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EXHIBIT 10.1
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EXECUTION COPY
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
NAGALV - OHIO, INC.
AND
GREGORY INDUSTRIES, INC.
DATED AS OF FEBRUARY 28, 2005
<PAGE>
TABLE OF
CONTENTS
Page
----
ARTICLE I
DEFINITIONS.........................................................
9
Section 1.1.
Definitions............................................... 9
Section 1.2. Other
Definitions.........................................12
ARTICLE II PURCHASE AND
SALE..................................................14
Section 2.1. Agreement to Purchase and
Sell............................14
Section 2.2.
Assets....................................................14
Section 2.3. Excluded
Assets...........................................15
Section 2.4. Assumed
Liabilities.......................................16
Section 2.5. Excluded
Liabilities......................................17
ARTICLE III PURCHASE PRICE; ADJUSTMENTS;
ALLOCATIONS..........................18
Section 3.1. Purchase
Price............................................18
Section 3.2. Payment of Purchase
Price.................................18
Section 3.3. Allocation of Purchase
Price..............................18
Section 3.4. Allocation of Certain
Items...............................18
Section 3.5. Adjustment of Purchase Price for Accounts
Receivable......19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
COMPANY..........................19
Section 4.1.
Organization..............................................19
Section 4.2.
Authorization.............................................19
Section 4.3. Absence of Restrictions and
Conflicts.....................20
Section 4.4. Real
Property.............................................20
Section 4.5. Title to Assets; Related
Matters..........................21
Section 4.6. Financial
Statements......................................22
Section 4.7. Inventory and
Products....................................22
Section 4.8. No Undisclosed
Liabilities................................23
Section 4.9. Absence of Certain
Changes................................23
Section 4.10. Legal
Proceedings.........................................23
Section 4.11. Compliance with
Law.......................................23
Section 4.12. Company
Contracts.........................................24
Section 4.13. Insurance
Policies........................................25
Section 4.14. Environmental, Health and Safety
Matters..................26
Section 4.15. Intellectual Property;
Software...........................27
Section 4.16. Transactions with
Affiliates..............................28
Section 4.17. Nondisclosed
Payments.....................................29
Section 4.18. Customer and Supplier
Relations...........................29
Section 4.19. Notes and Accounts
Receivable.............................30
Section 4.20. Licenses and
Permits......................................30
Section 4.21. Brokers, Finders and Investment
Bankers...................31
Section 4.22. Product and Service
Warranties............................31
Section 4.23. Ethical
Practices.........................................31
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Section 4.24.
Disclosure................................................31
Section 4.25.
Solvency..................................................32
Section 4.26.
Representations...........................................32
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
PURCHASER.........................32
Section 5.1.
Organization..............................................32
Section 5.2.
Authorization.............................................33
Section 5.3. Absence of Restrictions and
Conflicts.....................33
Section 5.4. Brokers, Finders and Investment
Bankers...................33
Section 5.5. Additional Representations and
Warranties.................34
ARTICLE VI CERTAIN COVENANTS AND
AGREEMENTS...................................34
Section 6.1. Conduct of Business by the
Company........................34
Section 6.2. Inspection and Access to
Information......................36
Section 6.3. Notices of Certain
Events.................................37
Section 6.4. Interim
Financials........................................38
Section 6.5. No Solicitation of
Transactions...........................38
Section 6.6. Reasonable Efforts; Further Assurances;
Cooperation.......38
Section 6.7.
Consents..................................................39
Section 6.8. Public
Announcements......................................40
Section 6.9. Supplements to
Schedules..................................40
Section 6.10.
Insurance.................................................41
Section 6.11.
Non-Competition...........................................41
Section 6.12. Trademarks;
Tradenames....................................43
Section 6.13. Risk of
Loss..............................................43
Section 6.14. Customer
Visits...........................................43
Section 6.15. Payment of Retained
Liabilities...........................43
Section 6.16. Removing Excluded
Assets..................................44
Section 6.17. Customer and Other Business
Relationships.................44
ARTICLE VII TAX
MATTERS.......................................................44
Section 7.1.
Definitions...............................................44
Section 7.2. Tax
Matters...............................................45
Section 7.3. Tax Cooperation; Allocation of
Taxes......................45
ARTICLE VIII EMPLOYEE
BENEFITS................................................46
Section 8.1. Representations Regarding Officers and
Employees..........46
Section 8.2. Representations Regarding Company and Employee
Benefit Plans.............................................47
Section 8.3. Representations Regarding Labor
Relations.................48
Section 8.4.
Employees.................................................50
Section 8.5. Company's Employee Benefit
Plans..........................51
Section 8.6. Purchaser Benefit
Plans...................................52
Section 8.7. Continuation of Administrative Services and
Insurance Coverage........................................53
Section 8.8. No Third Party
Beneficiaries..............................53
ARTICLE IX CONDITIONS TO
CLOSING..............................................53
Section 9.1. Conditions to Each Party's
Obligations....................53
6
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Section 9.2. Conditions to Obligations of the
Purchaser................54
Section 9.3. Conditions to Obligations of the
Company..................56
ARTICLE X CLOSING
............................................................56
ARTICLE XI
TERMINATION........................................................57
Section 11.1.
Termination...............................................57
Section 11.2. Specific Performance and Other
Remedies...................58
Section 11.3. Effect of
Termination.....................................58
ARTICLE XII
INDEMNIFICATION...................................................58
Section 12.1. Indemnification Obligations of the
Company................58
Section 12.2. Indemnification Obligations of the
Purchaser..............59
Section 12.3. Indemnification
Procedure.................................60
Section 12.4. Claims
Period.............................................62
Section 12.5.
Limitations...............................................64
Section 12.6.
Investigations............................................65
Section 12.7. Acknowledgement of the
Parties............................65
Section 12.8. Post-Closing Remediation Plan on Outstanding
Environmental Orders......................................65
Section 12.9. Letter of
Credit..........................................67
Section 12.10. Insurance
Proceeds........................................67
ARTICLE XIII MISCELLANEOUS
PROVISIONS.........................................67
Section 13.1.
Notices...................................................67
Section 13.2. Schedules and
Exhibits....................................68
Section 13.3. Assignment; Successors in
Interest........................68
Section 13.4. Number;
Gender............................................69
Section 13.5.
Captions..................................................69
Section 13.6. Controlling Law;
Amendment................................69
Section 13.7. Consent to Jurisdiction,
Etc..............................69
Section 13.8. Waiver of Jury
Trial......................................69
Section 13.9.
Severability..............................................70
Section 13.10.
Counterparts..............................................70
Section 13.11. Enforcement of Certain
Rights.............................70
Section 13.12. Waiver; Remedies
Cumulative...............................70
Section 13.13.
Integration...............................................70
Section 13.14. Cooperation Following the
Closing.........................71
Section 13.15. Transaction Costs;
Expenses...............................71
7
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LIST OF EXHIBITS
Exhibit 9.1(c) Form of Transition Services Agreement
Exhibit 9.1(d) Form of Galvanizing and Fabrication Agreement
Exhibit 9.1(e) Form of Lease Agreement
Exhibit 9.2(d) Form of Company Certificate
Exhibit 9.2(h) Form of Company's Counsel Opinion
Exhibit 9.2(j)(i) Form of Bill of Sale
Exhibit 9.2(j)(ii) Form of Assignment and Assumption
Agreement
LIST OF SCHEDULES
Schedule 2.4(b)(ii) Current Liabilities
Schedule 3.3 Allocation of Purchase Price
Schedule 4.3 Restrictions and Conflicts
Schedule 4.4(a) Owned Real Property
Schedule 4.4(b) Leased Real Property
Schedule 4.5 Title Exceptions
Schedule 4.6 Financial Statement Exceptions
Schedule 4.8 No Undisclosed Liabilities
Schedule 4.9 Absence of Certain Changes
Schedule 4.10 Legal Proceedings
Schedule 4.11 Compliance with Law
Schedule 4.12 Company Contracts
Schedule 4.13 Insurance Policies
Schedule 4.14 Environmental, Health and Safety Matters
Schedule 4.15(a) Intellectual Property
Schedule 4.15(b) Company Software
Schedule 4.16 Transactions with Affiliates
Schedule 4.18(a) Major Suppliers
Schedule 4.18(b) Major Customers
Schedule 4.19(a) Accounts Receivable
Schedule 4.20 Licenses and Permits
Schedule 4.21 Brokers
Schedule 4.22 Product and Service Warranties
Schedule 6.12 Company Trademarks and Tradenames
Schedule 8.1 All Officers and Employees
Schedule 8.2 Company Benefit Plans
Schedule 8.3 Labor Relations
Schedule 8.4(a) Employees
8
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ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of
February 28,
2005, is made and entered into by and between NAGalv - Ohio,
Inc., a Delaware
corporation ("Purchaser"), and Gregory Industries, Inc., an Ohio
corporation
(the "Company"). The Purchaser and the Company are sometimes
individually
referred to herein as a "Party" and collectively as the
"Parties." The term
"Company" as used in this Agreement includes Gregory Industries,
Inc. and its
subsidiaries.
WHEREAS, the Company conducts an after-fabrication hot-dip
galvanizing
business (the "Business");
WHEREAS, the Parties desire to enter into this Agreement
pursuant to which
the Company proposes to sell to the Purchaser, and the Purchaser
proposes to
purchase from the Company, all of the assets used or held for
use by the Company
in the conduct of the Business as a going concern, and the
Purchaser proposes to
assume certain of the liabilities and obligations of the Company
(the
"Acquisition"); and
WHEREAS, the Parties desire to make certain representations,
warranties and
agreements in connection with the Acquisition.
NOW, THEREFORE, in consideration of the foregoing and the
respective
representations, warranties, covenants, agreements and
conditions hereinafter
set forth, and intending to be legally bound hereby, the Parties
agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS.
(a) The following Terms, as used herein, have the following
meanings:
"Accounts Receivable" means (i) all trade accounts receivable
and
other rights to payment from customers of the Company and the
full benefit
of all security for such accounts or rights to payment,
including all trade
accounts receivable representing amounts receivable in respect
of goods
shipped or products sold or services rendered to customers of
the Company
and the full benefit of all security for such accounts and (ii)
any claim,
remedy or other right related to any of the foregoing.
"Affiliate" means, with respect to any Person, any other
Person
directly or indirectly controlling, controlled by, or under
common control
with such other Person. For purposes of this definition,
"control," when
used with respect to any specified Person, means the power to
direct the
management and policies of such Person, directly or indirectly,
whether
through the ownership of voting securities, by contract or
otherwise; and
the terms "controlling" and "controlled" have meanings
correlative to the
foregoing.
9
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"Associate" means, with respect to any Person, (i) any
corporation or
organization (other than a majority-owned subsidiary) of which
such Person
is an officer or partner or is, directly or indirectly, the
beneficial
owner of 10% or more of any class of equity securities, (ii) any
trust or
other estate in which such Person has a substantial beneficial
interest or
as to which such Person serves as trustee or in a similar
fiduciary
capacity, and (iii) any relative or spouse of such Person, or
any relative
of such spouse, who has the same home as such Person or who is a
director
of officer of an entity or any of its parents or
subsidiaries.
"Business Day" means any day except Saturday, Sunday or any day
on
which banks are generally not open for business in the United
States.
"CERCLA" means the Comprehensive Environmental Response,
Compensation
and Liability Act of 1980, as amended, and any rules or
regulations
promulgated thereunder.
"Commercially Reasonable Efforts" means the efforts necessary
to
complete the task at hand that would have been undertaken by a
reasonable
business entity under similar circumstances, giving due
consideration to
cost, timing, and other factors that would reasonably be
expected to be
considered by a reasonable business entity.
"Environmental Laws" means any federal, state, local or foreign
law
(including, without limitation, common law), treaty, judicial
decision,
regulation, rule, judgment, order, decree, injunction, permit
or
governmental restriction or any agreement with any governmental
authority
or other third party, whether now or hereafter in effect,
relating to the
environment, human health and safety or to pollutants,
contaminants, wastes
or chemicals or any toxic, radioactive, ignitable, corrosive,
reactive or
otherwise hazardous substances, wastes or materials.
"Environmental Permits" mean all permits, licenses,
franchises,
certificates, approvals and other similar authorizations of
governmental
authorities relating to or required by Environmental Laws and
affecting, or
relating in any way to, the Business.
"Hazardous Materials" mean any waste, pollutant,
contaminant,
hazardous substance, toxic, ignitable, reactive or corrosive
substance,
hazardous waste, special waste, industrial substance,
by-product, process
intermediate product or waste, petroleum or petroleum-derived
substance or
waste, chemical liquids or solids, liquid or gaseous products,
or any
constituent of any such substance or waste, the use, handling or
disposal
of which by the Company is in any way governed by or subject to
any
applicable Environmental Laws.
"Intellectual Property Right" means any trademark, service mark,
trade
name, mask work, invention, patent, trade secret, copyright,
know-how
(including any registrations or applications for registration of
any of the
foregoing) or any other similar type of proprietary intellectual
property
right.
"IRS" means the United States Internal Revenue Service and, to
the
extent relevant, the United States Department of the
Treasury.
10
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"Knowledge of the Company" or similar terms shall mean the
knowledge
of officers and directors of the Company. Knowledge shall be
both actual
knowledge, as well as the knowledge a reasonable business person
would have
obtained after making reasonable inquiry and after exercising
reasonable
diligence with respect thereto. The parties agree that with
respect to the
representations and warranties contained in Section 4.14 below,
the
Company's decision not to perform Phase I or Phase II
environmental
assessments shall not be construed as a failure by Company to
make
reasonable inquiry or to exercise reasonable diligence as set
forth in the
definition above.
"Lien" means, with respect to any property or asset, any
mortgage,
lien, pledge, charge, security interest, encumbrance or other
adverse claim
of any kind in respect of such property or asset. For the
purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any
property
or asset which it has acquired or holds subject to the interest
of a vendor
or lessor under any conditional sale agreement, capital lease or
other
title retention agreement relating to such property or
asset.
"Material Adverse Effect" means any change, event, effect or
occurrence that is or may be reasonably likely to be materially
adverse to
the financial condition of the Business, results of operations,
properties,
assets or liabilities (including, without limitation,
contingent
liabilities) of the Business or the Assets taken as a whole. A
Material
Adverse Effect shall also include any change, event or
occurrence that
shall have occurred or been threatened that (when taken together
with all
other adverse changes, events, effects or occurrences that have
occurred or
been threatened) is or would be reasonably likely to prevent or
materially
delay the performance by the Company of any of its obligations
under this
Agreement or the consummation of the transactions contemplated
hereby.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and
the rules and regulations promulgated thereunder.
"Permitted Exceptions" means (i) Liens for taxes not yet due
and
payable, (ii) zoning, building, or other governmental
restrictions now in
effect relating to the Real Property, (iii) all matters shown on
Schedule B
of Purchaser's title commitment, which is attached hereto as a
portion of
Schedule 4.4(a), and (iv) such Liens, claims, encumbrances, or
other
restrictions accepted by Purchaser in writing.
"Person" means an individual, corporation, partnership,
limited
liability company, association, trust or other entity or
organization,
including a government or political subdivision or an agency
or
instrumentality thereof.
"Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal,
administrative,
judicial or investigative, whether formal or informal, whether
public or
private) commenced, brought, conducted or heard by or before, or
otherwise
involving, any Governmental Entity or arbitrator.
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<PAGE>
SECTION 1.2. OTHER DEFINITIONS.
Each of the following terms is defined in the Section set forth
opposite
such term:
Terms Section
----- -------
Acquisition...................................................Recitals
ADA...........................................................8.3(i)
ADEA..........................................................8.3(i)
Agreement
....................................................Preamble
Applicable Benefit
Laws.......................................8.2(d)(iv)
Arbitrator....................................................3.3(c)
Assets........................................................2.1
Assignment and Assumption
Agreement...........................9.2(j)(ii)
Assumed
Contracts.............................................2.2(c)
Assumed
Liabilities...........................................2.4(b)
Apportioned
Obligations.......................................7.3(b)
Bill of
Sale..................................................9.2(j)(i)
Business......................................................Recitals
Business
Activities...........................................6.11(a)(i)
Claims
Period.................................................12.4
Closing.......................................................Article
X
Closing
Date..................................................Article X
Closing Date
Indebtedness.....................................2.5(c)
COBRA
Coverage................................................8.4(b)
Code..........................................................7.1(a)
Company
......................................................Preamble
Company Ancillary
Documents...................................4.2
Company Benefit
Plan..........................................8.2(a)
Company Financial
Statements..................................4.6
Company Indemnified
Parties...................................12.2
Company Licensed
Software.....................................4.15(b)
Company
Losses................................................12.2
Company Proprietary
Software..................................4.15(b)
Company
Software..............................................4.15(b)
Confidential
Information......................................6.11(a)(ii)
Employee Benefit
Plan.........................................8.2(b)
Environmental Indemnification
Obligations.....................12.9
ERISA.........................................................8.2(b)
ERISA
Affiliate...............................................8.2(c)
ERISA Affiliate
Plan..........................................8.2(c)
Excluded
Assets...............................................2.3
Excluded
Liabilities..........................................2.5
Financial
Statements..........................................4.6
FLSA..........................................................8.3(i)
FMLA..........................................................8.3(i)
GAAP..........................................................4.6
Governmental
Entity...........................................4.10
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Indemnified
Party.............................................12.3(a)
Indemnifying
Party............................................12.3(a)
Intellectual
Property.........................................4.15(a)
Interim Balance
Sheet.........................................4.6
Interim Financial
Statements..................................4.6
Inventory.....................................................2.2(a)
Irrevocable Letter of
Credit..................................12.9
Labor
Laws....................................................8.3(q)
Leased Real
Property..........................................4.4(b)
Licenses......................................................4.20
Major
Customer................................................4.18(b)
Major
Supplier................................................4.18(a)
NLRB..........................................................8.3(a)
Non-Assignable
Contracts......................................6.7
Noncompete
Period.............................................6.11(a)(iii)
Orders........................................................12.8(a)
OSHA..........................................................8.3(k)
Owned Real
Property...........................................4.4(a)
Parties.......................................................Preamble
Party.........................................................Preamble
Post-Closing Tax
Period.......................................7.3(b)
Pre-Closing Tax
Period........................................7.1(b)
Purchase
Price................................................3.1
Purchaser.....................................................Preamble
Purchaser Ancillary
Documents.................................5.2
Purchaser Indemnified
Parties.................................12.1
Purchaser
Losses..............................................12.1
Real
Property.................................................4.4(b)
Surviving
Representations.....................................12.4(a)
Taxes.........................................................7.1(c)
Tax
Return....................................................7.1(d)
Termination
Date..............................................11.1
Territory.....................................................6.11(a)(iv)
Trade
Secrets.................................................6.11(a)(v)
Transferred
Employees.........................................8.4(a)
Transfer
Taxes................................................7.3(c)
Unaudited Financial
Statements................................4.6
WARN..........................................................8.3(n)
Work..........................................................12.8(a)
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ARTICLE II
PURCHASE AND SALE
SECTION 2.1. AGREEMENT TO PURCHASE AND SELL.
Subject to the terms and conditions of this Agreement, at the
Closing and
except as otherwise specifically provided in this Article II,
the Company will
grant, sell, assign, transfer and deliver to the Purchaser, and
the Purchaser
will purchase and acquire from the Company, all right, title and
interest of the
Company in, to and under the assets, properties and business, of
every kind and
description, wherever located, real, personal or mixed, tangible
or intangible,
owned or held or used in the conduct of the Business by the
Company as the same
shall exist on the Closing Date and not disposed of in the
ordinary course of
business as permitted by this Agreement, and all of the assets
of the Business
thereafter acquired by the Company (which assets, properties and
rights are
collectively referred to in this Agreement as the "Assets"),
free and clear of
all Liens, other than Permitted Exceptions, and the Purchaser
will assume the
Assumed Liabilities (as hereinafter defined).
SECTION 2.2. ASSETS.
Except as otherwise expressly set forth in Section 2.3, the
Assets shall
include, without limitation, the following assets, properties
and rights of the
Company that relate to the Business, including the design,
manufacture and sale
of its products, as of the close of business on the Closing
Date:
(a) all inventory, including without limitation, office and
other
supplies, raw materials, spare, replacement and component parts,
works-in-
process, finished goods and other inventory property located at,
stored on
behalf of or in transit to the Company with respect to the
Business
(collectively, "Inventory");
(b) all fixed assets, equipment, furnishings, computer hardware,
vehicles,
machinery, fixtures and other tangible personal property;
(c) all rights of the Company under those contracts listed on
Schedule
4.12 (unless indicated to the contrary thereon) or that are of a
type that would
have been listed thereon except that they involve payments in an
amount less
than the applicable amount set forth in Section 4.12
(collectively, the "Assumed
Contracts");
(d) all Real Property and all licenses, permits, approvals,
qualifications, easements and other rights relating thereto;
(e) all goodwill, methods, know-how, technical documentation,
processes,
procedures, inventions, technology, research records, data,
designs, plans,
drawings, manufacturing know-how and formulas, whether
patentable or
unpatentable, and other intellectual or proprietary rights or
property of the
Business (and all rights thereto and applications therefor),
including, without
limitation, the Intellectual Property and the Company
Software;
(f) all Accounts Receivable;
14
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(g) all rights to causes of action, lawsuits, judgments, claims
and demands
of any nature available to or being pursued by the Company and
relating to the
Business, the Assets or the Assumed Liabilities, whether arising
by way of
counterclaim or otherwise;
(h) to the extent they are assignable, all rights in and under
all express
or implied guarantees, warranties, representations, covenants,
indemnities and
similar rights in favor of the Company and relating to the
Business, the Assets
or the Assumed Liabilities;
(i) all permits, approvals, licenses, qualifications,
product
registrations, safety certifications, authorizations or similar
rights to the
extent that they are assignable, including those set forth on
Schedule 4.20
(unless otherwise indicated thereon);
(j) all information, files, correspondence, records, data,
plans, reports,
contracts and recorded knowledge, including customer, supplier,
price and
mailing lists, and all accounting or other books and records of
the Business,
excluding any books and records of the Company not related to
the Business, in
whatever media retained or stored, including, without
limitation, computer
programs and disks; and
(k) all other tangible and intangible assets of any kind or
description,
wherever located, that are carried on the books of the Business
or which are
owned by the Company that relate to the Business, but excluding
the Excluded
Assets.
SECTION 2.3. EXCLUDED ASSETS.
Notwithstanding anything to the contrary set forth in this
Agreement, the
Assets will not include the following assets, properties and
rights of the
Company (collectively, the "Excluded Assets"):
(a) any cash, cash equivalents or marketable securities and all
rights to
any bank accounts of the Company;
(b) all ownership and other rights with respect to the Company
Employee
Benefit Plans (as hereinafter defined);
(c) all rights of the Company under those contracts identified
on Schedule
4.12 as not being Assumed Contracts;
(d) any permit, approval, license, qualification,
registration,
certification, authorization or similar right that by its terms
is not
transferable to the Purchaser, including those indicated on
Schedule 4.20 as not
being transferable;
(e) any Accounts Receivable from an Affiliate or any Accounts
Receivable
that have been written off in full prior to the Closing and any
collateral
associated therewith;
(f) the charter documents of the Company, minute books, stock
ledgers, tax
returns, books of account and other constituent records relating
to the
corporate organization of the Company;
15
<PAGE>
(g) any Assets sold or otherwise disposed of in the ordinary
course of
business and not in violation of any provision of this Agreement
during the
period from the date hereof until the Closing Date;
(h) the rights that accrue to the Company under this
Agreement;
(i) all manufacturing equipment used to produce guard rail posts
and the
equipment used in the MZR zinc reprocessing furnace;
(j) any labor contract or collective bargaining agreement;
(k) all trademarks, service marks and trade names identified on
Schedule
6.12;
(l) prepaid expenses;
(m) two (2) cars currently leased and described as a Buick Regal
and a
Ford Taurus;
(n) any raw materials, supplies, or inventory at the facility of
the
Company utilized by, or in processing for, other divisions of
the Company,
including without limitation, all 6-inch I-beams and H-post
fences, strut
inventory;
(o) Q-Net software program; and
(p) the Accounts Receivable of Shane Felter Industries, Inc.
which are
represented by each of those certain promissory notes, dated
November 16, 2004,
in the original face amounts of $38,905.65 and $161,949.00.
SECTION 2.4. ASSUMED LIABILITIES.
(a) Except as provided in Section 2.4(b), the Purchaser will not
assume,
in connection with the transactions contemplated by this
Agreement, any
liability or obligation of the Company whatsoever, and the
Company will retain
responsibility for all liabilities and obligations accrued as of
or on the
Closing Date and all liabilities and obligations arising from
the Company's
operations prior to or on the Closing Date, whether or not
accrued and whether
or not disclosed.
(b) As the sole exception to the provisions in Section 2.4(a),
effective
as of the close of business on the Closing Date, the Purchaser
will assume and
agree to pay, discharge or perform, as appropriate, the
following liabilities
and obligations of the Company existing as of such time and
arising out of the
conduct of the Business prior to or on the Closing Date
(collectively, the
"Assumed Liabilities"):
(i) obligations of the Company under the Assumed Contracts to
the
extent such obligations are not required to be performed prior
to the
Closing Date, are disclosed on the face of such Assumed
Contracts (or are
implied warranties or obligations under any law, including
without
limitation, the Uniform Commercial Code) and accrue and relate
to the
operations of the Business subsequent to the Closing Date;
and
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(ii) those current liabilities of the Company of the types
listed on
Schedule 2.4(b)(ii).
SECTION 2.5. EXCLUDED LIABILITIES.
Specifically, and without in any way limiting the generality of
Section
2.4(a), the Assumed Liabilities will not include, and in no
event will the
Purchaser assume, agree to pay, discharge or satisfy, or
otherwise have any
responsibility for, any liability or obligation (together with
all other
liabilities of the Company that are not Assumed Liabilities, the
"Excluded
Liabilities"):
(a) relating to any liability or obligation (including, without
limitation,
accounts payable) owed to any shareholder or any Affiliate of
the Company;
(b) for Taxes with respect to any period;
(c) for any indebtedness with respect to borrowed money and
notes payable,
including any interest or penalties accrued thereon,
(collectively, the "Closing
Date Indebtedness");
(d) relating to, resulting from or arising out of (i) claims
made in
pending or future Proceedings or (ii) claims based on violations
of law as in
effect on or prior to the Closing, breach of contract,
employment practices, or
environmental, health and safety matters or any other actual or
alleged failure
of the Company to perform any obligation, in each case arising
out of or
relating to events which shall have occurred, or services
performed, or the
operation of the Business, prior to the Closing;
(e) pertaining to any Excluded Asset;
(f) relating to, resulting from or arising out of any former
operations of
the Company that have been discontinued or disposed of prior to
the Closing;
(g) under or relating to any Company Benefit Plan, whether or
not such
liability or obligation arises prior to or after the Closing
Date;
(h) of the Company arising or incurred in connection with the
negotiation,
preparation and execution of this Agreement and the transactions
contemplated
hereby and any fees and expenses of counsel, accountants,
brokers, financial
advisors or other experts of the Company; and
(i) relating to the Environmental Indemnification
Obligations.
Such Excluded Liabilities shall include all Proceedings relating
to any or all
of the foregoing and all costs and expenses in connection
therewith.
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ARTICLE III
PURCHASE PRICE; ADJUSTMENTS; ALLOCATIONS
SECTION 3.1. PURCHASE PRICE.
Subject to adjustment pursuant to Section 3.5, the aggregate
amount to be
paid for the Assets (the "Purchase Price") shall be
$3,641,090.60. In addition
to the foregoing payment, as consideration for the grant, sale,
assignment,
transfer and delivery of the Assets, the Purchaser shall assume
and discharge
the Assumed Liabilities.
SECTION 3.2. PAYMENT OF PURCHASE PRICE.
(a) On the Closing Date, the Purchaser shall pay or cause to be
paid to
the Company or to such third parties as the Company may
designate in accordance
with subsection (b) of this Section an amount equal to the
Purchase Price.
(b) All payments required under this Section 3.2 shall be made
in cash by
the wire transfer of immediately available funds to such bank
account(s) as
shall be designated in writing by the recipient(s) at least
three (3) Business
Days prior to the applicable payment date.
SECTION 3.3. ALLOCATION OF PURCHASE PRICE.
Attached as Schedule 3.3 is an allocation of the Purchase Price
for the
Assets, the Assumed Liabilities and the covenant not to compete
contained in
Section 6.11. The Purchaser and the Company agree to file all
Tax Returns on the
basis of such allocation. In any Proceeding related to the
determination of any
Tax, neither the Purchaser nor the Company shall contend or
represent that such
allocation is not a correct allocation. The Purchaser shall
prepare and deliver
IRS Form 8594 to the Company within forty-five (45) days after
the Closing Date
to be filed with the IRS.
SECTION 3.4. ALLOCATION OF CERTAIN ITEMS.
With respect to certain expenses incurred with respect to the
Assets in the
operation of the Business, the following allocations will be
made between the
Purchaser and the Company:
(a) Taxes. Real and ad valorem property taxes will be
apportioned at the
Closing based upon the number of days in the taxable period
before and after the
Closing Date and the amounts set forth in the most recent tax
bills.
(b) Utilities. Utilities, water and sewer charges will be
apportioned
based upon the number of Business Days occurring before and
after the Closing
Date during the billing period for each such charge.
(c) Personal Property Taxes. Any personal property taxes of the
Company
relating to the Business shall be apportioned at the Closing
based upon the
number of days in the tax period before and after the Closing
Date in the amount
set forth in the current tax bills.
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Appropriate cash payments by the Purchaser or the Company, as
the case may
require, shall be made hereunder from time to time as soon as
practicable after
the facts given rise to the obligation for such payments are
known in the
amounts necessary to give effect to the allocations provided for
in this
SECTION 3.4. ADJUSTMENT OF PURCHASE PRICE FOR ACCOUNTS
RECEIVABLE.
The Purchase Price shall be subject to adjustment with respect
to the
Accounts Receivable set forth on Schedule 4.19(a). Purchaser
agrees that it will
attempt to collect the Accounts Receivable. Furthermore,
Purchaser agrees that
any and all payments received by the Purchaser from any customer
under any
Accounts Receivable shall first be applied to the oldest amount
due by customer,
unless a customer gives written instructions to do otherwise by
noting the
invoice number on the check or in some other manner; provided,
however,
Purchaser shall not suggest or direct a customer to do so unless
there is a
valid business reason, such as a disputed invoice or other
legitimate business
reason. Purchaser shall provide Company with monthly reports
detailing the
collection efforts on the Accounts Receivable. On or about the
date ninety (90)
days after the Closing Date, the parties agree that they shall
review and
discuss the collection efforts on the Accounts Receivable up to
said date. In
the event that as of the date one hundred fifty (150) days after
the Closing
Date any Accounts Receivable remain uncollected after Purchaser
has attempted to
collect such Accounts Receivable in accordance with the
obligations herein, then
in such event, all uncollected Accounts Receivable as of such
date shall be
assigned to Company, who shall thereafter be free to collect or
otherwise deal
with all such uncollected Accounts Receivable. Upon assignment,
the Company
shall make immediate payment in the full-face amount of any
uncollected Accounts
Receivables to the Purchaser.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company hereby represents and warrants to the Purchaser as
follows:
SECTION 4.1. ORGANIZATION.
The Company is a corporation duly formed and validly existing
under the
laws of Ohio and has all requisite power and authority to own,
lease and operate
its properties and to carry on its business as now being
conducted. The Company
is duly qualified or registered as a foreign corporation to
transact business
under the laws of each jurisdiction where the character of its
activities or the
location of the properties owned or leased by it requires such
qualification or
registration, except where the failure to be so qualified would
not,
individually or in the aggregate, have a Material Adverse Effect
on the Business
or the Assets. The Company has heretofore made available to the
Purchaser true,
correct and complete copies of its charter documents as
currently in effect and
its corporate record books with respect to actions taken by its
shareholders and
directors.
SECTION 4.2. AUTHORIZATION.
The Company has full power and authority to execute and deliver
this
Agreement and any other certificate, agreement, document or
other instrument to
be executed and delivered by it
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in connection with the transactions contemplated by this
Agreement
(collectively, the "Company Ancillary Documents") and to perform
its obligations
under this Agreement and the Company Ancillary Documents and to
consummate the
transactions contemplated hereby and thereby. The execution and
delivery of this
Agreement and the Company Ancillary Documents by the Company and
the performance
by the Company of its obligations hereunder and thereunder and
the consummation
of the transactions provided for herein and therein have been
duly and validly
authorized by all necessary board and shareholder action on the
part of the
Company. The shareholders and directors of the Company have
approved the
execution, delivery and performance of this Agreement and the
Company Ancillary
Documents and the consummation of the transactions contemplated
by this
Agreement and by the Company Ancillary Documents. This Agreement
has been, and
the Company Ancillary Documents will be as of the Closing Date,
duly executed
and delivered by the Company and do or will, as the case may be,
constitute the
valid and binding agreements of the Company, enforceable against
the Company in
accordance with their respective terms.
SECTION 4.3. ABSENCE OF RESTRICTIONS AND CONFLICTS.
The execution, delivery and performance of this Agreement and
the Company
Ancillary Documents, the consummation of the transactions
contemplated by this
Agreement and the Company Ancillary Documents and the
fulfillment of and
compliance with the terms and conditions of this Agreement and
the Company
Ancillary Documents do not or will not (as the case may be),
with the passing of
time or the giving of notice or both, violate or conflict with,
constitute a
breach of or default under, result in the loss of any benefit
under, permit the
acceleration of any obligation under or create in any party the
right to
terminate, modify or cancel, or otherwise require any action,
consent, approval,
order, authorization, registration, declaration or filing with
respect to (a)
any term or provision of the charter documents of the Company or
any resolution
adopted by the board of directors or shareholders of the
Company, (b) except as
indicated on Schedule 4.12, any Assumed Contract or any other
contract,
agreement, permit, franchise, license or other instrument
applicable to the
Business or any of the Assets, (c) any judgment, decree or order
of any court or
governmental authority or agency to which the Company is a party
or by which the
Business or any of the Assets are bound or (d) except as set
forth on Schedule
4.3, any permit, statute, law, rule, regulation or arbitration
award of any
governmental agency or public or regulatory unit, agency or
authority applicable
to the Company or the Business.
SECTION 4.4. REAL PROPERTY.
(a) Schedule 4.4(a) sets forth a complete and accurate list and
description
of the parcels of real property used in connection with the
Business and owned
by the Company (together with all fixtures and improvements
thereon, the "Owned
Real Property"). Except as set forth on Schedule 4.4(a), the
Company has good
and marketable, indefeasible, fee simple title to each parcel of
the Owned Real
Property free and clear of all Liens, other than Permitted
Exceptions.
(b) Schedule 4.4(b) sets forth a complete and accurate list and
description
of the parcels of real property used in connection with the
Business and leased
by the Company, if any, (together with all fixtures and
improvements thereon,
the "Leased Real Property" and
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collectively with the Owned Real Property, the "Real Property").
The Company has
a valid leasehold interest in its Leased Real Property, free and
clear of any
Liens, except for Permitted Exceptions. The leases of the Leased
Real Property
are in full force and effect. All leases of Leased Real Property
are in good
standing and are valid, binding and enforceable in accordance
with their
respective terms and there does not exist under any such lease
any default or
any event which, with notice or lapse of time or both, would
constitute a
default.
(c) To the Company's Knowledge, no portion of the Real Property,
or any of
the buildings and improvements located thereon, violates any
law, rule,
regulation, ordinance or statute, including those relating to
zoning, building,
land use, environmental, health and safety, fire, air,
sanitation and noise
control. Except as set forth on Schedule 4.4(a), all of the Real
Property is in
the possession or control of the Company, and except for common
driveway
easements, no other person is entitled to possession of any such
properties and
assets.
(d) Except as set forth on Schedule 4.4(a), the plants,
buildings and
structures included in the Assets currently have, and
immediately following the
Closing will have access to (i) public roads or valid easements
over private
streets or private property for such ingress to and egress from
all such plants,
buildings and structures and (ii) water supply, storm and
sanitary sewer
facilities, telephone, gas and electrical connections, fire
protection, drainage
and other public utilities, in each case as is necessary for the
conduct of the
Business as it has heretofore been conducted. None of the
structures on the Real
Property encroaches upon real property of another Person, and no
structure of
any other Person encroaches upon any Real Property.
(e) Except as set forth on Schedule 4.5, the improvements on the
Real
Property are in operating condition and are adequate and
suitable for the
purposes for which they are presently being used. There are no
condemnation or
appropriation or similar proceedings pending or, to the
Knowledge of the
Company, threatened against any of the Real Property or the
improvements
thereon.
SECTION 4.5. TITLE TO ASSETS; RELATED MATTERS.
The Assets constitute all of the assets necessary and sufficient
to conduct
the operations of the Business in accordance with the Company's
past practices.
Except as set forth in Schedule 4.4(a) or Schedule 4.5, the
Company has (and
will convey to the Purchaser at the Closing) good and marketable
title to the
Assets, free and clear of all Liens except for Permitted
Exceptions. Except as
set forth in Schedule 4.5, all plants, buildings, structures,
equipment and
other items of tangible personal property and assets included in
the Assets (a)
are in operating condition and are adequate and suitable for the
purposes for
which they are presently being used, consistent with standards
generally
followed in the industry, (b) to the Company's Knowledge,
conform to all
applicable laws, ordinances, codes, rules and regulations
applicable thereto,
and the Company has no Knowledge of any defects or problems with
any of the
Assets except as set forth on Schedule 4.5. No Person other than
the Company
owns any equipment or other tangible personal property or assets
situated on the
premises of the Company which are necessary to the operation of
the Business,
except for the leased items that are subject to personal
property leases. Since
May 31, 2004, the Company has not sold, transferred or disposed
of any assets,
other than sales of inventory in the ordinary course of
business. Schedule 4.5
sets forth a true, correct and complete list and general
description of each
item of tangible personal property of the Company
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<PAGE>
having a book value of more than $10,000.00. Purchaser agrees
that it has had an
opportunity to inspect all of the Assets being transferred
hereunder, to perform
its own inspection of the maintenance records, and to discuss
the condition of
the Assets with the personnel of the Company, and agrees and
acknowledges that
the Company makes only the representations and warranties
contained in this
Section 4.5 regarding the Assets or condition thereof, and such
Assets are
otherwise being transferred in "As Is" condition.
SECTION 4.6. FINANCIAL STATEMENTS.
Schedule 4.6 contains true, correct and complete copies of (i)
unaudited
internal balance sheets of the Business as of December 31, 2003,
and the related
unaudited internal statements of income and cash flows for the
same time period,
and the related notes thereto (the "Company Financial
Statements"); (ii) an
unaudited balance sheet of the Business as of May 28, 2004, and
the related
unaudited statements of income and cash flows for the twelve
(12) month period
then ended, including the notes thereto (the "Unaudited
Financial Statements"),
and (iii) the unaudited interim balance sheet of the Business
for the five (5)
months ended October 31, 2004, and the related unaudited
statements of income
and cash flows for the period then ended (the "Interim Financial
Statements"
and, collectively with the Unaudited Financial Statements, the
"Financial
Statements"). The unaudited balance sheet as of October 31,
2004, included in
the Interim Financial Statements is referred to herein as the
"Interim Balance
Sheet." The Interim Financial Statements are true, correct and
complete and
present fairly the financial position of the Business as of
October 31, 2004,
and the related results of the Business' operations and cash
flows for the five
(5) month period then ended. The Financial Statements are based
on the books and
records of the Business which have been kept, and such Financial
Statements have
been prepared, in accordance with generally accepted accounting
principles
("GAAP") applied on a consistent basis. Since May 31, 2003,
there has been no
material change in any of the accounting (and tax accounting)
policies,
practices or procedures of the Company.
SECTION 4.7. INVENTORY AND PRODUCTS.
(a) The Business' Inventories set forth in the Interim Balance
Sheet were
properly stated therein at the lesser of cost or fair market
value determined in
accordance with GAAP consistently maintained and applied by the
Company,
utilizing the LIFO method. Since the date of the Unaudited
Financial Statements,
Inventories related to the Business have been maintained in the
ordinary course
of business. All such Inventories are owned free and clear of
all Liens, other
than Permitted Exceptions. All of the Inventories recorded on
the Interim
Balance Sheet consist of, and all inventories related to the
Business on the
Closing Date will be usable or saleable in the normal course of
the Business in
accordance with past practices and that the zinc inventory will
meet ASTM B6-00
and A 123/A specifications. No previously sold Inventory is
subject to returns
in excess of those historically experienced by the Company.
(b) To the Company's Knowledge, each of the products produced or
sold by
the Company in connection with the Business is, and at all times
up to and
including the sale thereof has been, (i) in compliance in all
material respects
with all applicable federal, state, local and foreign laws and
regulations and
(ii) fit for the ordinary purposes for which it is intended to
be used and
conforms in all material respects to any promises or
affirmations of fact made
on the container or label for such product or in connection with
its sale. There
is no design defect with
22
<PAGE>
respect to any of such products and each of such products
contains adequate
warnings, presented in a reasonably prominent manner, in
accordance with
applicable laws, rules and regulations and current industry
practice with
respect to its contents and use.
SECTION 4.8. NO UNDISCLOSED LIABILITIES.
Except as disclosed in Schedule 4.8, to the Company's Knowledge,
the
Company does not have any liabilities or obligations (whether
accrued, absolute,
contingent, determined, determinable or otherwise), in
connection with the
Business which are not adequately reflected or provided for in
the Company
Financial Statements, except liabilities and obligations that
are not (singly or
in the aggregate) material to the Business and have been
incurred since the date
of such balance sheet in the ordinary course of business.
SECTION 4.9. ABSENCE OF CERTAIN CHANGES.
Since May 31, 2004, and except as set forth in Schedule 4.9,
there has not
been (i) any event, occurrence, development or state of
circumstances or facts
which, individually or in the aggregate, has had or could
reasonably be expected
to have a Material Adverse Effect on the Business or the Assets,
(ii) any
damage, destruction, loss or casualty to property or assets of
the Business with
a value in excess of $10,000.00, whether or not covered by
insurance, or (iii)
any action taken of the type described in Section 6.1, which,
had such action
occurred after the date hereof, would be in violation of such
Section.
SECTION 4.10. LEGAL PROCEEDINGS.
Except as set forth in Schedule 4.10, there are no Proceedings
(or any
basis therefor) pending or, to the Knowledge of the Company,
threatened against,
relating to or involving the Business, the Assets or the Assumed
Liabilities
before any federal, state or local or foreign government or any
court,
administrative or regulatory agency or commission or other
governmental
authority or agency, domestic or foreign (a "Governmental
Entity"), or any
arbitrator.
SECTION 4.11. COMPLIANCE WITH LAW.
To the Company's Knowledge, the Company is (and has been at all
times
during the past five (5) years) in compliance with all
applicable laws
(including, without limitation, applicable laws relating to
zoning,
environmental matters and the safety and health of employees),
ordinances,
regulations and orders of all Governmental Entities applicable
to the Assets or
the conduct of the Business. Except as set forth in Schedule
4.11, with respect
to the Business, the Assets or the Assumed Liabilities, (i) the
Company has not
been charged with and, to the Knowledge of the Company, is not
now under
investigation with respect to, a violation of any applicable
law, regulation,
ordinance, order or other requirement of a Governmental Entity,
(ii) the Company
is not a party to or bound by any order, judgment, decree or
award of any
Governmental Entity and (iii) the Company has filed all reports
and has all
licenses and permits required to be filed with any Governmental
Entity on or
before the date hereof.
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SECTION 4.12. COMPANY CONTRACTS.
(a) Schedule 4.12 sets forth a true, correct and complete list
of the
following contracts related to the Business:
(i) all bonds, debentures, notes, loans, credit or loan
agreements or
loan commitments, mortgages, indentures, guarantees or other
contracts
relating to the borrowing of money or binding upon any of the
Assets, or
the Leased Real Property that is subject to the lease to the
Purchaser
referenced herein;
(ii) all leases relating to the Leased Real Property or other
leases
or licenses involving any properties or assets used in the
Business
(whether real, personal or mixed, tangible or intangible)
involving an
annual commitment or payment of more than $10,000.00
individually by the
Company;
(iii) all contracts or agreements which limit or restrict the
Company
or any of the employees of the Company whose names are set forth
on
Schedule 8.4(a) from engaging in the Business in any
jurisdiction;
(iv) all franchising and licensing agreements;
(v) any contract that provides for an increased payment or
benefit, or
accelerated vesting, upon the execution of this Agreement or in
connection
with the transactions contemplated hereby;
(vi) any contract or agreement granting any Person a Lien on all
or
any part of any of the Assets;
(vii) any contract or agreement for the cleanup, abatement or
other
actions in connection with any Hazardous Materials, the
remediation of any
existing environmental condition or relating to the performance
of any
environmental audit or study;
(viii) any contract or agreement granting to any Person an
option or a
first refusal, first-offer or similar preferential right to
purchase or
acquire any of the Assets;
(ix) any contract or agreement with any agent, distributor
or
representative which is not terminable without penalty on thirty
(30)
calendar days' or less notice;
(x) any contract or agreement for the granting or receiving of
a
license or sublicense or under which any Person is obligated to
pay or has
the right to receive a royalty, license fee or similar
payment;
(xi) any contract providing for the indemnification or
holding
harmless of any officer, director, employee or other Person;
(xii) any joint venture or partnership contract;
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<PAGE>
(xiii) any customer contract for the provision of goods or
services by
the Company and any supplier contract for the provision of goods
or
services to the Company; and
(xiv) all existing contracts and commitments (other than
those
described in subparagraphs (i) through (xiv) of this Section
4.12(a)) to
which the Company is a party or by which any of the Assets are
bound
involving an annual commitment or annual payment to or from the
Company of
more than $10,000.00 individually or which is otherwise material
to the
Business.
True, correct and complete copies of all Assumed Contracts have
been made
available to the Purchaser. All of the contracts identified on
Schedule 4.12
shall be Assumed Contracts unless otherwise indicted on Schedule
4.12.
(b) The Assumed Contracts are legal, valid, binding and
enforceable in
accordance with their respective terms with respect to the
Company and, to the
Knowledge of the Company, with respect to each other party to
such Assumed
Contracts. To the Company's Knowledge, there are no existing
defaults or
breaches of the Company under any Assumed Contract (or events or
conditions
which, with notice or lapse of time or both would constitute a
default or
breach) and, to the Knowledge of the Company, there are no such
defaults (or
events or conditions which, with notice or lapse of time or
both, would
constitute a default or breach) with respect to any third party
to any Assumed
Contract. The Company has no Knowledge of any pending or
threatened bankruptcy,
insolvency or similar proceeding with respect to any party to
such agreements.
The Company is not participating in any discussions or
negotiations regarding
modification of or amendment to any Assumed Contract or entry in
any new
material contract applicable to the Business or the Assets.
Schedule 4.12
identifies each Assumed Contract set forth therein that requires
the consent of
or notice to the other party thereto to avoid any breach,
default or violation
of such contract, agreement or other instrument in connection
with the
transactions contemplated hereby, including the assignment of
such Assumed
Contract to the Purchaser.
SECTION 4.13. INSURANCE POLICIES.
Schedule 4.13 contains a complete and correct list of all
insurance
policies relating to the Business, the Assets or the Assumed
Liabilities carried
by or for the benefit of the Company, specifying the insurer,
amount of and
nature of coverage, the risk insured against, the deductible
amount (if any) and
the date through which coverage will continue by virtue of
premiums already
paid. The Company maintains insurance with reputable insurers
for the Business
and Assets against all risks normally insured against, and in
amounts normally
carried, by corporations of similar size engaged in similar
lines of business
and such coverage is sufficient. All insurance policies and
bonds with respect
to the Business and Assets are in full force and effect and will
be maintained
by the Company in full force and effect as they apply to any
matter, action or
event relating to the Company occurring through the Closing Date
and the Company
has not reached or exceeded its policy limits for any insurance
policies in
effect at any time during the past five (5) years. There is no
claim by the
Company pending under any of such policies or bonds as to which
coverage has
been questioned, denied or disputed by the underwriters of such
policies or
bonds or in respect of which such underwriters have reserved
25
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their rights. All premiums payable under all such policies and
bonds have been
timely paid and the Company has otherwise complied fully with
the terms and
conditions of all such policies and bonds. The Company does not
know of any
threatened termination of, premium increase with respect to, or
material
alteration of coverage under, any of such policies or bonds.
SECTION 4.14. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS.
Except as set forth in Schedule 4.14, with respect to the
Business, the
Real Property and the Assets:
(a) to the Company's Knowledge, (i) the Company possesses, and
is in
material compliance with, all permits, licenses and government
authorizations
and has filed all notices that are required under Environmental
Laws, and (ii)
the Company is in compliance with all applicable limitations,
restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules and
timetables contained in those laws or contained in any law,
regulation, code,
plan, order, decree, judgment, notice, permit or demand letter
issued, entered,
promulgated or approved thereunder, which are specifically
applicable to the
Business;
(b) to the Company's Knowledge, (i) there are no liabilities
arising in
connection with or in any way relating to the Assets, the
Business or the Real
Property of any kind whatsoever, whether accrued, contingent,
absolute,
determined, determinable or otherwise, arising under or relating
to any
Environmental Laws, and (ii) there are no facts, events,
conditions, situations
or set of circumstances which could reasonably be expected to
result in or be
the basis for any such liability;
(c) except as disclosed to Purchaser, the Company has not
received notice
of actual or threatened liability under CERCLA or any similar
foreign, state or
local statute or ordinance from any governmental agency or any
third party and
to the Company's Knowledge there are no facts or circumstances
which could form
the basis for the assertion of any claim against the Company
under any
Environmental Laws including, without limitation, CERCLA or any
similar local,
state or foreign law with respect to any on-site or off-site
location;
(d) except as disclosed to Purchaser, the Company has not
entered into or
agreed to enter into and the Company does not contemplate
entering into, any
consent decree or order, and except as disclosed to Purchaser
the Company is not
subject to any judgment, decree or judicial or administrative
order relating to
compliance with, or the cleanup of Hazardous Materials under,
any applicable
Environmental Laws, pending or, to the Company's Knowledge,
threatened against
the Company;
(e) except as disclosed to Purchaser, no notice, notification,
demand,
request for information, citation, summons or order or
administrative or
judicial proceeding has been received, no complaint has been
filed, no penalty
has been assessed and no investigation, action, claim, suite,
proceeding or
review is pending or, to the Company's Knowledge, threatened by
any governmental
entity or other Person with respect to any matters relating to
the Company and
relating to or arising out of any Environmental Laws;
(f) except as disclosed to Purchaser, to the Company's
Knowledge, it is not
subject to any claim, obligation, liability, loss, damage or
expense of whatever
kind or nature, contingent or
26
<PAGE>
otherwise, incurred or imposed or based upon any provision of
any Environmental
Laws or arising out of any act or omission of the Company, or
the Company's
employees, agents or representatives or arising out of the
ownership, use,
control or operation by the Company of any plant, facility,
site, area or
property (including, without limitation, any plant, facility,
site, area or
property currently or previously owned or leased by the Company)
from which any
Hazardous Materials were released into the environment (the term
"release"
meaning any spilling, leaking, pumping, pouring, emitting,
emptying,
discharging, injecting, escaping, leaching, dumping or disposing
into the
environment, and the term "environment" meaning any surface or
ground water,
drinking water supply, soil, surface or subsurface strata or
medium, or the
ambient air);
(g) the Company has heretofore made available to the Purchaser
true,
correct and complete copies of all files relating to
environmental matters, and
the Company has not paid any fines, penalties or assessments
within the last ten
(10) years with respect to environmental matters except as
disclosed to
Purchaser;
(h) to the Company's Knowledge, except as disclosed to
Purchaser, no
polychlorinated biphenyls, radioactive material, lead,
asbestos-containing
material, incinerator, sump, surface impoundment, lagoon,
landfill, septic,
wastewater treatment or other disposal system or underground
storage tank
(active or inactive) is or has been present at, on or under any
Real Property or
in any Asset;
(i) to the Company's Knowledge, except as disclosed to
Purchaser, no
Hazardous Material has been discharged, disposed of, dumped,
injected, pumped,
deposited, spilled, leaked, emitted or released at, on or under
any Real
Property;
(j) to the Company's Knowledge, except as disclosed to
Purchaser, the
Company has not imported, manufactured, stored, used, operated,
transported,
treated or disposed of any Hazardous Materials other than in
compliance with all
Environmental Laws;
(k) There has been no environmental investigation, study, audit,
test,
review or other analysis in Company's possession conducted of
which the Company
has Knowledge in relation to any Asset or Real Property which
has not been
delivered to the Purchaser prior to the date hereof; and
(l) For purposes of this Section, the term "Company" shall
include any
entity which is, in whole or in part, an affiliated predecessor
of the Company.
SECTION 4.15. INTELLECTUAL PROPERTY; SOFTWARE.
(a) Schedule 4.15(a) sets forth a true and correct list of all
copyrights,
trade names, trademarks, trade secrets, service marks or patents
(or
applications therefor) which are used in the Business or relate
to the Assets or
Assumed Liabilities (the "Intellectual Property") and the
jurisdictions where
each is registered (if any), with the exception of those trade
marks, service
marks and trade names indicated on Schedule 6.12. The Company
has good and
marketable title to or possesses adequate licenses or other
valid rights to use
such Intellectual Property, free and clear of all Liens and has
paid all
maintenance fees, renewals or expenses related to such
Intellectual Property.
Neither the use of such Intellectual Property nor the conduct of
the Business in
accordance with the Company's past practices, misappropriates,
infringes upon or
27
<PAGE>
conflicts with any patent, copyright, trade name, trade secret,
trademark or
other intellectual property rights of any third party. No party
has filed a
claim (or, to the Knowledge of the Company, threatened to file a
claim) against
the Company alleging that it has violated, infringed on or
otherwise improperly
used the intellectual property rights of such party and, to the
Knowledge of the
Company, the Company has not violated or infringed any patent,
trademark, trade
name, service mark, service name, copyright or trade secret held
by others.
(b) Schedule 4.15(b) sets forth a true and complete list of: (i)
all
software owned by the Company used in connection with the
Business (the "Company
Proprietary Software"); (ii) all other software (other than
Company Proprietary
Software), used in connection with the Business (the "Company
Licensed Software"
and, together with the Company Proprietary Software, the
"Company Software");
and (iii) all technical and restricted materials relating to the
acquisition,
design, development, use or maintenance of computer code program
documentation
and materials used in connection with the Business.
(c) The Company has all right, title and interest in and to
all
intellectual property rights in the Company Proprietary
Software. The Company
has developed the Company Proprietary Software through its own
efforts, as
described in Section 4.15(e), and for its own account, and the
Company
Proprietary Software is free and clear of all Liens. The use of
the Company
Software does not breach any terms of any license or other
contract between the
Company and any third party. To the Company's Knowledge, the
Company is in
compliance with the terms and conditions of all license
agreements in favor of
the Company relating to the Company Licensed Software.
(d) To the Company's Knowledge, the Company Proprietary Software
does not
infringe any patent, copyright or trade secret or any other
intellectual
property right of any third party. The source code for the
Company Proprietary
Software has been maintained in confidence.
(e) The Company Proprietary Software was: (i) developed by the
Company's
employees working within the scope of their employment at the
time of such
development; (ii) developed by agents, consultants, contractors
or others who
have executed appropriate instruments of assignment in favor of
the Company as
assignee that have conveyed to the Company ownership of all of
its intellectual
property rights in the Company Proprietary Software; or (iii)
acquired by the
Company in connection with acquisitions in which the Company
obtained
appropriate representations, warranties and indemnities from the
transferring
party relating to the title to the Company Proprietary Software.
The Company has
not received notice from any third party claiming any right,
title or interest
in the Company Proprietary Software.
(f) The Company has not granted rights in the Company Software
to any
third party.
SECTION 4.16. TRANSACTIONS WITH AFFILIATES.
Except as set forth in Schedule 4.16, no officer or director of
the
Company, or any person with whom any such officer or director
has any direct or
indirect relation by blood, marriage or adoption, or any entity
in which any
such person, owns any beneficial interest (other than a
28
<PAGE>
publicly held corporation whose stock is traded on a national
securities
exchange or in the over-the-counter market and less than five
percent (5%) of
the stock of which is beneficially owned by all such Persons in
the aggregate)
or any Affiliate of any of the foregoing or any current or
former Affiliate of
the Company has any interest in: (a) any contract, arrangement
or understanding
with, or relating to, the Business, the Assets or the Assumed
Liabilities; (b)
any loan, arrangement, understanding, agreement or contract for
or relating to
the Business, the Assets or the Assumed Liabilities; or (c) any
property (real,
personal or mixed), tangible or intangible, used or currently
intended to be
used by the Company relating to the Business, the Assets or the
Assumed
Liabilities. Schedule 4.16 also sets forth a complete list of
all accounts
receivable, notes receivable and other receivables and accounts
payable owed to
or due from any Affiliate to the Company relating to the
Business, the Assets or
the Assumed Liabilities.
SECTION 4.17. NONDISCLOSED PAYMENTS.
Neither the Company nor the officers or directors of the
Company, nor
anyone acting on behalf of any of them, has made or received any
payments not
correctly categorized and fully disclosed to the Purchaser and
in the Company's
books and records in connection with or in any way relating to
or affecting the
Business, the Assets or the Assumed Liabilities.
SECTION 4.18. CUSTOMER AND SUPPLIER RELATIONS.
(a) Schedule 4.18(a) sets forth a list of each supplier of goods
or
services to the Business to whom the Company paid in the
aggregate more than
$10,000.00 during the twelve (12) month period ended May 31,
2004 (each a "Major
Supplier" and collectively, "Major Suppliers"), together with,
in each case, the
amount paid during such period. The Company is not engaged in
any material
dispute with any Major Supplier and, to the Knowledge of the
Company, no Major
Supplier intends to terminate, limit or reduce its business
relations with the
Company. As of the date hereof, the Company has no reason to
believe that the
consummation of the transactions contemplated by this Agreement
will have a
Material Adverse Effect on the business relationship of the
Business with any
Major Supplier. Except as set forth in Schedule 4.18(a), to the
Knowledge of the
Company, none of the officers or directors of the Company or any
Affiliate or
Associate of any officer or director of the Company (or any
company or other
organization in which any officer or director of the Company or
any Affiliate or
Associate of any officer or director of the Company has a direct
or indirect
financial interest), has any financial interest in any supplier
of the Business
(other than a publicly held corporation whose stock is traded on
a national
securities exchange or in the over-the-counter market and less
than 1% of the
stock of which is beneficially owned by any such Persons).
(b) Schedule 4.18(b) sets forth a list of each customer of the
Business
which accounted for net revenue to the Business in the aggregate
of more than
$10,000.00 during the twelve (12) month period ended May 31,
2004 (each a "Major
Customer" and collectively, "Major Customers"), together with in
each case the
amount net revenue produced during such period. The Company is
not engaged in
any material dispute with any Major Customer and, to the
Knowledge of the
Company, no Major Customer intends to terminate, limit or reduce
its business
relations with the Company. Except as set forth on Schedule
4.18(b), as of the
date hereof, the Company has no reason to believe that the
consummation of the
transactions contemplated by this Agreement will have an adverse
effect on the
business relationship of
29
<PAGE>
the Business with any Major Customer. Except as set forth in
Schedule 4.18(b),
to the Knowledge of the Company, none of the officers or
directors of the
Company or any Affiliate or Associate of any officer or director
of the Company
(or any company or other organization in which any officer or
director of the
Company or any Affiliate or Associate of any officer or director
of the Company
has a direct or indirect financial interest), has any financial
interest in any
customer of the Business (other than a publicly held corporation
whose stock is
traded on a national securities exchange or in the
over-the-counter market and
less than 1% of the stock of which is beneficially owned by any
such Persons).
SECTION 4.19. NOTES AND ACCOUNTS RECEIVABLE.
Accounts Receivable. Schedule 4.19(a) contains a schedule of the
Business'
Accounts Receivable as of May 31, 2004, showing the amount of
each Account
Receivable and an aging of amounts due thereunder, which
schedule is true and
complete as of that date. Except as set forth in Schedule
4.19(a), to the
Knowledge of the Company, the debtors to which the Accounts
Receivable relates
are not in or subject to a bankruptcy or insolvency proceeding,
and none of the
Accounts Receivable has been made subject to an assignment for
the benefit of
creditors. Except as set forth in Schedule 4.19(a), and to the
Company's
Knowledge, all Accounts Receivable which are reflected on the
Unaudited Balance
Sheet and the Interim Balance Sheet (net of any reserves shown
thereon) (i) are
valid, existing and fully collectible in a manner consistent
with the Company's
past practice, (ii) represent monies due for goods sold and
delivered or
services rendered in the ordinary course of business and (iii)
are not subject
to any refunds or adjustments or any defenses, rights of
set-off, assignment,
restrictions, security interests or other encumbrances. Except
as set forth in
Schedule 4.19(a), all such Accounts Receivable are current, and
to the Company's
Knowledge, there are no disputes regarding the collectibility of
any such
Accounts Receivable. The Company has not factored any of the
Business's Accounts
Receivable. The parties hereby agree there shall be an
adjustment to the
Purchase Price based on the Accounts Receivable under Section
3.5 above. As
such, Purchaser's sole remedy for breach of this representation
and warranty
shall be an adjustment to the Purchase Price as provided under
Section 3.5, and
no breach of this provision shall result in an indemnification
claim by
Purchaser against the Company under Section 12.1 below.
SECTION 4.20. LICENSES AND PERMITS.
Schedule 4.20 is a true and complete list of all notifications,
licenses,
permits (including, without limitation, environmental,
construction and
operation permits), franchises, certificates, approvals,
exemptions,
classifications, registrations and other similar documents and
authorizations,
and applications therefor (collectively, the "Licenses") held by
the Company and
issued by, or submitted by the Company to, any Governmental
Entity or other
Person or entity relating to the Business or the Assets. To the
Company's
Knowledge, the Company owns or possesses all of the Licenses
that are necessary
to enable it to carry on the Business as presently conducted.
All Licenses are
valid, binding, and in full force and effect. Except as set
forth on Schedule
4.20, the execution, delivery, and performance of this Agreement
and the
consummation of the transactions contemplated hereby will not
have a Material
Adverse Affect on any License. The Company has taken all
necessary action to
maintain each License, except where the failure to so act is not
likely to have
an adverse effect on the Company, the Business or the Assets. To
the Company's
Knowledge, the Company is not in default and no condition
exists
30
<PAGE>
that with notice or lapse of time or both could constitute
default under the
Licenses. To the Company's Knowledge, no loss or expiration of
any License is
threatened, pending, or reasonably foreseeable (other than
expiration upon the
end of any term).
SECTION 4.21. BROKERS, FINDERS AND INVESTMENT BANKERS.
Except as set forth on Schedule 4.21, neither the Company, nor
any
officers, directors or employees of the Company nor any
Affiliate of the
Company, has employed any broker, finder or investment banker or
incurred any
liability for any investment banking fees, financial advisory
fees, brokerage
fees or finders' fees in connection with the transactions
contemplated by this
Agreement.
SECTION 4.22. PRODUCT AND SERVICE WARRANTIES.
Except as set forth in Schedule 4.22, the Company does not make
any express
warranties or guaranties on its own behalf as to goods sold, or
services
provided by, the Business, and there is no pending or, to the
Knowledge of the
Company, threatened claim alleging any breach of any such
warranty or guaranty.
To the Company's Knowledge, and except as set forth in Schedule
4.22, attached
to which are copies of all such warranties, the Company has no
exposure to
liability under any such warranty beyond that which is typically
assumed in the
ordinary course of business by companies or firms engaged in
businesses
comparable to the Business or which would have an adverse effect
on the Business
or the Assets.
SECTION 4.23. ETHICAL PRACTICES.
To the Company's Knowledge, neither the Company nor any
representative
thereof has offered or given, and the Company has no Knowledge
of any Person
that has offered or given on its behalf, anything of value to:
(i)any official
of a Governmental Entity, any political party or official
thereof, or any
candidate for political office; (ii) any customer or member of
the government;
or (iii) any other Person, in any such case while knowing or
having reason to
know that all or a portion of such money or thing of value may
be offered, given
or promised, directly or indirectly, to any customer, member of
the government
or candidate for political office for the purpose of the
following: (x)
influencing any action or decision of such Person, in such
Person's official
capacity, including a decision to fail to perform such Person's
official
function; (y) inducing such Person to use such Person's
influence with any
government or instrumentality thereof to affect or influence any
act or decision
of such government or instrumentality to assist the Company in
obtaining or
retaining business for, or with, or directing business to, any
Person; or (z)
where such payment would constitute a bribe, kickback or illegal
or improper
payment to assist the Company in obtaining or retaining business
for, or with,
or directing business to, any Person.
SECTION 4.24. DISCLOSURE.
(a) To the Company's Knowledge, no representation, warranty or
covenant
made by the Company in this Agreement, the Schedules or the
Exhibits attached to
this Agreement, or any of the Company Ancillary Documents
contains an untrue
statement of a material fact or omits to state a material fact
required to be
stated herein or therein or necessary to make the statements
contained herein or
therein not misleading.
31
<PAGE>
(b) Prior to the execution of this Agreement, the Company has
delivered to the
Purchaser true and complete copies of the Assumed Contracts,
documents
evidencing any of the Intellectual Property, and all security
agreements and
other instruments creating or imposing any security interest
encumbrance or
adverse claim on the Assets, and any other documents or
instruments identified
or referred to in this Agreement or the Schedules hereto. Such
delivery will not
alone constitute adequate disclosure of those facts required to
be disclosed on
any Schedule to this Agreement, and notice of their contents
(other than by
express reference on a Schedule) will in no way limit the
Company's other
obligations or the Purchaser's other rights under this
Agreement.
SECTION 4.25. SOLVENCY.
(a) The Company is not now insolvent and will not be rendered
insolvent
by the transactions contemplated by this Agreement and the
Company Ancillary
Documents. As used in this Section, "insolvent" means that the
sum of the debts
and other probable liabilities of the Company exceeds the
present fair saleable
value of the Company's assets.
(b) Immediately after giving effect to the consummation of the
transactions
contemplated by this Agreement and the Company Ancillary
Documents: (i) the
Company will be able to pay its liabilities as they become due
in the usual
course of its business; (ii) the Company will not have
unreasonably small
capital with which to conduct its present or proposed business;
(iii) the
Company will have assets (calculated at fair market value) that
exceed its
liabil
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