EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
SELAS CORPORATION OF AMERICA
AND
SELAS HEAT TECHNOLOGY COMPANY LLC
DATED AS OF MARCH 31, 2005
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is made and dated as of March 31,
2005
(the "Agreement"), by and between Selas
Corporation of America, a Pennsylvania
corporation ("Seller"), and Selas Heat
Technology Company LLC, a Delaware
limited liability company ("Buyer").
BACKGROUND: Seller owns and operates a heat technology business
based
in Dresher, Pennsylvania that manufactures
and sells original equipment and
replacement gas-fired burners, air/gas
mixers, flame arrestors and heat treat
equipment (the "Business"), including all
of the outstanding capital stock of
Nippon Selas Co. Ltd., a Japanese company
("Nippon Selas"), and Selas
Waermetechnik GmbH, a German company ("SW
Selas"), representing all of the
ownership interests of Nippon Selas and SW
Selas (the "Interests").
The parties desire that Seller sell and Buyer buy substantially all
of
Seller's assets used in the Business,
including Nippon Selas and SW Selas,
subject to the terms and conditions stated
in this Agreement;
NOW, THEREFORE, INTENDING TO BE LEGALLY BOUND, and in
consideration of the mutual agreements
contained herein, Seller and Buyer agree
as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.1 Sale and
Purchase. Subject to the terms and conditions
contained herein, at the Closing provided
for in Section 1.6 hereof (the
"Closing"), Seller will sell, transfer,
assign and convey to Buyer, and Buyer
will purchase, acquire and accept from
Seller free and clear of any encumbrance,
lien or claim, 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 used by Seller in the Business
including but not limited to the Specified
Assets (as defined in Section 1.2)
(the "Assets"), but not including the
Excluded Assets (as defined in Section
1.3), and Buyer shall assume the Assumed
Liabilities (as defined in Section
1.4).
1.2
Specified
Assets. "Specified Assets" means all of the
following assets of Seller:
1.2.1
Accounts Receivable. All of Seller's rights to
payment for goods sold, leased or licensed
or for services rendered, whether
billed or unbilled, and any other
receivable or right to payment or claim
related thereto of any nature whatsoever
arising in connection with the
Business, including but not limited to
those items as set forth on Section
1.2.1. of the Disclosure Schedule
("Accounts Receivable").
1.2.2
Tangible Assets. All of Seller's trade fixtures,
production equipment, information
technology equipment, software and office
equipment used in the Business including
such items located at the premises
occupied by the Seller at 2034 S. Limekiln
Pike, Upper Dublin, Pennsylvania, USA
(the "Dresher Property") or any premises
occupied by Nippon Selas or SW Selas,
including but not limited to those items as
set forth on Section 1.2.2. of the
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Disclosure Schedule ("Tangible Assets").
The Tangible Assets being acquired by
Buyer shall also include any claim Seller
had, has or may have pursuant to any
warranty, claim for refund or other right
related to any Tangible Asset.
1.2.3
Inventory. All of Seller's raw materials, supplies,
work in process, finished goods, office
supplies, parts, and other inventory of
any nature whatsoever used in the Business,
including but not limited to those
items as set forth on Section 1.2.3. of the
Disclosure Schedule ("Inventory").
The Inventory being acquired by Buyer shall
also include any claim Seller had,
has or may have pursuant to any warranty,
claim for refund or other right
related to any Inventory.
1.2.4
Contracts. All of Seller's rights under the
contracts, agreements, licenses, leases,
notes, guarantees and other
instruments, arising in connection with the
Business, including but not limited
to those items as set forth on Section
1.2.4. of the Disclosure Schedule, and
including any claims of any nature that
Seller had, has or may have against
third-parties related thereto
(collectively, "Assigned Contracts").
1.2.5
Intangibles. All of Seller's rights in and to the
tradename Selas Corporation of America and
the other names, service marks,
trademarks, tradenames, logos, slogans,
patents, copyrights, trade secrets and
similar intangible assets used in the
Business (including any registrations or
applications therefor), including but not
limited to those items as set forth on
Section 1.2.5. of the Disclosure Schedule,
and including any claims of any
nature that Seller had, has or may have
against third-parties related thereto.
("Intangibles").
1.2.6
Interests. All of Seller's Interests in Nippon Selas
and SW Selas.
1.2.7
Records and Goodwill. All of Seller's books and
records arising in connection with the
Business, all of Seller's rights in
drawings, plans and specifications related
to the Business, customer and
prospect lists, information, files and
records, correspondence, data, and other
information pertaining to the Business,
whether recorded on paper, computer
tapes or disks, or other media of any
nature, all of Seller's rights in and to
all advertising, promotional and marketing
materials for the Business, all
telephone numbers and telephone listings
and websites used by Seller with
respect to the Business (all of which
telephone numbers and websites are listed
on Section 1.2.7 of the Disclosure
Schedule), all of Seller's rights to solicit,
sell to, and do business with all of
Seller's customers and suppliers and all of
Seller's goodwill with respect to the
Business.
1.2.8
Prepaid Expenses. All of Seller's prepaid expenses
with respect to the Business and any claim
or right appurtenant thereto,
including but not limited to those as set
forth on Section 1.2.8 of the
Disclosure Schedule ("Prepaid Expenses").
Section 1.2.8 of the Disclosure
Schedule shall include a list of any
Prepaid Expenses that are not transferable
describing the reason therefor. Any such
nontransferable prepaid expenses set
forth in Section 1.2.8 to the Disclosure
Schedule shall not be included in the
definition of Prepaid Expenses.
1.3 Excluded
Assets. Anything in Section 1.2 to the contrary
notwithstanding, the Assets do not include:
(a) Seller's cash and cash
equivalents (on hand, in the bank or
invested)
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other than cash and cash equivalents of
Nippon Selas and SW Selas in an amount
up to $600,000, (b) deposits (however held)
(c) any nontransferable prepaid
expenses, premiums or other amounts
described as such on Section 1.2.8 of the
Disclosure Schedule, (d) any of Seller's
claims, causes of actions, rights to
refunds and other legal rights and
remedies, whether or not known at the Closing
Date (as hereinafter defined), related to
Seller's ownership of the Assets
and/or operation of the Business, other
than as referenced in Section 1.2 as
being included in the Specific Assets, (e)
any Accounts Receivable to the extent
that they have been collected, or any
finished goods in Inventory that have been
sold, transferred, or otherwise disposed
of, as applicable, since the date of
the applicable schedule in the ordinary
course of business consistent with
Seller's past practice, (f) any insurance
policy, (g) Seller's corporate
charter, qualifications to conduct business
as a foreign corporation,
arrangements with registered agents
relating to foreign qualifications, taxpayer
and other identification numbers, seals,
minute books, stock transfer books,
blank stock certificates, and other
documents relating to the organization,
maintenance, and existence of Seller as a
corporation, (h) the capital stock or
other equity interest in any subsidiary of
the Seller or any other entity other
than Nippon Selas or Selas SW, and (i) any
of the rights of Seller under this
Agreement, the Guaranty (as defined in
Section 7.2(h)) (or under any side
agreement between Seller on the one hand
and Buyer and/or Parent (as defined in
Section 7.2(h)) on the other hand entered
into on or after the date of this
Agreement) or any Material Contracts (as
defined in Section 3.17) other than the
Assigned Contracts.
1.4 Assumed
Liabilities. "Assumed Liabilities" means (a) all
liabilities and obligations of Seller under
the Assigned Contracts excluding any
monetary damages arising from Seller's
failure to timely perform any Assigned
Contract prior to the Closing Date, (b) all
accounts payable with respect to the
Business that arise from bona fide
transactions in the ordinary course of
business consistent with Seller's past
practice in such amounts as set forth on
the December 31, 2004 Balance Sheet as
updated and finalized on the Closing
Balance Sheet as finally determined
pursuant to Section 2.2.3 hereof, (c) all
accrued liabilities as described and in
such amounts as set forth on the
December 31, 2004 Balance Sheet as updated
and finalized on the Closing Balance
Sheet as finally determined pursuant to
Section 2.2.3 hereof, (d) all customer
advance payments and guaranteed obligations
with respect to the Assigned
Contracts as described and in such amounts
as set forth on the December 31, 2004
Balance Sheet as updated and finalized on
the Closing Balance Sheet as finally
determined pursuant to Section 2.2.3
hereof, (e) any other liabilities and
obligations in such amounts as set forth on
the Closing Balance Sheet as finally
determined pursuant to Section 2.2.3
hereof, (f) except as provided in Section
5.7(e), the obligations and liabilities of
the Seller under the Assumed Plans
(as defined in Section 5.7(e)) and (g)
accrued but unpaid salary, vacation,
holiday and sick pay as of the Closing Date
payable to employees of Seller who
are hired by Buyer and to employees of
Nippon Selas and SW Selas in such amounts
as set forth on the Closing Balance Sheet
as finally determined pursuant to
Section 2.2.3 hereof.
1.5 No Other
Liabilities. Buyer does not assume, and does not
purchase the Assets subject to, any debts,
liabilities or obligations of Seller
of any nature, known or unknown, fixed or
contingent, except the Assumed
Liabilities. All liabilities of Seller,
unless and to the extent expressly
included as an Assumed Liability according
to the terms of Section 1.4, shall be
retained, paid, performed and discharged
solely by Seller. Further, the parties
agree that, unless
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and to the extent assumed by Buyer as an
Assumed Liability according to the
terms of Section 1.4, it is their intention
that neither party shall assume any
liability of the other party by virtue of
any theory of transferee or successor
liability such as "de facto merger,"
"continuity of enterprise", the "product
line exception" or other similar principles
of law.
1.6 Closing.
The Closing of the transactions contemplated by this
Agreement shall take place on March 31,
2005 at the offices of Blank Rome LLP,
One Logan Square, Philadelphia,
Pennsylvania, or on such other date and at such
other time or place as the parties may
agree. The date of the Closing is
referred to herein as the "Closing Date".
The Closing shall be effective as of
5:00 p.m. Eastern Time on March 31,
2005.
ARTICLE II
CONSIDERATION FOR ASSETS
2.1 Purchase
Price. The total purchase price payable by Buyer to
Seller at Closing for the Assets is
$3,671,000 (the "Cash Purchase Price"),
subject to adjustment as provided in
Section 2.2, plus the assumption by Buyer
of the Assumed Liabilities ("Purchase
Price"). Subject to the conditions set
forth in this Agreement, the Cash Purchase
Price shall be paid by Buyer to
Seller at Closing as follows (i) $2,771,000
shall be paid by wire transfer of
immediately available funds to an account
designated in writing by Seller, and
(ii) $900,000 shall be paid by Buyer's
subordinated promissory note
substantially as set forth in Exhibit 1.3
(the "Promissory Note").
2.2 Net Total
Assets Adjustment. In the event that the Net Total
Assets (as defined in Section 2.2.1) as of
the Closing Date (the "Closing Net
Total Assets") is less than $2,430,000 (the
"Target Net Total Assets"), the
Purchase Price shall be reduced by the
amount by which the Target Net Total
Assets exceeds the Closing Net Total
Assets. In the event that the Closing Net
Total Assets is more than the Target Net
Total Assets, the Purchase Price shall
be increased by the amount by which the
Closing Net Total Assets exceeds the
Target Net Total Assets. The adjustment to
the Purchase Price effected by this
Section is referred to as the "Purchase
Price Adjustment."
2.2.1 Net
Total Assets. For purposes of this Agreement, the
term "Net Total Assets" shall mean the
difference between the book value of the
Assets acquired by Buyer less the book
value of the Assumed Liabilities assumed
by Buyer, in each case determined in
accordance with United States generally
accepted accounting principles consistently
applied ("GAAP") and the Seller's
historical accounting practices
consistently applied. Set forth in Section 3.6
of the Disclosure Schedule is Seller's
unaudited balance sheet for the Business
as of December 31, 2004 (the "December 31,
2004 Balance Sheet"), which shall be
used as an example of the method of
calculation and the categories that shall be
used in the determination of the Closing
Net Total Assets. For purposes of
determining the book value of Assets and
Assumed Liabilities, the following
shall apply:
(a)
Unless
otherwise provided, book values of
the Business, Nippon Selas and Selas SW
shall be determined as of the Closing
Date;
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(b) The book
value of the Accounts Receivable
included within the Assets shall include a
reasonable reserve for doubtful
accounts;
(c) The book
value of the Inventory included
within the Assets shall be based on the
value as reported on the December 31,
2004 Balance Sheet, as adjusted by
purchases and sales of such Inventory in the
ordinary course of business of Seller since
such date as reported in the
Seller's books and net of reserves for
obsolete Inventory recorded since such
date on a monthly basis in accordance with
past practices;
(d) The book
value of the Intangibles included
within the Assets shall be as set forth in
the November 30, 2004 Balance Sheet
attached to the Letter of Intent (as
defined in Section 10.9);
(e) The book
value of the Pre-Paid Expenses
included within the Assets shall be the
actual amount paid by Seller in the
ordinary course of business of the Seller
as reported in the Seller's books and
records but only to the extent the benefits
of those prepaid expenses inure to
Buyer's benefit following Closing;
(f) The book
value of the liabilities under the
Defined Benefit Pension Plans (as defined
in Section 5.7(e)) shall be deemed to
be $1,529,000 regardless of the actual
liabilities thereunder;
(g)
[intentionally omitted];
(h) The book
value of the Interests shall be
equal to the net worth of Nippon Selas and
Selas SW as of the Closing Date;
(i) The book
value of the liabilities for the
accounts payable included within the
Assumed Liabilities pursuant to Section
1.4(b) shall be as set forth on the
December 31, 2004 Balance Sheet as updated
to reflect accounts payable incurred or
paid by Seller in the ordinary course of
business since the date thereof;
(j) The book
value of the liabilities for
customer advance payments and deposits and
guaranteed obligations included
within the Assumed Liabilities pursuant to
Section 1.4(d) shall be as set forth
on the December 31, 2004 Balance Sheet as
updated to reflect any actual amounts
paid, incurred or guaranteed in the
ordinary course of business of Seller since
the date thereof;
(k) The book
value of the liabilities for
accrued liabilities included within the
Assumed Liabilities pursuant to Section
1.4(c) shall be as set forth on the
December 31, 2004 Balance Sheet as updated
to reflect any accrued liabilities incurred
or paid by Seller in the ordinary
course of business since the date
thereof;
(l) The book
value of the liabilities relating
to warranty liabilities and Assigned
Contracts that are included in the Assumed
Liabilities pursuant to Section 1.4(a)
shall be as set forth on the December 31,
2004 Balance Sheet as updated to reflect
any such liabilities
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incurred, paid or remedied by Seller in the
ordinary course of business since
the date thereof, except as specifically
provided in Section 2.2.1(l) of the
Disclosure Schedule.
2.2.2
Determination. Within forty-five (45) days after the
Closing Date, Seller shall prepare a
balance sheet as of the Closing Date or
another date agreed on by Buyer and Seller
(the "Closing Balance Sheet"). The
Closing Balance Sheet: (i) shall contain
line items substantially consistent
with the line items in December 31, 2004
Balance Sheet, (ii) shall be prepared
in accordance with Section 2.2.1 and
otherwise in accordance with GAAP and the
Seller's historical accounting practices,
consistently applied as reflected in
the December 31, 2004 Balance Sheet, (iii)
shall be accompanied by a certificate
of the chief financial officer of the
Seller certifying to the effect of clause
(ii) above and a calculation of the Closing
Net Total Assets and the Purchase
Price Adjustment certified by the Seller's
chief financial officer (the "Net
Total Assets Certificate"). The Net Total
Assets Certificate shall provide in
reasonable detail each of the totals and
categories by which the determination
of the Closing Net Total Assets was
made.
2.2.3
Right to Object. Seller shall make available to Buyer
all work papers and other materials as
Buyer may reasonably require for Buyer's
review of the proposed Closing Balance
Sheet. If Buyer has any objections to the
calculation of the Closing Balance Sheet,
Closing Net Total Assets or the
Purchase Price Adjustment, Buyer shall
deliver to Seller within thirty (30) days
after receiving the Net Total Assets
Certificate a detailed written statement
describing such objections. Buyer and
Seller will negotiate in good faith in an
effort to resolve such objections between
themselves. If the parties are unable
to finally resolve such objections within
thirty (30) days after Seller has
received the statement of objections, Buyer
and Seller will select a mutually
acceptable, independent accounting firm
(the "Accountant") to resolve any
remaining objections and/or, if mutually
agreed to by Buyer and Seller, conduct
an audit of the Closing Net Total Assets as
of the Closing Date. If Buyer and
Seller cannot agree on the choice of an
accounting firm, they will select by lot
a nationally recognized accounting firm,
other than any independent accounting
firm regularly engaged or then engaged by
Buyer or Seller, or any of their
affiliates, to perform their respective
audits or for tax or other services. The
Accountant shall be jointly instructed by
Buyer and Seller to finally determine
the amount(s) in dispute. The Accountant
shall deliver to each of Buyer and
Seller its determination within thirty (30)
days after receiving the joint
instructions of Buyer and Seller, and the
determination of the Accountant will
be set forth in writing and will be
conclusive and binding upon the parties. The
fees and expenses of the Accountant shall
be borne by Seller and Buyer equally.
The date upon which the Closing Balance
Sheet, Closing Net Total Assets and
Purchase Price Adjustment becomes final and
binding (either by Buyer's failure
to so deliver an objection notice, or
agreement of Buyer and Seller, or final
determination of the Accountant) shall be
the "Final Settlement Date."
2.2.4
Payment of Purchase Price Adjustment. Any Purchase
Price Adjustment shall be payable to Buyer
or Seller, as applicable, within ten
(10) business days after the Final
Settlement Date by wire transfer of
immediately available funds to an account
designated by the recipient provided,
however, that, in lieu of paying any
Purchase Price Adjustment payable by
Seller, Seller shall have the right to
set-off any Purchase Price Adjustment up
to $100,000 payable by Seller to Buyer by
reducing the principal amount due
under the Promissory Note in an amount
equal to the Purchase Price Adjustment
(but not more than $100,000), beginning
with the
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first installment of principal due
thereunder and continuing with the next
installment in the order of their maturity,
and any Purchase Price Adjustment in
excess of $100,000 shall be paid by Seller
to Buyer as set forth above.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1
Organization. Seller is a corporation duly organized, validly
existing and in good standing under the
laws of the Commonwealth of
Pennsylvania. Nippon Selas is a company
duly organized, validly existing and in
good standing under the laws of Japan. SW
Selas is a company duly organized,
validly existing and in good standing under
the laws of Germany. Each of Seller,
Nippon Selas and SW Selas has all requisite
corporate and other power and
corporate authority to own, lease and
operate its properties and to carry on its
operations as now being conducted. Neither
Nippon Selas nor SW Selas has any
direct or indirect subsidiaries or
otherwise owns any security in any entity.
Each of Seller, Nippon Selas and SW Selas
is duly qualified or licensed and in
good standing to do business in each
jurisdiction in which the property owned,
leased or operated by Seller, Nippon Selas
or SW Selas, or the nature of the
business conducted by Seller, Nippon Selas
or SW Selas makes such qualification
necessary, except in any such jurisdictions
where the failure to be so duly
qualified or licensed and in good standing
would not have a Material Adverse
Effect (as herein defined). Seller has
previously made available to Buyer
complete and correct copies of the
certificates of incorporation, by-laws or
other organizational documents of Seller,
Nippon Selas and SW Selas (in each
case an entity's "Governing Documents"), as
currently in effect. A "Material
Adverse Effect" shall mean a material
adverse effect on the assets, results of
operations or financial condition of the
Business taken as a whole, other than
matters (a) relating to generally
applicable economic conditions, or to the
industry of the Business in general, (b)
resulting from the announcement of this
Agreement or the announcement of the
transactions contemplated by this
Agreement, (c) resulting from the execution
and delivery of this Agreement or
the consummation of the transactions
contemplated hereby or (d) resulting from
Buyer's negotiation of a new collective
bargaining agreement with the Local
Union 1191 (UAW) and International Union,
United Automobile, Aerospace and
Agricultural Implement Workers of American,
UAW ("Union"). Seller has previously
made available to Buyer complete and
correct copies of all stock records and
minute books of Nippon Selas and SW Selas,
which stock records and minute books,
to Seller's knowledge, contain accurate and
complete records in all material
respects of all security holders and all
meetings held of, and corporate action
taken by, the shareholders, the board of
directors and committees of the board
of directors of such entities at which any
material action was taken. At the
Closing, all of those books and records
will be in the possession of Nippon
Selas and SW Selas as applicable.
3.2
Authorization. Seller has the capacity to execute and deliver
this Agreement and consummate the
transactions contemplated hereby. This
Agreement has been duly executed and
delivered by Seller, has been duly
authorized by all necessary corporate
action by Seller and constitutes a valid
and binding agreement of Seller,
enforceable against Seller in accordance with
its terms. Each of the other agreements,
documents and instruments to be
executed and delivered
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by Seller pursuant hereto, when executed
and delivered, will have been duly
authorized by all necessary action by
Seller's shareholders and/or board of
directors and will constitute, a valid and
binding agreement of Seller,
enforceable against Seller in accordance
with its terms, except that (a) such
enforcement may be subject to any
bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other
laws, now or hereafter in effect,
relating to or limiting creditors' rights
generally, and (b) the remedy of
specific performance and injunctive and
other forms of equitable relief may be
subject to equitable defenses and to the
discretion of the court before which
any proceeding therefor may be brought.
3.3 Interests.
Set forth in Section 3.3 of the Disclosure Schedule
is the type and number of authorized
securities of Nippon Selas and SW Selas,
and the total number of such securities of
each type that are issued and
outstanding (the "Interests"). All of the
Interests are validly issued, fully
paid and non-assessable and free of
preemptive rights. There are no outstanding
securities convertible into, exchangeable
for, or carrying the right to acquire,
equity securities of either of the Nippon
Selas or SW Selas, nor are there any
subscriptions, warrants, options, rights or
other arrangements or commitments
(other than this Agreement) which could
obligate the either of Nippon Selas or
SW Selas to issue or Seller to sell any of
equity securities of either of Nippon
Selas or SW Selas.
3.4 Ownership
of the Interests. Seller is the record and
beneficial owner of the Interests, which
comprise all of the issued and
outstanding shares of all classes of
capital stock of Nippon Selas and SW Selas.
Except as set forth in Section 3.4 of the
Disclosure Schedule, Seller has good
title to the Interests, free and clear of
all liens, claims, options, security
interests, restrictions, voting agreements,
"adverse claim" (within the meaning
of Section 8-102 of the Uniform Commercial
Code) or any other encumbrance, both
known and unknown, other than restrictions
arising solely under United States
federal and state securities laws. Seller
will transfer to the Buyer at Closing,
good title to the Interests, free and clear
of all liens, claims, options,
security interests, restrictions, voting
agreements or any other encumbrance,
both known and unknown, other than
restrictions solely arising under United
States federal and state securities laws or
other encumbrances.
3.5 Consents
and Approvals: No Violations. Except as set forth in
Section 3.5 of the Disclosure Schedule, the
execution, delivery and performance
of this Agreement and the related
agreements and the consummation of the
transactions contemplated by them: (a) do
not and will not violate provisions of
law applicable to Seller, Nippon Selas, SW
Selas; (b) do not and will not
conflict with, result in the breach or
termination of any provision of or
constitute a default under (in each case
whether with or without the giving of
notice or the lapse of time or both) the
certificate of incorporation, by-laws
or other organizations of any of Seller,
Nippon Selas or SW Selas, respectively,
or any indenture, mortgage, security,
agreement, lease, deed of trust; other
Material Contract (as defined in Section
3.17), any Permit (as defined in
Section 3.24) or any order, judgment,
arbitration award, or decree to which
Seller, Nippon Selas or SW Selas is a party
or by which any of them or any of
their respective assets and properties are
bound; (c) do not and will not result
in the creation of any encumbrance on any
of the Assets; (d) do not and will not
require the approval, authority or consent
of or filing by Seller, Nippon Selas
or SW Selas with, or notification to, any
federal, state or local court,
authority, or governmental or regulatory
body or agency, or any other
corporation, partnership, individual, or
other entity;
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excluding from the foregoing clauses (b),
(c) and (d), such conflicts, breaches,
terminations, defaults, encumbrances or
failures to obtain approvals,
authorities, or consents or make filings or
give notifications, which
individually or in the aggregate would not
have a Material Adverse Effect
(excluding clause (c) as set forth in the
definition of Material Adverse Effect
for the purpose of this representation) and
would not adversely affect the
ability of Seller to consummate the
transactions contemplated by this Agreement;
and (e) do not and will not result in any
shareholder of Nippon Selas or SW
Selas having the right to exercise
dissenters' appraisal rights.
3.6 Financial
Statements. Attached to Section 3.6 of the
Disclosure Schedule is a copy of the
December 31, 2004 Balance Sheet. Except as
disclosed in Section 3.6 of the Disclosure
Schedule, the December 31, 2004
Balance Sheet has been prepared in
accordance with generally accepted accounting
principles consistently applied ("GAAP")
and Seller's customary accounting
policies and practices and fairly presents
the financial condition of Seller
with respect to the Business (on a
consolidated basis with Nippon Selas and SW
Selas), as of December 31, 2004.
3.7 Absence of
Undisclosed Liabilities. Except (a) for liabilities
and obligations set forth on the December
31, 2004 Balance Sheet or current
liabilities incurred in the ordinary course
of business since December 31, 2004
and recorded in the books and records of
the Business, (b) as otherwise
disclosed herein or in Section 3.7(b) of
the Disclosure Schedule and (c)
liabilities incurred since December 31,
2004 in the ordinary course of business
and recorded in the books and records of
the Business, Seller, with respect to
the Business, Nippon Selas and SW Selas do
not have and have not incurred any
liabilities or obligations (whether direct,
indirect, accrued or contingent) in
excess of $35,000, individually or in the
aggregate, that would be required to
be reflected or reserved against in a
balance sheet of the Business prepared in
accordance with GAAP as used in preparing
the December 31, 2004 Balance Sheet.
3.8 Absence of
Material Adverse and Other Changes. Except as set
forth in Section 3.8 of the Disclosure
Schedule or as otherwise contemplated by
this Agreement, since December 31, 2004,
there has been no change in the assets,
business prospects, results of operations
or financial condition of the
Business, Nippon Selas or SW Selas or the
Assets that has had a Material Adverse
Effect and to Seller's knowledge no event
has occurred or circumstance exists
that may result in such a Material Adverse
Effect.
3.9 Title,
Ownership and Related Matters.
(a) As of the
date hereof, Seller, Nippon Selas,
and SW Selas do not own or hold any option
to acquire any real property relating
to the Business.
(b) Seller,
Nippon Selas and SW Selas have, or
will as of the Closing have, good title to,
or rights by license, lease or other
agreement to use (each of which is
identified in Section 1.2.4. of the
Disclosure Schedule), all the Assets or in
the case of Nippon Selas or SW Selas
their assets (or rights thereto) necessary
to permit Seller, Nippon Selas, and
SW Selas to conduct the Business as
currently conducted, except as set forth in
Section 3.9(b) of the Disclosure
Schedule.
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(c) Except as
set forth in Section 3.9(c) of the
Disclosure Schedule, all Assets owned by
Seller are sold to Buyer free and clear
of all liens or encumbrances and all assets
owned by Nippon Selas and SW Selas
are free and clear of all liens or
encumbrances.
(d) To knowledge of
Seller: (i) except as
disclosed in Section 3.9(d) of the
Disclosure Schedule, all material items of
tangible personal property used by Seller
in the Business or used by Nippon
Selas or SW Selas is in the possession of
such party and (ii) the Assets and the
assets of Nippon Selas and SW Selas
constitute all of the assets necessary to
permit Seller, Nippon Selas and SW Selas to
conduct the Business as currently
conducted in all material respects.
3.10
Leases.
(a) Section
3.10(a) of the Disclosure Schedule
lists all real property leases and
subleases for space occupied by Seller,
Nippon Selas, and SW Selas (the "Leased
Property") relating to the Business
(collectively, the "Leases"). True and
complete copies of the Leases and all
written amendments and agreements relating
thereto have been made available to
Buyer. All of the Leases are valid, binding
and enforceable in accordance with
their terms, and none of Seller, Nippon
Selas, and SW Selas nor, to the
knowledge of Seller, the other party to any
Lease has failed to comply in all
material respects or is in default under
such Lease. To the Seller's knowledge,
the use to which all such Leased Property
is being put by Seller, Nippon Selas
and SW Selas is in compliance with all
applicable laws and regulations in all
material respects.
(b) Section
3.10(b) of the Disclosure Schedule
lists all leases or other agreements or
rights under which any of Seller, Nippon
Selas, and SW Selas are the lessee of, or
hold or operate, any machinery,
equipment, vehicles or other tangible
personal property owned by a third party
except those that are terminable by such
company without penalty on 30 or fewer
days notice or that provide for annual
rental payments of less than $25,000.
3.11 Intellectual Property.
(a) Except as
set forth in Section 3.11(a) of
the Disclosure Schedule (i) to the Seller's
knowledge, the conduct of the
Business does not infringe, and has not
infringed since January 1, 2000, upon
any intellectual property right of any
third party in any material respect, and
(ii) there are no pending, or threatened in
writing, proceedings or litigation
or other adverse written claims by any
person against the use by Seller, Nippon
Selas or SW Selas of any Intangibles which
are owned or licensed by Seller,
Nippon Selas or SW Selas and used in the
operation of the Business as currently
conducted.
(b) Except as
set forth in Section 3.11(b) of
the Disclosure Schedule, (i) Seller, Nippon
Selas and SW Selas own free and
clear of any lien, encumbrance or claim of
right or have valid licenses or other
rights (each of which is identified in
Section 1.2.5 of the Disclosure Schedule)
to use the Intangibles necessary to permit
Seller, Nippon Selas and SW Selas to
conduct the Business operations as
currently conducted in all material respects,
(ii) all maintenance fees and other filings
necessary for the preservation of
any patents and trademarks
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set forth in Section 1.2.5 of the
Disclosure Schedule included in the
Intangibles that are registered with the
United States Patent and Trademark
Office and, to the Seller's knowledge, any
foreign counterpart set forth on
Schedule 1.2.5, that are material to the
Business have been so filed and paid,
or if not paid, are not in default and will
be accrued on the Closing Balance
Sheet (it being understood that filing fees
and other filings with respect to
patents and trademarks marked as
"abandoned" in Section 3.12 of the Disclosure
Schedule have not been made) and (iii) all
registrations for the United States
Trademarks set forth on Schedule 1.2.5 of
the Seller, and, to Seller's
knowledge, any foreign counterpart set
forth in Schedule 1.2.5, are valid and
existing.
(c) Section
1.2.5 of the Disclosure Schedule
completely and accurately lists (including
the name of the owner) all of the
following as relates to the Business: (i)
all business names, trade names,
registered and unregistered trademarks and
applications for registration of the
same (identified by jurisdiction and
application or registration number); (ii)
all patents and patent applications
(identified by jurisdiction and application
or registration number) and inventions and
discoveries that may be patentable;
(iii) all registered copyrights or
applications therefor (identified by
jurisdiction and application or
registration number), unregistered copyrights in
both published works and unpublished works
that are material to the Business;
(iv) all software (other than
non-customized software generally available for
off-the-shelf purchase for under $5,000);
and (vi) all Internet web sites and
Internet domain names. The Intangibles
constitute all of the intellectual
property necessary to permit Seller, Nippon
Selas and SW Selas to conduct the
Business operations as currently conducted
in all material respects.
(d) Other than
as set forth in Section 3.11(d)
of the Disclosure Schedule (i) no action
has been initiated or claim been made
by Seller, Nippon Selas or SW Selas
relating to any third party infringing or
violating any of Seller's, Nippon Selas' or
SW Selas' rights in or to any of the
Intangibles, (ii) to Seller's knowledge, no
facts or circumstances exist that
are reasonably likely to give rise to any
such action or claim.
3.12 Accounts
Receivable. All accounts receivable of the Business
that are reflected on the December 31, 2004
Balance Sheet including all accounts
receivable on Section 3.12 of the
Disclosure Schedule with respect to accounts
receivable of Nippon Selas and SW Selas (a)
represented valid obligations
arising from sales actually made or
services actually performed in the ordinary
course of business and are subject to no
valid offsets or counterclaims, and (b)
have been so determined in accordance with
GAAP. Except as disclosed on Section
3.12 of the Disclosure Schedule, all
accounts receivable of Seller, with respect
to the Business, Nippon Selas or SW Selas
that will be reflected on the Closing
Balance Sheet as finally determined in
accordance with Section 2.2.3: (a) will
represent valid obligations arising from
sales actually made or services
actually performed in the ordinary course
of business and will be subject to no
valid offsets or counterclaims, (b) will be
so determined in accordance with
GAAP, and (c) to the knowledge of Seller,
except to the extent that a reserve
against the possible uncollectibility of
such accounts receivable is established
and reflected in the Closing Balance Sheet
as finally determined in accordance
with Section 2.2.3, all of such accounts
receivable will be fully collectible
within 90 days of the date they become due
and payable (or the date set forth on
Section 3.12 of the Disclosure Schedule
with respect to the particular accounts
receivable of Nippon Selas specified
thereon) in accordance with Seller's
ordinary practice and without resort to
legal proceedings at the aggregate
recorded amount thereof as shown on the
Closing Balance
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Sheet as finally determined in accordance
with Section 2.2.3 (or on Section 3.12
of the Disclosure Schedule with respect to
particular accounts receivable of
Nippon Selas), except for the reserves, if
any, allocable thereto shown on such
Closing Balance Sheet. Except as disclosed
on Section 3.12 of the Disclosure
Schedule, no claim has been made in
writing, or to Seller's knowledge is
threatened, against Seller, Nippon Selas or
SW Selas objecting to the validity,
scope or right of payment of any account
receivable.
3.13
Inventory. All inventory of the Business that is reflected on
the December 31, 2004 Balance Sheet has
been determined in accordance with GAAP.
The book value of the inventory reflected
on the December 31, 2004 Balance Sheet
was based on quantities determined from the
Business' perpetual inventory
records, and valued at the lower of cost
(determined on a first-in, first-out
basis) or market value and on a basis
consistent with that of prior years. All
inventory of the Business that will be
shown on the Closing Balance Sheet as
finally determined in accordance with
Section 2.2.3, taken as a whole, to the
Seller's knowledge is not excessive, but is
reasonable in light of the present
circumstances of the Seller, Nippon Selas
and SW Selas and will consist of items
of a quality and quantity useable and
saleable in the ordinary course of the
business without markdown or discount, and
will be merchantable and fit for
their particular purpose. The Closing
Balance Sheet as finally determined in
accordance with Section 2.2.3 will reflect
adequate reserves for obsolete and
slow-moving items and items below standard
quality (which in any event will not
exceed normal commercial standards in
amount), which will reduce the carrying
value of inventory, taken as a whole, to
the lower of cost or net realizable
market value. All Inventory is owned by
Seller, Nippon Selas or SW Selas, as
applicable, free and clear of any lien,
encumbrance or claim of right, other
than sales by Seller, Nippon Selas or SW
Selas of finished goods made in the
ordinary course of business
3.14
[Intentionally Omitted]
3.15
Litigation. Except as set forth in Section 3.15 of the
Disclosure Schedule: (a) there is no claim,
charge, complaint, action, suit,
proceeding or governmental investigation
pending or, to the knowledge of Seller,
threatened against Seller with respect to
the Business or the Specified Assets,
Nippon Selas or SW Selas, by or before any
court, governmental or regulatory
authority, state, local, federal or
foreign, or by any third party, including
but limited to employees of Selas, Nippon
Selas or SW Selas, and (b) 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 claim, charge, complaint, action,
suit, proceeding or investigation.
3.16
Compliance with Applicable Law. Except as set forth on Section
3.16 of the Disclosure Schedule, to the
knowledge of Seller, each of Seller with
respect to the Business, Nippon Selas and
SW Selas are in compliance with all
applicable laws, ordinances, orders,
standards, executive orders, rules and
regulations of any federal, state, local or
foreign governmental authority
applicable to such company, except for
violations, if any, which would not have
a Material Adverse Effect including, but
not limited to any and all laws,
ordinances, orders, standards, executive
orders, rules and regulations of any
federal, state, local or foreign
governmental authority regulating safety in the
work place, prohibiting discrimination,
requiring accommodation, requiring
affirmation action, regulating wages,
overtime hours of work and child labor,
regulating labor relations, taxes,
regulating environmental issues, and
regulating
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securities. Neither Seller nor Nippon Selas
nor SW Selas has received, at any
time since January 1, 2003, any notice or
other communication (whether oral or
written) from any governmental authority
regarding any actual, alleged, possible
or potential violation of, or failure to
comply with, any term or requirement of
any such laws, ordinances, rules or
regulations.
3.17
Certain Contracts and Arrangements. Except as set forth in
Section 3.17 of the Disclosure Schedule, as
of the date hereof, Seller, with
respect to the Business, Nippon Selas and
SW Selas are not a party to any
written (a) employment agreement; (b)
indenture, mortgage, note, installment
obligation, agreement or other instrument
relating to the borrowing of money by
Seller, Nippon Selas or SW Selas (other
than intercompany accounts which shall
be governed by Section 2.3 hereof), or the
guaranty by Seller, Nippon Selas or
SW Selas of any obligation for the
borrowing of money; or (c) other agreement,
including without limitation, purchase
orders, or any enforceable oral
agreement, which individually, or in the
aggregate with respect to any series of
related agreements, involves the receipt or
payment after the date hereof of
more than $10,000 on an annual basis (each
such other agreement, a "Material
Contract"). Seller has delivered or made
available to Buyer accurate and
complete copies of all Material Contracts
to Buyer. Section 3.17 contains a
complete and accurate list of all Material
Contracts. All Assigned Contracts are
valid, binding and enforceable on Seller,
Nippon Selas or SW Selas, as
applicable, and to Seller's knowledge the
other party thereto, in accordance
with their terms, are the result of bona
fide arm's-length transactions, and,
none of Seller, Nippon Selas or SW Selas,
or to the knowledge of Seller any
other party thereto, is in default (with or
without notice or lapse of time or
both) under any of the aforesaid agreements
in any material respect. Except as
set forth in Section 3.17 of the Disclosure
Schedule, all Assigned Contracts are
assignable by Seller without the consent of
any other person or entity.
3.18
Employee Benefit Plans; ERISA; Employees.
(a) Section
3.18(a) of the Disclosure Schedule
lists each employee pension benefit plan
(as defined in section 3(2) of the
Employee Retirement Income Security Act of
1974, as amended ("ERISA")) ("Pension
Plan"), each employee welfare benefit plan
(as defined in section 3(1) of ERISA)
("Welfare Plan"), each specified fringe
benefit plans (as defined in section
6039D(d) of the Internal Revenue Code of
1986, as amended (the "Code")), and
each executive compensation, retirement,
deferred compensation, incentive,
bonus, severance, compensation associated
with change in control, perquisite,
health care, death benefit, disability,
life insurance, vacation pay, sick pay
or other plan or arrangement to which
Seller, Nippon Selas, or SW Selas is or
has during the prior six years been a
party, or with respect to which Seller,
Nippon Selas, or SW Selas has or may in the
future have an obligation, or that
is or has been during the prior six years
maintained, contributed to, or
sponsored by Seller, Nippon Selas, or SW
Selas for the benefit of any current or
former employee, officer, or director (such
plans and arrangements to be
referred to individually as "Business Plan"
and collectively as "Business
Plans").
For purposes of this Section 3.18, "Affiliate Health Plan"
means a group health plan (within the
meaning of section 607 of ERISA), and the
term "Affiliate Pension Plan" means a
Pension Plan, in either case to which an
ERISA Affiliate (as defined below) is or
has during the
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prior six years been a party, or with
respect to which an ERISA Affiliate has an
obligation, or that has been or is
maintained, contributed to, or sponsored by
an ERISA Affiliate for the benefit of any
current or former employee, or in
connection with which Seller, Nippon Selas,
or SW Selas may now or in the future
have any obligation by reason of its
current or former relationship with an
ERISA Affiliate.
The term "ERISA Affiliate" means each entity that is or has
ever been a member of either (i) a
controlled group (within the meaning of
section 414(b) or (c) of the Code) or, for
the purposes of the definition of
"Affiliate Health Plan," (ii) an affiliated
service group (within the meaning of
section 414(m) or (o) of the Code) that, in
either case, includes or included
Seller, Nippon Selas, or SW Selas or an
entity of which Seller, Nippon Selas, or
SW Selas is a successor.
Except as set forth in Section 3.18(a) of the Disclosure
Schedule: (a) no Business Plan or Affiliate
Pension Plan is a Multiemployer
Plan, as defined in ERISA, or is described
in Section 413 of the Internal
Revenue Code of 1986, as amended (the
"Code"); (b) no Affiliate Pension Plan is
or has been subject to section 302 or Title
IV of ERISA or to section 412 of the
Code; and (c) the Seller has not during the
prior six years been a party to,
maintained, contributed to or sponsored any
group health plan (within the
meaning of section 607 of ERISA) or Pension
Plan subject to section 302 or Title
IV of ERISA or to section 412 of the Code,
other than the Business Plans.
(b) Seller has
furnished to Buyer a complete and
accurate copy of each Business Plan
document (including, in each case, all
amendments), or written descriptions of any
unwritten Business Plan, and a
complete and accurate copy of all material
documents relating to such plan,
including, if applicable: (A) each trust
agreement, insurance or annuity
contract, investment management agreement,
custodial agreement, and other
agreement relating to the funding of the
plan, and all amendments to them; (B)
the most recent summary plan description
and any subsequent summary of material
modifications; (C) the three most recently
filed annual return reports (Form
5500 series), including all applicable
schedules; (D) the most recent
determination or opinion letter issued by
the Internal Revenue Service, if the
plan or its related funding arrangement is
intended to be qualified under
section 401(a) or exempt from tax under
section 501(a) of the Code, and any
pending application for a determination or
opinion letter; (E) the three most
recent financial statements; (F) the three
most recent actuarial valuation
reports; (G) all communications received
from the IRS, DOL or PBGC; and (H) any
and all correspondence or other written
communications relating to withdrawal
liability of any Multiemployer Plan.
(c) Except as
set forth in Section 3.18(c) of
the Disclosure Schedule, (i) each of the
Business Plans complies in all material
respects, in form and operation, and has
been administered and funded in all
material respects in accordance with its
terms and the requirements of all
applicable laws, including, without
limitation, ERISA, all provisions of the
Code applicable to secure intended tax
consequences, and federal securities law,
and all regulations and rulings under such
laws, and (ii) each of the Plans
intended to be "qualified" within the
meaning of Section 401(a) of the Code, has
been determined by the Internal Revenue
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Service (the "IRS") to be so qualified, is
presently so qualified, and Seller
knows of no fact or set of circumstances
that would adversely affect such
qualification prior to the Closing. To the
knowledge of Seller, there are no
pending or threatened material claims
(other than routine claims for benefits)
by, on behalf of or against any of the
Plans or any trusts related thereto, and
no fact or event exists that could give
rise to such a claim.
Each ERISA Affiliate Health Plan complies with and
has been administered in all material
respects in accordance with Part 6 and
Part 7 of Title I of ERISA, as in effect
from time to time.
(d) Except as
set forth in Section 3.18(d) of
the Disclosure Schedule: (i) all material
accrued obligations of Seller, with
respect to the Business, Nippon Selas and
SW Selas applicable to their
employees, whether arising by operation of
law, by contract, by past custom or
otherwise, for payments by such companies
to trusts or other funds or to any
governmental agency, with respect to
unemployment compensation benefits, social
security benefits or any other benefits for
their employees with respect to the
employment of said employees through the
date hereof have been paid or adequate
accruals therefor have been made on each
such company's books and records and
(ii) all reasonably anticipated material
obligations of Seller, with respect to
the Business, Nippon Selas and SW Selas
with respect to such employees, whether
arising by operation of law, by contract,
by past custom, or otherwise, for
salaries, vacation and holiday pay, sick
pay, bonuses and other forms of
compensation payable to such employees in
respect of the services rendered by
any of them prior to November, 2004 have
been or will be paid by Seller, Nippon
Selas or SW Selas, respectively, prior to
the Closing Date or adequate accruals
therefor have been made on the December 31,
2004 Balance Sheet, and all such
amounts accrued after December 31, 2004
through the Closing Date will have been
paid by Seller, Nippon Selas or SW Selas,
respectively, as of the Closing or
will be accrued on the Closing Balance
Sheet.
(e) Except as
set forth in Section 3.18(e) of
the Disclosure Schedule: with respect to
each Business Plan, all material
notices, reports, returns, applications,
election forms, and disclosures
required by law or the terms of the plan to
be made or provided to the Internal
Revenue Service, the U.S. Department of
Labor, the Pension Benefit Guaranty
Corporation, any participants, spouses of
participants, or beneficiaries in the
plan, any trustee, or any insurer with
respect to the plan have been timely and
adequately made or provided in accordance
with such law or plan.
(f) Except as
set forth in Section 3.18(f) of
the Disclosure Schedule, Seller, with
respect to the Business, Nippon Selas and
SW Selas do not maintain any health or life
insurance plan that provides for
continuing benefits or coverage for any
participant or any spouse, dependent or
beneficiary under such plan after
termination of employment, other than as may
be required under Section 4980B of the Code
and Part 6 of Title I of ERISA and
regulations thereunder ("COBRA"). Seller,
with respect to the Business, Nippon
Selas and SW Selas are in compliance in all
material respects with the COBRA
notice and continuation coverage
requirements with respect to Plans maintained
by such companies.
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(g) No filing
has been made with the Internal
Revenue Service, with respect to any
Business Plan that is a Pension Plan
intended to be qualified under section
401(a) of the Code, under the Internal
Revenue Service Voluntary Correction
Program or any similar program previously
in effect, nor has any self corrective
action been taken as to any such plan
under the provisions of any Internal
Revenue Service revenue procedure
permitting "self correction" of certain
qualification defects.
(h)
No
Business Plan that is a Pension Plan has
had an accumulated funding deficiency
(within the meaning of section 302 of
ERISA or section 412 of the Code), whether
or not waived. No asset of the
Business is the subject of a lien arising
under section 302(f) of ERISA or
section 412(n) of the Code.
(i) No
complete or partial termination has
occurred within the past five years with
respect to any Business Plan that is a
Pension Plan. No reportable event (within
the meaning of section 4043 of ERISA)
or event described in section 4063(a) of
ERISA has occurred or is expected to
occur with respect to any Business Plan
subject to Title IV of ERISA. The PBGC
has not instituted proceedings to terminate
any Business Plan, no event or
condition has occurred or exists that may
constitute grounds under section 4042
of ERISA for the termination of or
appointment of a trustee to administer any
such plan, nor has any notice of intent to
terminate any such plan been filed
with the PBGC. All premiums due the PBGC
with respect to such plans have been
paid on a timely basis.
(j) As to each
Business Plan subject to Title IV
of ERISA:
(A) Seller has
provided Buyer with the
actuarial valuation for the plan
performed for the fiscal year ended
December 31, 2004, for the purposes
of Statement of Financial
Accounting Standards No. 87 (the
"FAS 87 Report"); all employee
census data furnished to the plan's
actuary in connection with the FAS
87 Report have been accurate and
complete in all material respects;
no amendment or change to any such
Business Plan effective or adopted
after the date of the FAS 87 Report
would increase the benefits under
such Business Plan; and nothing has
occurred since the date of the FAS
87 Report that would have a
materially adverse effect on the
funding condition of any such
Business Plan; and the actuary(ies)
retained with respect to such
Business Plans are qualified in all
respects; and
(B) to the
knowledge of Seller (based
on, among other things, the FAS
Report and other communications
with such qualified actuaries), all
costs of such Business Plans have
been provided for on the basis of
consistent methods in accordance
with sound actuarial assumptions
and practices and such FAS 87
Report accurately reflects the
value of the
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plan assets and liabilities as of
the date of such valuation based on
the funding method and actuarial
assumptions specified in the FAS 87
Report.
(k)
[Intentionally omitted.]
(l) Except as
set forth in Section 3.18(l) of
the Disclosure Schedule, all contributions,
insurance premiums, or payments
required to be made with respect to the
Business Plans have been made by their
due dates.
(m) Except as
set forth in Section 3.18(m) of
the Disclosure Schedule, no Business Plan,
and no other commitment or agreement,
provides for the payment of separation,
severance, or similar benefits to any
person solely as a result of any
transaction contemplated by this Agreement or
as a result of a "change in control",
within the meaning of such term under
section 280G of the Code, and the
consummation of the transaction contemplated
by this Agreement will not accelerate the
time of payment or vesting of, or
increase the amount of, any compensation
due to any employee.
3.19
Insurance. Section 3.19 of the Disclosure Schedule sets forth
a complete and accurate list of all
currently effective insurance policies
(including any self-insurance arrangements
or other contract or arrangement,
other than a policy of insurance, for the
transfer or sharing of any risk to
which Seller, Nippon Selas or SW Selas is a
party or which involves the
Business) covering the Business (the
"Insurance Policies") identifying all of
the following for each such policy: (a) the
type of insurance; (b) the insurer;
(c) the policy number; (d) the policy
limits, (e) named and additional named
insureds, and (f) the expiration date.
Except as disclosed in Section 3.19 of
the Disclosure Schedule, there are no
claims, actions, suits or proceedings
arising out of or based on any of these
insurance policies and, to the knowledge
of Seller, no basis for any such claim,
action, suit or proceeding exists. Each
such insurance policy is valid and binding
and is and has been in full force and
effect since the date of its issuance.
Neither Seller, Nippon Selas nor SW
Selas, have been notified of any material
breach of or default under any such
policy. Seller owns, and after Closing is
retaining ownership of, all such
insurance policies. Nothing in this
Agreement shall affect Seller's right to
modify or terminate any such insurance
policy at any time or to remove Nippon
Selas or SW Selas as a named insured at any
time, provided that such
modification or termination does not affect
the rights of Nippon Selas or SW
Selas, if any, under such policies for
occurrences (as defined in such insurance
policies) existing or arising before and
including the Closing Date. Except as
set forth on Section 3.19 of the Disclosure
Schedule, since January 1, 2003,
neither Seller, Nippon Selas nor SW Selas
has received with respect to any of
the Insurance Policies (y) any refusal of
coverage or any notice that a defense
will be afforded with reservation of rights
or (x) 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.
3.20
Environmental Matters. Except as set forth in Section 3.20 of
the Disclosure Schedule, to the knowledge
of Seller: (a) the operation of the
Business is in compliance in all material
respects with all applicable
environmental laws and regulations and (b)
there have occurred no and there are
no events, conditions, circumstances,
activities, practices, incidents, or
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CONFIDENTIAL
actions that may give rise to a material
liability arising under environmental
laws, or with respect to the Business,
Nippon Selas or SW Selas, based upon or
related to the manufacture, processing,
distribution, use, treatment, storage,
disposal, transport or handling, or the
emission, discharge, release or
threatened release into the environment, of
any pollutants or contaminants.
Seller has delivered to Buyer true and
complete copies and results of any
reports, studies, analyses, tests, or
monitoring possessed or initiated by
Sellers, Nippon Selas or SW Selas or
pertaining to the Business regarding
compliance with environmental laws. Neither
Seller nor Nippon Selas nor SW Selas
has not received any notice or other
written communication from any governmental
authority regarding any actual, alleged,
possible or potential violation of, or
failure to comply with, any term or
requirement of any environmental laws,
ordinances, rules or regulations.
3.21
Taxes.
(a) Except as
set forth in Section 3.21 of the
Disclosure Schedule, Seller, Nippon Selas
and SW Selas have filed all material
Tax Returns that they were required to
file, and have paid all Taxes shown to be
due on such Tax Returns. All such Tax
Returns are true, correct and complete in
all material respects.
(b) Section
3.21 of the Disclosure Schedule
lists all material Tax Returns filed with
respect to Seller, Nippon Selas and SW
Selas for taxable periods ending on or
after January 1, 2001, indicates those
Tax Returns that have been audited, and
indicates those Tax Returns that
currently are the subject of audit.
(c) Seller,
Nippon Selas and SW Selas have not
waived any statute of limitations in
respect of any Taxes or agreed to any
extension of time with respect to a Tax
assessment or deficiency.
(d) No claim
has been made since January 1, 2003
or, to the knowledge of Seller, is expected
to be made by any governmental
authority in a jurisdiction where Seller,
Nippon Selas or SW Selas does not file
Tax Returns that it is or may be subject to
taxation by that jurisdiction. There
are no liens or 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 lien
or encumbrance.
(e) The
charges, accruals, and reserves with
respect to Taxes on the respective books of
Seller, with respect to the
Business, and Nippon Selas and SW Selas
are, and as of Closing will be, adequate
and are at least equal to the liability for
Taxes with respect to the Business,
Assets, income and operations of Seller,
with respect to the Business, and
Nippon Selas and SW Selas. To the extent
that any such Taxes of Nippon Selas and
SW Selas are unpaid at the time of Closing,
the amounts therefor reflected in
the Closing Balance Sheet shall be adequate
for the payment of all Taxes of
those entities attributable to periods
prior to Closing including any Taxes
resulting from any transfers of cash or
other property by Nippon Selas or SW
Selas to Seller or forgiveness of
obligations between Seller and Nippon Selas or
SW Selas in anticipation of the
transactions contemplated by this Agreement or
as described in this
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CONFIDENTIAL
Agreement. None of Seller, Nippon Selas or
SW Selas has received any written
proposed tax assessment against any of
Seller, Nippon Selas or SW Selas.
(f) As used in
this Agreement:
(i) "Taxes"
shall mean all taxes,
levies, charges or fees including income,
corporation, advance corporation,
gross receipts, transfer, excise, property,
sales, use, value-added, license,
payroll, pay-as-you-earn, withholding,
social security and franchise or other
governmental taxes or charges, imposed by
or under the taxing authority of the
United States or any state, county, local
or foreign government, and such term
shall include any interest, penalties or
additions to tax attributable to such
taxes.
(ii)
"Tax Return" shall mean any report,
return or statement required to be supplied
to a taxing authority in connection
with Taxes.
3.22
Related Party Transactions. Except as set forth in Section
3.22 of the Disclosure Schedule, there are
no material real estate leases,
personal property leases, loans,
guarantees, contracts, transactions or other
arrangements
