EXHIBIT 10.6
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made effective as of this 31st day of January, 2002,
by and among ZERO ZONE REFRIGERATION, LLC, a Wisconsin limited liability company
(the "BUYER"); SYSTEMATIC REFRIGERATION, INC., a Minnesota corporation (the
"SELLER"); XXXXXX X. XXXXXXX, XXXX XXXXX XXXXXX, XXXXXXXX X. XXXXXXX TRUST U/A
DATED FEBRUARY 14, 1996 AND XXXXX X. XXXXXXX TRUST U/A DATED FEBRUARY 14, 1996,
being all of the shareholders of the Seller (collectively, the "SHAREHOLDERS");
XXXXXXX PROPERTIES, LLC, a Minnesota limited liability company ("XXXXXXX
PROPERTIES"); and XXXXXXXX X. XXXXXXX and XXXXX X. XXXXXXX, being all of the
members of Xxxxxxx Properties (collectively, the "MEMBERS").
RECITALS
The Seller is engaged in the business of designing, manufacturing,
marketing and selling refrigeration systems (compressor racks), mechanical
centers, electrical centers, combination mechanical/electrical centers,
condensers, evaporator coils, refrigeration and electrical components,
condensing units and assemblies, chiller systems and related spare and
replacement parts for the foregoing (the "BUSINESS"). Xxxxxxx Properties owns,
and leases to Seller, the real estate, building and fixtures used by Seller in
the conduct of the Business. The Buyer desires to purchase from the Seller and
Xxxxxxx Properties all of the assets of the Seller used in the Business and the
real estate, building and fixtures owned by Xxxxxxx Properties, respectively,
upon the terms and conditions herein set forth.
NOW, THEREFORE, for and in consideration of the mutual promises herein
made, and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged,
IT IS HEREBY AGREED AS FOLLOWS:
AGREEMENT
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"BONDS" shall mean the outstanding Minnesota Agricultural and Economic
Development Minnesota Small Business Development Loan Program Revenue Bonds,
Series 2000D, Lot 1.
"BREACH" shall mean any breach of, or inaccuracy in, any representation
or warranty or any breach of, or failure to perform or noncompliance with, any
covenant or obligation, in or of this Agreement or any other Contract, License
or Order, or any event which with the passing of time, the giving of notice, or
both, would constitute such a breach, inaccuracy or failure.
"CLOSING DATE" shall mean January 31, 2002, or such other date as may
be mutually agreed to by the Buyer and the Seller.
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"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CONTRACTS" shall mean, collectively, all oral and written contracts,
agreements, instruments, documents, leases, indentures, insurance policies,
undertakings, understandings or other obligations, whether or not legally
binding.
"DISCLOSURE SCHEDULE" shall mean the disclosure schedule attached
hereto and incorporated herein, delivered to the Buyer concurrently with the
execution of this Agreement.
"EMPLOYMENT AGREEMENT" shall mean the Employment Agreement attached
hereto and incorporated herein as EXHIBIT A.
"ENCUMBRANCES" shall mean any charge, claim, community or other marital
property interest, condition, equitable interest, lien, option, pledge, security
interest, mortgage, right of way, easement, encroachment, right of first option
or first refusal or similar restriction including any restriction on use,
transfer or exercise of any other right of ownership.
"ENVIRONMENTAL LAWS" shall mean, collectively, the federal Clean Air
Act, the federal Clean Water Act, the federal Resource Conservation and Recovery
Act, the federal Comprehensive Environmental Response, Compensation and
Liability Act, the federal Toxic Substances Control Act, principles of common
law and any other federal, state or local laws, including rules and regulations
thereunder, regulating or otherwise affecting or relating to human health or the
environment.
"ENVIRONMENTAL MATERIALS" shall mean, collectively, any material,
substance, chemical, waste, contaminant or pollutant which is regulated, listed,
defined as or determined to be hazardous, extremely hazardous, toxic, dangerous,
restricted or a nuisance, or otherwise harmful to human health or the
environment, under any Environmental Laws.
"FINANCIAL STATEMENTS" shall mean, collectively, the reviewed financial
statements (including balance sheets and statement of earnings, stockholders'
equity and cash flow) of the Seller for each of its fiscal years ending December
31, 1999 through and including December 31, 2001, and the internally-prepared
balance sheet of the Seller as of January 31, 2002; and the balance sheet of
Xxxxxxx Properties as of January 31, 2002.
"GOVERNMENTAL AUTHORITY" shall mean the government of the United States
or any foreign jurisdiction, any state, county, municipality or other
governmental or quasi governmental unit, or any agency, board, bureau,
instrumentality, department or commission (including any court or other
tribunal) of any of the foregoing.
"HAZARDOUS SUBSTANCES" shall mean hazardous substances as defined under
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601, et seq. and/or Section 115B.02(8) of the Minnesota
Statutes, and all regulations promulgated thereunder.
"INDEMNIFIABLE DAMAGES" shall mean all losses, claims, damages,
liabilities, costs, expenses or deficiencies described in Section 10.1 or 10.2,
as the case may be, plus an amount of interest, compounded annually, on the
amount of such Indemnifiable Damages (computed before the application of this
sentence) computed at the applicable prime rate plus two hundred (200) basis
points per annum from the date such Indemnifiable Damages were incurred by the
Indemnitee and
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until paid by the Indemnitor. The applicable prime rate shall be the prime rate
of interest publicly quoted by U.S. Bank National Association (d/b/a Firstar
Bank), Milwaukee, Wisconsin as of December 31, which rate shall remain in effect
until the succeeding December 31 when it shall be adjusted to the prime rate
then publicly quoted by said bank ("PRIME RATE").
"IRS" shall mean the Internal Revenue Service.
"KNOWLEDGE" shall mean an individual deemed to have Knowledge of a
particular fact or other matter if:
(a) that individual is actually aware of that a fact or
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of that fact or matter in the
course of conducting a reasonable investigation
regarding the accuracy of any representation or
warranty contained in this Agreement.
A Person (other than an individual) will be deemed to have Knowledge of
a particular fact or other matter if any individual who is serving, or who has
at any time served, as a director, officer, partner, executor or trustee of that
Person (or in any similar capacity) has, or any time had, Knowledge of that fact
or other matter (as set forth in (a) and (b) above), and any such individual
(and any individual party to this Agreement) will be deemed to have conducted a
reasonably comprehensive investigation regarding the accuracy of the
representations and warranties made herein by that Person or individual.
"LATEST BALANCE SHEETS" shall mean the balance sheets as of and for the
period ending December 31, 2001 of the Seller ("SELLER'S LATEST BALANCE SHEET")
and November 30, 2001 for Xxxxxxx Properties ("XXXXXXX PROPERTIES' LATEST
BALANCE SHEET").
"LATEST BALANCE SHEET DATE" shall mean December 31, 2001 with respect
to the Seller and November 30, 2001 with respect to Xxxxxxx Properties.
"LAWS" shall mean, collectively, all federal, state, local, municipal,
foreign or international constitutions, laws, statutes, ordinances, rules,
regulations, codes, or principles of common law.
"LIABILITY" shall mean, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, outright or contingent, liquidated or unliquidated, due or to become
due, determined, determinable or otherwise, and whether or not the same is
required to be accrued or reflected on the financial statements of such Person.
"LICENSES" shall mean, collectively, governmental, regulatory,
administrative and non-governmental licenses, permits, approvals,
certifications, accreditations, notices and other authorizations.
"NOTICE OF CLAIM" shall mean a certificate signed by the Indemnitee or
its authorized representative: (i) stating that the Indemnitee has paid or
accrued (or intends to pay or accrue) Indemnifiable Damages to which it is
entitled to indemnification pursuant to Article X and the amount thereof (to the
extent then known); and, (ii) specifying to the extent possible (A) the
individual items of loss, damage, liability, cost, expense or deficiency
included in the amount so stated, (B) the date each such item was or will be
paid or accrued and (C) the basis upon which Indemnifiable Damages are claimed.
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"NOTICE OF OBJECTION" shall mean a written notice of objection by the
Indemnitor which shall set forth the grounds upon which the objection is based
and state whether the Indemnitor objects to all or only a portion of the matter
described in the Notice of Claim.
"ORDERS" shall mean all decisions, injunctions, writs, guidelines,
orders, arbitrations, awards, judgments, subpoenas, verdicts or decrees entered,
issued, made or rendered by any Governmental Authority.
"ORDINARY COURSE" shall mean, with respect to a Person, actions taken
by such Person but only if such actions are taken in the normal, day-to-day
operations of such Person's business, consistent in nature, scope and magnitude
with the past practices of such Person and not dissimilar in nature, scope and
magnitude with such actions customarily taken, without any special or separate
authorization, by other Persons engaged in the same or similar line of business
as such Person.
"PERMITTED ENCUMBRANCES" shall mean:
(i) Combination Mortgage, Security Agreement and Fixture
Financing Statement dated April 1, 2000, filed of
record April 11, 2000, as Document No. 1494492,
executed by Xxxxxxx Properties, LLC, to Minnesota
Agricultural and Economic Development Board, in the
original principal amount of $3,100,000, which was
assigned to U.S. Bank National Association, as
Trustee, by Assignment of Mortgage dated April 1,
2000, filed of record April 11, 2000 as Document No.
1494494;
(ii) Assignment of Leases and Rents dated April 1, 2000,
filed of record April 11, 2000, as Document No.
1494495 by and between Xxxxxxx Properties, LLC and
Minnesota Agricultural and Economic Development
Board, and assigned to U.S. Bank National Association
by Assignment of Assignment of Leases and Rents dated
April 1, 2000, filed for record April 11, 2000, as
Document No. 1494496;
(iii) Security interests of U.S. Bank National Association
against Xxxxxxx Properties, as debtor, evidenced by
UCC financing statements Nos. 2218289 and 2218290,
each filed April 11, 2000;
(iv) Mortgage, dated October 20, 2000, executed by Xxxxxxx
Properties to the City of Ramsey, Minnesota, filed of
record January 22, 2001 as Document No. 1546280 in
the original principal amount of $300,000;
(v) Security interest of the City of Ramsey, Minnesota,
against Xxxxxxx Properties, as debtor, evidenced by
UCC financing statement No. 2292990, filed January
22, 2001;
(vi) Security interest of Minnesota Agricultural and
Economic Development Board against Xxxxxxx
Properties, as debtor, evidenced by UCC financing
statement No. 1494594, filed of record April 11,
2000;
(vii) Contract for Private Development between the City of
Ramsey, Minnesota, and Xxxxxxx Properties, dated
March 31, 2000, filed of record as Document No.
1494490;
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(viii) Security interest of the City of Ramsey, Minnesota,
against the Seller, as debtor, evidenced by UCC-1
financing statement No. 2292989, filed January 22,
2001;
(ix) Security interest of Xxxxxx Business Finance
Corporation, against the Seller, as debtor, evidenced
by UCC financing statement No. 2316556, filed April
17, 2001; and
(x) Municipal and zoning ordinances, recorded easements,
covenants and restrictions, provided the same do not
prohibit or materially interfere with the present
use, or materially affect the present value, of the
Owned Real Estate or Leased Real Estate, and general
taxes levied on or after January 1, 2001, and not yet
due or payable.
"PERSON" shall mean any individual, partnership, corporation, trust,
limited liability company, limited liability partnership, joint stock company,
unincorporated association, and venture or other entity or Governmental
Authority.
"REAL PROPERTY" shall mean, collectively, the Real Estate, Leased Real
Estate, if any, and any other real property heretofore owned or used by the
Seller in the conduct of the Seller's business.
"RELATED PERSON" shall mean with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled
by any one or more members of such individual's
Family;
(c) any Person in which members of such individual's
Family hold (individually or in the aggregate) a
Material Interest; and
(d) any Person with respect to which one or more members
of such individual's Family serves as a director,
officer, partner, executor or trustee (or in a
similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by or is directly
or indirectly under common control with such Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor or trustee of such specified Person
(or in a similar capacity);
(d) any Person in which such specified Person holds a
Material Interest; and
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(e) any Person in which such specified Person serves as a
general partner or a trustee (or in similar
capacity).
For purpose of this definition (a) "CONTROL" (including "controlling,"
"controlled by," and "under common control with") means the possession, direct
or indirect, or the power to direct or cause the direction of the management and
policies of Person, whether through the ownership of voting securities, by
contract or otherwise, (b) the "FAMILY" of an individual includes (i) the
individual, (ii) the individual's spouse, (iii) any other natural person who is
related to the individual's spouse within the second degree and (iv) any other
natural person who resides with such individual; and (c) "MATERIAL INTEREST"
means direct or indirect beneficial ownership (as defined in Rule 13d-3 under
the Exchange Act) of voting securities or other voting interests representing at
least ten percent (10%) of the outstanding equity securities or equity interests
in a Person. Without limiting the foregoing, the Shareholders, Members, Xxxxxxx
Properties and Seller shall be deemed to be Related Persons to one another.
"SETTLEMENT AGREEMENT" shall mean that certain Note Repayment and
Forebearance Agreement, dated January 11, 2001[sic], by and between the Seller,
Xxxxxxxx X. Xxxxxxx and Xxxxxx Xxxxxxx Xxxx and Xxxxxxxx, Ltd. ("LHDL"), in the
form of EXHIBIT B attached hereto.
"SUBSIDIARIES" or, individually, "SUBSIDIARY" shall mean any entity in
which the Seller owns stock, other securities or any other ownership interest
(other than ownership of less than three percent (3%) of the stock or securities
of a corporation, partnership, limited liability company or other entity whose
shares are listed on a nationally recognized securities exchange or are traded
over-the-counter, and which stock or securities are held by the Seller solely as
an investment) and any other investment by the Seller in any corporation,
limited liability company, joint venture, partnership or other business
enterprise.
The following capitalized terms used in the Agreement shall have the meanings
ascribed thereto in the Section of the Agreement set forth across from each such
term.
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DEFINED TERM SECTION DEFINED TERM SECTION
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Adjusted EBITDA 2.1(c) Inventories 1.1(b)
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Agreement Caption LHDL Definitions-Settlement
Agreement
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Assignment and Xxxx of Sale 6.12 Leased Real Estate 4.9(a)
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Assumption Agreement 9.5 Licensed Intellectual Property 4.14
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Assumed Liabilities 2.1(b) Xxxxxxx Properties Caption
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Assumed Xxxxxxx Properties Obligations 2.2 Xxxxxxx Properties' Latest Balance Sheet Definitions-Latest
Balance Sheets
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Benefit Plans 4.25(a) Xxxxxxx Properties Purchase Price 2.2
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Business Recitals Xxxxxxx Properties Purchased Assets 1.2
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Business Equity Value 2.1(c) Members Caption
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Buyer Caption Prepaid Items 1.1(d)
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Buyer's 401(k) Plan 7.4(a) Prime Rate Definition-Indemnifiable
Damages
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Buyer's Group Health Plan 7.4(b) Products Liability 4.26(a)
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Buyer's Welfare Plans 7.4(b) Purchase Price 2.1
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Closing 1.4 Purchased Assets 1.1
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COBRA 4.25(h) Real Estate 1.2 (a)
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Commitment 6.6 Receivables 1.1(c)
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Contingent Amount 2.1(c) Restricted Interests 1.6(a)
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DCF 1.3(d) Seller Caption
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Equipment 1.1(e) Seller's 401(k) Plan 6.20(b)
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ERISA 4.25(a) Seller's Group Health Plan 6.20(a)
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Excluded Assets 1.3 Seller's Latest Balance Sheet Definitions-Latest
Balance Sheets
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Hired Employees 6.9 Seller's Welfare Plans 6.20(a)
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Indemnitee 10.3 Shareholders Caption
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Indemnitor 10.3 Subordination Agreement 6.23
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Insurance 4.15 Title Company 6.6
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Intellectual Property 4.14 Vehicles 1.1(f)
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ARTICLE I
PURCHASE AND SALE OF ASSETS
FROM SELLER AND XXXXXXX PROPERTIES
1.1 Purchased Assets. Subject to the terms and conditions herein
set forth, the Buyer shall purchase on the Closing Date, and the Seller shall
sell and transfer to the Buyer, the Business and all of the Seller's assets and
properties of every kind and description, real, personal and mixed, tangible and
intangible, and wherever situated, except only the assets excluded pursuant to
Section 1.3 hereof, all as the foregoing may exist as of the Closing Date, free
and clear of all Encumbrances other than Permitted Encumbrances, (hereinafter,
all of such assets and properties are referred to as the "PURCHASED ASSETS").
The Purchased Assets shall include, without limitation, the following:
(a) All cash and cash equivalents;
(b) All inventories of whatever kind, including, without
limitation, finished goods, work-in-process and raw
materials (the "INVENTORIES");
(c) All trade and other accounts receivable, all notes
receivable and all other amounts receivable (the
"RECEIVABLES");
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(d) All prepaid expenses or other items, advance
commissions, payments and deposits (the "PREPAID
ITEMS");
(e) All equipment (building or office), machinery,
tooling, dies, molds, patterns, stampings,
prototypes, parts, components, projects in process,
furniture, fixtures and fixed assets, including,
without limitation, those items listed on SCHEDULE
1.1(e) attached hereto (the "EQUIPMENT");
(f) All motor vehicles including, without limitation,
those listed on SCHEDULE 1.1(f) attached hereto (the
"VEHICLES");
(g) All rights of the Seller pursuant to Contracts, other
than as excluded in Section 1.3 hereof.
(h) All right, title and interest (including the right to
xxx for past infringements) in and to intellectual
property, including, without limitation, all patents
and applications therefor, unpatented inventions,
trademarks, trade names (including "Systematic" and
derivations thereof), service marks, copyrights,
applications for and registrations of any of the
foregoing, know-how, trade secrets, formulas and
technical information and the goodwill associated
with any and all of the foregoing throughout the
world;
(i) All Licenses;
(j) All manufacturing, delivery, office and other
supplies;
(k) All warranty rights, guaranty rights, causes of
actions, judgments and claims and similar rights of
the Seller (whether xxxxxx or inchoate, known or
unknown) against vendors, suppliers, designers,
architects, engineers or other third Persons;
(l) All lists of customers, suppliers, vendors and
sources; all books, records, journals, computer
software (whether purchased or internally developed)
and files; all information, blueprints, engineering
data, drawings, sales and promotional materials, and
telephone and telecopier numbers and listings; and
(m) All web sites, web pages, URLs, domain names,
directory names, other computer addresses, Internet
files, HTML files, image files, such as, jpeg files,
gif files, and java code, links, hyperlinks, and
other files, pages, sites, names or addresses located
on an on-line global computer network.
1.2 Xxxxxxx Properties Purchased Assets Subject to the terms and
conditions herein set forth, the Buyer shall purchase on the Closing Date, and
Xxxxxxx Properties shall sell, convey and transfer to the Buyer, free and clear
of all Encumbrances other than Permitted Encumbrances, all of Xxxxxxx
Properties' assets and properties of every kind, real, personal and mixed,
tangible or intangible, and wherever situated, except only the Excluded Assets
(as defined in Section 1.3 hereof), all as the foregoing may exist as of the
Closing Date, including, without limitation, the following (the "XXXXXXX
PROPERTIES PURCHASED ASSETS"):
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(a) The land, buildings, improvements, fixtures and
appurtenances thereto commonly known as 0000 000xx
Xxxxxx, X.X., Xxxxxx, Xxxxxxxxx 00000, the legal
description of which is set forth in SCHEDULE 1.2(a)
attached hereto (the "REAL ESTATE");
(b) All cash and cash equivalents, including, without
limitation, all positive balances in all escrow or
reserve accounts for the Bonds (including, without
limitation, the construction account, revenue
account, holding account, business account, special
redemption account, optional redemption account,
reimbursement account, rebate account, reconstruction
account, cost of insurance account, capitalized
interest account, or otherwise);
(c) All accounts, notes, or other receivable (including,
without limitation, advances from Xxxxxxx Properties
or rents due Xxxxxxx Properties);
(d) All warranty rights, guaranty rights, causes of
action, judgments and claims and similar rights of
Xxxxxxx Properties (whether xxxxxx or inchoate, known
or unknown) against vendors, suppliers, designers,
engineers, construction firms or other third Persons;
(e) All lists of suppliers, vendors and sources; all
records, journals, computer software and files and
all information, blueprints, engineering data,
drawings; and
(f) All rights of Xxxxxxx Properties pursuant to The
Single Lot Resolution adopted by the Minnesota
Agricultural and Economic Development Board on March
8, 2000 and the $3,100,000 Minnesota Agricultural and
Economic Development Board Small Business Development
Loan Reserve Bonds authorized thereby.
1.3 Excluded Assets. The Purchased Assets shall not include, and
the Seller or Xxxxxxx Properties, as appropriate, shall retain, the following
assets (the "EXCLUDED ASSETS"):
(a) The Seller's or Xxxxxxx Properties' rights under this
Agreement;
(b) The personal effects and memorabilia described on
SCHEDULE 1.3(b) attached hereto;
(c) The Seller's and Xxxxxxx Properties' minute books,
stock record books and corporate franchise and tax
return;
(d) The Seller's right under that certain Patent License
Agreement, dated January 1, 2001 between Delaware
Capital Formation, Inc., a Delaware Corporation
("DCF"), and the Seller;
(e) Any organizational costs of the Seller or Xxxxxxx
Properties, or any capital stock of the Seller or
Xxxxxxx Properties held in its treasury as treasury
stock;
(f) The remaining balances of the accounts of all
participants under the Seller's Flexible Spending
Account and any assets relating to any of the
Seller's
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other Benefit Plans (unless such assets are reflected
as or included within "Prepaid Items");
(g) The contents (not exceeding $16,745) of the Xxxxxxx
Xxxxx account maintained by Xxxxxxx Properties; and
(h) The principal sum (not including any accrued
interest) of $50,000 due Xxxxxxx Properties from the
Seller reflected on the Xxxxxxx Properties Latest
Balance Sheet as "Loan Receivable SRI.".
1.4 Closing. The closing (the "CLOSING") of the purchase and sale
of the Business, the Purchased Assets and Xxxxxxx Properties Purchased Assets
shall take place at 10:00 a.m., local time, on the Closing Date, at the offices
of Xxxxxxx Xxxx & Xxxxxxxxx LLP, 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx
00000, or at such other time and place as may be mutually agreed to by the Buyer
and the Seller, including, but not limited to, Closing via mail or facsimile.
The Closing shall be effective as of 11:59 p.m. on the Closing Date.
1.5 Retention of Business Records. The Buyer shall retain for a
period of at least 4 years all of the records of the Business included within
the Purchased Assets, and shall provide the Seller access to the same during
normal business hours for the purpose of inspecting, reviewing and copying the
same; provided, that following the expiration of such 4-year period, the Buyer
may dispose of any of such records which it no longer desires to retain if the
Buyer first shall have notified the Seller in writing of such proposed
disposition and allowed the Seller the opportunity to take possession of the
records proposed to be disposed of by the Buyer. The Seller shall retain for a
period of 4 years all of the items described in Section 1.3(c) hereof, and shall
provide the Buyer access to the same during normal business hours for the
purpose of inspecting, reviewing and copying the same; provided, that following
the expiration of such 4-year period, the Seller may dispose of any of such
items which it no longer desires to retain if the Seller first shall have
notified the Buyer in writing of such proposed disposition and allowed the Buyer
the opportunity to take possession of the records proposed to be disposed of by
the Seller.
1.6 Assets Not Assignable.
(a) To the extent that any interest in any of the
Purchased Assets or Xxxxxxx Properties Purchased Assets is not capable of being
assigned, transferred or conveyed without the consent, waiver or authorization
of a third person (including a governmental, regulatory or administrative
authority), or if such assignment, transfer or conveyance or attempted
assignment, transfer or conveyance would constitute a Breach of any of the
Purchased Assets or Xxxxxxx Properties Purchased Assets, or a violation of any
Law or is not immediately practicable, this Agreement shall not constitute an
assignment, transfer or conveyance of such interest, or an attempted assignment,
transfer or conveyance of such interest (such interests being hereinafter
collectively referred to as "RESTRICTED INTERESTS"). The entire beneficial
interest in any Purchased Assets or Xxxxxxx Properties Purchased Assets subject
to a restriction as described above, and any other interest in such Purchased
Assets or Xxxxxxx Properties Purchased Assets which are transferable
notwithstanding such restriction, shall be transferred from the Seller or
Xxxxxxx Properties to the Buyer as provided in this Section 1.6.
(b) Anything in this Agreement to the contrary
notwithstanding, the Seller and Xxxxxxx Properties shall not be obligated to
transfer to the Buyer any Restricted Interests without the Buyer or the Seller
first having obtained all consents, waivers and authorizations necessary for
such transfers. In consultation with the Buyer as to the practicalities of
proposed actions, the Seller
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and Xxxxxxx Properties shall use its best efforts to assist the Buyer in
obtaining such consents, waivers and authorizations and to resolve any
impracticalities of assignment referred to in Section 1.6(a) hereof.
(c) To the extent that the consents, waivers and
authorizations referred to in Section 1.6(a) hereof are not obtained by the
Buyer, Seller or Xxxxxxx Properties, or until the impracticalities of transfer
referred to therein are resolved, the Seller and Xxxxxxx Properties shall use
its best efforts to (i) provide to the Buyer, at the request of the Buyer and at
the Seller's or Xxxxxxx Properties' expense, the benefits of any Restricted
Interests, (ii) cooperate in reasonable and lawful arrangements designed to
provide such benefits to the Buyer and (iii) enforce, at the request of the
Buyer for the account of the Buyer, any rights of the Seller and Xxxxxxx
Properties arising from any Restricted Interests (including the right to elect
to terminate in accordance with the terms thereof upon the advice of the Buyer).
ARTICLE II
CONSIDERATION FOR TRANSFER
2.1 Purchased Assets Purchase Price. The full consideration
payable to the Seller for the Purchased Assets shall be (collectively, the
"SELLER PURCHASE PRICE"):
(a) Two hundred fifty thousand dollars ($250,000) cash,
payable to the Seller at the Closing (which the
Seller has warranted to the Buyer will be paid to
LHDL pursuant to the Settlement Agreement and which
the Seller hereby authorizes and directs the Buyer to
pay directly to LHDL in fulfillment of the Seller's
obligations under the Settlement Agreement);
(b) The Buyer's assumption at the Closing of, and
agreement to discharge or satisfy when and as due,
the following (and only the following) liabilities of
the Seller ("ASSUMED LIABILITIES"):
(i) All of the Liabilities of the types and the
amounts as are reflected on the Seller's
January 31, 2002 balance sheet included
within the Financial Statements, other than
the Liabilities reflected in accounts Nos.
2130 ("Note Payable-Attorneys-ST") and 2820
("Note Payable-Attorneys-LT"), 2132
("NP-Litigation-ST") and 2830
("NP-Litigation-LT");
(ii) The parties hereto acknowledge that the
Liabilities reflected on the Seller's
January 31, 2002 balance sheet may contain
some estimates, but the actual amounts will
not vary materially from the estimates. If
the Seller identifies any of the amounts of
the Liabilities described in clause (i) as
estimated due only to the absence of final
information as of the date of this
Agreement, the Buyer and Seller in good
faith will endeavor to agree on and
substitute the actual amount of such
Liability (provided that the actual amount
of such Liability was incurred in the
Ordinary Course and is not materially
different than the estimates) for the
estimated amount reflected on the January
31, 2002 balance sheet,
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and the Buyer shall then assume such actual
amount of such Liability instead of the
estimated amount;
(iii) Any executory Liability to the Seller's
customers incurred by the Seller in the
Ordinary Course for nondelinquent orders
outstanding as of the Closing reflected on
the Seller's books (other than any Liability
arising out of or relating to a Breach that
occurred simultaneously with or prior to the
Closing);
(iv) Any executory Liability to the Seller's
customers under written warranty agreements
in the forms disclosed in Section 4.26(b)
hereof given by the Seller to its customers
in accordance with the provisions of this
Agreement and in the Ordinary Course prior
to the Closing (other than any Liability
arising out of or relating to a Breach that
occurred simultaneously with or prior to the
Closing); and
(v) Any Liability arising after the Closing
under those Seller's Contracts listed in
SCHEDULE 2.1(b)(VI) attached hereto (other
than a Liability arising under any Contract
which is an Excluded Asset or arising out of
or relating to a Breach that occurred
simultaneously with or prior to the
Closing).
(c) A contingent amount ("CONTINGENT AMOUNT"), if any,
payable to the Seller, within 45 days of the Buyer's
receipt of an audited financial statement for the
Business for its fiscal year ending December 31,
2005, equal to (i) eighty-nine and three-tenths
percent (89.3%) of twenty percent (20%) of the
Business Equity Value of the Buyer as determined by
the Buyer's independent certified public accountants,
less (ii) those amounts specified or described in
Section 10.6 hereof and/or any other amounts properly
offset against the Contingent Amount in accordance
with this Agreement. "BUSINESS EQUITY VALUE" shall
mean an amount equal to the product of five (5) times
the weighted average Adjusted EBITDA of the Business
for its fiscal years ending December 31, 2003, 2004
and 2005, weighting 2003 Adjusted EBITDA by a factor
of one (1), weighting 2004 Adjusted EBITDA by a
factor of four (4), weighting the 2005 Adjusted
EBITDA by a factor of five (5), and dividing the
resulting sum by a factor of ten (10). "ADJUSTED
EBITDA" shall mean the separate earnings of the
Business as conducted by the Buyer computed before
interest, income taxes, depreciation and
amortization, as reflected on an income statement of
the Buyer, adjusted to: (i) eliminate the effect of
(A) extraordinary or non-recurring items of gain
(such as the gain or sale of disposed capital assets
or insurance proceeds) and (B) receipt of indemnity
payments, if any, received by the Buyer in connection
with this Agreement and the transactions contemplated
hereby, and (ii) reflect reasonable charges (as
determined by such independent certified public
accountants) for services (e.g., corporate services
including, but not limited to, accounting, sales and
marketing, general management/administrative, and
sales commission allocations) provided by Zero Zone,
Inc. to the Buyer. The Buyer shall cause its
independent certified public accountants to provide
the Seller, reasonably promptly after the end of each
calendar year and the
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completion of the financial statements for such year,
commencing with calendar year 2002, with such
accountant's calculation of such year's Adjusted
EBITDA. The Seller shall have a period of 30 days
after receipt thereof to confirm such calculation as
being made correctly in accordance with this Section
2.1(c) or issue an objection thereto. If the Seller
fails to object to such calculation within such
30-day period, the calculation shall be conclusive
and final. If the Seller objects within such 30-day
period, the Seller shall specify its objection in
writing, detailing the portion(s) of such calculation
which the Seller believes has not been made in
accordance with this Section 2.1(c), and supplying
such information as the Seller possesses to support
its objection. If, within 20 days after receipt of
such objection, the Buyer and Seller have not
resolved their differences, the parties shall submit
such differences (to the extent not reconciled during
such 20-day period) to arbitration pursuant to
Section 11.5 of this Agreement.
In the event that the Buyer disposes of the Business
prior to December 31, 2005 (which the Buyer covenants
that it shall not do, unless (i) the Buyer pays any
Contingent Amount due the Seller in accordance
herewith simultaneously with the closing of such
disposition, or (ii) if such Contingent Amount is not
so simultaneously paid, the acquiror thereof agrees
expressly to assume the obligation herein contained
to pay the Contingent Amount in accordance with its
terms, or (iii) the Seller expressly agrees in
writing to such disposition), Adjusted EBITDA will be
determined by utilizing the weighted average Adjusted
EBITDA of the Business for the three (3) completed
fiscal years of the Buyer immediately preceding the
year of such disposition, weighting such years'
Adjusted EBITDA in a similar manner as set forth
above, and the contingent Amount, as so determined,
will be paid by the Buyer simultaneously with the
closing of such disposition. If the Business is
disposed of at a time such that the Buyer has not
completed three (3) fiscal years' conduct of the
Business, weighted average Adjusted EBITDA shall be
based upon the actual number of completed fiscal
years which the Buyer has conducted the Business
preceding the disposition. In such event: if the
number of such completed fiscal years is two (2), the
Adjusted EBITDA for the fiscal year immediately
preceding the year of the Business's disposition
shall be weighted by a factor of six (6) and the next
preceding fiscal year's Adjusted EBITDA shall be
weighted by a factor of four (4), and the resulting
sum shall be divided by a factor of ten (10); if the
number of such completed fiscal years is one (1), the
Business Value will be determined based upon the
product of five (5) times such year's Adjusted EBITDA
and no weighting shall be required.
2.2 Xxxxxxx Properties Purchase Price. The full consideration
payable to Xxxxxxx Properties for the Xxxxxxx Properties Purchased Assets (the
"XXXXXXX PROPERTIES PURCHASE PRICE") shall be the Buyer's assumption at the
Closing of, and agreement to discharge, the following (and only the following)
obligations of Xxxxxxx Properties (the "ASSUMED XXXXXXX PROPERTIES
OBLIGATIONS"):
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(a) All of the current Liabilities of the types and the
amounts as are reflected on the Xxxxxxx Properties
January 31, 2002 balance sheet included within the
Financial Statements;
(b) The parties hereto acknowledge that the Liabilities
reflected on Xxxxxxx Properties' January 31, 2002
balance sheet may contain some estimates, but that
the actual amounts will not vary materially from the
estimates. If Xxxxxxx Properties identifies any of
the Liabilities described in Section 2.2(a) as
estimated due only to the absence of final
information as of the date of this Agreement, the
Buyer and Xxxxxxx Properties in good faith will
endeavor to agree on and substitute the actual amount
of such Liability (provided that the actual amount of
such Liability was incurred in the Ordinary Course
and is not materially different than the estimates)
for the estimated amount reflected on the January 31
balance sheet, and the Buyer shall then assume such
actual amount of such Liability instead of the
estimated amount; and
(c) The outstanding $3,100,000 of Minnesota Agricultural
& Economic Development Minnesota Small Business
Development Loan Program Revenue Bonds, Series 2000D,
Lot 1; the Agreement for Loan from Minnesota
Investment Fund, as amended; and Contract for Private
Development with City of Ramsey, Minnesota
(incorporating the Agreement for Loan), as amended.
ARTICLE III
LIABILITIES
3.1 Non-Assumption of Liabilities. Except only as provided in
Sections 2.1(b) and 2.2 hereof, the Buyer shall not assume, pay, perform,
discharge, or accept any liabilities, debts or obligations of the Seller,
Xxxxxxx Properties, Shareholders or Members of any kind whatsoever, whether
actual, contingent, accrued, known or unknown, including, without limitation,
any of the following:
(i) Any Liability arising out of or related to
products of the Seller to the extent
manufactured or sold prior to the Closing
other than to the extent assumed under
Sections 2.1(b)(iii), (iv) or (v);
(ii) Any Liability under a Contact assumed by the
Buyer pursuant to Section 2.1(b) or 2.2 that
arises after the Closing but that arises out
of or relates to any Breach that occurred
prior to the Closing;
(iii) Any Liability for taxes of whatever kind
(except to the extent of taxes which are
current liabilities and assumed by the Buyer
pursuant to Section 2.1(b)(i) or (ii)),
including taxes arising or resulting from
the conduct of the Business, the sale of the
Purchased Assets or Xxxxxxx Properties
Purchased Assets or any deferred taxes;
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(iv) Any Liability under Contracts not assumed by
the Buyer under Sections 2.1(b) or 2.2 or
any Liability relating to Excluded Assets;
(v) Any Liability under any of the Seller's
employee Benefit Plans;
(vi) Any Liability to (A) LHDL, (B) DCF
(including, without limitation, that certain
Promissory Note dated January 11, 2001 in
the original principal amount of $200,000)
or (C) Related Persons to the Seller or
Xxxxxxx Properties (except, in the case of
clause (C), to the extent reflected in the
January 31, 2002 balance sheet of the
Seller);
(vii) Any Liability to indemnify, reimburse or
advance amounts to any director, officer or
employee of the Seller or Xxxxxxx
Properties;
(viii) Any Liability arising out of any litigation,
claims, proceedings or investigations
pending as of the Closing, or any Liability
arising out of any litigation, claim,
proceeding or investigation commenced after
the Closing but arising out of or related to
any occurrence, event or happening prior to
the Closing;
(ix) Any Liability arising out of or related to
the Seller's or Xxxxxxx Properties
noncompliance with any Laws (including
Environmental Laws); or
(x) Any Liability of the Seller or Xxxxxxx
Properties as a guarantor, indemnitor or
similar suretor (including, without
limitation, any guaranty given to or for the
benefit of the U. S. Small Business
Administration with respect to the Seller's
former Maple Grove, Minnesota facilities),
except any Liability as guarantor of any of
the Assumed Liabilities or Assumed Xxxxxxx
Properties Obligations.
All such non-assumed liabilities, debts and obligations shall remain the
responsibility of the Seller or Xxxxxxx Properties which shall pay and discharge
the same when and as due.
3.2 Labor Relations; Benefit Plans. The Buyer shall not assume, honor or accept
any collective bargaining agreement relating to any employees of the Seller or
Xxxxxxx Properties, or any Benefit Plan of the Seller or Xxxxxxx Properties. The
Seller and Xxxxxxx Properties shall be solely responsible for satisfying all
obligations (whether arising under federal, state or local law, or pursuant to
contract) which may arise or which may have arisen prior to the Closing Date, in
connection with the employment by the Seller or Xxxxxxx Properties of the
Seller's or Xxxxxxx Properties' employees, or the creation, funding or operation
of any Benefit Plan, or which may arise as a result of the transactions
described in this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SELLER, XXXXXXX PROPERTIES
AND MEMBERS
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In order to induce the Buyer to enter into this Agreement, the Seller,
Xxxxxxx Properties and Members, jointly and severally, make the following
representations and warranties to the Buyer, each of which shall be deemed to be
independently material and relied upon by the Buyer, regardless of any
investigation made by, or information known to, the Buyer. Buyer's Knowledge of
the untruth or inaccuracy of a representation or warranty contained in this
Article, regardless of when, how or from whom said Knowledge was acquired, shall
not be deemed a waiver of Buyer's right to enforce any provision of this
Article. Any matter described on the DISCLOSURE SCHEDULE shall be set forth with
reference to each separate Section of this Agreement to which the matter
relates. In the event of any inconsistency between the statements in this
Agreement and those in the DISCLOSURE SCHEDULE (other than an exception
permitted by this Agreement to be expressly set forth as such in the DISCLOSURE
SCHEDULE with respect to a specifically identified Section of this Agreement)
the statements in this Agreement will control.
4.1 Subsidiaries. The Seller has no Subsidiaries.
4.2 Ownership, Organization and Qualification. The Shareholders
own all of the issued and outstanding shares of common stock of the Seller, and
the Members own all of the membership interest of Xxxxxxx Properties. The
Shareholders are revocable trusts created by Xxxxxxxx X. Xxxxxxx, grantor, and
own and have owned no assets other than the stock of the Seller. The Seller is a
corporation duly organized and validly existing under the Laws of the State of
Minnesota. Xxxxxxx Properties is a limited liability company duly organized,
validly existing and in good standing under the Laws of the State of Minnesota.
The Seller and Xxxxxxx Properties are qualified to transact business as a
foreign corporation or foreign limited liability company, respectively, in the
jurisdictions set forth on the DISCLOSURE SCHEDULE, and the Seller is not
otherwise required to be so qualified in any other jurisdiction. Xxxxxxx
Properties has conducted no business whatsoever and exists and operates solely
for the purpose of owning the Real Estate.
4.3 Conflicting Obligations. The execution and delivery of this
Agreement do not, and the consummation of the sale and purchase of the Purchased
Assets and Xxxxxxx Properties Purchased Assets contemplated hereby will not: (a)
conflict with or violate any provisions of the articles or certificate of
incorporation or bylaws of the Seller or the articles of organization or
Operating or similar agreement of Xxxxxxx Properties; (b) except as set forth on
the DISCLOSURE SCHEDULE, Breach or violate any provisions of, or result in the
maturation or acceleration of, any obligations under any Contract, Order,
License or Law, to which the Seller, Xxxxxxx Properties, or any of the
Shareholders or Members is a party or subject; or (c) except as set forth on the
DISCLOSURE SCHEDULE, violate any restriction or limitation, or result in the
termination or loss of any right (or give any third party the right to cause
such termination or loss), of any kind to which the Seller, Xxxxxxx Properties
or any of the Shareholders or Members is bound or has.
4.4 Third Party Consents. Except as set forth on the DISCLOSURE
SCHEDULE, no third party consents, approvals or authorizations are necessary for
the execution and consummation of the transactions contemplated hereby, nor are
any such consents, approvals or authorizations required in order for any of the
Purchased Assets Xxxxxxx Properties Purchased Assets, including without
limitation, any Contracts, Licenses or other rights of the Seller or Xxxxxxx
Properties to be assigned to the Buyer.
4.5 Enforceability. This Agreement and all other agreements of the
Seller, Xxxxxxx Properties, Shareholders and Members contemplated hereby are or,
upon the execution and delivery thereof will be, the valid and binding
obligations of such persons, respectively, enforceable against them in
accordance with their terms.
16
4.6 Authorization. The Seller, Xxxxxxx Properties, Shareholder and
Member have all necessary power and authority to enter into and perform the
transactions contemplated hereby in accordance with the terms and conditions
hereof. The execution and delivery of this Agreement, and the performance by the
Seller and Xxxxxxx Properties of each of its obligations contained herein, have
been duly approved by the Seller's Board of Directors and all of their
respective shareholders and member.
4.7 Organizational Documents. Attached to the DISCLOSURE SCHEDULE
are true, correct and complete copies of the articles of incorporation, bylaws,
articles of organization, operating or similar agreement and other
organizational documents, as amended, of the Seller and Xxxxxxx Properties.
4.8 Financial Statements. Attached to the DISCLOSURE SCHEDULE are
complete copies of the Financial Statements. The Seller's and Xxxxxxx
Properties' books and records of accounts accurately reflect all of the assets,
Liabilities, transactions and results of operations of the Seller and Xxxxxxx
Properties, and the Financial Statements have been prepared based upon and in
conformity therewith. The Financial Statements have been prepared in accordance
with the income tax method of accounting consistently applied by the Seller and
Xxxxxxx Properties. Except as described in the DISCLOSURE SCHEDULE, Seller's
income tax method of accounting is equivalent in all material respects to
generally accepted accounting principles maintained and applied on a consistent
basis throughout the indicated periods (except for depreciation). The Financial
Statements fairly present the financial condition and results of operation of
the Seller at the dates and for the relevant periods indicated.
4.9 Real Property; Leases.
(a) Good Title; Condition. The SCHEDULE 1.2(a) sets forth
a true and correct legal description of all the Real Estate, which is the only
real property owned by Xxxxxxx Properties or Seller. The DISCLOSURE SCHEDULE
also sets forth all other real properties leased, rented or utilized by the
Seller (the "LEASED REAL ESTATE"). Xxxxxxx Properties owns fee simple title to
the Real Estate (including buildings, structures and fixtures thereon or
attached thereto), and has good and marketable leasehold title to all Leased
Real Estate (including buildings, structures and fixtures thereon or affixed
thereto). All buildings, structures and other improvements on the Real Estate or
Leased Real Estate are in reasonably good condition and repair (normal wear and
tear excepted) and within the lot lines, do not encroach on the properties of
any other Person and have direct access to public roads in the location of the
currently existing driveways. The use and operation of the Real Estate and
Leased Real Estate conform to all applicable Laws. No portion of any of the Real
Estate or Leased Real Estate is located in a flood plain, flood hazard area or
designated wetlands area. None of the Seller, Xxxxxxx Properties, Stockholders
or Members has received any notice of, and none of them has any Knowledge of,
any assessments for public improvements against the Real Estate or Leased Real
Estate or any notice or Order by any Governmental Authority, any insurance
company which has issued a policy with respect to any of such properties or any
board of fire underwriters or other body exercising similar functions that: (i)
relates to violations of building, zoning, safety or fire ordinances or
regulations; (ii) claims any defect or deficiency with respect to any of such
properties; or (iii) requests the performance of any repairs, alterations or
other work to or in any of such properties or in the streets bounding the same.
There are no arrangements for the deferral of taxes or assessments for any of
the Real Estate. There is no condemnation, expropriation, eminent domain or
similar proceeding affecting all or any portion of the Real Estate or Leased
Real Estate pending or, to the Knowledge of the Seller, Xxxxxxx Properties,
Shareholders or Members, threatened.
17
(b) Leased Real Estate. Each parcel of the Leased Real
Estate is the subject of a written lease agreement, and there are no oral terms
or past practice inconsistent with the written terms thereof. All such leases
are valid and binding agreements, enforceable in accordance with their
respective terms, and are in full force and effect. The Seller has performed all
obligations required to be performed by it to date under each such lease and is
not in Breach thereunder, and there has been no event which, with the giving of
notice or the passage of time, or both, would become a Breach thereunder. To the
Knowledge of the Seller, Xxxxxxx Properties, Shareholder and Member, no lessor
or landlord to any of such leases is in Breach nor, has any event occurred
which, with the giving of notice on the passage of time, or both, will result in
a Breach thereof.
(c) Prior Premises. Other than the Real Estate, the
Seller has conducted the Business from no other locations except as described in
the DISCLOSURE SCHEDULE.
4.10 Purchased Assets; Title and Condition. The Seller and Xxxxxxx
Properties own good and marketable title to all of the Purchased Assets and
Xxxxxxx Properties Purchased Assets (including, without limitation, the Real
Estate), respectively, free and clear of all Encumbrances, except for Permitted
Encumbrances. All of the Purchased Assets are located at or about the Real
Estate, except as otherwise set forth on the DISCLOSURE SCHEDULE, and (except
for Inventory acquired or disposed of in the Ordinary Course since the date of
the Latest Balance Sheets) is reflected on the Latest Balance Sheets. All
tangible Purchased Assets are in reasonably good condition and repair (normal
wear and tear excepted) and contain no latent defects.
4.11 All Necessary Assets; Capital Expenditures and Repairs. The
Purchased Assets and Xxxxxxx Properties Purchased Assets constitute all of the
assets which are used in (except for the Excluded Assets), and all of the assets
which are necessary for, the conduct of the Business, as presently conducted.
Except as set forth on the DISCLOSURE SCHEDULE: all Equipment located at the
Real Estate is included within the Purchased Assets (and none is owned by
employees); and no capital expenditures relating to the Business or remediations
suggested or required by any applicable Governmental Authority or insurer, in
the next twelve (12) months in an amount exceeding $25,000 in the aggregate are
necessary or have been contemplated by the Seller or Xxxxxxx Properties to carry
on the Business as it is presently conducted, nor are any such expenditures
planned.
4.12 Receivables. All of the Receivables reflected on the Latest
Balance Sheets or on the accounting records of the Seller as of the Closing
arose or will arise solely from bona fide transactions in the Ordinary Course,
and, except as set forth on the DISCLOSURE SCHEDULE, are not and will not be
subject to counterclaim or set-off and are not or will not be otherwise in
dispute. All of such Receivables are and as of the Closing Date will be good and
collectible in full, and will be collected within sixty (60) days following the
date on which it first became due and payable, except Rink-Tek and Cooling
Equipment Receivables which will be collected within one hundred and twenty
(120) days following the dates they first became due and payable. The DISCLOSURE
SCHEDULE contains a true and correct aging list of Receivables, as of the most
recent date available, specifying the date of original invoice and current
payment status of each Receivable.
4.13 Inventories. The Inventories reflected on the Latest Balance
Sheets or on the accounting records of the Seller as of the Closing consist or
will consist solely of raw materials, supplies, work-in-process and finished
goods and have been valued at the lower of cost or market. Such Inventories
consist of a quality and quantity which are usable and salable at normal profit
margins and within customary time periods in the Ordinary Course and, except as
set forth in the DISCLOSURE SCHEDULE, contain no material amount of slow-moving,
obsolete or damaged items. The Inventories which consist of work-in-process are
being completed on schedule and there are no
18
forfeitures, chargebacks or penalties which have been or will be incurred due to
the failure of the Seller to complete the work-in-progress in a timely manner.
The values at which inventory is reflected on the Financial Statements have been
determined on a FIFO basis in accordance with generally accepted accounting
principles consistently applied for all periods, with appropriate writedowns for
slow-moving, obsolete and damaged merchandise. None of the Inventories has been
consigned to others, nor are any items consigned to the Seller except as set
forth on the DISCLOSURE SCHEDULE. All of the Inventories are located at the Real
Estate. The Inventories are sufficient and adequate for, but are not in excess
of the level appropriate to, the customary conduct of the Business as it
previously has been conducted.
4.14 Intellectual Property.
(a) The DISCLOSURE SCHEDULE lists (or, in the case of
trade secrets and secret processes, generally describes) all of the following
which are owned by the Seller and used or intended to be used by the Seller in
the Business: (i) patents and patent applications, (ii) trademarks, trade names,
service marks and registrations and applications for registrations thereof
(including, but not limited to, "Systematic Refrigeration"),(iii) copyrights and
copyright registrations, and (iv) trade secrets and secret processes (the
"INTELLECTUAL PROPERTY"). The DISCLOSURE SCHEDULE also lists all of the
foregoing types of intellectual property which are not owned but which are
licensed or otherwise used or intended to be used by Seller in the Business,
other than perpetual, paid-up licenses of commonly available software programs
commercially available at a value of less than $500 under which the Seller is
the licensee ("LICENSED INTELLECTUAL PROPERTY"). The DISCLOSURE SCHEDULE lists
for each item of Intellectual Property and which is patented or registered with
the United States or any foreign or state agency or office, the patent or
registration number thereof, the date of patent issuance or registration and the
agency or office where so patented or registered. The Intellectual Property and
Licensed Intellectual Property is all of the intellectual property that is used
in or necessary for the conduct of the Business, as presently conducted. Except
as otherwise described on the DISCLOSURE SCHEDULE, the Seller is the sole owner
of all right, title and interest in the Intellectual Property. The Seller has
valid, binding and enforceable License rights to use such Licensed Intellectual
Property. There are no interference, opposition or cancellation proceedings
pending or, to the Knowledge of the Seller, Xxxxxxx Properties, Shareholders and
Members, threatened against or with respect to Intellectual Property or Licensed
Intellectual Property. The use of the Intellectual Property and, to the
Knowledge of the Seller, Xxxxxxx Properties, Shareholders and Members, the
Licensed Intellectual Property does not infringe upon the rights of any third
Person; provided, however, that the Seller entered into a Confidential
Settlement Agreement with DCF and Hill Phoenix, Inc. acknowledging that the
continuously variable speed refrigeration systems identified in the DISCLOSURE
SCHEDULE, infringed DCF's United States Patent No. B1 RE 33620, but Seller no
longer makes or sells any such refrigeration systems incorporating the
technology of the infringement Patent. No claim, suit or action is pending or,
to the Seller's, Xxxxxxx Properties, Shareholders' or Members' Knowledge,
threatened alleging that the Seller is infringing upon the intellectual property
rights of others. Except as set forth on the DISCLOSURE SCHEDULE, the Seller has
not licensed or permitted any third party to use any of the Intellectual
Property.
(b) Except as set forth on the DISCLOSURE SCHEDULE, all
of the Seller's current or former employees who had or have any involvement
whatsoever in the conceptualization, discovery, design or invention of the
Seller's products or technology have executed written Contracts that assign to
the Seller all rights to any inventions, improvements, discoveries or
information relating to the Business.
4.15 Insurance.
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(a) General. The DISCLOSURE SCHEDULE lists each policy of
insurance owned or held by the Seller or Xxxxxxx Properties currently in effect
(including without limitation, policies for fire and casualty, liability,
worker's compensation, business interruption, umbrella coverage, products
liability, medical, disability and other forms of insurance) specifying the
insurer, amount of coverage, type of insurance, whether claims made or
occurrence, policy number, deductible limits and any pending claim (other than
worker's compensation claims) in excess of $1,000, whether or not covered by
insurance (the "INSURANCE"). True and complete copies of each policy of
Insurance have been previously delivered to Buyer. The Insurance is in full
force and effect, all premiums with respect thereto covering all periods up to
and including the date hereof have been paid, and no notice of cancellation or
termination has been received by the Seller or Xxxxxxx Properties with respect
to any such policy. Except as set forth on the DISCLOSURE SCHEDULE, there are no
provisions in such insurance policies providing for or allowing retroactive or
retrospective premium adjustments. The Insurance is sufficient for compliance
with all requirements of Law and with all agreements to which the Seller or
Xxxxxxx Properties is a party. The policies evidencing the Insurance are valid,
outstanding and enforceable policies subject to the terms and conditions
contained therein, and there has not occurred any act or omission of the Seller
or Xxxxxxx Properties which could result in cancellation of any such policy
prior to its scheduled expiration date. Neither the Seller nor Xxxxxxx
Properties has not received any notice from or on behalf of any insurance
carrier issuing any such policy that: (i) insurance rates will hereafter be
substantially increased; (ii) that there will hereafter be no renewal of any
such policy; or (iii) that alteration of any personal or real property or
purchase of additional equipment, or modification of any method of doing
business, is required or suggested. None of such policies will in any way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by this Agreement.
(b) Denials of Coverage. Neither the Seller nor Xxxxxxx
Properties has been refused any insurance with respect to the Business, Purchase
Assets or Xxxxxxx Properties Purchased Assets, nor has the dollar amount of any
coverage that has been previously in effect or requested by Seller or Xxxxxxx
Properties been limited or decreased by any insurance carrier to which it has
applied for or with which it has carried insurance.
(c) Claims. The DISCLOSURE SCHEDULE sets forth a summary
of information pertaining to all claims (other than workers compensation claims)
of property damage and personal injury or death against the Seller which are
currently pending or were made since January 1, 1998. Except as set forth on the
DISCLOSURE SCHEDULE, all of such claims (including worker's compensation claims)
are fully satisfied or are being defended by an insurance carrier and involve no
exposure to the Seller.
4.16 Licenses. The Seller possesses all Licenses (including,
without limitation, occupancy permits for the Real Estate and Leased Real Estate
and permits required pursuant to Environmental Laws) as are necessary for the
consummation of the transactions contemplated hereby or the conduct of the
Business. All such Licenses are currently in full force and effect. There is no
material oral modification or past practice inconsistent with the terms of any
License. The DISCLOSURE SCHEDULE sets forth a list of all such Licenses and true
and complete copies of each written document evidencing or affecting any of such
Licenses have been previously delivered to Buyer. The Seller and Xxxxxxx
Properties are in compliance with the terms and conditions of all such Licenses.
To the Knowledge of the Seller, Xxxxxxx Properties Shareholders and Members, no
state of facts exists which, with the giving of notice on the passing of time,
or both, may give rise to any Breach under any such License or permit the
Seller, Xxxxxxx Properties or other parties to any such License to declare a
Breach of, or otherwise cancel or terminate, any such License. Except as set
forth on the DISCLOSURE SCHEDULE, neither the execution of this Agreement nor
the
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consummation of the transactions contemplated hereby will result in the
revocation, or an adverse change in the terms or conditions, of any of such
Licenses, and all such Licenses shall continue in full force and effect in
accordance with their present terms unaffected by the consummation of the
transactions contemplated hereby.
4.17 Material Contracts and Other Descriptions and Lists. The
DISCLOSURE SCHEDULE identifies and briefly describes the following of Seller or
Xxxxxxx Properties:
(a) List.
(i) Leases. All leases of real or personal
property, including any leases described in Section 4.9 hereof;
(ii) Certain Personal Property. All items of
personal property (including Equipment and Vehicles) which have a book value or
estimated current market value in excess of $500;
(iii) Purchase and Sale Orders. A list (as of the
most recent date available preceding the Closing) of written or oral agreements
relating to (A) the sale of products, services or supplies by the Seller or
Xxxxxxx Properties or (B) material (including any blanket) purchase orders;
(iv) Certain Agreements. A list of the following
described types of Contracts or documents: (A) dealership, distributorship,
sales representative or similar Contracts; (B) license, royalty or similar
Contracts; (C) service or maintenance; (D) protective services or security; (E)
railroad track or spur track; and (F) commission or other contingent Contracts
pursuant to which the Seller's obligation to make payments is in excess of
$1,000 per year, or pursuant to which the Seller's obligation to make contingent
payments is dependent upon sales, revenues, income, success or other performance
standard;
(v) Other Financial Obligations. A list of any
other Contracts which would require the Seller to pay or expend, after the
Closing, more than $1,000 in any single instance or $5,000 in the aggregate of
all such instances with the same or related Persons;
(vi) Personnel. A list of: (A) all officers,
directors or managers of the Seller; (B) the names and current annual salary
rates (and bonus, incentive or commission arrangements) of all present employees
and agents of the Seller; (C) all loans made by the Seller to its employees and
a statement of the terms thereof; (D) a list of all the Seller's employees who
are currently laid-off or on parental, disability or other leave; (E) a list of
all retired employees, directors or managers of the Seller, or their dependents,
who have received or are scheduled to receive benefits from the Seller and a
description of the type and amount of all such benefits; and (F) all promises,
commitments or goals (including a description thereof) concerning job creation
or job maintenance made or adopted by the Seller or Xxxxxxx Properties;
(vii) Employment Contracts. A list of all
employment, consulting or deferred compensation commitments;
(viii) Accrued Vacation, Personal Days' or Sick
Days' Pay. A list of all employees who are expected, as of the Closing Date, to
have earned but unused vacation, personal days or sick days (or earned but
unused pay in lieu thereof), together with an estimate of the dollar amount
thereof;
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(ix) Loans, Notes and Borrowing Agreements. A
list of each written or oral (i) loan, note payable, credit or borrowing
arrangement or Contract; (ii) Contract by which the Seller or Xxxxxxx Properties
has guaranteed, indemnified, agreed to act or suretor or otherwise became liable
or contingently liable for the debt of another; and (iii) commitment by which
the Shareholders or Members have guaranteed or become contingently liable for
any Assumed Liability or Assumed Xxxxxxx Properties Obligations described in
Section 2.1(b) and Section 2.2, respectively.
(x) Bank or Escrow Accounts. The name of each
bank or savings and loan association, or commodities or securities firm, in
which the Seller or Xxxxxxx Properties has an account, escrow account or safe
deposit box, the numbers of each such account or box, the purpose(s) for such
account or box, and the names of all persons having power to borrow, discount
debt obligations, cash or draw checks, enter boxes, sell or buy securities, or
otherwise act on behalf of the Seller or Xxxxxxx Properties in any dealings with
such banks or savings and loan association, commodities or securities firm;
(xi) Capital Expenditures. A list of all
outstanding written or oral commitments by the Seller or Xxxxxxx Properties to
make a capital expenditure, capital addition or capital improvement;
(xii) Non-Compete Covenants. A list of any written
or oral covenants not to compete, non-solicitation covenants and non-disclosure
covenants in favor of the Seller or Business, or binding upon or against the
Seller or Business;
(xiii) Powers of Attorney. The names of all persons
holding powers of attorney from the Seller or Xxxxxxx Properties and a summary
statement of the terms thereof;
(xiv) Bonds. A list of performance, bid or
completion bonds, or letters of credit;
(xv) Discounts. A list of any Contract,
arrangement or program pursuant to which the Seller or Xxxxxxx Properties has
offered, promised or made available to its customers any volume discount,
rebate, credit or other allowance from the contract proposal price;
(xvi) Non-Ordinary Course Agreements. A list and
description of any Contract, or arrangement binding upon the Seller or Xxxxxxx
Properties and which was made or entered into other than in the Ordinary Course,
other than this Agreement or the Settlement Agreement; and
(xvii) Unemployment Account Balance. The Seller's
unemployment account balance with the State of Minnesota as of January 17, 2002,
the Seller's current unemployment compensation payroll tax rate with the State
of Minnesota and any anticipated increase to such tax rate.
(b) Accurate and complete copies of each Contract or
document (as amended to date) described in this Section previously have been
furnished to the Buyer or are attached to the DISCLOSURE SCHEDULE.
4.18 Litigation. Except as set forth on the DISCLOSURE SCHEDULE,
there is not now, and there has not been since January 1, 1998, any litigation,
claim, proceeding or investigation pending,
22
or, to the Knowledge of the Seller, Xxxxxxx Properties, Shareholders and
Members, threatened against or relating to the Seller, Xxxxxxx Properties, the
Purchased Assets, Xxxxxxx Properties Purchased Assets, the Business, or the
transactions contemplated hereby. The DISCLOSURE SCHEDULE discloses, with
respect to each item described thereon, the name or title of the action (and
parties or potential parties thereto), a description of the nature of the action
or claim, and an estimate of the maximum liability in the event of an adverse
result. Except as so described, to the Knowledge of the Seller, Xxxxxxx
Properties, Shareholders and Members, no state of facts or circumstances exists
which reasonably could be expected to ripen into litigation, proceeding or
investigation or adversely affect the Purchased Assets, Xxxxxxx Properties
Purchased Assets, the Business, its prospects, or the transactions contemplated
hereby. Except as described on the DISCLOSURE SCHEDULE, there is no outstanding
Order to which the Seller, Xxxxxxx Properties, Shareholders or Members is a
party or subject and which adversely affects or may reasonably be expected to
affect the Purchased Assets, Xxxxxxx Properties Purchased Assets, Business, its
prospects, or the transactions contemplated hereby.
4.19 Compliance With Laws, Licenses or Orders. The ownership and
use of the Purchased Assets and Xxxxxxx Properties Purchased Assets, and conduct
of the Business do not violate and have not violated since January 1, 1998, nor
is the Seller or Xxxxxxx Properties in violation or Breach under, any Law,
License or Order; and Buyer will not incur any liability or obligation after the
Closing as a result of any violation or default of any Law, License or Order
existing at the Closing or arising or accruing thereafter but based upon events
or occurrences extant at the Closing (including, but not limited to, Seller's or
Xxxxxxx Properties' failure to obtain a License required by Law).
4.20 Environmental Compliance.
(a) No Violations. Except as set forth on the DISCLOSURE
SCHEDULE, neither the Seller or Xxxxxxx Properties, nor their respective
operations or businesses, has ever violated or been threatened with or received
a notice, directive, violation report or charge asserting any violation of any
Environmental Law.
(b) No Proceedings. Except as set forth on the DISCLOSURE
SCHEDULE, no suit, proceeding or other administrative or legal action has ever
been instituted against the Seller or Xxxxxxx Properties, by any federal, state
or local governmental department or agency or any other person or entity
concerning any Environmental Laws.
(c) Claims for Remediation. Except as set forth on the
DISCLOSURE SCHEDULE, neither the Seller, Xxxxxxx Properties, Shareholders or
Members has ever received from any federal, state or local governmental
department or agency or any other person or entity any claim, demand, directive,
Order or request to investigate, restore, repair, clean up or otherwise
remediate, or to contribute to the costs of investigating, restoring, repairing,
cleaning up or otherwise remediating the Real Property.
(d) Compliance. Except as set forth on the DISCLOSURE
SCHEDULE: (i) the Seller and Xxxxxxx Properties are, and at all times in the
past have been, in compliance with all Environmental Laws; (ii) the Seller and
Xxxxxxx Properties have obtained all permits, authorizations, licenses, or
approvals which are necessary or required under Environmental Laws in connection
with the operation of their respective businesses, and the Seller and Xxxxxxx
Properties are in compliance with such Licenses; (iii) no asbestos, urea
formaldehyde or polychlorinated biphenyls are present on, at, in or under the
Real Property; and (iv) none of the assets or operations
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of the Seller or Xxxxxxx Properties is required to be upgraded, modified, or
replaced in order to be in compliance with Environmental Laws.
(e) No Releases. Except as set forth on the DISCLOSURE
SCHEDULE: (i) neither the Seller nor Xxxxxxx Properties has disposed of,
spilled, discharged, released or otherwise placed any Environmental Materials,
on, at, in or under the Real Property; (ii) to the Knowledge of the Seller,
Xxxxxxx Properties, Shareholders and Members, no third party has disposed of,
spilled, discharged, released or otherwise placed any Environmental Materials
on, at, in or under the Real Property or any real property adjacent to the Real
Property at any time during or prior to the Seller's or Xxxxxxx Properties'
operation or ownership of such Real Property; and (iii) other than the
information provided in (i) and (ii), there has been no release, discharge,
leakage, seepage or migration of any Environmental Materials from any
aboveground or underground storage tank or any other structure currently or
previously located on, at, in or under the Real Property.
(f) Certain Uses. Except as set forth on the DISCLOSURE
SCHEDULE: (i) no septic systems or xxxxx exist on, at, in or under the Real
Property; (ii) the Real Property has not been used as a landfill, dump site or
any other use which involves the disposal of Environmental Materials on the Real
Property in a manner which may subject the Seller or Xxxxxxx Properties to any
claim for investigation, remediation or damages, and (iii) except with respect
to the storage, use, generation, handling or removal from the Real Property of
Environmental Materials in the Ordinary Course and in compliance with all
Environmental Laws, no Environmental Materials are currently located at or ever
have been used, generated, treated, stored, disposed of, handled on or removed
from the Real Property.
(g) Storage Tanks. Except as set forth on the DISCLOSURE
SCHEDULE, no aboveground or underground storage tanks have ever been located on,
at, in or under the Real Property.
(h) List of Reports and Disposal Sites. The DISCLOSURE
SCHEDULE includes a list of: (i) all environmental investigative reports,
studies or assessments (including, but not limited to, Phase I and Phase II
assessments), compliance audits, laboratory analytical data, technical reviews,
or the like with respect to the Seller or Xxxxxxx Properties, the Real Property,
the Business or any of the Seller's or Xxxxxxx Properties' assets, copies of
which are attached hereto; (ii) all past and present locations where
Environmental Materials, which currently are or have been controlled by the
Seller or Xxxxxxx Properties have been sent, spilled, released, discharged or
disposed; and (iii) all correspondence, memoranda, electronic information or
other documentation regarding the environmental condition of the Real Property,
or any real property in the nearby vicinity of the Real Property.
(i) Assumption of Liability; Prior Real Property Sales.
Except as set forth on the DISCLOSURE SCHEDULE, neither the Seller nor Xxxxxxx
Properties has assumed, either contractually or by operation of law, any
liability of any person or entity under any Environmental Laws or, in connection
with the prior sale of any Real Property previously owned by the Seller or
Xxxxxxx Properties, or otherwise made any representations or warranties, or
given any indemnities to any third Person, concerning or in connection with the
sale of such Real Property.
4.21 Contingent and Undisclosed Liabilities. Neither the Seller nor
Xxxxxxx Properties has any Liabilities, nor is either subject to the imposition
of any valid claim by any third Person or Governmental Authority arising from
the conduct of the Business or the ownership or use of their respective
properties, whether such Liabilities are now known or unknown, fixed or
contingent, of any nature whatsoever, except: (i) those fully reflected or
reserved against on the Latest Balance
24
Sheets, or (ii) those fully disclosed on the DISCLOSURE SCHEDULE, or (iii) those
contractual and tax liabilities which have arisen in the Ordinary Course from
the respective Latest Balance Sheet Dates of the Seller and Xxxxxxx Properties
through the date hereof and which are not, singly or in the aggregate,
materially adverse to the Seller or Xxxxxxx Properties. Neither the Seller nor
Xxxxxxx Properties is obligated, as primary obligor, guarantor or otherwise, to
the United States Small Business Administration.
4.22 Taxes. The Seller and Xxxxxxx Properties have filed all tax
returns and reports required to be filed by them, including without limitation
returns for all applicable federal, state and local income, franchise, sales,
use, property, employment excise and other taxes, and such returns are accurate,
complete and correct. The Seller and Xxxxxxx Properties (or, with respect to
Xxxxxxx Properties, the Members) have paid all taxes, interest and penalties
required to be paid pursuant to said returns or otherwise required to be paid by
them, and there are no other taxes, interest or penalties payable on account of
the Seller's or Xxxxxxx Properties' operations or properties except: (i) as are
reflected or reserved against on the Latest Balance Sheets; or (ii) for taxes
arising from the conduct of the Seller's or Xxxxxxx Properties' Business and
ownership of their respective properties for and during periods subsequent to
the respective Latest Balance Sheet Dates of the Seller and Xxxxxxx Properties
which are not yet due and for which the Seller and Xxxxxxx Properties have made
adequate reserves in their respective books and records of account. The
DISCLOSURE SCHEDULE lists the dates as of and for which the federal and state
corporate income/franchise and sales/use tax returns of the Seller were audited
and closed and lists the jurisdictions in which the Seller files or is required
to file any such tax return. There is no tax audit or examination now pending
or, to the Knowledge of the Seller, Xxxxxxx Properties, Shareholders and
Members, threatened with respect to the Seller or Xxxxxxx Properties or their
respective businesses or assets. No correspondence has been received by the
Seller, Xxxxxxx Properties, Shareholders or Members from any state taxing
jurisdiction requesting information concerning the extent of the Seller's or
Xxxxxxx Properties' nexus with such jurisdiction or asserting that the Seller or
Xxxxxxx Properties has such nexus so as to impose such jurisdiction's taxing
authority on the Seller or Xxxxxxx Properties, and the Seller and Xxxxxxx
Properties do not have nexus with any jurisdiction in which it does not
currently file tax returns which would allow such jurisdiction to impose its
taxing authority. All taxes and assessments which the Seller or Xxxxxxx
Properties was or is required by Law to withhold or collect have been and are
being withheld or collected by it and have been paid over to the proper
Governmental Authorities or, if not yet due, are being held by the Seller or
Xxxxxxx Properties for such payment. The Seller has not waived or extended any
applicable statute of limitations relating to the assessment of any tax.
4.23 Labor Contracts. Except as set forth on the DISCLOSURE
SCHEDULE, the Seller is not (and never has been) a party to any collective
bargaining agreement or bound to any other agreement with a labor union. Xxxxxxx
Properties has (and never had) any employees. To the Knowledge of the Seller,
Xxxxxxx Properties, Shareholders and Members, the labor relations of the Seller
are satisfactory in that there has not been since January 1, 1998 any strike,
walkout or work stoppage; nor, to the Knowledge of the Seller, Xxxxxxx
Properties, Shareholders and Members, is any such action threatened. There are
no proceedings pending for certification or representation before the National
Labor Relations Board nor, to the Knowledge of the Seller or the Shareholders,
has there been any attempt since January 1, 1998 to organize the employees of
the Seller into a collective bargaining unit. There is no investigation pending,
nor is there any uncorrected or unresolved citation, complaint or charge issued,
by any agency responsible for administering or enforcing Laws relating to labor
relations, employee safety or health, fair labor standards and equal employment
opportunity nor, to the Knowledge of the Seller, Xxxxxxx Properties,
Shareholders and Members, is any such proceeding threatened.
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4.24 Performance of Contracts. Except as set forth on the
DISCLOSURE SCHEDULE, neither the Seller nor Xxxxxxx Properties is in Breach
under any Contract to which it is a party or by which it is bound, and there is
no material oral modification or past practice inconsistent with the terms of
any Contract. All of such Contracts are currently in full force and effect. To
the Knowledge of the Seller, Xxxxxxx Properties, Shareholders and Members, the
other parties to such Contracts have complied with their obligations thereunder
and are not in Breach thereof. Except as set forth on the DISCLOSURE SCHEDULE,
the Seller and Xxxxxxx Properties fully have performed each such term, condition
and covenant of each such Contract required to be performed by them. Except as
set forth on the DISCLOSURE SCHEDULE, to the Knowledge of the Seller, Xxxxxxx
Properties, Shareholders and Members, no state of facts exists which, with the
giving of notice or the passing of time, or both, may give rise to any Breach
under any such Contract or permit the Seller, Xxxxxxx Properties or the other
parties to any such Contract to declare a Breach of, accelerate the maturity or
performance of, or otherwise cancel or terminate any such Contract. Neither the
Seller nor Xxxxxxx Properties has received any notice regarding any actual,
alleged or potential Breach of any such Contract. Xxxxxxxx X. Xxxxxxx has, or
simultaneously with the Closing hereof shall have, paid LHDL the sum of $25,000
required under the Settlement Agreement to be paid by him.
4.25 Employee Benefit Plans.
(a) General. The DISCLOSURE SCHEDULE sets forth a true
and complete list and brief description of each "employee pension benefit plan"
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), each "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) and each other employee benefit plan (including without
limitation those providing any stock option, stock purchase, stock appreciation
right, bonus, employee stock ownership, salary continuation, severance,
retirement, supplemental retirement, short or long-term disability, dental,
vision care, hospitalization, major medical, life insurance, accident insurance,
vacation, holiday and/or sick pay, tuition reimbursement, executive perquisite
or other employee benefits) maintained or contributed to, or required to be
contributed to, by the Seller or Xxxxxxx Properties for the benefit of any
officers or employees, current or former, of the Seller or Xxxxxxx Properties,
whether on an active or frozen basis (all the foregoing being herein called
"BENEFIT PLANS"). Neither the Seller nor Xxxxxxx Properties have any formal plan
or commitment to create any additional plan or modify or change any existing
Benefit Plan. True, complete and correct copies of the following have been
previously delivered to the Buyer: (i) each Benefit Plan including any
amendments thereto (or, in the case of any unwritten Benefit Plans, descriptions
thereof); (ii) the most recent annual report (Form 5500 series) filed with the
IRS with respect to each Benefit Plan (if any such report was required); (iii)
each trust agreement or other funding arrangement relating to any Benefit Plan;
(iv) the most recent summary plan description together with each subsequent
summary of material modifications required under ERISA with respect to each such
Benefit Plan, and all material employee communications relating to each such
Benefit Plan; and (v) all currently effective IRS rulings or determination
letters relating to any Benefit Plan.
(b) Administration. Each Benefit Plan has been
administered in all respects in accordance with its terms. All of the Benefit
Plans and the Seller and Xxxxxxx Properties are in compliance in all respects
with the applicable provisions of ERISA, the Code and any other Laws. There are
no investigations by any Governmental Authority, termination proceedings or
other claims (except claims for benefits payable in the normal operation of the
Benefit Plans), suits or proceedings against or involving any Benefit Plan or
asserting any rights or claims to benefits under any Benefit Plan that could
give rise to any liability.
26
(c) Contributions; Funding. All contributions to, and
payments from, the Benefit Plans that may have been required to be made in
accordance with the Benefit Plans and applicable law have been timely made. None
of the Benefit Plans is subject to the minimum funding requirements of Section
302 of ERISA or Section 412 of the Code.
(d) Prohibited Transactions. No "prohibited transaction"
(as defined in Section 4975 of the Code or Section 406 of ERISA) has occurred
which involves the assets of any Benefit Plan and which could subject any
employees of the Seller or Xxxxxxx Properties, a trustee, administrator or other
fiduciary of any trusts created under any Benefit Plan to the tax or penalty on
prohibited transactions imposed by Section 4975 of the Code or the sanctions and
penalties imposed on prohibited transactions under Title I of ERISA.
(e) PBGC. None of the Benefit Plans is subject to Title
IV of ERISA. No facts exist which might give rise to any liability of the Seller
under Title IV of ERISA or which could reasonably be anticipated to result in
any claims being made against the Seller or Xxxxxxx Properties by the Pension
Benefit Guaranty Corporation with respect to any "employee pension benefit plan"
(as defined in Section 3(2) of ERISA) ever maintained or contributed to by the
Seller or Xxxxxxx Properties at any time (a "Pension Plan"). For purposes of the
preceding sentence and Subsection (i) of this Section, the term "Seller" shall
also include any entity which is under common control or affiliated with the
Seller, within the meaning of Section 4001(b)(1) of ERISA, and the rules and
regulations promulgated thereunder and/or Sections 414(b), (c), (m) or (o) of
the Code, and the rules and regulations promulgated thereunder.
(f) Certain Matters. Except as set forth on the
DISCLOSURE SCHEDULE, the execution and performance of the transactions
contemplated by this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) constitute an event under any Benefit Plan
that will or may result in any payment (whether of severance pay or otherwise),
acceleration, vesting (except as provided in Section 6.20(b) hereof) or increase
in benefits with respect to any employee, former employee, officer or director
of the Seller or Xxxxxxx Properties. No payment which will be or may be made by
the Seller to any employee, former employee, director or agent thereof will or
may be characterized as an "excess parachute payment" within the meaning of
Section 280G(b)(1) of the Code.
(g) Post-Retirement Benefits. No Benefit Plan provides
benefits, including without limitation, death, disability, or medical benefits
(whether or not insured), with respect to current or former employees of the
Seller or Xxxxxxx Properties beyond their retirement or other termination of
service other than (i) coverage mandated by applicable law; (ii) death benefits
or retirement benefits under any Pension Plan; or (iii) deferred compensation
obligations to Xxxxxx Xxxxxxxx pursuant to that certain Executive Salary
Continuation Agreement, dated January 17, 1992, by and between the Seller and
Xx. Xxxxxxxx.
(h) COBRA. Each "group health plan" (within the meaning
of Section 5000(b)(1) of the Code) maintained by the Seller or Xxxxxxx
Properties that covers or has covered any employees of the Seller or Xxxxxxx
Properties has been administered in compliance with the continuation coverage
requirements initially enacted as a part of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and as formerly provided under Section
162(k) of the Code and as currently provided under Part 6 of Subtitle B of Title
I of ERISA and Section 4980B of the Code and any applicable regulations
promulgated or proposed under either of those laws.
27
(i) Multiemployer Plans. At no time has the Seller or
Xxxxxxx Properties been required to contribute to, or incurred any withdrawal
liability (within the meaning of Section 4201 of ERISA) to any Benefit Plan
which is a multiemployer plan as defined in ERISA Section 3(37).
(j) Family and Medical Leave. No employees of the Seller
are inactive or are on a leave of absence covered by the Family and Medical
Leave Act of 1993, P.L. 103-3.
4.26 Products Liability; Warranties.
(a) Except as otherwise set forth on the DISCLOSURE
SCHEDULE: (i) there exists no defect in the design or manufacture of any product
designed, manufactured or sold by the Seller or any predecessor in interest to
the Seller; (ii) there exists no pending or, to the Knowledge of the Seller,
Xxxxxxx Properties, Shareholders and Members, threatened claims for personal
injury, property damage or other damage caused by any product manufactured,
distributed or sold (or alleged to have been manufactured, distributed or sold
by the Seller or any predecessor in interest to the Seller ("PRODUCTS
LIABILITY")); and (iii) to the Knowledge of the Seller, Xxxxxxx Properties,
Shareholders and Members, there is no valid basis for any such suit, inquiry,
action, proceeding, investigation or claim. The Seller is insured, and has been
insured continuously since at least March 29, 1992 against Product Liabilities,
in accordance with the insurance policies identified on the DISCLOSURE SCHEDULE
(including a statement of the name of the insurer, the type of policy [i.e., a
"claims made" or "occurrence" policy], the amounts of coverage and the
applicable deductible limits).
(b) The DISCLOSURE SCHEDULE sets forth the material terms
and conditions of all (i) standard one-year, (ii) extended four-year and (iii)
other product warranties in effect (whether in accordance with their original
terms or as extended as a result of negotiations or compromise of disputes with
customers) under which the Seller may have liability after the Closing. Except
as set forth on the DISCLOSURE SCHEDULE, all product warranties given by the
Seller in connection with the Business: (A) limit the remedy available to
Seller's customers to the repair and replacement of the warranted goods by the
Seller, or alternatively, a refund of the sales price of such goods to the
customer; (B) expressly disclaim for all other damages, including incidental,
consequential or special damages; and (C) expressly disclaim all other
warranties not expressly stated therein, whether express or implied, including
warranties of merchantability, fitness for a particular purpose, performance or
otherwise. All such limitations of liability and damages and disclaimers of
other warranties are valid, legal and enforceable.
4.27 Changes in Financial Position. Since September 1, 2001, the
Business has been conducted in the Ordinary Course, and except as described on
the DISCLOSURE SCHEDULE, there has not been:
(a) Adverse Changes. Any material and adverse change in
the Business, Purchased Assets, Xxxxxxx Properties Purchased Assets, condition
(financial or otherwise) or prospects of the Seller or Xxxxxxx Properties;
(b) Business or Property Damage. Any material damage,
destruction or loss (whether or not covered by insurance) adversely affecting
the Business, Purchased Assets or Xxxxxxx Properties Purchased Assets; or
(c) Extraordinary Events. Any transaction outside the
Ordinary Course of the Seller or Xxxxxxx Properties.
28
4.28 Events Subsequent to September 1, 2001. Neither the Seller nor
Xxxxxxx Properties has, except as described on the DISCLOSURE SCHEDULE, since
September 1, 2001:
(a) Incurred Liabilities. Incurred any obligation or
liability (absolute, contingent, accrued or otherwise), or guaranteed or become
a surety of any debt, except in connection with the performance of this
Agreement or in the Ordinary Course;
(b) Discharged Debt. Discharged or satisfied any
Encumbrance, or paid or satisfied any Liability other than (i) Liabilities shown
or reflected on the Seller's December 31, 2000 balance sheet included within the
Financial Statements or (ii) contractual or tax Liabilities incurred since the
date thereof in the Ordinary Course;
(c) Reserves. Increased or established any reserve for
taxes or bad accounts or any other liability on its books or otherwise provided
therefor;
(d) Encumbrances. Mortgaged, pledged or subjected to any
Encumbrance any of their assets;
(e) Disposition of Assets. Sold or transferred any of
their assets, or canceled any debts or claims or waived any rights, except sales
of inventory by the Seller in the Ordinary Course;
(f) Dividends. Made any declaration, setting aside or
payment to the Shareholders or Members of any dividend or other distributions
with respect to the Seller's capital stock or Xxxxxxx Properties' membership
interests, or agreed to take any such action;
(g) Stock Issuance. Issued or authorized any stock,
membership interests, bonds, debentures, options, warrants or other securities;
(h) Working Capital. Accelerated the collection of
Receivables, deferred the payment of its accounts payable or accrued expenses or
taken any other action outside the Ordinary Course which has or may decrease the
working capital of the Seller;
(i) Accounting Procedure. Changed or modified its
accounting methods or practices;
(j) Settle Litigation. Settled, or agreed to settle, any
litigation, arbitration or other proceeding, pending or threatened (other than
the Settlement Agreement); or
(k) Warranties. Given any product warranty to any
customer other than the standard one- and four-year warranties described in
Section 4.26(b).
(l) Certain Agreements. Agreed, orally or in writing, to
do any of the foregoing.
4.29 Customers and Suppliers. The DISCLOSURE SCHEDULE lists, in
descending order, the ten (10) customers of the Seller accounting for the
largest annual sales revenue in the Seller's fiscal year ending December 31,
2000 and during the 11-month period ending November 30, 2001, and the ten (10)
suppliers of raw materials or supplies accounting for the largest annual expense
to the Seller. None of the Seller, Xxxxxxx Properties, Shareholders or Members
has received notice since January 1, 2001, nor do any of them have any
Knowledge, that (a) any customer of the Seller or
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(b) any supplier to the Seller (if such supplier could not be replaced by the
Seller with no material adverse effect to it), has terminated, curtailed,
reduced, deferred, delayed or otherwise adversely impacted its business
relations with the Seller or will take any such actions after the Closing.
4.30 Brokerage. None of the Seller, Xxxxxxx Properties,
Shareholders or Members has incurred, or made commitments for, any brokerage,
finders' or similar fee in connection with the transaction contemplated by this
Agreement.
4.31 Related Person Transactions. Except (i) as described on the
DISCLOSURE SCHEDULE, (ii) the lease of the Real Estate by Xxxxxxx Properties to
the Seller, described in Section 4.9, (iii) a loan of $50,000 by Xxxxxxx
Properties to the Seller and (iv) an advance of $32,718.46 from Xxxxxxx
Properties to the Seller, the Seller: (a) has not had any financial transactions
or arrangements (other than payment of regular salary for bona fide services
actually rendered by Related Persons who are employees) with any Related Person
since January 1, 2000, and (b) does not have and will not have any present or
future obligation to enter into any transaction or arrangement with any Related
Person. Except as described on the DISCLOSURE SCHEDULE, to the Knowledge of the
Seller, Xxxxxxx Properties, Shareholders and Members, no Related Person owns,
directly or indirectly, or is a director, member, officer or employee of, or
consultant to, any business organization which is a competitor, supplier, or
customer having business dealings with the Seller, nor does any Related Person
own any assets or properties which are used in the Business, other than Xxxxxxx
Properties' ownership of the Real Estate.
4.32 Representations and Warranties True and Correct. The
representations and warranties contained herein, and all other documents,
certifications, materials and written statements or written information given to
the Buyer by or on behalf of the Seller, Xxxxxxx Properties, Shareholders or
Members or disclosed on the DISCLOSURE SCHEDULE, do not include any untrue
statement of a material fact or omit to state a material fact required to be
stated herein or therein in order to make the statements herein or therein, in
light of the circumstances under which they are made, not misleading.
4.33 Disclosure. None of the Seller, Xxxxxxx Properties,
Shareholders and Members has any Knowledge of any fact that has specific
application to the Seller or its Business (other than general economic
conditions affecting the Seller's industry as a whole) that may materially
adversely affect the Purchased Assets, Xxxxxxx Properties Purchased Assets, the
Business or its prospects that has not been set forth in this Agreement or the
DISCLOSURE SCHEDULE.
ARTICLE V
REPRESENTATIONS OF THE BUYER
In order to induce the Seller, Xxxxxxx Properties, Shareholders and
Members to enter into this Agreement, the Buyer makes the following
representations and warranties to the Seller, Xxxxxxx Properties and Members,
each of which shall be deemed to be independently material and relied upon by
the Seller, Xxxxxxx Properties and Members, regardless of any investigation made
by, or information known to, the Seller, Xxxxxxx Properties or Members.
5.1 Organization. The Buyer is a limited liability company duly
organized and validly existing under the laws of the State of Wisconsin.
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5.2 Enforceability; Conflicting Obligations. This Agreement and
all other agreements of the Buyer contemplated hereby are or, upon the execution
thereof, will be the valid and binding obligations of the Buyer enforceable
against it in accordance with their terms. The execution and delivery of this
Agreement do not, and the consummation of the purchase of the Purchased Assets
and Xxxxxxx Properties Purchased Assets will not, conflict with or violate any
provision of the articles of incorporation or bylaws of the Buyer, nor any
provisions of, or result in the acceleration of, any obligation of the Buyer.
5.3 Authorization. The Buyer has all necessary power and authority
to enter into and perform the transactions contemplated herein in accordance
with the terms and conditions hereof. The execution and delivery of this
Agreement, and the performance by the Buyer of its obligations contained herein,
have been duly approved by the Buyer's Board of Directors.
5.4 Brokerage. The Buyer has not incurred, nor made commitment
for, any brokerage, finders or similar fee in connection with the transactions
contemplated by this Agreement.
5.5 Litigation. There is no litigation, proceeding or governmental
investigation pending, or to the Buyer's knowledge, threatened against or
relating to the transactions contemplated herein.
5.6 Default. No "Class A Default" or "Class B Default" (as such
terms are defined in the Subordination Agreement) has occurred and is currently
continuing.
ARTICLE VI
COVENANTS
The Seller, Xxxxxxx Properties, Shareholders and Members covenant and
agree with the Buyer as follows:
6.1 Access. From the date hereof and until the Closing Date, the
Buyer and its authorized officers, agents and representatives shall have
reasonable access during normal business hours to all properties, books,
records, contracts, tax returns and documents of the Seller and Xxxxxxx
Properties; provided, however, that the Buyer shall inform the Seller of its
intention to seek access and the matters sought to be reviewed at least
twenty-four (24) hours in advance and, further, that the access requested shall
not interfere unreasonably with the business, properties or operations of the
Seller. The Seller, Xxxxxxx Properties, Shareholders and Members shall cooperate
with the Buyer by using their best efforts to cause the Seller's major customers
and suppliers to meet with and respond to all questions posed by the Buyer
concerning the Seller and promptly responding to, and causing the Seller's
officers and employees, and the Members, promptly to respond to, all questions
posed by the Buyer concerning the Seller, Xxxxxxx Properties, their respective
businesses, properties, condition (financial or otherwise) or prospects.
6.2 Operation of Business. From the date hereof and until the
Closing Date, without the express prior written consent of the Buyer, neither
the Seller nor Xxxxxxx Properties shall not take any action or permit the
occurrence of any matter described in Section 4.28(a)-(l) which, if such action
or occurrence had occurred between September 1, 2001 and the date hereof, would
be required to be disclosed on the DISCLOSURE SCHEDULE.
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6.3 Preservation of Business. From the date hereof and until the
Closing Date, the Seller, Xxxxxxx Properties, Shareholders and Members shall
carry on the Business diligently and substantially in the Ordinary Course
consistent with past practice and shall use their best efforts to keep the
Seller's business organization intact, including its present relationships with
employees, suppliers and customers and others having business relations with it.
The Seller shall maintain at all times in inventory quantities of raw materials,
finished goods, spare parts and other supplies and materials sufficient to allow
the Buyer to continue to operate the Business, after the Closing Date, free from
any shortage of such items.
6.4 Insurance and Maintenance of Property. From the date hereof
and until the Closing Date, the Seller and Xxxxxxx Properties shall cause all
property owned or leased by them (including the Real Estate) to be insured
against all ordinary insurable risks and shall maintain in effect all the
Insurance, and shall operate, maintain and repair all of their respective
properties in a manner consistent with past practice.
6.5 Compliance with Laws. From the date hereof and until the
Closing Date, the Seller and Xxxxxxx Properties shall comply with all applicable
Laws and Orders applicable to, or binding upon, them or their respective
business or properties.
6.6 Title Insurance. At least ten (10) days prior to the Closing,
Xxxxxxx Properties shall obtain an ALTA commitment (the "Commitment") to issue a
Form B ALTA Owner's Policy (10/17/92) owner's policy on the Real Estate. Such
Commitment shall be issued by a title company reasonably satisfactory to the
Buyer (the "Title Company"); be in the amount of $3,100,000; name the Buyer
and/or its lenders as the proposed insured; contain no exceptions except for the
Permitted Encumbrances and standard exceptions to be deleted by endorsement at
or prior to the Closing; and have an effective date not earlier than the date of
this Agreement. The Commitment shall include the following endorsements at
Xxxxxxx Properties' cost and in form and substance reasonably satisfactory to
the Buyer: an access endorsement ensuring that all of the real estate has direct
access to a publicly dedicated and public street; and ALTA form 3.1 zoning
endorsement ensuring that the real estate is zoned for its present uses; an ALTA
form of comprehensive endorsement; and such other endorsements as the Buyer may
reasonably request after its review of the Commitment. Included with the
Commitment shall be complete and legible copies of all documents referenced
therein. At the Closing, Xxxxxxx Properties shall provide to the Buyer all
certificates and affidavits as may be required to delete all exceptions to title
(including standard exceptions, but excluding Permitted Encumbrances) and extend
the effective date of the Commitment to a date as close to the Closing Date as
may be practical, and shall cause the Title Company to ensure over any gap risk.
At or prior to the Closing, Xxxxxxx Properties shall pay the cost of the premium
for the title insurance policy, charges for special assessment and other reports
ordered in connection therewith, all amendments and endorsements of the
Commitment and gap coverage.
6.7 Survey. At least ten (10) days prior to the Closing, Xxxxxxx
Properties shall cause to have delivered to the Buyer a survey of the Real
Estate prepared by a civil engineer or licensed surveyor no sooner than sixty
(60) days prior to the Closing Date, or, if prepared prior to such time period,
a certification of such previously prepared survey as shall be acceptable to the
Title Company and adequate to cause the Title Company to delete all matters
relating to survey exceptions contained in the Commitment or the policy. The
survey shall meet the Minimum Standard Detail Requirements for a Class A Urban
ALTA/ACSM Land Title survey, as most recently jointly adopted by ALTA/ACSM. Such
survey shall set forth a legal description of the Real Estate, which shall be
the same as the legal description set forth in the Commitment, shall delineate
the boundaries of all of such real estate, showing all adjoining rights of way,
water courses, drains, sewers, streets and roads, exits and entrances,
utilities, building and structure
32
locations and dimensions, fences, set-back lines, restrictions, encroachments,
rights of way, easements and other similar matters and setting forth the exact
acreage with courses and distances so as to permit a description of the real
estate and of any other items noted on the survey and shall contain a
certification that the survey correctly shows the location of all buildings,
structures and other improvements, including foundations and buildings in course
of construction, situated on the real estate, and that, except as shown, there
are no visible easements or rights of way across the real estate, no visible
encroachments on the real estate by improvements on adjoining premises and no
visible encroachments by improvements on the real estate on adjoining premises.
The survey shall be in such form and content as shall permit the Title Company
to eliminate all exceptions in the Commitment and the policy and title insurance
issued pursuant thereto which relate to matters of survey. The survey shall be
certified to the Buyer and the Title Company. The cost of the survey shall be
borne by Xxxxxxx Properties.
6.8 Fulfill Conditions. The Seller, Xxxxxxx Properties,
Shareholders and Members shall use their best efforts to cause to be fulfilled
on or prior to the Closing each of the conditions set forth in Article VIII
hereof.
6.9 Employees. The Seller shall terminate the employment of all of
its employees as of the Closing Date. The Seller authorizes the Buyer to hire,
on or after the Closing Date, such employees of the Seller employed on the date
of execution of this Agreement as the Buyer may determine. Any employees of the
Seller who are actually hired by the Buyer as of the Closing Date shall
hereinafter be referred to as the "HIRED EMPLOYEES."
6.10 Release of Security Interests. The Seller shall on or prior to
the Closing Date deliver to the Buyer such documents as are necessary to
terminate and release all Encumbrances (including, without limitation, the
security interest of LHDL evidenced by UCC-1 No. 2317141, filed April 18, 2001
and the security interests of Excel Bank, evidenced by UCC-1 Nos. 2050965 and
2238573, filed July 7, 1998 and June 23, 2000, respectively) other than
Permitted Encumbrances, which documents shall be in form and substance
acceptable to the Buyer and shall include without limitation, all documents
necessary to terminate of record any such security interest or encumbrance.
6.11 Change of Corporate Name. The Seller and the Shareholders
agree to take all action that is necessary to authorize the amendment of the
Seller's articles of incorporation to change the corporate name of the Seller to
a name which does not include the words "Systematic" or "Refrigeration." At or
prior to the Closing, the Seller and the Shareholders shall deliver to the Buyer
duly executed Articles of Amendment and such other documents as are necessary to
so change the Seller's corporate name, plus a check or checks made payable to
the applicable Minnesota Governmental Authorities in the amount of the filing
fees for such documents, which documents the Buyer shall have the right to file
on behalf of the Seller.
6.12 Documents of Transfer. On the Closing Date, the Seller and
Xxxxxxx Properties shall duly execute and deliver to the Buyer (i) an Assignment
and Xxxx of Sale in respective forms and substance as EXHIBIT C-1 and EXHIBIT
C-2 attached hereto, (ii) certificates of title sufficiently endorsed to
transfer the Vehicles to the Buyer and (iii) a Warranty Deed in form and
substance as EXHIBIT D attached hereto, together with an executed Minnesota
Certificate of Real Estate Value. All transfer fees or taxes shall be paid by
the Seller and/or Xxxxxxx Properties, as applicable, at the Closing. In
addition, the Seller shall execute and deliver to the Buyer at the Closing, in
form and substance reasonably satisfactory to counsel for the Buyer, assignments
assigning to the Buyer any of the following that the Buyer may designate:
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(a) All intellectual property rights, including
trademarks, trade names, slogans, patents,
inventions, patent applications, copyrights and
copyright applications;
(b) All Contracts;
(c) All assignable insurance policies then in effect; and
(d) All assignable Licenses.
6.13 Employment Agreement. At the Closing, Xxxxxxxx X. Xxxxxxx
shall execute and deliver to the Buyer the Employment Agreement.
6.14 Other Deliveries. On the Closing Date, the Seller shall
deliver to the Buyer the following:
(a) The resolutions of the Seller's shareholders and
Board of Directors and Xxxxxxx Properties' members
and Board of Governors authorizing and approving the
execution, delivery and performance of this Agreement
and the transactions contemplated hereby, certified
by the secretary or the president of the Seller and
the Managing Member of Xxxxxxx Properties,
respectively;
(b) All consents for the assignment of Contracts and
Licenses, which are necessary in order for said
Contracts and Licenses to be assigned to the Buyer
upon their present terms and the Seller and/or
Xxxxxxx Properties shall pay all fees, charges and
other costs that are required or imposed in
connection with obtaining any such consent;
(c) An affidavit that the Seller and Xxxxxxx Properties
are not a "foreign person" within the meaning of
Section 1445 of the Code, and stating the Seller's
and Xxxxxxx Properties' federal taxpayer
identification number, in form and substance
acceptable to counsel for the Buyer; and
(d) All other documents reasonably requested by counsel
for the Buyer to consummate the transactions herein
contemplated.
6.15 Collection of the Receivables. The Buyer shall have full power
and authority to collect for its account all Receivables, and to endorse,
without recourse to the Seller, in the name of the Seller, any checks or other
instruments of payment received on account of payment of any such Receivables;
provided, further, that if the Seller receives any payment on account of any
such Receivables, the Seller shall transfer and deliver such payment (endorsed
where necessary) to the Buyer, promptly after receipt.
6.16 Transfer Taxes. The Seller or Xxxxxxx Properties shall pay all
sales, mortgage and other transfer taxes (including any assessed in connection
with the conveyance of the Real Estate) resulting from the transactions
contemplated by this Agreement.
6.17 Certificates of Existence and Good Standing. At the Closing,
the Seller and Xxxxxxx Properties shall deliver to the Buyer current good
standing certificates relative to the Seller and Xxxxxxx Properties certified
not more than 10 days prior to the Closing by the Minnesota Secretary of State.
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6.18 Updated Disclosure; Notice. Promptly from time to time after
the date hereof and until the Closing Date, the Seller, Xxxxxxx Properties,
Shareholders and Members shall inform the Buyer in writing of all information,
events, actions or omissions which (i) if this Agreement were signed on the
Closing Date, would be required to be disclosed on the DISCLOSURE SCHEDULE in
order to make the Seller's, Xxxxxxx Properties', Shareholders' and Members'
representations and warranties contained herein true and not misleading, (ii)
causes or constitutes a Breach of any such representation or warranty contained
in Article IV, or would constitute a Breach of any representation or warranty if
again made at the time the fact or condition arises; (iii) constitutes a Breach
of any covenant contained in Article VI; and (iv) makes the satisfaction of the
conditions contained in Article VIII impossible or unlikely. The delivery of any
such notice shall not absolve the Sellers, Xxxxxxx Properties, Shareholders and
Members from liability for Breach of any representation or warranty which was
untrue when made.
6.19 Restrictions.
(a) Seller's Dissolution and Distributions. The Seller
shall not dissolve, or make any distribution or other payment to its
shareholders or Related Persons to such shareholders of the proceeds received by
it pursuant to this Agreement (including, without limitation, the Contingent
Amount), until the later to occur of (i) the Seller's payment, or adequate
provision for the payment, of all of its Liabilities (other than the Assumed
Liabilities) or (ii) one year after final determination and payment to the
Seller of the Contingent Amount.
(b) To insure continued compliance with the capital
expenditure limitations set forth in Section 144 of the Internal Revenue Code of
1986, as amended, (the "Code"), for the period commencing on the closing date
through April 11, 2003, neither the Seller, or Xxxxxxx Properties, nor any other
principal user of the Bond-financed facilities and equipment located in Ramsey,
Minnesota, or any "related person" (as defined in Section 144(a)(3) of the Code
shall pay or incur capital expenditures in the City of Ramsey, Minnesota without
prior consultation and consent of the Buyer.
6.20 The Seller's Benefit Plans.
(a)The Seller's Welfare Plans. Effective as of the end of the
day immediately preceding the Closing Date, except as otherwise provided in this
Section, Hired Employees shall cease to be covered by the Seller's Welfare Plans
(as hereinafter defined). The Seller shall be responsible for all of the
following claims incurred by Hired Employees under the Seller's Welfare Plans:
(i) under any medical, dental or health plans for any treatment or service
actually rendered prior to the Closing Date (but not rendered thereafter)
regardless of whether the service or treatment is part of an ongoing course of
treatment that commenced prior to the Closing Date; (ii) under any life
insurance plans or contracts with respect to deaths occurring prior to the
Closing Date; and (iii) for any payments or benefits incurred prior to the
Closing Date under any other Seller's Welfare Plan, except that the extent to
which any such claims are payable shall be determined by the provisions of the
applicable Seller's Welfare Plan. The Seller or Xxxxxxx Properties shall be
responsible for providing all employees of the Seller or Xxxxxxx Properties
whose employment is terminated and who are covered under a "group health plan"
(within the meaning of Section 5000(b)(1) of the Code) maintained by the Seller
or Xxxxxxx Properties (the "SELLER'S GROUP HEALTH PLAN"), and the qualified
spouses and dependents of these employees, with continuation coverage under
the Seller's Group Health Plan to the extent required by the provisions of
COBRA, as amended, as currently set forth in Part 6 of Subtitle B of Title I of
ERISA and Section 4980B of the Code, and the implementing regulations
promulgated or proposed under either of those laws. The Buyer shall have no
obligation to provide, nor any liability for, any benefits of any kind under
35
any of the Seller's Welfare Plans, including, but not limited to, any COBRA
benefits under any group health plan of the Seller or Xxxxxxx Properties. For
purposes of this Section, the "SELLER'S WELFARE PLANS" shall include each
"employee welfare benefit plan" (within the meaning of Section 3(1) of ERISA)
and each other Benefit Plan that is not an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA.
(b) The Seller's 401(k) Plan. The Seller maintains the
Systematic Refrigeration, Inc. Employee Savings & Retirement Plan (the "SELLER'S
401(k) PLAN"), a defined contribution profit-sharing plan with a cash or
deferred arrangement that is intended to be qualified under Sections 401(a) and
401(k) of the Code. The Seller shall retain sponsorship of the Seller's 401(k)
Plan after the Closing Date and neither the Buyer nor any plan maintained by the
Buyer shall be entitled to any assets of the Seller's 401(k) Plan. The Buyer
shall not assume any responsibility or liability for the Seller's 401(k) Plan,
and the Seller and the Seller's 401(k) Plan shall remain solely and entirely
responsible for satisfying any and all obligations and liabilities arising under
the Seller's 401(k) Plan. The accrued benefits under the Seller's 401(k) Plan of
all Hired Employees shall become 100% vested and non-forfeitable as of the
Closing Date to the extent not already 100% vested and non-forfeitable and the
Seller shall cause the Seller's 401(k) Plan to be amended, if necessary, to
provide for such 100% vesting and nonforfeitability. The accrued benefits of the
Hired Employees under the Seller's 401(k) Plan shall be distributed to the Hired
Employees after the Closing Date in accordance with the terms of the Seller's
401(k) Plan and the applicable provisions of the Code.
6.21 Confidentiality; Noncompetition.
(a) Confidential Information. The Seller, Xxxxxxx
Properties, Shareholders and Members acknowledge that they possess information
of a confidential nature relating, inter alia, to the operations, finances,
business relationships and trade secrets of the Business and agree that, for a
period of five (5) years following the Closing Date, other than as required in
the course of their employment with the Buyer, none of them directly or
indirectly shall use, publish, disclose or authorize anyone else to use, publish
or disclose, without the prior written consent of the Buyer, within the
geographical area in which such use, publication or disclosure could harm the
Business, any confidential information pertaining to the Business, including,
without limitation, any information relating to existing or potential business,
customers, suppliers, trade or industrial practices, finances, plans, costs,
processes, product formulae, technical or engineering data, or trade secrets;
provided, however, that the Seller, Xxxxxxx Properties, Shareholders and Members
shall be prohibited from ever using, publishing, disclosing or authorizing
anyone else to use, publish or disclose, any confidential information which
constitutes a trade secret under applicable law. However, such restrictions
shall not apply to any information which is generally known to the public
through no fault of the Seller, Xxxxxxx Properties, Shareholders or Members or
which is required by Law to be disclosed (provided, however, that before any
such disclosure required to be made by Law, the disclosing Person shall inform
the Buyer thereof, and shall cooperate with the Buyer in obtaining a protective,
limiting or similar order restricting the scope or dissemination of such
disclosed information).
(b) Noncompetition. For a five (5) year period following
the Closing Date, none of the Seller, Xxxxxxx Properties, Shareholders or
Members directly or indirectly (through Related Persons or otherwise) shall: (i)
engage, as an employee, officer, director, partner, consultant, owner (other
than a minority shareholder interest of not more than 1% of a company whose
equity interests are publicly traded on a nationally recognized stock exchange
or over-the-counter), financier or in any other capacity, or assist any other
person, firm or entity to engage in any activity (A) competitive to the Business
as such Business is conducted on the Closing Date or as planned by the Seller to
be conducted within one year of the Closing Date, in any
36
geographic area in which the Seller conducts the Business or promotes its
products and services or in any geographic area wherein the Seller has made
plans to enter within one year from the Closing Date; or (ii) solicit or accept
the competitive business of any person, firm or entity which is or was a
customer of the Business or of any prospective customer to whom the Seller made
any proposal, sales effort or solicitation since January 1, 1999, with respect
to products or services which compete with the Business.
(c) Non-Solicitation. For a period of five (5) years
following the Closing Date, none of the Seller, Xxxxxxx Properties, Shareholders
or Members shall directly or indirectly: (i) solicit, or assist another person,
firm or entity to solicit, any employee, supplier or other person having
business relations with the Business to terminate such employee's employment or
terminate or curtail such supplier's or other Person's relationship with the
Business; or (ii) hire, employ or retain, or solicit or assist another Person,
firm or entity to hire, employ or retain, any employee of the Business.
(d) Referral. For a period of five (5) years following
the Closing Date, if the Seller, Xxxxxxx Properties, Shareholders or Members
receives any request or inquiry to provide the types of products and services of
the type provided by the Business, such Person will promptly refer such request
or inquiry to the Buyer. In no event shall the Seller, Xxxxxxx Properties,
Shareholders or Members disparage the Buyer or the Business's reputation.
(e) Agreement on Fairness. The Seller, Xxxxxxx
Properties, Shareholders and Members acknowledge that, with respect to the
reasonableness of this noncompetition covenant: (i) in determining the
consideration paid to the Seller and Xxxxxxx Properties for the Purchased
Assets, Xxxxxxx Properties Purchased Assets and Business, the Buyer has valued
the Purchased Assets, Xxxxxxx Properties Purchased Assets and Business in
reliance upon the goodwill and earnings stream reasonably expected to be derived
therefrom and, further, upon the absence of activities by the Seller, Xxxxxxx
Properties, Shareholders and Members competitive to the Business and the absence
of disclosure by such Persons of confidential information, which reliance and
reasonable expectations would be unfairly frustrated if the Seller, Xxxxxxx
Properties, Shareholders or Members failed to comply with the restrictions
contained herein; (ii) the covenants contained in this Section 6.21 have been
specifically bargained between the parties in the context of the contemplated
transactions; (iii) the Seller, Xxxxxxx Properties, Shareholders and Members
have obtained legal counsel to review this Agreement; (iv) the covenants made by
and duties imposed upon them hereby are fair, reasonable and minimally necessary
to protect the legitimate business interests and expectations of the Buyer, and
such covenants and duties will not place an undue burden upon the Shareholders
or Members in the event of the strict enforcement of the covenants contained
herein; and (v) the economic benefits of the contemplated transactions directly
and indirectly accruing to the Seller, Xxxxxxx Properties, Shareholders and
Members constitute full, fair and adequate consideration to them in exchange for
their execution of and compliance with this Agreement.
(f) Equitable Relief. The Seller, Xxxxxxx Properties,
Shareholders and Members acknowledge that any Breach of this Section 6.21 will
cause substantial and irreparable harm to the Buyer for which money damages
would be an inadequate remedy. Accordingly, in addition to any other rights or
remedies available at law, in equity or by statute, the Buyer shall in any such
event be entitled, without the necessity of posting bond or other assurance, to
obtain injunctive and other forms of equitable relief to prevent such Breach.
37
(g) Joint and Several Obligations. The covenants and
representations of the Seller, Xxxxxxx Properties, Shareholders and Members
contained in this Section 6.21 shall be their joint and several obligations.
(h) Extension of Time Periods. In the event of a Breach
by the Seller, Xxxxxxx Properties, Shareholders or Members of any covenant set
forth in this Section 6.21, the duration of such covenant shall be extended by
the period of the duration of such Breach.
(i) Severability; Blue-Pencil. Each of the covenants
contained herein is independent and divisible. If any arbitrator or court of
competent jurisdiction determines that any particular provision of this
Agreement is invalid or unenforceable, then such invalidity or unenforceability
shall have no effect on the other provisions hereof, which shall remain valid,
binding and enforceable and in full force and effect. If any provision of this
Agreement is held to be invalid or unenforceable due to an excessively broad
duration, activity or subject, such provision shall be construed by limiting or
reducing it to such duration or scope as will render the remaining provision, as
so construed, valid and enforceable.
6.22 Termination of Lease. Xxxxxxx Properties and the Seller shall
have executed, and at the Closing delivered a counterpart thereof to the Buyer,
a termination of that certain Lease, dated April 1, 2000 by and between them,
effective as of the Closing, and on terms acceptable to the Buyer (including,
without limitation, a complete release by Xxxxxxx Properties in favor of the
Seller with respect to any and all obligations of the Seller thereunder, other
than the Seller's obligation to pay not more than $134,500 of any rent accrued
but unpaid through the Closing).
6.23 Agreement to Subordinate. At Closing, the Seller shall execute
and deliver to the Buyer and Buyer's lender the Subordination Agreement
(Contingent Amount) in the form attached hereto as EXHIBIT E ("SUBORDINATION
AGREEMENT"). In the event that, subsequent to the Closing, the Buyer or Zero
Zone, Inc. extends, amends (including, without limitation, any amendment
increasing the amount of the senior indebtedness), modifies, refinances or
replaces the senior debt described in the Subordination Agreement, whether in
whole or part and with the senior lender named in such Subordination Agreement
or with one or more different or other lenders, the Seller (together with any
Person to whom the Seller has transferred or assigned any rights to the
Contingent Amount), upon the request of the Buyer, shall execute any such other
or further subordination, intercreditor or similar agreement as may be requested
by the Buyer so as to subordinate the contingent Amount to the Buyer's or its
Related Persons' (including Zero Zone, Inc.'s) indebtedness to its or their
lenders, provided that no such subsequent subordination, intercreditor or
similar agreement shall impose subordination terms or conditions upon the Seller
as are materially more adverse to the interest of the Seller than those
contained in the Subordination Agreement.
ARTICLE VII
COVENANTS OF THE BUYER
The Buyer covenants and agrees with the Seller as follows:
7.1 Certified Resolutions. On the Closing Date, the Buyer shall
deliver to the Seller a copy of the resolutions of the Buyer's Board of
Directors, authorizing and approving the execution of this Agreement and the
performance by the Buyer of the transactions contemplated hereby, certified by
the secretary or the president of the Buyer.
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7.2 Employment Agreement. On the Closing Date, the Buyer shall
execute and deliver to Xxxxxxxx X. Xxxxxxx the Employment Agreement.
7.2 Fulfill Conditions. The Buyer shall use its best efforts to
cause to be fulfilled on or prior to the Closing each of the conditions set
forth in Article IX hereof.
7.4 The Buyer's Benefit Plans.
(a) The Buyer's 401(k) Plan. Effective as of the Closing
Date, the Buyer shall provide Hired Employees with coverage under a defined
contribution profit-sharing plan with a cash or deferred arrangement that is
intended to be qualified under Sections 401(a) and 401(k) of the Code (the
"BUYER'S 401(k) PLAN"). The Buyer's 401(k) Plan shall provide credit to Hired
Employees for all of their service with the Seller, solely for purposes of
eligibility to participate and vesting, to the same extent such service would
have been credited if the service had been performed for the Buyer. After the
Closing Date, Buyer shall permit Hired Employees who are entitled and who elect
to receive an "eligible rollover distribution" (as described in Section
402(f)(2)(A) of the Code) from the Seller's 401(k) Plan to direct that the
eligible rollover distribution be transferred to the Buyer's 401(k) Plan in
accordance with Section 402(c) of the Code and the Buyer shall cause the Buyer's
401(k) Plan to contain provisions permitting such transfers.
(b) The Buyer's Welfare Plans. The Buyer shall not assume
or continue any of the Seller's Benefit Plans. Other than the Buyer's 401(k)
Plan described in the preceding subsection of this Section, the Buyer shall
provide Hired Employees, as of the Closing Date, with such employee benefit
plans, programs, policies and arrangements (the "BUYER'S WELFARE PLANS") as the
Buyer may determine. With respect to medical and other health-related benefits,
the Buyer shall provide each Hired Employee (and each such Hired Employee's
spouses and dependents) with immediate coverage as of the Closing Date under a
"group health plan" (within the meaning of Section 5001(b) of the Code)
maintained by the Buyer (the "BUYER'S GROUP HEALTH PLAN") that provides benefits
and includes terms and conditions as determined by the Buyer, except that the
Buyer shall waive any pre-existing condition exclusions or restrictions with
respect to Hired Employees under the Buyer's Group Health Plan to the same
extent as coverage is provided under the Seller's Group Health Plan. Each Hired
Employee shall receive credit under the Buyer's Group Health Plan for all
amounts paid by each Hired Employee in calendar year 2002 under the Seller's
Group Health Plan for purposes of any applicable deductibles, co-payments or
out-of-pocket maximums for calendar year 2002. The Buyer shall be solely
responsible for providing Hired Employees with any continuation coverage (and
shall have sole liability in respect of any failure to provide such continuation
coverage) under Section 4980B of the Code or Part 6 of Subtitle B of Title I of
ERISA resulting from any "qualifying event" occurring on or after the Closing
Date. The Buyer shall grant full credit to Hired Employees under the Buyer's
Welfare Plans that are not group health plans, for service with the Seller for
purposes of (i) satisfying any and all eligibility and participation
requirements under the Buyer's Welfare Plans and (ii) determining the amount and
duration of any benefits under the Buyer's Welfare Plans to the extent that
service or seniority is a consideration in calculating benefits but the Buyer
shall not be required to credit any service that would result in a duplication
of benefits. The Seller shall have no obligation to provide nor any liability
for any benefits of any kind to Hired Employees under any of the Buyer's Welfare
Plans, including but not limited to COBRA benefits under any group health plan
of Buyer.
(c)Employment Terms and Benefits after the Closing Date.
Nothing in this Section or Section 6.20 shall be construed to limit or restrict
the Buyer in any way with respect to (i) the Buyer's conduct of the Business
after the Closing Date; (ii) the Buyer's modification or change in
39
the terms of employment (including the termination of employment) of any Hired
Employee; and (iii) the Buyer's modification, amendment or termination of any
employee benefit plan maintained or contributed to by the Buyer, including but
not limited to any of the Buyer's Welfare Plans.
ARTICLE VIII
CONDITIONS OF BUYER'S OBLIGATION TO CLOSE
The obligation of the Buyer to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction and fulfillment, prior to
and on the Closing Date, of each of the following express conditions precedent
(any of which may be waived by the Buyer in whole or in part):
8.1 Representation and Warranties. The representations and
warranties in this Agreement made by the Seller, Xxxxxxx Properties and Members
shall be true and correct in all respects as of and at the Closing Date with the
same force and effect as though said representations and warranties had been
again made on the Closing Date, and the Buyer shall have been furnished a
certificate signed by such Persons.
8.2 Performance of Covenants and Obligations. The Seller, Xxxxxxx
Properties, Shareholders and Members shall have performed and complied with all
of their covenants and obligations under this Agreement which are to be
performed or complied with by them prior to or on the Closing Date, and the
Buyer shall have been furnished a certificate signed by such Persons to that
effect.
8.3 Proceedings and Instruments Satisfactory. All proceedings,
corporate or otherwise, to be taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
satisfactory in form and substance to the Buyer; and the Seller and Xxxxxxx
Properties shall have made available to the Buyer for examination the originals
or true and correct copies of all documents which the Buyer reasonably may
request in connection with the transaction contemplated by this Agreement.
8.4 Adverse Change. From and after the date of this Agreement and
until the Closing Date, the Buyer shall have determined that there has been no
material adverse change in the Business, the Purchased Assets, the Xxxxxxx
Properties Purchased Assets, the Business or its prospects from that disclosed
to the Buyer in this Agreement, nor shall there have been any material casualty
to the Purchased Assets or Xxxxxxx Properties Purchased Assets in an amount
exceeding $100,000, as a result of any loss, taking, destruction or physical
damage, whether or not covered by insurance, occasioned by fire, flood,
explosion, earthquake, act of God or the public enemy, or otherwise.
8.5 No Litigation. No investigation, suit, action or other
proceeding shall be threatened or pending before any Governmental Authority (a)
in which it is sought to restrain, prohibit or obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby, or (b) that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with the transactions contemplated
hereby.
8.6 Consents. All necessary consents and Licenses with respect to
the transaction contemplated hereby, including, without limitation, the transfer
of the Purchased Assets and Xxxxxxx Properties Purchased Assets to the Buyer,
the absence of which would have a material and adverse effect on the Buyer's
rights under this Agreement, or which would constitute a Breach
40
pursuant to the provision of, or which would result in the termination or loss
of any right under, any Contract or License or without which the Buyer would be
precluded or materially impeded from conducting the Business or obtaining the
benefit of the Purchased Assets or Xxxxxxx Properties Purchased Assets, shall
have been received by the Buyer on or before the Closing Date.
8.7 Opinion of Counsel. On the Closing Date, the Seller and the
Shareholders shall have delivered to the Buyer the legal opinion of Van House &
Associates, counsel for the Seller, Xxxxxxx Properties, Shareholders and
Members, in substantially the form of EXHIBIT F attached hereto.
8.8 Due Diligence. The Buyer shall have conducted a due diligence
investigation and review of the Purchased Assets, Xxxxxxx Properties Purchased
Assets, the Business and all matters pertaining thereto that the Buyer deems
relevant and the results of such investigation and review shall be satisfactory
to the Buyer.
8.9 Searches. The Seller shall have delivered to the Buyer current
Uniform Commercial Code and state, local and federal tax, judgment, bankruptcy
and similar lien searches showing no liens, security interests, claims, or
judgment against the assets of the Seller, other than as set forth in DISCLOSURE
SCHEDULE.
8.10 Environmental Assessment. The Buyer shall have received
environmental site assessment reports acceptable to the Buyer and certified to
the Buyer and the Buyer's lender from an independent environmental consultant
selected by the Buyer, which reports shall evidence that: (i) the Real Estate
and Leased Real Estate, if any, comply with all Environmental Laws; (ii) no
improvements are reasonably required to maintain compliance with any and all
Environmental Laws; (iii) there are no material contingent liabilities affecting
the Real Property arising under any Environmental Laws; (iv) except as provided
for in Section 4.10(f)(iii) above, there are no Hazardous Substances or
Environmental Materials on or under the Real Estate or Leased Real Estate; and
(v) recommending no further investigation.
8.11 Further Assurances. The Seller, Xxxxxxx Properties,
Shareholders and Members shall have delivered to the Buyer such other written
documents, instruments, releases or otherwise, as the Buyer reasonably may
require to effectuate the provisions of this Agreement.
8.12 Certain Noncompetition Covenants. In consideration of the
Buyer's hiring of such Persons, the Buyer shall have received executed
confidentiality and noncompetition covenants from Xxxxx Xxxxx, Xxxx Xxxxxx and
Xxx X'Xxxxx.
8.13 Assignment and Assumption Agreements. There shall have been
delivered to the Buyer fully executed copies of the Assignment and Assumption
and Amendment of Contract for Private Development in the form attached hereto as
EXHIBIT G-1, the Assignment and Assumption Agreement for the Minnesota Small
Business Development Loan Program Bonds, Series 2000D, Lot 1 in the form
attached hereto as EXHIBIT G-2 and the Assignment of Loan Agreement and First
Amendment to Loan Agreement (Series 2000D, Lot 1), in the form attached hereto
as EXHIBIT G-3, together with such other written documents, instruments,
releases or otherwise as are necessary or appropriate in the opinion of the
Buyer's counsel to effectuate the provisions of the Assignment and Assumption
Agreements.
ARTICLE IX
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CONDITIONS TO SELLER'S, XXXXXXX PROPERTIES',
SHAREHOLDERS' AND MEMBERS'
OBLIGATION TO CLOSE
The obligation of the Seller, Xxxxxxx Properties, Shareholders and
Members to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction and fulfillment, prior to and on the Closing Date,
of the following express conditions precedent (any of which may be waived by the
Seller, Xxxxxxx Properties, Shareholders and Members, in whole or in part):
9.1 Representations and Warranties. The representations and
warranties in this Agreement made by the Buyer shall be true and correct in all
respects as of and at the Closing Date with the same force and effect as though
said representations and warranties had been again made on the Closing Date, and
the Seller and Xxxxxxx Properties shall have been furnished a certificate signed
by the president of the Buyer to that effect.
9.2 Performance of Covenants and Obligations. The Buyer shall have
performed and complied with all of its covenants and obligations under this
Agreement which are to be performed or complied with by it prior to or on the
Closing Date, and the Seller and Xxxxxxx Properties shall have been furnished a
certificate signed by the Buyer to that effect.
9.3 Proceedings and Instruments Satisfactory. All proceedings,
corporate or otherwise, to be taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to the Seller and Xxxxxxx
Properties; and, the Buyer shall have made available to the Seller and Xxxxxxx
Properties for examination the originals or true and correct copies of all
documents which the Buyer or Xxxxxxx Properties reasonably may request in
connection with the transactions contemplated by this Agreement.
9.4 Delivery of Agreements. The Buyer shall have executed and
delivered to Xxxxxxxx X. Xxxxxxx the Employment Agreement.
9.5 Payment of Purchase Price. The Buyer shall have: (i) made the
payment to the Seller as described in Section 2.1(a); (ii) executed and
delivered to the Seller an Assumption Agreement in the form of EXHIBIT H-1
attached hereto to evidence the Buyer's assumption of the Assumed Liabilities;
and (iii) executed and delivered to Xxxxxxx Properties the Assumption Agreement,
the Assignment, Assumption and Amendment of Contract for Private Development,
the Assignment, Assumption and Consent to Amendment of Agreement for Loan from
Minnesota Investment Fund and the Assignment of Loan Agreement and First
Amendment to Loan Agreement (Series 2000D, Lot 1), in the respective forms of
EXHIBITS G-1, G-2 and G-3 attached hereto, the Assumption Agreement in the form
of EXHIBIT H-2 attached hereto, and any such other documents as are necessary to
evidence the Buyer's assumption of the Assumed Xxxxxxx Properties Obligations.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by the Seller, Xxxxxxx Properties and Members.
Notwithstanding the Closing, and regardless of any investigation made by, or on
behalf of, the Buyer or any information known to the Buyer, the Seller, Xxxxxxx
Properties and Members, jointly and severally,
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shall indemnify, defend and hold the Buyer, its shareholders, officers,
directors, employees, agents and representatives (collectively, the "BUYER" as
used in Sections 10.1, 10.3, 10.6 and 10.7) harmless from and against any and
all losses, claims, damages, diminution in value, liabilities, costs, expenses
or deficiencies including, but not limited to, reasonable attorneys' fees and
other costs and expenses reasonably incident to proceedings or investigations or
the defense or settlement of any claim or claims, incurred by the Buyer arising
out of or resulting from any of the following:
(a) Representations or Warranties. The Breach of any
representation or warranty of the Seller, Xxxxxxx Properties or Members given in
or pursuant to this Agreement, without giving effect to any supplement to the
DISCLOSURE SCHEDULE;
(b) Covenants. The Breach or default in the performance
by the Seller, Xxxxxxx Properties, Shareholders or Members of any of their
covenants, obligations or agreements in or pursuant to this Agreement;
(c) Liabilities Not Expressly Assumed. Any Liability of
the Seller or Xxxxxxx Properties other than the Assumed Liabilities and Assumed
Xxxxxxx Properties Obligations;
(d) Pre-Closing Operations. The operation or conduct of
the Business or the ownership or use of the Seller's or Xxxxxxx Properties'
assets at any time prior to the Closing (including, without limitation,
Liability arising out of the manufacture, distribution or sale of any products,
or the performance of services, by the Seller prior to the Closing) or any
incident, occurrence, condition or claim existing, arising or accruing prior to
the Closing and relating to or arising from the operation or conduct of the
Business or the ownership or use of the Purchased Assets or Xxxxxxx Properties
Purchased Assets, other than any Assumed Liability or Assumed Xxxxxxx Properties
Obligations or
(e) Any of the matters set forth in Schedules 2.1(b)(vi),
item 8; 4.18, items 2, 4 and 5; and 4.21, item 1 of the DISCLOSURE SCHEDULE.
10.2 Indemnification by Buyer. Notwithstanding the Closing, and
regardless of any investigation made by, or on behalf of, the Seller, Xxxxxxx
Properties or Members, or any information known to them, the Buyer, subject to
the terms and conditions of this Article X, shall indemnify, defend and hold the
Seller, Xxxxxxx Properties and Members harmless from and against any and all
losses, claims, damages, liabilities, costs, expenses or deficiencies including,
but not limited to, reasonable attorneys' fees and other costs and expenses
reasonably incident to proceedings or investigations or the defense or
settlement of any claim or claims, incurred by the Seller due to or arising from
any of the following:
(a) Representations or Warranties. The Breach of any
representation or warranty of the Buyer given in or pursuant to this Agreement;
(b) Covenants. The Breach or default in the performance
by the Buyer of any of its covenants, obligations or agreements in or pursuant
to this Agreement;
(c) Liabilities Expressly Assumed. Any Assumed Liability
or Assumed Xxxxxxx Properties Obligations; or
(d) Post-Closing Operations. The operation or conduct of
the Business or the ownership of the Purchased Assets or Xxxxxxx Properties
Purchased Assets after the Closing, or any incident, occurrence, condition or
claim first arising and accruing after the Closing and arising from
43
the operation of the Business or the ownership or use of the Purchased Assets or
Xxxxxxx Properties Purchased Assets after the Closing, but in any case only if
the matter is not of a type for which the Seller, Xxxxxxx Properties and Members
are obligated to indemnify the Buyer under SECTION 10.1 hereof.
10.3 Procedures for Making Claims. If and when a party (the
"INDEMNITEE") desires to assert a claim for Indemnifiable Damages against
another party or parties (collectively, the "INDEMNITOR") pursuant to the
provisions of this Article X, the Indemnitee shall deliver a Notice of Claim to
the Indemnitor. If the Indemnitor shall object to such Notice of Claim, the
Indemnitor shall simultaneously deliver a Notice of Objection to the Indemnitee
within fifteen (15) days after the Indemnitee's delivery of the Notice of Claim.
If the Notice of Objection shall not have been so delivered within such fifteen
(15) day period, all Indemnitors shall be conclusively deemed to have
acknowledged the correctness of the claim or claims specified in the Notice of
Claim for the full amount thereof, and the Indemnifiable Damages set forth in
the Notice of Claim shall be promptly paid to the Indemnitee, on demand, in
cash. If the Indemnitor shall make timely objection to a claim or claims set
forth in any Notice of Claim, and if such claim or claims shall not have been
resolved or compromised within sixty (60) days from the date of delivery of the
Notice of Objection, then such claims shall be settled by arbitration pursuant
to Section 11.5 hereof. The arbitrator shall promptly obtain such information
regarding the matter that the arbitrator deems necessary and shall decide the
matter and render a written award which shall be delivered to the Indemnitor and
Indemnitee. Any award shall be a conclusive determination of the matter and
shall be binding upon the Indemnitor and Indemnitee. If, by arbitration, it
shall be determined that the Indemnitee shall be entitled to any Indemnifiable
Damages by reason of its claim or claims, the Indemnifiable Damages so
determined shall be paid to the Indemnitee by the Indemnitor in the same manner
as if the Indemnitee had not delivered a Notice of Objection.
10.4 Participation in Defense of Third Party Claims. If any third
Person shall assert any claim against an Indemnitee which, if successful, might
result in an obligation of the Indemnitor to pay Indemnifiable Damages and which
can be remedied to the sole satisfaction of the Indemnitee by the payment of
money damages without further adverse consequence to the Indemnitee, the
Indemnitor, at the sole expense of the Indemnitor, may assume the primary
defense thereof with counsel reasonably acceptable to the Indemnitee, but only
if and so long as: (i) the Indemnitor diligently pursues the defense of such
claim; and (ii) the Indemnitor acknowledges to the Indemnitee in writing that
the claim, if resolved or settled adversely to the Indemnitee, is one for which
the Indemnitor is obligated to indemnify the Indemnitee hereunder; and (iii) the
Indemnitor reasonably demonstrates to the Indemnitee that the Indemnitee
currently possesses sufficient cash and/or other liquid assets adequate to
defend and, if necessary, in the event that the claim is resolved or settled
adversely to the Indemnitor, satisfy the claim. If the Indemnitor fails or is
unable so to elect to assume the primary defense of any such claim, the
Indemnitee may (but need not) do so; in which event the Indemnitee may defend,
settle or compromise the claim, at the expense and cost of the Indemnitor, in
any such manner as the Indemnitee reasonably deems appropriate.
10.5 Survival of Indemnification. An Indemnitor's obligation to pay
Indemnifiable Damages arising out of claims described in Sections 10.1(b),
10.1(c), 10.1(d), 10.2(b), 10.2(c) and 10.2(d) hereof shall survive the Closing
of this transaction indefinitely. The representations and warranties contained
in Articles IV and V hereof, and an Indemnitor's obligation to pay Indemnifiable
Damages arising out of Section 10.1(a) and 10.2(a) hereof, shall survive the
Closing Date, as follows:
(a) Fraudulent Breach of Representations; Certain
Representations. In the case of a claim based upon the inaccuracy or Breach of a
representation or warranty which was made
44
fraudulently or with respect to any representation or warranty contained in
Sections 4.1 through and including 4.7, 4.10, 4.20, 4.30 and 4.31 hereof,
indefinitely;
(b) Taxes. In the case of a claim based upon the
inaccuracy or Breach of a representation or warranty pertaining to taxes, for a
period equal to the applicable statute of limitations; and
(c) All Other Claims. In the case of all other claims
based upon the inaccuracy or Breach of representation or warranty, for a period
commencing on the date hereof and ending on the date in 2006 that the Contingent
Amount, if any, becomes due as described in Section 2.1(c) hereof.
No claim for recovery of Indemnifiable Damages arising out of
Section 10.1(a) or Section 10.2(a) hereof may be asserted by an Indemnitee after
the expiration of the applicable time period described in the foregoing Sections
10.5(a)-(c); provided, however, that any claim first asserted by the giving of a
Notice of Claim within the applicable survival period shall neither be abated
nor barred.
10.6 Offset. The Buyer shall be entitled (but not required) to
offset against any obligations now or hereafter owed by the Buyer to the Seller,
Xxxxxxx Properties, Shareholders or Members (including, without limitation, the
Contingent Amount which may become due and payable pursuant to Section 2.1(c)
hereof) the sum of all Indemnifiable Damages that the Buyer is entitled to
pursuant to Section 10.1 hereof. Any Indemnifiable Damages which the Buyer
elects to set-off against an obligation owed the Buyer shall be deemed "paid"
(for purposes of calculating the interest component of such Indemnifiable
Damages) not earlier than the date when the obligation against which the
Indemnifiable Damages are offset otherwise becomes fixed, due and payable to the
Seller, Xxxxxxx Properties, Shareholders or Members. For example, if
Indemnifiable Damages are incurred by the Buyer on July 1, 2002 and the Buyer
then elects to set-off such Indemnifiable Damages against the Contingent Amount
due the Seller pursuant to Section 2.1(c) hereof, such Indemnifiable Damages
shall not be deemed paid (for purposes of computing the interest component
thereof) until that time in 2006 (or, in the event of a prior disposition of the
Business, such earlier time) when such Contingent Amount becomes fixed, due and
payable. No offset made by the Buyer pursuant to this Section shall constitute a
default under any of the Buyer's payment obligations or, even if it is
subsequently determined that no Indemnifiable Damages were due the Buyer, give
rise to any right of acceleration.
10.7 Limitations on Indemnifiable Damages.
(a) Minimum Amount. Notwithstanding the foregoing, the
Buyer shall not be entitled to recover Indemnifiable Damages for any matter
described in Section 10.1(a) hereof (other than a claim under Section 10.1(a)
based upon a Breach of Sections 4.1 through and including 4.7, 4.10, 4.20, 4.22,
4.30 and 4.31) unless and until the aggregate of all claims for Indemnifiable
Damages asserted pursuant to Section 10.1(a) hereof exceeds $25,000 (but, if
such claims exceed $25,000 in the aggregate, the Buyer shall be entitled to
recover from the first dollar). Furthermore, the Buyer shall not be entitled to
recover the first $5,000 of Indemnifiable Damages for the matters described in
Section 10.1(e) hereof.
(b) Assignment of Uncollected Receivables. In the event
that Indemnifiable Damages are payable to the Buyer because all or a portion of
the Receivables are not collected by the Buyer as herein provided, the Buyer
shall assign (without recourse) such Receivables (to the
45
extent uncollected) to the Seller promptly after payment by the Indemnitors of
the Indemnifiable Damages becoming due as a result of such noncollection.
ARTICLE XI
MISCELLANEOUS
11.1 Further Assurances. Each party hereto from time to time
hereafter, and upon request, shall execute, acknowledge and deliver such other
instruments as reasonably may be required to more effectively transfer and vest
in the Buyer the Purchased Assets and Xxxxxxx Properties Purchased Assets or to
otherwise carry out the terms and conditions of this Agreement.
11.2 Benefit and Assignment. This Agreement shall be binding upon
the parties hereto, their heirs, successors, assignees, and beneficiaries in
interest. No rights under this Agreement may be assigned nor any obligations
delegated, in whole or part, by the Seller, Xxxxxxx Properties, Shareholders or
Members, other than assignment of rights (in the case of the Shareholders or
Members, upon their death in accordance with their testamentary deposition or
the laws of intestacy or, in the case of the Seller or Xxxxxxx Properties, upon
their dissolution to their respective shareholders or members). The Buyer may
assign all or any of its rights and obligations under this Agreement (including,
without limitation, in favor of any Person providing financing to the Buyer).
11.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal Laws of the State of Minnesota
(regardless of such State's conflict of laws principles), and without reference
to any rules of construction regarding the party responsible for the drafting
hereof.
11.4 Expenses. The Buyer shall pay all of its own expenses, fees or
costs incurred by it in connection with the negotiation, drafting and
performance of its obligations under this Agreement. The Shareholders and
Members (and not the Seller or Xxxxxxx Properties) shall pay all of the
expenses, fees and costs incurred by them, the Seller or Xxxxxxx Properties in
connection with the negotiation, drafting and performance of their, the Seller's
and Xxxxxxx Properties' obligations under this Agreement or the Settlement
Agreement or any other document executed in connection herewith or therewith
(including their legal accounting and other professional fees; costs of the
Commitment, the premiums for the title insurance policy and the Survey; transfer
taxes, and any costs incurred in connection with the procural of third Person
consents or Licenses), and none of such expenses, fees and costs shall have been
paid or be paid by or accrued as a liability of the Seller or Xxxxxxx
Properties.
11.5 Arbitration. Any controversy, dispute or claim arising out of
or relating to this Agreement (including, but not limited to, any claim
regarding the scope or effect of this Section and any claim that this Section is
invalid or unenforceable), or the Breach hereof or thereof, shall be settled by
a single arbitrator in binding arbitration conducted in Madison, Wisconsin in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") (or such other arbitration service as the parties may agree
upon), and judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof. The arbitrator's decision shall be in
writing. In addition to the Commercial Arbitration Rules of the AAA and unless
otherwise agreed to by the parties, the following rules shall apply:
(a) Each party shall be entitled to discovery exclusively
by the following means: (i) requests for admission,
(ii) requests for production of documents, (iii) up
46
to 15 written interrogatories (with any subpart to be
counted as a separate interrogatory), and (iv)
depositions of no more than six individuals.
(b) Unless the arbitrator finds that delay is reasonably
justified or as otherwise agreed to by the parties,
all discovery shall be completed, and the arbitration
hearing shall commence within five months after the
appointment of the arbitrator.
(c) Unless the arbitrator finds that delay is reasonably
justified, the hearing will be completed, and an
award rendered within 30 days of commencement of the
hearing.
(d) If the dispute submitted to arbitration arises from
disagreement concerning Adjusted EBITDA or the proper
calculation of the Contingent Amount pursuant to
Section 2.1(c) hereof, the arbitrator shall be a
partner at the Madison, Wisconsin office of a "Big
Five" firm of independent certified public
accountants having no then current relationship to
any of the Buyer, Seller, Xxxxxxx Properties,
Shareholders or Members.
The arbitrator's authority shall include the ability to render equitable types
of relief and, in such event, any aforesaid court may enter an Order enjoining
and/or compelling such actions or relief ordered or as found by the arbitrator.
The arbitrator also shall make a determination regarding which party's legal
position in any such controversy or claim is the more substantially correct (the
"Prevailing Party") and the arbitrator shall require the other party to pay the
legal and other professional fees and costs incurred by the Prevailing Party in
connection with such arbitration proceeding and any necessary court action.
However, notwithstanding the foregoing, the parties expressly agree that a court
of competent jurisdiction may enter a temporary restraining order or an order
enjoining a Breach of this Agreement pending a final award or further order by
the arbitrator. Such remedy, however, shall be cumulative and nonexclusive, and
shall be in addition to any other remedy to which the parties may be entitled.
11.6 Notices. Any and all notices, demands, and communications
provided for herein or made hereunder shall be given in writing and shall be
deemed given to a party at the earlier of (i) when actually delivered to such
party, (ii) when facsimile transmitted to such party to the facsimile number
indicated for such party below (or to such other facsimile number for a party as
such party may have substituted by notice pursuant to this Section) or (iii)
when mailed to such party by registered or certified U.S. Mail (return receipt
requested) or sent by overnight courier, confirmed by receipt, and addressed to
such party at the address designated below for such party (or to such other
address for such party as such party may have substituted by notice pursuant to
this Section):
(a) If to the Buyer:
Zero Zone Refrigeration, LLC
000 Xxxxxxxx Xxxxx
Xxxxx Xxxxxxx, XX 00000-0000
Attention: Xxxx Van Der Ploeg
Facsimile Number: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxxxxx, Esq.
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Xxxxxxx Xxxx & Friedrich LLP
Suite 3300
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Facsimile Number: (000) 000-0000
(b) If to the Seller, Xxxxxxx Properties, Shareholders
and/or Members:
c/o Xxxxxxxx X. Xxxxxxx
000 Xxxxxxx Xxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
With a copy to: Xxxxx Van House, Esq.
Van House & Associates
0000 Xxxxxxx Xxxx
Xxxxx, XX 00000
Facsimile Number: (000) 000-0000
11.7 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, provided that all
such counterparts, in the aggregate, shall contain the signatures of all parties
hereto.
11.8 Headings. All Section headings herein are inserted for
convenience only and shall not modify or affect the construction or
interpretation of any provision of this Agreement.
11.9 Amendment, Modification and Waiver. This Agreement may not be
modified, amended or supplemented except by mutual written agreement of all the
parties hereto. Any party may waive in writing any term or condition contained
in this Agreement and intended to be for its benefit; provided, however, that no
waiver by any party, whether by conduct or otherwise, in any one or more
instances, shall be deemed or construed as a further or continuing waiver of any
such term or condition. Each amendment, modification, supplement or waiver shall
be in writing signed by the party or the parties to be charged.
11.10 Entire Agreement. This Agreement, the Exhibits and Schedules
attached hereto and the DISCLOSURE SCHEDULE delivered herewith represent the
full and complete agreement of the parties with respect to the subject matter
hereof and supersede and replace any prior understandings and agreements among
the parties with respect to the subject matter hereof and no provision or
document of any kind shall be included in or form a part of such agreement
unless signed and delivered to the other party by the parties to be charged.
11.11 Third-Party Beneficiaries. No third parties are intended to
benefit from this Agreement, and no third-party beneficiary rights shall be
implied from anything contained in this Agreement.
11.12 Publicity. The Buyer and the Seller agree that no publicity
announcements or disclosures of any kind concerning the terms of this Agreement
or concerning the transactions contemplated hereby shall be made without the
consent of the Buyer, except to the extent that disclosure is required by legal
process or to accountants, counsel, other professionals and to lenders
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on a "need to know" basis who similarly agree to maintain the confidentiality of
the Agreement and its terms.
[SIGNATURES ON NEXT PAGE FOLLOWING]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
BUYER: SHAREHOLDERS:
ZERO ZONE REFRIGERATION, LLC
_____________________________________
By: Zero Zone, Inc., Managing Member Xxxxxx X. Xxxxxxx
By:______________________________ _____________________________________
Xxxx Van Der Ploeg, President Xxxx Xxxxx Xxxxxx
XXXXXXXX X. XXXXXXX TRUST U/A
SELLER: DATED FEBRUARY 14, 1996
SYSTEMATIC REFRIGERATION, INC. By:__________________________________
Xxxxxxxx X. Xxxxxxx, Trustee
By:_____________________________________
Xxxxxxxx X. Xxxxxxx, President By:__________________________________
Xxxxx X. Xxxxxxx, Trustee
XXXXXXX PROPERTIES, LLC XXXXX X. XXXXXXX TRUST U/A DATED
FEBRUARY 14, 1996
By:_____________________________________ By:__________________________________
Xxxxxxxx X. Xxxxxxx, Managing Member Xxxxxxxx X. Xxxxxxx, Trustee
By:__________________________________
MEMBERS: Xxxxx X. Xxxxxxx, Trustee
________________________________________
Xxxxxxxx X. Xxxxxxx
________________________________________
Xxxxx X. Xxxxxxx
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EXHIBITS
--------
Exhibit A: Employment Agreement
Exhibit B: LHDL Settlement Agreement
Exhibit C-1: Assignment and Xxxx of Sale (Seller)
Exhibit C-2: Assignment and Xxxx of Sale (Xxxxxxx Properties)
Exhibit D: Warranty Deed
Exhibit E: Subordination Agreement
Exhibit F: Opinion of Shareholders' Counsel
Exhibit G-1 Assignment and Assumption and Amendment of Contract for Private
Development
Exhibit G-2: Assignment and Assumption Agreement for Minnesota Small Business
Development Loan Program Bonds, Series 2000D, Xxx 0
Xxxxxxx X-0: Assignment of Loan Agreement and First Amendment to Loan Agreement
(Series 2000D, Lot 1)
Exhibit H-1: Assumption Agreement (Seller)
Exhibit H-2 Assumption Agreement (Xxxxxxx Properties)
DISCLOSURE SCHEDULES
--------------------
1.1(e) Equipment.
1.1(f) Vehicles.
1.2(a) Legal Description of Real Estate.
1.3(b) Excluded Personal Effects.
2.1(b)(vi) List of Seller's Contracts Assumed by Buyer.
4.2 Ownership, Organization and Qualification.
4.3 Conflicting Obligations.
4.4 Third Party Consents.
4.7 Organizational Documents.
4.8 Financial Statements.
4.9 Real Property; Leases.
4.10 Purchased Assets; Title and Condition.
4.11 All Necessary Assets; Capital Expenditures and Repairs.
4.12 Receivables.
4.13 Inventories.
4.14 Intellectual Property.
4.15 Insurance.
4.16 Licenses.
4.17 Material Contracts and Other Descriptions and Lists.
4.18 Litigation.
4.20 Environmental Compliance.
4.21 Contingent and Undisclosed Liabilities.
4.22 Taxes.
4.23 Labor Contracts.
4.24 Performance Contracts.
4.25 Employee Benefit Plans.
4.26 Products Liability; Warranties.
4.27 Changes in Financial Position.
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4.28 Events Subsequent to Latest Balance Sheets.
4.29 Customers and Suppliers.
4.31 Related Person Transactions.
4.32 Representations and Warranties True and Correct.
52