EXHIBIT 2.1 ASSET PURCHASE AGREEMENTAsset Purchase Agreement |
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ASSET PURCHASE AGREEMENT by and between BRAND SERVICES, INC. and INTERSTATE SCAFFOLDING, INC. Dated as of July 14, 2006
This Asset Purchase Agreement, dated as of July 14, 2006, is by and between Brand Services, Inc., a Delaware corporation (" Purchaser "), and Interstate Scaffolding, Inc., an Illinois corporation (" Seller "). In consideration of the covenants, agreements, representations and warranties contained in this Agreement, the parties hereby agree as follows: 1.01 Specific Definitions. As used in this Agreement, the following terms have the following meanings: " Affiliate " means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, " control " (including, with correlative meaning, the terms " controlling ," " controlled by " and " under common control with ") shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of such Person, whether through the ownership of voting securities, by Contract or otherwise. " Agreement " means this Asset Purchase Agreement, together with all Exhibits hereto and the Disclosure Memorandum, as the same may be amended or supplemented from time to time in accordance with its terms. " Allocation Schedule " has the meaning specified in Section 2.08 . " Assignment and Assumption Agreement " means the assignment and assumption agreement, substantially in the form of Exhibit A , to be executed and delivered by Seller and Purchaser at the Closing. " Assumed Liabilities " has the meaning specified in Section 2.02(a) . " Assumed Payables " has the meaning specified in Section 2.02(a)(i) . " Base Balance Sheet " has the meaning specified in Section 3.06(a) . " Basket " has the meaning specified in Section 7.02 . " Bill of Sale " means the bill of sale, substantially in the form of Exhibit C , to be executed and delivered by Seller at the Closing. " Books and Records " means all books of account, records, files and invoices, including all employee files (for Hired Employees only), accounting records, financial information (both historical and current), inventory records, sales and sales promotional data and materials, customer lists, cost and pricing information, supplier lists, business plans, quality control records and manuals, material safety data sheets, technical service information and correspondence, including all such books, records, reports and all other materials existing in electronic format, in each case relating to the Business, but excluding any litigation files and attorney invoices. " Bulk Sales Laws " means the laws of any jurisdiction relating to bulk sales that are applicable to the sale of the Transferred Assets to Purchaser. " Business " means the provision of scaffolding work access services, including design engineering, project management, labor for the erection and dismantlement of scaffolding systems, the associated equipment rental and related activities as conducted by Seller. " Business Day " means any day other than a Saturday, a Sunday or a day on which banks in Chicago, Illinois are authorized or obligated by Law to close. " Claim Notice " means written notice delivered to the Indemnifying Party (and, if a Purchaser Indemnified Party is the Indemnified Party and the Escrow Fund continues to be held by the Escrow Agent, the Escrow Agent) of a claim pursuant to Section 7.04 , which notice shall include with reasonable particularity the details of such claim (to the extent known) and the basis for such claim for indemnification. " Closing " has the meaning specified in Section 2.04 . " Closing Date " means the date on which the Closing occurs. " Code " means the Internal Revenue Code of 1986, as amended, and the interpretations thereof set forth in the Treasury regulations promulgated thereunder. " Consent " means any consent, waiver, approval, authorization, exemption, registration or declaration. " Contract " means any contract, lease, commitment, arrangement, understanding, sales order, purchase order, agreement, indenture, mortgage, note, bond, right, warrant, instrument, plan, Permit or license, whether written or verbal, that is intended or purports to be binding and enforceable. " Customers " has the meaning specified in Section 3.20(a)(i) . " Damages " means any and all claims, actions, Liabilities, damages, judgments, assessments, losses, costs and expenses (including reasonable attorneys' fees and expenses). " Disclosure Memorandum " has the meaning specified in Article 3 . " Ending Date " has the meaning specified in Section 5.08(a) . " Environmental Law " means all laws (including common law), statutes, ordinances, rules, regulations, orders and judgments relating to pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface or subsurface strata, and natural resources), including (i) those related to emissions, discharges, exposures, releases or threatened releases of hazardous materials, or otherwise relating to any environmental aspect of the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous materials and (ii) environmental provisions of Laws other than Environmental Laws. " ERISA " means the Employee Retirement Income Security Act of 1974, as amended. " ERISA Affiliate " means, with respect to any Person, trade or business which, together with such Person, is a member of a controlled group of corporations or a group of trades or businesses under common control within the meaning of section 414 of the Code. " Escrow Agent " means LaSalle Bank, or another similar institution selected by Purchaser prior to the Closing Date, and any Person who becomes successor thereto in accordance with the Escrow Agreement. " Escrow Agreement " means an escrow agreement to be entered into by and among Purchaser, Seller and the Escrow Agent in substantially the form of Exhibit B , with such changes thereto as the Escrow Agent may reasonably request. " Escrow Amount " means $1,500,000. " Escrow Fund " has the meaning specified in Section 2.05 . " Excluded Assets " has the meaning specified in Section 2.01(b) . " Excluded Liabilities " has the meaning specified in Section 2.02(b) . " Financial Statements " has the meaning specified in Section 3.06(a) . 2 " GAAP " means United States generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the basis on which the most recent audited financial statements of such Person were prepared prior to the date of this Agreement. " Gardena Lease " means that certain lease between Seller, as lessee, and 340 W. Compton, LLC, as lessor, dated as of June 13, 2005, relating to 340 W. Compton Boulevard, Gardena, California. " Gardena Rent " has the meaning specified in Section 5.15(b) . " Gardena Use Termination Notice " has the meaning specified in Section 5.15(a) . " Governmental Authority " means the government of the United States or any foreign country or any state or political subdivision thereof and any entity, body, instrumentality or authority exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. " Hazardous Materials " means any material, substance or waste that is regulated, classified or otherwise characterized under or pursuant to any Environmental Law as "hazardous," "toxic," a "pollutant," a "contaminant," "radioactive" or words of similar meaning or effect, including petroleum and its by-products, asbestos, polychlorinated biphenyls, radon, mold, urea formaldehyde insulation, chlorofluorocarbons and all other ozone-depleting substances. " Health and Safety Laws " means the Occupational Safety and Health Act of 1970 and all other Laws regulating, relating to or imposing liability or standards of conduct concerning employee health and/or safety. " Hired Employees " has the meaning specified in Section 5.07(a) . " Indemnified Party " means the party or parties making a claim for indemnification under Article 7 . " Indemnifying Party " means the party or parties against whom an Indemnified Party makes a claim for indemnification under Article 7 . " Interim Financial Statements " has the meaning specified in Section 3.06(a) . " Judgment " means any judgments, injunctions, orders, writs, rulings, decrees or awards of any court or other judicial authority or any other Governmental Authority of competent jurisdiction. " June Financial Statements " has the meaning specified in Section 5.05 . " Knowledge " means, with respect to a particular fact or other matter, actual awareness of such fact or other matter after reasonable inquiry made of relevant records and personnel of the Business. Seller will be deemed to have "Knowledge" of a particular fact or other matter if any of Ronald E. Fowler and James Smith have actual awareness of such fact or other matter or would have such actual awareness after making the reasonable inquiry described in the immediately preceding sentence. " Law " means any federal, state, local or foreign law, statute, ordinance, rule, regulation, order or decree. " Leases " has the meaning specified in Section 3.07(b) . " Liability " means any liability or obligation of any nature, whether known or unknown, accrued, absolute, contingent or otherwise, and whether due or to become due. " Liens " means all liens, charges, security interests, sureties, options, restrictions or other encumbrances whatsoever other than liens for Taxes due but not yet payable. " Material Adverse Change " means any change, effect or circumstance that, individually or when taken with all such other changes, effects and circumstances, has or is reasonably likely to have a material adverse effect on (i) the operations, assets, financial condition, operating results or business prospects of the Business, or (ii) the ability of Seller to perform its obligations under this Agreement 3 and the Related Agreements or on the ability of Seller to consummate the transactions contemplated hereby and thereby; provided that no adverse change, effect or circumstance relating to or resulting from any of the following shall be deemed to constitute, and none of the following shall be taken into account in determining whether there has been, or is reasonably likely to be, a Material Adverse Change: (1) general business and economic conditions, including such conditions related to the construction and/or scaffolding business generally; (2) national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States; (3) the securities markets generally (including any disruption thereof or any decline in the price of any security or market index); (4) changes in U.S. generally accepted accounting principles; (5) the public announcement of the transactions contemplated by this Agreement and the Related Agreements; and (6) the taking of any action required by this Agreement or any Related Agreement. " Permits " means all permits, authorizations, approvals, consents, orders, filings, registrations, licenses, certificates or variances granted by, made with or obtained from a Governmental Authority. " Person " means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization. " Proceeding " means any action, suit, demand, claim or legal, administrative, arbitration or other alternative dispute resolution proceeding, hearing or investigation. " Purchase Price " has the meaning specified in Section 2.03 . " Purchaser " has the meaning specified in the preamble to this Agreement. " Purchaser Indemnified Party " means Purchaser and any wholly-owned direct or indirect subsidiary of Purchaser that holds at any time any of the Transferred Assets or assumes any of the Assumed Liabilities, and their respective successors and assigns. " Purchaser Material Adverse Change " means any change, effect or circumstance that, individually or when taken with all such other changes, effects and circumstances, has or is reasonably likely to have a material adverse effect on the ability of Purchaser to perform its obligations under this Agreement and the Related Agreements or on the ability of Purchaser to consummate the transactions contemplated hereby and thereby. " Real Property " has the meaning specified in Section 3.07(b) . " Real Property Laws " has the meaning specified in Section 3.07(e) . " Receivables " has the meaning specified in Section 3.14 . " Related Agreements " means the Assignment and Assumption Agreement, the Bill of Sale and the Escrow Agreement. " Rent Reimbursement Period " means from and after the Closing, but prior to the earliest of (i) the termination of the Gardena Lease, (ii) the assignment or transfer of the Gardena Lease, or the sublease of substantially all of the property that is the subject of the Gardena Lease, to any Person, (iii) any breach by Seller of its obligations set forth in Section 5.15(a) , and (iv) the date that is five (5) months after the date Purchaser provides the Gardena Use Termination Notice. " Required Consents " has the meaning specified in Section 3.05 . " Seller " has the meaning specified in the preamble to this Agreement. " Seller Indemnified Party " means Seller and its shareholders, successors and assigns. 4 " Suppliers " has the meaning specified in Section 3.20(a)(ii) . " Tax Authority " means any entity, body, instrumentality, division, bureau or department of any federal, state or local or any foreign Governmental Authority, or any agent thereof (third-party or otherwise), legally authorized to assess, lien, levy or otherwise collect, litigate or administer Taxes. " Tax Matters " has the meaning specified in Section 7.02(a) . " Tax Returns " means all federal, state, local and foreign reports, estimates, declarations of estimated Tax elections, information statements and returns, including any documentation submitted in connection with payments of Taxes, and all supporting working papers, records and data relating to, or required to be filed with, any Tax Authority or any other Person in connection with any Taxes. " Taxes " means all net income or profits taxes, alternative or add-on minimum tax, built-in gain, environmental (Code section 59A), gross income, gross receipts, sales, use, goods and services, ad valorem, earnings, franchise, capital profits, license, withholding (including all obligations to withhold or collect for taxes imposed on others), payroll, employment, unemployment insurance, social security, workers' compensation, excise, severance, stamp, occupation, premium, real and personal property, excess profit or windfall profit tax, custom duty, value added or other tax, or any payment for unclaimed property, escheatment or similar common law principles, fee or other like assessment or charge of any kind whatsoever, together with any interest and any penalty, addition to tax, or additional amount (whether payable directly, by withholding or otherwise). " Territory " has the meaning specified in Section 5.08(a) . " Third Party Claim Notice " means written notice delivered to the Indemnifying Party (and, if a Purchaser Indemnified Party is the Indemnified Party and the Escrow Fund continues to be held by the Escrow Agent, the Escrow Agent) of a claim (including the commencement of a Proceeding) by any Person not a party to this Agreement pursuant to Section 7.05 , which notice shall include with reasonable particularity the details of such claim (to the extent known) and any documents (including pleadings) forming the basis of such claim. " Title and Authorization Warranties " means the representations and warranties set forth in Sections 3.01 , 3.02 , 3.10 , 4.01 and 4.02 . " Transfer Taxes " has the meaning specified in Section 2.10 . " Transferred Assets " has the meaning specified in Section 2.01(a) . " Transferred Contracts " has the meaning specified in Section 2.01(a)(ii) . " Transferred FF&E " has the meaning specified in Section 2.01(a)(iv) . " Transferred Intellectual Property " means (i) all the patents and patent applications owned by Seller and its Affiliates relating to the Business, including those identified on Schedule 2.01(a)(iii) of the Disclosure Memorandum, including all rights, to the extent permitted by law, to file corresponding applications in any country in the world; (ii) all inventions, trade secrets, know-how or formulae, whether patentable or unpatentable, owned by Seller relating to the Business, including those identified on Schedule 2.01(a)(iii) of the Disclosure Memorandum, and those related to products or services under development, and further including any rights as permitted by Law to obtain patents thereon in any country in the world; (iii) all trademarks, service marks and trade dress (whether registered, unregistered or existing at common law), Internet domain names, business names and trade names, trademark applications, the goodwill associated therewith, and copyrights (registered and unregistered), and all future income from such trademarks and copyrights, relating to the Business, and including those trademarks and copyrights identified on Schedule 2.01(a)(iii) of the Disclosure Memorandum; (iv) all customer-based intangibles relating to the Business, including customer lists, market information and data, access to distribution channels and similar assets and information, customer service and 5 technical service call records and logs, customer demographic research, marketing or satisfaction surveys, market research, customer order reports, information on customer preferences, customer payment history, supply Contracts, customer databases, notes and documentation of all contacts and communications with customers, customer relationship reports, and any other customer-based documents, databases, reports, information and analyses; and (vi) all other rights relating to the foregoing assets, including the right to sue for past infringement, and all opinions of counsel and evidentiary privileges associated with such assets, all of the foregoing subject to existing licenses to third parties and ownership interests of third parties as identified on Schedule 2.01(a)(iii) of the Disclosure Memorandum. " Transferred Receivables " has the meaning specified in Section 2.01(a)(i) . " Year-End Financial Statements " has the meaning specified in Section 3.06(a) . 1.02 Other Definitional Provisions. (a) Any reference to an Article, Section or Exhibit is a reference to an Article or Section of, or an Exhibit to, this Agreement. (b) Terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa. (c) The words " include, " " includes " and " including " shall be in each case " without limitation. " (d) The terms " dollars " and " $ " mean United States dollars. 2.01 Purchase and Sale of Transferred Assets. (a) On the terms and subject to the conditions of this Agreement, at the Closing, Seller shall sell, transfer, convey, assign and deliver to Purchaser, and Purchaser shall purchase, acquire and accept from Seller all right, title and interest in, to and under all of the assets, rights, claims and Contracts used in or related to the Business, as the same may exist on the Closing Date, except for the Excluded Assets (collectively, the " 7Transferred Assets "). Without limiting the generality of the foregoing, the Transferred Assets shall include (other than Excluded Assets) all right, title and interest in, to and under: (i) all fees, prepaid expenses, notes and accounts receivable, advances and other trade receivables of the Business (the " Transferred Receivables "); (ii) all Contracts relating to the Business, including those Contracts and arrangements set forth on Schedule 2.01(a)(ii) of the Disclosure Memorandum (the " Transferred Contracts "), and all rights to receive and/or provide goods and services pursuant to such Transferred Contracts and to assert claims and to take other actions in respect of breaches or other violations thereof; (iii) all Transferred Intellectual Property; (iv) all furniture, fixtures, furnishings, supplies, equipment, vehicles, tools, computers, computer printers, fax machines, other business equipment (including scaffolding) and other tangible personal property of the Business, including all accessories and spare and replacement parts (the " Transferred FF&E "); (v) all of Seller's rights and claims against third parties to the extent related to the Business; 6 (vi) to the extent transferable, all Permits held by Seller that are useful, required or necessary for the lawful ownership or operation of the Business after the Closing; (vii) all warranties (express or implied), indemnities or other rights from Suppliers to the Business or otherwise related to the Business; (viii) all prepayments made for services not yet rendered or goods not yet delivered; (ix) any rights of Seller to the names "Interstate Scaffolding, Inc.," "Interstate Scaffolding" or any other similar trade name or service mark; (x) all Books and Records, except to the extent included in the Excluded Assets; (xi) all goodwill related to, arising from or used in connection with the Business; (xii) any other personal property (tangible or intangible) of Seller that is not an Excluded Asset and that is used in, or arises from, the Business; and (xiii) all other assets that are reflected on the Base Balance Sheet but are not otherwise listed in this Section 2.01(a) , other than the Excluded Assets and any assets that have been sold or otherwise disposed of in the ordinary and usual course of business not in violation of any provision of this Agreement during the period from the date of the Base Balance Sheet through the Closing Date. (b) The Transferred Assets shall not constitute an interest in, to or under the following assets, rights, claims and Contracts (collectively, the " Excluded Assets "): (i) all cash and cash equivalents of the Business, including all right, title and interest in and to the bank accounts and funds on deposit therein listed on Schedule 2.01(b)(i) of the Disclosure Memorandum; (ii) all of Seller's interests in the inactive Cayman Islands captive insurance vehicle and any rights to receive premiums associated with such interest; (iii) all of Seller's interests in the active Vermont captive insurance vehicle, and any rights to receive premiums associated with such interest; (iv) all of Seller's Tax Returns and all refunds, rebates or similar payments of Taxes to the extent such Taxes were paid by or on behalf of Seller, other than any such refund, rebate or similar payment which relates to any Assumed Liability (which shall be deemed a Transferred Asset); (v) all of Seller's employee benefits plans, programs, policies and arrangements; (vi) all of Seller's minute books, incorporation documents and stock transfer and Tax records or similar corporate records; (vii) all of Seller's rights under this Agreement and the Related Agreements; (viii) all of Seller's interests in certain automobiles set forth on Schedule 2.01(b)(viii) of the Disclosure Memorandum; (ix) the three laptop computers set forth on Schedule 2.01(b)(ix) of the Disclosure Memorandum; (x) all of Seller's interests in any claims or counterclaims made by Seller in the Proceedings described in Section 7.01(c) ; (xi) all of Seller's interests in the real property located at 340 West Compton Boulevard in Gardena, California; 7 (xii) all of Seller's interests in any Receivables owed to the Company by Seller's Affiliates (including those Affiliates named in Section 3.28) ; and (xiii) all assets that are reflected on the Base Balance Sheet that have been sold or otherwise disposed of in the ordinary and usual course of business not in violation of any provisions of this Agreement during the period from the date of the Base Balance Sheet through the Closing Date. 2.02 Assumption of Certain Liabilities. (a) Upon the terms and subject to the conditions of this Agreement, at the Closing, Purchaser agrees to assume and discharge or perform when due, and shall assume pursuant to the Assumption Agreement, the following Liabilities (collectively, the " Assumed Liabilities "): (i) all accounts payable of the Business to the extent incurred in the ordinary course and (A) reflected on the Base Balance Sheet or (B) incurred after the date thereof and not in violation of any provisions of this Agreement (the " Assumed Payables "); (ii) all post-Closing Date Liabilities arising under the Transferred Contracts that do not arise out of or relate to any breach of contract, breach of warranty, tort, infringement or violation of Law or other similar event, occurrence or omission on or prior to the Closing Date; and (iii) all other current Liabilities of Seller explicitly set forth on the Base Balance Sheet. (b) Notwithstanding anything to the contrary in this Agreement, except for the Assumed Liabilities expressly listed in Section 2.02(a) , Purchaser shall not assume, or in any way become liable, for any Liabilities of Seller or the Business of any nature whatsoever, whether related to the Business or the Transferred Assets and whether disclosed on the Disclosure Memorandum or otherwise, and regardless of when or by whom asserted (collectively, the " Excluded Liabilities "), including the following Liabilities: (i) all Liabilities relating to or arising out of the pre-Closing Date operation of the Business, including: (A) any Liabilities with respect to any products or services that were sold or provided prior to the Closing Date, including product liability, negligence and infringement claims and any related claims and litigation arising prior to, on or after the Closing Date; (B) any Liabilities arising (1) by reason of any violation or alleged violation of Laws or otherwise under Laws, including any Environmental Law or Health and Safety Law, or (2) by reason of any breach or alleged breach by Seller or any of its Affiliates of any Contract, commitment or Judgment; and (C) any Liabilities relating to any Proceeding arising out of or in connection with Seller's conduct of the Business or any other conduct of any of Seller's Affiliates, officers, directors, employees, consultants, agents or advisors on or prior to the Closing Date. (ii) all Liabilities arising out of, or related to, the Excluded Assets; (iii) all Liabilities under any existing lines of credit or other debt instruments or arrangements, including any drawings thereunder and unpaid interest thereon, and all other Liabilities for borrowed money; (iv) all pre-Closing Date Liabilities arising under the Transferred Contracts, including all Liabilities that arise out of or relate to any breach of contract, breach of warranty, tort, infringement or violation of Law or other similar event, occurrence or omission on or prior to the Closing Date; (v) all Liabilities to or with respect to Seller's Affiliates (including those Affiliates named in Section 3.28 ) and Seller's current or former shareholders, employees and consultants (including Donald Valentine, Sandy Thuer and Dave De La Torre), including any Liabilities under or with respect to Seller's existing or former employee compensation, benefit plans, programs, policies or arrangements, including Seller's Liabilities under any multiemployer pension plans 8 (whether incurred as a result of the transactions contemplated hereby or otherwise), except as set forth in Section 5.07(b) ; (vi) all Liabilities for Taxes, including any Liability or obligation of Seller in respect of any amount of Taxes which are imposed on or measured by the income or profits of Seller for any period; (vii) all Liabilities for any costs and expenses incurred by Seller in connection with this Agreement and the transactions contemplated by this Agreement, including any Liabilities in favor of Arnstein & Lehr, LLP, RSM McGladrey, Inc. and Catalina Capital Advisors LP; (viii) the Gardena Lease, as such lease may be amended from time to time; (ix) any Liabilities relating to or arising out of the acquisition of assets from a Person formerly known as Interstate Scaffolding, Inc., whether such Liabilities are in the form of deferred purchase price or otherwise; and (x) all of Seller's Liabilities under this Agreement and the Related Agreements. 2.03 Purchase Price. Upon the terms and subject to the conditions of this Agreement, Purchaser shall deliver or cause to be delivered to Seller in full payment for the aforesaid sale, conveyance, assignment and delivery of the Transferred Assets, and in addition to the assumption of the Assumed Liabilities, immediately available funds by wire transfer in the amount of $29,950,000 (such amount, the " Purchase Price "), less the Escrow Amount (which shall be delivered by Purchaser to the Escrow Agent). 2.04 The Closing. Unless otherwise mutually agreed, the transactions contemplated in this Article 2 (the " Closing ") shall take place at 9:00 a.m., central time, at the offices of Arnstein & Lehr LLP, 120 S. Riverside Plaza, Chicago, Illinois 60606, on the later of (a) July 30, 2006, or (b) the second Business Day after the date on which all of the conditions (other than conditions with respect to actions to be taken or deliveries to be made at the Closing itself) set forth in Article 6 are satisfied or waived. 2.05 Escrow Agreement. At the Closing, Purchaser and Seller shall duly execute and deliver the Escrow Agreement. Amounts deposited with the Escrow Agent pursuant to Section 2.03 (together with all accrued interest thereon, except as provided in the Escrow Agreement, and less any amounts distributed to Seller or any other Person pursuant to the Escrow Agreement, the " Escrow Fund ") shall be deposited for satisfying claims for indemnification made against the Escrow Fund by any of the Purchaser Indemnified Parties in the twelve (12) months after the Closing, as provided in Article 7 . The Escrow Fund shall be held as a trust fund and shall not be subject to any lien, attachment or other judicial process of any creditor of any party, and shall be held and disbursed solely for the purposes and in accordance with the terms hereof and of the Escrow Agreement. The Escrow Agreement shall provide that, on the six (6) month anniversary of the Closing Date, the Escrow Agent shall disburse to Seller an amount equal to the then current amount of the Escrow Fund (less any amount subject to then pending claims and less $1,000,000). 2.06 Deliveries by Seller. At the Closing, Seller shall deliver or cause to be delivered to Purchaser the following: (a) the Assignment and Assumption Agreement, duly executed by Seller; (b) the Bill of Sale, duly executed by Seller; (c) instruments of assignment with respect to the Transferred Contracts and Permits in form and substance acceptable to Purchaser; 9 (d) instruments of assignment with respect to the Transferred Intellectual Property, in form and substance acceptable to Purchaser and suitable for recordation with the appropriate Governmental Authorities; (e) the Escrow Agreement, duly executed by Seller; (f) resolutions of Seller's board of directors and shareholders authorizing the execution, delivery and performance of this Agreement and the Related Agreements, and a certificate of the corporate secretary of Seller, dated as of the Closing Date, to the effect that such resolutions were duly adopted and remain in full force and effect; (g) a long form good-standing certificate for Seller from the state of its incorporation dated no more than five (5) Business Days prior to the Closing Date; (h) a certificate, dated as of the Closing Date, in the form specified by Treasury Regulation section 1.1445-2(b)(2), certifying Seller's non-foreign status; and (i) any other assignments, documents and other instruments that Purchaser may reasonably request to vest in Purchaser all rights, title and interest in, to and under the Transferred Assets as of the Closing Date. 2.07 Deliveries by Purchaser. At the Closing, Purchaser shall deliver or cause to be delivered the following: (a) to Seller, the Purchase Price, less the Escrow Amount; (b) to Seller, the Assignment and Assumption Agreement, duly executed by Purchaser; (c) to Seller and the Escrow Agent, the Escrow Agreement, duly executed by Purchaser; (d) to Ronald E. Fowler, the agreement described in Section 6.03(g) ; (e) to the individuals identified in Section 6.03(h) and (i) , the agreements described therein; and (f) any other instruments of assumption that Seller may reasonably request to vest in Purchaser the Assumed Liabilities as of the Closing Date. 2.08 Allocation of Purchase Price. The Purchase Price shall be allocable among the Transferred Assets in accordance with Schedule 2.08 of the Disclosure Memorandum (the " Allocation Schedule "). Following the Closing, each of Purchaser and Seller and their respective Affiliates shall file all necessary Tax Returns (including Internal Revenue Service Form 8594) to report the transactions contemplated herein for income Tax purposes in accordance with such allocation, and shall not take any position inconsistent with such allocation. Any adjustment to the Purchase Price shall be allocated as provided in Treasury Regulation Section 1.1060-1, and, in the event of such adjustment, Purchaser and Seller agree to revise and amend the Allocation Schedule and Form 8594 within thirty (30) days of such adjustment. 2.09 Procedures for Assets Not Transferable. If any Contract, Permit or any other property or right included in the Transferred Assets is not assignable or transferable without the Consent of a third party, and such Consent cannot be obtained prior to the Closing Date, this Agreement and the related instruments of transfer shall not constitute an assignment or transfer thereof, but Seller shall diligently use its best efforts to obtain such Consent as soon as possible after the Closing Date. With respect to each such Contract, Permit, property or right for which a necessary Consent has not been obtained prior to the Closing Date, Seller shall use its best efforts to otherwise obtain for Purchaser, at no additional cost to Purchaser (except for any internal costs or legal fees incurred by Purchaser), the benefits of such Contract, Permit, property or right until such Consent is obtained. 10 2.10 Transfer Taxes. All sale, transfer and use Taxes, including any value added, excise, stock transfer, gross receipts, stamp duty, documentary, filing, recording, permit, license, authorization and similar Taxes, filing fees and similar charges, due by reason of the transfer of the Transferred Assets, including but not limited to any interest or penalties in respect thereof (the " Transfer Taxes ") shall be apportioned fifty percent (50%) to Seller and fifty percent (50%) to Purchaser. Any Tax Returns that must be filed in connection with Transfer Taxes shall be prepared and filed when due by the party primarily or customarily responsible under the applicable local law for filing such Tax Returns, and such party will use commercially reasonable efforts to provide such Tax Returns to the other party at least ten (10) days prior to the due date for such Tax Returns. 2.11 Property Taxes. All property Taxes relating to the Transferred Assets which are due and payable on or prior to the Closing Date shall be paid by Seller; any such property Taxes which are due and payable after the Closing Date shall be paid by Purchaser. In the case of property Taxes that are payable with respect to a taxable period that begins before the Closing Date and ends after the Closing Date, the portion of any such property Tax that is allocable to the portion of the taxable period ending on the Closing Date shall be deemed to be the amount of such property Taxes for the entire taxable period, multiplied by a fraction the numerator of which is the number of days ending on the Closing Date and the denominator of which is the total number of days in the taxable period. The portion of any such property Tax that is allocable to the portion of the taxable period beginning the day following the Closing Date shall be deemed to be the amount of such property Tax not allocated to the portion of the taxable period ending on the Closing Date. With respect to such property Taxes paid by Seller, Purchaser shall reimburse Seller within thirty (30) days of notice thereof for the portion of such property Taxes paid that is allocable to the portion of the taxable period which begins the first day following the Closing Date. With respect to such property Taxes paid by Purchaser, Seller shall reimburse Purchaser within thirty (30) days of notice thereof for the portion of such property Taxes paid that is allocable to the portion of the taxable period ending on the Closing Date. Any Tax Returns that must be filed in connection with property Taxes shall be prepared and filed when due by the party primarily or customarily responsible under the applicable local law for filing such Tax Returns, and such party will use its commercially reasonable efforts to provide such Tax Returns to the other party at least ten (10) days prior to the due date for such Tax Returns. Except as disclosed in the disclosure memorandum (the " Disclosure Memorandum ") delivered at or prior to the date of this Agreement, Seller represents and warrants to Purchaser that the representations and warranties contained in this Article 3 are true, correct and complete: 3.01 Organization. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois, with all requisite power and authority, and all Permits necessary, to carry on the Business as it is now being conducted and in the places where the Business is now conducted. Seller is duly licensed or qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the conduct of its business requires such qualification, all of which jurisdictions are listed on Schedule 3.01 of the Disclosure Memorandum. Except as set forth in Schedule 3.01 of the Disclosure Memorandum, Seller does not own any capital stock or other equity interest in any Person or have any direct or indirect economic, voting or management interest or security in or of any Person. 11 3.02 Authorization. Seller has full power and authority to execute, deliver and perform this Agreement and the Related Agreements and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by Seller of this Agreement and the Related Agreements and the consummation by Seller of the transactions contemplated hereby and thereby have been duly and validly approved by Seller's board of directors and its shareholders entitled to vote thereon, and no other actions or proceedings on the part of Seller is necessary to authorize the execution, delivery and performance by Seller of this Agreement, the Related Agreements or the consummation of the transactions contemplated hereby and thereby. 3.03 Binding Effect. This Agreement has been, and on the Closing Date each of the Related Agreements will be, duly executed and delivered by Seller. This Agreement is, and on the Closing Date each of the Related Agreements will be, legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms, subject to applicable bankruptcy, insolvency and similar Laws affecting creditors' rights generally and general principles of equity. 3.04 No Violations. The execution, delivery and performance by Seller of this Agreement and each of the Related Agreements, and the consummation by Seller of the transactions contemplated hereby and thereby, do not and will not (i) conflict with or violate any provision of Seller's articles of incorporation, bylaws or similar organizational documents, (ii) subject to obtaining the Required Consents, conflict with, result in the breach of, constitute a default under, result in the termination, cancellation, modification or acceleration (whether after the giving of notice or the lapse of time or both) of any right or obligation of Seller under, or give any other Person any right to terminate, cancel modify or accelerate (whether after the giving of notice or the lapse of time or both) any right or obligation of Seller under, any Contract to which Seller or the Business is a party or by which Seller or the Business is bound or result in the creation of any Lien upon any of the Transferred Assets, or (iii) subject to obtaining the Required Consents, violate or result in a breach of or constitute a default under (A) any Law or Judgment applicable to Seller or the Business, or by which any of the Business, Transferred Assets, Seller is bound or affected, or (B) any Permit related to the Business. Without limiting the generality of the foregoing, except for this Agreement, there are no agreements, options, commitments or rights with, of or to any Person to purchase or otherwise acquire any of the Transferred Assets or any interests therein. 3.05 Consents and Approvals. Except for the Consents described in Schedule 3.05 of the Disclosure Memorandum (the " Required Consents "), no Consent is required to be obtained by Seller from, and no notice or filing is required to be given by Seller to or made by Seller with, any Governmental Authority or any other Person in connection with the execution, delivery and performance by Seller of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby. 3.06 Financial Statements; Certain Estimated Liabilities; No Undisclosed Liabilities. (a) Schedule 3.06 of the Disclosure Memorandum contains (i) the audited balance sheets of the Business as of December 31, 2005 and 2004, and the related audited statements of operations, shareholders' equity and cash flows for the years then ended, together with the appropriate notes to such financial statements, accompanied by the report thereon of Seller's auditors (the " Year-End Financial Statements "), and (ii) the unaudited balance sheet of the Business as of May 31, 2006 (the " Base Balance Sheet "), and the related unaudited statement of operations for the five months then ended (the " Interim Financial Statements " and, together with the Year-End Financial Statements, the " Financial Statements "). The Year-End Financial Statements have been prepared in conformity with GAAP and fairly present the financial position of the Business at the dates of the balance sheets included therein and the results of its operations and cash flows for the respective periods indicated therein. The Interim Financial Statements are accurate (subject to customary year-end adjustments and differences in the determination of the value of the Transferred FF&E which will not in the aggregate 12 reduce the net worth of the Business by more than One Hundred Thousand Dollars ($100,000)) and were prepared in a manner consistent with the manner in which the Year-End Financial Statements were prepared. The Financial Statements are in accordance with Seller's Books and Records, do not reflect any transactions that are not bona fide transactions and do not contain any untrue statement of a material fact. The Financial Statements make full and adequate disclosure of, and provision for, all Liabilities of Seller as of the dates thereof. (b) Seller has no Liabilities, whether or not required to be disclosed on a balance sheet prepared in accordance with GAAP, except Liabilities (i) stated or adequately reserved against in the Financial Statements, (ii) incurred in the ordinary and usual course of business since the date of the Base Balance Sheet, (iii) arising out of executory Contracts not currently in default, or (iv) that are Excluded Liabilities. 3.07 Real Property. (a) Seller does not own any real property. (b) Schedule 3.07 of the Disclosure Memorandum contains a complete and correct list of all leases, licenses, occupancy agreements, subleases or similar agreements or arrangements (the " Leases ") under which Seller leases or otherwise uses any real property in connection with the Business (the " Real Property "), setting forth the address, landlord and tenant for each Lease. Seller has delivered or made available to Purchaser correct and complete copies of the Leases. Each Lease is valid and in full force and effect in accordance with its terms. Seller is not and, to Seller's Knowledge, no other party is in default, violation or breach in any respect under any Lease, and no event has occurred and is continuing that constitutes or, with notice or the passage of time or both, would constitute a default, violation or breach in any respect under any Lease by Seller or, to Seller's Knowledge, any other party. Each Lease grants the tenant under the Lease the exclusive right to use and occupy the demised premises thereunder. Except as described in Schedule 3.07 of the Disclosure Memorandum, none of the Leases contain any prohibition on assignment or other terms or conditions that will become applicable or inapplicable as a result of the transactions contemplated by this Agreement, and no Consent of any third party under any such Lease is required in connection with the transactions contemplated hereby. Seller has valid title to the leasehold estate under each Lease, free and clear of all Liens. Seller enjoys peaceful and undisturbed possession of the Real Property under the Leases. Seller has not subleased or licensed any Real Property to any Person. There are no improvements being constructed on any Real Property as of the date of this Agreement with an aggregate cost exceeding Five Thousand Dollars ($5,000). (c) To Seller's Knowledge, there are no eminent domain or other similar Proceedings pending or threatened affecting any portion of the Real Property. To Seller's Knowledge, there is no writ, injunction, decree, order or judgment outstanding, nor any action, claim, suit or Proceeding pending or threatened, relating to the ownership, lease, use, occupancy or operation by any Person of any Real Property. (d) To Seller's Knowledge, the use and operation of the Real Property by the Business does not violate in any material respect any instrument of record or agreement affecting the Real Property. To Seller's Knowledge, there is no violation of any covenant, condition, restriction, easement or order of any Governmental Authority having jurisdiction over such property or of any other Person entitled to enforce the same affecting the Real Property or the use or occupancy thereof. (e) To Seller's Knowledge, the Real Property is in compliance in all material respects with all applicable building, zoning, subdivision and other land use and similar Laws affecting the Real Property (collectively, the " Real Property Laws "), and Seller has not received any notice of violation or claimed violation of any Real Property Law. To Seller's Knowledge, there is no pending or anticipated change in any Real Property Law that will have or result in a material adverse effect upon the ownership, 13 alteration, use, occupancy or operation of the Real Property or any portion thereof by Seller or the Business. To Seller's Knowledge, no current use by Seller or the Business of the Real Property is dependent on a nonconforming use or other Consent or Permit the absence of which would materially limit the use of such Real Property by the Business. 3.08 Litigation and Legal Compliance. Except as set forth on Schedule 3.08 of the Disclosure Memorandum, (a) there are no (and, during the three years preceding the date hereof, there have not been any) Proceedings pending or, to Seller's Knowledge, threatened against or that would affect (i) Seller, (ii) any of its officers, directors, employees, agents or shareholders in their capacity as such, or (iii) the Business or any of the Transferred Assets or the Assumed Liabilities, and, to Seller's Knowledge, there are no facts which may constitute a valid legal basis for any such claim. None of Seller, the Business, the Transferred Assets or the Transferred Liabilities is subject to any Judgment, nor has Seller entered into any agreement to settle or compromise any Proceeding pending or threatened against it which has involved any obligation other than the payment of money or for which Seller has any continuing obligation. (b) Except as set forth on Schedule 3.08 of the Disclosure Memorandum, there are no claims or Proceedings pending or, to Seller's Knowledge, threatened against Seller regarding this Agreement or the transactions contemplated hereby, and Seller has no Knowledge of any fact which constitutes a valid legal basis for any such claim or Proceeding. 3.09 Absence of Certain Changes. Except as set forth on Schedule 3.09 of the Disclosure Memorandum, since December 31, 2005, (i) the Business has been operated in the ordinary course in a manner consistent with past practice and (ii) there has not been any Material Adverse Change. Except as disclosed on Schedule 3.09 of the Disclosure Memorandum, since December 31, 2005, Seller has not, with respect to the Business or the Tran | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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