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