ASSET PURCHASE AGREEMENT by and among WINNEBAGO OF INDIANA, LLC (“Buyer”), SUNNYBROOK MANUFACTURING, INC. (“SBM”), its wholly-owned subsidiary SUNNYBROOK RV, INC. (“RV”) (SBM and RV are sometimes collectively referred to herein as “Seller”) and Elvie J. Frey, John Cornelius, Beverly Cornelius Revocable Trust, Susan Kalb-Yoder, Richard Marshall Family Trust, Tommy Thorton, James T. Wilson and Galen D. Miller (“Shareholders”) Dated December 29, 2010

“Closing Financial Statements” has the meaning as set forth in Section 2.9(b).

 

“Closing Working Capital” has the meaning as set forth in Section 2.9(b).

 

“COBRA” has the meaning as set forth in Section 3.16(f).

 

“Code” means the Internal Rev enue Code of 1986.

 

“Colony Action” has the meaning as set forth in Section 2.4(b)(xvii).

 

“Confidential Information” has the meaning as set forth in Section 12.1.

 

“Consent” means any approval, consent, ratification, waiver or other authorization.

 

“Contemplated Transactions” means all of the transactions contemplated by this Agreement.

 

“Contract” means any agreement, contract, Lease, consensual obligation, promise or undertaking (whether written or oral and whether express or implied).

 

 

“Counter Notice” has the meaning as set forth in Section 11.10.

 

“Damages” has the meaning as set forth in Section 11.2.

 

“Disclosure Schedule” means the disclosure schedule delivered by Seller and Shareholders to Buyer concurrently with the execution and delivery of this Agreement.

 

“Effective Time” means 12:01 a.m. Central Time on the Closing Date.

 

“Employee Plans” has the meaning as set forth in Section 3.16(a).

 

“Encumbrance” means any charge, claim, community or other marital property interest, condition, equitable interest, lien, option, pledge, security interest, mortgage, right of way, easement, encroachment, servitude, right of first option, right of first refusal or similar restriction, including any restriction on use, voting (in the case of any security or equity interest), transfer, re ceipt of income or exercise of any other attribute of ownership.

 

 

 

 

“Environment” means soil, land surface or subsurface strata, surface waters (including navigable waters and ocean waters), groundwaters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life and any other environmental medium or natural resource.

 

“Environmental, Health and Safety Liabilities” means any cost, damages, expense , liability, obligation or other responsibility arising from or under any Environmental Law or Occupational Safety and Health Law, including those consisting of or relating to:

 

(a)    any environmental, health or safety matter or condition (including on-site or off-site contamination, occupational safety and health and regulation of any chemical substance or product);

 

(b)    any fine, penalty, judgment, award, settlement, legal or administrative proceeding, damages, loss, claim, demand or response, remedial or inspection cost or expense arising under any Environmental Law or Occupational Safety and Health Law;

 

(c)    financial responsibility under any Environmental Law or Occupational Safety a nd Health Law for cleanup costs or corrective action, including any cleanup, removal, containment or other remediation or response actions (“Cleanup”) required by any Environmental Law or Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by any Governmental Body or any other Person) and for any natural resource damages; or

 

(d)    any other compliance, corrective or remedial measure required under any Environmental Law or Occupational Safety and Health Law.

 

The terms “removal,” “remedial” and “response action” include the types of activities covered by the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA).

 

“Environmental Law” means any Legal Requirement that requires or relates to:

(a)    advising appropriate authorities, employees or the public of intended or actual Releases of pollutants or hazardous substances or materials, violations of discharge limits or other prohibitions and the commencement of activities, such as resource extraction or construction, that could have significant impact on the Environment;

 

(b)    preventing or reducing to acceptable levels the Release of pollutants or hazardous substances or materials into the Environment;

 

(c)    reducing the quantities, preventing the Release or minimizing the hazardous characteristics of wastes that are generated;

 

(d)    assuring that products are designed, formulated, packaged and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of;

 

(e)    protecting resources, species or ecological amenities;

 

(f)    reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil or other potentially harmful substances;

 

(g)    cleaning up pollutants that have been Released, preventing the Threat of Release or paying the costs of such clean up or prevention; or

 

(h)    making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment or permitting self-appointed representatives of the public interest to recover for injuries done to public assets.

 

“ERISA” means the Employee Retirement Income Security Act of 1974.

 

“Escrow Agreement” has the meaning as set forth in Section 2.7(a)(viii).

 

“Escrow Amount” has the meaning as set forth in Section 2.3(b)(ii).

 

“Exchange Act” means the Securities Exchange Act of 1934.

 

“Excluded Assets” has the meaning as set forth in Section 2.2.

 

“Facilities” means any real property, leasehold or other interest in real property currently owned or operated by Seller, including the Tangible Personal Property used or operated by Seller at the location of the real property specified in Section 2.7(c).

 

“Facility Lease” has the meaning as set forth in Section 2.7(c).

 

“FEMA Lawsuits” has the meaning as set forth in Section 2.4(b)(xvii).

 

“FFT” has the meaning as set forth in Section 2.7(c).

 

“GAAP” means generally accepted accounting principles for financial reporting in the United States, applied on a basis consistent with the basis on which the Balance Sheet and the other financial statements referred to in Section 3.4 were prepared.

 

“Governing Documents” means with respect to any particular entity, (a) if a corporation, the articles or certificate of incorporation and the bylaws; (b) if a general partnership, the partnership agreement and any statement of partnership; (c) if a limited partnership, the limited partnership agreement and the certificate of limited partnership; (d) if a limited liability company, the articles of organization and operating agreement; (e) if another type of Person, any other charter or similar document adopted or filed in connection with the creation, formation or organization of the Person; (f) all equityholders' agreements, voting agreements, voting trust agreements, joint venture agreements, registration rights agreements or other agreements or documents relating to the organization, management or operation of any Person or relating to the

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(d)    any Person in which such specified Person holds a Material Interest; and

 

(e)    any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity).

For purposes of this definition, (a) “control” (including “controlling,” “controlled by,” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and shall be construed as such term is used in the rules promulgated under the Securities Act of 1933, as amended; (b) the “Family” of an individual includes (i) the individual, (ii) the individual's spouse, (iii) any other natural person who is related to the individual or the individual's spouse within the second degree and (iv) any other natural person who resides with such individual; and (c) “Material Interest” mean s direct or indirect beneficial ownership of voting securities or other voting interests representing at least ten percent (10%) of the outstanding voting power of a Person or equity securities or other equity interests representing at least ten percent (10%) of the outstanding equity securities or equity interests in a Person.

 

“Release” means any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching or migration on or into the Environment or into or out of any property.

 

“Remedial Action” means all actions, including any capital expenditures, required (a) to clean up, remove, treat or in any other way address any Hazardous Material; (b) to prevent the Release or Threat of Release or to minimize the further Release of any Hazardous Material so it does not migrate or endanger public health or welfare or the Environment; (c) to perform required pre-remedial studies and investigations or post-remedial monitoring and care; or (d) to

 

bring all Facilities and the operations conducted thereon into material compliance with Environmental Laws and environmental Governmental Authorizations.

 

“Representative” means with respect to a particular Person, any director, officer, manager, employee, agent, consultant, advisor, accountant, financial advisor, legal counsel or other representative of that Person.

 

“Retained Liabilities” has the meaning as set forth in Section 2.4(b).

 

 

“Seller Contract” means any Contract (a) under which Seller has or may acquire any rights or benefits; (b) under which Seller has or may be come subject to any obligation or liability; or (c) by which Seller or any of the assets owned or used by Seller is or may become bound.

 

“Seller's Knowledge” means the Knowledge of Elvie J. Frey, Susan Kalb-Yoder or Tommy Thorton.

 

“Shareholders” means Elvie J. Frey, a resident of Shipshewana, Indiana; John Cornelius, a resident of St. Petersburg, Florida; Beverly Cornelius Revocable Trust dated January 12, 1998, as amended and restated; Susan Kalb-Yoder, a resident of Goshen, Indiana; Richard Marshall Family Trust, a Texas trust; Tommy Thorton, a resident of Austin, Texas; James T. Wilson, a resident of Middlebury, Indiana; and Galen D. Miller, a resident of Goshen, Indiana.

 

“Software” means all computer software and subsequent versions thereof, including source code, object, executable or binary code, objects, comments, screens, user interfaces, report formats, templates, menus, buttons and icons and all files, data, materials, manuals, design notes and other items and documentation related thereto or associated therewith.

 

“Subsidiary” means with respect to any Person (the “Owner”), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation's or other Person's board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred), are held by the Owner or one or more of its Subsidiaries.

 

“Tangible Persona l Property” means all machinery, equipment, tools, furniture, office equipment, computer hardware, supplies, materials, vehicles and other items of tangible personal property (other than Inventories) of every kind owned or leased by Seller (wherever located and whether or not carried on Seller's books), together with any express or implied warranty by the manufacturers or sellers or lessors of any item or component part thereof and all maintenance records and other documents relating thereto.

 

“Tax” means any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental, windfall profit, customs, vehicle, airplane,

boat, vessel or other title or registration, capital stock, franchise, employees' income withholding, foreign or domestic withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, value added, alternative, add-on minimum and other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any interest, penalty, additio n or additional amount thereon imposed, assessed or collected by or under the authority of any Governmental Body or payable under any tax-sharing agreement or any other Contract.

 

“Tax Return” means any return (including any information return), report, statement, schedule, notice, form, declaration, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the a dministration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.

 

“Third Party” means a Person that is not a party to this Agreement.

 

“Third-Party Claim” means any claim against any Indemnified Person by a Third Party, whether or not involving a Proceeding.

 

“Threat of Release” means a reasonable likelihood of a Release that may require action in order to prevent or mitigate damage to the Environment that may result from such Release.

 

“Transaction Documents” means this Agreement, the Disclosure Schedule, the Bill of Sale, the Assignment and Assumption Agreement, the Escrow Agreement, the Facility Lease and the certificates to be provided by Seller and Buyer pursuant to Sections 2.7(a)(viii) and 2.7(b)(v) of this Agreement, respectively.

 

“WARN Act” has the meaning as set forth in Section 3.23(d).

 

Section 1.2    Usage

 

(a)    In this Agreement, unless a clear contrary intention appears:

 

 

promulgated thereunder, and reference to any section or other provision of any Legal Requirement means that provision of such Legal Requirement from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

 

(b)     Unless otherwise specified herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP.

 

(c)    This Agreement was negotiated by the parties with the benefit of legal representation, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation hereof.

 

 

 

Section 2.1    Assets to Be Sold. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, but effective as of the Effective Time, Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase and acquire from Seller, free and clear of any Encumbrances other than Permitted Encumbrances, all of Seller's right, title and interest in and to all of Seller's property and assets, personal or mixed, tangible and intangible, of every kind and description, wherever located, including the following (but excluding the Excluded Assets):

 

(a)    all cash and cash equivalents;

 

(b)    all Tangible Personal Property owned by Seller, including, but not limited to, those items described in Section 2.1(b) of the Disclosure Schedule;

 

 

(d)    all Accounts Receivable;

 

(e)    except as set forth on Section 2.2(e) of the Disclosure Schedule, all Seller Contracts, including those listed in Section 3.20(a) of the Disclosure Schedule, and all outstanding offers or solicitations made by or to Seller to enter into any Contract;

 

(f)    all Governmental Authorizations and all pending applications therefor or renewals thereof, in each case to the extent transferable to Buyer, including those listed in Section 3.17(b) of the Disclosure Schedule;

 

(g)    all data and Records related to the operations of Seller, including client and customer lists and Records, referral sources, research and development reports and R ecords, production reports and Records, service and warranty Records, equipment logs, operating guides and manuals, financial and accounting Records, creative materials, advertising materials, promotional materials, studies, reports, correspondence and other similar documents and Records and, subject to Legal Requirements, copies of all personnel Records and other Records described in Section 2.2(g);

 

(h)    all of the intangible rights and property of Seller, including Intellectual Property Assets, going concern value, goodwill, telephone, telecopy and e-mail addresses and listings and those items listed in Sections 3.25(d), (e) and (g) of the Disclosure Schedule;

 

(i)    all insurance benefits, including rights and proceeds, arising from or relating to the Assets or the Assumed Liabilities prior to the Effective Time, unless expended by either Buyer or Seller (for purposes of satisfying a Retained Liability or an indemnification obligation) in accordance with this Agreement;

 

 

(k)    all rights of Seller relating to deposits and pr epaid expenses, claims for refunds and rights to offset in respect thereof that are not listed in Section 2.2(c) of the Disclosure Schedule and that are not excluded under Section 2.2(h).

 

All of the property and assets to be transferred to Buyer hereunder are herein referred to collectively as the “Assets.”

 

Notwithstanding the foregoing, the transfer of the Assets pursuant to this Agreement shall not include the assumption of any Liability related to the Assets unless Buyer expressly assumes that Liability pursuant to Section 2.4(a).

 

Section 2.2    Excluded Assets. Notwithstanding anything to the contrary contained in Section 2.1 or elsewhere in this Agreement, the following assets of Seller (collectively, the “ Excluded Assets”) are not part of the sale and purchase contemplated hereunder, are excluded from the Assets and shall remain the property of Seller after the Closing:

 

 

 

(a)    all minute books, stock Records and corporate seals;

 

(b)    the shares of capital stock of SBM held in treasury and all shares of capital stock of RV owned by SBM;

 

(c)    those rights relating to deposits and prepaid expenses and claims for refunds and rights to offset in respect thereof listed in Section 2.2(c) of the Disclosure Schedule;

 

(d)    all insurance policies and rights thereunder (except to the extent specified in Section 2.1(i) and (j));

 

(e)    all of the Seller Contracts listed in Section 2.2(e) of the Disclosure Schedule;

 

(f)    all personnel Records and other Records that Seller is required by law to retain in its possession;

 

(g)    all claims for refund of Taxes and other governmental charges of whatever nature;

 

(h)    all rights in connection with and assets of the Employee Plans except for the Group Health Plan;

 

(i)    all rights of Seller under this Agreement, the Bill of Sale, the Assignment and Assumption Agreement and the Escrow Agreement; and

 

(j)    the property and assets expressly designated in Section 2.2(j) of the Disclosure Schedule.

 

Section 2.3    Purchase Price and Payment of Purchase Price

(a)    The total purchase price under this Agreement will be Five Million Six Hundred Seventy-One Thousand Five Hundred Sixty-Five and 84/100 Dollars ($5,671,565.84) (the “Purchase Price”). The Purchase Price shall be calculated as follows: (1) Three Hundred Sixty-Eight Thousand One Hundred Seventy-Five and 00/100 Dollars ($368,175.00), which amount represents the book value of the Assets as of the date of the Interim Balance Sheet, less the book value of the Assumed Liabilities as of the date of t he Interim Balance Sheet (the “Net Book Value”); (2) plus Two Million and 00/100 Dollars ($2,000,000.00) (together with the Net Book Value, the “Cash Purchase Price”); (3) plus the dollar amount of the Bank Obligations to be repaid by Buyer at Closing; and (4) plus or minus the Adjustment Amount.

 

(b)    In accordance with Section 2.7(b), at the Closing, the Purchase Price, prior to adjustment on account of the Adjustment Amount, shall be delivered by Buyer to Seller as follows:

 

 

 

 

(c)    Seller shall maintain a balance of at least Two Hundred Thousand and 00/100 Dollars ($200,000.00) in a bank acc ount of Seller until the Adjustment Amount has been paid in accordance with Section 2.8.

Section 2.4    Liabilities

 

 

 

Section 2.5    Allocation. The Purchase Price shall be allocated in accordance with Exhibit 2.5. After the Closing, the parties shall make consistent use of the allocation, fair market value and useful lives specified in Exhibit 2.5 for all Tax purposes and in all filings, declarations and reports with the IRS in respect thereof, including the reports required to be filed under Section 1060 of the Code. Buyer shall prepare and deliver IRS Form 8594 to Seller within forty-five (45) days after the Closing Date to be filed with the IRS. In any Proceeding related to the determination of any Tax, neither Buyer nor Seller or Shareholders shall contend or represent that such allocation is not a correct allocation.

 

Section 2.6    Closing. The purchase and sale provided for in this Agreement (the “Closing”) will take place at the offices of Buyer's counsel at 215 10^th Street, Suite 1300, Des Moines, Iowa 50309, commencing at 10:00 a.m. (local time) on December 29, 2010, unless Buyer and Seller otherwise agree. As the parties will not physically be present at such offices, the parties shall cooperate to provide executed copies of all documents, in such format as agreed between the parties, via overnight courier and/or e-mail. Subject to the provisions of Article IX, failure to consummate the purchase and sale provided for in this Agreement on the date and time and at the place determined pursuant to this Section 2.6 will not result in the termination of this Agreement and will not relieve any party of any obligation under this Agreement. In such a situation, the Closing will occur as soon as practicable, subject to Article IX.

 

Section 2.7    Closing Obligations. In addition to any other documents to be delivered under other provisions of this Agreement, at the Closing:

 

(a)    Seller and Shareholders, as the case may be, shall deliver to Buyer, together with funds sufficient to pay all Taxes necessary for the transfer, filing or recording thereof:

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(b)    Buyer shall deliver to Seller and Shareholders, as the case may be:

 

(c)    In addition, Buyer and FFT Land Management, Inc., (“FFT”) shall enter into a lease agreement with option to purchase with respect to the real property located at 201 14^th Street, Middlebury, Indiana (the “Facility Lease”) in the form attached hereto as Exhibit 2.7(c) the terms and conditions of which are incorporated herein by this reference.

 

Section 2.8    Adjustment Amount And Payment. The “Adjustment Amount” (which may be a positive or negative number) will be equal to the amount determined by subtracting the Closing Working Capital from the Initial Working Capital. If the Adjustment Amount is positive, the Adjustment Amount shall be paid by wire transfer by Seller to an account specified by Buyer. If the Adjustment Amount is negative, the difference between the Closing Working Capital and the Initial Working Capital shall be paid by wire transfer by Bu yer to an account specified by Seller. Within three (3) Business Days after the calculation of the Closing Working Capital becomes binding and conclusive on the parties pursuant to Section 2.9, Seller or Buyer, as the case may be, shall make the wire transfer payment provided for in this Section 2.8.

 

Section 2.9    Adjustment Procedure

 

(a)    “Working Capital” as of a given date shall mean the amount calculated by subtracting the current liabilities of Seller included in the Assumed Liabilities as of that date from the current assets of Seller included in the Assets as of that date. The Working Capital of Seller as of the date of the Interim Balance Sheet (the “Initial Working Capital”) was Ninety-Three Thousand Five Hundred Seventy-Four and 00/100 Dollars ($93,574.00), as shown on Exhibit 2.9(a) attached hereto (the “Adjusted Interim Balance Sheet”).

 

(b)    Buyer shall prepare financial statements (“Closing Financial Statements”) of Seller as of the Effective Time and for the period from the date of the Interim Balance Sheet through the Effective Time on the same basis and applying the same accounting principles, policies and practices that were used in preparing the Interim Balance Sheet, except as set forth in Section 2.9(b) of the Disclosure Schedule. Buyer shall then determine the Working Capital as of the Effective Time (the “Closing Working Capital”) based upon the Closing Financial Statements and using the same methodology as was used to calculate the Initial Working Capital. Buyer shall deliver the Closing Financial Statements and its determination of the Closing Working Capital to Seller within sixty (60) days following the Closing Date.

 

(c)    If within thirty (30) days following delivery of the Closing Financial Statements and the Closing Working Capital calculation Seller has not given Buyer written notice of its objection as to the Closing Working Capital calculation (which notice shall state the basis of Seller's objection), then the Closing Working Capital calculated by Buyer shall be binding and conclusive on the parties and be used in computing the Adjustment Amount.

 

(d)    If Seller duly gives Buyer such notice of objection, Seller and Buyer shall meet in an effort to resolve any objection and arrive at a final determination and if Seller and Buyer fail to resolve the issues outstanding with respect to the Closing Financial Statements and the calculation of the Closing Working Capital within thirty (30) days of Buyer's receipt of Seller's

objection notice, Seller and Buyer shall submit the issues remaining in dispute to Deloitte & Touche LLP, independent public accountants (the “Independent Accountants”) for resolution applying the principles, policies and practices referred to in Section 2.9(b). If issues are submitted to the Independent Accountants for resolution, (i) Seller and Buyer shall furnish or cause to be furnished to the Independent Accountants such work papers and other documents and information relating to the disputed issues as the Independent Accountants may request and are available to that party or its agents and shall be afforded the opportunity to present to the Independent Accountants any material relating to the disputed issues and to discuss the issues with the Independent Accountants; (ii) the determination by the Independent Accountants, as set forth in a notice to be delivered to both Seller and Buyer within sixty (60) days of the submission to the Independent Accountants of the issues remaining in dispute, shall be final, binding and conclusive on the parties and shall be used in the calculation of the Closing Working Capital; and (iii) Seller and Buyer will each bear fifty percent (50%) of the fees and costs of the Independent Accountants for such determination.

 

Section 2.10    

 

 

 

 

Seller and each Shareholder represent and warrant, jointly and severally, to Buyer as follows:

 

Section 3.1    Organization and Good Standing

 

(a)    Section 3.1(a) of the Disclosure Schedule contains a complete and accurate list of jurisdiction of incorporation of Seller and any other jurisdictions in which it is qualified to do business as a foreign corporation. Seller is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, with full corporate power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under the Seller Contracts. Seller is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification.

 

(b)    Complete and accurate copies of the Governing Documents of Seller, as currently in effect, have previously been provided to Buyer.

 

(c)    Other than SBM's ownership of RV, Seller has no Subsidiary and, except as disclosed in Section 3.1(c) of the Disclosure Schedule, does not own any shares of capital stock or other securities of any other Person.

 

 

 

 

Section 3.2    Enforceability; Authority; No Conflict

 

(a)    This Agreement constitutes the legal, valid and binding obligation of Seller and each Shareholder, enforceable against each of them in accordance with its terms. Upon the e xecution and delivery by Seller and Shareholders of the Transaction Documents to which they are a party at the Closing, each of such Transaction Documents will constitute the legal, valid and binding obligation of each of Seller and the Shareholders, enforceable against each of them in accordance with its terms. Seller has the absolute and unrestricted right, power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations under the Transaction Documents, and such action has been duly authorized by all necessary action by the Shareholders and Seller's board of directors. Each Shareholder has all necessary legal capacity to enter into the Transaction Documents to which such Shareholder is a party and to perform his obligations hereunder and thereunder.

 

(b)    Except as set forth in Section 3.2(b) of the Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time):

 

 

(c)    Except as set forth in Section 3.2(c) of the Disclosure Schedule, neither Seller nor any Shareholder is required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consumma tion or performance of any of the Contemplated Transactions.

 

Section 3.3    Capitalization. The authorized equity securities of SBM consist of one thousand (1,000) shares of comm on stock, no par value per share, of which seven hundred seventy (770) shares are issued and outstanding. The authorized equity securities of RV consist of one thousand (1,000) shares of common stock, no par value per share, of which six hundred fifty (650) shares are issued and outstanding. Shareholders own all of the stock of SBM and SBM owns all of the stock of RV. Shareholders and SBM are and will be on the Closing Date the record and beneficial owners and holders of the shares owned by each of them, free and clear of all Encumbrances. There are no Contracts relating to the issuance, sale or transfer of any equity securities or other securities of Seller.

 

Section 3.4    Financial Statements. Seller has delivered to Buyer: (a) compiled balance sheets of Seller as of December 31 in each of the fiscal years 2006 through 2009, and the related statements of income and retained earnings for each of the fiscal years then ended; and (b) a compiled balance sheet of Seller as of November 30, 2010 (as attached hereto as Exhibit 3.4, the “Interim Balance Sheet”) and the related state ments of income and retained earnings for the eleven (11) months then ended. Such financial statements fairly present (and the financial statements delivered pursuant to Section 5.8 will fairly present) the financial condition and the results of operations, changes in retained earnings of Seller as at the respective dates of and for the periods referred to in such financial statements. The financial statements referred to in this Section 3.4 and delivered pursuant to Section 5.8 reflect and will reflect the consistent application of such accounting principles throughout the periods involved. The financial statements have been and will be prepared from and are in accordance with the accounting Records of Seller.

 

Section 3.5    Books and Records. The books of account and other financial Records of Seller, all of which have been made available to Buyer, are complete and correct and represent actual, bona fide transactions and have been maintained in accordance with sound business practices. The minute books of Seller, all of which have been made available to Buyer, contain accurate and complete Records of all meetings held of, and corporate action taken by, the shareholders, the board of directors and committees of the board of directors of Seller, and no meeting of any such shareholders, board of directors or committee has been held for which minutes have not been prepared or are not contained in such minute books.

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Section 3.6    Sufficiency of Assets. The Assets (a) constitute all of the assets, tangible and intangible, of any nature whatsoever, necessary to operate Seller's business in the manner presently operated by Seller and (b) include all of the operating assets of Seller except for the Excluded Assets.

 

Section 3.7    [Reserved]

 

Section 3.8    Description of Leased Real Property. Section 3.8 of the Disclosure Schedule contains a correct legal description and street address for all trac ts, parcels and subdivided lots in which Seller has a leasehold interest and an accurate description (by location, name of lessor, date of Lease and term expiry date) of all Ground Leases.

 

 

Section 3.9    Title to Assets; Encumbrances. Except for those Assets in which the Seller has only a leasehold interest, Seller owns good and transferable title to all of the Assets free and clear of any Encumbrances other than those described in Section 3.9 of the Disclosure Schedule (“Non-Real Estate Encumbrances”). Seller warrants to Buyer that, at the time of Closing, all Assets shall be free and clear of all Non-Real Estate Encumbrances except for those listed on Section 3.9 of the Disclosure Schedule (“Permitted Encumbrances”).

 

Section 3.10    Condition of Tangible Personal Property. Except as listed on Section 3.10 of the Disclosure Schedule, the Company has not received, in the last one (1) year, any written notice of any (i) order requiring repair, alteration, or correction of any existing condition affecting any Tangible Personal Property or the systems or improvements thereat, or (ii) structural, mechanical, or other defects of material significance affecting the Facilities or the systems or improvements thereat. Except as disclosed in Section 3.10 of the D isclosure Schedule, all Tangible Personal Property used in Seller's business is in the possession of Seller, is in good repair and good operating condition, ordinary wear and tear excepted, and is suitable for immediate use in the Ordinary Course of Business.

 

Section 3.11    Accounts Receivable. All Accounts Receivable that are reflected on the Balance Sheet or the Interim Balance Sheet or reflected in the Closing Financial Statements as of the Closing Date represent or will represent valid obligations arising from sales actually made or services actually performed by Seller in the Ordinary Course of Business. Except to the extent paid prior to the Closing Date, such Accounts Receivable are or will be as of the Closing Date current and collectible. Each of such Accounts Receivable either has been or will be collected in full, without any setoff, within ninety (90) days after the day on which it first becomes due and payable. To Seller's Knowledge, there is no contest, claim, defense or right of setoff, other than returns in the Ordinary Course of Business of Seller, under any Contract with any account debtor of an Account Receivable relating to the amount or validity of such Account Receivable. Section 3.11 of the Disclosure Schedule contains a complete and accurate list of all Accounts Receivable as of the date of the Interim Balance Sheet, which list sets forth the aging of each such Account Receivable.

 

Section 3.12    Inventories. All items included in the Inventories consist of a quality and quantity usable and, with respect to finished goods, saleable, in the Ordinary Course of Business of Seller except for obsolete items and items of below-standard quality, all of which have been written off or written down to net realizable value in the Interim Balance Sheet or in the Closing Financial Statements of Seller as of the Closing Date, as the case may be. Seller is not in possession of any inventory not owned by Seller, including goods al ready sold. All of the Inventories have been valued at the lower of cost or market value on a first in, first out basis. Inventories now on hand that were purchased after the date of the Interim Balance Sheet were purchased in the Ordinary Course of Business of Seller at a cost not exceeding market prices prevailing at the time of purchase. The quantities of each item of Inventories (whether raw materials, work-in-process or finished goods) are not excessive but are reasonable in the present circumstances of Seller. Work-in-process Inventories are now valued, and will be valued on the Closing Date, according to GAAP.

 

 

(b)    Seller has delivered to Buyer true, accurate and complete copies of (i) the documents comprising each Employee Plan (or, with respect to any Employee Plan which is unwritten, a detailed written description of eligibility, participation, benefits, funding arrangements, assets and any other matters which relate to the obligations of Seller or any ERISA Affiliate); (ii) all trust agreements, insurance contracts or any other funding instruments related to the Employee Plans; (iii) all rulings, determination letters, no-action letters or advisory opinions from the IRS, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation (“PBGC”) or any other Governmental Body that pertain to each Employee Plan and any open requests therefor; (iv) all collective bargaining agreements pursuant to which contributions to any Employee Plan(s) have been made or obligations incurred (including both pension and welfare benefits) by Seller or any ERISA Affiliate, and all collective bargaining agreements pursuant to which contributions are being made or obligations are owed by such entities; (v) all contract s with third-party administrators, actuaries, investment managers, consultants and other independent contractors that relate to any Employee Plan, and (vi) all summary plan descriptions, summaries of material modifications and memoranda, employee handbooks and other written communications regarding the Employee Plans.

 

(c)    Except as disclosed in Section 3.16(c) of the Disclosure Schedule, full payment has been made or accrued of all amounts that are required under the terms of each Employee Plan to be paid as contributions with respect to all periods prior to and inc luding the last day of the most recent fiscal year of such Employee Plan ended on or before the date of this Agreement and all periods thereafter prior to the Closing Date, and no accumulated funding deficiency or liquidity shortfall (as those terms are defined in Section 302 of ERISA and Section 412 of the Code) has been incurred with respect to any such Employee Plan, whether or not waived. Seller has paid in full all required insurance premiums, subject only to normal retrospective adjustments in the ordinary course, with regard to the Employee Plans for all policy years or other applicable policy periods ending on or before the Closing Date.

 

(d)    Seller has, at all times, complied, and currently complies, in all material respects with the applicable continuation requirements for its welfare benefit plans, including (1) Section 4980B of the Code (as well as its predecessor provision, Section 162(k) of the Code) and Sections 601 through 608, inclusive, of ERISA, which provisions are hereinafter referred to

collectively as “COBRA” and (2) any applicable state statutes mandating health insurance continuation coverage for employees.

 

(e)    The form of all Employee Plans is in compliance with the applicable terms of ERISA, the Code, and any other applicable laws, including the Americans with Disabilities Act of 1990, the Family Medical Leave Act of 1993 and the Health Insurance Portability and Accountability Act of 1996, and such plans have been operated in material compliance with such laws and the written Employee Plan documents. Neither Seller nor to Shareholder's knowledge any fiduciary of an Employee Plan has violated the requirements of Section 404 of ERISA. All required reports and descriptions of the E mployee Plans (including Internal Revenue Service Form 5500 Annual Reports, Summary Annual Reports and Summary Plan Descriptions and Summaries of Material Modifications) have been (when required) timely filed with the IRS, the U.S. Department of Labor or other Governmental Body and distributed as required, and all notices required by ERISA or the Code or any other Legal Requirement with respect to the Employee Plans have been appropriately given.

 

(f)    Each Employee Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determi nation letter from the IRS, and to Seller's Knowledge, there are no circumstances that will or could result in revocation of any such favorable determination letter. Each trust created under any Employee Plan has been determined to be exempt from taxation under Section 501(a) of the Code, and Seller is not aware of any circumstance that will or could result in a revocation of such exemption. Each Employee Welfare Benefit Plan (as defined in Section 3(1) of ERISA) that utilizes a funding vehicle described in Section 501(c)(9) of the Code or is subject to the provisions of Section 505 of the Code has been the subject of a notification by the IRS that such funding vehicle qualifies for tax-exempt status under Section 501(c)(9) of the Code or that the plan complies with Section 505 of the Code, unless the IRS does not, as a matter of policy, issue such notification with respect to the particular type of plan. With respect to each Employee Plan, no event has occurred or condition exists that will or could give ri se to a loss of any intended tax consequence or to any Tax under Section 511 of the Code.

 

(g)    There is no material pending or threatened Proceeding relating to any Employee Plan, nor is there any basis for any such Proceeding. Neither Seller nor any fiduciary of an Employee Plan has engaged in a transaction with respect to any Employee Plan that, assuming the taxable period of such transaction expired as of the date hereof, could subject Seller or Buyer to a Tax or penalty imposed by either Section 4975 of the Code or Section 502(l) of ERISA or a violation of Sectio n 406 of ERISA. The Contemplated Transactions will not result in the potential assessment of a Tax or penalty under Section 4975 of the Code or Section 502(l) of ERISA nor result in a violation of Section 406 of ERISA.

 

(h)    Seller has maintained workers' compensation coverage as required by applicable state law through purchase of insurance and not by self-insurance or otherwise except as disclosed to Buyer on Section 3.16(j) of the Disclosure Schedule.

 

(i)    Except as required by Legal Requirements and as provided in Section 10.1(d), the consummation of the Contemplated Transactions will not accelerate the time of vesting or the

time of payment, or increase the amount, of compensation due to any director, employee, officer, former employee or former officer of Seller.

 

(j)    Except for the continuation coverage requirements of COBRA, Seller has no obligations or potential liability for benefits to employees, former employees or their respective dependents following termination of employment or retirement under any of the Employee Plans that are Employee Welfare Benefit Plans.

 

(k)    No written or oral representations have been made to any employee or former employee of Seller promising or guaranteeing any employer payment or funding for the continuation of medical, dental, life or disability coverage for any period of time beyond the end of the current plan year (except to the extent of coverage required under COBRA). No written or oral representations have been made to any employee or former employee of Seller concerning the employee benefits of Buyer.

 

Section 3.17    Compliance With Legal Requirements; Governmental Authorizations

 

(a)    Except as set forth in Section 3.17(a) of the Disclosure Schedule:

 

 

(b)    Section 3.17(b) of the Disclosure Schedule contains a complete and accurate list of ea ch Governmental Authorization that is held by Seller or that otherwise relates to Seller's business or the Assets. Except as set forth in Section 3.17(b) of the Disclosure Schedule, each Governmental Authorization listed or required to be listed in Section 3.17(b) of the Disclosure Schedule is valid and in full force and effect. Except as set forth in Section 3.17(b) of the Disclosure Schedule:

 

 

 

 

The Governmental Authorizations listed in Section 3.17(b) of the Disclosure Schedule collectively constitute all of the Governmental Authorizations necessary to permit Seller to lawfully conduct and operate its business in the manner in which it currently conducts and operates such business and to permit Seller to own and use its assets in the manner in which it currently owns and uses such assets.

 

Section 3.18    Legal Proceedings; Orders

 

(a)    Except as set forth in Section 3.18(a) of the Disclosure Schedule, there is no pending or, to Seller's Knowledge, threatened Proceeding:

 

 

To Seller's Knowledge, no event has occurred or circumstance exists that is reasonably likely to give rise to or serve as a basis for the commencement of any such Proceeding. Seller has

delivered to Buyer copies of all material pleadings, correspondence and other documents relating to each Proceeding listed in Section 3.18(a) of the Disclosure Schedule. There are no Proceedings listed or required to be listed in Section 3.18(a) of the Disclosure Schedule that could have a material adverse effect on the business, operations, asset s, condition or prospects of Seller or upon the Assets.

 

(b)    Except as set forth in Section 3.18(b) of the Disclosure Schedule:

 

 

(c)    Except as set forth in Section 3.18(c) of the Disclosure Schedule:

 

Seller is, and, at all times since January 1, 2009, has been in compliance with all of the terms and requirements of each Order to which it or any of the Assets is or has been subject;

 

Section 3.19    Absence of Certain Changes and Events. Except as set forth in Section 3.19 of the Disclosure Schedule, since the date of the Balance Sheet, Seller has conducted its business only in the Ordinary Course of Business and there has not been any:

 

(a)    change in Seller's authorized or issued capital stock, grant of any stock option or right to purchase shares of capital stock of Seller or issuance of any security convertible into such capital stock;

 

(b)    amendment to the Governing Documents of Seller;

 

(c)    payment (except in the Ordinary Course of Business) or increase by Seller of any bonuses, salaries or other compensation to any shareholder, director, officer or employee or entry into any employment, severance or similar Contract with any director, officer or employee;

 

(d)    adoption of, amendment to or increase in the payments to or benefits under, any Employee Plan;

 

(e)    damage to or destruction or loss of any Asset, whether or not covered by insurance;

 

(f)    entry into, termination of or receipt of notice of termination of (i) any license, distributorship, dealer, sales representative, joint venture, credit or similar Contract to which Seller is a party, or (ii) any Contract or transaction involving a total remaining commitment by Seller of at least One Thousand Dollars ($1,000.00);

 

(g )    sale (other than sales of Inventories in the Ordinary Course of Business), lease or other disposition of any Asset or property of Seller (including the Intellectual Property Assets) or the creation of any Encumbrance on any Asset;

 

(h)    cancellation or waiver of any claims or rights with a value to Seller in excess of Twenty-Five Thousand Dollars ($25,000.00);

 

(i)    written notice by any current customer or supplier of Seller to Seller that it intends to discontinue or materially change the terms of its relationship with Seller;

 

(j)    material change in the accounting methods used by Seller; or

 

(k)    Contract by Seller to do any of the foregoing.

 

Section 3.20    Contracts; No Defaults

 

(a)    Section 3.20(a) of the Disclosure Schedule contains an accurate and complete list, and Seller has delivered to Buyer accurate and complete copies, of:

 

 

Section 3.20(a) of the Disclosure Schedule sets forth reasonably complete details concerning such Contracts, including the parties to the Contracts and date of the Contract (including amendments).

 

(b)    Except as set forth in Section 3.20(b) of the Disclosure Schedule, no Shareholder has or may acquire any rights under, and no Shareholder has or may become subject to any obligation or liability under, any Contract that relates to the business of Seller or any of the Assets.

 

(c)    Except as set forth in Section 3.20(c) of the Disclosure Schedule:

 

 

 

 

 

 

(d)    Except as set forth in Section 3.20(d) of the Disclosure Schedule:

 

 

(e)    There are no on-going renegotiations of, or to Seller's Knowledge, attempts to renegotiate or outstanding rights to renegotiate any material amounts paid or payable to Seller under current Contracts with any Person having the contractual or statutory right to demand or require such renegotiation and no such Person has made written demand for such renegotiation.

 

(f)    Each Contract relating to the sale, design, manufacture or provision of products or services by Seller has been entered into without the commission of any act alone or in concert with any other Person, or any consideration having been paid or promised, that is or would be in violation of any Legal Requirement.

 

Section 3.21    Insurance

(a)    Seller has delivered to Buyer:

 

 

(b)    Section 3.21(b) of the Disclosure Schedule describes all obligations of Seller to provide insurance coverage to Third Parties (for example, under Leases or service agreements) and identifies the policy under which such coverage is provided.

 

(c)    Seller has delivered to Buyer, by year, for the current policy year and each of the five (5) preceding policy years:

 

 

(d)    Except as set forth in Section 3.21(d) of the Disclosure Schedule:

 

 

Section 3.22    Environmental Matters. Except as disclosed in Section 3.22 of the Disclosure Schedule:

 

(a)    Seller is, and at all times has been, in full compliance with, and has not been and is not in violation of or liable under, any Environmental Law. Neither Seller nor any Shareholder has any reasonable basis to expect, nor has any of them or any other Person for whose conduct Seller may be held to be responsible received, any actual or threatened order, notice or other

 

(b)    There are no pending or, to Seller's Knowledge, threatened claims, Encumbrances, or other restrictions of any nature resulting from any Environmental, Health and Safety Liabilities or arising under or pursuant to any Environmental Law with respect to or affecting any Facility or any other property or asset (whether real, personal or mixed) in which Seller has or had an interest.

 

(c)    Seller has not received any citation, directive, inquiry, notice, Order, summons, warning or other communication that relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential violation or failure to comply with any Environmental Law, or of any alleged, actual, or potential obligation to undertake or bear the cost of any Environmental, Health and Safety Liabilities with respect to any Facility or property or asset (whether real, personal or mixed) in which Seller has or had an interest, or with respect to any property or facility to which Hazardous Materials generated, manufactured, refined, transferred, imported, used or processed by Seller or any other Person for whose conduct it is or may be held responsible, have been transported, treated, stored, handled, transferred, disposed, recycled or received.

 

 

(b)    any bodily injury (including illness, disability and death, regardless of when any such bodily injury occurred, was incurred or manifested itself), personal injur y, property damage (including trespass, nuisance, wrongful eviction and deprivation of the use of real property) or other damage of or to any Person or any Assets in any way arising from or allegedly arising from any Hazardous Activity conducted by Seller with respect to the business of Seller or the Assets prior to the Closing Date or from any Hazardous Material that was Released or allegedly Released by Seller on or at any Facilities or Assets at any time on or prior to the Closing Date.

 

Seller will be entitled to exclusively control any Remedial Action, any Proceeding relating to an Environmental Claim and any other Proceeding with respect to which indemnity may be sought under this Section 11.3.

 

Section 11.4    Indemnification and Reimbursement By Buyer. Buyer will indemnify and hold harmless Seller, and will reimburse Seller, for any Damages arising from or in connection with:

 

(a)    any Breach of any representation or warranty made by Buyer in the Transaction Documents delivered by Buyer in connection with the Closing;

 

(b)    any Breach of any covenant or obligation of Buyer in the Transaction Documents delivered by Buyer in connection with the Closing;

 

(c)    any claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by such Person with Buyer (or any Person acting on Buyer's behalf) in connection with any of the Contemplated Transactions; or

 

(d)    any Assumed Liabi lities.

 

Section 11.5    Limitations on Amount-Seller and Shareholders. Seller and Shareholders shall have no liability (for indemnification or otherwise) with respect to claims under Section 11.2(a) until the total of all Damages with respect to such matters exceeds Twenty-Five Thousand Dollars ($25,000.00) (the “Indemnity Basket” ) and then only for the amount by which such Damages exceed the Indemnity Basket. The Indemnity Basket will not apply to claims under Section 11.2(b) through (j) or to matters arising in respect of Sections 3.9, 3.11, 3.14 or 3.22. Notwithstanding the foregoing, Seller's and Shareholders' maximum indemnification obligations under this Article XI shall be equal to One Million Dollars ($1,000,000.00) (the “Indemnity Cap”). In addition, neither the Indemnity Basket nor the Indemnity Cap will apply to any intentional Breach of any representations and warranties of Seller or Shareholders of which the Seller or Shareholders had Knowledge at any time prior to the date on which such representation and warranty is made or any fraudulent Breach by Seller or any Shareholder of any covenant or obligation, and Seller and the Shareholders will be jointly and severally liable for al l Damages with respect to such Breaches.

 

Section 11.6    Limitations on Amount-Buyer. Buyer will have no liability (for indemnification or otherwise) with respect to claims under Section 11.4(a) until the total of all

Damages with respect to such matters exceeds the Indemnity Basket and then only for the amount by which such Damages exceed the Indemnity Basket. However, the Indemnity Basket will not apply to claims under Section 11.4(b) through (e) or matters arising in respect of Section 4.4. Notwithstanding the foregoing, Buyer's maximum indemnification obligation under this Article XI shall be equal to the Indemnity Cap. In addition, neither the Indemnity Basket nor the Indemnity Cap will apply to any intentional Breach of any of Buyer's representations and warranties of which Buyer had Knowledge at any time prior to the date on which such representation and warranty is made or any fraudulent Breach by Buyer of any covenant or obligation, and Buyer will be liable for all Damages with respect to such Breaches.

Section 11.6A      Limitations-All Parties.

 

(a)    The indemnification provisions contained in this Article XI are intended to be the exclusive remedies available to the Parties in connection with Contemplated Transactions.

(b)    No indemnified Person shall be entitled to indemnification:

(i)    in connection with any claim for indemnification based upon a claim, assessment or deficiency for any Tax which arises from adjustments having the effect only of shifting income, credits and/or deductions from one fiscal period to another; or

(ii)    to the extent of any insurance proceeds actually received by the Indemnified Person in connection with the facts giving rise to such indemnification.

(c)    With respect to any Damages for which a reserve has been expressly established on the Closing Financial Statements, an indemnified Person shall only be entitled to indemnification to the extent that such Damages exceed the amount of the applicable reserve.

 

Section 11.7    Time Limitations

 

(a)    If the Closing occurs, Seller and Shareholders will have liability (for indemnification or otherwise) with respect to any Breach of (i) a covenant or obligation to be performed or complied with prior to the Closing Date (other than those in Sections 2.1 and 2.4(b) and Articles X and XII, as to which a claim may be made at any time) or (ii) a representation or warranty (other than those in Sections 3.9, 3.14, 3.16, 3.22 or 3.29, as to which a claim may be made until sixty (60) days after the expiration of the applicable statute of limitations in question (giving effect to any waiver, mitigation or extension thereof)), only if on or before December 31, 2013, Buyer notifies Seller or Shareholders of a claim specifying the factual basis of the claim in reasonable detail to the extent then known by Buyer.

 

(b)    If the Closing occurs, Buyer will have liability (for indemnification or otherwise) with respect to any Breach of a representation or warranty (other than that set forth in Section 4.4, as to which a claim may be made until sixty (60) days after the expiration of the applicable statute of limitations in question (giving effect to any waiver, mitigation or extension thereof),at any time), only if on or before December 31, 2013, Seller or Shareholders notify Buyer of actual Damages incurred or reasonably expected to be incurred specifying the factual basis of the claim in reasonable detail to the extent then known by Seller or Shareholders.

 

Section 11.8    Right of Setoff; Escrow. Upon notice to Seller specifying in reasonable detail the basis therefor, Buyer may give notice of a claim in such amount under the Escrow Agreement. The giving of notice of a claim under the Escrow Agreement will not constitute an election of remedies or limit Buyer in any manner in the enforcement of any other remedies that may be available to it.

Section 11.9    Third-Party Claims

 

(a)    Promptly after receipt by a Person entit led to indemnity under Section 11.2, 11.3 (to the extent provided in the last sentence of Section 11.3) or 11.4 (an “Indemnified Person”) of notice of the assertion of a Third-Party Claim against it, such Indemnified Person shall give notice to the Person obligated to indemnify under such Section (an “Indemnifying Person”) of the assertion of such Third-Party Claim, provided that the failure to notify the Indemnifying Person will not relieve the Indemnifying Person of any liability that it may have to any Indemnified Person, except to the extent that the Indemnifying Person demonstrates that the defense of such Third-Party Claim is directly prejudiced by the Indemnified Person's failure to give such notice.

(b)    If an Indemnified Person gives notice to the Indemnifying Person pursuant to Section 11.9(a) of the assertion of a Third-Party Claim, the Indemnifying Person shall be entitled to direct, through counsel of its own choosing, the defense or settlement of any such claim or proceeding at the Indemnifying Person's expense. If Indemnifying Person elects to assume the defense of any such claim or proceeding, the Indemnifying Person shall consult with the Indemnified Person for the purpose of allowing the Indemnified Person to participate in such defense, but in such case the expenses of I ndemnified Party shall be paid for by the Indemnified Person and shall not be recoverable as part of any indemnification. After notice from the Indemnifying Person to the Indemnified Person of its election to assume the defense of such Third-Party Claim, the Indemnifying Person shall not, so long as it diligently conducts such defense, be liable to the Indemnified Person under this Article XI for any fees of other counsel or any other expenses with respect to the defense of such Third-Party Claim, in each case subsequently incurred by the Indemnified Person in connection with the defense of such Third-Party Claim, other than reasonable costs of investigation. If the Indemnifying Person assumes the defense of a Third-Party Claim, no compromise or settlement of such Third-Party Claims may be effected by the Indemnifying Person without the Indemnified Person's Consent unless (A) there is no finding or admission of any violation of Legal Requirement or any violation of the rights of any Person; (B) the sole reli ef provided is monetary damages that are paid in full by the Indemnifying Person; and (C) the Indemnified Person shall have no liability with respect to any compromise or settlement of such Third-Party Claims effected without its Consent. If notice is given to an Indemnifying Person of the assertion of any Third-Party Claim and the Indemnifying Person does not, within ten (10) days after the Indemnified Person's notice is given, give notice to the Indemnified Person of its election to assume the defense of such Third-Party Claim, the Indemnifying Person will be bound by any determination made in such Third-Party Claim or any compromise or settlement effected by the Indemnified Person.

 

 

(c)    Notwithstanding the foregoing, if an Indemnified Person determines in good faith that there is a reasonable probability that a Third-Party Claim may adversely affect it or its Related Persons other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the Indemnified Person may, by notice to the Indemnifying Person, assume the exclusive right to defend, compromise or settle such Third-Party Claim, but the Indemnifying Person will not be bound by any determination of any Third-Party Claim so defended for the purposes of this Agreement or any compromise or settlement effected without its Consent (which may not be unreasonably withheld).

(d)    Notwithstanding the provisions of Section 13.4, Seller and each Shareholder hereby consent to the nonexclusive jurisdiction of any court in which a Proceeding in respect of a Third-Party Claim is brought against any Buyer Indemnified Person for purposes of any claim that a Buyer Indemnified Person may have under this Agreement with respect to such Proceeding or the matters alleged therein and agree that process may be served on Seller and Shareho lders with respect to such a claim anywhere in the world.

 

(e)    With respect to any Third-Party Claim subject to indemnification under this Article XI: (i) both the Indemnified Person and the Indemnifying Person, as the case may be, shall keep the other Person fully informed of the status of such Third-Party Claim and any related Proceedings at all stages thereof where such Person is not represented by its own counsel, and (ii) the parties agree (each at its own expense) to render to each other such assistance as they may reasonably require of each other and to cooper ate in good faith with each other in order to ensure the proper and adequate defense of any Third-Party Claim.

 

(f)    With respect to any Third-Party Claim subject to indemnification under this Article XI, the parties agree to cooperate in such a manner as to preserve in full (to the extent possible) the confidentiality of all Confidential Information and the attorney-client and work-product privileges. In connection therewith, each party agrees that: (i) it will use its Best Efforts, in respect of any Third-Party Claim in which it has assumed or participated in the de fense, to avoid production of Confidential Information (consistent with applicable law and rules of procedure), and (ii) all communications between any party hereto and counsel responsible for or participating in the defense of any Third-Party Claim shall, to the extent possible, be made so as to preserve any applicable attorney-client or work-product privilege.

 

Section 11.10    Other Claims. A claim for indemnification for any matter not involving a Third-Party Claim ma y be asserted first in accordance with the notice provisions in the Escrow Agreement, and then, to the extent that the Escrow Amount has been exhausted, by notice from the Indemnified Person to the Indemnifying Person. The Indemnifying Person shall give notice to the Indemnified Person disputing any claim (a “Counter Notice”) within ten (10) Business Days following receipt by the Indemnifying Person of a notice regarding such claim. If no Counter Notice is received by the Indemnified Person within such ten (10)-Business Day period, then the dollar amount of damages claimed by the Indemnified Person as set forth in its notice shall be deemed established for purposes of this Section 11.10 and, at the end of such ten (10)-Business Day period and subject to the limitations set forth in this Article XI, the Indemnifying Person shall pay to the Indemnified Person the dollar amount claimed in the notice. If a Counter Notice is given with respect to a claim for indemnification under this Section 11.10, the

Indemnifying Person shall make payment with respect thereto only in accordance with (a) the joint written agreement of the parties, or (ii) a final, nonappealable order of a court of competent jurisdiction.

 

Se ction 11.10A Limitation of Liability of Galen D. Miller. Notwithstanding any other provision of this Agreement to the contrary, the exclusive obligation and limitation of Galen D. Miller with respect to any and all indemnity under the Contemplated Transactions, including representations and warranties, indemnity and this Article XI, shall be limited to One Hundred Fifty-Six Thousand Dollars ($156,000.00).

 

Section 11.11    Indemn ification in Case of Strict Liability or Indemnitee Negligence

 

THE INDEMNIFICATION PROVISIONS IN THIS ARTICLE XI SHALL BE ENFORCEABLE REGARDLESS OF WHETHER THE LIABILITY IS BASED UPON PAST, PRESENT OR FUTURE ACTS, CLAIMS OR LEGAL REQUIREMENTS (INCLUDING ANY PAST, PRESENT OR FUTURE BULK SALES LAW, ENVIRONMENTAL LAW, FRAUDULENT TRANSFER ACT, OCCUPATIONAL SAFETY AND HEALTH LAW OR PRODUCTS LIABILITY, SECURITIES OR OTHER LEGAL REQUIREMENT) AND REGARDLESS OF WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT) ALLEGES OR PROVES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE PERSON SEEKING INDEMNIFICATION OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED UPON T HE PERSON SEEKING INDEMNIFICATION.

 

 

 

Section 12.1    Definition of Confidential Information

 

(a)    As used in this Article XII, the term “Confidential Information” includes any and all of the following information of Seller, Buyer or Shareholders that has been or may hereafter be disclosed in any form, whether in writing, orally, electronically or otherwise, or otherwise made available by observation, in spection or otherwise by either party (Buyer on the one hand or Seller and Shareholders, collectively, on the other hand) or its Representatives (collectively, a “Disclosing Party”) to the other party or its Representatives (collectively, a “Receiving Party”):

 

computer hardware, Software and computer software and database technologies, systems, structures and architectures;

 

(b)    Any trade secrets of a Disclosing Party shall also be entitled to all of the protections and benefits under applicable trade secret law and any other applicable law. If any information that a Disclosing Party deems to be a trade secret is found by a court of competent jurisdiction not to be a trade secret for purposes of this Article XII, such information shall still be considered Confidential Information of that Disclosing Party for purposes of this Article XII to the extent included within the definition. In the case of trade secrets, each of Buyer, Seller and Shareholders hereby waives any requirement that the other party submit proof of the economic value of any trade secret or post a bond or other security.

 

Section 12.2    Restricted Use of Confidential Information

 

(a)    Each Receiving Party acknowledges the confidential and proprietary nature of the Confidential Information of the Disclosing Party and agrees that such Confidential Information (i) shall be kept confidential by the Receiving Party; (ii) shall not be used for any reason or purpose other than to evaluate and consum mate the Contemplated Transactions; and (iii) without limiting the foregoing, shall not be disclosed by the Receiving Party to any Person, except in each case as otherwise expressly permitted by the terms of this Agreement or with the prior written consent of an authorized representative of Seller with respect to Confidential Information of Seller or Shareholders (each, a “Seller Contact”) or an authorized representative of Buyer with respect to Confidential Information of Buyer (each, a “Buyer Contact”). Each of Buyer and Seller and Shareholders shall disclose the Confidential Information of the other party only to its Representatives who require such material for the purpose of evaluating the Contemplated Transactions and are informed by Buyer, Seller or Shareholders, as the case may be, of the obligations of this Article XII with respect to such information. Each of Buyer, Seller and Shareholders shall (iv) enforce the terms of this Article XII as to its respective Representatives; (v) take such action to the extent necessary to cause its Representatives to comply with the terms and conditions of this Article XII; and (vi) be responsible and liable for any breach of the provisions of this Article XII by it or its Representatives.

 

 

(c)    From and after the Closing, the provisions of Section 12.2(a) above shall not apply to or restrict in any manner Buyer's use of any Confidential Information of the Seller or Shareholders relating to any of the Assets or the Assumed Liabilities.

 

Section 12.3    Exceptions. Sections 12.2(a) and (b) do not apply to that part of the Confidential Information of a Disclosing Party that a Receiving Party demonstrates (a) was, is or becomes generally available to the public other than as a result of a breach of this Article XII; (b) was or is developed by the Receiving Party independently of and without reference to any Confidential Information of the Disclosing Party; or (c) was, is or becomes available to the Receiving Party on a nonconfidential basis from a Third Party not bound by a confidentiality agreement or any legal, fiduciary or other obligation restricting disclosure. Neither Seller nor any Shareholder shall disclose any Confidential Information of Seller or Shareholders relating to any of the Assets or the Assumed Liabilities in reliance on the exceptions in clauses (b) or (c) above.

  ;

Section 12.4    Legal Proceedings. If a Receiving Party becomes compelled in any Proceeding or is requested by a Governmental Body having regulatory jurisdiction over the Contemplated Transactions to make any disclosure that is prohibited or otherwise constrained by this Article XII, that Receiving Party shall provide the Disclosing Party with prompt notice of such compulsion or request so that it may seek an appropriate protective order or other appropriate remedy or waive compliance with the provisions of this Article XII. In the absence of a protective order or other remedy, the Receiving Party may disclose that portion (and only that portion) of the Confidential Information of the Disclosing Party that, based upon advice of the Receiving Party's counsel, the Receiving Party is legally compelled to disclose or that has been requested by such Governmental Body, provided, however, that the Receiving Party shall use reasonable efforts to obtain reliable assurance that confidential treatment will be accorded by any Person to whom any Confidential Information is so disclosed. The provisions of this Section 12.4 do not apply to any Proceedings between the parties to this Agreement.

 

Section 12.5     Return or Destruction of Confidential Information. If this Agreement is terminated, each Receiving Party shall (a) destroy all Confidential Information of the Disclosing Party prepared or generated by the Receiving Party without retaining a copy of any such material; (b) promptly deliver to the Disclosing Party all other Confidential Information of the Disclosing Party, together with all copies thereof, in the possession, custody or control of the Receiving Party or, alternatively, with the written consent of a Seller Contact or a Buyer Contact (whichever represents the Disclosing Party) destroy all such Confidential Information; and (c) certify all such destruction in writing to the Disclosing Party, provided, however, that the Receiving Party may retain a list that contains general descriptions of the information it has

returned or destroyed to facilitate the resolution of any controversies after the Disclosing Party's Confidential Information is returned.

 

Section 12.6    Attorney-Client Privilege. The Disclosing Party is not waiving, and will not be deemed to have waived or diminished, any of its attorney work product protections, attorney-client privileges or similar protections and privileges as a result of disclosing its Confidential Information (including Confidential Information related to pending or threatened litigation) to the Receiving Party, regardless of whether the Disclosing Party has asserted, or is or may be entitled to assert, such privileges and protections. The parties (a) share a common legal and commercial interest in all of the Disclosing Party's Confidential Information that is subject to such privileges and protections; (b) are or may become joint defendants in Proceedings to which the Disclosing Party's Confidential Information covered by such protections and privileges relates; (c) intend that such privileges and protections remain intact should either party become subject to any actual o r threatened Proceeding to which the Disclosing Party's Confidential Information covered by such protections and privileges relates; and (d) intend that after the Closing the Receiving Party shall have the right to assert such protections and privileges. No Receiving Party shall admit, claim or contend, in Proceedings involving either party or otherwise, that any Disclosing Party waived any of its attorney work-product protections, attorney-client privileges or similar protections and privileges with respect to any information, documents or other material not disclosed to a Receiving Party due to the Disclosing Party disclosing its Confidential Information (including Confidential Information related to pending or threatened litigation) to the Receiving Party.

 

 

 

Section 13.1    Expenses. Except a s otherwise provided in this Agreement, each party to this Agreement will bear its respective fees and expenses incurred in connection with the preparation, negotiation, execution and performance of this Agreement and the Contemplated Transactions, including all fees and expense of its Representatives. Buyer will pay one-half and Seller will pay one-half of the fees and expenses of the escrow agent under the Escrow Agreement. If this Agreement is terminated, the obligation of each party to pay its own fees and expenses will be subject to any rights of such party arising from a Breach of this Agreement by another party.

 

Section 13.2  & nbsp; Public Announcements. Any public announcement, press release or similar publicity with respect to this Agreement or the Contemplated Transactions will be issued, if at all, at such time and in such manner as Buyer determines. Except with the prior consent of Buyer or as permitted by this Agreement, neither Seller, Shareholders nor any of their Representatives shall disclose to any Person (a) the fact that any Confidential Information of Seller or Shareholders has been disclosed to Buyer or its Representatives, that Buyer or its Representatives have inspected any portion of the Confidential Information of Seller or Shareholders, that any Confidential Information of Buyer has been disclosed to Seller, Shareholders or their Representatives or that Seller, Shareholders or their Representatives have

inspected any portion of the Confidential Information of Buyer or (b) any information about the Contemplated Transactions, including the status of such discussions or negotiations, the execution of any documents (including this Agreement) or any of the terms of the Contemplated Transactions or the related documents (including this Agreement). Seller and Buyer will consult with each other concerning the means by which Seller's employees, customers, suppliers and others having dealings with Seller will be informed of the Contemplated Transactions, and Buyer will have the right to be present for any such communication.

 

Section 13.3    Notices. All notices, Consents, waivers and other communications required or permitted by this Agreement shall be in writing and shall be deemed given to a party when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the following addresses, facsimile numbers or e-mail addresses and marked to the attention of the person (by name or title) designated on Exhibit 13.3 (or to such other address, facsimile number, e-mail address or person as a party may designate by notice to the other parties).

 

Section 13.4    Jurisdiction; Service of Process. Any Proceeding arising out of or relating to this Agreement or any Contemplated Transaction may be brought in the courts of the State of Iowa, County of Hancock, or, if it has or can acquire jurisdiction, in the United States District Court for the Northern District of Iowa, and each of the parties irrevocably submits to the exclusive jurisdiction of each such court in any such Proceeding, waives any objection it may now or hereafter have to venue or to convenience of forum, agrees that all claims in respect of the Proceeding shall be heard and determined only in any such court and agrees not to bring any Proceeding arising out of or relating to this Agreement or any Contemplated Transaction in any other court. The parties agree that either or both of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary and bargained agreement between the parties irrevocably to waive any objections to venue or to convenience of forum. Process in any Proceeding referred to in the first sentence of this section may be served on any party anywhere in the world.

Section 13.5    Enforcement of Agreement. Seller and Shareholders acknowledge and agree that Buyer would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any Breach of this Agreement by Seller or Shareholders could not be adequately compensated in all cases by monetary damages alone. Accordingly, in addition to any other right or remedy to which Buyer may be entitled, at law or in equity, it shall be en titled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent Breaches or threatened Breaches of any of the provisions of this Agreement, without posting any bond or other undertaking.

 

Section 13.6    Waiver; Remedies Cumulative. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither any failure nor any delay by any party in exerc ising any right, power or privilege under this Agreement or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no

single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or any of the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

 

Section 13.7    Entire Agreement and Modific ation. This Agreement supersedes all prior agreements, whether written or oral, between the parties with respect to its subject matter (including the letter of intent dated October 13, 2010, between Buyer and Seller) and constitutes (along with the Disclosure Schedule, Exhibits and other documents delivered pursuant to this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended, supplemented, or otherwise modified except by a written agreement executed by the party to be charged with the amendment.

 

Section 13.8    Disclosure Schedule

 

(a)    The information in the Disclosure Schedule constitutes (i) exceptions to particular representations, warranties, covenants and obligations of Seller and Shareholders as set forth in this Agreement or (ii) descriptions or lists of assets and liabilities and other items referred to in this Agreement. If there is any inconsistency between the statements in this Agreement and those in the Disc losure Schedule (other than an exception expressly set forth as such in the Disclosure Schedule with respect to a specifically identified representation or warranty), the statements in this Agreement will control.

 

(b)    The statements in the Disclosure Schedule, and those in any supplement thereto, relate only to the provisions in the Section of this Agreement to which they expressly relate and not to any other provision in this Agreement.