|
Exhibit 10.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this " Agreement ") dated
as of the 20 th day
of December, 2006, by and among (i) Forefront Devant Inc., a
corporation organized and existing under the laws of the State of
Florida (the " Buyer "), (ii) Devant Ltd., a
corporation organized and existing under the laws of the State of
North Carolina (the " Seller "), (iii) James M.
Sheppard, Jr., Mary Ann Sheppard Chambers, Rebecca Sheppard Roberts
and Deborah Ann Sheppard (each of such persons and Seller are
collectively referred to herein as the " Seller Responsible
Parties "), (iv) ForeFront Group, Inc., a Florida
corporation (" ForeFront Group ") with respect to Sections
1.10(c)(vi) and (c)(x) and Articles 3 and 8 hereof, and
(v) ForeFront Holdings, Inc., a Florida corporation ("
ForeFront Holdings ") with respect to Sections 1.10(c)(vii)
and (c)(x) and Articles 3, 3A and 8 hereof.
W I T N E S S E T H :
WHEREAS, the Seller is engaged in the business of manufacturing,
marketing, distributing and selling high quality golf towels and
other towels and related accessories (the " Business ");
WHEREAS, the Buyer desires to acquire from the Seller and the
Seller desires to sell to the Buyer substantially all of the assets
utilized in and associated with the operation of the Business (as
presently conducted) upon the terms and subject to the conditions
set forth in this Agreement (the " Sale ");
WHEREAS, the respective Board of Directors of the Seller and the
Buyer have each approved the Sale, the terms of this Agreement and
the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, the parties, intending legally to be
bound, agree as follows:
AGREEMENT
[A list of defined terms is provided in Article 9 hereof]
Article 1. Purchase and Sale
1.1 General . On the terms and subject to the conditions
set forth in this Agreement, at the Closing, Buyer shall purchase
from Seller, and Seller shall sell, transfer, assign, convey and
deliver to Buyer, all of Seller’s right, title and interest
in and to the Business, including, without limitation, in and to
all of the assets, properties, rights, goodwill, contracts and
claims of the Business, other than the Excluded Assets, wherever
located, whether tangible or intangible, real or personal, known or
unknown, actual or contingent, as the same shall exist as of the
Closing (such rights, title and interest in and to all such assets,
properties, rights, contracts and claims, being collectively
referred to herein as, the " Purchased Assets "). The
Purchased Assets shall include, without limitation, the following
assets:
(a) cash and cash equivalents, including petty cash accounts or
cash on hand or in bank accounts, certificates of deposit,
commercial paper and other similar securities related to the
Business;
1
(b) all inventory (including work in process, raw
materials and finished goods), goods in transit, unbilled revenues
and other properties and rights associated with the performance of
contracts and the operation of the Business;
(c) all equipment and machinery owned by Seller related to the
Business, including but not limited to computers and software,
office furniture and fixtures, as well as the rights to all
communication numbers and addresses (telephone, fax, toll-free,
e-mail, web site, domain name), telephone systems, office equipment
and the like;
(d) all marketing materials, office supplies and letterhead used
in connection with the Business;
(e) all accounts and notes receivable as well as other claims
for money or other obligations due (or which hereafter will become
due) to Seller arising out of the Business;
(f) all of Seller’s ownership and rights to all, present
and future, trade names, trademarks, trade dress, copyright, copy,
marketing/advertising designs, and patents in all forms and
languages, used in or related to the Business;
(g) all goodwill associated with the Business;
(h) all of Seller’s past or present business files or
records (active or inactive) related to the Purchased Assets
including, but not limited to, appropriate correspondence,
inquiries, contracts, agreements, letters of intent, customer
lists, publications, forms and sales leads, but excluding all files
and records relating to Excluded Assets and employees and employee
benefits; provided , however , that the Seller shall
be entitled to retain copies of all financial and tax related files
and records and the Buyer shall be given copies of all employee and
employee benefit files and records to the extent permissible by
law;
(i) all right, title and interest in, to and under all Material
Contracts associated with the Business and assumed by the Buyer,
subject in each case to the terms of such contracts (the "
Assumed Contracts "), a list of such Assumed Contracts is
set forth in Schedule 1.1(i) hereto;
(j) all Permits which are transferable and which are used in the
Business, as presently conducted (other than those related to the
Excluded Assets);
(k) all rights of the Seller pursuant to any express or implied
warranties, representations or guaranties made by suppliers to the
Business;
(l) all rights under non-disclosure agreements with employees
and agents of Seller and under confidentiality agreements with
prospective purchasers of the Business or with other third parties
to the extent relating to the Business;
(m) all deposits, prepaid charges, insurance, sums and fees,
offset credit balances in any country, refunds, and causes of
action (other than those related to the Excluded Assets);
(n) all assets associated with the Sir Christopher Hatton
business recently acquired by the Seller; and
2
(o) any other assets of Seller which are used in
the Business and which are of a nature not customarily reflected in
the books and records of a business, such as assets which have been
written off for accounting purposes but which are still used by or
of value to the Business.
The Purchased Assets will be delivered to Buyer free and clear
of any Encumbrances.
1.2 Excluded Assets . Notwithstanding anything herein to
the contrary, the Purchased Assets shall not include any of the
following assets related to the Business (collectively, the "
Excluded Assets "):
(a) The fee owned Real Property located at 3011 Walkup Avenue,
Monroe, North Carolina 28110 (the " Premises ");
(b) All fixtures relating to the operation of the building or
improvements located on the Premises (i.e., HVAC, plumbing,
elevators, etc.) (but not including any furniture located within
such improvements);
(c) Life insurance policies that are held for the benefit of
Sheppard family members;
(d) Any personal items and furniture belonging to the Sheppard
family located in their respective offices at the Premises,
including without limitation, items contained in the attic above
the embroidery department and the flush rear door area (also know
as the "boat area");
(e) Jeep, Tahoe and Ford F350 vehicles identified on Schedule
1.2(e) ; and
(f) the items of property described on Schedule 1.2(f)
.
1.3 Certain Provisions Relating to the Purchased Assets
.
(a) To the extent that a contract, Permit or other asset which
would otherwise be included within the definition of "Purchased
Assets," or any claim, right or benefit arising thereunder or
resulting therefrom (each an " Interest " and collectively
the " Interests "), is not capable of being sold, assigned,
transferred or conveyed without the approval, consent or waiver of
the issuer thereof or the other party thereto, or any third person
(including a Governmental Authority), and such approval, consent or
waiver has not been obtained prior to the Closing, or if such sale,
assignment, transfer or conveyance or attempted sale, assignment,
transfer or conveyance would constitute a breach thereof or a
violation of any law, decree, order, regulation or other
governmental edict, this Agreement shall not constitute a sale,
assignment, transfer or conveyance thereof, or an attempted sale,
assignment, transfer or conveyance thereof.
(b) Seller Responsible Parties and Buyer shall use their
commercially reasonable best efforts and shall cooperate to obtain
all approvals, consents or waivers necessary to convey to Buyer
each Interest as of the Closing. The failure to obtain any
approval, consent or waiver necessary to convey any Interest to
Buyer shall not affect the obligations of the parties to close
hereunder. Subsequent to the Closing, the Seller Responsible
Parties shall execute and deliver any other instruments and take
any actions, which may be reasonably required for the
implementation of this Agreement and the transactions contemplated
hereby.
3
1.4 Assumption of Liabilities . On the
terms and subject to the conditions set forth in this Agreement, at
the Closing, Buyer will assume and become responsible for the
following liabilities and obligations of the Seller (the "
Assumed Liabilities "):
(a) all of the Seller’s accounts payable (which have
arisen in the ordinary course of the Business), accrued expenses
and the third party liabilities and obligations set forth on
Schedule 1.4(a) ;
(b) all liabilities and obligations arising out of the ownership
by Buyer of the Purchased Assets or the operation by the Buyer of
the Business after the Closing Date (other than any Excluded
Liability); and
(c) the obligations under the Assumed Contracts being
transferred to Buyer hereunder, a list of which is set forth on
Schedule 1.1(i) (to the extent that such liabilities and
obligations remain unsatisfied or are required to be performed on
or after the Closing Date), including the salary and royalty
obligations due to Sir Christopher Hatton (the amounts of which are
tied to sales volume).
1.5 Excluded Liabilities . Except for the Assumed
Liabilities, the Seller Responsible Parties and the Buyer expressly
understand and agree that Buyer shall not assume, pay, perform or
discharge or otherwise become liable for any obligations,
commitments or liabilities of any and every nature whatsoever of
the Seller, whether known or unknown, fixed or contingent, relating
to the ownership of the Purchased Assets, the operation of the
Business or otherwise (the " Excluded Liabilities "),
including, without limitation, liabilities and obligations relating
to or arising in connection with the following:
(a) all liabilities associated with the Real Property including
the Premises including, without limitation, the note and mortgage
thereon;
(b) liabilities resulting from Environmental Claims relating to
the operation of the Business prior to the Closing;
(c) Seller’s bank debt and other funded debt, including
overdrafts, all of which will be paid or discharged in full by
Seller at or prior to Closing;
(d) any liability or obligation arising out of any claim of or
for injury to persons or property by reason of the improper
performance or malfunctioning, improper design or manufacture, or
failure to adequately package, label or provide warnings as to the
hazards of, any product of the Business, where the injury giving
rise to such claim occurred on or prior to the Closing Date;
(e) any liability of the Seller to any plan, individual or
governmental agency arising out of any failure of the Seller to
comply with the applicable provisions of any Employee Benefit
Plans, ERISA, the Code, or other applicable Laws with respect to
its employees, including any obligation or liability of the Seller
for any penalty, fine or similar amount due from the Seller on
account of any breach of fiduciary duty or failure to comply with
applicable laws or regulations;
(f) any liability associated with the hiring, employment or
termination of any employees of Seller at any time prior to Closing
including obligations under any severance,
4
deferred compensation or employment agreements,
guaranteed fixed terms of employment or retirement benefits beyond
those provided under applicable law, collective bargaining
agreements, or any Employee Benefit Plan applicable to employees of
the Business generally, which arises out of any acts or omissions
of Sellers prior to the Closing Date;
(g) any liability associated with the Excluded Assets; and
(h) all liabilities of Seller or any Affiliate of Seller for
Taxes.
1.6 Purchase Price; Payment . On the terms and subject to
the conditions set forth in this Agreement, and subject to
adjustment as provided herein, at the Closing the Buyer shall
acquire the Purchased Assets from the Seller for an aggregate
consideration ranging from approximately Five Million Dollars
($5,000,000) up to Five Million Seven Hundred and Fifty Thousand
Dollars ($5,750,000) (the " Purchase Price "), dependent
upon the amount paid by the Buyer with respect to the
Seller’s loan payable to RBC Centura described in
Section 1.6(b), below. In addition, the Purchase Price may be
adjusted as provided in Section 1.8 below. The Purchase Price
shall be payable as follows:
(a) The Closing Cash Payment in cash by wire transfer to the
account or accounts designated by the Seller Responsible Parties
not later than three Business Days prior to the Closing Date;
(b) On the Closing Date, the Buyer shall pay, on behalf of the
Seller, the Seller’s loan payable to RBC Centura in the
outstanding amount of $1,019,472;
(c) On the Closing Date, the Buyer shall deliver to the Seller
the executed Promissory Note A in the principal amount of
$250,000;
(d) On the Closing Date, the Buyer shall deliver to the Seller
the executed Promissory Note B in the principal amount of
$1,250,000 (or such lesser amount as provided herein);
(e) On the Closing Date, the Buyer shall deliver to the Seller
the executed Promissory Note C in the principal amount of
$150,000;
(f) 250,000 shares of the common stock of ForeFront Holdings
(the " Common Shares ").
1.7 Closing Balance Sheet and Net Asset Value Statement .
At the Closing, the Buyer and the Seller shall jointly cause to be
prepared a balance sheet of the Business as it existed immediately
prior to the Closing (the " Closing Date Balance Sheet "),
prepared in accordance with GAAP. The Closing Date Balance Sheet
shall be accompanied by an additional schedule of information (the
" Closing Date Schedule of Net Assets ") which shall
accurately present the Net Assets purchased by the Buyer as at the
Closing Date (the " Closing Date Net Assets ").
5
1.8 Purchase Price Adjustments; Deemed
Satisfaction of Promissory Note B . The Purchase Price may be
adjusted in accordance with the following:
(a) The principal amount of Promissory Note B may be adjusted as
follows:
-
(i) Any amounts in excess of $1,750,000 paid by the Buyer to pay
off the Seller’s line of credit with RBC Centura shall be
deducted from the original principal amount of Promissory Note
B;
(ii) Intentionally deleted.
(iii) In the event that any other mutually agreeable adjustments
are necessary, then the Purchase Price will be further adjusted by
increasing or decreasing the principal amount of Promissory Note B.
For example, if the Buyer and the Seller disagree as to the value
of any Purchased Asset, then the Buyer will pay the Seller the
stated book value for the subject Purchased Asset. The Seller will
then have a period of 24 months following the Closing to sell such
Purchased Asset. If the Seller is unable to sell such Purchased
Asset for at least the stated book value, then the Purchase Price
shall be reduced dollar for dollar and shall be reflected by a
reduction in Promissory Note B. If the Seller is able to sell the
subject Purchased Asset for more than the stated book value, then
the difference between the stated book value and the sales proceeds
for such Purchased Asset shall be divided equally between the Buyer
and the Seller and paid to the Seller within 10 days after
sale.
(b) The principal amount of Promissory Note B may also be
adjusted as follows: The Purchase Price is based on the assumption
that adjusted EBITDA of the Seller for the 2007 fiscal year will be
at least $930,000. In the event that adjusted EBITDA for fiscal
year 2007 is less than $930,000, the Purchase Price will be
adjusted downward dollar for dollar for each dollar by which
adjusted EBITDA is less than $930,000 for such fiscal year. The
amount of any such adjustment shall be deducted from the principal
amount due under Promissory Note B. In the event that adjusted
EBITDA for fiscal year 2007 is greater than $930,000, the Purchase
Price will be adjusted upward dollar for dollar for each dollar by
which EBITDA exceeds $930,000 for such fiscal year. The amount of
any such adjustment shall be added to the principal amount due
under Promissory Note B. By way of illustration, (A) if the
adjusted EBITDA amount is $630,000 for the 2007 fiscal year, the
Purchase Price shall be decreased by $300,000 and the principal
amount of Promissory Note B shall be likewise reduced; and
(b) if the adjusted EBITDA amount is $1,230,000, the Purchase
Price shall be increased by $300,000 and the principal amount of
Promissory Note B shall be likewise increased. Such adjustment, if
any, shall be determined based on the Devant division’s
adjusted EBITDA for the year ended December 31, 2007 as set
forth in Forefront Holdings’ Annual Report on Form 10-KSB for
the year then ended, and the amount of such adjustment shall be
finalized within 10 days of the filing of such Annual Report on
Form 10-KSB with the SEC.
In determining the EBITDA for the 2007 fiscal year, the Buyer
shall prepare an income statement of the Devant division of the
Buyer normalized to reflect what the income statement of the Seller
for such period would have been had the Purchased Assets not been
sold to the Buyer and had such income statement been prepared in
the same manner as the Seller’s income statements were
prepared prior to Closing (including, without limitation, year-end
adjustments to inventory balances, reserves and allowances and
year-end accruals consistent with past practices of the Company)
(the " Normalized Income Statement "). The following are
examples of some of the types of adjustments to the income
statement for such period that will be reflected in the Normalized
Income Statement: (i) the Normalized Income Statement will not
include any
6
expenses or taxes paid, accrued or incurred by
the Buyer in connection with the transactions contemplated by this
Agreement; (ii) in the event that a facility of the Buyer is
closed or merged into or consolidated with the operations of
another facility, the Normalized Income Statement will reflect what
the consolidated income statement of the Devant division for such
period would have been had such closing, merger or consolidation
had not occurred; (iii) in the event that the Buyer acquires
any other business or product line, the results of such acquisition
and all expenses related to the acquisition and operation thereof
shall be excluded from the Normalized Income Statement;
(iv) in the event of any dispute relating to this Agreement,
all expenses of the Buyer related to the resolution of such dispute
shall be excluded from the Normalized Income Statement; (v) to
the extent that any related party transactions occurring after the
Closing Date are reflected on the books of the Buyer on terms other
than arms length terms, such transactions will be reflected in the
Normalized Income Statement as if they had been made on arms length
terms; (vi) to the extent that after the Closing the
compensation paid to employees is increased (other than increases
of compensation in the ordinary course of business consistent with
the Seller’s past practices), the Normalized Income Statement
will reflect the level of compensation expense that would have been
realized had such increase in compensation not occurred; and
(vii) to the extent that after the Closing, the Buyer acquires
any new capital equipment for any purpose other than to replace
existing equipment, the earnings and expenses related to such new
equipment will be excluded from the Normalized Income Statement to
the extent that such earnings and equipment are used to process
(a) business for a new customer that has not been a customer
of Seller during the twelve (12) month period immediately
preceding the Closing or (b) business for an existing customer
of the Company that is in excess of the average monthly volumes
processed for such customer during the preceding twelve-month
period.
(c) In addition to the foregoing, Promissory Note B may be
satisfied with the Common Shares as set forth herein. As of
April 15, 2009, the Buyer has a good faith belief that the
fair market value of the Common Shares will be at least $5.00 per
share (based on the 30 day moving average trading price of
Forefront Holdings’ common stock as quoted on the OTC
Bulletin Board or other established market (the " 30-Day
Value ")) and that such Common Shares will be saleable at such
price on a national exchange or other established market on
April 15, 2009.
-
(i) In the event that on April 15, 2009, the aggregate
value of the Common Shares (based on the 30-Day Value) is less than
the then outstanding principal amount of Promissory Note B, then
(1) the principal balance of Promissory Note B (as such amount
may be adjusted as provided herein) shall be reduced by the value
of the Common Shares as of such date (based on the 30-Day Value),
and (2) the Buyer shall pay the residual balance of Promissory
Note B in cash (provided that, any such payment is subject to the
subordination agreement entered into between the Seller and the
Buyer’s senior lender).
(ii) In the event that on April 15, 2009, the aggregate
value of such Common Shares (based on the 30-Day Value) is equal to
or greater than the then outstanding principal amount of Promissory
Note B, then Promissory Note B shall be deemed paid and satisfied
in full. In the event that there has been one or more downward
adjustments to Promissory Note B in accordance with this
Section 1.8 and the aggregate value of the Common Shares
(based on the 30-Day Value) is greater than the then outstanding
principal amount of Promissory Note B, then the Seller shall
immediately pay to the Buyer an amount in cash equal to the lesser
of (1) the shortfall amount between
7
provided , however , that the Seller may pay such
amount by transferring to the Buyer that amount of Common Shares
having a value (based on the 30-Day Value) equal to the difference
between the aggregate value of all of the Common Shares and the
then outstanding principal amount of Promissory Note B in lieu of
paying such amount in cash.
If at any time prior April 15, 2009, the Seller shall sell
all or a portion of the Common Shares, which sale shall require the
prior written consent of the Buyer, then Promissory Note B shall be
reduced by an amount equal to the product of $5.00 and the amount
of Common Shares sold.
1.9 Pro-rations . All obligations due in respect of
periods prior to Closing shall be paid in full or otherwise
satisfied by the Seller and all obligations due in respect of
periods after Closing shall be paid in full or otherwise satisfied
by Buyer. Taxes, customer deposits, prepayments, employee accruals
and similar items identified on Schedule 1.9 hereto will be
prorated at Closing.
1.10 Closing and Closing Date .
(a) The closing (the " Closing ") of the transactions
herein contemplated shall occur no later than ten Business Days
following the satisfaction of the conditions to Closing set forth
herein (such time and date being referred to herein as the "
Closing Date "), at such place or places and in such manner
as the parties shall reasonably agree. Notwithstanding the
foregoing, the Closing shall be held no later than
December 19, 2006 (unless otherwise agreed in writing by the
parties).
(b) At the Closing, the Seller Responsible Parties shall
deliver, or caused to be delivered, to the Buyer the following
items:
-
(i) a duly executed bill of sale and such other executed
assignments, bills of sale or certificates of title, each dated the
Closing Date and in form and substance reasonably satisfactory to
counsel to Buyer, as are reasonably necessary to transfer to Buyer
all of Seller’s right, title and interest in, to and under
the Purchased Assets and the Assumed Contracts;
(ii) duly executed assignments, sufficient to transfer all of
Seller’s right, title and interest in and to the Intellectual
Property Rights to Buyer, in a form suitable for recording in the
various appropriate national or regional patent, trademark,
copyright offices or other governmental offices;
(iii) certificate of the secretary of the Seller, dated the
Closing Date, (A) as to the incumbency and signatures of the
officers or representatives of the Seller executing this Agreement
and each of the agreements and any other certificate or other
document to be delivered pursuant hereto or thereto, together with
evidence of the incumbency of such Secretary, and
(B) certifying attached resolutions of the Board of Directors
and shareholders of the Seller, which authorize and approve the
execution and delivery of this Agreement and each of the agreements
to which Seller is a party and the consummation of the transactions
contemplated hereby and thereby;
8
-
(iv) duly executed letters, in the form of
Exhibit D attached hereto, whereby the Seller notifies its
customers and distributors of the consummation of the Sale and
instructs such customers and distributors to remit payment relating
to the Purchased Assets directly to the Buyer;
(v) duly executed letters, in the form of Exhibit E
attached hereto, whereby the Seller notifies its suppliers, vendors
and lessors of the consummation of the Sale;
(vi) duly executed lease agreement and landlord waiver, in the
form of Exhibit F attached hereto, for the Premises; and
(vii) duly executed subordination agreement in form and content
acceptable to the Seller and principal lender of Buyer and
ForeFront Holdings (along with any other documents which such
lender may reasonably request).
(c) At the Closing, the Buyer shall deliver, or caused to be
delivered, to the Seller the following items:
-
(i) the Closing Cash Payment;
(ii) the duly executed Promissory Note A in the form of
Exhibit A attached hereto;
(iii) the duly executed Promissory Note B in the form of
Exhibit B attached hereto;
(iv) the duly executed Promissory Note C in the form of
Exhibit C attached hereto;
(v) stock certificate(s) evidencing the Common Shares;
(vi) certificate of the secretary of the Buyer, dated the
Closing Date, (A) as to the incumbency and signatures of the
officers or representatives of Buyer executing this Agreement and
each of the agreements and any other certificate or other document
to be delivered pursuant hereto or thereto, together with evidence
of the incumbency of such Secretary, and (B) certifying
attached resolutions of the Board of Directors of the Buyer, which
authorize and approve the execution and delivery of this Agreement
and each of the agreements to which Buyer is a party and the
consummation of the transactions contemplated hereby and
thereby;
(vii) certificate of the secretary of ForeFront Group, dated the
Closing Date, (A) as to the incumbency and signatures of the
officers or representatives of ForeFront Group executing this
Agreement and each of the agreements and any other certificate or
other document to be delivered pursuant hereto or thereto, together
with
9
-
evidence of the incumbency of such Secretary, and
(B) certifying attached resolutions of the Board of Directors
of ForeFront Group, which authorize and approve the execution and
delivery of this Agreement and each of the agreements to which
ForeFront Group is a party and the consummation of the transactions
contemplated hereby and thereby;
(viii) certificate of the secretary of ForeFront Holdings, dated
the Closing Date, (A) as to the incumbency and signatures of
the officers or representatives of ForeFront Holdings executing
this Agreement and each of the agreements and any other certificate
or other document to be delivered pursuant hereto or thereto,
together with evidence of the incumbency of such Secretary, and
(B) certifying attached resolutions of the Board of Directors
of ForeFront Holdings, which authorize and approve the execution
and delivery of this Agreement and each of the agreements to which
ForeFront Holdings is a party and the consummation of the
transactions contemplated hereby and thereby;
(ix) duly executed employment agreement, in the form of
Exhibit G attached hereto, entered into between the Buyer
and James M. Sheppard, Jr.;
(x) duly executed lease agreement, in the form of Exhibit
F attached hereto, for the Premises; and
(xi) duly executed Guaranty Agreements executed by ForeFront
Group and ForeFront Holdings, each in the form of Exhibit H
attached hereto, whereby ForeFront Group and ForeFront Holdings
guarantee the obligations of the Buyer under Promissory Note A,
Promissory Note B and Promissory Note C which Guaranty Agreements
shall be subject to the terms of the subordination agreement
executed by Seller and Buyer’s senior lender.
(d) At the Closing, each of the parties hereto shall take, or
cause to be taken, all such actions and deliver, or cause to be
delivered, all such other documents, instruments, certificates and
other items as may be required under this Agreement or otherwise,
in order to perform or fulfill all covenants and agreements on its
part to be performed at or prior to the Closing Date.
1.11 Taking of Necessary Action; Further Action;
Cooperation .
(a) Each of the parties shall use its respective reasonable best
efforts to take all such action as may be necessary or appropriate
in order to effectuate the Closing as promptly as possible. If, on
or at any time after the Closing Date, any further reasonable
action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Buyer with full right, title and
possession to all assets, property, rights, privileges, powers, and
franchises of the Purchased Assets, the Seller Responsible Parties
shall take, and shall ensure that the officers of the Seller are
fully authorized, in the name of the Seller or otherwise, to take,
and shall take, all such lawful and necessary action, all at the
expense of the Buyer.
(b) The Seller Responsible Parties and the Buyer shall generally
cooperate with each other and their respective officers, employees,
attorneys, accountants and other agents and do such other acts and
things in good faith as may be reasonable, necessary or appropriate
to timely effectuate the intent and purposes of this Agreement and
the consummation of the Sale. In connection with these efforts,
each of the parties hereto shall use its commercially
reasonable
10
efforts to (i) take, or cause to be taken,
all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under any Law or otherwise to
consummate and make effective the transactions contemplated by this
Agreement; (ii) obtain any third party consents, licenses,
permits, waivers, approvals, authorizations or orders required to
be obtained or made in connection with the authorization, execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby, including the consents set forth
on Schedule 1.10 , approvals or waivers in respect of
contracts which are being assumed by the Buyer; and (iii) make
all filings and give any notice, and thereafter make any other
submissions either required or reasonably deemed appropriate by
each of the parties, with respect to this Agreement and the
transactions contemplated hereby required under any Law, including
applicable securities and antitrust Laws.
1.12 Allocation of Consideration . The parties agree that
the Purchase Price for the Purchased Assets shall be allocated to
and among the Purchased Assets, in a manner consistent with
Sections 338 and 1060 of the Code and the regulations thereunder
and as set forth in Forefront Holdings’ Current Report on
Form 8-K and any amendments thereto to be filed with the SEC in
connection with the transactions contemplated hereby. The parties
shall file all Tax Returns (including amended returns and claims
for refund) and information reports in a manner consistent with
such allocation. The parties agree to provide such cooperation and
information as may be required by the other for the purpose of
preparing such reports. The parties further agree that a portion of
the Purchase Price equal to the value of the Closing Date Net
Assets shall be allocated to the Purchased Assets based on the book
values of such Purchased Assets, and that the remaining portion of
the Purchase Price shall be allocated to goodwill.
Article 2. Representations and Warranties of the Seller
Responsible Parties.
In order to induce the Buyer to enter into this Agreement and
purchase the Purchased Assets, each of the Seller and James M.
Sheppard, Jr., jointly and severally, makes the following
representations and warranties to the Buyer, which representations
and warranties shall be true and correct as of the date hereof:
2.1 Disclosure Schedules; Due Diligence Information;
Access .
(a) The Seller Responsible Parties have delivered to the Buyer
the Disclosure Schedule, which includes the numbered schedules
specifically referred to in this Article 2 (the " Disclosure
Schedule "). The information contained in the Disclosure
Schedule is complete and accurate, and all documents that are
attached to or form a part of the Disclosure Schedule are complete
and accurate copies of the genuine original documents they purport
to represent. References to Schedules in this Agreement shall be to
Schedules included in the Disclosure Schedule.
(b) All of the documents, financial statements, reports,
compilations, management and statistical reports and other
information provided by the Seller to the Buyer in response to
Buyer’s due diligence investigation of the Business and the
Purchased Assets are true, correct and complete in all material
respects.
(c) The Seller has given the Buyer and its representatives
reasonable access to Seller’s employees (including
appropriate experts and other knowledgeable personnel), attorneys,
accountants, agents, independent contractors, properties, books and
records of the
11
Seller and has furnished the Buyer and its
representatives with such information concerning the Seller as the
Buyer has reasonably requested, including such access and
cooperation as may be necessary to allow the Buyer and its
representatives to:
-
(i) identify those contracts and Permits that require third
party consent to the transactions contemplated hereby, those that
expire or may be terminated prior to or soon after the Closing and
those that may require special documentation at the Closing;
and
(ii) review any arrangements with respect to those assets that
will be assigned or transferred to the Buyer at the Closing in
accordance with the terms of this Agreement.
2.2 Organization and Standing . The Seller is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of North Carolina and has all
requisite corporate power and authority to own, lease and operate
its properties and assets and to conduct its business as it is now
being conducted. The Seller is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
state in which the operation of its business or ownership of its
assets makes such qualification necessary, except where the failure
to so qualify or be in good standing could not reasonably be
expected to have a Material Adverse Effect. The copies of the
articles of incorporation and bylaws or other organizational
documents which have been delivered to the Buyer are true, accurate
and complete in all material respects. The Seller does not have any
subsidiaries and does not own or have any right to acquire any
equity interest in any other Person. The Seller does not presently
own or control, directly or indirectly, any interest in any other
corporation, association, or other business entity. The Seller is
not a participant in any joint venture, partnership or similar
arrangement.
2.3 Binding Agreement . The Seller has all requisite
corporate power and authority to enter into this Agreement, to
execute and deliver this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Seller and the
consummation by the Seller of its obligations hereunder have been
duly and validly authorized by all necessary corporate and
stockholder action on the part of the Seller. This Agreement has
been duly executed and delivered on behalf of the Seller and,
assuming the due authorization, execution and delivery by the
Buyer, constitutes a legal, valid and binding obligation of the
Seller enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting
creditors’ rights and remedies generally and to general
principles of equity. As of the Closing Date, each of the
agreements, instruments and other documents to be delivered
hereunder to the Buyer at the Closing will have been duly and
validly executed and delivered by the Seller and will be
enforceable against the Seller in accordance with its terms.
2.4 Absence of Violations; Required Consents .
(a) The execution, delivery and performance by the Seller of
this Agreement and the consummation of the transactions
contemplated hereby do not and will not (a) violate or result
in the breach or default of any provision of articles, certificates
of incorporation, by-laws or other charter or corporate governance
documents of the Seller, (b) violate any Law or Governmental
Order applicable to the Seller or any of its properties or assets,
(c) except for the Required Consents, require any consent,
approval, authorization or other order of, action by,
12
registration or filing with or declaration or
notification to any Governmental Authority or any other Person or
(d) result in any violation or breach of, constitute a default
(or event which with the giving of notice, or lapse of time or
both, could reasonably be expected to become a default) under,
require any consent under, or give to others any rights of notice,
termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any Encumbrance on
the Purchased Assets, or result in the imposition or acceleration
of any payment, time of payment, vesting or increase in the amount
of compensation or benefit payable, pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease,
license or permit, or franchise to which the Seller is a party or
by which its assets are bound.
(b) The Seller has obtained all of the Required Consents. The
Seller does not need to give any notice to, make any filing with or
obtain any authorization, consent or approval of any Governmental
Authority in order for the parties to consummate the transactions
contemplated by this Agreement. A true and complete list of all
third party (including, without limitation, lenders, lessors,
licensees, licensors, distributors and vendors) consents, licenses,
permits, waivers, approvals, authorizations or orders obtained or
made in connection with the authorization, execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby and the continuation in force of any rights,
licenses, permits, authorizations, agreements, instruments or
documents of the Seller is set forth on Schedule 2.4(b)
attached hereto. Without limiting the generality of the foregoing,
the Seller has obtained the consent and release of liens from RBC
Centura. Except as disclosed in Schedule 2.4(b), the Assumed
Contracts are assignable by the Seller without any consent of any
third parties and the assignment of the Assumed Contracts will not
cause any default in the performance of any of the terms,
covenants, conditions or agreements under the Assumed
Contracts.
(c) Neither any statute, rule, regulation, order, stipulation,
decree, judgment, or injunction has been enacted, promulgated,
entered, or enforced to the purchase nor any other action has been
taken by any Government Entity (i) which prohibits the
consummation of the transactions contemplated by this Agreement;
(ii) which prohibits Buyer’s ownership or operation of
all or any material portion of the Business or the Purchased
Assets, or which compels the Buyer to dispose of or hold separately
all or any portion of the Purchased Assets as a result of the
transaction contemplated herein; (iii) which makes the
purchase of, or payment for, some or all of the Purchased Assets
illegal; (iv) which imposes material limitations on the
ability of the Buyer to acquire or hold or to exercise effectively
all rights of ownership of the Purchased Assets; or (v) which
imposes any limitations on the ability of the Buyer effectively to
control in any material respect the Business or operations of the
Seller.
2.5 Entire Business . The Seller’s ownership of the
Business is evidenced solely by the Purchased Assets and the sale,
assignment, conveyance and delivery of the Purchased Assets to the
Buyer pursuant to this Agreement will transfer all of the
Seller’s and its Affiliates’ ownership interests
comprising such Business except for the Excluded Assets.
2.6 Financial Information . Attached hereto as
Schedule 2.6 are copies of the Seller’s unaudited
balance sheets and statements of income and cash flow as of and for
the calendar years ended on December 31 of 2004 through 2005
(the " Interim Financial Statements "). All such financial
statements are true, complete and correct in all material respects,
were prepared in accordance with accounting practices and
procedures historically used by the Seller applied on a consistent
basis throughout the periods covered thereby and present fairly the
financial condition of the Seller as of such dates and the results
of operations and cash flows for the periods then ended.
13
2.7 Absence of Certain Changes . Except as
set forth in Schedule 2.7 and in the unaudited balance sheet
of the Seller as at June 30, 2006 (" Interim Balance
Sheet ") and the Interim Financial Statements previously
delivered to the Buyer, since December 31, 2005 to the date of
this Agreement there has not been any change in the financial
condition or results of operations or cash flows of the Business or
in the condition of the Purchased Assets and the Business has not
suffered any damage, destruction or loss, in each case which has
had or which could reasonably be expected to have a Material
Adverse Effect.
2.8 No Undisclosed Liabilities . Except as set forth on
Schedule 2.8 , there are no liabilities associated with the
Business or the Purchased Assets (whether accrued, absolute,
contingent or otherwise), except for (i) liabilities of the
Business set forth or reserved against or disclosed in the
December 31, 2005 Balance Sheet or the notes thereto,
(ii) liabilities disclosed in this Agreement or the Disclosure
Schedules hereto or the other agreements contemplated by this
Agreement, (iii) liabilities incurred in the ordinary course
of business since the date of the December 31, 2005 Balance
Sheet and (iv) Excluded Liabilities.
2.9 Business Conduct . Neither the Seller nor any of its
officers, directors, employees or agents, nor persons acting under
the authority of any of the foregoing (i) have, to the
Knowledge of the Seller Responsible Parties, made, or have been
charged by any governmental authority with making, directly or
indirectly, any domestic or foreign payments for bribes or
kickbacks (governmental or commercial) or unlawful political
contributions or other questionable or illegal payments with
respect to the Business or to secure favorable treatment for the
Business or (ii) have maintained or permitted to exist any use
of "off the books" bookkeeping, secret accounts, unrecorded bank
accounts, "slush" funds, falsified books, or any other device that
could have been or could be utilized to distort records or reports
of the true operating results and financial condition of the
Business.
2.10 Title to Assets; Related Matters . (i) The
Seller has good, valid and marketable title (as measured in the
context of their current uses) to, or, in the case of leased or
subleased assets or other possessory interests, valid and
subsisting leasehold or other possessory interests (as measured in
the context of their current uses) in all of the Purchased Assets
in order to conduct the Business, free and clear of all
Encumbrances, (ii) the Purchased Assets constitute all the
assets and rights necessary for the operation of the Business as
currently conducted, (iii) the Equipment is in good operating
condition and repair, normal wear and tear excepted, and maintained
in accordance with industry practices taking into account the age
thereof, (iv) there are no assets, properties or rights
necessary to conduct the Business as the same was conducted
immediately prior to the date hereof that are owned by any Person
other than the Seller which assets, properties or rights are not to
be leased or licensed to Buyer under valid, current lease or
license arrangements and (v) there are no contractual or legal
restrictions to which the Seller is a party or by which the
Equipment is otherwise bound that preclude or restrict the
Seller’s ability to use the Equipment for the purposes for
which it is currently being used. The Seller enjoys peaceful and
undisturbed possession of all Equipment. The Equipment and other
tangible assets owned or used by the Seller have no known material
defects. None of the Purchased Assets is subject to any commitment
or other arrangement for its sale or use by the Seller, its
Affiliates or third parties. The assets reflected on the
December 31, 2005 Balance Sheet or acquired thereafter shall
be valued on the books of the Seller at or below the actual cost
less an adequate and proper depreciation charge. The Seller has not
depreciated any of the Purchased Assets on an accelerated basis (or
in any other manner) inconsistent with applicable requirements of
the Code.
14
2.11 Equipment and Other Tangible Assets .
The Equipment and other tangible assets which are included in the
Purchased Assets are in all material respects adequate for the
purposes for which such Purchased Assets are currently used or are
held for use, and are in good repair and operating conditions
(subject to normal wear and tear) and, to the Knowledge of the
Seller Responsible Parties, there are no facts or conditions
affecting the Purchased Assets which could, individually or in the
aggregate, interfere with any material respect with the use,
occupancy or operation thereof as currently used, occupied or
operated, or their adequacy for such use.
2.12 Absence of Certain Changes, Events and Conditions .
Since December 31, 2005, except as otherwise provided in or
contemplated by this Agreement or as set forth on Schedule
2.12 , the Seller has not:
(a) other than in the ordinary course of business consistent
with past practice, sold, transferred, leased, subleased, licensed,
encumbered or otherwise disposed of any Purchased Assets, other
than the sale of obsolete Equipment;
(b) permitted any of the Purchased Assets to be subjected to any
Encumbrance;
(c) made any changes, including changes to collection practices,
to be made in the operations of the Seller;
(d) made any commitments for the Seller to make capital
expenditures in excess of $20,000 individually or in the
aggregate;
(e) made any amendment of the articles of incorporation or
bylaws of the Seller;
(f) permitted any new agreement, contract, commitment or
arrangement, or amendments or modifications to any existing such
agreement, contract, commitment or arrangement, to be entered into
with any Affiliate of the Seller or any third parties that is
material to the Seller or that will continue in effect after the
Closing Date and not be terminable by the Seller on not more than
30 days’ written notice without payment of premium or
penalty;
(g) other than in the ordinary course of business consistent
with past practice, entered into any new Material Contract or any
amendments or modifications to any existing such Material
Contract;
(h) borrowed any amount or incurred or become subject to any
liabilities, except trade payables incurred in the ordinary course
of business and liabilities under contracts entered into in the
ordinary course of business (excluding any capital lease
obligations);
(i) discharged or satisfied any material Encumbrance or paid any
material obligation or liability, other than in the ordinary course
of business;
(j) declared, set aside or made any payment or distribution of
cash or other property to its stockholders with respect to its
capital stock or other equity securities or
15
purchased or redeemed any shares of its capital
stock or other equity securities (including, without limitation,
any warrants, options or other rights to acquire its capital stock
or other equity securities);
(k) sold, assigned or transferred any material Intellectual
Property Rights or disclosed any proprietary confidential
information to any Person;
(l) other than in the ordinary course of business consistent
with past practice, granted any increase, or announced any
increase, in the wages, salaries, compensation, bonuses,
incentives, pension or other benefits payable to any of the
officers, employees, independent contractors or agents, including,
without limitation, any increase or change pursuant to any Employee
Benefit Plan, or established, increased or accelerated the payment
or vesting of any benefits under any Employee Benefit Plan with
respect to officers or employees;
(m) made any material change in any method of accounting or
accounting practice or policy, including, without limitation,
material changes in assumptions underlying or methods of
calculating bad debt, contingency or other reserves, or notes or
accounts receivable write-offs, or in corporate allocation
methodology, in each case other than changes required by Law or
under GAAP;
(n) suffered any casualty loss or damage with respect to any
assets, whether or not covered by insurance;
(o) incurred or guaranteed any indebtedness for borrowed money
other than indebtedness repaid at or prior to the Closing or
indebtedness that will constitute Excluded Liabilities;
(p) other than in the ordinary course of business consistent
with past practice, deferred the payment of any accounts
payable;
(q) made any loans, advances or capital contributions to, or
investments in, any other Person, other than in the ordinary course
of business;
(r) merged or consolidated with, or acquired any equity or all
or substantially all of the assets of, any other Person;
(s) experienced any material adverse change in the condition,
financial or otherwise, business, assets or rights of the
Seller;
(t) conducted the Business outside of the ordinary and usual
course consistent with past practice;
(u) compromised, settled, granted any waiver or release relating
to, or otherwise adjusted any Action, Indebtedness or any other
claims or rights; or
(v) entered into any agreement, contract, commitment or
arrangement to do any of the foregoing.
16
2.13 Litigation .
(a) Except as set forth on Schedule 2.13 , as of the date
hereof: (i) there are no Actions against the Seller pending,
or, to the Knowledge of the Seller Responsible Parties, threatened
to be brought against the Seller or the Business, (ii) the
Seller is not subject to any Governmental Order (nor, to the
Knowledge of the Seller Responsible Parties, are there any such
Governmental Orders threatened to be imposed by any Governmental
Authority), in each case with respect to the Seller or the
Business; and (iii) there is no Action pending, or, to the
Knowledge of the Seller Responsible Parties, threatened to be
brought that seeks to question, delay or prevent the consummation
of the transactions contemplated hereby. As of the date hereof, no
preliminary or permanent injunction or other order issued by any
United States federal or state Governmental Authority, nor any Law
promulgated or enacted by any United States federal or state
Governmental Authority, that restrains, enjoins or otherwise
prohibits the transactions contemplated hereby or limits the
ability in any respect of the rights of the Seller to hold its
assets and conduct its present, planned or prospective business, or
imposes civil or criminal penalties on any stockholder, director or
officer of the Buyer if such transactions are consummated, is in
effect
(b) Schedule 2.13 lists the following for the period from
January 1, 2003 to the present (and, in the case of clause
(z), any other matter referred to therein which is currently in
effect): (x) all fines (civil and criminal), penalties imposed
by any governmental agency or authority (other than short or
long-term disability or medical claims), (y) actions,
administrative or arbitration proceedings requiring a payment by
the Seller in excess of $10,000 (other than short or long-term
disability claims) and (z) any final order, writ, judgment,
injunction, decree, determination or other award of any court or
any governmental agency which are related to the Business or the
Purchased Assets.
2.14 Insurance . The insurance policies of the Seller are
listed on Schedule 2.14 . The insurance policies to which
the Seller is a party or under which the Seller is covered as an
additional named insured or otherwise (or replacement policies
therefor) are (i) in full force and effect, and the Seller has
paid all premiums due and, to the Knowledge of the Seller, the
Company is not in default of such policies; and
(ii) sufficient for compliance by the Seller with all
applicable requirements of Law and all agreements to which the
Seller is a party or subject, in each case with respect to the
Business. The Seller has not received any notice of cancellation or
non-renewal with respect to, or disallowance of any claim under,
any such policy. The Seller has not been refused insurance, nor has
coverage been previously canceled or materially limited, by an
insurer to which the Seller has applied for such insurance, or with
which the Seller has held insurance, within the last three
years.
2.15 Material Contracts .
(a) Schedule 2.15 sets forth all Material Contracts as of
the date hereof.
(b) Each Material Contract of the Seller that is intended to be
binding upon the parties thereto is legal, valid and binding on the
Seller and, to the Knowledge of the Seller Responsible Parties, the
other parties thereto, and is enforceable against the Seller and,
to the Knowledge of the Seller Responsible Parties, the other
parties thereto in accordance with the terms thereof.
17
(c) The Seller has performed its obligations
under each such Material Contract and the Seller is not in default
under any such Material Contract and no condition exists nor event
has occurred which with the passage of time or the giving of notice
or both could reasonably be expected to result in a material
default, material breach or event of material noncompliance by the
Seller under any such Material Contract.
(d) The Seller does not have any present expectation or
intention of not fully performing all its material obligations
under each such Material Contract.
(e) To the Knowledge of the Seller Responsible Parties, no other
party to any of the Material Contracts has breached or is in
default thereunder.
(f) The Seller has delivered copies, which are true, correct and
complete, of each Material Contract and all amendments thereto and
documentation or correspondence modifying the terms thereof to the
Buyer.
(g) Except for the Material Contracts, the Seller is not a party
to (or, in the case of clause (v) below, the holder of) any
written or oral: (i) commitment, contract, note, loan,
evidence of indebtedness, purchase order or letter of credit
involving any obligation or liability on the part of the Seller of
more than $10,000 (and not more than $50,000 in the aggregate for
related instruments) and not cancelable (without further liability)
on not more than 30 days’ notice; (ii) lease of real
property; (iii) lease of personal property involving any
annual expense in excess of $5,000 and not cancelable without
further liability within 30 days; (iv) contracts and
commitments not otherwise described above which materially affect
the Business and which are not entered into in the ordinary course
of business; (v) contracts or agreements containing covenants
limiting the freedom of the Seller to engage in any line of
business or compete with any person; (vi) contracts,
commitments, licenses or permits containing any "change in control"
or "parachute payment" provision, as those terms are commonly
understood, including without limitation those which would be
triggered by the execution, delivery or consummation of the
transactions contemplated by this Agreement, including without
limitation, any right of termination, right of payment or
acceleration of any other right under such contracts, commitments,
licenses or permits; (vii) contracts, commitments or
agreements which impose any duty of confidentiality or
nondisclosure (other than customer agreements that contain
confidentiality or nondisclosure provisions);
(viii) employment or severance contracts, plans or
arrangements; or (ix) Tax sharing or similar agreements.
(h) No customer which is a party to a Material Contract is
entitled to any retroactive pricing, refund, rebate, price
adjustment or other financial settlement for charges in excess of
$5,000 relating to the sales by the Business.
(i) The sale of the Purchased Assets hereunder will not result
in a default under or the termination of any Material Contract.
(j) Except as set forth on Schedule 2.15 , there are no
contracts for the sale of goods or services by the Seller as to
which at the time of the most recent scheduled contract milestone
for any such Contract the work scheduled was more than sixty
(60) days late.
(k) Except as set forth on Schedule 2.15 , there are no
contracts, options or bids for the sale of goods or services by the
Seller which include a liquidated damages clause for late
delivery.
18
2.16 Accounts Receivable . All of the
accounts receivable of the Seller reflected on the Interim Balance
Sheet are collectible, actual and bona fide receivables
representing obligations for the total dollar amount thereof shown
on its books, subject to no defenses or counterclaims;
provided , however , that neither the Seller nor the
Seller Responsible Parties makes any representation that such
accounts receivable or other debts will actually be collected
following the Closing. No reserves for bad debt in excess of the
amounts thereof on June 30, 2006 are required by GAAP. The
allowance for doubtful accounts set forth in the Interim Balance
Sheet is adequate in accordance with GAAP. The revenue in respect
of the sales that gave rise to such receivables have been properly
invoiced to customers and properly recognized in accordance with
GAAP. Schedule 2.16 hereto accurately lists as of the date
hereof, all receivables arising out of or relating to the Business
in excess of $2,500, the amount owing, and the aging of such
receivable, the name and last known address of the party from whom
such receivable is owing, and any security in favor of the Seller
for the repayment of such receivable which the Seller purports to
have. Since June 30, 2006, the Seller has collected its
receivables and payments under all Contracts in accordance with
past business practices and has not negotiated for or accepted
advance payments nor accelerated the collection of any such
receivables or payments.
2.17 Inventory . All of inventories are of good usable
and merchantable quality in all material respects and do not
include obsolete or discontinued items. All inventories:
(i) are of such quality as to meet the quality controls of the
Buyer and any applicable governmental quality control standards;
(ii) that are finished goods are saleable as current
inventories at the current prices thereof in the ordinary course of
business; and (iii) are recorded in the books of the Business
at the lower of cost or market value. No write-down in inventory
has been made or should have been made in the past two years,
except as set forth on Schedule 2.17 hereto.
2.18 Permits and Licenses; Compliance with Law .
(a) The Seller currently holds all foreign, federal, state and
local permits, licenses, authorizations, certificates, exemptions
and approvals of Governmental Authorities or other Persons
including, without limitation, Environmental Permits, necessary to
conduct the businesses in which they are engaged and to own and use
the facilities and properties owned and used by them (collectively,
" Permits "). Each such Permit is valid and in good standing
with the issuer of the Permit and not subject to any proceedings
for suspension, modification or revocation. Without limiting the
generality of the foregoing: (i) the Seller has not received
any written notice from any Governmental Authority revoking,
canceling, rescinding, materially modifying or refusing to renew
any Permit and (ii) the Seller is in compliance in all
material respects with the requirements of all Permits. All such
Permits held by the Seller are assignable to the Buyer, and no
governmental approvals are required for such assignment, except in
each case as set forth on Schedule 2.18 . The sale of the
Purchased Assets hereunder will not result in a default under or
the termination of any such Permit.
(b) (i) The Seller is in compliance with all Laws (including,
without limitation, with respect to affiliate transactions) and
Governmental Orders applicable to the Business and (ii) the
Seller has not been charged at any time with a violation of any Law
or any Governmental Order relating to the conduct of the Business.
This Section 2.18(b) does not apply to Real Property (for
which Section 2.18(c) applies), environmental matters (for
which Section 2.19 applies), employee benefit matters (for
which Sections 2.20 and 2.29 apply), health and safety conditions
(for which Section 2.21 applies), labor relations (for which
Section 2.23 applies) and securities laws (for which
Section 2.30 applies).
19
(c) The Seller has not received any written
notice that the Seller is in violation in any respect of any zoning
regulation, building restriction, restrictive covenant, ordinance
or other Law relating to any Real Property that the Seller owns
including the Premises. The Premises is not the subject of any
condemnation action and there is no proposal under consideration by
any Governmental Authority or entity to condemn the
Premises.
2.19 Environmental Matters . Except as set forth in
Schedule 2.19, (i) Hazardous Materials have not been Released
on any Real Property except in compliance with applicable Law;
(ii) there have been no events related to the Seller or the
Real Property that could give rise to liability under any
Environmental Law; (iii) the Seller is now, and has for the
past three years been, in compliance in all material respects with
all applicable Environmental Laws and there are no extant
conditions that could reasonably be expected to constitute an
impediment to such compliance in the future; (iv) the Seller
has disposed of all wastes containing Hazardous Materials in
compliance with all applicable Environmental Laws (including the
filing of any required reports with respect thereto) and
Environmental Permits; (v) there are no pending or, to the
Knowledge of the Seller Responsible Parties, threatened
Environmental Claims against the Seller relating to the Real
Property or the operations of the Business; (vi) there is no
environmental remediation or other environmental response occurring
on any Real Property (including any easements, rights-of-way or
other possessory interests in the real property of others) nor has
the Seller issued a request for proposal or otherwise requested an
environmental contractor to begin plans for any such environmental
remediation or other environmental response; and (vii) the
Seller has not received any notice and does not have Knowledge of
any circumstances related to liability, under CERCLA or any
analogous state law.
2.20 Employee Benefit Matters . The Seller has delivered
true, accurate and complete copies of all Employee Benefit Plans
applicable to any employee of the Seller. All such Employee Benefit
Plans are in compliance with the terms of the applicable plan and
the requirements prescribed by applicable law currently in effect
with respect thereto, and the Seller has performed in all material
respects all obligations required to be performed by it thereunder.
The Seller has no Union Employees. The Seller has not incurred and
no event, transaction or condition has occurred or exists which
could result in the occurrence of, any liability to the Pension
Benefit Guaranty Corporation or any "withdrawal liability" within
the meaning of Section 4201 of ERISA, or any other liability
pursuant to Title I or IV of ERISA or the penalty, excise tax or
joint and several liability provisions of the Code relating to
employee benefit plans, in any such case relating to any Employee
Benefit Plan or any pension plan maintained by any company that
would be treated as a single employer with the Seller under
Section 4001 of ERISA or Section 414 of the Code (an "
ERISA Affiliate "). Except as set forth in Schedule
2.20 , the Seller does not have in effect an Employee Benefit
Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code. The consummation of the
transactions contemplated by this Agreement will not
(i) entitle any current or former employee or officer of the
Seller or any ERISA Affiliate to severance pay, unemployment
compensation or other payment, or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any
such employee or officer. There are no pending, or, to the
Knowledge of the Seller, threatened or anticipated claims by or on
behalf of any Employee Benefit Plan, by any employee or beneficiary
covered under any such plan, or otherwise involving any such plan
(other than routine claims for benefits). Except as set forth in
Schedule 2.20 , the Seller does not cont
|
