EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of August 12, 2005 (this
"Agreement"), is made by and among 4279 Investments Ltd., a British Columbia
corporation ("Parent"), its subsidiaries, Curaflo Technologies Inc., a Canadian
federal company ("Curaflo Technologies"), Curalease Ltd., a British Columbia
corporation ("Curalease"), Curaflo Technologies (Canada) Inc., a British
Columbia corporation ("Curaflo Canada"), CuraFlo of BC Inc., dba West Coast Pipe
Restoration, a British Columbia corporation ("Old BC"), Curaflo Technologies
(USA) Inc., a Nevada corporation ("Curaflo USA"), and Curaflo of the Silicon
Valley, Inc., a California corporation ("Silicon Valley"; and collectively with
each of the foregoing, "Sellers" and singly a "Seller"), and Cohesant
Infrastructure Protection and Renewal of Canada Ltd., a Canadian federal company
("CIPAR Canada"), 0728487 BC Ltd., a British Columbia corporation ("New BC"),
and Cohesant Infrastructure Protection and Renewal LLC, a Delaware limited
liability company ("CIPAR USA"; and collectively with CIPAR Canada and New BC,
"Purchasers" and singly a "Purchaser").
RECITALS:
A. Sellers are in the business of (i) restoration, protection, and
replacement of plumbing lines and other pipes, including without limitation
cleaning, lining with epoxy or other materials, and completely replacing
plumbing line systems (collectively, the "Relining and Repiping Services"), (ii)
the development, marketing and licensing of the Relining and Repiping Services;
and (iii) the leasing or sale of products and services for use in the Relining
and Repiping Services (collectively, the "Business").
B. Sellers now desire to sell and assign, and Purchasers desire to purchase
substantially all of the assets used in carrying on the business of each Seller,
and to only assume certain specified liabilities of Sellers, in accordance with
the terms and conditions of this Agreement.
C. (i) Parent owns 100% of the outstanding capital stock of Curaflo
Technologies, Curalease, Curaflo Canada and Curaflo USA; (ii) Curaflo Canada
owns 100% of the capital stock of Old BC; and (iii) Curaflo USA owns 100% of the
outstanding capital stock of Silicon Valley (collectively, the "Subsidiaries").
D. Definitions of certain terms used in this Agreement, not otherwise
defined herein, and rules for interpreting this Agreement are set forth in
APPENDIX A hereto.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and intending to be legally bound, the parties hereto agree as
follows:
ARTICLE I
CONTEMPLATED TRANSACTIONS
1.1 PURCHASE OF ASSETS.
Upon and subject to the terms and conditions of this Agreement, the
following specified Sellers shall sell, convey, transfer, or assign, as the case
may be, to the specified Purchasers listed directly across from such specified
Seller in the adjacent right-hand column, free and clear of all Liens, except
for Permitted Liens, and such Purchasers shall purchase from such Sellers, all
of such Sellers' right, title and interest, as of the Effective Time, in and to
all of the assets, rights, and properties of such Sellers, but excluding the
Excluded Assets (such purchased assets are referred to herein as the "Assets"):
Specified Seller(s) Specified Purchaser(s)
------------------- ----------------------
1. Parent, Curalease and Curaflo Technologies CIPAR Canada
2. Curaflo Canada and Old BC New BC
3. Curaflo USA and Silicon Valley CIPAR USA
The Assets shall include the following:
(a) all Inventory;
(b) all cash, marketable securities, cash equivalents, accounts
receivable, notes receivable and rights to payment of money;
(c) all Fixed Assets;
(d) all intangible personal property;
(e) all Permits;
(f) all Intellectual Property (including all rights to sue for
infringement thereof or otherwise to enforce same, and all royalties which
may be receivable in respect thereof), and the domain name(s) for any
website(s) utilized by Sellers;
(g) all of such Sellers' rights under those Contracts listed on or
referred to on SECTION 1.1(G) of the Disclosure Schedule (the "Assumed
Contracts"), including without limitation those Contracts entered into by
or in the name of "Curaflo of the Pacific Northwest, Inc." ("Pacific
Northwest");
(h) all telephone numbers utilized by such Sellers;
(i) all of such Sellers' books, files, records, documents, data,
plans, proposals and all other recorded knowledge, whether in written,
electronic, visual or other form, including lists of past, present, and
prospective customers and all vendor purchase orders or other requests for
services relating to the Business; and
(j) all of Sellers' rights under the two legal opinions issued by
Christine O'Conner Johnson Kindness PLLC on the date hereof to Curaflo
Technologies.
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(k) the Business as a going concern and all of the goodwill associated
with the Business.
Sellers acknowledge and agree that the Assets transferred hereunder include
any assets (including any Assumed Contracts) that may be held by or in the name
of Pacific Northwest, and that any such assets will be transferred to CIPAR USA
as the "Specified Purchaser." Notwithstanding the foregoing, those first five
(5) Fixed Assets designated on APPENDIX B with an asterisk (*) (the "U.S.
Assets") will be transferred from Curalease as "Specified Seller" to CIPAR USA
as "Specified Purchaser."
1.2 EXCLUDED ASSETS. The Assets shall not include any of the following
assets, rights and properties of Sellers as of the Effective Time (the "Excluded
Assets"), all of which shall be retained by Sellers:
(a) any capital stock, whether preferred or common, of any of the
Sellers, any membership interests in any of the Sellers or any rights to
acquire stock of, or any equity interest in, any of the Sellers;
(b) all prepaid federal and state income tax deposits and refunds of
any nature attributable to Sellers;
(c) all Contracts that are not Assumed Contracts, including without
limitation the Agreement dated as of June 16, 2005 by and among the
Principals (as defined below) and/or their Affiliates (the "June 16
Agreement");
(d) any and all Plans and any related trust or assets thereof;
(e) the rights of Sellers under this Agreement and the other
Transaction Agreements, including receipt of the Purchase Price;
(f) all assets, rights, and properties of Sellers that relate solely
to Sellers' corporate governance, including minute books and shareholder
records;
(g) all of Sellers' income, franchise or similar type tax records and
tax returns;
(h) the other excluded assets, rights, and properties set forth on
SECTION 1.2(H) of the Disclosure Schedule; and
(i) any of Sellers' obligations under or regarding any Contracts,
loans, or other transactions with any other Seller, Principal, or their
respective Affiliates.
1.3 ASSUMPTION OF LIABILITIES.
(a) Liabilities Assumed. As of the Effective Time, a Purchaser shall
assume only: (i) any obligations of Sellers under the Assumed Contracts
that were not to be performed before the Effective Time; and (ii) the
accounts payable listed on SECTION 1.3(A) of the Disclosure Schedule (which
shall be current as of August 11, 2005) and any trade accounts payable
incurred in the ordinary course of business consistent with Sellers'
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past practice and that arose on or before the Effective Time (collectively,
the "Assumed Liabilities");
(b) No Other Assumed Liabilities. Except as expressly set forth in
SECTION 1.3(A) above, Purchasers shall not assume or become liable for (and
hereby expressly disclaims any undertaking in respect of) the payment or
performance of any Liabilities of Sellers, its Affiliates or any
predecessor of Sellers, whether in connection with the Business or the
Assets or otherwise, of whatever nature, whether known or unknown,
contingent or otherwise, and whether currently in existence or arising
hereafter, including, without limitation, notes payable to employees or
shareholders, any amounts that may be payable pursuant to the B.C.
Employment Standards Act, Human Rights Code, Workers' Compensation Act for
claims arising prior to the Closing Date, and liabilities for Taxes, and
liabilities under any Contracts that are not Assumed Contracts, including
the June 16 Agreement (collectively, the "Excluded Liabilities"). Sellers
remain solely liable for and will timely pay and perform all such Excluded
Liabilities.
1.4 PROCEDURES FOR NON-TRANSFERABLE ASSETS. If any Contracts or Permits to
be included among the Assets are not assignable or transferable either by virtue
of the provisions thereof or under applicable law without the consent of some
other party or parties, then the Sellers shall seek such consents post-closing.
If such consents are not available, the parties intend that Purchasers
nevertheless receive the economic and other benefits of, and perform the
obligations under, such Contracts and Permits as if such Contracts and Permits
had been assigned to Purchasers. The parties shall cooperate with one another in
any reasonable arrangement designed to provide Purchasers the benefits of and
obligations under such Contract or Permit.
1.5 TELEPHONE LISTINGS AND TELEPHONE NUMBERS. From and after the Effective
Time, Sellers shall cooperate with and assist Purchasers in all reasonable
respects to cause the applicable telephone providers to transfer to Purchasers
and to Purchasers' account all telephone listings, telephone numbers and
telephone accounts of Sellers.
1.6 METHOD OF CONVEYANCE AND TRANSFER. The conveyance, transfer and
delivery of the Assets will be effected by bills of sale, endorsements,
assignments and other instruments of transfer, all in such form as Purchasers
reasonably prepare, vesting in Purchasers good and marketable title to the
Assets, free and clear of all Liens, other than Permitted Liens, including,
without limitation, the Trademark Assignment and the Copyright Assignment in the
forms attached hereto, respectively, as EXHIBITS A AND B (collectively, the
"Conveyance Documents").
1.7 FURTHER ASSURANCES. Sellers, at any time after the Effective Time, upon
request of Purchasers will do, execute, acknowledge and deliver, all such
further acts, deeds, assignments, transfers, conveyances, power of attorneys and
assurance as may be reasonably required for the conveying, transferring,
assigning, and delivering to Purchasers or to their successors and assigns, and
for aiding and assisting in collecting and reducing to possession, the Assets
(collectively, the "Further Assurances"), including without limitation any
Further Assurances that may be required to transfer any Assets held in the name
of Pacific Northwest to CIPAR USA.
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1.8 COSTS AND EXPENSES. Costs and expenses relating to the preparation and
filing of any and all Conveyance Documents shall be borne by Purchasers;
provided that Sellers shall pay to and/or reimburse Purchasers for all expenses
and or costs incurred in connection with obtaining the Further Assurances,
including expenses or costs relating to obtaining consents necessary to transfer
or assign the Assets to Purchasers. This paragraph shall not apply to any item
contemplated by SECTION 1.4.
ARTICLE II
PURCHASE PRICE
2.1 PURCHASE PRICE. In consideration of the transfer to Purchasers of the
Assets, Purchasers shall, on the Closing Date, in addition to Purchasers'
assumption of the Assumed Liabilities, pay to Sellers the Purchase Price as set
forth below (the "Purchase Price"), subject to the adjustment provisions of
SECTION 2.2 and SECTION 2.5 hereof. The Purchase Price shall be payable on the
Closing Date as follows:
(a) Four Million Fifty-Four Thousand Dollars ($4,054,000) will be paid
in cash by wire transfer of immediately available funds to Sellers to such
account(s) as shall have been designated by Sellers for such purpose prior
to the Closing Date (the "Cash Portion").
(b) Fifty Thousand Dollars ($50,000) (together with any dividends or
other cash earnings on the Escrowed Assets, the "Escrow Amount") will be
paid in cash by wire transfer of immediately available funds to the Escrow
Agent, and 231,741 of the 461,124 shares of Cohesant Stock described below
(the "Escrow Shares" and together with the "Escrow Amount," the "Escrowed
Assets") will be delivered to the Escrow Agent, in each case to be held in
accordance with the terms and conditions of the escrow agreement
substantially in the form of EXHIBIT C (the "Escrow Agreement").
(c) Of the Escrowed Assets, the Escrow Amount and 161,517 Escrow
Shares will be held for twenty-four (24) months and will secure (i) the
Sellers' indemnification obligations under SECTIONS 8.2 of this Agreement,
(ii) any Working Capital adjustment required under SECTION 2.2 of this
Agreement, and (iii) the Sellers' repurchase of any uncollected accounts
receivable as set forth in SECTION 2.3. Of the Escrowed Assets, the Escrow
Amount and 161,517 Escrow Shares, less any portion of the Escrow Amount and
less any of the 161,517 Escrow Shores used to satisfy Sellers' obligations
hereunder, will be released to Sellers on the twenty four-month anniversary
of the Closing Date, provided that there are no pending claims under
SECTIONS 2.2, 2.3 or 8.2 of this Agreement, then to the extent that there
are any such claims the estimated amount of the same shall be held back
pending resolution of such claims and the balance of the Escrowed Assets
shall be released to the Sellers.
(d) The remainder of the Escrowed Assets (consisting of 70,224 Escrow
Shares) (the "Remaining Escrowed Assets") will be held for sixty (60)
months for the sole purpose of securing Sellers' indemnification
obligations under SECTION 8.2 of this Agreement to the extent such
obligations arise as a result of: (i) a breach of any representation or
warranty of Sellers contained in SECTION 4.16 of this Agreement; or (ii)
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any and all claims that the services provided, the business conducted, and
products sold in connection with the Business infringe on the Intellectual
Property of any third party (regardless of whether such third parties are
listed on SECTION 4.16 of the Disclosure Schedule) (collectively, the
"Intellectual Property Claims"). The Remaining Escrowed Assets, less any
Remaining Escrow Assets used to satisfy Sellers' obligations hereunder,
will be released to Sellers on the sixty-month anniversary of the Closing
Date, provided that there are no pending Intellectual Property Claims, then
to the extent that there are any such Intellectual Property Claims, the
estimated amount of the same shall be held back pending resolution of such
claims and the balance of the Remaining Escrowed Assets shall be released
to the Sellers.
(e) Cohesant Technologies Inc. ("Cohesant") will issue to Sellers
461,124 shares of non-registered common stock (the "Cohesant Stock") of
Cohesant, of which the 231,741 Escrow Shares will be delivered to the
Escrow Agent in accordance with SECTION 2.1(B) of this Agreement. The
Cohesant Stock shall be represented by one or more stock certificates that
will bear the following legend (the "Restrictive Legend"):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE SOLD, TRANSFERRED, MADE SUBJECT TO A SECURITY INTEREST,
MORTGAGED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR AN OPINION OF COUNSEL FOR THE COMPANY IS RECEIVED
THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
Sellers agree that they will not sell, assign, pledge, give, transfer, or
otherwise dispose of the Cohesant Stock or any interest therein, or make any
offer or attempt to do any of the foregoing, in British Columbia or any other
jurisdiction of Canada, except pursuant to a prospectus for which the applicable
securities commission has issued a final receipt or in a transaction that is
exempt from the registration and prospectus requirements of the applicable
securities laws in Canada, or until Cohesant has been a reporting issuer in a
jurisdiction in Canada for the required period and all other resale restrictions
have been fulfilled. Cohesant is not currently a reporting issuer in any
jurisdiction of Canada and has no present intention of becoming a reporting
issuer anywhere in Canada in the future. Sellers have been cautioned to seek
their own legal advice as to the resale restrictions applicable to the Cohesant
Stock.
(f) Purchasers' payment and delivery of the entire Purchase Price to
any one or more of Sellers designated by Sellers shall constitute payment
in full to all of the Sellers.
2.2 NET WORKING CAPITAL.
(a) Sellers and Purchasers have determined that the appropriate amount
of adjusted net working capital for the Business as of the Closing Date for
the prudent
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operation thereof after the Closing is Ninety-Seven Thousand Five Hundred
Dollars ($97,500) (the "Required Working Capital Amount"). The current
assets and current liabilities utilized in determining the Example of the
Audited Closing Net Working Capital and the actual Audited Closing Net
Working Capital are and shall be only the following items: Current Assets
means: (i) cash and cash equivalents, (ii) accounts receivables, (iii)
inventories, (iv) non-refundable contract deposits; (v) work completed but
not invoiced; (vi) prepaid expenses; and (vi) other current assets; Current
Liabilities means: (i) trade account payables, (ii) accrued expenses, (iii)
other current liabilities, (iv) accrued training costs, as detailed on
SECTION 1.3(A) of the Disclosure Schedule, (v) equipment deposits, and (vi)
any profit on any partially-completed contracts, as listed on Section 2.5
of the Disclosure Schedule and includable as part of adjusted net working
capital, but deemed to be unearned, as calculated by Purchasers'
accountants using the percentage completion method of revenue and expense
recognition, which calculation shall exclude work completed and not
invoiced, accrued expenses, and any booked profits from license agreements.
The Example of the Audited Closing Net Working Capital, which is attached
hereto as EXHIBIT D, was prepared on the assumption that April 30, 2005 was
the Closing Date. Current assets and current liabilities for the purpose of
any adjustment to the Purchase Price pursuant to SECTION 2.2(B) below, will
not include any adjustments required by GAAP that were not of the type of
adjustments identified in Purchaser's review of Sellers' balance sheet
dated as of April 30, 2005 and excluded from inclusion in the Example of
the Audited Closing Net Working Capital attached hereto as EXHIBIT D.
(b) Within thirty (30) days after the Closing Date, Sellers shall
deliver to Purchasers a balance sheet of the Sellers on a consolidated
basis as of the Closing Date (the "Closing Balance Sheet"), which Closing
Balance Sheet will be prepared in the same manner as the Sellers' April 30,
2005 balance sheet and on a basis consistent with Sellers' past practices
and shall set forth both the current liabilities and current assets of
Sellers on a consolidated basis and the adjusted working capital amount.
Within ninety (90) days following the Closing Date, Purchasers' independent
accountants, at Purchasers' expense, shall deliver to Sellers an audit
report on the adjusted working capital amount (the "Audited Closing Net
Working Capital") as calculated in a manner consistent with SECTION 2.2(A).
Sellers will have a period of thirty (30) days (the "Sellers' Review
Period") in which to review the Audited Closing Net Working Capital. If
Audited Closing Net Working Capital is less than the Required Working
Capital Amount, and if Sellers dispute the accuracy of any items contained
or referred to in the Audited Closing Net Working Capital, Sellers and
Purchasers agree that Manning Elliott-Alden Aumann (the "Reviewing
Accountants") shall: (i) review any and only disputed items in the Audited
Closing Net Working Capital; (ii) contact Sellers and Purchasers to review
their respective positions on the working capital amount; (iii) make a
final and binding determination as to the accuracy of the disputed items in
the Audited Closing Net Working Capital (the "Final Determined Net Working
Capital"); and (iv) provide working papers to both Purchasers and Sellers
to support their final determination. On the date (the "Determination
Date") that is the later of: (a) three (3) days after the Seller Review
Period; or (b) three (3) days after the receipt by the Sellers and
Purchasers of the Final Determined Net Working Capital, the difference
between the Audited Closing Net Working Capital or the Final Determined Net
Working Capital, as the case may be, and
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the Required Net Working Capital (the "Variance") will be calculated. For
clarity, Final Determined Net Working Capital, if determined, will
supercede the reported Audited Net Working Capital in determining the
Variance. If the Variance is negative (so that Audited Closing Net Working
Capital or the Final Determined Net Working Capital, as the case may be, is
less than the Required Net Working Capital) the Sellers shall pay to the
Purchasers the amount of the Variance on the Determination Date in
immediately available funds. If the Variance be positive (so that Audited
Closing Net Working Capital or the Final Determined Net Working Capital, as
the case may be, exceeds Required Net Working Capital), the Purchasers
shall pay to the Sellers the amount of the Variance on the Determination
Date in immediately available funds. If the Sellers fail to pay any such
amount owed under this SECTION 2.2(B) on the Determination Date, Purchasers
may, at their option, be paid the amount thereof from the Escrow Assets.
(c) The costs and expenses for the services of Reviewing Accountants
shall be borne by Sellers unless the Final Closing Net Working Capital
exceeded the Audited Determined Net Working Capital by not less than Ten
Thousand Dollars ($10,000), in which case Purchasers shall bear the fees
and expenses of the Reviewing Accountants.
2.3 REPURCHASE OF UNCOLLECTED RECEIVABLES. Sellers shall repurchase from
Purchasers at unpaid face value any accounts receivable of Sellers that were
sold to Purchasers that have not been collected in full by Purchasers within
ninety (90) days after the Closing Date and that Purchasers desire to sell to
Sellers (the "Uncollected A/R"). Purchasers will provide to Sellers customary
information identifying the Uncollected A/R and Sellers, within five (5)
business days of receipt thereof, will pay to Purchasers by wire transfer an
amount equal to the Uncollected A/R. If Sellers fail to pay such amount,
Purchasers may, at their option, be paid the amount thereof from the Escrow
Assets. Upon receipt of such payment, Purchasers will transfer the Uncollected
A/R to Sellers as directed by them.
2.4 TAXES. Purchasers shall pay any and all Taxes assessable in respect of
the transactions contemplated by this Agreement and shall remit to the
appropriate taxing authority any and all such Taxes as and when same may be
payable. Nothing herein contained shall be deemed to acknowledge that any Taxes
may be payable in respect of any of the transactions contemplated by this
Agreement.
Sellers and Purchasers shall jointly elect to have section 167 of the
Excise Tax Act of Canada apply to the transfer of the Assets. Such election
shall be in the prescribed form and shall be filed in a timely fashion with the
return of the Purchasers for the reporting period in which the transfer occurs.
2.5 PRORATIONS. As of the Closing Date, taxes and other items payable by
Sellers under any license, Permit, Assumed Contract, Contract or other agreement
or arrangement to be assigned to, or assumed by, Purchasers and the items set
forth in SECTION 2.5 of the Disclosure Schedule which shall be paid or credited
to the Sellers shall be prorated such that the Sellers shall be liable to the
extent any such items relate to any time period up to and including the
Effective Time. The net amount of all such prorations will be settled and if not
included in Assets or Assumed Liabilities, included in such amounts to be paid
on the Closing Date from the Cash Portion of the Purchase Price. If the actual
expense of any such prorated items for the
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period within which the Closing Date falls is not known on the Closing Date the
proration shall be made at such time that the amount of the expense is known.
Sellers shall pay to Purchasers, or Purchasers shall pay to Sellers, as the case
may be, on or before five (5) days after the amount of such expense is finally
determined, the amount owed resulting from such proration.
2.6 ALLOCATION OF PURCHASE PRICE. The parties agree that the Purchase Price
paid for the Assets shall be allocated for tax purposes in accordance with the
allocations set forth on EXHIBIT E.
2.7 TAX ELECTION. Each Seller that is a Canadian entity and each Specified
Purchaser with respect to such Seller that is a Canadian entity shall jointly
execute an election at closing in prescribed form to have the provisions of
Section 22(1) of the Income Tax Act (Canada) apply in connection with the
purchase and sale of the accounts receivable and notes receivable contemplated
in Article 1.1(b) herein. Purchasers shall file the above election with their
return of income for the year of sale.
ARTICLE III
CLOSING; EFFECTIVE TIME
3.1 CLOSING. The formal exchange of signatures, definitive documentation,
and closing deliverables to evidence the transactions contemplated in this
Agreement (the "Closing") shall take place on the Closing Date at the offices of
Kahn Kleinman, a Legal Professional Association, 2600 Erieview Tower, 1301 East
Ninth Street, Cleveland, Ohio 44114, or at such location or in such other manner
as Purchasers and Sellers may mutually agree.
3.2 CLOSING DATE. The Closing of the transactions contemplated in this
Agreement shall occur at 12:00 a.m. local time on August 12, 2005, or such other
date as mutually agreed upon by the parties (the date of the Closing is referred
to herein as the "Closing Date").
3.3 EFFECTIVE TIME. The effective time of the transfer of the Assets and
assumption of the Assumed Liabilities shall be deemed to be 11:59 p.m. PDT on
August 12, 2005 (the "Effective Time").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as specifically set forth on the Disclosure Schedule, Sellers,
jointly and severally, represent and warrant to Purchasers that each of the
following statements are true and correct as of the date hereof and as of the
Closing Date:
4.1 ORGANIZATION; QUALIFICATION; SUBSIDIARIES. Each of the Sellers is
validly existing and in full force and effect under the laws of its jurisdiction
of organization, duly qualified and in good standing to do business in the other
jurisdictions where it is required to be so qualified, except for such failures
to be so qualified as would not have a Material Adverse Effect on the Business
or the Assets, and each has all requisite corporate power and authority to own,
lease and operate its assets and to carry on its businesses as currently
conducted. The Subsidiaries are the only subsidiaries of any of the Sellers.
SECTION 4.1 of the Disclosure Schedule sets forth the names of all legal and
beneficial owners of capital stock of Parent. No
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other Person has any right to acquire any legal or beneficial ownership of any
capital stock of Parent. Parent owns one hundred percent (100%) of all capital
stock of all the Subsidiaries except (i) Old BC, which is wholly owned by
Curaflo Canada and (ii) Silicon Valley, which is wholly owned by Curaflo USA.
Pacific Northwest has not been incorporated, formed, or organized in any
jurisdiction, and no Person other than the Sellers and/or the Principals has a
legal or equitable interest in such purported entity or its purported assets.
The Subsidiaries conduct all of the Business and the only business of Parent is
its ownership of the Subsidiaries.
4.2 AUTHORITY. Sellers have the full corporate power and authority to
execute and deliver, and no other proceedings are necessary on the part of
Sellers to authorize, each of the Transaction Agreements to which it is a party
and to consummate the transactions contemplated thereby. This Agreement has been
duly and validly executed and delivered by Sellers, and on or before the Closing
Date, each of the other Transaction Agreements to which it is a party will be
duly and validly executed by Sellers. This Agreement and each of the other
Transaction Agreements to which it is a party constitute or, upon execution,
will constitute, legal, valid and binding agreements of Sellers, enforceable
against Sellers in accordance with their terms.
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) The execution, delivery, and performance of the Transaction
Agreements by Sellers, and Sellers' compliance with the terms thereof, do
not and on or before the Closing Date will not: (i) conflict with any
provision of the articles of incorporation, bylaws or any other charter
documents of Sellers; (ii) conflict with, constitute a breach of, result in
a violation or default or give rise to any right of termination,
cancellation or acceleration (whether upon notice or lapse of time or both)
under any of the terms, conditions or provisions of any Contract that will
be in effect after the Closing; (iii) violate any statute, law, rule,
regulation, judgment, order, writ, injunction or decree of any Governmental
Authority; or (iv) result in the creation or imposition of any Lien on any
Asset.
(b) Except as set forth in SECTION 4.3(B) of the Disclosure Schedule
no consent, approval, order, or authorization of or registration,
declaration, or filing with any Governmental Authority or any other Person
is required by or with respect to Sellers in connection with the execution
and delivery of the Transaction Agreements by Sellers or the consummation
of the transactions contemplated thereby, including the transfer of the
Assets.
4.4 FINANCIAL STATEMENTS. Set forth in SECTION 4.4 of the Disclosure
Schedule is a list of the Financial Statements that Seller provided to
Purchasers prior to the Closing Date. The Financial Statements: (i) have been
prepared on a consistent basis during the periods therein specified in the
manner utilized by Sellers in preparation of their Canadian tax returns; (ii)
present fairly in all material respects, and in accordance with methods and
policies utilized by Sellers in preparation of their Canadian tax returns,
Sellers' financial position and results of its operations at and for the periods
therein specified; (iii) are true and complete; and (iv) are consistent with the
books and records of Sellers. The Financial Statements will be deemed to include
any accompanying notes and schedules.
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4.5 UNDISCLOSED LIABILITIES. Except as disclosed in SECTION 4.5 of the
Disclosure Schedule or the Financial Statements, Sellers have no Liabilities
other than (i) Liabilities incurred after the date of the Most Recent Financial
Statements in the ordinary course of business for the purchase of goods or
services in connection with the conduct of the Business consistent with Sellers'
historical practice or (ii) Liabilities under the Contracts.
4.6 ABSENCE OF CERTAIN CHANGES. Since April 30, 2005, there have been no
changes which have or could likely have a Material Adverse Affect on the
Business or Assets. Since April 30, 2005, there have been no changes that would
adversely affect Purchasers' ability to operate the Business or employ any of
the Assets in the Business. To the knowledge of Sellers, there are no proposed
legislation, regulations or other rules or laws governing the Business or
changes to existing legislation, regulations, rules or laws, which would likely
have an adverse effect on the Business, its prospects or financial condition.
4.7 CONDUCT OF BUSINESS. Since April 30, 2005, Sellers have conducted the
Business only in the ordinary course and in a manner consistent with past
practices and used reasonable efforts to preserve the Business and Sellers'
relationships with its Employees, customers and suppliers. Without limiting the
generality of the foregoing, except as otherwise contemplated by this Agreement,
Sellers have:
(a) not amended their articles of incorporation, bylaws, or any other
charter documents in any manner that would adversely affect Sellers'
ability to comply with their obligations under this Agreement;
(b) not granted to any Employee any bonus or any increase in fees,
compensation, benefits or perquisites except in the ordinary course and in
any case not to exceed 5% of immediately preceding fees, compensation,
benefits, or perquisites;
(c) not sold, leased, licensed or otherwise disposed of, or agree to
sell, lease, license, or otherwise dispose of, any Assets other than in the
ordinary course of business, except that Sellers may, prior to the
Effective Time, withdraw cash from the Business provided, that such cash
withdrawals do not reduce the adjusted net working capital (as determined
pursuant to the provisions of SECTION 2.2) of the Business to an amount
less than the Required Working Capital Amount;
(d) not taken any action that would make any of the representations or
warranties relating to Sellers or the Business contained in this Agreement
untrue or incorrect or would be reasonably likely to result in any of the
conditions set forth in this Agreement not being satisfied;
(e) except as disclosed on SECTION 4.7(E) of the Disclosure Schedule,
other than in the ordinary course of business consistent with past
practices, not entered into, canceled, or modified any Contract or create,
incur or undertake or assume any Liability;
(f) continued to pay trade payables currently in the ordinary course
of business;
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(g) not created or granted any Liens on any of the Assets, other than
Permitted Liens;
(h) not agreed or committed, whether in writing or otherwise, to do
any of the foregoing; and
(i) maintained advertising, marketing and promotional activities in
amount, timing and placement consistent with past practices.
4.8 CERTAIN CONTRACTS AND ARRANGEMENTS. Except as set forth on SECTION 4.8
of the Disclosure Schedule, neither Sellers nor, to Sellers' knowledge, any
other party to a Contract is in breach or default under any such Contract, and
no event has occurred which, with notice or lapse of time or both, would
constitute such a breach or default. Without limiting the immediately preceding
sentence, to the extent any Assumed Contract is one in respect of which Sellers
have commenced but not completed performance of any Relining and Repiping
Services: (i) Sellers have completed such performance to the Effective Time as
is required by the terms of such Assumed Contract and in accordance with the
Sellers' customary practices and good and workmanlike standards; (ii) Sellers
have no reason to believe that Purchasers will not be able to complete
performance of the Assumed Contract in accordance with its required terms
without undue hardship or undertaking extraordinary measures; and (iii) Sellers
have appropriately matched the same percentage of recorded revenues and expenses
on its Financial Statements through the Effective Time with respect to such
Assumed Contracts in accordance with Seller's accounting practices. All
Contracts are legal, valid, binding, enforceable obligations of the Seller that
is party thereto and to the best of Sellers' knowledge, each other party
thereto. None of the Assumed Contracts are expected to result in a loss to
Seller, and, except as noted on SECTION 4.8 of the Disclosure Schedule, are
expected to achieve Sellers' standard margins. Sellers have delivered to
Purchasers true, accurate, and complete copies of each written Contract with
copies of all modifications and amendments thereto, or have provided a
description of each oral Contract. Set forth in SECTION 4.8 of the Disclosure
Schedule is a list of all Contracts, other than any Contract which is terminable
by its terms on less than thirty (30) days notice or calls for the payment of
money less than Five Thousand Dollars ($5,000), and also indicates any Contract
that requires consent of another party to the assignment thereof to Purchasers.
4.9 LITIGATION. Except as set forth on SECTION 4.9 of the Disclosure
Schedule, no claims, actions, suits, investigations, oppositions, or proceedings
are pending or, to the knowledge of Sellers, threatened against either Sellers
or any of the Assets or in respect of the transactions contemplated by this
Agreement. Set forth in SECTION 4.9 of the Disclosure Schedule is a list of all
litigation, claims (including worker's compensation claims), grievances, charges
and investigations, that have been made against any Seller or any predecessor
entity of any Seller (including XPert and West Coast (as such terms are defined
below) during the preceding three (3) years.
4.10 COMPLIANCE WITH APPLICABLE LAWS. Sellers are in compliance with all
applicable laws, rules, and regulations applicable to the Business. Sellers have
not received any written notice of default or violation, nor is Sellers in
default or violation, with respect to any judgment, order, writ, injunction,
decree, demand or assessment issued by any Governmental Authority, court or
arbitration tribunal. Sellers have not been charged with, nor, to the
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knowledge of Sellers, is under investigation with respect to any violation of
any applicable law, rule, or regulation.
4.11 EMPLOYEE MATTERS.
(a) Set forth on SECTION 4.11 of the Disclosure Schedule, is a list of
all of Sellers' current, both active and non-active employees and
salespersons, their names, positions, duration of employment with the
Sellers, remuneration and benefit obligations, accrued vacation pay and the
amount of severance or notice in lieu thereof provided. Subject to SECTION
6.2 of this Agreement, the Sellers will have paid the full amounts of
salaries, pensions, bonuses, commissions, and other remuneration of any
nature, including severance pay and unpaid earned wages of the Sellers'
employees and salespersons, up to the Closing Date.
(b) The Sellers warrant that the Business is not certified to any
union, association or council or in any other manner under the BC Labor
Relations Code and is not a party to or obligated to bargain a collective
agreement relating to the Business. The Sellers warrant that they have no
knowledge of any union or association organization drive relating to the
Business and that the Business, to its knowledge, is not a potential
successor and/or common employer to any other entity, under the BC Labor
Relations Code or any applicable labor relations legislation in Canada.
There have been no labor strikes, disputes, work stoppages and, to the
knowledge of Sellers, no such actions are threatened against Sellers. No
union is now certified or has claimed in writing the right to be certified
as a collective bargaining agent to represent any employees and there are
no organizational activities pending or, to the knowledge of Sellers,
threatened relating to any Employees. There are no unfair labor practice
claims (or their foreign equivalents) or charges pending or, to the
knowledge of Sellers, threatened against Sellers, and Sellers have no
knowledge of any complaint or grievance relating to any actual or alleged
violation of any law, regulation or order relating to Sellers' employees.
4.12 EMPLOYEE BENEFIT PLANS.
(a) Sellers have and maintain those specific employee welfare benefit
plans, including, but not limited to, medical, dental, retirement,
dependent care, disability, life insurance and other similar or related
plans as set forth in SECTION 4.12 of the Disclosure Schedule.
(b) Sellers do not have any liability with respect to any employee
benefit plan that has been terminated or was provided by any other employer
or ERISA Affiliate or predecessor thereof.
4.13 TAX MATTERS.
(a) Sellers have filed, and will file, on a timely basis, all Tax
Returns required to be filed by Sellers (including any consolidated or
combined return required to be filed by them or any affiliated person or
entity) accurately reflecting all Taxes owing to the United States, Canada
or any other government or any government subdivision, state, local, or
foreign or any other taxing authority, and have paid in full or made
adequate
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provision (excluding any reserve for deferred Taxes to reflect timing
differences between book and Tax income) for the payment of all Taxes for
which Sellers have or may have liability. All such Tax Returns are true,
correct and complete in all material respects. Sellers do not have
knowledge of any unassessed Tax deficiency proposed or threatened against
Sellers as a result of the operation of the Business. There are no Liens on
the Assets as a result of any Tax liabilities except for Taxes not yet due
and payable. There are, and after the date of this Agreement will be, no
Tax deficiencies of any kind assessed against or relating to Sellers with
respect to any taxable period ending on or before the Closing Date.
(b) Sellers have complied with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and have,
within the time and the manner prescribed by law, withheld and paid over to
the proper governmental authorities, all amounts required to be so withheld
and paid over under applicable laws.
(c) Sellers are not a party to any action, audit or proceeding by any
governmental or taxing authority for the assessment or collection of Taxes,
nor to Sellers' knowledge has any such event been asserted or threatened.
Sellers are not subject to any accumulated earnings penalties.
(d) There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any Tax Return of Sellers for
any period.
(e) Sellers are each registrants for purposes of Part IX of the Excise
Tax Act (Canada), and their registration numbers are:
(i) Parent #884204322
(ii) Curaflo Technologies #864976410
(iii) Curalease #891334716
(iv) Curaflo Canada #861271583
(v) Old BC #860182294
(f) No Seller disposing of any Asset that is taxable Canadian property
as defined in the Income Tax Act (Canada) is a non-resident of Canada for
purposes of the Income Tax Act (Canada).
(g) The Sellers represent that for the purposes of the Excise Tax Act
(Canada) that the Assets constitute a business or part of a business and
represent all or substantially all of the property that can reasonably be
regarded as being necessary for the Purchaser to be capable of carrying on
the Business or part of the Business as a business.
4.14 TITLE TO AND CONDITION, LOCATION AND SUFFICIENCY OF ASSETS. Sellers
own and have good, valid and marketable title to all of the Assets, free and
clear of all Liens except Permitted Liens and such other Liens as shall be
released in connection with the Closing, all of
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which Liens are set forth on SECTION 4.14 of the Disclosure Schedule. All of the
Assets are located on the Leased Real Properties except as set forth in SECTION
4.14 of the Disclosure Schedule. Except for Excluded Assets and certain
equipment and other assets to be made available to Purchasers pursuant to the
Shared Services Agreement described below, the Assets constitute all of the
assets, tangible and intangible, of any nature whatsoever, necessary to operate
the Business in the manner as historically operated by Sellers. All tangible
Assets are (a) except for equipment, if any, out for repair, in good operating
condition and in a state of good maintenance and repair, ordinary wear and tear
excepted, (b) are usable in the regular and ordinary course of the Business and
(c) conform to all applicable law. No Person other than Sellers owns any
equipment, computer hardware, machinery, vehicles or other tangible personal
property situated on the premises of Sellers that are used in the operation of
the Business, except for such Assets that are leased by Sellers or an Excluded
Asset.
4.15 REAL PROPERTY.
(a) SECTION 4.15 of the Disclosure Schedule sets forth the street address
of Sellers' facility located in Vancouver, British Columbia (the "Facility"),
and each other parcel of real estate leased by Sellers and related to or used in
the Business. SECTION 4.15 of the Disclosure Schedule also shows the portion of
the Facility utilized by Sellers in connection with the Business (the "Leased
Real Properties"). Sellers own no real property used in the Business.
(b) Sellers have a valid leasehold interest in the Leased Real Properties,
free and clear of any Liens other than Permitted Liens. There are no written
leases setting forth any of the terms and conditions of Sellers' leaseholds in
the Leased Real Properties. Each such lease is legal, valid, binding and
enforceable in accordance with its respective terms with respect to Sellers and,
to the knowledge of Sellers, each other party thereto. There are no existing
defaults or breaches of Sellers under any such lease (or events or conditions
which, with notice or lapse of time or both would constitute a default or
breach) and, to the knowledge of Sellers, there are no such defaults (or events
or conditions which, with any notice or lapse of time or both, would constitute
a default or breach) with respect to any other party to any such lease.
(c) To the best knowledge of Sellers, no portion of the Leased Real
Properties, or any of the plants, buildings, structures and other improvements
located thereon, violate any applicable law. None of the plants, buildings,
structures and other improvements located on the Leased Real Properties
encroaches upon real property of another Person, and no plants, buildings,
structures and other improvements of any other Person encroaches upon any
portion of the Leased Real Properties.
(d) Except as set forth on SECTION 4.15 of the Disclosure Schedule, there
are no leases, subleases or licenses granting to any third party the right of
use or occupancy of any portion of any of the Leased Real Properties.
(e) The plants, buildings and structures located on the Leased Real
Properties currently have access to (i) public roads or valid easements over
private streets or private property for such ingress to and egress from all such
plants, buildings and structures and (ii) water supply, storm and sanitary sewer
facilities, telephone, gas and electrical connections, fire protection, drainage
and other public utilities. Such plants, buildings and structures are in good
15
operating condition and in a state of good maintenance and repair, ordinary wear
and tear excepted, are structurally sound and are adequate and suitable for the
purposes for which they are presently being used. The Leased Real Properties are
in the same condition as used by Sellers to conduct the Business as historically
conducted by them without any known or, to Sellers' best knowledge, latent
defect. There are no condemnation or appropriation or similar proceedings
pending or, to the knowledge of Sellers, threatened against any of the Leased
Real Properties.
4.16 INTELLECTUAL PROPERTY; PREDECESSORS; TRADE NAMES. SECTION 4.16 of the
Disclosure Schedule lists all of the Intellectual Property owned or used by
Sellers in the Business. SECTION 4.16 of the Disclosure Schedule sets forth all
trade names used by any Sellers, the names and trade names of all predecessors
to any Seller or other Persons from whom any Seller purchased or acquired any
part of the Business. To Sellers' knowledge, no other Person is currently
infringing upon any of the Intellectual Property owned or used by Sellers.
Except as set forth in SECTION 4.16 of the Disclosure Schedule, Sellers are
entitled to use all Intellectual Property as it currently uses, without
objection by or payment or other obligation to a third party, and Sellers have
not granted to any third party any right, title or interest in or to any such
Intellectual Property. No Employee has any rights in the Intellectual Property
owned or used by Sellers. The processes and methods employed, the services
provided, the business conducted, and products sold by Sellers do not infringe
and have not infringed the Intellectual Property of any third party, including
without limitation those third parties listed on SECTION 4.16 of the Disclosure
Schedule. The Intellectual Property owned or used by Sellers comprises all the
intellectual property necessary to conduct the Business as it is currently
conducted. Any contractual rights or obligations once existing between
InterTechno AG, Steinacherstrasse 101, CH--8804 ("LSE"), on the one hand, and/or
any of the Sellers, their respective Affiliates or transferors to Sellers of a
business or substantially all assets used in a business, on the other hand, have
terminated and do not constitute the legal, valid and binding obligation of any
party. Neither LSE nor any of its Affiliates have any rights in the Intellectual
Property owned or used by Sellers, or any of the other Assets transferred
pursuant to the Asset Purchase Agreement or otherwise necessary to operate the
Business.
4.17 ENVIRONMENTAL MATTERS.
(a) None of Sellers has ever generated, used, handled, treated,
managed, stored or disposed of any Hazardous Materials, except in
compliance with all applicable Environmental Laws. Likewise Sellers have
neither treated nor stored hazardous waste (as defined in the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901-6992) nor disposed
of Hazardous Materials in any location. Sellers' historical and present
operations were and are in compliance with all applicable Environmental
Laws. There are no conditions or occurrences on any Leased Real Properties
or arising or resulting from Sellers' historical or present operations that
would reasonably be expected to lead to any demands or claims or notices of
noncompliance or violation against either Sellers relating to an
Environmental Law.
(b) There are not now nor have there been any storage tanks (whether
underground or above ground) located at any of the Leased Real Properties.
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(c) (i) Sellers have not sent or disposed of, otherwise had taken or
transported, arranged for the taking or disposal of (on behalf of itself, a
customer, or any other party) or in any other manner participated or been
involved in the taking of or disposal or release of a Hazardous Material in
an amount or concentration that would reasonably be expected to give rise
to any liability under Environmental Law to or at a site that, to Sellers'
knowledge, is contaminated by any Hazardous Material or that, pursuant to
any Environmental Law, (A) has been placed or proposed for placement on the
"National Priorities List", the "CERCLIS" list, a brownfield list, or any
similar local, state, or federal list, or (B) is subject to or the source
of a claim, an administrative order or other request to take "removal",
"remedial", "corrective," or any other "response" action pursuant to any
Environmental Law, or to pay for the costs of any such action at the site;
(ii) Sellers are not involved in and do not have knowledge of any actual or
threatened suit or proceeding and have not received any notice, request for
information or other communication from any Governmental Authority or other
third party with respect to a release or threatened release of any
Hazardous Material or a violation or alleged violation of any Environmental
Law, and have not received notice of any claims from any Person relating to
property damage or to personal injuries from exposure to any Hazardous
Material; and (iii) Sellers have timely submitted all data, documentation,
records and reports required to be submitted, acquired all necessary
certificates, approvals and Permits (all of which remain in full force and
effect), and generated and maintained all required data, documentation,
records and reports pursuant to all Environmental Laws, in all such
instances.
(d) Neither Sellers nor, to Sellers' knowledge, any other Person has
ever discharged, emitted, placed, buried, spilled, released, poured,
injected, dumped or disposed of any Hazardous Material in an amount or
concentration or at a location that would reasonably be expected to give
rise to any liability pursuant to Environmental Laws on, beneath or from
any of Leased Real Properties.
(e) There have not been any audit, assessment, remedial or other
environmental reports prepared by or for Sellers in the last ten (10)
years. Complete and accurate copies of all certificates, approvals, and
Permits obtained by Sellers pursuant to Environmental Laws have been
delivered to Purchasers.
4.18 PERMITS. SECTION 4.18 of the Disclosure Schedule contains an accurate
and complete list of all Permits that are necessary or required to conduct the
Business and also designates those Permits that are transferable to Purchasers.
All such Permits have been legally obtained and maintained by Sellers and are in
full force and effect and, to the extent transferable, are transferable to
Purchasers at no or nominal cost. No proceeding is pending to revoke or limit
any of the Permits or otherwise impose any conditions or obligations on the
possession or transfer of any of them, and no state of facts or event exists
that could form the basis for any revocation or limitation of Purchasers' use of
the Permits.
4.19 INVENTORY. The Inventory of Sellers consists only of items of a
quality and quantity usable and saleable in the ordinary course of business,
consistent with past practice, and does not include any item of inventory
previously written off by Sellers. Items of below-standard quality and items not
previously readily saleable in the ordinary course of business have
17
been written down to estimated net realizable market values. The value at which
the inventory is carried on Sellers' books reflects the lower of cost (on a FIFO
basis) or estimated net realizable market value, and is based on quantities
determined by physical count.
4.20 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE.
(a) Sellers will deliver to Purchasers an aging schedule as of a date
not more than ten (10) days prior to the date of this Agreement, which is
true, correct and complete, of the accounts receivable, both trade and
non-trade, of Sellers as of that date. The accounts receivable as reflected
on the books of Seller as of the Closing Date will be fully collectible in
the ordinary course of business within ninety (90) days after the Closing
Date, without resort to legal proceedings. All of such accounts receivable
will represent valid claims that have arisen in the ordinary course of
business.
(b) All accounts payable of Sellers as of the Closing Date will be (i)
reflected on the Closing Balance Sheet and (ii) are not past due or
otherwise delinquent and (iii) arise from completed bona fide transactions
in the ordinary course of business.
4.21 CUSTOMERS; LICENSEES AND SUPPLIERS. Set forth on SECTION 4.21 of the
Disclosure Schedule, Sellers have listed the customers and licensees accounting
for the fifty (50) highest in gross revenue volume in the twenty-four (24)
months prior to the date hereof and the suppliers accounting for the twenty-five
(25) highest gross purchases for the same period. In the past year, no supplier
has terminated, decreased, or delayed, or threatened to terminate, decrease, or
delay, its performance of services for or delivery of supplies to Sellers.
Except as set forth on SECTION 4.21 of the Disclosure Schedule, in the past
year, no licensee has terminated, decreased, or delayed, or threatened to
terminate, decrease, or delay, its obligations under any license from Sellers.
Sellers are not aware of any supplier that has or has threatened to increase
prices in an amount greater than is usual and customary for such suppliers.
There are no sole source suppliers of goods, equipment or services used by
Sellers, (other than public utilities and epoxy) with respect to which practical
alternative sources of supply are unavailable. SECTION 4.21 of the Disclosure
Schedule lists those currently ongoing customer transactions or Bid Projects (as
defined below) where bonds have been secured or requested to be secured (the
"Bonded Projects"). Except for the Bonded Projects and projects similar in
nature to the Bonded Projects, Sellers are not required, in the ordinary course
of business, to provide any bonding or any other financial security arrangements
in connection with any transactions with any customers or suppliers. Sellers are
not aware of any supplier or licensee of the Business that will not continue to
do business the Purchasers after the Closing Date on substantially the same
terms as with the Sellers.
4.22 BID PROJECTS. SECTION 4.22 of the Disclosure Schedule sets forth the
potential customer transactions for which Sellers or Pacific Northwest have
submitted an active bid or proposal (each, a "Bid Project," and collectively,
the "Bid Projects"), including the date of the proposal or bid, estimated
transaction amount, and estimated performance date(s). None of the Bid Projects
are expected to result in a loss to Seller, and, except as noted on SECTION 4.22
of the Disclosure Schedule, are expected to achieve Sellers' standard margins.
Except as set forth on SECTION 1.8(G) of the Disclosure Schedule, no bid Project
has been accepted or otherwise reduced to Contract.
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4.23 WARRANTY POLICIES. SECTION 4.23 of the Disclosure Schedule sets forth
the Sellers' warranties and customer services policies, any existing warranty
claims or recurring warranty problems, and customer complaints. Sellers have
fully performed and completed all work in respect of any warranty claims made
upon any Seller or any predecessor to any Seller. Sellers do not have any
outstanding contracts or proposals that depart from the warranty and customer
services policies disclosed in the Disclosure Schedule.
4.24 INSIDER RELATIONSHIPS. Except as set forth in SECTION 4.24 of the
Disclosure Schedule, no member, manager, officer, or Employee of Sellers nor any
relative of any of them or any Affiliate of Sellers (i) owns, directly or
indirectly, any interest in, or is an employee or agent of, any entity that is a
competitor, lessor, lessee, customer, or supplier of Sellers and that is not a
publicly-traded company, (ii) is a party to any Contract with Sellers; (iii) is
related by blood or marriage to any other Employee of Sellers.
4.25 INVESTOR REPRESENTATIONS.
(a) Sellers, in the aggregate, and each of the Principals (being such
individuals being so designated as such on the signature page hereto are
hereafter referred to as the "Principals") is an "Accredited Investor"
within the meaning of Rule 501 of Regulation D promulgated pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"). Sellers, in the aggregate, and each of the Principals are also
"Accredited Investors" within the meaning of Sections 1.1(l), 1.1(m) and/or
1.1(t) of Multilateral Instrument 45-103 (Canada) ("MI 45-103"). The shares
of Cohesant Stock received by any Seller pursuant to this Agreement will be
acquired for such Seller's own account and not with a view to or in
connection with the sale or distribution of any part thereof.
(b) By reason of such their business or financial experience, each of
Sellers and the Principals is capable of evaluating the merits and risks of
its acquisition of the Cohesant Stock, and has the capacity to protect its
own interests in connection with such acquisition.
(c) Each of Sellers and the Principals have had an opportunity to
discuss the Purchasers' business, management and financial affairs with
directors, officers and management of the Purchasers and has had the
opportunity to review the Purchasers' publicly filed documents, filed
pursuant to the Securities Act or the Securities Exchange Act of 1934, or
amended (the "Exchange Act"). Sellers and the Principals have also had the
opportunity to ask questions of and receive answers from the Purchasers and
their management regarding the terms and conditions of the acquisition of
the Cohesant Stock.
(d) Each of Sellers and the Principals understands, and has been
advised a reasonable time prior to the execution of this Agreement, that
the shares of Cohesant Stock received by any Seller pursuant to this
Agreement will not be registered under the Securities Act, Purchasers will
not be registered as dealers under applicable Canadian securities law, and
neither a prospectus nor an offering memorandum will be delivered under
applicable Canadian securities law, on the ground that the issuance of
Cohesant Stock provided for in this Agreement is exempt from the
registration, prospectus, and
19
offering memorandum requirements of the Securities Act and applicable
Canadian securities law, and that the reliance of Purchasers on such
exemption is predicated in part on representations set forth in this
Agreement. The certificates representing the shares of Cohesant Stock
issued to any Seller pursuant to this Agreement will bear an appropriate
legend reflecting such exempt issuance without registration. Each of
Sellers and the Principals understands that the shares of Cohesant Stock
received by any Seller pursuant to this Agreement are restricted securities
within the meaning of Rule 144 under the Securities Act.
4.26 BROKERS AND FINDERS. No broker, finder or other Person is entitled to
any brokerage fees, commissions or finder's fees in connection with the
transactions contemplated hereby by reason of any action taken or commitment
made by Sellers, or any Affiliates.
4.27 INSURANCE. In the past five (5) years, Sellers (i) maintained such
insurance policies in full force and effect in amounts and subject to terms and
conditions that, in every case, are reasonable given Sellers' business and
location and (ii) has not received notice from any insurer threatening to cancel
any insurance coverage or requiring any changes or corrective work which has not
been satisfied. Set forth in the SECTION 4.27 of the Disclosure Schedule is a
list of all insurance policies of Sellers for the past five (5) years and any
and all claims made thereon and the status of such claims.
4.28 TRANSACTIONS IN COHESANT STOCK. Neither the Sellers, nor any of their
officers, directors or Affiliates has made a transaction in the securities of
Cohesant since December, 2004.
4.29 WEST COAST PURCHASE. Pursuant to the terms of an Agreement of Purchase
and Sale dated as of April 1, 2005 (the "West Coast Purchase Agreement") by and
between Parent and West Coast Pipe Restoration Ltd., a British Columbia company
("West Coast"), Parent acquired all of the "Business Assets" (as that term is
used in the West Coast Purchase Agreement) free and clear of all Liens, except
for those Liens existing in favor of Spencer Torpy and/or his Affiliates
(collectively, "Torpy"). Such "Business Assets," except for certain equipment
and other assets to be made available to Purchasers pursuant to the Shared
Services Agreement described below, constitute all of the assets, tangible and
intangible, of any nature whatsoever necessary to operate the business conducted
by West Coast in the manner as historically conducted by it. All required PST,
GST, and other applicable transfer taxes have been paid, or will be paid during
the period within which such taxes must be paid in accordance with applicable
law, with respect to such transfer of the Business Assets to Parent pursuant to
the West Coast Purchase Agreement. Each of the parties to the West Coast
Purchase Agreement had the requisite corporate power to execute, deliver and
perform its obligations under the West Coast Purchase Agreement and the
Transaction Agreements to which it is a party. The execution, delivery and
performance of the West Coast Purchase Agreement and any other instruments of
transfer or documents necessary to effect the conveyance, assignment and/or
assumption of the Business Assets or the other transactions contemplated in the
West Coast Purchase Agreement (the "West Coast Transaction Documents") have been
duly authorized by all requisite corporate action on the part of each of the
parties to the West Coast Purchase Agreement. The West Coast Purchase Agreement
and the West Coast Transaction Agreements constitute the legal, valid and
binding obligations of each of the parties thereto, enforceable against each of
such parties in accordance with their respective terms. West Coast has no right,
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title, or interest in any of the Assets transferred pursuant to the Asset
Purchase Agreement or otherwise necessary to operate the Business.
4.30 XPERT PURCHASE. Pursuant to the terms of an Agreement of Purchase and
Sale dated as of April 1, 2005 (the "XPert Purchase Agreement") by and between
Old BC and XPert Mechanical and J.K. Lillie Ltd., a British Columbia company
("XPert", Old BC acquired all of the "Interests" (as that term is used in the
XPert Purchase Agreement) and all other assets required to operate XPert's
re-piping business operations (collectively, the "XPert Assets") free and clear
of all Liens, except for those Liens existing in favor of Torpy. Except for
certain equipment and other assets made available to Purchasers pursuant to the
Shared Services Agreement described below, such XPert Assets constitute all of
the assets, tangible and intangible, of any nature whatsoever necessary to
operate the re-piping business operations conducted by XPert in the manner as
historically conducted by it. All required PST, GST, and other applicable
transfer taxes have been paid, or will be paid during the period within which
such taxes must be paid in accordance with applicable law, with respect to such
transfer of the XPert Assets to XPert pursuant to the XPert Purchase Agreement.
Each of the parties to the XPert Purchase Agreement had the requisite corporate
power to execute, deliver and perform its obligations under the XPert Purchase
Agreement and the Transaction Agreements to which it is a party. The execution,
delivery and performance of the XPert Purchase Agreement and any other
instruments of transfer or documents necessary to effect the conveyance,
assignment and/or assumption of Business Assets or the other transactions
contemplated in the XPert Purchase Agreement (the "Xpert Transaction Documents")
have been duly authorized by all requisite corporate action on the part of each
of the parties to the XPert Purchase Agreement. The XPert Purchase Agreement and
the XPert Transaction Agreements constitute the legal, valid and binding
obligations of each of the parties thereto, enforceable against each of such
parties in accordance with their respective terms. XPert has no right, title or
interest in any of the Assets transferred pursuant to the Asset Purchase
Agreement or otherwise necessary to operate the Business.
4.31 DISCLOSURE. No representation or warranty made by Sellers in this
Agreement or any Transaction Agreements contains any untrue statement of a
material fact or omits to state a fact required to be stated herein or necessary
to make the statements and facts contained herein, in light of the circumstances
under which they are made, not false or misleading.
ARTICLE V
REPRESENTATIONS AND COVENANTS OF PURCHASERS
Purchasers represent and warrant to Sellers that each of the following
statements is true and correct as of the date hereof and as of the Closing Date:
5.1 ORGANIZATION; QUALIFICATION. CIPAR Canada is a Canadian federal
company, New BC is a British Columbia corporation and CIPAR USA is a Delaware
limited liability company duly formed under the laws of Canada, British Columbia
and the State of Delaware, respectively, and each is validly existing and in
good standing under the laws of Canada, British Columbia and the State of
Delaware, respectively, are duly qualified and have all requisite power and
authority to own, lease and operate their assets and to carry on their
businesses as presently conducted.
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The following Purchasers are registrants for purposes of Part IX of the
Excise Tax Act (Canada), and their registration numbers are:
(i) CIPAR Canada: # 834182545
(ii) New BC # 834574345
5.2 CORPORATE AUTHORITY; VALIDITY OF AGREEMENT; NECESSARY ACTION.
Purchasers have full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. As of the
Closing Date, the execution, delivery and performance by Purchasers of this
Agreement and the consummation by Purchasers of the transactions contemplated
hereby will have been duly and validly authorized, and no other action or
proceedings on the part of Purchasers will be necessary to authorize the
execution and delivery by Purchasers of this Agreement and the consummation by
Purchasers of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Purchasers, and, assuming this Agreement constitutes
valid and binding obligations of Sellers, constitutes a valid and binding
obligation of Purchasers, enforceable against Purchasers in accordance with its
terms.
5.3 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) The execution, delivery, and performance of the Transaction
Agreements by Purchasers, and Purchasers' compliance with the terms
thereof, do not and will not: (i) conflict with any provision of the
organizational documents of Purchasers; or (ii) violate any statute, law,
rule, regulation, judgment, order, writ, injunction or decree of any
Governmental Authority.
(b) No consent, approval, order, or authorization of or registration,
declaration, or filing with any Governmental Authority or any other Person
is required by or with respect to Purchasers in connection with the
execution and delivery of the Transaction Agreements by Purchasers and the
consummation of the transactions contemplated thereby.
5.4 AUTHORIZATION OF COHESANT STOCK. The Cohesant Stock has been duly
authorized and, when issued in accordance with this Agreement, will be validly
issued, fully paid and nonassessable and will be free and clear of all Liens
imposed by or through Purchasers, other than restrictions on transfer imposed
under applicable state and federal securities laws.
5.5 LITIGATION. There are no proceedings or governmental investigations
pending or, to the knowledge of Purchasers, threatened against Purchasers or
respective Affiliates that could reasonably be expected to impair Purchasers'
ability to perform their obligations under this Agreement.
5.6 BROKERS AND FINDERS. No broker, finder or other Person is entitled to
any brokerage fees, commissions or finder's fees in connection with the
transactions contemplated hereby by reason of any action taken or commitment
made by Purchasers or any of their Principals or respective Affiliates.
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5.7 COHESANT STOCK.
(a) The restrictions on the transferability of the shares of Cohesant Stock
shall cease and terminate when such shares of Cohesant Stock, shall have been
registered under the Securities Act and are proposed to be sold or otherwise
disposed of in accordance with an intended method of disposition set forth in
the registration statement covering such Cohesant Stock, or when such shares of
Cohesant Stock are transferable in accordance with the provisions of Rule 144
promulgated under the Securities Act ("Rule 144") and applicable Canadian
securities law. Whenever the restrictions on transfer shall terminate as
hereinabove provided with respect to any of the shares of Cohesant Stock, the
holder of any such shares of Cohesant Stock bearing the Restrictive Legend as to
which such conditions shall have terminated (the "Released Stock") shall be
entitled to receive from Cohesant, without expense (except for the payment of
any applicable transfer tax) and as expeditiously as possible, new stock
certificates for the Released Stock not bearing such Restrictive Legend. In
addition, whenever shares of Cohesant Stock are transferable pursuant to
paragraph (k) of Rule 144 to a person or entity who is not an "affiliate" (as
that term is defined in Rule 144) of Cohesant at the time of the transfer or
during the preceding three (3) months, Cohesant shall, upon the written request
of the transferor of any such shares of Cohesant Stock being transferred,
without expense (except for the payment of any applicable transfer tax) and as
expeditiously as possible, submit irrevocable instructions to its transfer agent
authorizing the transfer to be recorded on the books and records of Cohesant.
(b) In the event of any proposed transfer of any shares of Cohesant Stock
permitted under Rule 144 during the two (2) year period referenced in paragraph
(k) of Rule 144, Cohesant agrees to, at its expense, cause its U.S. corporate
and securities counsel to issue all required opinions that may be required to
effect the transfer of the Cohesant Stock; provided that such proposed transfer
is not subject to Canadian securities laws. Cohesant agrees that it shall use
all reasonable best efforts to cause such opinion of counsel to be transmitted
to Cohesant's transfer agent within 48 hours of receipt of a request by the
holder of such Cohesant Stock, provided that all required certifications or
representations required to effect such transfer have been provided with such
request.
(c) The Cohesant Stock is subject to restrictions on resale in Canada until
such time as: (i) Cohesant has been a reporting issuer in a jurisdiction in
Canada for at least 4 months; (ii) the trade is made in reliance on an available
statutory exemption; or (ii) an appropriate discretionary order is obtained from
the applicable securities regulator pursuant to applicable securities laws.
Since Cohesant is not a reporting issuer in any jurisdiction in Canada, the
applicable hold period in Canada may never expire, and if no further statutory
exemption is available and if no discretionary order is obtained, this could
result in Seller having to hold the Cohesant Stock for an indefinite period of
time. Cohesant does not intend to file a prospectus or otherwise become a
"reporting issuer" pursuant to applicable Canadian securities laws and
accordingly it is not intended that the Cohesant Stock will become freely
tradable in Canada.
(d) Notwithstanding the restrictions on transfers specified in this SECTION
5.7, Sellers may transfer the shares of Cohesant Stock to Permitted Transferees,
provided such Premitted Transferees remain subject to the restrictions contained
in this SECTION 5.7. "Permitted Transferees" mean: (i) the current shareholders,
partners or members of the Sellers (the "Equity
23
Holders"); (ii) the spouses of such Equity Holders; or (iii) a trust, family
partnership, or family limited liability company the sole beneficiaries of which
are the Equity Holders, their spouses, or any lineal descendant (including
adoptees) of the Equity Holders.
ARTICLE VI
COVENANTS OF THE PARTIES
6.1 COOPERATION WITH AUDIT. The parties recognize that Cohesant is required
to file with the Securities and Exchange Commission audited consolidated
financial statements of Sellers for the two year period ended November 30, 2004,
and unaudited financial statements for the six month periods ended May 31, 2004
and 2005 within seventy one (71) days of the Closing Date. Such statements shall
be prepared by Cohesant's independent accountants at Cohesant's expense. Sellers
will cooperate fully, at their own expense except for out of pocket expenses for
travel, with Purchasers, Cohesant and Cohesant's independent accountants in
connection with the preparation of such audited and unaudited financial
statements, recognizing that time is of the essence.
6.2 EMPLOYEES.
(a) Prior to the Closing, Sellers will notify their Employees that a
sale of their assets is being consummated, that such Employees will no
longer be employed by Sellers, and that each such Employees' prior length
of service with Sellers will be recognized for the purposes of vacation,
statutory holiday entitlement, insurance eligibility, and any termination
pay under the B.C. Employment Standards Act, but not for common law
severance or any other purpose (the "Employee Notice").
(b) Following or in conjunction with delivery of the Employee Notice,
Purchasers will offer employment to all current Employees of Sellers
relating to the Business on substantially similar terms with substantially
similar benefits, with such terms to include an offer to recognize each
such Employee's prior length of service with Sellers for the sole purposes
of vacation, statutory holiday entitlement, insurance eligibility, and any
termination pay under the B.C. Employment Standards Act.
(c) Notwithstanding the foregoing, Sellers shall be liable for any
severance payments due any Employee who does not become an employee of
Purchaser. Additionally, if the employment of any Employee who becomes an
employee of Purchasers is terminated within 12 months of the Effective
Time, Sellers will reimburse Purchasers for any severance payments made by
Purchasers, but only as it may relate to such Employee's employment with
Seller prior to the Effective Time. For example, if an Employee is
terminated within 12 months of the Effective Time and becomes entitled to
six weeks' worth severance pay, but five weeks of such severance pay is
based on such Employee's service with Sellers prior to the Effective Time,
Sellers' reimbursement obligation hereunder shall only be for five of the
six weeks' worth of severance.
6.3 POST CLOSING ACCESS. Sellers and Purchasers each shall grant to the
other or authorized representatives access without charge to its records (to the
extent related, pre-closing,
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to the Assets or the Business) for such reasonable purposes and at such
reasonable times as may be required from time to time for a period of five (5)
years after the Closing Date.
6.4 DISCLOSURE OF CONFIDENTIAL INFORMATION. Except as may be required law
or necessary in connection with any dealings with any public agency or
authority, from and after the Closing Date, Sellers will not disseminate,
divulge, discuss, copy, or otherwise use or suffer to be used in competition
with or in any way harmful to the interests of Purchasers any information
(written or oral), documents, lists, or other data of or respecting any aspect
of the Assets or the Business, it being agreed that such information constitutes
trade secrets acquired by Purchasers.
6.5 NAME CHANGE. As soon as reasonably practical after the Closing Date,
but in no event greater than 5 days thereafter, Sellers will change the names of
each of Sellers to a name that does not contain "Curaflo" or any derivative
thereof.
6.6 SHARED SERVICES. Sellers and the Principals shall cause all parties
(excluding Purchasers) to that certain Shared Services Agreement substantially
in the form as attached as EXHIBIT F hereto to fully and completely perform
their obligations thereunder, including but not limited to, the sharing or
separation of certain services and license for use of the Leased Real Properties
after the Effective Time used in the Business.
6.7 LEASED REAL PROPERTIES. Upon Purchasers' request and pursuant to the
terms of the Shared Services Agreement, Sellers and the Principals shall cause
all necessary parties (excluding Purchasers) to negotiate in good faith and
enter into a mutually-acceptable lease for the Leased Real Properties.
6.8 ADDITIONAL INTELLECTUAL PROPERTY. Purchasers may, if Sellers do not do
so, execute in Sellers' name and on their behalf all such documents and
instruments necessary or reasonably required in Purchasers' judgment to assign
the Trade Marks, trade names, domain names and copyrights; and Sellers' hereby
irrevocably nominate, constitute and appoint the person serving from time to
time as the Secretaries of Purchasers to be their attorney-in-fact so to do, and
Sellers hereby allow, ratify and confirm all actions taken in pursuance of the
authority herein conferred upon the Secretaries of Purchasers by the granting of
this power of attorney. Any recipient including the Trade Marks Office,
Copyright Office, Patent Office and any internet domain name granting authority
may accept this Agreement or a notarized copy thereof as executed by Sellers as
evidence of such power of attorney.
6.9 PUBLICITY. Sellers acknowledge that Purchasers will make certain public
disclosures about the Transactions, including, but not limited to, making
certain filings with the SEC, including filing a copy of this Agreement and some
or all of the Transaction Documents.
6.10 WARRANTY CLAIMS. If after the Effective Time, there are warranty or
other claims of customers or others based on an alleged or admitted defect of
material, workmanship or design or otherwise in or in respect of any products
sold or services performed by any of Sellers (or any Person from whom Sellers
acquired a business or substantially all of the assets in a business) prior to
the Effective Time (a "Warranty Claim"), Sellers will be given seven (7) days to
complete, at their expense, such remedial actions as may be necessary to cure
the defect
25
or otherwise resolve the Warranty Claim to the customer's satisfaction. If such
Warranty Claim is not resolved in a manner satisfactory to the customer within
such seven (7) day period, Sellers agree that Purchasers may, at their sole
option, take such remedial actions in respect of such Warranty Claim as
Purchasers reasonably deem appropriate and Sellers shall reimburse Purchasers
for all costs thereof. Following the seven (7) day period referenced above,
Purchasers may, at their sole option, require Sellers to honor any Warranty
Claims and to remediate the same, all at Sellers' sole expense.
6.11 TORPY TRANSACTION. Pursuant to the terms of a Consulting and
Non-Competition Agreement dated as of December 20, 2004 as modified by an
Amendment to Settlement Agreement dated as of May, 2005, by and among certain of
the Sellers, certain of the Principals, Torpy, and their respective Affiliates
(collectively, the "Consulting Agreement"), Sellers shall in conjunction with
the Closing: (a) pay to Torpy, out of proceeds from the Cash Portion or
otherwise, all amounts necessary or required to terminate and completely
discharge all obligations Sellers, the Principals, and/or their Affiliates under
the terms of the Consulting Agreement (the "Torpy Payment"); (b) secure and file
documentation required to release and terminate all Liens placed on the Assets
by Torpy; and (c) deliver to Sellers written confirmation from Torpy that the
non-competition, non-solicitation, and confidentiality provisions contained in
Section 2 of the Consulting Agreement remain in effect throughout the "Term" (as
defined in the Consulting Agreement) notwithstanding payment of the Torpy
Payment and the termination of all other rights and obligations under Consulting
Agreement and run in favor of Purchasers as of the Effective Time.
ARTICLE VII
NON-COMPETITION AGREEMENT
7.1 COVENANT NOT TO COMPETE. Except as contemplated by the Transaction
Agreements, for a period of five (5) years from and after the Closing Date (but
as to clause (iv) at any time after the Closing Date), in any state in the
United States or any province in Canada, Sellers shall not, directly or
indirectly, whether as an individual on Sellers' account, or as a member,
shareholder, partner, joint venturer, director, officer, employee, consultant,
creditor and/or agent, of any person, firm or organization or otherwise,
directly or indirectly:
(i) engage in, carry on or have any interest in a business that
performs (i) Relining and Repining Services; (ii) development, marketing
and licensing of Relining and Repiping Services and processes for Relining
and Repiping Services and (iii) leasing or sale of products and services
for use in Relining and Repiping;
(ii) enter into, engage in, or be employed by or consult with any
Person that competes with Purchasers, Sellers, or any of their Affiliates
on matters in any way similar or related to the Business as carried on by
Sellers, the Principals, or any of their Affiliates on the date of this
Agreement;
(iii) employ, assist in employing, or otherwise associate in business
with any present, former, or future Employee of Purchasers or Sellers, or
any of their Affiliates; or
26
(iv) induce any person who is a present or future employee, officer,
agent, affiliate, customer, or supplier of Purchasers, Sellers or any of
their Affiliates, to terminate their relationship with or refuse to do
business with Purchasers or any of their Affiliates, as the case may be, on
as favorable terms as previously done with Purchasers, Sellers, Principals,
or any of their Affiliates, as the case may be.
The parties acknowledge and agree that the restrictions contained in this
SECTION 7.1 do not restrict, and will not be construed to restrict, Sellers'
current involvement and/or business relationship with XPert, but only to the
extent such involvement or business relationship relates to the business
conducted by XPert as of the date hereof.
7.2 REASONABLE RESTRICTION. Sellers acknowledge that the length of time and
geographic restriction pertaining to all prohibitions in SECTION 7.1 both are
reasonable and necessary for the legitimate protection of Purchasers' business
and interests.
7.3 REMEDIES AND ENFORCEMENT.
(a) Sellers expressly agree and understand that the remedy at law for
any breach by Sellers of SECTION 7.1 will be inadequate and that the
damages flowing from such breach are not readily susceptible to being
measured in monetary terms. Accordingly, it is acknowledged that upon
adequate proof of Sellers' violation of SECTION 7.1, Purchasers will be
entitled, among other remedies, to immediate injunctive relief and may
obtain a temporary restraining order restraining any threatened or further
breach. Nothing in SECTION 7.1 will be deemed to limit Purchasers' remedies
at law or in equity for any breach by Sellers of any of the provisions of
this Agreement which may be pursued or availed of by Purchasers.
(b) In the event any court of competent jurisdiction determines that
the specified time period or geographical area set forth in SECTION 7.1 is
unreasonable, arbitrary, or against public policy, then a lesser time
period or geographical area that is determined by the court to be
reasonable, non-arbitrary, and not against public policy may be enforced.
Sellers acknowledge that the provisions of this Article VII have been
inserted for the sole benefit of Purchasers and that Purchasers shall have
the right, in their sole discretion, to waive in whole or in part or
otherwise reduce the scope of any covenant set forth in this Article VII or
any portion thereof without the Sellers' consent effective upon Purchasers
giving notice to that effect to Sellers and Sellers hereby consent to any
such amendment.
(c) In the event Sellers violate any specified time period in SECTION
7.1 during which Sellers are prohibited from taking certain actions or
engaging in certain activities, then such violation will toll the running
of such time period from the date of such violation until such violation
ceases.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS. All representations, warranties, covenants
and agreements made by Sellers in or pursuant to this Agreement or any of the
other Transaction
27
Agreements shall survive the Closing for a period of two (2) years, except that
the representations and warranties contained in: (a) SECTION 4.13 (Taxes),
SECTION 4.12 (Employee Benefit Matters) shall survive until the expiration of
the applicable statute of limitations and an additional sixty (60) days; (b)
SECTION 4.17 (Environmental) shall survive until the expiration of the
applicable statute of limitations; (c) SECTION 4.16 (Intellectual Property)
shall survive the Closing for a period of five (5) years; and (d) SECTION 4.2
(Authority), SECTION 4.14 (Title), SECTION 4.25, (Investor Representations), and
SECTION 4.26 (Brokers and Finders) shall survive indefinitely. All claims made
by virtue of such representations, warranties, covenants and agreements shall be
made exclusively under, and subject to the limitations set forth in, this
ARTICLE VIII.
8.2 SELLERS' AGREEMENT TO INDEMNIFY.
(a) Subject to the limitations, conditions, and provisions set forth
herein, Purchasers shall be entitled, from and after the Effective Time, to
indemnification by Sellers, jointly and severally, for all demands, claims,
actions, losses, damages, liabilities, costs, and expenses, including
interest, penalties, reasonable costs of investigation, and reasonable
attorneys' fees, asserted against or incurred by Purchasers or any of their
respective shareholders, officers, directors, Affiliates, employees and
agents (the "Purchasers' Indemnitees"): (i) resulting from a breach of any
representation or warranty of Sellers contained in this Agreement or any of
the other Transaction Agreements; (ii) resulting from a breach of any
covenant or agreement of Sellers or the Principals contained in this
Agreement or any of the other Transaction Agreements (including without
limitation those obligations contained in SECTION 1.8 and SECTION 6.2
hereof); (iii) related to Sellers' operation of the Business or any other
operations prior to the Effective Time; (iv) resulting from Warranty
Claims; (v) with respect to any Excluded Liabilities; (vi) resulting from
or arising out of (A) all Liabilities arising from or related to any
presence, suspected presence, release, generation, treatment, transport,
recycling, storage, or disposal of any Hazardous Material, or arising from
arrangements for any of the foregoing by or for Sellers, prior to the
Effective Time, or (B) all Liabilities under or, any violation of or, any
noncompliance with, any Environmental Law, which liability, violation or
noncompliance occurred or existed prior to the Closing Date; (vii) any and
all current claims and/or claims arising up to and including the Effective
Time under the BC Employment Standards Act, Human Rights Code, Workers'
Compensation Act, and/or any other applicable legislation; (viii) subject
to Article VI, liability to any employee, past or present, active or
inactive of the Business, for wages, severance and/or wrongful dismissal
under common law and for Employment Standards Act notice, specifically but
not limited to under Section 97 and 88 of the Employment Standards Act
arising up to and including the Effective Time; (ix) with respect to any
broker, finder, or other Person acting on behalf of Sellers, the Principals
or their Affiliates in connection with the transactions herein
contemplated; (x) with respect to liabilities for Taxes owed by Sellers or
the Principals relating to any period ending on or before the Effective
Time; (xi) resulting from any consent not obtained as contemplated by
SECTION 1.4; and/or (xii) any and all claims that the services provided,
the business conducted, and products sold in connection with the Business
infringe on the Intellectual Property of any third party (regardless of
whether such third parties are listed on SECTION 4.16 of the Disclosure
Schedule) (collectively, the "Purchasers' Damages").
28
(b) Purchasers' Indemnitees shall have the right to Purchasers'
Damages upon written notice delivered by Purchasers to Sellers or the
Principals pursuant to this Section 8.2(b) that sets forth, to the extent
known to Purchasers, the basis for the claim for indemnification and an
estimate of the amount thereof. Except for claims arising under Sections
2.2(b) or 2.3, Purchasers' Indemnities shall first exhaust all Escrowed
Assets available under the Escrow Agreement pursuant to its terms before
proceeding against the Sellers for recovery of Purchasers' Damages.
8.3 PURCHASERS' AGREEMENT TO INDEMNIFY.
(a) Subject to the limitations, conditions, and provisions set forth
herein, Sellers shall be entitled, from and after the Effective Time, to
indemnification by Purchasers, for all demands, claims, actions, losses,
damages, liabilities, costs, and expenses, including interest, penalties,
reasonable costs of investigation, and reasonable attorneys' fees, asserted
against or incurred by Sellers or any of Sellers' respective Principals,
managers, officers, Affiliates, employees and agents (the "Seller
Indemnitees"): (i) resulting from a breach of any representation or
warranty of Purchasers contained in this Agreement or any of the other
Transaction Agreements; (ii) resulting from a breach of any covenant or
agreement of Purchasers contained in this Agreement or any of the other
Transaction Agreements; (iii) with respect to Assumed Liabilities; and (iv)
related to Purchasers' operation of the Business or any other operations
after the Effective Time (collectively, the "Seller Damages").
(b) Seller Indemnitees shall have the right to Seller Damages upon
written notice delivered by Seller to Purchasers pursuant to this SECTION
8.3(B) that sets forth, to the extent known to Sellers, the basis of the
claim for indemnification and an estimate of the amount thereof.
8.4 INDEMNIFICATION PROCEDURE.
(a) Promptly after receipt by a Purchasers' Indemnitee or a Seller
Indemnitee (hereinafter collectively referred to as an "Indemnified Party")
of notice by a third party of any complaint or the commencement of any
audit, investigation, action or proceeding with respect to which such
Indemnified Party may be entitled to receive payment from the other party
for any Purchasers' Damages or Seller Damages (as the case may be), such
Indemnified Party will notify Purchasers or Sellers, as the case may be
(the "Indemnifying Party"), promptly following the Indemnified Party's
receipt of such complaint or of notice of the commencement of such audit,
investigation, action or proceeding; provided, however, that the failure to
so notify the Indemnifying Party will relieve the Indemnifying Party from
liability under this Agreement with respect to such claim only if, and only
to the extent that, such failure or notify the Indemnifying Party results
in the forfeiture by the Indemnifying Party of rights and defenses
otherwise available to the Indemnifying Party with respect to such claim.
The Indemnifying Party will have the right, upon written notice delivered
to the Indemnified Party within ten (10) days thereafter assuming full
responsibility for any Purchasers' Damages or Seller Damages (as the case
may be) resulting from such audit, investigation, action or proceeding, to
assume the defense of such audit, investigation, action or proceeding,
29
including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of the fees and disbursements of such
counsel. If, however, the Indemnifying Party declines or fails to assume
the defense of the audit, investigation, action or proceeding on the terms
provided above or to employ counsel reasonably satisfactory to the
Indemnified Party, in each case within such ten-day period, then such
Indemnified Party may employ counsel to represent or defend it in any such
audit, investigation, action or proceeding and the Indemnifying Party will
pay the reasonable fees and disbursements of such counsel as incurred;
provided, however, that the Indemnifying Party will not be required to pay
the fees and disbursements of more than one (1) counsel for all Indemnified
Parties in any jurisdiction in any single audit, investigation, action or
proceeding. In any audit, investigation, action or proceeding with respect
to which indemnification is being sought hereunder, the Indemnified Party
or the Indemnifying Party, whichever is not assuming the defense of such
action, will have the right to participate in such matter and to retain its
own counsel at such party's own expense. The Indemnifying Party or the
Indemnified Party, as the case may be, will at all times use reasonable
efforts to keep the Indemnifying Party or the Indemnified Party, as the
case may be, reasonably apprised of the status of the defense of any matter
the defense of which they are maintaining and to cooperate in good faith
with each other with respect to the defense of any such matter.
(b) No Indemnified Party may settle or compromise any claim or consent
to the entry of any judgment with respect to which indemnification is being
sought hereunder without the prior written consent of the Indemnifying
Party, unless (i) the Indemnifying Party fails to assume and maintain the
defense of such claim pursuant to this Section or (ii) such settlement,
compromise or consent includes an unconditional release of the Indemnifying
Party from all liability arising out of such claim. An Indemnifying Party
may not, without the prior written consent of the Indemnified Party, settle
or compromise any claim or consent to the entry of any judgment with
respect to which indemnification is being sought hereunder unless (i) such
settlement, compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such claim, (ii) does
not contain any admission or statement suggesting any wrongdoing or
liability on behalf of the Indemnified Party and (iii) does not contain any
equitable order, judgment or term which in any manner affects, restrains or
interferes with the business of the Indemnified Party or any of the
Indemnified Party's Affiliates.
(c) In the event any Indemnified Party should have a claim for
indemnity against any Indemnifying Party that does not involve a third
party claim, the Indemnified Party shall deliver notice of such claim with
reasonable promptness to the Indemnifying Party. Such notice shall specify
the basis for such claim. The failure by any Indemnified Party so to notify
the Indemnifying Party shall not relieve the Indemnifying Party from any
liability that it may have to such Indemnified Party with respect to any
claim made pursuant to this Section, it being understood that notices for
claims in respect of a breach of a representation or warranty must be
delivered prior to the expiration of the applicable survival period for
such representation or warranty under SECTION 8.1. If the Indemnifying
Party does not notify the Indemnified Party within thirty (30) calendar
days following its receipt of such notice that the Indemnifying Party
disputes its liability to the Indemnified Party under this Article, or the
amount thereof, the claim specified by the
30
Indemnified Party in such notice shall be conclusively deemed a liability
of the Indemnifying Party under this Article, and the Indemnifying Party
shall pay the amount of such liability to the Indemnified Party on demand
or, in the case of any notice in which the amount of the claim (or any
portion of the claim) is estimated, on such later date when the amount of
such claim (or such portion of such claim) becomes finally determined. If
the Indemnifying Party has timely disputed its liability with respect to
such claim as provided above, as promptly as possible, such Indemnifying
Party and the Indemnified Party will establish the merits and amount of
such claim (by mutual agreement, litigation, arbitration or otherwise) and,
within five (5) business days of the final determination of the merits and
amount of such claim, the Indemnifying Party will pay to the Indemnified
Party immediately available funds in an amount equal to such claim as
determined hereunder.
8.5 THRESHOLD FOR INDEMNIFICATION. Notwithstanding any thing to the
contrary set forth herein, the Purchasers' Indemnitee shall not make a claim
against Sellers for indemnification pursuant to SECTION 8.2 for Purchasers'
Damages unless and until the aggregate amount of such Purchasers' Damages
exceeds Twenty-Five Thousand Dollars ($25,000), in which event the Purchasers'
Indemnitee may claim indemnification for all such Purchasers' Damages, including
the initial $25,000; provided, however, that the foregoing limitation shall not
apply to any matters referred to in clauses (a)(ii), (iv), (vi) and (vii) of
SECTION 8.2.
8.6 INVESTIGATIONS. The respective representations and warranties of the
parties contained in this Agreement or in any certificate or other document
delivered by any party prior to the Closing and the rights to indemnification
set forth in this Article VIII will not be deemed waived or otherwise affected
by any investigation made by a party to this Agreement.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 EXPENSES. Purchasers, on the one hand, and Sellers will bear their own
respective expenses, including counsel and accountants' fees, in connection with
the preparation and negotiation of, and transactions contemplated under, this
Agreement.
9.2 FURTHER ASSURANCES. Each of the parties will use all commercially
reasonable efforts to take, or cause to be taken, all actions necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement.
9.3 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or
supplemented only by written agreement signed by Sellers, the Principals and
Purchasers.
9.4 WAIVERS. Any failure by any of the parties to comply with any of the
obligations, agreements or conditions set forth in this Agreement may be waived
by the other party or parties, but any such waiver will not be deemed a waiver
of any other obligation, agreement or condition contained herein.
9.5 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given the day when delivered by hand or confirmation
of facsimile transmission is received, three (3) days after having been
deposited in the United States mail, certified or
31
registered, return receipt requested, postage prepaid, or one (1) business day
after having been dispatched by a nationally recognized overnight courier
service, in every case to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) If to Sellers, to:
c/o 4279 Investments Ltd.
1020 East Cordova Street
Vancouver, British Columbia
Canada V6A 4A3
Facsimile: 604-294-5673
Attention: Stuart McNeill
With copies to:
JPM Law Corporation
3562 West King Edward Avenue
Vancouver, BC V6S 1M6
Facsimile: 604-730-2990
Attention: Paul Mancuso
(b) If to Purchasers, to:
Cohesant Technologies Inc.
5845 W. 82nd Street, Suite 102
Indianapolis, Indiana 46278
Facsimile: 317-875-5456
Attention: Morris H. Wheeler, President and CEO
With copies to:
Kahn Kleinman, LPA
1300 East 9th Street, Suite 2600
Cleveland, Ohio 44114-1824
Facsimile: (216) 623-4912
Attention: Kevin D. Barnes, Esq.
and
Porter Wright Morris & Arthur LLP
1700 Huntington Building
925 Euclid Avenue
Cleveland, Ohio 44115-1407
Attention: Michael A. Ellis, Esq.
9.6 ASSIGNMENT. This Agreement is not assignable by any party hereto
without the prior written consent of the other parties. Notwithstanding the
above, Purchasers may assign, without the consent of Sellers or the Principals,
all or any
32
part of this Agreement and all or any part of their rights and obligations
hereunder to: (a) an Affiliate of Purchasers; or (b) any of Purchasers' lenders
in this transaction; in which event, Sellers shall execute and deliver any
documents reasonably requested by the assignee(s) in connection with such
assignments, but no such assignment shall relieve Purchasers of any of their
obligations hereunder.
9.7 GOVERNING LAW. The execution, interpretation and performance of this
Agreement shall be governed by the internal laws and judicial decisions of the
State of Delaware, without giving effect to the rules and principles governing
conflicts of laws.
9.8 DISPUTE RESOLUTION. Any dispute that may arise between the parties
shall be resolved by arbitration in Cleveland, Ohio according to the Rules of
the American Arbitration Association and the award of the Arbitrator shall be
final and binding upon the parties. Under any such arbitration proceeding, the
parties shall have the same rights to discovery under the Federal Rules of Civil
Procedure, as if the dispute had been filed as an original action in a Untied
States District Court. The United States District Court located in the
jurisdiction where the matter is pending shall have jurisdiction and shall be
authorized to enforce such rights as if the entire dispute were pending before
that Court, if there exists federal subject matter jurisdiction, otherwise the
state court of such jurisdiction shall have jurisdiction to enforce such rights.
9.9 COUNTERPARTS. This Agreement maybe executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.10 SEVERABILITY. If any provision of this Agreement, or the application
thereof to any Person(s) or circumstance(s), shall be held by a court of
competent jurisdiction to be contrary to law, invalid, or unenforceable to any
extent or in any respect, then such provision shall be deemed to be amended,
modified and reduced in scope and effect, only to that extent necessary to
render same valid and enforceable, and all other provisions of this Agreement
shall be unaffected and shall remain in full force and effect.
9.11 PARTIES IN INTEREST. Nothing in this Agreement, express or implied,
other than as otherwise specifically provided herein, is intended to or shall
confer upon any Person other than the parties hereto any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
9.12 ENTIRE AGREEMENT. This Agreement, including any documents delivered
pursuant to its terms, constitutes the entire agreement between the parties.
Each party acknowledges that no other party has made any, or makes any,
promises, representations, warranties, covenants or undertakings, other than
those expressly set forth herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
33
IN WITNESS WHEREOF, Sellers and Purchasers have caused this Agreement to be
signed on their respective behalf by their respective duly authorized officers
as of the date first above written.
PURCHASERS:
COHESANT INFRASTRUCTURE PROTECTION
AND RENEWAL LLC
By:
---------------------------------
Name: Morris Wheeler
Title: Authorized Person
0728487 BC LTD.
By:
---------------------------------
Name: Morris Wheeler
Title: Director
COHESANT INFRASTRUCTURE PROTECTION
AND RENEWAL OF CANADA LTD.
By:
---------------------------------
Name: Morris Wheeler
Title: Director
SELLERS:
4279 INVESTMENTS LTD.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
CURAFLO TECHNOLOGIES INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
CURALEASE LTD.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
CURAFLO TECHNOLOGIES (CANADA) INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
CURAFLO OF BC INC. (DBA WEST COAST
PIPE RESTORATION)
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
CURAFLO TECHNOLOGIES (USA) INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
CURAFLO OF THE SILICON VALLEY, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
In consideration of the premises contained herein and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, each of the
undersigned makes the representations, warranties, and agreements being made by
the Principals in SECTION 4.25, SECTION 6.6, and SECTION 6.7, and hereby agrees
to be bound by the provisions of Article VII of the foregoing Agreement to the
same extent that the Sellers have agreed to be bound thereunder.
PRINCIPALS:
- -------------------------------------
STUART MCNEILL
35
- -------------------------------------
BRIAN LEMAIRE
- -------------------------------------
CRAIG RADEMAKER
In consideration of the premises contained herein and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, the
undersigned makes the representations, warranties, and agreements being made in
SECTION 2.1(C), SECTION 5.4, and SECTION 5.7 to the same extent that the
Purchasers have agreed to be bound thereunder.
COHESANT TECHNOLOGIES INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
36
================================================================================
ASSET PURCHASE AGREEMENT
BY AND AMONG
4279 INVESTMENTS LTD.,
CURAFLO TECHNOLOGIES INC.,
CURALEASE LTD.,
CURAFLO TECHNOLOGIES (CANADA) INC.,
CURAFLO OF BC INC. (DBA WEST COAST PIPE RESTORATION),
CURAFLO TECHNOLOGIES (USA) INC.,
CURAFLO OF THE SILICON VALLEY, INC., AS SELLERS
AND
COHESANT INFRASTRUCTURE PROTECTION AND RENEWAL LLC,
0728487 BC LTD.,
COHESANT INFRASTRUCTURE PROTECTION AND RENEWAL OF CANADA
LTD., AS PURCHASERS
DATED AS OF AUGUST 12, 2005
================================================================================
TABLE OF CONTENTS
1.1 PURCHASE OF ASSETS.................................................. 1
1.2 EXCLUDED ASSETS..................................................... 3
1.3 ASSUMPTION OF LIABILITIES........................................... 3
1.4 PROCEDURES FOR NON-TRANSFERABLE ASSETS.............................. 4
1.5 TELEPHONE LISTINGS AND TELEPHONE NUMBERS............................ 4
1.6 METHOD OF CONVEYANCE AND TRANSFER................................... 4
1.7 FURTHER ASSURANCES.................................................. 4
1.8 COSTS AND EXPENSES.................................................. 5
2.1 PURCHASE PRICE...................................................... 5
2.2 NET WORKING CAPITAL................................................. 6
2.3 REPURCHASE OF UNCOLLECTED RECEIVABLES............................... 8
2.4 TAXES............................................................... 8
2.5 PRORATIONS.......................................................... 8
2.6 ALLOCATION OF PURCHASE PRICE........................................ 9
3.1 CLOSING............................................................. 9
3.2 CLOSING DATE........................................................ 9
3.3 EFFECTIVE TIME...................................................... 9
4.1 ORGANIZATION; QUALIFICATION; SUBSIDIARIES........................... 9
4.2 AUTHORITY........................................................... 10
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS............................... 10
4.4 FINANCIAL STATEMENTS................................................ 10
4.5 UNDISCLOSED LIABILITIES............................................. 11
4.6 ABSENCE OF CERTAIN CHANGES.......................................... 11
4.7 CONDUCT OF BUSINESS................................................. 11
4.8 CERTAIN CONTRACTS AND ARRANGEMENTS.................................. 12
4.9 LITIGATION.......................................................... 12
4.10 COMPLIANCE WITH APPLICABLE LAWS..................................... 12
4.11 EMPLOYEE MATTERS.................................................... 13
4.12 EMPLOYEE BENEFIT PLANS.............................................. 13
4.13 TAX MATTERS......................................................... 13
4.14 TITLE TO AND CONDITION, LOCATION AND SUFFICIENCY OF ASSETS.......... 14
4.15 REAL PROPERTY....................................................... 15
4.16 INTELLECTUAL PROPERTY; PREDECESSORS; TRADE NAMES.................... 16
4.17 ENVIRONMENTAL MATTERS............................................... 16
4.18 PERMITS............................................................. 17
4.19 INVENTORY........................................................... 17
4.20 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE............................... 18
4.21 CUSTOMERS; LICENSEES AND SUPPLIERS.................................. 18
4.22 BID PROJECTS........................................................ 18
4.23 WARRANTY POLICIES................................................... 19
4.24 INSIDER RELATIONSHIPS............................................... 19
4.25 INVESTOR REPRESENTATIONS............................................ 19
4.26 BROKERS AND FINDERS................................................. 20
4.27 INSURANCE........................................................... 20
4.28 TRANSACTIONS IN COHESANT STOCK...................................... 20
4.29 WEST COAST PURCHASE................................................. 20
4.30 XPERT PURCHASE...................................................... 21
4.31 DISCLOSURE.......................................................... 21
5.1 ORGANIZATION; QUALIFICATION......................................... 21
5.2 CORPORATE AUTHORITY; VALIDITY OF AGREEMENT; NECESSARY ACTION........ 22
5.3 CONSENTS AND APPROVALS; NO VIOLATIONS............................... 22
5.4 AUTHORIZATION OF COHESANT STOCK..................................... 22
5.5 LITIGATION.......................................................... 22
5.6 BROKERS AND FINDERS................................................. 22
5.7 COHESANT STOCK...................................................... 23
6.1 COOPERATION WITH AUDIT.............................................. 24
6.2 EMPLOYEES........................................................... 24
6.3 POST CLOSING ACCESS................................................. 24
6.4 DISCLOSURE OF CONFIDENTIAL INFORMATION.............................. 25
6.5 NAME CHANGE......................................................... 25
6.6 SHARED SERVICES..................................................... 25
6.7 LEASED REAL PROPERTIES.............................................. 25
6.8 ADDITIONAL INTELLECTUAL PROPERTY.................................... 25
6.9 PUBLICITY........................................................... 25
6.10 WARRANTY CLAIMS..................................................... 25
6.11 TORPY TRANSACTION................................................... 26
7.1 COVENANT NOT TO COMPETE............................................. 26
7.2 REASONABLE RESTRICTION.............................................. 27
7.3 REMEDIES AND ENFORCEMENT............................................ 27
8.1 SURVIVAL OF REPRESENTATIONS......................................... 27
8.2 SELLERS' AGREEMENT TO INDEMNIFY..................................... 28
8.3 PURCHASERS' AGREEMENT TO INDEMNIFY.................................. 29
8.4 INDEMNIFICATION PROCEDURE........................................... 29
8.5 THRESHOLD FOR INDEMNIFICATION....................................... 31
8.6 INVESTIGATIONS...................................................... 31
9.1 EXPENSES............................................................ 31
9.2 FURTHER ASSURANCES.................................................. 31
9.3 AMENDMENT AND MODIFICATION.......................................... 31
9.4 WAIVERS............................................................. 31
9.5 NOTICES............................................................. 31
9.6 ASSIGNMENT.......................................................... 32
9.7 GOVERNING LAW....................................................... 33
9.8 DISPUTE RESOLUTION.................................................. 33
9.9 COUNTERPARTS........................................................ 33
9.10 SEVERABILITY........................................................ 33
9.11 PARTIES IN INTEREST................................................. 33
9.12 ENTIRE AGREEMENT.................................................... 33
DISCLOSURE SCHEDULE
APPENDICES
Appendix A Definitions and Interpretation
Appendix B Fixed Assets
EXHIBITS
Exhibit A Copyright Assignment
Exhibit B Trademark Assignment
Exhibit C Escrow Agreement
Exhibit D Example of Closing Balance Sheet
Exhibit E Purchase Price Allocation
Exhibit F Shared Services Agreement
APPENDIX A
DEFINITIONS AND INTERPRETATIONS
1. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"AFFILIATE" means, with reference to a Person, any Person that directly or
indirectly through one or more intermediaries controls or is controlled by or is
under common control with the specified Person and in the case of Sellers, any
Person having legal or beneficial ownership, directly or indirectly, of more
than ten percent (10%) of the capital stock of any Seller. For purposes of this
definition, "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"BUSINESS DAY" means a day other than a Saturday, Sunday or day on which
commercial banks in Cleveland, Ohio are generally closed for business.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto, together with the regulations thereunder, in each
case as in effect from time to time.
"CONTRACT" means any obligation or agreement by which Sellers are bound or
the Assets are subject, whether or not reduced to writing, and specifically
including any client or customer agreement, note, bond, mortgage, lease of real
or personal property (including automobile, vehicle and other equipment leases),
service agreement, purchase or sale agreement, partnership or joint venture
agreement, license or other instrument, but not including Permits.
"DISCLOSURE SCHEDULE" means the schedule on which the parties have
enumerated all information, with clear indication of the section and paragraph
to which such information pertains, that this Agreement requires them to
disclose to the other party.
"EMPLOYEE BENEFIT PLANS" means any plan as defined in Section 3(3) of
ERISA.
"EMPLOYEES" means all persons employed by Sellers, including individuals
employed or engaged on any of a consulting, full time, part time, or temporary
basis and dependent contractors.
"ENVIRONMENTAL LAWS" means any applicable federal, state, provincial, local
or municipal law, statue, ordinance, rule or regulation governing environmental,
health and/or safety matters, as the same have been amended as of the date
hereof and any judgment, order, injunction or decree, or settlement agreement
relating to environmental matters, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Sections 9601, et seq.; the Emergency Planning and Community Right-to-Know Act
of 1986, 42 U.S.C. Sections 11001, et seq.; the Resource Conservation and
Recovery Act, 42 U.S.C. Sections 6901, et seq.; the Toxic Substances Control
Act, 15 U.S.C. Sections 2601, et seq.; the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. Sections 136, et seq.; the Clean Air Act, 42 U.S.C.
Sections 7401 et seq.; the Clean Water Act (Federal Water Pollution Control
Act), 33 U.S.C. Sections 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C.
Sections 300f, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
Sections 1801, et seq.; the
Occupational Safety and Health Act, 29 U.S.C. Sections 651 et seq.; the
Transportation of Dangerous Goods Act (Canada) and the Canadian Environmental
Protection Act and the Environmental Management Act (British Columbia).
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, together with the regulations
thereunder, in each case as in effect from time to time.
"ERISA AFFILIATE" means, with respect to Sellers, any other Person that,
together with Sellers, would be treated as a single employer under Code Section
414.
"ESCROW AGENT" means JPMorgan Trust Company, National Association.
"FINANCIAL STATEMENTS" means those financial statements described in
SECTION 4.4 of the Disclosure Schedule, with the financial statements as of the
period ending and as of April 30, 2005 being referred to separately as the "Most
Recent Financial Statements".
"FIXED ASSETS" means all tangible personal property and fixtures owned by
Sellers, including all machinery, equipment, tooling, office supplies, leasehold
improvements, furniture and furnishings, fixtures, computers, vehicles, tools,
parts, accessions, and other fixed assets, including those fixed assets set
forth on APPENDIX B attached hereto.
"GAAP" or "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means generally
accepted accounting principles as recognized by the American Institute of
Certified Public Accountants, as in effect from time to time in the United
States of America, consistently applied and maintained on a consistent basis for
Sellers throughout the periods indicated.
"GOVERNMENTAL AUTHORITY" means any nation, province, state or political
subdivision thereof, and any agency, natural person or other entity exercising
executive, judicial, legislative, regulatory or administrative functions of or
pertaining to government.
"HAZARDOUS MATERIAL" means any substance or material meeting any one or
more of the following criteria: (a) it is regulated pursuant to any
Environmental Law; (b) it is or contains a substance designated as a hazardous
waste, hazardous substance, hazardous material, pollutant, contaminant or toxic
substance under any Environmental Law; (c) its presence at some quantity
requires investigation, notification or remediation under any Environmental Law;
or (d) it contains, without limiting the foregoing, asbestos, polychlorinated
biphenyls, petroleum hydrocarbons, petroleum derived substances or waste, crude
oil or any fraction thereof, nuclear fuel, natural gas or synthetic gas.
"INTELLECTUAL PROPERTY" means all of the following in any jurisdiction
throughout the world: patents, copyrights, trademarks, service marks, trade
names, trade dress, trade secrets, know how, proprietary information and
knowledge, business methods, inventions, designs, formulas, industrial designs,
computer software programs, corporate names, logos, Internet domain names and
other intellectual property rights, any and all applications and/or
registrations for any of the foregoing and all goodwill associated with any of
the foregoing owned by Sellers or used by Sellers in the Business; including,
without limitation, all rights Sellers may have to the names, including, without
limitation,
the name "Curaflo, "West Coast Pipe Restoration", and "TriSure Plumbing System,"
and any versions thereof.
"INVENTORY" means all inventories excluding obsolete or unusable items but
including raw materials, work-in-process, finished products, scrap, supplies,
spare parts, shipping containers and packaging materials of Sellers, wherever
located.
"LIABILITIES" means all liabilities or obligations of any nature
whatsoever, whether absolute or contingent, due or to become due, accrued or
unaccrued, known or unknown, direct or consequential or otherwise, including
indebtedness for money borrowed, obligations under Contracts, performance
obligations, accounts payable, liabilities imposed by law and/or Governmental
Authorities, and obligations to remit sales, use and other taxes as and when
due.
"LIEN" means any mortgage, claim, lien, judgment, security interest,
pledge, escrow, charge, right of way, easement, restriction, or other
encumbrance.
"MATERIAL ADVERSE EFFECT" means any change or effect (a) that has been or
would be likely to be materially adverse to the condition (financial or
otherwise), business, assets, prospects or results of operation of Sellers, the
Business or Purchasers, as the case may be, excluding changes and effects
resulting from general economic and industry conditions not specific to Sellers,
the Business or Purchasers, as the case may be, or (b) that has impaired or
would likely impair materially the ability of Sellers or Purchasers, as the case
may be, to consummate the transactions contemplated by this Agreement or perform
its obligations under the Transaction Agreements.
"PERMITS" means all licenses, permits, authorizations, registrations,
certificates of occupancy, franchises and approvals necessary to or used in the
Business and issued by any Governmental Authority to Sellers or otherwise
obtained by Sellers from any Governmental Authority.
"PERMITTED LIENS" means: (a) Liens in favor of carriers, warehousemen,
mechanics, landlords and materialmen and other similar Persons that are incurred
in the ordinary course of the Business for sums not yet due and payable; and (b)
Liens for current Taxes incurred in the ordinary course of the Business that are
not delinquent or remain payable without any penalty and are being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves are maintained.
"PERSON" means a corporation, a company, a limited liability company, an
association, a joint venture, a partnership, a limited partnership, an
organization, a business, an individual, a trust, a Governmental Authority or
any other legal entity.
"PLAN" means any employee pension, retirement, profit sharing, bonus,
incentive, deferred compensation, severance, stock option, employee stock
ownership, hospitalization, medical, dental, insurance, or similar employee
benefit plan, whether arrived at through collective bargaining or otherwise,
providing employee benefits (including any "employee benefit plan" as that term
is defined in Section 3(3) of ERISA, any employee benefit plan that is a
"cafeteria plan" as described in Section 125 of the Code or any employee welfare
plan) currently maintained or previously maintained by, sponsored in whole or in
part by, or contributed to by Sellers, for the benefit of employees or retirees
of Sellers, dependents and spouses of employees or retirees of Sellers,
independent contractors of Sellers, or other beneficiaries related to Sellers.
"TAX RETURN" means any report, return or other information required to be
supplied to or filed with a taxing authority in connection with Taxes.
"TAXES" means any taxes, assessments, duties, fees, levies, imposts, or
other governmental charges of any nature whatsoever imposed by any Governmental
Authority and any liabilities with respect thereto, including income, excise,
property, sales, use, value added, franchise, payroll, transfer, transfer gain,
gross receipts, withholding, social security and unemployment taxes or other
taxes of any kind, and any interest, additions to tax, fines, penalty and
expense relating to such taxes, charges, duties, imposts, fees, levies or other
assessments or governmental charges.
"TRANSACTION AGREEMENTS" means this Agreement, the Bill of Sale and General
Assignment, the Patent Assignment, the Copyright Assignment, the Trademark
Assignment, the Shared Services Agreement, the Leased Properties Lease and any
other instruments of transfer or documents necessary to effect the conveyance,
assignment and/or assumption of Assets and/or Assumed Liabilities or the other
transactions contemplated in the Agreement.
2. INTERPRETATION. The following provisions shall govern the interpretation
of this Agreement:
(a) The words "herein" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Article, Section,
subsection, Exhibit or Schedule; references to this Agreement include the
Exhibits and Schedules to this Agreement; and, unless the context requires
otherwise, references to Exhibits and Schedules refer to the Exhibits and
Schedules to this Agreement.
(b) Headings or captions are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement.
(c) Words importing the singular number only shall include the plural and
vice versa and words importing the masculine gender shall include the feminine
and neuter genders and vice versa and words importing individuals shall include
Persons and vice versa.
(d) The calculation of time within which or following which any act is to
be done or step is to be taken pursuant to this Agreement excludes the date
which is the reference day in calculating such period.
(e) Performance on holidays is not required hereunder. Whenever anything is
required to be done or any action is required to be taken hereunder on or by a
day which is not a Business Day, then such thing may be validly done and such
action may be validly taken on or by the next succeeding day that is a Business
Day.
(f) The term "including" shall be deemed to mean "including without
limitation."
(g) Except as specifically provided otherwise in this Agreement, all
accounting terms used herein that are not specifically defined shall have the
meanings customarily given them in accordance with GAAP.
(h) All references to dollars or $ shall mean United States dollars.