EX-2.2 ASSET PURCHASE AGREEMENT

 

TABLE OF CONTENTS

				PAGE
ARTICLE I.		DEFINITIONS		1
ARTICLE II.		SALE AND PURCHASE		7
Section 2.01.		Transfer of Assets		7
Section 2.02.		Sale Free of Encumbrances		7
Section 2.03.		Certain Excluded Assets		7
Section 2.04.		No Assumption of Liabilities		8
Section 2.05.		Subsequent Documentation		8
Section 2.06.		Post-Closing Adjustments to Purchased Inventory		8
ARTICLE III.		PURCHASE PRICE		9
Section 3.01.		Purchase Price and Payment		9
Section 3.02.		Fair Consideration		9
Section 3.03.		Allocation of the Purchase Price		9
Section 3.04.		Taxes		10
ARTICLE IV.		CLOSING		10
Section 4.01.		Closing Date		10
Section 4.02.		Deliveries by Sellers		10
Section 4.03.		Deliveries by Buyer		11
Section 4.04.		Possession of Acquired Assets		12
ARTICLE V.		REPRESENTATIONS AND WARRANTIES OF SELLERS AND HARCKE		12
Section 5.01.		Organization; Power		12
Section 5.02.		Authorization and Validity of Agreement		12
Section 5.03.		No Conflict or Violation		13
Section 5.04.		Consents and Approvals		13
Section 5.05.		Financial Statements		13
Section 5.06.		Absence of Certain Changes or Events		14
Section 5.07.		Tax Matters		14
Section 5.08.		Absence of Undisclosed Liabilities		15
Section 5.09.		Real Property		15
Section 5.10.		Conformity of the Real Property		16
Section 5.11.		Equipment and Machinery		16

 

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Section 5.12.		Intellectual Property and Software		16
Section 5.13.		Accounts Receivable		17
Section 5.14.		Employee Benefit Plans		17
Section 5.15.		Labor Relations		18
Section 5.16.		Environmental Compliance		18
Section 5.17.		Licenses and Permits		19
Section 5.18.		Insurance; Bonds		19
Section 5.19.		Assigned Contracts		19
Section 5.20.		Customers		19
Section 5.21.		Compliance with Law		19
Section 5.22.		Litigation		20
Section 5.23.		Title to the Acquired Assets and Related Matters		20
Section 5.24.		Absence of Certain Business Practices		20
Section 5.25.		No Other Agreements to Sell Assets		20
Section 5.26.		Debts of Branford		20
Section 5.27.		Due Diligence		20
Section 5.28.		Broker’s and Finder’s Fees		21
Section 5.29.		All Material Information		21
Section 5.30.		Sellers and Harcke Independently Advised		21
Section 5.31.		Condition of Acquired Assets		21
ARTICLE VI.		REPRESENTATIONS AND WARRANTIES OF BUYER		21
Section 6.01.		Organization; Power		21
Section 6.02.		Authorization and Validity of Agreement		21
Section 6.03.		No Conflict or Violation		21
Section 6.04.		Approvals and Consents		22
Section 6.05.		Broker’s and Finder’s Fees		22
ARTICLE VII.		COVENANTS OF SELLERS AND HARCKE		22
Section 7.01.		Regulatory and Other Approvals		22
Section 7.02.		Fulfillment of Conditions		22
Section 7.03.		Conduct of Business		23
Section 7.04.		Certain Restrictions		23
Section 7.05.		No Solicitation		24
Section 7.06.		Use of Names		24
Section 7.07.		Post-Closing Operations		25
Section 7.08.		Notification		25
ARTICLE VIII.		COVENANTS OF BUYER		25
Section 8.01.		Access		25
Section 8.02.		Fulfillment of Conditions		25
Section 8.03.		Employee Matters		26
Section 8.04.		Assumed Liabilities		27

 

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ARTICLE IX.		CONDITIONS TO OBLIGATIONS OF BUYER		27
Section 9.01.		Representations and Warranties		27
Section 9.02.		Performance		27
Section 9.03.		Closing Deliveries		27
Section 9.04.		Laws		27
Section 9.05.		Regulatory Consents and Approvals		27
Section 9.06.		No Material Adverse Change		27
Section 9.07.		Balance Sheet		27
Section 9.08.		Bulk Sales Compliance		27
Section 9.09.		Approval of Board of Directors		28
ARTICLE X.		CONDITIONS TO OBLIGATIONS OF SELLERS AND HARCKE		28
Section 10.01.		Representations and Warranties		28
Section 10.02.		Performance		28
Section 10.03.		Laws		28
Section 10.04.		Regulatory Consents and Approvals		28
ARTICLE XI.		EXCESS INVENTORY		28
Section 11.01.		Procedures for Storage and Disposition of Excess Inventory		28
Section 11.02.		Compliance		30
Section 11.03.		Sales Efforts		30
Section 11.04.		Offset of Returns for Credit		30
ARTICLE XII.		OTHER AGREEMENTS		30
Section 12.01.		Tax Returns; Cooperation on Tax Matters		30
Section 12.02.		Files and Records		31
Section 12.03.		Certain Costs		31
Section 12.04.		Payment of Debts		31
Section 12.05.		Collection of Certain Accounts Receivable		31
Section 12.06.		Costs of Clean-up of PCP Contamination		32
ARTICLE XIII.		INDEMNIFICATION		32
Section 13.01.		Survival		32
Section 13.02.		Indemnification by Sellers		32
Section 13.03.		Indemnification by Buyer		33
Section 13.04.		Procedure		34
Section 13.05.		Buyer Right to Offset		34
ARTICLE XIV.		TERMINATION		34
Section 14.01.		Termination		34
Section 14.02.		Effect of Termination		35

 

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ARTICLE XV.		MISCELLANEOUS		35
Section 15.01.		Confidential Information		35
Section 15.02.		Public Announcements		35
Section 15.03.		Expenses		35
Section 15.04.		Utilities Proration		35
Section 15.05.		Reasonable Efforts; Cooperation		36
Section 15.06.		Notices		36
Section 15.07.		Headings		36
Section 15.08.		Construction		36
Section 15.09.		Severability		37
Section 15.10.		Entire Agreement		37
Section 15.11.		Amendments; Waivers		37
Section 15.12.		Parties in Interest		37
Section 15.13.		Successors and Assigns		38
Section 15.14.		Governing Law; Jurisdiction		38
Section 15.15.		Counterparts		38

 

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (“AGREEMENT”), dated as of October 28, 2004 (the “EFFECTIVE DATE”), is made and entered into by and among Haynes Wire Company, a Delaware corporation (“BUYER”), The Branford Wire and Manufacturing Company, a Connecticut corporation (“BRANFORD”), Carolina Industries, Inc., a Connecticut corporation (“CAROLINA INDUSTRIES”) (Branford and Carolina Industries, collectively, “SELLERS”) and Richard Harcke (“HARCKE”).

WITNESSETH:

WHEREAS, Sellers are engaged in the business of owning and operating a wire manufacturing business (the “BUSINESS”); and

WHEREAS, Buyer desires to purchase from Sellers, and Sellers desire to sell to Buyer, the Acquired Assets, as hereinafter defined, upon the terms and subject to the conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the foregoing and of the mutual representations, warranties, covenants, and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

AGREEMENT

ARTICLE I.

DEFINITIONS

As used in this Agreement, the following terms have the meanings indicated below:

“ACCOUNTS RECEIVABLE” means all accounts and notes receivable, rights to refunds, and deposits of any kind of Branford other than Excluded Accounts receivable and Uncollectible Accounts Receivable.

“ACQUIRED ASSETS” means the Accounts Receivable, Assigned Contracts, Equipment and Machinery, Files and Records, Intangible Assets, Intellectual Property, Licenses and Permits, Miscellaneous Assets, Purchased Inventory, Real Property, exclusive use of the names “Branford Wire and Manufacturing Company” and “B&S Wire Rod Sales” and all other assets of Branford as of the Closing Date (including all such items shown or reflected in the Closing Balance Sheet of the Seller, with additions thereto, net of dispositions in the ordinary course of the Business, since the Balance Sheet Date), of every kind, nature, character, and description, whether real, personal or mixed, whether accrued, contingent or other, and wherever situated, and whether or not reflected in any financial statement of Branford, used or useful in conducting the Business

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including, without limitation, those listed on SCHEDULE 1.01 hereto, but excluding all of the Excluded Assets.

“ACQUIRED WORKING CAPITAL” means, as of any date of determination, an amount equal to the sum of (i) Sellers’ Accounts Receivable PLUS (ii) Sellers’ Inventory (other than Excess Inventory), in each case as reflected on Seller’s balance sheet prepared in accordance with past practice.

“AFFILIATE” means any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified Person or which together with a specified Person is a member of a controlled group (within the meaning of Code Section 1563(a) determined without regard to Sections 1563(a)(4) and 1563(e)(3)(C)) of the Code.

“ASSIGNED CONTRACTS” means the leases, contracts, agreements and arrangements assigned to Buyer by Seller hereunder and set forth in SCHEDULE 1.02.

“ASSUMED LIABILITIES” has the meaning specified in SECTION 2.04.

“BALANCE SHEET DATE” means September 30, 2004 (the date of the Interim Balance Sheet).

“BRANFORD” has the meaning set forth in the introductory paragraph hereto.

“BRANFORD’S BENEFIT OBLIGATIONS” means all obligations, arrangements or customary practices (other than those contained in or provided under Branford’s Plans), whether or not legally enforceable, to provide benefits (other than salary or wages) to present or former directors, employees, or agents of Branford. Branford’s Benefit Obligations also includes consulting agreements under which the compensation paid does not depend upon the amount of service rendered, sabbatical policies, severance payment policies and fringe benefits within the meaning of Section 132 of the Code.

“BRANFORD’S PLANS” means each voluntary employees’ beneficiary association under Section 501(c)(9) of the Code whose members include employees of Branford and all employee benefit plans, as defined in Section 3(3) of ERISA, to which Branford is a plan sponsor, as defined in Section 3(16)(B) of ERISA, or to which Branford otherwise contributes or has contributed, or in which Branford otherwise participates or has participated.

“BUSINESS” has the meaning set forth in the recitals hereto.

“BUSINESS DAY” means any day that the banks in Indianapolis, Indiana, U.S.A. are open for business.

“BUYER” has the meaning set forth in the introductory paragraph hereto.

“BUYER BENEFIT PLANS” has the meaning specified in SECTION 8.03(b).

“CAROLINA INDUSTRIES” has the meaning set forth in the introductory paragraph hereto.

 

“CERCLA” means the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended.

“CLAIM” has the meaning specified in SECTION 13.02.

“CLOSING” has the meaning specified in SECTION 4.01.

“CLOSING BALANCE SHEET” has the meaning specified in SECTION 3.02(b).

“CLOSING DATE” has the meaning specified in SECTION 4.01.

“CLOSING DATE A/R REPORT” has the meaning specified in SECTION 2.06(b).

“CLOSING DATE INVENTORY REPORT” has the meaning specified in SECTION 2.06(b).

“COBRA” means Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

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

“CONTRACTS” means any agreement, lease, license, evidence of indebtedness, mortgage, indenture, security agreement or other contract.

“EFFECTIVE DATE” has the meaning specified in the first paragraph of this Agreement.

“ENCUMBRANCES” means all liens (statutory or other), leases, mortgages, pledges, security interests, conditional sales agreements, charges, claims, options, easements, rights of way (other than easements of record), rights of third parties and other encumbrances of any kind or nature whatsoever.

“ENVIRONMENTAL REQUIREMENTS” mean all past, present and future Laws, rules, regulations, ordinances, policies, guidance documents, approvals, plans, authorizations, Licenses and Permits issued by any Governmental Entity of the United States, state or political subdivision thereof, and any foreign governmental body and all judicial, administrative, and regulatory decrees, judgments, and orders relating to human health, pollution, or protection of the environment (including ambient air, surface water, ground water, land surface or surface strata), including (i) Laws relating to emissions, discharges, releases, or threatened releases of Hazardous Materials, (ii) Laws relating to the identification, generation, manufacture, processing, distribution, use, treatment, storage, disposal, recovery, transport or other handling of Hazardous Materials, (iii) CERCLA; the Toxic Substances Control Act, as amended; the Hazardous Materials Transportation Act, as amended; RCRA; the Clean Water Act, as amended; the Safe Drinking Water Act, as amended; the Clean Air Act, as amended; the Atomic Energy Act of 1954, as amended; and the Occupational Safety and Health Act, as amended; and (iv) any similar Law.

“EQUIPMENT AND MACHINERY” means (i) all equipment, machinery, furniture, fixtures and improvements, tooling, spare parts, supplies, computer hardware and software, and motor vehicles (certificated or uncertificated) owned or leased by Branford in connection with the

 

Business (including all leases of such property), (ii) any rights of Branford to warranties applicable to the foregoing (to the extent assignable), and licenses received from the manufacturers or sellers of any such item, and (iii) any related claims, credits, and rights of recovery with respect thereto.

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

“EXCESS INVENTORY” means the Inventory of Sellers that is not Purchased Inventory, ownership of which shall remain in [CAROLINA INDUSTRIES] from and after the Effective Date until purchased by Buyer or otherwise disposed of as provided in SECTION 11.01.

“EXCLUDED ACCOUNTS RECEIVABLE” means the accounts receivable of Sellers identified on SCHEDULE 1.03.

“EXCLUDED ASSETS” has the meaning specified in SECTION 2.03.

“FILES AND RECORDS” mean all files and records of the Seller relating to the Business, whether in hard copy or magnetic or other format including customer and supplier records, equipment maintenance records, equipment warranty information, plant plans, specifications and drawings, sales and advertising material, computer software and records relating to employees to be employed by the Buyer following the Closing.

“FINAL A/R REPORT” has the meaning specified in SECTION 2.06(b).

“FINAL INVENTORY REPORT” has the meaning specified in SECTION 2.06(b).

“GAAP” means generally accepted accounting principles in the United States of America, in effect from time to time, consistently applied.

“GOVERNMENTAL ENTITY” means any court, government agency, department, commission, board, bureau or instrumentality of the United States, any local, county, state, federal or political subdivision thereof, or any foreign governmental body of any kind.

“HARCKE” has the meaning set forth in the introductory paragraph hereto.

“HAZARDOUS MATERIALS” mean (i) any substance that is or becomes defined as a “hazardous substance,” “hazardous waste,” “hazardous material,” pollutant, or contaminant under any Environmental Requirements, including CERCLA; the Superfund Amendments and Reauthorization Act, as amended; the RCRA; and any analogous and applicable Law; (ii) petroleum (including crude oil and any fraction thereof); and (iii) any natural or synthetic gas (whether in liquid or gaseous state).

“HIRED EMPLOYEES” has the meaning specified in SECTION 8.03(a).

“INDEBTEDNESS” of any Person means, without duplication, all obligations of such Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for the deferred purchase price of goods or services (other than trade payables incurred in the

 

ordinary course of business), (iv) under capital leases and (v) in the nature of guarantees of the obligations described in clauses (i) through (iv) above of any other Person.

“INDEMNIFIED PARTY” has the meaning specified in SECTION 13.04.

“INDEMNIFYING PARTY” has the meaning specified in SECTION 13.04.

“INTANGIBLE ASSETS” mean all intangible personal property rights of the Seller, including goodwill, customer lists and related information, and all contract rights with respect to the Assigned Contracts.

“INTELLECTUAL PROPERTY” means any and all of the following and all rights in, arising out of, or associated therewith: (i) all United States and foreign patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (ii) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, proprietary processes or formulae, franchises, licenses, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (iii) all copyrights, copyright registrations and applications therefor and all other rights corresponding thereto throughout the world; (iv) all trade names, logos, common law trademarks and service marks; trademark and service mark registrations and applications therefor and all goodwill associated therewith throughout the world; (v) all databases and data collections and all rights therein throughout the world; (vi) all computer software including all source code, object code, algorithms, display screens, layouts, firmware, development tools, files, records and data, all media on which any of the foregoing is recorded, all Web addresses, sites and domain names; (vii) any similar, corresponding or equivalent rights to any of the foregoing; and (viii) all documentation related to any of the foregoing.

“INTERIM BALANCE SHEET” has the meaning specified in SECTION 5.05.

“INVENTORY” means all Inventory of Sellers, wherever located, including all finished goods, work in process and raw materials.

“LAW” or “LAWS” means any local, county, state, federal or other law, statute, regulation, ordinance, rule, order, decree, judgment, consent decree, settlement agreement or governmental requirement enacted, promulgated, entered into, agreed or imposed by any Governmental Entity.

“LICENSES AND PERMITS” mean all licenses, permits, franchises, authorizations, and approvals issued by or under the authority of a Governmental Entity that relate directly or indirectly to, or are necessary for, the conduct of the Business, including those described in SCHEDULE 5.17.

“MATERIAL ADVERSE EFFECT,” when used with respect to Sellers or the Business, means any event, change, occurrence, condition or circumstance which has had or may have a material adverse impact on any of the Acquired Assets, the prospects, operations or financial condition of the Business as conducted by Sellers immediately prior to the date hereof or the Closing, as applicable, or the ability of Sellers to consummate any of the transactions contemplated by this Agreement, and when used with respect to Buyer, means any event, change, occurrence,

 

condition or circumstance which has had or may have a material adverse impact on the ability of Buyer to consummate any of the transactions contemplated by this Agreement.

“MISCELLANEOUS ASSETS” means all telephone numbers, web site addresses and post office boxes used by Branford in the Business, all materials and supplies (other than Inventory) to be used or consumed by Sellers in the production of finished goods and all prepaid expenses reflected on the Closing Balance Sheet to the extent such expenses accrue to the benefit of Buyer after the Effective Date.

“NONCOMPETITION AGREEMENTS” means the Confidentiality and Noncompetition Agreements in the Form attached as EXHIBITS 4.02(g)(i) and 4.02(g)(ii).

“PERSON” means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, or unincorporated organization, or any Governmental Entity.

“PERSONNEL” means the current and former officers, employees and/or agents of any Seller.

“POLICIES” and “POLICY” have the meanings specified in SECTION 5.18.

“PURCHASE PRICE” has the meaning specified in SECTION 3.01.

“PURCHASED INVENTORY” means the Inventory of Sellers consisting of inventory consigned to third parties for sale, work-in-process that is committed to customer orders, work-in-process that is semi-finished goods, raw materials necessary to fulfill Sellers’ existing order backlog and other raw materials, each as set forth on SCHEDULE 1.04, adjusted as provided in SECTION 2.06.

“RCRA” means the Resource Conservation and Recovery Act, as amended.

“REAL PROPERTY” has the meaning specified in SECTION 5.09.

“RELATED AGREEMENTS” means all agreements, instruments and certificates (other than this Agreement) to be executed by Sellers or Harcke in connection with the transactions contemplated by this Agreement, including without limitation each Bill of Sale, each Assignment and Assumption Agreement and each Noncompetition Agreement.

“REPLACEMENT COST” has the meaning specified in SECTION 11.01(c).

“SALE OF ASSETS” means the sale of the Acquired Assets by Sellers to Buyer pursuant to the terms of this Agreement.

“SECURITY AGREEMENT” has the meaning specified in SECTION 4.02(a).

“SELLERS” has the meaning specified in the first paragraph of this Agreement.

“SITE ASSESSMENT” has the meaning specified in SECTION 4.02(n).

“STORAGE SITE” has the meaning specified in SECTION 11.01(a).

 

 “TAX” or “TAXES” mean all federal, state, local and foreign taxes (including excise taxes, value added taxes, occupancy taxes, employment taxes, unemployment taxes, ad valorem taxes, custom duties, transfer taxes, and fees), levies, imposts, fees, impositions, assessments and other governmental charges of any nature imposed upon a Person including all taxes and governmental charges imposed upon any of the personal properties, real properties, tangible or intangible assets, income, receipts, payrolls, transactions, stock transfers, capital stock, net worth or franchises of a Person (including all sales, use, withholding or other taxes which a Person is required to collect and/or pay over to any Governmental Entity), and all related additions to tax, penalties or interest thereon.

“TAX RETURNS” mean all returns, reports, information returns, and other documents (including all related and supporting information) filed or required to be filed with any Governmental Entity in connection with the determination, assessment, collection, or administration of any Taxes.

“TERMINATED EMPLOYEES” has the meaning specified in SECTION 8.03(e).

“UNCOLLECTIBLE ACCOUNTS RECEIVABLE” shall mean any account receivable of Sellers that has been written off as uncollectible prior to the Closing Date and included on the list of such accounts receivable delivered by the Sellers to the Buyer pursuant to SECTION 12.05.

ARTICLE II.

SALE AND PURCHASE

SECTION 2.01.       TRANSFER OF ASSETS. Subject to the terms and conditions set forth in this Agreement, at the Closing, Sellers shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall purchase, acquire and accept from Sellers all of the right, title, and interest of Sellers in and to the Acquired Assets.

SECTION 2.02.       SALE FREE OF ENCUMBRANCES. Sellers and Harcke, jointly and severally, represent, warrant and agree that the sale, conveyance, transfer, assignment and delivery by Sellers of the Acquired Assets to Buyer as provided herein is being made free and clear of all Encumbrances.

SECTION 2.03.       CERTAIN EXCLUDED ASSETS. Notwithstanding any other provision of this Agreement to the contrary, the Acquired Assets shall not include the following assets of Sellers (collectively, the “EXCLUDED ASSETS”):

(a)            all cash on hand or on deposit;

(b)            rights under agreements with suppliers (other than Assigned Contracts);

(c)            minute books, stock ledgers and other corporate records of any Seller;

(d)            assets held in any employee benefit plan of any Seller;

(e)            the Excess Inventory; and

 

(f)             the Excluded Accounts Receivable.

SECTION 2.04.       NO ASSUMPTION OF LIABILITIES. Buyer is not assuming, and shall not be responsible for in any manner, any obligations or liabilities of any Seller, direct or indirect, known or unknown, choate or inchoate, absolute, fixed or contingent, except (a) that Buyer agrees to assume and timely pay or perform all obligations of Seller under the Assigned Contracts which (i) initially accrue or arise after the Closing Date and (ii) are not the result of or caused by any breach or default thereunder by any Seller, and (b) as set forth in SCHEDULE 2.04 (such obligations, collectively, the “ASSUMED LIABILITIES”). Any Excluded Assets that remain on the Real Property, as defined herein, as of the Closing Date remain at Sellers’ sole risk. Buyer will have no liability for damage to or destruction of Excluded Assets whether caused by Buyer’s negligence or otherwise.

SECTION 2.05.       SUBSEQUENT DOCUMENTATION. At any time and from time to time after the Closing Date, Sellers shall, upon the request of Buyer, and Buyer shall, upon the request of Sellers, promptly execute, acknowledge, and deliver, or cause to be executed, acknowledged, and delivered, such further instruments and other documents, and perform or cause to be performed such further acts, as may be reasonably required to evidence or effectuate (a) the sale, conveyance, transfer, assignment and delivery hereunder of the Acquired Assets, (b) the performance by the parties of any of their other respective obligations under this Agreement, and (c) the purposes and intent of this Agreement.

SECTION 2.06.       POST-CLOSING ADJUSTMENTS TO PURCHASED INVENTORY.

(a)            The amount of Purchased Inventory shall be increased or decreased by a number of pounds having a value as of the Closing Date equal to (i) the dollar amount by which Branford’s Accounts Receivable as shown on the Final A/R Report, is lower or higher, respectively, than Branford’s Accounts Receivable as shown on the Closing Date A/R Report; PLUS (ii) the amount by which the net book value of the Equipment and Machinery included in the Acquired Assets is less than $275,000. If the adjustment required by this SECTION 2.06 results in a net decrease in Purchased Inventory, Buyer shall deliver to Sellers a quantity of the Purchased Inventory (in the inverse order specified in SCHEDULE 1.04) equal to the amount of such decrease and the Inventory so delivered shall become Excess Inventory for all purposes of this Agreement. If the adjustment required by this SECTION 2.06 results in a net increase in Purchased Inventory, Sellers shall deliver to Buyer a quantity of Excess Inventory (in the order specified in SCHEDULE 1.04) equal to the amount of such increase and the amount so delivered shall become Purchased Inventory for all purposes of this Agreement. Any transfer of Inventory as a result of the application of this SECTION 2.06 shall be completed within five (5) Business Days of determination of the Closing Balance Sheet, as provided for herein.

(b)            On the Closing Date, Sellers shall deliver to Buyer a written report showing all accounts receivable of Sellers outstanding on the Closing Date, excluding Excluded Accounts Receivable (the “CLOSING DATE A/R REPORT”), and a written report showing all Inventory of Sellers as of the Closing Date divided into the categories identified on SCHEDULE 1.04 (the “CLOSING DATE INVENTORY REPORT”). Not later than twenty (20) days after the Closing Date, Buyer may disagree with the information set forth in the Closing Date A/R Report or the Closing Date Inventory Report and notify Sellers in writing specifying in reasonable detail the items in

 

disagreement and the basis therefor. If Buyer so disagrees, Buyer and Sellers shall meet and attempt in good faith to resolve the disagreement on a mutually satisfactory basis. If Buyer and Sellers are unable to resolve the disagreement within 10 days, Sellers and Buyer shall cause their respective accountants to, within 15 days after the end of such 10-day period, agree upon a final Closing Date A/R Report or Closing Date Inventory Report, in which case such agreed-upon report shall be final and binding on the parties. In the event that their respective accountants cannot agree upon such final report within such timeframe, their respective accountants shall, within 2 days, jointly select an independent auditor of recognized national standing to determine, within 10 days, a final report as of the Closing Date, in which case such determined final report shall be final and binding on the parties. The final Closing Date A/R Report and the final Closing Date Inventory Report prepared and finally determined in accordance with this SECTION 2.06(b) are referred to herein respectively as the “FINAL A/R REPORT” and the “FINAL INVENTORY REPORT”.

ARTICLE III.

PURCHASE PRICE

SECTION 3.01.       PURCHASE PRICE AND PAYMENT. Subject to the terms and conditions set forth in this Agreement, as full consideration for the Acquired Assets, Buyer shall:

(a)            pay to Sellers at Closing in cash by wire transfer to an account designated by Sellers at least two (2) Business Days prior to the Closing Date an amount equal to Eight Million Three Hundred Thousand Dollars ($8,300,000); and

(b)            assume the Assumed Liabilities.

The amounts set forth in subsections (a) and (b) are referred to collectively as the “PURCHASE PRICE.”

SECTION 3.02.       FAIR CONSIDERATION. All of the parties acknowledge and agree that the consideration provided for in this ARTICLE III represents fair consideration and reasonably equivalent value for the sale and transfer of the Acquired Assets and the transactions, covenants and agreements set forth in this Agreement, which consideration was agreed upon as the result of arm’s-length, good-faith negotiations between the parties and their respective representatives.

SECTION 3.03.       ALLOCATION OF THE PURCHASE PRICE. Buyer and Sellers agree that the Purchase Price shall be allocated to the Acquired Assets sold by Sellers as set forth on SCHEDULE 3.03 subject to adjustment by written consent of both Sellers and the Buyer following a determination of the Closing Balance Sheet and shall file Internal Revenue Service Form 8594 (and/or other appropriate Tax Returns) with the applicable Taxing authorities, and shall not file any amendments or take any action inconsistent with the foregoing in any audit, refund claim, Tax Return, or any other administration or judicial proceeding, pursuant to Section 1060 of the Code and underlying Treasury Regulations promulgated thereunder. Sellers shall make its Tax Returns and amendments thereof available for inspection by Buyer for the purpose of verifying compliance with this SECTION 3.03.

 

SECTION 3.04.       TAXES. Sellers shall timely pay (a) all Taxes arising out of (i) the ownership or use of the Excluded Assets, (ii) the ownership or use of the Acquired Assets on or before the Closing Date, including all real or personal property Taxes and payroll withholding Taxes due and payable (or assessed for periods) on or before the Closing Date; and (b) all Taxes, including gross and net income Taxes, and transfer, recording, sales and use Taxes arising out of the sale or transfer of the Acquired Assets pursuant to this Agreement or the other agreements and instruments contemplated hereby or the recording or filing of any sale or transfer agreements or instruments.

ARTICLE IV.

CLOSING

SECTION 4.01.       CLOSING DATE. The closing of the transactions contemplated by this Agreement (the “CLOSING”) shall take place at a date and time mutually agreed upon by the parties to the Agreement following satisfaction or waiver of all conditions set forth herein at the offices of Ice Miller, One American Square, 34th Floor, Indianapolis, Indiana (the “CLOSING DATE”).

SECTION 4.02.       DELIVERIES BY SELLERS. At the Closing, and simultaneously with delivery of possession of all of the Acquired Assets to Buyer, Sellers have delivered (or caused to be delivered) to Buyer originals or copies, if specified, of the following agreements, documents and other items:

(a)            A Security Agreement by and among Sellers and Buyer (the “SECURITY AGREEMENT”), executed by Buyer, in the form attached hereto as EXHIBIT 4.02(a);

(b)            A Bill of Sale, executed by Sellers, in the form attached hereto as EXHIBIT 4.02(b);

(c)            Copies of all the resolutions adopted by Sellers’ Boards of Directors and shareholders authorizing and approving the execution and delivery of this Agreement and all agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby, certified to be true and complete and in full force and effect by the corporate Secretary of each Seller;

(d)            An Assignment and Assumption Agreement, executed by Sellers, in the form attached hereto as EXHIBIT 4.02(d);

(e)            Copies of each consent, waiver, authorization and approval required pursuant to SECTION 5.04 of this Agreement or necessary for the sale of the Acquired Assets or the assignment of the Assigned Contracts to Buyer as contemplated hereby;

(f)             Certificates of Good Standing of each Seller issued by the Secretary of State of the State of Connecticut or other appropriate Governmental Authority, and Certificates of Authorization for each Seller from the North Carolina Secretary of State, dated within fifteen (15) days of the Closing;

(g)            Noncompetition Agreements, executed by each Seller and Harcke;

 

(h)            Certificates of title for the motor vehicles included in the Acquired Assets, duly endorsed, and all other documents necessary to effect transfer of title to any such motor vehicles;

(i)             The original of the ALTA title insurance policy with respect to the Real Property, as defined herein, issued by Chicago Title Insurance Company;

(j)             A Certificate executed by Sellers acknowledging delivery by Buyer of the items set forth in SECTION 4.03 of this Agreement and certifying that Sellers have performed in all respects all of the covenants, agreements, obligations and conditions required under this Agreement to be performed, complied with or fulfilled by Sellers on or before the Closing Date;

(k)            An opinion of counsel to Sellers, dated as of the Closing Date, in substantially the form attached hereto as EXHIBIT 4.02(k);

(l)             The Closing Date A/R Report and the Closing Date Inventory Report;

(m)           A copy of the ALTA survey certified by Professional Surveying Services for the Real Property, as defined herein;

(n)            A copy of the Phase I environmental site assessment (“SITE ASSESSMENT”) of the Real Property;

(o)            Evidence of zoning of the Real Property that is satisfactory to Buyer, in its reasonable discretion;

(p)            The list of Uncollectible Accounts Receivable provided for in SECTION 12.05(d);

(q)            The evidence of compliance with applicable bulk sales or bulk transfer laws required by SECTION 9.08;

(r)             Non-Foreign Affidavit executed by Sellers, in connection with the transfer of the Real Property;

(s)            Owner’s Affidavit executed by Sellers, in connection with the transfer of the Real Property;

(t)             General Warranty Deed executed by Sellers, in connection with the transfer of the Real Property; and

(u)            Such other documents and certificates, as Buyer shall reasonably request.

SECTION 4.03.       DELIVERIES BY BUYER. At the Closing and simultaneously with the payment of the Purchase Price to Sellers, Buyer has delivered (or has caused to be delivered) to Sellers originals, or copies if specified, of the following agreements, documents and other items:

(a)            The Purchase Price to be paid at the Closing pursuant to SECTION 3.01 by wire transfer to accounts designated by Sellers;

 

(b)            The Security Agreement, executed by Sellers, in the form attached as EXHIBIT 4.02(a);

(c)            Copies of all resolutions adopted by the Board of Directors of Buyer authorizing and approving the execution and delivery of this Agreement and all agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby, certified to be true and complete and in full force and effect by the corporate Secretary of Buyer;

(d)            An Assignment and Assumption Agreement, executed by Buyer, in the form attached hereto as EXHIBIT 4.02(d);

(e)            A Certificate executed by Buyer acknowledging delivery by Sellers of the items set forth in SECTION 4.02 of this Agreement and certifying that Buyer has performed in all respects all of the covenants, agreements, obligations and conditions required under this Agreement to be performed, complied with or fulfilled by Buyer on or before the Closing Date;

(f)             The Noncompetition Agreements, executed by Buyer;

(g)            A Certificate of Good Standing of Buyer issued by the Secretary of State of the State of Delaware, dated within fifteen (15) days of the Closing; and

(h)            Such other documents and certificates, as Sellers shall reasonably request.

SECTION 4.04.       POSSESSION OF ACQUIRED ASSETS. Immediately following the Closing on the Closing Date, the Seller shall take all actions which are required or requested by the Buyer to put the Buyer in full possession and control of all of the Acquired Assets.

ARTICLE V.

REPRESENTATIONS AND WARRANTIES OF SELLERS AND HARCKE

As a material inducement to Buyer to enter into this Agreement and to consummate the transactions contemplated hereby, Sellers and Harcke jointly and severally represent and warrant to Buyer as follows:

SECTION 5.01.       ORGANIZATION; POWER. Each Seller is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Each Seller is qualified as a foreign corporation and is in good standing in each state or jurisdiction where qualification is necessary because of the nature of the assets and properties it owns, leases or operates or because of the nature of the business it conducts.

SECTION 5.02.       AUTHORIZATION AND VALIDITY OF AGREEMENT. Each Seller has all requisite corporate power and authority to own, lease and operate the Acquired Assets, to carry on the Business as it is now being conducted, and to enter into, execute and deliver this Agreement and all Related Agreements executed by it, to consummate the transactions contemplated by this Agreement and other Related Agreements and to comply with and fulfill the terms and conditions of this Agreement and such Related Agreements. Harcke has the legal capacity and authority to enter into this Agreement and each of the Related Agreements, to be executed by

 

Harcke and to carry out his obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and each Related Agreement by each Seller and Harcke and the consummation by each Seller and Harcke of the transactions contemplated by this Agreement and each Related Agreement have been duly authorized by all necessary corporate action by the Board of Directors and shareholders of each Seller, and no other corporate proceedings on the part of any Seller are necessary to authorize such execution, delivery, performance or consummation. This Agreement and each Related Agreement has been duly executed and delivered by each Seller and Harcke, as applicable, and constitutes a legal, valid and binding obligation of each Seller and Harcke, as applicable, enforceable against each Seller and Harcke in accordance with their respective terms and conditions.

SECTION 5.03.       NO CONFLICT OR VIOLATION. The execution, delivery and performance of this Agreement by each Seller and Harcke does not and will not: (a) violate or conflict with any provision of the certificate of incorporation, bylaws or other governing document of Sellers, (b) violate any provision of Law of any Governmental Entity applicable to any Seller, Harcke, or the Business; (c) violate or result in a breach of or constitute (with due notice or lapse of time or both) a default under any contract, lease, loan agreement, mortgage, security agreement, trust, indenture, license, consent order or other instrument or obligation to which any Seller or Harcke is a party, or by which any Seller is bound or to which any Seller’s or Harcke’s assets or properties may be bound; or (d) result in the imposition of any Encumbrance or restriction on the Business or any of the Acquired Assets.

SECTION 5.04.       CONSENTS AND APPROVALS. SCHEDULE 5.04 sets forth a list of each consent, waiver, authorization or approval of any Governmental Entity or of any other Person, and each declaration to or filing or registration with any Governmental Entity required in connection with the execution and delivery of this Agreement by any Seller or Harcke or the performance by any Seller and Harcke of its or his obligations hereunder.

SECTION 5.05.       FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 5.05 are true, correct and complete copies of (i) the balance sheets of Sellers as of April 30, 2003 and 2002 and the related statements of income, changes in stockholders’ equity and cash flows for each of the fiscal years ended April 30, 2003, 2002 and 2001, together with a true and correct copy of the review letter on such information by Sally Massagee, Sellers’ independent public accountant, (ii) the balance sheet of Sellers as of April 30, 2004 and the related statement of income, changes in stockholders’ equity and cash flows for the year then ended, and (iii) the unaudited balance sheet of the Sellers as of July 31, 2004 (the “INTERIM BALANCE SHEET”), and the related unaudited statements of income, changes in stockholders’ equity and cash flows for the three (3) months then ended, together with the notes thereto. All financial statements referred to in this SECTION 5.05 have been prepared in a manner consistent with the manner in which Sellers’ Tax Returns are prepared. All of the financial statements fairly present, in all material respects, the financial position of the Sellers as of the respective dates thereof and the results of the Sellers’ operations and changes in the stockholders’ equity and cash flows for the period then ended, subject, in the case of clauses (ii) and (iii) above, to normal recurring adjustments which are not, individually or in the aggregate, material.

 

SECTION 5.06.       ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on SCHEDULE 5.06, since the Balance Sheet Date, Sellers have operated the Business in the ordinary course consistent with past practice and there has not been any:

(a)            (i) increase in the compensation payable or to become payable to any Personnel engaged in the Business, (ii) bonus, incentive compensation, service award or other like benefit granted, made or accrued, contingently or otherwise, for or to any Personnel engaged in the Business, (iii) addition to or modification of any of the Branford’s Benefit Obligations and Branford’s Plans agreed to by any Seller for any Personnel engaged in the Business other than in the ordinary course of the Business consistent with past practice, or (iv) new employment agreement with any Personnel engaged in the Business;

(b)            cancellation of any indebtedness or waiver of any rights having a value of $5,000 or greater, whether or not in the ordinary course of the Business, or increase in any obligation or liability of Branford except in the ordinary course of the Business consistent with past practice;

(c)            execution and delivery, amendment, cancellation or termination of any contract, license or other instrument material to the Business;

(d)            failure to preserve the Business intact, to keep available to Buyer the services of the Personnel and to preserve for Buyer the goodwill of each of the Branford’s dealers, suppliers, customers and others having business relations with it;

(e)            change in accounting methods or practices;

(f)             damage, destruction or loss (whether or not covered by insurance) affecting the Acquired Assets or the Business;

(g)            sale, assignment, transfer or encumbering (or subjecting to any Encumbrance) of any of the assets or properties except in the ordinary course of the Business consistent with past practice;

(h)            agreement by any Seller to do any of the foregoing; or

(i)             other event or condition of any character which in any one case or in the aggregate has had or may have a Material Adverse Effect on any Seller, the Business or any of the Acquired Assets.

SECTION 5.07.       TAX MATTERS. Each Seller has duly and timely filed all Tax Returns required to have been filed with any federal, state, local or foreign Taxing authority on or before the Closing Date and has timely paid all Taxes due and payable by it on or before the Closing Date, whether or not shown on such Tax Returns. Branford has set up reserves or accruals on the Agreement Balance Sheet which are adequate for the payment of all Taxes for all periods through the Closing Date. No Taxing authority has asserted any claim against any Seller for the assessment of any additional Tax liability or initiated any action or proceeding which could result in such an assertion. Each Seller has made all withholding of Taxes required to be made under all applicable Laws and regulations, including withholding with respect to sales and use Taxes and compensation paid to employees, and the amounts withheld have been properly paid

 

over to the appropriate Taxing authorities. The state, federal and local Tax Returns of each Seller have been audited for or through the respective periods set forth on SCHEDULE 5.07 hereof, and there have been no waivers or extensions by such Seller of statutes of limitations with respect to Taxes. Neither Seller is a “foreign person” within the meaning of Section 1445(f)(3) of the Code. The transactions contemplated by this Agreement are not subject to the Tax withholding provisions of Section 3406 of the Code or of Sub-Chapter A or Chapter 3 of the Code, or of any other comparable provision of Law.

SECTION 5.08.       ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE 5.08, Branford has no indebtedness or liability which is not shown on the Agreement Balance Sheet or provided for thereon, other than liabilities incurred or accrued in the ordinary course of the Business consistent with past practice since the Balance Sheet Date. The Acquired Assets are being conveyed to Buyer pursuant to this Agreement free and clear of all Encumbrances and Buyer will not incur any liability or obligation as a result of its acquisition of the Acquired Assets (other than the Assumed Liabilities).

SECTION 5.09.       REAL PROPERTY. SCHEDULE 5.09 sets forth a list of all real property owned, used or occupied by any Seller (or any of their Affiliates) which is used in the business (the “REAL PROPERTY”). None of the real property used by any Seller in the Business is leased. All of the following apply to the Real Property:

(a)            None of the Real Property is subject to any option to purchase, purchase agreement, lease, sublease, right of first refusal or any other grant to any Person of any right to the purchase, lease, sublease, use, occupancy or enjoyment of such property or any portion thereof by any Seller.

(b)            There is no litigation or proceeding pending or, to the knowledge of any Seller, threatened against or relating to the Real Property, including, without limitation, condemnation proceedings relating to any of the Real Property.

(c)            There is no pending re-zoning relating to the Real Estate.

(d)            All Licenses and Permits and approvals necessary for the occupancy and use of the Real Property for the conduct of the Business have been obtained.

(e)            Good, marketable and indefeasible fee simple title to each parcel of the Real Property is owned by Carolina Industries, free and clear of every kind or description of lien, lease or encumbrance except easements, agreements and restrictions of record and current taxes not delinquent.

(f)             There are no easements, agreements and restrictions which encumber the Real Property or frustrate Buyer’s intended use of the Real Property.

(g)            There are no unpaid claims for labor done upon or materials furnished for the Real Property in respect of which liens have been or may be filed.

(h)            There is no judgment of any court of any State or of the United States that is or may become a lien on the Real Property.

 

(i)             The improvements upon the Real Property are all located entirely within the bounds of the Real Property, and there are no encroachments thereon.

(j)             Each parcel of the Real Property is now in possession of Sellers and no other person has a right to possession or claims possession of all or any part of the Real Property. Sellers will deliver possession of the Real Property to Buyer at the Closing, free and clear of any right or claim of any person to the possession of the Real Property except as disclosed in writing to Buyer.

(k)            Each parcel of the Real Property has direct access to a publicly-dedicated right-of-way.

(l)             Neither Seller is a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Code and regulations adopted pursuant thereto).

(m)           All utilities presently serving the Real Property are operated through public easements or rights-of-way, or through valid private easements or rights-of-way in favor of the applicable owner of the Real Property, and all installation and connection charges relating thereto have been paid in full.

SECTION 5.10.       CONFORMITY OF THE REAL PROPERTY. All buildings, structures and improvements located on, fixtures contained in,