ASSET PURCHASE AGREEMENT
BETWEEN
REEVES SOUTHEASTERN CORPORATION
AND
MASTER-HALCO, INC.
OCTOBER 2, 2000
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TABLE OF CONTENTS
Page
1. Definitions...........................................................1
2. Basic Transaction.....................................................8
(a) Purchase and Sale of Assets..................................8
(b) Assumption of Liabilities....................................9
(c) Purchase Price...............................................9
(d) Determination of Estimated Preliminary Purchase Price and
Estimated Preliminary Closing Date Balance Sheet.............9
(e) Determination of the Preliminary Closing Date Balance Sheet
and the Preliminary Purchase Price...........................9
(f) Inventory Valuation.........................................10
(g) Procedures for Review and Approval of Closing Date Balance
Sheet and Purchase Price....................................10
(h) Expenses for Closing Date Balance Sheet.....................11
(i) Adjustment..................................................11
(j) The Closing.................................................11
(k) Deliveries at the Closing...................................12
(l) Escrow......................................................12
(m) Reduction for Environmental Costs...........................12
(n) Allocation..................................................12
3. Representations and Warranties of the Buyer..........................12
(a) Organization of the Buyer...................................13
(b) Authorization of Transaction................................13
(c) Sufficient Funds............................................13
(d) Brokers' Fees...............................................13
(e) Noncontravention............................................13
(f) Investment..................................................13
4. Representations and Warranties Concerning the Seller.................13
(a) Qualification and Corporate Power...........................13
(b) Noncontravention............................................14
(c) Title to Assets.............................................14
(d) Subsidiaries and Investments................................14
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TABLE OF CONTENTS
Page
(f) Legal Compliance............................................15
(g) Tax Matters.................................................16
(h) Real Property...............................................17
(i) Intellectual Property.......................................19
(k) Litigation..................................................23
(l) Employee Benefits...........................................23
(m) Environmental Matters.......................................24
(n) Certain Business Relationships with the Seller..............25
(o) Brokers' Fees...............................................25
(p) Accounts Receivable.........................................25
(q) Inventory...................................................26
(r) Standard Product Warranty Obligations, Returns and
Allowances..................................................26
(s) Employee Relations..........................................26
(t) Customers and Suppliers.....................................27
5. Pre-Closing Covenants................................................28
(a) General.....................................................28
(b) Notices and Third-Party Consents............................28
(c) Operation of Business.......................................29
(d) Notice of Developments......................................29
(e) Exclusivity.................................................29
(f) Access Prior to Closing.....................................29
(g) Transfer Taxes and Certain Expenses.........................29
(h) Tax Adjustments.............................................30
(i) Certain Related Party Transactions..........................30
(j) Insurance...................................................30
6. Conditions to Obligation to Close....................................30
(a) Conditions to Obligation of the Buyer.......................30
(b) Conditions to Obligation of the Seller......................31
7. Termination..........................................................33
(a) Termination of Agreement....................................33
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(b) Effect of Termination.......................................33
8. Post-Closing Covenants...............................................34
(a) General.....................................................34
(b) Litigation Support..........................................34
(c) Transition..................................................34
(d) Covenant Not to Compete or Solicit Business.................34
(e) Access to Records After Closing.............................35
(f) Name Change.................................................35
(g) Warranty and Other Repairs..................................35
(h) Discharge of Assumed Liabilities............................35
9. Remedies for Breaches of this Agreement..............................36
(a) Survival of Representations and Warranties..................36
(b) Indemnification Provisions for Benefit of the Buyer.........36
(c) Indemnification Provisions for Benefit of the Seller........37
(d) Matters Involving Third Parties.............................37
(e) Matters Involving Environmental Liability...................38
(f) Determination of Adverse Consequences.......................38
10. Miscellaneous........................................................38
(a) Certain Understandings of Buyer.............................38
(b) Press Releases and Public Announcements.....................39
(c) No Third-Party Beneficiaries................................39
(d) Entire Agreement............................................39
(e) Succession and Assignment...................................39
(f) Counterparts................................................40
(g) Headings....................................................40
(h) Notices.....................................................40
(i) Governing Law...............................................41
(j) Amendments and Waivers......................................41
(k) Severability................................................41
(l) Expenses....................................................41
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(m) Construction................................................41
(n) Incorporation of Exhibits and Schedules.....................41
(o) Employee Benefits Matters...................................42
(p) Bulk Transfer Laws..........................................42
(q) Submission to Jurisdiction..................................42
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Exhibit A--Assignment Agreements
Exhibit B--Intellectual Property Assignment Agreement
Exhibit C--Assumption Agreement
Exhibit D--Escrow Agreement
Exhibit E--Allocation Schedule
Exhibit F--Most Recent Financial Statements and March 31 Financial Statements
Exhibit G--Pro Forma Balance Sheet
Exhibit H--Required Landlord Consents
Exhibit I--Landlord Estoppel Certificate
Exhibit J--Form of Opinion of Seller's Counsel
Exhibit K--Insurance Policy Assignments
Exhibit L--Form of Opinion of Buyer's
Counsel Disclosure Schedule--Exceptions to Representations and Warranties
Schedule 1.1--Excluded Assets
Schedule 1.1-A--Knowledge
Schedule 1.1-B--Change of Control and Severance Pay Agreements
Schedule 1.1-C--Excluded Assets
Schedule 1.1-D--Excluded Liabilities
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ASSET PURCHASE AGREEMENT
Agreement entered into as of October 2, 2000, by and between
Master-Halco, Inc., a California corporation (the "Buyer") and Reeves
Southeastern Corporation, a Florida corporation (the "Seller"). The Buyer and
the Seller are referred to collectively herein as the "Parties."
This Agreement contemplates a transaction in which the Buyer will
purchase substantially all of the assets (and assume substantially all of the
liabilities) of the Seller in return for cash.
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.
1. Definitions.
"Accounting Firm" has the meaning set forth in Section 2(g) below.
"Accounts Receivable" means all notes and accounts receivables,
advances, employee loan receivables, manufacturer and supplier rebates and all
other receivables owned by Seller in existence on the Closing Date.
"Accounts Receivable Schedule" has the meaning set forth in Section
4(p) below.
"Acquired Assets" means all of the right, title, and interest that the
Seller possesses and has the right to transfer in and to all of the assets
relating to the Business, including all of its (a) real property, leaseholds and
subleaseholds therein, improvements, fixtures, and fittings thereon, and
easements, rights-of-way, and other appurtenances thereto (such as appurtenant
rights in and to public streets), (b) (1) tangible personal property (such as
machinery, equipment, manufactured and purchased parts, goods in process and
finished goods, furniture, office, telecommunication and computer equipment,
automobiles, trucks, tractors, trailers, tools, jigs, and dies) and (2)
Inventory, (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, (d) personal property leases, subleases, and rights
thereunder, (e) agreements, contracts, indentures, mortgages, instruments,
Security Interests, guaranties, other similar arrangements, and rights
thereunder, (f) Accounts Receivable, notes, and other receivables, (g) the M&M
Venture Shares, (h) claims, deposits (including without limitations, utility
deposits and deposits with respect to any leased property), prepayments,
refunds, vendor rebates, allowances or discounts, causes of action, choses in
action, rights of recovery, rights of set off, and rights of recoupment
(including any such item relating to the payment of taxes), (i) Governmental
Authorizations, franchises, approvals, permits, licenses, orders, registrations,
certificates, variances, and similar rights obtained from governments and
governmental entities, (j) books, records, ledgers, files, documents,
correspondence, lists, plats, architectural plans, drawings, and specifications,
policies of title insurance and title abstracts and opinions, creative
materials, advertising and promotional materials, studies, reports, and other
printed or written materials, telephone numbers, and all post office boxes
identified in said printed or written materials, (k) those Change in Control and
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Severance Pay Agreements with the employees of the Seller as set forth on
Schedule 1.1-B; provided, however, that the Acquired Assets shall not include
(i) the corporate charter, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of the Seller as a corporation,
(ii) any Cash, (iii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyer on the
other hand entered into on or after the date of this Agreement), and (iv) the
items described on Schedule 1.1-C ("Excluded Assets").
"Adverse Consequences" means all actions, suits, proceedings,
investigations, charges, complaints, claims, injunctions, judgments, orders,
decrees, rulings, damages, dues, penalties, fines, costs, reasonable amounts
paid in settlement, liabilities, obligations, taxes, liens, losses, expenses,
and fees, including court costs and reasonable attorneys' fees and expenses, and
response, investigative, remedial or inspection costs and expenses. The term
Adverse Consequences shall not mean any punitive, exemplary or consequential
damages or lost profits relating to any of the foregoing, other than any such
amounts payable by an Indemnified Party to a third party pursuant to a Third
Party Claim.
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned Person
within the meaning of the Securities Exchange Act.
"Agent" means Harris Trust and Savings Bank as agent for itself and for
LaSalle Bank National Association and Bank of America, N.A. under that certain
Credit Agreement dated April 20, 1998 by and among Diamond, Agent and the other
banks a party thereto, any other loan, credit or other agreement by and between
Agent and other banks a party thereto, or any extensions, modifications, or
supplements to any of the forgoing.
"Agreed Adjustments" has the meaning set forth in Section 2(g) below.
"Agreed Accounting Principles" means GAAP consistently applied.
"Agreed Rate" means the rate of interest actually earned on the Escrow
Amount.
"Applicable Contract" has the meaning set forth in Section 4(j) below.
"Assumed Liabilities" means the following liabilities and obligations
of the Seller (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) arising from or relating to the
Acquired Assets: (a) all Standard Product Warranty Obligations, (b) all
liabilities and obligations under contracts for sales or purchase of Inventory
in the Ordinary Course of Business, and all liabilities and obligations of the
Seller under the agreements, contracts, leases, licenses and other arrangements
set forth in Section 4(j) of the Disclosure Schedule, (c) accounts payables
incurred by Seller in the Ordinary Course of Business and not related to any
Excluded Asset, (d) all obligations and liabilities, in an amount not to exceed
$700,000 in the aggregate, concerning those Change in Control and Severance Pay
Agreements with the employees of the Seller as set forth on Schedule 1.1-B, (e)
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accrued employee vacation as set forth on Section 4(l) of the Disclosure
Schedule, and (f) amounts payable under the terms of the Prospective Purchaser
Agreement, to the extent that the Purchase Price has been reduced therefor
pursuant to clause (i) of Section 2(m); provided, however, that the Assumed
Liabilities shall not include any liability or obligation of the Seller under
this Agreement (or under any side agreement between the Seller on the one hand
and the Buyer on the other hand entered into on or after the date of this
Agreement), or the Excluded Liabilities.
"Business" means the Seller's business of manufacturing, fabricating
and distributing fencing products. As used in this Agreement, "Business" also
includes historical operations of manufacturing, fabricating and distributing
fencing products of Southeastern International Sales, Inc., which corporation is
inactive and holds no operational assets and which corporation's operations have
been absorbed into the operation of Seller.
"Buyer" has the meaning set forth in the preface above.
"Buyer's Indemnified Parties" has the meaning set forth in Section 9(b)
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.
"Closing" has the meaning set forth in Section 2(j) below.
"Closing Date" has the meaning set forth in Section 2(j) below.
"Closing Date Inventory " has the meaning set forth in Section 2(f))
below.
"Closing Date Inventory Schedule" has the meaning set forth in Section
2(f)) below.
"Closing Date Accounts Receivable" has the meaning set forth in Section
4(p) below.
"Closing Date Balance Sheet" has the meaning set forth in Section 2(g)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" has the meaning set forth in Section 10(d)
below.
"Consent Decree" means the Consent Decree entered July 17, 1995 in U.S.
v. Reeves Southeastern Corporation, Case No. 94-1752-CIV-T-24A in the United
States District Court for the Middle District of Florida.
"Diamond" means Diamond Home Services, Inc., a Delaware corporation.
"Diamond Acquisition" means the closing of the purchase of Seller by
Diamond Home Services, Inc., a Delaware corporation, on April 20, 1998.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
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"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan, or (d)
Employee Welfare Benefit Plan.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(l).
"Environment" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, waters of the
contiguous zone, stream sediments, ambient air, plant and animal life, and any
other environmental medium or natural resource.
"Environmental Law" means any Legal Requirement pertaining to, relating
to, or in any way arising out of the Environment, environmental protection,
pollution, the use, storage, treatment, generation, transportation, processing,
handling, production, manufacturing, or disposal of materials (including
Hazardous Materials), the release or discharge of Hazardous Materials into the
Environment, health, safety, and further including, without limitation, any
Legal Requirement related to obtaining and maintaining in force all
environmental permits, licenses, registration, and other Governmental
Authorizations, making all notifications, and involving all Governmental Bodies
in environmental activities as required, and all of the foregoing in existence
on the Closing Date.
"Environmental Liabilities" means any cost, damages, expense,
liability, obligation, or other responsibility arising out of a Third Party
Claim from or under Environmental Law, including but not limited to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, and regulation of chemical
substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial or inspection costs and expenses arising under any
Environmental Law;
(c) financial responsibility under any Environmental Law for cleanup
costs or corrective action, including any investigation, cleanup, removal,
containment, or other remediation or response actions ("Cleanup") required by
applicable Environmental Law and for any natural resource damages;
(d) any other compliance, corrective, investigative, or remedial
measures required under any Environmental Law; or
(e) any toxic tort arising out of any Environmental Law.
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The terms "removal," "remedial," and "response action" include the
types of activities covered by the United States Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sec. 9601 et seq., as
amended ("CERCLA").
"Escrow Agent" means The Northern Trust Company, Chicago, Illinois.
"Estimated Preliminary Purchase Price" has the meaning set forth in
Section 2(d).
"Estimated Preliminary Closing Date Balance Sheet" has the meaning set
forth in Section 2(d).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means those assets listed as not being a part of the
Acquired Assets or described on Schedule 1.1.
"Excluded Liabilities" means those obligations and liabilities arising
from the Excluded Assets and those obligations and liabilities described on
Schedule 1.1-D.
"Financial Statements" has the meaning set forth in Section 4(e) below.
"Foreline" means Foreline Security Corporation, a Florida corporation,
a wholly-owned subsidiary of Seller.
"GAAP" means United States generally accepted accounting principles,
consistently applied. "Governmental Authorization" means any approval,
consent, license, permit, waiver, or other
authorization issued, granted, given, or otherwise required by or under the
authority of any Governmental Body or pursuant to any Legal Requirement for the
operation of the Business.
"Governmental Body" means any legislative, executive, administrative or
judicial authority of any federal, state or local government, including any
department, agency, or political subdivision thereof.
"Hazardous Activity" means distribution, generation, handling,
remediating, importing, management, manufacturing, processing, production,
refinement, release, storage, transfer, transportation, treatment, or use
(including any withdrawal, remediation or other use of groundwater) of Hazardous
Materials in, on, under, about, or from the real property or leaseholds,
constituting part of the Acquired Assets.
"Hazardous Materials" means any waste or other substance that is
listed, defined, designated, or classified as, or otherwise considered or
determined by a federal, state or local government to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law (including without limitation CERCLA and the Resource
Conservation and Recovery Act), including any admixture or solution thereof, and
specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor, asbestos or asbestos-containing materials, heavy metals,
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solvents, and other substances used in the manufacturing and other operations at
the site of the Acquired Assets.
"Income Tax" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto.
"Indemnified Party" has the meaning set forth in Section 9(d) below.
"Indemnifying Party" has the meaning set forth in Section 9(d) below.
"Independent Certified Public Accountants" shall mean Ernst & Young,
LLP, with respect to Seller, and KPMG, LLP, with respect to Buyer.
"Intellectual Property" has the meaning set forth in Section 4(i)
below.
"Inventory" means all items of inventory, goods held for sale,
merchandise, finished products, component and raw materials.
"Knowledge" means actual knowledge of those persons set forth on
Schedule 1.1.A.
"Legal Requirement" means any applicable federal, state, local,
municipal, foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, rule,
statute, or treaty, and any applicable order, writ, injunction, decision, award,
judgment or decree of any Governmental Body.
"March 31 Financial Statements" has the meaning set forth in Section
4(e) below.
"M&M Venture Shares" has the meaning set forth in Section 4(d) below.
"Net Working Capital" means the sum of the following:
(i) Accounts Receivable (less related allowance for doubtful
accounts) generated by or relating to the Acquired Assets; plus
(ii) Inventory (net of reserves for obsolete or slow-moving
items); plus
(iii) prepaid expenses and deposits relating to the Acquired
Assets; minus
(iv) accounts payable which constitute Assumed Liabilities;
minus
(v) accrued expenses which constitute Assumed Liabilities;
all as determined under the Agreed Accounting Principles and reflected
on the Closing Date Balance Sheet.
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"Ordinary Course of Business" means an action taken by Seller in the
ordinary course of business of the Seller consistent with past custom and
practice and such action is similar in nature and magnitude to actions
customarily taken, without any authorization from the board of directors (or any
Person or group of Persons exercising similar authority), in the ordinary course
of the normal day to day operations of other Persons that are in the same line
of Business as Seller.
"Party" has the meaning set forth in the preface above.
"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, or a Governmental Body.
"Preliminary Accounting Report" has the meaning set forth in Section
2(e) below.
"Preliminary Closing Date Accounts Receivable Schedule" has the meaning
set forth in Section 4(p)) below.
"Preliminary Closing Date Balance Sheet" has the meaning set forth in
Section 2(e) below.
"Preliminary Closing Date Inventory Schedule" has the meaning set forth
in Section 2(f) below.
"Preliminary Purchase Price" has the meaning set forth in Section 2(e)
below.
"Pro Forma Balance Sheet" has the meaning set forth in Section 4(e)
below.
"Prospective Purchaser Agreement" has the meaning set forth in
Section 6(a)(xi) below.
"Purchase Price" has the meaning set forth in Section 2(c) below.
"Release" has the meaning ascribed thereto under CERCLA.
"Representative" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable or for taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money or credit purchase of
goods.
"Seller's Indemnified Parties" has the meaning set forth in Section
9(c) below.
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"Subsidiary" means any corporation, limited liability company, or other
entity with respect to which a specified Person (or a Subsidiary thereof) owns a
majority of the common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors, managers, or other
persons with the power to control the management of such entity.
"Seller" has the meaning set forth in the preface above.
"Standard Product Warranty Obligations" are those obligations to repair
or replace goods sold by Seller prior to the Closing Date under standard printed
warranties as forth in Section 4(r) of the Disclosure Schedule. In no event
shall Standard Product Warranty Obligations mean or include any liability for
any remedy for repair or replacement in any amount beyond the purchase price of
the goods sold, including consequential or incidental damages as said terms are
defined in the Uniform Commercial Code, lost profits, personal injury or
property damage, or for punitive or exemplary damages irrespective as to whether
the Seller has liability for consequential, incidental, punitive or exemplary
damages.
"SWP Shares" has the meaning set forth in Section 4(d) below.
"Tax" means any tax (including income tax, capital gains tax, value
added tax, gross receipts tax, business occupation tax, sales or use tax,
property tax, franchise tax, gift, estate, or excise tax), levy, assessment,
tariff, duty (including any customs duty), deficiency, or other fee, and any
related charge or amount (including any fine, penalty, interest, or addition to
tax) imposed, assessed, or collected by or under the authority of any
Governmental Body, or payable pursuant to any tax sharing agreement or any other
contract relating to the sharing or payment of any such tax, levy, assessment,
tariff, duty, deficiency, or fee.
"Tax Return" means any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"Title Searches and Surveys" has the meaning set forth in Section 4(h)
below.
"Third Party Claim" means a claim asserted by a Governmental Body or
any other Person not a party to this Agreement.
"Threat of Release" means any substantial likelihood of a Release that
may require action in order to prevent or mitigate damage to the Environment
that may result from such Release.
"Threatened" means, with respect to any claim, proceeding, dispute,
action, or other matter, that a demand or statement has been made (orally or in
writing) or any notice has been given (orally or in writing), or that another
event has occurred or other circumstances exist that would lead a reasonably
prudent Person to conclude that such a claim, Proceeding, dispute, action, or
other matter is likely to be asserted, commenced, taken, or otherwise pursued in
the future.
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2. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms
and conditions of this Agreement, the Buyer agrees to purchase from the Seller,
and the Seller agrees to sell to the Buyer, all of the Acquired Assets for the
consideration specified in this Section 2.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become responsible
for and discharge all of the Assumed Liabilities. The Buyer will not assume or
have any responsibility, however, with respect to any other obligation or
liability of the Seller. Buyer is not Seller's successor-in-interest and Seller
will remain liable for all of its obligations other than the Assumed
Liabilities.
(c) Purchase Price. The purchase price for the Acquired Assets
(the "Purchase Price") shall be the sum of the following:
(i) $35,500,000.00; plus
(ii) the excess of Net Working Capital as reflected
in the Closing Date Balance Sheet over the Net Working Capital as reflected in
the Pro Forma Balance Sheet or minus the excess of the Net Working Capital as
reflected in the Pro Forma Balance Sheet over the Net Working Capital as
reflected in the Closing Date Balance Sheet, as the case may be.
(d) Determination of Estimated Preliminary Purchase Price and
Estimated Preliminary Closing Date Balance Sheet. At least three (3) business
days prior to the Closing Date, Seller shall deliver to Buyer a certificate
executed on behalf of Seller by the President or any Vice President of Seller,
dated as of the date of its delivery, stating that there has been conducted
under the supervision of such officer a review of all relevant information and
data then available and setting forth Seller's best estimate of the Purchase
Price, including an estimate of the various accounts which such officer
anticipates based upon the most recent available financial statements will be
reflected on the Closing Date Balance Sheet prepared in accordance with the
Agreed Accounting Principles (the "Estimated Preliminary Purchase Price" and the
"Estimated Preliminary Closing Date Balance Sheet"). Such Estimated Preliminary
Purchase Price and Estimated Preliminary Closing Date Balance Sheet shall be
subject to approval by Buyer.
(e) Determination of the Preliminary Closing Date Balance
Sheet and the Preliminary Purchase Price.
As promptly as practicable following the Closing Date
(but not later than sixty (60) days after the Closing Date),
(i) Buyer shall:
(A) prepare a Preliminary Closing Date
Inventory Schedule, in accordance with the provisions of Section 3(g) below;
(B) prepare a Closing Date Accounts
Receivable Schedule, in accordance with the provisions of Section 4(p) below;
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(C) prepare, in accordance with the Agreed
Accounting Principles, a balance sheet as the Closing Date with respect to the
Acquired Assets and the Assumed Liabilities (the "Preliminary Closing Date
Balance Sheet");
(D) determine the Purchase Price in
accordance with the provisions of this Agreement (such Purchase Price as
determined by Buyer being referred to as the "Preliminary Purchase Price"); and
(E) deliver to Seller each of the items set
forth in subparagraphs (A), (B), and (C) above, and a certificate of the Buyer
setting forth its calculation of the Preliminary Purchase Price (the
"Preliminary Accounting Report").
(f) Inventory Valuation. The Seller shall conduct a physical
inventory of the Inventory in manner customary in the industry. The physical
inventory shall commence upon the close of business on the Friday immediately
preceding the Closing. Seller shall provide sufficient personnel to assist in
the conduct of the physical inventory. Inventories are to be stated at the lower
of cost or net realizable value determined on a first in, first out (FIFO)
method consistently applied. Buyer and at Buyer's option, Buyer's Independent
Certified Accountants shall be permitted to observe or review in all respects
the physical inventory and each of the agreed upon procedures. Upon completion
of the physical inventory by Seller (other than price testing as set forth
below), as promptly as practical following the Closing Date (but not later than
thirty (30) days following the Closing Date), Seller shall deliver the results
thereof, together with such books, records and other information (including work
papers) relevant to the conduct of the physical inventory to Buyer so that Buyer
can prepare a Preliminary Closing Date Inventory Schedule for inclusion as part
of the Preliminary Accounting Report which shall be submitted to Seller for
review and approval pursuant to Section 2(e)(i). Buyer shall be privileged to
complete price testing and other procedures following the physical inventory
conducted by Seller and all such price testing and other post-physical inventory
procedures performed and the results thereof shall be included in the
Preliminary Accounting Report.
(g) Procedures for Review and Approval of Closing Date Balance
Sheet and Purchase Price.
(i) Promptly following receipt of the Preliminary
Accounting Report, Seller may review the same and, within thirty (30) days after
the date of such receipt, may deliver to Buyer a certificate setting forth its
objections to the Preliminary Closing Date Balance Sheet and the Preliminary
Purchase Price as set forth in the Preliminary Accounting Report, together with
a summary of the reasons therefor and calculations which, in its view, are
necessary to eliminate such objections. If Seller does not so object within such
30-day period, the Preliminary Closing Date Balance Sheet and the Preliminary
Purchase Price set forth in the Preliminary Accounting Report shall be final and
binding as the "Closing Date Balance Sheet" and the Purchase Price,
respectively, for purposes of this Agreement.
(ii) If Seller so objects within such 30-day period,
Buyer and Seller shall use their reasonable efforts to resolve by written
agreement (the "Agreed Adjustments") any differences as to the Preliminary
Closing Date Balance Sheet and the Preliminary Purchase Price and, in the event
Buyer and Seller so resolve any such differences, the Preliminary Closing Date
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Balance Sheet and the Preliminary Purchase Price set forth in the Preliminary
Accounting Report as adjusted by the Agreed Adjustments shall be final and
binding as the Closing Date Balance Sheet and the Purchase Price, respectively,
for purposes of this Agreement, in the absence of manifest error.
(iii) If any objections raised by Seller are not
resolved by Agreed Adjustments within the 30-day period next following such
30-day period, then Buyer and Seller shall submit the objections that are then
unresolved to Pricewaterhouse Coopers or any other national accounting firm
acceptable to both Buyer and Seller, who shall certify its independence to Buyer
and Seller in writing, and such firm (the "Accounting Firm") shall be directed
by Buyer and Seller to resolve the unresolved objections (based solely on the
presentations by Buyer and by Seller and their respective Independent Certified
Public Accountants as to any disputed matter) within thirty (30) days of receipt
of such submission and to deliver written notice to each of Buyer and Seller
setting forth its resolution of the disputed matters. The Preliminary Closing
Date Balance Sheet and the Preliminary Purchase Price, after giving effect to
any Agreed Adjustments and to the resolution of disputed matters by the
Accounting Firm, shall be final and binding as the Closing Date Balance Sheet
and the Purchase Price, respectively.
(h) Expenses for Closing Date Balance Sheet. The parties
hereto shall make available to Buyer, Seller and, if applicable, the Accounting
Firm, such books, records and other information (including work papers) as any
of the foregoing may reasonably request to prepare or review the Preliminary
Accounting Report or any matters submitted to the Accounting Firm. The fees and
expenses of the Accounting Firm hereunder shall be paid 50% by Buyer and 50% by
Seller. The fees and expenses of each the Buyer and Seller and their respective
Independent Certified Public Accountants shall be paid by the parties as
provided for in Section 10(l).
(i) Adjustment. Promptly after the determination of the
Purchase Price pursuant to Section 2(g) that is final and binding as set forth
herein, the Purchase Price shall be adjusted as follows:
(i) if the Purchase Price exceeds the Estimated
Preliminary Purchase Price, Buyer shall pay to Seller, by wire transfer of
immediately available funds to such bank account(s) of Seller as Seller shall
designate in writing to Buyer, an amount equal to the excess of the Purchase
Price over the Preliminary Purchase Price, plus interest on such excess from the
Closing Date to the date of payment thereof at the Agreed Rate; or
(ii) if the Estimated Preliminary Purchase Price
exceeds the Purchase Price, Buyer and Seller shall cause the Escrow Agent to pay
to Buyer, by wire transfer of immediately available funds to such bank account
of Buyer as Buyer shall designate in writing to the Escrow Agent, an amount
equal to the excess of the Estimated Preliminary Purchase Price over the
Purchase Price, plus interest on such excess from the Closing Date to the date
of payment thereof at the Agreed Rate.
(j) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of McDermott,
Will & Emery in Chicago, Illinois, commencing at 9:00 a.m. local time on January
16, 2001 (or, if later, the second business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
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transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) or such other date as
the Parties may mutually determine) (the "Closing Date").
(k) Deliveries at the Closing. At the Closing, (i) the Seller
will deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 6(a) below, (ii) the Buyer will deliver to the Seller the
various certificates, instruments, and documents referred to in Section 6(b)
below, (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyer (A) assignments (including real property and intellectual property
transfer documents) in the forms attached hereto as Exhibit A and B and (B) such
other instruments of sale, transfer, conveyance, and assignment as the Buyer and
its counsel reasonably may request, (iv) the Buyer will execute, acknowledge (if
appropriate), and deliver to the Seller (A) an assumption in the form attached
hereto as Exhibit C and (B) such other instruments of assumption as the Seller
and its counsel reasonably may request, and (v) the Buyer will deliver to the
Seller, or to the Agent to the extent necessary to satisfy the condition
specified in Section 6(a)(viii), the Estimated Preliminary Purchase Price, in
cash, less the amount delivered by the Buyer to the Escrow Agent pursuant to
Section 2(l) and less the amount of the reduction specified in Section 2(m).
(l) Escrow. On the Closing Date, the Buyer shall withhold from
the Estimated Preliminary Purchase Price payable on the Closing Date, and shall
deliver by wire transfer of immediately available funds to the Escrow Agent, to
be held in an interest-bearing account pursuant to the terms of an escrow
agreement in the form of Exhibit D attached hereto (the "Escrow Agreement"), the
sum of (i) $500,000 in cash, (the "Indemnification Escrow Amount"), which may be
used to satisfy certain amounts due to Buyer pursuant to Section 9(e) hereof,
and (ii) $1,000,000 in cash (the "Adjustment Escrow Amount"), which may be used
to satisfy the obligations of Seller under Section 2(i)(ii) and Section 8(i) and
the balance of which, if any, shall be paid to Seller in accordance with the
terms of the Escrow Agreement. Buyer's recourse for liabilities arising under
Section 2(i)(ii) and Section 8(i) shall be limited to the Adjustment Escrow
Account.
(m) Reduction for Environmental Costs. The Purchase Price
shall be reduced by (i) any amounts payable under the terms of the Prospective
Purchaser Agreement and not paid prior to the Closing Date, and (ii) the amount
of expenses reasonably expected to be required by Buyer in order to complete all
remediation and other work that is required under the Prospective Purchaser
Agreement, with such amount to be reasonably determined in good faith by Buyer
and Seller or, if they fail to agree on such amount within 10 days after receipt
of the Prospective Purchaser Agreement, to be determined by seeking bids from
three environmental consultants, one chosen by Buyer, one chosen by Seller with
the third chosen by the agreement of the two previously selected consultants.
Each such consultant shall submit its estimate of the expenses required for
remediation pursuant to the Prospective Purchaser Agreement, with the final
determination of the expense being the average of the two estimates, out of the
three, that are closest to one another.
(n) Allocation. The Parties agree to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial accounting and tax purposes) in accordance with
the allocation schedule attached hereto as Exhibit E.
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3. Representations and Warranties of the Buyer. Except where
the warranty specifies another time, the Buyer represents and warrants to the
Seller that the statements contained in this Section 3 are true and correct as
of the date of this Agreement.
(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of California
its jurisdiction of incorporation. Buyer is duly authorized to conduct business
and is in good standing as a foreign corporation in the State of Florida and
under the laws of each other jurisdiction where such qualification is required.
(b) Authorization of Transaction. The Buyer has full corporate
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 the Buyer, enforceable against Buyer in accordance with its terms
and conditions, except as enforcement thereof may be limited by bankruptcy,
insolvency, or other similar laws affecting the enforcement of creditors' rights
in general, moratorium laws or by general principles of equity. Buyer need not
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any Governmental Body in order to consummate the transactions
contemplated by this Agreement.
(c) Sufficient Funds. At the Closing, Buyer will have cash
available, in amounts sufficient to pay at the Closing the Purchase Price for
the Acquired Assets and to assume the Assumed Liabilities as provided in Section
2 above.
(d) Brokers' Fees. The Buyer has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller or any of its
Affiliates could become liable or obligated.
(e) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
will (i) violate any statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any Governmental Body to which
the Buyer is subject or any provision of the charter or bylaws of the Buyer or
(ii) 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 or consent under any agreement, contract,
lease, license, instrument, or other arrangement to which the Buyer is a party
or by which it is bound or to which any of its assets are subject.
(f) Investment. Buyer is not acquiring any capital stock or
other equity interests with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act.
4. Representations and Warranties Concerning the Seller .
Subject to the limitations set forth in Section 9, Seller represents and
warrants to Buyer that the statements contained in this Section 4 are true and
correct as of the date of this Agreement except as set forth in or apparent from
information contained in the disclosure schedule accompanying this Agreement
(the "Disclosure Schedule"). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 4.
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(a) Qualification and Corporate Power. The Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Florida. The Seller is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required. The Seller has full power and authority to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it. The Seller has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligations of the Seller, enforceable
against the Seller in accordance with its terms and conditions, except as
enforcement thereof may be limited by bankruptcy, insolvency, or other similar
laws affecting the enforcement of creditors' rights in general, moratorium laws
or by general principles of equity.
(b) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
will (i) violate any statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any Governmental Body to which
the Seller is subject or any provision of the charter or bylaws of the Seller or
(ii) 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 or consent under any material agreement,
contract, lease, license, instrument, or other arrangement to which the Seller
is a party or by which it is bound or to which any of its assets is subject. The
Seller does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Governmental Body in order for the
Parties to consummate the transactions contemplated by this Agreement, except
consents, as set forth in Section 4(b) of the Disclosure Schedule, to the
transfer of franchises, approvals, permits, licenses, orders, registrations,
certificates, variances, and similar rights obtained from Governmental Bodies as
set forth in Section 4(f) and Section 4(m) of the Disclosure Statement.
(c) Title to Assets. The Seller owns or has a valid leasehold
interest in or other valid right to use, the Acquired Assets. After disbursement
of the Purchase Price, the Acquired Assets shall be free and clear of all
Security Interests. The Acquired Assets include all rights and property,
tangible and intangible, necessary to the conduct of the Business in the manner
it is presently conducted by Seller, and no Excluded Assets constitute property
or rights necessary to the conduct of the Business in the manner it is presently
conducted by Seller. At Closing, the book value (determined in accordance with
GAAP) of the tangible assets of Seller which constitute Acquired Assets, other
than Inventory, Accounts Receivable and prepaid expenses, will not be less than
$9,921,498, less accumulated depreciation incurred since March 31, 2000. The
tangible assets included in the Acquired Assets, taken as a whole, are in good
working order, ordinary wear and tear excepted.
(d) Subsidiaries and Investments. Section 4(d) of the
Disclosure Schedule identifies all Subsidiaries and investments of Seller.
Except for Seller's ownership of record and beneficially of 1 share of no par
value common stock of M&M Venture Capital Corp. (the "M&M Venture Shares"),
which owns of record and beneficially 1,300 shares of no par value common stock
of SWP Industries Inc. (the "SWP Shares"), representing (according to the
information most recently provided to Seller by SWP Industries Inc.)
approximately 8% of the issued and outstanding capital stock of SWP Industries
Inc., the Acquired Assets do not, directly or indirectly: (i) include any
outstanding voting securities or other equity interests in any corporation,
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partnership, joint venture or other entity; or (ii) control any corporation,
partnership, joint venture or other entity. With the exception of M&M Venture
Capital Corp., SWP Industries, Inc., and Foreline, each Subsidiary of Seller is
inactive and contains no assets used or useful in the conduct of the Business by
Seller. Other than encumbrances and security interests that will be discharged
in full and released by the disbursement of the Purchase Price in accordance
with Section 6(a)(viii), the M&M Venture Shares and the SWP Shares are owned
free and clear of all encumbrances and security interests, including purchase
money liens and other liens in the ordinary course of business. No legend or
other reference to any purported encumbrance appears upon any certificate
representing the M&M Venture Shares and the SWP Shares (except for the legend
with respect to the Unanimous Shareholder Agreement). All of the M&M Venture
Shares and the SWP Shares have been duly authorized and validly issued and are
fully paid and nonassessable. The M&M Venture Shares constitute 100% of the
issued and outstanding equity securities of M&M Venture Capital Corp. There are
no contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of M&M Venture Capital Corp. or the SWP Shares by
which either the M&M Venture Capital Corp. or Seller is bound. None of the
outstanding equity securities or other securities of M&M Venture Capital Corp.
was issued in violation of the Securities Act or any other Legal Requirement.
M&M Venture Capital Corp. is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required and each has full power and authority to carry on the business in which
it is engaged and to own and use the properties owned and used by it. M&M
Venture Capital Corp. is not subject to any liability or obligation of any
nature, direct or indirect, accrued or contingent, except as disclosed in
Section 4(d) of the Disclosure Schedule.
(e) Financial Statements; Books and Records. Attached hereto
as Exhibit F are (i) consolidated balance sheets and statements of income,
changes in stockholders' equity, and cash flow, independent accountant's audit
report, and consolidating schedules--balance sheet, for the Seller which have
been audited by Seller's Independent Certified Accountants, (the "Most Recent
Financial Statements"), as of and for the 12 months ended December 31, 1999 (ii)
interim consolidated balance sheet and statement of earnings and consolidating
schedule--balance sheet for the Seller as of and for the period ended March 31,
2000 which have not been audited or reviewed by Seller's Independent Certified
Accountants ("March 31 Financial Statements") and (iii) and a non-consolidated
balance sheet of Seller as March 31, 2000, prepared in conformity with the
provisions of this Agreement containing only the Acquired Assets and the Assumed
Liabilities and excluding Excluded Assets and Excluded Liabilities (the "Pro
Forma Balance Sheet") as set forth in Exhibit G, which also has not been audited
or reviewed by Seller's Independent Certified Accountants (collectively, the
"Financial Statements"). The Most Recent Financial Statements have been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and present fairly the financial condition of the Seller in all
respects as of such dates and the results of operations of the Seller for such
periods. The March 31 Financial Statements have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby and
present fairly the financial condition of the Seller as of such dates and
results of operations of the Seller for such periods, but are subject to normal
year-end adjustments and lack footnotes and other presentation items. The Pro
Forma Balance Sheet has been based upon the March 31 Financial Statements. The
books of account of Seller are complete and correct and have been maintained in
accordance with sound business practice, including the maintenance of a system
of internal controls.
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(f) Legal Compliance.
(i) Seller is, and at all times since the Diamond
Acquisition, has been, in compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its Business or the ownership
or use of any of the Acquired Assets;
(ii) To Seller's Knowledge, no event has occurred or
circumstance exists that (with or without notice or lapse of time) (A) may
constitute or result in a violation by Seller of, or a failure on the part of
Seller to comply with, any Legal Requirement, or (B) may give rise to any
obligation on the part of Seller to undertake, or to bear all or any portion of
the cost of, any remedial or response action of any nature; and
(iii) Seller has not received, at any time since the
Diamond Acquisition, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential violation of, or failure to comply with, any
material Legal Requirement, or (B) any actual, alleged, possible, or potential
obligation on the part of Seller to undertake, or to bear all or any portion of
the cost of, any remedial or response action of any material nature.
(iv) Section 4(f) of the Disclosure Schedule contains
a complete and accurate list of each Governmental Authorization that is held by
Seller or that otherwise relates to the Business of, or to any of the Acquired
Assets. Each Governmental Authorization listed Section 4(f) of the Disclosure
Schedule is valid and in full force and effect.
(v) Seller is, and at all times since the Diamond
Acquisition, has been, in compliance with all of the terms and requirements of
each Governmental Authorization identified in Section 4(f) of the Disclosure
Schedule;
(vi) To Seller's Knowledge, no event has occurred or
circumstance exists that may (with or without notice or lapse of time) result
directly or indirectly in the revocation, withdrawal, suspension, cancellation,
or termination of, or any modification to, any Governmental Authorization listed
in Section 4(f) of the Disclosure Schedule;
(vii) Seller has not received, at any time since the
Diamond Acquisition, any notice or other written communication from any
Governmental Body or any other Person regarding any actual, proposed, possible,
or potential revocation, withdrawal, suspension, cancellation, termination of,
or modification to any Governmental Authorization;
(viii) All applications required to have been filed
for the renewal of the Governmental Authorizations listed in Section 4(f) of the
Disclosure Schedule have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have been made with
respect to such Governmental Authorizations have been duly made on a timely
basis with the appropriate Governmental Bodies; and
(ix) The Governmental Authorizations listed Section
4(f) of the Disclosure Schedule collectively constitute all of the Material
Governmental Authorizations necessary to permit Seller to lawfully conduct and
operate the Acquired Assets and own and use the Acquired Assets in the manner in
which it currently owns and uses such assets
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(g) Tax Matters.
(i) Seller has filed or caused to be filed on a
timely basis all Tax Returns that are required to be filed by it, either
separately or as a member of a group of corporations, pursuant to applicable
Legal Requirements. Seller has delivered to Buyer copies of, and Section 4(g) of
the Disclosure Schedule contains a complete and accurate list of, all such Tax
Returns relating to sales and use taxes filed monthly since the Diamond
Acquisition. Seller has paid, or made provision for the payment of, all Taxes
that have or may have become due pursuant to those Tax Returns or otherwise, or
pursuant to any assessment received by Seller, except such Taxes, if any, as are
listed in Section 4(g) of the Disclosure Schedule and are being contested in
good faith and as to which adequate reserves (determined in accordance with
GAAP) have been provided in the Financial Statements.
(ii) The United States federal income Tax Returns of
Seller subject to such Taxes since the Diamond Acquisition have been audited by
the IRS or are closed by the applicable statute of limitations for all taxable
years through December 31, 1999. Section 4(g) of the Disclosure Schedule
contains a complete and accurate list of all audits of all such Tax Returns,
including a reasonably detailed description of the nature and outcome of each
audit. All deficiencies proposed as a result of such audits have been paid,
reserved against, settled, or, as described in Section 4(g) of the Disclosure
Schedule, are being contested in good faith by appropriate proceedings. Section
4(g) of the Disclosure Schedule describes all adjustments to the United States
federal income Tax Returns filed by Seller, any Subsidiary or Affiliate of
Seller or any group of corporations including Seller, any Subsidiary or
Affiliate of Seller, for all taxable years since the Diamond Acquisition, and
the resulting deficiencies proposed by the IRS. Except as described in Section
4(g) of the Disclosure Schedule no Seller or Subsidiary or Affiliate of Seller
has given or been requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of Seller any Subsidiary or
Affiliate, or for which Seller, any Subsidiary or Affiliate of Seller may be
liable.
(iii) The charges, accruals, and reserves with
respect to Taxes on the respective books of Seller, are adequate (determined in
accordance with GAAP) and are at least equal to the liability for Taxes. There
exists no proposed tax assessment against Seller, except as disclosed in the
Balance Sheet or in Section 4(g) of the Disclosure Schedule. No consent to the
application of Section 341(f)(2) of the Code has been filed with respect to any
property or assets held, acquired, or to be acquired by Seller. All Taxes that
Seller is or was required by Legal Requirements to withhold or collect have been
duly withheld or collected and, to the extent required, have been paid to the
proper Governmental Body or other Person.
(iv) All Tax Returns filed by (or that include on a
consolidated basis) Seller are true, correct, and complete. There is no tax
sharing agreement that will require any payment by Seller.
(v) The Seller is not a party to any Tax allocation
or sharing agreement.
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(h) Real Property.
(i) Section 4(h)(i) of the Disclosure Schedule lists
all real property that is a not an Excluded Asset. Seller has made available, or
will make available prior to Closing, to Buyer copies of the deeds and other
instruments by which Seller acquired such real property and interests, and
copies of all title insurance policies, opinions, abstracts, and surveys in
possession of the Seller, and will make available to Buyer, or an abstractor or
title insurer reasonable selected by Buyer and reasonably acceptable to Seller,
the originals of all such abstracts of title in possession of Seller for the
purposes of obtaining policies of title insurance. With respect to each such
parcel of real property, owned by Seller:
(A) Seller has good and marketable title to all real
property, fixtures and mixed real and personal property located on real property
that it purports to own that constitute a part of the Acquired Assets. After
disbursement of the Purchase Price at the Closing, each parcel of real property,
and fixtures and mixed real and personal property located on each parcel of real
property that is an Acquired Asset, will be free and clear of any Security
Interest, including any purchase money liens, and other liens arising in the
Ordinary Course of Business. At the Closing, each parcel of real property, and
fixtures and mixed real and personal property located on each parcel of real
property shall be free and clear of any easement, covenant, or other
restrictions, except for (i) installments of taxes and special assessments not
yet due, (ii) minor imperfections in title, easements, covenants, variances,
building restrictions, governmental restrictions, land use and zoning
restrictions, and other restrictions existing generally with respect to
properties of a similar character, if any, none of which is substantial in
amount, materially detracts from the value or impairs the use of the property,
or impairs the use and operations of the Seller. All buildings, plants, and
structures owned by the Seller that is an Acquired Asset lie wholly within the
boundaries of the real property owned by the Seller and do not encroach upon the
property of, or otherwise conflict with the property rights of, any other
Person.
(B) There are no leases, subleases, licenses,
concessions, or other agreements granting to any party or parties the right of
use or occupancy of any material portion of the parcel of real property,
fixtures or mixed real and personal property located on real property that is an
Acquired Asset that would survive the Closing; and
(C) There are no outstanding options or rights of
first refusal to purchase any parcel of real property, fixtures or mixed real
and personal property located on real property that is an Acquired Asset that
would survive the Closing.
(ii) Section 4(h)(ii) of the Disclosure Schedule lists all
real property leased or subleased to the Seller or any of its Subsidiary or
Affiliate, or by the Seller, any Subsidiary or Affiliate of Seller that is an
Acquired Asset. The Seller has made available to the Buyer copies of the leases
and subleases listed in Section 4(h)(ii) of the Disclosure Schedule. Seller is,
and at all times since the Diamond Acquisition has been, in compliance with all
applicable terms and requirements of each lease and sublease. To the Knowledge
of Seller, each other Person that has or had any obligation or liability under
any such lease or sublease, or any interest in the real property which is the
subject of any such lease or sublease of Seller, including sublessors and master
lessors, is, and since the Diamond Acquisition has been, in compliance with all
applicable terms and requirements of such lease or sublease, that is a part of
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the Acquired Assets. To Seller's Knowledge, no event has occurred or
circumstance exists (with or without notice or lapse of time) may give any
Person the right to declare a default, or exercise any remedy under, or to
cancel, terminate or modify any lease or sublease that is a part of the Acquired
Assets. Seller has neither given nor received from any Person, at any time since
the Diamond Acquisition, any notice or other communication (whether oral or
written) regarding any actual, alleged, possible, or potential violation or
breach of or default under any lease or sublease that is an Acquired Asset.
There are no negotiations of, attempts to renegotiate, or outstanding rights to
renegotiate any amounts paid or payable under any lease or sublease that is an
Acquired Asset, and to the Knowledge of Seller, no such Person has made written
demand for such renegotiation. Each lease and sublease listed in Section
4(h)(ii) of the Disclosure Schedule is legal, valid, binding, enforceable on the
part of the Seller against the parties to such lease or sublease in accordance
with its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, or other similar laws affecting the enforcement of creditors' rights
in general, moratorium laws or by general principles of equity, and in full
force and effect.
(i) Intellectual Property.
(i) Intellectual Property--The term "Intellectual
Property" includes:
(A) the name Reeves Southeastern, and all fictional
business names, trading names, registered and unregistered
trademarks, service marks, and applications (collectively,
"Marks"); and
(B) all know-how, trade secrets, confidential
information, customer lists, software, technical information,
data, process technology, plans, drawings, and blue prints
(collectively, "Trade Secrets"); owned, used, or licensed by
Buyer as licensee or licensor.
(ii) Agreements--Section 4(i) of the Disclosure
Schedule contains a complete and accurate list and summary
description, including any royalties paid or received by
Seller, of all Contracts relating to the Intellectual Property
to which Seller is a party or by which Seller is bound, except
for any license implied by the sale of a product and
perpetual, paid-up licenses for commonly available software
programs with a value of less than $1,000 under which Seller
is the licensee. There are no outstanding and, To Seller's
Knowledge, no Threatened disputes or disagreements with
respect to any such agreement.
(iii) Know-How Necessary for the Business.
The Intellectual Property is all that necessary for
the operation of the Seller's Business as it is currently
conducted. Seller is the owner of all right, title, and
interest in and to each of the Intellectual Property Assets,
free and clear of all liens, security interests, including all
purchase money liens and other liens incurred in the Ordinary
Course of Business, charges, encumbrances, equities, and other
adverse claims, and has the right to use without payment to a
third party all of the Intellectual Property.
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(iv) Patents. Seller has no patents and none are
conveyed to Buyer in the transactions contemplated by this
Agreement;
(v) Trademarks
(A) Section 4(i) of the Disclosure Schedule contains
a complete and accurate list and summary description of all
Marks. Seller is the owner of all right, title, and interest
in and to each of the Marks, free and clear of all liens,
security interests, charges, encumbrances, equities, and other
adverse claims.
(B) All Marks that have been registered with the
United States Patent and Trademark Office are currently in
compliance with all formal legal requirements (including the
timely post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety days after the
Closing Date.
(C) No Mark has been or is now involved in any
opposition, invalidation, or cancellation and, To Seller's
Knowledge, no such action is Threatened with the respect to
any of the Marks.
(D) To Seller's Knowledge, there is no potentially
interfering trademark or trademark application of any third
party.
(E) No Mark is infringed or, To Seller's Knowledge,
has been challenged or threatened in any way. To Seller's
Knowledge, none of the Marks used by Seller infringes or is
alleged to infringe any trade name, trademark, or service mark
of any third party.
(F) All products and materials containing a Mark bear
the proper federal registration notice where permitted by law.
(vi) Copyrights. Seller has no copyrights and none
are conveyed to Buyer in the transactions contemplated by this
Agreement;
(vii) Trade Secrets
(A) With respect to each Trade Secret, the
documentation relating to such Trade Secret is current,
accurate, and sufficient in detail and content to identify and
explain it and to allow its full and proper use without
reliance on the knowledge or memory of any individual.
(B) Seller has taken all reasonable precautions to
protect the secrecy, confidentiality, and value of their Trade
Secrets.
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(C) Seller has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. The
Trade Secrets are not part of the public knowledge or
literature, and, To Seller's Knowledge, have not been used,
divulged, or appropriated either for the benefit of any Person
(other than Diamond or Foreline) or to the detriment of
Diamond or Foreline. No Trade Secret is subject to any adverse
claim or has been challenged or threatened in any way.
(j) Contracts; No Defaults
(i) Section 4(j) of the Disclosure Schedule contains
a complete and accurate list, and Sellers have delivered to Buyer true and
complete copies, of any agreement, contract, obligation, promise, or undertaking
that is legally binding, under which Seller has any rights, has any or may
become subject to any obligation or liability, or by which Seller or any of the
Acquired Assets owned and used by it is or may become bound ("Applicable
Contract"):
(A) each Applicable Contract that involves
performance of services or delivery of goods or materials by Seller of an amount
or value in excess of $25,000; each Applicable Contract for the purchase of
Inventory by Seller of an amount or value in excess of $100,000; and each other
Applicable Contract that was not entered into in the Ordinary Course of Business
and that involves expenditures or receipts of Seller in excess of $25,000;
(B) each lease, rental or occupancy
agreement, license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of, title to, use of, or
any leasehold or other interest in, personal property or fixtures (except
personal property leases and installment and conditional sales agreements having
a value per item or aggregate payments of less than $10,000 or with terms of
less than one year which are otherwise scheduled on Section 4(h)(i) of the
Disclosure Schedule;
(C) each licensing agreement or other
Applicable Contract with respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the non-disclosure of
any of the Intellectual Property;
(D) each collective bargaining agreement and
other Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(E) each joint venture, partnership, and
other Applicable Contract (however named) involving a sharing of profits,
losses, costs, or liabilities by Seller with any other Person;
(F) each Applicable Contract containing
covenants that in any way purport to restrict the business activity of Seller or
any Affiliate of Seller or limit the freedom of Seller or any Affiliate of
Seller to engage in any line of business or to compete with any Person, whether
or not, and any similar Applicable contract in favor of Seller, its Subsidiaries
or Affiliates;
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(G) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or profits, other than
direct payments for goods;
(H) each power of attorney that is currently
effective and outstanding with respect to any Applicable Contract;
(I) each Applicable Contract entered into
other than in the Ordinary Course of Business that contains or provides for an
express undertaking by Seller to be responsible for consequential damages;
(J) each Applicable Contract for capital
expenditures for an amount in excess of $25,000;
(K) each Standard Product Warranty and each
written warranty guaranty, and or other similar undertaking with respect to
contractual performance extended by Seller other than in the Ordinary Course of
Business;
(L) except as otherwise disclosed as an
Employee Benefit Plan pursuant to Section 4(l) of the Disclosure Schedule, each
Applicable Contract for the employment of any individual on a full-time,
part-time, consulting or other basis, not terminable by Seller at will; and
(M) each amendment, supplement, and
modification (whether oral or written) in respect of any of the foregoing.
(ii) Except as set forth in Section 4(j) of the
Disclosure Schedule, each contract identified or required to be identified in
Section 4(j) of the Disclosure Schedule is in full force and effect and is valid
and enforceable in accordance with its terms.
(iii) Except as set forth in Section 4(j) of the
Disclosure Schedule:
(A) Seller is, and at all times since the
Diamond Acquisition, has been, in material compliance with all applicable terms
and requirements of each Applicable Contract under which Seller has or had any
obligation or liability or by which Seller or any of the Acquired Assets owned
or used by Seller is or was bound;
(B) to the Knowledge of Seller, each other
Person that has or had any obligation or liability under any Applicable Contract
under which Seller has or had any rights is, and at all times since the Diamond
Acquisition has been, in material compliance with all applicable terms and
requirements of such Applicable Contract;
(C) no event has occurred or circumstance
exists that (with or without notice or lapse of time) may contravene, conflict
with, or result in a violation or breach of, or give any Seller or other Person
the right to declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or to cancel, terminate, or modify, any
Applicable Contract; and
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(D) Seller has neither given to nor received
from any other Person, at any time since the Diamond Acquisition any notice or
other written communication regarding any actual, alleged, possible, or
potential violation or breach of, or default under, any Applicable Contract.
(iv) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any amounts paid or payable to
any Applicable Contract under current or completed Applicable Contracts with any
Person and, to the Knowledge of Seller, no such Person has made written demand
for such renegotiation.
(v) The Applicable Contracts relating to the sale,
design, manufacture, or provision of products or services by Seller have been
entered into in the Ordinary Course of Business and have been entered into
without the commission of any act alone or in concert with any other Person, or
any consideration having been paid or promised, that is or would be in violation
of any Legal Requirement.
(vi) Except as set forth on Section 4(j) of the
Disclosure Schedule, no consent of any party other than Seller is necessary for
the assignment to Buyer of all rights and obligations of Seller under the
Applicable Contracts.
(k) Litigation. Section 4(k) of the Disclosure Schedule sets
forth each instance in which the Seller (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party to any
action, suit, proceeding, hearing, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction
(other than collection actions brought by Seller in the Ordinary Course of
Business). To the Knowledge of Seller (i) no 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 has
been Threatened and (ii) no event has occurred or circumstance exists that may
give rise to or serve the basis for the commencement of 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. Seller is, and at all times since the Diamond Acquisition has
been, in compliance with all of the terms and requirements of each such
injunction, judgment, order, decree, ruling, or charge to which it, or any of
the assets owned or used by it have been subject, including any outstanding
injunction, judgment, order, decree, ruling, or charge set forth in Section 4(k)
of the Disclosure Schedule. To Seller's Knowledge, no event has occurred or
circumstance exists that may constitute or result in (with or without notice or
lapse of time) a violation of or failure to comply with any term or requirement
of any injunction, judgment, order, decree, ruling, or charge to which Seller,
or any of the assets owned or used by Seller, is subject. Seller has not
received, at any time since the Diamond Acquisition any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding any actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any injunction, judgment,
order, decree, ruling, or charge to which Seller, or any of the assets owned or
used by Seller, is or has been subject.
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(l) Employee Benefits.
(i) Section 4(l)(i) of the Disclosure Schedule lists
each Employee Benefit Plan that the Seller maintains or to which the Seller
contributes.
(ii) To the Knowledge of the Seller, each such
Employee Benefit Plan (and each related trust, insurance contract, or fund)
complies in form and in operation in all respects with the applicable
requirements of ERISA and the Code.
(iii) All contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been reserved for in the accounts of the Seller or paid to each such Employee
Benefit Plan which is an Employee Pension Benefit Plan.
(iv) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan has received a determination letter from the
Internal Revenue Service to the effect that it meets the requirements of Code
Section 401(a).
(v) None of the Employee Benefit Plans set forth in
Section 4(l) of the Disclosure Schedule is subject to Title IV of ERISA.
(vi) Seller has made available to Buyer true and
correct copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the most
recent Form 5500 Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each such Employee
Benefit Plan.
(vii) Section 4(l)(i) of the Disclosure Schedule sets
forth the employee vacation accrual policy of Seller.
(m) Environmental Matters.
(i) Seller is, and at all times has been, in material
compliance with, any Environmental Law. To Seller's Knowledge, Seller has no
basis to expect, nor has Seller received, any actual or Threatened order,
notice, or other communication from (i) any person (including, but not limited
to, any Governmental Body, or a person acting in his or her own behalf or in the
public interest), or (ii) the current or prior owner or operator of any
facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental Liabilities with respect to any of the
Acquired Assets (including without limitation properties geologically or
hydrologically adjoining the Acquired Assets) or with respect to any property or
facility at or to which Hazardous Materials from Acquired Assets were generated,
manufactured, refined, transferred, imported, used, or processed by Seller.
(ii) There are no pending or, to the Knowledge of
Seller, Threatened claims, encumbrances, or other restrictions of any nature,
resulting from any Environmental Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the Acquired Assets.
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(iii) Seller does not have any Knowledge of any basis
to expect, nor has Seller received, any citation, directive, inquiry, notice,
order, summons, warning, or other communication that relates to Hazardous
Activity, Hazardous Materials, or any alleged, actual, or potential violation or
failure to comply with any Environmental Law, or of any alleged, actual, or
potential obligation to undertake or bear the cost of any Environmental
Liabilities with respect to any of the Acquired Assets (including without
limitation properties geologically or hydrologically adjoining the Acquired
Assets) or with respect to any property or facility to which Hazardous Materials
generated, manufactured, refined, transferred, imported, used, or processed by
Seller from the Acquired Assets have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(iv) To Seller's Knowledge, Seller has no
Environmental Liabilities with respect to the Acquired Assets or at any property
geologically or hydrologically adjoining the Acquired Assets.
(v) Except for Hazardous Materials in quantities
ordinarily and customarily generated, manufactured, refined, transferred,
imported, used, or processed by Company in the manufacturing operations at the
Acquired Assets in material compliance with applicable Environmental Laws, there
are no Hazardous Materials present on or in the Environment at the Acquired
Assets or at any geologically or hydrologically adjoining property, including
any Hazardous Materials contained in drums or barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether moveable or
fixed) or other containers, either temporary or permanent, and deposited or
located in land, water, sumps, or any other part of the Acquired Assets or such
adjoining property, or incorporated into any structure therein or thereon. To
Seller's Knowledge, neither Seller nor any other Person, has permitted or
conducted, or is aware of, any Hazardous Activity conducted with respect to the
Acquired Assets, except in compliance with all applicable Environmental Laws.
(vi) To Seller's Knowledge, there has been no Release
that is reportable under any applicable Environmental Laws, or any threat of
Release which, if it occurred, would be reportable under any applicable
Environmental Laws, of any Hazardous Materials at or from the Acquired Assets.
(vii) Seller has made available to Buyer true and
complete copies and results of any reports, studies, analyses, tests, or
monitoring data possessed or initiated by Seller pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Acquired Assets, or at
any property geologically or hydrologically adjoining the Acquired Assets
(including, but not limited to, the Reeves Southeastern, Peak Oil Co., and Bay
Drum Co. Superfund sites), or concerning compliance by Seller with Environmental
Laws.
(viii) All remedial action under operable unit #1
required by the Consent Decree for the Reeves Southeastern Superfund Site has
been completed and approved by the United States Environmental Protection Agency
by letter dated October 6, 1997.
(n) Certain Business Relationships with the Seller. None of
the Seller's Affiliates owns any asset, tangible or intangible, which is used in
the Business, or provides any service to Seller.
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(o) Brokers' Fees. The Seller has no liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(p) Accounts Receivable. Seller has delivered to Buyer a
current aged list of unpaid Accounts Receivable at July 31, 2000 owing to Seller
("Accounts Receivable Schedule"), and will deliver to Buyer at Closing, an aged
list of accounts receivable ("Closing Date Accounts Receivable") owing to Seller
as of the close of business on the last business day immediately preceding the
Closing Date ("Preliminary Closing Date Accounts Receivable Schedule"), and
other information pertaining to the Accounts Receivable as Buyer shall
reasonably request. Neither the Accounts Receivable Schedule, the Preliminary
Closing Date Accounts Receivable Schedule, or the Closing Date Accounts
Receivable Schedule contains any account receivable that is an Excluded Asset.
All Accounts Receivable of Seller that are reflected on the Closing Date
Accounts Receivable Schedule or otherwise on the accounting records of the
Seller and used in the preparation of the Closing Date Balance Sheet, represent
or will represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. All Accounts Receivable
that are reflected on the Closing Date Accounts Receivable Schedule or otherwise
on the accounting records of the Seller and used in the preparation of the
Closing Date Balance Sheet, are or will be current and collectible (net of
applicable reserves). Each of the Accounts Receivable of Seller that are
reflected on the Closing Date Accounts Receivable Schedule or otherwise on the
accounting records of the Seller and used in the preparation of the Closing Date
Balance Sheet either has been or will be collected in full, without any set-off
other than those liabilities assumed under Assumed Liabilities, within 120 days
after the Closing Date. There is no contest, claim, or right of set-off, other
than returns in the Ordinary Course of Business, under any Contract with any
obligor of any accounts receivable of Seller that are reflected on the Closing
Date Accounts Receivable Schedule or otherwise on the accounting records of the
Seller and used in the preparation of the Closing Date Balance Sheet relating to
the amount or validity of same.
(q) Inventory. All Inventory used by Seller in the conduct of
the Business: (i) was acquired and has been maintained in the Ordinary Course of
the Business; (ii) is of a merchantable quality (subject to applicable
reserves); and (iii) consists of a quality and condition usable, leasable or
saleable in the Ordinary Course of Business.
(r) Standard Product Warranty Obligations, Returns and
Allowances. All Standard Product Warranties, return policies and procedures and
other credit and sales practices of Seller and the Business that have been in
force or effect at any time during the preceding twenty-four (24) month period,
regardless of the date of the sale to which such warranty, return policy or
other practice may relate, are listed or described on Section 4(r) of the
Disclosure Schedule. The costs that have been incurred by Seller during the
preceding twenty-four (24) month period in connection with Seller fulfilling
Standard Product Warranty obligations undertaken by Seller concerning products
manufactured or sold by or for Seller, has not exceeded One Hundred Thousand
Dollars ($100,000), in the aggregate for such twenty-four (24) month period.
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(s) Employee Relations. (i) Since the Diamond Acquisition, no
Seller, Subsidiary or Affiliate of Seller has been or is a party to any
collective bargaining or other labor Contract. Since the Diamond Acquisition,
there has not been, there is not presently pending or existing, and To Seller's
Knowledge, there is not Threatened, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (b) any Proceeding against or affecting
Seller, any Subsidiary or Affiliate of Seller relating to the alleged violation
of any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting Seller, or any Subsidiary or Affiliate
of Seller, or their premises, or (c) any application for certification of a
collective bargaining agent. To Seller's Knowledge, no event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any employees by Seller or any Subsidiary
or Affiliate of Seller, and no such action is contemplated by Seller or any
Subsidiary or Affiliate of Seller. Seller and each Subsidiary and Affiliate of
Seller has complied in all respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing. Neither Seller
nor any Subsidiary or Affiliate of Seller is liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
(ii) Section 4(s)(ii) of the Disclosure Schedule contains a
complete and accurate list of the following information for each employee or
director of the Seller, including each employee on leave of absence or layoff
status; name; job title; current compensation paid or payable and any change in
compensation since the date of the Most Recent Financial Statements; vacation
accrued; and services credited for the purposes of vesting and eligibility to
participate in any Employee Benefit Plan of Seller. M&M Venture Capital Corp.
has never had employees.
(t) Customers and Suppliers. Section 4(t) of the Disclosure
Schedule contains a list of the 20 largest suppliers and customers of the Seller
for each of the two most recent fiscal years (determined on the basis of total
dollar purchases). None of the customers or suppliers listed on Section 4(t) of
the Disclosure Schedule has indicated that as of the date of this Agreement it
intends to terminate its relationship with the Seller.
(u) Insurance. (i) Section 4(u) of the Disclosure Schedule
describes:
(A) a summary of policies of insurance or true and
complete copies of the declaration pages of policies of insurance under which
Seller or Diamond is or has been covered at any time since the Diamond
Acquisition;
(B) true and complete copies of all pending
applications by Seller or Diamond for policies of insurance;
(C) any statement by the auditor of Seller or
Diamond's financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims; and
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(D) except for Workers' Compensation matters, any
self-insurance arrangement by or affecting Seller, other than a policy of
insurance, for the transfer or sharing of any risk by Seller, including a
statement describing the amount and containing a brief description of each
pending or threatened claim, name of the claimant, and the reserves established
thereunder any contract or arrangement under such self-insurance arrangement.
(ii) Except as set forth on Section 4(u) of the Disclosure
Schedule:
(A) All policies to which Seller is a party or that
provide coverage to either Seller:
(1) are valid, outstanding and enforceable;
(2) are issued by an insurer that is
financially sound and reputable; and
(3) will continue in full force and effect
through the Closing, or will be replaced by policies that afford substantially
similar coverage, policy limits and other terms, and that otherwise are in
conformity with the provisions of this Section 4(u);
(B) Each pending litigation matter disclosed in items
1, 4, 5, 8 and 9 of Section 4(k) of the Disclosure Schedule is an insurable
matter under the policies of insurance disclosed in subsection (i) above,
without, with respect to each matter disclosed in items 1, 4, 8 and 9 of Section
4(k) of the Disclosure Schedule, any reservation of rights on the part of any
insurer;
(C) Neither Seller nor Diamond has received (1) any
refusal of coverage of a claim against Seller, or any notice that a defense will
be afforded on a claim against Seller with reservation of rights, or (2) any
notice of cancellation or any other indication that any insurance policy that
provides coverage to Seller is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder;
(D) Seller and Diamond have paid all premiums due,
and have otherwise performed all of their respective obligations, under each
policy to which Seller is a party or that provides coverage to Seller.
(E) Seller or Diamond has given notice to the insurer
of all known claims of Seller that may be insured by such insurer, and each such
claim is an insurable matter under the policies of insurance disclosed in
subsection (i) above, without any reservation of rights on the part of any
insurer; and
(F) The policies of insurance described in subsection
(i) above, taken together, provide adequate insurance coverage both for
outstanding claims and otherwise for the assets and operations of Seller,
Diamond and the other insureds for all risks normally insured against by a
Person carrying on the same business or businesses as Seller, Diamond and the
other insureds, notwithstanding the erosion of aggregate limits for all such
past claims, and for claims that may be incurred by Seller or Diamond prior to
Closing.
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(v) No Material Adverse Change. Since the date of the Most
Recent Financial Statements, there has not been any material adverse change in
the business, operations, properties, prospects, assets, or condition of Seller,
and no event has occurred or circumstance exists that may result in such a
material adverse change.
(w) Absence of Certain Changes and Events. Except as set forth
in Section 4(v) of the Disclosure Schedule, since the date of the Most Recent
Financial Statements, Seller has conducted its businesses only in the Ordinary
Course of Business and there has not been any:
(i) payment or increase by Seller of any bonuses,
salaries, or other compensation to any stockholder, director, officer, or
employee or entry into any employment, severance, or similar Contract with any
director, officer, or employee;
(ii) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of Seller;
(iii) damage to or destruction or loss of any asset
or property of Seller, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition, or
prospects of Seller, taken as a whole;
(iv) entry into, termination of, or receipt of notice
of termination of (A) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (B) any contract
or transaction involving a total remaining commitment by or to Buyer of at least
$25,000;
(v) sale (other than sales of inventory in the
Ordinary Course of Business), lease, or other disposition of any Acquired Assets
or property of Seller or mortgage, pledge, or imposition of any lien or other
encumbrance on any Acquired Assets or property of Seller, including the sale,
lease, or other disposition of any of the Intellectual Property;
(vi) material change in the accounting methods used
by Seller; or
(vii) agreement, whether oral or written, by Seller
to do any of the foregoing.
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 reasonable
efforts to take all action 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 Section 6 below).
(b) Notices and Third-Party Consents. The Parties will give
any notices to third parties, and each Party will use its commercially
reasonable efforts to obtain third party consents referred to in Section 3(e)
and Section 4(b) or the Disclosure Schedule above, and to obtain estoppel
certificates executed on behalf of those landlords identified in Exhibit H and
each in the form of Exhibit I. Each of the Parties will give any notices to,
make any
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filings with, and use its best efforts to obtain any authorizations, consents,
and approvals of Governmental Bodies in connection with the matters referred to
in Section 3(e), Section 4(b) and Section 4(m) above. Each of the Parties will
use their commercially reasonable efforts to make any filings and to obtain the
consents and approvals of the United States Environmental Protection Agency.
Buyer will work expeditiously to obtain a satisfactory Prospective Purchaser
Agreement from the United States Environmental Protection Agency and to consult
with Seller during these negotiations. Seller shall consult with Buyer with
respect to any work required under the Prospective Purchaser Agreement to be
completed prior to Closing, and Seller shall complete such work to Buyer's
reasonable satisfaction or make provision therefor pursuant to Section 2(m).
Upon Closing, and in accordance with Section 2(m), Buyer shall be solely
responsible for paying the costs and performing the work that the United States
Environmental Protection Agency or the State of Florida may require under the
Prospective Purchaser Agreement. In connection therewith each of the Parties
shall consult with the other Party, confer on a common strategy and not make any
submission to the United States Environmental Protection Agency without the
consent of the other Party. Seller agrees to work expeditiously to obtain
whatever additional approvals may be required for the United States
Environmental Protection Agency under the Consent Decree and to consult with
Buyer during these negotiations. Each party shall bear its own costs in
connection with the negotiation of the Prospective Purchaser Agreement.
(c) Operation of Business. The Seller will not engage in any
practice, take any material action, or enter into any transaction outside the
Ordinary Course of Business that materially adversely affects the Acquired
Assets.
(d) 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 Section 3 and Section
4 above. Seller shall from time to time up to 5 days prior to the Closing
supplement or amend any section of the Disclosure Schedule. Such supplementing
or amending may include one or more supplements or amendments to correct any
matter that would constitute a breach of any representation or warranty set
forth in this Agreement. No such supplement or amendment shall be effective to
cure or correct any breach of any representation or warranty that would have
existed if Seller had not made such supplement or amendment.
(e) Exclusivity. Until such time, if any, as this Agreement is
terminated pursuant to Article 7, the Seller and its Affiliates will not
directly or indirectly solicit, initiate, or encourage the submission of any
proposal or offer from, discuss, or negotiate with, provide any non-public
information to, or consider the merits of any unsolicited inquiries proposals
from, any Person (other that Buyer) relating to the acquisition of all or
substantially all of the capital stock or assets of the Seller (including any
acquisition structured as a merger, consolidation, or share exchange), nor will
it enter into any agreement with respect to any of the forgoing. The Seller
shall promptly report to the Buyer any inquiries that the Seller receives
soliciting any of the foregoing.
(f) Access Prior to Closing. From the date of execution of
this Agreement through the Closing, the Seller shall afford the Buyer and the
Buyer's agents reasonable access during normal business hours to the offices,
properties, personnel and business and financial records (including records
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related to environmental matters) of the Business to the extent the Buyer shall
deem necessary or desirable and shall furnish to the Buyer or its authorized
representatives such additional information concerning the Acquired Assets and
the Business as shall be reasonably requested. The Buyer agrees that such
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operations of the Seller or the Business and that requests
for access shall be coordinated with James Bradshaw, the Seller's President.
(g) Transfer Taxes and Certain Expenses. With respect to any
real estate which constitutes a part of the Acquired Assets, all fees and costs
for Title Search and Surveys, escrow charges and recording fees, title abstract,
title insurance premiums and related fees, costs and expenses, stamp, transfer,
documentary, sales, use, registration and other such Taxes (other than income or
franchise taxes) and fees related to such transfer shall be paid by the party
who customarily pays such fees in commercial transactions in the jurisdiction in
which such real estate is located. Buyer and Seller shall each pay one-half of
all other Taxes (other than income or franchise taxes) and fees imposed on the
act of selling or delivering the Acquired Assets other than real estate or
documents to the Buyer or recording or lodging of documents (other than those
relating to real estate) with any Governmental Body.
(h) Tax Adjustments. Except as otherwise provided in this
Agreement, the Seller shall be liable for and shall pay all Taxes (whether
assessed or unassessed) applicable to the Business and the Acquired Assets in
each case attributable to periods ending on the Closing Date. Buyer shall be
liable for and shall pay all Taxes (whether assessed or unassessed) applicable
to the Business and the Acquired Assets in each case attributable to periods
beginning with the Closing Date.
(i) Certain Related Party Transactions.. Seller shall acquire
all right, title and interest, including all real property leasehold interests
and all intellectual property interests from any Subsidiary or Affiliate of
Seller, which is used by the Seller and which is necessary or convenient to the
conduct of the Business in the manner it is presently conducted by Seller, such
that at the Closing, no Subsidiary or Affiliate of Seller will have any right,
title or interest in any Acquired Asset, nor to any real property or
Intellectual Property in which Seller has any right, title or interest which is
an Acquired Asset.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of
the Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) All of Seller's representations and warranties
set forth in Section 4 of this Agreement must have been accurate in all material
respects as of the date of the Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, in each case
without giving effect to any knowledge qualification or limitation contained in
any such representation and warranty;
(ii) All of the covenants and obligations that Seller
is required to perform or to comply with pursuant to this Agreement at or prior
to the Closing must have been duly performed and complied with in all material
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respects. Seller shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(iii) Each of the consents identified in Sections
4(b) and 4(j)(vi) of the Disclosure Schedule must have been obtained and must be
in full force and effect and Seller shall have delivered to Buyer estoppel
certificates executed on behalf of those landlords identified in Exhibit H and
dated as of a date not more than 10 days prior to the Closing Date each
substantially in the form of Exhibit I;
(iv) There shall not have been commenced or
Threatened against Buyer any action, suit, proceeding, hearing, investigation,
any injunction, judgment, order, decree, ruling, or charge in or before any
court or quasi-judicial or administrative agency of any federal, state, or
local, or foreign jurisdiction (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the transactions contemplated
by this Agreement, or (b) that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with the consummation of any of the
transactions contemplated by this Agreement;
(v) The Seller shall have delivered to the Buyer (a)
a certificate to the effect that each of the conditions specified above in
Sections 6(a)(i)-(iv) is satisfied in all material respects, and (b) shall have
delivered to the Buyer such other documents as the Buyer may reasonably request
for the purpose of (i) evidencing the accuracy of any representation or warranty
of the Seller, (ii) evidencing the performance by the Seller of, or the
compliance by the Seller with, any covenant or obligation required to be
performed or complied with by the Seller, (iii) evidencing the satisfaction of
any condition referred to in this Section 6(a), or (iv) otherwise facilitating
the consummation of any of the contemplated transactions;
(vi) Agent shall have consented to the transactions
contemplated by this Agreement, shall have released its Security Interests in
the Acquired Assets, and shall have delivered to Buyer a general release of
Buyer in a form reasonably satisfactory to Buyer;
(vii) Lori Bronson, et al., Robert Estes, et al.,
William Everidge, et al., Maryann Blackwell, et al., State of Alabama Department
of Revenue, NCNB National Bank of Florida and/or NationsBank, N.A. and/or
NationsBank, N.A. South, and/or NationsBank, National Assn., f/k/a NCNB National
Bank of Florida, and Leon W. Ponte et al. each shall have released their
Security Interests in the Acquired Assets and with respect to the indebtedness,
if any, to such parties, or the Seller shall have provided evidence of the
discharge of the indebtedness giving rise to the Security Interests or other
evidence that the Security Interests no longer exist, to the reasonable
satisfaction of the Buyer;
(viii) Industrial Galvanizers America, Inc. ("IGA"),
shall have entered into a settlement agreement with the Seller pursuant to which
IGA has delivered to the Seller an unconditional release of the Buyer, in form
and substance reasonably acceptable to the Buyer, from any liability to IGA or
its successors, assigns, or affiliates relating to or arising out of any
Environmental Liability associated with the Seller, any assets of the Seller, or
the acquisition by the Buyer of any assets from the Seller;
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(ix) The Buyer shall have received from counsel to
the Seller an opinion in form and substance as set forth in Exhibit J attached
hereto, addressed to the Buyer, and dated as of the Closing Date;
(x) The Buyer shall have received from the United
States Environmental Protection Agency a Prospective Purchaser Agreement (the
"Prospective Purchaser Agreement") in form and substance satisfactory to Buyer
and Seller;
(xi) The Buyer shall have obtained insurance,
satisfactory to it in its reasonable judgement, against Environmental
Liabilities related to the Acquired Assets;
(xii) Seller and Diamond have paid all premiums due,
and have otherwise performed all of their respective obligations, under each
insurance policy to which Seller is a party or that provides coverage to Seller;
and
(xiii) All actions to be taken by the Seller 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 the Buyer.
The Buyer may waive any condition specified in this Section 6(a) at or prior to
the Closing.
(b) Conditions to Obligation of the Seller. The obligation of
the Seller to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) All of Buyer's representations and warranties set
forth in Section 3 of this Agreement must have been accurate in all material
respects as of the date of the Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date;
(ii) All of the covenants and obligations that Buyer
is required to perform or to comply with pursuant to this Agreement at or prior
to the Closing must have been duly performed and complied with in all material
respects. Buyer shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(iii) There shall not have been commenced or
Threatened against Seller any action, suit, proceeding, hearing, investigation,
any injunction, judgment, order, decree, ruling, or charge in or before any
court or quasi-judicial or administrative agency of any federal, state, or
local, or foreign jurisdiction (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the transactions contemplated
by this Agreement, or (b) that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with the consummation of any of the
transactions contemplated by this Agreement;
(iv) The Buyer shall have delivered to the Seller (a)
a certificate to the effect that each of the conditions specified above in
Section 6(b)(i)-(iii) is satisfied in all material respects, and (b) shall have
delivered to the Seller such other documents as the Seller may reasonably
request for the purpose of (i) evidencing the accuracy of any representation or
warranty of the Buyer, (ii) evidencing the performance by the Buyer of, or the
compliance by the Buyer with, any covenant or obligation required to be
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performed or complied with by the Buyer, (iii) evidencing the satisfaction of
any condition referred to in this Section 6(b), or (iv) otherwise facilitating
the consummation of any of the contemplated transactions;
(v) Agent shall have released its Security Interests
in the Acquired Assets;
(vi) The Seller shall have received from counsel to
the Buyer an opinion in form and substance as set forth in Exhibit K attached
hereto, addressed to the Seller, and dated as of the Closing Date;
(vii) The Seller shall have received a Secretary's
Certificate certifying as to the By-laws, resolutions and incumbency of the
officers of the Buyer;
(viii) Buyer shall have assumed Seller's obligations
under those Change of Control and Severance Pay Agreements listed on Schedule
1.1-B; and
(ix) All actions to be taken by the 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 the Seller.
The Seller may waive any condition specified in this Section 6(b) if it executes
a writing so stating at or prior to the Closing.
7. Termination.
(a) Termination of Agreement. This Agreement may be terminated
as provided below:
(i) The Buyer and the Seller may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing: (A) in the event
(1) the Seller has breached any representation, warranty, or covenant, or other
obligation that Seller is required to perform or comply with pursuant to this
Agreement in any material respect, (2) the Buyer has notified the Seller of the
breach, and (3) the breach has continued without cure for a period of 30 days
after the notice of breach and such breach has not been waived; or (B) if the
United States Environmental Protection Agency has not published for comment in
the Federal Register notice of their intention to grant the Prospective
Purchaser Agreement within 75 days after the date this Agreement is executed; or
(C) if the Closing shall not have occurred on or before 120 days after the date
this Agreement is executed (unless the failure results primarily from the Buyer
itself breaching any representation, warranty, or covenant, or other obligation
that Buyer is required to perform or comply with pursuant to this Agreement in
any material respect); and
(iii) the Seller may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing: (A) in the
event (1) the Buyer has breached any representation, warranty, or covenant, or
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other obligation that Buyer is required to perform or comply with pursuant to
this Agreement in any material respect, (2) the Seller has notified the Buyer of
the breach, and (3) the breach has continued without cure for a period of 30
days after the notice of breach; or (B) if the United States Environmental
Protection Agency has not published for comment in the Federal Register notice
of their intention to grant the Prospective Purchaser Agreement within 75 days
after the date this Agreement is executed; or (C) if Buyer has not provided
Seller with a letter waiving the conditions to Closing contained in Section
6(a)(xi) within 45 days after the date this Agreement is executed; or (D) if the
Closing shall not have occurred on or before 120 days after the date this
Agreement is executed (unless the failure results primarily from the Seller
itself breaching any representation, warranty, or covenant or other obligation
that Seller is required to perform or comply with pursuant to this Agreement in
any material respect).
(b) Effect of Termination. Each party's right of termination
under this Section 7(a) is in addition to any other rights it may have under
this Agreement or otherwise, and the exercise of any right of termination will
not be an election of remedies. If any Party terminates this Agreement pursuant
to Section 7(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 which has committed a material breach hereof or any Party
which fails to consummate the Closing notwithstanding the fact that (1) all of
the conditions running in its favor under Section 6 hereof have been satisfied
and (2) all of the conditions running in the favor of the other Party under
Section 6 have been satisfied or waived); provided, however that the
Confidentiality Agreement and the provisions of Section 10(l)shall survive
termination.
8. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further
reasonable action is necessary to carry out the purposes of this Agreement, each
of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party may
reasonably request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 9 below).
(b) Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Seller, each of the other Parties shall
cooperate with such Party or its counsel in the defense or contest, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the defense or contest, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 9 below).
(c) Transition. Neither Seller nor its Affiliates will take
any action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of the Seller
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from maintaining the same business relationships after the Closing as it
maintained with the Seller prior to the Closing.
(d) Covenant Not to Compete or Solicit Business. In
furtherance of the sale of the Acquired Assets and the Business to Buyer
hereunder by virtue of the transactions contemplated hereby and more effectively
to protect the value and goodwill of the Acquired Assets and the Business so
sold, Seller covenants and agrees that, for a period ending on the third
anniversary of the Closing Date, Seller or any of its respective Affiliates will
not:
(i) directly or indirectly (whether as principal,
agent, independent contractor, partner or otherwise) own, manage, operate,
control, participate in, perform services for, sell materials to, or otherwise
carry on, the business of the manufacture, distribution and/or sale of fencing
products anywhere in the United States (it being understood by the parties
hereto that the Business is not limited to any particular region of the United
States and that such business may be engaged in effectively from any location in
the United States); or
(ii) induce or attempt to persuade any Employee,
agent or customer of the Business to terminate such employment, agency or
business relationship in order to enter into any such relationship on behalf of
any other business organization in competition with the Business; provided,
however, that nothing set forth in this Section shall prohibit Seller or its
Affiliates from owning not in excess of 5% in the aggregate of any class of
capital stock of any corporation if such stock is publicly traded and listed on
any national or regional stock exchange or on the NASDAQ national market.
(e) Access to Records After Closing. For a period of five
years after Closing, Buyer shall retain and make available to Seller for copying
any of the books delivered to Buyer, at the Closing, at any reasonable time
during normal business hours. Upon 60 calendar days prior written notice to
Seller and Seller's ability to remove such records or books, Buyer shall have
the right after the applicable periods to dispose of any such books or records
that are not material in nature. Buyer will provide Seller with suitable office
facilities at the principal location of the Business or Buyer's principal place
of business for the purpose of such access. For a period of five years after
Closing, Seller shall retain and make available to Buyer for copying any of the
books of any Subsidiary or Affiliate, reasonably connected with the Business of
Seller, at any reasonable time during normal business hours. Upon 60 calendar
days prior written notice to Buyer and Buyer's ability to copy such records or
books, Seller, its Affiliates and Subsidiaries shall have the right after the
applicable periods to dispose of any such books or records that are not material
in nature.
(f) Name Change. Seller agrees, and agrees to cause each
Subsidiary and Affiliate of Seller, promptly after the Closing Date to change
its corporate name to a name that does not include the word "Reeves
Southeastern" or any variation thereof.
(g) Warranty and Other Repairs. From and after the Closing,
Buyer shall pay perform and otherwise satisfy all Standard Warranty Obligations,
and Seller shall pay, perform and otherwise satisfy all other warranty service
relating to products manufactured or serviced by Seller and all Seller warranty
arrangements prior to the Closing.
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(h) Discharge of Assumed Liabilities. From and after the
Closing Date, Buyer agrees to pay, perform and otherwise satisfy in full when
due all liabilities and obligations arising from the Assumed Liabilities.
(i) Accounts Receivable. Following the expiration of 90 days
after the Closing Date, the Buyer shall deliver to the Seller a schedule of all
uncollected Accounts Receivable of the Seller that are reflected on the Closing
Date Accounts Receivable Schedule or otherwise on the accounting records of the
Seller and used in the preparation of the Closing Date Balance Sheet, and to the
extent that the aggregate unpaid balance of principal and interest of all
uncollected Accounts Receivable of the Seller that are reflected on the Closing
Date Accounts Receivable Schedule or otherwise on the accounting records of the
Seller and used in the preparation of the Closing Date Balance Sheet (less net
recoveries made by Company during such 90 day period), exceed the allowance for
doubtful accounts on the Preliminary Closing Date Accounts Receivable Schedule
(the amount of such excess being referred to as the "Uncollected Receivable
Amount"), the Seller and the Buyer shall cause the Escrow Agent to pay to the
Buyer from the Adjustment Escrow Amount, the Uncollected Receivable Amount
within 10 days after delivery of such schedule, by wire transfer to a bank
account designated by the Buyer in writing. In the event that the aggregate
unpaid balance of principal and interest of all uncollected Accounts Receivable
of the Seller that were reflected on the Closing Date Accounts Receivable
Schedule or otherwise on the accounting records of the Seller and used in the
preparation of the Closing Date Balance Sheet is less than the allowance for
doubtful accounts on the Preliminary Closing Date Accounts Receivable Schedule,
no such payment shall be made by the Escrow Agent to the Buyer.
For purposes of determining the aggregate balance of uncollected
accounts receivable of the Seller that are reflected on the Closing Date
Accounts Receivable Schedule or otherwise on the accounting records of the
Seller and used in the preparation of the Closing Date Balance Sheet at the
expiration of the 90 day period, as between the Buyer and the Seller for the
purposes of this Section 8(i) only, the Buyer agrees to apply all payments by
account debtors with respect to Accounts Receivable first to accrued interest
and then to principal balances on the basis of the earliest invoice date of
accounts receivable. This method shall be applied as between the Buyer and the
Seller irrespective of the manner in which any account debtor may have indicated
that any payment was to have been applied as to its Account Receivable balance
or as to a specific item of account receivable. The Buyer and the Seller
recognize that both the Buyer and the Seller hold, and will hold, as of the
Closing, Accounts Receivable from some of the same account debtors. The
provisions of this Section 8(i) shall apply only to payments received by Buyer
on account of accounts receivable of the Seller, and shall in no way govern the
application by the Buyer of payments by account debtors of the Buyer against
accounts receivable of the Buyer which are not related to Acquired Assets under
this Agreement.
Following payment by Seller to Buyer of an Uncollected Receivable
Amount, Buyer shall continue to attempt, using commercially reasonable efforts,
to collect the uncollected Accounts Receivables for a period of thirty (30) days
thereafter and at the end of such 30 day period, shall remit to Seller in
immediately available funds any proceeds collected on such previously
uncollected Accounts Receivable, up to the amount of the Uncollected Receivable
Amount paid by Seller to Buyer. At the end of such 30 day period Buyer shall
assign to Seller, without recourse, those items of uncollected Accounts
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Receivable, (including all formerly written off accounts receivable not yet
collected).
The Buyer shall use commercially reasonable efforts in the collection
of the accounts receivable the Seller that are reflected on the Closing Date
Accounts Receivable Schedule or otherwise on the accounting records of the
Seller and used in the preparation of the Closing Date Balance Sheet, but in no
event shall the Buyer be required to threaten or commence any proceeding,
action, arbitration or suit against an account debtor or maker or any other
Person who may be liable thereon.
9. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. The
representations and warranties of Seller contained in Section 4 above shall not
survive the Closing hereunder, except that the representations and warranties
set forth in Section 4(g) and Section 4(o) shall survive the Closing and
continue in full force and effect forever (subject to any applicable statutes of
limitations). Following the Closing, the rights and remedies set forth in this
Section 9 and in the agreements and instruments delivered at the Closing shall
constitute the exclusive rights and remedies, either at law or in equity, of the
Parties with respect to any breach of representation or warranty under this
Agreement, other than with respect to matters involving fraud.
(b) Indemnification Provisions for Benefit of the Buyer.
In the event that, following the Closing, (A) the
Seller breaches any of its representations or warranties contained in Section
4(g) or Section 4(o) or breaches any of its post-Closing covenants contained
herein, and (B) the Buyer makes a written claim for indemnification against the
Seller with respect thereto (which written claim shall specify in reasonable
particulars the basis of the breach being asserted and, to the extent then
determinable, a calculation of any Adverse Consequences which the Buyer or
Buyer's Indemnified Parties (as hereinafter defined) claim to suffer as a result
thereof), then the Seller agrees to indemnify the Buyer, and its
Representatives, stockholders, and Affiliates and each Affiliate's
Representatives (collectively "Buyer's Indemnified Parties") from and against
any Adverse Consequences the Buyer or Buyer's Indemnified Parties suffer
arising, directly from or in connection with such breach or failure. Buyer's
sole recourse with respect to any indemnification claim arising out of
Environmental Liabilities in accordance with Section 9(e) shall be limited to
the Indemnification Escrow Amount pursuant to the terms of the Escrow Agreement.
(c) Indemnification Provisions for Benefit of the Seller.
In the event that, following the Closing, (A) the
Buyer breaches any of its representations or warranties contained in Section
3(d), breaches any of its post-Closing covenants contained herein, or fails to
pay when due any Assumed Liability, and (B) the Seller makes a written claim for
indemnification against the Buyer with respect thereto (which written claim
shall specify in reasonable particulars the basis of the breach being asserted
and, to the extent then determinable, a calculation of any Adverse Consequences
which the Seller or Seller's Indemnified Parties (as hereinafter defined) claim
to suffer as a result thereof), then the Buyer agrees to indemnify the Seller,
and its Representatives, stockholders, and Affiliates and each Affiliate's
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Representatives (collectively "Seller's Indemnified Parties") from and against
any Adverse Consequences the Seller or Seller's Indemnified Parties suffer
arising, directly from or in connection with such breach or failure.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party, any
Buyer Indemnified Parties, and any Seller Indemnified Parties, as the case may
be (the "Indemnified Party") with respect to any matter (a "Claim") which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 9, then the Indemnified Party shall
promptly (and in any event within 10 business days after receiving notice of the
Claim) notify each Indemnifying Party thereof in writing; provided, however,
that failure to provide such notice on a timely basis shall not release the
Indemnifying Party from any of its obligations under this Section 9 except to
the extent the Indemnifying Party is materially prejudiced by such failure.
(ii) The Indemnifying Party will have the right at
any time to assume and thereafter conduct the defense of the Claim with counsel
of its choice; provided, however, that the Indemnifying Party will not consent
to the entry of any judgment or enter into any settlement with respect to the
Claim without the prior written consent of the Indemnified Party (not to be
unreasonably withheld or delayed) unless the judgment or proposed settlement
involves only the payment of money damages and does not impose an injunction or
other equitable relief upon the Indemnified Party.
(iii) Unless and until the Indemnifying Party assumes
the defense of the Claim as provided in Section 9(d)(ii) above, the Indemnified
Party may defend against the Claim in any manner it reasonably may deem
appropriate.
(iv) In no event will the Indemnified Party consent
to the entry of any judgment or enter into any settlement with respect to the
Claim without the prior written consent of each of the Indemnifying Party (not
to be unreasonably withheld or delayed).
(v) In the event that any Party suffers damage or
loss in respect of which it has or makes a valid claim against another Party for
indemnification, it must take reasonable steps to mitigate its loss or damage.
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(e) Matters Involving Environmental Liability. In addition to
the provisions of Section 9(b), Seller will indemnify and hold harmless Buyer,
and the Buyer' Indemnified Parties for, and will pay to Buyer and the Buyer's
Indemnified Parties, from and against any Environmental Liabilities arising out
of Third Party Claims relating to the ownership, operation, or condition of the
real property known as the Reeves Southeastern Superfund Site (including the
Reeves Southeastern Wire Facility and Reeves Southeastern Galvanizing Facility),
including any Environmental Liabilities with respect to the Peak Oil Co.
Superfund Site or the Bay Drum Co. Superfund Site that Buyer incurs by reason of
its ownership of its purchase or ownership of the Acquired Assets. Buyer's sole
recourse for claims arising out of this Section 9(e) shall be the
Indemnification Escrow Amount, and Buyer shall have no recourse to Seller or the
Indemnification Escrow Amount for Environmental Liabilities for which notice is
not given to Seller within 3 years of the Closing Date.
(f) Determination of Adverse Consequences. The Parties shall
make appropriate adjustments for tax benefits and insurance coverage, and take
into account the time cost of money (using the Agreed Rate as the discount
rate), in determining Adverse Consequences for purposes of this Section 9. All
indemnification payments under this Section 9 shall be deemed adjustments to the
Purchase Price. The reference to "insurance coverage" in this subsection (f)
shall in no way be construed as to limit the indemnification obligations of a
Party as set forth in Article 9, nor shall the amount shall the amount of any
insurance coverage be deemed to be a limitation or ceiling on the liability of
any Party of its obligations under this Article 9.
10. Miscellaneous.
(a) Certain Understandings of Buyer. Buyer acknowledges that
it has had sufficient opportunity to make whatever investigation it has deemed
necessary and advisable for purposes of determining whether or not to enter into
this Agreement and acknowledges and agrees that, EXCEPT TO THE EXTENT OF THE
EXPRESS REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS CONTAINED IN THIS
AGREEMENT, AND SUBJECT TO THE DISCLOSURE SCHEDULE, BUYER IS ACQUIRING THE
ACQUIRED ASSETS AND ASSUMING THE ASSUMED LIABILITIES IN RELIANCE UPON ITS OWN
INVESTIGATION AND WITHOUT ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY,
FITNESS FOR ANY PARTICULAR PURPOSE OR ANY OTHER IMPLIED WARRANTIES WHATSOEVER.
Except as otherwise provided in this Agreement, Buyer is acquiring all the
Acquired Assets in "as is, where is condition." Buyer waives all claims and
causes of action against Seller, whether arising by federal, state, or local
statute or common law, including but not limited to environmental law, and
agrees that this Agreement and all documents and instruments executed at the
Closing provide Buyer's sole recourse against Seller. Buyer acknowledges (i)
that in the course of its independent investigation of the Seller, it examined
the information contained in a Confidential Information Memorandum (the
"Offering Memorandum") and attended presentations conducted by management of the
Seller (the "Presentations"), (ii) that because of its investigation, Buyer is
not relying on the information contained in the Offering Memorandum or the
statements made and information furnished in connection with the Presentations
in its decision to enter into this Agreement, to purchase the Acquired Assets
and to assume the Assumed Liabilities hereunder, and (iii) that Seller makes no
representation or warranty concerning the information contained in the Offering
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<PAGE>
Memorandum or the statements made and information furnished in connection with
the Presentations.
(b) 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 or its Affiliate may make
any public disclosure it believes in good faith is required by applicable law
(or the Securities Exchange Act), the regulations of the Over-the-Counter
Bulletin Board or other exchange on which is publicly-traded the securities of
the Party or its Affiliate, or any listing or trading agreement concerning the
publicly-traded securities of the Party or any Affiliate of the Party (in which
case the Party which is, or the Affiliate of which is, making disclosure will
use its reasonable best efforts to advise the other Party prior to making the
disclosure).
(c) 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.
(d) 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 related in any way to
the subject matter hereof, provided, however, that the letter agreement between
Buyer and Houlihan Lokey Howard & Zukin Capital concerning confidentiality (the
"Confidentiality Agreement") shall continue in effect.
(e) 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 (i) any Party may (A) assign
any or all of its rights and interests hereunder to one or more of its
Affiliates and (B) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the assigning Party
nonetheless shall remain responsible for the performance of all of its
obligations hereunder) and (ii) Seller may assign any or all of its rights and
interests hereunder as security to lenders to Diamond.
(f) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) 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.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
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<PAGE>
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller: Reeves Southeastern Corporation
9800 Reeves Road
Tampa, Florida
(813) 620-0932 (fax)
Attn: Chief Executive Officer
with a copies to:
----------------
Diamond Home Services, Inc.
500 North Western Avenue
Suite 212
Lake Forest, Illinois 60045
Attn: C. Stephen Clegg
McDermott, Will & Emery
227 West Monroe Street
Suite 3100
Chicago, IL 60606-5096
(312) 984-7700 (fax)
Attn: Harold Nations
If to the Buyer: Master-Halco, Inc.
110 E. La Habra Boulevard
La Habra, California 90633-0365
(562) 691-4686 (fax)
Attn: Chief Executive Officer
with a copy to:
--------------
Itochu International Inc.
777 S. Figueroa Street
Suite 4500
Los Angeles, California 90017-5418
(213) 614-0001 (fax)
Attn: Edward Stieg
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. 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.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Illinois without
giving effect to any choice or conflict of law provision or rule (whether of the
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<PAGE>
State of Illinois or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois.
(j) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Seller. The Seller may consent to any such amendment at any
time prior to the Closing with the prior authorization of its board of directors
and, if required under the corporation laws of the State of Florida, its
stockholder. No waiver by any Party of any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not, shall 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 occurrence.
(k) 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.
(l) Expenses. Except as otherwise provided for herein, each of
the Buyer and the Seller will bear its own costs and expenses (including legal
fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
(m) 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.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(o) Employee Benefits Matters. The Buyer will ensure that
Seller's employees who are eligible for employment with Buyer (e.g. drug testing
and other employment criteria established by Buyer and applicable to all
prospective employees of Buyer) will treat employment with the Seller prior to
the Closing Date the same as employment with Buyer from and after the Closing
Date for purposes of eligibility, vesting, pre-existing conditions and benefit
accrual under Buyer's Employee Benefit Plans.
(p) Bulk Transfer Laws. Except to the extent requested in
writing by Buyer (which request shall be made no earlier than 45 days after the
execution of this Agreement) to comply with the bulk transfer laws in any
particular jurisdiction, the Buyer acknowledges that the Seller will not comply
with the provisions of any bulk transfer laws of any jurisdiction in connection
with the transactions contemplated by this Agreement.
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<PAGE>
(q) Submission to Jurisdiction. Each of the Parties consents
to the exclusive jurisdiction of the federal courts of the Northern District of
Illinois for any legal action, suit, or proceeding arising out of or in
connection with this Agreement, and agree that any such action, suit, or
proceeding may be brought only in such courts. Each of the Parties further
waives any objection to the laying of venue for any such suit, action, or
proceeding in such courts. Each Party agrees to accept and acknowledge service
of any and all process that may be served in any suit, action, or proceeding.
Each Party agrees that any service of process upon it mailed by registered or
certified mail, return receipt requested to such Party at the address in
Section 10(h) above shall be deemed in every respect effective service of
process upon such Party in any such suit, action, or proceeding.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
MASTER-HALCO, INC.
By: /s/ Barry J. Marrs
---------------------------------------
Title: President
-------------------------------------
REEVES SOUTHEASTERN CORPORATION
By: /s/ James W. Bradshaw
---------------------------------------
Title: President
-------------------------------------
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<PAGE>
SCHEDULE 1.1-A
--------------
KNOWLEDGE
---------
1. C. Stephen Clegg
2. James W. Bradshaw
3. Nick Scalamogna
4. Jerry Gambrell
5. Robert C. DuMont
-1-
<PAGE>
SCHEDULE 1.1-B
--------------
CHANGE OF CONTROL AND SEVERANCE PAY AGREEMENTS
----------------------------------------------
A. Change in Control and Severance Pay Agreement between James W.
Bradshaw and the Seller, dated December 1, 1999, as amended on
June 8, 2000.
B. Change in Control and Severance Pay Agreement between Doug
Vanderjagt and the Seller, dated December 1, 1999, as amended
on June 8, 2000.
C. Change in Control and Severance Pay Agreement between Nick
Scalamogna and the Seller, dated December 1, 1999, as amended
on June 8, 2000.
D. Change in Control and Severance Pay Agreement between Robert
C. Dumont and the Seller, dated December 1, 1999, as amended
on June 8, 2000.
E. Change in Control and Severance Pay Agreement between Ken
Butler and the Seller, dated December 1, 1999, as amended on
June 8, 2000.
F. Change in Control and Severance Pay Agreement Between Gary
Burt and the Seller, dated December 1, 1999, as amended on
June 8, 2000.
<PAGE>
SCHEDULE 1.1-C
--------------
EXCLUDED ASSETS
---------------
1. All securities in and assets of the following Subsidiaries of Seller:
Southeastern International Sales, Inc.
Foreline Security Corp.
Reeves Southeastern Realty Inc.
2. The Seller's investment in Tampa Plaid, L.C.
3. All Accounts Receivable from Industrial Galvanizers America, Inc., or
any Subsidiary or Affiliate, including that certain $3,000,000
Promissory Note dated March 1, 1996 made by Industrial Galvanizers
America, Inc. in favor of Seller.
4. All of Seller's accounts, notes or other intercompany receivable from
any Subsidiary or Affiliate, including:
Southeastern International Sales, Inc.
Foreline Security Corp.
Diamond Home Services, Inc.
Reeves Southeastern Realty Inc.
Diamond Exteriors, Inc.
Marquise Financial Services, Inc.
Marquise Special Purpose Corporation
Diamond Realty Acquisition Corporation
Solitaire Heating and Cooling, Inc. dba KanTel
5. All of the Seller's property, general liability, business auto workers'
compensation foreign liability, umbrella, commercial crime and
directors and officers, employment practices, employed lawyers and
fiduciary insurance policies and all rights, claims and proceeds
thereunder, prepaid expenses consisting of any premium or other amount
attributable to any of the foregoing insurance policies for any period
of coverage beyond the Closing Date, or retrospective premium
adjustment or other experience-based liability on the part of Seller,
Diamond, or any of their affiliates.
<PAGE>
6. The Employee Benefit Plans of the Seller.
7. Any Income Tax refund or credit payable to Diamond.
8. Any Income Tax refund or credit payable to Seller.
9. Any right to use the name Diamond Shield or the Vantive Software, each
of which are owned by Diamond.
10. All bank accounts, deposit or lock box accounts of the Seller.
11. Those certain premises specified in that certain Lease Agreement and
Grant of Easement by and between Industrial Galvanizers America, Inc.,
as Tenant, and Seller, as Landlord, dated March 1, 1996.
<PAGE>
SCHEDULE 1.1-D
--------------
EXCLUDED LIABILITIES
--------------------
1. All obligations and liabilities of Seller to any Subsidiary or
Affiliate of Seller, including all of the Seller's payables to
Subsidiaries and Affiliates, other than that certain real estate lease
with Foreline Security Corporation, disclosed as item __ to Section
4(g)(ii) of the Disclosure Statement.
2. All injunctions, judgments, orders, decrees, rulings, charges actions,
suits, proceedings, hearings, or investigations of, in, or before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction, pending or threatened against Seller,
any Subsidiary or Affiliate of Seller, whether or not as described on
Sections 4(k) and 4(m) of the Disclosure Schedule, including without
limitation the Consent Decree.
3. All obligations and liabilities of Seller, any Subsidiary or Affiliate
of Seller, arising from or related to that certain Stock Purchase
Agreement, dated March 5, 1998 by and between Diamond Acquisition Corp.
and certain former stockholders of Seller, including without
limitation, (A) Seller's obligations and liabilities under that certain
$8,000,000 Non-Negotiable Promissory Note dated April 20, 1998 made by
Diamond Acquisition Corp. in favor of the former stockholders of
Seller, (B) Seller's obligations and liabilities under that certain
$3,700,000 Replacement Non-Negotiable Promissory Note dated April 20,
1998 made by Diamond Acquisition Corp. in favor of the former
stockholders of Seller and (C) certain Consulting Agreement between
Diamond Acquisition Corp. and Miles Lenhart dated April 20, 1998.
4. All obligations and liabilities of Seller, any Subsidiary or Affiliate
of Seller, to Agent, including without limitation, obligations and
liabilities arising from or related to that certain Credit Agreement
dated April 20, 1998 by and between Diamond and Agent.
5. All obligations and liabilities of Seller, any Subsidiary or Affiliate
of Seller, to Industrial Galvanizers America, Inc., and any Subsidiary
or Affiliate, including without limitation, those arising from or
related to (A) Environmental Indemnification Agreement, dated March 1,
1996; (B) Lease Agreement and Grant of Easement dated as of March 1,
1996, (C) claims arising from or related to possible liability under
Environmental Laws, including without limitation, possible liability
under the Resource Conservation and Recovery Act arising out of a
notice of violation issued to Industrial Galvanizers America, Inc. by a
Governmental Body.
6. All obligations and liabilities of Seller arising from or related to
any product shipped by, or any services provided by Seller, any
Subsidiary or Affiliate of Seller prior to the Closing Date, other than
Standard Product Warranty Obligations.
<PAGE>
7. All obligations and liabilities of Seller, any Subsidiary or Affiliate
of Seller, arising from or related to any and all Employee Benefit
Plans of the Seller, including, without limitation the filing of any
Form 5500 with any Governmental Body.
8. All obligations and liabilities of Seller, any Subsidiary or Affiliate
of Seller, for premiums or other amounts attributable to any insurance
policies of Seller, any Subsidiary or Affiliate of Seller including
without limitation those set forth in Section 4(u) of the Disclosure
Schedule for any period of beyond the Closing Date or for any
retrospective premium adjustment or other experience based liability on
the part of Seller or Diamond or any of their Affiliates.
9. All obligations and liabilities of Seller, any Subsidiary or Affiliate
of Seller, arising from or related to those certain matters disclosed
items 1 through 5 of Section 4(n) of the Disclosure Schedule.
10. All obligations and liabilities of Seller, any Subsidiary or Affiliate
of Seller, arising from or related to those matters disclosed in
Section 4(o) of the Disclosure Schedule.
11. All obligations and liabilities of Seller, or any Subsidiary or
Affiliate of Seller, arising from or related to Taxes, including the
filing of any Tax Return by Seller, except for sales and use taxes to
the extent that there is an accrual therefor on the Closing Date
Balance Sheet.
12. All obligations and liabilities of Seller, any Subsidiary or Affiliate
of Seller, arising from or related to Exclusive Diamond Home
Exteriors/Sears Warranties.
