ASSET PURCHASE AGREEMENT EXHIBIT 10.15
AGREEMENT dated as of July 18th, 2005, (herein, together with the Exhibits
attached hereto and the Lists to be delivered pursuant hereto referred to as the
"Agreement") by and among Lakeland Industries, Inc, a Delaware corporation
("Parent"), Mifflin Valley, Inc., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Buyer"), Mifflin Valley Inc, a Pennsylvania corporation
("Seller") and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("Shareholder").
In reliance upon the representations and warranties made herein and in
consideration of the mutual agreements herein contained, Buyer and Parent, on
the one hand, and Seller and the Shareholder, on the other hand, hereby agree as
follows:
1. Transfer of Business, Properties and Assets of Seller and Certain
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Related Matters.
(a) Sale and Transfer of Business, Properties and Assets. Subject to
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the terms and conditions of this Agreement, and in reliance on the
representations, warranties, undertakings (including the Undertaking, as
hereinafter defined) and agreements of Buyer and Parent made or deemed to be
made hereunder, and in consideration of the purchase by Buyer described below
and the Undertaking by Buyer, Seller hereby agrees to sell, transfer, convey,
assign and deliver to Buyer at the Closing all of its then existing business,
properties and assets, as a going concern, including, without limitation, the
properties, assets and other rights referred to in the ▇▇▇▇ of sale (the "▇▇▇▇
of Sale") in the form of Exhibit A hereto, but excluding the Excluded Assets
(such business, properties, assets and other rights of Seller to be purchased
and sold hereunder being hereinafter referred to as the "Purchased Assets"). As
used in this Agreement, the term Excluded Assets shall mean those assets listed
on Exhibit B hereto.
(b) Purchase Price. Subject to the terms and conditions of this
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Agreement, and in reliance on the representations, warranties, undertakings and
agreements of Seller made or deemed to be made hereunder, and in consideration
of such sale, conveyance, transfer, assignment and delivery, Buyer agrees:
(i) To pay to Seller an amount equal to $1,580,000.00 (being
hereinafter referred to as the "Initial Purchase Price").
(ii) Except as expressly provided for herein, to undertake, assume and
agree to perform and otherwise pay, satisfy and discharge in accordance with
their respective terms, and to indemnify and hold Seller harmless with respect
to, all of the debts, liabilities and obligations of Seller specified in the
undertaking to be executed by Buyer and delivered to Seller at the closing
provided for in Section 2 hereof (herein called the "Closing" and the date of
which is herein called the "Closing Date") substantially in the form attached
hereto as Exhibit C (the "Undertaking"). As used herein, the term "Accounts
Receivable" shall mean the aggregate amount of accounts receivable of Seller,
determined in accordance with generally accepted accounting principles
consistently applied throughout the period involved.
(iii) June 30, 2005, is hereinafter referred to as the "Effective
Date". A Balance Sheet as of June 30, 2005 (the "Audited Effective Date Balance
Sheet") and the Profit & Loss Statement for the period from January 1, 2005, to
the Effective Date of the Seller (the "2005 Interim P&L") are both to be
prepared pursuant to Generally Accepted Accounting Principles (GAAP) as applied
in the United States. The Audited Effective Date Balance Sheet shall be audited
by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, the cost of which shall be borne by Buyer.
Based on the Audited Effective Date Balance Sheet, the Initial Purchase Price
shall be adjusted to determine a Final Purchase Price, the ("Final Purchase
Price") as set forth herein, the cost of which shall be borne by Buyer.
(iv) The Final Purchase Price shall be determined by the amount
reflected as Shareholder Equity on the Audited Effective Date Balance Sheet. An
adjustment to the Initial
Purchase Price shall be made should such Shareholder Equity be greater or less
than $600,000 (the "Adjustment"), which Adjustment shall be paid within 10
business days of receipt of the Audited Effective Date Balance Sheet, except as
provided for in Section 1(b)(vi) herein. The Adjustment shall be computed as
follows: should the Shareholder Equity as reflected on the Audited Effective
Date Balance Sheet be less than $600,000, the Seller shall pay the difference to
the Buyer; Should the Shareholder Equity be greater than $600,000, the Buyer
shall pay the difference to the Seller.
(v) An amount of $75,000 shall be reserved (the "Reserve") at Closing
in an escrow account that shall be applied towards indemnifying Buyer against
any breach by Seller of its representations and warranties set forth in this
Agreement. The escrow shall be set up by Buyer and Seller. The Reserve shall be
liquidated and paid to Seller as follows: 50% six months after the date of the
Closing and the balance one year following the closing. In the case any item
shall be charged to this Reserve, Seller shall be given notice and the
opportunity to contest and correct or resolve the item.
(vi) In the event either Buyer or Seller in good faith, believes that
the Audited Effective Date Balance Sheet has not been prepared in accordance
with GAAP or is otherwise erroneous, such party shall have 10 business days from
the receipt of the Audited Effective Date Balance Sheet in which to appeal. In
such case, the parties shall engage a second independent CPA firm, acceptable to
both sides, to opine on the item or items in dispute. Both parties will be bound
by the opinion of such second CPA firm, with the fees of such firm to be paid by
the side ruled unsuccessful in the appeal.
(vii) Seller's accounts receivable and inventory. The net value of
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Seller's Account Receivable and Inventory shall be reflected on the Audited
Effective Date Balance Sheet after deduction for appropriate reserves as
mutually agreed to reflect uncollectible and aged accounts receivable and to
reflect obsolete and slow-moving inventory, it being agreed that inventories
will be stated on Seller's books at the lower of cost (determined in accordance
with customary inventory pricing practices and procedures for Seller utilizing
Seller's standard cost system but also in compliance with GAAP as applied in the
United States) or market.
(c) Allocation of Purchase Price. The Purchase Price described in
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Section 1(b) above will be initially allocated pursuant to the assets and
liabilities as reflected on the Audited Effective Date Balance Sheet; $61,000.00
then shall be allocated to Seller's and the Shareholder' agreement not to
compete with the business transferred to Buyer as set forth in Section 13
hereof. Buyer and Parent, on the one hand, and Seller, on the other hand,
represent, warrant, and agree that such allocation was determined through arm's
length negotiations. Buyer and Parent, on the one hand, and Seller, on the other
hand, each agrees that it will adopt and utilize the amounts allocated to each
asset or class of assets described in the immediately preceding sentence for
purposes of all federal, state and other income tax returns filed by it and that
it will not voluntarily take any position inconsistent therewith upon
examination of any such tax return, in any claim, in any litigation or otherwise
with respect to such income tax returns. Notwithstanding any other provision of
this Agreement, the foregoing representation, warranty and agreement shall
survive the Closing Date without limitation.
(d) Payment of Purchase Price. At the Closing, Buyer will deliver to
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Seller a check drawn against immediately available funds in an amount equal to
$1,505,000.00, pursuant to the amount determined under Section 1(b). The
remainder of the Initial Purchase Price, $75,000, shall be paid by Buyer at
Closing but held in escrow pursuant to Section 1(b)(v). The Adjustment, pursuant
to the Audited Effective Date Balance Sheet, subject to adjustment as provided
in Section 1(b)(vi), shall be paid after the Closing pursuant to Section
1(b)(vi). The Reserve shall be liquidated pursuant to Section 1(b)(v).
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(e) Instruments of Conveyance, Transfer, Assumption, Etc. Seller shall
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properly execute and deliver to Buyer at the Closing: (i) the ▇▇▇▇ of Sale; (ii)
assignments and consents to assignments, in form reasonably satisfactory to
Buyer with respect to each of the contracts and other agreements and rights to
be assigned to Buyer hereunder which require for such assignment the consent or
waiver of any third party [and as to which Buyer shall have requested the
obtaining of such consent or waiver]; and (iii) a lease otherwise reasonably
satisfactory in form and substance to counsel for Buyer and Parent to the real
property being leased hereunder in accordance with Section 4(i).
Simultaneously with the Closing, Seller shall take all steps requisite
to put Buyer in actual possession and operating control of the Purchased Assets,
including, without limitation, disclosure to such persons as Buyer and Parent
may designate of Seller's trade secrets, formulae and other proprietary
information pertaining to the business of Seller.
Buyer shall properly execute and deliver the Undertaking to Seller at
the Closing.
Seller and Buyer shall each properly execute and deliver to the other
at the Closing the following additional documents, each dated the Closing Date
(all of which, together with this Agreement, the ▇▇▇▇ of Sale, and the
Undertaking, are hereinafter sometimes referred to as the "Agreements"):
(f) Further Assurances. At the Closing and from time to time after the
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Closing, (i) at the request of Buyer and without further consideration, Seller
shall promptly execute and deliver to Buyer such certificates and other
instruments of sale, conveyance, assignment and transfer, and take such other
action, as may reasonably be required by Buyer more effectively to confirm any
obligation assumed by Buyer pursuant to the Undertaking and to sell, convey,
assign and transfer to and vest in Buyer or to put Buyer in possession of the
Purchased Assets and (ii) at the request of Seller and without further
consideration, Buyer shall promptly execute and deliver to Seller such
certificates and other instruments, of assumption, and take such other action,
as may reasonably be required by Seller more effectively to confirm and carry
out the assumption by Buyer of the obligations of Seller assumed by Buyer
pursuant to the Undertaking.
2. Closing. The Closing of the transactions provided for in Section 1
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hereof will take place at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or at such other place,
time as may be agreed upon by Buyer, Parent and Seller, on August 1, 2005,
unless extended by mutual agreement of both Buyer and Seller.
3. Termination. Anything contained in this Agreement other than in this
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Section 3 to the contrary notwithstanding, this Agreement may be terminated
prior to the Closing Date
(a) by mutual consent in writing of Buyer and Parent, on the one hand,
and Seller, on the other hand, or
(b) by Buyer, Parent or Seller if, due to causes beyond the control of
any of the parties to this Agreement, the Closing does not occur on August 1,
2005, or on or before such later date as may be agreed upon in writing by the
parties hereto.
Termination pursuant to this Section 3 shall be without liability of
any kind on the part of either party hereto, and in such event each party shall
bear and pay all costs and expenses incurred by it in connection with this
Agreement and the transactions contemplated hereby.
4. Representations and Warranties by Seller and the Shareholder. Seller
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and the Shareholder represent and warrant jointly and not severally that:
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(a) To the best knowledge of Seller and Shareholder, Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Pennsylvania and has all power and authority to carry on its
business as now being conducted and to own its properties and is duly licensed
or qualified and in good standing as a foreign corporation in each jurisdiction
in which its failure to qualify would have a materially adverse effect on the
business, financial condition, operations or prospects of Seller.
(b) Seller has full corporate power and authority to enter into each
of the Agreements to the extent it is a party thereto and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Seller of each of the Agreements to which Seller is a party have been duly
authorized by all requisite corporate action; each of the Agreements to which
Seller is a party has been duly executed and delivered by Seller and (assuming
due execution and delivery by the other party thereto) constitutes a valid and
binding obligation of Seller, enforceable in accordance with their respective
terms, subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium, and other laws affecting creditors'
rights generally from time to time in effect.
(c) The instruments of conveyance and transfer to be executed by
Seller and delivered to Buyer at the Closing will be valid in accordance with
their terms and effective to assign, transfer and convey to Buyer at the Closing
all of the then existing business of Seller and properties, assets and other
rights of Seller used in its business, including such title as is specified in
Sections 4(h) and 4(i), but excluding the Excluded Assets.
(d) Seller is not a party to, subject to or bound by any agreement or
any judgment, award, order, writ, injunction or decree of any court,
governmental body or arbitrator which would conflict with or be breached by the
execution, delivery or performance by Seller of this Agreement or which could
prevent the carrying out of this Agreement.
(e) Except as disclosed on Lists 10 and 11, neither Seller nor any of
the properties, assets and other rights referred to in the ▇▇▇▇ of Sale is a
party to, subject to or bound by any agreement or any judgment, award, order,
writ, injunction or decree of any court or of any governmental body or of any
arbitrator which could prevent the use by Buyer of the properties, assets and
other rights referred to in the ▇▇▇▇ of Sale or materially adversely affect the
conduct by Buyer of the business of Seller, in each case in accordance with
present practices, after the Closing Date or which, by operation of law, or
pursuant to its terms, would be breached, terminate, lapse, or be subject to
termination upon the consummation of the transactions contemplated herein absent
the consent or other action of any third party or agency.
(f) Except as disclosed on List 10, there is no action, suit or
governmental, administrative, arbitration or regulatory proceeding or
investigation pending or, to the best of Seller's knowledge, threatened against
or relating to Seller which could have a materially adverse effect on its
business, financial condition, operations or prospects, the Purchased Assets or
the transactions contemplated by this Agreement.
(g) To the best knowledge of Seller and Shareholder, Seller (A) has
delivered to Buyer complete, correct and detailed lists, in form and substance
reasonably acceptable to Buyer, as of the date of this Agreement, specifying
with respect to the business, properties, assets and obligations of the Seller
each and every material item in the following categories referred to below, and
(B) has delivered, or shall deliver as part of the due diligence process, to
Buyer true and complete copies of the documents and other materials that
underlie such lists:
(i) List 1 - presently outstanding written contracts, agreements,
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commitments and bids (other than those included in List 4); written and oral
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leases (other than leases disclosed in List 8); security deposits under leases;
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licenses; franchises; dealership, service, agency and other agreements which, in
each case, involve the receipt or payment of more than $2,500; and, with
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respect to each item in each category referred to above, a specification as to
whether the consent of any third person or agency is required for the effective
assignment thereof;
(ii) List 2 - machinery, equipment, tools, dies, furniture,
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furnishings, leasehold improvements, vehicles, buildings and other tangible
physical assets and fixtures and the location of such (other than items in any
of the foregoing categories having a value of not more than $500 in the
aggregate);
(iii) List 3 - (A) the policies of insurance presently in force (other
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than those required to be set forth in List 4) and, without restricting the
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generality of the foregoing, those covering Seller's public and product
liability and its personnel, properties, buildings, machinery, equipment,
furniture, fixtures and operations, specifying with respect to each such policy,
the name of the insurer, type of coverage, term of policy, limits of liability
and annual premium, (B) Seller's premiums and losses, by year, by type of
coverage, for the past five years based on information received from Seller's
insurance carrier(s), (C) all outstanding insurance claims by Seller for damage
to or loss of its property or income which have been referred to insurers or
which Seller believes to be covered by commercial insurance, (D) general
comprehensive liability policies carried by Seller for the past five years,
including excess liability policies, and (E) any agreements, arrangements or
commitments under which Seller indemnifies any other person (with the exception
of any obligation arising in connection with lease, purchase or sale
transactions arising in the ordinary course of Seller's business) in which the
maximum exposure exceeds $1,000 or pursuant to which Seller is required to carry
insurance for the benefit of any other person;
(iv) List 4 - names, current annual compensation rates (including
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bonuses and commissions), accrued bonus, accrued sick leave and accrued
severance pay of all present salaried employees of Seller; aggregate accrued
vacation pay; the current base salary rate of each of such individuals;
employment, managerial, advisory or consulting agreements and confidentiality or
other agreements protecting proprietary processes, formulae or information;
copies of all pension, profit-sharing, thrift, or other retirement plans,
employee stock ownership plans, deferred compensation, stock ownership, stock
purchase, performance share, individual or group bonus or other deferred or
incentive plans, severance plans, hospitalization, insurance, vacation, death
benefit, collective bargaining, union or other employee association agreements,
or other similar plans in each case covering employees of Seller and as amended
to date, and all amendments thereto prior to the Closing Date, agreements,
arrangements, commitments or understandings providing for any employee benefit,
the latest annual report (on Form 5500, if applicable) for each plan, the most
recent actuarial valuations with respect to all defined benefit plans, copies of
all Internal Revenue Service determination letters regarding such plans, all
such reports, actuarial valuations and determination letters as may be made,
received or issued prior to the Closing Date, the annual cost of each such plan
or arrangement and a summary description with respect to the funding of each
such welfare benefit plan or arrangement; all other contracts and relationships
with or with respect to, and all other obligations or liabilities with any
employee (or other individual with whom Seller has a business relationship) of
Seller; and all disclosures required by Section 4(m) hereof;
(v) List 5 - individual refundable deposits, prepaid expenses,
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deferred charges and "other assets" in excess of $200;
(vi) List 6 - all loans or advances made by Seller to any person in
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excess of $100 except (A) normal travel advances or other reasonable expense
advances to an officer or employee of Seller, or (B) pursuant to normal business
dealings with the customers of Seller;
(vii) List 7 - liens, encumbrances, charges, restrictions, claims and
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security interests with respect to the business, assets and property to be
transferred hereunder which do not constitute real property;
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(viii) List 8 - each and every parcel of real property or interest
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therein owned in whole or in part by Seller or held for the benefit of Seller
under a title-holding agreement or held under a lease; and complete and correct
copies of each and every of the following, if any, in the possession of Seller
will be made available for review by Buyer: (A) title reports, title binders,
survey documents and data affording information or opinions with respect to,
certifying to, or evidencing the extent, current title, title history, title
marketability, use, possession, restriction or regulation, if any (governmental
or otherwise), and compliance with applicable laws, of (x) the real property or
(y) any estate or interest in (or in the nature of) real property or in a land
or building lease or chattel real; (B) deed or title-holding or trust
agreements, if any, under which any of the parcels may have been conveyed to
Seller or under which the same may be held for the benefit of Seller; and (C)
leases; except as noted in such list, all such buildings, structures, leasehold
improvements and the equipment therein currently are used by or useful to Seller
in the ordinary course of business and, except as so noted and except for normal
wear and tear, there are no material defects with respect thereto which would
impair the day-to-day use by Buyer of any such buildings, structures, leasehold
improvements or equipment or which would subject Buyer to material liability
under applicable law;
(ix) List 9 - except for any Excluded Assets listed on Exhibit B,
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trademark registrations and applications and notices of infringement therefor,
service ▇▇▇▇ registrations (which list shall include but not be limited to
indications of length of use of each trade and service ▇▇▇▇ as well as
identification of product(s) on which each trade and service ▇▇▇▇ is used, and
registration numbers, registration and renewal dates, affidavit of use filings),
patents and patent applications, copyrights, and applications therefor
(including information as to expiration dates of all the foregoing where
applicable) presently owned, in whole or in part, by Seller and used or useful
in Seller's business; and all trademark licenses, service ▇▇▇▇ licenses,
copyright licenses, royalty agreements, patent licenses, assignments, grants and
contracts with employees or others relating in whole or in part to disclosure,
assignment, registering or patenting of any trademarks, service marks,
copyrights, inventions, discoveries, improvements, processes, formulae, trade
secrets or other know-how and used or useful in Seller's business. To the best
of Seller's knowledge, except as noted in such list: (i) the foregoing
trademarks, service marks, copyrights, licenses, assignments, grants, agreements
and contracts are valid; (ii) the foregoing trademark registrations, service
▇▇▇▇ registrations, copyright registrations and patents have been duly issued
and have not been cancelled, abandoned or otherwise terminated; (iii) the
foregoing trademark applications, service ▇▇▇▇ applications, copyright
applications and patent applications have been duly filed; (iv) Seller is not in
default under any of the foregoing licenses or agreements other than defaults,
if any, which will not result in any material loss or liability; and (v) all
such licenses and agreements are binding in accordance with their terms;
(x) List 10 - all litigation, governmental or regulatory proceedings,
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investigations or labor disputes pending or to the best of Seller's knowledge,
threatened against Seller, the officers or directors of Seller as such officers
or directors, or any of the business, assets or properties of Seller to be
transferred pursuant hereto or to which Seller or its officers or directors as
such officers or directors, is a party, as plaintiff, defendant or otherwise;
and
(xi) List 11 - all federal, state, local and foreign governmental
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licenses and permits necessary in the conduct of Seller's business; each
jurisdiction in which the nature of the business of Seller requires Seller to
qualify to do business as a foreign corporation; all federal, state, local and
foreign governmental or judicial consents, orders, decrees and other compliance
agreements under which Seller is operating or bound; all reports of inspection
of Seller's businesses and properties from January 1, 2002 to the date hereof
under all applicable federal, state and local health and safety laws and
regulations; and copies of all of the foregoing and correspondence relating
thereto.
(xii) List 12 - Seller will provide a schedule to Buyer listing all
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distributions of cash to Seller or Shareholder of Seller other than payment of
wages and salary made from
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January 1, 2005 until the Closing Date; such schedule shall be provided to Buyer
no later than the day prior to closing.
(xiii) List 13 - Seller will provide a schedule listing all items of
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the machinery, tools, equipment and other tangible physical assets to be
transferred by Seller hereunder (other than items of inventory) which are NOT in
good working order, normal wear and tear excepted, are NOT being used or are NOT
useful in the business of Seller at its present level of activity and are NOT in
an operating condition sufficient to conduct the business of Seller
substantially as now being conducted.
(h) Except as disclosed on List 7, Seller has title to the properties,
assets and other rights referred to in the ▇▇▇▇ of Sale and that do not
constitute real property, free and clear of all liens and encumbrances other
than a security interest in favor of Sovereign Bank which will be released or
discharged at Closing.
(i) Except for, (A) such imperfections of title which do not
materially affect the use or value thereof, (B) liens of current taxes not yet
delinquent or being contested in good faith, and (C) except as may be described
in List 8 hereto, Seller has good and marketable title to the properties
constituting real property to be transferred to Buyer hereunder.
(j) Seller has heretofore furnished Buyer with copies of (i) unaudited
balance sheets as at, and statements of earnings for each of Seller's three
prior fiscal years ended, respectively, December 31, 2004, December 31, 2003,
and December 31, 2002; (ii) an unaudited balance sheet and statement of earnings
for Seller's fiscal quarter ended March 31, 2005; and (iii) an unaudited balance
sheet as of April 30, 2005 and an unaudited statement of earnings for Seller's
four fiscal months ended April 30, 2005. To the best knowledge of Seller and
Shareholder, the foregoing financial statements present fairly the financial
condition of Seller at such dates and the results of its operations for the
periods then ended.
(k) To the best knowledge of Seller and Shareholder, Seller has made
and will make available for inspection by Buyer all books of account with
respect to the conduct of its business. Seller has heretofore furnished Buyer
with copies of its Federal and state tax returns for the years ended December
31, 2004, 2003 and 2002.
(1) Seller has filed (or has obtained extensions of the time by which
it is required to file) all United States federal income tax returns and all
other federal, state and local tax returns required to be filed by it and has
paid all taxes shown due on the returns so filed as well as all other taxes,
assessments and governmental charges which have become due, except such taxes,
if any, as are being contested in good faith and as to which adequate reserves
have been provided.
(m) with regard to those plans listed on List 4 which are employee
pension benefit plans within the meaning of Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("Pension Plans")
and employee welfare benefit plans within the meaning of Section 3(1) of ERISA
("Welfare Plans") and except as set forth in List 4:
(i) Seller has in all respects performed all obligations required to
be performed by it under, is not in default under, is not in violation of, and
has no knowledge of any default or violations by any other party to, any of the
Pension Plans and Welfare Plans (hereinafter, collectively, the "Seller's
Employee Plans") which obligations, defaults or violations are material to the
financial condition, results of operations, business or prospects of Seller.
(ii) None of the Seller's Employee Plans which cover or covered
employees of Seller, nor any trust created thereunder, nor any trustee or
administrator thereof, nor any "party in interest" nor any "disqualified person"
with respect thereto, has engaged in one or more "prohibited transactions" as
such term is defined in Section 4975 of the Code or Section 406 of ERISA, which
could subject such Seller's Employee Plans, or any of them, or Seller or any
such
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trust or any trustee or administrator thereof, or any party dealing with such
Seller's Employee Plans or any such trust, or any of the employees of Seller to
a tax or penalty on prohibited transactions imposed by said Section 4975 of the
Code or Section 502(i) of ERISA which, singly or in the aggregate, are material
to the financial condition, results of operations, business or prospects of
Seller.
(iii) No judicial proceedings have been initiated to terminate any
Pension Plans subject to Title IV of ERISA which cover or covered employees of
Seller or any of the trusts related thereto; nor have there been any "Reportable
Events", as that term is defined in Section 4043 of ERISA and the regulations
thereunder, with respect to such plans. (The foregoing representation is to be
made as of a date five days prior to the Closing Date with regard to the
existence of a "Reportable Event" described in Section 4043(b)(3) of ERISA.)
(iv) Seller has not incurred, nor has it any reason to expect to
incur, any liability to the Pension Benefit Guaranty Corporation which would be
material to the financial condition, results of operations, business or
prospects of Seller.
(v) There are no actions, suits or claims pending (other than routine
claims for benefits in the ordinary course), or, to the knowledge of Seller,
threatened and Seller has no reason to expect any such actions, suits or claims
(other than routine claims for benefits in the ordinary course) to arise against
any of Seller's Employee Plans or against the assets of any such Plan which
actions, suits or claims might, singly or in the aggregate, materially and
adversely affect the financial condition, results of operations, business or
prospects of Seller.
(vi) There are not and will not as of the Closing Date be any liens
encumbrances, charges, claims or security interests with respect to the
Purchased Assets, and any additions thereto or improvements thereon, arising out
of any liabilities in connection with any of Seller's Employee Plans.
(vii) As of the Closing Date, all participants in the Pension Plans
who become employees of Buyer shall be 100 percent vested in their full accrued
benefits through the Closing Date under such plans and either (A) annuity
contracts shall be purchased on behalf of and distributed to each participant in
such Pension Plans which will provide for the payment of such accrued benefit or
(B) to the extent permitted by law and such Pension Plans, cash in an amount
equal to such accrued benefit shall be distributed to each such participant.
(viii) Since September 1, 1974, Seller has not contributed to a
multi-employer plan within the meaning of Section 3(37) of ERISA covering
employees of the Seller.
(n) To the best of Seller's knowledge and except as disclosed on List
9, none of the processes currently used by Seller with respect to the business,
properties and assets to be transferred hereunder or any of its properties or
products contracted or sold by Seller with respect thereto, or trademarks, trade
names, labels or other marks or copyrights used by Seller with respect thereto,
materially infringe the patent, industrial property, trademark, trade name,
label, other ▇▇▇▇, right or copyright of any other person or entity, and Seller
has not received any notice of adverse claim by any third party with respect
thereto. Seller has license agreements in force to the extent necessary to
permit its full use of all of the processes used by it with respect to the
business, properties and assets to be transferred hereunder and to permit such
operations and sales in accordance with its present and planned practices.
(o) Except as specifically disclosed in writing by Seller to Buyer or
Buyer's independent certified public accountants and reflected in the
calculation of the Inventory Amount, Seller's inventories of raw materials,
in-process and finished products being transferred hereunder conform in all
respects with Seller's applicable specifications and warranties and are not
obsolete; all in-process and finished products in such inventories have been
produced in compliance with
8
Seller's applicable quality control procedures and all finished products in such
inventories are merchantable and are fit for the purpose intended; and all
information furnished to the independent certified public accountants and other
representatives of Buyer for the purpose of determining the Inventory Amount
under Section 15 is complete and correct.
(p) Except as disclosed in List 13 as described in Section 4(g)(xiii)
above, the machinery, tools, equipment and other tangible physical assets to be
transferred by Seller hereunder (other than items of inventory) are in good
working order, normal wear and tear excepted, are being used or are useful in
the business of Seller at its present level of activity and are in an operating
condition sufficient to conduct the business of Seller substantially as now
being conducted.
(q) Since December 31, 2004, there has been no material adverse change
in the financial condition, assets, liabilities (contingent or otherwise),
results of operations, business or business prospects of Seller. Seller has
conducted its business in the normal course of business: since December 31, 2004
there have been no unusual arrangements with customers or vendors, no dividends
to shareholder other than reasonable amounts to pay actual and estimated taxes,
and no additional borrowing over the amount outstanding as of December 31, 2004.
Notwithstanding the foregoing, Seller has the right to distribute cash in such
manner as Seller shall determine prior to the Closing Date; and has or shall
provide a schedule to Buyer listing each such cash distribution no later than
the day prior to closing.
(r) Vacation pay accrued for employees of Seller as of June 30, 2005,
is estimated to total approximately Eleven Thousand Four Hundred Three and
76/100 Dollars ($11,403.76). This estimate was determined as follows: Vacation
pay for Seller's employee population as of May 18, 2005, was computed for the
period ending June 30, 2005. From this total, vacation earned and paid prior to
May 18, 2005, and vacation days requested by employees and committed to be
honored by management of Seller and paid prior to June 30, 2005, were subtracted
from vacation pay. The resulting total does not account for new hires or
terminated employees vacation entitlement between May 18, 2005, and June 30,
2005.
(s) No representation or warranty by Seller or the Shareholder
contained in this Agreement and no statement contained in any certificate, list,
exhibit or other instrument specified in this Agreement or otherwise furnished
to Buyer in connection with the transactions contemplated hereby, whether
heretofore furnished to Buyer or hereafter required to be furnished to Buyer,
is, or will be when furnished, inaccurate, incomplete, misleading or untrue in
any material respect.
5. Representations and Warranties by Buyer and Parent. Buyer and Parent
---------------------------------------------------
each represent and warrant that:
(a) Buyer and Parent are duly organized and validly existing
corporations in good standing under the laws of the State of Delaware, and Buyer
is qualified to do business as a foreign corporation and is in good standing in
the State of Pennsylvania.
(b) Buyer and Parent each has full corporate power and authority to
enter into each of the Agreements to the extent it is a party thereto and to
consummate the transactions contemplated hereby; the execution, delivery and
performance by each of Buyer and Parent of each of the Agreements to which it is
a party have been duly authorized by all requisite corporate action on the part
of Buyer and Parent; each of the Agreements to which it is a party has been duly
executed and. delivered by Buyer or Parent, as the case may be, and (assuming
due execution and delivery by Seller of those Agreements to which it is a party)
constitutes a valid and binding obligation of Buyer or Parent, as the case may
be, enforceable in accordance with its terms, subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
other laws affecting creditors' rights generally from time to time in effect.
9
(c) The Undertaking executed and delivered to Seller by Buyer at the
Closing is valid in accordance with its terms and is effective to provide, as
between Buyer and Seller, for the assumption by Buyer of all of the obligations
and liabilities of Seller specified therein which are valid and binding
obligations and liabilities of Seller.
(d) Neither Buyer nor Parent is a party to, subject to or bound by any
material agreement or any judgment, award, order, writ, injunction, or decree of
any court, governmental body or arbitrator which would conflict with or be
breached by the execution, delivery or performance by it of this Agreement or
which could prevent the carrying out of this Agreement.
(e) There is no action, suit or governmental, administrative,
arbitration or regulatory proceeding or investigation pending or, to the best of
Buyer's and Parent's knowledge, threatened against or relating to Buyer or
Parent which could have a materially adverse effect on the transactions
contemplated by this Agreement.
6. Conditions Precedent to Obligations of Buyer. Buyer need not consummate
--------------------------------------------
the transactions contemplated by this Agreement unless the following conditions
shall be fulfilled:
(a) All proceedings taken in connection with the transactions
contemplated herein and all instruments and documents required in connection
therewith or incident thereto shall be reasonably satisfactory in form and
substance to ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and/or ▇▇▇▇▇▇ Poster, counsels for Buyer.
(b) Except for changes in the ordinary course of business or as
otherwise contemplated or permitted by this Agreement, the representations and
warranties of Seller and the Shareholder contained herein or in any certificate
or document delivered to Buyer and/or Parent pursuant hereto shall be deemed to
have been made again at and as of the Closing Date and shall then be true in all
material respects; Seller shall have performed and complied in all material
respects with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date; and Buyer and
Parent shall have been furnished with certificates of appropriate officers of
Seller dated as of the Closing Date certifying to the fulfillment of the
foregoing conditions.
(c) Buyer and Parent shall have been furnished with an opinion dated
as of the Closing Date of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, counsel for Seller, to the effect
that, under the laws of the Commonwealth of Pennsylvania:
(i) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania and to the best
of such counsel's knowledge, has all power and authority to carryon its business
as now being conducted and to own its properties;
(ii) Seller has full corporate power and authority to enter into each
of the Agreements to the extent it is a party thereto and to consummate the
transactions contemplated hereby and thereby; the execution, delivery and
performance by Seller of the Agreements to which it is a party have been duly
authorized by all requisite corporate action on the part of Seller; each of the
Agreements to which it is a party have been duly executed and delivered by
Seller and except as provided in such opinion (assuming due execution and
delivery by the other party thereto) constitutes a valid and binding obligation
of Seller, enforceable in accordance with its terms, subject, as to enforcement
of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium,
and other laws affecting creditors' rights generally from time to time in effect
and general principles of equity;
10
(iii) the instruments of conveyance and transfer executed by Seller
and delivered to Buyer at the Closing have been duly authorized and executed by
Seller and are valid in accordance with their terms and effective to assign,
transfer and convey to Buyer at the Closing all of the Purchased Assets;
(iv) to the best of such counsel's knowledge and to the extent that
any of the following would materially and adversely affect the business of
Seller, neither Seller nor any of the properties, assets and other rights
referred to in the ▇▇▇▇ of Sale is subject to or bound by any agreement or any
judgment, award, order, writ, injunction or decree of any court or of any
governmental body or of any arbitrator to which Seller is a party or which
specifically refers to Seller and notice of which has been delivered to Seller
which could prevent the use by Buyer of the properties, assets and other rights
referred to in the ▇▇▇▇ of Sale or the conduct by Buyer of the business of
Seller, in each case in accordance with present practices, after the Closing
Date or which, by operation of law, or pursuant to its terms, would be breached,
terminate, lapse, or be subject to termination upon the consummation of the
transactions contemplated herein absent the consent or other action of any third
person or agency; and
(v) except as provided in such opinion, counsel does not know of any
action, suit or governmental, administrative, arbitration or regulatory
proceeding or investigation pending or threatened against or relating to Seller.
In rendering the foregoing opinions, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ may rely upon information
and certificates provided by one or more officers of Seller and of certificates
provided by public officials and such opinions shall be subject to such
conditions and limitations as ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ may proscribe.
(d) No action, suit or proceeding before any court or governmental or
regulatory authority shall be pending, no investigation by any governmental or
regulatory authority shall have been commenced, and no action, suit or
proceeding by any governmental or regulatory authority shall have been
threatened, against Buyer or Seller or Parent or any of the principals, officers
or directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the legality or validity of any
such transactions or seeking material damages in connection with any such
transactions.
(e) All consents of third parties including, without limitation,
governmental authorities and self-regulatory agencies, and all filings with and
notifications of governmental authorities, regulatory agencies (including
non-governmental self-regulatory agencies) or other entities which regulate the
business of Seller or Buyer or Parent, necessary on the part of Seller or Buyer
or Parent, or their respective subsidiaries or affiliates, to the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and to permit the continued operation of the respective businesses of
Seller and Buyer and their respective subsidiaries in substantially the same
manner after the Closing Date as theretofore conducted, other than routine
post-closing notifications or filings, shall have been obtained or effected.
(f) All consents required for the assignment of all contracts,
patents, trademarks, copyrights and other intangibles and other agreements
necessary for the continued operation of the business of Seller after the
Closing Date on substantially the same basis as presently operated shall have
been obtained.
(g) The employment agreement executed and delivered by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
shall be in full force and effect and there shall not have occurred any default
or repudiation thereof.
(h) Individuals holding not less than one hundred percent (100%) of
the voting stock of Seller shall have executed this Agreement.
11
7. Conditions Precedent to Obligations of Seller. Seller need not
--------------------------------------------------
consummate the transactions contemplated hereby unless the following conditions
shall be fulfilled:
(a) All proceedings taken in connection with the transactions
contemplated herein and all instruments and documents required in connection
therewith or incident thereto shall be reasonably satisfactory in form and
substance to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, counsel for Seller.
(b) Except for changes in the ordinary course of business or as
otherwise contemplated or permitted by this Agreement, the representations and
warranties of Buyer and Parent contained herein or in any certificate or
document delivered to Seller pursuant hereto shall be deemed to have been made
again at and as of the Closing Date and shall then be true in all material
respects; Buyer and Parent shall have performed and complied in all material
respects with all agreements and, conditions required by this Agreement to be
performed or complied with by them prior to or at the Closing Date; and Seller
shall have been furnished with certificates of appropriate officers of Buyer and
Parent dated as of the Closing Date certifying to the fulfillment of the
foregoing conditions.
(c) Seller shall have been furnished with an opinion dated as of the
Closing Date of counsel for Buyer and Parent, to the effect that:
(i) Buyer and Parent are duly organized and validly existing
corporations in good standing under the laws of the State of Delaware, and Buyer
is qualified to do business as a foreign corporation and is in good standing in
the State of Pennsylvania.
(ii) Buyer and Parent each has full corporate power and authority to
enter into each of the Agreements to the extent it is a party thereto and to
consummate the transactions contemplated hereby and thereby; the execution,
delivery and performance by each of Buyer and Parent of the Agreements to which
it is a party have been duly authorized by all requisite corporate action on the
part of Buyer and Parent; each of the Agreements to which it is a party has been
duly executed and delivered by Buyer and Parent, as the case may be, and
(assuming due execution and delivery by Seller of those Agreements to which it
is a party) constitutes a valid and binding obligation of Buyer and Parent,
enforceable in accordance with its terms, subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
other laws affecting creditors' rights generally from time to time in effect and
general principles of equity;
(iii) the Undertaking executed and delivered to Seller by Buyer at the
Closing is valid in accordance with its terms and is effective to provide, as
between Buyer and Seller, for the assumption by Buyer of all of the obligations
and liabilities of Seller specified therein which are valid and binding
obligations and liabilities of Seller; and
(iv) Except as may be specified by said counsel, they do not know of
any action, suit or governmental, administrative, arbitration or regulatory
proceeding or investigation pending or threatened against or relating to Buyer
or Parent which could have a materially adverse impact on the transactions
contemplated by this Agreement.
In rendering such opinion, counsel to Buyer and Parent may rely upon
certificates of one or more officers of Buyer or of public officials as to
factual matters.
(d) No action, suit, or proceeding before any court or governmental or
regulatory authority shall be pending, no investigation by any governmental or
regulatory authority shall have been commenced, and no action, suit or
proceeding by any governmental or regulatory authority shall have been
threatened, against Buyer or Parent or any of its officers or directors seeking
to restrain, prevent, or change the transactions contemplated hereby or
questioning the legality or validity of any such transactions or seeking
material damages in connection with any
such transactions.
12
(e) All consents of third parties including, without limitation,
governmental authorities and self-regulatory agencies, and all filings with and
notifications of governmental authorities, regulatory agencies (including
non-governmental self-regulatory agencies) or other entities which regulate the
business of Buyer or Parent, necessary on the part of Buyer or Parent, or their
respective subsidiaries or affiliates, to the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, other
than routine post-closing notifications or filings, shall have been obtained or
effected.
8. Indemnification by Seller and the Shareholder. Seller and the
--------------------------------------------------
Shareholder hereby agree jointly and not severally to defend, indemnify and hold
harmless Buyer and Parent and each of their respective successors, assigns and
affiliates from and against any and all costs, liabilities and damages to the
extent they result from:
(a) any and all: (i) material misrepresentations or material breaches
of warranty, agreement or undertaking hereunder on the part of Seller; and (ii)
material failures by Seller to perform or otherwise fulfill any undertaking or
other agreement or obligation hereunder;
(b) all liabilities of Seller not specifically assumed by Buyer
pursuant to its Undertaking, including, without limitation, (i) all liabilities
and expenses (including attorneys' fees and disbursements) incurred by Buyer
and/or Parent resulting from the parties' failure to comply with the Bulk
Transfer Statutes of Pennsylvania, as amended, at 43 P.S. ss.788.3, 72 P.S.
ss.1403(a), and 72 P.S. ss.7240, and (ii) all expenses incurred by Buyer and/or
Parent in respect of taxes to the extent owed by Seller covering any period
prior to the Effective Date; unless such costs, liabilities, damages or expenses
arise by reason of Buyer's failure to fully observe and perform its duties and
obligations under the Undertaking;
(c) any and all actions, suits, proceedings, claims, liabilities,
demands, assessments, judgments, costs and expenses, including reasonable
attorneys' fees, incident to any of the foregoing which are subject to such
indemnification;
provided, however, that in no event shall Seller or the Shareholder have any
duty to defend, indemnify or hold harmless on account of any cost, liability,
loss, damage or expense to the extent that such cost, liability, loss, damage or
expense arises out of or is caused by any act or omission of Parent or Buyer or
any of their respective shareholder, directors, officers, agents, employees or
representatives; and provided further, however, that if any claim, liability,
demand, assessments action, suit or proceeding shall be asserted against Buyer
and/or Parent or any of their respective successors or assigns in respect of
which Buyer and/or Parent proposes to demand indemnification, Buyer and/or
Parent shall immediately notify Seller thereof in writing. Subject to rights of
or duties to any insurer or other third person having liability therefor, Seller
or the Shareholder (or the insurer of either) shall have the right promptly upon
receipt of such notice to assume the control of the defense, compromise or
settlement of any such claim, demand, liability, assessment, action, suit or
proceeding, including, at its own expense, employment of counsel reasonably
satisfactory to Buyer and Parent; provided, however, that if Seller shall have
exercised its right to assume such control, Buyer and/or Parent may, in its sole
discretion, employ counsel to represent it (in addition to counsel employed by
Seller, and in the latter case, at the sole expense of Buyer and Parent) in any
such matter, and in such event counsel selected by Seller shall be required to
cooperate with such counsel of Buyer and/or Parent in such defense, compromise
or settlement; and provided further, however, that Seller's and Shareholder's
obligation to defend, indemnify, or hold harmless under this Section 8 shall
accrue only if and to the extent the aggregate of all such losses, damages,
deficiencies, debts, liabilities, costs and expenses arising under this
Agreement exceeds $5,000 and, except as otherwise provided in Section 12, occurs
within two (2) years after the Closing.
13
The rights of Buyer and Parent pursuant to this Section 8 shall
constitute the sole and exclusive right and remedy of Buyer and Parent with
respect to any breach, violation or default by Seller or the Shareholder arising
out of any of the Agreements or the transactions contemplated thereby.
9. Indemnification by Buyer and Parent. Buyer and Parent agree to defend,
-----------------------------------
indemnify and hold harmless Seller and the Shareholder and each of their
respective successors, assigns and affiliates from and against any and all
costs, liabilities and damages resulting from:
(a) any and all losses, damages or deficiencies resulting from any and
all: (i) material misrepresentations or material breaches of warranty, agreement
or undertaking hereunder on the part of Buyer and/or Parent; and (ii) material
failures by Buyer and/or Parent to perform or otherwise fulfill any undertaking
or agreement or obligation hereunder;
(b) all liabilities of Seller specifically assumed by Buyer pursuant
to the Undertaking;
(c) all liabilities, losses or damages directly or indirectly
resulting from the sale of any product of or by, or the providing of any
services by, Seller (including, without limitation, with respect to product
recalls, warranty claims and product liability claims, whether claims for
damages; injuries to persons or damage to property); and
(d) any and all actions, suits, proceedings, claims, liabilities,
demands, assessments, judgments, costs and expenses, including reasonable
attorneys' fees, incident to any of the foregoing or such indemnification;
provided, however, that if any claim, liability, demand, assessment, action,
suit or proceeding shall be asserted against Seller or any of its successors or
assigns in respect of which it proposes to demand indemnification, Seller shall
immediately notify Buyer (with a copy to Parent) thereof in writing. Subject to
rights of or duties to any insurer or other third person having liability
therefor, Buyer shall have the right promptly upon receipt of such notice to
assume the control of the defense, compromise or settlement of any such claim,
demand, liability, assessment, action, suit or proceeding, including, at its own
expense, employment or counsel reasonably satisfactory to Seller; provided,
however, that if Buyer shall have exercised its right to assume such control,
Seller may, in its sole discretion, employ counsel to represent it (in addition
to counsel employed by Buyer, and in the latter case, at Seller's sole expense)
in any such matter, and in such event counsel selected by Buyer shall be
required to cooperate with such counsel of Seller in such defense, compromise or
settlement; and provided further, however, that except as provided in the final
sentence of this Section 9, Buyer's and Parent's obligation to indemnify under
this Section 9 shall accrue only if and to the extent that the aggregate of all
such losses, damages, deficiencies, debts, liabilities, costs and expenses
arising under this Agreement exceeds $5,000 and, except as otherwise provided in
Section 12, occurs within two (2) years after the Closing. Notwithstanding
anything to the contrary, the duty of Parent and Buyer to pay the Initial
Purchase Price, the Final Purchase Price, the liabilities set forth in the
Undertaking, and all other amounts set forth or referred to in any of the
Agreements shall be absolute and shall not be subject to the $5,000.00
limitation set forth in the preceding sentence.
10. Product Liability Matters
-------------------------
(a) For purposes of this Section, the following terms shall have the
following definitions:
(i) "Coverage Period" means the period of time beginning as of June
30, 2005, and ending as of August 1, 2010.
14
(ii) "Product Liability Matters" shall mean any matters arising in
whole or in part out of the manufacture, production or sale at any time of any
product by Seller, including without limitation, product recalls, returns,
warranty claims, claims of product defect, claims of negligence and product
liability claims, whether or not the sale of such products shall have occurred
prior to, on or after the Effective Date.
(iii) "Product Liability Policies" shall mean insurance policies
pertaining to Product Liability Matters.
(b) Seller shall maintain in full force and effect all Product
Liability Policies which Seller maintained as of June 30, 2005, through the
respective policy expiration dates. Buyer shall reimburse Seller for the pro
rata portion of all insurance premiums applicable to such Product Liability
Policies for the period of time from June 30, 2005, through the respective
policy expiration dates.
(c) Seller shall indemnify Buyer and Parent solely to the extent that
Seller has coverage under any Product Liability Policies for all loss, damage,
cost and expense, including without limitation reasonable attorneys' fees,
suffered or incurred by Buyer or Parent with respect to Product Liability
Matters. Notwithstanding anything to the contrary, the liability of Seller and
Shareholder arising out of the duty of indemnification set forth in this
Subsection (c). shall not extend to any of the assets of Seller or Shareholder.
(d) At their sole cost and expense, throughout the Coverage Period,
Buyer and Parent shall maintain Product Liability Policies on an occurrence
basis naming Seller and Shareholder as insureds, such Product Liability Policies
to be in amount, form and substance and with insurance companies reasonably
satisfactory to Seller and Shareholder. Upon request from time to time but at
least no less than annually, Buyer and Parent shall provide Seller and
Shareholder with evidence of such coverage as Seller and Shareholder shall
reasonably require.
(e) Buyer and Parent shall defend, indemnify and hold harmless Seller
and Shareholder from any and all loss, damage, cost and expense, including
without limitation deductibles, self-insured retention amounts, and reasonable
attorneys' fees, suffered or incurred by Seller or Shareholder by reason of any
Product Liability Matters, to the extent that Seller and Shareholder are not
subject to a defense and indemnification under the Product Liability Policy
referred to in Subsection b. of this Section.
11. Expenses and Finder's Fees. Seller will bear the expenses incurred by
--------------------------
Seller in connection with this Agreement and its performance and Buyer and
Parent will bear the expenses incurred by them. Seller, on the one hand, and
Buyer and Parent, on the other hand, each represent and warrant to the other
that the negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on by Seller directly with Buyer and
Parent and in such a manner as not to give rise to any valid claims against
Seller or Buyer or Parent for a brokerage commission, finder's fee or other like
payment. Seller represents and warrants to Buyer and Parent that neither Seller
nor any officer or director of Seller knows of any broker or finder having any
connection with this Agreement or the transactions contemplated hereby; Buyer
and Parent represent and warrant to Seller that neither Buyer nor Parent nor any
officer or director of Buyer or Parent knows of any broker or finder having any
connection with this Agreement or the transactions contemplated hereby.
12. Survival of Representations and Warranties. Except as otherwise
----------------------------------------------
provided in this Agreement, the respective representations, warranties,
covenants and agreements of Seller and the Shareholder and of Buyer and Parent
contained or deemed to be contained herein shall survive the Closing Date for
two (2) years, except for:
15
(a) Any item as to which, within such two (2) year period, Buyer
and/or Parent, under Section 8, or Seller and the Shareholder, under Section 9,
shall have in good faith asserted a bona fide claim in writing against the other
party or parties, which claim shall identify with reasonable specificity the
basis of the claim;
(b) Buyer's obligation, and Parent's obligation to cause Buyer to pay
or perform assumed liabilities or obligations pursuant to the Undertaking, which
terminates when such liabilities or obligations have been paid or performed, as
the case may be;
(c) Any representation, warranty, covenant or agreement on the part of
Seller relating to taxes owing by Seller, including liens attaching to any of
the Purchased Assets as a result of the failure to pay taxes, which shall extend
for a period equal to the applicable statute of limitations;
(d) Any representation, warranty, covenant, agreement, duty or
obligation on the part of Buyer and Parent referred to in Section 9(c) of this
Agreement or referred to in Section 10 of this Agreement, which shall extend
forever;
(e) The agreements relating to transfer taxes under Section 17(1).
13. Covenant Against Competition. (a) As a further inducement to Buyer to
----------------------------
purchase the assets of Seller hereunder, Seller and the Shareholder agree
jointly and not severally that (except to the extent otherwise provided in
subsection (b) hereof) for the period from the Closing Date through the two (2)
year anniversary of the Closing Date:
(i) Seller and the Shareholder will not in any way, directly or
indirectly, own, manage, operate or control any enterprise which engages in, or
otherwise carries on, any business activity in competition with the business of
Seller transferred to Buyer as of the Closing Date in any geographic area
(including, without limitation, North, Central and South America) in which
products of Seller are sold or are offered for sale by Buyer; Seller and the
Shareholder recognize that the offer and sale of the products of Seller will be
worldwide in scope in that Buyer will directly advertise and solicit business
from customers wherever they may be found;
(ii) Neither Seller nor the Shareholder will at any time disclose to
other than Buyer or any of Buyer's affiliates, or use, any proprietary
information relating to Seller, whether or not such information is embodied in
writing or other physical form, except for any such proprietary information
which is or becomes publicly available through no fault of Seller or the
Shareholder, in which case Seller or the Principal Shareholder may disclose to
the extent required by applicable law. For purposes of this Agreement, the
phrase "proprietary information" means all information which is known only to an
employee, former employee or consultant of or other person in a confidential
relationship with Seller or any of its affiliates and which relates to specific
technical matters concerning Seller, such as, without limiting the generality of
the foregoing, devices, formulae, components, patterns or materials or machines
for manufacturing, testing, building or product development, sales or financing
procedures or methods of Seller or any of its affiliates or which relates to
specific business matters concerning Seller such as, without limiting the
generality of the foregoing, the identity of suppliers, customers or contractors
of Seller or its affiliates;
(iii) Seller and the Shareholder recognize that all documents and
objects containing or reflecting any proprietary information relating to Seller,
whether developed by Seller or by someone else for Seller or any of its
affiliates, will be after the Closing Date the respective exclusive property of
Buyer or of such of its affiliates, as the case may be; and
16
(iv) Neither Seller nor the Shareholder will recruit any employees who
accept employment with Buyer who were formerly employed by Seller, except with
the consent of Buyer, which shall not be unreasonably withheld.
(b) In the event that a court of competent jurisdiction holds that
Parent or Buyer breached the provisions of any of the Agreements, including the
Employment Agreement, the restrictions contained in this covenant as described
in Section 13 herein shall automatically terminate.
(c) Notwithstanding anything to the contrary, in the event of any
material breach, violation or default by: Buyer or Parent of the provisions of
this Asset Purchase Agreement, or by Parent of the provisions of the Employment
Letter Agreement between Parent and Shareholder, or by Parent of the provisions
of the Lease Agreement between Shareholder and Parent, Seller and Shareholder
shall be released and relieved of any and all duties and obligations arising
under Section 13 of this Agreement.
14. Guaranty of Receivables. On the Closing Date, Seller and Buyer shall
-----------------------
jointly send a letter to each of the obligors on the Accounts Receivable
purchased hereunder, informing each such obligor of the transfer hereunder and
instructing them to remit all payments and other items in respect of such
Accounts Receivable and all future Accounts Receivable of the Buyer to the
lockbox of the Buyer as specified in such letter. Buyer shall, after the Closing
Date, use efforts consistent with the efforts used by Buyer in the collection of
its own Accounts Receivable, exclusive, however, of suit or other third-party
collection methods, to collect the Accounts Receivable of Seller purchased
hereunder. For each such Account Receivable, any amounts received from, the
account customer shall be applied first to reduce such Account Receivable and
then to other amounts owed by such customer, except for amounts which are the
subject of a bona fide dispute and not paid by reason of such disputed amounts
which are identifiable to a particular Account Receivable and amounts as to
which the account customer has directed that there be- application to a
particular Account Receivable. Without regard to any assertion that Seller may
make with respect to prior collection efforts, ninety (90) days after the
Closing Date, to the extent the aggregate amount of such uncollected Accounts
Receivable exceeds the amount contained in the Reserve, Seller shall upon ten
(10) days notice from Buyer, reimburse Buyer an amount equal to the amount then
outstanding in respect of each such Account Receivable transferred to Buyer
hereunder, and upon such reimbursement, Buyer shall promptly transfer to Seller
or its assignee all right, title and interest in and to such Account Receivable.
With respect to any Account Receivable for which Seller has reimbursed Buyer,
Buyer shall apply any funds collected by it with respect to such Account
Receivable in the same manner as they would be applied hereunder had they been
collected prior to reimbursement by Seller and shall promptly remit any such
collections thereon to Seller. Seller shall be entitled to pursue the collection
of any outstanding Account Receivable for which it has reimbursed Buyer or which
Buyer has not purchased hereunder, except that Seller shall confer with Buyer
prior to taking any such action and Seller agrees to use its reasonable best
efforts not to injure any customer relationships of Buyer. Seller hereby agrees
to authorize such banks as Buyer shall designate to deposit without Seller's
endorsement into Buyer's account payments on Accounts Receivable which are
addressed to Seller, and any payments received by Seller on an Account
Receivable of Buyer attributable to the Seller will be held in trust for Buyer
and promptly delivered to Buyer.
15. Inventory Amount. For purposes of determining the Purchase Price, the
----------------
Inventory Amount shall be determined in accordance with Exhibit D hereto which
shall be finalized and attached to this Agreement at Closing.
16. Press Releases. Any public announcements regarding the transactions
--------------
contemplated hereby shall be made only with the mutual consent of Seller and
Parent.
17
17. Miscellaneous.
-------------
(a) Cooperation. Each of the parties hereto shall use its best efforts
-----------
to take or cause to be taken, and to cooperate with the other party hereto, to
the extent necessary with respect to all actions, and to do, or cause to be
done, consistent with applicable law, all things' necessary, proper or advisable
to consummate and make effective the transactions contemplated by this
Agreement. From time to time prior to the Closing Date, Seller will promptly
supplement or amend any list previously delivered to Buyer pursuant to Section
4(g) with respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in such list. No supplement or amendment to any list shall
have any effect for the purpose of determining satisfaction of the condition set
forth in Section 6(b).
(b) Regulatory Filings; Access. Each of the parties hereto will
-------------------
furnish to the other party hereto such necessary information and reasonable
assistance as such other party may reasonably request in connection with its
preparation of necessary filings or submissions to any governmental agency;
provided, however, that any regulatory filings required of Buyer shall be at
Buyer's expense. Seller agrees to give Buyer and advisors, counsel and
representatives of Buyer reasonable access to its records and facilities for the
purpose of evaluating the basis for the transactions contemplated hereby. Such
access shall include, without limitation, the review of the books, records and
business affairs of Seller.
(c) Waiver. Any failure of either of the parties hereto to comply with
------
any of its obligations or agreements or to fulfill conditions herein contained
may be waived in writing by the other party.
(d) Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed. to have been duly given if delivered or mailed,
first class postage prepaid:
(i) If to Seller or to the Shareholder, to:
Mifflin Valley, Inc.
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(with a copy to):
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
P.O. Box 6286
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(ii) If to Buyer or Parent, to:
Lakeland Industries, Inc.,
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
(with a copy to) ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Such names and addresses may be changed by written notice to each person listed
above.
(e) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal substantive laws and not the choice of laws of
the Commonwealth of Pennsylvania. All disputes brought with respect to the
Agreement shall be brought before the courts of Pennsylvania or other court of
competent jurisdiction.
18
(f) Counterparts. This Agreement may be executed simultaneously in two
------------
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are for
--------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Entire Agreement. This Agreement, including the Exhibits hereto
-----------------
and the documents referred to herein embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, representations, warranties,
covenants or undertakings, other than those expressly set forth or referred to
herein or therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(i) Amendment and Modification. This Agreement may be amended or
----------------------------
modified only by written agreement of the parties hereto.
(j) Binding Effect; Benefits. This Agreement shall inure to the
--------------------------
benefit of and be binding upon the parties hereto and their respective
successors and assigns; nothing in this Agreement, express or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
(k) Assignability. This Agreement shall not be assignable by any party
-------------
hereto other than, in the case of an assignment by Buyer, to a direct or
indirect subsidiary of Parent, without the prior written consent of the other
party hereto.
(1) Transfer Taxes. All transfer taxes, stamp taxes, realty
----------------
documentary stamp taxes and sales and use taxes, if any, imposed by the laws of
the Commonwealth of Pennsylvania and payable by reason of this transaction or
the sale, transfer or delivery of any of the Purchased Assets shall be paid and
borne as follows:
(i) All such taxes with respect to any realty included in the
Purchased Assets shall be paid and borne by Seller.
(ii) The parties believe that the tangible personal property included
in the Purchased Assets (including, without limitation, inventories of raw
materials, work in process and finished goods) is exempt from sales and other
transfer taxes in the State of Pennsylvania. However, in the event that any such
taxes are ultimately determined to be due with respect to any of such Purchased
Assets, they shall be paid and borne by Buyer.
(m) Prorations. At the Closing, ad valorem property taxes on the
----------
Purchased Assets and utility services with respect thereto shall be prorated as
of the Closing Date between Seller and Buyer.
(n) General Manager's Salary. Following the Closing, the General
--------------------------
Manager of Seller shall have his annual salary adjusted upward by the amount of
the annual withholding for medical and dental health insurance.
(o) Reimbursement for COBRA Payments. The parties to this Agreement
--------------------------------
acknowledge that as of the Closing Date, Seller shall terminate the health
coverage benefits of Shareholder and the General Manager of Shareholder. The
parties to this Agreement further acknowledge that although Buyer shall enroll
Shareholder and General Manager of Seller in its health care coverage program,
that program has a ninety (90) day eligibility waiting period and thus
Shareholder and General Manager of Shareholder shall need to obtain COBRA
coverage
19
during that ninety (90) day eligibility waiting period. Buyer covenants that
upon demand, Buyer shall reimburse Shareholder and the General Manager of Seller
in an amount equal to the COBRA payments which they pay during such ninety (90)
day eligibility waiting period.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
LAKELAND INDUSTRIES, INC.
By: /s/▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President & General Counsel
By:
----------------------------------
Name:
Title:
MIFFLIN VALLEY, INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
MIFFLIN VALLEY, INC.
By: /s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
20
EXHIBIT A
▇▇▇▇ OF SALE
Mifflin Valley Inc., a Pennsylvania corporation ("Assignor"), pursuant to the
Asset Purchase Agreement, dated as of July 18, 2005, (the "Agreement"), between
Assignor and the Principal Shareholder of Assignor and Mifflin Valley, Inc.,
("Buyer"), a Delaware corporation, and wholly-owned subsidiary of Lakeland
Industries, Inc., and for good and valuable consideration to it in hand paid,
receipt of which is hereby acknowledged, does sell, assign, transfer and convey
unto Assignee, its successors and assigns, as at the opening of business on the
date hereof, all of Assignor's business, properties and assets constituting a
going concern, and all of Assignor's rights, whether at common law or otherwise
(except rights of Assignor and Excluded Assets under the Agreement), claims,
including the proceeds of any claims which may not be assignable, and causes of
action arising out of any transaction occurring on or prior to the date hereof,
with respect to Assignor's business, properties and assets transferred
hereunder, irrespective of the time or date on which any such right, claim or
cause of action may arise or accrue.
Without limiting the generality of the foregoing, and subject to the exceptions
set forth above, the rights, claims, causes of action and property and assets
being sold, assigned, transferred and conveyed hereunder by Assignor include all
of its right, title and interest in, to and under the following:
a) Existing assets, properties and business;
b) Leases (other than for the existing real estate lease agreement pertaining
to the property located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇), security deposits and options under leases, licenses,
franchises, sales and other contracts;
c) Inventories, merchandise, machinery, equipment, furniture, tools, dies,
jigs, vehicles, instruments and fixtures;
d) ▇▇▇▇▇ cash as of the date hereof;
e) Patents, copyrights, trademarks, formulae, trade secrets, trade names and
other intangibles;
f) Accounts receivable;
g) Sundry assets and supplies; and
h) Designs, drawings; research. engineering; marketing, and other data, and
all books and records, including those maintained on tapes, discs or other
magnetic or electronic storage media, except for corporate minute books,
stock ledgers and stock books, relating to its assets, business, and
operations; and
Notwithstanding the foregoing; there shall be excluded from the rights, claims,
causes of action and property and assets being sold, assigned, transferred and
conveyed hereunder all Excluded Assets (as defined in Exhibit "B").
Assignor hereby authorizes Assignee to take any appropriate action in
connection with any of said rights, claims, causes of action and property and
assets being sold, assigned, transferred and conveyed hereunder, in the name of
Assignor or in its own or any other name but at its own expense.
TO HAVE AND TO HOLD said rights, claims, causes of action and
property, including without limitation the assets and business of Assignor, as a
going concern, unto Assignee and its successors and assigns., to and for its or
their use forever.
And Assignor does hereby warrant, covenant and agree that it:
(a) will warrant and defend the sale of said property, assets and business
against each and every person or persons whomsoever claiming: or who may claim
against any or all of the same;
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and
(b) will take all steps necessary to put Assignee, its successors or
assigns in actual possession and operating control of said property, assets and
business.
Notwithstanding anything to the contrary, except for such representations
and warranties as are specifically set forth in the Agreement or in this ▇▇▇▇ of
Sale, Seller makes no representations or warranties of any kind or nature with
respect to the business, properties and assets which are the subject matter of
this ▇▇▇▇ of Sale.
IN WITNESS WHEREOF, Assignor has caused the same to be signed by its
President as at the opening of business on this first day of August, 2005.
MIFFLIN VALLEY INC.
By: /s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
22
Exhibit B
EXCLUDED ASSETS
Minute Book
Stock Transfer Ledger
Tax Returns
Financial Reports
Property of a Personal Nature of Either ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇
Table and eight (8) chairs
Insurance policies
Antique display cases
Fifth floor stove and refrigerator
Fifth floor banquet chairs and stools (approximately eighty [80])
Front awning and roof
Building fire extinguishers
Basement sump pump
All property affixed to building located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ including all equipment and mechanical systems
All claims arising out of the Smarty Pants bankruptcy/insolvency account
The cause of action against the Borough of Shillington and Shillington Municipal
Authority and all proceeds thereof.
23
Exhibit C
Undertaking as of August 1, 2005.
Undertaking by Mifflin Valley, Inc. ("Buyer"), a Delaware corporation
and wholly-owned subsidiary of Lakeland Industries, Inc. ("Parent"), in favor of
Mifflin Valley, Inc, a Pennsylvania corporation ("Seller").
WITNESSETH:
WHEREAS, pursuant to an Asset Purchase Agreement dated as of July
____, 2005,(the "Agreement") by and among Seller, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
("Shareholder"), the shareholder of Seller, Parent and Buyer, Seller has
concurrently herewith assigned, transferred, conveyed and delivered to Buyer
certain of Seller's existing property, assets and business, as a going concern;
and
WHEREAS, in partial consideration therefor the Agreement requires that
Buyer undertake to assume and to agree to perform, pay or discharge certain
liabilities and obligations of Seller as specified herein; and
WHEREAS, all terms used but not otherwise defined herein shall have
the meaning set forth in the Agreement;
NOW, THEREFORE, in consideration of the mutual promises set forth in
the Agreement and other good and valuable consideration, the receipt of which is
hereby acknowledged, Buyer hereby undertakes. assumes and agrees to timely
perform, pay and discharge each and every duty, obligation and liability of
Seller set forth below to the extent not performed, paid or discharged by Seller
as of the Effective Date as that term is defined in the Agreement:
1. All bids, orders, commitments, proposals, agreements and contracts
made or incurred in the ordinary course of business of the Seller including
those set forth on any of the lists attached to the Agreement; and
2. All commissions, loans, credit card balances and other debts,
obligations and liabilities of Seller shown or set forth on the books and
records of Seller as of the Closing Date.
provided, however, that (except as otherwise provided above) Buyer does not
undertake, assume, agree to perform, pay or discharge any obligation of Seller
for or arising out of any contract or other agreement which requires the consent
of a third party, which consent has not been obtained at the date hereof, or
within ten (10) days following receipt by Seller of notice from Buyer thereof.
Upon request from time to time by Seller or Shareholder, Buyer shall
provide Seller and Shareholder with reasonable evidence of Buyer's full and
timely compliance with the provisions of this Undertaking, such evidence to be
in form and substance reasonably satisfactory to Seller and Shareholder.
Nothing contained herein shall require Buyer to pay or discharge any
liability or obligation assumed hereby prior to the entry of a final judgment so
long as Buyer in good faith shall contest or cause to be contested the amount or
validity thereof by the institution of appropriate proceedings, provided that
Buyer shall promptly pay or discharge any such liability or obligation to the
extent determined to be due in any such final judgment.
No title warranty, representation or covenant made to Buyer by Seller
pursuant to the Agreement is hereby assumed by Buyer. Other than as specifically
stated above, Buyer
24
assumes no liability or obligation of Seller by this Undertaking.
This Undertaking shall inure to the benefit of Seller and Shareholder
and their respective heirs, representatives, successors and assigns and shall be
binding upon Buyer and its successors and assigns. Buyer will execute any
additional documents reasonably requested by Seller to evidence Buyer's
undertaking hereunder.
Notwithstanding any term or provision of the Agreement or this
Undertaking, this document does not create any right of subrogation on the part
of and shall not inure to the benefit of any person other than Seller.
MIFFLIN VALLEY, INC.
By: /s/▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President & Secretary
25
Exhibit D
INVENTORY AMOUNT
[TO BE COMPLETED AT CLOSING]
26