Exhibit 10.1
ASSET PURCHASE AGREEMENT
by and among
PROMARK
INTERNATIONAL, INC.
d/b/a PHOTOGENIC PROFESSIONAL LIGHTING
and
NATURE VISION, INC.
October 20, 2006
TABLE OF CONTENTS
Page
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ARTICLE 1.
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PURCHASE AND SALE OF ASSETS
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1
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1.3
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Assumption of Liabilities
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3
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1.4
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Excluded Liabilities
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3
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ARTICLE 2.
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CONSIDERATION FOR THE PURCHASED
ASSETS
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4
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2.2
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Purchase Price Adjustment
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4
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2.3
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Procedures for Final Determination of
Inventory
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5
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ARTICLE 3.
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REPRESENTATIONS AND WARRANTIES OF
SELLER
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6
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3.1
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Organization and Power
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6
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3.3
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Authorization; No Breach
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6
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3.4
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Financial Statements
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7
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3.5
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Absence of Undisclosed Liabilities
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7
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3.6
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No Material Adverse Changes
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7
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3.7
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Absence of Certain Developments
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7
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3.8
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Title and Condition of Properties
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8
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3.10
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Contracts and Commitments
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9
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3.11
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Proprietary Rights
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11
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3.12
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Litigation; Proceedings
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11
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3.14
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Governmental Consent, Etc.
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12
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3.16
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Employee Benefit Plans
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12
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3.17
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Affiliated Transactions
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14
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3.18
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Compliance with Laws; Permits; Certain
Operations
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14
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3.19
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Product and Warranty Claims;
Warranties
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15
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ARTICLE 4.
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REPRESENTATIONS AND WARRANTIES OF
PURCHASER
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15
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4.1
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Corporate Organization and Power
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15
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4.2
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Authorization; No Breach
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16
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ARTICLE 5.
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CLOSING TRANSACTIONS
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17
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i
TABLE OF CONTENTS
(continued)
Page
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5.2
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Action to Be Taken at the Closing
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17
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5.5
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Nonassignable Contracts
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18
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ARTICLE 6.
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CONDITIONS TO PURCHASER’S OBLIGATION TO
CLOSE
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19
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6.1
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Conditions to Purchaser’s
Obligation
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19
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ARTICLE 7.
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CONDITIONS TO SELLER’S OBLIGATION TO
CLOSE
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20
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7.1
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Conditions to Seller’s
Obligation
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20
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ARTICLE 8.
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INDEMNIFICATION
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20
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8.1
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Indemnification by Seller
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20
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8.2
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Indemnification by Purchaser
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21
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8.3
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Method of Asserting Claims
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21
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8.6
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Exclusive Remedies
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23
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ARTICLE 9.
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ADDITIONAL AGREEMENTS
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23
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9.3
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Press Release and Announcements
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23
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9.6
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Transition Assistance
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23
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9.8
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Non-Compete; Non-Solicitation
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24
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9.9
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Specific Performance
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24
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9.11
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Employees and Agents of Seller
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25
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ARTICLE 10.
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MISCELLANEOUS
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25
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10.1
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Amendment and Waiver
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25
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10.5
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No Third-Party Beneficiaries
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27
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10.6
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No Strict Construction
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27
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10.8
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Complete Agreement
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27
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ii
EXHIBITS
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Exhibit A
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—
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Form of Transition Services Agreement
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Exhibit B
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—
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Form of Promissory Note
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i
DISCLOSURE
SCHEDULES
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Schedule 1.1(a)
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—
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Prepaid Assets
Schedule
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Schedule 1.1(b)
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—
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Inventory Schedule
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Schedule 1.1(c)
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—
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Tangible Property
Schedule
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Schedule 1.1(e)
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—
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Intellectual Property
Schedule
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Schedule 1.1(k)
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—
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Computer Hardware and Software
Schedule
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Schedule 1.2
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—
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Excluded Assets
Schedule
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Schedule 1.3(b)
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—
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Assumed Liability
Schedule
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Schedule 2.1(a)
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—
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Purchase Price Allocation
Schedule
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Schedule 2.2(a)
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—
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Estimated Inventory
Schedule
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Schedule 3.1
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—
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Qualifications
Schedule
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Schedule 3.3
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—
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No Conflicts Schedule
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Schedule 3.5
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—
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Undisclosed Liabilities
Schedule
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Schedule 3.7
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—
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Developments Schedule
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Schedule 3.8(c)
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—
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Permitted Encumbrances
Schedule
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Schedule 3.10(a)
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—
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Contracts Schedule
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Schedule 3.10(d)
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—
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Customer Contracts
Schedule
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Schedule 3.11
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—
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Proprietary Rights
Schedule
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Schedule 3.12
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—
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Litigation Schedule
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Schedule 3.14
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—
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Consents Schedule
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Schedule 3.15
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—
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Employees Schedule
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Schedule 3.16
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—
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Employee Benefits
Schedule
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Schedule 3.17
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—
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Affiliated Transactions
Schedule
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Schedule 3.18(a)
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—
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Compliance Schedule
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Schedule 3.18(b)
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—
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Permits Schedule
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Schedule 3.19
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—
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Claims Schedule
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Schedule 3.21
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—
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Customer List Schedule
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ii
ASSET PURCHASE
AGREEMENT
ASSET PURCHASE AGREEMENT made as of
October 20, 2006 (this “Agreement”) by and between
PROMARK INTERNATIONAL, INC. d/b/a PHOTOGENIC PROFESSIONAL LIGHTING,
an Illinois corporation (“Purchaser”), and NATURE
VISION, INC., a Minnesota corporation
(“Seller”).
W I T N E S S E T H
:
WHEREAS, the Seller is engaged in
the business of designing, manufacturing, marketing, distributing
and selling cameras, electronic-flash equipment, and related
accessories used in the photography business and marketed under the
Norman, Lindahl and Camerz product lines (the
“Business”); and
WHEREAS, on the terms and subject to
the conditions of this Agreement, Purchaser desires to acquire from
Seller and Seller desires to sell to Purchaser, substantially all
of the assets and properties of the Seller, both tangible and
intangible, as described herein on terms and conditions hereinafter
set forth.
NOW, THEREFORE, the parties agree as
follows:
ARTICLE 1.
PURCHASE AND SALE OF
ASSETS
1.1
Purchased Assets . On the terms and subject to the
conditions of this Agreement, on the Closing Date (as defined in
Section 5.1), Purchaser shall purchase from Seller, and Seller
shall sell, convey, assign, transfer and deliver to Purchaser all
of the following assets related to the Business:
(a) all
prepayments, prepaid expenses, deferred charges, advance payments
and security deposits as of the Closing Date listed on
Schedule 1.1(a) (the “Prepaid
Assets”);
(b) all
inventories (including raw materials, work-in-process and finished
goods) and related supplies, including component parts, cartons and
packaging materials, located at the Seller’s facilities or
stored off-site, in transit to or from the Seller’s
facilities or which otherwise relate to the Business which are
listed on Schedule 1.1(b) (the
“Inventory”);
(c) Seller’s
interests in only that machinery, equipment, fixtures, fittings,
tools, dies, jigs, molds, printing films, office furnishings,
shelving, spare parts and supplies and other tangible personal
property, whether owned or leased which are listed on
Schedule 1.1(c) (including, without limitation, items
which have been fully depreciated or expensed);
3
(d) all
rights in and to products sold or leased (including, but not
limited to, products hereafter returned or repossessed and unpaid
and the Seller’s rights of rescission, replevin, reclamation
and rights to inventory in transit) to the extent of any credit
that is given by the Purchaser related to such products and to the
extent Purchaser is not indemnified hereunder with respect to any
such credit;
(e) all
intangible assets and intellectual property (including, without
limitation, registered and unregistered trademarks, service marks
and product line trade names, trade dress and other names, marks
and slogans, including the names “Norman”,
“Camerz”, “Photo Control” and
“Lindahl” and any deviations thereof); all publishing
and distribution rights, and all associated goodwill; all
statutory, common law and registered copyrights; all patents,
inventions, shop rights, know-how, trade secrets and confidential
information; all registration applications for any of the
foregoing; all interests in and to the telephone numbers of
800-787-8078, 763-537-3601 and 763-537-2852 and all listings
pertaining to these telephone numbers along with all listings
pertaining to the Business in other directories; all interest in
web-sites and web addresses; together with all rights owned by
Seller to use all of the foregoing and all other rights of Seller
in, to, and under the foregoing in all countries, including,
without limitation, such items as set forth on
Schedule 1.1(e) ;
(f) all
discoveries, improvements, processes, formulae (secret or
otherwise), data, confidential information, engineering, technical
and shop drawings, specifications and ideas, whether patentable or
not, all licenses and other similar agreements, and all drawings,
records, books or other indicia, however evidenced, of the
foregoing; all rights in and to any products or other intellectual
property rights under research or development prior to or on the
Closing Date;
(g) all
rights existing under purchase orders, sales and purchase
agreements and orders, warranties, consents, orders, registrations,
privileges, franchises, memberships, certificates, approvals or
other similar rights, including, without limitation, all rights
existing under the contracts listed on the Contracts
Schedule and Customer Contracts Schedule (as defined in
Section 3.10 hereof);
(h) the
right to receive all mail and other communications addressed to the
Seller related directly to the Business (including, without
limitation, mail and communications from customers, suppliers,
distributors, agents and others and accounts receivable payments
which are assets of the Purchaser);
(i) all
lists, records and files, or copies thereof, pertaining to
customers, suppliers, distributors, personnel and agents and other
books, ledgers, files, documents, correspondence, drawings and
specifications and business records of every kind and
nature;
(j) all
business and marketing plans and proposals and pricing and cost
information;
4
(k)
all
computer hardware, software and systems and licenses related
thereto, proprietary or otherwise, related source codes, data and
documentation which are listed on Schedule 1.1(k)
;
(l)
all
creative materials (including, without limitation, photographs,
films, art work, color separations and the like, catalogues,
electronic data for catalogues, price lists, sell sheets, labels,
cartons, advertising and promotional materials and all other
printed or written materials); and
(m)
all goodwill
as a going concern and all other intangible property related
directly to the Business.
For purposes of the Agreement, the
term “Purchased Assets” means all properties, assets
and rights which Seller shall convey to Purchaser or shall be
obligated to convey to Purchaser under this Agreement. The
Purchaser will be deemed the owner of the Purchased Assets as of
12:01 a.m. on the Closing Date (the “Effective
Time”).
1.2
Excluded Assets . Notwithstanding the foregoing, the
following assets (the “Excluded Assets”) are expressly
excluded from the purchase and sale contemplated hereby and, as
such, are not included in the Purchased Assets:
(a) cash,
cash equivalents and marketable securities;
(b)
the
minute books, member or unit records, articles of organization,
operating agreement of Seller and other documents and
correspondence that relate to Seller’s corporate organization
and maintenance thereof;
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(c)
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all accounts receivable;
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(d)
all
rights in real estate except for rights under that certain Sublease
between Seller and Purchaser dated the Closing Date;
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(e)
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those certain assets listed on
Schedule 1.2 ; and
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(f)
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all of the Seller’s assets not
included as part of the Purchased Assets.
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1.3
Assumption of Liabilities . Subject to the conditions
specified in this Agreement, on the Closing Date, Purchaser shall
assume and agree to pay, defend, discharge and perform as and when
due only the following liabilities and obligations of the Seller
(the “Assumed Liabilities”):
(a)
the
Seller’s obligations and liabilities under the contracts
listed on the Contracts Schedule ( Schedule 3.10(a) )
and on the Customer Contract Schedule (
Schedule 3.10(d) ) for any activity following the
Closing Date;
5
(b) the
Seller’s outstanding commitments as listed on
Schedule 1.3(b) for goods and services which have not
been delivered to Seller as of the Closing Date; and
(c) the
Seller’s obligations for warranty claims for products sold
prior to the Closing up to $35,000 per year for a period of two
years in liability as calculated pursuant to that certain
Transition Services Agreement between Purchaser and Seller (the
“Transition Services Agreement”), attached hereto as
Exhibit A ; provided, however, the parties hereto agree
that certain repair work for Portrait Corporation of America
(“PCA”) will be covered by a Vendor Agreement with PCA
dated September 29, 2006.
1.4
Excluded Liabilities . Notwithstanding anything to the
contrary contained in this Agreement, Purchaser shall not assume or
be liable for any liabilities or obligations of Seller other than
the Assumed Liabilities and all such other liabilities or
obligations shall be the responsibility of the Seller, including,
but not limited to the following liabilities and obligations (the
“Excluded Liabilities”):
(a) any
liabilities or obligations arising out of or in connection with
charge backs, returns, allowances or customer adjustments relating
to products sold by the Seller; and
(b) any
accounts payable or accrued liabilities or obligations relating to
the operations of the Seller prior to the Closing Date, including,
but not limited to, accrued liabilities or obligations related to
vacation, accrued bonuses and incentives, other employee-related
charges, accrued commissions, accrued rebates, accrued returns and
any co-op advertising responsibilities.
ARTICLE 2.
CONSIDERATION FOR THE PURCHASED
ASSETS
2.1
Purchase Price . The aggregate purchase price for the
Purchased Assets shall be an amount equal to Two Million Four
Hundred Twenty Three Thousand Two Hundred Fifty Two Dollars
($2,423,252) as adjusted pursuant to Section 2.2 hereof (the
“Purchase Price”), which shall be payable to Seller as
follows:
(a) on
the Closing Date by wire transfer of immediately available funds to
such account or accounts as shall have been designated in writing
by Seller in an amount equal to One Million Nine Hundred Ninety
Eight Thousand Two Hundred Fifty Two Dollars ($1,998,252), subject
to adjustment as provided for in Section 2.2(b)
hereof;
(b) on
a date forty-five (45) days following the date of determination of
the Final Inventory pursuant to Section 2.3 hereof, an amount
equal to One Hundred Twenty Five Thousand Dollars ($125,000),
subject to adjustment as provided in Section 2.2(b) hereof;
and
6
(c) by
a promissory note in an amount equal to Three Hundred Thousand
Dollars ($300,000) as adjusted pursuant to Section 2.2(b),
substantially in the form attached hereto as Exhibit B
(the “Promissory Note”) to be issued by Purchaser to
Seller which shall be paid by Purchaser in accordance with the
terms thereof.
The Purchase Price shall be
allocated among the Purchased Assets as mutually agreed to by the
parties and as set forth on Schedule 2.1 (the
“Purchase Price Allocation”). The parties agree that
the Purchase Price Allocation shall be used by them and respected
for all purposes, including income tax purposes if in conformance
with the rules and regulations of the Internal Revenue Code of
1986, as amended (the “Code”), and that the parties
shall follow such allocation for all reporting purposes, including,
without limitation, Internal Revenue Service (“IRS”)
Form 8594.
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2.2
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Purchase Price
Adjustment .
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(a) An
estimate of the Inventory Value (as defined below) will be made as
of the Effective Time based on a physical inventory taken by the
Seller and Purchaser which shall be used to determine the Purchase
Price (the “Estimated Inventory Value “) as provided
for on Schedule 2.2(a) hereof. For purposes hereof,
“Inventory Value” means 90% of the Seller’s cost
of raw materials and finished goods Inventory related to the
Business and 100% of the Seller’s cost of work in process
Inventory related to the Business (such cost to exclude any
warehouse costs, handling costs, insurance costs and any other
related overhead costs).
Any Inventory which is defective
which cannot be reworked in the reasonable discretion of Purchaser
will not be included in the net realizable value calculation for
the Inventory and will be given zero value for purposes of
calculating the Purchase Price. Inventory which can be reworked
will be included in the Inventory Value for purposes hereof;
provided, however, such rework will be conducted by Purchaser at a
cost equal to labor plus materials and be paid for by Seller.
Inventory which is obsolete will not be excluded from the Estimated
Inventory Value due to its unmerchantability.
(b) If
the Final Inventory Value (as defined below) is greater than
$2,100,000, no adjustment shall be made to the Purchase Price. The
Purchase Price shall be reduced by any amount by which the
Estimated Inventory Value exceeds the Final Inventory Value (the
“Payback Amount”) and a dollar for dollar reduction of
the payment provided for in Section 2.1(b) hereof shall be made
upon the final determination of such Payback Amount. If the Payback
Amount exceeds the amount of Purchase Price payable pursuant to
Section 2.1(b) hereof, Purchaser shall reduce the Promissory Note
referred to in Section 2.1(c) hereof by an amount equal to
such excess within ten (10) days of final determination of the
Payback Amount; provided such reduction of the Promissory Note
shall not exceed $200,000. If the Payback Amount exceeds the amount
of Purchase Price provided for in Section 2.1(b) and $200,000 of
the Promissory Note pursuant to Section 2.1(c), the Seller
shall pay Purchaser an amount equal to such excess within ten (10)
days of final determination of the Payback Amount.
7
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2.3
|
Procedures for Final
Determination of Inventory .
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(a) An
estimate of the Inventory Value shall be taken by Purchaser and
Seller as of the Effective Time as provided in Section 2.2
hereof.
(b) Within
ninety (90) days of the Closing Date, Purchaser shall prepare and
deliver to Seller at Purchaser’s sole cost and expense a
statement (the “Inventory Report”) setting forth
Purchaser’s determination of the Inventory for the Seller as
of the Effective Time.
(c) Within
thirty (30) days after receipt of the Inventory Report, Seller
shall deliver to Purchaser a detailed written statement describing
its objections, if any, to such determination of the Inventory
Value. If Seller does not raise any objections within the 30-day
period, the Purchaser’s determination of the Inventory Value
shall become final and binding upon all parties. If Seller does
raise any objections, Purchaser and Seller shall use reasonable
efforts to resolve any such disputes. If a final resolution is not
obtained within thirty (30) days after Seller shall have
submitted its objections to Purchaser, any remaining disputes shall
be resolved by an accounting firm mutually agreeable to Purchaser
and Seller. If Purchaser and Seller are unable to mutually agree on
such an accounting firm within five (5) days after the expiration
of said 30-day period, an accounting firm shall be selected by lot
from six (6) accounting firms, none of which have ever
performed services for Purchaser or Seller, with each of Purchaser
and Seller submitting three names of accounting firms (the
“Neutral Auditor”). The determination of the Neutral
Auditor shall be set forth in writing and shall be conclusive and
binding upon the parties, and the fees and expenses of such firm
shall be paid one-half by Purchaser and one-half by Seller. For
purposes hereof, “Final Inventory Value” is the
Inventory Value determined by this Section 2.3(c).
ARTICLE 3.
REPRESENTATIONS AND
WARRANTIES
OF SELLER
As an inducement to Purchaser to
enter into this Agreement, Seller represents and warrants to
Purchaser as of the date hereof and as of the Closing Date
that:
3.1
Organization and Power . Seller is a corporation duly
organized, validly existing and in good standing under the laws of
Minnesota. Seller is qualified to do business as a foreign entity
and is in good standing in the jurisdictions specified on the
“Qualifications Schedule” attached hereto as
Schedule 3.1 , which are all jurisdictions in which
ownership of the Purchased Assets or the conduct of the Business
requires it to be so qualified. The Seller has all corporate power
and authority and all material licenses, permits and other
authorizations necessary to own and operate its properties and to
carry on its business as now conducted as they relate to the
Business. The articles of incorporation and by-laws of Seller which
have been previously furnished to Purchaser reflect all amendments
made thereto at any time prior to the date of this Agreement and
are correct and complete.
8
3.2
Subsidiaries . Seller owns no stock, membership interest,
partnership interest, joint venture interest or other security or
interest in any other corporation, limited liability company,
organization or entity related to the Business.
3.3
Authorization; No Breach . The execution, delivery and
performance of this Agreement and the other agreements contemplated
hereby and the transactions contemplated hereby and thereby have
been duly and validly authorized by Seller. No other act or
proceeding on the part of Seller, its shareholders, directors or
officers is necessary to authorize the execution, delivery or
performance of this Agreement, any other agreement contemplated
hereby or the consummation of the transactions contemplated hereby
or thereby. This Agreement has been duly executed and delivered by
Seller and this Agreement constitutes, and the other agreements
contemplated hereby upon execution and delivery by Seller shall
each constitute, a valid and binding obligation of Seller,
enforceable against it in accordance with their terms. Except as
set forth on Schedule 3.3 , the execution, delivery and
performance of this Agreement and the other agreements contemplated
hereby by Seller and the consummation of the transactions
contemplated hereby and thereby do not and shall not
(a) conflict with or result in any breach of any of the
provisions of, (b) constitute a default under, result in a
violation of, or cause the acceleration of any obligation under,
(c) result in the creation of any lien, security interest,
charge or encumbrance upon any of the Purchased Assets under, or
(d) require any authorization, consent, approval, exemption or
other action by or notice to any court or other governmental body
under the provisions of Seller’s articles of incorporation,
by-laws, any indenture, mortgage, lease, loan agreement or other
agreement or instrument to which Seller is bound or affected or any
law, statute, rule, regulation, judgment, order or decree to which
Seller is subject or by which any of the Purchased Assets are
bound.
3.4
Financial Statements . Seller has furnished Purchaser with
copies of (a) its audited balance sheet as of
December 31, 2005 and the related audited financial statements
for the twelve-month period then ended (the “Latest Balance
Sheet”), (b) its audited balance sheets as of
December 31, 2004 and December 31, 2003 and the related
audited financial statements for the fiscal years then ended, and
(c) internally prepared unaudited financial statements for the
Seller as at and for the six-month period ended June 30, 2006.
Each of the foregoing financial statements has been based upon the
information contained in Seller’s books and records (which
are accurate and complete in all material respects) and fairly
presents the financial condition and results of operations of
Seller as of the times and for the periods referred to therein, and
such financial statements contain proper accruals and adequate
reserves and have been prepared in accordance with generally
accepted accounting principles, consistently applied throughout the
periods indicated, except as otherwise noted therein.
9
3.5
Absence of Undisclosed Liabilities . As of the Closing (as
defined in Section 5.1), except as set forth on
Schedule 3.5 , Seller shall have no liabilities or
obligations whether accrued, absolute, contingent, unliquidated or
otherwise, whether or not known to Seller, whether due or to become
due, arising out of or related to transactions entered into at or
prior to the Closing, or out of any action or inaction by Seller or
any employee, agent, licensee or contractor of any of them at or
prior to the Closing related to the Purchased Assets or the
Business, or out of any state of facts existing at or prior to the
Closing, regardless of when any such liability or obligation is
asserted, including, without limitation, taxes with respect to or
based upon transactions or events occurring on or before the
Closing or any errors in billing by Seller with respect to
transactions or events occurring on or before the Closing related
to the Purchased Assets or the Business, except
(a) liabilities and obligations reflected on Seller’s
Latest Balance Sheet, and (b) liabilities and obligations
which have arisen after the date of Seller’s Latest Balance
Sheet in the ordinary course of business (none of which is a
liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit).
3.6
No Material Adverse Changes . Since the date of the Latest
Balance Sheet, there has been no material adverse change in the
financial condition, operating results, assets, operations,
employee relations, customer relations or business prospects of the
Seller as they relate to the Business.
3.7
Absence of Certain Developments . Except as set forth in the
“Developments Schedule” attached hereto as
Schedule 3.7 , since the date of the Latest Balance
Sheet, Seller has not, as it relates to the Business or the
Purchased Assets:
(a) mortgaged,
pledged or subjected to any lien, charge or any other encumbrance,
any portion of the Purchased Assets, except liens for current
property taxes not yet due and payable;
(b) sold,
assigned or transferred, or agreed to do so, any of the Purchased
Assets, except in the ordinary course of business or canceled
without fair consideration any material debts or claims owing to or
held by it;
(c) sold,
assigned, transferred, abandoned or permitted to lapse any patents,
trademarks, trade names, copyrights, trade secrets or other
intangible assets, or disclosed any material proprietary
confidential information to any person;
(d) made,
or agreed to make, any capital expenditures or commitments
therefore that aggregate in excess of $50,000;
(e) suffered
any extraordinary losses or waived any rights of material value,
whether or not in the ordinary course of business or consistent
with past practice;
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(f) entered
into, or agreed to enter into, any other material transaction other
than in the ordinary course of business;
(g) failed
to replenish the Seller’s supplies in a normal and customary
manner consistent with its prior practice and prudent business
practices prevailing in the industry, or made any purchase
commitment of services or goods in excess of the normal, ordinary
and usual requirements of its business or at any price in excess of
the then current market price or upon terms and conditions more
onerous than those usual and customary in the industry, or made any
change in its selling, pricing, advertising or personnel practice
inconsistent with its prior practice and prudent business practices
prevailing in the industry; or
(h) suffered
any material damage, destruction or casualty loss to the Purchased
Assets, whether or not covered by insurance.
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3.8
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Title and Condition of
Properties .
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(a) The
Seller owns no real estate related to the Business other than the
property located at 4800 Quebec Avenue North, Minneapolis,
Minnesota 55428.
(b) The
Seller holds no leasehold interest in real estate related to the
Business.
(c) Except
as set forth on Schedule 3.8(c) , Seller owns good and
marketable title, free and clear of all liens, charges, security
interests, encumbrances, encroachments and claims of others, to all
of the Purchased Assets, except for leased equipment, for liens of
current taxes not yet due and payable (“Permitted
Encumbrances”), and all of such personal property is
necessary or useful in the conduct of the Business. At the Closing,
Seller shall sell, assign, transfer and convey to Purchaser all of
the personal property included within the Purchased Assets, free
and clear of all liens, security interests, charges, encumbrances
and claims of others, other than Permitted Encumbrances.
(d) Seller’s
leased premises, machinery, equipment and other tangible assets are
in good condition and repair in all material respects, have been
maintained in accordance with normal industry standards and are
usable in the ordinary course of business. Seller owns or leases
under valid leases all buildings, machinery, equipment and other
tangible assets necessary for the conduct of the
Business.
(e) The
Purchased Assets and the Excluded Assets, together with the
services and arrangements described on the Contracts Schedule,
comprise all assets and services required for the continued conduct
of the Business by the Purchaser as now being conducted. The
Purchased Assets and the Excluded Assets, taken as a whole,
constitute all the properties and assets relating to or used or
held for use in connection with the Business during the past twelve
months (except supplies utilized, cash disposed of, accounts
receivable collected, prepaid expenses realized, Contracts fully
performed, properties or
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assets replaced by equivalent or
superior properties or assets, in each case in the ordinary course
of business). There are no assets or properties used in the
operation of the Business and owned by any Person other than the
Seller that will not be leased or licensed to the Purchaser under
valid, current leases or license arrangements, except as set forth
in this Agreement. The Purchased Assets are in all material
respects adequate for the purposes for which such assets are
currently used or are held for use, and are in reasonably good
repair and operating condition (subject to normal wear and tear)
and there are no facts or conditions affecting the Purchased Assets
which could, individually or in the aggregate, interfere in any
material respect with the use, occupancy or operation thereof as
currently used, occupied or operated, or their adequacy for such
use.
(a) Seller
has duly filed all federal, foreign, state and local tax
information and tax returns of any and every nature and description
(the “Returns”) required to be filed by it (all such
returns being accurate and complete in all material respects) and
has duly paid or made provision for the payment of all taxes and
other governmental charges (including without limitation any
interest, penalty or additions to tax thereto) which have been
incurred or are shown to be due on said Returns or are claimed in
writing by the appropriate taxing authority to be due from Seller
or imposed on Seller or its properties, assets, income, franchises,
leases, licenses, sales or use, by any federal, state, local or
foreign taxing authorities (collectively, the “Taxes”)
on or prior to the date hereof, other than Taxes which are being
contested in good faith and by appropriate proceedings and as to
which Seller has set aside on its books adequate reserves or which
may be attributable to the transactions contemplated hereby.
Neither the IRS nor any foreign, state, local or other taxing
authority is in the process of examining any federal, foreign,
state, local or other tax return of Seller. There are no disputes
pending, or claims asserted, for Taxes upon Seller.
(b) All
monies required to be withheld from employees, independent
contractors, shareholders, or creditors of Seller for Taxes,
including, but not limited to, income taxes, back-up withholding
taxes, social security and unemployment insurance taxes or
collected from customers or others as Taxes, including, but not
limited to, sales, use or other taxes, have been withheld or
collected and paid, when due, to the appropriate governmental
authority, or if such payment is not yet due, an adequate reserve
has been established for such Taxes.
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3.10
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Contracts and
Commitments .
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(a) Except
as set forth in Section 3.16 or in the “Contracts
Schedule” attached hereto as Schedule 3.10(a) or
in the “Customer Contracts Schedule” attached hereto as
Schedule 3.10(d) , Seller is not a party to
any:
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(i) contract
with any labor union or contract for the employment of any officer,
individual employee or other person on a full-time, part-time or
consulting basis;
(ii) mortgaging,
pledging or otherwise placing a lien on any of the Purchased
Assets;
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(iii)
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license or royalty agreement related
to the Business;
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(iv) lease
or agreement related to the Business under which it is lessee of or
holds or operates any personal property owned by any other
party;
(v) lease
or agreement related to the Business under which it is lessor of or
permits any third party to hold or operate any property, real or
personal, owned or controlled by it;
(vi) contract
or group of related contracts related to the Business with the same
party for the purchase or sale of products or services other than
the Customer Contracts (as defined in Section 3.10(d)
hereof);
(vii) other
contract related to the Business with any party continuing over a
period of more than six months from the date or dates thereof, not
terminable by it on thirty (30) days’ or less notice without
penalties;
(viii) contract
which prohibits it from freely engaging in the Business anywhere in
the world;
(ix) contract
relating to the distribution of its products as it relates to the
Business; or
(x) other
agreements related to the Business whether or not entered into in
the ordinary course of business but not including insurance
agreements.
(b) Except
as specifically disclosed in the Contracts Schedule or the
Customer Contracts Schedule, (i) to the Seller’s
knowledge, no contract or commitment related to the Business has
been breached in any respect or canceled by the other party;
(ii) since December 31, 2005, no supplier of the Business
has notified the Seller that it shall stop or decrease in any
material respect the rate of business done with the Seller;
(iii) the Seller has in all respects performed all the
obligations required to be performed by it to the date of this
Agreement and is not in receipt of any claim of default under any
material lease, contract, commitment or other agreement related to
the Business to which it is a party; (iv) to Seller’s
knowledge, no event has occurred which with the passage of time or
the giving of notice or both would result in a breach or default
under any lease, contract, instrument or other agreement related to
the Business to which the Seller is a party and which is related to
the Business; and (v) the Seller is not a party to any
contract which is adverse to the Business’s operations,
financial condition, operating results or business
prospects.
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(c) Purchaser
has been supplied with a true and correct copy of all written
contracts which are referred to on the Contract Schedule and
Customer Contracts Schedule, together with all amendments, waivers
or other changes thereto.
(d) Seller
has no knowledge of any (i) pending or threatened termination,
cancellation, limitation, modification or change in any of the
Seller’s business relationships with any customer
o
