ASSET PURCHASE AGREEMENT

 

TABLE OF CONTENTS

ASSET PURCHASE AGREEMENT		1
RECITALS		1
AGREEMENT		1
ARTICLE I — DEFINITIONS		1
ARTICLE II — PURCHASE AND SALE OF ASSETS		5
2.1 — Purchased Assets		5
2.2 — Excluded Assets		7
2.3 — Assumed Liabilities		7
2.4 — Limitation of Liabilities		7
2.5 — Delivery		9
2.6 — Name Change		9
ARTICLE III — PURCHASE PRICE		9
3.1 — Consideration for the Purchased Assets		9
3.2 — Closing Escrow and Payment of Purchase Price		11
3.3 — Allocation of Purchase Price		11
3.4 — Prorations		11
ARTICLE IV — CLOSING		12
4.1 — Deliveries by the Seller		12
4.2 — Deliveries by the Shareholder		13
4.3 — Deliveries by the Buyer		13
ARTICLE V — REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDER		14
5.1 — Organization and Existence		14
5.2 — Authority		14
5.3 — No Violations or Breaches		15
5.4 — Ownership of Purchased Assets		15
5.5 — Litigation		16
5.6 — Governmental Approval		17
5.7 — No Brokers		17
5.8 — Environmental Matters		17
5.9 — Employee Matters		18
5.10 — Compliance With Laws		20
5.11 — Financial Statements		20
5.12 — Intangible Assets		21

 

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5.13 — Instruments in Full Force and Effect		21
5.14 — Customers and Suppliers		22
5.15 — Taxes		22
5.16 — Disclosure		22
5.17 — Seller’s and Shareholder’s Knowledge		22
ARTICLE VI — REPRESENTATIONS AND WARRANTIES OF THE BUYER		22
6.1 — Organization and Existence		22
6.2 — Authority		23
6.3 — No Violations		23
6.4 — Governmental Approval		23
6.5 — No Brokers		24
ARTICLE VII — COVENANTS AND AGREEMENTS OF THE PARTIES		24
7.1 — Expenses		24
7.2 — Certain Taxes		24
7.3 — Employee Matters		24
7.4 — Supplements to Disclosure Schedules		26
7.5 — Warranty Claims		26
ARTICLE VIII — INDEMNIFICATION		27
8.1 — Indemnification by the Seller and the Shareholder		27
8.2 — Indemnification by the Buyer		27
8.3 — Indemnification Procedure		27
8.4 — Survival		28
8.5 — Applicability of Indemnification Obligations		28
8.6 — Indemnification Threshold		28
8.7 — Limitation of Liability		28
8.8 — Determination of Claims		28
ARTICLE IX — CONDITIONS TO BUYER’S OBLIGATIONS		28
9.1 — Representations and Warranties True at Closing Date		28
9.2 — Performance		29
9.3 — Consents		29
9.4 — No Litigation		29
9.5 — No Material Adverse Change		29
9.6 — Due Diligence		29
9.7 — Documents Satisfactory in Form and Substance		29
9.8 — Benefit of Material Contracts		29
9.9 — Board Approval		29

 

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ARTICLE X — CONDITIONS TO SELLER’S OBLIGATIONS		30
10.1 — Representations and Warranties True at Closing Date		30
10.2 — Performance		30
10.3 — Documents Satisfactory in Form and Substance		30
ARTICLE XI — MISCELLANEOUS		30
11.1 — Notices		30
11.2 — Entire Agreement		32
11.3 — Amendments and Waiver; Rights and Remedies		32
11.4 — Governing Law; Arbitration		32
11.5 — Attorneys Fees		33
11.6 — Binding Effect		33
11.7 — Counterparts		33
11.8 — References		33
11.9 — Severability of Provisions		33
11.10 —Termination and Break-Up		33
11.11 — Further Assurances		34

 

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TABLE OF EXHIBITS

EXHIBIT A
— FORM OF GENERAL CONVEYANCE, TRANSFER AND ASSIGNMENT		A-1
EXHIBIT B
— FORM OF ASSUMPTION AGREEMENT		B-1
EXHIBIT C
— FORM OF NONCOMPETITION AGREEMENT		C-1
EXHIBIT D
— FORM OF LEASE AGREEMENT		D-1
EXHIBIT E
— FORM OF FINAL PURCHASE PRICE ADJUSTMENT STATEMENT		E-1
EXHIBIT F
— STANDARD VALUATION METHODS		F-1
EXHIBIT G
— FORM OF ESCROW AGREEMENT		G-1
EXHIBIT H
— RIGHT OF FIRST REFUSAL		H-1

 

TABLE OF SCHEDULES

Schedule 1.1(a) — Retained Notes/Accounts Receivable		4
Schedule 1.1(b) — Retained Software		4
Schedule 1.1 (c) — Retained Trade Accounts Payable		4, 10, 26
Schedule 1.1 (d) — Trade Accounts Payable		4, 10, 26
Schedule 2.1 (c) — Proprietary Information		6
Schedule 2.1 (g) — Contracts		6, 26
Schedule 2.1 (h) — Fixed Assets		6
Schedule 2.1 (i) — Permits		6
Schedule 2.1 (l) — Vehicles		6

 

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Schedule 2.1 (m) — Prepaid and Other Assets		6
Schedule 2.2 — Excluded Assets		7
Schedule 2.3 — Assumed Liabilities		2,7
Schedule 3.3 — Allocation of Purchase Price		11, 26
Schedule 5.3 (c) — No Violation or Breach		15
Schedule 5.4 (a) — Ownership of Purchased Assets-Exceptions		15
Schedule 5.4 (d) — Ownership of Purchased Assets-Leases		16
Schedule 5.5 (a) — Litigation and Proceedings		16
Schedule 5.5 (b) — Outstanding Judicial or Administrative Matters		16
Schedule 5.5 (c) — Material Compliance/Outstanding Judgments		16
Schedule 5.8 — Environmental Matters		17
Schedule 5.9 (a) — Employee Plans and Agreements		18
Schedule 5.9 (b) — Labor and Employee Relations		20
Schedule 5.11 (a) — Financial Statements		20
Schedule 5.11 (d) — Financial Statements-Other Liabilities		21
Schedule 5.11 (f) — Financial Statements-Other Liabilities (of any nature)		21
Schedule 5.13 — Instruments in Full Force and Effect		22
Schedule 5.14 — Customers and Suppliers		22
Schedule 6.3 — No Violations		23
Schedule 7.3(e) — Employee Matters		25
Schedule 7.3(f) — Accrued Vacation		26

 

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ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this “Agreement”) is entered into in Seattle, Washington, on December 14, 2006, by and among Pacific Services & Manufacturing, Inc., a Washington corporation, (the “Seller”); and Walter Pisco, an individual resident of Mercer Island, Washington, owner of 100% of the outstanding  capital stock of the Seller (the “Shareholder”); and PSM LLC, a Washington limited liability company (the “Buyer”), and Cascade Corporation, an Oregon corporation (“Cascade”). The Seller, the Shareholder, the Buyer, and Cascade are each a “party” and together are “parties” to this Agreement.

RECITALS

WHEREAS, the Seller desires to transfer to the Buyer substantially all of the Seller’s assets relating to the Seller’s manufacturing business based in Woodinville, Washington, and the Buyer desires to acquire such assets and business, all upon the terms and subject to the conditions set forth herein; and

WHEREAS, the parties hereto desire to set forth certain representations, warranties and agreements, all as more fully set forth below;

AGREEMENT

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

As used in this Agreement, the following terms have the following respective meanings:

“ Adjustment Review Period ” has the meaning specified in Section 3.1(d).

“ Affiliate ” means, as to the person specified, any person controlling, controlled by or under common control with such person, with the concept of control in such context meaning the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of another, whether through the ownership of voting securities, by contract or otherwise.

“ Agreement ” has the meaning specified in the opening paragraph.

“ Applicable Laws ” has the meaning specified in Section 5.10.

“ Assumed Liabilities ” has the meaning specified in Section 2.3.

“ Assumption Agreement ” has the meaning specified in Section 4.1(c).

“ Balance Sheets ” has the meaning specified in Section 5.11(b).

“ Business ” means the construction attachment and related product manufacturing and sales business of the Seller.

“ Buyer ” means PSM LLC, a Washington limited liability company.

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“ Buyer’s 401(k) Plan ” has the meaning specified in Section 7.3(g).

“ Cascade ” means Cascade Corporation, an Oregon corporation.

“ Claims ” has the meaning specified in Section 8.1.

“ Closing ” has the meaning specified in Section 3.2(b).

“ Closing Date ” has the meaning specified in Section 3.2(b).

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Contracts ” has the meaning specified in Section 2.1(g).

“ Customers ” means the customers of the Seller.

“ Debts to be Assumed at Closing ” means all Trade Accounts Payable and amounts owed on lines of credit and long-term indebtedness, all as described on Schedule 2.3.

“ Defined Benefit Plan ” has the meaning specified in Section 5.9(a)(1).

“ Domain Names ” has the meaning specified in Section 2.1(d).

“ Encumbrances ” means liens, charges, pledges, options, mortgages, security interests, claims, easements, rights-of-way, servitudes, title defects, rights of third parties and other encumbrances of every type and description, whether imposed by law, agreement, understanding or otherwise.

“ Environmental Laws ” shall include all such laws in effect in any and all jurisdictions in which the Purchased Assets or the Facilities are located or in which the Seller or their Affiliates have conducted operations using any of the Purchased Assets or on the Facilities, including, without limitation, the Clean Air Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Rivers and Harbors Act of 1899, as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976, as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, and all other municipal, state or federal environmental conservation or protection laws.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ ERISA Affiliate ” means any trade or business (whether or not incorporated) which is or at any time within the six (6) year period preceding the date of this Agreement would have been treated as a “single employer” with the Seller under Section 414(b), (c), (m), or (o) of the Code.

“ Escrow Agent ” has the meaning specified in Section 3.2(a).

“ Escrow Agreement ” has the meaning specified in Section 3.2(a).

“ Estimated Adjusted Purchase Price ” has the meaning specified in Section 3.1(b).

“ Estimated Purchase Price Adjustment ” has the meaning specified in Section 3.1(b).

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“ Excluded Assets ” has the meaning specified in Section 2.2.

“ Facilities ” means the Seller’s facilities located at 21307 87 th  Ave., SE, Woodinville, Washington 98072.

“ Final Adjusted Purchase Price ” has the meaning specified in Section 3.1(c).

“ Final Purchase Price Adjustment Amount ” has the meaning specified in Section 3.1(c).

“ Final Purchase Price Adjustment Statement ” has the meaning specified in Section 3.1(c).

“ Financial Statements ” has the meaning specified in Section 5.11(a).

“ GAAP ” has the meaning specified in Section 5.11(a).

“ General Conveyance ” has the meaning specified in Section 4.1(c).

“ Governmental Entity ” means any court or tribunal in any jurisdiction (domestic or foreign) or any public, governmental or regulatory body, agency, department, commission, board, bureau or other authority or instrumentality (domestic or foreign).

“ Holdback ” has the meaning specified in Section 3.2(a).

“ Indemnification Threshold ” has the meaning specified in Section 8.6.

“ Indemnified Party ” has the meaning specified in Section 8.3.

“ Indemnifying Party ” has the meaning specified in Section 8.3.

“ Instruments ” has the meaning specified in Section 5.13.

“ Interim Balance Sheet ” has the meaning specified in Section 5.11(a)(2).

“ Interim Financial Statements ” has the meaning specified in Section 5.11(a)(2).

“ Inventory ” has the meaning specified in Section 2.1(b).

“ Lease Agreement ” has the meaning specified in Section 4.2(d).

“ Materials of Environmental Concern ” has the meaning specified in Section 5.8.

“ Multi-Employer Plan ” has the meaning specified in Section 5.9(a)(1).

“ Names ” has the meaning specified in Section 2.1(c).

 “ Noncompetition Agreement ” has the meaning specified in Section 4.1(d).

“ Objection Notice ” has the meaning specified in Section 3.1(g).

“ PBGC ” means the Pension Benefit Guaranty Corporation.

“ Permits ” has the meaning specified in Section 2.1(i).

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“ Permitted Encumbrances ” means (i) Encumbrances for taxes, assessments and governmental charges not yet due and payable or the validity of which are being contested in good faith by appropriate proceedings; and (ii) statutory liens arising in the ordinary course of business relating to obligations as to which there is no default on the part of the Seller, excluding any mortgage, but shall not include any Encumbrances for taxes, assessments or governmental charges filed of record against the Purchased Assets, or statutory liens filed of record against the Purchased Assets.

“ Person ” shall mean a corporation, an association, a partnership, an organization, a business, an individual or a Governmental Entity.

“ Plan ” has the meaning specified in Section 5.9(a).

“ Proceedings ” means all proceedings, actions, claims, suits, investigations and inquiries by or before any arbitrator or Governmental Entity.

“ Proprietary Information ” has the meaning specified in Section 2.1(c).

“ Purchased Assets ” has the meaning specified in Section 2.1.

“ Purchase Price ” has the meaning specified in Section 3.1.

“ Retained Notes Receivable ” means those certain trade accounts receivable of the Seller which have been converted to promissory notes as set forth on Schedule 1.1(a) attached hereto, all of which the Sellers agree to retain.

“ Retained Software ” means the computer software of the Seller set forth on Schedule 1.1(b) attached hereto which will be retained by the Seller.

“ Retained Trade Accounts Payable ” means any accounts of the Seller which are payable to Affiliates of the Seller and any other accounts payable of the Seller all as set forth on Schedule 1.1(c) attached hereto and subject to adjustment in accordance with Sections 3.1(h) and 7.4, all of which the Seller agrees to retain and pay.

“ Retained Liabilities ” has the meaning specified in Section 2.4.

“ Seller ” means Pacific Services & Manufacturing, Inc., a Washington corporation.

“ Seller MAE ” means a single event, occurrence or fact that, together with all other events, occurrences and facts that (i) would have, or might reasonably be expected to have, (A) a material adverse effect on the condition, business, prospects or operations of the Purchased Assets (other than events or conditions generally affecting the construction attachment industry or economy as a whole) or (B) a material adverse effect on the ability of the Business to be operated as of the Closing Date; (ii) would create an Encumbrance on any of the Purchased Assets except for a Permitted Encumbrance; (iii) results in a loss or damage to the Purchased Assets (whether or not covered by insurance) in an amount in excess of (A) Fifty Thousand Dollars and No/100 ($50,000) if not covered by insurance or (B) One Hundred Thousand Dollars and No/100 ($100,000) if covered by insurance; or (iv) may constitute a criminal violation of law involving a felony.

“ Shareholder ” means Walter Pisco, holder of 100% of the issued and outstanding capital stock of the Seller.

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“ Tax ” or “ Taxes ” means all federal, state, local, foreign and other taxes, charges, fees, duties, levies, imposts, customs or other assessments, including, without limitation, all net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, profit sharing, license, lease, service, service use, value added, withholding, payroll, employment, excise, estimated, severance, stamp, recording, occupation, premium, property, windfall profits, or other taxes, fees, assessments, customs, duties, levies, imposts, or charges of any kind whatsoever, together with any interest, penalties, additions to tax, fines or other additional amounts imposed thereon or related thereto, and the term “Tax” means any one of the foregoing Taxes.

“ Trade Accounts Payable ” means the total amount of payables of the Seller as of the Closing Date, as set forth on Schedule 1.1(d) attached hereto and subject to adjustment in accordance with Sections 3.1(h) and 7.4, excluding the Retained Trade Accounts Payable.

“ Transferred Employees ” has the meaning specified in Section 7.3(b).

“ Transferred Trade Accounts Receivable ” has the meaning specified in Section 2.1(a).

“ Transferred Washington Employees ” has the meaning specified in Section 7.3(f)

“ Vehicles ” has the meaning specified in Section 2.1(l).

“ Websites ” has the meaning specified in Section 2.1(d).

“ Year End Financial Statements ” has the meaning specified in Section 5.11(a)(1).

“ Year End Balance Sheet ” has the meaning specified in Section 5.11(a)(1).

ARTICLE II
PURCHASE AND SALE OF ASSETS

2.1          Purchased Assets .  Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, the Seller shall sell, assign, transfer, deliver and convey to the Buyer, and the Buyer shall purchase, free and clear of any Encumbrances, other than Permitted Encumbrances, all of the following assets of the Seller (other than the Excluded Assets) (collectively, the “Purchased Assets”):

(a)           All trade accounts receivable of the Seller and all other rights of the Seller to payment for goods sold or leased or for services rendered as of the end of the Closing Date, together with all instruments and all documents of title representing any of the foregoing, all rights in any merchandise or goods which any of the same represent, and all rights, title, security and guaranties in favor of the Seller with respect to any of the foregoing, all as provided to the Buyer as of or prior to the Closing Date, excluding the Retained Trade Accounts Receivable and the Retained Notes Receivable (collectively, the “Transferred Trade Accounts Receivable”);

(b)           All inventories of manufactured and purchased parts, raw materials, goods in process and finished goods (the “Inventory”);

(c)           All of the Seller’s rights to (i) the names “Pacific Services & Manufacturing, Inc.”, “PSM Corporation”, and all derivatives or variations thereof (collectively, the “Names”); (ii) all registered and unregistered trademarks, service marks, logos, corporate names, trade names, and all other trademark rights, and all registrations for, and applications for registration of, any of the foregoing, with respect to the Names; (iii) and all trade names and marks used in the Business; and (iv) all patents, patent applications, copyrights, technology, know-how, and all

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other intangible assets used in or related to the Business, all as set forth on Schedule 2.1(c) attached hereto (all such items described in this Section 2.1(c) being collectively referred to as the “Proprietary Information”) and all rights and remedies against infringements of Proprietary Information;

(d)           All telephone and fax numbers used in connection with the Business, the domain name “psmcorp.com” and all other domain names used in connection with the Business (collectively, the “Domain Names”) and all rights to the information, data and related materials contained or reflected on the Seller’s Internet website(s) located at the Domain Names (collectively, the “Websites”);

(e)                                   Any goodwill associated with the Business;

(f)            All Customer and vendor lists used in the Business, including all such Persons’ available names, addresses and telephone numbers;

(g)           All assignable agreements and contracts to which Seller is a party, oral or written, including but not limited to all agreements and contracts with Customers and other similar arrangements and rights thereunder, all purchase orders placed by Customers on or before the Closing Date which have not been satisfied by the Seller prior to the Closing Date, and all leases for personal property, all as set forth on Schedule 2.1(g) attached hereto (collectively, the “Contracts”).  Seller agrees to exercise his best efforts to obtain consents to assignment for all assignable contracts, and shall furnish proof of such consents obtained to Buyer on the Date of Closing;

(h)           The fixed assets set forth in Schedule 2.1(h) attached hereto, including any and all (i) manufacturers’ and sellers’ warranties with respect thereto (to the extent assignable); (ii) computer software, including but not limited to all versions, variations, modifications, enhancements, additions or replacements thereof, software program documentation and user materials, associated utilities, and support software, excluding the Retained Software; and (iii) computer hardware, including but not limited to all versions, variations, modifications, enhancements, additions or replacements thereof;

(i)            The certificates, licenses, permits, consents, operating authorities, orders, exemptions, franchises, approvals, registrations and other authorizations and applications therefor specifically associated with the maintenance and operation of the Business and the Purchased Assets, all as set forth on Schedule 2.1(i) attached hereto (collectively, the “Permits”);

(j)            All records, files, documents and correspondence related to the Purchased Assets, electronic or otherwise;

(k)           All fixtures attached to or contained within the Facilities;

(l)            All automobiles, trucks, trailers, tractors, forklifts and other vehicles listed on Schedule 2.1(l) attached hereto (collectively, the “Vehicles”);

(m)          All covenants and agreements relating to assignment of inventions, noncompetition with Seller or the confidentiality of information regarding Seller’s business and operations; and

(n)           All prepaid expenses listed on Schedule 2.1(n) and all other or additional privileges, rights, interests, properties and assets of the Seller of every kind and description and

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wherever located that are used or intended for use in connection with, or that are necessary to the continued conduct of, the Business as presently being conducted.

2.2          Excluded Assets .  The Purchased Assets to be transferred by the Seller hereunder shall include only those described or referred to in Section 2.1, and no other assets or properties of the Seller shall be transferred hereunder.  Without limiting the generality of the preceding sentence, the Purchased Assets shall not include any real property or any of the assets identified on Schedule 2.2 attached hereto, including but not limited to products and equipment sold to Cat Work Tools and stored at the Facility (the “Excluded Assets”).

2.3          Assumed Liabilities .   Subject to Section 2.4, the Buyer hereby assumes the rights and obligations under the express written terms of the Contracts being assumed by the Buyer to the extent and only to the extent such obligations accrue on or after the Closing, excluding any Retained Liabilities, and further assumes and agrees to pay all Trade Accounts Payable, and amounts owed on lines of credit and long term indebtedness, all as described on Schedule 2.3 , the “Assumed Liabilities”.

2.4          Limitation of Liabilities .   Except as otherwise specifically provided in Section 2.3, the Buyer does not assume and is not in any way liable or responsible for any liabilities or obligations of the Seller or the Seller’s Affiliates; it being expressly acknowledged that it is the intention of the parties hereto that all liabilities that the Seller or the Seller’s Affiliates have or may have in the future, whether fixed or contingent, and whether known or unknown, not expressly described in the definition of Assumed Liabilities shall be “Retained Liabilities” and remain the liabilities of the Seller and the Seller’s  Affiliates.  Without limiting the generality of the foregoing, except to the extent specifically provided in Section 2.3, the Buyer shall not assume, or take title to the Purchased Assets subject to:

(a)           Any liability or obligation for any and all Taxes of, or pertaining or attributable to, (i) the Seller for any period that ends on or before, or includes, the Closing Date; or (ii) the Business and/or the Purchased Assets for any period or portion thereof that ends on or before the Closing Date (including, but in no way limited to, any and all Taxes described in clauses (i) and (ii) of this Section 2.4(a)) for which liability is or may be sought to be imposed on the Buyer under any successor liability, transferee liability or similar provision of any applicable federal, foreign, state or local law;

(b)           Any liability or obligation of the Seller or any of the Seller’s Affiliates under any note, bond or other instrument;

(c)           Any defects in products manufactured or sold by the Seller or any liability or obligation of the Seller or any of the Seller’s Affiliates in respect of any express or implied representation, warranty, agreement or guaranty made (or claimed to have been made) by the Seller or any of the Seller’s Affiliates or imposed or asserted to be imposed by operation of law (except obligations or liabilities imposed on the Buyer by operation of law after the Closing);

(d)           Any obligation of the Seller (including indemnification and other contingent obligations) relating to (i) acts, events or omissions by any Person or circumstances existing at or prior to the Closing Date; (ii) goods or services provided to or for the benefit of the Seller or any of the Seller’s Affiliates prior to the Closing Date; (iii) goods or services provided by or on behalf of the Seller or any of the Seller’s Affiliates or licensees prior to the Closing Date; (iv) any pending or threatened litigation or claims made or threatened prior to the Closing Date, including without limitation any liability arising out of the payment or non-payment of worker’s compensation premiums on behalf of employees of the Seller or other issues arising out of the coverage of the Seller’ employees with respect to worker’s compensation insurance; or (v) the

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conduct of the Business, the ownership or operation of the Purchased Assets or any benefit realized by the Seller prior to the Closing Date;

(e)           Any note, account payable or other obligation to any Affiliate of the Seller;

(f)            Any statutory liens accrued or existing at the time of Closing against the Purchased Assets;

(g)           Any violation by the Seller or any of the Seller’s Affiliates of, or default by the Seller or any such Affiliate under, any Applicable Laws and Environmental Laws, including without limitation any Environmental Law which affects the ownership or operation of the Purchased Assets or results in any change in the Assumed Liabilities, or any remedial obligation under any Environmental Law arising out of or related to the ownership or operation of the Purchased Assets prior to Closing;

(h)           Any claims, actions, demands, losses or liabilities, including negligence or strict liability claims indemnified by the Seller and the Shareholder pursuant to Section 8.1;

(i)            Any debts, liabilities or obligations to any employee, agent, officer, director, consultant, contractor or security holder of the Seller as to any salary, bonus, commission, severance or other termination pay or benefits or other compensation or benefits arising out of or in connection with any bonus plan or arrangement, pension plan, profit sharing plan, multi-employer plan within the meaning of Section 3(37) of ERISA, health plan or any other benefit plan of the Seller or any other liabilities or obligations of the Seller to any employee, agent, officer, director, consultant, contractor or security holder of the Seller, including but not limited to liabilities or obligations for medical, dental, vision, travel accident, accidental death or dismemberment and life insurance expenses and employee post-retirement life insurance or health care benefits (irrespective of the time at which claims are presented), all of which shall be paid by the Seller or the Seller’s insurance carriers;

(j)            Any liability resulting from or relating to the employment relationship between the Seller or the Seller’s Affiliates and any of their present or former employees or the termination of any such employment relationship with the Seller or any of the Seller’s Affiliates, including, without limitation, accrued severance pay and other similar benefits, if any, and any claim filed on or prior to the Closing Date or which may thereafter be filed by or on behalf of any employee or former employee of the Seller or their Affiliates relating to the employment or termination of employment of any such employee by the Seller or the Seller’s Affiliates, including, but not limited to, any claim for wrongful discharge, breach of contract, unfair labor practice, employment discrimination, unemployment compensation or workers’ compensation on or prior to the Closing Date; or

(k)           All Retained Trade Accounts Payable.

2.5          Delivery .  The Buyer is entitled to the records relevant to the Purchased Assets, and the Seller shall deliver to the Buyer all documents and other papers relating to the Purchased Assets, the Assumed Liabilities and the current and proposed operations of the Business, including, without limitation, all files, computer disks reflecting any books or records, documents or other papers, or other information or data relating to the operation of the Business or the Purchased Assets stored on any electronic media, including computers.  The Seller, however, shall be entitled to retain the historical books and records relating to their Business to the extent such books and records are not necessary for the ongoing operations of such Business by the Buyer and such books, records and other materials as the Seller or their Affiliates may reasonably consider necessary to the compilation of tax returns or other

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reports in connection with the Business as operated by the Seller.  The Seller agrees that so long as the corporate, accounting, auditing and tax books, records (including work papers) and other books and records relating to the Seller, the Seller’s Business and the Purchased Assets, the employees of the Seller that are hired by the Buyer and the Assumed Liabilities remain in existence and in the possession of the Seller or the Seller’s Affiliates, the Buyer and its authorized representatives shall have the right to inspect and, at the Buyer’s expense, to copy the same at any time during regular business hours for any proper purpose.  For a period of seven (7) years following the Closing Date, the Seller agrees that it will not destroy any of such books and records without having first offered to deliver the same to the Buyer.  The Buyer will likewise permit the Seller, the Seller’s Affiliates, and the authorized representatives of either to inspect and, at the Seller’ expense, copy any records transferred to the Buyer pursuant to this Section 2.5 and will not destroy any such records for a period of seven (7) years following the Closing Date without first offering to deliver the same to the Seller.

2.6          Name Change .  Seller shall promptly after the Closing Date (and in any event within seven calendar days) change its corporate name to a name which does not include any of the words “Pacific,” “Services,” or “Manufacturing,” or the initials “PSM” in any configuration and will furnish a certificate indicating such name change.  Shareholder shall promptly after the Closing Date (and in any event within seven calendar days) cause any entity controlled by or under common control with Shareholder, directly or indirectly, to change its name to a name which does not include any of the words “Pacific,” “Services,” or “Manufacturing,” or the initials “PSM” in any configuration and will furnish a certificate indicating such name change.

ARTICLE III
PURCHASE PRICE

3.1          Consideration for the Purchased Assets .   The purchase price for the Purchased Assets shall be FORTY-FOUR MILLION EIGHT HUNDRED NINETY-EIGHT THOUSAND TWO HUNDRED SEVENTY-FOUR DOLLARS ($44,898,274) (the “Purchase Price”) payable as set forth in Section 3.2 below.  The Purchase Price will be subject to the following adjustments:

(a)           The Purchase Price shall be increased dollar for dollar, to the extent that the Transferred Trade Accounts Receivable, Inventory, and prepaid expenses being purchased exceed Debts to Be Assumed at Closing by more than $32,518 and shall be decreased, dollar for dollar, to the extent that the Transferred Trade Accounts Receivable, Inventory, and prepaid expenses being purchased do not exceed Debts to Be Assumed at Closing by at least $32,518 (the “Purchase Price Adjustment”).

(b)           On or before the Closing Date, the parties will estimate the Debts to be Assumed at Closing and the Transferred Trade Accounts Receivable, Inventory and prepaid assets as of the Closing Date.  Using these numbers, the Seller will prepare a preliminary statement of the Purchase Price Adjustment (the “Estimated Purchase Price Adjustment”).  The Purchase Price shall then be adjusted in accordance with Section 3.1(a) (the “Estimated Adjusted Purchase Price”).

(c)           Within thirty (30) days following the Closing Date, the Buyer, in cooperation with the Seller, shall prepare and deliver to the Seller a statement (the “Final Purchase Price Adjustment Statement”) in the form attached as Exhibit E, setting forth (i) Transferred Trade Accounts Receivable, Inventory and prepaid expenses, (ii) Debts Assumed at Closing, and the increase or decrease in the Purchase Price determined in accordance with Section 3.1(a) (the “Final Purchase Price Adjustment Amount”).  The Purchase Price as so increased or decreased shall be the “Final Adjusted Purchase Price”.

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(d)           The Seller shall have fifteen (15) days following its receipt of the Final Purchase Price Adjustment Statement (the “Adjustment Review Period”) to review the same for compliance with Section 3.1(e) below.  On or before the expiration of the Adjustment Review Period, the Seller shall deliver to the Buyer a written statement accepting or objecting to the Final Purchase Price Adjustment Statement.  In the event that the Seller shall object to the Final Purchase Price Adjustment Statement, such statement shall include a detailed itemization of the Seller’s objections and its reasons for such objections.  If no such statement is delivered by the Seller to the Buyer within the Adjustment Review Period, the Seller shall be conclusively deemed to have accepted the Final Purchase Price Adjustment Statement.

(e)           If the Estimated Adjusted Purchase Price paid by the Buyer to the Seller at the Closing is greater than the Final Adjusted Purchase Price, then the Seller shall pay the Buyer the Final Purchase Price Adjustment Amount by wire transfer of immediately available funds within ten (10) days of the agreement by the Seller and the Buyer on the Final Purchase Price Adjustment Statement.  If the Estimated Adjusted Purchase Price paid by the Buyer to the Seller at the Closing is less than the Final Adjusted Purchase Price, then the Buyer shall pay the Seller the Final Purchase Price Adjustment Amount by wire transfer of immediately available funds within ten (10) days of the agreement by the Seller and the Buyer on the Final Purchase Price Adjustment Statement.

(f)            The Final Purchase Price Adjustment Statement shall be prepared from the books and records of the Seller as appropriate in accordance with GAAP applied on a basis consistent with that used in the preparation of the Financial Statements.  Transferred Accounts Receivable and Inventory shall be valued according to Buyer’s standard valuation methods, which are attached as Exhibit F. Buyer shall take physical counts of inventory, fixed assets, and vehicles being purchased as of the Closing Date for purposes of the Final Purchase Price Adjustment Statement.

(g)           In the event that the Seller shall accept or shall be conclusively deemed to have accepted the Final Purchase Price Adjustment Statement as prepared and delivered by the Buyer, the Final Purchase Price Adjustment Statement shall be used for the purposes of determining any adjustment to the Purchase Price in accordance with this Section 3.1.  If the Seller objects to the Final Purchase Price Adjustment Statement, then the Seller shall provide notice to the Buyer no later than 30 days following the delivery of the Final Purchase Price Adjustment Statement (an “Objection Notice”).  If no Objection Notice is made by the Seller within such 30 day period, the Final Purchase Price Adjustment Statement shall be final and binding on all the parties hereto.  Any Objection Notice shall specify in reasonable detail the basis for the objection, as well as the amount in dispute.  If an Objection Notice is given, the parties shall consult with each other with respect to the objection.  If the parties are unable to reach agreement within 30 days after an Objection Notice has been given, any unresolved disputed items shall be promptly referred to an independent accounting firm to be selected by the Buyers and the Sellers.  The resolution of the dispute by the independent accounting firm shall be final and binding on the parties.  The fees and expenses of the independent accounting firm shall be split evenly between the parties.

(h)           In accordance with the preparation of the Final Purchase Price Adjustment Statement under this Section 3.1, the Buyer agrees after the Closing to update or supplement Schedules 1.1(c) and 1.1(d) with any changes and additions and deliver such supplemented disclosure schedules to the Seller.

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3.2          Closing Escrow and Payment of Purchase Price .

(a)           Purchase Price With Security.   Seller shall obtain and deposit with Mellon Financial, in Seattle, Washington (the “Escrow Agent”) at or before Closing two irrevocable standby letters of credit furnished by a mutually agreeable financial institution, each in the amount of $1,250,000 running in favor of the Escrow Agent, as beneficiary.  The letters of credit, one of which will have an expiry date of nine months following the Closing Date and the other of which will have an expiry date of eighteen months following the Closing Date will be available to satisfy any amounts owed by Seller or the Shareholder to Buyer in accordance with the terms of the Escrow Agreement attached hereto as Exhibit G (the “Escrow Agreement”).  Upon the timely procurement of the letters of credit, Buyer shall pay to Seller at the Closing the Estimated Adjusted Purchase Price by delivery of cash payable by wire transfer or delivery of other immediately available funds.

(b)          Closing .   The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Newcomb, Sabin, Schwartz & Landsverk, LLP, in Portland, Oregon, on December 15, 2006, or at such earlier or later business day immediately  following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself) or such other date as the Parties may mutually determine (the “Closing Date”).

(c)           Deliveries at Closing .   At the Closing, (i) Buyer will deliver to Seller the various certificates, instruments, and documents referred to in Section 4.1 below; (ii) Seller will deliver to Buyer the various certificates, instruments, and documents referred to in Section 4.2 below; (iii) Seller will execute, acknowledge (if appropriate), and deliver to Buyer (A) assignments including Proprietary Information transfer documents) in the form attached hereto as Exhibit A and (B) such other instruments of sale, transfer, conveyance, and assignment as Buyer and its counsel may reasonably request; (iv) Buyer will execute, acknowledge (if appropriate), and deliver to Seller (A) an assumption in the form attached hereto as Exhibit B and (B) such other instruments of assumption as Seller and its counsel may reasonably request; and (v) Buyer will deliver to Seller and the Escrow Agent the consideration specified in Section 3.2(a) or 3.2(b) above.

3.3          Allocation of Purchase Price .  The Purchase Price shall be allocated among the Purchased Assets in the manner specified on Schedule 3.3 hereto.  The Seller and the Buyer shall cooperate with each other in the preparation, execution and filing of (a) all information returns and supplements thereto required to be filed with the Internal Revenue Service by the parties under Section 1060 of the Code and the Treasury Regulations promulgated thereunder relating to the allocation of the Purchase Price and (b) all similar filings required to be filed with respect to the transactions contemplated by this Agreement with the Internal Revenue Service and other appropriate taxing authorities.

3.4          Prorations .  Any and all license fees, permit fees, lease deposits, prepaid items, utilities, property taxes, and other similar items pertaining to the Purchased Assets and the ongoing Business will be adjusted ratably as of the Closing Date.  The net amount of the prorations will be paid by the Seller and the Buyer, as appropriate, on the Closing Date or as soon as practicable following the Closing Date, as the parties may mutually agree.

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ARTICLE IV
CLOSING

4.1          Deliveries by the Seller .    At the Closing, the Seller shall deliver to the Buyer the following:

(a)           Certificates of the Secretary of State of the state of Washington, dated not more than five (5) days prior to the Closing Date, attesting to the existence of Seller as a corporation in its jurisdiction of incorporation;

(b)           Copies, certified by the Secretary or Assistant Secretary of Seller as of the Closing Date, of resolutions duly adopted by the Board of Directors and the shareholders of Seller authorizing the execution and delivery by Seller of this Agreement and all other agreements contemplated herein, the consummation the transactions contemplated herein, and the taking of all such other corporate action as shall have been required as a condition to, or in connection with the consummation of the contemplated transactions;

(c)           Four (4) executed counterparts of a General Conveyance, Transfer and Assignment, substantially in the form attached hereto as Exhibit A (the “General Conveyance”), and an Assumption Agreement, substantially in the form attached hereto as Exhibit B (the “Assumption Agreement”), together with such other bills of sale, assignments and other instruments of transfer, assignment and conveyance as the Buyer shall reasonably request, to vest in the Buyer good and marketable title to the Purchased Assets;

(d)           Four (4) executed counterparts of a Noncompetition Agreement, by and between the Seller, the Shareholder and the Buyer, substantially in the form attached hereto as Exhibit C (the “Noncompetition Agreement”);

(e)           Five (5) executed counterparts of the Escrow Agreement;

(f)            Title certificates for Vehicles which have certificates of title, duly endorsed for transfer;

(g)           Any executed and filed (if applicable) transfer and assignment agreements necessary to transfer all of the Seller’s right, title and interest in and to the Proprietary Information to the Buyer, including but not limited to patent and patent application assignments, trademark and service mark assignments, and copyright assignments;

(h)           Any transfer and assignment agreements necessary to transfer all of the Seller’s right, title and interest in and to the Domain Names and Websites to the Buyer;

(i)            Releases of any and all Encumbrances on the Purchased Assets;

(j)            Certificates as required pursuant to Sections 9.1 and 9.2;

(k)           A certificate setting forth the Estimated Purchase Price Adjustment in accordance with Section 3.1(b);

(l)            A complete set of the disclosure schedules attached to this Agreement updated and supplemented in accordance with Section 7.4; and

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(m)          Payment in immediately available funds for the Transferred Employees’ accrued but unused vacation in accordance with Section 7.3(f) below.

4.2          Deliveries by the Shareholder .  At the Closing, the Shareholder shall deliver the following to the Buyer:

(a)           Such bills of sale, assignments and other instruments of transfer, assignment and conveyance as the Buyer shall reasonably request, to vest in the Buyer good and marketable title to the Purchased Assets;

(b)           Four (4) executed counterparts of the Noncompetition Agreement;

(c)           Five (5) executed counterparts of the Escrow Agreement;

(d)           Four (4) executed counterparts of the Lease Agreement, by and between the Buyer and Stessa Business Park, LLC, an affiliate of the Shareholder, regarding the lease of the facility located at 21307-87 th  Avenue SE, Woodinville, Washington by the Buyer, substantially in the form attached hereto as Exhibit D , and shall furnish a right of first refusal to Buyer for the purchase of the Facility (the “Lease Agreement”);

(e)           Four (4) executed counterparts of the Right of First Refusal for the real property adjacent to the Facility and owned by Scandia Business Park, L.L.C., an affiliate of the Shareholder, substantially in the form attached hereto as Exhibit H ; and

(f)            Certificates as required pursuant to Sections 9.1 and 9.2.

4.3          Deliveries by the Buyer and Cascade .  At the Closing, the Buyer and Cascade shall deliver the following to the Seller and the Shareholder:

(a)           Certificate of the Secretary of State of the state of Washington, dated not more than five (5) days prior to the Closing Date, attesting to the existence of the Buyer as a limited liability company in its jurisdiction of organization;

(b)           Certificate of the Secretary of State of the state of Oregon, dated not more than five (5) days prior to the Closing Date, attesting to the existence of Cascade as a corporation in its jurisdiction of incorporation;

(c)           Copies, certified by the Secretary or Assistant Secretary of the Buyer as of the Closing Date, of resolutions duly adopted by the sole member of the Buyer authorizing the execution and delivery by the Buyer of this Agreement and all other agreements contemplated herein, the consummation the transactions contemplated herein, and the taking of all such other corporate action as shall have been required as a condition to, or in connection with the consummation of the contemplated transactions;

(d)           Copies, certified by the Secretary or Assistant Secretary of Cascade as of the Closing Date, of resolutions duly adopted by the Board of Directors of the Buyer authorizing the execution and delivery by the Buyer of this Agreement and all other agreements contemplated herein, the consummation the transactions contemplated herein, and the taking of all such other corporate action as shall have been required as a condition to, or in connection with the consummation of the contemplated transactions;

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(c)           Four (4) executed counterparts each of the General Conveyance, the Assumption Agreement, the Noncompetition Agreement, and the Lease Agreement;

(d)           The Estimated Adjusted Purchase Price payable at the Closing in accordance with Section 3.2; and

(e)           Certificates as required pursuant to Sections 10.1 and 10.2.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLER
AND THE SHAREHOLDER

The Seller and the Shareholder, jointly and severally, hereby represent and warrant to the Buyer as follows:

5.1          Organization and Existence .  Seller is a corporation duly incorporated,