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Exhibit
10.9
Asset Purchase
Agreement
This Asset Purchase
Agreement is made on August ,
2007 between Neogen Corporation , a Michigan corporation
whose address is 620 Lesher Place, Lansing, Michigan 48912 (“
Buyer ”), Kane Enterprises, Inc. , a
South Dakota corporation (“ Seller ”)
whose address is 1117 Ash Street, Brandon, South Dakota 57005, and
G. Kevin and Robyn A. Kane, husband and wife, South Dakota
residents whose business address is 1117 Ash Street, Brandon, South
Dakota 57005 (individually “ Kane ” and
collectively, “ Kanes ”) (“
Agreement ”).
Recitals
A. Seller is engaged in the
business of manufacturer, importer and distributor of specialty
animal health products (collectively, “
Business ”).
B. Buyer desires to purchase,
and Seller desires to sell, those assets of Seller described in
this Agreement upon the terms, conditions and covenants contained
in this Agreement.
The parties agree as
follows:
1. Purchase and Sale of
Assets . Based upon the representations, warranties and
agreements contained in this Agreement and subject to the terms and
conditions set forth in this Agreement, at the Closing Date, as
defined in Section 3A, Seller shall sell, transfer and deliver
to Buyer, and Buyer shall purchase and accept from Seller, all of
the assets used or employed by Seller in the conduct of the
Business (collectively referred to as the “ Purchased
Assets ”), including but not limited to the
following, as applicable:
(a) Machinery and
Equipment . All manufacturing, laboratory, and office machinery
and equipment, non-passenger vehicles, furniture, fixtures,
supplies, fixed assets and all other tangible personal property
used in the Business including, but not limited to, the equipment
listed on attached Exhibit 1.(a) (“
Machinery and Equipment ”).
(b) Intangible
Property . All of the intangible property of Seller used in the
Business, including, but not limited to, the following listed on
attached Exhibit 1.(b) :
(1) Patents, trademarks,
service marks, trade names, trade dress and copyrights and all
applications therefore;
(2) Trade secrets, secret
processes, proprietary processes and technology and secret
manufacturing processes;
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(3) To the extent assignable,
all permits and licenses used or employed by Seller in the
Business; and
(4) The name “
KANE ENTERPRISES, INC. ”, and “
Ag-Tek ” and all derivations thereof, and the
associated goodwill throughout the world, formulae, processes,
procedures, product formulations, product names, designs, research
and development, production, sales, and credit reports, data,
models, catalogs, technical specifications, files, engineering
data, business and accounting records, customer lists, supplier
lists, sales literature, marketing materials, budgets, forecasts,
telephone and facsimile numbers and all other business documents
and information, software, source code and computer programs
(including all current and historical data bases) which relate
primarily to the Business and all domain names, URLs and websites
used in the Business .
Sections 1(b)(1) to
(4) are collectively referred to as “ Intangible
Property ”.
(c) Accounts
Receivable . All accounts receivable as of the Closing Date
arising from the sale of inventory or services in the ordinary
course of the Business determined in accordance with United States
generally accepted accounting principles (“
GAAP ”); provided this amount shall not include
any accounts receivable that were outstanding, as of the Closing
Date, either (i) more than ninety days (“ Aged
Receivables ”); or (ii) for which there existed
on the Closing Date any payment dispute (but only to the extent of
the disputed amount) including but not limited to, those listed on
attached Exhibit 1.(c) (“
Receivables ”).
(d) Inventories . All
inventories, including, but not limited to, merchandise, materials,
component parts, manufacturing and packaging supplies, raw
materials, work in process and finished goods relating to the
Business on hand as of the Closing Date determined in accordance
with GAAP on the average cost basis of accounting consistently
applied; provided this amount shall not include either (i) any
inventory with less than six months shelf life remaining on the
Closing Date (“ Dated Inventory ”); or
(ii) any inventory in excess of twelve months sales based on
sales during the past twelve months (“ Excess
Inventory ”) including, but not limited to, the
inventories listed on attached Exhibit 1.(d) (“
Inventories ”).
(e) Contract Rights .
All rights, benefits and causes of action in favor of Seller
resulting or arising from contracts, purchase orders, sales orders,
service agreements, commission agreements, dealership or
distribution agreements, marketing agreements, licensing
agreements, warranties, guaranties or otherwise, which relate
primarily to the Business (“ Contract Rights
”). These include, but are not limited to, those listed on
Exhibit 1.(e) .
(f) Other Current
Assets . All deposits, prepaid expenses and other current
assets relating to the Business including, but not limited to,
those listed on Exhibit 1.(f) (“ Other
Current Assets ”).
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(g) Excluded Assets .
The Purchased Assets do not include the following: (i) cash
and marketable securities; (ii), passenger vehicles owned or leased
by Seller; (iii), Aged Receivables, (iv) Dated Inventory;
(v) Excess Inventory; and (vi) insurance and tax refunds
(collectively, “ Excluded Assets
”).
2. Non-Assumption of
Liabilities .
(a) General Non-Assumption
of Liabilities . Buyer shall not assume, expressly or
implicitly, pay, perform or discharge any debts, liabilities or
obligations of any nature of Seller, whether or not related to the
Business, other than the Trade Accounts Payable (as defined in
Section 2.(d)) specifically listed in Exhibit
2.(a) (“ Assumed Liabilities ”).
All the debts, liabilities and obligations of Seller, whether fixed
or contingent, accrued or unaccrued, known or unknown shall
continue to be the responsibility of Seller, which shall pay,
perform and discharge them in accordance with their terms, and
nothing contained in this Agreement shall be construed in any
fashion as imposing, directly or indirectly, responsibility for any
such debt, liability and obligation on Buyer except the Assumed
Liabilities.
(b) Product Liabilities;
Warranty Claims . Without limiting the generality of
Section 2(a), Buyer shall not assume, nor be liable whatsoever
for, liabilities, obligations or claims for losses, damages,
liabilities, costs or expenses exceeding Five Hundred and XX/100
Dollars ($500) per claim and Two Thousand and XX/100 Dollars
($2,000) in the aggregate based upon, or arising out of, any claim
alleging defect or negligence in the assembly, processing,
manufacture or sale of products, goods or services by Seller in
connection with the Business on or prior to the Closing Date,
including, but not limited to, negligence, product liability,
whether based on contract or tort, or warranty claims regarding
such products, goods or services arising out of transactions,
accidents or events on, prior to, or after the Closing Date, and
regardless of any claim was filed or made known to the Seller or
Buyer prior to the Closing Date (“ Product
Claims ”).
(c) Additional
Liabilities . Notwithstanding the provisions of
Section 2(a) to the contrary, and as an express exception,
Buyer shall assume, perform and discharge Seller’s liability,
existing as of the Closing Date, with respect to all post Closing
duties and obligations of Seller with respect to the open purchase
orders and distribution and sales agreements listed in
Exhibit 1.(e) , the assumption of which Buyer
expressly and separately acknowledges to Seller on the Closing Date
(“ Sales Agreement Liabilities
”).
(d) Trade Accounts
Payable . The term “ Trade Accounts Payable
” shall mean all trade accounts payable related to the
Business as of the Closing Date incurred in the ordinary course of
the Business.
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3. Purchase Price and
Method of Payments . The purchase price to be paid by Buyer to
Seller for the Purchased Assets shall be computed and paid as
provided in this Section (“ Price
”).
(a) Buyer shall pay Five
Million Eight Hundred Fifteen Thousand and XX/100 Dollars
($5,815,000) in immediately available funds to Seller at Closing,
subject to adjustment as provided in this Agreement (“
Cash Price ”).
(b) The Cash Price shall be
adjusted as follows:
(1) Not less than two
business days prior to the Closing Date, Seller will prepare and
deliver a certificate (“ Purchase Price
Certificate ”) setting forth Seller’s best
estimate, as of the Closing Date, Receivables (“
Estimated Closing Receivables ”), estimated
Inventories (“ Estimated Closing Inventories
”) and Trade Accounts Payable (“ Estimated
Closing Trade Payables ”). Representatives from
Seller and Buyer shall jointly take a physical inventory on or
about the Closing Date using a mutually acceptable procedure from
which the estimated Inventories as of Closing Date shall be
calculated and using such counts the final Inventories shall be
computed.
(2) On the Closing Date, the
Cash Price shall be adjusted by the amount (“ Closing
Purchase Price Adjustment Amount ”) equal to the sum
of (i) Estimated Closing Receivables minus the Estimated
Closing Trade Payables; and (ii) Estimated Closing Inventories
minus Seller’s inventories as of June 30, 2007,
determined in accordance with the definition of Inventories, of One
Million Five Hundred Fifty Nine Thousand and XX/100 Dollars
($1,559,000) (“ Target Inventories ”). If
the Closing Purchase Price Adjustment Amount is a positive number,
then the Cash Price payable at Closing shall be increased by the
Closing Purchase Price Adjustment Amount. If the Closing Purchase
Price Adjustment Amount is a negative number, then the Cash Price
payable at Closing shall be decreased by the Closing Purchase Price
Adjustment Amount.
(3) After the Closing Date
and pursuant to the procedure and set forth and as defined in
Section 11, the Price shall be adjusted by the amount (
“ Post-Closing Purchase Price Adjustment Amount
”) equal to (i) the Final Closing Receivables and
Inventories Value minus (ii) the Closing Purchase Price
Adjustment Amount. If the Post-Closing Purchase Price Adjustment
Amount is a positive number, then the Price shall be increased by
the Post-Closing Purchase Price Adjustment Amount and Buyer shall
promptly (and in any event within five Business Days) after the
final determination thereof pay to Seller the Post-Closing Purchase
Price Adjustment Amount by wire transfer of immediately available
funds to an account designated in writing by Seller. If the
Post-Closing Purchase Price Adjustment Amount is a negative number,
then the Price shall be decreased by the Post-Closing Purchase
Price Adjustment Amount and Seller shall promptly (and in any event
within five Business Days) after the final determination thereof
pay to Buyer the Post-Closing Purchase Price Adjustment Amount by
wire transfer of immediately available funds to an
account
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designated in writing by Buyer. The
party that owes the other any amount pursuant to this
Section 2.(b)(3) agrees to pay that party interest at the
prime rate published in the Wall Street Journal plus 6%
between the date on which the amount was due and the date on which
the amount due is paid in full.
(c) The Price shall be
increased, but not by more than Fifty Thousand and XX/100 Dollars
($50,000), by fifteen percent (15%) of the excess of Net Sales
(as defined in Section 2.(h) for the period beginning
September 1, 2007 and ending August 31, 2008 (“
August 31, 2008 Ending Net Sales ”) over Net
Sales of Six Million Four Hundred Fifty Thousand and XX/100 Dollars
($6,450,000). The amount payable pursuant to this
Section 2.(c) shall be paid to Seller on or before
September 30, 2008.
(d) The Price shall be
increased, but not by more than Fifty Thousand and XX/100 Dollars
($50,000), by fifteen percent (15%) of the excess of Net Sales
for the period beginning September 1, 2008 and ending
August 31, 2009 over the August 31, 2008 Ending Net
Sales. The amount payable pursuant to this Section 2.(d) shall
be paid on or before September 30, 2009.
(e) Buyer shall pay the Trade
Accounts Payable.
(f) An amount equal to Ten
Thousand and XX/100 Dollars ($10,000) of the Price shall be
assigned to a Covenant Not to Compete from Seller and the Kanes
pursuant to Section 9.(a)(2).
(g) The purchase price to be
paid by Buyer shall be allocated in the manner required by
Section 1060 of the Internal Revenue Code of 1986, as amended
(“ Code ”), and the Treasury Regulations
promulgated thereunder. In making the allocation, Buyer and Seller
shall apply the fair market values set forth on the Certificate of
Allocation substantially in the form of attached Exhibit
3.(g) This allocation shall be conclusive and binding on
the Buyer and Seller for all purposes, including the reporting and
disclosure requirements of the Code.
(h) The term “
Net Sales ” shall mean the total of the
aggregate gross invoice prices of the products that were being sold
by Seller as of the Closing Date attributable to the Business
(including any of such products that are improved or modified, but
excluding all new products added), less the sum of (i) cash,
trade, or quantity discounts; (ii) sales, use, tariff,
import/export duties or other excise taxes imposed upon particular
sales; (iii) transportation charges; and (iv) allowances
or credits to customers because of rejections or
returns.
(i) Buyer shall maintain
books and records to compute Net Sales for the periods identified
in this Agreement.
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3A. The Closing . The
closing of the purchase and sale of the Purchased Assets as
provided in this Agreement shall occur no later than
September 4, 2007 at the offices of Buyer, or at such other
place as may be fixed by mutual agreement of Buyer and Seller. The
date and event of closing are respectively referred to in this
Agreement as the “ Closing Date ” and
“ Closing .” At the Closing:
(a) Seller shall deliver to
Buyer a Warranty Bill of Sale, substantially in the form of
attached Exhibit 3A.(a) , for the Purchased Assets
(“ Warranty Bill of Sale ”),
non-passenger vehicle titles and the other matters required by
Section 6; and
(b) Buyer shall deliver to
Seller the Cash Price and other matters required by
Section 7.
4. Representations and
Warranties of Seller and the Kanes . In order to induce Buyer
to enter into this Agreement, Seller and the Kanes, jointly and
severally, make the following representations and warranties, each
of which shall be deemed to be independently material and relied
upon by Buyer, regardless of any investigation made by, or
information known to, Buyer:
(a) Organization and
Qualification . Seller is validly existing and in good standing
under the laws of the State of South Dakota. No failure on the part
of Seller to be qualified as a foreign corporation in any
jurisdiction materially and adversely affects the Business or
financial position or results of the operation of the properties of
Seller by reason of any disability affecting its right to own
property, collect receivables, enforce contracts or otherwise.
Seller has the requisite corporate power and authority to own or
hold the Purchased Assets and to carry on the Business as it is now
being conducted. Seller need not be duly qualified to do business
as a foreign corporation in any state in connection with the
conduct of its business. Seller has previously delivered to Buyer
complete and correct copies of Seller’s Articles of
Incorporation and Bylaws and all amendments to them. Seller has
delivered to Buyer a complete and accurate copy of the
Seller’s minute book in which there are accurate records of
all meetings, and consents in lieu of meetings, of the
Seller’s board of directors and shareholders held or executed
since the incorporation of Seller. The stock books and ledgers of
Seller have been delivered to Buyer for its inspection, and such
books and records are accurate and complete.
(b) No Violation . The
execution and delivery of this Agreement by Seller and the
consummation of the transactions contemplated by it will not
violate any provision of law, order, or regulation of any
governmental authority applicable to Seller or the corporate
charter or bylaws of Company or constitute a default under any
judgment, order or decree of any court of governmental agency or
instrumentality, or conflict or constitute a breach or a default
under any agreement to which Seller or the Kanes is a party or by
which any of them is bound.
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(c) Financial
Information . Seller has provided in Exhibit
4.(c) its (i) unaudited balance sheet and profit and
loss account as of and for the period ended September 30, 2006
and 2005 (“ Unaudited Financial Statements
”); and (ii) interim financial statements for the period
ended June 30, 2007 (“ Interim Financial
Statements ”) (collectively, “
Financial Statements ”) all in reasonable
detail. The Financial Statements:
(1) Have been prepared in
accordance with the books of account and records of
Seller.
(2) Fairly present and are
true, complete and correct statements of Seller’s financial
position, the results of its operations and changes in
stockholder’s equity of Seller as of and for the periods
specified in the Financial Statements.
(3) Have been prepared in
accordance with GAAP consistently applied (other than the
approximate $300,000 difference of understatement of book
inventory).
(4) Do not include or omit to
state any fact that renders them misleading.
(5) Make full and adequate
disclosure of all Seller’s obligations and liabilities (fixed
or contingent).
(6) Do not contain any items
of special or non-recurring income or expenses except as expressly
stated in the Financial Statements.
(d) Title to Assets .
Seller owns and has corporate power to own, and has good and
marketable title to the Purchased Assets free and clear of liens,
security interests, mortgages, pledges, claims or encumbrances of
any kind whatsoever, except as disclosed in Exhibit
4.(d)i . Seller has delivered to Buyer true and complete
copies of all written leases, contracts, agreements, options,
purchase orders, instruments and commitments relating to Seller or
the Business and written summaries of all oral contracts binding on
Seller, as evidenced in Exhibit 4.(d)ii
(collectively, “ Contracts ”). All
Contracts are legally valid and binding and in full force and
effect, and there are no defaults or breaches by Seller or
counterclaims or defenses against it. Seller has received no notice
of any default, breach, counterclaim or offset by any other party
to any of the Contracts, nor do Seller or Kanes have any knowledge
thereof. All Contracts will continue in full force and effect on
the same terms as currently exists, notwithstanding the
consummation of the sale contemplated by this Agreement.
(e) Condition of
Assets . All Purchased Assets conform in all material respects
with all health and safety rules and other rules and regulations.
All Purchased Assets, including all their components and parts, are
ready for operation, and, taking into account their ages, are in
normal operating condition and good order and repair. There are no
conditions or events, except for normal wear and tear, proper use
and the age of the Purchased Assets, which would prevent their
continued normal operation or would otherwise materially and
adversely affect their operation or use by Buyer after the Closing
as currently used by Seller.
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(f) Intellectual
Property . Seller owns, or is licensed to use, or otherwise has
the right to use all patents, trademarks, service marks, trade
names, trade secrets, franchises, and copyrights, and all
applications for any of the foregoing, and all technology, know-how
and processes necessary for the conduct of the Business as now
conducted (collectively, “ Proprietary Rights
”). With respect to Seller’s Proprietary
Rights:
(1) There are no licensing
arrangements relating in any manner to any of the Proprietary
Rights (whether or not in writing). Seller is in compliance with
and is not in default under any of such license agreements, and all
other parties to any of such license agreements are in full
compliance with and are not in default under any of the license
agreements;
(2) Exhibit
1.(e) sets forth a complete list of all patents,
trademarks, service marks, and copyrights used by Seller in the
conduct of the Business that are currently registered in any
jurisdiction, and Seller has good and marketable title to all such
assets free and clear of all liens, charges and encumbrances and
all filing or maintenance fees that are required to maintain such
registrations that are due and payable as of the date of this
Agreement have been paid and all associated maintenance filings
have been made;
(3) Exhibit
1.(e) sets forth a complete list of all unregistered
trademarks, service marks, and trade names used by Seller in the
conduct of the Business, and Seller has good and marketable title
to all such assets free and clear of all liens, charges and
encumbrances;
(4) Exhibit
1.(e) sets forth the dates of first use and the geographic
territory of use for each trademark, service mark, or trade name,
and Sellers represent that such marks and trade names have been in
continuous use in their respective territories since the listed
dates of first use;
(5) There has been no
software that the Seller has had written or developed by any person
or entity not an employee of Seller, lists the current owner of the
copyright interest in such software, and if Seller is the current
owner, lists the date of the written assignment of the copyright
interest to Seller;
(6) Seller has not infringed,
misappropriated, or otherwise used in an unauthorized manner the
proprietary rights (including but not limited to the patent, trade
secret, trademark, trade dress, or copyright rights) of any third
party;
(7) Seller has not granted or
committed to grant any rights in Seller’s Proprietary Rights
of any nature whatsoever to any third party;
(8) No claim has been
asserted by any person or entity (i) to the effect that any
action by Seller infringes on the intangible or intellectual
property rights of any other person or entity; or (ii) that
challenges or questions the right of Seller to use any of the
Proprietary Rights being used by it; or (iii) which asserts
the right of any third party to use such Proprietary
Rights.
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(9) There is no basis for any
claim against Seller that any of its operations, activities,
products, or publications infringes on any patent, trademark,
service mark, trade name, copyright, or other proprietary right of
a third party, or that it is illegally or in any unauthorized
manner using the trade secrets or any proprietary rights of
others.
(10) No person or entity is
infringing upon or has misappropriated any of Seller’s
Proprietary Rights. No person or entity other than Seller has any
right to use any Proprietary Rights.
(g) Receivables . The
list of Receivables attached as Exhibit 1.(c) is a
complete and accurate list of all the Receivables. All of the
Receivables listed on Exhibit 1.(c) arose from bona
fide sales transactions of Seller, and no portion of the
Receivables is subject to counterclaim or offset or is otherwise in
dispute. All of the Receivables are good and collectible in full in
the ordinary course of business at the net aggregate amounts
disclosed on Exhibit 1.(c) .
(h) Inventories . The
Inventories are accurately and consistently valued in accordance
with GAAP. The Inventories are usable and saleable in the ordinary
course of the Business. No Inventories have been consigned to
others.
(i) Contracts .
Exhibit 4.(d)i describes all Contracts to which
Seller is a party or to which it is bound and which arose out of,
or relate to, the Business that extend beyond the Closing Date.
Sellers have delivered true and correct copies of all such
documents evidencing the Contracts to Buyer. All Contracts shall
remain vested with Seller without change or the occurrence of any
default following the consummation of the transactions contemplated
by this Agreement, except as described on Exhibit
4.(d)ii .
(j) Litigation . There
are no actions, suits, proceedings or investigations pending or
threatened against Seller at law or in equity, or before any
federal, state or municipal or other governmental department,
commission, board, agency or instrumentality, domestic or foreign,
which involves a demand for any judgment or liability and which
could materially affect the Business or the transactions
contemplated by this Agreement. Seller is not in default with
respect to any order, writ, injunction or decree of any court of
federal, state, or municipal or other governmental department,
commission, board, agency or instrumentality, domestic or foreign,
and that there are no such orders, decrees, injunctions or
regulations issued specifically against Seller which may affect,
limit or control the method or manner of the Business, the
Purchased Assets or any transactions contemplated by this
Agreement.
(k) Compliance with
Law . Seller has complied with all applicable laws, orders and
regulations of any federal, state or municipal or other
governmental
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department, commission, board, agency or
instrumentality, domestic or foreign, having jurisdiction,
including, but not limited to, laws, orders and regulations thereof
relating to antitrust, wage, hours, collective bargaining,
environmental protection, employee safety, or legislation
pertaining to illegal bribes or kickbacks.
(l) Taxes .
(1) Seller has duly and
timely filed all required declarations, returns, and reports with
foreign, federal, state and local taxing authorities for which
Seller may be liable which are due and required to be filed by any
applicable tax law (“ Returns ”). All
taxes, interest and penalties owed (whether or not shown on the
Returns) have been paid. There is no tax audit or examination now
pending or threatened with respect to the Business.
(2) As of the Closing Date,
Seller did not have any liability for taxes of any sort other than
taxes for which full provision has been made in the Interim
Financial Statements. Seller agrees to pay all taxes associated
with all transactions occurring in all tax years ending on or
before the Closing Date.
(3) Seller has complied in
all material respects with all applicable laws, rules and
regulations relating to information reporting with respect to
payments made to third parties and the withholding of and payment
of withheld taxes and has timely withheld from employee wages and
other payments and paid over to the proper taxing authorities all
amounts required to be so withheld and paid over for all periods
under all applicable laws.
(4) There are no pending
audits, judicial proceedings, or assessments or deficiencies
asserted with respect to taxes of Seller. There is no pending claim
by any taxing authority in any jurisdiction in which Seller does
not pay taxes or file Returns that Seller is required to pay taxes
or file Returns.
(5) (i) Seller has not and
has not been a party to any transaction that presents a material
risk of being recharacterized by any tax authority or any other
entity entitled to collect compulsory payments in a way that could
result in the imposition of any additional penalties, additions to
tax, or like charges; and (ii) all documents that are subject
to registration have been duly and timely registered and the
related taxes have been duly and timely paid.
(6) Seller has no liability
for any taxes of any entity (other than the Seller) under Treasury
Regulation 1.1502-6 (or any corresponding provision of state, local
or foreign income tax law), as transferee or successor, by contract
or otherwise.
(7) Seller has at all times
on and after October 1, 1989 had in effect a valid election
under Section 1362 of the Code to be treated as an “
S corporation ” within the meaning of
Section 1361 of the Code, and has also had in
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effect a valid and corresponding
election for the purposes of each state in which Seller engages in
business (to the extent such state permits corporations to make an
election). Such elections remain in full force and effect at all
times through the Closing Date.
(m) No Adverse Changes
. Since September 30, 2006, there has been no material adverse
change in the condition, financial or otherwise, of Seller, the
Purchased Assets or in the Business other than changes (not in the
aggregate either material or adverse) occurring in the ordinary
course of business. Buyer agrees that the change in suppliers from
G.C. Distributing Co, Inc. to PolySem, Inc. is not considered to be
an adverse change.
(n) Warranties and Product
Liability . Seller has previously delivered to Buyer true,
correct and complete copies of all outstanding standard product
warranties and guaranties given by Seller with respect to the
Business and true, correct and compete copies of all other product
warranties and guaranties now in effect with respect to products
manufactured or sold by Seller concerning the Business. There are
no pending claims or actions against Seller for breach of warranty
or based upon product liability (whether based on tort or contract
principles) and, to the best of Seller’s and Kanes’
knowledge, no such claims or actions are threatened. There are no
defects in craftsmanship, design or engineering with respect to any
product now or previously sold or manufactured by Seller in the
Business which may constitute the basis for any such claim against
Seller or Buyer. All of Seller’s products being sold to Buyer
as part of the Purchased Assets are listed in attached
Exhibit 1.(d) .
(o) Contingent and
Undisclosed Liabilities . Except as to the Permitted
Liabilities and those disclosed on the Financial Statements (as
defined in the next sentence), Seller has no debts, obligations or
liabilities, whether fixed or contingent, of any nature whatsoever,
relating to the Purchased Assets or to the Business not disclosed
in writing to Buyer. The term “ Permitted
Liabilities ” shall mean the Assumed Liabilities and
the Sales Agreement Liabilities. Seller knows of no basis for
assertion of any claim against the Seller or the Purchased Assets
for any liability relating to the Business except those disclosed
in Exhibit 4.(o) (whose payment shall remain the sole
responsibility of Seller and which Buyer does not
assume).
(p) Performance of
Contracts . Seller is not in default, nor has it breached any
provision of, any contract, agreement, lease, obligation, license
or permit (including the Contracts) with regard to all agreements
relating to the Business to which it is a party or by which it is
bound. Seller has fully performed each material term, condition and
covenant of each such contract, agreement, lease, obligation,
license or permit required to be performed on or prior to the date
of this Agreement (including the Contracts). Seller knows of no
state of facts which, with or without the giving of notice or the
passage of time, or both, would give rise to any default or
revocation. Seller is neither subject to any penalty, discount or
liquidated damages due to the delayed delivery of products, goods
or services of the Business, nor has it received any notice that
any of the Business’s customer relations are in jeopardy
because of such late deliveries or otherwise.
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(q) Events Subsequent to
September 30, 2006 . Except as disclosed in Exhibit
4.(q) , Seller has not, since September 30,
2006:
(1) Incurred
Liabilities . Incurred any obligation or liability (absolute,
contingent, accrued or otherwise) or guaranteed or become a surety
of any debt, except in connection with the performance of this
Agreement or in the ordinary course of business;
(2) Discharged Debt .
Discharged or satisfied any lien or encumbrance, pertaining to the
Business, or paid or satisfied any obligation or liability
(absolute, contingent, accrued or otherwise) other than
(i) liabilities shown on Company’s accounting records on
September 30, 2006 or (ii) liabilities incurred since
September 30, 2006 in the ordinary course of
business;
(3) Encumbrances .
Mortgaged, pledged or subjected to any lien, charge, security
interest or other encumbrance any of the properties utilized in the
Business;
(4) Disposition of
Assets . Sold or transferred any of the properties utilized in
the Business, or canceled any debts or claims or waived any rights,
except in the ordinary course of business;
(5) Sale of Business .
Entered into any contract for the sale of the Business, or any part
thereof, or for the purchase of another business, whether by
merger, consolidation, exchange of capital stock or otherwise
(other than negotiations with respect to this
Agreement);
(6) Accounting
Procedure . Changed or modified the accounting methods or
practices relating to the Business; or
(7) Capital
Expenditure . Purchased or made a commitment for the purchase
of capital assets for use or employment in the Business.
(r) Customer Relations
. Seller and the Kanes know of no state of facts, nor have any
communications been made to it, which would indicate that
(i) any current customer of Seller which accounted for more
than 5% of Seller’s sales relative to the Business for the
most recent fiscal year ending, or (ii) any current supplier
of Seller (if such supplier could not be replaced by Seller at
comparable cost), will terminate its business relations with
Seller.
(s) Brokerage . Seller
has made no commitment for a brokerage fee in connection with the
transactions contemplated by this Agreement. Seller agrees to hold
Buyer harmless from all amounts owed by them for any brokerage
fee.
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(t) Books and Records
. The books and accounts of Seller relating to the Business are
true, complete and correct in all material respects and fully and
fairly reflect all of the transactions entered into by or on behalf
of Seller to which it is a party or by which it is
affected.
(u) Transactions With
Insiders . There are no agreements between Seller or any of its
shareholders or family or entities in which Kanes’ family has
any financial interest other than the real estate lease and
redemption of the Seller’s stock formerly owned by George K.
Kane.
(v) Binding Effect .
The Agreement and all related documents have been duly executed,
made and delivered by Seller and the Kanes, and constitute legal,
valid and binding obligation of Seller and the Kanes enforceable
against them in accordance with their respective terms, subject to
the laws of general application affecting creditors’
rights.
(w) Authorization .
The transactions contemplated by this Agreement have been duly
authorized by the Board of Directors and shareholders of Seller and
on the Closing Date all of the necessary corporate action to
authorize the consummation of this Agreement will have been taken.
Seller and the Kanes have the power and authority to enter into
this Agreement.
(x) Employee Relations
. Exhibit 4.(x) sets forth a list of all of the
officers, employees and agents of Seller as of December 31,
2006:
(1) There is not now in
existence or pending, nor has there been within the last three
years, any grievance, arbitration, administrative hearing, claim of
unfair labor practice, wrongful discharge, employment
discrimination or sexual harassment or other employment dispute of
any nature pending or, to the best of the Kanes’ or
Seller’s knowledge, threatened against Seller.
(2) Seller is, and during all
applicable limitation periods has been, in material compliance with
all applicable Federal, state, local or foreign laws, executive
orders and regulations respecting employment and employment
practice, terms and conditions of employment, occupational safety,
wages and hours and there is no existing but unasserted claim for
violation of any such laws, executive orders or regulations nor, to
the best of the Kanes’ and Seller’s knowledge, is there
any factual basis upon which such a claim could be
asserted.
(3) Seller has no collective
bargaining agreements and is not a party to any written or oral,
express or implied, other contract, agreement or arrangement with
any labor union or any other similar arrangement that is not
terminable at will by Seller without cost, liability or
penalty.
(4) Seller is not a party to
any written or oral contract, agreement or arrangement with any of
its present or former directors, officers,
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employees or agents with respect to
length, duration or conditions of employment (or the termination
thereof), salaries, bonuses, percentage compensation, deferred
compensation or any other form of remuneration outside the ordinary
course of business.
(5) There is no pending claim
or, to the best of the Kanes’ or Seller’s knowledge,
threatened or existing but unasserted claim, against Seller for
violation of any contract, agreement or arrangement, nor to the
best of the Kanes’ or Seller’s knowledge, is there any
factual basis upon which such a claim could be asserted.
(6) Upon termination of the
employment of any of the Seller’s employees, Buyer shall not
incur any liability.
(y) Employee Benefit
Plans .
(1) Seller has disclosed to
Buyer all Seller’s “ employee welfare benefit
plans ” , “ employee pension benefit
plans ” and “ multi-employer
plans ” within the respective meanings of Sections
3(1) and 3(2) and 3(37) of the Employment Retirement Income
Security Act of 1974, as amended (“ ERISA
”), all incentive compensation plans, benefit plans for
retired employees and all other employee benefit plans maintained
by Seller, or to which Seller has made payments or contributions on
behalf of its employees since 1974, including, without
limitation,
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