EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
BETWEEN
KEY COMPONENTS, INC.,
a New York corporation ("KCI")
and its wholly-owned subsidiary
KEY COMPONENTS, LLC,
a Delaware limited liability company ("KCLLC,"
and together with KCI, "PARENT"),
and its wholly-owned subsidiary
XXXXXX LOCK, LLC,
a Delaware limited liability company ("TARGET," and together with Parent,
"SELLERS"),
AND
HL ACQUISITION, LLC,
a Delaware limited liability company ("BUYER")
October 7, 2004
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TABLE OF CONTENTS
SS.1. DEFINITIONS............................................................9
SS.2. BASIC TRANSACTION.....................................................20
(a) Purchase and Sale of Assets...................................20
(b) Assumption of Liabilities.....................................20
(c) Preliminary Purchase Price....................................20
(d) Closing.......................................................21
(e) Deliveries at Closing.........................................21
(f) Determination of Closing Date Balance Sheet...................21
(g) Post-Closing Adjustment to Unadjusted Purchase Price..........23
(h) Allocation....................................................24
SS.3. TARGET'S REPRESENTATIONS AND WARRANTIES...............................24
(a) Organization of Sellers.......................................24
(b) Authorization of Transaction..................................24
(c) Non-contravention.............................................25
(d) Brokers' Fees.................................................25
(e) Title to Personal Property....................................25
(f) Subsidiaries..................................................25
(g) Financial Statements..........................................25
(h) Events Subsequent to Most Recent Fiscal Year End..............26
(i) Undisclosed Liabilities.......................................28
(j) Legal Compliance..............................................28
(k) Tax Matters...................................................28
(l) Real Property.................................................29
(m) Intellectual Property.........................................32
(n) Tangible Assets...............................................34
(o) Inventory.....................................................34
(p) Contracts.....................................................34
(q) Notes and Accounts Receivable.................................36
(r) Powers of Attorney............................................36
(s) Insurance.....................................................36
(t) Litigation....................................................36
(u) Product Warranty..............................................36
(v) Product Liability.............................................36
(w) Employees.....................................................37
(x) Employee Benefits.............................................38
(y) Guaranties....................................................39
(z) Environmental, Health, and Safety Matters.....................39
(aa) Certain Business Relationships With Target...................40
(bb) Customers and Suppliers......................................41
(cc) Disclosure...................................................41
(dd) Investment...................................................41
SS.4. BUYER'S REPRESENTATIONS AND WARRANTIES................................42
(a) Organization of Buyer.........................................42
(b) Authorization of Transaction..................................42
(c) Non-contravention.............................................42
(d) Brokers' Fees.................................................42
SS.5. PRE-CLOSING COVENANTS.................................................43
(a) General.......................................................43
(b) Notices and Consents..........................................43
(c) Operation of Business.........................................43
(d) Preservation of Business......................................43
(e) Full Access...................................................43
(f) Notice of Developments........................................43
(g) Exclusivity...................................................44
(h) Maintenance of Real Property..................................44
(i) Leases........................................................44
(j) Environmental Insurance Policy................................44
SS.6. CONDITIONS TO OBLIGATION TO CLOSE.....................................44
(a) Conditions to Buyer's Obligation..............................44
(b) Conditions to Target's Obligation.............................48
SS.7. POST-CLOSING AGREEMENTS...............................................49
(a) Inspection of Records.........................................49
(b) Payroll Taxes and Payroll Records.............................49
(c) Certain Assignments...........................................49
(d) Employees.....................................................50
(e) Payments of Accounts Receivable...............................50
(f) Reproration of Real Estate Taxes..............................50
(g) Covenant Not to Compete.......................................50
(h) Disclosure of Confidential Information........................51
(i) Injunctive Relief.............................................51
(j) Further Assurances............................................51
(k) Tax Clearance Certificates....................................52
(l) Environmental Matters.........................................52
SS.8. INDEMNIFICATION.......................................................52
(a) Survival of Representations and Warranties....................52
(b) Indemnification Provisions for Buyer's Benefit................52
(c) Indemnification Provisions for Target's Benefit...............55
(d) Matters Involving Third Parties...............................56
(e) Determination of Adverse Consequences.........................57
(g) Other Indemnification Provisions..............................57
(h) Change of Control.............................................58
SS.9. TERMINATION...........................................................58
(a) Termination of Agreement......................................58
(b) Effect of Termination.........................................58
SS.10. MISCELLANEOUS........................................................58
(a) Press Releases and Public Announcements.......................59
(b) No Third-Party Beneficiaries..................................59
(c) Entire Agreement..............................................59
(d) Succession and Assignment.....................................59
(e) Counterparts..................................................59
(f) Headings......................................................59
(g) Notices.......................................................59
(h) Governing Law.................................................60
(i) Amendments and Waivers........................................60
(j) Severability..................................................60
(k) Expenses......................................................61
(l) Construction..................................................61
(m) Incorporation of Exhibits and Schedules.......................61
(n) Specific Performance..........................................61
(o) Submission to Jurisdiction....................................61
(p) Bulk Transfer Laws............................................62
(q) No Consequential Damages......................................62
EXHIBIT A - Escrow Agreement
EXHIBIT B - Volatile Organic Chemicals and Chlorinated Compounds
EXHIBIT C - Form of Buyer Note
EXHIBIT D - Form of Buyer Security Agreement
EXHIBIT E - Form of Buyer Mortgage
EXHIBIT F - Forms of Assignments
EXHIBIT G - Form of Assumption
EXHIBIT H - Financial Statements
EXHIBIT I - Form of Environmental Site Protection Policy of Insurance
EXHIBIT J - Form of Opinion of Target's Counsel
EXHIBIT K - Form of Assignment of Lease
EXHIBIT L - Form of Estoppel Certificate
EXHIBIT M - Form of Opinion of Buyer's Counsel
EXHIBIT N - Form of Escrow Agreement (for Setoff with respect to Buyer Note)
EXHIBIT O - Form of Intercreditor and Subordination Agreement
DISCLOSURE SCHEDULE - Exceptions to Representations and Warranties
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "AGREEMENT") is entered into on October
7, 2004, among KEY COMPONENTS, INC., a New York corporation ("KCI"), KEY
COMPONENTS, LLC, a Delaware limited liability company ("KCLLC," and jointly and
severally with KCI, "PARENT"), and XXXXXX LOCK, LLC, a Delaware limited
liability company ("TARGET," and jointly and severally with Parent, "SELLERS"),
and HL ACQUISITION, LLC, a Delaware limited liability company ("BUYER"). Buyer
and Seller are referred to collectively herein as the "PARTIES."
RECITALS
A. Target is engaged in the business of designing, manufacturing and
marketing medium-security custom and specialty locks for original equipment
manufacturer (OEM) customers and fabricating and selling keys, locks and lock
accessories to locksmith distributors.
B. Target desires to sell and assign to Buyer substantially all of Target's
assets and certain of Target's liabilities, and Buyer desires to purchase said
assets and assume said liabilities, all on the terms and subject to the
conditions contained in this Agreement.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
AGREEMENTS
ss.1. DEFINITIONS.
"ACCOUNTS PAYABLE" means trade accounts payable of Target as of the Closing
Date to the extent included on the Closing Date Balance Sheet.
"ACCREDITED INVESTOR" has the meaning set forth in Regulation D promulgated
under the Securities Act.
"ACCRUED EXPENSES" means, as of the Closing Date, accrued and unpaid
expenses of the Target to the extent included on the Closing Date Balance Sheet,
including (a) accrued payroll, bonuses, commissions, and unpaid vacation,
personal and sick days, with respect to those employees of Target who become
employees of Buyer immediately after the Closing and (b) accrued utility
expenses.
"ACQUIRED ASSETS" means all right, title, and interest in and to all of the
assets of Target other than Excluded Assets, including, without limitation, all
of its (a) Owned Real Property and Leased Real Property; (b) tangible personal
property (such as machinery, equipment, inventories of raw materials and
supplies, manufactured and purchased parts, goods in process and finished goods,
furniture, automobiles, trucks, tractors, trailers, tools, jigs, and dies); (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions; (d) leases,
subleases, and rights thereunder; (e) agreements, contracts, guaranties,
indentures, instruments, Liens, purchase orders, quotations, bids and sales
orders, other similar arrangements, and rights thereunder; (f) accounts, notes,
and other receivables; (g) letters of credit issued to Target; (h) those
insurance policies (and rights thereunder) which do not constitute Excluded
Assets; (i) claims, deposits, prepayments, refunds, causes of action, choses in
action, rights of recovery, rights of set-off, and rights of recoupment; (j)
franchises, approvals, permits, licenses, orders, registrations, certificates,
variances, and similar rights obtained from governments and governmental
agencies; (k) books, records, ledgers, files, documents, correspondence, lists,
plats, architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, studies, reports, and other printed or
written materials; and (l) the Xxxxxx Lock Medical Plan.
"ACTUAL VALUE" has the meaning set forth in ss.2(f)(iii)(C).
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of Code
ss.1504(a) or any similar grouP defined under a similar provision of state,
local, or foreign law.
"APSLEY TRUST" means the Apsley Street Paved Parking Area Trust established
under the Declaration of Trust dated December 11, 1996.
"APSLEY TRUST PROPERTY" means the parking lot located at the Northeast
corner of Apsley Street and Xxxx Street, Hudson, Massachusetts, consisting of
approximately 17,555 square feet and legally owned by the Apsley Trust.
"ARBITRATING ACCOUNTING FIRM" has the meaning set forth in ss.2(f)(ii)
below.
"ASSUMED LIABILITIES" means (a) Accounts Payable; (b) Accrued Expenses; (c)
all obligations of Target under the agreements, contracts, insurance policies,
leases, licenses, and other arrangements entered into in the Ordinary Course of
Business and referred to and included in the definition of Acquired Assets
either (i) to furnish goods, services, and other non-Cash benefits to another
party after the Closing or (ii) to pay for goods, services, and other non-Cash
benefits that another party will furnish to it after the Closing; (d) Assumed
Real Property Taxes; (e) Target's product warranty liabilities; (f) Liabilities
of Target to Xxxx Xxxxxxx, Xxxxx Poodiak and Xxxxxx Xxxxxx for bonus
compensation under their respective bonus agreements set forth on ss.3(h)(ii) of
the DisclosurE Schedule; (g) Liabilities of Target to Xxxx Xxxxxxx, Xxxxxx
Xxxxxx and Xxxx Xxxxxxxxxx for xxxxxxxxx pay under their respective severance
agreements set forth on ss.3(h)(ii) of the Disclosure Schedule, and Target's
paymenT obligation to executive search firm PSSI in the amount of $17,000 with
respect to the recruitment of Target's controller; and (h) with respect to the
Xxxxxx Lock Medical Plan, (i) premiums due and payable, and the performance of
obligations relating to administration of, the Xxxxxx Lock Medical Plan accruing
after the Closing and (ii) Target's obligations under continuation coverage
rules of COBRA with respect to a "qualifying event," within the meaning of
Section 4980B(f) of the Code and Section 603 of ERISA, occurring on or before
Closing with respect to any Employee and their dependents.
"ASSUMED REAL PROPERTY TAXES" means general real estate and ad valorem
taxes applicable to the Owned Real Property which are accrued (but not yet due
and payable) as of the Closing Date and included on the Closing Date Balance
Sheet in the amount of the Real Property Tax Proration (subject to reproration
pursuant to ss.7(f) below).
"BUYER" has the meaning set forth in the preface above.
"BUYER MORTGAGE" has the meaning set forth in ss.2(c)(ii) below.
"BUYER NOTE" has the meaning set forth in ss.2(c)(ii) below.
"BUYER'S PLAN" has the meaning set forth in ss.8(b)(ii)(A) below.
"BUYER SECURITY AGREEMENT" has the meaning set forth in ss.2(c)(ii) below.
"CASH" means cash and cash equivalents (including marketable securities and
short-term investments) calculated in accordance with GAAP applied on a basis
consistent with the preparation of the Financial Statements.
"CERCLA" has the meaning set forth in ss.3(z)(iv) below.
"CHANGE OF CONTROL" means, with respect to KCI, the sale, exchange,
transfer or other disposition (in one transaction or a series of related
transactions) of all or substantially all of the assets of KCI or the
consummation of any reorganization, merger, consolidation, liquidation,
dissolution or other transaction with respect to KCI (i) which results in a
material diminution of the assets of KCI or (ii) after which the company
succeeding to substantially all of KCI's assets or business is not liable for or
does not assume Sellers' indemnification obligations under ss.8 below or has
materially diminished assets as compared to KCI prior to thE transaction.
Notwithstanding the foregoing, "Change of Control" shall not include a stock
sale of KCI, either directly or indirectly pursuant to a so-called reverse
triangular merger, and the incurrence of indebtedness in connection with such a
transaction shall not be deemed to result in a diminution of assets.
"CLOSING" has the meaning set forth in ss.2(d) below.
"CLOSING DATE" has the meaning set forth in ss.2(d) below.
"CLOSING DATE BALANCE SHEET" has the meaning set forth in ss.2(f)(ii)
below.
"CLOSING DATE INVENTORY" means the amount of Target's inventory included in
the Acquired Assets, as determined from the Closing Date Balance Sheet.
"CLOSING DATE NET WORKING CAPITAL" means the amount of the positive
difference, if any, of (x) Target's current assets included in the Acquired
Assets, other than inventory, minus (y) Target's current liabilities included in
the Assumed Liabilities (other than liabilities described in clauses (f) and (g)
of the definition thereof), as determined from the Closing Date Balance Sheet.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of ERISA
and Code ss.4980B and of anY similar state law.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any confidential or proprietary
information concerning the business and affairs of Sellers that is not already
generally available to the public, but specifically excluding (a) information
which is or becomes generally available to the public on a non-confidential
basis, including from a third party provided that to Buyer's knowledge such
third party is not in breach of an obligation of confidentiality with respect to
the information; (b) information that Buyer can reasonably substantiate by
documentary evidence that it possessed prior to the receipt of any Confidential
Information from Sellers; (c) information that Buyer can reasonably substantiate
by documentary evidence that it developed independently and without the
disclosure or use of any of Seller's Confidential Information in violation of
this Agreement; or (d) information that Sellers authorize may be disclosed.
"CONTROLLED GROUP" has the meaning set forth in Code ss.1563.
"DEPOSIT" means $100,000.
"DISCLOSURE SCHEDULE" has the meaning set forth in ss.3 below.
"DRAFT CLOSING DATE BALANCE SHEET" has the meaning set forth in ss.2(f)(i)
below.
"EMPLOYEE" means any current or former employee, officer, independent
contractor, agent or consultant of Target.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" (as such term is
defined in ERISA ss.3(3)) anD any other plan, program, policy, practice,
contract, agreement or other arrangement providing for compensation, deferred
compensation, profit sharing, severance, termination pay, performance awards,
stock or stock-related awards, fringe benefits or other employee benefits of any
kind for one or more employees, whether formal or informal, proposed or final,
funded or unfunded and whether or not subject to ERISA or legally binding.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA ss.3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA ss.3(1).
"ENCUMBRANCE DOCUMENTS" has the meaning set forth in ss.3(l)(xii) below.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean, as amended and
as now and hereafter in effect, all federal, state, local, and foreign statutes,
regulations, ordinances, and other provisions having the force or effect of law,
all judicial and administrative orders and determinations, all contractual
obligations, and all common law concerning public health and safety, worker
health and safety, pollution, or protection of the environment, including,
without limitation, all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances, or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise, or radiation.
"ENVIRONMENTAL INSURANCE POLICY" has the meaning set forth in ss.5(j)
below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means each entity that is treated as a single employer
with Target for purposes of Code ss.414.
"ESCROW AGENT" has the meaning set forth in ss.2(c)(i) below.
"ESCROW AGREEMENT" means the Escrow Agreement entered into concurrently
herewith and attached hereto as EXHIBIT A.
"ESTOPPEL CERTIFICATES" has the meaning set forth in ss.6(a)(xv) below.
"EXCLUDED ASSETS" means (a) Cash and marketable securities; (b) claims (and
benefits to the extent they arise therefrom) and litigation against third
parties to the extent such claims and litigation are not in any way related to
the Acquired Assets or the Assumed Liabilities; (c) Employee Benefit Plans
(other than assets related to the Xxxxxx Lock Medical Plan); (d) insurance
policies and proceeds of insurance policies related to claims made by Target
prior to the Closing Date; (e) rights arising from deposits and prepaid
expenses, if any, with respect to the Excluded Assets; (f) Target's limited
liability company certificate of formation, qualifications to conduct business
as a foreign limited liability company, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, membership interest transfer books, blank membership
interest certificates, and other documents relating to the organization,
maintenance, and existence of Target as a limited liability company; and (g) any
of the rights of Target under this Agreement (or under any side agreement
between Target on the one hand and Buyer on the other hand entered into on or
after the date of this Agreement).
"EXCLUDED LIABILITIES" means any liability or obligation of Target not
expressly included within the definition of Assumed Liabilities, including (a)
any liabilities of Target to Parent or to any of Sellers' Affiliates; (b) any
liabilities for legal, accounting, audit and investment banking fees, brokerage
commissions, and any other expenses incurred by Target in connection with the
negotiation and preparation of this Agreement and the sale of the Acquired
Assets to Buyer hereunder; (c) any liabilities for Taxes (as herein defined),
other than Assumed Real Property Taxes, Taxes included in Assumed Liabilities,
and as set forth in ss.10(k); (d) any liability for or
related to indebtedness to banks, financial institutions or other persons or
entities with respect to borrowed money or otherwise; (e) any liabilities in
connection with or relating to the cessation of Target's business activities,
and the closure of Target's operations, in Monterrey, Mexico; (f) any
liabilities under those agreements, commitments, contracts, insurance policies,
leases, licenses and permits which are not assigned to Buyer pursuant to the
provisions of this Agreement; (g) any liabilities under collective bargaining
agreements in respect of Target's employees; (h) any liabilities for medical,
dental, and disability (both long-term and short-term) benefits, whether insured
or self-insured, accruing or based upon exposure to conditions, or aggravation
of disabilities or conditions in existence, on or prior to the Closing Date or
for claims incurred or disabilities commencing on or prior to the Closing Date,
and any liability for the foregoing which arises by virtue of an employment
relationship at any time with Target, except as provided in clause (h) of the
definition of "Assumed Liabilities"; (i) any liabilities arising out of or in
connection with any EMPLOYEE BENEFIT PLANS that Target or any ERISA Affiliate
maintains, contributes to or has any obligation to contribute to, except as
provided in clause (h) of the definition of "Assumed Liabilities"; (j) any
liabilities to Employees for salaries, wages, bonuses, vacation pay and other
compensation, including any liabilities to pay bonuses or severance to employees
of Target whose employment is terminated prior to the Closing Date or in
connection with the sale of the Acquired Assets (other than liabilities included
in Accrued Expenses or described in clauses (f) and (g) of the definition of
"Assumed Liabilities"); (k) any liabilities under any federal or state civil
rights or similar law, or the "WARN Act," resulting from the termination of
employment of any Employee by Target; (l) any liabilities as a result of any
grievance proceeding, arbitration, administrative proceeding, or proceedings in
any court, based upon any employment actions, inactions or omissions by Target,
involving any Employee, or any individual who applied for employment with
Target, which relate in any way to decisions to hire or not hire such
individual, decisions to terminate, discharge or lay off such individual, and
decisions regarding payment of compensation and/or benefits to such individual
(including, without limitation, claims raised under any federal, state or local
statute or regulation, common law claims, claims based upon any employment
contract, or claims based upon any collective bargaining agreement); (m) any
claims against or liabilities for injury to or death of persons or damage to or
destruction of property (including, without limitation, any workers'
compensation claim) regardless of when said claim or liability is asserted,
including, without limitation, any claim or liability for consequential or
punitive damages in connection with the foregoing; (n) any liabilities arising
out of or in connection with any violation of a statute or governmental rule,
regulation or directive; (o) any liabilities or obligations with respect to, or
relating to, any ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS; (p) any
liabilities in connection with or arising out of the transfer or assignment of
any agreements, commitments, contracts, leases, licenses or permits (including,
without limitation, under any computer software agreement or license); (q) any
liabilities for retrospective or similar insurance premium adjustments with
respect to insurance policies transferred or assigned to Buyer pursuant to the
provisions of this Agreement; and (r) any liabilities (whether asserted before
or after Closing) for or arising in connection with any breach of a
representation, warranty, or covenant, or for any claim for indemnification,
contained in any agreement, contract, lease, license or permit to the extent
that such breach or claim arose out of or by virtue of Target's performance or
nonperformance thereunder on or prior to the Closing Date, it being understood
that, as between Target and Buyer, this subsection shall apply notwithstanding
any provisions which may be contained in any form of consent to the assignment
of any such agreement or contract, or any novation agreement, which, by its
terms, imposes such liabilities upon Buyer and which assignment or novation
agreement is accepted by
Buyer notwithstanding the presence of such a provision, and that Target's
failure to discharge any such liability shall entitle Buyer to indemnification
subject to and in accordance with the provisions of this Agreement; provided,
however, that any liability taken into account in determining the Purchase Price
Adjustment shall not be an Excluded Liability.
"FIDUCIARY" has the meaning set forth in ERISA ss.3(21).
"FINAL PLAN" has the meaning set forth in ss.8(b)(ii)(A) below.
"FINANCIAL STATEMENTS" has the meaning set forth in ss.3(g) below.
"FIRPTA AFFIDAVIT" has the meaning set forth in ss.6(a)(xvi) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time, consistently applied.
"HIGH VALUE" has the meaning set forth in ss.2(f)(iii)(B).
"HUDSON LOCK MEDICAL PLAN" means the Xxxxxx Lock medical plan made
available to the Employees and listed in ss.3(x) of the Disclosure Schedule.
"IMPROVEMENTS" has the meaning set forth in ss.3(l)(v) below.
"INDEMNIFIED PARTY" has the meaning set forth in ss.8(d)(i) below.
"INDEMNIFYING PARTY" has the meaning set forth in ss.8(d)(i) below.
"INTELLECTUAL PROPERTY" means all of the following in any jurisdiction
throughout the world: (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names and rights in telephone numbers,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including source code, executable code, data,
databases, and related documentation), (g) all advertising and promotional
materials, (h) all other proprietary rights, and (i) all copies and tangible
embodiments thereof (in whatever form or medium).
"KCI" has the meaning set forth in the preface above.
"KCLLC" has the meaning set forth in the preface above.
"KNOWLEDGE" means actual knowledge after reasonable investigation,
including, in the case of Target, the Knowledge of Xxxxxx X. Xxx, Xxxxx XxXxxxx,
Xxxx X. Xxxxxx and Xxxx Xxxxxxxx.
"LEASED REAL PROPERTY" means all leasehold or subleasehold estates and
other rights to use or occupy any land, buildings, structures, improvements,
fixtures, or other interest in real property held by Target.
"LEASED REAL PROPERTY SUBLEASES" means all subleases, licenses or other
agreements pursuant to which Target conveys or grants to any Person a
subleasehold estate in, or the right to use or occupy, any Leased Real Property
or portion thereof.
"LEASES" means all leases, subleases, licenses, concessions and other
agreements (written or oral), including all amendments, extensions, renewals,
guaranties, and other agreements with respect thereto, pursuant to which Target
holds any Leased Real Property, including the right to all security deposits and
other amounts and instruments deposited by or on behalf of Target thereunder.
"LIABILITY" means any liability or obligation of whatever kind or nature
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability for Taxes.
"LIEN" means any mortgage, pledge, lien, encumbrance, charge, or other
security interest other than (a) liens for Taxes not yet due and payable and (b)
purchase money liens and liens securing rental payments under capital lease
arrangements.
"LOW VALUE" has the meaning set forth in ss.2(f)(iii)(A).
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means any effect or
change materially adverse (or that would be materially adverse but for the
passage of time) to the business, assets, or financial condition of Target,
taken as a whole, or to the ability of Target to consummate timely the
transactions contemplated hereby.
"MOST RECENT BALANCE SHEET" means the balance sheet contained within the
Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in ss.3(g)
below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in ss.3(g) below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in ss.3(g) below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA ss.3(37).
"NEW LEASE" has the meaning set forth in ss.6(a)(xiv) below.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"OWNED REAL PROPERTY" means all land, together with all buildings,
structures, improvements and fixtures located thereon, including all electrical,
mechanical, plumbing and other building systems, fire protection, security and
surveillance systems, telecommunications, computer, wiring, and cable
installations, utility installations, and landscaping, together with all
easements and other rights and interests appurtenant thereto (including air,
oil, gas, mineral, and water rights), owned, legally or beneficially, by Target
(including the Apsley Trust Property).
"OWNED REAL PROPERTY LEASES" means all leases, licenses, or other
agreements (written or oral) pursuant to which Target conveys or grants to any
Person a leasehold estate in, or the right to use or occupy, any Owned Real
Property or portion thereof.
"PARENT" has the meaning set forth in the preface above.
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITTED ENCUMBRANCES" means with respect to each parcel of Real
Property: (a) real estate taxes, assessments and other governmental levies,
fees, or charges imposed with respect to such Real Property that are (i) not due
and payable as of the Closing Date or (ii) being contested in good faith, and in
each case for which appropriate reserves have been established in accordance
with GAAP; (b) mechanics' liens and similar liens for labor, materials, or
supplies provided with respect to such Real Property incurred in the Ordinary
Course of Business for amounts that are (i) not due and payable as of the
Closing Date or (ii) being contested in good faith, and in each case for which
appropriate reserves have been established in accordance with GAAP; (c) zoning,
building codes and other land use laws regulating the use or occupancy of such
Real Property or the activities conducted thereon that are imposed by any
governmental authority having jurisdiction over such Real Property that are not
materially violated by the current use or occupancy of such Real Property or the
operation of Target's business as currently conducted thereon; (d) easements,
covenants, conditions, restrictions, and other similar matters of record
affecting title to such Real Property that do not materially impair the value of
such Real Property or its use or occupancy in the operation of Target's business
as currently conducted thereon, to which the Parties shall mutually agree and
set forth on ss.3(l)(i)(A) of the Disclosure Schedule prior to Closing.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, any other business entity, or a
governmental entity (or any department, agency, or political subdivision
thereof).
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA ss.406 and Code
ss.4975.
"PURCHASE PRICE" has the meaning set forth in ss.2(g) below.
"PURCHASE PRICE ADJUSTMENT" has the meaning set forth in ss.2(g) below.
"REAL ESTATE IMPOSITIONS" has the meaning set forth in ss.3(l)(xiv) below.
"REAL PROPERTY" has the meaning set forth in ss.3(l)(iv) below.
"REAL PROPERTY DEBT" has the meaning set forth in ss.2(c)(ii) below.
"REAL PROPERTY LAWS" has the meaning set forth in ss.3(l)(vii) below.
"REAL PROPERTY LENDER" has the meaning set forth in ss.2(c)(ii) below.
"REAL PROPERTY PERMITS" has the meaning set forth in ss.3(l)(x) below.
"REAL PROPERTY TAX PRORATION" means the accrued general real estate and ad
valorem taxes applicable to the Owned Real Property as of the Closing Date based
upon 110% of the most recent ascertainable tax bills for the Owned Real Property
(subject to reproration pursuant to ss.7(f) below);
"REMEDIATION COSTS" means, with respect to the Suspect Lacquer and Naphtha
Tanks, any and all costs (a) to investigate, neutralize, remove, remediate
(including associated monitoring) or dispose of the compounds listed on EXHIBIT
B hereto in the soil, surface water, groundwater or to perform risk assessments
or other "no action" efforts in lieu of the foregoing (i) to the extent required
by Environmental, Health, and Safety Requirements, (ii) in response to an
imminent and substantial endangerment to the public health, safety or welfare or
to the environment, or (iii) that have been actually incurred by a government
agency or body acting under the authority of Environmental, Health and Safety
Requirements, or by third parties; (b) to restore the applicable area to
substantially the same condition it was in prior to being damaged in the course
of performing the activities described in clause (a) above; and (c) of legal
counsel to assist Target in connection with clause (a) or (b) above, provided
that such costs are reasonable.
"REPORTABLE EVENT" has the meaning set forth in ERISA ss.4043.
"SECONDING ARRANGEMENT" has the meaning set forth in ss.7(b) below.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SELLERS" has the meaning set forth in the preface above.
"SELLERS' PLAN" has the meaning set forth in ss.8(b)(ii)(A) below.
"SENIOR DEBT" has the meaning set forth in ss.2(c)(ii) below.
"SENIOR LENDER" has the meaning set forth in ss.2(c)(ii) below.
"SUSPECT LACQUER AND NAPHTHA TANKS" means the two possible underground
storage tanks as described in the Phase I Environmental Site Assessment dated
January 21, 2004, prepared by Arcadis, and the associated area where any
contamination from such tanks may have migrated.
"SUBSIDIARY" means, with respect to any Person, any corporation, limited
liability company, partnership, association, or other business entity of which
(a) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (b) if a limited
liability company, partnership, association, or other business entity (other
than a corporation), a majority of the partnership or other similar ownership
interests thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons own a majority ownership interest in
such a business entity (other than a corporation) if such Person or Persons
shall be allocated a majority of such business entity's gains or losses or shall
be or control any managing director or general partner of such business entity
(other than a corporation). The term "SUBSIDIARY" shall include all Subsidiaries
of such Subsidiary.
"SURVEYS" has the meaning set forth in ss.6(a)(xiii) below.
"TARGET" has the meaning set forth in the preface above.
"TARGET NET WORKING CAPITAL" means $1,161,000.
"TARGET INVENTORY" means $6,077,000.
"TAX" or "TAXES" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, whether computed on a separate
or consolidated, unitary or combined basis or in any other manner, including any
interest, penalty, or addition thereto, whether disputed or not and including
any obligation to indemnify or otherwise assume or succeed to the Tax liability
of any other Person.
"TAX BENEFIT" has the meaning set forth in ss.8(e) below.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"THIRD-PARTY CLAIM" has the meaning set forth in ss.8(d)(i) below.
"TITLE COMMITMENTS" has the meaning set forth in ss.6(a)(x) below.
"TITLE COMPANY" has the meaning set forth in ss.6(a)(x) below.
"TITLE POLICIES" has the meaning set forth in ss.6(a)(xi) below.
"UNADJUSTED PURCHASE PRICE" has the meaning set forth in ss.2(c) below.
"WARN ACT" has the meaning set forth in ss.3(w) below.
ss.2. BASIC TRANSACTION.
(a) PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, Buyer agrees to purchase from Target, and Target
agrees to sell, transfer, convey, and deliver to Buyer, all of the Acquired
Assets at the Closing for the consideration specified below in this ss.2.
(b) ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, Buyer agrees to assume and become responsible for
all Assumed Liabilities at the Closing. Buyer will not assume or have any
responsibility, however, with respect to any Excluded Liabilities, which shall
remain the responsibility of Target.
(c) UNADJUSTED PURCHASE PRICE. The aggregate purchase price for the
Acquired Assets shall be Four Million Six Hundred Eighty Thousand and No/100
Dollars ($4,680,000.00) (the "UNADJUSTED PURCHASE Price"). The Unadjusted
Purchase Price shall be subject to adjustment after the Closing pursuant to
ss.2(f) below.
(i) Simultaneously with Buyer's execution and delivery of this
Agreement, Buyer shall pay to Fifth Third Bank, Chicago, Illinois, as escrow
agent (the "ESCROW AGENT"), the Deposit in cash payable by wire transfer or
delivery of other immediately available funds for deposit into the escrow
account. The Deposit shall be held by the Escrow Agent pursuant to the terms of
the Escrow Agreement attached hereto as EXHIBIT A.
(ii) Buyer shall pay to Target at the Closing an amount equal to
the Unadjusted Purchase Price, less the amount of the Deposit (including any
interest earned thereon) paid to Target pursuant to the Escrow Agreement, by
delivery of (A) its promissory note in the form of EXHIBIT C hereto in the
aggregate principal amount of One Million One Hundred Seventy Thousand and
No/100 Dollars ($1,170,000.00) and (B) cash for the balance payable by wire
transfer or delivery of other immediately available funds. To secure Buyer's
payment obligations under the Buyer Note, Buyer shall execute and deliver to
Target at the Closing a security agreement in the form of EXHIBIT D hereto (the
"BUYER SECURITY AGREEMENT") and a mortgage in the form of EXHIBIT E hereto (the
"BUYER MORTGAGE"). Buyer's indebtedness to Target pursuant to the Buyer Note,
and the security interests granted by Buyer to Target pursuant to the Buyer
Security Agreement, shall be subordinate and subject to Buyer's indebtedness
incurred in connection with the Closing (the "SENIOR DEBT," including any
refinancing of any revolving credit facility not to exceed $5,000,000 and any
refinancing of the then outstanding principal amount of any term credit
facility) to a commercial lender (the "SENIOR LENDER") to finance both
the transaction contemplated hereunder and Buyer's post-Closing working capital
requirements and to the security interests granted by Buyer to the Senior Lender
to secure the satisfaction and performance of Buyer's liabilities and
obligations with respect to such Senior Debt. Further, the Buyer Mortgage shall
be subordinate and subject to any future indebtedness of Buyer (the "REAL
PROPERTY DEBT," including any refinancing not to exceed the then outstanding
principal amount thereof) to a commercial lender (the "REAL PROPERTY LENDER"),
provided that one hundred percent (100%) of the net proceeds of such Real
Property Debt shall be used to retire or prepay the then outstanding principal
amount of the Buyer Note. Target hereby agrees to sign and deliver to the Senior
Lender at Closing an Intercreditor and Subordination Agreement in form and
substance substantially similar to EXHIBIT O hereto, and, from time to time
thereafter upon request of each Senior Lender and Real Property Lender, to sign
and deliver such other "inter-creditor" or "subordination" agreement
acknowledging and agreeing to the foregoing provisions of this ss.2(c)(ii) and
including such normal and customary terms and provisions as the Senior Lender oR
the Real Property Lender may reasonably require (including a so-called
"standstill" provision).
(d) CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place by the exchange via facsimile of
executed counterparts of the documents and wire transfer of consideration
referred to in ss.2(e) below, commencing at 10:00 a.m. New York time on the
third FridaY following the effective date of the Parties' execution of this
Agreement, or on such other date, or at such other time or place, as the Parties
shall mutually agree; provided, however, that subject to ss.9 below, the date of
thE Closing shall be automatically extended from time to time for so long as any
of the conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) shall not be satisfied
or waived as provided herein. The date on which the Closing occurs in accordance
with the preceding sentence is referred to in this Agreement as the "CLOSING
DATE." The Closing shall be deemed to be effective as of the close of business
on the Closing Date.
(e) DELIVERIES AT CLOSING. At the Closing, (i) Target will deliver to
Buyer the various certificates, instruments, and documents referred to in
ss.6(a) below; (ii) Buyer will deliver to Target thE various certificates,
instruments, and documents referred to in ss.6(b) below; (iii) Target will
execute, acknowledge (if appropriate), and deliver to Buyer (A) assignments
(including Real Property and Intellectual Property transfer documents) in the
forms attached hereto as EXHIBITS F-1 through F-3 and (B) such other instruments
of sale, transfer, conveyance, and assignment as Buyer and its counsel may
reasonably request; (iv) Buyer will execute, acknowledge (if appropriate), and
deliver to Target (A) an assumption in the form attached hereto as EXHIBIT G and
(B) such other instruments of assumption as Target and its counsel may
reasonably request; (v) Buyer will execute (in the case of the Buyer Note) and
deliver to Target the consideration specified in ss.2(c) above, (vi) Buyer will
execute and deliver to Target the Buyer Security Agreement and Buyer Mortgage,
and (vii) Target will execute and deliver to the Senior Lender an intercreditor
or subordination agreement referred to in ss.2(c)(ii) above.
(f) DETERMINATION OF CLOSING DATE BALANCE SHEET.
(i) Within forty-five (45) days after the Closing Date, Buyer
will prepare and deliver to Target a draft balance sheet (the "DRAFT CLOSING
DATE BALANCE SHEET") for Target as of
the close of business on the Closing Date (determined on a pro forma basis as
though the Parties had not consummated the transactions contemplated by this
Agreement), together with a calculation of the Closing Date Net Working Capital.
Buyer will prepare the Draft Closing Date Balance Sheet on a basis consistent
with the balance sheet included within the Most Recent Financial Statements;
provided, however, that assets, liabilities, gains, losses, revenues, and
expenses in interim periods or as of dates other than year-end (which normally
are determined through the application of so-called interim accounting
conventions or procedures) shall be determined, for purposes of the Draft
Closing Date Balance Sheet, through full application of the procedures used in
preparing the balance sheet included within the Most Recent Financial
Statements. The Draft Closing Balance Sheet shall reflect only the Acquired
Assets and the Assumed Liabilities (other than liabilities described in clauses
(f) and (g) of the definition thereof). Notwithstanding, or without limitation,
as the case may be, of the foregoing:
(A) inventory shall be determined pursuant to a physical
count and valued in a manner consistent with past practices pursuant to the
methodology described on SCHEDULE 2(F)(I)(A) hereto. The physical count of
inventory shall be conducted on such date and at such time as the Parties shall
mutually agree as soon as reasonably possible following the Closing. Sellers
shall have the right to have a representative present to observe such count; and
(B) assets and liabilities shall be reflected without regard
to materiality.
(ii) If Target has any objections to the Draft Closing Date
Balance Sheet, Target shall deliver a statement describing its objections in
reasonable detail to Buyer within sixty (60) days after receiving the Draft
Closing Date Balance Sheet. If Target does not deliver such a statement of
objections to Buyer within said 60-day period, the Closing Date Balance Sheet
and calculation of Closing Date Net Working Capital delivered by Buyer shall be
deemed to have been accepted and agreed to by Target and shall be final and
binding on the Parties. Buyer and Target shall use reasonable efforts to resolve
any objections themselves. If the Parties do not obtain a final resolution
within thirty (30) days after Buyer has received the statement of objections,
however, Buyer and Target shall select an accounting firm mutually acceptable to
them to resolve any remaining objections. If Buyer and Target are unable to
agree on the choice of an accounting firm, they will select a
nationally-recognized accounting firm by lot (after excluding their respective
regular outside accounting firms). The determination of any accounting firm so
selected (the "ARBITRATING ACCOUNTING FIRM") shall be set forth in writing and
shall be conclusive and binding upon the Parties. Buyer shall revise the Draft
Closing Date Balance Sheet as appropriate to reflect the resolution of any
objections thereto pursuant to this ss.2(f)(ii). The "CLOSING DATE BALANCE
SHEET" shall mean the Draft Closing Date Balance Sheet together with anY
revisions thereto pursuant to this ss.2(f)(ii).
(iii) In the event the Parties submit any unresolved objections
to an accounting firm for resolution as provided in ss.2(f)(ii) above, Buyer and
Sellers shall share responsibility for the fees anD expenses of the accounting
firm as follows:
(A) if the accounting firm resolves all of the remaining
objections in favor of Buyer (the Closing Date Net Working Capital so determined
is referred to herein as
the "LOW VALUE"), Sellers shall be responsible for all of the fees and expenses
of the accounting firm;
(B) if the accounting firm resolves all of the remaining
objections in favor of Sellers (the Closing Date Net Working Capital so
determined is referred to herein as the "HIGH VALUE"), Buyer shall be
responsible for all of the fees and expenses of the accounting firm; and
(C) if the accounting firm resolves some of the remaining
objections in favor of Buyer and some objections in favor of Sellers (the
Closing Date Net Working Capital so determined is referred to herein as the
"ACTUAL VALUE"), Sellers shall be responsible for that fraction of the fees and
expenses of the accounting firm equal to (x) the difference between the High
Value and the Actual Value over (y) the difference between the High Value and
the Low Value, and Buyer shall be responsible for the remainder of the fees and
expenses.
(iv) Buyer will make the work papers and back-up materials used
in preparing the Draft Closing Date Balance Sheet, and the books, records, and
financial staff of Target, available to Target and its accountants and other
representatives at reasonable times and upon reasonable notice at any time
during (A) the preparation by Buyer of the Draft Closing Date Balance Sheet, (B)
the review by Target of the Draft Closing Date Balance Sheet, and (C) the
resolution by the Parties of any objections thereto.
(g) POST-CLOSING ADJUSTMENT TO UNADJUSTED PURCHASE PRICE. The
Unadjusted Purchase Price shall be adjusted as follows (the "PURCHASE PRICE
ADJUSTMENT"):
(i) If the Closing Date Net Working Capital:
(A) exceeds the Target Net Working Capital, Buyer will pay
to Target an amount equal to such excess by wire transfer or delivery of other
immediately available funds within three (3) business days after the date on
which the Closing Date Net Working Capital for Target finally is determined
pursuant to ss.2(f) above; or
(B) is less than the Target Net Working Capital, Sellers
shall pay to Buyer an amount equal to such deficiency by wire transfer or
delivery of
other immediately available funds within three (3) business days after the date
on which the Closing Date Net Working Capital for Target finally is determined
pursuant to ss.2(f) above; and
(ii) If the Closing Date Inventory:
(A) exceeds Target Inventory, then Buyer shall pay to Target
an amount equal to such excess by wire transfer or delivery of other immediately
available funds within three (3) business days after the date on which the
Closing Date Inventory for Target finally is determined pursuant to ss.2(f)
above; or
(B) is less than the difference of (x) Target Inventory
minus (y) $250,000, then Sellers shall pay to Buyer an amount equal to such
deficiency by wire transfer or delivery of
other immediately available funds within three (3) business days after the date
on which the Closing Date Inventory for Target finally is determined pursuant to
ss.2(f) above; and
The Parties' determination of Closing Date Inventory pursuant to ss.2(f) above
shall be final and the PurchasE Price Adjustment pursuant to ss.2(g)(ii) above
shall not be subject to further adjustment as a result of anY change or alleged
change in the value of Target's inventory as of the Closing Date. The Unadjusted
Purchase Price as adjusted pursuant to this ss.2(g) is referred to herein as the
"PURCHASE PRICE." Notwithstanding anythinG to the contrary herein, Sellers shall
not be obligated to indemnify Buyer against any Adverse Consequences as a result
of, or based upon or arising from, any claim or liability to the extent such
claim or liability is taken into account in determining Closing Date Net Working
Capital, Closing Date Inventory or the Purchase Price Adjustment.
(h) ALLOCATION. Buyer and Target shall mutually agree upon and prepare
an allocation of the Unadjusted Purchase Price (plus all other capitalized costs
and those Assumed Liabilities that constitute liabilities for federal income tax
purposes) among the Acquired Assets, and the non-competition provision set forth
in ss.7(g) below, in accordance with Code ss.1060 and the Treasury regulations
thereunder (and any simiLar provision of state, local or foreign law, as
appropriate). Such allocation shall be set forth on SCHEDULE 2(H); provided,
however, that after any adjustment to the Unadjusted Purchase Price is finally
determined pursuant to ss.2(f) above, such allocation shall be adjusted to
reflect the Purchase Price Adjustment, which shall be allocateD on a
dollar-for-dollar basis to the particular class of Acquired Assets or Assumed
Liabilities that gave rise to such Purchase Price Adjustment. Buyer and Seller
and their Affiliates shall report, act and file Tax Returns (including, but not
limited to Internal Revenue Service Form 8594) in all respects and for all
purposes consistent with such allocation prepared by Buyer. Target shall timely
and properly prepare, execute, file and deliver all such documents, forms and
other information as Buyer may reasonably request to prepare such allocation.
Neither Buyer nor Target shall take any position (whether in audits, tax returns
or otherwise) that is inconsistent with such allocation unless required to do so
by applicable law.
ss.3. TARGET'S REPRESENTATIONS AND WARRANTIES. Target represents and
warrants to Buyer that thE statements contained in this ss.3 are correct and
complete as of the date of this Agreement, except as set forth iN the disclosure
schedule accompanying this Agreement and initialed by the Parties (the
"DISCLOSURE SCHEDULE"). The Disclosure Schedule will be arranged in sections
corresponding to the lettered and numbered sections contained in this ss.3.
(a) ORGANIZATION OF SELLERS. Each of Sellers is a limited liability
company or corporation, as the case may be, duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its formation.
(b) AUTHORIZATION OF TRANSACTION. Each of Sellers has full power and
authority (including full limited liability company or corporate power and
authority) to execute and deliver this Agreement and to perform its obligations
hereunder. Without limiting the generality of the foregoing, the manager(s) or
board of directors, as the case may be, and sole member of Target and the
manager(s) or board of directors, as the case may be, of each Parent have duly
authorized the execution, delivery, and performance of this Agreement by Target
and each Parent,
respectively. This Agreement constitutes the valid and legally binding
obligation of each of Sellers, enforceable in accordance with its terms and
conditions.
(c) NON-CONTRAVENTION. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of Sellers is subject or any
provision of the certificate of formation, Charter, any operating agreement, or
bylaws of any of Sellers or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which any of Sellers is a party or by which it is bound or to which any of
its assets is subject (or result in the imposition of any Lien upon any of its
assets), except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, failure to give notice, or Lien would
not have a Material Adverse Effect. Sellers need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in ss.2 above), except where the failure to give notice,
tO file, or to obtain any authorization, consent, or approval would not have a
Material Adverse Effect.
(d) BROKERS' FEES. Target has no Liability to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Buyer could become liable or obligated.
(e) TITLE TO PERSONAL PROPERTY. Target has good and marketable title
to, or a valid leasehold interest in, the personal property (including
Intellectual Property) used by it, located on its premises, or shown on the Most
Recent Balance Sheet or acquired after the date thereof, free and clear of all
Liens, except for properties and assets disposed of in the Ordinary Course of
Business since the date of the Most Recent Balance Sheet. Without limiting the
generality of the foregoing, Target has good and marketable title to all of such
personal property included in the Acquired Assets, free and clear of any Liens
or restriction on transfer.
(f) SUBSIDIARIES. Target does not have, nor has it ever had, any
Subsidiaries.
(g) FINANCIAL STATEMENTS. Attached hereto as EXHIBIT H are the
following financial statements (collectively the "FINANCIAL STATEMENTS"): (i)
unaudited balance sheets and statements of income, changes in members' equity,
and cash flow as of and for the fiscal years ended December 31, 2001, December
31, 2002, and December 31, 2003 (the "MOST RECENT FISCAL YEAR END") for Target;
and (ii) unaudited balance sheets and statements of income, changes in members'
equity, and cash flow (the "MOST RECENT FINANCIAL STATEMENTS") as of and for the
four (4) months ended April 30, 2004 (the "MOST RECENT FISCAL MONTH END") for
Target. The Financial Statements (including the notes thereto, if any) have been
consistently prepared, present fairly in all material respects the financial
condition of Target as of such dates and the results of operations of Target for
such periods and are consistent with the books and records of Target; provided,
however, that the Most Recent Financial Statements are subject to normal
year-
end adjustments (which will not be material individually or in the aggregate);
further provided, that Sellers shall not be obligated to indemnify Buyer against
any Adverse Consequences as a result of, or based upon or arising from, any
breach or alleged breach of the foregoing statement relating to an inaccurate
valuation of inventory or reserves therefor, provided that Target's inventory
set forth on the Financial Statements was accounted for on a consistent basis
pursuant to the methodology described on SCHEDULE 2(F)(I)(A) hereto. ss.3(g) of
the Disclosure Schedule describes the extent to which the preparation of the
Financial Statements differs materially from GAAP.
(h) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Except as set
forth on the Disclosure Schedule, since the Most Recent Fiscal Year End, there
has not been any Material Adverse Change. Without limiting the generality of the
foregoing, since that date:
(i) except solely in connection with the cessation of Target's
business activities, and the closure of Target's operations, in Monterrey,
Mexico, Target has not sold, leased, transferred, or assigned any of its assets,
tangible or intangible, other than for a fair consideration in the Ordinary
Course of Business;
(ii) Target has not entered into any agreement, contract, lease,
or license (or series of related agreements, contracts, leases, and licenses)
either involving more than $25,000 or outside the Ordinary Course of Business;
(iii) except solely in connection with the cessation of Target's
business activities, and the closure of Target's operations, in Monterrey,
Mexico, no party (including Target) has accelerated, terminated, modified, or
cancelled any material agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) to which Target is a party
or by which any of them is bound;
(iv) Target has not imposed or permitted to exist any Lien upon
any of its assets, tangible or intangible, except for Permitted Encumbrances;
(v) Target has not made any capital expenditure (or series of
related capital expenditures) either involving more than $25,000 or outside the
Ordinary Course of Business;
(vi) Target has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of, any other Person (or series
of related capital investments, loans, and acquisitions);
(vii) Target has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation;
(viii) Target has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of Business;
(ix) Target has not cancelled, compromised, waived, or released
any right or claim (or series of related rights and claims);
(x) Target has not transferred, assigned, or granted any license
or sublicense of any rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the
Certificate of Formation or any limited liability company agreement of Target;
(xii) Target has not issued, sold, or otherwise disposed of any
of its membership interests, or granted any options, warrants, or other rights
to purchase or obtain (including upon conversion, exchange, or exercise) any of
its membership interests;
(xiii) Target has not declared, set aside, or paid any
distribution in respect of its membership interests (whether in cash or in kind)
or redeemed, purchased, or otherwise acquired any of its membership interests;
(xiv) Target has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xv) Target has not made any loan to, or entered into any other
transaction with, any of its managers, officers, and employees outside the
Ordinary Course of Business;
(xvi) Target has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xvii) Target has not granted any increase in the base
compensation of any of its managers, officers, and employees outside the
Ordinary Course of Business;
(xviii) Target has not adopted, amended, modified, or terminated
any bonus, profit sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its managers, officers, and employees (or
taken any such action with respect to any other Employee Benefit Plan);
(xix) except in connection with the cessation of Target's
business activities, and the closure of Target's operations, in Monterrey,
Mexico, Target has not made any other material change in employment terms for
any of its managers, officers, and employees outside the Ordinary Course of
Business;
(xx) Target has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xxi) Target has not paid any amount to any third party with
respect to any Liability (including any costs and expenses Target has incurred
or may incur in connection with this Agreement and the transactions contemplated
hereby) that would not constitute an Assumed Liability if in existence as of the
Closing;
(xxii) Target has not discharged a material Liability or Lien
outside the Ordinary Course of Business;
(xxiii) Target has not made any loans or advances of money;
(xxiv) Target has not disclosed any Confidential Information,
except under customary nondisclosure agreements; and
(xxv) Target has not committed to any of the foregoing.
(i) UNDISCLOSED LIABILITIES. Target does not have any material
Liability required to be set forth on a balance sheet prepared in accordance
with GAAP, except for (i) Liabilities set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) and (ii) Liabilities that have
arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business
(none of that results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
(j) LEGAL COMPLIANCE. Target is in compliance, and has complied during
the past three (3) years, with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder and including the Foreign Corrupt Practices Act, 15 U.S.C.
78dd-1 et seq.) of federal, state, local, and foreign governments (and all
agencies thereof), and no action, suit, proceeding, hearing, investigation, or
any written charge, complaint, claim, demand, or notice has been filed or
commenced against it alleging any failure so to comply, except where the failure
to comply would not have a Material Adverse Effect.
(k) TAX MATTERS.
(i) Target is and has always been disregarded as an entity
separate from its owner for federal income tax purposes pursuant to Treasury
Regulation ss.301.7701-3(b)(1)(ii).
(ii) Target or Sellers, as the case may be, have timely filed all
Tax Returns required to be filed in connection with Target's assets and
business. All such Tax Returns were correct and complete in all material
respects and were prepared in substantial compliance with all applicable laws
and regulations. All Taxes owed by Target or in connection with Target's assets
and business (whether or not shown or required to be shown on any Tax Return),
have been paid. Except as set forth in ss.3(k)(i) of the DisclosurE Schedule,
Sellers are not currently the beneficiaries of any extension of time within
which to file any Tax Return of Target or in connection with Target's assets or
business. No claim has ever been made by an authority in a jurisdiction where
Sellers do not file Tax Returns for Target or in connection with Target's assets
or business that Target, or its assets or business, is or may be subject to
taxation by that jurisdiction. There are no Liens on any of the assets of Target
that arose in connection with any failure (or alleged failure) to pay any Tax.
(iii) Sellers have withheld and paid all Taxes required to have
been withheld and paid in connection with any amounts paid or owing to any
employee, independent contractor, creditor, or member of Target, or any other
third party in connection with Target's business, and all Forms W-2 and 1099
required with respect thereto have been properly completed and timely filed.
(iv) There is no dispute or claim concerning any Tax liability of
Target or in connection with Target's assets or business claimed or raised by
any authority in writing.
(v) Sellers have not waived any statute of limitations in respect
of Taxes, or agreed to any extension of time with respect to a Tax assessment or
deficiency, with respect to Target's assets or business.
(vi) None of the Assumed Liabilities is an obligation to make a
payment that is not deductible under Code ss.280G.
(l) REAL PROPERTY.
(i) ss.3(l)(i) of the Disclosure Schedule sets forth the address
and description oF the use of each parcel of Owned Real Property. With respect
to each parcel of Owned Real Property:
(A) Target has fee simple title, free and clear of all liens
and encumbrances, except Permitted Encumbrances; provided, however, that the
Apsley Trust Property is owned legally by the Apsley Trust of which KCI is the
sole beneficiary. Attached to ss.3(l)(i) of the Disclosure Schedule is A true
and correct copy of the Declaration of Trust establishing the Apsley Trust, as
amended;
(B) except as set forth in ss.3(l)(i)(B) of the Disclosure
Schedule, TargeT has not leased or otherwise granted to any Person the right to
use or occupy such Owned Real Property or any portion thereof; and
(C) there are no outstanding options, rights of first offer
or rights of first refusal to purchase or lease such Owned Real Property or any
portion thereof or interest therein.
(ii) ss.3(l)(ii) of the Disclosure Schedule sets forth the
address of each parcel oF Leased Real Property, and a true and complete list of
all Leases for each such Leased Real Property (including the date and name of
the parties to such Lease document). Target has delivered to Buyer a true and
complete copy of each such Lease document, and in the case of any oral Lease, a
written summary of the material terms of such Lease. Except as set forth in
ss.3(l)(ii) of the Disclosure Schedule, with respect to each of the Leases:
(A) such Lease is legal, valid, binding, enforceable and in
full force and effect;
(B) the transactions contemplated by this Agreement do not
require the consent of any other party to such Lease, will not result in a
breach of or default under such Lease, and will not otherwise cause such Lease
to cease to be legal, valid, binding, enforceable and in full force and effect
on identical terms following the Closing;
(C) to Target's Knowledge, Target's possession and quiet
enjoyment of the Leased Real Property under such Lease has not been disturbed
and, to Target's Knowledge, there are no disputes with respect to such Lease;
(D) neither Target nor, to Target's Knowledge, any other
party to the Lease is in breach of or default under such Lease, and, to Target's
Knowledge, no event has occurred or circumstance exists that, with the delivery
of notice, the passage of time or both, would constitute such a breach or
default, or permit the termination, modification or acceleration of rent under
such Lease;
(E) no security deposit or portion thereof deposited with
respect to such Lease has been applied in respect of a breach of or default
under such Lease that has not been redeposited in full; (F) Target does not owe,
nor will it owe in the future, any brokerage commissions or finder's fees with
respect to such Lease;
(G) the other party to such Lease is not an Affiliate of,
and otherwise does not have any economic interest in, Target;
(H) except as set forth in the Disclosure Schedule, Target
has not subleased, licensed or otherwise granted any Person the right to use or
occupy the Leased Real Property or any portion thereof;
(I) Target has not collaterally assigned or granted any
other Lien in such Lease or any interest therein; and
(J) except as set forth in the Disclosure Schedule, there
are no Liens on the estate or interest created by such Lease.
(iii) Target is not a party to any Owned Real Property Leases or
Leased Real Property Subleases.
(iv) The Owned Real Property identified in ss.3(l)(i) of the
Disclosure Schedule anD the Leased Real Property identified in ss.3(l)(ii) of
the Disclosure Schedule (collectively, the "REAL PROPERTY") comprise all of the
real property used in Target's business; and Target is not a party to any
agreement or option to purchase any real property or interest therein.
(v) All buildings, structures, fixtures, and all material
components thereof, including the roof, foundation, load-bearing walls, and
other structural elements thereof, heating, ventilation, air conditioning,
mechanical, electrical, plumbing and other building systems, environmental
control, remediation and abatement systems, sewer, storm, and waste water
systems, irrigation and other water distribution systems, parking facilities,
fire protection, security and surveillance systems, and telecommunications,
computer, wiring, and cable installations, included in the Real Property (the
"IMPROVEMENTS") are in working condition and repair and sufficient for the
operation of Target's business. To Target's Knowledge, there are no structural
deficiencies or latent defects affecting any of the Improvements and there are
no facts or conditions affecting any of the Improvements which would,
individually or in the aggregate, interfere in any material respect with the use
or occupancy of the Improvements or any portion thereof in the operation of
Target's business as currently conducted thereon.
(vi) There is no condemnation, expropriation or other proceeding
in eminent domain, pending or, to Target's Knowledge, threatened, affecting any
parcel of Real Property or any portion thereof or interest therein. To Target's
Knowledge, there is no injunction, decree, order, writ or judgment outstanding,
and Target has not received any written notice of any claim, litigation,
administrative action or similar proceeding, pending or, to Target's Knowledge,
threatened, relating to the ownership, lease, use or occupancy of the Real
Property or any portion thereof.
(vii) To Target's Knowledge, the Real Property is in material
compliance with all applicable building, zoning, subdivision, health and safety
and other land use laws, including the Americans with Disabilities Act of 1990,
as amended, and all insurance requirements affecting the Real Property
(collectively, the "REAL PROPERTY LAWS"), and to Target's Knowledge, the current
use and occupancy of the Real Property and operation of Target's business
thereon do not violate any Real Property Laws. Target has not received any
written notice of violation of any Real Property Law.
(viii) Each parcel of Owned Real Property has direct vehicular
and pedestrian access to a public street adjoining the Owned Real Property, or
has vehicular and pedestrian access to a public street via an insurable,
permanent, irrevocable and appurtenant easement benefiting such parcel of Real
Property, and such access is not dependent on any land or other real property
interest that is not included in the Owned Real Property. None of the
Improvements or any portion thereof is dependent for its access, use or
operation on any land, building, improvement or other real property interest
that is not included in the Owned Real Property.
(ix) To Target's Knowledge, all water, oil, gas, electrical,
steam, compressed air, telecommunications, sewer, storm and waste water systems
and other utility services or systems for the Real Property are operational and
sufficient for the operation of Target's business as currently conducted
thereon.
(x) All certificates of occupancy, permits, licenses, franchises,
approvals and authorizations (collectively, the "REAL PROPERTY PERMITS") of all
governmental authorities, board of fire underwriters, association or any other
entity having jurisdiction over the Real Property that are required or
appropriate to use or occupy the Real Property or operate Target's business as
currently conducted thereon have been issued and are in full force and effect.
ss.3(l)(x) of the Disclosure Schedule lists all material ReaL Property Permits
held by Target with respect to each parcel of Real Property. Target has not
received any written notice from any governmental authority or other entity
having jurisdiction over the Real Property threatening a suspension, revocation,
modification or cancellation of any Real Property Permit and, to Target's
Knowledge, there is no basis for the issuance of any such notice or the taking
of any such action. The Real Property Permits are transferable to Buyer without
the consent or approval of the issuing governmental authority or entity; no
disclosure, filing or other action by Target is required in connection with such
transfer; and Buyer shall not be required to assume any additional liabilities
or obligations under the Real Property Permits as a result of such transfer.
(xi) The classification of each parcel of Real Property under
applicable zoning laws, ordinances and regulations permits the use and occupancy
of such parcel and the operation of Target's business as currently conducted
thereon, and permits the Improvements located
thereon as currently constructed, used and occupied. There are sufficient
parking spaces, loading docks and other facilities at such parcel to comply with
such zoning laws, ordinances and regulations. Target's use or occupancy of the
Real Property or any portion thereof or the operation of Target's business as
currently conducted thereon is not dependent on a "permitted non-conforming use"
or "permitted non-conforming structure" or similar variance, exemption or
approval from any governmental authority.
(xii) To Target's Knowledge, the current use and occupancy of the
Real Property and the operation of Target's business as currently conducted
thereon do not violate any easement, covenant, condition, restriction or similar
provision in any instrument of record or other unrecorded agreement affecting
such Real Property (the "ENCUMBRANCE DOCUMENTS"). Target has not received any
written notice of violation of any Encumbrance Documents, and to Target's
Knowledge there is no basis for the issuance of any such notice or the taking of
any action for such violation.
(xiii) To Target's Knowledge, none of the Improvements encroaches
on any land that is not included in the Real Property or on any easement
affecting such Real Property, or violates any building lines or set-back lines,
and there are no encroachments onto the Real Property, or any portion thereof,
would interfere with the use or occupancy of such Real Property or the continued
operation of Target's business as currently conducted thereon.
(xiv) To Target's Knowledge, each parcel of Real Property is a
separate lot for real estate tax and assessment purposes, and no other real
property is included in such tax parcel. There are no Taxes, assessments, fees,
charges or similar costs or expenses imposed by any governmental authority,
association or other entity having jurisdiction over the Real Property
(collectively, the "REAL ESTATE IMPOSITIONS") with respect to any Real Property
or portion thereof that are delinquent. To Target's Knowledge, the Title
Commitments set forth all Real Estate Impositions that are due and payable with
respect to such parcel, and there is no pending or threatened increase or
special assessment or reassessment of any Real Estate Impositions for such
parcel.
(xv) To Target's Knowledge, none of the Owned Real Property or
any portion thereof is located in a flood hazard area (as defined by the Federal
Emergency Management Agency).
(m) INTELLECTUAL PROPERTY.
(i) Target owns or possesses or has the right to use pursuant to
a valid and enforceable written license, sublicense, agreement, or permission
all Intellectual Property used in or necessary for the operation of the business
of Target as presently conducted. Each item of Intellectual Property owned or
used by Target immediately prior to the Closing will be owned or available for
use by Buyer on identical terms and conditions immediately subsequent to the
Closing hereunder without expiration or interruption or additional payment
therefor.
(ii) To Target's Knowledge, Target has not interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties. Target has never received any
written charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or violation
(including any claim that Target must license or refrain from using any
Intellectual Property rights of any third party). To Target's Knowledge, no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of Target.
(iii) ss.3(m)(iii) of the Disclosure Schedule identifies each
patent or registratioN that has been issued to Target with respect to any of its
Intellectual Property, identifies each pending patent application or application
for registration that Target has made with respect to any of its Intellectual
Property, and identifies each license, sublicense, agreement, or other
permission that Target has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). Target has delivered to
Buyer correct and complete copies of all such patents, registrations,
applications, licenses, sublicenses, agreements, and permissions (as amended to
date) and has made available to Buyer correct and complete copies of all other
written documentation evidencing ownership and prosecution (if applicable) of
each such item. ss.3(m)(iii) of the Disclosure Schedule also identifies each
material unregistered trademark, service xxxx, tradE name, corporate name or
Internet domain name, computer software item (other than commercially available
off-the-shelf software purchased or licensed for less than a total cost of
$1,000 in the aggregate) used by Target in connection with its business. With
respect to each item of Intellectual Property required to be identified in
ss.3(m)(iii) of the Disclosure Schedule:
(A) Target owns and possesses all right, title, and interest
in and to the item, free and clear of any Lien, license, or other restriction or
limitation regarding use or disclosure;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation, or
any written charge, complaint, claim, or demand is pending or, to Target's
Knowledge, is threatened that challenges the legality, validity, enforceability,
use, or ownership of the item, and there are no grounds for the same;
(D) Target has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other conflict with
respect to the item; and
(E) no loss or expiration of the item is threatened or
pending, except for patents expiring at the end of their statutory terms (and
not as a result of any act or omission by Sellers, including without limitation,
a failure by Sellers to pay any required maintenance fees).
(iv) ss.3(m)(iv) of the Disclosure Schedule identifies each item
of IntellectuaL Property that any third party owns and that Target uses pursuant
to license, sublicense, agreement, or permission. Target has delivered to Buyer
correct and complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each item of Intellectual
Property required to be identified in ss.3(m)(iv) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission
covering the item is, and following the Closing will continue to be, legal,
valid, binding, enforceable, and in full force and effect in all material
respects;
(B) to Target's Knowledge, no party to the license,
sublicense, agreement, or permission is in material breach or default, and no
event has occurred that with notice or lapse of time would constitute a material
breach or default or permit termination, modification, or acceleration
thereunder;
(C) to Target's Knowledge, no action, suit, proceeding,
hearing, investigation, or any written charge, complaint, claim, or demand is
pending or, to Target's Knowledge, is threatened that challenges the legality,
validity, or enforceability of the underlying item of Intellectual Property, and
there are no grounds for the same; and
(D) Target has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(n) TANGIBLE ASSETS. Target owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted. Each such tangible asset required to conduct Target's
business as it is currently conducted is in operating condition and repair
(subject to normal wear and tear), and is suitable for the purposes for which it
presently is used. Except as set forth in the preceding sentence, all such
machinery and equipment is being sold AS IS, WHERE IS, WITH ALL FAULTS, and
Target makes no express or implied representation or warranty concerning such
machinery and equipment except as expressly set forth in this Agreement.
(o) INVENTORY. The inventory of Target consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods. Target has managed its inventory in accordance with the past custom and
practice of Target. The condition, composition and level of Target's inventory
is sufficient for the continuing conduct of Target's business as currently
conducted.
(p) CONTRACTS. ss.3(p) of the Disclosure Schedule lists the following
contracts and otheR agreements to which Target is a party:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease payments in
excess of $25,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one (1) year, result in a
material loss to Target, or involve consideration in excess of $25,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $25,000 or under which
it has imposed a Lien on any of its assets, tangible or intangible;
(v) any material agreement concerning confidentiality or
non-competition;
(vi) any agreement involving any of Sellers or their Affiliates
(other than Target);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of any Employee;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $25,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xi) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect;
(xii) any agreement under which it has granted any Person any
registration rights (including, without limitation, demand and piggyback
registration rights);
(xiii) any settlement, conciliation or similar agreement, the
performance of which will involve payment after the Closing Date of
consideration in excess of $25,000;
(xiv) any agreement under which Target has advanced or loaned any
other Person amounts in the aggregate exceeding $25,000; or
(xv) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000.
Target has delivered to Buyer a correct and complete copy of each written
agreement listed in ss.3(p) of thE Disclosure Schedule (as amended to date) and
a written summary setting forth the terms and conditions of each oral agreement
referred to in ss.3(p) of the Disclosure Schedule. With respect to each such
agreement: (A) thE agreement is legal, valid, binding, enforceable, and in full
force and effect in all material respects; (B) the agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect in all material
respects following the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above); (C)
neither Target nor, to Target's Knowledge, any third party is in breacH or
default, and to Target's Knowledge, no event has occurred that with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or
acceleration, under the agreement; and (D) no party has repudiated in writing
any provision of the agreement.
(q) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable
of Target are reflected properly on their books and records, are valid
receivables that arose in the Ordinary Course of Business subject to no setoffs
or counterclaims, and are, to Target's Knowledge, collectible, subject only to
the reserve for bad debts set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of Target.
(r) POWERS OF ATTORNEY. Except as set forth in ss.3(r) of the
Disclosure Schedule, therE are no outstanding powers of attorney executed on
behalf of Target.
(s) INSURANCE. ss.3(s) of the Disclosure Schedule sets forth any
claims made with respecT to each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage and bond and
surety arrangements) to which Target has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past three (3)
years. Target has been covered during the past three (3) years by insurance in
scope and amount customary and reasonable for the business in which it has
engaged during the aforementioned period.
(t) LITIGATION. ss.3(t) of the Disclosure Schedule sets forth each
instance within thE last three (3) years in which Target (i) was or is subject
to any outstanding injunction, judgment, order, decree, ruling, or charge or
(ii) was or is a party or, to Target's Knowledge, is threatened to be made a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. To Target's
Knowledge, there is no basis to reasonably expect that any of the actions,
suits, proceedings, hearings, and investigations set forth in ss.3(t) of the
Disclosure Schedule will result in any Material Adverse Change.
(u) PRODUCT WARRANTY. To Target's Knowledge, each product
manufactured, sold, leased, or delivered by Target has been in conformity in all
material respects with all applicable contractual commitments and all express
and implied warranties, and Target does not have any Liability (and there is no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement or repair thereof or other damages in
connection therewith, subject only to the reserve for product warranty claims
and sales returns set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of Target. ss.3(u)
of the Disclosure SchedulE includes copies of the standard terms and conditions
of sale or lease for Target (containing applicable guaranty, warranty, and
indemnity provisions). No product manufactured, sold, leased, or delivered by
Target is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease set forth in ss.3(u)
of the Disclosure Schedule.
(v) PRODUCT LIABILITY. To Target's Knowledge, Target does not have any
Liability (and there is no basis for any present or future action, suit,
proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to any
material Liability) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product manufactured, sold,
leased, or delivered by Target.
(w) EMPLOYEES.
(i) With respect to the business of Target:
(A) there is no collective bargaining agreement or
relationship with any labor organization;
(B) to Target's Knowledge, no manager or executive of Target
(1) has any present intention to terminate his or her employment, or (2) is a
party to any confidentiality, non-competition, proprietary rights or other such
agreement between such employee and any Person besides such entity that would be
material to the performance of such employee's employment duties, or the ability
of such entity or Buyer to conduct the business of such entity;
(C) no labor organization or group of employees has filed
any representation petition or made any written or oral demand for recognition;
(D) to Target's Knowledge, no union organizing or
decertification efforts are underway or threatened and no other question
concerning representation exists;
(E) no labor strike, work stoppage, slowdown, or other
material labor dispute has occurred, and none is underway or, to Target's
Knowledge, threatened;
(F) there is no workers' compensation liability, experience,
or matter that could have a Material Adverse Effect;
(G) there is no employment-related charge, complaint,
grievance, investigation, inquiry, or obligation of any kind, pending or, to
Target's Knowledge, threatened, in any forum, relating to an alleged violation
or breach by Target (or its officers or directors) of any law, regulation, or
contract; and,
(H) to Target's' Knowledge, no employee or agent of Target
has committed any act or omission giving rise to material liability for any
violation or breach identified in subsection (G) above.
(ii) Except as set forth in ss.3(w) of the Disclosure Schedule,
(A) there are no employment contracts or severance agreements with any employees
of Target, and (B) there are no written personnel policies, rules, or procedures
applicable to employees of Target.
(iii) With respect to this transaction, any notice required under
any law or collective bargaining agreement has been given, and all bargaining
obligations with any employee representative have been, or prior to the Closing
Date will be, satisfied. Except for the cessation of Target's business
activities, and the closure of Target's operations, in Monterrey,
Mexico, within the past three (3) years, Target has not implemented any plant
closing or layoff of employees that could implicate the Worker Adjustment and
Retraining Notification Act of 1988, as amended, or any similar foreign, state,
or local law, regulation, or ordinance (collectively, the "WARN ACT"), and no
such action will be implemented without advance notification to Buyer.
(x) EMPLOYEE BENEFITS.
(i) ss.3(x) of the Disclosure Schedule lists each Employee
Benefit Plan that TargeT maintains or to which Target contributes or has any
obligation to contribute.
(A) Target has performed in all material respects all
obligations required to be performed under each such Employee Benefit Plan (and
each related trust, insurance contract, or fund), and each such Employee Benefit
Plan has been maintained, funded and administered in all material respects in
accordance with its terms (and with the terms of each related trust, insurance
contract, or fund) and in compliance with all applicable laws, statutes, orders,
rules and regulations, including but not limited to ERISA and the Code.
(B) All required reports and descriptions (including Form
5500 annual reports, summary annual reports, and summary plan descriptions) have
been timely filed and/or distributed in all material respects in accordance with
the applicable requirements of ERISA and the Code with respect to each such
Employee Benefit Plan. Each Employee Plan that is a "group health plan" within
the meaning of Section 4980B(g)(2) of the Code maintained by the Target or any
ERISA Affiliate (including the Xxxxxx Lock Medical Plan), has been administered
in all material respects in compliance with the continuation requirements
contained in COBRA as set forth in the Code and any regulations promulgated or
proposed thereunder.
(C) All contributions (including all employer contributions
and employee salary reduction contributions) that are due have been made within
the time periods prescribed by ERISA and the Code to each such Employee Benefit
Plan that is an Employee Pension Benefit Plan and all contributions for any
period ending on or before the Closing Date that are not yet due have been made
to each such Employee Pension Benefit Plan or accrued in accordance with the
past custom and practice of Target. All premiums or other contributions for all
periods ending on or before the Closing Date have been paid with respect to each
such Employee Benefit Plan that is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan that is intended to meet
the requirements of a "qualified plan" under Code ss.401(a) has received a
determination letter from the InternaL Revenue Service that such Employee
Benefit Plan is so qualified. Such determination letter includes any applicable
requirements under the Retirement Protection Act of 1994 provisions of the
Uruguay Round Agreements Act implementing the General Agreement on Trade and
Tariffs, the Uniformed Services Employment and Reemployment Rights Act of 1994,
the Small Business Job Protection Act of 1996 and the Taxpayer Relief Act of
1997. No such determination letter has been revoked, nor to Target's Knowledge
has revocation been threatened. To Target's Knowledge, nothing has occurred or
is expected to occur that would adversely affect the qualified status of such
Employee Benefit Plan subsequent to the issuance of such determination letter.
(E) To Target's Knowledge, there have been no Prohibited
Transactions with respect to any such Employee Benefit Plan and no Fiduciary has
any Liability for any material breach of fiduciary duty or any other material
failure to act or comply in connection with the administration or investment of
the assets of any such Employee Benefit Plan. No action, suit, proceeding,
hearing, or investigation with respect to the administration or the investment
of the assets of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or, to Target's Knowledge, threatened.
(ii) Neither Target nor any ERISA Affiliate maintains,
contributes to, or has any obligation to contribute to any Employee Pension
Benefit Plan that is a "defined benefit plan" (as defined in ERISA ss.3(35)).
(iii) Neither Target nor any ERISA Affiliate is or ever has been
a party to a Multiemployer Plan. Neither Target nor any ERISA Affiliate
contributes to, has any obligation to contribute to, or has any withdrawal
liability (as defined in ERISA ss.4201) under or with respect to any
Multiemployer Plan.
(iv) Target does not maintain, contribute to or have an
obligation to contribute to, or have any Liability with respect to, any Employee
Welfare Benefit Plan providing health or life insurance or other welfare-type
benefits for any retired or terminated Employee (or any spouse or other
dependent thereof) or of any other Person other than in accordance with COBRA or
any other statute. Neither Target nor any ERISA Affiliate provides or has
promised any retired or terminated Employee (or any spouse or other dependent
thereof) or any other Person any medical or other benefit coverage under the
Xxxxxx Lock Medical Plan other than in accordance with COBRA or any other
statute.
(y) GUARANTIES. Target is not a guarantor or otherwise liable for
any Liability (including indebtedness) of any other Person.
(z) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(i) Target and its Affiliates are in compliance in all material
respects with all Environmental, Health, and Safety Requirements in respect of
the Real Property, their facilities thereon, and their operation of the
business.
(ii) Without limiting the generality of the foregoing, each of
Target and its Affiliates has obtained and is in compliance in all material
respects with, all permits, licenses and other authorizations that are required
pursuant to Environmental, Health, and Safety Requirements for the occupation of
its facilities and the operation of its business; and a list of all such
material permits, licenses and other authorizations is set forth on ss.3(z)(ii)
of the Disclosure Schedule.
(iii) Except as set forth in the Disclosure Schedule, neither
Target nor any of its Affiliates or, to Target's Knowledge, its predecessors,
have received any written or oral notice, report or other information regarding
any actual or alleged violation of Environmental, Health, and Safety
Requirements, or any Liabilities, including any material investigatory,
remedial or corrective obligations, relating to the Real Property, their
facilities thereon, or their operation of the business arising under
Environmental, Health, and Safety Requirements.
(iv) Except as set forth in the Disclosure Schedule, neither
Target nor any of its Affiliates or, to Target's Knowledge, its predecessors,
has treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, manufactured, distributed, or released any substance,
including without limitation any hazardous substance, or owned or operated any
property or facility (and no such property or facility is contaminated by any
such substance) so as to give rise to any current or future Liabilities,
including any Liability for fines, penalties, response costs, corrective action
costs, personal injury, property damage, natural resources damages or attorneys'
fees, pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Solid Waste Disposal Act, as
amended, or any other Environmental, Health, and Safety Requirements.
(v) Except as set forth in the Disclosure Schedule, neither
Target nor any of its Affiliates or, to Target's Knowledge, its predecessors,
has assumed, undertaken or otherwise become subject to any material Liability,
including without limitation any obligation for corrective or remedial action,
of any other Person relating to Environmental, Health, and Safety Requirements.
(vi) No facts, events or conditions relating to the past or
present facilities, properties or operations of Target, its Affiliates or, to
Target's Knowledge, its predecessors, will prevent, hinder or limit continued
compliance with Environmental, Health, and Safety Requirements, give rise to any
material investigatory, remedial or corrective obligations pursuant to
Environmental, Health, and Safety Requirements, or give rise to any other
material Liabilities pursuant to Environmental, Health, and Safety Requirements,
including without limitation any relating to on-site or off-site releases or
threatened releases of hazardous materials, substances or wastes, personal
injury, property damage or natural resources damage.
(vii) Target has furnished to Buyer all environmental audits,
reports and other material environmental documents relating to its or its
predecessors' or Affiliates' past or current properties, facilities, or
operations that are in its possession or under its reasonable control.
(viii) The information furnished by Target to complete the
application with respect to the Environmental Insurance Policy (including but
not limited to information regarding any pollution incident that commenced prior
to the inception of such policy or regarding transport or arrangement to
transport a hazardous substance to an off-site location for treatment, storage
or disposal) does not contain any untrue statement of material fact or omit any
material fact necessary in order to make the statements and information
contained in the application, in light of the circumstances in which they are
made, true, accurate and complete.
(aa) CERTAIN BUSINESS RELATIONSHIPS WITH TARGET. Neither Parent nor
any of its Affiliates (other than Target), or any of Sellers' managers,
directors, officers, employees and shareholders, has been involved in any
material business arrangement or relationship with Target within the past twelve
(12) months, and none of the foregoing owns any material asset, tangible or
intangible, that is used in the business of Target. Without limiting the
foregoing, no
transaction between or among Target and Parent and any of its Affiliates is
included in the Financial Statements.
(bb) CUSTOMERS AND SUPPLIERS.
(i) ss.3(bb) of the Disclosure Schedule lists the ten (10)
largest customers oF Target (on a consolidated basis) for each of the two (2)
most recent fiscal years and sets forth opposite the name of each such customer
the dollar amount and percentage of consolidated net sales attributable to such
customer. ss.3(bb) of the Disclosure Schedule also lists any additional current
customers that Target anticipateS shall be among the ten (10) largest customers
for the current fiscal year.
(ii) Since the date of the Most Recent Balance Sheet, no material
supplier of Target has indicated in writing that it will stop, or materially
decrease the rate of, supplying materials, products or services to Target, and
no customer listed on ss.3(bb) of the Disclosure Schedule has indicated iN
writing that it will stop, or materially decrease the rate of, buying materials,
products or services from Target.
(cc) DISCLOSURE. The representations and warranties contained in this
ss.3 do not omit tO state any material fact necessary in order to make the
statements and information contained in this ss.3, in lighT of the circumstances
in which they are made, not misleading.
(dd) INVESTMENT. (i) Target (A) understands that the Buyer Note has
not been, and will not be, registered under the Securities Act, or under any
state securities laws, and is being offered and sold in reliance upon federal
and state exemptions for transactions not involving any public offering, (B) is
acquiring the Buyer Note solely for its own account for investment purposes, and
not with a view to the distribution thereof (except to Target's member), (C) has
received certain information concerning Buyer and has had the opportunity to
obtain additional information as desired in order to evaluate the merits and the
risks inherent in holding the Buyer Note, (D) is able to bear the economic risk
and lack of liquidity inherent in holding the Buyer Note, and (E) is an
Accredited Investor for the reasons set forth in ss.3(dd) of the Disclosure
Schedule.
(ii) Each Buyer Note will be imprinted with a legend
substantially in the following form:
THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE IS SUBJECT TO CERTAIN
RECOUPMENT PROVISIONS SET FORTH IN AN ASSET PURCHASE AGREEMENT DATED AS OF
OCTOBER [ ], 2004 (THE "AGREEMENT") AMONG THE ISSUER OF THIS NOTE AND
---
CERTAIN OTHER PERSONS. THIS NOTE WAS ORIGINALLY ISSUED ON ,
---------------
2004, AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES ACT, AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN EXEMPTION THEREFROM
UNDER THE SECURITIES ACT OR ANY SUCH STATE SECURITIES LAWS THAT MAY BE
APPLICABLE. THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS
SET FORTH IN THE AGREEMENT. THE ISSUER OF THIS NOTE WILL FURNISH A COPY OF
THESE PROVISIONS TO THE HOLDER HEREOF WITHOUT CHARGE UPON WRITTEN REQUEST.
(iii)Each holder desiring to transfer the Buyer Note first must
furnish Buyer with (A) a written opinion reasonably satisfactory to Buyer in
form and substance from counsel reasonably satisfactory to Buyer by reason of
experience to the effect that the holder may transfer the Buyer Note as desired
without registration under the Securities Act and (B) a written undertaking
executed by the desired transferee reasonably satisfactory to Buyer in form and
substance agreeing to be bound by the recoupment provisions and the restrictions
on transfer contained herein.
ss.4. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants
to Target that thE statements contained in this ss.4 are correct and complete as
of the date of this Agreement and will be correct anD complete as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this ss.4), except as set forth in the
Disclosure Schedule. The Disclosure SchedulE will be arranged in sections
corresponding to the lettered and numbered sections contained in this ss.4.
(a) ORGANIZATION OF BUYER. Buyer is a limited liability company duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its formation.
(b) AUTHORIZATION OF TRANSACTION. Buyer has full power and authority
(including full limited liability company power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Buyer, enforceable in
accordance with its terms and conditions. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby have
been duly authorized by Buyer.
(c) NON-CONTRAVENTION. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in ss.2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject or any provision of its
certificate of formation, operating agreement, or other governing documents or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which Buyer is a party or by which
it is bound or to which any of its assets are subject, except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Lien would not have a Material Adverse
Effect. Buyer does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement (including the assignments and assumptions referred to in ss.2
above), except where the failure to givE notice, to file, or to obtain any
authorization, consent, or approval would not have a Material Adverse Effect.
(d) BROKERS' FEES. Buyer has no Liability to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Target could become liable or
obligated.
ss.5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between thE execution of this Agreement and the Closing:
(a) GENERAL. Each of the Parties will use its best efforts to take all
actions and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the Closing conditions set forth in
ss.6 below); provided, however, that Target shall not be required to expend any
funds to cause the conditions in clauses (x)-(xiii) of ss.6(a) to be satisfied.
(b) NOTICES AND CONSENTS. Target will give any notices to third
parties, and Target will use its best efforts to obtain any third-party
consents, referred to in ss.3(c) above and the items set forth oN ss.5(b) of the
Disclosure Schedule. Each of the Parties will give any notices to, make any
filings with, and usE his, her, or its best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in ss.3(c) and ss.4(c) above.
(c) OPERATION OF BUSINESS. Target will not engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, Target will not (i)
declare, set aside, or make any distribution with respect to its membership
interests or redeem, purchase, or otherwise acquire any of its membership
interests, (ii) pay any amount to any third party with respect to any Liability
(including any costs and expenses Target has incurred or may incur in connection
with this Agreement and the transactions contemplated hereby) that would not
constitute an Assumed Liability if in existence as of the Closing, or (iii)
otherwise engage in any practice, take any action, or enter into any transaction
of the sort described in ss.3(h) above.
(d) PRESERVATION OF BUSINESS. Target will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, insurance policies, and relationships with
lessors, licensors, suppliers, customers, and employees.
(e) FULL ACCESS. Target will permit representatives of Buyer to have
full access at all reasonable times, and in a manner so as not to interfere with
the normal business operations of Target, to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents of
or pertaining to Target; provided, however, that Buyer shall not perform any
physical environmental inspections without the prior written consent of Target,
which may be granted or withheld in its sole discretion. Buyer will treat and
hold as such any Confidential Information it receives from Sellers in the course
of the reviews contemplated by this ss.5(e), will not use any of the
Confidential Information except in connection with thiS Agreement, and, if this
Agreement is terminated for any reason whatsoever, will return to Sellers all
tangible embodiments (and all copies) of the Confidential Information that are
in its possession.
(f) NOTICE OF DEVELOPMENTS. Each Party will give prompt written notice
to the other Party of any material adverse development causing a breach of any
of its own representations and warranties in ss.3 and ss.4 above. No disclosure
by any Party pursuant to this ss.5(f), however, shall be deemed to amend or
supplemEnt the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
(g) EXCLUSIVITY. Sellers will not, prior to the termination of this
Agreement pursuant to ss.9 below, (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relatinG to the acquisition
of any membership interests, or any substantial portion of the assets, of Target
(including any acquisition structured as a merger, consolidation, or membership
interest exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. Sellers will notify Buyer immediately if any Person makes
any proposal, offer, inquiry, or contact with respect to any of the foregoing.
(h) MAINTENANCE OF REAL PROPERTY. Target shall maintain the Real
Property, including all of the Improvements, in substantially the same condition
as existed on the date of this Agreement, ordinary wear and tear excepted, and
shall not demolish or remove any of the existing Improvements, or erect new
improvements on the Real Property or any portion thereof, without the prior
written consent of Buyer, which consent shall not be unreasonably delayed or
withheld.
(i) LEASES. Target shall not amend, modify, extend, renew or terminate
any Lease, nor shall Target enter into any new lease, sublease, license or other
agreement for the use or occupancy of any Real Property, without the prior
written consent of Buyer.
(j) ENVIRONMENTAL INSURANCE POLICY. Target shall use best efforts to
obtain for Buyer an environmental insurance policy in form substantially similar
to the insurance policy described in EXHIBIT I hereto (the "ENVIRONMENTAL
INSURANCE POLICY"). At or prior to the Closing, Target shall pay the premium for
the Environmental Insurance Policy in an amount not to exceed $80,000 (assuming
the same coverage, limitations and deductibles as set forth on EXHIBIT I
hereto).
ss.6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO BUYER'S OBLIGATION. Buyer's obligation to consummate
the transactions to be performed by it in connection with the Closing is subject
to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3 above
shall be true anD correct in all material respects at and as of the Closing
Date, except to the extent that such representations and warranties are
qualified by the term "material," or contain terms such as "Material Adverse
Effect" or "Material Adverse Change," in which case such representations and
warranties (as so written, including the term "material" or "Material") shall be
true and correct in all respects at and as of the Closing Date;
(ii) Target shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing, except to the
extent that such covenants are qualified by the term "material," or contain
terms such as "Material Adverse Effect" or "Material Adverse Change," in which
case Target shall have performed and complied with all of such covenants (as so
written, including the term "material" or "Material") in all respects through
the Closing;
(iii) Target shall have procured all of the third-party consents
specified in ss.5(b) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) adversely affect the right of Buyer to own the
Acquired Assets, to operate the former business of Target (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
(v) Target shall have delivered to Buyer a certificate to the
effect that each of the conditions specified above in ss.6(a)(i)-(iv) is
satisfied in all respects;
(vi) Target and Buyer shall have received all other
authorizations, consents, and approvals of governments and governmental agencies
referred to in ss.3(c) and ss.4(c) above;
(vii) Buyer shall have received from counsel to Target an opinion
in form and substance as set forth in EXHIBIT J attached hereto, addressed to
Buyer and on which Buyer's lenders shall be entitled to rely, and dated as of
the Closing Date;
(viii) Buyer shall have obtained on terms and conditions
reasonably satisfactory to it all of the financing it needs in order to
consummate the transactions contemplated hereby and fund the working capital
requirements of the acquired business after the Closing;
(ix) all actions to be taken by Target in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
Buyer;
(x) Buyer shall have obtained, no later than ten (10) days prior
to the Closing, a commitment for a 1992 ALTA Owner's Title Insurance Policy or
other form of policy acceptable to Buyer for each Owned Real Property, issued by
a title insurance company reasonably satisfactory to Buyer (the "TITLE
COMPANY"), together with a copy of all documents referenced therein (the "TITLE
COMMITMENTS").
(xi) at Closing, Buyer shall have obtained title insurance
policies from the Title Company (which may be in the form of a xxxx-up of a pro
forma of the Title Commitments) in accordance with the Title Commitments,
insuring Buyer's fee simple title to each Owned Real Property as of the Closing
Date (including all recorded appurtenant easements, insured as separate legal
parcels), with gap coverage from Target through the date of recording, subject
only to Permitted Encumbrances, in such amount as Buyer reasonably determines to
be the value of the Real Property insured thereunder and which shall include the
endorsements identified herein (the "TITLE POLICIES"). The Title Policies shall
have the creditor's rights exception deleted, and shall include the following
endorsements (to the extent available in the
applicable jurisdiction, but regardless of whether any additional amount is
charged for such endorsement), in form and substance reasonably acceptable to
Buyer: (A) extended coverage endorsement (insuring over the general or standard
exceptions); (B) ALTA Form 3.1 zoning endorsement (with parking and loading
docks), or if unavailable in the applicable jurisdiction, a satisfactory zoning
letter from the local zoning authorities; (C) a survey accuracy endorsement
(insuring that the Real Property described therein is the real property shown on
the Survey (as defined below) delivered with respect thereto and that such
Survey is an accurate survey thereof); (D) access endorsement (insuring that the
Real Property described therein is adjacent to a public street and has direct
and unencumbered pedestrian and vehicular access to such public street); (E)
ALTA Form 9 owner's comprehensive endorsement; (F) tax parcel number endorsement
(insuring that the tax parcel number in the endorsement includes all of the Real
Property insured thereunder and no other real property); (G) if the Real
Property insured therein consists of one or more adjacent parcels, a contiguity
endorsement (insuring that all of such parcels are contiguous to one another
without any gaps or gores); (H) utilities endorsement (insuring the availability
of utilities to the Real Property); and (I) such other endorsements as
reasonably requested by Buyer. The Title Company shall insure over Permitted
Encumbrances that constitute (1) real estate taxes, assessments and other
governmental levies, fees, or charges imposed with respect to such Real Property
that are being contested in good faith, and (2) mechanics' liens and similar
liens for labor, materials, or supplies provided with respect to such Real
Property that are being contested in good faith. Target shall provide the Title
Company with any affidavits, indemnities, memoranda or other assurances
reasonably requested by the Title Company to issue the Title Policies in form
and substance as set forth herein. Target and Buyer shall share equally all
fees, costs and expenses with respect to the Title Commitments and Title
Policies, including the endorsements requested by Buyer;
(xii) Target shall have delivered to Buyer (A) KCI's assignment
of beneficial interest in the Apsley Trust naming Buyer as the sole beneficiary
and (B) the resignation of the trustee of the Apsley Trust (and Buyer shall have
the sole right to designate a successor trustee), each in form and substance
reasonably satisfactory to Buyer. Further, Target shall have delivered to Buyer
and the Title Company the following documents required for the Title Company to
issue to Buyer the Title Policy with respect to the Apsley Trust Property
immediately following the Closing: (C) Mechanics' Lien Affidavit and Parties in
Possession Affidavit; (D) Seller's Gap Indemnity; (E) Certified Copy of the
Declaration of Trust establishing the Apsley Trust (including any amendments
thereto); and (F) such other documents as the Title Company may reasonably
require, it being understood that Buyer shall cause the trustee to prepare and
deliver the trustee's deed conveying the Apsley Trust Property to Buyer or its
nominee. Target and Buyer shall share equally all fees, costs and expenses with
respect to the Title Commitment and Title Policy for the Apsley Trust Property,
including the endorsements requested by Buyer;
(xiii) Buyer shall have obtained, no later than ten (10) days
prior to the Closing, a survey for each Owned Real Property, dated no earlier
than the date of this Agreement, prepared by a surveyor licensed in the
jurisdiction where the real property is located, reasonably satisfactory to
Buyer, and conforming to 1999 ALTA/ACSM Minimum Detail Requirements for Land
Title Surveys, including Table A Items Nos. 1, 2, 3, 4, 6, 7(a), 7(b)(1), 7(c),
8, 9, 10, 11(b)(2), 13, 14, 15, and 16, and such other standards as the Title
Company and Buyer reasonably require as a condition to the removal of any survey
exceptions from the Title
Policies, and certified to Buyer, Buyer's lender, and the Title Company, in a
form and with a certification satisfactory to each of such parties (the
"SURVEYS"); the Surveys shall not disclose any encroachment from or onto any of
the Real Property or any portion thereof or any other survey defect that does
not constitute a Permitted Encumbrance or has not been cured or insured over to
Buyer's reasonable satisfaction prior to the Closing; and Target and Buyer shall
share equally all fees, costs and expenses with respect to the Surveys;
(xiv) Target shall have obtained and delivered to Buyer an
assignment of each of the Leases in form and substance substantially similar to
EXHIBIT K hereto;
(xv) Target shall have obtained and delivered to Buyer an
estoppel certificate with respect to each of the Leases, dated no more than
sixty (60) days prior to the Closing Date, from the other party to such Lease,
in form and substance substantially similar to EXHIBIT L hereto (the "ESTOPPEL
CERTIFICATES");
(xvi) Target shall deliver to Buyer a non-foreign affidavit dated
as of the Closing Date, sworn under penalty of perjury and in form and substance
required under Treasury Regulations issued pursuant to Code ss.1445 stating that
Target is not a "foreign person" as defined in Code ss.1445 (the "FIRPTA
AFFIDAVIT");
(xvii) no damage or destruction or other change has occurred with
respect to any of the Real Property or any portion thereof that, individually or
in the aggregate, would materially impair the use or occupancy of the Real
Property or the operation of Target's business as currently conducted thereon;
(xviii) Sellers shall have delivered to Buyer copies of the
certificate of formation (or incorporation) of each of KCI, KCLLC and Target,
certified on or soon before the Closing Date by the Secretary of State (or
comparable officer) of the jurisdiction of each such Person's formation (or
incorporation);
(xix) Sellers shall have delivered to Buyer copies of the
certificate of good standing of each of KCI, KCLLC and Target issued on or soon
before the Closing Date by the Secretary of State (or comparable officer) of the
jurisdiction of each such Person's formation and, in the case of Target, of each
jurisdiction in which it is qualified to do business;
(xx) Target shall have delivered to Buyer a certificate of the
secretary or an assistant secretary of Target, dated the Closing Date, in form
and substance reasonably satisfactory to Buyer, as to: (i) no amendments to the
certificate of formation of such Target since the date specified in clause
(xviii) above; (ii) the limited liability company agreement of Target, if any;
and (iii) any resolutions of the managers (or other authorizing body) (or a duly
authorized committee thereof) of Target relating to this Agreement and the
transactions contemplated hereby;
(xxi) Buyer and Target shall have received an insurance binder
for the Environmental Insurance Policy naming Buyer as insured or additional
insured, as the case may be, and showing the premium as fully paid; and
(xxii) Target shall have executed and delivered to the Senior
Lender an Intercreditor and Subordination Agreement in form and substance
substantially similar to EXHIBIT O hereto.
Buyer may waive any condition specified in this ss.6(a) if it executes a writing
so stating at or prior to thE Closing.
(b) CONDITIONS TO TARGET'S OBLIGATION. Target's obligation to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.4 above shall
be true anD correct in all material respects at and as of the Closing Date,
except to the extent that such representations and warranties are qualified by
the term "material," or contain terms such as "Material Adverse Effect" or
"Material Adverse Change," in which case such representations and warranties (as
so written, including the term "material" or "Material") shall be true and
correct in all respects at and as of the Closing Date;
(ii) Buyer shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing, except to the extent
that such covenants are qualified by the term "material," or contain terms such
as "Material Adverse Effect" or "Material Adverse Change," in which case Buyer
shall have performed and complied with all of such covenants (as so written,
including the term "material" or "Material") in all respects through the
Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(iv) Buyer shall have delivered to Target a certificate to the effect
that each of the conditions specified above in ss.6(b)(i)-(iii) is satisfied in
all respects;
(v) Target shall have received all other authorizations, consents, and
approvals of governments and governmental agencies referred to in ss.3(c) above;
(vi) Target shall have received from counsel to Buyer an opinion in
form and substance as set forth in EXHIBIT M attached hereto, addressed to
Target, and dated as of the Closing Date;
(vii) all actions to be taken by Buyer in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
Target;
(viii) Buyer and Target shall have received a certificate of insurance
and an insurance binder for the Environmental Insurance policy naming Sellers as
insureds or additional insureds, as the case may be, and showing the premium as
fully paid; and
(ix) at Closing, Target shall have obtained a mortgage policy of title
insurance from the Title Company (which may be in the form of a xxxx-up of a pro
forma of the Title Commitments) in the amount of the Buyer Note, insuring the
Buyer Mortgage as a first mortgage lien on the Owned Real Property, subject only
to the Permitted Encumbrances.
Target may waive any condition specified in this ss.6(b) if it executes a
writing so stating at or prior to thE Closing.
ss.7.POST-CLOSING AGREEMENTS From and after the Closing, the Parties shall
have the respective rights anD obligations which are set forth in the remainder
of this ss.7.
(a) INSPECTION OF RECORDS Sellers and Buyer shall each retain and make
their respective books and records (including work papers in the possession of
their respective accountants) available for inspection by the other Party, or by
its duly accredited representatives, for reasonable business purposes at all
reasonable times during normal business hours, for a seven (7) year period after
the Closing Date, with respect to all transactions of Target occurring prior to
and those relating to the Closing, and the historical financial condition,
assets, liabilities, operations and cash flows of Target. In the case of
Sellers' records, such records shall be made available at KCI's executive
office, and in the case of Buyer's records, such records shall be made available
at Buyer's executive office. As used in this subsection, the right of inspection
includes the right to make extracts or copies. The representatives of a Party
inspecting the records of the other Party shall be reasonably satisfactory to
the other Party.
(b)PAYROLL TAXES AND PAYROLL RECORDS. Sellers and Buyer agree that if
the Closing shall have occurred, Buyer shall have purchased substantially all of
the assets of Target, and in connection therewith Buyer may employ certain
individuals who immediately before the Closing Date were employed by Target.
Accordingly, pursuant to Rev. Proc. 84-77, 1984-2 C.B. 753, Buyer, at its
election, may require Sellers to provide Buyer with all necessary payroll
records for the calendar year which includes the Closing Date, and Buyer shall
furnish a Form W-2 to each employee employed by Buyer who had been employed by
Sellers disclosing all wages and other compensation paid for such calendar year,
and taxes withheld therefrom, and Sellers shall be relieved of the
responsibility to do so. As soon as practicable after Closing, Sellers shall
provide to Buyer a copy of any payroll records (or copies thereof) in Sellers'
possession for each employee of Target as of the Closing Date.
(c)CERTAIN ASSIGNMENTS Any other provision of this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
transfer or assign, or a transfer or assignment of, any agreement, claim,
commitment, contract, lease, license, permit, sales order or purchase order, or
any benefit arising thereunder or resulting therefrom, if an attempt at transfer
or assignment thereof without the consent required or necessary for such
assignment, would constitute a breach thereof or in any way adversely affect the
rights of Buyer or Target thereunder. If (i) the required consent to any such
transfer or assignment is not obtained, (ii) an
attempted transfer or assignment would be ineffective or would adversely affect
the rights of Buyer or Target thereunder so that Buyer would not receive
substantially all of such rights, (iii) any such agreement or contract is
assigned to Buyer pursuant to the provisions hereof and the other contracting
party thereafter raises objections to the assignment and refuses to allow Buyer
to perform the contract on the terms therein provided, or threatens to terminate
the contract or xxx for damages, or (iv) a surety company issuing a bond to
Target objects to the completion of a sales order or contract included among the
Acquired Assets by Buyer, then Buyer and Target shall cooperate in any
arrangement Buyer may reasonably request to provide for Buyer the benefits under
such agreement or contract. Cooperation may include, without limitation, and at
Buyer's request shall include, an arrangement (a so-called "SECONDING
ARRANGEMENT"), to be entered into between Buyer and Target pursuant to which
Target shall nominally perform an order or contract, Buyer shall retain the
economic benefits or detriments of the order or contract and Target shall
perform the order or contract with employees lent to Target by Buyer (which
employees shall be treated as employees of Target during the period of
performance) and with inventory, equipment and supplies of Buyer necessary to
complete the order or contract transferred from Buyer to Target as required.
Nothing contained in this subsection shall be construed as a waiver of any
closing condition, nor shall it limit the Liability, if any, of Buyer pursuant
to this Agreement for failing to have disclosed the need for, or failing to have
obtained any consent referred to herein.
(d)EMPLOYEES. Buyer shall not be obligated to offer employment to any
employee of Target, but Buyer shall have the right to employ employees of Target
as of the Closing Date, on terms and conditions established by Buyer in its sole
discretion. For a period of five (5) years commencing on the Closing Date,
Sellers and their Affiliates shall not take any actions which are calculated to
persuade any salaried, technical or professional employees, representatives or
agents of Buyer to terminate their association with Buyer.
(e)PAYMENTS OF ACCOUNTS RECEIVABLE In the event Sellers shall receive
any instrument of payment of any of the Accounts Receivable, Sellers shall
promptly deliver it to Buyer, endorsed where necessary, without recourse, in
favor of Buyer. Similarly, in the event Buyer shall receive any instrument of
payment of any Excluded Assets, Buyer shall promptly deliver it to Sellers,
endorsed where necessary, without recourse, in favor of Sellers.
(f)REPRORATION OF REAL ESTATE TAXES. Within thirty (30) days after
receipt of the final real estate tax bills for the Owned Real Property for 2004
the Buyer and Target shall reprorate such taxes to the Closing Date. If the
reprorated amount for the year 2004 is different than the amount of the Assumed
Real Estate Taxes, an adjusting payment in the amount of the difference shall be
paid to the Party entitled thereto.
(g)COVENANT NOT TO COMPETE. As an inducement for Buyer to enter into
this Agreement, Sellers agree that:
(i)from and after the Closing and continuing for the lesser of
five (5) years from the Closing Date or the longest time permitted by applicable
law, Sellers shall not do any one or more of the following, directly or
indirectly:
(A)engage or participate, anywhere in the continental United
States, as an owner, partner, shareholder, consultant or (without limitation by
the specific enumeration of the foregoing) otherwise in any business which is
competitive with the Target's business (for purposes of this ss.7(g), "Target's
business" shall mean thE manufacture and sale of low and medium security locks),
as conducted on the Closing Date or as about to be conducted on the Closing
Date;
(B)solicit or direct any person, firm or entity to solicit
any customer of Target within the previous two (2) years for the purpose of
purchasing, leasing or renting any goods or products identical or similar to
those sold by Target, nor disclose the identity of any such customers or
prospective customers or any part thereof to any person, firm, corporation,
association or other entity for the purpose of assisting any person to so
solicit; or
(C)solicit or accept if offered, with or without
solicitation, the services of any person who is or was, during the previous
twelve (12) months, an employee or agent of Target or Buyer, nor solicit any of
the Buyer's employees or agents to terminate employment with the Buyer.
(ii) in the event of any breach of subsection (i) the time period
of the breached covenant shall be extended for the period of such breach.
Sellers recognize that the territorial, time and scope limitations set forth in
this subsection are reasonable and are required for the protection of Buyer and
in the event that any such territorial, time or scope limitation is deemed to be
unreasonable by a court of competent jurisdiction, Buyer and Sellers agree to
the reduction of either or any of said territorial, time or scope limitations to
such an area, period or scope as said court shall deem reasonable under the
circumstances.
(h) DISCLOSURE OF CONFIDENTIAL INFORMATION. As a further inducement
for Buyer to enter into this Agreement, Sellers agree that for the longest
period permitted by law after the Closing Date, Sellers shall, and shall cause
their Affiliates to, hold in strictest confidence, and not, without the prior
written approval of Buyer, use for their own benefit or the benefit of any party
other than Buyer or disclose to any person, firm or corporation other than Buyer
(other than as required by law) any information of Target, whether written, oral
or in any other format, which is either non-public, confidential or proprietary
in nature, including, without limitation, research and studies, data, analyses,
assets and/or liabilities, books of record and account, financial data, business
plans, or other documents regarding Target or its business.
(i) INJUNCTIVE RELIEF. Sellers specifically recognizes that any breach
of subsections (g) or (h) will cause irreparable injury to Buyer and that actual
damages may be difficult to ascertain, and in any event, may be inadequate.
Accordingly (and without limiting the availability of legal or equitable,
including injunctive, remedies under any other provisions of this Agreement),
Sellers agree that in the event of any such breach, Buyer shall be entitled to
injunctive relief in addition to such other legal and equitable remedies that
may be available. The prevailing party in any action or proceeding under
subsections (g) or (h) above shall be entitled to recover reasonable attorneys'
fees from the other party.
(j)FURTHER ASSURANCES. The parties shall execute such further
documents, and perform such further acts, as may be necessary to transfer and
convey the Purchased Assets to Purchaser, on the terms herein contained, and to
otherwise comply with the terms of this Agreement and consummate the transaction
contemplated hereby.
(k)TAX CLEARANCE CERTIFICATES. Buyer and Target shall cooperate in
preparing and filing with the appropriate governmental authorities such forms as
may be required in order to obtain a tax clearance certificate or other document
absolving Buyer from any responsibility or liability for Target's income, sales
and use taxes.
(l) ENVIRONMENTAL MATTERS. If, following the Closing, Buyer
determines, in its sole and absolute discretion, to renew the Environmental
Insurance Policy, or to procure and maintain another such environmental
insurance policy, Buyer shall use commercially reasonable efforts to cause
Sellers to be named as additional insureds. Further, in the event Buyer sells,
exchanges or otherwise disposes of the business it acquires hereunder (whether
pursuant to an asset sale, sale of equity interests, a merger, consolidation or
similar transaction or series of related transactions), Buyer, with Sellers'
reasonable assistance and cooperation, shall use commercially reasonable efforts
to obtain from the transferee for the benefit of Sellers: (i) the same
indemnities from and against environmental liabilities relating to Sellers'
ownership and/or operation of the Acquired Assets as Buyer obtains for itself
relating to Buyer's ownership and/or operation of the Acquired Assets (but
specifically excluding, as pertains to Sellers, liabilities assumed by Sellers
from third parties); and (ii) the same coverage under environmental insurance
policies as Buyer obtains for itself with respect to environmental liabilities
arising out of, relating to, or caused by the Acquired Assets and the operation
of the business. Buyer's covenants and obligations under this subsection shall
be personal to Buyer and except as expressly provided in the proviso of the
second sentence in ss.10(d) below, Buyer's obligationS hereunder shall not be
binding on its successors and assigns, nor shall Target's rights hereunder be
transferred, sold, assigned, pledged or hypothecated separately from Target's
liabilities and obligations hereunder.
ss.8. INDEMNIFICATION.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Target contained in ss.3(a)-(f) above, and the representations
and warranties of Buyer contained in ss.4(a)-(D) above, shall survive the
Closing and continue in full force and effect indefinitely. The representations
and warranties of Target contained in ss.3(k) and ss.3(x) and above shall
survive the Closing and continue in full foRCE and effect until the expiration
of any applicable statutes of limitations (after giving effect to any extensions
of waivers) plus sixty (60) days. All of the other representations and
warranties of Target and Buyer contained herein shall survive the Closing and
continue in full force and effect for a period of twelve (12) months thereafter.
Neither the period of survival nor an Indemnified Party's right to
indemnification based on the Indemnifying Party's representations, warranties,
covenants and obligations hereunder will be affected by any investigation
conducted with respect to, or any knowledge acquired (or capable of being
acquired) at any time, by or on behalf of the Indemnified Party, whether before
or after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant or obligation.
(b) INDEMNIFICATION PROVISIONS FOR BUYER'S BENEFIT.
(i) In the event Target breaches (or in the event any third party
alleges facts that, if true, would mean Target has breached) any of its
representations, warranties, and covenants contained in this Agreement
(determined without regard to any limitations or qualifications by materiality
except in the case of ss.3(g), and in the case of ss.3(j), ss.3(k)(i) (in
respect of the February 2004 notice from the Internal ReVENue Service), and
ss.3(z), without regard to the disclosures thereof in the Disclosure Schedule),
and provided thaT Buyer makes a written claim for indemnification against
Sellers pursuant to ss.10(g) below within the survivaL period (if there is an
applicable survival period pursuant to ss.8(a) above), then each of the Sellers
shall bE obligated jointly and severally to indemnify Buyer from and against the
entirety of any Adverse Consequences Buyer shall suffer (including any Adverse
Consequences Buyer shall suffer after the end of any applicable survival period)
resulting from, arising out of or caused by the breach (or the alleged breach);
provided, however, that:
(A) Sellers shall not have any obligation to indemnify Buyer
from and against any Adverse Consequences resulting from, arising out of, or
caused by Target's breach of any representation or warranty contained in
ss.3(g)-(j), ss.3(l)-(t), ss.3(w), ss.3(x) (other than a breach relating TO thE
Xxxxxx Lock Medical Plan), ss.3(y), and ss.3(aa)-(bb) of this Agreement until
Buyer has suffered Adverse ConsequenCES by reason of all such breaches in excess
of a $25,000 aggregate threshold (after which point Sellers will be obligated to
indemnify Buyer from and against such Adverse Consequences relating back to the
first dollar);
(B) Sellers shall not have any obligation to indemnify Buyer
from and against any Adverse Consequences resulting from, arising out of, or
caused by Target's breach of any representation or warranty contained in ss.3(u)
and (v) of this Agreement (1) until Buyer has suffered AdversE Consequences by
reason of all such breaches in excess of a $15,000 aggregate deductible (after
which point Sellers will be obligated to indemnify Buyer from and against
further such Adverse Consequences) or thereafter (2) to the extent the Adverse
Consequences Buyer has suffered by reason of such breach(es) exceeds $100,000
(after which point Sellers will have no obligation to indemnify Buyer from and
against further such Adverse Consequences); and
(C) Sellers' maximum aggregate liability under this
ss.8(b)(i) with respecT to Target's breach of any of its representations and
warranties under ss.3(z) of this Agreement shall be the excesS of $900,000 over
the sum of (x) aggregate amounts paid by Seller to Buyer in respect of claims
for indemnification under ss.8(b)(ii) below, plus (y) aggregate amounts paid by
Seller to Buyer in respect of claimS for indemnification under ss.8(b)(iii)
below for Adverse Consequences suffered by Buyer with respect to ExcludeD
Liabilities resulting from, arising out of, relating to, or caused by
Environmental, Health, and Safety Requirements.
(ii) Following the Closing, Buyer, at its sole cost and expense,
may conduct soil sampling to sample for the compounds identified on EXHIBIT B
hereto, with the objective of proving the existence or non-existence of the
Suspect Lacquer and Naphtha Tanks and determining whether the existence of any
such compounds, if any, violates any Environmental, Health, and Safety
Requirements or gives rise to any further investigatory, remedial or corrective
obligations pursuant thereto. Buyer shall promptly furnish to Sellers a copy of
the environmental report resulting from such testing. In the event such testing
reveals the presence of any of the compounds identified on EXHIBIT B hereto,
then:
(A) Within sixty (60) days after completing such testing,
Buyer shall submit a reasonably detailed plan of remediation, corrective action
or other response action, including corresponding Remediation Costs for
implementing any such actions (the "BUYER'S
PLAN"), solely to the extent any such action is required under Environmental,
Health, and Safety Requirements. If Sellers object in writing to Buyer's Plan
(which objection shall include a reasonably detailed plan of remediation,
corrective action or other response action, including corresponding Remediation
Costs for implementing such actions (the "SELLERS' PLAN")) within thirty (30)
days following receipt, then the Parties shall work together in good faith to
resolve such dispute within thirty (30) days thereafter. If the dispute is not
resolved within said 30-day period, the Parties will select a mutually
acceptable third party professional engineer licensed in the Commonwealth of
Massachusetts, who will select either the Buyer's Plan or the Sellers' Plan
based upon his or her best professional judgment as to the commercially
reasonable approach for environmental response action (including no action)
under Environmental, Health, and Safety Requirements. The Parties shall share
equally any fees, costs, and expenses of the engineer. The decision of the
engineer shall be final, conclusive and binding on the Parties.
(B) Notwithstanding anything to the contrary contained
herein (including any survival period for Target's representations and
warranties set forth in ss.8(a) above), Sellers shall bE obligated jointly and
severally to indemnify Buyer from and against any and all Remediation Costs
incurred in connection with the Final Plan agreed upon or selected by the
engineer pursuant to subsection (A) above; provided, however, that:
(1) Buyer shall make a written claim for
indemnification against Sellers pursuant to ss.10(g) below within the period of
eighteen (18) months following the Closing;
(2) Sellers' maximum aggregate liability under this
ss.8(b)(ii) shall be the excess of $2,500,000 over the sum of (x) aggregate
amounts paid by Sellers to Buyer in respect of claims for indemnification under
ss.8(b)(i) above by reason of Target's breach of any representation or warrantY
under ss.3(z), plus (y) aggregate amounts paid by Sellers to Buyer in respect of
claims for indemnification undeR ss.8(b)(iii) below for Adverse Consequences
suffered by Buyer with respect to Excluded Liabilities resulting from, arising
out of, relating to, or caused by Environmental, Health, and Safety
Requirements; further provided, that Sellers' maximum aggregate liability under
this subsection with respect to claims made after the period of twelve (12)
months following the Closing Date shall be the excess of $900,000 over the sum
of (x) aggregate amounts paid by Sellers to Buyer in respect of claims for
indemnification under ss.8(b)(i) above by reason of Target's breach oF any
representation or warranty under ss.3(z), plus (y) aggregate amounts paid by
Sellers to Buyer in respect oF claims for indemnification under ss.8(b)(iii)
below for Adverse Consequences suffered by Buyer with respect tO Excluded
Liabilities resulting from, arising out of, relating to, or caused by
Environmental, Health, and Safety Requirements.
This ss.8(b)(ii) shall be Buyer's sole remedy against Sellers for any matter
arising out of the Suspect Lacquer anD Naphtha Tanks.
(iii) Each of the Sellers shall be obligated jointly and
severally to indemnify Buyer from and against the entirety of any Adverse
Consequences Buyer may suffer resulting from, arising out of, relating to, or
caused by any Excluded Liabilities (including any Liability of Target that
becomes a liability of Buyer under any bulk transfer law of any jurisdiction,
under any common law doctrine of de facto merger, or successor liability,
Environmental, Health, and Safety Requirements, or otherwise by operation of
law); provided, however, that Buyer shall
have made a written claim for indemnification against Sellers pursuant to
ss.10(g) beloW within the twelve (12) month period after the Closing Date.
The foregoing to the contrary notwithstanding, Sellers' maximum aggregate
liability under (x) ss.8(b)(i) above witH respect to Target's breach of any
representation or warranty contained in ss.3(g)-(j), ss.3(l)-(t), ss.3(w),
ss.3(X)-(cc) above and (y) ss.8(b)(iii) above, shall not exceed $900,000;
provided, however, that Sellers' liability undeR ss.ss.8(b)(i) and 8(b)(iii)
above with respect to Target's breach of any representation or warranty
contained IN ss.3(x), or any Excluded Liability that becomes a liability of
Buyer, in each case arising out of, relating to, oR caused by the Xxxxxx Lock
Medical Plan shall not be subject to the foregoing limitation or be deemed
amounts paid by Sellers for purposes of any limitations on Sellers' liability
under this ss.8. Further, Sellers shall not havE any obligation to indemnify
Buyer from and against any Adverse Consequences resulting from, arising out of,
or caused by (1) Target's breach of any representation or warranty contained in
ss.3(z) or (2) any Excluded LiabilitY that becomes a liability of Buyer under
Environmental, Health, and Safety Requirements, in each case to the extent
Buyer's claim for indemnification is eligible to be satisfied by the
Environmental Insurance Policy without regard to policy limits or the exhaustion
thereof or any default by the insurer.
(c) INDEMNIFICATION PROVISIONS FOR TARGET'S BENEFIT.
(i) In the event Buyer breaches (or in the event any third party
alleges facts that, if true, would mean Buyer has breached) any of its
representations, warranties, and covenants contained in the Asset Purchase
Agreement and in this Agreement, and provided that Target makes a written claim
for indemnification against Buyer pursuant to ss.10(h) below within the survival
period (if there is an applicablE survival period pursuant to ss.4(a) above),
then Buyer shall indemnify Target from and against the entirety of anY Adverse
Consequences suffered (including any Adverse Consequences suffered after the end
of any applicable survival period) resulting from, arising out of, relating to,
in the nature of, or caused by the breach (or the alleged breach).
(ii) Buyer agrees to indemnify Target from and against the
entirety of any Adverse Consequences Target may suffer resulting from, arising
out of, relating to, in the nature of, or caused by any Assumed Liabilities.
(iii) Buyer agrees to indemnify Target from and against the
entirety of any Adverse Consequences Target may suffer resulting from any
Liability (other than an Excluded Liability or Liability with respect to which
Sellers have an indemnification obligation to Buyer pursuant to ss.8(b) above)
of Buyer thaT becomes a liability of Target under Environmental, Health, and
Safety Requirements to the extent such Liability is caused by an act or omission
of Buyer in connection with Buyer's operation of its business after the Closing;
provided, however, that: (A) Buyer's maximum aggregate liability under this
ss.8(c)(iii) shall not exceed $900,000; (B) further Buyer shall not have any
obligation to indemnify Target from and against any Adverse Consequences under
this ss.8(c)(iii) to the extent Target's claim for indemnification is eligible
to be satisfied by thE Environmental Insurance Policy without regard to policy
limits or the exhaustion thereof or any default by the insurer; and (C) Buyer's
indemnification obligations under this ss.8(c)(iii) shall be personal to Target
and excepT as expressly provided in the proviso in the second sentence in
ss.10(d) below, Buyer's obligations hereunder shalL not be binding on its
successors and assigns, nor shall Target's rights hereunder be transferred,
sold, assigned, pledged or hypothecated separately from Target's liabilities and
obligations hereunder.
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party notifies any Party entitled to
indemnification hereunder (the "INDEMNIFIED PARTY") with respect to any matter
(a "THIRD-PARTY CLAIM") that may give rise to a claim for indemnification
against any other Party (the "INDEMNIFYING PARTY") under this ss.8, then the
Indemnified PartY shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced.
(ii) Any Indemnifying Party will have the right to assume the
defense of the Third-Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party at any time within fifteen (15) days after
the Indemnified Party has given notice of the Third-Party Claim; provided,
however, that the Indemnifying Party must conduct the defense of the Third-Party
Claim actively and diligently thereafter in order to preserve its rights in this
regard; further provided, that the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the defense of the
Third-Party Claim.
(iii) So long as the Indemnifying Party is conducting the defense
of the Third-Party Claim in accordance with ss.8(d)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its solE cost and expense
and participate in the defense of the Third-Party Claim, (B) the Indemnifying
Party shall not consent to the entry of any judgment on or enter into any
settlement with respect to the Third-Party Claim without the prior written
consent of the Indemnified Party (not to be unreasonably withheld) unless the
judgment or proposed settlement involves only the payment of money damages by
one or more of the Indemnifying Parties, does not impose an injunction or other
equitable relief upon the Indemnified Party, and is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential custom or
practice materially adverse to the continuing business interests or the
reputation of the Indemnified Party, and (C) the Indemnified Party shall not
consent to the entry of any judgment on or enter into any settlement with
respect to the Third-Party Claim without the prior written consent of the
Indemnifying Party (not to be unreasonably withheld).
(iv) In the event none of the Indemnifying Parties assumes and
conducts the defense of the Third-Party Claim in accordance with ss.8(d)(ii)
above, however, (A) the Indemnified Party may defenD against, and consent to the
entry of any judgment on or enter into any settlement with respect to, the
Third-Party Claim in any manner it may reasonably deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (B) the Indemnifying Parties shall
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third-Party Claim (including reasonable attorneys' fees
and expenses), and (C) the Indemnifying Parties shall remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third-Party Claim to the
fullest extent provided in this ss.8.
(e) DETERMINATION OF ADVERSE CONSEQUENCES. (i) The Parties shall make
appropriate adjustments for insurance coverage (including under the
Environmental Insurance Policy), subject to deductibles, retroactive premium
adjustments and the like, in determining Adverse Consequences for purposes of
this ss.8; provided, however, that proceeds from insurance other than the
Environmental Insurance Policy shall not be deemed amounts paid by the
Indemnifying Party for purposes of any limitations on the Indemnifying Party's
liability under this ss.8; further provided, that Sellers shall pay the
deductibles for the Environmental Insurance PolicY with respect to applicable
claims for indemnification made by Buyer under ss.8(b) above.
(ii) Indemnification payments under this ss.8 shall be paid by
the Indemnifying PartY without reduction for any Tax Benefits available to the
Indemnified Party. However, to the extent that the Indemnified Party recognizes
Tax Benefits as a result of any Adverse Consequences, the Indemnified Party
shall pay the amount of such Tax Benefits (but not in excess of the
indemnification payment or payments actually received from the Indemnifying
Party with respect to such Adverse Consequences) to the Indemnifying Party as
such Tax Benefits are actually recognized by the Indemnified Party. For this
purpose, the Indemnified Party shall be deemed to recognize a tax benefit ("TAX
BENEFIT") with respect to a taxable year if, and to the extent that, the
Indemnified Party's cumulative liability for Taxes through the end of such
taxable year, calculated by excluding any Tax items attributable to the Adverse
Consequences and the receipt of indemnification payments under this ss.4 from
all taxable years, exceeds the Indemnified Party's actual cumulative liability
for Taxes through the end of such taxable year, calculated by taking into
account any Tax items attributable to the Adverse Consequences and the receipt
of indemnification payment under this ss.8 for all taxable years (to the extent
permitted by relevanT Tax law and treating such Tax items as the last items
taken into account for any taxable year).
(iii) All indemnification payments under this ss.8 shall be
deemed adjustments to thE Purchase Price.
(f) SETOFF AGAINST BUYER NOTE. Buyer may elect by written notice to
Sellers to setoff against the Buyer Note the amount of any indemnification to
which Buyer is entitled under this ss.8; provided, however, that in the event of
a dispute between the Parties regarding a claim by Buyer for indemnification
under this ss.8, Buyer shall pay all amounts due and owing under the Buyer Note
Buyer to a financial institution selecteD by Buyer, as escrow agent, to be held
pursuant to the terms of an escrow agreement in a form substantially similar to
EXHIBIT N hereto. Any such reduction in the principal amount under the Buyer
Note shall affect the timing and amount of payments required under the Buyer
Note in the same manner as if Buyer had made a permitted prepayment (without
premium or penalty) thereunder.
(g)OTHER INDEMNIFICATION PROVISIONS. Buyer and Sellers acknowledge
that following the Closing the foregoing indemnification provisions in this ss.8
shall be the exclusive remedy of Buyer and Sellers with respect to thE
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, Buyer and Sellers hereby waive any statutory, equitable, or
common law rights or remedies, including, without limitation, any such matters
arising under any Environmental, Health, and Safety Requirements, and including,
without limitation, any arising under CERCLA.
(h)CHANGE OF CONTROL. In the event of a Change of Control with respect
to any one or more of the Sellers during the eighteen (18) month period
following the Closing, such Sellers shall: (i) cause one or more members or
shareholders, as the case may be, to expressly assume, severally and not
jointly, Sellers' indemnification obligations to Buyer hereunder, provided that
the financial condition of the new indemnifying party or parties is reasonably
sufficient to satisfy such indemnification obligations; or (ii) otherwise
provide reasonably adequate security or collateral for the satisfaction of
Sellers' indemnification obligations hereunder.
ss.9. TERMINATION.
(a) TERMINATION OF AGREEMENT. Certain of the Parties may terminate
this Agreement as provided below:
(i) Buyer and Target may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving written notice
to Target at any time prior to the Closing (A) in the event Target has breached
any material representation, warranty, or covenant contained in this Agreement
in any material respect, Buyer has notified Target of the breach, and the breach
has continued without cure for a period of thirty (30) days after the notice of
breach or (B) if the Closing shall not have occurred on or before the third
Friday following the effective date of the execution of this Agreement, by
reason of the failure of any condition precedent under ss.6(a) hereof (unless
the failure results primarily froM Buyer itself breaching any representation,
warranty, or covenant contained in this Agreement);
(iii) Target may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing (A) in the event Buyer has
breached any material representation, warranty, or covenant contained in this
Agreement in any material respect, Target has notified Buyer of the breach, and
the breach has continued without cure for a period of thirty (30) days after the
notice of breach or (B) if the Closing shall not have occurred on or before the
third Friday following the effective date of the execution of this Agreement, by
reason of the failure of any condition precedent under ss.6(b) hereof (unless
the failure results primarily froM Target itself breaching any representation,
warranty, or covenant contained in this Agreement).
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to ss.9(a) above, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party (except
for any Liability of any Party then in breach and any Liability under this
ss.9(b)). IF Target terminates this Agreement pursuant to ss.9(a)(iii)(A) or
ss.9(a)(iii)(B) (other than by reason of the failURE of a condition precedent
under ss.6(b)(iii) (including any resulting failure to deliver the certificate
describeD in ss.6(b)(iv)), (v), (viii) or (ix)), then the Deposit (and any
interest earned thereon) shall be released tO Target pursuant to the terms of
the Escrow Agreement. If any Party otherwise terminates this Agreement pursuant
to ss.9(a) above, then except as provided in the immediately preceding sentence,
the Deposit (and any interesT earned thereon) shall be released to Buyer
pursuant to the terms of the Escrow Agreement.
ss.10. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they relate in any way to the subject
matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that Buyer may (i) assign any or
all of its rights and interests hereunder to one or more of its Affiliates and
(ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases Buyer nonetheless shall remain
responsible for the performance of all of its obligations hereunder).
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts (including by means of facsimile), each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) when
delivered personally to the recipient, (ii) one (1) business day after being
sent to the recipient by reputable overnight courier service (charges prepaid),
(iii) one (1) business day after being sent to the recipient by facsimile
transmission or electronic mail, or (iv) three (3) business days after being
mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid, and addressed to the intended recipient as set
forth below:
If to Sellers: Xxxxxx Lock, LLC
Key Components, Inc.
Key Components, LLC
000 Xxxxx Xxxxxx Xxxx
0xx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Mr. Xxxxxx Xxx, President
with copy to: Millbrook Capital Management, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
with copy to: Xxxxxxxxxxxx Xxxx & Xxxxxxxxx LLP
1221 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxxx X. Xxxxx, Esq.
If to Buyer: HL Acquisition, LLC
0000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xx. Xxxx Xxxxxx
Copy to: Xxxxxx, Xxxxx & Samotny Ltd.
000 Xxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of New York without giving
effect to any choice or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Target. No waiver by any Party of any provision of this Agreement or any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver nor shall such waiver be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such default, misrepresentation, or breach of warranty or
covenant.
(j) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of
the remaining terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any other
jurisdiction.
(k) EXPENSES. Buyer and each Seller will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. Notwithstanding the
foregoing, all transfer, documentary, sales, use, stamp, registration and other
such Taxes, and all conveyance fees, recording charges and other fees and
charges (including any penalties and interest) incurred in connection with the
consummation of the transactions contemplated by this Agreement shall be borne
equally by Target and Buyer, and the Parties will jointly file all necessary Tax
Returns and other documentation with respect to all such Taxes, fees and
charges, and, if required by applicable law, the Parties will, and will cause
their Affiliates to, join in the execution of any such Tax Returns and other
documentation.
(l) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) that the Party
has not breached shall not detract from or mitigate the fact that the Party is
in breach of the first representation, warranty, or covenant.
(m) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) SPECIFIC PERFORMANCE. Each Party acknowledges and agrees that the
other Party would be damaged irreparably in the event any provision of this
Agreement is not performed in accordance with its specific terms or otherwise is
breached, so that a Party shall be entitled to injunctive relief to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in addition to any other remedy to
which such Party may be entitled, at law or in equity. In particular, the
Parties acknowledge that the business of Target is unique and recognize and
affirm that in the event Target breaches this Agreement, money damages would be
inadequate and Buyer would have no adequate remedy at law, so that Buyer shall
have the right, in addition to any other rights and remedies existing in its
favor, to enforce its rights and the other Parties' obligations hereunder not
only by action for damages but also by action for specific performance,
injunctive, and/or other equitable relief.
(o) SUBMISSION TO JURISDICTION. Each of the Parties submits to the
non-exclusive jurisdiction of any state or federal court sitting in New York,
New York, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the
action or proceeding may be heard and determined in any such court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Nothing in this
ss.10(o), however, shall affect the right of anY Party to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or in equity.
(p) BULK TRANSFER LAWS. Buyer acknowledges that Target will not comply
with the provisions of any bulk transfer laws of any jurisdiction in connection
with the transactions contemplated by this Agreement.
(q) NO CONSEQUENTIAL DAMAGES. NOTWITHSTANDING ANY OTHER PROVISION OF
THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL ANY PARTY BE LIABLE FOR
SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER LEGAL THEORY; PROVIDED, THAT THIS LIMITATION
SHALL NOT LIMIT THE INDEMNIFICATION OBLIGATION OF SELLERS AND BUYER UNDER THE
PROVISIONS OF ss.8 FOR SUCH DAMAGES CLAIMED BY A THIRD PARTY.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date
first above written.
SELLERS:
XXXXXX LOCK, LLC
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: Vice President and Secretary
KEY COMPONENTS, INC.
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: Vice President and Secretary
KEY COMPONENTS, LLC
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: Vice President and Secretary
BUYER:
HL ACQUISITION, LLC
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Authorized Representative of WI-Xxxxxx, LLC, its Manager