ASSET PURCHASE AGREEMENT

 

 

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

 

 

 

 

i

 

 

 

 

 

 

ii

 

 

 

 

 

 

 

iii

 

 

EXHIBITS

 

1.01(a)		Form of Assignment of Lease
1.01(b)		Form of Assignment of Transferred Intellectual Property
1.01(c)		Form of Assumption Agreement
1.01(d)		Form of Bill of Sale and Assignment
1.01(e)		Form of Deed
1.01(f)		Form of Deposit Escrow Agreement
2.07(b)		Net Working Capital
5.08		Form of Transition Services Agreement
5.14(b)		Proposed Language for Bidding Procedures
6.01		Current Employees

 

 

 

 

 

 

 

iv

 

 

ASSET PURCHASE AGREEMENT

 

ASSET PURCHASE AGREEMENT (this “ Agreement ”), dated as of August 9, 2008 (the “ Execution Date ”), by and among Atlantis Plastics, Inc., a Delaware corporation (“ Parent ”), Atlantis Plastics Films, Inc., a Delaware corporation (“ AP Films ”), and Linear Films, Inc., an Ontario, Canada corporation (“ Linear Films ”), (“Linear Films”, and jointly and severally with Parent, and AP Films, the “ Seller ”), and AEP Industries Inc., a Delaware corporation (the “ Purchaser ”).

 

WHEREAS, Parent is engaged in the business of manufacturing specialty plastic films and custom molded and extruded plastic products used for storage and transportation, food service, appliance, automotive, commercial and consumer applications at various locations in the United States (the “ Parent’s Business ”); and

 

WHEREAS, Seller is engaged in the business of manufacturing specialty plastic films used for storage and transportation, food service, commercial and consumer applications through three business divisions: stretch films, custom films and institutional products, which business divisions operate at facilities in Tulsa, Oklahoma; Nicholasville, Kentucky; Fontana, California; Mankato, Minnesota; and Cartersville, Georgia and receive certain services from Parent’s headquarters in Atlanta, Georgia (such business activity which is conducted at such locations is referred to herein as the “ Business ”), which, for avoidance of doubt, shall not include any of the businesses commonly referred to as injection molding, building products, profile extrusion or Elkhart businesses; and

 

WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser wishes to purchase from the Seller, the Purchased Assets comprising the Business, and in connection therewith the Purchaser is willing to assume from the Seller all of the Assumed Liabilities, all upon the terms and subject to the conditions set forth herein; and

 

WHEREAS, because the Purchase Price for the Purchased Assets, together with the purchase price for the remaining assets of Parent’s Business, are insufficient to satisfy the obligations of Parent and its Subsidiaries to all of their creditors, Parent and its Subsidiaries have concluded that, promptly after the Execution Date, Parent and its Subsidiaries will file cases (the “ Bankruptcy Cases ”) in the United States Bankruptcy Court for the Northern District of Georgia, Atlanta Division (the “ Bankruptcy Court ”) pursuant to Chapter 11 of the Title 11 of the United States Code (the “ Bankruptcy Code ”); and

 

WHEREAS, Seller and Purchaser desire to effect the purchase and sale transaction hereunder in the manner and subject to the terms and conditions set forth in this Agreement, the Sale Order and in accordance with sections 105, 363, 365 and 1146 and other applicable provisions of the Bankruptcy Code; and

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, and intending to be legally bound, the Seller and the Purchaser hereby agree as follows:

 

 

 

 

 

ARTICLE I

 

DEFINITIONS

 

SECTION 1.01             Certain Defined Terms .  For purposes of this Agreement:

 

“ Acquired Contracts ” means all contracts, licenses, agreements, leases, subleases, supply contracts, purchase orders, sales orders and instruments primarily used or held for use in the operation or conduct of the Business, whether written or oral, and including all amendments, renewals, extensions or modifications thereof; provided , that except for the Ancillary Agreements, “Acquired Contracts” solely between Parent or its non-Seller Affiliates, on the one hand, and Seller, on the other hand shall be deemed Excluded Contracts; provided , further , that “Acquired Contracts” shall exclude the Excluded Contracts.

 

“ Active Business Employees ” means those employees of the Business who, at Closing, are actively working for the Business or are on short-term approved leaves of absence, including vacation, personal, or medical leave, and any other employees of the Business who the Purchaser or Seller has a legal obligation, as of the Closing, to rehire.

 

“ Action ” means any Claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any arbitrator or Governmental Authority.

 

“ Affiliate ” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under Common Control with, such specified Person.

 

“ Ancillary Agreements ” means the Bill of Sale, the Deeds, the Assignments of Leases, the Assignment of Transferred Intellectual Property, the Transition Services Agreement, the Assumption Agreement, the Deposit Escrow Agreement, the Working Capital Escrow Agreement, and the Intellectual Property License Agreement and any and all other documents or instruments to be entered into in connection with this Agreement.

 

“ Assignment of Lease ” means the Assignment of Lease to be executed by the Seller at the Closing with respect to each parcel of Leased Real Property listed on Section 2.01(a)(i)(B) of the Disclosure Schedule , substantially in the form of Exhibit 1.01(a) .

 

“ Assignment of Transferred Intellectual Property ” means the Assignment of Transferred Intellectual Property to be executed by the Seller at the Closing, substantially in the form of Exhibit 1.01(b) .

 

“ Assumption Agreement ” means the Assumption Agreement to be executed by the Purchaser and the Seller at the Closing, substantially in the form of Exhibit 1.01(c) .

 

“ Avoidance Actions ” means any and all actions which a trustee, a debtor-in-possession or other appropriate party in interest may assert on behalf of the Estate under possession or other appropriate party in interest may assert on behalf of the Estate under applicable state statute or

 

 

 

 

 

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Chapter 5 of Bankruptcy Code, including actions under one or more provisions of sections 542, 543, 544, 545, 546, 547, 548, 549, 550, 551 and 553.

 

“ Bidding Procedures Order ” means an order of the Bankruptcy Court that approves, inter alia, bidding and auction procedures to be followed by the Seller and all potential bidders for the Purchased Assets that are consistent with the terms of this Agreement.

 

“ Bill of Sale ” means the Bill of Sale and Assignment to be executed by the Seller at the Closing, substantially in the form of Exhibit 1.01(d) .

 

“ Bond Liabilities ” means, with respect to the Bonds, any and all of (i) the outstanding principal and accrued and unpaid interest on the Bonds as of Closing, (ii) any transfer fees/expenses required by a Government Authority for the assignment of the Bonds to Purchaser, and (iii) all post-Closing Liabilities associated with the Bonds and any loan agreement, credit agreement other agreement related thereto.

 

“ Bonds ” means the $3,500,000 Revenue Bonds (Atlantis Plastic Films, Inc. Project, Series 2005) issued by the Development Authority of Cartersville, Georgia dated as of November 1, 2005, and the $4,100,000 Revenue Bonds (Atlantis Plastic Films, Inc. Project, Series 2007) issued by the City of Mankato, Minnesota dated as of January 1, 2007.

 

“ Business Day ” means any day that is not a Saturday, a Sunday or a banking holiday on which banks in the States of Georgia or New York are closed for business.

 

“ Business Records ” means all books, records, ledgers, and files or other similar information located at the Real Property or primarily used or held for use in the operation or conduct of the Business, including price lists, customer lists, vendor lists, mailing lists, warranty information, invoices, shipping records, catalogs, sales promotion literature, advertising materials, brochures, historical financial, accounting, Tax and operating records, standard forms of documents, manuals of operations or business procedures, research materials, product designs and drawings, and product testing reports.

 

“ Claims ” means all rights, claims, causes of action, defenses, debts, demands, damages, offset rights, setoff rights, recoupment rights, obligations, and liabilities of any kind or nature under contract, at law or in equity, known or unknown, contingent or matured, liquidated or unliquidated, and all rights and remedies with respect thereto.

 

“ COBRA ” means Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA and the regulations promulgated thereunder.

 

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

 

“ Control ” (including the terms “ Controlled by ” and “ under Common Control with ”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of

 

 

 

 

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voting securities, as trustee, personal representative or executor, by contract, credit arrangement or otherwise.

 

“ Conveyance Taxes ” means all sales, use, value added, transfer, stamp, stock transfer, real property transfer or gains and similar Taxes.

 

“ Deed ” means, with respect to each parcel of Owned Real Property, the instrument of conveyance customary to the applicable jurisdiction to be executed by the Seller at the Closing in order to convey to the Purchaser the Seller’s interest, if any, in such parcel of Owned Real Property, substantially in the form of Exhibit 1.01(e) , which conveyance shall be subject only to the Permitted Encumbrances and matters set forth on Exhibit B to the Deeds, exclusive of all items which are discharged or cleared by the Sale Order.

 

“ Deposit ” means an amount of cash equal to Six Million Ninety Thousand Dollars ($6,090,000) to be tendered in escrow pursuant to the Deposit Escrow Agreement to be applied to the Purchase Price at Closing.

 

“ Deposit Escrow Agreement ” means that certain escrow agreement among Seller, Purchaser, and the escrow agent, governing the deposit and release of the Deposit substantially in the form of Exhibit 1.01(f) .

 

“ Disclosure Schedule ” means the Disclosure Schedule attached hereto, dated as of the Execution Date delivered by the Seller to the Purchaser in connection with this Agreement.

 

“ Employee Benefit Plans ” means all employee benefit plans as defined in section 3(3) of ERISA, all employment, compensation, pay, fringe benefit, welfare, medical, dental, life insurance, severance pay, salary continuation, bonus, incentive, equity or phantom equity, retirement, pension, profit sharing or deferred compensation plans, contracts, programs, funds or arrangements of any kind and all other employee benefit plans, programs, funds or arrangements (whether written or oral, qualified or nonqualified, funded or unfunded, foreign or domestic, currently effective or terminated, and whether or not subject to ERISA) and any trust, escrow or similar agreement related thereto, whether or not funded.

 

“ Encumbrance ” means any security interest, pledge, hypothecation, assignment, right of first or last refusal, option to purchase, mortgage, deed of trust, encumbrance (including any easement, charges, encroachment, covenant, restriction, right of way, and defect in title), charge, or lien (statutory or other), including as such terms, if any, are defined in the Bankruptcy Code.

 

“ Environmental Law ” means any federal, state, local or foreign statute, law, ordinance, regulation, common law, rule, code, order, consent decree or judgment relating to health, safety, or pollution or protection of the environment.

 

“ Environmental Liability ” means any claim, demand, order, suit, obligation, liability, cost (including the cost of any investigation, testing, compliance or remedial action), consequential damages, loss or expense (including reasonable and incurred attorney’s and consultant’s fees and expenses) arising out of, relating to or resulting from any Environmental Law or environmental,

 

 

 

 

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health or safety matter or condition, including natural resources, and related in any way to the Purchased Assets or to this Agreement or its subject matter.

 

“ Environmental Permits ” means any Permit, approval, identification number, license and other authorization required under or issued pursuant to any applicable Environmental Law.

 

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

 

“ ERISA Affiliate ” means any entity, trade or business that is a member of a group described in Section 414(b), (c) (m) or (o) of the Code or Section 4001(b)(1) of ERISA, or that is a member of the same “controlled group” with Seller pursuant to Section 4001(a)(1) of ERISA.

 

“ Escrow Funds ” means the Deposit and the Working Capital Escrow Funds.

 

“ Estate ” means, with respect to Seller, the estate created pursuant to section 541 of the Bankruptcy Code.

 

“ Executory Contract ” means those Acquired Contracts that constitute an “executory contract” or “unexpired lease” as such terms are used in Section 365 of the Bankruptcy Code as of the Closing Date.

 

“ GAAP ” means United States generally accepted accounting principles and practices in effect from time to time applied consistently throughout the periods involved.

 

“ Governmental Authority ” means any federal, national, supranational, state, provincial, local or other government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.

 

“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

 

“ Hazardous Material ” means (a) any petroleum, petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials or polychlorinated biphenyls or (b) any chemical, material or substance defined or regulated as toxic or hazardous or as a pollutant, contaminant or waste under any Environmental Law.

 

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

 

“ Intellectual Property ” means the Seller’s right, title and interest to all intangible property rights of any kind and nature, whether or not protectable, used in or held for use in connection with, or related to or arising from, the conduct or operation of the Business as currently conducted and as conducted as the Closing Date, including (a) patents and patent applications (including all provisional, divisional, continuations, continuations-in-part, reissues, renewals, extensions and re-examinations), (b) trademarks (including common law trademarks), service marks, assumed names, trade names, trade dress, logos, slogans, and domain names, together with the goodwill associated therewith, (c) copyrights, including copyrights in computer

 

 

 

 

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software, (d) confidential and proprietary information, including inventions, trade secrets, formulae, models, methodologies, practices, methods, and know-how, and (e) registrations and applications for registration of the foregoing.

 

“ Intellectual Property License Agreement ” means the Intellectual Property License Agreement to be executed between the Seller and the Purchaser (or their designees) at the Closing, in the form agreed to by Seller and the Purchaser.

 

“ Inventories ” means all inventory owned by Seller and either (i) located at the Real Property or (ii) not located at the Real Property (including in-transit inventory and inventory on consignment), but primarily used or held for use by Seller in the operation or conduct of the Business, including in each case, merchandise, finished goods, Supplies, work in progress and raw materials and any rights of Seller to the warranties (express or implied) received from suppliers and any related Claims with respect to such Inventory.

 

“ IRS ” means the Internal Revenue Service of the United States.

 

“ Law ” means any federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law).

 

“ Leased Real Property ” means the Real Property leased by the Seller, as tenant, to the extent primarily used or held for use in the operation or conduct of the Business, together with, all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, equipment and items of personal property of the Seller attached or appurtenant thereto and all easements, licenses, rights and appurtenances relating to the foregoing.

 

“ Liabilities ” means any and all debts, losses, Claims, damages, costs, expenses, demands, fines, judgments, penalties, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including those arising under any Law, Action or Governmental Order and those arising under any contract, agreement, arrangement, commitment or undertaking.

 

“ Material Adverse Effect ” means any event, change, condition, development or effect that individually or in the aggregate, with all other events, changes, conditions, developments and effects, is or is reasonably likely to be materially adverse to (i) the Purchased Assets or the operations, results of operations or condition (financial or otherwise) of the Business taken as a whole or (ii) the ability of the Seller to perform its obligations under this Agreement; provided , however , that none of the following shall be deemed in and of itself, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Material Adverse Effect: (a) events, circumstances, changes or effects that generally affect the plastic films manufacturing industry (including legal and regulatory changes) to the extent related to stretch films, custom films and institutional products, (b) economic or political conditions in the United States or the economy generally prevailing in the localities in which the Business is conducted, or events, circumstances, changes or effects affecting the U.S. securities markets generally, (c) events or circumstances that directly result

 

 

 

 

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from, and occur in close proximity in time from, the announcement of this Agreement or the initial filing of the Bankruptcy Case (but excluding any loss of customers, employees, distributors or suppliers, that individually or in the aggregate, with all other events, changes, conditions, developments and effects, is or is reasonably likely to be materially adverse to (i) the Purchased Assets or the operations, results of operations or condition (financial or otherwise) of the Business taken as a whole or (ii) the ability of the Seller to perform its obligations under this Agreement, unless Purchaser’s actions directly caused the loss of such customer, employee, distributor or supplier), (d) events or circumstances that directly result from any action taken pursuant to, or in accordance with, this Agreement or at the request of the Purchaser, (e) any reduction in the price of services or products offered by the Business in response to the reduction in price of comparable services or products offered by a competitor, and (f) any failure to meet any financial projections or forecasts ending on or after the date of this Agreement; provided , that in the case of (a), (b) or (e), the effect on the Business is not materially disproportionate to the effect on similarly situated Persons in the plastic films manufacturing industry.

 

“ Owned Real Property ” means the Real Property in which the Seller has fee title (or equivalent) interest to the extent primarily used or held for use in the operation or conduct of the Business, together with all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, equipment and items of personal property of the Seller attached or appurtenant thereto and all easements, licenses, rights and appurtenances relating to the foregoing.

 

“ Permits ” means any license, permit, waivers, authorization, approval, certificate of authority, qualification or similar document or authority, including any Environmental Permits, that has been issued or granted by any Governmental Authority under applicable Law, that is used in or held for use in the operation or conduct of the Business as currently conducted or related to the Real Property.

 

“ Permitted Encumbrances ” means, (a) statutory liens for current Taxes not yet due and payable, (b) mechanics’, carriers’, workers’, repairers’ and landlords’ liens arising or incurred in the ordinary course of business for sums not yet due and payable, and (c) to the extent that such Encumbrances, individually or in the aggregate, do not materially interfere with the conduct or operation of the Business or with the use or ownership of the Purchased Assets, or do not materially and adversely affect the value of the Purchased Assets, (i) zoning, entitlement, conservation restriction and other land use and environmental regulations by Governmental Authorities, (ii) with respect to Real Property, all covenants, conditions, restrictions, easements, charges, rights-of-way, other Encumbrances and other similar matters of record set forth in any state, local or municipal franchise under which the Business is conducted, (iii) with respect to Real Property, minor defects of title, restrictions and other similar charges or encumbrances, and (iv) matters which would be disclosed by an accurate survey or inspection of the Real Property.

 

“ Person ” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

 

 

 

 

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“ Petition ” means the filing which commences the Bankruptcy Case.

 

“ Petition Date ” means the date on which the Bankruptcy Case is commenced.

 

“ Product Liabilities ” means, with respect to any products designed, manufactured, tested, marketed, or distributed by Seller relating to the Business or the Purchased Assets but sold prior to Closing, all Liabilities resulting from actual or alleged harm, injury, damage or death to persons, property or business, irrespective of the legal theory asserted from such products sold prior to Closing.

 

“ Property Taxes ” means real and personal ad valorem property Taxes.

 

“ Purchase Price Bank Account ” means a bank account in the United States to be designated by the Seller in a written notice to the Purchaser at least five Business Days before the Closing.

 

“ Real Property ” means the Owned Real Property, the Leased Real Property, and all land, buildings, improvements and fixtures erected thereon and all appurtenances related thereto.

 

“ Receivables ” means any and all accounts receivable, notes and other amounts receivable from third parties, billed and unbilled, including customers, as well as rights of payments arising from sales of consigned inventory, arising primarily out of or related to the Business before the Closing, whether or not in the ordinary course, together with any unpaid financing charges accrued thereon, but excluding any amounts owed by any of Seller’s Affiliates.

 

“ Regulations ” means the Treasury Regulations (including Temporary Regulations) promulgated by the United States Department of Treasury with respect to the Code or other federal tax statutes.

 

“ Sale ” means the sale, assignment and conveyance of the Purchased Assets from Seller to Purchaser in accordance with this Agreement.

 

“ Sale Order ” shall mean an order, entered by the Bankruptcy Court, that substantially incorporates the provisions below and otherwise in form and substance agreed upon by Seller and Purchaser, which, among other things, shall:

 

(a)           contain a finding pursuant to Section 363(m) of the Bankruptcy Code to the effect that Purchaser is a “good faith” purchaser and authorize the Sale of the  Purchased Assets, pursuant to the terms and conditions of this Agreement and Sections 363(b) and (f) and 365 of the Bankruptcy Code and to the extent, if any, necessary, Section 105 of the Bankruptcy Code, free and clear of all Claims (including Excluded Liabilities) and Encumbrances (other than (i) Permitted Encumbrances, and (ii) the Assumed Liabilities);

 

(b)           to the extent provided in this Agreement, approve and direct (i) the assumption of all of the Acquired Contracts by Seller, as debtor in possession, (ii) the assignment of all of the Acquired Contracts to Purchaser, (iii) except to the extent

 

 

 

 

 

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Section 365 of the Bankruptcy Code permits the non-cure of non-payment defaults, the cure by Seller of any non-payment defaults under any of the Acquired Contracts, and (iv) the establishment of the Cure Costs therefor and to authorize and require payment by Purchasers of all Cure Costs on or before Closing pursuant to Sections 365(a), (b), (c), (f) and (k) of the Bankruptcy Code and Section 2.02(a) of this Agreement;

 

(c)           provide that the assumption by the Seller and assignment to the Purchaser of the Acquired Contracts shall not render the Acquired Contracts unenforceable, nor cause an event of default thereunder, on account of such assumption and assignment;

 

(d)           provide that after the Petition Date the Bankruptcy Court shall have and retain jurisdiction to resolve any controversy or claim arising out of or relating to the Agreement or breach thereof; and

 

(e)           authorize and direct Seller to make all payments provided for by this Agreement and the Disclosure Schedules on the dates that Seller is obligated to make such payments.

 

“ Seller’s Knowledge ”, “ Knowledge of the Seller ” or similar terms used in this Agreement mean the actual (but not constructive or imputed) knowledge, after reasonable due inquiry, of any of Bud Philbrook, Paul Saari, Kevin Monroe, Kevin Keneally, John Iacobucci and Brad Bastion.

 

“ Supplies ” means all supplies, items and materials (including spare parts) owned by Seller and primarily used or held for use in the operation or conduct of the Business or located at the Real Property.

 

“ Tax ” or “ Taxes ” means any and all taxes, assessments and charges of any kind imposed by any Governmental Authority, including income, gross receipts, profits, sales, use, occupation, value added, ad valorem, transfer, capital, franchise, withholding, payroll, employment, withholding, excise, and property taxes, together with any interest, penalties or additions to tax imposed with respect thereto.

 

“ Tax Returns ” means any and all returns, reports and forms (including, elections, declarations, amendments, schedules, information returns or attachments thereto) required to be filed with respect to Taxes.

 

“ Title Company ” means Land America Financial Group, Inc. (Troy, Michigan) or such other title insurance company reasonably acceptable to Purchaser.

 

“ Trade Accounts Payable and Other Accrued Operating Expenses ” means all trade accounts payable and accrued operating expenses of the Seller, only to the extent primarily related to the Business, accrued in the ordinary course of business and to the extent taken into account for purposes of determining Net Working Capital.

 

 

 

 

 

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“ Transferred Intellectual Property ” means all Intellectual Property owned by the Seller used in or held for use in the Business.

 

“ Transferred IP License Agreements ” means all (i) licenses of Intellectual Property to the Seller, and (ii) licenses of Intellectual Property by the Seller to third parties, in each case, that are related to or used in the Business or arising from or in connection with the Purchased Assets.

 

“ WARN Act ” means the Worker Adjustment and Retraining Notification Act of 1988, as amended.

 

“ Working Capital Escrow Agreement ” means that certain escrow agreement among Seller, Purchaser, and the escrow agent, governing the deposit and release of the escrow contemplated in Section 2.07(c).

 

SECTION 1.02          Definitions .  The following terms have the meanings set forth in the Sections set forth below:

 

 

 

 

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SECTION 1.03          Interpretation and Rules of Construction.  In this Agreement, except to the extent otherwise provided or that the context otherwise requires:

 

(a)           when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated;

 

 

 

 

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(b)           the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

 

(c)           whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”;

 

(d)           the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

 

(e)           all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein;

 

(f)            the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

 

(g)           references to a Person are also to its successors and permitted assigns; and

 

(h)           the use of “or” is not intended to be exclusive unless expressly indicated otherwise.

 

 

ARTICLE II

 

PURCHASE AND SALE

 

SECTION 2.01          Purchase and Sale of Assets.

 

(a)                                   Purchased Assets .  Upon the terms and subject to the conditions of this Agreement, at the Closing, the Seller shall sell, assign, transfer, convey and deliver, or cause to be sold, assigned, transferred, conveyed and delivered, to the Purchaser, and the Purchaser shall purchase from the Seller, all of the Seller’s right, title and interest in and to the Purchased Assets, free and clear of any Claims and Encumbrances (other than Permitted Encumbrances), to the fullest extent permitted by the Bankruptcy Code.  For purposes of this Agreement, “ Purchased Assets ” means Seller’s right, title and interest in all assets, properties and rights primarily used or held for use by Seller in the operation or conduct of the Business and all assets and properties located at the Real Property, including all assets, properties and rights set forth or described in (i) — (xiv) below, whether tangible or intangible, real, personal or mixed (except, in each case, for the Excluded Assets) and whether or not such assets, properties or rights have any value for accounting purposes:

 

                                                (i)                                      the Owned Real Property, as listed on Section 2.01(a)(i)(A) of the Disclosure Schedule , and all rights in respect of the Leased Real Property, as listed on Section 2.01(a)(i)(B) of the Disclosure Schedule ;

 

 

 

 

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                                                (ii)                                   the furniture, fixtures, Supplies, machinery, and equipment and other tangible property located at the Real Property and owned by the Seller primarily for use in the operation or conduct of the Business, together with Seller’s right, title and interest to any leases of tangible property located at the Real Property and owned by the Seller primarily for use in the operation or conduct of the Business, as listed on Section 2.01(a)(ii) of the Disclosure Schedule ;

 

                                                (iii)                                the Acquired Contracts as listed on Section 2.01(a)(iii) of the Disclosure Schedule .  At any time prior to the date which is three Business Days prior to the date scheduled by the Bankruptcy Court for the Sale Order hearing, Purchaser, in its sole discretion by written notice to Seller, may elect to exclude any Executory Contract (including the Bonds) as an Acquired Contract, in which case such Executory Contract shall no longer be deemed an “Acquired Contract” and shall constitute an “Excluded Contract” under this Agreement;

 

                                                (iv)                               the Inventories, as listed on Section 2.01(a)(iv) of the Disclosure Schedule ;

 

                                                (v)                                  all owned cars, trucks, forklifts, railcars, other industrial vehicles and other motor vehicles located at the Real Property or primarily used or held for use in the operation or conduct of the Business (“ Motor Vehicles ”), together with Seller’s right, title and interest to any leases of Motor Vehicles, as listed on Section 2.01(a)(v) of the Disclosure Schedule ;

 

                                                (vi)                               the Receivables;

 

                                                (vii)                            the Business Records (provided that Seller is permitted access to such Business Records as set forth in Section 5.10 below);

 

                                                (viii)                         the goodwill associated with the Business or the Purchased Assets;

 

                                                (ix)                                 the Intellectual Property, including the Transferred IP License Agreements (to the extent transferable under applicable Law);

 

                                                (x)                                    all Permits (to the extent transferable under applicable Law), as listed on Section 2.01(a)(x) of the Disclosure Schedule ;

 

                                                (xi)                                 to the extent taken into account in the Net Working Capital calculations on Exhibit 2.07(b)  attached hereto, any rights to any refund of Taxes, credits or similar benefits attributable to Taxes of Seller;

 

                                                (xii)                              to the extent taken into account in the Net Working Capital calculations on Exhibit 2.07(b)  attached hereto, any utility and security deposits, warranties, prepaid expenses and insurance premiums, credits, orders, claims for refunds, rights of recovery and indemnification, and rights to offset in respect thereof, as listed on Section 2.01(a)(xii) of the Disclosure Schedule ;

 

 

 

 

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                                                (xiii)                           the Avoidance Actions in respect of the Acquired Contracts (the “ Included Avoidance Actions ”); and

 

                                                (xiv)                          (a) any and all rights of any nature with respect to all current insurance policies of the Seller, including all insurance recoveries thereunder and rights to assert Claims with respect to any such insurance recoveries, (b) any and all warranties, claims for refunds, rights of recovery and indemnification, in each case, the basis for which arises solely with respect to any event, circumstance or occurrence in connection with a Purchased Asset, from June 30, 2008 through the Closing Date.

 

                                                (b)                                  Excluded Assets .  Notwithstanding anything in Section 2.01(a) to the contrary, the Seller shall not sell, convey, assign, transfer or deliver, nor cause to be sold, conveyed, assigned, transferred or delivered, to the Purchaser, and the Purchaser shall not purchase, and the Purchased Assets shall not include, the Seller’s right title and interest to any assets of the Seller not expressly included in the Purchased Assets (the “ Excluded Assets ”), including, but not limited to:

 

                                                (i)            the Purchase Price Bank Account;

 

                                                (ii)                                   all of Seller’s interest in any letters of credit issued by any Person at the request or for the benefit of Seller, including, without limitation, the letters of credit described on Section 2.01(b)(ii) of the Disclosure Schedule , and any proceeds or return of fees in connection therewith, cash and cash equivalents, securities, and negotiable instruments of the Seller on hand, in lock boxes, in financial institutions or elsewhere, including all cash residing in any collateral cash account securing any indebtedness obligation or contingent obligation of the Seller or any Affiliate;

 

                                                (iii)                                to the extent not set forth in the Net Working Capital calculations on Exhibit 2.07(b)  attached hereto, any rights to Tax refunds, credits or similar benefits attributable to Taxes of Seller;

 

                                                (iv)                               the company seal, minute books, charter documents, stock or equity record books and such other books and records as pertain to the organization, existence or capitalization of the Seller, as well as any other records or materials relating to the Seller, Parent and its Subsidiaries that are not Business Records (except to the extent contained within computer hardware that is Purchased Assets);

 

                                                (v)                                  the Retained Names and Marks;

 

                                                (vi)                               any asset of Seller that otherwise would constitute a Purchased Asset but for the fact that it is conveyed, leased or otherwise disposed of, in the ordinary course of Seller’s business, consistent with the terms of this Agreement and any post-petition credit agreement, during the time from the Execution Date until the Closing Date;

 

 

 

 

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                                                (vii)                            all contracts that are not Acquired Contracts (“ Excluded Contracts ”);

 

                                                (viii)                         all Employee Benefit Plans currently or previously sponsored or maintained by Seller or any of Seller’s ERISA Affiliates (collectively, the “ Seller Controlled Group ”) or their respective predecessors or with respect to which the Sellers Controlled Group or their respective predecessors has made or is required to make payments, transfers or contributions in respect of any present or former employees, directors, officers, shareholders, consultants or independent contractors of Seller or any of the Seller’s ERISA Affiliates or their respective predecessors (collectively, the “ Seller Benefit Plans ”), and all insurance policies, fiduciary liability policies, benefit administration contracts, actuarial contracts, trusts, escrows, surety bonds, letters of credit and other contracts primarily relating to any Seller Benefit Plan;

 

                                                (ix)                                 all rights of the Seller under this Agreement and the Ancillary Agreements;

 

                                                (x)                                    Tax Returns of the Seller, other than those relating primarily to the Purchased Assets or the Business;

 

                                                (xi)                                 except as specified in Sections 2.01(a)(xii) and (a)(xiv), all current and prior insurance policies of the Seller and all rights of any nature with respect thereto, including all insurance recoveries thereunder and rights to assert claims with respect to any such insurance recoveries;

 

                                                (xii)                              the Avoidance Actions, other than Included Avoidance Actions;

 

                                                (xiii)                           the computer equipment, servers, operations and accounting software, and such other back-office services owned or leased by Parent and used to provide corporate operational support for Parent’s Business, other than as set forth on any section of Section 2.01(a) of the Disclosure Schedule or as may be offered and identified pursuant to the terms and conditions of a Transition Services Agreement among Seller and Purchaser and their appropriate Affiliates as set forth on Section 2.01(b)(xiii) of the Disclosure Schedule ;

 

                                                (xiv)                          any right, property or asset that would otherwise be a Purchased Asset but is not permitted to be transferred in accordance with applicable Law; and

 

                                                (xv)         except as specified in Sections 2.01(a)(xii) and (a)(xiv) and except to the extent set forth in the Net Working Capital calculations on Exhibit 2.07(b)  attached hereto, any post-Petition utility and security deposits, warranties, prepaid expenses and insurance premiums, credits, orders, claims for refunds, rights of recovery and indemnification, and rights to offset in respect thereof; and

 

 

 

 

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                                                (xvi)                          any right, property or asset that is listed or described in Section 2.01(b)(xvi) of the Disclosure Schedule .

 

SECTION 2.02          Assumption and Exclusion of Liabilities.

 

                                                (a)           Assumed Liabilities .  Upon the terms and subject to the conditions set forth in this Agreement, the Purchaser shall, by executing and delivering, at the Closing, the Assumption Agreement, assume, and agree to pay, perform and discharge when due, only those liabilities and obligations of Seller set forth in paragraphs (i) — (vii) below (the “ Assumed Liabilities ”):

 

                                                (i)            Trade Accounts Payable and Other Accrued Operating Expenses, to the extent taken into account in the Net Working Capital calculations on Exhibit 2.07(b)  attached hereto;

 

                                                (ii)           all Liabilities arising on or after the Closing Date under the Acquired Contracts, Permits and such other contracts assumed by the Purchaser under Section 2.01(a) hereof; provided , however , Purchaser shall not assume or agree to pay, discharge or perform any Liabilities arising out of any breach by Seller of any provision of any contract or Permit, including Liability for breach, misfeasance or under any other theory relating to Seller’s conduct prior to Closing;

 

                                                (iii)          all Liabilities for product warranty service claims relating to products of the Business manufactured by Purchaser following the Closing Date;

 

                                                (iv)          to the extent taken into account in the Net Working Capital calculations on Exhibit 2.07(b)  attached hereto, any Taxes of Seller which are taken into account for purposes of determining Net Working Capital;

 

                                                (v)           to the extent taken into account in the Net Working Capital calculations on Exhibit 2.07(b)  attached hereto, all Liabilities related to any and all vacation, sick leave and medical insurance claims of the Transferred Employees and the WARN Act, to the extent specified in Section 6.01(b);

 

                                                (vi)          the Bond Liabilities;

 

                                                (vii)         to the extent taken into account in the Net Working Capital calculations on Exhibit 2.07(b)  attached hereto, all returns and customer allowances related to the post-Petition, Pre-Closing Period; and

 

                                                (viii)        such other Liabilities set forth in Section 6.03 and 6.05 of this Agreement.

 

                                                (b)                                  Excluded Liabilities .  Notwithstanding any provisions of this Agreement to the contrary, other than the Assumed Liabilities, Purchaser shall not assume or in any way be liable or responsible for, any Liabilities whatsoever (including Liabilities

 

 

 

 

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relating to the conduct or operation of the Business or to the Purchased Assets and the use thereof at any time on or prior to the Closing Date), whether relating to or arising out of the Business or the Purchased Assets or otherwise, whether direct or indirect, known or unknown, fixed or contingent or otherwise, liquidated, due or to become due (the “ Excluded Liabilities ”). In furtherance of the foregoing and not in limitation thereof, except for the Assumed Liabilities, in no event shall Purchaser be liable or responsible for:

 

                                                (i)            all Taxes, except Taxes taken into account in the Net Working Capital calculations on Exhibit 2.07(b)  attached hereto;

 

                                                (ii)           all Liabilities relating to or arising out of the Excluded Assets, whether before, on or after the Closing;

 

                                                (iii)          the Seller’s obligations under this Agreement and the Ancillary Agreements;

 

                                                (iv)          all Environmental Liabilities to the extent that they arise out of or relate to the ownership or operation of the Business, the leasing, ownership or operation of the Real Property or any of the other Purchased Assets, in each case to the extent involving or relating to facts, events or circumstances arising or occurring on or prior to the Closing Date, no matter when raised;

 

                                                (v)           All Liabilities that arise (whether under the Acquired Contracts, Permits or otherwise) with respect to the Business or the Purchased Assets or the use of the Purchased Assets on or prior to the Closing Date, or are to be observed, paid, discharged or performed on or prior to the Closing Date (other than Liabilities in this Section 2.02(b)(v) to the extent taken into account in the Net Working Capital calculations on Exhibit 2.07(b)  attached hereto);

 

                                                (vi)          All Products Liabilities and all other Liabilities arising out of or relating to (a) the manufacture and sale of products manufactured or sold by Seller or an Affiliate on or prior to the Closing, (b) warranty claims arising out of or related to products manufactured or sold by Seller or an Affiliate on or prior to the Closing Date, and (c) any other claims arising out of or related to the use of products manufactured or sold by Seller or an Affiliate on or prior to the Closing Date;

 

                                                (vii)         Except for the Bond Liabilities (only to the extent the related Bonds are assigned to Purchaser at Closing), all Liabilities associated with notes, loan agreements, credit agreements, bonds, indentures, hedging obligations and similar debt instruments or evidence of indebtedness for borrowing money and guarantees of Seller or an Affiliate, in each case, including any interest on or fees, expenses or costs with respect thereto;

 

                                                (viii)        All Liabilities related to any employee or former employee of Seller or an Affiliate, including under the WARN Act (except as specified in

 

 

 

 

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Section 6.01(b))or as the immediate result of the consummation of the transactions contemplated by this Agreement; provided , however , with respect to Transferred Employees, all such Liability shall be Excluded Liabilities only to the extent (a) incurred or accrued for periods on or prior to the Closing Date, and (b) such Liabilities are not taken into account for purposes of determining Net Working Capital as set forth in the Net Working Capital calculations on Exhibit 2.07(b)  attached hereto; and

 

                                                (ix)           all Liabilities of Seller or an Affiliate under any collective bargaining agreement, agreement with any labor union, employment agreement or severance agreement.

 

                                                (c)                                   Cure Costs .  To the extent any amount is required to be paid to cure any monetary defaults which exist as of the Closing Date with respect to any of the Acquired Contracts, Permits to the extent assignable under applicable Law, or other contracts subject to the Assumption Agreement, Seller shall cure such monetary defaults at or prior to the Closing to the extent such cure is required by Section 365 of the Bankruptcy Code (any such amounts paid to cure any such defaults, being referred to the “ Cure Costs ”).  Section 2.02(c) of the Disclosure Schedule sets forth the Cure Costs that Seller reasonably believes due and payable.  If, following the Execution Date, Purchaser determines to assume any contract or agreement that is specified herein as an Excluded Asset as of the Execution Date, Purchaser shall be required to cure all monetary defaults, solely with respect to such newly assumed contracts or agreements, at or prior to the Closing to the extent such cure is required by Section 365 of the Bankruptcy Code .

 

SECTION 2.03          Purchase Price.

 

                                                (a)                                   Deposit.  Upon the earlier of (i) the entry of an order by the Bankruptcy Court approving the Deposit Escrow Agreement or (ii) the entry of the Bidding Procedures Order, the Purchaser shall deliver to the escrow agent, who is party to that certain Deposit Escrow Agreement, an amount equal to the Deposit to be held in an interest bearing account (collectively, the “ Deposit Escrow Funds ”).  The Seller shall have no right, title or interest in and to the Deposit unless and until such time as the Bankruptcy Court enters the Bidding Procedures Order.   The parties hereby agree, and the Deposit Escrow Agreement shall provide, that the escrow agent will immediately disburse the Deposit to the Purchaser if the Purchaser notifies such escrow agent in writing that either (i) any Person (including, but not limited, to any creditor, creditors’ committee, or representative of the Office of the United States Trustee) has moved any court for reconsideration or rehearing of the deposit escrow order, or (ii) any Person has filed a notice of appeal with respect to the deposit escrow order.  If the Deposit Escrow Funds are disbursed to the Purchaser pursuant to the preceding sentence, upon entry of the Bidding Procedures Order and written notice of such event by Seller to Purchaser, the Purchaser shall redeposit the Deposit Escrow Funds with the escrow agent within one Business Day of such written notice.  Upon the earlier of (i) the entry of an order by the Bankruptcy Court approving the Deposit Escrow Agreement or (ii) the

 

 

 

 

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Bankruptcy Court’s entry of the Bidding Procedures Order, the parties irrevocably elect, as the sole judicial forum for the adjudication of any matters arising under or in connection with the Deposit Escrow Agreement and the Deposit Escrow Funds, and consent to the exclusive jurisdiction of, the Bankruptcy Court.  The Deposit will be (i) payable to Seller at the Closing and applied to the Base Purchase Price, or (ii) disbursed subject to the Bidding Procedures Order and the Deposit Escrow Agreement.

 

                                                (b)           Closing Purchase Price .  For purposes of this Agreement, the “ Base Purchase Price ” shall mean Eighty-Seven Million Dollars ($87,000,000.00).  At Closing, the Purchaser shall deliver to Seller, by wire transfer in immediately available funds, an amount equal to (i) the Base Purchase Price (as adjusted pursuant to Sections 2.07, 5.11 and 5.12); less (ii) all principal, interest and assignment costs attributable to the Bonds (to the extent the obligations under the Bonds are assumed by Purchaser), and (iii) the Escrow Funds (“ Closing Purchase Price ”).  If one or more of the Bonds are not assigned to Purchaser at Closing, then there shall be no reduction in the Base Purchase Price paid in cash at Closing with respect to the non-assigned Bond for purposes of this Section 2.03(b).  The Closing Purchase Price shall be subject to further adjustment as set forth in Section 2.08 below (as so adjusted, plus the Escrow Funds to the extent payable or paid to Seller, the “ Purchase Price ”).

 

                                                (c)           Allocation .  The sum of the Purchase Price and any other relevant items, including the Assumed Liabilities, shall be allocated among the Purchased Assets as the Purchaser shall reasonably determine and communicate to Seller within ninety (90) days following the Closing (the “Allocation”), provided however, the Purchaser and the Seller agree that the amount allocated to the tangible personal property located in California and Georgia other than Inventories, (“FA”) shall be as close to the adjusted basis (for federal income tax purposes) of the FA on the Closing Date, as Purchaser’s auditors determine to be consistent with the requirements of GAAP.  If the Purchase Price is adjusted after Closing, the Allocation shall also be adjusted by the Purchaser within ten (10) Business Days of such Purchase Price adjustment.  To the extent permitted by the Code or other applicable tax law, any adjustments to the Purchase Price shall be allocated, to the extent possible, to the classes of assets that were the subject of the adjustments to the Purchase Price, subject to the agreement herein with respect to FA. The parties agree to abide by such allocation for all Tax purposes, and shall take no position on any Tax return inconsistent with such allocation.  Without limiting the foregoing, each of the Seller and Purchaser shall file IRS Form 8594 in manner consistent with such allocation.

 

                                                (d)           Escrow Agent .  The fees, costs and expenses of the escrow agent under the Deposit Escrow Agreement and the Working Capital Escrow Agreement, and all other fees, costs and expenses related thereto, shall be borne by Seller and Purchaser in equal proportion.

 

SECTION 2.04          Closing .   Subject to the terms and conditions of this Agreement, the sale and purchase of the Purchased Assets and the assumption of the Assumed Liabilities contemplated by this Agreement shall take place at a closing (the “ Closing ”) to be held at the

 

 

 

 

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offices of Greenberg Traurig, LLP, 3290 Northside Parkway, Suite 400, Atlanta, Georgia  30327 at 10:00 A.M. Atlanta time on the third Business Day following the satisfaction or waiver of all of the conditions specified in Article VII or at such other place or at such other time or on such other date as the Seller and the Purchaser may mutually agree upon in writing (the “ Closing Date ”).  All acts and deliveries pursuant to Sections 2.05 and 2.06 shall be deemed to occur contemporaneously on the occurrence of the last act or delivery and none of such acts or deliveries shall be effective until the last of the same has occurred.

 

SECTION 2.05             Closing Deliveries by the Seller .   At the Closing, the Seller shall deliver or cause to be delivered to the Purchaser:

 

                                                (a)           the Bill of Sale, the Deeds with all required Conveyance Tax stamps affixed (in the form acceptable to the Title Company), each Assignment of Lease, and the Assignment of Transferred Intellectual Property;

 

                                                (b)           executed counterparts of the Assumption Agreement;

 

                                                (c)           executed counterparts of each Ancillary Agreement to which the Seller is a party other than the Ancillary Agreements delivered pursuant to Section 2.05(a) and (b);

 

                                                (d)           a receipt for the Closing Purchase Price;

 

                                                (e)           a certificate of non-foreign status pursuant to section 1.1445-2(b)(2) of the Regulations;

 

                                                (f)            any consents, waivers or approvals obtained by Seller with respect to transactions contemplated by this Agreement and the Ancillary Agreements to the extent permitted under the Bankruptcy Code and approved by the Bankruptcy Court;

 

                                                (g)           an executed copy of the Sale Order;

 

                                                (h)           a certificate from the Seller, dated the Closing Date, certifying the fulfillment of the conditions set forth in Section 7.02; and

 

                                                (i)            all such other instruments of assignment, transfer or conveyance as Purchaser may reasonably request or as may be otherwise necessary to evidence and effect the sale, transfer, assignment, conveyance and delivery of the Purchased Assets to Purchaser and to put Purchaser in actual possession or control of the Purchased Assets.

 

SECTION 2.06             Closing Deliveries by the Purchaser .   At the Closing, the Purchaser shall deliver to the Seller or, with respect to Section 2.06(b), the escrow agent:

 

                                                (a)           the Closing Purchase Price by wire transfer in immediately available funds to the Purchase Price Bank Account;

 

 

 

 

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                                                (b)           the Working Capital Escrow Funds;

 

                                                (c)           executed counterparts of the Assumption Agreement, each Assignment of Lease, the Assignment of Transferred Intellectual Property and such other instruments, in form and substance satisfactory to the Seller, as may be requested by the Seller to effect the assumption by the Purchaser of the Assumed Liabilities and to evidence such assumption on the public records;

 

                                                (d)           a certificate of Purchaser, dated the Closing Date, certifying the fulfillment of the conditions set forth in Section 7.01;

 

                                                (e)           executed counterparts of each Ancillary Agreement (other than the Ancillary Agreements delivered pursuant to Section 2.06(c)) to which the Purchaser is a party;

 

                                                (f)            all such other instruments of assignment, transfer or conveyance as Seller may reasonably request or as may be otherwise necessary to evidence and affect the sale, transfer, assignment, conveyance and delivery of the Purchased Assets to Purchaser and the assumption of the Assumed Liabilities by Purchaser.

 

SECTION 2.07             Pre-Closing Adjustment of Purchase Price.

 

                                                (a)           Within five (5) Business Days prior to the Closing, Seller, shall cause to be prepared and delivered to the Purchaser a certificate (the “ Estimated Closing Certificate ”) reasonably acceptable to Purchaser.  The Estimated Closing Certificate shall be executed by a senior officer of the Seller, dated as of the date of delivery, stating that there has been conducted under the supervision of such senior officer, with the participation of Purchaser as Purchaser deems appropriate (including, without limitation, having a representative at each inventory count and a review of all books and records utilized in preparing the Estimated Closing Certificate), a review of all relevant information and data then available and setting forth the Seller’s estimate of the Net Working Capital (as defined below) of the Seller as of the Closing Date (the “ Estimated Net Working Capita l”).  The Estimated Net Working Capital shall be determined in accordance with GAAP applied on a basis consistent with the past practices of Seller.  The Base Purchase Price shall be increased by the positive amount by which  the Estimated Net Working Capital exceeds $44,562,000 (the “ Target Net Working Capital ”), or the Base Purchase Price shall be decreased by the positive amount by which the Target Net Working Capital exceeds the Estimated Net Working Capital.

 

                                                (b)           For the purposes of this Agreement, including the determination of the Estimated Net Working Capital, the Target Net Working Capital, the Closing Net Working Capital, and the Final Net Working Capital, the term “ Net Working Capital ” shall have the meaning and will be calculated as set forth on Exhibit 2.07(b)  attached hereto.

 

 

 

 

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                                                (c)           At Closing, Purchaser shall tender Two Million Five Hundred Thousand Dollars ($2,500,000.00) (the “ Working Capital Escrow Amoun t”) to be held in escrow in an interest bearing account (collectively with interest, the “ Working Capital Escrow Funds ”) pursuant to the Working Capital Escrow Agreement.

 

SECTION 2.08             Post-Closing Purchase Price Adjustment.

 

                                                (a)           As promptly as practicable, but no later than forty-five (45) days after the Closing Date, the Purchaser will cause to be prepared and delivered to the Seller a certificate (the “ Closing Certificate ”) signed by a senior officer of the Purchaser setting forth a calculation of the Net Working Capital of the Seller as of the Closing Date (the “ Closing Net Working Capital ”), which shall be prepared in accordance with GAAP applied on a basis consistent with the past practices of Seller and the principles utilized in preparing the Estimated Net Working Capital.  The Seller will assist the Purchaser in the preparation of the Closing Certificate and will provide the Purchaser and its independent auditors access at all reasonable times to the Seller’s personnel and properties, books, and records for such purpose.  Purchaser and Seller shall be entitled to have a representative present at each respective inventory count.  The Closing Certificate shall present fairly, in all material respects, the Net Working Capital of the Seller as of the close of business on the Closing Date.  The Seller shall have 25 days to review the certificate and accompanying report (the “ Review Period ”).  The Seller and its accountants shall be provided with customary access to the work papers of the Purchaser’s independent accountants in connection with such review, subject to the execution of customary confidentiality and other undertakings.  If the Seller disagrees in any respect with any item or amount shown or reflected in the Closing Certificate or with the calculation of the Closing Net Working Capital, the Seller may, on or prior to the last day of the Review Period, deliver a notice to the Purchaser setting forth, in reasonable detail, the disputed item or amount and the basis for the Seller’s disagreement therewith (the “ Dispute Notice ”).  The Dispute Notice shall set forth the Seller’s position as to the proper Closing Net Working Capital. If no Dispute Notice is received by the Purchaser on or prior to the last day of the Review Period, the Closing Certificate shall be deemed accepted by the Seller, whereupon the Closing Net Working Capital reflected on the Closing Certificate shall be deemed to be the “ Final Net Working Capital ,” and the Purchaser or the Seller, as the case may be, will pay to the other Party the amount owing in accordance with Section 2.08(d) hereof. In the event that the Seller timely delivers a Dispute Notice to the Purchaser, the Purchaser or the Seller, as the case may be, will pay to the other Party any undisputed portion of the amount determined under Section 2.08(d) hereof which would be payable regardless of how the matters set forth in the Dispute Notice are resolved (the “ Undisputed Amount ”), with interest on such amount accruing as of the Closing Date as determined in Section 2.08(f) hereof.

 

                                                (b)           For fourteen (14) days after the Purchaser’s receipt of a Dispute Notice, if any, the Parties shall endeavor in good faith to resolve by mutual agreement all matters in the Dispute Notice.  In the event that the Parties are unable to resolve by mutual agreement any matter in the Dispute Notice within such 14-day period, the

 

 

 

 

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Purchaser and the Seller hereby agree that they shall engage Dixon Hughes, PLLC (the “ Independent Accounting Firm ”) in respect of this Section 2.08, provided that in the event Dixon Hughes, PLLC is unable or unwilling to serve as the Independent Accounting Firm the parties shall agree upon an accounting firm of national reputation as the Independent Accounting Firm.  The Seller and the Purchaser shall submit the disputed matters, as described in the Dispute Notice, together with such arguments as either of them choose to make in connection therewith, in writing to the Independent Accounting Firm within twenty (20) days after the Independent Accounting Firm’s engagement.

 

                                                (c)           The Seller and the Purchaser shall use their commercially reasonable efforts to cause the Independent Accounting Firm to resolve the disputed matters based upon the materials submitted to it pursuant to the last sentence of Section 2.08(b) hereof within thirty (30) days following the submission of such materials.  The Independent Accounting Firm shall determine, based solely on presentations by the Seller and the Purchaser, and not by independent review, only those issues in dispute specifically set forth in the Dispute Notice and shall render a written report to the Seller and the Purchaser (the “ Adjustment Report ”) in which the Independent Accounting Firm shall, after considering all matters set forth in the Dispute Notice, determine what adjustments, if any, should be made to the Closing Certificate solely as to the disputed items and shall determine the appropriate Final Net Working Capital on that basis.  The Adjustment Report shall set forth, in reasonable detail, the Independent Accounting Firm’s determination with respect to each of the disputed items or amounts specified in the Dispute Notice, and the revisions, if any, to be made to the Closing Certificate and the Closing Net Working Capital, together with supporting calculations.  In resolving any disputed item, the Independent Accounting Firm (i) shall be bound to the principles of this Section 2.08, (ii) shall limit its review to matters specifically set forth in the Dispute Notice; and (iii) shall not assign a value to any item higher than the highest value for such item claimed by either Party or less than the lowest value for such item claimed by either Party.  All fees and expenses relating to the work of the Independent Accounting Firm shall be borne by the Seller, on the one hand, and by the Purchaser, on the other hand, in inverse proportion as they may prevail on the matters resolved by the Independent Accounting Firm (such inverse proportion for each Party shall be the positive value obtained by each Party by dividing (1) the difference of (A) the amount of the Closing Net Working Capital proposed by such Party and (B) the amount of the Final Net Working Capital established by the Independent Accounting Firm by (2) the difference between (A) the amount of the Closing Net Working Capital proposed by the Seller and (B) the amount of Closing Net Working Capital proposed by the Purchaser), which proportionate allocation will also be determined by the Independent Accounting Firm and be included in the Adjustment Report.  The Adjustment Report, absent fraud or willful misconduct, shall be final and binding upon the Purchaser and the Seller, shall be deemed a final arbitration award that is binding on each of the Purchaser and the Seller, and no Party shall seek further recourse to courts, other tribunals or otherwise, other than to enforce to the Adjustment Report. Judgment may be entered to enforce the Adjustment Report in any court having proper jurisdiction.

 

 

 

 

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                                                (d)           Effective upon the end of the Review Period (if a timely Dispute Notice is not delivered), or upon resolution of an Undisputed Amount, upon the resolution of all matters set forth in the Dispute Notice by mutual agreement of the Parties or by the issuance of the Adjustment Report (if a timely Dispute Notice is delivered), the Closing Purchase Price shall be (i)  increased dollar-for-dollar by the amount by which the Final Net Working Capital exceeds the Estimated Net Working Capital, or (ii)  decreased dollar-for-dollar by the amount by which the Final Net Working Capital is less than the Estimated Net Working Capital. The aggregate net adjustment paid by Purchaser, or Seller on its behalf by the escrow agent, under this Section 2.08 shall not be more than $2.5 million plus any interest determined in accordance with Section 2.08(e), and in no event shall the amount payable under this Section 2.08 be subject to any offset, defense or counterclaim by the paying Party.  Any adjustment to the Closing Purchase Price pursuant to this Section 2.08 shall be paid by the Purchaser or the Seller, as the case may be, together with interest accruing as of the Closing Date as determined pursuant to Section 2.08(e) below, (1) if a timely Dispute Notice is not delivered, on the fifth (5th) Business Day following the end of the Review Period, or (2) if a timely Dispute Notice is delivered, (A) with respect to Undisputed Amounts paid pursuant to the last sentence of Section 2.08(a), on the fifth (5th) Business Day following the delivery of a Dispute Notice to the Seller, and (B) adjusted for any payment made by the Purchaser or the Seller, as the case may be, as described in the foregoing clause (A), on the fifth (5th) Business Day following the resolution of all matters set forth in the Dispute Notice by mutual agreement of the Parties or on the fifth (5th) Business Day following the date on which the Adjustment Report has been received by the Seller and the Purchaser, whichever is earlier. Any such payment shall be made by wire transfer of immediately available funds to an account or accounts designated by the Purchaser or the Seller, as the case may be, at least two (2) Business Days prior to the applicable payment date.  In accordance with the Working Capital Escrow Agreement, any funds payable by Seller to Purchaser in this Section 2.08 shall be made by the escrow agent to Purchaser.  Any Working Capital Escrow Amount remaining in the related escrow account after any payments are made to Purchaser pursuant to this Section 2.08(d) shall be automatically released by the escrow agent and paid to Seller within three (3) Business Days after the Closing Purchase Price becomes final and binding on the parties.

 

                                                (e)           Any interest payable pursuant to this Section 2.08 shall be paid at an annual rate equal to the prime rate per annum as quoted in The Wall Street Journal on the Closing Date and shall be calculated on the basis of the actual days elapsed between the Closing Date and the date of payment over three hundred and sixty (360) days.  Any interest payable pursuant to the prior sentence shall first be paid from the accrued interest portion of the Working Capital Escrow Funds.

 

 

 

 

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ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF THE SELLER

 

The Seller, jointly and severally, hereby represents and warrants to Purchaser that the following statements are true and correct as of the Execution Date, and will be, as of the Closing Date, true and correct (or, in each case, if a representation or warranty is made as of a specified date, as of such date):

 

SECTION 3.01             Organization, Authority and Qualification of the Seller.

 

                                                (a)           The Seller is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all necessary corporate power and authority to enter into this Agreement and the Ancillary Agreements, to carry out its obligations hereunder and thereunder