Section 3.4 and delivered pursuant to
Section 5.8 reflect and will reflect the consistent application of such
accounting principles throughout the periods involved, except as disclosed in
the notes to such financial statements. The financial statements have been
prepared from and are in accordance with the accounting Records of Seller.
Seller has also delivered to Buyer copies of all letters from Seller's auditors
to Seller's board of directors or the audit committee thereof during the
thirty-six (36) months preceding the execution of this Agreement, together with
copies of all responses thereto.
3.5 Books and Records
Except as disclosed on Part 3.5, the books of account and other financial
Records of Seller, all of which have been made available to Buyer, are complete
and correct and represent actual, bona fide transactions and have been
maintained in accordance with sound business practices and in reasonable detail
to accurately reflect the conduct of Business transactions and acquisitions and
dispositions of Assets, including the maintenance of an adequate system of
internal controls. All of the minute books of Seller have been made available to
Buyer and contain accurate and complete Records of all meetings held of, and
company action taken by members, management board, and committees of the
management board of Seller, and no meeting of any such members, management
board, or committee has been held for which minutes have not been prepared or
are not contained in such minute books.
3.6 Sufficiency of Assets
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Except as disclosed in Part 3.6, the Assets (a) constitute all of the
assets, tangible and intangible, of any nature whatsoever, necessary to operate
the Business in the manner presently operated by Seller and (b) include all of
the operating assets of Seller.
3.7 Description of Owned Real Property
Part 3.7 contains a correct legal description, street address and tax
parcel identification number of all tracts, parcels and subdivided lots in which
Seller have an ownership interest.
3.8 Description of Leased Real Property
Part 3.8 contains a correct legal description, street address and tax
parcel identification number of all tracts, parcels and subdivided lots in which
Seller has a leasehold interest and an accurate description (by location, name
of lessor, date of Lease and term expiry date) of all Real Property Leases and
all copies of such Real Property Leases have been attached to Part 3.8.
3.9 Title to Assets; Encumbrances
(a) Seller owns good and marketable title (insurable at regular
rates) to its estates in the Real Property, free and clear of any Encumbrances,
other than:
(i) liens for Taxes for the current tax year which are not yet
due and payable; and
(ii) those described in Part 3.9(a) ("Real Estate
Encumbrances").
True and complete copies of (A) all deeds, existing title insurance
policies and surveys of or pertaining to the Real Property and (B) all
instruments, agreements and other documents evidencing, creating or constituting
any Real Estate Encumbrances have been delivered to Buyer. Seller warrants to
Buyer that, at the time of Closing, the Real Estate shall be free and clear of
all Real Estate Encumbrances other than those identified on Part 3.9(a) as
acceptable to Buyer ("Permitted Real Estate Encumbrances").
(b) Seller owns good and transferable title to all of the other
Assets free and clear of any Encumbrances other than those described in Part
3.9(b) ("Non-Real Estate Encumbrances"). Seller warrants to Buyer that, at the
time of Closing, all other Assets shall be free and clear of all Non-Real Estate
Encumbrances other than those identified on Part 3.9(b) as acceptable to Buyer
("Permitted Non-Real Estate Encumbrances" and, together with the Permitted Real
Estate Encumbrances "Permitted Encumbrances").
3.10 Condition of Facilities
(a) To the Knowledge of Seller, use of the Real Property for the
various purposes for which it is presently being used is permitted as of right
under all applicable zoning legal requirements and is not subject to "permitted
nonconforming" use or structure classifications. To the Knowledge of Seller, all
Improvements are in compliance with all applicable Legal Requirements, including
those pertaining to zoning, building and the disabled. All Improvements are in
good repair and in good condition, ordinary wear and tear excepted, and to the
Knowledge of Seller, are free from latent and patent defects. To the Knowledge
of Seller, no part of any Improvement encroaches on any real property not
included in the Real Property, and there are no buildings, structures, fixtures
or other Improvements primarily situated on adjoining property which encroach on
any part of the Land. To the Knowledge of Seller, the Land for each owned
Facility abuts on and has direct vehicular access to a public road or has access
to a public road via a permanent, irrevocable, appurtenant easement benefiting
such Land and comprising a part of
25
the Real Property, is supplied with public or quasi-public utilities and other
services appropriate for the operation of the Facilities located thereon and is
not located within any flood plain or area subject to wetlands regulation or any
similar restriction. To the Knowledge of Seller, there is no existing or
proposed plan to modify or realign any street or highway or any existing or
proposed eminent domain proceeding that would result in the taking of all or any
part of any Facility or that would prevent or hinder the continued use of any
Facility as heretofore used in the conduct of the Business.
(b) The Tangible Personal Property in the aggregate is sufficient
for the operation of the Business, ordinary wear and tear excepted. Except as
disclosed in Part 3.10(b), all Tangible Personal Property used in the Business
is in the possession of Seller.
3.11 Accounts Receivable
All Accounts Receivable that are reflected on the Balance Sheet, Interim
Balance Sheet, Pro Forma Balance Sheet and in the accounting Records of Seller
as of the Closing Date represent or will represent valid obligations arising
from sales actually made or services actually performed by Seller in the
Ordinary Course of Business. Except to the extent paid prior to the Closing
Date, such Accounts Receivable are or will be as of the Closing Date current and
collectible net of the respective reserves shown on the Pro Forma Balance Sheet
or to be shown on the Audited Closing Balance Sheet. Subject to such reserves,
each of such Accounts Receivable is collectible, in cash or by credit, in the
Ordinary Course of Business, consistent with past custom and practice, although
no guaranty of collection is being made by Seller. There is no contest, claim,
defense or right of setoff, other than returns in the Ordinary Course of
Business, under any Contract with any account debtor of an Account Receivable
relating to the amount or validity of such Account Receivable. Part 3.11
contains a complete and accurate list of all Accounts Receivable as of June 30,
2005, which list sets forth the aging of each such Account Receivable, which
list shall be updated as of the Closing Date.
3.12 Inventories
All items included in the Inventories of the Business consist of a quality
and quantity usable and, with respect to finished goods, saleable, in the
Ordinary Course of Business except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the Balance Sheet, Interim Balance Sheet, Pro Forma
Balance Sheet and in the accounting Records of Seller as of the Closing Date, as
the case may be. Seller is not in possession of any inventory not owned by
Seller, including goods already sold. All of the Inventories have been valued
based upon the most current invoice as to such Inventory. All Inventories now on
hand that were purchased after the date of the Balance Sheet were purchased in
the Ordinary Course of Business at a cost not exceeding market prices prevailing
at the time of purchase. Except as disclosed on Part 3.12, the quantities of
each item of Inventories (whether raw materials, work-in-process or finished
goods) are not excessive but are reasonable in the present circumstances of
Seller. Inventories are now valued, and will be valued in the Pro Forma Balance
Sheet and in the Audited Closing Balance Sheet according to Exhibit 2.8(b).
3.13 No Undisclosed Liabilities
Except as set forth in Part 3.13, Seller has no Liability except for
Liabilities reflected or reserved against in the Audited Closing Balance Sheet,
and current liabilities incurred in the Ordinary Course of Business since the
date of the Interim Balance Sheet.
3.14 Taxes
(a) Tax Returns Filed and Taxes Paid. Seller has filed or caused to
be filed on a timely basis all Tax Returns and all reports with respect to Taxes
that are or were required to be filed
26
pursuant to applicable Legal Requirements. All Tax Returns and reports filed by
Seller are true, correct and complete. Seller has paid, or made provision for
the payment of, all Taxes that have or may have become due for all periods
covered by the Tax Returns or otherwise, or pursuant to any assessment received
by Seller, except such Taxes, if any, as are listed in Part 3.14(a) and are
being contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided in the Balance Sheet, Interim Balance
Sheet and Pro Forma Balance Sheet. Except as provided in Part 3.14(a), Seller
currently is not the beneficiary of any extension of time within which to file
any Tax Return. No claim has ever been made or is expected to be made by any
Governmental Body in a jurisdiction where Seller does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction. There are no
Encumbrances on any of the Assets that arose in connection with any failure (or
alleged failure) to pay any Tax, and Seller has no Knowledge of any basis for
assertion of any claims attributable to Taxes which, if adversely determined,
would result in any such Encumbrance.
(b) Delivery of Tax Returns and Information Regarding Audits and
Potential Audits. Seller has delivered or made available to Buyer copies of, and
Part 3.14(b) contains a complete and accurate list of, all Tax Returns filed
since December 31, 1999. The federal and state income or franchise Tax Returns
of Seller have been audited by the IRS or relevant state tax authorities or are
closed by the applicable statute of limitations for all taxable years through
December 31, 1999. Part 3.14(b) contains a complete and accurate list of all Tax
Returns of Seller that have been audited or are currently under audit and
accurately describe any deficiencies or other amounts that were paid or are
currently being contested. To the Knowledge of Seller, no undisclosed
deficiencies are expected to be asserted with respect to any such audit. All
deficiencies proposed as a result of such audits have been paid, reserved
against, settled or are being contested in good faith by appropriate proceedings
as described in Part 3.14(b). Seller has received no notice of any threatened or
pending audit (written or otherwise) and seller has no reason to believe that
any audit or threat of an audit is forthcoming in the future, other than those
specifically as described in Part 3.14(b). Seller has delivered, or made
available to Buyer, copies of any examination reports, statements or
deficiencies or similar items with respect to such audits. Except as provided in
Part 3.14(b), Seller has no Knowledge that any Governmental Body is likely to
assess any additional taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Taxes of Seller in any
jurisdiction, including any jurisdiction in which the Seller does not file Tax
Returns but where it is subject to taxation, either: (i) claimed or raised by
any Governmental Body in writing or (ii) as to which Seller has Knowledge. Part
3.14(b) contains a list of all Tax Returns for which the applicable statute of
limitations has not run. Except as described in Part 3.14(b), Seller has not
given or been requested to give waivers or extensions (or is or would be subject
to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of Seller or for which Seller may
be liable.
(c) Proper Accrual. The charges, accruals and reserves with respect
to Taxes on the Records of Seller are adequate (determined in accordance with
GAAP) and are at least equal to Seller's liability for Taxes. There exists no
proposed tax assessment or deficiency against Seller except as disclosed in the
Pro Forma Balance Sheet or in Part 3.14(c).
(d) Specific Potential Tax Liabilities and Tax Situations.
(i) Withholding. All Taxes that Seller is or was required by
Legal Requirements to withhold, deduct or collect have been duly withheld,
deducted and collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(ii) Tax Sharing or Similar Agreements. There is no tax
sharing agreement, tax allocation agreement, tax indemnity obligation or similar
written or unwritten agreement, arrangement, understanding or practice with
respect to Taxes (including any advance pricing agreement, closing agreement or
other arrangement relating to Taxes) that will require any payment by Seller.
27
(iii) Consolidated Group. Seller (A) has not been a member of
an affiliated group within the meaning of Code Section 1504(a) (or any similar
group defined under a similar provision of state, local or foreign law) and (B)
has no liability for Taxes of any person (other than Seller and its
Subsidiaries) under Treas. Reg. sect. 1.1502-6 (or any similar provision of
state, local or foreign law), as a transferee or successor by contract or
otherwise.
(v) Substantial Understatement Penalty. Seller has disclosed
on its federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the meaning of
Code Section 6662.
(e) The Contemplated Transactions are not subject to the Tax
withholding provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code or of any other provision of federal, state, local or
foreign law.
(f) Seller has never participated in an international boycott as
defined in Code Section 999.
(g) There are no tax rulings, request for rulings, closing
agreements, compromises or any transfer pricing rulings with any Governmental
Body related to the Seller that could affect the Tax Liability of the Seller for
any period (or portion of a period) after the Closing Date.
(h) Seller is not a Person other than a U.S. Person as such term is
defined in the Code.
3.15 No Material Adverse Change
Since the date of the Balance Sheet, there has not been any Material
Adverse Effect and no event has occurred or circumstance exists that could
reasonably be expected to result in such a Material Adverse Effect.
3.16 Employee Benefits
(a) Set forth in Part 3.16(a) is a complete and correct list of all
"employee benefit plans" as defined by Section 3(3) of ERISA, all specified
fringe benefit plans as defined in Section 6039D of the Code, and all other
bonus, incentive-compensation, deferred-compensation, profit-sharing,
stock-option, stock-appreciation-right, stock-bonus, stock-purchase,
employee-stock-ownership, savings, severance, change-in-control,
supplemental-unemployment, layoff, salary-continuation, retirement, pension,
health, life-insurance, disability, accident, group-insurance, vacation,
holiday, sick-leave, fringe-benefit or welfare plan, and any other employee
compensation or benefit plan, agreement, policy, practice, commitment, contract
or understanding (whether qualified or nonqualified, currently effective or
terminated, written or unwritten) and any trust, escrow or other agreement
related thereto that (i) is maintained or contributed to by Seller or any other
corporation or trade or business controlled by, controlling or under common
control with Seller (within the meaning of Section 414 of the Code or Section
4001(a)(14) or 4001(b) of ERISA) ("ERISA Affiliate") or has been maintained or
contributed to in the last six (6) years by Seller or any ERISA Affiliate, or
with respect to which Seller or any ERISA Affiliate has or may have any
liability, and (ii) provides benefits, or describes policies or procedures
applicable to any current or former director, officer, employee or service
provider of Seller or any ERISA Affiliate, or the dependents of any thereof,
regardless of how (or whether) liabilities for the provision of benefits are
accrued or assets are acquired or dedicated with respect to the funding thereof
(collectively the "Employee Plans"). Nether Seller or any ERISA Affiliate
maintains or previously maintained a "defined benefit plan" (as defined in
Section 414(l) of the Code, or a plan that is, or was, subject to Title IV of
ERISA or Section 302 of ERISA or Section 412 of the Code. Part 3.16(a)
identifies as such any
28
Employee Plan that is a plan intended to meet the requirements of Section 401(a)
of the Code. Neither Seller nor any ERISA Affiliate maintains, or previously
maintained a "Multiemployer Plan" (as defined in Section 3(37) of ERISA. Also
set forth on Part 3.16(a) is a complete and correct list of all ERISA Affiliates
of Seller during the last six (6) years.
(b) Seller has delivered to Buyer true, accurate and complete copies
of (i) the documents comprising each Employee Plan of Seller (or, with respect
to any Employee Plan which is unwritten, a detailed written description of
eligibility, participation, benefits, funding arrangements, assets and any other
matters which relate to the obligations of Seller or any ERISA Affiliate); (ii)
all trust agreements, insurance contracts or any other funding instruments
related to the Employee Plans; (iii) all rulings, determination letters,
no-action letters or advisory opinions from the IRS, the U.S. Department of
Labor, the Pension Benefit Guaranty Corporation ("PBGC") or any other
Governmental Body that pertain to each Employee Plan and any open requests
therefor; (iv) the most recent actuarial and financial reports (audited and/or
unaudited) and the annual reports filed with any Government Body with respect to
the Employee Plans during the current year and each of the three preceding
years; (v) all collective bargaining agreements pursuant to which contributions
to any Employee Plan(s) have been made or obligations incurred (including both
pension and welfare benefits) by Seller or any ERISA Affiliate, and all
collective bargaining agreements pursuant to which contributions are being made
or obligations are owed by such entities; (vi) all contracts with third-party
administrators, actuaries, investment managers, consultants and other
independent contractors that relate to any Employee Plan; and (vi) all summary
plan descriptions, summaries of material modifications and memoranda, employee
handbooks and other written communications regarding the Employee Plans.
(c) Except as disclosed in Part 3.16(c), full payment has been made
of all amounts that are required under the terms of each Employee Plan to be
paid as contributions with respect to all periods prior to and including the
last day of the most recent fiscal year of such Employee Plan ended on or before
the date of this Agreement and all periods thereafter prior to the Closing Date.
Seller has paid in full all required insurance premiums, subject only to normal
retrospective adjustments in the ordinary course, with regard to the Employee
Plans for all policy years or other applicable policy periods ending on or
before the Closing Date.
(d) Seller has, at all times, complied, and currently complies, in
all material respects with the applicable continuation requirements for its
welfare benefit plans, including (1) Section 4980B of the Code (as well as its
predecessor provision, Section 162(k) of the Code) and Sections 601 through 608,
inclusive, of ERISA, which provisions are hereinafter referred to collectively
as "COBRA" and (2) any applicable state statutes mandating health insurance
continuation coverage for employees.
(e) The form of all Employee Plans is in compliance with the
applicable terms of ERISA, the Code, and any other applicable laws, including
the Americans with Disabilities Act of 1990, the Family Medical Leave Act of
1993 and the Health Insurance Portability and Accountability Act of 1996, and
such plans have been operated in compliance with such laws and the written
Employee Plan documents. Neither Seller nor any fiduciary of an Employee Plan
has violated the requirements of Section 404 of ERISA in a manner that would
result in a Liability to Seller or Buyer. All required reports and descriptions
of the Employee Plans (including Internal Revenue Service Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions and Summaries of
Material Modifications) have been (when required) timely filed with the IRS, the
U.S. Department of Labor or other Governmental Body and distributed as required,
and all notices required by ERISA or the Code or any other Legal Requirement
with respect to the Employee Plans have been appropriately given.
(f) Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the IRS, and Seller has no Knowledge of any circumstances that will or could
result in revocation of any such favorable determination letter. Each trust
29
created under any Employee Plan has been determined to be exempt from taxation
under Section 501(a) of the Code, and Seller is not aware of any circumstance
that will or could result in a revocation of such exemption. Each Employee
Welfare Benefit Plan (as defined in Section 3(1) of ERISA) that utilizes a
funding vehicle described in Section 501(c)(9) of the Code or is subject to the
provisions of Section 505 of the Code has been the subject of a notification by
the IRS that such funding vehicle qualifies for tax-exempt status under Section
501(c)(9) of the Code or that the plan complies with Section 505 of the Code,
unless the IRS does not, as a matter of policy, issue such notification with
respect to the particular type of plan. With respect to each Employee Plan, no
event has occurred or condition exists that will or could give rise to a loss of
any intended tax consequence or to any Tax under Section 511 of the Code.
(g) There is no material pending or threatened Proceeding relating
to any Employee Plan, nor is there any basis for any such Proceeding. Neither
Seller nor any fiduciary of an Employee Plan has engaged in a transaction with
respect to any Employee Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject Seller or Buyer to a
Tax or penalty imposed by either Section 4975 of the Code or Section 502(l) of
ERISA or a violation of Section 406 of ERISA. The Contemplated Transactions will
not result in the potential assessment of a Tax or penalty under Section 4975 of
the Code or Section 502(l) of ERISA nor result in a violation of Section 406 of
ERISA.
(h) Seller has maintained workers' compensation coverage as required
by applicable state law through purchase of insurance and not by self-insurance
or otherwise except as disclosed to Buyer on Part 3.16(h).
(i) Except as required by Legal Requirements and as provided in
Section 10.1(d), the consummation of the Contemplated Transactions will not
accelerate the time of vesting or the time of payment, or increase the amount,
of compensation due to any current or former management board member, officer,
or employee of Seller. There are no contracts or arrangements providing for
payments that could subject any person to liability for tax under Section 4999
of the Code.
(j) Except for the continuation coverage requirements of COBRA,
Seller has no obligations or potential liability for benefits to employees,
former employees or their respective dependents following termination of
employment or retirement under any of the Employee Plans that are Employee
Welfare Benefit Plans.
(k) Except as provided in Section 10.1(d), none of the Contemplated
Transactions will result in an amendment, modification or termination of any of
the Employee Plans. No written or oral representations have been made to any
employee or former employee of Seller promising or guaranteeing any employer
payment or funding for the continuation of medical, dental, life or disability
coverage for any period of time beyond the end of the current plan year (except
to the extent of coverage required under COBRA). No written or oral
representations have been made to any employee or former employee of Seller
concerning the employee benefits of Buyer.
3.17 Compliance With Legal Requirements; Governmental Permits
(a) Except as set forth in Part 3.17(a):
(i) to the Knowledge of Seller, Seller is, and at all times
since December 31, 1999, has been, in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
the Business or the ownership or use of any asset of its assets except where the
failure to be in such compliance would not have a Material Adverse Effect;
(ii) to the Knowledge of Seller, no event has occurred or
circumstance exists that (with or without notice or lapse of time) (A) could
reasonably be expected to constitute or result in a
30
violation by Seller of, or a failure on the part of Seller to comply with, any
Legal Requirement or (B) may give rise to any obligation on the part of Seller
to undertake, or to bear all or any portion of the cost of, any remedial action
of any nature; and
(iii) Seller has not received, at any time since December 31,
1999, any written notice from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible or potential violation of, or
failure to comply with, any Legal Requirement or (B) any actual, alleged,
possible or potential obligation on the part of Seller to undertake, or to bear
all or any portion of the cost of, any remedial action of any nature.
(b) Part 3.17(b) contains a complete and accurate list of each
Governmental Permit that is held by Seller or that otherwise relates to the
Business or the Assets. Each Governmental Permit listed or required to be listed
in Part 3.17(b) is valid and in full force and effect. Except as set forth in
Part 3.17(b):
(i) to the Knowledge of Seller, Seller is, and at all times
since December 31, 1999, has been, in full compliance with all of the terms and
requirements of each Governmental Permit identified or required to be identified
in Part 3.17(b) except where the failure to be in such compliance would not have
a Material Adverse Effect;
(ii) to the Knowledge of Seller, no event has occurred or
circumstance exists that reasonably could be expected to (with or without notice
or lapse of time) (A) constitute or result directly or indirectly in a violation
of or a failure to comply with any term or requirement of any Governmental
Permit listed or required to be listed in Part 3.17(b) or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation or
termination of, or any modification to, any Governmental Permit listed or
required to be listed in Part 3.17(b);
(iii) Seller has not received, at any time since December 31,
1999, any written notice from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible or potential violation of or failure
to comply with any term or requirement of any Governmental Permit or (B) any
actual, proposed, possible or potential revocation, withdrawal, suspension,
cancellation, termination of or modification to any Governmental Permit; and
(iv) all applications required to have been filed for the
renewal of the Governmental Permits listed or required to be listed in Part
3.17(b) have been duly filed on a timely basis with the appropriate Governmental
Bodies, and all other filings required to have been made with respect to such
Governmental Permits have been duly made on a timely basis with the appropriate
Governmental Bodies.
To the Knowledge of Seller, such Governmental Permits collectively
constitute all of the Governmental Permits necessary to permit Seller to
lawfully conduct and operate the Business in the manner in which the Business is
currently conducted and operated and to permit Seller to own and use the Assets
in the manner in which the Assets are currently owned and used by Seller.
3.18 Legal Proceedings; Orders
(a) Except as set forth in Part 3.18(a), there is no pending or, to
the Knowledge of Seller, threatened Proceeding:
(i) by or against Seller or that otherwise relates to or may
affect the Business of, or any of the assets owned or used by, Seller; or
31
(ii) against Seller that challenges, or that may have the
effect of preventing, delaying, making illegal or otherwise interfering with,
any of the Contemplated Transactions.
To the Knowledge of Seller, no event has occurred or circumstance exists
that is reasonably likely to give rise to or serve as a basis for the
commencement of any such Proceeding. Seller has delivered to Buyer copies of all
pleadings, correspondence and other documents relating to each Proceeding listed
in Part 3.18(a). There are no Proceedings listed or required to be listed in
Part 3.18(a) that could have a Material Adverse Affect on the Business,
operations, assets, condition or prospects of Seller or upon the Assets.
(b) Except as set forth in Part 3.18(b):
(i) there is no Order to which Seller, the Business or any of
the Assets is subject; and
(ii) to the Knowledge of Seller, no officer, director, agent
or employee of Seller is subject to any Order that prohibits such officer,
director, agent or employee from engaging in or continuing any conduct, activity
or practice relating to the Business.
(c) Except as set forth in Part 3.18(c):
(i) Seller is, and, at all times since December 31, 1999, has
been in compliance with all of the terms and requirements of each Order to which
they, the Business, or any of the Assets is or has been subject except where the
failure to be in such compliance would not have a Material Adverse Effect;
(ii) no event has occurred or circumstance exists that is
reasonably likely to constitute or result in (with or without notice or lapse of
time) a violation of or failure to comply with any term or requirement of any
Order to which Seller, the Business, or any of the Assets is subject; and
(iii) Seller has not received, at any time since December 31,
1999, any written notice from any Governmental Body or any other Person
regarding any actual, alleged, possible or potential violation of, or failure to
comply with, any term or requirement of any Order to which Seller, the Business,
or any of the Assets is or has been subject.
3.19 Absence of Certain Changes And Events
Except as set forth in Part 3.19, since the date of the Balance Sheet,
Seller has conducted the Business only in the Ordinary Course of Business and
there has not been any:
(a) (i) change in Seller's membership interest ownership, or (ii)
grant of any option or right to purchase a membership interest of Seller or
issuance of any security convertible into such membership interest;
(b) amendment to the Governing Documents of Seller;
(c) payment or increase (except in the Ordinary Course of Business)
by Seller of any bonuses, salaries or other compensation to any member, manager,
officer or employee or entry into any employment, severance or similar Contract
with any director, officer or employee;
(d) adoption of, amendment to or increase in the payments to or
benefits under, any Employee Plan;
32
(e) damage to or destruction or loss of any Asset in excess of
$5,000 for any individual Asset and $15,000 in the aggregate for all Assets,
whether or not covered by insurance;
(f) except as disclosed in Part 3.20(a), entry into, termination of
or receipt of notice of termination of (i) any license, distributorship, dealer,
sales representative, joint venture, credit or similar Contract to which Seller
is a party, or (ii) any Contract or transaction involving a total remaining
commitment by Seller of at least $75,000;
(g) sale, lease or other disposition of any Asset or property of
Seller (including the Intellectual Property Assets) or the creation of any
Encumbrance on any Asset (other than sales, leases or other dispositions of
Inventories in the Ordinary Course of Business);
(h) cancellation or waiver of any claims or rights with a value to
Seller in excess of $50,000;
(i) any written notification from customer or supplier of an
intention to discontinue or change the terms of its relationship with Seller;
(j) material change in the accounting methods used by Seller; or
(k) Contract by Seller to do any of the foregoing.
3.20 Contracts; No Defaults
(a) Part 3.20(a) contains an accurate and complete list, and Seller
has delivered to Buyer (or attached to the Disclosure Schedule as required
herein) accurate and complete copies, of:
(i) backlog lists of Seller, listing all Seller Contracts that
are orders from Business customers on backlog (by customer name, order number,
order date, model, selling price, cost, and gross profit) as of the date hereof,
updated as of the Closing Date ("Backlog List(s)"), which has been separately
attached to the Disclosure Schedule;
(ii) to the extent not listed on Part 3.20(a) from Section
3.20(a)(i) above, each Seller Contract that involves performance of services or
delivery of goods or materials by or to Seller of an amount or value in excess
of twenty-five thousand ($25,000) dollars;
(iii) each Seller Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of Seller
in excess of ten ($10,000) dollars;
(iv) each Seller Contract affecting the ownership of, leasing
of, title to, use of or any leasehold or other interest in any real or personal
property (except personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than
twenty-five thousand ($25,000) dollars and with a term of less than one year);
(v) each Seller Contract with any labor union or other
employee representative of a group of employees relating to wages, hours and
other conditions of employment;
(vi) each Seller Contract (however named) involving a sharing
of profits, losses, costs or liabilities by Seller with any other Person;
33
(vii) each Seller Contract containing covenants that in any
way purport to restrict Business activity or limit the freedom of Seller to
engage in any line of business or to compete with any Person;
(viii) each Seller Contract providing for payments to or by
any Person based on sales, purchases or profits, other than direct payments for
goods;
(ix) each power of attorney of Seller that is currently
effective and outstanding;
(x) each Seller Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by Seller to be responsible for consequential damages;
(xi) each Seller Contract for capital expenditures in excess
of twenty thousand ($20,000) dollars;
(xii) each Seller Contract not denominated in U.S. dollars;
(xiii) each written warranty, guaranty and/or other similar
undertaking with respect to contractual performance extended by Seller other
than in the Ordinary Course of Business; and
(xiv) each amendment, supplement and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.20(b), no member of Seller has or
may acquire any rights under, and no member of Seller has or may become subject
to any obligation or liability under, any Contract that relates to the Business
or any of the Assets.
(c) Except as set forth in Part 3.20(c):
(i) each Seller Contract identified or required to be
identified in Part 3.20(a) and which is to be assigned to or assumed by Buyer
under this Agreement is in full force and effect and is valid and enforceable in
accordance with its terms and the Backlog List is a complete and correct list of
all Business customer orders on backlog as of the Closing Date and such list
represents actual, bona fide, outstanding orders of the Business that have not
been cancelled on or prior to the Closing Date;
(ii) each Seller Contract identified or required to be
identified in Part 3.20(a) and which is being assigned to or assumed by Buyer is
assignable by Seller to Buyer without the consent of any other Person; and
(iii) to the Knowledge of Seller, no Seller Contract
identified or required to be identified in Part 3.20(a) and which is to be
assigned to or assumed by Buyer under this Agreement will upon completion or
performance thereof have a Material Adverse Effect on the Business, assets or
condition of Seller or the Business to be conducted by Buyer with the Assets.
(d) Except as set forth in Part 3.20(d):
(i) Seller is, and at all times since December 31, 1999, has
been, in compliance with all applicable terms and requirements of each Seller
Contract which is being assumed by Buyer except where any noncompliance would
not have a Material Adverse Effect;
34
(ii) to the Knowledge of Seller, each other Person that has or
had any obligation or liability under any Seller Contract which is being
assigned to Buyer is, and at all times since December 31, 1999, has been, in
compliance with all applicable terms and requirements of such Contract;
(iii) to the Knowledge of Seller, no event has occurred or
circumstance exists that (with or without notice or lapse of time) constitutes a
Breach of, or give Seller or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
payment under, or to cancel, terminate or modify, any Seller Contract that is
being assigned to or assumed by Buyer;
(iv) to the Knowledge of Seller, no event has occurred or
circumstance exists under or by virtue of any Seller Contract that (with or
without notice or lapse of time) would cause the creation of any Encumbrance
affecting any of the Assets; and
(v) Seller has not given to or received from any other Person,
at any time since December 31, 1999, any notice regarding any actual, alleged,
possible or potential violation or Breach of, or default under, any Contract
which is being assigned to or assumed by Buyer.
(e) There are no renegotiations of, attempts to renegotiate or
outstanding rights to renegotiate any material amounts paid or payable to Seller
under current or completed Seller Contracts with any Person having the
contractual or statutory right to demand or require such renegotiation and no
such Person has made written demand for such renegotiation.
(f) Each Seller Contract relating to the sale, design, manufacture
or provision of products or services by Seller has been entered into in the
Ordinary Course of Business and has been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
(g) No penalty or premium will be imposed upon Buyer for any
prepayment of any amount due and/or outstanding under the Line of Credit or any
Seller Contract assumed by Buyer at Closing.
3.21 Insurance
(a) Set forth in Part 3.21(a) is a complete list and description of
all pending fire, liability, product liability, workers compensation, vehicular,
unemployment and other insurance claims (excluding health insurance claims)
relating to or arising from operation of the Business (specifying the insurer,
the policy number or covering note number with respect to binders and the amount
of any deductible, describing the pending claims and the applicable policy
limits, setting forth the aggregate limit, if any, of the insurer's liability
thereunder). In addition, set forth in Part 3.21(a) is a complete and accurate
list of all policies or binders of fire, liability, product liability, workers
compensation, vehicular, unemployment and other insurance held by or on behalf
of Seller that relate to the Business and have been in effect at any time during
the two (2) year period immediately prior to the date of this Agreement.
(b) Except as set forth in Part 3.21(b), to the Knowledge of Seller:
(i) all policies of insurance to which Seller is a party or
that provide coverage to Seller:
(1) are valid, outstanding and enforceable;
(2) are issued by an insurer that is financially sound
and reputable;
35
(3) taken together, provide adequate insurance coverage
for the Assets and the Business operations for all risks normally insured
against by a Person carrying on the same business or businesses as the Business
in the same location; and
(4) are sufficient for compliance with all Legal
Requirements and Seller Contracts;
(ii) Neither Seller has received (A) any refusal of coverage
or any notice that a defense will be afforded with reservation of rights or (B)
any notice of cancellation or any other indication that any policy of insurance
is no longer in full force or effect or that the issuer of any policy of
insurance is not willing or able to perform its obligations thereunder;
(iii) Seller has paid all premiums due, and has otherwise
performed all of its obligations, under each policy of insurance to which either
is a party or that provides coverage to Seller; and
(iv) Seller has given notice to the insurer of all claims that
may be insured thereby.
3.22 Environmental Matters
Except as disclosed in Part 3.22:
(a) Seller is, and at all times have been, in full compliance with,
and are not in violation of or liable under, any Environmental Law. Seller has
no Knowledge of, and have not received any actual or threatened order or written
notice or other communication from, (i) any Governmental Body or private citizen
acting in the public interest or (ii) the current or prior owner or operator of
any Facilities, of any actual or potential violation or failure to comply with
any Environmental Law, or of any actual or threatened obligation to undertake or
bear the cost of any Environmental, Health and Safety Liabilities with respect
to any Facility or other property or asset (whether real, personal or mixed) in
which Seller has or had an interest, or with respect to any property or Facility
at or to which Hazardous Materials were generated, manufactured, refined,
transferred, imported, used or processed by Seller or any other Person for whose
conduct it is or may be held responsible, or from which Hazardous Materials have
been transported, treated, stored, handled, transferred, disposed, recycled or
received.
(b) There are no pending or, to the Knowledge of Seller, threatened
claims, Encumbrances, or other restrictions of any nature resulting from any
Environmental, Health and Safety Liabilities or arising under or pursuant to any
Environmental Law with respect to or affecting any Facility or any other
property or asset (whether real, personal or mixed) in which Seller has or had
an interest.
(c) Seller has no Knowledge of, and have not received, any citation,
directive, inquiry, notice, Order, summons, warning or other communication that
relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any Environmental Law, or of any
alleged, actual, or potential obligation to undertake or bear the cost of any
Environmental, Health and Safety Liabilities with respect to any Facility or
property or asset (whether real, personal or mixed) in which Seller has or had
an interest, or with respect to any Real Property or Facility to which Hazardous
Materials were generated, manufactured, refined, transferred, imported, used or
processed by Seller from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled or received.
(d) Seller has no any Environmental, Health and Safety Liabilities
with respect to any Facility or, to the Knowledge of Seller, with respect to any
other property or asset (whether real,
36
personal or mixed) in which Seller or any predecessor has or had an interest or
at any property geologically or hydrologically adjoining any Facility or any
such other property or asset.
(e) To the Knowledge of Seller, there are no Hazardous Materials
present on or in the Environment at any Facility, including any Hazardous
Materials contained in barrels, aboveground or underground storage tanks,
landfills, land deposits, dumps, equipment (whether movable or fixed) or other
containers, either temporary or permanent, and deposited or located in land,
water, sumps, or any other part of the Facility or such adjoining property, or
incorporated into any structure therein or thereon. Neither Seller nor any
Person for whose conduct it is or may be held responsible, or to the Knowledge
of Seller, any other Person, has permitted or conducted, or is aware of, any
Hazardous Activity conducted with respect to any Facility or any other property
or assets (whether real, personal or mixed) in which Seller has or had an
interest except in full compliance in all material respects with all applicable
Environmental Laws.
(f) There has been no Release or, to the Knowledge of Seller, Threat
of Release of any Hazardous Materials at or from any Facility or at any other
location where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by any Facility, or
from any other property or asset (whether real, personal or mixed) in which
Seller has or had an interest, or to the Knowledge of Seller any geologically or
hydrologically adjoining property, whether by Seller or any other Person.
(g) Seller has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Seller pertaining to Hazardous Materials or Hazardous Activities
in, on, or under the Facilities, or concerning compliance, by Seller or any
other Person for whose conduct it is or may be held responsible, with
Environmental Laws at the Facilities.
3.23 Employees
(a) Part 3.23(a) contains a complete and accurate list of the
following information for each employee of Seller and Xxxxx Xxxxx, including
each employee on leave of absence or layoff status: employer; name; job title;
date of hiring or engagement; date of commencement of employment or engagement;
current compensation paid or payable and any change in compensation since
December 31, 1999; sick and vacation leave that is accrued but unused; and
service credited for purposes of vesting and eligibility to participate under
any Employee Plan, or any other employee or director benefit plan.
(b) Upon request of Buyer prior to Closing, Seller shall provide
Buyer with a complete and accurate list of the following information for each
retired employee or director, and manager of Seller, or their dependents,
receiving benefits or scheduled to receive benefits in the future: name; pension
benefits; pension option election; retiree medical insurance coverage; retiree
life insurance coverage; and other benefits.
(c) Upon request of Buyer prior to Closing, Seller shall provide
Buyer with the number of employees terminated by Seller since December 31, 1999,
and a complete and accurate list of the following information for each employee
of Seller who has been terminated or laid off, or whose hours of work have been
reduced by more than fifty percent (50%) by Seller, in the six (6) months prior
to the date of this Agreement: (i) the date of such termination, layoff or
reduction in hours; (ii) the reason for such termination, layoff or reduction in
hours; and (iii) the location to which the employee was assigned.
(d) Seller has not violated the Worker Adjustment and Retraining
Notification Act, as amended (the "WARN Act") or any similar state or local
Legal Requirement. During the ninety (90)
37
day period prior to the date of this Agreement, Seller has terminated the
employees set forth on Part 3.23(d).
(e) To the Knowledge of Seller, no officer, director, manager,
agent, employee, consultant, or contractor of Seller is bound by any Contract
that purports to limit the ability of such officer, director, agent, employee,
consultant, or contractor (i) to engage in or continue or perform any conduct,
activity, duties or practice relating to the Business or (ii) to assign to
Seller or to any other Person any rights to any invention, improvement, or
discovery. No former or current employee of Seller is a party to, or is
otherwise bound by, any Contract that in any way adversely affected, affects, or
will affect the ability of Seller or Buyer to conduct the Business as heretofore
carried on by Seller.
3.24 Labor Disputes; Compliance
(a) Seller has complied in all respects with all Legal Requirements
relating to employment practices, terms and conditions of employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining and other Legal Requirements, the payment of social
security and similar Taxes and occupational safety and health. Seller is not
liable for the payment of any Taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
(b) Except as disclosed in Part 3.24(b), (i) Seller has not been,
and is not now, a party to any collective bargaining agreement or other labor
contract; (ii) since December 31, 1999, there has not been, there is not
presently pending or existing, and to the Knowledge of Seller, there is not
threatened, any strike, slowdown, picketing, work stoppage or employee grievance
process involving Seller; (iii) to the Knowledge of Seller, no event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute; (iv) there is not pending or, to the Knowledge
of Seller, threatened against or affecting Seller any Proceeding relating to the
alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed with the National
Labor Relations Board or any comparable Governmental Body, and there is no
organizational activity or other labor dispute against or affecting Seller or
the Facilities; (v) no application or petition for an election of or for
certification of a collective bargaining agent is pending; (vi) no grievance or
arbitration Proceeding exists that might have an adverse effect upon Seller or
the conduct of the Business; (vii) there is no lockout of any employees by
Seller, and no such action is contemplated by Seller; and (viii) to the
Knowledge of Seller there has been no charge of discrimination filed against or
threatened against Seller with the Equal Employment Opportunity Commission or
similar Governmental Body.
3.25 Intellectual Property Assets
(a) The term "Intellectual Property Assets" means all intellectual
property owned or licensed (as licensor or licensee) by Seller in which Seller
has an interest, including:
(i) Seller's name, all assumed fictional business names, trade
names, registered and unregistered trademarks, service marks, trade dress and
applications and the good will of Seller's business in which the foregoing are
used (collectively, "Marks"), including any contained in or forming a part of
the Software or the Housing Plans;
(ii) all patents, patent applications and inventions and
discoveries that may or may not be patentable (collectively, "Patents"),
including any contained in or forming a part of the Software or the Housing
Plans;
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(iii) all registered and unregistered copyrights in both
published works and unpublished works (collectively, "Copyrights"), including
any contained in or forming a part of Software or the Housing Plans;
(iv) all know-how, trade secrets, confidential or proprietary
information, customer lists, technical information, data, databases, process
technology, plans, drawings, blue prints, formulae, patterns, compilations
including any program, device, method of technique (collectively, "Trade
Secrets"), including any contained in or forming a part of the Software or the
Housing Plans or otherwise listed in Part 2.1(h); and
(v) all rights in internet web sites and internet domain names
presently used by Seller and the goodwill of Seller's business in which the
foregoing are used (collectively "Net Names").
(b) Part 3.25(b) contains a complete and accurate list and summary
description, including any royalties paid or received by Seller, and Seller has
delivered to Buyer accurate and complete copies, of all Seller Contracts
relating to the Intellectual Property Assets. There are no outstanding and, to
the Knowledge of Seller, no threatened or potentially viable disputes or
disagreements with respect to any such Contract.
(c) Except as set forth in Part 3.25(c), the Intellectual Property
Assets are all those used in or necessary for the operation of the Business as
it is currently conducted. Seller is the owner or licensee of all right, title
and interest in and to each of the Intellectual Property Assets, free and clear
of all Encumbrances or any Third Party rights therein, and has the right to use
without payment or accounting to a Third Party all of the Intellectual Property
Assets, other than in respect of licenses listed in Part 3.25(c).
(d)
(i) Part 3.25(d) contains a complete and accurate list and
summary description of all Patents.
(ii) All of the issued Patents are currently in compliance
with formal legal requirements (including payment of filing, examination and
maintenance fees and proofs of working or use), are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date.
(iii) No Patent has been or is now involved in any
interference, reissue, reexamination, or opposition Proceeding. To the Knowledge
of Seller, there is no potentially interfering patent or patent application of
any Third Party or any threatened or potentially viable disputes or
disagreements with respect to any Patent.
(iv) Except as set forth in Part 3.25 (d), (A) no Patent is
infringed or, to the Knowledge of Seller, has been challenged or threatened in
any way and (B) none of the products manufactured, used, offered for sale, sold
or imported, nor any process or know-how used, by Seller infringes or is alleged
to infringe any patent or other proprietary right of any other Person.
(v) All products made, used, offered for sale, sold or
imported under the Patents have been marked with the proper patent notice.
(e)
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(i) Part 3.25(e) contains a complete and accurate list and
summary description of all Marks.
(ii) All Marks have been registered with the United States
Patent and Trademark Office, are currently in compliance with all formal Legal
Requirements (including the timely post-registration filing of affidavits of use
and incontestability and renewal applications), are valid and enforceable and
are not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date.
(iii) No Xxxx has been or is now involved in any opposition,
invalidation or cancellation Proceeding and, to the Knowledge of Seller, no such
action is threatened with respect to any of the Marks and there are not
threatened or potentially viable disputes or disagreements with respect to any
Xxxx.
(iv) To the Knowledge of Seller, there is no potentially
interfering registered, pending or common law trademark, service xxxx, trade
name or trade dress of any other Person.
(v) No Xxxx is infringed or, to the Knowledge of Seller, has
been challenged or threatened in any way. None of the Marks used by Seller
infringes or is alleged to infringe any trade name, trademark, service xxxx or
trade dress of any other Person.
(vi) All products and materials containing a Xxxx xxxx the
proper federal registration notice where permitted by law.
(f)
(i) Part 3.25(f) contains a complete and accurate list and
summary description of all Copyrights.
(ii) All of the registered Copyrights are currently in
compliance with formal Legal Requirements, are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the date of Closing.
(iii) No Copyright is infringed or, to the Knowledge of
Seller, has been challenged or threatened in any way, and there are no
potentially viable disputes or disagreements with respect to any Copyright. None
of the subject matter of any of the Copyrights infringes or is alleged to
infringe any copyright of any Third Party or is a derivative work based upon the
work of any other Person.
(iv) All works encompassed by the Copyrights have been marked
with the proper copyright notice.
(g)
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate and sufficient in detail and
content to identify and explain it and to allow its full and proper use without
reliance on the knowledge or memory of any individual.
(ii) Seller has taken all reasonable precautions to protect
the secrecy, confidentiality and value of all Trade Secrets (including the
enforcement by Seller of a policy requiring each employee or contractor to
execute proprietary information and confidentiality agreements
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substantially in Seller's standard form, and all current and former employees
and contractors of Seller have executed such an agreement).
(iii) Seller have good title to and an absolute right to use
the Trade Secrets. The Trade Secrets are not part of the public knowledge or
literature and, to the Knowledge of Seller, have not been used, divulged or
appropriated either for the benefit of any Person (other than Seller) or to the
detriment of Seller. No Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way or infringes any intellectual property right
of any other Person, and there are no threatened or potentially viable disputes
or disagreements with respect to any Trade Secret.
(h)
(i) Part 3.25(h) contains a complete and accurate list and
summary description of all Net Names.
(ii) All Net Names have been registered in the name of Seller
and are in compliance with all formal Legal Requirements.
(iii) No Net Name has been or is now involved in any dispute,
opposition, invalidation or cancellation Proceeding and, to the Knowledge of
Seller, no such action is threatened with respect to any Net Name.
(iv) To the Knowledge of Seller, there is no trademark,
service xxxx, trade name, domain name or domain name application pending of any
other person which would or would potentially interfere with or infringe any Net
Name.
(v) No Net Name is infringed or, to the Knowledge of Seller,
has been challenged, interfered with or threatened in any way. No Net Name
infringes, interferes with or is alleged to interfere with or infringe the
trademark, copyright or domain name of any other Person, and there are no
threatened or potentially viable disputes or disagreements with respect to any
Net Name.
3.26 RESERVED
3.27 Relationships with Related Persons
Except as disclosed in Part 3.27, neither Seller nor any Related Person of
any of them has, or since January 1, 2003, has had, any interest in any property
(whether real, personal or mixed and whether tangible or intangible) used in or
pertaining to the Business. Neither Seller nor any Related Person of any of them
owns, or since January 1, 2003, has owned, of record or as a beneficial owner,
an equity interest or any other financial or profit interest in any Person that
has (a) had business dealings or a material financial interest in any
transaction with Seller other than business dealings or transactions disclosed
in Part 3.27, each of which has been conducted in the Ordinary Course of
Business with Seller at substantially prevailing market prices and on
substantially prevailing market terms or (b) engaged in competition with Seller
with respect to any line of the products or services of Seller or the Business
(a "Competing Business") in any market presently served by Seller, except for
ownership of less than one percent (1%) of the outstanding capital stock of any
Competing Business that is publicly traded on any recognized exchange or in the
over-the-counter market. Except as set forth in Part 3.27, neither Seller nor
any Related Person of any of them is a party to any Contract with, or has any
claim or right against, Seller.
3.28 Brokers or Finders
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Neither Seller nor any of Seller's Representatives have incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payments in connection with the sale of
the Business or the Assets or the Contemplated Transactions.
3.29 Compliance with Building Codes and other Legal Requirements
All modular and manufactured housing units and other Inventories, and
corresponding House Plans, comply in all respects to the Building Codes and
other Legal Requirements of each locality in which Seller sells or delivers such
units except where the failure to be in such compliance would not have a
Material Adverse Effect. Notwithstanding the foregoing, Seller makes no
representation or warranty concerning any actions or omissions of any of
Seller's customers that might cause such housing units and other Inventories,
and corresponding House Plans, to not be in such compliance.
3.30 Solvency
(a) Seller is not now insolvent and will not be rendered insolvent
by any of the Contemplated Transactions. As used in this section, "insolvent"
means that the sum of the debts and other probable Liabilities of Seller exceeds
the present fair saleable value of Seller's assets.
(b) Immediately after giving effect to the consummation of the
Contemplated Transactions: (i) Seller will be able to pay its respective
Liabilities as they become due in the usual course of the Business; (ii) Seller
will not have unreasonably small capital with which to conduct its present or
proposed business; (iii) Seller will have assets (calculated at fair market
value) that exceed Seller's Liabilities; and (iv) taking into account all
pending and threatened litigation, final judgments against Seller in actions for
money damages are not reasonably anticipated to be rendered at a time when, or
in amounts such that, Seller will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into account the maximum
probable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered) as well as all other
obligations of Seller as the case may be. The cash available to Seller, after
taking into account all other anticipated uses of the cash, will be sufficient
to pay all such debts and judgments promptly in accordance with their terms.
3.31 Disclosure
(a) No representation or warranty or other statement made by Seller
in this Agreement, the Disclosure Schedule, any supplement to the Disclosure
Schedule, the certificates delivered pursuant to Section 2.7(a) or otherwise in
connection with the Contemplated Transactions contains any untrue statement or
omits to state a material fact necessary to make any of them, in light of the
circumstances in which it was made, not misleading.
(b) Seller has no Knowledge of any fact that has specific
application to Seller (other than general economic or industry conditions) and
that may materially adversely affect the Assets, Business, prospects, financial
condition or results of operations of Seller that has not been set forth in this
Agreement or the Disclosure Schedule.
4. Representations and Warranties of Buyer
Buyer represents and warrants to Seller as follows:
4.1 Organization and Good Standing
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Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Michigan, with full corporate power and
authority to conduct the Business as it is now conducted.
4.2 Authority; No Conflict
(a) This Agreement constitutes the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Assignment and Assumption
Agreement, the Escrow Agreement, the Fabri and Xxxxx Letter Agreements, and each
other agreement to be executed or delivered by Buyer at Closing (collectively,
the "Buyer's Closing Documents"), each of the Buyer's Closing Documents will
constitute the legal, valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its respective terms. Buyer has the absolute and
unrestricted right, power and authority to execute and deliver this Agreement
and the Buyer's Closing Documents and to perform its obligations under this
Agreement and the Buyer's Closing Documents, and such action has been duly
authorized by all necessary corporate action.
(b) Neither the execution and delivery of this Agreement by Buyer
nor the consummation or performance of any of the Contemplated Transactions by
Buyer will give any Person the right to prevent, delay or otherwise interfere
with any of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Governing Documents;
(ii) any resolution adopted by the board of directors or the
shareholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be
subject; or
(iv) any Contract to which Buyer is a party or by which Buyer
may be bound.
Buyer is not and will not be required to obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
4.3 Certain Proceedings
There is no pending Proceeding that has been commenced against Buyer and
that challenges, or may have the effect of preventing, delaying, making illegal
or otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been threatened.
4.4 Brokers Or Finders
Except for Buyer's agreement with Devon Value Advisors in connection with
the Contemplated Transactions, neither Buyer nor any of its Representatives have
incurred any obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
the Contemplated Transactions. Any fees due from Buyer to Devon Value Advisors
in connection with the Contemplated Transactions shall not reduce the Purchase
Price due from Buyer to Seller at the Closing.
5. Covenants of Seller Prior to Closing
5.1 Access and Investigation
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Between the date of this Agreement and the Closing Date, and upon
reasonable advance notice received from Buyer, Seller shall (a) afford Buyer and
its Representatives and prospective lenders and their Representatives
(collectively, "Buyer Group") full and free access, during regular business
hours, to Seller's personnel, properties (including subsurface testing),
Contracts, Governmental Permits, books and Records and other documents and data,
such rights of access to be exercised in a manner that does not unreasonably
interfere with the operations of Seller; (b) furnish Buyer Group with copies of
all such Contracts, Governmental Permits, books and Records and other existing
documents and data as Buyer may reasonably request; (c) furnish Buyer Group with
such additional non-privilege, financial, legal, environmental, operating and
other relevant data and information as Buyer may reasonably request; and (d)
otherwise cooperate and assist, to the extent reasonably requested by Buyer,
with Buyer's investigation of the properties, assets and financial condition
related to Seller. In addition, Buyer shall have the right to have the Real
Property and Tangible Personal Property inspected by Buyer Group, at Buyer's
sole cost and expense, for purposes of determining the physical condition and
legal characteristics of the Real Property and Tangible Personal Property. In
the event subsurface or other destructive testing is recommended by any of Buyer
Group, Buyer shall be permitted to have the same performed and Buyer shall be
responsible for all costs associated with the testing, including without
limitation the disposal of soils or other media generated during the testing,
and shall defend, indemnify and hold harmless Seller for all Damages as a result
of such testing. Without limiting the generality of the foregoing and as soon as
practicable after the date of this Agreement, Seller shall provide Buyer with
all Seller's payroll information in possession of Seller and its payroll
processor.
5.2 Operation of the Business
Between the date of this Agreement and the Closing, Seller shall:
(a) conduct the Business only in the Ordinary Course of Business;
(b) except as otherwise directed by Buyer in writing, and without
making any commitment on Buyer's behalf, use its Best Efforts to preserve intact
its current business organization, keep available the services of its officers,
employees and agents and maintain its relations and good will with suppliers,
customers, landlords, creditors, employees, agents and others having business
relationships with it;
(c) confer with Buyer prior to implementing operational decisions
regarding the Business of a material nature;
(d) otherwise report periodically to Buyer concerning the status of
the Business and Seller's operations and finances;
(e) make no material changes in management personnel of the Business
without prior consultation with Buyer;
(f) maintain the Assets in a state of repair and condition that
complies with Legal Requirements and is consistent with the requirements and
normal conduct of the Business;
(g) keep in full force and effect, without amendment, all material
rights relating to the Business;
(h) comply with all Legal Requirements and contractual obligations
applicable to the operations of the Business;
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(i) continue in full force and effect the Business insurance
coverage under the policies set forth in Part 3.21 or substantially equivalent
policies;
(j) except as required to comply with ERISA or to maintain
qualification under Section 401(a) of the Code, not amend, modify or terminate
any Employee Plan without the express written consent of Buyer, and except as
required under the provisions of any Employee Plan, not make any contributions
to or with respect to any Employee Plan without the express written consent of
Buyer, provided that Seller shall contribute that amount of cash to each
Employee Plan necessary to fully fund all of the benefit liabilities of such
Employee Plan on a plan-termination basis as of the Closing Date;
(k) cooperate with Buyer and assist Buyer in identifying the
Governmental Permits required by Buyer to operate the Business from and after
the Closing Date and either transferring existing Governmental Permits of Seller
to Buyer, where permissible, or obtaining new Governmental Permits for Buyer;
(l) upon request from time to time, execute and deliver all
documents, make all truthful oaths, testify in any Proceedings and do all other
acts that may be reasonably necessary or desirable in the opinion of Buyer to
consummate the Contemplated Transactions, all without further consideration;
(m) maintain all books and Records of Seller relating to the
Business in the Ordinary Course of Business; and
(n) not make any distributions to Seller's members, make any changes
to long-term debt, or enter into any long-term commitments of Seller; provided,
however, Seller may make distributions to Seller's members to cover member Tax
Liabilities consistent with past practices and consented to by Buyer in advance
in a signed writing, which consent shall not be unreasonably withheld.
5.3 Negative Covenant
Except as otherwise expressly permitted herein, between the date of this
Agreement and the Closing Date, Seller shall not without the prior written
Consent of Buyer, (a) take any affirmative action, or fail to take any
reasonable action within the control of Seller, as a result of which any of the
changes or events listed in Sections 3.15 or 3.19 would be likely to occur; (b)
make any modification to any material Contract or Governmental Permit; or (c)
enter into any compromise or settlement of any litigation, proceeding or
governmental investigation relating to the Assets, the Business or the Assumed
Liabilities.
5.4 Required Approvals; Material Consents and Nonmaterial Consents
Seller shall (in cooperation with Buyer) make, or cause to be made, all
filings and procure any Consent required under the HSR Act to consummate the
Contemplated Transactions. Except for filings required under the HSR Act for
which Buyer and Seller shall be jointly responsible, Seller shall make all other
filings required by Legal Requirements to be made either company in order to
consummate the Contemplated Transaction, including those set forth in Section
5.12. Without limiting the generality of the foregoing, Seller shall procure all
possible exemption certificates for all state, county, and local sales and use
Taxes related to the transfer of the Tangible Personal Property under the
Contemplated Transactions under applicable laws ("Sales and Use Tax
Exemptions"). Through and up to the Closing Date, Seller shall continuously
update Parts 2.10(a) and 2.10(b) for all Material Consents and Nonmaterial
Consents, respectively. Except for any Material Consent to be procured by Buyer
and Seller under the HSR Act, jointly, Seller shall procure all Material
Consents and Nonmaterial Consents, prior to the Closing Date. Seller shall
cooperate with Buyer and its Representatives with respect to all filings under
the HSR Act and those other filings that Buyer elects to make or, pursuant to
Legal Requirements, shall be required to
45
make in connection with the Contemplated Transactions. Other than fees
associated with filings required under the HSR Act borne by Buyer under Section
6.1 hereof, all other costs and fees associated with making required filings and
procuring Material Consents in connection with the Contemplated Transactions
shall be borne by Seller.
5.5 Notification
Between the date of this Agreement and the Closing, Seller shall promptly
notify Buyer in writing if it becomes aware of (a) any fact or condition that
causes or constitutes a Breach of any of Seller's representations and warranties
made as of the date of this Agreement or (b) the occurrence after the date of
this Agreement of any fact or condition that would or be reasonably likely to
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had that representation or
warranty been made as of the time of the occurrence of, or Seller's discovery
of, such fact or condition. Should any such fact or condition require any change
to the Disclosure Schedule, Seller shall promptly deliver to Buyer a supplement
to the Disclosure Schedule specifying such change. Such delivery shall not
affect any rights of Buyer under Section 9.2 and Article 11. During the same
period, Seller shall also promptly notify Buyer of the occurrence of any Breach
of any covenant of Seller in this Article 5 or of the occurrence of any event
that may make the satisfaction of the conditions in Article 7 impossible or
unlikely.
5.6 No Negotiation
Until such time as this Agreement shall be terminated pursuant to Section
9.1, neither Seller nor Seller's members, management board, officers, employees,
affiliates, advisors, or agents shall directly or indirectly solicit, initiate,
discuss, encourage or entertain any inquiries or proposals from, discuss or
negotiate with, provide any nonpublic information to or consider the merits of
any inquiries or proposals from any Person (other than Buyer) relating to any
business combination transaction involving Seller, including any sale of
Seller's membership interests, the merger or consolidation of Seller or the sale
of the Business or any of the Assets (other than in the Ordinary Course of
Business). Seller shall notify Buyer of any such inquiry or proposal within
twenty-four (24) hours of receipt or awareness of the same by Seller.
5.7 Best Efforts
Seller shall use its Best Efforts to cause the conditions in Article 7 and
Section 8.3 to be satisfied.
5.8 Interim Financial Statements
Until the Closing Date, Seller shall deliver to Buyer within fifteen (15)
days after the end of each month a copy of its respective balance sheet for such
month prepared in a manner and containing information consistent with the
current practices of Seller and certified by the respective principal financial
officers of Seller as to compliance with Section 3.4.
5.9 Change Of Name
On the Closing Date, Seller shall (a) amend its Governing Documents and
take all other actions necessary to change its name to one sufficiently
dissimilar to Seller's present name, in Buyer's judgment, to avoid confusion and
(b) take all actions requested by Buyer to enable Buyer to change its name to
Seller's present name.
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5.10 Payment Of Liabilities
Seller shall pay or otherwise satisfy in the Ordinary Course of Business
all of its Liabilities and obligations.
5.11 Current Evidence of Title
(a) Unless previously provided to Buyer by Seller, no later than ten
(10) Business Days after the date of this Agreement, Buyer shall obtain (at
Buyer's expense), for each parcel, tract or subdivided land lot of Real Property
or Ground Lease Property:
(i) from Fidelity National Title Insurance Company (the "Title
Insurer"):
(1) title commitments issued by the Title Insurer to
insure (at regular rates) good and marketable to all Land, Improvements,
insurable Appurtenances, if any, and Ground Lease Property in the amount of that
portion of the Purchase Price allocated to the Real Property, as specified in
Part 2.5, covering such Real Property, naming Buyer as the proposed insured and
having an effective date after the date of this Agreement, wherein the Title
Insurer shall agree to issue an ALTA 1992 form owner's policy of title insurance
(each a "Title Commitment"); and
(2) complete and legible copies of all recorded
documents listed as Schedule B-1 matters to be terminated or satisfied in order
to issue the policy described in the Title Commitment or as special Schedule B-2
exceptions thereunder (the "Recorded Documents"); and
(ii) a survey of the Real Property as required by Buyer
("Survey"); and
(iii) complete and current Uniform Commercial Code searches.
(b) Each Title Commitment shall include the Title Insurer's
requirements for issuing its title policy, which requirements shall be met by
Seller on or before the Closing Date (including those requirements that must be
met by releasing or satisfying monetary Encumbrances, but excluding Encumbrances
that will remain after Closing and those requirements that are to be met solely
by Buyer).
(c) If any of the following shall occur (collectively, a "Title
Objection"):
(i) any Title Commitment or other evidence of title or search
of the appropriate real estate records discloses that any party other than
Seller has title to the insured estate covered by the Title Commitment;
(ii) any title exception is disclosed in Schedule B to any
Title Commitment that is not one of the Permitted Real Estate Encumbrances or
one that Seller specifies when delivering the Title Commitment to Buyer as one
that Seller will cause to be deleted from the Title Commitment concurrently with
the Closing, including (A) any exceptions that pertain to Encumbrances securing
any loans that do not constitute an Assumed Liability and (B) any exceptions
that Buyer reasonably believes could materially and adversely affect Buyer's use
and enjoyment of the Real Property described therein; or
(iii) any Survey discloses any matter that Buyer reasonably
believes could materially and adversely affect Buyer's use and enjoyment of the
Real Property described therein;
47
then Buyer shall notify Seller in writing ("Buyer's Notice") of such matters
within ten (10) Business Days after receiving all of the Title Commitment,
Survey and copies of Recorded Documents for the Facility covered thereby.
(d) Seller shall use its Best Efforts to cure each Title Objection
and take all steps required by the Title Insurer to eliminate each Title
Objection as an exception to the Title Commitment. Any Title Objection that the
Title Company is willing to insure over on terms acceptable to Seller and Buyer
is herein referred to as an "Insured Exception." The Insured Exceptions,
together with any title exception or matters disclosed by the Survey not
objected to by Buyer in the manner aforesaid shall be deemed to be acceptable to
Buyer.
(e) Nothing herein waives Buyer's right to claim a breach of Section
3.9(a) or to claim a right to indemnification as provided in Section 11.2 if
Buyer suffers Damages as a result of a misrepresentation with respect to the
condition of title to the Real Property.
5.12 Qualification of Buyer to Engage in the Business
Seller shall, upon the request of Buyer, and at Buyer's expense, assist
Buyer in Buyer's efforts to obtain in Buyer's name all Governmental Permits
necessary to permit Buyer to lawfully conduct and operate the Business after
Closing in the manner in which Seller currently conducts and operates the
Business and to permit Buyer to own and use the Assets after Closing in the
manner in which Seller currently owns and uses the Assets, in:
(a) Buyer's and Seller's jurisdictions of
incorporation/organization;
(b) any jurisdictions specified in Part 3.1(a) in which Seller is
qualified to do business as a foreign limited liability company; and
(c) any jurisdictions: (i) into which Seller has delivered
Inventories or (ii) in which Inventories were otherwise in use by customers, at
anytime during the two (2) years preceding the Closing Date; and
(d) any other jurisdictions which may be specified in the
non-delinquent orders outstanding as of the Effective Time to be assumed by
Buyer as described in Part 2.4(a)(ii).
6. Covenants of Buyer Prior to Closing
6.1 Required Approvals; Material Consents and Nonmaterial Consents
Buyer shall (in cooperation with Seller) make, or cause to be made, all
filings and procure any Consent required under the HSR Act to consummate the
Contemplated Transactions. Buyer also shall cooperate, and cause its Related
Persons to cooperate, with Seller (a) with respect to all filings required of
Seller under Sections 5.4 and 5.12 and (b) in obtaining all Material Consents
and Nonmaterial Consents to be procured by Seller under Sections 5.4 and 5.12.
The fees associated with any filings required under the HSR Act shall be borne
by Buyer, provided, however, that, in all other cases, Buyer shall not be
required to dispose of or make any change to the Business, expend any material
funds or incur any other burden in order to comply with this Section 6.1.
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6.2 Best Efforts
Buyer shall use its Best Efforts to cause the conditions in Article 8 and
Section 7.3 (if applicable) to be satisfied.
7. Conditions Precedent to Buyer's Obligation to Close
Buyer's obligation to purchase the Assets and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1 Accuracy of Representations
All of Seller's representations and warranties in this Agreement, together
with the information provided in the Disclosure Schedule (considered
collectively), and each of these representations and warranties (considered
individually), shall have been accurate in all material respects as of the date
of this Agreement, and shall be accurate in all material respects as of the time
of the Closing as if then made.
7.2 Performance of Seller
All of the covenants and obligations that Seller is required to perform or
to comply with pursuant to this Agreement at or prior to the Closing (considered
collectively), including those under Articles 5 and 10 hereof, and each of these
covenants and obligations (considered individually), shall have been duly
performed and complied with in all material respects.
7.3 Material Consents and Nonmaterial Consents, Expiration of Waiting
Periods
Each of the Material Consents and Nonmaterial Consents shall have been
obtained in a form satisfactory to Buyer and shall be in full force and effect.
All waiting periods have expired under applicable Legal Requirements, including
those stipulated under the HSR Act.
7.4 Additional Documents
Seller shall have caused the documents and instruments required by Section
2.7(a) and the following documents to be delivered (or tendered subject only to
Closing) to Buyer:
(a) an opinion of Seller's counsel, dated the Closing Date, in a
form to be agreed upon by the parties prior to Closing;
(b) The articles of organization and all amendments thereto of
Seller, duly certified as of a recent date by the Delaware Department of State;
(c) If requested by Buyer, any Consents or other instruments that
may be required to permit Buyer's qualification in each jurisdiction in which
Seller is licensed or qualified to do business as a foreign limited liability
company under the name "Carolina Building Solutions" or any derivative thereof;
(d) A statement from the holder of each note and mortgage listed on
Part 2.4(a)(vii), if any, dated the Closing Date, setting forth the principal
amount then outstanding on the indebtedness represented by such note or secured
by such mortgage, the interest rate thereon and a statement to the effect that
Seller, as obligor under such note or mortgage, is not in default under any of
the provisions thereof;
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(e) Releases of all Encumbrances on the Assets, other than Permitted
Encumbrances, including releases of each mortgage of record and reconveyances of
each deed of trust with respect to each parcel of real property included in the
Assets;
(f) Certificates of Good Standing, dated as of a date not earlier
than the fifth business day prior to the Closing Date, as to the subsistence and
good standing of Seller, executed by the appropriate officials of the States of
Delaware and North Carolina and each other jurisdiction in which Seller is
licensed or qualified to do business as a foreign limited liability company as
specified in Part 3.1(a);
(g) All estoppel letters required by Sections 2.7(a)(xii) and (xiv)
executed by Seller and each respective landlord and/or landowner;
(h) Clearance certificates or similar document(s) from each federal,
state, county, local, or foreign jurisdiction (or political subdivision thereof)
that may be required to relieve the Buyer of any obligation to withhold any
portion of the Purchase Price;
(i) All Sales and Use Tax Exemptions in accordance with Section 5.4
hereof;
(j) A Nonforeign Affidavit sworn to and executed by Seller,
attesting that Seller is not a Person other than a U.S. Person as such term is
defined in the Code; and
(k) Such other documents as Buyer may reasonably request for the
purpose of:
(i) evidencing the accuracy of any of Seller's representations
and warranties;
(ii) evidencing the performance by Seller of, or the
compliance by Seller with, any covenant or obligation required to be performed
or complied with by Seller;
(iii) evidencing the satisfaction of any condition referred to
in this Article 7; or
(iv) otherwise facilitating the consummation or performance of
any of the Contemplated Transactions.
7.5 No Material Adverse Affect; No Proceedings
Since the date of this Agreement, there shall not have been any event or
occurrence that would have a Material Adverse Effect. Since the date of this
Agreement, there shall not have been commenced or threatened against Buyer, or
against any Related Person of Buyer, any Proceeding (a) involving any challenge
to, or seeking Damages or other relief in connection with, any of the
Contemplated Transactions or (b) that may have the effect of preventing,
delaying, making illegal, imposing limitations or conditions on or otherwise
interfering with any of the Contemplated Transactions.
7.6 No Conflict
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), contravene or conflict with or result in a violation of or cause Buyer or
any Related Person of Buyer to suffer any adverse consequence under (a) any
applicable Legal Requirement or Order or (b) any Legal Requirement or Order that
has been published, introduced or otherwise proposed by or before any
Governmental Body.
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7.7 Satisfactory Completion of Investigation
Buyer shall have completed its investigation described in Section 5.1
respecting environmental matters to the sole and subjective satisfaction of
Buyer, for which Buyer shall have until the 5:00 p.m. Eastern Daylight Time on
Friday July 22, 2005 to give written notice to Seller of: (a) Buyer's
dissatisfaction respecting one or more environmental matters and (b) Buyer's
termination of the Agreement pursuant to Section 9.1(c) hereof. Buyer shall have
completed its investigation described in Section 5.1 respecting real estate
matters to the sole and subjective satisfaction of Buyer, for which Buyer shall
have until the 5:00 p.m. Eastern Daylight Time on Wednesday July 27, 2005 to
give written notice to Seller of: (a) Buyer's dissatisfaction respecting one or
more real estate matters and (b) Buyer's termination of the Agreement pursuant
to Section 9.1(c) hereof.
7.8 Title Insurance
Buyer shall have received unconditional and binding commitments to issue
policies of title insurance consistent with Section 5.11, dated the Closing
Date, in an aggregate amount equal to the amount of the Purchase Price allocated
to the Real Property, deleting all requirements listed in ALTA Schedule B-1,
amending the effective date to the date and time of recordation of the deed
transferring title to the Real Property to Buyer with no exception for the gap
between closing and recordation, deleting or insuring over Title Objections as
required pursuant to Section 5.11, attaching all endorsements reasonably
required by Buyer in order to ensure provision of all coverage required pursuant
to Section 5.11 and otherwise in form reasonably satisfactory to Buyer insuring
Buyer's interest in each parcel of Real Property or interest therein to the
extent required by Section 5.11.
7.9 Governmental Permits
Seller has procured for Buyer all Governmental Permits set forth in
Section 5.12.
7.10 Environmental Report
Buyer shall have received an environmental site assessment report with
respect to Seller's Facilities, which report shall be acceptable in form and
substance to Buyer in its sole discretion.
7.11 WARN Act And Employees
(a) All requisite notice periods under the WARN Act shall have
expired.
(b) Buyer shall have entered into the Fabri and Xxxxx Letter
Agreements, each duly executed by the corresponding Seller employee specified
therein.
(c) A sufficient amount of employees of Seller to operate the
Business in the Ordinary Course of Business shall be available for hiring by
Buyer, in its sole discretion, on and as of the Closing Date.
7.12 Ancillary Agreements
The relevant Persons shall have entered into their corresponding ancillary
agreements set forth in form and substance acceptable to Buyer.
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7.13 Board Approval
Buyer shall have obtained all requisite resolutions or actions of Buyer's
board of directors approving the execution and delivery of this Agreement and
the consummation of the Contemplated Transactions.
7.14 Closing under the Other Purchase Agreements
The closing of the transactions contemplated under the Other Purchase
Agreements shall have occurred simultaneously with the Closing on the Closing
Date set forth herein.
8. Conditions Precedent to Seller's Obligation to Close
Seller's obligation to sell the Assets and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller in whole or in part):
8.1 Accuracy of Representations
All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), shall have been accurate in all material respects as
of the date of this Agreement and shall be accurate in all material respects as
of the time of the Closing as if then made.
8.2 Buyer's Performance
All of the covenants and obligations that Buyer is required to perform or
to comply with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), shall have been performed and complied with in all material
respects.
8.3 Expiration of HSR Waiting Period
The waiting period, if any, has expired under the HSR Act.
8.4 Management Board and Member Approval
Seller shall have obtained all requisite resolutions or actions of
Seller's management board and members approving the execution and delivery of
this Agreement and the consummation of the Contemplated Transactions.
8.5 Additional Documents
Buyer shall have caused the documents and instruments required by Section
2.7(b) and the following documents to be delivered (or tendered subject only to
Closing) to Seller:
(a) an opinion of Buyer's counsel, dated the Closing Date, in the
form to be agreed upon by the parties prior to Closing; and
(b) such other documents as Seller may reasonably request for the
purpose of
(i) evidencing the accuracy of any representation or warranty
of Buyer,
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(ii) evidencing the performance by Buyer of, or the compliance
by Buyer with, any covenant or obligation required to be performed or complied
with by Buyer or
(iii) evidencing the satisfaction of any condition referred to
in this Article 8.
9. Termination
9.1 Termination Events
By notice given prior to or at the Closing, subject to Section 9.2, this
Agreement may be terminated as follows:
(a) by Buyer if a material Breach of any provision of this Agreement
has been committed by Seller and such Breach has not been waived by Buyer;
(b) by Seller if a material Breach of any provision of this
Agreement has been committed by Buyer and such Breach has not been waived by
Seller;
(c) by Buyer if any condition in Article 7 has not been satisfied as
of the date specified for Closing in the first sentence of Section 2.6 or if
satisfaction of such a condition by such date is or becomes impossible (other
than through the failure of Buyer to comply with its obligations under this
Agreement), and Buyer has not waived such condition on or before such date;
(d) by Seller if any condition in Article 8 has not been satisfied
as of the date specified for Closing in the first sentence of Section 2.6 or if
satisfaction of such a condition by such date is or becomes impossible (other
than through the failure of Seller to comply with its obligations under this
Agreement), and Seller has not waived such condition on or before such date;
(e) by mutual consent of Buyer and Seller;
(f) by Buyer, at its option, if the Closing has not occurred on or
before August 31, 2005, or such later date as the parties may agree upon, unless
the Buyer is in material Breach of this Agreement;
(g) by Seller if the Closing has not occurred on or before August
31, 2005, or such later date as the parties may agree upon, unless the Seller is
in material Breach of this Agreement or have caused the delay in Closing; or
(h) by Buyer, at its option, if either of the Other Purchase
Agreements is terminated.
9.2 Effect Of Termination
Each party's right of termination under Section 9.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
such right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 9.1, all obligations of the parties under this
Agreement will terminate, except that the obligations of the parties in this
Section 9.2 and Article 12 will survive, provided, however, that, if this
Agreement is terminated because of a Breach of this Agreement by the
non-terminating party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired, including those set forth in Section 12.5.
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10. Additional Covenants
10.1 Employees and Employee Benefits
(a) Information on Active Employees. For the purpose of this
Agreement, the term "Active Employees" shall mean all employees employed on the
Closing Date by Seller for the Business who are:
(i) bargaining unit employees currently covered by a
collective bargaining agreement or
(ii) employed exclusively in the Business as currently
conducted, including employees on temporary leave of absence, including family
medical leave, military leave, temporary disability or sick leave, but excluding
employees on long-term disability leave.
(b) Employment of Active Employees by Buyer.
(i) Buyer is not obligated to hire any Active Employee but may
interview all Active Employees. Buyer will provide Seller with a list of Active
Employees to whom Buyer has made an offer of employment that has been accepted
to be effective on the Closing Date (the "Hired Active Employees"). Subject to
Legal Requirements, Buyer will have reasonable access to the Facilities and
personnel Records (including performance appraisals, disciplinary actions,
grievances and medical Records) of Seller for the purpose of preparing for and
conducting employment interviews with all Active Employees and will conduct the
interviews as expeditiously as possible prior to the Closing Date. Access will
be provided by Seller upon reasonable prior notice during normal business hours.
Effective immediately before the Closing, Seller will terminate the employment
of all of the respective Hired Active Employees of Seller.
(ii) As soon as practicable, Buyer shall inform Seller of the
identities of those Active Employees to whom it will not make employment offers.
Seller, and not Buyer, shall assume and comply with all obligations under the
WARN Act.
(iii) It is understood and agreed that (A) Buyer's expressed
intention to extend offers of employment as set forth in this section shall not
constitute any commitment, Contract or understanding (expressed or implied) of
any obligation on the part of Buyer to a post-Closing employment relationship of
any fixed term or duration or upon any terms, and (B) employment offered by
Buyer is "at will" and may be terminated by Buyer or by an employee at any time
for any reason (subject to any written commitments to the contrary made by Buyer
or an employee and Legal Requirements). Nothing in this Agreement shall be
deemed to prevent or restrict in any way the right of Buyer to terminate,
reassign, promote or demote any of the Hired Active Employees after the Closing
or to change adversely or favorably the title, powers, duties, responsibilities,
functions, locations, salaries, other compensation or terms or conditions of
employment of such employees.
(iv) Notwithstanding the foregoing, Buyer will afford to any
employees of Seller hired by Buyer a prior service credit, for purposes of all
Buyer's employee benefit plans and Buyer's vacation benefits and eligibility,
for the period of the individual's employment by Seller.
(c) Salaries and Benefits.
(i) Seller shall be responsible for (A) the payment of all
wages and other remuneration due to Active Employees with respect to their
services as employees of Seller through the close of business on the Closing
Date; (B) the payment of any termination or severance payments and the
54
provision of health plan continuation coverage in accordance with the
requirements of COBRA and Sections 601 through 608 of ERISA; and (C) any and all
payments to employees required under and all liability imposed by the WARN Act.
(ii) Seller shall be liable for any claims made or incurred by
Active Employees and their beneficiaries through the Closing Date under the
Employee Plans. For purposes of the immediately preceding sentence, a charge
will be deemed incurred, in the case of hospital, medical or dental benefits,
when the services that are the subject of the charge are performed and, in the
case of other benefits (such as disability or life insurance), when an event has
occurred or when a condition has been diagnosed that entitles the employee to
the benefit.
(d) Seller's Retirement and Savings Plans. All Hired Active
Employees who are participants in Seller's retirement plans shall retain their
accrued benefits under Seller's retirement plans as of the Closing Date, and
Seller (or Seller's retirement plans) shall retain sole liability for the
payment of such benefits as and when such Hired Active Employees become eligible
therefor under such plans
(e) No Transfer of Assets. Neither Seller nor its Related Persons
will make any transfer of pension or other employee benefit plan assets to
Buyer.
(f) Collective Bargaining Matters. Buyer will set its own initial
terms and conditions of employment for the Hired Active Employees and others it
may hire, including work rules, benefits and salary and wage structure, all as
permitted by applicable Legal Requirements. Buyer is not obligated to assume any
collective bargaining agreements under this Agreement. Seller shall be solely
liable for any severance payment required to be made to its employees due to the
Contemplated Transactions. Any bargaining obligations of Buyer with any union
with respect to bargaining unit employees subsequent to the Closing, whether
such obligations arise before or after the Closing, shall be the sole
responsibility of Buyer.
(g) General Employee Provisions.
(i) Seller and Buyer shall give any notices required by Legal
Requirements and take whatever other actions with respect to the plans, programs
and policies described in this Section 10.1 as may be necessary to carry out the
arrangements described in this Section 10.1.
(ii) Seller and Buyer shall provide each other with such plan
documents and summary plan descriptions, employee data or other information as
may be reasonably required to carry out the arrangements described in this
Section 10.1.
(iii) If any of the arrangements described in this Section
10.1 are determined by the IRS or other Governmental Body to be prohibited by
law, Seller and Buyer shall modify such arrangements to as closely as possible
reflect their expressed intent and retain the allocation of economic benefits
and burdens to the parties contemplated herein in a manner that is not
prohibited by applicable Legal Requirements.
(iv) Seller shall provide Buyer with completed I-9 forms and
attachments with respect to all Hired Active Employees, except for such
employees as Seller certifies in writing to Buyer are exempt from such
requirement.
(v) Except as expressly provided herein, Buyer shall not have
any responsibility, liability or obligation, whether to Active Employees, former
employees, their beneficiaries or to any other Person, with respect to any
employee benefit plans, practices, programs or arrangements
55
(including the establishment, operation or termination thereof and the
notification and provision of COBRA coverage extension) maintained by Seller.
10.2 Payment of all Taxes Resulting From Sale of Assets by Seller
(a) Buyer. Buyer shall be responsible and pay for in a timely
manner:
(i) the state, county, and local transfer or recording Taxes
related to the transfer of the Real Property identified on Part 3.7 to Buyer
pursuant to a special warranty deed, an Assignment and Assumption of Lease or
document or instrument of transfer executed by Seller in accordance with Section
2.7(a)(iii) hereof;
(ii) one-half of the state, county, and local sales and use
Taxes otherwise payable related to the transfer of the Tangible Personal
Property under the Contemplated Transactions assuming Seller had properly
applied and/or filed for all Sales and Use Tax Exemptions under applicable laws;
and
(iii) the real property Taxes related to the Real Property
transferred by Seller to Buyer in accordance with Section 2.7(a)(iii), prorated,
however, as of the Closing Date on the basis of the fiscal year of the tax
authority for the assessment period portions remaining after the Closing Date
(foregoing Taxes referred to as "Buyer Transaction Taxes").
(b) Seller. Seller shall be responsible and pay for in a timely
manner:
(i) one-half of the state, county, and local sales and use
Taxes otherwise payable related to the transfer of the Tangible Personal
Property under the Contemplated Transactions assuming Seller had properly
applied and/or filed for all Sales and Use Tax Exemptions under applicable laws,
and in the event of a failure by Seller to have properly applied and/or filed
for all Sales and Use Tax Exemptions possible under applicable laws, all of
Taxes arising out of or related to such failure;
(ii) the real property Taxes related to the Real Property
transferred by Seller to Buyer in accordance with Section 2.7(a)(iii), prorated,
however, as of the Closing Date on the basis of the fiscal year of the tax
authority for the assessment period portions prior to the Closing Date; and
(iii) all Taxes other than those identified in subsection (a)
above resulting from or payable in connection with the sale of the Assets
pursuant to this Agreement, regardless of the Person on whom such Taxes are
imposed by Legal Requirements (foregoing Taxes referred to as "Seller
Transaction Taxes").
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10.3 Payment of Other Retained Liabilities
In addition to payment of Seller Transaction Taxes pursuant to Section
10.2(b), Seller shall pay or make adequate provision for the payment in full of
all of the Retained Liabilities and other Liabilities of Seller under this
Agreement.
10.4 Restrictions on Seller Dissolution and Distributions
Except for distributions to Seller's members to cover member Tax
Liabilities consistent with past practices and approved by Buyer in advance in a
signed writing, Seller shall not dissolve, or make any distribution of the
proceeds received pursuant to this Agreement, until Seller's payment, or
adequate provision for the payment, of all of its obligations pursuant to
Sections 10.2(b) and 10.3 which, as of the date of any such dissolution or
distribution, are known or accrued and not merely contingent.
10.5 Removing Excluded Assets
On or before the Closing Date, Seller shall remove all Excluded Assets
from all Facilities and other Real Property to be occupied by Buyer other than
minute books and personnel records, which Seller shall remove prior to the first
anniversary of the Closing. Such removal shall be done in such manner as to
avoid any damage to the Facilities and other properties to be occupied by Buyer
and any disruption of the Business operations to be conducted by Buyer after the
Closing. Any damage to the Assets or to the Facilities resulting from such
removal shall be paid by Seller at the Closing. Should Seller fail to remove the
Excluded Assets as required by this Section, Buyer shall have the right, but not
the obligation, (a) to remove the Excluded Assets at Seller's sole cost and
expense; (b) to store the Excluded Assets and to charge Seller all storage costs
associated therewith; (c) to treat the Excluded Assets as unclaimed and to
proceed to dispose of the same under the laws governing unclaimed property; or
(d) to exercise any other right or remedy conferred by this Agreement or
otherwise available at law or in equity. Seller shall promptly reimburse Buyer
for all costs and expenses incurred by Buyer in connection with any Excluded
Assets not removed by Seller on or before the Closing Date.
10.6 Reports and Returns
Seller shall promptly after the Closing prepare and file all reports and
returns required by Legal Requirements relating to the Business as conducted
using the Assets, to and including the Effective Time.
10.7 Assistance in Proceedings
Seller will cooperate with Buyer and its counsel in the contest or defense
of, and make available its personnel and provide any testimony and access to its
books and Records in connection with, any Proceeding involving or relating to
(a) any Contemplated Transaction or (b) any action, activity, circumstance,
condition, conduct, event, fact, failure to act, incident, occurrence, plan,
practice, situation, status or transaction on or before the Closing Date
involving Seller or the Business.
10.8 Noncompetition and Confidentiality
After Closing, Seller shall adhere to the terms, conditions, and
limitations of Seller's Noncompetition and Confidentiality Agreement and
executed by Seller on the Closing Date.
10.9 Customer and Other Business Relationships
After the Closing, Seller will cooperate with Buyer in its efforts to
continue and maintain for the benefit of Buyer those business relationships of
Seller existing prior to the Closing and relating to the
57
Business to be operated by Buyer after the Closing, including relationships with
lessors, employees, regulatory authorities, licensors, customers, suppliers and
others, and Seller will satisfy the Retained Liabilities in a manner that is not
detrimental to any of such relationships. Seller will refer to Buyer all
inquiries relating to the Business. Neither Seller nor any of its officers,
management board, employees, agents or members shall take any action that would
tend to diminish the value of the Assets after the Closing or that would
interfere with the Business to be engaged in by Buyer after the Closing,
including disparaging the Business or the name or other businesses of Buyer.
10.10 Retention of and Access to Records
After the Closing Date, Buyer shall retain for a period consistent with
Buyer's record-retention policies and practices those Records of Seller
delivered to Buyer. Buyer also shall provide Seller and its Representatives
reasonable access thereto, during normal business hours and on at least three
days' prior written notice, to enable them to prepare financial statements or
tax returns or deal with tax audits. After the Closing Date, Seller shall
provide Buyer and its Representatives reasonable access to Records that are
Excluded Assets, during normal business hours and on at least three days' prior
written notice, for any reasonable business purpose specified by Buyer in such
notice.
10.11 Further Assurances
Subject to the proviso in Section 6.1, the parties shall cooperate
reasonably with each other and with their respective Representatives in
connection with any steps required to be taken as part of their respective
obligations under this Agreement, and shall (a) furnish upon request to each
other such further information; (b) execute and deliver to each other such other
documents; and (c) do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the Contemplated Transactions.
10.12 Procurement of Tax Clearance Certificates
Seller shall do all things which may be necessary or advisable to procure,
as expeditiously as possible, original Tax Clearance Certificates issued in the
name of Seller in respect of the Contemplated Transactions by the States of
Delaware and North Carolina and by each jurisdiction in which Seller is licensed
or qualified to do business as a foreign limited liability company, as specified
in Part 3.1(a). Seller shall keep Buyer informed of its efforts to procure the
Tax Clearance Certificates and shall copy Buyer and all correspondence received
from any Governmental Body with respect to the same. Seller shall provide Buyer
with complete copies of such Tax Clearance Certificates when the same are
received by Seller.
11. Indemnification; Remedies
11.1 Survival
All representations, warranties, covenants and obligations in this
Agreement, the Disclosure Schedule, the supplements to the Disclosure Schedule,
the certificates delivered pursuant to Section 2.7 and any other certificate or
document delivered pursuant to this Agreement shall survive the Closing and the
consummation of the Contemplated Transactions, subject to Section 11.7. The
right to indemnification, reimbursement or other remedy based upon such
representations, warranties, covenants and obligations shall not be affected by
any investigation (including any environmental investigation or assessment)
conducted with respect to, or any Knowledge acquired (or capable of being
acquired) at any time, whether before or after the execution and delivery of
this Agreement or the Closing Date, with respect to the accuracy or inaccuracy
of or compliance with any such representation, warranty, covenant or obligation.
The waiver of any condition based upon the accuracy of any representation or
warranty, or
58
on the performance of or compliance with any covenant or obligation, will not
affect the right to indemnification, reimbursement or other remedy based upon
such representations, warranties, covenants and obligations.
11.2 Indemnification and Reimbursement by Seller
Seller will indemnify and hold harmless Buyer, and its Representatives,
shareholders, subsidiaries and Related Persons (collectively, the "Buyer
Indemnified Persons"), and will reimburse the Buyer Indemnified Persons for any
loss, liability, claim, damage, expense (including costs of investigation and
defense and reasonable attorneys' fees and expenses) or diminution of value,
whether or not involving a Third-Party Claim (collectively, "Damages"), arising
from or in connection with:
(a) any Breach of any representation or warranty made by Seller in
(i) this Agreement (without giving effect to any supplement to the Disclosure
Schedule), (ii) the Disclosure Schedule, (iii) the supplements to the Disclosure
Schedule, (iv) the certificates delivered pursuant to Section 2.7 (for this
purpose, each such certificate will be deemed to have stated that Seller's
representations and warranties in this Agreement fulfill the requirements of
Section 7.1 as of the Closing Date as if made on the Closing Date without giving
effect to any supplement to the Disclosure Schedule, unless the certificate
expressly states that the matters disclosed in a supplement have caused a
condition specified in Section 7.1 not to be satisfied), (v) any transfer
instrument or (vi) any other certificate, document, writing or instrument
delivered by Seller pursuant to this Agreement;
(b) any Breach of any covenant or obligation of Seller in this
Agreement or in any other certificate, document, writing or instrument delivered
by Seller pursuant to this Agreement;
(c) any Liability arising out of the ownership or operation of the
Business or the Assets prior to the Effective Time other than the Assumed
Liabilities;
(d) any brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding made, or alleged to have been
made, by any Person with Seller (or any Person acting on its behalf) in
connection with any of the Contemplated Transactions;
(e) any product or component thereof manufactured by or shipped, or
any services provided by, Seller, in whole or in part, prior to the Closing
Date, except for those warranty service and repair obligations assumed by Buyer
under Section 2.4(a)(iii);
(f) any noncompliance with any Bulk Sales Laws or fraudulent
transfer law in respect of the Contemplated Transactions;
(g) any Tax Liability of Seller incurred while Seller was: (i) in
existence or operating in the States of North Carolina or Delaware, or (ii)
licensed or qualified to do business as a foreign limited liability company in
those other jurisdictions specified in Part 3.1 (a), in including, but not
limited to, any Tax Liability arising out of or related to the failure of Seller
to properly apply and/or file for all Sales and Use Tax Exemptions possible
under applicable laws (but excluding any sales Tax Liability otherwise payable
by Buyer under Section 2.4(a)(viii) or as a Buyer Transaction Tax);
(h) any liability under the WARN Act or any similar state or local
Legal Requirement that may result from an "Employment Loss", as defined by 29
U.S.C. Section 2101(a)(6), caused by any action of Seller prior to the Closing
or by Buyer's decision not to hire previous employees of Seller;
(i) any Employee Plan established or maintained by Seller;
59
(j) fraudulent misrepresentation or willful breach or any criminal
liability;
(k) Retained Liabilities (other than Liabilities under Environmental
Laws, which are covered in Section 11.3).
11.3 Indemnification and Reimbursement by Seller--Environmental Matters
In addition to the other indemnification provisions in this Article 11,
Seller will indemnify and hold harmless Buyer and the other Buyer Indemnified
Persons, and will reimburse Buyer and the other Buyer Indemnified Persons, for
any Damages (including costs of cleanup, containment or other remediation)
arising from or in connection with:
(a) any Environmental, Health and Safety Liabilities arising out of
or relating to: (i) the ownership or operation by any Person at any time on or
prior to the Closing Date of any of the Facilities, Assets or the Business, or
(ii) any Hazardous Materials or other contaminants that were present on the
Facilities or Assets owned or operated by Seller on or prior to the Closing
Date; or
(b) any bodily injury (including illness, disability and death,
regardless of when any such bodily injury occurred, was incurred or manifested
itself), personal injury, property damage (including trespass, nuisance,
wrongful eviction and deprivation of the use of real property) or other damage
of or to any Person or any Assets in any way arising from or allegedly arising
from any Hazardous Activity conducted by any Person with respect to the Business
or the Assets prior to the Closing Date or from any Hazardous Material that was
(i) present or suspected to be present on or before the Closing Date on or at
the Facilities (or present or suspected to be present on any other property, if
such Hazardous Material emanated or allegedly emanated from any Facility and was
present or suspected to be present on any Facility, on or prior to the Closing
Date) or (ii) Released or allegedly Released by any Person on or at any
Facilities or Assets at any time on or prior to the Closing Date.
Buyer will be entitled to control any Remedial Action, any Proceeding
relating to an Environmental Health and Safety Liability and, except as provided
in the following sentence, any other Proceeding with respect to which indemnity
may be sought under this Section 11.3. The procedure described in Section 11.9
will apply to any claim solely for monetary damages relating to a matter covered
by this Section 11.3.
11.4 Indemnification and Reimbursement by Buyer
Buyer will indemnify and hold harmless Seller, and will reimburse Seller,
for any Damages arising from or in connection with:
(a) any Breach of any representation or warranty made by Buyer in
this Agreement or in any certificate, document, writing or instrument delivered
by Buyer pursuant to this Agreement;
(b) any Breach of any covenant or obligation of Buyer in this
Agreement or in any other certificate, document, writing or instrument delivered
by Buyer pursuant to this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on
Buyer's behalf) in connection with any of the Contemplated Transactions; or
(d) any Assumed Liabilities.
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(e) fraudulent misrepresentation or willful breach or any criminal
activity; or
(f) any product or component thereof manufactured or any services
provided by Buyer, in whole, after the Closing Date.
11.5 Limitations on Amount--Seller
(a) Basket Amount. Seller shall have no liability (for
indemnification or otherwise) with respect to claims under Section 11.2(a) until
the total of all Damages with respect to such matters exceeds one hundred
thousand dollars ($100,000) ("Basket Amount"), whereupon indemnification will be
payable only for Damages in excess of the Basket Amount. However, this Section
11.5 will not apply to claims for Damages under Section 11.3 or to matters
arising in respect of Sections 3.15 (Taxes) or 3.22 (Environmental Matters) or
to any Breach of any of Seller's representations and warranties of which the
Seller had Knowledge at any time prior to the date on which such representation
and warranty is made or any intentional Breach by Seller of any covenant or
obligation, and Seller will be liable for all Damages with respect to such
Breaches.
(b) Cap. Except with respect to claims for Damages under Sections
11.2(b) - (k) or 11.3 or to matters arising in respect of Sections 3.15 (Taxes)
or 3.22 (Environmental Matters), which shall be unlimited, the maximum aggregate
indemnification amount that shall be payable under Article 11 to Buyer, whether
paid under the Escrow Agreement or otherwise, by Seller shall be limited to the
amount of the Purchase Price.
11.6 Limitations on Amount--Buyer
Buyer will have no liability (for indemnification or otherwise) with
respect to claims under Section 11.4(a) until the total of all Damages with
respect to such matters exceeds the Basket Amount, whereupon indemnification
will be payable only for Damages in excess of the Basket Amount. However, this
Section 11.6 will not apply to claims Damages under Section 11.4(d) or to any
Breach of any of Buyer's representations and warranties of which Buyer had
Knowledge at any time prior to the date on which such representation and
warranty is made or any intentional Breach by Buyer of any covenant or
obligation, and Buyer will be liable for all Damages with respect to such
Breaches.
11.7 Time Limitations
(a) Except with respect to any claim for Damages (under
indemnification or otherwise) arising from or connected with: (i) fraudulent
misrepresentation or willful breach or any criminal liability, which claim may
be made until the longer of (A) thirty-six (36) months after the Closing Date or
(B) one hundred eighty (180) days after Buyer first has Knowledge of the
fraudulent misrepresentation or intentional Breach, (ii) any Breach of a
representation or warranty set forth in Sections 3.15 (Taxes) or 3.22
(Environmental Matters), which claim may be made until one hundred eighty (180)
days after the expiration of the applicable statute of limitations with respect
to the underlying liability, (iii) any claim for Damages under Section 11.3,
which claim may be made until one hundred eighty (180) days after the expiration
of the applicable statute of limitations with respect to the underlying
liability, or (iv) any Retained Liability, which claim may be made until the
longer of (A) thirty-six (36) months after the Closing Date or (B) one hundred
eighty (180) days after Buyer first has Knowledge of the existence of a claim
arising from or connected with a Retained Liability, Seller shall have no
liability (under indemnification or otherwise) with respect to any Breach of (i)
a covenant or obligation to be performed or complied with prior to the Closing
Date or (ii) a representation or warranty (other than those in Sections 3.15
(Taxes) or 3.22 (Environmental Matters), unless if within thirty-six (36) months
of the Closing Date, Buyer notifies Seller of a claim specifying the factual
basis of the claim in reasonable detail to the extent then known by Buyer.
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(b) Buyer shall have no liability (for indemnification or otherwise)
with respect to any Breach of (i) a covenant or obligation to be performed or
complied with prior to the Closing Date or (ii) a representation or warranty,
unless if within thirty-six (36) months of the Closing Date, Seller notifies
Buyer of a claim specifying the factual basis of the claim in reasonable detail
to the extent then known by Seller.
11.8 Set Off; Escrow
Upon notice to Seller specifying in reasonable detail the basis therefor,
Buyer may set off any amount to which Buyer may be entitled under this Article
11 against any amount to which Seller may be entitled from Buyer under this
Agreement or in connection with the Contemplated Transactions. Upon notice to
Seller specifying in reasonable detail the basis of any amount to which Buyer
may be entitled under this Article 11, Buyer may, in addition, give notice of a
claim of such amount to the escrow agent under the Escrow Agreement against the
Escrow Amount in addition to any Seller Shortfall Payment to which Buyer may be
entitled under the Escrow Agreement pursuant to Section 2.9(b). Neither the
exercise of nor the failure to exercise such right of setoff or to give a notice
of a claim under the Escrow Agreement will constitute an election of remedies or
limit Buyer in any manner in the enforcement of any other remedies that may be
available to it. On the date which is six (6) months, twelve (12) months, and
eighteen (18) months after the Closing Date, the escrow agent shall release to
Seller from the Escrow Amount an Escrow Tranche under the terms of the Escrow
Agreement, less any amount previously released from that Tranche by the escrow
agent to Buyer under the terms of this Article 11 and/or the Escrow Agreement,
less any disputed or undisputed claim, then outstanding, made by Buyer under
this Article 11 and/or the Escrow Agreement and less any amount of the Seller
Shortfall Amount (whether disputed or undisputed) then outstanding owing to
Buyer pursuant to Section 2.9.
11.9 Third-Party Claims
(a) Promptly after receipt by a Person entitled to indemnity under
Section 11.2, 11.3 (to the extent provided in the last sentence of Section 11.3)
or 11.4 (an "Indemnified Person") of notice of the assertion of a Third-Party
Claim against it, such Indemnified Person shall give notice to the Person
obligated to indemnify under such Section (an "Indemnifying Person") of the
assertion of such Third-Party Claim, provided that the failure to notify the
Indemnifying Person will not relieve the Indemnifying Person of any liability
that it may have to any Indemnified Person, except to the extent that the
Indemnifying Person demonstrates that the defense of such Third-Party Claim is
prejudiced by the Indemnified Person's failure to give such notice.
(b) If an Indemnified Person gives notice to the Indemnifying Person
pursuant to Section 11.9(a) of the assertion of a Third-Party Claim, the
Indemnifying Person shall be entitled to participate in the defense of such
Third-Party Claim and, to the extent that it wishes (unless (i) the Indemnifying
Person is also a Person against whom the Third-Party Claim is made and the
Indemnified Person determines in good faith that joint representation would be
inappropriate or (ii) the Indemnifying Person fails to provide reasonable
assurance to the Indemnified Person of its financial capacity to defend such
Third-Party Claim and provide indemnification with respect to such Third-Party
Claim), to assume the defense of such Third-Party Claim with counsel
satisfactory to the Indemnified Person. After notice from the Indemnifying
Person to the Indemnified Person of its election to assume the defense of such
Third-Party Claim, the Indemnifying Person shall not, so long as it diligently
conducts such defense, be liable to the Indemnified Person under this Article 11
for any fees of other counsel or any other expenses with respect to the defense
of such Third-Party Claim, in each case subsequently incurred by the Indemnified
Person in connection with the defense of such Third-Party Claim, other than
reasonable costs of investigation. If the Indemnifying Person assumes the
defense of a Third-Party Claim, (i) such assumption will conclusively establish
for purposes of this Agreement that the claims made in that Third-Party Claim
are within the scope of and subject to indemnification, and (ii) no compromise
or settlement
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of such Third-Party Claims may be effected by the Indemnifying Person without
the Indemnified Person's Consent unless (A) there is no finding or admission of
any violation of Legal Requirement or any violation of the rights of any Person;
(B) the sole relief provided is monetary damages that are paid in full by the
Indemnifying Person; and (C) the Indemnified Person shall have no liability with
respect to any compromise or settlement of such Third-Party Claims effected
without its Consent. If notice is given to an Indemnifying Person of the
assertion of any Third-Party Claim and the Indemnifying Person does not, within
ten (10) days after the Indemnified Person's notice is given, give notice to the
Indemnified Person of its election to assume the defense of such Third-Party
Claim, the Indemnifying Person will be bound by any determination made in such
Third-Party Claim or any compromise or settlement effected by the Indemnified
Person.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a
Third-Party Claim may adversely affect it or its Related Persons other than as a
result of monetary damages for which it would be entitled to indemnification
under this Agreement, the Indemnified Person may, by notice to the Indemnifying
Person, assume the exclusive right to defend, compromise or settle such
Third-Party Claim, but the Indemnifying Person will not be bound by any
determination of any Third-Party Claim so defended for the purposes of this
Agreement or any compromise or settlement effected without its Consent (which
may not be unreasonably withheld).
(d) Notwithstanding the provisions of Section 12.4, Seller hereby
consents to the nonexclusive jurisdiction of any court in which a Proceeding in
respect of a Third-Party Claim is brought against any Buyer Indemnified Person
for purposes of any claim that a Buyer Indemnified Person may have under this
Agreement with respect to such Proceeding or the matters alleged therein and
agree that process may be served on Seller with respect to such a claim anywhere
in the world.
(e) With respect to any Third-Party Claim subject to indemnification
under this Article 11: (i) both the Indemnified Person and the Indemnifying
Person, as the case may be, shall keep the other Person fully informed of the
status of such Third-Party Claim and any related Proceedings at all stages
thereof where such Person is not represented by its own counsel, and (ii) the
parties agree (each at its own expense) to render to each other such assistance
as they may reasonably require of each other and to cooperate in good faith with
each other in order to ensure the proper and adequate defense of any Third-Party
Claim.
(f) With respect to any Third-Party Claim subject to indemnification
under this Article 11, the parties agree to cooperate in such a manner as to
preserve in full (to the extent possible) the confidentiality of all
confidential information and the attorney-client and work-product privileges. In
connection therewith, each party agrees that: (i) it will use its Best Efforts,
in respect of any Third-Party Claim in which it has assumed or participated in
the defense, to avoid production of confidential information (consistent with
applicable law and rules of procedure), and (ii) all communications between any
party hereto and counsel responsible for or participating in the defense of any
Third-Party Claim shall, to the extent possible, be made so as to preserve any
applicable attorney-client or work-product privilege.
(g) With respect to any Tax Controversy, Seller shall notify Buyer
of the existence of any Tax Controversy and shall promptly furnish to the Buyer,
upon receipt, a copy of all relevant notices, letters, reports and other
documents. Seller shall provide Buyer any information reasonably necessary to
resolve any Tax Controversy and will execute any powers of attorney that are
required to allow the Buyer to effectively discharge its obligations in respect
of the Tax Controversy.
11.10 Other Claims
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A claim for indemnification for any matter not involving a Third-Party
Claim may be asserted by notice to the party from whom indemnification is sought
and shall be paid promptly after such notice.
11.11 Indemnification in Case of Strict Liability or Indemnitee Negligence
THE INDEMNIFICATION PROVISIONS IN THIS ARTICLE 11 SHALL BE ENFORCEABLE
REGARDLESS OF WHETHER THE LIABILITY IS BASED UPON PAST, PRESENT OR FUTURE ACTS,
CLAIMS OR LEGAL REQUIREMENTS (INCLUDING ANY PAST, PRESENT OR FUTURE BULK SALES
LAW, ENVIRONMENTAL LAW, FRAUDULENT TRANSFER ACT, OCCUPATIONAL SAFETY AND HEALTH
LAW OR PRODUCTS LIABILITY, SECURITIES OR OTHER LEGAL REQUIREMENT).
11.12 Additional Limitations of Liability
Notwithstanding anything in this Article 11 to the contrary:
(a) Seller has no liability under this Agreement with respect to any
Damages on account of any Assumed Liability to the extent of the amount
reflected in the Audited Closing Balance Sheet.
(b) Buyer Indemnified Persons may not recover Damages more than once
for any specific facts, omissions, or circumstances, notwithstanding the fact
that such facts, omissions, or circumstances may constitute the Breach of more
than one representation or warranty.
(c) Seller shall have no liability to Buyer Indemnified Persons with
respect to any Damages related to any Accounts Receivable which are compromised
by Buyer after Closing or any disputed payables paid by Buyer after Closing to
the extent that such settlements or payments exceed the amounts accounted or
reserved therefore on the Audited Closing Balance Sheet (as evidenced by the
work papers used to prepare the Audited Closing Balance Sheet) unless Seller has
approved such compromise or payment in writing prior to the time such compromise
is agreed to by Buyer or such payment is made by Buyer, such approval by Seller
not to be unreasonably withheld or delayed.
(f) In no case shall Damages include (i) any incidental,
consequential, indirect or special losses or damages (including, without
limitation, lost profits, lost revenues and loss of business), or (ii) fees and
expenses of more than one counsel with respect to any indemnity claim or claims
arising out of the same general allegations or circumstances.
11.13 Effect of Insurance Proceeds
The amount due to any indemnified party for Damages pursuant to this
Article 11 shall be reduced by the amount of any insurance proceeds actually
received by such indemnified party with respect to the subject matter of such
Damages.
12. General Provisions
12.1 Expenses
Except as otherwise provided in this Agreement, each party to this
Agreement will bear its respective fees and expenses incurred in connection with
the preparation, negotiation, execution and performance of this Agreement and
the Contemplated Transactions, including all fees and expense of its
Representatives. Buyer will pay all amounts payable to the Title Insurer in
respect of the Title Commitments, copies of exceptions and the Title Policy,
including premiums (including premiums for
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endorsements) and search fees. Buyer will pay the HSR Act filing fee. Buyer
shall pay one-half and Seller shall pay one-half the fees and expenses of the
escrow agent under the Escrow Agreement. If this Agreement is terminated, the
obligation of each party to pay its own fees and expenses will be subject to any
rights of such party arising from a Breach of this Agreement by another party.
12.2 Public Announcements; Confidentiality
Unless otherwise required to be disclosed by Buyer pursuant to Legal
Requirement or stock exchange regulation, any public announcement, press release
or similar publicity with respect to this Agreement or the Contemplated
Transactions will be issued, if at all, at such time and in such manner as Buyer
and Seller mutually determine. Buyer and Seller agree to comply with the
Confidentiality Agreement, dated February 25, 2005, by and among Buyer and
Seller (the "Confidentiality Agreement"), and the Confidentiality Agreement
shall continue in full force and effect in accordance with its terms and shall
survive the execution and delivery of this Agreement and the Closing hereunder,
unless otherwise explicitly superseded by the Noncompetition and Confidentiality
Agreement and the Fabri and Xxxxx Letter Agreements. Seller and Buyer will
consult with each other concerning the means by which Seller's employees,
customers, suppliers and others having dealings with Seller will be informed of
the Contemplated Transactions, and Buyer will have the right to be present for
any such communication.
12.3 Notices
All notices, Consents, waivers and other communications required or
permitted by this Agreement shall be in writing and shall be deemed given to a
party when (a) delivered to the appropriate address by hand or by nationally
recognized overnight courier service (costs prepaid); (b) sent by facsimile with
confirmation of transmission by the transmitting equipment; or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested,
in each case to the following addresses or facsimile numbers and marked to the
attention of the person (by name or title) designated below (or to such other
address, facsimile number, or person as a party may designate by notice to the
other parties):
Seller: Carolina Building Solutions, L.L.C.
Attention: Xxxxxx X. Xxxxx, President
000 Xxxx Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Fax Number: 000-000-0000
with a mandatory copy to: Xxxxx X. Xxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Fax Number: 000-000-0000
and
X. Xxxxxxx, Esq.
Xxxxx & Xxxxxxx, P.C.
00 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Fax Number: 000-000-0000
Buyer and Champion: NEBS Acquisition Corp.
c/o Champion Enterprises, Inc.
Attention: Xxxxxxx X. Xxxxxxxxx, President & CEO
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0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxx 00000-0000
Fax Number: 000-000-0000
with a mandatory copy to: Champion Enterprises, Inc.
Attention: Xxxx X. Xxxxxxx,
Senior Vice President & General Counsel
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxx 00000-0000
Fax Number: 000-000-0000
with a mandatory copy to: Miller, Canfield, Paddock and Stone, PLC
Attention: Xxxxxx X. Xxxxxx
000 Xxxx Xxxx Xxxx Xxxx, Xxxxx 000
Xxxx, Xxxxxxxx 00000-0000
Fax Number: 000-000-0000
12.4 Jurisdiction; Service of Process; Waiver of Jury Trail
(a) Any Proceeding arising out of or relating to this Agreement or
any Contemplated Transaction may be brought in the courts of the State of
Michigan, County of Oakland and the courts of the Commonwealth of Pennsylvania,
County of Clarion, or, if it has or can acquire jurisdiction, in the United
States District Court for the Eastern District of Michigan and the United States
District Court for the Western District of Pennsylvania, and each of the parties
irrevocably submits to the exclusive jurisdiction of each such court in any such
Proceeding, waives any objection it may now or hereafter have to venue or to
convenience of forum, agrees that all claims in respect of the Proceeding shall
be heard and determined only in any such court and agrees not to bring any
Proceeding arising out of or relating to this Agreement or any Contemplated
Transaction in any other court. The parties agree that either or both of them
may file a copy of this paragraph with any court as written evidence of the
knowing, voluntary and bargained agreement between the parties irrevocably to
waive any objections to venue or to convenience of forum. Process in any
Proceeding referred to in the first sentence of this section may be served on
any party anywhere in the world.
(b) THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
CONTEMPLATED TRANSACTIONS, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE PARTIES AGREE THAT ANY OF
THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE
KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO
WAIVE TRIAL BY JURY AND THAT ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO
THIS AGREEMENT OR ANY OF THE CONTEMPLATED TRANSACTIONS SHALL INSTEAD BE TRIED IN
A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
12.5 Enforcement of Agreement
Seller acknowledges and agrees that Buyer would be irreparably damaged if
any of the provisions of this Agreement are not performed in accordance with
their specific terms and that any Breach of this Agreement by Seller could not
be adequately compensated in all cases by monetary damages alone. Accordingly,
in addition to any other right or remedy to which Buyer may be entitled, at law
or in equity, it shall be entitled to enforce any provision of this Agreement by
a decree of specific performance and to
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temporary, preliminary and permanent injunctive relief to prevent Breaches or
threatened Breaches of any of the provisions of this Agreement, without posting
any bond or other undertaking.
12.6 Waiver; Remedies Cumulative
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither any failure nor any delay by any party in
exercising any right, power or privilege under this Agreement or any of the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable law, (a) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of that party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
12.7 Entire Agreement and Modification
This Agreement supersedes all prior agreements, whether written or oral,
between the parties with respect to its subject matter (including the Letter of
Intent, dated May 9, 2005, by and among Buyer, and certain Seller) and
constitutes (along with the Disclosure Schedule, Exhibits and other documents
delivered pursuant to this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
This Agreement may not be amended, supplemented, or otherwise modified except by
a written agreement executed by the party to be charged with the amendment.
12.8 Disclosure Schedule
(a) Seller shall prepare the Disclosure Schedule, which shall be
signed by Seller on the date of this Agreement and updated through and up to
Closing. The information in the Disclosure Schedule constitutes (i) exceptions
to particular representations, warranties, covenants and obligations of Seller
as set forth in this Agreement or (ii) descriptions or lists of assets and
liabilities and other items referred to in this Agreement. If there is any
inconsistency between the statements in this Agreement and those in the
Disclosure Schedule (other than an exception expressly set forth as such in the
Disclosure Schedule with respect to a specifically identified representation or
warranty), the statements in this Agreement will control.
(b) The statements in the Disclosure Schedule, and those in any
supplement thereto, relate only to the provisions in the Section of this
Agreement to which they expressly relate and not to any other provision in this
Agreement.
12.9 Assignments, Successors and no Third-Party Rights
No party may assign any of its rights or delegate any of its obligations
under this Agreement without the prior written consent of the other parties,
except that Buyer may assign any of its rights and delegate any of its
obligations under this Agreement to any Subsidiary of Buyer and may collaterally
assign its rights hereunder to any financial institution providing financing in
connection with the Contemplated Transactions. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the
67
parties to this Agreement any legal or equitable right, remedy or claim under or
with respect to this Agreement or any provision of this Agreement, except such
rights as shall inure to a successor or permitted assignee pursuant to this
Section 12.9.
12.10 Severability
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
12.11 Construction
The headings of Articles and Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Articles," "Sections" and "Parts" refer to the corresponding
Articles, Sections and Parts of this Agreement and the Disclosure Schedule.
12.12 Time of Essence
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
12.13 Governing Law
This Agreement will be governed by and construed under the laws of the
State of Delaware without regard to conflicts-of-laws principles that would
require the application of any other law.
12.14 Execution of Agreement
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement. The
exchange of copies of this Agreement and of signature pages by facsimile
transmission shall constitute effective execution and delivery of this Agreement
as to the parties and may be used in lieu of the original Agreement for all
purposes. Signatures of the parties transmitted by facsimile shall be deemed to
be their original signatures for all purposes.
12.15 Guaranty of Champion
In order to induce Seller to execute and deliver this Agreement and to
consummate the Contemplated Transactions, Champion does hereby agree to become a
signatory to this Agreement and does hereby guarantee to Seller payment and
performance of each and every obligation owing to Seller by Buyer arising under
this Agreement and the Assignment and Assumption Agreement.
[Balance of Page Intentionally Left Blank.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BUYER:
NEBS Acquisition Corp., a Michigan corporation
By: __________________________________
Name: ___________________
Title: __________________
SELLER:
Carolina Building Solutions, L.L.C., a Delaware
limited liability company
By: __________________________________
Name: ___________________
Title: __________________
GUARANTOR:
Champion Enterprises, Inc., a Michigan
corporation
By: __________________________________
Name: ___________________
Title: __________________
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