ASSET PURCHASE AGREEMENT Between DXP ENTERPRISES, INC. (“Buyer”) and ROCKY MTN. SUPPLY, INC. (“Seller”) and THE SHAREHOLDERS JANUARY __, 2008
Between
DXP
ENTERPRISES, INC.
(“Buyer”)
and
ROCKY
MTN. SUPPLY, INC.
(“Seller”)
and
THE
SHAREHOLDERS
JANUARY
__, 2008
THIS ASSET PURCHASE AGREEMENT (this
“Agreement”) is made and entered into this __ day of January, 2008 (“the
Effective Date”), by and among ROCKY MTN. SUPPLY, INC., a Colorado corporation
(the “Seller”), the SHAREHOLDERS and DXP ENTERPRISES, INC., a Texas corporation
(the “Buyer”).
W I T N E S S E T H:
WHEREAS, the Seller desires to transfer
to the Buyer the Business and all of the Transferred Assets and the Assumed
Liabilities and the Buyer desires to acquire such Business, Transferred Assets
and Assumed Liabilities, all upon the terms and subject to the conditions set
forth herein; and
WHEREAS, the parties hereto desire to
set forth certain representations, warranties, covenants and agreements, all as
more fully set forth below;
NOW, THEREFORE, in consideration of the
premises and the mutual covenants and agreements contained herein, the parties
hereto agree as follows:
ARTICLE
1
PURCHASE AND SALE OF
ASSETS
1.01 Transferred
Assets.
(a) Subject
to the terms and conditions of this Agreement and in consideration of the
obligations of the Buyer as provided herein, and except for the Excluded Assets
as provided in Section
1.02 hereof, at the Closing, the Seller shall sell, assign, transfer,
grant, bargain, deliver and convey to the Buyer, free and clear of all Liens,
other than Permitted Liens, all of Seller’s right, title and interest in, to and
under the Business, as a going concern, and all assets owned or leased and used
by the Seller in connection with or arising out of the Business of every type
and description, real or personal, tangible and intangible, wherever located and
whether or not reflected on the books and records of the Seller (hereinafter
sometimes collectively referred to as the “Transferred Assets”), including, but
not limited to:
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(i)
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all
tangible personal property, including but not limited to the Equipment,
furniture and vehicles set forth in Schedule
1.01(a)(i) to the Disclosure
Schedule;
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(ii)
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all
Inventories, including the Inventories set forth in Schedule
1.01(a)(ii) to the Disclosure
Schedule;
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(iii)
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all
cash, accounts receivable and other rights to payment from customers of
Seller, including the accounts receivable set forth in Schedule
1.01(a)(iii) to the Disclosure
Schedule;
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(iv)
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the
Proprietary Information, including but not limited to the name “Rocky Mtn.
Supply” or any derivative thereof, and the names of the customers and
suppliers of the Business;
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(v)
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all
Contracts and Other Agreements, including but not limited to (A) all
rights of Seller under non-disclosure or confidentiality agreements,
non-compete or non-solicitation agreements with former employees,
Transferred Employees and agents of Seller or with third Persons to the
extent relating to the Business or the Transferred Assets and (B) all
rights of Seller under or pursuant to all warranties, representations and
guarantees made by suppliers, manufacturers and contractors to the extent
relating to products sold and services provided to Seller or to the extent
affecting any Transferred Assets or the Business (but specifically
excluding warranties, representations and guaranties specifically and
solely relating to any Excluded Assets or Retained
Liabilities);
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(vi)
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[intentionally
omitted];
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(vii)
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to
the to the extent assignable, all prepaid expenses, deposits and similar
assets of Seller, including but not limited to customer deposits, security
for rent, electricity, telephone or other utilities and prepaid charges
and expenses including prepaid rent and any prepaid items shown on
Seller’s November 30, 2007 Financial Statements relating to the
Transferred Assets and the
Business;
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(viii)
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all
documents that are related to the Business, including but not limited to
documents relating to products, services, marketing, advertising,
promotional materials, Proprietary Information, personnel files of the
Transferred Employees and all files, customer files and related documents
(including credit information), supplier lists, records, literature and
correspondence, to the extent permitted by law to be assigned and
transferred;
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(ix)
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to
the extent assignable, all permits, including but not limited to
environmental permits used by Seller in the Business and all permits
necessary to conduct the Business as currently conducted, and all rights,
and incidents of interests therein;
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(x)
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all
supplies and computer equipment owned by Seller and used or held for use
in connection with the Transferred Assets and the
Business;
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(xi)
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to
the extent not used to repair or replace any Transferred Assets, all
rights to third-party property and casualty insurance proceeds to the
extent receivable in respect of property or assets that would otherwise be
Transferred Assets; and
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(xii)
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all
other intangible assets of Seller, if any, associated with the Transferred
Assets and the Business.
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(b) The
Seller shall use its reasonable efforts to obtain, or as the case may be assist
the Buyer in obtaining, such consents of third parties as are necessary for the
assignment of the Transferred Assets; provided, however, that Seller shall
not be required to pay any amounts in respect of obtaining such
consents. To the extent that any of the Transferred Assets are not
assignable or consents to the assignment thereof cannot be obtained as herein
provided, such Transferred Assets shall be held by the Seller in trust for the
Buyer and any obligations with respect thereto shall be performed by the Buyer
in the name of the Seller and all benefits and obligations derived thereunder
shall be for the action of the Buyer. The Seller shall, at the
request of the Buyer, enforce in a reasonable manner, at the cost of and for the
account of the Buyer, any and all rights of the Seller against such third party
relating to any such Transferred Assets. Seller shall promptly pay
over to the Buyer all money or other consideration received by it in respect of
such entitlement.
(c) The
Seller shall also notify each Person which may have possession of the
Transferred Assets on the Closing Date of the transfer of such Transferred
Assets to the Buyer.
1.02 Excluded
Assets. There shall be excluded from the Transferred Assets
(the “Excluded Assets”): (i) the life insurance policies insuring the lives of
the Shareholders in the amounts of $915,000, in the aggregate, for ▇▇▇▇▇▇ ▇▇▇▇
and $652,000 for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, (ii) the minute books, organizational
documents, stock registers and such other books and records of Seller pertaining
to ownership, organization or existence of Seller as a corporation, provided, however, duplicate copies of
such records shall be provided to Buyer as are reasonably necessary to enable
Buyer to file tax returns and file information with the Securities and Exchange
Commission, and (iii) those assets of listed or described on Schedule 1.02 of the
Disclosure Schedule.
1.03 Consideration.
(a) The
consideration for Buyer’s purchase of the Transferred Assets and the Business
shall be: (i) subject to adjustment as otherwise provided under this
Section 1.03,
$4,050,000.00 (the “Seller Cash Payment”), (ii) a promissory note in the form of
Exhibit “A” in
an original principal amount of $400,000.00 (the “Seller Note”, which along with
the Seller Cash Payment, subject to adjustment as otherwise provided in this
Section 1.03,
shall be the “Seller Purchase Price”), and (iii) the assumption of the Assumed
Liabilities (together with the Seller Purchase Price, shall be the “Seller
Consideration”). On the Closing Date, Buyer shall (x) pay the Seller
Cash Payment to Seller (i) by wire transfer of $3,425,500.00 of same day funds
into an account(s) designated by Seller and (ii) by wire transfer of $624,500.00
(the “Escrow Amount”) to the escrow account as specified in the Escrow Agreement
and (y) deliver to Seller the duly executed Seller Note.
(b) In
consideration of the Shareholders covenants and agreements as set forth in Section 7.07 and
7.10 hereof, on
the Closing Date Buyer shall execute and deliver to each of the Shareholders the
Shareholder Note in the amount of $150,000.00. In the event Buyer
were to seek damages for any breach of Section 7.07 or 7.10, the amount
specified in the immediately preceding sentence or otherwise allocated by the
parties to the covenants set forth in Sections 7.07 and
7.10 shall not
be considered a measure of or limit on such damages. On the Closing
Date, Buyer shall enter into and consummate with the Shareholders a separate
purchase of the goodwill and intangible assets of the Shareholders associated
with the Business, and in consideration therefor shall pay each of the
Shareholders the amount of $225,000 (for an aggregate payment in respect thereof
to the Shareholders of $450,000, the “Personal Goodwill Consideration”) by wire
transfer of same day funds into an accounts designated by the
Shareholders.
(c) Not
later than sixty (60) days after the Closing Date, Buyer shall cause to be
prepared and delivered to Seller and the Shareholders a statement setting forth
Buyer’s calculation of Net Working Capital as of the end of business on January
31, 2008 (the "Closing Statement"), which shall be prepared by Buyer in
accordance with Schedule
14.42.
(d) If
Seller disagrees with Buyer’s calculations in the Closing Statement, Seller may,
within fifteen (15) days after delivery of the Closing Statement, deliver a
notice to Buyer disagreeing with such calculation and setting forth Seller’s
calculation of such amounts (a "Dispute Notice"). Any such Dispute
Notice shall specify those items or amounts as to which Seller disagrees, and
Seller shall be deemed to have agreed with all other calculations and amounts
contained in the Closing Statement. If a Dispute Notice shall be duly
delivered by Seller to Buyer, Buyer and Seller shall, during the fifteen (15)
days following such delivery, use their good faith efforts to reach agreement on
the disputed items or amounts in order to determine, as may be required, the Net
Working Capital as of the Closing Date, as applicable, which amount shall not be
less than the amount thereof shown in the Closing Statement nor more than the
amount thereof shown in Seller’s Dispute Notice. If the parties so
resolve all disputes, the computation of the Net Working Capital as of the
Closing Date, as amended to the extent necessary to reflect the resolution of
the dispute, shall be conclusive and binding on all parties. If
during such period, Buyer and Seller are unable to reach an agreement, they
shall within five (5) days thereafter cause ▇▇▇▇ & Associates, LLP (the
“Firm”) to review this Agreement and the disputed items or amounts for the
purpose of calculating the Net Working Capital as of the Closing Date (it being
understood that in making such disputed calculation, the Firm shall be
functioning as an expert and not as an arbitrator). In making such
disputed calculation, the Firm shall consider only those items or amounts in the
Closing Statement and the Dispute Notice to which Seller has
disagreed. The Firm shall deliver to Buyer and Seller, as promptly as
practicable (but in any case no later than thirty (30) days from the date of
engagement of the Firm), a report setting forth the calculations of the Net
Working Capital as of the Closing Date. Such report shall be final
and binding upon Buyer, Seller and the Shareholders and judgment may be entered
to enforce such report in any court of competent jurisdiction. The
fees, costs and expenses of the Firm (“the Expenses”) shall be paid
as follows: (i) if the event the Firm agrees with Buyer’s calculation of the Net
Working Capital, then Seller shall pay the Expenses, (ii) if the Firm agrees
with Seller’s calculation of the Net Working Capital, then Buyer will pay the
Expenses, or (iii) if the Firm does not agree with Buyer’s or Seller’s
calculation of Net Working Capital, then the Expenses shall be prorated between
Buyer and Seller based on the percentage of adjustment for each parties’ Net
Working Capital calculation.
(f) Buyer
and Seller shall, and shall cause their respective representatives to, cooperate
and assist in the preparation of the Closing Statement and the calculation of
the Net Working Capital and in the conduct of the review thereof, including the
making available to the extent necessary books, records, work papers and
personnel.
(g) If
the Final Net Working Capital is less than Four Million Two Hundred Seventy and
No/100 Dollars ($4,270,000.00), Seller and Buyer shall set-off and apply such
difference to the Seller Note in the direct order of maturity of the
payments.
(h) The
Escrow Amount shall be held and disbursed pursuant to the terms and conditions
of the Escrow Agreement. Seller shall take all requisite action to
provide notices and consummate the payment and redemption of all preferred stock
issued by the Seller, with such payment and redemption to finally occur no later
than the sixty-first (61st) day
following the Closing Date. Upon such final payment and redemption of
the Seller’s preferred stock, any remaining amounts held in the escrow account
under the terms of the Escrow Agreement (and not otherwise required for the
payment of fees and expenses thereunder) shall be distributed to Seller, and
Buyer agrees to consent to such final distribution.
1.04 Assumed
Liabilities. On the terms and subject to the conditions set
forth in this Agreement, at the Closing the Buyer will assume, effective as of
the Closing Date, the following liabilities of Seller (collectively, the
“Assumed Liabilities”):
(a) all
liabilities of Seller under the Contracts and Other Agreements that arise out of
or relate to the performance thereof for the period from and after the Closing
Date and the other obligations and liabilities associated with the operation of
the Business from and after the Closing Date;
(b) all
Trade Payables of the Seller as of the Closing Date arising out of the ordinary
course of the Business prior to the Closing Date;
(c) all
obligations of Seller with respect to unpaid payroll and sales taxes as of the
Closing Date arising in the ordinary course of Business prior to the Closing
Date;
(d) the
liabilities set forth in Article 6 assumed by Buyer;
(e) the
four (4) promissory notes payable to GMAC and secured by four (4) vehicles as
described in the January 31, 2007 Financial Statements (and set forth therein in
an aggregate amount of indebtedness of $40,258) provided to Buyer;
(f) federal
and state income taxes related to the Business from February 1, 2007 to the
Closing Date (and for which Seller may be entitled to obtain reimbursement from
Buyer in accordance with Section 1.07(c)
hereof); and
(g) those
liabilities listed on Schedule
1.04(g).
1.05 Liabilities Not Assumed by
the Buyer. Except for the Assumed Liabilities and the warranty
claims as provided in Section 7.09 hereof,
the Seller shall pay and discharge in due course all of its liabilities, debts
and obligations, whether known or unknown, now existing or hereafter arising,
contingent or liquidated, including, without limitation, those listed in Schedule 1.05 of the
Disclosure Schedule (the “Retained Liabilities”), and the Buyer shall not
assume, or in any way be liable or responsible for, any of such Retained
Liabilities. Without limiting the generality of the foregoing, the
Retained Liabilities shall include the following:
(a) any
liability or obligation of the Seller arising out of or in connection with this
Agreement and the consummation and performance of the transactions contemplated
hereby, whether or not such transactions are consummated, including but not
limited to, and except as otherwise provided herein, any liability for Taxes so
arising;
(b) except as
set out in Section
1.04(f), any liability or obligation for any and all Taxes of, or
pertaining or attributable to, (i) the Seller for any period that ends on or
before, or includes, the Closing Date, or (ii) the Business and/or the
Transferred Assets for any period or portion thereof that ends on or before the
Closing Date (including, but in no way limited to, any and all Taxes described
in clauses (i) and (ii) of this Section 1.05(b) for
which liability is or may be sought to be imposed on the Buyer under any
successor liability, transferee liability or similar provision of any applicable
foreign, federal, state or local law);
(c) except
for the warranty claims as provided in Section 7.09 hereof,
all other liabilities and obligations to any Person arising prior to the Closing
or related to the conduct or operation of the Transferred Assets or the Business
prior to the Closing Date, including, but not limited to, the Pre-Closing
Obligations and the specific liabilities, obligations or litigation listed on
Schedule
1.05(c) of the Disclosure Schedule; and
(d) all
environmental costs and liabilities, to the extent arising out of or otherwise
related to: (i) the ownership or operation by Seller of the
Transferred Assets or the Business prior to the Closing Date, and (ii) the
Excluded Assets or any other real property formerly owned, operated, leased or
otherwise used by Seller;
(e) except as
set forth in Article 6, all
liabilities arising out of, relating to or with respect to (i) the employment or
performance of services, or termination of employment or services by Seller of
any individual (including any Transferred Employee) on or before the Closing
Date, (ii) worker’s compensation claims against Seller that relate to the
conduct of the Business or the operation of the Transferred Assets on or before
the Closing Date, irrespective of whether such claims are made prior to or after
the Closing or (iii) any employee benefit plan of the Seller;
(f) all
liabilities arising out of, under or in connection with any indebtedness of
Seller, not specifically assumed by Buyer in this Agreement, including but not
limited to notes payable to the Shareholders or to notes payable to any employee
or employees of the Seller;
(g) all
liabilities in respect of: (i) any pending or threatened legal
proceeding or any claim arising out of, relating to or otherwise in respect of
the operation of the Business prior to the Closing Date or (ii) any Excluded
Asset;
(h) except as
provided in Section
7.09, all liabilities relating to any dispute with any client or customer
of the Business existing as of the Closing Date or based upon, relating to or
arising out of events, actions, or failures to act prior to the Closing Date;
provided, however, the Buyer agrees to reasonably assist Seller in satisfying
such dispute at Seller's cost, including by providing services of Buyer and the
Transferred Employees and Transferred Assets; and
(i) all
liabilities related to the preferred stock issued by the Seller, including but
not limited to accumulated undeclared dividends, liquidation preferences or any
other provisions of said preferred stock.
1.06 Prorations of Expenses and
Certain Property Taxes.
(a) Any
general property Tax assessed against or pertaining to the Transferred Assets,
including pursuant to the Leases being entered per Section 7.08, for the
taxable period that includes the Closing Date shall be prorated between the
Buyer (after the Closing Date) and the Seller (prior to and including the
Closing Date) as of the Closing Date. In the event the amount of any
such general property Tax cannot be ascertained as of the Closing Date,
proration shall be made on the basis of the preceding year and to the extent
that such proration may be inaccurate the Seller and the Buyer agree to make
such payment to the other after the tax statements have been received as are
necessary to allocate such general property Tax properly between the Seller and
the Buyer as of the Closing Date.
(b) Except as
otherwise provided in this Agreement, the Seller and the Buyer agree that
amounts payable with respect to utility charges and other items of expense
attributable to the conduct of the Business shall be prorated as of the Closing
Date (with Seller responsible for the period up to and including the Closing
Date and Buyer responsible for the period after the Closing Date) to the extent
the charges and expenses cannot be identified as to the party who received the
benefits to which such charges and expenses relate.
1.07 Transfer Taxes; Recording
Fees; Tax Reimbursement.
(a) The Buyer
and the Seller acknowledge and agree that the Purchase Price does not include
any sales tax imposed as a result of the transfer of equipment and motor
vehicles. The Buyer hereby agrees to indemnify the Seller and the
Shareholders against, and agrees to protect, save and hold the Seller and
Shareholders harmless from, any loss, liability, obligation or claim (whether or
not ultimately successful) for sales, transfer or other similar Taxes (and any
interest, penalties, additions to tax and fines thereon or related thereto)
imposed as a result of the consummation of the transactions contemplated by this
Agreement.
(b) The Buyer
shall pay any and all recording, filing or other fees relating to the conveyance
or transfer of the Transferred Assets from the Seller to the Buyer.
(c) Seller
shall timely file all Tax Returns relating to the operation of the Transferred
Assets and conduct of the Business prior to the Closing Date. If
Seller remits any income taxes that are Assumed Liabilities of Buyer pursuant to
Section 1.04(f)
hereof, then Buyer shall promptly reimburse Seller for such payment upon
provision by Seller of reasonable written evidence of such
remittance.
1.08 Allocation of Purchase
Price.
(a) Seller,
the Shareholders and Buyer have prepared an initial written statement setting
forth the allocation of the consideration (including, without limitation, the
Seller Purchase Price and any adjustments thereto) deemed to have been paid for
federal income tax purposes by the Buyer to the Seller and the Shareholders
pursuant to this Agreement (the “Tax Consideration”) among the Transferred
Assets and the other covenants and rights arising hereunder (the “Allocation”)
and a copy of such written statement is attached hereto as Exhibit
“H”.
(b) For
federal income tax purposes (including, without limitation, Buyer’s, each
Shareholder’s and the Seller’s compliance with the reporting requirements of
Section 1060 of the Code), each of the Seller, Shareholders and the Buyer hereby
agree to use the Allocation and to cooperate in good faith with each other in
connection with the preparation and filing of any information required to be
furnished to the Internal Revenue Service under Section 1060 of the Code
(including, without limitation, Section 1060(b) and (e) of the Code) and any
applicable regulations thereunder. Without limiting the generality of
the preceding sentence, the Buyer, Shareholders and the Seller agree to (i)
report the Allocation to the Internal Revenue Service on Form 8594 and, if
required, supplemental Forms 8594, in accordance with the instructions to Form
8594 and the provisions of Section 1060 of the Code and the applicable
regulations thereunder, and (ii) coordinate their respective preparation and
filing of each such Form 8594 and any other forms or information statements or
schedules required to be filed under Section 1060 of the Code and the applicable
regulations thereunder so that the Allocation and information reflected on such
forms, statements and schedules shall be consistent.
(c) Notwithstanding
the foregoing provisions of this Section 1.08, Buyer
shall prepare and deliver to Seller and Shareholders from time to time revised
statements of any Allocation to the extent that any matters need updating
(including, without limitation, in respect of any adjustments under Section 1.03 hereof),
which such revised statements shall be substantially consistent with the manner
of allocation previously agreed by the Seller, Shareholders and the
Buyer.
1.09 Right to Control
Payment. Buyer shall have the right, but not the obligation,
to make any payment due from Seller with respect to any Retained Liabilities
which are not paid by Seller within five (5) Business Days following written
request for payment from Buyer; provided, however, that if Seller
advises Buyer in writing during such five (5) Business Day-period that a good
faith payment dispute exists or Seller has valid defenses to non-payment with
respect to such Retained Liability, then Buyer shall not have the right to pay
such Retained Liability. Seller agrees to reimburse Buyer promptly
and in any event within five (5) Business Days following written notice of such
payment by Buyer for the amount of any payment made by Buyer pursuant to this
Section
1.09.
1.10 Accounts
Receivable. Following the Closing Date, Seller and
Shareholders shall provide reasonable assistance to Buyer in the collection of
the accounts receivable. If Seller shall receive payment in respect
of the accounts receivable, then Seller shall promptly forward such payment to
Buyer.
ARTICLE
2
CLOSING
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Subject
to the conditions set forth in this Agreement, the Closing shall take
place at the offices of ▇▇▇▇▇▇▇▇▇▇ Hyatt ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP, located in
Denver, Denver County, Colorado, at 10:00 a.m. on or before January 31,
2008 or at such other time, date and place as the parties hereto shall
mutually agree upon in writing (the “Closing Date”). Except as
set forth in Article 13,
failure to consummate the transactions contemplated hereby on such date
shall not result in a termination of this Agreement or relieve any party
hereto of any obligation hereunder. Title to, ownership of,
control over and risk of loss of the Transferred Assets shall pass to the
Buyer at the Closing.
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ARTICLE
3
REPRESENTATIONS, WARRANTIES
AND COVENANTS
OF THE SELLER AND THE
SHAREHOLDERS
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The
Seller and the Shareholders, as applicable, hereby represent and warrant
to the Buyer and covenant and agree as
follows:
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3.01 Corporate
Matters.
(a) The
Seller is a corporation organized, validly existing and in good standing under
the laws of the State of Colorado. The Seller is duly authorized,
qualified and licensed and has all requisite power and authority under all
applicable laws, ordinances and orders of public authorities to own, operate and
lease its properties and assets and to carry on its business in the places and
in the manner currently conducted. There is no other jurisdiction in
which the nature and extent of the Seller’s business or the character of its
assets makes qualification to transact business as a foreign corporation
necessary, except where failure to be so qualified would not be reasonably
expected to result in a Material Adverse Effect. The Seller has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations under this Agreement.
(b) The
Seller has no Subsidiaries.
(c) The
Seller does not do business in any state or commonwealth under any name other
than the corporate name set forth in the first paragraph of this
Agreement.
(d) The
Seller and the Shareholders represent and warrant to the Buyer that (i) the
Shareholders hold of record and own beneficially 24,920 shares of the common
stock which is all of the issued and outstanding common stock of the Seller free
and clear of any Liens, except encumbrances on transfer generally imposed under
applicable securities law; (ii) 61,144.5 shares of non-voting preferred stock of
Seller are issued and outstanding, with some shares providing for an 8%
cumulative dividend and other shares providing for a 12% cumulative dividend
both payable semi-annually and all such shares are callable at $10 per share
plus accumulated and unpaid dividends (the “Preferred Shares”); and (iii) no
other form of stock of the Seller has been issued by the Seller. Set
out in Schedule
3.01(d) are the names of the parties that hold of record and own
beneficially all of the preferred stock and common stock of the Company and the
number of shares of non-voting preferred stock and common stock owned by each
party. Neither the Shareholders nor, to the Seller’s knowledge, any
other Persons owning common stock and preferred stock of the Company are party
to an option, warrant, purchase right, or other contract or commitment that
could require the Shareholders or such other owners of the common or preferred
stock to sell, transfer, or otherwise dispose of any preferred stock or common
stock of the Seller (other than in this Agreement). The Shareholders
or the other owners of the preferred stock are not a party to any voting trust,
proxy, or other agreement or understanding with respect to the voting of any
shares of the preferred or the common stock of the Seller. All of the
preferred and common stock of the Seller has been duly authorized and validly
issued. Set out in Schedule 3.01(d) are
copies of the Articles of Incorporation and Bylaws of the Seller and all
amendments thereto.
3.02 Validity of Agreement and
Conflict with Other Instruments.
(a) This
Agreement has been duly authorized by the Shareholders of the
Seller. No further corporate action is necessary on the part of the
Seller to execute and deliver this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by the Seller and the Shareholders and is a legal, valid and binding
obligation of the Seller and the Shareholders enforceable against the Seller and
the Shareholders in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect that affect creditors’ rights generally
and by legal and equitable limitations on the availability of specific
remedies.
(b) The
covenants set out in Sections 7.07 and
7.10 hereof
have been approved by all necessary corporate action on the part of Seller and,
when executed and delivered at the Closing as contemplated by this Agreement,
shall be legal, valid and binding obligations of the Seller and the
Shareholders, enforceable against the Seller and the Shareholders in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect that affect creditors’ rights generally and by legal and
equitable limitations on the availability of specific remedies.
(c) The
execution, delivery and performance of this Agreement and the other agreements
and documents to be delivered by the Seller to the Buyer, the consummation of
the transactions contemplated hereby or thereby, and the compliance with the
provisions hereof or thereof, by the Seller will not, with or without the
passage of time or the giving of notice or both:
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(i)
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conflict
with, constitute a breach, violation or termination of any provision of,
or give rise to any right of termination, cancellation or acceleration, or
loss of any right or benefit or both, under, any of the Contracts and
Other Agreements to which the Seller is a party or by which any of them is
bound, other than, in each case, such that would not materially and
adversely affect the ability of the Seller to consummate the transactions
contemplated hereby or thereby;
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(ii)
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result
in an acceleration or increase of any amounts due with respect to the
Trade Payables;
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(iii)
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conflict
with or violate the Articles of Incorporation or Bylaws of the
Seller;
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(iv)
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result
in the creation or imposition of any Lien on any of the Transferred
Assets; or
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(v)
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violate
any law, statute, ordinance, regulation, judgment, writ, injunction, rule,
decree, order or any other restriction of any kind or character applicable
to the Seller or any of their respective properties or
assets.
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(d) The
execution, delivery and performance of this Agreement and the other agreements
and documents to be delivered by the Shareholders, the consummation of the
transactions contemplated hereby and thereby, and the compliance with the
provisions hereof and thereof, by the Shareholders will not, with or without the
passage of time or the giving of notice or both:
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(i)
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conflict
with, constitute a breach, violation or termination of any provision of,
or give rise to any right of termination, cancellation or acceleration, or
loss of any right or benefit or both under any contract or other agreement
to which the Shareholders are a party or by which any of them is bound,
other than, in each case, such that would not materially and adversely
affect the ability of each Shareholder to consummate the transactions
contemplated hereby or thereby; or
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(ii)
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violate
any law, statute, ordinance, regulation, judgment, writ, injunction, rule,
decree, order or any other restriction of any kind or character applicable
to the Shareholders or any of their respective properties or
assets.
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(e) Attached
as Schedule
3.02(e) of the Disclosure Schedule are true, correct and complete copies
of all resolutions adopted by the directors and shareholders of Seller with
respect to the Seller approving this Agreement and the transactions contemplated
hereby. Such resolutions were adopted at meetings duly called and
convened at which a quorum was present and acting throughout or by unanimous
written consents. Such resolutions are in full force and effect
without amendment or modification.
3.03 Approvals, Licenses and
Authorizations.
(a) Except as
set forth on Schedule
3.03(a), no order, license, consent, waiver, authorization or approval
of, or exemption by, or the giving of notice to, or the registration with, or
the taking of any other action in respect of, any Person not a party to this
Agreement, including any Governmental Entity, and no filing, recording,
publication or registration in any public office or any other place is now, or
under existing law in the future will be, necessary on behalf of the Seller to
authorize the execution, delivery and performance of this Agreement or any other
agreement contemplated hereby to be executed and delivered by them and the
consummation of the transactions contemplated hereby or thereby (including, but
not limited to, assignment of the Transferred Assets), or to effect the
legality, validity, binding effect or enforceability thereof.
(b) Schedule 3.03(b)
contains a list of all material licenses, permits, concessions, warrants,
franchises and other governmental authorizations and approvals of all
Governmental Entities required or necessary to carry on the Business in the
places and in the manner currently conducted have been duly obtained, are in
full force and effect. Except as set forth on Schedule 3.03(b), no
violations are in existence or have been recorded since January 1, 2007 with
respect to such licenses, permits or other authorizations and no proceeding is
pending or, to the best knowledge of the Seller, threatened with respect to the
revocation or limitation of any of such licenses, permits or other
authorizations. The Seller has complied with all laws, rules,
regulations and orders applicable to the Business, and all rules, regulations
and orders respecting the provision of services by the Seller, except for
violations that would not have a Material Adverse Effect.
3.04 Title to and Condition of
Transferred Assets. Seller represents and warrants to Buyer as
follows:
(a) The
Seller leases the Facilities. All of the Transferred Assets are
located at one of the Facilities.
(b) The
Seller has good and marketable title to all Equipment free and clear of all
Liens other than those Liens set forth on Schedule 3.04(b) of
the Disclosure Schedule and Permitted Liens. All of the Equipment is
in the Seller’s possession and control and in good condition and repair,
ordinary wear and tear accepted, and is suitable for the purposes
used.
(c) All
Inventories are set forth on Schedule 1.01(a)(ii)
of the Disclosure Schedule. The Seller has valid title to all
Inventories free and clear of all Liens other than those Liens set forth on
Schedule
3.04(c) of the Disclosure Schedule and Permitted Liens, which Liens shall
be released on or prior to the Closing. The Inventories are in good
and marketable condition and are saleable in the ordinary course of
business. The Inventories constitute sufficient quantities for the
normal operation of the Business and the Inventories will be in such sufficient
quantities on the Closing Date.
(d) The
accounts receivable comprising part of the Transferred Assets are owned by the
Seller free and clear of all Liens (other than those Liens set forth in Schedule 3.04(d) of
the Disclosure Schedule, which Liens shall be released on or prior to the
Closing and Permitted Liens) and relate to receivables owed to the
Seller. All accounts receivable were generated in the ordinary course
of business pursuant to bona fide transactions and are payable on ordinary trade
terms. The Seller is unaware of any existing facts or circumstances
that could reasonably be expected to increase uncollectible accounts receivable
beyond the allowance for bad debt reflected in the December 31, 2007 Financial
Statements.
(e) The
Seller owns or possesses licenses or other rights to use, and will at the
Closing transfer to the Buyer, all rights to all Proprietary Information
necessary for the conduct of the Business as currently conducted, except for
standard "shrink wrapped, off the shelf" or "click-wrap"
software. Set forth in Schedule 3.04(e) of
the Disclosure Schedule is a complete and accurate list of all patents,
trademarks, copyrights and licenses that Seller owns or possesses or otherwise
has rights to use pertaining to the Business, except for standard "shrink
wrapped, off the shelf" or "click-wrap" software including the jurisdictions in
which each such item has been issued or registered and the registration
date. No licenses, sublicenses, covenants or agreements have been
granted or entered into by the Seller in respect of the items listed in Schedule 3.04(e) of
the Disclosure Schedule except as noted thereon. The Seller has not
received any notice of infringement, misappropriation or conflict from any other
Person with respect to such Proprietary Information except as noted in Schedule 3.04(e) of
the Disclosure Schedule, and, to Seller's knowledge, the conduct of the Business
has not infringed, misappropriated or otherwise conflicted with any Proprietary
Rights of any such Person. The Seller has not given indemnification
for patent, trademark, service ▇▇▇▇ or copyright infringements except to
licensees or customers in the ordinary course of business. All of the
Proprietary Information that is owned by the Seller is owned free and clear of
all Liens except as set forth in Schedule 3.04(e) of
the Disclosure Schedule and Permitted Liens. All Proprietary Rights
that are licensed by the Seller to third parties are licensed pursuant to valid
and existing license agreements and such interests are not subject to any Liens
other than those under the applicable license agreements. The
consummation of the transactions contemplated by this Agreement will not result
in the loss of any Proprietary Information. To Seller's knowledge,
the present business practices, methods and operations of Seller regarding the
Proprietary Information does not infringe, constitute an unauthorized use of,
misappropriation or violate any copyright, ▇▇▇▇, patent, trade secret or other
similar right of any Person. Except with respect to licenses of
commercial off-the-shelf software Seller is not obligated, required or under any
liability whatsoever to make any payments by way of royalties, fees or otherwise
regarding the Proprietary Information.
(f) Other
than the Facilities, there is no real property or interest in real property
owned by Seller for use in the Business or in connection with the Transferred
Assets. Schedule 14.24 of the
Disclosure Schedule sets forth a complete list of the six (6) Facilities leased
by Seller, including a legal description of each such Facility (including the
name of the third party lessor and the date of the lease and all amendments
thereto). There is not any events of default regarding said six
Facility leases. To Seller's knowledge, said leased real property is
not subject to any rights of first refusal, options to purchase except as set
out in the leases.
(g) Except
for the current leases for the Facilities, the Seller owns or has rights to use,
and is transferring to the Buyer hereunder, all tangible assets necessary for
the conduct of the Business in the ordinary course consistent with past
practices. The conduct of the Business in the ordinary course is not
dependent upon the right to use the property of others, except such property as
is leased or licensed by Seller and assignable to Buyer pursuant to and included
in the Transferred Assets.
3.05 Contracts and
Commitments. Seller represents and warrants to Buyer as
follows:
(a) Other
than leases for the Facilities and as otherwise set forth in Schedule 3.05(a) of
the Disclosure Schedule, none of the Transferred Assets are subject to, and the
Seller is not a party to or bound by:
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(i)
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any
agreement, contract or commitment requiring the expenditure or series of
related expenditures of funds in excess of $10,000 in any fiscal year
(other than purchase orders in the ordinary course of business for goods
necessary for the Seller to complete then existing contracts or purchase
orders);
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(ii)
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any
agreement, contract or commitment requiring the payment for goods or
services whether or not such goods or services are actually provided or
the provision of goods or services at a price less than the Seller’s cost
of producing or supplying such goods or providing such
services;
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(iii)
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any
loan or advance to, or investment in, any Person or any agreement,
contract, commitment or understanding relating to the making of any such
loan, advance or investment;
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(iv)
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any
contract, agreement, indenture, note or other instrument relating to the
borrowing of money or any guarantee or other contingent liability in
respect of any indebtedness or obligation of any Person (other than the
endorsement of negotiable instruments for deposit or collection in the
ordinary course of business);
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(v)
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any
management service, employment, consulting or other similar type contract
or agreement;
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(vi)
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any
agreement, contract or commitment that would limit the freedom of the
Buyer or any affiliate thereof following the Closing Date to engage in any
line of business, to own, operate, sell, transfer, pledge or otherwise
dispose of or encumber any of the Transferred Assets or to compete with
any Person or to engage in any business or activity in any geographic
area;
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(vii)
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any
agreement, lease, contract or commitment or series of related agreements,
leases, contracts or commitments not entered into in the ordinary course
of business or, except for agreements to purchase or sell goods and
services entered into in the ordinary course of business of the Seller,
not cancelable by the Seller without penalty to the Seller within 30
calendar days;
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(viii)
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other
than in respect of the Seller’s customary general warranty for goods sold
as described on Schedule 3.13(a) to
the Disclosure Schedule, any agreement or contract obligating the
Seller or that would obligate or require any subsequent owner of the
Business or any of the Transferred Assets to provide for indemnification
or contribution with respect to any
matter;
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(ix)
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any
sales, distributorship or similar agreement relating to the products sold
or services provided by the Seller;
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(x)
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any
license, royalty or similar
agreement;
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(xi)
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any
contract requiring performance by Seller for a period of one year or more
or requiring Seller to purchase or sell a stated portion of its
requirements or outputs;
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(xii)
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any
contract regarding the acquisition by Seller of any operating business or
material assets or the capital stock of any Person;
or
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(xiii)
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any
other agreement, contract or commitment that might reasonably be expected
to have a Material Adverse Effect.
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(b) Seller is
not in material breach of any provision of, or is in material default (or knows
of any event or circumstance that with notice, or lapse of time or both, would
constitute an event of default) under the terms of any of the Contracts and
Other Agreements that constitute a part of the Transferred
Assets. All of the Contracts and Other Agreements that constitute a
part of the Transferred Assets are in full force and effect. To
Seller's knowledge, there are no pending or threatened disputes with respect to
any of the Contracts and Other Agreements.
(c) The
enforceability of the Contracts and Other Agreements that constitute a part of
the Transferred Assets will not be affected in any manner by the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby and none of the Contracts and Other Agreements that constitute a part of
the Transferred Assets require the receipt of the consent or waiver of any
Person or Governmental Entity prior to the sale, assignment, transfer,
conveyance or delivery thereof pursuant to this Agreement.
3.06 Financial
Statements. Seller represents and warrants to Buyer as
follows:
(a) Attached
as Schedule
3.06 to the Disclosure Schedule are true, correct and complete copies of
(i) the reviewed balance sheets of the Business as of January 31, 2006 and
January 31, 2007 and the compiled balance sheet of Business as of May 31,
2007, August 31, 2007, September 30, 2007, October 31, 2007 and
November 30, 2007, and (ii) the reviewed statements of income of the
Business for the annual periods ended January 31, 2006 and January 31, 2007, and
the compiled monthly and year-to-date statements of income of the Business for
the applicable periods ended May 31, 2007, August 31, 2007, September
30, 2007, October 31, 2007 and November 30, 2007. No later than three
(3) days prior to the Closing Date, Seller shall deliver to Buyer the compiled
balance sheet and statement of income for the Business for the period ended
December 31, 2007 (such balance sheet and statement of income, collectively with
each of the balance sheets and statements of income described in clauses (i) and
(ii) of this Section
3.06(a), referred to herein as the “Financial Statements”).
The
Financial Statements:
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(i)
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fairly
present the financial position of the Business as of their respective
dates and the results of operations of the Business for the periods
indicated therein (except, with respect to interim monthly reports, for
normal recurring year-end adjustments that, individually or in the
aggregate, would not be
material);
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(ii)
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have
been reviewed or compiled, as applicable, by ▇▇▇▇▇▇▇ & Associates,
P.C. in accordance with the Statements and Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants based on generally accepted accounting principles applied on a
consistent basis throughout the periods covered by the Financial
Statements (“GAAP”); and
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(iii)
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reflect
all liabilities or obligations, whether accrued, absolute, contingent or
otherwise, of the Seller that are Assumed Liabilities as required under
GAAP consistently applied other than those liabilities incurred since
January 31 2007, in the ordinary course of business consistent with past
practice.
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(b) The
values at which the Inventories and accounts receivable are carried on the
Financial Statements are in accordance with GAAP and reflect normal and
consistent inventory valuation policies of the Seller. The amounts
shown for the accounts receivable on the Financial Statements are collectible or
are net of adequate reserves reflected in the Financial Statements.
3.07 Taxes. Seller
represents and warrants as follows:
(a) All Tax
Returns that are required to be filed (taking into account all extensions) on or
before the Closing Date for, by, on behalf of or with respect to the Seller,
including, but not limited to, those relating to the Business, the Transferred
Assets and the Assumed Liabilities, and those which include or should include
the Seller, the Business, the Transferred Assets or the Assumed Liabilities,
have been or will be timely filed with the appropriate foreign, federal, state
and local authorities on or before the Closing Date, and all Taxes shown to be
due and payable on such Tax Returns or related to such Tax Returns have been or
will be timely paid in full on or before the Closing Date;
(b) All such
Tax Returns and the information and data contained therein have been or will be
properly and accurately compiled and completed in all material respects, fairly
present or will fairly present the information purported to be shown therein,
and reflect or will reflect all liabilities for Taxes for the periods covered by
such Tax Returns;
(c) None of
such Tax Returns are now under audit or, to the Seller’s knowledge, examination
by any foreign, federal, state or local authority and there are no agreements,
waivers or other arrangements providing for an extension of time with respect to
the assessment or collection of any Tax or deficiency of any nature against the
Seller, the Business or the Transferred Assets, or with respect to any such Tax
Return, or any suits or other actions, proceedings, investigations or claims now
pending or threatened against the Seller, the Business or the Transferred Assets
with respect to any Tax, or any matters under discussion with any foreign,
federal, state or local authority relating to any Tax, or any claims for any
additional Tax asserted by any such authority;
(d) All Taxes
due and owing from the Seller or assessed and due and owing against the Business
or the Transferred Assets on or before the Closing Date have been or will be
timely paid in full on or before the Closing Date;
(e) The
Transferred Assets are not, and on the Closing Date will not be, subject to or
liable for any special assessments or similar types of impositions;
(f) All
withholding Tax and Tax deposit requirements imposed on the Seller and
applicable to the Business for any and all periods prior to and including the
Closing Date have been or will be timely satisfied in full; and
(g) The
Financial Statements reflect adequate provision by the Seller for the payment in
full of any and all unpaid Taxes which in any way may affect the Transferred
Assets or the Business for any and all periods or portions thereof ending on or
before the respective dates thereof.
3.08 No Violations or
Litigation. Seller represents and warrants to Buyer as
follows:
(a) Seller is
currently not in material violation of, and the consummation of the transactions
contemplated hereby will not cause any violation of, any order of any
Governmental Entity or any law, ordinance, regulation, order, requirement,
statute, rule, permit, concession, grant, franchise, license or other
governmental authorization relating or applicable to the Seller, the Business or
to any of the Seller’s properties, assets or operations, including without
limitation, the Transferred Assets.
(b) There is
no action, suit, claim, investigation or legal, administrative, arbitration or
other proceeding, or governmental investigation or examination, or any change in
any zoning or building ordinance pending or, to the Seller’s knowledge,
threatened against or affecting the Seller, the Business or any of the
Transferred Assets, at law or in equity, before or by any Governmental Entity
and, to Seller's knowledge, no basis exists for any such action, suit, claim,
investigation or proceeding.
3.09 No Adverse Changes or
Events. Other than as set forth on Schedule 3.09 to the
Disclosure Schedule, since January 31, 2007, the Business has been consistently
operated only in the ordinary course and there has not been:
(a) any
adverse change or any occurrence, circumstance or combination thereof that might
reasonably be expected to have an adverse change in the financial condition,
assets, liabilities (contingent or otherwise), results of operations, business
or prospects of the Seller before or after the Closing Date;
(b) any
damage, destruction or loss, whether or not covered by insurance, adversely
affecting the Transferred Assets or the Business having a replacement cost of
more than $5,000 for any single loss or $25,000 for all such
losses;
(c) except
for ordinary salary increases and year end bonuses that have been disclosed in
writing to the Buyer at least fifteen (15) days prior to the Closing, any
increase in the compensation or rate of compensation or commissions or bonuses
payable or to become payable by the Seller to any Transferred Employee on or
after December 31, 2007, agent or representative that is not consistent with
past practice, any payment or accrual of, or commitment with respect to, any
bonus plan, vacation pay, sick leave, deferred compensation, insurance, pension,
salary continuation for disability or severance or termination arrangement that
is not consistent with past practice or any change or modification to any
severance arrangement or any agreement to increase the coverage or benefits
available under any employee benefit plan or arrangement;
(d) any debt,
obligation, mortgage, security interest or liability incurred by the Seller, any
assumption, guarantee, endorsement or other responsibility by the Seller for the
liability or obligation of any other Person (whether absolute, accrued,
contingent or otherwise), or any engagement in any other transaction by the
Seller other than in the ordinary course of business;
(e) any
mortgage, pledge or creation of any Lien with respect to any of the Transferred
Assets other than Permitted Liens;
(f) any sale,
assignment, transfer or other disposition or lapse of any Proprietary Rights or
disclosure to any Person (other than employees of the Seller in the scope of
their employment) of any Proprietary Rights material to the
Business;
(g) any write
up or write down in the value of any Equipment or Inventories;
(h) any
cancellation or compromise of any material claims, or any waiver of any other
material rights relating to the Business, or any sale, transfer or other
disposition of any material properties or assets, real, personal or mixed,
tangible or intangible, of the Business (other than sales of Inventories in the
ordinary course of business);
(i) any
change in the Seller’s method of accounting for financial, Tax or other
purposes;
(j) any
material change in the customary methods used in operating the Business
(including the pricing practices) or any material change in the sales
operations, including but not limited to promptly paying or discharging current
liabilities;
(k) any
commitment to make any capital expenditures in respect to the
Business;
(l) instituted
or settled any legal proceeding;
(m) any grant
of a license or sublicense of any rights under or with respect to any
Proprietary Information; or
(n) any
settlement or compromise of any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes.
3.10 Environmental
Matters. Seller represents and warrants to Buyer as
follows:
(a) Seller
has not caused or allowed the generation, use, treatment, storage, or disposal
of Hazardous Materials at any site or facility owned, leased or operated by the
Seller including but not limited to the Facilities or used in the Business
except in accordance with all applicable Environmental Laws and would not result
in any liability, contingent or otherwise, to the Buyer or its
affiliates;
(b) the
Seller does not own or lease any real property, improvements or related assets
that form a part of the Transferred Assets or the Business that have been
subject to the release of any Hazardous Materials;
(c) the
Seller has secured all Environmental Permits necessary to the conduct of the
Business and the operations and the Seller is in compliance with such
permits;
(d) the
Seller has not received any notice concerning any proposal to amend, revoke or
replace any Environmental Permit, or requiring the issuance of any additional
Environmental Permit, and to the Seller’s knowledge no such proposal
exists;
(e) the
Seller has not received inquiry or notice and, to its knowledge, has no reason
to suspect or believe it will receive inquiry or notice of any actual or
potential proceedings, claims, lawsuits or losses related to or arising under
any Environmental Law;
(f) the
Seller is not currently operating or required to be operating under any
compliance order, schedule, decree or agreement, any consent decree, order or
agreement, and/or corrective action decree, order or agreement issued or entered
into under any federal, state or local statute, regulation or ordinance
regarding the environment and/or health or safety in the work
place;
(g) the
Seller has not transported, arranged for the transportation of or disposed of
any substance in a manner that may lead to claims against the Buyer for clean-up
costs, remedial work, damages to natural resources or for personal injury
claims; and
(h) Seller
has provided to Buyer all environmentally related audits, studies, reports,
analyses and results of investigations that have been performed with respect to
any currently or previously owned, leased or operated properties of Seller or of
the Business.
3.11 Related Party
Transactions. Except as specifically set out in this Agreement
or on Schedules 1.02
or 3.11 to the Disclosure Schedule, no employee, officer, director,
partner, member or shareholder of Seller, any member of his or her immediate
family or any of their respective Affiliates (i) owes any amount to Seller nor
does Seller owe any amount to or has Seller committed to make any loan or extend
or guarantee credit to or for the benefit of such persons, (ii) is involved in
any business arrangement or other relationship with Seller, (iii) owns any
property or right, tangible or intangible, that is used by Seller, (iv) has any
claim or cause of action against Seller or the Business, or (v) owns any direct
or indirect interest of any kind in, or controls or is a director, officer,
employee or partner of, or consultant to, or lender to or borrower from or has
the right to participate in the profits of, any Person which is a competitor,
supplier, customer, creditor or debtor of Seller or the Business.
3.12 Undisclosed
Liabilities. The Seller does not have any liabilities or
obligations of any nature, whether accrued, absolute, contingent, unliquidated,
civil, criminal or otherwise, and whether due or to become due, other than
liabilities that (a) are reflected or reserved against in the January 31, 2007
Balance Sheet, (b) are disclosed in any Schedule (or in any plan, instrument,
lease or agreement referred to therein) or Exhibit hereto, (c) are liabilities
incurred since January 31, 2007 in the ordinary course of business.
3.13 Warranties, Product
Liability and Insurance. Seller represents and warrants to
Buyer as follows:
(a) Except
for warranties implied by law and the Seller’s customary general warranty for
goods sold as described on Schedule 3.13(a), the
Seller has not given or made any warranties in connection with the sale or
rental of goods or services, including, without limitation, warranties covering
the customer’s consequential damages. To Seller's knowledge, there
are no facts or the occurrence of any event forming the basis of any present
claim against the Seller with respect to warranties relating to products
manufactured, sold or distributed by the Seller or services performed by or on
behalf of the Seller except any claim that would not individually or in the
aggregate exceed $10,000. Seller has not sold any products or
delivered any services that included a warranty for a period longer than one
year. To Seller's knowledge, Seller has not committed any act or
failed to commit any act which would result in, and there has been no occurrence
which would give rise to or form the basis of, any product liability or
liability for breach of warranty on the part of Buyer with respect to the
products designed, manufactured, assembled, repaired maintained, delivered sold
or installed or services rendered by or on behalf of Seller or the
Business.
(b) To
Seller's knowledge, there is no state of facts or any event forming the basis of
any present claim against the Seller not fully covered by insurance, except for
deductibles and self-insurance retentions, for personal injury or property
damage alleged to be caused by products shipped or services rendered by or on
behalf of the Seller.
(c) Seller
has insurance policies in full force and effect (i) for such amounts as are
sufficient for all legal requirements to which Seller is a party or by which
it’s bound and (b) which are in such amounts, with such deductibles and against
such risks and losses, as is reasonable for the Business, assets and properties
of Seller. Set out in Schedule 3.13.(c) to
the Disclosure Schedule is a list of all insurance policies held by or
applicable to Seller.
3.14 Employee
Matters.
(a) There are
no collective bargaining or other labor union agreements to which the Seller is
a party or by which it is bound. To Seller’s knowledge, neither
Seller nor the Business has encountered any labor union organizing activity or
had any actual or threatened employee strikes, work stoppages, slowdowns or
walkouts.
(b) The
Seller does not contribute to or have an obligation to contribute to, and has
not at any time within six years prior to the Closing Date contributed to or had
an obligation to contribute to, a multi-employer plan within the meaning of
Section 3(37) of ERISA.
(c) The
Seller does not have any defined benefit pension. Seller does have
employee benefit plan(s) established pursuant to Section 401(k) of the Code and
such plan(s) has been maintained in all material respects in accordance with its
terms and the provisions of applicable law. Seller does have a profit
sharing plan and such plan has been maintained in all material respects in
accordance with its terms and the provisions of applicable law. Other
than the foregoing, Seller does not maintain any other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as
amended.
(d) No
lawsuit, complaint or investigation or governmental audit has been noticed,
initiated or filed with respect to any employee benefit plan. The
Company has not incurred any liability to the PBGC or otherwise under
ERISA. There has not been any reportable event as defined in ERISA
which would require the giving of notice or any event requiring the giving of
notice to be provided.
(e) Schedule 3.14.(e) to
the Disclosure Schedule sets forth a complete and correct list of all employee
benefit plans and all other employee benefit arrangements or payroll practices
maintained by Seller or to which Seller contributed or is obligated to
contribute thereunder for current or former employees of the Seller or that
cover employees of Seller. All items listed on Schedule 3.14.(e) to
the Disclosure Schedule have been maintained in all material respects in
accordance with their terms and the provisions of applicable law.
(f) Any
individual who performs services for Seller and who is not treated as an
employee for federal income tax purposes by Seller is not an employee for such
purposes.
3.15 Banks. Schedule 3.15 to the
Disclosure Schedule contains a complete and correct list of (a) the names and
locations of all banks in which Seller has accounts or safe deposit boxes, (b)
the account numbers of all such accounts and (c) the names of all persons
authorized to draw thereon or to have access thereto.
3.16 Customers and
Suppliers. Since January 31, 2007, no material customer or
supplier of the Business has terminated its relationship with the Business or
has materially reduced or changed the pricing or has materially changed any
other terms of its business with the Business and no material customer or
supplier of the Business has notified Seller that it intends to terminate or
materially reduce or change the pricing or other terms of its business with the
Business.
3.17 Executive
Status. Shareholders acknowledge and represent that they are
and have been executive and management personnel of the Seller for many
years. Shareholders acknowledge that the covenants contained in Sections 7.07 and
7.10 hereof are
a material element of this Agreement and that Buyer would not have entered into
this Agreement or purchased the Business or the Transferred Assets without the
Shareholders’ agreement to honor the provisions of Sections 7.07 and
7.10.
3.18 Definition of
Knowledge. For purposes of this Agreement and any document
delivered at Closing, whenever the phrase (i) "to the Seller's knowledge" or the
"knowledge" of the Seller or words of similar import are used, they shall be
deemed to mean and are limited to the actual knowledge of the directors and
officers of the Seller, upon Seller’s inquiry of such officers’ and directors’
actual knowledge, at the times indicated only, and not any implied, imputed or
constructive knowledge of such individual, the Seller or the
Shareholders. Furthermore, it is understood and agreed that, except
as expressly provided herein (including, without limitation, as provided in
Article 10
hereof), none of the individuals named above shall, in any event or in any
capacity, have any personal liability in any manner whatsoever hereunder or
otherwise related to the transactions contemplated hereby.
ARTICLE
4
REPRESENTATIONS AND
WARRANTIES OF THE BUYER
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The
Buyer represents and warrants to the Seller and the Shareholders as
follows:
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4.01 Corporate
Matters. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Texas. The Buyer has the requisite corporate power and authority to
enter into this Agreement and to perform its obligations under this
Agreement. This Agreement has been duly authorized, executed and
delivered by the Buyer and is a legal, valid and binding obligation of the
Buyer, enforceable against the Buyer in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect that
affect creditors’ rights generally and by legal and equitable limitations on the
availability of specific remedies. The execution and delivery of this
Agreement and the other agreements and documents to be delivered by the Buyer,
the consummation of the transactions contemplated hereby and thereby and the
compliance with the provisions hereof and thereof, by the Buyer will not, with
or without the passage of time or the giving of notice or both, violate any
provision of, or constitute a default under, any contract or other agreement to
which the Buyer is a party or by which it is bound, conflict with its articles
of incorporation or bylaws, other than violations, defaults or conflicts that
would not materially and adversely affect the ability of the Buyer to consummate
the transactions provided for in this Agreement.
4.02 Conflicts and
Litigation. The execution, delivery and performance of this
Agreement and the other agreements and documents to be delivered by the Buyer to
the Seller and the Shareholders, the consummation of the transactions
contemplated hereby or thereby, and the compliance with the provisions hereof or
thereof, by the Buyer will not, with or without the passage of time or the
giving of notice or both violate any law, statute, ordinance, regulation,
judgment, writ, injunction, rule, decree, order or any other restriction of any
kind or character applicable to the Buyer or any of its respective properties or
assets. There are no legal proceedings pending or, threatened that
are reasonably likely to prohibit, restrain or materially delay the ability of
Buyer to enter into this Agreement or consummate the transactions contemplated
hereby.
ARTICLE
5
ACCESS TO INFORMATION BY THE
BUYER
5.01 Prior to
Closing. Until the Closing and pursuant to the terms and
conditions of the Confidentiality Agreement executed by Seller and Buyer as of
January 4, 2008 (“the CA”), the Seller will furnish the Buyer and its employees,
officers, accountants, attorneys, agents, investment bankers and other
authorized representatives with all books, records, financial information,
contracts, and other data and information concerning the Business, commitments,
personnel and properties and facilities of the Seller as the Buyer shall from
time to time reasonably request and will afford the Buyer and its employees,
officers, accountants, attorneys, agents, investment bankers and other
authorized representatives reasonable access during normal business hours to the
Seller’s offices, properties, books, records, financial information, contracts
and documents (including Tax Returns filed and those in preparation) and will be
given the opportunity to ask questions of, and receive answers from,
representatives of the Seller with respect to the Business, the Transferred
Assets and the other properties of the Seller (“the Inspection”). The
Inspection shall not include the Facilities and the inspection of the Facilities
shall be conducted as set out in the leases for the Facilities. All
investigation on Seller's property or with employees of Seller must be conducted
in the presence of a Shareholder (each Shareholder shall use their good faith
efforts to be available as requested by Buyer) or with a Shareholder's prior
approval (not to be unreasonably withheld, delayed, denied or
conditioned). No investigations by the Buyer or its employees,
representatives or agents shall reduce or otherwise affect the obligation or
liability of the Seller with respect to any representations, warranties,
covenants or agreements made herein or in any Exhibit, Schedule or other
certificate, instrument, agreement or document, including the Disclosure
Schedule, executed and delivered in connection with this
Agreement. The Seller will cooperate with the Buyer and its
employees, officers, accountants, attorneys, agents and other authorized
representatives in the preparation of any documents or other materials that may
be required by any Governmental Entity.
5.02 Public
Information. Until the Closing or termination hereof, the
Buyer and the Seller will consult in advance on the necessity for, and the
timing and content of, any communications to be made to the public and to the
form and content of any application or report to be made to any Governmental
Entity that relates to the transactions contemplated by this Agreement, except
with respect to public announcements or disclosures in response to legal
requirements (including, without limitation, requirements under the Federal
securities laws).
ARTICLE
6
EMPLOYEE
MATTERS
6.01 Hiring of Transferred
Employees. The Buyer shall offer employment (on an “at will
basis”) to all of the Seller’s active hourly employees and other active salaried
employees as of the Closing (all individuals who accept such offer are
collectively, the “Transferred Employees”). The Buyer shall not
assume any liabilities or obligations of the Seller with respect to its
employees, and the Buyer will have complete discretion as to the terms of
employment that are offered to the Transferred Employees. Nothing
contained in this Section 6.01 is
intended to confer upon any of the Seller’s employees any right to continued
employment after the Closing Date. Notwithstanding any other
provision of this Agreement, the parties hereto do not intend to create any
third-party beneficiary rights respecting any of the Seller’s employees or
former employees as a result of the provisions herein and specifically hereby
negate any such intention.
6.02 Employee
Benefits.
(a) Except as
set forth in Section
6.03 and otherwise provided herein, the Buyer shall not be liable or
obligated under any employee benefit plan or for any other employee benefits
that may have been established by the Seller for the Seller’s employees prior to
the Closing, and the Seller expressly acknowledges that it has sole liability
for all employee benefit costs accrued as of the Closing whether or not any or
all of such employees are subsequently hired by the Buyer. Without
limiting the generality of the foregoing, the Seller acknowledges and agrees
that the Buyer does not assume the sponsorship of, the responsibility of
contributions to, or any liabilities in connection with any employee benefit
plan maintained by the Seller for active employees, retirees, former employees,
their beneficiaries or any other Person, including any employee pension benefit
plan within the meaning of ERISA, employee welfare plan within the meaning of
ERISA and any personnel policy, stock option plan, bonus or profit sharing plan
or arrangement, incentive award plan or arrangement, vacation policy, severance
pay plan, policy or agreement, deferred compensation agreement arrangement,
executive compensation or supplemental income arrangement, consulting agreement,
employment agreement and each other employee benefit plan, agreement,
arrangement, program, practice or understanding.
(b) With
respect to the Transferred Employees the Seller will remain responsible for
medical expenses covered under its plans (i) actually incurred prior to the
Closing Date or (ii) actually incurred with respect to any hospitalization that
began prior to the Closing Date until such hospitalization ends (as required
under such plans), and the Buyer will be responsible for all other medical
expenses incurred on or after the Closing Date to the extent covered under its
plans without the application of any waiting period for coverage generally
applicable to newly hired employees. To the fullest extent permitted
under its applicable policies of insurance and to the extent required by
applicable law, the Seller shall maintain medical, health, hospitalization,
life, travel and accident insurance coverage for the Transferred Employees in
effect for so long as Buyer shall request; provided, however, that Buyer shall be
responsible for all costs (if any) of maintaining such policies for all
applicable periods following the Closing Date. Seller’s cost of such
insurance coverage from and after the Closing Date shall be borne by the Buyer
and, to the extent applicable, Buyer agrees to reimburse Seller for such costs
or expenses within thirty (30) days after receipt from Seller of proof of
payment of such costs or expenses. The Seller shall cooperate with
the Buyer to provide continuity of such insurance coverage to the Transferred
Employees. Set out in Schedule 6.02(b)
[this Schedule needs to be furnished] of the Disclosure Schedule is the list of
all employees, their salary or hourly rate (as applicable), annual vacation and
sick days and their outstanding balances in Seller’s 401(k) plan.
6.03 Severance Benefits;
Employment Termination. Buyer and Seller hereby agree that
Buyer shall assume Seller’s obligation to make COBRA Coverage (as hereinafter
defined) available to all of Seller’s qualified beneficiaries, as such term is
defined by COBRA (26 U.S.C. § 4980B(g)(1) and 29 U.S.C. § 1167(3)) (the “M+A
Qualified Beneficiaries”) in accordance with the provisions of COBRA (as
hereinafter defined) and, accordingly, Buyer shall cause its group health plan
to make COBRA Coverage available to the M+A Qualified
Beneficiaries. For purposes of this Section, the term “COBRA
Coverage” means the health insurance coverage required to be offered pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”), 26 U.S.C. §§ 4980B et seq., and 29 U.S.C. §§ 1162
–1167. The Buyer agrees to provide severance benefits, only in
accordance with Buyer’s policies and procedures, to the Transferred
Employees.
6.04 Reporting of
Data. The Buyer and the Seller shall complete and furnish to
each other such other employee data as shall be reasonably required from time to
time for each party to perform and fulfill its obligations under this Article
6. Seller and Buyer shall report on a predecessor/successor
basis as set forth under any IRS revenue procedure including the filing of Form
W-2 for each Transferred Employee.
6.05 Employment Related
Claims. The Seller agrees that the Seller and not the Buyer
shall be solely responsible for all liability, costs and expenses (including
attorneys’ fees) for all existing employment claims that have been filed by any
employee or former employee of the Seller prior to the Closing Date relating to
arbitrations, unfair labor practice charges, employment discrimination charges,
wrongful termination claims, workers’ compensation claims, any
employment-related tort claim or other claims or charges of or by employees of
the Seller, or any thereof filed after the Closing Date but arising as a result
of conditions, actions or events or series of actions or events which occurred
prior to the Closing Date. The Buyer agrees that it shall be
responsible for all liability, costs and expenses (including attorneys’ fees)
for all employment claims that are filed by any Transferred Employee relating to
arbitrations, unfair labor practice charges, employment discrimination charges,
wrongful termination claims, workers’ compensation claims, any
employment-related tort claim or other claims or charges of or by the
Transferred Employees to the extent, but only to the extent, that the same
result from the employment relationship between the Buyer and the Transferred
Employee and conditions, actions or events or series of actions or events
occurring subsequent to the Closing Date. Seller shall pay
Transferred Employees their accrued and unused vacation through the Closing
Date. Effective as of the Closing Date, Seller shall cause the
tax-qualified 401(k) plans in which the Transferred Employees were eligible to
participate immediately prior to the Closing Date to fully vest such employees’
accrued benefit through the Closing Date thereunder.
ARTICLE
7
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ADDITIONAL
AGREEMENTS
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7.01 Conduct of the
Business. The Seller and the Shareholders (as applicable)
covenant and agree with the Buyer that from and after the Effective Date until
the Closing, except as expressly authorized by this Agreement or expressly
consented to in writing by the Buyer, the Seller and the Shareholders (as
applicable) shall, and to the extent the same would affect the Proprietary
Rights:
(a) operate
the Business and the Transferred Assets only in the usual, regular and ordinary
course of business with a view to maintaining the goodwill that the Seller now
enjoys and, to the extent consistent with such operation, will use all
reasonable efforts to preserve intact its present business organization, keep
available the services of its employees and preserve its relationships with its
customers, suppliers, jobbers, distributors and other Persons having business
relations with it;
(b) use all
reasonable efforts to maintain the Transferred Assets in a state of repair,
order and condition consistent with its ordinary course of business in
connection with the Business;
(c) maintain
its books of account and records relating to the Business in the ordinary course
of business, in accordance with the Seller’s usual accounting practices applied
on a consistent basis;
(d) comply in
all material respects with all statutes, laws, orders and regulations applicable
to it and to the conduct of the Business;
(e) not sell,
assign, transfer, lease or otherwise dispose of any Proprietary Rights,
Equipment or any of the other Transferred Assets except for dispositions of
Inventories for value in the usual and ordinary course of business or other than
to the Buyer pursuant to the terms of this Agreement;
(f) preserve
and maintain all rights that it now enjoys in and to the Proprietary Rights and
not sell, assign, transfer, lease or otherwise dispose of any Proprietary Rights
other than to the Buyer pursuant to the terms of this Agreement;
(g) not
mortgage, pledge or otherwise create a security interest in any of the
Transferred Assets or permit there to be created or exist any Liens thereon
other than Permitted Liens;
(h) not enter
into any contract, commitment or lease in relation to the Business that is out
of the ordinary course of the Business or, if effective on the date hereof,
would be required to be disclosed in Schedule 3.05(a) of
the Disclosure Schedule;
(i) not amend
or modify any of the Contracts and Other Agreements disclosed in Schedule 3.05(a) of
the Disclosure Schedule or any other contract, commitment, lease or other
agreement that would, if entered into on the date hereof, be required to be
disclosed on any Schedule to this Agreement, including the Disclosure
Schedule;
(j) not
consent to the termination of any of the Contracts and Other Agreements
disclosed in Schedule
3.05(a) of the Disclosure Schedule or waive any of the Seller’s rights
with respect thereto;
(k) not grant
any increase in the compensation or rate of compensation or commissions or
bonuses payable to or severance obligations for any of employees or in any bonus
plan and not transfer or otherwise change any of the terms or conditions of
employment of any of the employees except the bonuses contemplated in Section
6.02;
(l) not
permit any insurance policy naming it as a beneficiary or a loss payee relating
to the Business or the Transferred Assets to be canceled or terminated or any of
the coverage thereunder to lapse unless simultaneously with such termination or
cancellation replacement policies providing substantially the same coverage are
in full force and effect; and
(m) pay when
due all accounts payable, all payments required by any of the Contracts and
Other Agreements, and all Taxes other than Taxes that are being contested in
good faith and for which adequate reserves against the Transferred Assets exist
and which would not result in a Lien being imposed on any of the Transferred
Assets.
7.02 Information and
Consents. During the period from the date of this Agreement to
the Closing Date, the Buyer and the Seller will promptly inform the other in
writing of (a) any claim, action or any proceeding commenced against such party
with respect to the transactions contemplated by this Agreement or any assets or
property of the Seller or the Business or (b) any other fact, change, condition,
circumstance, event or occurrence that has caused or is reasonably likely to
cause any representation or warranty in this Agreement made by the Seller or the
Shareholders to be untrue or inaccurate in any material
respect. Seller shall use its reasonable efforts to obtain at the
earliest practicable date all consents, waivers, approvals and notices that are
required to consummate, or in connection with the transactions contemplated by
this Agreement. All such consents, waivers, approvals and notices
shall be in a form and substance reasonably satisfactory to Buyer.
7.03 Compliance.
(a) Each of
Seller and the Shareholders shall use their commercially reasonable efforts (i)
to cause the obligations imposed upon it or them in this Agreement to be duly
complied with, and all conditions precedent to such obligations to be satisfied
and (ii) to obtain any and all consents, waivers, amendments, modifications,
approvals, authorizations, notations and licenses necessary to the consummation
of the transactions contemplated by this Agreement.
(b) Except
for Permitted Liens or as otherwise specifically set out in this Agreement, the
Seller and the Shareholders shall cause all Liens on the Transferred Assets to
be released as of the Closing Date.
7.04 Delivery of Corporate
Documents. On the Closing Date, Seller shall deliver to the
Buyer all Documents and Other Papers relating to the Transferred Assets, the
Assumed Liabilities and the current and proposed operations of the Business
(other than Excluded Assets), including, without limitation, all files relating
to the Trade Payables, computer programs, files, disks reflecting any books or
records, documents or other papers, or other information or data relating to the
operation of the Business or the Transferred Assets or customer records and
sales history stored on any electronic media, including computers in its
possession. The Seller, however, shall be entitled to retain the
historical books and records relating to the Business to the extent such books
and records are not necessary for the ongoing operations of the Business by the
Buyer. The Seller agrees that so long as the corporation, accounting,
auditing and tax books, records (including work papers) and other books and
records relating to the Seller, the Business and the Transferred Assets, the
Transferred Employees and the Assumed Liabilities remain in existence and in the
possession of the Seller or its affiliates, the Buyer and its authorized
representatives shall have the right to inspect and, at the Buyer’s expense, to
copy the same at any time during regular business hours for any proper
purpose. For a period of five (5) years following the Closing Date,
the Seller agrees that it will not destroy any of such books and records without
having first offered to deliver the same to the Buyer.
7.05 Further
Assurances. Prior to and on and after the Closing Date, Seller
and the Shareholders shall execute, acknowledge and deliver or cause to be
executed, acknowledged and delivered to the Buyer such bills of sale,
assignments and other instruments of transfer, assignment and conveyance, in
form and substance reasonably satisfactory to counsel for the Buyer, as shall be
necessary to vest in the Buyer all the right, title and interest in and to the
Transferred Assets free and clear of all Liens (including the release of all
Liens of record) and shall use its reasonable efforts to cause to be taken such
other action as the Buyer reasonably may require to more effectively consummate,
implement and carry into effect the transactions contemplated by this
Agreement.
7.06 Cooperation After
Closing.
(a) The
Seller, the Shareholders and the Buyer shall cooperate with each other after the
Closing hereunder in clearing the title to any of the Transferred Assets to the
Buyer pursuant hereto in the event that the Seller’s title to any such property,
as the case may be, as of the Closing Date, shall be defective, not marketable
or nonassignable. In this connection, the Seller shall take all
commercially reasonable action, including, but not limited to, the furnishing of
documents and evidences of title and assistance in the preparation and trial of
any necessary litigation, to clear title to any such property, all of which
shall be at the expense of the Seller.
(b) For the
greater of eight (8) years from the Closing Date and such period as may be
required by any statute, regulation or Governmental Entity or any then pending
litigation, the Buyer shall permit, the Seller and its representatives
reasonable access to the business records and files of the Seller that are
transferred to the Buyer in connection herewith in anticipation of, or
preparation for, existing or future litigation or any Tax audit which the Seller
or any of its affiliates is involved and which is related to the Business or the
Transferred Assets, during regular business hours and upon reasonable notice at
the Buyer’s principal places of business or at any location where such records
are stored; provided, however, that (i) any such access shall be had or done in
such a manner so as to not interfere with the normal conduct of the Business,
(ii) the Buyer shall not be required to provide access to any confidential
record or records, the disclosure of which would violate any governmental
statute or regulation or applicable confidentiality agreement with any Person,
and (iii) the Buyer shall not be required to provide access to any confidential
record or records, the disclosure of which would cause the Buyer or any of its
Affiliates to waive its attorney-client privilege or attorney work product
privilege, it being understood and agreed that the records delivered by the
Seller to the Buyer shall not be deemed to be restricted from the Seller
pursuant to either clause (ii) or (iii) above. The Buyer shall also
provide the Seller with (i) reasonable access to each Facility for the purpose
of complying with applicable Environmental Laws provided that such access does
not interfere with the normal conduct of the Business and (ii) reasonable access
to the accounting records and schedules necessary for the preparation of
financial reports and tax returns for the year ended January 31, 2008, and for
the 2008 accounting period ending on the Closing Date.
(c) For the
greater of eight (8) years from the Closing Date and such period as may be
required by any statute, regulation or Governmental Entity or any then pending
litigation, the Seller shall retain the general business records and files of
Seller and shall permit the Buyer and its representatives reasonable access to
the general business records and files of the Seller in anticipation of, or
preparation for, existing or future litigation or any Tax audit or other
reasonable purposed in which the Buyer or any of its affiliates is involved and
which is related to the Business or the Transferred Assets, during regular
business hours and upon reasonable notice at the Seller’s principal places of
business or at any location where such records are stored; provided, however,
that (i) any such access shall be had or done in such a manner so as to not
interfere with the normal conduct of the Seller’s business, (ii) the Seller
shall not be required to provide access to any confidential record or records,
the disclosure of which would violate any governmental statute or regulation or
applicable confidentiality agreement with any Person, and (iii) the Seller shall
not be required to provide access to any confidential record or records, the
disclosure of which would cause the Seller or any of its Affiliates to waive its
attorney-client privilege or attorney work product privilege.
(d) The
Seller, if requested by the Buyer (and at Buyer’s expense), shall cooperate and
assist in preparing such financial statements of the Business that the Buyer may
reasonably require in order to permit Buyer to timely file any report required
by the Securities and Exchange Commission in accordance with the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder in
connection with the transactions contemplated thereby and to comply with any
other financial statement requirements with respect to the Business applicable
to Buyer under the Securities Exchange Act of 1934, as amended, the Securities
Act of 1933, as amended, and the rules and regulations
thereunder. The Seller shall cause its accountant to provide the
Buyer with reasonable access to such firm’s work papers in support of the
Business. The cost of such accounting work shall be borne by the
Buyer, but the Seller shall use its reasonable efforts to cause its accountant
to provide the Buyer with an estimate of its costs. The Seller will
also cooperate with and assist the Buyer in preparing, and, if requested, shall
use reasonable efforts to cause its accountant to cooperate, at Buyer’s expense,
in preparing, such other financial statements for the Business as may be
specified by the Buyer.
(e) In
furtherance of Sections 1.03(a) and
1.05(i) hereof, Seller shall enter into the Escrow Agreement, as defined
in Sections 8.03, and Seller shall redeem all of the Preferred Shares on or
before April 1, 2008.
7.07 Covenants of Nondisclosure
of Proprietary Information.
The
Seller and the Shareholders covenant and agree that, from and after the Closing
Date, they and their respective affiliates shall hold in confidence and will not
directly or indirectly at any time reveal, report, publish, disclose or transfer
to any Person other than the Buyer any of the Proprietary Information that is
not generally known to the public or utilize any of the Proprietary Information
for any purpose. The Seller and the Shareholders hereby agree that,
upon the Closing and as between Buyer, Seller, the Shareholders and each of
their respective affiliates, Buyer shall have the sole right to use the name
“Rocky Mtn. Supply” or similar names and any service marks, trademarks, trade
names, d/b/a names, fictitious names, identifying symbols, logos, emblems or
signs containing or comprising the foregoing or otherwise used in the Business
and owned by Seller or the Shareholders (and Seller and the Shareholders shall
not, and shall not permit any of their respective affiliate to, use such name or
any variation or simulation thereof). As soon as legally practicable
after the Closing (but not later than twenty (20) Business Days after the
Closing Date) Seller shall, and shall cause its affiliates to, remove any ▇▇▇▇
from its legal name by appropriate legal proceedings in the jurisdiction of its
incorporation and each jurisdiction where such entity has registered to do
business.
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Notwithstanding
the foregoing, the Seller and its affiliates may disclose information that
is (i) required to be disclosed by applicable State or federal tax or
securities laws to the extent, and only to the extent, such laws require
such disclosure and, to the extent practicable, the Seller provides the
Buyer prior written notice of its intent to provide such disclosure and
the general text of such disclosure, and (ii) required to be disclosed by
final order of a court of competent jurisdiction; provided that, in the
event Seller or such affiliate is served or threatened with litigation
that would require the Seller or such affiliate to disclose such
information, the Seller or such affiliate shall tender to the Buyer the
opportunity to defend, at its cost, against such
disclosure.
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(a) The
Seller acknowledges that all documents and objects containing or reflecting any
Proprietary Information, whether developed by the Seller or by someone else for
it or any of its affiliates, will after the Closing Date become the exclusive
property of the Buyer and be delivered to the Buyer.
(b) Because
of the unique nature of the Proprietary Information, if any, the Seller
understands and agrees that the breach or anticipated breach of its or its
affiliates obligations under this Section 7.07 will
result in immediate and irreparable harm and injury to the Buyer and its
affiliates, for which it will not have an adequate remedy at law, and that the
Buyer and its affiliates and their successors and assigns shall be entitled to
an injunction, restraining order or other equitable relief to enjoin such breach
or anticipated breach and to seek any and all other legal and equitable remedies
to which they may be entitled. In the event that Buyer were to seek
damages for any breach of this Section 7.07, the
portion of the consideration which is allocated by the parties to this covenant
shall not be considered a measure or limit on such damages. The Seller and the
Shareholder acknowledge that this covenant regarding Proprietary Information is
being provided as an inducement to the Buyer to acquire the Business and
Transferred Assets. The parties agree that if any court of competent
jurisdiction determines that any relevant feature of this Section 7.07 is
determined to be unreasonable, arbitrary or against public policy then such
relevant feature which is determined by the court to be reasonable, not
arbitrary and not against public policy may be enforced against the applicable
party.
7.08 Real
Property. On or prior to the Closing Date, Seller shall obtain
and deliver to Buyer a Lease Termination Agreement, substantially in the form
attached hereto as Exhibit “F”, from
each of the lessors of the Facilities and memorializing the termination of the
respective leases for each of the respective Facilities as of the Closing Date
and the entry into new leases for such Facilities in substantially the form
attached hereto as Exhibit “C” (the
“Lease”), as of such date both upon such terms and conditions reasonably
acceptable to Buyer.
7.09 Warranty
Claims. With respect to any claims made pursuant to warranties
to third Persons in connection with products manufactured, sold or distributed
or services provided by the Seller prior to the Closing Date that relate to the
Business and that are covered by valid and existing warranties of the Seller,
the Buyer agrees to assume and pay for such claims to the extent, but only to
the extent, that the Buyer’s Damages with respect to all such claims do not
exceed in the aggregate $10,000. Any claims in excess of such amount
shall remain part of the Retained Liabilities. The Buyer agrees to
provide to Seller, at prices equal to Buyer’s out-of-pocket cost, the necessary
services so Seller can satisfy any claims made pursuant to warranties of third
Persons in connection with products manufactured, sold or distributed or
services provided by the Seller prior to the Closing Date that relate to the
Business and that are covered by valid and existing warranties of the Seller and
not assumed by Buyer pursuant to Section 7.09. The foregoing
limitations, however, shall not be deemed in any way to limit the right of the
Buyer to seek indemnification from the Seller for any Damages in connection with
products manufactured, sold or distributed or services provided by the Seller
prior to the Closing Date to the extent the Buyer incurs any monetary liability
to any third Person with respect to such matters or is obligated to take any
action other than that expressly covered by this Section
7.09.
7.10 Covenant Not to Compete With
the Business. The Seller and the Shareholders covenant and
agree that, effective as of the Closing Date and for a period of five (5) years
thereafter, the Seller and the Shareholders shall not, without the consent of
the Buyer, directly or indirectly, (i) design, develop, market, produce,
manufacture or provide any product, good or service that competes with the
Business in Colorado, Nebraska and Wyoming, (ii) make any contact with, for the
purpose of transacting any business competitive to the Business, with any Person
which was a customer of Seller at any time in the five (5) years prior to the
Closing Date (“Company’s Customers”), (iii) attempt to direct or take away the
business or patronage of any of the Company’s Customers or suppliers, (iv)
attempt to have any dealings with the Company’s Customers or suppliers for the
purpose of attempting to secure such customers or suppliers or their patronage
in competition with the Business, (v) solicit, hire away or attempt to solicit
or hire away to any firm or entity engaged in the Business, any person presently
employed by Seller, (vi) engage in the Business, (vii) interfere with or molest
the business, trade, goodwill, suppliers or customers of the Seller, (viii)
directly or indirectly, own, invest in, manage, operate, control, be employed
by, consult with or be an agent for, engage or participate in the
ownership, management, operation, control or any other engagement of, any
business, whether in corporate, proprietorship or partnership form or any other
business form, engage in the business of distribution of industrial products or
in any business that competes with the Business, or (ix) use for Seller’s or
Shareholders’ own benefit or the benefit of another or disclose, disseminate, or
distribute to another, any trade secrets of the Business. The Seller
and the Shareholders acknowledge that a remedy at law for any breach or
attempted breach of this Section 7.10 will be
inadequate and they further agree that any breach of this Section 7.10 will
result in irreparable harm to the Business and to the Buyer and in addition to
any other remedy that may be available to Buyer, Buyer shall be entitled to
specific performance and injunctive and other equitable relief in case of any
such breach or attempted breach. The Seller and the Shareholders
acknowledge that this covenant not to compete is being provided as an inducement
to the Buyer to acquire the Business and the Transferred Assets and that this
Section 7.10
contains reasonable limitations as to time, geographical area and scope of
activity to be restrained that do not impose a greater restraint than is
necessary to protect the goodwill or other business interest of the
Buyer. Whenever possible, each provision of this Section 7.10 shall be
interpreted in such a manner as to be effective and valid under applicable law
but if any provision of this Section 7.10 shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Section
7.10. If any provision of this Section 7.10 shall,
for any reason, be judged by any court of competent jurisdiction to be invalid
or unenforceable, such judgment shall not affect, impair or invalidate the
remainder of this Section 7.10 but
shall be confined in its operation to the provision of this Section 7.10 directly
involved in the controversy in which such judgment shall have been
rendered. In the event that the provisions of this Section 7.10 should
ever be deemed to exceed the time or geographic limitations permitted by
applicable laws, then such provision shall be reformed to the maximum time or
geographic limitations permitted by applicable law.
7.11 Continuation of Business by
the Buyer. Nothing in this Section 7.11, in any
other provision of this Agreement, in any Exhibit or Section hereto, or in any
agreement, instrument, or other document executed or delivered in connection
with this Agreement shall require the Buyer to continue its business or
operations or to manage and operate the Business with any duty or standard of
care to the Seller and the Shareholders. The Seller and the
Shareholders acknowledge and agree that the Buyer in its sole discretion may
continue, manage, modify or discontinue the operations of the Business,
liquidate or otherwise change or cease its operations.
ARTICLE
8
CONDITIONS TO THE BUYER’S
OBLIGATION
TO CONSUMMATE THE
TRANSACTIONS
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The
obligation of the Buyer to purchase the Transferred Assets, to assume the
Assumed Liabilities and to consummate the transactions contemplated by
this Agreement is, at the option of the Buyer, subject to the satisfaction
on or before the Closing Date of the fulfillment of the conditions set
forth below, any of which may be waived by the Buyer in
writing.
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8.01 Representations, Warranties
and Covenants. The representations and warranties of the
Seller and the Shareholders contained in this Agreement qualified as to
materiality (including as to any Material Adverse Effect) shall be true, correct
and complete in all respects, and those not so qualified shall be true, correct
and complete in all material respects, on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made or given on and as of such date; each and all of the agreements and
covenants of the Seller and the Shareholders to be performed or complied with by
it on or before the Closing Date pursuant to this Agreement shall have been
materially performed or complied with and Buyer shall have received copies of
such documents evidencing such performance as Buyer may reasonably request; and
Seller shall have delivered to the Buyer a certificate, in a form reasonably
acceptable to Buyer, signed by its President and its Treasurer, dated the
Closing Date, to all such effects.
8.02 Good Standing and Corporate
Authorizations. The Seller shall have delivered to the Buyer
certificates issued by appropriate Governmental Entities evidencing the good
standing of the Seller, as of a date not more than ten (10) calendar days prior
to the Closing Date, in the State of Colorado and in the states or commonwealths
in which Seller is qualified to do business as a foreign
corporation. Seller shall have delivered to Buyer a certified copy of
the resolutions adopted by Seller’s board of directors authorizing the
execution, delivery and performance of this Agreement and the resolutions duly
adopted by the Shareholders approving the performance of this Agreement and the
consummation of the transactions contemplated hereby.
8.03 Closing
Instruments. The Seller and the Shareholders, as applicable,
shall have executed, acknowledged and delivered to the Buyer (i) the General
Conveyance, Transfer, Assignment and Assumption, in substantially the form
attached hereto as Exhibit “D”, (ii) the
Goodwill Purchase Agreement, (iii) the Employment Agreements, and (iv) any other
documents necessary in the reasonable opinion of counsel to Buyer to transfer
and assign the Transferred Assets to Buyer. The Shareholders shall
have executed and delivered to Buyer a separate purchase agreement pursuant to
which Buyer shall effect a separate purchase of the goodwill and intangible
assets of the Shareholders associated with the Business, contemporaneously with
the Closing hereunder (the “Goodwill Purchase Agreement” in the form and
substance attached hereto as Exhibit “I”) and the
Employment Agreements. The Seller and the escrow agent under the
Escrow Agreement (in form and substance attached hereto as Exhibit “G, the
“Escrow Agreement”) shall have executed and delivered to Buyer such agreement
and the Escrow Agreement shall be in full force and effect as of the
Closing.
8.04 Amendment to Articles of
Incorporation. The Seller shall have prepared, obtained all
necessary corporate authorizations, executed and delivered to the Buyer
documents, in form and substance reasonably satisfactory to counsel for the
Buyer, sufficient to change the Seller’s corporate name to one bearing no
resemblance to the Seller’s current corporate name and sufficient to assign and
insure to the Buyer the continuing right to use the present corporate name of
the Seller and all variations thereof.
8.05 No
Litigation.
(a) No
preliminary or permanent injunction or other order of any court or other
Governmental Entity shall be in effect nor shall there be in effect any statute,
rule, regulation or executive order promulgated or enacted by any Governmental
Entity that, in any such case, prevents the consummation of the transactions
contemplated by this Agreement.
(b) No suit,
action, claim, proceeding or investigation before any Governmental Entity shall
have been commenced or threatened seeking to prevent the consummation of the
transactions contemplated by this Agreement.
8.06 Employment
Agreements. Each of the Shareholders shall have executed and
delivered to Buyer an employment agreement with Buyer in the form attached
hereto as Exhibit
“E” (the “Employment Agreements”).
8.07 Leases. The
lessors for each of the Facilities shall have executed and delivered to Buyer
(i) the landlord’s letter as provided in Section 7.08 hereof
and (ii) the Lease containing the specific terms for each such Facility as set
forth on Schedule
8.07 to the Disclosure Schedule.
8.08 Other Legal
Matters. All Exhibits, Schedules, certificates, documents and
legal matters in connection with this Agreement and the transactions
contemplated hereby shall be in the forms required by this
Agreement.
8.09 Licenses, Consents and
Approvals by the Buyer. Other than as contemplated by Section 8.07, the
Buyer shall have received each of the licenses, consents, approvals and other
authorizations from Governmental Entities and third parties that are set forth
on Schedule
8.09 hereto.
8.10 Release of
Liens. Seller shall have delivered to the Buyer releases of
all Liens, other than Permitted Liens, on the Transferred Assets in form and
substance reasonably satisfactory to the Buyer.
ARTICLE
9
CONDITIONS TO THE SELLER’S
OBLIGATION
TO CONSUMMATE THE
TRANSACTIONS
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The
obligation of the Seller to transfer the Transferred Assets as
contemplated hereby is, at the option of the Seller, subject to the
satisfaction on or before the Closing Date of the conditions set forth
below, any of which may be waived by the Seller in
writing.
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9.01 Representations, Warranties
and Covenants. The representations and warranties of the Buyer
contained in this Agreement qualified as to materiality shall be true, correct
and complete in all respects, and those not so qualified shall be true, correct
and complete in all material respects, on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made or given on and as of such date, and the Buyer shall have performed and
complied in all material respects with all covenants, obligations and agreements
required in this Agreement to be performed or complied with by Buyer on or prior
to the Closing Date. Buyer will deliver to the Seller a certificate
signed by its President dated the Closing Date, to all such effect.
9.02 Receipt of the Purchase
Price. The Seller shall have received the Seller Cash Payment
and the Seller Note and each Shareholder shall have received his applicable
executed Shareholders’ Note. The Shareholders shall have received the
INDIVIDUAL GOODWILL PURCHASE PRICE as set out in the Goodwill Purchase
Agreement, contemporaneously with the Closing hereunder.
9.03 Licenses, Consents and
Approvals. The Seller shall have received each of the
licenses, consents, approvals and other authorizations from Governmental
Entities necessary or appropriate for the Seller to consummate the transactions
contemplated by this Agreement.
9.04 No
Litigation.
(a) No
preliminary or permanent injunction or other order of any court or other
Governmental Entity shall be in effect nor shall there be any statute, rule,
regulation or executive order promulgated or enacted by any Governmental Entity
that, in any such case, prevents the consummation of the transactions
contemplated by this Agreement.
(b) No suit,
action, claim, proceeding or investigation before any court or other
Governmental Entity shall have been commenced or threatened seeking to prevent
the consummation of the transactions contemplated by this
Agreement.
9.05 Closing
Instruments. The Buyer shall have executed, acknowledged and
delivered to the Seller or the Shareholders, as applicable, (i) the General
Conveyance, Transfer, Assignment and Assumption, in substantially the form
attached hereto as Exhibit “D”, (ii)the
Seller’s Note, and (iii) any other documents, in the reasonable opinion of
counsel to Seller, regarding the assumption of the Assumed Liabilities by
Buyer. Buyer shall have executed and delivered to each of the
Shareholders, respectively, (i) the Goodwill Purchase Agreement, (ii) the
Shareholders’ Notes and (iii) the Employment Agreements. The Seller,
Buyer and the escrow agent under the Escrow Agreement shall have executed and
delivered said agreement and the Escrow Agreement shall be in full force and
effect as of the Closing.
9.06 Other Legal
Matters. All Exhibits, Schedules, certificates, documents and
legal matters in connection with this Agreement and the transactions
contemplated hereby shall be in the forms required by this
Agreement.
ARTICLE
10
INDEMNIFICATION
10.01 Indemnification by the
Seller and the Shareholders. Except as otherwise limited by
this Article 10
and Article 11
hereof, the Seller and the Shareholders (in the event of a Closing) agree to
indemnify, defend and hold the Buyer and each of its officers, directors,
stockholders, and controlling Persons and their respective representatives,
successors and assigns harmless from and against and in respect of Damages
actually suffered, incurred or realized by such party (collectively, “General
Buyer Losses”), arising out of or resulting from or relating to:
(a) any
misrepresentation or breach of warranty made by the Seller and/or the
Shareholders in this Agreement or any misrepresentation in or breach of warranty
made by the Seller and/or the Shareholders under any other agreement,
certificate, Schedule, Exhibit or writing delivered to the Buyer pursuant to
this Agreement, including but not limited to the Disclosure
Schedule;
(b) any
breach of any covenant or other agreement made or undertaken by the Seller
and/or the Shareholders in this Agreement or in any other agreement,
certificate, Schedule, Exhibit or writing delivered to the Buyer pursuant to
this Agreement, including the Disclosure Schedule;
(c) any
Retained Liability or Excluded Asset; or
(d) any fees,
commissions or like payments by any Person having acted or claiming to have
acted, directly or indirectly, as a broker, finder or financial advisor for
Seller and/or the Shareholders in connection with the transactions contemplated
by this Agreement.
10.02 Intentionally
Omitted
10.03 Indemnification by the
Buyer. Except as otherwise limited by this Article 10 and Article 11 hereof,
the Buyer agrees to indemnify, defend and hold the Seller and each of its
officers, directors, employees, agents, stockholders and controlling Persons and
its successors and assigns harmless from and against and in respect of Damages
actually suffered, incurred or realized by such party (collectively, “Seller
Losses”), arising out of or resulting from:
(a) any
misrepresentation or breach of warranty made by the Buyer in this Agreement or
any misrepresentation in or breach of warranty under any other agreement,
certificate, Schedule, Exhibit or writing delivered to the Seller pursuant to
this Agreement;
(b) any
breach of any covenant or other agreement made or undertaken by the Buyer in
this Agreement or in any other agreement, certificate, Schedule, Exhibit or
writing delivered by the Buyer to the Seller pursuant to this Agreement,
including the Disclosure Schedule
(c) any
Assumed Liability or the Buyer’s operation of the Business or the Transferred
Assets or the use of the Facilities after the Closing Date; provided, however,
that the Buyer shall in no event be liable for or be required to provide
indemnity pursuant to this Section 10.03 for the
Buyer’s failure to detect or remedy any Environmental Liabilities arising on or
prior to the Closing Date;
(d) any fees,
commissions or like payments by any Person having acted or claiming to have
acted, directly or indirectly, as a broker, finder or financial advisor for
Buyer in connection with the transactions contemplated by this Agreement;
or
(e) any
actions taken by Seller in compliance with the requirements of Sections 1.01(b)
and 7.06(e).
10.04 Procedure. All
claims for indemnification under this Article 10 shall be
asserted and resolved as follows:
(a) An
Indemnitee shall promptly give the Indemnitor notice of any matter which an
Indemnitee has determined has given or could give rise to a right of
indemnification under this Agreement, stating the amount of the Loss, if known,
and method of computation thereof, all with reasonable particularity, and
stating with particularity the nature of such matter. Failure to
provide such notice shall not affect the right of the Indemnitee to
indemnification except to the extent such failure shall have resulted in
liability to the Indemnitor that could have been actually avoided had such
notice been provided within such required time period.
(b) The
obligations and liabilities of an Indemnitor under this Article 10 with
respect to Losses arising from claims of any third party that are subject to the
indemnification provided for in this Article 10 (“Third
Party Claims”) shall be governed by and contingent upon the following additional
terms and conditions: if an Indemnitee shall receive notice of any Third Party
Claim, the Indemnitee shall give the Indemnitor prompt notice of such Third
Party Claim and the Indemnitor may, at its option, assume and control the
defense of such Third Party Claim at the Indemnitor’s expense and through
counsel of the Indemnitor’s choice reasonably acceptable to
Indemnitee. In the event the Indemnitor assumes the defense against
any such Third Party Claim as provided above, the Indemnitee shall have the
right to participate at its own expense in the defense of such asserted
liability, shall cooperate with the Indemnitor in such defense and will attempt
to make available on a reasonable basis to the Indemnitor all witnesses,
pertinent records, materials and information in its possession or under its
control relating thereto as is reasonably required by the
Indemnitor. In the event the Indemnitor does not elect to conduct the
defense against any such Third Party Claim, the Indemnitor shall pay all
reasonable costs and expenses of such defense as incurred and shall cooperate
with the Indemnitee (and be entitled to participate) in such defense and attempt
to make available to it on a reasonable basis all such witnesses, records,
materials and information in its possession or under its control relating
thereto as is reasonably required by the Indemnitee. Except for the
settlement of a Third Party Claim that involves the payment of money which
Indemnitor shall pay and only and for which the Indemnitee is totally
indemnified by the Indemnitor, no Third Party Claim may be settled without the
written consent of the Indemnitee.
10.05 Payment. Payment
of any amounts due pursuant to this Article 10 shall be
made within ten (10) Business Days after notice of a final determination of any
Third Party Claims is sent by the Indemnitee.
10.06 Failure to Pay
Indemnification. If and to the extent the Indemnitee shall
make written demand upon the Indemnitor for indemnification pursuant to this
Article 10 and
the Indemnitor shall refuse or fail to pay in full within ten (10) Business Days
of such written demand the amounts demanded pursuant hereto and in accordance
herewith, then the Indemnitee may utilize any legal or equitable remedy to
collect from the Indemnitor the amount of its Losses. Nothing
contained herein is intended to limit or constrain the Indemnitee’s rights
against the Indemnitor for indemnity, the remedies herein being cumulative and
in addition to all other rights and remedies of the
Indemnitee. Notwithstanding the foregoing, while any amount of the
Seller Note and/or the Shareholders’ Notes remain unpaid, Buyer will, upon an
occurrence of an indemnification obligation owing to Buyer under this Agreement,
as determined by a final order in any adjudication, have the right to set-off
and apply any payment that otherwise would be paid in respect to the Seller Note
and/or the Shareholders’ Notes to the payment of any indemnification
obligation.
10.07 Adjustment of
Liability. The amount which an Indemnitee shall be entitled to
receive from an Indemnitor with respect to any indemnifiable Loss under this
Article 10
shall be net of any insurance recovery by the Indemnitee on account of such Loss
from an unaffiliated party.
10.08 Limitations of
Indemnity.
(a) Notwithstanding
anything to the contrary contained herein, (i) none of Seller, the Shareholders
or the Buyer shall make a payment under Section 10.01(a) or
Section
10.03(a), as applicable, unless and until the aggregate amount to be paid
by Seller and the Shareholders, on the one hand, or the Buyer, on the other
hand, in the absence of this clause, exceeds $25,000 (the "Basket"), in which
event all such amounts shall be paid and (ii) in no event shall the aggregate
liability of Seller and the Shareholders, on the one hand, or Buyer, on the
other hand, under Section 10.01(a) or
Section
10.03(a), as applicable, exceed $1,000,000 (the "Cap"); provided,
however, that (x) the Cap shall not apply to any liability arising out of,
resulting from or relating to the actual fraud (excluding constructive
knowledge, negligence or recklessness) of Seller and/or the Shareholders and (y)
neither the Basket nor the Cap limitation shall apply in respect of
indemnification under Sections 10.01(a) or
10.03(a)
for any misrepresentation or breach of warranty as set forth in Sections 3.01, 3.02(a), 3.02(b), the first
sentence of each of 3.04(b), 3.04(d), 3.04(e) and 3.04(f), the second
sentence of 3.04(c), 3.07, and 4.01.
(b) For
purposes of calculating the Damages hereunder arising out of, resulting from or
relating to any misrepresentations or breaches of warranties or any breach of
any covenants or agreements, any materiality or Material Adverse Effect
qualifications in the representations, warranties, covenants and agreements
shall be disregarded.
(c) The
remedies provided in this Article 10 shall
constitute the sole and exclusive source of satisfaction of Buyer with respect
to any Damages arising after the Closing, and Buyer shall not have any other
remedies against Seller except as specifically otherwise provided
herein.
ARTICLE
11
NATURE OF STATEMENTS AND
SURVIVAL OF COVENANTS,
REPRESENTATIONS, WARRANTIES
AND AGREEMENTS
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The
representations and warranties of the parties to this Agreement shall
survive the Closing Date and shall remain in full force and effect for a
period of eighteen (18) months {need DXP’s approval of this requested
change} following the Closing Date (except that (i) the representations
and warranties set forth in Sections 3.01,
3.02(a),
3.02(b),
the first sentence of each of 3.04(b), 3.04(d), 3.04(e) and
3.04(f),
the second sentence of 3.04(c) and
4.01
shall survive the Closing Date without limitation and (ii) the
representations and warranties contained in Section 3.07
hereof shall survive the Closing Date and shall not terminate until twenty
(20) days after the expiration of all applicable statutes of limitations
therefor (including any and all extensions thereof)). The
respective period during which the representations and warranties shall
survive being referred to herein with respect to such representations and
warranties as the “Survival Period”, and the Survival Period shall further
be effective with respect to any respective representation or warranty
(and a claim for indemnification under Article 10
hereof may be made thereon) if a written notice asserting the claim shall
have been duly given in accordance with Article 10
hereof within the Survival Period with respect to such
matter. Any claim for indemnification made during the Survival
Period shall be valid and the representations and warranties relating
thereto shall remain in effect for purposes of such indemnification not
withstanding such claim may not be resolved within the Survival
Period. All representations, warranties and covenants and
agreements made by the parties shall not be affected by any investigation
heretofore or hereafter made by and on behalf of any of them and shall not
be deemed merged into any instruments or agreements delivered in
connection with the Closing or otherwise in connection with the
transactions contemplated hereby.
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ARTICLE
12
EXPENSES
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Except
as otherwise set forth herein, and whether or not the transactions
contemplated by this Agreement shall be consummated, each party agrees to
pay, without right of reimbursement from any other party, the costs
incurred by such party incident to the preparation and execution of this
Agreement and performance of its obligations hereunder, including without
limitation the fees and disbursements of legal counsel, accountants and
consultants employed by such party in connection with the transactions
contemplated by this Agreement.
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ARTICLE
13
TERMINATION
13.01 Best Efforts to Satisfy
Conditions. Subject to the provisions of this Agreement, the
Buyer, the Shareholders and the Seller agree to use their good faith efforts to
bring about the satisfaction of their respective conditions specified in Articles 8 and 9
hereof.
13.02 Termination. The
obligation to close the transactions contemplated by this Agreement may be
terminated by:
(a) mutual
agreement of the Buyer and the Seller;
(b) the
Buyer, if a material default shall be made in the observance or in the due and
timely performance by the Seller or the Shareholders of any agreements and
covenants of the Seller or the Shareholders herein contained, or if
there shall have been a material breach by the Seller or the Shareholders of any
of the warranties and representations of the Seller or the Shareholders herein
contained, and such default or breach has not been cured (if capable of cure) or
has not been waived within 10 days after notice thereof;
(c) the
Seller, if a material default shall be made by the Buyer in the observance or in
the due and timely performance by the Buyer of any agreements and covenants of
the Buyer herein contained, or if there shall have been a material breach by the
Buyer of any of the warranties and representations of the Buyer herein
contained, and such default or breach has not been cured (if capable of cure) or
has not been waived within 10 days after notice thereof; or
(d) the Buyer
or the Seller (provided the terminating party has not materially breached any of
its agreements, covenants or representations and warranties) if the Closing
shall not have occurred on or before February 1, 2008.
13.03 Liability Upon
Termination. If the obligation to close the transactions
contemplated by this Agreement is terminated pursuant to Section 13.02(a) or
(d), then this Agreement shall, forthwith become null and void and there
shall not be any liability or obligation with respect to the terminated
provisions of this Agreement on the part of the Seller or the
Buyer. If this Agreement is terminated pursuant to Section 13.02(b) or
(c), then the terminating party’s sole and exclusive remedy shall be able
to either (i) specifically enforce the terms of this Agreement or (ii) the
terminating party shall be entitled to receive all filing and other fees paid by
the terminating party and all out-of-pocket expenses incurred by the terminating
party including but not limited to the fees and expenses of any attorney or
other adviser of the terminating party which in no event shall exceed $150,000;
provided in no event shall either Shareholder have any personal liability to
Buyer prior to the Closing.
13.04 Notice of
Termination. The parties hereto may exercise their respective
rights of termination under this Article 13 only by
delivering written notice to that effect to the other party or parties, and such
notice is received on or before the Closing Date.
ARTICLE
14
DEFINITIONS OF CERTAIN
TERMS
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In
addition to terms defined elsewhere in this Agreement, the following terms
shall have the meanings assigned to them herein, unless the context
otherwise indicates, both for purposes of this Agreement and all Exhibits
and Schedules hereto:
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14.01 Intentionally
Omitted.
14.02 Intentionally
Omitted.
14.03 “Agreement” shall mean this
Asset Purchase Agreement between the Seller, the Buyer and the Shareholders, as
amended from time to time by the parties hereto.
14.04 “Assumed Liabilities” shall
have the meaning given such term in Section 1.04
hereof.
14.05 “Business” shall mean the
existing businesses and operations of the Seller including, but not limited to
the purchase and sale of bearings, power transmission, conveyor belting, rubber
products and material handling products for industrial, agricultural and OEM
needs.
14.06 “Business Day” shall mean any
day other than a Saturday, Sunday or any other day on which nationally banking
institutions in the State of Texas or Colorado are authorized by law to
close.
14.07 “Buyer” shall mean DXP
Enterprises, Inc., a Texas corporation.
14.08 “Closing” shall mean the
transfer by the Seller to the Buyer of the Transferred Assets, the assumption by
the Buyer of the Assumed Liabilities and the transfer by the Buyer to the Seller
of the other considerations set forth herein, which shall all be deemed to have
occurred on the Closing Date.
14.09 “Closing Date” shall mean the
time and date of the Closing as specified in Article 2
hereof.
14.10 “Code” shall mean the
Internal Revenue Code of 1986, as amended from time to time.
14.11 “Contracts and Other
Agreements” shall mean all purchase orders, leases of equipment,
contracts, agreements, understandings, indentures, notes, bonds, loans,
instruments, leases (including of real property), mortgages, franchises,
licenses, commitments or other arrangements, understandings, undertakings,
obligations, or other engagements whether express or implied, oral or written,
to which the Seller is a party or bound.
14.12 Intentionally
Omitted.
14.13 “Damages” shall mean any and
all liabilities, losses, damages, demands, assessments, claims, costs,
obligations, deficiencies, judgments and expenses (excluding incidental and
consequential damages), including interest, awards, judgments, penalties,
settlements, fines, claims, suits, actions, causes of action, assessments,
awards, costs of remediation, diminutions in value, costs and expenses incurred
in connection with investigating and defending any claims or causes of action
(including, without limitation, attorneys’ fees and expenses and all fees and
expenses of consultants and other professionals).
14.14 “Disclosure Schedule” shall
mean the disclosure schedule of even date delivered to the Buyer.
14.15 “Documents and Other Papers”
shall mean and include any document, paper, book, report, record, tape,
photograph, budget, forecast, ledger, journal, customer list, supplier list,
regulatory filings, operating data, plans, technical documentation, marketing
documentation, agreement, instrument, certificate, writing, notice, consent,
affidavit, letter, telegram, telex, statement, file, computer disk or file or
program, microfilm, microfiche or other document in electronic format, schedule,
exhibit or any other paper or record whatsoever.
14.16 “Employment Agreements” shall
have the meaning given such term in Section 8.06
hereof.
14.17 “Environmental Laws” shall
mean all federal, state, or municipal laws, rules, regulations, statutes,
ordinances, or orders of any Governmental Entity relating to (a) the control of
any potential pollutant or protection of the air, water, or land, (b) solid,
gaseous or liquid waste generation, handling, treatment, storage, disposal or
transportation and (c) exposure to hazardous, toxic or other substances alleged
to be harmful. “Environmental Laws” shall include, but not be limited
to, the Clean Air Act, 42 U.S.C. § 7401 et seq., the Clean Water Act,
33 U.S.C. § 1251 et seq., the Resource Conservation Recovery Act
(“RCRA”), 42 U.S.C. § 6901 et seq., the Superfund Amendments and ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇, ▇▇ ▇.▇.▇. § ▇▇▇▇▇, et seq., the Toxic Substances Control Act, 15
U.S.C. § 2601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. App
& 1801 et seq., the Safe Drinking Water Act, 42 U.S.C. § 300f et seq. and
the Comprehensive Environmental Response, Compensation and Liability Act
(“CERCLA”), 42 U.S.C. § 9601 et seq. The term “Environmental
Laws” shall also include all state, local and municipal laws, rules,
regulations, statutes, ordinances and orders dealing with the same subject
matter or promulgated by any governmental or quasi-governmental agency
thereunder or to carry out the purposes of any federal, state, local and
municipal law.
14.18 “Environmental Liabilities”
shall mean any and all liabilities, responsibilities, claims, suits, losses,
costs (including remedial, removal, response, abatement, clean-up,
investigative, and/or monitoring costs and any other related costs and
expenses), other causes of action recognized now or at any later time, damages,
settlements, expenses, charges, assessments, liens, penalties, fines,
pre-judgment and post-judgment interest, attorney’s fees and other legal fees,
costs of experts, consultants, investigations and feasibility studies, sanctions
(a) incurred as a result of any agreement, claim, demand, order, notice, or
responsibility, directive (including directives embodied in Environmental Laws),
injunction, judgment, or similar documents (including settlements); or (b)
pursuant to any claim by a Governmental Entity or other Person for personal
injury, property damage, damage to natural resources, remediation, or payment or
reimbursement of response costs incurred or expended by such Governmental Entity
or Person pursuant to any Environmental Law, common law or statute.
14.19 Intentionally
Omitted.
14.20 “Environmental Permit” shall
mean any permit, license, approval, registration, identification number or other
authorization with respect to the Transferred Assets or the operations or
businesses of the Seller under any applicable law, regulation or other
requirement of the United States or any other country or of any state,
municipality or other subdivision thereof relating to the control of any
pollutant or protection of health or the environment, including laws,
regulations or other requirements relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or hazardous or toxic materials
or wastes into ambient air, surface water, groundwater or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of chemical substances, pollutants,
contaminants or hazardous or toxic materials or wastes.
14.21 “Equipment” shall mean all
machinery, transportation equipment, tools, equipment, furnishings and fixtures
owned, leased or subject to a contract of purchase and sale, or lease commitment
by the Seller.
14.22 “ERISA” shall mean the
Employee Retirement Income Security Act of 1974, and the related regulations, as
amended from time to time.
14.23 “Excluded Assets” shall have
the meaning given such term in Section 1.02
hereof.
14.24 “Facilities” shall mean the
six (6) real properties and interests in real properties that are leased by
Seller and are described in Schedule 14.24 to the
Disclosure Schedule. Facilities shall include all fixtures,
improvements and other appurtenances erected or located on or affixed to all
said real property and interests in said real property.
14.25 Intentionally
Omitted.
14.26 “Final Net Working Capital”
means the Net Working Capital (i) as shown in Buyer’s Closing Statement, if no
Dispute Notice is duly delivered; or (ii) if such a Dispute Notice is delivered,
(A) as agreed by Buyer and Seller or (B) in the absence of such agreement, as
shown in the Firm’s calculation.
14.27 “Financial Statements” shall
have the meaning given such term in Section 3.06(a)
hereof.
14.28 “GAAP” shall have the meaning
given such term in Section 3.06(a)(ii)
hereof.
14.29 “General Buyer Losses” shall
have the meaning given such term in Section 10.01
hereof.
14.30 “Governmental Entity” shall
mean any arbitrator, court, administrative or regulatory agency, commission,
department, board or bureau or body or other government or authority or
instrumentality or any entity or Person exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
whether foreign, federal, state, county, city or local.
14.31 “Hazardous Materials” shall
mean any chemical, material, substance or waste that is regulated, classified or
otherwise characterized by any Governmental Entity under or pursuant to any
Environmental Law.
14.32 “Indemnitee” shall mean the
Person or Persons indemnified, or entitled, or claiming to be entitled to be
indemnified, pursuant to the provisions of Sections 10.01 or
10.03 hereof,
as the case may be.
14.33 “Indemnitor” shall mean the
Person or Persons having the obligation to indemnify pursuant to the provisions
of Sections
10.01 or 10.03 hereof, as the
case may be.
14.34 Intentionally
Omitted.
14.35 “Inventories” shall mean all
inventories of including but not limited to bearings, power transmission,
conveyor belting, rubber products, material handling products for industrial,
agricultural and OEM needs, goods, supplies and other inventories of Seller
relating to the Business, wherever situated.
14.36 Intentionally
Omitted.
14.37 Intentionally
Omitted.
14.38 “Lien” shall mean any lien,
pledge, claim, charge, mortgage, deed of trust, lease, right of first refusal,
security interest or other encumbrance, option, defect or other restriction,
limitation or rights of any third Person of any nature whatsoever.
14.39 “Losses” shall mean Seller
Losses or General Buyer Losses, as the case may be.
14.40 “Material Adverse Effect”
shall mean a single event, occurrence or fact that, together with all other
events, occurrences and facts that could reasonably be expected to result in a
loss to the Business, which would have, or might reasonably be expected to have,
a material adverse effect on the assets, business, operations, prospects or
financial condition of the Transferred Assets or the Business that would result
in a diminution in value of the Transferred Assets to an extent greater than
$25,000, or that would constitute a criminal violation of law involving a
felony.
14.41 ”Net Asset Value” shall mean
all assets of the Business less all the liabilities of the Business as of a
given date.
14.42 “Net Working Capital” is the
current assets of the Business reduced by the current liabilities of the
Business both determined in accordance with generally accepted accounting
principles applied on a basis consistent with the past practices used by Seller
in the previous three (3) years and in accordance with the adjustments thereto
that have been agreed to by Seller and Buyer. Schedule 14.42 sets
forth the parties’ agreement and calculation of Net Working Capital of the
Seller as of November 30, 2007.
14.43 “Permitted Liens” shall mean
(a) Liens created by this Agreement, (b) Liens for current taxes and assessments
not yet due, (c) title of a lessor under an operating lease, (d) inchoate
mechanic, materialmen, workmen, repairmen, warehousemen, customer, employee and
carriers Liens arising in the ordinary course of business that are not resulting
from a breach, default or violation of any contract, agreement or law, (e)
zoning, entitlement or other land use and environmental regulations by any
Governmental Entity, provided that such
regulations have not been violated, and (f) such other Liens and imperfections
of title that, singly or in the aggregate, do not impose any material
limitations or restrictions on the conduct of the Business or the operation of
the Transferred Assets.
14.44 “Person” shall mean a
corporation, an association, a partnership, an organization, a business, an
individual or a Governmental Entity.
14.45 Intentionally
Omitted.
14.46 “Pre-Closing Obligations”
shall mean all obligations of the Seller (including indemnification and other
contingent obligations) relating to (i) acts, events or omissions by any Person
or circumstances existing at or prior to the Closing, (ii) goods or services
provided to or for the benefit of the Seller or any of its affiliates prior to
the Closing, (iii) goods or services provided by or on behalf of the Seller or
any of its affiliates or licensees prior to the Closing, (iv) any pending or
threatened litigation or claims made or threatened prior to the Closing, (v) any
of the matters listed on Schedule 1.05 hereto,
(vi) the conduct of the Business, the Seller or operation of the Transferred
Assets or any benefit realized by the Seller prior to the Closing, (vii)
contracts, agreements and other commitments that were required to be scheduled
in Schedule
3.05(a) of the Disclosure Statement but were not scheduled and (viii) the
employees of the Seller under any contracts, agreements, arrangements or
understandings with such employees entered into or existing at or prior to the
Closing and all other obligations of the Seller or any of its affiliates with
respect to its employees at or prior to the Closing.
14.47 “Proprietary Information”
shall mean collectively (a) Proprietary Rights and (b) any and all other
information and material proprietary to the Seller, owned, possessed or used by
the Seller, whether or not such information is embodied in writing or other
physical form, and which is not generally known to the public, that (i) relates
to financial information regarding the Seller or the Business, including,
without limitation, (x) accounting and inventory systems (y) business plans and
(z) sales, financing, pricing and marketing procedures or methods of the Seller
or (ii) relates to specific business matters concerning the Seller, including,
without limitation, the identity of or other information regarding sales
personnel, suppliers or customers of the Seller.
14.48 “Proprietary Rights” means
all patents, inventions, shop rights, internet domain names, computer programs,
databases, compilations, descriptions, flow-charts, accounting and inventory
systems, know how, trade secrets, designs, plans, manuals, computer software,
specifications, confidentiality agreements, confidential information and other
proprietary technology and similar information; all registered and unregistered
trademarks, service marks, logos, corporate names, trade names and all other
trademark rights; all registered and unregistered copyrights; and all
registrations for, and applications for registration of, any of the foregoing,
that are used in the conduct of the Business.
14.49 “Retained Liabilities” shall
have the meaning given such term in Section 1.05
hereof.
14.50 “Seller” shall mean Rocky
Mtn. Supply, Inc., a Colorado corporation.
14.51 “Seller Purchase Price” shall
have the meaning given such term in Section 1.03(a)
hereof.
14.52 “Shareholders” shall mean
▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
14.53 “Shareholders’ Notes” means
collectively or individually (a) a promissory note in the principal amount of
$150,000 made payable to ▇▇▇▇▇▇ ▇▇▇▇, in the form attached as Exhibit “B”, and (b)
a promissory note in the principal amount of $150,000 made payable to ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, in the form attached as Exhibit
“B”.
14.54 “Subsidiary” shall mean, as
to a Person or other entity or organization in which such Person owns (directly
or indirectly) any equity or other similar corporate interest.
14.55 “Tax Consideration” shall
have the meaning given such term in Section 1.08(a)
hereof.
14.56 “Tax Returns” shall mean all
returns, declarations, reports, statements and other documents of, relating to,
or required to be filed in respect of, any and all Taxes.
14.57 “Taxes” shall mean all
federal, state, local, foreign and other taxes, charges, fees, duties, levies,
imposts, customs or other assessments, including, without limitation, all net
income, gross income, capital, transfer, inventory, capital stock, license,
social security, unemployment, estimated taxes, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, profit share, license, lease, service,
service use, value added, withholding, payroll, employment, excise, estimated,
severance, stamp, occupation, premium, property, windfall profits, or other
taxes, fees, assessments, customs, duties, levies, imposts, or charges of any
kind whatsoever, together with any interests, penalties, additions to tax, fines
or other additional amounts imposed thereon or related thereto.
14.58 “Third Party Claims” shall
have the meaning given such term in Section 10.04(b)
hereof.
14.59 “Trade Payables” shall mean
those obligations of the Seller relating to the provision of goods and services
to the Seller for the conduct of the Business in the ordinary course of business
of the Seller that relate to the Transferred Assets and that are classified as
Trade Payables in accordance with GAAP and are shown on Seller’s financial
statements.
14.60 “Transferred Assets” shall
have the meaning given such term in Section 1.01(a)
hereof.
14.61 “Transferred Employees” shall
have the meaning given such term in Section 6.01
hereof.
ARTICLE
15
MISCELLANEOUS
15.01 Notices. All
notices, requests, consents, directions and other instruments and communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered in person, by courier, by
overnight delivery service with proof of delivery or by prepaid registered or
certified United States first-class mail, return receipt requested, addressed to
the respective party at the address set forth below, or if sent by facsimile or
other similar form of communication (with receipt confirmed) to the respective
party at the facsimile number set forth below:
If to the Seller,
to: Rocky
Mtn. Supply, Inc.
c/o ▇▇▇▇▇▇ ▇▇▇▇,
President
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
(V)
(▇▇▇) ▇▇▇-▇▇▇▇
(F) (▇▇▇) ▇▇▇-▇▇▇▇
|
Copies
to:
|
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
|
|
|
▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
|
|
|
▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
|
|
|
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
|
(V) (▇▇▇) ▇▇▇-▇▇▇▇
(F) (▇▇▇) ▇▇▇-▇▇▇▇
If to the Buyer,
to: DXP
Enterprises, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
CEO
(V) (▇▇▇) ▇▇▇-▇▇▇▇
(F) (▇▇▇) ▇▇▇-▇▇▇▇
|
Copies
to:
|
▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇▇
|
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇,
P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇., ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(V) (▇▇▇) ▇▇▇-▇▇▇▇
(F) (▇▇▇) ▇▇▇-▇▇▇▇
or to
such other address or facsimile number and to the attention of such other
Person(s) as either party may designate by written notice. Any notice
mailed shall be deemed to have been given and received on the third Business Day
following the day of mailing.
15.02 Bulk Transfer
Laws. Seller and Buyer agree that the bulk sales provisions of
Article 6 of chapter 155 in C.R.S. 1963 was repealed in 1991; therefore there is
not any bulk sales provisions of the Colorado statutes and/or codes applicable
to this Agreement.
15.03 Assignment. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. No party to this
Agreement may sell, transfer, assign, pledge or hypothecate its rights,
interests or obligations under this Agreement without the prior written consent
of the other parties, except that the Buyer may assign its rights to any
affiliate of the Buyer (provided Buyer remains as an obligor under the Seller
Note and the Shareholders’ Notes). No assignment of this Agreement or
any of the rights, interests or obligations hereof by the Buyer shall relieve
the Buyer of its obligations under this Agreement and, upon any such assignment
occurring prior to the Closing, the representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to have been made by the
Buyer’s assignee as well as by the Buyer.
15.04 Successors. This
Agreement shall inure to the benefit of, be binding upon and be enforceable by
the parties hereto and their respective successors and assigns.
15.05 Entire
Agreement. This Agreement and the Exhibits and Schedules
hereto and the Disclosure Schedule constitute the entire agreement and
understanding between the parties relating to the subject matter hereof and
thereof and supersedes all prior representations, endorsements, premises,
agreements, memoranda communications, negotiations, discussions, understandings
and arrangements, whether oral, written or inferred, between the parties
relating to the subject matter hereof. This Agreement may not be
modified, amended, rescinded, canceled, altered or supplemented, in whole or in
part, except upon the execution and delivery of a written instrument executed by
a duly authorized representative of each of the parties hereto. No
action taken pursuant to this Agreement, including without limitation, any
investigation by or behalf of any party, shall be deemed to constitute a waiver
by the party taking such action of compliance with any representation, warranty,
covenant, or agreement contained herein. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a further or continuing waiver of such breach or as a waiver or any
other subsequent breach.
15.06 Governing
Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Colorado without giving
effect to choice of law principles. The parties submit to the
non-exclusive jurisdiction of the courts of the State of
Colorado. Venue of any dispute arising out of this Agreement shall be
in Denver, Denver County, Colorado.
15.07 Waiver. The
waiver of any breach of any term or condition of this Agreement shall not be
deemed to constitute the waiver of any other breach of the same or any other
term or condition.
15.08 Severability. If
any term or other provision of this Agreement is invalid, illegal, incapable of
being enforced by any law or public policy, prohibited or unenforceable all
other terms or provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is
invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
15.09 No Third Party
Beneficiaries. Any agreement contained, expressed or implied
in this Agreement shall be only for the benefit of the parties hereto and their
respective legal representatives, successors and assigns, and such agreements
shall not inure to the benefit of the obligees of any indebtedness of any party
hereto, it being the intention of the parties hereto that no Person shall be
deemed a third party beneficiary of this Agreement, except to the extent a third
party is expressly given rights herein.
15.10 Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original copy of this Agreement and all of which, when taken together
shall constitute one and the same Agreement.
15.11 Headings. Each
statement set forth in the Disclosure Schedule with respect to a particular
section herein shall be deemed made solely with respect to such section and not
with respect to any other section hereof unless specifically set forth in the
Disclosure Schedule as also being made with respect to such other
section. The headings of the Articles and sections of this Agreement
have been inserted for convenience of reference only and shall in no way
restrict or otherwise modify any of the terms or provisions hereof or affect in
any way the meaning or interpretation of this Agreement.
15.12 Negotiated
Transaction. The provisions of this Agreement were negotiated
by the parties hereto, and this Agreement shall be deemed to have been drafted
by all of the parties hereto.
15.13 Negotiation with
Others. The Seller agrees that from the date hereof until the
Closing Date or the termination of this Agreement pursuant to Article XIII, it
will not, directly or indirectly, negotiate with any Person not a party hereto
or not affiliated with a party hereto with respect to a merger, consolidation,
asset purchase or any similar transaction with any such Person regarding the
Business or the Transferred Assets.
15.14 Prevailing
Party. In the event there is any legal action commenced to
enforce or interpret this Agreement, the prevailing party shall be entitled to
collect all reasonable costs incurred from the other party, including but not
limited to court costs, expert witness fees and attorneys’ fees.
15.15 Disclosure
Schedules. Seller will immediately update each Disclosure
Schedule when required because of (i) a change in the information provided, or
(ii) additional information must be provided.
IN WITNESS WHEREOF, the parties hereto
have duly executed this Agreement as of the date first above
written.
SELLER:
Rocky Mtn. Supply, Inc.
By: ▇▇▇▇▇▇ ▇.
▇▇▇▇
SHAREHOLDERS:
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
BUYER:
DXP ENTERPRISES, INC.
By: ▇▇▇ ▇▇▇▇▇▇▇▇▇,
Senior Vice
President