PURCHASE AGREEMENT

Exhibit 2

 

 

PURCHASE AGREEMENT

 

Dated as of November 23, 2004

 

By and Between

 

GLOBAL POWER EQUIPMENT GROUP INC.

 

and

 

WILLIAMS GROUP INTERNATIONAL, LLC

 

 

TABLE OF CONTENTS

 

 

(i)

 

(ii)

 

(iii)

 

(iv)

 

*	Omitted. The Registrant agrees to furnish supplementally a copy of any omitted schedule or similar attachment to the Securities and Exchange Commission upon its request.

 

(i)

PURCHASE AGREEMENT

 

This PURCHASE AGREEMENT (this “ Agreement ”) , dated as of November 23, 2004, is entered into by and between Global Power Equipment Group Inc., a Delaware corporation ( “ Purchaser ” ) and Williams Group International, LLC a Georgia limited liability company ( “ Seller ” and, together with Purchaser, the “ Parties ” ).

 

W I T N E S S E T H :

 

WHEREAS, Seller owns all of the outstanding limited liability company interests (the “ LLC Interests ” ) in each of (i) Williams Specialty Services, LLC, a Georgia limited liability company ( “ Specialty Services ” ), (ii) Williams Plant Services, LLC, a Georgia limited liability company ( “ Plant Services ” ) and (iii) Williams Industrial Services, LLC, a Georgia limited liability company ( “ Industrial Services ” and, collectively with Specialty Services and Plant Services, the “ Companies ” and each a “ Company ” ); and

 

WHEREAS, upon the terms and subject to the conditions contained in this Agreement, Seller desires to sell the LLC Interests to Purchaser and Purchaser desires to purchase the LLC Interests from Seller.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements hereinafter contained, and for other good and valuable consideration the receipt and adequacy of which is hereby acknowledged, the Parties, intending to be legally bound, do hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

§ 1. Definitions.

 

§ 1.1 Defined Terms . When used in this Agreement, the following terms shall have the respective meanings specified therefor below.

 

“ Affiliate ” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person; provided , that, for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise and provided , further , that an Affiliate of any Person shall also include (i) any Person that directly or indirectly owns more than five percent (5%) of any class of capital stock or other equity interest of such Person, (ii) any officer, director, trustee or beneficiary of such Person, (iii) any spouse, parent, sibling or descendant of any Person described in clauses (i) or (ii) above, and (iv) any trust for the benefit of any Person described in clauses (i) through (iii)

 

above or for any spouse, issue or lineal descendant of any Person described in clauses (i) through (iii) above.

 

“ Bid ” shall mean any quotation, bid or proposal by any Company which, if accepted or awarded, would result in a Contract that would constitute a Government Contract.

 

“ Bond ” shall mean any performance collateral, including without limitation, collateral in the form of cashiers checks in lieu of bid bonds, certificates of deposit, letters of credit, license/permit bonds, performance bonds, payment bonds, bid bonds, wage or payroll bonds and prepaid union stamps.

 

“ Books and Records ” shall mean all of the records, systems, controls, data or information of the Companies created since the date of the consummation of the Restructuring and all documents, records, data or information relating to executory Contracts of the Companies.

 

“ Business Day ” shall mean any day, other than a Saturday, Sunday or a day on which banks located in New York, New York shall be authorized or required by law to close.

 

“ Cash ” shall mean all cash on deposit in any bank account disclosed on Schedule 3.26, all cleared checks naming any Company as payee and all other immediately available funds in the possession or control of any Company.

 

“ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time and the regulations promulgated and the rulings issued thereunder. Section references to the Code are to the Code, as in effect on the date of this Agreement.

 

“ Collateral ” shall mean any combination of (i) unconditional, irrevocable standby letters of credit in favor of Seller issued by any national banking institution(s) having a net worth of not less than $500,000,000 and/or (ii) payment bonds in favor of Seller issued by any surety (or sureties) having an A.M. Best Co. financial strength rating of A or better securing the performance by Purchaser of its indemnification obligations pursuant to Section 5.13(b).

 

“ Company Property ” shall mean any real property and improvements owned or leased by any of the Companies.

 

“ Convertible Debt Offering ” shall mean an offering of debt securities of Purchaser that are convertible into Purchaser’s common stock.

 

“ Contract ” shall mean any note, bond, mortgage, indenture, guarantee, license, franchise, agreement, understanding, arrangement, contract, commitment, lease, franchise, agreement or other instrument or obligation (in each case whether written or oral), including all amendments thereto.

 

“ Employee ” shall mean salaried employees of any Company, but shall not mean hourly employees (union or non-union).

 

-2-

“ Environmental Law ” any Law, Order or other requirement of Law, including any principle of common law, relating to the protection of human health or the environment, or to the manufacture, use, transport, treatment, storage, disposal, release or threatened release of petroleum products, asbestos, urea formaldehyde insulation, polychlorinated biphenyls or any substance listed, classified or regulated as hazardous or toxic, or any similar term, under such Environmental Law.

 

“ Equity Purchase Price ” shall mean an amount equal to the Purchase Price (a) minus (i) the amount of the Estimated Indebtedness and (ii) the excess, if any of the Working Capital Target over the Estimated Working Capital and (b) plus (i) the amount of the Estimated Cash, (ii) the excess, if any, of Estimated Working Capital over the Working Capital Target and (iii) the lesser of the Estimated Excluded Liabilities Amount and $3,450,000.

 

“ Escrow Account ” shall mean the account established by the Escrow Agent, pursuant to the Escrow Agreement, for the deposit of the Purchase Price Escrow Amount and the Indemnity Escrow Amount.

 

“ Excluded Liabilities ” shall mean liabilities and obligations for all worker’s compensation, general liability and commercial automobile claims attributable to events occurring prior to the Closing Date, including currently filed claims, pending claims and incurred but not reported claims for which the accident, injury or other event giving rise to the claim occurred prior to the Closing Date.

 

“ GAAP ” shall mean generally accepted accounting principles in the United States of America.

 

“ GAAP Practices ” shall mean generally accepted accounting principles in the United States of America applied on a basis consistent with the past practices of the Companies.

 

“ Government Contract ” shall mean: (i) any Contract between, on the one hand, any Company and, on the other hand (A) any Governmental or Regulatory Authority, (B) any prime contractor to any Governmental or Regulatory Authority in respect of such Contract or (C) any contractor with respect to any Contract described in clause (A) or (B); and (ii) any Contract that to the knowledge of Seller is wholly or partially funded, directly or indirectly, by or through any Governmental Authority.

 

“ Governmental or Regulatory Authority ” shall mean any court, administrative agency or other authority of the United States or any state, municipality or other government or political subdivision thereof exercising any regulatory, taxing, importing or other governmental authority.

 

“ Indebtedness ” of any Person shall mean and include (i) indebtedness for borrowed money or indebtedness issued or incurred in substitution or exchange for indebtedness for borrowed money, (ii) amounts owing as deferred purchase price for property or services, including all seller notes and “earn-out” payments, (iii) indebtedness evidenced by any note, bond, debenture, mortgage or other debt instrument or debt security, (iv) commitments or obligations by which such Person assures a creditor against loss (including contingent reimbursement obligations with respect to letters of credit), (v) indebtedness secured by a Lien

 

-3-

on assets or properties of such Person, (vi) obligations or commitments to repay deposits or other amounts advanced by and owing to third parties, (vii) obligations under any interest rate, currency or other hedging agreement, (viii) that portion of obligations with respect to any capital leases that is properly classified as a liability on a balance sheet in accordance with GAAP (but not any operating leases that become capital leases solely because of the transactions contemplated herein), (ix) any obligation or liability in respect of any “change of control,” “stay-put,” transaction bonus, severance arrangement or any similar obligation that is or will become payable as a result of the transactions contemplated by this Agreement, or (x) guarantees or other contingent liabilities (including so called take-or-pay or keep-well agreements) with respect to any indebtedness, obligation, claim or liability of any other Person of a type described in clauses (i) through (ix) above and (xi) with respect to clauses (i) through (x) above, all accrued interest thereon and any fees, prepayment penalties or “breakage” costs associated with the repayment of any such Indebtedness on the Closing Date. For the avoidance of doubt, Indebtedness of the Companies shall include (x) any Indebtedness of any Company owed to Seller or any of its Affiliates (other than any Company), to the extent not settled at or prior to the Closing pursuant to Section 5.10 and (y) any allowance or liability in respect of uncleared checks. Indebtedness shall not, however, include (i) accounts payable to trade creditors and accrued expenses arising in the ordinary course of business consistent with past practice, (ii) the endorsement of negotiable instruments for collection in the ordinary course of business consistent with past practice or (iii) obligations under Bonds.

 

“ Indemnity Escrow Amount ” means Six Million Five-Hundred Thousand Dollars ($6,500,000.00), which amount is to be deposited by Purchaser with the Escrow Agent in accordance with the terms of this Agreement and held and released pursuant to the terms and subject to the conditions set forth in this Agreement and in the Escrow Agreement.

 

“ Law ” shall mean any statute, law, ordinance, rule or regulation of any Governmental or Regulatory Authority.

 

“ Liens ” shall mean liens, security interests, options, rights of first refusal, claims, easements, mortgages, charges, indentures, deeds of trust, rights of way, restrictions on the use of real property, encroachments, security agreements, or any other encumbrances and other restrictions or limitations on use of real or personal property or irregularities in title thereto.

 

“ Material Adverse Effect ” shall mean (i) when used with respect to the Companies, any effect, change or circumstance that has, or would reasonably be expected to have, a material adverse change in or effect on the business, assets, liabilities, results of operation or condition (financial or otherwise) of the Companies taken as a whole or (ii) when used with respect to Seller, any effect, change or circumstance that materially impedes the ability of Seller to perform its obligations hereunder (including any material delay of such performance); provided , that “Material Adverse Effect”, for purposes of clause (i), shall exclude any effect, change or circumstance that (a) results from or is related to changes or developments generally applicable to the United States economy, including changes in interest rates, (b) is attributable to Seller’s compliance with its obligations under clause (i) through (xxii) of Section 5.1(a), or (c) results from or is related to the occurrence of any military or terrorist activity.

 

-4-

“ Monthly Shared Salary Payment ” shall mean the amount obtained when 4566.92 is multiplied by the quotient obtained when (i) the amount by which twenty four (24) exceeds the number of Shared Salary Payments previously made by Seller to Purchaser pursuant to Section 5.24 is divided by (ii) twenty four (24).

 

“ Offering Amount ” shall mean the aggregate amount, if any, net of underwriting commissions, received by Purchaser from proceeds of the Convertible Debt Offering.

 

“ Order ” shall mean any judgment, order, injunction, decree or writ of any Governmental or Regulatory Authority or any arbitrator.

 

“ Permitted Liens ” shall mean (i) Liens reflected in the Reference Balance Sheet, (ii) Liens consisting of zoning or planning restrictions or regulations, easements, Permits, restrictive covenants, encroachments and other restrictions or limitations on the use of real or personal property or irregularities in, or exceptions to, title thereto which, individually or in the aggregate, do not materially detract from the value of, or materially impair the use of, such property by the Companies as such property is used by the Companies in the ordinary course of business consistent with past practice and (iii) Liens for current taxes, assessments or governmental charges or levies not yet due and payable.

 

“ Person ” shall mean and include an individual, a partnership, a joint venture, a corporation, a limited liability company, a limited liability partnership, a trust, an incorporated organization and a Governmental or Regulatory Authority.

 

“ Purchase Price ” shall mean Sixty-Five Million Dollars ($65,000,000.00).

 

“ Purchase Price Escrow Amount ” means Five Hundred Thousand Dollars ($500,000.00), which amount is to be deposited by Purchaser with the Escrow Agent in accordance with the terms of this Agreement and held and released pursuant to the terms and subject to the conditions set forth in this Agreement and in the Escrow Agreement.

 

“ Purchaser Designees ” shall mean Larry Edwards, John Matheson and Jim Wilson.

 

“ Regulation S-K ” shall mean Regulation S-K promulgated under the Securities Act of 1933, as amended.

 

“ Reference Balance Sheet ” shall mean the unaudited combined balance sheet of the Companies as at March 31, 2004 forming part of the Unaudited Financial Statements.

 

“ Reference Balance Sheet Date ” shall mean March 31, 2004.

 

“ Solvent ” shall mean, with respect to any Person, that (a) the property of such Person, at a present fair saleable valuation, exceeds the sum of its debts (including contingent and unliquidated debts); (b) the present fair saleable value of the property of such Person exceeds the amount that will be required to pay such Person’s probable liability on its existing debts as they become absolute and matured; (c) such Person has reasonably adequate capital to carry on its business; and (d) such Person does not intend or believe it will incur debts beyond its ability

 

-5-

to pay as such debts mature. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become actual or matured liabilities.

 

“ Stored Books and Records ” shall mean all of the records, systems, controls, data or information of the Companies not under the exclusive ownership and direct control of the Companies.

 

“ Subsidiary ” shall mean, with respect to any Person, (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is owned by such Person directly or indirectly through one or more Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person directly or indirectly through one or more Subsidiaries of such Person has more than a 50% equity interest.

 

“ Third Party ” shall mean any Person other than a Party.

 

“ Transaction Documents ” shall mean each of (i) this Agreement, (ii) the Escrow Agreement, (iii) the Transition Services Agreement (ii) the Headquarters Lease and (iv) each other agreement, instrument or document contemplated by any of the foregoing.

 

“ Transaction Expenses ” shall mean all fees, costs, charges, expenses and obligations that are incurred by Seller or the Companies in connection with or relating to the preparation for and consummation of the transactions contemplated by this Agreement, including, without limitation, the fees, costs, charges, expenses and obligations relating to or arising out of (a) the preparation, negotiation and execution of this Agreement and the other agreements and instruments contemplated hereby and the consummation of the transactions contemplated hereby and thereby by the Company, (b) the preparation of the Audited Financial Statements and the other financial statements contemplated by Section 5.4(b) and (c) and all fees and expenses of Smith & Howard and BDO Seidman, LLP in connection therewith and (c) professional services provided by (i) FMI Capital and (ii) Arnall Golden Gregory LLP.

 

“ Working Capital ” shall mean the aggregate current assets of the Companies less the aggregate current liabilities of the Companies, determined in accordance with the GAAP Practices and in the manner set forth on Exhibit A using the account captions set forth on Exhibit A . Current assets shall not include Cash, security deposits posted in favor of any of the Companies or amounts receivable from any employee of Seller or any of the Companies. Current liabilities shall not include the current portion of any long-term Indebtedness of the Companies, any Transaction Expenses, Transfer Taxes or the Excluded Liabilities.

 

“ Working Capital Target ” shall mean $7,500,000.

 

§ 1.2 Additional Defined Terms . In addition to the terms defined in §1.1, the following terms shall have the respective meanings assigned thereto in the sections indicated below.

 

-6-

 

-7-

§ 1.3 Construction . In this Agreement, unless the context otherwise requires:

 

(a) any reference in this Agreement to “writing” or comparable expressions includes a reference to facsimile transmission or comparable means of communication;

 

(b) words expressed in the singular number shall include the plural and vice versa, words expressed in the masculine shall include the feminine and neuter gender and vice versa;

 

(c) references to Articles, Sections, Exhibits, Schedules and Recitals are references to articles, sections, exhibits, schedules and recitals of this Agreement;

 

(d) reference to “day” or “days” are to calendar days;

 

(e) this “Agreement” or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented; and

 

(f) “include,” “includes,” and “including” are deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of similar import.

 

§ 1.4 Schedules and Exhibits . The Schedules and Exhibits to this Agreement are incorporated into and form an integral part of this Agreement; provided , however , that no representation or warranty contained in this Agreement shall be deemed qualified or modified by any disclosure in any Schedule hereto, and no such disclosure shall be deemed an exception to any representation or warranty contained herein, unless such disclosure is made in a Schedule hereto that specifically corresponds to the numbered Section of this Agreement in which such representation or warranty is contained, and such disclosure shall not be deemed an exception to or qualification of any other representation or warranty contained herein, whether or not the applicability of such disclosure to such other representation or warranty is reasonably apparent or otherwise. If an Exhibit is a form of agreement, such agreement, when executed and delivered by the parties thereto, shall constitute a document independent of this Agreement.

 

§ 1.5 Knowledge . Where any representation or warranty contained in this Agreement is expressly qualified by reference to the knowledge of Seller, “knowledge” means the actual knowledge of the following Persons: Virgil Williams, Jim Williams, Luther “Dan” Daniels, Doug Page, Dave Harley, Tina Robinson, Joe Mason or Dave Baxter.

 

ARTICLE II

 

SALE OF LLC INTERESTS

 

§ 2.1 Sale of LLC Interests; . On the terms, and subject to the conditions, set forth in this Agreement, Seller agrees to sell, assign, transfer and deliver the LLC Interests to Purchaser at the Closing, and Purchaser agrees to purchase the LLC Interests from Seller at the Closing. The certificates representing the LLC Interests shall be duly endorsed in blank, or accompanied by either membership interest powers duly executed in blank by Seller or such other instruments of transfer as are reasonably acceptable to Purchaser, in each case with all

 

-8-

necessary transfer tax and other revenue stamps affixed and canceled. Seller agrees to cure any deficiencies with respect to the endorsement of the certificates representing the LLC Interests or with respect to the membership interest power accompanying any such certificates. Seller agrees to take such action as is reasonably necessary to reflect the sale, assignment, transfer and delivery of the LLC Interests on the books and records of the Companies and to provide to Purchaser such evidence of the same as Purchaser shall reasonably request.

 

§ 2.2 Determination and Payment of Closing Payment . (a) At least two (2) Business Days but not more than five (5) Business Days prior to the Closing Date, Seller shall deliver to Purchaser (i) a good faith estimate of the combined Working Capital of the Companies (the “ Estimated Working Capital ” ), (ii) a good faith estimate of the aggregate amount of the liabilities that would be required to be set forth as current liabilities on a combined balance sheet of the Companies with respect to the Excluded Liabilities (the “ Estimated Excluded Liabilities Amount ” ), (iii) a good faith estimate of the aggregate Indebtedness of the Companies (the “ Estimated Indebtedness ” ) and (iv) a good faith estimate of the aggregate Cash of the Companies (the “ Estimated Cash ” ), in each case as of the Closing Date, which shall quantify in reasonable detail the items constituting such Working Capital, Excluded Liabilities, Indebtedness and Cash, and in the case of (A) Excluded Liabilities (with respect to the determination of the portion of the aggregate amount of Excluded Liabilities that are current liabilities), Working Capital, Indebtedness and Cash, prepared in accordance with the GAAP Practices and (B) in the case of the Estimated Excluded Liabilities Amount, prepared (without prejudice to the determination of such amount by the Independent Actuary pursuant to Section 2.3(d)) in accordance with the GAAP Practices.

 

(b) In full consideration for the sale and transfer of the LLC Interests to Purchaser, Purchaser shall:

 

(i) pay, at the Closing, subject to adjustment as provided in Section 2.3, (A) to Seller, an amount equal to the Equity Purchase Price minus the Purchase Price Escrow Amount and the Indemnity Escrow Amount, by wire transfer of immediately available funds to an account of Seller designated in writing to Purchaser not later than two (2) Business Days prior to the Closing Date, and (B) to the Escrow Agent, subject to the terms and conditions of the Escrow Agreement, an amount equal to the Purchase Price Escrow Amount and the Indemnity Escrow Amount, by wire transfer of immediately available funds to the Escrow Account; and

 

(ii) pay the amounts (the “ Deferred Purchase Price Payments ” ), if any, determined in the manner and subject to the terms and conditions set forth on Exhibit B .

 

§ 2.3 Purchase Price Adjustment . (a) Promptly after the Closing Date, but in any event not later than sixty (60) days following the Closing Date, Purchaser shall prepare and deliver to Seller (i) a statement setting forth a computation as of the close of business on the Closing Date of the aggregate amount of the liabilities that would be required to be set forth as current liabilities on a combined balance sheet of the Companies with respect to the Excluded Liabilities (the “ Excluded Liabilities Statement ” ) and (ii) a combined balance sheet of the

 

-9-

Companies as of the close of business on the Closing Date (the “ Closing Balance Sheet ” ), and statements derived from the Closing Balance Sheet setting forth a computation as of the close of business on the Closing Date of (A) the combined Working Capital of the Companies (the “ Working Capital Statement ” ), (B) the aggregate Indebtedness of the Companies (the “ Indebtedness Statement ” ) and (C) the aggregate Cash of the Companies (the “ Cash Statement ” and, together with the Working Capital Statement and the Indebtedness Statement, the “ Closing Statements ” ). The Excluded Liabilities Statement (with respect to the determination of the portion of the aggregate amount of Excluded Liabilities that are current liabilities), the Closing Balance Sheet and the Closing Statements shall be prepared in accordance with the GAAP Practices and the Excluded Liabilities Statement (other than with respect to the determination of the portion of the aggregate amount of Excluded Liabilities that are current liabilities) shall be prepared in accordance with standard actuarial methods.

 

(b) Upon delivery of the Excluded Liabilities Statement to Seller, Purchaser shall provide Seller and its representatives with reasonable access during business hours to the books and records of the Companies in order to allow Seller and its representatives to verify the accuracy of the Excluded Liabilities Statement. Seller shall complete its review of the Excluded Liabilities Statement within thirty (30) days of the delivery of the Excluded Liabilities Statement. Promptly after completion of its review, Seller shall either inform Purchaser in writing that the Excluded Liabilities Statement is acceptable or object thereto in writing, setting forth a specific description of each of Seller’s objections. If Seller so objects and the Parties do not resolve such objections on a mutually agreeable basis within thirty (30) calendar days after Purchaser’s receipt of Seller’s objection, then the aggregate amount of the liabilities (both current and long-term) that would be required to be set forth on a combined balance sheet of the Companies with respect to the Excluded Liabilities shall be determined within an additional thirty (30) calendar days by an actuary mutually agreed upon by the Parties or, in the event that the Parties cannot reach agreement on the selection of an actuary by the thirty fifth (35 ^th ) calendar day after Purchaser’s receipt of Seller’s objection, by an actuary of national standing selected by Deloitte Touche Tohmatsu (Atlanta office), other than Deloitte Touche Tohmatsu (the “ Independent Actuary ” ). In determining the aggregate amount of the liabilities (both current and long-term) that would be required to be set forth on a combined balance sheet of the Companies with respect to the Excluded Liabilities, the Independent Actuary shall apply standard actuarial methods. The amount that is determined by either (i) any mutual agreement of the Parties with respect to the aggregate amount of the liabilities (both current and long-term) that would be required to be set forth on a combined balance sheet of the Companies with respect to the Excluded Liabilities or (ii) the decision of the Independent Actuary is referred to as the “ Total Excluded Liabilities Amount ” .

 

(c) Upon delivery of the Closing Balance Sheet and the Closing Statements to Seller, Purchaser shall provide Seller and its representatives with reasonable access during business hours to the books and records of the Companies in order to allow Seller and its representatives to verify the accuracy of the Closing Balance Sheet and the Closing Statements. Seller shall complete its review of the Closing Balance Sheet and the Closing Statements within thirty (30) days of the delivery of the Closing Balance Sheet and the Closing Statements. Promptly after completion of its review, Seller shall either inform Purchaser in writing that the Closing Balance Sheet and the Closing Statements are acceptable or object thereto in writing, setting forth a specific description of each of Seller’s objections. If Seller so objects and the

 

-10-

Parties do not resolve such objections on a mutually agreeable basis within thirty (30) calendar days after Purchaser’s receipt of Seller’s objection, (i) the remaining disputed items with respect to the Closing Balance Sheet and the Closing Statements shall be resolved within an additional thirty (30) calendar days by Deloitte Touche Tohmatsu (Atlanta office) or another accounting firm mutually agreed upon by the Parties (the “ Arbitrator ” ). In resolving any disputed item with respect to the Closing Balance Sheet or the Closing Statements, the Arbitrator (w) shall be bound by the provisions of this Section 2.3, (x) may not assign a value to any item greater than the greatest value claimed for such item or less than the smallest value claimed for such item by either Party, (y) shall apply the GAAP Practices and (z) shall limit its decision to such items as are in dispute. Upon the date (the “ Working Capital Determination Date ” ) of the first to occur of (i) any mutual agreement of the Parties with respect to the Closing Balance Sheet and the Closing Statements, (ii) a decision of the Arbitrator or (iii) the failure of Seller to deliver to Purchaser, within the first 30-day period referred to above, an objection to the Closing Balance Sheet or the Closing Statements prepared by Purchaser, the Closing Balance Sheet and the Closing Statements as so adjusted by any mutual agreement of the Parties or decision of the Arbitrator, as applicable, shall become conclusive and binding on the Parties and shall constitute an arbitral award that is final and non-appealable and upon which a judgment may be entered by any court of competent jurisdiction. The combined Working Capital of the Companies as finally determined in accordance with this Section 2.3 shall be referred to as the “ Closing Working Capital ” ; the aggregate Indebtedness of the Companies as finally determined in accordance with this Section 2.3 shall be referred to as “ Closing Indebtedness ” ; and the aggregate Cash of the Companies as finally determined in accordance with this Section 2.3(c) shall be referred to as “ Closing Cash ” .

 

(d) If Seller delivered a written objection to Purchaser with respect to the Excluded Liabilities Statement, then upon determination of the Total Excluded Liabilities Amount pursuant to Section 2.3(b), unless the Parties have agreed on the portion of the Total Excluded Liabilities Amount that would be required to be reflected as current liabilities on a combined balance sheet of the Companies within fifteen (15) Business Days of the determination of the Total Excluded Liabilities, determination of the portion of the Total Excluded Liabilities that would be required to be reflected as current liabilities on a combined balance sheet of the Companies, shall be submitted by the Parties to the Arbitrator, who shall make such determination within an additional fifteen (15) calendar days. Upon the date of the first (the “ Excluded Liabilities Determination Date ” ) to occur of (i) any mutual agreement of the Parties with respect to the portion of the Total Excluded Liabilities that would be required to be reflected as current liabilities on a combined balance sheet of the Companies or (ii) a decision of the Arbitrator, the portion of the Total Excluded Liabilities that would be required to be reflected as current liabilities on a combined balance sheet of the Companies as so determined by any mutual agreement of the Parties or determination of the Arbitrator, as applicable, shall become conclusive and binding on the Parties and shall constitute an arbitral award that is final and non-appealable and upon which a judgment may be entered by any court of competent jurisdiction. The portion of the Total Excluded Liabilities that would be required to be reflected as current liabilities on a combined balance sheet of the Companies, as finally determined in accordance with this Section 2.3(d) shall be referred to as “ Closing Excluded Liabilities ” ;

 

-11-

(e) The following amounts shall be payable in accordance with the following terms within (i) two (2) Business Days of the later of the Working Capital Determination Date and the Excluded Liabilities Determination Date:

 

(i) if the sum of Closing Cash plus Closing Working Capital plus the lesser of (i) Closing Excluded Liabilities and (ii) $3,450,000 minus Closing Indebtedness exceeds the sum of Estimated Cash plus Estimated Working Capital plus the lesser of (i) the Estimated Excluded Liabilities Amount and (ii) $3,450,000 minus Estimated Indebtedness , Purchaser shall pay to Seller, by wire transfer of immediately available funds to an account designated in writing by Seller on or before the Final Determination Date, an amount equal to the amount of such excess and the Parties shall cause the Escrow Agent to immediately release the Purchase Price Escrow Amount to Seller; or

 

(ii) if the sum of Estimated Cash plus Estimated Working Capital plus the lesser of (i) the Estimated Excluded Liabilities Amount and (ii) $3,450,000 minus Estimated Indebtedness exceeds the sum of Closing Cash plus Closing Working Capital plus the lesser of (i) Closing Excluded Liabilities and (ii) $3,450,000 minus Closing Indebtedness, the Parties shall cause the Escrow Agent to immediately release to Purchaser from the Purchase Price Escrow Amount held in the Escrow Account an amount equal to the amount of such excess and to immediately release to Seller the balance, if any, of the Purchase Price Escrow Amount; provided , however , that if the Purchase Price Escrow Amount is less than the amount of such excess, Seller shall pay the amount by which such excess exceeds the Purchase Price Escrow Amount to Purchaser, by wire transfer of immediately available funds to an account designated in writing by Purchaser on or before the Final Determination Date.

 

(f) The fees, costs and expenses of the Arbitrator and the Independent Actuary shall be shared equally by the Parties.

 

§ 2.4 Closing . Unless this Agreement shall have been terminated and the transactions contemplated hereby shall have been abandoned pursuant to Article X, and subject to the satisfaction or waiver of all of the conditions set forth in Articles VI and VII, the closing of the transactions described in Section 2.1 (the “ Closing ” ) shall take place at 10:00 A.M. at the offices of Arnall Golden Gregory LLP, 171 17 ^th Street Suite 2100, Atlanta, Georgia 30363, as soon as practicable (but in any event within five (5) Business Days) after the later to occur of April 4, 2005 and the last of the conditions set forth in Articles VI and VII is satisfied or waived, other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions, or at such other date, time or place as the Parties shall agree in writing. The date on which the Closing occurs is referred to herein as the “ Closing Date ” .

 

-12-

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

§ 3. Representations and Warranties of Seller . Seller represents, warrants and agrees as follows:

 

§ 3.1 Ownership of LLC Interests; Existence, Good Standing and Capitalization of Seller . Seller is the lawful owner, beneficially and of record, of all of the LLC Interests, free and clear of all Liens, except for Liens described on Schedule 3.1(a). Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Georgia. The actions taken pursuant to Section 2.1 of this Agreement will transfer to Purchaser good and valid title to all of the outstanding limited liability company interests in each of the Companies, free and clear of all Liens.

 

§ 3.2 Authority and Enforceability . Seller has the limited liability company power and authority to execute and deliver this Agreement and the other Transaction Documents to be executed and delivered by Seller. Seller has the limited liability company power and authority to consummate the transactions contemplated hereby and by the other Transaction Documents to be executed and delivered by Seller, including the sale, assignment, transfer and conveyance of the LLC Interests pursuant to this Agreement and the Existing LLC Agreements. The execution, delivery and performance of this Agreement, and all other Transaction Documents to be executed and delivered by Seller, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by Seller and no other action on the part of Seller is necessary to authorize the execution, delivery and performance by Seller of this Agreement and such other Transaction Documents and the consummation of the transactions contemplated hereby and thereby. This Agreement and all other Transaction Documents to be executed and delivered by Seller, when delivered in accordance with the terms hereof, assuming the due execution and delivery of this Agreement and each such other Transaction Document by the other parties hereto and thereto, shall have been duly executed and delivered by Seller and shall be valid and binding obligations of Seller, enforceable against Seller in accordance with their terms, except to the extent that their enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and to general equitable principles.

 

§ 3.3 Consents and Approvals; No Violations . (a) Except as set forth on Schedule 3.3(a), the execution and delivery of this Agreement by Seller does not and the execution and delivery by Seller of the other Transaction Documents to be executed and delivered by Seller shall not and the consummation by Seller of the transactions contemplated hereby and thereby shall not result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, payment or acceleration) under, or result in the creation of any Lien on any of the properties or assets of Seller or any of the Companies under: (i) any provision of the certificate of formation or limited liability company agreement of Seller or the certificate of formation or Existing LLC Agreement of any of the Companies; (ii) subject to obtaining and making any of the approvals, consents, notices and filings referred to in paragraph (b) below, any Law or Order applicable to Seller or any of the Companies or by which any of their respective properties or assets may be bound; (iii) any of the terms, conditions or provisions of any Contract to which Seller or any of the Companies is a party, or by which they or any of their respective properties or assets are bound, except, in each case under subsection (a)(ii) and (a)(iii) above, where such violation, breach, conflict, default or Lien does not have a Material Adverse Effect.

 

(b) Except for such filings and approvals as may be required pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the rules and

 

-13-

regulations thereunder (the “ HSR Act ” ) and as set forth on Schedule 3.3(b), no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority or other third party is necessary or required under any of the terms, conditions or provisions of any Law or Order (i) applicable to Seller or any of the Companies or (ii) by which any of Seller’s or the Companies’ properties or assets may be bound, for the execution and delivery of this Agreement by Seller, the performance by Seller of its obligations hereunder or the consummation of the transactions contemplated hereby.

 

§ 3.4 Existence and Good Standing of the Companies . Each Company is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Georgia. Each Company has all requisite limited liability company power and authority to own its property and to carry on its business as now being conducted. Each Company is duly qualified to do business and is in good standing in each jurisdiction in which the character or location of the properties owned, leased or operated by such Company or the nature of the business conducted by such Company makes such qualification necessary, except for such jurisdictions where the failure to be so qualified or licensed and in good standing does not have a Material Adverse Effect with respect to the Companies.

 

§ 3.5 Capitalization of the Companies; Restructurings . (a) Prior to the date hereof, Seller has delivered to Purchaser true and complete copies of the limited liability company agreements (the “ Existing LLC Agreements ” ) and certificates of formation of each Company, in each case together with any amendments thereto, as in effect as of the date hereof. None of the Companies is in violation or breach of any term of its Existing LLC Agreement or certificate of formation, and no amendments to its Existing LLC Agreement or certificate of formation are pending (except as specifically contemplated by this Agreement). Seller is the sole member of each Company and the capitalization of each Company (with respect to limited liability company interest ownership percentages, classes and capital accounts) is as set forth on Schedule 3.5(a) to this Agreement. There are no outstanding or authorized options, warrants, rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities, or other commitments contingent or otherwise, relating to the limited liability company interests of, or other equity or voting interest in, any Company, pursuant to which Seller or any Company may become obligated to issue, deliver or sell or cause to be issued, delivered or sold, limited liability company interests of or other equity or voting interest in, any Company or any securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire, any limited liability company interests of or other equity or voting interest in, any Company. Neither the members of any Company nor any Company has any authorized or outstanding bonds, debentures, notes or other Indebtedness the holders of which have the right to vote (or convertible into, exchangeable for, or evidencing the right to subscribe for or acquire securities having the right to vote) with Seller or any Company on any matter. There are no Contracts to which Seller or any Company is a party or by which they are bound to (i) repurchase, redeem or otherwise acquire any limited liability company interests of, or other equity or voting interest in, any Company or any other Person or (ii) vote or dispose of any limited liability company interests of, or other equity or voting interest in, any Company. There are no irrevocable proxies and no voting agreements with respect to any membership interests of, or other equity or voting interest in, any Company.

 

-14-

(b) Seller has delivered to Purchaser true and complete copies of all material agreements and documents relating to each of the following transactions (such transactions being collectively referred to herein as the “ Restructuring ” ): (i) the formation of Plant Services and Specialty Services, (ii) the conversion of Industrial Services from a Georgia corporation into a Georgia limited liability company, (iii) the conveyance by Williams Services Group, Inc., a Georgia corporation and a wholly owned subsidiary of Seller (the “ Transferor ” ) to each of Plant Services and Specialty Services of the “Assets” (as such term is defined in the applicable Bill of Sale, each dated as of January 1, 2004, between Transferor and the applicable Company) and (iv) the sale and transfer by Transferor to Seller of all of the issued and outstanding limited liability company interests in each of Plant Services and Specialty Services. The consummation of the Restructuring did not result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, payment or acceleration) under, or result in the creation of any Lien on any of the Assets under: (1) any provision of the organizational or operating documents of Seller, Transferor or any Company, (2) any Law or Order applicable to Seller, Transferor or any Company or by which any of their assets are bound or (3) any of the terms, conditions or provisions of any Contract to which Seller, Transferor or any Company is or was a party, or by which they or any of their respective properties or assets are bound, except, in each case under subsection (2) and (3) above, where such violation, breach, conflict, default or Lien does not have a Material Adverse Effect.

 

(c) The Restructuring was not entered into by any of Seller, Transferor or any Company with the intent to hinder, delay or defraud creditors of any of them. Immediately after giving effect to the Restructuring each of Seller, Transferor and each Company was Solvent.

 

§ 3.6 Subsidiaries and Investments . (a) Except as set forth on Schedule 3.6(a) attached hereto, none of the Companies owns, directly or indirectly, any capital stock of, or other equity, ownership, membership, proprietary or voting interest in, any Person.

 

(b) Except as set forth on Schedule 3.6(b), there are no restrictions of any kind which prevent or restrict the payment of dividends or other distributions by any of the Companies other than those imposed by the Laws of general applicability of their respective jurisdictions of organization.

 

§ 3.7 Financial Statements . (a) Prior to the date hereof, Seller has delivered to Purchaser (i) an unaudited combined balance sheet of the Companies as at March 31, 2004 and the related unaudited combined statement of income for the fiscal year then ended (the “ Unaudited Financial Statements ” ) and (ii) unaudited combined summary information about the Companies for the three months ended June 30, 2004 and for the twelve months ended December 31, 2003.

 

(b) The Unaudited Financial Statements have been, and the Audited Financial Statements (when delivered to Purchaser pursuant to Section 5.4(b)) shall be, prepared in conformity with the books and records of the Companies and in accordance with the GAAP Practices, subject in the case of the Unaudited Financial Statements, to any adjustment to overhead (including any accrual for workers’ compensation obligations, general liability and

 

-15-

commercial automobile claims) allocated by Seller to the Companies that may be required to comply with the requirements of Regulation S-K.

 

(c) The Unaudited Financial Statements do, and the Audited Financial Statements (when delivered to Purchaser pursuant to Section 5.4(b)) shall, fairly present in all material respects the financial condition of the Companies as at the dates thereof and the results of operations and changes in financial position of the Companies for the periods indicated therein, subject, in the case of the Unaudited Financial Statements, to any adjustment to overhead (including any accrual for workers’ compensation obligations, general liability and commercial automobile claims) allocated by Seller to the Companies that may be required to comply with the requirements of Regulation S-K.

 

§ 3.8 Liabilities . Except as set forth on Schedule 3.8 attached hereto, none of the Companies has any claims, obligations or liabilities, whether absolute, accrued, contingent or otherwise, except for (i) claims, obligations, liabilities or Indebtedness set forth in the Reference Balance Sheet or specifically disclosed in the footnotes thereto, (ii) claims, obligations, liabilities or Indebtedness (including, without limitation, accounts payable to trade creditors and accrued expenses) incurred subsequent to the date of the Reference Balance Sheet in the ordinary course of business consistent (in amount and kind) with past practice and that, individually and in the aggregate, are not material and adverse and (iii) liabilities not required to be accrued for or disclosed by GAAP. None of the Companies is a party to any “off balance sheet arrangements” as such term is defined in Item 303(a)(4)(ii) of Regulation S-K.

 

§ 3.9 Books and Records . (a) The respective minute books of the Companies, and of Seller with respect to the Companies, copies of each of which have been delivered to Purchaser and its representatives, contain materially accurate records of all meetings of, and limited liability company action taken by, the Companies (including action taken by written consent of the member(s) thereof and Seller (including action taken by written consent of the members thereof) with respect to the Companies, and have been prepared and maintained in accordance with applicable accounting requirements and Law. At the Closing, all of the Books and Records shall be under the exclusive ownership and direct control of the Companies or Purchaser.

 

(b) Each Company and Seller (with respect to the Companies or their predecessors) has at all times during the previous three (3) years maintained books and records which accurately reflect all its material transactions in reasonable detail, and has at all times followed Seller’s policy and procedures manual and applied the GAAP Practices.

 

§ 3.10 Title to Personal Properties .

 

(a) Except as set forth on Schedule 3.10(a), the Companies have good title to or, in the case of leased assets, a valid leasehold interest in, free and clear of all Liens, except for Permitted Liens, all of the tangible and intangible personal property and assets reflected in the Reference Balance Sheet or thereafter acquired, except for properties and assets disposed of in the ordinary course of business, consistent with past practice, since the date of the Reference Balance Sheet. Except in respect of the services to be provided pursuant to the Transition Services Agreement and except as set forth on Schedule 3.10(a), the Companies own or have the

 

-16-

exclusive right to use all of the tangible personal properties and assets necessary for the conduct of their business as currently conducted. All of the tangible personal property used in the business of the Companies is, to the knowledge of Seller, in good operating condition and repair, ordinary wear and tear excepted and except for property under repair in the ordinary course of business consistent with past practice and, in the aggregate, is adequate and suitable for the purposes for which it is presently being used.

 

(b) Schedule 3.10(b) sets forth an accurate and complete list of each lease pursuant to which Seller has a leasehold interest in the tangible personal properties and assets set forth on Schedule 3.10(a).

 

§ 3.11 Owned Real Property . None of the Companies owns any real property.

 

§ 3.12 Leased Real Property . Except as set forth on Schedule 3.12, none of the Companies is a party to any lease or sublease of real property other than those which are either month-to-month or may be cancelled by Seller or the Company on less than 90 days notice without penalty.

 

§ 3.13 Material Contracts . (a) Schedule 3.13(a) sets forth an accurate and complete list of the following described types of Contracts to which any of the Companies is a party or by which any of them are bound (each a “ Material Contract ” and collectively, “ Material Contracts ” ):

 

(i) all Contracts which contain restrictions with respect to payment of dividends or any other distribution in respect of the LLC Interests or other equity interests of the Companies;

 

(ii) all Contracts relating to capital expenditures or other purchases of material, supplies, equipment or other assets or properties (other than purchase orders for inventory or supplies in the ordinary course of business consistent with past practice) in excess of $150,000 individually, or $500,000 in the aggregate;

 

(iii) all Contracts involving a loan (other than accounts receivable from trade debtors in the ordinary course of business consistent with past practice) or advance to (other than travel and entertainment allowances to the employees of any of the Companies extended in the ordinary course of business consistent with past practice), or investment in, any Person in each case in excess of $5,000 or any Contract relating to the making of any such loan, advance or investment;

 

(iv) all Contracts involving Indebtedness of any of the Companies (other than loan documentation evidencing Seller’s credit facility with Bank of America, N.A.);

 

(v) all Contracts (including so called take-or-pay or keep-well agreements) under which any Person (other than any Company) has directly or indirectly guaranteed Indebtedness of any Company;

 

-17-

(vi) all Contracts granting or evidencing a Lien on any properties or assets of any of the Companies in each case securing an obligation greater than $25,000, other than (A) Permitted Liens or (B) those relating to Seller’s credit facility with Bank of America, N.A.;

 

(vii) any management service, consulting, financial advisory or any other similar type Contract and any Contracts with any investment or commercial bank except (A) in the case of consulting agreements and management service agreements only, those agreements that do not by their terms require payments in excess of $5,000 individually, or $150,000 in the aggregate and (B) in the case of Contracts with commercial banks, those Contracts relating to Seller’s credit facility with Bank of America, N.A.;

 

(viii) all Contracts limiting the ability of any of the Companies to engage in any line of business or to compete with any Person;

 

(ix) all Contracts which are not cancelable without penalty on thirty (30) days or less notice (other than this Agreement and any agreement or instrument entered into pursuant to this Agreement) with (A) Seller, any other Affiliate of any Company or any Affiliate of Seller (other than any Company) or (B) any current or former officer or director of any Company (other than Contracts set forth on Schedule 3.25);

 

(x) all Contracts (including letters of intent), other than any relating to the transactions contemplated hereby, involving the future disposition or acquisition of material assets or properties, or any merger, consolidation or similar business combination transaction, whether or not enforceable;

 

(xi) all Contracts involving any joint venture, license of Intellectual Property, partnership, strategic alliance, shareholders’ agreement, co-marketing, co-promotion, co-packaging, joint development or similar arrangement except, in the case of licenses of Intellectual Property and co-packaging agreements only, those agreements that do not by their terms involve an annual payment in excess of $50,000;

 

(xii) all Contracts involving any resolution or settlement of any actual or threatened material litigation, arbitration, claim or other dispute, except for workers compensation claim settlements, settlements in respect of which no action remains to be taken and no payment is due and resolutions and settlements involving in the aggregate less than $150,000;

 

(xiii) all Contracts, other than any relating to the transactions contemplated hereby, involving a confidentiality, standstill or similar arrangement;

 

(xiv) all Contracts involving leases or subleases of personal property to which any Company is a party (as lessee or lessor) and involving an annual base rental payment in excess of $150,000 unless month-to-month or cancelable on less than ninety (90) days notice by a Company without penalty;

 

(xv) notwithstanding anything contained in any other clause of this Section 3.13(a), all Contracts relating to projects for customers, as follows: (A) in respect of cost plus contracts, those with anticipated annual revenues in excess of $4,000,000; (B) in respect of lump

 

-18-

sum contracts, those with anticipated revenues in excess of $1,000,000; and (C) in respect of fixed unit price contracts, those with anticipated revenues in excess of $1,000,000; or

 

(xvi) all other Contracts that involve $150,000 or more and which are not cancelable by the applicable Company without penalty on thirty (30) days or less notice; provided, however, that no Contract excluded from the definition of “Material Contract” by any other clause in this Section 3.13(a) shall be included in the definition of “Material Contract” by virtue of this clause (xvi).

 

(b) Each Material Contract set forth on Schedule 3.13(a) (or required to be set forth on Schedule 3.13(a)) is in full force and effect and there exists no (i) material default or material event of default by any of the Companies or, to the knowledge of Seller, any other party to any such Material Contract or (ii) event, occurrence, condition or act (including the consummation of the transactions contemplated hereby) which, with the giving of notice, the lapse of time or the happening of any other event or condition, would become a material default or material event of default by any of the Companies or, to the knowledge of Seller, any other party thereto. None of the Companies has violated any of the material terms or conditions of any Material Contract set forth on Schedule 3.13(a) (or required to be set forth on Schedule 3.13(a)) and, to the knowledge of Seller all of the covenants to be performed by any other party thereto have been fully performed in all material respects. Except as described on Schedule 3.13(a), Seller has delivered to Purchaser true and complete copies, including all amendments, of each Material Contract set forth on Schedule 3.13(a).

 

§ 3.14 Litigation . Except as set forth on Schedule 3.14, there is no action, suit, proceeding at law or in equity, arbitration or administrative or other proceeding by (or to the knowledge of Seller any investigation by) any Governmental or Regulatory Authority or any other Person, pending or, to the knowledge of Seller, threatened, against or affecting any of the Companies, or any of their properties, assets or rights , other than any such action, suit, proceeding, arbitration or administrative or other proceeding which, individually or in the aggregate, does not have a Material Adverse Effect with respect to the Companies. None of the Companies is subject to any Order other than any such Order which, individually or in the aggregate, does not have a Material Adverse Effect with respect to the Companies.

 

§ 3.15 Taxes .

 

(a) Tax Returns . Seller and the Companies have timely filed or caused to be timely filed with the appropriate taxing authorities all material tax returns, statements, forms and reports (including, elections, declarations, disclosures, schedules, estimates and informational tax returns) for Taxes ( “ Returns ” ) that are required to be filed by, or with respect to, the income, operations or property of the Companies on or prior to the Closing Date. The Returns have accurately reflected and shall accurately reflect all material liability for Taxes of, or with respect to, the income, operations or property of the Companies for the periods covered thereby.

 

(b) Payment of Taxes . All material Taxes and material Tax liabilities with respect to the Companies for all taxable years or periods that end on or before the Closing Date and, with respect to any taxable year or period beginning on or before and ending after the Closing Date, the portion of such taxable year or period ending on and including the Closing

 

-19-

Date ( “ Pre-Closing Periods ” ) have been timely paid in full or accrued in accordance with the GAAP Practices on the Reference Balance Sheet, or, for periods or portions thereof after the date of the Reference Balance Sheet, on the books and records of the Companies which books and records have been made available to Purchaser.

 

(c) Other Tax Matters . (i) Except as set forth on Schedule 3.15(c)(i), since January 1, 2001, (A) none of Seller or the Companies has been the subject of an audit or other examination of Taxes by the tax authorities of any nation, state or locality and there is currently no such audit pending or, to the knowledge of Seller, contemplated and (B) none of Seller or the Companies has received any written notices of adjustment or requests for examination from any taxing authority.

 

(ii) Except as set forth on Schedule 3.15(c)(ii), none of Seller or the Companies has, as of the Closing Date, (A) entered into an agreement or waiver or requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of Taxes of, or with respect to, any of the Companies or (B) is presently contesting the Tax liability of, or with respect to, any of the Companies before any court, tribunal or agency.

 

(iii) All material Taxes which any of the Companies are (or were) required by law to withhold or collect in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party have been duly withheld or collected, and have been timely paid over to the proper authorities to the extent due and payable.

 

(iv) Since January 1, 2001, no written claim has been made by any taxing authority in a jurisdiction where Seller, with respect to the income, operations or property of the Companies, or any of the Companies, does not file Returns that Seller with respect to the income, operations or property of the Companies or any of the Companies, as the case may be, is or may by subject to taxation by that jurisdiction.

 

(v) There will be as of the Closing no tax sharing, allocation, indemnification or similar agreements in effect as between any Company or any predecessor or Affiliate thereof and any other Person under which Purchaser or the Companies could be liable for any Taxes or other claims of such Person from and after the Closing Date.

 

(vi) Seller is not a “foreign person” within the meaning of Section 1445 of the Code.

 

(vii) There are no Liens or security interests on any of the assets of any of the Companies that arose in connection with any failure (or alleged failure) to pay any Taxes.

 

(viii) Each of the Companies is treated as a disregarded entity for U.S. federal income tax purposes.

 

(d) Taxes Defined . For purposes of this Agreement, “ Taxes ” shall mean all taxes, assessments, charges, duties, fees, levies or other governmental charges, including, without limitation, all U.S. and non-U.S. federal, state, local and other income, franchise, profits, capital gains, capital stock, transfer, sales, use, value-added, occupation, property, excise, severance, windfall profits, stamp, license, payroll, social security, withholding and other taxes,

 

-20-

assessments, charges, duties, fees, levies or other governmental charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Return), all estimated taxes, deficiency assessments, additions to tax, penalties and interest and shall include any liability for such amounts as a result either of being a member of a combined, consolidated, unitary or affiliated group or of a contractual obligation to indemnify any Person or other entity.

 

§ 3.16 Insurance . Set forth on Schedule 3.16 is an accurate and complete list of each insurance policy which covers any of the Companies or their businesses, properties, assets or employees (including self-insurance, but excluding Employee Benefit Plans). Such policies are in full force and effect, all premiums thereon have been paid, and the Companies are otherwise in compliance in all material respects with the terms and provisions of such policies. None of the Companies is in material default under any of the insurance policies set forth on Schedule 3.16 (or required to be set forth on Schedule 3.16) and to the knowledge of Seller there exists no event, occurrence, condition or act (including the purchase of the LLC Interests hereunder) which, with the giving of notice, the lapse of time or the happening of any other event or condition, would become a material default thereunder. Except as set forth on Schedule 3.16, neither Seller nor any of the Companies has received any written notice of cancellation or non-renewal of any such policy or arrangement nor has the termination of any such policies or arrangements been, to the knowledge of Seller, threatened. Schedule 3.16 also sets forth a list of all pending insurable claims and the claims history for each Company during the past three (3) years (including with respect to insurance obtained but not currently maintained).

 

§ 3.17 Intellectual Property .

 

(a) Except as set forth on Schedule 3.17(a), the Companies own and/or have the right to use all foreign and domestic patents, trademarks, service marks, trade names, copyrights, internet domain names, uniform resource locators and corresponding internet site, trade secrets and proprietary information not otherwise listed above, including, without limitation, unpatented inventions, invention disclosures, moral and economic rights of authors and inventors (however denominated), confidential information, technical data, customer lists, corporate and business names, trade names, trade dress, brand names, know-how, show-how, mask works, formulae, methods (whether or not patentable), designs, processes, procedures, technology, source codes, object codes, computer software programs, databases, data collections and other proprietary information or material of any type, and all derivatives, improvements and refinements thereof, howsoever recorded, or unrecorded, registrations, applications and reservations for any of the foregoing and any goodwill associated with any of the foregoing (collectively, “ Intellectual Property ” ) used by the Companies in the operation of their business (collectively, the “ Company Intellectual Property ” ), free and clear of any Liens other than Permitted Liens, without obligation to pay any royalty or any other fees with respect thereto. Schedule 3.17(a) lists all registrations and applications for any Company Intellectual Property as well as material unregistered trademarks and software used by the Companies in their business. Upon the consummation of the transactions contemplated hereby and compliance with applicable laws as to the assignment of such Company Intellectual Property, other than in respect of services to be provided pursuant to the Transition Services Agreement and except as set forth on Schedule 3.17(a) attached hereto, the Companies will own exclusively or have the exclusive right to use the Company Intellectual Property. No claim challenging the right of any Company to own or

 

-21-

use any of the Company Intellectual Property, no claim of a violation, infringement, misuse or misappropriation by any Company of Intellectual Property and no claim challenging or questioning the validity or effectiveness of any state or federal registration of the Company Intellectual Property is pending or, to the knowledge of Seller, threatened by any Person except in each case for claims that individually or in the aggregate do not have a Material Adverse Effect and Seller does not know of any valid basis for such claim. Neither Seller nor any of the Companies has made (i) any claim challenging the right of any Person to use any Intellectual Property, (ii) any claim of a violation, infringement, misuse or misappropriation of any Person of Intellectual Property or (iii) any claim challenging or questioning the validity or effectiveness of any state or federal registration of Intellectual Property; and Seller does not know of any valid basis for any such claim.

 

(b) Except as set forth on Schedule 3.17(b), the Company Intellectual Property constitutes all Intellectual Property rights necessary for the Companies to conduct their respective business(es) as and where conducted on the Closing Date and none of the Companies uses any Intellectual Property which is not Company Intellectual Property or Intellectual Property licensed pursuant to the Transition Services Agreement. None of the Companies’ business operations infringes or misappropriates any Person’s rights in or to Intellectual Property.

 

(c) Each item of Company Intellectual Property owned by a Company and registered, filed, issued or applied for, has been duly and validly registered in, filed in or issued by, the appropriate official governmental registrars and/or issuers (or officially recognized issuers) of patents, trademarks, copyrights or Internet domain names and except as set forth on Schedule 3.17(c), each such registration, filing and/or issuance (i) has not been abandoned, canceled or otherwise compromised, (ii) has been maintained effective by all requisite filings, renewals and payments, and (iii) remains in full force and effect as of the Closing Date. Except as set forth on Schedule 3.17(c), there are no actions that must be taken or payments that must be made by any of the Companies within one hundred and eighty (180) days following the Closing Date that, if not taken, will materially and adversely affect the Company Intellectual Property or the right of any Company to use same as and where used as of the Closing Date.

 

(d) To the extent any Company Intellectual Property is or has been used under license in the business of any of the Companies, no written notice of a material default of such license has been sent or received by any of the Companies which default remains uncured, and the execution, delivery or performance of the Company’s obligations hereunder and under the other instruments and agreements to be executed and delivered as contemplated hereby will not result in such a default. Each such license agreement is a legal, valid and binding obligation of the applicable Company and, to the knowledge of Seller, the relevant other parties thereto, enforceable in accordance with the terms thereof and the transactions contemplated by this Agreement will not breach the terms thereof, subject to bankruptcy, insolvency, reorganization and other laws affecting creditors rights generally and by general principles of equity (whether in a proceeding at Law or in equity).

 

(e) Each of the Companies has taken reasonable steps to protect and preserve the confidentiality of all of its trade secrets and other proprietary and confidential information.

 

-22-

§ 3.18 Compliance with Laws . Except as set forth on Schedule 3.18, each of the Companies has complied in all material respects and is in compliance in all material respects with all applicable Laws and Orders. Neither Seller nor any of the Companies has received any written notice that any violation of the foregoing is being or may be alleged and to the knowledge of Seller there is no such violation or allegation of violation.

 

§ 3.19 Accounts Receivable . All of the accounts receivable, costs in excess of billings and other debts due or recorded in the respective records and books of account of each Company as being due to such Company as at the Closing Date (less the amount of any provision or reserve therefor made in the respective records and books of account of such Company) represent amounts receivable for merchandise actually delivered or services actually provided (or, in the case of non-trade accounts or notes, represent amounts receivable in respect of other bona fide business transactions), have arisen in the ordinary course of business and none is or at the Closing Date will be, to the knowledge of Seller, subject to any set-off or counterclaim, except to the extent of any such provision or reserve.

 

§ 3.20 Inventories . The aggregate book value of the inventories of all Companies as of August 31, 2004 determined in accordance with the GAAP Practices, and as of the Closing will be, less than $500,000.

 

§ 3.21 Suppliers and Customers . Schedule 3.21 sets forth the top ten (10) customers and the top ten (10) suppliers of the Companies, listed in order of aggregate sales or purchases, as the case may be, for the twelve month period preceding September 30, 2004. The relationships of each Company with each such supplier and customer are, to the knowledge of Seller, good commercial working relationships in all material respects and, except as set forth on Schedule 3.21, no such supplier or customer has canceled or otherwise terminated in writing or, to the knowledge of Seller, orally terminated or threatened to cancel or otherwise terminate, its relationship with such Company. Neither Seller nor any of the Companies has received any written notice that any such supplier or customer may cancel or otherwise materially and adversely modify its relationship with any Company or limit its services, supplies or materials to any Company, or its usage or purchase of the services and products of any Company, either as a result of the transactions contemplated hereby or otherwise and to the knowledge of Seller no such supplier or customer intends to effect any such cancellation, modification, limitation or change in usage or purchase.

 

§ 3.22 Employment Relations . (a) Except as set forth on Schedule 3.22(a), each of the Companies has been and is in material compliance with all applicable Laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and has not within the last three years and is not engaged in any unfair labor practice.

 

(b) No unfair labor practice complaint against any of the Companies is pending before the National Labor Relations Board.

 

(c) There is no labor strike, dispute, slowdown or stoppage actually pending or, to the knowledge of Seller, threatened against or involving any of the Companies.

 

-23-

(d) Except as set forth on Schedule 3.22(d), no grievance exists, no arbitration proceeding arising out of or under any collective bargaining agreement is pending and no claim in writing therefor has been asserted and, to the knowledge of Seller, no claim therefor exists.

 

(e) The Companies are subject to, bound by or currently negotiating, the collective bargaining or labor union agreements applicable to Persons employed by the Companies set forth on Schedule 3.22(e).

 

(f) Except as set forth on Schedule 3.22(f), none of the Companies have experienced any material labor difficulty or work stoppage during the last three years.

 

(g) Except as set forth on Schedule 3.22(g), there has not been, and to the knowledge of Seller without inquiry, there will not be, any Material Adverse Effect in relations with employees of any of the Companies as a result of any announcement of the transactions contemplated by this Agreement.

 

(h) Except as set forth on Schedule 3.22(h), none of the Companies has any Equal Employment Opportunity Commission charges or other claims of employment discrimination pending or, to the knowledge of Seller, threatened against it.

 

(i) Except as set forth on Schedule 3.22(i), during the last three years, the Companies have not received written notice of any wage and hour department investigation of any of the Companies and to the knowledge of Seller no wage and hour department investigation of any of the Companies exists.

 

(j) Except as set forth on Schedule 3.22(j), there are no occupational health and safety claims by any Governmental or Regulatory Authority asserted in writing against any of the Companies and, to the knowledge of Seller, no claim therefor exists .

 

(k) Since the enactment of the Worker Adjustment and Retraining Notification Act ( “ WARN ” ), neither Seller (with respect to any Company) nor any of the Companies has effectuated either (i) a “plant closing” (as defined in WARN) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of any of the Companies or (ii) a “mass layoff” (as defined in WARN) affecting any site of employment or facility of any of the Companies. Neither Seller (with respect to any Company) nor any of the Companies has been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar Law and none of the employees of any of the Companies has suffered an “employment loss” (as defined in WARN) during the six months prior to the date hereof.

 

(l) Seller (with respect to any Company) and each of the Companies is in compliance with the terms and provisions of the Immigration Reform and Control Act of 1996, as amended, and all related regulations promulgated thereunder, except for such non-compliance which, individually and in the aggregate, does not have a Material Adverse Effect with respect to the Companies.

 

-24-

(m) Set forth on Schedule 3.22(m) is an accurate and complete list showing the names of all Employees employed by the Companies as of October 14, 2004 whose aggregate annualized base salary exceeds $50,000.

 

§ 3.23 Employee Benefit Plans . (a) List of Plans. Set forth on Schedule 3.23(a) is an accurate and complete list of the “ Employee Benefit Plans, ” which term means all U.S. and non-U.S. (i) “employee benefit plans,” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder ( “ ERISA ” ); (ii) bonus, stock option, stock purchase, restricted stock, incentive, fringe benefit, “voluntary employees’ beneficiary associations” ( “ VEBAs ” ) under Section 501(c)(9) of the Code, profit-sharing, pension, or retirement, deferred compensation, medical, life insurance, disability, accident, salary continuation, severance, accrued leave, vacation, sick pay, sick leave, supplemental retirement and unemployment benefit plans, programs, arrangements, commitments and/or practices (whether or not insured); and (iii) employment, consulting, termination, and severance contracts or agreements for active, retired or former employees or directors, whether or not any such plans, programs, arrangements, commitments, contracts, agreements and/or practices (referred to in (i), (ii) or (iii) above) are in writing or are otherwise exempt from the provisions of ERISA that have been established, maintained or contributed to (or with respect to which an obligation to contribute has been undertaken) within the previous two (2) years or with respect to which any liability is borne by any of the Companies, but the term Employee Benefit Plans excludes any such plans, programs, arrangements, commitments, contracts, agreements and/or practices that are either “multiemployer plans” within the meaning of Section 3(37) of ERISA or that are plans or programs sponsored by a union and to which any of the Companies contribute, or have an obligation to contribute, or with respect to which any liability is borne by any of the Companies (collectively, “ Multiemployer Plans ” ).

 

(b) Status of Plans . Each Employee Benefit Plan (including any related trust) substantially complies in form with the requirements of all applicable laws, including ERISA and the Code, and has at all times been maintained and operated in substantial compliance with its terms and the requirements of all applicable laws, including ERISA and the Code. None of the Companies has any commitment, intention or understanding to create any Employee Benefit Plan. To the knowledge of Seller, no event has occurred and no condition or circumstance has existed that would result in a material increase in the benefits under or the expense of maintaining any Employee Benefit Plan or Multiemployer Plan from the level of benefits or expense incurred for the most recent fiscal year ended thereof. No Company sponsors any Employee Benefit Plan. Except for certain of the Multiemployer Plans, none of Seller, the Companies nor any employer (whether or not incorporated) that would together with Seller or any Company be treated as a single employer within the meaning of Section 414 of the Code maintains or contributes to, or has ever maintained or contributed to (or has any potential liability with respect to) (i) any employee pension benefit plan that is or was the subject of 412 or 418B of the Code or Section 302 or Title IV of ERISA, (ii) any VEBA or (iii) any “multiple employer plan” (within the meaning of the Code or ERISA).

 

(c) No Post-Employment Welfare Benefits . None of the Companies has any obligation to provide post-employment or retiree health, life insurance and/or other welfare benefits to any retired or former employees or active employees following such employees’

 

-25-

retirement or termination of service, other than continuation coverage mandated by applicable Law.

 

(d) Liabilities . Except to the extent that a breach of the representations contained in this Section 3.23(d) would not result in a liability of any Company (i) there are no actions, suits, claims or disputes pending, or, to the knowledge of Seller, threatened, anticipated or expected to be asserted against or with respect to any Employee Benefit Plan or, to the knowledge of Seller, a Multiemployer Plan or the assets of any such plan (other than routine claims for benefits and appeals of denied routine claims); (ii) no civil or criminal action brought pursuant to the provisions of Title I, Subtitle B, Part 5 of ERISA is pending or, to the knowledge of Seller, threatened, anticipated, or expected to be asserted against any of the Companies with respect to any Employee Benefit Plan or, to the knowledge of Seller, a Multiemployer Plan; and (iii) to the knowledge of Seller, no Employee Benefit Plan or any fiduciary thereof is the subject of an audit, investigation or examination by any governmental or quasi-governmental agency.

 

(e) Contributions . Full payment has been timely made of all amounts which any of the Companies are required, under applicable Law or under any Employee Benefit Plan or Multiemployer Plan or any agreement relating to any Employee Benefit Plan or Multiemployer Plan to which any of the Companies is a party, to have paid as contributions or premiums thereto as of the last day of the most recent fiscal year of such Employee Benefit Plan or Multiemployer Plan ended prior to the date hereof and such contributions or premiums have been timely deposited into the appropriate trusts or accounts, if applicable. All such contributions and/or premiums have been fully deducted for income tax purposes and no such deduction has been challenged or disallowed by any governmental entity, and to the knowledge of Seller no event has occurred and no condition or circumstance has existed that would give rise to any such challenge or disallowance. The Companies have made adequate provision for reserves to meet contributions and premiums and any other liabilities that have not been paid or satisfied because they are not yet due under the terms of any Employee Benefit Plan, applicable law or related agreements. Benefits under all Employee Benefit Plans are as represented to Purchaser pursuant to Section 3.23(j) and have not been increased subsequent to the date as of which documents have been provided to Purchaser, except for any such increases as would not, individually or in the aggregate, result in a material liability of Purchaser or any Affiliate thereof on or after the Closing.

 

(f) Tax Qualification . Each Employee Benefit Plan intended to be qualified under Section 401(a) of the Code has, as currently in effect, been determined to be so qualified by the IRS. Each trust established in connection with any Employee Benefit Plan which is intended to be exempt from Federal income taxation under Section 501(a) of the Code has, as currently in effect, been determined to be so exempt by the IRS. Since the date of each most recent determination referred to in this paragraph (f), to the knowledge of Seller, no event has occurred and no condition or circumstance has existed that resulted or is likely to result in the revocation of any such determination or that would adversely affect the qualified status of any such Employee Benefit Plan.

 

(g) Transactions . Neither the Companies nor any of their respective directors, officers or employees has engaged in any transaction with respect to any Employee Benefit Plan or breached any applicable fiduciary responsibilities or obligations under Title I of ERISA that

 

-26-

would subject any Company to a material tax, penalty or liability for prohibited transactions or breach of any obligations under ERISA or the Code.

 

(h) Triggering Events . Except as set forth on Schedule 3.23(h), the execution of this Agreement and the consummation of the transactions contemplated hereby, do not constitute a triggering event under any Employee Benefit Plan, policy, arrangement, statement, commitment or agreement, whether or not legally enforceable, w