Exhibit 2.1
ASSET PURCHASE AGREEMENT
BETWEEN
BCP INGREDIENTS, INC.
(the "Buyer")
-----
and
CHINOOK GLOBAL LIMITED
(the "Seller")
------
Dated as of March 16, 2007
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1
Definitions
........................................................
1
1.2
Construction
.......................................................
1
ARTICLE II
SALE AND TRANSFER OF ASSETS; CLOSING
2.1 Assets
to be Sold ..................................................
2
2.2
Excluded Assets
.................................................... 3
2.3
Consideration
...................................................... 4
2.4
Liabilities
........................................................
6
2.5
Allocation
.........................................................
6
2.6
Closing
............................................................
6
2.7
Delivery of Purchased Inventory
.................................... 6
2.8
Consents
...........................................................
7
2.9
Transfer Taxes and Other Expenses
.................................. 7
2.10 Proration
of Certain Items .........................................
8
ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO THE BUSINESS
3.1
Organization; Good Standing
........................................ 8
3.2
Authority; Enforceability
.......................................... 9
3.3
Consent and Approvals; No Violation
................................ 9
3.4 Taxes
and Tax Returns ..............................................
9
3.5
Litigation
.........................................................
9
3.6
Undisclosed Liabilities
............................................ 10
3.7 EBITDA
.............................................................
10
3.8
Permits
............................................................
10
3.9
Compliance with Laws
............................................... 10
3.10 Contracts
..........................................................
11
3.11 Title to
Personal Property .........................................
11
3.12 Finished
Goods Inventory ...........................................
11
3.13 Proprietary
Rights .................................................
11
3.14 Warranties
.........................................................
11
3.15 Brokers
............................................................
12
3.16 Disclosure
.........................................................
12
3.17 No Other
Representations or Warranties .............................
12
i
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES RELATING TO BUYER
4.1
Organization; Good Standing; GST Registration
...................... 12
4.2
Authority; Enforceability
.......................................... 12
4.3
Consents and Approvals; No Violation
............................... 12
4.4
Litigation
.........................................................
13
4.5
Brokers
............................................................
13
4.6 No
Other Representations or Warranties .............................
13
ARTICLE V
COVENANTS AND AGREEMENTS
5.1
Consent Agreement
.................................................. 13
5.2
Rebates
............................................................
14
5.3
Accounts Receivable
................................................ 14
5.4
Transferred Employees
.............................................. 15
5.5
Equipment
..........................................................
15
5.6 Bulk
Sales Act of Ontario ..........................................
15
5.7 Access
to Seller Records ...........................................
15
5.8
Morrisburg Facility Negotiation Right
.............................. 16
5.9
Customer Contract Liability
........................................ 16
5.10 Certain
Deliveries .................................................
16
ARTICLE VI
INDEMNIFICATION
6.1
Survival
...........................................................
17
6.2
Seller's Agreement to Indemnify
.................................... 17
6.3
Buyer's Agreement to Indemnify
..................................... 18
6.4
Limitations
........................................................
18
6.5
Procedure for Indemnification - Third-Party Claims
................. 19
6.6
Indemnification Procedure - Direct Claims
.......................... 20
6.7
Exclusive Remedy
................................................... 22
ARTICLE VII
GENERAL PROVISIONS
7.1
Expenses
...........................................................
23
7.2
Amendment and Modification
......................................... 23
7.3 Waiver
of Compliance; Consents .....................................
23
7.4
Notices
............................................................
23
7.5
Publicity
..........................................................
24
7.6
Assignment; No Third-Party Rights
.................................. 25
ii
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7.7
Governing Law
...................................................... 25
7.8
Jurisdiction; Service of Process
................................... 25
7.9
Further Assurances; Records
........................................ 25
7.10
Severability
.......................................................
25
7.11
Counterparts
.......................................................
26
7.12 Entire
Agreement ...................................................
26
iii
<PAGE>
EXHIBITS
A
Form of Escrow Agreement
B
Form of Consent Agreement
C
Form of Equipment Purchase Agreement
D
Form of Bill of Sale
E
Form of Assignment and Assumption Agreement
F
Form of Tolling Agreement
G
Form of Non-Compete Agreement
H
Form of Transition Services Agreement
SCHEDULES
2.1(b)(i) Assumed
Contracts
2.2(a) Country List
2.3(c) Purchased
Inventory Valuation
2.5
Purchase Price Allocation
2.10(a)
Prorated Contracts
2.10(b)
Prorated Commission Payments
3.12
Finished Goods Inventory Specifications
5.4
Transferred Employees
iv
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset
Purchase Agreement,
dated as of March 16, 2007, is between BCP
Ingredients, Inc., a
Delaware corporation
(the "Buyer"), and Chinook Global
Limited, an Ontario corporation (the "Seller").
-------
Background Statement
Seller is
engaged in the business of producing and selling choline
chloride and specialty choline derivatives (the "Business") from
its Sombra and
Morrisburg, Ontario,
Canada facilities (the
"Facilities").
Seller desires to
sell, and Buyer desires to purchase, certain of the assets of
Seller used in the
Business, for the consideration and on the terms set forth
herein.
Statement of Agreement
The
parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1
Definitions.
Capitalized
terms used in this Agreement have the
meanings given to them in Appendix 1 to this Agreement.
1.2
Construction.
------------
(a) The
article and section
headings contained in this Agreement are
solely for the
purpose of reference and convenience, are not part of the
agreement of the
parties and shall not
in any way limit,
modify or
otherwise
affect the meaning or interpretation of this Agreement.
(b)
References to "Sections" or "Articles" refer to corresponding
Sections
or Articles of this Agreement unless otherwise specified.
(c)
Unless the context requires otherwise, the words "include,"
"including" and variations thereof mean "including,
without limitation"; the
words "hereof," "hereby," "herein," "hereunder" and similar terms
refer to this
Agreement as a whole
and not any particular
Section or Article in which such
words appear.
(d) Unless
the context requires
otherwise, words in
the singular include
the plural, words in
the plural include the singular, and words importing any
gender shall be applicable to all genders. Any reference to any law, statute
or
regulation shall be as in effect on the date hereof.
(e) If a
term is defined as one part of speech (such as a noun),
it shall
have a corresponding
meaning when used as another part of speech (such as a
verb).
(f)
Currency amounts referenced herein are in U.S. Dollars.
<PAGE>
(g)
References to a number of days refer to calendar days unless
Business
Days are specified.
Except as otherwise specified, whenever any action must be
taken on or by a day that is not a Business Day, then such action
may be validly
taken on or by the next day that is a Business Day. References herein to "local
time" are to local time in Charlotte, North Carolina.
(h) All
accounting
terms used herein and
not expressly
defined herein
shall have the meanings given to them under GAAP.
(i) The
parties acknowledge
that they and their
attorneys have
reviewed
this Agreement
and have had the
opportunity
to negotiate fully all of its
provisions, and that any rule of construction to the effect that
any ambiguities
are to be resolved
against the drafting
party, or any similar
rule operating
against the drafter of an agreement, shall not be applicable to the
construction
or interpretation of this Agreement.
ARTICLE II
SALE AND TRANSFER OF ASSETS; CLOSING
2.1 Assets
to be Sold. Upon the
terms and subject to the conditions set
forth in this Agreement, at the Closing and effective as of
the Effective Time,
Seller shall sell,
convey, assign,
transfer and deliver to Buyer, and Buyer
shall purchase
and acquire from Seller, all of Seller's right, title and
interest in and to
only the following
assets of Seller
used in the
Business
(collectively, the "Purchased Assets"):
------------------
(a) all
Product Inventory
held in connection with the operation of the
Business (including any such Product Inventory located at any
transload shipment
site, consignment
warehouse or any other
offsite location or in transit in any
railcar, truck or
other mode of
transportation,
but excluding the Product
Inventory described in Section 2.2(b)) (the "Purchased Inventory")
(for clarity,
Product Inventory
associated
with invoices issued prior to Closing shall
be
deemed to have
been converted to Seller Accounts Receivable and Product
Inventory associated
with invoices issued subsequent to Closing shall be deemed
to be Purchased Inventory); and
(b) the
goodwill of the Business, comprised of all of the intangible
property associated
with the Business and
customarily
described as
goodwill,
including (but subject to Section 2.2):
(i) the Business Contracts set out in Schedule 2.1(b)(i)
(collectively, the "Assumed Contracts");
(ii) the following records of Seller: (x) customer records,
customer
lists and
other customer
information
related to the
Business as it has
been
conducted since January 1, 2006, including principal customer
contacts,
addresses and telephone numbers and an electronic version of
the
price book
for the periods
beginning February 1,
2007 and March 1, 2007,
however,
to the extent that
such records relate to Assumed Contracts with
terms
beginning prior to January 1, 2006, Seller will provide each of
the
above
since the commencement of said Assumed Contract(s) and (y) for each
customer
located in a country on Schedule 2.2 other than the United
States
or Canada
to whom the Seller has
2
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sold or
shipped Business
products since January 1, 2006,
copies of the
transaction documents related to the most recent such sale or
shipment, in
each
case except to the extent that Seller has an obligation of
confidentiality with
respect to such records pursuant to an agreement set
forth on
Section 2.1(b)(ii) of the Disclosure Schedule (collectively,
the
"Purchased
Records");
provided that Seller may retain copies of the
Purchased
Records; and
(iii) all of the
operating procedures,
formulas and other
similar
Know-How
and Trade Secrets used in connection with production of the
Business
products.
2.2
Excluded Assets. Notwithstanding anything to the contrary contained
in
Section 2.1 or
elsewhere in this
Agreement,
the following assets of Seller
(collectively, the "Excluded Assets") are not included in the
Purchased Assets:
---------------
(a) any
goodwill (including customer contracts, customer information and
transportation,
logistics and
other records) or other assets primarily
associated with the
conduct of the
Business in any country not set forth on
Schedule 2.2, it being
agreed that the Buyer is not acquiring the Business as
conducted in any country not set forth on Schedule 2.2;
(b) a
maximum of five
containers
of liquid drums (92 metric tons) of
liquid choline
chloride in inventory,
which shall be retained by the Seller to
satisfy supply obligations existing as of the Closing for one
customer;
(c) all
cash, cash equivalents and short-term investments;
(d)
all accounts receivable of the Seller (the "Seller Accounts
Receivable");
(e) the capital
stock or other equity interests of any of the subsidiaries
of Seller or any minority-owned affiliate of Seller;
(f) the
Seller's right, title and interest in the Facilities including
all
real property,
improvements, personal
property and equipment
located at such
Facilities;
(g)
rights, claims or
causes of action of Seller against third parties
relating to the assets, properties, business or operations of Seller
that arise
in connection with the
discharge by Seller of the Retained Liabilities or that
relate to the Excluded Assets;
(h) all
contracts of insurance and self-insurance arrangements of Seller,
and the rights thereunder;
(i) all
customer and other records relating to the conduct of the
Business
prior to December 31, 2005;
(j) all
software and computer systems;
(k) all
Proprietary Rights not described in Section 2.1(b)(iii);
3
<PAGE>
(l) any
and all rights arising under the Business Contracts not set out
in
Schedule 2.1(b)(i),
including any and all
Business Contracts
relating to the
lease or purchase of office equipment, software, material handling equipment,
raw materials,
specialty gases and
management
and production services (the
"Excluded Contracts"); and
--------------------
(m) all
claims for refund of Taxes and other
governmental
charges of
whatever nature.
2.3
Consideration.
-------------
(a)
Purchase Price and Payment. The consideration for the Purchased
Assets
will be (i) the sum of (A) Twenty-Nine Million dollars ($29,000,000) (the "Base
Purchase Price"), plus
(B) the Estimated
Purchased Inventory Amount (such sum,
the "Purchase Price"),
and (ii) the assumption of the Assumed Liabilities. At
the Closing, the Buyer
shall deliver to the
Seller (x) a promissory note, in
form and substance mutually satisfactory to the parties, for
an amount equal to
3.0% of the Base Purchase Price, and (y) an amount equal to the
remainder of the
Purchase Price minus the Purchased Inventory Escrow Amount by wire transfer
to
an account or accounts designated in writing by Seller.
(b)
Inventory Escrow. At the Closing, Buyer shall pay, out of the
Purchase
Price, an amount equal to fifteen percent of the Estimated
Purchased Inventory
Amount (the "Purchased Inventory Escrow Amount") to be held in an
escrow account
(the "Escrow Account")
in accordance
with an Escrow
Agreement to be
executed
prior to Closing in the form of Exhibit A (the "Escrow
Agreement").
----------------
(c)
Valuation of Purchased
Inventory. The
Estimated Purchased
Inventory
Amount is $1,840,444 and represents Seller's good faith estimate of
the value of
the Purchased
Inventory as of the close of business on the Business Day
preceding the Closing Date calculated in accordance with the
per-unit valuation
set forth on Schedule 2.3(c). Inventory items known at the time of
such count to
not be useable or saleable in the ordinary course of business or
not included in
Purchased Inventory
pursuant to Section 2.2(b) have not been included for
purposes of calculating the Estimated Purchased Inventory
Amount.
(d)
Post-Closing Adjustment for Purchased Inventory.
-----------------------------------------------
(i) From the Closing
until no later
than noon on March 19,
2007,
Seller
shall be permitted to continue to produce "specialty products" at
Seller's
Sombra, Ontario
Facility using existing raw materials Purchased
Inventory.
Such production shall not be deemed a violation of the
Non-Compete Agreement.
The specialty
products produced
pursuant to this
Section
2.3(d)(i) shall be deemed finished goods Purchased Inventory
hereunder,
including for purposes
of determining
the Closing
Purchased
Inventory
Amount. Upon
completion of the activities contemplated by this
Section
2.3(d)(i),
Seller shall notify
Buyer of the amount of additional
finished
goods Purchased Inventory produced.
(ii) Within two Business Days of the Closing, Buyer and Seller
shall
jointly
conduct a count of the Purchased Inventory located at the
Seller's
Morrisburg,
Ontario Facility. Within 30 days following the
Closing Date
Buyer
shall provide to Seller a final statement of its determination of
the value
of all of the Purchased Inventory (as
4
<PAGE>
determined
in accordance
with Sections 2.3(c) and 2.3(d)(i) and, for
Purchased
Inventory located at the Seller's Morrisburg, Ontario Facility,
using the
inventory count established pursuant to the preceding
sentence)
as of the
Effective Time and such amount shall be the
Closing Purchased
Inventory
Amount. Following
delivery of such statement, Buyer shall make
available
to Seller such
information as Seller may reasonably request in
order
to verify the accuracy of such statement. If within 30 days
following
delivery of the
statement of the
Closing Purchased
Inventory
Amount,
Seller has not given
Buyer written notice
of its objection as to
such
amount (which
notice shall state the
basis of Seller's
objection),
then the
Closing Purchased
Inventory Amount
calculated by Buyer shall be
binding
and conclusive on the parties.
(iii) If Seller duly gives Buyer such notice of objection, and if
Buyer and
Seller fail to resolve the issues outstanding with respect to
Buyer's
statement of the Closing Purchased Inventory Amount within 20
days
of Buyer's
receipt of Seller's
objection notice,
Buyer and Seller
shall
submit the
issues remaining
in dispute to the Due Diligence Agent for
resolution
applying the
principles set forth in this Agreement. The Due
Diligence
Agent shall not have any power to alter
or modify the terms of
this
Agreement
and shall have the authority only to resolve the
outstanding issues
with respect to the statement of the Closing Purchased
Inventory
Amount as described in
the preceding
sentence. If issues are
submitted
to the Due Diligence Agent for resolution, (i) Seller and Buyer
shall
furnish or cause to be
furnished to the Due
Diligence Agent such
work
papers and other documents and information relating to the disputed
issues as
the Due Diligence Agent may request; (ii) the determination by
Due
Diligence Agent, as set forth in a notice to be
delivered to both
Seller and
Buyer within 30 days
of the submission
to the Due
Diligence
Agent of
the issues remaining
in dispute, shall be final, binding and
conclusive
on the parties;
and (iii) Seller and
Buyer will each bear 50%
of the
fees and costs of the Due Diligence Agent for such
determination.
(iv) Within five days after the Closing Purchased Inventory Amount
is finally
determined pursuant to this Section 2.3(d) (either by agreement
of the
parties or by the Due Diligence Agent):
(A) if the Closing
Purchased Inventory Amount exceeds the
Estimated Purchased
Inventory Amount, then (x) Buyer shall pay such
excess to Seller by wire transfer of immediately available funds
and
(y) Buyer and Seller
shall jointly
instruct the Escrow Agent to
release to Seller all funds then held in the Escrow Account;
(B) if the Estimated
Purchased Inventory
Amount exceeds the
Closing Purchased Inventory Amount by an amount that is less than
or
equal to the amount of funds in the Escrow Account, then Buyer and
Seller shall jointly
instruct the Escrow
Agent to release to Buyer
such excess and to
release all remaining funds then held in the
Escrow Account to Seller; and
(C) if the Estimated
Purchased Inventory
Amount exceeds the
Closing Purchased Inventory Amount by an amount that is greater
than
the amount of funds in the Escrow Account, then (x) Buyer and
Seller
shall jointly instruct the
5
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Escrow Agent to release all funds then held in the Escrow Account
to
Buyer and (y) Seller shall pay the remainder of such excess to
Buyer
by wire transfer of immediately available funds.
Unreasonable failure
by either party to
cooperate in instructing the
Escrow
Agent, in the manner described in the Escrow Agreement,
to release
funds as
provided in this Section 2.3(d)(iv) shall be deemed a breach of
this
Agreement.
(v) Any adjustment
contemplated
by this Section 2.3(d) shall be
deemed to
be an adjustment to the Purchase Price.
2.4
Liabilities.
-----------
(a)
Assumed Liabilities.
On the Closing
Date, but effective as of the
Effective Time,
Buyer shall assume and
agree to discharge
only the following
liabilities of Seller (the "Assumed Liabilities"):
-------------------
(i) all liabilities
under the Assumed Contracts, including all
outstanding purchase
orders, other than any liabilities of Seller (x) for
breaches
of the Assumed Contracts occurring, or warranty claims arising,
prior to
the Effective Time,
and (y) to pay the
Non-Contingent
Rebates
required
to be paid by the Seller pursuant to Section 5.2(a); and
(ii) all other liabilities specifically allocated to Buyer
pursuant
to the
terms of Article II, Article V, Article VI and Section 7.1.
(b)
Retained Liabilities.
Buyer shall not assume, and Seller shall remain
responsible for, the Retained Liabilities. "Retained Liabilities" shall mean
every liability of
Seller resulting
from the Business
other than the
Assumed
Liabilities.
2.5
Allocation.
The Purchase
Price (including as adjusted
pursuant to
Section 2.3(d)(iv))
shall be allocated in
accordance with
Schedule 2.5. After
the Closing, the
parties shall make consistent use of the allocation specified
in Schedule
2.5 for all Tax
purposes and in all filings, declarations and
reports with the Canada Revenue Agency and the United
States Internal
Revenue
Service. In any
Proceeding
related to the
determination
of any Tax, none
of
Buyer, Seller or their
respective
shareholders shall contend or represent that
such allocation is not a correct allocation.
2.6
Closing. The purchase
and sale provided for
in this Agreement
(the
"Closing") will take place at the offices of Robinson, Bradshaw & Hinson, P.A.,
in Charlotte, North Carolina, commencing at 10:00 a.m. (local
time) on the date
hereof. The Closing
shall be effective as of 11:59 p.m. (local time) on the
Closing Date (the "Effective Time").
--------------
2.7
Delivery of Purchased Inventory.
-------------------------------
(a) Raw
Materials. Seller
shall, at Seller's expense, cause all Purchased
Inventory consisting
of raw materials (except for raw materials Purchased
Inventory processed
into finished specialty products pursuant to Section
2.3(d)(i)) to be delivered within a reasonable
6
<PAGE>
period of time
following the
Closing to Buyer's facility in St. Gabriel,
Louisiana, to
Buyer's facility in Verona, Missouri or to the Facility in
Morrisburg, Ontario,
Canada for processing
pursuant to the
Tolling Agreement,
which facility
shall be determined at the reasonable discretion of Seller.
Notwithstanding the
foregoing,
if Buyer requests that such raw materials be
delivered to a
facility not selected by Seller, Seller shall reasonably
cooperate with Buyer
to deliver such raw materials to such facility, provided
that Buyer shall bear all costs relating to such delivery in excess
of the costs
Seller would have incurred had the raw materials been delivered to the facility
selected by Seller.
(b)
Finished Goods.
Buyer shall, at Buyer's expense, arrange for the
shipment to a facility of the Buyer, to customers or other third
parties, or to
the Facility in
Morrisburg,
Ontario, Canada for processing pursuant to the
Tolling Agreement,
of all Purchased
Inventory consisting of finished goods
located at the Facility in Sombra, Ontario, Canada as of the
Effective Time and
all finished
good generated pursuant to Section 2.3(d)(i). The Buyer shall
ensure that all such
shipments have occurred within 60 days following the
Closing. Purchased
Inventory consisting of finished goods not located at either
Facility as of the
Effective Time or
generated pursuant to
Section 2.3(d)(i)
(including any such
goods located at transload facilities, in transit to
transload facilities,
or held by
customers on consignment) shall be deemed
delivered on a where-is basis as of the Effective Time or upon
their production
pursuant to Section 2.3(d)(i), as applicable.
(c) Other
Product Inventory.
The parties
anticipate
that all Purchased
Inventory consisting
of bags, pallets,
stretch wrap and other
supplies of the
Business will be utilized in the processing of finished
goods pursuant to the
Tolling Agreement.
Accordingly,
at the Closing,
the Seller shall
deliver all
such Product Inventory to Buyer at the Facility in Morrisburg,
Ontario, Canada.
Upon termination of, or satisfaction of all of Seller's
obligations
under, the
Tolling Agreement,
Buyer shall, at Buyer's expense, promptly arrange for
shipment of any such
Purchased Inventory
that remains to third parties or to a
facility of the Buyer.
2.8
Consents. To the
extent that there are certain Assumed Contracts that
are not assignable
without the consent or approval of Persons other than Seller
("Consent Contracts"),
and such consents or approvals are not
obtained by the
Closing Date, Seller and Buyer shall cooperate for a period of one
year from the
Closing Date to obtain
such consent or
approval, and, in the absence of such
consent or approval,
shall cooperate with one another to give Buyer (or its
designated Affiliate)
the practical
benefits of such
Consent Contract.
Such
Consent Contract
shall be deemed to be a Purchased Asset and an Assumed
Liability; provided
that Buyer (or its designated Affiliate) is given the
practical benefits of such Consent Contract.
2.9
Transfer Taxes and Other Expenses.
---------------------------------
(a) Buyer
shall pay any and all
transfer and ad valorem (as opposed to
income) Taxes applicable to the sale of the Purchased Assets,
including without
limitation any and all
goods and services, sales or other Taxes as may be
required under the law of the applicable state or province, and specifically
including goods and services tax payable pursuant to the Excise Tax
Act (Canada)
in respect of the supply of the Purchased Assets, which tax shall be payable in
the amount
of 6.0% of the
Purchase Price for payment by the Buyer to the
applicable Canadian
taxing authorities,
which Canadian goods
and services tax
shall be payable
by the Buyer to the Seller at the same time and in the
same
manner that the closing payment is being made to the
7
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Seller pursuant to Section 2.3(a)(y). If Buyer does not deliver such
amounts to
Seller at the Closing,
any Damages that
Seller may suffer in
connection with
Canadian goods and services taxes on the sale of the Purchased
Assets shall not
be subject to the limitations on indemnification set forth in
Section 6.4.
(b) Buyer shall pay the costs for registering the transfer of any
Proprietary Rights included in the Purchased Assets.
(c) Buyer
shall be responsible for any and all ad valorem (property)
Taxes
on the Purchased Assets.
(d) Seller
shall be responsible
for and shall pay any and all sales Taxes
applicable to sales of goods or services by the Business
prior to the
Effective
Time. Buyer shall be
responsible
for and shall pay
sales Taxes applicable
to
sales of goods or services by the Business from and after the
Effective Time.
2.10
Proration of Certain Items.
--------------------------
(a) The
parties shall
prorate the lease or
service payment
obligations
under the applicable Assumed Contracts set forth in Schedule
2.10(a) through the
Effective Time,
with Seller
being responsible for the payment obligations
accruing through the
Effective Time and receiving credit for any prepayments or
deposits and Buyer being responsible for the payment obligations accruing from
and after the Effective Time.
(b) The
parties shall prorate the commission payment obligations to the
sales agents set forth in Schedule 2.10(b) through the Effective Time, with
Seller being
responsible for the
commission
payment obligations for Seller
Accounts Receivable as
in existence at the Effective Time and receiving credit
for any prepayments
and Buyer being
responsible
for the payment
obligations
arising from accounts receivable created after the Effective
Time.
(c) To the
extent payments to be
prorated or credited pursuant to this
Section 2.10 are
determined as of the Closing Date, an appropriate adjustment
shall be made to the closing payment due pursuant to Section 2.3(a). To the
extent payments to be prorated or credited pursuant to this Section
2.10 are not
determined as of the Closing Date, appropriate payments shall be made from
the
Buyer to the Seller or
from the Seller to the
Buyer, as applicable, at such
times as such payment
obligations
are determined. Buyer and Seller agree to
cooperate and communicate with each other, to a commercially
reasonable extent,
to determine
the amount of any
payments required pursuant to this Section
2.10(c).
ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO THE BUSINESS
Seller
represents and warrants to Buyer that:
3.1
Organization; Good
Standing. Seller is a
corporation duly organized,
validly existing and
in good standing under the laws of the jurisdiction of its
incorporation. Seller
has the requisite
corporate power and
authority to own,
lease and use the properties and assets that it
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owns, leases
and uses in
connection
with the Business and to conduct the
Business as presently conducted.
3.2
Authority;
Enforceability.
Seller
has the requisite power and
authority to (i)
execute and
deliver this Agreement and each certificate,
document and
agreement to be executed by Seller in connection herewith
(collectively,
the "Seller
Documents")
and (ii) perform its obligations
hereunder and
thereunder. The
execution and delivery of this Agreement and the
Seller Documents and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by the Board of
Directors and
shareholders of the
Seller and no other
proceedings on the
part of Seller are
necessary to authorize
this Agreement or any
Seller Document or to
consummate
the transactions
contemplated hereby or
thereby. This
Agreement has been duly
and validly executed and delivered by Seller, and upon execution
and delivery by
Seller of each Seller
Document, such Seller
Document shall constitute a legal,
valid and binding
obligation of Seller,
enforceable
against it in
accordance
with its terms.
3.3
Consent and Approvals; No Violation.
-----------------------------------
(a) The
Seller is not required to obtain any Governmental Authorization
in
connection with (i) the execution or delivery by Seller of this
Agreement or the
Seller Documents or (ii) the performance by Seller of its
obligations under this
Agreement or the Seller Documents.
(b) Except
as disclosed
in Section
3.3(b) of the
Disclosure
Schedule,
neither the execution and delivery of this Agreement and the Seller
Documents by
Seller nor the performance of Seller's obligations hereunder or
thereunder will:
(i)
violate any provision of the certificate and articles of
incorporation,
certificates and articles of amendment or bylaws of Seller
or any
resolution
adopted by the board
of directors or
shareholders of
Seller;
(ii) breach any of the terms or provisions of, or give any Person a
right to
declare a default under, or require the consent or waiver
of any
Person
under, any Material Contract;
(iii) conflict with or violate any Legal Requirement applicable to
the
Business; or
(iv) conflict
with or violate the
terms of any Permit
relating to
the
Business.
3.4
Taxes and Tax Returns. There are no Liens with respect to Taxes
(except for
Liens for Taxes not yet delinquent) upon any of the Purchased
Assets.
3.5
Litigation.
Except as disclosed in Section 3.5 of the Disclosure
Schedule, there are no
Proceedings
by or against
Seller with
respect to the
Business or the Purchased Assets that are pending or have
been commenced
since
April 1, 2005, or, to Seller's Knowledge, that are threatened against Seller
with respect to the Business or the Purchased Assets, or that
challenge,
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or that may have
the effect of preventing, delaying, making illegal, or
otherwise interfering with, the transactions contemplated by this
Agreement.
3.6
Undisclosed
Liabilities.
Except as disclosed in Section 3.6 of
the
Disclosure Schedule,
to Seller's Knowledge, the Seller has no material
obligation or liability in connection with the Purchased
Assets or the
Business
and to the Seller's
Knowledge there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against Seller giving rise to any such material obligation or liability,
except liabilities
and obligations that (i) are fully accrued or reserved
against in the
Statement of EBITDA;
(ii) were incurred
since the date of
the
Statement of EBITDA in the ordinary course of the Business and
consistent with
past practices
and are of the same
type and category as shown on the Statement
of EBITDA; or (iii) are the Seller's obligations under the Business
Contracts,
excluding liability for breaches thereof.
3.7
EBITDA. Seller has
provided to the Due Diligence Agent a statement of
EBITDA for the Business for the twelve month period beginning on February 1,
2006 and ending on January 31, 2007 (the "Statement of EBITDA").
The Statement
of EBITDA presents fairly, in all material respects, the EBITDA of the Business
for the period referred to therein.
3.8
Permits.
-------
(a) To the
Seller's Knowledge,
the Seller
holds, owns or otherwise has
available to it all Governmental Authorizations necessary or
required for Seller
to lawfully conduct
the Business as
currently conducted, for Seller to own,
lease or use the
Purchased Assets,
and for Seller to
fulfill its
obligations
under the Assumed Contracts, except for any such Governmental
Authorizations the
failure to hold,
own or otherwise have available would not have a material
adverse effect on the
Business (all such Governmental Authorizations, the
"Permits"). For
clarity, Permits do not include
Governmental
Authorizations
solely relating to the
operation of the Facilities or not otherwise pertaining
to the Purchased Assets.
(b) To
Seller's Knowledge,
each of the Permits is valid and in full force
and effect, and all applications required to have been filed for
renewal of the
Permits have been duly filed on a timely basis with the appropriate
Governmental
Authorities. Seller
has not received, at any time since April 1, 2005, any
written notice from any Governmental Authority regarding any actual or
proposed
revocation, withdrawal, suspension, cancellation or termination (other
than by
expiration) of any Permit.
3.9
Compliance
with Laws. Except as set forth on Section 3.9 of the
Disclosure Schedule:
(a) to
Seller's Knowledge, Seller is in material compliance with all
Legal
Requirements applicable to the Business, the Assumed Contracts and
the ownership
of the Purchased
Assets and is not liable for the payment of any compensation,
damages, taxes, fines,
penalties or other
amounts, however
designated, for a
failure to fully comply with any such Legal Requirement; and
(b) Seller
has not received, at
any time since April 1, 2005, any written
notice from any
Governmental
Authority, with
respect to the
Business or the
Purchased Assets, alleging any
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material violation
of, or failure to
comply with,
any Legal Requirement by
Seller with respect to the Business.
3.10
Contracts.
---------
(a) Set
forth in Section 3.10 of the Disclosure Schedule is a list of all
of the Business
Contracts,
other than any
Excluded Contract or any Business
Contract that (i)
relates only to Excluded Assets or (ii) does not impose
a
material obligation on Seller and does not provide a material
benefit to Seller.
(b) Seller
has heretofore made
available to the Due Diligence Agent true
and complete copies of all written Business Contracts set forth on Section
3.10
of the Disclosure
Schedule, in each case as amended to date
and currently in
effect.
(c) Each
of the Business
Contracts set forth in Part A of Section 3.10 of
the Disclosure Schedule (the "Material Contracts") is in full force and
effect,
constitutes a valid and binding obligation of Seller and, to
Seller's Knowledge,
the other parties
thereto, is legally enforceable against Seller and, to
Seller's Knowledge,
the other parties
thereto, in accordance with its terms,
except as enforcement
may be limited
by applicable bankruptcy, insolvency,
reorganization,
moratorium or similar
law affecting
the rights of
creditors
generally.
(d) Seller
is not in breach or default in any material respect under any
Business Contract set
forth on Section 3.10 of the Disclosure Schedule and, to
Seller's Knowledge,
no other party to any
such Business Contracts is in breach
or default in any material respect thereunder and to Seller's
Knowledge there is
no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against Seller
under any such
Business Contracts.
3.11 Title
to Personal Property.
Seller owns good and valid and legal and
beneficial title to
the Purchased Assets free and clear of all Liens except for
Permitted Liens.
3.12
Finished Goods
Inventory. The
Finished Goods Inventory was produced
in the ordinary course and meets the specifications set forth in Schedule 3.12
and is otherwise
in good and
saleable condition in the ordinary course of
business and conforms to all applicable warranties.
3.13
Proprietary Rights. Seller, legally and beneficially,
owns free and
clear of all Liens except for Permitted Liens or otherwise has the right
to use
in the manner in which they are currently used all of the Proprietary Rights
that are included
in the Purchased Assets and has no obligation to pay any
royalty to any Person
relating to any such
Proprietary
Rights. To Seller's
Knowledge, Seller's
use of such Proprietary Rights in the conduct of the
Business has not infringed upon any Proprietary Right of any other Person,
and
no Person is infringing upon any such Proprietary Right of Seller in connection
with the conduct of the Business.
3.14
Warranties. To
Seller's Knowledge, as
of the date hereof, there
