Exhibit 2.2
ASSET PURCHASE AGREEMENT
Dated as of July 25, 2002
by and among
Brentwood Acquisition Corp.,
Brentwood, Inc.,
The ▇▇▇▇▇ ▇▇▇▇▇▇▇ Company, LLC,
and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TABLE OF CONTENTS
ARTICLE I SALE OF SHARES AND CLOSING ...............................................................1
1.01 Purchase and Sale.........................................................................1
1.02 Excluded Assets...........................................................................4
1.03 Assumption of Liabilities.................................................................4
1.04 Excluded Liabilities .....................................................................5
1.05 Purchase Price............................................................................6
1.06 Closing ..................................................................................6
1.07 Payment of Purchase Price.................................................................6
1.08 Adjustment to Purchase Price .............................................................7
1.09 Allocation of Purchase Price..............................................................9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
▇▇▇▇▇ AND THE PRINCIPALS ............................................................................9
2.01 Enforceability; Authority.................................................................9
(a) Enforceability .......................................................................9
(b) Authority ............................................................................9
2.02 Organization and Corporate Power ........................................................10
2.03 Ownership ...............................................................................10
2.04 Subsidiaries ............................................................................10
2.05 No Conflicts ............................................................................10
2.06 Governmental Approvals and Filings ......................................................11
2.07 Books and Records .......................................................................11
2.08 Financial Statements ....................................................................11
2.09 Undisclosed Liabilities..................................................................11
2.10 No Material Adverse Changes .............................................................12
2.11 Absence of Certain Developments..........................................................12
2.12 Tax Returns and Payments; Tax Liens; Tax Matters ........................................14
2.13 Legal Proceedings........................................................................14
2.14 Employees; Labor Matters ................................................................14
2.15 Immigration Matters .....................................................................15
2.16 Employee Benefits........................................................................16
(a) Employee Plans ......................................................................16
(b) Compliance; No Claims ...............................................................16
(c) Documents for Employee Plans.........................................................16
(d) No Changes ..........................................................................17
(e) No Multiemployer Plans ..............................................................17
(f) Fiduciary Responsibility ............................................................17
(g) No Penalties or Disqualifications....................................................17
2.17 Title to Properties, Condition and Sufficiency of Assets ................................17
(a) Real Property........................................................................17
(b) Leases...............................................................................17
(c) Title................................................................................18
(d) Condition............................................................................18
(e) No Violations .......................................................................18
(f) No Improvements or Assessments.......................................................18
2.18 Accounts Receivable.......................................................................19
2.19 Inventory ................................................................................19
2.20 Contracts ................................................................................19
2.21 Insider Transactions .....................................................................21
2.22 Customers and Suppliers ..................................................................21
2.23 Brokers ..................................................................................21
2.24 Intellectual Property Rights..............................................................21
2.25 Insurance.................................................................................22
2.26 Warranty and Related Matters..............................................................22
2.27 Compliance with Laws; Permits ............................................................23
2.28 Environmental, Health and Safety Matters .................................................23
2.29 Guaranties................................................................................24
2.30 Disclosure ...............................................................................24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER ...................................................24
3.01 Corporate Existence.......................................................................24
3.02 Enforceability; Authority.................................................................24
3.03 No Conflicts..............................................................................25
3.04 Governmental Approvals and Filings........................................................25
3.05 Brokers ..................................................................................25
3.06 Financing ................................................................................25
ARTICLE IV PRE-CLOSING COVENANTS ......................................................................26
4.01 General....................................................................................26
4.02 Conduct of Business .......................................................................26
4.03 Preservation of Business ..................................................................26
4.04 Full Access................................................................................26
4.05 Current Evidence of Title .................................................................27
(a) Title Commitments......................................................................27
(b) Survey.................................................................................27
(c) Unpermitted Exceptions; Survey Defects ................................................27
4.06 Exclusivity ...............................................................................28
4.07 Notice of Developments ....................................................................28
4.08 Change of Name ............................................................................28
4.09 Software Licenses .........................................................................28
4.10 Permit Applications........................................................................28
ARTICLE V POST-CLOSING COVENANTS.......................................................................29
5.01 General....................................................................................29
5.02 Further Assurances; Post-Closing Cooperation...............................................29
5.03 Transition.................................................................................29
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ARTICLE VI CONDITIONS TO OBLIGATIONS OF BUYER ..........................................................30
6.01 Representations and Warranties .........................................................30
6.02 Warranty Deed...........................................................................30
6.03 ▇▇▇▇ of Sale............................................................................30
6.04 Assignment and Assumption Agreement ....................................................30
6.05 Consents ...............................................................................31
6.06 Assignment of Scheduled Contracts and Permits ..........................................31
6.07 Assignment of Intellectual Property Rights .............................................31
6.08 Title Insurance ........................................................................31
6.09 Certificates of Title ..................................................................31
6.10 Employment Agreements...................................................................31
6.11 Agreement ..............................................................................31
6.12 Releases................................................................................31
6.13 Financing...............................................................................31
6.14 Opinion of Counsel......................................................................31
6.15 Articles of Incorporation...............................................................32
6.16 Employees ..............................................................................32
6.17 Additional Documents ...................................................................32
6.18 Closing Documents.......................................................................32
ARTICLE VII CONDITIONS TO OBLIGATIONS OF THE COMPANY AND ▇▇▇▇▇...............................................32
7.01 Representations and Warranties..........................................................32
7.02 Purchase Price..........................................................................33
7.03 Assignment and Assumption Agreement.....................................................33
7.04 Officers' Certificates..................................................................33
7.05 Opinion of Counsel......................................................................33
7.06 Additional Documents....................................................................33
7.07 Closing Documents.......................................................................33
ARTICLE VIII SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS, INDEMNIFICATION..............................................................................33
8.01 Survival of Representations, Warranties, Covenants and Agreements.......................33
8.02 Indemnification by the Company, ▇▇▇▇▇ and the Principals ...............................34
8.03 Indemnification by Buyer ...............................................................35
8.04 Method of Asserting Claims .............................................................35
ARTICLE IX TERMINATION.......................................................................................37
9.01 Termination.............................................................................37
9.02 Effect of Termination...................................................................38
ARTICLE X MISCELLANEOUS.......................................................................................38
10.01 Notices..................................................................................38
10.02 Expenses ................................................................................39
10.03 Press Releases and Announcements ........................................................39
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10.04 Waiver .................................................................................40
10.05 Amendment ..............................................................................40
10.06 No Third Party Beneficiary..............................................................40
10.07 No Assignment; Binding Effect ..........................................................40
10.08 Headings................................................................................40
10.09 Severability............................................................................40
10.10 Complete Agreement......................................................................40
10.11 Arbitration ............................................................................40
10.12 Governing Law ..........................................................................41
10.13 Counterparts ...........................................................................41
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SCHEDULES
A Definitions
Schedule 1.01(d) Fixed Assets
Schedule 1.01(e) Purchase Orders
Schedule 1.01(g) Vehicles
Schedule 1.01(l) Telephone Listings and Email Addresses
Schedule 1.02(h) Personal Property of the Principals and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
DISCLOSURE SCHEDULE
Section 2.02(b) Organization and Corporate Power
Section 2.04 Subsidiaries
Section 2.05 Conflicts
Section 2.06 Required Governmental Approvals and Filings
Section 2.08 Financial Statements
Section 2.09 Undisclosed Liabilities
Section 2.11 Absence of Certain Developments
Section 2.12 Tax Returns
Section 2.13 Legal Proceedings
Section 2.14 Employees, Labor Matters
Section 2.15 Immigration Matters
Section 2.16 Employee Benefits
Section 2.17 Title to Properties, Condition and Sufficiency of Assets
Section 2.18 Accounts Receivables
Section 2.19 Inventory
Section 2.20 Contracts
Section 2.21 Insider Transactions
Section 2.22 Customers and Suppliers
Section 2.23 Brokers
Section 2.24 Intellectual Property Rights
Section 2.25 Insurance
Section 2.26 Warranty and Related Matters
Section 2.27 Compliance with Laws; Permits
Section 2.28 Environmental Matters
Section 4.05 Survey Objections or Exceptions
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EXHIBITS
Exhibit A Warranty Deed
Exhibit B ▇▇▇▇ of Sale and Assignment of Contract Rights
Exhibit C Allocation of Purchase Price
Exhibit D Description of Financing Commitments
Exhibit E Assignment and Assumption Agreement
Exhibit F Form of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Employment Agreement
Exhibit G Form of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Employment Agreement
Exhibit H Form of ▇▇▇▇▇▇▇ Agreement
Exhibit I Matters to be Covered by Opinion of Counsel to the Company, ▇▇▇▇▇ and the Principals
Exhibit J Matters to be Covered by Opinion of Counsel to Buyer
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ASSET PURCHASE AGREEMENT
THIS
ASSET PURCHASE AGREEMENT (the "Agreement") dated as of
July 25, 2002, by and among Brentwood Acquisition Corp., a
Minnesota
corporation ("Buyer"). Brentwood, Inc., an Oregon corporation (the
"Company"), The ▇▇▇▇▇ ▇▇▇▇▇▇▇ Company, LLC, an Oregon limited liability
company ("▇▇▇▇▇") and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (each a
"Principal" and collectively, the "Principals"). Capitalized terms not
otherwise defined herein have the meanings set forth in Schedule A to this
Agreement.
RECITALS
A. The Principals in the aggregate own 3,000 shares of common
stock, $1.00 par value per share (the "Shares"), of the Company, which
constitute all of the issued and outstanding shares of capital stock of the
Company.
B. The Company is engaged in the business of manufacturing,
selling and distributing hardwood and vinyl doors and accessories (the
"Business").
C. The Principals own all of the outstanding membership
interests of ▇▇▇▇▇ and all of the assets of ▇▇▇▇▇ are utilized in the
operation of the Business.
D. The Company and ▇▇▇▇▇ desire to sell and assign to Buyer, and
Buyer desires to purchase from the Company and ▇▇▇▇▇, on the terms and
subject to the conditions set forth in this Agreement, substantially all of
the assets (with specified exclusions) of the Company and ▇▇▇▇▇ used in the
Business.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein, and in consideration of the representations,
warranties, and covenants herein contained, the parties, intending to be legally
bound, agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.01 PURCHASE AND SALE OF ASSETS. On the terms and subject to the
conditions set forth in this Agreement, each of the Company and ▇▇▇▇▇ agrees to
sell, assign, transfer, convey and deliver to Buyer on the Closing Date, and
Buyer agrees to purchase from the Company and ▇▇▇▇▇, for the Purchase Price, all
of its respective right, title and interest in and to all of the assets and
other property interests of the Company and ▇▇▇▇▇ related to, or used in
connection with, the Business, (collectively, except for the Excluded Assets set
forth in Section 1.02, the "Acquired Assets"), including without limitation, the
following:
(a) All of the real property owned by it and used in the operation
of the Business, all of which properties are identified in the Disclosure
Schedule under the caption referencing Section 2.17(a);
(b) Its interest in all real property leases to which it is a party
that are used in the operation of the Business, all of which leases are
identified in the Disclosure Schedule under the caption referencing Section
2.17(b);
(c) Its interest in all personal property leases to which it is a
party that are used in connection with the operation of the Business, all of
which leases are identified in the Disclosure Schedule under the caption
referencing Section 2.17(d);
(d) All of the machinery and equipment, attachments and parts
therefor, tools, dies, leasehold improvements, fixtures, patterns,
engineering equipment, office furniture, supplies and tangible personal
property of every kind and nature (other than personal property leases
identified in subsection (c) above) owned or used by it in connection with
the operation of the Business, including, without limitation, those tangible
assets listed on Schedule 1.01(d) (the "Fixed Assets"), except that those
personal assets listed in Schedule 1.02(h) are specifically excluded from the
Fixed Assets;
(e) All of its inventories, including supplies, raw materials, parts,
components, work-in-process, finished goods, product labels and packaging
materials used in connection with the Business and its interest in all orders
or contracts for the purchase of supplies, raw materials, parts, components,
product labels and packaging materials to the extent listed on Schedule
1.01(e) (the "Purchase Orders");
(f) All of its rights under contracts, agreements, commitments and
other arrangements identified in the Disclosure Schedule under the caption
referencing Section 2.20(a) as being assumed by Buyer and all unfilled or
uncompleted customer contracts or orders for the sale of goods and services
received and accepted by the Company in connection with the Business in the
ordinary course;
(g) All vehicles owned or used by it in connection with the
Business (the "Vehicles") including, without limitation, those listed on
Schedule 1.01(g);
(h) All of its business records and files relating to the Acquired
Assets or the Business, including, without limitation, customer lists and
records, sales information, supplier records, inventory records, purchase
orders and invoices, cost and pricing information, commission records,
correspondence, employment and personnel records of its employees, on
whatever media such records are maintained;
(i) All computer software, source codes, computer files, programs,
patents, trademarks, copyrights, applications, trade names, logos, licenses,
technical data, product specifications, blueprints, know-how, trade secrets
and other intellectual property rights owned by, licensed to or otherwise
controlled by it or used in, developed for use in or
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necessary to the conduct of the Business as now conducted or planned to be
conducted including, without limitation, those set forth in the Disclosure
Schedule under the caption referencing Section 2.24 and including the rights to
institute or maintain any action or investigation for and to recover damages for
any past infringement thereof or any actions of unfair competition relating
thereto;
(j) The name "Brentwood" or any combination of words in which the
name "Brentwood" appears or any rights associated with such name or any right
to use such name in all jurisdictions in which the Company or ▇▇▇▇▇ either
currently uses any such name or has any right to use any such name;
(k) All accounts, notes and other receivables owing to it that
relate to the Business and are existing on the Closing Date;
(l) The current telephone listings and email addresses of the
Business and the right to use the telephone numbers and email addresses
currently being used at the principal offices and other offices or facilities
of the Business, all of which telephone numbers and addresses are listed on
Schedule 1.01(l) hereto;
(m) All licenses, permits and approvals associated with, used or
employed in the Business or with respect to the Acquired Assets, including,
without limitation, all such licenses, permits and approvals listed in the
Disclosure Schedule under the caption referencing Sections 2.27 and 2.28;
(n) All sales and promotional materials, catalogues and
advertising and marketing literature and materials;
(o) All of its insurance policies obtained in connection with the
Business and all of its rights (including the rights to receive dividends)
under or arising out of such insurance policies;
(p) All prepaid expenses, deposits, claims, refunds, causes of
action, rights of recovery and warranty rights with respect to the Business
or the Acquired Assets;
(q) Goodwill (including all goodwill associated with and symbolized
by the name "Brentwood" as used as a trademark or service ▇▇▇▇ and all
goodwill associated with and symbolized by any other trademark or service
▇▇▇▇, trade name or corporate name used in the conduct of the Business as now
conducted), all related tangibles and intangibles which the Company uses in
the conduct of the Business and all rights to continue to use the Acquired
Assets in the conduct of a going business;
(r) All rights in connection with and assets of the Employee Plans
identified under the caption referencing Section 2.16(a) of the Disclosure
Schedule as being assumed by Buyer; and
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(s) All other assets of ▇▇▇▇▇ and the Company reflected on their
respective balance sheets as at March 31, 2002 other than inventory sold in
the ordinary course of the Company's business.
1.02 EXCLUDED ASSETS. Notwithstanding anything to the contrary contained in
Section 1.01 or elsewhere in this Agreement, the following assets, properties,
rights and interests of the Company and ▇▇▇▇▇ (the "Excluded Assets") shall not
be part of the sale and purchase contemplated hereunder, are excluded from the
Acquired Assets and shall remain the property of the Company and ▇▇▇▇▇ after the
Closing:
(a) All cash or cash equivalents of the Company and ▇▇▇▇▇ with respect
to the Business;
(b) All corporate minute books, charter documents, stock documents and
membership documents of the Company and ▇▇▇▇▇;
(c) All rights of the Company and ▇▇▇▇▇ under this Agreement, the ▇▇▇▇
of Sale and the Assignment and Assumption Agreement;
(d) All claims for tax refunds and other governmental charges of
whatever nature, including prepaid taxes and rebates;
(e) The contracts, agreements, commitments and other arrangements
identified in the Disclosure Schedule under the caption referencing Section
2.20(a) as not being assumed by Buyer;
(f) Such licenses, permits or authorizations which, by their terms,
are nonassignable, all of which are identified in the Disclosure Schedule
under the caption referencing Section 2.28 as being retained by the Company
or ▇▇▇▇▇;
(g) All rights in connection with and assets of the Employee Plans,
except for those Employee Plans identified in the Disclosure Schedule under
the caption referencing Section 2.16(a) as being assumed by Buyer; and
(h) Personal property of the Principals and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as set
forth in Schedule 1.02(h) hereto.
1.03 ASSUMPTION OF LIABILITIES. As part of the consideration for the
purchase and sale of the Acquired Assets, at the Closing, Buyer will assume, pay
and perform in accordance with their terms or otherwise satisfy, the following
(the "Assumed Liabilities"):
(a) The liabilities and obligations of the Company and ▇▇▇▇▇ accruing
after the Closing Date under the executory portion of all Scheduled
Contracts identified in Section 2.20(a) of the Disclosure Schedule as
being assumed by Buyer and Purchase Orders, but not including any liability
or obligation for any breach thereof occurring prior to the Closing Date;
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(b) The liabilities and obligations of the Company and ▇▇▇▇▇ for
accounts payable, payroll taxes, accrued expenses (other than Taxes and
compensation payable to the Principals) and product remakes (subject to
Buyer's right of indemnification set forth in Section 8.02(a)(iii)) of the
Business incurred by the Company or ▇▇▇▇▇ in the ordinary course of
business prior to the Closing and accrued real estate taxes on the Real
Property; and
(c) Liabilities or obligations arising out of or relating to the
Employee Plans identified in Section 2.16(a) of the Disclosure Schedule as
being assumed by Buyer but not including any liability or obligation
existing thereunder on or prior to the Closing Date.
1.04 EXCLUDED LIABILITIES. Buyer has no responsibility for, and the
Company, ▇▇▇▇▇ and the Principals, jointly and severally, shall indemnify and
hold Buyer harmless from, any liabilities or obligations of the Company and
▇▇▇▇▇ of any nature whatsoever which are not specifically included in the
Assumed Liabilities identified in Section 1.03, whether similar or dissimilar to
the Assumed Liabilities, whether now existing or hereafter arising, and whether
known or unknown to Buyer, the Company, ▇▇▇▇▇ or the Principals (the "Excluded
Liabilities"), including, without limitation, all of the following:
(a) Liabilities or obligations arising out of an event that occurred,
products sold or services performed by the Company or ▇▇▇▇▇, or their
ownership of the Acquired Assets or the operation of the Business, on or
prior to the Closing Date;
(b) Liabilities or obligations for foreign, federal, state, county,
local or other governmental taxes of the Company and ▇▇▇▇▇ relating to the
operation of the Business or the ownership of the Acquired Assets on or
prior to the Closing Date;
(c) Liabilities or obligations related to or arising out of any
Employee Plans or any other liabilities to employees or former employees of
the Company or ▇▇▇▇▇, except for payroll taxes incurred in the normal
course of business and payable after the Closing Date and those liabilities
or obligations accruing after the Closing Date with respect to the Employee
Plans identified in Section 2.16(a) of the Disclosure Schedule as being
assumed by Buyer;
(d) Liabilities or obligations arising out of any litigation or
administrative or arbitration proceeding to which the Company, ▇▇▇▇▇ or
either Principal is a party or any claims by or against any one of them
arising from circumstances existing on or prior to the Closing Date;
(e) Liabilities or obligations resulting from any breach by the
Company or ▇▇▇▇▇ on or prior to the Closing Date of any contract or
agreement to which the Company, ▇▇▇▇▇ or either Principal is a party or by
which any one of them is bound, including, without limitation, any Assumed
Contract or Purchase Order;
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(f) Liabilities or obligations resulting from any violation by the
Company, ▇▇▇▇▇, either Principal, or any employee, director or agent of the
Company or ▇▇▇▇▇, or any predecessor for which the Company or ▇▇▇▇▇ ▇▇▇ be
liable, of any applicable foreign, federal, state, county, local or other
governmental laws, decrees, ordinances or regulations, or any permit,
license, consent, certificate, approval or authorization issued pursuant to
such laws, decrees, ordinances or regulations, including, without
limitation, those applicable to discrimination in employment, employment
practices, wage and hour, retirement, labor relations, occupational safety,
health, trade practices, environmental matters, competition, pricing,
product warranties, product liability and product advertising;
(g) Liabilities or obligations resulting from workers' compensation
claims or audits arising out of events occurring on or prior to the Closing
Date; and
(h) The Company's and ▇▇▇▇▇' obligations under this Agreement.
1.05 PURCHASE PRICE. Subject to the adjustment under Section 1.08, the
aggregate purchase price for the Acquired Assets is $8,150,000.00 MINUS any
Indebtedness of the Company as of the Closing Date (the "PURCHASE PRICE")
payable in the manner set forth in Section 1.07.
1.06 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇, P.A., 5500 ▇▇▇▇▇ Fargo Center, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00 A.M. local 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
such other date and time as Buyer, the Company and ▇▇▇▇▇ mutually agree (the
"Closing Date"). At the Closing, the Company and ▇▇▇▇▇ will assign and transfer
to Buyer good and valid title in and to the Acquired Assets, free and clear of
all Liens, by delivering to Buyer a warranty deed substantially in the form
attached hereto as EXHIBIT A ("Warranty Deed"), a ▇▇▇▇ of sale substantially in
the form attached hereto as EXHIBIT B ("▇▇▇▇ of Sale") and such other
instruments of conveyance, transfer, assignment and delivery as Buyer shall
reasonably request to cause the Company and ▇▇▇▇▇ to transfer, convey, assign
and deliver the Acquired Assets to Buyer; and Buyer shall pay to the Company
and ▇▇▇▇▇ the Purchase Price in accordance with the provisions of Section 1.07
hereof. At the Closing, there shall also be delivered to the Company, ▇▇▇▇▇ and
Buyer the opinions, certificates, documents and instruments to be delivered
under Articles VI and VII.
1.07 PAYMENT OF PURCHASE PRICE. At the Closing, the Purchase Price (as
preliminarily adjusted pursuant to Section 1.08 hereof) will be paid by Buyer as
follows:
(a) $3,156,758.00 to the Company by wire transfer of immediately
available funds to such account as the Company may reasonably direct by
written notice delivered to Buyer by the Company at least two Business Days
before the Closing Date; and
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(b) $4,993,242.00 to ▇▇▇▇▇ by wire transfer of immediately available
funds to such account as ▇▇▇▇▇ ▇▇▇ reasonably direct by written notice
delivered to Buyer by ▇▇▇▇▇ at least two Business Days before the Closing
Date.
1.08 ADJUSTMENT TO PURCHASE PRICE.
(a) No later than three (3) Business Days prior to the Closing Date,
the Principals shall cause the Company to prepare and deliver to Buyer a
calculation of the Net Working Capital (as defined below) of the Company
estimated as of the opening of business on the Closing Date ("ESTIMATED NET
WORKING CAPITAL"). The Estimated Net Working Capital shall be calculated in
accordance with generally accepted accounting principles, as applied on a
consistent basis with the Company's Financial Statements provided to Buyer
pursuant to Section 2.08(a) hereof, including, but not limited to,
provisions for uncollectable receivables, warranty claims and the like,
PROVIDED, HOWEVER, that in all events such calculation shall include a
provision for product remakes (the "NET WORKING CAPITAL BALANCE SHEET"). As
used herein, the term "NET WORKING CAPITAL" shall mean an amount equal to
the excess of total current assets of the Company and ▇▇▇▇▇ that are a part
of the Acquired Assets over the liabilities of the Company and ▇▇▇▇▇
described in Section 1.03(b), calculated in accordance with generally
accepted accounting principles on a consistent basis with the Net Working
Capital Balance Sheet.
(b) If Estimated Net Working Capital is less than $1,000,000.00
("TARGET NET WORKING CAPITAL"), then the cash portion of the Purchase Price
payable to the Company at Closing shall be reduced by an amount equal to
the amount of such deficit (the "ESTIMATED WORKING CAPITAL ADJUSTMENT").
(c) As soon as reasonably practicable after the Closing Date, but in
all events within 90 days thereafter, the Buyer will prepare and deliver to
the Principals (i) a draft balance sheet (the "Draft Closing Date Net
Working Capital Balance Sheet") for the Company as of the close of business
on the Closing Date (determined on a pro forma basis as though the parties
had not consummated the transactions contemplated by this Agreement), (ii)
a computation and determination of the Net Working Capital as of the
Closing Date; and (iii) a computation and determination of the Adjusted
Purchase Price (as defined below).
(d) If the Principals have any objections to the Draft Closing Date
Net Working Capital Balance Sheet, they will deliver a detailed statement
describing their objections to the Buyer within thirty (30) days of receipt
thereof. Buyer and the Principals will use reasonable efforts to resolve
any such objections among themselves. If the parties do not obtain a final
resolution within thirty (30) days after Buyer has received the statement
of objections, Buyer and the Principals will select an independent
accounting firm mutually acceptable to them to resolve any remaining
objections. If Buyer and the Principals are unable to agree on the choice
of an accounting firm, they will select by lot a nationally recognized
accounting firm which is not then currently and has not provided any
services to any of the parties hereto or the Company, or any of their
Affiliates within the past three (3) years which shall be jointly
instructed by the Buyer, on the one hand, and the Principals, on
7
the other hand, to determine the Net Working Capital and the Adjusted
Purchase Price in accordance with this Agreement. (The accounting firm
selected by either mutual agreement or lot is herein referred to as the
"Accountant".) The Accountant shall deliver to each of Buyer and the
Principals its determinations within thirty (30) days after receiving the
joint instructions from Buyer and the Principals, and the determinations of
the Accountant will be set forth in writing and will be conclusive and
binding upon the parties. The expenses of the Accountant shall be borne
equally by Buyer and the Principals. The Buyer will give the Principals the
Draft Closing Date Net Working Capital Balance Sheet revised to reflect the
Accountant's determinations. The "CLOSING DATE BALANCE SHEET" shall mean
the Draft Closing Date Net Working Capital Balance Sheet, together with any
revisions thereto pursuant to this Section 1.08, including the
determination of the Accountant. The "ADJUSTED PURCHASE PRICE" shall mean
the Purchase Price, together with any revisions thereto pursuant to this
Section 1.08, including the determination of the Accountant.
(e) For purposes of the Principals' review of the Closing Date Balance
Sheet and the Adjusted Purchase Price, Buyer will make reasonably available
to the Principals and their accountants and other representatives the work
papers and backup materials used in preparing the Draft Closing Date Net
Working Capital Balance Sheet at reasonable times and upon reasonable
notice at any time during (i) the preparation by Buyer of the Draft Closing
Date Net Working Capital Balance Sheet, (ii) the review by the Principals
of the Draft Closing Date Net Working Capital Balance Sheet, and (iii) the
resolution by the parties of any objections thereto.
(f) If Estimated Net Working Capital is less than Target Net Working
Capital AND
(i) Net Working Capital is less than Estimated Net Working
Capital, the Principals shall pay Buyer the difference
between Estimated Net Working Capital and Net Working
Capital;
(ii) Net Working Capital is greater than Estimated Net Working
Capital, Buyer shall pay the Company the difference between
(x) the lesser of Target Net Working Capital or Net Working
Capital and (y) Estimated Net Working Capital; or
(iii) Net Working Capital is equal to Target Net Working Capital,
Buyer shall pay the Company the Estimated Working Capital
Adjustment.
(g) If Estimated Net Working Capital is equal to or greater than
Target Net Working Capital and Net Working Capital is less than Target
Net Working Capital, the Principals shall pay Buyer the difference between
Net Working Capital and Target Net Working Capital.
(h) Any payment to be made under either Section 1.08(f) or Section
1.08(g) shall be made no later than thirty (30) days after the earliest to
occur of (i) the 30th day
8
after the Draft Closing Date Net Working Capital Balance Sheet shall have
been given by Buyer to the Principals, if the Principals shall not have
objected to the Draft Closing Date Net Working Capital Balance Sheet within
such period; (ii) the first Business Day after which the Buyer and the
Principals have resolved any objection raised by the Principals; or (iii)
the first Business. Day after the date on which the determination of the
Accountant referred to in Section 1.08(d) above is given to Buyer and the
Principals.
1.09 ALLOCATION OF PURCHASE PRICE. The parties agree to allocate the
Purchase Price and the Assumed Liabilities among the Acquired Assets as set
forth on EXHIBIT C, which exhibit is (i) consistent with the requirements set
forth in the Code, including Section 1060 of the Code, and the treasury
regulations thereunder and (ii) shall be updated as of the Closing Date after
taking into account the adjustment under Section 1.08. After the Closing, the
parties shall make consistent use of the allocation, fair market value and
useful lives specified in EXHIBIT C for all tax purposes and in all filings,
declarations and reports with the IRS in respect thereof, including the reports
required to be filed under Section 1060 of the Code. Buyer shall prepare and
deliver IRS Form 8594 to the Company and ▇▇▇▇▇ within 45 days after the Closing
Date to be filed with the IRS.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY, ▇▇▇▇▇ AND THE
PRINCIPALS
The Company, ▇▇▇▇▇ and each Principal hereby jointly and severally
represent and warrant to Buyer as follows, except as set forth in the disclosure
schedule (the "Disclosure Schedule") delivered by them to Buyer in connection
with the execution and delivery of this Agreement (which Disclosure Schedule
sets forth the exceptions to the representations and warranties contained in
this Article II under captions referencing the Sections to which such exceptions
apply).
2.01 ENFORCEABILITY; AUTHORITY.
(a) ENFORCEABILITY. This Agreement, assuming the due authorization,
execution, and delivery by Buyer, constitutes the valid and binding
obligation of the Company, ▇▇▇▇▇ and each Principal, enforceable against
each of them in accordance with its terms. Upon the execution and delivery
by the Company, ▇▇▇▇▇ and the Principals of the ▇▇▇▇ of Sale, the
Assignment and Assumption Agreement, the Employment Agreements and the
▇▇▇▇▇▇▇ Agreement and each other agreement to be executed or delivered by
any or all of the Company, ▇▇▇▇▇ and the Principals at the Closing
(collectively, the "Sellers' Closing Documents"), each of Sellers' Closing
Documents will constitute the legal, valid and binding obligation of the
parties thereto, enforceable against them in accordance with its terms.
(b) AUTHORITY. Each of the Company and ▇▇▇▇▇ have the absolute and
unrestricted right, power and authority to execute and deliver this
Agreement and the Sellers' Closing Documents to which it is a party and to
perform its obligations under this Agreement and the Sellers' Closing
Documents to which it is a party, and such action has been duly authorized
by all necessary action by the Company's shareholders, ▇▇▇▇▇' members, and
the governing board of each of the Company and ▇▇▇▇▇. Each Principal
9
has all necessary legal capacity to enter into this Agreement and the
Sellers' Closing Documents to which such Principal is a party and to
perform his or her obligations hereunder and thereunder.
2.02 ORGANIZATION AND CORPORATE POWER.
(a) Each of the Company and ▇▇▇▇▇ is duly organized, validly existing
and in good standing under the laws of the State of Oregon, and has all
requisite power and authority and all authorizations, licenses, permits
and certifications necessary to carry on the Business as and to the extent
now conducted and to own, use and lease the Acquired Assets, and to perform
all of its obligations under the Purchase Orders and Scheduled Contracts.
(b) Each of the Company and ▇▇▇▇▇ is duly qualified, licensed or
admitted to do business and is in good standing in those jurisdictions
specified in SECTION 2.02(b) of the Disclosure Schedule, which are the only
jurisdictions in which the ownership, use or leasing of the Acquired
Assets, or the conduct or nature of the Business, makes such qualification,
licensing or admission necessary.
(c) Prior to the execution of this Agreement, each of the Company and
▇▇▇▇▇ delivered to Buyer true and complete copies of the Governing
Documents of the Company and ▇▇▇▇▇ as in effect on the date hereof.
2.03 OWNERSHIP. The Principals own all of the Shares and all of the
membership interests (financial and governance) of ▇▇▇▇▇.
2.04 SUBSIDIARIES. Except as disclosed on SECTION 2.04 of the Disclosure
Schedule, neither the Company nor ▇▇▇▇▇ has any subsidiaries or owns, directly
or indirectly, any shares of capital stock or other equity securities in any
corporation or owns any interest in any partnership, limited liability company,
joint venture, association, trust or any other unincorporated organization or
entity or has any agreement or commitment to purchase any such interest.
2.05 NO CONFLICTS. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will:
(a) conflict with or result in a violation or breach of any provision
of the Governing Documents of the Company or ▇▇▇▇▇;
(b) conflict with or result in a violation or breach by either
Principal, the Company or ▇▇▇▇▇ of any constitution, statute, regulation,
rule, Order or other restriction of any Governmental or Regulatory
Authority to which either Principal, the Company or ▇▇▇▇▇, or any of the
Acquired Assets is subject; other than such conflicts, violations or
breaches (i) which could not in the aggregate reasonably be expected to
materially and adversely affect the validity or enforceability of this
Agreement or to have a Material Adverse Effect; or
10
(c) except as disclosed in SECTION 2.05 of the Disclosure Schedule,
conflict with or result in a violation or breach of, constitute (with or
without notice or lapse of time or both) a default under, result in the
acceleration of, create in any Person the right to accelerate, terminate,
modify, or cancel, or require any notice under, any contract or other
arrangement to which any of the Principals, the Company or ▇▇▇▇▇ is a party
or by which it is bound or to which any of the Acquired Assets is subject
(or result in the imposition of any Lien upon any of the Acquired Assets),
which, individually or in the aggregate is material to the validity or
enforceability of this Agreement or could in the aggregate be reasonably
expected to have a Material Adverse Effect.
2.06 GOVERNMENTAL APPROVALS AND FILINGS. Except as disclosed in SECTION
2.06 of the Disclosure Schedule, neither the Company nor ▇▇▇▇▇ nor either
Principal is required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Governmental or Regulatory Authority
in connection with the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby.
2.07 BOOKS AND RECORDS. The minute books and other similar Records of the
Company and ▇▇▇▇▇ as made available to Buyer prior to the execution of this
Agreement contain a true and complete record, in all material respects, of all
action taken at all meetings and by all written consents in lieu of meetings of
the shareholders or members, as the case may be, the board of directors and
committees of the board of directors of the Company, the board of governors and
committees of the board of governors of ▇▇▇▇▇, and the stock Records of the
Company and membership Records of ▇▇▇▇▇ are correct and complete.
2.08 FINANCIAL STATEMENTS. Prior to the execution of this Agreement, the
Company has delivered to Buyer true and complete copies of the balance sheets of
the Company for the years ended April 30, 2002 (the "Company's Latest Balance
Sheet") and April 30, 2001, together with all related statements of operations
and cash flow for the years then ended (the "Company's Financial Statements").
The Company's Financial Statements have been prepared in the ordinary course of
the Company's business, consistent with the internal accounting practices of the
Company, applied on a consistent basis throughout the periods covered thereby
and present fairly the financial condition of the Company as of such dates and
the results of operations of the Company for such periods. Except as disclosed
in Section 2.08 of the Disclosure Schedule, the Company's Financial Statements
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated.
2.09 UNDISCLOSED LIABILITIES. With respect to the Acquired Assets or the
operations of the Business, neither the Company nor ▇▇▇▇▇ has any material
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due, whether known or unknown, and regardless of when
asserted) arising out of transactions or events heretofore entered into, or any
action or inaction, or any state of facts existing, except (i) as reflected in
the Company's Latest Balance Sheet, (ii) as specifically set forth in SECTION
2.09 of the Disclosure Schedule, or (iii) liabilities which have arisen after
the date of the Company's Latest Balance Sheet in the ordinary course of
business (none of which is a material uninsured liability for breach of
contract, breach of warranty, tort, infringement, claim or lawsuit).
11
2.10 NO MATERIAL ADVERSE CHANGES. Since March 31, 2002, there has been no
event, occurrence, development or state of circumstances or facts which
individually or in the aggregate has had, will have or could reasonably be
expected to have a Material Adverse Effect, and, to the Knowledge of Principals,
no facts or conditions exist or are threatened or contemplated which
individually or in the aggregate will have or could reasonably be expected to
have a Material Adverse Effect in the foreseeable future, provided that for
purposes of this Section 2.10, Material Adverse Effect shall be deemed not to
include events, occurrences, developments or states of circumstances or facts
that affect the wood products industries generally.
2.11 ABSENCE OF CERTAIN DEVELOPMENTS. Except for the execution and delivery
of this Agreement and the transactions to take place pursuant hereto on or prior
to the Closing Date or as disclosed in SECTION 2.11 of the Disclosure Schedule,
since April 30, 2002 neither the Company nor ▇▇▇▇▇ has:
(a) borrowed any amount or incurred or become subject to any liability
except (i) current liabilities incurred in the ordinary course of business
and (ii) liabilities under contracts entered into in the ordinary course of
business;
(b) granted any Lien or any other encumbrance on any of the Acquired
Assets except (i) Liens for current property taxes not yet due and payable,
(ii) Liens imposed by law and incurred in the ordinary course of business
for obligations not yet due to carriers, warehousemen, laborers,
materialmen and the like, or (iii) Liens in respect of pledges or deposits
under workers' compensation laws;
(c) discharged or satisfied any Lien or paid any liability other than
current liabilities paid in the ordinary course of business;
(d) sold, assigned or transferred (including, without limitation,
transfers to any employees, Affiliates, shareholders or members) any
tangible assets of the Business except for sales of inventory in the
ordinary course of business;
(e) disclosed, to any Person other than its employees, agents and
representatives, Buyer or authorized representatives of Buyer, any
proprietary confidential information, other than pursuant to a
confidentiality agreement prohibiting the use or further disclosure of such
information, which agreements are identified in the Disclosure Schedule
under the caption referencing this Section 2.09(e) and are in full force
and effect on the date hereof;
(f) modified or canceled any debts or claims or waived any rights of
material value or suffered any extraordinary losses or adverse changes in
collection loss experience, whether or not in the ordinary course of
business or consistent with past practice;
(g) entered into any transaction, or modified any agreement,
arrangement or understanding, with any Insider;
(h) entered into, terminated or modified any other material agreement
except in the ordinary course of business and consistent with past custom
and practice;
12
(i) suffered any material theft, damage, destruction or loss of or to
any property or properties owned or used by it in connection with the
Business, whether or not covered by insurance;
(j) made or granted any bonus or any wage, salary or compensation
increase to any director, officer, employee with a base salary or base
compensation of more than $5,000 per year, or consultant;
(k) entered into or modified any employment agreement, arrangement or
understanding with any director, officer or employee;
(1) made or granted any increase in any employee benefit plan or
arrangement, or amended or terminated any existing employee benefit plan or
arrangement, or adopted any new employee benefit plan or arrangement or
made any commitment or incurred any liability to any labor organization;
(m) made any single capital expenditure or commitment therefor in
excess of $10,000 or capital commitments exceeding $25,000 in the
aggregate;
(n) made any loans or advances to (other than employee expense
advances made in the ordinary course of business), or guarantees for the
benefit of, any Persons;
(o) made charitable contributions or pledges except in accordance with
past custom and practice;
(p) made any change in accounting principles, methods or practices
from those utilized in the preparation of the Company's Financial
Statements or ▇▇▇▇▇' Financial Statements;
(q) amended any of its Governing Documents;
(r) entered into or modified any severance or similar arrangement with
any officer or employee;
(s) terminated, modified, canceled, or committed any breach of any
insurance contract providing insurance coverage to the Company, ▇▇▇▇▇ or
the Acquired Assets;
(t) taken any other action or entered into any other transaction other
than in the ordinary course of business and in accordance with past custom
and practice (other than the transactions contemplated by this Agreement);
or
(u) agreed, consented or committed, either orally or in writing, to do
any of the foregoing.
13
2.12 TAX RETURNS AND PAYMENTS; TAX LIENS; TAX MATTERS. Except as set
forth in Schedule 2.12 of the Disclosure Schedule, each of the Company and
▇▇▇▇▇ has filed when and as due all federal, state and local income,
franchise, sales, use, payroll, excise, business and license and other tax
returns required by law to be filed by it for all periods prior to the date
hereof (collectively, "Tax Returns"). There are currently no extensions of
time in effect with respect to the dates on which any Tax Returns of the
Company or ▇▇▇▇▇ are due to be filed. Each of the Company and ▇▇▇▇▇ has paid
all federal, state, local or foreign taxes or other governmental charges
(including interest, additions to tax or penalties) (collectively, "Taxes")
imposed with respect to its business operations for all periods prior to the
date hereof. Without limitation, each of the Company and ▇▇▇▇▇ has made all
necessary tax withholding with respect to its employees. There are no Liens
for any Taxes on any of the Acquired Assets that arose in connection with any
failure (or alleged failure) to pay any Taxes and to the Knowledge of
Principals there is no basis for assertion of any claims attributable to
Taxes, which if adversely determined, would result in any such Lien. There
are no outstanding assessments or any Taxes otherwise due that if not paid on
a timely basis would result in any Liens for such assessments or Taxes on any
of the Acquired Assets. All deficiencies asserted as a result of any audit or
examination of any Tax Return of the Company or ▇▇▇▇▇ have been paid in full,
and no deficiencies of any Taxes payable by the Company or ▇▇▇▇▇ are being
proposed or threatened. No audit or investigation of any Tax Return of the
Company or ▇▇▇▇▇ is currently being conducted or pending. There are no
outstanding waivers or agreements for extension of time for the assessment of
any Taxes.
2.13 LEGAL PROCEEDINGS. Except as disclosed in SECTION 2.13 of the
Disclosure Schedule, there are no actions, suits, proceedings, Orders or
investigations pending or, to the Knowledge of Principals, threatened against
the Company or ▇▇▇▇▇ or that otherwise relates to or may affect any of the
Acquired Assets or the financial condition, operating results or business
condition of the Business, at law or in equity, or before or by any federal,
state, municipal or other Governmental or Regulatory Authority. There is no
unsatisfied Order binding upon the Company or ▇▇▇▇▇.
2.14 EMPLOYEES; LABOR MATTERS.
(a) SECTION 2.14(a) of the Disclosure Schedule lists, as of the date
set forth in the Disclosure Schedule, each employee of the Company and
▇▇▇▇▇ who performs functions in connection with the Business and the job
classification, remuneration (including any scheduled salary or
remuneration increases), date of employment and accrued vacation time of
each such employee. Neither the Company nor ▇▇▇▇▇ is delinquent in payments
to any of its employees for any wages, salaries, commissions, bonuses,
severance, termination pay or other direct compensation for any services
performed for it to the date hereof or amounts required to be reimbursed to
such employees.
(b) Except as set forth in SECTION 2.14(b) of the Disclosure Schedule,
neither the Company nor ▇▇▇▇▇ has a policy, practice, plan or program of
paying severance pay or any form of severance compensation in connection
with the termination of employment, and the consummation of the
transactions contemplated by this Agreement will not (either alone or
together with any other acts or events) result in any payment, benefit or
other right becoming due from the Company or ▇▇▇▇▇ to any current or former
employee, director, shareholder, partner, independent contractor or agent
of the Company or ▇▇▇▇▇, nor
14
accelerate the timing or vesting of any such payment, benefit or right, nor
otherwise increase the amount of compensation due to any such Person.
(c) Each of the Company and ▇▇▇▇▇ is in material compliance with all
applicable laws and regulations respecting labor, employment, labor and
union relations, fair employment practices, safety and health, terms and
conditions of employment, and wages and hours except to the extent that any
such non-compliance is not material to the operation of the Business as
presently conducted.
(d) Except as set forth in SECTION 2.14(d) of the Disclosure Schedule,
no charges of employment discrimination or unfair labor practices have been
brought against the Company or ▇▇▇▇▇, nor are there any strikes, slowdowns,
stoppages of work, or any other concerted interference with normal
operations of the Business existing, pending, or, to the Knowledge of
Principals, threatened against or involving the Company or ▇▇▇▇▇.
(e) Except as set forth in SECTION 2.14(e) of the Disclosure Schedule,
neither the Company nor ▇▇▇▇▇ has received notice of any impending,
strikes, slowdowns, concerted interference with normal operations or union
organization activities.
(f) Except as set forth in SECTION 2.14(f) of the Disclosure Schedule,
there are no grievances, complaints or charges that have been filed against
the Company or ▇▇▇▇▇ under any dispute resolution procedure (including, but
not limited to, any proceedings under any dispute resolution procedure
under any collective bargaining agreement).
(g) Neither the Company nor ▇▇▇▇▇ is a party to any labor or
collective bargaining, agreements and none are currently being or are about
to be negotiated by the Company or ▇▇▇▇▇.
(h) Neither the Company nor ▇▇▇▇▇ has received notice of, and to the
Knowledge of Principals, there are no pending or threatened changes with
respect to (including, without limitation, resignation of) the senior
management or key supervisory personnel of the Company or ▇▇▇▇▇.
2.15 IMMIGRATION MATTERS.
(a) With respect to all employees (as defined in Section 274a.1(g) of
Title 8, Code of Federal Regulations) of the Company who perform functions
in connection with the Business, the Company is in compliance in all
material respects with the Immigration Reform and Control Act of 1986 and
all regulations promulgated thereunder ("IRCA") with respect to the
completion, maintenance and other documentary requirements of Forms 1-9
(Employment Eligibility Verification Forms) for all current and former
employees and the reverification of the employment status of any and all
employees whose employment authorization documents indicated a limited
period of employment authorization.
(b) SECTION 2.15(b) of the Disclosure Schedule contains a true and
complete list of all employees of the Company as of May 31, 2002 who,
according to documentation
15
provided to the Company by their employees, are not citizens of the United
States and who are not permanent residents of the United States, together
with a true and complete list of the visa status and visa expiration dates
of each such employee.
(c) Except as set forth on SECTION 2.15(c) of the Disclosure Schedule,
to the Knowledge of Principals, the Company has employed only individuals
authorized to work in the United States. Except as set forth on SECTION
2.15(c) of the Disclosure Schedule, neither the Company nor any Principal
has received any written notice of any inspection or investigation relating
to its or their alleged noncompliance with or violation of IRCA, nor has it
or they been warned, fined or otherwise penalized by reason of any failure
to comply with IRCA.
(d) The consummation of the transactions contemplated by this
Agreement will not (i) give rise to any liability for the failure to
properly complete and update Forms 1-9, (ii) give rise to any liability for
the employment of individuals not authorized to work in the United States,
or (iii) cause any current employee to become unauthorized to work in the
United States.
2.16 EMPLOYEE BENEFITS.
(a) EMPLOYEE PLANS. SECTION 2.16 of the Disclosure Schedule contains a
complete list of Employee Plans maintained or contributed to by the Company
or ▇▇▇▇▇ with respect to all employees and former employees who perform or
performed functions in connection with the Business.
(b) COMPLIANCE; NO CLAIMS. The Employee Plans have been maintained in
compliance, in all material respects, with the terms of such Employee Plans
and in accordance with applicable laws, including but not limited to ERISA
and the Code. With respect to the Employee Plans, (i) all required
contributions which are due have been made and all contributions for any
period ending on or before the Closing Date will on the Closing Date either
be made or properly accrued; (ii) there are no actions, suits or claims
pending, other than routine uncontested claims for benefits; and (iii)
there have been no prohibited transactions (as defined in Section 406 of
ERISA or Section 4975 of the Code) for which either the Company or ▇▇▇▇▇
has or could reasonably be expected to have a material liability.
(c) DOCUMENTS FOR EMPLOYEE PLANS. Buyer has received or had made
available to it true and complete copies of (i) each employee pension plan
(and related trust documents) which covers or has covered employees of the
Company and ▇▇▇▇▇ and all amendments thereto (each, a "Pension Plan");
(ii) each Welfare Plan and Benefit Arrangement; (iii) the most recent
determination letter, if any, issued by the Internal Revenue Service with
respect to each Employee Plan and any amendments to any Employee Plan made
subsequent to or not covered by such determination letter, (iv) the most
recent financial statements and annual reports or returns for the Employee
Plans; and (v) the most recently prepared actuarial valuation reports for
the Employee Plans.
16
(d) NO CHANGES. Since the last day of the last plan year for which an
annual report or return has been filed in respect of an Employee Plan,
there has been no material change with respect to such plan's operation,
administration or financial position.
(e) NO MULTIEMPLOYER PLANS. Neither the Company nor ▇▇▇▇▇ contributes
(or has ever contributed) to any defined benefit Multiemployer Plan.
Neither the Company nor ▇▇▇▇▇ has any actual or potential liabilities under
Section 4201 of ERISA for any complete or partial withdrawal from a
Multiemployer Plan. Neither the Company nor ▇▇▇▇▇ has any actual or
potential liability for death or medical benefits after separation from
employment, other than health care continuation benefits described in
Section 4980B of the Code.
(f) FIDUCIARY RESPONSIBILITY. Neither the Company nor ▇▇▇▇▇ nor any
ERISA Affiliates, nor any of their directors, officers, employees or other
"fiduciaries," as such term is defined in Section 3(21) of ERISA, has
committed any breach of fiduciary responsibility imposed by ERISA or any
other applicable law with respect to the Employee Plans which would subject
an Employee Plan, the Company, ▇▇▇▇▇, any ERISA Affiliates, Buyer or any of
their respective directors, officers or employees to any material liability
under ERISA or any applicable law.
(g) NO PENALTIES OR DISQUALIFICATIONS. Neither the Company nor ▇▇▇▇▇
has incurred any material liability for any tax or civil penalty or any
disqualification of any Employee Plan imposed by Sections 4980B and 4975 of
the Code and Part 6 of Title I and Section 502(i) of ERISA.
2.17 TITLE TO PROPERTIES, CONDITION AND SUFFICIENCY OF ASSETS.
(a) REAL PROPERTY. SECTION 2.17(a) of the Disclosure Schedule includes
a list of the real property owned, used or occupied by the Company in the
operation of the Business (the "Real Property"), its address and the name
of the record owner thereof. The Real Property has access, sufficient for
the conduct of the Business as now conducted or as presently proposed to be
conducted, to public roads and to all utilities, including electricity,
sanitary and storm sewer, potable water, natural gas and other utilities,
used in the operation of the Business at that location. The Company or
▇▇▇▇▇ has delivered to Buyer complete and accurate copies of all deeds,
existing title insurance policies and surveys of or pertaining to the Real
Property and all instruments, agreements and other documents evidencing,
creating or constituting any lien on such Real Property.
(b) LEASES. SECTION 2.17(b) of the Disclosure Schedule includes a list
of all leases of real property to which either the Company or ▇▇▇▇▇ is a
party (the "Facility Leases"). All of the Facilities Leases are in full
force and effect, and the Company or ▇▇▇▇▇ holds a valid and existing
leasehold interest under each of such leases. The Company or ▇▇▇▇▇ has
delivered to Buyer complete and accurate copies of each of the Facility
Leases, and none of the Facility Leases has been modified in any respect,
except to the extent that such modifications are disclosed by the copies
delivered to Buyer. Neither the Company nor ▇▇▇▇▇ is in default under any
Facility Lease, and, to the Knowledge of Principals, no circumstances exist
which, if unremedied, would, either with or without notice or the
17
passage of time or both, result in such default by the Company or ▇▇▇▇▇
under any of the Facility Leases; nor, to the Knowledge of Principals, is
any other party to any Facility Lease in default.
(c) TITLE. ▇▇▇▇▇ owns good and marketable title to each parcel of Real
Property identified in SECTION 2.17(a) of the Disclosure Schedule as being
owned by it and each of the Company and ▇▇▇▇▇ owns good title to each of
the other Acquired Assets identified in the Disclosure Schedule or any
schedule provided in Section 1.01 hereof as being owned by it in each case
free and clear of all Liens, except for (i) Liens for current taxes not yet
due and payable and (ii) Liens imposed by law and incurred in the ordinary
course of business for obligations not yet due to carriers, warehousemen,
laborers and materialmen.
(d) CONDITION. Except as set forth in SECTION 2.17(d) of the
Disclosure Schedule (i) all of the Acquired Assets are in good condition
and repair, and are adequate for the uses to which they are being put; (ii)
there are no defects in such Acquired Assets or other conditions relating
thereto which, in the aggregate, materially adversely affect the operation
or value of such Acquired Assets as of the date hereof and as of the
Closing; and (iii) ▇▇▇▇▇ owns, or leases under valid leases, all of the
Acquired Assets necessary for the conduct of the Business after the Closing
in substantially the same manner as conducted prior to the Closing. SECTION
2.17(d) of the Disclosure Schedule includes a list of all leases of
personal property to which either the Company or ▇▇▇▇▇ is a party (the
"Personal Property Leases"). All of the Personal Property Leases are in
full force and effect, and the Company or ▇▇▇▇▇ holds a valid and existing
leasehold interest under each of such leases. The Company and ▇▇▇▇▇ have
delivered to Buyer complete and accurate copies of each of the Personal
Property Leases, and none of the Personal Property Leases has been modified
in any respect, except to the extent that such modifications are disclosed
by the copies delivered to Buyer. Neither the Company nor ▇▇▇▇▇ is in
default under any Personal Property Lease, and, to the Knowledge of
Principals, no circumstances exist which, if unremedied, would, either with
or without notice or the passage of time or both, result in such default by
the Company or ▇▇▇▇▇ under any of the Personal Property Leases; nor, to the
Knowledge of Principals, is any other party to any Personal Property Lease
in default.
(e) NO VIOLATIONS. Neither the Company nor ▇▇▇▇▇ is in violation of
any applicable zoning ordinance or other law, regulation or requirement
relating to the construction, condition or operation of any properties used
in the operation of the Business, except for such violations which,
individually or in the aggregate, will not or could not reasonably be
expected to have a Material Adverse Effect. Neither the Company nor ▇▇▇▇▇
has received any notice of any such violation, or the existence of any
condemnation proceeding with respect to any of the Real Property.
(f) NO IMPROVEMENTS OR ASSESSMENTS. Neither the Company nor ▇▇▇▇▇ has
knowledge of improvements made or contemplated to be made by any public or
private authority, the costs of which are to be assessed as special taxes
or charges against any of the Real Property, and there are no present
assessments.
18
2.18 ACCOUNTS RECEIVABLE. The accounts receivable of the Business reflected
on the Company's Latest Balance Sheet are valid receivables, were generated in
the ordinary course of business, are not subject to valid counterclaims or
setoffs, and are collectible in accordance with their terms, except to the
extent of the bad debt reserve reflected thereon. SECTION 2.18 of the Disclosure
Schedule contains a complete and accurate list of all accounts receivable
reflected on the Company's Latest Balance Sheet, which list sets forth the aging
of such accounts receivable. Each of the accounts receivable of the Company to
be reflected on the Closing Date Balance Sheet will be a valid receivable,
generated in the ordinary course of business, not subject to valid counterclaim
or setoff, and will be collected within one hundred twenty (120) days of the
Closing Date, except to the extent of the bad debt reserve reflected on the
Closing Date Balance Sheet.
2.19 INVENTORY. Except as set forth in SECTION 2.19 of the Disclosure
Schedule, the inventory of raw materials, work in process and finished goods
reflected on the Company's Latest Balance Sheet or acquired after the date of
the Company's Latest Balance Sheet and reflected on the accounting Records of
the Company as of the date of this Agreement, consists of a quality and quantity
of items which, subject to any reserve for obsolescence, below standard quality
or slow moving inventory on the Company's Latest Balance Sheet, will be used in
the ordinary course of the business of the Company within three hundred
sixty-five (365) days following the Closing Date, except to the extent of any
reserve for obsolescence, below standard quality or slow moving inventory
reflected on the Draft Closing Date Net Working Capital Balance Sheet.
2.20 CONTRACTS.
(a) SECTION 2.20(a) of the Disclosure Schedule contains a true and
complete list of each of the following contracts (true and complete copies
or, if none, reasonably complete and accurate written descriptions of
which, together with all amendments and supplements thereto, have been
delivered to Buyer prior to the execution of this Agreement) to which the
Company or ▇▇▇▇▇ is a party and which relate to the operation of the
Business or the Acquired Assets ("Scheduled Contracts"):
(i) contracts (excluding Employee Plans) providing for a
commitment of employment or consultation services for a specified or
unspecified term, the name, position and rate of compensation of each
Person party to such a contract and the expiration date of each such
contract;
(ii) partnership, joint venture, shareholders' or other similar
contracts with any Person;
(iii) agreement or indenture relating to the borrowing of money
or to mortgaging, pledging or otherwise placing a Lien on any of the
Acquired Assets;
(iv) guaranty of any obligation for borrowed money or otherwise;
(v) contracts with distributors, dealers, manufacturer's
representatives, sales agencies or franchisees which involve the
payment or potential payment,
19
pursuant to the terms of any such contract, by or to the Company or
▇▇▇▇▇ of more than $25,000;
(vi) contracts that (A) involve the payment or potential payment,
pursuant to the terms of any such contract, by or to the Company or
▇▇▇▇▇ of more than $25,000 and (B) cannot be terminated within ninety
(90) calendar days after giving notice of termination without
resulting in any material cost or penalty to the Company;
(vii) contract or group of related contracts with the same party
for the purchase of products or services under which the undelivered
balance of such products or services is in excess of $25,000;
(viii) contract or group of related contracts with the same party
for the sale of products or services under which the undelivered
balance of such products or services has a sales price in excess of
$25,000;
(ix) contract or other commitment for capital expenditures in
excess of $10,000;
(x) contract with any Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, the Company or ▇▇▇▇▇ which in any way relates to
the Business (other than for employment on customary terms); and
(xi) other contracts, agreements, commitments or other
arrangements to be assumed by Buyer.
(b) Each Scheduled Contract is in full force and effect and
constitutes a legal, valid and binding obligation of the Company or ▇▇▇▇▇,
as the case may be, and, to the Knowledge of Principals, of the other
parties thereto. Each of the Company and ▇▇▇▇▇ has performed all material
obligations required to be performed by it in connection with the Scheduled
Contracts and is not in receipt of any claim of default under any Scheduled
Contract. Neither the Company nor ▇▇▇▇▇ has a present expectation or
intention of not fully performing any material obligation pursuant to any
Scheduled Contract; and no Principal has knowledge of any breach or
anticipated breach by any other party to any Scheduled Contract. Neither
the Company nor ▇▇▇▇▇ has made an assignment or transfer of any of its
rights under any of the Scheduled Contracts. Except as disclosed in Section
2.20(b) of the Disclosure Schedule, there is not any Scheduled Contract
that, when performed in accordance with its terms, will, or may reasonably
be expected to, result in any loss on account of such performance following
the Closing.
(c) Except as disclosed in SECTION 2.20 of the Disclosure Schedule, no
consent or approval of any party to any Scheduled Contracts is required to
be obtained by the Principals or the Company or ▇▇▇▇▇ in connection with
the execution and delivery of this Agreement and the consummation of the
transactions hereby.
20
2.21 INSIDER TRANSACTIONS. Except as disclosed in SECTION 2.21 of the
Disclosure Schedule, during the periods covered by the Financial Statements, no
shareholder, member, officer, director or employee of the Company or ▇▇▇▇▇ or
any member of the immediate family of any such shareholder, member, officer,
director or employee, or any entity in which any of such persons owns any
beneficial interest (other than any publicly-held corporation whose stock is
traded on a national securities exchange or in the over-the-counter market and
less than one percent of the stock of which is beneficially owned by any of such
Persons) (collectively "Insiders"), has any agreement with the Company or ▇▇▇▇▇
(other than normal employment arrangements) or any interest in any property,
real, personal or mixed, tangible or intangible, used in or pertaining to the
Business (other than ownership of capital stock of the Company or ownership of a
membership interest in ▇▇▇▇▇). None of the Insiders has any direct or indirect
interest in any competitor, supplier or customer of the Company or ▇▇▇▇▇ or in
any Person from whom or to whom the Company or ▇▇▇▇▇ leases any property, or in
any other Person with whom the Company or ▇▇▇▇▇ transacts business of any
nature. For purposes of this Section 2.21, the members of the immediate family
of a shareholder, member, officer, director or employee shall consist of the
spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and
daughters-in-law, and brothers- and sisters-in-law of such shareholder, member,
officer, director or employee.
2.22 CUSTOMERS AND SUPPLIERS. SECTION 2.22 of the Disclosure Schedule lists
the 10 largest customers and the 10 largest suppliers of the Company relating to
the Business for the fiscal years ended April 30, 2002 and 2001 and sets forth
opposite the name of each such customer or supplier the approximate percentage
of net sales or purchases by the Company attributable to such customer or
supplier for each such period. Since the Company's Latest Balance Sheet Date, to
the Knowledge of Principals, no customer or supplier listed on the Disclosure
Schedule under the caption referencing this Section 2.22 has indicated that it
will stop or decrease the rate of business done with the Company.
2.23 BROKERS. Except as set forth on SECTION 2.23 of the Disclosure
Schedule, all negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by the Company, ▇▇▇▇▇ and the
Principals directly with Buyer without the intervention of any Person on their
behalf in such manner as to give rise to any valid claim by any Person against
Buyer or the Company or ▇▇▇▇▇ for a finder's fee, brokerage commission or
similar payment.
2.24 INTELLECTUAL PROPERTY RIGHTS.
(a) SECTION 2.24(a) of the Disclosure Schedule describes all rights in
patents, patent applications, trademarks, service marks, trade names,
corporate names, copyrights, mask works, trade secrets, know-how or other
intellectual property rights owned by, licensed to or otherwise controlled
by the Company or ▇▇▇▇▇ or used in, developed for use in or necessary to
the conduct of the Business as now conducted (the "Intellectual Property
Rights"). The Company either (i) owns and possesses all right, title and
interest, free and clear of any Liens or (ii) has the right and necessary
permission to use and otherwise benefit from the Intellectual Property
Rights to the extent necessary for its current use now and after the
Closing.
21
(b) SECTION 2.24(b) of the Disclosure Schedule describes all
Intellectual Property Rights which have been licensed to third parties and
those intellectual property rights which are licensed from third parties.
The Company has taken all necessary action to protect the Intellectual
Property Rights described in Section 2.24(b) of the Disclosure Schedule. No
employee or former employee of the Company or ▇▇▇▇▇ has any claim with
respect to any Intellectual Property Rights of the Company or ▇▇▇▇▇.
(c) Neither the Company nor ▇▇▇▇▇ has received any notice of, nor do
the Principals have any knowledge of, any infringement or misappropriation
by any third party with respect to the Intellectual Property Rights. No
claim by any third party contesting the validity of any Intellectual
Property Rights is currently outstanding or, to the Knowledge of
Principals, threatened; neither the Company nor ▇▇▇▇▇ has received any
notice of, nor do the Principals have any knowledge of, any infringement,
misappropriation or violation by the Company or ▇▇▇▇▇ of any intellectual
property rights of any third parties. Neither the Company nor ▇▇▇▇▇ has
infringed, misappropriated or otherwise violated any such intellectual
property rights of any third parties and no infringement, illicit copying,
misappropriation or violation has occurred with respect to products
currently being sold or services provided by the Company or ▇▇▇▇▇ or with
respect to the products or services currently under development (in their
present state of development) or with respect to the conduct of the
Business as now conducted.
(d) The management information software that is a part of the
Intellectual Property Rights is performing in accordance with its
specifications in all material respects. In the event that such software
shall fail, the Company has in place adequate backup Records and accounting
systems that will enable the Company to conduct the Business in the
ordinary course.
2.25 INSURANCE. SECTION 2.25 of the Disclosure Schedule lists and briefly
describes each insurance policy or fidelity bond maintained by the Company or
▇▇▇▇▇ with respect to the Acquired Assets and operations of the Business and
sets forth the date of expiration of each such insurance policy. All of such
insurance policies are in full force and effect, are issued by insurers of
recognized responsibility and are in such amounts and against such hazards as is
customary in the case of reputable firms engaged in the same business as the
Company and similarly situated. Neither the Company nor ▇▇▇▇▇ is in default with
respect to its obligations under any of such insurance policies and fidelity
bonds and no notice of cancellation or termination of any such insurance
policies has been given to the Company or ▇▇▇▇▇.
2.26 WARRANTY AND RELATED MATTERS. Except as disclosed in SECTION 2.26 of
the Disclosure Schedule, all of the products manufactured, sold, leased, and
delivered by the Company with respect to the Business have conformed in all
respects with all applicable contractual commitments and all express and implied
warranties, and the Company does not have any liability (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due) for replacement or repair thereof or other damages in connection
therewith, except to the extent of any reserve for product warranty claims set
forth on the face of the Company's Latest Balance Sheet as adjusted for
operations and transactions through the Closing Date in accordance with the past
custom and
22
practice of the Company. SECTION 2.26 of the Disclosure Schedule summarizes all
claims outstanding, pending or, to the Knowledge of Principals, threatened for
breach of any warranty relating to any products sold or services provided by the
Company prior to the date hereof. Section 2.26 of the Disclosure Schedule also
contains a correct and complete description of each of the warranties relating
to any product of the Business.
2.27 COMPLIANCE WITH LAWS; PERMITS.
(a) The Company, ▇▇▇▇▇ and their respective officers, directors,
agents and employees have been in compliance with all applicable laws,
regulations and other requirements, including, but not limited to, federal,
state, local and foreign laws, ordinances, rules, regulations and codes
which affect the Business or the Acquired Assets and to which the Company
or ▇▇▇▇▇ ▇▇▇ be subject, except where such noncompliance, individually or
in the aggregate, will not or could not reasonably be expected to have a
Material Adverse Effect, and no action, suit, proceeding, hearing,
investigation, charge, claim, demand or notice has been filed or commenced
against the Company or ▇▇▇▇▇ alleging a violation of any such laws,
regulations or other requirements.
(b) Each of the Company and ▇▇▇▇▇ has in full force and effect, all
licenses, permits and certificates, from federal, state, local and foreign
authorities (including, without limitation, federal and state agencies
regulating occupational health and safety) necessary to conduct the
Business and own or operate the Acquired Assets, including the Real
Property (collectively, the "Permits") except where the failure to have the
Permits in effect, individually or in the aggregate, will not or could not
reasonably be expected to have a Material Adverse Effect. A true, correct
and complete list of all the Permits is set forth under the caption
referencing this SECTION 2.27(b) of the Disclosure Schedule with an
indication as to whether the Permit is assignable to Buyer. The Company and
▇▇▇▇▇ have conducted the Business in compliance with the terms and
conditions of the Permits, except where the failure to be in such
compliance, individually or in the aggregate, will not or could not
reasonably be expected to have a Material Adverse Effect. All Permits have
been lawfully and validly issued, and no proceeding is pending or, to the
Knowledge of Principals, threatened with respect to the revocation,
suspension or limitation of any of the Permits.
2.28 ENVIRONMENTAL, HEALTH AND SAFETY MATTERS.
(a) Except as set forth in SECTION 2.28(a) of the Disclosure Schedule,
each of the Company and ▇▇▇▇▇ is in compliance with all Environmental,
Health and Safety Requirements with respect to the Business and the
Acquired Assets, except for such noncompliance as could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Without limiting the generality of the foregoing, each of the
Company and ▇▇▇▇▇ has obtained, has complied, and is in compliance with,
all permits, licenses and other authorizations that are required pursuant
to Environmental, Health, and Safety Requirements for the occupation of its
facilities and the operation of the Business, except for such non-
23
compliance as could not, in the aggregate, reasonably be expected to
have a Material Adverse Effect; a list of all such permits, licenses and
other authorizations is set forth in SECTION 2.28(b) of the Disclosure
Schedule (the "Environmental Permits") with an indication as to whether
the Environmental Permit is assignable to Buyer.
(c) Neither the Company nor ▇▇▇▇▇ has received any written or oral
notice, report or other information regarding any actual or alleged
violation of Environmental, Health and Safety Requirements or any
liabilities or potential liabilities including any investigatory,
remedial or corrective obligations relating to the Company, ▇▇▇▇▇ or
their facilities, the subject of which could reasonably be expected to
have a Material Adverse Effect.
2.29 GUARANTIES. Except as set forth in Section 2.20(a) of the
Disclosure Schedule, neither the Company nor ▇▇▇▇▇ is a guarantor or
otherwise liable for any liability or obligation (including indebtedness) of
any other Person.
2.30 DISCLOSURE. No statement contained herein or in any Exhibit hereto
or any Section of the Disclosure Schedule provided by the Company or ▇▇▇▇▇ or
either Principal contains or will contain any untrue statement of a material
fact regarding the Company, ▇▇▇▇▇ or the Business or omits or will omit any
material fact necessary to make the statements contained herein or therein
not misleading, and there is no fact which has not been disclosed to Buyer of
which the Company, ▇▇▇▇▇ or either Principal or any of their officers or
directors is aware which materially affects adversely or could reasonably be
anticipated to materially affect adversely the Acquired Assets or the
Business, including operating results, financial condition, assets, customer
relations, employee relations or business prospects.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Principals as follows:
3.01 CORPORATE EXISTENCE. Buyer is a
Minnesota corporation validly
existing and in good standing under the laws of the State of
Minnesota.
Buyer has full corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.
3.02 ENFORCEABILITY; AUTHORITY. This Agreement constitutes the legal,
valid and binding obligation of Buyer enforceable against Buyer in accordance
with its terms. Upon the execution and delivery of the Buyer Note under the
▇▇▇▇▇▇▇ Agreement, the Assignment and Assumption Agreement, the Employment
Agreements, the ▇▇▇▇▇▇▇ Agreement and each other agreement to be executed or
delivered by Buyer at Closing (the "Buyer's Closing Documents"), each of the
Buyer's Closing Documents will constitute the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its
respective terms. The Buyer has the absolute and unrestricted right, power
and authority to execute and deliver this Agreement and the Buyer's Closing
Documents, and such action has been authorized by the board of directors of
Buyer, no other corporate action on the part of Buyer or its shareholders
being necessary.
24
3.03 NO CONFLICTS. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby, will:
(a) conflict with or result in a violation or breach of any of the
Governing Documents of Buyer,
(b) conflict with or result in a violation or breach by the Buyer
of any constitution, statute, regulation, rule, Order or other
restriction of any Governmental or Regulatory Authority to which the
Buyer is subject; other than such conflicts, violations or breaches (i)
which could not in the aggregate reasonably be expected to materially
and adversely affect the validity or enforceability of this Agreement or
to have a Material Adverse Effect on Buyer, or
(c) except as disclosed in SECTION 3.03 of the Disclosure Schedule,
conflict with or result in a violation or breach of, constitute (with or
without notice or lapse of time or both) a default under, result in the
acceleration of, create in any Person the right to accelerate,
terminate, modify, or cancel, or require any notice under, any
agreement, contract lease, license, instrument, or other arrangement to
which Buyer is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Lien upon any of
its assets), which, individually or in the aggregate is material to the
validity or enforceability of this Agreement or could in the aggregate
be reasonably expected to have a Material Adverse Effect on Buyer.
3.04 GOVERNMENTAL APPROVALS AND FILINGS. Except as disclosed in SECTION
3.04 of the Disclosure Schedule, Buyer is not required to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of
any Governmental or Regulatory Authority in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
3.05 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Buyer directly with
the Company, ▇▇▇▇▇ and the Principals without the intervention of any Person
on behalf of Buyer in such manner as to give rise to any valid claim by any
Person against the Company or ▇▇▇▇▇ or any Principal for a finder's fee,
brokerage commission or similar payment.
3.06 FINANCING. Buyer has delivered to the Company and ▇▇▇▇▇ true and
complete copies of the commitment letters described in EXHIBIT D (the
"Financing Commitments") for financing required to close the transactions
contemplated by this Agreement (the "Financing"). Subject to the satisfaction
of the terms and conditions set forth in the Financing Commitments, the
Financing will be sufficient to consummate the transactions contemplated by
this Agreement and to pay all of the related fees and expenses.
25
ARTICLE IV
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the date
of this Agreement and the Closing.
4.01 GENERAL. Each of the parties will use his or its reasonable best
efforts to take all action and to do all things necessary or advisable in
order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions
set forth in Articles VI and VII below).
4.02 CONDUCT OF BUSINESS. The Business will be conducted only in, and
the Company and ▇▇▇▇▇ will not take any action except in, the ordinary
course, on an arm's-length basis and in accordance in all material respects
with all applicable laws, rules and regulations and past custom and practice.
Without limiting the generality of the foregoing and unless Buyer has been
given prior written consent, neither the Company nor ▇▇▇▇▇ will take, or
commit to take, any of the actions described in Section 2.11 of this
Agreement insofar as they relate to the Business or the Acquired Assets.
4.03 PRESERVATION OF BUSINESS. The Company and ▇▇▇▇▇ will each (i) use
its best efforts to preserve intact the present business organization and
goodwill of the Business, keep available the services of its officers and
employees as a group and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with it in
connection with the Business; (ii) maintain the Acquired Assets in a state of
repair and condition that complies with legal requirements and is consistent
with the requirements and normal conduct of the Business; (iii) confer on a
regular and frequent basis with representatives of Buyer to report
operational matters and the general status of ongoing operations; (iv) not
intentionally take any action which would render, or which reasonably may be
expected to render, any representation or warranty made by it in this
Agreement untrue at the Closing; (v) notify Buyer of any emergency or other
change in the normal course of the Business or in the operation of the
properties of the Business and of any governmental or third party complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) if such emergency, change, complaint, investigation or hearing
would be material to the business operations or financial condition of the
Company or ▇▇▇▇▇; and (vi) promptly notify Buyer in writing if the Company or
▇▇▇▇▇ shall discover that any representation or warranty made by it or any
Principal in this Agreement was when made, or has subsequently become, untrue
in any material respect.
4.04 FULL ACCESS. The Company and ▇▇▇▇▇ will each (a) provide Buyer and
its officers, employees, counsel, accountants, financial advisors,
consultants, lenders, and other representatives (together, "REPRESENTATIVES")
with full access, at all times and upon reasonable notice, to all premises,
properties, books, Records (including Records relating to Taxes), contracts,
documents, attorneys, accountants, employees, and other advisors and other
information of or pertaining to the Business and the Acquired Assets, but
only to the extent that such access does not unreasonably interfere with the
business and operations off each of the Company and ▇▇▇▇▇ and, with respect
to Records relating to Taxes, only for the periods related to the Financial
Statements provided under this Agreement.
26
4.05 CURRENT EVIDENCE OF TITLE.
(a) TITLE COMMITMENTS. Within a reasonable period of time after the
date of this Agreement and in any event not less than ten (10) Business
Days after the date hereof, ▇▇▇▇▇ shall, at its own expense, obtain and
deliver to Buyer commitments (the "Commitments") issued by Chicago Title
Insurance Company (the "Title Company") and dated after the date hereof
for the issuance of an ALTA 1992 form owner's policy of title insurance
(the "Title Policy") for each parcel of Real Property. The Commitments
and the Title Policy to be issued by the Title Company shall have all
standard and general exceptions deleted so as to afford full "extended
form coverage" and shall contain an ALTA Zoning Endorsement 3.1,
contiguity and such other endorsements as may be reasonably requested by
Buyer. At the Closing, upon delivery of supporting documentation from
the Title Company, Buyer shall reimburse ▇▇▇▇▇ for that portion of the
cost of the Title Policy that is in excess of $6,000.00. At the Closing,
▇▇▇▇▇ shall deliver to Buyer a warranty deed for each parcel of Real
Property which shall be in recordable form free and clear of all liens,
claims and encumbrances of every kind or character whatsoever, other
than Permitted Exceptions, and for each such parcel such affidavits or
other instruments as the Title Company may require to delete standard
and general exceptions and to provide the special endorsements required
hereunder. ▇▇▇▇▇ shall cause the Commitments to be later-dated to cover
the Closing and the recording of the deeds to be delivered at the
Closing and to cause the Title Company to deliver the Title Policy at
the Closing as directed by Buyer.
(b) SURVEY. Within a reasonable period of time after the date of
this Agreement and in any event not less than thirty (30) days after the
date hereof, ▇▇▇▇▇ shall, at its own expense, deliver to Buyer and the
Title Company an as-built plat of survey of each parcel of Real Property
(the "Surveys") prepared by a registered land surveyor or engineer,
licensed in the respective states in which the Real Property is located,
dated on or after the date hereof, certified to the Buyer, the Title
Company, and such other entities as the Buyer may designate in writing
to ▇▇▇▇▇ prior to the Closing, and conforming to current ALTA Minimum
Detail Requirements for Land Title Surveys, sufficient to cause the
Title Company to delete the standard printed survey exception, and to
issue the Title Policy free from any survey objections or exceptions
whatsoever other than those set forth on Section 4.05 of the Disclosure
Schedule. Each Survey shall show access from the land to dedicated
public roads and shall include a flood plain certification. Any Survey
may be a recertification of a prior survey, provided that it meets the
above described criteria.
(c) UNPERMITTED EXCEPTIONS; SURVEY DEFECTS. If (i) any Commitment
discloses a title exception other than a Permitted Exception (an
"Unpermitted Exception") or (ii) any Survey discloses an encroachment,
overlap, or gap or any other matter which renders title to any parcel
of Real Property or reflects any other matter adversely affecting the
use or improvements of the parcel of Real Property, other than as set
forth on SECTION 4.05 of the Disclosure Schedule (a "Survey Defect"),
then ▇▇▇▇▇, prior to the Closing, shall use all reasonable efforts to
have the Unpermitted Exception removed from such Commitment or the Survey
Defect corrected or insured over by an appropriate title insurance
endorsement, all in a manner reasonably satisfactory to Buyer. If after
using all reasonable efforts, ▇▇▇▇▇
27
fails to have any Unpermitted Exception removed or any Survey Defect
corrected or otherwise insured over to the satisfaction of Buyer prior
to the Closing, Buyer, at its sole option, may: (i) take title to the
subject parcel as it then is with the right to deduct from the
consideration to be paid pursuant to Section 1.05 only an amount equal
to the ascertainable amount, if any, necessary to remove Unpermitted
Exceptions securing payment of deeds of trust, liens, judgments or other
monetary obligations; provided, however, that in no instance may use
amount deducted with respect to any parcel exceed the portion of the
Purchase Price reasonably allocable to such parcel; or (ii) terminate
this Agreement and all of Buyer's obligations hereunder with the effect
as set forth in Article IX.
4.06 EXCLUSIVITY. Neither the Company, nor ▇▇▇▇▇, nor either Principal
will (i) solicit, initiate, or encourage the submission of any proposal or
offer from any Person relating to the acquisition of any of the capital stock
or all or substantially all of the assets of the Company or ▇▇▇▇▇ (including
any acquisition structured as a merger, consolidation, or share exchange) or
(ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. In the event that the Company, ▇▇▇▇▇ or either Principal receives
any inquiry or proposal therefor, such receiving party will promptly notify
Buyer thereof and discontinue or cause to discontinue (and decline to
participate in) the same.
4.07 NOTICE OF DEVELOPMENTS. Each of the Company, ▇▇▇▇▇ and the
Principals will give prompt written notice to Buyer of any development
causing a breach of any of its representations and warranties in Article II
hereof. Buyer will give prompt written notice to the Company and ▇▇▇▇▇ of any
development causing a breach of any of its representations and warranties in
Article III hereof. No disclosure by any party pursuant to this Section 4.06,
however, shall be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty or breach of
covenant.
4.08 CHANGE OF NAME. On or before the Closing Date, the Company shall
(a) amend its Governing Documents and take all actions necessary to change
its name to one sufficiently dissimilar to the Company's present name, in
Buyer's judgment, to avoid confusion and (b) take all actions requested by
Buyer to enable Buyer to change its name to the Company's present name.
4.09 SOFTWARE LICENSES. On or before the Closing Date, the Company
shall, at its own expense, order software licenses for all barcode stations
and workstations used in the Business, including but not limited to those
listed as unlicensed on Section 1.01(d) of the Disclosure Schedule. The
ordered software licenses shall be installed within a reasonable period of
time after the date ordered and in any event not later than thirty (30) days
after the Closing Date.
4.10 PERMIT APPLICATIONS. On or before the Closing Date, the Company
shall, at its own expense, submit applications for, or arrange for the
preparation of an application for, a stormwater permit and a basic air permit
for the Company's facility located at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇.
The Company shall promptly respond to all requests for further information
from the Governmental or Regulatory Authority issuing said permits and will
use its best efforts to have them issued within a reasonable period of time
after the date applied for and
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in any event not later than ninety (90) days after the Closing Date, subject
to processing delays on the part of the issuing Governmental or Regulatory
Authority that are not within the control of the Company.
ARTICLE V
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period following the
Closing:
5.01 GENERAL. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the parties
will take such further action (including the execution and delivery of such
further instruments and documents) as any other party reasonably may request,
all at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification therefor under Section 8.02
or 8.03 below). The Company, ▇▇▇▇▇ and the Principals acknowledge and agree
that from and after the Closing Buyer will be entitled to possession of all
Records relating to the Business and the Acquired Assets, PROVIDED, HOWEVER,
that Buyer shall make copies of such Records available to the Company, ▇▇▇▇▇
or the Principals upon request after the Closing.
5.02 FURTHER ASSURANCES; POST-CLOSING COOPERATION.
(a) Subject to the terms and conditions of this Agreement, at any
time or from time to time after the Closing, each of the parties hereto
shall execute and deliver such other documents and instruments, provide
such materials and information and take such other actions as may
reasonably be necessary, proper or advisable, to the extent permitted by
applicable laws, to fulfill its obligations under this Agreement.
(b) In the event and for so long as any party hereto is actively
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction
involving the Acquired Assets or the Business, the other parties will
cooperate with the contesting or defending party and its counsel in the
contest or defense, reasonably make available its personnel, and provide
such testimony and access to its Records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense
of the contesting or defending party (unless the contesting or defending
party is entitled to indemnification therefor under Article VIII below).
5.03 TRANSITION. Neither the Company, nor ▇▇▇▇▇ nor the Principals will
take any action that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of the Company or ▇▇▇▇▇ in connection with the operation of the
Business from maintaining the same business relationships with the Buyer
after the Closing as it maintained with the Company and ▇▇▇▇▇ prior to the
Closing.
29
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF BUYER
The obligation of the Buyer to consummate the transactions contemplated
by this Agreement is subject to the fulfillment, at or before the Closing, of
each of the following conditions (all or any of which may be waived in whole
or in part by Buyer in its sole discretion):
6.01 REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties contained in Article II of
this Agreement shall be true and correct in all material respects on and
as of the Closing Date as though made on and as of the Closing Date or,
in the case of representations and warranties made as of a specified
date earlier than the Closing Date, on and as of such earlier date;
(b) Each of the Company, ▇▇▇▇▇ and the Principals shall have
performed and complied with the agreements, covenants and obligations
required by this Agreement to be so performed or complied with by it at
or before the Closing;
(c) No action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or (iii) affect
materially and adversely the right of each of the Company and ▇▇▇▇▇ to
own the Acquired Assets and to operate the Business (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect); and
(d) The Company, ▇▇▇▇▇ and the Principals shall have delivered to
Buyer a certificate to the effect that each of the conditions specified
in (a), (b) and (c) is satisfied in all respects, and that, to the
Knowledge of Principals, no fact or condition exists or is threatened or
contemplated which will have or could reasonably be expected to have a
Material Adverse effect
6.02 WARRANTY DEED. ▇▇▇▇▇ shall have executed and delivered to Buyer the
Warranty Deed substantially in the form of EXHIBIT A attached hereto for each
parcel of Real Property.
6.03 ▇▇▇▇ OF SALE. The Company and ▇▇▇▇▇ shall have executed and
delivered to Buyer the ▇▇▇▇ of Sale substantially in the form of EXHIBIT B
attached hereto, and such other instruments of conveyance, transfer,
assignment and delivery as Buyer shall have reasonably requested pursuant to
Section 1.06 hereof.
6.04 ASSIGNMENT AND ASSUMPTION AGREEMENT. The Company and ▇▇▇▇▇ shall
have executed and delivered the Assignment and Assumption Agreement
substantially in the form of EXHIBIT E attached hereto (the "Assignment and
Assumption Agreement").
30
6.05 CONSENTS. The Company and ▇▇▇▇▇ shall have provided Buyer with
copies of each of the consents necessary to consummate the transactions
contemplated by this Agreement (including without limitation the consents
listed in SECTIONS 2.05(c), 2.06 AND 2.20(c) of the Disclosure Schedule),
each of which shall be in form and substance reasonably acceptable to the
Company and Buyer. The Company and ▇▇▇▇▇ shall deliver to Buyer executed
copies of each of the consents when received and in any event not later than
sixty (60) days after the Closing Date.
6.06 ASSIGNMENT OF SCHEDULED CONTRACTS AND PERMITS. The Company and
▇▇▇▇▇ shall have assigned to Buyer the Scheduled Contracts to be assumed by
Buyer. Permits and Environmental Permits specified in the Disclosure Schedule
under the captions referencing Sections 2.20, 2.27 and 2.28, respectively.
6.07 ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS. The Company shall have
assigned to Buyer the Intellectual Property Rights specified in the
Disclosure Schedule under the caption referencing Section 2.24(a).
6.08 TITLE INSURANCE. ▇▇▇▇▇ shall have caused Buyer to receive title
insurance policies and endorsements with respect to the Real Property, in
form and substance reasonably satisfactory to Buyer, insuring Buyer to have
fee title thereto free and clear of all liens, claims and encumbrances of
every kind or character whatsoever, subject only to current real estate
taxes not yet due and payable as of the Closing Date, Liens reflected on
Section 4.05 of the Disclosure Schedule, and such other covenants,
conditions, easements and exceptions to title as Buyer may approve in writing
(collectively, the "Permitted Exceptions").
6.09 CERTIFICATES OF TITLE. The Company and ▇▇▇▇▇ shall have delivered
certificates of title or origin with respect to all Vehicles included in the
Acquired Assets and other Acquired Assets for which a certificate of title or
origin is required, with any necessary accompanying assignments, in order for
title to be transferred to Buyer.
6.10 EMPLOYMENT AGREEMENTS. Buyer and each of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall have entered into employment agreements substantially
in the forms of EXHIBIT F and EXHIBIT G attached hereto, respectively (the
"Employment Agreements"), and such agreements shall be in full force and
effect as of the Closing.
6.11 AGREEMENT. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall have entered into an agreement
substantially in the form of EXHIBIT H attached hereto (the "▇▇▇▇▇▇▇
Agreement").
6.12 RELEASES. The Company and ▇▇▇▇▇ shall have delivered to Buyer
releases of all Liens on the Acquired Assets, including releasing each
mortgage of record and reconveyance of each deed of trust with respect to
each parcel of Real Property.
6.13 FINANCING. Buyer shall have received the proceeds of the Financing
Commitments.
6.14 OPINION OF COUNSEL. Buyer shall have received the opinion of
▇▇▇▇▇▇▇ LeChevallier P.C., counsel to the Company, ▇▇▇▇▇ and the Principals,
dated the Closing Date, in form and
31
substance as set forth in EXHIBIT I attached hereto, addressed to Buyer and
on which Buyer's lenders shall be entitled to rely.
6.15 SECRETARY'S CERTIFICATE. Each of the Company and ▇▇▇▇▇ shall have
delivered to Buyer a certificate of its secretary dated as of the Closing
Date certifying that (i) attached thereto is a true and complete copy of its
articles of incorporation or articles of organization, certified as of a
recent date by the Oregon Secretary of State, (ii) attached thereto is a true
and complete copy of its Bylaws or similar governing document as in effect on
the date of such certificate, (iii) attached thereto is a true and complete
copy of the resolutions adopted by the board of directors and the
shareholders or members, as the case may be, approving this Agreement, all
other agreements and documents contemplated hereby and the consummation of
the transactions contemplated hereby and thereby; and (iv) as to the
incumbency and genuineness of the signature of each officer of the Company
and ▇▇▇▇▇ executing this Agreement or any of the other documents contemplated
hereby.
6.16 EMPLOYEES. Except as provided in Section 6.10, substantially all
other employees of the Company shall be available for hiring by Buyer in its
sole discretion, on and as of the Closing Date. Prior to the Closing Date,
Buyer shall provide the Company with a list of employees to whom it intends
to offer employment following the Closing.
6.17 ADDITIONAL DOCUMENTS. The Company and ▇▇▇▇▇ shall have delivered
any and all other documents reasonably requested by Buyer or its counsel.
6.18 CLOSING DOCUMENTS. All actions to be taken by the Company, ▇▇▇▇▇
and either Principal in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to Buyer and its counsel.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE COMPANY AND ▇▇▇▇▇
The obligations of the Company and ▇▇▇▇▇ to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before
the Closing, of each of the following conditions (all or any of which may be
waived in whole or in part by the Company and ▇▇▇▇▇ in their sole discretion):
7.01 REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties made by Buyer in Article III
of this Agreement, shall be true and correct in all material respects on
and as of the Closing Date as though made on and as of the Closing Date
or, in a case of representations and warranties made as of a specified
date earlier than the Closing Date, on and as of such earlier date;
(b) Buyer shall have performed and complied with the agreements,
covenants and obligations required by this Agreement to be so performed
or complied with by Buyer at or before the Closing;
32
(c) No action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge
would (i) prevent consummation of any of the transactions contemplated
by this Agreement or (ii) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect); and
(d) Buyer shall have delivered to the Company and ▇▇▇▇▇ a
certificate to the effect that each of the conditions specified in (a),
(b) and (c) is satisfied in all respects.
7.02 PURCHASE PRICE. At the Closing, the Purchase Price to be paid at
Closing shall be paid by Buyer in accordance with Section 1.07.
7.03 ASSIGNMENT AND ASSUMPTION AGREEMENT. Buyer shall have executed and
delivered the Assignment and Assumption Agreement substantially in the form
of EXHIBIT E attached hereto.
7.04 OFFICERS' CERTIFICATES. Buyer shall have delivered to the Company
and ▇▇▇▇▇ an officer's certificate dated as of the Closing Date certifying
that (i) attached thereto is a true and complete copy of Buyer's Articles of
Incorporation and all amendments thereto; (ii) attached thereto is a true and
complete copy of Buyer's Bylaws as in effect on the date of such
certification; (iii) attached thereto is a true and complete copy of
resolutions of Buyer's board of directors and, to the extent required, its
shareholders approving this Agreement, all other agreements and documents
contemplated hereby and the consummation of the transactions contemplated
hereby and thereby; and (iv) as to the incumbency and genuineness of the
signature of each officer of Buyer executing this Agreement or any of the
other documents contemplated hereby.
7.05 OPINION OF COUNSEL. The Company and ▇▇▇▇▇ shall have received the
opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, P.A., counsel to Buyer, dated the
Closing Date in form and substance as set forth in EXHIBIT J attached hereto,
addressed to the Company and ▇▇▇▇▇.
7.06 ADDITIONAL DOCUMENTS. Buyer shall have delivered any and all other
documents reasonably requested by the Company or its counsel.
7.07 CLOSING DOCUMENTS. All actions to be taken by Buyer in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby shall be reasonably satisfactory in form
and substance to the Company and its counsel.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS, INDEMNIFICATION
8.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
The representations and warranties of the Company, ▇▇▇▇▇, the Principals and
Buyer contained in this
33
Agreement will survive the Closing and remain in full force and effect for a
period of thirty (30) months from the date of the Closing. The covenants and
agreements of the parties contained in this Agreement shall survive the Closing
unless and until they are otherwise terminated pursuant to their terms or as a
matter of applicable laws.
8.02 INDEMNIFICATION BY THE COMPANY, ▇▇▇▇▇ AND THE PRINCIPALS.
(a) Subject to the limitations of Section 8.02(b), 8.02(c), 8.02(d)
and 8.02(e) each of the Company, ▇▇▇▇▇ and the Principals, jointly and
severally, agrees to indemnify Buyer and its officers, directors,
employees, agents, shareholders and Affiliates (collectively, the "Buyer
Indemnified Parties") and hold them harmless against any loss, liability,
deficiency, damage, expense or cost (including reasonable legal fees) (each
a "Loss" and collectively, "Losses"), which Buyer Indemnified Parties may
suffer, sustain, or become subject to, (i) prior to any applicable
termination date, as a result of any misrepresentation in any of the
representations and warranties of the Company, ▇▇▇▇▇ or either Principal
contained in this Agreement or in any exhibits, schedules, certificates or
documents delivered or to be delivered by or on behalf of the Company, or
▇▇▇▇▇ or either Principal pursuant to the terms of this Agreement (the
"Related Documents"), (ii) as the result of any breach of, or failure to
perform any agreement of the Company, ▇▇▇▇▇ or either Principal contained
in this Agreement, (iii) as the result of any product remakes incurred in
connection with or arising from products sold by the Company prior to the
Closing Date, (iv) as the result of any failure by the Company to obtain
the permits listed on Section 2.28 of the Disclosure Schedule or (v) as a
result of any Claims (as defined in Section 8.04(a) hereof) or threatened
Claims arising out of the actions or inactions of the Company or ▇▇▇▇▇ or
either Principal with respect to the ownership or operation of the Acquired
Assets or the Business prior to the Closing other than the Assumed
Liabilities (the Losses described in clauses (i) through (v) hereof are
collectively referred to herein as "Buyer Losses").
(b) Neither the Company, nor ▇▇▇▇▇ nor either Principal shall be
liable to the Buyer Indemnified Parties for any Buyer Losses described in
Clause (i) of Section 8.02(a) unless and until, and only to the extent
that, the total Buyer Losses for which they would otherwise be liable
under said Clause (i) exceeds $150,000.00 (the "Deductible"), in which case
they shall only be obligated to indemnify Buyer for Losses in excess of the
Deductible; PROVIDED, HOWEVER, the Deductible shall not apply to any Buyer
Losses with respect to or as a result of a breach of a representation or
warranty in Sections 2.02(b) (Organization and Corporate Power), 2.12 (Tax
Returns and Payments; Tax Liens; Tax Matters), 2.16 (Employee Benefits),
2.17(c) (Title) and 2.28 (Environmental, Health and Safety Matters);
PROVIDED, FURTHER, that in applying the foregoing, the Company, ▇▇▇▇▇ and
the Principals shall be considered a single party.
(c) The aggregate liability of the Company, ▇▇▇▇▇ and the Principals
to indemnify the Buyer Indemnified Parties for any Buyer Losses described
in Clause (i) of Section 8.02(a) shall be an amount which shall not exceed
$1,750,000.00; PROVIDED, HOWEVER, that the foregoing shall not apply to any
Buyer Losses with respect to or as a result of a breach of a representation
or warranty in Sections 2.02(b) (Organization and
34
Corporate Power), Section 2.12 (Tax Returns and Payments; Tax Liens; Tax
Matters), 2.16 (Employee Benefits), 2.17(c) (Title) and 2.28
(Environmental, Health and Safety Matters).
(d) The aggregate liability of the Company, ▇▇▇▇▇ and the Principals
to indemnify Buyer for any Buyer Losses described in Clause (i) of Section
8.02(a) with respect to a breach of a representation or warranty in
Sections 2.12 (Tax Returns and Payments; Tax Liens; Tax Matters), 2.16
(Employee Benefits) and 2.28 (Environmental, Health and Safety Matters)
shall not exceed the difference between (i) $2,500,000.00 and (ii) the
amount of any other Buyer Losses previously paid by the Company, ▇▇▇▇▇ and
the Principals pursuant to Clause (i) of Section 8.02(a).
(e) Neither the Company, nor ▇▇▇▇▇ nor either Principal shall be
liable to the Buyer Indemnified Parties for any Buyer Losses described in
Clause (iii) of Section 8.02(a) unless and until, and only to the extent
that, the total Buyer Losses for which they would otherwise be liable
under said Clause (iii) exceeds the amount of the reserve reflected on the
face of the Net Working Capital Balance Sheet.
(f) For the purposes of determining Buyer Losses, the representations
and warranties in Article II hereof, shall be deemed to be made without
reference to any materiality qualifications, including, without limitation
Material Adverse Effect qualifications.
8.03 INDEMNIFICATION BY BUYER.
(a) Buyer agrees to indemnify the Company, ▇▇▇▇▇ and the Principals
and their officers, directors, employees, agents and Affiliates
(collectively, the "Principal Indemnified Parties") and hold them harmless
against any Losses which any of the Principal Indemnified Parties may
suffer, sustain or become subject to as a result of (i) any
misrepresentation in any of the representations and warranties of Buyer
contained in this Agreement or in any of the Related Documents, (ii) any
breach of, or failure to perform, any agreement of Buyer contained in this
Agreement or any of the Related Documents, or (iii) any Claims or
threatened Claims against the Company or ▇▇▇▇▇ or either Principal arising
out of the actions or inactions of Buyer with respect to the ownership or
operation of the Acquired Assets or the Business after the Closing other
than the Retained Liabilities (the Losses described in clauses (i) through
(iii) hereof are collectively referred to as "Principal Losses").
8.04 METHOD OF ASSERTING CLAIMS. As used herein, an "Indemnified Party"
shall refer to a "Buyer Indemnified Party" or a "Principal Indemnified Party",
as applicable, the "Notifying Party" shall refer to the party hereto whose
Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or
administrative, instituted by any third party,
35
the liability or the costs or expenses of which could result in a Loss (any
such third party action or proceeding being referred to as a "Claim"), the
Notifying Party shall give the Indemnifying Party prompt notice thereof.
The failure to give such notice shall not affect any Indemnified Party's
ability to seek reimbursement unless and only to the extent such failure
has materially and adversely affected the Indemnifying Party's ability to
defend successfully a Claim. The Indemnifying Party shall be entitled to
contest and defend such Claim; PROVIDED, that the Indemnifying Party (i)
has a reasonable basis for concluding that such defense may be successful
and (ii) diligently contests and defends such Claim. Notice of the
intention so to contest and defend shall be given by the Indemnifying Party
to the Notifying Party within 15 days after the Notifying Party's notice of
such Claim (but, in all events, at least five Business Days prior to the
date that an answer to such Claim is due to be filed). Such contest and
defense shall be conducted by reputable attorneys employed by the
Indemnifying Party. The Notifying Party shall be entitled at any time, at
its own cost and expense (which expense shall not constitute a Loss unless
the Notifying Party reasonably determines that the Indemnifying Party is
not adequately representing or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties, and then
only to the extent that such expenses are reasonable) to participate in
such contest and defense and to be represented by attorneys of its or their
own choosing. If the Notifying Party elects to participate in such defense,
the Notifying Party will cooperate with the Indemnifying Party in the
conduct of such defense. Neither the Notifying Party nor the Indemnifying
Party may concede, settle or compromise any Claim without the consent of
the other party, which consents will not be unreasonably withheld.
Notwithstanding the foregoing, (i) if a Claim seeks equitable relief or
(ii) if the subject matter of a Claim relates to the ongoing business of
any of the Indemnified Parties, which Claim, if decided against any of the
Indemnified Parties, would materially and adversely affect the ongoing
business or reputation of any of the Indemnified Parties, then, in each
such case, the Indemnified Parties alone shall be entitled to contest,
defend and settle such Claim in the first instance and, if the Indemnified
Parties do not contest, defend or settle such Claim, the Indemnifying Party
shall then have the right to contest and defend (but not settle) such
Claim.
(b) In the event any Indemnified Party shall have a claim against any
Indemnifying Party that does not involve a Claim, the Notifying Party shall
deliver a notice of such claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Notifying Party
that it does not dispute the claim described in such notice or fails to
notify the Notifying Party within 30 days after delivery of such notice by
the Notifying Party whether the Indemnifying Party disputes the claim
described in such notice, the Loss in the amount specified in the Notifying
Party's notice will be conclusively deemed a liability of the Indemnifying
Party and the Indemnifying Party shall pay the amount of such Loss to the
Indemnified Party on demand. If the Indemnifying Party has timely disputed
its liability with respect to such claim, the Indemnifying Party and the
Notifying Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through the negotiations of the parties
within 60 days after the delivery of the Notifying Party's notice of such
claim, either party to such dispute may commence an action to resolve the
same.
36
(c) After the Closing, the rights set forth in this Article VIII shall
be each party's sole and exclusive remedies against the other party hereto
for misrepresentations or breaches of covenants contained in this Agreement
and the Related Documents. Notwithstanding the foregoing, nothing herein
shall prevent any of the Indemnified Parties from bringing an action based
upon actual and knowing fraud or other intentional breach of an obligation
of or with respect to either party in connection with this Agreement and
the Related Documents. In the event such action is brought, the prevailing
party's attorneys' fees and costs shall be paid by the nonprevailing party.
(d) Any indemnification payable under this Article VIII shall be, to
the extent permitted by law, an adjustment to the Purchase Price.
ARTICLE IX
TERMINATION
9.01 TERMINATION. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Closing:
(a) by mutual written agreement of the Company, ▇▇▇▇▇, the Principals
and Buyer;
(b) by the Company, ▇▇▇▇▇ and the Principals, on the one hand, or
Buyer, on the other, in the event that any Order or law becomes final which
effectively restrains, enjoins or otherwise prohibits or makes illegal the
consummation of any of the transactions contemplated by this Agreement upon
notification of the non-terminating party by the terminating party;
(c) by the Company, ▇▇▇▇▇ and the Principals, on the one hand, or
Buyer, on the other, if the Closing has not occurred on or before July 31,
2002 provided that, neither will be entitled to terminate this Agreement
pursuant to this Section 9.01(c) if such party's willful breach of this
Agreement has prevented the consummation of the transactions contemplated
by this Agreement;
(d) by either Buyer, on the one hand, or the Company, ▇▇▇▇▇ and the
Principals, on the other, if there has been a material misrepresentation,
breach of warranty or breach of covenant on the part of the other in the
representations, warranties and covenants set forth in this Agreement; or
(e) by Buyer if, after the date hereof, there shall have been a
material adverse change (other than a seasonal change consistent with the
Company's historical experience) in the Acquired Assets, operations,
results of operation or financial condition of the Business or if an event
shall have occurred which, so far as reasonably can be foreseen, would
result in any such change, except to the extent such change is directly
caused by Buyer.
37
9.02 EFFECT OF TERMINATION. In the event of termination of this Agreement
by Buyer, on the one hand, or the Company and the Principals, on the other, as
provided in Section 9.01, all provisions of this Agreement shall terminate and
shall be of no further force or effect, except that this Section 9.02 will
continue to apply following any such termination; PROVIDED, HOWEVER, that the
liability of any party for any breach by such party of the representations,
warranties, covenants or agreements of such party set forth in this Agreement
occurring prior to the termination of this Agreement shall survive the
termination of this Agreement for a period of one year from the date of such
termination and, in addition, in any action for breach of contract in the event
of a termination of this Agreement, the prevailing party shall be reimbursed by
the other party to the action for reasonable attorneys' fees and expenses
relating to such action.
ARTICLE X
MISCELLANEOUS
10.01 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by facsimile, electronic
or digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service; and two
Business Days after being mailed, if sent by certified or registered mail,
return receipt requested or if sent by first class mail postage prepaid. In each
such case notice shall be sent to:
If to Buyer, to:
Brentwood Acquisition Corp.
c/o Goldner, Hawn, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Incorporated
5250 ▇▇▇▇▇ Fargo Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Israel
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, P.A.
5500 ▇▇▇▇▇ Fargo Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
38
If to the Company or ▇▇▇▇▇, to:
The ▇▇▇▇▇ ▇▇▇▇▇▇▇ Company, LLC
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ LeChevallier P.C
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Principals, to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ LeChevallier P.C
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No:(▇▇▇) ▇▇▇-▇▇▇▇
Any party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving written notice
specifying such change to the other party hereto.
10.02 EXPENSES. Except as otherwise expressly provided in this Agreement,
whether or not the transactions contemplated hereby are consummated, each party
will pay its own costs and expenses incurred in connection with the negotiation,
execution and closing of this Agreement and the transactions contemplated
hereby.
10.03 PRESS RELEASES AND ANNOUNCEMENTS. At all times at or before the
Closing, the parties to this Agreement will not issue any press release (or make
any other public announcement) related to this Agreement or the transactions
contemplated hereby or make any announcement to the employees, customers or
suppliers without the prior written approval of the other party, except as may
be necessary in the opinion of counsel to the party seeking to make disclosure,
to comply with the requirements of this Agreement or applicable law.
39
10.04 WAIVER. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion.
10.05 AMENDMENT. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of each party hereto.
10.06 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person.
10.07 NO ASSIGNMENT: BINDING EFFECT. This Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, except that
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by any party hereto without the prior written consent of the
other parties hereto.
10.08 HEADINGS. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
10.09 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
10.10 COMPLETE AGREEMENT. This Agreement and the Related Documents and
other exhibits hereto, the Disclosure Schedule and the other documents referred
to herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
10.11 ARBITRATION. If a dispute arises relating to this Agreement, it will
be decided finally by three arbitrators in an arbitration proceeding in
Portland, Oregon conforming to the rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, ▇▇▇▇▇ and the Principals, one by Buyer and the
third by said two arbitrators or, if they cannot agree, then the third
arbitrator shall be appointed by the American Arbitration Association. The third
arbitrator shall be chairman of the panel and shall be impartial. The decision
of a majority of the arbitrators shall be binding and final upon the parties,
and their decision shall be enforceable as a judgment in a court of competent
jurisdiction. The cost of such arbitration shall be shared equally between the
parties hereto, except that each party shall pay its own attorneys' and witness
fees.
40
10.12 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of
Minnesota applicable to a contract
executed and performed in such State without giving effect to the conflicts of
laws principles thereof.
10.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
41
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officer of each party hereto as of the date first above
written.
BRENTWOOD, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Its: President
------------------------------------
THE ▇▇▇▇▇ ▇▇▇▇▇▇▇ COMPANY, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Its: Managing Member
------------------------------------
PRINCIPALS:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
BUYER:
BRENTWOOD ACQUISITION CORP.
By:
-------------------------------------
Its:
------------------------------------
SIGNATURE PAGE TO
ASSET PURCHASE AGREEMENT
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officer of each party hereto as of the date first above
written.
BRENTWOOD, INC.
By:
-------------------------------------
Its:
------------------------------------
THE ▇▇▇▇▇ ▇▇▇▇▇▇▇ COMPANY, LLC
By:
-------------------------------------
Its:
------------------------------------
PRINCIPALS:
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
BUYER:
BRENTWOOD ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, President,
Chief Executive Officer and
Chief Financial Officer
SIGNATURE PAGE TO
ASSET PURCHASE AGREEMENT
SCHEDULE A
DEFINITIONS
(a) AS used in this Agreement, the following defined terms shall have the
meanings indicated below:
"ACCOUNTANT" has the meaning ascribed to it in Section 1.08(d).
"ADJUSTED PURCHASE PRICE" has the meaning ascribed to it in Section
1.08(d).
"AFFILIATE" means any Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise and, in
any event and without limitation of the previous sentence, any Person owning
more than 50% of the voting securities of a second Person shall be deemed to
control that second Person.
"AGREEMENT" means this Stock Purchase Agreement, the Exhibits and the
Schedules hereto and the certificates delivered in accordance with the terms
hereof, as the same shall be amended from time to time.
"ACQUIRED ASSETS" has the meaning ascribed to it in Section 1.01.
"ASSUMED LIABILITIES" has the meaning ascribed to it in Section 1.03.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" has the meaning ascribed to it in
Section 6.04.
"BENEFIT ARRANGEMENT" means any employment, consulting, severance or other
similar contract, arrangement or policy and each plan, arrangement, program,
agreement or commitment providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health or accident benefits (including, without limitation, any "voluntary
employees' beneficiary association" as defined in Section 501(c)(9) of the Code
providing for the same or other benefits) or for deferred compensation,
profit-sharing bonuses, stock options, stock appreciation rights, stock
purchases or other forms of incentive compensation or post-retirement insurance,
compensation or benefits which (1) is not, a Welfare Plan, Pension Plan or
Multiemployer Plan. (2) is entered into, maintained, contributed to or required
to be contributed to, as the case may be, by the Company or ▇▇▇▇▇ and (3) covers
any employee or former employee of the Company or ▇▇▇▇▇ or under which the
Company or ▇▇▇▇▇ has any liability to any such employee or former employee.
"▇▇▇▇ OF SALE" has the meaning ascribed to it in Section 1.06.
"BUSINESS" has the meaning ascribed to it in the forepart of this
Agreement.
"BUSINESS DAY" means a day other than Saturday, Sunday or any day on which
banks located in the State of
Minnesota are authorized or obligated to close.
"BUYER" has the meaning ascribed to it in the forepart of this Agreement.
"BUYER INDEMNIFIED PARTIES" has the meaning ascribed to it in Section
8.02(a).
"BUYER LOSSES" has the meaning ascribed to it in Section 8.02(a).
"BUYER'S CLOSING DOCUMENTS" has the meaning ascribed to it in Section 3.02.
"CLOSING" means the closing of the transactions contemplated by Section
1.06.
"CLOSING DATE" has the meaning ascribed to it in Section 1.06.
"CLOSING DATE BALANCE SHEET" has the meaning ascribed to it in Section
1.08.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning ascribed to it in the forepart of this Agreement.
"COMPANY'S FINANCIAL STATEMENTS" means the financial statements of the
Company delivered to Buyer pursuant to Section 2.08.
"COMPANY'S LATEST BALANCE SHEET" has the meaning ascribed to it in Section
2.08(a).
"COMPANY PENSION PLAN" has the meaning ascribed to it in Section 2.16(c).
"DEDUCTIBLE" has the meaning ascribed to it in Section 8.02(b).
"DISCLOSURE SCHEDULE" has the meaning ascribed to it in the forepart of
Article II.
"DRAFT CLOSING DATE NET WORKING CAPITAL BALANCE SHEET" has the meaning
ascribed to it in Section 1.08(c).
"EMPLOYEE PLANS" means all Benefit Arrangements, Pension Plans and Welfare
Plans.
"EMPLOYMENT AGREEMENTS" has the meaning ascribed to it in Section 6.09.
"ENVIRONMENTAL, HEALTH AND SAFETY REQUIREMENTS" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and similar
provisions concerning public health
2
and safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances, or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or by-products, asbestos,
polychlorinated biphenyls, noise or radiation.
"ENVIRONMENTAL PERMITS" has the meaning ascribed to it in Section 2.28.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" shall mean any entity which is (or at any relevant time
was) a member of a "controlled group of corporations" with or under "common
control" with the Company as defined in Section 414(b) or (c) of the Code, or
which is (or at any relevant time was) aggregated with the Company under Section
414(m) or (o) of the Code.
"ESTIMATED NET WORKING CAPITAL" has the meaning ascribed to it in Section
1.08(a).
"ESTIMATED WORKING CAPITAL ADJUSTMENT" has the meaning ascribed to it in
Section 1.08(b).
"EXCLUDED ASSETS" has the meaning ascribed to it in Section 1.02.
"EXCLUDED LIABILITIES" has the meaning ascribed to it in Section 1.04.
"FACILITY LEASES" has the meaning ascribed to it in Section 2.17(b).
"FINANCING COMMITMENTS" has the meaning ascribed to it in Section 3.07.
"FINANCING" has the meaning ascribed to it in Section 3.07.
"FIXED ASSETS" has the meaning ascribed to it in Section 1.01(d).
"▇▇▇▇▇▇▇ AGREEMENT" has the meaning ascribed to it in Section 6.11.
"GOVERNING DOCUMENTS" means with respect to a particular entity, (i) if a
corporation, the articles or certificate of incorporation and the bylaws; and
(ii) if a limited liability company, the articles of organization and operating
agreement.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or any state, county, city or other political subdivision.
3
"INDEBTEDNESS" of any Person means all obligations of such Person (i) for
borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business) and
(iv) under capital leases.
"IRCA" has the meaning ascribed to it in Section 2.15.
"IRS" means the United States Internal Revenue Service.
"INSIDER" has the meaning ascribed to it in Section 2.21.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning ascribed to it in Section
2.24(a).
"KNOWLEDGE OF PRINCIPALS" means the actual knowledge of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
"LIENS" means any mortgage, pledge, assessment, security interest, lease,
lien, adverse claim, levy, charge or other encumbrance.
"LOSSES" has the meaning ascribed to it in Section 8.02.
"▇▇▇▇▇" has the meaning ascribed to it in the forepart of this Agreement.
"MATERIAL ADVERSE EFFECT" means, a material adverse effect on the Acquired
Assets or on the operations, results of operations, or financial condition of
the Business.
"MULTIEMPLOYER PLAN" means mean any "multiemployer plan," as defined in
Section 4001(a)(3) of ERISA, (1) which the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to (or
maintained, administered, contributed to or was required to contribute to) and
(2) which covers or covered any employee or former employee of the Company or
any ERISA Affiliate (with respect to their relationship with such entities).
"NET WORKING CAPITAL" has the meaning ascribed to it in Section 1.08(a).
"NET WORKING CAPITAL BALANCE SHEET" has the meaning ascribed to it in
Section 1.08(a).
"ORDER" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
"PBGC" shall mean the Pension Benefits Guaranty Corporation.
"PENSION PLAN" shall mean any "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) (1) which the Company,
▇▇▇▇▇ or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to (or
4
maintained, administered, contributed to or was required to contribute to) and
(2) which covers or covered any employee or former employee of the Company,
▇▇▇▇▇ or any ERISA Affiliate (with respect to their relationship with such
entities).
"PERMITS" has the meaning ascribed to it in Section 2.27(b).
"PERMITTED EXCEPTIONS" has the meaning ascribed to it in Section 6.08.
"PERSON" means any natural person, corporation, general partnership,
limited partnership, limited liability company, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory Authority.
"PERSONAL PROPERTY LEASES" has the meaning ascribed to it in Section
2.17(d).
"PRIMEWOOD" has the meaning ascribed to it in Section 3.06.
"PRINCIPAL" or "PRINCIPALS" have meanings ascribed in the forepart of this
Agreement.
"PRINCIPAL INDEMNIFIED PARTIES" has the meaning ascribed to it in Section
8.03.
"PRINCIPAL LOSSES" has the meaning ascribed to it in 8.03(a).
"PURCHASE ORDERS" has the meaning ascribed to it in Section 1.01(e).
"PURCHASE PRICE" has the meaning ascribed to it in Section 1.05.
"REAL PROPERTY" has the meaning ascribed to it in Section 2.17(a).
"RECORDS" means information that is inscribed on a tangible medium or that
is stored in an electronic or other medium and is retrievable in perceivable
form.
"RELATED DOCUMENTS" has the meaning ascribed to it in Section 8.02(a).
"REPRESENTATIVES" has the meaning ascribed to it in Section 4.01.
"SCHEDULED CONTRACTS" has the meaning ascribed to it in Section 2.20.
"SELLER'S CLOSING DOCUMENTS" has the meaning ascribed to it in Section
2.01(a).
"SHARES" has the meaning ascribed to it in the forepart of this Agreement.
"SURVEY DEFECT" has the meaning ascribed to it in Section 4.05(c).
"SURVEYS" has the meaning ascribed to it in Section 4.05(b).
5
"TARGET NET WORKING CAPITAL" has the meaning ascribed to it in Section
1.08(b).
"TAXES" has the meaning ascribed to it in Section 2.12.
"TAX RETURNS" has the meaning ascribed to it in Section 2.12
"TITLE COMMITMENTS" has the meaning ascribed to it in Section 4.05(a).
"TITLE COMPANY" has the meaning ascribed to it in Section 4.05(a).
"TITLE POLICY" has the meaning ascribed to it in Section 4.05(a).
"UNPERMITTED EXCEPTIONS" has the meaning ascribed to it in Section 4.05(c).
"VEHICLES" has the meaning ascribed to it in Section 1.01(g).
"WARRANTY DEED" has the meaning ascribed to it in Section 1.06.
"WELFARE PLANS" mean any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, (1) which the Company maintains, administers, contributes
to or is require to contribute to (or maintained, administered, contributed to,
or was required to contribute to) and (2) which covers any employee or former
employee of the Company or ▇▇▇▇▇ (with respect to their relationship with such
entities), or under which the Company or ▇▇▇▇▇ has any liability.
"WOODCRAFT" has the meaning ascribed to in Section 3.06
(b) Unless the context of this Agreement otherwise requires, (i) words of
any gender include each other gender; (ii) words using the singular or plural
number also include the plural or singular number, respectively; (iii) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to this
entire Agreement; (iv) the terms "Article" or "Section" refer to the specified
Article or Section of this Agreement; and (v) the phrase "ordinary course of
business" refers to the Business.
6
AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT (this "Amendment") is made
and entered as of July 30, 2002, by and among Brentwood Acquisition Corp., a
Minnesota corporation ("Buyer"), Brentwood, Inc., an Oregon corporation (the
"Company"), The ▇▇▇▇▇ ▇▇▇▇▇▇▇ Company, LLC, an Oregon limited liability company
("▇▇▇▇▇") and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (each a "Principal" and
collectively, the "Principals"). This Amendment amends that certain
Asset
Purchase Agreement dated as of July 25, 2002, by and among Buyer, the Company,
▇▇▇▇▇ and the Principals (the "Agreement"). Except as otherwise indicated
herein, capitalized terms used herein and not otherwise defined herein have the
meanings ascribed to such terms in the Agreement.
RECITALS
A. Section 1.03(c) of the Agreement provides that, on the Closing Date,
Buyer will assume the liabilities or obligations arising out of or relating to
the Employee Plans identified in Section 2.16(a) of the Disclosure Schedule as
being assumed by Buyer.
C. The Brentwood, Inc. 401(k) Pension and Profit Sharing Plan (the "401(k)
Plan"), referred to in Item 1 of Section 2.16(a) of the Disclosure Schedule is
not identified as one of the Employee Plans to be assumed by Buyer.
D. Brentwood desires that Buyer assume, and Buyer is willing to assume at
the Closing, the 401(k) Plan, except for any liability or obligation existing
thereunder on or prior to the Closing Date.
E. The parties to the Agreement have mutually agreed to amend certain
provisions of the Agreement, subject to the terms and conditions set forth in
this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the agreements contained herein, the
parties hereto agree as follows:
1. AMENDMENTS. The Agreement is hereby amended as follows:
a. Section 2.16(a) of the Disclosure Schedule to the Agreement is
hereby amended by inserting an asterisk after Item 1 to reflect that the
401(k) Plan is being assumed by Buyer.
b. Section 2.16(b) of the Agreement is hereby amended by adding the
following sentences to the end of said Section:
The Brentwood, Inc. 401(k) Pension and Profit Sharing Plan (the
"401(k) Plan") is qualified in form and operation under Section 401(a)
of the Code and the trust
under the 401(k) Plan is exempt from tax under Section 501(a) of the
Code. No event has occurred that will or could give rise to
disqualification or loss of tax exempt status of the 401(k) Plan.
c. Clause (i) of Section 2.16(c) of the Agreement is amended by
restating said clause in its entirety as follows:
each employee pension plan (and related trust documents) which covers
or has covered employees of the Company and ▇▇▇▇▇ and all amendments
thereto, including the 401(k) Plan (each, a "Pension Plan").
2. AMENDMENT TO ▇▇▇▇ OF SALE AND ASSIGNMENT OF CONTRACT RIGHTS. The ▇▇▇▇ of
Sale and Assignment of Contract Rights, attached as Exhibit B to the Agreement,
is hereby amended by restating in its entirety the clause immediately preceding
paragraph 1 as follows:
NOW, THEREFORE, in consideration of the Purchase Price provided in the
Purchase Agreement, a portion of which is paid to a Qualified
Intermediary as part of a ss.1031 deferred exchange pursuant to the
direction of the Sellers, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, each of the Sellers hereby agrees as
follows:
3. REFERENCES TO AND EFFECT ON THE AGREEMENT. The Company, ▇▇▇▇▇, Buyer and
the Principals each acknowledge and affirm that the Agreement, as hereby
amended, is hereby ratified and confirmed in all respects and all terms and
conditions and provisions of the Agreement, except as amended by this Amendment,
shall remain in full force and effect.
4. SUCCESSORS. This Amendment shall be binding on the parties hereto and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
5. COUNTERPARTS. This Amendment may be executed in counterparts, any one of
which need not contain the signatures of more than one party, but all such
counterparts together constitute one agreement.
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IN WITNESS WHEREOF, the parties have executed this Amendment No. 1
effective as of the date first written above.
BRENTWOOD, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President and
Chief Executive Officer
THE ▇▇▇▇▇ ▇▇▇▇▇▇▇ COMPANY, LLC,
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Member
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Member
PRINCIPALS:
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
3