STOCK PURCHASE
AGREEMENT
This Stock Purchase
Agreement (this “Agreement”) is entered into as of
October 1, 2007 by and among Steel Dynamics, Inc., an Indiana
corporation (“Buyer”), Omnisource Corporation, an
Indiana corporation (the “Corporation”), and the
shareholders of the Corporation listed on the signature pages
hereto (collectively, the “Shareholders”).
Capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to them in Section 14.1 . The
Buyer, the Corporation and the Shareholders may be referred to
herein each as a “Party” and collectively, the
“Parties”.
RECITALS
WHEREAS, the
Shareholders are the registered and beneficial owners of 100% of
the issued and outstanding capital stock of the Corporation on a
fully diluted basis (the “Stock”); and
WHEREAS, the
Shareholders desire to sell and the Buyer desires to purchase 100%
of the Stock on the terms and subject to the conditions set forth
herein.
TERMS OF
AGREEMENT
In consideration of the
representations, warranties, covenants and agreements contained
herein, the parties hereto agree as follows:
THE
TRANSACTION
The Stock Purchase . Subject to the terms and
conditions of this Agreement, at the Closing, the Shareholders
shall sell and the Buyer shall acquire good and marketable title to
all the Stock free and clear of all Liens (including Permitted
Liens) and Restrictions.
CONSIDERATION FOR TRANSFER
Consideration . The aggregate consideration for the
Stock shall be as follows:
$393,400,000 (the “Cash Amount”);
and
9,700,000 shares (the “Shares”) of
the Buyer’s common stock (the “Buyer Common
Stock”).
THE
CLOSING AND TRANSFER OF STOCK
Closing . The closing of the transactions
contemplated by this Agreement shall be effective as of the end of
the Closing Date, as hereinafter defined (the
“Closing”), and shall occur at the offices of McDermott
Will & Emery LLP, 227 West Monroe Street, Chicago, Illinois at
10:00 A.M., central standard time, on the second business day
following the satisfaction or
waiver of all
conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the Closing
itself) or at such other time or place as may be mutually agreed
upon by the Parties (the “Closing Date”).
Deliveries by Buyer . At the Closing, Buyer shall
deliver (or cause to be delivered) the following:
the
Cash Amount, as adjusted pursuant to the terms hereof, by wire
transfer of immediately available funds to the persons identified
on Schedule 3.2(a) in the proportions set forth opposite
their respective names;
1,050,000 shares of Buyer Common Stock (the
“Escrow Amount”) to an escrow agent mutually acceptable
to Buyer and the Shareholders (“Escrow Agent”),
pursuant to the provisions of the Escrow Agreement between the
Escrow Agent, Buyer and the Shareholders in the form of Exhibit
A hereto (the “Escrow Agreement”);
such number of shares of Buyer Common Stock as
designated by the Shareholders in accordance with Section
7.19 (the “Bonus Shares”);
a
number of Shares of Buyer Common Stock equal to the number of
Shares less the Escrow Amount less the Bonus Shares
to the Shareholders in the relative proportions set forth on
Schedule 3.2(d) ;
the
Section 9.1 Certificate; and
such other instruments or documents as may be
necessary or reasonably requested by the Shareholders to carry out
the transactions contemplated hereby.
Deliveries by the Shareholders
. At the Closing,
the Shareholders shall deliver the following:
certificates representing the Stock free and
clear of all Liens (including Permitted Liens) and Restrictions,
together with stock powers endorsed in blank;
the
Section 8.1 Certificate;
the
opinion referred to in Section 8.2 ;
the
landlord waivers and estoppel letters referred to in Section
8.4;
completed and executed IRS Forms 8023 (and any
similar state forms) required to be filed in connection with
Section 338(h)(10) Election;
pay
off letters from each applicable lender indicating the amount
necessary to pay the Corporation Debt in full at Closing (the
“Pay Off Letters”); and
such other instruments or documents as may be
necessary or reasonably requested by Buyer to carry out the
transactions contemplated by this Agreement.
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Closing Agreements . At the Closing, the applicable
parties shall execute, acknowledge and deliver the following:
(i) the Shareholders Agreement and (ii) the Escrow
Agreement.
REPRESENTATIONS AND WARRANTIES OF
BUYER
As a material
inducement to the Shareholders to enter into this Agreement, Buyer
hereby represents and warrants to the Shareholders as of the date
hereof, and as of the Closing Date, as set forth below:
Corporate Status and Authority
. Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of Indiana. Buyer has full corporate right,
power and authority, without the consent of any other Person, to
execute and deliver this Agreement and the agreements contemplated
hereby, to perform its obligations hereunder and to consummate the
transactions contemplated hereby and thereby. All corporate
and other acts or proceedings required to be taken by Buyer to
authorize the execution, delivery and performance of this Agreement
and the agreements contemplated hereby and all transactions
contemplated hereby and thereby have been duly and properly
taken.
Validity . This Agreement has been, and the
agreements and other documents to be delivered at Closing will be,
duly executed and delivered by Buyer and constitute the legal,
valid and binding obligations of Buyer, enforceable in accordance
with their respective terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors’ rights
generally and general equitable principles regardless of whether
such enforceability is considered in a proceeding at law or in
equity.
Violations and Approvals . The execution and delivery of
this Agreement and the agreements contemplated hereby, the
performance by the Buyer of its obligations hereunder and
thereunder and the consummation of the transactions contemplated
hereby and thereby will not (with notice, the passage of time or
both) result in the creation of any lien, charge or encumbrance or
the acceleration of any indebtedness or other obligation of Buyer
and are not prohibited by, do not violate or conflict with any
provision of, and do not and will not (with notice, the passage of
time or both) result in a default under or a breach of (i) the
charter or bylaws of Buyer, (ii) any contract, agreement, permit,
license or other instrument to which Buyer is a party or by which
it is bound, (iii) any order, writ, injunction, decree or judgment
of any court or governmental agency applicable to Buyer, or (iv)
any law, statute, ordinance, rule or regulation, decree, writ,
injunction, judgment or order of any Governmental Authority or of
any arbitration award which is binding upon, enforceable against or
applicable to Buyer, except for antitrust filings under the HSR Act
or any applicable foreign jurisdictions, compliance with applicable
requirements of the Securities Act and compliance with any
applicable foreign or state securities or “blue sky”
laws.
Buyer Common Stock . The Shares of Buyer Common Stock
to be issued pursuant to Article II hereof have been duly
authorized and when issued and delivered in
3
accordance
with the terms of this Agreement will be fully paid and
non-assessable and the issuance thereof is not subject to any
pre-emptive or similar right.
Buyer SEC Reports; Financial
Statements . The filings required to be made by the
Buyer under the Securities Act and the Exchange Act have been filed
with the SEC and complied, as of their respective dates, in all
material respects with all applicable requirements of the
appropriate statutes and the rules and regulations
thereunder. As of their respective dates, none of the Buyer
SEC Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim
financial statements of the Buyer included in the Buyer SEC Reports
have been prepared in accordance with GAAP applied on a consistent
basis during the period involved (except as may be stated in the
notes thereto) and fairly present the financial position and the
results of operations and cash flows of the Buyer and its
Subsidiaries as of the times and for the periods referred to
therein, subject, in the case of unaudited interim financial
statements, to normal, recurring audit adjustments.
4.6
Subsequent
Events .
Since the date of filing of the Buyer SEC Reports, no event has
occurred or failed to occur and no action has been taken or failed
to be taken by the Buyer regarding the Buyer, the Buyer’s
assets, its current business operations or its future business
prospects which, taken as a whole, has had or is likely in the
future to have a Material Adverse Effect on the Buyer or the
Buyer’s assets, its current business operations or its future
business prospects.
REPRESENTATIONS AND WARRANTIES OF
SHAREHOLDERS
As a material
inducement to the Buyer to enter into this Agreement, the
Shareholders hereby jointly and severally represent and warrant to
the Buyer as of the date hereof and as of the Closing Date, as set
forth below; provided, however, that each Shareholder makes the
representations and warranties contained in Sections 5.2(b), 5.3
and 5.6 only as to himself and the Corporation and its
Subsidiaries (if applicable) and not as to any other
Shareholder.
Corporate Status . The Corporation and each of its
Subsidiaries is a corporation or limited liability company duly
organized, validly existing and in good standing under the laws of
the state of its incorporation, which is identified on Section
5.1 of the Disclosure Schedule , and has the requisite
power and authority to own or lease its properties and to carry on
its business as now being conducted. The Corporation and each
Subsidiary is legally qualified to transact business as a foreign
corporation and is in good standing in each jurisdiction listed on
Section 5.1
of the Disclosure Schedule and is qualified and in good
standing in all other jurisdictions where the nature of its
properties and the conduct of its business requires such
qualification. There is no pending or, to the Knowledge of
the Shareholders and the Corporation, threatened proceeding for the
merger, consolidation, dissolution, liquidation, insolvency or
rehabilitation of the Corporation or any of its
Subsidiaries.
4
Authority . (a) The Corporation has the full
corporate right, power and authority to execute and deliver this
Agreement and the agreements contemplated hereby, to perform its
obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby and has taken all
action necessary to authorize the execution and delivery of this
Agreement and the agreements contemplated hereby and the
performance of its obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and
thereby. (b) Each of the Shareholders is an individual with
the requisite competence and authority to execute and deliver this
Agreement and the agreements contemplated hereby and to perform his
obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby.
Validity . This Agreement has been and the
agreements and other documents to be delivered at Closing will be,
duly executed and delivered by each of the Shareholders and the
Corporation, and constitute the legal, valid and binding obligation
of each of them, enforceable in accordance with their respective
terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors’ rights generally and general
equitable principles, whether such enforceability is considered in
a proceeding at law or in equity.
Violations and Approvals . The execution and delivery of
this Agreement and the agreements contemplated hereby by the
Shareholders and the Corporation, the performance by the
Shareholders and the Corporation of their respective obligations
hereunder and thereunder, and the consummation by them of the
transactions contemplated hereby and thereby will not (with notice,
the passage of time, or both) (i) contravene any provision of the
charter or bylaws of the Corporation, (ii) violate or conflict with
any law, statute, ordinance, rule, regulation, decree, writ,
injunction, judgment or order of any Governmental Authority or of
any arbitration award which is either applicable to, binding upon
or enforceable against Shareholders or the Corporation or its
Subsidiaries, (iii) except as set forth in Section 5.4 of the
Disclosure Schedule , conflict with, result in any breach of,
or constitute a default (or an event which would, with the passage
of time or the giving of notice or both, constitute a default)
under, or give rise to a right of payment under or the right to
terminate, amend, modify, abandon or accelerate, any contract,
agreement, permit, license or other instrument which is applicable
to, binding upon or enforceable against the Shareholders or the
Corporation or any of its Subsidiaries, (iv) result in or require
the creation or imposition of any Lien upon or with respect to any
of the property or assets of the Corporation or its Subsidiaries,
or (v) except as set forth in Section 5.4 of the Disclosure
Schedule , require the consent, approval, authorization or
permit of, or filing with or notification to, any Governmental
Authority, any court or tribunal or any other Person.
Capitalization . Section 5.5 of the
Disclosure Schedule sets forth, with respect to the
Corporation, (a) the number of authorized shares of each class of
its capital stock, (b) the number of issued and outstanding shares
of each class of its capital stock, and (c) the number of shares of
each class of its capital stock which are held in treasury.
All of the issued and outstanding shares of capital stock of the
Corporation (i) have been duly authorized and validly issued and
are fully paid and non-assessable, (ii) were issued in compliance
with all applicable state and federal securities laws, and (iii)
were not issued in violation of any preemptive rights or rights of
first refusal. No preemptive rights or rights of first
refusal exist with respect to the shares of capital stock of the
Corporation and, no such rights will arise by virtue of or
in
5
connection
with the transactions contemplated hereby. There are no
outstanding or authorized rights, options, warrants, convertible
securities, subscription rights, conversion rights, exchange rights
or other agreements or commitments of any kind that could require
the Corporation to issue or sell any shares of its capital stock
(or securities convertible into or exchangeable for shares of its
capital stock). There are no outstanding stock appreciation,
phantom stock, profit participation or other similar rights with
respect to the Corporation. The Corporation is not obligated
to redeem or otherwise acquire any of its outstanding shares of
capital stock.
Stock Ownership . Each Shareholder is the sole
record and beneficial holder of all issued and outstanding shares
of capital stock of the Corporation designated next to such
Shareholder’s name on Section 5.6 of the Disclosure
Schedule . Each Shareholder owns such shares free and
clear of all Liens and Restrictions and such shares in the
aggregate represent all of the issued and outstanding capital stock
of the Corporation. The stock ledger of the Corporation, as
attached to Section 5.6 of the Disclosure Schedule ,
accurately sets forth the current issued and outstanding shares of
the capital stock of the Corporation.
Records of the Companies . The copies of the charter and
bylaws of the Corporation attached to Section 5.7(a) of the
Disclosure Schedule are true, accurate and complete and reflect
all amendments made through the date of this Agreement. The
books and records of the Corporation and its Subsidiaries fully and
accurately reflect all of their transactions, properties, assets
and liabilities in all material respects. Section 5.7(b)
of the Disclosure Schedule lists each account of the
Corporation and its Subsidiaries now existing with any bank,
broker, or other depository institution, and the names of all
persons authorized to withdraw funds from each such
account.
Subsidiaries and Joint Ventures
.
Subsidiaries . Section 5.8(a) of the Disclosure
Schedule sets forth each Subsidiary of the Corporation and sets
forth, with respect to each Subsidiary, (a) the number of
authorized shares of each class of its capital stock, (b) the
number of issued and outstanding shares of each class of its
capital stock, and (c) the number of shares of each class of its
capital stock which are held in treasury. Section 5.8(a)
of the Disclosure Schedule sets forth the holders of all issued
and outstanding securities of each Subsidiary including a
description of the securities held by such Persons. The
equity interests of Subsidiaries of the Corporation held by the
Corporation and any of its Subsidiaries are owned free and clear of
any Lien or Restriction. All of the issued and outstanding
shares of capital stock and other equity interests of each
Subsidiary (i) have been duly authorized and validly issued and are
fully paid and non-assessable, (ii) were issued in compliance with
all applicable state and federal securities laws, and (iii) were
not issued in violation of any preemptive rights or rights of first
refusal. No preemptive rights or rights of first refusal
exist with respect to the equity interests of any Subsidiary and,
no such rights will arise by virtue of or in connection with the
transactions contemplated hereby. There are no outstanding or
authorized rights, options, warrants, convertible securities,
subscription rights, conversion rights, exchange rights or other
agreements or commitments of any kind that could require any
Subsidiary to issue or sell any of its equity interests (or
securities convertible into or exchangeable for its equity
interests). There are no outstanding stock appreciation,
phantom stock, profit participation or other
6
similar rights
with respect to any Subsidiary. No Subsidiary is obligated to
redeem or otherwise acquire any of its outstanding equity
interests.
Joint Ventures . The ownership of each Joint Venture is
as set forth on Section 5.8(b) of the Disclosure Schedule ,
including (i) name of each equityholder, (ii) type and number of
securities issued to such equityholders and (iii) percentage
interest in the Joint Venture of each such equityholder. All
of the issued and outstanding securities of each Joint Venture have
been duly authorized and validly issued, are fully paid and
nonassessable and, to the Knowledge of the Shareholders and the
Corporation have been issued in compliance with all applicable
securities laws. The equity interests in each Joint Venture
held by the Corporation or any of its Subsidiaries are held of
record by the Corporation or such Subsidiary and are and will be at
Closing free and clear of all Liens (including Permitted
Liens). Except as set forth in Section 5.8(b) of the
Disclosure Schedule or the joint venture agreements among the
Corporation, any of its Subsidiaries and any other Person (the
“Joint Venture Agreements”), (i) the
Corporation’s and, if applicable, its Subsidiary’s
equity interests in the Joint Ventures are not subject to any
agreement, restriction on transfer, or any limitation on voting,
voting trust, stockholders agreement, proxies or other
understandings with respect to the voting of such equity interests,
(ii) no party has a right of first refusal, right to purchase or
compel the sale of any such equity interests, right to put any
equity interests held by such third party to the Corporation or one
of its Subsidiaries or to the Joint Venture, and (iii) none of the
Corporation or any of its Subsidiaries has any material liability
relating thereto, other than the value of its investment in such
Joint Venture. Except as set forth on Section 5.8(b) of
the Disclosure Schedule , neither the Corporation nor any of
its Subsidiaries has any obligation to make or contribute
additional capital or assets to any Joint Venture. Neither
the execution and delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, will conflict with, result
in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any Joint
Venture Agreement, or to the Knowledge of the Corporation or any of
the Shareholders, of any agreement, contract lease, license,
instrument, or other arrangement to which Joint Venture is a
party.
Financial Statements .
Attached to Section 5.9(a) of the Disclosure
Schedule is a true and correct copy of the audited consolidated
financial statements of the Corporation and its Subsidiaries as of
September 30, 2005 and September 30, 2006 and for the one year
periods ended on September 30, 2004, 2005 and 2006 including the
notes thereto (the “Audited Financial
Statements”). Attached to Section 5.9 of the
Disclosure Schedule is the unaudited consolidated balance sheet
and income statement of the Corporation and its Subsidiaries as of
and for the period ending August 31, 2007 (the “Interim
Financial Statements” and collectively with the Audited
Financial Statements, the “Financial
Statements”). The Financial Statements (including the
notes thereto) fairly present, in all material respects, the
financial position of the Corporation and its Subsidiaries at each
of the balance sheet dates and the results of operations and cash
flows for each of the periods covered thereby, and, except as set
forth on Section 5.9(a) of the Disclosure Schedule , have
been prepared in accordance with GAAP consistently applied
throughout
7
the periods
indicated, except with respect to the Interim Financial Statements
insofar as it does not reflect normal, recurring year-end
adjustments and does not contain footnote disclosures. Except
as set forth in Section 5.9(a) of the Disclosure Schedule ,
there are no extraordinary (as provided under GAAP) items of income
or expense during the periods covered by the Financial Statements
and the balance sheets included in the Financial Statements do not
reflect any write-up or revaluation increasing the book value of
any assets, except as specifically disclosed in the notes
thereto.
All
of the Receivables of the Corporation and its Subsidiaries
represent a sale made in a bona fide transaction in the ordinary
course of business, have been accounted for in a manner consistent
with the Corporation’s historical practices and the
Corporation and its Subsidiaries have performed their obligations
to produce the goods or perform the services to which such
receivable relates.
All
inventory of the Corporation and its Subsidiaries, including spare
parts inventories, (i) was acquired in the ordinary course of
business consistent with past practice and, (ii) is, in all
material respects, of a quality, quantity and condition useable or
saleable in the ordinary course of business with the Corporation or
such Subsidiaries normal inventory turnover experience, and is
valued in accordance with GAAP. None of the Corporation or
its Subsidiaries has any material liability with respect to the
return or repurchase of any goods in the possession of any
customer.
Changes Since September 30, 2006
. Except as set
forth on Section 5.10 of the Disclosure Schedule , since
September 30, 2006, (i) neither the Corporation nor any of its
Subsidiaries has suffered a Material Adverse Effect, (ii) the
Corporation and its Subsidiaries have conducted their businesses in
the ordinary course consistent with past practice, and (iii)
neither the Corporation nor any of its Subsidiaries has taken any
action that, if taken after the date hereof, would constitute a
violation of Sections 6.1(d) , (e) , (l) ,
(m) or (n) .
Liabilities . Neither the Corporation nor any of its
Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise), whether or
not any such liability or obligation would have been required by
GAAP to be set forth on a balance sheet of the Corporation or any
of its Subsidiaries or in the notes thereto, other than (a)
liabilities or obligations set forth on the Audited Financial
Statements as of September 30, 2006 or liabilities or obligations
reflected in the unaudited consolidated balance sheet of the
Corporation and its Subsidiaries as of the date of the Interim
Financial Statements, (b) liabilities or obligations specifically
required to be incurred by the Corporation or any of its
Subsidiaries pursuant to this Agreement, (c) liabilities or
obligations incurred since the date of the Interim Financial
Statements in the ordinary course of business (which are not
material, individually or in the aggregate) consistent with past
practice, (d) liabilities or obligations for the purchase of
inventory, equipment, goods or services in the ordinary course of
business (which are not material, individually or in the aggregate)
consistent with past practice, (e) liabilities or obligations for
the purchase of equipment as reflected in the capital expenditure
budget of the Corporation attached to Section 5.11 of the
Disclosure Schedule , and (f) those disclosed on Section
5.11(a) of the Disclosure Schedule . Section 5.11(b)
of the Disclosure Schedule contains a complete and accurate
description (including the name of the lender, amount outstanding
and any related security interests), subject to ordinary and normal
month end financial statement
8
adjustments
which are not material, of all indebtedness for borrowed money of
the Corporation and its Subsidiaries, whether owed to a bank or any
other Person, including capitalized leases, guarantees of
indebtedness and any prepayment penalties that may arise with
respect to the repayment thereof as of September 30, 2007
(collectively, “Corporation Debt”).
Litigation . Except as listed on Section 5.12 of
the Disclosure Schedule , there is no, and since
September 30, 2006 there has not been, any action, suit, or
other legal or administrative proceeding or governmental
investigation pending, or to the Knowledge of the Shareholders or
the Corporation, threatened, anticipated or contemplated (i)
against, by or affecting the Corporation or any of its
Subsidiaries, or any of their properties or assets, in excess of
the Litigation Materiality Threshold or where injunctive relief is
being sought as a remedy, or (ii) which questions the validity or
enforceability of this Agreement, or the transactions contemplated
hereby, and, to the Knowledge of the Shareholders or the
Corporation, there is no reasonable basis for any of the
foregoing. There are no outstanding orders, decrees or
stipulations issued by any Governmental Authority applicable to the
Corporation or any of its Subsidiaries.
Environmental Matters .
The
Shareholders and the Corporation represent and Buyer acknowledges
that the Corporation has, for extended periods of time, owned and
operated scrap yards and metal recycling facilities at the Owned
Properties and Leased Premises, which activities and processes
represent a substantial portion of the on-going value of the
business being acquired by Buyer and which Buyer intends to
continue to operate. These activities and processes involve the
routine handling of Materials of Environmental Concern normally
associated with scrap yards and metal recycling facilities,
including, without limitation, petroleum products, solvents,
antifreeze, heavy metals and other substances associated with such
activities and processes.
Except as set forth on Section 5.13( b
) of the Disclosure Schedule , each of the Corporation, its
Subsidiaries and, to the Knowledge of the Shareholders and the
Corporation, Joint Ventures has previously and is currently
complying in all material respects, with all obligations under all
Environmental Laws in connection with the operation of their
respective businesses and occupancy of the Facilities. Except
as set forth on Section 5.13(b) of the Disclosure Schedule, none of the Corporation,
its Subsidiaries, the Shareholders or, to the Knowledge of the
Shareholders and the Corporation, the Joint Ventures have received
any outstanding or unresolved written notices alleging any
non-compliance with or any liability pursuant to any Environmental
Laws or with respect to any Materials of Environmental
Concern.
Except as set forth on Section
5.13( c ) of
the Disclosure Schedule , no action, suit, claim, demand,
proceeding, investigation, threat, complaint, arbitration or charge
(i) alleging the failure to comply with, or a violation of, any
Environmental Laws, (ii) requesting or mandating investigation,
remediation or cleanup, or (iii) alleging release or disposal of
Materials of Environmental Concern at the Facilities or at any off
site location (collectively, hereinafter defined as an
“Environmental Claim”) has been made or, to the
Knowledge of Shareholders or the Corporation, threatened and
neither
9
the
Corporation nor any of its Subsidiaries has received any notice
alleging an Environmental Claim which has not heretofore been fully
and finally resolved, subject to no further right of appeal and for
which no further action is required.
Except as set forth on Section
5.13( d )(i)
of the Disclosure Schedule , no Materials of Environmental
Concern have ever been used, generated, treated, stored, released
or disposed of at any Facility, except in compliance with then
existing Environmental Laws and except as does not result in any
material damage to person or property. Except in compliance
with Environmental Laws and except as set forth on Section
5.13( d )(ii) of the Disclosure Schedule , no
underground storage tanks, as defined in RCRA or under applicable
state law, are present at any Facility or are operated by the
Corporation or its Subsidiaries at any Facility, and, to the
Knowledge of the Shareholders or the Corporation, no such tanks
were previously abandoned or removed except in compliance with then
existing Environmental Laws.
Except as set forth on Section
5.13( e
) of the Disclosure
Schedule , the
Corporation and its Subsidiaries and, to the Knowledge of
Shareholders and the Corporation, Joint Ventures do not have
any material
liability or unfulfilled
obligation, whether fixed, unliquidated, absolute, contingent or
otherwise, under any Environmental Laws or with respect to any
Materials of Environmental Concern, including any
material
liability, responsibility
or obligation for fines or penalties, or for investigation,
expense, removal, or remedial action to effect compliance with or
discharge any duty, obligation or claim under any such laws or
regulations and, to
the Knowledge of the Shareholders and the Corporation
, there is no basis for
any such liability or obligation. Except as set forth in Section 5.13(a)
and Section 5.13(e)(ii) of the Disclosure Schedule, (i)
there has not been
and is not occurring at any Facility, or any location currently used by the
Corporation, its Subsidiaries or, to the Knowledge of the
Shareholders or the Corporation, any of their predecessors, or (ii)
to the Knowledge of the Shareholders or the Corporation,
to which the Corporation
or any of its Subsidiaries or their predecessors ever sent any
materials, any release or threatened release, as those terms are
defined in CERCLA, of any Materials of Environmental Concern.
E xcept
as identified in
Section 5.13( e )(ii) of the Disclosure Schedule
, neither the Corporation
nor any of its Subsidiaries has ever applied or disposed,
transported or arranged for the transportation or disposal of any
Materials of Environmental Concern, in any manner which
presently forms
the basis for any present
or future claim, demand or action seeking investigation, removal,
remedial action or expense at any facility, site, location or body
of water, surface or subsurface. E xcept as identified in Section 5.13(
e )(iii) of the Disclosure
Schedule ,
neither the Corporation nor any of its Subsidiaries has received
notice that the Corporation or any of its Subsidiaries has sent,
arranged for disposal or treatment, arranged with a transporter for
transport for disposal or treatment, transported, or accepted for
transport any Materials of Environmental Concern, to a facility,
site or location, which, pursuant to CERCLA or any similar state or
local law, (i) has been placed or has been publicly proposed by
authorities having jurisdiction to be placed, on the National
Priorities List or its state equivalent, or (ii) which is subject
to a claim, administrative order or other request to take removal
or remedial action by any person having jurisdiction and authority
in the matter.
10
Section 5.13 of the Disclosure
Schedule identifies all environmental audits or
assessments or occupational health studies undertaken by or on
behalf of the Corporation or any of its Subsidiaries or, to the
Knowledge of the Shareholders and the Corporation, other Persons
with respect to any Facility or the business of the Corporation and
its Subsidiaries, in the past five years, copies of which have been
provided to the Buyer.
Facilities (Owned Properties and Leased
Premises) .
Title to Owned Properties
. All of the real
property owned in fee by the Corporation and/or its Subsidiaries
(the “Owned Properties”) are listed or described by
common address and related title commitment number on Section
5.14(a)(i) of the Disclosure Schedule . Title to the
Owned Properties is, and at Closing shall be, good and marketable,
fee simple absolute, held in the name of the Corporation or one of
its Subsidiaries, free of all Liens and encumbrances (collectively,
“Encumbrances”), excepting only the Permitted
Encumbrances. The Permitted Encumbrances are presented on
Section 5.14(a)(ii) of the Disclosure Schedule in a manner
so that the Owned Properties to which they relate is readily
identifiable. At Closing, title to the Owned Properties shall
be insurable by LandAmerica or Lawyers Title Insurance Corporation
pursuant to an ALTA Form 2006 owner’s form of policy or other
form reasonably acceptable to Buyer, free of all exceptions, except
the Permitted Encumbrances. Except as set forth on Section
5.14(a)(iii) of the Disclosure Schedule , other than the
Corporation or any Subsidiary thereof, no Person will be leasing,
using or occupying, under a claim of legal right, any portion of
land, property, structures, fixtures or Improvements covered by the
Owned Properties or any part of any thereof as of the Closing
Date.
[Intentionally Deleted]
Leased Premises.
Section 5.14.(c)(i) of the Disclosure
Schedule lists
each real property lease (“Lease”) to which the
Corporation or one of its Subsidiaries is a tenant and lists the
names of the parties thereto, the expiration dates of the current
term, and the annual base rent. Accurate and complete copies
of each Lease have been delivered to Buyer.
Each Lease is, and at Closing shall be, legal,
valid and binding and in full force and effect and, except as
provided in a landlord waiver or estoppel letter provided to Buyer
at or prior to Closing, if any, has not now and will not at closing
have been assigned, modified, supplemented or amended. The
Corporation and/or its Subsidiaries have performed all of the
obligations required to be performed by it under the Leases.
Neither the Corporation nor any Subsidiary thereof nor, to the
Knowledge of the Shareholders and the Corporation, the landlord or
sublandlord under any Lease, is in default under any of the Leases,
and to the Knowledge of Shareholders and the Corporation, no
circumstances or state of facts presently exists which, with the
giving of notice or passage of time, or
11
both, would constitute a default under any
Lease or would permit the landlord or sublandlord under any Lease
to terminate any Lease.
Except as set forth on Section 5.14(c)(iii)
of the Disclosure Schedule , other than the Corporation or any
Subsidiary thereof, no Person will be subleasing, using or
occupying, under a claim of legal right, any portion of the Leased
Premises covered by the Leases as of the Closing Date.
The
Corporation and/or its Subsidiaries have the right to quiet
enjoyment of each parcel of the premises subject to each Lease (the
“Leased Premises”) as provided in each Lease for the
full term of the applicable Lease (and any renewal option related
thereto) after consummation of the transactions contemplated
hereby. There are no contracts or agreements other than the
Leases that affect or pertain to the Corporation’s and/or its
Subsidiary’s quiet enjoyment of each parcel of Leased
Premises.
No
written notice has been received by the Corporation or any
Subsidiary indicating the desire or intention of any other party to
a Lease to amend, modify, rescind or terminate the same.
Zoning . The classification of the Real Property
(which shall mean the Leased Premises and the Owned Properties
(collectively, the “Real Property”)) under applicable
zoning laws, ordinances and regulations permits the present use and
occupancy of all Real Property by the Corporation or the
Subsidiaries and permits the Improvements (as hereinafter defined)
located thereon as currently constructed, used and occupied.
To the Knowledge of the Shareholders and the Corporation, there are
no pending or threatened actions or proceedings which could result
in a modification or termination of such zoning and other land use
requirements of a Governmental Authority which would affect the
continued right of the Corporation and its Subsidiaries to use and
occupy the Real Property and Improvements in a manner consistent
with historical practices and in the ordinary course of
business.
Utility Services . The water, electric, gas and
sewer utility services and any septic tank and storm drainage
facilities currently servicing the Real Property are adequate for
the present use of the Real Property by the Corporation and its
Subsidiaries in conducting the business operations thereon. To the
Knowledge of the Shareholders and the Corporation, there is no
condition which will result in the termination of the present
access from the Real Property to such utility services and such
other facilities described above.
Access . The Corporation has obtained all
Permits and rights-of-way which are necessary to ensure vehicular
and pedestrian ingress and egress to and from the Owned
Properties. Except with respect to any matters specifically
established by the Permitted Encumbrances, there are, to the
Knowledge of the Shareholders and the Corporation, no restrictions
on entrance to or exit from the Real Property to
adjacent
12
public streets
and no conditions which will result in the termination of the
present access from the Real Property to existing highways and
roads.
Eminent Domain . Neither the Corporation nor any of its
Subsidiaries has received any notices that any Governmental
Authority having the power of eminent domain over the Real Property
has commenced to exercise the power of eminent domain with respect
to all or any part of the Real Property.
Improvements . All buildings, structures, fixtures, building
systems and all components thereof (collectively, the
“Improvements”) located on the Real Property have been
maintained in accordance with the Corporation’s standard
maintenance policies in the ordinary course of business and are sufficient for the business operations
as currently conducted thereon. All mechanical and other
systems located in the Improvements have been maintained in
accordance with the Corporation’s standard maintenance
policies in the ordinary course of business, and are sufficient for
the business operations as presently conducted.
Public Improvements . No assessment for public
improvements has been made against the Real Property which is
currently due and payable and remains unpaid.
All Real Property . Except as set forth on Section
5.14(j) of the Disclosure Schedule , the Real Property
comprises all of the real property used by the Corporation in its
presently conducted business operations; and neither the
Corporation nor any of its Subsidiaries is a party to any agreement
or option to purchase or lease any real property or interest
therein, except as set forth on Section 5.14(j) of the
Disclosure Schedule .
Proceedings. With respect to the Real
Property, (i)
except as set forth on Section 5.14(k)(i) of the Disclosure
Schedule , no portion thereof is subject to any pending or, to
the Knowledge of the Shareholders and the Corporation, threatened
fire, health, safety, building, environmental, hazardous
substances, pollution control, zoning or other land use regulatory
proceedings or proceeding by any Governmental Authority, and(ii)
neither the Corporation nor any of its Subsidiaries has received
any notice of a violation or claimed violation of any Law affecting
the Real Property.
Damage . No portion of the Real Property that is
material to the operation of the business of the Corporation and
its Subsidiaries has suffered any damage by fire or other casualty
which (i) has not heretofore been repaired; or, (ii) (A) for which
repairs have commenced and are being diligently pursued, and (B)
for which the Corporation or the Subsidiaries have adequate
insurance coverage to complete such repairs.
Landlord Leases . Section 5.14(m) of the
Disclosure Schedule describes each real property leased by the Corporation or one of its
Subsidiaries to a third party tenant by listing the name of the
parties thereto, a brief description of the leased premises, the
expiration dates of the current term, and the annual rental (the
“Landlord Leases”).
Shareholders Premises . Section 5.14(n) of the
Disclosure Schedule described those real properties owned or
controlled by the Shareholders, or entities owned or controlled by
the Shareholders (the “Shareholder Premises”), now
leased to the
13
Corporation or
one of its Subsidiaries. For purposes of the representations
and warranties contained herein, the Shareholder Premises shall be
deemed “Owned Properties”.
Assets .
Except as set forth on Section 5.15 of the
Disclosure Schedule and Permitted Liens , the Corporation or
one of its Subsidiaries has good title to all of its Assets, free
and clear of any Liens or restrictions on use.
The
Fixed Assets currently in use in the business of the Corporation
and its Subsidiaries have been maintained in the ordinary course of
business and are sufficient for the business operations as
presently conducted.
The
Assets and Facilities constitute, in the aggregate, all of the
assets and properties used in the conduct of the business of the
Corporation and its Subsidiaries as currently conducted.
Compliance with Laws . Except as set forth on Section
5.16 of the Disclosure Schedule , the Corporation and its
Subsidiaries are and have been in compliance, in all material
respects, with all laws, regulations and orders of federal, state,
local and foreign governments (and all agencies thereof) applicable
to them, their business, Assets and operations. Neither the
Corporation nor any of its Subsidiaries has been cited, fined or
otherwise notified in writing of any past or present failure to
comply with any laws, regulations or orders which has not been (i)
paid, (ii) cured, (iii) is in the process of being cured and set
forth on Section 5.16 of the Disclosure Schedule , or (iv)
which is being contested in good faith and set forth on Section
5.16 of the Disclosure Schedule .
Labor and Employment Matters
. The Corporation
has provided Buyer with the name and current rate of compensation
of all employees of the Corporation and its Subsidiaries with total
annual compensation in excess of $200,000. Except as set
forth in Section 5.17 of the Disclosure Schedule :
neither the Corporation nor any of its
Subsidiaries is a party to or bound by any Collective Bargaining
Agreement or any other agreement with a labor union, and there has
been no effort by any labor union during the 24 calendar months
prior to the date hereof to organize any employees of the
Corporation or any of its Subsidiaries into one or more collective
bargaining units;
there is no pending or, to the Knowledge of the
Shareholders or the Corporation, threatened labor dispute, strike
or work stoppage which affects or which may affect the business of
the Corporation and its Subsidiaries or which may interfere with
its continued operations;
there are no outstanding arbitration awards,
labor grievances, arbitration proceedings or other proceedings
under any Collective Bargaining Agreement which are
material;
14
the
Corporation and its Subsidiaries have received no written notice
of, and the Corporation and its Subsidiaries have committed no
material breaches of any Collective Bargaining
Agreement;
there are no written or, to the Knowledge of
the Shareholders and the Corporation, oral agreements or courses of
conduct which modify any Collective Bargaining Agreement;
and
no
Collective Bargaining Agreement has a remaining term that will
terminate in accordance with its terms within twenty-four (24)
months of the date hereof.
Except as set forth on
Section 5.17 of the Disclosure Schedule , none of the
Corporation, its Subsidiaries, nor any agent, representative or
employee thereof has committed any unfair labor practice as defined
in the National Labor Relations Act, as amended, and there is no
pending or, to the Knowledge of the Shareholders and the
Corporation, threatened charge or complaint against the Corporation
or any of its Subsidiaries by or with the National Labor Relations
Board or any representative thereof in the past 3 years.
There is no employment-related charge, complaint, grievance,
investigation, inquiry or obligation of any kind, pending or
threatened in any forum relating to an alleged violation or breach
by the Corporation or any of its Subsidiaries (or any of their
officers or directors) of any law, regulation or contract. To
the Knowledge of the Shareholders and the Corporation, no executive
or key employee or group of key employees has any plans to
terminate his, her or their employment with the Corporation or any
of its Subsidiaries as a result of the transactions contemplated
hereby or otherwise. The Corporation and its Subsidiaries
have complied in all material respects with applicable laws, rules
and regulations relating to employment, civil rights and equal
employment opportunities, including but not limited to, the Civil
Rights Act of 1964, the Fair Labor Standards Act, and the Americans
with Disabilities Act, as amended. Neither the Corporation
nor any of its Subsidiaries has undertaken any action that would
require notices to be made under the Worker Adjustment and
Retraining Notification Act (the “ WARN Act ”),
and the Corporation and the Subsidiaries are otherwise in
compliance with the requirements of, and have no liabilities
pursuant to, the WARN Act.
Employee Benefit Plans .
Employee Benefit Plans . Section 5.18(a) of the
Disclosure Schedule contains a complete and accurate list of
each employee benefit plan or arrangement of the Corporation and
its Subsidiaries, including but not limited to employee pension
benefit plans, as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended
(“ERISA”), multiemployer plans, as defined in Section
3(37) of ERISA, employee welfare benefit plans, as defined in
Section 3(1) of ERISA, deferred compensation plans, stock option
plans, bonus plans, stock purchase plans, change in control, loans,
hospitalization, disability, life insurance, and other insurance
plans, retiree medical, severance or termination pay plans and
policies, whether or not described in Section 3(3) of ERISA, in
which current or former employees, their spouses or dependents, of
the Corporation or its Subsidiaries participate or for which the
Corporation or any Subsidiary contributes or has a liability
(“Employee Benefit Plans”)
15
(in the case
of Employee Benefit Plans for which the Corporation or one of the
Subsidiaries is the employer sponsor), true and accurate copies of
which, together with the most recent annual reports on Form 5500
and all schedules thereto, all favorable determination or opinion
letters or other rulings issued by the Internal Revenue Service,
all related trust agreements and insurance contracts (if any), the
most recent summary plan descriptions, and written summaries of any
unwritten arrangements were furnished to the Buyer). None of
the assets of any Employee Benefit Plan is stock of the Corporation
or any of its Subsidiaries, or property leased to or jointly owned
by the Corporation or any of its Subsidiaries.
Compliance with Law . With respect to each Employee
Benefit Plan for which the Corporation or one of the Subsidiaries
is the employer sponsor (i) each has been administered in all
material respects in compliance with its terms and with all
applicable laws, including, but not limited to, ERISA and the Code;
(ii) no actions, suits, claims or disputes are pending, or to the
Knowledge of the Shareholders or the Corporation threatened (except
for routine claims for benefits); (iii) no audits, inquiries,
reviews, proceedings, claims, or demands are pending with any
governmental or regulatory agency; (iv) there are no facts of which
the Shareholders or the Corporation have Knowledge which could give
rise to any material liability; (v) all reports, returns, and
similar documents required to be filed with any governmental agency
or distributed to any plan participant have been duly or timely
filed or distributed; and (vi) no “prohibited
transaction” has occurred within the meaning of the
applicable provisions of ERISA or the Code with respect to the
Corporation or its Subsidiaries; with respect to each other
Employee Benefit Plan, neither the Corporation nor any of its
Subsidiaries has received written notice of any of the
foregoing. All Employee Benefit Plans and any other
employment agreement or arrangement have been operated in
compliance with Section 409A of the Internal Revenue Code, such
that the Corporation and its Subsidiaries shall be entitled to
deduct the cost of such compensation and no excise tax shall be
imposed on any employee, contractor, or other service
provider.
Qualified Plans . With respect to each Employee
Benefit Plan intended to qualify under Code Section 401(a) or
403(a) and with
respect to which the Corporation or a Subsidiary is the employer
sponsor , (i) each
such plan is qualified under Code Section 401(a) or 403(b), as
applicable, and the Internal Revenue Service has issued a favorable
determination letter (or, the plan is maintained through adoption of
a prototype or similar plan document with respect to which the
Internal Revenue Service has issued a favorable notification letter
to the prototype sponsor) , true and correct copies of which have been
furnished to the Buyer, that such plans are qualified and exempt
from federal income taxes, all such plans and amendments thereto
have been timely adopted and then filed with the Internal Revenue
Service for a favorable determination letter within the applicable
remedial amendment period (or such period has not yet ended), and
such plans have been properly amended to comply with the Economic
Growth and Tax Relief Reconciliation Act of 2001; (ii) no such
determination letter has been revoked nor has revocation been
threatened, nor has any amendment or other action or omission
occurred with respect to any such plan since the date of its most
recent determination letter or application therefor in any respect
which would adversely affect its qualification or materially
increase its costs; (iii) no such plan has been amended in a manner
that would
16
require
security to be provided in accordance with Section 401(a)(29) of
the Code; (iv) no reportable event (within the meaning of Section
4043 of ERISA) has occurred; (v) as of the Closing Date, the
present value of all liabilities that would be “benefit
liabilities” under Section 4001(a)(16) of ERISA if benefits
described in Code Section 411(d)(6)(B) were included will not
exceed the then current fair market value of the assets of such
plan (determined using the reasonable actuarial assumptions used
for the most recent actuarial valuation for such plan); (vi) all
contributions to, and payments from and with respect to such plans,
which may have been required to be made in accordance with such
plans and, when applicable, Section 302 of ERISA or Section 412 of
the Code, have been timely made; and (vii) all such contributions
to the plans, and all payments under the plans (except those to be
made from a trust qualified under Section 401(a) of the Code) and
all payments with respect to the plans (including, without
limitation, PBGC and insurance premiums) for any period ending
before the Closing Date that are not yet, but will be, required to
be made are properly accrued and reflected on the Interim Financial
Statements.
Multiemployer Plans . With respect to any multiemployer
plan, as described in Section 4001(a)(3) of ERISA (“MPPA
Plan”) (i) all contributions required to be made with respect
to employees of the Corporation and its Subsidiaries have been
timely paid; (ii) except as set forth in Section 5.18(d) of the
Disclosure Schedule , neither the Corporation nor any of its
Subsidiaries has incurred, and they will not incur, directly or
indirectly, any withdrawal liability under ERISA with respect to
any such plan (whether by reason of the transactions contemplated
by this Agreement or otherwise); (iii) Section 5.18(d) of the
Disclosure Schedule sets forth (A) the withdrawal liability
under ERISA with respect to each MPPA Plan as determined by the
plan sponsor as of the date specified on Section 5.18(d) of the
Disclosure Schedule , (B) the date as of which such amount was
calculated, and (C) the method for determining the withdrawal
liability; and (iv) except as set forth in Section 5.18(d) of
the Disclosure Schedule , neither the Corporation nor any of
its Subsidiaries has received written notice that any such plan is
insolvent or in reorganization or that an accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of
the Code), whether or not waived, exists with respect to any such
plan. The hours reported by the Corporation and its
Subsidiaries for work performed by their respective employees on
any withdrawal liability assessment or estimate are accurate in all
material respects. Anything contained in this Section 5.18
to the contrary notwithstanding, except as specifically set forth
in this Section 5.18(d) , the Shareholders and the
Corporation make no representations or warranties with regard to
any MPPA Plan.
Welfare Plans . (i) Except as set forth on Section
5.18(e) of the Disclosure Schedule , neither the Corporation
nor any of its Subsidiaries is obligated under any employee welfare
benefit plan as described in Section 3(1) of ERISA (“Welfare
Plan”) to provide medical or death benefits with respect to
any employee or former employee of the Corporation, its
Subsidiaries or any of their predecessors after termination of
employment (except as required by Code Section 4980B or Section 601
through 608 of ERISA and only if the cost of such coverage is paid
in full by the former employee); (ii) the Corporation and each of
its Subsidiaries has complied with the notice and continuation
coverage requirements of Section 4980B of the Code and
the
17
regulations
thereunder with respect to each Welfare Plan that is, or was during
any taxable year for which the statute of limitations on the
assessment of federal income taxes remains, open, by consent or
otherwise, a group health plan within the meaning of Section
5000(b)(1) of the Code; and (iii) there are no reserves, assets,
surplus or prepaid premiums under any Welfare Plan which is an
Employee Benefit Plan. The consummation of the transactions
contemplated by this Agreement will not entitle any individual to
severance pay, and, will not accelerate the time of payment or
vesting, or increase the amount of compensation, due to any
individual under an Employee Benefit Plan or otherwise.
Controlled Group Liability
. Neither the
Corporation nor any entity that would be aggregated with it under
Code Section 414(b), (c), (m) or (o): (i) has ever terminated
or withdrawn from an employee benefit plan under circumstances
resulting (or that could reasonably be expected to result) in a
liability to the Pension Benefit Guaranty Corporation
(“PBGC”), the fund by which the employee benefit plan
is funded, or any employee or beneficiary for whose benefit the
plan is or was maintained (other than routine claims for benefits)
which would be a liability of the Corporation or any of its
Subsidiaries; (ii) has any assets subject to (or that could
reasonably be expected to be subject to) a lien for unpaid
contributions to any employee benefit plan which would be a
liability of the Corporation or any of its Subsidiaries; (iii) has
failed to pay premiums to the PBGC when due which would be a
liability of the Corporation or any of its Subsidiaries; (iv) is
subject to (or could reasonably be expected to be subject to) an
excise tax under Chapter 43 of the Code which would be a liability
of the Corporation or any of its Subsidiaries; (v) has engaged in
any transaction which would give rise to liability under Section
4069 or Section 4212(c) of ERISA which would be a liability of the
Corporation or any of its Subsidiaries; or (vi) has violated Code
Section 4980B or Section 601 through 608 of ERISA which would be a
liability of the Corporation or any of its Subsidiaries.
Other Liabilities . Except as set forth on Section
5.18(g) of the Disclosure Schedule , (i) none of the Employee
Benefit Plans obligates the Corporation or any of its Subsidiaries
to pay separation, severance, termination or similar benefits as a
result of any transaction contemplated by this Agreement or as a
result of a “change of control” (as such term is
defined in Section 280G of the Code) which would be a liability of
the Corporation or any of its Subsidiaries; (ii) all required or
discretionary (in accordance with historical practices) payments,
premiums, contributions, reimbursements, or accruals for all
periods ending prior to or as of the Closing Date shall have been
made or properly accrued on the Interim Financial Statements or
will be properly accrued on the books and records of the
Corporation and its Subsidiaries as of the Closing Date; and (iii)
none of the Employee Benefit Plans has any unfunded liabilities
which are not reflected on the Interim Financial Statements or the
books and records of the Corporation and its
Subsidiaries.
Tax Matters .
The
Corporation (i) has duly and timely filed or caused to be filed
with the appropriate Tax Authorities all Tax Returns of, related to
or including the Corporation
18
and each of
its Subsidiaries, including, without limitation, with respect to
income, assets, payroll or operations, and properly included the
items related thereto in such Tax Returns, which Tax Returns are
true, correct and complete in all material respects, and (ii) has
duly and timely paid or caused to be paid to the appropriate
authorities all Taxes that are due and payable on or before the
Closing Date by the Corporation and its Subsidiaries, and has
properly accrued on its books and records in accordance with GAAP
any Tax which is not then due. Neither the Corporation nor
the Subsidiaries is the beneficiary of any extension of time within
which to file any Tax Return. The Shareholders, the
Corporation and each of its Subsidiaries have complied with all
applicable laws, rules and regulations relating to the reporting,
payment, collection and withholding of Taxes and have duly and
timely collected or withheld and paid over to the proper Tax
Authorities all amounts required to be so collected or withheld and
paid over under applicable Laws. Except as set forth on
Section 5.19 of the Disclosure Schedule , all taxable years
or periods for the assessment of Taxes are closed either by
agreement with the applicable Tax Authority or by operation of the
normal statute of limitations for such Tax Returns (without
extension). Section 5.19 of the Disclosure Schedule
sets forth a list of each jurisdiction where the Corporation or any
of its Subsidiaries files a Tax Return and the type of Tax Return
filed.
Except as set forth on Section 5.19 of the
Disclosure Schedule , no Tax Authority has asserted any
adjustment that would result in additional Tax for which the
Corporation or any of its Subsidiaries is or may be liable or with
respect to which a Lien may be imposed on any asset or property of
the Corporation or any of its Subsidiaries which has not been fully
paid or which adjustment, if asserted, would apply to any other
period. No such adjustment is pending or, to the Knowledge of
the Corporation, being considered and there is no basis for any
such adjustment.
Except as set forth on Section 5.19 of the
Disclosure Schedule (1) neither the Corporation nor any of its
Subsidiaries is a party to any agreement, contract or arrangement
that would result, individually or in the aggregate, in the payment
of any amount that would not be deductible by reason of Section
162, 280G or 404 of the Code; (2) neither the Corporation nor
any of its Subsidiaries has any “tax-exempt bond financed
property” or “tax-exempt use property” within the
meaning of Section 168(g) or (h), respectively, of the Code;
(3) neither the Corporation nor any of its Subsidiaries have
entered into any sale-leaseback or leveraged lease
transaction; (4) none of the Assets of the Corporation and
its Subsidiaries is required to be treated as being owned by any
other Person pursuant to the “safe harbor” leasing
provisions of Section 168(f)(8) of the Internal Revenue Code of
1954, as in effect prior to the repeal of said leasing
provisions; (5) neither the Corporation nor any of its
Subsidiaries has been included in a consolidated, combined or
unitary Tax Return; (6) neither the Corporation nor any of
its Subsidiaries is or ever has been a party to any Tax sharing or
Tax allocation agreement, arrangement or understanding; (7)
no Tax Authority has ever asserted that the Corporation or any of
its Subsidiaries should file a Tax Return in a jurisdiction where
it does not file; and (8) neither the Corporation nor any of its
Subsidiaries has outstanding any power of attorney, closing
agreement or other instrument authorizing another Person to act on
its behalf in connection with any Tax matter.
19
Except as set forth on Section 5.19 of the
Disclosure Schedule , neither the Corporation nor any of its
Subsidiaries will be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a
result of any (i) change in method of accounting for a taxable
period ending on or prior to the Closing Date; (ii) “closing
agreement” as described in Section 7121 of the Code (or any
similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date; (iii) installment sale or
open transaction disposition made on or prior to the Closing Date;
or (iv) prepaid amount received on or prior to the Closing
Date.
The
Corporation is and has been a S corporation (or its equivalent),
and each of its Subsidiaries that is a corporation is and has been
a “qualified subchapter S subsidiary” within the
meaning of Section 1361(b)(3) of the Code, for federal, state
and, where applicable, local income and franchise Tax purposes
since October 1, 2001, or the date of its incorporation, if later,
through and including the Closing Date. Except as set forth
on Section 5.19 of the Disclosure Schedule , neither the
Corporation nor any of its Subsidiaries has, since October 1, 2001,
acquired assets from another corporation in a transaction in which
the Corporation’s or Subsidiaries’ Tax basis for the
acquired assets was determined, in whole or in part, by reference
to the Tax basis of the acquired assets in the hands of the
transferor, or acquired the stock of a corporation which is a
“qualified subchapter S subsidiary” within the meaning
of Section 1361(b)(3) of the Code. !
Except to the extent attributable to the
transactions contemplated by this Agreement, neither the
Corporation nor any of its Subsidiaries will incur any liability
for Taxes from the date of this Agreement through the Closing Date
other than in the ordinary course of business and consistent with
past practice.
The
Corporation has delivered to Buyer correct and complete copies of
all federal and state income and franchise Tax Returns filed by the
Corporation and its Subsidiaries, and examination reports and
statements of deficiencies assessed against or agreed to by the
Corporation and its Subsidiaries since January 1, 2004.
Insurance . Section 5.20 of the Disclosure
Schedule sets forth a description of each insurance policy
covering the Assets, rights, business equipment, properties,
operations, employees, consultants and directors of the Corporation
and its Subsidiaries, including the name of the insurer, policy
number, policy limits and expiration dates (copies of which,
including all amendments and riders, have been provided to the
Buyer (the “Insurance Policies”). Such Insurance
Policies are in full force and effect, all premiums due thereon
have been paid and neither the Corporation nor any Subsidiary is in
breach or default and, to the Knowledge of the Shareholders and the
Corporation, no event has occurred that with notice or the lapse of
time, would constitute a breach or default thereunder. As of
the Closing, each of the Insurance Policies will be in full force
and effect. Except as set forth in Section 5.20 of the
Disclosure Schedule , none of the Insurance Policies will lapse
or terminate as a result of the transactions contemplated by this
Agreement. The Corporation and each of its Subsidiaries has
complied with all provisions of such Insurance Policies, has not
received any notice or other communication from any insurance
company canceling or materially amending any Insurance Policy and,
to the Knowledge of the Shareholders, no such cancellation or
amendment is
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threatened.
Except as set forth in Section 5.20 of the Disclosure
Schedule, during the past three (3) years there have been no
claims made (including pending claims) under any of the Insurance
Policies where the amounts paid or expected to be paid or reserved
against exceed $1,000,000. To the Knowledge of the
Shareholders and the Corporation, neither the Corporation nor any
of its Subsidiaries has failed to give, in a timely manner, any
notice required under any of the Insurance Policies to preserve its
rights thereunder.
Licenses and Permits . T he Corporation and each of its Subsidiaries
possess all material licenses and governmental or official
approvals, permits or authorizations (collectively, the
“Permits”) required for their businesses and operations
as currently conducted, including with respect to the operation of
each of the Facilities. Section 5.21 of the Disclosure
Schedule contains a complete and accurate list of all material
Permits.
All Permits are
valid and in full force and effect, the Corporation and each of its
Subsidiaries are in compliance, in all material respects, with the
respective requirements thereof . Except as set forth in Section 5.21 of the
Disclosure Schedule , no proceeding is pending or, to the Knowledge
of the Shareholders or the Corporation, threatened to revoke or
amend any such
Permits . None of such Permits is or will be impaired or
in any way materially affected by the execution and delivery of
this Agreement or the consummation of the transactions contemplated
hereby.
Affiliated Transactions . Except as set forth in
Section 5.22 of the Disclosure Schedule , none of the
Shareholders or their Affiliates or family members has any direct
or indirect interest in any customer, supplier or competitor of the
Corporation or any of its Subsidiaries, or in any person from whom
or to whom the Corporation or any of its Subsidiaries leases real
or personal property (other than ownership of less than 5% of a
publicly-traded company). Except as set forth in Section
5.22 of the Disclosure Schedule , none of the Shareholders,
their Affiliates or family members, or the Corporation’s and
its Subsidiaries’ officers, employees or shareholders has
been involved in any business arrangement or relationship with the
Corporation or any of its Subsidiaries within the past 24 months,
and none of Shareholders, their Affiliates or family members or the
Corporation’s and its Subsidiaries’ officers, employees
and shareholders owns any asset, tangible or intangible, that is
used in the business of the Corporation and its Subsidiaries (the
“Affiliated Transactions”). The Leases between
the Corporation or any of its Subsidiaries and any Shareholder,
their Affiliates or family members are separately identified on
Section 5.22 of the Disclosure Schedule (the
“Affiliate Leases”).
Material Contracts . Section 5.23 of the Disclosure
Schedule sets forth an accurate, correct and complete list of
all contracts, instruments, commitments, agreements, arrangements
and understandings (whether written or oral) including all
amendments and supplements thereto, to which the Corporation or any
of its Subsidiaries is a party or is bound, or by which any of the
assets of the Corporation or any of its Subsidiaries are subject or
bound, which are (A) not able to be terminated by the Corporation
on not more than 60 days advance notice and which involve total
payments to or by the Corporation of $2,000,000 or more within any
12 month period, or (B) which otherwise involve any of the
following types of contracts (the items in (A) and (B) being
collectively referred to herein as the “Material
Contracts”):
21
all
raw material supply contracts (exclusive of scrap metal supply
contracts) and any other purchase orders, agreements or contracts
for the purchase of any materials or services (including utilities)
involving an amount in excess of $1,000,000;
any
sales, license, service or distribution agreements and contracts,
open purchase orders or similar commitments providing for sales of
products (exclusive of scrap metal products and secondary aluminum
alloys) in an amount in excess of $1,000,000 annually;
all
Leases and all other leases, agreements, contracts and other
instruments affecting the Facilities under which the aggregate
potential payments under any such lease, agreement, contract and
other instrument in any 12 month period are greater than
$2,000,000;
(i)
all employment contracts for employees with annual base pay of
$100,000 or more that are not cancellable by the Corporation or its
Subsidiaries on not more than 60 days notice without liability to
the Corporation or its Subsidiaries, (ii) all Collective Bargaining
Agreements and (iii) any contracts with employees containing
severance obligations in excess of one year’s base salary not
otherwise disclosed in Sections 5.17 or 5.18(a) of the
Disclosure Schedule ;
all
machinery leases, equipment leases and other personal property
leases, (excluding master leases disclosed in Section 5.23(e) of
the Disclosure Schedule ), involving payment obligations in any
12 month period in excess of $2,000,000;
all
material licenses, agreements, contracts and other instruments
relating to the Intellectual Property or Software (other than COTS
Software);
all
agreements and contracts containing “take or pay”
provisions involving consideration in excess of
$200,000;
all
powers of attorney executed on behalf of the Corporation or any of
its Subsidiaries;
all
agreements and contracts for insurance not otherwise disclosed in
Section
