Exhibit 10.5
EXECUTION
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this “
Agreement ”)
among Nature Vision, Inc., a Minnesota corporation (the
“ Buyer ”), and Cass Creek International, LLC, a New York limited
liability company (“ Cass
Creek ”) and Gary R. Lynn
(“ Lynn ”), John T. Bergstue (“ Bergstue ”), and James G.
Streib (“ Streib
”) (where Lynn, Bergstue and Streib are
individuals, each of whom may be referred to as a “
Member ” or
collectively as “ Members
,” and where Members and Cass Creek referred
to collectively as the “ Sellers ”), takes effect on
September 20, 2007 (the “ Closing Date ”). The Buyer,
Cass Creek, Bergstue, Streib and Lynn are referred to individually
as a “ Party ” and collectively as the “ Parties .”
RECITALS
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A.
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Cass Creek manufactures and distributes electronic
game calling devices (the “ Business ”).
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B.
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The Sellers desires to sell, transfer and otherwise
convey, and the Buyer desires to purchase and assume, all of the
assets of the Sellers related to the Business, on the terms and
subject to the conditions of this Agreement.
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AGREEMENT
In consideration of the above recitals and the
promises set forth in this Agreement, the Parties agree as
follows.
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1.1
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Purchase and Sale of Assets
. On the terms and subject to the conditions of this
Agreement, the Buyer hereby purchases from the Sellers, and the
Sellers hereby sell, transfer, convey and deliver to the Buyer, all
right, title and interest in, to and under all of the assets of the
Sellers related to the Business (collectively, the “
Acquired Assets ”), free and clear of all security interests, liens,
claims, charges, restrictions and encumbrances of any nature except
the Assumed Liabilities defined in Section 1.3 below, in
exchange for the Purchase Price (defined below), including the
following:
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(a)
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all of the equipment, tools, molds, dies and other
items and materials owned by the Sellers and related to the
Business, wherever located, including the assets identified
on Schedule 1.1(a) to this Agreement, together with all related warranties,
accessories and spare parts (collectively, the “
Equipment ”);
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(b)
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all inventories of supplies, raw materials, parts,
finished goods, work-in-process, product prototypes, samples,
product labels and packaging materials of the Sellers related to
the Business, including the inventories identified on
Schedule
1.1(b) (collectively,
the “ Inventory
”);
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(c)
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all of the intellectual property related to the
Business and its associated goodwill, including (a) all
inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements, and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and
reexaminations; (b) all trademarks, service marks, trade
dress, logos, trade names and corporate names, together with all
translations, adaptations, derivations and combinations and
including all associated goodwill, and all applications,
registrations and renewals; (c) all copyrightable works, all
copyrights and all applications, registrations and renewals;
(d) all mask works and all applications, registrations and
renewals in connection therewith; (e) all trade secrets and
confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and
cost information, and business and marketing plans and proposals);
(f) all computer software (including data and related
documentation); (g) all other proprietary rights; and
(h) all copies and tangible embodiments (in whatever form or
medium) (collectively, “ Intellectual Property ”) owned
by, licensed to or otherwise controlled by the Sellers or used in,
developed for use in or necessary to the conduct of the Business as
now conducted or presently proposed to be conducted, including the
Intellectual Property listed on Schedule 1.1(c) ;
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(d)
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the current telephone numbers, e-mail addresses,
uniform resource locators, domain names and websites of the Seller
and the listings for each related to the Business, including the
website and related content found at www.CassCreek.com
and any rights to software related to the foregoing,
identified on Schedule
1.1(d)
(collectively, “ Addresses ”);
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(e)
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all of the Sellers’ books, records and other
documents and information related to the Business, including, all
customer, prospect, dealer and distributor lists, sales literature,
inventory records, purchase orders and invoices, sales orders and
sales order log books, customer information, product data, price
lists, product demonstrations, quotes and bids and product
advertising and brochures;
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(f)
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to the extent assignable, all permits, licenses and
other governmental approvals held by the Sellers and related to the
Business;
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(g)
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all accounts receivable, customer deposits, notes
receivable or other amounts receivable arising from sales of
merchandise or services to customers of the Business set forth
on Schedule 1.1(g) (the “ Receivables
”);
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(h)
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the licenses, contracts and agreements listed as
assumed contracts on Schedule
1.3 ;
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(i)
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all of Cass Creek’s cash and cash equivalents
(including marketable securities and short term investments)
calculated in accordance with GAAP applied on a consistent
basis;
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(j)
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all claims, causes of action, rights of recovery,
rights of set off and rights of recoupment related to the Business;
and
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(k)
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all goodwill and general intangibles associated with
the Business.
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1.2
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Excluded Assets . The
Buyer will not purchase and the Sellers will not sell any accounts
receivable over 90 days old as of the Closing Date and the assets
set forth on Schedule
1.2
(collectively, the “ Excluded Assets ”).
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1.3
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Assumed Liabilities .
On the terms and subject to the conditions of this Agreement, the
Buyer will assume only those liabilities of the Sellers which are
set forth on Schedule
1.3
, as of and from after the Closing Date
(collectively, the “ Assumed Liabilities ”). The
Seller is solely responsible and liable for making all payments due
under, and curing all defaults arising under or relating to, the
Assumed Liabilities prior to the Closing Date. The Assumed
Liabilities exclude all other claims, indebtedness, liabilities or warranty work of
any kind, whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, whether secured or not secured
and whether due or to become due, including any liability for
taxes. Buyer will reduce the principal amount outstanding on the
Promissory Note defined in Section 1.4(b) (and the next
scheduled annual payment of principal) by the cost of parts and
labor to service warranty claims, which exceed an aggregate of
$10,000, on products sold by Sellers prior to the
Closing.
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In the event that the cost of parts and labor to
service these warranty claims exceed such $10,000 amount, the Buyer
agrees to give Sellers 30 days to rectify these warranty claims in
a manner acceptable to the Buyer after notifying the Sellers of the
same in writing.
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1.4
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Purchase Price . Each
of the Members acknowledges that all consideration due to Sellers
will be paid to Cass Creek. The Buyer agrees to pay to Cass Creek
the following (the “ Purchase
Price ”):
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(a)
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$1,560,000.00, as adjusted pursuant to
Section 1.4(d)(i), on the Closing Date in cash by wire
transfer or other immediately available funds (the “
Closing Payment ”);
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(b)
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$500,000, as adjusted pursuant to Sections 1.3,
1.4(c)(iv), 1.4(d) and Section 6.5, by a five year unsecured
promissory note, which will be guaranteed by an individual
acceptable to the Sellers, payable in annual payments on the first
through fifth anniversaries of the Closing Date of $100,000 of
principal plus interest accrued at 8% per annum (the “
Promissory Note ”) in the form attached hereto as Exhibit A . Payments
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will be made in cash by wire transfer or other
immediately available funds; and
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(c)
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For purposes of this Agreement, the following
capitalized terms will have the meanings set forth, unless the
context clearly implies otherwise:
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(i)
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“ Estimated Working
Capital ” means the current assets
less the current liabilities of Cass Creek according to an
estimated interim balance sheet as of the Closing Date prepared by
the Sellers seven- ( 7) days before the Closing
Date, estimating the Cass Creek balance sheet as of the Closing
Date using generally accepted accounting principles (“
GAAP ”)
consistently applied in comparison to Cass Creek’s most
recent audited financial statements, except that all accounts
receivable older than 90 days as of the Closing Date and all stale
and obsolete inventory will be valued at zero dollars
($0).
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(ii)
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“ Final Working
Capital ” means the current assets
less the current liabilities of Cass Creek according to a final
interim balance sheet as of the Closing Date, prepared by the Buyer
within [ 60 ] days
after the Closing Date using GAAP consistently applied in
comparison to Cass Creek’s most recent audited financial
statements, except that all accounts receivable older than 90 days
as of the Closing Date and all stale and obsolete inventory as
determined by Buyer in its sole discretion will be valued at zero
dollars ($0).
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(iii)
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“ Target Working
Capital ” means
$505,000.00.
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(iv)
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“ Working Capital
Reconciliation ” means the process
by which Sellers may dispute the Final Working Capital. If the
Sellers dispute the amount determined as Final Working Capital, and
any changes to the Purchase Price and Promissory Note arising from
determination of the Final Working Capital, they must notify the
Buyer in writing on or before the 75th day following the Closing
Date, and Sellers and Buyer must attempt to resolve the dispute. If
they cannot resolve this dispute within 90 days after the Closing
Date, the Buyer and the Sellers will submit this dispute to an
“ Independent Accountant
” as defined in Section 1.4(c)(v) below.
The Independent Accountant will render a decision regarding the
Final Working Capital, which decision will be final and binding on
the Buyer and the Sellers. The Independent Accountant will conduct
such arbitration by reviewing the Estimated Working Capital and
Final Working Capital calculations and their components with the
understanding that the Estimated Working Capital and Final Working
Capital amounts were calculated in accordance with this Section 1.4
applied on a consistent basis.
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Each of the Sellers and the Buyer will bear their
own costs and expenses for such arbitration (including legal and
accounting fees and expenses). The fees and expenses of the
Independent Accountant will be borne 50% by the Buyer and 50%
jointly and severally by the Sellers.
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(v)
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“ Independent
Accountant ” means the mutually
acceptable accounting firm in Hennepin County, Minnesota to be
appointed by Sellers and Buyer if they have not agreed to the Final
Working Capital amount within 90 days after the Closing Date, to
arbitrate the dispute and render a decision regarding the Final
Working Capital, which decision will be final and binding on the
Buyer and the Sellers. If no Independent Accountant is appointed
within 110 days after the Closing Date, then, either Buyer or
Sellers may petition the Hennepin County District Court to appoint
the Independent Accountant.
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(d)
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The components of the Purchase Price will be
adjusted as follows:
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(i)
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If the Estimated Working Capital is less than the
Target Working Capital, the amount of the Closing Payment will be
reduced by the difference of Target Working Capital less Estimated
Working Capital and such adjustment will be a decrease to the
Purchase Price (“ Closing Payment
Adjustment ”). If Estimated Working
Capital is greater than Target Working Capital, no change will be
made to the Purchase Price or Closing Payment.
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(ii)
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If the Final Working Capital is greater than the
Estimated Working Capital, Buyer will pay Sellers the difference of
Final Working Capital less Estimated Working Capital (but in no
event more than the Closing Payment Adjustment) within
[
10 ] days of Buyer’s
receiving the Working Capital Reconciliation which will be an
increase to the Purchase Price.
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(iii)
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If the Final Working Capital is less than the
Estimated Working Capital, Buyer will reduce the amount of the
Promissory Note (and the first payment of principal under the
Promissory Note) by the difference of Target Working Capital less
Final Working Capital within 10 days of Buyer’s receiving the
amount of the Final Working Capital, and such adjustment will be a
decrease to the Purchase Price.
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1.5
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Allocation of Purchase Price
. The Parties agree to allocate the Purchase Price
and all other capitalizable costs among the Acquired Assets for all
purposes, including financial and tax purposes, in accordance with
the allocation schedule set forth on Schedule 1.5 , which will be adjusted as
necessary to agree with the Final Working Capital
determination.
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1.6
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The Closing . The
closing of the transactions contemplated by this Agreement (the
“ Closing ”) will be effective as of 12:01 a.m. on the date set
forth in the preface above (the “ Closing Date ”).
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1.7
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Buyer’s Deliveries at the
Closing . The Buyer will make the
following deliveries at the Closing:
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(a)
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Executed and acknowledged (if appropriate)
certificates, instruments and documents that the Sellers and their
counsel may reasonably request;
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(b)
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The Closing Payment to the Sellers;
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(d)
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Executed Inventions Royalty Agreement (as defined in
Section 2.1 below); and
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(e)
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Assignment and Assumption Agreement in the form
attached as Exhibit B .
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1.8
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Sellers’ Deliveries at the
Closing . The Sellers will make the
following deliveries at the Closing:
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(a)
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Executed and acknowledged (if appropriate)
certificates, instruments and documents that the Buyer and its
counsel may reasonably request;
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(b)
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Executed Bill of Sale for the Acquired Assets in the
form attached as Exhibit
C
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(c)
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Executed Inventions Royalty Agreement (as defined in
Section 2.1 below);
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(d)
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Noncompetition Agreements from the Members and Todd
E. Hallquist in the form attached as Exhibit D ;
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(e)
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Technology Transfer Agreement in the form attached
as Exhibit E ;
and
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(f)
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Opinion of Sellers’ Counsel in substantially
the form attached as Exhibit
F
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2.1
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Inventions Royalty Agreement
. Each of the Members (and an entity to be formed by
them) (collectively “ Inventors ”) and Buyer will
enter into an agreement providing that the Inventors expect to
invent products intended for sale in the hunting, fishing and other
outdoor recreation markets (“ Invented Products ”), for which
will Buyer will be granted a right of first purchase
(“ Inventions Royalty
Agreement ”) in the form attached
hereto as Exhibit G .
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The Inventions Royalty Agreement will have a term of
five years and will provide for Buyer to acquire any of the
Invented Products for a 5% royalty on Buyer’s net wholesale
invoice amounts to be paid to Inventors.
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2.2
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Bergstue Agreement .
For a period of one year following the Closing Date, Buyer will
make good faith efforts to enter into an agreement with Bergstue
providing that Bergstue will provide advertising and promotion to
Buyer on matters related to the products of the Business. The Buyer
may ask Bergstue to attend trade shows, assist in key account sales
presentations and or interface with outside designers on new
products. Failure to finalize an agreement with Bergstue in spite
of Buyer’s good faith efforts is not a breach of this
Agreement.
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3.
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Representations and Warranties of the
Sellers . Sellers, jointly and severally,
represent and warrant to the Buyer that the statements contained in
this Section 3 are correct and complete as of the Closing
Date, except as set forth in the attached disclosure schedule
accompanying this Agreement (the “ Sellers’ Disclosure Schedule ”). The Seller’s Disclosure Schedule will be
arranged in paragraphs corresponding to the sections contained in
this Section 3. For the purposes of this Section 3,
“Knowledge” shall mean the actual knowledge of a Member
or what a Member reasonably should have known if such Member used
due care in the performance of his duties or could be expected to
discover in the course of conducting a reasonable investigation
regarding the accuracy of a representation or warranty.
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3.1
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Organization, Qualification and Power
. Cass Creek is a limited liability company duly
organized, validly existing and in good standing under the laws of
the State of New York. Cass Creek is duly authorized to conduct
business and is in good standing under the laws of each
jurisdiction where qualification is required. Cass Creek has full
organizational power and authority and all permits and licenses
necessary to carry on the businesses in which it is engaged and in
which it presently proposes to engage, and to own and use the
properties owned and used by it. Lynn, Bergstue, and Streib are the
only members and holders of issued and outstanding membership
interests of Cass Creek.
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3.2
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Authorization of Transaction;
Shareholders . Cass Creek has full power
and authority, corporate or otherwise, to enter into and perform
its obligations under this Agreement. In addition, the members,
board of managers and managers of Cass Creek have duly authorized
the execution and performance of this Agreement and the ancillary
documents to which Cass Creek is a party. This Agreement and the
ancillary agreements to which any the Sellers is a party constitute
valid and legally binding obligations of the Sellers, as
applicable, enforceable in accordance with their respective terms
and conditions.
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3.3
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Noncontravention . To
Sellers’ Knowledge, neither the execution and the delivery of
this Agreement or the ancillary documents to which any of the
Sellers is a party, nor the consummation of the contemplated
transactions will (a) violate any law, order or regulation to
which any of the Sellers is subject; (b) violate any provision
of the organizational documents of Cass Creek; or (c) conflict
with,
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result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other
arrangement to which any of the Sellers is a party or is bound or
to which any of the Sellers’ assets are subject.
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3.4
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Broker Fees . To
Sellers’ Knowledge, none of the Sellers has any liability or
obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this
Agreement for which the Buyer could become liable or
obligated.
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3.5
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Title to Assets; Sufficiency of Assets
. On the Closing Date, the Acquired Assets are free
and clear of all security interests, liens, encumbrances of any
nature, infringements, licenses, liens or claims of third parties.
Cass Creek or Members, as applicable, have good and marketable
title to, a valid license to or a valid leasehold interest in the
Acquired Assets. To Sellers’ Knowledge, the Acquired Assets
constitute all of the assets used in or necessary for the operation
of the Business as presently conducted.
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3.6
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Financial Statements .
Attached to the Sellers’ Disclosure Schedule are the
following financial statements (collectively, the “
Financial Statements ”): (a) audited consolidated and unaudited
consolidating balance sheets and statements of income, changes in
members’ equity and cash flow as of and for the fiscal years
ended December 31, 2005, and December 31, 2006, (the “
Most Recent Fiscal Year End
”) for the Seller and its Subsidiaries; and
(b) unaudited consolidated and consolidating balance sheets
and statements of income, changes in members’ equity and cash
flow (the “ Most Recent Financial
Statements ”) for the seven months
ended July 31, 2007, (the “ Most
Recent Fiscal Month End ”) for Cass
Creek and its subsidiaries. To Sellers’ Knowledge, the
Financial Statements (including the notes) have been prepared in
accordance with GAAP applied on a consistent basis throughout the
periods covered, present fairly the financial condition and the
results of operations of Cass Creek and its Business for those
periods, are correct and complete and are consistent with the books
and records of Sellers related to the Business (which books and
records are correct and complete). The Most Recent Financial
Statements, however, are subject to normal year-end adjustments
(which will not be material individually or in the aggregate) and
lack footnotes and other presentation items.
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3.7
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Events Subsequent to Most Recent Fiscal Year End;
Undisclosed Liabilities . To
Sellers’ Knowledge, since January 1, 2007, there has been no
material adverse change in the business, financial condition,
operations, and results of operations or future prospects of Cass
Creek. To Sellers’ Knowledge, except as set forth on the
Financial Statements, the Seller has no obligations or liabilities
of any kind that would have a material adverse effect upon the
Acquired Assets or to which the Acquired Assets are
subject.
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3.8
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Legal Compliance; Litigation
. To Sellers’ Knowledge, the Sellers have
complied with all applicable laws related to the Business, and no
action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed, commenced or, to
the knowledge of the Sellers, alleged against them in any way
related to the Business. To Sellers’ Knowledge, there are no
pending or threatened claims, actions, suits, proceedings, hearings
or investigations affecting the Acquired Assets. To Sellers’
Knowledge, the Sellers and the Business are not operating under or
subject to, or in default with respect to, any order, writ,
injunction or decree of any court or governmental
agency.
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3.9
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Tax Matters . The
Sellers have filed all tax returns that they were required to file
related to the Business. All such tax returns were correct and
complete. The Sellers have paid all federal, state, local or
foreign taxes owed by the Sellers, whether or not
disputed.
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3.10
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Intellectual Property .
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(a)
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Sellers collectively own or have the right to use
pursuant to license, sublicense, agreement or permission all
Intellectual Property necessary for the operation of the Business
of Sellers as presently conducted. Each item of Intellectual
Property owned or used by Sellers immediately before the Closing
will be owned or available for use by the Buyer on identical terms
and conditions immediately after the Closing.
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(b)
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To the Seller’s Knowledge, none of the Sellers
has interfered with, infringed upon or misappropriated any
Intellectual Property rights of third parties. To Sellers’
Knowledge, none of Sellers has received any charge, complaint,
claim, demand or notice alleging any such infringement or
misappropriation (including any claim that any of the Sellers must
license or refrain from using any Intellectual Property rights of
any third party). As of the Closing Date, to the Seller’s
Knowledge, no third party is interfering or misappropriating any
Intellectual Property rights of the Sellers.
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(c)
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To Sellers’ Knowledge, Schedule 3.10(c) attached to this Agreement
and incorporated by reference, identifies the following:
(i) each patent, copyright, trademark or registration that has
been issued to the Sellers for any Intellectual Property;
(ii) each pending patent, copyright or trademark application
or application for registration that Sellers has made for any of
their Intellectual Property; (iii) each license, agreement or
other permission that each of the Sellers has granted to any third
party with respect to Intellectual Property (together with any
exceptions); (iv) each trade name or unregistered trademark
used by the Sellers in connection with the Business; and
(v) each trade secret used by the Sellers in connection with
the Business.
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